Bailey v Medical Defence Union
184 CLR 39969 ALJR 890
132 ALR 1
(Judgment by: McHUGH AND GUMMOW JJ)
BAILEY v NSW MEDICAL DEFENCE UNION LTD (estate of BAILEY) NSW MEDICAL DEFENCE UNION LTD v CRAWFORD
Court:
Judges:
Brennan CJ, Deane and Dawson JJ
McHugh and Gummow JJ
Judgment date: 3 November 1995
Judgment by:
McHUGH AND GUMMOW JJ
McHUGH AND GUMMOW JJ. These appeals were heard together. Mrs Bailey is executrix of the estate of the late Dr H R Bailey ("the Estate"). Dr Bailey died on 8 September 1985. From 1951 until his death, Dr Bailey was a member of the New South Wales Medical Defence Union Limited ("the Union"), a company limited by guarantee. Mr Crawford was born in 1947. Mr Crawford claimed that, in late 1973 and early 1974, while he was Dr Bailey's patient at the Chelmsford Hospital, Sydney, he suffered injuries, including profound brain damage, by reason of treatment received from Dr Bailey. This had involved what was called "deep sleep therapy".
On 8 July 1992, judgment was entered in the Supreme Court of New South Wales after the hearing by a judge of that Court (Enderby J) of two proceedings. They had been heard together. The first proceeding had been commenced by Mr Crawford against Dr Bailey in 1980 and continued after his death against the Estate. It had been instituted by Mr Crawford against Dr Bailey after an order was made on 17 December 1980 pursuant to s 58 of the Limitation Act 1969 (NSW). The order extended until 25 December 1980 the limitation period in respect of causes of action in negligence and trespass to the person pleaded by Mr Crawford against Dr Bailey.
The second proceeding was commenced in 1988 by Mr Crawford against the Union as insurer of Dr Bailey and in reliance upon s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) ("the Law Reform Act"). Mr Crawford sought to enforce, by action directly against the Union as insurer of Dr Bailey, the charge said to be created by s 6 in favour of Mr Crawford on all insurance moneys payable by the Union in respect of the liability of Dr Bailey to Mr Crawford.
In the first proceeding, the Estate cross-claimed against the Union, seeking indemnity in respect of the claim against the Estate. This was on the footing that the claim arose out of acts or omissions on the part of Dr Bailey whilst he was a member of the Union and that there was a contract between the Union and Dr Bailey for indemnity by the Union in respect of such claims.
In the first proceeding Enderby J ordered (1) the Estate to pay Mr Crawford damages in the sum of $586,196 and (2) the Union, as cross defendant, to pay $500,000 to the Estate, as cross-claimant. In the second proceeding, his Honour ordered the Union to pay Mr Crawford $500,000. Payment by the Union to Mr Crawford of that sum was deemed to be satisfaction of order (2) in the first proceeding. Alternatively, payment by the Union of the sum in order (2) to the Estate was deemed to be satisfaction of the order in the second proceeding that the Union pay Mr Crawford. The Union would not have to pay twice, to the Estate and to Mr Crawford.
Of the total damages awarded against the Estate of $586,196, the primary judge attributed $524,196 to brain damage and schizophrenia and $62,000 for injury to Mr Crawford's leg. The entry of judgment against the Union for $500,000 was a slip for $562,000. This latter sum reflected the circumstance that there were two relevant acts or omissions in respect of each of which there was a limit in liability under the insurance to $500,000. The slip was rectified in the orders by the Court of Appeal.
The orders of the primary judge were entered on 8 July 1992. Earlier, on 28 February 1992, Enderby J, in the Protective Division of the Supreme Court, had declared Mr Crawford to be incapable of managing his affairs and ordered that the management of his estate be committed to the Protective Commissioner under the Protected Estates Act 1983 (NSW).
The second proceeding had been instituted on 28 July 1988 by Mr Crawford, pursuant to leave granted under s 6(4) of the Law Reform Act, by orders of the Court of Appeal. The Court of Appeal allowed an appeal against refusal of such leave. Its decision is reported [F21] . The first proceeding, as we have indicated, had been commenced in 1980 by Mr Crawford against Dr Bailey and continued after his death in 1985. On notification by Dr Bailey of the action against him by Mr Crawford, the Union had resolved to indemnify Dr Bailey and had taken over the defence of the action. However, on 3 October 1985, after his death, the Union resolved to terminate assistance to the Estate. It was this turn of events which led Mr Crawford to seek and to obtain leave to commence the second proceeding directly against the Union in reliance upon the Law Reform Act.
From the orders made by Enderby J on 25 June 1992, the substance of which has been set out above, appeals and cross-appeals were brought to the Court of Appeal and these were heard together. Three sets of reasons were delivered, on 3 September 1993, 30 June 1994 and 23 September 1994. The first of these is reported [F22] .
In this Court, the Union appeals against so much of the orders of the Court of Appeal as implemented its holding that Mr Crawford was entitled to enforce the statutory charge under s 6 of the Law Reform Act against the Union. The issue here turns primarily upon the construction of s 6, a matter in which there has been division of opinion in the Court of Appeal.
In the other appeal to this Court, the Estate appeals against the allowance by the Court of Appeal of the appeal against the orders of Enderby J in its favour on the cross-claim against the Union. The Court of Appeal held that the Estate was not entitled to indemnity in respect of the claim brought against it by Mr Crawford. The issue here turns primarily upon the construction of the Articles of Association of the Union as they have stood from time to time. There is the question of whether what has been called "a special contract" between Dr Bailey and the Union was unaffected by certain changes to the Articles which were relied upon to support the refusal to the Estate, after Dr Bailey's death in 1985, of any further assistance or indemnity in respect of the action by Mr Crawford which was then on foot.
The Union and its Articles of Association
At all material times, until 27 May 1983, the Union had authority pursuant to the Insurance Act 1973 (Cth) to carry on insurance business. On 2 June 1983, and with effect from and including 27 May 1983, the Acting Insurance Commissioner revoked that authority. The revocation apparently followed a request by the Union, pursuant to s 36(1) of that statute, that the authority be revoked and upon the Commissioner being satisfied, within the meaning of the sub-section, that the Union had no liabilities in respect of insurance business carried on by it in Australia. The taking of these steps followed the passage on 4 November 1982 of amendments to the Articles of Association. It will be necessary to refer to these amendments later in these reasons.
The Union appears to have been incorporated under the Companies Act 1899 (NSW) ("the 1899 Act"). Its Memorandum of Association is dated 11 January 1934, that is to say, before the commencement of the Companies Act 1936 (NSW) ("the 1936 Act"). The objects specified in the Memorandum include the taking over as a going concern and the carrying on of the unincorporated body known as "New South Wales Medical Union"; the protection, support and safeguarding of the character and interests of legally qualified medical practitioners; and the indemnification of members and the personal representatives of deceased members in respect of actions, proceedings, claims or demands made by or against them which, in any way, affect their professional character or interest. In the Court of Appeal, Mahoney JA [F23] described the purposes of the Union as multiple, saying that insurance was only one of them.
The evidence includes the original membership card of Dr Bailey, showing that he made application dated 22 February 1951 which had been accepted on 8 March 1951, and that he had paid an entrance fee. The card also shows payments by Dr Bailey of subscriptions for the year ended December 1952 and succeeding years. In particular, it shows that he made payments at the rate necessary to entitle him to the current highest indemnity cover.
The earliest form of the Articles which is in evidence shows them as they stood at an unspecified date after the commencement of the Companies Act 1961 (NSW) ("the 1961 Act") but before 7 September 1972 when the limitation of indemnity to $100,000 was increased to $250,000. That sum in turn was increased on 5 April 1979 to $500,000. The document in evidence is headed:
"The Companies Act 1936
The Companies Act 1961".
In Art 1, "Act" is defined as meaning "[t]he Companies Act 1961 as amended of New South Wales". Although the evidence does not include the Articles in any other form they may have taken when Dr Bailey first became a member in 1951, in the absence thereof, it should be inferred that there was no material difference from the document in evidence.
We turn to consider the Articles in this form.
The management of the business and control of the Union was vested in the Council (Art 55). The Council consisted of 14 members elected by the members, together with such other members, not exceeding three, as might be appointed by the Council itself (Art 36).
The 1899 Act (s 72), the 1936 Act (s 20), the 1961 Act (s 31) and the Companies (New South Wales) Code ("the 1981 Act") (s 76) all provided for the amendment of articles of association by special resolution. Further, the 1936 Act (s 6), the 1961 Act (s 5) and the 1981 Act (s 5) each treated as a "company" for its purposes an existing company incorporated under a previous corresponding enactment.
In Hunt v. Carrier A/asia Ltd [F24] , Jordan CJ referred to Shuttleworth v. Cox Brothers & Co (Maidenhead) [F25] as a case of "an agreement constituted solely by the articles of association themselves, unsupplemented by any external facts, and therefore inherently and necessarily alterable in the manner provided by the Statute". Although the proposition is put in several ways, the substance of the case for the Union is that the contractual rights against it upon which the Estate relies are of this description and therefore liable to abrogation, as it was put "retrospectively", by changes to the Articles.
The opposing submission is that, although the contract incorporates certain provisions of the Articles, it cannot be said that the agreement for indemnity between Dr Bailey and the Union was constituted solely by the Articles unsupplemented by any external facts. The result is said to be that the basic principle against unilateral variation or abrogation of contractual rights applied in this case to prevent changes of the Articles having an immediate impact upon the contract. On this approach, which it will become apparent we accept, the interrelation between the articles and the terms of the contract is a matter of construction of the contract in the relevant circumstances of the case.
Against that background, we turn to consider the provisions of the Articles as to membership and the reasoning in certain decisions.
An applicant for membership is obliged to sign and deliver to the Secretary an application in the form approved by the Council of the Union; the applicant "shall therein signify his agreement to be bound by the Memorandum and Articles of Association of the Union" (Art 5). Article 6 states:
"Any such applicant shall be deemed to have agreed to become a member of the Union on receipt by the Secretary of an application for membership in the form or to the effect of the application referred to in Article 5 hereof signed by the applicant. Any such applicant (upon payment of the prescribed entrance fee and subscription) shall be entitled to the benefits of indemnity and assistance conferred by Articles 57 to 67 inclusive from the date of such payment until the date of his becoming a member or the notification of refusal of his application for membership as the case may be."
Articles 5 and 6 are expressed in a fashion which attracts the reasoning in a passage from Lindley on Companies [F26] . A passage to similar effect in Palmer's Company Law [F27] was adopted by Myers CJ in Eltham Co -operative Dairy Factory Co, Ltd v. Johnson [F28] . The passage in Lindley was as follows:
"The articles may express the terms upon which a person may become a member of, or accept some office or employment from, or otherwise contract with the company, and if acted upon, an agreement between him and the company on which either party may sue may be implied partly from the ... articles, and partly from the conduct of the parties."
An example is In re New British Iron Company; Ex parte Beckwith [F29] . The claimants had served as directors without any express agreement for remuneration. The articles provided that the remuneration of the board should be an annual specified sum. The directors successfully claimed in the liquidation of the company arrears of fees on the footing that a contract incorporating the terms of the articles was to be inferred.
In Shalfoon v. Cheddar Valley Co-operative Dairy Co Ltd [F30] , Salmond J said:
"[T]here is no legal reason why the terms on which a company ... proposes to contract either with strangers or with its own members should not be set out in the document known as the articles of association. In such a case, on the existence of the contract being proved aliunde in the individual instance, the articles of association can be referred to as evidence of the terms of the contract. For instance, it is not uncommon for articles of association to provide that the directors of the company shall acquire or possess a certain number of shares as a qualification for their office. Such a clause is not in itself a binding regulation imposing any enforceable obligation upon the directors to acquire such shares; but it is operative as the basis of an express or implied contract made by each director with the company when he accepts office - a contract, that is to say, that he will acquire the qualification shares prescribed by the articles. This rule is illustrated by such a case as Swabey v. Port Darwin Gold Co [F31] . 'The articles,' said Lord Esher, 'do not themselves form the contract, but from them you get the terms upon which the director is serving.' See also In re New British Iron Co [F32] ; Isaacs' case [F33] ."
All depends upon the circumstances of the particular case [F34] .
This impression as to the operation of Arts 5 and 6 is confirmed by Arts 7, 8 and 11. Article 7 provides for submission of each application to the Council and for admission as a member if three-quarters of the votes cast at the meeting of the Council at which the application is considered are in favour of admission of the applicant. Membership then shall be from the date of admission to the end of the then current financial year. Article 7 continues:
"Thereafter unless terminated pursuant to these Articles membership shall be deemed to have been renewed for a further period of twelve (12) months from the end of each calendar year unless the member notifies the Council prior to that date that he does not desire continuance of membership or unless not later than three (3) months prior to that date, the Council has notified the member in writing that his membership will not be renewed."
Article 11 obliges each new member, within 21 days of admission, to pay an entrance fee of such amount as the Council may determine and also to pay the annual subscription pursuant to Art 10 or such lesser sum as the Council may determine. The membership of a new member is deemed to commence as from the date on which all payments payable upon admission are received by the Union; on that date the name of the new member shall be entered in the Register of Members (Art 8).
Article 79 empowers the Council from time to time by instrument under seal to make regulations upon various matters including entrance fees and annual subscriptions and the limits of indemnity to be granted to members.
Each member is obliged to pay to the Union annually in advance on the first day of January a subscription of such amount as the Council may from time to time determine (Art 10(1)). Any member who neglects to pay the subscription before the first day of February in the relevant year ipso facto becomes an "unfinancial member", unless reasonable cause for such delay has been shown (Art 10(2)). The Council, in its absolute discretion, by resolution may expel from the Union any unfinancial member (Art 10(3)). Further, Art 10(2) states:
"Unfinancial members and unindemnified members shall subject to Articles 58 to 60 hereof cease to be entitled to receive assistance from the Council, but shall remain subject to the liabilities of a member."
Any member who does not require indemnity for a period may become an unindemnified member (Art 4(1)(iii)).
A member who, inter alia, has been reprimanded or cautioned by a professional tribunal or body or refuses or neglects to observe the provisions of the Memorandum or Articles or the regulations made under Art 79 is liable to expulsion from the Union (Art 13). In certain circumstances, the Council may expel a member who is absent from New South Wales, the Australian Capital Territory or some other "prescribed area" for a period in excess of two years (Art 14). Further, a member is also liable to expulsion for failure to meet a call upon members to contribute funds for the purposes of the Union (Arts 17-19).
A member may resign by notice in writing given before the end of the current year for which the subscription has been paid (Art 12). A member also shall cease to be a member in the circumstances detailed in Art 15(1). This states:
"A member shall cease to be a member
(a) if he dies,
(b) if he resigns in the manner provided by Article 12 hereof,
(c) if he remains absent from the prescribed area for a period exceeding six consecutive years,
(d) if he is expelled from the Union pursuant to Articles 10, 13, 14 or 19;
(e) if he ceases to be a member by reason of any of the provisions of these Articles."
If any member ceases to be a member, then, "subject to Articles 57 to 67", there are forfeited all the rights and privileges of membership (Art 15(2)).
It is convenient now to turn to the Articles dealing with professional indemnity for members. These commence with Art 57. This states:
"(1) The Council shall investigate all cases in which assistance is sought from the Union.
(2) The Union shall indemnify each member or the personal representatives of a deceased member in respect of any legal liability for damages or costs arising from any claim or claims which may be made upon him or them arising out of any act or omission on the part of such member done or omitted while he is a member other than an unfinancial or unindemnified member in the course of his practice by him or by any person employed by him.
(3) The indemnity under this Article shall be limited in respect of all claims arising from any one act or omission to $100,000 or such greater sum or sums as the regulations may provide.
(4) The indemnity under this Article shall not extend to any liability arising from any act or omission done or omitted to be done in the United States of America."
The sum of $100,000 fixed in Art 57(3) was increased to $250,000 by regulation passed by the Council under Art 79 on 7 September 1972. The increase applied in respect of a member who applied in writing and his application was accepted by the Council and such increase was effective upon payment of the additional subscription called a "surcharge" payable in advance on 1 January in each year. In 1973, Dr Bailey commenced his annual payments of the surcharge to obtain the higher indemnity limit. By further regulation made 5 April 1979, the limit of $250,000 was increased to $500,000. In 1980, Dr Bailey commenced annual payments of the surcharge for that higher indemnity limit.
The Estate relies upon the steps taken by Dr Bailey to obtain and retain membership, including the making and acceptance of payments, together with the terms of the Articles, particularly Art 57, to support the existence of a contract to provide indemnity in respect of legal liability for damages or costs arising from the claim made in 1980 by Mr Crawford arising out of acts or omissions by Dr Bailey in the course of his treatment of Mr Crawford in the period 25 December 1973 to 25 January 1974.
We accept that submission but that is not the end of the matter. It then becomes necessary to identify the relevant terms of that contract and the effect upon them of changes made to the Articles, particularly on 1 December 1977 and 4 November 1982.
Moreover, as it stood at the time of the events giving rise to the claim, Art 57 was subject to qualifications found in Arts 58, 59 and 60. Article 58 dealt with the situation where the member resigned before the claim or demand was first made or the action or proceeding first commenced. It obliged the Union to indemnify the member, or his personal representatives in the event of his death, in accordance with and to the extent provided for in Art 57. Article 58 thus assisted the position of members. Article 59 applied where the member was an unfinancial member or an unindemnified member at the time when the claim or demand was first made or the action or proceeding first commenced. In such a situation, indemnity was nevertheless available if all arrears of membership and any interest or charges in respect of unpaid membership dues were paid in full and payments thereafter were made up to the end of the financial year during which the action or claim was finalised.
Of central importance in the present case is Art 60. Before its amendment on 1 December 1977, Art 60 conferred a discretion upon the Council to refuse indemnity to members who were expelled from the Union. Dr Bailey was never expelled. Art 60 stated:
"Notwithstanding the provisions of Article 57 where the action, proceeding, claim or demand is one in respect of which the Union shall give indemnity to a member under Article 57 and all conditions entitling such member to such indemnity have been fulfilled but before such action, proceeding, claim or demand has been finalised such member was expelled from the Union under the provisions of these Articles the Council shall have complete and absolute power and discretion to refuse to indemnify such member or his personal representative in the case of his death either wholly or in part and subject to such conditions as the Council may impose and the Council shall not be required to give reasons for decisions made by it in the exercise of its said power and discretion and any decision so made shall be final and conclusive and binding on all members as well as the members so expelled and the personal representative of such member in the event of his death and such decision shall not be the subject of any question or discussions at any general meetings of the Union." (emphasis added)
By special resolution passed 1 December 1977, Art 60 was amended by deleting the phrases which we have emphasised and inserting in the first instance the phrase "ceased to be a member" and in the second "concerned". The effect of this was to broaden the discretion of the Union by making it exercisable not only in cases of expulsion but in cases where the member had ceased to be a member for any one or more of the other grounds set out in Art 15(1). These included par (a), the death of the member.
As we have indicated, the Court of Appeal dealt with the appeals to it in three sets of reasons for judgment, the first of which was delivered on 3 September 1993. On the last day of the hearing preceding the delivery of those reasons, 27 November 1992, counsel for the Union drew the attention of the Court to the circumstance that, prior to 1977, Art 60 was limited to cases of expulsion and the discretion of the Council did not arise where the member ceased to be a member for any other reason. In the reasons for judgment subsequently delivered, there was discussion of Art 60, but only Sheller JA referred to the article in its form before 1977, noting that the discretion to refuse indemnity had applied only if a member was expelled [F35] .
What then, at the time of the institution of the action by Mr Crawford against Dr Bailey in 1980, was the extent and effect of the incorporation of provisions of the Articles into the contract between Dr Bailey and the Union?
The Articles and Dr Bailey's contract
In our view, the steps taken by Dr Bailey in acquiring and maintaining his position as a financial member of the Union brought about and continued a single contract which conferred upon him entitlements to the benefits of indemnity and assistance specified in Art 57 and qualified by other articles.
The provisions of the Articles show that a vital incident of membership of the Union was provision to financial members of indemnity and assistance pursuant to Arts 57-67. However, that does not mean that the relationship between Dr Bailey and the Union is to be characterised as if it were no more than that between a policy holder and an insurance company which had been paid the necessary premium for a particular period. In particular, payment to the Union by a member of the annual subscription avoided the consequences which otherwise could, but not necessarily would, flow from the member becoming an unfinancial member. Article 10(2) is a significant provision in this connection. It provides that reasonable cause might be shown for delay in payment, and that, whilst an unfinancial member ceased "to be entitled to receive assistance from the Council" (a phrase indicative of what otherwise was a continuing entitlement), cessation of entitlement was "subject to Articles 58 to 60 hereof". Payment of the subscription was not analogous to a renewal of a policy of insurance resulting on each occasion in a fresh contract of insurance [F36] .
The entitlement of Dr Bailey arose upon the occurrence of a relevant act or omission whilst he was a member of the Union. This included the time of his treatment of Mr Crawford in late 1973 and early 1974. Dr Bailey's entitlement would not have arisen if at that time he had been an unfinancial or unindemnified member. That would have followed from the terms of Art 57(2). The obligation of the Union to indemnify is in respect of liability arising from a claim made which arises out of any act or omission done or omitted whilst a member "other than an unfinancial or unindemnified member". If the member was unfinancial or unindemnified when the relevant act or omission was done or omitted, there is thereafter no obligation to indemnify. Again, if the act or omission was done or omitted to be done in the United States of America, there is no obligation to indemnify (Art 57(4)). These provisions suggest that the gist of the contract is concerned with "occurrences" rather than "claims made".
If Dr Bailey had died before the claim had been made, the entitlement to indemnity would have enured in favour of his personal representatives. That also would have been a consequence of the terms of Art 57(2). Further, entitlement would have persisted if Dr Bailey had resigned before action against him had been commenced (Art 58). However, if, at the time of the first making of the claim or commencement of the action, Dr Bailey had been an unfinancial member or an unindemnified member, the obligation would have persisted only if certain conditions were met. These would have been that repayment in full was made of all arrears of membership and any interest or charges in respect of unpaid membership dues and such membership dues were thereafter paid up to the end of the financial year during which the action or claim was finalised (Art 59).
In addition, if, before the claim or action were finalised, Dr Bailey had been expelled, then Art 60 would have conferred upon the Council the power and discretion to refuse indemnity to Dr Bailey or, if he had died, to refuse it to his personal representatives (Art 60).
It is not useful and may be dangerous to attach descriptive labels to contracts which lack necessarily fixed characteristics. However, in the particular sense described above, the contract between the Union and Dr Bailey may be described as one in respect of "occurrences" rather than "claims made". This classification commended itself to two members of the Court of Appeal [F37] .
That is not to say that, as a matter of construction of the Articles, the limitation to the indemnity imposed by Art 57(3) in respect of all claims arising from any one act or omission necessarily operated by reference to the limit specified at the date of the relevant occurrence, rather than at the time of the performance of the obligation to indemnify following the making of the claim or institution of action. At the time of the events complained of by Mr Crawford, the limit was $250,000. At the time of the institution of his action late in 1980, the regulations referred to in Art 57(3) had increased the indemnity limit to $500,000. It will be noted that Art 57(3) fixes upon $100,000 or "such greater sum or sums" as may be provided by the regulations. Thus, change is to operate to the advantage of the indemnified party.
The point was dealt with as follows in the Court of Appeal by Sheller JA [F38] :
"Quite clearly the limit in article 57(3) is expressed in respect of claims. When a claim is made it is necessary to look to see what limit applies to that claim. As a matter of language, in my opinion, the limit is that applicable at the time the claim is made."
However, Art 57(3) is to be construed with Art 57 as a whole. In particular, the subject of the limitation in Art 57(3) is "[t]he indemnity under this Article". As indicated above, the liability to provide that indemnity is anchored to the occurrence of each relevant act or omission whilst the member was a financial member who had not become an unindemnified member within the meaning of Art 4(1)(iii). From any one such act or omission, a plurality of claims might arise and do so over a period, with claims being made at different times. The significance of the phrase "in respect of all claims arising from any one act or omission" is to indicate that the limit specified in Art 57(3) applies to all claims which arise in this way from any one act or omission. The amount of the limitation is $100,000 or such greater sum or sums as the regulations provided at the time of the relevant act or occurrence.
Were the position otherwise, the monetary limit in respect of claims made at different times but arising from the one act or omission would be greater or lesser, depending upon what might be the purely chance sequence in which claims were made. Further, the matter may be examined by reference to the position of a member who had resigned before any claim was first made. It would be an odd result if that member had the benefit of the increased level of indemnity which was in force by reason of steps taken after resignation by the then current members to increase that level and to raise the amount of the annual subscription. Likewise, in the case of a member who had died before the claim was made against the personal representatives of that member.
The consequence of this is that there must be a reduction in the amounts awarded by Enderby J to reflect the limitation of $250,000 rather than $500,000.
Once the position is reached that the entitlement of Dr Bailey arose upon the occurrence of the relevant acts or omissions, the next question concerns the effect thereon of subsequent changes to the Articles which would operate adversely to his interests by changing the incidents of his entitlement or, indeed, abrogating it.
It is appropriate here to refer again to Hunt v. Carrier A/asia Ltd in the New South Wales Full Court [F39] and in this Court [F40] . By written agreement, the company agreed to employ Mr Hunt as managing director and he agreed to serve "for the term and subject to the company's articles of association and the provisions hereinafter contained" [F41] . The agreement stated that the employment was to continue until a specified date and also provided that the company was to be at liberty to terminate the term on notice if Mr Hunt "ceases to be a director of the company" [F42] . Article 91 empowered the company by extraordinary resolution to remove any director before the expiration of his period of office but stated that this was "[s]ubject to the provisions of any agreement for the time being subsisting" [F43] . The company, by special resolution, amended Art 91 by deleting those words and then removed Mr Hunt from the board and gave due notice of termination. In the Full Court, Jordan CJ said [F44] :
"The question is whether the obligations of the particular contract left it still open to the company, upon altering its articles so as to give itself power to remove the plaintiff from the directorate, to exercise that power and so dismiss him as managing director, without thereby committing a breach of contract. At the date when the contract was made, the only power which the company had to remove a director by extraordinary resolution was that conferred by article 91, and this was expressed to be subject to the provisions of any agreement for the time being subsisting. ... It is true that the contract is to employ 'subject to the articles,' but I am of opinion that this does not mean 'subject to a right in the company so to alter the articles as to enable the company to free itself from the obligations of the contract.' ... I am of opinion, however, that the presence in article 91 of the words which have been deleted did not make any difference to the effect of that article. They served as a reminder that the power conferred by the articles is one the exercise of which may involve the risk of committing a breach of contract. All that their deletion has achieved has been to remove the reminder."
Later in his judgment, the Chief Justice said [F45] :
"A company has power to alter its articles by special resolution: Companies Act, 1936, s 20. But if a company makes a contract dehors the articles by which it agrees expressly or impliedly not to do a particular thing, it cannot, by altering its articles and conferring on its board of directors or a general meeting power to do the thing on its behalf, acquire a right to do the thing with impunity. No doubt the thing may be effectual if done, but it is none the less a breach of contract".
In this Court, the bench was equally divided so that the decision of the Supreme Court was affirmed. McTiernan J, who was in favour of dismissing the appeal, said [F46] that it would be contradictory to imply into the contract, expressed to be subject to the articles, a term that the company have the right to make Mr Hunt cease to be director at any time and in that way to terminate his employment as managing director.
In the present case, the substance of the contract was to confer upon Dr Bailey, in the events that had allegedly happened during his treatment of Mr Crawford, an entitlement to indemnity in respect of the claim which might later be made upon him. In that sense, Dr Bailey acquired vested or accrued rights or interests. Consistently with general principle, a power which might be construed so as to curtail or abrogate what otherwise would be rights or interests in favour of one party to the contract is construed as operating prospectively [F47] .
Accordingly, and to adapt what was said in Westralian Farmers Ltd v. Commonwealth Agricultural Service Engineers Ltd [F48] , changes made to the Articles after 1974 would operate prospectively upon the continuing contract in relation to acts or omissions on the part of Dr Bailey done or omitted thereafter. But they would not operate upon past events which already had given rise to his entitlement. This would be true, for example, of an amendment to Art 60 which broadened the circumstances in which in respect of such a past event the Council might exercise adversely the power and discretion to refuse indemnity to the member or, in the case of death, to the personal representatives of the member.
We turn now to relate those actions by the Union which did involve such amendments. The evidence does not disclose any protest or objection by Dr Bailey when those amendments were made. This absence of complaint is consistent with an interpretation that the changes to the articles would operate upon the continuing contract, although in the prospective sense we have described [F49] .
We have referred to the amendments to Art 60 made in 1977. These did have the effect of broadening the power of the Council to refuse indemnity. However, as we have indicated, they were ineffective to modify so much of the existing and continuing contract as operated upon the then accrued entitlement to indemnity by reason of the alleged acts or omissions in respect of Mr Crawford.
On 21 April 1981, whilst the action of Mr Crawford against Dr Bailey was on foot and the solicitors for the Union had taken over the defence of the case, further amendments were made to the Articles of the Union (Arts 4, 10, 57, 58, 59, 60, 61, 62 and 63). It is not suggested by any party that these changes are material for present purposes. However, on 4 November 1982, the Articles were further amended in such a fashion as to produce the result that the Union no longer carried on insurance business within the meaning of the Insurance Act. The reference in Art 6 to "entitlement" of applicants, upon payment of entrance fee and subscription, to the benefits "of indemnity and assistance conferred by Arts 57 to 67" was replaced. Articles 57 to 67 were deleted and a discretionary regime established [F50] . New Arts 57 to 61 were as follows:
"57. The Council shall investigate all cases in which assistance is sought from the Union by a member.
58. The Council may in its sole and absolute discretion and either in whole or in part and upon such terms and conditions as to the Council may seem proper determine that the Union will assist a member:
(a) by undertaking the conduct of or assisting in the conduct of or defence of any matter or proceedings whether of a strictly legal nature or otherwise and,
(b) by granting indemnity to such member in respect of any action, proceedings, claim or demand
arising in the course of the practice of such member from an event which occurred while he was a member.
59. Any member who has sought assistance authorises the Union and any lawyers appointed by it to conduct the defence of or settle on such terms as the Council may in its sole and absolute discretion think fit any action proceeding claim or demand against such member.
60. The Council may in its sole and absolute discretion terminate any grant of assistance or indemnity and thereafter cease to assist any member in whose favour a determination had been made under Article 58.
61. Any member who has sought assistance from the Union before 4 November 1982 shall be deemed to have requested assistance and the Council shall as soon as expedient make a determination under Article 58 in respect of such request."
In accordance with the conclusions already expressed as to the relevant ineffectiveness of the change to Art 60 in 1977, these changes are to be treated as ineffective to commute a current right to indemnity, which had been conferred by contract created in the course of conduct of an insurance business, into a right in the Council, in its sole and absolute discretion, to provide assistance to members in certain circumstances. That conclusion is not qualified by the presence of a new Art 61. On the construction proffered by the Union, this would translate what had been a present entitlement to a request for assistance. Rather, as indicated earlier, these changes would operate prospectively upon the continuing contract between Dr Bailey and the Union.
On 2 December 1982, the Council, acting pursuant to the new Art 61, resolved in general terms to grant assistance under the new Articles to those members who had previously requested assistance from the Union under the old Art 58. The effect of this resolution was to afford assistance to Dr Bailey in respect of the then outstanding action brought by Mr Crawford. The conduct of the defence to that action continued and the carriage of it remained with the solicitors for the Union. It was not until some three weeks after Dr Bailey died that the attitude of the Council changed. On 3 October 1985 the Council resolved:
"(1) That the assistance granted to Dr Bailey in respect of the claim by Mr Crawford be terminated.
(2) That the Defence Union's solicitors be instructed to file a Notice of Ceasing to Act in the Supreme Court proceedings.
(3) That consideration of any application for assistance by the legal representative of Dr Bailey be deferred until any such application is made."
In his reasons for judgment, the primary judge said:
"No attempt has been made to offer any explanation for the change and no members of Council have been called to give evidence. It is notorious, however, that by 1985 'Chelmsford' had become very well known in the media and was being given great publicity. Many ex patients of Chelmsford were making complaints and claims similar to those of the plaintiff."
On 8 October 1985, Mrs Bailey, on behalf of the Estate, requested assistance from the Union in relation to the claim by Mr Crawford. On the same day, Mr Crawford instituted a proceeding in the Supreme Court seeking leave to commence action against the Union under s 6 of the Law Reform Act.
On 23 October, the Union filed a motion in the action against it by Mr Crawford seeking a declaration that it was no longer an "insurer" within the meaning of s 6. On 7 November, the Council resolved "that the request for assistance by Mrs M J Bailey on behalf of the Estate ... in respect of the claim by Mr Crawford be refused". Yeldham J declined to make the declaration sought by the Union but he also refused Mr Crawford leave under s 6(4) of the Law Reform Act. An appeal by Mr Crawford and cross-appeal by the Union produced the result that the appeal was allowed and the cross-appeal dismissed [F51] . It was after refusal by this Court of an application by the Union for special leave to appeal against the grant of leave to Mr Crawford to proceed against the Union that, on 28 July 1988, Mr Crawford commenced the proceeding under s 6(4).
On 16 August 1990, shortly before the trial together of both proceedings, the Union resolved that "pursuant to its powers generally and in particular its power under Old Article 60 [it] refuses to indemnify the late Dr Bailey and/or Mrs J Bailey, executrix of the Estate of the late Dr Bailey in relation to the following claims: ... Crawford".
The reference to "Old Article 60" is not without its difficulties. First, if what was intended was a reference to Art 60 in its form before the special resolution of 1 December 1977, that article could have had no application because it required the expulsion of Dr Bailey, something which never occurred. If what was intended was a reference to the power of the Council under Art 60 as it stood after amendment on 1 December 1977, there is still the difficulty that such power must have ceased with the deletion of Art 60 by the special resolution passed on 4 November 1982. In so far as what was relied upon was a power conferred by contract, but adopting the Articles as they stood from time to time, the deletion of Art 60 in 1982 would have deprived the contract of the relevant subject-matter. Because Dr Bailey had never been expelled from membership of the Union, the power conferred upon the Council by Art 60 in the form it took before amendment in 1977 was never exercisable by the Council. The 1977 amendment and subsequent deletion of Art 60 were, as we have indicated, picked up by the contract between Dr Bailey and the Union but only in their prospective operation.
Our conclusion is that the Union was obliged by the contract it had with Dr Bailey to indemnify his estate in respect of any legal liability for damages or costs from the claim made by Mr Crawford. Accordingly, the Court of Appeal should have upheld the orders of Enderby J in this respect and the appeal to this Court by the Estate against the Union should succeed.
However, we should not part with the matter without further reference to the submissions made by the Union as to the distinction between what was identified as a "special contract" and a "statutory contract".
"Special contract" and "statutory contract"
The Union submitted that Art 57 conferred upon members "in their capacity as members or as incidents of their membership" rights which amounted to a "statutory contract" between each member and the Union. However, the rights enjoyed under this arrangement by members would subsist only unless and until the Articles were altered. In the present case, this occurred when Art 57 was deleted and entitlement was superseded by the claim to the exercise of discretion by the Council under the new Articles.
In support of these propositions counsel referred to statutory provisions producing the result that the Memorandum and Articles of the Union had the effect of a contract under seal between the Union and each member, and between a member and each other member. Section 14 of the 1899 Act was in the following terms:
"(1) The articles of association shall be printed and shall be signed by each subscriber in the presence of, and be attested by, one witness at least.
(2) When registered they shall bind the company and the members thereof to the same extent as if each member had subscribed his name and affixed his seal thereto, and there were in such articles contained a covenant on the part of himself, his heirs, executors, and administrators, to conform to all the regulations contained in such articles subject to the provisions of this Act.
(3) All moneys payable by any member to the company, in pursuance of any of the conditions and regulations of the company, shall be deemed to be a specialty debt due from such member to the company."
Section 10 thereof was a corresponding provision as to observance of the conditions of the Memorandum of Association.
Provisions to the effect of s 14(3) were introduced into the companies legislation in the United Kingdom and Australia, to set at rest the doubt expressed in Robinson's Executor's Case [F52] that unpaid calls were simply not specialty debts [F53] and so subject to the six year rather than 20 year limitation period under the statute of 1623 [F54] . However, in The Land Mortgage Bank of Victoria Ltd v. Reid [F55] , Cussen J interpreted such a provision in s 16 of the Companies Act 1890 (Vic) as applying only to moneys payable by a member "in his character as a member" rather than as including moneys "payable by a person who happens to be a member".
Section 22 of the 1936 Act and s 33 of the 1961 Act were to the same effect as the 1899 provisions, save that each now dealt with both the articles and the memorandum. In Australian Coal & Shale Employees' Federation v. Smith [F56] of s 22 of the 1936 Act, Jordan CJ said:
"The provision now contained in s 22 of the NSW Companies Act, 1936, that the Memorandum and Articles shall when registered bind the company and the members thereof to the same extent as if they respectively had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the Memorandum and Articles, which has the effect of obviating the necessity for the execution of a deed by the members of the company, first made its appearance in the English Joint Stock Companies Act of 1856, ss 9 and 10. The section does not say that the Memorandum and Articles are to operate as if they had been executed by, and had contained a similar covenant on the part of, the company; but it does say that they are to bind the company, and this should be perhaps regarded as a statutory application of the principle that a party who takes the benefit of a deed is bound by it though he does not execute it [F57] ".
The curiosity to which the Chief Justice referred was remedied by s 78(1) of the 1981 Act (which was inserted as a consequence of s 52 of the Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 (Cth)). This provided that the memorandum and articles had the effect of a contract under seal between the company and each member, between the company and each officer and between a member and each other member; the "effect" of that contract under seal was stated as one under which each of these persons agreed "to observe and perform the provisions of the memorandum and articles in force for the time being so far as those provisions are applicable to that person". Section 180(1) of the Corporations Law is to the same effect as s 78(1) of the 1981 Act.
Professor Sealy has observed of this legislation [F58] :
"[It] was enacted to cover a gap which was thought to have been created when the memorandum and articles replaced the deed of settlement in 1856; neither it nor all the subsequent theorising has any relevance to the present-day world".
In so far as the memorandum and articles, pursuant to such legislative provision, constitute a contract between the company and its individual members or between the members inter se, the contract is of an unusual type. First, the members are deemed to have contracted on the basis that, since the articles, and in general the memorandum, can be altered by special resolution of the company, the terms of the contract are variable from time to time without agreement of both parties to that variation. Secondly, there is no jurisdiction in a court of Equity to rectify the articles of association even if they do not accord with the concurrent intention of all the signatories thereof at the moment of signature; the articles may be amended only pursuant to statutory authority [F59] . Thirdly, the direct enforcement by a member of rights under such a contract against the company may have to overcome obstacles placed in its path by the rule in Foss v. Harbottle [F60] . Fourthly, as Salmond J pointed out in Shalfoon v. Cheddar Valley Co-operative Dairy Co [F61] , whilst a contract binds those who made it and their personal representatives, the articles in a company limited by shares bind the owners thereof for the time being and the obligations imposed by the deemed covenant are appurtenant to the shares and pass with ownership of them. Finally, the view has been taken, not without doubt, that, in the absence of some other statutory provision, the effect of the decision in Houldsworth v. City of Glasgow Bank [F62] is to preclude a member of a company limited by shares from suing the company for damages for breach of contract whilst still a member and without seeking rescission of the contract whereby the shares were obtained [F63] .
As Jordan CJ and Professor Sealy indicate in the above passages, the perceived need for statutory provisions as to deemed covenants arose in the course of development in England of modern company law with incorporation by registration and the displacement of earlier forms of business organisation. One of these organisations was conducted under a deed of settlement and with some features of partnership and some of trust. The term "company" may be used to describe business associations, incorporated and unincorporated [F64] . The unincorporated joint stock company involved the use of a deed of settlement containing covenants between the members and trustees, the effect of which was to oblige the trustees to refuse transfers by members of their interests unless fresh covenants were obtained from the transferees [F65] . In this way the deed of settlement gave rise to a series of covenants binding the members who sealed it. The Joint Stock Companies Registration and Regulation Act 1844 (UK) [F66] adopted the existing method of formation of an unincorporated joint stock company by use of a deed of settlement and superimposed incorporation as the consequence of statutory registration. As Jordan CJ pointed out in Australian Coal & Shale [F67] in the passage set out above, the Joint Stock Companies Act 1856 (UK) [F68] introduced the memorandum and articles of association in place of the deed of settlement. However, the inclusion of ss 9 and 10, the progenitors of ss 10 and 14 of the 1899 Act and other Australian legislation, evinced the intention, as a matter of form, to preserve the link with the old deed of settlement by carrying over contractual notions to support what, in any event, would later come to be seen as incidents of modern company law.
We have referred to several curiosities, if not difficulties, involved in accommodating the contractual concepts apparently preserved in the legislation to other mechanisms of company law. This, in turn, led to decisions which concentrated upon the specification in the legislation of a deemed covenant between the company and "the members thereof", being a deemed covenant to observe the conditions of the memorandum and conform to the regulations contained in the articles.
Hence, there has been built up a body of authority in Australia, New Zealand and the United Kingdom that the memorandum and articles have no direct contractual effect in so far as they purport to confer rights or obligations on a member, otherwise than in the capacity of a member. This concept is expressed in such phrases as "qua member" and "member as such" [F69] . The point is that adumbrated by Cussen J in The Land Mortgage Bank of Victoria [F70] that the statute speaks of members whereas persons who are members may also deal with the company or be involved in its affairs in some further capacity as "an outsider".
In addition to the special considerations applying to variation and enforcement of the "statutory contract", the decisions of the courts, at least since that of Lord Cairns LC in Eley v. Positive Government Security Life Assurance Company [F71] , have displayed a concern that persons becoming members should not become bound to do something unrelated by their membership of a company as a consequence of a provision one would not expect to find in the constitution of the company in question. In The Land Mortgage Bank of Victoria [F72] , Cussen J identified the primary function of the articles as similar to that of by-laws, namely the provision of a series of enactments to govern the company in the administration of its affairs and to bind members in that respect whilst they were members. Later, in Hickman v. Kent or Romney Marsh Sheep-Breeders' Association [F73] , Astbury J distinguished rights which are part of the general regulations of the company applicable alike to all shareholders from those provisions of articles said to create a contract between a particular member or members and the company.
This distinction has been criticised as not consistent with the earlier English authorities [F74] , and as creating the difficult distinction between a member as a member and as an outsider [F75] . Nevertheless, on this appeal it was not disputed that, where rights are by the articles given to members in some other capacity, reliance cannot be placed on the "statutory contract" as the source of contractual rights. The issue was whether Dr Bailey had been party to such a statutory contract in respect of his policy.
The distinction drawn in Hickman became of added importance as business and professional associations were organised in corporate form. Examples included co-operative associations of primary producers [F76] , groups of trade unions [F77] , mutual insurance associations [F78] , associations of sheep breeders [F79] , and of taxi operators [F80] . In Australia, before and to some extent after the enactment of the strata title legislation, a corporate structure was employed to apportion through the medium of the articles of association the occupation and enjoyment of buildings containing home units as an alternative to co-ownership under real property law [F81] .
In some cases, where a corporation has been formed for such a special purpose (for example, before modern trade practices legislation, to implement co-operative and marketing arrangements between primary producers), it has been said that, by adopting the corporate structure, the members must be taken to have accepted that all their rights under the articles were the subject of the "statutory contract". These rights were said to extend, for example, to the co-operative marketing arrangements. There was a deemed covenant to conform to all of the regulations contained in the articles, subject to the provisions of the statute dealing with such matters as change of the articles by special resolution.
An example is the New Zealand decision of Gore Bros v. Newbury Dairy Co [F82] . The issue was whether the company could set-off against a claim by a member liquidated damages for breach of an obligation set out in the articles to supply the company with the whole of his milk production against payment at a rate stated by way of liquidated damages in the event of default. The company was successful. Chapman J said [F83] :
"The subject, therefore, of the mutual rights and obligations of the company and of the shareholders and shareholder-suppliers is intimately connected with the very purpose of the incorporation of the company; and the articles, as was clearly intended, can form and do form a contract between the company and the individual shareholder."
However, the broad trend of authority referred to above, particularly since Hickman, has been to identify the subject-matter of the "statutory contract", so far as concerns the relations between the corporation and the members, not as commercial rights but as the government of the corporation and the exercise of the constitutional powers of the corporation. Such matters as inspection of the register, the right to receive a share certificate, to vote, to receive informative notice of meetings, to receive payment of duly declared and payable dividends, and the like, even where not specifically supported by statutory provision, have been treated as inherent in the relationship between the corporation and its members [F84] .
The term "special contract" appears to have been coined by Lindley MR and Romer LJ in Allen v. Gold Reefs of West Africa, Limited [F85] . The expression has proved to be an unfortunate one. What it identifies is no more than a contract which is not a "statutory contract". That is to say, the expression identifies a contract which is constituted otherwise than solely by the articles unsupplemented by any external facts. Once the relevant "statutory contract" cannot be so found (which is, in our view, the position in the present case), then it is a question whether the evidence supports the finding of the existence of a contract which, in truth, is ordinary rather than "special" in nature. Such a contract may, as this case illustrates, pick up in a particular fashion provisions of the articles.
The present case did not involve a "statutory contract" constituted solely by the articles and unsupplemented by any external facts. The particular rights to indemnity upon which the Estate sues the Union could not, consistently with Hickman [F86] , be described as flowing from the general regulations of the Union as applicable alike to all shareholders. The attaining of the right to indemnity had been dependent upon Dr Bailey making the necessary application for membership and the payments which from time to time were fixed by the regulations as necessary for him to remain a financial member with the appropriate level of protection. Further, and again consistently with Hickman and the cases which have followed it, the entitlement in Art 57 was not conferred upon members "as such". This is so despite the fact that, before the changes which were made in 1982 to its constitution, the provision of malpractice insurance may have been one of the significant purposes sought to be achieved when the Union was incorporated.
In the light of these conclusions on the contract issue, as between the Union and the Estate, the Estate should have the substance to meet the judgment against it in favour of Mr Crawford. The orders made by Enderby J assist this result by providing for direct payment by the Union to Mr Crawford. Nevertheless, we should also deal with the alternative path pursued by Mr Crawford, that which led to success in the Court of Appeal. We turn therefore to consider s 6 of the Law Reform Act.
Section 6 of the Law Reform Act
The ancestry of s 6 is found in New Zealand. It appears to commence with s 42 of the Workers' Compensation Act 1908 (NZ). This provided:
"(1) When any employer has entered into a contract with any insurer for an indemnity in respect of any liability to pay compensation or damages to any worker, or to the representative or dependants of any worker, in respect of any accident, then in the event of the employer dying insolvent, or becoming bankrupt, or making a composition or arrangement with his creditors, or, if the employer is a body corporate, in the event of that body corporate having commenced to be wound up, the amount of that liability, whether already determined or not, shall be a charge upon all insurance moneys which are or may become payable in respect of that liability, or which would be or become payable in respect thereof had no such insolvency, bankruptcy, composition, arrangement, or winding-up taken place.
(2) The said charge shall have priority over all other charges or claims affecting the said insurance-moneys, and where the same insurance-moneys are subject to two or more charges by virtue of this Act those charges shall have priority between themselves in the order of the dates of the accidents out of which the liability arose, and if two or more accidents happen to different workers on the same day the charges arising out of these accidents shall rank equally between themselves.
(3) Such a charge shall be enforceable by way of an action against the insurer by the worker or the representative or dependants of the worker in the same manner and in the same Court as if the action was against the employer for compensation under this Act or for damages, as the case may be; 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 power, as if the action was against the employer.
(4) Such an action may be brought although judgment has been already recovered against the employer for compensation or damages in respect of the same matter.
(5) This section does not apply when a body corporate is wound up voluntarily merely for the purposes of reconstruction or amalgamation with another body corporate.
(6) Any payment made by an insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this section contained.
(7) No insurer shall be liable under this section for any sum beyond the limits fixed by the contract of insurance as between himself and the employer."
The 1908 statute was repealed by s 69 of the Workers' Compensation Act 1922 (NZ). Section 42 of the previous law was replaced by s 48 of the 1922 Act, which was in the same terms.
Section 10 of the Motor-vehicles Insurance (Third-party Risks) Act 1928 (NZ) ("the 1928 Act") introduced a provision of like nature [F87] . Sub section (1) stated:
"In the event of an owner dying insolvent or making a composition or arrangement with his creditors, or, if the owner is a body corporate, in the event of proceedings being commenced for winding up that body corporate, after the happening of an accident giving rise to a claim for damages in respect of which the owner is indemnified by a contract of insurance under this Act, or in the event of an owner being bankrupt at the time of such accident or thereafter becoming bankrupt, the amount of the owner's liability, whether already determined or not, shall be a charge on all insurance-moneys which are or may become payable in accordance with this Act in respect of that liability, or which would be or become payable in respect thereof had no such insolvency, bankruptcy, composition, arrangement, or winding-up taken place."
The balance of the section followed sub-ss (2)-(7) of s 48 of the Workers' Compensation Act 1922 (NZ).
It was in this setting that general provision was then made in New Zealand by the Law Reform Act 1936 (NZ) ("the 1936 New Zealand Act"). Part III thereof (ss 9, 10) was headed "Charges on Insurance-moneys payable as Indemnity for Liability to pay Damages or Compensation". Section 10 repealed s 48 of the 1922 Act and s 10 of the 1928 Act. Their place was taken by s 9. In speaking on the Bill for the 1936 statute, the Attorney-General said [F88] :
"Part III simply consolidates some existing provisions, which provide that where there is wrong perpetrated by a person who is insured the injured person can have a lien on the insurance-moneys. That already exists in the law in respect of the Workers Compensation Act, and also there are provisions in the Motor vehicles Insurance (Third-party Risks) Act in relation to the matter. There was no provision of that sort in regard to the Deaths by Accidents Compensation Act, and instead of making a third provision the Law Draftsman thought it better to consolidate them all and to make a general rule, which he has done in Part III to cover all cases of that description."
ection 9(2) of the 1936 New Zealand Act dealt not only with the case of the winding-up of a corporate insured but also with an insured who had died insolvent or who was bankrupt. The proviso to s 9(4) did not include the words, later found in s 6(4) of the New South Wales statute:
"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."
Nor did s 9 include s 6(8) of the New South Wales provision, preserving the operation of the workers compensation and motor vehicles third party insurance legislation. Otherwise, s 6 directly reflected the terms of s 9 of the 1936 New Zealand Act.
As originally enacted, s 6(8) of the New South Wales statute stated:
"Nothing in this section shall affect the operation of any of the provisions of the Workers' Compensation Act, 1926-1945, or the Motor Vehicles (Third Party Insurance) Act, 1942."
Section 18 of the Workers' Compensation Act 1926 (NSW) required compulsory insurance by employers under a policy which provided that the insurer, as well as the employer, be directly liable to any worker insured under such policy. Section 15 of the Motor Vehicles (Third Party) Insurance Act 1942 (NSW) provided, in certain circumstances, for entry of judgment against the authorised insurer in an action against the tortfeasor.
On the first reading of the Law Reform (Miscellaneous Provisions) Bill [F89] , the Attorney-General spoke as follows of what became s 6 of the New South Wales Law Reform Act:
"[E]xcept in regard to workers' compensation and motor vehicles (third party) insurance, it is possible for an injured person to obtain a judgment against an insured person and yet be deprived of the fruits of that judgment, because there is nothing in the law to prevent the insured person collecting his insurance money and just disappearing. Similarly, there is nothing to prevent an insured person, when sued, going to his insurance company and releasing it from its liability to him on payment to him of a lump sum which he immediately dissipates or makes away with. ... The amendment imposes no additional liability on insurers, and will, I am confident, be accepted as just by insurance companies generally."
In Pattinson v. General Accident, Fire, and Life Assurance Corporation, Ltd [F90] , Myers CJ observed that s 9 of the 1936 New Zealand Act imposed a charge on the insurance-moneys in respect of the liability of the insured to pay compensation or damages and that such charge accrued as on the happening of the event giving rise to the claim for damages for compensation. The point had earlier been made, in greater detail, by Blair J in Findlater v. Public Trustee and Queensland Insurance Co [F91] . His Honour construed s 10 of the 1928 Act as follows:
"As Wiggs' negligence [he was the insured] has not yet been established the amount of this charge is not fixed, but the charge though indefinite as to amount becomes fixed as soon as liability on Wiggs' part is established. Until it becomes fixed and there is only a possible liability the charge is in the nature of a floating charge liable to become fixed with its priority preserved as from the date of the accident."
Speaking of s 9 in National Insurance Co of New Zealand, Ltd v. Wilson [F92] , Johnston J said that the section imposed "on the insurer an obligation to keep intact the amount of its liability to the insured, whatever it may be, so that the injured man is protected". His Honour held that s 9(1) did not fix the amount of the insurer's liability to the insured and said [F93] :
"To find the amount one must go to the contract of indemnity. It is true that the liability of the insured may be greater as in this case than the amount for which the insurer has indemnified him, and the total amount of the insurer's liability is made a charge on all insurance-moneys payable to him. But although the amount for which the charge can be made may exceed the insurer's liability, the liability is not measured by the charge. Subsection 7 makes sure of this, providing that no insurer shall be liable under that part of the Act for any sum beyond the limits fixed by the contract of insurance between himself and the insured. To find out, therefore, the amount payable by the insurer, resort must be had to the contract of insurance, and to it alone."
We should now set out the text of s 6 of the Law Reform Act:
"(1) If any person (hereinafter in this Part referred to as the insured) has, 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 on 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.
(2) If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up.
(3) Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves.
(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.
(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.
(6) Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained.
(7) No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between himself and the insured.
(8) Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942."
The reference in s 6(8) to the Workers Compensation Act 1987, in lieu of to the 1926 statute, was inserted by the Miscellaneous Acts (Workers Compensation) Amendment Act 1987 (NSW), s 3.
The construction of s 6 of the Law Reform Act has produced divisions of opinion in the New South Wales Court of Appeal. These are reflected not only in the present case, but in Oswald v. Bailey [F94] , Grimson v. Aviation & General (Underwriting) [F95] and McMillan v. Mannix [F96] . The New South Wales decisions, in turn, have been considered, in construing the New Zealand legislation, by the New Zealand Court of Appeal in FAI (NZ) General Insurance v. Blundell [F97] . Some of these decisions concerned limitation questions. These were not agitated before us. Rather, the focus of submissions was on the proposition, advanced by the Union, that, on the proper construction of s 6 and in light of the 1982 amendments to the Articles, in 1985 the Council had been entitled to withdraw assistance from the Estate. The result was said to be that no insurance moneys are payable by the Union in respect of Dr Bailey's liability and no subject-matter exists upon which a charge could fix under s 6 in favour of Mr Crawford.
We turn then to consider the basic questions of construction of s 6 which are raised by the case put by the Union.
The construction of s 6 of the Law Reform Act
That which is created by s 6(1) is given the name "charge". This invokes an institution of the general law and suggests the creation by force of the statute of a security for the payment of a debt or the performance of some other obligation [F98] . In such cases, the obligation secured may be that of the party giving the charge or a third party. The assignment of a presently existing legal chose in action by way of charge rather than an absolute assignment by way of legal mortgage is well recognised. However, in New South Wales, this cannot be effected under s 12 of the Conveyancing Act 1919 (NSW) [F99] . Accordingly, the assignment by way of charge of a presently existing chose in action is effective only in equity. Likewise, an assignment of part of a presently existing chose in action [F10] . Where the subject-matter of the assignment is the future "fruit" rather than the whole or part of the presently existing "tree", value is necessary to render the "future assignment" effective in equity. The distinction is illustrated in a number of decisions of this Court, most strikingly in Shepherd v. Federal Commissioner of Taxation [F10] .
Section 6 is to be read against the background of these distinctions in property law. However, what s 6 achieves is the creation of a new right with an associated remedy to enforce it [F10] . The section does so by sweeping up distinctions in the general law between legal and equitable assignments of whole or part of presently existing or future choses in action and between cases where value is required or inessential. 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.
That the charge arises on the happening of the event giving rise to the claim for damages or compensation is apparent not only from s 6(1) itself, but from sub-ss (2) and (3). If, on the happening of that event, the insured is being wound up, the charge arises and applies notwithstanding the currency of the winding up; likewise, if a later winding up is deemed to have commenced not later than the happening of that event, the charge nevertheless applies (s 6(2)). These provisions protect and advance the interests of the claimant. So also does the conferring by s 6(3) of priority over all other charges affecting the insurance moneys.
Where the same insurance moneys are subject to two or more charges created by s 6, they have priority between themselves in order of the dates of the events out of which the liability arose (s 6(3)).
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 become 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.
This is achieved by creating in favour of the claimant a charge on all insurance moneys that are or may become payable in respect of the liability of the insured to pay damages or compensation to the claimant. The liability to pay damages may sound in a sum which is greater (or less) than that of the insurance moneys. That is to say, the obligation the performance of which is secured by the charge may be greater (or less) than the value of the security provided by the statute.
Although the claimant is a stranger to the contract between the insurer and the insured [F10] , the charge created by the section is enforceable, by reason of s 6(4), by way of an action by the claimant against the insurer. This action is to be maintained in the same way and in the same court as if it were an action by the claimant to recover damages or compensation from the insured. Moreover, in respect of that action and of the judgment given therein, the parties to it, the claimant and the insurer, have, to the extent of the charge, the same rights and liabilities and the court has the same powers as if the action were brought by the claimant against the insured. In most circumstances, the action cannot be commenced save with leave of the court.
The action by the claimant against the insurer may be brought even though judgment has already been recovered by the claimant against the insured for damages or compensation in respect of the same matter (s 6(5)). Nevertheless, the position of the insurer is guarded in several ways against the consequences of exposure to the direct action by the claimant created by s 6. First, there is the leave requirement. Secondly, as already indicated, the insurer has the same rights against the claimant as if the action were brought by the claimant against the insured. Thirdly, if the contract of insurance between the insurer and the insured fixes the greatest sum for which the insurer may be liable to be insured, then in the action brought by the claimant against the insurer the insurer shall not be liable for any greater sum (s 6(7)). This protects the insurer in cases where the amount of the liability of the insured to the claimant exceeds the insurance moneys. Fourthly, any payment made by the insurer under the contract without actual notice of the existence of the charge is, as between the claimant and the insurer, a valid discharge to the insurer, to the extent of the payment (s 6(6)).
The reference in s 6(7) to the contract of insurance is, in our view, that contract referred to in s 6(1) by which the insured is indemnified on the happening of the event giving rise to the claim for damages or compensation. It is not that contract identified in s 6(1) as varied or replaced by unilateral or mutual action of the insurer and insured in the interval between the happening of the event giving rise to the claim for damages or compensation (and thus to the charge) and some later date, such as the recovery of judgment in the action by the claimant to enforce the charge against the insurer.
That is not to say that the contract may not, at the time the charge arises, contain provisions conferring rights which, in the events which have already happened or which later happen, are exercisable by the insurer against the insured. But those rights, whenever exercised, draw their life from the contract at the time when the charge descended, not from any subsequent variation or replacement of that contract.
It is now possible to come to the central issue of construction of s 6 which arises on this appeal. It is necessary first to turn to the text of the last sentence in s 6(4). This states:
"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."
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 [F10] . 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) [F10] .
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 [F10] , 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 damages 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.
It is necessary now to return to the text of s 6(1). As we have indicated, the charge is created, by force of the legislation, on the happening of the event giving rise to the claim for damages. It is expressed to be a charge on all insurance moneys that are payable in respect of that liability. That clearly would cover the case where the terms of the policy and the events that had happened were such that it could be said that a particular sum was payable by the insurer to the insured. In that state of affairs, the charge has an immediate operation upon an existing and quantified obligation of the insurer to make payment to the insured. However, even though all other necessary facts and circumstances for the insured to have a present right to receive payment may exist, the contract of insurance may be liable to avoidance for non-disclosure or misrepresentation. Then there can be no moneys payable and thus nothing upon which the charge may operate at any time. Thus, in substance, it may be accurate to say that the charge mentioned in s 6(1) never comes into existence.
The phrase in s 6(1), "insurance moneys that ... may become payable", is apt to deal with the situation where, whilst the charge has descended, there is as yet no sum which could be identified as presently payable by the insurer to the insured. In such a case, the statutory charge operates, by loose analogy to an agreement for a charge on after acquired property, upon such moneys as and when they do become payable. However, there will be nothing in respect of which the charge may be enforced if the moneys never become payable by reason of the exercise by the insurer of rights to avoid the contract or of a vitiating factor in its formation. So also in the case of a breach which, pursuant to the terms of the contract [F10] or the general law, entitles the insurer to disclaim liability and this state of affairs exists when action is brought by the claimant under s 6(4) or, as necessary, leave is sought to commence that action. In all these cases, there were no insurance moneys which were payable when the charge arose and none have become payable.
However, once the charge has descended on the happening of the event giving rise to the claim for damages or compensation, no mutual or unilateral action of insurer or insured which is taken otherwise than under or pursuant to the contract of insurance or the general law as it operates upon the contract may vary, discharge or otherwise qualify or abrogate the contract of insurance so as to deny to the claimant what otherwise would be the fruits of enforcement of the charge by action taken under s 6(4) against the insurer. The contract of insurance is that as it stood when the charge descended. Nor, after the charge has descended, is it open to the insurer to rely upon a payment made under the contract to the insured, unless the payment was made without actual notice of the existence of the claimant's charge (s 6(6)). In these ways the position of the claimant is protected.
In the present case, in the Court of Appeal the steps taken by the Union in 1982 and 1985 were characterised by the President [F10] as including reconstruction by the Union of itself as a non-insurer, retrospective abolition of the contract of insurance, retrospective repeal of the indemnity against liability to Dr Bailey and, as a consequence, the destruction of what otherwise would have been "all insurance moneys" and reduction to nil of the "sum ... fixed by the contract of insurance" within the meaning of s 6(1).
However, the conclusion reached on the first branch of the case has the consequence that the steps in question were taken unilaterally by the Union and not under or in pursuance of the contract of insurance between the Union and Dr Bailey. Accordingly, they were ineffective to deprive the charge which had arisen in 1974 of its operation upon the insurance moneys that, under the contract of insurance as so construed, are payable to the Estate.
The charge was available for enforcement by Mr Crawford in the action instituted under s 6(4) against the Union.
Conclusions
In the appeal by the Estate against the Union, No S200 of 1994, the following orders should be made. The appeal should be allowed. There should be set aside the orders of the Court of Appeal which allowed appeal No 40127/92 to that Court and which set aside orders (2), (4) and (5) in matter 17289/80 and in lieu thereof ordered that the cross-claim by the Estate against the Union be dismissed and that the Estate pay the costs of the Union of that cross-claim. This Court should order that, in place of those orders of the Court of Appeal, orders (1) to (5) of Enderby J entered on 8 July 1992 be restored save that in orders (2) and (5) "$500,000" should be "$312,000". This reflects both the finding in the Court of Appeal that $500,000 "was a slip and did not correctly express the decision of the primary judge", and the conclusion reached in this Court that the applicable limit was $250,000 not $500,000, upon the proper construction of Art 57. Finally, the Union should pay the costs of the Estate of the appeal to the Court of Appeal and to this Court.
In appeal No S205 of 1994, that by the Union against Mr Crawford, the appeal should be allowed to the extent necessary to enable an order to be made by this Court that the sum of $312,000 be substituted for that of $562,000, and a declaration to be made that payment by the Union of that amount be deemed satisfaction of the order in the other proceeding that the Union pay the Estate the sum of $312,000. Otherwise, the appeal should be dismissed. The Union should pay the costs of Mr Crawford.
Oswald v Bailey (1987) 11 NSWLR 715.
See Australian Coal & Shale Employees' Federation v Smith (1937) 38 SR(NSW) 48 at 54-55 and now Companies (New South Wales) Code 1981, s 78(1) and Corporations Law, s 180(1). See also Beattie v E & F Beattie Ltd [1938] CH 708 at 721.
See Allen v Gold Reefs of West Africa Limited [1900] 1 CH 656 at 672-674.
See Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 CH 881 at 899-900.
[1900] 1 Ch 656 at 673.
See Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 CH 881 at 900.
(1889) 1 Megone 385.
[1893] 2 Ch 311.
[1900] 1 Ch 656 at 673.
See Allen v Gold Reefs of West Africa Limited [1900] 1 CH 656 at 671; Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457 ; Gambotto v WCP Ltd (1995) 182 CLR 432 ; cf Gra-Ham Australia Pty Ltd v Perpetual Trustees WA Limited (1989) 1 WAR 65 .
[1904] 1 Ch 374.
Baily v British Equitable Assurance Company [1904] 1 CH 374 at 384-385.
[1900] 1 Ch 656.
British Equitable Assurance Company Limited v Baily [1906] AC 35 .
(1922) 30 CLR 315.
Heron v Port Huon Fruitgrowers' Co-operative Association Ltd (1922) 30 CLR 315 at 341-342.
[1924] NZLR 561.
Shalfoon v Cheddar Valley Co-operative Dairy Co Ltd [1924] NZLR 561 at 580.
[1931] NZLR 216. See also Black White & Grey Cabs Ltd v Reid [1980] 1 NZLR 40.
See CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 546.
Oswald v Bailey (1987) 11 NSWLR 715. An application by the Union seeking special leave to appeal to this Court was refused on 19 February 1988.
NSW Medical Defence Union v Crawford (1993) 31 NSWLR 469.
(1993) 31 NSWLR 469 at 509.
(1938) 39 SR(NSW) 12 at 16; appeal dismissed (1939) 61 CLR 534.
[1927] 2 KB 9. See also the discussion of this case by Priestley JA in Oswald v Bailey (1987) 11 NSWLR 715 at 740.
6th ed (1902) at 456.
13th ed (1929) at 37.
[1931] NZLR 216 at 244.
[1898] 1 Ch 324; see also In re City Equitable Fire Insurance Co [1925] CH 407 at 520-521.
[1924] NZLR 561 at 579-580.
(1889) 1 Megone's Com Cas 385.
[1898] 1 Ch 324.
[1892] 2 Ch 158 at 167.
In re Standard Salt and Alkali Limited; Ex parte Lahiff [1934] SASR 168 at 171.
(1993) 31 NSWLR 469 at 513.
cf C E Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 545-546.
(1993) 31 NSWLR 469 at 493, 535-536.
(1993) 31 NSWLR 469 at 536.
(1938) 39 SR(NSW) 12.
(1939) 61 CLR 534.
(1938) 39 SR(NSW) 12 at 14.
(1938) 39 SR(NSW) 12 at 14.
(1938) 39 SR(NSW) 12 at 13.
(1938) 39 SR(NSW) 12 at 16-17.
(1938) 39 SR(NSW) 12 at 18.
(1939) 61 CLR 534 at 554.
Swabey v Port Darwin Gold Mining Co (1889) 1 Megone's Com Cas 385; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 476-477; Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 380, 386; Elkhoury v Farrow Mortgage Services Pty Ltd (in liq) (1993) 114 ALR 541 at 546-547; Victrawl Pty Ltd v Telstra Corporation Limited, unreported, High Court of Australia, 3 October 1995 at 27-28 per Deane, Dawson, Toohey and Gaudron JJ; cf British Equitable Assurance Company, Limited v Baily [1906] AC 35 .
(1936) 54 CLR 361 at 386.
cf Eltham Co-operative Dairy FActory Co, Ltd v Johnson [1931] NZLR 216 at 246.
cf Medical Defence Union Ltd v Department of Trade [1980] CH 82 .
(1987) 11 NSWLR 715.
(1856) 6 De G M & G 572 [43 ER 1356].
Buck v Robson (1870) LR 10 Eq 629 at 631.
Halsbury's Laws of England, 2nd ed, vol 20, par 824.
[1909] VLR 284.
(1937) 38 SR(NSW) 48 at 54-55; cf In re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] CH 146 at 187.
Norton on Deeds, 2nd ed (1928) at 26.
Cases and Materials in Company Law, 5th ed (1992) at 96.
Scott v Frank F Scott (London), Ltd [1940] CH 794 .
(1843) 2 Hare 461 [67 ER 189]. See Ford's Principles of Corporations Law, 7th ed (1995), pars 6.120-6.130; Drury, "The Relative Nature of a Shareholder's Right to Enforce the Company Contract", [1986] Cambridge Law Journal 219 at 237-244.
[1924] NZLR 561 at 580.
(1880) 5 App Cas 317.
See Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 30-33.
In re Stanley, Tenant v Stanley [1906] 1 CH 131 at 134.
Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 229-230; Cornish and Clark, Law and Society in England 1750-1950, (1989) at 246-251; Sealy, "The Director as Trustee", [1967] Cambridge Law Journal 83 at 84-86.
7 & 8 Vict c 110.
(1937) 38 SR(NSW) 48 at 54-55.
19 & 20 Vict c 47. Similar provision to ss 9 and 10 of the 1844 statute was made by the Companies Act 18 62 (UK), s 16.
Hickman v Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 CH 881 ; Heron v Port Huon Fruit-Growers' Co-operative Association Ltd (1922) 30 CLR 315 at 338-340; Australian Coal & Shale (1937) 38 SR(NSW) 48 at 57; Beattie v E & F Beattie, Ltd [1938] CH 708 at 721; Black, White and Grey Cabs Limited v Gaskin [1971] NZLR 552 at 556.
[1909] VLR 284.
(1876) 1 Ex D 88.
[1909] VLR 284 at 288-289.
[1915] 1 Ch 881 at 900.
Gregory, "The Section 20 Contract", (1981) 44 Modern Law Review 526.
Drury, "The Relative Nature of a Shareholder's Right to Enforce the Company Contract", [1986] Cambridge Law Journal 219 at 225-229; Welling, Corporate Law in Canada. The Governing Principles, 2nd ed (1991) at 61-64.
Gore Bros v Newbury Dairy Co [1919] NZLR 205; Shalfoon v Cheddar Valley Co-Operative Dairy Co Ltd [1924] NZLR 561; Eltham Co-operative Dairy FActory [1931] NZLR 216; Heron v Port Huon Fruit-Growers' Co-operative Association Ltd (1922) 30 CLR 315 ; Pakenham Upper Fruit Co Ltd v Crosby (1924) 35 CLR 386 at 400.
Australian Coal & Shale (1937) 38 SR(NSW) 48.
Lion Insurance Association v Tucker (1883) 12 QBD 176; In re Bangor and North Wales Mutual Marine Protection Association. Baird's Case [1899] 2 CH 593 .
Hickman [1915] 1 CH 881 .
Black, White and Grey Cabs Limited [1971] NZLR 552.
Crumpton v Morrine Hall Pty Ltd [1965] NSWR 240; Magill v Santina Pty Ltd [1983] 1 NSWLR 517.
[1919] NZLR 205.
[1919] NZLR 205 at 208.
See Gower's Principles of Modern Company Law, 5th ed (1992) at 286; Ford's Principles of Corporations Law, 7th ed (1995) par 6.370; Farrar's Company Law, 3rd ed (1991) at 122-127.
[1900] 1 Ch 656 at 673-674, 679. See the analysis of these judgments by Priestley JA in Oswald v Bailey (1987) 11 NSWLR 715 at 737-739. This aspect of Allen was not material in Gambotto v WCP Ltd (1995) 69 ALJR 266; 127 ALR 417 .
[1915] 1 Ch 881 at 897.
See Findlater v Public Trustee and Queensland Insurance Co [1931] GLR 291.
New Zealand, Parliamentary Debates, 17 September 1936 at 237.
New South Wales, Legislative Assembly, Parliamentary Debates, 5 March 1946, 2nd series, vol 179 at 2456.
[1941] NZLR 1029 at 1039.
[1931] GLR 291 at 293.
[1941] NZLR 639 at 644.
[1941] NZLR 639 at 644-645.
(1987) 11 NSWLR 715.
(1991) 25 NSWLR 422.
(1993) 31 NSWLR 538.
[1994] 1 NZLR 11.
Handevel Pty Ltd v Comptroller of Stamps (Vict) (1985) 157 CLR 177 at 192.
Tancred v Delagoa Bay and East Africa Railway Co (1889) 23 QBD 239; National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 6 ACTR 1 at 4-5.
0Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385.
(1965) 113 CLR 385.
See Pasmore v Oswaldtwistle Urban Council [1898] AC 387 ; Josephson v Walker (1914) 18 CLR 691 ; Houston v Dewi Thomas Pty Ltd [1967] VR 300.
cf Trident General Insurance Co Ltd v McNeice Bros Pty Ltd (1988) 165 CLR 107.
Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 635-638; Banque Keyser SA v Skandia (UK) Insurance [1990] 1 QB 665 at 778-781; affd [1991] 2 AC 249 at 280.
Part IV, Div 3 of that statute comprises ss 28-33. Section 33 states that the provisions of the division are exclusive of any right that the insurer has otherwise than under the statute in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement.
(1993) 31 NSWLR 538.
cf Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361 at 379-380.
(1993) 31 NSWLR 469 at 481-482.
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