Danbol Pty Ltd v Swiss Re International SE
[2020] VSCA 274
•5 November 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2020 0025
| DANBOL PTY LTD (ACN 147 432 399) | Applicant |
| v | |
| SWISS RE INTERNATIONAL SE (ABN 38 138 873 211) & ORS (according to the attached Schedule) | Respondents |
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| JUDGES: | McLEISH, NIALL and SIFRIS JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 5 October 2020 |
| DATE OF JUDGMENT: | 5 November 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 274 |
| JUDGMENT APPEALED FROM: | [2020] VSC 23 (Riordan J) |
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CONTRACT – Insurers declined annual renewal of insurance policy – Insurers offered to extend cover for 14 days for extra premium – No express acceptance of offer to extend cover – Ongoing engagement regarding potential renewal of annual policy – Fire destroyed property – Whether acceptance implied – Whether contract inferred from circumstances – Whether bilateral contract of insurance – Whether unilateral contract of insurance – No contract formed – Appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr C M Caleo QC with Mr A M Dinelli | Davis Advisory |
| For the Respondents | Mr G G McArthur QC with Ms K E Foley | Lander & Rogers |
McLEISH JA
NIALL JA
SIFRIS JA:
The applicant held with the respondents an annual insurance policy relating to a warehouse in West Footscray (‘the Property’). That policy expired on 24 August 2018. That morning, the respondents’ representative emailed the applicant’s insurance broker to advise that the respondents had declined to renew the policy essentially because there had been a change of use of the Property. In the same email, the respondents’ representative offered a 14 day extension of the policy in return for a specified premium of $3,506.06 ‘to assist with placement’ and said that it would need further information in order to reconsider its decision to decline to renew the annual policy.
The applicant, through its insurance broker, provided further information about the use of the Property and continued to engage with the respondents’ representative to see if an annual policy could be secured. It said nothing about the offer of 14 day cover. On 29 August 2018, the respondents’ representative offered an annual policy, and said that if that offer was not accepted the extra premium attached to the 14 day extension ’applies’ until 7 September 2018. The Property burnt down on 30 August 2018, before the applicant could accept the offer of annual cover.
The applicant contends that its communications with the respondents amounted to an implied acceptance of the offer of a 14 day extension and, therefore, the 14 day extension policy was in place at the time of the fire. The respondents deny that a contract was formed because, they say, the applicant had not accepted the offer. They have refused to pay under the policy. The applicant commenced proceedings in the Trial Division, seeking recovery under the policy.
A judge in the Trial Division determined, as a preliminary question, whether there was a 14 day extension of the insurance policy. His Honour decided that question adversely to the applicant. As a result, he held that there was no insurance policy in force at the time of the fire. On the basis of the answer to the preliminary question, the proceeding was dismissed. The applicant seeks leave to appeal.
For the reasons that follow, the judge was correct in his conclusion. The conduct of the applicant in providing information and attempting to secure annual cover did not manifest an intention to accept the offer of a 14 day extension of the policy. We would grant leave to appeal but dismiss the appeal.
The facts
The facts are not in dispute. They are contained in a statement of agreed facts and correspondence passing between the parties which was tendered by agreement. The following is largely drawn from the reasons of the primary judge.
By a schedule and policy of insurance dated 24 August 2017 (‘the 2017 Policy’), the respondents, through their representative Pen Underwriting (‘Pen’), agreed to insure and indemnify the applicant against the risk, amongst others, of physical loss, destruction or damage, including fire, for the period between 24 August 2017 and 4:00 pm on 24 August 2018 with respect to the Property.
The 2017 Policy contained the following reminder:
You are reminded that the policy mentioned below falls due for renewal on 24-Aug-17. To ensure your continued protection, payment must be received within 7 days of this date. This is an invitation to renew, and not a demand for payment.
The schedule to the 2017 Policy recorded the ‘Business Activities’ of the insured as being ‘Property Owner’ with a tenant involved in the manufacture, storage and transport of timber pallets and reconstituted logs, production of woodchips and mulch and any other associated activities of the insured. The annual premium was $ 99,275.23.
As the 2017 Policy was expiring on 24 August 2018, there were communications contained in various email exchanges between the applicant’s insurance broker, Griffiths Goodall Insurance Brokers (‘the applicant’s broker’) and Pen, concerning the renewal.
By email of 6 July 2018, the applicant’s broker advised Pen that the insured Property was now partly occupied by a tenant who was storing decommissioned gas bottles for BOC, stating that ‘[m]ost will be oxygen and co2’.
By email of 17 July 2018, Pen confirmed that ‘the new tenant in the premises’ had been noted on the underwriting file.
On 18 July 2018, Pen emailed the applicant’s broker and advised that the 2017 Policy was due to expire on 24 August 2018 at 4:00 pm and stated: ‘If we do not receive a response [to certain requested information] we will assume the policy is no longer required and the policy will lapse at 4pm on the expiry date noted above.’
By email of 9 August 2018, Pen emailed the applicant’s broker, attaching a renewal quotation. The email directed attention to special conditions relating to the obtaining of a survey, a thermo-scan and an asbestos condition. The covering email also said that Pen would ‘ask the risk assessor to confirm the external timber pallet piles [were] being removed/housekeeping maintained & storage of combustibles are 3 meters from the building line.’
The attached renewal terms commenced:
We wish to advise that the Policy detailed below expires at 4.00 pm on the Due Date shown. Renewal of this policy is invited on the basis of the details provided in this notice. Please note that no automatic hold covered provisions apply so it is necessary to confirm the insured’s intention to renew prior to the Due Date.[1]
The renewal terms provided cover with respect to a tenant being ‘Manufacturer, Storage & Transport of Timber Pallets and Reconstituted Logs, Production of Woodchips & Mulch’ and ‘any other occupation incidental thereto’ for a period of 12 months from 4:00 pm on 24 August 2018 to 4:00 pm on 24 August 2019 with a premium of $91,683.02. We note that this description did not include any reference to the storage of decommissioned gas bottles.
[1]Emphasis added.
By email of 14 August 2018 at 3:56 pm, the applicant’s broker asked Pen to provide revised terms by deleting the existing description of occupancy and replacing it with the following:
Property Owner of Factory storing decommissioned gas bottles for boc (Most will be oxygen and co2) & Billiard Table Manufacturer[.]
By email of 14 August 2018 at 4:58 pm, Pen advised the applicant’s broker:
We may not be able to assist, could you advise;
Would there be any storage of other gass (sic) bottles such as LPG, Argon etc
How are they stored, are they in an upright position & secured?
How long are they stored for — are they transferred off-site for refurbishment & reuse? Or waiting disposal
Can you advise the process of the billiard table manufacture, I assume that there is wood working involved? If so is there any dust extraction systems?
What percentage of the building is used for the gas bottles? And what portion for gas bottle storage? Is there separation between the two?
By email of 21 August 2018 at 5:45 pm, the applicant’s broker replied:
Could you please arrange terms based on the following additional information;
…
I confirm the only tenant currently occupying this building is the tenant with a contract with BOC to decommission gas bottles, mainly oxygen and co2.
The gas bottles are decommissioned at property, stored upright (vertically) & wrapped in plastic, then sent off for disposal at a Third party site.
They are stored on a short term basis & not transferred for refurbishment or reuse.
There is no storage of other gas bottles such as LPG, Argon etc
Also confirm there is no longer recycling or wood works at this property.
(please note the Billiard table manufacture (sic) has since left).
On 23 August 2018 at 4:04 pm, Pen asked the applicant’s broker whether she could confirm that ‘there will be no gas bottles stored on site that are currently or have previously been holding flammable gases?’
By email of 23 August 2018 at 4:27 pm, the applicant’s broker replied:
There are currently no gas bottles that would have any flammable gases in them.
There would be bottles stored that would have previously held flammable gases but they are all ‘decommissioned’ prior to be (sic) transported to this property.
At 5:04 pm on that day, Pen emailed the applicant’s broker:
I will be in contact with you tomorrow. I do have to refer for approval & will be in contact as soon as I’m able.
In a critical email the following day, 24 August 2018, at 10:19 am, Pen said:
Decline to Renew — 14 Day Extension.
It sounds in your previous email that there is decommissioning on site?
‘The gas bottles are decommissioned at property, stored upright (vertically) & wrapped in plastic, then sent off for disposal at a Third party site’
You also refer to the gas bottles having been decommissioned prior to coming on site.
On further consideration, this is not one we are going to be able to assist with at renewal with the change of tenancy, however given the time-frame we will offer 14 days extension to assist with placement.
[Table showing calculation of ‘Net Premium’ of $3,506.06].
For Pen to re-consider we would require a survey or suitable qualified engineer report to provide details in relation to the process, adequate ventilation, safety of procedures and storage on site.[2]
(‘the 24 August email’).
[2]Emphasis in original.
By email of 24 August 2018 at 10:58 am, the applicant’s broker stated:
Apologies — I have provided incorrect information with regards to the gas bottles being ‘decommissioned on site’, this is not the case.
I have confirmed that BOC empties/decommissions all the gas bottles themselves (not our tenant), Our (sic) client only stores them temporarily (once they have been decommissioned).
Our client then sends them to the third party site to be destroyed, which is not connected to this risk.
Please review & advise?
A few minutes later, at 11:01 am, the applicant’s broker added: ‘Our client also holds an EPA licence to store. Thanks’.
By email of 27 August 2018 at 10:16 am, the applicant’s broker asked Pen whether there was ‘[a]ny news on this one please’.
By email of 27 August 2018 at 10:33 am, Pen sought some information from the applicant’s broker about the decommissioning process. A short time later, the applicant’s broker replied that she would ‘need to confirm the process’ but confirmed that there was ‘no processing on site.’
By email of 27 August 2018 at 2:48 pm, the applicant’s broker, Rochelle Mullane, provided the following answers about the decommissioning process:
Please see below;
BOC decommissions by the following process;
— Removing traces of gas (off-site/BOC) [Rochelle Mullane] YES
— Removal of valves (off-site/BOC [Rochelle Mullane] YES
—Puncturing of bottles – (so it is known that they have been decommissioned) (off-site/BOC) [Rochelle Mullane] unsure if punctured but it is known that they are all decommissioned.
[Rochelle Mullane] once decommissioned by BOC, client stores them for a short time then sends them off to landfill. Landfill is a third party site, again nothing to do with this risk.
If so can you confirm that it is all taken care of prior to arriving at the site (no process on site & all gas bottles decommissioned prior to arriving on-site) [Rochelle Mullane] yes[.][3]
[3]Emphasis in original.
By email of 27 August 2018 at 3:48 pm, Pen advised:
Sorry Rochelle, I have to refer this one & sent the referral on (to save time) prior to receiving your reply, that was intended to be forwarding internally additional responses.
By email of 27 August 2018 at 3:58 pm, the applicant’s broker responded: ‘No worries – thanks’.
In the second critical email, on 29 August 2018 at 12:33 pm, Pen emailed the applicant’s broker and attached the ‘Industrial Special Risk – Renewal Quotation’ (‘Renewal Quotation’), and stated:
Please find attached terms, subject to no know (sic) circumstances effective 24th August, 2018.
If our terms are not accepted below EP [extra premium][4] applies for the 14 day extension until 7 September 2018 to assist with placement.
[4]See Danbol Pty Ltd (ACN 147 432 399) v Swiss Re International SE (ABN 38 138 873 211) [2020] VSC 23, [7(d)] (‘Reasons’).
I bring to your attention the Special Conditions relating to;
1.Subject to a survey satisfactory to Pen Underwriting’s criteria with any risk recommendations completed in required time-frames. Should the survey note any decommissioning, recycling, processing, bottles stored that have not been degassed/decommissioned, or incorrect storage Pen reserves the right to cancel the policy.
2. A thermo-scan is required within 30 days of cover.
– If any hot spots are detected they then must be rectified within 30 days, Otherwise we will cancel the policy in accordance with General Conditions 5.
3. Asbestos Condition[.]
(‘the 29 August email’).
The Renewal Quotation was in a similar form to the earlier renewal terms attached to Pen’s email of 9 August 2018, except that it recorded the tenant’s business as ‘Storage of emptied Gas Bottles for disposal – No decommissioning on site … and any other occupation incidental thereto’, and quoted a premium of $106,709. In particular, the attached terms still provided:
(a) ‘that no automatic hold covered provisions apply’; and
(b) the proposed period of cover was from 4:00 pm on 24 August 2018 to 4:00 pm on 24 August 2019.
On 30 August 2018, at about 5:00 am, a fire started at the Property.
By email of 30 August 2018 at 8:44 am, the applicant’s broker wrote to Pen and stated: ‘Thanks Lisa, terms accepted. Please find our closing attached.’ The attached ‘Closing Advice’:
(a) was dated 30 August 2018;
(b) was addressed to Pen;(c)stated: ‘[p]lease renew the following policy as per the details shown below’ with the ‘Schedule of Insurance’ attached; and
(d) showed the net premium at $106,709.00.
By email of 25 September 2018 at 12:05 pm, the applicant’s broker stated:
Just touching base with you with regards to the above,
For my file, can you please confirm if I should have the underwriter as Pen Underwriting or Pen UW Group.
We have both on our broking system?[5]
[5]Emphasis in original.
The applicant’s broker sent a further email at 12:24 pm that day, stating:
Also confirming we have received confirmation from Hunter Premium Funding that the insured’s funding has been approved &
We are now just awaiting settlement, our underwriter payment will be included in next weeks’ underwriter remittance which are processed on Tuesdays.
On 2 October 2018, the applicant’s broker remitted $106,709 to Pen, which the latter returned by cheque dated 4 October 2018.[6]
[6]Reasons [7]–[32].
The pleaded case and separate question
By its statement of claim, the applicant pleaded a contract on three bases:
(a) on or about 29 August 2018 the respondents agreed to extend the original contract of insurance for 14 days, with effect from 24 August 2018 to 7 September 2018, while the applicant considered the renewal terms offered by the respondents on 29 August 2018 (the extension) — with the result that the original contract was extended to 7 September 2018;[7]
(b) a statutory renewal under s 58 of the Insurance Contracts Act 1984 (Cth);[8]
(c) further or alternatively, on 24 August 2018 at 10:19 am, the respondents declined to renew the original contract of insurance with the change of tenancy but proposed a 14 day extension to assist with placement for a premium of $3,506.06 and thereby agreed that there would be continuous cover on the same terms as the original contract, unless a new offer was accepted within a reasonable time or 14 days.[9]
[7]Statement of Claim [8] and [9].
[8]Ibid [14].
[9]Ibid [15] and [16].
By way of reply, the applicant pleaded that the 29 August email proposed terms that might be accepted or, if not accepted, the extra premium applied for the 14 day extension.[10] It pleaded that the 14 day extension was to assist with placement and was automatic regardless of whether the terms proposed were accepted.[11]
[10]Reply [2].
[11]Ibid [3].
The respondents pleaded that the original contract had expired, there was no agreement to extend and s 58(3) did not apply to extend the contract.
The judge ordered that the existence of the contract be determined by way of a preliminary question framed as follows:
Pursuant to rule 47.04 of the Supreme Court (General Civil Procedure) Rules2015, the trial of the proceeding shall be split, with the plaintiff’s affirmative case (specifically, whether there was an extension of insurance cover and whether there was a breach of s 58(2) of the Insurance Contracts Act 1984, as pleaded in the statement of claim) being determined before and separately from the defendants’ affirmative defences (Preliminary Question).
Subsequently, the applicant abandoned its claim under s 58 of the Insurance Contracts Act. The judge said that ‘the sole question for preliminary determination was whether there was a 14 day extension of the original 2017 insurance policy.’[12]
[12]Reasons [5].
The judge’s reasons
The judge noted that the applicant’s case for a subsisting contract of insurance was put on two bases. First, it argued that the applicant had accepted the respondents’ offer of a 14 day extension contained in the 24 August email (‘the bilateral contract’). Second, it contended that the respondents agreed to a 14 day extension of the 2017 Policy in the 29 August email, which constituted a unilateral contract (‘the unilateral contract’).
The judge rejected both claims. After referring to a number of authorities, to which we shall return, the judge expressed his conclusions on both aspects.
Bilateral contract
The judge noted that the following matters were not in dispute:
(d) Pen’s 24 August email constituted an offer (on the part of the respondents) to extend the 2017 Policy for 14 days that, if accepted, would have supported a binding contract;
(e) payment of the extra premium was not a required method of acceptance; and
(f) acceptance of the offer could be implied but must be absolute and unqualified.[13]
[13]Ibid [55].
However, the judge held that the applicant had not accepted the respondents’ offer. His Honour said that none of the emails, which embodied the only communications between the parties, ‘purports, on any reading, to accept the offer of a 14 day extension for a premium of $3,506.06.’[14]
[14]Ibid [56].
In reaching that conclusion, the judge had regard to the following surrounding circumstances:
(a)By [Pen]’s email of 9 August 2018 and the attached renewal terms, the defendants expressly stated that the policy expired on 24 August 2018 and that ‘no automatic hold covered provisions apply’. At no time did the defendants retreat from this position.
(b)The emails from the plaintiff’s broker requesting that the defendants reconsider their refusal to renew are consistent with an intention not to accept the extension, which was being expressly offered for the purpose of allowing the plaintiff an opportunity to negotiate alternative insurance cover.
(c)The email of 29 August 2018 from [Pen] would be read by a reasonable business person as comprising two alternative offers, being:
(i) an offer to renew; or
(ii)an offer for a 14 day extension at extra premium ‘to assist with placement.’
This is consistent with the fact that the renewal was being offered from 24 August 2018, rather than 14 days after that date. It is also consistent with the fact that on 30 August 2018, the plaintiff’s broker accepted the renewal offer. There was no acceptance of the offer for a 14 day extension at extra premium.
(d)The contention that the email of 29 August 2018 acknowledged that the defendants and the plaintiff had already agreed that the defendants would extend cover under the 2017 Policy from 24 August 2018 to 7 September 2018 and that the plaintiff would pay the extra premium, is not consistent with the fact that:
(i)both the renewal and the extension were being offered from 24 August 2018;
(ii)on 30 August 2018, the plaintiff’s broker accepted the renewal offer for the period from 24 August 2018, without reference to any liability to pay for the extra premium; and
(iii)the Renewal Quotation attached to [Pen]’s email of 29 August 2018, expressly stated that ‘no automatic hold covered provisions apply so it is necessary to confirm the insured’s intention to renew prior to the Due Date’.[15]
[15]Ibid [57].
Unilateral contract
In order to establish a unilateral contract, the applicant relied on the second paragraph of the 29 August email as follows:
If our terms are not accepted below EP [extra premium] applies for the 14 day extension until 7 September 2018 to assist with placement.
The judge held that this did not give rise to a unilateral contract because it was a repetition of the earlier offer, which had undoubtedly required acceptance.[16] Further, to accept that it gave rise to a unilateral contract would unilaterally impose an obligation on the applicant to pay the extra premium if the applicant did not accept the renewal.[17] Although the judge accepted that the respondents could have offered to cover the insured for the 14 day period in consideration of the renewal of the policy, that was not reflected in the correspondence.[18]
[16]Ibid [60(a)].
[17]Ibid [60(b)].
[18]Ibid [61].
Applicant’s submissions
The applicant seeks leave to appeal on two proposed grounds. The first of them is headed ‘existence of a contract by implied acceptance’ and is in these terms:
The learned primary judge erred in concluding that there had not been acceptance by [the applicant] of the offer made to it by the [respondents] on 24 August 2018 (Reasons, [56]–[62]).
Under cover of this ground, the applicant submits that the judge ought to have concluded that the offer in the 24 August email either dispensed with acceptance or was accepted by the applicant by its continued engagement with the respondents in relation to the necessary annual renewal, which the extension had been offered to facilitate.
In advancing that submission, to an extent, the applicant moved away from the dichotomy between bilateral and unilateral contracts, observing that such a distinction was a distraction from the central question. Rather, it posed the key issue as whether, having regard to the words and conduct of the applicant in the context in which they occurred, a reasonable person in the position of the respondents would have concluded that the offer had been accepted.
It submits that the rule in Felthouse v Bindley,[19] that an offeror cannot stipulate that silence is sufficient to communicate acceptance, is not invariable. It cites an observation of McHugh JA in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd,[20] that in certain cases ‘the silence of an offeree in conjunction with the other circumstances of the case may indicate [acceptance of] the offer’.[21] It also submits that in the case of a unilateral contract, the circumstances usually indicate that separate acceptance is not required.
[19](1862) 11 CB (NS) 869; 142 ER 1037 (‘Felthouse’).
[20](1988) 14 NSWLR 523 (‘Empirnall’).
[21]Ibid 534, citing Rust v Abbey Life Assurance Co Ltd [1979] 2 Lloyd’s Rep 334, 340.
Applying those general precepts, the applicant points to seven contextual matters to support its contention that the 14 day extension in the 24 August email had been accepted, and a contract formed.
First, the applicant’s commercial objective, known to both parties, was to obtain continuous insurance cover.
Second, the terms of the 24 August email, in the context of an imminent cessation of cover, offered a 14 day extension ‘to assist with placement.’ The applicant submits that this was to facilitate renewal of an annual policy and either dispensed with the need for acceptance or indicated that it could be signalled by conduct ‘in the form of continuing to pursue an annual renewal.’
Third, the applicant accepts that the premium was a new element that had not been raised earlier, but since it was, pro rata, roughly equivalent to the previous annual premium and the applicant had not indicated that it was sensitive to price, it did not require separate and clear acceptance.
Fourth, within an hour of receiving the 24 August email, the applicant provided further information directed to securing an annual renewal. This is said to be a clear indication that the applicant had accepted the offer as part of its attempt to secure an annual renewal. It says that the contrary, and inherently unlikely, conclusion would entail the applicant risking a break in cover, which it was seeking, in order to avoid a modest interim payment.
Fifth and sixth, there is less warrant for rigidly applying the rule in Felthouse v Bindley where it is the offeror who would be disadvantaged by its rigid application. That is more so where the applicant had, in substance, initiated the offer in aid of its objective of securing continuous cover, and had updated its tenancy details on 6 July 2018 and sought revised terms on 14 August 2018.
Seventh, the 29 August email confirms an existing legal obligation. That email attached terms for a policy intended to operate from 24 August 2018. The email stated that if the terms were not accepted, an extra premium applied for a 14 day extension until 7 September 2018. The applicant submits that this proceeds on the assumption that the 14 day period started on 24 August 2018 (with around nine days to run) and thus reflected an existing agreement.
The applicant submits that the context provided by those seven matters supports the existence of a contract. It says that the judge’s conclusion to the contrary was flawed because his Honour had confined his analysis to whether an express acceptance could be discerned.
Further, the applicant attacks a number of specific aspects of the judge’s reasoning. First, it says that the express clause to which Pen had drawn attention, that there was to be no automatic extension, did not support the respondents. Rather, it made it more likely that during the period of active exchange of information for an annual renewal, the parties would have proceeded on the basis of an agreed interim extension.
Similarly, the judge was said to be wrong to have treated the applicant as having gone down an alternative path of seeking that the respondents reconsider their position, rather than accept a 14 day extension as a prelude to negotiation of a new contract of insurance — rather, the two paths naturally went together. In that context, the applicant submits that it would be perverse to suggest that a reasonable underwriter would have understood the applicant to be solely pursuing annual renewal to the exclusion of any interim cover, thereby leaving it exposed to the risk of uninsured loss.
In the alternative, under proposed ground 2, the applicant submits that an inferred contract had come into existence. Ground 2 is in the following terms:
The learned primary judge erred in concluding that a contract could not be inferred from the circumstances of the parties’ relationship and dealings (Reasons, [56]–[58]).
It relies on the decision of this Court in P’Auer AG v Polybuild Technologies International Pty Ltd[22] as authority for the proposition that a contract may be inferred where a manifestation of mutual assent can be implied from the circumstances, even where an offer and acceptance or the precise point of formation cannot be identified clearly.
[22][2015] VSCA 42 (‘P’Auer’).
Effectively repeating the analysis it proffered under ground 1, the applicant submits that ‘viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.’[23]
[23]Meates v Attorney-General [1983] NZLR 308, 377 (Cooke J), cited in Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 81–3 (Ormiston J) (‘Vroon’). See also PRA Electrical Pty Ltd v Perseverance Exploration Pty Ltd (2007) 20 VR 487, 489 [6] (Nettle JA); [2007] VSCA 310.
In its oral submissions the applicant brought the threads of its argument together. It emphasised that the test is what a reasonable person in the position of the offeree would make of an alleged offer and what a reasonable person in the position of the offeror would make of an alleged acceptance.
It pointed to the fact that in the email from Pen declining cover, the respondents left open the possibility that, with the provision of further information by the applicant, they might reconsider their rejection. In that context, they offered the benefit of interim cover for the purpose of allowing the applicant to pursue annual cover either with the respondents or elsewhere.
It submits that the judge came to the wrong result and also made four specific errors in doing so. First, the judge misunderstood the 24 August email as only contemplating that the annual cover might be sourced elsewhere and not with the existing respondents. Second, in requiring the applicant to show that its conduct accepted the offer in absolute and unequivocal terms, the judge applied the wrong test. In doing so, he referred to cases that were distinguishable because they dealt with pure silence by the offeree or acceptance by conduct without communications, or involved uncertain terms. Third, the judge misunderstood the significance of the ‘no automatic hold’ provision in the 2017 Policy which, it was said would only be relevant where there was silence and was irrelevant to the characterisation of the communications that were exchanged. Fourth, the judge erred in failing to treat the 29 August email as an acknowledgement of an existing contract.
Respondents’ submissions
The respondents submit that the applicant fails to address the critical issue, namely, whether it accepted the respondents’ offer of a 14 day extension in consideration for the specified premium. Instead, it erects an alternative foundation which proceeds on the false basis that there was an offer to extend in consideration of the applicant continuing to engage with the respondents for a renewal. But, it submits, no offer was made in those terms and no contract was formed on that basis.
The respondents submit that the 24 August email contained an express offer of a 14 day extension for a specified premium. It was not answered, expressly or by implication, by continuing to deal with the respondents. That was not what the respondents were seeking. The respondents had declined to offer a renewal of the 2017 Policy and did not seek continued engagement. They separately stated conditions for reconsidering declining to renew the 2017 Policy. Continued engagement with the respondents was undertaken in order to have them reconsider the decision to decline renewal. That process might or might not result in a further offer to renew at some time in the future, but continued engagement was not the consideration for the 14 day extension.
Applicable principles
In accordance with classical contract theory, a party seeking to rely on the existence of a contract must prove its elements: offer, acceptance, consideration and an intention to create legal relations.
The requirement for acceptance, which must be communicated by the offeree to the offeror, is subject to a number of principles. First, as a general rule, silence cannot constitute acceptance.[24] The rule is primarily designed to protect the offeree from having a contract foisted upon it by preventing an offeror from stipulating that a contract will be created by silence on the part of the offeree.[25] It is a reflection of the requirement for mutual assent.
[24]Felthouse (1862) 11 CB (NS) 869; 142 ER 1037.
[25]Empirnall (1988) 14 NSWLR 523, 534 (McHugh JA).
Second, although silence cannot generally be equated with assent, it is also well accepted that acceptance may be inferred from conduct. As explained by Whelan JA in P’Auer: ‘[t]his will be the case if an objective bystander would conclude from the offeree’s conduct, including his silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.’[26] The conduct relied on must be objectively capable of constituting and conveying acceptance in the eyes of a reasonable person in the position of the offeror.[27] It may be found where the offeree takes the benefit of the offer.[28]
[26][2015] VSCA 42, [9] (with whom Ferguson and Kaye JJA agreed).
[27]Empirnall (1988) 14 NSWLR 523, 535 (McHugh JA).
[28]Ibid.
In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd,[29] McHugh JA said:
… it is an error ‘to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed’. Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of their words. The question in this class of case is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract.[30]
[29](1988) 5 BPR 11,110.
[30]Ibid 11,117 (citations omitted).
Taking the point further, it has also been held that, in certain cases, the search for both offer and acceptance may be dispensed with altogether where the conduct between the parties yields sufficient evidence of mutual assent. Ormiston J in Vroon was prepared to accept:
that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. In the language of para. 22(2) of the Second Re-statement on Contracts: ‘A manifestation of mutual assent may be made even though neither offer nor acceptance could be identified and even though the moment of formation cannot be determined’.[31]
[31][1994] 2 VR 32, 81.
It appears from his Honour’s reference to cases where an acceptance cannot be establish or inferred, that he did not have in mind cases where the offer is clear and the offeree manifests acceptance by conduct. In order to dispense with offer and acceptance as tools of analysis it is necessary that the mutual promises, and therefore the tacit agreement, be identified clearly.
In a passage adopted by this Court in P’Auer,[32] Sundberg J put it this way:
A contract may in certain circumstances be inferred from conduct, even where no offer and acceptance can be identified. However the existence or otherwise of an enforceable agreement depends ultimately on the manifest intention of the parties, objectively ascertained. Where mutual promises are sought to be inferred, the conduct relied upon must, on an objective assessment, evince a tacit agreement with sufficiently clear terms. It is not enough that the conduct is consistent with what are alleged to be the terms of a binding agreement. The evidence must positively indicate that both parties considered themselves bound by that agreement.[33]
[32][2015] VSCA 42, [11] (Whelan JA, Ferguson and Kaye JJA).
[33]Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499, [39] (‘Adnunat’) (citations omitted) (emphasis in original).
The analysis adopted by Sundberg J arose in a context in which the applicant alleged that the respondent was bound by a settlement agreement to which it was not an original named party. It was said that the respondent was bound by the settlement agreement by its conduct. After setting out the passage we have just cited, Sundberg J observed that ‘it will only be in very clear cases that the courts will infer a contract from conduct in the absence of written or oral communications that evidence the exchange of mutual promises.’[34] Sundberg J held that to found a contract from conduct in that way, the moving party ‘must point to conduct that positively and unambiguously demonstrates an agreement’.[35]
[34]Ibid [40], citing Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288, [45] (Finkelstein J).
[35]Ibid [41].
In Woolcorp Pty Ltd v Rodger Constructions Pty Ltd,[36] this Court adopted a similar analysis and said:
(1) Circumstances in which a contract will be inferred are rare.
(2) Before the inference may be drawn, a party must establish that the conduct positively indicated that both parties considered themselves bound by the contract. It is not enough to establish that conduct was merely consistent with the alleged terms of the contract.
(3) In the absence of an offeree’s express consent, acceptance of an offer may be inferred if an objective bystander would conclude from the offeree’s conduct, including its silence, that the offeree has accepted the offer and has signalled that acceptance to the offeror.[37]
[36][2017] VSCA 21 (Santamaria and Kyrou JJA and Elliott AJA) (’Woolcorp’).
[37]Ibid [9] (citations omitted).
To observe that it is rare to infer a contract in circumstances where neither offer nor acceptance can be clearly discerned, is not to state a legal principle. Rather, it is a reflection that in the absence of a clearly identified offer and acceptance, it will be difficult to identify mutual assent to a binding legal relationship and its terms. As one moves away from express terms it becomes harder to attribute a clear meaning to conduct. In the context of an express offer, relevant accepting conduct may comprise the doing of acts or, as in this case, communications that do not embody an express acceptance. Such cases are by no means uncommon. They may involve an implied contract in the sense that the party seeking to prove the contract is unable to point to any express acceptance, however, they are far from that end of the spectrum in which neither offer nor acceptance can be identified.
In assessing the adequacy of the conduct or communication which is said to amount to acceptance, and thereby sustain a contract, it is important not to lose sight of the critical inquiry: what would a reasonable person in the position of the offeror make of an alleged acceptance? To find a contract in that context, the court must be satisfied that the offeror would conclude that the offeree had positively bound itself to the contract. It may be easier to find such an expression in verbal communications.
In every case it will be necessary to show that the conduct was responsive to the offer, and that the offeree has signalled an acceptance of a binding obligation. Where the offeree’s conduct would leave a reasonable person in the positon of the offeror unclear or uncertain as to its meaning then the court will be left unpersuaded as to the existence of the contract. That remains true whether the conduct takes the form of acts, communication or silence.
In the absence of an express acceptance, the existence of a contract will depend on what inferences can be drawn from the conduct or communications. The fact that conduct is consistent with the existence of a contract may mean no more than that one available inference supports the existence of a contract. Depending on what other inferences might arise, the fact that conduct is consistent with there being a contract in place is unlikely to be enough, on its own, to establish the existence of a contract.
The critical issue is what a reasonable person would make of the communications in the context in which they occurred. In considering that issue in this case, the task is to focus on the overt communications between the two parties. In assessing those communications, and whether they evidence an acceptance of an offer, it may be tempting to consider how a reasonable person might be expected to respond in order to secure agreement. Similarly, where there is silence, it might be tempting to consider whether a reasonable person would have made their assent express. Given that the existence of a contract is to be determined objectively, those matters are not necessarily irrelevant to the inquiry. However, the issue is not whether the conduct and silence of the offeree was reasonable or prudent, but what a reasonable person in the positon of the offeror would make of the conduct.
Unilateral contracts
Although the applicant has moved away from the dichotomy between unilateral and bilateral contracts that it invited the judge to adopt, in its submissions in this Court, it still seeks to attach some significance to those labels.
A unilateral contract is one which creates obligations only on the offeror. It takes the form of a promise to do something (e.g. make a payment) if the other party performs an act. The doing of that act simultaneously provides acceptance and consideration. The contract is fully executed by the doing of the act, and the offeror becomes bound to fulfil its promise. The concept of a unilateral contract is relevant for present purposes because there is no requirement for a separate or distinct acceptance of the offer by the offeree.
Consideration
Ground 1
It was common ground before the judge that, in the 24 August email, the respondents offered to the applicant a contract of insurance for 14 days’ cover. However, the parties disagree as to what should be made of the offer in the context of the email as a whole. A useful starting point, therefore, is the terms of that offer as it appeared in the 24 August email. That email is headed ‘Decline to renew — 14 day extension’.[38] Although the first sentence is a question and directed to the use of the Property, the second paragraph is tolerably clear. It says:
On further consideration, this is not one we are going to be able to assist with at renewal with the change of tenancy, however given the time-frame we will offer 14 days extension to assist with placement.
[38]Emphasis in original.
After setting out, in tabular form, the premium for the extension, the email goes on to set out what would be required for Pen ‘to re-consider’.
There are two potential ambiguities in the email. The first is what is meant by ‘assist with placement’ and the second is what is meant by the term ‘re-consider’. There might be some room for argument about whether ‘placement’ was referring to placement through Pen or another party, or both, and whether the word ‘re-consider’ suggested that there was room for the respondents to revisit renewing the 2017 Policy in the sense of ‘a repetition of the whole arrangement by substituting the like agreement in place of that previously subsisting, to be operative over a new period’.[39]
[39]CE Heath Underwriting & Insurance (Australia) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535, 545 (Dawson, Toohey and McHugh JJ); [1993] HCA 21, citing Re Kerr [1943] SASR 8, 16 (Mayo J).
The applicant submits that the judge erroneously construed the purpose of the offer as being to allow the applicant to seek insurance with another insurer. In his reasons the judge identified the purpose of the extension being to assist the applicant with placement of an ‘alternative policy’[40] and to provide ‘an opportunity to negotiate alternative insurance cover.’[41] We do not read the judge’s reason in the narrow way contended for by the applicant. Although the applicant was not seeking alternative cover in the sense of a different kind of insurance, the reference to ‘alternative insurance cover’ means no more than a different insurance policy in circumstances where the respondents had declined renewal and the use of the Property had changed. The applicant was not seeking to insure exactly the same risk as existed in the preceding 2017 Policy and the judge’s reference to ‘alternative insurance cover’ has to be seen in that context. In our view, the judge correctly proceeded on the basis that the purpose of the extension was to allow placement either with the respondents or elsewhere.
[40]Reasons [55(a)].
[41]Ibid [57(b)].
Despite the ambiguities, read fairly, we consider that the 24 August email addressed two related but distinct things. First, the email conveyed that the respondents would not renew the 2017 Policy. Rather, they would consider offering a new policy in the light of the changed tenancy and in order to do that they would require further information. The email does not suggest that the respondents assumed that there would be a renewal. It is fair to infer from the correspondence that both before and after the 24 August email, the respondents had yet to calibrate the risks associated with the change of use that they were being asked to insure. As the applicant correctly submits, the emails reveal a degree of uncertainty as to the nature of the activity that was to be conducted at the Property. For example, there was a lack of clarity on the part of Pen as to whether gas cylinders would be decommissioned on site or brought there in that state.
Second, to allow the applicant to attempt to obtain a new policy or to place the risk with another insurer, the respondents offered a ‘14 days extension’ at the stipulated premium. The offer was neutral on whether the contemplated placement would be through Pen or another party.
In order to establish a binding contract based on this offer, the applicant, in its written case, puts forward two essential arguments: first, that the offer embodied in the 24 August email dispensed with the need for acceptance; and second, acceptance was signalled by the applicant continuing to seek annual cover. In oral submissions it confined itself to the latter contention. We cannot accept either argument.
Was acceptance dispensed with?
As to the first, there is nothing in the context or words of the offer that dispensed with the need for acceptance. The applicant had engaged with Pen before the expiration of the 2017 Policy and provided some information on the current use of the Property. It may be accepted that both parties were alive to the applicant’s apparent desire for continuous insurance cover. No doubt this is what prompted the offer of the extension ‘given the time-frame’. The 14 day extension would have facilitated that process by ensuring that there was no break in cover.
However, those matters do not take the applicant as far is it needs to go. First, and importantly, accepting the offer of 14 days’ cover would have imposed an enforceable obligation on the applicant to pay the premium. Although, as the judge found, acceptance could have been communicated before the payment of the premium,[42] the text of the email does not suggest that the applicant was bound to pay the premium independently of any expression of agreement on its part to accept the interim cover.
[42]Reasons [60(a)].
We add that we are unpersuaded by the applicant’s submissions that the premium set out was unimportant and its acceptance may be inferred from silence. We acknowledge that a contract of insurance may be found to exist even where the premium has not been settled.[43] In some cases the premium, although not stated as a fixed amount, will be treated as a reasonable premium. Past dealings between the parties will be relevant in this context. Equally, a cover note for interim cover may give rise to a contract on the assumption that in the event that the original policy is eventually renewed, the premium for interim cover may be included in the new annual premium.[44]
[43]Canberra Pools v MMI General Insurance Ltd (2000) 98 FCR 296, 306–08 [39]–[47], (O’Connor, Higgins and Dowsett JJ); [2000] FCA 751.
[44]Taylor v Allon [1966] 1 QB 304, 311 (Lord Parker CJ).
The applicant is also correct to observe that the premium was, near enough, proportionate to that which was paid for annual cover the previous year. However, what was contemplated was not an advance payment on account of any policy that might be entered into, but a separate and discrete premium payable for the relevant period. Even if the offer did not expressly call for a response, it plainly did not dispense with the need for one. The subjective willingness of the applicant to secure cover and, from its perspective, the benefit in doing so, does not mean that the requirement for acceptance was dispensed with.
The applicant’s case that acceptance was dispensed with is not advanced by reference to unilateral contracts. It will be recalled that before the judge the applicant put its case as involving a unilateral contract. It appears that this was confined to the 29 August email, but in its written case in this Court, the applicant refers to unilateral contracts as being relevant to the earlier 24 August email and the need for acceptance.
In our view, regardless of whether it is considered from the perspective of the 24 August email or the 29 August email, the offer of an insurer to provide cover in return for the payment of a premium is not a unilateral contract in the relevant sense. As the High Court observed in Australian Woollen Mills, every contract requires an agreement between two parties and ‘the term [unilateral contract] is open to criticism on the ground that it is unscientific and misleading.’[45] It describes the circumstance where the contract is fully executed by the doing of the act by the offeree. Examples include the doing of an act for which a reward is offered, and forbearance by a creditor in return for the debtor’s promise to give security.
[45](1954) 92 CLR 424, 456 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ); [1954] HCA 20.
The High Court explained:
It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation. The intention must, of course, be judged in the light of the principle laid down in Freeman v Cooke,[46] but, in the absence of such an intention, actual or imputed, the alleged ‘offer’ cannot lead to a contract: there is, indeed, in such a case no true ‘offer’.[47]
[46](1848) 2 Ex 654, 663; [1848] 154 ER 652, 656.
[47](1954) 92 CLR 424, 457 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ); [1954] HCA 20.
Unilateral contracts provide challenges for conventional analysis based on offer, acceptance and the passing of consideration. The offeree is not bound to do anything, but having done so, that act constitutes execution of the contract to which the offeror is bound. However, those problems are ameliorated by the requirement that there must be some quid pro quo in the transaction,[48] which is often found by way of an express or implied request by the offeror that the offeree do some act.[49]
[48]Ibid 456–7.
[49]Ibid 458.
That analysis is simply inapt to describe the circumstances where an insurer offers cover in return for the payment of a premium. In such cases there is a mutual promise: the promise to provide cover in return for the promise to pay the premium. That does not describe a unilateral contract.
Did the applicant impliedly accept the offer by continuing to provide information?
The applicant contends, by way of its main submission, that it had accepted the offer, as evidenced by its conduct and silence, in continuing to deal with the respondents with respect to the annual renewal.
It is convenient to deal first with a point of principle. In his reasons for judgment the judge acknowledged that acceptance of an offer can be implied from the circumstances and the conduct of the parties. He went on to say that ‘it must be absolute and unqualified.’[50]
[50]Reasons [55(d)].
The applicant submits that, in this respect, the judge applied the wrong test by asking whether the conduct of the applicant was absolute and unequivocal. The applicant implicitly acknowledged that such a hurdle may apply in cases of an inferred contract where neither offer nor acceptance can be identified and may explain cases where there is only silence,[51] where the conduct does not include exchange of communication[52] or where the offer is uncertain.[53] However, it submits that here, none of those limiting characteristics are present.
[51]Felthouse (1862) 11 CB (NS) 869; 142 ER 1037.
[52]Taylor v Allon [1966] 1 QB 304.
[53]Woolcorp [2017] VSCA 21.
The applicant submits that the reasons why the courts strive for clear and unambiguous conduct in those cases are not present in this case. That is so because the conduct took the form of communications and the Court is able to see the precise exchange between the parties, and because the offer of the respondents is clear — it left no room for ambiguity in what it was that the applicant was responding to. As a result, this Court should reject the test adopted by the judge and return to the overarching question of what a reasonable person would make of the communications between the parties.
We accept that the applicant does not need to show acceptance in absolute and unqualified terms to establish the existence of a binding contract. To the extent that the judge imposed the test in those terms, then respectfully we would not agree with it. Something short of that formulation may suffice. It will also depend on what is contemplated by the use of the phrase ‘unqualified’. However, the communication on which acceptance is said to depend must respond to the offer and amount to a manifestation of assent to the terms of a binding contract. In our view, the observation of Sundberg J in Adnunat that ‘[t]he evidence must positively indicate that both parties considered themselves bound by that agreement’[54] is applicable to all contracts. It requires a necessary correlation between the offer and the relevant conduct.
[54]Adundat [2009] FCA 499, [39].
It is here that the applicant’s case falls down, essentially because the applicant elides the two distinct issues that were dealt with in the 24 August email.
From the perspective of the respondents, their offer to reconsider an annual policy was neutrally expressed and gave no indication as to whether an annual policy might eventuate. The email did not encourage the applicant to provide further information. It simply left open the possibility that the respondents would reconsider renewal in the event that further information was provided. There is little to suggest that an annual policy was a likely or particularly desired outcome on the part of the respondents. Pen was awaiting the information necessary for it to reconsider its position.
At the same time, the respondents offered a 14 day extension to assist with placement. In this respect, the phrase ‘assist with placement’ was not confined to placement with the respondents, and the opportunity was apt to give time to the applicant to seek alternative sources of cover. Although the time frame was tight, there is nothing in the 24 August email which suggests that the applicant need not deal with any other insurer or even an expectation that the applicant would continue to pursue an annual renewal.
The applicant seeks to bring the two aspects of the email together by observing that the purpose of the extension was to enable the applicant to secure an annual renewal. It says that given that purpose, providing information towards annual cover necessarily proceeded on an implied acceptance of the interim cover.
Although the two topics were related, the applicant’s pursuit of annual cover was neutral as to whether it had accepted the offer of interim cover and a liability to pay the extra premium. It was possible to achieve the purpose of securing an annual policy without accepting the interim cover. And accepting interim cover did not advance the purpose of achieving annual cover, which depended on providing information to Pen relevant to the insured risk.
The disjunction can be demonstrated by assuming that the applicant sought annual cover from another insurer. That fact would say nothing about whether it accepted the respondents’ offer of interim cover, yet it would reveal that the applicant had taken active steps to secure annual cover. Similarly, pursuing annual cover through Pen did not mean that the applicant must have been intending to take the benefit of the interim cover. That the applicant wanted continuous annual cover did not mean that it had to accept the offer of interim insurance that the respondents had made.
The question is whether the applicant’s conduct ought reasonably be taken to manifest an acceptance of the offer of interim cover rather than an assessment of what a prudent person in the position of the applicant would do. There were a number of possibilities open to the applicant faced with the 24 August email and, in the absence of some positive indication, no way of knowing which one it had adopted. For example, the respondents could not have known whether the applicant was concurrently seeking alternative cover from another insurer. Given the clear indication that cover had been declined and the uncertainty that surrounded renewal, such a course would not have been unlikely. The continued provision of information to Pen did not make a dealing with other respondents less likely. It is not irrelevant that the applicant was seeking cover through a broker. It may be readily inferred that a broker would have access to a number of different underwriters.
Plainly, not taking the interim cover at the same time as it was providing information for a reconsideration of annual cover opened up the possibility, or risk, that the applicant would, for a period, be uninsured with the respondents. It is possible that the applicant turned its mind to the question of interim cover and simply thought that it would wait until it secured annual cover. Perhaps it did not turn its mind to the question at all. However, whether the applicant was willing to take the risk, or simply did not turn its mind to that risk, is not the critical question and involves a degree of speculation that provides an unsure footing for a contract. How it chose to respond to the risk of a break in cover was unclear beyond the fact that it was continuing to seek annual cover and had not expressly accepted the offer that the respondents had made. Declining interim cover would not mean that the applicant could not enjoy the full benefit of the contract of insurance that it was actively seeking.
Although it is not necessary for the applicant to show that its conduct absolutely and unequivocally accepted the offer of 24 August, it is necessary for it to show that its conduct positively evidenced, to a reasonable person in the position of the respondents, that their offer had been accepted. Ultimately, there is nothing in the applicant’s conduct that manifested with a sufficient degree of certainty that it had accepted the respondents’ offer of a 14 day extension of cover. The provision of information in order to obtain annual cover was consistent with its desire for annual cover, and was not inconsistent with accepting the 14 day extension; however, it went no higher than that.
Although the offer of interim cover was a benefit to the applicant which it may have been prudent to accept, the benefits of the interim cover were not all one way. The 14 day extension was neither a gratuity nor offered in return for the applicant continuing to deal with the respondents. Had a contract been made, the respondents could have enforced payment of the premium. It was not open to the respondents to oblige the applicant to pay the premium in the absence of an agreement, and nor could the applicant enjoy the benefit of the policy without a promise to pay the premium. Of course, whether the respondents could enforce payment is simply the other side of the coin. However, in seeking to enforce the premium, the respondents could point to no more than silence in respect of the offer of 14 days’ cover and continued efforts to see if an annual policy could be obtained. In our view, that is an inadequate foundation for a contract, whichever side of the coin is considered.
The applicant relied on the 29 August email as an acknowledgement by the respondents of the existence of the contract. It is well established that post formation conduct may be admissible to prove the existence of a contract.[55]
[55]See, eg, Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68, 77–8 (Griffith CJ with whom O’Connor J agreed), 84 (Isaacs J); [1907] HCA 38; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647, 668–9 (Griffith CJ) and 672 (Isaacs J); [1908] HCA 88; Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286, [134] (Warren CJ, Kyrou and McLeish JJA).
The 29 August email attached terms of an annual policy with cover commencing on 24 August 2018. It provides:
If our terms are not accepted below EP applies for the 14 day extension until 7 September 2018 to assist with placement.
Immediately after that paragraph, Pen drew attention to three special conditions contained in the policy relating to a survey (of the risks associated with the proposed use), a thermo-scan and asbestos.
The parties disagreed as to whether the word ‘below’ referred to the extra premium, which was referred to in the 24 August email which was part of the sequence of emails that ended with the 29 August email, or whether it referred to the special conditions that were set out in the body of the 29 August email.
We agree with the respondents that the phrase ‘below EP’, refers to the EP set out in the 24 August email which formed part of the email chain. However, nothing turns on this.
The real issue is whether the phrase ‘EP applies’ is an acknowledgement that there is in place a contract for interim cover at the cost of the extra premium. Alternatively, as the judge found, it is also capable of conveying that the offer of 14 days’ cover at the set premium remained capable of acceptance.[56] On that basis, the respondents were simply making it clear that they were not offering a further 14 days’ cover for free.
[56]Reasons [60(a)].
It is important to bear in mind that the 29 August email was not relied on as part of the facts that together made up the acceptance. Rather, it was said to be an admission as to the existence of an earlier concluded agreement. In our view, the language of the email is unclear. Of the two potential meanings, we prefer the view taken by the judge that it was simply a restatement of the offer, with an implicit reminder that the clock was ticking.
We would reject ground 1.
Ground 2
Under ground 2, the applicant seeks to rely on the principles that apply to inferred contracts. It relies on the same facts.
Whether the issue is approached from the narrower question whether the applicant had accepted the offer or from the broader perspective of whether the parties should be taken to have conceded an agreement, the answer is the same.
Conclusion
In our view the judge was correct in his conclusion that no concluded contract was formed. We would grant leave to appeal but dismiss the appeal.
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SCHEDULE OF PARTIES
DANBOL PTY LTD (ACN 147 432 399) Applicant
and
SWISS RE INTERNATIONAL SE (ABN 38 138 873 211) First Respondent
and
CERTAIN UNDERWRITERS AT LLOYD’S UNDER
CONTRACT NO. B 1262BW0020616 Second Respondentand
BERKLEY INSURANCE COMPANY (ABN 53 126 559 706) Third Respondent
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