High Court denies equitable contribution claim of the HIH claims support scheme

The federally administered HIH claims support scheme has failed in its equitable contribution claim against Insurance Australia Ltd, upholding the doctrine of the ‘common obligation’ of co-insurers.

The law as it stands only allows for equitable contribution if the liability of plaintiff and defendant are of the same nature. For example, two car insurers who insure the same car may claim contribution from one another in the event of an accident and subsequent claim by the insured.

Conversely, an insurer against personal injury and a person who is liable to an injured person because they caused the injury have different legal obligations to the injured (one being as an insurer and the other as a tortfeasor). Therefore in the second example, the insurer and the tortfeasor cannot claim contribution against one another.

Likewise, in HIH Claims Support Ltd v Insurance Australia Ltd, the appellant was a trustee for the Federal government’s scheme to indemnify those insured by HIH after its collapse whereas the respondent was an insurer. The appellant had paid out 90% of what HIH would have paid to Ronald Steele, who was insured by both HIH and Insurance Australia Ltd (or more accurately, its predecessor).

The High Court ruled that the lack of common obligation between the appellant and the respondent meant that equitable contribution could not be granted.

This was despite the fact that:

The decision of the Federal Government to save insured persons in the position of Mr Steele from the risk of completely losing indemnity has absolved the respondent from fulfilling what would otherwise have been a just obligation to share the burden with HIH. The liquidation of HIH, instead of leaving the respondent to bear the whole burden, has relieved it of the whole burden (per Heydon J, at 61)

The case is quite novel in terms of facts, and the the unjust enrichment of the respondent was a major point which counsel for the appellant pressed but was ultimately unsuccessful.

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