ACN 068 691 092 Pty Ltd v Plan 4 Insurance Services Pty Ltd - [2012] SASCFC 25

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
ACN 068 691 092 PTY LTD & ANOR v PLAN 4 INSURANCE SERVICES PTY LTD & ORS
[2012] SASCFC 25
Judgment of The Full Court
(The Honourable Justice Anderson, The Honourable Justice Kelly and The Honourable Justice Stanley)
22 March 2012
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - FINDINGS ON ISSUE OF NEGLIGENCE
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT
INSURANCE - GENERAL - POLICIES OF INSURANCE - RENEWAL, AFFIRMATION, RECTIFICATION OR NOVATION OF POLICY
Appeal against decision of trial Judge dismissing appellants’ claim against the respondents for alleged misleading, deceptive and negligent conduct – policy of insurance issued by respondents over shop premises owned by appellant companies – all properties destroyed by fire – Director of appellant companies reduced insurance cover over the properties prior to the fire – allegations of misleading and deceptive conduct against second respondent as a result of discussions with Director of appellant companies when reduction in insurance cover requested – allegations of negligence arising out of format of policy documents issued by the respondents from mid 2004 to July 2006 – appellants claimed policy documentation issued by respondents inaccurate and misleading and thereby induced Director to make an erroneous assumption which was never corrected by the respondents – allegations that loss to appellant companies caused by respondents’ conduct as a whole.
Held: appeal dismissed – the evidence did not establish any misleading and deceptive conduct on the part of the respondents – any erroneous assumption held by the Director of the appellant companies was not caused or induced by any conduct of the respondents – in any event by the date of the fire the Director of the appellant companies was aware of the underinsurance over the properties and did nothing about it – conduct of respondents in issuing of policy documents between 2004 to 2006 not deceptive or misleading – trial Judge’s decision was based on adverse findings of credit in relation to Director’s evidence – no basis to disturb findings of credit – in any event even if Director’s evidence had been accepted, appellants did not establish any misleading, negligent or deceptive conduct on the part of the respondents.

APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - PARTICULAR CASES - OTHER MATTERS - COSTS
Appeal against costs awarded in favour of third and fourth respondents respectively and costs awarded to each of the respondents in respect of the cross-actions.
Held: no error in exercise of the discretion to award costs – trial Judge took into account relevant considerations – no proper basis established to disturb trial Judge’s orders.
Australian Securities and Investments Commission Act 2001 (Cth) s 12DA; Corporations Act 2001 (Cth) s 1041H(1), referred to.
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Lombard Insurance Co (Australia) Ltd v Pastro & Ors (1994) 175 LSJS 448, applied.
Naiama Pastoral Company Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2010] SASC 105; Watson v Foxman (1995) 49 NSWLR 315; Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288; O’Connor v BDB Kirby & Co & Anor [1972] 1 QB 90, considered.

ACN 068 691 092 PTY LTD & ANOR v PLAN 4 INSURANCE SERVICES PTY LTD & ORS
[2012] SASCFC 25
Full Court: Anderson, Kelly and Stanley JJ

ANDERSON J. I agree that the appeal should be dismissed for the reasons given by Kelly J.
I agree with Her Honour’s analysis of the overwhelming credit findings against Mr Scragg. Likewise I agree with her consideration of the alleged “misunderstanding” by the trial judge as to the effect of Mr Scragg’s evidence.
There are two aspects, to my mind, which are crucial. First, the meeting of 9 March 2005 was followed by the letter sent a few days later which made it plain that there was $400,000 cover on each of 87-89 Commercial Road and 91 Commercial Road.
Second, Mr Scragg, some time later but prior to the fire, realised that 87-89 Commercial Road was insured for only $400,000 and did nothing to increase the cover. If he did overlook that fact then as a matter of causation he cannot hold Mr Dixon or the insurers responsible for his own lack of action.
I agree also with Her Honour’s analysis of the costs order.
KELLY J.
Introduction
This is an appeal from the decision of a District Court judge dismissing a claim made by the appellants against the respondents for damages for misleading and deceptive conduct as well as for negligence. The appellants’ claim at trial arose out of dealings between the parties in relation to a business policy of insurance over commercial shop premises at 87-91 Commercial Road, Port Adelaide. The policy provided cover for loss and damage to the buildings caused by a number of defined events which included fire.
The two shops at 87-89 Commercial Road (87-89 Commercial Road) were owned by the appellants and an adjoining shop at 91 Commercial Road (91 Commercial Road) was owned by Mr and Mrs Barry Zientara (the Zientaras).
All the shops were destroyed by fire in July 2006. At trial the appellants contended that the property was underinsured as a result of negligent and misleading and deceptive conduct on the part of the insurers, the third respondent AMP GI Distribution Pty Ltd (AMP) and the fourth respondent GIO General Ltd (GIO) through their agents, the first respondent Plan 4 Insurance Services Pty Ltd (Plan 4) and the second respondent Mr Dixon (Mr Dixon). It was the appellants’ case that their two shops at 87-89 Commercial Road would have been insured for the sum of $800,000 and not for the sum of $400,000, but for the misleading and deceptive conduct of the respondents.
The appellants’ case at trial centred on dealings between Mr Peter Scragg, a legal practitioner, and Mr Dixon in relation to the appellants’ insurance requirements in respect of the Commercial Road properties. Mr Dixon was a director and employee of Plan 4. Mr Dixon acted as agent for AMP. AMP distributed business insurance on behalf of GIO. Mr Scragg was a director of the appellant companies.
There have been two trials in respect of this matter. At the conclusion of the appellants’ case in the first trial, a District Court judge upheld the respondents’ submission that there was no case to answer and dismissed the appellants’ claim. After a successful appeal to the Full Court[1] the action was sent back to the District Court for retrial. It is that judgment which the appellants now appeal.
[1] Naiama Pastoral Company Pty Ltd& Anor v Plan 4 Insurance Services Pty Ltd & Ors [2010] SASC 105.
Issues on Appeal
The appellants pursue 27 grounds of appeal alleging numerous errors of fact and law made by the trial Judge. The principal complaints on appeal are that the trial Judge misunderstood the appellants’ case in that he misunderstood the true effect of the evidence of the appellants’ sole witness Mr Scragg and as a consequence made adverse findings of credit about him.
The appellants also contend that the trial Judge erred in law in finding that the first and second respondents’ conduct did not amount to misleading conduct within the meaning of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and s 1041H(1) of the Corporations Act 2001 (Cth) (the Corporations Act) and that the respondents were not negligent.
Factual Background
Before dealing with the legal issues which arise for determination it is necessary to set out the history of the dealings between the relevant parties.
Much of the factual background is uncontentious. In 2002 Mr Scragg and Mr Zientara (and their respective interests) purchased the whole of the properties at 87-91 Commercial Road, Port Adelaide for $300,000.
There were two titles, one encompassing two shops at 87-89 Commercial Road and the other encompassing one shop at 91 Commercial Road, Port Adelaide. The shop at 87 was a St Vincent De Paul shop selling second hand clothes. The shop next door at 89 was known as the Conti Bar and was a clothing shop. The shop at 91 was vacant at the time of purchase but subsequently became known as the Swop Shop.
The agreement between the parties was that the Zientaras would purchase 91 Commercial Road for $140,000. Mr Scragg and his interests would purchase 87-89 Commercial Road for $160,000. Mr Scragg signed the contract for purchase of the properties as nominee. The properties always remained on separate titles.
Mr Scragg and Mr Zientara had known each other since about 1980. They met through family connections. Thereafter they had a number of business dealings and were in the habit of meeting regularly for coffee. As a result of a suggestion made by Mr Scragg to Mr Zientara, Mr Zientara contacted Mr Dixon regarding insurance. Mr Dixon later produced a quotation for insurance for the two properties as a whole for $300,000 plus an additional sum of $20,000 for demolition costs. After Mr Dixon met with Mr Zientara at the property the quotation was sent by post to Mr Scragg and the Zientaras. Mr Scragg said he left it entirely to Mr Zientara and Mr Dixon as to how to arrange the insurance on the properties. He was not particularly interested in the mechanism by which that occurred.
Payment of the initial premium in respect of the policy was made by Mr Zientara with a Visa credit card. Mr Scragg then reimbursed Mr Zientara in respect of his portion of the premium for 87-89 Commercial Road.
The relevant policy of insurance number AP8IL001444 was issued in the name of both Mr Scragg and Mr Zientara. Throughout the whole of the period from 2002 until the date of the fire on 27 July 2006 the policy number remained the same.
The Renewal Notice for 2003 was sent with a covering letter to Mr Zientara and Mr Scragg to Mr Zientara’s post box address at Hindmarsh. At that time there were some discussions between Mr Dixon and Mr Zientara about splitting the single premium which later led to the appellants’ property and the Zientaras’ property being separately described on the policy of insurance.
As a consequence of a request made to him, Mr Dixon issued an amended Renewal Notice which was sent to Mr Zientara and Mr Scragg care of Mr Zientara’s post box at Hindmarsh.[2] It is a five page document issued on 7 March 2003. On the second page under the heading ‘Insured’ are two names, Mr B Zientara, Mr P Scragg (repeated twice). On the third page under the heading ‘Fire and Other Damage Policy Section’ the property at 87-89 Commercial Road is shown as a separate situation insured for the sum of $250,000. On the fourth page the property at 91 Commercial Road is shown as a separate situation insured for the sum of $250,000. Both properties continued to be insured on the same policy. Mr Scragg again paid for his portion of the premium in 2003.
[2] Exhibit IDD6; Appeal Book (AB) 576-581. Also found in IDD36; AB 1363-67.
On 19 February 2004 the Renewal Notice for 2004 was again sent to Mr Zientara and Mr Scragg care of Mr Zientara’s post box at Hindmarsh. In June 2004 Mr Scragg paid Mr Zientara his portion of the insurance premium for 2004. At some stage Mr Scragg and Mr Zientara agreed between them that the public liability premium would be split in a ratio of 60/40. The 60/40 split was a not insignificant matter as it was based on the disparity between the floor space in Mr Scragg’s shops and Mr Zientara’s shop.
It is important to understand that Mr Dixon would have regarded Mr Scragg and Mr Zientara as close business associates to the extent that he sent notices for both to Mr Zientara’s post box and later to Mr Scragg’s address. Mr Scragg and Mr Zientara were friends. To outward appearances they acted in concert when arranging insurance cover over their adjoining properties.
In mid 2004 companies and persons associated with Mr Scragg (including the first appellant) purchased a commercial property at 255-265 St Vincent Street, Port Adelaide (255-265 St Vincent Street). Mr Zientara had no interest in this property. The purchase price for that property was $1.1 million. Mr Scragg obtained finance for the purchase of the St Vincent Street property from Challenger Managed Investments Ltd. The property at 87-89 Commercial Road was provided as part of the security for the loan and the financier required that the Commercial Road property be insured for $800,000. As a consequence Mr Scragg wrote to Mr Dixon by letter on 29 June 2004 requesting that he attend to certain insurance requirements for him. In relation to his property at 87-89 Commercial Road he wrote:[3]
Could you please arrange for the property which is situated at 87-89 Commercial Road which is the St Vincent de Paul and the Conti Bar shops to have noted on them the interests of Challenger Managed Investments Limited as responsible entity and Permanent Trustee Australia Limited as custodian on behalf of Howard Mortgage Trust as mortgagees. This is the property comprised in Certificate of Title Register Book Volume 5774 Folio 736 and registered in the names of A.C.N. 068 691 092 Pty Ltd and Naima Pastoral Company Pty Ltd.
[3] Exhibit P7; AB 459.
After further discussions, Mr Dixon then forwarded a Confirmation of Advice/Request document.[4] That document confirmed that cover had been put in place for the 87-89 Commercial Road property for $800,000 and that cover for $2.8 million had been put in place for the property purchased at 255-265 St Vincent Street. Enclosed with it was an Extra Premium Notice dated 13 July 2004[5] requiring payment of the extra premium by 12 August 2004.
[4] Exhibit P8; AB 460-461
[5] Exhibit IDD29; AB 791-797.
That document is a seven page document issued on 13 July 2004. On the second page, under the heading ‘Insured’, are the names of both appellants and Melanie Bernadette Scragg who is Mr Scragg’s daughter. On the third page under the ‘Fire and Other Damage Policy Section’ the property at 87-89 Commercial Road is shown as a separate situation insured for the sum of $800,000. On the fourth page the property at 91 Commercial Road is shown as a separate situation insured for the sum of $275,000. On the fifth page the property at 255-265 St Vincent Street is shown as a separate situation insured for the sum of $2,850,000.
A copy of the Extra Premium Notice[6] which came from Mr Scragg’s own records was the subject of cross‑examination of Mr Scragg at trial. In Mr Scragg’s own handwriting is a notation “insurance (1) 87 Commercial Rd 0.8 m (2) 255 St Vincent St Pt Adelaide 2.8 m”. This was one of a number of documents tendered at trial which the respondents contend revealed that at all relevant times Mr Scragg possessed knowledge and awareness that his shops were at 87-89 Commercial Road and the Zientaras’ shop was at 91 Commercial Road.
[6] Exhibit IDD30; AB798-799.
After the changes requested by Mr Scragg in his letter of 29 June 2004, the name of the Zientaras did not appear again as insured in respect of the page of the policy documents referring to 91 Commercial Road. In all other respects the documentation which issued from Mr Dixon’s office thereafter continued to be in the same format as before. The property at 91 Commercial Road continued to be described as a separate situation, showing the insured amount as $275,000.
Later in 2004 there were some further dealings between the office of Mr Dixon and Mr Zientara when Mr Zientara, independently of Mr Scragg, contacted Plan 4 and spoke to another employee of Mr Dixon, Mr Roger Glaetzer. A note in the files of Mr Dixon records that on 20 August 2004 Mr Glaetzer spoke with Mr Zientara who requested cover in respect of 91 Commercial Road to be increased to the sum of $500,000.[7]
[7] Exhibit P10; AB 464.
Mr Zientara’s request led to the generation of an Extra Premium Notice[8] which was posted to the second appellant at Mr Scragg’s address. A copy of that notice was located in Mr Scragg’s records. On the page which recorded the increased insurance cover of $500,000 at 91 Commercial Road is the notation “Barry” in the handwriting of Mr Scragg’s bookkeeper.
[8] Exhibit P24; AB 539-552.
The appellants submitted that the series of transactions between Mr Dixon and Mr Scragg in mid 2004 was pivotal to understanding why and how an answer which Mr Dixon gave to Mr Scragg in the course of a discussion between the two men on 9 March 2005 was misleading.
The Meeting on 9 March 2005
The conversation on 9 March 2005 was critical to the appellants’ case that Mr Dixon engaged in misleading and deceptive conduct. There was some disagreement at trial as to who arranged the meeting, however nothing seems to turn on that disagreement. Mr Dixon said he arranged the meeting as he thought it prudent to review the insurances covering the policy at the time when the renewal became due in March 2005.
Mr Scragg on the other hand said he initiated the meeting with Mr Dixon to discuss the cover he had over all the properties his company was involved with. Both Mr Dixon and Mr Scragg gave evidence about what occurred at the meeting. Mr Scragg’s evidence is best encapsulated in a passage of evidence referred to by the trial Judge:[9]
Q.Was the topic of insurance at Commercial Road discussed.
A.Yes, it was.
Q.How did it arise and who said what.
A.Well, the purpose of the meeting was to go through the values of each of the properties, and that was the first one that we discussed. I said "How much cover" or "How much insurance" - I don't recall which exact word I used - did I have in relation to Commercial Road, and he said "1.3 million". I said "That's too much. I only want 800, 000, that's what the mortgagee requires". I think I also said "How did you get $1.3 million?", although I don't have a recollection about that. I can't be definite about that last bit, your Honour.
Q.Was anything else said on that topic.
A.There was a pause while he appeared to read some papers in front of him and then he asked me a question which - I won't say, but he said "How do you want that divided between the shops?" I think he also said the word "two", but I'm certain he said the words "How do you want that divided between the shops?" He may have said "How do you want that divided between the two shops?", and there was a pause because I wasn't expecting the question. I thought about it for a moment and I said "half each", or "equally", words to that effect.
…
[9] ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2011] SADC 59 at [37].
Mr Dixon gave a similar account of the conversation. He said he took with him a number of papers including the renewal notice for 2005 to the meeting at Mr Scragg’s office. He said there was a reference to a sum insured for the Commercial Road properties. He said:[10]
As best I can, Mr Scragg asked what was the sums insured for the properties at Commercial Road and I advised collectively of $1.3 million.
[10] Transcript of proceedings, ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors, District Court of South Australia, Judge Clayton, 7 April 2011 at 293.
Mr Scragg responded by saying words to the effect “that seems to be over the top” or “that appears to be well and truly over the top”.

Both Mr Scragg and Mr Dixon agreed that at the meeting Mr Scragg did tell Mr Dixon that $800,000 was all the insurance he required. Mr Dixon then asked “how would you like me to apply that to the shops?” to which Mr Scragg responded “half on each” or words to that effect.[11]
[11] Transcript of proceedings, ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors, District Court of South Australia, Judge Clayton, 7 April 2011 at 295.
Mr Dixon said in all his dealings with both Mr Scragg and Mr Zientara he understood they were referring to all of the properties at 87-91 Commercial Road. That is not surprising in view of the way the notices were sent as described earlier.
The appellants contend that in the light of the earlier communications between Mr Scragg and Mr Dixon back in 2004, when Mr Scragg in March 2005, requested advice from Mr Dixon as to the extent of cover on the properties at Commercial Road, it should have been obvious to Mr Dixon that Mr Scragg was referring to his properties at 87-89 Commercial Road and not the properties at 87-91 Commercial Road. I do not agree with that submission. In my view the objective facts point to the opposite conclusion.
After the meeting of 9 March 2005 Mr Dixon generated a further Confirmation of Advice/Request document dated 15 March 2005[12] and an Amended Renewal Notice for the 2005 year[13] confirming the instructions Mr Dixon received from Mr Scragg at the meeting on 9 March 2005. That document P9 recorded what Mr Dixon understood the instructions of Mr Scragg to be, namely that 87-89 Commercial Road be insured for $400,000 and 91 Commercial Road be insured for $400,000.
[12] Exhibit P9; AB 462-463.
[13] Exhibit P14; AB 478-484.
Events Subsequent to the Meeting on 9 March 2005
On 21 March 2005 the appellants’ insurance funder sent a final letter of demand to Mr Scragg in relation to the loan provided in August 2004.[14] The funder threatened to cancel the insurance unless the outstanding arrears were paid within 48 hours. In any event there is no dispute that at that time Mr Scragg was looking to reduce his overheads in relation to the insurance premiums paid by him.
[14] Exhibit IDD21; AB 751.
There were a number of further dealings later in 2005 and in 2006 between Mr Dixon and Mr Scragg, and Mr Zientara and Mr Dixon, which led to the generation of further documentation out of Mr Dixon’s office.
On 21 April 2005 Mr Scragg wrote to Mr Dixon requesting that the name of Mr Omar Kanj be noted as an insured in respect of the property at 255-265 St Vincent Street.[15]
[15] Exhibit P13; AB 477.
By two letters to Mr Dixon on 5 August 2005[16] Mr Scragg requested that the interests of a Mr and Mrs Temby and a Mr and Mrs Denison in 255-265 St Vincent Street, and the first appellant and Barry Joseph and Barbara Joanna Zientara in respect of 19 Montpelier Square, Port Adelaide, be noted.
[16] Exhibit P15; AB 485 and Exhibit P16; AB 486.
As a result of those requests, a Premium Adjustment Notice was issued by Mr Dixon[17] on 9 August 2005 noting the respective changes as requested in the letters of 21 April and 5 August 2005.
[17] Exhibit P17; AB 487-498.
In February 2006 a Renewal Notice issued[18] in the same form as the earlier Premium Adjustment Notice. It was addressed to the second appellant care of Mr Scragg’s office.
[18] Exhibit P18; AB 499-506.
In June 2006 Mr Zientara and Mr Scragg had discussions in relation to plate glass insurance. As a result of those discussions Mr Zientara phoned Mr Dixon and requested cover in relation to plate glass insurance over the properties at 87-91 Commercial Road.
Exhibit P20
As a result of that request Mr Dixon generated a Premium Adjustment Notice dated 27 June 2006 (P20).[19] In a letter of the same date[20] from Mr Dixon addressed to the second appellant care of Mr Scragg’s office, but written to “Dear Barry”, Mr Dixon recorded the changes effected and advised the additional insurance premium payable in respect of the requested amendments. On P20 in Mr Scragg’s handwriting the notation “Peter” is written on the page recording the insurance requested for 87-89 Commercial Road in the sum of $400,000, and the name “Barry” is recorded against the property at 91 Commercial Road for the insured amount of $400,000. It will be necessary to return to the terms of exhibit P20 later in these reasons.
[19] Exhibit P20; AB 508.
[20] Exhibit P19; AB 507.
Exhibit P20 is the document which Mr Scragg said alerted him for the first time to the fact that there was, as he put it, “a sleeper” on the policy, namely Mr Zientara’s interests at 91 Commercial Road. On 5 July 2006 Mr Scragg wrote to Mr Dixon by email:[21]
[21] Exhibit P21; AB 530.
re your letter of the 27th June.
please make the following alterations
1.lot 703 St Vincent St has been sold. Please alter the policy accordingly. Settlement date was the 30th June 2006.
please cancel all elements of the policy.
2.please advise the premium cost of all items relating to the following properties;
a. Lot 701 St Vincent St Pt Adelaide
b. Lot 702 St Vincent St Pt Adelaide
c. 91 Commercial Rd Pt Adelaide
d. 19 Montpelier Sq Pt Adelaide
This information is required for the financial years ending 30th June 2005 and 2006. Please provide this information
as soon as possible.
There was no request to amend the sum insured in respect of 87-89 Commercial Road notwithstanding the fact that Mr Scragg acknowledged that he was by then aware that the insurance on 87-89 Commercial Road was only $400,000. Mr Scragg said the reason for that was because by that stage he overlooked the fact that he was required by Challenger to insure the properties for $800,000.
On 10 July 2006 the information requested in the email of 5 July 2006 by Mr Scragg was provided.[22] A further Premium Adjustment Notice dated 6 July 2006[23] was generated and sent to the second appellant reflecting the deletion from the policy of lot 703 at 255-265 St Vincent Street. In all other respects the documents were in the same format as previously.
[22] Exhibit P22; AB 531.
[23] Exhibit IDD25; AB 759-770.
On 27 July 2006 the shops at 87-91 Commercial Road were totally destroyed by fire.
The Appellants’ Case at Trial
The appellants’ case at trial was based on the conduct of Mr Dixon in his dealings with Mr Scragg from about mid 2004 up until the date of the fire on 27 July 2006.
It was said that Mr Dixon did not adequately identify the Zientaras’ interest in 91 Commercial Road in the policy documents which he issued after the changes requested by Mr Scragg in 2004 were made. Specifically, it was said that the failure to record the Zientaras’ names as “insured” in respect of 91 Commercial Road in all of the policy documents which he issued thereafter created in the mind of Mr Scragg an erroneous assumption that a new policy had been cut in mid 2004 which included only Mr Scragg’s interests and that of his immediate family.
On the appellants’ case, that led to the misunderstanding by Mr Scragg in the conversation with Mr Dixon on 9 March 2005. When Mr Dixon told him that the properties at Commercial Road were worth $1.3 million, Mr Scragg understood that to be a reference only to the properties in which he and his companies were interested, namely 87-89 Commercial Road, and not a reference to all of the properties at Commercial Road, namely 87-91 Commercial Road.
Mr Scragg, the sole witness for the appellants, said he did not pay any attention to the street numbers of his properties at Commercial Road. When he looked at the policy documents sent to him by Mr Dixon in February 2004 and again in March 2005 he did not appreciate that the shops which the appellants owned were at 87-89 Commercial Road.
He acknowledged that by the end of June 2006 he did have a greater appreciation of street numbers and was by then aware that 87-89 Commercial Road related to his interests and 91 Commercial Road related to Mr Zientara’s. However at the time in June or early July 2006 when he looked at the document exhibit P20 (the amended Premium Notice of 27 June 2006) he had forgotten the requirement of Challenger that his property at 87-89 Commercial Road be insured for $800,000.
It was said that the conduct of Mr Dixon in the conversation of 9 March 2005 against the background of previously failing to note the Zientaras as insured on the policy documents in respect of 91 Commercial Road after July 2004 was misleading and deceptive in breach of s 12DA of the ASIC Act and s 1041H(1) of the Corporations Act.
Mr Dixon’s conduct was also said to be negligent because he ought to have realised that reducing the insurance on 87-89 Commercial Road from $800,000 to $400,000 would result in substantial underinsurance for those properties. It was said that the failure by Mr Dixon, when he advised Mr Scragg that the insured sum was $1.3 million, to disclose that the sum of $1.3 million covered Mr Zientara’s interest at 91 Commercial Road as well was also negligent.
Specifically, it was said that Mr Dixon assumed a duty to exercise a reasonable degree of care and skill in taking and executing the appellants’ instructions but he was negligent in failing to avoid or resolve ambiguity arising in the course of taking and executing those instructions when that ambiguity arose because of his earlier failure to show the Zientaras as insured on the policy. The appellants’ claim was for the sum of $400,000 by way of damages.
The Trial Judge’s Findings
The trial Judge rejected the appellants’ claim based on misleading and deceptive conduct. He found that the evidence did not establish that Mr Dixon had engaged in misleading conduct either during the conversation on 9 March 2005 or in his conduct as a whole in his dealings with Mr Scragg.
After analysing the evidence of both Mr Scragg and Mr Dixon the trial Judge concluded first that the evidence did not establish to the necessary degree of certainty what statements were actually made by both Mr Scragg and Mr Dixon at the meeting on 9 March 2005. In particular, he found that the evidence did not establish that Mr Scragg’s question was directed at the appellants’ Commercial Road property, rather than all of the Commercial Road properties.
He found in relation to Mr Dixon’s conduct in mid 2004 that the failure to note the Zientaras’ interest on the policy in relation to 91 Commercial Road was neither negligent nor did it amount to misleading conduct. First, because even though the names of the Zientaras were not referred to under “multiple situations” the relevant policy documents at all times clearly described all properties which were covered by the policy, including the property at 87-89 Commercial Road and the property at 91 Commercial Road separately, and the documentation always showed the sum insured in relation to each property.
Second, even if Mr Scragg’s evidence was accepted, the failure to note the Zientaras’ interest on the policy was inconsequential as, by June 2006 at the latest, Mr Scragg knew that the two properties were included in the one policy and the failure to note Mr Zientara’s interest in 91 Commercial Road was no longer causative of any loss suffered by Mr Scragg. In this regard the trial Judge held that if prior to the fire, the appellants were aware (as he found) that cover for 87-89 Commercial Road was $400,000 but did nothing then the loss suffered was not caused by the respondents’ conduct irrespective of whether it be characterised as misleading or negligent.
The trial Judge also found that even if he accepted Mr Scragg’s evidence that he did nothing when he realised in late June 2006 that the Zientaras’ interest was included on the policy because he overlooked or forgot that the financier required cover of $800,000, it did not establish the required causal link between the conduct and the loss. This was because any loss was a result of his own failure to check properly the documentation forwarded to him on numerous occasions by the respondents.
The trial Judge specifically rejected the claim that Mr Dixon was negligent in not realising that insurance of only $400,000 in respect of 87-89 Commercial Road would result in substantial under insurance for the property, and in failing to make it clear to Mr Scragg that $1.3 million insurance covered all the properties and not just 87-89 Commercial Road. The trial Judge reasoned that there was no evidence of what the full insurable value of the property was, or should have been, and noted that the purchase price was $160,000 in 2002.
As to the evidence of Mr Scragg that he assumed after mid 2004 that a new policy had been cut, the trial Judge rejected the evidence of Mr Scragg on that topic and found that his evidence was inconsistent with the objective facts. In reaching that conclusion the trial Judge referred to many documents which were tendered during the trial, some of which contained notations in the handwriting of Mr Scragg, all of which the trial Judge found pointed to the conclusion that Mr Scragg did not believe a new policy had been cut in mid 2004
Analysis
The trial Judge’s alleged misunderstanding of the appellants’ case relates to Mr Scragg’s state of knowledge and awareness of the numbers of the property he owned at 87-89 Commercial Road. As I understood the argument on appeal the appellants’ complaint is that the trial Judge wrongly took Mr Scragg to be asserting that he did not realise the Zientaras owned 91 Commercial Road until June 2006. The appellant pointed to two passages in the judgment in particular. The first was at [10]:
Mr Scragg has acknowledged that while he did see documents which described the level of insurance over No. 87-89 Commercial Road as being $400,000, his belief at the time of the fire was that the total cover for those premises was $800,000. Number 91 Commercial Road was also insured for $400,000. Mr Scragg said that at times he believed that No. 91 Commercial Road was part of the holding of the plaintiffs and that the total insurance over the plaintiffs Commercial Road properties was $400,000 for No’s. 87-89 and a further $400,000 for No. 91, making a total of $800,000. He said in evidence that the street numbers which identified the properties meant nothing to him.
The appellant also pointed to [129]:
I do not accept Mr Scragg's evidence that he first became aware that the plaintiffs’ properties were 87-89 Commercial Road and that Mr and Mrs Zientara held an interest in relation to the property at 91 Commercial Road at the end of June 2006.
Those two passages were said to reveal a fundamental misunderstanding on the part of the trial Judge which caused him to be unnecessarily sceptical of the evidence of Mr Scragg because he took Mr Scragg to be asserting matters which on a proper analysis of the evidence Mr Scragg never asserted. For example, it was pointed out that it was never in doubt that Mr Scragg was aware that the Zientaras held an interest in 91 Commercial Road. The important point was not Mr Scragg’s awareness of that fact but his belief that after mid 2004 the policy of insurance only covered the interests of Mr Scragg and his immediate family.
It was the appellants’ position, that in light of the earlier communications between Mr Scragg and Mr Dixon, in mid 2004 when Mr Scragg requested Mr Dixon to increase the insurance on the property to $800,000 to reflect the financier’s requirements, it should have been obvious to Mr Dixon in a conversation on 9 March 2005 in which Mr Scragg asked how much insurance he had on the Commercial Road properties, that Mr Scragg was asking about his properties at 87-89 Commercial Road and not the properties at 87-91 Commercial Road.
The appellants pointed to a letter which Mr Scragg wrote to Mr Dixon on 29 June 2004 and to the fact that after the request in June 2004 the names of the Zientaras were never recorded as insured in respect of the property at 91 Commercial Road. This, it was said, was the genesis of the erroneous assumption created in Mr Scragg’s mind by Mr Dixon’s answer of “$1.3 million” in response to his question.
On the appellants’ argument, the subsequent confirmation document P9 sent out to Mr Scragg on 15 March 2005 did not, and could not, correct the erroneous assumption because the clarification document still did not alert Mr Scragg to the fact that the Zientaras owned 91 Commercial Road.
In considering this complaint it is important to analyse the impugned paragraphs [10] and [129] in their proper context within the judgment.
The factual matters referred to by the trial Judge in [10] which are said to reveal the fundamental misunderstanding, were made in the context of a recitation by the trial Judge of the history of the matter. At the first trial Mr Scragg had been cross‑examined about his understanding at the time when he met with Mr Dixon on 9 March 2005. During the course of his cross-examination he was referred to the renewal notice issued on 4 February 2005 which had been forwarded to the second appellant care of Mr Scragg’s address. The renewal notice showed $800,000 as the sum insured for 87-89 Commercial Road and the sum of $500,000 for the property at 91 Commercial Road. When cross-examined about that notice Mr Scragg said:[24]
Q.The reference to 91 Commercial Road you thought was a reference to a property owned by your companies.
A.My word. Where is it not? You look at it, one street number address identifies a property. All I know is it relates to me, Zientaras name is not mentioned. Why isn’t it? No fault of mine and there is this confusion, for the sake of one full number. This concept of situations. I didn’t understand all I knew it appeared to be too much overall. It was too rich and I wanted it checked out.
Q.Too rich, the premium was very high.
A.It seemed I purchased too much, yes.
Q.You thought when you purchased [sic] this document, referring to p.122 of MFI D4, that the address of 91 Commercial Road identified as a property owned by you.
A.Yes, I did truly.
[24] AB 221.
At the second trial he was cross-examined about the evidence he gave in that passage at the first trial:[25]
Q.Have you read the question and answer.
A.Yes, I've read them.
Q.You remember giving that answer to the question appearing at line 10.
A.No, I don't. But I accept it's correct. I mean it correctly records my answer.
Q.Which is the truth of it.
A.I thought - I mean if what's meant by that - well, that's what I said, perhaps my recollection was better then than what it is now.
[25] Transcript of proceedings, ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors, District Court of South Australia, Judge Clayton, 4 April 2011 at 64.
After acknowledging at that point that he thought 91 Commercial Road was a property owned by him he was then asked:[26]
A.I thought that this property here that's set out on p.546 [the property at 91 Commercial Road] was owned by me, yes, I did.
Q.Right, and that is the only reason you thought you were over-insured, because you had $800,000 on the preceding page, $500,000 on that page, and yet your evidence is that you thought the sum insured for your properties had been arranged to be for $800,000.
A.That may well be, I don't recall, that may well be, I don't - I can't take the step because I don't have the recollection, I'm sorry. It probably is right but I don't know.
Q.You're not able to give any reason now in the course of your evidence today as to why you thought the property that you owned at Commercial Road was over-insured at the time of your meeting with Mr Dixon in February 2005.
A.Not from my recollection, no, I'm unable to.
[26] Transcript of proceedings, ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors, District Court of South Australia, Judge Clayton, 4 April 2011 at 65.

At the first trial, the appellants’ own counsel had put to the trial Judge that Mr Scragg’s belief that 91 Commercial Road was his property was the reason why Mr Scragg had not twigged to the fact that 87-89 Commercial Road and 91 Commercial Road were insured only for a total of $800,000.
Thus it can be seen that the trial Judge’s remarks at [10] of the judgment are, as a matter of historical fact, accurate. I do not accept that the trial Judge’s remarks in that paragraph or the subsequent passage at [129] demonstrate any misunderstanding of the case put forward on behalf of the appellants. All that the Judge did in those paragraphs was to recount the history of what Mr Scragg had said about some of these matters in evidence at the first and second trial.
It is important also that [129] is understood in its proper context:[27]
[128]If, as Mr Scragg said he had "forgotten" the amount of cover that he wanted, his memory lapse is not a reason for holding the defendants liable.
[129]I do not accept Mr Scragg's evidence that he first became aware that the plaintiffs’ properties were 87-89 Commercial Road and that Mr and Mrs Zientara held an interest in relation to the property at 91 Commercial Road at the end of June 2006.
[130]There are many inconsistencies in the evidence of Mr Scragg on the topic of his knowledge prior to the fire. He took every opportunity to avoid any suggestion that he was aware of the level of insurance on 87-89 Commercial Road before the fire.
[131]I do not accept the evidence of Mr Scragg that he did not realise the "true situation" of the under insurance until after the fire. His evidence was unconvincing and is contrary to the objective facts. The "true situation" was clearly set out in the clearest terms in many documents which Mr Scragg has acknowledged that he read.
[27] ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2011] SADC 59 at [128]-[131].
It is evident from the trial Judge’s detailed analysis that his Honour correctly apprehended that before the fire Mr Scragg’s evidence was that he saw the reference to the sum of $400,000 on the Amended Notice of Premium[28] in late June 2006 and it was then that he realised that the sum of $400,000 related only to his property at 87-89 Commercial Road. However, it was Mr Scragg’s evidence that at that particular time he had either forgotten or overlooked the requirement of his financier that he insure the properties for the sum of $800,000.
[28] Exhibit P20; AB 508-529.
That the trial Judge understood this is evident from his remarks in the following paragraphs:[29]
[29] ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2011] SADC 59 at [125], [128], [179] and [191].
[125]Mr Scragg sought to avoid the effect of his evidence that he had knowledge that 87 89 Commercial Road was insured for $400,000 by claiming in cross examination that he had wanted No’s. 87-89 insured for $800,000 and he did not appreciate that the sum shown on Exhibit P20 was not in accordance with his wishes. He said:
…I noted the amounts and please rest assured if I had recalled that I wanted 800,000, I would have changed it instantly. I would have, in that email that I sent to Mr Dixon, included a requirement that it should be increased to 800,000 as per previous instructions. I had forgotten and I'm sorry I forgot and I wish I'd never forgotten but it's the truth.
…
[128]If, as Mr Scragg said he had "forgotten" the amount of cover that he wanted, his memory lapse is not a reason for holding the defendants liable.
…
[179]Mr Scragg has attempted to avoid the effect of the statements in the documents by claiming that he had overlooked the fact that the financiers required cover of $800,000. If that was the case, Mr Scragg's error was not something for which the defendants were responsible. The Renewal Notices contained accurate statements as to the level of the cover offered both in 2005 and 2006.
…
[191]The fact that the property at 87-89 Commercial Road was insured for the sum of $400,000 at the time of the fire was not caused by the negligence or misleading conduct of the defendants. If at the end of June 2006 Mr Scragg had forgotten that the financier required $800,000 insurance the defendants can not be held responsible for his state of mind. Furthermore I do not accept that Mr Scragg had forgotten the requirements of the insurer.
Mr Scragg gave evidence about his state of knowledge and awareness of the numbers of the property owned by him at 87-89 Commercial Road in both trials. His evidence was not always easy to follow. Nevertheless, as his claimed fluctuating state of awareness of his ownership of 87-89 Commercial Road in terms of the street numbers was critical to his misunderstanding in the conversation on 9 March 2005, it was important for the trial Judge to make findings on that topic.
The findings at [128] to [131] including the impugned passage at [129] were part of a series of findings by the trial Judge rejecting the evidence of Mr Scragg as to the claimed fluctuating awareness of these critical factual matters. In particular it was part of the trial Judge’s conclusion that at all relevant times Mr Scragg was aware that his shops were at 87-89 Commercial Road and that Mr Zientara’s was at 91 Commercial Road.
When the Judge’s remarks are understood in their proper and appropriate context it can be seen that there is no misunderstanding evidenced by the remarks of the trial Judge at either [10] or [129]. Furthermore, in the light of the whole of the evidence the inferences drawn by the trial Judge in those paragraphs were plainly open to him. I would reject the complaint that the trial Judge misunderstood the appellants’ case.
Credit Findings
Many of the appellants’ grounds of appeal are complaints that the trial Judge simply reached the wrong conclusion on important factual matters.
Central to the appellants’ case based both on misleading conduct and negligence was Mr Scragg’s evidence that after July 2004 he believed a new policy had been cut which included only his interests and those of his immediate family viz the family companies and his daughter.
However as I pointed out earlier, his awareness of his interest in the property at 87-89 Commercial Road by reference to the street numbers was also an important plank in the appellants’ case on misleading conduct. It was said that Mr Scragg’s fluctuating state of cognitive awareness about the numbers of the property he owned at 87-89 Commercial Road was critical to his misunderstanding of Mr Dixon’s answer of $1.3 million in the conversation on 9 March 2005.
Mr Scragg also claimed that in June 2006 when he realised for the first time that his property at 87-89 Commercial Road was only insured for $400,000 he had overlooked or forgotten the requirements of his financier that he insure the property for $800,000 and he did not realise the true situation of the under insurance of his property at 87-89 Commercial Road until after the fire.
Mr Scragg was the sole witness for the appellants and there is no doubt that his evidence was critical to the appellants’ case that reliance was placed by the appellants on the conduct of Mr Dixon said to be misleading, in particular the answer given in the conversation on 9 March 2005. Irrespective of how Mr Dixon’s conduct is characterised, the appellants’ claim could never succeed if no reliance was placed on Mr Dixon’s conduct. Once it was established that Mr Scragg had knowledge of the true position, the appellants could not claim reliance on any conduct of Mr Dixon.
The fundamental requirement in a misrepresentation case is that there must not only be misleading conduct but there must be reliance on that conduct, and damage must flow from that reliance. Once Mr Scragg realised that the property at 87-89 Commercial Road was insured for only $400,000 he could no longer claim to have relied upon any alleged misleading conduct of Mr Dixon. As Doyle CJ pointed out in Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd[30] to prove that there has been misleading and deceptive conduct it is not sufficient to show that he was labouring under an erroneous belief. He must also prove that his belief was caused by the respondent’s conduct. The failure by Mr Scragg to recall in June 2006, the requirements of his financier that the property be insured for $800,000, is not a failure which could be sheeted home to any conduct on the part of Mr Dixon.
[30] Software Integrators Pty Ltd v Roadrunner Couriers Pty Ltd (1997) 69 SASR 288 at 295.
In considering whether adverse findings of credit in relation to Mr Scragg’s evidence on each of these topics is justified it is necessary to bear in mind the whole of the evidence about the dealings between Mr Scragg, Mr Zientara, and Mr Dixon over a period of some years between 2002 and 2006. It was against that background that the trial Judge assessed the evidence of Mr Scragg and formed his view about the credit of Mr Scragg. After carefully analysing the evidence of Mr Scragg the trial Judge rejected his evidence on a number of important topics, including his claim that after mid 2004 he thought a new policy had been cut and that his knowledge of the street numbers of the property he owned at 87-89 Commercial Road fluctuated.
A close analysis of the evidence of Mr Scragg compels the conclusion that at all relevant times he was aware that his shops were at 87-89 Commercial Road and that the Zientaras’ shop was at 91 Commercial Road. Although he claimed a number of times to have left most of his affairs concerning his property matters to others, in the end, the evidence showed otherwise, that at critical times he demonstrated a keen awareness of his interest at 87-89 Commercial Road.
There is no doubt that Mr Scragg was well able to discriminate between his shops and the Zientaras’ shop at the time of the 2003 and 2004 renewals of the policy. By 2003 the two properties had been split up by agreement between Mr Scragg and Mr Zientara to make it easier to determine how much each of them needed to contribute to the premium. Mr Scragg himself acknowledged in evidence he was aware of the new description on the 2003 policy renewal documents. Mr Zientara paid the premium that year and Mr Scragg reimbursed him. A similar situation followed in the renewal period in 2004. Once again both situations at 87-89 Commercial Road and 91 Commercial Road were separately described, Mr Zientara paid the premium and Mr Scragg reimbursed him.
When Mr Scragg wrote the letter to Mr Dixon on 29 June 2004[31] he was well able to discriminate between his property and Mr Zientara’s. The letter on its face demonstrates that. This was one of a number of matters in respect of which there was a subtle change in Mr Scragg’s evidence between the first and the second trial, a matter which the trial Judge was entitled to take into account. At the first trial it was Mr Scragg’s evidence when he wrote the letter on 29 June 2004 it was his understanding that as far as 91 Commercial Road was concerned the policy would remain unaffected by the changes he requested. However in the second trial Mr Scragg resiled from that position and said that when he wrote the letter he had no expectation at all about the Zientaras’ interest.
[31] Exhibit P7; AB 459.
The copy of the Extra Premium Notice of 13 July 2004 sent to Mr Scragg by Mr Dixon in response to Mr Scragg’s request in the letter of 29 June 2004 is a powerful pointer to the state of mind of Mr Scragg in August 2004 about his knowledge of the street numbers at the Commercial Road properties. On a copy of the Extra Premium Notice[32] located in Mr Scragg’s own files is a notation in his own handwriting to which I have previously referred. That notation plainly indicates Mr Scragg’s ability to discriminate between his property at 87-89 Commercial Road and the Zientaras’ property at 91 Commercial Road in respect of both the numbers and the ownership of each.
[32] Exhibit IDD30; AB 798-799 (referred to in [27] of these reasons).
The notes which he recorded are the changes which he himself just requested.
A further pointer to Mr Scragg’s knowledge is found in documents located in Mr Dixon’s files, copies of which were also held in Mr Scragg’s own files, namely IDD36[33] and P24.[34] Each of those documents are copies of the same document, namely the Extra Premium Notice generated by Mr Dixon and sent to the second appellant care of Mr Scragg’s business address as a result of a request by Mr Zientara on 20 August 2004 for amendment to the cover on his property at 91 Commercial Road to increase the sum to $500,000. Recorded on P24 in the handwriting of Mr Scragg’s bookkeeper on the page which refers to the situation at 91 Commercial Road is the word “Barry” (Mr Zientara).
[33] Exhibit IDD36; AB 1306.
[34] Exhibit P24; AB 545.
There are numerous other documents which the trial Judge relied on, including various documents in connection with loan applications of Mr Scragg in 2004,[35] which all reveal that Mr Scragg was well able to discriminate between his shops at 87-89 Commercial Road and Mr Zientara’s shop at 91 Commercial Road. For example in the two asbestos registers[36] which Mr Scragg forwarded to the financier on 10 May 2004 he clearly distinguished number 87 as the St Vincent De Paul shop and number 89 as the Conti Bar dress shop. Further documents concerned with the leasing of one of Mr Scragg’s shops in April 2006, including lease documents and other dealings he had with a real estate agent who he retained to lease the property, point to Mr Scragg’s awareness of his ownership at 87-89 Commercial Road.[37]
[35] Exhibit IDD5; AB 553-575.
[36] Exhibit IDD11; AB 617.
[37] Exhibit IDD12; AB633. Exhibit IDD18; AB683-705.
The obvious inference which the trial Judge drew was that at all relevant times Mr Scragg was clearly aware, by reference to the street numbers, of his ownership of the property at 87-89 Commercial Road in contrast to Mr Zientara’s property at 91 Commercial Road.
The various notations made on documents tendered during the trial, some of them in Mr Scragg’s own handwriting, also provide evidence of Mr Scragg’s state of mind with regard to the issue of whether a new policy had been struck in 2004 as a result of his request to Mr Dixon on 29 June 2004. The trial Judge found that the fact that Mr Scragg requested Mr Zientara to have glass cover included in the policy was inconsistent with Mr Scragg's assertion that a new policy had been cut and that he believed from 2004 onwards that this policy related to the interest of the plaintiffs and his daughter only.
Some of the evidence relied on by the trial Judge in reaching that conclusion provides a further example of a telling change of position adopted by Mr Scragg in the second trial in contrast with his evidence at the first trial.
At the first trial Mr Scragg gave evidence that he had discussions with Mr Zientara in June 2006 concerning the need for plate glass insurance on Mr Zientara’s property at 91 Commercial Road. During the course of that discussion Mr Scragg said he asked Mr Zientara to arrange for plate glass insurance on his property as well. It was Mr Scragg’s evidence in the first trial that he expected, as a result of that request, there to be three new items of plate glass insurance; one for his property at 87-89 Commercial Road, one for his property at St Vincent Street, and one for Mr Zientara’s property at 91 Commercial Road. During the course of cross‑examination in the second trial when confronted directly with that evidence and the implications in terms of his claimed belief that he believed the composite policy document related to his interests and his interests alone, Mr Scragg resiled from that position claiming that his expectation as a result of the conversation with Mr Zientara was that there would be two changes to the policy, not three. An expectation that there would be three items noted in respect of plate glass on the composite policy document was plainly inconsistent with a belief that a new policy had been formed.
This was all material on which the trial Judge was entitled to rely in forming his view about the credit of Mr Scragg and ultimately in rejecting his evidence as to his belief about the fact that a new policy had been struck in 2004, and that he was unaware at critical times of the numbers of his property at 87-89 Commercial Road.
I bear in mind that the trial Judge had the opportunity to assess the evidence of Mr Scragg over a lengthy and searching cross-examination in the second trial. An analysis of some of the subtle changes in Mr Scragg’s position between the first and the second trial, two of which I have mentioned, supports the conclusion that his evidence changed in the second trial when he was confronted with evidence which plainly contradicted his earlier position. In my view the adverse findings of credit made by the trial Judge were well open to him.
Misleading and Deceptive Conduct
The appellants’ case that Mr Dixon engaged in misleading and deceptive conduct upon which Mr Scragg placed reliance is based principally on the conversation between the two men on 9 March 2005 against the background of Mr Dixon’s failure since July 2004 to record the Zientaras name as insured in relation to 91 Commercial Road on any of the policy documentation sent to the appellants.
The starting point for consideration of that argument is to first identify precisely what conduct it is which the appellants say constitutes the misleading conduct. As I understood the argument on appeal, the conduct which was said to give rise to the claim, was Mr Dixon’s answer of “$1.3 million” to the question asked by Mr Scragg to the effect “what is the value of the Commercial Road properties?” or “what is the value of my Commercial Road properties?”.
The trial Judge made findings about that conversation:[38]
[38] ACN 068 691 092 Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors [2011] SADC 59 at [47], [140], [145], [147], [156], [158] and [160].
[47]The plaintiffs allege that the actions of Mr Dixon at the meeting and following the meeting amounted to misleading conduct and that Mr Dixon was negligent. I will discuss the allegations in more detail later. One thing which is obvious is the lack of specificity in the statements made by both Mr Scragg and Mr Dixon.
…
[140]The conversation which is said to amount to the misleading conduct took place as part of an overall transaction which involved the reduction of the premium. That transaction culminated in the insurer forwarding to the insured at Mr Scragg's office the Confirmation of Advice. In that document Mr Dixon purported to confirm the discussions whereby Mr Scragg gave instructions to divide the sum insured between the two properties.
…
[145]Mr Scragg’s evidence was that he asked how much cover or insurance "did I have in relation to Commercial Road". If those words accurately described the question asked by Mr Scragg the question did not make it clear whether Mr Scragg was enquiring as to the plaintiffs’ properties alone or whether his enquiry related to all of the properties at Commercial Road.
…
[147]Mr Dixon responded to Mr Scragg's question saying "$1.3 million". If the question was directed to all Commercial Road properties that answer would have been correct. That is how Mr Dixon interpreted Mr Scragg's question. His answer to the question is understandable. Mr Scragg could have made the information which he sought clearer. Given the history of the policy and the form of the policy there was no reason why Mr Dixon should have interpreted Mr Scragg’s unspecific question to relate to the plaintiffs properties alone.
…
[156]If at the time of the meeting with Mr Dixon on 9 March 2005 Mr Scragg was misled as to the extent of the cover over 87-89 Commercial Road and because of that Mr Scragg gave instructions which resulted in the cover over that property being reduced from $800,000 to $400,000 I find that Mr Scragg failed to take reasonable care of his own interests. First, he did not make it clear that the cover that he was enquiring about was restricted to 87-89 Commercial Road. Secondly, he overlooked the fact that he had arranged cover over 87-89 Commercial Road to be increased to $800,000. Thirdly, he overlooked the information which was clearly set out in many documents which the plaintiffs had received from the insurer showing that the cover on 87-89 Commercial Road was $800,000, not $1.3 million, and that the cover on 91 Commercial Rd was $500,000. Mr Scragg should have known that the figure of $1.3 million was the total of the insurance on both 87-89 Commercial Road and 91 Commercial Road.
…
[158]Mr Scragg's question did not distinguish between the properties. I accept the submission of Mr Jones for the third defendant that any confusion on the part of Mr Scragg resulted from his own question.
…
[160]Mr Scragg's evidence as to the conversation on 9 March 2005 was confused and there is the possibility that Mr Dixon's answer was a correct answer to the question asked. The evidence does not establish that Mr Scragg's question was directed at the plaintiffs’ Commercial Road property rather than all the Commercial Road properties.
[emphasis added]

Implicit in the findings in those paragraphs, and made explicit at [160] in the sentence I have underlined, is the conclusion of the trial Judge that he was not satisfied that Mr Scragg’s question was in fact directed at the appellants’ Commercial Road properties rather than all the properties at Commercial Road.
That finding is critical to the outcome of this appeal at least in relation to the claim based on misleading and deceptive conduct. It was common ground between the parties that if, all which occurred in the conversation on 9 March 2005, was a case of two people genuinely at cross purposes through no fault of Mr Dixon’s, then the appellants’ case based on either misleading conduct or negligence must fail.
It follows from the trial Judge’s conclusion that he could not determine with any precision what Mr Scragg’s question was in the conversation, that the evidentiary foundation for the claim of misleading conduct was not laid with the necessary degree of specificity to enable the Court to conclude that in fact the conduct of Mr Dixon was misleading.
The basic principle is to be found in an often quoted passage of McLelland CJ in Watson v Foxman:[39]
Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
[emphasis added]
[39] Watson v Foxman (1995) 49 NSWLR 315 at 318-319.
Here, as the trial Judge noted, if Mr Scragg did question Mr Dixon about the Commercial Road properties as opposed to his Commercial Road properties, then the answer of $1.3 million was correct. Even if Mr Scragg explicitly made reference to his properties, the trial Judge found, it would still not have been clear in light of the previous history of the dealings between Mr Scragg, Mr Dixon and Mr Zientara, that Mr Scragg was referring solely to the property owned by him at 87-89 Commercial Road. That finding in light of the history was also open to the trial Judge.
As I have earlier noted there was considerable evidence in the trial about the previous dealings between Mr Dixon, Mr Scragg and Mr Zientara either by writing or by telephone concerning various aspects of the insurance in relation to all of the Commercial Road properties. Sometimes these communications were made by Mr Zientara solely in reference to his own property at 91 Commercial Road, sometimes they were made by Mr Scragg in relation to his property at 87-89 Commercial Road and other properties in respect of which he had an interest, sometimes the approaches were made by one or other of the men on behalf of the two of them. As far as Mr Dixon was concerned they acted in a way which meant communication to one was in fact communication to both. That is the basis established at trial on which the parties had been previously dealing for some years.
The trial Judge was correct to view the conversation on 9 March 2005 in the context of the background of those dealings between the parties. That approach is consistent with authority. Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd[40] is a case on point.
[40] Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357.
The facts in Miller were that in 2000 an insurance broker (Miller) negotiated for an insurance premium funding loan with BMW Australia Finance Ltd (BMW). BMW entered into negotiations on behalf of its client, Consolidated Timber Holdings Ltd. The insurance policy for the loan sought was a cost of production policy which was not cancellable. Due to an administrative error, BMW sent Consolidated Timber a welcome letter stating that the loan had been approved following negotiations with Miller. Consolidated Timber sent Miller a copy of the welcome letter and then paid BMW the first payment due under the loan. However, the loan had not been approved by BMW through its normal investigation and approval procedures. BMW in trying to rectify the situation then requested information from Miller and, in response to that request, Miller sent BMW an insurance certificate outlining four properties and “properties insured”. In October 2000, BMW decided not to proceed with the loan and then refunded the instalment which had been paid by Consolidated Timber.
After a short time, BMW entered discussions with Miller about renegotiating a loan with terms shorter than the first one. Miller sent BMW a number of documents which included an insurance policy with terms that differed significantly from the previously sent certificate. Miller did not provide any accompanying explanation about the contents of these documents or how they differed from the first loan. The second insurance policy was also not cancellable. This loan was approved by BMW in December 2000.
In 2001 the client defaulted. BMW then alleged that Miller had engaged in misleading and deceptive conduct because Miller had represented in the insurance certificate that the insurance policy was cancellable or at the very least, Miller had omitted to disclose that the second policy was not cancellable. The trial judge in the Supreme Court of Victoria dismissed BMW’s claims. The Court of Appeal allowed the appeal and ordered Miller to pay damages. Miller then appealed to the High Court. In concluding that Miller did not engage in misleading and deceptive conduct, French CJ and Kiefel J (who were in agreement with the majority) said:[41]
[20]In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business.
…
[22]… as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence.
[41] Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [20]-[22].
Heydon, Crennan and Bell JJ observed:[42]
[91]Was Miller's conduct in failing to inform BMW, in terms, that the policy to be funded was not cancellable, or that the policy in the bundle was the policy to be funded, misleading? That question requires close analysis of all of the circumstances of the transaction. The parties were commercially sophisticated. They were experienced in their respective fields. The transaction involved the assessment by BMW of an application to lend Miller's client $3.975 million. The only document that Miller supplied in support of the application which appeared to relate to the policy to be funded did not disclose the nature of the risks insured. But it did put BMW on notice that the underlying policy may be an unusual one. BMW made no further inquiry. BMW's failure to make reasonable inquiries would not automatically defeat its statutory claim for damages for misleading conduct. However, given the history of this transaction, it is a circumstance that is relevant to whether Miller's conduct in failing to disclose its knowledge of the policy is correctly characterised as misleading.
…
[96]The requirement of the provision of "full policy information", contained in BMW's quotation dated 8 December 2000, did not make Miller's failure to advise BMW that the policy was not a cancellable property policy misleading. Miller had supplied BMW with a copy of the policy. BMW was an experienced premium lender. The policy was not a lengthy document. It was apparent that it did not insure the holders against loss or damage to property. It did not contain a cancellation clause. Miller's failure to draw to BMW's attention a circumstance that the document itself disclosed was not misleading or deceptive.
[42] Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [91]-[96].
Relevantly, as the High Court in Miller observed, the knowledge of the person to whom the conduct is directed is also a relevant factor as may be the existence of common assumptions and practices established between the parties.
The test as to whether conduct is misleading and deceptive is an objective one. The trial Judge was entitled to approach the assessment of the evidence on the basis of a reasonable person in Mr Scragg’s position.
In Butcher v Lachlan Elder Realty Pty Ltd, Gleeson CJ, Hayne and Heydon JJ said:[43]
So here, it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known. Indeed, counsel for the purchasers conceded that the mere fact that a person had engaged in the conduct of supplying a document containing misleading information did not mean that that person had engaged in misleading conduct: it was crucial to examine the role of the person in question.
[43] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [37].
McHugh J in the same judgment also said:[44]
The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document.
[footnotes omitted]
[44] Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [109].
Here it was relevant that Mr Scragg and Mr Dixon had a longstanding commercial relationship. Mr Dixon was an experienced insurance agent, Mr Scragg a professional man with experience in matters of real estate and insurance. There can be no legitimate complaint that the trial Judge took into account the fact that Mr Scragg is a professional man.
If there was confusion between the two men at the meeting on 9 March 2005, as the trial Judge found, then that confusion was clarified six days later on 15 March 2005 when Mr Dixon sent out a request for confirmation,[45] a document which Mr Scragg acknowledged he read. The terms of that document were plain. In it Mr Dixon wrote:
[45] Exhibit P9; AB 462-463.
Your Request
We refer to our meeting on Wednesday 9^th March 2005 in your office to review your Business Insurance Policy AP81L00144 for 2005/2006.
Recommendation / Advice
We wish to confirm our discussion as follows:
1. Fire and Other Damage
a) Building Situated at 87-89 Commercial Road, Port Adelaide. Peter Scragg advised to reduce Sum Insured on the Building from $800,000 to $400,000.
b) Property situated at 91 Commercial Road, Port Adelaide. Peter Scragg advised to reduce Sum insured on the Building from $500,000 to $400,000
…
At the bottom of the document there was a warning “you should check to ensure the recommendation I have set out meets your needs”. In any event by June of that year, Mr Scragg realised that his property at 87-89 Commercial Road was insured only for the sum of $400,000. There is no dispute about that. At that time, even though he set in train procedures to recover the proportion of the premium he had already paid in respect of Mr Zientara’s property at 91 Commercial Road, it is significant that he still did nothing to effect any change to the amount of cover in respect of his property at 87-89 Commercial Road.
In this respect, even if Mr Scragg’s evidence were to be accepted, contrary to the trial Judge’s finding, that he had overlooked the fact or had forgotten that the financier required $800,000 insurance in respect of his property, Mr Scragg’s loss of memory as to the adequacy of the insurance cover in light of the insurer’s requirements, must have ended any reliance by him on any misleading conduct of Mr Dixon as a result of the earlier conversation. The fact that Mr Scragg remained insured for only $400,000 in respect of the property at 87-89 Commercial Road at the date of the fire was a consequence of his own inaction after becoming aware that his property was not insured for more than $400,000. There is no causal connection between his oversight about the insurer’s requirement and Mr Dixon’s conduct.
For these reasons the trial Judge’s finding that there was in fact no misleading and deceptive conduct on the part of Mr Dixon is correct.
Negligence
The trial Judge’s finding that the conduct of Mr Dixon was not negligent was also challenged. Specifically, it was said that the omission to include the Zientaras’ name in policy documents issued in and after July 2004 should have led to the finding that Mr Dixon’s conduct was negligent.
The appellant also placed some reliance on handwritten notes made by Mr Dixon after he received the written request from Mr Scragg in the letter of 29 June 2004.[46] Mr Dixon said that his handwritten notes reflected the instructions which he understood to have been received from Mr Scragg at that time. The handwritten notes, like the documents generated later, also specifically omitted to record anything about the Zientaras as owners of 91 Commercial Road. After receiving the written request Mr Dixon generated the documents exhibits P8 and IDD29, namely the confirmation of advice and request form and the Extra Premium Notice, both of which reflect the amendments sought by Mr Scragg.
[46] Exhibit P7; AB 459.
The first handwritten notation on Mr Dixon’s file records the change of name in respect of the owner of 87-89 Commercial Road into the names of both appellant companies. The second notation records the request for insurance in respect of the additional property purchased at 255-265 St Vincent Street. The third notation contains specific details about the property at St Vincent Street which was purchased by both the first appellant and Ms Melanie Bernadette Scragg and was to be insured as an additional situation.
It was said that therein lay the genesis for the erroneous assumption made by Mr Scragg later in the conversation he had with Mr Dixon on 9 March 2005.
In my view that submission overlooks the fact that the handwritten notes on their face purport to do no more than reflect the specific requests made by Mr Scragg for amendment, or addition to, the existing insurance cover in relation to the specific properties identified.
Nevertheless, that is part of the background which the appellants relied on in making the submission that Mr Dixon’s conduct on 9 March 2005 was both misleading and his conduct as a whole was negligent leading to Mr Scragg’s erroneous assumption which it was said was not corrected by the issuing of the clarification document on 15 March 2005, [47] some six days after the conversation.
[47] Exhibit P9; AB 462-463.
It was submitted that Mr Dixon was also negligent in failing to verify the instructions contained in the letter of 15 March 2005 with either of the Zientaras; further that Mr Dixon should have noted the interests of Challenger in respect of the property at 87-89 Commercial Road. This was said to be a failure to disclose relevant information to Mr Scragg.
It was contended that Mr Dixon had a duty to inform Mr Scragg that the instructions which Mr Scragg gave to him on 9 March 2005 would have the effect of reducing the cover in respect of the Zientaras’ interest from $500,000 to $400,000 and the cover in respect of the appellants’ property from $800,000 to $400,000.
The trial Judge found there was no duty on Mr Dixon to give advice to Mr Scragg to that effect, nor was there any negligence in failing to record the Zientaras’ name against 91 Commercial Road in relation to the policy. The trial Judge found in any event that Mr Scragg was under no misapprehension about the street numbers of his property at 87-89 Commercial Road, and accordingly any omission to record the Zientaras’ name as insured against 91 Commercial Road was irrelevant. The trial Judge found that there was no evidence to support the argument that Mr Dixon departed from any necessary or usual format in relation to his preparation of the policy documents which were forwarded to the appellants, and nor was there any evidence about the usual way in which policy documents are usually drawn.
In any event contrary to the submission made by the appellants, the trial Judge found that exhibit P9, the request for confirmation of 15 March 2005, was clear in its terms. Mr Scragg had the opportunity to read and check the information contained in P9 and to confirm that they were his instructions or otherwise. Even if there had been an error through some fault of Mr Dixon’s in the recording of the instructions, the trial Judge found that the document P9 gave Mr Scragg an opportunity to rectify the mistake.
In my view the trial Judge was correct. The facts here are not dissimilar to the facts in O’Connor v BDB Kirby & Co & Anor.[48] In O’Connor the unsuccessful plaintiff sought car insurance. The insurance broker asked the plaintiff whether he kept his car in a garage to which the plaintiff responded no, however the broker made a mistake and wrote yes on the application form.
[48] O’Connor v BDB Kirby & Co & Anor [1972] 1 QB 90.

The English Court of Appeal found that the conduct of the broker as a whole was not negligent in that even if there had been error at the stage when the application form was completed, the plaintiff was given an opportunity to read and check the proposal form. The Court found that the loss to the plaintiff in that case was caused by the carelessness of the plaintiff who did not read the proposal form properly and had only himself to blame for the error.
In my view the same conclusion applies here. Mr Scragg had the opportunity to read P9, a document which he acknowledged he received. The information in that document plainly advised Mr Scragg of the reduction in insurance in respect of both properties.
The appellants’ submissions on this ground of appeal overlook two important matters. The first is, the practice which established between both Mr Scragg and Mr Zientara from the date of purchase of the properties in 2002, that one or both of them, sometimes on their own behalf and sometimes on behalf of the two of the them, dealt with Mr Dixon about amendments and additions to various aspects of the policy. Nothing changed between 2002 and 2006 in respect of that practice. As late as June 2006 Mr Zientara contacted Mr Dixon on behalf of the two of them about plate glass insurance over the Commercial Road properties.
The second is, the policy documents which routinely issued from mid 2004 referred to 91 Commercial Road as a “situation” at all times accurately described the amount of cover. The appellants’ submission also overlooks the fact that Mr Scragg himself acknowledged that at the very latest by June or early July 2006, he was aware both of the Zientaras’ interest in 91 Commercial Road and of the amount of insurance in respect of 91 Commercial Road.
For these reasons I would dismiss the grounds of appeal which complain about the trial Judge’s findings in relation to the claim based on negligence.
Other Errors Said to be Made by the Trial Judge
The appellants complain that three of the findings made by the trial Judge are contrary to the Full Court’s judgment in Naiama Pastoral Company Pty Ltd & Anor v Plan 4 Insurance Services Pty Ltd & Ors.[49] In Naiama the appellants were successful in arguing that the trial Judge in the first trial wrongly dismissed the appellants at the conclusion of the appellants’ case, after hearing a submission that there was no case to answer.
[49] Naiama Pastoral Company Pty Ltd& Anor v Plan 4 Insurance Services Pty Ltd & Ors [2010] SASC 105.
The three specific findings said to be contrary to the Full Court judgment in Naiama were, first, the finding that the omission in the policy documents to include the Zientara name as insured in reference to 91 Commercial Road did not cause the loss, second, the finding that the renewal of the policy in March 2006 was not caused by any misleading conduct on the part of the respondents, and third, that the appellants by their own conduct were estopped from asserting that the amount of the policy should be $800,000.
In my view there is no inconsistency between any of the findings made by the trial Judge and the judgment of the Full Court in Naiama.
The decision in Naiama was based on assumptions which the Court made about Mr Scragg’s knowledge for the purpose of a submission of no case to answer. The Full Court was careful not to express any view about the correctness or otherwise of the Judge’s factual findings in the first trial and was careful not to compromise the trial Judge in any future trial.[50]
[50] See Naiama Pastoral Company Pty Ltd& Anor v Plan 4 Insurance Services Pty Ltd & Ors [2010] SASC 105 at [91]-[92] per Layton J.
Nor is there any substance in the further complaint made by the appellants that the trial Judge’s comment at [196] that the policy documents issued by the respondents were relatively simple and perfectly clear contrary to the Full Court judgment in Naiama. In that paragraph [196] the trial Judge was plainly referring to P9, the confirmation of advice letter which went to Mr Scragg on 15 March 2005. The remark of Layton J in Naiama relied on by the appellants concerned a different document, P20. Her Honour commented in obiter that P20 was not an easy document to read. I consider this complaint to be without substance as, the trial Judge was, in any event, entitled to make up his own mind about the matter.
Costs
The appellants also appeal the costs orders made by the trial Judge.
On 29 April 2011 the Judge delivered reasons dismissing the appellants’ claims. On that day he also ordered the appellants to pay the respondents’ costs. The appellants were represented at the hearing that day by counsel, as they had been all along. There was no opposition to the making of the costs order on that day. That is a significant matter because experienced counsel was acting on instructions from Mr Scragg.
On 25 May 2011 the appellants brought an interlocutory application in which they sought an order to recall the costs order made by the Judge on 29 April 2011. On 1 June 2011 the Judge heard argument on that application and dismissed it. In a separate judgment delivered on 7 June 2011 the Judge ordered the appellants to pay each of the respondents’ costs in respect of the cross-claims.
On appeal the appellants challenge two aspects of the orders made by the Judge, the first, his refusal to order that AMP and GIO are entitled only to a single order only in respect of their costs; the second, that the appellants pay the costs of each of the respondents of the cross-actions.
In respect of the first issue the Judge noted that AMP and GIO were both joined as parties to the action by the appellants. This was not a situation where they became parties to the action as a result of any application by them. He found that both AMP and GIO have separate economic interests and separate legal interests with different shareholding and different obligations to their shareholders. More importantly, both put separate arguments at trial. The Judge acknowledged that although there was some commonality of interest, there were differences between the two in relation to any suggested apportionment of liability. Moreover there were different heads of relief directed at GIO alone. For example, the claim for rectification of the contract could only have affected GIO, whereas the claim for damages affected all of the respondents.
At trial AMP and GIO did put different arguments. GIO submitted that even if Plan 4 and Mr Dixon had engaged in misleading or negligent conduct, it was in the capacity of Mr Dixon as an agent for the appellants and not as an agent for the respondents. Additionally GIO’s contention that even if Mr Dixon was an agent for AMP, that agency did not extend to GIO. That was a submission which placed both AMP and GIO in direct conflict.
As to the second matter, that the appellants pay the costs of each of the respondents of the cross-actions, the Judge found that it was reasonable for the respondents to bring the cross-claims, having being joined in the proceedings by the appellants. The cross-claims brought by Plan 4, Mr Dixon and AMP were claims in the nature of indemnity and contribution. Although it was not necessary to determine the merits of any of the cross-claims in light of the dismissal of all of the appellants’ claims, nevertheless the Judge accepted a submission that the principle in Lombard Insurance Co (Australia) Ltd v Pastro & Ors[51] applied with equal force to the application for costs of the cross-claims.
[51] Lombard Insurance Co (Australia) Ltd v Pastro & Ors (1994) 175 LSJS 448.
The appellants’ submission on the first issue was that because the evidence at trial focused in the main on the disputed claim that Mr Dixon engaged in misleading and negligent conduct therefore all of the respondents joined had only one common interest, both on the facts and the law, in defending that claim. The appellants pointed to the fact that the only oral evidence called and the bulk of the documentary evidence in the trial was directed to the dealings between Mr Dixon and Mr Scragg on behalf of the appellants and that no significant time at trial was taken up with GIO’s denial of any vicarious liability or with the cross-actions.
On the second issue the appellants argued that the cross-actions by Plan 4 and Mr Dixon lacked merit because there was an express agreement between AMP and Plan 4 and Mr Dixon that Plan 4 and Mr Dixon would not receive an indemnity where they were negligent or in breach of the relevant law and that the cross-action against GIO was bound to fail in any event.
The trial Judge rejected the appellants’ submission. He found that the cross-claims enabled all of the issues which were raised on the pleadings of the appellants to be properly ventilated. He found it was reasonable for AMP to bring its cross-claim against Plan 4 and Mr Dixon as on the case put forward by the appellants AMP was the principal and Plan 4 and Mr Dixon were the agents.
In my view the trial Judge approached the issues of costs in an appropriate way. In reaching his decision his Honour relied on the remarks of King CJ in Lombard:[52]
I think that a guiding principle for the exercise of the discretion in such cases may be formulated as follows. Where the nature of the plaintiffs claim, or allegations in support thereof, render it reasonable, having regard to the purposes of third party procedure, to bring in the third party, and the third party claim is unsuccessful solely by reason of the failure of the plaintiff to sustain its claim or the relevant allegations, the defendant should ordinarily recover from the plaintiff the costs of the third party claim including those which the defendant is ordered to pay to the third party. The emphasis is on the word “ordinarily”. The discretion is unfettered and a variety of factors may properly enter into the exercise of it.
[52] Lombard Insurance Co (Australia) Ltd v Pastro& Ors (1994) 175 LSJS 448 at 450.
The appellants have not shown any error in the exercise of the discretion to award costs. It has not been shown that the Judge took into account any irrelevant matter or that he failed to consider any relevant matter. The Judge’s reasoning was clear and consistent with well established authority.
I would dismiss the appeal against the costs order made by the Judge.
Conclusion
The appellant cannot overcome significant findings adverse to Mr Scragg’s credit, which were central to the trial Judge’s conclusion that Mr Dixon’s conduct was not misleading. I do not accept that the trial Judge misunderstood the state of knowledge Mr Scragg had at the relevant time. Even if Mr Scragg’s evidence about the conversation on 9 March 2005 between Mr Scragg and Mr Dixon was accepted, the evidence at trial did not establish that Mr Dixon’s conduct was misleading or negligent.
For these reasons I would dismiss this appeal.
STANLEY J: I would dismiss the appeal. I agree with the reasons of Kelly J. I have also had the advantage of reading the reasons of Anderson J. I agree also with those reasons.