Danbol Pty Ltd v Swiss Re International Se
[2020] VSC 23
•7 February 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
INSURANCE LIST
S ECI 2019 02517
| DANBOL PTY LTD (ACN 147 432 399) | Plaintiff |
| v | |
| SWISS RE INTERNATIONAL SE (ABN 38 138 873 211) & ORS | Defendants |
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JUDGE: | RIORDAN J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 August 2019 |
DATE OF JUDGMENT: | 7 February 2020 |
CASE MAY BE CITED AS: | Danbol Pty Ltd v Swiss Re International Se |
MEDIUM NEUTRAL CITATION: | [2020] VSC 23 |
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INSURANCE CONTRACTS – Offer and acceptance – Offer by insurer to extend insurance contract – Whether offer was implicitly accepted – Circumstances where acceptance can be inferred – No acceptance of offer made by insurer.
CONTRACT – Whether offer by insurer constituted unilateral contract of insurance – Principles of unilateral contracts considered – No unilateral contract.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | P G Cawthorn QC with T J McLean | Davis Advisory |
| For the Defendants | G McArthur QC with K Foley | Lander & Rogers |
HIS HONOUR:
By statement of claim filed 6 June 2019, the plaintiff claimed indemnity under a policy of insurance for losses caused by a fire at its property at 2 Victoria Drive, West Footscray, Victoria (‘the Property’) on 30 August 2018. The pleading alleged that the indemnity arose out of:
(a) an agreement to extend an expired insurance policy for 14 days, for the period 24 August 2018 to 7 September 2018, as constituted by:
(i)an email from the defendants’ representative of 24 August 2018 at 10:19 am (referred to in the pleading as ‘the submission’); or
(ii)emails between the parties’ respective representatives of 24 August 2018 at 10:19 am, 10:58 am and 11:01 am, and 29 August 2018 at 12:33 pm (referred to in the pleading as ‘the extension’); or
(b) a renewal of the expired insurance policy by force of s 58(3) of the Insurance Contracts Act1984 (Cth) (‘the Insurance Act’).
On 12 July 2019, the defendants applied for a stay of this proceeding pending the finalisation of ongoing parallel investigations currently being conducted by agencies including the Coroner, the Victoria Police Arson and Explosives Unit, the Environment Protection Authority, Worksafe, Maribyrnong City Council and the Metropolitan Fire Brigade. The defendants’ submission was that they would be prejudiced in establishing affirmative defences to the plaintiff’s claim for insurance cover prior to the completion of these investigations, which were not expected to be completed before the second half of 2020.
In the circumstances, I decided that it was appropriate to determine as a preliminary question, the plaintiff’s affirmative case that it was entitled to insurance cover at the time of the fire. Accordingly, I relevantly ordered as follows:
1.Pursuant to rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2015, 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).
2. By 4:00 pm on 19 July 2019, the defendants file and serve their defence on matters relevant to the Preliminary Question, with the option of reserving their position on their affirmative defences.
By their defence filed 19 July 2019, the defendants alleged that at the time of the fire:
(a) the original contract of insurance dated 24 August 2017 had expired;
(b)there was no agreement to extend the original contract of insurance for 14 days with effect from 24 August 2018 to 7 September 2018 while the plaintiff considered the renewal terms offered by the defendants on 29 August 2018; and
(c)the original contract of insurance was not renewed by force of s 58(3) of the Insurance Act.
By 16 August 2019, the plaintiff abandoned its claim based on s 58(3) of the Insurance Act. The plaintiff also foreshadowed an application to include a claim that the expired policy was renewed for 12 months, but likewise abandoned that application. Accordingly, the sole question for preliminary determination was whether there was a 14 day extension of the original 2017 insurance policy.
The evidence
No witnesses were called by the parties and the trial proceeded on the basis of certain agreed facts together with correspondence between the representatives of the defendants and the plaintiff’s insurance broker.
The agreed facts were as follows:
(a)By a schedule and policy of insurance dated 24 August 2017 (‘the 2017 Policy’), the defendants, through their representative Pen Underwriting (‘the defendants’ representative’), agreed to insure and indemnify the plaintiff against the risk, inter alia, 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.
(b)As the 2017 Policy was expiring on 24 August 2018, there were communications between the plaintiff’s insurance broker, Griffiths Goodall Insurance Brokers (‘the plaintiff’s broker’) and the defendants’ representative concerning the renewal.
(c)The plaintiff had not, as at 4:00 pm on 24 August 2018, obtained from some other insurer insurance cover to replace that provided by the 2017 Policy.
(d)‘EP’ as that term is used in the defendants’ representative’s email of 29 August 2018 at 12:33 pm meant ‘extra premium’.
(e)On 30 August 2018 the Property was damaged by a fire that started at about 5:00 am.
The relevant correspondence tendered into evidence was as follows.
By email of 6 July 2018 to the defendants’ representative, the plaintiff’s broker advised 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 to the plaintiff’s broker, the defendants’ representative confirmed that the new tenant in the premises had been noted on the underwriting file.
By email of 18 July 2018 to the plaintiff’s broker, the defendants’ representative 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 to the plaintiff’s broker, the defendants’ representative attached renewal terms. The email directed attention to Special Conditions relating to the obtaining of a survey, a thermo-scan and an asbestos condition. 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.
[1]Underlining added.
By email of 14 August 2018 at 3:56 pm to the defendants’ representative, the plaintiff’s broker requested revised terms amending the occupancy to:
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 to the plaintiff’s broker, the defendants’ representative stated:
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 to the defendants’ representative, the plaintiff’s broker stated:
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).
By email of 23 August 2018 at 4:04 pm to the plaintiff’s broker, the defendants’ representative asked 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 to the defendants’ representative, the plaintiff’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.
By email of 23 August 2018 at 5:04 pm to the plaintiff’s broker, the defendants’ representative stated:
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.
By email of 24 August 2018 at 10:19 am to the plaintiff’s broker, the defendants’ representative stated:
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 [the defendants’ representative] 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.
By email of 24 August 2018 at 10:58 am to the defendants’ representative, the plaintiff’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?
By email of 24 August 2018 at 11:01 am to the defendants’ representative, the plaintiff’s broker added: ‘Our client also holds an EPA licence to store. Thanks.’
By email of 27 August 2018 at 10:16 am to the defendants’ representative, the plaintiff’s broker asked whether there was ‘[a]ny news on this one please’.
By email of 27 August 2018 at 10:33 am to the plaintiff’s broker, the defendants’ representative asked questions about the decommissioning process.
By email of 27 August 2018 at 2:48 pm to the defendants’ representative, the plaintiff’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.
By email of 27 August 2018 at 3:48 pm to the plaintiff’s broker, the defendants’ representative said:
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 to the defendants’ representative, the plaintiff’s broker responded: ‘No worries – thanks.’
By email of 29 August 2018 at 12:33 pm to the plaintiff’s broker, the defendants’ representative 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][2] applies for the 14 day extension until 7 September 2018 to assist with placement.
[2]See paragraph 7(d).
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 Renewal Quotation was in a similar form to the earlier renewal terms attached to the defendants’ representative’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 $106,708. 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 to the defendants’ representative, the plaintiff’s broker stated: ‘Thanks Lisa, terms accepted. Please find our closing attached.’ The attached ‘Closing Advice’:
(a) was dated 30 August 2018;
(b) was addressed to the defendants’ representative;
(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 to the defendants’ representative, the plaintiff’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?
By email of 25 September 2018 at 12:24 pm to the defendants’ representative, the plaintiff’s broker stated:
Also confirming we have received confirmation from Hunter Premium Funding that the insured's funding has been approved & [w]e 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 plaintiff’s broker remitted $106,709 to the defendants’ representative, which the latter returned by cheque dated 4 October 2018.
Plaintiff’s submissions
The plaintiff contended that the policy had been extended for 14 days because:
(a) the plaintiff had accepted the defendants’ offer of a 14 day extension contained in the defendants’ representative’s email of 24 August 2018 at 10:19 am (‘the bilateral contract’); or
(b) the defendants agreed to a 14 day extension of the policy in their representative’s email of 29 August 2018 at 12:33 pm, which constituted a unilateral contract (‘the unilateral contract’).
With respect to the bilateral contract, the plaintiff submitted that the defendants’ offer of an extension policy in their email of 24 August 2018 at 10:19 am was implicitly accepted by the plaintiff’s broker by the emails of 24 August 2018 at 10:58 am and 27 August 2018 at 2:48 pm in which the plaintiff’s broker requested that the defendants reconsider their decision not to offer an annual renewal of the 2017 Policy.
The implication had to be considered in the following relevant surrounding circumstances:
(a) The Property had been the subject of an existing policy of the defendants.
(b) The defendants’ representative did not state at any time after the offer of an extension policy that the previous 2017 Policy had lapsed.
(c) The email of 29 August 2018 asserted that the ‘EP [extra premium] applies for the 14 day extension until 7 September 2018’, which was indicative of a common understanding that the extension policy was in place.
(d) The fact that by 29 August 2018:
(i) five of the 14 days of the period of the extension policy had passed; but
(ii) the defendants still sought the full 14 days of the extra premium;
indicates that the insurer had considered itself on risk from 24 August 2018.
The intimation that there was a 14 day extension until 7 September 2018 to assist with placement was confirmation that the plaintiff was held covered until 7 September 2018, in the same way that the communication ‘held covered’ (pending receipt of a declaration from the accountant) was understood in Canberra Pools Pty Ltd v MMI General Insurance Ltd.[3]
[3](2000) 98 FCR 296 (O’Connor, Higgins and Dowsett JJ) (‘Canberra Pools’).
With respect to the unilateral contract, the plaintiff submitted that a unilateral contract was formed by the plaintiff accepting the defendants’ offer of an extension policy in their email of 29 August 2018 by considering entering into the renewal of the annual policy on the terms proposed in the same email. A unilateral contract can be formed by the offeree doing an act, or refraining from doing an act.
Defendants’ submissions
The defendants conceded that they had offered an extension policy in their representative’s email of 24 August 2018, and that payment of the premium was not the only manner by which the offer could be accepted. However, it was submitted on behalf of the defendants that the offer was not accepted for the following reasons:
(a) The subsequent emails did not accept the offer of an extension policy.
(b) The request by the plaintiff’s broker to the defendants’ representative to reconsider its decision not to offer an annual renewal of the 2017 Policy could not constitute an unequivocal acceptance of the offer of an extension policy.
(c) The failure of the plaintiff to accept the offer of an extension policy is consistent with it not wanting to take interim cover.
(d) The email of 29 August 2018 was only a repeat of the earlier offer of an extension policy in the email of 24 August 2018.
(e) For the plaintiff to have accepted the offer of an extension policy, there must have been an act of acceptance which objectively committed the plaintiff to pay the quoted premium of $3,506.06.
Principles regarding the formation of a contract
It is trite law that the major elements necessary for the formation of a contract are:
(a) offer and acceptance;
(b) consideration;
(c) intention to create legal relations; and
(d) certainty of terms.[4]
[4]NC Seddon and RA Bigwood, Cheshire and Fifoot Law of Contract (LexisNexis Butterworths, 11th ed, 2017) 10 [1.16].
However, a contract may be inferred without a clearly identifiable offer and acceptance. The circumstances in which such a contract will be inferred were explained by Sundberg J in Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd as follows:
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.[5]
[5][2009] FCA 499, [39] (citations omitted); quoted with approval by the Court of Appeal in P’Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42, [11] (Whelan JA, with whom Ferguson and Kaye JJA agreed).
In Woolcorp Pty Ltd v Rodger Constructions Pty Ltd, the Court of Appeal identified the following considerations to be ‘kept in mind’ in considering whether the facts allow a contract to be inferred:
(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.[6]
[6][2017] VSCA 21, [9] (Santamaria, Kyrou JJA and Elliott AJA).
Principles regarding contracts to renew or extend insurance policies
In Canberra Pools,[7] the Full Court of the Federal Court considered whether an employer was entitled to indemnity under an interim policy of insurance in the following circumstances:
[7](2000) 98 FCR 296 (O’Connor, Higgins and Dowsett JJ).
(a) The employer’s previous workers compensation insurance policy had expired on 21 April 1993 and it was proposed that any new policy would commence on 30 June 1993.
(b) The employer’s broker encountered some difficulties obtaining a Wages Declaration from the employer but, on 15 June 1993, the broker had a conversation with the employer’s representative and made a note ‘Client being held covered “Dec with Accountant” and when received future date is to be 30/6/94’.
(c)There was subsequent correspondence between the employer and the broker particularly about the completion of the Wages Declaration but no policy was issued prior to an employee’s death on 1 December 1993.
The Full Court found that there was an agreement for insurance cover commencing on 15 June 1993 at the latest, which remained in force until at least 1 December 1993.[8] The Court held that ‘in the absence of express agreement as to the term of interim cover, there will generally be an implied term that the cover is to continue for a reasonable time in the absence of termination by either party … and there was no submission that any interim cover had lapsed prior to that date’.[9] The Court also found that there was an implied term for payment of a reasonable premium which was calculable.[10]
[8]Ibid 306.
[9]Ibid.
[10]Ibid 307-8.
In Taylor v Allon,[11] the English Court of Appeal considered whether a temporary cover note arose in the following circumstances:
(a) The defendant’s motor vehicle insurance policy expired on 5 April 1964.
(b)The defendant was found using his motor vehicle on 15 April 1964 and charged with driving a vehicle while uninsured.
(c)By way of defence, a temporary cover note from the old insurance company was produced which purported to cover him for 15 days from 6 April 1964, the date of the expiration of the old policy.
(d)The temporary cover note took the form of a motor vehicle renewal notice referring to the policy number and the due date for the renewal premium, being 6 April 1964. It provided that the renewal premium was payable on 6 April 1964 and included a provision:
Temporary cover note. Insurance is hereby granted in terms of the policy referred to in this notice for a period of 15 days commencing from and including the due date [6 April 1964] referred to in this notice.[12]
[11][1966] 1 QB 304 (Lord Parker CJ, Marshall and Widgery JJ).
[12]Ibid 311.
Lord Parker CJ found that, for the temporary cover note to be enforceable, there must be an acceptance of the insurer’s offer either by:
(a) communication of the fact to the insurer; or
(b) inference from the insured using the car in reliance on the temporary cover, which would create an implied promise to pay either the renewal premium or the premium for the temporary cover note.
On the facts of the case, the defendant did not contend that he used the motor vehicle in reliance on the temporary cover note, and so the appeal against conviction was dismissed.[13]
[13]Ibid 311-2 (Lord Parker CJ, with whom Marshall and Widgery JJ agreed).
In Randle v Western Australian Insurance Company Ltd,[14] Jacobs J upheld an appeal from a magistrate who found that the insured was liable for premiums because ‘the arrangement between the plaintiff and the defendant was [that] a policy would be renewed from year to year and in due course paid for by the defendant’,[15] unless cancelled. Jacobs J stated this was contrary to insurance law which he said was as follows:
The policy remains in force in the ordinary course of events until the expiration of the period of insurance. Where the policy is renewable and both parties so desire, the renewal is effected in one of two ways. The insured, by tendering the renewal premium, in the first instance, makes an offer to renew the policy which the insurers may accept or decline at their pleasure; they cannot therefore be compelled to accept the renewal premium when tendered. If, on the other hand, the insurers invite the insured to renew the policy by sending him a renewal notice, which is what appears to have happened in the present case, the offer to renew the policy proceeds from them and the insured’s acceptance is signified by payment of the renewal premium. If the insured does not pay the renewal premium, within the time stipulated by the insurer, or any extension thereof, the policy lapses.[16]
He rejected the proposition that the insurer sending a renewal notice and statements of account debiting premiums for policies did any more than indicate that the insurer was keeping open the offer to renew. He concluded that:
[I]t is a novel proposition that the insured’s silence in response to such statements, i.e. non-payment of the premium, must be taken as acceptance of the offer of renewal. In short, in absence of some express agreement, the insured cannot be compelled to renew the policy and pay the premium after the period for which the policy runs has expired.[17]
[14](1981) 1 ANZ Insurance Cases 60-442 (‘Randle’).
[15]Ibid 77,167.
[16]Ibid 77,168 (citations omitted).
[17]Ibid 77,169.
Principles regarding unilateral contracts
In Heydon on Contract, the learned author explains a unilateral contract as follows:
What is a “unilateral” contract? An offer of a unilateral contract arises when one party promises the second to do or abstain from doing some other act, or abstain from doing some act, if the second will do, or abstain from doing something without making any promise to that effect. The contract is “unilateral” because the promisee makes no counter-promise to perform the stipulated act or abstention.[18]
[18]JD Heydon, Heydon on Contract (Lawbook Co, 2019) 46 [2.220].
In Australian Woollen Mills Pty Ltd v Commonwealth,[19] the High Court considered whether the Commonwealth, which had announced that subsidies would be paid to manufacturers on wool that was purchased and used for local manufacture, was contractually obliged to pay the subsidy to a manufacturer who purchased wool.
[19](1954) 92 CLR 424 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ) (‘Australian Woollen Mills’).
The plaintiff alleged that the contract was of a ‘type which is commonly said to be constituted by an offer of a promise for an act, the offer being accepted by the doing of the act’.[20] The Court concluded that for a contract to arise in these circumstances the necessary elements were:
(a)the statement relied on as a promise was offered as consideration for the doing of the act; and
(b)the act was done in consideration of the promise inherent in the statement.[21]
[20]Ibid 456.
[21]Ibid.
The Court gave an example of what it described as the necessary element of quid pro quo as follows:
(a)A says to B ‘I’ll pay you a sum of money on your arrival in Sydney’, and the next day B goes to Sydney. On those facts alone no contract is established because it is perfectly consistent with A stating that he will make a gift to B if and when he arrives in Sydney.
(b)However, if further facts were established such as:
(i)A told B that it was of vital importance that B go to Sydney forthwith; and
(ii)B objected on the basis that it might cause him financial loss;
it would be possible to infer that:
Athe statement that A will pay B a sum of money on his arrival in Sydney was intended as an offer of a promise;
Bthe promise was offered as consideration for the doing of an act by B; and
Cthe doing of the act was acceptance of the offer and the provision of the consideration.[22]
[22]Ibid 456-7.
The Court rejected the plaintiff’s claim on the basis that it was impossible to infer from the documents anything more than an announcement of an intention, which is not capable of leading to a contract.[23]
[23]Ibid 463.
In Gippsreal Ltd v Registrar of Titles and Kurek Investments Pty Ltd,[24] the Court of Appeal considered whether a unilateral contract had arisen in the following circumstances:
[24](2007) 20 VR 157 (Neave, Redlich and Kellam JJA).
(a) The lender made a mortgage loan offer to the borrower that reserved to the lender a right not to proceed with the loan. The form of acknowledgement and acceptance of the loan offer signed by the borrower provided that, if the borrower chose not to proceed with the loan after acceptance, it would be liable to pay liquidated damages for professional costs, three months’ interest and other costs and disbursements incurred by the lender or its agents.
(b) The lender prepared mortgage documents and lodged two caveats over the borrower’s properties.
(c)The borrower decided not to proceed with the loan and the lender demanded the sum of $128,174.64, comprising liquidated damages, professional costs, three months’ interest and disbursements due under the terms of the loan offer.
On appeal it was accepted that as the lender reserved the right not to proceed with the loan its consideration was illusory. However, it was contended that a unilateral contract had come into existence which had been accepted by the lender by it carrying out title searches and preliminary investigations.
The Court of Appeal rejected the lender’s contention finding that ‘the necessary relationship of quid pro quo did not exist between [the borrower’s] alleged promise and the acts which were to be done by [the lender]’.[25]
[25]Ibid 169-70 [53]-[55].
Conclusion regarding the alleged bilateral contract
The following matters are not contested:
(a) The defendants, by their representative’s email of 24 August 2018, offered to extend the policy for 14 days. It did this in the context of refusing a renewal of the policy but allowing the extension ‘to assist [the plaintiff] with placement [of an alternative policy]’.
(b) If this offer was accepted, the additional requirements of consideration, intention to create legal relations and certainty of terms would have been satisfied.
(c) Payment of the extra premium was not a required method of acceptance.
(d) Acceptance of an offer can be implied from the circumstances and the conduct of the parties;[26] although it must be absolute and unqualified.[27]
[26]Brogden v Metropolitan Railway Co (1877) 2 App Cas 666.
[27]Quadling v Robinson (1976) 137 CLR 192, 200-1 (Gibbs J).
In my opinion, at no time after the defendants’ offer of 24 August 2018, did the plaintiff accept the defendants’ offer. All communications between the parties’ representatives were by email and none of the emails from the plaintiff’s broker to the defendants’ representative purports, on any reading, to accept the offer of a 14 day extension for a premium of $3,506.06.
This conclusion is supported by the following surrounding circumstances:
(a) By their representative’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 the defendants’ representative 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 the defendants’ representative’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’.
In my opinion, the plaintiff is not assisted by Canberra Pools.[28] In that case, the Court found as matter of fact, that the insurer and the insured had agreed that the insured was being ‘held covered’;[29] and it was an implied term that, in the absence of termination by either party, the interim cover would continue for a reasonable time or until issue of the policy.[30] For the reasons stated, in the present case, there was no agreement for the plaintiff to be held covered.
[28](2000) 98 FCR 296 (O’Connor, Higgins and Dowsett JJ).
[29]Ibid 304 [29]-[30].
[30]Ibid 306 [38].
Conclusion regarding the alleged unilateral contract
The plaintiff relied on the second paragraph of the email from the defendants’ representative of 29 August 2018 at 12:33 pm, which reads:
If our terms are not accepted below EP [extra premium] applies for the 14 day extension until 7 September 2018 to assist with placement.
I reject the contention that this statement, in combination with the plaintiff’s silence until after the fire had started at the Property the following morning at 5:00 am, constituted a unilateral contract, for the following reasons:
(a)The paragraph must be read in the context of the earlier emails and in particular the earlier offer of a 14 day extension in the email of 24 August 2018 at 10:19 am. In my opinion, a reasonable business person or an objective bystander would read the paragraph as being a repeat of the earlier offer, which had undoubtedly required acceptance. No other reading would make commercial sense because, for the plaintiff to accept the extension offer, it was required to commit to payment of the extra premium.
(b)Even if read as an attempt by the defendants to impose an obligation on the plaintiff to pay the extra premium, the defendants could not unilaterally impose a legal obligation on the plaintiff to pay the extra premium if the plaintiff did not accept the renewal within the 14 day period. To paraphrase Jacobs J in Randle, in the absence of some express agreement, the insured cannot be compelled to extend the policy and pay the premium after the period for which the policy runs has expired.[31]
[31](1981) 1 ANZ Insurance Cases 60-442, 77,169 (see paragraph 46 above).
I accept that a unilateral contract of the type referred to in Australian Woollen Mills[32] could arguably arise if the insurer promised to hold the insured covered for a period of 14 days in consideration of the insured considering renewal of the policy on terms. That is not this case. The quid pro quo for the defendants’ 14 day extension of the policy was not the plaintiff’s consideration of the renewal of the policy or even refraining from entering into another insurer’s policy. The defendants’ offer was expressly to provide a 14 day extension in consideration of the promise to pay the extra premium. The plaintiff did not make that promise.
[32](1954) 92 CLR 424 (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ).
I accept the submission of counsel for the defendants that each of the plaintiff’s contentions can be tested as follows:
The matter can be tested by the position if there was no fire and no further communication at all after 29 August 2018 between plaintiff and defendants. Did the defendants then have a right to the premium of $3,506.06 as a result of the state of the correspondence before the fire occurred? Obviously not – because there was no acceptance by the plaintiff.
Orders
Accordingly, the answer to the preliminary question (as modified by the plaintiff’s concession with respect to a breach of s 58(2) of the Insurance Act) is as follows:
Was there an extension of the insurance cover as pleaded in the statement of claim?
No.
Accordingly, I will dismiss the plaintiff’s claim.
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