13 November 2015

Is it time to revisit the ‘true rule’ in Codelfa?

In previous updates we have observed the ongoing judicial controversy regarding whether evidence of surrounding circumstances is admissible on a question of construction of a contractual provision that is on its face ‘unambiguous or susceptible of only one meaning’. A recent High Court decision adds further intrigue (although without resolving the controversy) and indicates that it is only a matter of time before the issue will be reconsidered by the High Court, subject to an appropriate case being presented.

Recap: the controversy

The traditional approach, following Mason J’s exposition in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, which his Honour described as the ‘true rule’, prevents extrinsic evidence being admitted to contradict what would otherwise be the plain meaning of a contractual provision, and effectively imposes a ‘gateway requirement’ of establishing ambiguity before such extrinsic evidence may be admitted in aid of the construction of the contract.

However, the application of the ‘true rule’ has given rise to significant uncertainty, and some intermediate appellate court decisions – notably in the New South Wales Court of Appeal – have cast doubt on whether a strict exclusionary approach is correct, given the modern, contextual approach to the construction of contracts, and the perceived need to evaluate the issue of ambiguity in the context of the surrounding circumstances and commercial purposes or objects of the contract.

In Western Export Services Inc v Jireh International Pty Ltd (2011) 282 ALR 604, three judges of the High Court, in determining a special leave application, sought to temporarily quell the controversy on the basis that the true rule requires ambiguity to be identified prior to having regard to surrounding circumstances and, until the High Court reconsiders what was said in Codelfa by Mason J, primary judges and intermediate appellate courts are ‘bound to follow that precedent’.

While some judges have proceeded to follow Jireh and Codelfa in refusing to admit extrinsic evidence on a question of construction where there is a plain meaning to the provision to be construed, others have pointed to more recent statements by the High Court in Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 in support of there being no gateway requirement of ambiguity. One such decision in which doubt was expressed regarding the existence of an ambiguity gateway requirement was the New South Wales Court of Appeal decision in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323.

(See further our previous case updates: Construction of Contracts and The Codelfa controversy continues)

High Court’s ruling in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd

The High Court recently handed down its decision in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37, and in doing so made some interesting observations regarding the ‘true rule’ and the ambiguity gateway requirement. While the decision did not ultimately turn on this point (the Court having made it clear that, as the parties agreed the relevant clause was ambiguous, it was unnecessary to decide the point in this case and it was not the subject of submissions by the parties) all seven judges commented on the issue to some extent.

Chief Justice French, Nettle and Gordon JJ, in a joint judgment, reiterated the ‘true rule’, stating:

if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning

Their Honours noted further that:

sometimes, recourse to events circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating” … [or] in determining the proper construction where there is a constructional choice.

Justices Kiefel and Keane, in their separate joint reasons, observed in relation to the ambiguity requirement in Codelfa:

The “ambiguity” which Mason J said may need to be resolved arises when the words are “susceptible of more than one meaning.” His Honour did not say how such an ambiguity might be identified. His Honour’s reasons in Codelfa are directed to how an ambiguity might be resolved.

This on one view accords with the position adopted in some of the intermediate appellate court decisions referred to in our previous case updates, to the effect that the ‘true rule’, properly understood, does not prevent extrinsic evidence being led for the purpose of determining whether ambiguity exists (including latent ambiguity).

Their Honours were also critical of lower court decisions which purported to apply Jireh as a binding authority (French CJ, Nettle and Gordon JJ agreeing):

It should, however, be observed that statements made in the course of reasons for refusing an application for special leave create no precedent and are binding on no one. An application for special leave is merely an application to commence proceedings in the Court. Until the grant of special leave there are no proceedings inter partes before the Court.

Justices Bell and Gageler, in separate joint reasons, noted that the issue of the scope of the ‘true rule’ is an ‘important question on which intermediate courts of appeal are currently divided’. Their Honours went on to state that, until the High Court determines the issue, other Australian courts should continue to apply Codelfa. However, they further noted that this point ‘says nothing about the scope of the holding in Codelfa’. Given that Bell J was one of the judges whose joint reasons in Jireh explicitly rejected the proposition that it is not essential to identify ambiguity prior to having regard to surrounding circumstances, this could on one view foreshadow a softening of the previous position that was so firmly (and briefly) stated in Jireh.

Conclusion

Much of the uncertainty concerning the true rule may be said to stem from  Mason J’s use of the word ‘admissible’, which – as observed by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 – is itself ambiguous. In one sense, if evidence of surrounding circumstances is ‘inadmissible’ it cannot be received or considered by a court. However, in another sense ‘inadmissible’ may simply refer to evidence that has been formally (or provisionally) admitted but is not permitted to be used by a court in a particular process of reasoning.

If extrinsic evidence is ‘admissible’ in the former sense, which would seem to accord with the modern, contextual approach to contractual construction, then the question arises as to whether that evidence can permissibly be used by a court to determine whether a provision is ambiguous notwithstanding that it has a plain meaning on its face. If so, any purported gateway requirement to establish ambiguity prior to admitting evidence of surrounding circumstances and commercial objects would be futile: if ambiguity cannot be established on the face of the provision or when regard is had to extrinsic material, it necessarily follows that no construction other than the plain meaning could possibly be available.

While the Mount Bruce decision invites renewed speculation as to how the current High Court judges might ultimately decide the issue, it is clear that the Court is waiting for an appropriate case – where ambiguity is only able to be established by recourse to evidence of surrounding circumstances – to clarify the ‘true rule’ and (one hopes) finally determine this important issue in Australian commercial and contractual law.

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Tom has extensive experience in acting for high net wealth families, private and public corporations and corporate trustees...

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Jason’s practice focuses on personal injury litigation management and administrative law.

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Kitty advises on complex commercial, industrial and retail leases and licences, including pre-commitment documentation and long-term leasing arrangements...

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John’s practice focuses on personal injury litigation management. He acts primarily for WorkSafe Victoria and is responsible for managing the delivery of quality common law and statutory benefits service and outcomes.

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Andrew has extensive experience in the provision of advice and conduct of litigation for insurers.

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John has broad experience in financial services, funds management, blockchain, corporate and commercial law, with a particular emphasis on funds management related matters.

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Bree has worked almost exclusively in Insurance and Risk since being admitted to the Supreme Court of Western Australia in 2004...

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Matthew is a general commercial lawyer with more than 18 years’ experience covering a range of areas of practice including private M&A, general commercial and corporate transactions, projects and advisory work, family succession arrangements, non-contentious employment matters, property, contracts and governanc

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Sauming is a specialist insurance lawyer with over 11 years’ civil litigation experience in personal injury and property damage.

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Rosena practices in insurance litigation: state compensation and liability claims (personal injury and property damage)...

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Kristopher advises on all aspects of migration to Australia, with particular emphasis on employment-related migration...

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Scott advises on a wide variety of corporate and commercial disputes and insolvency matters. His clients include those in a range of industry sectors, including insolvency practitioners, energy and resources, commercial property, financial services and intellectual property and technology.

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Rachel has over 15 years of experience advising on tax law and specialises in stamp duties, land tax and other tax issues in all Australian states and territories.

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Since arriving in Australia Albert has worked on various types of commercial disputes, for a range of clients including the Greater Building Society, Newcastle Airport, Port Stephens Council and various engineering companies based in Newcastle and the Hunter Valley.

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Vanessa has worked in the area of insurance law, with a specific focus on workers compensation and personal injury insurance litigation since beginning her career as a paralegal in 1996...

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Thomas is an experienced litigation lawyer with knowledge across a diverse range of litigation practice areas...

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Taleen has significant experience in insurance litigation and advice in workers’ compensation and public liability matters in Western Australia and the Northern Territory...

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Amy practices in insurance litigation and personal injury law.

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Catherine is an experienced insurance lawyer who focuses on public liability and property damage claims.

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Jacinta’s current practice includes direct and indirect taxes, business transactions, corporate restructuring, taxation disputes (including pre-audit, audit and litigation), the not-for-profit sector and trusts.

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James has more than 8 years of experience working across a broad range of general commercial transactions and arrangements, including acting in mergers, acquisitions and restructures and drafting general commercial agreements.

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Barbara works with insurers on CTP and public liability insurance claims involving sensitive and complex matters, often involving multi-defendant and medical causation issues.

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Jessica’s practice concentrates on personal injury litigation management. Jessica focuses on achieving quality outcomes for her clients in worker’s compensation matters, including statutory benefits and common law claims under the Accident Compensation Act and the Workplace Injury Rehabilitation and Compensation Act...

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Ben has a broad knowledge across all disciplines of property, planning and construction and currently acts for clients in a wide range of matters in the firm’s Property & Projects practice.

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Elise's practice focuses on common law and statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) and common law claims brought pursuant to the Transport Accident Act 1986 (Vic).

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Anthony assists insurers to resolve CTP claims involving complex liability and quantum issues, fraud, catastrophic injuries, nervous shock, multi-defendant matters and administrative law challenges.

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Jane-Elise is an experienced insurance lawyer whose practise focuses on general liability. Her clients include international insurers and large self-insured corporations.

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Adam is an experienced tax lawyer, and advises clients on a range of matters including tax planning and structuring, Division 7A, the small business CGT concessions, corporate restructuring, professional firm structures, trust taxation, the taxation of settlements and cryptocurrency taxation.

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Elizabeth is a commercial litigation lawyer who specialises in corporate and commercial dispute resolution, with a particular focus on contractual disputes, consumer law, corporations and equity, real property disputes and insolvency.

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Jennifer has over 10 years’ experience in the insurance industry and has worked in both private practice and in house defending claims under the Personal Injuries Proceedings Act 2002 and the Workers Compensation and Rehabilitation Act 2003.

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Natasha acts for a variety of professionals in the defence of professional negligence and other claims arising out of purely economic loss, property damage, defamation, and alleged breaches of the Australian Consumer Law.

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Felicity is an experienced energy and resources and corporate lawyer, who specialises in general corporate and commercial matters, rail, infrastructure and energy and resources...

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Catherine's expertise include compulsory third party (CTP) and public liability claims, including major claims, section 151z recovery matters and defendant insurance litigation.

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  • Fluent in Bahasa Indonesia - Conversational

Belinda’s practice focuses on the litigation of common law claims brought pursuant to the Transport Accident Act 1986 (Vic) and common law and statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic).

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  • Fluent in French - Conversational

Alexandra has experience acting on behalf of and advising both public and private sector clients in a broad range of industries including in the tertiary education, apprenticeship training and retail sectors.

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Sarah is an experienced employment and industrial relations lawyer.  Sarah acts for a range of local and global clients across a wide range of industries in both litigious and non-litigious employment and industrial relations matters.

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    Fluent in Macedonian

Diana specialises in personal injury law and insurance litigation.

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Kate has close to 10 years' experience specialising in succession law including wills, testamentary and discretionary trusts, protective trusts, powers of attorney, appointments of guardian advanced health directives and probate and letters of administration.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Morbi vel viverra mauris, quis aliquet ipsum. Cras efficitur erat et purus bibendum, et bibendum nulla aliquet. More about Joshua

Julian is an experienced senior litigator who has acted in high profile, complex and fiercely contested commercial litigation, public inquiries and investigations on behalf of companies, individuals (including members of parliament) and Government entities...

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Sarah has over 10 years’ experience in workers’ compensation and personal injuries claims. She has worked predominately on workers’ compensation matters in Queensland and more recently in the Western Australian jurisdiction

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Terri is an experienced insurance and litigation lawyer who has defended claims on behalf of domestic and international insurers for a decade...

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Katherine’s practice is predominantly in the area of general commercial dispute resolution and litigation and includes tax litigation and tax audit, contractual disputes, leasing disputes, restraint of trade injunctions, debt recovery, and insolvency and corporations matters.

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George has particular expertise in representing and advising insurers in relation to large scale litigation including class actions, indemnity disputes and insurance fraud claims, as well as public and product liability and professional indemnity claims.

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William specialises in private M&A and general commercial transactions and provides strategic advice on acquisitions, restructures and exits...

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Sheridan specialises in insurance litigation, with particular experience in complex claims and fraud...

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Ben’s practice focuses on common law and statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic).

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Clare is passionate, practical and results-oriented employment lawyer who takes pride in providing commercially-minded advice, exceptional communication and effective problem-solving skills to all types of employment, industrial and safety issues.

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Jennifer has significant experience in general insurance litigation. Her experience includes public and product liability, property damage and compulsory third party insurance...

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Jamie is an experienced lawyer with her practice focusing primarily on CTP claims, in particular non-meritorious claims.

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Daniella’s practice focuses on common law and statutory benefit claims in all jurisdictions, where she continuously delivers quality results.

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Rachel is a tax lawyer specialising in direct taxes and tax disputes. Rachel’s areas of experience include advising on a variety of domestic and international tax laws...

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Kate has a broad practice, having experience in public and product liability, professional indemnity, fraud and policy interpretation...

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Holly provides advice and acts on behalf of insurers in a variety of CTP claims including advising on complex quantum and liability issues and representing insurers in the Local and District Courts and the Claims Assessment and Resolution Service.

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Mark has a broad range of experience in corporate and commercial practice areas, with a particular focus on the sports and media industries.

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  • Fluent in Cantonese - Conversational | Mandarin - conversational

Joey’s practice focuses on property acquisitions and sales, property due diligence, contract negotiations, commercial leasing, and foreign investments.

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Jeanette has over 10 years’ experience working in the Asia-Pacific region. She specialises in advising borrowers and financial institutions on bilateral and syndicated financing, as well as cross-border project financing.

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    Fluent in Mandarin - conversational

Tina is experienced in defending public and product liability claims in New South Wales and Queensland on behalf of domestic and international insurers.

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William is an experienced litigator with over 11 years’ experience in both Australia and overseas and currently practices in multiple Australian jurisdictions...

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Stacey has over 6 years’ experience in workers’ compensation law. In addition to her workers’ compensation practice, Stacey has specialised expertise in common law, public liability and asbestos claims.

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David’s practice is predominantly in commercial litigation and insolvency...

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Donna has approximately 20 years’ experience in alternative dispute resolution through her previous roles in the insurance and legal industry...

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Bianca’s commercial dispute resolution and litigation practice extends to include acting for entities and individuals in contractual disputes, high quantum intellectual property disputes, breach of confidence and restraint of trade matters, shareholder oppression claims, partnership disputes, estate disputes and large equitable disputes.

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Nina has 11 years’ broad experience as a commercial lawyer with a specialty in intellectual property and information technology law, and related areas of practice including privacy, data security and competition law.

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Amber has more than 12 years of experience in the legal insurance sphere, and has covered the field, working in State and Federal Government legal practices, private practice and in-house at WorkCover in 2011.

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Hamish is a commercial dispute resolution lawyer. His experience extends to applications for urgent relief, appellate matters and defence of class actions.

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  • Fluent in Bahasa Malaysia - Conversational | Hokkien | Mandarin - conversational

Victoria’s practice focuses on the common law and statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and Workplace Injury Rehabilitation and Compensation Act 2013 (Vic).

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With over fourteen years’ experience working in the NSW workers compensation area, Jenny is a highly skilled and proficient lawyer who defends statutory and common law workers compensation claims.

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Toniel’s practice focuses on general insurance advice and litigation. She manages complex and varied matters for a number of high profile insurers and private clients.

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Elisa's practice focuses on common law and statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and the Workplace Injury Rehabilitation and Compensation Act 2014 (Vic).

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Hannah practices in general insurance litigation with a particular focus on claims and risk...

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Rebecca's areas of expertise include the preparation of design and construction documents, and construction dispute advice and litigation...

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Jessica practices in employment and workplace relations law and provides strategic advice to clients across a range of industries.

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    Fluent in French - Conversational | Italian - Conversational | Mandarin - conversational

Pia is a Senior Associate in the Commercial Dispute Resolution team with experience across general commercial litigation, banking enforcement and insolvency...

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Markus’ practice focuses on statutory benefits claims brought pursuant to the Accident Compensation Act 1985 (Vic) and Workplace Injury Rehabilitation and Compensation Act 2013 (Vic).

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Martin specialises in insurance litigation, working with insurers on defending compulsory third party claims...

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Liz's practice focuses on state compensation and liability claims. She has developed particular expertise in identifying and managing complex and technical liability and state compensation claims, considering, analysing and providing commercial advice to both insurers and self-insured employers...

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Lauren specialises in resolving disputes, and works collaboratively with her team and with clients to provide strategic advice and success for the client...

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    Fluent in Japanese - Conversational

Kathryn advises and represents clients in a wide range of matters, including general commercial litigation, banking and finance litigation involving mortgages, guarantees and loan agreements, debt recovery and enforcement and corporate insolvency advice.

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Brandon is an experienced insurance litigator specialising in workers’ compensation, medical treatment liability and public liability claims.

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Mitch is an experienced insurance and litigation lawyer who has defended claims on behalf of insurer and private clients as well as state government departments.

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Zoe acts predominately for corporate clients and company directors in cases involving contractual disputes, fraud, corporations and equity matters, competition and consumer law...

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Bridget is an experienced insurance and litigation lawyer who has acted for leading Australian and international insurers and underwriters...

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Shane has a broad commercial and regulatory litigation practice, encompassing investment fund and trustee disputes, banking and company law, financial services, civil and commercial fraud, aviation, construction and infrastructure disputes.

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Belinda is an insurance lawyer with decades of experience over a range of jurisdictions. Belinda is an Accredited Specialist in Personal Injury Law...

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Daisy has extensive experience within the Common Law Workers’ Compensation area. She has also acted in public liability, product liability, medical negligence and CTP cases...

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Ebonie has worked in the area of insurance law since 2011. She has a specific interest in representing employers in workers compensation claims, with her practice encompassing both physical injury and psychological injury claims in both litigated and non-litigated advice matters.

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  • Fluent in Italian - Conversational

Melissa is an experienced insurance lawyer who focuses on advising major national insurers on CTP and public liability claims ranging from homeowners to small businesses.

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Lorem ipsum dolor sit amet, consectetur adipiscing elit. Morbi vel viverra mauris, quis aliquet ipsum. Cras efficitur erat et purus bibendum, et bibendum nulla aliquet. More about Geoff
    Fluent in Vietnamese - Conversational

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    Fluent in French - Conversational

More about Will
    Fluent in Bahasa Indonesia - Conversational | French - Conversational | German - Conversational | Spanish - Conversational

More about Alicia
    Fluent in Mandarin - conversational

More about Lucy
    Fluent in Italian - Conversational

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    Fluent in Bosnian - Conversational | Croatian - Conversational | Serbian

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    Fluent in German

Dr Wolfgang Babeck has more than 20 years’ experience as a corporate and commercial lawyer and is admitted in New South Wales, England & Wales and as Rechtsanwalt in Germany...

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Sumith Perera

Chief Operating Officer

Sumith is the Chief Operating Officer and the national Head of Corporate Services at Hall & Wilcox. He has over 20 years' experience in leading and managing teams at professional services firms.

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Peter is the Client Solutions Director at Hall & Wilcox where he drives their Smarter Law program and fosters innovation at the firm...

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Dean is the Head of Hall & Wilcox’s Finance team. He has over 15 years’ experience in finance within professional services firms.

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Katie is the Director of People & Culture for Hall & Wilcox. She has over 20 years’ experience in the legal industry.

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Melanie is the national head of Hall & Wilcox’s Business Development, Marketing & Communications team...

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Mike manages the Legal Excellence & Risk team at Hall & Wilcox and is responsible for the firm’s precedents, risk management and general counsel/company secretarial functions.

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    Fluent in Dutch - Conversational

Janneke is the operations manager and head of operations nationally at Hall & Wilcox. She has over 15 years’ experience in human resources and project management across a variety of industries, including professional services, IT, banking and utilities...

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    Fluent in Hindi

Pious is the IT manager and head of IT nationally at Hall & Wilcox. He has over 18 years’ experience as a senior IT executive with a proven track record in legal and government technology management sectors.

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Melinda is the national marketing and communications manager at Hall & Wilcox. She has more than 20 years’ experience as a journalist, content creator and marketing communications specialist at professional services firms.

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Thinking | Thu 03 2007

Corporate and Financial Services Reform Update March 2007

The first tranche of draft regulations was released for public consultation on 26 March 2007 as part of the Corporations and Financial Services Regulation Review process. Some key issues dealt with in the first round of draft regulations are set out below: Keeping Financial Services Guides and Product Disclosure Statements up to date Where there […]

Thinking | Mon 05 2007

Compensation Arrangements for Financial Services Providers

Yesterday the Parliamentary Secretary to the Treasurer (Chris Pearce), announced that regulations to complement section 912B of the Corporations Act 2001 (the Act) are expected to be made by 1 July 2007. The Act requires financial services licensees that provide financial services to retail clients to have in place appropriate compensation arrangements. The arrangements must either be approved […]