Reported Decision : 59 NSWLR 14 (2004) 13 ANZ Insurance Cases 61-596 New South Wales Court of Appeal CITATION : Orica Limited & Anor v CGU Insurance Limited [2003] NSWCA 331 HEARING DATE(S) : 13 May 2003 JUDGMENT DATE : 11 November 2003 JUDGMENT OF : Spigelman CJ at 1; Mason P at 61; Santow JA at 84 DECISION : Appeal dismissed with costs. CATCHWORDS : INSURANCE - definition of "liability" - definition of "Injury" - latent diseases - mesothelioma - "trigger" of cover - exposure theory - retrospective legislation Workers' Compensation Act 1926 (NSW); s6; s7(4) and (5); s18; Workers' Compensation (Amendment) Act 1960 LEGISLATION CITED : Workers' Compensation (Further Amendment) Act 1975 Workers Compensation (Amendment) Act 1980 Workers' Compensation (Amendment) Act 1981 Workers' Compensation Act 1987; s151AB; s159 Admastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 Amaca Pty Ltd v State of New South Wales ([2003] HCA 44, 7 August 2003, unreported) American Home Insurance v Saunders (1987) 11 NSWLR 363 AMP Fire & General Insurance Co Ltd v Miltenburg [1982] 1 NSWLR 391 AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd (2003) 53 NSWLR 35 Ansett Transport Industries (Operations) Pty Ltd v Srdic (1982) 42 ACTR 45 Armstrong World Industries Inc v Aetna Casualty & Surety Company & Ors 1996 45 CA4 1 Attorney General v Vernazza [1960] AC 965 Austin v Abbey Mills Inc 824 So 2d 1137 (2002) Australian Casualty Co Ltd v Federico (1986) 4 ANZ Insurance Cases 60-712 Australian Iron & Steel Ltd v Coal Mines Insurance Pty Ltd (1952) 52 SR(NSW) 47 Australian Iron and Steel v GIO [1978] 2 NSWLR 59 Battaglia v James Hardy and Co Pty Ltd (unreported, Vincent J, Supreme Court of Victoria, 12 March 1987) Bendix Mintex Pty Limited v Barnes (1997) 42 NSWLR 307 Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200 Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 Cacciola and Ors v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 Cartledge v E Jopling & Sons Ltd [1963] AC 758 Clarke v Bailey (1993) 30 NSWLR 556 Connair Pty Ltd v Frederiksen (1979) 53 ALJR 505 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 Di Cecco v Mercantile Mutual Insurance (Workers Compensation) Ltd (2002) DDT 1 Dillingham Engineering Pty Ltd v National Employers' Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 Dingle v Associated Newspapers [1961] 2 QB 172 Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 Distillers Co (Biochem) Ltd v Thompson (1971) AC 458 Dwyer v Broken Hill South Ltd (1928) 2 WCR 209 E M Baldwin & Son Pty Limited v Plane & Another (1998) 17 NSWCCR 434 Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (receivers and managers appointed - in liquidation) (1993) 43 FCR 510 Fairchild v Glenhaven Funeral Services Ltd [2002] 3 WLR 89 Favelle Mort Limited v Murray (1976) 133 CLR 580 Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422 Fisher v Hebburn Ltd (1960) 105 CLR 188 Flintkote Co v American Mutual Liability Insurance, No.808-594 (unreported) (Cal. Sup. Ct., 1982) Footner v Broken Hill Ass Smelters (1983) 33 SASR 58 Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 GRE Insurance Ltd v Bristile (1991) 6 ANZ Ins. Cas. 61-078 Green v Windman [1964] VR 297 CASES CITED : Gustavson Drilling (1964) Ltd v Minister of National Revenue [1977] 1 SCR 271 Insurance Co of North America v Forty-Eighth Insulations Inc 633 F 2d 1212 (6th Cir 1980) Insurers Guarantee Funds - NEM General Insurance Ltd (in liq) v Manufacturers Mutual Insurance Ltd (unreported, 12 August 1994, NSW Court of Appeal) Judamia v State of Western Australia, Supreme Court of Western Australia, unreported, 1 March 1999 Kelly v Norwich Union Fire Insurance Ltd (1990) 1 WLR 139 Kodak (Aust) Pty Ltd v Retail Traders Mutual Indemnity Insce Assn (1942) 42 SR(NSW) 231 Letang v Cooper [1965] 1 QB 232 Manufacturers Mutual Insurance Ltd v National Employers Mutual General Insurance Ltd (1989) 5 ANZ Ins.Cas 60-906 Manufacturers Mutual Insurance Ltd v National Employers Mutual General Insurance Association Ltd (1991) 6 ANZ Ins Cas 61-038 Martindale v Burrows [1997] 1 Qd R 243 Maxwell v Murphy (1957) 96 CLR 261 Metro North Commuter Railroad Co v Buckley 521 US 424 (1997) MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23 MLC Insurance Ltd v Pinto (1994) 8 ANZ Ins Cas 61-214 National General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 NEM General Insurance Ltd (in Liq) v GIO General Ltd (1994) 33 NSWLR 247 Newton v Federal Commissioner of Taxation [1958] 98 CLR 2 Ogden Industries v Lucas (1969) 118 CLR 32 Papadopoulos v James Hardy and Co Pty Ltd (unreported, Kaye J, Supreme Court of Victoria, 12 February 1988) Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 Powell v Weaver 2003 La LEXIS 308 Ratcliffe v V S & B Border Homes Ltd (1987) 9 NSWLR 390 Registrar of the Workers Compensation Commission (NSW) v National Employers Mutual Insurance Association Limited (1978) 141 CLR 462 Rheem Australia Ltd v Manufacturer's Mutual Insurance Ltd [1984] 2 NSWLR 370 Scarcella v Lettice (2000) 51 NSWLR 302 Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Segal v Fleming [2002] NSWCA 262 State Mines Control Authority v Government Insurance Office (NSW) (1964) 65 SR(NSW) 258 Stevenson v James Hardie & Co Ltd (1997) 15 NSW CCR 568 Sydney Turf Club v Crowley [1971] 1 NSWLR 724; (1972) 126 CLR 420 TNT Australia Pty Ltd v Horne (1995) 36 NSWLR 630 Wardley Australian Ltd v Western Australia (1992) 175 CLR 514 West v Gwynne [1911] 2 Ch 1 Western Pastoral Co v Eyeington (1971) 125 CLR 342 Williams v Milotin (1957) 97 CLR 465 Wilson v First County Trust Ltd (No. 2) [2003] 3 WLR 568 (HL(E)) Wilson v Harvey Trinder (NSW) Pty Ltd [1973] 2 NSWLR 870 WorkCover Authority of NSW v Chubb Australia Limited [2000] NSWCA 221 PARTIES : Orica Limited and Orica Australia Pty Limited (Appellants) CGU Insurance Limited (Respondent) FILE NUMBER(S) : CA 40559/02 COUNSEL : M Joseph, SC (Appellants) G Little, SC/ D Morgan (Respondent) SOLICITORS : Phillips Fox (Appellants) PriceWaterhouseCoopers Legal (Respondent) LOWER COURT Dust Diseases Tribunal of New South Wales JURISDICTION : LOWER COURT DDT 454 of 2001/1 FILE NUMBER(S) : LOWER COURT Curtis J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40559/02 SPIGELMAN CJ MASON P SANTOW JA 11 NOVEMBER 2003 ORICA LIMITED and ORICA AUSTRALIA PTY LIMITED v CGU INSURANCE LIMITED CATCHWORDS INSURANCE – definition of "liability" – definition of "Injury" – latent diseases – mesothelioma – "trigger" of cover – exposure theory – retrospective legislation FACTS John Beaumont Dunstan (the worker) was employed by the insurers between April 1959 and August 1961 (three years). He was exposed to asbestos dust and fibre in such employment and contracted mesothelioma. The disease was only diagnosed in October 2001, though derived from the much earlier exposure, between 1959 and 1961 in course of his employment. No symptoms of the disease were present until August 2001. There was no sufficient evidence to infer greater exposure at any one period rather than another in the three years. On 15 May 2002 the appellant employers settled the worker's common law negligence claim for a verdict of $240,000 inclusive of costs. The appellants were insured by the respondent CGU Insurance Limited ("CGU") throughout the period of the worker's employment, such period being spanned by 3 policies for one year each, and each providing an indemnity limit of $60,000 (plus costs). The policies were in the statutory form required by the Workers Compensation Act 1926 ("the 1926 Act"): The appellants by cross-claim claimed indemnity from the respondent CGU in respect of the worker's verdict and its costs. Orica based its claim to an indemnity on the three policies issued in 1959, 1960 and 1961 pursuant to the 1926 Act. In the alternative Orica sought an indemnity from CGU up to the fixed policy limit for each policy current in each policy year of exposure ($60,000 for each policy or $180,000 in aggregate). The respondent asserted it was not liable to indemnify the appellants at all as liability arose only when the worker suffered damage, namely August 2001 and that had occurred outside the period of insurance. Alternatively it posited that liability was limited by the terms of the policy to one payment of $60,000. The trial judge in his judgment of 7 June 2002 accepted the respondent's first submission, holding that the respondent was not liable at all to indemnify the appellants in respect of the worker's verdict and dismissed the cross-claim altogether. The appellants contend His Honour erred in so holding. HELD Per Spigelman CJ, Mason P and Santow JA: (1) The words "liable" and "liability" are protean and the ascertainment of their meaning must depend on the context in which they are used: Spigelman CJ at [12] and [17]. Mason P at [67]. Santow JA at [87]. (2) The inhalation of asbestos fibres, during the policy period, was an "injury for the purpose of the policy. Spigelman CJ at [24]-[28]. Mason P at [63]. Santow JA at [136] and [141]. Per Spigelman CJ and Mason P (Santow JA in dissent): (3) Liability does not accrue or vest immediately on injury. For liability to accrue there must be "actual liability" in the form of damage. The language in the policy did not mean contingent, potential or inchoate liability. Without a cause of action in negligence completed by damage there is no corresponding liability on the behalf of the employer. Spigelman CJ at [28]-[33], Mason P at [70], [72], [75]. (4) The vesting of liability, in respect of compensation under the Workers Compensation Act, is distinguished from common law damages. Spigelman CJ [29]-[33]. Mason P [76]-[78]. Per Spigelman CJ, Santow JA agreeing: (5) The amendments made by the Workers Compensation Amendment Act 1981 to s18(3)(a) of the Workers Compensation Act 1926 did not operate with retrospective effect. They were merely for the administrative purpose of correcting the otiose nature of s18(1) of the Act. Section 151AB of the Workers Compensation Act 1987 cannot be used retrospectively to amend a past policy of insurance issued in the statutory form and to which the new statutory provisions have no apparent application. Spigelman CJ at [34]-[43]. Santow JA at [175]-[191]. Per Spigelman CJ: (6) The penetration of the lung, based on the accepted aetiology of mesothelioma, only occurred in one year. This is sufficient basis to say that only one policy could have responded if the liability of the insurer had accrued on injury. Spigelman CJ at [48]-[49]. (7) If the injury had occurred in each of the three years of different policies then only the one policy would respond. The "liability" arises only once. Spigelman CJ [51]–[57]. Per Santow JA (in dissent): (8) The policy is triggered by injury and an accrued or accruing liability; though the latter is yet to crystallise in the form of damage constituting a completed cause of action. Requiring both injury and damage to occur in the same year of a policy for indemnity to arise would produce a substantial gap in the statutory insurance cover and would be contrary to the commercial purpose of the policy in its statutory context to cover diseases of gradual onset, with unreasonable results. However, liability at common law and "exposure" to having to pay future damages must not depend on contingencies which make eventual payment less than probable but here upon the fatal ingestion mesothelioma is an unavoidable result unless some other trauma intervenes; Santow JA at [98], [161], [171]. (9) The phrase "liable to pay" should take the same meaning for compensation at common law or under the Act. Santow JA [125]. (10) Each of the three policies answers the claim, applying the analogy of solidary liability. There is no inconsistency between accepting that one cannot get mesothelioma "twice", and the proposition that mesothelioma once triggered, is triggered by cumulation of asbestos exposure and fibre. Thus on the accepted expert medical evidence in a material contribution sense, each period of exposure is causative in its cumulative affect on the indivisible condition of mesothelioma though not affecting its severity. Santow JA at [198]. ORDERS Appeal dismissed with costs. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40559/02 SPIGELMAN CJ MASON P SANTOW JA 11 NOVEMBER 2003 ORICA LIMITED and ORICA AUSTRALIA PTY LIMITED v CGU INSURANCE LIMITED Judgment 1 SPIGELMAN CJ: I have read the judgment of Santow JA in draft. His Honour sets out the facts, issues, submissions and relevant provisions. I gratefully adopt his Honour's judgment in these respects. 2 The starting point must be the policy of insurance which is the basis of the cross-claim which the Appellant filed in the worker's proceedings in the Dust Diseases Tribunal. The Appellant seeks indemnity under the policy. 3 The policy relevantly provides, with reference to each of the three periods of one year for which policies in the same terms was issued: "If, between … and … the Employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such Employer or to pay any … amount not exceeding twenty thousand pounds in respect of his liability independently of the Act for any injury to any … person … Then, and in every such case the Insurer will indemnify the Employer against all such sums for which the Employer shall be so liable." 4 The policy goes on to provide: "the Insurer shall be … directly liable to any worker … to pay the … amount for which the Employer is liable and in respect of which the Employer is indemnified under this Policy." 5 This policy is in the precise form required by Regulation 1 of the Workers' Compensation Regulations under the Workers' Compensation Act 1926 ("the Act") and by the explicit terms of s18 of the Act. See especially s18(1) and s18(3)(a) set out by Santow JA. 6 The word "injury" in the policy, as in s18(1), must be given its statutory definition in s6(1) of the Act: "'Injury' means personal injury arising out of or in the course of employment, and includes - (a) a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor; and (b) the aggravation, acceleration, exacerbation or deterioration of any disease, where the employment was a contributing factor to such aggravation, acceleration, exacerbation, or deterioration." "Disease" is not relevantly defined. 7 The terminology of 'liability' occurs on four relevant occasions in the policy: · The employer has a "liability" at common law "for any injury to" a worker. · Between the two dates identified in the policy, the employer "shall be liable to pay" an amount with respect to the employer's liability at common law. · The insurer indemnifies the employer against "sums for which the employer shall be so liable". · The Insurer is "directly liable" to pay a worker "the amount for which the employer is liable" to the worker. 8 It is the second and third of the four instances which fall to be construed in the present proceedings. 9 In the worker's proceedings against the employer, which were settled, the basic allegations, repeated by the Appellant in the cross-claim, were: · "In the course of his employment with ICI the Plaintiff was exposed to and inhaled asbestos dust and fibre." · "As a consequence of his inhalation of asbestos dust and fibre, the Plaintiff has suffered and will continue to suffer injuries, loss and damage: Particulars of Injury (a) Mesothelioma; (b) Loss of expectation of life; (c) Nervous shock, anxiety, depression and other psychological sequelae." 10 The only one of these particulars to which reference was made before this Court was (a), i.e. mesothelioma. This was the relevant damage for which the Appellant was said to be liable by the worker in the proceedings. There was never an allegation that, in some way, the original penetration of the fibre into the lung could be or was of itself damage which perfected the cause of action in tort. Construing the Policy 11 Notwithstanding the origins of the policy in a mandatory statutory form, the policy must be constructed as a contract. That is the legal character of the relationship which the Parliament adopted. The approach to construction is reasonably well established: · The words of the policy must be construed, not the section of the Act which requires the policy to exist. (Sydney Turf Club v Crowley [1971] 1 NSWLR 724 at 732D; (1972) 126 CLR 420 at 426). · The provisions of the Act may assist in determining the proper construction of the policy, not least because they are expressly "incorporated and form part of the policy" and s18(1) of the Act is set out as the first recital of the policy. (State Mines Control Authority v Government Insurance Office of NSW (1964) 65 SR (NSW) 258 at 260-261; Dillingham Engineering Pty Ltd v National Employers' Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 at 582E-F and 584F-585A; AMP Fire & General Insurance Co Ltd v Miltenburg [1982] 1 NSWLR 391 at 396-397). · The extent of the indemnity by the insurer to the employer must be found in the language of the policy, properly construed. (State Mines, at 261.) · There is no policy discernible in the legislative scheme to favour employers, as distinct from employees. (Kodak (Australasia) Pty Ltd v Retail Traders Mutual Indemnity Insurance Association (1942) 42 SR (NSW) 231 at 233.) · Neither party can be said to have proffered the contract and it cannot be construed contra proferentem. (Kodak v Retail Traders, at 233; Green v Windman [1964] VR 297 at 298.) Insofar as Nicholson J in GRE Insurance Limited v Bristile Ltd (1991) 6 ANZ Ins Cas 61-078 at 77,257 construed the policy contra proferentem. I believe his Honour erred. This Court should follow its own prior decision in Kodak. · The proposition that the legislative scheme, particularly by making the insurer directly liable to the worker, evinces an intention that the insurer should be liable whenever the insured employer is liable has not been adopted. (See Registrar, Workers' Compensation Commission of NSW v National Employers' Mutual General Insurance Association (1978) 141 CLR 462 at 490 and compare the analysis in MLC Insurance Ltd v FAI Traders Insurance Co Ltd (1994) 49 FCR 23 at 25, 34.) When is an Employer "Liable"? 12 The words "liable" and "liability" are protean and the ascertainment of their meaning must depend on the context, broadly defined, in which they are used. See particularly the review of the authorities by McHugh JA in Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at [136]-[147]. To the authorities there considered could be added Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200, esp at 206-211, Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 695; Australian Iron and Steel v GIO [1978] 2 NSWLR 59 at 62. 13 The essential character of liability insurance is well summarised in E.R. Hardy Ivamy General Principles of Insurance Law (6th ed) Butterworths, London, 1993 at 12: "In liability insurance, in which the assured insures against liability to third parties arising otherwise than from the contract, the liability insured against is the real subject-matter of insurance. The assured has no direct interest in the safety of third persons or in the preservation of their property from harm. The loss against which he seeks protection is not the injury or damage caused by the accident. It is the consequence of the fact that he happens to be responsible for the accident in the circumstances in which it takes place." 14 This is reflected in the policy here under consideration where the indemnity applies, relevantly, to liability to pay an amount because of liability for an injury. 15 There is a line of authority with respect to policies of liability insurance that the liability of the insurer arises only as and when the liability of the insured is established in the sense of being crystallised by settlement, arbitration or verdict. (See Post Office v Norwich Union Fire Insurance Society Ltd [1967] 2 QB 363 esp at 373-374, 377-378; Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 695; Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 25-26; Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 at 964-966.) 16 In AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd (2003) 53 NSWLR 35 at [9], Handley JA, with whom Mason P and Beazley JA agreed, applied this line of authority to a New South Wales workers' compensation policy. However, at [15]-[16] Handley JA went on to refer to the consideration by Glass JA of the word "liability" in Australian Iron and Steel v GIO, where at 62, his Honour construed the word "liability" in the then third party motor vehicle policy. His Honour held that in that context – "against all liability … incurred by the owner" – the word did not require liability to be ascertained by judgment or settlement. 'Liability' arose at the time the cause of action arises which is when a defendant has incurred a liability in tort to pay damages. 17 The determination of the meaning of the word 'liability' will always turn on the precise words of the policy in their context. In Post Office v Norwich Union, Cacciola, and Distillers v Ajax, the policy words were to the effect: "against all sums which the insured shall become legally liable to pay". The words "shall become" do suggest a process of establishing liability which is not inherent in the words "shall be so liable", in the policy under consideration. 18 In the present appeal, Mr G F Little SC, who appeared for the Respondent, did not put forward a contention that the policy did not respond until ascertainment of damage by verdict or judgment. He propounded a construction that liability arose when there has occurred damage which would "justify the bringing of proceedings for damages" (written submissions par [5]) or "entitling those indemnified to bring an action" (T21 line 39). In substance, this submission propounded a test of enforceability, as distinct from enforcement. 19 Mr M Joseph SC, who appeared for the Appellant, contended that the policy responded at the time of "injury". He submitted that injury occurred at the time of inhalation of the fibres. Alternatively, he submitted, if the test of liability required a complete enforceable cause of action there was sufficient damage at the time of inhalation. 20 The policy, upon payment of a single premium, extends indemnity for both an employer's liability at common law and for its obligations under the Act. It does this by one use only of the word "liable", applicable to both matters, i.e. "to pay compensation under the Act" and "to pay any other amount". The word "liable" must have the same meaning in both applications. Similarly, the words of indemnity are made applicable to both categories by a single clause "all such sums for which the Employer shall be so liable". Again the word "liable" is used in the same sense with respect to both matters. 21 The authorities establish that an employer's liability under the Act accrues when injury occurs, not when consequential incapacity arises and, accordingly, compensation falls to be paid. The statutory policy responds at the time of injury, even if incapacity arises later. (See eg Australian Iron & Steel Ltd v Coal Mines Insurance Pty Ltd (1952) 52 SR (NSW) 47 at 50-51, 52, 55-6; Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 at 384, 404; Manufacturers Mutual Insurance Ltd v National Employers' Mutual General Insurance Association Ltd (1991) 6 ANZ Ins Cas 61-038 at 76,964 (hereafter "MMI v NEM"); National & General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 334-335; State Mines v GIO at 264-265, 268; Dillingham Engineering at 586-587.) 22 In contrast, liability arose at the time of incapacity in the case of a disease of gradual onset, not at the time of receipt of the injury. (See Fisher v Hebburn Ltd (1960) 105 CLR 188 esp at 203; State Mines Control Authority esp at 261, 265.) Furthermore, a dependent's death claim arose at the time of death, not injury. (Ogden Industries Pty Ltd v Lucas (1968) 118 CLR 32 at 38, 39 approving Ogden Industries Pty Ltd v Lucas (1967) 116 CLR 537.) Similarly, compensation under the Act turning on the worker's election, arises upon the election, not at the time of the injury. (Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 esp at 394-395.) 23 If the policy responds at the time of injury, with respect to an employer's liability to make payments under the Act, it is arguable that it should respond at the time of injury with respect to an obligation to make payments for liability at common law. 24 There is authority for the proposition that injury occurs upon inhalation of fibres. The reasoning in Favelle Mort Ltd v Murray (1976) 133 CLR 580, as Santow JA shows, is to the effect that the entry of a virus into the body is itself an "injury" within the meaning of the Act and, therefore, of the policy. In GRE, the Full Court of the Supreme Court of Western Australia applied this reasoning and concluded that the inhalation of asbestos fibres into the body was the "injury" and not the subsequent commencement of mesothelioma. (See at 77,260-77,261.) 25 Older authorities suggest that the injury constituted by the initial penetration of the lungs by asbestos fires is not sufficiently material to constitute damage for purposes of determining whether a cause of action in negligence is complete. (See e.g. Cartledge v E. Jopling & Sons Ltd [1963] AC 758 at 774.1 and 779.3 (a pneumoconiosis case) and Footner v Broken Hill Associated Smelters Pty Ltd (1983) 33 SASR 58 at 74.3.) It is not necessary to decide any such question here. 26 The Appellant's case depends on when an "injury" has occurred within the meaning of the policy, not when damage has occurred for purposes of the law of negligence. It may be that an injury has occurred at the time of inhalation and penetration of the lungs, even if the disease of mesothelioma can only be said to have commenced at a later date, when the malignancy develops on the lung. (See American Home Assurance v Saunders (1987) 11 NSWLR 363 at 378 and 384 (cf 372) and Martindale v Burrows [1997] 1 Qd R 243 at 245.) 27 The policy, relevantly, relates to the occurrence of the injury in the following formulation: "… the Employer shall be liable … to pay any other amount … in respect of his liability independently of the Act for any injury to any … worker." 28 I accept, for present purposes, that there may be an "injury" within the policy at the time of inhalation of the fibres. It does not follow that at that time, an employer is 'liable to pay an amount in respect of his liability' at common law 'for that injury'. Some of the observations of Santow JA are directed to rejecting a construction of the policy that would require an injury and damage to occur in the same policy period. I wish to make it clear that that is not how I construe the policy. The relevant insured peril is 'liability' rather than the occurrence of the injury. 29 The authorities which determine that a liability to pay compensation under the Act arises even before incapacity, do not, when properly understood, turn on the time when the injury occurs in and of itself. They turn on the fact that the statute creates a liability or right at the time of the injury. 30 Each of the cases turn on the particular provisions of the statute which fell to be construed. Under s7(1) of the Act, which determined many of the cases, "A worker who has received an injury … shall receive compensation from his employer in accordance with this Act". The cases determine that the liability to pay compensation arose immediately upon injury, because s7(1), as properly construed, created a legal obligation arising at that time. 31 The rights of the worker, and the correlative obligations of the employer, were expressed in different terms in the various cases, but to the same effect. For example, "the rights and liabilities are vested" in the words of Rainbow J from Dwyer v Broken Hill South Ltd (1928) 2 WCR 209, quoted with approval by Street CJ in Australian Iron & Steel v Coal Mines Insurance at 50-51; and there is "a vested right to compensation" at the time of injury. (Ibid at 55.) The question is when can it be said that there are "rights in law" (Ogden Industries (Privy Council) at 38) or an "accrued right" or "accrued liability". (Fisher v Hebburn at 202-203 esp at 203.9; Western Pastoral Company v Eyeington (1971) 125 CLR 342 at 352; Dillingham Engineering at 586C-587B; TNT Australia Pty Ltd v Horne (1995) 36 NSWLR 630 at 637B-F.) 32 If the words of the policy – "liable to pay" – mean the same with respect to the two circumstances to which they apply – i.e. "compensation under the Act" and "in respect of his liability independently of the Act" – then the policy responds in the latter case only if the employer's liability has, within the relevant period, 'vested' or 'accrued'. In my opinion, that does not occur earlier than the time of onset of mesothelioma. Damage is the gist of the action in negligence. The "injury" occasioned at the time of penetration of the lung by a fibre, if it be injury within the meaning of the policy at all, which I doubt, is so negligible in and of itself, as distinct from its potential, that it does not constitute damage that is compensable at common law. 33 Accordingly, the policy did not respond during its currency. The appeal should be dismissed. Was Liability Unlimited? 34 On the above analysis it is not necessary for me to consider the other issues that arise. As, however, the matter may go further, it is appropriate to do so. 35 The Workers Compensation (Amendment) Act 1980, by Schedule 4 cl 1 amended s18(1), so that the reference therein to the amount for which an employer was obliged to obtain insurance in respect of liability independently of the Act was deleted and the words "unlimited amount" inserted. That this amendment was prospective only was made plain by cl 2 of the transitional provisions found in Schedule 13 of that Act which stated: "2(2) Where a policy of insurance or indemnity against liability under the Principal Act that is being maintained in force on the date of assent to this Act does not insure the employer for an unlimited amount against his liability independently of the Principal Act, it shall be deemed to insure the employer during the currency of the policy for an unlimited amount against his liability independently of the Principal Act in respect of an injury to a worker that occurs on or after the date of assent to this Act. (3) Where a policy of insurance or indemnity against liability under the Principal Act - (a) was in force at the time of an injury that occurred before the date of assent to this Act; and (b) was not being maintained in force on that date, the policy shall be deemed always to have insured the employer against any additional liability to which he may become subject on or after that date in respect of that injury by reason of any amendment made by this Act." 36 The Appellant did not rely on this provision, nor could it have done so. The amendment to s18(1) did not constitute "any additional liability" to which an employer became subject with respect to a previous injury "by reason of any amendment made by this Act". Section 18(1) was not one of the provisions that imposed an additional liability. It made provision for the content of policies of insurance to be issued in the future. Clause 2(2) extended the operation of existing policies to injuries that occurred on or after the date of assent. 37 The Appellant relied for its argument that the policy had, by retrospective legislation, become unlimited on, alternatively: (i) The amendments made by the Workers' Compensation Amendment Act 1981 to s18(3)(a). (ii) The terms of s151AB of the replacement Workers Compensation Act 1987. 38 The 1981 amendment to s18(3)(a) was made to that part of the subsection which defined the word "other amount". That definition was for the purpose of the immediately preceding paragraph of s18(3) which required every policy of insurance to provide that the insurer would be directly liable to an employee "to pay the compensation or other amount for which the employer is liable". Prior to 1981 the definition of "other amount" had referred to "an amount not exceeding the amount for which the employer has obtained a policy of insurance". After the 1981 amendment that part of the definition was replaced by the words "which the insured person is liable to pay". 39 In my opinion, the 1981 amendment was simply tidying up an omission from the amendments of the previous year. Section 18(1) by then provided for an "unlimited amount" and the reference in s18(3)(a) to "not exceeding the amount" had no "amount" to refer to. The words had become otiose. Nothing in these amendments suggest that they were intended to operate with retrospective effect, contrary to the express provisions of the amendments of the previous year, with which the tidying up amendment of s18(3)(a) must be read. 40 Section 151AB of the 1987 Act is set out by Santow JA. The 1987 Act repealed the 1926 Act including s18(3)(a). Section 159(2) as then enacted stated: "A policy of insurance shall provide that - (a) the insurer as well as the employer is directly liable to any worker insured under the policy and, in the event of a worker's death, to the dependants or other persons to pay the compensation under this Act for which the employer is liable; and (b) the insurer is bound by and subject to any judgment, order, decision or award given or made against the employer of any such worker in respect of the injury for which the compensation or amount is payable." 41 Counsel for the Appellant conceded that s151AB had no direct relevance to the present case because it was concerned with a situation in which there are two insurers, one of whom is liable to pay the full amount of damage to a plaintiff suing for an occupational disease. However, in some manner, the Court was asked to construe s151AB and s159 to reach the conclusion that pre-existing policies had been amended with retrospective affect. The Appellant relied on the conclusion and reasoning of Curtis J in Di Cecco v Mercantile Mutual Insurance (Workers Compensation) Limited, (unreported, Dust Diseases Tribunal, 21 February 2002). 42 In that judgment Curtis J relied on the reasoning of Aickin J in Registrar, Workers' Compensation Commission (NSW) v National Employers' Mutual Insurance, esp at 490. However, his Honour's reasoning was contrary to the reasoning of the majority in that case, as analysed by the Full Federal Court in MLC Insurance v FAI Traders Insurance. 43 I can see no proper basis by which the new provisions with respect to direct liability of an insurer to an employee, can be used to retrospectively amend a past policy of insurance issued in the statutory form and to which the new statutory provisions have no apparent application. The Aggregate Limit 44 The Appellant contends that, as there was exposure to asbestos in each of the three years for which the Respondent issued policies to the Appellant, it is entitled to recover the maximum amount of $60,000 for the policy in each year on the basis that there had been an injury or injuries in each of the three years. 45 The factual material before this Court is limited. As the case of the worker against the employer was settled there were no relevant factual findings. The worker's affidavit outlining the nature of his exposure was, however, tendered, without objection. 46 The parties agreed to proceed on the basis that the relevant facts relating to the aetiology of mesothelioma were as set out in pars [89]-[96] of the judgment of Justice Fitzgerald in Baldwin v Plane (1998) 17 NSWCCA 434. Santow JA summarises the effect of these paragraphs. 47 The determination of when a person becomes "liable to pay" an amount in respect of a common law liability is quite a different thing from deciding whether or not exposure to asbestos fibres has created a risk which made a material contribution to the worker contracting mesothelioma. Issues of causation for purposes of the law of negligence do not answer the question whether or not an event has occurred which causes a policy of insurance to respond. 48 The relevant event is, on the basis of the Appellant's submissions, the penetration of fibre to the lungs. There is no evidence, including from Baldwin v Plane, that penetration of the lung, as distinct from inhalation, occurred in more than one year. 49 In my opinion this would be sufficient to dispose of the Appellant's contention that it is entitled to recover the maximum amount in each of the three years. However, I proceed on the basis that, even in the absence of any direct evidence, an inference is available that, more probably than not, penetration of the lung by asbestos fibres occurred in each of the three years. 50 This is not a case involving contribution amongst employers, each of whom has exposed a single employee to asbestos fibres. Nor is it a case involving different insurers who were at risk in different years when an employee was exposed. The statutory construction of particular provisions of the Act and questions of equity arise in such situations. They do not arise in the present circumstance where a single insurer was liable under a policy to a single employer. 51 The issue that arises here is whether more than one policy responds. I proceed on the basis of an assumption that there was penetration of the worker's lung in each of the three years, the cumulative effect of which was that he contracted mesothelioma. 52 The line of authority on which the Appellant relied on the issue of when the employer's liability arose is relevant. That case law turned, in relevant respects, on the particular provisions of the statutory policies under consideration in each case. Nevertheless, the issue that was being determined was the effect, for purposes of compensation under the Act, where relevant incapacity arose from the cumulative effect of injuries that had occurred in more than one year. 53 Different views were expressed in this respect, but they were resolved by the judgment of this Court in MMI v NEM, approving the approach taken by Cole J in Manufacturers Mutual Insurance Limited v National Employers' Mutual General Insurance Association Limited (1989) 5 ANZ Ins Cas 60-906 ("MMI v NEM at trial"), in which his Honour relied particularly on the reasoning of Deane J in National & General Insurance v South British Insurance, at 334-335. 54 This line of authority concluded that where incapacity results from a number of injuries sustained by an employee in the course of employment with the one employer, in the case of a single consequence, relevantly, "where partial incapacity has resulted from a number of separate injuries", to use the words of Deane J in National & General Insurance v South British Insurance, at 335, applied by Cole J in MMI v NEM at trial, supra, at 75,793 and implicitly accepted by Samuels JA and Priestley JA on appeal in MMI v NEM at 76,965, the liability to pay compensation under the Act is "properly to be seen as flowing from the last injury and as having arisen at the time of that injury". (See also NEM General Insurance Ltd (in liq) v GIO General Ltd (1994) 33 NSWLR 247 esp at 264-265; MLC Insurance Ltd v Pinto (1994) 8 ANZ Ins Cas 61-211 esp at 75,341; Insurers' Guarantee Fund – NEM General Insurance Association Ltd (in liq) v Manufacturers Mutual Insurance Ltd (unreported, 12 August 1994, NSW Court of Appeal, Handley, Sheller and Powell JJA)). For the respective purposes to which these authorities relate, only one 'injury' was found to have the requisite consequences. 55 Although each of the cases turns on the particular section of the statute in issue, a similar result appears appropriate in the present case. The 'liability' arises only once. My conclusion fits no more elegantly into the words of the policy than the cases to which I have referred fit into the various statutory contexts where the result has been as I have indicated. Nevertheless this is, in my opinion, the proper construction of the policy. 56 The employer becomes "liable to pay" upon a single penetration with respect to the whole of "his liability" at common law. When another penetration occurs the employer's "exposure" or "risk", and therefore "liability", is not changed. I refer, of course, to "liability" where appearing in the second and third points set out in par [7] above, i.e. "liable to pay an amount" and "for which the employer shall be so liable". It may be that the employer's "liability independently of the Act" has become more likely to come home, because of the cumulative effect of the exposures, but that is a different matter. Establishing the state of affairs in which the employer is "liable to pay" occurs only once. That state of being "liable" is not affected by other exposures. 57 Only one cause of action will arise at common law against the employer for the development of mesothelioma, despite there having been multiple "injuries" within the meaning of the policy. There will be only one occasion on which the employer will become "liable to pay". It does not matter in the present case when that occurs. 58 On this basis also, the Appellant's case that more than one policy responded should be rejected. 59 Accordingly, if the view I have expressed above that no policy responded is wrong, in my opinion, only one policy would respond. Orders 60 The appeal should be dismissed with costs. 61 MASON P: I have had the benefit of reading the judgments of Spigelman CJ and Santow JA. They set out the facts and legislation upon which this appeal turns. 62 In my view, the appeal should be dismissed because none of the policies respond. 63 I agree with Santow JA that the inhalation of asbestos fibres was an "injury". But each policy required the employer's liability to pay compensation/common law damages for the injury to accrue during the term of the policy. 64 The Chief Justice's analysis shows that the critical question is whether, between the two dates identified in each policy, the employer became "liable to pay" an amount with respect to its liability to the worker, being a liability "independently of the Act". The latter concept is commonly and loosely described as liability at common law. If such liability arose, the insurer was bound to indemnify the employer "against all such sums for which the Employer shall be so liable". 65 With respect to Santow JA, I do not read the policy as requiring injury and liability each to accrue in the year of cover. It is the liability (for injury) that must accrue. 66 The relevant interpretative principles are expounded by the Chief Justice. 67 That most protean of words, "liable", must be construed in its particular context. Usually the choice is between "actually liable" and "found to be liable" (Cacciola v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691 at 693 per Jacobs JA). I agree with my colleagues that the latter meaning must be rejected in the present situation. It would effectively rob the indemnity of content, because it would relegate the employer's cover to the vagaries and delays of the litigation process and would not even address the situation where the employer's legal responsibility was too plain to require the worker to sue. The reasoning in Dillingham Engineering Pty Ltd v National Employers' Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 (discussed below) supports this conclusion. 68 Santow JA would however reject the alternative suggested by Jacobs JA and espouse something falling short of actual liability at common law as sufficient to cause the policy to respond. In his analysis, the policy does not require that sufficient events come to pass to establish a cause of action in negligence against the employer within the year(s) of cover. 69 "Liable" must have a common core of meaning (connotation) when used in a single phrase such as "liable to pay". But the circumstances in which that meaning come to be applied may cover a spectrum (ie have different denotations). Two different circumstances appear on the face of the policy, namely liability for compensation and for damages. Within the latter category are included damages stemming from direct or vicarious liability on the employer's part and damages stemming from a common law tort or breach of statutory duty. 70 I do not consider that "liable" in this context can ever mean something falling short of an accrued legal liability. A premium has been paid for an insurance policy in the nature of an indemnity. That indemnity is, in turn, "against all sums for which the Employer is liable". The policy also provides that the insurer is "directly liable to any worker...to pay the...amount for which the Employer is liable and in respect of which the Employer is indemnified under [the] policy". This is the language of legal, not moral obligation; and it bespeaks present or accrued liability, not a liability that is contingent, potential or inchoate. 71 The law has concepts known as causes of action. These define the criteria capable of giving rise to a liability recognised and enforced at law. A cause of action tells a plaintiff what must be proved as a bare minimum, when proceedings may first be brought, and when the time commences to run for limitation purposes. In relation to a right of indemnity against liability, it prescribes the matters capable of triggering a claim. The concept also forms the basis of res judicata. See generally Letang v Cooper [1965] 1 QB 232 at 242-3, Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597, 611; Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527, 558; Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (receivers and managers appointed – in liquidation) (1993) 43 FCR 510 at 521; Clarke v Bailey (1993) 30 NSWLR 556 at 564; Judamia v State of Western Australia, Supreme Court of Western Australia, unreported, 1 March 1999. 72 With the benefit of hindsight we know as a fact (because it is shown as more probable than not) that the worker, Mr Dunstan, suffered the disease-inducing injury between 1959 and 1961 when he was employed at the ICI plant. I agree with Santow JA's analysis as to the process whereby it was established that the risk of injury to which he was negligently exposed came home during this period, with the consequence that the negligent employer fell under a potential liability to compensate the worker, his estate and dependants according to tort law. But that liability remained inchoate, in the eyes of tort law, because damage is the gist of the relevant cause or causes of action. 73 The worker did not sue or recover damages on the debatable bases that the chance or fear of contracting mesothelioma was the damage suffered (cf GRE Insurance Ltd v Bristile Ltd (1991) 5 WAR 440 at 442, 6 ANZ Ins Cas 61-078 at p77,254 per Pidgeon J and contrast Metro North Commuter Railroad Co v Buckley 521 US 424 (1997) Scarcella v Lettice (2000) 51 NSWLR 302 at 306, Segal v Fleming [2002] NSWCA 262). 74 Mr Dunstan might have suffered devastating injury or been killed, perhaps due to a third party's negligence, before the ingested asbestos fibre triggered the manifestation of his disease that is recognised as the accrual of his tortious cause of action stemming from the negligent exposure at the ICI plant. This did not occur. But if it had done so, the worker or his estate might not have had to look to ICI for damages. Indeed, had death been caused by tortious accident occurring after 1961 but before the diagnosis of mesothelioma, Mr Dunstan's estate or dependants could not have sued the ICI companies under the Law Reform (Miscellaneous Provisions) Act 1944 or the Compensation to Relatives Act 1897. This is merely to restate the proposition that any tortious cause of action against the ICI companies required proof that damage recognised in law had been caused by ICI's negligence. But it does indicate the unusual and somewhat unworkable nature of the indemnity asserted by the appellant. 75 Not only could the worker not have claimed negligence damages without damage, the employer could not point to any corresponding liability on its part. The same principles are at work at both phases. 76 Santow JA sees a close analogy between the way that the policy responds as regards liability in respect of compensation and liability in respect of damages. As the Chief Justice points out, a long line of cases establish that the statutory policy responds (qua compensation) at the time of injury, even if future events have to occur before the worker's enjoyment of various statutory entitlements that are compendiously described as compensation "fructify". 77 These cases turned upon the construction of the workers compensation legislation. For example, s7 of the Workers' Compensation Act 1926 (NSW) provided that a worker who received an injury was entitled to receive compensation in accordance with the Act. Later provisions defined the events that triggered the enjoyment of particular benefits. Leaving aside diseases contracted by gradual onset, s7 was construed as generating liability in the employer as at the date when the work-related injury was suffered. For example, in Fisher v Hebburn Ltd (1960) 105 CLR 188 Kitto and Menzies JJ said (at 202-3): "What has to be identified...is the point of time at which a right to receive or a liability to pay compensation in accordance with the Act accrues in the case of a disease of gradual onset. In other cases the point of time is shown by s. 7 (1) to be the date of receipt of the injury [cases cited] the reason being that immediately upon the happening of that event the worker's employer comes under a statutory liability to pay compensation in accordance with the Act, to the worker if incapacity for work results and to his dependants if death results. It is nothing to the point that the liability thus arising does not entail any payment unless and until incapacity or death supervenes: the liability exists none the less." 78 Merely because liability to pay compensation accrues upon the suffering of an employment injury does not suggest any reason why a similar approach should be taken as regards tortious claims. The common search for the event triggering liability produces different answers for different types of claim. The law of negligence gives a different answer to the law of workers compensation, because the former requires proof of damage as an essential element before "liability" arises. 79 At first blush, the reasoning of this Court in Dillingham Engineering appears to contradict my conclusions. The decision establishes that, as regards a worker engaged inside New South Wales but injured outside it, the workers' compensation insurer under the Workers' Compensation Act 1926 is liable to provide indemnity in respect of a claim for damages at common law. The worker had received workers' compensation payments in Queensland. It was argued by Mr Yeldham for the insurer that this discharged its obligation to indemnify in respect of common law liability because "the two indemnities go hand in hand" (at 581). The Court rejected this argument and held that receipt of Queensland compensation affected the employee's liability for compensation in New South Wales but not in its liability at common law. 80 In this context, Moffitt JA (with whom Holmes JA agreed and Asprey JA substantially agreed) said (at 586-7): The obligation of the insurer to indemnify the employer, attaches as soon as a compensable injury occurs [he cited the line of cases, including Fisher v Hebburn Pty Ltd to which the Chief Justice and I have referred] … It follows that liability of the employer for workers' compensation under the Act, being that in respect of which the obligation to indemnify then arises under the policy, attaches in respect of any injury which falls within s7(1A), as it does with an injury which falls within s7(1), at the time the injury occurs. It is at this point of time that the operation of the policy in respect of common law liability must be considered. Liability of a negligent employer arises upon the happening of the injury. At that time the words "worker" and "injury" are applicable to the circumstances. Hence these words of the policy serve to extend the indemnity to this liability at common law and not to exclude it. Any question of receiving workers' compensation payments can of necessity only arise after the injury is received. Liability for workers' compensation and at common law attach, if at all, when the injury occurs. At that time the right to be indemnified arises. It would be difficult to see how the time limits of the indemnity cover could operate if it were otherwise. There is no ground in principle or by reason of the terms of s7(1A) to infer that the liability of the employer under the Act or at common law in a case within the initial part of s7(1A) or the indemnity in respect of either is suspended until it is determined whether the worker will choose to receive workers' compensation elsewhere in terms of s7(1A)(a). The consequence of provisions such as s7(1A)(a), in common with other provisions such as s53 or the last provision in 64(1)(a) in the case of workers' compensation payments and in common with provisions such as s63(3) in the case of damages at common law, is that they or the lapse of time serve to vary or even extinguish or render unenforceable the particular liability. They do not retrospectively nullify the liability which formerly existed, and they do not extinguish an obligation to indemnify which has arisen under an insurance policy. 81 This passage confirms that the liability with which the policy is concerned is not confined to liability "found", in the sense of being established by agreement or order. But the passage does not support the view that injury without damage is enough to cause the policy to respond to a negligence claim. This is because the worker in Dillingham Engineering was immediately incapacitated by the injury he suffered at work. Just before the passage quoted above, Moffitt JA said (at 586): The question of when liability of an employer for workers' compensation payments arises has been dealt with in a number of decided cases, some of which have had to deal with the particular problems which arise where the injury is a disease of a progressive nature or where the incapacity, for this or some other reason, is separated from the happening of the injury. Those particular problems do not exist in the present case because of the coincidence of the injury and the incapacity. However, it is clear, when, as here, a worker receives an ordinary injury with accompanying incapacity, that a liability in the employer to pay compensation then accrues and, in particular, that the liability which then accrues is that which is referred to and indemnified under a workers' compensation insurance policy which is in the terms prescribed by the Act. 82 Nothing in the reasoning even hints at the right of indemnity descending in advance of circumstances giving rise to a fully-constituted cause of action in respect of an actual liability that is presently enforceable. 83 Findlay v Westfield Development Corporation Ltd [1972] 1 NSWLR 422 and Rheem Australia Ltd v Manufacturer's Mutual Insurance Ltd [1984] 2 NSWLR 370 demonstrate that the liability need not be one owed directly to the worker. The former case involved liability to contribute as a joint tortfeasor and the latter case related to a common law claim for loss of consortium by the injured worker's spouse. But nothing in the reasoning of those cases suggests that the employer seeking indemnity need not establish an accrued liability. Indeed, the reasoning of Glass JA (at 373) and Mahoney JA (at 376-7) in Rheem strongly infers that their Honours would confine "liability…for injury" to liability in the sense that I construe the policy. 84 SANTOW JA: INTRODUCTION The present case in its essentials comes to this. Did the negligent employer's statutory insurance answer at all a settled common law claim to compensate an employee who, long after that insurance and employment had ceased, was diagnosed with mesothelioma? There were three insurance policies, one for each year of employment, dating back to 1959. Each provide cover limited in amount, that limit being well below the employer's liability. This is unless subsequent legislation operated retrospectively to remove the limit and provide unlimited cover. Mesothelioma resulted from the employee's exposure to asbestos fibre at the hands of the negligent employer during that earlier period of insurance and employment. We do not know with any certainty which year during this period of three years the fatal ingestion occurred. But we do know that cumulative exposure increases the risk of contracting the disease but has no effect on its severity. 85 Then there are two further questions in the event that one or more of these policies does answer. Taking into account the Workers' Compensation Act 1926 (NSW) ("the 1926 Act"), including subsequent amendments in 1981 and 1987 removing monetary limits: (a) does each policy now answer for an unlimited amount, so that it does not matter which of the three policies answers, or if the limit still remains because the later legislation is not retrospective, then (b) (i) do all three policies answer so as to aggregate the monetary limit in each available to meet the appellants' claim, or (ii) does only one policy answer, so limiting the claim to its monetary limit? 86 In answering these questions and the earlier question, I have had the advantage of reading the judgments of Spigelman CJ and Mason P in draft. I do differ on the first and third questions (whether any policy answers at all and if so, do all three answer) though not on the second (retrospective operation of subsequent legislation). Spigelman CJ and Mason P both conclude that no policy answers. This is essentially on the basis that, while injury may have occurred during the policy period, no "liability" in the sense that term is used in the policy had yet occurred. This was because, in contrast to statutory liability under the Workers Compensation legislation, which vests or accrues immediately on injury, liability at common law neither vests nor accrues until damage is suffered. That occurred only upon later onset of incapacity, when employment and insurance cover had ceased. 87 For my part, I reach a different conclusion on the meaning of that many-shaded term "liability". I do so because I consider that, read in context, the narrower meaning of "liability" (an actually accrued legal liability) is not the sense in which the policy uses that term. That narrower sense produces an unreasonable, even oppressive result which would defeat the main commercial object of the policy. That object is to ensure that employers have the financial wherewithal to meet workers' negligence claims under a comprehensive scheme for compulsory insurance also giving direct rights to workers, and itself mandated by a workers' compensation statute for the benefit of workers. By denying insurance cover to workers suffering diseases like mesothelioma, simply because injury in temporal terms occurs well before damage, would leave a large gap in that insurance safety net, contrary to the evident purpose of the legislation and the policy. Indeed while no-one could have anticipated in 1926 or in the period of insurance the potentially catastrophic effect of mesothelioma claims, there is no doubt that the intention was to include diseases of gradual onset; see s7(4) and (5) of the 1926 Act (quoted later). Such temporal separation could be even as short as a year. It could occur even between two consecutive insurance years, where there is a fresh policy for each year. That is so, though here damage happened to occur when there was no insurance policy, many years later. Yet on the narrow meaning of liability that would be fatal to insurance coverage. Thus if injury occurs in year 1 and damage in year 2 or subsequently, and even though there be a separate policy for each year, that will on that construction be fatal, as injury and liability, so defined, have not coincided but straddle two policies. I conclude that construction is not how the policy terms should be read, when their context is properly considered. 88 Indeed such a result also involves a further anomaly. It appears accepted in the reasoning of Spigelman CJ and implicitly of Mason P that such a gap would only occur in common law negligence claims, but not in statutory compensation claims. The statutory policy would evidently cover the latter. This is because the authorities establish that an employer's liability under the Act accrues when injury occurs, not when consequential incapacity arises. Accordingly, while compensation in a practical sense could hardly be claimed before any damage is suffered (how could it be quantified?) a declaratory judgment could perhaps be sought though in NSW that practice (based on Privy Council authority in Ogden Industries v Lucas (1969) 118 CLR 32) had long fallen into disuse; see Mills "New South Wales Workers' Compensation (Butterworths, 1979) at 192-3. This is because the statutory policy has nonetheless been held, correctly in my view, to respond at the time of injury, even if incapacity arises later for what is, in reality also a liability yet to manifest itself in any damage. See for example Australian Iron & Steel Ltd v Coal Mines Insurance Pty Ltd (1952) 52 SR(NSW) 47 at 50-51, 52, 55-6; Geraldton Building Co Pty Ltd v May (1977) 136 CLR 379 at 384, 404; Manufacturers Mutual Insurance Ltd v National Employers Mutual General Insurance Association Ltd (1991) 6 ANZ Ins Cas 61-038 at 76,964 (hereafter MMI v NEM); National General Insurance Co Ltd v South British Insurance Co Ltd (1982) 149 CLR 327 at 334-335; State Mines Control Authority v Government Insurance Office (NSW) (1964) 65 SR(NSW) 258 at 264-265, 268; Dillingham Engineering Pty Ltd v National Employers' Mutual General Insurance Association Ltd [1971] 1 NSWLR 578 at 586-587. 89 These questions must ultimately turn on the proper interpretation of these policies according to their contractual terms as embodied in statute, namely the Workers Compensation Act 1926 (NSW) and its regulations. That requires first establishing when "injury" occurred. The policy then requires that in addition there be "liability" on the part of the employer in the dual sense of liability to pay compensation and liability independently of the Act. The central issue is whether the latter requires an actual legal liability by way of completed cause of action against the employer, or is satisfied by something less, namely a liability accruing due, but yet to manifest itself in onset of incapacity. Indeed in one sense, damage in the sense of injury has occurred, by reason of the ineluctable progress towards mesothelioma. 90 Answering these questions is made more difficult by the fact that mesothelioma is a disease whose aetiology of cause, behaviour and prognosis is still not completely understood, though our knowledge has expanded over time. The question of its causation is sometimes expressed in terms of whether particular exposure, or its prolongation, has brought about a material increase in risk of injury. But in Australia more is required. The risk must come home so as to implicate the defendant, by showing on the balance of probabilities that the defendant at the least "materially contributed" to the injury suffered; Mason P in Bendix Mintex Pty Limited v Barnes (1997) 42 NSWLR 307 at 312-320. While we do not know precisely why it is that one employee suffers mesothelioma but not another under similar conditions, nor when precisely that employee suffered a fatal ingestion of fibre, the law nonetheless accommodates a degree of imprecision in these matters. It does so by what Mason P calls a "robust and pragmatic approach" to proof of causation. "It can be demonstrated that the common law is not unsympathetic to the plight of plaintiffs who are faced with multiple defendants yet uncertain as to which of them was legally responsible, where it appears that not all of them were. First, proof that any defendant caused or contributed to injury or damage by negligent breach of a duty of care will suffice to impose liability on that defendant. In other words, the law readily embraces the notion that several persons may bear legal responsibility for the one injury. Secondly, the trier of fact is entitled (indeed encouraged) to take a "robust and pragmatic approach" to proof of causation. The inability to call lay or expert evidence that shows the precise way in which something has happened is not fatal: see Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538 at 563-564, 569; Tubemakers of Australia Ltd v Fernandez . Thirdly, slight evidence may suffice to persuade the trier of fact that liability has been sheeted home to a defendant where the facts are particularly within the knowledge of that party: Parker v Paton (1941) 41 SR (NSW) 237; 58 WN (NSW) 189; Hampton Court Ltd v Crooks (1957) 97 CLR 367 at 371-372. Fourthly, a plaintiff who has sued multiple defendants one or more of whom may be liable is entitled, upon showing prima facie that at least one defendant may be responsible, to insist that the court hear the whole of the evidence before entertaining submissions by any other defendant that no case has been established against that defendant: Broken Hill Proprietary Co Pty Ltd v Waugh (1988) 14 NSWLR 360 at 372. This principle may be vital to a plaintiff who needs to seek an extension of time in which to bring proceedings against a number of defendants: see Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549. Fifthly, there is a special "rule" relating to a pre-existing medical condition, although it probably reflects little more than a commonsense or lay approach. It is that: '... where a plaintiff has ... made out a prima facie case that incapacity has resulted from the defendant's negligence, the onus of adducing evidence that his incapacity is wholly or partly the result of some pre-existing condition or that incapacity, either total or partial, would, in any event, have resulted from a pre-existing condition, rests upon the defendant.' ( Purkess v Crittenden (1965) 114 CLR 164 at 168.) 91 Establishing causation in Australia for diseases of gradual onset, though aided by this approach, nonetheless requires more of the claimant than merely to establish that "a particular matter [exposure to asbestos] cannot be excluded as a cause"; per Beazley JA in Bendix Mintex Pty Limited v Barnes (supra) at 339. 92 That warning is apposite when it comes to considering the extent of the evidentiary gap allowed to be overcome for the employee who suffered mesothelioma in the United Kingdom in Fairchild v Glenhaven Funeral Services Ltd [2002] 3 WLR 89. The House of Lords had to deal, not with several successive insurance policies and insurance periods, but with several successive careless employers and employment periods. Under the current state of medical knowledge, onset of the disease could not be attributed exclusively to one of several successive employers, all equally careless. The evidence, given the limitations of medical knowledge, did not enable the Court to establish which employer was responsible for the employee's fatal ingestion of asbestos fibre leading to his mesothelioma, though it did establish that any one of these employers must have been responsible. Fairchild held that in those special circumstances the claimant need not prove on the balance of probabilities that a particular employer's tortious conduct, being one of several employers who carelessly exposed the employee to asbestos fibre, caused or materially contributed to the claimant's injury. It suffices if the claimant can prove on the balance of probabilities that the defendant chosen to be sued, materially contributed to the risk of the injury (mesothelioma) that the claimant suffered (as distinct from materially contributing to the injury itself). Such an elision (from causing injury to merely causing its risk) is not permitted under Australian authority to overcome difficulty in establishing causation. 93 The present case, as I have said, does not involve multiple employers or different insurers over an extended period. Rather it involves the one insurer's successive insurance policies, one for each year over three years, each with its own monetary limit on cover. If under the statutory wording, the policies can answer at all, the further questions posed by their financial limits are fundamentally temporal problems of causation. They concern when the relevant event or events have occurred which render the policy liable to answer. In each or any of the three years, did the events in question cause both injury and employer liability, within the meaning of those terms in the policy? Is there any basis for apportionment between the three policies, given that there was only one insurer throughout? Problems of apportionment were left unsolved by Fairchild as Professor Stapleton explains, in her article "Lords a'leaping evidentiary gaps" in (2002) 10 Torts Law Journal 1 at 24-30. If there were no retrospective removal of these monetary limits, the question turns on whether the first year's policy for 1959 did meet the total claim, if it meets any claim at all; or whether the three policies combine in aggregate to meet the total claim in the amount of $180,000. If the former, then only $60,000 is available under that policy's monetary limit. If the latter, then $180,000 is available, by aggregating the monetary limit of $60,000 per policy (for 1959, 1960 and 1961 respectively). 94 In determining whether the policy answers at all, under its statutory terms both "injury" and "liability" of the employer must occur and coincide with the term of the one policy. The term "injury", like "liability", has its own range of possible meanings, to which the effect of cumulative exposure is relevant. Does "injury" in the sense used in the policy, occur when the fibre is first ingested or only after a sufficient cumulative exposure over time, or when the disease first manifests itself? What can we conclude as a matter of probability, though our knowledge is incomplete? When, following injury to the worker, is the employer "liable to pay" in respect of the employer's "liability" to the worker independently of the Act? Has that occurred during the currency of the policy? The answers to these questions bear on which policy answers, if any policy does, or whether all do. While we know that the minimum exposure to asbestos dust capable of triggering its occurrence can be the ingestion of one fibre, the expert evidence of Professor Henderson has been accepted in other cases, including an important case in the Dust Diseases Tribunal which went on appeal to this Court. According to his evidence in that case, which was accepted, prolonged exposure to asbestos fibre does accentuate the risk of its occurrence ("the cumulative effect" theory); E M Baldwin & Son Pty Limited v Plane & Another (1998) 17 NSWCCR 434 at [95-6] per Fitzgerald A-JA. No argument was put to the contrary of that proposition in the present case. It was accepted in argument there was a practical need to draw upon expert evidence accepted in other cases in the Dust Diseases Tribunal (or on appeal therefrom) in this specialised area of its jurisdiction; compare s25(3) of the Dust Diseases Act 1989 (NSW). During oral submissions (T, 26) the parties agreed that insofar as the court needed to have before it evidence of the cause of mesothelioma in relation to the inhalation of asbestos dust and fibre, it could assume that the evidence of Professor Henderson as set out by Fitzgerald AJA in Baldwin & Son Pty Limited v Plane (supra) at [89] to [96] was accepted by the Tribunal and should be accepted by this Court, including in particular the cumulative effect theory. I shall return to this aspect later. 95 This present case also poses the question whether the negligent employer's "liability", as that term is used in this policy, is limited to the actual crystallised liability when the disease manifested itself, or does it extend back to the time when the asbestos fibres were first ingested, as would lead inexorably to the onset of mesothelioma, assuming the worker did not die from other causes? The time of onset of symptoms is conventionally said to be when the employee's cause of action is complete, as only then is damage said to occur. The respondent therefore contends that that is when "liability" first occurs, within the meaning of the policy, as it is only then that the employer can invoke the policy to seek indemnity for that liability. The respondent then relies on this event being outside the policy period. 96 On the other hand the appellants contend that the trial judge was in error in accepting that narrower meaning of "liability". The appellants contend that "liability" for the purposes of the policy arises when it is inchoate or merely potential. Alternatively, I consider whether it arises (i) when the liability, though yet to crystallise, is essentially unavoidable following sufficient ingestion, or (ii) when the employer is exposed to, or at risk of, liability to make (future) payment to the worker. 97 One might compare the first kind of liability to the liability to tax which is yet to accrue, but inevitably will fall upon the tax-payer at the close of the year of income, when the tax can then be calculated and an assessment issue; compare Newton v Federal Commissioner of Taxation [1958] 98 CLR 2 at 7 (Privy Council). Such a liability is not a contingent liability in the sense of it depending on any uncertain contingency. Here too we know, though in retrospect, that there was no further uncertain contingency required. Onset of disease was, we now know, unavoidable after the fatal ingestion. Though it took many years to come home, it worked its inexorable way to that outcome. 98 That intermediate sense of "liability" picking up claims accruing due is in no way strained. It aptly fits the context of a compulsory insurance scheme comprehending, for the benefit of worker, diseases of gradual onset. If such a gap exists in the insurance coverage, this would be as oppressive as a new authority succeeding to the assets and liabilities of the old, but not those liabilities by way of claims accruing but not yet accrued; see Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1, discussed later. It is wrong to treat this case as the paradigm, for in many situations the period between injury and damage may be much shorter. Moreover if there be a second policy only when damage manifests, it will not answer either, as injury pre-dates. Thus in Kelly v Norwich Union Fire Insurance Ltd (1990) 1 WLR 139 a policy was held not to answer which was in force when damage to a building occurred as the relevant event bringing that about (incursion of water) pre-dated the policy. Importantly the Court of Appeal emphasised that the crucial event triggering policy cover was the event of incursion of water, not the later damage. That is an approach which applies by analogy here, where the event of injury from exposure to asbestos fibre is the essential trigger, not the advent of damage from later established legal liability, as distinct from an earlier accruing liability. That of course needs to be tested by reference to the precise policy wording of the policy here under consideration and I deal with that later in this judgment. Essentially I conclude that the policy is triggered by injury and an accrued or accruing liability, though the latter be yet to crystallise in the damage that constitutes a completed cause of action. This has the beneficial result that statutory compensation and common law liability independently of the Act are not artificially differentiated, based on statutory compensation supposedly not requiring damage, in terms of qualifying for insurance cover. 99 The starting point to elaborate on the answer to these questions must be the contractual terms of the statutory policy in its statutory context. Account must be taken of subsequent amendments or re-enactments, but only to the extent, if at all, that they have retrospective effect. The terms so construed must then be applied to the present circumstances. While legal principles and authority have determined in other cases when "liability" and "injury" occur, those terms ultimately depend for their interpretation on the policy terms themselves. I turn, however, first to the salient facts, which are not in dispute. THE PRESENT APPEAL The Salient Facts 100 (a) John Beaumont Dunstan (the worker) was employed by the appellants then named ICI Limited and Imperial Chemical Industries of Australia and New Zealand Limited (subsequently re-named Orica Limited) and Orica Australia Limited (both referred to collectively as "Orica") between April 1959 and August 1961 (three years). He was exposed to asbestos dust and fibre in such employment and contracted mesothelioma. This was in course of his duties in a supervisory capacity (Shift Superintendent) at the ICI plant. It was diagnosed only in October 2001, though derived from the much earlier exposure, between 1959 and 1961 in course of his employment. His evidence is contained in an affidavit of 14 May 2002 (black, 45 and following). It attests to (i) the lack of precautions against asbestos dust and fibre taken by his employer, (ii) its apparent state of knowledge of the dangers, (iii) his own lack of knowledge of such dangers, (iv) his various exposures to asbestos dust and fibre in unprotected conditions throughout the three years of his employment, there being no sufficient evidence to infer greater exposure at any one period rather than another in the three years (though he describes a particular incident involving exposure to asbestos dust and fibre over 4 or 5 days for several hours in the first few days of his employment (at para [50])), (v) absence of any likely exposure outside that period of employment, whether before or after, (vi) that he was in good health until August 2001 when he experienced his first symptoms, leading to extensive treatment and extreme pain, and (vii) finally, diagnosis in October 2001 of mesothelioma. (b) Mr Dunstan subsequently brought proceedings in the Dust Diseases Tribunal by statement of claim against the appellants seeking damages in respect of his condition which he alleged was due to the negligence of the appellants. On 15 May 2002 the appellants settled the worker's claim for a verdict of $240,000 inclusive of costs. (c) The appellants were insured by the respondent CGU Insurance Limited ("CGU") throughout the period of the worker's employment, such period being spanned by 3 policies for one year each, and each providing an indemnity limit of $60,000 (plus costs). The policies were in the statutory form required by the Workers Compensation Act 1926 ("the 1926 Act") quoted below. (d) The appellants by cross-claim claimed indemnity from the respondent CGU in respect of the worker's verdict and its costs. Orica based its claim to an indemnity on the three policies issued in 1959, 1960 and 1961 pursuant to the 1926 Act. In the alternative Orica sought an indemnity from CGU up to the fixed policy limit for each policy current in each policy year of exposure ($60,000 for each policy or $180,000 in aggregate). The respondent in its written defence to the cross-claim admitted that it issued the three policies and admitted liability but limited to the sum of $60,000. Subsequently, whilst admitting it insured the appellants, it asserted it was not liable to indemnify the appellants at all as liability arose only when the worker suffered damage, namely August 2001 and that had occurred outside the period of insurance. Alternatively it posited that liability was limited by the terms of the policy to one payment of $60,000. It thus asserted that (as recorded by the trial judge Curtis J): "(a) It is not liable to indemnify Orica because the policy indemnified only against a liability of Orica that arose during the period of insurance. Because the liability of Orica arose only when the plaintiff suffered damage; that is in August 2001, the policy issued by CGU does not respond. (b) In the alternative the indemnity was limited by the terms of its policy to $60,000." (iv) The trial judge in his judgment of 7 June 2002 accepted the respondent's first submission, holding that the respondent was not liable at all to indemnify the appellants in respect of the worker's verdict and dismissed the cross-claim altogether. The appellants contend His Honour erred in so holding. They seek on appeal in the alternative (a) full indemnity for $240,000 plus costs (on the basis that the $60,000 limit was removed retrospectively by later amendments in 1981 and 1987 to the 1926 Act), (b) indemnity limited in aggregate to $180,000 plus costs (on the basis that all three policies apply), or (c) indemnity limited to $60,000 plus costs (on the basis that only one policy could answer). 101 In addressing those issues and the contentions of the parties, it is necessary to consider the precise terms of the statutory policy of insurance issued at the time, and the relevant legislative provisions. THE WORKERS' COMPENSATION LEGISLATION AND THE STATUTORY POLICY Terms of Statutory Policy 102 The statutory policy of insurance in force for each year between 1959 to 1961 was mandated by regulation 1 of the regulations to the 1926 Act. Regulation 1 required the policy "to contain only such provisions relating thereto as are contained in the form of policy in the Appendix hereto". The appendix, relevantly, provided as follows: "Whereas by virtue of the Worker's Compensation Act 1926, as amended (hereinafter called the Act), it is provided that every employer shall obtain from an Insurer licensed under the Act to carry on business in the State a policy of insurance or indemnity for the full amount of its liability under the Act to all workers employed by him and for an amount of at least £20,000 in respect of its liability independent of the Act for any injury to any such worker and shall maintain such policy in force and… Now this policy witnesseth that in consideration of the payment by the employer to the insurer of the above-mentioned premium .., if between the …… day of ……………. And 4 o'clock on the afternoon of …… day of …………. And thereafter to 4 o'clock on the afternoon of the last day of any subsequent period in respect of which the premium shall have been paid to and accepted by the insurer, the employer shall be liable to pay compensation under the Act to or in respect of any person who is or is deemed by the Act to be a worker of such employer or to pay any other amount not exceeding £20,000 in respect of his liability independently of the Act for any injury to any such person, THEN, and in every such case the insurer will indemnify the employer against all such sums for which the employer shall be so liable; the Insurer will pay all costs and expenses incurred … in connection with the defence of any legal proceedings in which such liability is alleged …." [emphasis added] 103 The policy goes on to provide: "the Insurer shall be directly liable to any worker … to pay the … amount for which the Employer is liable and in respect of which the employer is indemnified under this policy" 104 There is a proviso finally that "this Policy shall be subject to the Act and the Rules and Regulations made thereunder, all of which shall be deemed to be incorporated in and form part of this Policy". 105 The policy provides for a single premium based on the amount of "wages, salaries and all other forms of remuneration" (cl 9 and introduction). The premium is subject to adjustment based on inspection of the wages book (cl 11), but not, evidently, so as to extend the insurance period. That period can be taken ordinarily to be of a year, as these three policies were, though no doubt capable of being for a longer period if a larger initial premium were paid (see reference to "subsequent period"). The case proceeded on the basis that each policy was a separate policy and not simply an extension of the previous one. 106 There is some possible significance in the fact that the policy proceeds on the basis that the employer may in some circumstances know of the injury, but not of "any incapacity arising therefrom". Thus under cl 2, "claims" it is provided that: " Claims . 2. The Employer shall give notice to the Insurer of any personal injury as soon as practicable after information as to the happening of such, or of any incapacity arising therefrom, comes to the knowledge of the Employer or of the employer's representative for the time being, and shall forward to the Insurer forthwith after receipt thereof, every written notice of claim or proceedings, and all information as to any verbal notice of claim or proceedings." 107 Finally, I should note that regulation 1(a) of the regulations containing the policy terms in an appendix requires that "every policy of insurance or indemnity shall contain only such provisions as are contained in the form of policy" there found. I refer below to s18 of the Workers Compensation Act and the relevant definitions. The legislation – Workers' Compensation Act 1926 as amended 108 The policy issued by CGU was issued pursuant to the 1926 Act. "Injury" is an essential requirement for indemnity under the policy. Section 6 of the 1926 Act contains a definition of "injury" which was subsequently amended on several occasions. In 1942 the original definition of injury was repealed and replaced with the following: "'Injury' means personal injury arising out of or in the course of employment and includes a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor …." 109 In 1960, the Workers' Compensation (Amendment) Act 1960 repealed this definition and inserted the definition for injury that continued until the repeal of the 1926 Act. This definition was given retrospective application, as it applied with effect from 1 July 1942. It provided: "'Injury' means personal injury arising out of or in the course of employment, and includes – (a) a disease which is contracted by the worker in the course of his employment whether at or away from his place of employment and to which the employment was a contributing factor; and (b) the aggravation, acceleration, exacerbation or deterioration of any disease where the employment was a contributing factor to such aggravation, acceleration, exacerbation, or deterioration. …" 110 Section 18 of the 1926 Act governed the obligation on employers to obtain insurance in respect of the liability of the employer that may arise independently of the 1926 Act. 111 At the time of the employee's employment s18 provided: "18(1) Every employer shall obtain from an insurer licensed under this Act to carry on business in the State, a policy of insurance or indemnity for the full amount of liability under this Act to all workers employed by him and for an amount of at least twenty thousand pounds in respect of his liability independently of this Act for any injury to such worker and shall maintain such policy in force … .…(2) No Insurer shall, except with the consent of the Commission, given after due inquiry into the circumstances, refuse to issue such a policy of insurance or indemnity to any employer who has complied with the prescribed conditions …. 18(3)(a) Every policy of insurance or indemnity shall, in so far as it relates to any liability referred to in subsection one of this section, contain only such provisions as are prescribed, but may contain such other provisions relating to any other liability at common law or under any Act or Commonwealth Act as are appropriate to any particular case. ….. Every such policy shall provide that the insurer shall as well as the employer be directly liable to any worker insured under such policy and in the event of his death, to his dependants, to pay the compensation or other amount to which the employer is liable, and that the insurer shall be bound by and subject to any judgment, order, decision or award, given or made against the employer of such worker in respect of the injury for which such compensation or amount is payable. In this paragraph the expression "other amount" means an amount not exceeding the amount for which the employer has obtained a policy of insurance or indemnity in respect of his liability independently of this Act for any injury to such worker". [emphasis added] 112 In 1967, the Workers' Compensation (Dust Diseases) Amendment Act, amended s18 so that the employer was required to maintain a policy of insurance for liability independently of the Act for a minimum of $50,000. 113 In addition the following provision was inserted: "18 (6B) For the purposes of any contract of insurance or indemnity obtained by an employer after the commencement of Part III of the Workers' Compensation (Dust Diseases) Amendment Act 1967, or obtained by him before and being maintained in force after such commencement the liability of the employer, independently of this Act, for an injury, being an occupational disease, to a worker shall be deemed to have arisen when the worker was last employed by the employer in an employment to the nature of which the disease was due. In this paragraph "occupational disease" means a disease which is of such a nature as to be contracted by a gradual process …." 114 In 1975 the minimum prescribed amount to be insured for liability independently of the Act was increased to $100,000. Additional provisions were inserted for policies taken out or being maintained on or after the amending Act in relation to subsisting policies and extension to indemnity provisions imposing liability on the insurer. Although these provisions do not apply retrospectively to the present situation they are nevertheless worth noting: "7(1) A policy of insurance or indemnity against liability under the Principal Act being maintained in force on the appointed day shall be deemed to have insured the employer and always to have insured the employer against any additional liability to which he may become liable during the currency of the policy under any amendment made by this act" 115 By the Workers' Compensation (Further Amendment) Act 1975, the following change (in bold) was made to s18(2): "(2) No Insurer shall, except with the consent of the commission, given after due inquiry into the circumstances, refuse to issue such a policy of insurance or indemnity to any employer, or to effect the renewal of such a policy issued to the employer, unless conditions are prescribed in respect of the issue or renewal of such a policy and the employer has not complied with those conditions …." 116 In 1980, the legislation was again amended, this time to require employers to obtain insurance for an unlimited amount in respect of liability that may arise independently of the Act. Thus Schedule 4 amended s18(1) by omitting "amount of at least $100,000" and substituted instead "unlimited amount". 117 Bearing on whether the policy in the present case was thereby amended with retrospective effect so as to provide cover for an unlimited amount, the transitional provisions of this amending act provide: "Schedule 13, cl 2 (3) Where a policy of insurance or indemnity against liability under the Principal Act – (a) was in force at the time of an injury that occurred before the date of assent to this Act; and (b) was not being maintained in force on that date, the policy shall be deemed always to have insured the employer against any additional liability to which he may become subject on or after that date in respect of that injury by reason of amendment made by this Act" 118 The Workers' Compensation (Amendment) Act 1981 made further changes (in bold) to s18 which are also of potential significance to the present case and relied on by the appellants. Section 18(3)(a) was changed to remove the previous monetary limit applicable to "other amount" being the amount which the employer, as the insured person, is " liable to pay independently of this Act for any injury to such worker ". "….(3) (a) Every such policy shall provide that the insurer shall as well as the employer be directly liable to any worker insured under such policy and in the event of his death, to his dependants, to pay the compensation or other amount to which the employer is liable, and that the insurer shall be bound by and subject to any judgment, order, decision or award, given or made against the employer of such worker in respect of the injury for which such compensation or amount is payable. In this paragraph the expression "other amount" means an amount which the insured person is liable to pay independently of this Act for any injury to such worker" [emphasis added to show the amendment] 119 The Transitional Provisions in this 1981 Act contained the same provision as in the 1980 amending Act; see schedule 6 clause (8). The legislation – Workers' Compensation Act 1987 120 In 1987, the 1926 Act was repealed by the Workers' Compensation Act 1987 (the 1987 Act). Section 151AB of the 1987 Act should be noted insofar as it bears on whether the financial limits were removed retrospectively. It provides: " 151AB. Special insurance provisions relating to occupational diseases (1) If an employer is liable independently of this Act for damages for an occupational disease contracted by a worker, the following provisions have effect for the purpose of identifying from among a number of insurers under policies of insurance obtained by the employer for different periods which insurer or insurers is liable to indemnify the employer for the full amount of the damages or which is liable to pay the full amount of damages to the worker (without any right to a contribution from those other insurers): (a) Any liability of that employer that arose before the relevant commencement is taken to have arisen when the worker was last employed before that commencement by that employer in an employment to the nature of which the disease was due. (b) Any liability of that employer that arose after the relevant commencement is taken to have arisen when the worker was last employed after that commencement by that employer in an employment to the nature of which the disease was due. (2) If the employer's liability arose partly before and partly after the relevant commencement, the following additional provisions apply: (a) Subsection (1) (a) applies to any liability that arose before that commencement and subsection (1) (b) applies to any liability that arose after that commencement, with the result that 2 insurers are identified as the insurers who are to be liable as referred to in subsection (1). These insurers are referred to in this subsection as the " responsible insurers ". (b) Of the responsible insurers, the one that is the insurer in respect of the employer's liability that arose after the relevant commencement is to be the insurer "primarily responsible" for the claim. (c) The responsible insurers can however agree as to which of them is to be primarily responsible for the claim or the court can order that one of them is to be the insurer primarily responsible, and any such agreement or order overrides paragraph (b). (d) The insurer who is primarily responsible for the claim is to act for both the responsible insurers in respect of any claim for the damages and has sole liability for the claim (that is, it is to indemnify the employer for the full amount of the damages or is to pay the full amount of damages to the worker, without any right to a contribution from any other insurer, except as provided by paragraph (e)). (e) The insurer who is primarily responsible is entitled to recover from the other responsible insurer half of the amount paid as damages to the worker, half of the amount paid in respect of the worker's legal costs and half of such reasonable amount as the insurer primarily responsible may have incurred in respect of its own legal expenses in the matter. (3) If 2 or more employers are jointly or severally liable for damages referred to in this section, the provisions of this section apply separately to each employer. (4) This section does not affect the amount of damages recoverable by a worker. (5) This section applies to any liability arising before or after the commencement of this Act and to any policy of insurance issued before or after that commencement. (6) In sections 151AB and 151AC: "occupational disease" means a disease of such a nature as to be contracted by a gradual process, and includes: (a) a dust disease as defined by the Workers' Compensation (Dust Diseases) Act 1942, and (b) total or partial loss of sight which is of gradual onset, and (c) the condition known as "boilermaker's deafness" or any deafness of similar origin. " relevant commencement " means: (a) except as provided by paragraph (b)---4 pm on 30 June 1987, or (b) in the case of an employer who was insured under a policy of insurance that was assigned as referred to in clause 10 of Part 15 of Schedule 6 to this Act---the commencement of the period of insurance of the policy so assigned." 121 The predecessor provision to s151AB in the 1926 Act was s7(4) and (5) the relevant parts of which are quoted below: " 7 …. (4) Where the injury is a disease which is of such a nature as to be contracted by a gradual process compensation shall be payable by the employer in whose employment the worker is or who last employed the worker. ….. (5) For the purposes of subsections four and (4A) of this section and of sections forty-four and fifty-three of this Act the injury shall be deemed to have happened at the time of the worker's incapacity." RESOLUTION OF APPEAL QUESTIONS 122 I return to the primary question. Did any or all of the three statutory policies in effect successively in 1959, 1960 or 1961 answer at all to the employer's claim for indemnity, however quantified? 123 Under the terms of the statutory policy (disregarding the question of whether subsequent amendments to the 1926 Act removed retrospectively the monetary limit): (i) there is a recital referring to the obligation on the employer to obtain a policy of insurance or indemnity for an amount of at least [$60,000] in respect of employer's " liability independently of the Act " (i.e. at common law) " for any injury to " any worker employed by him; (ii) there is a parallel recited obligation to obtain such a policy also for "the full amount of his liability under the Act to all workers employed by him", again for any injury; (iii) [if] between the two dates identified in the policy, the employer "shall be liable to pay any … amount not exceeding [$60,000] in respect of his liability independently of the Act again "for any injury to any such person", then (iv) such indemnity is against "sums for which the employer shall be so liable", and so that (v) the insurer is "directly liable" to pay a worker "the amount for which the employer is liable" to the worker. 124 The critical terms are "liable/liability" and "injury". The terms "liable" and "liability" are used in two distinct senses, following upon injury to a worker. First, there is employer "liability to pay" an amount to the injured worker, (either under the Act or independently of the Act). Second, what is paid is for liability under the Act, in respect of any worker, or "in respect of" liability "independently of the Act"; but in each case for any injury. Thus the word "liability" in the phrase "in respect of his liability independently of the Act" is used in a different sense to its earlier use in the phrase "liable to pay". The latter expression "liable to pay" refers to a state of exposure to potential or future liability to pay a claim, including in my view a future accruing claim, involving statutory or common law liability. Earlier cited cases have determined this to be the case for statutory claims under the Workers' Compensation legislation. Yet there can in reality be no practically exigible statutory liability until damage is suffered. But those cases, correctly in my view, treat as a liability such a statutory claim, though still accruing in the sense of still to yield any damage, on the basis that this is a liability that has vested or accrued, subject only to future incapacity; see also the Privy Council in Ogden Industries Pty Ltd v Lucas (supra) followed by Walsh J in Western Pastoral Co v Eyeington (1971) 125 CLR 342. It would be incongruous indeed if the accruing liability to pay a common law claim, one which crystallises upon onset of incapacity, were excluded from cover under the Policy though its incurrence could not be avoided unless some other disaster intervened. Context and logic justify treating the latter type of claim as embraced by the term "liability", no less than the statutory claim. 125 I consider the phrase "liable to pay", qualifying as it does both compensation under the Act and compensation at common law, should in logic take essentially the same meaning in both contexts. It is supported by the line of authorities concerning liability to pay compensation under the Act to which I have earlier made reference. There the relevant time is the time of injury. Here injury occurs when the asbestos fibre penetrated the lung, triggering its later malignant condition leading inexorably to mesothelioma. Thus liability to pay an amount should encompass the notion of being "exposed to" or "at risk of" having to pay, so long as that exposure or risk is certain or at the least highly likely. Consistent with the meaning of "liability independently of the Act", it would certainly include a liability to pay which is bound to come about (even if not yet known) but which is still accruing. I consider it includes a liability still to crystallise but which is not subject to such contingencies as to render its crystallisation less than highly probable. 126 The respondent's contention was to deny that either injury or liability occurred during the currency of the policy and to assert that it occurred only after its expiry; that is, when, with damage suffered, the tort of negligence became complete. "Liability" it is said, only followed for the purpose of the policy when damage was first suffered. That was when symptoms first manifested themselves upon onset of incapacity from the mesothelioma. All this would be long after employment and insurance ceased. I quote from the respondent's written submissions: "5. The entitlement to claim indemnity under the policy of insurance is not in respect of an injury to a worker but it is in respect of a liability of the employer "to pay any other amount not exceeding £20,000 in respect of his liability independently of the Act for any injury to a worker". It is not the time of the injury that is relevant but the time the liability to pay damages occurs i.e. when damage is suffered such that it would justify the bringing of proceedings for damages: Crimmins v Stevedoring Industry Finance Committee (1999-2000) 200 CLR 1 State Mines Control Authority v Government Insurance Office of New South Wales & Anor (1964) 82 WN 289.9, 290.5, 290.7, 290.8, 291.4. 6. State Mines Control Authority v Government Insurance Office of New South Wales & Anor is authority for the proposition that liability must arise during the currency of the policy and that liability arose when incapacity occurred, the receipt of injury (the determining factor governing the entitlement to compensation) being deemed to occur at the same time as the incapacity. The submission that the suggested construction should apply in respect of liability independently of the Act is contrary to the holding of the High Court in Crimmins (supra) particularly McHugh J at p.136 where His Honour said: "The case would be different if the respondent was to be liable only for causes of action that existed immediately before the expiration of that period. But the legislature has chosen a more ambiguous term." And further at paragraph 147. …. 8. It is submitted that the liability to pay any sum independently of the Act did not arise during the currency of the policy of insurance nor at the time the liability arose was the plaintiff a worker employed by the Appellant; therefore neither of the two required conditions for indemnity was established." 127 The starting point in the analysis is to identify the relevant context, for "liability" takes its meaning from context; Crimmins v Stevedoring Industry Finance Committee (supra) per McHugh J at 52 [137-8]. In Crimmins that context was legislation providing for a successor waterside authority to assume the liabilities of its predecessor. Unless the successor did take over all liabilities, including merely potential ones, those with inchoate claims at the time of succession would be left without remedy when they crystallised. There, context favoured a very wide reading of "liability" to include potential or inchoate liabilities. McHugh J explains the importance of context in these passages: [137] The precise meaning to be given to the word "liabilities" depends on its context. In Tickle Industries Pty Ltd v Hann , Barwick CJ pointed out: 'The use of the word "liable" can cause difficulty in construction because of the various senses in which the word is or has been from time to time employed. The word takes its particular significance, however, from the context in which it appears and the subject matter and evident policy of the legislation in which it is found.' This is so, even though some judges have expressed the opinion that the "ordinary or natural meaning" of the word is limited to "actual" (rather than "potential") liability [138] In some contexts, the meaning of "liabilities" will be wide enough to embrace a "contingent" or "inchoate" liability. Thus, Jowitt's Dictionary of English Law defines "liability" as: '… the condition of being actually or potentially subject to an obligation , either generally, as including every kind of obligation, or, in a more special sense, to denote inchoate, future, unascertained or imperfect obligations , as opposed to debts, the essence of which is that they are ascertained and certain. Thus when a person becomes surety for another, he makes himself liable, though it is unascertained in what obligation or debt the liability may ultimately result.' [footnotes omitted] And at [147] he adds "… The case would be different if the respondent was to be liable only for causes of action that existed immediately before the expiration of that period. But the legislature has chosen [liability] a more ambiguous term. …" [emphasis added] 128 Here giving "liability" its widest meaning would encompass potential, prospective, contingent or inchoate liability. That widest meaning of liability is distinct from an actual liability or obligation which may be said to be its alternative meaning. "Liability", as I have said, also has an important intermediate sense, that of an obligation which has yet to accrue but is bound to do so. An example is a tax liability yet to accrue but which, accruing due over time, is bound to crystallise. As the argument in Newton (supra) in the Privy Council illustrates, one can speak of a tax liability which must accrue in the future, once the tax year ends and the balance of taxable income is struck. Meantime though the liability has not yet accrued, it is accruing due. It is in the meantime nonetheless a liability and not merely a contingent obligation, because its crystallisation must follow according to the preordained requirements of the tax law. One may describe such liability to pay future accruing tax in terms of "exposure" to that liability for payment. One may, as I explain, similarly characterise the negligent employer's liability to pay compensation to his worker who has suffered injury as a result, though as yet unknown. 129 Accordingly, compare what here has occurred during the currency of employment and insurance. First, the employer was careless. Second, the employee as a result suffered injury resulting from the ingestion of the asbestos fibre, with each progressive exposure rendering it more likely that progress towards mesothelioma will be triggered. With the vision of hindsight, we now know that original entry of harmful material into the body would lead inexorably to mesothelioma. The trigger for that inevitable outcome was pulled some time during the currency of the policy. It then only required the employee to outlive the long latency period, without suffering one of the "thousand natural shocks the flesh is heir to", before mesothelioma manifested itself. The employer's liability, though yet to accrue in discernible damage, is accruing due. It will become due once incapacity occurs as it must with the inevitable onset of disease. On this basis, injury and liability, in that intermediate sense, both occur during the period of employment and thus when the policy indemnity could be triggered. 130 If, contrary to the view I take, liability were given its narrower sense, that of "present legal obligation or duty", or "present or actual liability", the position favours the respondent. Then it is necessary to ascertain, in accordance with the common law rule, when the wrongful act (here of the employer) caused actual not merely potential loss or damage, being damage which is beyond what can reasonably be regarded as negligible and which is not dependent on a future contingency. Only then, with those conditions fulfilled, is the tort complete; Cartledge v E Jopling & Sons Ltd [1963] AC 758; Wardley Australian Ltd v Western Australia (1992) 175 CLR 514 at 526 per Mason CJ, Dawson, Gaudron and McHugh JJ and at 555 per Toohey J. On that basis even if injury occurs during the currency of the policy the employer's liability has yet to occur. 131 It is important to emphasise that in Crimmins, the parties all accepted in relation to a waterside worker's mesothelioma "that the damage for which the plaintiff seeks to recover damages occurred shortly before symptoms were diagnosed …" (per McHugh J at [136]). The other judges also proceeded on that assumption. For example Kirby J at [196] said this: "[196] Obviously, upon the assumption made for the purposes of the present argument, some lasting physiological change short of injury took place in the deceased's body at the time of his exposure to asbestos fibres while employed as a waterside worker in the 1960s. The mere fact that it produced no immediate symptoms and constituted no "injury", in the sense of occasioning damage for which the deceased could then have sued, does not destroy its contingent potential. The same would be true in a case of negligent exposure of a person to an extremely serious virus, such as strains of hepatitis or the human immunodeficiency virus. The potentiality for future damage would be caused at the moment of such exposure. Without such exposure there would be no possibility of future damage, absent a new event. There seems no reason of principle to treat such a case as different from the liability of a surety under a guarantee before the events giving rise to legal obligations have occurred. There may be no legal "obligation" of the Authority actually existing immediately before the expiration of the period specified. But given the clear purpose of the transmission provision, it seems unduly narrow to read "liabilities" as excluding contingent or potential liabilities." 132 There was not before the High Court any dispute based upon the kind of issue with which Derrington J has to grapple, in Martindale v Burrows [1997] 1 Qd R 243, nor Curtis J in Gibson v SIFC (DDT 89 of 1996, 2 June 1998 unreported. In Curtis J's own earlier decision in Gibson, which he cited in the present case as a parallel situation, Curtis J attempted "to resolve the conundrum of whether 'injury' within the general meaning of the word may be suffered without 'damage' giving rise to an action": "It is true that had the plaintiff brought his action on the day preceding the relevant date he may have failed for want of proof that his asbestos exposure had caused him damage. Symptoms did not occur until 1994. At that time the flaw in the plaintiff's action would have been want of evidence that his exposure had caused him more than the possibility of loss. (See Wardley Australia Ltd v State of Western Australia 1992 175 CLR 514 at 526). We do know, however, in retrospect, that the plaintiff's inhalation of asbestos fibre had caused in him pathological changes, present at the relevant date, that would inevitably and inexorably lead to the symptoms from which he now suffers. Had this evidence been available to him in 1978 he would be, albeit symptom free, entitled to damages no less than a person negligently subjected to the HIV virus who will inevitably contract AIDS. The argument of SIFC addresses not the perfection of the tort but the availability of evidence of such perfection at the relevant date." 133 Curtis J in the present case however concluded that the approach he took in Gibson was no longer tenable after Crimmins, citing McHugh J at [136]. 134 He does not however mention that in Crimmins, this was a matter of agreement between the parties, as the actual passage quoted below makes clear. "[136] Given that both parties accept that the damage for which the plaintiff seeks to recover damages occurred shortly before symptoms were diagnosed in 1997 , Tadgell JA was plainly right when he said that it is "scarcely possible to contend that the authority could have been amenable on or at any time before 26 February 1978 to a claim, let alone a judgment, for the tort of negligence at the suit of the [plaintiff]". The tort of negligence is derived from the action on the case. Damage is the gist of that action and is an essential element of the cause of action. To say that the plaintiff did not have a complete cause of action as at 26 February 1978, however, does not end the matter. In two cases involving this very question and legislation, two judges have expressed their opinion that "liabilities" includes "potential" or "contingent" liabilities. It is therefore necessary to determine whether the view of the Court of Appeal judges should be preferred to that of the trial judge in this case and those two judges. [footnotes omitted and emphasis added] 135 Moreover Crimmins, as I have said, emphasised the primacy of context in resolving the meaning of liability. Here the context is an insurance policy, predicating indemnity on the employer's non-statutory common law "liability" to a worker for any "injury" to that worker. So the first question is when "injury" occurred; was it when the harmful material was ingested during the currency of employment and insurance? If so, that would support a reciprocal wider meaning for liability; one which would accommodate its contemporaneous occurrence with the injury, though yet to fructify in a completed cause of action. 136 It is not in dispute in this case, as in GRE Insurance Ltd v Bristile (1991) 6 ANZ Ins. Cas. 61-078 at 77,257, that the asbestos fibres which eventually caused the mesothelioma were inhaled during the period of employment and when the respondent was the insurer. In GRE Insurance Ltd "personal injury", the term employed, was, in my view correctly, attributed to that fatal ingestion of fibres, though the employee was only aware of the injury much later when manifest as mesothelioma. The circumstances in GRE Insurance Ltd (supra) were of a 20 year employment (from 1962 to October 1982) in which GRE was insurer throughout, rather than just for 3 years, the injured worker was employed as a labourer "pipe sticker' where his exposure was from working in close proximity to asbestos sheeting which was periodically damaged from 1963 to 1975 releasing asbestos fibres into the factory environment. That was held to create a foreseeable and avoidable risk of injury to employees. 137 In Favelle Mort Limited v Murray (1976) 133 CLR 580, dicta, highly persuasive, support that conclusion in GRE Insurance Ltd as to when injury occurred. It was there held that an employee suffered "injury" within the meaning of s6 of the Workers' Compensation Act 1926 (NSW). That definition expressly included in paragraph (a) "a disease which is contracted by the worker in the course of his employment". The worker had been attacked by a virus and as a consequence developed meningo-encephalitis. In the course of their reasons for judgment, members of the Court also considered whether the entry of the virus into the worker's body was an "injury" within the primary definition of that term as being a "personal injury arising out of or in the course of employment". Barwick CJ said at 587: "Apart from any effect of the extension effected by par. (a) of the definition, an external excitement initiating a morbid condition of the body would, in my opinion, be an injury within the meaning of that word in the context of a workers' compensation law. It must be remembered that at the outset of such legislation, i.e. in the original English act, the injury had to be by accident or, perhaps more accurately expressed, the worker had to suffer or receive an injury by accident. Consequently, the universal character of the word 'injury' was to an extent limited by its conjunction with the word 'accident'. But English courts held that the contraction of a disease by external cause could be the reception of an injury by accident. Brintons Ltd v Turvey [1905] A.C. 230 and cases which followed that case sufficiently evidence that course of decision. The same view has been adopted in New Zealand – see Storey v Wellington Hospital Board [1932] N.Z.L.R. 1553. The removal of the word 'accident' from the expression 'injury by accident' did not, in my opinion, reduce the connotation of the word 'injury'. Rather, it increased the occasions on which that connotation could be given effect. …It may thus be concluded, as I would conclude, that in its normal meaning the word 'injury' in the Act itself embraces an externally excited disease." 138 For reasons which are not here relevant, he did not consider that he was free to give effect to these views and decided the case on another basis. McTiernan J (at 593) considered "injury" was caused solely by the virus entering the worker's body. Stephen J (at 593) agreed with Mason J (at 595-6) who expressed the view that, apart from the effect of para (a), the disease was a personal injury. Jacobs J said at 600: "It would appear to me that the entry of a virus into the human body is an injury within the first words of the definition. By the infection of more and more body cells the injury leads to what may be described as a disease in the sense that it is a pathological condition of the body cells which results in a morbid physical condition of the body. The minuteness of the initial entry or invasion of a body cell does not change its essential nature. …" 139 It follows that, as pointed out by Nicholson J in GRE Insurance Ltd, although the ratio decidendi of Favelle is not to the point here, the reasons for judgment contain highly persuasive dicta relevant to the interpretation of the policy. 140 Favelle (supra) has been elsewhere considered. In Connair Pty Ltd v Frederiksen (1979) 53 ALJR 505 Mason J at 512 referred to the absence of any definition of "disease" in the statutory definition of "injury" in s6(1) of the Workmen's Compensation Ordinance 1949 (NT). He took this as justification for putting aside the shading of opinion between the members of the High Court in Favelle and entitling a conclusion that an infection due to the entry into the body of bacteria or a virus is an injury. Blackburn CJ in Ansett Transport Industries (Operations) Pty Ltd v Srdic (1982) 42 ACTR 45 at 47 applied Favelle to conclude the entry of toxic bacteria into the bloodstream, causing a disease, is an injury. 141 We do know that this employee, who eventually contracted mesothelioma, must therefore have indeed suffered injury at the time he inhaled asbestos fibres, increasing his risk, but not the severity of the disease, the more he inhaled. Though the injury was imperceptible in its beginning, we can accept that the resultant disease occurred as a result. It is true that there is some suggestion, not tested in the present case, that earlier exposures to asbestos fibre are more significant than later equivalent exposures. But the evidence does not provide sufficient basis for any division of the present employee's different work activities so as to justify attributing the injury to an earlier year rather than a later one, as distinct from apportioning it over the three years of exposure. 142 This result accords with E M Baldwin & Son Pty Ltd v Plane & Anor, a decision of the New South Wales Court of Appeal. That case concerned a worker who suffered from mesothelioma. In an action in the Dust Diseases Tribunal against his employer (Baldwin) and the manufacturer and supplier of the asbestos brake blocks with which he worked (Jsekarb), the trial judge in the Dust Diseases Tribunal entered a verdict and judgment in the worker's favour and apportioned liability in a ratio of 95 per cent against Baldwin and 5 per cent against Jsekarb. The worker was exposed to two forms of amphibolic (mesothelioma-forming) asbestos. During the first period from 1948 to 1970 (22 years), he was exposed to crocidolite from products found throughout the work environment at Baldwin. During the second period, consisting of 10-15 years ending in or before 1983, he was exposed to tremolite-contaminated chrysotile from the Jsekarb brake blocks used at Baldwin's. However, the Court of Appeal found that there could not be any rational basis for the division of causation of the mesothelioma between the worker's different work activities and the different asbestos fibres to which he was exposed, and thus concluded that it was just and equitable that apportionment of responsibility be ordered. That determination was made pursuant to s5(1) and (2) of the Law Reform (Miscellaneous Provisions) Act, 1946 (NSW). 143 The evidence of Professor Henderson explaining the "cumulative effect" of mesothelioma was recorded by Fitzgerald A-JA at [90]: "90 Professor Henderson gave evidence that, while there is uncertainty concerning the process of development of mesothelioma, it is related to the cumulative effect of all asbestos fibre inhaled in the material period, which ends about 10 years prior to the first diagnosis of the disease. The inhalation of asbestos fibre produces genetic mutations and eventually invasive clonal growth which results in mesothelioma. There is no ' mesothelioma cell' while the protracted series of mutational events is occurring ' until there is a progressive clonal growth and invasion of tissue' . Earlier exposures to asbestos fibre are more significant than later equivalent exposures, and the heavier the exposure the greater its significance: '... an important part of the equation is that the time is multiplied by the cumulative dose' . Further, some forms of asbestos fibre are more likely to produce mesothelioma than other forms; more particularly, '... exposure to amphibole asbestos is more likely to be associated with mesothelioma than chrysotile asbestos ', which Professor Henderson said " as a rough estimate" has ' between a 50th and 100th potency ... compared to the amphibole asbestos variety to cause mesothelioma' ." 144 Fitzgerald AJA accepted that evidence at [95]. He also accepted these propositions derived from Professor Henderson's evidence: (a) Multiple factors are relevant to the development of mesothelioma: the potency of the form of amphibole inhaled, the duration of the exposure period, the heaviness of the exposure and of the fibre burden in the lungs, and the time lapse between each exposure period and a diagnosis of mesothelioma [93]; (b) It is incorrect to suggest that the inhalation of more than one form of asbestos fibre raises a number of separate, independent, possible causes of the disease [95]; (c) The inhalation of one form of asbestos fibre may materially contribute to the development of the disease, even though in the absence of prior inhalation of other asbestos fibres, mesothelioma would probably not have resulted [96]. 145 To place that acceptance in context, Fitzgerald AJA earlier (at [88]) rejected the assertion by Jsekarb (which was responsible for the later exposure) that it was entitled to exoneration on the basis that the employee "already had ample opportunity to get mesothelioma from his first 20 years work" [with Baldwin] and …"once you've got the [mesothelioma] change occurring you cannot get it twice" [from the later 10-15 year exposure from Jsekarb's brake blocks]. In other words, as is evident from the result in Baldwin, the Court by majority took the view that the probability was that the cumulative exposure over a period of around 32 to 37 years caused the mesothelioma and justified equal apportionment, notwithstanding the earlier and longer 22 year exposure under Baldwin as employer. 146 In argument before us, it was not suggested that any other view should be taken of the aetiology of mesothelioma in this respect. It generally accords with the lucid description of the imperceptible but inexorable progress of the disease, given by Derrington J in Martindale v Burrows (supra) at 244-246: "…. During the earlier period the harmful substance is ingested causing incremental changes that ignite the process, though the changes do not at that stage reach such a magnitude as to be described as a medical injury. In the later stage, even without any necessary further exposure, the process originally ignited progresses to a more dramatic transformation which becomes manifest. However the risk of developing malignant mesothelioma increases with each episode of exposure. The period of exposure prior to the manifestation is normally somewhere between twenty and forty years. Although mesothelioma is just one of a number of pathologies which may arise as a result of exposure to asbestos fibres, it is quite distinct and separate from any of the other pathologies which may also arise as a result of it in that none of the others is necessarily a precursor to or indicator of the development of this disease. In other words, it does not necessarily arise out of any of the other pathologies and it may arise in patients who do not have any evidence of any of them. It is also said that for variable reasons other persons similarly exposed may have suffered other possible results, not connected with mesothelioma except as being commonly attributable to the same cause. However all of this simply means that although the harm in this case was in fact caused from that exposure, not everyone would have suffered the same result. It is irrelevant that in some cases there is no progress to the malignant transformation. It is relevant that in those cases where it does so, its course can be traced back through the harm that has led to it by a natural progression in that case. It is necessary only to note that the results may differ in other cases and that they are unpredictable until they manifest themselves, so that, when the plaintiff suffered the initial harm that with further continuing harm was to lead to the present result, it could not then be predicted that what was going to happen would happen. The tendency to refer to hypothetical alternatives that may possibly have occurred with someone else can lead into error if it is used for more than to mark the unpredictability of the plaintiffs condition in its early stages. It is not possible to say that, once a person has been subjected to a certain dosage of asbestos, that person will then develop malignant mesothelioma nor when the risk of developing it either commences or commences to increase appreciably. Moreover, the final malignancy is the product of a process of distinct physiological change. The asbestos fibres move to the peripheral part of the lung where they impinge on the walls of the small airways and gradually move through the lung tissue until a large number reach the pleural surface. Once there they will irritate other pleura until through some unknown physiological process there is a malignant transformation in one or more mesothelial cells which form part of the pleura. It is at this point that the mesothelioma can be said to commence. Until then there are no physiological changes in that form or even precursors of it, but there may be physiological changes constituting an increased risk of the later development of it; but such conditions also commonly exist in patients who have been exposed to asbestos fibres but who never advance to the development of malignant mesothelioma. However, all this merely means that in any case where it does come about, the condition is the final step in the continuing harm in a natural progression from the original continuity of small occurrences of harm leading, in that case, to that inexorable conclusion. They may have produced no immediate physiological change which, without regard for its actual though delayed consequences, could in medical terms have been called an injury in its own right at that time. However, this does not detract from the fact that in that case the initiating harm was then caused once anything beyond the insubstantial on the road to the catastrophic result was achieved. Here, there was an ongoing established injury, imperceptible in its beginning and incremental nature, that has led to a cumulative result which was then perceptible and identifiable. In turn that has then proceeded to its further development, either of its own accord after ignition or by the further traumatic stimulus from the plaintiff's continuing ingestion of asbestos. The harm done to him in causing the changes to his body that would lead to such a result amounted to an injury. This cannot be insubstantial if it is part of a total process with such a catastrophic result, and it would be artificial to analyse the totality by reference to its discrete parts. In such a gradual continuing process, it would be inapt to apply the same concepts as where the harm is done in one blow and its injurious nature can be identified and established at once." [emphasis added] 147 If one stopped at this point, one might understand Derrington J as questioning whether in the very early period of ingestion, there is any medical injury. However, he went on to say this (at 246): "It does not follow that if it is established that the condition has developed into mesothelioma, there will have been no relevant injury until the commencement of that development. The appearance of that condition establishes that the earlier morbid changes were indeed so serious as to be productive of mesothelioma at the later stage and were not merely potentially so . This means that the early changes did cause harm substantial enough to amount to injury at law. This distinction permits of a reconciliation of the cases cited with the leading authority on the point, Cartledge v Jobling and Sons Ltd [1963] AC 758 where after originally suffering many tiny injuries to his lungs from inhaling microscopic silicon particles the plaintiff later developed pneumoconiosis in circumstances similar in principle to the present case." [emphasis added] 148 Earlier he distinguishes Wardley Australia Ltd v Western Australia (supra) in these terms (at 246): "While vulnerability to injury or the potential for harm does not itself amount to an injury ( Wardley Australia Ltd v Western Australia (1992) 66 ALJR 839, 843), that is different from the position where a morbid condition is initiated, leading naturally to more serious developments at a later stage. It is not a matter of potentiality in such a case simply because in other cases such a consequence might not follow. In Wardley , no harm whatever was done at the earlier stage and it was only when another event in the form of a trigger occurred that any harm followed." 149 In the present case, had the employee in 1961 sought to bring proceedings for his increased risk of contracting mesothelioma, it is clear he could not have succeeded then. But that is only for want of proof, available only in hindsight, that his ingestion of asbestos fibres had caused him damage. This is so even if we assume that the hypothetical court hearing that action in 1961 was armed with the evidence courts now accept regarding the causation and aetiology of mesothelioma. The most that could be said was that this exposure increased the risk of the employee contracting mesothelioma, as compared to the non-exposed population. That is to say, the employee "lost the chance" of not being at material risk of contracting mesothelioma, by his three year exposure at the hands of his careless employer. On the present state of the law that is not enough. As Professor Stapleton in her recent article "Cause-in-Fact and the Scope of Liability for Consequences" (2003) 119 LQR 388 at 424 explains: "English judges seem uniformly hostile to allowing the pure-loss-of-a-physical-chance to form actionable damage when there are, as yet absolutely no physical changes.1 It is thought that mere exposure to risk, say to asbestos, without any physical changes would allow in too many speculative claims …" 1 Gregg v Scott [2002] EWCA Civ 1471 [awaiting judgment on appeal to the House of Lords] The weight of authority in Australia is to similar effect, though there may come a time and case as in the United States where it may be possible to demonstrate actual damage, in the form of some psychological condition induced by anxiety, or even increased life insurance premiums or other discernible disadvantage by reason of a greater risk of contracting a disease like mesothelioma from past exposure. 150 So far it has been held in Australia that where there has been an inhalation of asbestos that has led to pleural thickening of the lung at the time of trial, but which has caused no physical discomfort or disability, with only the potential for more serious developments, those physiological changes wrought to that stage could not be said to have amounted to an actionable injury because of the lack of any established harm. The potential for more harmful developments could not alter that situation: Battaglia v James Hardy and Co Pty Ltd (unreported, Vincent J, Supreme Court of Victoria, 12 March 1987); Papadopoulos v James Hardy and Co Pty Ltd (unreported, Kaye J, Supreme Court of Victoria, 12 February 1988. 151 To the contrary is one only of the judgments in the appeal court GRE Insurance Ltd, that of Pidgeon J. He says (at 77,254): "I agree with Nicholson J that the injury occurred when the fibres were inhaled. In my view sufficient damage occurred at that particular time to give rise to an action in tort. The damages at that stage may have been no more than to compensate for a prospect or chance of the disease subsequently developing and of a shortening of life expectancy ." [emphasis added] 152 However, while Nicholson J concluded that at time of inhalation of the fibres, the employee suffered an injury (the external excitement of the disease of mesothelioma), he did not also conclude that the liability to make payment – here under the Workers Compensation legislation – was such as to "give rise to a liability in the period of insurance" (at 77,261). (Murray J agreed with Nicholson J.) That did not however prevent the policy from answering the claim. Nicholson J considered that the policy terms, read with the Act had that result, though he relied also on there being construed contra proferentem the insurer. That obviated any requirement for the liability, as distinct from the injury, to arise during the period of insurance. I agree with Spigelman CJ that, on the authority of Kodak (Aust) Pty Ltd v Retail Traders Mutual Indemnity Insce Assn (1942) 42 SR(NSW) 231, the contra proferentem doctrine can have no place here, as neither party can be said to have "proffered" a statutory contract; see also Derrington and Ashton "The Law of Liability Insurance" (Butterworths, 1990) at 117 (hereafter "Derrington and Ashton) and Green v Windman [1964] VR 297. 153 In WorkCover Authority of NSW v Chubb Australia Limited [2000] NSWCA 221, Stein JA, with Powell JA and Foster A-JA agreeing, concluded: "…it is important to note that there is a significant difference between a closed claim for industrial deafness and a claim in respect of mesothelioma. The former is a succession of completed tortious insults, whereas the latter, because of its aetiology is not complete until the disease of mesothelioma strikes, usually many years after the asbestos exposure. Also one will normally not know which asbestos fibre caused the mesothelioma. It could be an asbestos fibre inhaled during any time over a lengthy period of exposure." (at [26]) Stein JA concluded (at [33]) that "the tort was not complete" until the occupational disease of mesothelioma was diagnosed. That must be taken to be the law. 154 The question this still leaves is whether the present policy can be properly construed as still answering the appellants' claim on one or other of the following contentions: (a) that the policy wording does not require "liability" as distinct from "injury", to arise during the period of insurance cover, or (b) that it employs the term "liability" to include what hindsight shows to have been (i) an inchoate or potential liability, or (ii) more narrowly, a liability still to accrue, but which will necessarily arise in the future, (here by reason of the unavoidable future onset of the disease, brought about by the ingestion of the fibre), or at the least is not subject to such contingencies as would render that future onset less than highly probable, with hindsight here permitted. 155 The policy wording is clear enough that injury must arise during the period of insurance. However, liability in the two senses used (liability to pay, liability independently of the Act), while it cannot first arise after the policy, may pre-date it so long as it continues on during the policy. Here there is suffered an increased probability of mesothelioma with each year of asbestos fibre exposure. Given that injury remains the critical element, exposure to the asbestos fibre here does increase the probability of mesothelioma, under Professor Henderson's accepted cumulative effect theory. Moreover, in construing what has been described as that "chameleon term" liability I consider that there is no clear indication in the policy wording which would restrict its reach to an actual present liability from a completed cause of action. For reasons I elaborate below, I consider that "liability" should be construed to include the sense in (b)(ii) above but not (b)(i). For reasons I have earlier explained, the decision in Crimmins places no impediment in the way of that conclusion, nor indeed the reasoning. 156 The proper approach to the interpretation of a policy of insurance, where the contra proferentem rule, as here, could not be invoked, is as described by Gibbs CJ in Australian Casualty Co Ltd v Federico (1986) 4 ANZ Insurance Cases ¶60-712 at 74,240; (1986) 60 ALJR 460 at 462: "The ordinary rules of interpretation apply to a policy of insurance. As in the case of any other commercial contract, a court may depart from the strictly literal meaning of a particular expression to place upon it an alternative construction which is more reasonable and more in accord with the probable intention of the parties if the words will bear that construction: McCowan v Baine [1891] A.C. 401 at 403; see also MacGillivray & Parkington, op. cit. at pp.436, 437 (par. 1037, 1039) and Sutton, Insurance Law in Australia and New Zealand (1980), p.294, par. 8.45. Further 'the trend is, if anything, to adopt a liberal interpretation in favour of the assured, so far as the ordinary and natural meaning of the words used by the insurers permits this to be done': Halsbury, 4th ed., vol. 25, par. 594, note 1, cited in Mount Albert city Council v New Zealand Municipalities Co-operative Insurance Co. Ltd (1984) 3 ANZ Insurance Cases ¶60-544 at p. 78,178; [1983] N.Z.L.R. 190 at p. 193. …" 157 Important are two further principles of construction to which I have earlier made reference. The first, exemplified in cases such as Admastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133 is that the construction of words and phrases in a contract must take account of the main object or commercial purpose of the contract, so promoting its business efficacy. The commercial purpose here is to ensure employers have resort to a compulsory insurance scheme so that workers with claims for work-related injuries are not left with uninsured employers of straw, when it comes to meeting their statutory or common law claims. 158 Second, is the principle that, so far as practicable, but not so as to re-write the contract, one should reject a construction of a contract that leads to unreasonable results; see for example Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, Wilson v Harvey Trinder (NSW) Pty Ltd [1973] 2 NSWLR 870. 159 An interpretation which denied employer access to any policy in the case where injury and liability (in the strict sense of a completed cause of action) occur in separate years, would defeat that evident commercial purpose. But, even more anomalously, it would only do so for liability at common law, not statutory liability. 160 Here it is the case that the latency period is very long. Unsurprisingly there was no policy extant when the mesothelioma at last manifested itself. But that need not be so. The simple proposition remains true that if injury occurs in policy year 1 and liability in policy year 2 then assuming successive annual policies there will never be any effective insurance cover. That would be so for any disease of gradual onset where there were any delay in the manifestation of symptoms after injury. This is so because on this interpretation, injury and actual legal liability must occur in the same policy period, typically a year. That is self-evidently an unreasonable result. It would, if the statutory contract of insurance were so interpreted, defeat the whole purpose of a comprehensive compulsory insurance scheme for work-related injury if it gave no proper cover for this not uncommon category of injury of gradual onset. That would be an extraordinary and anomalous result, especially under comprehensive statutory insurance cover designed for the benefit of workers. Yet it is a result which would follow if liability were restricted to its narrow sense. Moreover if injury need not occur in the policy year, but only legal liability with damage, again diseases of long latency are likely to fall outside the safety net of insurance cover. 161 I do not consider that I am impelled by the language of the policy to that result. I start with the proposition that the basal concept of the Workers Compensation legislation is "injury", to which "liability" in the two senses used is consequential. It is defined as in the 1926 Act as "a disease which is contracted in the course of employment". Like the virus in Favelle Mort, the ingested fibre had here started upon its slow but inevitable physiological process of malignant transformation of the pleura of the employee's lung, doing so sometime during the course of employment and thus during the period of insurance. That meant "injury" occurred during the period of insurance. It also meant that, while the onset of incapacity from mesothelioma had still to manifest itself, we know in retrospect that it did. Because we know that this outcome could not have been averted from the time during employment that this process of malignant transformation started, therefore "liability" in the sense of a liability accruing due had fallen upon the negligent employer during the currency of the insurance. 162 However, I do not consider that it would be enough, in the context of this policy of insurance, for there to be during its currency merely any inchoate liability on the employer's part particularly one whose future occurrence was open to real doubt. Otherwise that would unfairly expose the insurer to having to indemnify in relation to highly uncertain contingencies that had yet to be satisfied during the course of the insurance. 163 But nor does the liability have to actually crystallise during the currency of the insurance nor by that time constitute a completed cause of action, when it is the case that damage must necessarily accrue in the future. It must be remembered that the insuring clause does not refer to the insured's being "legally liable", or "legally liable by way of damages" or refer to a "cause of action"; compare Cacciola and Ors v Fire and All Risks Insurance Co Ltd [1971] 1 NSWLR 691. It is certainly sufficient if there be a liability on the employer's part which, though yet to accrue, was bound to occur in the future (save if precluded by premature death or some other supervening trauma); that is, by reason of the unavoidable future onset of the disease, even if no-one were aware of this in 1961. 164 There are indeed good practical reasons for this, quite apart from the evident gap in the insurance cover. This includes that the insured may wish to know whether there is indemnity against its future accruing liability to pay damage to the worker, but may be unable to have the issue determined because the insurer refuses either to acknowledge liability or repudiate it and when the matter may only come to be determined many years later; see Derrington and Ashton at 345-6. 165 The approach I favour is not inconsistent with the line of authority in the United States described as based on "the exposure theory" or sometimes "continuous trigger theory" as distinct from manifestation theory. In the discussion that follows, I express my indebtedness to the authors of the second edition of Derrington and Ashton, currently in course of preparation and in particular to the draft section headed "The trigger of cover" which I had the advantage of reading in draft. 166 In the United States the policy language pertinent to the trigger of coverage issue, in the line of cases examined (see for example, Armstrong World Industries Inc v Aetna Casualty & Surety Company & Ors 1996 45 CA4 1) was generally as follows: The Insurance Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay, as damages, because of personal injury or property damage. The path of the United States cases has been to determine whether or not an "injury" has occurred in the situation where the worker has become exposed to asbestos during the policy period, though damage has not become apparent until much later. If an injury was found to have occurred, then the policy was triggered. The legal obligation to pay is implicitly treated as accruing on the finding of injury. It appears accepted that while 'damage' must still ultimately accrue, it need not crystallise until well after the policy period has ceased. The United States Courts make no reference to any necessity to prove damage during the policy period: indeed the phrase " legally obligated to pay " was never the central issue, but rather the fact of injury; the fact of injury is dealt with under what is called in the cases " exposure theory " (or some times " continuous trigger theory "). 167 Exposure theory says that mere exposure to a harmful condition will be sufficient to cause "injury" within its usual meaning. See for example, Insurance Co of North America v Forty-Eighth Insulations Inc 633 F 2d 1212 (6th Cir 1980); Flintkote Co v American Mutual Liability Insurance, No.808-594 (unreported) (Cal. Sup. Ct., 1982). This is sometimes called the "significant exposure" approach, which locates the trigger event as the earliest point in time when the injury inflicted is such that the harm will proceed independently of further exposure. It is favoured for example in Louisiana and is preferred more generally to the so-called "manifestation theory"; Austin v Abbey Mills Inc 824 So 2d 1137 (2002); Powell v Weaver 2003 La LEXIS 308. 168 However, I would add the qualification that there must be sufficient evidence, as here, to enable the inference properly to be drawn that the particular exposure, or series of exposures over an employment or insurance period, give rise to the deleterious change leading eventually to damage. 169 There is English authority to the effect that the trigger is the happening of the event causing deleterious change leading to the consequential harm and not the appearance of the harm it causes; Kelly v Norwich Union Fire Insce Ltd (supra) and in Australia Martindale v Burrows (supra). Moreover, this result is not affected by the principle that damages are not recoverable when only minimal damage occurs; Williams v Milotin (1957) 97 CLR 465, 474; Distillers Co (Biochem) Ltd v Thompson (1971) AC 458, 467; Ratcliffe v V S & B Border Homes Ltd (1987) 9 NSWLR 390, 398; Footner v Broken Hill Ass Smelters (1983) 33 SASR 58, 72; GRE v Bristile (supra). 170 Finally, I would adopt this statement of the authors of Derrington and Ashton (from the unpublished second edition), quoted below, but with the qualification identified in square brackets, reflecting the fact that multiple exposure increases vulnerability to mesothelioma but not its severity: "If harm is done, no matter how small, that will without more develop naturally into illness or disability, then, in the opinion of the authors, it is hard to see why it should not constitute an injury when the precipitating harm is done. It injures the body in rendering it vulnerable to that result. Then each progressive exposure that causes further injury [by rendering the body more vulnerable] constitutes a further trigger so that in the event of continuous exposure over a period during which cover is held with different insurers, there will be a series of discrete injuries, each referable to the period in which it occurred. The extent of the injury during that period will however not be limited to the actual deterioration: it will include the factor of vulnerability to further harm [or the factor of greater vulnerability to the illness or disability which eventually occurs], whether from the natural progress of the condition or from further exposure to the harm. Consequently, a real but undiscovered injury, proved in retrospect to have existed at the relevant time, would establish cover, irrespective of the time the injury became manifest1. There is no requirement that the injury should be diagnosable during the policy period. If the condition is diagnosed before the policy period but there is continuing exposure during the period, the cover applies.2" 1 American Home Products Corpn v Liberty Mutual Insce 748 F 2d 760, 766 (2nd Cir 1984); Campbell ex rel Campbell v Metropolitan Property & Casualty Insce Co 239 F 3d 179, 181 (2nd Cir 2001); Greater New York Mutual Insce Co v Royal Insce Co 238 AD 2d 261; 657 NYS 2d 326 (1st Dept 1997); Mount Vernon Fire Insce Co v Abesol Realty Corpn 2003 US Dist LEXIS 18415. 2 General Accident Insce Co v Idbar Realty Corpn 163 Misc 2d 809;; 622 NYS 2d417 (Sup Ct Suffolk Co 1994); United States Liability Inse Co v Farley 215 AD 2d 371; 626 NYS 2d 238 (2nd Dept 1995); Mount Vernon Fire Insce Co v Chong 1998 WL 178847 (EDNY); Mount Vernon Fire Insce Co v Abesol Realty Corpn. 171 I consider that where, as here, the employer will be liable in the future to pay common law damages following injury, the employer is "liable" in the sense of being "exposed to" pay within the meaning of that term in the policy. I do not understand the alternative expression, "at risk of", here should be treated as connoting a low degree of likelihood of having to pay in the future. Thus I would add this caveat for clarity. "Exposure" to having to pay must not depend on contingencies which make eventual payment less than probable. 172 Moreover, importantly, the liability to pay compensation may pre-exist the policy, so long as it continues during the term of the policy. While injury must occur during the period of the policy, one can have, as here, a continuing injury from the three years of exposure. It spans the three policies. That liability in this sense may pre-exist is apparent from the expression "the employer shall be liable to pay compensation", not "become" liable. Similarly, reference to "liability independently of the Act" (like liability under the Act) encompasses a liability that can pre-exist the policy, so long as it continues during the policy term and there is injury during the policy term. Conclusion 173 It follows that at least one policy must answer the appellants' claim. Quantum of Indemnity 174 The next question is essentially in what amount and which policies answer the appellants' claim, or whether all three do. The latter question only arises as a practical matter, if the policies remain limited in their cover to $60,000. 175 It is convenient to consider first whether the 1981 and 1987 amendments to the 1926 Act operated retrospectively, so (a) removing the $60,000 monetary limit in the three policies and (b) substituting cover, essentially unlimited, being indemnity for that "which the insured person is liable to pay" whatever that may be. 176 Both parties made extensive and detailed written submissions in relation to the legislation and its course of amendments. I have earlier quoted the relevant legislation. It is convenient that I begin by setting out their respective submissions, starting with the appellants' submissions, quoted below. Appellants' Submissions "The appellants submits that the indemnity is unlimited and it is entitled to indemnity for the whole of the judgment sum plus costs as a result of the effect of various amendments and statutory provisions in the 1926 Act and the Workers Compensation Act 1987 (the 1987 Act) principally as follows: A. (a) At the time the relevant policies were issued s18(3) of the 1926 Act provided for direct recourse by the worker against the insurer but that recourse was expressly limited to an amount not exceeding that for which the employer had obtained a policy of insurance or indemnity in respect of his liability. (b) The Workers Compensation Act 1981 amended s18(3) by deleting the words of limitation and inserting instead the words 'which the insured person is liable to pay'. (c) Parliament in so amending s18(3) did not distinguish between policies of insurance issued before the commencement of the Act in which the common law indemnity was limited and those issued after that commencement. In both cases the insurer was bound by the judgment amount which the insured was liable to pay to the workers. (d) This conclusion is supported by the provisions of Schedule 6 Clause 8 of the Amending act. (e) The effect of the amendment to s18(3) was to impose liability on insurers beyond the limit of the risk accepted and for an unlimited amount. B. (a) The terms of s151AB of the 1987 Act, which expressly apply to policies of insurance issued before the commencement of the 1987 Act (s151AB(5)) and expressly impose a liability on the insurer for 'the full amount of the damages'. (b) In CIC Workers Compensation (NSW) Ltd v Alcan Australia Ltd (1994) 35 NSWLR 169 at 171A-B, this Court said the general purpose of the section was to identify one insurer which is to indemnify the employer for the full amount of the employer's liability to a worker who has contracted an occupational disease of the kind mentioned. C. Section 159(2) of the 1987 Act provides the insurer was bound by and liable to pay the amount independently of the Act which the employer was liable to pay. D. It has been held by Curtis J in Di Cecco v Mercantile Mutual Insurance (Workers' Compensation) Ltd (2002) DDT 1, that as a result of the above statutory provisions the indemnity under all statutory policies is unlimited. The appellants submit such decision is correct and of application to the present case though it is noted Di Cecco is the subject of appeal to this Court." Respondent's Submissions 177 The respondent denies that retrospectivity of operation asserted for these amendments. The respondent relies in its submissions on the following: (a) its basal argument that the requirement to obtain indemnity was that the liability at common law of the employer to the plaintiff worker arise during the currency of the policy of insurance. This was not the fact as in the present case the disease giving rise to the liability only arose in 2001; American Home Insurance v Saunders (1987) 11 NSWLR 363; (b) the absence of any express statement of retrospectivity in the amendments to s18(3) of the 1926 Act, in particular that contained in the amending enactment in 1981. (c) The primacy of the terms of the policy and its construction was settled law at the time of the 1981 amendments: "Indeed, by the time of the amending enactment in 1981, parliament would have been aware of the remarks of Barwick CJ (with whom Walsh and Stephen JJ agreed) in Sydney Turf Club v Crowley (1972) 126 CLR 420 where His Honour said at 426: 'but whatever difficulties there may be in the language; and in the application of section 18, the extent of the respondent's promise to indemnify the appellants will be found in the words of the policy it issued, properly construed and not in section 18.'" (c) The appellants' contrary contention, that s18 as amended in 1981 makes the liability of the insurer to the employer match the liability of the employer to the worker notwithstanding the terms of the policy, relies on the judgment of Aickin J in Registrar of the Workers Compensation Commission (NSW) v National Employers Mutual Insurance Association Limited (1978) 141 CLR 462. But as the respondent correctly says, that was not the majority view in that case. Jacobs J (with whom (at 474) Stephen and Murphy JJ agreed) said, contrary to Aickin J, that "[T]o accord so dominant a role to the policy itself was to maintain consistency with the course of decision in this area of the law." Aickin J was thus in the minority in allowing that the statute had, by 1981, displaced the primacy of the policy. Hence I would agree that Aickin J's minority judgment afforded no basis for Curtis J likewise so concluding in Di Cecco v Mercantile Mutual Insurance (Workers Compensation) Ltd (2002) DDT 1. Curtis J concluded that these statutory amendments (in 1981 and 1987) rendered indemnity unlimited under all statutory policies notwithstanding the policy wording contained a stated limit. The respondent contends that he was in error in so doing, while the appellants support that conclusion. (d) finally, I quote below the respondent's submissions on indications it finds in the 1987 Act (which repealed the 1926 Act) said to support the proposition that the unlimited common law cover earlier introduced did not operate retrospectively. The parts in square brackets are added by way of explanation. " Respondent's Submissions The Workers' Compensation Act 1987 repealed the 1926 Act but contained saving and transitional provisions. Schedule 6 Clause 15(1) deals with policies issued or renewed before 4.00 pm on 30 June 1987. It provides: '(1) This clause applies to policies of insurance issued or renewed before 4.00 pm on 30 June 1987 by insurers licensed under section 27 of the former Act. (2) A policy of insurance to which this clause applies extends, and is to be taken to have always extended) to any liability under this Act including liability for injuries received before, at or after 4.00 pm on 30 June 1987 [the emphasis Counsel's]. (3) This clause applies despite the fact that the policy of insurance refers to liability under the Workers' Compensation Act 1926.' The clause just cited is restricted to the liability of an employer under the Act . Had Parliament intended to provide that old policies had unlimited common law cover , they could simply have provided for that in the same provision. This contention is reinforced by the existence of clause 19A which provides that policies of insurance obtained during the period between 4.00 pm on 30 June 1987 to the end of 31 January 1990 by an employer are taken to have covered the employer: '(b) for an unlimited amount in respect of the employer's liability independent of this Act (being a liability under a law of New South Wales) and (c) for the full amount of the indemnity provided by the policy as in force when it was obtained for any injury to any worker employed by the employer during that period ' [counsel's underlining] Once again, parliament had the opportunity in enacting that clause to provide for a general unlimited cover rather than unlimited cover only in the restricted circumstances specified in that clause i.e. a policy obtained during the specified period and an injury to a worker employed by the employer during that period. Retrospective operation of the Act [dealing with allocation of liability to contribute between multiple insurers] affecting insurance rights appears in section 151AB(5) that provides 'This section applies to any liability arising before or after the commencement of this Act and to any policy of insurance issued before or after that commencement.' Section 159 [whose antecedent is s18 of the 1926 Act though they differ in various respects] could have simply contained a similar provision. The Court of Appeal have stated that without subsection 5 of section 151AB, the section could not operate retrospectively: MMI v Baker (1990) 41 NSWLR 289. Accordingly, it is submitted that section 159 does not give any rights in addition to the policy, it is the policy properly construed that provides for the limit of the insurer's liability. The subsequent enactment of unlimited insurance provisions following the removal of a limit on common law liability support the proposition that the provisions were not intended to be retrospective. The only retrospectivity that has been given was in section 18(6B) in 1967 which was expressed to apply only to a policy current at the time of the amendment or policies obtained thereafter and section 151AB(5) which is expressed to be for the particular purposes of that section. No other retrospectivity in respect of common law insurance is found in the Act." 178 The starting point in construing the 1981 and 1987 amendments to determine whether they remove any past limit on the insurer's liability, is to consider whether the presumption against the retroactive operation of legislation applies and, if so, with what effect. The presumption itself is long established and was conveniently stated by Dixon CJ in Maxwell v Murphy (1957) 96 CLR 261 at 267: "The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events." 179 However where legislation alters existing rights and duties, but only prospectively, Viscount Simonds rightly casts doubt on whether such provisions can properly be described as "retrospective"; Attorney General v Vernazza [1960] AC 965 at 975. Here too it may be said that the 1981 and 1987 legislation operates upon existing rights and liabilities that pre-exist the legislation, namely those derived from the statutory policy with its then limit as applied to the events of employer negligence during the period of employment and insurance. However, the legislation also would have to operate prospectively, in that accrual of the employer's pre-existing liability (in the sense I have described it) post-dates the 1981 and 1987 legislation. That accrual occurred after the employee's onset of incapacity leading to a settlement of the employee's claim and the resultant claim by the employer for indemnity. 180 The presumption against retrospectivity has long been held to be inapplicable to the prospective operation of a statute, for example by the English Court of Appeal in West v Gwynne [1911] 2 Ch 1. There a lease pre-existed with a covenant against under-letting without landlord's consent. The legislation subsequently imposed a proviso precluding payment for consent. The landlord sought payment on the basis that the legislation should be construed as not applying to the existing lease. The Court of Appeal held that it did, Cozens-Hardy MR at 11 in these words: "It was forcibly argued by Mr Hughes that a statute is presumed to have a retrospective operation unless the contrary appears by express language or by necessary implication. I assent to this general proposition, but I fail to appreciate its application to the present case. 'Retrospective operation' is an inaccurate term. Almost every statute affects rights which would have been in existence but for the statute. … I doubt whether the power to refuse consent to an assignment except upon the terms of paying a fine can fairly be called a vested right or interest. Upon the whole I think section 3 is a general enactment based on grounds of public policy, and I decline to construe it in such a way as to render it inoperative for many years wherever leases for 99 years, or it may be for 999 years, are in existence." 181 Buckley LJ observed at 11-12: "During the argument the words 'retrospective' and 'retroactive' have been repeatedly used, and the question has been stated to be whether section 3 of the Conveyancing Act 1892, is retrospective. To my mind the word 'retrospective' is inappropriate, and the question is not whether the section is retrospective. Retrospective operation is one matter. Interference with existing rights is another. If an Act provides that as at a past date the law shall be taken to have been that which it was not, that Act I understand to be retrospective. That is not this case. The question here is whether a certain provision as to the contents of leases is addressed to the case of all leases or only of some, namely, leases executed after the passing of the Act. The question is as to the ambit and scope of the Act, and not as to the date as from which the new law, as enacted by the Act, is to be taken to have been the law." 182 As Lord Rodger explains in Wilson v First County Trust Ltd (No. 2) [2003] 3 WLR 568 (HL(E)) at 624 the courts then turned to a presumption against legislation impairing rights that are described as vested, though the legislation be prospective in operation; see for example the Canadian case of Dickson J in Gustavson Drilling (1964) Ltd v Minister of National Revenue [1977] 1 SCR 271. But this was without conspicuous success in defining what is meant by "vested" rights. Thus Lord Rodger ultimately based the test on fairness, in determining construction issues when applying legislation retrospectively, or so as to affect what are labelled "vested rights". He does so in these passages at 624 [196] and 626 [201]: "[196] … The courts have grappled with this idea in a series of cases which Simon Brown LJ surveyed in Chief Adjudication Officer v Maguire [1999] 1 WLR 1778. It is not easy to reconcile all the decisions. This lends weight to the criticism that the reasoning in them is essentially circular: the courts have tended to attach the somewhat woolly label 'vested' to those rights which they conclude should be protected from the effect of the new legislation. If that is indeed so, then it is perhaps only to be expected since, as Lord Mustill observed in L'Office Cherifien des Phosphates v Yamashita-Shinnihon Steamship Co Ltd [1994] 1 AC 486, 525A, the basis of any presumption in this areas of the law 'is no more than simple fairness, which ought to be the basis of every general rule." "[201] On Lord Mustill's approach an appropriate test might be formulated along these lines: would the consequences of applying the statutory provision retroactively, or so as to affect vested rights or pending proceedings, be 'so unfair' that Parliament could not have intended it to be applied in these ways? In answering that question, a court would rightly have regard to the way the courts have applied the criterion of fairness when embodied in the various presumptions." 183 One may imply that criterion of fairness here in applying the presumption. Or, one may simply ask whether there is a legislative intention, apparent with reasonable certainty, that the legislation would operate with the degree of retroactive operation here required to remove the $60,000 limit. The insurer may be said to have had a vested right to have its liability limited to the original $60,000. It is fixed at $60,000 by a combination of statutory regulation, fixing a minimum of $50,000 and an agreed increase to $60,000 (T, 18.47, appeal transcript). The last policy expired in 1961. It might be thought prima facie unfair to alter that state of affairs for past policies by subsequent legislation, by construing that legislation as imposing unlimited liability retroactively. The question is whether the 1981 and 1987 amendments evinced such an intention, apparent "with reasonable certainty". 184 It is not irrelevant to whether such a result were brought about, that if it were, it would be by amendment to legislation designed for the benefit of workers. The 1926 Act included amongst its purposes "to provide for the compulsory insurance by employers against their liabilities in respect of injuries to workers". It is, however, also relevant, by way of countervailing consideration, that under the terms of s18 of the 1926 Act, even as it was at the time of employment, that first, the employer is obliged to insure against his liability both under the Act and, to the designated extent, against his liability at common law. Second, no insurer was free to refuse to issue the then policy to an employer, save with the consent of the Commission (s18(2)). While the rights it conferred remained contractual, and therefore do not arise under statute (Green v Windman [1964] VR 297), nonetheless the statute does regulate a number of incidents of the policy. There would be unexpected hardship in the insurer being burdened retroactively with an increased amount above both the designated amount stipulated as a statutory minimum, and even more so if above a higher but still limited agreed amount. The 1981 amendments – retroactive operation? 185 I turn now to the transitional provisions, first found in the 1980 Act (as schedule 3 cl 2) and later replicated in the 1981 Act. These are relied on by the appellants as providing for a retroactive operation to the amendments earlier referred to concerning s18. Those provisions are directed at a "policy of insurance … against liability under the Principal Act," which (a) " was in force at the time of an injury that occurred before the date of assent to this Act ", namely before 28 May 1981; and (b) "was not being maintained in force at [28 May 1981]". In such a case "the policy shall be deemed always to have insured the employer against any additional liability to which he may become subject on or after [28 May 1981] in respect of that injury by reason of amendment made by this [1981] Act". The Minister's introductory speech in Parliament (Hansard 29 April 1981) contained a schedule which describes these transitional provisions in these terms: "Transitional provisions to deem a policy, whether current or lapsed to cover and always to have covered any additional liability under the amending Act ; [emphasis added] The appellants say such additional liability " picks up the common law as well as statutory liability, for which insurance must provide unlimited cover ". The respondent says that the wording applies only to liability insofar as it was increased by the 1981 amendments themselves. That clearly did not occur with respect to common law liability arising independently of the Act, rather than "under" the Act. 186 Here "injury" occurred before 28 May 1981, namely during the course of employment when the fibre was ingested that was to cause the disease. When one looks at "this Act", that of 1981, to see what "additional liability to which he [the employer] may become subject on or after [28 May 1981] in respect of that injury by reason of amendment made by this Act" the answer is clear. Additional liability of the employer was imposed on the employer by the 1981 Act for liability under the Act (see in particular schedule 2 listing specific (increased) amounts payable for "loss of arm" etc). Additional liability of the employer was not imposed by the Act for "an amount which that insured person is liable to pay independently of this [1981] Act for any injury to such work". 187 The whole point of the amendments to s18 was not to impose further liability on the employer independently of the Act but "under" the Act. What the employer was required to do by the Act with respect to his separate extra-statutory common law liability for future negligence was to take out insurance which covered the employer's liability, whatever that amount may be, plus covered any compensation payable under the Act. The Act elsewhere provides for employee election between the two remedies. True it is that s18(3)(a) says that the policy shall provide that the employer is directly liable to any worker insured, "to pay the compensation or other amount" (the latter being the common law liability). But that is not to evince an intention to impose any additional liability by the Act for past events. Rather it operates for future events. Conclusion on retroactive operation of 1981 Amendments 188 In my judgment, the 1981 amendments did not, as a matter of their plain language, have the retroactive operation contended for by the appellants. This is without calling in aid the presumption against such retroactive operation, or invoking fairness. Certainly any intention retroactively to alter the insurance indemnity so it became unlimited does not appear with any "reasonable certainty" so as to overcome the evident unfairness to insurers if it did. That result is consonant with giving proper primacy to the terms of the policy. The 1987 Act – retroactive operation? 189 That leaves for consideration the 1987 Act, which repeals and replaces the 1926 Act. I do not consider that s151AB of the 1987 Act and in particular subs (5), can have the effect contended for by the appellants. Those provisions are directed to determining which insurer is liable for an occupational disease "among a number of insurers under policies of insurance obtained by the employer for different periods", where "an employer is liable independently of the Act for an occupational disease contracted by the worker". The appellants place reliance on the following words "which insurer is liable to indemnify the employer for the amount of damages to the worker or which is liable to pay the full amount of damages to the worker …". Conclusion on retroactive operation of 1987 Act 190 I agree with the respondent that when s151AB(5) there provides that "[T]his section applies to any liability arising before or after the commencement of this Act and to any policy of insurance issued before or after that commencement" it does so only for the particular purpose of the section, namely attribution of responsibility to a particular insurer amongst multiple insurers. It is true that the section presupposes a liability to indemnify for the full amount of damages to the worker in respect of previously issued policies (as well as policies issued after 1987). But that is explicable by the fact that there was since 1980, full indemnity under policies issued from 1980 on, so that s151AB(5) does have need to refer to pre-existing policies in that category. Neither s151AB nor s159 (which provides in subs (2) that the liability of the insurer to the employer is the same as the liability of the employer to the worker) nor any other provision of the 1987 Act provide for retroactive operation of those provisions which introduced unlimited indemnity, starting in 1980. I agree with the respondent's submissions on the 1987 Act. OVERALL CONCLUSION ON RETROACTIVE OPERATION 191 Even without resort to any interpretive presumption the language of the 1987 Act, like the that of the 1981 legislation, does not readily comport with a retroactive operation. The interpretive presumption against retroactive operation and fairness considerations reinforce that result. It follows that the three policies are each subject to an individual $60,000 limit that has not been replaced by an indemnity obligation for an unlimited amount. In so concluding, I agree with the observations of Spigelman CJ on the issue of retrospectivity. Aggregate limit under policies? 192 The final question is whether resort may be had to all three policies for an aggregate cover of $180,000, or whether cover is only available under one of these, for $60,000. 193 Here no statutory apportionment or contribution may be called in aid. The appellants' argument for aggregation is encapsulated in these propositions in the written submissions: "Alternatively, the Appellant submits it is entitled to indemnity in the sum of $60,000 for each policy period giving rise to a total indemnity entitlement of $810,000 plus costs as: (a) The period of the worker's employment was spanned by 3 policies each providing an indemnity limit of $60,000 and costs; (b) Each exposure to asbestos makes a material contribution to the injury – Stevenson v James Hardie & co Pty Ltd 15 NSWCCR 568; (c) The worker inhaled asbestos fibres during the whole of the period of employment; (d) Bodily injury was occasioned during the period covered by each policy." 194 The respondent's answer is encapsulated in its written submissions in these terms: "In the event that the Respondent's argument as to the limit of indemnity contained in the policy is accepted, it is submitted that is a liability to pay damages independently of the Act. The damages in this case are for a one and indivisible sum for mesothelioma i.e. one liability and in such case there is no evidentiary basis for finding a separate and distinct liability in each of the three successive years. Accordingly, it is submitted that the policy, renewed as it was, was limited to the sum of $60,000." 195 The starting point is the aetiology of mesothelioma, summarised in these six propositions (paragraph references corresponding to the judgment of Fitzgerald AJA in E M Baldwin): (a) The development of the disease is related to the cumulative effect of all asbestos fibre inhaled in the period which ends about 10 years prior to its first diagnosis [90], (b) There is no single "mesothelioma cell" in the early stages. A protracted series of genetic mutations occurs in the lungs. Eventually there is a clonal growth, which invades tissue and results in mesothelioma [90]; (c) Earlier exposures to asbestos are more significant than later equivalent exposures [90]; (d) Multiple factors are relevant to the development of mesothelioma: the potency of the form of amphibole inhaled, the duration of the exposure period, the heaviness of the exposure and of the fibre burden in the lungs, and the time lapse between each exposure period and a diagnosis of mesothelioma [93]; (e) It is incorrect to suggest that the inhalation of more than one form of asbestos fibre raises a number of separate, independent, possible causes of the disease [95]; (f) The inhalation of one form of asbestos fibre may materially contribute to the development of the disease, even though in the absence of prior inhalation of other asbestos fibres, mesothelioma would probably not have resulted [96]. 196 In Stevenson v James Hardie & Co Ltd (1997) 15 NSW CCR 568 O'Meally J was dealing first with the liability of each of two defendants to the plaintiff, who had been exposed negligently, but to substantially different degrees, to their asbestos products. Second, he was dealing with apportionment between two defendants inter se. They were James Hardie & Co Ltd – who exposed the plaintiff to its products between 1960 to 1971 and Wunderlich who exposed the plaintiff to its products but only between 1970 and 1971 (that is, 1.5 years for Wunderlich out of the total exposure of around 11 years), so the greater bulk of exposure was the former's. Both were however held liable in solidum on the basis that "each exposure made a material contribution to the plaintiff's injury and so each defendant is liable in respect of the same damage" (at 575). The apportionment of liability between defendants reflected broadly the relative level of exposure, with the principal employer bearing most of the damage. Any more precise mathematic basis was eschewed. At 575, O'Meally J concluded that "It [mesothelioma] is not the result of successive deteriorations. In a case of mesothelioma his injury was one and indivisible. This is because mesothelioma is a form of cancer to which all asbestos exposure contributes. It is a disorder quite distinct from asbestosis and other fibrosis-inducing diseases caused by exposure to fibrosis-inducing substances, which produce increasing fibrosis with continued exposure. Mesothelioma is not a cumulative process such as occurs in cases of asbestosis or silicosis. It is not the result of successive deteriorations. In a case of mesothelioma, a plaintiff is suffering from an injury that is one and indivisible" 197 O'Meally J relied on Professor Henderson's expert evidence given also in that case. His opinion is consistent with the evidence he gave in Baldwin and is quoted by O'Meally J (at 573] "… it is my opinion that his mesothelioma is attributable to his total cumulative asbestos exposure: it is also my view that each of the episodes of exposure has contributed to the development of the mesothelioma taking into account lag times between each period of employment and onset." 198 O'Meally J's conclusion that each defendant was liable to the plaintiff for the whole injury, before considering apportionment or contribution as between the two defendants must rest on two propositions. The first is that mesothelioma, which "you cannot get twice" is nonetheless an "indivisible injury" to which more than one person or entity and set of events may in a causal sense, make material contribution; doing so by reason of the cumulative effect of each year's negligent exposure to which each, or both, have contributed. There is no inconsistency between accepting that one cannot get mesothelioma "twice", or in different parts of the lung, or otherwise in severer form from prolonged exposure, and the proposition that mesothelioma once triggered, is triggered by cumulation of asbestos exposure and fibre (here over 3 years). Thus in a material contribution sense, each period of exposure is causative in its cumulative effect of the indivisible condition of mesothelioma. 199 The second proposition is that "Any person liable for a causative exposure which made a material contribution to an indivisible injury is liable to compensate for the whole injury"; Dingle v Associated Newspapers [1961] 2 QB 172 per Devlin LJ at 188. Essentially the two defendants in Stevenson were concurrent tortfeasors, who in the words of Glanville Williams in "Joint Torts and Contributory Negligence" (1951) at 1, "are tortfeasors whose torts concur (run together) to produce the same damage". They are "solidary wrong-doers; indicating that each is liable in full for the damage collectively done". This is where, as here, "the concurrence is exclusively in the realm of causation". Thus (at 3) "concurrent tortfeasors are, unlike other tortfeasors, liable in full for damage done by all …". That enables the plaintiff to be protected should any defendant lack the wherewithal to meet the full claim and is analogous to more than one insurance policy providing similar assurance. 200 Here there is but one employer and one insurer. So consideration of material contribution relates not to which multiple defendant (employer or insurer) was responsible, but which policy or policies must answer, with no statutory basis of attribution or apportionment to call in aid. It is true that we do not know for certain whether sufficient exposure occurred by the first year to trigger the physiological changes that inexorably led to mesothelioma. Nor do we know for certain if that triggering occurred only by the second or third year. But we do know that it was more probable than not that each of the three years of exposure represented, in its cumulative effect, a material contribution to the mesothelioma that later resulted. Thus each year's policy saw a coincidence in that year of both injury and material contribution to the ultimate onset of the disease with liability (accruing but not yet accrued) in each year. We can reasonably assume that the level of exposure was evenly distributed over the three years of employment, based on the earlier affidavit evidence to which I have made reference. We also can accept from Professor Henderson's conclusions that the development of the disease is related to the cumulative effect of the continuing exposure, even if earlier exposure may have the greater effect. 201 To elaborate, I consider that, on the reasoning in Bendix Mintex Pty Limited v Barnes (supra) and the earlier stated six propositions, coupled with a "robust and pragmatic approach" to proof of causation, where inability to show the precise way something happened is not fatal, allows the following conclusion to be drawn, on the balance of probabilities. It is that each year's exposure over the three years materially contributed to the outcome of mesothelioma and not merely its risk, with the insurance for each year being thus called upon to answer the employer's claim. Had there been three employers each would have been liable by reason of their material contribution to the outcome of mesothelioma. Likewise, if there were three insurers, unless statute or policy wording produced a different result (as it later did by s151AB of the 1987 Act). In that context, we do know that mesothelioma did eventuate and that the same employer materially contributed to that outcome. Moreover, the same insurer offered annual cover on the same terms each year for the three years. There is no evidence pointing to triggering earlier than three years as against the more probable result that mesothelioma was caused by the cumulative effect of three years of exposure, with each year playing its part. Had the period of exposure been longer and had there been such evidence pointing to a different result, that same result would not necessarily follow. That is a matter for future consideration in a case that poses that issue. 202 The result which I reach is, as I have said, analogous to each of three defendants, each providing one consecutive year of employment, being separately and individually liable "in solidum" to the plaintiff for the entire indivisible disease, with apportionment or contribution determined between defendants but of no concern of the plaintiff's; compare Stapleton "Lords a'leaping evidentiary gaps" (supra) at 24 and most recently Amaca Pty Ltd v State of New South Wales ([2003] HCA 44, 7 August 2003, unreported). 203 While that analogy is incomplete, because there are not multiple defendants but a single defendant insurer with three policies of a year each, I consider that the analogy of solidary liability is nonetheless helpful. Liability and causation only arise in a temporal sense in answering the question, has the triggering policy "event" occurred. The question concerns which policy or policies answer, by reference to the events of their respective years. There is here no competition between insurers, but that is an accident of circumstance. I conclude that each of the events of 1959, 1960 and 1961 caused injury and made a material contribution to the onset of the disease and thus to the employer's liability to the employee. The employer was exposed to an accruing liability to make payment to the worker following that onset. That suffices each year as the event to trigger the policy for that year. Each policy is then required to answer, like one of three defendants facing liability in solidum with the others. 204 Nor is Fairchild being applied by analogy, for Australian law currently does not permit causation to be so easily satisfied by reference only to risk despite the hardship this may entail. But, as I have explained, the law is nonetheless not unsympathetic to plaintiffs in such a situation. Here we have one insurer which provided three years of continuous insurance, under three obligatory statutory policies in identical terms. There is no basis in the evidence for treating one policy, last or first, as solely required to answer the outcome of this cumulative exposure which spanned the term of all three. Such a result would be quite arbitrary. A simple way of testing this is to hypothesise different sub-underwriters for each policy of the three. Why should only one group of sub-underwriters have to meet the result of the whole claim? It would be even more unfair to say no policy answers, because we are only able to say on the balance of probabilities that the exposure had a cumulative effect over the three years. 205 Spigelman CJ concludes first that no policy answers, but also that if one policy did answer, it is only one policy; there is no cumulation. It is convenient that I set out his reasoning as elaborated in [56] to [57] of his judgment. It proceeds first on the basis of an assumption that there was penetration of the worker's lung in each of the three years, which if made out, would be based on inference rather than any evidence. "[56] The employer becomes "liable to pay" upon a single penetration with respect to the whole of "his liability" at common law. When another penetration occurs the employer's "exposure" or "risk", and therefore "liability", is not changed. I refer, of course, to "liability" where appearing in the second and third points set out in par [7] above, i.e. "liable to pay an amount" and "for which the employer shall be so liable". It may be that the employer's "liability independently of the Act" has become more likely to come home, because of the cumulative effect of the exposures, but that is a different matter. Establishing the state of affairs in which the employer is "liable to pay" occurs only once. That state of being "liable" is not affected by other exposures. [57] Only one cause of action will arise at common law against the employer for the development of mesothelioma, despite there having been multiple "injuries" within the meaning of the policy. There will be only one occasion on which the employer will become "liable to pay". It does not matter in the present case when that occurs." 206 There is a line of authority to which Spigelman CJ refers, which appears at first sight against any cumulation from liability under the Workers' Compensation legislation. The statutory policy, in its reference to "liability" and "liable to pay", applies equally to an employer's statutory obligation to a worker and his common law obligation. That line of authority could be cited in support of the proposition that "where partial incapacity has resulted from a number of separate injuries" the liability of the insurer to pay compensation under the Workers' Compensation legislation is "properly to be seen as flowing from the last injury and as having arisen at the time of that injury" per Deane J (Mason, Murphy, Wilson, Brennan JJ agreeing) in National & General Insurance v South British Insurance (1982) 149 CLR 327 at 335. The present case might then be said to be analogous. 207 Those cases (to which I have earlier made reference) are National & General Insurance v South British Insurance (supra) at 335, applied by Cole J in Manufacturers Mutual Insurance Ltd v National employers Mutual General Insurance Ltd (1989) 5 ANZ Ins.Cas 60-906 at 75,792-3 at trial ("MMI v NEM") and implicitly accepted by Samuels JA and Priestley JA on appeal in MMI v NEM (1991) 6 ANZ Ins Cas 61-038 at 76,965; NEM General Insurance Ltd (in Liq) v GIO General Ltd (1994) 33 NSWLR 247 esp at 264-265; MLC Insurance Ltd v Pinto (1994) 8 ANZ Ins Cas 61-214 esp at 75,341; Insurers Guarantee Funds – NEM General Insurance Ltd (in liq) v Manufacturers Mutual Insurance Ltd (unreported, 12 August 1994, NSW Court of Appeal). 208 They were however all cases where successive injuries were found to exist which were a series of trauma injuries (typically to back and/or neck). These successive trauma injuries had a consequent cumulative effect on the worker's capacity to work. They gave rise under the Statute to an employer obligation of one kind or another such as to find suitable alternative employment or make a compensatory statutory payment. 209 I consider that in attributing critical significance to the last of a series of "tortious insults" by requiring only the last insurer to pay or for that matter the first, the Court in each case is implicitly recognising a case of the first of the two kinds identified by Stein JA in WorkCover Authority of NSW (supra): "there is a significant difference between a closed claim for industrial deafness and a claim in respect of mesothelioma. The former is a succession of completed tortious insults whereas the latter because of its aetiology is not complete until the disease of mesothelioma strikes" 210 It was not illogical in the line of cases cited therefore to attribute the greatest significance to the last trauma injury rendering liable the insurer at the time. Each trauma was cumulative, but in a different sense to ingestion of asbestos fibre in mesothelioma. In the trauma case, each injury augmented the previous one, making the extent of the injury cumulatively worse, culminating in the last trauma which finally tips the balance. In the case of mesothelioma, each ingestion was added to each previous one, till they reached the cumulative point where one or other fibre penetrated the lung and started the genetic mutations leading inexorably to mesothelioma. But the critical point is that we do not know which fibre or fibres so penetrated; we only know that they had cumulative effect "from the fibre burden in the lungs". We certainly cannot assume that fibre penetration occurred in the first year (or the last) it being on the Henderson cumulative effect theory, more probable that each year contributed. 211 The difference with the successive traumas is that each is added to the previous injury culminating in the last one. The last trauma becomes "the straw which breaks the camel's back". Whereas with each ingestion "one will normally not know which asbestos fibre caused the mesothelioma. It could be an asbestos fibre inhaled during any time over a lengthy period of exposure"; WorkCover Authority of NSW v Chubb Australia Limited (supra) at [26] per Stein JA. 212 Importantly, in National & General Insurance Co Limited v South British Insurance Co Limited (supra) there are several factors which are distinguishable from the present case. The first I have already noted, is the inability to relate a particular injury to the "excitation" which produces the mesothelioma, unlike each blow to the back which is a separate and discrete injury so that the last blow can be identified as finally resulting in the partial incapacity. A more accurate description of ingestion of asbestos fibre over three years is that it is a continuing injury occurring in each year of the policy though no less an injury in each year for that. 213 A further distinguishing feature is that in the case of s11(2) of the Workers' Compensation Act, the provision in question in National & General Insurance Co Limited, the critical requirement is that following partial incapacity, which we know only occurred after the final trauma, the employer must fail to provide suitable employment. That then exposes that employer (and if more than one, the last employer) to liability to pay compensation. It is that compensation which the insurance policy was required to indemnify. That consideration clearly directs attention to the last injury, for it is that last injury which is coincident with the consequent liability on the employer. There is certainly no counterpart to that consideration here. As an analogy it suffers from the fact that there is no real rationale for relating that authority, and the cases which followed it to a situation where only the first policy answers, with no sense of a last straw, breaking the camel's back. 214 In the present case, as I have said, one cannot say that it was necessarily the first or the last ingestion over the three year period, or indeed the first or the last year's ingestion which caused the mesothelioma. Nor can one assume that each ingestion penetrated the lung. What one can infer, consistent with Professor Henderson's findings, is that more probably than not, each ingestion has a cumulative effect and has thus contributed to the "protracted series of genetic mutations" which lead to "a clonal growth which invades tissue and results in mesothelioma"; and also that relevant causal factors include "the fibre burden in the lungs" from whence penetration occurred. So in that distinct sense each ingestion constitutes part of a continuing injury, spanning the three years. One cannot, unlike a series of traumas, relate a particular ingestion to a particular injury at a particular time. Thus the logic of attributing greater significance to the first or the last injury, in rendering the insurer at that time liable to answer the claim does not apply with mesothelioma. Nor is the disease any more severe from one exposure or multiple exposures, unlike a series of traumas or industrial deafness. It is just that multiple exposures are more likely to bring about the disease. 215 Indeed the long delayed onset of mesothelioma, not untypically here nearly 40 years after the last exposure, weakens the case even further for attributing any special significance to the first year of exposure, as justification for rendering only the first insurer liable (or for that matter the last insurer). Compare this to a series of traumas culminating in the last. That last trauma becomes not only the straw that breaks the camel's back, but it is coincident in time with the compensable injury. 216 It is for these reasons that I do not consider the analogy compelling, based on statutory compensation for cumulative traumas where only the last insurer is liable. With mesothelioma, I prefer the analogy of solidary liability. I do so because its occurrence does not correlate with the time of first or last exposure in either a temporal or causal sense and because we are here dealing with a continuing injury other than a distinct set of injuries. 217 It is true that, as Spigelman CJ says that "[E]stablishing the state of affairs in which the employer is "liable to pay" occurs only once. That state of being "liable" is not affected by other exposures. This is so even if the probability of contraction of the disease is increased by cumulative exposure, so in that sense legal liability is more likely to come home. I would respectfully accept those propositions, but they do not to my mind end the matter. 218 This is because I consider that "liability" (in both the sense of exposure to pay and "liability independently of the Act" for negligence) does not have to occur for each policy during that policy's term. It suffices if there is a liability (in the two senses), pre-existing or not, which subsists during the period of each policy along with a continuing or repeated injury. Each policy focuses for its trigger on whether the Employer "shall be liable" not, shall become liable, during each policy period. The employer is here exposed (liable) to having to make eventual payment to the worker suffering injury. This is by reason of his original carelessness leading ineluctably to onset of incapacity from the mesothelioma and thus to an accruing liability to pay compensation. 219 Solidary liability presupposes that, for the plaintiff's benefit, there is a plurality of legally responsible persons who are collectively responsible. That result is usually accompanied by the capacity to obtain contribution between that plurality of responsible persons but not at the cost of the plaintiff. Here as it happens there is only one insurer to answer so contribution does not arise, but the result should not depend on that. That is why I consider that each and every insurance policy is required to answer, as each policy is triggered in the events that happened. 220 Again this result is consistent with a line of US authority referred to in the yet to be published second edition of Derrington and Ashton (save that loss is apportioned between policies according to the time on risk method). This is on the basis that one treats each year's exposure through the employer's negligence as the proximate cause of the eventual mesothelioma. I quote: … When the policy is more complex or when there are related policies, there may be an anti-stacking provision 1 , but, depending on the language used, it may be found that in a particular case there is no clear exclusion of stacking, or it may be limited in its operation. When it is applied, the number of occurrences is determined by reference to the number of proximate causes 2 . When there is a continuing harm over a number of periods of cover, there may be stacking of the limit for each relevant period when the limit is framed as " per occurrence per year "; and this will not be affected by a term of the policy deeming damage from repeated or continuous exposure to be one occurrence 3 . When the harm extends over several policy periods that are covered respectively by policies of different insurers, then, if the progress of the harm is constant, the liability of each insurer will depend on its time on risk, and the total liability will be apportioned accordingly. 4 This is subject to any variation produced by the terms of a particular policy. 1 See this condition in Chapter 9. 2 In Flemming v Air Sunshine Inc 2002 US App LEXIS 23785, for example, it was held that the policy's words put a limit on the amount of any claim and a further limit on the total amount payable on all claims arising from one occurrence, but within that limitation it would have permitted stacking in respect of separate claims by one claimant based on multiple discrete occurrences arising out of one occasion. In the circumstances of that case, however, it found that there was only one occurrence. See the topics, Occurrences and Causation in this chapter. 3 Stonewall Insce Co v City of Palos Verdes Estates 46 Cal App 4th 1810; 54 Cal Rptr 2d 176 (1996); Alpha Therapeutic Corpn v The Home Insce Co 90 Cal App 4th 1330: 109 Cal Rptr 2d 698 (2001); Employers Insce of Wausau v Granite State Insce Co 2003 US App LEXIS 11111. This reasoning does not apply to self-insured retentionsion, as to which see that topic in this chapter; and the result may be different if the limit is expressed on a "per occurrence" basis. 4 Owens-Illinois v United Insce Co 138 NJ 437; 650 A 2d 974; Olin Corpn v Insce Co of North America 221 F 3d 307; Stonewall Insce Co v Asbestos Claim Management Corpn 73 F 3d 1178 (2nd Cir 1995); 85 F 3d 49 (2nd Cir 1996); Mayor & City Council of Baltimore v Utica Mutual Insce Co 145 Md App 256; 802 A 2d 1070; Matter of Wallace & Gale Co 284 BR 557 –asbestos; Consolidated Edison Co of NY v Allstate Insce Co 98 NY 2d 208; 746 NYS 2d 622; 774 NE 2d 687; Quincy Mutual Fire Insce Co v Borough of Bellmawr 172 NJ 409; 799 A 2d 499; Champion Dyeing & Finishing Co v Centennial Insce Co 355 NJ Super 262; 810 A 2d 68 – pollution; Scottsdale Insce Co v American Empire Surplus Lines Insce Co 811 F Supp 210 (D Minn); NL Industries v Commercial Union Insce Co 926 F Supp 446 (DNJ);Serio v Public Service Mutual Insce Co 2003 NY App Div LEXIS 4431 – lead paint; Silicone Implant Insce Coverage Litigation 652 NW 2d 46 (Minn) – silicone breast implants. Summing Up 221 I accept that my conclusion fits no more elegantly into the words of the policy than Spigelman CJ's, as he fairly recognises. But I believe it more appositely deals with a continuing injury having the cumulative but here long delayed effect of mesothelioma. In that context I do not consider it right to single out the first or last policy by an arbitrary rule derived from multiple trauma or industrial deafness cases. With those cases, unlike mesothelioma, you can identify the last straw which breaks the camel's back and you do know that back was broken in or around the last year of insurance cover. There is therefore no incongruity for the last policy to bear the whole burden when dealing with trauma and like cases. But not so with mesothelioma, where (i) there is no identifiable last straw, nor indeed a probable first and only straw but a cumulative effect (here over three years) with increased exposure to employer liability each year as a result. (ii) no once and for all injury but continuing injury spanning the term of each policy, (iii) no propinquity between onset of incapacity and the last exposure, and (iv) the policy terms accommodate a pre-existing and continuing liability (in the two senses used) so long as there is, as here, injury during the policy term. Here the relevant event is covered by more than one policy in a series. It is not an unconventional result that each policy answers. That is why, typically, insurance policies, though not these three policies, provide specifically for how "double insurance" is to be dealt with, as by rateable proportion and excess provision; see ch 12 of "Principles of Insurance Law in Australia and New Zealand" by Kelly and Ball (Butterworths, 1991). OVERALL CONCLUSION 222 I conclude that each of the three policies do answer the appellants' claim but on the basis that their limit remains $60,000. They answer, each to their limit of $60,000, the employer's claim for indemnity. They therefore make available by way of indemnity an aggregate sum of $180,000 for that purpose plus a sum equal to the costs of the employer's defence. ORDERS 223 I would propose orders as follows: (1) Appeal allowed. (2) Verdict for the respondent on the cross-claim set aside. (3) In lieu thereof verdict for the appellants on the cross-claim in the sum of $180,000 plus an amount equal to the costs and expenses incurred by the appellants in connection with the defence of any legal proceedings in which liability of the respondent was alleged by the employee Mr Dunstan. (4) The respondent to pay the appellants' costs of the appeal and in the court below. ******** Last Modified: 11/14/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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