HIGH COURT OF AUSTRALIA
GLEESON CJ,
KIRBY, CALLINAN, HEYDON AND CRENNAN JJCGU INSURANCE LIMITED APPELLANT
AND
AMP FINANCIAL PLANNING PTY LTD RESPONDENT
CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36
29 August 2007
M127/2006 & M128/2006ORDER
In M127 of 2006
1. Appeal allowed with costs.
2.Set aside the orders of the Full Court of the Federal Court made on 2 September 2005 and order 3 of the orders made on 8 June 2006 and, in lieu thereof, order that the appeal to that Court be dismissed with costs.
3. Application for special leave to cross-appeal refused.
In M128 of 2006
Set aside orders 1, 2 and 4 of the Full Court of the Federal Court made on 8 June 2006 and remit the matter of the cross-appeal to the Full Court of the Federal Court to that Court for further consideration in the light of the decision of this Court in M127 of 2006.
On appeal from the Federal Court of Australia
Representation
A J Myers QC with P Zappia for the appellant (instructed by Deacons Lawyers)
N J O'Bryan SC with P D Crutchfield for the respondent (instructed by Minter Ellison)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
CGU Insurance Limited v AMP Financial Planning Pty Ltd
Insurance – Appellant agreed to provide insurance to the respondent in respect of claims for civil liability – Respondent notified the appellant of potential liability to investors arising out of misconduct of financial advisers who were representatives of the respondent for the purposes of the Corporations Law – Appellant represented to the respondent that it would not rely on clause prohibiting the respondent from admitting liability or settling claims or clause requiring formal claims against the respondent – Appellant told the respondent to act as a prudent uninsured – Respondent, for sound commercial reasons including preservation of its relations with the Australian Securities and Investments Commission, proposed a protocol for responding to the investors' claims designed to recompense investors without the need for legal proceedings – Appellant agreed in principle to the protocol – No legal proceedings were commenced – Respondent sought confirmation that the appellant would indemnify it for settlement amounts – Respondent paid settlement amounts to the investors at a time when the appellant had not accepted liability – Whether the appellant's liability to indemnify the respondent extended to payment of reasonable settlement amounts – Whether the settlement amounts were reasonable – Relevance of the requirement to act with utmost good faith in s 13 of the Insurance Contracts Act 1984 (Cth).
Insurance – Requirement to act with utmost good faith in s 13 of the Insurance Contracts Act 1984 (Cth) – Meaning of utmost good faith – Whether lack of utmost good faith means only dishonesty – Whether utmost good faith may require an insurer to act with due regard to the legitimate interests of the insured as well as to its own interests – Whether the appellant's delay in accepting or rejecting liability amounted to a lack of utmost good faith – Relevance of reciprocity – Whether the respondent could invoke the appellant's lack of utmost good faith if the respondent had failed to act with utmost good faith – Whether the respondent's lack of diligence and acting for its own interests amounted to a lack of utmost good faith.
Estoppel – Estoppel by convention – Appellant represented to the respondent that it would not rely on clause prohibiting the respondent from admitting liability or settling claims or clause requiring formal claims against the respondent – Appellant told the respondent to act as a prudent uninsured – Respondent, for sound commercial reasons including preservation of its relations with the Australian Securities and Investments Commission, proposed a protocol for responding to the investors' claims designed to recompense investors without the need for legal proceedings – Appellant agreed in principle to the protocol – No legal proceedings were commenced – Respondent sought confirmation that the appellant would indemnify it for settlement amounts – Respondent paid settlement amounts to the
investors at a time when the appellant had not accepted liability – Whether the appellant represented that the respondent would not subsequently be required to prove its liability to the investors – Whether the respondent relied on the representation – Whether detriment established.
Words and phrases – "prudent uninsured", "utmost good faith".
Insurance Contracts Act 1984 (Cth), ss 13, 14.
Corporations Law, s 819.
GLEESON CJ AND CRENNAN J. The facts of this complex litigation appear from the reasons of Callinan and Heydon JJ. We will repeat them only to the extent necessary to explain our own reasons.
It is convenient to leave to one side, for the present, the second appeal. The first appeal deals with the matter that occupied almost the whole of the time spent in argument in the Federal Court, and in this Court. It concerns the liability of the appellant ("CGU") to indemnify the respondent ("AMP"), pursuant to a contract of insurance, in respect of amounts paid by AMP ("the settlement amounts") to certain investors who placed funds for investment with two financial advisors, Mr Pal and Mr Howarth. Those two men were carrying on business through the medium of their company Macquarie Advisory Group Pty Ltd ("MAG"). The investments made by MAG failed. Messrs Pal and Howarth became bankrupt and MAG went into liquidation. The investors lost their money. It appeared that AMP may have been liable, under the Corporations Law ("the Law"), to those investors by reason of its relationship with Messrs Pal and Howarth. The circumstances in which AMP paid out the claims of some of those investors, and at the same time asserted a right to be indemnified by CGU, appear from the reasons of Callinan and Heydon JJ.
Our view, which accords substantially with that of Gyles J who was in dissent in the Full Court of the Federal Court, is that the Full Court should have dismissed the appeal from Heerey J. Heerey J held, on a number of grounds, that AMP had not established a right to indemnity from CGU in respect of the settlement amounts. Gyles J did not agree with all the reasons given for that conclusion, but held that the conclusion was right. In order to explain our reasons for agreeing with Gyles J that the appeal to the Full Court should have been dismissed, it is necessary to begin by referring to certain features of the case.
First, payment of the settlement amounts was not within the terms of the cover provided by the contract of insurance. (There were, in fact, two contracts, covering successive years, but it is convenient to refer to the insurance cover in the singular.) Under the insuring clause, CGU agreed to provide cover for "Claims for Civil Liability" arising from the conduct of AMP's "Insured Professional Business Practice" made while the policy was in force. "Civil Liability" was defined to mean liability for damages, costs and expenses which a civil court ordered the insured to pay on a claim. "Claim" was defined (so far as presently relevant) to mean any originating process in a legal proceeding or arbitration. None of the investors to whom settlement amounts were paid made a claim, as defined. In the events that occurred, there were no claims for civil liability within the meaning of the contract of insurance. That was not fatal to AMP's right to be indemnified in respect of the settlement amounts. Nevertheless, it is part of the context in which the conduct of CGU is to be evaluated, especially in considering arguments based on estoppel, or failure to comply with the statutory requirement to act with the utmost good faith imposed by s 13 of the Insurance Contracts Act 1984 (Cth) ("the Act"). Criticism of CGU for delay in either accepting or denying liability to indemnify AMP needs to be tempered by the reminder that, at the time the settlement amounts were paid, it could not have been suggested that the event against which cover was provided had occurred.
For its own sound commercial reasons (including the need to protect its relations with the Australian Securities and Investments Commission ("ASIC"), its licence, and its goodwill) AMP adopted a procedure for dealing with investors which was designed to ensure, as far as possible, that claims for civil liability, within the meaning of the policy, were not made. There are difficulties with the idea that good faith requires an insurer to inform the insured, before the insured event has occurred, whether the insurer will accept liability if and when it occurs. For reasons that will appear, however, those difficulties do not need to be resolved. Delay in accepting or denying liability was not the possible breach of the requirement of good faith contemplated by the majority in the Full Court in formulating certain issues for further consideration by Heerey J. It is a criticism of CGU that seems to have generated more heat than light.
Secondly, at the time it paid the settlement amounts, AMP was concerned not to put CGU in a position where it might decide to exercise its contractual right to take over and defend any claim in the name of AMP. In an internal memorandum after a meeting of 5 October 2001 at which CGU was briefed on the nature of the claims against AMP, AMP's senior legal counsel said that AMP was "endeavouring to conclude the claims process ASAP" so as to reduce the risk of CGU assuming conduct of the claims. As Gyles J pointed out, Heerey J's findings amounted to a conclusion "that AMP was not prepared to let the contractual process take its normal course but was manoeuvring events to serve its commercial purpose of satisfying ASIC whilst preserving, as best it could, its rights against CGU." This led Gyles J to describe AMP's complaint that CGU was not acting with the utmost good faith as "somewhat bold". Heerey J referred to complaints of delay as "a trifle disingenuous".
Thirdly, most of the settlement amounts were paid during October and November 2001, and all settlement amounts were paid at a time when it was plain to AMP that CGU was not committing itself to accepting liability to indemnify AMP. A chronology of events which took no account of that fact would produce a distortion of the true picture. The pressure for urgent payment of the settlement amounts came following the meeting of 5 October 2001. At that meeting, CGU's solicitor told the AMP representatives that she was not satisfied that AMP was liable to the investors under the Law, that CGU did not have documentation to support many of the claims, that CGU would not be forced into making decisions on indemnity within 14 days of receiving liability reports, and that she intended to seek an opinion from Mr Archibald QC on AMP's liability to investors. By the end of December 2001, that opinion had not been received. On 2 December 2001, AMP's senior counsel advised AMP that in his opinion AMP was likely to be found liable to investors. Since it was between 5 October 2001 and the end of 2001 that most of the settlement amounts were paid, it could not be suggested that they were paid in reliance on any acceptance by CGU of an obligation to indemnify AMP. On the contrary, they were made at a time when CGU was questioning whether AMP was under any liability to the investors.
On the other hand, it should be accepted that the conduct of CGU in relation to the protocol for claims settlement involved a representation by CGU that it would not, in any subsequent litigation concerning its liability to indemnify AMP, rely on cl 7.6 of the policy (prohibiting the insured from admitting liability or settling a claim) or upon the absence of any formal claim (as defined) by an investor to whom AMP was liable. CGU repeatedly told AMP that it should act as a prudent uninsured. As Gyles J said:
"AMP was entitled to rely upon that assurance. It follows that CGU is estopped from denying liability to indemnify AMP for any payment pursuant to a settlement reached accordingly, notwithstanding any policy conditions to the contrary. Whether it did in fact act as a prudent uninsured in making the payments is another and, in my opinion, the main, issue. If it did so, it would have acted to its detriment. There would be a clear case of estoppel – whether by representation ... or convention ... To act as a prudent uninsured is, for relevant present purposes and leaving aside onus, similar to the position of an insured denied cover in breach of contract. A prudent uninsured might arrive at an objectively reasonable settlement in the light of its potential liability and pay accordingly."
Although the insured event never occurred, estoppel by convention produces the legal consequence that CGU's liability to indemnify AMP operated to cover AMP's reasonable payment of the settlement amounts in satisfaction of its liabilities to investors. How the requirements imposed by s 13 of the Act, in the circumstances of the present case, add anything to that is not clear. None of the judges in the Federal Court appeared to suggest that they did so, or to explain why.
There was nothing in the conduct of CGU and, in particular, nothing in the conduct of CGU between 5 October 2001 and the end of 2001, the period when most of the settlement amounts were paid, that conveyed a representation to AMP that (to use the language of AMP's written argument in the Full Court) AMP "would not be required to subsequently prove its liability to the investors with whom it had settled by calling those investors as witnesses in its case in any subsequent legal proceeding." Such a proposition is inconsistent with the findings of Heerey J. Furthermore, the conduct of AMP, as found by Heerey J, does not support a conclusion that, in paying the settlement amounts, it relied on any such representation.
The orders made by the Full Court were for the remitter of the case to Heerey J for further consideration of the following questions:
". whether AMP was induced by CGU's conduct to assume that, if it settled [an investor's] demand on reasonable terms, it would not be required to establish by admissible evidence that it was legally liable to that investor in order to be reimbursed by CGU for the amount paid pursuant to such settlement;
.if so, whether AMP settled that demand in reliance upon that assumption;
.whether, in the light of the answers to those questions, CGU is estopped from asserting that, or it would be a want of utmost good faith for CGU to assert that, AMP is required to establish by admissible evidence that it was legally liable to that investor;
.whether AMP settled that demand on reasonable terms."
It is that order of remitter that AMP seeks to uphold in this appeal, and that was the focus of argument in this Court. It is, therefore, necessary to attend with some particularity to the questions raised for further consideration.
As to the first three questions, if they do not arise on the evidence, or if they have already been decided by primary findings of Heerey J which were not set aside in the Full Court, then nothing is achieved by the remitter. The conduct assumed by the questions to constitute reliance by AMP upon the relevant inducement is the payment of the settlement amounts. We have already pointed out when, and in what circumstances, that occurred. Furthermore, the possible breach of the requirement of utmost good faith to which the questions direct attention is the assertion by CGU, in this litigation, that AMP was required to establish by admissible evidence that it was liable to the individual recipients of the settlement amounts. It is not dilatory conduct of CGU in announcing its intention to accept or deny liability. There is a clear practical reason for that, related to the timing and circumstances of the payment of the settlement amounts. Heerey J made a finding as to the extent of the representations and reliance, when dealing with CGU's repeated statements to AMP that it should act as a prudent uninsured. He said:
"The real significance of the term [prudent uninsured] to my mind is that CGU made it clear that [AMP] was to be no worse off in respect of [its] rights (if any) under the Policies by negotiating with the Investors and entering into the Settlements. One particular consequence of that is that CGU would not refuse indemnity on the basis that [AMP] had entered into the Settlements without CGU's prior written consent (Policies cl 7.6) or that Investors had not obtained an order of a civil court or an originating process (Policies cl 12.1 and cl 12.2). A prudent uninsured person, being ex hypothesi not bound by any policy of insurance, would not be subject to such restrictions. Neither would [AMP]."
Heerey J found that AMP had no belief that CGU accepted liability, and that AMP paid the settlement amounts because it considered that it was in its own interests to do so, especially having regard to the attitude of ASIC. To revert to a point made above, Heerey J also found that AMP "had a motive to settle as many claims as it could while the indemnity issue remained unresolved." From the point of view of its dealings with ASIC, the last thing AMP wanted was for CGU to take over and manage the claims process.
We accept the wider view of the requirement of utmost good faith adopted by the majority in the Full Court, in preference to the view that absence of good faith is limited to dishonesty. In particular, we accept that utmost good faith may require an insurer to act with due regard to the legitimate interests of an insured, as well as to its own interests[1]. The classic example of an insured's obligation of utmost good faith is a requirement of full disclosure to an insurer, that is to say, a requirement to pay regard to the legitimate interests of the insurer. Conversely, an insurer's statutory obligation to act with utmost good faith may require an insurer to act, consistently with commercial standards of decency and fairness, with due regard to the interests of the insured. Such an obligation may well affect the conduct of an insurer in making a timely response to a claim for indemnity.
[1]Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 31 per Stephen J.
However, the Act does not empower a court to make a finding of liability against an insurer as a punitive sanction for not acting in good faith. If there is found to be a breach of the requirements of s 13 of the Act, there remains the question how that is to form part of some principled process of reasoning leading to a conclusion that the insurer is liable to indemnify the insured under the contract of insurance into which the parties have entered. Let it be assumed, for example, that CGU's failure throughout substantially the whole of the year 2002 to admit or deny liability was a failure to act with the utmost good faith. What follows from that? Most of the settlement amounts were paid during 2001. Again, even if it be said that CGU should have made up its mind about liability before October 2001 (a difficult assertion to sustain having regard to what was said at the meeting of 5 October 2001), what follows? Between a premise that CGU's delay constituted a failure to act with the utmost good faith, and a conclusion that CGU is liable to indemnify AMP in respect of the settlement amounts, there must be at least one other premise. What it might be has never been clearly articulated.
As the questions posed by the Full Court for reconsideration by Heerey J reveal, it is not any delay on the part of CGU that is said to be the relevant form of want of good faith; it is the possibility that it is unconscientious of CGU to assert in this litigation (as it has from before the commencement of the hearing before Heerey J) that AMP must show, by admissible evidence, that it was liable to the individual recipients of the settlement amounts.
The hypothesis of the first three questions posed for reconsideration by Heerey J is that AMP did not establish by admissible evidence that it was legally liable to the investors. It was accepted in argument in this Court that the remitter is not intended to give AMP an opportunity to reopen its case, and adduce further evidence. If AMP, at the trial, had established by admissible evidence that it was legally liable to the investors, then the first three questions formulated by the Full Court would not arise. It is necessary to note why the questions arise.
The main area of potential doubt about AMP's liability to the investors concerned the application, in the events that happened and in the circumstances of the business of Messrs Pal and Howarth, and MAG, of Pt 7.3, Div 4 and, in particular, s 819 of the Law. Gyles J said:
"The backdrop to this issue is that the conduct of the persons that led to the potential liability of AMP had nothing to do with the business of AMP. The only relevant link was that one of the individuals concerned happened to be an AMP representative at the time. It is therefore obvious that there would be a live issue as to whether there would be any liability of AMP for the conduct in question if the claims were litigated. On the face of it, applying ordinary principles of vicarious liability or agency, it would be quite unlikely that AMP would be responsible. Hence the reference to the important but complex provisions of Div 4 Pt 7.3 (including s 819) of the Corporations Law."
Two particularly relevant provisions were s 819(1)(b)(ii), on which Mr Archibald QC relied in his opinion to CGU in early 2002, and s 819(4). Section 819(4), which was not considered by AMP's lawyers at the time the settlement amounts were paid, could have made MAG, rather than AMP, liable to the investors. Heerey J, on the limited information available to him, considered that s 819(4) may well have had this consequence. We say "on the limited information available", because that raises the point of the first three questions formulated by the Full Court. It was only because the information at trial was incomplete that the necessity to ask those questions is supposed to exist.
At the trial before Heerey J, AMP did not set out to establish that it was legally liable to the investors. It did not call the investors, or undertake to prove the facts that would have to be decided in order, for example, to reach a conclusion about the effect on AMP of s 819. Rather, it set out to demonstrate the process it followed in settling the claims. It tendered a large number of documents, including statements by investors, and legal recommendations. When those were tendered, CGU objected on the basis that the information in them was hearsay. Senior counsel for AMP said that they were not tendered as evidence of the facts stated in them, they were tendered "to prove AMP's state of mind at the time it settled". They were received into evidence on that limited basis.
Heerey J found that AMP did not enter into the settlements in reliance on any commitment or promise or representation by CGU. The evidence did not support a representation by CGU, at the time the settlement amounts were paid, that it would not put AMP to legal proof of its liability to the investors. On 5 October 2001, CGU told AMP that it did not accept that AMP was liable to the investors, and that it was taking its own legal advice on the matter. By the time it obtained, and communicated, the substance of that legal advice (which was that AMP was not liable to the investors) the settlement amounts had been paid.
Heerey J dealt with the issue of estoppel as it was argued before him. His findings of fact, and the evidence, did not leave open for further consideration the issues sought to be raised by the first three questions.
We turn now to the fourth question. Heerey J asked himself whether the settlements had been shown by AMP to be reasonable, that is, "based on a reasonable assessment of the risk faced by [AMP] if the Investors' claims were to proceed to trial and judgment". In this connection, he considered Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd[2], referring in particular to the reasons of Brennan CJ[3] and Hayne J[4]. He referred to the circumstances in which the investors whose claims were accepted were paid in full, the pressure from ASIC, and the haste to achieve settlements before CGU took over the claims. He also referred to the doubts about liability by reason of s 819(4) of the Law.
[2](1998) 192 CLR 603.
[3](1998) 192 CLR 603 at 608-609 [6].
[4](1998) 192 CLR 603 at 653 [129].
Heerey J made the following finding:
"[T]he whole process was so dominated by pressure from ASIC that I am quite unable to conclude that the Settlements would have been reached in the agreed amounts, or indeed at all, had that pressure not existed ... A settlement can fail the reasonableness test because of flaws in the process by which it was reached, quite apart from an assessment of settlement sum against predicted result of litigation. In the present case the reasoning that led [AMP] to make the Settlements in the way that it did was not to reach a compromise based on an assessment of the prospects of success of the claims, but to satisfy the demands of ASIC. [AMP] did not merely fail to give proper weight to the interests of CGU; it was explicitly told by ASIC to ignore those interests, and did so.
Apart from the question of process, the Settlements were unreasonable because they failed to take into account the availability of the s 819(4) defence."
In the Full Court, Emmett J, with whom Moore J agreed, criticised the reasoning of Heerey J. He said that it was irrelevant that AMP took no account of the interests of CGU because the reasonableness of a settlement must be assessed from the point of view of an uninsured recipient of the relevant demand. However, the gist of what Heerey J found was that AMP did not reach a compromise based primarily on an assessment of the objective prospects of success of the individual claims. Emmett J said that, in this respect, Heerey J failed to pay due regard to the evidence as to the legal advice AMP received from its solicitors and as to the claims process, citing a particular example. As to the effect of s 819(4) it appears to be common ground that it was not considered. Emmett J said:
"His Honour's reasoning appears to have been that, simply because AMP did not turn its attention to s 819(4) at all, it was unreasonable to settle each of the 63 demands made by investors. His Honour did not examine, for example, the particular circumstances of the Bajada demand to see whether there was any basis for the application of s 819(4) to that demand.
CGU did not dispute that AMP may have a liability under s 819(2) or s 819(3). Before deciding that it was unreasonable not to have considered the possible application of s 819(4) to a demand against AMP by an investor, because of the involvement of MAG as an indemnifying principal, it would be necessary to examine the material relied on by AMP as to the relationship between Pal and Howarth, on the one hand, and MAG, on the other, and to speculate as to whether MAG and AMP would both be parties to a proceeding in a court. The primary judge did not undertake that task in relation to any investor demand."
As has been pointed out above, the hypothesis of questions 1 to 3, and the occasion for the need to ask them, was that AMP conducted the litigation on the footing that, contrary to what CGU had asserted since before the trial, AMP did not need to prove, by admissible evidence, facts which established its liability to the investors. The criticism of Heerey J for not examining the material relied on by AMP needs to be considered in that light. Heerey J considered the limited material available to him and formed a tentative view that s 819(4) could have applied. Since, at the time of the settlements, attention was not directed to s 819(4), it is difficult to see what more he could have done.
When, at the trial, senior counsel for AMP tendered the documents relating to the settlements, which were in 30 lever arch files, he told Heerey J that he did not need to read through them and that it was sufficient to observe the pattern of the procedures that were adopted by AMP to reach the level of satisfaction it required to deal with each of the investors' claims. There is no occasion to doubt that Heerey J did what he was asked to do. In his reasons, Heerey J said:
"I should note an important evidentiary question. [AMP] claims that the Settlements it reached with the investors were, objectively considered, 'reasonable'. CGU says the true question is whether [AMP] became legally liable to the investors and that [AMP] cannot make out its case merely by showing that it reached settlements, whether reasonable or otherwise. Alternatively, CGU says that anyway the Settlements were not reasonable. But [AMP] has not called evidence from any of the Investors, or Pal or Howarth. There is evidence of investigations conducted by [AMP], its solicitors and ASIC, which includes reports of interviews with Investors. But there is no direct evidence from Investors and, in particular, no direct evidence of their dealings with Pal and Howarth."
The concluding sentence in that passage is of particular relevance to the issue about s 819(4). The objective reasonableness of the settlements, bearing in mind the circumstances of haste and external pressure under which they were reached, could not be divorced from the question whether AMP was, as the settlements assumed, liable to the investors with whom it settled in the full amount claimed. AMP had been admonished by ASIC not to attempt to rely on technicalities in its dealings with the investors, and this appears to have been a reason why AMP was anxious to avoid CGU's taking over management of the claims. It may well be that ASIC and CGU would have had different views on what constituted a technicality. At all events, it was well open to Heerey J to conclude that AMP had not shown that the settlements were reasonable.
Finally, we turn to the second appeal, M128 of 2006. This concerns the costs order made by Heerey J. The order was not to the satisfaction of CGU, which cross-appealed to the Full Court. The reasons for the order included certain views reached by Heerey J on questions of construction of the contract of insurance. They were of relevance, or potential relevance, to indemnity sought by AMP other than in respect of the settlement amounts. Before the Full Court, and in this Court, CGU sought to use its cross-appeal on the costs issue as a vehicle for arguing those questions of construction. The Full Court did not deal with the cross-appeal for the understandable reason that, since it was allowing the appeal from Heerey J and setting aside his costs order, it was moot. CGU then appealed to this Court against the decision of the Full Court, again seeking to argue the questions of construction decided by Heerey J. On those questions, we do not have the benefit of any reasoning of the Full Court. The second appeal should be remitted to the Full Court for consideration of CGU's cross-appeal to that Court.
Orders
In M127 of 2006, the following orders should be made:
1. Appeal allowed with costs.
2.Set aside the orders of the Full Court of the Federal Court made on 2 September 2005 and order 3 of the orders made on 8 June 2006 and, in lieu thereof, order that the appeal to that Court be dismissed with costs.
3.Application for special leave to cross-appeal refused.
In M128 of 2006, set aside orders 1, 2 and 4 of the Full Court of the Federal Court made on 8 June 2006 and remit the matter of the cross-appeal to the Full Court of the Federal Court to that Court for further consideration in the light of the decision of this Court in M127 of 2006.
KIRBY J. This Court has before it two appeals from successive orders of the Full Court of the Federal Court of Australia. In each appeal, the appellant, CGU Insurance Limited ("CGU"), challenges decisions of the Full Court in favour of the respondent, AMP Financial Planning Pty Ltd ("AMP"). The main point in the appeals is the meaning and application of the obligation of utmost good faith, owed by an insurer to an insured under Australian law. However, there are many other issues that require consideration. That consideration demands close attention to the complex circumstances of the case and the arguments of the parties.
The complex issues in the litigation
The decision in the appeal below: The appeals in this Court arise out of a dispute between the parties as to the obligation of CGU to indemnify AMP under professional indemnity policies ("the Policies") issued by CGU in favour of AMP. Specifically, an important question is presented under the reformed law enacted by the Insurance Contracts Act 1984 (Cth) ("the Act"), s 13. That section implies into insurance contracts in Australia "a provision requiring each party to it to act towards the other party … with the utmost good faith".
The first appeal challenges the orders originally made by the Full Court[5] allowing AMP's appeal against the decision of the primary judge (Heerey J), substantially (but not on all issues) in favour of CGU[6]. The Full Court's decision dealt with issues relevant to the liability of CGU (as insurer) to AMP (as insured). It was concerned principally with whether, contrary to the findings of the primary judge, AMP had established entitlements to recover against CGU on the basis of the objective reasonableness of settlements arrived at between AMP and persons claiming against it ("the investors"). Those claims arose in circumstances alleged to engage the Policies and in accordance with a protocol agreed in principle between AMP and CGU as to the handling of such claims ("the Protocol").
[5]AMP Financial Planning Pty Ltd v CGU Insurance Ltd (2005) 146 FCR 447.
[6]AMP Financial Planning Pty Ltd v CGU Insurance Ltd (2004) 139 FCR 223.
In the appeal to the Full Court (as before the primary judge) AMP relied on the Policies, the Protocol, and also on arguments based both on the law of estoppel and on s 13 of the Act. The result of the first Full Court decision was an order, proposed by Emmett J[7] (with whom Moore J agreed[8]), allowing AMP's appeal. The order remitted to the primary judge for further consideration questions "in relation to each of the investor demands" upon AMP; issues of whether AMP had been induced in any way by CGU's conduct to settle those demands; and, if so or otherwise, whether CGU was estopped from, or would be in breach of its duty of utmost good faith by, asserting that AMP was required to establish by admissible evidence that it was legally liable to each investor[9].
[7](2005) 146 FCR 447 at 489 [154].
[8](2005) 146 FCR 447 at 449 [1].
[9](2005) 146 FCR 447 at 489 [154].
In its first decision, the majority of the Full Court effectively concluded that the approach of the primary judge to the claim by AMP against CGU had miscarried by reason of a misunderstanding of, or failure to give effect to, AMP's estoppel arguments and also its arguments based on s 13 of the Act.
The third judge in the Full Court (Gyles J) agreed with some of the conclusions of the majority. He too was critical of the approach of the primary judge to AMP's claim[10]. However, for reasons somewhat different from those expressed by the primary judge, Gyles J rejected AMP's reliance on arguments of estoppel[11] and on s 13 of the Act[12]. By reference to the requirements of the Policies, which he held to be unaffected by these issues, Gyles J decided that the primary judge had come to the correct conclusion[13]. He would have dismissed the appeal. The orders favoured by the majority were made.
[10](2005) 146 FCR 447 at 491-492 [161]-[163], 492 [166].
[11](2005) 146 FCR 447 at 493 [172]-[173].
[12](2005) 146 FCR 447 at 491 [162].
[13](2005) 146 FCR 447 at 493-494 [173]-[177].
The decision on the application to reopen: CGU moved immediately for a stay of the entry of judgment, which was granted. CGU then applied to reopen the appeal to the Full Court in order to permit the Full Court to determine issues which CGU submitted would result in the appeal being dismissed. Those issues, which concerned the construction of the Policies, had been determined adversely to CGU by the primary judge[14] and were the subject of CGU's cross-appeal in the Full Court. The second Full Court unanimously dismissed CGU's application to reopen. All three judges concluded that the reopening of the contractual issues would be "academic"[15] or "futile"[16] in light of the orders made in the principal decision. In consequence, those orders were duly formalised. Special leave to appeal to this Court was granted to CGU in respect of the orders made in each of the Full Court decisions.
[14]AMP Financial Planning Pty Ltd v CGU Insurance Ltd [2006] FCAFC 90.
[15][2006] FCAFC 90 at [2] per Moore J.
[16][2006] FCAFC 90 at [3].
The contention and cross-appeal:In this Court, AMP, for its part, filed a notice of contention asserting that the Full Court had erred in failing to uphold the primary judge's decisions in favour of AMP on the specified issues relating to "the construction of the insurance policies"[17]. AMP sought special leave to cross-appeal. Its proposed cross-appeal was limited to a challenge to the order of remitter made by the first decision of the Full Court. AMP contended that, instead, the Full Court should have entered judgment in favour of AMP, as it contends this Court should now do. AMP also sought to substitute an order for costs against CGU and in favour of AMP by reason of the conduct of CGU, as insurer, about which AMP complains.
[17]These were issues 7, 8 and 9 in the reasons of the primary judge. See (2004) 139 FCR 223 at 250-252 [108]-[120].
The foregoing description of the proceedings before this Court indicates the complexity of the litigation in the stage it has now reached. There are two appeals; an application for special leave to cross-appeal; and a notice of contention. Within the first appeal, issues are raised concerning:
.the liability of CGU as insurer under the contractual terms in the Policies;
.the reasonable settlement of investor claims pursuant to a suggested agreed Protocol;
.the law of estoppel; and
.whether the obligations of CGU are affected by the duty of good faith now contained in s 13 of the Act.
As if these "substantive" complexities were not enough, by their arguments before the Full Court, and in this Court, CGU and AMP each submitted that the other was restricted in the arguments it could advance in the appeals, by reason of considerations of procedural fairness. These submissions were made having regard to the pleadings; the respective conduct of the parties both at trial and on appeal; and the limited way in which certain evidence had been received concerning the individual investor claims against AMP, the payment of which by AMP has led to AMP's present claim for indemnity against CGU.
Revocation of special leave?: It must be questioned whether proceedings of this kind, proffering so many issues, most of which can only be resolved by reference to detailed facts, are truly suitable for determination in a second-level appeal and in a final national court. A tempting thought occasionally crossed my mind that the proper resolution of the proceedings might be the revocation of the grant of special leave for which I was myself, in part, to blame[18]. By its order of remitter, the Full Court majority had contemplated that the primary judge would reconsider all of his conclusions, giving adequate and correct attention to the issues of estoppel and good faith. In that sense, the proceedings were at an interlocutory stage.
[18][2006] HCATrans 534 at 935; cf Klein v Minister for Education (2007) 81 ALJR 582; 232 ALR 306.
Nevertheless, special leave having been granted, the issues having been fully explored, the amount ultimately at stake (not to say the costs) being substantial and some of the issues being important for the Australian insurance industry[19], this Court must resolve such of the issues as require determination. Unfortunately, to do this it is necessary, in the nature of those issues, to set out in some detail the factual background to the parties' disputes.
[19]cf Sutherland, "An Uneasy Compromise: An Analysis of the Effect of Settlement Reached by an Insured with a Third Party Claimant vis-a-vis his or her Insurer", (1998) 9 Insurance Law Journal 257; Hopkins, "AMPFP v CGU – Utmost Good Faith under section 13, the Principle in Rocco Pezzano and the 'prudent uninsured'. What does it all mean and where to from here?", (2007) 18 Insurance Law Journal 25.
The facts
Actions of securities representatives: In August 1991, AMP was granted a licence as a securities dealer pursuant to s 784 of the former Corporations Law ("the Law")[20]. As such, AMP carried on business as an adviser to investors on finance, investment and insurance and as a licensed securities dealer and mortgage originator[21].
[20]The Law has since been repealed.
[21](2005) 146 FCR 447 at 453 [12] per Emmett J.
AMP and CGU entered into professional risks insurance contracts for two relevant years respectively from 28 February 1999 to 28 February 2000 ("the 1999 Policy") and from 28 February 2000 to 28 February 2001 ("the 2000 Policy"). The terms of the 1999 and 2000 policies were relevantly identical.
Some years previously, AMP had issued authorities to Mr Ashok Pal and Mr Anthony Howarth as "securities representatives" of AMP for the purposes of Ch 7 of the Law. Messrs Pal and Howarth conducted a financial advisory business through a company which they controlled, Macquarie Advisory Group Pty Ltd ("MAG"). Each of them held a proper authority from AMP. At various times they also held proper authorities from Hillross Pty Ltd ("Hillross"), a related company of AMP[22]. Because the role of MAG (and whether it separately conducted a securities business) was later to become relevant, AMP made the point that the evidence did not establish that MAG itself conducted a securities business. AMP contended that the evidence was consistent with MAG having been no more than an administrative or service company of Messrs Pal and Howarth.
[22](2005) 146 FCR 447 at 455 [22].
In May 1999, officers of Hillross discovered that Messrs Pal and Howarth had traded outside their proper authorities with Hillross. This discovery caused Hillross to notify the Australian Securities and Investments Commission ("ASIC") of possible breaches of the Law. At the same time, Hillross terminated the respective proper authorities of Messrs Pal and Howarth.
Following an investigation, ASIC obtained an order for the winding up of MAG and orders banning Messrs Pal and Howarth and MAG from the securities industry. These steps were followed by the compulsory examination of Messrs Pal and Howarth and officers of a company ("Hibiscus Spa") in which it was suspected that approximately $3.4 million of investor funds had been invested and lost. In December 1999, MAG was placed into liquidation.
Notice to insurer of the claims: On 16 December 1999, AMP informed CGU that it had become aware of a possible claim against it in relation to the activities of Mr Pal. It was this notice that gave rise to the claim under the 1999 Policy. Subsequently, on 5 September 2000, AMP gave further notification to CGU that it had become aware of matters that might give rise to additional claims. This notice was given under the 2000 Policy[23].
[23](2005) 146 FCR 447 at 456 [24].
On 14 February 2001, officers of ASIC met officers of AMP. ASIC informed AMP that it was concerned about delay in compensating investors for losses arising from the conduct of Messrs Pal and Howarth, its securities representatives. A representative of ASIC told AMP that, if compensation was properly payable to investors, "there should be no discounting of valid claims and investors should not be required to follow a procedure that required court proceedings if such proceedings were unnecessary"[24]. It was made clear to AMP that ASIC considered that the responsibility of AMP and Hillross was to handle all demands made by investors in an efficient, fair and timely manner and that such obligations should override any insurance concerns[25]. It was implicit that an inadequate response to the claims by the investors could put AMP's securities dealer's licence at risk.
[24](2005) 146 FCR 447 at 456 [25].
[25](2005) 146 FCR 447 at 456 [25].
Following the meeting between ASIC and AMP, AMP initiated discussions, through its solicitors, with CGU's then solicitors, designed to ensure that the demands by investors would be properly and quickly investigated and, where justified, paid "in the light of the comments made by [ASIC]"[26]. On 1 March 2001, AMP's solicitors (Minter Ellison) wrote to CGU's then solicitors (Ebsworth & Ebsworth) enclosing material in relation to AMP's "claim for indemnity for loss arising from the activities" of Messrs Pal and Howarth. In the letter, AMP's solicitors pointed to the importance for AMP's licence of a correct handling of the claims:
"[T]he relationship between [AMP] and ASIC is critical to [AMP's] business. ASIC expects that securities licensees will conduct their business in a way which gives effect to their obligation to ensure that investors are adequately compensated for losses that arise from the wrong doings of securities representatives."
AMP made clear its obligation and intention to pay heed to ASIC's views when dealing with the investors' claims.
[26](2005) 146 FCR 447 at 456 [26].
Provision of a protocol: The materials supplied to CGU included files maintained by AMP regarding Messrs Pal and Howarth as well as a summary of the investments that had given rise to demands for compensation by investors and details of their demands on AMP to date. As an example of how the legal liability of AMP to investors would arise, a draft liability report, prepared in relation to demands made by Bajada Retirement Fund ("Bajada") on AMP, was included. AMP's solicitors' letter went on:
"When it is clear from the facts that advice was given or an investment made, at a time when Pal or Howarth, as the case may be, was authorised to act for more than one licensed securities dealer, notice will be issued to the other dealer seeking equal contribution. However, consistent with ASIC's requirements, contribution will not hold up resolution of the claim by [AMP] in any case.
The proposed procedure for the handling of claims … is presently being revised to reflect ASIC's comments … These proposed procedures will be supplied to you when they have been finalised."
On 26 March 2001, AMP's solicitors wrote again to CGU's solicitors enclosing a document described as "Proposed Procedure for the Management of Claims". This became known as "the Protocol". The further letter enclosed additional notification reports in relation to investor demands, as known to that time. It ended with an invitation:
"We look forward to receiving, as soon as possible, confirmation that your client will indemnify [AMP] in respect of its liability arising out of the conduct of Pal and Howarth."
Clause 3 of the Protocol stated[27]:
[27](2005) 146 FCR 447 at 457 [30].
"[AMP] proposes that the following protocol be adopted for each complaint that is received by [AMP], whether direct or via Hillross:
(a)receive claim and provide a notification report to CGU;
(b)place Pal and Howarth on notice of claim as well as any other licensees that provided Pal or Howarth with a proper authority during the period of the investor's claim;
(c)collate all relevant documentary evidence obtained from the investor;
(d)prepare a report setting out [AMP's] legal liability and recommendations on the claim, considering factors such as investor risk profile, risk of investment and knowledge of that risk ('liability report') …
(e)obtain instructions from CGU in relation to settling or defending the claim within 14 days of provision of the liability report;
(f)if settling: prepare settlement deed, including full releases, confidentiality and any assignments of interests and associated causes of action …
(g)if defending: prepare defence material for trial."
On 6 April, CGU's then solicitors responded in the following terms[28]:
"We understand the requirements of [AMP's] internal and external complaints resolution procedures and have sought instructions from our client in respect of indemnity. Pending indemnity your client should continue to act as a prudent uninsured."
[28](2005) 146 FCR 447 at 457 [31] (emphasis added).
Agreement in principle to the protocol: On 11 May 2001, CGU's solicitors again wrote to AMP's solicitors[29]:
"[W]e are instructed by CGU … to agree in principal [sic] to the protocol for the handling of claims provided to us under cover of your letter dated 26 March 2001.
In accordance with the protocol our client will consider your client's claim for indemnity on an investor by investor basis consequent upon receipt of your summary document. Upon receipt of your summary document we shall arrange to attend your office and inspect the relevant primary documents which it is submitted evidence the claim and comprise the basis of liability. Thereafter we shall advise our client's instructions in respect of the particular investor."
[29](2005) 146 FCR 447 at 458 [31] (emphasis added).
By 7 June 2001, AMP's solicitors were in a position to settle a concrete claim, namely that of Bajada. Accordingly, by letter of that day, they wrote to CGU's solicitors[30]:
"You were provided with the liability report in respect of [Bajada's] claim on 26 March 2001. You have since indicated that CGU accepts liability in principle subject to examining the documents in support of each claim. We have since provided you with all the documents submitted by the claimants in support of their claim.
[ASIC] has indicated to our client that settlement of claims ought not to be delayed due to the requirements of insurers. Accordingly, if we do not receive confirmation as requested above within 14 days of the date of this letter our client will settle this claim without the involvement of CGU. Our client will, however, expect CGU to reimburse it for the full amount of the settlement sum. Upon doing so our client will be willing to assign any assignments it takes from the claimants to CGU."
[30](2005) 146 FCR 447 at 458 [32].
The assertions contained in the foregoing letter were repeated in respect of the demand by Bajada later in June 2001. On 9 July 2001 similar letters were sent by AMP's solicitors in relation to specific demands upon AMP, made by other investors. On 12 July 2001, CGU's solicitors responded[31]:
"[W]hilst our client has no difficulties with the claim protocol as noted in our letter of 11 May it has not yet determined to confer indemnity upon your client. Frankly it is interested to understand why it is that the directors (or their insurers) are not being required to meet the claims and why it appears that [AMP] has not pursued GIO Insurance for a decision on their liability. We would be grateful for your advice on precisely at what stage your client's negotiations with GIO Insurance have reached and if GIO Insurance has denied liability whether you believe such denial is sustainable."
The reference in this letter to GIO Insurance was to the insurer under a professional indemnity policy held by MAG with GIO Insurance.
[31](2005) 146 FCR 447 at 458 [34] (emphasis added).
Ensuing protracted correspondence: On 1 August 2001, AMP's solicitors again wrote to their counterparts expressing disappointment at the lack of response to their letters concerning investor demands[32]:
"Due to our client's responsibilities under its dealers licence … to the claimants and the expectations of [ASIC], our client is obliged to go ahead with the settlements with these claimants.
We enclose copies of the settlement deeds that our client proposes to use. [AMP] expects reimbursement from CGU in accordance with the terms of the above policy. Upon reimbursement, if CGU wishes, [AMP] is willing to assign any assignment it takes from the claimants to CGU."
[32](2005) 146 FCR 447 at 458-459 [35].
This letter was followed by one of 8 August 2001 from CGU's solicitors to their counterparts[33]:
"We confirm that your client should continue to act as a prudent uninsured in respect of the subject claim."
[33](2005) 146 FCR 447 at 459 [35] (emphasis added).
Some time during August 2001, the retainer of Ebsworth & Ebsworth was terminated. CGU appointed a new firm, Solomon & Associates, as its solicitors. The change of solicitors was not one that would quickly produce either a frank and explicit denial or acceptance of indemnity. On 19 September 2001, AMP's solicitors wrote to the new solicitors for CGU[34]:
"Your client … appeared to consider that [in the situation where the investor was not aware of the connection between Pal or Howarth and AMP] the principal would not be liable to the claimant. [AMP] suggested that if your client's view of liability was based on legal advice which differed from our advice, that fact has [sic] best be disclosed to us straight away.
From [CGU's] response, we have taken it that Ebsworths [ie CGU's former solicitors] have not given advice which differs from our view concerning liability under section 819.
As is evidenced from the liability reports already sent to you (and Ebsworths) our experience in dealing with investors is that the majority of them have the clear view that they were dealing with MAG, or in some cases Macquarie Bank. That is, that Pal and Howarth were acting as representatives of MAG. For the majority, the association with [AMP] has only come to light after the event. In our view, the effect of section 819 of the Corporations Act is to make [AMP] liable to such investors, even where investors do not know of [AMP], provided they reasonably believed that Pal or Howarth were acting for 'some person', such as MAG."
[34](2005) 146 FCR 447 at 459 [36].
Despite this explicit invitation to the new solicitors for CGU to let AMP know, through its solicitors, of any contrary view concerning the operation of s 819 of the Law, there was no relevant response from Solomon & Associates.
On 5 October 2001 a meeting took place between the respective solicitors at which representatives of CGU were also present. AMP's solicitors made a presentation concerning the demands that had been made by investors in respect of the conduct of Messrs Pal and Howarth. On the same day, a letter was written providing a spreadsheet which summarised the amounts in respect of which demands had been received from investors. This document indicated that some had been rejected, some deferred and some paid by AMP. The letter concluded[35]:
"Until CGU makes a decision on indemnity under the policy, our client will continue to act in good faith as a prudent uninsured, consistently with its obligations under the policy and its dealer's licence, to keep its exposure (financial, regulatory or to its reputation) to a minimum."
[35](2005) 146 FCR 447 at 460 [39] (emphasis added).
There were several further follow-up letters from AMP's solicitors to CGU's new solicitors, in each case indicating an expectation of reimbursement from CGU. There was no response either from CGU or its solicitors.
Repeated offer of discussions: In March 2002, Solomon & Associates ceased practice. CGU then retained Ms Nicole Wearne of Middletons, solicitors. On 5 April 2002, AMP's solicitors wrote to the new solicitors for CGU referring to the correspondence that had taken place over more than a year with the two previous solicitors, stating[36]:
"At all times, our client has been willing to discuss this matter with CGU and its solicitors, and to provide any documents requested. We believe that we have complied, at all times, with requests for documents. If you believe that further documents need to be provided, please indicate which documents you require and we will attempt to find them."
[36](2005) 146 FCR 447 at 460 [41].
Ms Wearne replied to this letter on 8 April 2002[37]:
[37](2005) 146 FCR 447 at 460-461 [42].
"We are instructed that our client continues to reserve its rights with respect to its liability to indemnify under the professional indemnity insurance policy issued to your client …
[Y]our firm has acted for both [AMP] and [Hillross] throughout the claims administration process … There is a clear conflict of interest in your firm acting for both potential defendants …
Our client insists that your firm immediately ceases to act for [AMP] and [Hillross] and that independent solicitors be appointed to administer any claims made against that entity.
…
As your firm is aware our client has obtained Senior Counsel's advice on the liability of [AMP] to clients of [MAG]. Counsel's advice is that your firm's interpretation of the Corporations Law is incorrect and accordingly in many cases no liability to a third party claimant exists.
We confirm your … verbal advice … that [AMP] has obtained releases and paid monies to investor clients of MAG. It is our view that to the extent the payments relate to any claim covered by the policy that the insured has breached the no admission or settlement condition set out in clause 7.6 of the policy.
Our client believes that the procedure adopted by the insured to resolve disputes with clients of MAG may be in breach of condition 7.2 of the policy and in breach of the obligations imposed on the insured by Section 13 of the Insurance Contracts Act 1984 as amended.
…
However our client is prepared to consider the insured's claim for indemnity arising from claims made by the clients of MAG on an individual basis.
In the circumstances we have been instructed to review each client file to assess any liability on the part of the insured to the claimants for which it is entitled to be indemnified. In order for us to do this we seek that the insured provide us with a list setting out the name of every client of MAG where [AMP] considers that a claim for indemnity exists."
Senior counsel's advice:It is apparent that the foregoing letter represented a change of attitude on the part of CGU, as expressed by the new solicitors. It apparently coincided with the retainer of the new solicitors. Nevertheless, even at this time, there was no clear decision to repudiate the Protocol or to inform AMP that liability was denied by CGU. The reference to "Senior Counsel's advice" was a reference to an advice received by Solomon & Associates from Mr Alan Archibald QC on the issue of liability. That advice suggested that AMP had a defence to the claims being advanced by investors, based on the provisions of s 819(2) of the Law.
As will appear, the reliance on that sub-section was later abandoned. It was not pressed before this Court. The reference to Mr Archibald's advice provoked AMP's solicitors to respond to the preceding letter, recounting once again the communications between the parties since November 2000 and enclosing a consolidated schedule of all investors in relation to whose demands AMP sought indemnity under the Policies. CGU's solicitors declined to make Mr Archibald's advice available to AMP or its solicitors at that stage. They claimed legal professional privilege in respect of it. No specific reason was nominated as to why AMP had no liability to the investors. A demand was made for further information, sought as a "bear [sic] minimum"[38].
[38](2005) 146 FCR 447 at 461 [43].
There is however yet another of them. It is that the respondent seems to have chosen either to ignore, or deliberately not to invoke, cl 7.8, the "senior counsel clause" of the policies. It was open at all times for the respondent to bring that clause into play. It would certainly have been, in our view, an act of much less than utmost good faith for the appellant to refuse, had it been asked to do so, to co-operate in the choice of, and obtaining of advice from, senior counsel. That advice could well have been to the effect that legal proceedings by investors ought not to be contested. Senior counsel advising pursuant to cl 7.8 was bound to have regard to the economics of the claims generally, and the respondent's prospects of defending them. Why this clause was not invoked has been left entirely unexplained. Indeed it seems to be that no reference was made to it by anyone until the parties' attention was drawn to it during the course of the appeal to this Court. Certainly no party suggested otherwise.
Having regard to the failure to invoke cl 7.8 of the policies, the respondent's determination to settle the investors' claims quickly for its own reasons, and its failure to consider the possibility of exoneration under s 819(4) of the Law, even if there had been an absence of good faith on the part of the appellant as to which we make no conclusive finding, there was not such a degree of reciprocal good faith on the part of the respondent as would entitle it to relief against the appellant. If it were otherwise the respondent might perhaps have been able to make out a case that, as a practical matter, in the marketplace, both competitive and regulated as it was, in which it was operating, and having regard to the daily exigencies of business, an insurer acting opportunistically, and temporizing, was not acting in good faith, in consequence of which settlements had to be, and were, not inappropriately made, even though in some instances strictly legally they need not have been made at all, or not for the amounts for which they were in fact made.
The respondent's case on Pt II of the Insurance Act fails.
The last question remitted by the majority in the Full Court related to the reasonableness of the claims. That question cannot arise in view of the conclusions that we have reached about the other questions. In any event the respondent made its choice about this aspect of the case at the trial, that is, to tender documents only to show the respondent's "state of mind". There is no basis for re-opening that matter.
The other appeal
The other appeal is concerned, as the Chief Justice and Crennan J point out, with a matter of costs. We agree with the opinion of the Chief Justice and Crennan J about it.
Conclusion
We would agree with the orders proposed by the Chief Justice and Crennan J.