61 NSWLR 451 Reported Decision : (2004) 13 ANZ Insurance Cases 61-623 (2004) 22 ACLC 1637 New South Wales Court of Appeal CITATION : AssetInsure Pty Limited (formerly Gerling Global Reinsurance Company of Australia Pty Limited) v New Cap Reinsurance Corporation Limited (In Liq) & 3 Ors [2004] NSWCA 225 HEARING DATE(S) : 23/06/04, 24/06/04, 25/06/04 JUDGMENT DATE : 6 October 2004 JUDGMENT OF : Hodgson JA at 1; Ipp JA at 37; Bryson JA at 235 DECISION : (A) The first cross-appeal is dismissed with costs (B) The appeal is dismissed with costs (C)(i) The second cross-appeal is upheld (C)(ii) Declaration 1(e) made by Windeyer J is set aside and in lieu thereof the following direction is made: "1(e) [Contract TY165A] for the 1998 underwriting year and [Contract FC3A] for the 1997 and 1998 underwriting years are not 'relevant contracts of insurance' within the definition of that term in subsection (8) of section 562A of the Corporations Act 2001 (Cth)." (C)(iii) Direction 2(h) made by Windeyer J is set aside and in lieu thereof the following direction is made: "2(h) The liquidator would be justified in treating a contract of reinsurance entered into by [NCRA] as reinsurer as one to which the provisions of section 562A of the Corporations Act 2001 are not applicable." (C)(iv) AssetInsure and Faraday pay NCRA and NC Re their costs of the second cross-appeal and their costs of that part of the directions hearing before Windeyer J concerning directions 1(e) and 2(h) (C)(v) AssetInsure and Faraday to have a certificate under the Suitors' Fund Act 1951 (NSW) if otherwise entitled. (D) There be liberty to any party to make written submissions within 21 days in regard to the declarations and costs orders. CATCHWORDS : STATUTORY INTERPRETATION - Whether certain liabilities under insurance contracts are "liabilities in Australia" for the purposes of the Insurance Act 1973 (Cth) - Whether s 31(4) of the Insurance Act 1973 (Cth) was intended to be an exhaustive definition of "liabilities in Australia" - Discussion of general law regarding where a debt is satisfied - Whether s 116(3) of the Insurance Act 1973 (Cth) conferred accrued rights on creditors at the start of a winding up - Whether any such accrued rights were extinguished by s 562A of the Corporations Act 2001 (Cth) - Whether any such accrued rights were extinguished by the replacement of s 116 under the General Insurance Reform Act 2001 (Cth) - Whether contracts of reinsurance are "contracts of insurance" for the purposes of s 562A of the Corporations Act 2001 (Cth). - INSURANCE - Priority created by s 116 of the Insurance Act 1973 (Cth) - Requirement that liabilities of an insurance company in Australia be paid out of assets in preference to other liabilities - Discussion of "insurance", "reinsurance" and "re-reinsurance" - Meaning of "insurance" and "reinsurance" for the purposes of the Insurance Act 1973 (Cth) and the Corporations Act 2001 (Cth) - Discussion between a contract of insurance, a policy accepted in Australia and a policy issued in Australia - Whether an informal policy is a policy for the purposes of s 31 of the Insurance Act 1973 (Cth) - Whether the issue of a policy requires "something bilateral" - Whether the acceptance of a proposal for an insurance policy requires communication for the purposes of s 31 of the Insurance Act 1973 (Cth) - Whether a term regarding payment to a local broker was implied by custom or usage. - WINDING UP - Date at which creditors' rights are to be determined - Whether any accrued rights of priority arose - Effect of winding up on debts of creditors - Effect of change in legislation on creditors' rights. D Acts Interpretation Act 1901 (Cth), ss 8(c), 15AB Companies Act 1928 (Vic), ss 160(3), 447, 448 Companies Act 1961 (NSW), s 292(5) Corporate Law Reform Act 1992 (Cth) LEGISLATION CITED : Corporations Law, ss 562, 562A Corporations Act 2001 (Cth), ss 511, 562, 562A Insurance Act 1973 (Cth), ss 22, 23, 27, 29(1), 30, 31, 32, 34, 35, 39(3), 40, 41, 43, 44, 116, Pts III & IV General Insurance Reform Act 2001 (Cth), Schedule 2 Third Parties (Rights against Insurers) Act 1930 (UK), s 1(5) Lugano Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988, s 3 Agnew v Lansforsakringsbolagens AB [2001] 1 AC 223 Butterell v The Douglas Group Pty Ltd (2000) 35 ACSR 398 Drexel v Drexel [1916] 1 Ch 251 Durra v The Bank of New South Wales [1940] VLR 170 Earthworks and Quarries Ltd v F T Eastment & Sons Pty Limited [1966] VR 24 Ex Parte Coote (1949) 49 SR (NSW) 179 Fisher v Madden (2001) 54 NSWLR 179 Forsikringsaktieselskabet National (of Copenhagen) v Attorney General [1925] AC 639 Gosman v Ockerby [1908] VLR 298 Haque v Haque (No 2) 114 CLR 98 In Re Federal Building Assurance Co Ltd (In Liq) [1932] VLR 301 In Re Russo-Asiatic Bank [1934] 1 Ch 720 Jabbour v Custodian of Israeli Absentee Property [1954] 1 WLR 139 Maybury v Plowman (1913) 16 CLR 468 CASES CITED : McCaughey v The Commissioner of Stamp Duties (1946) 46 SR (NSW) 192 Melville Island Limited v Richards (1933) 50 WN (NSW) 41 Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177 Palmdale Insurance Limited (In Liq) (No 3) [1986] VR 439 Re Dominion Insurance Co of Australia Limited [1980] 1 NSWLR 271 Re Harrington Motor Company Limited; Ex Parte Chaplin [1928] 1 Ch 105 Re National Employers' Mutual General Insurance Association Ltd (In Liq) (1995) 15 ACSR 624 Roberts v Security Company [1897] 1 QB 111 Saltergate Insurance Co Limited and the Companies Act (No 2) [1984] 3 NSWLR 389 Shallay Holdings Pty Ltd v Griffith Co-operative Society Ltd [1983] VR 760 Steinberg v Herbert (1988) 14 ACLR 80 Thornley v Tilley (1925) 36 CLR 1 Universal General Insurance Co (UGIC) v Group Josi Reinsurance Co SA [2001] QB 68 Wight v Eckhardt Marine GmbH [2004] 1 AC 147 Xenos v Wickham (1867) LR 2 HL 296 AssetInsure Pty Limited (formerly Gerling Global Reinsurance Company of Australia Pty Ltd) (Appellant) New Cap Reinsurance Corporation Limited (In Liquidation) (First Respondent) PARTIES : John Raymond Gibbons (As liquidator to the First Respondent) (Second Respondent) Faraday Underwriting Limited (Third Respondent) NC Re Capital Limited (In Liquidation) (Fourth Respondent) FILE NUMBER(S) : CA 40904/03 R B S MacFarlan QC/S A Goodman (Appellant) B Coles QC/D Robertson (First & Second Respondents) COUNSEL : F Douglas/J Hogan-Doran (Third Respondent) S Epstein SC (Fourth Respondent) M R Aldridge SC (Australian Prudential Regulation Authority) by leave Clayton Utz (Appellant) SOLICITORS : Henry Davis York (First & Second Respondents) PricewaterhouseCoopers Legal (Third Respondent) Deacons (Fourth Respondent) LOWER COURT Supreme Court - Equity Division JURISDICTION : LOWER COURT ED 6094/02 FILE NUMBER(S) : LOWER COURT Windeyer J JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40904/03 SC 6094/01 HODGSON JA IPP JA BRYSON JA Wednesday, 6 October 2004 AssetInsure Pty Limited (Formerly Gerling Global Reinsurance Company of Australia Pty Limited) v New Cap Reinsurance Corporation Limited (In Liquidation) & 3 Ors FACTS New Cap Reinsurance Corporation Limited (NCRA) is a company incorporated in Australia. It is under winding up. In the winding up of NCRA, some questions arose concerning various claims of NCRA's creditors. These claims concerned three categories of insurance contracts. NCRA and its liquidator applied to Windeyer J for directions regarding the treatment of these claims, pursuant to s 511 of the Corporations Act 2001 (Cth). Apart from NCRA and its liquidator, the parties before Windeyer J were: · Faraday Underwriting Limited ("Faraday") – a company carrying on business in London as an insurer. Faraday was reinsured under two contracts of reinsurance issued by NCRA. These contracts were referred to as TY165A and FC3A. · Gerling Global Reinsurance Company of Australia Pty Limited, now AssetInsure Pty Limited ("AssetInsure") – a company carrying on business in Australia as a reinsurer. AssetInsure was reinsured with NCRA under a contract of reinsurance. · NC Re Capital Limited (in liquidation) ("NC Re") – the principal shareholder of NCRA and a loan creditor of NCRA. · The Australian Prudential Regulation Authority ("APRA") – which was given leave to appear and make submissions. The proceedings before Justice Windeyer were regarded as a test case to determine a number of issues regarding the application of ss 31 and 116(3) of the Insurance Act 1973 (Cth) to NCRA's liabilities and s 562A of the Corporations Act 2001 (Cth) to contracts of reinsurance and re-reinsurance. A voluntary administrator was appointed to NCRA on 21 April 1999. NCRA was placed in liquidation on 16 September 1999. On 15 July 2001 the Corporations Act 2001 (Cth) replaced the Corporations Law, re-enacting s 562A in somewhat different terms (although those differences are not presently relevant). On 1 July 2002 the General Insurance Reform Act 2001 (Cth) repealed the old s 116 of the Insurance Act 1973 (Cth) and replaced it with a new s 116. Both the old and the new s 116 concerned the treatment, in the winding up of a corporation authorised to carry on insurance business, of the corporation's liabilities in Australia. The new s 116 does not apply to NCRA. The old s 116 did so apply. Windeyer J made certain declarations and directions. There were three issues on appeal. 1. The appeal AssetInsure (supported by NC Re and opposed by NCRA, the liquidator and Faraday) contends that Windeyer J erred in holding that NCRA's liabilities under contracts TY165A and FC3A were "liabilities in Australia". 2. The first cross-appeal Faraday (supported by NCRA and the liquidator and opposed by AssetInsure, NC Re and APRA) contends that Windeyer J erred in holding that upon the winding up of NCRA, the old s 116(3) conferred accrued rights on creditors. Faraday further contends that Windeyer J erred in holding that any accrued rights were not extinguished by either s 562A of the Corporations Act 2001 (Cth) or the replacement of the old s 116 by the new s 116. 3. The second cross-appeal NCRA and the liquidator (supported by NC Re and opposed by AssetInsure and Faraday) contend that Windeyer J erred in finding that contracts of reinsurance are "contracts of insurance" for the purposes of s 562A of the Corporations Act 2001 (Cth). HELD per Hodgson JA (Bryson JA agreeing): 1. The appeal (a) Is s 31(4) of the Insurance Act 1973 (Cth) an exhaustive definition of "liabilities in Australia"? Section 31(4) of the Insurance Act 1973 (Cth) was not intended to be exhaustive. The question of what are liabilities in Australia is not answered by reference to a simple definition. Liabilities in Australia include liabilities to indemnify insured persons against losses occurring in Australia and liabilities which are to be satisfied in Australia. Otherwise, the question is to be determined pragmatically, having regard to the purpose of the Act that liabilities in Australia are the liabilities for which there should be assets in Australia available to meet them. Any liabilities that satisfy s 31(4) of the Insurance Act 1973 (Cth) will be included. HELD per Hodgson JA (Bryson JA agreeing; Ipp JA agreeing but on different grounds): (b) Are NCRA's liabilities under contract TY 165A "liabilities in Australia"? The proposal for policy TY 165A was accepted in Australia, the policy was issued in Australia and it did not relate only to a liability contingent upon an event that could happen only outside Australia, or only a liability that the company had undertaken to satisfy in Australia. Therefore, liabilities under policy TY 165A fall within s 31(4) of the Insurance Act 1973 (Cth), and are "liabilities in Australia". HELD per Hodgson JA (Bryson JA agreeing): (c) Are NCRA's liabilities under contract FC3A "liabilities in Australia"? Policy FC3A relates only to liabilities contingent on events that can happen only outside Australia. Therefore, liabilities under the policy do not fall within s 31(4) of the Insurance Act 1973 (Cth). However the practice applicable to the policy was that claims would be paid by NCRA to a local broker in Australia. Liabilities under policy FC3A can therefore fairly be regarded as liabilities to be met in Australia, and are therefore "liabilities in Australia". The appeal therefore fails, although not for the reasons given by the trial judge. HELD per Ipp JA (dissenting): 1. The appeal (a) Is s 31(4) of the Insurance Act 1973 (Cth) an exhaustive definition of "liabilities in Australia"? Despite the omission of any express statement, the strong indication from Part III of the Insurance Act 1973 (Cth) as a whole is that what is a "liability in Australia" in terms of s 31(4) was intended by the legislature to be an exhaustive definition. (c) Are NCRA's liabilities under contract FC3A "liabilities in Australia"? The evidence does not establish an undertaking to satisfy the contract in Sydney, nor does it establish a general custom under contract FC3A of satisfaction of the contract by payment to a local placement broker. Because Faraday was resident in England, NCRA's liability under contract FC3A was not a liability that NCRA undertook to satisfy in Australia. Contract FC3A therefore falls within s 31(4)(a)(i) of the Insurance Act 1973 (Cth). The liability of NCRA under contract FC3A is not a liability in Australia. HELD per Ipp JA (Hodgson and Bryson JJA agreeing): 2. The first cross-appeal (a) Did the old s 116(3) of the Insurance Act 1973 (Cth) give rise to accrued rights of NCRA's creditors? It would be contrary to principle to hold that a change to the law (not expressed to be retrospective) between winding up and distribution alters priorities established according to the law at the date of the winding up. Wight v Eckhardt Marine GmbH [2004] 1 AC 147 is not of application in the present circumstances. An administrator or liquidator, upon appointment, is obliged to pay (out of any surplus assets) the proved debts of the company according to the priorities fixed by law at the date of commencement of the winding up. This duty gives rise to an entitlement on the part of preferential creditors, although this may not be an entitlement to immediate payment. Windeyer J correctly held that at the commencement of the winding up, rights accrued to NCRA's creditors to have their rights to payments adjusted in accordance with the applicable regime for the distribution of the company's assets. (b) Were the rights accrued extinguished by s 562A of the Corporations Act 2001 (Cth)? The scheme of s 562A works on the basis that it applies only to companies placed under winding up after the coming into force of the Corporations Act 2001 (Cth) and does not affect rights accrued against companies wound up before that date. Since rights of creditors accrued at the commencement of the winding up, there is no inconsistency between s 562A and s 116(3). The rights that accrued under the old s 116(3) were not extinguished by s 562A of the Corporations Act 2001 (Cth). (c) Were the rights accrued extinguished by the enactment of the new s 116(3) of the Insurance Act 1973 (Cth)? The transitional provisions of the General Insurance Reform Act 2001 (Cth), had no effect on rights that had accrued under the old s 116(3) prior to the commencement of the Reform Act. This is demonstrated by the anomalous result that would arise from the alternative conclusion and by the legislative intention demonstrated by the enactment of the new s 116(3) in the same terms as the old s 116(3). Windeyer J did not err in this respect. The first cross-appeal fails. 3. The second cross appeal The legislature intended by s 562A to benefit only ordinary insureds, that is insureds other than reinsured insurance companies. This is readily understandable given the weaker position of ordinary insureds. The need to protect professional insurers is less compelling. A textual construction supports this interpretation, as a "relevant contract of insurance" under s 562A means simply a contract of insurance and not a contract of reinsurance, and a "reinsurance payment" is a payment received pursuant to a contract of reinsurance and not a payment received pursuant to a contract of re-reinsurance. Contracts of reinsurance are not "contracts of insurance" for the purposes of s 562A of the Corporations Act 2001 (Cth). The second cross-appeal is upheld. ORDERS A. The first cross-appeal is dismissed with costs. B. The appeal is dismissed with costs. C. (1) The second cross-appeal is upheld. (2) Declaration 1(e) made by Windeyer J is set aside and in lieu thereof the following direction is made: "1(e) [Contract TY165A] for the 1998 underwriting year and [Contract FC3A] for the 1997 and 1998 underwriting years are not 'relevant contracts of insurance' within the definition of that term in subsection (8) of section 562A of the Corporations Act 2001 (Cth)." (3) Direction 2(h) made by Windeyer J is set aside and in lieu thereof the following direction is made: "2(h) The liquidator would be justified in treating a contract of reinsurance entered into by [NCRA] as reinsurer as one to which the provisions of section 562A of the Corporations Act 2001 are not applicable." (4) AssetInsure and Faraday pay NCRA and NC Re their costs of the second cross-appeal and their costs of that part of the directions hearing before Windeyer J concerning directions 1(e) and 2(h). (5) AssetInsure and Faraday to have certificate under the Suitors Fund Act 1951 (NSW) if otherwise entitled. D. There be liberty to any party to make written submissions within 21 days in regard to the declarations and costs orders. ********** IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40904/03 SC 6094/01 HODGSON JA IPP JA BRYSON JA Wednesday, 6 October 2004 AssetInsure Pty Limited (Formerly Gerling Global Reinsurance Company of Australia Pty Limited) v New Cap Reinsurance Corporation Limited (In Liquidation) & 3 Ors Judgment 1 HODGSON JA: The circumstances of this appeal, and the issues raised by it, are set out in the judgment of Ipp JA. 2 I will deal in turn with Faraday's cross-appeal, AssetInsure's appeal, and the liquidator's cross-appeal. FARADAY'S CROSS-APPEAL 3 In this cross-appeal, Faraday challenged the conclusions of the primary judge that the old s.116(3) of the Insurance Act 1973 (Cth), as it existed prior to its amendment as from 1 July 2002, applied to the distribution to creditors in the NCRA liquidation; and that it prevailed over s.562A of the Corporations Act 2001 (Cth). 4 I agree with Ipp JA that this challenge fails, and subject to what I say below, I agree substantially with his reasons. 5 In my opinion, consistently with Motor Terms Co. Pty. Ltd. v. Liberty Insurance Ltd. (1967) 116 CLR 177, a creditor of a company acquires rights at the commencement of a winding up, in return for the restrictions then placed upon enforcement of its debt. Prima facie, those are accrued rights, which will not be affected by changes in applicable legislation, in the absence of a disclosed legislative intention to the contrary. 6 In my opinion, the legislative provisions by which s.116(3) was amended did not disclose any intention to change in any relevant respect the rights of creditors in relation to liquidations commenced but not concluded. It is true, as submitted by Mr. Douglas QC for Faraday, that there were extensive transitional provisions which did not advert to the matter; but on the other hand, the circumstance that the substituted s.116(3) made the same provision in respect of liquidations of companies carrying on insurance in accordance with the provisions of the new regime set up by the amending legislation, is a powerful indication that the legislature did not intend to do away with the regime set up by the old s.116(3) in respect of liquidations commenced but not concluded. 7 As regards s.562A, it is clear that so long as that provision was contained in State legislation (the Corporations Law), it could not displace s.116(3). The question is whether the enactment of that provision by the Commonwealth Corporations Act 2001 on 15 July 2001 gave effect to a partial repeal of s.116(3). 8 I agree with Ipp JA that this enactment did not disclose any intention to interfere with accrued rights; and also that, in any event, the mere re-enactment as Commonwealth law of an existing State provision concerning companies generally did not disclose an intention to displace an existing Commonwealth provision specifically relating to insurance companies. ASSETINSURE'S APPEAL 9 In this appeal, AssetInsure contended that the primary judge was wrong in so far as he determined that certain liabilities were "liabilities in Australia" within the old s.116(3) of the Insurance Act, firstly because s.31(4) of that Act was exhaustive, and secondly because of exceptions existing at general law. 10 On this matter, I do not agree with Ipp JA; and these are my reasons. 11 In my opinion, it is necessary to have regard to certain general aspects of the Insurance Act, and in particular to ss.29(1), 31, 32(2), 35 and 116(4), as they existed prior to 1 July 2002. Those provisions were as follows: 29 Conditions to which authority is subject (1) Subject to this Part, an authority granted to a body corporate under this Part is subject to the following conditions: (a) where the body corporate has a share capital - a condition that its paid-up share capital shall not at any time be less than $2,000,000; (b) where the body corporate is incorporated in Australia - a condition that the value of its assets shall at all times exceed the amount of its liabilities by not less than: (i) $2,000,000; or (ii) 20% of its premium income during its last preceding financial year; or (iii) 15% of its outstanding claims provision as at the end of its last preceding financial year; whichever is the greatest; (c) a condition that the value of the assets in Australia of the body corporate shall at all times exceed the amount of its liabilities in Australia by not less than: (i) $2,000,000; or (ii) 20% of its premium income in Australia during its last preceding financial year; or (iii) 15% of its outstanding claims provision in respect of liabilities in Australia as at the end of its last preceding financial year; whichever is the greatest; (d) a condition that the body corporate shall, at all times other than a time at which an exemption from the requirements of section 34 is in force in respect of it, have arrangements for reinsurance, being arrangements approved by APRA under that section, or, if it has been granted an exemption under that section, shall comply with the terms and conditions of that exemption; (e) where a change occurs in the particulars specified in the application for the authority and referred to in paragraph 22(2)(a), (b), (c), (d), (e), (ea) or (f) or in the matters contained in a document required to accompany that application - a condition that the body corporate shall, within a period of 21 days after the change occurs, or within such further period as APRA, within that period of 21 days, approves, give to APRA notice in writing signed by a director and specifying particulars of the change; and (f) such other conditions (if any) as APRA or the Treasurer, as the case may be, specifies in the authority. … 31 Liabilities (1) In this Part, unless the contrary intention appears, a reference to liabilities of a body corporate includes a reference to provision for liabilities made in its accounts, or directed in accordance with this section to be made, but does not include: (a) a liability in respect of share capital; or (b) where the body corporate is registered under the Life Insurance Act 1995, a liability that is, in accordance with that Act: (i) referable to a class of life insurance business carried on by the body corporate in respect of which it has established a statutory fund under that Act; or (ii) charged on any of the assets of such a statutory fund. (2) For the purposes of this Act, a body corporate carrying on insurance business shall make in its accounts provision in respect of liabilities. (3) For the purposes of this Act, APRA may, with the Treasurer's agreement, at any time, if APRA thinks fit, by notice in writing served on a body corporate carrying on insurance business, direct that the body corporate shall, within a specified period, not being less than 21 days, after the giving of the direction, or as at a specified date, make in its accounts provision, or further provision: (a) of a specified amount; or (b) of an amount determined in a specified manner; in respect of liabilities. (3A) Part VI applies to a decision of APRA under this section. (3AA) Subsection (3A) does not apply to a decision made within 5 years after the commencement of this subsection. (3AB) It is not necessary to obtain the agreement of the Treasurer to the making of a decision by APRA under this section after 5 years after the commencement of subsection (3AA). (3B) Where a direction has been given to a body corporate under subsection (3) and it appears at any time to APRA, and the Treasurer agrees, that the direction is no longer necessary or should be varied, APRA shall, by notice in writing served on the body corporate, revoke or vary the direction. (3C) Where a body corporate to which a direction has been given under subsection (3) applies to APRA, by notice in writing, for the direction to be revoked or varied, APRA shall: (a) if it appears to APRA, and the Treasurer agrees, that the direction is no longer necessary or should be varied - revoke or vary the direction; or (b) in any other case - refuse to revoke or vary the direction; and shall serve on the body corporate notice in writing of the decision. (3D) The powers of APRA under this section are in addition to, and do not derogate from, the powers of APRA or of the Treasurer under Part V. (3E) Where a body corporate in respect of which a direction has been given under subsection (3) is commenced to be wound up, the direction ceases to have effect. (3F) A body corporate that fails to comply with a direction given to it under subsection (3) is, in respect of each day during which it so fails to comply with the direction (including the day of a conviction under this subsection or any subsequent day), guilty of an offence punishable on conviction by a fine not exceeding 100 penalty units. (4) For the purposes of this Part, where a liability is undertaken by a body corporate under: (a) a contract of insurance (including reinsurance) made in Australia or in respect of which a proposal was accepted or a policy issued in Australia, not being a contract: (i) that relates only to a liability contingent upon an event that can happen only outside Australia, not being a liability that the body corporate has undertaken to satisfy in Australia; or (ii) where the body corporate carries on insurance business both in and outside Australia, that relates only to a liability that the body corporate has undertaken to satisfy outside Australia; or (b) a contract of insurance (including reinsurance) made outside Australia or in respect of which a proposal was accepted or a policy issued outside Australia where any part of the negotiations or arrangements leading to the making of the contract, to the acceptance of the proposal or to the issue of the policy took place or were made in Australia, being a contract: (i) that relates to a liability contingent upon an event that can happen only in Australia; or (ii) where the body corporate carries on insurance business both in and outside Australia, that relates to a liability that the body corporate has undertaken to satisfy in Australia; that liability is a liability in Australia. (5) In this section, unless the contrary intention appears, direction includes, where a direction is varied, the direction as varied. 32 Premium income and premium income in Australia … (2) For the purposes of this Part, a reference to the premium income in Australia of a body corporate during a financial year is a reference to the amount that is the amount of premiums for insurance business received by or due to the body corporate during that year in respect of the undertaking by the body corporate of liabilities that are liabilities in Australia less the sum of: (a) the amount of those premiums included in the premium income of the body corporate in respect of a preceding financial year; (b) the amount of those first-mentioned premiums that the body corporate, during the first-mentioned financial year, refunded or was liable to refund not including an amount that the body corporate was, during a preceding financial year, liable to refund; (c) the amount of premiums for reinsurance in respect of insurance business paid or payable by the body corporate during the first-mentioned financial year relating to liabilities undertaken by it that are liabilities in Australia less the sum of: (i) the amount of those premiums that, during a preceding financial year, were payable by the body corporate; and (ii) the amount of premiums for reinsurance relating to those liabilities that, during the first-mentioned financial year, were refunded or liable to be refunded to the body corporate not including an amount that, during a preceding financial year, was liable to be refunded to the body corporate; (d) the amount paid by the body corporate during the first-mentioned financial year under a law of a State or Territory relating to payments by insurers for or with respect to fire brigades; (e) the amount of stamp duty paid by the body corporate, during the first-mentioned financial year, under a law, or a provision of a law, of a State or Territory imposing stamp duty in respect of the carrying on of insurance business; and (f) the amount paid by the body corporate during the first-mentioned financial year under a prescribed law of the Commonwealth or of a State or Territory or under a prescribed provision of such a law. 35 Exemption from requirement relating to assets in Australia (1) Where a body corporate authorized under this Act to carry on insurance business has, as the result of the happening of an exceptional event outside Australia, incurred substantial liabilities in respect of any business of insurance carried on by it, the Treasurer may, if he or she is satisfied that it is necessary for the body corporate to remove from Australia assets in Australia in order to assist in discharging those liabilities, by notice in writing given to the body corporate, determine that, during such period, not exceeding 6 months after the giving of the notice, as he or she specifies in the notice, the body corporate shall be deemed not to have failed to comply with the condition referred to in paragraph 29(1)(c) so long as the value of its assets in Australia is not less than: (a) the amount of its liabilities in Australia; or (b) if the Treasurer specifies in the notice an amount exceeding the amount of its liabilities in Australia - that amount. (2) The Treasurer may, by notice in writing given to the body corporate, extend for such period, not exceeding 6 months, as he or she specifies in the notice, the period of 6 months referred to in subsection (1). 116 Body corporate not to carry on insurance business after commencement of winding up … (4) Section 31 has effect for the purposes of this section. … 12 Sections 29, 31, 32, and 35 were all within Part III of the Act. 13 Except in so far as s.31(4) did so, the Insurance Act 1973 (Cth) did not define what were "liabilities in Australia". However, the expression was a very important one, particularly because of the requirement in s.29(1)(c), which indicated that great importance was placed on the availability of assets in Australia to satisfy liabilities in Australia. 14 This is reinforced by s.35, which suggests that, where assets in Australia are removed from Australia to satisfy liabilities incurred "as a result of the happening of an exceptional event outside Australia", this may affect the balance between assets in Australia and liabilities in Australia; suggesting in turn that the Act contemplates that the liabilities for the satisfaction of which assets in Australia are removed from Australia are not liabilities in Australia. 15 I think it is reasonable to approach the question as to what are liabilities in Australia on the basis that prima facie these are liabilities in respect of which there should be assets in Australia available to satisfy them. And again, prima facie, in the case of liabilities under insurance policies, this would seem to be liabilities to indemnify against losses occurring in Australia and other liabilities which are to be satisfied by payments in Australia. What is to be "in Australia" is the insurance company's liability, not the creditor's asset corresponding to that liability; and I do not think that private international law rules concerning the location of such an asset are of direct application. 16 In my opinion, all this is confirmed by s.31(4), although for reasons I will give I do not think s.31(4) is exhaustive, even in respect of liabilities arising under insurance policies. 17 It is important to note that s.31 is a section which makes "liabilities" include "provision for liabilities" which are or should be made in the company's accounts, and is directed primarily at such provision for liabilities. Section 31(4) concerns liabilities undertaken by insurance companies under contracts of insurance, and not (or not only) liabilities that have become actual liabilities because of the actual occurrence of the event on which liability is contingent. In my opinion, s.31(4) is primarily directed to determining the location of the liability at the time provision is to be made for it, rather than the location of a liability that has actually arisen. I think this is made clear by the importance given by s.31(4) to the terms of the contract relating to the possible location of the event that could give rise to actual liability: if s.31(4) were directed to the location in Australia of liability in respect of an event that had actually occurred, the actual location of that event would assume importance, which s.31(4) does not give it. (However, s.116(4) does indicate that s.31(4) is not limited to the determination of the location of liabilities at the time provision is made for them.) 18 The wording of s.31(4) is such as to make it very difficult to grasp the different categories dealt with, and their significance. It is I think helpful to set out the categories in a more systematic way. This incidentally discloses two strange anomalies, to which I will come. 19 Before setting out the categories, I note that I will adopt a shorthand of "liability undertaken in Australia" to cover the alternatives of contract made in Australia or proposal accepted in Australia or policy issued in Australia. I also note that a company that carries on business only in Australia could possibly make a contract of insurance where liability is not undertaken in Australia, because occasional transactions entered into outside Australia may not constitute carrying on business outside Australia. 20 The categories set up by s.31(4) are as follows: 1. Company carries on business in Australia but not outside Australia. 1.1 Liability undertaken in Australia (a) triggering event can happen in Australia (b) liability required to be satisfied in Australia (c) neither (a) nor (b). 1.2 Liability not undertaken in Australia, but some negotiations in Australia. (a) triggering event can only happen in Australia (b) not (a). 1.3 Liability not undertaken in Australia and no negotiations in Australia. 2. Company carries on business in Australia and outside Australia. 2.1 Liability undertaken in Australia (a) triggering event can happen in Australia and liability not required to be satisfied outside Australia. (b) liability required to be satisfied in Australia. (c) neither (a) nor (b). 2.2 Liability not undertaken in Australia but some negotiations in Australia (a) triggering event can only happen in Australia (b) liability required to be satisfied in Australia (c) neither (a) nor (b). 2.3 Liability not undertaken in Australia and no negotiations in Australia. 21 According to s.31(4), categories 1.1(a) and (b), 1.2(a), 2.1(a) and (b) and 2.2(a) and (b) are liabilities in Australia. Categories 1.1(c), 1.2(b), 1.3, 2.1(c), 2.2(c) and 2.3 are not made liabilities in Australia. 22 There are two curious anomalies. 23 First, the absence from 1.2 of a category corresponding to 2.2(b). Where the company carries on business outside Australia as well as in Australia, it is sufficient to make it a liability in Australia that the liability is required to be satisfied in Australia. However, this is not sufficient where a company carries on business only in Australia. Why this should be so is a mystery. 24 Second, the absence from 2.1 of a category corresponding to 2.2(a). It is sufficient to make it a liability in Australia that the triggering event can only happen in Australia, where the liability is not undertaken in Australia. However, this is not sufficient where the liability is undertaken in Australia. Why this should be so is a further mystery. 25 It is perhaps also strange that, where the liability is not undertaken in Australia and there are no negotiations in Australia, so that category 2.3 is engaged, even liability under a contract under which the triggering event can only happen in Australia and liability is required to be satisfied in Australia is not made a liability in Australia. 26 Three points emerge from this analysis: 1. Great importance is placed on where the liability is to be satisfied. If it must be in Australia, this is sufficient, except in the case of the first anomaly, and categories 1.3 and 2.3. 2. Great importance is also placed on where the triggering event is to occur. If it must be in Australia, this is sufficient, except in the case of the second anomaly, and categories 1.3 and 2.3. 3. No independent significance is placed on where a triggering event actually occurs, or where a liability would in fact be paid, except where payment in Australia or outside Australia is specifically required by the contract. 27 In my opinion, these points confirm that s.31(4) was not intended to be exhaustive, at least in relation to liabilities that have actually been triggered. They also strongly suggest that such liabilities are liabilities in Australia if they indemnify an insured against a loss occurring in Australia (that is, where the triggering event has actually occurred in Australia), or if the liability is in fact to be paid in Australia (either because the contract requires this, or because the insured resides in Australia and there is no reason to pay elsewhere). 28 I also think that s.31(4) was not intended to be exhaustive even in relation to liabilities that are only provisions for liabilities. Suppose both insurer and insured reside in Australia, and an insurance contract is made in Australia to cover the insured's travel in Europe, which permits but does not require compensation for lost luggage to be paid in Australia. Although that insurance would fall into category 1.1(c) or 2.1(c), it would be surprising if provision for liabilities in Australia did not include provision for compensation that might be paid in Australia for luggage lost in Europe under such a contract. 29 Thus, in my opinion, the question of what are liabilities in Australia is not answered by reference to a simple definition, whether it be the private international law rules as to the location of debts or the provisions of s.31(4) or some other definition. In my opinion, they include liabilities to indemnify insured persons against losses occurring in Australia, and liabilities which are to be satisfied in Australia. Otherwise, the question is to be determined pragmatically, having regard to the purpose of the Act that liabilities in Australia are the liabilities for which there should be assets in Australia available to meet them, and to the other considerations set out above. Of course, any liabilities that satisfy s.31(4) will also be included. 30 I turn now to the sample policies dealt with in this case. 31 The proposal for policy TY165A was accepted in Australia and the policy was issued in Australia; and it was common ground that it did not relate only to a liability contingent upon an event that could happen only outside Australia, or only to a liability that the company had undertaken to satisfy in Australia. Accordingly, liabilities under this policy fall within s.31(4). 32 Otherwise, I would not have been satisfied that liabilities incurred under this policy were liabilities in Australia, unless they were liabilities in respect of losses suffered in Australia or liabilities which were to be satisfied in Australia. I do not believe that either of these things was shown. 33 The proposal for policy FC3A was also accepted in Australia and the policy was also issued in Australia. Probably the contract was made in Australia. However, this policy relates only to liabilities contingent on events that can happen only outside Australia, not being liabilities that the company had undertaken to satisfy in Australia; and so liabilities under this policy do not fall within s.34(1). 34 However, the practice applicable to this policy was that claims would be paid by NCRA to a local broker in Australia (Australian Independent Re-insurances Pty. Ltd. or AIRS), and AIRS would then account to the re-insured's broker. Thus, although the policy did not require payment in Australia, liabilities under the policy can fairly be regarded as liabilities to be met in Australia; and accordingly in my opinion liabilities under this policy are liabilities in Australia. 35 Thus, in my opinion this appeal substantially fails, though not for the reason given by the primary judge. I propose that it be ordered that the appeal be dismissed with costs, but that there be liberty to the parties to make submissions about costs. LIQUIDATOR'S CROSS-APPEAL 36 I agree with Ipp JA that this cross-appeal succeeds, substantially for the reasons he gives. 37 IPP JA: The parties and their respective interests 38 New Cap Reinsurance Corporation Limited (NCRA) is a company incorporated and resident in Australia. It is under winding up. Until it was placed under winding up, it was engaged in the business of writing international reinsurance. Many of NCRA's liabilities to its creditors are in respect of contracts of reinsurance whereby it reinsured other insurers. NCRA also owes significant liabilities to Australian creditors that arose otherwise than pursuant to contracts of reinsurance or insurance. Amongst NCRA's assets are the proceeds of contracts of reinsurance it entered into as reinsured. 39 Several questions of some complexity arose concerning the treatment of various claims of NCRA's creditors in the winding up of the company. In order to resolve these questions, NCRA and its liquidator applied to Windeyer J sitting in the Equity Division for directions pursuant to s 511 of the Corporations Act 2001 (Cth). 40 The issues before his Honour concerned three categories of insurance contracts. The first category comprised ordinary contracts of insurance between insurers and insureds. The second category comprised contracts whereby insurers obtain reinsurance of risks they insure under contracts falling within the first category. The third category comprises contracts whereby reinsurers obtain "re-reinsurance" of the risks they reinsure under contracts falling within the second category. 41 At times during argument on appeal the parties referred to contracts falling within the third category as contracts of re-reinsurance and at times as contracts of retrocession. I shall adopt the terminology of "contracts of re-reinsurance", "re-reinsurer" and "re-reinsured". The language is inelegant, but I have adopted it in an attempt to avoid the confusion that tends to creep in when discussing the three categories of contracts to which I have referred. 42 The parties before Windeyer J, apart from NRCA and its liquidator, were Faraday Underwriting Limited ("Faraday"), a company carrying on business in London as an insurer, Gerling Global Reinsurance Company of Australia Pty Limited - now AssetInsure Pty Limited ("AssetInsure") - a company carrying on business in Australia as a reinsurer, and NC Re Capital Limited (in liquidation) ("NC Re"), the principal shareholder of NCRA. NC Re is a loan creditor of NCRA in the amount of $30 million. 43 The interests of NCRA and the liquidator in the litigation are self-evident. The interests of the other parties are more complex; they need to be explained. 44 Faraday was a re-insured under two contracts of reinsurance issued by NCRA (referred to as contract TY165A and contract FC3A, respectively). These contracts were chosen as representative contracts to be the subject of the litigation (the proceedings being regarded as a test case). Faraday contended that it was entitled to a priority under s 116(3) of the Insurance Act 1973 (Cth) (the "old s 116(3)") prior to its amendment by the General Insurance Reform Act 2001 (Cth) (the "Reform Act") in respect of its claims under those contracts. The validity of that contention depended on whether Faraday's claims under those contracts were in respect of NCRA's "liabilities in Australia" within the meaning of that phrase in the old s 116(3). Faraday, accordingly, sought to put a broad construction upon the meaning of "liabilities in Australia" in s 116(3). 45 AssetInsure was insured with NCRA under a contract of reinsurance. As Windeyer J said: "As any payment to [AssetInsure] would be made in Australia there is no doubt its claim was a liability in Australia. It is therefore in its interests to have a narrow construction put upon the class of creditors whose claims are held to be liabilities of NCRA in Australia". 46 NC Re, as a non-insurance creditor of NCRA, sought to limit, as far as possible, the priorities to be accorded to insurance companies in the winding up of NCRA. 47 In addition to the priorities of insurance creditors under the old s 116(3), a further issue on appeal involved the correct application in a winding up of moneys received by a liquidated reinsurer pursuant to contracts of re-reinsurance entered into by it. This issue concerned s 562A of the Corporations Act 2001 (Cth). The interests of AssetInsure and Faraday in regard to this issue are identical, but are opposed to the interests of NC Re – which makes common cause on this aspect with NCRA and the liquidator. 48 On appeal, the Australian Prudential Regulation Authority ("APRA") was given leave to appear and to make submissions in regard to certain aspects of the issues in dispute. 49 As can be seen the matters in controversy concern matters of general insurance law and statutory construction. The legislative provisions principally involved are the old s 116(3), s 31 of the Insurance Act and s 562A of the Corporations Act. The meaning and effect of these legislative provisions are complicated by the temporal interaction between the relevant statutes, various amendments made to them, and the winding up of NCRA. 50 On 21 April 1999, a voluntary administrator was appointed to NCRA. On 16 September 1999, NCRA was placed in liquidation. Thereafter (on 15 July 2001), the Corporations Act replaced the Corporations Law and s 562A of the Corporations Act re-enacted, in somewhat different terms, the same numbered section of the Corporations Law. Those differences are not presently relevant. On 1 July 2002, the Reform Act repealed the old s 116 of the Insurance Act and replaced it with a new s 116. 51 The old s 116(3) contained provisions that concerned the treatment, in the winding up of a body corporate authorised under the Act to carry on insurance business, of the "liabilit[ies] in Australia" of the body corporate in question. In the winding up of such a body corporate, that section conferred a priority on creditors in respect of the body corporate's liabilities in Australia. The section provided: "In the winding up of a body corporate authorised under this Act to carry on insurance business … the assets in Australia of the body corporate shall not be applied in the discharge of its liabilities other than its liabilities in Australia unless it has no liabilities in Australia." 52 The new s 116(3) (as replaced by the Reform Act) provides: "In the winding up of a general insurer, the insurer's assets in Australia must not be applied in the discharge of its liabilities other than its liabilities in Australia unless it has no liabilities in Australia." Thus, the new s 116 applies only to "a general insurer". As, prior to the coming into force of the Reform Act, NCRA was wound up and ceased carrying on business, it does not, for the purposes of the new s 116, fall within the term "general insurer" as defined. Hence, the new s 116 does not apply to it. 53 The appeal concerns the true meaning of "liabilities in Australia" within the meaning of the old s 116(3). The first cross-appeal concerns the question whether any rights accrued under the old s 116(3) and the effect of s 562A of the Corporations Act and the Reform Act on any such rights. The second cross-appeal concerns the way in which, pursuant to s 562A, the proceeds of re-reinsurance policies received by NCRA are to be applied. The directions made pursuant to s 511 of the Corporations Act 54 Windeyer J made the following declarations: "1(a) Any provable claim of [Faraday] against [NCRA] under [contract TY165A] for the 1998 underwriting year is a ' liability in Australia ' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth). (b) Any provable claim of [Faraday] against [NCRA] under [contract FC3A] for the 1997 and 1998 underwriting years is a ' liability in Australia ' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth). (c) Any provable claim of [NC Re] against [NCRA] under the Perpetual Unsecured Notes issued by [NCRA] to [NC Re] on or about 31 December 1998 is a ' liability in Australia ' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth) (d) In distributing the amounts that have been received by [NCRA] or [the liquidator] under contracts of reinsurance to creditors entitled thereto under s 562A of the Corporations Act 2001 (Cth), [the liquidator] is required to have regard to the application of section 116(3) of the Insurance Act 1973 (Cth) and pay any amounts required to be distributed pursuant to that section in priority to any amounts payable pursuant to section 562A. (e) [Contract TY 165A] for the 1998 Underwriting Year and [contract FC3A] for the 1997 and 1998 Underwriting Years are " relevant contracts of insurance " within the definition of that term in subsection 8 of section 562A of the Corporations Act 2001 (Cth)." 55 Windeyer J also made several directions, including the following: "2(a) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that section 116(3) of the Insurance Act 1973 as in force prior to 1 July 2002 applies to NCRA's liquidation. (b) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that for the purposes of section 116(3) of the Insurance Act , 'liabilities in Australia' includes both liabilities of NCRA arising under contracts of insurance or reinsurance and other liabilities of NCRA not so arising. (c) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that 'liabilities in Australia' for the purposes of s 116(3) of the Insurance Act is not limited to those liabilities described in sub-section 31(4) of the Insurance Act 1973". (d) The liquidator would be justified in distributing funds representing the proceeds of collection or realisation of assets situated outside of Australia on the basis that those proceeds are not to be regarded as assets in Australia for the purposes of section 116(3) of the Insurance Act 1973 by reason only of the fact that in the ordinary course of administration the proceeds have been transferred or remitted to Australia. (e) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that any moneys recovered pursuant to the provisions of Part 5.7B of the Corporations Act are available to be distributed to creditors of NCRA without regard to section 116 (3) of the Insurance Act 1973. (f) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that any interest earned on deposits of the proceeds of realisation of assets that were not, prior to realisation, assets in Australia does not itself constitute an asset in Australia for the purposes of section 116(3) of the Insurance Act 1973. (g) Following the distribution by the liquidator of the proceeds of realisation of all 'assets in Australia' to creditors preferred under section 116(3) the liquidator would be justified in distributing the balance of the proceeds of realisation of assets by withholding any further dividend distribution to creditors preferred under section 116(3) whilst the balance of the proceeds are distributed to all other creditors until they have received a dividend of equal proportion to that received by the preferred creditors out of the Australian assets, and then making a pari passu distribution of any remaining proceeds to all creditors. (h) The liquidator would be justified in treating a contract of reinsurance as one to which the provisions of section 562A of the Corporations Act 2001 are applicable notwithstanding that the relevant contract or contracts of insurance insured under the contract of reinsurance are themselves contracts of reinsurance. …" The appeal and cross-appeals; the parties and their respective positions 56 AssetInsure is the appellant in the appeal. NCRA, the liquidator, Faraday and NC Re are the respondents. AssetInsure is supported in its appeal by NC Re and opposed by NCRA, the liquidator and Faraday. APRA supports NCRA, the liquidator and Faraday. 57 In the appeal, AssetInsure accepts that Windeyer J correctly held that the old s 116(3) continues to apply to NCRA's liabilities to Faraday under contracts TY165A and FC3A, but contends that his Honour erred in holding that those liabilities are liabilities in Australia. AssetInsure seeks that declarations 1(a) and (b) made by Windeyer J be set aside and in lieu thereof the following declarations be made: "1. (a) Any provable claim of [Faraday] against [NCRA] under [contract TY165A] for the 1998 underwriting year is not a 'liability in Australia' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth); (b) Any provable claim of [Faraday] against [NCRA] under [contract FC3A] for the 1997 and 1998 underwriting years is not a 'liability in Australia' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth). 58 In addition, AssetInsure seeks orders that direction 2(c) made by his Honour be set aside and in lieu thereof the following direction be made: 2. (c) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that 'liabilities in Australia' for the purposes of section 116(3) of the Insurance Act is, with the exception of liabilities undertaken under contracts of insurance, not limited to those liabilities described in sub-section 31(4) of the Insurance Act 1973". 59 In the first cross-appeal, Faraday is the cross-appellant and the other parties (save for APRA) are the cross-respondents. Faraday is supported by NCRA and the liquidator, but is opposed by AssetInsure, NC Re and APRA. 60 In the first cross-appeal, Faraday argues that Windeyer J erred in holding that, upon the winding up of NCRA, the old s 116(3) conferred accrued rights on creditors; it asserts that rights to creditors accrued only upon the distribution of NCRA's surplus assets. 61 Faraday contends, further, that his Honour erred in holding that rights that may have accrued under s 116(3) were not extinguished by s 562A of the Corporations Act or the replacement of the old s 116(3) by the new s 116(3). 62 Faraday challenges declarations 1(a) to (d) and the directions in paras 2(a) to 2(g) and 2(o). It seeks orders setting aside those declarations and directions and in lieu thereof seeks that the following direction be made: "The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that section 116(3) of the Insurance Act 1973 as in force prior to 1 July 2002 does not apply to NCRA's liquidation". 63 In the alternative, Faraday seeks orders that declaration 1(d) and direction 2(o) be set aside and in lieu thereof the following declaration and direction, respectively, be made: "1(d) In distributing the amounts that have been received by the [NCRA] or [the liquidator] under contracts of reinsurance to creditors entitled thereto under section 562A of the Corporations Act 2001 (Cth), [the liquidator] is not required to have regard to the application of section 116(3) of the Insurance Act 1973 (Cth)." "2(o) The liquidator would be justified in distributing the proceeds of assets realised in the liquidation on the basis that, where the application of section 116(3) of the Insurance Act 1973 would require the proceeds to be distributed in a way different to that which would be required pursuant to section 562A of the Corporations Act 2001 (Cth), the provisions of section 562A of the Corporations Act 2001 (Cth) prevail." 64 In the second cross-appeal, NCRA and the liquidator are the cross-appellants and the other parties (save for APRA) are the cross-respondents. NCRA and the liquidator are supported by NC Re and opposed by AssetInsure and Faraday. NCRA and the liquidator challenge declaration 1(e) and direction 2(h) made by Windeyer J. They contend that his Honour erred in finding that contracts of reinsurance are "contracts of insurance" within the meaning of the latter phrase in s 562A(1)(a) of the Corporations Act. 65 In the second cross-appeal, NCRA and the liquidator seek orders that declaration 1(e) and direction 2(h) be set aside and in lieu thereof the following declaration and direction be made: "1(e) [Contract TY165A] for the 1998 underwriting year and [contract FC3A] for the 1997 and 1998 underwriting years are not 'relevant contracts of insurance' within the definition of that term in subsection (8) of section 562A of the Corporations Act 2001 (Cth)." "2(h) The liquidator would be justified in treating a contract of reinsurance as one to which the provisions of section 562A of the Corporations Act 2001 are not applicable notwithstanding that the relevant contract or contracts of insurance insured under the contract of reinsurance are themselves contracts of reinsurance." Alternatively to direction 2(h) in the terms so stated, NCRA and the liquidator seek that the following direction be made: "2(h) The liquidator would be justified in treating a contract of reinsurance entered into by [NCRA] as reinsurer as one to which the provisions of section 562A of the Corporations Act 2001 are not applicable." 66 At the request of the Court, Faraday's cross-appeal (the first cross-appeal) was argued first, followed by the appeal and then the cross-appeal of NCRA and the liquidator (the second cross-appeal). It is convenient in these reasons to proceed in the same order. Faraday's (the first) cross-appeal Did the old s 116(3) give rise to accrued rights? 67 The old s 116(3) provided that the assets in Australia of a body corporate authorised to carry on insurance business should, upon the winding up of the body corporate, first be applied in the discharge of its "liabilities in Australia". This, in effect, provided that the body corporate's assets in Australia would be applied to payment of liabilities in Australia in priority to any other liabilities. 68 Faraday's first argument in the cross-appeal is that, contrary to the view expressed by Windeyer J, the old s 116(3) did not give rise, on the commencement of NCRA's winding up, to any accrued rights of priority to creditors in respect of NCRA's liabilities in Australia. Faraday argues that rights could only accrue upon the distribution of NCRA's surplus assets. Faraday submits that as, prior to the distribution of the surplus assets, the old s 116(3) was repealed by the Reform Act and replaced by the new s 116(3), and as the new s 116(3) does not apply to NCRA, the creditors in respect of NCRA's liabilities in Australia have no rights of priority (either under the old or the new s 116(3)). 69 Faraday relied for this argument largely on Wight v Eckhardt Marine GmbH [2004] 1 AC 147. Lord Hoffman (who delivered the judgment of the House of Lords) held that, when the debt in issue in that case was discharged under its proper law (the law of Bangladesh), it ceased to be provable in the place where the winding up order was made (in the Cayman Islands) and was properly rejected by the Cayman Islands liquidator. He said (at 155-156): "The winding up leaves the debts of the creditors untouched. It only affects the way in which they can be enforced. … The creditors are confined to a collective enforcement procedure that results in pari passu distribution of the company's assets. The winding up does not either create new substantive rights in the creditors or destroy the old ones. Their debts, if they are owing, remain debts throughout. They are discharged by the winding up only to the extent that they are paid out of dividends. But when the process of distribution is complete, there are no further assets against which they can be enforced." 70 Faraday, relying on these observations, submits that the winding up order did not result in the creditors of NCRA acquiring any new substantive rights. 71 The decision in Wight v Eckhardt Marine GmbH must be contrasted with Motor Terms Co Pty Ltd v Liberty Insurance Ltd (1967) 116 CLR 177 where Barwick CJ (at 179) held that the date of the commencement of winding up is the date "as at which to determine who are the creditors and as at which to adjust their rights". Taylor J (at 190-192) was of a like view. He said, (at 190-191): "[T]he rights of the creditors are to be regarded as subject to the rights created by the statute as from the commencement of the winding up. It would be, at least, strange if a creditor, not being a petitioning creditor, whose debt was not statute-barred at the commencement of the winding up but who foresaw the possibility of it becoming statute-barred before the making of the order, would find it necessary to protect himself by commencing an action which was liable to be stayed under s 143 and in the prosecution of which he could obtain no other benefit …" 72 A similar approach was adopted in Steinberg v Herbert (1988) 14 ACLR 80 (a decision of the Full Court of the Supreme Court of Western Australia) and Fisher v Madden (2001) 54 NSWLR 179 (which approved Steinberg v Herbert). Although these two cases involved companies under receivership and not companies under winding up, the reasoning involved is the same as that of Barwick CJ and Taylor J in Motor Terms Co Pty Ltd v Liberty Insurance Ltd. 73 Wight v Eckhardt Marine GmbH was concerned with the question whether, subsequent to winding up but prior to distribution, a debt owed by the company under winding up had been discharged. Plainly, as Lord Hoffman pointed out (at 157) it would be strange if, once a winding up order is made, the Court could not have regard to the fact that, after the winding up but before distribution, "someone has ceased to be a creditor at all". There is nothing unfair, his Lordship remarked, in a rule that requires that anyone who claims to participate in a distribution should have the status of a creditor at the time of the distribution. If by some applicable law, made after winding up, the claimant's debt is discharged, it would not be contrary to principle to hold that the claimant is no longer a creditor for the purposes of distribution. 74 The question whether a debt is discharged concerns its very existence and governs whether the creditor in respect of the debt will share in the distribution at all. This is to be contrasted with the question whether a debt is entitled to priority or preferential treatment. The latter question assumes that the debt exists and concerns the order in which the debt will be paid. On this basis, it seems to me, Wight v Eckhardt Marine GmbH is distinguishable from Motor Terms Co Pty Ltd v Liberty Insurance Ltd and the other Australian cases to which I have referred. 75 In my opinion, it would be contrary to principle to hold that a change to the law (not expressed to be retrospective), between winding up and distribution, alters priorities established according to the law at the date of winding up. In my view, for the reasons I have given, Wight v Eckhardt Marine GmbH is not of application to the present circumstances. Moreover, this Court must follow Motor Terms Co Pty Ltd v Liberty Insurance Ltd. 76 In my opinion, an administrator or liquidator, upon appointment, is obliged to pay - out of the surplus assets of the company under winding up – the proved debts of the company according to the priorities fixed by law at the date of commencement of the winding up. This duty gives rise to a correlative entitlement on the part of preferential creditors, although it may not be an entitlement to immediate payment. 77 That correlative entitlement will of course disappear if, after the commencement of the winding up, the debt in respect of which it is conferred is discharged (see Wight). This phenomenon, however, says nothing about whether priorities do or do not accrue at the date of the commencement of winding up. 78 In my respectful opinion, Windeyer J correctly held that, according to the law in Australia, at the commencement of a winding up of a corporation, rights accrue to creditors to have their rights adjusted in accordance with the applicable regime for the distribution of the assets of the company in liquidation. I would not uphold Faraday's argument in this respect. Were the accrued rights extinguished by s 562A of the Corporations Act? 79 Faraday submits that, if rights accrued under the old s 116(3), they were extinguished by s 562A of the Corporations Act. It submits that any rights that may have accrued to creditors by the old s 116(3) are irreconcilably inconsistent with the rights of creditors under s 562A. 80 Section 562A governs the payment by a wound up insurer, of amounts received by it pursuant to contracts of reinsurance, to those creditors to whom it is liable, as insurer, under contracts of insurance. The section does not confer a specific priority, in respect of such amounts, on creditors in respect of liabilities in Australia. Section 562A, therefore, is to that limited extent inconsistent with the old s 116(3) which provided that claims in respect of liabilities in Australia were to be discharged from the wound up insurer's assets in Australia, in priority to claims in respect of other liabilities. 81 Faraday accepts that, because the old s 116 was part of a Commonwealth statute, and the Corporations Law was a State statute, rights accrued under the old s 116 prevailed over any provision to the contrary in the Corporations Law. But, Faraday points out, on 15 July 2001 the Corporations Act replaced the Corporations Law. Thus, Faraday says, s 562A of the Corporations Act - being inconsistent Commonwealth legislation promulgated after the old s 116 was in force - must prevail over any rights that may have accrued under the old s 116. 82 Windeyer J held to the contrary and Faraday submits that his Honour was wrong in this respect. 83 Faraday's argument has to pass over the hurdle of s 8(c) of the Acts Interpretation Act 1901 (Cth) which provides: "Where an Act repeals in the whole or in part a former Act, then unless the contrary intention appears the repeal shall not: … (c) affect any right privilege obligation or liability acquired accrued or incurred under any Act so repealed; …" 84 In my view, once it is accepted that rights accrued on winding up, Faraday's argument cannot overcome s 8(c) of the Acts Interpretation Act. The scheme of s 562A works sensibly on the basis that it applies only to companies placed under winding up after the coming into force of the Corporations Act and does not affect rights accrued against companies wound up before that date. On that basis any inconsistency between s 562A and s 116(3) disappears. There is, moreover, nothing in s 562A that suggests that the legislature intended by that section to interfere with accrued rights either generally or by particular reference to the old s 116(3). 85 I would in any event add that, in my view, the old s 116(3), being legislation dealing specifically with insurance companies, is not displaced by s 562A, which deals with companies, generally: Maybury v Plowman (1913) 16 CLR 468. 86 I would reject Faraday's argument based on s 562A of the Corporations Act. The new s 116(3) argument 87 Faraday submits, also, that any rights that may have accrued under the old s 116(3) were extinguished by the replacement of the old s 116(3) with the new s 116(3). Faraday submits that the Reform Act, by replacing the old s 116(3) (albeit without materially altering its terms), extinguished rights accrued under the old s 116(3). Faraday argues further that Schedule 2 to the Reform Act assumed that rights under the old s 116(3) were extinguished. 88 Windeyer J rejected these arguments and Faraday submits that his Honour thereby erred. 89 Schedule 2 sets out certain transitional provisions applicable to "the transition period" (being a period of two years as from the commencement of the Reform Act). By cl 10A of Schedule 2, APRA had the power, under certain circumstances, to direct that the old s 116(3) would apply to the winding up of NCRA. Faraday submits that the power so afforded to APRA assumes that rights that had accrued under the old s 116(3) were no longer of any force. In addition, Faraday submits that there was nothing in the transitional provisions that sought to preserve rights that had accrued under the old s 116(3). 90 I am not persuaded by these submissions that the views expressed by Windeyer J in regard to the continuing application of the old s 116 are incorrect. 91 Schedule 2 is readily understandable on the basis that it applied only to companies that were wound up after the commencement of the Reform Act. That is to say, once the Reform Act came into force, unless APRA exercised its powers under cl 10A of Schedule 2, the old s 116(3) ceased to operate so as to confer rights upon companies wound up thereafter. On this construction, the transitional provisions, including Schedule 2, had no effect on rights that had accrued under the old s 116(3) prior to the commencement of the Reform Act. 92 In my opinion, there is no persuasive reason that leads to a contrary construction. The fact that the transitional provisions empowered APRA to make a determination that s 116(3) could apply during the transition period carries no implication as to whether or not any of the provisions of the Insurance Act, in its form prior to its amendment by the Reform Act, have any continued operation. The transitional provisions are simply neutral in this respect. 93 There is, furthermore, a strong indication from the relevant legislation that rights accrued under the old s 116(3) would continue to apply. 94 Prior to the enactment of the Reform Act, the winding up of a body corporate carrying on insurance business was governed by the old s 116 which conferred the priority in respect of liabilities in Australia to which I have referred. As from the enactment of the Reform Act, a priority was again conferred on creditors in respect of liabilities in Australia, but only by reference to the winding up of a "general insurer". 95 If Faraday's argument were to be accepted, provided the distribution of surplus assets took place before the Reform Act came into force, the priority effected pursuant to the old s 116(3) in respect of liabilities in Australia would remain of effect. Also, on Faraday's argument, once the Reform Act became law, such a priority would be recognised, pursuant to the new s 116(3), in respect of general insurers liquidated after that date. But no such priority would be accorded to creditors of insurance companies liquidated before that date in cases where the distribution of surplus assets took place thereafter. A lacuna would exist for such companies. That would be an anomalous result militating strongly against Faraday's argument. 96 I also accept the argument advanced by NC Re and APRA that the enactment of the new s 116(3) in the same terms as the old s 116(3) indicates a legislative intention that the old s 116(3) is to continue to apply to companies wound up prior to the coming into force of the Reform Act. 97 I would not uphold Faraday's argument in this regard. Conclusion as to Faraday's cross-appeal 98 I would dismiss the first cross-appeal with costs. The appeal Is s 31(4) an exhaustive definition of "liabilities in Australia"? 99 In the appeal AssetInsure (supported by NC Re) contends, principally, that Windeyer J erred: (a) In not finding that, for the purposes of the old s 116, "liabilities in Australia" are "exhaustively and exclusively defined in s 31(4) of the Insurance Act 1973 (Cth), insofar as such liabilities arise under contracts of insurance". (b) In finding that NCRA's liabilities under contracts TY 165A and FC3A were liabilities in Australia. 100 The old s 116(4) provided that "[s]ection 31 has effect for the purposes of this section". Section 31(4) provides: "For the purposes of this Part, where a liability is undertaken by a body corporate under: (a) a contract of insurance (including reinsurance) made in Australia or in respect of which a proposal was accepted or a policy issued in Australia, not being a contract: (i) that relates only to a liability contingent upon an event that can happen only outside Australia, not being a liability that the body corporate has undertaken to satisfy in Australia; or (ii) where the body corporate carries on insurance business both in and outside Australia, that relates only to a liability that the body corporate has undertaken to satisfy outside Australia; or (b) a contract of insurance (including reinsurance) made outside Australia or in respect of which a proposal was accepted or a policy issued outside Australia where any part of the negotiations or arrangements leading to the making of the contract, to the acceptance of the proposal or to the issue of the policy took place or were made in Australia, being a contract: (i) that relates to a liability contingent upon an event that can happen only in Australia; or (ii) where the body corporate carries on insurance business both in and outside Australia, that relates to a liability that the body corporate has undertaken to satisfy in Australia; that liability is a liability in Australia." 101 It was not in dispute that the old s 116(3) made s 31(4) relevant when determining the meaning of "liabilities in Australia" for the purposes of that section (even though the old s 116 was part of Pt X and s 31 is expressed to be "for the purposes of Pt III"). The intention that s 31(4) apply to s 116 is clear. 102 Windeyer J discussed the general law in regard to the location of debts and observed: "Liability in respect of a chose in action is normally where the debtor resides." His Honour said that s 31(4) "is not a definition section" and remarked: "Unless s 31(4) is an exclusive definition claims under both policies would be liabilities in Australia under the general law." 103 Thus, Windeyer J held that s 31(4) is not an exhaustive definition of "liabilities in Australia." His Honour held that, as NCRA was resident in Australia, by the general law its liabilities under contracts TY165A and FC3A were liabilities in Australia. AssetInsure, supported by NC RE, contends that his Honour erred in this regard. 104 Faraday, in supporting the reasoning of Windeyer J, submits that s 31(4) is not exhaustive in defining liabilities in Australia. Faraday argues that s 31(4) is not cast in exclusive terms and does not override the general law. Section 31(4) merely sets out what "is" a liability in Australia and does not prescribe what "is not" a liability in Australia. Faraday argues that s 31(4)(a) merely clarifies the application of the general law to insurance contracts that have foreign elements, and s 31(4)(b) merely extends the operation of the general law to widen the circumstances in which a liability is a liability in Australia. 105 The liquidator and NCRA advance submissions to the same effect. They submit that s 116(3), so far as it is concerned with liabilities in Australia, directs attention to the location of those liabilities in private international law terms. They submit that the legislature intended general law principles to apply, as well as s 31(4), in determining "liabilities in Australia". They point to the fact that there is nothing in the wording of s 116(4) or s 31(4) that suggests in terms that an exhaustive definition was intended. 106 There is force in these arguments, but there are matters that tend to the contrary conclusion. 107 The first such matter is the way in which the concept of "liabilities in Australia" is used in Pt III of the Insurance Act. 108 The principal purpose of s 31 as a whole, as appears from its own terms, concerns its application in Pt III. Part III, as its heading indicates, deals with the "authority to carry on insurance business". That "authority" includes the prudential requirements applicable to the carrying on of an insurance business by a body corporate. 109 Part III is comprised of ss 21 to 38 and it is helpful to refer to the more pertinent of these sections. 110 Section 22 provides that a body corporate might make an application to APRA for an authority to carry on an insurance business. Section 23 provides that APRA might grant the body corporate an authority to carry on insurance business if APRA is satisfied that: "(a) … (b) where the body corporate is incorporated in Australia – the value of the assets of the body corporate exceeds the amount of its liabilities by not less than $2,000,000; (c) the value of the assets in Australia of the body corporate exceeds the amount of its liabilities in Australia by not less than $2,000,000; (d) … (e) the body corporate is, and is likely to continue to be, able to meet its liabilities; and (f) …" By s 27, where APRA decides not to grant an authority, the Treasurer might, after considering the relevant material, grant or refuse the authority. 111 Section 29(1) provides: "(1) Subject to this Part, an authority granted to a body corporate under this Part is subject to the following conditions: (a) where the body corporate has a share capital – a condition that its paid-up share capital shall not at any time be less than $2,000,000; (b) where the body corporate is incorporated in Australia – a condition that the value of its assets shall at all times exceed the amount of its liabilities by not less than: (i) $2,000,000; or (ii) 20% of its premium income during its last preceding financial year; or (iii) 15% of its outstanding claims provision as at the end of its last preceding financial year; whichever is the greatest; (c) a condition that the value of the assets in Australia of the body corporate shall at all times exceed the amount of its liabilities in Australia by not less than: (i) $2,000,000; or (ii) 20% of its premium income in Australia during its last preceding financial year; or (iii) 15% of its outstanding claims provision in respect of liabilities in Australia as at the end of its last preceding financial year; whichever is the greatest; …" 112 It can be seen that s 29(1)(c) provides for a condition applicable to body corporates, generally, that concerns their "liabilities in Australia". Section 29(1)(b), on the other hand, provides for a condition applicable only to body corporates incorporated in Australia, and that condition concerns their liabilities, generally. 113 Generally, therefore, by Pt III, the authority granted to a body corporate to carry on insurance business is subject to separate and different conditions relating, firstly, to its liabilities, wherever those liabilities might be and, secondly, to its liabilities in Australia. Part III assumes that the fact that a body corporate is incorporated in Australia does not necessarily mean that its liabilities are "liabilities in Australia". 114 The term "assets" is dealt with in s 30, also in Pt III. The section makes no reference to assets which are to be regarded as "assets in Australia", save that s 30(1)(d)(ii) stipulates the circumstances in which an amount due in respect of a deposit with a bank or other specified financial institution will be "taken for the purposes of this Part to be an asset in Australia of the body corporate". 115 Section 31(1) provides that, in Pt III, save for certain exceptions, "a reference to liabilities of a body corporate includes a reference to provision for liabilities made in its accounts". Section 31(2) concerns the making of provision in respect of "liabilities", generally, in the accounts of a body corporate carrying on insurance business. Then follows a number of provisions dealing with directions that might be given by APRA for the making of particular provisions for liabilities, generally, in the accounts of such a body corporate. Section 31(4) sets out the circumstances "where a liability is" a liability in Australia. Section 31, like s 29(1)(c), differentiates between liabilities, generally, and liabilities in Australia. 116 Section 32(1) identifies "premium income" by stating that a reference to the premium income of a body corporate during a financial year "is a reference to the amount that is …". The drafting technique involved in the use of the word "is" in s 32(1) is the same as that used in s 31(4) (where the sub-section states what "is a liability in Australia"). The repetition of this drafting technique is of some significance. Section 32(1) sets out a detailed and complex description of what "is" premium income. There is no generally accepted meaning of "premium income" under the general law. An inference arises that s 32(1) is intended to be an exhaustive definition of the term "premium income". 117 By s 39(3), s 31 also has effect for the purposes of Pt IV of the Insurance Act. Part IV concerns the accounts and accounting records kept by body corporates authorised to carry on insurance business. By s 40, insurers are required to keep separate accounts for their Australian insurance business on the one hand and their overseas insurance business on the other. Section 41 requires insurers to apportion in their statutory accounts amounts received or paid between insurance business carried on in Australia and insurance business carried on outside Australia. Section 43 requires insurers to furnish information to APRA with respect to apportionments and s 44 requires accounts and statements of insurers to be lodged with APRA. 118 In summary, Pt III sets out the way in which liabilities in general, liabilities in Australia, assets and premium income are to be treated from an accounting point of view. The accounting treatment of these terms would be of great importance to APRA and the Treasurer when determining whether to grant and monitor the authority to a body corporate to carry on insurance business. Consistency of meaning on a well-understood basis would be crucial to the proper administration of the prudential requirements. A less than certain meaning would not be conducive to efficient investigation and the monitoring contemplated by the Act. It would also impede the efficient administration of insurance companies. A uniform standard applicable to the accounting treatment of these terms would be highly desirable. Otherwise insurance companies would be at large in the way they dealt with these concepts in their accounts, and this could result in confusion in the industry and detriment to the public, generally. 119 In my opinion, despite the omission of any express statement to the effect that, for the purposes of Pt III, no other liability would be regarded as a liability in Australia, the strong indication from Pt III as a whole is that what is a "liability in Australia" in terms of s 31(4) was intended by the legislature to be exhaustive. 120 Once it is accepted that the statement as to what is a "liability in Australia" in s 31(4) is exhaustive for the purposes of Pt III, it must also be accepted that that statement is exhaustive for the purposes of the old s 116(3). It could not have been the intention of the legislature that s 31(4) would have one meaning for Pt III and a different meaning for s 116(3). 121 The next matter to be addressed is the relevance of the significant differences between s 31(4) and the general law in regard to the determination of the location of a debt in Australia. I turn, firstly, to the general law. 122 Windeyer J held that, at general law, a debt is located where the debtor resides, unless the debtor has a place of residence at a place other than at its principal place of residence and agrees to make payment at the other place. 123 AssetInsure submits that Windeyer J erred in his formulation of the exception to the rule that the residence of a debtor determines the location of a debt. According to AssetInsure, irrespective of where the debtor resides, if the contract between the debtor and the creditor provides that payment be made at a particular place, that place of payment is the location of the debt (and some form of residence at that place is not required). 124 AssetInsure relied for its argument on Melville Island Limited v Richards (1933) 50 WN (NSW) 41 where Street J, when dealing with whether a debt owed by the Bank of New South Wales would be recoverable in New South Wales in circumstances where the Bank had agreed to pay the money in London, said (at 41): "It seems to me that the locality of the debt has been fixed by the parties, and that that locality is in London." AssetInsure also cited McCaughey v The Commissioner of Stamp Duties (1946) 46 SR (NSW) 192 and Ex Parte Coote (1949) 49 SR (NSW) 179. In McCaughey Jordan CJ said (at 201): "[I]n law, a simple contract debt is locally situated where the debtor resides … unless it is agreed to be paid in a particular place, in which case it may be locally situated at that place." Jordan CJ repeated this statement In Ex Parte Coote at 184. AssetInsure also referred to In Re Russo-Asiatic Bank [1934] 1 Ch 720 where Eve J said (at 738) that: "[A]lthough as a general rule the location of simple contract debts is the place in which the debtor is to be found, that rule, in my opinion, does not apply here, where the obligation is in terms to pay in sterling in London." This statement, AssetInsure submits, supports its contention as the debtor in In Re Russo-Asiatic Bank resided in Russia. 125 Faraday, on the other hand, supports the decision of Windeyer J on this aspect. Faraday points out that in Melville Island Limited v Richards, the Bank of New South Wales had a branch office in London. In In Re Russo-Asiatic Bank, the Russian Bank also had a branch in London. Thus, Faraday submits that the remarks of Eve J, when seen in this context, meant no more than the location of the debt was in London by reason of the fact that the Russian bank had an office in London and had agreed to make payment there. Faraday points out that in McCaughey v The Commissioner of Stamp Duties, Jordan CJ cited In Re Russo-Asiatic Bank and submits that his Honour's remarks, on which AssetInsure relied, should be understood as meaning merely that the location of the debt is where the debtor resides, unless the parties agree that the debt is to be paid in a particular place where the debtor is also resident. 126 In Jabbour v Custodian of Israeli Absentee Property [1954] 1 WLR 139 Pearson J, after a formidably thorough examination of the authorities, said (at 145-146): "It is established by the decided cases that not only debts, but also other choses in action, are for legal purposes localised and are situated where they are properly recoverable and are properly recoverable where the debtor resides … … Where a corporation has residence in two or more countries, the debt or chose in action is properly recoverable, and, therefore, situated, in that one of those countries where the sum payable is primarily payable, and that is where it is required to be paid by an express or implied provision of the contract, or, if there is no such provision, where it would be paid according to the ordinary course of business." 127 In Haque v Haque (No 2) (1965) 114 CLR 98 Windeyer J said (at 137) that a debt made payable at a particular place may sometimes be regarded as being located at that place "but only it seems when the debtor has a residence there". 128 The learned authors of Dicey and Morris, The Conflict of Laws (13th ed) state (at para 22-029): "A stipulation that payment should be made in a country where the debtor has no residence does not affect the general rule … Where, however, the debtor has two or more places of residence and the creditor either expressly or impliedly stipulates for payment at one of them, then the debt will be there situate." 129 In my view, the authorities cited by AssetInsure, when properly understood, are not inconsistent with Haque v Haque (No 2) and Jabbour. In my opinion, the authorities bear out the primary judge's formulation of the general law. In my view, that formulation is correct. 130 On that understanding of the general law rule, s 31(4) in some respects widens and in other respects limits what, according to the general law, would be a liability in Australia. 131 The widening effect results, for example, from the fact that under s 31(4) a liability, incurred by an insurance company resident in Australia, which has a branch overseas and which agrees to pay its insured at the overseas branch in respect of the occurrence of a contingency occurring only overseas, is a liability in Australia. Under the general law, such a liability would not be a liability in Australia. 132 The limiting effect results from the several circumstances under which a liability incurred by an insurance company resident in or outside Australia does not fall within the categories of liabilities in Australia as stipulated by s 31(4). 133 Take, for example, an insurer resident in Australia which incurs a liability under a contract of insurance made in Australia, or in respect of which a proposal is accepted or a policy issued in Australia, which liability is contingent upon an event that could happen only outside Australia. If such an insurer does not undertake to satisfy the liability in Australia, the liability is not a liability in Australia within the meaning of s 31(4). Under the general law, on the other hand, such circumstances, alone, would not result in the liability not being a liability in Australia. 134 Another limiting example is where an insurer, resident in Australia, carrying on insurance business both in and outside Australia, is liable under a contract of insurance made in Australia (or in respect of which a proposal is accepted or a policy issued in Australia), that relates to a liability that the insurer undertakes to satisfy outside Australia. Such a liability is not a liability within Australia under 31(4). Under the general law, on the other hand, the sole fact that such an insurer undertakes to satisfy such a liability outside Australia would not prevent the liability from being a liability in Australia. 135 A further limiting example is where an insurer, resident in Australia, is liable under a contract of insurance made outside Australia (or in respect of which contract a proposal is accepted or a policy is issued outside Australia) and the contract relates either to a liability contingent upon an event that could only happen outside Australia, or a liability that the insurer undertakes to satisfy outside Australia. Such a liability is not a liability within Australia under 31(4). Under the general law, on the other hand, the fact that such a contract relates to a liability contingent upon an event that could only happen outside Australia, and the insurer undertakes to satisfy that liability outside Australia, would not, alone, prevent that liability from being a liability in Australia. 136 It is difficult to understand what the elaborate limiting provisions of s 31(4) were intended to achieve if all liabilities that were liabilities in Australia under the general law were still be regarded as liabilities in Australia for the purposes of the Insurance Act. What would be the point of constructing this edifice of complex restrictions if, in practice, all could be ignored by having resort to the relative simplicity and breadth of the general law? 137 The fact that s 31(4) widens the meaning of the phrase "liabilities in Australia" is also significant. The widening effect of s 31(4) overrides, to that extent, the application of the general law when determining what "is" a liability in Australia for the purposes of the Insurance Act. The inference arises that, by limiting the meaning of the phrase, the legislature similarly intended to override the application of the general law in regard to this issue. 138 A further factor tending towards construing s 31(4) as an exhaustive code is that it attempts to deal comprehensively with liabilities under all contracts of insurance, not only those made in Australia (covered by s 31(4)(a)) but also those made outside Australia (covered by s 31(4)(b)). 139 I also take into account the fact that 160(3) of the Companies Act 1928 (Vic) appears to have been the progenitor of the scheme found in Pt III of the Insurance Act. Section 447 and 448 of the Victorian Act were discussed by Cussen ACJ in In Re Federal Building Assurance Co Ltd (In Liq) [1932] VLR 301. His Honour described the "result" of ss 447 and 448 of the 1928 Victorian Companies Act as follows: "[T]he secured assets in Victoria are primarily charged with the payment or satisfaction of all the liabilities in Victoria, that no part of such secured assets are to be removed from Victoria till the whole of the liabilities in Victoria are paid in full, and that the entire assets of the company in Victoria shall be applied so far as the same will extend in or towards satisfaction of the liabilities of the company in Victoria, and that no part of such assets shall be applied in payment of any liabilities incurred elsewhere than in Victoria until the whole of the liabilities incurred in Victoria are paid in full." 140 In In Re Federal Building Assurance Co Ltd (In Liq) liquidators had taken out a summons asking for directions as to whether certain claims should, if valid, be considered as "liabilities in Victoria". Cussen ACJ determined the question by "looking at the substance of the transaction". His Honour did not apply the rules of private international law to the determination of the location of debts. It seems reasonable to infer that, when the legislature first adapted the scheme of the Victorian Act in enacting s 116(3), it would have assumed that the courts would construe the section in the same way as the Victorian statute had been construed in In Re Federal Building Assurance Co Ltd (In Liq). 141 In my opinion, the factors tending to show that the legislature did intend s 31(4) to be an exhaustive definition of "liabilities in Australia" are more powerful than the factors to the contrary. I am not persuaded by the fact that the legislature provided only for what "is" a liability in Australia and did not expressly say that nothing else would be such a liability. In my view, the circumstances to which I have referred compel the construction contended for by AssetInsure and NC Re. Contracts TY165A and FC3A 142 The question then arises whether NCRA's liabilities under the two contracts TY165A and FC3A are liabilities in Australia. 143 Contract TY165A is a contract involving treaty reinsurance. Contract FC3A involves facultative reinsurance. 144 Treaty reinsurance was described in evidence as follows: "A treaty reinsurance contract protects the reinsured's aggregate book of business which may be narrowly defined to specific classes of business, or broadly defined, such as the reinsured's whole account (which covers all business underwritten by the reinsured). Treaty reinsurance may be divided into two broad classifications depending on the form, being proportional or non-proportional." 145 Facultative reinsurance was described in evidence as follows: "Facultative reinsurance occurs where a single risk or a schedule of risks is reinsured. Terms and conditions are negotiated individually for each policy. Facultative reinsurance may be underwritten on the basis that the reinsured has the option of placing/retaining the individual risk. It may be also be written on an obligatory basis. Facultative reinsurance may be divided into two broad classifications depending on the form, being proportional or non-proportional". Are the liabilities under contract TY165A liabilities in Australia? 146 Section 31(4)(a) refers to "a contract of insurance (including reinsurance) made in Australia or in respect of which a proposal was accepted or a policy issued in Australia". It was not disputed (and, in my view, it could not have been) that these are three independent concepts. In other words, a contract of insurance (including reinsurance), a proposal accepted in Australia, and a policy issued in Australia, are true alternatives. 147 Faraday contended that a proposal in respect of contract TY165A was accepted in Australia, alternatively, the policy in respect of that contract was issued in Australia. It is only necessary to deal with Faraday's alternative contention. 148 On 14 January 1999, a document termed a "signing schedule" was sent by NCRA in Australia to Beach and Associates Limited ("Beach"), brokers in Canada. Beach, together with London brokers, Bradstock Blunt and Crawley Limited ("Bradstock"), were brokers associated with the placing of the insurance effected pursuant to contract TY165A. Faraday dealt with Bradstock in this regard. It is not in dispute that contract TY 165A, in fact, was entered into. 149 The signing schedule records that it was attached to and formed part of "property excess of loss reinsurance agreement". A property excess of loss reinsurance agreement is an apt description of the policy that was to be issued upon the entering into of contract TY615A. 150 The signing schedule also records that the "property excess of loss reinsurance agreement" was issued to "all syndicates underwritten for by D P Mann Esq and/or their Quota Share Reinsurers, if applicable". D P Mann is associated with Faraday. 151 AssetInsure submits that the signing schedule is not a policy. That is correct, but the letter of 14 January 1999 from NCRA to Beach and the signing schedule constitute evidence that NCRA produced (in respect of contract TY615A) a document (the property excess of loss reinsurance agreement) which appears to have been, at least, an "informal" policy, and sent it from Australia to Bradstock, Faraday's brokers in London. This evidence was not refuted and, in my view, must be accepted. 152 AssetInsure then submits that the phrase, "a policy issued in Australia," in s 31(4)(a), means a formal policy that would only be issued after a contract of insurance has been entered into "because otherwise the position would be covered by the first limb". 153 I do not accept this submission. The issuing of a policy does not necessarily establish that a contract of insurance has been entered into. A policy may be issued in the erroneous belief that a contract of insurance has already been concluded, it may itself be the act whereby an offer to enter into such contract is accepted, or it may be a counter-offer. As "a contract of insurance (including reinsurance) made in Australia or in respect of which a proposal was accepted or a policy issued in Australia" are three independent concepts and true alternatives, the meaning of the third alternative (that is, a policy issued in Australia) has to be construed without any assumption that the issuing of a policy is conditional on the conclusion of a prior contract of insurance. 154 Section 31(4) refers merely to the issuing of a "policy" and "policy" is not qualified in any way. I see no reason why an informal policy should not fall within the section. I do not accept AssetInsure's submissions to the contrary. 155 AssetInsure finally, in this regard, submits that the issue of a policy involved "something bilateral occurring". It submits that the issuing of a policy is not a unilateral act but "the passing of the policy from one person to another". 156 Butterworths Australian Legal Dictionary (at 639), defines "issue" as "[t]he act of delivery; emission; sending". This is the ordinary meaning of the word and I do not accept AssetInsure's submissions to the contrary. 157 But, in any event, the matter is covered by long-standing authority. In Roberts v Security Company [1897] 1 QB 111, a case that concerned burglary insurance, the English Court of Appeal accepted that a policy was issued when it was duly executed, even though the document was then still in the hands of the company and had not been delivered to the insured. Xenos v Wickham (1867) LR 2HL 296 (a case of marine insurance) is to the same effect. 158 In my view, the evidence establishes that NCRA issued a policy in Australia in respect of contract TY165A. 159 NCRA undertook under contract TY165A to indemnify the reinsured "in respect of all losses, wheresoever arising under [certain policies of insurance and/or reinsurance in respect of certain property business]". It was not in dispute that part of the risk was in Australia. 160 It follows that contract TY165A is not a contract in respect of which a policy was issued in Australia that related only to a liability contingent upon an event that could happen only outside Australia. In the circumstances, contract TY165A is not a contract falling within s 31(4)(a)(i). 161 It follows that, in terms of s 34(1)(a), the liability undertaken by NCRA under contract TY 165A is a liability within Australia. I would not uphold the appeal in respect of this contract. Are the liabilities under contract FC3A liabilities in Australia? 162 Faraday submits that contract FC3A was a contract of insurance made in Australia. In the alternative, Faraday submits that a proposal was accepted in Australia, within the meaning of s 31(4)(a), in respect of contract FC3A. A crucial element of this alternative submission is that "acceptance" of a proposal in the sense required by s 31(4)(a) does not require communication of the acceptance. 163 Contract FC3A was entered into in 1997 and renewed in 1998. I have found it difficult to determine the precise facts relating to the formation of contract FC3A and its renewal. The evidence is diffuse, unclear and incomplete. Windeyer J made no factual findings in this connection. It was not necessary for him to do so as he considered that s 31(4) was not an exhaustive definition of "liabilities in Australia" and he resolved the question whether contract FC3A gave rise to liabilities in Australia in favour of Faraday by reference to the general law. 164 AssetInsure contends that contract FC3A was entered into outside Australia and Faraday contends that it was entered into within Australia. I do not propose to attempt to resolve this question (beset as it is by evidential difficulties) as I have concluded, for the reasons that follow that a proposal, in respect of contract FC 3A, was accepted in Australia. 165 It is common ground that, both in respect of 1997 and 1998, NCRA performed acts in Australia whereby it accepted an informal proposal made in respect of contract FC3A. Faraday contends that, in both years, NCRA communicated that acceptance to brokers in Australia acting on behalf of Faraday. In the alternative, Faraday argues that the acceptance of a proposal within the meaning of s 31(4)(a) required only an act of acceptance and did not require communication of the acceptance. It is common ground that in this sense (that is, without communication of the acceptance) NCRA accepted the proposal in Australia. Faraday submits that, by such acceptance, it was established that contract FC3A was a contract in respect of which a proposal was accepted within the meaning of s 31(4)(a). 166 AssetInsure argues, firstly, that s 31(4)(a) required the acceptance of a formal proposal. Secondly, AssetInsure contends that the acceptance of a proposal within the meaning of s 31(4)(a) required communication of the acceptance. Thirdly, AssetInsure disputes that the acceptance of the proposal was communicated within Australia, and contends that NCRA communicated its acceptance to brokers acting on behalf of Faraday outside Australia. 167 I do not agree with the submission that a formal proposal was required to satisfy the section. Section 31(4)(a) refers merely to the acceptance of a "proposal," and "proposal" is not qualified in any way. As I have said above, I see no reason why an informal proposal should not fall within the section. It is common knowledge that, particularly in regard to reinsurance, informal proposals are accepted which give rise to valid contracts of insurance, and there is nothing to suggest that such informal proposals were intended to be excluded from the operation of s 31(4)(a). 168 I turn now to AssetInsure's argument that acceptance of a proposal as contemplated by s 31(4)(a) requires the communication of the acceptance. 169 According to the general law, a contract of insurance would, ordinarily, be constituted by an offer and acceptance and, for such a contract to be made in Australia, the acceptance would have to be communicated to the offeror in Australia. If the same requirement were to be applied to a proposal accepted in Australia, there would be no difference in the elements, contemplated by s 31(4)(a), required to establish the making of a contract of insurance (including reinsurance) in Australia and the acceptance of a proposal in Australia. 170 Putting the matter in another way, if the words "in respect of which a proposal was accepted" mean "in respect of which the acceptance of a proposal was communicated", then "a contract in respect of which a proposal was accepted in Australia" would add nothing to the phrase, in s 31(4)(a), "a contract of insurance (including reinsurance) made in Australia" (as the place where the contract of insurance would be made would be the place at which the acceptance of the offer would be communicated). 171 In my view, the legislature intended to differentiate between a contract of insurance (including reinsurance) made in Australia, on the one hand, and, on the other, a proposal, in respect of such a contract, accepted in Australia. The distinction, it seems to me, has to lie in the fact that, to fall within s 31(4)(a), conduct constituting acceptance would not necessarily include the communication of an act of acceptance. 172 In my view, for the purposes of s 31(4)(a), the acceptance of a proposal does not require the communication of the acceptance. Accordingly, I accept Faraday's contention that contract FC3A, both in respect of the years 1997 and 1998, is a contract of insurance in respect of which a proposal was accepted in Australia. I would add that this conclusion is consistent with the conclusion to which I have come in regard to the question whether the issuing of a policy is a bilateral or unilateral act. 173 I turn now to the question whether contract FC3A is a contract that does not fall within s 31(4)(a)(i) or s 31(4)(a)(ii). 174 Contract FC3A relates only to a liability contingent upon an event that can happen only outside Australia. It follows therefore that for contract FC3A to fall outside s 31(4)(a)(i) the liability to which it gives rise must be a liability that NCRA has undertaken to satisfy in Australia. 175 NCRA's liability under contract FC3A is, of course, a contractual liability and whether or not NCRA has undertaken to satisfy its liability under contract FC3A in Australia depends upon the terms of that contract. 176 Contract FC3A does not record an express undertaking by NCRA to make payment of its liability in terms thereof at a particular place. Nor is there anything in the terms of contract FC3A that gives rise to an implied undertaking to make payment at a particular place. 177 The general rule under the general law is that "the debtor must seek his creditor and must pay him" (per Neville J in Drexel v Drexel [1916] 1 Ch 251 at 260). In Earthworks and Quarries Ltd v F T Eastment & Sons Pty Limited [1966] VR 24 Dean J said (at 26): "It has long been settled, at least since Sheppard's Touchstone , that prima facie where a contract or bond is silent as to place of payment, it is for the debtor or obligor to seek out his creditor or obligee and the debt is payable where the creditor or obligee is found. But there is said to be one qualification of this rule, namely, that where the creditor is outside the Kingdom there is no such necessity, and the debtor is excused from following him abroad. The only question is the nature of such exception. But the issue should be stated more broadly. The place of payment depends on the place which, in the absence of express provision in the contract, it should be held from all the circumstances the parties should be taken as impliedly intending. The whole matter is explained with his customary lucidity by Cussen, J, in Gosman v Ockerby [1908] VLR 298, at pp 305-6; 14 ALR 186, at p 188, in a passage quoted by O'Bryan, J, in Durra v The Bank of New South Wales [1940] VLR 170; [1940] ALR 151. Cussen J, said: 'I think … there is some misapprehension with regard to the application of the rule as to the obligation of the debtor to seek out his creditor. There are two entirely distinct classes of cases. In one class the question is one of jurisdiction dependent upon the proper construction of the contract in regard to the place where payment of money is to be made. You look at the contract and the circumstances existing where it was entered into, and if you rightly conclude that the place of payment is Victoria, or some place in Victoria, and if through the default of the debtor the money is not paid, there is prima facie a breach within the jurisdiction. One of the circumstances which may have to be taken into consideration in deciding on the answer to this question is the residence or place of business of the creditor, but except to this extent the alleged rule that the debtor must seek out his creditor is of no importance in this class of cases. The other class of case is that which does not deal with obligations under a contract, but deals with the excuses for non-performance of a contract. If you find that there is an obligation to pay money somewhere in the State of Victoria the debtor is bound to pay in this country, and, if necessary, to seek out his creditor. But if the creditor refuses to take the money, or goes away and leaves no one behind to receive it, the debtor is excused. He is not bound to follow the creditor to a foreign country.' The authorities appear to me entirely to support this statement … In many of these cases the plaintiff, who lived in the jurisdiction, had gone to a place outside the jurisdiction and made a contract there to do work in that place, and it was held that the implied obligation on the defendant was to pay him where he lived." 178 In Shallay Holdings Pty Ltd v Griffith Co-operative Society Ltd [1983] VR 760 Beach J approved the statement by Dean J in Earthworks and Quarries Ltd. 179 There is nothing in contract FC3A that displaces the general rule that "the debtor must seek his creditor and must pay him". 180 In written submissions Faraday contends: "NCRA, which had its sole office in Sydney, undertook to satisfy all claims under … FC3A at its office in Australia and from its bank accounts, also located in Sydney (Affidavit of Patrick Corkery, 6 March 2002, paras 7-12)". 181 The evidence of Mr Corkery, however, does not establish such an undertaking. Mr Corkery's testimony is simply to the effect that the method by which NCRA paid claims was through either an Australian dollar account or a foreign currency account held at NCRA's bank in Sydney. Mr Corkery's evidence of the practice of NCRA (and his testimony goes no further than that) does not prove that there was an undertaking by NCRA to pay Faraday under contract FC3A in Australia. 182 Next, Faraday submits: "[A]t least for FC3A a term may be implied by custom or usage that it was to be satisfied by payment to the local placement broker." The evidence relied on is that of Mr Hedley and Mr Richard Martin. 183 For some time, Mr Hedley was an officer of brokers known as "AIRS". AIRS acted as brokers for NCRA. The essence of Mr Hedley's evidence concerns the way, during his time at AIRS, payments of premiums in relation to facultative reinsurance with NCRA were made. 184 Mr Hedley said: "Payment of the premium followed the same progression as the placement of the facultative reinsurance, being that: (i) the underwriter would pay its share of the premium to the facultative broker; (ii) the facultative broker would forward on that payment to AIRS; and (iii) AIRS would then account to NCRA for that share of the premium. All of the payments referred to in the preceding paragraph occurred by way of telegraphic transfer. To the extent that AIRS and NCRA were concerned, all payments were made to and from bank accounts held by those companies in Australia." 185 The evidence of Mr Hedley does not establish a general custom; it goes merely to his personal practice or the practice of NCRA. 186 Mr Martin, a former reinsurance broker, with more than 25 years experience in the reinsurance industry, was asked to provide an opinion on the following question: "If (a) the reinsurance contract was effected through a broker located in Australia with a reinsurer located in Australia; (b) a claim is made under the reinsurance contract on the Australian reinsurer; and c) the Australian reinsurer makes a payment on that claim; to whom is that payment is made?" Mr Martin answered this question as follows: "In my experience, the usual practice followed in the payment of claims by Australian reinsurers in such cases was that the reinsurer would pay the broker located in Australia which placed the business with it ('the placing broker'). However, the usual practice was not invariable. In some cases (in my experience approximately five to ten per cent by number and ten to twenty per cent by quantum) of claims were not paid by the reinsurer to the placing broker but instead were paid either directly to the [reinsured] or to an intermediate broker (for example, where the [reinsured] was London based, the business may have come to the Australian reinsurer via a London broker (the intermediate broker) and an Australian broker (the placing broker)). Payment by the reinsurer direct to the [reinsured] or to an intermediate broker usually occurred at the request of the [reinsured] or intermediate broker, via the placing broker. Such requests would usually involve large claims, exceeding AUS$1,000,000. I was content to pass on such requests because prompt payment only served to enhance the perception of the Australian reinsurance market. The geographic distance from London made it difficult to 'sell' the Australian market. When major claims occurred the market practice was to make every effort to give a claims payment service which was as efficient and quick as the service offered in the London market." 187 The evidence of Mr Martin does not establish that the custom was notorious, uniform, reasonable and certain: Thornley v Tilley (1925) 36 CLR 1 (at 8). 188 Faraday, the insured (or, more accurately, reinsured) party under contract FC3A, was resident in England, not in Australia. In my opinion, NCRA's obligation under contract FC3A was to discharge its liability in terms thereof by payment to Faraday at its place of residence in England. Therefore, in my view, NCRA's liability under contract FC3A was not a liability that NCRA undertook to satisfy in Australia. 189 Accordingly, in my opinion, contract FC3A is a contract that falls within s 31(4)(a)(i). 190 As NCRA carries on insurance business only in Australia, s 31(4)(a)(ii) does not apply. It is common ground that s 31(4)(b) does apply. 191 Therefore, in my view, the liability of NCRA under contract FC3A is not a liability in Australia. Windeyer J held to the contrary and, with respect to his Honour, I consider that he erred in this regard. I would uphold the appeal to this extent. 192 Thus, in summary, the appeal fails in regard to contract TY165A but succeeds in regard to contract FC3A. In my view, declaration 1(b) as made by Windeyer J should be set aside and in lieu thereof the declaration sought by AssetInsure should be made. I also consider that direction 2(c) made by Windeyer J should be set aside. I would not make the declaration proposed by AssetInsure in lieu thereof as I regard it as neither necessary nor appropriate. The cross appeal by NCRA and the liquidator (the second cross appeal) 193 The question raised by the second cross appeal concerns the meaning of "contract of reinsurance" and "contract of insurance" in s 562A(1)(a) of the Corporations Act. Section 562A(1)(a) has to be construed by reference to the section itself (and the Act) as a whole. Section 562A is in the following terms: "(1) This section applies where: (a) a company is insured, under a contract of reinsurance entered into before the relevant date, against liability to pay amounts in respect of a relevant contract of insurance or relevant contracts of insurance; and (b) an amount in respect of that liability has been or is received by the company or the liquidator under the contract of reinsurance. (2) Subject to subsection (4), if the amount received, after deducting expenses of or incidental to getting in that amount, equals or exceeds the total of all the amounts that are payable by the company under relevant contracts of insurance, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay the amounts that are so payable under those contracts of insurance. (3) Subject to subsection (4), if subsection (2) does not apply, the liquidator must, out of the amount received and in priority to all payments in respect of the debts mentioned in section 556, pay to each person to whom an amount is payable by the company under a relevant contract of insurance an amount calculated in accordance with the formula: Particular amount owed ____________________ x Reinsurance payment Total amount owed where particular amount owed means the amount payable to the person under the relevant contract of insurance. reinsurance payment means the amount received under the contract of reinsurance, less any expenses of or incidental to getting in that amount. total amount owed means the total of all the amounts payable by the company under relevant contracts of insurance. (4) The Court may, on application by a person to whom an amount is payable under a relevant contract of insurance, make an order to the effect that subsections (2) and (3) do not apply to the amount received under the contract of reinsurance and that that amount must, instead, be applied by the liquidator in the manner specified in the order, being a manner that the Court considers just and equitable in the circumstances. (5) The matters that the Court may take into account in considering whether to make an order under subsection (4) include, but are not limited to: (a) whether it is possible to identify particular relevant contracts of insurance as being the contracts in respect of which the contract of reinsurance was entered into; and (b) whether it is possible to identify persons who can be said to have paid extra in order to have particular relevant contracts of insurance protected by reinsurance; and (c) whether particular relevant contracts of insurance include statements to the effect that the contracts are to be protected by reinsurance; and (d) whether a person to whom an amount is payable under a relevant contract of insurance would be severely prejudiced if subsections (2) and (3) applied to the amount received under the contract of reinsurance. (6) If receipt of a payment under this section only partially discharges a liability of the company to a person, nothing in this section affects the rights of the person in respect of the balance of the liability. (7) This section has effect despite any agreement to the contrary. (8) In this section: relevant contract of insurance means a contract of insurance entered into by the company, as insurer, before the relevant date." 194 By the second cross-appeal, NCRA and the liquidator, supported by NC Re, challenge declaration 1(e) and direction 2(h) made by Windeyer J. For the sake of convenience I shall repeat the declaration and direction that are in issue. Declaration 1(e) is in the following terms: "[Contract TY165A] for the 1998 Underwriting Year and [contract FC3A] for the 1997 and 1998 Underwriting Years are " relevant contracts of insurance " within the definition of that term in subsection 8 of section 562A of the Corporations Act 2001 (Cth)." Direction 2(h) is in the following terms: "The liquidator would be justified in treating a contract of reinsurance as one to which the provisions of s 562A of the Corporations Act 2001 are applicable notwithstanding that the relevant contract or contracts of insurance insured under the contract of reinsurance are themselves contracts of reinsurance." 195 On the argument of NCRA, the liquidator and NC Re, the phrase "relevant contract of insurance" in s 562A(1)(a) does not include contracts of reinsurance. On that basis, contracts TY165A and FC3A are not relevant contracts of insurance as they are contracts whereby NCRA reinsured Faraday against liabilities it undertook as insurer. Hence, the challenge to declaration 1(e). 196 In relation to direction 2(h), the same point arises, namely, whether the phrase "relevant contract of insurance" in s 562A(1)(a) includes a contract of reinsurance. 197 It is also to be noted that the effect of direction 2(h) is that s 562A(1)(a) applies to contracts of re-reinsurance entered into by NCRA as a re-reinsured. That is, upon the winding up of NCRA, s 562A(1)(a) applies to the proceeds of contracts of re-reinsurance to which NCRA is entitled. On the argument of NCRA, the liquidator and NC Re, the phrase "contract of reinsurance" in s 562A(1)(a) does not include contracts of re-reinsurance and s 562A does not apply to the proceeds of contracts of re-reinsurance. 198 The reasoning of Windeyer J, relevant to the second cross-appeal, is as follows: "[Section 562A of the Corporations Act (or Corporations Law)] was introduced as a result of the Harmer Report and the recognition that the direct matching provisions of s 562 as in place prior to 1992 were not satisfactory for contracts of reinsurance. It had been held that a contract of insurance under s 562 in its pre-1992 form and as it existed in earlier manifestations of the Companies Act included a contract of reinsurance. Re Dominion Insurance Co of Australia Limited [1980] 1 NSWLR 271; Saltergate Insurance Co Limited (No 2) [1984] 3 NSWLR 389 and Palmdale Insurance Limited (in liq) (No 3) [1986] VR 439. I think it is clear that a contract of reinsurance extends to reinsurance of a contract of reinsurance. While such a contract may be referred to from time to time and often as a retrocession that is not enough to decide that in the absence of an express statement that a contract of reinsurance extends to a retrocession agreement that s 562A does not apply. The evidence of Mr Girvan is that retrocession is just a name for an outwards reinsurance contract. The next question is whether a relevant contract of insurance in s 562A(1) extends to or includes a contract of reinsurance, a relevant contract of insurance being defined in s 562A(8). Section 562 assumes that a contract of insurance would embrace a contract of reinsurance if it were not excluded. 'Relevant contract of insurance' is not expressed to exclude a contract of reinsurance and as in general and as the evidence shows a reinsurance contract is regarded as a contract of insurance I consider that s 562A applies to a contract of reinsurance of a contract of reinsurance. Counsel for the plaintiff in his helpful argument referred to the decision of the House of Lords in Agnew v Länsförsäkringsbolagens AB [2001] 1 AC 223 where it was held that the term 'insurance' in s 3 of the Lugano Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1988, which was incorporated into English law for certain purposes, did not include reinsurance, which is of interest as questions relating to jurisdiction matters seem often to be decided on the basis that courts generally wish to assume jurisdiction to themselves. In any event it was said in that case it was a question of construction of the relevant legislation in that case having regard to its intended and stated purpose. I consider that when ss 562 and 562A are read together then contract of insurance as it applies under s 562A can include a contract of reinsurance." 199 Before giving consideration to the terms of s 562A, it is necessary to have regard to s 562 of the Corporations Act. This section provides: "(1) Where a company is, under a contract of insurance (not being a contract of reinsurance) entered into before the relevant date, insured against liability to third parties, then, if such a liability is incurred by the company (whether before or after the relevant date) and an amount in respect of that liability has been or is received by the company or the liquidator from the insurer, the amount must, after deducting any expenses of or incidental to getting in that amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability, or any part of that liability remaining undischarged, in priority to all payments in respect of the debts mentioned in section 556. (2) If the liability of the insurer to the company is less than the liability of the company to the third party, subsection (1) does not limit the rights of the third party in respect of the balance. (3) This section has effect notwithstanding any agreement to the contrary." 200 The origin of s 562 can be traced back to Re Harrington Motor Company Limited; Ex Parte Chaplin [1928] 1 Ch 105. Mr Chaplin was knocked down by a motor vehicle and suffered personal injuries. He obtained a judgment for damages and costs against the owner of the vehicle (a limited company). Before execution could be levied, the company went into liquidation, and the insurer - with which the company in liquidation was insured against third party risks - paid the amount of the damages and costs to the liquidator. The issue then arose whether the liquidator was obliged to pay Mr Chaplin, or whether he was entitled to retain the funds received for the benefit of all creditors. In the absence of any statutory provision to the contrary, the English Court of Appeal decided that the insurance proceeds were to be distributed by the liquidator for the benefit of all the company's creditors, but two of the judgments noted that the result was unsatisfactory. Atkin LJ, in particular, observed (at 124): "It is quite obvious that [the] very reasonable and proper precaution [of taking out a policy against third party risks] is defeated in the very case in which it is intended to be of most use – namely, where the cab owner becomes insolvent". 201 Re Harrington Motor Company Limited; Ex Parte Chaplin resulted in changes to the corporations legislation in both the United Kingdom and Australia. The new legislation was intended to remedy the anomalous situation that had arisen in Chaplin. In England, s 1(5) of the Third Parties (Rights against Insurers) Act 1930 expressly excluded contracts of reinsurance from the operation of the Act. There was no such statutory exclusion in the Australian legislation (see s 292(5) of the Companies Act 1961 (NSW)). 202 In Re Dominion Insurance Co of Australia Ltd [1980] 1 NSWLR 271, Needham J decided that s 292(5) of the Companies Act was of application to the proceeds of reinsurance policies received by a liquidated insurer. The same approach was adopted in Saltergate Insurance Co Ltd and the Companies Act (No 2) [1984] 3 NSWLR 389 and Re Palmdale Insurance Limited (in liq) (No 3) [1986] VR 439. 203 In Re Dominion Insurance Company of Australia Limited Needham J said (at 274): "It would be no less unjust, in the present case, to deny the right of claimants to a right against the reinsurer than it would, in the ordinary case, to deny to a claimant against an insurance company which had insured the person against whom the claim was made against the type of claim being made." 204 This proposition has been challenged. It has been said, for example: "[I]n the case of the insolvency not of the insured but of an insurance company, each and every one of the policy holders are in the equivalent position of Mr Chaplin. To accord the priority to policy holders whose claims are reinsured will, by definition, reduce the return to the other equally meritorious policy holders whose claims were not fortunate enough to be covered by reinsurance". (John Martin, "Distribution complexities in the winding up of an insurance company in Australia" (2002) 10 Insolvency Law Journal 80 at 90). 205 In 1988, the Law Reform Commission Report No 45 (General Insolvency Inquiry) (the "Harmer Report"), stated (at Vol 1 para 763): "The Commission agrees that contracts of reinsurance are for the most part fundamentally different from contracts of insurance and that the application of [the precursor to s 562] to reinsurance contracts may lead to inequities. It appears unfair to allow an insured a special priority if the particular insurance policy is backed in some way by reinsurance whereas an insured with a policy not backed by reinsurance ranks with other unsecured creditors. There may however be situations where reinsurance is specifically taken out at the request of an insured even though this may not be a condition of the insurance contract. In such situations it is appropriate for the insured to get the benefit of the application of [the precursor s 562]. Generally, however, the Commission is of the view that [the precursor to s 562] should not apply to contracts of reinsurance." [footnote omitted] 206 Following the Harmer Report, the Corporate Law Reform Act 1992 (Cth) ("the CLRA") inserted s 562A into the Corporations Law. By s 562A, specific provision was made for the proceeds of contracts of reinsurance. The CLRA also amended s 562 to exclude contracts of reinsurance from the operation of that section. 207 The Explanatory Memorandum to the CLRA referred to the recommendations of the Harmer Report and in para 946 referred to the observation in the Harmer Report that "the inclusion of contracts of reinsurance under section 562 may lead to problems if the company being wound up is an insurance company". The "problems" were described as follows: · "Identifying third party claimants who are entitled to the benefit of reinsurance; · Where third parties are both creditors and debtors, the applicability of the law of set-off in relation to the proceeds of an insurance policy; · The possibility that surplus money will result from the failure of the third parties to lodge claims which were reinsured; and · The inequity of only those persons whose contracts of insurance are backed by reinsurance being able to benefit." It can be seen that the "problems" to which the Harmer Report was referring were problems in connection with the proceeds received by a wound up reinsured from a policy of reinsurance. That is, problems concerning the application of those proceeds when the liquidator of the wound up company pays claims arising from contracts of insurance the company entered into as insurer. This part of the Harmer Report was discussing problems of the kind exemplified by Re Harrington Motor Company Limited; Ex Parte Chaplin . 208 The Explanatory Memorandum, in para 947, referred to the statement in the Report that: "[R]einsurance should be viewed as no more than the means adopted by an insurer to satisfy itself that it can pay claims which might be made under all policies which it has issued irrespective of whether it has reinsured its risk under each of these policies." 209 Paragraph 948 of the Explanatory Memorandum set out the Harmer Report's recommendation that, "unless a court orders otherwise, section 562 should not apply to a contract of reinsurance" and stated: "The court should take into account, in deciding whether to make an order, the circumstances under which the contract of reinsurance was entered into, including any contract, arrangement or understanding between the insured and the company that the company would reinsure the risk, and any prejudice likely to be suffered by the insured if the order is not made." 210 The thrust of these recommendations is that "a relevant contract of insurance" should not include a contract of reinsurance and the phrase "contract of reinsurance" should not include a contract of re-reinsurance. 211 The Explanatory Memorandum then stated, in para 950, that: "[Section 562A as inserted by the CLRA] deals with the problems identified in the Harmer Report by providing specifically for the disposition of moneys due under a contract of reinsurance and by providing for the Court to make orders in accordance with the grounds proposed by the Harmer Report where such a disposition would be inappropriate or unjust." Again, the problems identified concern the proceeds of contracts of reinsurance received by wound up reinsureds that, in turn, become due and owing by those wound up reinsureds as insurers pursuant to contracts of insurance. 212 The Explanatory Memorandum stated (at para 952) that, by s 562A (and subject to s 562A(4)), the "general rule" was that "the proceeds of contracts of reinsurance are to be applied to all relevant insurance contracts". That is, the proceeds of reinsurance received by a wound up reinsured are to be applied to all relevant insurance contracts in respect of which the wound up reinsured is an insurer. According to para 952: "[Section 562A] provides that, again subject to proposed subsection 562A(4), the amount received is to be used in the satisfaction of amounts payable under the contracts of insurance in priority to debts mentioned in section 556. Where the amount received under the contract of reinsurance is insufficient to pay such claims in full, then, again subject to proposed subsection 562A(4), the liquidator must pay out the amount received proportionately, to all the persons to whom the company is liable under such contracts of insurance". Here again, the Explanatory Memorandum is speaking of the application of amounts received by a wound up re-insured to payment of claims against it by the insurers it reinsured. It is to be noted that NCRA is a wound up re-insured and the claims against it under contracts TY165A and FC3A are by Faraday, the insurer NCRA reinsured, and the dispute concerns the proceeds of re-reinsurance policies re-reinsuring NCRA . 213 NCRA, the liquidator and NC Re submit that there are strong reasons of public policy, expressly advocated in the Harmer Report and the Explanatory Memorandum, for concluding that the benefit of s 562A "was not intended to extend to insurance market participants reinsured under inwards contracts of reinsurance". They submit that s 562A was not intended to apply to the proceeds of re-reinsurance policies received by wound up reinsurers. 214 NCRA, the liquidator and NC Re submit that the object of s 562A was to protect only the beneficiaries of contracts of direct insurance (in the event of the winding up of the reinsured insurer) and not insurance and reinsurance companies, themselves solvent, which take out reinsurance or re-reinsurance policies with companies that are later wound up. They argue that there is no ascertainable policy objective served by extending to reinsured insurance companies the same protection as was clearly intended to be granted to members of the public (not professional insurers) who are directly insured by ordinary policies of insurance. 215 AssetInsure and Faraday, on the other hand, submit that the absence of any reference to the exclusion of contracts of reinsurance in s 562A indicates that Parliament intended an unqualified usage of the phrase "contract of insurance" in s 562A. They submit that the fact that s 562A does not expressly exclude reinsurance contracts from "contract of insurance" should be regarded as an intentional decision of the legislature. They submit that the phrase "contract of insurance" was intended to be used in its normal sense as a generic term embracing all types of insurance whether reinsurance or direct insurance. On this basis, the phrase "contract of reinsurance" in s 562A(1)(a) is to be construed as covering a contract of re-reinsurance. They also submit that "contract of insurance" is an unambiguous term and resort cannot be had to extrinsic materials for the purpose of construing s 562A(1)(a). 216 AssetInsure and Faraday submit, in any event, that the extrinsic materials do not suggest that s 562A was not intended to apply to the proceeds of re-reinsurance policies. Their argument is that there is no difference, in practice, in the purpose underlying reinsurance and insurance. There is only a difference in the level of the insurance. On the other hand, as the Harmer Report makes plain, there is a material difference between reinsurance and insurance (and that, they say, is the relevant distinction between s 562 and s 562A). 217 I turn firstly to the question whether the word "insurance", in s 562A(1)(a), is potentially ambiguous in a relevant sense. The phrase, "contract of insurance", has frequently been held to include a contract of reinsurance. See Re Dominion Insurance Co of Australia Ltd, Re National Employers' Mutual General Insurance Association Ltd (In Liq) (1995) 15 ACSR 624, Re Palmdale Insurance Limited (In Liq) (No 3) and Butterell v The Douglas Group Pty Ltd (2000) 35 ACSR 398. Relying on these authorities, AssetInsure and Faraday contend that it is not permissible to have regard to the Harmer Report and the Explanatory Memorandum. 218 In Agnew v Länsförsäkringsbolagens AB [2001] 1 AC 223 the House of Lords considered the question whether the statutory context may indicate that the phrase "a contract of insurance" excludes a contract of reinsurance. The specific question at issue in Agnew was whether, under the Lugano Convention, "insurance" meant "reinsurance". 219 Lord Woolf MR (at 237) noted the submission that it was well established as a matter of English law that "by a contract of reinsurance the reinsuring party insures the original insuring party against the original loss" (Viscount Cave LC in Forsikringsaktieselskabet National (of Copenhagen) v Attorney General [1925] AC 639 at 642). Despite this general rule, Lord Woolf (at 239) regarded it as "contrary to the policy and structure of the Lugano Convention" to treat a particular section thereof, which dealt with "insurance," as applying to reinsurance. As part of his reasoning, Lord Woolf observed that s 3 of Title II of the Convention (together with another section) had the primary objective of protecting the weaker party. He remarked (at 237) "Unlike the ordinary insured, the reinsured cannot conventionally be regarded as a weaker party than the reinsurer". Lord Cooke said (at 245): "As to section 3 of the Lugano Convention, the word 'insurance' may be used in a general sense covering all aspects of the subject, but just as naturally it may be used in a more limited sense to refer only to direct insurance as distinct from reinsurance. Which sense is appropriate in any given instrument will depend on the context and purpose of the provision in question. The more limited sense is likely to be more appropriate when the rights of policyholders other than reinsured in the insurance industry are the focus of attention." Lord Hope said (at 249): "In my opinion Title II, Section 3 of the Lugano Convention, by which matters relating to insurance are to be determined by special rules, does not apply to matters arising out of contracts of reinsurance. While it is no doubt true that reinsurance is a form of insurance, a clear line can be drawn between the generality of insurance business conducted between insurers and members of the public who wish to obtain insurance cover and the particular form or category of it which is commonly referred to by insurers, textbook writers and judges as reinsurance. The purpose of reinsurance is to lay off or pass on part of the liability of the insurer under an underlying insurance contract to another insurer. The contracting parties are engaged in the same industry. The reinsurer is an insurance company or underwriter who deals not with members of the public but only with other insurance companies or underwriters." His Lordship went on to say: "One has only to ask the question whether social protection needs to be extended to the insured under a reinsurance contract for it to be plain that the concept of social protection does not apply to this type of contract." Lord Millett (at 260) while noting that "reinsurance is merely a species of insurance" concluded: "I am satisfied that the social policy to which Section 3 of the Convention gives effect provides a compelling context which requires the word to be given a restrictive interpretation excluding reinsurance from its scope." Lord Millett said (at 262): "[W]hile both employ the same insurance mechanism, insurance and reinsurance are conceptually different and serve different purposes. All insurance is about managing risk. Direct insurance protects the insured against extraordinary risks outside the ordinary course of events, whether in his private life or in his business dealings. Reinsurance is concerned with the management of risks which it is the ordinary business of both parties to underwrite. It is essentially a professional hedging operation by which, by the only means known to the law, the insurer assigns all or part of his insurance liabilities to the reinsurer". 220 In Universal General Insurance Co (UGIC) v Group Josi Reinsurance Co SA [2001] QB 68 the Court of Justice of the European Communities came to a like decision. Underlying the reasoning of the Court of Justice is that the proposition that ordinary insurance contracts are designed to protect insured persons as presumptively weaker contracting parties, but that is not the case with reinsurance contracts. According to the judgment of the Court (at 86): "Both parties to the reinsurance contract are professionals in the insurance sector, neither of whom can be presumed to be in a weak position compared with the other party to the contract." The Court came to the same conclusion as the House of Lords in Agnew . It held that s 3 of Title II of the Lugano Convention "may not be regarded as applying to the relationship between a reinsured and his reinsurer in connection with a reinsurance contract". 221 The Lugano Convention is very different legislation to the Corporations Act, but Agnew and Universal General Insurance Company (UGIC) v Group Josi Reinsurance Company SA support the proposition that, in a particular context, "insurance" may not mean "reinsurance". As these cases demonstrate, the term "insurance" is inherently ambiguous and, in my view, by virtue of s 15AB of the Acts Interpretation Act, regard can be had to the Harmer Report and the Explanatory Memorandum. 222 In my opinion, there are aspects of the wording used in s 562A and the Corporations Act as a whole that tend to support the contentions of NCRA, the liquidator and NC Re. 223 The cogency of the argument that, while s 562 expressly excludes contracts of reinsurance, that exclusion does not expressly appear in s 562A, is, I think, materially diminished by the fact that in s 562A each of the expressions, "contract of insurance" and "contract of reinsurance" is used. In other words, s 562A uses the two expressions "contract of insurance" and "contract of reinsurance" to denote two different things; hence an express exclusion of "contract of reinsurance" from the term "contract of insurance" is unnecessary. 224 On this strict textual construction, s 562A refers to contracts of insurance when it means contracts of insurance alone, and refers to contracts of reinsurance when it means contracts of reinsurance alone. On this basis, a "relevant contract of insurance" under s 562A means simply a contract of insurance and not a contract of reinsurance, and a "reinsurance payment" under that subsection is not a payment received pursuant to a contract of re-reinsurance. A "reinsurance payment" on this construction means a payment received pursuant to a contract of reinsurance. Any potential ambiguity in s 562A is thus resolved by the fact that the section deals with the two concepts of insurance and reinsurance separately and in contra-distinction. 225 On the textual argument, advanced by NCRA, the liquidator and NC Re, the ultimate beneficiaries of s 562A are those persons who are insured directly under insurance policies issued by an insurer that has been wound up. No professional insurer would then be a beneficiary under s 562A in respect of the proceeds of re-reinsurance policies taken out by it with a reinsurer that has been placed under winding up. 226 The textual argument therefore supports the policy considerations identified in the Harmer Report and the Explanatory Memorandum. 227 Turning to those policy considerations, it may, I think, be accepted that, generally, the ordinary insured is a weaker party than the insurer. That, as Agnew and Universal General Insurance Co (UGIC) v Group Josi Reinsurance Co SA point out, is not the case as between insurer and reinsurer where "both parties are professionals in the insurance sector, neither of whom can be presumed to be in a weak position compared with the other party to the contract". 228 On the construction advanced by NCRA, the liquidator and NC Re, s 562A would be similar in effect to s 562 inasmuch as both sections would provide protection only to members of the public entitled to claim from an insured company that is under winding up. The same policy would underlie each section. On the other hand, on the construction upheld by Windeyer J (and contended for by AssetInsure and Faraday), s 562A also provides protection to professionals in the insurance sector. In my opinion, when due regard is had to text of the Corporations Act, the Harmer Report and the Explanatory Memorandum, that was not the intent of s 562A. 229 The policy issue in the second cross-appeal does not, as AssetInsure and Faraday submit, concern the distinction drawn in s 562 and s 562A between direct insurance on the one hand and reinsurance on the other. I accept their submission that, practically speaking, there is no difference in purpose between insurance and reinsurance. But that is no answer to the question whether, by s 562A, the legislature intended to confer benefits on reinsureds as well as ordinary insureds, or whether it intended only to benefit ordinary insureds. This, in my view, is the true or essential question of construction that arises. 230 In my opinion, the legislature intended by s 562A to benefit only ordinary insureds, that is insureds other than reinsured insurance companies. It is readily understandable that, by reason of the weaker position of such ordinary insureds, the legislature would wish to afford them protection by way of the priorities provided by s 562A. The need to protect professional insurers, in a similar way, against the general body of creditors, is far less compelling. 231 Accordingly, in my view, the second cross-appeal should be upheld and the relief sought by NCRA, the liquidator and NC Re should be granted. Overall conclusion 232 The parties made no submissions as to the precise form of the declarations that should be made. I propose the declarations set out below but would give liberty to apply by written submissions within 21 days in that regard. 233 In regard to the costs orders I propose, I have treated NCRA and the liquidator as identical and I do not intend that any of the costs orders should apply to both. The costs orders I propose are intended to apply to NCRA alone and not the liquidator. As no submissions have been made in this respect, I would give liberty to the parties to make written submissions within 21 days in regard to the costs orders proposed. 234 Subject to what I have stated in the two preceding paragraphs, I propose the following orders: A. The first cross-appeal is dismissed with costs. B. As regards the appeal: (1) The appeal in regard to contract TY165A is dismissed with costs; the costs in regard to this aspect of the appeal to be paid by AssetInsure and NC Re. (2) The appeal in regard to contract FC3A is upheld. (3) Declarations 1(a) and (b) and the direction in para 2(c) made by Windeyer J are set aside and in lieu of declarations 1(a) and (b) the following declarations are made: "1(a) Any provable claim of [Faraday] against [NCRA] under [reinsurance contract TY165A] for the 1998 underwriting year is not a 'liability in Australia' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth); (b) Any provable claim of [Faraday] against [NCRA] under [contract FC 3A] for the 1997 and 1998 underwriting years is not a 'liability in Australia' of [NCRA] for the purposes of section 116(3) of the Insurance Act 1973 (Cth)." (4) NCRA and Faraday to pay AssetInsure and NC Re's costs of the appeal in regard to contract FC3A and their costs of that part of the directions hearing before Windeyer J concerning contract FC3A which related to declarations 1(a) and (b) and the direction in para 2(c) made by his Honour. (5) NCRA and Faraday to have certificates under the Suitors Fund Act if otherwise entitled. C. As regards the second cross-appeal: (1) The second cross-appeal is upheld. (2) Declaration 1(e) made by Windeyer J is set aside and in lieu thereof the following direction is made: "1(e) [Contract TY165A] for the 1998 underwriting year and [Contract FC3A] for the 1997 and 1998 underwriting years are not 'relevant contracts of insurance' within the definition of that term in subsection (8) of section 562A of the Corporations Act 2001 (Cth)." (3) Direction 2(h) made by Windeyer J is set aside and in lieu thereof the following direction is made: "2(h) The liquidator would be justified in treating a contract of reinsurance entered into by [NCRA] as reinsurer as one to which the provisions of section 562A of the Corporations Act 2001 are not applicable." (4) AssetInsure and Faraday pay NCRA and NC Re their costs of the second cross-appeal and their costs of that part of the directions hearing before Windeyer J concerning directions 1(e) and 2(h). (5) AssetInsure and Faraday to have certificates under the Suitors Fund Act 1951 (NSW) if otherwise entitled. D. There be liberty to any party to make written submissions within 21 days in regard to any of the declarations and costs orders. 235 BRYSON JA: In my opinion the first cross-appeal should be dismissed and the second cross-appeal should be allowed for the reasons which Ipp JA has given. 236 In my opinion subs.31(4) of the Insurance Act 1973 (Cth.) operated to widen the liabilities in Australia which, and provision for which, required to be considered in the scheme of authorization to carry on insurance business in Part III of that Act; with the purpose of maintaining, or tending to maintain financial capacity to meet obligations the protection of which the Commonwealth Parliament saw as its concern. It would not serve the purpose of subs.31(4) that it should be exhaustive, and it was not in its own text expressed to be exhaustive. The anomalies of expression which Hodgson JA has exposed present no real difficulty for interpretation of subs.31(4) overall: the subsection operated to declare that the cases with which it expressly deals are included (para (b)) or in some cases excluded (para (a)) without attempting to deal completely with what are liabilities in Australia. Discernible anomalies where a provision in one Part of this elaborate legislation is referentially given effect in a provision in another Part cannot be closely searched for implications. Attribution of entire integration and internal logic to the whole of a piece of legislation may not be a reliable indication of what the legislature truly intended. 237 The question whether liabilities are "liabilities in Australia" within the meaning of old s.116(3), if not determined by the application of subs.31(4), is to be determined by the pragmatic process described by Hodgson JA and applied by his Honour to policy FC 3A. The question is not a question in the Conflict of Laws, and old s.116(3) did not adopt the Conflict of Laws in its workings. The appeal should be dismissed for the reasons which Hodgson JA has given. 238 Questions of costs should be decided on written submissions, and detailed directions for times for submissions should be made. ********** Last Modified: 10/07/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.