As his Honour later observed, the phrase may be used when speaking of an agency relationship, but also of some quite ephemeral relationships, such as that which exists between a party to litigation and the witness he calls. A further possible use was where the relationship was one of trustee and cestui que trust. As his Honour further observed:
"Context will always determine to which of the many possible relationships the phrase 'on behalf of' is in a particular case being applied; 'the context and subject matter' … will be determinative". [at 149]"
22 Mr Davies' detailed submissions in support of the proposition that the insured is not able by an agreement reached with the claimant to agree upon a liability greater than might have been achieved in the proceedings, overlooks the commercial purpose of the definition of "loss" which in the policy presently under consideration, unlike some others, specifically picks up a liability established by settlement and not merely a liability established by judgment. Difficulties have arisen in relation to a previous practice for policies to provide that the insurer will indemnify the insured from any liability and disputes have arisen from time to time about whether a liability has been established when a case is settled. However the policy currently under consideration deliberately and carefully overcomes that problem insofar as it provides in the definition of "loss" that a liability is established by a settlement. As Mr Pembroke SC submitted, the insurer is protected because it has firstly, the insured's statutory duty of good faith under section 13 of the Insurance Contracts Act, 1984 (Cth) and secondly it has the right to control negotiations for settlement - claims condition 2.
23 What then is the proper construction of the phrase in clause 2.1 of the deed of settlement "on behalf of"? Did the deed impose a legal liability on the officers?
24 RAS was of course, not a party to the deed of settlement. The proper approach to the construction of the deed is to look for the objective intent of the parties to the deed. In that regard the following matters seem to me to be important factors to be taken into account:
· Particular attention requires to be paid to the context in which clause 2.1 appears in the deed. The context includes the fact that the recitals specifically and carefully recite the three sets of proceedings and specifically state which of the insured persons are the defendants to each of those proceedings.
· The deed goes on to provide for the discontinuance of the actions against the insured persons, and goes on to provide for the giving of releases and discharges of each of the insured persons.
· The deed provides valuable benefits to the insured persons, and in return for that, the Killorgan and Price parties, the claimants in the Victorian Supreme Court, are obtaining, on the proper construction of clause 2.1, in the overall context a promise, or joint and several promises. The promise is a promise by Baycorp Advantage to pay within 28 days, jointly and severally, with promises by each of the insured persons.
· It would be surprising that in a context where the claimants have all the defendants before them at the bargaining table, they would likely be prepared to accept a promise by one but not by each of the other parties, to make a payment.
25 The short point is that one is about ascertaining whether each of the insured persons is legally liable to pay to the plaintiffs in the Victorian Proceedings, the amount determined by the settlement provided for in the deed in respect of a claim. It is true that the sole vehicle for determining the answer to this question is the proper construction of the deed of settlement. But the deed itself is to be construed by reference to the setting. The commercial purpose of the deed requires to be ascertained. And knowledge of the genesis of the terms of the deed is relatively simply gained by reference to the anterior litigation being settled upon the entry into of the deed.
26 In my view the plaintiff's submissions in respect of the proper construction of clause 2.1 should be accepted as correct. The construction has the advantage that the words "on behalf of itself and each of the other defendants" have work to do. The alternative construction has the clear disadvantage that this phrase would be unnecessary. The deed would accomplish the entirety of the task at hand in the absence of such words. In this regard the words "the claims" as used in clause 2.1 refer to all the claims made against all the parties in the modification agreement proceedings - and likewise the references in clause 2.1(b) and (c) are read as references to the claims made against all the defendants in those proceedings.
27 Further the agreement to the terms on the last page of Exhibit PX provides a clear indicator to the same effect. In that agreement the words "to pay on my behalf" seem clearly to denote the acceptance of a liability on the part of the person on whose behalf the payment was being made. So much would certainly involve a strong contention by the plaintiffs in the Victorian Proceedings were Baycorp for example to be placed into liquidation forthwith after entering into the deed. Thus the context determines the construction issue.
28 I do not see that the inclusion of clause 3.2 of the deed requires an otherwise construction. Naturally this would permit the necessary use of all of the evidence in the proceedings for the purpose of ascertaining the liability of the insurer for defence costs. No doubt all of these statements will be put before the referee who will presumably be an experienced costs assessor or may well be such a person. In any event that person will be in a position by reference to those statements to determine what costs are referable to the claims brought against the officers and what costs are solely referable to the claims brought against the corporate entities. And as Mr Pembroke further submitted, in any event it would be extremely likely to find a clause such as clause 3.2 in any deed of settlement of proceedings where insurance matters still remain to be resolved. Such a clause would be highly desirable whatever might be the future in terms of litigation or negotiation with an insurer.
29 Mr Davies drew attention to the fact that not all of the directors were sued in each of the three sets of proceedings so that for example Messrs Klimpton and Blair were only sued in the defamation claim and not in the other two suits. Mr Davies proposition was that there is an obvious difficulty in any suggestion that the proper construction of the deed was that it created a joint and several liability in the present plaintiffs to pay $10 million. Why, it may be asked, would directors who had not been joined and could not have been liable in relation to certain of the proceedings, have agreed to accept a liability to pay any amount at all in relation to those proceedings?
30 As the plaintiffs have submitted and as I accept, the short answer to the submission is that for each individual officer the amount which he or she is jointly and severally liable to pay is the specified amount for each of the Victorian proceedings in which that person was a defendant. The phrase "to pay on my behalf the sums referred to in clause 2.1 of the Deed of Settlement " appearing on the last page of Exhibit PX Tab 13 refers to the sums identified in clause 2.1 of the deed. Properly construed there is a joint and several liability of each of the parties who were the defendants in the relevant proceedings to pay the amounts specified in clause 2.1. In the exercise of construing the deed to ascertain the objective intent of the parties in relation thereto, the court is plainly entitled to take into account the terms of the acknowledgement/agreement to be found on the last page of the above exhibit. Albeit that the construction issue is always to be determined in the particular context, the language of clause 2.1 of the deed of settlement: "on behalf of itself and each of the other defendants" is certainly open to be construed as the language of joint and several obligation. [Compare: "we bind ourselves and each of us by himself" and "for themselves and for each of them": Glanville Williams, Joint Obligations, 1949, page 38.]
31 It further seems to me that there is substance in the plaintiff's submissions in terms of the policy provisions concerning settlement.
32 The parties' agreement that the amount which an insured person could be legally liable to pay could be determined by settlement as well as by judgment, may be seen to have been intended. [Cf Exclusion 1 where dishonest intent or purpose may only be established by judgment]. It avoids the need for debate as to whether the insured's liability is proved only by judgment, or whether settlement is sufficient.
33 The parties' agreement in this regard reveals a sensible, practical and commercial purpose. Where allegations are made against an insured person, the allegations may, in an appropriate case, be compromised (with the mutual benefit of avoiding unnecessary legal costs) without prejudicing the insured person's entitlement to indemnity.