ACN 068 691 092 Pty Ltd v Plan 4 Insurance Services Pty Ltd
[2011] SADC 59
•29 April 2011
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ACN 068 691 092 PTY LTD & ANOR v PLAN 4 INSURANCE SERVICES PTY LTD & ORS
[2011] SADC 59
Judgment of His Honour Judge Clayton
29 April 2011
INSURANCE - GENERAL - POLICIES OF INSURANCE - RENEWAL, AFFIRMATION, RECTIFICATION OR NOVATION OF POLICY
Defendants issued a single insurance policy over two shops owned by the plaintiffs and another shop owned by other persons. The amount of cover was reduced following discussions between second defendant and a director of the plaintiff companies. Reduction confirmed in writing. Policy subsequently renewed for the amount of the amended cover on two occasions. Other variations to policy at request of insured. Properties destroyed by fire.
Director of plaintiff companies gave evidence that the reduction in the cover which was effected was not in accordance with his request. Claim that the director was unaware of amended level of insurance. Evidence that although the director saw documents accurately describing the amended insurance he did not realise that the cover was less than he had requested.
Allegations of misleading and deceptive conduct and negligence.
HELD: Rather than looking at a single statement in isolation the negotiations to vary the amount of the insurance should be considered as a whole. Evidence does not establish misleading or deceptive conduct or negligence. If there was misleading conduct or negligence the causal link was broken by a confirmation of advice and other documents sent from defendants to plaintiffs advising of the amount of the insurance.
Australian Securities and Investment Commission Act 2001 (Cth) s 12GM, s 12DA, s12GF, s12GJ; Corporations Act 2001 (Cth) s 1325, s1041I, s 1041H(1), s1337E; Trade Practices Act 1974 s 52, referred to.
Veljkovic v Vrybergen [1985] VR 419; Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193; March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; Brown v Jam Factory Pty Ltd (1981) 53 FLR 340; Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Yorke v Lucas (1985) 158 CLR 661; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; Argy v Blunts & Anor (1990) 26 FCR 112; Tiplady v Gold Coast Carlton Pty Ltd (1984) 54 ALR 337; Watson v Foxman (1995) 49 NSWLR 315; CE Heath Underwriting and Insurance (Australia) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161; O'Connor v BDB Kirby and Co [1972] 1 QB 90; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; Plum v Commonwealth Bank Of Australia [2005] FCA 790; Taylor v Johnson (1983) 151 CLR 422; Medsara Pty Ltd v Sande [2005] NSWCA 40; AGIP S.p.A v Navigazione Alta Italia S.p.A [1984] 1 Ll Rep 353; Caldwell v JA Neilson Investments Pty Ltd (2007) 69 NSWLR 120; Hamilton-Smith v CFS Managed Property Ltd & Perpetual Nominees Ltd [2005] SASC 461, considered.
ACN 068 691 092 PTY LTD & ANOR v PLAN 4 INSURANCE SERVICES PTY LTD & ORS
[2011] SADC 59
The plaintiff companies are the owners of shop premises at 87‑89 Commercial Road, Port Adelaide. Mr Peter Scragg, a legal practitioner, is a director of the companies and acted on their behalf in the transactions which are relevant to these proceedings.
The adjoining shop premises at 91 Commercial Road, Port Adelaide were at the relevant time owned by Mr and Mrs Zientara.
On 27 July 2006, when all of the properties at 87-91 Commercial Road were destroyed by fire, the defendants had been involved in different ways with the insurance of the properties.
The second defendant, Mr Jeffrey Dixon, was an agent of the first defendant, Plan 4 Insurance Services Pty Ltd ("Plan 4") up until the commencement of the financial services reform legislation in January 2000 and acted as an agent for AMP in his capacity as a broker. Mr Dixon and Plan 4 became authorised representatives of AMP GI Distribution Pty Ltd. In a letter from Plan 4 to the plaintiff Naiama Pastoral Company Pty Ltd ("Naiama") dated 27 June 2006 Mr Dixon described himself as an "authorised representative" said "we wish to advise in respect of this insurance policy Plan 4 Insurance Services Pty Ltd is acting as an authorised representative of AMP GI Distribution Pty Ltd" ("AMP"). The relevant insurance policies were issued by the fourth defendant GIO General Ltd ("GIO").
The plaintiffs allege that AMP and GIO held out Mr Dixon and Plan 4 as their agents.
At the time of the fire GIO was the insurer of the plaintiffs’ two shops at 87-89 Commercial Road, Port Adelaide under a policy which provided cover for $400,000. The plaintiffs’ case is that the cover over the two shops at 87‑89 Commercial Road should have been for $800,000.
This action was initially heard by another District Court Judge and has been sent back for retrial following a successful appeal to the Full Court. The majority of the Full Court found that the District Court Judge erred in finding that there was no case to answer.
The plaintiffs rely upon two basic causes of action. First, they seek orders pursuant to s 12GM of the Australian Securities and Investment Commission Act 2001 (Cth) and s 1325 of the Corporations Act 2001 (Cth) that "the total declared value of the insurance" be varied to $800,000. In essence they seek rectification of the contract, although their claim is made pursuant to the provisions of the statutes. Secondly, the plaintiffs seek a declaration that the defendants are liable to pay damages for misrepresentation pursuant to s 12GF of the Australian Securities and Investment Commission Act 2001 and s 1041I of the Corporations Act 2001 as well as damages for negligence.
The history of the insurance over the properties is set out in the documents which have been admitted into evidence. The court also heard oral evidence from Mr Scragg and Mr Dixon. There is little dispute about the facts. The case depends firstly on a discussion at a meeting between Mr Scragg and Mr Dixon on 9 March 2005 and secondly the state of mind of Mr Scragg at various times. Mr Scragg gave evidence at both the first trial and the present trial.
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 Facts
In 2002 Mr Scragg signed a contract to purchase all of the property at 87‑91 Commercial Road, Port Adelaide for the sum of $300,000. It was a nominee contract and on settlement Mr and Mrs Zientara, as nominees, acquired the property at 91 Commercial Road for the sum of $140,000 and the plaintiffs, which are companies associated with Mr Scragg, acquired the property at 87‑91 Commercial Road for $160,000. The documentation for the assignment of the interest in No. 91 was prepared in Mr Scragg's office.[1]
[1] Exhibit 1DD17.
Mr Dixon had sold insurance to Mr Scragg for many years. At the time the properties were purchased Mr Scragg suggested to Mr Zientara that he should contact Mr Dixon to obtain insurance for the whole Commercial Road property. Mr Zientara did that and Mr Dixon arranged for a single policy to be issued by GIO to cover both the plaintiffs’ property at 87-89 Commercial Road and Mr and Mrs Zientara's property at 91 Commercial Road. The declared value of both of the properties was $320,000 which included $20,000 for the removal of debris. Mr Dixon's file note of his discussion with Mr Zientara refers to one commercial property at 87-91 Commercial Road with one sum insured for both properties of $300,000.[2]
[2] 2T 251.
Mr Scragg played no part in arranging the initial insurance. He said "I left my affairs entirely in Mr Dixon's hands, how he thought it best to do, that's what I did. I never questioned him in respect of anything, not even premiums".[3] Mr Scragg also said "I just asked him (Zientara) to arrange insurance and we discussed the amount. The mechanics of that was entirely up to them, I had no part in it".[4] Mr Scragg was aware that the proposed arrangement was to insure all three shops as one for $300,000.[5]
[3] 2T 70 l25.
[4] 2T 70 l11.
[5] 2T 70 l19.
On 21 March 2002 Mr Dixon wrote to "Mr P Scragg and Mr Zientara C/‑Peter Scragg and Associates" "Re: Commercial Property Insurance 87‑91 Commercial Road, Port Adelaide" referring to discussions with Mr Zientara "on-site" "in relation to insurance for the property situated at 87‑91 Commercial Road, Port Adelaide". He confirmed temporary cover which had been arranged.[6] The letter enclosed what was described as a general insurance quotation prepared for Mr Zientara and Mr P Scragg, 87‑91 Commercial Road, Port Adelaide. It referred to one property at 87‑91 Commercial Road. The letter requested further instructions from Mr Scragg and Mr Zientara.
[6] Exhibit P5.
Mr Zientara did not have a cheque book and he paid the initial premium in respect of both 87-89 and 91 Commercial Road with a credit card. Mr Scragg then reimbursed Mr Zientara for his share of the premium in respect of 87‑89 Commercial Road by giving Mr Zientara a cheque. At that time Mr Scragg had no difficulty distinguishing between the different interests.
About 11 months later on 7 February 2003 Mr Dixon wrote to Mr Zientara and Mr Scragg enclosing a Renewal Notice.[7] That resulted in discussions between Mr Dixon and Mr Zientara about describing the interests of the plaintiffs and Mr Zientara separately. The policy was amended so that 87-89 Commercial Road and 91 Commercial Road were shown separately with each property being insured for $250,000. However both properties continued to be insured on the same policy.[8]
[7] Plan 4 file – Exhibit 1DD36 p 209.
[8] Plan 4 file – Exhibit 1DD36 pp 204-208.
In 2003 Mr Scragg again paid his share of the premium.
On 19 February 2004 Mr Dixon wrote to Mr Zientara and Mr Scragg at Mr Scragg’s post office box enclosing a Renewal Application Advice in respect of the following 12 months.[9] The Amended Renewal Notice proposed that the shops at 87-89 Commercial Road be insured for $250,000 and the shop at 91 Commercial Road also be insured for $250,000.[10]
[9] Exhibit 1DD8.
[10] Exhibit 1DD9.
The policy was renewed and again the premium in respect of all properties was paid by Mr Zientara. Following a discussion between Mr Scragg and Mr Zientara it was agreed that Mr Scragg should bear 60% of the premium and Mr Zientara 40%. On 2 June 2004 Mr Scragg reimbursed Mr Zientara for his proportion. Again Mr Scragg had no difficulty in distinguishing the plaintiffs’ interests at No. 87-89 from the Zientara interest at No. 91 as described in the renewal documents.
In mid-2004 interests associated with Mr Scragg purchased another property at 255-265 St Vincent Street, Port Adelaide for $1.1 million plus GST. The purchase was funded by borrowings.
By letter dated 29 June 2004[11] which was headed "Commercial Property Insurance 87-91 Commercial Road, Port Adelaide" Mr Scragg requested Mr Dixon to "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 (the financier)" (my underlining). The property was also identified by a certificate of title reference. The letter advised Mr Dixon "Both properties need to be insured to full replacement value".
[11] Exhibit P7.
What is significant about Mr Scragg's letter of 29 June 2004[12] is that Mr Scragg was able to differentiate in the heading between 87-91 in respect of the properties covered by the insurance and 87-89 in the text of the letter in relation to the properties to which his request related.
[12] Exhibit P7.
In cross-examination Mr Scragg agreed that at the time he wrote Exhibit P7 it was clear to him that the correct numbers of his shops were 87-89.[13] Mr Scragg gave the following evidence:
His Honour
QIs it your evidence that while on 29 June 2004 you knew that number 91 Commercial Road was not owned by you there were occasions subsequent to that when you didn't know that knowledge.
AYes, your Honour and then there was occasions subsequent to that when I did. My knowledge moved in and out.
[13] 2T 89 l7.
Mr Scragg also gave evidence:[14]
AWhen I wrote a letter on 29 June I had the policy in front of me. At the moment I wrote the letter and settled the letter and dispatched the letter, I had a clear recollection of the distinction between the two situations. Thereafter I don't now recall how long that distinction occurred, though I do know that there are long periods of time where I was not cognitive of that distinction…
[14] 2T 230-231.
Mr Scragg’s request to Mr Dixon resulted in the production of Exhibit P8 which is a document from Plan 4 headed "Confirmation of Advice/Request-Commercial Insurance". The clients are described as the two plaintiffs together with Mr Scragg’s daughter Melanie Bernadette Scragg. They were the purchasers of the St Vincent Street property. The document referred to Mr Scragg’s letter of 29 June 2004[15] and advised that Mr Dixon had inspected the property at 255‑265 St Vincent St "and as a result of that inspection we wish to confirm the covers we've put in place…". The St Vincent Street property was insured for $2.8 million plus $50,000 for removal of debris. Under the heading Recommendation/Advice the document continued:
(b) Property Situated at 87-89 Commercial Rd, Port Adelaide
1. Fire and other damage
Increased building Sum Insured to $800,000
Wish to advise that we have noted the following interested party for both properties at 87‑89 Commercial Road, Port Adelaide and 255-265 St Vincent Street, Port Adelaide as follows…(The financiers were then identified)
[15] Exhibit P7.
An Extra Premium Notice dated 13 July 2004 addressed to Naiama was attached.[16] It referred to "Multiple Situations", one of which was the property situated at 87-89 Commercial Road, Port Adelaide in respect of which the two plaintiffs were noted as the insured. The Zientara property at 91 Commercial Road was not listed in the "Situations". On p 3 the notice referred to the property at 87-89 Commercial Road as being insured for $800,000 and on p 4 the notice referred to the property at 91 Commercial Rd as being insured for $275,000. On p 5 the notice referred to the St Vincent Street property as being insured for $2.85 million. Mr Scragg agreed that he received the Extra Premium Notice.[17]
[16] Exhibit 1DD29.
[17] 1T 57, 1T 271 l13 to 29 and 2T 227 l38 to 228 l32.
Mr Scragg gave evidence that he thought Mr Dixon had cut a new policy in relation to his interest alone and that No. 91 no longer continued to be insured under his policy.[18] He said that was his state of mind and that was his case.
[18] 1T 136 l32, 1T 138 l32, 2T 121 l23 to 34 and 2T 167 l12 to 24.
That evidence of Mr Scragg is shown to be incorrect by p 4 of Exhibit 1DD29 and by Exhibit 1DD30 which is another Extra Premium Notice dated 12 August 2004 addressed to Naiama. Mr Scragg wrote by hand on p 1 of Exhibit 1DD 30 "Insurance. (1). 87 Commercial Road 0.8 m. (2). 255 St Vincent Street, Port Adelaide 2.8m".
It is to be noted that Mr Scragg had no difficulty in identifying the plaintiffs’ interest notwithstanding the fact that there was no reference to the Zientara name in the "Situations" described. Mr Scragg also highlighted the premium which was $5,657.82. The fact that Mr Scragg was able to identify the plaintiffs’ properties at that time is relevant to a complaint which Mr Scragg has made about the consequences of the omission to refer to the Zientara interest as a "Situation" in various documents prepared by the defendants.
The following evidence of Mr Scragg during cross examination at the first trial is inconsistent with the suggestion that the insurer had "cut" a new policy:
QI understand that, thank you. But then in respect of the policy insofar as related to No. 91, if we go to p 4 of D27, you understood the policy would remain unaffected by your request.
AYes.
QAnd that the policy would continue insuring your two shops and Mr Zientara's shops but with your interest properly described and as requested the interest of Challenger Finance properly noted.
AThat was my expectation at the time.[19]
[19] 1T 134 l15 to 24.
I do not accept that Mr Scragg believed that a new policy had been cut because later when Mr Scragg wanted the St Vincent Street property and the Kanj interest to be noted he requested that they be noted on the original policy.
In all of the loan application documents addressed to the financier (Challenger) Mr Scragg correctly identified the plaintiffs property at 87‑89 Commercial Road.[20] He designated the shops as being the subject of asbestos registers.[21]
[20] Exhibit 1DD19.
[21] Exhibit 1DD19.
On 20 August 2004 Mr Zientara spoke to an employee of the first defendant and increased the cover over 91 Commercial Road to $500,000. That increase in the cover lead to a further Extra Premium Notice dated 1 October 2004.[22] As usual it was addressed to Naiama.
[22] Exhibit P24.
In February 2005 the policy came up for renewal. Mr Scragg gave evidence:
The thing I recall is looking at the renewal document which had a sizeable sum to be paid, I think approaching $10,000, and trying to understand how it is that the figure of premium could be that amount. I kept looking at it and looking at it and I just couldn't understand. At that point there was a telephone discussion between Mr Dixon and myself, I believe I initiated it, and we agreed between ourselves that he would come and explain to me what cover I had and that applied not just to this particular policy, the properties at Port Adelaide, but that applied to all the properties that the first plaintiff was involved in across-the-board.
The other properties included Mr Scragg’s residence and other properties which he had at Hindmarsh and Findon.
One evidentiary dispute relates to whether it was Mr Scragg who initiated the discussion or whether it was Mr Dixon. Whatever the correct position a meeting did take place on 9 March 2005 between Mr Scragg and Mr Dixon at Mr Scragg’s office. The plaintiffs misleading and deceptive conduct case depends largely upon the interpretation of the discussion at that meeting.
Mr Scragg gave evidence that he sat at his desk. Mr Dixon sat alongside with papers on his knee. Mr Scragg gave the following evidence in chief:
QWas the topic of insurance at Commercial Road discussed.
AYes, it was.
QHow did it arise and who said what.
AWell, 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.
QWas anything else said on that topic.
AThere 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.
QWas anything else said on the topic of Commercial Road.
AI think at some stage there was a discussion about insurance for loss of rent. I’m not sure if it arose right then or it arose after we had reviewed all the situations.
QWhat other situations were reviewed.
AI then asked him how much there was for St Vincent Street.
QWho said what on that topic.
AWell, again I said "How much cover?", and he said - I don't know if he said "two million 800", and it was either 800 or 850,000. I don't recall, but it was the right amount. There was no need for me to have any concern about that one.[23]
[23] 1T 66 l14.
Mr Scragg said they then went on to discuss other "Situations" being the properties at Port Road, Hindmarsh, Hill Street, North Adelaide and Grange Road, Findon. He recalled going through every property that the first plaintiff owned that time. Mrs Zientara's name was never mentioned at the meeting. There was a discussion about rental and premium funding.
Mr Scragg said "As I understand it (the meeting) concluded with instructions for (Mr Dixon) to cover the Commercial Road situation at $800,000 and that he was - we would set in place the direct debit facility".[24]
[24] 1T 68 l35.
Mr Dixon also gave evidence of the meeting.[25] He said that when producing the documents for renewal in March 2005 he thought it would be prudent of him to make contact with Mr Scragg to arrange a time to review the insurances that were covering the properties within the policy. He said that he arranged a meeting and that he attended at Mr Scragg’s office on 9 March 2005. At that time the plaintiffs were in arrears with the premium funding.[26]
[25] 2T 292.
[26] 2T 296 l32. Plan 4 file – Exhibit 1DD36 p 146.
Mr Dixon said he took with him a number of papers including the Renewal Notice dated 4 February 2005.[27] Mr Scragg had other insurance with the defendants. Mr Dixon said they discussed the contents of the Renewal Notice and the sum insured or appropriated to each of Mr Scragg's properties.[28] He said there was reference to a sum insured for the Commercial Road properties. He said "As best I can, Mr Scragg asked me what was the sum insured for the properties at Commercial Road and I advised collectively of $1.3 million".[29] The sum of $1.3 million was not broken down in the discussion.[30] Mr Scragg responded "That seems to be over the top"[31] or "That appears to be well and truly over the top".[32]
[27] Exhibit 1DD16.
[28] 2T 293 l13.
[29] 2T 291 l30.
[30] 2T 303 l22.
[31] 2T 294 l4.
[32] 2T 302 l36.
Mr Dixon's understanding was that the sum insured had been increased to $800,000 in June/July 2004 because of a requirement of financiers.[33] He knew that the financier was Challenger. The following exchange then occurred:
QWas Challenger mentioned in this discussion on 9 March 2005.
ANo.
QWas anything said about insurance requirements.
AFrom as best I can recall Mr Scragg advised me that there was the finance agreement for the Commercial Road properties was only for 800,000.
QWas anything said about insurance requirements in respect of that finance arrangement.
AHe believed that that is all he needed to have to satisfy his finance.
[33] 2T 294 l11.
Later Mr Dixon was asked whether at the meeting of 9 March 2005 anything was said by Mr Scragg as to what sum insured he wanted and he replied "Yes. He said $800,000 was what was required". Mr Dixon then asked "How would you like me to apply that to the shops?" and Mr Scragg replied "To provide half on each".[34] The evidence of Mr Scragg was essentially the same.[35]
[34] 2T 295 l3.
[35] 1T 66 l28.
Mr Dixon's copy of the Renewal Notice contained a handwritten direction to one of his staff members to "Amend renewal as highlighted and remit".[36] On p 4 of the Renewal Notice, which described the property at 87‑89 Commercial Road, the figure $800,000 has been struck out and in handwriting there are the words "Reduce sum insured to $400,000". On p 4 which relates to the property at 91 Commercial Road, Port Adelaide the figure of $500,000 has been struck out and the handwritten notation made "Reduce sum insured to $400,000". Mr Dixon said that he made those notations on the Renewal Notice while he was at the meeting with Mr Scragg sitting at his desk.[37] He said those notations reflected the instructions he understood he received from Mr Scragg at the meeting.[38]
[36] Plan 4 file – Exhibit 1DD36 p 108.
[37] 2T 295.
[38] 2T 296 l1
The following evidence was then given by Mr Dixon in answer to questions from myself:
QAs to that, p.111 is a page dealing with 91 Commercial Road indicating a certificate of insurance for $400,000. What did Mr Scragg say which indicated he wanted to reduce the insurance on No. 91 Commercial Road.
AIn all my dealings with Mr Scragg and Mr Zientara I always understood when we talked about these properties we talked about properties from 87-91 Commercial Road.
QWas anything said at that meeting on 9 March about No.91 Commercial Road.
ANo.[39]
[39] 2T 296 l5 to 13.
The plaintiffs complaint is that instead of advising Mr Scragg that the total sum insured on the Commercial Road properties was $1.3 million, which was the total sum insured for both the plaintiffs properties at 87-89 Commercial Road and the Zientara property at 91 Commercial Road, Mr Dixon should have given an answer which was confined to the plaintiffs properties at 87-89 Commercial Road and Mr Dixon should have allocated the whole sum of $800,000 which Mr Scragg requested to the plaintiffs properties at 87-89 Commercial Road.. The sum insured of $500,000 for the Zientara property at 91 Commercial Road should not have been amended at all.
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.
On 10 March 2005 an Amended Renewal Notice was forwarded to the plaintiff, Naiama, requesting payment of a total amount of $8,521.74.[40] It described "Multiple Situations" including the plaintiffs’ interest in respect of the property at 87-89 Commercial Road, Port Adelaide and the interests of the plaintiffs and Melanie Bernadette Scragg in respect of the St Vincent Street property. The interest of Mr and Mrs Zientara in 91 Commercial Road was not listed as a "Situation".
[40] Exhibit P14.
The Amended Renewal Notice referred to 87-89 Commercial Road with sum insured of $400,000. Again, while there was no reference to the property of Mr and Mrs Zientara at 91 Commercial Road as a "Situation", p 4 of the Amended Renewal Notice did refer to 91 Commercial Road as an insured property with a sum insured of $400,000.
The absence of a reference to the interest of Mr Mrs Zientara at 91 Commercial Road as a "Situation" is the subject of a complaint by the plaintiffs.
On 15 March 2005 Plan 4 and Mr Dixon forwarded a document headed "Confirmation of Advice/Request-Commercial Insurance".[41] Mr Scragg has acknowledged that he received and read the document.[42] The client was described as the two plaintiffs and Melanie Bernadette Scragg. There was no reference by name on the document to Mr and Mrs Zientara. Mr Scragg said that Mr Zientara's name was never discussed at the meeting on 9 March.[43] The document described the meeting on 9 March 2005 as being "to review your business insurance policy…". Under the heading "Recommendation/Advice" the document stated:
We wish to confirm our discussions as follows:
1. Fire & Other Damage
a) Building situated at 87-89 Commercial Road, Port Adelaide. Peter Scragg advised to reduce the 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.
c) Property situated at 255-265 St Vincent Street, Port Adelaide to remain as is and unaltered.
…
[41] Exhibit P9.
[42] 1T 69 l1.
[43] 1T 69 l16.
Additionally the Confirmation of Advice also stated that:
This advice is based on information you have supplied to us and is not a full review of your insurance needs. You should check to ensure the recommendation I have set out meets your needs. Please read the Product Disclosure Statement or Policy Document to ensure the cover provided meets your needs and to be aware of your obligations. (My underlining)
The document referred at the top of the first page to Plan 4 and Mr Dixon as Authorised Representatives and under the heading "Licensee Contact Details" named AMP GI Distribution Pty Ltd. The document also stated that AMP GI Distribution Pty Ltd ("AMPGID") had an Australian Financial Services Licence to provide advice and services in relation to general insurance products and had an arrangement with GIO General Limited ("GIOG") whereby AMPGID distributed general insurance products issued by GIOG (the insurer) which were branded AMP or GIO.
At the first trial Mr Scragg accepted that he saw the Confirmation of Advice at about the time it was issued.[44] He said he understood it to be in accordance with the instructions given by him to Mr Dixon on 9 March 2005.[45] Mr Scragg gave evidence that he read the Confirmation of Advice and:
AI assumed that was a confirmation of what had taken place at the meeting; in other words, for some reason I was over insured and that my interests at Commercial Road were being corrected to the right amounts that I instructed Mr Dixon to effect.[46]
[44] Exhibit P9.
[45] 1T 74 l19 and 1T 77 l7.
[46] 1T 69 l37.
Mr Scragg gave the following evidence in chief at the first trial:
QYour evidence is that you think that the document at pp 128 through to and including p 134 of MFI P4, being the document calling itself "Amended Renewal Notice" and stating its date of issue as 10 March 2005, your recollection is that that's the thing that came with the Confirmation of Advice, Exhibit P9, the thing being referred to on the second page of P9 as the "policy document".
AYes, I've got no recollection, but I just suspect that's what it was, that's all.
QHowever it arrived or whatever it arrived with-
His Honour: "It" being?
Mr Hoile: "It" being the document at pp 128 through to p 134.
XN
QDo you recall getting it or reading it.
ANo, I relied on the document at P9, I relied on P9. That set it all out for me. There it was.[47]
[47] 1T 74 l3 to 20.
In cross-examination Mr Scragg again agreed that Exhibit P9 set out the terms on which he sought the policy to be renewed.[48]
[48] 1T 177 l7.
The Confirmation of Advice was the first of many documents which described the level of insurance that was in place from March 2005 up until the time of the fire at the end of July 2006.[49] Those documents all advised Mr Scragg of what Mr Dixon had done following the meeting of 9 March 2005. If the conduct of Mr Dixon at the meeting of 9 March 2005 was misleading or deceptive Mr Scragg was advised in writing first shortly after the meeting and then many times thereafter of the actual level of insurance.
[49] Exhibit P9.
For reasons discussed later the fact that Mr Scragg read Exhibit P9 at about the time it was issued is an answer to the plaintiffs’ case, whether it be based on misleading and deceptive conduct or negligence.
In due course the adjusted premium was paid. A further Premium Adjustment Notice was issued dated 8 April 2005.[50] An endorsement indicated that payment was made on 20 March 2005. The notice had been forwarded to Naiama. It showed a sum insured of $400,000 for each of 87-89 Commercial Road and 91 Commercial Road. Mr Scragg did not dispute that he saw that document at about the time that it was issued.
[50] Exhibit P12.
The confusion surrounding the meeting of 9 March 2005 is exacerbated if Mr Scragg did, as he sometimes asserted, believe that the reference to 91 Commercial Road was a reference to a property owned by his companies.[51] If that was Mr Scragg's belief then his enquiry to Mr Dixon would have related to 87-89 and 91 Commercial Road, in which case the answer given by Mr Dixon would have been correct.
[51] For example 1T 164 to 165.
On 21 April 2005 Mr Scragg wrote to the insurers advising that "Mr Omar Kanj of 263 St Vincent Street, Port Adelaide, South Australia is to be entered on the insurance policy as an insured party for lot 702, 255-265 St Vincent Street, Port Adelaide. This takes effect as at 1 April 2005".
On 5 August 2005 Mr Scragg wrote to Mr Dixon advising him to arrange insurance for a property at 19 Montpelier Square, Port Adelaide in the names of Barry Joseph Zientara, Barbara Joanna Zientara, the first plaintiff and the lender in respect of the purchase of that property.
The insurance over the Montpellier Square property was affected by the inclusion of that property on the policy which had been in force since 2002.[52] By that time all of the Commercial Road properties, the St Vincent Street property, and the Montpelier Square property were included as different "Situations" on the same policy. Mr Dixon said there were benefits to the insured if the insurance was arranged in that way because the public liability cover that is included in the policy is cheaper if there is one policy than it is if there are separate policies.[53]
[52] 2T 297.
[53] 2T 284 l28.
Mr Scragg wrote a second letter to Mr Dixon on 5 August 2005 referring to a telephone conversation on 3 August confirming that a two thirds interest in the St Vincent Street property had been sold. Mr Scragg advised that the owners of the property were the existing policyholders with a one third interest held by a company, Mr and Mrs Denison and Mr and Mrs Temby. Mr Scragg requested Mr Dixon to alter the policy to reflect that change.[54]
[54] Exhibit P15.
The changes made to the policy in August 2005 resulted in an increase of $641.62 in the premium. A Premium Adjustment Notice was issued to Naiama on 9 August 2005. Pages 2 and 3 described "Multiple Situations" including the various interests in the St Vincent Street properties, the plaintiffs interest in 87‑89 Commercial Rd and the interests of Mr and Mrs Zientara and the plaintiff ACN 068 691 092 in the Montpellier Square property. Like earlier documentation the list of "Situations" made no reference to Mr and Mrs Zientara's interest in 91 Commercial Road although on page 3 there was a reference to the property at 87-89 Commercial Road where the sum insured was shown as $400,000 and on page 4 there was a reference to the property at 91 Commercial Road where the insured sum was shown as $400,000.[55]
[55] Exhibit P17.
The policy was due to expire on 20 March 2006. A Renewal Notice addressed to Naiama is dated 1 March 2006.[56] The total amount due was $9,770.36. The notice referred to "Multiple Situations" including the interest of Mr Omar Kanj in respect of 263 Saint Vincent Street, the plaintiffs in respect of 87-89 Commercial Road and 255-265 St Vincent Street, Mr and Mrs Temby in respect of 255-265 St Vincent Street and the interest of Mr and Mrs Zientara in respect of Montpellier Square, Port Adelaide. Again, the Renewal Notice did not refer to Mr and Mrs Zientara's interest at 91 Commercial Road as a "Situation"; although reference was made to the property at 87-89 Commercial Road being insured for $400,000 and the property at 91 Commercial Road, Port Adelaide being insured for $400,000. Mr Scragg said that he scanned that document and that the "Situations" all looked in order to him.[57]
[56] Exhibit 1DD27.
[57] 1T 237 l27.
The policy was renewed. The renewed policy is the one which was in force at the time of the fire.
On 26 June 2006 Mr Zientara, acting on behalf of himself and Mr Scragg, telephoned Mr Dixon at Mr Scragg's request to have glass cover added to the policy. In his handwritten record of the conversation Mr Dixon noted that the request was in respect of three properties namely (1) 87-89 Commercial Road, (2) 91 Commercial Road and (3) 19 Montpelier Square. Mr Dixon wrote "In all other respects the policy remains unaltered".[58]
[58] Plan 4 file – Exhibit 1DD36 p 57 and 2T 299.
The fact that Mr Scragg had requested Mr Zientara to have glass cover included in the policy is inconsistent with Mr Scragg's assertion that a new policy had been cut and that he believed from the 2004 onwards that the policy related to the interest of the plaintiffs and his daughter only.
Mr Dixon arranged the glass cover which Mr Zientara had requested. On 27 June 2006 Mr Dixon addressed a letter to "Dear Barry" at Naiama care of Mr Scragg’s office enclosing a Policy Change Certificate confirming the changes.[59] Mr Dixon said he addressed that letter to "Dear Barry" because Mr Zientara was the person who gave the advice to make the alteration. A Premium Adjustment Notice advising of the new premium was addressed to Naiama.[60] The "Multiple Situations" were described as they had been on the earlier documents with no reference to the Zientara interest at 91 Commercial Road. The property at 87-89 Commercial Road was shown as having a sum insured of $400,000 and 91 Commercial Road was also shown as having a sum insured of $400,000.
[59] Plan 4 file – Exhibit 1DD36 p 56.
[60] Exhibit P20.
The original of the Premium Adjustment Notice is a most significant document because of handwritten notes which Mr Scragg made on it.[61] On the first page he has written the words "Port Adelaide Properties". On p 3 of the document, which described the property at 87-89 Commercial Road with a sum insured of $400,000, Mr Scragg wrote the word "Peter". On p 4, which described the property at 91 Commercial Road, he wrote the word "Barry". On p 8 of the document, which refers to glass cover on the Montpelier Square property, Mr Scragg wrote the words "Jeff. This cover is not required". Mr Scragg said that he made the notes on the document shortly after the received it - he expects it was the same day.[62]
[61] Exhibit P20.
[62] 1T 90 l35.
Mr Scragg's handwritten notes are important because they show that when Mr Scragg read Exhibit P20 at the end of June 2006 he was able to identify his property and the Zientara property. He should have seen that the plaintiffs’ property was insured for $400,000.
Mr Scragg was asked why he made those notes on Exhibit P20 and replied:
ABecause I became aware for the first time that there was a sleeper within the document. In other words, I became aware for the very first time that Mr and Mrs Zientara held an interest in relation to those properties at Commercial Road. Up until that time I was not aware and I was able to identify from events relating to the creation of this document that the sleeper existed and I wrote "Peter" against what related to my interests, the plaintiffs’, and I wrote "Barry" as in relation to the sleeper interest to identify it on p 4.[63]
[63] 1T 91 l20.
Initially Mr Scragg did not concede that when he read Exhibit P20 he became aware of the level of insurance on each of the properties at 87‑89 Commercial Road and 91 Commercial Road, however Mr Scragg did eventually make the concession. Mr Scragg then made the claim that he had overlooked the fact that he required $800,000 not $400,000 as shown.
On his own evidence, at the time Mr Scragg received Exhibit P20 he was aware that the plaintiffs’ property at 87-89 Commercial Road was covered for $400,000. If, as he claimed, that was an error he did nothing to correct that error. It is significant that on 5 July 2006 Mr Scragg did send a message by e-mail to Mr Dixon saying:
Re your letter of the 27th June.
Please make the following alterations.
1. Lot 703 St Vincent Street 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 Street Pt Adelaide
b. Lot 702 St Vincent Street Pt Adelaide
c. 91 Commercial Rd Pt Adelaide
d. 19 Montpelier Sq Pt Adelaide
This information is required for the financial years ending 30 June 2005 and 2006.
Please provide this information as soon as possible.
Yours Peter Scragg[64]
[64] Plan 4 file – Exhibit 1DD36 p 55.
The fact that after reading the Premium Adjustment Notice[65] Mr Scragg did request an amendment to the policy in respect of lot 703 St Vincent Street, but did not seek to amend the sum insured in respect of 87-89 Commercial Road, is telling.
[65] Exhibit P20.
As requested Mr Dixon cancelled the policy in relation to lot 703 St Vincent Street. On 6 July 2006 a Premium Adjustment Notice was issued which continued to show 87-89 Commercial Road, Port Adelaide to have an insured value of $400,000 and 91 Commercial Road, Port Adelaide to have an insured value of $400,000.
The plaintiffs had been informed in clear terms as to the sum insured. The evidence to which I have referred establishes that Mr Scragg had been told on many occasions that 87-89 Commercial Road had an insured value of $400,000. He was first given that information in March 2005.
On 10 July 2006 Mr Dixon e-mailed to Mr Scragg the premium information which had been requested for the four properties for the 2005 and 2006 periods.[66]
[66] Plan 4 file – Exhibit 1DD36 p 43.
On 28 July 2006 the property was destroyed by fire.
Mr Scragg gave evidence that a few days after the fire he had a telephone conversation with Mr Frank Gretz, a loss assessor retained by the insurers. Mr Zientara went into Mr Scragg’s office while Mr Scragg was speaking with Mr Gretz. Mr Zientara placed a document in front of Mr Scragg and pointed to a section of the document which he read. Mr Scragg said that from that document he realised that the amount of cover that was stated on the documents immediately before the fire was wrong. Mr Scragg was asked to identify the information which he saw and then replied "It was in relation to the declared value for my property at Commercial Road and it had a figure of $800,000 whereas in the earlier documents it had $400,000".[67]
[67] 1T 100.
It is difficult to know how to interpret that evidence because the value of each of the properties at 87-89 Commercial Road and 91 Commercial Road was consistently shown in the insurance documents from the time of the adjustment in March 2005 as being $400,000. It was in fact the documents prior to March 2005 which showed $800,000. There was no document showing the insured value of the plaintiffs’ property at $800,000 subsequent to March 2005.
Whatever the position I do not regard discussions with Mr Zientara and Mr Gretz after the fire as being of any consequence.
The Basis of the Plaintiffs’ Claim
The Statement of Claim alleges that by reason of the failure of Mr Dixon and Plan 4 to give effect to Mr Scragg’s instructions the plaintiffs have suffered "an under insurance loss of $400,000 or thereabouts".[68]
[68] Statement of Claim para 8.
In the Statement of Claim it is alleged that the conduct of the defendants was misleading in that the defendants failed to properly distinguish between the respective interests of the plaintiffs and the Zientaras. The plaintiffs refer to the fact that different interests were included on the same policy of insurance, that in taking instructions Mr Dixon failed to distinguish between the respective interests of the plaintiffs and Mr and Mrs Zientara. They complain that Mr Dixon treated Mr Scragg’s instruction on 9 March 2005 wrongly and say that Mr Dixon should have realised that to insure the plaintiffs’ shops for only $400,000 in total would result in substantial under insurance. The plaintiffs complain that when on 9 March 2005 Mr Dixon advised that the total declared value of the insurance was $1.3 million he did not disclose that sum included 91 Commercial Road.[69]
[69] Statement of Claim para 9.
The conduct of Mr Dixon is alleged to be in breach of s 12DA of the Australian Securities and Investments Commission Act 2001 ("the ASIC Act") and s 1041H(1) of the Corporations Act 2001.[70] Additionally it is alleged that Mr Dixon and Plan 4 "assumed a duty to exercise a reasonable degree of care and skill in taking and executing the instructions of the plaintiffs, but were negligent in failing to avoid or to resolve ambiguity arising in the course of taking and executing those instructions".[71]
[70] Statement of Claim para 11.
[71] Statement of Claim para 12.
Pursuant to s 12GM of the ASIC Act and s 1325 of the Corporations Act the plaintiffs seek an order "that the total declared value of the plaintiffs insurance be varied to $800,000". In essence that is a claim for rectification of the policy.
The plaintiffs also seek declarations that the defendants are liable to pay damages pursuant to s 12GF of the Australian Securities and Investment Commission Act and s 1041I of the Corporations Act.
Finally the plaintiffs seek an order for rectification of the policy in accordance with an agreement alleged to have been reached between Mr Scragg and Mr Dixon.
At the first trial before His Honour Judge Burley Mr Hoile of counsel appeared for the plaintiffs. In opening the plaintiffs’ case he said:
The plaintiffs’ case is that the statements and the conduct of Mr Dixon were misleading. I use that word advisedly. There is no suggestion that it was intentional and I don't use the word which on the authorities has a slightly different connotation of deception. As I said, there is no suggestion at all that the conduct of Mr Dixon was anything other than inadvertent, but the plaintiffs’ case is that its effect was misleading. Again on the authorities to which we will refer your honour in due course, it is conceptually a simple factual enquiry. Was Mr Scragg, in fact, misled? Did he form an erroneous belief? And the plaintiffs’ case is that he did.
The second part of the enquiry will be was the formation of that erroneous belief caused, or contributed to by the conduct of Mr Dixon? And the plaintiffs will be seeking a finding from your honour at the end of the day that it was.
His Honour: You say that this arose out of the conversation that you have just recounted?
Mr Hoile: Yes.[72]
[72] 1T 26 l10 Exhibit 1DD32.
At that time the emphasis of the plaintiffs’ case was directed at the conversation with Mr Dixon on 9 March 2005 and allegedly misleading conduct.
His Honour Judge Burley found that there was no case to answer because the plaintiffs had been informed by the defendants as to the correct position so that any misleading conduct had ceased to have effect. In order to avoid a similar finding at this trial the plaintiffs’ case is that they had not been informed as to the correct position. They now place a greater emphasis on negligence.
In opening the plaintiffs’ case to this court Mr Britton said in 2006 when Mr Scragg saw Exhibit P20 on or about 27 or 28 June, he saw there was a clear error because of the inclusion of glass on Montpelier Square house and for that reason he wrote to Mr Dixon. Mr Britton told the court that Mr Scragg thought "Well, why would I be paying insurance premiums in relation to an interest that Mr Kanj has in St Vincent Street". He also wondered why he had been paying premiums in respect of the interests of the Temby's and William and Sylvia Dennison.[73] Mr Britton said that Mr Scragg identified the Zientara property at 91 Commercial Road and identified what he called a "sleeper". He said:
…At this point, however, and of course this is a point only some three weeks approximately before the fire, he didn't turn his mind, because he is concentrating on, one might think because of all of these premiums that he has over-paid, didn't turn his mind to the insured value of his property at Commercial Road. As I've said, he has had faith in Mr Dixon who he has now known for 10 years, and although he had requested the increase to $800,000 when he purchased the St Vincent Street properties, the actual insurance cover wasn't something that was foremost in his mind.[74]
[73] 2T 9 l17.
[74] 2T 12 l8.
He said:
It is the plaintiffs’ case that because of that, albeit unwitting misrepresentation by Mr Dixon, that the plaintiff is entitled to the cover which he had as from about July 2004 when Challenger said they wanted that degree of cover. There is absolutely no reason to think that he would be in any way wanting to reduce the cover.[75]
[75] 2T 12 l27.
While referring to the insurance documents Mr Britton said that at no stage did Mr Scragg say:
…"Hold on, 91, that's not my property, that Mr Zientara's property". There is nothing in this document which bears the name Zientara. It then sets out the cost of the recommendation and Mr Scragg, at that point, believes that what has been put in place is what he requested, without looking at this document in any detail because he's had the meeting with Dixon, who he has known for, at that stage, nine years and having faith that what he has asked him to do, the instruction, will be taken up, and that state of mind persists over the period from March 2005 until the very end. All that Mr Scragg learns in late June 2006, the following year, is that he has had what he refers to as a "sleeper" on the policy, and that is the Zientara insured interest and those other interests from Montpelier Place, the Square, where he has the joint interest with Mr Zientara and the two lots of people from the St Vincent Street properties.[76]
[76] 2T 15 to 16.
For that argument to be valid Mr Scragg must not have had knowledge of the contents of many insurance documents sent to the plaintiffs between March 2005 and July 2006. Also, at the end of June 2006, Mr Scragg must have failed to comprehend the statements in Exhibit P20 as to the amount for which the plaintiffs’ properties were insured.
In his final address Mr Britton referred to an Extra Premium Notice dated 27 October 2004 and observed that there is no reference on that document to a "Multiple Situation" at 91 Commercial Road.[77] He acknowledged that it is true that within the document there is a description of property at 91 Commercial Road but pointed out that in that document there is no reference to the name Zientara. He submitted that by any reasonable reading of that document, if one did not see the Zientara name, there has effectively been a misrepresentation by omission.[78] A similar submission was made with respect to Exhibit P9, the Confirmation of Advice dated 15 March 2005.[79] Mr Britton also relied upon other similar documents for the same argument.[80]
[77] Exhibit P23.
[78] 2T 472 l37.
[79] 2T 481 l11.
[80] Plaintiff Closing Address 2T 473 l22.
Mr Britton submitted that the error (the omission to refer to the Zientara interest as a "Situation") amounted to a negligent act.[81] I do not accept that submission. There is no evidence as to how an insurance agent should word policy documents. There is no evidence that the omission was causative of any loss.
[81] 2T 479.
Mr Britton referred again to Exhibit P9 and the omission to refer to the word "Zientara" and submitted:
…It is the plaintiffs’ case that Mr Dixon had an obligation having regard to all of the circumstances to volunteer information which was available and which Mr Dixon should have had.[82]
[82] 2T 524 l29.
I do not accept that there was such a duty. Why did Mr Dixon have a duty to volunteer information which must have been well-known to Mr Scragg. In fact Mr Scragg was Mr Dixon's source of the information.
Mr Britton referred to the Victorian Full Court decision of Veljkovic v Vrybergen [1985] VR 419 to support the following submission:
…So relying on that principle I submit that the knowledge of one of the sites - that's if Mr Dixon did have a knowledge - Zientara interest he should have known that that would be a matter which would be germane to the decision which Mr Scragg was making in front of him at the meeting, namely, that he wanted $800,000 worth of insurance on his properties.[83]
[83] 2T 525 l23.
I do not accept that the principles referred to in Veljkovic provide any basis on which to hold the defendants liable. The decision of Marks J in Veljkovic was criticised by Ipp J in the New South Wales case of Caldwell v JA Neilson Investments Pty Ltd (2007) 69 NSWLR 120 on the basis that was not a case against an agent but was the case against a broker.
The submission of the plaintiffs as to Veljkovic is not supported by the evidence. However if the submission was factually correct Mr Scragg's erroneous state of mind is not something for which the defendants can be held responsible.
Mr Britton submitted that right up until July 2006 Mr Scragg continued "not to have an appreciation that the amount of cover on his property is less than he wanted".[84] He submitted that Mr Scragg had forgotten that $800,000 was the Challenger requirement.[85] He submitted that the chain of causation was not broken until the conversation with Mr Gretz and Mr Zientara a few days after the accident.[86]
[84] 2T 505 l27.
[85] 2T 506 l30.
[86] 2T 512.
I find the evidence establishes that the chain of causation had been broken a few days after the meeting on 9 March 2005.
Mr Scragg's Evidence
In order to succeed the plaintiffs must avoid the effect of the information contained in the insurance documentation. They seek to do that by relying upon the evidence of Mr Scragg.
Initially Mr Scragg's evidence was that he did not know the shop numbers of the respective interests and therefore could not identify No. 91 Commercial Road as being owned by Mr and Mrs Zientara. As a consequence he thought that the sum insured of $400,000 shown in the insurance documents on No. 91 Commercial Road was included in the cover over the plaintiffs’ properties.
In answer to a question from the judge at the first trial Mr Scragg said that all he remembered was that the Zientara interest and his interest were insured under the one policy and he did not identify that by reference to street numbers.[87]
[87] 1T 184 l34.
Mr Scragg said that when he looked at policy documents in February 2004 and March 2005 he did not understand that the shops which the plaintiffs owned were 87-89 Commercial Road. He gave evidence at the first trial that at no time from 2003 until the end of 2005 did he have any appreciation of the numbers of the shops that he owned. He said "the only exception was when I wrote the letter on 29 June (2006) when I went and got the policy document itself".
His evidence in cross-examination was:
QSo for that fleeting moment when you wrote that one letter you had the appreciation the numbers of your shops were 87-89.
AYes, from the document, the one that was issued in February 2004, then I put that away, I wrote the letter and to me that was the end of it.
QSo in the short period of time which you directed your attention for asking for the policy amendment in July 2004 you were conscious of the numbers 87-89 as relating to your shops but at no other time in the period, from the commencement of the policy until the end of 2005 did you have such an appreciation.
AI had a general appreciation that it was somewhere around the 80s but I had no specific appreciation that Barry's property was 91 and that mine was 87, 89. I had 91A as one of my entrances to one of my properties.
QThe only time you had an appreciation of the correct numbers of your shops was for the fleeting moment when you wrote the letter seeking an amendment to the policy in July 2004.
AI can't answer that because I don't have a recollection. I don't - I object to the expression "fleeting moment", I at that time made a precise enquiry because I had to borrow over $1 million, the default, if I - if the settlement didn't take place, just for the sake of one day, I lost something like $350 just a day in penalties. I wanted to make sure it was dead right. I went and got the original document, I wrote the letter against the original document. I sent the letter, I put the original document away and then what followed was just the transactions which were in the book and that's the reason why I did it. I may have on other occasions, when I spoke to Anna, from Malin and Russell and all that, been given an appreciation of the exact number, I can't say definitely I wasn’t, but clearly it's not something that was foremost and fixed in my mind.[88]
[88] 2T 59 l20 to 60 17.
In other evidence Mr Scragg said that at the time of the renewal in 2003 it was apparent to him that both his property and Mr Zientara's property were included in the same policy of insurance.[89]
[89] 1T 119 l3.
Mr Scragg said that in the case of the 2004 renewal he saw that the shops at No’s. 87-89 and No. 91 were separately described in the policy documents.[90]
[90] 1T 128 l3, Exhibit D27 and 1T 134 l15.
Mr Scragg was asked in evidence in chief whether at the end of June 2006 he had noticed the street addresses that were given on pp 3 and 4 of Exhibit P20. He replied:
AYes, I think that I had an increased recollection at the time because from February of 2006 I'd been refurbishing my property and I needed to go to the address for tradesmen and that to come to the property because I had another proposed tenant, which was obviously moving in at the time that the fire occurred and I had a greater awareness of the numbers and I was able to go from my knowledge and dissect and make a calculation that, 87, 89 related to me and 91 related to Zientara.[91]
[91] 1T 92 l22.
Mr Scragg was asked whether at the time he made the notes on. Exhibit P20 he noticed the amounts for which the Commercial Road properties were insured and he said:
AI saw the amounts, but I didn't ask myself the question, I didn't take the next step and say "Is this amount right?" I didn't take ask myself that question. I just simply noted it, noted that I had a sleeper, became very annoyed that I was paying for a sleeper without my knowledge, but I didn't look at the document and say "In actual fact is what’s declared here and put in place here right or wrong?" I just didn't ask myself that question.[92]
[92] 1T 92 l37.
Mr Scragg was cross-examined about Exhibit P20 at the first trial.[93] His evidence was as follows:
[93] 1T 242 l29.
QWhat was it about the content of that particular page that alerted you at this time at the end of June 2006 this was a sheet of this documentation confirmed the insurance cover was extended to 91 Commercial Road and that it was Barry's property.
ABecause it had the description on p 7 in relation to the second piece of plate glass at 91 Commercial Road, Port Adelaide on it. I had, having read the document because I was asked to check it and I expected to check it because I knew that the request had just been made and I wanted to make sure it was right, I didn't want plate glass problems because Barry had told me it cost a lot of money, and I had noted on p 4 it was an identical description. Together the penny began to drop. I began to conclude, I agree with you that there wasn't much to go on, I was able to get over the line at that moment.
QLook at p 7, the page you have just referred to; given your evidence that in these documents I have taken you to from July 04 onwards you thought 91 Commercial Road was a reference to a property made by you, why did you not think that p 7 did not relate to glass insurance for a property you owned at 91 Commercial Road.
ABecause there was a request for three items. He was going to get three done, so I assume that this was a request for three. I was more number literate because I-as I said, from February 2006, I had been regularly on site instructing tradesmen. My number awareness was greater. I don't know if I can apportion it to because of a greater number literacy or the discussions, but I formed-I adopted an hypothesis that pp 7 and 8 comprised the sum total of Mr Zientara's instructions. I looked at the situation, it describes "91 Port Road". I go back into the document, I see "91" and, to me, I form a conclusion, at that point, that "91", on p 4 relates to Barry Zientara for the first time. Because it is not manifestly apparent, I then write the name "Barry" as an aid-memoir.
QFrom this time on, from about 28, 29 June 2006, you were aware that the policy, the subject of these documents-
AYes.
Q- and, indeed, the documents that were the request of the renewal earlier that year, in February 06, related to the property owned by Mr Zientara.
AYes.
QIndeed, that's why the penny dropped.
AYes.
QAlso in the sense that you became aware at this time, that is, the end of June 2006, that from early 2005, when the policy was renewed, it had also extended cover to a property owned by Mr Zientara, at 91 Commercial Road.
AYes.
QYou didn't complain to Mr Dixon about Mr Zientara's property at 91 Commercial Road being included in the policy at this time.
ANo.
QWhat you did, in fact, was seek by your emailed letter, Exhibits P21, at p 204, details of premium payments for the two financial years that were extended back to the time of the renewal of the policy in March 05.
AYes.
QIn fact, you sent tax invoices to Mr and Mrs Zientara seeking the reimbursement of sums that related to the premiums for 91 Commercial Road; correct.
AYes, because Frank Gretz had said-
QI am not interested in what Mr Gretz had said. Is the answer "yes".
AThe answer is "yes" but it is explainable by other events.
QThe fact is you sought, by Exhibit P21, the details of the premium as identified in that letter and subsequent a receipt of that letter, using the information provided to you by Mr Dixon, which is on p 215, Exhibit P22.
AYes.
QDo you see that.
AYes.
QYou used that information to render tax invoices to Mr and Mrs Zientara to obtain reimbursement for the premiums for the 2005 and 2006 insurance years.
AYes.
QAlso going back to Exhibit P21, on p 204, in paragraph numbered 1 you were correcting an error you saw in the policy, or more exactly, inviting Mr Dixon to alter the policy to be amended to reflect the sale of the property that had been insured.
AYes, it had just been sold. The property had settled on 30 June. On 5 July, a couple of days later, I write to him telling him to take it off, yes. It is not an error. It's just a transaction. That's the way I see it.
QBut you told us earlier in your evidence that you were aware when you went through the renewal document, Exhibit P20, that the sum insured for your property, 87-89 Commercial Road was, in fact, $400,000.
AAt the time, yes. I had forgotten.
Counsel then established that when Mr Scragg prepared a tender book for the first trial he had included a photocopy of Exhibit P20 in which the incriminating handwritten words "Peter" on p 3 and "Barry" on p 4 had been erased in the photocopying process but the handwritten note to "Jeff" on p 8 was copied. It is unnecessary for me to rule on the submission that Mr Scragg’s conduct reflects on his credibility.
The cross examination continued:[94]
QYou have told us already that you noted upon examining P20 when it came in at the end of June 2006, that the sum insured for your properties at 87-89 Commercial Road had a sum insured of $400,000. You also noted that the sum insured for 91 Commercial Road that you noted as being owned by Barry were insured for $400,000.
AYes, I had no idea what his requirements were.
QNo, just answer my question.
AYes, I did note that, yes, I did.
QYou noted that the sum insured was $400,000.
AYes.
[94] 1T 247 l18.
If Mr Scragg believed that what was set out in Exhibit P20 was wrong he did nothing to correct the error, although he did request other amendments to the policy.
It is difficult to understand the evidence of Mr Scragg about the "sleeper". The Zientara properties had been included in the policy from its inception. Mr Scragg had requested Mr Zientara to arrange the insurance. Initially the entire premium had been paid by Mr Zientara and Mr Scragg reimbursed Mr Zientara for his proportion. Nothing had happened which would have indicated to Mr Scragg that the total premium did not relate to all the insured interests including the interest of Mr and Mrs Zientara. All of the renewal notices and other documents issued by the insurer correctly advised of the sum insured for each 87-89 Commercial Road and 91 Commercial Road.
Irrespective of whether Mr Scragg's level of awareness of the street numbers changed from time to time, one thing which is clear is that at the end of June 2006, as a result of Exhibit P20, Mr Scragg had been told that the sum insured in respect of each of the plaintiffs’ property and the Zientara property was $400,000. He was also aware that the reference to 91 Commercial Road was a reference to Mr and Mrs Zientara's property.
That was confirmed by the following evidence about Exhibit P20 in cross‑examination during the present trial:
QYou read this document and understood that the sum insured for the property at 91 Commercial Road was in fact $400,000.
AYes, that's right. And I believe at the time that I formed the view-I believed that this document was right and I went through it, I saw this $400,000 for 87-89, I realised that was my property. Over the page it was Zientara and I thought that is what it was meant to be, it was all right and perfect. I didn't form a view that this document was wrong. I came to this document, I saw it in this document that it wasn't clear as to who had an interest in respect of each of the various situations. I wrote these down for financial reasons-[95]
[95] 2T 180 l19 to 32.
In cross-examination Mr Scragg said that when he read Exhibit P20:
AI became aware-yes, I became aware, yes, I had no interest in 91 Commercial Road and I became aware that I was paying for someone else's insurance, that was the realisation, but I didn't-I wasn't aware that there was a problem with the document per se.[96]
[96] 2T 189 l33.
That evidence establishes that at the time that Mr Scragg read Exhibit P20 he knew that No. 91 Commercial Road was the Zientara property and not the plaintiffs and he knew that the plaintiffs’ property at No’s. 87-89 Commercial Road was insured for the sum of $400,000.[97]
[97]` See also 2T 183 l14 to 29.
If at the end of June 2006 Mr Scragg knew that the plaintiffs’ property was 87-89 Commercial Road and that the Zientara property was 91 Commercial Road and that the plaintiffs’ property was insured for $400,000, the fact that there was no reference to the Zientara interests as a "Situation" is inconsequential.
Having noted that 91 Commercial Road was owned by "Barry" Mr Scragg clearly had knowledge that 91 Commercial Road was not the plaintiffs’ property. Whether the Zientara interest was shown as a "Situation" was inconsequential. The fact that the Zientara interest was not shown as a "Situation" would only have been relevant if Mr Scragg did not know the "true situation" and it was necessary for him to deduce that No. 91 was not the plaintiffs’ property. On his evidence he already knew that information.
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.[98]
[98] 2T 184 l22.
Later Mr Scragg gave the following evidence:
QThat being the case, having that belief about 91, then coming to the realisation there was a sleeper on the policy, it must have become apparent to you that the sum insured in respect of your interests at Commercial Road was $400,000 less than you thought it was.
ALook I - I thought the policy document was right. I did not at that moment recall the meeting in March of 2005.
QI'm not asking you that question. Could you listen to the question again.
AI am sorry.
Question read back by reporter.
ANo it became apparent that my interest was $400,000 I thought that was correct. I’d forgotten that I required $800,000.
QWell you read, when you looked at this page of the document where No. 91 is described as the property insured, the $400,000 was the sum insured, isn’t it the case that when you realised 91 was not your property, that you realised you were $400,000 short of what you had previously thought was the sum insured in respect of your properties.
ANo, this document came to me - I thought it was completely right and accurate. I looked through it, I saw that Zientara wasn't identified. I knew that we were paying for everything on this-on this policy, every single entry in the policy the first plaintiff was paying for and I realised that it was wrong, that there was a possibility that my bookkeeper wasn't aware that in respect of 91 we were paying for Barry (Zientara) but I didn't think at that time that the amount of cover in relation to my property, which was 87-89 was wrong. I had forgotten - but I looked at it and I thought that was right. I thought this was right. I had forgotten that my requirements were $800,000. I didn't sort of put - well I thought that was Barry's, therefore I must be uninsured. I know this is the step you are asking me to take. I didn't take that step, I didn't take that, I'm sorry.[99]
[99] 2T 191 l13 to 192 l12.
Mr Scragg also said:
AWhen I affected the insurance I understood it was $800,000. When I came back to this document, which is document P10, I had an understanding that it was $400,000 but I forgotten that I required $800,000. I just made the assumption that that part of the document which is unchanged was satisfactory and it was the correct amount. It was only after the fire that Mr Zientara showed me another document that he had received that I hadn't received in relation to this policy, which showed to me that my - that what was set out here (indicates), which you are now referring to, page 438, was wrong. (Page 438 of the extract of the appeal book was p 3 of Exhibit P20, that is the page which showed that 87-89 Commercial Road was insured for $400,000).
Consideration of the Evidence of Mr Scragg
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.
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.
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.
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.
Mr Scragg said that when he read Exhibit P20 he did not consider whether the amount of cover for the plaintiffs’ property was correct but that his focus was on whether he had been paying for a "sleeper", that is paying the premium on the Zientara property in which he had no interest. That may have been Mr Scragg’s focus, but what is important for present purposes is that Exhibit P20 clearly stated the amount for which 87-89 Commercial Road was insured and the amount for which 91 Commercial Road was insured. The defendants cannot be held responsible if Mr Scragg failed to understand something which was clearly stated in the document.
Exhibit P20 was not the first document which informed the plaintiffs of the sum insured. Mr Scragg was first told in writing of the sum insured by Exhibit P9 in March 2005.
The defendants cannot be held responsible if Mr Scragg had not appreciated the "true situation" as it was described in many documents. Section 52 of the Trade Practices Act 1974 does not protect people who fail to take reasonable care of their own interests. Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193. There is no reason why the same principle should not be applied in the case of the legislation relied upon by the plaintiffs.
Jurisdiction
The plaintiffs allege that jurisdiction is conferred on the District Court by s 1337E of the Corporations Act 2001 and by s 12GJ of the Australian Securities and Investments Commission Act 2001.[100]
[100] Statement of Claim para 15.
The fourth defendant disputes the jurisdiction of this court to hear the claim.
If the alleged lack of jurisdiction extended to the whole of the plaintiffs claim it would have been appropriate to determine the jurisdictional issue as a threshold issue. However in addition to the statutory claims there is also the claim in negligence which is within the jurisdiction of this court and I have decided to consider the merits of the claim without first determining the question of jurisdiction. My findings on the merits of the claim have the consequence that it is unnecessary to consider the dispute as to jurisdiction.
Conclusions
Misleading and Deceptive Conduct
The defendants had no reason to induce Mr Scragg to reduce the amount of the insurance cover. In fact it was in their interests to continue with the higher level of cover which would have maximised the premium. There was no incentive for the defendants to mislead or deceive Mr Scragg.
The amount of the insurance cover was always fixed by the plaintiffs and was never determined by the defendants. The amount of $400,000 was the result of Mr Scragg instructing Mr Dixon that a sum insured of $800,000 should be divided between the two properties and Mr Dixon assuming that the two properties referred to by Mr Scragg were those two properties in respect of which the sums insured of $800,000 and $500,000 applied at that time. Mr Dixon’s incorrect assumption was contributed to by the statements which Mr Scragg made to him during the conversation on 9 March 2005. Mr Dixon had no reason to believe that separate sums insured should be allocated to No. 87 and No. 89 Commercial Road. That had never been done previously.
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.[101] In that document Mr Dixon purported to confirm the discussions whereby Mr Scragg gave instructions to divide the sum insured between the two properties.
[101] Exhibit P9.
I am not satisfied that the plaintiff has established misleading conduct on the part of Mr Dixon at the meeting on 9 March 2005.
If Mr Dixon made a statement on 9 March 2005 which was misleading or deceptive the misstatement was quickly corrected by Exhibit P9 which advised the plaintiffs of the amount of insurance which was offered. Importantly Exhibit P9, the Confirmation of Advice, contains the statement "You should check to ensure the recommendation I have made set out meets your needs".
I find that any misleading or deceptive conduct resulting from oral representations by Mr Dixon on 9 March 2005 was corrected within days by the written statements in Exhibit P9.
In determining whether the conduct of the defendants was misleading or deceptive it is appropriate to look at the entirety of the dealings in connection with the transaction in question.
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.
The conversation must be interpreted in the light of the previous dealings between the parties from the time when the policy was first arranged. Mr Zientara initially arranged insurance for both properties at Commercial Road. Initially there was one sum insured for both 87-89 Commercial Road and 91 Commercial Road. At different times one of either Mr Scragg or Mr Zientara dealt with Mr Dixon on behalf of all the insured covered by the policy. There was no reason for Mr Dixon to assume that Mr Scragg was making the enquiry on his own behalf. The premium on the policy was shown as one amount and was not allocated to the individual insured. The apportionment of the premium was decided upon by the insured themselves.
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.
Mr Scragg's evidence continued "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".[102] That piece of evidence is quite remarkable. If Mr Scragg had asked "How did you get $1.3 million" Mr Dixon's answer would have revealed the two components of the $1.3 million namely $800,000 in respect of 87-89 Commercial Road and $500,000 in respect of 91 Commercial Road. If that had happened there would be no basis for this action.
[102] 1T 66 l23.
Mr Scragg gave evidence that Mr Dixon then asked "How do you want that divided between the shops" or "How do you want that divided between the two shops" and Mr Scragg responded "Half each" or "Equally" or words to that effect.[103]
[103] 1T 66 l36.
Up until that time there had never been separate sums insured for the plaintiffs shops at 87 Commercial Road and 89 Commercial Road. There had always been one lump sum for the plaintiffs’ two shops.
Mr Dixon's question as to how the sum should be divided between the two shops should have indicated to Mr Scragg that the parties were not ad idem. Mr Scragg’s response that he wanted the $800,000 divided between the two shops only added to the confusion but explains why Mr Dixon made the sum insured in respect of 87-89 Commercial Road $400,000 and the sum insured in respect of 91 Commercial Road $400,000. Having regard to the history of the matter it would have been inconsistent with the previous practice to place separate values of $400,000 on each of No’s. 87 and 89.
In considering whether the conduct was misleading or deceptive the intention of Mr Dixon is not relevant. One must look to the audience and ask objectively whether the conduct complained of was misleading to Mr Scragg. A person who acts honestly and reasonably may engage in conduct that is misleading and deceptive. Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 per Fox J. Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216. Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Yorke v Lucas (1985) 158 CLR 661.
Whether conduct is misleading or deceptive (or likely to mislead or deceive) is to be determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102].
It is therefore relevant to consider the position of Mr Scragg. He has practised as a solicitor for many years. If he had taken reasonable care he would on 9 March 2005 have known that the sum suggested for 87-89 Commercial Road was $800,000. He was the person who had previously arranged for the cover to be raised to that amount. After the sum insured had been raised to $800,000 Mr Scragg had received documents from the insurer which revealed the levels of insurance on No’s. 87-89 and 91 Commercial Road. Mr Scragg must have overlooked that information at the time of the discussion with Mr Dixon on 9 March 2005.
It is necessary to consider the position of a person who has been misled because he did not take reasonable care. In Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 Franki J said that an "extra ordinarily stupid person" would not receive the benefit of s 52 of the Trade Practices Act. In Elders[104] Gummow J said that s 52 would not protect people who failed to take reasonable care of their own interests. See also Parkdale at 199 and Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45, Argy v Blunts & Anor (1990) 26 FCR 112, Tiplady v Gold Coast Carlton Pty Ltd (1984) 54 ALR 337 at 374 and 375.
[104] (supra)
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.
Mr Scragg gave evidence that at the time of the conversation he believed that 91 Commercial Road belonged to the plaintiffs. If that evidence is correct then the answer which Mr Dixon gave would have been a correct answer to Mr Scragg's question, that is that the amount of insurance on the properties at 87‑89 Commercial Road and 91 Commercial Road was $1.3 million.
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.[105]
[105] Outline of Written Submission para 11.
I also accept the submission of Mr Doyle for the fourth defendant that when dealing with allegations of misleading conduct arising from the spoken word special care needs to be taken to ensure that the relevant words have been proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading. Watson v Foxman (1995) 49 NSWLR 315, 318-319 and Veljkovic v Vrybergen [1985] VR 419.
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.
If Mr Scragg was misled by Mr Dixon at the meeting on 9 March 2005 the defendants clarified the situation when Plan 4 forwarded to the plaintiffs Exhibit P9: the Confirmation of Advice dated 15 March 2005 which purported to confirm that Mr Scragg advised to reduce the sum insured on 87-89 Commercial Road from $800,000 to $400,000 and the sum insured on 91 Commercial Road from $500,000 to $400,000. The Confirmation of Advice contained a statement "You should check to ensure the recommendation I have set out meets your needs. Please read the product disclosure statement or policy document to ensure that cover provided in each your needs and to be aware of your obligations".
Attached to Exhibit P9 was an "Amended Renewal Notice detailing the new terms and conditions and premiums payable". The Amended Renewal Notice was Exhibit P14. It advised that the insurance cover would expire at 4 p.m. on the payment due date shown, which was 9 April 2005, and invited payment of the total amount due by that date "to ensure continuation of the insurance". It advised "when paid, this notice becomes your current schedule. Please consider whether your sums insured are adequate". In the case of each of the Commercial Road properties the proposed sum insured was $400,000.
Mr Scragg acknowledged that he had received and read Exhibit P9.[106] It is difficult to understand how Mr Scragg can claim that he had been misled. A person with knowledge of the true facts can not be misled by deceptive conduct. Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at 349.
[106] 1T69 l32 to 34.
I find that the Amended Renewal Notice was an offer by the defendants to enter into a new policy on the terms set out in the notice.
I find that when the total amount due was paid the defendants offer was accepted by the plaintiffs and a new policy came into force on the terms which had been offered. CE Heath Underwriting and Insurance (Australia) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 545. At the time of the fire the property was covered by the policy which came into existence in March 2006.
I find that both the Confirmation of Advice Exhibit P9 and the Amended Renewal Notice Exhibit P14 advised the plaintiffs of the insurance which was offered over all the Commercial Road properties. Mr Scragg checked the documents and the plaintiffs had an opportunity to correct any mistake or misapprehension.
If at the meeting on 9 March 2005 Mr Dixon had caused Mr Scragg to believe that his Commercial Road property alone would be insured for $800,000, Exhibit P9 and Exhibit P14 corrected any misunderstanding. From the time when the plaintiff received those documents onwards any misleading statement or negligence on the part of Mr Dixon was no longer causative of any loss suffered by the plaintiffs.
The statutory provisions require a causal connection between the alleged conduct and the loss. That is the loss or damage must be suffered "by conduct of another person". The evidence does not establish that the plaintiffs have suffered any loss or damage "by conduct" of the defendants.
The concept of damage having been caused "by" the conduct of the person can be equated with the notion of causation in common law claims as discussed in March v E & MH Stramare Pty Ltd (1991) 171 CLR 506.
The question is whether the plaintiffs were induced to enter into the contract of insurance in March 2005 as a consequence of the misleading conduct of the defendants. One cannot look at one statement in isolation. The contract was reached at the time when the plaintiffs paid the amount due. Whether Mr Dixon's conduct was misleading must be considered in the light of everything that happened up until the time that the plaintiffs’ contract entered into the contract of insurance. Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, Miller and Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 [22, 23, 96], Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304, Stuart Alexander & Co (Interstate) Pty Ltd v Blenders Pty Ltd (1981) 37 ALR 161.
I accept the submission of Mr Doyle that a later document is capable of curing or dispelling earlier ambiguity or confusion and hence avoiding liability for misleading conduct. Because the test is an objective one that is the case even if Mr Scragg did not read or understand the later document.
I find that the plaintiffs have not established that the conduct of Mr Dixon, considered as a whole, was misleading at the time the parties entered into the March 2005 contract.
In March 2006 the defendants provided a Renewal Notice (Exhibit P18) which set out the terms of the insurance offered. There was nothing misleading about that notice. The plaintiffs accepted the terms offered including cover of $400,000 on 87-89 Commercial Road. Mr Scragg gave evidence that he had scanned Exhibit P18 and "the situations all looked in order" to him.[107]
[107] 1T 237.
From March 2005 onwards there were many documents which informed Mr Scragg and the plaintiffs of the level of insurance that was offered or was in place.
Mr Scragg has attempted to avoid the clear effect of the statements in the insurance documents by claiming to have been under a misapprehension that he did not realise that 91 Commercial Road was the Zientara's property and not the plaintiffs. Whether that is correct or not the Renewal Notices for both the 2005 renewal and the 2006 renewal accurately described the level of the cover.
After a degree of procrastination Mr Scragg eventually accepted that by 29 June 2006 he was aware that the property at 91 Commercial Road was the Zientara property and that the property at 87-89 Commercial Road was insured for $400,000.
The handwriting on Exhibit P20 establishes that Mr Scragg had identified the separate interests of the plaintiffs and Mr or Mrs Zientara no later than the end of June 2006.
It can be inferred from the fact that Mr Scragg did request other amendments to the policy by his email dated 5 July 2006 that the plaintiffs were content to allow the insurance over 87-89 Commercial Road to remain at $400,000.
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.
Negligence
Paragraph 12 of the Statement of Claim alleges that Mr Dixon and Plan 4 "assumed a duty to exercise a reasonable degree of care and skill in taking and executing the instructions of the plaintiffs but was negligent in failing to avoid or resolve ambiguity arising in the course of taking and executing those instructions".
As I have mentioned Exhibit P27 informed Mr Dixon that the financiers required the properties to be "insured to full replacement value" but there is no evidence that in March 2005 Mr Dixon had any information as to what the "full replacement value" of the properties was. The plaintiffs had acquired the property at 87-89 Commercial Road in 2002 for $160,000.
As to particular 9(f) of the Statement of Claim the evidence does not establish that Mr Dixon was negligent in treating Mr Scragg's instruction as requiring the total declared value in combination of the two shops at 87‑89 Commercial Road to be reduced to $400,000. As I have mentioned separate values had never been fixed for the properties of the plaintiffs and Mr Dixon cannot be criticised for continuing the established practice of fixing one value for 87-89 Commercial Road and one for 91 Commercial Road. To fix separate values for each of 87-89 Commercial Road would have been a departure from the established practice.
As to the allegation in paragraph 9(g) of the Statement of Claim there is no evidence that Mr Dixon should have realised that to insure the plaintiffs’ shops for only $400,000 in total would result in substantial under insurance of the premises as compared to their full insurable value. Likewise there is no evidence which establishes the allegation in paragraph 9(h) that the defendants should have recognized that it was contrary to the practice of the plaintiffs to deliberately underinsure.
Insofar as the Statement of Claim alleges that Mr Dixon and Plan 4 failed to take any or adequate steps to verify Mr Scragg's instructions the allegation is factually incorrect. I have already referred to Exhibit P9 and Mr Scragg's evidence that he had read the document.[108] The document specifically referred to the reduction in the insured value of 87-89 Commercial Road from $800,000 to $400,000 and requested Mr Scragg to check the recommendation and policy documents to ensure that they satisfied his needs.
[108] 1T 69 l9.
Additionally, as I have mentioned, if Mr Scragg believed that the plaintiffs owned No. 91, the answer given by Mr Dixon was a correct answer to his question.
If Mr Dixon was negligent in the way alleged in paragraph 9(i) in that when Mr Dixon informed Mr Scragg that the total declared value of the Commercial Road properties was $1.3 million he did not disclose that included the declared value of 91 Commercial Road at $500,000 Mr Dixon remedied the situation when he forwarded Exhibit P9 to the plaintiffs.
If any loss occurred as a consequence of the fact that the sum insured for 87-89 Commercial Road remained at $400,000 from 15 March 2005 until the date of the fire that was not a consequence of any negligence on the part of the defendants. Having forwarded Exhibit P9 the defendants were entitled to assume that the insurance which had been arranged was in accordance with the instructions of Mr Scragg.
The evidence does not establish that the defendants were negligent. There is no evidence as to the standard of care owed by an insurance agent. If Mr Dixon was negligent in making an erroneous statement on 9 March 2005 the error was corrected by the subsequent documents. As is the case with the claim for allegedly misleading conduct the advice given by the defendants must be considered in its entirety. It must be borne in mind that the defendants never purported to provide advice to the plaintiffs. They sold the insurance cover which was requested. They offered on behalf of the insurer the cover which was described in the renewal notices.
Relevantly there is no evidence which shows that there was anything misleading or deceptive about what the defendants did by including different interests on the same policy of insurance. There was full disclosure of the terms of the insurance and the plaintiffs were fully informed as to the nature of the cover. They were never misled or deceived as to the form of the policy.
While different interests were maintained on the same policy of insurance and the interest of Mr and Mrs Zientara in respect of 91 Commercial Road was not referred to under the "Multiple Situations", the relevant documents 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 showed the sum insured in each case.
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.
There is no evidence as to what the full insurerable value should have been. The plaintiffs’ allegation should be viewed in the light of the purchase price paid by the plaintiffs for the purchase of both 87-89 Commercial Road and 91 Commercial Road. In any event the allegation is not made out by the evidence.
If the conduct of Mr Dixon was misleading that conduct had ceased to be operative at the time of the fire because of Mr Scragg's knowledge of the facts. Similarly any negligence had ceased to be a causative factor. The plaintiff has not proved causation.
If the plaintiffs have suffered any loss that was caused solely by the conduct of Mr Scragg. He had failed to check the documentation provided by the defendants in particular the Confirmation of Advice in July 2005 (Exhibit P9), the contents of the Renewal Notice in March 2005 (Exhibit P14), the contents of the Renewal Notice in March 2006 and the Premium Adjustment Notice of 27 June 2006 (Exhibit P20). All of these documents advised that the level of cover over 87-89 Commercial Road was $400,000. O'Connor v BDB Kirby and Co [1972] 1 QB 90.
Jurisdiction
Having regard to the findings which I have made it is unnecessary to consider Mr Doyle’s interesting argument as to the jurisdiction of the District Court. In any event the court does have jurisdiction to hear that part of the claim which is based on negligence.
Fluctuating Knowledge
I do not accept Mr Scragg's evidence that he had forgotten the street numbers of the properties which he owned or that the state of his knowledge fluctuated at different times. If the evidence of Mr Scragg is correct, the defendants cannot be held responsible if Mr Scragg did not remember the street numbers of the plaintiffs’ properties or if he failed to understand the meaning of relatively simple and perfectly clear documents. At the time Mr Scragg requested Mr Dixon to increase the insured value Mr Scragg did know that the plaintiffs’ property was No’s. 87-89 and the Zientara property was No. 91.[109]
[109] 2T 227 l12 to 26.
Omission to Refer to Zientara as a “Situation”
As I have mentioned the plaintiffs complain about the omission to refer to the Zientara interest in 91 Commercial Road under the heading “Situations” in various documentation. I do not accept that the failure to refer to the Zientara interest amounted to negligence. It may have been better if the insurance documents had referred specifically to the Zientara interest in 91 Commercial Road under the heading "Situations". However I am not satisfied that the documents were misleading by reason of the omission to do that. The documents did state quite clearly that 87-89 Commercial Road was insured for $400,000 and that 91 Commercial Road was insured for $400,000. The documents were not misleading.
The allegation that the defendants failed to identify the Zientara interest as a "Situation" takes the matter nowhere. First the evidence does not establish that the omission of the Zientara name as a "Situation" actually had any effect on Mr Scragg. Secondly, while the name Zientara was omitted as a "Situation" the property at 91 Commercial Road did continue to appear in the documentation with an insured value of $400,000. Looked at in its entirety the documentation was not misleading. Thirdly, by late June 2006, prior to the fire, Mr Scragg was to use his expression "Number savvy" and upon reading Exhibit P20 he realised that the Zientara property was included in the policy. If the failure to refer to the Zientara interest as a "Situation" in the policy document was negligent, that had ceased to have any causative effect after Mr Scragg realised that the Zientara property was included.
The evidence establishes that by no later than the end of June 2006 the plaintiffs did know that Mr and Mrs Zientara were the owners of 91 Commercial Road. It would not have made any difference if the documents specifically listed the Zientara interest as a “Situation” because Mr Scragg knew the true position. He knew that Mr and Mrs Zientara owned No. 91.
The plaintiff’s case is that even if Mr Scragg realised that cover over 87‑89 Commercial Road was only $400,000 and that the property at 91 Commercial Road was the Zientara's property, the causative effect of the misleading conduct on 9 March 2005 had not been brought to an end. Mr Britton submitted:
The negligence can't be cured by the fact that Mr Scragg doesn't do something. As I said, it is a bar that is put too high. That's the thrust of what the third defendant submits and it is the thrust of what I think all of the defendants say. An example would be, if a motorist noses a bit out into the traffic and he can't complain because the driver of another vehicle there doesn't take quite the defensive manoeuvre that he should. In other words, if we think of the duty that the insurance agent has, he can't complain and turn around and say "Oh, you are the author of your own injury." It is not the law.
Mr Dixon's negligence created a problem. He can't be exonerated. Until Mr Scragg had the full-time, the full opportunity, to realise the extent of the negligent conduct which first became apparent to him in late June, early July 2006, it would be totally wrong to effectively exonerate what Mr Dixon has done. The negligence didn't stop there.[110]
[110] 2T 526 l33.
I do not accept that submission. If, prior to the fire, the plaintiffs were aware that the cover over the property at 87-91 Commercial Road, which was their property, was $400,000, but did nothing to amend that cover then any loss suffered by the plaintiffs was not caused "by" the defendants conduct whether it be negligence or misleading and deceptive conduct.
Mr Britton relied upon Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 and Plum v Commonwealth Bank Of Australia [2005] FCA 790, 15 June 2005. He submitted "that the silence, that being that there was no information provided, it was the failure to disclose, has to be seen in the context of that principle, that is against all of the background of the policy having been initiated in 2002 and going right through to all the other changes, like the Challenger issue and the like".[111]
[111] 2T 539.
In my opinion that submission takes the matter no further than the submissions I have already dealt with.
In Hamilton-Smith v CFS Managed Property Ltd & Perpetual Nominees Ltd [2005] SASC 461 Duggan J said:
…it is well established that silence can constitute misleading and deceptive conduct… However, all the circumstances of the case must be considered: Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. As Hill J said in Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 114, it is difficult to see how mere silence could, of itself, constitute conduct which is misleading or deceptive…[112]
[112] At para 40.
In this case the evidence does not establish that the defendants have omitted to disclose relevant information. This is not a case of misrepresentation by silence. It is not a case where the failure to correct a statement has the effect of making statements which were made misleading.
If it is the omission to refer in the insurance documents to the Zientara interest as a "Situation" which is said to be negligent or constitute misleading and deceptive conduct by silence, the fact that the policy extended to Mr and Mrs Zientara's property at 91 Commercial Road is a matter which was already known to the plaintiffs. I do not accept that the defendants were negligent or that any document was misleading because the Zientara interest was not listed as a "Situation". The property at 91 Commercial Road was shown in all relevant documents as being insured for $400,000.
There is no evidence that the absence of the name Zientara as a "Situation" caused anyone to been misled.
If the complaint is that the defendants omitted to advise the plaintiffs that 87-89 Commercial Road was only insured for $400,000 or that the property at 91 Commercial Road which was insured for $400,000 was the Zientara property that omission was remedied by Exhibit P9 and the subsequent documents.
This is not a case of misrepresentation by silence.
The Renewal of the Contract of Insurance in March 2006
The policy was due to expire on 20 March 2006. On 1 March 2006 Plan 4 forwarded to Naiama a letter enclosing a "Renewal Application Advice for Business Insurance" inviting renewal for a further twelve (12) months. Amongst other things the letter said:
Would you kindly check the covers provided, please contact me should you wish to make any alterations or additions to the policy.
As discussed, by providing you with this insurance, any advice given has been provided without taking into account your objectives, financial situation or needs. You should consider whether the advice is appropriate in light of your objectives, financial situation and needs. Please read the Product Disclosure Statement before making a decision to acquire the product.
The enclosed Renewal Notice described the property at 87-89 Commercial Road with the sum of insured of $400,000 and the property at 91 Commercial Road with the sum insured of $400,000.
The Renewal Notice commenced with the statement:
The insurance cover provided by this Policy will expire at 4pm on the Expiry Date shown above. Unless you advise otherwise, the Total Amount Due will be paid by instalments as previously agreed. This notice will then become your current schedule. Please consider whether your sums insured are adequate.
Mr Scragg claimed that the street numbers of the Commercial Road shops meant nothing to him. Whether the street numbers meant anything to Mr Scragg is not to the point. The offer made by the insurer to renew the insurance was clear and unambiguous. When the plaintiffs paid the premium they accepted that offer, that is they accepted the insurers offer of a policy which provided cover for $400,000 over 87-89 Commercial Road, Port Adelaide.
The evidence does not establish that when the plaintiffs entered into the relevant contract of insurance in March 2006 they did so in reliance upon any misleading or deceptive conduct on the part of the defendants. Nor does the evidence establish that the plaintiffs entered into that contract insurance as a consequence of any negligence on the part of the defendants.
By renewing the policy in March 2006 in the terms offered the plaintiffs adopted the terms of the renewed policy including the sum insured.
It was the 2006 policy that was in force at the time of the fire.
Rectification
There is no basis for rectification of any policy. Leaving to one side the fact that there was a fresh policy entered into at each renewal there is no evidence of a common mistake. If there was a mistake it was the mistake of Mr Scragg alone. Rectification is not available in the case of unilateral mistake. Taylor v Johnson (1983) 151 CLR 422, Medsara Pty Ltd v Sande [2005] NSWCA 40, AGIP S.p.A v Navigazione Alta Italia S.p.A [1984] 1 Ll Rep 353.
The policy of insurance which would have to be rectified was the policy which applied at the time of the fire, that is the policy which was entered into in March 2006.
Vicarious Liability
Having regard to my earlier findings there is no need to consider the submission of GIOG that it is not liable for any wrongdoing on the part of Mr Dixon or Plan 4.
Estoppel
I accept the submission of the defendants that by their own conduct the plaintiffs are estopped from asserting that there should be an amount insured other than $400,000. The defendants submitted that an estoppel by convention has arisen. Having regard to my other findings it is unnecessary to discuss that submission in more detail.
For the foregoing reasons the plaintiffs’ claims must be dismissed.
1
27
1