Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd
[2013] WASC 386
BIRLA NIFTY PTY LTD -v- INTERNATIONAL MINING INDUSTRY UNDERWRITERS LTD [2013] WASC 386
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2013] WASC 386 | |
| Case No: | CIV:3302/2011 | 17 & 18 JUNE 2013 | |
| Coram: | HALL J | 23/10/13 | |
| 29 | Judgment Part: | 1 of 1 | |
| Result: | Declaration refused | ||
| B | |||
| PDF Version |
| Parties: | BIRLA NIFTY PTY LTD INTERNATIONAL MINING INDUSTRY UNDERWRITERS LTD |
Catchwords: | Contract Insurance policy Interpretation Excess clause Meaning of term 'annual value' as used in excess clause for business interruption losses Proceedings seeking declaration as to meaning Whether any of the meanings proposed reflect the common intention of the parties Estoppel Whether plaintiff estopped from advancing its interpretation due to earlier implicit acceptance of that advanced by defendant |
Legislation: | Nil |
Case References: | Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526 Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) City of Belmont v Link Interiors Pty Ltd [2001] WASC 64 Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 McCourt v Cranston [2012] WASCA 60 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 Western Australian Bank v Royal Insurance Co [1908] HCA 11; (1908) 5 CLR 533 Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604 Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
INTERNATIONAL MINING INDUSTRY UNDERWRITERS LTD
Defendant
Catchwords:
Contract - Insurance policy - Interpretation - Excess clause - Meaning of term 'annual value' as used in excess clause for business interruption losses - Proceedings seeking declaration as to meaning - Whether any of the meanings proposed reflect the common intention of the parties - Estoppel - Whether plaintiff estopped from advancing its interpretation due to earlier implicit acceptance of that advanced by defendant
Legislation:
Nil
Result:
Declaration refused
Category: B
Representation:
Counsel:
Plaintiff : Mr S K Dharmananda SC & Mr T J Palmer
Defendant : Mr G G McArthur SC & Mr P D Herzfeld
Solicitors:
Plaintiff : DLA Piper
Defendant : HWL Ebsworth Lawyers
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S)
City of Belmont v Link Interiors Pty Ltd [2001] WASC 64
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCourt v Cranston [2012] WASCA 60
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Western Australian Bank v Royal Insurance Co [1908] HCA 11; (1908) 5 CLR 533
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604
Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401
- HALL J:
Introduction
1 The plaintiff is one of a group of companies that operate the Nifty Copper Mine in the East Pilbara Region of Western Australia. On 3 June 2008 there was a gas explosion at Varanus Island which interrupted supplies of gas to the mine. This affected the operation of the mine.
2 There was an insurance policy in respect of property damage and business interruption at the mine. The plaintiff was named as the insured. The defendant was one of the insurers, with authority to represent the others.
3 The plaintiff made a preliminary claim under the policy for business interruption losses. The defendant rejected the claim on the basis that it was below the applicable excess, that is the amount of the loss that the insured must bear. Whether that is correct depends on how the clause dealing with excess in the insurance contract is interpreted.
4 The clause dealing with the excess provides that it is to be calculated by multiplying the 'average daily value' by 30. The 'average daily value' is stated to be the 'annual value of the site affected' divided by 365. The issue in these proceedings is what the phrase 'annual value of the site affected' means.
5 The plaintiff contends the phrase in question means the amount of gross profit generated from the affected site in the 12-month period following the event giving rise to the claim. Alternatively, it is contended that it means the gross profit generated in the 12 months following inception of the policy. The plaintiff seeks a declaration supporting one or other of these constructions.
6 The defendant contends that the annual value is the declared value of the mine referred to in the policy. It was on the basis of this value that the preliminary claim was rejected. The defendant maintains that this construction remains correct and that the plaintiff's application for a declaration should be refused.
7 The defendant also contends that its construction of the excess clause was accepted by the plaintiff at the time the preliminary claim was rejected and that an insurance policy for the following year was entered into on that understanding. This is said to establish that the defendant acted to its detriment on the basis of a representation, or a common assumption, that the defendant's construction was correct. In these circumstances the defendant contends that the plaintiff is estopped from asserting a contrary construction.
8 For the reasons that follow I do not accept that either of the constructions advanced by the plaintiff is correct. Nor do I accept the defendant's alternative construction. It is strictly unnecessary for me to deal with the estoppel argument but I have done so in deference to the extensive submissions made by the parties. I do not consider that a basis for estoppel could be made out on the evidence. The application for a declaration must be dismissed.
The insurance contract
9 On 28 March 2008 the plaintiff agreed with a group of underwriters, including the defendant, that the underwriters would provide to the plaintiff insurance coverage for property damage and business interruption for designated events affecting two mine sites, one of which was the Nifty Copper Mine. The agreement was in writing in the form of a policy document. The period of insurance was from 31 March 2008 to 31 March 2009.
10 The defendant, for and on behalf of International Insurance Company of Hannover Ltd, subscribed to 15% of the risk covered by the policy. It was a term of the policy that the individual subscribing underwriters agreed that if a suit was instituted against any one of them they would all abide by the final decision of the court.
11 The policy commences with the following three paragraphs:
This Policy incorporates the Schedule, Sections, Definitions, Conditions, Exclusions, Endorsements, Memoranda and Warranties (if any) and any other terms herein contained which are to be read together and any word or expression to which a specific meaning has been given in any part of this Policy shall bear this meaning wherever it may appear unless such meaning is inapplicable to the context in which the word or expression appears.
Whereas the Insured named in the Schedule has paid or agreed to pay to the Insurer(s) specified below the Premium shown in the Schedule, now the Insurer(s) agree(s), subject to the terms, Conditions, Exclusions, Memoranda, Warranties, limitations and other provisions, contained herein or endorsed hereon, to indemnify the Insured as specified herein against loss arising from any insured events which occur during the Period of Insurance stated in the schedule or any renewal thereof.
Provided That the total liability of the Insurer(s) at any one Situation shall not exceed the appropriate Limit or Sub Limit(s) of Liability as stated in the Schedule or such amount(s) as may be substituted therefore by endorsement or memorandum hereon or attached hereto and that each Insurer specified below shall only be liable to contribute to any loss covered by this Policy that proportion of the loss as is specified besides its name.
12 Section 2 of the policy is headed 'Business Interruption'. It provides that in the event of damage to the insured property by any cause that is not excluded and that results in interruption or interference with the business carried on at the mine site the insurer will pay to the plaintiff the amount of loss resulting from such interruption or interference in accordance with the applicable 'Basis of Settlement'. The section dealing with the basis of settlement provides that losses in this category can be recovered for five items; gross profit, additional increase in cost of working, claims preparation costs, contractual payments and accounts receivable. The first item is relevant in this case. The indemnity under the gross profit item is limited to a loss of gross profit due to reduction in turnover and increase in cost of working. A formula is provided for the calculation of these components. It relates to losses incurred in the indemnity period. That period is defined as being a period beginning with the occurrence of the damage and ending not later than the number of months specified in the schedule during which the business is affected by the damage. The schedule provides that the business interruption indemnity period is 12 months. Loss in respect of reduction in turnover is calculated by determining the shortfall in turnover in the 12 months following the damage event as compared to the 12 months immediately before that date and applying to that shortfall the rate of gross profit for the financial year immediately before the date of the damage.
13 The schedule to the policy provides for limits of liability. The insurers are only liable to a maximum of $50 million in respect of any one event. There are also a number of sub-limits in respect of particular types of loss. There is a sub-limit of $25 million in respect of consequential losses from specified suppliers. The policy itself does not nominate any specified suppliers however such suppliers are listed in the placing note that preceded the policy. The placing note is the written proposal prepared by the brokers on behalf of the plaintiff and submitted to the insurers. An issue to be determined in this case is the extent to which the placing note can be used in interpreting the policy document.
14 Losses incurred as a result of damage to the property of specified suppliers are deemed to be consequential losses covered by the policy. The gas supplier in this case was nominated as a specified supplier in the placing note. Damage to the gas pipeline at Varanus Island owned by the relevant specified supplier resulted in loss of supply to the Nifty Copper Mine. Thus the consequential losses flowing from this were covered by the policy, subject to none of the exclusions applying. There is an issue between the parties as to whether the 'perils' exclusion in the policy applies, but that is not an issue for determination in the present proceedings.
15 The critical part of the schedule for the purposes of these proceedings is that dealing with excess. It provides as follows:
The Insured shall bear the following amount(s) in respect of each loss or series of losses arising out of any one event:
Section 1 - Material Loss or Damage
AUD 1,000,000
Section 2 - Consequential Loss
Thirty (30) days each and every loss or series of losses arising out of one event calculated at thirty (30) times Average Daily Value, but increased to 90 days Average Daily Value in respect of loss or damage to Pinions, Gears, Rotors of SAG/Ball Mill where no serviceable spare retained on site and to Conveyor Gearboxes at Nifty Copper Mine where no serviceable spare exits on site.
Average Daily Value shall be the annual value of the site affected, divided by three hundred and sixty five (365).
16 There is no definition of 'annual value' either in the policy or the placing slip.
17 The schedule states that the premium will be 'as agreed'. However premium amounts are stated to be provisional and are to be adjusted in accordance with the provisions of the policy.
18 There is a section in the schedule headed 'Declared Values'. It provides as follows:
The following declared values are for the purpose of calculation of the premium only:
(in accordance with the Basis of Settlement)
Section 1 - AUD 420,000,000
Section 2 - AUD 424,000,000
19 It is the defendant's contention that the declared value for the purpose of business interruption loss (ie the Section 2 declared value), is the relevant annual value for determining the excess. However, it is acknowledged that this declared value represents the accumulated declared values of both sites covered by the policy. The part of that declared value attributable to the Nifty Copper Mine can only be determined by referring to the placing slip, which gives a declared value for the Nifty Copper Mine of $305 million. Given that the declared values section states that the values are for the purpose of calculation of the premium only it is relevant to consider whether these declared values are referred to anywhere else in the policy and in what context.
20 There is a section in the memoranda at page 39 of the policy which is headed 'Adjustment of Premium'. This has a subsection at page 40 dealing with business interruption which provides as follows:
a) The Insured shall at the commencement of the Period of Insurance and at each subsequent Period of Insurance provide to the Insurer(s) a Declaration of the estimated Gross Profit and Payroll under the terms of the Policy for that period.
b) The estimated Annual Gross Profit and Payroll as declared will form the basis of the premium for Insurance under Section 2 and the premium produced shall be non adjustable for the period of Insurance.
21 There is another provision which refers to declared values. It deals with co-insurance and a cap on liability calculated by reference to the declaration of value. The purpose of the clause is apparently to protect against underinsurance. It appears at page 45 of the policy in the section 'Conditions Applicable to All Sections'. It reads as follows:
In the event of damage to Property Insured hereunder at any situation caused by any event hereby insured against the Insurer(s) shall be liable for no greater proportion of such damage than the amount of the Insured(s) declaration of value of such property on the day of the commencement of the Period of Insurance bears to the sum representing ninety per cent (90%) of the actual value of Property Insured at such situation on the day of commencement of the Period of Insurance but not exceeding the Limit of Liability expressed in the Schedule.
Provided that this Condition shall not apply if the amount of the damage does not exceed 5% of the amount of the Insured's declaration aforementioned.
It is expressly understood and agreed that the provisions of this Co-Insurance Condition shall not apply in respect of that part of any claim which is made under the provisions of the Reinstatement and Replacement Memorandum.
Principles of construction
22 The ordinary principles relevant to the construction of commercial contracts are relevant to the construction of insurance policies. The principles to be applied are well established and can be summarised as follows:
1. The contract should be construed objectively. The subjective beliefs or understandings of the parties do not govern their contractual relations. The meaning of a term in the contract is to be determined by what a reasonable person would have understood it to mean: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 [40].
2. The construction of a commercial agreement requires a reference to be made to the language used by the parties read in the context of the commercial transaction as a whole and the common intention of the parties as manifest in the text and explicit and implicit objects of the agreement: Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S) [52] (Martin CJ) and the authorities there referred to.
3. The starting point is the text of the agreement. It is to be construed in the context of the contractual document as a whole: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526, 109 (Gibbs J); and Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 [69], [71].
4. An absurd or manifestly unjust result will be avoided upon the hypothesis that such could not have been intended by the parties. A construction that accords with business common sense will usually be favoured over one that does not: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 [43].
5. If the language of the agreement is ambiguous or susceptible of more than one meaning evidence of surrounding circumstances is admissible to assist in the interpretation of the contract: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24;(1982) 149 CLR 337, 352 (Mason J); and Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604 [2] - [6].
23 In Wilson v Anderson [2002] HCA 29; (2002) 213 CLR 401, Gleeson CJ explained the objectivity principle in terms which are particularly relevant to this case:
The law of contract seeks to give effect to the common intention of the parties to a contract. But the test is objective and impersonal. The common intention is to be ascertained by reference to what a reasonable person would understand by the language used by the parties to express their agreement. If the contract is in the form of a document, then it is the meaning that the document would convey to a reasonable person that matters. The reason for this appears most clearly in the case of commercial contracts. Many such contracts pass through a succession of hands in the course of trade, and the rights and liabilities of parties other than the original contracting parties are governed by them. ... it is only the document that can speak to the third person [8].
24 The requirement of ambiguity before there can be reference to surrounding circumstances has been considered in numerous cases. Whilst the reiteration of this requirement in Jireh leaves no doubt as to its existence, ambiguity is a broad concept. In any event it is enough if the instrument is susceptible of more than one meaning. A practical approach was suggested by Pullin JA in McCourt v Cranston [2012] WASCA 60 as follows:
If a trial judge decides that the contract under examination is not ambiguous or susceptible of more than one meaning, and rules that evidence of surrounding circumstances is not admissible, and an appeal court then decides that decision to be in error, then the case will have to be reheard, because relevant evidence will have been excluded. If, however, the trial judge receives evidence of surrounding circumstances and evidence of the object or aim of the transaction, and if the trial judge's construction is found to be in error, then the Court of Appeal will be able to remedy that on appeal without sending it back for retrial.
Until the High Court says more about the subject, it would be wise for trial judges, in cases where a party reasonably contends that the contract is ambiguous or susceptible of more than one meaning and there is relevant evidence of objective relevant surrounding circumstances known to both parties or objective evidence of the aim or object of the transaction, to allow that evidence in provisionally, even if the trial judge considers that his or her likely conclusion will be to reject the argument of the party contending that the agreement is ambiguous or susceptible of more than one meaning [25] - [26].
25 Once the threshold for admissibility of evidence of surrounding circumstances has been met it is important to restrict the evidence to that which is relevant. The objective approach remains pertinent. Thus evidence of surrounding circumstances must be such as could assist a reasonable person to understand the language used in the contract. Clearly evidence of subjective opinions or of negotiations are not admissible; the surrounding circumstances must be objective facts and must be known to both parties: McCourt v Cranston [24] (Pullin JA).
26 The plaintiff submitted that a liberal approach was to be adopted in the construction of insurance contracts and that in the case of ambiguity the contra proferentem rule should be applied against the insurer. It was said that this rule strongly applies to insurance contracts drafted by the companies who issue them. One of the authorities referred to in support of this submission was Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266 [19] (Kirby J). Kirby J was in dissent in that case. In any event his statement that insurance policies containing words that are intractably ambiguous will be construed so as to strongly favour the resolution of the ambiguity in a way advantageous to the insured was based on Western Australian Bank v Royal Insurance Co [1908] HCA 11; (1908) 5 CLR 533, 559. His Honour accepted that this approach was now not so much in favour and that courts today accept the duty to endeavour to find the meaning from the language and logic of the document rather than by resort to maxims and other rules of thumb. His Honour also accepted that the contra proferentem principle was in any event a last resort in construction.
The surrounding circumstances
27 Whether or not the term 'annual value of the site affected' is ambiguous it is beyond doubt that it is susceptible of more than one meaning. The plaintiff implicitly acknowledged this by contesting two possible meanings. The defendant has raised a third. The phrase is not a defined term and whilst other clauses in the contract provide some assistance they are not determinative. Accordingly reference may be had to evidence of the surrounding circumstances.
28 It is worth noting that these proceedings for a declaration were brought by way of originating summons pursuant to O 58 r 10 of the Rules of the Supreme Court 1971 (WA). That provision allows for proceedings for a declaration to be brought where the interpretation of a written instrument is in issue. The clear objective is to provide for a simple and efficient means by which such questions of interpretation can be determined. This assumes that the issue can be resolved on the documents and without the need to refer to evidence. If questions of disputed evidence are involved the more appropriate course will be to proceed by writ: City of Belmont v Link Interiors Pty Ltd [2001] WASC 64.
29 In this case both parties have filed affidavits. This has been done both to provide evidence of the surrounding circumstances and evidence relevant to the defendant's claim of estoppel. Objections have been made by both sides and resolution of those objections was deferred for determination in these reasons. The need to consider evidential issues has added a level of complexity to this case that ought not arise under O 58 proceedings.
30 The plaintiff filed affidavits of Mr Timothy Kavenagh sworn on 24 July 2012 and 4 June 2013. Mr Kavenagh is the in-house counsel for the plaintiff and commenced in that role on 3 January 2012. The first affidavit merely produces a number of documents. The second affidavit is relied upon only in respect of the estoppel claim.
31 The defendant has filed an affidavit of Mr Patrick Selwyn Plaisted sworn on 3 September 2012. Mr Plaisted is the managing director of the defendant. In his affidavit Mr Plaisted deposes to his experience as an insurance underwriter, the background to these proceedings, his opinion about typical methods for calculating business interruption deductibles for mining risks, the history of negotiations between the plaintiff's insurance broker, Aon Ltd (Aon), and the defendant between 2007 and 2009, and the fate of the preliminary claim made by the plaintiff following the accident at Varanus Island on 3 June 2008.
32 The plaintiff objects to all paragraphs of the affidavit of Mr Plaisted, other than par 8 which attaches a copy of the policy. This objection is made insofar as the affidavit is relied upon in relation to the proper construction of the policy. It is accepted that the affidavit may contain evidence capable of being introduced in the estoppel case. The defendant confirmed that it did rely upon Mr Plaisted's evidence both for construction and estoppel. The plaintiff's objections are that the affidavit is inadmissible as it contains merely evidence of Mr Plaisted's intentions and subjective beliefs or understanding about what the terms of the policy and other documents mean and that it contains evidence of negotiations between the parties rather than objective facts known to both parties.
33 I uphold the objections of the plaintiff. The affidavit of Mr Plaisted almost wholly contains an account of his subjective beliefs and impressions and an account of the negotiations which preceded the policy. That evidence does not constitute objective facts known to both parties and is not admissible. The relevance of any of the contents of the affidavit to the estoppel case need not be considered at this point.
34 The parties consented to the tender of an agreed bundle of documents which included the policy and a number of other documents which both preceded and followed it. It is these documents which provide admissible evidence of the surrounding circumstances. The evidence in this regard can be summarised as follows.
35 The 2008/2009 policy was not the first. In March 2007, Aon, acting as insurance agents for the plaintiff, prepared a draft placement slip seeking insurance for material damage and consequential loss in respect of the Nifty Copper Mine and another mine in Queensland. The draft slip contained details of the proposed conditions of insurance. The excess clause in respect of consequential loss was in different terms than in the 2008/2009 policy. In the draft slip this excess was stated to be:
Thirty (30) days each and every loss or series of losses arising out of one event calculated at Thirty (30) times Actual Average Daily Indemnifiable Loss Suffered by the Insured.
Actual Average Daily Indemnifiable Loss Suffered by the Insured is calculated by taking the total Business Interruption loss and dividing it by the total number of days that production was affected solely due to the Damage. For the purposes of this definition, this total period of time commences from the date that production is first affected and stops once production reaches the position it was at prior to the loss. This period excludes any planned shutdown periods or any other periods of time when the business would not normally have been producing.
36 The draft slip includes a section dealing with declared values which are said to be 'for premium calculation purposes only'. A schedule of declared values provides an itemisation for each mine including consequential loss for the Nifty Copper Mine.
37 The draft placing slip of 6 March 2007 was not accepted and a further placing slip of 15 March 2007 was prepared. In this placing slip the excess clause applicable to consequential loss was amended to a form that was effectively identical to that later used in the policy for that year and for the subsequent year. This is the form of the clause which is under consideration in this case. The provisions in relation to declared values in the second placing slip were materially the same as those in the earlier slip. The second placing slip was accepted and formed the basis for the 2007/2008 insurance policy.
38 In the following year a placing slip was again prepared by Aon dated 10 March 2008. The excess clause was materially the same (although it was given a different name, 'Underlying Amounts' rather than 'Excess'). This placing slip again included declared values (expressed to be for premium calculation purposes only) that included a declared value of consequential loss for the Nifty Copper operations. This slip was subscribed on behalf of the defendant as to a 15% proportion of the liability. Other underwriters subsequently took up the balance of the liability.
39 Prior to the first policy being entered into there were exchanges of emails between Aon representatives and employees of the plaintiff. One of the issues raised in these emails was how the excess, or deductible, would be calculated. In an email dated 16 February 2007 Aon advised that it was not feasible for the business interruption deductible to be reduced from 30 days (document 20). On 19 February 2007 the Aon Australia office advised its London office that the 30 day business interruption deductible was 'okay' (document 22). On 22 February 2007 Aon London advised its Australian office that, amongst other things:
Deductibles to be USD1,000,000 for property damage and 30 days ADV for B/I (ADV being 1/365th of BI value at site affected) but increasing to 90 days in respect of loss/damage to pinions/gears/motors at the sag or ball mills were no serviceable replacement spare exists on site (document 24, page 526).
40 At this stage the brokers were looking at two options for insurance. One option was with the syndicate led by the defendant. The other was with another syndicate and offered 'more favourable deductibles' but was not recommended by the brokers as it was considered to be a more short term solution. This is reflected in an email from Aon to the plaintiff dated 2 March 2007 (document 25).
41 In an email of 4 May 2007 from an employee of the plaintiff to Aon the possibility of a 'trade off' between premiums and current levels of excess was raised. Aon was asked to comment on the impact on the premium if the plaintiff sought to reduce the exclusion period from current levels down to 21, 15, seven or three days. This was clearly a reference to the excess applicable to business interruption. That proposal was responded to on 7 May 2007 and Aon advised that reducing the deductible was not a question of premium. Aon said that underwriters would expect a company the size of the plaintiff to retain a certain level of risk. It was noted that there had been an effective tripling of asset values and the limit of liability had also increased accordingly. Aon advised that taking into account these limit increases and the potential for significant loss they were comfortable that the deductibles were as low as possible in the current market (document 28).
42 Subsequent documents relate to the incident at Varanus Island and why a preliminary claim in respect of it for business interruption was not accepted. These documents do not assist in understanding the terms of the policy. However I will refer to them for the sake of completeness.
43 On 3 June 2008 a pipeline rupture at Varanus Island resulted in an interruption of gas supply to the Nifty Copper Mine (document 32). There was a capability to generate electricity from alternate fuel, being diesel, but this was at an additional cost. Partial gas supply was resumed on 27 August 2008 and it proved necessary to obtain further gas supplies from another supplier at additional cost. Losses were estimated at $9.9 million (document 34, page 561). This was calculated on the basis of losses occurring over a seven month period.
44 A claim was then made for an amount of $8.5 million. This appears to have been calculated on the basis of averaging out the loss over the seven month period and deducting 30 days. That calculation was not correct on any party's view of the contract. When the claim was made the defendant disputed calculation of the excess on the basis that the deductible was to be calculated as being 30 days at 1/365th of the annual BI value of the site affected. On this basis it was argued that the losses did not exceed the excess and no amount was payable under the policy.
45 On 9 October 2008 Aon London sent an email to its Perth office that was then forwarded to the plaintiff. The email states:
Unfortunately the deductible for Aditya Birla is the standard for this type of account in the market at the moment.
Without IMIU involvement it would be impossible to place an account like AB 100% on the current terms, markets in our opinion would write much smaller lines and probably increase the deductibles, especially on the basis of the underwriting reports prior to IMIU involvement. It must be remembered on accounts of this size the markets look to IMIU to set terms and conditions.
ADV applies to all placements of this type i.e small to mid sized with exposures that mean a high scoring on the IMIU 'risk exposure' scale. The only accounts that ADV tends to not apply is on the major's, which IMIU tend not to participate on as their retentions are of a size that takes away the area's that IMIU tends to participate on.
While we can totally understand the client feeling frustrated that given a partial loss, such as in this case, the deductible seems extremely high. It must however be pointed out that our markets over the years have been hit repeatedly by these sorts of B/I losses, hence the move a couple of years ago to ADV.
Aditya can rest assured that they've not been singled out for special treatment.
46 The plaintiff did not pursue the claim in 2008. In an email from one of the plaintiff's employees of 12 January 2009 there is an acknowledgement that the definition of excess was changed during the renewal process in 2007. However it is stated that the change was not brought to the plaintiff's attention by the brokers (document 49).
47 Whilst it is strictly only relevant to the estoppel case, there were proposals to change the excess clause in the following year. They included replacing it with a straight 30 day waiting period. That was something that the defendant was willing to entertain but the premium in that case would be different (document 58). That proposal did not proceed and the policy for 2009/2010 was in the same terms as the immediately preceding policy. By this stage, of course, the plaintiff was aware of the view that the defendant took as to how the excess clause operated.
48 After the 2009/2010 policy was finalised the plaintiff renewed its claim in respect of the Varanus Island incident. On 23 December 2009 the plaintiff claimed $12,893,962 before application of the policy excess. It was asserted that the excess calculation should be based on gross profit for the one year period following the explosion on 3 June 2008. This produced an excess of $1,168,833. The liability on this basis was therefore $11,725,129 (document 61). The defendant also rejected this claim on the same grounds as the earlier claim. The defendant maintained that the excess was to be calculated in accordance with the declared value, and at a declared value for the Nifty Copper Mine of $305 million the excess for business interruption was $25 million.
Plaintiff's contentions
49 The plaintiff contends that the declared value in respect of business interruption is only for the purpose of calculation of the premium. This is reflected in the clear words of the policy. This leaves the term 'annual value of the site affected' to be determined in accordance with the grammatical and ordinary sense of the words used.
50 It is submitted that the ordinary meaning of the words annual value must mean the gross profit for a year of the site affected. The question then becomes when the relevant annual period commences or how it is to be determined. The plaintiff submits that the policy is ambiguous in this regard.
51 The plaintiff contends that given that what is being calculated is the excess period in relation to an entitlement to an indemnity for loss of gross profit for business interruption, the relevant 30 days must be the 30 days following the event that caused the interruption. It is accepted that the wording does not provide for a simple calculation of the loss sustained during that 30 day period, however it is said that if the relevant period of loss is the 30 days following the event the relevant annual period must be the year following the event causing the business interruption loss. If the relevant annual period is the 12 months following the event, then dividing the annual value of the site affected by 365 and multiplying it by 30 would produce a value for the 30 day period that is an average 30 day period in the year following the event. It is said that that result would be consistent with the plain and ordinary meaning of the words used in the policy.
52 The plaintiff anticipates that the defendant's response would be that the effect of this proposed interpretation is that the greater the loss the smaller the excess. This would be counterintuitive since the purpose of the excess is to ensure that the plaintiff bears at least a proportion of any loss incurred. The logical extension of the plaintiff's argument is that a very high loss could result in no excess for business interruption at all. The plaintiff submits that there is a simple and powerful response to this. It says that since the limit of liability under the policy is $50 million and that the sub-limit of liability in respect of specified suppliers (which is applicable here to gas suppliers) is $25 million, the circumstances in which the insurer would be liable for business interruption would be very limited. If the declared value is used to calculate excess then the insurer would only be liable for business interruption losses that exceed $25 million (being $305 million divided by 365 and multiplied by 30). Thus indemnity would only be provided for business interruption losses in respect of specified suppliers that exceed $25 million but do not exceed $50 million. The relatively small exposure to liability is said to weigh against the defendant's proposed interpretation.
53 The plaintiff's alternative submission is that the relevant annual period is the 12 months following the inception of the policy. It is said that this construction would also be consistent with the plain and ordinary meaning of the words and would not suffer the effect referred to by the defendant.
54 The plaintiff submits that it would have been simple to have referred to the declared value rather than the annual value if this was the intention. The use of the word annual rather than declared in the excess clause indicates that annual value was intended to have a different meaning to declared value. This is said to be reinforced by the fact that the policy expressly states that the declared values are for the purposes of calculation of premium only. The use of the words of limitation cannot be dismissed as an obvious typographical mistake or ignored in the process of construction.
55 Furthermore, the plaintiff submits that if the excess was capable of being calculated at the time the policy was made (by using the declared value) it would have been open to the parties to simply state the amount of the excess rather than agree a formula for its calculation. The inclusion of a formula suggests that the relevant amount was not calculable at the time the policy was concluded.
56 The plaintiff also submitted that on the basis of the defendant's contention the excess would be calculated at approximately $25 million and that this would preclude claims for a number of items relating to business interruption where the sub-limits of liability fell below $25 million. There was an obvious flaw in this argument as it assumes that the sub-limits of liability refer to the amount of loss. They clearly do not. They relate to the amount that the insurer is liable to pay in respect of any loss. Accordingly the sub-limits of liability sit above the excess. For that reason I will not further refer to this part of the submission.
Defendant's contentions
57 The defendant contends that annual value must be a reference to the declared value for the Nifty Copper Mine referred to in the placement slip for the policy as that is the only annual value referred to in the relevant documents. That declared value is incorporated into the total declared value referred to in the policy (which also covers the Queensland mine). It is said that it must have been the declared values that the parties were referring to when they referred to annual values for each site.
58 It is accepted that the declared value could have been used to calculate the excess at the time the policy commenced. However, the defendant submits that it is not surprising that it was not. It is said that the use of a formula means that the policy wording can be applied without modification over subsequent years and to multiple sites with different declared values which may change from year to year. It is simpler to change the declared values than to use the formula to work out the excess.
59 It is said that analysis of the policy shows that the declared value was agreed to have purposes other than premium calculation. It was also important in the operation of the co-insurance clause. This clause expressly limits the amount the insured can recover to the proportion of the loss suffered represented by the proportion the declared value bears to 90% of the actual value. In effect this clause uses the declared values to penalise under-insurance. As it does not relate to premium calculation it is said that this reflects an intention to use the declared values for broader purposes under the policy.
60 The defendant submits that there is an apparent inconsistency between the statement that declared values are for premium calculation purposes only and their use for other purposes elsewhere in the policy. It is said that this ambiguity justifies a reference being made to extrinsic material, including the drafting history.
61 The defendant notes that the excess clause changed from that which was included in the initial draft 2007/2008 placing slip. The reference to the annual value in the excess clause was incorporated into the draft placing slip subsequently. However the statement that declared values were for premium calculation purposes only continued unchanged. The suggested conclusion is that reference to declared values being for premium calculation purposes only was not intended to address the inclusion of the reference to annual value in the excess clause.
62 The defendant also argues that the absence of any evidence of annual value being discussed, other than the declared value, prior to the initial policy being entered into, is significant. It is said that this shows that the parties understood that the declared value of the site was the annual value referred to in the excess clause. This is said to be confirmed by the fact that in an email from a broker to the plaintiff dated 17 March 2009 (document 56) the broker uses the declared value as the annual value to calculate the excess. However it is acknowledged that this document post-dates the 2008/2009 policy and cannot be used directly for the purposes of construction. Nevertheless it is said it can be used as evidence of the background circumstances known to the parties prior to the policy inception. It is also submitted that emails of 9 October 2008 and 12 January 2009 (documents 39 and 50) confirm that the plaintiff's broker understood that a higher excess had been required by the defendant and was subsequently agreed.
63 As to the first of the plaintiff's proposed constructions, the defendant says that it makes no commercial sense because it cannot be identified as a certain number at inception or during the currency of the policy. It requires the plaintiff to subsequently produce accounts which either have to be accepted at face value or can themselves be the subject of dispute. It would be expected that the amount of excess would be agreed and ascertainable at the outset of the policy.
64 Secondly, the defendant says that the plaintiff's construction makes no commercial sense because the bigger the actual loss due to the claim event the smaller the actual gross profit generated in the 12-month period following that event and therefore the smaller the excess. The point will be reached where there is no excess at all if the claim event eliminates all gross profit and results in an operating loss over the 12-month period. It cannot be imagined that an insurer would agree to an excess which varies inversely with the size of the loss and that would become smaller and perhaps cease to exist as an excess at all as the claim becomes larger.
65 Thirdly, the defendant says that the plaintiff's construction makes no commercial sense because the amount of the excess would remain unknown to the parties at least until after a period of 12 months had elapsed. The parties could not determine whether a claim exceeded the excess until a year after the event. This would also mean that the plaintiff could not be paid on a claim until more than a year after the loss commenced even though the loss event may have concluded many months earlier. It cannot be imagined that either the plaintiff or the insurer intended such an impractical impediment to any claim being concluded or to any payment being made to the insured under the policy.
66 Fourthly, the defendant says that the plaintiff's contention produces an outcome at variance with the common intention of the parties which was to produce a higher excess than originally sought by the plaintiff in 2007/2008. It is said that a bystander on the day of the policy inception would likely conclude that the excess would be calculated by reference to the expected profit, represented by the declared value. The difference between an excess calculated on this basis, being $25 million, as compared to the basis proposed by the plaintiff, being $1.168 million, is so marked as to make it unlikely that the latter reflected the common intention of the parties.
Findings as to the policy
67 The policy document presents as being the product of a mix and match exercise. It is a collection of various different documents variously entitled conditions, memoranda, schedule and exclusions. This makes the policy document very difficult to read. The impression I have is that having gathered together the various component parts no-one has made an effort to ensure that they can be read together as a coherent whole. This is notwithstanding the invocation at the start of the policy to read the various parts together.
68 The policy document is also not self-contained. An example of this is the co-insurance clause. It has the effect of limiting the liability of the insurer by reference to a declaration of value of the property insured. There are no declared values for the property insured in the policy other than those appearing in the schedule which appear to represent the consolidated value of all property at both the Nifty Copper Mine in Western Australia and the Mount Gordon Mine in Queensland. The amount of the total sum attributable to each of the mines is only apparent by referring to the declared values section of the placing slip (document 5, page 121). For the purposes of business interruption (or consequential loss as it is referred to in the placing slip) the value attributed to the Nifty Copper operations is $305 million. Accordingly, the contract between the parties must be read as being constituted by the policy document together with the placing slip.
69 The ordinary meaning of the excess clause in the policy needs to be understood in the context of the policy as a whole. The purpose of the policy is clearly to indemnify the plaintiff from loss caused by damage to property and consequential losses that may flow from such damage. It also includes loss which results from interruption or interference with the business of the plaintiff in consequence of damage to property of any supplier specified in appendix 1 (there is in fact no appendix 1, at least in the documents provided in the agreed bundle). It is necessary to refer again to the placement slip to determine the specified suppliers. One of them is the gas supplier in respect of the Nifty Mine. By reference to the clause headed 'Specified Customers and Suppliers' in the policy (document 7, page 187), it is apparent that loss resulting from damage to the property of a specified supplier is deemed to be loss resulting from damage to property used by the plaintiff at the relevant premises for the purposes of the business. The limit of liability in respect of losses resulting from damage to the property of a specified supplier is $25 million.
70 The purpose of the excess clause is to require the plaintiff to bear a proportion of any loss suffered. This limits the liability of the insurer and protects it from small claims that might otherwise make the policy commercially unviable. In respect of material loss or damage, the amount of the excess is $1 million. The nomination of an amount in this regard is understandable as it relates to physical property which can readily be the subject of valuation. Losses resulting from business interruption are not so simply quantified.
71 The basis for settlement of a claim for business interruption losses includes a loss of gross profits due to reduction in turnover and any increase in the cost of operations. This type of loss will be incurred in the period following the damage event. The maximum period of indemnity is 12 months, but the period of interruption may be less than 12 months and a claim could be made at the end of the interruption period. It is at that time that the amount of the consequential losses can be determined. The purpose of the part of the excess clause dealing with business interruption is to ensure that the plaintiff bears a proportion of any such loss. The amount to be borne is an amount equal to 30 days of the annual value of the site affected. Whilst the excess will be a proportion of the loss, it is not calculated by reference to that loss.
72 The words 'annual value' are not in themselves ambiguous. They clearly refer to a value of the site for a period of one year. This must be a valuation determined by reference to the gross profits of the site. The difficulty is in determining which 12-month period is intended to be used for this calculation. Obviously this is of critical importance as the annual value may vary over time. In particular, it could vary significantly in the year following a catastrophic damage event.
73 The policy does not define the term 'annual value', but it must have been intended that this term would have a definite meaning which would enable a calculation to be conducted at the time a claim was made. The first proposition by the plaintiff, that is that the term refers to the 12 months following a damage event, has insurmountable difficulties. They are as follows:
1. no claim for business interruption losses could be made until after 12 months has elapsed following a damage event. This is because it could not be known until after 12 months had elapsed what the annual value of the site was and, therefore, what the excess was. However, as I have noted, business interruption losses may have been incurred for a lesser period than 12 months. For example, the gas supply could have been resumed in full after one or two months. In this event, any loss for the interruption to supply could be calculated at the end of that interruption period. It would be expected that a claim could be made and assessed at that time. It is inconceivable that the plaintiff would have entered into an insurance contract that would require any claims for business interruption to be deferred until the end of 12 months following the event. Such an agreement could potentially require the plaintiff to bear the consequences of the loss for many months after that loss had been incurred and was complete. This is antithetical to the purpose of the policy to provide an indemnity for such loss;
2. an excess calculated by reference to the year following the damage event would mean that the greater the losses the smaller the excess. This is because it must be expected that business interruption will result in a reduction in gross profits in the 12 months following a damage event. If there was a catastrophic damage event that resulted in no gross profit in the following year, then the excess would be reduced to nil. This appears to be counterintuitive. There is no obvious reason why the excess should reduce as the losses increase. It would be expected that an excess would be payable regardless of the size of the loss;
3. whilst the excess clause requires a calculation to be made, it must have been expected that such a calculation could be done at the time a claim is made. This requires that the annual value be something that has meaning at that time. It favours an annual value by reference to past performance. This would provide not only certainty, but would also better accord with the obvious purpose of the excess clause.
74 The second approach proposed by the plaintiff is that' annual value' refers to the 12-month period following inception of the policy. That proposal has similar difficulties:
1. it would mean that at the time the policy commenced the term 'annual value' could not be quantified. Furthermore, it could not be quantified until 12 months had elapsed after the policy had commenced. A claim for losses in that 12-month period could not be determined because the annual value for the purposes of the excess could not be determined until the end of that period;
2. since the period of the policy is 12 months, the annual value would necessarily be calculated in respect of a period which included at least some, if not all, of the period in which the loss was incurred. This would have the effect referred to earlier of reducing the gross profits in that year and thereby reducing, perhaps to nil, the amount of the excess.
75 In my view, neither of the interpretations advanced by the plaintiff could possibly reflect the common intention of the parties. They do not provide a method for calculating the excess at a time that loss is incurred or a claim is made that accords with common sense and the evident purpose of the policy.
76 It is also relevant to consider the proposed interpretation advanced by the defendant. Whilst the defendant bears no onus in these proceedings of establishing an alternative interpretation, if such an interpretation is established that would provide a further reason to refuse the declaration sought.
77 The defendant proposes that the declared values given in the schedule are intended to be used as the annual value in the excess clause. There are a number of obvious difficulties with this proposal:
1. the values provided in the declared values section are not expressly referred to as annual values or as values determined by a calculation of gross profit for a 12 month period. It is very likely that they do in fact represent annual gross profit, but that is merely an assumption that cannot be relied upon in interpreting the policy;
2. the excess clause does not use the term declared values. If it was intended that the excess for business interruption would be calculated by reference to the declared values this could have been readily stated. The use of the term 'annual value', rather than declared value suggests that it was not intended that the declared values would be used for the purposes of calculating the excess;
3. the declared values section of the schedule contains express words of limitation as to how those declared values are to be used. It states that they are to be used 'for the purpose of calculation of the premium only'. To conclude that those values are to be used in calculating the excess would be to ignore the words of limitation or to render them meaningless. They cannot be ignored as they form part of the contract. They are not meaningless; to the contrary, their meaning is plain. This is not a case in which the words can be dismissed as an obvious typographical mistake;
4. if the declared values were to be used in calculating the excess it would have been open to the parties to simply calculate the amount of the excess in respect of business interruption at the commencement of the policy. That amount could then have been stated rather than agree a formula for its calculation. The inclusion of a formula suggests that the relevant amount was not calculable at the time the policy was concluded. There was a suggestion that the declared values could be more readily changed in future policies and that this explains why the formula was used even though the declared values were known. This suggestion has little attraction in circumstances where the formula is so simple. It does not support use of the declared values in calculating the excess;
5. the declared values in the schedule are not in fact the value of any individual site, rather they are consolidated values for both the Nifty Copper Mine and the Mt Gordon Mine. The excess clause requires use of an annual value 'of the site affected'. This requires a value for the individual site in respect of which a claim is made. Separate declared values are given in the placing slip, but not the schedule. If it was intended that declared values would be used in calculating excess under the policy it would be expected that the policy would stipulate values for each site. The fact that it does not suggests that it was not intended that declared values would be used;
6. the use of consolidated declared values in the policy is also consistent with those values being used for calculation of the premium only. The premium is calculated on the basis of the value of all property covered by it. This is to be contrasted to claims, which will only relate to the site affected.
78 I have also considered the fact that the co-insurance clause does appear to require that declared values be used in a context other than calculation of premium. However, this inconsistency does not lead to a conclusion that the declared values can be used for any purpose in the policy. It may be that the co-insurance clause is inconsistent with the words of limitation in the declared values section of the schedule, but that does not mean that it can be assumed that they were an error and can be ignored. The declared values do have clear meaning and purpose in respect of the calculation of premium and use of those values only for that purpose could not be said to have been unintended.
79 It should also be noted that the declared values referred to in the co-insurance clause appear to be a reference to values of individual items of property at each of the mine sites, not to the consolidated total value referred to in the schedule. Itemised declared values can be found only in the placement slip. Thus the declared values in the policy cannot be those referred to in the co-insurance clause. To this extent that clause is not inconsistent with the words of limitation.
80 Insofar as the evidence of the surrounding circumstances is relevant, I note, in particular, that the excess clause was changed in the placement slip for the immediately preceding policy at the suggestion of the insurer. The excess clause originally included in the 2007 placement slip did not refer to an annual value. Rather, it required that the excess for business interruption be calculated as 30 times the actual average daily indemnifiable loss suffered by the plaintiff. The effect of this was to require the plaintiff to bear the first 30 days of any loss averaged out over the whole loss period. That excess required no reference to declared values and was capable of being calculated at the end of any interruption loss period. That placement slip still included declared values in relation to material loss and consequential loss. There could be no argument that declared values in that context were relevant to calculation of excess. The declared values section of the placement slip included the same words of limitation 'for premium calculation purposes only'.
81 It may well be that when the insurer caused the excess clause to be changed in the 2007 placement slip, the expectation of the insurer was that this would produce a higher excess. But that expectation cannot found a conclusion that the new excess clause was necessarily intended to refer to declared values. If the insurer thought that the annual value was to be the declared value, then that is a view that was not clearly expressed in the policy. If this was the intention then it would be expected that the words of limitation in the declared values section would have been removed or amended. Absent such an amendment it is impossible to conclude that there was a common intention to use the declared value for calculation of the excess.
82 For these reasons the defendant's proposal cannot be accepted. That does not, of course, reinforce the plaintiff's interpretations because they suffer from the problems I raised earlier. It is not a question of finding the least worst solution proposed by the parties; it may well be that none of the alternatives advanced can be accepted as correct. The court is not obliged to give a contract one of the meanings advanced by the parties if none of them are likely to reflect the common intention of the parties.
83 During the course of the proceedings, I suggested that there was another possible interpretation. It may be open to a court to adopt a construction not advanced by either party. However, such a course should only be adopted after giving the parties notice. I suggested that it may be open to interpret 'annual value' as being the value calculated on the 12 months immediately preceding the damage event. This seems to avoid problems with the other interpretations suggested. Whilst such a value could not have been calculated at the time the policy commenced, it could be determined at the time of a damage event. This would explain why a formula rather than a fixed amount was used. It would avoid problems related to calculation of an excess by reference to the year in which the damage occurred. It would also avoid the problem of having to wait for 12 months either after inception of the policy or after the damage occurred before being able to make a claim.
84 Neither of the parties embraced this alternative and I was not provided with any detailed arguments as to why it was not viable. In the absence of argument I will refrain from making any conclusion in regard to this possible interpretation. Another possibility is the 12 months represented by the last completed financial year prior to the damage event. This latter possibility was not raised at the hearing so I will not consider it any further. What I will say is that the interpretations advanced by the parties are not the only, nor the most obviously preferable, options that are available.
85 For the reasons I have given the interpretations proposed by the plaintiff cannot be accepted. The application for a declaration in respect of either of those interpretations must therefore be refused.
The estoppel claim
86 Given that the declaration sought by the plaintiff will not be granted it is strictly unnecessary to consider the estoppel claim. I will only do so briefly. I have for this purposed had regard to the affidavit evidence.
87 The defendant claims that the plaintiff is estopped either by its conduct or by a common assumption from disputing the interpretation advanced by the defendant. Estoppel by representation or conduct and estoppel by convention or common assumption are common law estoppels that operate as a rule of evidence and preclude the estopped party from denying the truth of the assumed state of affairs: The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1 [3458].
88 It is an indispensable condition of an estoppel by representation that the party asserting the estoppel must have been induced to act to his detriment, or more properly, that a detriment or harm would be incurred unless the law gives protection from a change of position by the other party: Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 674 - 675 (Dixon J).
89 In this case it is asserted that by not proceeding with the preliminary claim in 2008 and then entering into a new policy on the same terms, when the plaintiff was aware of the defendant's interpretation of the excess clause, there was effectively a representation, or at least conduct, which conveyed to the defendant that the plaintiff accepted that interpretation. That conclusion requires that an inference be made regarding what was conveyed by the failure to pursue the preliminary claim. It also requires that the conduct would reasonably be seen as something that would be relied on by the insurer.
90 This was not a representation or conduct in clear terms directed to inducing the defendant to act to its detriment. The reasons why the preliminary claim was not pursued in 2008 may have been other than acceptance of the defendant's interpretation. A decision not to pursue a claim could not, without more, be reasonably taken as a concession that the defendant was correct. If such a concession cannot be proved then it follows that no change of position can be proved.
91 Furthermore, whilst Mr Plaisted in his affidavit says that he would not have agreed to the subsequent policy had he known that the interpretation was disputed, there is nothing in the correspondence from the relevant time which establishes that this was a critical factor. Claims made after the event that some critical assumption was made must be viewed with caution. The possibility that they are coloured by hindsight cannot be discounted.
92 The party claiming the benefit of estoppel must also show that they acted to their detriment. The defendant asserts that it acted to its detriment by undertaking the obligation in the 2009/2010 policy and that it would be unconscionable for the plaintiff to be permitted to assert its construction of the policy. The defendant was paid a premium of approximately $3.39 million for entering into the 2009/2010 policy. No claims have been made against that policy and the period of insurance covered by it has now expired. The defendant has apparently received a net benefit in the amount of the premium for assuming the obligations under the 2009/2010 policy. True it is that it also undertook a liability and it is only because the risks against which it indemnified the plaintiff did not occur that a financial detriment has not been incurred. Nevertheless, whether merely entering into contractual arrangements on apparently commercial terms is, without more, a detriment for estoppel purposes must be capable of doubt.
93 If I had favoured either of the interpretations advanced by the plaintiff, I would not have allowed the estoppel claim advanced by the defendant.
Conclusion
94 I appreciate that in rejecting the alternative interpretations advanced by the parties, I have not provided a definitive answer as to the operation of the excess clause. Obviously, it would have been desirable to provide a definitive answer if that were possible. However, it is not the role of the court to rewrite the contract. Nor is it appropriate in proceedings of this nature to suggest a way in which the dispute could be commercially resolved that has nothing to do with the terms of the contract actually entered into.
95 The declarations sought by the plaintiff must be refused.
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