Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Chubb Insurance Company of Australia Limited v Moore [2013] NSWCA 212 Decision date: 11 July 2013 Before: Bathurst CJ at [1]; Beazley P at [2]; Macfarlan JA at [3]; Emmett JA and Ball J at [4]. Decision: The Court orders that: 1. No later than 18 July 2013, the plaintiffs file and serve short minutes of orders to give effect to the conclusions stated in the reasons of the Court of 11 July 2013. 2. No later than 18 July 2013, the plaintiffs file and serve any submissions they wish to make as to costs. 3. No later than 25 July 2013, all defendants file and serve any submissions they wish to make in relation to the proposed short minutes of orders and as to costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: INSURANCE - separate questions to be decided by Court of Appeal based on statement of agreement facts - directors' and officers' liability insurance contracts - proper construction of s 6 Law Reform (Miscellaneous Provisions) Act 1946 - territorial operation of s 6 - whether s 6 applies to claims made policies - whether s 6 applies where insured's alleged conduct giving rise to claim for damages or compensation happened before policy entered into - whether The Owners - Strata Plan No 50530 v Walter Construction Group Limited [2007] NSWCA 124, which held that s 6 does not apply where insured's alleged conduct giving rise to claim for damages or compensation happened before policy entered into, should be followed - whether Court of Appeal when constituted as a bench of five will more readily overrule its own decisions or only when decision plainly wrong - whether "insurance moneys that are or may become payable" on which s 6 imposes charge include defence costs paid by insurer under policy before claimant's claim determined - whether insurer's payment in respect of insured's liability, excluding defence costs, is valid discharge to insurer if made before claimant's claim determined - whether insurers on actual notice of existence of charges under s 6 by reason of correspondence from claimants' solicitors Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) Bankruptcy Act 1966 (Cth) s 117 Civil Liability Act 2005 s 5N Corporations Act 2001 (Cth) Ch 5C, s 562 Fair Trading Act 1987 s 42 Fair Trading Act 1987 (WA) Fair Trading Act 1999 (Vic) Interpretation Act 1987 s 12(1)(b) Law Reform (Miscellaneous Provisions) Act 1946 s 6 Law Reform Act 1936 (NZ) s 9 Motor-vehicle Insurance (Third-party Risks) Act 1928 (NZ) s 10 Supreme Court Act 1970 Supreme Court Act 1986 (Vic) Pt IVA Workers Compensation Act 1908 (NZ) s 42 Workers Compensation Act 1922 (NZ) Cases Cited: Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 FAI General Insurance Limited v McSweeney [1997] FCA 152; (1997) 73 FCR 379 Solomons v District Court of New South Wales [2002] HCA 47; (2002) 211 CLR 119 Meyer Heine Pty Ltd v China Navigation Co Ltd [1966] HCA 11; (1966) 115 CLR 10 Hore v Albury Radio Taxis Co-op Society Ltd [2002] NSWSC 1130; (2002) 56 NSWLR 210 FAI Insurance Limited v Hospital Care Pty Ltd [2001] HCA 38; (2001) 204 CLR 641 Kay's Leasing Corporation Pty Ltd v Fletcher [1964] HCA 79; (1964) 116 CLR 124 Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd [2010] 3 NZLR 713 Mynott v Barnard [1939] HCA 13; (1939) 62 CLR 68 Dow Jones & Co Inc v Gutnick [2002] HCA 56; (2002) 210 CLR 575 John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503 Clarke v Commissioner of Taxation [2009] HCA 33; (2009) 240 CLR 272 Re Wakim; ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 McMillan v Mannix (1993) 31 NSWLR 538 New South Wales Medical Defence Union v Crawford (1993) 31 NSWLR 469 Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302 Caltex Oil (Aust) Pty Ltd v The Dredge Willemstad [1976] HCA 65; (1976) 136 CLR 529 Steigrad v BFSL 2007 Ltd [2012] NZCA 604 Steigrad v BFSL 2007 Ltd [2011] NZHC 1037; (2011) 16 ANZ-Ins Cas 61-910 Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 3; (1974) 130 CLR 1 Bailey v New South Wales Medical Defence Union Limited [1995] HCA 28; (1995) 184 CLR 399 Insight Vacations Pty Ltd v Young [2011] HCA 16; (2011) 243 CLR 149 Wanganui-Rangitikei Electric Power Board v Australian Mutual Providence Society [1934] HCA 3; (1934) 50 CLR 581 Barcelo v Electrolytic Zinc Company of Australasia Limited [1932] HCA 52; (1932) 48 CLR 391 The Owners - Strata Plan No 50530 v Walter Construction Group Limited (In Liquidation) & Ors [2007] NSWCA 124; (2007) 14 ANZ-Ins Cas 61-734 Northern Territory v Mengel [1995] HCA 65; (1995) 185 CLR 307 Imbree v McNeilly [2008] HCA 40; (2008) 236 CLR 510 Cain v Malone [1942] HCA 20; (1942) 66 CLR 10 Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86 Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504 Texts Cited: Speech on the Second Reading of the Law Reform (Miscellaneous Provisions) Bill, New South Wales Legislative Council, Parliamentary Debates, 20 March 1946 Category: Principal judgment Parties: Chubb Insurance Company of Australia Limited (First Plaintiff) Liberty Mutual Insurance Company t/as Liberty Insurance Underwriters (Second Plaintiff) Allianz Australia Insurance Limited (Third Plaintiff) Chartis Australia Insurance Limited (Fourth Plaintiff) AXIS Specialty Europe Public Limited Company t/a AXIS Specialty Australia (Fifth Plaintiff) QBE Insurance (Australia) Limited (Sixth Plaintiff) Wesfarmers General Insurance Limited (Seventh Plaintiff) Margaret Moore (First Defendant) Michael Snelgrove (Second Defendant) Peter Clarke as Trustee for the Clarke Family Trust (Third Defendant) Samantha Murray (Fourth Defendant) Raymond Drummond (Fifth Defendant) Laurence Hogan (Sixth Defendant) Jaclyne Fisher (Seventh Defendant) Adrian Williams (Eighth Defendant) Mohetishwar Prasad (Ninth Defendant) Janet Micallef (Tenth Defendant) Glenn Ford (Eleventh Defendant) Great Southern Managers Australia Limited (Receivers & Managers Appointed) (in liquidation) (Twelfth Defendant) John Young (Thirteenth Defendant) Cameron Rhodes (Fourteenth Defendant) Phillip Butlin (Fifteenth Defendant) Peter Patrikeos (Sixteenth Defendant) Jeffrey Mews (Seventeenth Defendant) Murray Colvin (Eighteenth Defendant) Steven Cole (Nineteenth Defendant) Robert Jenkins (Twentieth Defendant) Representation: Counsel: D L Williams SC, J A Redwood and M F Newton (Plaintiffs) N C Hutley SC and T Prince (First and Second Defendants) A S Bell SC and A Munro (Third to Eleventh Defendants) G K Rich (Fourteenth & Fifteenth Defendants) T W Marskell (Thirteenth, Sixteenth, Seventeenth Defendants) M D Howard SC and J D Steedman (Eighteenth, Nineteenth, Twentieth Defendants) Solicitors: Colin Biggers & Paisley (Plaintiffs) Solomon Brothers (First & Second Defendants) Macpherson + Kelley Lawyers (Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth & Eleventh Defendants) DLA Piper (Twelfth Defendant) Colin Biggers & Paisley (Thirteenth Defendant) Arnold Bloch Leibler (Fourteenth & Fifteenth Defendants) Moray & Agnew (Sixteenth & Seventeenth Defendants) Karp Steedman Ross-Adjie (Eighteenth Defendant) Lavan Legal (Nineteenth & Twentieth Defendants) File Number(s): CA 2013/31425 Judgment 1BATHURST CJ: I have had the privilege of reading the judgment of Emmett JA and Ball J. I agree with the orders proposed by them and their Honours reasons for making those orders. 2BEAZLEY P: I have had the advantage of reading in draft the reasons of Emmett JA and Ball J with which I agree. I also agree with the orders proposed by their Honours. 3MACFARLAN JA: I agree with the judgment of Emmett JA and Ball J. 4EMMETT JA & BALL J: Table of Contents Introduction [5] The Great Southern Group and the Great Southern Proceedings [13] The PDS Proceedings [15] The Transform Proceedings [21] The Insurers and the Policies [26] The Connection with New South Wales [29] The Primary Policy [41] Section 6 of the Reform Act and the Nature of the Right Created [52] The Questions [65] Question 2: Claims Made Policies [72] Question 3: Relevant Event Prior to Inception [88] Questions 4 and 5: Defence Costs and Multiple Claims [105] Question 6: Actual Notice [136] Question 1: Territorial Operation of s 6 [142] - General Principles [144] - The Insurers' Contentions on Question 1 [148] - The Transform Claimants' Contentions on Question 1 [175] - The PDS Claimants' Contentions on Question 1 [189] - The Other Parties' Contentions on Question 1 [196] - Conclusion as to Question 1 [197] Conclusion [206] Appendix: Section 6 of the Reform Act Introduction 5This proceeding concerns the somewhat enigmatic provisions of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Reform Act). The effect of s 6 is that the amount of any liability to pay damages or compensation, of a person who has entered into a contract of insurance by which that person is indemnified against such a liability, is, on the happening of the event that gives rise to that liability, to be a charge on all insurance moneys that may become payable in respect of that liability under that contract of insurance. The terms of s 6 of the Reform Act are set out in their entirety in the Appendix to these reasons. 6The provisions of s 6 have been invoked in connection with claims made in several proceedings in the Supreme Court of Victoria (the PDS Proceedings) and in the Supreme Court of Western Australia (the Transform Proceedings). The first and second defendants in the present proceeding, together with the persons whom they represent in the present proceeding (collectively the Transform Claimants), are the plaintiffs in one or other of the Transform Proceedings. The third to eleventh defendants in the present proceeding, together with the persons whom they represent in the present proceeding (collectively the PDS Claimants), are the plaintiffs in one or other of the PDS Proceedings. 7All of the PDS Proceedings and the Transform Proceedings (together the Great Southern Proceedings) arise out of the collapse of Great Southern Limited (GSL) and its subsidiaries (together the Great Southern Group). In one or more of the Great Southern Proceedings, the PDS Claimants and the Transform Claimants (together the GS Claimants) claim damages from Messrs John Young, Cameron Rhodes, Phillip Butlin, Peter Patrikeos, Jeffrey Mews, Murray Colvin, Steven Cole and Robert Jenkins, who are former directors and executives of companies in the Great Southern Group (the Executives), and from Great Southern Managers Australia Limited (GSMAL), a member of the Great Southern Group. That is to say, each of the Executives and GSMAL is a defendant in one or more of the Great Southern Proceedings. The GS Claimants allege contraventions of the Corporations Act 2001 (Cth) (the Corporations Act), the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act), the Fair Trading Act 1999 (Vic) (the Victorian Fair Trading Act) and the Fair Trading Act 1987 (WA) (the WA Fair Trading Act). The Executives and GSMAL are alleged to have committed or been involved in the contraventions. 8The PDS Proceedings are presently being heard before a judge of the Supreme Court of Victoria. The Transform Proceedings are not yet fixed for hearing. 9All of the defendants in all of the Great Southern Proceedings are insured persons under contracts of insurance (collectively the Policies) entered into between GSL, on the one hand, and the plaintiffs in the present proceeding (collectively the Insurers) on the other. The Policies cover the liability that the Executives and GSMAL may be found to have in the Great Southern Proceedings. However, in addition, the Policies cover legal expenses incurred by the defendants in the Great Southern Proceedings in defending those proceedings. The essential question that gave rise to the present proceeding is whether s 6 affords priority to the GS Claimants over the defendants in the Great Southern Proceedings (the GS Defendants) in relation to moneys that may be payable under the Policies. 10By letter dated 13 September 2012, the solicitors for the Transform Claimants have also asserted the existence of charges in their favour by the operation of s 6 of the Reform Act. By letter dated 17 September 2012, the solicitors for the PDS Claimants have asserted the existence of charges in their favour by the operation of s 6 of the Reform Act. Both claim priority over legal expenses incurred by the GS Defendants in defending the Great Southern Proceedings. 11Those assertions have given rise to a dispute between the Insurers and the defendants in the Great Southern Proceedings, on the one hand, and the GS Claimants, on the other hand. In the present proceeding, the Insurers seek clarification of the rights of the GS Claimants under s 6 of the Reform Act, in respect of moneys that may be or become payable under the Policies. 12The present proceeding was commenced by summons in the Commercial List of the Equity Division of the Court. On 31 January 2013, a judge of the Equity Division ordered that the proceeding be removed to the Court of Appeal for the determination of a number of separate questions, on the basis of a statement of agreed facts. Before dealing with s 6 of the Reform Act and addressing the specific questions posed for the Court of Appeal, it is desirable to say something about the Great Southern Group, the Great Southern Proceedings and the Policies. The Great Southern Group and the Great Southern Proceedings 13GSMAL was the responsible entity for various managed investment schemes registered under Chapter 5C of the Corporations Act. GSMAL is the twelfth defendant in the present proceeding. Great Southern Finance Pty Limited (GSF), which is a member of the Great Southern Group, provided loans to many investors in the schemes managed by GSMAL. 14At relevant times, all of the Executives were directors of GSMAL. All of the Executives, other than Messrs Colvin, Cole and Jenkins, were also directors of GSL at relevant times. Messrs Rhodes and Butlin are the 14th and 15th defendants, Messrs Colvin, Cole and Jenkins are the 18th to 20th defendants and Messrs Young, Patrikeos and Mews are the 13th, 16th and 17th defendants in the present proceeding. The PDS Proceedings 15On 22 November 2004, the directors of GSMAL resolved to form a due diligence committee to oversee the preparation of a product disclosure statement for two managed investment schemes, to be known as the Great Southern Plantation 2005 Project (the 2005 Plantation Scheme) and the Great Southern Plantation 2006 Project (the 2006 Plantation Scheme) (together the Plantation Schemes). On 10 February 2005, the Plantation Schemes were registered with the Australian Securities and Investments Commission (ASIC). 16On 1 March 2005, the due diligence committee resolved to sign the final due diligence report and to recommend to the board of GSMAL that GSMAL issue a product disclosure statement by which it would offer to the public the opportunity to participate in the Plantation Schemes (the Plantation PDS). On the same day, the board of GSMAL resolved to issue the Plantation PDS. In March 2005, GSMAL issued the Plantation PDS dated 8 March 2005. 17The Plantation PDS contained an application form for persons who wished to apply for interests in either of the Plantation Schemes. The application form included a section by which a person could also apply to GSF to borrow the amount required to pay for an interest in either of the Plantation Schemes. 18Prior to 30 September 2008, each of the PDS Claimants applied to participate in one or other of the Plantation Schemes. Each of the PDS Claimants either paid the application fees in respect of the interest, or entered into a loan with GSF to fund such a payment. The applications by the PDS Claimants to participate in one or other of the Plantation Schemes were accepted by GSMAL. 19In the PDS Proceedings, the PDS Claimants allege that the making of certain statements in the Plantation PDS and the failure to disclose relevant matters in the PDS constituted contraventions of provisions of the Corporations Act, the ASIC Act or the Victorian Fair Trading Act and that certain of the Executives were involved in the contraventions. They allege that they suffered loss upon becoming members of the various schemes. That occurred when the PDS Claimants entered into management agreements with GSMAL, following a decision by GSMAL to accept their applications to participate in the relevant schemes. The entry into management agreements by the PDS Claimants was the event giving rise to their claims. 20The PDS Claimants assert that they would not have become members of the schemes managed by GSMAL, and would not have entered into loans to fund their investment in those schemes, had the relevant statements not been made and had there been full disclosure of relevant matters. The entry into management agreements with GSMAL was the transaction, or the formal mechanism, by which the PDS Claimants became members of the schemes. That is what gave rise to the liabilities that the PDS Claimants assert constitute their loss or damage in the PDS Proceedings. They claim all amounts paid by them, and liabilities incurred by them, as a consequence of becoming members of the schemes or borrowing in order to finance their investment in the schemes. The Transform Proceedings 21As at July 2008, GSMAL was the responsible entity for six plantation managed investment schemes and two beef cattle managed investment schemes (collectively the Transform Schemes). On 22 July 2008, GSMAL received a proposal from GSL under which GSL offered to acquire the interests of investors in the Transform Schemes in exchange for shares in GSL. The proposal came to be known as Project Transform. Project Transform was to be effected by schemes of arrangement under the Corporations Act. 22On 26 August 2008, GSL publicly announced Project Transform, saying that it involved, among other things: * restructuring the Great Southern Group to create a company with three business streams, namely, forestry, agricultural investment services and cattle; and * inviting investors in the Transform Schemes to convert their interests to shares in GSL. 23On 13 October 2008, the directors of GSMAL and GSL resolved to enter into an agreement between GSMAL and GSL for the implementation of Project Transform. On 22 October 2008, the directors resolved to approve and issue separate explanatory memoranda for meetings of members of the Transform Schemes to consider schemes of arrangement to implement Project Transform. On 23 October 2008, meetings of the members of each of the Transform Schemes were convened. The notices of meeting were accompanied by explanatory memoranda that included a prospectus issued by GSL. 24At adjourned meetings held on 19 January 2009, more than 75% in value of votes were cast in favour of the schemes of arrangement relating to the beef cattle schemes. Less than 75% in value of votes were cast in favour of the schemes of arrangement relating to the plantation schemes. On 4 February 2009, shares in GSL were issued to all members of the beef cattle schemes and the rights of those members were terminated or were sold or assigned to a subsidiary of GSL. On 13 February 2009, shares in GSL were issued to those members of the plantation schemes who had provided and not withdrawn individual acceptances, and the rights of those members were terminated or were sold or assigned to a subsidiary of GSL. 25The Transform Claimants were the holders of interests in the Transform Schemes who received shares in GSL following the termination or sale or assignment of those interests. In the Transform Proceedings, the Transform Claimants allege that there were contraventions of the Corporations Act, the ASIC Act or the WA Fair Trading Act, in connection with the explanatory memoranda and prospectus provided to them by GSMAL in relation to the meetings to approve the schemes of arrangement that gave effect to Project Transform, and that certain of the Executives were involved in those contraventions. They say that they would not have taken various steps if certain matters had been disclosed, or certain statements had not been made, in the explanatory memoranda and prospectus. Each alleges that loss and damage have been sustained as a consequence. The Insurers and the Policies 26GSL entered into a contract of insurance with each of the Insurers for the period 30 September 2008 to 30 September 2009 (the Policy Period). The first and second plaintiffs, Chubb Insurance Company of Australia Limited (Chubb) and Liberty Mutual Insurance Company (Liberty), entered into Policy No. 93255855/93255857 (the Primary Policy). The third plaintiff, Allianz Australia Insurance Limited (Allianz), entered into Policy No. 99 0001034 PLP/99 0001035 and Policy No. 99 0000300 PLP (the Allianz Excess Policies). Liberty entered into Policy No. PL-ME-SPC-08-501912 and Policy No. DO-ME-SPC-08-501911 (the Liberty Excess Policies). American Home Assurance Company (AHAC) entered into Policy No. 110350 and Policy No. 110349 (the Chartis Excess Policies). The fifth plaintiff, AXIS Specialty Europe Public Limited Company (AXIS) entered into Policy No. 00097071 and Policy No. 00097072 (the AXIS Excess Policies). The sixth plaintiff, QBE Insurance Australia Limited (QBE), entered into Policy No. 7703227DOL (the QBE Excess Policy). The seventh plaintiff, Wesfarmers General Insurance Limited (Lumley), entered into Policy No. SD/09589/000/08/Z and Policy No. SI/09588/000/08/Z (the Lumley Excess Policies). 27The Allianz Excess Policies, the Liberty Excess Policies, the Chartis Excess Policies, the AXIS Excess Policies, the QBE Excess Policy and the Lumley Excess Policies will be together referred to as the Excess Policies. The Primary Policy and the Excess Policies are together referred to as the Policies. 28Each of the Policies is a claims made and notified (claims made) contract of insurance. That is to say, each responds to a claim for liability made against the insured during the Policy Period and notified to the relevant Insurers during the Policy Period. Each of the Executives and GSMAL is an insured under all of the Policies. The claims that are the subject of the PDS Proceedings and the Transform Proceedings were first made by the GS Claimants against the Executives and GSMAL during the Policy Period and were notified to the Insurers during the Policy Period. There is no dispute that the Policies respond to the claims made by the GS Claimants, and Chubb and Liberty have already paid substantial amounts in respect of defence costs and legal representation expenses, which have become payable under the Primary Policy. The Connection with New South Wales 29One of the questions referred to the Court of Appeal concerns the territorial operation of s 6 of the Reform Act. In order to deal with the contentions of the parties as to that question, it is necessary to consider the extent of the connection that the Insurers, the Policies, the claims of the GS Claimants and the GS Proceedings have with New South Wales and with other polities that constitute the Commonwealth of Australia. 30The principal place of business of the Great Southern Group is Western Australia. The Great Southern Group consisted of a group of Western Australian companies, the ultimate parent being GSL. Each had its registered office and principal place of business in Western Australia. That had been the case since the inception of the Great Southern Group in the 1990s. Substantially all of the directors and officers of the members of the Great Southern Group had residential addresses in Western Australia. Its auditor has always been located in Western Australia. Its legal and financial advisors were also located in Western Australia. Further, most of the employees of the Great Southern Group resided in Western Australia. All of the Executives resided and worked in Western Australia. 31The Great Southern Group was engaged in commercial activities in various parts of Australia. Those activities had no special connection with New South Wales and were concentrated outside New South Wales. The agricultural assets of the Great Southern Group were concentrated in Western Australia and the southern corridor of Australia. 32The Great Southern Group had an executive committee responsible for all areas of corporate strategy and operational performance. All members of the executive committee ordinarily worked in Western Australia from the principal place of business in Perth of the Great Southern Group. The headquarters of GSL, from which its high-level officers directed, controlled and coordinated its activities, were in Western Australia. In all of the circumstances, it is fair to characterise the Great Southern Group as a distinctive Western Australian enterprise, anchored in Western Australia, from which it managed business assets predominantly located in Western Australia and the southern corridor of Australia. 33The Policies are not directed at insuring the risk of loss in connection with any particular assets of the Great Southern Group. Rather, they provide cover against directors' and officers' liability and against professional liability. As such, in determining the location of the risk insured, the focus is on where the insureds ordinarily work or have their principal place of business. Clearly, that was Western Australia. 34The course of negotiations that led to entry into the Policies occurred during August and September 2008, predominantly by email. The individuals involved were representatives of Aon in Perth, as the broker and agent for GSL, and representatives of the respective Insurers. The terms of the Primary Policy were negotiated with representatives of Chubb, in Sydney, and representatives of Liberty, in Melbourne. Accordingly, communications from individuals situated in Western Australia and Victoria exceeded those from New South Wales. 35The Allianz Excess Policies were negotiated between individuals in Western Australia and New South Wales, without any predominant factual connection to either location. The same observation can be made in relation to the Liberty Excess Policies. The Chartis Excess Policies were entirely negotiated in Western Australia, without any factual connection to New South Wales. The AXIS Excess Policies were negotiated between individuals in the United Kingdom, South Australia and Western Australia, without any factual connection to New South Wales. The terms of the Lumley Excess Policies were negotiated between individuals in Western Australia and New South Wales, in circumstances where the majority of the communications were within Western Australia and the majority of the individuals involved were in Western Australia. Finally, the negotiation of the QBE Excess Policy occurred between individuals in Western Australia and New South Wales, without any predominant factual connection to either location. 36The negotiation of the Policies was part of an integrated insurance program. The negotiations for all of the Policies were contemporaneous. The subject matter of the Excess Policies depends upon the underlying terms and conditions of the Primary Policy. The Excess Policies respond only upon exhaustion of the limit of liability under the Primary Policy. A common broker, Aon, was involved in connection with all of the Policies. It is fair to conclude that one clear common denominator in relation to the negotiation of the Policies was the involvement of Aon in Western Australia. It is reasonable to draw the inference that Aon's branch office in Perth had primary responsibility for the negotiation of the Policies. That flowed from the fact that Western Australia was the location of the insureds and of the risk to be insured. In summary, it is fair to conclude that, viewed in their proper integrated commercial context, the negotiation of the Policies overwhelmingly occurred in Western Australia, which was the centre of gravity of those negotiations. 37The Insurers had no obligation under any of the Policies to make payments with respect to claims to an address or an account in New South Wales. There was no requirement that the parties perform any obligations under the Policies in New South Wales. Given that all of the insureds reside in or have their principal places of business in Western Australia, one would reasonably expect that any payment under the Policies would be made in Western Australia. 38Each of the Insurers has meaningful business operations and employees spread throughout the states of Australia. Some of the Insurers had their principal places of business in places other than New South Wales. Liberty and AXIS were both foreign corporations with their principal place of business outside Australia. AHAC had its principal place of business in Victoria and Lumley had its registered office in Western Australia. 39In the case of the Transform Claimants, the relevant event for the purposes of s 6 was the disposition of their interests in the relevant schemes in consideration of the allotment of shares in GSL. They did so in reliance on the explanatory memoranda and prospectus that are alleged to have been misleading or deceptive by reason of material contained in or omitted from the explanatory memoranda or prospectus. In the case of the PDS Claimants, the relevant event for the purposes of s 6 was the decision to accept their application to participate in the Plantation Schemes in reliance on the Plantation PDS, which is alleged to be misleading or deceptive by reason of material contained in it or omitted from it. 40The conclusion to be drawn as to the relevant connection with New South Wales will be addressed below, when dealing with the relevant question referred to the Court of Appeal. However, before dealing with the questions, it is first necessary to say something about the terms of the Policies. The Primary Policy 41The terms of the Policies are not identical. However, their structure is generally similar. It is convenient to describe in some detail the relevant parts of the Primary Policy. It was not suggested that any part of the Primary Policy would lead to a conclusion in relation to the Primary Policy different from the conclusion in relation to all the other Policies. 42The Primary Policy contains an endorsement that the liability coverage sections provide claims made coverage, which applies only to claims first made during the Policy Period. The Primary Policy provides coverage for both directors' and officers' liability and professional liability. Each has a maximum limit of liability of $30,000,000. There is therefore a combined maximum limit of liability for all coverage sections of the Primary Policy of $60,000,000. 43One of the insuring clauses of the directors' and officers' liability section of the Primary Policy provides that Chubb and Liberty (the Primary Insurers) will pay, on behalf of each insured person, loss for which the insured person is not indemnified by an organisation on account of any claim first made during the Policy Period for a wrongful act occurring before or during the Policy Period. The directors' and officers' liability section of the Primary Policy also includes an insuring clause whereby the Primary Insurers are to pay, on behalf of each insured person, legal representation expenses on account of the attendance, or provision of documents or information, by the insured person in an insured capacity at or to any formal investigation commenced during the Policy Period. 44Relevantly, insured person means any natural person who was, now is or shall be a director or officer of an organisation. Organisation relevantly means, collectively, GSL and any of its subsidiaries. 45Claim is defined, relevantly, as a written demand for monetary damages or non-pecuniary relief, or a civil proceeding. Wrongful act means, relevantly, any act or omission, including any error, misstatement, misleading statement, neglect, breach of trust or breach of duty committed by an insured person in his or her insured capacity. Insured capacity means capacity as director or officer of an organisation. 46Loss is defined as including the amount that an insured person or an organisation becomes legally obligated to pay on account of any covered claim for defence costs and legal representation expenses. Loss also includes awards of damages or orders made by any court to pay compensation and judgment sums, as well as sums payable due to any settlement to which the Primary Insurers have consented. 47Defence costs include reasonable costs, charges, fees, including legal counsel's fees and experts' fees and expenses, incurred in defending, investigating, settling or appealing any claim. Legal representation expenses include reasonable defence costs that an insured person incurs on account of the attendance, or provision of documents or information, by such insured person in an insured capacity at or to any formal investigation. Formal investigation is a formal administrative or formal regulatory enquiry by a body or institution that is empowered by law to investigate the affairs of an insured person or an organisation. 48The professional liability section of the Primary Policy contains an insuring clause whereby the Primary Insurers agree to pay, on behalf of the insured, loss that such insured becomes legally obligated to pay on account of any professional services claim first made against an insured during the Policy Period for a wrongful act occurring before or during the Policy Period. The professional liability section of the Primary Policy also includes an insuring clause whereby the Primary Insurers are to pay, on behalf of an insured, legal representation expenses on account of any formal investigation commenced during the Policy Period. 49In the professional liability section, claim means a professional services claim or a formal investigation. Professional services claim means a written demand for monetary damages or non-pecuniary relief, or a civil proceeding, and includes an arbitration, mediation, conciliation or alternative dispute resolution proceeding. Wrongful act is any act or omission committed by an insured while performing or failing to perform professional services. The term professional services relevantly includes financial, economic or investment advice given, or investment management services performed or required to be performed, by an organisation in respect of a managed investment scheme, unit trust, partnership or investment company managed, operated or administered by an organisation. 50For the purposes of the professional liability section, insured means GSL and any subsidiary of GSL, as well as any natural person who was, now is or shall be a member of any board committee or advisory board or a director or officer of GSL or any subsidiary of GSL. Loss includes the amount that an insured becomes legally obligated to pay on account of any covered claim for defence costs or legal representation expenses. It also includes awards of damages or orders made by any court to pay compensation and judgment sums, as well as sums payable due to settlements to which the insurer has consented. 51Importantly for present purposes, the directors' and officers' liability section of the Primary Policy contains an extension whereby the Primary Insurers must, prior to the final disposition of any claim, advance defence costs or legal representation expenses within 30 days of receipt of an invoice for the same from defence counsel. The professional liability section of the Primary Policy also provides that the Primary Insurers must, prior to the final disposition of any claim, advance defence costs and legal representation expenses, as provided under the professional liability coverage section, within 30 days of receipt of an invoice for the same from defence counsel. Section 6 of the Reform Act and the Nature of the Right Created 52Section 6 of the Reform Act was enacted to address a perceived unfairness that could arise where a person is insured against a liability, that liability arises, the insured obtains a sum from its insurer and then the insured either disappears or fritters away the sum or enters into a collusive arrangement with the insurer. In such situations, even if a claimant obtains a verdict against the insured wrongdoer, he or she may not recover any sum from the insured (see Speech on the Second Reading of the Law Reform (Miscellaneous Provisions) Bill, New South Wales Legislative Council, Parliamentary Debates, 20 March 1946 at 2809). 53The origin of s 6 was s 42 of the Workers Compensation Act 1908 (NZ), which was predicated upon the entry by an employer into a contract with an insurer for an indemnity in respect of any liability to pay compensation or damages to any worker in respect of any accident. Section 42 provided that, if the employer died insolvent, became bankrupt, made a composition or arrangement with his or her creditors or, if a company, commenced to be wound up, then the amount of any liability of the employer to the worker was to be a charge on all insurance moneys that may become payable in respect of that liability. 54Section 42 was re-enacted in the Workers Compensation Act 1922 (NZ). A similar provision was enacted in relation to motor vehicle accidents, in s 10 of the Motor-vehicle Insurance (Third-party Risks) Act 1928 (NZ). Those provisions were then consolidated in s 9 of the Law Reform Act 1936 (NZ), which is in terms substantially identical to s 6 of the Reform Act. 55The language of s 6 has been described as "undoubtedly opaque and ambiguous" (New South Wales Medical Defence Union v Crawford (1993) 31 NSWLR 469 at 479D). It has also been said that its "ambiguity may be its only clear feature" (McMillan v Mannix (1993) 31 NSWLR 538 at 542B). Section 6 should be repealed altogether or completely redrafted in an intelligible form, so as to achieve the objects for which it was enacted. 56Section 6(1) provides that the amount of the liability to pay damages or compensation, of any person who has entered into a contract of insurance by which that person is indemnified against that liability, is to be a charge on all insurance moneys that may become payable in respect of that liability. The charge comes into existence on the happening of the event that gives rise to the claim for damages or compensation. 57The reference in s 6(1) to "the happening of the event giving rise to the claim for damages or compensation" should be construed as a reference to the moment when the liability arises, rather than to a later time when the claim based on that liability is made. That is to say, it should be construed as referring to "the happening of the event giving rise to the liability to pay damages or compensation". The charge comes into existence on the happening of the event that gives rise to the liability to pay damages or compensation, not when the claim for damages or compensation that that liability may prompt is made. The claim for damages or compensation will ordinarily be made some time after the liability arises. 58Under s 6(3), every charge created by s 6 is to have priority over all other charges affecting the insurance moneys. Where the same insurance moneys are subject to two or more charges by virtue of s 6, they are to have priority as between themselves in the order of the dates of the events out of which the liability arose. If they arise out of events happening on the same date, they are to rank equally among themselves. 59An action against an insurer in accordance with s 6(4) appears to be the only way in which a claimant can enforce the right conferred by s 6(1). Under s 6(4), the charge is to be enforceable by way of an action against the insurer by the claimant in the same way, and in the same court, as if the action were an action to recover damages or compensation from the insured. The parties are, to the extent of the charge, to have the same rights and liabilities, in respect of any such action, and of the judgment given in such action, as if the action were against the insured. Under s 6(5), such an action may be brought even though judgment has already been awarded against the insured for damages in respect of the same matter. 60Section 6(6) provides that any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge is, to the extent of that payment, to be a valid discharge to the insurer, notwithstanding anything contained in s 6. Section 6 (7) provides that no insurer is to be liable under s 6 for any greater sum than that fixed by the contract of insurance. 61The use of the word charge to describe the right created by s 6 indicates that the Reform Act is intended to create a security for the payment of a debt or the performance of some other obligation. The law recognises the assignment of a presently existing legal chose in action by way of charge or hypothecation, as distinct from the transfer or assignment of a chose in action by way of legal mortgage. A security by way of charge over a presently existing chose in action is effective only in equity. Similarly, a security by way of charge over only part of a presently existing chose in action is effective only in equity. Where the subject matter is the future "fruit", rather than the whole or part of the presently existing "tree", the charge will be effective in equity when given for value (Bailey v New South Wales Medical Defence Union Limited [1995] HCA 28; (1995) 184 CLR 399 at 446) (Bailey). 62However, s 6 creates a new right, with an associated remedy to enforce it. It appears to do so by ignoring the distinction between legal and equitable assignments of the whole or part of a presently existing or future chose in action and ignores the requirement for value. Where it applies, s 6 by its own force, creates a so-called charge on insurance moneys that are then payable in respect of the liability against which the insured is indemnified and on all insurance moneys that may become payable thereafter in respect of that liability. The so-called charge is created on the happening of the event giving rise to the claim, or more correctly when the liability for damages or compensation arises (Bailey at 446). It will be convenient for the purposes of these reasons to refer to the statutory right created by s 6 as the charge, notwithstanding that it is a distinct statutory right that is not in the nature of a hypothecation. 63Section 6 seeks to secure the performance of not only the insurer's obligation to pay to the insured insurance moneys that are or may become payable, but also the insured's performance of its obligation to pay damages or compensation to the claimant in satisfaction of the insured's liability to the claimant. That is achieved by creating the charge in favour of the claimant over all insurance moneys that are or may become payable in respect of the insured's liability to pay damages or compensation to the claimant. The obligations, the performance of which are to be secured by the charge, may be greater or less than the value of the security created by s 6, being the insurance moneys payable under the relevant contract of insurance (Bailey at 447). 64The reference in s 6(1) to "insurance moneys that ... may become payable" indicates that the charge comes into existence notwithstanding that there is no sum that could be identified as presently payable by the insurer to the insured that could be the subject of a dispute as to priority. In those circumstances, the charge operates in relation to such moneys as and when they do become payable. However, the charge will dissolve if the claimant fails in his claim against the insured (Bailey at 449). The Questions 65By their amended summons filed on 1 November 2012, the Insurers claim declarations to the effect of the following: (1)A declaration that, on its proper construction, there can be no charge under s 6(1) of the Reform Act on any insurance moneys that are or may become payable by any of the Insurers under any of the Policies: (a)in respect of the liability of any insured to pay damages or compensation to any of the PDS Claimants as claimed in the PDS Proceedings; or (b)in respect of the liability of any insured to pay damages or compensation to any of the Transform Claimants as claimed in the Transform Proceedings. (2)Alternatively, a declaration that, to the extent that s 6 of the Reform Act does impose a charge on insurance moneys that are or may become payable under any of the Policies in respect of the liability of an insured to pay damages or compensation to any of the PDS Claimants or the Transform Claimants, those insurance moneys do not include defence costs, legal representation expenses or costs and expenses that are paid by the Insurers in accordance with the Policies before any insurance moneys become payable in respect of the liability of the insured to any of the PDS Claimants or the Transform Claimants. (3)Further, and alternatively, a declaration that, to the extent that s 6 of the Reform Act does impose a charge on insurance moneys that are or may become payable under any of the Policies in respect of the liability of an insured to pay damages or compensation to any of the PDS Claimants or the Transform Claimants, any payment by the Insurers in accordance with the Policies for covered claims, other than defence costs, legal representation expenses or costs and expenses that are paid by Insurers in accordance with the Policies, before the insurance moneys the subject of the charge have become presently and unconditionally payable for a different covered claim, is a valid discharge to the Insurers. (4)A declaration that the Insurers are not, by reason of their receipt of the letter of 13 September 2012 sent on behalf of the Transform Claimants, on actual notice of the existence of any charges within the meaning of s 6(6) of the Reform Act. (5)A declaration that the Insurers are not, by reason of their receipt of the letter of 17 September 2012 sent on behalf of the PDS Claimants, on actual notice of the existence of any changes within the meaning of s 6(6) of the Act. (6)Further, and alternatively, a declaration that, if the Insurers received actual notice of any charge under s 6 of the Reform Act in favour of the Transform Claimants, on or after 13 September 2012, or of any charge under s 6 of the Reform Act in favour of the PDS Claimants, on or after 17 September 2012, any payment of defence costs and legal representation expenses by Chubb and Liberty under the Primary Policy prior to those dates was a valid discharge to Chubb and Liberty. 66The questions referred to the Court of Appeal are as follows: On the proper construction of s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (Section 6): Territoriality 1. Does section 6 create a charge on insurance moneys that are or may become payable under the Policies only where: a)the law of New South Wales is the governing law of the Insured's cause of action against the Plaintiffs in relation to indemnity for the Claimants' claim against the Insured; b)the locus of the relevant event that gives rise to the Claimants' claim against the Insured is in New South Wales; c)the law of New South Wales is the proper law of the Policy; d)the law of New South Wales is the law governing the cause of action of the Claimants said to give rise to the charge; e)the situs of the Insured's choses in action against the Plaintiffs under the Policies is New South Wales; f)the law of New South Wales is the law with the closest and most real connection to the Policy; and/or g)there is some other territorial connection between the Policy or the claim made by the Claimants, and New South Wales? Application to Claims Made and Notified Policies 2. Does the fact that the Policies indemnify an Insured in respect of a claim for damages or compensation made against the Insured and notified by the Insured to the Plaintiff within the Policy Period, render Section 6 inapplicable to any insurance moneys that are or may become payable under the Policies? Relevant Event 3. If the answer to question 2 is in the negative, a)is Section 6 capable of applying to insurance moneys that are or may become payable under the Policies in respect of a liability to pay damages or compensation to a PDS Claimant where the alleged conduct of the Insured giving rise to the claim for damages or compensation happened before the Policies were entered into? b)should the decision in The Owners-Strata Plan No 50530 v Walter Construction Group (In Liquidation) & Ors (2007) 14 ANZ Insurance Cases 61,734 be followed to the extent it concluded that Section 6 does not create a charge based upon a claim arising from an event which has (or events which have) occurred prior to the insurer and the Insured having entered into the Policy? Defence Costs 4. To the extent that Section 6 does impose a charge on "insurance moneys that are or may become payable" under the Policies in respect of an Insured's liability to pay damages or compensation to any of the Claimants, do those "insurance moneys" include Defence Costs, Legal Representation Expenses or Costs and Expenses that are paid by the Plaintiffs in accordance with the Policy before judgment is entered or a settlement is agreed in respect of the Claimants' claim for damages or compensation? Operation of Charge Where Multiple Claims Against Insured 5. To the extent that Section 6 does impose a charge on "insurance moneys that are or may become payable" under the Policies in respect of an Insured's liability to damages or compensation to any of the Claimants, will any payment made by the Plaintiffs under the Policies by way of indemnity for an Insured's liability to pay damages or compensation (excluding a payment of Defence Costs, Legal Representation Expenses, or Costs and Expenses), be a valid discharge to the Plaintiffs, if the payment is made before judgment is entered or a settlement is agreed in respect of the Claimants' claim for damages or compensation? Actual Notice 6. To the extent that Section 6 does impose a charge on "insurance moneys that are or may become payable" under the Policies in respect of an Insured's liability to pay damages or compensation to any of the Claimants, are the Plaintiffs on actual notice of the existence of any charges within the meaning of subsection (6) of Section 6, by reason of: a)their receipt of the letter dated 13 September 2012 sent on behalf of the WA Claimants? b)their receipt of the letter dated 17 September 2012 sent on behalf of the PDS Claimants? Other Relief 7. What relief, if any, are the Plaintiffs entitled to? Costs 8. What order, if any, should be made with respect to the costs of the proceedings? Note: For the purposes of the above questions, defined terms have the meaning given to them in the Plaintiffs' Amended Summons dated 31 October 2012. 67The parties accepted that it would be convenient for the Court to answer such of questions 1, 2, 3, 4, 5 and 6 as are appropriate to answer before deciding on the relief, if any, to which the Insurers might be entitled. It is also convenient to defer the question of costs until the Court has published its conclusions. 68The essence of the dispute between the parties is raised directly by questions 4 and 5. Those questions also explain why it is important for the parties to obtain answers to the separate questions now, rather than to await the determination of all of the Great Southern Proceedings. On one view of s 6, the Insurers cannot safely pay any insurance moneys otherwise than in accordance with s 6 from the time when they are on notice of the charge. The consequence of that view is that, if s 6(1) applies, the Insurers could not safely pay defence costs on behalf of the defendants in the Great Southern Proceedings. If the Insurers were to pay those costs, they would do so at their peril if, ultimately, the amount of the liability of all of the insured persons to the GS Claimants exceeds the amount available under the Policies at the time when the amount of that liability is determined by judgment, award or settlement. Similarly, if that view is correct, and s 6(1) applies in respect of liabilities said to be owing to both the PDS Claimants and the Transform Claimants, s 6 may affect the priorities as between the PDS Claimants and the Transform Claimants in relation to the available insurance moneys, so as to put the Insurers at risk if they pay out one set of the GS Claimants in preference to another. 69On another view, the Insurers remain free to pay out moneys in accordance with the Policies up until the time when the insured's liability is determined by a judgment, award or settlement. Only then does the charge "attach" to the moneys payable in respect of that judgment, award or settlement, and it is only those moneys that must be dealt with in accordance with s 6. If that view be correct, a number of the questions may not need to be answered at this stage, and some may never arise, either because no liability may be established or because there may be no competing claims in respect of the same moneys. 70The specific questions will be considered against the background outlined above. Depending upon the way in which some questions are answered, others of the questions may not arise. However, out of deference to the parties and their contentions, it is appropriate to address each of the questions, notwithstanding that it may not arise. 71It is convenient to address questions 2, 3, 4, 5 and 6 before addressing question 1. In order to answer question 1, concerning the extent of any extra-territorial operation of s 6, it is necessary to consider the context and subject matter of s 6. The answers to questions 2, 3, 4, 5 and 6 and particularly the answers to question 4 and 5 provide a description of the subject matter of section 6 and the way in which it might operate. That will be of importance in answering question 1. That was the approach adopted by the Insurers and other parties in their submissions to the court. Question 2: Claims Made Policies 72The issue raised by question 2 is whether s 6 applies to claims made contracts of insurance, as distinct from occurrence based contracts of insurance. The Insurers contend that the wording of s 6(1) is only apt to cover occurrence based policies and, accordingly, that it does not apply to the Policies, which are all claims made contracts. 73A contract of insurance against liability will ordinarily create an obligation on the part of the insurer to indemnify the insured in respect of specified liabilities. The difference between an occurrence based contract and a claims made contract is that, in the case of the former, the indemnity arises by reason that an occurrence giving rise to liability on the part of the insured occurs during the period of insurance cover, whereas, in the latter case, the liability on the part of the insurer arises upon the notification by the insured to the insurer during the period of a claim against the insured. 74Putting it another way, a claims made contract of insurance differs from an occurrence based contract of insurance in that, instead of attaching the insurer's liability to indemnify the insured to the happening of an occurrence during the policy period, a claims made contract of insurance attaches the insurer's liability in various ways to the making of a claim against the insured, the notification by the insured to the insurer or the discovery of a claim within the period of cover. In the case of a claims made contract of insurance, it is the happening of those events that gives rise to the insurer's liability to indemnify the insured (FAI Insurance Limited v Hospital Care Pty Ltd [2001] HCA 38; (2001) 204 CLR 641 at [64]). 75Typically, claims made contracts also contain an extension so that the rights of indemnity under the contract are triggered by notification of "circumstances" that may give rise to a claim against the insured. The Policies contain such an extension. But even in that case, the rights under a claims made contract are likely to be triggered at a later time than the right arising by the operation of s 6. 76The Insurers contend, in effect, that s 6(1) does not apply to all contracts of liability insurance. They say that, in determining the types of liability insurance contracts to which s 6 applies, it is necessary to bear in mind the central significance of the event for the scheme of s 6. The relationship of the event to the charge and the relationship of the event to the indemnity are important pointers, they say, to the proper construction of s 6. 77The Insurers say, first, that the ancestry of s 6 demonstrates that occurrence based contracts are the only kinds of contracts of insurance to which s 6 applies. Thus, s 6 focuses on the event giving rise to the liability for damages or compensation in respect of which the claim is made. That is the event that triggers indemnity in an occurrence based contract. In an occurrence based contract, the charge would arise at the same time as the occurrence of the trigger that gives rise to the entitlement to indemnity under the contract of insurance. Accordingly, the Insurers say, s 6(1) does not apply where a person has entered into a claims made contract and should be construed as applying only to contracts of insurance where the event giving rise to the liability for damages or compensation in respect of which the claim is made is also the trigger for the entitlement of the insured to indemnity. 78The Insurers assert that claims made contracts of insurance were devised to address the difficulty of identifying the timing of some classes of events. That object was given legal effect by redefining the entitlement to indemnity in a fundamental way: instead of the event or occurrence that gave rise to liability being the trigger, the notification of the making of a claim is the trigger. The Insurers contend that part of the rationale for that fundamental shift in practice would be undermined by forcing insurers under claims made contracts of insurance to assess exposure to charges under s 6 by reference to the nature and timing of events giving rise to claims against the insured, a matter that would otherwise rarely involve investigation. 79In addition, the Insurers say that the statutory scheme and its history indicate that claims made contracts of insurance were not in the contemplation of the Parliament of New Zealand in 1908 or 1936, or in the contemplation of the New South Wales Parliament in 1946. They say that they were not in contemplation because the statutory scheme does not accommodate such contracts of insurance. Thus, in particular, the original New Zealand statute of 1908 referred expressly to the liability of an employer to pay compensation or damages to a worker in respect of an accident. There would be no difficulty under that provision in identifying the event giving rise to the charge. 80Because claims made contracts of insurance are not triggered by the happening, during the policy period, of the event giving rise to liability in respect of which the claim is made, but by the making of a claim (or the notification of circumstances), there may be a significant lapse of time between the happening of an event that gives rise to a liability for damages or compensation, on the one hand, and the event that triggers the right to an indemnity under a claims made contract of insurance. Such insurance cover may only come into existence after the event that gives rise to the claim for damages or compensation. The Insurers contend that s 6 is limited to the case where an insured is indemnified by the relevant contract of insurance against liabilities to pay damages or compensation arising from the happening of an event within the policy period, being the event that gives rise to the claim for damages or compensation. 81In summary, then, the Insurers advance three arguments in support of the proposition that question 2 should be answered in the negative: * Claims made contracts of insurance were rare in 1946 and the New South Wales legislature, much less the New Zealand legislature, could not have intended to deal with them at the time s 6 and its predecessors were passed. * The application of s 6 to claims made contracts of insurance gives rise to anomalies. * It is not appropriate to describe claims made contracts of insurance as contracts "by which a person is indemnified against liability to pay damages or compensation", because they are contracts by which a person is indemnified against certain claims made against him or her during the policy period. None of those arguments should be accepted. 82The argument that question 2 should be answered in the negative because claims made policies were not in the contemplation of the New South Wales legislature in 1946 is contrary to the general principle that legislation should be construed as if it were always speaking (see Hore v Albury Radio Taxis Co-op Society Ltd [2002] NSWSC 1130; (2002) 56 NSWLR 210 at 226 - 231). Another way of putting that proposition is that a statute should generally be construed so as to apply to all things coming within the denotation of its terms, having regard to their connotation at the time of enactment. The connotation of a word or phrase is its essential attributes, which are to be determined as at the time of enactment. The denotation of a word or phrase is the class of things that, from time to time, may be seen to possess those essential attributes sufficiently to justify the application of the word or phrase to them. Claims made contracts of insurance clearly enough come within the denotation of the phrase "contract of insurance" by which a person is indemnified against liability to pay any damages or compensation. 83Whether or not claims made contracts of insurance were in the contemplation of the drafter of s 42 of the Workers Compensation Act 1908 (NZ) is not to the point. The question is whether the language used in s 6, as a matter of English, describes a contract of insurance that happens to be a claims made contract, as well as a contract of insurance that happens to be an occurrence based contract. The language of s 6(1) is equally apt to describe both kinds of contract, so long as the liability of the insured to pay damages is one in respect of which it can be said that an event happened that gave rise to the liability to pay such damages. A contract of insurance against liability will respond whether it is the happening of an event occurring during the period of insurance, or the giving of notice during the period of insurance of a claim in respect of an event, that is the trigger for the right of indemnity under the contract of insurance. 84There is nothing in the context or text of s 6 to suggest that the general principle described above is inapplicable. On the contrary, the generality of the language used and the reforming object of s 6 suggest that the provision should apply to any contract of insurance by which an insured is indemnified against liability to pay any damages or compensation. There is no reason to conclude that the remedial purpose of s 6 was intended to be limited to those kinds of liability insurance contracts that might have been in the contemplation of the New South Wales legislature in 1946. If it were intended to be so limited, insurers could easily contract out of the effect of s 6 by not offering occurrence based insurance but only claims made insurance. Whether or not claims made contracts were in the contemplation of the New South Wales Parliament in 1946, it does not follow that s 6 is inapplicable to such contracts of insurance. 85The anomaly relied upon by the Insurers in support of the second argument is said to arise from the decision of this Court in The Owners - Strata Plan No 50530 v Walter Construction Group Limited (In Liquidation) & Ors [2007] NSWCA 124; (2007) 14 ANZ-Ins Cas 61-734 (the Walter Construction Case). In the Walter Construction Case, the Court concluded that a charge under s 6 is not available where the contract of insurance did not come into existence until after the event triggering the operation of s 6. If that proposition be correct, s 6 applies in respect of some claims made contracts, namely, where the event occurs and the claim is notified in the same policy period, but not others, namely, where the claim is notified in a subsequent policy period. It may be an anomaly that s 6 does not apply to all contracts of insurance that provide cover in respect of third party liability claims. However, it is not clear how that anomaly would be cured by restricting further the classes of contract to which s 6 applies. 86As to the Insurers' third argument, it is difficult to see why a claims made contract cannot properly be described as a contract by which a person is indemnified against liability to pay damages or compensation. That is the clear effect of a claims made contract. It makes no sense to say that a person is indemnified against a claim. A claim itself is not something against which someone can be indemnified. It is only liability to pay damages or compensation in respect of which a claim is made that can be the subject of an indemnity. 87Question 2 would be answered "no". Question 3: Relevant Event Prior to Inception 88Question 3 is concerned with whether s 6 applies to a claim for damages or compensation where the event or events giving rise to the claim occurred before the inception of the relevant contract of insurance. The question raises the issue of whether the PDS Claimants are entitled to any charge in respect of their claims for damages or compensation in the PDS Proceedings, in circumstances where the event or events giving rise to those claims arose before the inception of the Policies. The question raises two competing constructions of s 6, which were summarised by Lindgren J in FAI General Insurance Limited v McSweeney [1997] FCA 152; (1997) 73 FCR 379 at 415. 89The first construction is that s 6(1) speaks as at the moment after the contract of insurance is entered into, and at subsequent moments throughout the period of the contract of insurance up to the time of the happening of the relevant event. At that moment, and at those moments, the insured is indemnified against liability to pay any damages or compensation. The happening of the relevant event is, at that moment, and at those moments, a future event. So much is indicated by the words "shall on the happening of the event giving rise to the claim ... be a charge". The words "all insurance moneys that are or may become payable in respect of that liability" encompass two possibilities. One is that the insurance moneys will be payable upon the happening of the relevant event. The other is that the insurance moneys will become payable subsequently. In either case, the moneys will be payable pursuant to the contract of insurance by which the insured is already indemnified. In the latter case, the charge might conveniently be thought of as a floating charge. 90The second construction is that s 6(1) speaks as at the time of adjudication. As at that time, the insured will have entered into a contract of insurance that indemnifies the insured, as at the time of the adjudication, against any liability to pay damages or compensation. Under the second construction, the expression "shall ... be a charge" is in the imperative mood, not the future tense. That is to say, the expression is prescriptive of a legal result to which a court must give effect. The charge that s 6 creates exists on and from the relevant event. It is fixed, in the case where insurance moneys are payable at the time of the relevant event, and floating, in respect of insurance moneys that may become payable, and do in fact become payable, at a later date. In relation to the latter, it is immaterial that the insurance moneys become payable pursuant to an insurance contract entered into after the relevant event. Thus, once insurance moneys have in fact become payable in respect of the liability, the charge fixes upon them. 91In the Walter Construction Case, the Court of Appeal adopted the first construction. That case was concerned with an allegation that the design and construction of a building that was the subject of a strata scheme were defective. The owners corporation under the strata scheme brought the proceeding against the builder and two other defendants. The builder went into liquidation. However, the builder was insured under a claims made contract of insurance, the policy period for which was from 31 December 1999 to 31 December 2001. The event giving rise to the claim against the builder occurred no later than August 1995. 92The owners corporation sought to join the builder's insurer under s 6 of the Reform Act. The joinder application was dismissed at first instance, on the ground that s 6 did not apply to a contract of insurance that came into existence after the event giving rise to the claim. The Court of Appeal dismissed an appeal from that decision. 93In the Court of Appeal, Hodgson JA, with whom Tobias JA agreed and Giles JA in substance agreed, said: "[31] It is true that the charge under s 6(1) is something created by statute, which does not have to conform to pre-existing general law categories; but it is difficult in the extreme to read s 6(1) as disclosing a legislative intention that there be something called a charge in existence at a time when there is no property to which it could attach, and no person against whom any rights could be asserted to have a charge attached to property if and when the property comes into existence. ... [32] It is also true that the charge extends to "moneys that ... may become payable"; but in the situation under discussion, there would not be in existence any circumstance giving rise to a possibility that moneys may become payable, apart from the possibility that the person against whom the cause of action has arisen might, in the future, make a contract with some as-yet unidentified insurer, which covers liability under that cause of action. The words "may become payable" are apt to refer to cases where the amount payable under an existing insurance policy has not been determined and/or depends on future circumstances, and also cases where there are conditions of the insurance policy which may or may not be satisfied. [33] The other main difficulty I see with the view adopted by Lindgren J is the indication of temporal order strongly given by the language of s 6(1). It is true, as asserted by Lindgren J, that the question of whether a person "has ... entered into a contract of insurance" is to be considered at the date of adjudication; but the link between that expression and the words "shall upon the happening of the event" cannot be disregarded, and this, as a matter of language, is a strong indication that s 6(1) is directed to those cases where the "event" happens after the entry into the contract. ... [35] So although there is force in the considerations that a beneficial construction should be given to beneficial legislation, and that distinctions should be generally avoided where there is no rationale for them, I think the opposing considerations are stronger, and that the primary judge's conclusion was correct." 94The PDS Claimants contend that the Walter Construction Case should be overruled and should not be followed. Thus, question 3 raises the question of whether the Walter Construction Case was correctly decided, in so far as it determined that s 6 does not create a charge on insurance moneys payable under a contract of insurance where the contract came into existence after the events giving rise to the claim for damages or compensation. It also raises the question of whether, even if the Court prefers the second construction articulated by Lindgren J, the Walter Construction Case should nevertheless be followed because it was not plainly wrong. 95It could be suggested that the reasoning of Hodgson JA set out above does not pay sufficient regard to the legislative policy of s 6, in so far as his Honour held that s 6 applies only to some contracts of insurance. Thus, from a policy point of view, it may not be necessary to draw the distinction drawn by Hodgson JA. In circumstances where the language of s 6 is obscure, it may be undesirable to place too much emphasis on the particular words used, at the expense of the policy behind the provision. If the words used are capable of an interpretation that gives effect to the policy of s 6, that interpretation may be the one to be preferred. 96It could also be suggested that the reasoning of Hodgson JA does not place sufficient weight on the words "or may become payable". Those words expressly contemplate that insurance moneys may become payable at a point after the charge arises. That could happen where an insured subsequently enters into a contract of insurance that responds to a claim. Thus, there may not be sufficient reason to confine the words of s 6 to cases where the amount of the liability, if any, under an existing contract of insurance has not been determined at the time when the charge arises. 97In addition, the reasoning of Hodgson JA places some emphasis on the characteristics of a charge in the nature of hypothecation, and it could be suggested that his Honour did not pay sufficient regard to the fact that the right created by s 6 is sui generis. Once it is accepted that the charge, although already in existence, only applies when the amount of the claim is determined by judgment, award or settlement, then there may be nothing out of the ordinary in saying that it is capable of fixing on moneys that become payable under a contract of insurance that was entered into after the charge came into existence. The right created by s 6 is a continuing one, which applies to moneys that meet the description contained in s 6(1). 98In general, where a question concerns the meaning of unclear statutory language, and the view expressed in an earlier decision is well and truly open, a mere preference for a different view will not justify overruling the earlier decision. The later court must have a strong conviction as to the incorrectness of the earlier decision before it overrules an earlier decision (see Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86 at 100). Before an intermediate appellate court will depart from, or overrule, an earlier decision of that court, it must have a strong conviction that the earlier decision was erroneous and the nature of the error of the earlier court must be one that can be demonstrated with a degree of clarity by the application of correct legal analysis (see Gett v Tabet [2009] NSWCA 76; (2009) 254 ALR 504 at [294] and [295]). 99In the present case, although there are reasons for concluding that the second construction set out by Lindgren J is to be preferred, it certainly cannot be said that the reasoning of Hodgson JA was plainly wrong. The wording of the section is at best opaque. The reasons for preferring the alternative construction were identified and dealt with by his Honour. In addition, as his Honour pointed out, s 6 contains a temporal order that counts against the second construction. 100The PDS Claimants contend that the reasoning of Hodgson JA was plainly wrong and should not be followed because his Honour did not consider the particular anomalies that arise where there are multiple claims that, together, exceed the policy limit and the charge may apply to some claims made policies and not to others. However, for reasons that will become apparent from the answers to questions 4 and 5, the operation of s 6 is substantially narrower than the operation for which the PDS Claimants contend, and, as a result, many of the anomalies to which the PDS Claimants point do not arise. 101The PDS Claimants contended, in the alternative, that it should not be a requirement for the Court, when it consists of five judges, as the court hearing the present proceeding did, to overrule an earlier decision of the Court, that the Court considers that that earlier decision is plainly wrong. In their submission, it is sufficient if the later court of five prefers the alternative construction. That contention should be rejected. There is no basis for the Court to adopt a different approach to overruling its previous decisions based simply on the number of judges comprising the Court. 102The Court of Appeal is a court constituted under s 42 of the Supreme Court Act 1970, whether constituted by three or any greater number of judges of appeal. As a matter of principle, the reasons why the Court of Appeal should be reluctant not to follow an earlier decision of the Court apply equally to a court consisting of more than three judges as to a court consisting of three judges. The High Court has never suggested that different principles apply to overruling one of its earlier decisions according to the number of judges comprising the later court (see Northern Territory v Mengel [1995] HCA 65; (1995) 185 CLR 307 at 338 - 399; Imbree v McNeilly [2008] HCA 40; (2008) 236 CLR 510 at [47] and [72]; Cain v Malone [1942] HCA 20; (1942) 66 CLR 10 at 15 to 17). 103The purpose of constituting a bench comprising five judges is not to lessen the requirement that the later court have a strong conviction that the earlier decision be plainly wrong before overruling it. The reason for constituting a bench of five judges is that, if it is to be said by the Court that a previous decision of the Court is plainly wrong, that should be said by at least three judges of the Court. Acceptance of the proposition that, when constituted by five judges, the Court need not be persuaded that an earlier decision is plainly wrong, would mean that parties' rights would depend upon the number of judges selected to comprise the Court. Since it would always be possible to select a panel of five judges, it would never be necessary to conclude that a previous decision was plainly wrong in order to overrule or depart from it. 104While there may be grounds for concluding that the view expressed by Hodgson J is not necessarily the preferable one, it is certainly not plainly wrong, and the Court should follow it as precedent. It follows that question 3(a) should be answered in the negative and question 3(b) should be answered in the positive. Questions 4 and 5: Defence Costs and Multiple Claims 105The essence of the dispute reflected in questions 4 and 5 is whether, because the charge under s 6(1) comes into existence on the happening of an event giving rise to a liability, it must, at that time, attach to or descend on all insurance moneys that are, or may become, payable, in respect of the claim made to enforce that liability, subject to the requirement, under s 6(7), of actual notice of the charge being received by the insurer. The critical question concerns the meaning of the words in s 6(1) that the amount of the liability of the insured is to be a charge on "all insurance moneys that are or may become payable in respect of that liability". 106The word liability in the quoted phrase refers back to the liability of an insured to pay damages or compensation to a third party claimant. The Transform Claimants contend that the quoted phrase can encompass defence costs and other like costs and expenses, the payment of which erodes the limit of liability under the Policies. Accordingly, they say, any payment by the Insurers of defence costs or legal representation costs, after they have actual notice of the existence of the charge in favour of the PDS Claimants, will not be a valid discharge to the Insurers. The PDS Claimants say that several textual features of s 6 support that construction. 107The charge attaches to, or descends on, not only insurance moneys that are payable, but to all insurance moneys that may become payable. The PDS Claimants say that the words may become payable are apt to encompass insurance moneys that may be applied for several purposes. Thus, the charge is not limited to moneys that are payable for the liability of the insured to the third party claimant. Rather, the charge attaches to insurance moneys that are, or may become, payable in respect of that liability. The words in respect of convey the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer. The charge arises notwithstanding that the amount of the insured's liability may not then have been determined. That emphasises that the insurance moneys are to be subject to the charge as security for the full amount of the insured's potential liability, notwithstanding that, at the time when the charge attaches or descends, it may not be possible to assess how much is owed by the insured to the claimant. 108The PDS Claimants contend that that construction is consistent with the statutory purpose of s 6, being to enable a third party claimant to have recourse to funds paid or payable by an insurer to a wrongdoer in respect of the injury of which the third party claimant complains. It is designed to prevent the wrongdoer from either dispersing the moneys amongst its creditors or frittering it away on its own purposes. It is also designed to prevent the wrongdoer and its insurer from making a corrupt bargain (McMillan v Mannix (1993) 31 NSWLR 538 at 547). Thus, they say, insurance moneys are not to be depleted to the prejudice of the third party claimant, particularly by being consumed in defence costs. 109The charge arises on the happening of the event giving rise to the claim for damages or compensation (Bailey at 446 and 415). At that time, the charge affects all insurance moneys that are or may become payable in respect of the claim for damages or compensation against the insured. Therefore, the PDS Claimants say, all insurance moneys that respond, or may respond, to the claim for damages or compensation are subject to the charge. 110The Policies indemnify the insureds for a maximum amount of Loss (as defined) suffered by them. The Policies do not provide one limit of liability for claims made by third parties and another limit of liability for defence costs. Rather, the Policies provide that the Insurers are to pay up to a maximum amount for the Loss suffered by the insureds. That, the PDS Claimants say, is the sum that is or may become available to pay the liability for any claim first made against the insureds during the Policy Period. It is a necessary corollary, they say, that that is the sum that is the subject of the charge, at the time of the event that gives rise to the claim against the insured. They say that the maximum amount of Loss payable by an insurer for a claim for damages or compensation under the relevant contract of insurance is the amount available to pay the liability for any claim made against the insured. 111The PDS Claimants accept that the Insurers may pay moneys under the Policies until such time as they receive actual notice of a charge. Such payments would be a valid discharge of the Insurers. However, they say, by the operation of s 6(6), after the Insurers receive actual notice of the charge, no payment made by them under the Policies will be a valid discharge of their delegations (see Bailey at 450 and 415). The language of s 6(6), they say, is sufficiently wide to capture all payments made to the insured after the charge attaches or descends (Steigrad v BFSL 2007 Ltd [2011] NZHC 1037; (2011) 16 ANZ-Ins Cas 61-910 at [51]) (Steigrad). 112Where general words are used, they should be given their ordinary meaning unless the contrary intention is shown. The PDS Claimants say that no reason has been shown for limiting the terms of s 6(6) and that, in accordance with ordinary principles of statutory construction, the words any payment in s 6(6) would include a payment made by the Insurers for defence costs. Thus, if the Insurers make any payment of defence costs after they have received actual notice of a charge, they will be at risk, upon enforcement of the charge by the GS Claimants, of being liable to restore the amount of any such payment to the pool of moneys available under the Policies to meet the claims of the GS Claimants. 113The PDS Claimants assert that the Insurers received actual notice of the charge in their favour by the letter of 17 September 2012. Accordingly, they say, any payments that the Insurers might make under the Policies after that time must be for the purpose of satisfying the liability of the insureds to the GS Claimants. Any payment made towards defence costs after that date will have been made voluntarily (Steigrad at [57]). They contend that, since s 6(6) effectively renders the Insurers volunteers in respect of defence costs after receiving actual notice of a charge, the Insurers could refuse to provide their consent to pay defence costs under the terms of the Policies. 114The PDS Claimants point to the provision of the Primary Policy whereby each insured agrees not to incur defence costs or legal representation expenses without the prior written consent of Chubb and Liberty. Further, Chubb and Liberty are not to be liable for any defence costs, legal representation expenses or other element of loss incurred, or any obligation assumed or any admission made, by any insured without their prior written consent. However, under the relevant provision of the Primary Policy, they may not unreasonably withhold or delay such consent. 115That contention rather begs the question. The question is whether the charge extends to moneys payable under the Policies in respect of defence costs. That is to say, the question is whether s 6 operates to deprive an insured of a vital benefit under the Policies to have defence costs paid as they are incurred in order to defend a claim. It could not be said that the Insurers would be acting reasonably if they withheld consent for the Executives and GSMAL to incur defence costs in defending the claims made by the GS Claimants in the Great Southern Proceedings. 116The PDS Claimants also contend that s 6(6) prevents the Insurers from making any payment under the Policies with actual notice of a charge, unless it is for the purpose of satisfying a liability that an insured has to a claimant. Such a liability, they say, only arises as and when the liability of the insured is established by settlement, arbitration or judgment. Valid payment of any such liability would be a valid discharge to the Insurers. The Transform Claimants, on the other hand, contend that the same reasoning that prevents the payment of defence costs by the Insurers would prevent payment to any of the GS Claimants after receipt of notice of the claims by such GS Claimants. 117The object of the right conferred by s 6 is to ensure that insurance moneys paid by an insurer to an insured, in respect of a liability of the insured to pay damages or compensation to a third party claimant, are available to meet that liability. That is to say, s 6 creates the charge in relation to insurance moneys that are, or may become, payable in respect of a liability to pay damages or compensation. Importantly, s 6 does not confer such a right in respect of insurance moneys that are, or may become, payable to an insured otherwise than in respect of a liability to pay damages or compensation. There is nothing in the policy of s 6 that would require a claimant to be preferred over the insured in relation to a right of the insured under its contract of insurance to be indemnified in respect of a loss or outgoing that is something other than a liability to pay damages or compensation to such a claimant. 118The source of many of the difficulties with s 6 is that it provides that the charge comes into existence at a time, and by reference to events, different from the circumstances in which the moneys to which the charge attaches or on which it descends become determinate and payable. The charge comes into existence on the happening of an event giving rise to a liability to pay damages or compensation for which a claim may be made. The charge, however, only attaches to or descends on moneys that are or may become payable in respect of that liability to pay damages or compensation. There is nothing to which the charge can attach, or on to which it can descend, unless and until a liability to pay damages or compensation has been determined. The liability is not determined, so as to give rise to an entitlement to payment by the insurer, unless and until a determination has been made, by judgment, award or settlement, that the insured is liable. 119Thus, s 6(1) looks at the position as at the time when the charge is created. It contemplates the possibility that, immediately on the happening of the relevant event, the insured becomes liable to make a payment to the claimant. However, it also contemplates the possibility, which is far more likely, that that liability will be established subsequently, in which case the charge would attach to or descend on moneys that become payable at that later time. 120The charge is concerned with moneys payable in respect of that liability, being the liability of the insured to pay damages or compensation to the claimant. The charge is not expressed to catch all moneys that might be payable under the contract of insurance (see Steigrad v BFSL 2007 Ltd [2012] NZCA 604 at [25]). 121The Transform Claimants rely on the proposition that s 6 is intended to ensure that insurance moneys are not depleted to the prejudice of a claimant. However, stating the purpose in those terms glosses over an important distinction. It is unquestionably the purpose of s 6 to ensure that insurance moneys that are payable to an insured in respect of liability to a claimant are not depleted to the prejudice of the claimant. Nevetheless, there is nothing to suggest that the purpose of s 6 is to prevent insurance moneys being paid to discharge other obligations that an insurer may have to an insured under a contract of insurance. 122Importantly, if s 6 were construed as catching all moneys available at the time when the charge arises, that would alter the contractual rights between insurer and insured. In the present case, each insured under the Primary Policy has a contractual right to be advanced defence costs within 30 days of receipt of an invoice from defence counsel. That right exists even if the right to indemnity under the Primary Policy has not yet been determined. The Primary Policy contains a provision permitting the Insurer to recover amounts so advanced in the event that it is ultimately determined that the Primary Policy does not respond to the claim in question. 123Those provisions provide a valuable benefit to the insureds. They ensure that the insureds are not placed in the invidious position of having insufficient resources to defend major claims while the Insurers consider the question of indemnity. If the charge caught all moneys available under the Primary Policy at the time when the charge arose, and s 6 applied, Chubb and Liberty could not safely pay defence costs, if there were any possibility that the ultimate liability of the insured might exceed the amount available to meet that liability at that time. There would then be a real question as to what would happen. 124The insured would have a contractual right to be paid defence costs and could bring an action to enforce that right. It would be extraordinary if the effect of s 6 were to provide Chubb and Liberty with a defence to such an action, on the basis that they might, at some time in the future, be liable, by the operation of s 6(4), to pay to the GS Claimants the moneys that would otherwise have been paid in defence costs. There is nothing on the face of s 6 to suggest that it was intended to alter the contractual rights of the parties in such a radical fashion. If the New South Wales Parliament intended s 6 to have such a drastic effect on the contractual rights of an insured, it could be expected to have provided so in express terms. 125The GS Claimants suggest that it would be open to the parties to a contract of insurance to avoid such a problem by agreeing to separate limits in respect of liability to pay damages or compensation and defence costs. However, that supposed solution ignores the important relationship between legal costs and claims. Where there are separate limits, there would be the possibility that the defence of a claim might be successful but the insurer's maximum liability in respect of defence costs might be exhausted before the proceedings are resolved. It is difficult to see, as a matter of commercial logic, why the balance of the liability limit should not be available to pay defence costs. On the other hand, the proceeding might be resolved before the limit in respect of defence costs is exhausted. It is difficult to see, as a matter of commercial logic, why the balance should not be available to settle a claim. 126Under the terms of the Primary Policy, an insured is entitled to be indemnified against any loss. Where the indemnity concerns an obligation to satisfy a judgment, award or settlement, the right to the indemnity arises at the time when the liability is established by that judgment, award or settlement (see Bradley v Eagle Star Insurance Co Ltd [1989] 1 AC 957 at 966; Distillers Co Biochemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd [1974] HCA 28; (1974) 130 CLR 1 at 2526). At that time, the insured is entitled to sue on the indemnity and, subject to exhaustion of the maximum liability under the relevant contract of insurance, is entitled to recover the amount of the judgment, award or settlement. The fact that other claims have been, or may be brought, against the insured, or any other insured indemnified by the same contract of insurance, does not alter the first insured's right to indemnity in respect of the liability that has been determined. 127If s 6 caught all moneys available at the time when the charge arises, and s 6(1) applied to a second claim, an insurer could not safely pay the first ascertained claim if the second claim might exceed the amount of the limit that would then remain, unless it could be satisfied that that first ascertained claim has priority under s 6(3). Again, on that approach, the effect of s 6 would be, by a side wind, to alter the rights of the contracting parties. The insurer would be entitled to refuse to pay a claim that it was obliged by the terms of the contract of insurance to pay, because it would run the risk of having to pay more than the maximum amount it contracted to pay. 128The GS Claimants say that an insurer faced with such a problem could interplead. Interpleader may solve the problem for an insurer, but it would not solve the problem for an insured. The insured has a contractual entitlement to indemnity. The insured may have a judgment or award against it that must be satisfied, and can only be satisfied, from the proceeds of insurance. If the judgment or award is not satisfied, the insured may face insolvency proceedings. The court hearing the interpleader proceeding could provide no solution for the insured in such circumstances. 129More importantly, s 6 says nothing about altering the contractual rights and liabilities of the parties to the relevant contract of insurance. Indeed, s 6(4) and s 6(7) demonstrate that s 6 was not intended to affect the contractual rights and liabilities of the parties to the relevant contract of insurance. If the GS Claimants' contentions are correct, that is what s 6 would do. 130It is true that, if priority is given only in respect of moneys that have become payable as a result of a judgment, award or settlement, the circumstances in which there may be competing claims to that sum of money will be rare. Generally, competing claims will only arise where a judgment is obtained in favour of a number of claimants whose claims arise out of the same or similar facts. However, s 6(3) is not rendered otiose by the interpretation advanced on behalf of the Insurers. The fact that, on that interpretation, the circumstances in which it may operate are limited is not a reason for rejecting it. 131Moreover, on the Insurers' interpretation, the creation of the charge still has consequences. A contract of insurance is to remain as it stood at the time when the charge arose (Bailey at 448). Further, by the operation of s 6(6), it would not be open to the insurer, after that time, to rely upon a payment made to the insured under the contract of insurance in respect of a liability to a claimant, unless the payment was made without actual notice of the existence of the charge in favour of the claimant. To that extent, the position of such a claimant is protected (see Bailey at 450). Thus, once the charge has arisen, upon the happening of the event that gives rise to the liability for damages or compensation, no mutual or unilateral action by either the insurer or the insured, which is taken otherwise than under the contract of insurance or the general law as it operates upon the contract, may vary, discharge or otherwise qualify or abrogate the contract of insurance so as to deny to a claimant what otherwise would be the fruits of enforcement of the charge by action taken under s 6(4) against the insurer. 132It is clearly possible that the limit under a contract of insurance might be reached as a consequence of the payment of insurance moneys in respect of defence costs. Notwithstanding such payment, if the insured is still found liable to a claimant, the insured, assuming it is solvent and is able to meet any liability that it is found to have to the claimant, will be out of pocket and will not be indemnified in respect of the liability to the claimant. Where the insured is not insolvent and is found liable, the claimant will be entitled to enforce its judgment against the insured and the insured will be required to meet and satisfy that judgment from its own funds, notwithstanding that it receives no indemnity from the insurer in respect of that liability because the limit under the contract of insurance had been reached. 133There is no reason in principle why a claimant should not be exposed to that same risk. A claimant should not be in a more favourable position than an insured is in respect of the insured's contractual right of indemnity under its contract of insurance, where the obvious intention of the parties to the contract of insurance is that the insured be indemnified for defence costs as and when they are incurred. An insured should not be required to wait until after the question of its liability to a claimant has been determined before it can be indemnified for such costs. It would be quite anomalous for an insured, who successfully defends a claim by a claimant, to be compelled to wait until after that successful defence before being reimbursed for what could be very substantial legal costs incurred in defending the claim. 134Similar observations can be made in respect of the determination of the liability of an insured following a judgment, award or settlement. The obvious intention of the parties to a contract of insurance is that the insured be indemnified in respect of its liability under such judgment, award or settlement when that liability is determined. An insured should not have to await the determination of some other claim, which might prove unsuccessful, before enforcing its contractual right to indemnity under its contract of insurance. 135It follows that question 4 should be answered in the negative and question 5 should be answered in the positive. That is to say, the charge under s 6 would not extend to moneys payable under the Policies for defence costs and the like before any judgment, award or settlement in favour of the GS Claimants. While the question has not been raised expressly, it would follow that, if an entitlement to a payment for defence costs and the like had arisen before any judgment, award or settlement, the charge under s 6 would not extend to the moneys payable under that entitlement. Further, payment by the Insurers under the Policies, by way of indemnity for an insured's liability to pay damages or compensation to any of the GS Claimants, would be a valid discharge to the Insurers if made before judgment, award or settlement in relation to claims of other GS Claimants. Question 6: Actual Notice 136Section 6(6) speaks of a payment made by an insurer without actual notice of the existence of the charge in relation to a liability in respect of which a claim has been made against the insured. Clearly enough, if, notwithstanding the making of a claim, an insured does not have any liability to pay any damages to the claimant, the claimant will have no right against the insured. A fortiori, the claimant would have no right against the insurer. In that case, the insurer would not be at risk in having paid moneys to the insured. 137On the other hand, if an insurer paid insurance moneys after the insurer had actual notice of the existence of a claim by a third party, and it was subsequently established by judgment, award or settlement that the insured had a liability to pay damages or compensation to the third party, then the insurer may be liable to pay again. That may be an impractical result, but seems to be the inevitable consequence of the scheme created by s 6. That is to say, s 6(6) has the effect that an insurer, once it has actual notice of a claim having been made by a claimant, cannot obtain a valid discharge from the insured for the insurer's liability to indemnify the insured under the contract of insurance. 138That difficulty raises the question of just what moneys are payable in respect of the liability to pay damages or compensation. That is the issue addressed above in dealing with questions 4 and 5. The charge does not apply to moneys payable under the Policies to insured persons in respect of defence costs and the like. 139Although expressed in terms of notice, the real issue raised by question 6 is when it can be said that a charge exists for the purposes of s 6(6). The Insurers contend that the charge does not come into existence until it attaches to moneys that have become payable. Consequently, it is not in existence until there has been a determination of liability by judgment, arbitration or settlement and, the Insurers say, they could not have actual notice of a charge before that time. 140However, it is clear enough from the terms of s 6(1) that the charge comes into existence on the happening of the event giving rise to the liability for damages or compensation in respect of which the relevant claim is made. Section 6(1) says that, at that time, the amount of the person's liability is to be a charge. Section 6(6) speaks of actual notice of the existence of any such charge. Those words clearly refer back to the right created by s 6(1). Consequently, it is sufficient, for the purposes of s 6(6), that an insurer have actual notice of the circumstances that, by the operation of s 6(1), give rise to the charge. The Insurers clearly have notice of those circumstances in the present case. However, for the reasons given above, the charge does not, in the present case, apply to moneys payable under the Policies in respect of defence costs and the like. 141There may be a question as to what is meant by the expression "the event giving rise to the claim for damages or compensation" and, in particular, as to whether the expression refers to an act or omission that gives rise to damage or loss, or whether it refers to the act, the occurrence of which completes the relevant cause of action. That is to say, where damage is an essential element of a cause of action, the question is whether the occurrence of the damage is the event giving rise to the claim for damages or compensation, or whether it is an earlier act or omission that is the cause of subsequent damage. In addition, in the case of claims for the recovery of pure economic loss, as all the claims in the GS Proceedings are, it may be difficult to identify the event giving rise to the claim for damages or compensation in circumstances where the insured's conduct giving rise to the liability to pay damages may be remote in time from the actual economic loss suffered by the claimant. That has led to the creation of special rules for the accrual of a cause of action in negligence founded upon pure economic loss (see Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302 at [15]). That difficulty may make it difficult to determine when the rights conferred by s 6 arise. It is not, however, necessary to resolve these questions in the context of the present case. Question 1: Territorial Operation of s 6 142In the course of argument, there was some discussion about the formulation of question 1. As a consequence, the Transform Claimants formulated additional question 1A, as follows: "In light of the answers to question 1, could the following GS Claimants be held to be entitled to a charge on any of the insurance moneys payable under of the any of the Policies, and if so, which: a) the Transform Claimants, or any class of them; or b) the PDS Claimants, or any class of them." In addition, the Insurers reformulated question 1, as follows: "Is s 6 capable of giving rise to a charge on insurance moneys that are or become payable under any of the Policies in favour of: a) the Transform Claimants, or any class of them; or b) the PDS Claimants, or any class of them." 143Thus, the essence of question 1 is whether, having regard to such connection as the Great Southern Proceedings, and the claims that have been made in them, have with New South Wales, s 6 is capable of giving rise to a charge on insurance moneys that are or become payable under any of the Policies in respect of those claims. The various criteria set out in question 1, as originally formulated, may be helpful for the purpose of considering the various competing contentions as to the territorial operation of s 6. Ultimately, however, the question is whether s 6 applies to any of the claims made in any of the Great Southern Proceedings. General Principles 144Question 1 is concerned with the territorial scope of s 6 of the Reform Act. That is a question of construction. In the absence of an express provision as to the territorial scope of legislation, the primary rule of construction requires one to have regard to the context and subject matter of the legislation in question. That directs attention to the central concern of the relevant legislation or that on which the legislation is shown to hinge (see Insight Vacations Pty Ltd v Young [2011] HCA 16; (2011) 243 CLR 149 (Insight Vacations) at [29] and [36]). 145A basic canon of statutory interpretation is that legislation is presumed not to have extra-territorial effect (see Solomons v District Court of New South Wales [2002] HCA 47; (2002) 211 CLR 119 at 130). Under the general law, there is a presumption that legislation does not apply to persons and matters outside the territory of the legislature that enacted the legislation (Meyer Heine Pty Ltd v China Navigation Co Ltd [1966] HCA 11; (1966) 115 CLR 10 at 23, 30 - 31, 38 and 43). Since s 6 is silent about any extra-territorial application or restriction, the extra-territorial application of s 6 should be construed as being limited in its operation to New South Wales. That approach is confirmed by s 12 of the Interpretation Act 1987, which provides that a reference in New South Wales legislation to a locality, jurisdiction or other matter or thing is a reference to a locality, jurisdiction or other matter or thing in and of New South Wales. Section 12 of itself is reason enough to read generally worded legislation as subject to a geographical limitation (Insight Vacations at [28]-[29]). 146The presumption must be applied, however, by reference to the central concern of the legislation or hinge by reference to which it operates. For example, the concern of what used to be s 42 of the Fair Trading Act 1987 is misleading or deceptive conduct. The principle says that s 42 should be interpreted as being concerned only with misleading or deceptive conduct that occurs in New South Wales. It would not be said that s 42 has an extra-territorial operation - or at least not one that is inconsistent with the principle - simply because it may catch a person who is engaged in misleading or deceptive conduct in New South Wales while a resident of another state. Similarly, the Insurance Contracts Act 1984 (Cth) applies to contracts the law of which, absent an express choice of law clause, is the law of a state or territory. It would not be said that that act has an extra-territorial operation in the relevant sense, simply because it catches contracts of insurance that were entered into in another jurisdiction. On the other hand, if the central concern or hinge of particular legislation is the entry into a contract, then the principle would require that the operation of that legislation be confined to contracts entered into in Australia (or New South Wales, if state legislation), even if their proper law were the law of some other jurisdiction. 147Where the territorial limits of state legislation cannot be determined from its context and subject matter, courts have taken different approaches in determining those limits. One approach is to adopt a rule of construction that, in the absence of any countervailing consideration, general words should not be understood as extending to cases that, according to the rules of private international law, are governed by foreign law (see Wanganui-Rangitikei Electric Power Board v Australian Mutual Providence Society [1934] HCA 3; (1934) 50 CLR 581 at 601 (Wanganui)). Another approach is to treat the legislation as being limited only by the constitutional authority of the legislature that passed it (see Barcelo v Electrolytic Zinc Company of Australasia Limited [1932] HCA 52; (1932) 48 CLR 391 at 406, 415 (Barcelo)). Of the two approaches, the first is preferable. The difficulty with the second approach is that courts of the jurisdiction in which the legislation was passed may give the legislation its full effect, whereas courts of other jurisdictions may only give it effect in accordance with applicable choice of law rules. That would be an unfortunate consequence in a federation. Further, it would be erroneous to conflate constitutional power with statutory interpretation. The ambit of particular legislation is not a question of constitutional power but one of statutory interpretation. The question is not what the Parliament of New South Wales could have done but what, as a matter of construction, it has done, in enacting the relevant legislation. The Insurers' Contentions on Question 1 148The primary contention of the Insurers is that s 6 applies only where the following three conditions are satisfied: * the event giving rise to the claim for damages or compensation occurred in New South Wales; * the claim for damages or compensation is governed by the law of New South Wales; and * the law with the closest and most real connection to the contract of insurance is New South Wales. The Insurers say that those three connecting factors are necessary conditions and cumulatively determine the territorial operation of s 6. They assert that the other connecting factors suggested in question 1 are either inapposite or would lead to a variable and unstable outcome. 149Applying those three connecting factors or necessary conditions to the claims by the GS Claimants, the Insurers contend that s 6 is not capable of applying to any of the claims made in the Great Southern Proceedings because: * the facts, matters and circumstances that gave rise to the claims for damages or compensation made by both the PDS Claimants and the Transform Claimants, in substance, occurred in Western Australia; * the claims are founded on federal law, namely, the Corporations Act and the ASIC Act, or the enacted laws of another state, and have been brought by the GS Claimants in the Supreme Court of Victoria or the Supreme Court of Western Australia; and * in all of the circumstances, the law with the closest and most real connection to the Policies is the law of Western Australia. That is to say, none of the three connecting factors or necessary conditions contended for by the Insurers is satisfied by the facts pertaining to the claims of either the Transform Claimants or the PDS Claimants. 150For the purpose of determining the location of the claims made in the PDS Proceedings and the Transform Proceedings, the relevant focus is on where the essential matters giving rise to the claims occurred. That is to say, it is necessary to determine where the essential acts and omissions occurred that initiated the complaint and underpin the allegations made. The essential enquiry is as to where, in substance, the act or omission giving rise to the complaint took place (see Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 at 567 - 569 (Voth)). 151Where there is some quality of the wrongdoer's conduct that is critical, it is usually very important to look to where the wrongdoer acted, not to where the consequences of the wrongdoer's conduct were felt. The focus is not on all elements of the claim or cause of action, but on the act or omission of the wrongdoer that gave the claimant the cause for complaint (Dow Jones & Co Inc v Gutnick [2009] HCA 56; (2002) 210 CLR 575 at 606). Thus, it is necessary to ascribe a territorial quality to the claims made by the GS Claimants that, in substance, fastens on the cause of the complaint against the Executives and GSMAL that underpins their claims. 152In relation to the PDS Claimants, the relevant event was GSMAL's decision to accept the applications on behalf of the PDS Claimants to participate in the relevant scheme and execute the management agreement. That occurred in Western Australia. The Insurers say that the place of the claims depends upon the conduct of GSMAL and relevant Executives in the preparation of the Plantation PDS. GSMAL and the relevant Executives are alleged to have contravened the Corporations Act and the ASIC Act. They did that in Western Australia. 153In the case of the Transform Claimants, the relevant event was the simultaneous issuing to the Transform Claimants of shares in GSL and the termination, sale or assignment of various interests that they had acquired by reason of their membership of the relevant schemes. That is the central event on which the alleged claims in the Transform Proceedings are founded. That occurred in Western Australia. Further, as with the PDS Proceedings, the claims made in the Transform Proceedings are contraventions of provisions of the Corporations Act and the ASIC Act. The material facts allegedly constituting contraventions occurred in Western Australia. The substance of the complaint made by the Transform Claimants is the failure of GSMAL and the relevant Executives to observe the stipulated statutory norms. The conduct alleged to constitute contravention was the convening of meetings and issuing of explanatory memoranda and the like relating to the schemes of arrangement that were misleading and deceptive. All of that occurred in Western Australia. 154Putting the Insurers' approach to Question 1 another way, they contend that the object and subject matter of s 6 are insurers, insureds and third party claimants in respect of injuries sustained in New South Wales resulting in claims instituted in the courts of New South Wales. To the extent that s 6 gives expression to various social considerations in relation to that subject matter, there are, according to the Insurers, three considerations that powerfully militate against an expansive territorial operation. 155The first consideration is that the priority regime proposed by s 6 must be considered in the light of s 562 of the Corporations Act, which deals with priorities as to the application of proceeds of contracts of insurance in the winding-up of a corporation. Section 6(3) confers priority according to the time of the occurrence of the relevant event. Section 562, on the other hand, provides for pari passu sharing of available insurance moneys amongst claimants. The wider the reach of s 6, the greater will be the likely number of winners and losers in respect of claims on a limited fund. Wherever there is a benefit for a claimant by reason of a charge under s 6, there may be a corresponding detriment visited upon other claimants who do not enjoy the priority given by s 6(3) but who would otherwise have the benefit of the priority regime established by s 562 of the Corporations Act. 156The second consideration relied on by the Insurers is that, whatever social policy may have prompted the Parliament of New South Wales to adopt and maintain the regime of s 6, notwithstanding the statutory predecessors in state companies legislation, prior to 2001, of the provisions of s 562 of the Corporations Act and s 117 of the Bankruptcy Act 1966 (Cth), which also adopt the concept of pari passu distribution on insolvency, no other state of Australia and only one other territory (the Australian Capital Territory) has adopted the same view. That indicates that the view of social policy adopted by New South Wales is not common throughout the Commonwealth of Australia. A wide territorial operation of s 6 would tend to intrude upon the view of social policy adopted in the other states. 157The third consideration relied upon by the Insurers is that an expansive geographical operation of s 6 would sit awkwardly with the operation of provisions, such as Pt IVA of the Supreme Court Act 1986 (Vic), dealing with group proceedings. Were the Insurers effectively prevented from settling with some Claimants because of an expansive operation of s 6, it is very unclear how a disaggregation of insurance moneys could be managed and divided amongst so many claimants. The consequence may be that the PDS Proceedings and the Transform Proceedings cannot as a practical matter be settled or compromised. 158The Insurers assert that there is nothing in s 6 to suggest an intention to pick up causes of action other than causes of action based on laws of New South Wales, whether statutory or common law. It is to be inferred, the Insurers say, that the Parliament of New South Wales was concerned with its own laws and the common law applicable within its jurisdiction. The legislative history suggests a concern with personal injury claims under accident legislation and under the common law. In contrast, the claims in both the Transform Proceedings and the PDS Proceedings relevantly allege contraventions of the Corporations Act, the ASIC Act and the Victorian Fair Trading Act or the WA Fair Trading Act. Those claims are derived from the laws of polities other than New South Wales. To pick up claims governed by the law of the Commonwealth of Australia or the law of other states or territories would extend the operation of s 6 significantly. 159The members of the Great Southern Group continue to have their principal places of business and registered offices in Western Australia and their winding-up is being administered by liquidators in Western Australia. The Insurers contend that s 6 should be interpreted as extending only to companies whose principal place of business and registered office is in New South Wales and who would, therefore, as at 1946 and at all times prior to the enactment of the Corporations Act, have been incorporated under and regulated by New South Wales legislation. 160The Insurers contend that, as a matter of statutory construction, s 6 is not capable of applying to a corporation, such as GSMAL, that has its principal place of business in Western Australia and was formed under the law of Western Australia. It says that there would be an incongruity were s 6 to apply to claims made against the Executives in respect of acts and omissions that occurred as part of their duties in Western Australia. Thus, the Insurers say, s 6(2), in dealing with circumstances that might arise in the case of the winding-up of a corporation, clearly indicates an intention that s 6 have a confined territorial operation. 161At the time of the enactment of s 6, the incorporation, regulation and winding-up of corporations was a matter of state law. Further, while the constitutional power of the Commonwealth Parliament extended to trading and financial corporations, it did not extend to the winding-up of corporations. The constitutional division, between the states and the Commonwealth, of power relating to corporations is part of the context in which s 6 was enacted. The constitutional validity of s 6 may have been open to doubt if it had purported to alter the statutory law concerning the winding-up of corporations in other states. That is to say, any purported alteration of the winding-up regime in another state would have burdened or curtailed impermissibly an important function then exercised by that other state as a distinct polity and essential integer of the federal compact (see Clarke v Commissioner of Taxation [2009] HCA 33; (2009) 240 CLR 272 at [32]-[65]). 162The effect of enacting the Corporations Act, as federal law, should not be construed as inadvertently giving s 6 a significantly wider territorial reach than it had immediately before its enactment. Prior to the enactment of the Corporations Act, the winding-up a corporation was a matter of state law. Section 6 should not be construed as applying to corporations that, prior to the enactment of the Corporations Act, were incorporated and registered under the laws of another state. 163Those observations must be understood, however, in the context of legislation dealing with foreign corporations in force in New South Wales prior to the enactment of the Corporations Act. That is to say, there has always been New South Wales legislation dealing with the winding-up of branches of foreign corporations or companies. 164Against that background, in the light of the text, context, subject matter and purpose of s 6, the Insurers say that the three necessary conditions or cumulative connecting factors, constituting in effect implied geographical restraints, should be applied to the operation of s 6. They say that all three point intractably against the application of s 6 to the claims being pressed in the Great Southern Proceedings. All three factors, they say, are objectively ascertainable. That is consistent with fundamental objectives of private international law that there be both certainty and predictability (John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503 at [79]). 165The GS Claimants accept that their claims are not governed by the law of New South Wales. According to the Insurers, that fact, in itself, would mean that a necessary condition is not satisfied by the claims, such that s 6 does not apply. Further, the claims have been brought in courts other than New South Wales courts, namely, the Supreme Court of Victoria and the Supreme Court of Western Australia. That was the choice of forum made by all of the GS Claimants. There is no reason to doubt that the choice to commence proceedings in those courts reflected the fact that those courts were considered to be the more appropriate forum to bring the relevant claims. 166The Insurers contend that the law with which the Policies have their closest and most real connection is that of Western Australia. Thus, the Primary Policy provides that the construction and enforcement of its provisions is to be determined in accordance with and governed by the law of Australia. Thus, it is neutral as to the applicability of the laws of a state or territory. That cannot mean that every statute of all of the states and territories automatically applies to the Primary Policy. Although the Primary Policy adopts that designation of choice of law, some of the Excess Policies adopt a different choice of law designation. Such express choice of law clauses, without more, do not engage s 6. 167By way of example, the QBE Excess Policy provides that its construction, interpretation and meaning are to be determined in accordance with the law of the state or territory in which it was issued. If Sydney were the place of issue, the construction, interpretation and meaning of the QBE Excess Policy would be determined by the law of New South Wales. However, that selection does not mean that s 6 automatically applies to all damages or compensation under the QBE Excess Policy. The express choice of law clause is directed to regulating the mutual rights and obligations of the parties. Similar observations can be made about the other Excess Policies that select New South Wales as the governing law by an express choice of law provision. 168The Insurers identified two "hinges" on which they say s 6 turns. One hinge is the proper law of the contract of insurance. The other hinge is the event giving rise to the liability for damages or compensation in respect of which the claim is made. According to the Insurers, both hinges need to be satisfied. However, the Insurers accept that there are difficulties with the proper law of the contract approach, because the parties are free to choose it. Consequently, they contend that it is appropriate to include, as a further requirement where no express choice of law is made, the objective test that is applied in determining the proper law of a contract. 169If the concern of s 6 were the contract of insurance, it would be necessary to determine what it is about the contract that s 6 seeks to regulate. For example, where a provision is hinged on the place where the contractual obligations are to be performed, it should be interpreted as applying only to contracts performed in New South Wales (see Insight Vacations, dealing with s 5N(1) of the Civil Liability Act 2005). The Insurers do not explain why construing s 6 as hinging on the proper law of the contract best gives effect to the purposes and text of s 6. Section 6 is directed to claims made by third parties, not to contracts the proper law of which is New South Wales law. 170It is not a solution to the problem to say that the proper law, as well as being the parties' choice of law, must also be the proper law objectively ascertained. On the Insurers' approach, those two requirements are separate and cumulative so that, unless insurer and insured choose New South Wales law, s 6 does not apply. That approach appears to involve the Court in legislating, rather than applying established legal principle. Accordingly, the proper law of the contract is not a necessary condition for the territorial application of s 6. 171In addition, s 6 does not hinge on the event that gives rise to the liability for damages in respect of which the claim is made. There does not appear to be any reason why the New South Wales Parliament would have been concerned with the question of where the event occurred, when the focus of s 6 is on protecting claimants. The mere fact that the charge arises at the time of the happening of the event that gives rise to the liability does not mean that s 6 hinges on that event. Thus, neither of the matters that the Insurers contend are hinges are, on the true construction of s 6, hinges on which s 6 turns. 172There is no reason why the relevant event need occur in New South Wales. Section 6 is not directed to providing compensation for injuries that occur in New South Wales. The event giving rise to the claim for damages or compensation is whatever completes the cause of action of the claimant against the insured. In a contract case, the event will be the breach of contract. In a negligence case, the event will be the loss or damage. In any particular case, the location of the breach of contract, or the occurrence of the loss or damage, may be entirely fortuitous and capricious. For example, if a New South Wales insured failed to deliver goods from New South Wales to Victoria, the charge would not arise because the breach, being the failure to deliver, would have occurred in Victoria. On the other hand, if the contract provided for the delivery of goods into New South Wales, the failure would occur there and the charge would arise. Such arbitrariness could not be supposed to have been the intention of the Parliament. 173Two of the three necessary conditions or connecting factors for the territorial application of s 6 for which the Insurers contend are that the event occurred in New South Wales and that the proper law of the contract is New South Wales law. For the above reasons, neither is a necessary condition for the operation of s 6. That leaves the third condition for which the Insurers contend, namely, that the claim is governed by New South Wales law. The 14th and 15th defendants contend that that is the sole necessary factor. 174If s 6 applied only where the law governing the claim for damages or compensation is the law of New South Wales, the application of s 6 would depend on the character of the claim that is brought. Many claims can be brought in either contract or tort. Most liability policies cover both types of claim, although many have an exclusion in respect of contractual liability that is not co-extensive with tortious liability. It would be curious if the application of s 6 depended on the characterisation of the claim that was brought. Moreover, the position also seems open to manipulation. For example, a question could arise as to what would happen if insurer and insured agreed to dismiss a cause of action that was governed by New South Wales law but agreed to settle another that was governed by some other law. The Transform Claimants' Contentions on Question 1 175The fundamental contention of the Transform Claimants is that, while each of the following would be a sufficient territorial connection, none should be accepted as a necessary connection: * the law governing the claimant's cause of action is New South Wales law; * the event giving rise to the claim for damages occurred in New South Wales; * the proper law of the contract of insurance is the law of New South Wales; * the contract of insurance has its closest and its most real connection with New South Wales; * the situs of the contract of insurance is New South Wales. 176The Transform Claimants say that the approach most consistent with the object of s 6 is to construe it as being limited only by the constitutional power of the New South Wales Parliament, such that the meaning of the words should be limited only by reference to that power: it would apply to any transaction that, in a real and practical sense, concerns New South Wales. That is, the Transform Claimants ultimately argue for the application of the Barcelo approach to s 6. Such an approach, they say, recognises that Parliament intended s 6 to have as wide an operation as constitutionally possible. That approach, they say, gives effect to the reformatory and beneficial object of s 6. 177The Transform Claimants accept the presumption that legislation is intended to be read as confined to what, according to the New South Wales rules of private international law, it is within the province of New South Wales law to affect or control (Wanganui at 601), although that presumption can be displaced by the context of a particular provision (see Insight Vacations at [30]). Thus, the Transform Claimants' central positive contention on question 1 is that if, according to applicable common law choice of law rules, s 6 would be applied by a foreign court because of a particular connecting factor to New South Wales, then s 6 should be construed as requiring that connecting factor with New South Wales. The result, they say, would be that the application of s 6 would be uniform as between New South Wales courts and foreign courts applying common law choice of law rules (see Ludgater Holdings Ltd v Gerling Australia Insurance Co Pty Ltd [2010] 3 NZLR 713) (Ludgater). 178The Transform Claimants say that, if they bring a claim in the Supreme Court of Western Australia relying on s 6, there would be two possibilities. The first is that the claim would be treated as a claim to enforce a charge over movable property, being moneys payable under the Policies. In that case, they say, s 6 should be applied if New South Wales is the lex situs of the Policies (see Ludgater). The second is that, since the claim, although described in s 6 as the enforcement of a charge, is really a claim for damages parasitic on the contract of insurance, it should be treated for choice of law purposes as a contractual claim. The Transform Claimants say that s 6 would then apply only if the proper law of the Policies was the law of New South Wales. They suggest that the second approach, that of the proper law of the contract, is preferable, since it recognises that, despite the use of the word charge, s 6 actually creates a cause of action for damages. 179The Transform Claimants point out that the charge is enforceable by way of an action against the insurer, to be maintained in the same way and in the same court as if the action were to recover damages or compensation from the insured. In that action, the rights and liabilities of the insurer are, to the extent of the charge, the same as those of the insured. Thus, in effect, the claimant has a statutory cause of action against the insured to the extent of the charge, although the cause of action is generally only enforceable by leave of the court. 180The Transform Claimants contend that s 6(2) has no bearing on the territorial connection required by the provision. The fact that s 6(2) could not validly apply to alter the statutory order of priority in a winding-up governed by the law of another state does not mean that the provision is limited, in respect of insureds that are corporations, to corporations registered in New South Wales. They contend that s 6(2) is equally consistent with the Parliament of New South Wales giving the section its broadest constitutionally permissible operation, dealing expressly with the winding-up where possible, but not thereby excluding its application to corporations incorporated elsewhere that are not being wound up. 181However, the Transform Claimants say, neither the common law presumption as to lack of extra-territorial effect nor s 12(1)(b) of the Interpretation Act require every aspect of a legislative provision to be read as territorially limited. It is only possible to ascertain the territorial connection intended by a particular provision by construing it as a whole, having regard to its context and subject matter. 182In relation to the notion that s 6 applies only where the relevant event occurs in New South Wales, the Transform Claimants assert that, on the facts presently under consideration, the relevant event for the first defendant and the Transform Claimants represented by her occurred in New South Wales. That is because, at all material times, the Transform Claimants represented by the first defendant were resident in New South Wales and the relevant notices and explanatory memoranda for Project Transform were received by them in New South Wales. They say that the Court should draw the inference that those persons relied upon that material, and therefore suffered loss or damage, in New South Wales. 183The Transform Claimants also contend that any action brought by an insured under the Policies against the Insurers would be most effectively enforced in New South Wales and that claims for indemnity under the Policies are properly recoverable in New South Wales. Therefore, they say, the situs of the Policies is New South Wales and, accordingly, the lex situs is the law of New South Wales. 184The Transform Claimants point to the fact that the Policies were part of an integrated insurance arrangement entered into contemporaneously through a common broker, Aon, who had knowledge of all of the Policies. The express choice of New South Wales law in over half of the Policies is, they say, a strong factor suggesting New South Wales law as the applicable law for the remainder of the Policies. The place of performance of the Policies and the place in which they would be most effectively enforced would be New South Wales. They contend, therefore, that the law governing each of the Policies is New South Wales law. 185The Transform Claimants contend that the merit in each of the above choice of law approaches is that the treatment of the parties' rights is consistent, whether inside or outside New South Wales. It avoids the possibility that, if a contract of insurance is governed by Victorian law, the insurer could be forced to pay more than the limit of indemnity under the contract, first to an insured in the Victorian court and then to a claimant in respect of another insured in a New South Wales court. That approach is consistent with s 6(7). 186The Transform Claimants advance two reasons why the Insurers' contention, that s 6 should be construed as limited in its application to contracts of insurance that have their closest and real connection to New South Wales, should not be accepted. First, it has none of the benefits of the proper law approach suggested above. More fundamentally, however, the beneficial operation of s 6 should not turn on matters over which the claimant has no control: res inter alios acta alteri nocere non debet - a transaction between strangers ought not to injure another party. It is unlikely, they say, that the Parliament of New South Wales intended that the benefit of s 6 for residents in New South Wales would depend upon such factors as the residence of the insurer and insured and the location of the negotiations between them. For the same reasons, they say, s 6 should not be construed as being limited to a contract of insurance where the situs is New South Wales. 187The Transform Claimants point to a number of connecting factors with New South Wales, apart from the governing law of the Policies, the situs of the Policies and the location of all of the Insurers in New South Wales. Thus, the Transform Claimants represented by the first defendant have at all material times resided in New South Wales. Secondly, claims are required to be notified under the Policies in New South Wales, except in relation to the Axis Excess Policies, where no place is specified. Thirdly, in the case of the Primary Policy, the Allianz Excess Policies, the Axis Excess Policies and the QBE Excess Policy, they say that the insurance moneys will be located in New South Wales. In those circumstances, they say, there is a sufficient connection between the facts, matters and circumstances of the present case and New South Wales for s 6 to apply in respect of the claims made by the Transform Claimants in the Transform proceedings. 188There are difficulties with the approach advocated by the Transform Claimants. One is that, contrary to their submissions, it is unlikely that s 6 would be applied in the same way irrespective of the jurisdiction in which the claim was brought. Section 6 would only be applied by a court of another state if the choice of law rules of that state required the court to apply the law of New South Wales. That assumes a pre-existing claim in that state which, according to the conflict of law rules of that state, is to be resolved by applying New South Wales law. However, s 6 itself creates the cause of action by means of which the rights it confers are to be enforced. How in those circumstances a court of another state could ever come to apply s 6 was not explained. More significantly, the approach of the Transform Claimants depends on the proposition that the territorial reach of s 6 cannot be determined from its context and subject matter. For the reasons given below in resolving Question 1, that is not correct. The PDS Claimants' Contentions on Question 1 189The PDS Claimants contend that ordinary principles of statutory interpretation indicate that s 6 was intended to apply to policies of insurance governed by New South Wales law. Section 6 adjusts the rights and obligations of the parties to contracts of insurance. It secures the obligation of an insurer to pay to the insured all insurance moneys that are or may become payable under the contract of insurance. It also secures the obligation on the insured to pay all insurance moneys that are received under a contract of insurance to the claimants in discharge of the liability of the insured (Bailey at 447 and 415). 190The PDS Claimants say that, when enacting s 6, the Parliament intended to make a law only with respect to contracts of insurance governed by the law of New South Wales and not with respect to all contracts of insurance. In the absence of any other clear indication of the intention of Parliament, the governing law of the contract may be selected as the best practicable means of determining the territorial application of legislation that is essentially dealing with contracts (Mynott v Barnard [1939] HCA 13; (1939) 62 CLR 68 at 79). 191The PDS Claimants contend that there is a close connection between the statutory cause of action under s 6 and the underlying contract of insurance. Thus, the statutory cause of action is a derivative of, and dependent on, the contract of insurance. The source of the statutory cause of action and the charge is the contractual right to payment of the insurance moneys under the contract of insurance. The effect of s 6 is to put the third party claimant in the shoes of the insured, in pursuing a claim for indemnity against the insurer. Section 6(7) fixes the sum that a claimant may recover from the insurer by reference to the contract of insurance. Thus, they say, there are strong textual indicators that the proper law of the contract of insurance is a relevant criterion for the applicability of s 6. 192However, the PDS Claimants say, there is no basis for further confining the operation of s 6 by reference to the additional and cumulative requirements contended for by the Insurers, that the event giving rise to the underlying liability must have occurred in New South Wales and that the cause of action underpinning that liability must also be governed by the law of New South Wales. 193The PDS Claimants contend that a person with the benefit of a contract of insurance governed by New South Wales law should not be exposed to the risks of being uncompensated simply because the relevant cause of action sued upon was characterised as arising outside New South Wales or, even if it arises in New South Wales, the relevant event within the meaning of s 6 occurred outside New South Wales. If the event giving rise to a claim for damages were negligent manufacture outside New South Wales, there would be no rationale for denying the beneficial operation of s 6 to claimants against companies importing the negligently manufactured items into New South Wales that have the benefit of New South Wales contracts of insurance. 194The PDS Claimants contend that the proper law of each of the Policies is the law of New South Wales. They say that s 6 creates the charge on insurance moneys that are or may become payable under the Policies, where the governing law of the Policies is New South Wales. 195However, a consequence of limiting the scope of s 6 by the proper law of the contract approach is that it enables an insurer and an insured to do one of the very things that s 6 was designed to avoid, namely, to reach an agreement that deprives a third party claimant of the benefits of the proceeds of the contract of insurance. Moreover, for the reasons given in the answers to questions 4 and 5, there is not a close connection between the statutory cause of action and the contract of insurance. The statutory cause of action was not intended to vary the rights and liabilities of insurer and insured under the contract, although it was intended to prevent insurer and insured from varying those rights once the charge comes into existence. The Other Parties' Contentions on Question 1 196The 18th to 20th defendants contended that s 6 applies only to insurance moneys payable, or that may be payable, in New South Wales. However, it is difficult to see why the New South Wales Parliament would have been concerned about the place of payment. Further, the place of payment can be manipulated in the same way that the proper law of the contract can be manipulated. Conclusion as to Question 1 197There is an obvious difficulty in construing s 6 as being limited to contracts of insurance whose proper law is New South Wales law. That would have the consequence that provisions enacted as salutary reforms might be set at nought by the simple expedient of inserting in an agreement a stipulation that validity should be a matter of the law of some other jurisdiction (see Kay's Leasing Corporation Pty Ltd v Fletcher [1964] HCA 79; (1964) 116 CLR 124 at 143). Section 6 was intended to prevent an insured dispersing or distributing insurance moneys other than to the third party claimant and to prevent an insurer and an insured making a corrupt bargain. Section 6 would entirely fail to remedy that mischief if an insurer and insured, wherever located, could easily avoid the application of the provision by choosing that the contract of insurance be governed by the law of a jurisdiction other than New South Wales. Therefore, s 6 should not be construed as limited to contracts the proper law of which is New South Wales law. Nor is the place where the event occurred that gave rise to the insured's liability a determinative factor as to the territorial application of s 6. Nor is the law of the claim for damages or compensation. 198It is important to have regard to the reference in s 6(4) to the enforceability of the charge by way of an action against the insurer in the same way, and in the same court, as if the action were an action to recover damages or compensation from the insured. Section s 6(4) clearly contemplates that s 6 would apply to claims instituted in the courts of New South Wales. That is an indication of Parliament's intention as to the way in which the territorial operation of s 6 was to be confined. 199Importantly for present purposes, s 6(4) also provides that "the court" is to have the same powers as if the action were against the insured. When the Reform Act was enacted, the full faith and credit provisions of the Constitution existed. However, cross-vesting legislation did not. While the effect of cross-vesting legislation may be that the courts of other states and territories may be given jurisdiction to hear and deal with claims that might otherwise have been within the exclusive jurisdiction of courts of New South Wales, no such provisions existed when the Reform Act was enacted. It would be indeed curious for the New South Wales legislature to have purported, in 1946, to confer judicial powers other than on a court of New South Wales. 200The reference in s 6(4) to "an action ... in the same court" is directed partly at the jurisdictional limit, as between courts within New South Wales, that applies to the statutory cause of action. That indicates that s 6 is directed at claims instituted in New South Wales courts, and that that is the territorial connection with New South Wales that is required for s 6 to operate. 201Assuming that a claim against an insurer was within the jurisdiction of a court, the parties to that proceeding would have such rights and liabilities, and the court would have such powers, as would be applicable to a proceeding in that court. It is unlikely that the Parliament of New South Wales would endeavour to confer rights and impose liabilities, or confer judicial power, in respect of a proceeding conducted in a court other than a court of New South Wales, over which the New South Wales legislature had no control. It is unlikely that the New South Wales Parliament would purport to confer rights and impose liabilities on parties in a proceeding in a court other than a court of New South Wales. Apart from anything else, there would be a question as to the constitutional validity of the provision if the reference to "the same court" encompassed the courts of other states so as to confer jurisdiction upon the courts of other states or to direct the manner in which they should exercise their jurisdiction (see Re Wakim; ex parte McNally [1999] HCA 27; (1999) 198 CLR 511 at [108]). 202The fundamental legislative purpose behind s 6 is to protect claimants who have obtained a judgment or settlement, or who are entitled to obtain a judgment, and to secure the payment of that judgment or settlement when the defendant is insured from moneys that would otherwise be payable to the insured in respect of that judgment or settlement. It is difficult to see why the New South Wales legislature would not have intended to protect any person who properly brings a claim in New South Wales, even where that claim is governed by some other law, given the focus in s 6(4) upon the powers of the court in the s 6 enforcement process. Section 6(4) provides the essential enforcement mechanism, by the claimant against the insurer, without which the claimant will not be protected by s 6. Put another way, s 6 may be described as a procedural mechanism by which that fundamental purpose is achieved. At the heart of that mechanism is s 6(4). The s 6(4) enforcement mechanism is the hinge or central concern of s 6, and the references to courts in s 6(4) referred to above indicate that s 6 is focused on New South Wales courts. 203On the other hand, it is not obvious that the New South Wales Parliament would have intended that s 6 should protect any claimant who chose to bring a claim against an insurer elsewhere, even if that claim is in relation to a contract of insurance the proper law of which is New South Wales. 204In all of the circumstances, the preferable approach is to treat s 6 as applying to all claims brought in a court of New South Wales, and as not applying to a claim brought in a court that is not a court of New South Wales. None of the Great Southern Proceedings has been brought in a New South Wales court. It follows that s 6 has no application to any of the claims being prosecuted in the Great Southern Proceedings. 205Question 1 is not without its difficulties and the answer suggested above is certainly not without doubt. The answers advanced by the various parties discussed above have some merit, despite the anomalies that may result. Indeed, no doubt there are anomalies in the approach suggested above. Nevertheless, the suggested approach accords with the language and policy of s 6 and has the additional merit of providing, despite the complexity and opacity of s 6, some measure of certainty as to whether s 6 will apply in any particular case. Conclusion 206The answer to question 1 is that s 6 of the Reform Act does not apply in relation to the claims made by the Transform Claimants in the Transform Proceedings, or any class of them, or to the claims made by the PDS Claimants in the PDS Proceedings, or any class of them. In the light of the answer to question 1, the other questions do not arise. 207However, the questions would be answered as follows: 2. The fact that the Policies only indemnify insured persons in respect of a claim for damages or compensation made against the insured person and notified by the insured person to the Insurers within the Policy Period would not render s 6 of the Reform Act inapplicable to any insurance moneys that are or may become payable under the Policies. 3. The decision of the Court in the Walter Construction Case should be followed to the extent that it concludes that s 6 does not create a charge based upon a claim arising from an event that has, or events that have, occurred prior to the inception of the Policies. Accordingly, s 6 of the Reform Act is not capable of applying to insurance moneys that are or may become payable under the Policies in respect of a liability to pay damages or compensation to any of the PDS Claimants, where the alleged conduct of the insured giving rise to the claim for damages or compensation happened before the inception of the Policies. 4. Even if s 6 of the Reform Act imposed a charge on any insurance moneys that are or may become payable under the Policies in respect of the liability of an insured person to pay damages or compensation to any of the Transform Claimants or the PDS Claimants, such charge would not extend to insurance moneys payable in respect of defence costs, legal representation expenses or costs and expenses that are paid by the Insurers in accordance with the Policies before judgment is entered or settlement is agreed in respect of the claim for damages or compensation of the relevant Transform Claimant or PDS Claimant. 5. Even if s 6 of the Reform Act imposed a charge on insurance moneys that are or may become payable under the Policies in respect of the liability of an insured to pay damages or compensation to any of the PDS Claimants or the Transform Claimants, any payment made by the Insurers under the Policies by way of indemnity for the liability of an insured to pay damages or compensation (excluding a payment of defence costs, legal representation expenses or costs and expenses) will constitute a valid discharge of the Insurers, if the payment is made before judgment is entered, or a settlement is agreed, in respect of the claim for damages or compensation of any such GS Claimant. 6. To the extent that s 6 of the Reform Act imposed a charge, within the meaning of s 6(6) of the Reform Act, on insurance moneys that are or may become payable under the Policies in respect of the liability of an insured to pay damages or compensation to any of the PDS Claimants or the Transform Claimants, the Insurers are on actual notice of the existence of such charge by reason of: a)receipt of the letter dated 13 September 2012 sent on behalf of the Transform Claimants, and b)receipt of the letter dated 17 September 2012 sent on behalf of the PDS Claimants. 208The Insurers should be directed to bring in short minutes to give effect to the conclusions stated above. Directions should also be given for the parties to make submissions in writing as to the costs of the proceeding in the Court of Appeal and, since the answers to the questions appear to dispose of the proceeding, the costs of the proceeding generally. Appendix Section 6 of the Reform Act (1)If any person (hereinafter in this Part referred to as the insured) has, whether before or after the commencement of this Act, entered into a contract of insurance by which the person is indemnified against liability to pay any damages or compensation, the amount of the person's liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that the amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability. (2)If, on the happening of the event giving rise to any claim for damages or compensation as aforesaid, the insured (being a corporation) is being wound up, or if any subsequent winding-up of the insured (being a corporation) is deemed to have commenced not later than the happening of that event, the provisions of subsection (1) shall apply notwithstanding the winding-up. (3)Every charge created by this section shall have priority over all other charges affecting the said insurance moneys, and where the same insurance moneys are subject to two or more charges by virtue of this Part those charges shall have priority between themselves in the order of the dates of the events out of which the liability arose, or, if such charges arise out of events happening on the same date, they shall rank equally between themselves. (4)Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken. (5)Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter. (6)Any payment made by the insurer under the contract of insurance without actual notice of the existence of any such charge shall to the extent of that payment be a valid discharge to the insurer, notwithstanding anything in this Part contained. (7)No insurer shall be liable under this Part for any greater sum than that fixed by the contract of insurance between the insurer and the insured. (8)Nothing in this section shall affect the operation of any of the provisions of the Workers Compensation Act 1987 or the Motor Vehicles (Third Party Insurance) Act 1942. (9)Despite subsection (8), this section applies in relation to a policy of workers compensation insurance entered into by an employer (whether entered into before or after the commencement of this subsection), where the employer: a)being a natural person, has died, or is permanently resident outside the Commonwealth and its Territories, or cannot after due inquiry and search be found, or b)being a corporation (other than a company that has commenced to be wound up), has ceased to exist, or c)being a company, corporation, society, association or other body (other than a company that has commenced to be wound up), was at the time when it commenced to employ workers to which the policy relates incorporated outside the Commonwealth and its Territories and registered as a foreign company under the laws of any State or Territory and is not so registered under any such law, or d)being a company, is in the course of being wound up. ********** Amendments 12 July 2013 - Typographical error Amended paragraphs: 108 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: 12 July 2013