Talifero v Asbestos Injuries Compensation Fund Limited as Trustee for the Asbestos Injuries Compensation Fund

BEAZLEY P: I have had the advantage of reading in draft the reasons of Sackville AJA. I agree with his Honour’s reasons and proposed orders.

SACKVILLE AJA: This appeal arises out of an application for judicial advice made by the respondent, Asbestos Injuries Compensation Fund Ltd (Trustee), pursuant to s 55(1) of the James Hardie Former Subsidiaries (Winding Up and Administration) Act 2005 (NSW) (Winding Up Act). [1] In its summons filed on 29 January 2018, the Trustee sought an order in the following terms:

The summons defined “Talifero Proceeding” to mean proceeding number 116 of 2017 in the Dust Diseases Tribunal of New South Wales (Tribunal) which was commenced by Mr FJ Talifero against Amaca Pty Ltd (Amaca), formerly known as James Hardie and Co Pty Ltd. Mr Talifero died of mesothelioma on 16 October 2017 and his legal personal representative was substituted as the plaintiff. The Tribunal gave judgment on 11 December 2017 for the plaintiff (Estate) in the sum of $560,482 as damages for the mesothelioma contracted by Mr Talifero as a consequence of Amaca’s negligence. [2]

The Trustee’s application for judicial advice did not join any other party. On 8 March 2018, the primary Judge granted leave to Amaca to make submissions and be heard on the application and also granted leave to Allianz Australia Insurance Ltd to make submissions. The Attorney-General for New South Wales intervened in the proceedings pursuant to s 58 of the Winding Up Act but it does not appear that a formal order was made joining the Estate as a party to the application for judicial advice.

It was common ground both before the Tribunal and the primary Judge that Mr Talifero had been exposed to asbestos in Australia and, before he migrated to this country, in the United Kingdom (including through his employment as a stoker in the British Navy). The Tribunal recognised that Mr Talifero had been exposed to asbestos during his employment in the United Kingdom, but that that exposure was irrelevant since the disease of mesothelioma is “indivisible”. [3]

Before the primary Judge neither the Attorney-General nor the parties given leave to make submissions disputed that s 55 of the Winding Up Act authorised the Court to give the advice sought by the Trustee if it was otherwise appropriate to do so. After hearing argument, the primary Judge gave advice in the terms sought by the Trustee in a judgment delivered on 4 May 2018. [4] The effect of the advice is that the Trustee is justified in not paying the portion of the judgment sum that reflects the contribution made to Mr Talifero’s mesothelioma by his exposure to asbestos in the United Kingdom. The Trustee has made a determination as to the extent of the contribution to asbestos in the United Kingdom, but the correctness of that determination was not an issue before the primary Judge and does not arise on the appeal.

By a notice of appeal filed on 1 June 2018, the Estate purports to appeal as of right from the order made by the primary Judge. The notice of appeal names the Trustee as the respondent and contains the following ground:

The Estate seeks orders allowing its appeal and setting aside the judicial advice given by the primary Judge. In lieu of that advice the Estate seeks an order to the following effect:

The issue for determination on the appeal depends on the construction of three inter-related instruments:

The expression “Proven Claim”, which is referred to in the notice of appeal, is defined in identical terms in both the Trust Deed and the Final Funding Agreement. But much of the debate in this Court centred on the definitions of the expressions “payable liability” and “personal asbestos claim” in the three relevant instruments. The definitions of these terms are in substance the same in the Trust Deed and the Final Funding Agreement, but the definitions are different in the Winding Up Act.

The Estate, represented in this Court by Mr Walker SC and Mr Robertson, relies on the Tribunal’s finding that Mr Talifero’s exposure to James Hardie’s asbestos products in Australia alone was sufficient to cause his mesothelioma, whatever contribution may or may not have been made by his exposure to asbestos in the United Kingdom. The Estate submits that the Final Funding Agreement obliges the Trustee to pay in full a “proven asbestos claim” where that claim rests exclusively on exposure to asbestos in Australia. The Estate contends that there is nothing in the Winding Up Act that detracts from the Trustee’s obligation imposed by the Final Funding Agreement. Since Mr Talifero succeeded before the Tribunal on a claim wholly founded on exposure to asbestos in Australia it follows, so the Estate argues, that the Trustee must pay the entirety of the judgment sum.

The Trustee supports the reasoning of the primary Judge. It contends that the three instruments, when read together, oblige the Trustee only to pay a personal asbestos claim to the extent to which the claim (as distinct from the judgment on the claim) is in fact attributable to exposure to asbestos in Australia. According to the Trustee, if as a matter of fact Mr Talifero’s mesothelioma can be attributed both to exposure to asbestos in Australia and in the United Kingdom, the Trustee has to apportion responsibility for his mesothelioma between the two periods of exposure. On this analysis, if 40 per cent of responsibility for Mr Talifero’s mesothelioma is attributable to exposure in the United Kingdom and 60 per cent to exposure in Australia, the Trustee is obliged only to pay 60 per cent of the judgment sum awarded by the Tribunal to the Estate.

On the Trustee’s case, it is not to the point that the Estate succeeded before the Tribunal in establishing that Mr Talifero’s exposure to Amaca’s asbestos products in Australia was sufficient under common law principles to be regarded as the cause of his mesothelioma. The question is rather whether, on a harmonious reading of the three instruments constituting the scheme, the Trustee is entitled to pay only the proportion of the damages awarded to Mr Talifero that can be attributed as a matter of fact to his exposure to asbestos products in Australia.

The Attorney-General has intervened in the appeal as he did on the application for judicial advice. For the most part Mr Sexton SC SG, who appeared with Ms Jones for the Attorney-General, supports the reasoning of the primary Judge, but makes no submission as to the particular facts of the case.

As has been noted, no issue was raised before the primary Judge as to whether s 55(1) of the Winding Up Act authorised the primary Judge to give the direction sought by the Trustee. Similarly, none of the parties who participated in the appeal disputed the primary Judge’s powers to give that direction.

Section 55(1) permits a liable entity or the Trustee to apply for advice or direction on any matter relating to the scope of the Trustee’s functions under Part 4 of the Winding Up Act, the exercise of any function by the Trustee under Part 4 or any other matter relating to the operation of Part 4. [6] Section 4(1) defines “functions” to include “power, authority or duty”.

I accept the parties’ implicit assumption that s 55(1) of the Winding Up Act authorised the Court to make the direction sought by the Trustee. Section 23(1) of the Winding Up Act provides that the powers of each liable entity must be exercised during the “winding up period” so as to carry on the business of the entity to ensure that only payable liabilities of the entity are paid in accordance with Part 4 of the Act and to pay payable liabilities in accordance with Part 4. [7] Section 32 stipulates that during the winding up period for a liable entity only “payable liabilities” of the entity may be paid, whether by the entity itself or the Trustee. Section 34 authorises a liable entity or the Trustee on its behalf to pay the payable liabilities of the entity as and when they fall due. Sections 23, 32 and 34 are within Part 4 of the Winding Up Act. The language of s 55(1) is sufficiently broad to encompass a direction by the Court to the Trustee that it would be justified in not paying out of the funds available to it a particular proportion of damages awarded to a claimant.

The Estate’s notice of appeal raises other issues. The Estate seeks in substitution for the order made by the primary Judge a direction to the Trustee advising that it is obliged to pay the whole of the judgment in favour of the Estate. Section 55(1) of the Winding Up Act makes no mention of an application by a person other than a liable entity or the Trustee. Nor does s 55 provide for an application or cross-application by a third party, such as a claimant who has obtained a judgment against a liable entity or the claimant’s estate. It will be necessary to return to the question of whether the Estate is entitled in proceedings under s 55(1) (including an appeal) to seek a direction in the terms stated in the Estate’s notice of appeal.

The Trustee has not objected to the competency of the appeal despite the fact that the Estate was not joined as a party to the Trustee’s application in the Equity Division for advice or direction. Section 101(1)(a) of the Supreme Court Act 1970 (NSW) provides that subject to the Act and the rules, an appeal lies to the Court of Appeal from any judgment or order of the Court in a Division. It is, however, established that a non-party requires leave to appeal from a judgment or order. [8] A non-party has standing to seek leave to appeal if he or she is “aggrieved” or is “sufficiently interested” in the judgment or order. [9]

The Estate is aggrieved by the orders made by the primary Judge and in any event clearly has a sufficient interest in challenging them. It is therefore appropriate to permit the Estate to apply for leave to appeal. Since the issues raised by the Estate are clearly of general importance, it is also appropriate that the Court grant leave to appeal

Section 55(4) of the Winding Up Act provides that a written statement signed by the Trustee seeking judicial advice is sufficient evidence of the matters set out. The Trustee prepared an “Amended Statement of Facts” pursuant to s 55(4) which was admitted into evidence.

Based on the Amended Statement of Facts, the primary Judge made the following findings concerning the Talifero Proceeding: [10]

Two expert reports were tendered in the Tribunal on behalf of the Estate. Professor Breslin, a consultant thoracic physician, opined on the basis of Mr Talifero’s history of definite occupational asbestos exposure that 10 to 12 per cent of his exposure occurred in Britain and the balance in Australia. Professor Breslin considered that the “overwhelming cause” of Mr Talifero’s asbestos exposure was his work in Australia, but that his exposure in Britain materially contributed to the development of his mesothelioma.

Professor Henderson, Emeritus Professor of Anatomical Pathology at Flinders University, did not express an opinion as to the percentage contributions made by Mr Talifero’s exposure to asbestos in Britain and Australia. However he expressed the view that Mr Talifero’s exposure to asbestos in Australia represented a “significant and substantial causal contribution to the singular (i.e. all or none; so-called ‘indivisible’) injury” in the form of pleural malignant mesothelioma. The Tribunal referred to the expert reports [12] but had no need to make a finding as to the proportional contribution to Mr Talifero’s mesothelioma of his exposure to asbestos in Britain.

The primary Judge noted [13] that the Trustee had made its own determination that 48 per cent of Mr Talifero’s total exposure was attributable to his exposure in the United Kingdom and that, accordingly, it intended to deduct 48 per cent from the damages award made by the Tribunal in favour of the Estate. [14] In making this determination the Trustee relied on a report by Professor Richard Fox, a medical oncologist. Professor Fox, whose report was not tendered before the Tribunal, adopted the so-called “Peto hypothesis” (which is also referred to as the Peto model or Peto formula) to make the apportionment. [15] Although Professor Fox’s report was not in evidence at the Tribunal, Professor Henderson in his report stated that he had “major and serious reservations, and substantial doubt” about Professor Fox’s use of the Peto hypothesis to estimate relative percentage causal contributions from Mr Talifero’s exposure to asbestos in Britain and Australia.

No challenge has been made either before the primary Judge or in this Court to the Trustee’s determination founded on Professor Fox’s analysis. It follows that if the primary Judge’s order is upheld and the Trustee acts in accordance with the judicial advice and its own determination (assuming no further challenges), the Estate will receive only 52 per cent of the judgment sum awarded by the Tribunal.

In February 2001 the Board of James Hardie Industries established the Medical Research and Compensation Foundation (MRCF) as a means of funding the James Hardie Group’s liability for current and future asbestos-related claims. It became obvious within a short time that the funding allocated to the MRCF would fall well short of the amount required to meet all claims.

By Letters Patent issued on 27 February 2004 under s 4(1) of the Special Commissions of Inquiry Act 1983 (NSW), DF Jackson QC was appointed to inquire into and report on a number of matters (Jackson Inquiry). The matters were as follows:

The recitals to the Final Funding Agreement provide a convenient if not complete record of the principal findings of the Jackson Report and the events leading to the arrangements embodied in the Winding Up Act, the Trust Deed and the Final Funding Agreement. The Recitals include the following:

The Jackson Report did not make detailed recommendations as to how future asbestos claims against James Hardie entities could or should be met. Instead, the Report noted that consideration of the adequacy of current arrangements had been overtaken to a significant degree by the expressed willingness of the James Hardie Group to fund future asbestos liabilities of Amaca, Amaba and JHIL notwithstanding that the Group was not under a legal obligation to do so. [16]

The Jackson Report concluded that the best long-term solution for satisfying the asbestos liabilities would be a scheme “for which that proposed by JHI NV [James Hardie Industries NV] might be a starting point”. But that proposal was “in an embry[onic], and sometimes contradictory form” and needed more clarification and detailed work. [17] The ten “key principles” proposed by JHI NV as the basis for its suggested scheme made no explicit reference to the consequences for a scheme of exposure to asbestos outside Australia.

The bill for the Winding Up Act was one of a package of three bills introduced into and passed by both Houses of the New South Wales Parliament on a single day, 1 December 2005. The related legislation comprised the James Hardie (Civil Liability) Act 2005 (NSW) and the James Hardie (Civil Penalty Compensation Release Act) 2005 (NSW). The effect of these two enactments was to extinguish the potential civil liability of James Hardie entities (including civil penalties) arising from the events investigated by the Jackson Inquiry.

The second reading speech addressed all three bills. The Minister explained that:

The Minister said that the bill for the Winding Up Act:

The Minister paid tribute to the people who had campaigned “over many years for justice”. He also acknowledged that contributions of those who had participated in the negotiations leading to the Final Funding Agreement, including James Hardie’s negotiating team. The Minister concluded as follows:

The Winding Up Act received assent on 2 December 2005. Part 1 (ss 1-7) came into force on 3 March 2006. [21] Part 2 (ss 8-10) came into force on 1 December 2005, the date the Bill for the Winding Up Act was first introduced into Parliament. [22] Part 4 (ss 20-60) came into force on 7 February 2007. [23]

Section 3(1) of the Winding Up Act states the principal objects of the Act as follows:

The “Final Funding Agreement” is defined in s 4(1) to mean the agreement entered into by the State of New South Wales, James Hardie Industries NV and LGTDD Pty Ltd on 1 December 2005 as amended from time to time. Section 64 provides for the Final Funding Agreement to be tabled in Parliament.

Section 8(1) of the Winding Up Act declares that the trust fund established by James Hardie Industries NV (the SPF) as contemplated by the Final Funding Agreement is a valid charitable trust for the purposes of the law of New South Wales, provided it complies with certain conditions.

Section 3(2) of the Winding Up Act provides as follows:

Part 4 of the Winding Up Act is headed “Winding up of liable entities”. The term “liable entity” is defined in s 4 to include Amaca. Section 20(1) defines the “winding up period” for a liable entity to mean the period commencing on the day s 20 commenced and ending upon the deregistration of the entity or on a date appointed by the Governor for termination of the winding up.

Section 21 states that during the winding up period for a liable entity any winding up of the entity must be conducted in accordance with the provisions of Part 4.

Section 23 provides as follows:

Section 23(2) empowers a liable entity to make any compromise or arrangement with personal asbestos claimants or persons alleging that they have a personal asbestos claim or a claim for a payable liability against the entity. Section 23(2) also gives the liable entity other powers in relation to claims against it.

The following definitions in s 4(1) of the Winding Up Act are relevant inter alia, to s 23:

Division 5 of Part 4 of the Winding Up Act is headed “Making and payment of claims”. It includes the following provisions:

Section 34 of the Winding Up Act states as follows:

Section 35(1) enables the Trustee, with the approval of the Minister, to apply to the Supreme Court for an approved payment scheme if it appears reasonably likely that for a period of time there will be insufficient funds “for all payable liabilities of a liable entity to be paid in full as and when they fall due”. On such an application, the Supreme Court may make an order for the payment by instalments of the full amount of liabilities due or for the deferral of payment of payable liabilities of the entity during a specified period (s 35(5)).

Section 36 of the Winding Up Act relevantly provides as follows:

Division 8 of Part 4 of the Winding Up Act provides for the completion of the winding up of an entity. The Minister, if satisfied that the provisions of Part 4 are no longer of utility in achieving the objects of the Act, may make an order that the Trustee proceed to the final stage of winding up of the liable entity (s 43(2)). The Trustee is under a duty as soon as practicable after the “finalisation day” to collect the property of the liable entity and discharge its outstanding liabilities (s 44). Division 8 provides for claims against the liable entity to be proved, including a claim other than a claim for a payable liability (s 47(1)). Section 50 sets out the debts that are to be paid in priority to all other claims. After costs and expenses, priority is to be given to payable liabilities and then to “claims for the payment of liabilities (other than payable liabilities)”.

Division 9 of Part 4 of the Winding Up Act is headed “Enforcement”. Division 9 includes s 55 which relevantly provides as follows:

Section 62 (in Part 5) declares for the avoidance of doubt that nothing in the Winding Up Act operates to create any liability for a personal asbestos claim if the liability does not arise under another law.

The Trust Deed executed on 14 December 2006 amends and restates the original trust deed entered into between James Hardie Industries NV (JHINV), a limited liability company incorporated in the Netherlands, and the Trustee. It appears that amendments were intended to overcome difficulties created by a ruling from the Australian Taxation Office concerning the charitable status of the trust.

The recitals to the Trust Deed include the following:

The “Performing Subsidiary” is defined to mean James Hardie 117 Pty Ltd, formerly known as LGTDD Pty Ltd. A “Claimant” relevantly means an individual or the legal personal representative of an individual who makes a “Personal Asbestos Claim”. The expression “Liable Entities” means Amaca, Amaba and ABN 60.

Clause 2.2 of the Deed confirms that the “Charitable Fund” was established upon execution of the Original Deed. “Charitable Fund” means the charitable trust established under the Original Deed as amended and confirmed by Part 2 of the “Transaction Legislation” to carry out the “Charitable Purpose”. The “Transaction Legislation” is the Winding Up Act. The “Charitable Purpose” includes (cl 3):

The following definitions are relevant to cl 3.1 and to other provisions in the Deed:

The moneys held on trust by the Trustee for the Charitable Purpose include the following:

The Trustee is required to exercise its discretion to apply income to ensure to the extent possible that all net income is included in the assessable income of the Liable Entities (cl 4.2(a)). However, under cl 4.2(b):

Subject to the Deed, the Trustee has all the powers and privileges of ownership over all the Charitable Fund Property and Income (cl 5.2). In addition to the powers conferred on the Trustee by the Trust Deed, it may exercise each and any power conferred on it by the Winding Up Act or by any other New South Wales legislation (cl 5.7).

Clause 5 imposes limitations to the powers of the Trustee as follows:

The Final Funding Agreement comprises an “Amended and Restated Deed” dated 21 November 2006. The parties are James Hardie Industries SE (JHISE), a company incorporated in Ireland, the Performing Subsidiary (James Hardie 117 Pty Ltd), the State of New South Wales and the Trustee. The text of the Final Funding Agreement is 153 pages in length, excluding ten schedules, and involves navigating an extraordinary number of definitions and cross-references.

Some of the recitals to the Final Funding Agreement have been set out earlier. [24] The recitals also include the following:

Clause 4.2 provides that the Trustee’s role is to include the following:

As in the Trust Deed, “Payable Liability” is defined in the Final Funding Agreement to include “any Proven Claim”. The term “SPF Funded Liability” is also defined to include “any Proven Claim”. “Proven Claim” and “Personal Asbestos Claim” in substance have the same meaning in the Final Funding Agreement as in the Trust Deed. [25]

Clause 3 of the Final Funding Agreement deals with “Structure” as follows:

“Claimant” means an “individual (or legal personal representative of an individual) who makes a Personal Asbestos Claim …”. The term “Related Agreements” is defined to mean documents ancillary to the Final Funding Agreement listed in Schedule 1, including the Trust Deed. The “Release Legislation” is defined to mean, in effect, the James Hardie (Civil Liability) Act 2005 (NSW) and the James Hardie (Civil Penalty Compensation Release) Act 2005 (NSW).

Clauses 6 and 9 of the Final Funding Agreement specify the funding obligations of JHISE and the Performing Subsidiary.

Clause 8 provides as follows:

Consistently with observations made by Gzell J in Asbestos Injuries Compensation Fund Ltd, [26] the primary Judge accepted that the three instruments (the Winding Up Act, the Trust Deed and the Final Funding Agreement) must be read “together harmoniously”. [27] His Honour said that: [28]

The primary Judge considered that there was no conflict between the key definitions in the instruments, but a “measure of disconformity or ambiguity”. [29] By way of example, he pointed to the word “claim”, which is a defined term in the Winding Up Act but is not defined in the Trust Deed or the Final Funding Agreement. [30]

His Honour also pointed out that there is a disconformity between “the singularly important definition” of “Personal Asbestos Claim” in the Trust Deed and Final Funding Agreement and the definition of “personal asbestos claim” in the Winding Up Act. [31] His Honour described the latter as a “blander definition” because it “does not refer to any limit attributable to exposure caused [by] or contributed [to] outside Australia”. [32]

The primary Judge concluded that when the various provisions are read together the Trustee is not liable for any loss by reason of exposure outside Australia:

The primary Judge observed that it was uncontroversial that mesothelioma is an “indivisible injury”. [33] But that proposition did nothing to illuminate the role of the Trustee under the scheme. The Trustee was obliged by the Trust Deed and the Final Funding Agreement, particularly proviso (a)(i)(B) to the definition of “Personal Asbestos Claim”

His Honour continued as follows: [35]

First, the parties to the appeal accept the “uncontroversial” proposition that mesothelioma is an “indivisible injury”. [36] Santow JA explained this concept in Orica Ltd v CGU Insurance Ltd: [37]

The concept of a “divisible” disease, where the condition is dose-related, was addressed by Lord Phillips PSC in Sienkiewicz v Greif (UK) Ltd: [38]

In Harradine v Cockatoo Dockyard, [39] O’Meally P succinctly explained the difference between indivisible and divisible injuries as follows:

It is also useful to refer to the summary given by Lord Phillips in Sienkiewicz v Greif (UK) Ltd of the aetiology of mesothelioma as understood in 2011: [40]

Secondly, the parties agree that it is necessary to attempt to construe the Winding Up Act, the Trust Deed and the Final Funding Agreement “harmoniously”. However, as Mr Walker observed in argument, that proposition is perhaps of limited assistance because each party maintains that its construction of the three instruments is “harmonious” notwithstanding that the outcomes are very different in each case. For example, the Trustee submits that the definition of “Personal Asbestos Claim” in the Winding Up Act should be construed as referring to an individual’s actual exposure to asbestos as distinct from the exposure alleged in the individual’s claim. This construction, so it is said, would ensure that the less explicit language in the Winding Up Act definition conforms to what the Trustee says is the clear meaning of the more explicit definition in the Final Funding Agreement. The Estate says that the definition in the Final Funding Agreement is not clear and should be read as referring to the individual’s exposure to asbestos as alleged in the claim. In this way, so the Estate argues, the definition in the Final Funding Agreement conforms to the definition in the Winding Up Act.

The third matter is of more significance. The Estate and the Trustee agree that the source of the Trustee’s obligation to pay moneys to the Estate is to be found in the Final Funding Agreement and not in the Winding Up Act. Both identify the source as cl 4.2(d) of the Final Funding Agreement which states that the Trustee’s role, subject to it having the necessary funds to do so, is to

The Attorney-General accepts that cl 4.2(d) of the Final Funding Agreement, when read with cl 5.7 of the Trust deed, constitutes a source of the Trustee’s power to pay out a damages award. However, the Attorney-General identifies cll 3.1 and 5.2 of the Trust Deed as additional sources of power for the Trustee.

Fourthly, both the Estate and the Trustee accept that cl 4.2(d) of the Final Funding Agreement, read with the Trust Deed, imposes a duty on the Trustee to pay SPF Funded Liabilities to claimants. They agree, therefore, that the Trustee is obliged to pay the Estate’s “Proven Claim”, but they disagree as to the content of that duty. [41]

Fifthly, the effect of cl 5.8(a) of the Trust Deed is that the Trustee must not discharge any liability of a Liable Entity which a Liable Entity is not authorised to pay or discharge by the Final Funding Agreement, the Trust Deed itself or the Winding Up Act. When cl 5.8(a) of the Trust Deed is read with s 32(1) of the Winding Up Act, the Trustee is permitted only to pay “payable liabilities”. I do not understand there to be any dispute as to this proposition.

The Estate submitted that the Winding Up Act was enacted against the background of “elementary” common law principles governing claims against a tortfeasor. Under those principles it is not open to a defendant whose breach of duty has materially contributed to an indivisible disease such as mesothelioma to escape or diminish its liability to pay full compensation to the plaintiff simply because there may be a concurrent tortfeasor whose acts also contributed to the loss and damage. According to Mr Walker, the Winding Up Act must be construed against that background.

Consistently with this approach, so it was argued, the judgment obtained by the Estate in the Tribunal satisfies the definition of “payable liability” in the Winding Up Act because the exposure to asbestos to which the claim related occurred wholly within Australia. It was on the basis of Mr Talifero’s exposure to asbestos in Australia that Amaca was found liable to the Estate for the whole of Mr Talifero’s loss, regardless of any exposure he had to asbestos outside Australia. Since the judgment obtained by the Estate is a “payable liability” of Amaca, s 32(1) of the Winding Up Act permits the Trustee to pay the full amount of the judgment debt to the Estate.

Mr Walker contended that Mr Talifero’s claim also satisfied the definition of “Personal Asbestos Claim” in the Trust Deed and the Final Funding Agreement because Mr Talifero had a personal injury claim for damages under common law arising from exposure to asbestos occurring in Australia. The reference to “common law” in the definition shows that it is intended to incorporate the common law principle that wrongful exposure to asbestos in Australia suffices to establish liability for the entirety of the claimant’s loss and damage.

Mr Walker acknowledged that for Mr Talifero’s claim to satisfy the definition of “Personal Asbestos Claim” in the Final Funding Agreement, his claim must satisfy the proviso to the definition. He also accepted that the wording of the proviso is capable of referring to the actual exposure of an individual to asbestos throughout his or her life, as distinct from the exposure which was relied on to justify the claim for common law damages. But, so he submitted, the constructional choice should be informed by the need to achieve a construction of the Trust Deed and Final Funding Agreement that is harmonious with the Winding Up Act.

Proviso (a)(i)(A) to the definition of “Personal Asbestos Claim” should therefore be construed to refer not to the claimant’s actual exposure to asbestos over his or her lifetime, but to whether the claimant’s common law claim arose from exposure to asbestos occurring wholly within Australia. Mr Talifero’s claim satisfied that requirement notwithstanding that as a matter of fact he had also been exposed to asbestos while working in Britain or in the British Navy. Since Mr Talifero’s claim satisfied the definition of “Personal Asbestos Claim” the final judgment obtained by the Estate constituted a “Proven Claim” and an SPF Funded Liability. Accordingly, 4.2(d) of the Final Funding Agreement imposed a duty on the Trustee to pay the Estate the full judgment sum.

This construction, so Mr Walker argued, avoided a “savage and arbitrary” outcome that could not have been intended by the drafters of the tripartite scheme. The determination made by the Trustee as to the proportion of the exposure in Britain which contributed to Mr Talifero’s loss or damage demonstrated the arbitrariness of the approach proposed by the Trustee. For no good policy reason the Estate would be deprived of 48 per cent of the final judgment it had obtained in the Tribunal.

Mr Walker contended that the primary Judge was wrong to describe a scheme that provided for full payment of judgment debts due to Amaca as “largesse”. [42] Mr Walker also submitted that his Honour wrongly characterised an approach which denied a claimant or his or her estate full payment of a judgment debt as “a fair method of apportioning and paying claimants”. [43] The Estate would be left to pursue action against overseas entities which may or may not be liable for the injury sustained by Mr Talifero under the lex loci delicti, and which may or may not have the resources to pay any judgment obtained against them.

The Trustee supported the primary Judge’s conclusion that the three instruments, properly construed, oblige it to pay only that amount of a “personal asbestos claim” attributable to the proportion of the exposure which caused or contributed to the loss in Australia. Mr Jackman SC, who appeared with Ms Ng for the Trustee, submitted that the exclusion of liability attributable to exposure outside Australia does not depend on how the claimant happens to have framed his or her case for damages. The inquiry has to be into the underlying facts relating to a claimant’s exposure to asbestos within and outside Australia. The Trustee relied on three principal arguments to support this submission.

First, although the definition of “Personal Asbestos Claim” in the Winding Up Act is different from the definition of “personal asbestos claim” in the Trust Deed and Final Funding Agreement, when read harmoniously to achieve the goals of the tripartite scheme there is no difference in meaning or effect. The objects of the Winding Up Act, which require the liabilities of the James Hardie companies to be dealt with in accordance with the Final Funding Agreement, suggest that the definition in the Winding Up Act should be construed consistently with the definition in the other two instruments. The role of the Winding Up Act is to provide a legislative framework for and facilitation of the Final Funding Agreement and the Trust Deed.

Secondly, the provisos to the definition of “Personal Asbestos Claim” in the Trust Deed and Final Funding Agreement clearly refer to exposure to asbestos suffered by a claimant as a matter of fact rather than as an element in a claim. If an inquiry into exposure to asbestos is limited to the terms of a claim filed in a court or tribunal, proviso (a)(i)(B) would be rendered otiose for mesothelioma cases, since all material exposure to asbestos contributes to the development of the condition.

Thirdly, as the primary Judge held, [44] the Estate’s construction of “Personal Asbestos Claim” is premised on an “overly literal reading” of the word “claim” in each of the instruments. The word should be interpreted to refer not to a formal claim for compensation or pleading, but to the method or means by which a party may make a request for compensation.

The Trustee submitted that on a proper construction of the tripartite scheme it is under a duty to pay the proportion of payable liabilities that are attributable to exposure within Australia and a correlative duty not to pay that proportion of payable liabilities that are attributable to exposure outside Australia. The Trustee therefore has no discretion to ignore the proportion attributable to exposure outside Australia but must determine the appropriate apportionment. The absence of a precise formula in the Final Funding Agreement does not mean that the Trustee does not have to make the apportionment. The Trustee must do so having regard to the circumstances of the case and the medical and scientific evidence available to it.

Mr Jackman disputed that the instruments should be construed against a background of the common law in the manner contended for by the Estate. He pointed out that a claimant has no common law rights against the Trustee. The claimant’s rights are created by the Winding Up Act and, more particularly, by the Final Funding Agreement. Those rights are qualified by the terms of the Agreement. The functions of the Trustee are, as the primary Judge held, quite different from those of the Tribunal when adjudicating the rights of the claimant against one of the Liable Entities.

The tripartite arrangement constituted by the Winding Up Act, the Trust Deed and the Final Funding Agreement was clearly the product of intense negotiation between a number of parties including the State and representatives of the James Hardie Group. The issues requiring resolution extended beyond establishing a scheme for the payment of present and future asbestos-related liabilities of the “Liable Entities”. They included, for example, legislation relieving James Hardie entities from civil liabilities to which they would otherwise have been exposed. But the tripartite scheme was a key element of the negotiated arrangement.

The difficulties of drafting complex inter-related agreements and legislation designed to implement arrangements made between a government and corporate entities should not be underestimated. The difficulties are compounded when the arrangements present novel issues and necessarily affect the rights of third parties who have suffered profoundly because of the negligence of parties to the arrangements. Even so, it is odd that the extremely lengthy and detailed Final Funding Agreement does not explicitly address a question as important as the entitlement of a victim of mesothelioma to the fruits of a final Australian judgment where the victim has been exposed to asbestos both in Australia and overseas. The competing arguments in the present case revolve around the construction of a proviso to a definition in the Trust Deed and Final Funding Agreement. It might have been expected that an issue of such importance to a class of victims – the size of which is uncertain – would have been given the same close attention by the drafters as a multitude of other issues.

As has been noted, the parties agree that the Trustee’s liability to make payments to the Estate has its source in the Final Funding Agreement. This position reflects, at least in part, the objects clause of the Winding Up Act which states that the legislation seeks to ensure that present and future liabilities of the James Hardie companies in respect of personal injury arising from exposure to asbestos are dealt with in accordance with the Final Funding Agreement. [45] The parties’ position also reflects the limitation imposed by cl 5.8 of the Trust Deed, which denies the Trustee power to pay or discharge any liability of a Liable Entity which the Liable Entity is not authorised to pay or discharge by the Final Funding Agreement or the Winding Up Act.

Nevertheless, it is appropriate to commence the process of construction by considering the provisions of the Winding Up Act. The legislation creates the framework for what the objects clause [46] describes as a “State scheme for the winding up and external administration” of companies formerly within the James Hardie Group. It is the legislation which, among other things, protects those entities during the winding up period from civil claims or enforcement action that otherwise would be instituted or pursued against them by claimants or their representatives.

Section 23(1)(a) of the Winding Up Act requires the powers of each liable entity to be exercised so as to carry on the business of the entity for the management of claims against it to ensure that only “payable liabilities” are paid in accordance with Part 4 and to pay “payable liabilities” in accordance with Part 4. This reflects Recital (A)(k) to the Final Funding Agreement which records that the commercial viability of the James Hardie Group is to provide the basis for the long term funding of claims subject to the tripartite scheme. Section 23(1)(b) and (c) require the powers of each liable entity to be exercised “to pay payable liabilities”.

The making and payment of claims is addressed in Division 5 of Part 4, which includes ss 31 and 32. Section 31(1) states that claims against the entity may only be paid in the manner permitted by Part 4. Section 31(2) prohibits a person from beginning or continuing civil proceedings against the entity, except (relevantly) to enforce a “personal asbestos claim” (whether a proven claim or not) or a “payable liability” of the entity. Section 32(1) provides that only payable liabilities of the entity may be paid, whether by the entity itself or the Trustee on the entity’s behalf. Section 34 authorises a liable entity or the Trustee on its behalf to pay the payable liabilities of the entity as and when they fall due for payment if there are sufficient funds to do so, except as provided by Part 4 of the Winding Up Act. Curiously, s 34 received virtually no attention in the argument in this Court.

It can be seen from these provisions that the expression “payable liability” is central to the operation of the Winding Up Act. Definitions are not, however, to be construed in the abstract. As McHugh J observed in Kelly v The Queen: [47]

Bearing that in mind, the starting point must still be the language of the definition itself. A “payable liability” of a liable entity is defined in the Winding Up Act to include:

In the present case, the judgment entered by the Tribunal in favour of the Estate is a “proven personal asbestos claim”. That is because Mr Talifero’s claim was a “personal asbestos claim” against a liable entity (Amaca) that proceeded to judgment. The claim was a “personal asbestos claim” (as defined in the Winding Up Act) because it was a claim for damages by a person who sustained personal injury arising from exposure to any asbestos manufactured or distributed by a liable entity.

The judgment obtained by the Estate after Mr Talifero’s death was for $560,482. This sum represented damages for the totality of his loss by reason of his exposure to asbestos. The question posed by the qualification in the definition of “payable liability” is this: to what extent did the exposure to asbestos to which the claim related occur wholly within Australia? The term “claim” is defined in the Winding Up Act to mean any “claim, demand, action, cause of action or proceedings”.

Mr Talifero’s “claim” was that propounded in the proceedings determined by the Tribunal. Contrary to the Trustee’s submissions, it is not “overly literal” to read the definition of “claim” in this way. On the contrary, the language clearly refers to the claim formulated by or on behalf of the injured person in proceedings against a liable entity. Mr Talifero’s claim in the Tribunal was wholly founded on his exposure to asbestos in Australia. The exposure to which his claim related was therefore the exposure to asbestos in Australia on which he relied exclusively to establish his cause of action against Amaca. The claim was for an “indivisible injury” and did not relate to his exposure to asbestos in Britain.

This construction of “payable liability” can be applied readily to s 31 of the Winding Up Act. Section 31 prevents a person beginning or continuing with civil proceedings unless the proceedings seek to enforce (relevantly) a personal asbestos claim or a payable liability of the liable entity. The intention is clearly to prevent a claimant who has the benefit of a final judgment against a liable entity from enforcing that judgment against the entity except in the manner permitted by Part 4. It would be very strange if the Estate, for example, was prohibited from pursuing action to enforce the final judgment against Amaca, but only to the extent that the final judgment as a matter of fact (as distinct from the way the case was conducted) could be attributed to exposure to asbestos in Australia. This would leave an undetermined proportion of the judgment outside the tripartite scheme. The Estate would presumably be free to attempt to enforce the judgment against Amaca, to the extent the judgment could be apportioned to exposure to asbestos outside Australia.

Section 32(1) of the Winding Up Act also accommodates this construction of “payable liability” without any linguistic difficulty and without creating any absurd or inconvenient outcome. The effect of s 32(1) read in this way is that the entirety of a judgment based on exposure to mesothelioma may be paid to a claimant by the liable entity or the Trustee, provided that the claim leading to the judgment was founded exclusively on exposure to asbestos wholly in Australia. This is hardly a surprising result in a scheme which, according to the Minister’s second reading speech, is intended “to fund compensation for the victims of the asbestos products of [James Hardie’s] former subsidiaries”. The second reading speech contains no hint that the Trustee was to be prevented from paying the full amount of a judgment obtained by a claimant against a liable entity because the claimant had been exposed to asbestos overseas as well as in Australia.

Similarly, there is no difficulty in applying this construction of “payable liabilities” to s 34 of the Winding Up Act. Incorporating the definition, the ordinary meaning of s 34 is that the Trustee is authorised to pay in full a judgment debt of a liable entity, provided that the exposure on which the claim against the entity was based related to exposure to asbestos wholly within Australia and provided that there are sufficient funds to make the payment. Since Mr Talifero’s claim against Amaca was based on his exposure to asbestos in Australia, s 34 authorises the Trustee to pay the whole of the judgment debt due to the Estate.

It is true that this construction of the definition makes it likely that those acting on behalf of a claimant will base a claim against a liable entity exclusively on exposure to asbestos in Australia. But long-standing principles of causation as applied to mesothelioma cases permit this to be done. Whether the liable entity is entitled to claim contributions from an entity in another country responsible for exposing the claimant to asbestos is not a matter with which the claimant has had to be concerned.

The construction of the definition of “personal asbestos claim” does not mean that the words “but only to the extent that the exposure to asbestos … to which the claim relates occurred wholly within … Australia” have no work to do. For example, some claimants may base their claims against a liable entity on exposure to the entity’s asbestos products both in Australia and overseas. There may also be claims against a liable entity in an Australian court based entirely on exposure to the entity’s asbestos products outside Australia. [48]

Clause 3.1 of the Final Funding Agreement states that the Parties (JHISE, James Hardie 117 Pty Ltd, the State and the Trustee):

Clause 3.3(a) of the Final Funding Agreement states that the State and the Trustee shall not have or seek recourse to any liabilities of the Liable Entities other than and only to the extent set out in:

As has been seen, the parties in this Court identified cl 4.2(d) of the Final Funding Agreement as imposing a duty on the Trustee, subject to having the necessary funds, to pay in accordance with the Winding Up Act, “SPF Funded Liabilities” (relevantly, any Proven Claim). A “Proven Claim” relevantly means any “Personal Asbestos Claim” in respect of which a final judgment has been given against a liable entity. The Estate obtained a final judgment in the Tribunal against Amaca, which is a liable entity.

The definition of “Personal Asbestos Claim” in the Final Funding Agreement has a number of components. The expression is defined to mean a claim by an individual or his or her personal representative for damages under common law or any other law, which:

The proviso is expressed as a qualification to the requirement that the claim for damages arises from exposure to asbestos in Australia:

As Mr Walker acknowledged, the language used in the proviso can be read as referring to an individual claimant’s actual exposure to asbestos, as distinct from the exposure to asbestos relied upon in his or her personal injury claim. The proviso is not expressed to apply where the individual’s claim arises wholly from exposure to asbestos in Australia or, alternatively, where the claim arises from exposure to asbestos both within and outside Australia. Neither sub-par (A) nor sub-par (B) expressly links exposure to asbestos to the particular claim for damages made by the individual.

Read in this way the first situation identified by the proviso is where the individual’s claim for damages arises from exposure to asbestos occurring in Australia and the individual’s actual exposure to asbestos occurred wholly within Australia. In this situation no adjustment to the damages included in the Personal Asbestos Claim is required. The second situation is where the individual’s claim for damages arises from exposure to asbestos occurring in Australia but the individual’s actual exposure to asbestos occurred both within and outside Australia. In this situation the damages included in the Personal Asbestos Claim are to be limited to the amount attributable to the proportion of the exposure which caused or contributed to the loss or damages giving rise to the Personal Asbestos Claim which occurred in Australia.

This, however, is not the only available construction of the definition as applied to cl 4.2(d) of the Final Funding Agreement. The chapeau to the definition identifies the subject matter as a present or future claim for damages by an individual. To satisfy the definition the claim must satisfy the requirements in sub-paras (i) and (ii). The requirement in sub-para (i) is that the claim for damages arises from exposure to asbestos occurring in Australia.

The provisos are expressed to be qualifications to that requirement, although proviso (B) incorporates, rather awkwardly, a direction as to what is to happen if proviso (B) applies. The provisos can be read as identifying two sub-classes of claims for damages arising from exposure to asbestos occurring in Australia:

In the latter case (proviso (B)) the damages included in the claim are to be limited to the amount attributable to the proportion of the exposure which caused or contributed to the loss or damage giving rise to the claim which occurred in Australia. This language is fraught with difficulty. The direction in proviso (B) does not descend to an explanation of the purpose for which damages included in the claim are to be limited. It cannot be a direction to the court which determines the claim for damages; such a claim must be determined in accordance with the common law and any legislation modifying the common law. If the direction is intended to qualify the Trustee’s duty imposed by cl 4.2(d) of the Final Funding Agreement to pay “SPF Funded Liabilities”, the language would appear to be inapt. The expression “SPF Funded Liabilities” includes a “Proven Claim”, which is defined to include a Personal Asbestos Claim in respect of which final judgment has been entered. A claim for damages merges into a final judgment. [49] Thus the claimant’s entitlement is no longer a claim for damages but a right to enforce the judgment debt against the judgment debtor.

In my view, the better construction of the proviso, as applied to cl 4.2(d) of the Final Funding Agreement, is that each element refers to the claimant’s exposure to asbestos alleged in his or her claim for personal injury damages. There are a number of contextual matters that support this construction:

Two further points should be noted. The first concerns the primary Judge’s observation that the tripartite scheme is not intended to provide “largesse”. In my respectful opinion this observation does not advance the question of construction. A claimant who has lawfully obtained a final judgment against a liable entity is entitled to enforce that judgment unless prevented by statute. As a practical matter a judgment creditor cannot enforce a judgment against the judgment debtor if the debtor, being a corporation, is wound up and has insufficient assets to pay creditors. The tripartite scheme provides a mechanism for a claimant to receive the benefit of final judgment against a liable entity notwithstanding that in the absence of the scheme the liable entity might not have sufficient assets to satisfy the judgment. The mechanism is created by the continuing obligation imposed on the James Hardie entities to contribute to the Compensation Funds.

This is not a case of “largesse” being offered by the James Hardie Group to the claimants. In return for promising to contribute to the Compensation Funds to be administered by the Trustee, members of the James Hardie Group received important concessions. Not the least of these was immunity from certain civil liabilities and civil penalties and protection from even more drastic legislative intervention.

Secondly, the primary Judge referred to cl 8.2(b) of the Final Funding Agreement as supporting the proposition that the tripartite scheme “is not intended to cover the potential liabilities of foreign asbestos manufacturers or … similar foreign exposure”. [50] Clause 8.2(b) states that nothing in the Final Funding Agreement requires any member of the James Hardie Group to provide funding for “personal injury or death claims arising from exposure to asbestos outside Australia”. This language is apt to exclude claims that are founded on exposure to asbestos outside Australia. It is not apt to exclude claims founded exclusively on exposure to asbestos within Australia where the claimant as a matter of fact was also exposed to asbestos outside Australia. Clause 8.2(b) of the Final Funding Agreement is therefore consistent with the construction of “Personal Asbestos Claim” I prefer.

For the reasons that have been given, the appeal should be allowed and the direction given by the primary Judge set aside. The following orders should therefore be made:

As has been explained, [51] there appear to be difficulties in making the direction sought by the Estate in the notice of appeal. Subject to those difficulties being resolved, it would be appropriate to make the following additional order:

It is obviously desirable that a resolution of the matters that have been fully argued should not be thwarted by the procedural difficulties that have been identified. To this end the parties should be given the opportunity to address and, if appropriate, to overcome those difficulties. It may be possible, for example, for the Trustee’s application to be reconstituted as an application for judicial advice pursuant to s 63(1) of the Trustee Act 1925 (NSW) (Trustee Act) and for the Estate’s application for directions to be made pursuant to s 63(10) of the Trustee Act (assuming the Estate is a “beneficiary” within s 63(10)). [52] Alternatively the Estate may wish to file further written submissions contending that the Court has power to make the direction it seeks, whether pursuant to s 55(1) of the Winding Up Act or otherwise.

Accordingly, the following directions should be made:

The parties should also have the opportunity to make submissions as to costs in accordance with the timetable proposed above. Thus the following additional directions should be made:

EMMETT AJA:

These proceedings are concerned with the true construction, in the context of the James Hardie Former Subsidiaries (Winding Up and Administration) Act 2005 (NSW) (the Act), of two separate instruments, as amended and restated, relating to the Asbestos Injuries Compensation Fund (the Fund). The two instruments are described as the Asbestos Injuries Compensation Fund Trust Deed (the Trust Deed), by which the Fund was established, and the Final Funding Agreement (the Agreement). The question in the proceedings arises in an application for the advice and direction of the Supreme Court under s 55 of the Act made by the Asbestos Injuries Compensation Fund Limited (the Trustee) in its capacity as trustee of the Fund.

A principal object of the Act is to ensure that liabilities of certain companies that were formerly within the James Hardie corporate group, in respect of personal injury or death of persons arising from exposure to any asbestos or asbestos products that were sold or used by those companies, will be dealt with in accordance with the Agreement. The intention is that preference will be given to those claims over other claims in a manner that recognises that exposure to such asbestos or asbestos products, or personal injury or death arising from such exposure, may occur for an extended period into the future.

The Trustee’s application under s 55 of the Act related to a judgment obtained in the Dust Diseases Tribunal (the Tribunal) in proceedings brought by Mr Francis Talifero (Mr Talifero) against Amaca Pty Ltd (Amaca) seeking damages for injury suffered by Mr Talifero as a consequence of his exposure to asbestos products supplied by Amaca. Amaca is one of the companies formerly within the James Hardie corporate group to which the Act is intended to apply. The question is whether the Trustee would be justified in not paying so much of the damages awarded in favour of Mr Talifero in the proceedings in the Tribunal as reflects the extent to which Mr Talifero’s exposure to asbestos or asbestos products occurred outside Australia. Before addressing the question raised in the appeal, it is necessary to say something about the Act, the Trust Deed and the Agreement.

Part 4 of the Act, which consists of ss 20 to 60 inclusive, relates to the winding up of liable entities. It is common ground that Amaca is a liable entity for the purposes of the Act, the Trust Deed and the Agreement. Section 21(1) of the Act relevantly provides that, during the winding up period for a liable entity, no proceedings may be brought or continued in a court or other tribunal for the winding up of the entity otherwise than in accordance with Pt 4. Under s 20, the winding up period is the period commencing on the day on which s 20 of the Act commenced and ending at the end of the day appointed by the Governor, or on which the liable entity is deregistered under the Corporations Act 2001 (Cth), whichever first occurs.

Under s 23(1) of the Act, the powers of a liable entity must be exercised during the winding up period so as to:

Section 32(1) relevantly provides that, during the winding up period for a liable entity, only payable liabilities of the liable entity may be paid. It is relevant that s 32 does not impose any obligation or liability on a liable entity. Rather, s 32 restricts the liabilities of a liable entity that may be paid.

The term payable liability is defined in the Act, relevantly, as a liability of the liable entity to pay a proven personal asbestos claim made against the liable entity in an Australian court or other Australian tribunal, but only to the extent that the exposure to asbestos or asbestos products to which the claim relates occurred wholly within the territorial limits of Australia. A personal asbestos claim is defined as including a claim for damages, in respect of personal injury or death arising from exposure to any asbestos or asbestos products that were sold by or on behalf of a liable entity, by the person who sustains the personal injury. A proven personal asbestos claim is defined as a personal asbestos claim against a liable entity in respect of which a final judgment has been entered by a court or other tribunal against the liable entity, or a binding settlement has been entered into by the liable entity, but only to the extent that the judgment or settlement gives rise to a liability of the liable entity.

Clause 5.10 of the Trust Deed relevantly provides that the Trustee must at all times comply fully with the obligations imposed on it by the Agreement. Further, cl 5.8(a) relevantly provides that the Trustee was to have no power to, and must not pay or discharge or purport to pay or discharge, any liability of a liable entity that the liable entity was not authorised to pay or discharge by the Agreement or the Act.

Clause 3 of Trust Deed relevantly provides that the charitable fund established under it is to exist and be maintained by the Trustee, and that the charitable fund property is to be maintained and applied by the Trustee for the principal purpose of receiving and providing funding for the payment and paying of Payable Liabilities and providing services with respect to the management and resolution of Payable Liabilities. The term Payable Liability is defined in the Trust Deed, relevantly, as a Proven Claim as defined in the Agreement.

Clause 4.2 of the Agreement relevantly provides that the Trustee’s role is, subject to the provisions of the Act, to pay Proven Claims in respect of liable entities. However, a liable entity has no right to direct the Trustee as to the payment or manner of timing of any payment of such amounts, nor to have any rights to itself receive such amounts.

Under the Agreement, Proven Claim means any Personal Asbestos Claim in respect of which final judgment has been given against, or a binding settlement has been entered into by, a liable entity, to the extent to which that entity incurs liability under that judgment or settlement. Personal Asbestos Claim is defined, relevantly, as any present or future personal injury or death claim by an individual or the legal personal representative of an individual, for damages under common law or under other law that:

Mr Talifero was born in the United Kingdom in 1931 and had some exposure to asbestos during his employment in the United Kingdom first with the British Navy and then with a roofing company and a brick company. He came to Australia in 1971 where he worked for 25 years as a house painter. During that time, he had to replace broken asbestos cement sheets from time to time in order to complete house painting jobs. Mr Talifero was exposed to asbestos by way of new fibro sheets manufactured by Amaca and supplied to Kingsford Timber, where Mr Talifero bought the sheets. He subsequently contracted mesothelioma, a disease from which he subsequently died.

On 18 April 2017, Mr Talifero commenced proceedings against Amaca in the Tribunal. Mr Talifero’s statement of claim alleged that, from 1971 to 1996, while working as a self-employed house painter, he handled asbestos cement building materials manufactured and supplied by Amaca, as a consequence of which, he was exposed to and inhaled asbestos dust and fibre and contracted mesothelioma. He claimed damages for the injury, loss and damage suffered by reason of his contracting mesothelioma. Following Mr Talifero’s death, the proceedings in the Tribunal were continued by Mr Anthony Talifero (the Executor), who is the son and legal personal representative of Mr Talifero.

On 16 June 2017, Amaca’s solicitors wrote to Mr Talifero’s solicitors saying that the Trustee could not make a payment to Mr Talifero from the Fund for any exposure to asbestos outside Australia. The letter stated that, if Mr Talifero obtained judgment in the Tribunal, the Trustee would deduct a portion of the judgment attributable to the overseas exposure. On 19 June 2017, Mr Talifero’s solicitors wrote to Amaca’s solicitors asking whether Amaca and the Trustee had made an application under s 55 of the Act and, if not, whether it intended to make such an application. Amaca’s solicitors told Mr Talifero’s solicitors that the Trustee had not made an application because it did not consider such an application to be required.

The Trustee subsequently obtained a report by Professor Richard Fox dated 29 July 2017 (the Fox Report). The Fox Report described a model for the incidence of mesothelioma related to the fibre type, size, mix of asbestos, the intensity of exposure, the time since first exposure, and the year of exposure (the Peto Model). The Fox Report explained that the Peto Model predicts that risk of mesothelioma is increased after each increment of exposure to asbestos by an amount proportional to the level of exposure and the cube of time after that, and that incidence is much more dependent on early or low levels of exposure and increases less rapidly as exposure continues to increase, depending mainly on the time since first exposed.

The Fox Report was based on certain assumptions that do not appear to be in dispute. The assumptions were that Mr Talifero:

For the purposes of the Fox Report, Mr Talifero’s 1% exposure with the roofing and brick companies in the United Kingdom was ignored and exposure with the British Navy was taken to be the midpoint of the period, being 64.5 years prior to the development of his mesothelioma. That, when cubed, produced the numerical value of 268,336. By contrast, the Australian employment was over a period of 25 years during which, the Fox Report said, the asbestos exposure was “relatively light”. The exposure in Australia was taken to be the midpoint of the period being 32 years prior to the development of mesothelioma. When cubed, that gave a numeric value of 32,768. The concentration of 10% with the British Navy gave a figure of 26,834 and the concentration of 90% in Australia gave a figure of 29,949. That, the Fox Report concluded, gave a non-Australian contribution of 48% and an Australian contribution of 52%.

On 22 November 2017, the Trustee’s solicitors wrote to the Executor’s solicitors saying that the Trustee was under a statutory duty to pay a claim only to the extent of asbestos exposure within Australia, even if an award of damages is made by a court or tribunal on the basis of a single indivisible injury. They said that, where a claimant has experienced overseas exposure to asbestos, the Trustee is prohibited from making a payment for the proportion resulting from overseas exposure. The letter confirmed that no payment would be made by the Trustee for any damages award with respect “to the relevant determined proportion of overseas asbestos exposure” and that if any damages award included both domestic and overseas exposure, the Trustee would make an appropriate adjustment to deduct the proportion relating to overseas exposure. The letter said that the Trustee would make an application under s 55 of the Act for judicial advice in that regard.

On 11 December 2017, for reasons published on that day, a judge of the Tribunal directed the entry of judgment for the Executor against Amaca in the sum of $560,482. The Tribunal found that Mr Talifero’s exposure to the products manufactured and supplied by Amaca was sufficient to cause his mesothelioma and that he was therefore entitled to judgment against Amaca.

On 8 January 2018, Amaca’s solicitors wrote to the Executor’s solicitors saying that the Trustee had directed that a 48% deduction be applied to the award made by the Tribunal. By letter of 15 January 2018 to the Trustee’s solicitors, the Executor’s solicitors asserted that the Executor was entitled to the whole of the judgment sum awarded by the Tribunal. The Trustee’s solicitors replied on 19 January 2018 saying, relevantly, that the Trustee had determined that, in giving effect to s 32 of the Act and the relevant provisions of the Agreement, only 52% of the award in the Tribunal was a “payable liability” of Amaca capable of being properly paid by the Trustee in accordance with the Act. That assertion was apparently based on the Fox Report. The Trustee’s solicitors referred to their letter of 22 November 2017 as setting out the approach adopted by the Trustee.

On 23 January 2018, the Trustee’s solicitors gave notice to the Attorney General under s 57 of the Act that the Trustee proposed to make an application under s 55 of the Act. Accordingly, by summons filed in the Equity Division on 23 January 2018, the Trustee sought an order pursuant to s 55 of the Act that it would be justified in not paying so much of the damages award made in proceedings brought in the Tribunal by Mr Talifero as reflects the extent to which Mr Talifero’s exposure to asbestos or asbestos products occurred outside Australia.

On 4 May 2018, for reasons published on that day, a judge of the Equity Division (the primary judge) concluded that the Act, the Agreement and the Trust Deed obliged the Trustee only to pay those personal asbestos claims as limited to the amount attributable to the proportion of the exposure that caused or contributed to the loss or damage which occurred in Australia. The primary judge made an order in accordance with prayer 1 of the Trustee’s summons of 29 January 2018. Although the proceedings before the primary judge were for advice and direction under s 55 of the Act, the Executor was given leave to intervene, as was the Attorney General. The primary judge ordered that the Trustee’s costs of the proceedings on an indemnity basis and the Executor’s costs on an indemnity basis be paid out of the Fund.

By Notice of Appeal filed on 1 June 2018, the Executor appeals from the orders made by the primary judge. Before addressing the question raised in the appeal, it is desirable to say something about the procedure involved in the Trustee’s application.

Under s 55(1) of the Act, the Trustee may apply for advice or direction by the Supreme Court on any matter relating to:

On one view, the application under s 55 of the Act could be misconceived. Section 55 is concerned with advice or direction in relation to Pt 4 of the Act. The real question raised by the proceedings, however, concerns the true construction of the Agreement and the Trust Deed. It may be that the application could have been framed as an application under s 63 of the Trustee Act 1925 (NSW). Under s 63, a trustee may apply to the Supreme Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. If the trustee acts in accordance with the opinion advice or direction, the trustee will be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.

Since the Executor was not a party to the Trustee’s summons, he may need leave to appeal. Clearly, he should have leave to the extent that it is necessary.

The ground specified in the Notice of Appeal is that the primary judge erred in failing to find that the whole of the claim made and upheld in Mr Talifero’s proceedings in the Tribunal was a Proven Claim that the Trustee is obliged to pay under the Agreement. That question turns upon the language of the proviso contained in par (a)(i)(B) of the definition of Personal Asbestos Claim in the Agreement and the Trust Deed. The proviso calls for a factual inquiry on the part of the Trustee as to whether:

The material before the Trustee demonstrates that Mr Talifero was exposed to asbestos or asbestos dust both within and outside Australia. It appears that the state of the science in relation to the contracting of mesothelioma is that mesothelioma can be caused by the inhalation of a single fibre of asbestos and that the onset of the disease might not occur until as many as 40 years after the inhalation. It is not presently possible to identify the precise time when the fibre that causes mesothelioma might have been inhaled. Thus, it is not possible to say whether the fibre inhaled by Mr Talifero that caused his mesothelioma was inhaled while working in Australia with products manufactured and supplied by Amaca, or was inhaled while, for example, on service with the British Navy outside Australia. Nevertheless, it is clear that Mr Talifero was exposed to asbestos both within and outside Australia.

It is possible that, while working with the British Navy, Mr Talifero inhaled a fibre of asbestos and that, while working on products manufactured or supplied by Amaca in Australia, he also inhaled a fibre of asbestos. That raises a significant question of causation. Each fibre may, on its own, have been causative of Mr Talifero’s mesothelioma, quite independently of the other. That will now never be known.

The possibility that there may have been two independent causes of the disease does not appear to be reflected in the language of par (a)(i)(B) in so far as that provision calls for an inquiry as to the amount of damages included in the claim made by Mr Talifero that is “attributable to the proportion of the exposure” that caused or contributed to his loss and damage that occurred in Australia. That language is quite inapt to refer to the circumstances of a victim of mesothelioma.

It appears likely that the exposure to asbestos that actually caused Mr Talifero’s mesothelioma occurred either wholly within Australia or wholly outside Australia, although it is not possible to say which. The provisions of the Trust Deed and the Agreement call for an inquiry by the Trustee as to whether Mr Talifero inhaled the fibre that actually caused his mesothelioma in Australia or outside Australia. It may be that Mr Talifero inhaled fibres both outside Australia and inside Australia. Nevertheless, the Trustee must make a decision as to whether it is more likely than not that Mr Talifero inhaled the fibre that caused his mesothelioma while in Australia. It may be that, before coming to Australia, Mr Talifero had inhaled a fibre that, ultimately would have caused mesothelioma and that, after he arrived in Australia, he inhaled another fibre that may, of itself alone, have caused his mesothelioma.

If Mr Talifero inhaled the fibre that caused his mesothelioma in Australia, he is entitled to the full amount of the award made by the Tribunal. On the other hand, if Mr Talifero inhaled the fibre that caused his mesothelioma before he came to Australia, he would not be entitled to any part of the award made by the Tribunal. That question, however, is not presently before this Court. However, the Fox Report appears to be a singularly inappropriate basis for determining whether it is more likely than not that the fibre that caused Mr Talifero’s mesothelioma was inhaled inside or outside Australia.

It is interesting that considerations of policy similar to those raised in proceedings such as these led, as long ago as the 2nd Century, to a departure from what the law would usually require by way of proof of causation. In a situation such as the present, the Romans would have held both wrongdoers liable under the Lex Aquilia, which imposed liability on a person who caused the death of a slave iniuria, that is to say, without justification or wrongfully. Under Roman law, a slave was property and the owner was entitled to recover damages from a wrongdoer who wrongfully caused the death of a slave. Where a slave was mortally injured wrongfully by one wrongdoer and, subsequently, before death occurred, was killed wrongfully by another wrongdoer, the Roman solution, as explained by Julian, the greatest jurist of the reign of Hadrian in the first half of the 2nd Century, was to permit full recovery from both wrongdoers, [53] although the quantum of damages recoverable could differ because the value of the slave was significantly reduced by the first act. [54] That view was confirmed by Ulpian at the beginning of the 3rd Century on the basis that the Lex Aquilia was penal in its nature. [55] Of course, as Lord Rodger observed in 2002, Justinian’s compilations in the Digest published AD 533 may not furnish much guidance on the formulation of an equivalent rule today. [56] On the other hand, the apportionment contemplated by the Act is not all that different from the solution of the Roman jurists.

As indicated above, the primary judge concluded that the Trustee would be justified in not paying so much of the damages award made by the Tribunal as reflects the extent to which Mr Talifero’s exposure to asbestos or asbestos products occurred outside Australia. In so far as it appears to authorise paying a proportion between nil and 100% of the award of the Tribunal, that conclusion, is erroneous.

I would allow the appeal and set aside the orders made by the primary judge. Clearly, it would be desirable that the matters that have been fully argued should be resolved and should not be thwarted by procedural difficulties. However, I am not persuaded that this Court is in a position to decide the question. The Trustee should be advised that it would not be justified in paying the amount of damages specified in the summons.

After the proceedings in the Equity Division have been properly constituted, along the lines suggested by Sackville AJA, the Trustee should be given the opportunity of making a decision as to the amount that is to be paid to the Executor in respect of the award made by the Tribunal, in the light of the conclusions reached above. If the Executor were to be dissatisfied with any decision made by the Trustee, it would be open to him to take proceedings against the Trustee in respect of that decision.

Since that result was not contended for by any party, it would be appropriate to afford the parties the opportunity to make any further submissions they wish as to the costs at first instance and of the appeal.