BOS International (Australia) Ltd v Babcock & Brown International Pty Ltd

MacGillivray on Insurance Law, 11th ed (2008) A Paolini & D Nambisan, Directors' and Officers' Liability Insurance, (2008) Category: Principal judgment Parties: BOS International (Australia) Ltd (plaintiff) Babcock & Brown International Pty Ltd (defendant) Representation: D L Williams SC; J Knackstredt (plaintiff) R C A Higgins (defendant) Henry Davis York (plaintiff) Freehills (defendant) File Number(s): SC 2011/260538

Judgment 1The plaintiff, BOS International (Australia) Ltd ( "BOSI" ), manages a facility on behalf of a large number of lenders who together lent $3 billion to the defendant, Babcock & Brown International Pty Ltd (" Babcock" ), one of a number of companies in the Babcock & Brown Group ( "the Group" ). Many of the entities within the Group, including the parent company of Babcock, have been placed in liquidation but not Babcock. The parent company was, when trading, listed on the Australian Stock Exchange. For ease of reference in these reasons, I shall refer to BOSI as if it were the lender and to Babcock to cover all members of the Group except where the distinction between them is of relevance. Nature of the dispute 2The $3 billion was lent pursuant to a Syndicated Facility Agreement dated 4 December 2008 which was amended on 6 February 2009 and was restructured on 10 May 2010 in a document entitled the Second Amended and Restated Syndicated Facility Agreement ( "the Agreement" ). The Agreement was restructured again in May this year but nothing is said to turn on that fact given that the clause (of which the relevant sub-clause forms part) in dispute was agreed to remain "in full force and effect". 3The Agreement contains a clause 10.1 in the following terms: " 10. UNDERTAKINGS 10.1 General Each Obligor undertakes to each Indemnified Party to: (a) ( comply with obligations ) comply with all its obligations under the Finance Documents to which it is a party and procure that each other Obligor does likewise; (b) ( obtain Authorisations ) obtain, keep in force and comply with the terms of all Authorisations necessary to enable it to enter into the Finance Documents to which it is a party, fully comply with its obligations under them and allow them to be enforced; (c) ( comply with laws ) comply in all material respects with all laws binding on it (including Environmental Laws) or any of its assets and all requirements or orders of any Governmental Agency; (d) ( Taxes ) pay all Taxes payable by it when due, but: (i) it need not pay Taxes for which it has set aside sufficient reserves and which are being contested in good faith, except where failure to pay is likely to have a Material Adverse Effect; and (ii) to the extent liable, it will pay those Taxes on the final determination or settlement of the contest; (e) ( Accounts ) maintain proper Accounts in accordance with Accounting Practices except as otherwise disclosed in those Accounts; (f) ( maintain written financial records ) maintain written financial records which record correctly its transactions and financial position and performance; (g) ( ensure not de-registered ) maintain its incorporation and registration and do everything necessary in order to maintain its good standing; (h) ( insurance ) insure, and maintain insurance in relation to, its business and assets against those risks and to the extent as is usual for companies carrying on the same or substantially similar business. All such insurances will be with reputable independent insurers, companies or underwriters; [emphasis added] (i) [intentionally omitted]; (j) ( litigation ) promptly provide the Facility Agent with written particulars (excluding any attorney-client privileged communications) of any current, pending or to its knowledge threatened litigation, arbitration, Tax claim, dispute or administration or other proceeding or claim in connection with or against any member of the Borrower Group or its Secured Property involving a claim in a Material Amount; (k) ( Government Agency ) promptly provide the Facility Agent with copies of notices, orders and other documents received by the Obligor from any Governmental Agency which may have a Material Adverse Effect, promptly following receipt by the Obligor; (l) ( other information ) provide the Facility Agent with any other information the Facility Agent or a Lender requests relating to the assets, operations, accounting methods or financial position of the Obligor or any other member of the Borrower Group promptly on being requested to do so; [emphasis added] (m) ( public announcements ) not make any public announcement mentioning Lenders without the consent of the Facility Agent (acting on the Majority Lenders' instructions and those of each Lender mentioned by name, provided that any announcements referring to the syndicate or group of Lenders as a whole need to be approved by all Lenders) except as required by any law or regulation or by the rules of any stock exchange (including the ASX) or by a Governmental Agency; (n) ( insolvency ) as soon as it becomes aware, promptly provide the Facility Agent with notice of any intention of a member of the Borrower Group, its representatives or employees or any other person to take any step to appoint a Controller to that entity; (o) ( notice of demand ) promptly following receipt provide the Facility Agent with a copy of any notice of demand served on an Obligor in a Material Amount; (p) ( give notice ) give notice to the Facility Agent as soon as it becomes aware of any Event of Default (other than the Acknowledged Event of Default), Potential Event of Default or any event or series of events (whether related or not) which may adversely affect a Transaction Party's ability to perform its obligations under the Finance Documents; (q) ( Event of Default ) ensure that no Event of Default (other than the Acknowledged Event of Default) occurs (except that this shall not prevent or restrict the directors of the Borrower or the directions of any other member of the Borrower Group from appointing, or taking any action or step to appoint, an administrator to the Borrower or that member of the Borrower Group); and (r) ( senior executives ) procure on reasonable request (having regard to the location of the executive and the location of the meeting) that any senior executive of the Borrower and/or the relevant Obligor requested attends any meeting with the Lenders, the Legal Advisors and/or the Financial Advisors." 4There is no dispute that: (1)BOSI has sought "(a) copies of all director and officer insurance policies in respect of the directors and officers of the Borrower and other members of the Borrower Group which would respond to a claim for any notification that may have been made at any time between 1 January 2006 and 1 January 2011; and (b) certificates of currency for all such policies." (2)Babcock has not provided the policies requested. (3)Babcock (and not only its directors and officers) is an insured under director and officer policies ( "D&O Policies" ). (4)If the construction advanced by the plaintiff is accepted the plaintiff is entitled to the relief sought. (5)The primary layer D&O Policy contains (and has in past years since 2006 contained) a clause in the following terms ( "the Confidentiality Clause" ): " Confidentiality The Insureds shall make all reasonable efforts not to disclose the existence of this policy to any person except to professional advisers or as required by law or court order and shall only state within the Company's annual report that the Company has agreed, or otherwise, to pay a premium for this policy but shall not publish the nature of the liability covered by this policy, the name of the Insurer, the Limit of Liability or the Premium paid for this policy." (6)The terms "assets" and "financial position" are not defined in the Agreement. 5In paragraph 18 of his affidavit of 24 August 2011, Mr Michael Dodson sets out the reason for the plaintiff's request for information: "As part of its assessment of the financial position of Babcock & Brown and the Borrower Group, BOS International wishes to inspect copies of any director and officer insurance policies in respect of the directors and officers of Babcock & Brown and other members of the " Borrower Group " (as defined in the Second Amended Facility Agreement) in order to ascertain whether those policies might respond to claims which some of those companies might bring against their directors and officers and to quantify the prospects of recovering the value of such claims." 6The question for determination is whether Babcock is required, by virtue of clause 10.1(l) of the Agreement, to hand over the D&O Policies of which it holds copies. This, it is agreed, is a matter of construction of the terms of the Agreement; no implied term is asserted. Representation 7Mr D L Williams SC of counsel appears with Mr J Knackstredt of counsel for BOSI and Ms R C A Higgins of counsel appears for Babcock. Outline of arguments 8BOSI's case in chief has these elements: (1)A claim by Babcock against current or former directors and officers is a chose in action and hence an asset of Babcock. (2)A request for a copy of the policy is a request for information relating to the asset because the worth of the chose in action is or may be dependent on whether or not any judgment obtained against the directors or officers would be met by the insurer. (3)Alternatively, in written submissions in reply (see paragraph 17), it was contended that the rights of Babcock contained in or created by the D&O Policies are also assets of Babcock. (4)The words "relating to" are words of wide import. (5)The word "asset" is wide and there is no warrant to read it down. (6)The existence of the insurance policies does or might impact on the financial position of Babcock and hence a request for a copy of the insurance policies is a request for information relating to the financial position of Babcock. (7)The request for the policies therefore, BOSI submits, falls within clause 10.1(l) of the Agreement. 9Babcock, in support of its contention that clause 10.1(l) of the Agreement does not oblige Babcock to provide copies of the D&O Policies to BOSI, puts forward the following: (1)The matrix of surrounding facts known to both BOSI and Babcock included relevantly: (a)The parties were both highly sophisticated parties who had the benefit of sophisticated legal advice. (b)The Agreement is a private agreement inter partes. (c)It was or ought to have been known to BOSI that any D&O Policies held by Babcock would require Babcock to maintain confidentiality in respect of the cover, breach of which might lead to loss of cover. Reference is made to Beneficial Finance Corporation v Price Waterhouse (1996) 68 SASR 19 at 42-43 and D Derrington & R S Ashton, The Law of Liability Insurance, 2 nd ed (2005) ("Derrington & Ashton") at [11-322] and [13-129]. (2)The asserted breach of the confidentiality clause by provision of the policies is also relied on in conjunction with clause 10.1(c) because it requires Babcock to comply with all laws which, Babcock submits, includes contractual obligations under the D&O Policies. (3)The Agreement does specifically grant a wide degree of protection to BOSI, giving it wide powers of enquiry and these should not be expanded by reliance on clause 10.1(l). (4)The interpretation advanced by Babcock accords with commonsense and commercial reality because it does not require Babcock to hand over policies in breach of the requirements of insurance and courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient: Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314 per Kirby P. (5)There is a specific sub-clause, clause 10.1(h), which is a highly prescriptive clause dealing with insurance and it says nothing about providing copies of policies to BOSI, thus clause 10.1(l) should be interpreted as dealing with matters other than those the subject of earlier sub-clauses. Further, Ms Higgins made reference to other clauses, such as clause 10.2, clause 10.3(e), clause 10.8 and clause 10.9 in which the information to be provided to BOSI is specified in detail whereas clause 10.1(l) does not descend into such detail. (6)The word "asset" has been used in clause 10.1(l), and is not defined, unlike "Net Assets" (as used in clause 10.7(a)(i)), "Top Twenty Assets" (as used in clause 10.4(a)), "Asset Sales Program" (as defined in clause 26.1), "Asset Sale Protocol" (as used in clause 10.4(a)(iv)) and "Deemed Asset Sale" (as used in clause 10.4(b)); ie BOSI could have utilised a word that would have included insurance policies but did not do so. (7)The Agreement does make specific reference to directors and officers insurance by including premiums for such policies in the definition of "Operating Expenses" in clause 26.1, and this term could have been used in clause 10.1(l). (8)The word "asset" used in clause 10.1(h) cannot mean insurance policies because insurance policy is a form of protection "one obtains in respect of an asset", and so "asset" in clause 10.1(l) should also be interpreted to exclude insurance policies: see paragraph 29 of Ms Higgins' outline of submissions. (9)The rights under insurance policies are contingent rights dependent on: (a)there having been a circumstance giving rise to a claim against Babcock by a third party or a claim against Babcock directors and/or officers by Babcock or by a third party; and (b)that claim falling within the cover granted by the insurance policy. No circumstance giving rise to a possible claim against Babcock or its directors and/or officers has been identified and no assessment could therefore be made of whether a policy might respond and whether Babcock would have a claim under those policies. (10)Ms Higgins drew attention to the fact that an insured will receive "nothing" under a policy in the absence of an insured event and that until there is a loss there is no right of indemnity: see Prudential Insurance Company v Inland Revenue Commissioners [1904] 2 KB 658 and Dalby v India & London Life-Assurance Company (1854) 15 CB 365; and that the insured's right to payment under a liability policy arises only when liability to the third party is determined by agreement, award or judgment: see Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363, MacGillivray on Insurance Law, 11th ed (2008)("MacGillivray" ) at [28-002], and see also Bradley v Eagle Star Insurance Co Ltd [1989] AC 957 which is discussed at [28-003] of MacGillivray . (11)(The reason that BOSI wants to see the D&O Policies is speculative. (12)The natural meaning of "asset" does not include a contingent asset and Babcock's "financial position" is not affected by the existence of an insurance policy or rights under an insurance policy. 10BOSI's reply to these submissions has these limbs: (1)The assertion that both parties ought to have known that any D&O Policies would have confidentiality clauses precluding Babcock from providing them to its lenders is not well founded: (a)No evidence has been led to establish that D&O Policies contain "standard" confidentiality clauses or that the clause in the policy obtained by Babcock is standard. (b)There is no evidence of whether, even if a confidentiality clause was contained in a policy, such a clause would preclude provision of the policies to a lender, as opposed to a third party. (c)There is no evidence of what remedy the asserted standard or usual term of confidentiality provides in respect of breach, and the specific Confidentiality Clause put into evidence does not state what consequences flow from breach. (d)An assumption that the effect of a breach of a confidentiality clause would lead to loss of cover is erroneous. If the Confidentiality Clause advanced in evidence here was standard it would not entitle the insurer to deny cover. (2)The matrix of facts which should, BOSI submits, be taken into account include that: (a)a huge amount of money was being lent by BOSI; (b)the Agreement governs the rights and obligations of the parties as borrower and lender of that very large amount of money; and (c)the Agreement is obviously intending, BOSI submits, to grant extensive protection to the lenders. (3)The interpretation of the Agreement advanced by Babcock is restrictive and promotes a construction that is not in accordance with its express terms. (4)Babcock seeks to have the Court read down the provisions of clause 10.1(l) by virtue of other clauses in the Agreement, particularly clause 10.1(h), and by assertion of the restraint of confidentiality. (5)The heading of clause 10.1 is "General" and the nature of the matters covered by the subclauses in clause 10.1 is different. There are, it is said, three types of matters in clause 10.1: (a)requirements mandating that Babcock do or not do something: sub-clauses (a)-(h), (m), (q) and (r); (b)requirements that specify that certain items of information are to be automatically provided: sub-clauses (j), (k), (n), (o) and (p); and (c)items requiring Babcock to provide information on specific request of BOSI: sub-clause (l). BOSI submits that clause 10.1(h) is dealing with a mandatory requirement and clause 10.1(l) is a requirement for provision of information on request and that it is not surprising at all that clause 10.1(h) does not deal with a request for insurance policies. (6)BOSI submits that it is the interpretation of Babcock which leads to an absurdity because it means that although the borrower is required to do something (ie obtain insurance policies), the lender is not permitted to check and see if the contractual obligation has been complied with. (7)Mr Williams drew attention to the fact that the wording which Ms Higgins proffered through a document which she had prepared as wording which would be required if the plaintiff's requirement for disclosure were to be met actually demonstrated that the policies and what they represent do fall within the term "asset". I have had that document marked MFI 2 since the hearing. 11I have referred to the Confidentiality Clause. Babcock contends that the likelihood of such a clause was a fact of which both parties would have been aware when entering the Agreement and that it is unlikely that it was intended that it would be required to make available copies of the D&O Policies when these policies were likely to (and did in fact) contain confidentiality clauses that prevented such disclosure. This, says the defendant, is an important part of the surrounding circumstances relevant to construing the clause in question, namely clause 10.1(l). 12The Court has the wording of the Confidentiality Clause but otherwise does not have before it the policies. The plaintiff draws attention to the types of cover available and cites A Paolini & D Nambisan, Directors' and Officers' Liability Insurance, (2008) at [3.61] where the learned authors state (omitting footnotes): "It will be seen that this insurance policy contains two different parts, commonly known as Side A and B. On the one hand, it offers cover for individual directors or officers (Side A). On the other hand, it offers reimbursement to the company itself to the extent that the company has indemnified the wrongdoer (Side B). Some policies offer in addition Side C cover, which overlaps with the basic forms of cover and insures against both the company's liability and that of its directors and officers. This type of cover is known as "entity" or "corporate" cover." 13BOSI's argument (see paragraph 17 of the plaintiff's submissions in reply) seemed to conflate Side B and Side C cover. It is theoretically possible that Side B cover to Babcock is available but not Side C cover, but no point was made by Ms Higgins about that and there was no dispute that Babcock is an insured under the D&O Policies. 14Each of Mr Williams and Ms Higgins drew my attention to particular clauses of the Agreement which they contend assists the construction advanced. Principles of construction 15Ms Higgins has set out in paragraphs 19 to 23 of her outline of opening submissions filed 21 October 2011 the principles which she submits the Court should adopt in construing contractual provisions. I set these out (omitting footnotes): "19. Following Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 and Toll (FGCT) v Alphapharm (2004) 219 CLR 165 at [35] - [40] ( per curiam ), it is settled that the exercise of contractual interpretation involves an enquiry into what each party, by words and conduct, would have led a reasonable person, in the position of the other party, to believe. This requires consideration of the text of the instrument, the surrounding circumstances which are either known to the parties or notorious at the time of entry into the contract, and the purpose and object of the transaction. 20. In construing a commercial contract, McCann v Switzerland Insurance Ltd (2000) 203 CLR 579 (per Gleeson CJ at [22]), directs attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects it is intended to secure. The Court must strive to ascribe to the contract a meaning which accords with commercial good sense. Conversely, the words should be given a construction so as "to avoid...[making] commercial nonsense" or be "shown to be commercially inconvenient": Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-314, per Kirby P. 21. The words used in a contract should be interpreted in their grammatical and ordinary sense within the context in which they are used, save to the extent that modification is necessary to avoid absurdity, inconsistency or repugnancy: Australian Paper Manufacturers Ltd v American International Underwriters (Australia) Pty Ltd [1994] 1 VR 685, per Fullagar, Smith and JD Phillips JJ at 689-692; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337, per Mason J at 352. 22. Where parties provide their own dictionary, the Court is bound to give effect to the meaning prescribed thereby: Birks, Re [1990] 1 Ch. 417 at 419 per Sir FH Jeune. As Lord Cottenham L.C. observed in Lloyd v Lloyd (1837) 2 My. & Cr. 192: "If the parties have themselves furnished a key to the meaning of the words used, it is not material by what expresses they convey their intention." 23. Similarly, where a word or expression is expressly defined by a contract, the Court will give effect to the agreed definition in preference to the conventional meaning of the word or expression: T & N Ltd (In administration) v Royal & Sun Alliance Plc [2003] 2 All E.R. (Comm) 939 per Lawrence Collins J at [130] - [132] and [190] - [191]." 16Mr Williams accepts that the summary above accurately reflects the law but points out that paragraph 22 of Ms Higgins' submissions as set out above is not relevant because the parties did not define "asset" or "financial position" in the Agreement. Both counsel agreed that Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 at [4] and [235] summarises accurately the broad approach. At [288] of Franklins v Metcash, the Court reaffirmed the principle in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40] where the High Court unanimously said: "... It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]." 17Both parties contend that the other party's approach flouts business commonsense, and that the need for a businesslike construction will lead to the Court accepting its respective proposed construction. It should be noted that whilst courts endeavour to find a construction that is "commercial", the fundamental rule (identified by Kirby P in Hide & Skin in the passages relied on by Babcock) is that the court "should give the words of a written agreement the natural meaning that they bear" (see Hide & Skin at 313 per Kirby P). 18I make three preliminary observations. First, the question of motive for the request by the plaintiff has been ventilated. Mr Dodson's affidavit ventures into this territory and I confess to having, in the course of Mr Williams' submissions, sought to better understand the motive of the plaintiff in seeking these policies. I think discussions elucidated that the plaintiff is, or at least might reasonably be expected to be, interested in determining whether it is worthwhile BOSI investigating the question of whether Babcock has a claim against current and former directors and officers by ascertaining if there is a policy to which recourse could be had should Babcock be successful in establishing such a claim: see T36-38 of Day 2. BOSI, I should add, submits that its right to the information it seeks is not dependent on it establishing a reason and I accept that submission, but it is helpful to know what its motives are in considering whether the scope of the clause advanced is a reasonable construction. 19The second aspect which should be noted is that clause 10.1(h) of the Agreement does not mention D&O Policies by name. Both parties agree that D&O Policies are a type of policy covered by clause 10.1(h). 20The third aspect is that even though there is agreement that D&O Policies are among the policies that Babcock is required to effect, it is not suggested by either party that that is the only type of policy with which clause 10.1(h) is concerned. It follows that the interpretation to be given to the clause is one that ought, at least prima facie, be pertinent to all types of insurance policies and not only D&O Policies. Construction of "relating to" 21The plaintiff contends that the words "relating to" in clause 10.1(l) are words of wide important, relying on First Provincial Building Society Ltd v Federal Commissioner of Taxation (1995) 128 ALR 118, Timic v Hammock [2001] FCA 74, PMT Partners Pty Ltd v Australian National Parks & Wildlife Service [1995] HCA 36; (1995) 184 CLR 301 and Re Irismay Holdings Pty Ltd [1996] 1 Qd R 172 at 174-175 per Lee J. 22I accept that the words "relating to" are similar to "in relation to" and hence of "wide important": First Provincial Building Society per Hill J at 130 (Black CJ and Carr J concurring), and are "among the broadest which could be used to denote a relationship between one subject matter and another": Nordland Papier AG v Anti-Dumping Authority (1999) 93 FCR 454 at [25] per Lehane J. 23In PMT Partners, Brennan CJ, Gaudron and McHugh JJ at 313 said the meaning of the words "in or in relation to" in an Act or any instrument "must be ascertained by reference to the nature and purpose of the provision in question and the context in which it appears", and Toohey and Gummow JJ said at 331 that the connection required by the phrase "in relation to" is a question of degree and "[t]here must be some 'association' which is 'relevant' or 'appropriate'", although the Court was there addressing an issue of statutory construction. A similar notion of "context" was referred to in Workers Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 653 per Deane, Dawson and Toohey JJ. 24Here the information sought must be information associated with or connected to the financial position of Babcock or associated with or connected to an asset of Babcock. Further ambit of submissions 25Attention was given in the submissions to the requirements of the Corporations Act 2001 (Cth) and Australian Accounting Standard AASB 137 which deals with provisions, contingent liabilities and contingent assets. AASB 137 defines a "contingent asset" as: "a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity." 26Paragraphs 32-35 in AASB 137 also provides: "32 Contingent assets usually arise from unplanned or other unexpected events that give rise to the possibility of an inflow of economic benefits to the entity. An example is a claim that an entity is pursuing through legal processes, where the outcome is uncertain. 33 Contingent assets are not recognised in financial statements since this may result in the recognition of income that may never be realised. However, when the realisation of income is virtually certain, then the related asset is not a contingent asset and its recognition is appropriate. 34 A contingent asset is disclosed, as required by paragraph 89, where an inflow of economic benefits is probable. 35 Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognised in the financial statements of the period in which the change occurs. If an inflow of economic benefits has become probable, an entity discloses the contingent asset (see paragraph 89)." 27In a table at pages 31-32 of AASB 137, there is a summary of the position which explains that if the inflow of economic benefits is virtually certain, the asset is not to be treated as contingent. If the inflow of economic benefits is probable but not virtually certain, the asset is not recognised but disclosure is required; and if the inflow is not probable, then no asset is recognised. Section 300 of the Corporations Act provides that the directors' report must include details of "indemnities given and insurance premiums paid during or since the end of the year for a person who is or has been an officer or auditor" (see s 300(1)(g)) and the amount of the premium (see s 300(8) and (9)). However the directors' report "need not give details of the nature of the liability covered by, or the amount of the premium payable under, a contract of insurance to the extent that disclosure of those details is prohibited by the insurance contract" (see s 300(9)), and Babcock relies on this as reinforcing the confidentiality aspect of such policies. 28Babcock relies on the table found in AASB 137 to claim that the insurance policy is only a contingent asset and that where no claim is articulated or identified there can be no probability that the asset would be recognised. Hence, goes the submission, the policy is only a possible asset and not an asset at all for the purposes of accounting standards relevant to the preparation of corporate accounts and further that since it is not an asset for those purposes it should not be regarded as an asset for the purposes of clause 10.1(l). BOSI submits that the material relied on by Babcock demonstrates that a contingent asset is an asset - but one which does not need to be included in the accounts. 29It will be observed that Babcock's argument seeks to focus attention on whether an amount will be payable under the policies. It is obviously correct that the indemnity will only be payable if it is established that directors and officers are in breach of a duty and hence liable to Babcock and it is established that the liability so established falls within the cover granted by the policy. Alternatively, indemnity may be payable if Babcock has suffered a loss and that loss falls within the cover granted by the policy. In either case, the right to indemnity is contingent in that sense. 30In determining whether the request for a copy of the D&O Policies falls within clause 10.1(l), and recognising that the onus of establishing that it does lies on BOSI, I need to resolve the following questions: (1)Is a D&O Policy which includes insurance cover for Babcock an "asset" of Babcock? (2)Is a potential claim by Babcock against its current and former directors and officers an "asset" of Babcock? (3)Does the D&O Policy relate to the "financial position" of Babcock? (4)Was the likelihood of the existence of a confidentiality obligation and likely loss of cover if that obligation is breached part of the matrix of facts? (5)If the answer to (4) is yes, does this affect the construction of clause 10.1(l)? (6)Assuming that a D&O Policy is an asset in ordinary parlance or might relate to the financial position of Babcock, can the request by the plaintiff, to fall within clause 10.1(l), only be made when there does definitely exist an identified claim against the directors and officers (or the company)? (7)What is the impact of clause 10.9 of the Agreement? (8)Is the request for production of insurance policies a request for "information relating to" an asset? (9)The significance of the words "any other information" in clause 10.1(l) and the existence of clause 10.1(h). The nature of an insurance policy 31In Prudential, which is relied on by Babcock, Channell J said that an insurance contract is a contract whereby the insurer agrees to pay to the insured money (or provide a corresponding benefit) on the occurrence of an uncertain and adverse event in return for a money consideration usually called a premium. Whilst there may be some additions and qualifications that may need to be added to create a universal rule, the essentials are sufficiently encapsulated in Prudential for present purposes. 32The terms of the insurance contract are usually written and contained in a document described as a policy. To call for a copy of the policy is to call for a copy of the contract between the insured and the insurer (or between the reinsured and the reinsurer in contracts of reinsurance). 33The bundle of rights that an insured has under a contract of insurance is a chose in action and is assignable at law, although the policy or contract as such is not assignable in the absence of an express right to assign: see MacGillivray at [20-005] and the cases cited therein. 34The rights of an insured under a policy of insurance pass to his or her legal personal representatives on death, bankruptcy, or, if a corporation, to its liquidator: see MacGillivray at [20-012]. 35At T1 of Day 2 Ms Higgins described the contingent asset as: "...first, an unidentified potential chose in action by [Babcock] against its directors or officers and, secondly, an unspecified right of [Babcock] under a D and O policy". As I have already remarked, the asset is the bundle of rights which Babcock has under the policy. It is not correct to describe it as "an unspecified right". 36I accept that where the event for which insurance has been obtained has occurred, as in Bastion v Gideon Investments Pty Ltd (in liq) [2000] NSWSC 939; (2000) 35 ACSR 466 (although the court in that case was satisfied that the policies were an asset, it was not persuaded on the evidence that the policies were owned by the company), the conclusion that the policy is an asset of the company is more obvious. However, in my view, a policy of insurance which indemnifies a company in respect of loss which might be suffered by it (or in respect of a liability which may have been suffered by it) is an asset of that company within the ordinary meaning of the word, and it is not to be read down because the right to indemnity for which it provides is contingent upon an event occurring which may never occur. 37Even if it be correct to describe the policy and the rights which it grants as a "contingent asset", it is still in my view an asset. At T64.15 of Day 1, Ms Higgins indicated that Babcock does not dispute that "an actual chose in action is property and is thereby described as [an] asset". The chose in action is "actual" because it is the bundle of rights which the insured has under the insurance contract - whether they will ever be exercised is a different matter. 38One further matter to which consideration needs to be given is whether the word "asset" in clauses 10.1(l) and (h) must have the same meaning. Generally speaking, words ought be given the same meaning in one clause as another clause in the contract (although the ambit of this canon of construction encouraging "uniform and consistent" interpretation of a contract is limited: see K Lewison, The Interpretation of Contracts (2007) ("Lewison") at 244-245). It is clear that "assets" in clause 10.1(h) cannot include insurance policies because there can be no insurance in respect of insurance (other than perhaps reinsurance). If it is correct that the rights given by an insurance policy are an "asset", then having regard to the fact that clause 10.1(h) requires an asset of that type to be obtained, I do not think it is appropriate to read down "asset" in clause 10.1(l) because of its meaning in clause 10.1(h). The asset only comes into existence because of compliance with clause 10.1(h). "Asset" - claims against directors 39The primary case of BOSI is that any claims Babcock has against its current and former directors and officers is a chose in action, the value of which chose may well be dependent on whether there is indemnity available under the D&O Policy for those directors and officers, or for Babcock directly. BOSI does not assert that it has identified that such a claim exists, but it contends that it is entitled to enquire about the policies which are relevant to the question of what, if such claims exist, is their potential value to Babcock. Further, BOSI asserts that it does not have to know that Babcock does have rights against its directors and officers to ask about the existence of such claims and their worth. 40Babcock submits that in the absence of some concrete claim against Babcock or by Babcock against its current or former directors and officers, there is nothing to turn the "asset" constituted by the policy into a "real" asset in respect of which information needs to be provided. This seems to propose a type of asset or contingent asset which could be the subject of a request for information if other conditions are met. I do not accept this contention and I do not think that BOSI must, as a precondition of enquiry about the value of any claims against directors and officers, establish that such claims exist, for the following reasons: (1)The lender may not have sufficient information to know whether the current or former directors and officers have breached their duties to Babcock. One of Babcock's points is that BOSI cannot assert that any claims, if identified, would be a claim to which a policy responds. That must be because BOSI does not have the policy terms. (2)If the lender can enquire about the possibility of a cause of action in respect of losses suffered by Babcock, that information may be linked to the question of whether any such cause of action is viable (which could depend on the existence of indemnity cover). (3)In my view, BOSI could, under clause 10.1(l), ask "Does Babcock hold any mining lease and what value is placed on the lease or leases held?" (my example), even if BOSI did not know whether Babcock held any mining leases. A potential chose in action (ie claims against directors and officers) is not as clear-cut as a mining lease, so whereas the answer "no mining leases exist" also answers the question of "What value do they have?", it is not the same with potential claims against directors and officers. (4)Clause 10.1(l) itself does not seek to make any distinction between types of assets and clause 10.1(h) does not make any distinction between types of insurance. (5)The existence of a policy covering property from risk of fire and other damage may be a very significant matter to a lender since without it the security obtained might be worthless. I accept that it would be unusual to list a policy of insurance as an asset in a financial statement but a policy of insurance over property relates to the asset and a policy of indemnity insurance that would provide indemnity to a corporation in respect of claims made or losses it has suffered by reason of breaches of directors' duties relates to the potential choses in action which are potentially assets of Babcock. (6)Mr Williams points out that the fact that Babcock's parent company has been placed in liquidation suggests that the notion that the directors and officers of Babcock might be subject to a claim of breach of duty is not fanciful, and utilising the analogy of the fire policy, he submitted that the events leading to liquidation are akin to a "fire" in the context of the D&O Policies: see T35 of Day 1. Whilst there is no necessary correlation between liquidation and breach of duty, I think that the fact that the parent company has been placed in liquidation suggests that the request for the policies does not arise out of idle speculation on the part of the lenders. I do not think it surprising that the lenders of $3 billion, in entering into the Agreement, would want to create a right to information about all insurance policies obtained by Babcock, and what the limits of cover are in each case. 41In Grosvenor Hill (Queensland) Pty Ltd v Barber (1994) 12 ACSR 646, the Full Federal Court (Beaumont, Spender and Cooper JJ) rejected an appeal from Drummond J who had determined that a firm of valuers were required to produce copies of its professional indemnity policy in connection with "information with respect to the examinable affairs of Interchase". Interchase Corporation Ltd (in liq) ( "Interchase" ) had been wound up and the examination in respect of the financial affairs of Interchase was being conducted on behalf of the liquidators. The context was that the liquidators are (at 647): "concerned to ascertain if Interchase has a good cause of action for damages against Grosvenor [the valuers] by reason of alleged negligence in providing valuations (the valuations) of the Myer Centre in Brisbane". Relevantly, the definition of affairs of a body corporate included "property", and the Court said at 650: "A cause of action which vests in Interchase by reason of breach of a professional duty owed to it by a valuer would, if established, be a chose of action possessed by Interchase and, in that sense, would be property of Interchase. ... It is not, and could not be, seriously disputed that an inquiry as to the existence, and value, of any property that the corporation may possess would be a ``relevant'' inquiry for the purposes of s 597(9)." 42In Re Interchase Corporation Ltd (1996) 68 FCR 481 (in a passage cited in Korda (infra)), Kiefel J said: "Logically I cannot see why information about whether the judgment resulting has any worth, by reason that it will or will not likely be met by payment, is not also then "about" that property." Also see Korda (Receiver and Manager); Re South Eastern Secured Investments Limited (Receivers and Managers Appointed) [2010] FCA 1417; (2010) 191 FCR 63 and Meteyard v Love [2005] NSWCA 444; (2005) 65 NSWLR 36 at [10] per Santow JA, and at [36] and [47] per Basten JA. 43Ms Higgins relied on the judgment of Basten JA in Meteyard v Love (with whom Beazley JA concurred and with whom Santow JA generally agreed) at [42] where his Honour held that "information about" property should not include "any information which may affect the value of the property", but this was in the context of whether the internal considerations of other persons or corporations (including the insurer of the company in receivership and the insurer's advisers) should be treated as part of the examinable affairs of the company, and I do not read what Basten JA said in Meteyard v Love at [42] in relation to third parties as relevantly cutting back what his Honour said at [36] and [47] or what Santow JA said at [10]. I do not think Meteyard v Love supports Babcock's submission. 44Here the insurance is not only that of the directors (ie third parties) but also the company itself. 45Although the cases to which reference has been made are concerned with statutory powers of examination granted to the liquidators, the position of a lender who has been given contractual rights to information (and who is thereby placed in a privileged position), whilst not identical, is not too far removed and the dicta set out at [41] and [42] above are, I think, quite apt in the present context. "Financial position" 46In Re Pine Vale Investments Ltd [1989] 1 Qd R 324 the Court was required to consider whether, for the purposes of the Companies (Acquisition of Shares) (Queensland) Code, the financial position had "materially changed" and hence whether reference should be made to a decline in property prices in the annual accounts of the company. There had been a deterioration in the value of real estate owned by the company (due to general market conditions) and the directors took the view that since a number of the assets held by the company had in the accounts an ascribed value which was less than their true value, the overall position of the company and the net figure in the balance sheet would not be materially different in amount so the decline in property value need not be stated. Connolly J said at 325-326: "...this approach ignores the fact that the paragraph requires an examination, not of the balance sheet alone and therefore not merely of the financial position as revealed by the balance sheet, but of the financial position in fact." After noting that he was prepared to accept that assets had values greater than those stated in the balance sheet, Connolly J said at 326: "It does not and cannot mean that a large fall in value of substantial assets did not reduce the nett worth of the company. The suggested adjustments to balance sheet values could only increase the nett worth and could not be used to offset the admitted fall in value of other assets so as, in effect, to obliterate them." His Honour also expressed the view at 326 that a change in the nature of investments of the same value but of a different character would alter the risk factors and be a material change. 47The reasoning in Re Pine Vale Investments is inconsistent with a contention that "financial position" must mean "net financial position", and that a claim on the policy would correspond only to the company's liability or loss, and therefore not affect Babcock's financial position. Ms Higgins asserts that this is not the contention of Babcock (see T1.47-48 of Day 2), but at T69.18-26 of Day 1 there is a submission of that kind. 48I do not think it can be doubted that if there was in existence a potential claim against Babcock, the existence of a policy of insurance covering that liability would affect Babcock's financial position. If Babcock had suffered loss by reason of breach of directors' duties or was liable to a third party and had no insurance policy to compensate for that loss, its financial position would be materially worse than if it did. The insurance which clause 10.1(h) requires to be effected was insurance relating to Babcock's "business" and "assets" so that reading clause 10.1(l) as requiring the policies to be produced, if sought, is consistent with that mandatory requirement. 49There remain four issues with which I need to deal: (1)whether the "confidentiality" requirement is part of the matrix and whether it renders the construction advanced by BOSI as commercially unsound or unrealistic; (2)the impact of clause 10.9 of the Agreement; (3)whether the request for production of insurance policies is a request for "information relating to" an asset; and (4)whether the Court ought to read clause 10.1(l) down because of the words "other information". Confidentiality clauses 50In Beneficial Finance, a plaintiff, in an action against a firm of auditors, sought to obtain a copy of the auditors' insurance policy. At first instance the auditors were ordered to provide the policy but on appeal the majority of the Full Court of the Supreme Court of South Australia (Perry and Lander JJ) held that the policy had nothing to do with the claim and there being no evidence of any dispute between the insured and the insurers, that there was no basis for discovery of the policy being ordered. Cox J, in dissent, felt that the Court was bound by an earlier decision of State Bank of South Australia v Smoothdale (No 2) Ltd (1993) 174 LSJS 378 upon which the trial judge had relied. 51In the course of his judgment in Beneficial Finance , Lander J said, at 42-43: "It is the case that professional people and their underwriters are anxious not to publish details of their insurance cover. There is a perception in the commercial world that the existence of appropriate cover of insurance is not only a protection from, but as well, a magnet for claims, because plaintiffs perceive a chance of recovery from a party who is insured. Where the insured parties and non insured parties are joint or concurrent tort feasors it means those who have insurance cover will more likely attract proceedings than those without cover and in due course, even if only partly responsible for the damages become liable for the whole (Wrongs Act). Apart from the odium associated with a claim of professional negligence, it is recognised claims brought against professional people, even if unsuccessful, cause an increase and sometimes a significant increase in the premium paid for professional indemnity cover. The reason I have referred to these matters is to make clear that at least in the mind of the appellant there are good reasons to resist a request to divulge its insurance arrangements and to resist an application which will require the divulging of that information. ... That may well mean handing over documents containing information relating to the action itself including perhaps the statements of partners commenting upon the claim or the claim for damages. The documents might refer to the appellant's attitude to the appropriateness of the claim. None of these matters would ordinarily come to the attention of a plaintiff in proceedings but this order has the potentiality to give to the respondents information of the most damaging kind provided by the appellant for the purpose of advising its insurers." 52These comments of Lander J are expressed to be an explanation as to why the defendants did not want to divulge the information sought. Whilst I accept that insured professionals would prefer not to disclose information about insurance policies that they hold lest it might encourage claims, I think it is not unknown for persons intending to contract with professional persons to require details of professional indemnity cover before retaining the professional, and for the professionals (builders and engineers particularly) to provide those details. I do not think the comments of Lander J can be elevated to the status of evidence, and especially not in the context of what unstated limitations might be imposed on a borrower by its insurer. 53Derrington & Ashton , a text dealing with professional indemnity insurance, speak about usual conditions in a section on directors and officers policies and give an example of a term more specific to this type of cover at [11-322]: "The insured parties will not reveal to others the existence or details of the insurance unless required by law to do so or with the consent of the insurer." The learned authors also summarised the first two sentences of the passages in Lander J's judgment in Beneficial Finance which I have set out above at [51]. 54Mr Williams pointed out that Dr Paolini and Mr Nambisan, in their text (supra), do not say anything about terms of confidentiality and this contention was not disputed. 55I do not think that I can treat the comments of Lander J in Beneficial Finance and the learned authors in Derrington & Ashton as evidence (and as to the latter Ms Higgins accepted this: see T47.8 of Day 2) of a notorious practice within the insurance market, but even assuming it is or could be so treated, it cannot be treated as evidence of a matter notorious within the banking sector or amongst lenders. To be a fact or matter which can be "presumed" to be known to a party who has not been shown to have known of it (see Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1981-1982) 149 CLR 337 at 352 per Mason J and The Movie Network Channels Pty Ltd v Optus Vision Pty Ltd [2010] NSWCA 111), the fact or matter must be notorious "in the market in which the parties are operating" ( The Movie Network Channels at [100] per Macfarlan JA). No evidence was called as to that and I do not think that I can treat the existence of such a confidentiality clause as "notorious" and therefore one which can be "presumed" to be have known to both parties. 56There are other problems with Babcock's argument. First, clause 10.1(h) is not limited to D&O Policies and the request for information pursuant to clause 10.1(l) is not qualified by reference to such policies. Second, even on Babcock's case the prohibition on disclosure is not absolute and it is not clear why it could not have been assumed that a borrower who was borrowing a very large amount of money would not seek the agreement of its insurers to the clause before entering into the Agreement (or advising the insurer if the policy was effected after the Agreement was entered into). As Mr Williams pointed out, the Agreement contains a warranty at clause 9.1(e) that: "Each Obligor represents and warrants in favour of each Indemnified Party that: ... (e) ( no contravention ) it is not, and will not by entering into the Finance Documents to which it is a party and the transactions under them, be in contravention of any law, regulation, obligation, undertaking, deed, warranty or any directive of any Governmental Agency;" Ms Higgins argued that Babcock would not have given such a warranty if clause 10.1(l) has the meaning for which BOSI contends, and that clause 9.1(e) is an "objectively clear indication that the parties did not understand clause 10.1(l) to be operating in the manner for which the plaintiff currently contends" (see T58.37-T59.1 of Day 1). I think this argument is circular and I do not accept it. 57A third problem with Babcock's argument is that if the "notorious" confidentiality clause were similar to that actually in evidence here, it excepts from prohibition obligations imposed by law. Ms Higgins accepted that an obligation imposed by contract is one imposed by law: see T58.3-32 of Day 1. 58Although there was some debate about what remedies an insurer might have for breach of confidentiality where no consequence of breach is specified and what responses might be available by virtue of the Insurance Contracts Act 1984 (Cth), I do not think it is necessary to venture into that territory in view of the matters referred to above. The impact of clause 10.9 of the Agreement 59One argument of BOSI is that unless clause 10.1(l) is read as it contends it should be, the lenders have no means to ascertain whether Babcock has complied with clause 10.1(h), which requires Babcock to obtain and maintain insurance in relation to its business and assets. Ms Higgins submitted that if the lender asked whether clause 10.1(h) had been complied with, it might be required, in accordance with an implied duty of good faith, to indicate whether it had; but in any event, the lender did not need to ask because the borrower was required to certify pursuant to clause 10.9 of the Agreement that it had complied with this obligation. 60Mr Williams makes the point that if Ms Higgins is right in accepting that the borrower would be required by reason of a duty of good faith or by virtue of an implied term to respond to a request from the lender that clause 10.1(h) has been complied with, that is inconsistent with her case because no such right is identified. It could also be put that the duty would extend to providing evidence of compliance if sought. Mr Williams submitted that it would be a surprising conclusion that there was no requirement on the borrower to provide information about the policies which the borrower was specifically required to obtain. 61Ms Higgins responded by submitting that the requirement for a Compliance Certificate pursuant to clause 10.9 of the Agreement would confirm Babcock's compliance with clause 10.1(h) without the provision of the policies themselves (see T16-17 and T22-23 of Day 2). The form of the Compliance Certificate can be found in Schedule 4 of the Agreement (see page 542 of Exhibit A2) which provides, relevantly, in paragraph 4: "4. We confirm that no Event of Default (other than the Acknowledged Event of Default) or Potential Event of Default is continuing with respect to any Obligor." 62An "Event of Default" is defined in clause 11.1 of the Agreement and includes the breach of any covenant or undertaking given to BOSI under the Agreement (not dealt with elsewhere in clause 11.1) which is not remedied within five business days (see clause 11.1(l)(ii)). 63However, the Compliance Certificate would not of itself provide any information as to the type or extent of policies obtained so I do not think it is sufficient, in practical terms, to answer the need for the lender to be satisfied that the insurance obtained is sufficient or appropriate (or simply to be informed for its own purposes) and hence to require clause 10.1(l) to be read as narrowly as Babcock contends. Whether the request for production of insurance policies is a request for "information relating to" an asset 64Babcock also advanced an argument that BOSI's request for the production of the D&O policies is not a request for "information relating to" an asset of Babcock as per clause 10.1(l). Ms Higgins submits that "[i]nformation relating to a thing is distinct from the thing itself" (see paragraph 56 of her outline of submissions), and in oral submissions she gave the example that "[i]nformation about a wind farm in France does not include the production of the wind farm to the facility agent" (see T11.42-43 of Day 2). 65I accept that a request for information about an asset is not the same as a request for production of the asset itself. Here, the relevant "asset" is the bundle of rights pursuant to an insurance policy, and it is an intangible chose in action which cannot be produced. Rather than seeking production of the chose in action per se, the plaintiff is seeking production of copies of the policies. Providing copies of the policies is the best way of providing information about the asset (ie the chose in action), and hence the plaintiff's request constitutes a request for "information relating to" the chose in action, as opposed to the chose in action itself. "any other information" 66The remaining issue is whether the words "any other information" in clause 10.1(l) should be read as meaning information about matters not already mentioned in clauses 10.1(a) to (k). 67I do not accept that contention by Babcock for the following reasons: (1)Clause 10.1(h) does not require any information to be provided - it requires Babcock to effect and maintain insurance. (2)Taxes, accounts, litigation and notices from government agencies which "may have a Material Adverse Effect" are all matters which relate to the financial position of the company. There is no logical reason why the lender would be agreeing to restrict its request for information to matters that did not include such aspects of the Babcock and the Group's business. (3)Babcock relies on the principle " expressio unius est exclusio alterius " ie the expression of one thing is the exclusion of another: see Lewison at 254-258. If there was no clause 10.1(l) and BOSI was seeking to argue that the policies should be provided pursuant to clause 10.1(h) the canon of construction or a closely related canon " expressum tacit cessare tacitum ", ie express terms negative implied terms (see Lewison at 259) might apply, but the case advanced is that clause 10.1(l) should not be read to include a request for information about insurance policies because policies are dealt with in clause 10.1(h). Given that clause 10.1(h) does not say anything about Babcock providing information I do not think the argument is correct. I accept Mr Williams' argument that it is because obtaining insurance is specified in clause 10.1(h) that it is reasonable to read the request for information as extending to that as well (provided the information sought meets the criteria of clause 10.1(l)). Conclusion 68In my view, therefore, the directors and officers contracts of insurance are assets of Babcock, and a request for the D&O Policies is a request for information relating to those assets and to choses in action which may be held by Babcock, and is also a request for information relating to the financial position of Babcock. 69Accordingly, the request of BOSI is one which falls within the terms of clause 10.1(l). BOSI is therefore entitled to orders in accordance with paragraphs 1 and 3 of the summons filed 12 August 2011.