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The Insurance Contracts Act and the courts or litigation in the age of statutes. Keynote address, Australian Insurance Law Association National Conference, Melbourne, 17 October 2002















          It is now nearly 40 years since I started my study of the law.  Milestones of that kind provoke reflection.  Like most lawyers, the path I travelled for many years seemed to lead to smaller and smaller fields as the need to specialise became more pressing.  Sometimes I was taken into new and unfamiliar fields where the fear that I did not know basic aspects of the topography was very pressing.  Even in familiar fields, the longer I worked in them, the more I knew that there were many areas of the field which I had not explored sufficiently.  No less importantly, I came to understand that, for all its benefits, specialisation carried with it the very significant risk that the participants would see only the field in which they worked without any sufficient understanding of its place in the wider legal world and its dependence on developments in that world.


          I mention these matters today, not just as a piece of self-indulgent reminiscence, but because they bear directly upon the questions that are now presented daily to those who practise law, whether as practitioner, academic or judge.  When I entered upon the study of the law in 1963, legislation played a much smaller role in the daily practice of the law than now is the case.  Of all that has changed over these last 40 years it is, I think, the rise of statute as the source of the definition of rights and liabilities which is most significant.  Of course, the common law continues to play its role.  That must be so for at least as long as the imperial march of negligence continues.  But increasingly it is to the statute book which we must look if we are to find the rights and interests which parties have in any particular case.


          Whether this trend is desirable or undesirable is a question which will be for others to decide.  For those who practise the law, whether in the courts or in other areas, what is important is to recognise that this is what has happened and, so far as we can see, will continue to happen.


          There are several reasons for this development that can be identified.  First, there is a deal of legislation which is enacted to give effect to particular social policies.  (I use the term "social policy" in its widest sense.)  Legislation like the Trade Practices Act 1974 (Cth) can be understood as giving effect to particular policy choices about how the economy should be regulated and about how competition in the economy should be conducted.  Secondly, however, other legislation is enacted to respond to particular difficulties or problems that are identified in the operation of the law in a particular area and has reflected a wish to enact legislation in a form that will cover circumstances that are identified with very great particularity.  Much income tax legislation has been of this kind.  No doubt reasons other than these two can be identified and assigned to other legislation.


          Again, I emphasise that I make no judgment about the validity of the reasons that can be identified for the enactment of particular legislation or about whether the resulting legislation is necessary or unnecessary, desirable or undesirable.  Those are, as I say, decisions for others.  There are, however, some consequences which lawyers must recognise when they come to deal with any particular problem which legislation may affect.


          As the volume of relevant legislation increases it becomes very important to attempt to identify how separate pieces of legislation intersect with each other and how they intersect with the common law.  That may or may not be immediately apparent from the terms of the legislation.  Further, in a federal system such as ours this process will often require consideration of problems presented by the apparent intersection of State and Commonwealth legislation and the apparent intersection of the legislation of different States or Territories.  One need only refer to recent experience with the National Corporations legislation to make good the point which I have just made.


          But in addition to issues of this last kind, there may be some issue about the intersection of different pieces of legislation enacted by the one legislature.  Do general pieces of legislation like Trade Practices or Fair Trading legislation have any work to do in a case in which there is an Act which deals with a particular kind of commercial dealing like insurance?  Many, one would hope most, of the problems of this last kind are readily answered, but it is necessary to recognise the existence of the problem before one can decide what the answer to it is or assess how easy it was to reach that answer.


          And what, if any, work is left for any body of judge-made law which preceded the enactment of the legislation?  Has the Act supplanted it all?  Is the Act to be read in the light of what went before it?


          Again, the answers to these questions are in many, perhaps most, cases readily ascertainable.  But it is necessary first to recognise that there is a question to be answered.


          Insurance law has not been exempt from these general trends.  The federal Parliament has power under s 51(xiv) to make laws with respect to "insurance, other than State insurance; also State insurance extending beyond the limits of the State concerned".  Very early in the life of the Commonwealth, in 1905, the federal Parliament passed its first Act in relation to insurance - the Life Assurance Companies Act 1905 (Cth) - an Act relating to assurance on the lives of children.  Subsequent federal Acts, the Insurance Act 1932 (Cth), the Life Insurance Act 1945 (Cth) and the Insurance Act 1973 (Cth) were, for the most part, Acts directed to regulating insurers rather than insurance contracts.  Some State statutes, for example, Pt 3 of the Instruments Act 1958 (Vic) dealt with that latter subject.  Marine insurance was left to the operation of codifying imperial legislation:  the Marine Insurance Act 1906 (Imp).


          These arrangements changed radically following the work of the Australian Law Reform Commission in its reports "Insurance Agents and Brokers" 1 , and "Insurance Contracts" 2 .  Out of these reports came the Insurance (Agents and Brokers) Act 1984 (Cth) and the Insurance Contracts Act 1984 (Cth).


          The Insurance Contracts Act was intended, as its long title said, "to reform and modernise the law relating to certain contracts of insurance".  The long title went on to say that it was to do that "so that a fair balance is struck between the interests of insurers, insureds and other members of the public".  Whether the Act has achieved that end is for others to decide.  For present purposes, the fundamental point to be noticed is that the Insurance Contracts Act was intended to regulate most, if not all, aspects of insurance contracts.  Looking at the list of titles of the Act's Parts and Divisions reveals that to be so.  It deals with the duty of the utmost good faith 3 , insurable interests 4 , disclosures and misrepresentations 5 , the contract 6 , claims 7 , expiration, renewal and cancellation 8 , subrogation 9 and information, notices and reasons 10 .


          It is inevitable that there will be disputes between insurers and those who are or believe themselves to be insured.  It is inevitable that some of those disputes will lead to litigation.  There are some aspects of litigation to which I want to make some reference.


          No legal conference these days is complete without reference to the issue of access to justice and its correlative of the cost of litigation or without reference to alternative methods of dispute resolution either within or outside the court system.  That is because these are truly pressing issues.  You will forgive me, however, if I do not stay to examine those subjects now.  Rather, I want to offer two different, but related reflections on litigation in the age of statute.


          It has been pointed out by others (most recently by Gleeson CJ in his article "Individualised Justice -The Holy Grail" 11 ) that there has been a discernible trend away from what are sometimes called black letter rules of law, in favour of conferring open-ended discretions intended to permit the doing of justice in each particular case.


          Again, I leave to others the decision about whether this is good or bad.  Again, I want to do no more than identify what seem to me to be some consequences of this trend.  The more open textured a rule, the more important it is to articulate the factors which are identified as relevant to a particular application of the rule.  That is important for the decision-maker because otherwise the assertion that a particular result is "fair and reasonable" or "just and equitable" is a statement of the outcome, not the reasons for arriving at it.  But if it is important for the decision-maker to articulate the factors that have been taken into account and to attribute particular weight to each, and it is, it is equally important for those who advocate a particular outcome to frame their argument by reference to the same considerations.


          This is no novel problem for the law or for lawyers.  Judges sentencing for crime have long been confronted by this sort of task and judicial remarks on sentencing take the form of recording the matters that have been taken into account in exercising the discretion which a sentencing judge has in fixing the punishment that is to be ordered.  And there is a well-developed body of law that identifies what are the relevant considerations.


          Likewise, it is now common place for lawyers to consider the decision of an administrative decision-maker and seek to identify whether relevant considerations have been taken into account and irrelevant considerations have not.  So the problem presented by legislation providing an open textured rule is far from novel.  Yet there are times when it seems that insufficient attention may be given by those who seek to engage such a rule to the identification of the considerations that are relevant to its exercise.  All that is said is "Well … it's a matter of discretion".


          The second kind of reflection I would make about litigation in the age of statutes concerns how the problem is attacked.


          In these days of the Internet, almost every decision of a superior court can readily be found recorded in some legal data base.  Some, but by no means all, of the decisions of the superior courts will be reported.  A body of reported and unreported decisions about matters touching questions, for example, of insurance and insurance contracts is therefore readily accessible to all who wish to look.  So much is an inevitable and normal path for the development and elucidation of the law in a common law system.


          What is increasingly noticeable in many areas of the law, is, however, a trend that is neither necessary nor desirable.  As the available body of decided cases increases, there appears an increasing tendency for practitioners to take those cases, or commentaries on the cases, as the starting point for any inquiry.  To do so in any matter in which there is applicable legislation is to invite serious error.  In those matters, and matters concerning insurance or insurance contracts are of this kind, it is the Act which represents the relevant starting point.  There is no doubt that, from that starting point, the inquirer must go on to consider the decided cases but, having done that, it is to the Act that the inquirer must return.  For not only is the statute the starting point for the inquiry, it must be its end point.  If that path is not followed, there emerges a body of folklore about the rights and duties of parties that is rooted not in the Act but in someone's understanding of what the courts have said in a particular context about a particular problem that has been encountered and resolved.


          It would be wrong of me to attempt to amplify what has been said in the High Court's decisions about insurance law or about the Insurance Contracts Act .  The reasons given by the Court must stand without any later attempt by me to elucidate them.  That, I hate to tell you, is entirely your task.  Mine, in a later case, is simply to let you know whether I think that you are right.  Nonetheless, you may notice in cases concerning the Insurance Contracts Act , like FAI Insurance Co Ltd v Australian Hospital Care Pty Ltd 12 , that there is an emphasis in the judgments on the words of the Act.


          That is no narrow-minded literalism.  It is recognition of two facts of cardinal importance.  First, the courts must give effect to valid legislation.  As covering cl 5 of the Constitution says, "This Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts, judges, and people of every State and of every part of the Commonwealth … ."  Secondly, it is in the words of the statute that the statute's operation and effect are to be found.  Of course, that must be done with an understanding of the purpose which it was intended that the legislation should achieve or, if you like, the mischief to which it was directed.  And it is only in that artificial and objective sense that it is useful, if at all, to speak of searching for parliamentary intention.  The law relating to statutory interpretation, like so many other areas of the law, continues to grow and develop.  "Mischief" and "parliamentary intention" are terms which do not now find universal favour.  I do not wish to enter that field of debate.  It is enough to say that it is the text of the legislation which will convey its meaning.


          Permit me, however, to spend a few more minutes saying something more about the several propositions that I have just advanced.  They are propositions that apply in a very wide variety of cases but I will relate them to insurance.


          I have said that it is important to start and finish any inquiry about the operation of a statute like the Insurance Contracts Act with the statutory text.  That proposition should be elementary.  Experience teaches that it is not.  Further, although it is very important to consider any decisions that have been given about particular provisions in the Act, it is no less important to read those decisions with the text of the Act beside you and to do so with the relevant version of the Act at hand, not some later, irrelevant version.  Then, the task is to identify what light the case sheds upon the problems under consideration.  What was the problem that confronted the court in the case that you are reading?  What is the principle which you identify from the case?  Is there a principle established?  Is the case any more than the application of statutory words to a particular factual context?  Only by asking and answering these questions can you see what light (if any) the case casts upon the particular problem you face.  Again, all this should go without saying.  Again, experience teaches that it is not.


          In this area, as in many other areas of the law, it is necessary to beware of starting any analysis from premises that do not find reflection in the relevant legislation.  Two examples, drawn from insurance law, may make the point.  First, as was pointed out in FAI Insurance Co Ltd v Australian Hospital Care Pty Ltd 13 , difficulties may emerge from the application of particular labels to various types of insurance contract if, as a result, an attempt is then made to force into the mould of the Act a scheme of classification which is not found in it.  In that case reference was made to the classification of policies as "claims made" or "claims made and notified policies" as distinct from "occurrence policies".  None of these is a term found in the Act.  Their application may be convenient but it would be wrong to take such categories and argue from the name given to them to some conclusion about their content.


          Secondly, not only are there difficulties of that kind, it must always be recalled that in some respects the Insurance Contracts Act restricts what otherwise might be the contractual freedom of parties to a contract of insurance.  No longer are parties free to strike whatever bargain they choose.  That being so, pointing to the commercial advantage that one party may gain from a particular construction of the Act, and then labelling that as "commercially sensible" may assume a degree of contractual freedom which the Act expressly denies.  Again, the relevant question is, what does the Act say?  Consideration of commercial consequences for the parties may assist in resolving some questions about the Act's meaning, but it is the Act which is the start and the end of the inquiry.


          It is with these considerations in mind that I referred to the need to avoid the development of folklore.  When specialists come together they inevitably speak in shorthand.  Each of them may know precisely what the other is saying, but there is undoubtedly a great risk that the jargon will take on a life of its own and that the debate shifts from a debate about the terms of the relevant Act to the meaning to be assigned to certain pieces of jargon.  There is a real risk that in the process a body of folklore develops which is not rooted in the Act.


          Whether the courts have done well or badly in performing their task in the field of insurance law is for others to judge.  The number of journal articles published in the field suggests that to many the point is at least contestable.  But again, may I make some obvious points that bear upon this aspect of the matter.  First, if the point has given rise to litigation which has gone to judgment, it should suggest that the point is arguable - that reasonable minds might differ about its resolution.  If the case has gone to the High Court of Australia then, unless the system has failed somewhere along the line, the point at issue is certainly open to doubt.  It should not, in those circumstances, be a matter for comment or criticism if the Court divides in its opinion.  The premise is that the point is disputable.


          Whether or not that is so, the lawyer who would wish to consider the decision has no choice except to read it and think about what is said in the reasons.  It is not enough to depend upon someone else's summary of what they think the case stands for or someone else's summary of the reasons that lead to that conclusion.  What you do not know is what assumptions the author of the summary makes.  And very often in disputable questions of law, isolating the unexpressed premise of the argument is fundamental to testing its validity.


          How then can this be done?  Where is the practitioner to find time to devote to this task?  Does not the practitioner inevitably come to narrow the focus to a smaller and smaller field of law?  While I fear that an affirmative answer to this last question is well-nigh inevitable, I regret that it should be so.  The truly skilled practitioner has a wide and a deep knowledge of many areas of the law.  And if the practitioners and the judges do not seek to place each particular problem in a broader context of the law as a whole, there is a great risk that the field of study will yield a mutant crop of principles which, ultimately, will wither and die.  No area of the law, however specialised, can grow and thrive unless it takes its proper place in the whole legal system.


          All that I have said will be understood as reflecting the preoccupations of one who, for the last 10 years, has served as a judge and for the preceding 20 years was a barrister.  All of it, therefore, reflects a preoccupation with litigation.  Those of us who are concerned with litigation see matters where one or other side says that something has gone wrong.  We see the operating theatre, if not the pathology laboratory, rather than the maternity ward of the law.


          The tasks which we undertake both reflect and find support in certain fundamental constitutional foundations.  For a federal judge the foundation is Ch III of the Constitution concerning the judicial power of the Commonwealth.  At several points in this address I have gone to some lengths to emphasise that I am expressing no view about policy or similar issues.  I have confined myself to identifying what seem to me to be some consequences of some recent developments in the law.  In recent years the Court has had to examine a number of issues about the exercise of the judicial power of the Commonwealth.  The cases concerning the cross-vesting legislation ( Re Wakim; Ex parte McNally 14 ) are but one example of these cases.


          The separation of powers which follows from the text and structure of our Constitution has been held to require the separation of the federal judicial power from the legislative and executive functions.  Just as the judicial power of the Commonwealth cannot be conferred otherwise than in accordance with Ch III, non-judicial power cannot be conferred on a Ch III court.


          Questions of legislative policy are for the legislature to decide.  The task of the courts is, as the judicial oath puts it, to do justice according to law without fear or favour, affection or ill-will.  The addition of the words "according to law" in the phrase "do justice according to law" is not done to provide plumpness to an expression thought otherwise too thin in its expression.  It is an addition of substance.  The obligation of the judges is to do justice according to law.


          From time to time judges, particularly in a final court of appeal like the High Court of Australia, must make a choice about how the law is to develop.  Commonly, the debate about that choice will refer to what will be termed "policy" considerations.  "Policy" in that context is used in a different, and more confined sense than it is used when legislators debate what statutes should be enacted.  The sweep of policy which legislators can and should consider is very much wider than the matters to which the courts can give effect.


          There has been much debate in recent months about insurance and the law of negligence.  I will not enter upon that debate.  Nor will I venture a view about whether the common law did or did not take some wrong turning in its development of principles in the area.  The debate that is now occurring is a debate about legislative and social policy and that is not an area into which I will go.  If, in the course of that debate, it is thought necessary to consider how the courts have done their job whether in relation to the law of negligence or otherwise, it must be recalled that scrutiny of that kind is a normal and very important process fundamental to any democratic society.  It is as well to remind you, however, that there are recognised and accepted limitations on the role of the courts in developing the common law.  As Gaudron and McHugh JJ said in Breen v Williams 15 :


          "Advances in the common law must begin from a baseline of accepted principle and proceed by conventional methods of legal reasoning.  Judges have no authority to invent legal doctrine that distorts or does not extend or modify accepted legal rules and principles.  Any changes in legal doctrine, brought about by judicial creativity, must 'fit' within the body of accepted rules and principles.  The judges of Australia cannot, so to speak, 'make it up' as they go along.  It is a serious constitutional mistake to think that the common law courts have authority to 'provide a solvent' 16 for every social, political or economic problem.  The role of the common law courts is a far more modest one.


          In a democratic society, changes in the law that cannot logically or analogically be related to existing common law rules and principles are the province of the legislature.  From time to time it is necessary for the common law courts to re-formulate existing legal rules and principles to take account of changing social conditions.  Less frequently, the courts may even reject the continuing operation of an established rule or principle.  But such steps can be taken only when it can be seen that the 'new' rule or principle that has been created has been derived logically or analogically from other legal principles, rules and institutions."


          This Conference offers a great opportunity for those who participate in this important and specialised aspect of law to place their pursuit in the broader context.  I hope that you will enjoy it and benefit from it.




1     (1980) 16 ALRC.


2     (1982) 20 ALRC.


3     Pt II.


4     Pt III.


5     Pt IV.


6     Pt V.


7     Pt VI.


8     Pt VII.


9     Pt VIII.


10    Pt XIX.


11    (1995) 69 ALJR 421.


12    (2001) 204 CLR 641.


13    (2001) 204 CLR 641 at 652 [23].


14    (1999) 198 CLR 511.


15    (1996) 186 CLR 71 at 115.


16    Tucker v US Department of Commerce (1992) 958 F 2d 1411 at 1413.