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

This is an application for judicial advice made by the Asbestos Injuries Compensation Fund Limited (the Trustee) pursuant to section 55(1) of the James Hardie Former Subsidiaries (Winding up and Administration) Act 2005 (NSW) (the 2005 Act).

The only issue for determination by this Court is whether the Trustee would be justified in not paying so much of the damages award made in proceedings before the Dust Diseases Tribunal of New South Wales concerning Mr Francis John Talifero (the Talifero Proceeding) as reflects the extent to which Mr Talifero was exposed to asbestos or asbestos products outside Australia.

By a Statement of Claim filed 18 April 2017 in the Dust Diseases Tribunal of New South Wales, Mr Talifero sued Amaca Pty Ltd for damages in negligence, alleging that he had contracted mesothelioma as a consequence of exposure to James Hardie asbestos cement products (Amended Statement of Facts [25]).

Mr Talifero’s Statement of Claim was first filed on 18 April 2017. His claim was made against Amaca Pty Ltd (not the Trustee) in negligence. At paragraph [3] of his Statement of Claim, Mr Talifero asserted that at all material times Amaca Pty Ltd manufactured and supplied asbestos cement building materials in Australia and supplied asbestos cement building materials to hardware stores and retail outlets including Kingsford Timber Co Pty Ltd. Mr Talifero alleged therefore that the cause of his injury, loss and damage was the negligence of Amaca Pty Ltd (Statement of Claim [5]). The claim was framed by reference to exposure that had been experienced in Australia.

In Mr Talifero’s Statement of Particulars filed 19 May 2017, he did provide a summary of work and exposure to asbestos, which relevantly included exposure whilst employed overseas in the United Kingdom (Exhibit P1, 248).

However, I note this Statement of Particulars suggested exposure to asbestos whilst overseas accounted for only 10% (with respect to exposure whilst employed as a Stoker in the British Navy) or less than 1% (with respect to Turnerised Roofing Co Ltd, Birmingham UK and Burberry Brick Co in the United Kingdom). This was no doubt to suggest the exposure overseas was de minimis or at least that the relevant material exposure to asbestos products occurred in Australia.

Amaca Pty Ltd filed a defence to Mr Talifero’s claim on 25 August 2017 where it relied upon a reduction of liability on account of Mr Talifero’s allegations of exposure to asbestos overseas (Exhibit P1, 327). In an Amended Defence filed 4 September 2017, Amaca Pty Ltd withdrew this reduction of liability (Exhibit P1, 333).

Mr Talifero passed away on 16 October 2017. On 7 November 2017, orders were made substituting Mr Talifero’s son, Anthony David Talifero, as legal representative of the estate of Mr Talifero for the purposes of continuing the Talifero Proceeding (Amended Statement of Facts [26]-[27]).

The Talifero Proceeding was set down for hearing and concluded on 23 November 2017. On 11 December 2017, Judge Russell SC delivered his reasons in Anthony David Talifero v Amaca Pty Ltd [2017] NSWDDT 14 and also ordered judgment for the plaintiff against the defendant (Amaca Pty Ltd) for $560,482.00 and ordered the defendant to pay the plaintiff’s costs (Amended Statement of Facts [29]).

Judge Russell SC made the following findings of fact about Mr Talifero’s exposure to asbestos in his written reasons (Amended Statement of Facts [31]):

As noted Mr Talifero was exposed to asbestos during the following periods of overseas employment (Amended Statement of Facts [35]):

Further details of Mr Talifero’s exposure to asbestos while employed overseas are set out in the Amended Statement of Facts at [33]-[44]. The relevant correspondences are set out and summarised in the Amended Statement of Facts at [45]-[55].

There are in fact three expert reports which include the report of Professor Breslin (Exhibit P1, Tab 13), Professor Fox (Exhibit P1, Tab 14) and Professor Henderson (Exhibit P1, Tab 15). The reports of Professor Breslin and Professor Henderson appear to have been tendered before Judge Russell SC in the Dust Diseases Tribunal. Professor Fox’s report appears not to have been before Judge Russell SC, however his opinion is one which has been relied upon by the Trustee in making the reduction of 48%.

Professor Breslin expressed the opinion that based on the history of Mr Talifero, he “had a history of definite occupational asbestos exposure as detailed above with some 10-12% of his exposure occurring in the United Kingdom and then later the remainder of his exposure occurring while working in Australia” (Exhibit P1, 370). Professor Breslin noted the overwhelming cause of Mr Talifero’s asbestos exposure was his work in Australia. However, he thought there was a material contribution to the development of his mesothelioma from his asbestos exposure while working in the United Kingdom (Exhibit P1, 371).

Professor Fox referred to the Peto formula to conclude that Mr Talifero’s United Kingdom exposure should be calculated at a contribution of 48% and the Australian exposure at a contribution of 52% (Exhibit P1, 377).

Professor Henderson expressed major and serious reservations about Professor Fox’s use of the Peto formula for estimating the relative percentage causal contributions from Mr Talifero’s’ asbestos exposures in the United Kingdom and Australia. Professor Henderson did not himself express an opinion about relevant percentage contributions, except to observe: (Exhibit P1, 382).

Professor Henderson however also noted, generally, for an individual case of mesothelioma following multiple exposures to asbestos (Exhibit P1, 381):

The Trustee has made a determination on the basis of the expert reports, particularly evidently the report of Professor Fox, that a 48% deduction should be made from the damages award by reason of Mr Talifero’s exposure to asbestos in the United Kingdom (Trustee’s Outline of Submissions [23]-[28]). The Trustee asserts this determination has a reasonable and cogent basis, asserting that the actual quantification of the appropriate discount to the amount of damages is not raised on the present application (Trustee’s Outline of Submissions [28]-[29]).

By Summons filed 29 January 2018, the Trustee applied for advice pursuant to section 55(1) of the 2005 Act. As noted, the Trustee seeks (Summons [1]-[2]):

On 8 March 2018, I granted Allianz Australia Insurance Limited (Allianz) leave to make submissions concerning the application for advice. On that date, I also granted leave for Amaca Pty Ltd (Amaca) to appear in Court, although Amaca did not provide written submissions. On that date, I also permitted the Estate (that is, Anthony David Talifero in his capacity as the executor of the estate of the late Mr Talifero) to be heard on the application for advice (the Estate).

The Attorney-General for New South Wales also intervened pursuant to his statutory right under section 58 of the 2005 Act (Attorney-General).

At the heart of this case is the construction of the 2005 Act, the Asbestos Injuries Compensation Fund Amended and Restated Trust Deed dated 14 December 2006 (the Trust Deed) and the Amended and Restated Final Funding Agreement dated 21 November 2006 (Final Funding Agreement).

Before I consider the relevant legal principles, it is useful to note that the recitals that appear in the Final Funding Agreement helpfully set out the historical background to the implementation and adoption of the 2005 Act, the Trust Deed and the Final Funding Agreement.

Recital A of the Final Funding Agreement refers to the New South Wales government establishing the Jackson Inquiry in February 2004 and sets out some of the findings of that Inquiry. In September 2004, the Jackson Inquiry found that the relevant Medical Research and Compensation Foundation (MRCF) was underfunded in the sense that Amaca and Amaba, being two former subsidiaries of James Hardie then owned by MRCF, would not over time have sufficient funds and other assets to meet their anticipated future liabilities.

This recital relevantly highlights how following the release of the Jackson Inquiry Report, the New South Wales government requested the ACTU, Unions NSW and Banton conduct negotiations with James Hardie Industries NV (now JHISE) to resolve the underfunding of the MRCF.

Recital A(i) relevantly observes (emphasis added):

Recital A(k) notes how the Final Funding Agreement reflects the intention that JHISE’s continued commercial viability and success will provide the basis for the long term funding of the claims which are to be subject to the funding arrangement.

Recital A(m) also observes:

Recitals B to E set out the negotiations and compromises that produced the 2005 Act, the Trust Deed and the Final Funding Agreement in response to this underfunding issue. One purpose of this tripartite scheme was clearly in part to ensure the continued profitability of the JHISE Group because its profits would generate income to keep the fund and overall scheme going on a long-term basis:

I should also note the Second Reading Speech for the James Hardie Former Subsidiaries (Winding up and Administration) Bill 2005 (NSW), which was made on the same date that the Original Final Funding Agreement was entered into on 1 December 2005 (see recital B of the Final Funding Agreement). It again reflects the concerns of the New South Wales government to ensure the continued funding of potential asbestos claims for a substantial period of time in response to the concerns raised by the Jackson Inquiry that there was an underfunding problem (New South Wales, Parliamentary Debates, Legislative Assembly, 1 December 2005, 20551 (Bob Debus)):

Clause 3.1 of the Trust Deed provides:

Clause 1.1 of the Trust Deed provides definitions for the key terms “Personal Asbestos Claim”, “Proven Claim”, “Payable Liability” and “SPF Funded Liability”.

“Personal Asbestos Claim” in the Trust Deed is defined:

“Proven Claim” in the Trust Deed is defined:

“Payable Liability” in the Trust Deed is relevantly defined:

“SPF Funded Liability” in the Trust Deed is defined:

These key definitions are relevantly the same between the Trust Deed and the Final Funding Agreement.

The Trust Deed also defines “Contribution Claim”, “Income Beneficiary” and “Liable Entities”.

“Contribution Claim” in the Trust Deed is defined:

“Income Beneficiary” in the Trust Deed is defined:

“Liable Entities” in the Trust Deed is defined:

“Transaction Legislation” in the Final Funding Agreement is also defined:

“Transaction Bill” in the Final Funding Agreement is also defined:

Clause 4.2(a)-(b) of the Trust Deed provides:

Clause 5.2 of the Trust Deed provides:

Clause 5.7 of the Trust Deed provides:

Clause 5.8 of the Trust Deed provides:

Clause 4.2(d) of the Final Funding Agreement provides:

Clause 8.1 of the Final Funding Agreement provides:

Clause 8.2 of the Final Funding Agreement provides:

Section 3 of the 2005 Act provides:

Section 4(1) of the 2005 Act provides the following relevant definitions.

For “payable liability” in the 2005 Act:

For “proven personal asbestos claim” in the 2005 Act:

For “personal asbestos claim” in the 2005 Act:

The more general term “claim” is defined in section 4(1) of the 2005 Act as: “any claim, demand, action, cause of action or proceedings (whether based in tort, contract, under legislation or otherwise)”.

Section 4(1) also provides the following definitions (emphasis in original):

Section 23(1) of the 2005 Act provides:

Section 31 of the 2005 Act provides:

Section 32(1) of the 2005 Act provides:

Section 35, particularly subsections (1)-(4) of the 2005 Act, provide:

The Trustee has the power to seek judicial advice or directions under section 55(1)-(4) of the 2005 Act:

As is made clear by Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-2 (McHugh, Gummow, Kirby and Hayne JJ); [1998] HCA 28 (“Project Blue Sky”), at least in a statutory context, provisions should be read as a whole. That is, the primary object of statutory construction is to construe a particular provision so that it is consistent with the language and purpose of all the provisions of the statute or legislation. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. As McHugh, Gummow, Kirby and Hayne JJ observed (at 382) (citations omitted) (emphasis added):

In a contractual setting in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36, Gibbs CJ also observed:

See also Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 529 (Gleeson CJ, McHugh, Gummow and Kirby JJ); [2005] HCA 17.

In the cases of conflict between particular provisions in a legislative instrument there may be the need to adjust the meaning of the conflicting provisions to give effect to the unified purpose and language of those provisions as a whole. This may involve determining the hierarchy, or predominance, of the provisions within the legislative instrument.

With respect to determining hierarchy or predominance in cases of conflict, the Full Court of the Federal Court of Australia has observed in Secretary, Department of Health & Ageing v Nguyen [2002] FCAFC 416; (2002) 124 FCR 425 at [22] (Black CJ, Sundberg and Finkelstein JJ):

On the above view the need to determine hierarchy or predominance, or a more radical ‘reading down’ of inconsistent provisions for example, is dependent on a conflict between provisions. Nevertheless, the broader need to interpret an Act or scheme harmoniously or purposively is a matter of common sense in an Act or legislative scheme, will also obviously apply to ambiguity or disconformity.

There is here some obvious ambiguity and disconformity between the relevant definitions of the Trust Deed and Final Funding Agreement on one hand and the 2005 Act on the other hand, such as with the definitions of “Personal Asbestos Claim”, “Proven Claim” and “Payable Liability”. It is clear however that these three instruments are intended to operate together, therefore a harmonious reading of the various related terms is essential.

The 2005 Act, the Trust Deed and the Final Funding Agreement were considered in Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97. In this case, Gzell J outlined a number of important constructional principles applicable to the interpretation of those instruments.

His Honour observed at [76]-[84] (emphasis added):

As is clear in His Honour’s observations, the 2005 Act, the Trust Deed and the Final Funding Agreement should be read together harmoniously. His Honour also concluded that the Final Funding Agreement was intended to be the pre-dominant instrument in this scheme.

Although Gzell J made no specific reference to Project Blue Sky in the judgment, I am satisfied His Honour’s approach concerning harmonious interpretation appears to be substantially along the same lines as the approach adopted in that case.

However, I should note that Gzell J did not in the course of his analysis identify a “conflict” as such between the 2005 Act, the Final Funding Agreement and the Trust Deed. His Honour’s focus on a harmonious interpretation and predominance appears rather to be a method of resolving a “strained construction” (at [79]) of the provisions.

I do agree with Gzell J that harmony is essential in interpreting the scheme of the 2005 Act, the Final Funding Agreement and the Trust Deed. However, I am of the view that there is an ambiguity or disconformity falling short of a “conflict” between the various provisions of the 2005 Act on one hand, and the Final Funding Agreement and Trust Deed on the other hand. In the circumstances of this case, I am of the view that it is not necessary to determine the question of “predominance” as between the three instruments.

The Trustee submits that, on a proper construction of the 2005 Act, the Final Funding Agreement and the Trust Deed, the Trustee is justified in not paying so much of the damages award made in the Talifero Proceeding as reflects the extent to which Mr Talifero’s exposure to asbestos or asbestos products occurred outside Australia (Outline of Submissions [11]).

The Trustee notes the interlocking definitions that appear in the 2005 Act, the Final Funding Agreement and the Trust Deed (noting that the definitions of clause 1.1 of the Final Funding Agreement are relevantly the same as in the Trust Deed). The Trustee places particular regard to the way in which “personal asbestos claim” is defined in the 2005 Act, the Final Funding Agreement and the Trust Deed (Outline of Submissions [12]-[18]). Particular emphasis is based upon proviso (a)(i)(B) of the definition of “Personal Asbestos Claim” in the Final Funding Agreement (T2/3-18).

The Trustee submits that the 2005 Act, the Final Funding Agreement and the Trust Deed should be read together harmoniously, with the Final Funding Agreement as the predominant instrument in this tripartite structure (Outline of Submissions [19]-[21]). This submission is made with positive reference to the judgment of Gzell J in Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97.

The Trustee therefore suggests to the extent that the definition of “personal asbestos claim” in the 2005 Act is ambiguous, it should be read to conform with the definition of “Personal Asbestos Claim” in the Final Funding Agreement and the Trust Deed (Outline of Submissions [21]).

The crux of the Trustee’s argument is therefore to the extent that the definition of “personal asbestos claim” in the 2005 Act is ambiguous, the Final Funding Agreement and the Trust Deed confirm that the only types or kinds of liability that may be paid by the Trustee or the liable entity are those (Outline of Submissions [21]):

The Trustee does not dispute that mesothelioma is an indivisible condition (Outline of Submissions [23]-[26]). With reference to expert witnesses in the Talifero Proceeding and the “Peto Formula”, the Trustee submits that it has made a determination that a 48% deduction should be made by reason of Mr Talifero’s exposure to asbestos in the United Kingdom (Outline of Submissions [26]-[27]).

The Trustee expressly notes, however, that these proceedings are not concerned with the correct percentage quantification of 48% or apportionment of the Trustee’s determination (Outline of Submissions [28]-[29]).

In oral argument, the Trustee outlined the history of the 2005 Act, the Final Funding Agreement and the Trust Deed, including the Jackson Inquiry and the broader issue of how the New South Wales government attempted to address the need of providing for a compensation fund for current and future Australian asbestos personal injury claimants. This included recognition that James Hardie should remain a viable and profitable business developing profits to fund the asbestos compensation fund (T3/20-T4/21).

Importantly, the Trustee argues that the proviso in (a)(i)(B) concerning the definition of “Personal Asbestos Claim” in the Final Funding Agreement is not intended to be dependent on the way in which a claimant expresses their pleading on the “claim” (T4/33-35).

The Trustee also submitted in oral argument that “payable liability” as defined in the 2005 Act is expressed in different terms to the definition provided in the Final Funding Agreement and Trust Deed. The Trustee submits that the definition, and particularly the reference to “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” in the definition of “payable liability” in the 2005 Act acts as a shorthand paraphrase of the corresponding definitions in the Final Funding Agreement and Trust Deed (notably, I think, proviso (a)(i)(B) of the definition of “Personal Asbestos Claim” in the Trust Deed and Final Funding Agreement).

The Trustee submits more generally that the language of the 2005 Act is plainly a shorthand paraphrase of the corresponding definitions in the Funding Agreement and the Trust Deed. Further, that the language in the 2005 Act is too loose to give rise to any clear intention that Parliament had in mind different contents for the statutory definitions as compared to the definitions in the Final Funding Agreement and Trust Deed (T14/1-7). The Trustee submits even if it is wrong on this ground, it still remains nevertheless constrained by the Final Funding Agreement and Trust Deed (T14/9-19).

The Attorney-General does not make submissions on the specific facts of this case (Outline of Submissions [4]).

The Attorney-General makes reference to the judgment of Gzell J in Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97 as applicable to the construction of the 2005 Act, the Final Funding Agreement and the Trust Deed (Outline of Submissions [5]-[16]).

Particularly, the Attorney-General refers to instances in which His Honour proposed that the 2005 Act, the Final Funding Agreement and the Trust Deed should be read together harmoniously (Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97 at [76]) and that the Final Funding Agreement is the predominant instrument in the scheme (Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97 at [80]). The Attorney-General also submits that this judgment of Gzell J reflects the broader principle that as between the three instruments, the same phrases were presumptively intended to bear the same meaning (Outline of Submissions [13]).

The Attorney-General submits that the Trustee’s power to pay out on damages derives from at least three sources (Outline of Submissions [17]-[21]):

The Attorney-General suggests that particularly clause 3.1 and clause 4.2(d) of the Final Funding Agreement not only provides the Attorney-General with a power to pay out on damages, but provides a duty to pay out on the relevant liabilities (Outline of Submissions [22]-[23]).

Importantly, the Attorney-General submits that the Trustee has a duty to pay out a “Payable Liability” or a “SPF Funded Liability” and that this duty extends to the whole of the defined liability absent some express carve-out (Outline of Submissions [24]).

With respect to the question of whether an “SPF Funded Liability” for the purposes of the Final Funding Agreement necessarily encompasses the whole of a damages award in asbestos proceedings, or whether the relevant liability may be less if there is exposure to asbestos outside Australia, the Attorney-General submits (Outline of Submissions [31]-[45]):

With respect to any relevant issue estoppels, the Attorney-General does not make explicit submissions on whether any issue estoppels relevantly arise (Outline of Submissions [39]-[45]).

The Attorney-General submits that the term “Payable Liabilities” in the Trust Deed, through the interposed phrases “Proven Claim” and “Personal Asbestos Claim”, should be defined in relevantly the same way as “SPF Funded Liability” in the Final Funding Agreement (Outline of Submissions [46]-[47]).

With respect to the 2005 Act, the Attorney-General submits (Outline of Submissions [48]-[60]):

The Estate submits that the Trustee should be advised that it is required to pay the whole of the liability of Amaca under the judgment given in the Estate’s favour by Judge Russell SC on 11 December 2017 (including Amaca’s liability under that judgment to pay pre-and post-judgment interest and costs) (Outline of Submissions [2]).

The Estate contends that the Trustee’s refusal to discharge the judgment obtained in the Dust Diseases Tribunal of New South Wales amounts to a breach of the Final Funding Agreement and the Trust Deed. The Estate submits this breach is confirmed by a consideration of the text and context of the 2005 Act, the Final Funding Agreement and the Trust Deed (Outline of Submissions [14]).

The Estate submits (Outline of Submissions [26]-[53]):

The Estate submits a contrary approach would introduce unintended and unnecessary absurdity into the compensation scheme and relevant instruments. This could include providing Amaca with a unique proportionate liability-style defence distinct from any other Australian asbestos manufacturer (Outline of Submissions [54]-[57]).

Importantly, the Estate argues it is impossible to provide for such a proportionate liability scheme for mesothelioma as it is an “indivisible injury” (T22/35-T23/2). The Estate submits the word “proportion” evident in the legislative scheme, such as in proviso (a)(i)(B) of the definition of “Personal Asbestos Claim” in the Trust Deed, has work to do in cases of “divisible injury”. However, the Estate argues this word does not invite an assessment of any causational contributions. The Estate suggests it invites only a focus on the amount of damages attributable, and that in the Talifero Proceeding the entirety of the damages were attributed to Australian exposure alone. In the case of the indivisible injury of mesothelioma, the Trustee has no discretion.

The Estate does not dispute that the quantification of the appropriate discount to the amount of damages is not raised on the Trustee’s present application. However, it argues the approach suggested by the Trustee invites a separate question of calculating the appropriate discount, which could be reviewed afresh by a court and would require victims of James Hardie Asbestos to navigate two or more separate procedures in order to obtain compensation (Outline of Submissions [75]-[83]).

The Estate therefore submits the correct view is that sections 31 and 32 of the 2005 Act require consideration, at a preliminary stage, as to whether a claim does or does not relate to overseas exposure. The Estate contends these sections (and their counterparts in the Final Funding Agreement and the Trust Deed) do not intend to contemplate a secondary process of proportionate liability or the likes (Outline of Submissions [82]-[83]).

In oral argument, the Estate emphasised three salient points (T17/45-T18/11):

The Estate therefore interprets the proviso (a)(i)(B) in the definition “Personal Asbestos Claim” in the Trust Deed and Final Funding Agreement as concerned with damages included in a personal asbestos claim (T19/25-32). The Estate submits once a claim is made and judgment is given in favour of a claimant, the Trustee has no discretion to exercise any further steps in paying out the liability (T23/11-30).

Allianz embraces the Estate’s submissions and makes a number of additional submissions in support (Outline of Submissions [4]).

Allianz submits that the Trustee’s construction of the scheme is strained and contrary to legislative intention, as neither the 2005 Act nor the Final Funding Agreement repose any power, discretion or scheme for the Trustee to decide the degree to which liability should be reduced by overseas exposure (Outline of Submissions [5]-[7]).

Allianz submits that the Trustee’s construction is inconsistent with the definition of “Proven Claim” in the Final Funding Agreement, and that subclause (a)(i)(B) of the definition of “Personal Asbestos Claim” in the Final Funding Agreement does not arise in the present case (Outline of Submissions [8]-[13]).

Allianz also opines that the Trustee’s reliance upon the 2005 Act cannot be reconciled with the definition of “payable liability” in section 4 of the 2005 Act (Outline of Submissions [14]).

Allianz admits this Court is “probably” bound by Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97 (Outline of Submissions [15]).

Allianz submits the 2005 Act is beneficial legislation and should be construed in a way that does not curtail Mr Talifero’s right of recovery because of overseas exposure (Outline of Submissions [16]).

As I have noted, I granted Amaca leave to appear in Court on 8 March 2018. However, Amaca did not provide any written or oral submissions. Though a representative did appear in court. This accords with Amaca’s position as a debtor in the relevant scheme.

In response to the Estate, the Trustee argues in its Submissions in Reply dated 18 April 2018:

The Trustee responds to the written submissions filed for Allianz on 6 March 2018 (Outline of Submissions [22]):

In response to Allianz, the Trustee also argues in its Submissions in Reply dated 18 April 2018:

The Estate also provides response to the Trustee’s Outline of Submissions. The Estate submits (Outline of Submissions [58]-[74]):

Although I have set out in some detail above the key definitions, objects, powers and duties of the 2005 Act, the Final Funding Agreement and the Trust Deed, it is useful to observe more broadly how these provisions interact and the evident synchronicity intended of the various instruments. In that respect in my view Gzell J was clearly correct.

As noted in the Recitals to the Final Funding Agreement, it is clear that the genesis of the tripartite scheme was the concern generated by the Jackson Inquiry that the MRCF was underfunded. That is, there was a concern that James Hardie entities would not have enough funding or assets to meet all of the asbestos claims that could be brought against them in Australia presently and in the future. This is the ‘evil’ that the 2005 Act, the Final Funding Agreement and the Trust Deed attempt to address.

With respect to the 2005 Act, the following broad and non-exhaustive observations can be made:

The 2005 Act therefore provides for the legislative environment surrounding the Trust Deed and the Final Funding Agreement. In addition to placing numerous controls on how the corporate entities of the various liable entities may operate, the 2005 Act operates as the legislative vehicle for implementing the Trust Deed and the Final Funding Agreement.

The Trust Deed, on the other hand, is directed towards constituting the SPF trust and setting out the terms of the trust, the powers of the Trustee and the way in which the Trustee can exercise its discretion.

The Trust Deed is between James Hardie Industries NV (the settlor) and Asbestos Injuries Compensation Fund Limited (the trustee).

The following broad and non-exhaustive observations can be made of the Trust Deed:

The Final Funding Agreement is an agreement between James Hardie Industries SE, James Hardie 117 Pty Ltd, the New South Wales government and the Trustee.

The Final Funding Agreement plays a role in facilitating the ongoing funding and payment of claims against the liable entities. Although it is concerned with the Trustee’s powers and discretion, it operates more broadly to facilitate ongoing funding and payment of potential claims.

The following broad observations can be made of the Final Funding Agreement:

From this brief survey, in my view, it is clear that the 2005 Act, the Final Funding Agreement and the Trust Deed are distinct instruments that play their own bespoke role in addressing the concern that funding of personal asbestos claims in Australia would be insufficient to meet those claims.

Each of the three instruments plays a different role. However, the three instruments clearly act as a regime that was intended to operate synchronously. This is demonstrated by the significant level of interrelation and interdependence of the various terms and provisions of the 2005 Act, the Final Funding Agreement and the Trust Deed.

As to the key definitions referred to there is in my view no conflict, but rather a measure of disconformity or ambiguity in the language between definitions of which would prima facie be identical or like provisions.

For example, “claim” is defined in section 4(1) of the 2005 Act broadly as “any claim, demand, action, cause of action or proceedings (whether based in tort, contract, under legislation or otherwise)” and does not appear to be confined simply to the pleading made by a claimant. In the Final Funding Agreement and Trust Deed, the general term “claim” is not defined, although the more specific term “Proven Claim” is defined by clause 1.1 of the Trust Deed and Final Funding Agreement.

There is also a disconformity between the singularly important definition of “Personal Asbestos Claim” in the Final Funding Agreement and Trust Deed on one hand, and the definition of “personal asbestos claim” in the 2005 Act on the other hand. The proviso in section (a)(i)(B) of the definition of “Personal Asbestos Claim” in the Final Funding Agreement and Trust Deed states (emphasis added): “where the individual has been exposed to Asbestos both within and outside Australia, damages included in the Personal Asbestos Claim shall 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 Personal Asbestos Claim which occurred in Australia”.

The definition of “personal asbestos claim” in the 2005 Act is by contrast a blander definition that does not refer to any limit to the amount attributable to exposure caused or contributed outside of Australia.

However, it is true that the definition of “payable liability” in the 2005 Act makes reference to claims “made against the 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” (emphasis added). This appears to pick up on the distinction provided in proviso (a)(i)(B) of the definition in the Final Funding Agreement and Trust Deed between domestic and foreign exposure.

Given the palpable synchronicity between the Final Funding Agreement, the Trust Deed and the 2005 Act, it is clear the overarching legislative intention in facilitating the scheme was that the three instruments were to be read harmoniously. That is, the tripartite scheme should be construed on the basis that the provisions are intended to give effect to harmonious goals.

It seems to me when one reads these various provisions together harmoniously, the Trustee is not able to pay for any loss by reason of exposure outside of Australia. The Trustee is obliged to limit the payment attributable to the proportion of overseas exposure as stipulated by proviso (a)(i)(B) in the definition of “Personal Asbestos Claim” in the Final Funding Agreement and Trust Deed. The blander definition of “personal asbestos claim” in the 2005 Act should be read harmoniously as to give best effect to the purpose and language of the scheme as a whole, which attempts to address the funding and payment of asbestos claims against James Hardie entities or subsidiaries. There is no apparent intention in the scheme for the various definitions between the instruments somehow to be treated differently or separately.

The tripartite scheme is not one intended to provide for largesse and is not intended to cover the potential liabilities of foreign asbestos manufacturers or the similar foreign exposure (see for example clause 8.2 of the Final Funding Agreement). There is no reason to read down the definition of “Personal Asbestos Claim” in the Final Funding Agreement or Trust Deed to conform with the blander definition in the 2005 Act.

This conclusion is reinforced by noting that the 2005 Act unsurprisingly does not provide an exhaustive list of the trustee’s obligations, duties or discretions or the entire mechanics of the legislative scheme. The 2005 Act’s role in the scheme is as a legislative framework and facilitation of the Funding Agreement and Trust Deed, as well as control over the corporate operation of the James Hardie entities. That the definition of “personal asbestos claim” in the 2005 Act is a blander definition is attributable to the different functions the instruments each play in the scheme.

I am further not satisfied that the word “claim” in the 2005 Act, the Final Funding Agreement or the Trust Deed is intended to be confined merely to a party’s pleading. It is intended to indicate no more than the method or means by which a party may make a request for compensation. The Estate’s construction of the word “claim” in my view relies on an overly literal reading.

Again, the history of the scheme as set out in the relevant Recitals and the principal provisions is directed towards the concern that there needs to be a method of funding any potential claims made against the liable entities (those entities that constitute the James Hardie Group) and not companies worldwide. The negotiation process and history of the scheme reflects the concern that the compensation fund might run out of money or would not have sufficient funds (see for example the potential for rationing provided for in section 35(2) of the 2005 Act). The Trustee has access to finite resources for claimants now and into the future.

I am also of the view that the Trustee’s obligation not to pay out the amount attributable to the proportion of exposure occurring outside of Australia is not diminished by the indivisibility of mesothelioma (cf T22/35-50).

It is uncontroversial that mesothelioma is an indivisible injury: Orica Ltd v CGU Insurance Ltd (2003) 59 NSWLR 14; [2003] NSWCA 331 at [196]-[202] (Santow JA); Amaca Pty Ltd v CSR Ltd [2007] NSWDDT 17 at [16] (O’Meally P). This has been, long before the 2005 Act, an uncontroversial proposition.

I should note in passing that as between the United Kingdom and Australia, Courts have approached the question of causation in instances of injuries like mesothelioma somewhat differently.

In the United Kingdom, the House of Lords, particularly in Fairchild v Glenhaven Funeral Services Ltd [2002] 3 All ER 305; [2002] UKHL 22 (“Fairchild”), has accepted in certain circumstances of injury such as mesothelioma a court may depart from the usual ‘but for’ test of causal connection. A court may treat a lesser degree of causal connection as sufficient; such as the defendant’s breach materially increased the risk of the disease, falling short of the ‘but for’ test of causation (see for example, at 342 and 357-8). See also Barker v Corus UK Ltd [2006] 3 All ER 785; [2006] UKHL 20 and Sienkiewicz v Greif (UK) Ltd; Willmore v Knowsley Metropolitan Borough Council [2011] 2 All ER 857; [2011] UKSC 10.

However, in Australia in Amaca Pty Ltd v Booth (2011) 246 CLR 36; [2011] HCA 53 (“Amaca v Booth”), the High Court has so far distinguished the Fairchild exception (at 58 and 66-7). See also Alcan Gove Pty Ltd v Zabic (2015) 257 CLR 1 at 10; [2015] HCA 33. If the cause of action is made out against a defendant in Australia and causation is satisfied on the standard principles of causation, the defendant is liable to bear the entirety of the loss. Of course, the defendant may seek contribution for any other parties it wishes to argue should be held as jointly liable.

Nevertheless, accepting these jurisdictional differences with regards to the legal test of causation does little to illuminate the role of the Trustee under the scheme established by the 2005 Act, the Final Funding Agreement and Trust Deed. This is because the Trustee is obliged by the Final Funding Agreement and Trust Deed, particularly proviso (a)(i)(B), to make a proportionate determination as a matter of fact apportioning or distinguishing exposure to asbestos within Australia and outside of Australia.

This can be through court-tendered evidence, such as the reports of Professor Breslin and Professor Henderson whose evidence was before the Dust Diseases Tribunal. The Trustee can also procure expert evidence for its own determination of a claim absent any court proceedings.

The scheme does not distinguish between mesothelioma or asbestosis or other forms of asbestos disease or injury. The scheme is instead concerned generally with “personal injury or death of persons arising from exposure to any asbestos or asbestos products that were mined, manufactured, sold, distributed or used by those companies” (section 3(1)(b) of the 2005 Act).

To say, as the Estate does at T22/35-T23/2, that mesothelioma is indivisible and is therefore incapable of being apportioned, is in my view to confuse the role of a court and the role of the Trustee.

There is therefore a fundamental difference between what a court needs to do in determining causation curially and what the Trustee is obliged to do under the exercise of its discretion in the tripartite scheme. A court decides causation, whereas the Trustee’s discretion is governed by the Trust Deed, the Final Funding Agreement and the 2005 Act, and particularly the proviso (a)(i)(B) in the definition of “Personal Asbestos Claim” in the Trust Deed and Final Funding Agreement.

Merely because the pleading of Mr Talifero before the Dust Diseases Tribunal gave rise to a global figure of $560,482.00 to be paid by Amaca, and the current evidence that mesothelioma is indivisible, does not detract from the requirement stipulated in the definition of “Personal Asbestos Claim” in the Final Funding Agreement and Trust Deed for the Trustee to make this apportionment exercise as a matter of fact. It is rather concerned with providing for a fair method of apportioning and paying claimants harmed by James Hardie asbestos now and into the future, and in the interests of the scheme as a whole.

Of course medicine can express expert views as to whether particular exposure is material or non-material as a matter of fact. It can also be determined as a matter of fact whether overseas exposure materially contributed to the injury or death of the claimant.

I am of the view that the 2005 Act, the Final Funding Agreement and the Trust Deed, when read together harmoniously, oblige the Trustee to only pay those personal asbestos claims as limited to the amount attributable to the proportion of the exposure which caused or contributed to the loss or damage which occurred in Australia.

I would make an order in accordance with paragraph [1] of the Trustee’s Summons filed 29 January 2018.

The Estate submits that the Trustee should pay its costs of the proceedings on an indemnity basis (Outline of Submissions [87]-[90]). The Trustee does not oppose such a course (T14/30-45).

Unsurprisingly the Attorney-General did not make submissions on costs. Allianz does not seek a costs order and notes if necessary there should be an order that it pay its own costs. Amaca did not make submissions on costs.

On that basis the only other order I would make is that the costs of the Estate be paid by the Trustee on an indemnity basis.