New South Wales Supreme Court CITATION : HIH Casualty & General Insurance Limited v General Reinsurance Australia [2008] NSWSC 461 HEARING DATE(S) : 28/04/08, 29/04/08 and 30/04/08 JUDGMENT DATE : 2 June 2008 JUDGMENT OF : McDougall J at 1 DECISION : See paragraphs [116] and [117] of the judgment. CATCHWORDS : INSURANCE – Contract of – reinsurance – trade credit policy – liability of insurer to indemnify – whether 'Trade Credit' claim outside scope of policy – whether claim an 'Insured Debt' – whether debt a trade related debt. LEGISLATION CITED : Income Tax Assessment Act 1936 (Cth) Uniform Civil Procedure Rules CATEGORY : Principal judgment Abbey National Building Society v Cann [1991] 1 AC 56 Associated Midland Corporation Ltd v Bank of New South Wales (1984) 51 ALR 641 Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (In Liquidation) (2000) 202 CLR 588 Bluebottle UK Ltd v Deputy Commissioner of Taxation (2006) 233 ALR 747 CASES CITED : Deputy Commissioner of Taxation v Bluebottle UK Ltd (2006) 68 NSWLR 558 Esanda Ltd v Burgess [1984] 2 NSWLR 139 Ingram v Inland Revenue Commissioners [1999] 1 All ER 297 Perpetual Trustee Co (Ltd) v Bligh (1940) 41 SR (NSW) 33 Sonenco (No.87) Pty Ltd v Commissioner of Taxation (1992) 38 FCR 555 TEXTS CITED : Australian Oxford Dictionary (second edition, 2004) Fourth Edition of Halsbury's Laws of England PARTIES : HIH Casualty & General Insurance Limited (in Liq) (ACN 008 482 291) (Plaintiff) General Reinsurance Australia Ltd (ACN 008 427 450) (Defendant) FILE NUMBER(S) : SC 50134/06 COUNSEL : S Gageler SC / T Mehigan (Plaintiff) G Nell SC (Defendant) SOLICITORS : Blake Dawson Lawyers (Plaintiff) Allens Arthur Robinson (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST McDOUGALL J 2 June 2008 50134/06 HIH CASUALTY & GENERAL INSURANCE LIMITED (In liquidation) (ACN 008 482 291) v GENERAL REINSURANCE AUSTRALIA LTD (ACN 008 427 450) JUDGMENT 1 HIS HONOUR: In December 1998, the plaintiff (HIH) concluded a quota share reinsurance treaty (the treaty) with the Defendant (Gen Re) and others. The reinsured business was described as "Trade Credit and Export Credit". The treaty provided cover to HIH "in respect of Policies issued or renewed during the period". It appears that the relevant "period" was the 1999 calendar year. 2 On 13 April 1999, HIH issued what it called a "domestic policy of trade credit insurance" (the Suncorp policy) to Suncorp Metway Limited (Suncorp). Suncorp made a claim on that policy on 31 January 2000. HIH met the claim. It has sought indemnity from the reinsurers under the treaty. Most have paid. Gen Re has not. In these proceedings, HIH claims what it says is Gen Re's share of the claim, $2,359,813.00, together with interest. The issues 3 The parties have narrowed the real issues in dispute. They accept that, for HIH to succeed, there must be an affirmative answer to each of the following questions: (1) was the Suncorp policy a "Trade Credit" policy within the scope of the treaty? (2) was each of the debts in respect of which Suncorp claimed under the Suncorp policy an "Insured Debt" as defined in that policy, and properly the subject of indemnity under it? 4 The first question inquires whether the Suncorp policy fell within the class of business ceded by the treaty. The second inquires whether, on the proper construction of the Suncorp policy and in the events that happened, HIH had been obliged to indemnify Suncorp for the claim that was made. 5 In very general terms, the parties accepted that the denotation of the phrase "Trade Credit Insurance" including the following: (1) a policy of insurance, issued to a supplier of goods or services who sold those goods or services on credit, that covered the supplier against the risk of non-payment; and (2) a policy of insurance issued to a financier who at the request of the supplier had paid the amount owed to the supplier, assumed the payment risk that hitherto had been borne by the supplier, and thereby "stood in the shoes of the supplier" vis a vis the buyer in respect of that payment risk. 6 As HIH propounded its case in opening, it said that Suncorp was a financier in the second or alternatively a supplier in the first of those categories. However, in his closing submissions in reply, Mr Gageler SC (who appeared with Mr Mehigan of counsel for HIH) accepted that Suncorp did not fall into the second category. Before a financier could fall into the second category, the supplier must have supplied goods or services on credit, thereby giving rise to a credit risk that the financier could assume. Mr Gageler accepted that, on the evidence in this case, the supplier of the goods in question did not sell them on credit terms. The treaty 7 HIH entered into the field of trade credit insurance in 1997. It secured the services of Messrs Lindsay Weate and Charles Wright as joint managing directors of its trade credit division. Both those gentleman had had substantial experience in the negotiation and management of trade credit insurance. They worked with Mr Ray Gosling, who was the reinsurance manager for the HIH group of companies. 8 At some stage, Messrs Weate, Wright and Gosling had a meeting (or, it may be, meetings) with Mr Lindsay Self, the general manager – treaty of the operations of Gen Re (then known as General and Cologne Reinsurance Australasia Limited). 9 There was some controversy in the evidence as to how many meetings took place and what was said at each meeting. There was also some controversy as to when a particular meeting, said by Mr Weate to have occurred in about August 1998, in fact took place. It is not necessary to resolve those controversies. As to the date: it is clear that, whenever the meeting occurred, it was before the treaty was concluded. As to the matters discussed: on Mr Self's evidence, either Mr Weate or Mr Wright referred to the facts that banks were becoming more involved in trade transactions, and that HIH might be seeking to provide trade credit insurance to banks. Mr Self said that he "was not particularly surprised to hear Messrs Weate or Wright refer to banks in the context of trade credit insurance", because HIH had indicated in previous meetings that it might be seeking to provide trade credit insurance to banks. Mr Self "was aware that banks were interested in export and domestic trade business", although he said that if trade credit insurance were to cover a bank as an insured, a "special acceptance" would be needed. In this context, Mr Self defined a "special acceptance" as "a request by a reinsured to allow an underlying risk or category of risks to be included within the coverage of a reinsurance treaty in circumstances where, had that request not been made and granted, the risk or risks would have been excluded from coverage by a term in the treaty." (my emphasis). 10 To the extent that there appears to be some inconsistency between this aspect of Mr Self's evidence and the common ground that I have pointed out at [5] above, it does not need to be pursued; and I accept that there may well be a credible explanation that Mr Self, if asked, could have given. 11 The reinsurance effected by the treaty was placed on HIH's behalf by a broker, MBR Reinsurance Pty Limited (MBR). The terms of the treaty are found in a slip prepared by MBR and accepted on various dates and for varying percentages by the reinsurers. (The slip was over-subscribed, and the percentages were "written down": in the case of Gen Re, from 40% to 30.5%. Nothing turns on this.) 12 The slip noted at the end, but before the acceptances, that MBR had provided the reinsurers with an "information package as supplied by HIH". Although Mr Gageler placed some reliance on the information package, nothing of present moment turns on it. 13 The slip stated the following: (1) The reinsured were the parent company of the HIH group and its operating subsidiaries including HIH (i.e., the present plaintiff). (2) The period of cover was from midnight on 31 December "in respect of Policies made or renewed during the period". Although the end date of the period was not specified, it appears to have been common ground in these proceedings that the period of the slip was the calendar year 1999. (3) The class of business reinsured was specified as "Trade Credit and Export Credit". (4) The exclusions included: · "Bonding"; · "Commercial or Residential Mortgage Insurance"; and · "Financial or Bank Guarantee Policy – written as such"; (5) The treaty was governed by Australian law. (6) The wording was "[t]o be agreed". 14 It was common ground that no further terms were negotiated, and that there was a binding contract of reinsurance on the terms expressed in the slip together with such terms (if any) as might be implied into the treaty. The trade finance agreement 15 On 29 March 1999, Suncorp entered into a document styled "Trade Finance Agreement" with Daewoo Australia Pty Limited. Suncorp's claim under the Suncorp policy, and HIH's claim under the treaty, arose out of transactions effected between Suncorp and Daewoo Australia on the terms of the trade finance agreement. Background 16 Mr Nell SC (who appeared for Gen Re) submitted that it was necessary to take into account the background to the making of the trade finance agreement. He submitted that the background was relevant to his characterisation of that agreement as in truth a financing agreement, under which Suncorp provided finance to Daewoo Australia to enable Daewoo Australia to buy goods. 17 On 2 December 1997, Suncorp offered Daewoo Australia a trade finance facility with a facility limit of the lesser of USD10,000,000.00 or AUD15,000,000.00. If the offer were accepted, the facility would enure until 31 October 1998. Suncorp required by way of security a guarantee from Daewoo Australia's parent Daewoo Corporation, and a fixed and floating charge over the assets of Daewoo Australia. The offer was accepted on 3 December 1997, on which date (among other things) Daewoo Corporation acknowledged that it would give the guarantee in question. That appears to have been done on 9 December 1997. 18 It appears that Suncorp and Daewoo Australia conducted business thereafter on the terms of the facility, including, on Suncorp's part, by issuing letters of credit at the request of Daewoo Australia. It appears further that Suncorp became somewhat disenchanted by Daewoo Australia's performance of its obligations under the facility. 19 At some stage, Daewoo Australia wished to have the fixed and floating charge released. Suncorp was prepared to do this, on conditions including that at the time of release it "also exit the relationship"; and that the charge not be released "prior to full repayment of outstandings, which is expected to occur by the end of October 1998". Notwithstanding the desire to "exit the relationship", Suncorp apparently remained prepared "to consider an application for the provision of alternate Trade facilities to the Daewoo Group, subject to the Bank's exposure being satisfactorily protected through retention of control over items funded (non-specialised), suitable Bank L/c's etc.". Suncorp communicated those views to Daewoo Australia by letter dated 3 September 1998. 20 At some stage, Suncorp investigated with another insurer the possibility of obtaining "Trade Indemnity Insurance". Ultimately, that proposal did not proceed. 21 Thereafter, Daewoo Australia sought release of the fixed and floating charge, with the continuance of trade finance facilities "on an unsecured negative pledge basis". At that point, Suncorp appears to have been unwilling to renew the facility. It advised Daewoo Australia "to seek alternative financing arrangements post 31/10". A Suncorp file note dated 1 October 1998 reflects an appreciation "that Daewoo is experiencing severe cash flow pressures and have utilised the proceeds of sale [of goods purchased utilising letters of credit issued by Suncorp] for working capital purposes or have experienced a downturn in sales and provided overly generous terms of payment to its debtors". 22 At some stage in October or early November 1998, Suncorp began to investigate a proposal somewhat similar to that which was ultimately embodied in the trade finance agreement. An essential element of the proposal was that the arrangement be structured so that: (1) Suncorp could obtain trade credit insurance in respect of amounts provided (to use a neutral word) by it to or for Daewoo Australia; and (2) the amount payable on any claim would be 100% of Suncorp's actual out-of-pocket costs notwithstanding that the policy provided for a 10% retention (or, conversely, indemnity only up to 90% of the amount of any claim). 23 Suncorp retained a broker, Zuellig Credit Insurance Brokers Limited (Zuellig) to seek to obtain suitable insurance. 24 On 5 November 1998, Suncorp advised Daewoo Australia "that facilities have been extended for fourteen (14) days pending finalisation of a suitable insurance policy to underwrite the trade finance facilities currently in place with your company". The letter noted also that "we are currently having conversations with QBE Insurance with regards to a suitable policy…" and that once that policy had been negotiated "we will provide a new Letter of Offer for the revised facility…". 25 The letter stated that "[o]nce the facility has been put in place, we would envisage that the Fixed and Floating Charge … can be released immediately". 26 While all of this was happening, Suncorp extended the term of the December 1997 facility by a month, to 30 November 1998. 27 On 24 November 1998, Zuellig wrote to Suncorp outlining a transaction structure. The letter noted that trade credit insurance could not be obtained for more than 90% of the value of the insured debt. It thus suggested a structure which included the following elements: (1) on receiving instructions from Daewoo Australia, Suncorp would order goods from a supplier; (2) the goods would be shipped and the supplier would invoice Suncorp at sight; (3) Suncorp would invoice Daewoo Australia at 180 days after shipment for the goods, fixing the price at 111% of the price charged by the supplier to Suncorp; (4) Suncorp would pay the supplier direct; and (5) if Daewoo settled Suncorp's invoice on its due date, the amount payable would be rebated back to the price actually paid by Suncorp to the supplier. 28 The price uplift was designed to ensure that if Daewoo Australia defaulted and Suncorp made a claim on the policy, indemnity at the rate of 90% of the amount invoiced by Suncorp to Daewoo Australia would provide Suncorp with recovery in full of the amount paid by it to the supplier. 29 The proposal contemplated that Suncorp would derive revenue not from the mark-up on cost price reflected in its invoices to Daewoo Australia, but from interest charged and paid "up front". 30 To jump ahead somewhat: Mr Nell suggested that this background confirmed what was in any event apparent on a consideration of the real substance of the trade finance agreement; namely that the relationship between Suncorp and Daewoo Australia was one of lender and borrower. In essence, he submitted, Suncorp continued to do what it had done under the December 1997 agreement: supply finance to Daewoo Australia to enable it to acquire goods. 31 Mr Gageler did not dispute this broad characterisation either of the relationship generally or of the arrangements established by the trade finance agreement. He submitted, however, that in dealing with the issues, it was necessary to take into account not (or not merely) some broad characterisation of the arrangements, but the legal incidents of the freely negotiated contract by which those arrangements were created and regulated. Terms of the trade finance agreement 32 The background to and purpose of the trade finance agreement were set out in the recitals: RECITALS A As part of its business, the Borrower [Daewoo Australia] wishes to acquire goods from Suppliers for the purpose of onsale to its customers. B The Borrower has requested the Bank [Suncorp] to make and afford certain trade finance accommodation to the Borrower. C The Bank has agreed to the request of the Borrower on certain terms and conditions including execution of this Agreement. 33 Clause 3 set out conditions precedent, including to the operation of the agreement at all and to drawings under it. Neither party placed any reliance on cl 3. 34 Clauses 4, 5, 6 and 7 set out how the facility would operate. They provided that: (1) Daewoo Australia might enter into contracts to buy goods from suppliers (cl 4.1); (2) every time Daewoo Australia did so, it would request the supplier to issue an invoice to Suncorp, and would request Suncorp to issue a letter of credit to the supplier for the purchase price (cl 4.3); (3) property in the goods would pass to Suncorp once Suncorp paid the supplier (cl 4.7); (4) when Suncorp received an invoice from a supplier, it would invoice Daewoo Australia for the relevant goods at the amount of 111.12% of the purchase price stated in the supplier's invoice (cl 5.1); (5) Daewoo Australia would pay each of Suncorp's invoice by its due date (cl 5.2) and if Daewoo Australia did so, it need pay only the actual price paid by Suncorp to the supplier (cl 5.5); (6) title in goods the subject of invoices from Suncorp to Daewoo Australia would pass from Suncorp to Daewoo Australia at the later of the time when Suncorp obtained title to the goods under cl 4.7 or the time when Suncorp issued its invoice to Daewoo Australia in relation to the goods (cl 5.6); (7) it was a condition precedent to the provision of facilities under the agreement that Suncorp have appropriate trade credit insurance in place, for which Daewoo Australia would pay the premium (cls 6.1 and 6.2); and (8) Daewoo Australia would pay interest to Suncorp on the amount of each amount drawn down pursuant to a letter of credit. All interest was payable in advance on or before any drawdown (cl 7.1). 35 I set out in full those clauses of the agreement that I have summarised above, together with clause 4.2 (on which Mr Nell laid some stress) 4. NATURE AND OPERATION OF FACILITY 4.1 Purchase Contracts The Borrower will enter into Purchase Contracts with Suppliers in relation to Goods. 4.2 Borrower Responsibilities The Borrower acknowledges and agrees that the Borrower will be responsible for and will satisfy itself in respect of the following matters: (a) the terms and conditions of all Purchase Contracts; (b) all matters relating to the condition, quality, fitness, safety or otherwise of the Goods; (c) shipment or transportation of the Goods to the Borrower's customers; (d) insurance with respect to the Goods generally and, without limitation, while in transit; (e) the payment of any excise import duties, customs duties or other duties, Taxes or other taxes of any nature in relation to the Goods and, without limitation, any GST payable in relation to the supply of Goods by the Borrower to its customers. 4.3 Suppliers' Invoices (a) The Borrower will request Suppliers to issue Suppliers' Invoices to the Bank for the Purchase Price denominated in an Available Currency, but provided the Purchase Price will not exceed the purchase price payable for the Goods under the relevant Purchase Contract. (b) The Borrower will request the Bank to issue Documentary Letters of Credit in favour of Suppliers for the Purchase Price (denominated in an Available Currency) of the Goods under the Suppliers' Invoices in accordance with the provisions set out later in this document. 4.7 Property in Goods The Borrower agrees that upon the Bank making payment to a Supplier under a Documentary Letter of Credit, the Bank will be beneficially entitled to the Goods in respect of which the Documentary Letter of Credit has been issued and property in those Goods will pass to the Bank. 5 BANK INVOICES 5.1 Issue (a) The Borrower and the Bank agree that the Bank will upon receipt of a Supplier's Invoice (in respect of which a Drawdown is requested) or, if acceptable to the Bank in its discretion, a copy of the Supplier's Invoice, issue a Bank Invoice to the Borrower in respect of the relevant Goods the subject of the Supplier's Invoice. (b) The Bank Invoices will be: (i) in an amount equal to 111.12% of the Purchase Price (denominated in the Relevant Available Currency) of the relevant Goods; and (ii) payable on the Payment Date requested by the Borrower in the relevant Drawdown Notice, but provided the Payment Date shall not be later than the Maximum Payment Date. 5.2 Payment of Bank Invoices In consideration of the Bank agreeing to issue Documentary Letters of Credit in accordance with this document, the Borrower undertakes and agrees to purchase the Goods referred to in the Bank Invoices from the Bank by making payments to the Bank of the amounts payable under the Bank Invoices in the Relevant Available Currency on or before the Payment Dates specified in the Bank Invoices. 5.5 Satisfaction The Bank agrees that if in respect of any Bank Invoice, the Borrower pays to the Bank the amount of the Purchase Price which was payable under the relevant Supplier's Invoice (in respect of which the Bank Invoice was issued), on or before the relevant Payment Date, the Bank will accept that amount in satisfaction of the Borrower's obligation to pay the amount of the Bank Invoice under clause 5.2. 6 INSURANCE 6.1 Bank Condition The Borrower acknowledges and agrees that as a condition precedent to the Bank agreeing to issue Documentary Letters of Credit or provide any other facilities in accordance with the provisions of this document, the Bank requires to obtain, and at all times until all Outstanding Accommodation has been paid and satisfied to the satisfaction of the Bank, maintain the Insurance in relation to the obligations and liabilities of the Borrower to make payment of the Bank Invoices. 6.2 Payment of Premiums The Borrower agrees that it will: (a) pay and continue to pay at all times during the Availability Period and until all Outstanding Accommodation has been paid and satisfied to the satisfaction of the Bank, all premiums relating to the Insurance; and (b) produce to the Bank confirmation of payment of the premiums in a form satisfactory to the Bank. 7 CALCULATION AND PAYMENT OF INTEREST 7.1 Interest on Outstanding Principal The Borrower shall pay interest on the Outstanding Principal in relation to each Documentary Letter of Credit and such interest shall be paid in advance on or before the Drawdown Date relating to the relevant Documentary Letter of Credit or on such later date as the Bank agrees to in its discretion. The Borrower will not be entitled to any refund if the Outstanding Principal is paid or satisfied prior to the Payment Date. The underwriting guidelines 36 HIH and Gen Re each relied on underwriting guidelines produced by the other. Gen Re's underwriting guidelines (more accurately, underwriting guidelines prepared by the parent corporation for the General and Cologne Group) dealt with credit insurance in section 2.2.1. HIH relied on the following: "2.2.1.1 Domestic Credit Insurance A traditional Credit insurance policy covers against the default of a domestic buyer. Protracted default is also covered in a number of countries." 37 In the HIH Group's 1998 underwriting guidelines, certain "Underwriting Exclusions" were dealt with in section 4. Section 4.1 noted that "[a]ll pure financial risks insurance is specifically excluded". Section 4.2 stated that "[m]ortgage insurance and trade credit insurance are not deemed to be financial risks". Trade credit insurance was defined as follows: "Trade credit insurance is defined as indemnification of the original policyholder up to the insured percentage for loss arising: (i) from the provision of goods and/or services on credit in the normal course of business; or (ii) where the original policyholder is a confirming house (or an institution acting in a similar capacity) in respect of obligations undertaken or contingent liability assumed by the insured and due to insolvency." The expert evidence 38 HIH and Gen Re each relied on expert evidence. It is not necessary to deal with that evidence in any detail, having regard to the way in which each party put its case in final submissions. 39 In substance, each expert (Messrs James Franklin and Jeremy Hampshire called by HIH, and Mr David Thomas called by Gen Re) accepted that at all material times the essence of trade credit insurance was that it provided protection against the risk of non-payment for goods or services supplied on credit. 40 There was a difference between the experts as to whether, in 1998 and 1999, trade credit insurance was offered to or taken out by financiers who provided financial assistance to suppliers by assuming the payment risk borne by those suppliers (for example, by factoring the supplier's trade debts or by confirming a foreign letter of credit procured by the buyer to be given to the supplier). Mr Franklin and Mr Hampshire said that they had had actual experience in Australia of trade credit insurance being given to such financiers, although each accepted that it was a relatively small part – some 5 or 10% - of the total volume of trade credit insurance. That evidence was also supported by the evidence of Mr Weate. Mr Thomas did not deny that trade credit insurance was not so provided to financiers at the relevant time. His evidence was that he had no experience or knowledge of it. 41 To the extent that it is necessary to express a view, I prefer the evidence of Messrs Franklin and Hampshire (supported by that of Mr Weate) on this point. Firstly, as I have tried to indicate, what they said was not directly controverted by Mr Thomas. Secondly, the evidence of Mr Thomas on this point was undercut to a substantial extent when he was shown a publication produced by his employer at the time, Swiss Re, which made it plain that trade credit insurance could be taken out by financiers in certain circumstances. Although that publication seems to have been produced in July 2000, there is nothing either in it or in the evidence of Mr Thomas relating to it to suggest that the extension of credit trade insurance to financiers was an entirely novel development as at July 2000. I note also, although it is not decisive, that the evidence of Mr Self to which I have referred at [9] above is at least not inconsistent with (in fact, I think, supports) the evidence of Messrs Franklin & Daw. 42 Each of Mr Franklin and Mr Hampshire emphasised that if a financier wished to take out trade credit insurance, the insured debt must be a trade-related debt – a debt arising out of the supply of goods or services on credit – and the insurer must have an insurable interest in the debt. 43 Mr Hampshire gave unchallenged evidence that in his experience (which was substantially in the international market, although he was aware of trade credit insurance practices in Australia at the relevant time) it was also well recognised internationally that trade credit insurance might be extended to financiers in certain circumstances. Mr Gageler pointed to the fact that the reinsurers under the treaty were either overseas corporations or Australian subsidiaries of overseas corporations (and, in the latter case, that the decision to scratch the slip was made at the head office of the company concerned). Thus, Mr Gageler submitted, to the extent that the question of practice was relevant, it should be considered by reference to international practice, not just Australian practice. The Suncorp policy 44 The Suncorp policy was issued on 23 March 1999. The cover provided by it extended up until 31 March 2000. The insured was named as Suncorp, and the business of Suncorp was described as "Confirming Bank". It was common ground that this description was erroneous. There is no evidence that any relevant activity of Suncorp (i.e., in relation to the trade finance agreement or its other dealings with Daewoo Australia) fell within the activities that might be carried on by a confirming bank. 45 The insuring clause reads as follows: Insuring clause 1. HIH agrees, subject to all limitations, terms, conditions and endorsements: To indemnify the "Insured" for the direct loss arising from the non-payment of any "Insured Debt" due to the "Insolvency" or "Protracted Default" of an "Insured Buyer" in the "Approved Countries". 46 Each of the apostrophised terms is defined. So far as they are relevant, the definitions are as follows: 3.6 "Insured Buyer" is any person or entity carrying on business with the "Insured" in any of the "Approved Countries" under a "Permitted Limit" or "Discretionary Limit." This however shall exclude: (i) Government Department, (ii) Public Authorities, (iii) Nationalised Undertakings, (iv) Associated and/or Subsidiary Companies of the "Insured", (v) "Permitted Limits" or "Discretionary Limit" where the limit is Nil. 3.8 "Insured" is the person or entity specified in the "Schedule" to the policy. 3.9 "Insured Debt" is an unpaid amount of debt included in "Insurable Turnover" during the "Policy Period" owing to the "Insured" by the "Insured Buyer" under the terms of payment which are within the maximum approved as specified in the "Schedule" to the policy. The "Insured Debt" in all cases cannot be greater than the "Permitted Limit" approved by HIH or justified under any specified "Discretionary Limit". 47 In turn, and either immediately or mediately, those definitions call up other definitions: 3.2 "Delivered" means the time during the "Policy Period" at which goods pass from the "Insured" into the physical control of the "Insured Buyer", or legal title to the goods has transferred from the "Insured" to the "Insured Buyer". 3.7 "Insurable Turnover" means the aggregate invoice value of goods sold and delivered by the "Insured" during the "Policy Period" to "Insured Buyers", excluding cash sales where payment is received on or before dispatch of the goods. 48 A limit endorsement forming part of the Suncorp policy including the following: (1) HIH would only be at risk in respect of Daewoo Australia as insured buyer; (2) the limit of the policy was $11,112,000.00; and (3) the limit was "subject to a valid and enforceable guarantee from Daewoo Corporation". It was common ground that such a guarantee was given. First issue: is the Suncorp policy within the scope of the treaty? 49 According to the Australian Oxford Dictionary (second edition, 2004), the primary meanings of the noun "trade" include "buying and selling" and "business conducted for profit (especially as distinct from a profession)". Thus, one might think that "Trade Credit" denoted, or at least included, credit afforded in the context of or in connection with buying and selling, or credit afforded in the course of conducting a business. That view of the phrase is consistent with the expert evidence. For example, Mr Hampshire said in paragraph 18 of his statement dated 12 June 2007 that "[t]rade credit is commonly understood within the insurance market as the granting of credit by, usually (but not invariably), a supplier to a buyer. Trade credit can also be granted by a bank or other type of lender to a buyer of goods or services." Trade credit insurance, Mr Hampshire said, was insurance against the risk of non-payment when credit was so extended. 50 Mr Thomas appeared to accept this as the general concept of trade credit (see paragraph F2 of his statement dated 9 August 2007) although he drew (in my view correctly) a distinction between "credit" on the one hand and "trade credit" on the other. In addition, as I have noted, Mr Thomas pointed out that not all credit provided by a financier for the acquisition of goods or services would be trade credit. I accept that point also, although I do not think that Mr Thomas sought to do anything other than suggest that some credit provided by a bank in connection with the supply of goods or services might not be trade credit. 51 There is no doubt that the Suncorp policy is capable of being a policy of trade credit insurance. That is what it is called. When the insuring clause is read in conjunction with the definitions of the defined terms contained within it, it is clear that the policy may afford indemnity to the insured against loss arising from the non-payment of a debt owing for goods or services supplied on credit. 52 The real point in relation to the first issue was not the general nature of the Suncorp policy but whether, having regard to the business relationship between Suncorp and Daewoo Australia as documented in the trade finance agreement and carried on pursuant (or purportedly pursuant) to that agreement, Suncorp in fact provided trade credit to Daewoo Australia. Gen Re's case 53 Mr Nell submitted that there were four principal reasons why Suncorp did not provide trade credit to Daewoo Australia: (1) Suncorp was not a dealer in goods of the kind acquired by Daewoo Australia pursuant to the trade finance agreement, and did not carry on any trade either in relation to the supply of those goods or by way of supply of goods generally; (2) when the acts done by Suncorp and Daewoo Australia in performance of the trade finance agreement were examined, it was clear that Suncorp did not sell the goods in question to Daewoo Australia; (3) alternatively, Suncorp did not sell goods to Daewoo Australia on credit; the substance and effect of the arrangements documented by the trade finance agreement was that Suncorp provided finance to Daewoo Australia to enable it to acquire goods from suppliers; and (4) Suncorp did not acquire title in the goods in question, and did not give title in those goods to Daewoo Australia. 54 It will be seen that the second, third and fourth points overlap. Further, the fourth point is really a restatement of the second issue. 55 I turn to the first of those submissions. First question: business of supplying the particular good or services 56 Although there was no direct evidence on the point, I am prepared to accept that the ordinary business activities of Suncorp do not (and in 1999 did not) include the purchase and on-sale of goods such as monoethylene glycol, pure lead ingots or prime hot rolled steel billets. 57 Mr Nell submitted that trade credit insurance was in substance the insurance of trade receivables. This, he submitted, indicated that the receivables must be those arising, or payable, in the course of trade. He submitted further that in this context "trade" indicated a business of trading in goods or services of the kind in question, and not merely a one-off or isolated transaction. 58 In this context, Mr Nell pointed out that trade credit insurance is generally written over a trader's book of receivables. He did however accept that, as the experts had said, trade credit insurance could cover a single customer of the trader; and that, as also appears from the expert evidence, there are other possibilities (of trade credit insurance extending to less than the entire book of receivables) as well. 59 Mr Gageler submitted that there was no reason in principle, and no reason found in the expert evidence, why trade credit insurance should be available only to traders. He submitted that it was sufficient if a receivable became owing to the insured in the course of conduct of the insured's business, whether or not that business ordinarily comprehended the supply of the goods and services in question. In this case, Mr Gageler submitted, Suncorp was acting in the normal course of its business – the business of providing finance – and the debts in question became owed to it through those business activities. 60 None of the experts supported in terms the proposition that trade credit insurance was available only for receivables in respect of the supply of goods or services by a person whose ordinary business, or trade, was the supply of those goods or services. Nor was such a proposition put to any of the experts (or, for that matter, to Mr Weate). Indeed, I think, the evidence of Mr Thomas suggests that trade credit insurance may not be so limited. He accepted that trade credit insurance was defined in the Swiss Re publication to which I have referred at [41] above: insurance providing "companies with coverage for outstanding commercial receivables, protecting against risk of buyer default or insolvency". The phrase "outstanding commercial receivables" is apt to denote the debts owed by Daewoo Australia to Suncorp in respect of which HIH paid Suncorp's claim under the Suncorp policy. 61 Thus, I conclude, there is no necessary restriction in the phrase "trade credit insurance" limiting the availability of such insurance in the manner suggested by Mr Nell. I do accept however that it is necessary that the insured debts arise in the course of a business. In this case, I think, that qualification is met (notwithstanding the somewhat unusual way in which the debts arose) substantially for the reasons given by Mr Gageler (see [59] above). Second question: did Suncorp sell anything to Daewoo Australia 62 The trade finance agreement is drafted in such a way as to suggest that, in respect of any goods ordered by Daewoo Australia from a supplier, those goods will be invoiced by the supplier to Suncorp (cl 4.3) and invoiced and sold by Suncorp to Daewoo Australia (cls 5.1, 5.2). Thus, on the face of the trade finance agreement, the parties did intend that Suncorp would sell goods to Daewoo Australia. 63 Mr Nell submitted however that when one examined the trade finance agreement in context, and looked at the detail of the transactions that were effected pursuant to it, there was no sale. 64 The starting point for Mr Nell's submission was that the substance of the relationship between Suncorp and Daewoo Australia created by the trade finance agreement was one whereby Suncorp provided finance to Daewoo Australia for the purchase of goods. Mr Gageler did not cavil with that proposition. Nor could he. The document is entitled "Trade Finance Agreement". The recitals make it clear that Suncorp proposes to afford "certain trade finance accommodation" to Daewoo Australia to enable it to acquire goods and on-sell them. Mr Gageler submitted, however, that the question required attention to be given not just to the "substance of the relationship" but to the rights and obligations conferred and imposed by the agreement in which the parties chose to document their relationship. No sham 65 Mr Nell expressly refrained from submitting that the trade finance agreement was a sham: an agreement not intended to operate according to its terms, but as a cloak for an agreement of a different kind and with different incidents. See Perpetual Trustee Co (Ltd) v Bligh (1940) 41 SR (NSW) 33; Esanda Ltd v Burgess [1984] 2 NSWLR 139. I therefore proceed on the basis that the parties intended the trade finance agreement to define the incidents of their relationship, and that they intended to perform it according to its terms. History of the transactions 66 It is necessary (on Mr Nell's submission) to trace the history of the transactions effected pursuant to the trade finance agreement. 67 There is no evidence of the arrangements made between Daewoo Australia and the supplier of the goods (in each case, Daewoo Hong Kong Limited) whereby the goods were ordered. Presumably, Daewoo Australia entered into "Purchase Contracts" with Daewoo Hong Kong as contemplated by cl 4.1 of the trade finance agreement. 68 On (I think) 15 April 1999, Daewoo Australia applied to Suncorp for the issue of three letters of credit. Each application gave details of the applicant, the beneficiary and the goods; and specified that the letter of credit was payable at sight. Each described the documents required as follows: " Documents Required purporting to evidence shipment/s of above goods – unless stipulated full sets of bills of lading are required and other documents in duplicate. 3. Commercial Invoice Marine Bill of Lading, onboard, to order shipper, blank endorsed and marked freight pre-paid. Other documents Charter Party B/L Acceptable. C/O is not required. Beneficiary's statement that the original full set of B/L have been sent to the applicant directly by DHL. T/T reimbursement is allowed." 69 The applications specified "other documents" as follows: "(1) One photocopy of clean bill of lading made out to the order marked freight pre-paid and notify: Kohap Ltd. Seoul, Korea". 70 On 15 April 1999, Daewoo Hong Kong provided three invoices to Suncorp: presumably, as the "Commercial Invoice" referred to in the list of documents required. The invoices described the goods and stated that they were shipped in good order and condition on a particular vessel (with details given) "on account & risk of Messrs Suncorp-Metway Limited…". Each stated that the goods had been shipped against the relevant letter of credit provided by Suncorp Metway. 71 The letters of credit were established on 16 April 1999. Each conformed to the terms of the application, including that its tenor was "at sight". Each was addressed to Daewoo Hong Kong's bank. It repeated the description of documents required as set out in the application, and stated that "on receipt of documents at our counters conforming to the terms and conditions of the letter of credit, we will remit funds to your nominated depository." 72 The beneficiary (Daewoo Hong Kong) was thereafter notified, through its bank, that Suncorp had "opened our irrevocable documentary credit …", giving details. 73 While all of this was happening, on 20 or 21 April 1999 Daewoo Australia invoiced the entity (Daewoo UK Ltd) to whom it was proposing to on-sell the goods. The invoiced price was the same as the price payable by Suncorp to Daewoo Hong Kong for the price of the goods. (It appears that the object of the exercise was not to implement some transfer pricing scheme but to take advantage, for transactions within the Daewoo Group, of the availability of credit to Daewoo Australia. The evidence suggests that the financial resources of the Daewoo Group may have been under considerable strain at this time.) 74 On 22 April 1999, Suncorp Metway invoiced Daewoo Australia for the goods. The invoiced amount was 111.12% of the price payable by Suncorp to Daewoo Hong Kong (see cl 5.1(b) of the trade finance agreement). 75 Also on 22 April 1999, and once the shipping documents had become available, Suncorp sent "import schedules" to Daewoo Australia. The import schedules noted discrepancies between the documents presented and the documents called for by the application for the issue of the relevant letter of credit and specified in that letter of credit. It does not appear that the documents presented included any original bill of lading. Daewoo Australia accepted the discrepancies the same day, thereby (as I understand it) authorising Suncorp Metway to make payment under the letters of credit. 76 Suncorp Metway appears to have made payments to Daewoo Hong Kong under the letters of credit on 22 April 1999: presumably, after receiving Daewoo Australia's acceptance of the discrepant documents. 77 Again on 22 April 1999, Daewoo Australia sent further invoices to Daewoo UK. They were not invoices for the goods but invoices in respect of a lending transaction. They described the lender as Daewoo Australia and the borrower as Daewoo UK. The term of the loan was 155 days. The principal of the loan corresponded to the purchase price of the goods. Interest was calculated at 7% for the term of the loan. A handling fee at 0.30% was added. 78 Mr Nell submitted that when the facts were examined, there was never a sale by Suncorp to Daewoo Australia. In truth, Mr Nell submitted, what had happened was that the goods were sold by Daewoo Hong Kong to Daewoo UK on credit, financed by Daewoo Australia with the assistance of Suncorp. Alternatively, Mr Nell submitted, the substance of the transaction was that the goods were sold by Daewoo Hong Kong to Daewoo Australia (financed by Suncorp) and on-sold by Daewoo Australia to Daewoo UK. Analysis 79 The starting point of the analysis seems to be the shipment by Daewoo Hong Kong. The letter of credit applications suggested that the goods would be shipped under a marine (or ocean) bill of lading to the order of Daewoo Hong Kong as shipper. Mr Nell accepted that Daewoo Hong Kong was thereby reserving title in the shipped goods. 80 The bills of lading did not come into the possession of Suncorp. Thus, Suncorp never had the bills of lading as indicia of title. But it did have the invoices from Daewoo Hong Kong, the owner of the goods who had reserved its title to them. Those invoices stated that the goods were shipped on the account and risk of Suncorp. It is open to infer that by those words, and in the overall factual context, Daewoo Hong Kong was intending to transfer title in the goods to Suncorp upon payment. 81 It is clear that the existence of an invoice, coupled with payment of the invoiced amount, may lead to an inference of a contract between the payer and the payee for the sale of the goods or services the subject of the invoices. See Gibbs CJ (with whom Mason, Wilson, Deane and Dawson JJ agreed) in Associated Midland Corporation Ltd v Bank of New South Wales (1984) 51 ALR 641 at 642. 82 The question of implication (or inference) of a contract on the facts of a particular case was discussed by the Full Court of the Federal Court of Australia in Sonenco (No.87) Pty Ltd v Commissioner of Taxation (1992) 38 FCR 555 at 595 – 596. Their Honours referred with approval to a statement in the Fourth Edition of Halsbury's Laws of England (volume 41, para 643, note 5) that "[a] contract of sale may be implied from conduct as an inference of fact, that is to say, when the parties really intend a sale, but do not express it in words… . A contract of sale may also be implied from conduct by inference of law…". 83 In this case, it seems to me, it is open to infer as a matter of fact that there were contracts of sale between Daewoo Hong Kong and Suncorp in respect of the goods the subject of Daewoo Hong Kong's commercial invoices addressed to Suncorp Australia. 84 Thus, looking at those commercial invoices and the payment of the amounts invoiced standing alone, I would be prepared to conclude that there were contracts for sale of the goods described in the commercial invoices. 85 Do the surrounding circumstances negate that conclusion? Mr Nell submitted that they did. One of the matters on which he relied was the documents referred to at [77] above. Those invoices do indicate that the Daewoo group planned to finance its intra-group transactions using Daewoo Australia as a financier because it had sources of finance available. Mr Nell submitted that the inference from these documents was that the whole transaction was in substance a financing arrangement. I am prepared to accept that characterisation. 86 It seems to me that if the intention of the Daewoo group were to finance its activities in the way I have outlined, then one could infer that the group would be aware of the way in which that financing would be effected. Thus, it might be possible to infer that companies within the group knew – at least in outline, or substance - of the arrangements between Suncorp and Daewoo Australia documented in the trade finance agreement, and intended that those arrangements should have effect. The availability of that inference is supported by the fact that Daewoo Corporation (the parent corporation of the group) was asked to confirm, and did confirm, that its guarantee of the obligations of Daewoo Australia extended to obligations undertaken or to be undertaken by Daewoo Australia pursuant to the trade finance agreement. 87 In my view, this consideration does not detract from, but rather supports, the inference that is available from the rendering and payment from the commercial invoices addressed by Daewoo Hong Kong to Suncorp. 88 Thus, so far, I think that the circumstances of this case do give rise to an inference that there were contracts of sale between Daewoo Hong Kong as seller and Suncorp as buyer. "Scintilla temporis" 89 The trade finance agreement makes it clear that the intention of Suncorp and Daewoo Australia was that, in respect of goods ordered by Daewoo Australia from a supplier, Suncorp would acquire title in those goods upon payment to the supplier (cl 4.7) and would give that title to Daewoo Australia at the later of the time of that payment or the time of issuing the relevant Bank Invoice (cl 5.6). Suncorp paid under the letters of credit on 22 April 1999, and issued its Bank Invoices to Daewoo Australia on the same date. Mr Nell submitted that, in those circumstances, if title vested at all in Suncorp did so only momentarily: as he put it, for a "scintilla temporis". Mr Nell submitted that any such momentary vesting of title should be disregarded. He relied on the decision of Gzell J in Bluebottle UK Ltd v Deputy Commissioner of Taxation (2006) 233 ALR 747 and the decisions of the House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56 and Ingram v Inland Revenue Commissioners [1999] 1 All ER 297. 90 I do not regard the decision of Gzell J in Bluebottle as providing any guidance in the present case. The question for his Honour's decision was whether a shareholder in a company, having assigned to third parties its future rights (if any) to receive dividends, ever held property to which s255 of the Income Tax Assessment Act 1936 (Cth) could attach. His Honour held that s255 could not attach, because there was no instant in time – no "scintilla temporis" – when the shareholder had a legal right to the dividend that was not encumbered by the equity arising from the assignment. (I note in passing that an appeal from the decision of Gzell J was allowed: Deputy Commissioner of Taxation v Bluebottle UK Ltd (2006) 68 NSWLR 558.) 91 Nor do I regard the decisions of the House of Lords as having particular relevance. In each case, their Lordships considered the conveyancing theory that, for a moment in time – a "scintilla temporis" – a purchaser of land who has agreed to encumber it (by lease, mortgage or whatever) holds the legal title free of the obligation to complete the subsequent transaction. In each case, their Lordships dismissed that theory as artificial. For example, as Lord Oliver of Aylmerton pointed out in Abbey at 92, "in the vast majority of cases, the acquisition of the legal estate and the charge are not only precisely simultaneous but indissolubly bound together. The acquisition of the legal estate is entirely dependant upon the provision of funds which have been provided before the conveyance can take effect and which are provided only against an agreement that the estate will be charged to secure them." In Ingram, Lord Hoffman said at 303 that "I do not think that a theory based on the notion of a scintilla temporis can have a very powerful grasp on reality", referring to what Lord Oliver had said in Abbey. 92 Their Lordships' reasoning does not however suggest that the subsequent encumbrancee – lessee, mortgagee or whatever – does not acquire its title from the proprietor. It suggests, at most, that there was no point in time at which the proprietor's title was free of the obligation to create or give effect to the encumbrance. Indeed, their Lordships' reasoning seems to me to support the proposition that it is necessary for the proprietor to have title, in order to pass the requisite estate or interest to the encumbrancee. In this case, assuming (against Mr Nell's submissions) that it was intended that Daewoo Australia should have title to the goods, and that it did not get title from Daewoo Hong Kong, it was necessary that Suncorp should acquire title so that it could give title to Daewoo Australia. Countervailing analysis? 93 In considering whether the inference available from the circumstances to which I have referred and the terms of the trade finance agreement should be accepted, it is also useful to inquire whether there was any commercial or other reason why the Daewoo Group might have intended the transaction to proceed in a way other than that indicated by that inference. I have said already (at [86]) that it might be that one could conclude that the group did intend the arrangements to have effect according to their terms. Is there available any countervailing analysis? 94 Presumably, in the circumstances of this case, the basic intention of the Daewoo Group was that goods should be supplied from Daewoo Hong Kong to Daewoo UK, and that title to the goods should vest in Daewoo UK. The Daewoo Group appears to have appreciated that this ultimate intention could be facilitated, or effected, through Daewoo Australia because it had available financial resources. There is no reason, from the perspective of the Daewoo Group, why achievement of the basic objective – sale of the goods, and transfer of title, from one company to the other – should not be effected through a series of transactions (involving a chain of title) rather than one overarching transaction. From the perspective of the Daewoo Group, if the achievement of that basic objective involved the taking of a number of steps, in the course of which title to the goods was passed from one entity to another, there is no reason to impute to the individual members of the Daewoo Group any intention other than that those steps would be carried out and that title would pass accordingly. 95 Thus, this is not a case where achievement of the basic objective of the participants, viewed in context, requires an analysis that does not give recognition and effect to the legal incidents whereby the parties to a particular transaction chose to define their parts in the process. 96 In this context, it is necessary to bear in mind that "transactions…[that are] extraordinary, even artificial, in commercial terms" are not necessarily "shams", and will not be shams if the parties "genuinely intended to enter into [those] transactions": Sonenco at 592, approved by the majority (Gaudron, McHugh, Gummow and Hayne JJ) in Associated Alloys Pty Limited v ACN 001 452 106 Pty Limited (In Liquidation) (2000) 202 CLR 588 at 606 [35]. As the High Court pointed out, if there is no sham then "[i]t must follow that the terms of the invoices embodied the intentions of the parties." 97 In my view, neither the circumstances leading up to the making of the trade finance agreement nor the way in which it was performed (nor, for that matter, those matters considered together) undermine the available inference to which I have referred at [88] above. There is no reason in those circumstances to deprive, of their proper legal effect, the contractual provisions by which the parties chose to organise their relationship or the steps taken by them in pursuance of those contractual provisions. Other considerations 98 Mr Nell submitted that if title passed to Daewoo Australia at all, it passed from Daewoo Hong Kong, not from Suncorp. He relied on the fact that it was Daewoo Australia that placed the orders for the goods; in the terms of cl 4.1 of the trade finance agreement, Daewoo Australia entered into "Purchase Contracts" for those goods. (The expression "Purchase Contracts" was defined, perhaps not surprisingly, to mean all purchase contracts made by Daewoo Australia with Suppliers for the purchase of goods.) Thus, Mr Nell submitted, any transfer of title from Daewoo Hong Kong would have been to Daewoo Australia, not to Suncorp. 99 I do not think that this analysis is correct. Clause 4.1 must be looked at in the context of all relevant provisions of the trade finance agreement. To my mind, those provisions make it clear that once Suncorp accepted an application to establish a letter of credit in respect of any particular purchase, it became the purchaser of those goods. There are a number of legal mechanisms that might give effect to that result: including agency, trust and novation. If it were necessary to express a concluded view, I would prefer the analysis of novation. On that analysis, once Suncorp agreed to establish an unconditional letter of credit in respect of goods, and once the supplier of those goods agreed to invoice Suncorp for them, whatever contract may have existed between the supplier and Daewoo Australia was discharged in consideration of the making of a fresh contract between the supplier and Suncorp. Where the transactions are intra-group (as all three were) that analysis seems to me to be supported by the considerations to which I have referred at [86] and [94] above. 100 Mr Nell relied on the terms of the trade finance agreement whereby (assuming that Daewoo Australia would perform, or had performed, its obligations) Suncorp's profit would have been derived not from a mark-up on the purchase price but from the interest charged to Daewoo (cls 5.1, 5.5 and 7.1). He submitted that these provisions were consistent with the existence of a financing transaction, and inconsistent with the existence of a contract for sale. Further, Mr Nell relied on the obvious purpose underlying those provisions: namely, to ensure that Suncorp would recover full indemnity from HIH if Daewoo Australia failed to pay (including, in this context, the condition precedent as to insurance and the obligation on Daewoo to pay the premium for that insurance – cls 6.1, 6.2). 101 I accept that those matters, considered individually and together, are unusual features of an agreement for sale of goods. I do not accept that they require the Court to deny that the parties intended effect to be given to the other provisions of their agreement: in particular, those provisions relating to the sale and purchase of goods and the passing of title. As always, it is necessary to bear in mind not only the objectives that the parties sought to achieve but also the legal steps that they considered to be necessary for the achievement of those objectives. The intention to achieve the objectives should not be taken to override, or negate, the intention to be bound by the legal steps documented in their written contract unless those steps viewed objectively are inconsistent with the achievement of the objectives. For the reasons that I have given, they are not. 102 I have not considered all of the matters raised by Mr Nell: for example, his reliance on cl 4.2 of the trade finance agreement (whereby, in effect, it was Daewoo Australia as buyer rather than Suncorp as seller that undertook responsibility for, among other things, "all matters relating to the condition, quality, fitness safety or otherwise of the Goods". It is sufficient to say that I have taken into account the entirety of the relevant contractual obligations and the entirety of the evidence relating to their performance in deciding, as I do, that: (1) There were agreements for sale, on the terms of the trade finance agreement, between Suncorp as seller and Daewoo as buyer in respect of the three shipments in question; and (2) In each case, title to those goods passed from Daewoo Hong Kong to Suncorp and from Suncorp to Daewoo Australia. Third question: sale on credit? 103 Once it is accepted (as I have done) that the Court should recognise the mechanism chosen by the parties to achieve their commercial objectives, there is no remaining reason to deny recognition to the individual components of that mechanism. It may be accepted that Daewoo Hong Kong did not sell on credit. Mr Gageler did not argue otherwise. But it does not follow that Suncorp too did not sell on credit. 104 Clause 5.2 of the trade finance agreement recognises that the Bank Invoices given by Suncorp to Daewoo Australia might require payment at some time in the future (and this is reflected in the form of those invoices). Likewise, cl 5.5 (providing for a rebate for the price payable under the Bank Invoices if payment be made on or before the relevant Payment Date) recognises this; as does cl 7.1 (dealing with interest). 105 I have concluded that there were sales by Suncorp to Daewoo Australia. It is clear from the terms of Suncorp's Bank Invoices that those sales were on terms that payment for the goods sold would be made in the future, although title would pass, at the latest, on the delivery of those invoices. In those circumstances, the argument that there was no sale on credit requires for its success that the terms of the trade finance agreement, and the terms of the individual invoices, be disregarded. For the reasons that I have given in considering the previous question, I do not think that the terms of the trade finance agreement should be disregarded. Nor do I think that the terms of the invoices should be disregarded: essentially, for the same reasons. Fourth question: did Suncorp acquire and transfer title? 106 It follows from what I have said in relation to the second and third questions that Suncorp did acquire title to the goods from Daewoo Hong Kong, and did transfer that title to Daewoo Australia (in accordance with, respectively, cls 4.7 and 5.6 of the Trade Finance Agreement). Second issue: HIH's obligation to indemnify Suncorp 107 As it was argued, the answer to this question depended on whether each of the debts owed by Daewoo Australia to Suncorp was an "Insured Debt" for the purposes of the Suncorp policy. That in turn depended on whether the goods in question had been "delivered" for the purposes of that policy. 108 The concept of delivery, as it was defined in the policy, comprehended either actual transfer of possession of the goods or transfer of legal title to the goods. In this case, it being common ground that the goods never passed into the "physical control" of Daewoo Australia, the answer to the question turns on transfer of legal title. 109 For the reasons I have given in considering the first issue, I think that Suncorp did give title to the goods to Daewoo Australia. It follows that the goods in question were not only sold but also relevantly "delivered" by Suncorp to Daewoo Australia, so that the invoice price of the goods forms part of the relevant "Insurable Turnover" and each of the debts owed is an "Insured Debt". Interest 110 HIH claimed interest from April 2000. The parties' submissions did not address this. 111 HIH made a claim (or "cash call") on the treaty on 13 April 2000. The claim was amended on 17 April 2000 and again, it appears, on 26 October 2000. 112 On the evidence, all reinsurers apart from Gen Re and a Lloyds syndicate had paid, or agreed to pay, by 2 November 2000. There is no explanation of the reason why the Lloyds syndicate (which had taken 8% of the reinsured business) had declined to pay, and it was not submitted that the position of this syndicate was in any way relevant. 113 It is apparent that, between April and November 2000, Gen Re took a number of steps to investigate the claim, and that it applied its mind to the merits of the claim. 114 In those circumstances, although the parties have not put submissions on this aspect of the case, my tentative view is that interest should run on the amount of the claim from 1 November 2000, being a date which, on the evidence, would appear to have allowed a reasonable time for Gen Re to have investigated the claim. 115 There having been no evidence as to an appropriate rate of interest, interest should run at the rate from time to time applicable in accordance with Schedule 5 to the Uniform Civil Procedure Rules. Conclusion and orders 116 Each of the issues must be answered "yes". It follows that HIH succeeds. 117 I make the following orders: (1) Direct entry of judgment for the plaintiff in the sum of $2,359,813.00 together with interest as agreed or assessed. (2) Subject to order (3), order the defendant to pay the plaintiff's costs. (3) Direct any party seeking to vary or discharge order (2) to notify the other party thereof in writing within 14 days of today's date; any such notification to set out both the alternative orders sought and in brief the reasons why those orders are sought; a copy of any such notification to be given to my Associate. (4) Order that the exhibits remain with the file for 28 days and that they be dealt with thereafter in accordance with the rules. (5) Reserve liberty to apply in relation to the assessment of interest and costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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