Supreme Court New South Wales Medium Neutral Citation: The Ocean Marine Insurance Company Limited v CSR Limited [2012] NSWSC 1229 Hearing dates: 27 August 2012; 5 September 2012 Decision date: 12 October 2012 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: The proceedings are dismissed with costs Catchwords: CONFLICT OF LAWS - choice of law - conflict between English law and Australian law - lex causae - assignment of chose in action - voluntary and involuntary assignment - lex situs - lex loci actus CONFLICT OF LAWS - foreign judgment - conditions for recognition of foreign judgment CONTRACTS - construction - insurance Legislation Cited: Financial Services and Markets Act 2000 (UK) Foreign Judgments Act 1991 (Cth) General Insurance Reform Act 2001 (Cth) Insurance Act 1973 (Cth) Cases Cited: Adams v Cape Industries Plc [1990] Ch 433 AssetInsure Pty Ltd v New Cap Reinsurance Corp Ltd (2006) 225 CLR 331 Application of XL Re Europe [2004] FCA 974 Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) [2004] HCA 4; (2004) 221 CLR 178 Castrique v Imrie (1870) LR 4 HL 414 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 In the matter of Idoport Pty Ltd [2012] NSWSC 524 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 Jabbour v Custodian of Absentee's Property of State of Israel [1954] 1 ER 145 Newcom Holdings Pty Ltd v Funge Systems Inc [2006] SASC 284 Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] QB 825 Re Queensland Mercantile & Agency Co Limited [1891] 1 Ch 536 Royal Trust Co v Attorney-General (Alberta) [1930] AC 144 State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549 Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 Workers Compensation Board of Qld v Technical Products Pty Ltd (1988) 165 CLR 642 Texts Cited: Davies, Bell and Brereton, Nygh's Conflict of Laws in Australia, 8th ed (2010) Category: Principal judgment Parties: The Ocean Marine Insurance Company Limited (first plaintiff) Aviva Insurance Limited (second plaintiff) CSR Limited (defendant) Representation: Counsel: R R I Harper SC with T Bors (plaintiffs) J C Sheahan SC with D F C Thomas (defendant) Solicitors: Curwoods Lawyers (plaintiffs) Freehills (defendant) File Number(s): SC 2009/298728 Publication restriction: Nil Judgment Introduction 1The defendant, CSR Limited, and various insurers described as "the NZI Group" entered a deed on 3 March 1995 ("the Deed"). The plaintiffs are Ocean Marine Insurance Company Limited and Aviva Insurance Limited. Aviva was, but Ocean Marine was not, a party to the Deed. 2In 2004 and 2005, the High Court of Justice of England and Wales ("the UK High Court") made orders ("the 2004/2005 Orders") pursuant to the Financial Services and Markets Act 2000 (UK) ("the UK Act"). The 2004/2005 Orders gave effect to a scheme to transfer the general insurance business of various insurers associated with the NZI Group (including Aviva) to Ocean Marine. 3Three questions arise in these proceedings. 4The first question is whether Ocean Marine is entitled to sue CSR on the Deed, by operation of the 2004/2005 Orders made by the UK High Court. 5The second question is whether, on the proper construction of the Deed, Aviva and Ocean Marine are entitled to indemnity from CSR in relation to payments made by Aviva and certain corporate predecessors of Ocean Marine. 6The third question is whether, assuming the answers to each of the preceding questions is "yes", Aviva and Ocean Marine have established an entitlement to indemnity in the amount claimed. Decision 7In my opinion, for the reasons that follow, the answer to each of these questions is "no". 8It follows that the plaintiffs' claims fail. Background 9Aviva and Ocean Marine are insurance companies domiciled in the United Kingdom. 10CSR is an Australian company formerly involved in, relevantly, the mining, manufacture and sale of asbestos products. 11From about 1943 until about 1966, a subsidiary of CSR operated an asbestos mine at Wittenoom, Western Australia. During the same period, CSR sold asbestos to various entities around the world. Pre 1978 insurance policies and related litigation 12From 1955 to November 1978, CSR was insured under a number of insurance policies issued by the NZI Group. 13The insurers within the NZI Group included: - (a)General Accident Fire & Life Assurance Corporation Plc. That company later changed its name to CGU Insurance Plc and then to Aviva; (b)General Accident Reinsurance Company Limited ("GARC"); and (c)Scottish Insurance Corporation Limited ("SIC"). 14Between 1992 and 1995, CSR (and a subsidiary, Midalco Pty Ltd) were involved in litigation with various insurers in the NZI Group, in this Court and in the Superior Court of New Jersey. The litigation concerned the extent of coverage provided under insurance policies issued by the NZI Group to CSR in the period prior to November 1978. 15On 3 March 1995, CSR entered into the Deed to settle the litigation. 16The Deed required the NZI Group to pay AUD$100 million to CSR in return for the releases and other obligations, including indemnities, of CSR (and Midalco) under the Deed. 17The indemnities given by CSR were set out in clause 4.4.1 of the Deed: - "4.4.1 CSR as a separate and independent obligation indemnifies and agrees to defend and keep indemnified the NZI Group for: (a) All claims against the NZI Group by CSR or Midalco in the Insurance Coverage Litigation; and (b) All claims against the NZI Group by CSR or Midalco or any other member of the CSR Group for any indemnity or other relief under any of the Policies (whether in respect of Asbestos Related Claims or any other Claims), or for any Extra Contractual Obligations; and (c) All claims against the NZI Group by any person claiming or purporting to claim under or through the Policies (including any person claiming to be a beneficiary under the Policies or claiming a statutory or other right to directly claim against or sue the NZE Group under or through the Policies) or because a person asserts an Asbestos Related Claim against the NZI Group upon the basis that the NZI Group is or was an insurer or indemnifier of the CSR Group (including any person claiming a statutory or other right to directly sue the NZI Group); and (d) All claims against the NZI Group or any person in respect of an Asbestos Related Claim (other than all Claims under policies of insurance referred to in clause 4.8.4) arising out of or related to the Wittenoom Operation; and (e) All obligations of the NZI Group to the CSR Group under the Policies, and (f) The Costs of the CSR Group (but only those relating to the subject matter of clauses 4.4.1 (a)-(e) above); and (g) The Costs of the NZI Group." 18The particular indemnity by which Ocean Marine seeks recovery in these proceedings is that in clause 4.4.1(d). Post 1978 insurance policies and related litigation 19In November 1978, CSR adopted a reinsurance regime underwritten by Insurance Company of North America Australia Limited. This company subsequently became known as ACE Insurance Limited. 20As it happened, in four successive periods between 1979 and 1985, Aviva, GARC and SIC reinsured ACE under separate reinsurance polices. 21The Aviva reinsurance policies were issued for the four year period 20 September 1979 to 30 September 1983. The GARC reinsurance policy was issued for the period 30 September 1983 to 30 September 1984. The SIC reinsurance policy was issued for the period 30 September 1984 to 30 October 1985. 22There is no evidence to suggest, and Ocean Marine and Aviva do not allege, that CSR was aware of these reinsurance relationships. It appears to be a coincidence that Aviva, GARC and SIC were members of the NZI Group in the period up to November 1978, and thus a party to the Deed, and also reinsurers of ACE in the years 1979 to 1985. 23Between 1995 and 2006, CSR was involved in litigation in the United States against, inter alia, ACE. The litigation concerned the coverage provided under the post 1978 insurance policies issued by ACE to CSR. 24The litigation was settled pursuant to a "Confidential Settlement Agreement and Complete Policy Release" dated 30 November 2006. The settlement required ACE to pay some AUD$120 million to CSR in return for a global release. 25ACE paid that sum to CSR on 20 December 2006. Reinsurance payments made to ACE 26On or about 26 February 2007 ACE made claims on its reinsurance polices in respect of the money it had paid pursuant to the settlement with CSR. The reinsurance policies included those issued by Aviva, GARC and SIC. 27The following payments were made in respect of the reinsurance policies issued by Aviva, GARC and SIC: - (a)Aviva made payments to ACE totalling $1,527,373.48; (b)The UK High Court made the 2004/2005 Orders pursuant to the UK Act giving effect to a scheme to transfer the general insurance business of, amongst other companies, GARC, and SIC, to Ocean Marine. Ocean Marine made payments to ACE in respect of the GARC and SIC reinsurance policies in the sums of $323,466.93 and $89,635.54 respectively. Claim by Aviva and Ocean Marine under the Deed 28On 2 November 2007, Aviva and Ocean Marine demanded that CSR indemnify them, pursuant to clause 4.4.1(d) of the Deed, for the reinsurance payments made to ACE. 29By Summons filed on 1 December 2009, Aviva and Ocean Marine commenced these proceedings. Transfer of Aviva's insurance business to Ocean Marine 30On 10 October 2011, the UK High Court made orders pursuant to the UK Act transferring what was described in the orders as the "LM Assets" and "LM Business" of Aviva to Ocean Marine ("the 2011 Orders"). "LM" stands for London Market. 31Thereafter, on 31 January 2012, Ocean Marine filed an Amended Commercial List Summons and List Statement which removed Aviva as a plaintiff and which maintained that Ocean Marine, alone, was entitled to the declarations and other relief sought. 32I heard these proceedings on 27 August 2012. 33The hearing proceeded upon the basis that the 2011 Orders were effective, as a matter of English law, to transfer to Ocean Marine such rights as Aviva had against CSR under clause 4.4.1(d) of the Deed. Ocean Marine contended, and CSR disputed, that the 2011 Orders were effective to transfer those rights under New South Wales law. 34However, Ocean Marine adduced no evidence to show whether such rights fell within the definition of "LM Assets" or "LM Business" for the purposes of the 2011 Orders. 35On 31 August 2012, my Associate received a letter from Ocean Marine's solicitors inviting the Court, with the consent of CSR, to "direct" that the amendments made in Ocean Marine's Amended Commercial List Summons and List Statement of 31 January 2012 be "disallowed", with the intent that Ocean Marine (and Aviva) now propound the case set out in the Commercial List Summons and List Statement originally filed. 36I did not consider this the appropriate way to proceed. I caused the matter to be listed for directions on 5 September 2012 and, on that date, with the consent of CSR, gave Ocean Marine leave to file a Second Amended Commercial List Summons and List Statement. I also directed that further submissions be filed dealing with the implications of this amendment. 37The effect of the Second Further Amended Commercial List Summons and List Statement is to restore Aviva as a plaintiff in the proceedings and reinstate the case propounded when these proceedings were commenced; namely a claim by Aviva to an entitlement to enforce the indemnities in clause 4.4.1(d) of the Deed by reason of it being a party to the Deed and a claim by Ocean Marine of a corresponding entitlement by virtue of the 2004/2005 Orders. 38Arising out of these developments, the parties have informed me that it is common ground that: - (a)I should proceed on the basis that the 2011 Orders are irrelevant to the issues in these proceedings; (b)I should decide the case on the basis of the issues raised by the Second Further Amended Commercial List Summons and List Statement; and (c)CSR does not dispute that Aviva has standing to enforce the indemnities in clause 4.4.1(d) of the Deed. 39I will proceed on that basis. Ocean Marine's standing to sue - a conflict of laws? 40Ocean Marine sues CSR on the indemnity in clause 4.4.1(d) of the Deed. 41As Ocean Marine is not a party to the Deed, an issue arises as to the standing of Ocean Marine to bring the action. 42Ocean Marine relies on the operation of the 2004/2005 Orders of the UK High Court to give it standing to sue on the indemnity. It submits that the effect of those orders is to transfer to it the chose in action represented by the entitlement to indemnity under clause 4.4.1(d). 43A number of issues arise concerning the standing of Ocean Marine to bring these proceedings. Those issues turn on questions of conflict of laws. I will consider whether there is a conflict of laws between English and NSW law. I will then consider how any such conflict should be resolved. Sanctioning of insurance business transfer schemes under the UK Act - effect under English law 44There is in evidence an "Expert Opinion" of an English barrister, Mr Martin Moore QC. The parties agreed that I could receive Mr Moore's opinion as evidence of the relevant provisions of the UK Act and of the procedures customarily adopted by the UK High Court concerning the sanctioning by that Court of insurance business transfer schemes under the UK Act. 45It was also agreed that I could receive Mr Moore's opinion as to the effect, as a matter of English law, of orders made under the UK Act. 46What follows, comes from Mr Moore's opinion. 47Part VII of the UK Act permits the transfer of the insurance business from a body authorised by the United Kingdom Financial Services Authority to conduct that business, to another body. 48For such a transfer to take place, the UK High Court must, by order, sanction the relevant "insurance business transfer scheme". The scheme, and the corresponding transfer of business, assets and liabilities do not become effective until the making of such an order (s 111 of the UK Act). 49An application may be made to the UK High Court for an order sanctioning an insurance business transfer scheme by the company carrying out the business of insurance or reinsurance, or the proposed transferee of that business, or both (s 107(2) of the UK Act). 50According to Mr Moore: - "The transferor and the transferee are responsible for formulating the transfer proposal...The first step in the process is for the transferor and transferee to identify the business, assets and liabilities that they wish to be transferred." 51The UK Act makes provision for the role of the United Kingdom Financial Services Authority, and for the involvement of an independent expert. Directions hearings are heard before the UK High Court to ensure notification to policyholders and other such matters. 52Section 112(3) of the UK Act provides that if an order sanctioning an insurance business transfer scheme is made, and an order is made for the transfer to the transferee of the whole or any part of the undertaking concerned, and of any property or liabilities, then the property is transferred to, and vests in the transferee, and the liabilities are transferred to become liabilities of the transferee "as a result of the order". 53Subsection 112(4) of the UK Act provides: - "But if any property or liability included in the order is governed by the law of any country or territory outside the United Kingdom, the order may require the [transferor], if the transferee so requires, to take all necessary steps for securing that the transfer to the transferee of the property or liability is fully effective under the law of that country or territory." 54Mr Moore opined that an insurance transfer business scheme under the UK Act would be effective "as a matter of English law" to transfer any rights and liabilities governed by foreign law. Before me there was no dispute that, as a matter of English law, this is correct. 55So far as concerns s 112(4) of the UK Act Mr Moore said: - "I add that the provisions of sub-section 4 should not in my view be taken to detract from the effectiveness as a matter of English law of the transfer of property governed by foreign law but rather as a recognition that further steps may be necessary to effect a transfer in an overseas jurisdiction, in particular in relation to real property or other property transferable only by entries in registers, and that the court can exercise its in personam jurisdiction over the transferor to ensure that as a matter of foreign law the transfer is effective." 56GARC and SIC were amongst the applicants for the 2004/2005 Orders. The nature of the transfers 57The effect of the 2004/2005 Orders was, relevantly, to transfer to, and vest in Ocean Marine the property of GARC and SIC constituted by the chose in action under clause 4.4.1(d) of the Deed. 58What occurred was not an assignment of debt in the traditional sense of an express agreement between parties to assign a chose in action from one to the other. 59All of the property of GARC and SIC was transferred to and vested in Ocean Marine, by operation of the UK Act. That property included all policies issued by GARC and SIC. Also swept up in the transfer was the chose in action with which these proceedings are concerned. 60CSR submits that the assignments should be seen as being involuntary for the reasons that the relevant transfer could not take place without the sanction of the UK High Court and that the effect of the UK Act is that the transfers were prohibited without such sanction. 61There is some substance in this submission in that the relevant assignment was not a matter only for the parties' agreement, but required the imprimatur of the UK High Court. 62On the other hand, the assignment was consensual in that the applications to the UK High Court were made by GARC, SIC and Ocean Marine together. The UK High Court endorsed or sanctioned a scheme put forward by parties who were not in an adversarial relationship. 63Ocean Marine drew attention to Application of XL Re Europe [2004] FCA 974 in which Moore J considered the analogous statutory scheme for the transfer of insurance business under the Insurance Act 1972 (Cth). Moore J made reference (at [4]) to the supplementary Explanatory Memorandum in relation to the General Insurance Reform Act 2001 (Cth), which said that the relevant mechanism was: - "...to enable an insurer to voluntarily transfer policies to another authorised general insurer without being exposed to the complications arising from the novation of insurance contracts involving the consent of parties to those contracts." 64There are both voluntary and involuntary aspects of the assignments with which these proceedings are concerned. The assignment does not fit easily into either category. The lex situs 65The lex situs of the chose in action with which these proceedings are concerned is, plainly, NSW. 66First, the chose in action represented by the promise under clause 4.4.1(d) of the Deed is, in my opinion, located in NSW. 67The general rule is that a debt is situated where the debtor resides: AssetInsure Pty Ltd v New Cap Reinsurance Corp Ltd (2006) 225 CLR 331 at [58] per Kirby and Hayne JJ. 68The same applies to other choses in action; they are "for legal purposes localised and are situated where they are properly recoverable and are properly recoverable where the debtor resides": Jabbour v Custodian of Absentee's Property of State of Israel [1954] 1 ER 145 at 151 per Pearson J. 69All the parties to the Deed (except for Midalco, which is not an indemnifying party and gave an address in Western Australia) gave their addresses in NSW. In particular, CSR gave its address as O'Connell Street, Sydney. There is no suggestion in the evidence, and it was not submitted, that CSR is resident or located other than in NSW. 70The Deed is expressed to be governed by NSW law and the parties irrevocably submitted to the exclusive jurisdiction of the "courts of New South Wales and Australia" in relation to any dispute under the Deed (clause 4.8.2). Notices must be delivered to the parties at an address in NSW (clause 4.9.1). 71If a debt is due on a deed, its situs may potentially be where the deed is located: Royal Trust Co v Attorney-General (Alberta) [1930] AC 144 at 150. All executed copies of the Deed are currently located in NSW and, so far as the evidence reveals, have never been located elsewhere. Was the assignment effective under the lex situs? 72In my opinion, the assignment was not effective under NSW law. 73First, the 2004/2005 Orders of the UK High Court purport to deal with property situated in NSW. 74Second, the Deed contained a prohibition on assignment in the following terms: - "4.11 No Assignment The rights created by this deed are personal to the parties and must not be dealt with at law or in equity." 75The clause is drawn in emphatic terms. I can see no reason why effect should not be given to it. 76Ball J recently considered the principles in In the matter of Idoport Pty Ltd [2012] NSWSC 524. At [47] his Honour said: - "Generally speaking, a purported assignment of a contractual right in breach of a provision of the contract prohibiting assignment is ineffective. That was the conclusion reached by the House of Lords in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85. In that case, Lord Browne-Wilkinson (with whom the other members of the House of Lords agreed) accepted that the question was one of construction of the relevant contract and that there may be cases where, properly construed, the term does not invalidate a purported assignment but only gives rise to a right to damages, although his Lordship expressed the view that cases of that type 'are very unlikely to occur': at 104. Exceptional cases of that type aside, his Lordship said (at 108): '[T]he existing authorities establish that an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights. I regard the law as being satisfactorily settled in that sense. If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz., to ensure that the original parties to the contract are not brought into direct contractual relations with third parties'." 77As Ball J pointed out, Linden Gardens has been referred to with apparent approval in a number of Australian cases including Broadcast Australia Pty Ltd v Minister Assisting the Minister for Natural Resources (Lands) [2004] HCA 4; (2004) 221 CLR 178 at 183 (see the authorities set out by his Honour at [48]). 78In my opinion, the language used by the parties in clause 4.11 reveals their intention that any purported assignment have no effect. The language used by the parties suggests to me that they did not intend that, despite the wording of clause 4.11, an assignment made in the face of the clause could be effective, and give rise to no more than an entitlement to damages. The parties agreed there could be no assignment in any circumstances. Resolving the conflict of laws 79I must consider what "indicative" or "choice of law" rule should be adopted to "indicate the law which will supply the rule or rules settling the issue (the lex causae)": Davies, Bell and Brereton, Nygh's Conflict of Laws in Australia, 8th ed (2010) at [14.2]. 80The "indicative" or "choice of law" rules relevant in this case are those concerning assignment of choses in action. 81The authorities dealing with the "indicative" or "choice of law" rules to be adopted to ascertain the lex causae for assignments of choses in action draw a distinction between involuntary and voluntary assignments. 82So far as concerns involuntary assignments, it is clearly established that the validity of such assignments depends on the lex situs: Re Queensland Mercantile & Agency Co Limited [1891] 1 Ch 536 and Nygh's Conflict of Laws at [33.61] and the authorities referred to therein. 83So far as concerns voluntary assignments, the authors of Nygh's Conflict of Laws state, at [33.62]: - "In relation to voluntary assignments the bulk of authorities certainly favours the proposition that the intrinsic validity of such an assignment, both as to form and as to substance, is governed by the lex loci actus. Preferably, as Dicey-Morris urged in previous editions [the authors refer to the 11th ed at p 963], past references to the lex loci actus must today be interpreted as referring to the proper law of the assignment rather than the law of the place where the transaction physically took place." 84The learned authors continue: - "However, this does not mean that the lex situs is completely irrelevant. Indeed, one may ask oneself the question whether an assignment valid by the proper law but void by the lex situs would be upheld." 85Later the authors state (at [33.65]): - "Thus, in general, it could be argued that an assignment of an intangible must comply with the requirements as to essence and form of its proper law and must conform with everything that is required to pass title according to the lex situs of the debt." 86This point appears to be recognised by subsection 112(4) of the UK Act (see [37] and [39] above). 87The authors continue (at [33.65]): - "On that point the remarks made by Pearson J in relation to involuntary assignments in Jabbour v Custodian of Absentee's Property of State of Israel [1954] 1 ER 145 at 157 are, it is submitted, of equal force in relation to voluntary assignments: - '...there is considerable weight of authority in favour of the view that only the lex situs can alter the title to debts and choses in action, and the authorities cited to prove the contrary proposition do not seem to have that effect. On principal there is the consideration that, if the action to recover a debt or chose in action is brought in the country where it is properly recoverable and therefore situated, and if there is conflict between the lex situs and the proper law...the court trying the action will be bound to apply its own which is the lex situs...'." 88Ocean Marine drew attention to the decision of the United Kingdom Court of Appeal in Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] QB 825. 89In that case Mance LJ (at [27]), speaking of the principles governing the identification of the appropriate law, said: - "The overall aim is to identify the most appropriate law to govern a particular issue. The classes or categories of issue which the law recognises [when characterising the relevant issue] are man-made, not natural. They have no inherent value, beyond their purpose in assisting to select the most appropriate law. A mechanistic application, without regard to the consequences, would conflict with the purpose for which they were conceived." (emphasis in original) What is the lex causae? 90Assuming that the lex loci actus, or the proper law of the assignment, is English law, and accepting Mr Moore's opinion that under English law the orders of the UK High Court were effective to transfer rights governed by foreign law (see [54] above), the fact remains that, in my opinion, this assignment is one that NSW courts would not recognise. 91I agree with the observations of the learned authors of Nygh's Conflict of Laws set out in their text at [33.62] and [33.65]: see [83-87] above. 92The Deed is strongly connected to NSW. It was caught up by the 2004/2005 Orders but otherwise has little connection with English law, save that Ocean Marine (but not CSR) is resident there. 93The chose in action represented by the indemnity in clause 4.4.1(d) of the Deed is located in NSW. 94In these circumstances, and to adopt the words of Mance LJ in Raiffeisen, my opinion is that "the most appropriate law to govern" the issue of assignment is that of NSW. 95Accordingly, my conclusion is that as the assignment was not effective under NSW law, Ocean Marine has no standing to bring these proceedings. 96Neither party contended that this was as a case of the kind referred to in Nygh's Conflict of Laws at [35.46] to [35.49]. Applicability of the principles relevant to recognition of foreign judgments 97CSR submits that a further reason why Ocean Marine is not entitled to enforce the indemnity under clause 4.4.1(d) of the Deed is because the conditions for the recognition and enforcement of judgments have not been satisified. 98There is no dispute between the parties as to the relevant principles at common law, and under the Foreign Judgments Act 1991 (Cth). 99So far as the common law is concerned, the principles are set forth in Nygh's Conflict of Laws at [40.2]: - "To entitle a foreign judgment to recognition at common law, four conditions must be satisfied: (a) the foreign court must have exercised a jurisdiction that Australian courts recognise; (b) the foreign judgment must be final and conclusive; (c) there must be an identity of parties; and (d) if based on a judgment in personam, the judgment must be for a fixed debt. The onus of establishing the existence of these conditions rests upon the party seeking to rely upon the foreign judgment." 100There is also no dispute that the first, third and fourth of these conditions, if they be relevant, are not met. 101As CSR submitted: - (a)the first condition is not met because the UK High Court purported to alter the title of intangible moveable property located in Australia. Accordingly, the English court had no jurisdiction, in the international sense, to make the orders in rem (see Nygh's Conflict of Laws at [40.28] citing Castrique v Imrie (1870) LR 4 HL 414 at 429). Even if the orders were characterised merely as in personam in effect, CSR has not been shown to have been resident in England, nor to have been served with the applicable originating process (see Nygh's Conflict of Laws at [40.5]; ff Adams v Cape Industries Plc [1990] Ch 433 at 517-518); (b)the third condition is not met because CSR was not a party to the English proceedings (see Nygh's Conflict of Laws at [40.36]; Newcom Holdings Pty Ltd v Funge Systems Inc [2006] SASC 284); (c)to the extent that the 2004/2005 Orders can be characterised as in personam in their effect, the fourth condition is not met because they are not for a debt or definite sum of money. 102So far as concerns the Foreign Judgments Act, no application pursuant to that Act has been filed in accordance with s 6(1) in this or any other Australian court. 103Further, the Foreign Judgments Act only applies to judgments for a sum of money. The fact that the first condition at common law is not met has the consequence that the requirements of s 7(3)(a) and (b) of the Foreign Judgments Act are also not met. 104In view of the conclusions to which I have come concerning Ocean Marine's standing, it is not necessary for me to express any conclusions in regard to this issue. 105However, I am inclined to accept Ocean Marine's submission that the principles to which CSR refers have no bearing on the issues before me. 106The question is one of recognition of the effect of the 2004/2005 Orders. This is a choice of law question. Ocean Marine is not seeking to enforce the 2004/2005 Orders in NSW. 107Further, the 2004/2005 Orders are a "non-money judgment" for the purposes of the Foreign Judgments Act. No regulations have yet been made under s 5(6) of that Act extending part two of the Foreign Judgments Act to "non-money judgments": see Nygh's Conflict of Laws at [41.11] footnote 35. The proper construction of clause 4.4.1(d) 108In any event, for the reasons that follow, it is my opinion that on the proper construction of the Deed, neither Aviva nor Ocean Marine (assuming it does have standing), is entitled to indemnity for the amounts sought. 109Aviva and Ocean Marine claim that, on the proper construction of clause 4.4.1(d), they are entitled to indemnity from CSR for the payments, referred to at [27] above, made by them to ACE under the reinsurance policies referred to in [21]. The relevant provisions 110Clause 4.4.1 is set out at [17] above. 111The recitals to the Deed are: - "3. RECITALS 3.1 Certain of the NZI Group issued or are alleged to have issued the Policies to certain of the CSR Group, or are otherwise alleged to be presently liable to certain of the CSR Group in respect of the Policies. 3.2 Asbestos Related Claims and other Claims have been asserted against the CSR Group and may in the future be asserted against the CSR Group. 3.3 CSR and Midalco have asserted, and may in the future (were it not for the execution of this deed) assert entitlement to defence and indemnity from the NZI Group under the Policies or otherwise with respect to Asbestos Related Claims or otherwise. 3.4 Certain of the CSR Group have commenced the Insurance Coverage Litigation against certain of the NZI Group. 3.5 The NZI Group denies that it has any obligation whatsoever to the CSR Group under the Policies or in connection with the Policies, whether for Asbestos Related Claims or otherwise, including any and all Extra Contractual Obligations which have arisen or may arise in the future in connection with the Policies or in connection with Asbestos Related Claims, or other Claims, or in connection with the Insurance Coverage Litigation. 3.6 The issues in the Insurance Coverage Litigation are complex and uncertain of outcome for each of the parties and are likely to occupy each of them in very time consuming and expensive litigation (including appeals) and accordingly the parties have agreed to forego their rights of action and other rights in the Insurance Coverage Litigation and to compromise those rights and their rights with respect to each other under the Policies upon the terms of, and for the consideration set out in, this deed. 3.7 It has been agreed between the parties that without admission of liability on the part of the NZI Group, the NZI Group will pay in cash or by electronic transfer to CSR the sum of A$100,000,000.00 ('the Settlement Sum') in return for the releases and other obligations of CSR and Midalco under this deed." 112The recitals refer to "Asbestos Related Claims". That term is defined in the Deed: - "'Asbestos Related Claim' means any past, present or future Claim involving or against the CSR Group relating to asbestos; whether brought in Australia, the United States of America ('the USA'), or elsewhere; whether for actual, alleged, threatened or potential loss or damage of any kind whatsoever including loss or damage arising from or related to personal injury, property damage, abatement, cleanup, remedial action, fines or penalties; and whether arising out of the Wittenoom Operation or the conduct or operation by the CSR Group of any mining, milling, production, manufacturing, storage, sale, transportation or distribution of any type of asbestos (including but not limited to blue, white or brown asbestos) or any product containing any type of asbestos." 113The recitals also refer to "the Policies". That expression is defined: - "'The Policies' means: (a) any and all public and/or goods sold and/or product liability insurance policies issued, at any time up to and including 1985, by the NZI Group to CSR or any member of the CSR Group who at the date of this deed is controlled (within the meaning of the Corporations Law) by CSR; and (b) all those policies referred to in Attachment C." 114Clause 4.2 of the Deed sets out the releases given by the parties. The releases given by CSR (and Midalco) are at clause 4.2.1: - "RELEASES In consideration of the payment of the Settlement Sum, CSR and Midalco each release the NZI Group from: - (a) All claims made by CSR and Midalco in the Insurance Coverage Litigation; (b) Any other Claim which they might otherwise make or have made for any indemnity or any other relief under any of the Policies, whether in respect of Asbestos Related Claims or any other Claims under the Policies; (c) Any Claim for Extra Contractual Obligations; (d) Any other Asbestos Related Claim (other than all Claims under policies of insurance referred to in clause 4.8.4) arising out of or related to the Wittenoom Operation; (e) Any and all obligations of the NZI Group to CSR and Midalco under or through the Policies; and (f) The Costs of CSR and Midalco. PROVIDED ALWAYS that nothing in this clause or deed will extend or be deemed or construed to extend to prevent or bar in any way CSR of Midalco or any member of the CSR Group from claiming against or suing any other person (not being within the NZI Group) for indemnity under or for any other relief under any of the Policies or any other policy of insurance in respect of any Claim of any kind brought against CSR or Midalco or any member of the CSR Group. It is agreed by the parties that in respect of any such Claim or suit, this deed is not intended to operate as a release of any such person under any of the Policies or any other policy of insurance." 115The releases refer to "Extra Contractual Obligations". That expression is defined: - "'Extra Contractual Obligations' means any and all obligations, other than under the Policies or any other insurance policy, of whatever kind or nature, known and unknown, past, present and future, for damages of any kind including punitive, or other legal, equitable or statutory relief which the NZI Group has or may have or is alleged to have to the CSR Group arising out of, resulting from or in any way connected with the Policies or Asbestos Related Claims, or the Insurance Coverage Litigation and any other Claims including acts or omissions, if any, constituting unfair defence or settlement practices, any breach of the duty of utmost good faith, bad faith or breach of fiduciary duty." 116CSR also "expressly assumed" various risks concerning Asbestos Related Claims as set out in clause 4.3: - "Assumption of Risk by CSR Group The CSR Group as against the NZI Group expressly assumes all past, present and future risk that there may be outstanding or future Asbestos Related Claims or other Claims against it, and that the damages or costs sustained by the CSR Group as a result of any Asbestos Related Claims or other Claims may be greater than it currently realises; that the damages may increase in amount or in severity over time; that the injuries, damages, and/or Claims may be progressive, cumulative, unknown and/or unforeseeable; and that there may be hidden, unknown and unknowable damages or costs." 117The critical clause, clause 4.4.1, follows immediately after clause 4.3. 118Thus, the structure of the Deed was that CSR: - (a)released the insurers from claims it may make against them of the kind described in clause 4.2.1; (b)agreed to assume the risks referred to in clause 4.3; and (c)to that end, gave the insurers the indemnities referred to in clause 4.4.1. 119Although recital 3.3 refers to the assertion, or possible future assertion, by CSR of an entitlement to indemnity under the Polices "or otherwise", there is no material before me to suggest that any member of the NZI Group could have any liability to CSR otherwise than under the Policies, or somehow connected to the Policies. 120Pursuant to clause 4.2.1(c), CSR released the NZI Group from "Extra Contractual Obligations" being obligations "other than under the Policies" whether known, unknown, past, present or future. Such claims had to arise out of or be related to the Policies "or Asbestos Related Claims". However the concluding words of the definition of Extra Contractual Obligations ("including acts or omissions, if any, constituting unfair defence or settlement practices, any breach of the duty of utmost good faith, bad faith or breach of fiduciary duty") suggest that the parties had in mind that Extra Contractual Obligations would arise out of an obligation of the NZI Group arising out its dealings with CSR. Principles concerning proper construction 121There was no dispute before me as to the principles I should follow in relation to the proper construction of the Deed. They were recently summarised in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 in which Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) said (at [52]): - "The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphafarm Pty Limited [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Limited v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Limited [2011] HCA 45; (2011) 282 ALR 604." 122Thus, I must have regard to: - (a)the language used by the parties; (b)the context in which that language is used; and (c)the purpose and object of the transaction. Purpose and object 123Dealing with the last point first, it is clear from the terms of the Deed that its principal object was to record the terms on which the litigation was settled. Language 124So far as concerns the language in clause 4.4.1(d) itself, CSR accepts that, read literally, the words at 4.4.1(d) can be reconciled to Ocean Marine's construction of the clause. 125That is, the claims by ACE against Aviva, GARC and SIC for indemnity under its contracts of reinsurance were, literally: - (a)claims "against NZI Group"; (b)by a "person" (ACE); (c)"in respect of an Asbestos Related Claim" (in that there is some connection between the claim for indemnity made by ACE, as CSR's post 1978 insurer, and the claims "involving or against CSR relating to asbestos" - see the definition of Asbestos Related Claims - which led CSR to claim indemnity from ACE); (d)"arising out of or related to the Wittenoom Operation" (in that some of the claims against CSR, which led to its claim of indemnity from ACE, which led to ACE seeking indemnity from its reinsurers Aviva, GARC and SIC, arose out of CSR's Wittenoom Operation). 126In that regard Aviva and Ocean Marine submitted that, for this purpose, the Asbestos Related Claim referred to in clause 4.4.1(d) was that made by CSR against ACE, rather than claims made against CSR. I do not accept that submission. Asbestos Related Claims are defined by reference to claims "involving or against" CSR. That language is not, in my opinion, apt to capture a claim by CSR. Context 127However, in my opinion, the context in which the indemnity in clause 4.4.1(d) was given makes clear that the parties did not intend that the indemnity extend to amounts paid by members of the NZI Group under contracts of reinsurance entered into by them with CSR's insurer in an entirely separate, and later period of insurance. 128As I have said at [22], it appears to be a coincidence that Aviva, GARC and SIC were insurers of CSR in the period up to November 1978 and also reinsurers of ACE in the years following. As CSR submits, so far as the evidence reveals, it is "mere happenstance" that Aviva, GARC and SIC were members of the NZI Group in the period to November 1978, as well as being some of the reinsurers of CSR's subsequent insurer, ACE, in later periods of indemnity. 129Further, the object of the Deed was to settle the litigation with the NZI Group. 130It seems improbable, in circumstances where the relationship of insurer and insured between CSR and the NZI Group had come to an end in November 1978, that the parties to the Deed intended that the Deed operate to impose on CSR a liability to indemnify any members of the NZI Group who happened to reinsure their successors as CSR's insurer, at any time in the future, and for an unlimited amount. Language elsewhere in the Deed 131Further, there are, in my opinion, clear signposts within the Deed pointing to the conclusion that this was not the parties' intention. 132First, the proviso to clause 4.2.1(c) - see [114] above - expressly preserves the right of CSR to sue insurers, other than the NZI Group under other policies. It would be inconsistent with the preservation of that right if CSR were liable, by virtue of clause 4.4.1(d), to indemnify the NZI Group for reinsurance it had granted to those insurers. As CSR submits, there is no indication in the text of the Deed, or the surrounding circumstances, that the parties to the Deed intended this circularity. 133Second, clause 4.4.3(b) requires the NZI Group to consult with CSR in respect of any Asbestos Related Claims made against the NZI Group. In addition, the NZI Group is entitled to require CSR to take over the conduct of the defence of the Claim. 134Thus clauses 4.4.2 and 4.4.3(b) and (d) provide: - "4.4.2 If any Asbestos Related Claim or other Claim is made or is threatened to be made directly against the NZI Group by any person referred to in the circumstances described in clauses 4.4.1 (b), (c), (d), and (e) above then the NZI Group must forthwith notify CSR in writing of any such Claim or Asbestos Related Claim or any information received or obtained by the NZI Group which reasonably indicates that such Claim or Asbestos Related Claim might be brought against the NZI Group. The NZI Group must thereafter provide to CSR such information as is in the possession of the NZI Group as CSR may reasonably require so as to determine whether or not the Asbestos Related Claim or other Claim is the subject of the indemnity in clause 4.4.1 4.4.3 If CSR acknowledges in writing to the NZI Group that the Asbestos Related Claim or other Claim is the subject of the indemnity in clause 4.4.1 then the following shall apply: ... (b) The NZI Group will consult with CSR concerning all material matters relating to the conduct of any defence or response with respect to any such Claim and must act in accordance with CSR's expressed views so long as those views are not unreasonable having regard to the legitimate interests of the NZI Group and so long as those views are confirmed to the NZI Group by CSR in writing; ... (d) The NZI Group has the right at any time by notice in writing to CSR to require CSR to take over the conduct of the defence of any such Claim, in which event the following will apply; ...". 135If Aviva and Ocean Marine were correct in their construction of clause 4.4.1(d), it would follow that CSR could be required to defend the NZI Group's liability, under its policies of reinsurance with ACE, to indemnify ACE for the insurance payments made by it to CSR. 136As CSR submits, that outcome would place CSR in the position where, on the one hand, it was attempting to extract the highest insurance payment from an insurer, whereas on the other hand, it would be required to take all reasonable steps to minimise the quantum of that payment. I accept CSR's submission that extremely clear language would be required before the Court would conclude that the parties intended such an unusual outcome. 137Aviva and Ocean Marine submitted that clause 4.4.3 had no relevant application as it only applied to Asbestos Related Claims, not to claims "in respect of" Asbestos Related Claims. However clause 4.4.2 makes specific reference to clause 4.4.1(d), thus indicating the parties intended that clause, and therefore clause 4.4.3, would apply in circumstances where clause 4.4.1(d) was enlivened. 138Third, clause 4.4.8 of the Deed is in the following terms: - "4.4.8 CSR and Midalco each agree that they shall not in any way whatsoever encourage or incite Claims against the NZI Group or any of them, including Claims by Claimants, and shall not provide to Claimants any information relating to the NZI Group or the Policies except as may be required by law." 139That clause prohibits CSR (and Midalco) from encouraging "in any way whatsoever" the making of a claim against the NZI Group including, by "Claimants", who are defined in clause 2.6 to mean persons making Asbestos Related Claims. 140If Aviva and Ocean Marine were correct in their construction of clause 4.4.1(d), CSR's decision to seek indemnity from, and sue ACE, and subsequently reach the settlement, would be in breach of clause 4.4.8 because it would be conduct which would "encourage or incite" ACE to make claims under its reinsurance policies with Aviva, GARC and SIC. 141Fourth, there is an exception to the indemnity in clause 4.4.1(d) in relation to "all Claims under polices of insurance referred to in clause 4.8.4". 142Clause 4.8.4 refers to workers' compensation or employers' indemnity insurance that may exist at the date of the Deed. That suggests that the parties' intention was that the indemnity in clause 4.4.1(d) would be in respect of claims against the NZI Group under policies of insurance issued by it, rather than policies of reinsurance. "In respect of" 143Clause 4.4.1(d) refers to claims against the NZI Group "in respect of" an Asbestos Related Claim. Thus the claim against the NZI Group necessary to enliven the indemnity must be "in respect of" an Asbestos Related Claim (arising out of or related to the Wittenoom Operation). 144Ocean Marine emphasised the potentially wide meaning of this expression. 145The words "in respect of" are certainly capable of having a very wide meaning. However the words must be construed in the context in which they appear: Workers Compensation Board of Qld v Technical Products Pty Ltd (1988) 165 CLR 642 at 653-654; State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549 at 561; Technical Products Pty Ltd v State Government Insurance Office (Qld) (1989) 167 CLR 45 at 47. 146The intended scope of clause 4.4.1(d), and the meaning to be given to the words "in respect of" in this context must be considered in the light of the other indemnities granted in clause 4.4.1. 147Those indemnities concerned: - (a)claims made by CSR (or Midalco) in the litigation itself (subclause (a)); (b)claims that CSR (or Midalco) or any other member of the CSR Group under any of the Polices or for any Extra Contractual Obligations (subclause (b)); (c)claims made by any person under or through the Policies or because the person asserts an Asbestos Related Claim against the NZI Group itself, by reason of NZI Group's status as in insurer or indemnifier of the CSR Group (subclause (c)). 148What subclauses 4.4.1(a), (b) and (c) do not do is to impose on CSR an obligation to indemnify the NZI Group if an Asbestos Related Claim arising out of the Wittenoom Operation was made against a member of the NZI Group, under a policy issued by the NZI Group to a party other than CSR. 149In its submissions CSR gave the example of a transportation worker employed by a third party to load asbestos from Wittenoom who sued that third party in negligence. As CSR submitted, such a claim would likely constitute an Asbestos Related Claim because it would be a claim for damages "involving...CSR Group relating to asbestos". 150If that employer were insured by the NZI Group, and the NZI Group were liable to indemnify the employer, there would be a strong risk that, in the absence of clause 4.4.1(d), the releases granted by the NZI Group in clause 4.2.3 would preclude it from having recourse to CSR, whether pursuant to the doctrine of contribution or otherwise. 151In my opinion, this is the work the parties intended clause 4.4.1(d) to do. The parties did not intend to provide the NZI Group, or its corporate successors, with a windfall indemnity in relation to their liabilities as a reinsurer. Conclusion 152All these factors point to the conclusion, in my opinion, that the indemnity given by CSR in clause 4.4.1(d) is only enlivened by claims made against members of the NZI Group in their capacity as insurers and that the indemnity was not intended by the parties to oblige CSR to reimburse the NZI Group in respect of the reinsurance liabilities. 153For these reasons my opinion is that Aviva and Ocean Marine are not entitled to indemnity from CSR pursuant to clause 4.4.1(d) in respect of the reinsurance payments referred to at [27] above. Was the claim by ACE on Aviva, GARC and SIC one to which clause 4.4.1(d) applies? 154Assuming, contrary to my findings, that Aviva and Ocean Marine do have standing to bring these proceedings, and that their construction of clause 4.4.1(d) is correct, they must prove that the relevant claims (that is those made by ACE against Aviva, GARC and SIC under the reinsurance policies) "arose out of or related to the Wittenoom Operation". 155Further, it is for Aviva and Ocean Marine to prove how much of the claim made by ACE against Aviva, GARC and SIC should be so characterised. 156The claims made against CSR, which led to the litigation and the settlement with ACE, did not all relate to the Wittenoom Operation. Some arose out of other operations and activities of CSR. 157Ocean Marine has adduced no evidence to show what part (if any) of the sums paid by it and Aviva to ACE arose out of or relate to the Wittenoom Operation. 158Aviva and Ocean Marine submit that as the claims made against CSR that gave rise to the litigation and the settlement (and thus to ACE's reinsurance claims against Aviva, GARC and SIC) related to the Wittenoom Operation, then the whole of the claim should be so characterised. They submitted that "whichever way you look at it, the payment we made was in relation to asbestos claims". 159But this is not the point. The question is the ambit of the indemnity (assuming it applies). The indemnity only applies to claims against the NZI Group having particular characteristics; relevantly that the claim arises out of the Wittenoom Operation. It cannot follow that the whole of the "claim" so arises merely because some part of it does. Otherwise CSR's indemnity would be enlivened if any part (no matter how small) of the claim against it had the relevant characteristic. 160Aviva and Ocean Marine have not pointed to any evidence that would enable me to come to any conclusion as to what (if any) part of the amounts paid by them to ACE (referred to at [27]) arose out of or related to the Wittenoom Operation. 161For that further reason, its claim in these proceedings must fail. Conclusion 162Aviva and Ocean Marine have failed to make out their case. The proceedings should be dismissed with 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. 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. Decision last updated: 18 October 2012