Coveney v Asbestos Injuries Compensation Fund Ltd; Davis v Asbestos Injuries Compensation Fund Ltd; WorkCover Queensland v Asbestos Injuries Compensation Fund Ltd

1. [1]

   THE COURT: No fewer than four proceedings have been brought and heard with considerable expedition following advice given to the first respondent, Asbestos Injuries Compensation Fund Ltd (AICF), by the primary judge sitting as the Expedition List judge on 13 September 2024 to the effect that it would be justified in not making payments to Messrs Eric Thomas Coveney and Barry Davis, despite each of those men having the benefit of judgments in their favour against Amaca Pty Ltd: In the matter of Asbestos Injuries Compensation Fund Ltd (and WorkCover Queensland) [2024] NSWSC 1163. The principal purpose of the trust administered by AICF included providing funding for the payment of, and paying, “Payable Liabilities”, and while the precise scope of that defined term is disputed and central to this litigation, at its core are liabilities pursuant to judgment debts against Amaca for damages for personal injury caused by exposure to asbestos.

2. [2]

   Each of Messrs Coveney and Davis had been employed in Queensland, had suffered asbestos-related injury in the course of their work, and had received workers compensation payments. In each case, the total amount of workers compensation payments was less than the judgments each man had obtained against Amaca. Section 207B of the Workers’ Compensation and Rehabilitation Act 2003 (Qld), speaking generally, imposed a personal obligation on the person from whom damages were recoverable to pay the amount of workers compensation payments to the workers compensation insurer, and imposed a charge on amounts of damages paid as compensation for injury. WorkCover Queensland sought to exercise its rights in relation to the judgments obtained by each man against Amaca.

3. [3]

   The essence of the advice given by the primary judge to AICF comprised two parts. The first concerned the portion of the judgment debt up to the total amount of workers compensation payments which each man had received. The advice was that the trustee was justified in not making a payment so as to discharge that portion of Amaca’s judgment debt, because of a lack of power to make payments to the extent that the men had received substantial payments of workers compensation from WorkCover Queensland. The second concerned the amount by which the judgment debt exceeded the workers compensation payments received. Insofar as WorkCover Queensland asserted an entitlement to be reimbursed from any payments made by the trustee to Messrs Coveney or Davis, the advice was that the trustee would be justified in the exercise of its discretion not to make a payment to either man.

4. [4]

   The primary judge encapsulated her conclusions at [147]-[148] as follows:

5. [5]

   The main ground of appeal in this Court concerned the first aspect of the advice. No party sought actively to support the second aspect of the advice. The trustee, despite acknowledging it as an available construction, did not contend it was the preferable construction, and indeed candidly acknowledged that no such submission had been advanced to her Honour. On the view we take on the main ground, it will not be necessary to consider the nature and extent of the discretion reposed in the trustee, bearing in mind the scope of the trustee’s application for advice (which merely asked whether it would be justified in not paying (prayers 1-3) or alternatively whether it would be justified in paying (prayers 4-5) payments in satisfaction of the judgments obtained by Messrs Coveney and Davis). Without seeking to analyse such discretion as AICF might have (an issue which in light of the parties’ stance was not the subject of anything like full submissions), it is sufficient to observe that nothing has been put forward in this application to warrant the exercise of any discretion against making payments to discharge the judgment debts in favour of Messrs Coveney and Davis against Amaca. That is because the only matter relied upon, namely, the possibility that WorkCover Queensland may seek reimbursement, is not a sound basis to exercise any discretion against making payments.

6. [6]

   The appeal extended to a separate subsequent decision concerning costs (In the matter of Asbestos Injuries Compensation Fund Ltd (and WorkCover Queensland) (No 2) [2024] NSWSC 1238) but in light of the outcome of the main ground, it will be necessary in any event to re-exercise the discretion as to costs. No useful purpose will be served in determining whether there was appellable error in the exercise of a costs discretion on the counterfactual basis that the submissions they had made were incorrect.

7. [7]

   The main ground of appeal turns on the James Hardie Former Subsidiaries (Winding up and Administration) Act 2005 (NSW), an “Amended and Restated Trust Deed” dated 14 December 2006 and an “Amended and Restated Final Funding Agreement” dated 21 November 2006. We shall refer to the Winding up Act, the Trust Deed and the Funding Agreement. Speaking generally, they established a regime to deal with the payment over an extended period of time of the liabilities of three former James Hardie subsidiaries, which are in a long-term winding-up which stands outside the Corporations Act 2001 (Cth), using a trust to which the current James Hardie operating company is required to make ongoing contributions.

8. [8]

   Before turning to those documents, these reasons first summarise the relevant procedural and factual background, after noting that the Court received written and oral submissions of a high calibre from six separately represented parties, all of whom co-operated in an expedited timetable to achieve a hearing less than two months after originating process in this Court was filed.

Procedural issues

1. [9]

   Each of WorkCover Queensland, Mr Coveney and Mr Davis was heard as an interested party on the trustee’s application for judicial advice, but was not joined to the proceeding. Each sought leave to appeal. In addition, Mr Coveney purported to appeal as of right, and filed a notice of appeal (which became proceeding 2024/362958; his summons seeking leave to appeal was proceeding 2024/390046).

2. [10]

   AICF is the “SPF trustee” for the purposes of the Winding up Act. It is entitled by s 55 of that statute to seek “advice or direction”. Any such advice or direction is to be given by order: s 55(7). A note to that subsection confirms that the right of appeal conferred by s 101(1)(a) of the Supreme Court Act 1970 (NSW) from any “order of the Court in a Division” applies to orders incorporating advice or directions. AICF also invoked the general power in s 63 of the Trustee Act 1925 (NSW), in respect of which once again the advice is to be given by order (UCPR r 55.2) and from which an appeal lies: UCPR r 55.4. A party to the proceedings in which the advice is sought thereby enjoys an appeal as of right, assuming the $100,000 monetary threshold in s 101(2)(m) is satisfied: Beck v Henley [2014] NSWCA 201 at [58].

3. [11]

   However, none of Messrs Coveney or Davis or WorkCover Queensland was a party to AICF’s application. As non-parties, their appeals are subject to the grant of leave: see Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher & Barnet (as liquidators of Octaviar Administration Pty Ltd (in liq)) (2015) 89 NSWLR 110; [2015] NSWCA 85 at [75]-[82]; Resilient Investment Group Pty Ltd v Barnet and Hodgkinson as liquidators of Spitfire Corporation Ltd (in liq) (2023) 111 NSWLR 446; [2023] NSWCA 118 at [7]. Talifero v Asbestos Injuries Compensation Fund Limited as Trustee for the Asbestos Injuries Compensation Fund (2018) 98 NSWLR 1107; [2018] NSWCA 227 at [19] applied Fortress Credit Corporation to advice given to the same trustee. Mr Davis submitted that the application of those principles to advice given to the same trustee was wrong. However, the submission was confined to a footnote of his written submissions, and was not sought to be developed orally. That falls well short of making out a proper basis to overturn a line of authority.

4. [12]

   In any event, there was a concurrent hearing, in light of the fact that the decision would affect a large number of injured individuals and represented a change of stance from that taken by AICF over the last twenty years. Plainly the appeals present questions of law which are of general importance, and which warrant the grant of leave.

5. [13]

   The NSW Attorney-General generally supported the stance of AICF. He intervened in the litigation, thereby becoming a party (see Corporate Affairs Commission v Bradley [1974] 1 NSWLR 392 at 396 and Doyle’s Farm Produce Pty Ltd v Murray Darling Basin Authority (No 2) (2021) 106 NSWLR 41; [2021] NSWCA 246 at [22]) who should have been joined to the applications for leave to appeal filed by Messrs Coveney, Davis and WorkCover Queensland and to Mr Coveney’s appeal. However, he was given notice of the proceedings in this Court and participated by counsel. James Hardie 117 Pty Ltd, which is the operating company and remains subject to obligations to make payments to AICF, was heard as an interested party, and was likewise given notice of the proceedings in this Court, and participated by counsel.

6. [14]

   The orders made by this Court will regularise the position with parties, by adding as a party to each proceeding the Attorney-General (who should have been joined having intervened below) and James Hardie 117 Pty Ltd, which (as will be seen) is directly affected by the construction reflected in the judicial advice, by reason of the quantum of payments it is required to make to AICF. Further, WorkCover Queensland will be joined to the proceedings commenced by each of Messrs Coveney and Davis, as it too is directly affected by the orders made. Mr Coveney’s appeal is incompetent, but rather than dismissing it, and then granting leave to appeal and directing him to file a notice of appeal, the simpler course will be to let it stand as the appeal for which leave is granted by ordering that it be treated for all purposes as filed in proceeding 2024/390046.

Background

1. [15]

   The essence of the scheme is described in s 3 of the Winding up Act, namely, to set up a scheme for a long term winding up of three companies that were formerly within the James Hardie corporate group so as to ensure that not only present, but also future, liabilities of those companies in respect of 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 are dealt with (a) in accordance with the Funding Agreement, and (b) so that preference is given to those claims over other claims which are deferred. To that end, parts of the Corporations Act have been displaced, in accordance with s 5G of that Act.

2. [16]

   The administration of AICF and the funds of which it is trustee is governed by a “tripartite arrangement” comprising the Winding up Act, the Trust Deed and the Funding Agreement, all of which should be construed harmoniously: Talifero v Asbestos Injuries Compensation Fund Ltd at [80].

3. [17]

   From its inception almost two decades ago until February this year, AICF had provided funds to discharge liabilities of liable entities such as Amaca for personal injury claims which have been established by judgment, even if the injured plaintiff had been in receipt of workers compensation payments from employers (or employers’ insurers) within Australia but outside New South Wales.

4. [18]

   Certain claims may be brought against Amaca, Amaba and ABN 60 (which are defined to be “liable entities”) and a trust is established whose principal purpose is to make payments discharging certain claims made against those companies. Liable entities are permitted to continue to conduct their business despite being insolvent, and indeed are prevented during the winding up period from applying for deregistration: s 28. The operating company is required to contribute funds to the charitable trust according to a formula which is based (speaking generally) on a proportion of its operating profit and the anticipated need for payments to discharge liabilities of liable entities. There is thus a direct connection between James Hardie 117 Pty Ltd’s obligation to make payments and the scope of “payable liabilities”.

5. [19]

   The Funding Agreement is between the State of NSW, James Hardie Industries plc (the parent company of the James Hardie Group), James Hardie 117 Pty Ltd (the entity primarily liable to provide funding) and AICF (which joined by Deed of Accession in June 2006). The tripartite arrangement was a product of a Commission of Inquiry and subsequent negotiations between the State and James Hardie 117 Pty Ltd to provide some $4.5 billion to pay certain of Amaca’s liabilities during Amaca’s statutory winding-up period. The Winding up Act was intended to implement key parts of that Agreement, including the establishment of a trust fund to pay the liabilities of designated entities, and in April 2006 AICF was appointed trustee of that fund under the Trust Deed.

6. [20]

   Mr Coveney contracted mesothelioma as a result of his exposure to Amaca’s asbestos products during the course of his employment as a demolition labourer in Queensland. He had worked for third-party employers. On 31 March 2023, Mr Coveney applied to WorkCover Queensland for the payment of compensation pursuant to the Workers Compensation and Rehabilitation Act 2003 (Qld) for terminal illness, being mesothelioma. On 2 June 2023, WorkCover Queensland accepted Mr Coveney’s claim and later paid him statutory compensation in a lump sum of $873,720. On 11 August 2023, Mr Coveney sued Amaca for damages in negligence in the Dust Diseases Tribunal of NSW and a consent judgment was entered against Amaca on 21 February 2024 giving judgment for $1 million plus costs of $190,000. (Amaca’s cross-claim seeking contribution from Mr Coveney’s employers, both of whom were insured by WorkCover Queensland, remains undetermined).

7. [21]

   Mr Davis contracted mesothelioma as a result of his exposure to Amaca’s asbestos products while he was working as a carpenter in Queensland, also for third-party employers. In March 2020, Mr Davis lodged a claim with WorkCover Queensland for statutory compensation. WorkCover Queensland paid Mr Davis compensation payments totalling $418,640. In July 2023, Mr Davis sued Amaca for negligence in the Dust Diseases Tribunal of NSW, and following a two day hearing (confined to quantification) on 7 and 8 February 2024, judgment was entered in Mr Davis’ favour on 22 February 2024 in the amount of $897,020.64 plus costs: Davis v Amaca Pty Ltd [2024] NSWDDT 2.

8. [22]

   AICF has not yet paid Mr Coveney for the judgment obtained against Amaca. There are two aspects in respect of which AICF sought advice:

   1. (1)

      Would AICF be justified in paying the $873,720 in respect of which Mr Coveney has already received workers compensation payments?

   2. (2)

      Would AICF be justified in paying the balance of the judgment debt of $316,280 (representing the balance of the judgment debt and the costs judgment) in respect of which WorkCover Queensland asserted a charge?

9. [23]

   AICF has paid $476,820.64 to Mr Davis’s solicitors’ trust account. WorkCover Queensland asserts a charge over the entirety of what has been paid, and an entitlement to the unpaid portion of the judgment of $418,640. AICF sought advice as to whether it would be justified in paying the unpaid balance of Amaca’s judgment debt of $418,640. (There is a minor discrepancy between those amounts and Mr Davis’ judgment, which relates to an adjustment for the repayment of a Medicare benefit in the order of $1,000, on which nothing turns.)

10. [24]

    On 5 February 2024, shortly before both of Messrs Coveney and Davis obtained judgments against Amaca, AICF wrote to each man’s solicitors advising that it would not make payments discharging any liability found to be owed by Amaca to them insofar as WorkCover Queensland sought, or might seek, to recover such payments against the amounts of workers compensation it had paid either man.

11. [25]

    In February and March 2024, WorkCover Queensland demanded that AICF pay the amounts previously paid as statutory compensation to each of Messrs Coveney and Davis to WorkCover Queensland as a first charge over the judgment moneys. It was accepted that that charge arose under section 207B of the Workers’ Compensation and Rehabilitation Act 2003 (Qld), which reads:

12. [26]

    AICF contended that it did not have power to pay the judgment sum to Messrs Davis and Coveney because of limitations in the Winding up Act and the Funding Agreement. AICF asked WorkCover Queensland whether it claimed a charge over the difference between Mr Coveney’s judgment sum and the compensation payments, so that it could pay that “top up amount” to Mr Coveney as soon as possible. WorkCover Queensland did not reply.

13. [27]

    On 8 March 2024, WorkCover Queensland filed a statement of claim in the Supreme Court of Queensland against Amaca and Mr Coveney seeking, among other things, a declaration that WorkCover Queensland was entitled to a first charge over the judgments sums and mandatory injunctions to effect the payment of that sum to WorkCover Queensland. In April 2024 that proceeding was transferred to the Supreme Court of New South Wales under s 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Qld) because of its interrelationship with the trustee’s application for judicial advice, but the proceedings were not consolidated and thus WorkCover Queensland continued not to be a party to AICF’s application for judicial advice. AICF sought orders that it would be justified in not paying to WorkCover Queensland, as a first charge over the judgment moneys in respect of the judgments against Amaca, the amount paid in statutory compensation to Messrs Coveney and Davis.

14. [28]

    It is not necessary to express views on all aspects of WorkCover Queensland’s entitlements under statute, and in point of principle, it would be inappropriate in proceedings in a New South Wales court for judicial advice, in which no party claimed he or it was acting adversarially, for questions of the construction of the Queensland statute to be determined unnecessarily.

15. [29]

    It is sufficient to observe that on any view, the Queensland statute confers on it a right to recover amounts paid by AICF to discharge judgments against Amaca, with the result that plaintiffs with actions for personal injury against Amaca will not, on the stance now adopted by AICF and endorsed by the advice given at first instance, be paid in full. This was explained by reference to Mr Davis’ position, who had received $418,640 by way of workers compensation payments, and had been paid $478,000 in advance of judgment (it will be recalled that the only issue at the hearing in February 2024 was quantum):

16. [30]

    There was no issue about the correctness of what was said on behalf of Mr Davis. Ms Higgins confirmed this on behalf of AICF:

17. [31]

    Likewise, the Attorney-General confirmed his position:

18. [32]

    Thus a person injured in Queensland or any other Australian State or Territory aside from New South Wales with a claim against Amaca and who has been in receipt of workers compensation payments is in a very different position from a person injured in Australia but outside New South Wales who is not entitled to workers compensation payments. Both may obtain judgments against Amaca. Amaca will probably lack funds to satisfy the judgment, and the steps available to the judgment creditor to enforce it are severely limited. However, the trustee will make a payment to the latter so as to satisfy the judgment debt, but insofar as any payment by the trustee is clawed back, or is liable to be clawed back pursuant to an interstate workers compensation insurer’s entitlement to reimbursement, then the trustee is, as the position presently stands, justified in making no payment.

19. [33]

    This concededly unpalatable outcome is contrary to the fundamental purpose of the regime which is designed to ensure that the liable entities including Amaca remain in extended winding up and AICF may exercise its powers to distribute funds in accordance with its charitable purpose so that, of all things, Amaca’s liabilities for direct claims of asbestos-related personal injury may be discharged. The Funding Agreement recites that the parties’ objective was:

20. [34]

    It is true, as the Attorney-General submitted, that the closing words of the definition of “Payable Liabilities” reflect an intention to subtract something from the class of obligations the discharge of which is the principal purpose of the trust. But interstate employees injured by James Hardie products are an eminently foreseeable class of case, and almost all of them would be entitled to workers compensation, and would receive payments faster than they could establish a judgment against Amaca, and all interstate workers compensation regimes contain clawback provisions to recover payments when damages have been awarded. The result is that the scenario confronting Messrs Coveney and Davis is far removed from the periphery of liabilities in respect of which the tripartite arrangement was directed.

21. [35]

    AICF and the New South Wales Attorney-General candidly acknowledged that that was the outcome of the advice given by the primary judge. They said that this was a consequence of WorkCover Queensland exercising, or threatening to exercise, its statutory entitlement to reimbursement, rather than waiving such rights. But, as WorkCover Queensland put it:

22. [36]

    The unpalatable outcome summarised above applies to employees with claims against Amaca incurred at workplaces within Australia but outside New South Wales. The position of New South Wales employees is different. The Workers Compensation Act 1987 (NSW) does not (for all practical purposes) apply, by reason of an exclusion in the definition of “injury”. Instead, such claims are governed by the Workers’ Compensation (Dust Diseases) Act 1942 (NSW). Generally speaking injured workers who receive damages from the Dust Diseases Board are not subject to a clawback from the Board, but instead the Board has an entitlement to make a claim itself, by reason of s 8E of that Act. Such claims are recognised within the tripartite arrangement. The Winding up Act defines in s 4 a “statutory recovery claim” as follows:

23. [37]

    It is clear that Amaca’s liability to pay a “statutory recovery claim” is a payable liability, and thus may be paid. But there have been no regulations made to accommodate recoveries pursuant to statute such as those made by WorkCover Queensland, and thus such claims for reimbursement are outside the scope of “statutory recovery claims”.

24. [38]

    The trustee’s obligation to make payments is to be found in the Funding Agreement and the Trust Deed, and the Trust Deed is expressed (in cl 5.10) to be subject to the terms of the Funding Agreement. That is, in part, why the Funding Agreement is “the pre-dominant instrument”: Re Asbestos Injuries Compensation Fund Ltd [2011] NSWSC 97 at [82].

25. [39]

    The Winding up Act supports that conclusion. One of the “principal objects” of the Act, outlined in s 3, is to ensure that the liabilities of liable entities are “dealt with in accordance with the Final Funding Agreement”. Section 32 of the Act confines the payments that may be made by AICF or Amaca to only Amaca’s “payable liabilities” during Amaca’s winding up period. The primary judge accepted that each judgment debt was a “proven personal asbestos claim”. However, the primary judge held that the Trust Deed and Funding Agreement further circumscribed the payments that could be made out of the SPF, noting that s 23(1) of the Act endorses the primacy of any further limitations imposed by those two instruments:

26. [40]

    Clause 8 of the Funding Agreement provides:

27. [41]

    “SPF Funded Liability” is a more confined concept in the Funding Agreement than “payable liability” is in the Act. (Amaca is liable for all Payable Liabilities that are not SPF Funded Liabilities.) The definition of “SPF Funded Liability” includes only some of the itemised subsets of “Payable Liabilities” in the Funding Agreement, one of which is a “Personal Asbestos Claim”.

28. [42]

    Clause 13.7 deals with “statutory recovery claims” consistently with s 32(3) of the Winding up Act and the accompanying regulations. Clause 13.7(a) provides:

29. [43]

    Clause 13.7(b) provides that, in consideration of JHI and James Hardie 117’s agreement “to include Recoveries within the scope of the funding arrangements set out in this deed (but only to the limited extent provided for in this clause 13.7), the NSW Government agrees to use its best endeavours to ensure, through the [Winding up Act], that the Liable Entities (or the Trustee on their behalf) cannot be compelled to pay (whether paid directly to Relevant Bodies or as a component of amounts payable or liabilities incurred in respect of Personal Asbestos Claims…) Recoveries which in aggregate exceed in any Financial Year” the lesser of the Liable Entities’ liability to pay Recoveries or $750,000 per annum. It is unnecessary to summarise the balance of the clause save to note that cl 13.7(f) includes an undertaking that the New South Wales Government will not make or amend a regulation to prescribe any claim as a “statutory recovery claim” without James Hardie’s written consent.

30. [44]

    The provisions summarised above reflect the “tight” constraints upon statutory recovery claims on which the primary judge placed reliance.

The critical definitions

1. [45]

   Clause 13.7 feeds into the cascade of definitions of “Personal Asbestos Claim”, “Proven Liability” and “Payable Liability”. There are some minor variations in these terms in the Funding Agreement and the Trust Deed, which are also defined slightly differently from the similar (uncapitalised) terms in the statute, but no party maintained that anything turned on the discrepancies. In the definitions reproduced below from the Funding Agreement, the words which are or may be applicable to the claims by Messrs Coveney and Davis have been emphasised.

2. [46]

   SPF Funded Liability was defined to mean:

3. [47]

   Payable Liability was defined to mean:

4. [48]

   Proven Claim is defined in cl 1.1 of the Funding Agreement (and identically in the trust deed) as follows:

5. [49]

   A Proven Claim includes a Personal Asbestos Claim, which is defined in cl 1.1 of the Funding Agreement (and the Trust Deed) as follows:

6. [50]

   It is convenient immediately to note the following complexities.

7. [51]

   First, there is a cascade of definitions, all of which must be satisfied if the trustee is to comply with its obligation only to pay SPF Funded Liabilities. Relevantly to the claims made by Messrs Coveney and Davis, that involves satisfying the definitions of Personal Asbestos Claim, then Proven Claim, then Payable Liability, and then SPF Funded Liabilities.

8. [52]

   Secondly, there are two main ways by which the claims of Messrs Coveney and Davis may fall outside that cascade of definitions: by the words “subject to clause 13.7” in the definition of Personal Asbestos Claim, and by what was called the “Exclusion” – the similarly worded exclusions at the end of the definitions of each of “Personal Asbestos Claim” and “Payable Liability”.

9. [53]

   Thirdly, “Personal Asbestos Claims” are expressly “subject to” cl 13.7. That is a little awkward, because the definition identifies a class of claims, while cl 13.7 is a complex clause directed to limiting “Recoveries”. However, the note to cl 13.7(a)(i) excludes statutory entitlements which are “properly” paid out of Proven Claims pursuant to a judgment or settlement of a Personal Asbestos Claim from being treated as a Recovery. Although that is merely a note, it reflects the idea that in some circumstances (and certainly in respect of claims pursuant to s 8E of the Workers’ Compensation (Dust Diseases) Act 1942), a claim under statute for reimbursement from a judgment against Amaca is not to be treated as a “Recovery” and therefore is not to be excluded from the scope of Personal Asbestos Claims by reason of the subjection of that definition to cl 13.7. That is to say, none of the tight restrictions applicable to “Recoveries” in cl 13.7 applies if as a matter of the construction of Proven Claims and Personal Asbestos Claims there is a statutory entitlement to be paid out of the damages payable as part of a Proven Claim. The focus of debate in this Court was not on cl 13.7, but on the cascade of definitions of Personal Asbestos Claim, Proven Claim and Payable Liability.

10. [54]

    Fourthly, on its face, “Personal Asbestos Claims” are candidates for membership of the class of “Proven Claims”, which in turn are candidates for membership of the class of “Payable Liabilities”. There are many other ways in which “Payable Liabilities” may come into existence, which need not be summarised. It was accepted that the claims by each of Messrs Coveney and Davis against Amaca for personal injury following their exposure to asbestos were Personal Asbestos Claims under paragraph (a) of the definition, subject perhaps to the Exclusion. They were claims for damages at common law against Amaca.

11. [55]

    Fifthly, the additional elements of a “Proven Claim” (relevantly, a final decision by a court) were satisfied in respect of each of the claims advanced by Messrs Coveney and Davis when in February 2024, they obtained judgments in their favour against Amaca.

12. [56]

    Sixthly, the Exclusion in the definition of “Payable Liability” is very similarly worded to that in “Personal Asbestos Claims”. It is difficult to see why both are necessary.

13. [57]

    Seventhly, the scope of those exclusions turns on the meaning of “a Worker’s Compensation Scheme or Policy”. The Funding Agreement defines that term as follows:

The reasons of the primary judge

1. [58]

   There was a great deal of the reasons of the primary judge which all parties said was correct. The critical aspect of the reasons which was challenged in the main ground of this appeal was the conclusion that AICF lacked power to pay Messrs Coveney and Davis their respective judgment sums out of the SPF. In part this turned on the role played by cl 13.7, but it was principally a consequence of the “Exclusion” in the definitions of Personal Asbestos Claim and Payable Liability.

2. [59]

   The primary judge adverted at [117] to the breadth of the definition of “Worker’s Compensation Scheme or Policy” in clause 1.1 of the Funding Agreement.

3. [60]

   Although Messrs Coveney and Davis distinguished the workers compensation payments paid by their employer’s insurer pursuant to contract, as opposed to being damages for a claim against Amaca, that submission was rejected by the primary judge, at [119]:

4. [61]

   The primary judge identified at [126]-[131] four difficulties with the contrary construction:

5. [62]

   The upshot was that the only payable liability was, in Mr Coveney’s case, $316,280 (being the remaining $126,280 of the judgment sum, plus $190,000 in costs) and, in Mr Davis’ case, the balance that is yet to be paid.

6. [63]

   The second aspect of the primary judge’s reasons was that AICF would be justified in not paying even those balances. Her Honour held that the payment of the payable liability was only a power, not a duty – and a power expressed in clause 5.9 of the Trust Deed to be in the trustee’s “absolute discretion”.

7. [64]

   Her Honour further held that the trustee would be justified in not paying the above balances to Messrs Coveney and Davis in circumstances where WorkCover Queensland could immediately exercise its statutory charge over the amounts received. The primary judge discussed the principles governing the exercise of trustees’ dispositive powers and concluded that, in light of the duty to act in the best interests of beneficiaries, AICF could refuse to make a distribution that is likely to be immediately expropriated from the object. Reference was made to the correspondence between AICF and WorkCover Queensland, in which WorkCover Queensland left open, albeit by silence, the possibility of asserting its charge immediately upon receipt by Messrs Coveney and Davis.

8. [65]

   Separately, WorkCover Queensland submitted that AICF had power to pay out of the SPF an amount corresponding to WorkCover Queensland’s statutory charge directly to WorkCover Queensland. That submission was rejected, and was outside the scope of the appeals in this Court.

9. [66]

   As a result, the primary judge made the following substantive orders:

Parties’ submissions and their resolution

1. [67]

   The starting point is the text. The syntax of each Exclusion is not free from difficulty. There are two distinct difficulties, both of which turn on the words “to the extent”. What words are qualified by “to the extent”, and what does “to the extent” mean?

2. [68]

   It will be recalled that, in the case of a Personal Asbestos Claim, the Exclusion is:

3. [69]

   In the case of Payable Liabilities, the Exclusion is:

4. [70]

   There was a debate as to whether one should start with the definition of “Payable Liabilities” or “Personal Asbestos Claim”. That debate is relatively arid. The provisions are cognate, and need to be read together in order to achieve the purpose of delineating the extent to which the trustee may make distributions. It will be necessary to consider both definitions, but it is sensible to start with that which is lower in the hierarchy, because it attaches directly to the claims made by Messrs Coveney and Davis.

5. [71]

   It seems clear enough that the words “to the extent” in the definition of Personal Asbestos Claim qualify both “any Marlew Claim” and “any other claim”. That is because they are followed by three plural pronouns or verbs (“they”, “have been recovered” and “are recoverable”) and if “to the extent” qualified only “any other claim” then three singular pronouns or verbs would follow. That view is strengthened by the consideration that in the definition of Payable Liability the cognate Exclusion operates across the board (“excludes any such liabilities or claims”), including to Marlew Claims (which are expressly capable of being Proven Claims and therefore capable of falling within paragraph (a) of the definition of Payable Liability).

6. [72]

   It is true that if the words “to the extent” qualify both “any Marlew Claim” and “any other claim”, it is difficult to see what purpose is achieved by the exclusion commencing with “any Marlew Claim and any other claim”. It would have been simpler to write “any claim” or perhaps “any claim (including any Marlew Claim)”. However, where different definitions in the cascade which culminates in Payable Liabilities needlessly deploy substantially the same Exclusion, there can be little surprise that the wording is neither as concise nor as clear as it could be.

7. [73]

   Turning from parsing the structure of the Exclusion to identifying its meaning, the Exclusion subtracts from what is a Personal Asbestos Claim but it does so only “to an extent”. That involves an ellipsis which is a little problematic, in that the result of the application of the exclusion is to subtract from what would otherwise be the class of “Personal Asbestos Claims”, but to do so by excluding certain claims “to an extent”. The “extent” to which the exclusion applies is expressed in terms of claims being “recovered” or “recoverable”, which is to speak in terms of a dollar amount. That is to say, the extent to which a claim is excluded from the definition of Personal Asbestos Claim is determined by looking forward to the actual or anticipated recovery of an amount of money.

8. [74]

   The application of the dollar deduction is complicated further by itself having two limbs (“have been recovered” or “are recoverable”) with the latter meaning that the unexercised capacity to recover an amount of money in the future reduces the amount of the claim here and now. It is easy to see how there could be disputes about the extent to which a Worker’s Compensation Scheme or Policy might result in a future payment. Fortunately, this litigation involves only the actual workers compensation payments made to Messrs Coveney and Davis.

9. [75]

   Fundamentally, it was submitted on behalf of Messrs Coveney and Davis and WorkCover Queensland that the exclusion in the definition of Personal Asbestos Claim should be understood as excluding a class of claims from the claims included earlier in the definition. The exclusion of claims “to the extent they have been recovered or are recoverable under a Worker’s Compensation Scheme of Policy” could apply, so it was said, only to claims for damages under common law which had been made against a Liable Entity. The workers compensation payments which had been made to Messrs Coveney and Davis had not been claims for damages, nor had they been made against Amaca or any other Liable Entity. It followed that the money actually received by Messrs Coveney and Davis was the result of a claim which fell outside the scope of the claims caught by the opening paragraphs of the definition, and for that reason was not to be taken into account by the Exclusion.

10. [76]

    As it was put in Mr Coveney’s written submissions:

11. [77]

    The contrary argument relied on both the damages and the workers compensation being received to compensate for the same injury. AICF said that “a statutory compensation payment under that Queensland Act in respect of an injury arising from asbestos exposure constitutes a recovery of a personal injury claim by an individual for damages under common law arising from that same asbestos exposure and injury”.

12. [78]

    The trustee defended the reasoning of the primary judge at [120]-[121]:

13. [79]

    The trustee submitted that the primary judge’s conclusion reflected a natural and common-sense way to construe the nested definitions that employed the exclusion referrable to a workers’ compensation scheme or policy. It was said that:

14. [80]

    Similarly, the Attorney submitted that:

15. [81]

    Counsel accepted, properly, that the submission turned upon characterising the payments received by way of workers compensation as damages. That was supported by references to Haines v Bendall (1991) 172 CLR 60; [1991] HCA 15 and Harris v Commercial Mines Ltd (1996) 186 CLR 1; [1996] HCA 49. Representative of the passages relied upon was the passage in the joint judgment in Haines at 69-70:

16. [82]

    But little use is served by relying on passages in other decisions in other contexts which compare workers compensation payments and damages at common law. The issue in Haines was whether interest should have been included in respect of payments of workers compensation, and parts of the reasoning turned on the “character” of those payments. That is well removed from the question of construction of the repeated exclusion in the definitions of Personal Asbestos Claim and Payable Liability in the Funding Agreement. As is commonly the case for questions of construction of legal instruments, a careful analysis of text, context and purpose is of greater assistance than reasons for judgment in a case where similar words in a different context were being construed.

17. [83]

    We also see little utility in seeking to draw inferences from the different language employed when the Funding Agreement addresses “Marlew Claims” (which, speaking generally, were a class of claims arising from mining at Baryulgil). Some parties sought to rely upon parts of that wording to support the reasoning of the primary judge, while Mr Davis sought to rely upon different aspects of it to support the appeal. We agree with the approach adopted by Mr Coveney, which was that all of this was a distraction. Little is to be gained, in transactional documents as complex and cumbersomely drafted as those giving rise to this appeal, to look at different wording in other provisions which do not apply. The mode of reasoning is inferential at best, and assumes a coherence in the drafting of the whole of the document which is far from self-evident.

18. [84]

    To reiterate, the reason there is scope for argument is that both Exclusions, but especially the Exclusion for Personal Asbestos Claims, employ an ellipsis. The bulk of the definition is directed to identifying a class of claims. However, the Exclusion does not exclude some members of the class. On its face, it excludes claims “to the extent” that such claims have been recovered or will be recovered. But the claim for damages at common law is quite different from the recovery of money in satisfaction of a judgment or compromise of that claim. The Exclusion requires one to look forward from the claim to a time when there has been or will be an amount of dollars recovered.

19. [85]

    Hence the divide between the parties. If attention continues to be directed to the time at which the claim is made, then it is much more natural to read the words “to the extent they have been recovered or are recoverable” as referring to the claim at common law for damages against a James Hardie company. On the other hand, if one looks forward to the time at which there is a recovery, which is after all necessary in order to apply the Exclusion, then it is more natural to focus on the money which has been received and ask what is its nature. That reflected the essential difference between the submissions, especially those of Mr Walker for Mr Coveney, who emphasised the grammar of the Exclusion, and Ms Higgins for AICF, who emphasised the juristic nature of the workers compensation payments.

20. [86]

    Ultimately the key difference as a matter of text comes down to the pronoun “they”. The syntax is not straightforward, but it would be to inflict violence upon the parties’ chosen language to read the words “Marlew Claim”, “any other claim” and especially “they” in the Exclusion to mean anything other than the various claims which are defined by paragraphs (a), (b) and (c) to fall within the definition. It is true that the ordinary literal meaning is not always the legal meaning of a legal document, but it often is, and in any event it is the necessary starting point. There is also force in Mr Walker’s submission that the documents representing the tripartite arrangement were negotiated over an extensive period of time, and perhaps for that reason are needlessly complex, but also for that reason not lightly should one depart from the ordinary textual meaning.

21. [87]

    To illustrate the force of the textual considerations in the previous paragraph, it is useful to consider a slightly differently worded Exclusion, which omitted the pronoun “they”. If the Exclusion were in the passive, so as to exclude claims “to the extent there has been or will be recovery under a Worker’s Compensation Scheme of Policy”, that would more soundly warrant a shift in focus from the claims defined by the definition to the portion of those claims for which compensation has not been received from workers compensation payments. The force of the pronoun “they” is that it insists that the Exclusion turns upon whether the claims earlier in the definition have been recovered or are recoverable, as opposed to whether there has been recovery for the injury.

22. [88]

    Tending against the foregoing, we acknowledge the force of the proposition that the express exclusion to the extent that there have been recoveries “under a Worker’s Compensation Scheme or Policy”, twice in two separate definitions, coupled with the broad definition of “under a Worker’s Compensation Scheme or Policy” and the facility to expand the operation of “statutory recovery claim”, all suggests a regime whose starting point was the exclusion of clawback claims such as those brought by WorkCover Queensland, at least until some agreement had been reached which could then be reflected in a regulation.

23. [89]

    Thus the primary judge acknowledged, and the trustee, Attorney-General and James Hardie 117 emphasised, the way that the broad definition of “Worker’s Compensation Schemer Policy” would be undercut if the workers compensation payments received by Messrs Coveney and Davis were not treated as engaging the Exclusion. They submitted that if the narrower approach favoured by Messrs Coveney and Davis and WorkCover Queensland were the proper construction, much of that definition had no work to do. Against this, Messrs Coveney and Davis and WorkCover Queensland submitted that a literal reading of the Exclusion meant that it was confined to payments pursuant to workers compensation schemes which had the same nature as the claims which were comprehended by the earlier part of the definition, namely, claims for damages at common law against a liable entity.

24. [90]

    But this Court’s task is not to try to guess what the parties’ probable intention was, and then to adjust the language accordingly. It is to construe the language chosen by the parties to reflect their bargain, doing so in light of the context and purpose. While it is true, as Mr Lockhart on behalf of James Hardie 117 emphasised, that if the idea were to include within the scope of Personal Asbestos Claim and Payable Liability the amenability of an inter-State workers compensation insurer seeking reimbursement, that could have been done much more straightforwardly than has occurred. But the Funding Agreement is replete with surplusage, which diminishes the force of that submission.

25. [91]

    The purpose of the tripartite arrangement was clear, and it is difficult to see why in light of Mr Davis’ receipt of workers compensation payments, he should only receive some half of the judgment he has obtained. The point of the decades-long winding up of Amaca and other Liable Entities and the funding of AICF was to permit claims by Australians exposed to James Hardies’ products to be paid in full. We think that very clear language would be required to prevent a natural person who sustained personal injury from James Hardie’s asbestos products, and who obtained judgment against Amaca, from being within the scope of the definitions of Personal Asbestos Claim and Payable Liability.

26. [92]

    With the foregoing in mind, we return to the four considerations on which the primary judge relied at [126]-[131] which are reproduced above. We acknowledge the strength of the second, which turns on the width of the definition of Workers’ Compensation Scheme or Policy. But we respectfully disagree with the weight attributed by the primary judge to the first, third and fourth.

27. [93]

    Contrary to the first, and while we acknowledge that the definitions are far from being models of clarity, their ordinary textual meaning is to subtract a class of claims from those which would otherwise be Personal Asbestos Claims. The claims of Messrs Coveney and Davis which resulted in their receipt of workers compensation payments were not claims for damages at common law, and they were not claims against Amaca or some other Liable Entity. Both as a matter of grammar and as a matter of the claims falling within the Exclusion being of the same class as those defined earlier in the definition, the Exclusion does not apply to the claims for workers compensation. As Mr Davis put it, far from the construction placing a restriction which “is not readily apparent from the words used”, the words used “are in plain sight: ‘liabilities’, ‘claims’ and ‘they’”.

28. [94]

    Contrary to the third consideration, and whether or not claims for Recoveries are “very tightly circumscribed”, the constraints in cl 13.7 are not to the point, once it is seen that statutory recoveries properly paid (which is to say, in accordance with the proper construction of Personal Asbestos Claim, Proven Claim and Payable Liability) are outside the operation of the clause. In this Court all parties proceeded on the basis that what mattered was the construction of the Exclusions, not the effect of cl 13.7.

29. [95]

    Contrary to the fourth consideration, it is true that the Exclusion is harder to apply when it applies to Payable Liability. That is because it extends to claims and liabilities – thereby making express what is implicit in the Exclusion in the definition of Personal Asbestos Claims, which implicitly looks forward from the existence of a claim to the recovery or recoverability of an amount of money. But that difficulty is simply a product of the ellipsis in the drafting. We do not see it as a compelling reason to expand the scope of either Exclusion.

30. [96]

    The primary judge in this section of her reasons also placed particular weight on the treatment of Legal Costs (which are one limb of the definition of Payable Liability). We respectfully disagree. There is no reason to doubt that the $1,000,000 and the $190,000 judgment debts owed by Amaca to Mr Coveney are in the same category. Each is very closely connected with the other. Each is the foreseeable and foreseen consequence of personal injury caused by exposure to James Hardie asbestos products.

Conclusion and orders

1. [97]

   Like most contestable questions of construction, the considerations do not all point in the same direction. However, the textual arguments are relatively strong, and while it leads to surplusage elsewhere, that is of relatively little weight in documents replete with surplusage. The literal construction avoids the concededly unpalatable results whereby Australian workers harmed by James Hardie products who obtain judgment against a Liable Entity cannot obtain full satisfaction, merely by the commonplace fact that they have received workers compensation payments for the same injury. The parties’ purpose is clear from the recital to the Funding Agreement, and it accords with the literal construction.

2. [98]

   For what it is worth, the foregoing accords with the way the trustee has administered the trust for almost two decades, until February 2024. Of course, the parties’ post-contractual conduct is not admissible as an aid to construction: Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]. No party submitted to the contrary, and it is not open to this Court to rely upon it, notwithstanding the different position taken in New Zealand (Wholesale Distributors Ltd v Gibbons Holdings Ltd [2008] 1 NZLR 277; [2007] NZSC 37) and the United States of America (under art 2-208 of the Uniform Commercial Code) and in many international instruments to which the Vienna Sales Convention applies, and notwithstanding that the State of New South Wales and the operating James Hardie companies were intensively involved in the negotiations leading to the Funding Agreement and the Winding up Act.

3. [99]

   For those reasons, there should be grants of leave, the appeals allowed, the orders made below set aside, and in lieu thereof AICF should be advised that it is justified in paying the judgments obtained by Messrs Coveney and Davis in full. It is appropriate to give the parties an opportunity to be heard as to the precise formulation of that advice, although we note that the conclusions we have reached accord with prayers 4 and 5 of AICF’s amended summons. The advice sought in those paragraphs extended to whether the payment of interest on the judgment debts would be justified, and in light of the inclusion of interest in Proven Claim, we see no reason why it would not be justified.

4. [100]

   Because the occasion for the advice was the claims of Messrs Coveney and Davis, which results in judgments against Amaca only a week or so after the trustee advised of its changed stance, their costs should follow the event. The directions below will entitle the parties to be heard as to whether the principle stated in Re Buckton [1907] 2 Ch 406 at 414 is applicable to the costs of any or all of Messrs Coveney and Davis and WorkCover Queensland.

5. [101]

   We make the following orders:

6. [102]

   In proceeding 2024/390046 commenced by Mr Coveney:

7. [103]

   In proceeding 2024/373482 commenced by Mr Davis:

8. [104]

   In proceeding 2024/372881 commenced by WorkCover Queensland: