Hellyer & Anor v AMP General Insurance Ltd

COUNSEL : D. Toomey - Applicant R. Cavanagh - Respondent SOLICITORS : Porters Lawyers - Applicant Henry Davis York - Respondent CATCHWORDS : Seeking to sue insurer direct - interaction of s 6 Law Reform (Miscellaneous Provisions) Act 1946 and s 54 Isurance Contracts Act 1984 (Cth) - what constitutes a claim LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Insurance Contracts Act 1984 (Cth) Walton v National Employers Insurance Association [1973] 2 NSWLR 73 Junemill Ltd (In liq) v FAI General Insurance Co Ltd (1996) 9 ANZ Insurance Cases 61-315 West Wake Price and Co v Ching [1956] 3 All ER 821 East End Real Estate Pty Ltd v C.E. Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400 CASES CITED : East End Real Estate Pty Ltd v C.E. Heath Casualty& General Insurance Ltd (1992) 7 Leg Rep SL2 Greentree v FAI General Insurance (1998) 44 NSWLR 706 Bailey v NSW Medical Defence Union Ltd (1995) 184 CLR 399 FAI General Insurance v Jarvis (1999) 46 NSWLR 1 McMillan v Mannix (1993) 31 NSWLR 538 DECISION : Application dismissed

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20367/97 Kerry Hellyer (formerly Williams) and Mark Williams v AMP General Insurance Limited

1 About 16 March 1994 each of the plaintiffs entered into an agreement with Diveteach Pty Ltd, which subsequently changed its name to Aquateach Pty Limited, in which Diveteach was, during a five day introductory course, to teach them the basic elements of safe scuba diving. The course was to be conducted in accordance with the procedures, practices and standards laid down by the Professional Association of Diving Instructors (PADI). Diveteach engaged Andrew Gunst, a qualified diving instructor, for the purpose of teaching, providing instruction and supervising the plaintiffs in scuba diving. During the course of diving instruction provided by Gunst and supervised by him from 16 to 20 May 1994 the plaintiffs suffered decompression illness, loss and damage.

2 Gunst had effected a professional indemnity insurance policy with AMP General Insurance Limited (AMPG) through a scheme underwritten by AMPG for the Australian Underwater Federation. That policy with AMPG was current during the period December 1993 to 31 October 1994 and renewed for 2 years thereafter. Gunst died on 8 November 1996.

3 The plaintiffs seek leave to commence proceeding against AMPG pursuant to the provisions of section 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 and leave to amend the statement of claim so as to join AMPG as the second defendant. The actual policy with completed schedules cannot be found. AMPG has produced a copy of a professional indemnity policy of insurance, stating that it is that policy wording which most likely formed the basis of the contract of insurance between Mr Gunst and AMPG as at May 1994. AMPG has also stated that it is highly unlikely that any other type of policy would have been issued to insure the Australian Underwater Federation's professional indemnity risk. The plaintiffs cannot and do not challenge these assertions.

4 AMPG has described the policy as a claims made and notified policy. The copy policy produced provides: "[AMPG] (hereinafter called the Company) hereby agrees, subject to payment of the premium specified in the schedule and subject to the terms of this policy, to indemnify the Insured up to the limit of indemnity against all sums which the insured shall become legally liable to pay as a result of any claim or claims first made against the Insured during the Period of Insurance and reported to the Company during that period for breach of professional duty arising out of any negligence whether by way of act, error or omission on the part of the insured." 5 The words 'and reported to the Company during that period' are of importance in the present case. Condition 1 of the policy provides: "1. Notification of Claims:

Upon the making of a claim against the Insured, or the making of any allegation or the discovery of any circumstance which indicates the possibility of a claim arising, the Insured shall notify the Company in writing immediately and shall provide to the Company whatever information relating to the claim or possible claim is in the Insured's possession.

If during the Period of Insurance the Insured becomes aware of any circumstance which may subsequently give rise to a claim against the Insured and during the Period of Insurance gives written notice to the Company of such circumstance, any claim which may subsequently be made against the Insured arising out of that circumstance shall be deemed for the purposes of this policy to have been made during the Period of Insurance.'" 6 Clause 1, Definitions provides: "1. The expression 'the Insured' shall mean: (4) the person, members of the partnership, company or corporation named as the Insured in the Schedule and

(4) any person who is or becomes or ceases to be during the Period of Insurance a principal, partner, director or employee of the Insured as named in the Schedule but in each case only in respect of work carried out in the conduct of the Insured's Profession by the Insured as named in the Schedule"

7 Clause 2 (b) of the Extensions provides: "Former Partners and Directors

This policy is hereby extended by adding the following sub-paragraphs to Definition 1 on page 1:

(4) any person who has been a Principal, Partner or Director of the insured as named in the Schedule (4) the legal personal representatives of any Principal, Partner, or Director as defined in paragraphs b. and c. above in the event of the death or incapacity of such person" 8 Heather Ballantyne was the Acting Professional Indemnity Claims Manager for AMPG from May 1994 to the end of July 1994. In August 1994 she was appointed permanently as the Claims Manager. There was a standard procedure for dealing with any new claims or notifications of circumstances which may give rise to a claim. In summary the details of the new claim or circumstances were entered onto the AMPG general computer system which allocated a claim number. A physical claims file was also created. Claims and notifications were acknowledged. The files were periodically reviewed by the claims officers. Inactive files were closed after one year with the physical file being placed in the archives. An entry was made on the computer that the file had been closed and the reserve was deleted. The matter could still be accessed on the computer screen by way of the name of the insured or the claimant or the file number.

9 Scott Bendall is a claims officer with Cobalt Run Off Services Limited. Cobalt manages claims for AMPG now known a TGI Australia Ltd (TGI). Mr Bendall has made searches of the relevant databases. Such searches have revealed no notification of a claim or a circumstance by Andrew Gunst relating to the plaintiffs. Similarly there was no claim against Australian Underwater Federation or any claims involving the plaintiffs, Aquateach Pty Ltd or Andrew Gunst save for that relating to the claim the subject of these proceedings, that claim file being opened on 2 April 1999. A physical search yielded no other file.

10 In her affidavit of 8 February 2001 Mrs K. Hellyer (formerly Williams) said that on returning to Canberra on 22 May 1994 she and Mark Williams saw their local doctor. It was discovered that Mark Williams was suffering from decompression sickness. He was transported via ambulance to HMAS Penguin at Balmoral and placed in a decompression chamber. Mrs Hellyer accompanied him to Balmoral. The doctors there discovered that she was suffering from decompression sickness and placed her in a decompression chamber.

11 About 26 May 1994, whilst at Balmoral, Mrs Hellyer telephoned Cairns Memorial Swimming Pool and asked to speak to Mr Gunst. A person came onto the telephone identifying himself as Mr Gunst. Mrs Hellyer deposed to a conversation with him to this effect: "KW: Hi, this is Kerry Williams and I've been diagnosed with the bends. I'm at HMAS Penguin being decompressed. Gunst: Are you serious?

Gunst then laughed and said: Wow, really? Well congratulations, you're my first.

KW: Are any of the participants from our diving course still in Cairns? Could you please contact anyone who is still there to make sure they are OK? Gunst: No, most of them left this morning.

KW: Where have they gone? Gunst: I don't know.

KW: Could you please contact anyone who is still there to make sure they are OK. You should suggest to them to get checked for the bends. Gunst: No, they'll be all right.

12 In her further affidavit of 11 July 2002 Mrs K. Hellyer (Williams) said that having re-read paragraph 6 of her earlier affidavit she believed it was inaccurate in one respect. She continued, 'I recall informing Mr Gunst that both I and my then boyfriend, Mark Williams, had been diagnosed with the bends and that we were both being treated at HMAS Penguin.'

13 In his affidavit if 11 July 2002 Mark Williams stated that the first two days of the diving course were mainly theoretical, including exercises in a swimming pool. Between 18 and 20 May 1994 he participated in eight dives in the ocean. On the last dive at about 11.00 am on 20 May 1994 he descended to a depth of about 12 metres. After a short time he ascended to 6 metres. His affidavit continued:

I immediately experienced sharp agonising pain in my forehead. It felt like somebody had shot a spear through my head. I was paralysed and could not move.

After a failed attempt, I eventually ascended to the surface with the assistant dive master, 'Justin'.

I said to Justin words to he effect, 'I just felt a sharp agonising pain in my forehead as I ascended to six metres.' Justin replied, 'That was a sinus squeeze'.

I then said to Justin words to the effect, 'My head is killing me. I am not going to continue with the dive'. Justin replied, 'Swim back to the boat and I will stay on the surface and watch you.' I then swam back to the boat.

That evening at a hotel bar, I said to Andrew Gunst words to the effect, 'Today I felt a sharp agonising pain in my forehead as I ascended to six metres and now I feel like I can't regain my balance.' He replied, 'That is because you are back on land.'

On 22 May 1994, Kerry and I returned to Canberra. I was still feeling unwell and an appointment was made for myself and Kerry to see our general practitioner, Dr Barraclough. At the appointment, Dr Barraclough said to me words to the effect, 'You are suffering decompression sickness.'

I was then transported by ambulance to Balmoral in Sydney to HMAS Penguin where I was placed in a decompression chamber.

On or about 25 May 1994, I was with Kerry when she made a phone call. I heard her say words to the effect: "Can I speak to Andrew Gunst?' A short time later, I heard her say words to the effect: "Andrew, this is Kerry Hellyer (sic). I am with Mark in Sydney. We both have been diagnosed with decompression sickness and are having treatment at HMAS Penguin. You should contact the other participants on the course, especially Sil, to make sure they are OK." 14 The plaintiffs pointed out that the policy contains no definition of a 'claim'. The plaintiffs submitted that the telephone conversation between Mrs Hellyer and Mr Gunst in May 1994 constituted a claim for the purpose of the policy. That telephone call was made for the purpose of asserting her right and that of Mr Williams against Gunst. She told him of the serious consequences from which she and Mr Williams were suffering as a result of the diving course they had undertaken under Gunst.

15 AMPG contended that the telephone call did not amount to a claim. Mrs Hellyer would have had to have said more, for example, you will have to pay for the damage we are suffering. In Sutton, The Law of Insurance, para 15.19 the following appears: "The word 'claim' is ambiguous for it may mean the occurrence of facts giving rise to a claim, that is, the right to make a claim, or the assertion of that right either by a formal demand or the initiation of proceedings. There is also the intermediate step of an informal intimation that a demand will be made. Which meaning is to be placed on the word must depend on the circumstances of a particular case and the context in which the term is used, and it is of limited utility to examine the meaning ascribed to the word in other insurance policies for other purposes … with policies of professional indemnity insurance … the word 'claim' is usually defined in terms of a demand for compensation made by a third party against the assured, or legal proceedings instituted against the insured."

16 Footnote 99 reads: "A claim for purposes of a 'claims made' policy was described by Hawke, 'Notification of Circumstances Under Claims Made Policies' (1994) 4 Ins LJ 252 at 256 as follows: "Subject to policy definition, a claim need not be embodied in formal legal or arbitral proceedings, but it must consist of an explicit demand for compensation of some sort quantified or otherwise, not merely of implied threats or allegations of breach of duty. Provided it consists of an assertion by the claim of a legal right to damages from the assured, in terms which clearly evince an intention to pursue it, the communication will constitute a claim against the assured for the purposes of a claims made policy."

17 In Walton v National Employers Insurance Association [1973] 2 NSWLR 73 the Court of Appeal was dealing with a policy of insurance which provided for indemnity: "Against any claim for which the Insured is legally liable arising out of negligence in the conduct of the Insured's business as Stockbrokers committed during the Period of Insurance by the Insured or the Insured's partners or employees." 18 Bowen JA at 82 said: "In my opinion the word 'claim' is here used in its primary sense of a demand for something as due, an assertion of a right to something. It imports the assertion, demand or challenge of something as a right. This, I think, is supported by other provisions of the policy. There are three time elements to be satisfied. The claim must arise out of negligence committed during the period of insurance (s 3B). The claim must itself be 'made' during the period of insurance (operative cl. (b)). And it must not arise from an "occurrence before inception date" of the policy (general exceptions cl. 3 (c)). Under the general conditions (cl. 2) the insured, as a condition precedent to his right to be indemnified, must give the insurer notice in writing of any claim made against him immediately it shall have come to his knowledge, or that of his representative."

19 In Junemill Ltd (In liq) v FAI General Insurance Co Ltd (1996) 9 ANZ Insurance Cases 61-315 at 76,491 Dowsett J followed what Bowen JA had said and pointed out that a similar view was taken by Devlin J in West Wake Price and Co v Ching, [1956] 3 All ER 821 at 829-831. Dowsett J accepted that it was a matter of construction of the contract in question. Dowsett J continued: "A mere allegation that, 'there exists a number of grounds for legal proceedings against you in relation to the valuations', is not, in my view, accurately described as a 'claim', nor is an assertion that, '… in the event of our client sustaining a loss in relation to any of the mortgages comprising its mortgage portfolio and upon which you have prepared a valuation, our client intends to commence legal proceedings against you.' A claim must assert some entitlement vested in the claimant and enforceable against the recipient. An assertion of a possible future claim is not enough."

20 In the present case under the policy the indemnity is against all sums which the Insured shall become legally liable to pay as a result of any claim or claims first made against the Insured during the period of Insurance and reported to the Company during that period. The indemnity is limited to claims for damages for professional negligence. The duty upon the Insured is to report in writing immediately not only the making of a claim but also the making of any allegation or the discovery of any circumstance which indicates the possibility of a claim arising. The second part of Condition 1 is of importance as it provides that if, during the period of insurance, the insured becomes aware of any circumstance which may subsequently give rise to a claim against the insured and during the period of insurance gives written notice to AMPG of such circumstance any claim which may subsequently be made against the insured arising out of that circumstance shall be deemed for the purposes of this policy to have been made during the period of insurance.

21 AMPG pointed out that in the conversation between Mrs Hellyer and Gunst she did not say that Gunst was to blame or that they proposed to sue him for any damage suffered or that they intended to pursue or were considering making a claim for compensation. AMPG further submitted that there was in essence nothing for Gunst to report to the insurer because there was no claim made against him during the period of insurance.

22 AMPG submitted that not only was no claim made against Gunst during the relevant policy period but there were no circumstances notified during that period which would bring the deeming provision into operation. It was submitted that merely telephoning someone and saying, 'I feel sick' does not qualify as circumstances likely to give rise to a claim. That does not accurately summarise what happened in the present case or pay heed to the context in which the conversation occurred. It was submitted that Mr Gunst was not made aware that there was a possibility of a claim against him for malpractice. I think that he would have realised that a claim may be made against him.

23 At one stage AMPG appeared to be submitting that Gunst had to appreciate that a claim was likely to be made. In my opinion it is sufficient if the insured is told of circumstances which would point to a claim being in the wings. In the present case Gunst was told of the plaintiffs who had attended the diving course which he had conducted and supervised being treated for bends and being decompressed at HMAS Penguin. That was a serious state of affairs.

24 I do not regard what Mrs Hellyer said in the telephone call as the making of a claim. It fell marginally short of a claim. However, what she said made Gunst aware of circumstances which were subsequently likely to give rise to a claim. Indeed, the circumstances which Mrs Hellyer reported made claims by her and Mr Williams probable. Gunst should have notified AMPG in writing of the circumstances communicated by Mrs Hellyer to him and thereby brought the deeming provision of the contract of insurance into operation. If that had occurred, this would have allowed AMPG to have investigated the matter promptly. As events have transpired, the prompt seeking of medical advice on 22 May 1994 and the prompt placing of each plaintiff in a decompression chamber reinforce the truthfulness of the claims subsequently made.

25 The evidence of AMPG is to the effect that no notification was received from Gunst. His attitude to what Mrs Hellyer said to him points to it being unlikely that he would have notified AMPG.

26 In order to overcome the breaches of the policy conditions by Gunst which meant that the liability of AMPG to him (or his estate) was avoided the plaintiffs relied on s 54 of the Insurance Contracts Act 1954, which relevantly provides: "(1). Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer's liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer's interests were prejudiced as a result of that act. … (4) A reference in this section to an act includes a reference to: (4) an omission; and (4) an act or omission that has the effect of altering the state or condition of the subject-matter of the contract or of allowing the state or condition of that subject-matter to alter.' 27 In East End Real Estate Pty Ltd v C. E. Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400 the Court of Appeal (Gleeson CJ, Mahoney and Clarke JJA) held that where a policy of professional indemnity insurance provides that the insured is indemnified against claims first made against the insured within the period of insurance and which are notified to the insurer during the period of cover, s 54 operates to prevent the claim from failing merely by reason of the circumstances that the claim against the insured was notified to the insurer after the expiration of the period of insurance cover. The failure of an insured to notify his insurer was treated as an omission and thus, by virtue of s 54(6), within s 54(1) of the Insurance Contracts Act 1984. The High Court refused special leave to appeal on the basis that the Court of Appeal decision was not attended with sufficient doubt: East End Real Estate Pty Ltd v C.E. Heath Casualty & General Insurance Ltd (1992) 7 Leg Rep SL2.

28 In Greentree v FAI General Insurance (1998) 44 NSWLR 706 it was held that the omission of a third party to make a claim on the insured was not an 'omission … of some other person' within s 54(1) in a 'claims made and notified policy'. At p 723 Mason P observed: "It is one thing to say that the insured's failure to notify receipt of a claim within the period of cover may be treated as an omission attracting s 54 in a proper case. It is another thing entirely to invoke s 54 where the insured had not even received a claim within the period of cover." 29 This case differs from Greentree in that the third party (Mrs Hellyer) promptly within the period of insurance notified Gunst of circumstances which would probably lead to claims being made and if Gunst had, as he was obliged to do, given notice to AMPG of those circumstances then the subsequent claim made against the Insured would have been deemed for the purpose of the policy to have been made during the period of insurance. In view of Gunst's death and he having left no known estate it would not be necessary to first sue his estate. That would be pointless. The combination of the contents of the telephone call and the deeming clause in the provision for notification make this case a little different from some of the other cases. The deeming clause is a provision for the benefit of the insured. If the insured wants the benefit of being covered by the policy he is required to notify the insurer of the circumstances. Such notice enables the insurer to commence its investigations.

30 It is now necessary to turn to the provisions of section 6(1) and (4) of the Law Reform (Miscellaneous Provisions) Act 1946: "(1) If any person (hereinafter in this Part referred to as the insured) had, whether before or after the commencement of this Act, entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation, the amount of his liability shall in the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. … (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured:

Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim have been taken….'

31 In Bailey v NSW Medical Defence Union Ltd (1995) 184 CLR 399 at 444 McHugh and Gummow JJ pointed out that what s 6 of the 1946 Act achieves is the creation of a new right with an associated remedy to enforce it. That new right is given the name 'charge'. At 446 the Justices said: "By its own force, the statute, in circumstances where it applies, creates, on the happening of the event giving rise to the claim for damages or compensation, a charge on all insurance moneys which are then payable in respect of the liability against which the insured is indemnified and on all such insurance moneys that may become payable in respect of that liability." At 447 the Justices continued: "The obligations, the performance of which s 6 seeks to secure, are not only payment by the insurer to the insured of all insurance moneys that are or may be payable, but also the performance by the insured of the obligation to pay damages or compensation to the claimant in discharge of the liability of the insured to the claimant."

As to s 6(4) they said at 448-9: "This provision is not directing the court that leave be denied only in a case where it is satisfied both of entitlement to disclaim liability and that necessary steps have been taken to establish entitlement to do so. Leave may be refused in other cases but must be refused in these cases. What the sentence does suggest is that, if there is an entitlement to disclaim, there may be no moneys which are or may become payable in respect of the liability of the insurer to the insured and thus nothing upon which the charge specified in s 6(1) can operate.

The phrase in s 6(4) is 'the insurer is entitled under the terms of the contract of insurance to disclaim liability'. A clear example of such entitlement would be a disclaimer under the general law right to rescind for non-disclosure. Another instance would be the exercise of the right to avoid the contract of insurance given the insurer in certain cases of non-disclosure and misrepresentation by s 28 of the Insurance Contracts Act 1984 (Cth).

However, the terms of s 6(4) of the Law Reform Act are apt to include more than avoidance by reason of some vitiating factor in the formation of the contract of insurance. For example, in McMillan v Mannix, a provision of the policy of insurance required the co-operation of the insured in the event of a claim; such co-operation was a condition precedent to liability and breach of it was a basis for disclaiming liability. It was true that the relevant event, failure to co-operate in the event of a claim, occurred only after, in the terms of s 6(1), 'the happening of the event giving rise to the claim for damage or compensation'. Nevertheless, the entitlement to disclaim liability was conferred by the contract as it stood at the earlier date, albeit the entitlement became exercisable only after the happening of a later event. In McMillan v Mannix, the New South Wales Court of Appeal, by majority, held, correctly in our view, that there were no insurance moneys which were or might become payable in the sense of s 6(1) of the Law Reform Act." The majority (Brennan CJ, Deane and Dawson JJ) agreed (at 415) with the observations of McHugh and Gummow JJ on s 6. The plaintiffs placed considerable reliance upon these observations in developing their alternative argument that as section 6(1) creates a charge over the insurance moneys it creates a substantive right in itself.

32 In FAI General Insurance v Jarvis (1999) 46 NSWLR 1 Powell JA, after a careful review of the facts and the authorities expressed the view at 18 that the decision of the High Court in Bailey v NSW Medical Defence Union Ltd (1995) 184 CLR 399 and that of the NSW Court of Appeal in McMillan v Mannix (1993) 31 NSWLR 538 seemed to indicate that a failure by an insured to comply with policy provisions requiring prompt notification of occurrences, preservation of property and assistance and co-operation and not making any admissions is - notwithstanding s 54 of the Insurance Contracts Act 1984 (Cth) - sufficient for the purposes of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 to prevent a court granting to a plaintiff or an intended plaintiff leave to commence proceedings against or leave to amend existing proceeding so as to permit the making of a claim against the relevant insurer pursuant to s 6 of the Act. Powell JA continued at 18-19: "That this should be so is not entirely surprising, for the provisions of s 6(4) are directed to the questions whether leave to commence, or to amend, such proceeding might be granted, whereas the provisions of s 54 of the Insurance Contracts Act clearly require the determination, at a trial, of the extent of the prejudice which an insurer may have suffered, and the determination of whether or not, in those circumstances, the act or omission of the insured which would other wise have permitted a disclaimer of liability should be permitted to provide a defence, either in whole, or in part, to the claim made by the insured: see, eg, Ferrcom Pty Ltd v Commercial Union Assurance Co of Australia Ltd (1993) 176 CLR 332; Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652. If this be a correct assessment of the effect of the judgment of the High Court in Bailey v NSW Medical Defence Union Ltd then it follows that the provisions of s 54 of the Insurance Contracts Act are irrelevant to any consideration of the question whether or not leave to commence, or to amend, proceedings ought to be given pursuant to the provisions of s 6(4) of the Law Reform (Miscellaneous Provisions) Act. If this be not so, then, by reason of the coming into force of the provisions of s 54 of the Insurance Contracts Act, the proviso to s 6(4) of the Law Reform (Miscellaneous Provisions) Act had long since been deprived of operation, a position for which no-one seems yet to have argued." 33 The plaintiffs contended that FAI v Jarvis was wrongly decided and reserved the right to so argue on appeal. The plaintiffs submitted that he construction of s 6(4) adopted by Powell JA, deprived the second paragraph of s 6(4) of much of its effect. Putting aside the unusual facts of the present case there will be cases where the injured party has made a claim on the insured but the insured or his estate does not send it on to the insurer. The plaintiffs referred to the case where the insured was killed in an accident and the potential plaintiff was seriously injured and died a few days later. They may both be killed in the accident. Assuming the insured cannot be sued, for example, he has disappeared or cannot be found or has died leaving no estate or has become mentally ill, the plaintiffs contended that it would be odd if the effect of s 54 of the Insurance Contracts Act 1984 (Cth) could not be taken into account when considering an application for leave under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946. The plaintiffs submitted that if leave were granted under s 6(4) of the 1946 Act that would not stop the insurer agitating those matters in denial or reduction of its liability mentioned in s 54 of the1984 Act. The plaintiffs accepted that on such an approach, prior to leave being granted under s 6(4), the Court would have to be satisfied that the plaintiffs had a good arguable case under s 54.

34 AMPG submitted that the words of s 6(4) and the course of authority did not allow the considerations just mentioned to be taken into account in granting or refusing leave and that FAI v Jarvis resolved the issue. AMPG submitted that it was entitled to disclaim liability under the policy and that on an application under s 6(4) the provisions of s 54 of the 1984 Act were irrelevant. AMPG pointed out that Gunst had never made a claim and certainly none within the period of insurance.

35 Whatever reservations I may have about FAI v Jarvis and the restrictive approach it takes I am bound by it. Reliance cannot therefore be placed in an application under s 6(4) of the 1946 Act on the effect of the operation of s 54 of the 1984 Act.

36 The plaintiffs' position was:- a A claim had been made on the insured within the period of insurance. Gunst omitted to tell AMPG of the claim. Accordingly, s 54 of the 1984 Act applied. The Court should exercise its discretion in their favour under s 6(4) of the 1946 Act. I have held that no claim was made. Further, FAI v Jarvis prohibits the Court from taking s 54 matters into account on an application under s 6(4).

b Alternatively, if no claim was made, nevertheless, during (and well within) the period of insurance the insured was made aware by Mrs Hellyer on behalf of the plaintiffs of circumstances which may subsequently give rise to a claim by the plaintiffs. The insured should have given written notice of such circumstances during the period of insurance. There was thus an omission by him on which section 54 could properly operate. The claim subsequently made against the Insured arising out of those circumstances is deemed for the purposes of the policy to have been made during the period of insurance. I have earlier held that the insured was made aware of circumstances which may subsequently give rise to claims by the plaintiffs. I went further in that I thought that they probably would give rise to such claims. It was submitted that the court should exercise its discretion under s 6(4) in the plaintiffs' favour. However, FAI v Jarvis stands in the plaintiffs' way.

c If no claim was made and the insured did not become aware of circumstances which may subsequently give rise to a claim, nevertheless the plaintiffs could rely on the words 'some act … of some other person' in s 54. The plaintiffs accepted that this was contrary to FAI v Jarvis and reserved the right to argue on appeal that this decision was wrong. Accordingly, I reject this approach. 37 The plaintiffs advanced the following further argument. Section 6(1) of the 1946 Act creates a substantive right in itself, by creating a charge over the insurance moneys. Section 6(4) provides the means by which the charge is to be enforced. The requirement in the present policy for the insured to notify the insurer was 'merely adjectival of the policy and not substantive'. It was described, alternatively, as a procedural condition. The policy itself covers the events in question, namely, the liability of Gunst for the development of the bends by each of the plaintiffs. The plaintiffs submitted that once section 6(1) operated to create a charge on the insurance moneys, such matters as the failure by the insured to notify a claim should not operate to prevent the plaintiffs from seeking relief against the insurer; otherwise section 6 of the 1946 Act is deprived of its beneficial effect merely by reason of the insured choosing not to notify the insurer of the claim. That is something over which the plaintiffs, for whose benefit the section was enacted, have no control. Reliance was placed upon the minority judgment of Kirby P in McMillan v Mannix at 544. The majority of Meagher and Cripps JJA were concerned that the liability of the insurer should not be augmented beyond that specified in the policy. Kirby P held that events which took place after the event or events which give rise to the liability cannot be relevant to the existence of the charge created by s 6(1) and the right to which that charge gives rise.

38 Conditions or provisions requiring prompt notification of claims or circumstances are important. They go to the important right of the insurer to investigate claims and circumstances while matters are fresh. In a case such as the present one Gunst and the assistant dive master may have been able, for example, to show that the plaintiffs did not comply with instructions or that they took reasonable care for the plaintiffs' safety. The policy importantly required that all claims be made within the period of insurance. This limits the exposure of the insurer. It is not possible to put these provisions on one side. The alternative argument is incorrect.

39 The application of the plaintiffs is dismissed with costs.

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