David Dusko Tanevski v Trenwick International Limited

[2003] NSWCA 303

Reported Decision: (2004) 13 ANZ Insurance Cases 61-587

Court of Appeal

CITATION:	David Dusko Tanevski v Trenwick International Limited and Ors [2003] NSWCA 303
HEARING DATE(S):	08/09/03,09/09/03
JUDGMENT DATE:	17 October 2003
JUDGMENT OF:	Tobias JA at 1; Young CJ in Eq at 2; Davies AJA at 3
DECISION:	Appeal allowed. Parties to bring in short minutes.
CATCHWORDS:	Insurance - Whether public liability cover obtained - whether insurance broker arranged cover under its binder with unauthorised overseas insurer - whether there could be an insurance contract when broker represented and insurer understood that cover was Lloyd's - what was effect of misleading insurance certificate - whether insurance agents were negligent - whether breach of Trade Practice Act
LEGISLATION CITED:	Insurance (Agents and Brokers) Act 1984, s. 32(5), s.34 Trade Practices Act 1974, s.52
CASES CITED:	Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 Yorke & Anor v Lucas (1985) CLR 661 Siu Yin Kwan v Eastern Insurance Co. Ltd [1994] 2 AC 194 Trident General Insurance Co. Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Lloyd v Grace Smith and Co. [1912] AC 716
PARTIES :	First Appellant: David Dusko Tanevski Second Appellant: Samac Pty Limited First Respondent: Trenwick International Limited Second Respondent:I & S Insurance Broking Group Pty Limited
FILE NUMBER(S):	CA 40895/02
COUNSEL:	Appellant: Mr A Meagher SC, Mr J Bartos First Respondent: Mr M Pembroke SC, Mr A Losurdo Second Respondent: Mr P Greenwood, Mr S.A Goodman
SOLICITORS:	Appellant: Deacons First and Second Respondents: Minter Ellison Third Respondent: Anderson Rice

LOWER COURTJURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	2913/00
LOWER COURT JUDICIAL OFFICER :	Sorby J

- 1 -

CA 40895/02
ED 2913/00

TOBIAS JA
YOUNG CJ In EQ
DAVIES AJA

Friday 17 OCTOBER 2003

DAVID DUSKO TANEVSKI & ANOR

v

TRENWICK INTERNATIONAL LIMITED & ANOR

Judgment

1 TOBIAS JA: I agree with Davies AJA.

2 YOUNG CJ in EQ: I agree with Davies AJA.

3 DAVIES AJA: This is an appeal from a judgment of a judge of the District Court of New South Wales, Sorby DCJ, in respect of two cross-claims, which were brought in proceedings for personal injury.

4 On 23 April 1998, the second appellant, Samac Pty Limited (“Samac”), and associated companies, completed the purchase of and the taking possession of the Grand Hotel Wyong. The first appellant, David Dusko Tanevski, was the licensee of the hotel. On 3 July 1998, the plaintiff in the Court below, Vincent Komene, was assaulted on the premises by another patron of the hotel. In 2000, he sued Mr Tanevski and Samac for damages. The learned trial Judge found in Mr Komene’s favour and awarded damages of $516,435.05 against Mr Tanevski and Samac.

5 There were four cross-claims. The first, against Mr T R Williams, the patron who assaulted Mr Komene, was never served. The second was brought by Mr Tanevski and Samac against I & S Insurance Broking Group Pty Limited (“I&S”). I&S was an insurance broker and was engaged by the proprietors of the Grand Hotel to arrange insurance. The third cross-claim was brought by Mr Tanevski and Samac against Metalworth Pty Limited (In Liq.) (“Citilink”) which carried on business as an insurance broker. I&S made arrangements with Citilink for the provision of insurance cover with respect to the Grand Hotel. Citilink went into liquidation and that cross-claim did not proceed. The fourth cross-claim was brought by Mr Tanevski and Samac against Trenwick International Limited (“Sorema”), an insurer which had taken over the affairs of Sorema (UK) Per Specialist Risks Underwriters Limited. The fourth cross-claim alleged that Sorema, through its agent Citilink, had covered the Grand Hotel against public liability in the amount of $10,000,000.

I & S

6 It is convenient first to consider the state of affairs as between Samac and I&S.

7 In April 1998, Samac and its associates made arrangements for the purchase of the Grand Hotel Wyong from Daravel Pty Limited (“Daravel”), the then proprietor. This purchase was completed on 23 April 1998. Daravel had or believed it had full insurance cover arranged through Citilink. The purchasers sought quotations from a number of sources, including I&S. Apparently I&S was not familiar with hotel insurance. Mr Hakim, one of the principals of I&S, approached an executive of QBE Insurance Ltd (“QBE”). That executive said that QBE did not underwrite hotels but that he knew a broker, Blundell & Associates, who had a large book of business for hotels. Mr Hakim knew Mr Paul Blundell. He rang him and was told that Blundell & Associates dealt with Citilink who had a good facility at Lloyd’s. Mr Blundell gave Mr Hakim the contact number for Citilink.

8 On 16 April 1998, Mr Hakim sent a facsimile to Mr Roy Holdsworth, the principal of Citilink. The facsimile set out the details of the cover required, which included legal liability of $10,000,000. Mr Holdsworth replied with a facsimile on 17 April 1998, which set out a premium of $6,000 which, with charges, brought the premium to a total of $7,693.50. Mr Hakim rang Mr Holdsworth and was informed that the insurer would be Lloyd’s and that the claims would be dealt with in Australia through GAB Robin. A note of that conversation was endorsed upon the facsimile of 17 April 1998 by Mr Hakim.

9 On 20 April 1998, I&S sent a facsimile to a Mr Hyman, who was a director of Samac. The facsimile stated, “We refer to your request for a premium quotation for the Grand Hotel Wyong and now have pleasure in advising the premium applicable for the following covers as advised by you.” One of the covers mentioned was “Legal Liability $10,000,000”. The quotation noted, “The policy is underwritten by Lloyds of London with claims settled in Australia.” The premium quoted was a little different from that quoted by Mr Holdsworth and a little different from that ultimately agreed but there seems to be no significance in that.

10 The purchasers of the Grand Hotel were satisfied with the premium and with insurance through Lloyd’s. They gave I&S instructions to proceed. I&S issued an invoice setting out the details of the insurance. Each invoice said, “Please find below, detail of interim insurance cover that we have arranged, as per you[r] instructions. The enclosed documents must be returned fully completed together with payment within 14 days to ensure continuity of your protection.” The invoice was dated 17 April 1998 but whether it was issued on that precise date is not clear. The invoice included cover for public liability of $10,000,000. The total premium was $7,299.50.

11 At the same time, I&S sent documents headed, “New Business Closing” to Citilink requesting Citilink to “close this transaction”. The transactions included public liability cover for $10,000,000. I draw the conclusion that, by procedure, I&S understood that their clients were immediately covered for the insurance period, the cover to be on an interim basis pending receipt and acceptance of the proposal and premium. The insurance period requested was 23 April 1998 to 23 April 1999.

12 Neither the invoice nor the closure documents dated 17 April 1998 specified the insurer. Citilink was specified as the underwriter.

13 The insurance proposal, as completed, was a proposal on a QBE form but written at the top in large letters was “LLOYDS”. The proposal gave the details of the applicants for the insurance, who included Samac. Although the proposal was a QBE form, it did contain a public liability section and that was filled in showing the limit sought as $10,000,000.

14 On 21 April 1998, John Dunn, the account manager of I&S, forwarded the completed proposal form to Citilink and gave details of the arrangements for the payment of the premium. The facsimile requested “a certificate of insurance by return as the client is meeting with the Bank tomorrow and settlement will take place Thurs/Frid”.

15 On 22 April 1998, Citilink sent to I&S the following Certificate of Currency:-

“ Client : WEST END GROUP PTY LTD, SAMAC PTY LTD, ADVANCED COIN ENTERTAINMENTS SYSTEMS PTY LTD … GRAND HOTEL WYONG PTY LTD.
…/ Mortgagee : NATIONAL AUSTRALIA BANK LTD
Policy No : C369147 Due Date : 23/4/1998 to 23/4/1999

Situation : 126 PACIFIC HIGHWAY, WYONG NSW 2259

Interest and Sum Insured : Building of Hotel - $1,500,000
Contents of Hotel - $430,000 Debris $50,000, Gross
Profits $775,000 Others as per policy
Insurance Company : Lloyds of London
Class of Insurance : Business pak Insurance
In response to your request, we confirm that cover has been issued subject to the terms and conditions as advised.”

16 That certificate was certainly adequate for the purposes of settlement for it covered the matters in respect of which the Bank would have been interested. However, unbeknown to I&S, it related only to the property cover. I&S read the words “Others as per policy” as relating to matters such as public liability. However, in the context of the policy number given, those words related only to other minor matters covered by that policy, which was a property policy taken out with Lloyd’s. The certificate was also incorrect in that the cover which had been obtained was one covering the dates 23 April 1998 to 19 January 1999. I&S, however, read the certificate as covering all the matters specified in the closure documents which it had sent to Citilink.

17 I&S then issued the following certificate to the proprietors of the Grand Hotel:-

“ CERTIFICATE OF CURRENCY

INSURED : Westend Group Pty Ltd, Samac Pty Ltd, Advanced Coin Entertainments Systems Pty Ltd, Grand Hotel Wyong Pty Ltd
For Their Respective Rights and Interests

POLICY TYPE : Commercial Package including Fire & Perils, Public/Products Liability, Consequential Loss and Sub Limits as per policy

INTEREST : 1) Building of Hotel 2) Contents of Hotel
3) Removal of Debris 4) Gross Profits
5) Public/Products Liability

SUM INSURED : 1) $ 1,500,000 2) $430,000
3) $ 50,000 4) $750,000
5) $10,000,000

SITUATION : 126 Pacific Highway, Wyong NSW

PERIOD OF COVER : 23/04/98 to 23/04/99

POLICY NO : G369147

INSURER : Lloyds of London

FINANCE : National Australia Bank Limited.”

18 Subsequently, on 26 June 1998, Citilink issued to I&S a certificate entitled “BUSINESSPAK CERTIFICATE NO. C22391” which detailed the cover for the proprietors of the Grand Hotel. It indicated that the insurer of all covers was Lloyd’s of London. One of the heads of cover was “LEGAL LIABILITY OF THE INSURED $ 10,000,000”. The period of cover stated was 23 April 1998 to 23 April 1999. This was the cover which Samac and its associates had sought but it was not the period of cover which Citilink in fact obtained.

19 In the light of these facts, I am satisfied that Samac and the other proprietors of the Grand Hotel engaged I&S to arrange on its behalf insurance cover, including public liability cover of $10,000,000. I am satisfied that Citilink represented that the cover would be a Lloyd’s cover. I am further satisfied that I&S represented to the proprietors of the hotel that that cover had been arranged. The required premium was paid. I&S received its brokerage.

20 The trial Judge was not satisfied that there was any negligence on the part of I&S. The duty of the agent is to act with reasonable and proper care, skill and diligence. The standard by which the duty is to be measured is that of a person’s experience and skill in the profession. See Ivamy, The General Principles of Insurance Law, 5th Edition, at p 516; Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 555-556.

21 I see no error in this finding of fact. No expert evidence was called to show that I&S had failed in its duty to take reasonable care. Nor was it shown that I&S did not deal with an apparently reputable insurance agent. Mr Hakim took advice from another broker who was skilled in the field of hotel insurance. Counsel for Mr Tanevski and Samac submitted that I&S failed in its fundamental duty by failing to sight a policy, failing to identify an insurer who would be liable if a claim was made, failing to obtain any particulars of the insurance and failing to check that Citilink had a binder with Lloyd’s for public liability insurance. However, in the absence of expert evidence, I am not satisfied that I&S was not entitled to rely upon the Businesspak Certificate issued by Citilink on 26 June 1998. Both Mr Hakim and Mr Dunn of I&S gave evidence that they followed normal practice in the industry. Mr Dunn said that it was not normal to obtain a certificate of insurance from Lloyd’s and that, normally, the certificate of the person who held the binder would be accepted. In my view, the failures alleged on the part of I&S were not so simple and clear that expert evidence to prove them was unnecessary.

22 I should add that, in the present case, no issue arose as to the terms of the policy. The trial Judge found that, whatever the terms, the risk that occurred was within it. There is no challenge to that finding.

23 However, the Certificate of Currency issued to Samac and its associates by I&S on 22 April 1998 was misleading and deceptive. The proprietors of the Grand Hotel were lulled into a false sense of security by it. They believed that they had the cover they sought and that the insurer was Lloyd’s of London. In these circumstances, if they have suffered any loss as a result of their reliance upon the certificate, they are entitled to recover that loss from I&S. It is no defence to I&S that the principals of that company acted in good faith and to the best of their knowledge. I&S was not a mere conduit of information passed on by someone else. I&S had undertaken to obtain insurance and it gave a certificate in its own name certifying that public liability cover, as stated, had been obtained. It had not. See Yorke & Anor v Lucas (1985) 158 CLR 661 at 666.

Citilink and Sorema

24 I turn now to the question whether public liability insurance was in fact arranged by Citilink. The trial judge held that he was satisfied that public liability cover had not been arranged with Sorema. He further held that he was not satisfied that public liability cover had not been taken out with Lloyd’s. On this latter point, I consider the evidence to be abundantly clear that no public liability insurance was taken out with Lloyd’s. The evidence shows that Citilink arranged public liability insurance with Sorema, not Lloyd’s, and that, in the present case, Citilink took steps to obtain that cover. Whether or not it did so effectively is the issue to which I shall now turn.

25 An insurance broker, TL Dallas (London) Ltd (“Dallas”), was agent for both Lloyd’s and Sorema. Throughout 1997, there were negotiations between Citilink and Dallas with a view to achieving an association whereby Citilink in Australia could take advantage of Dallas’ agencies. On 18 September 1997, Dallas issued a cover note which authorised Citilink to provide public and products liability cover. Various conditions, premiums and brokerage were set out in the cover note. The cover note noted that the procedures stated in Citilink’s facsimile dated 15 April 1997 were agreed. The cover note specified that Sorema was to be the insurer as to 100 per cent of the cover.

26 Shortly thereafter, a further change was made. A New Zealand broker, International Underwriting Agencies Ltd (“IUA”) came into the arrangement. IUA was associated with another New Zealand broker, Wilkinson Insurance Brokers Ltd (“Wilkinson”). Mr Tim Haynes was a, or the, principal of both firms. Apparently, both firms carried on business in the same premises, one as an underwriting agency, the other as a broker. Wilkinson had an agency from Dallas which entitled it to write property cover with Lloyd’s. A new cover note of 7 January 1998 authorised both Citilink and IUA to write public and products liability cover to a maximum of $10,000,000. The cover note did not make it clear whether IUA was to write public and products liability but it did make it clear that IUA was to be part of the arrangement. The cover note expressly authorised Citilink to provide insurance cover. Condition 6 provided:-

“6) Citilink Insurance Brokers have authority to:
(i) Provide coverage for risks as stated herein
(ii) Issue certificates, covernotes, policy wordings and memoranda in respect of risks bound”
[p40 blue book]

Any public and products liability insurance written under the cover note was to be taken out in association with a property policy issued by either Eagle Star Reinsurance Ltd or Lloyd’s Underwriters. Condition 7(vi) provided:-

“(vi) Warranted coverage limited to the ‘Interest’ stated herein and only in conjunction with property policy(ies) with Eagle Star Reinsurance Ltd. and/or Lloyd’s Underwriters.”

Presumably IUA was to play a role in this for Wilkinson had the authority to write property policies with Lloyd’s underwriters. Sorema was to be the insurer of 100 per cent of the cover written under authority of the public liability cover note.

27 In so far as procedures were specified, they were set out in condition 3, which provided for there to be a monthly bordereau specifying the monthly premiums due for cover written and the moneys due under claims made. The bordereaux were to be accompanied by certificates. These were written out by Citilink and forwarded with the bordereaux to Dallas. This procedure followed the procedure which Citilink already had in place with Dallas. The certificates were not sent to the insured. After 7 January 1998, the bordereaux and certificates went from Citilink to IUA and from IUA to Dallas.

28 On or about 19 January 1998, Citilink sent to IUA the necessary underwriting information for property cover for the Grand Hotel. The proposed insured were Daravel and a Mr M Downie. Wilkinson issued a certificate showing property cover over the Grand Hotel in favour of Daravel and Mr Downie for the period 19 January 1998 to 19 January 1999. Wilkinson was the authorised agent and the certificate commenced with the words:-

“THIS IS TO CERTIFY that in accordance with the authorisation granted under the Contract No. 491/NPO48460U to the undersigned by certain Underwriters at Lloyd’s whose names and the proportions underwritten by them, which will be supplied on application, can be ascertained b[y] reference to the said Contract which bears the Seal of Lloyd’s Policy Signing office, and in consideration of the premium specified herein, the said Underwriters are hereby bound each for his own part and not one for another, their Heirs, Executors and Administrators, to insure (as follows:) (In accordance with the terms and conditions contained herein or endorsed hereon).”

29 On 21 April 1998, Citilink sent a facsimile to Mr Haynes with respect to Cert. No. C22391, which was the property cover. He set out details of the purchasers of the Grand Hotel and asked, “Can we endorse existing policy to now cover”.

30 On 22 April 1998, in relation to the property cover, Mr Haynes passed on the details of Samac and its associates. On 23 April 1998, Dallas sent a facsimile to Wilkinson to say that the facsimile of 22 April 1998 was noted and okay. On 24 April 1998, Wilkinson issued a certificate which read, inter alia:-

“Cover arranged subject to Policy document.

INSURED : Daravel Pty Ltd & M Downie trading as GRAND HOTEL

LOCATION: Pacific Highway, Wyong NSW 2259

PERIOD: 19/1/98 to 19/1/99

INSURERS: London Lloyd’s Lineslip 1998 100%
…
Amend the name of the Insured to now read as follows: West End Group Pty Ltd, Samac Pty Ltd and Advanced Coin Entertainments Systems Pty Ltd trading as Grand Hotel Wyong Pty Ltd.”


Wilkinson thus treated the property policy as being amended so as to substitute Samac and its associated companies as the insured in place of Daravel and Mr Downie as from 21 April 1998. Other amendments were made in relation to the value of the building, the value of the plant and machinery, the value of the stock and other like changes. The increased premium was picked up in the bordereau for the month of April 1998. The bordereau divided its information between the property facility, which separated London companies and Lloyd’s, and the Sorema public liability facility. The increased property premium was placed in the Lloyd’s section.

31 There is no reason to doubt, therefore, and the trial judge accepted, that the property policy was endorsed over to the new owners and changed to reflect the property values which the new owners required. The premium payments passed from I&S to Citilink to IUA and Wilkinson and through to Dallas.

32 The position in relation to the public liability cover is not so clear for Citilink was incompetent as well as being dishonest.

33 Citilink had apparently neglected to provide for Daravel the public liability insurance which Daravel required, a cover of $5,000,000. This matter came to the attention of Mr Holdsworth on belief of Citilink, the principal of Citilink, in April 1998 when he became aware that the Grand Hotel was being sold to Samac and its associates and that the new owners required cover. In April 1998, Mr Holdsworth issued the following certificate of insurance under the authority conferred by the cover note of 7 January 1998:-

“ Date : 25/4/98
Dec. No : LL1463
Cover bound as shown below on behalf of Underwriters:
Insured : Daravel Pty Ltd
Hotel : Grand Hotel
Location : 110 Pacific Highway, Wyong NSW 2259
Period of Insurance : 19/1/98 to 19/1/99
Limit of Liability : $5,000,000
Annual Turnover : $1,000,000
Number of Rooms : 30
3 Year Loss History : Nil
Gross Premium $700.00”
[p 52 blue book]

34 A date was placed on the bottom of that certificate of insurance in handwriting, 30 April 1998. On the same day, one of Citilink’s Businesspak Certificates issued to Daravel specifying the policies for which Daravel was covered. These included legal liability of $5,000,000. The certificate described the insurer as Lloyd’s of London whereas it should have described the insurer in respect of policies 1-4 and 8 as Lloyd’s of London and the insurer in respect of policy 7 as Sorema.

35 There is a question whether, in preparing the certificate in that form so as to show only Lloyd’s, Citilink was being deliberately misleading or simply incompetent. However, the fact that Sorema was an unauthorised foreign insurer and that Citilink did not comply with its obligations under ss 32(5) and 34 of the Insurance (Agents and Brokers) Act, 1984 suggests strongly that Citilink was, in this respect, deliberately misleading. There is no indication in the material before the Court that Citilink disclosed to Daravel that the public liability insurer was Sorema.

36 The fact that Citilink took the trouble of issuing these documents in late April 1998, after the sale of the Grand Hotel to Samac and its associated companies, is a reliable indication that Mr Holdsworth of Citilink had it in mind that there would be an endorsement of Daravel’s liability policy over to the new owners as had occurred in relation to the property cover.

37 A premium totalling $850 in respect of the public liability insurance was paid and, subject to proper brokerages and reductions along the way, that money passed through to Dallas. In accordance with the premium structure set down in the cover note of 7 January 1998, the premium for the $5,000,000 liability insurance, taken out to cover Daravel from 19 January 1998 to 19 January 1999 was $700. An increase of that cover to $10,000,000 would have cost another $200. Mr Holdsworth appears to have calculated that, as the policy was being increased to $10,000,000 for only three-quarters of the year, an additional premium of $150 was appropriate. There has been no challenge in relation to that calculation. Both the $700 and the additional premium of $150 passed through the chain to Dallas. The April bordereau, in the section dealing with the Sorema insurance, recorded “Dec. No. LL1463” in relation to the Grand Hotel Wyong from 19 January 1998 to 19 January 1999, the premium being $700. The certificate which accompanied that bordereau was the April certificate in respect of Daravel.

38 It is to be noted that, by the date of the certificate, the hotel had passed into the hands of Samac and its associated companies, as IUA was well aware. IUA responded to the bordereau on 12 May 1998 with an invoice for the premium of $700.

39 Citilink generated two further relevant certificates of insurance. The first was in this form:-

“CERTIFICATE OF INSURANCE

Legal Liability Insurance
Date : 25/4/98
Dec. No : LL1463
Cover bound as shown below on behalf of Underwriters:

Insured : West End Group Pty Ltd, Samac Pty Ltd, Advanced Coin Entertainments Systems Pty Ltd trading as Grand Hotel Wyong Pty Ltd

Hotel : Grand Hotel

Location : 110 Pacific Highway, Wyong NSW 2259

Period of Insurance : 23/4/98 to 23/4/99

Limit of Liability : $10,000,000

Annual Turnover : $1,000,000

Number of Rooms : 30

3 Year Loss History : Nil

Gross Premium : $850.00”

40 That certificate was in the same form and related to the same policy as the Daravel certificate but it contained the names of the new owners, it put the limit of liability at $10,000,000 and it described the period of insurance as 23 April 1998 to 23 April 1999. There is no reason to suppose that that certificate was not generated at the same time as the Daravel certificate, that is, on or shortly after 25 April 1998.

41 I have already mentioned that, by the closure notes dated 17 April 1998, but probably issued a few days later, I&S had requested Citilink to close the transaction, including the public liability insurance. The issue of the certificate dated 25 April 1998 is strong evidence that Citilink did so. Although I&S did not see that certificate, I&S understood, at least by 21 April 1998, that cover had been provided and so informed Samac and its associates. I&S asked Citilink for a certificate of insurance for the purpose of settlement. It received the certificate of currency of 22 April 1998 which included the advice that:-

“In response to your request, we confirm that cover has been issued subject to the terms and conditions as advised.”

42 By that stage, Citilink could not have denied that cover had been provided “as requested”. The issue of the certificate of 25 April 1998, was the formal act by which the agent, Citilink, bound its insurer, Sorema, to provide that cover. Thereafter, and in the ordinary course, Citilink received the formal proposal and the premium, which included the premium for public liability insurance.

43 In my view, the generation by Citilink of this certificate, together with the receipt by Citilink of a premium which included $850 for public liability cover, is sufficient to justify the conclusion that Citilink bound Sorema in April 1998 to provide public liability cover for Samac and its associates as from 23 April 1998.

44 Citilink issued a Businesspak Certificate on 26 June 1998, which it sent to I&S, which showed Samac and its associated companies as being insured for public liability in the amount of $10,000,000. Like the Daravel certificate, it wrongly described the insurer as Lloyd’s of London.

45 The certificate of 25 April 1998 appears to have been sent forward with the July bordereau. It was initialled by Mr Holdsworth and dated in his handwriting, 10 July 1998. Written on the document next to the figure of $10,000,000 was “(Increase from $5M)”. Mr Holdsworth crossed out the premium of $850 and substituted in his handwriting a premium of $150. This premium, together with the $700 premium paid for the Daravel cover, was the appropriate premium for the cover.

46 At some stage, Mr Holdsworth realised that, as he had proceeded on the basis of an endorsement of the Daravel policy, the dates that he had inserted for the period of insurance were incorrect. Accordingly, on another copy of the Certificate of Insurance of 25 April 1998, Mr Holdsworth crossed out the expiry date of 23 April 1999 and substituted in his handwriting, 19 January 1999, the date when the Daravel policy expired. Mr Holdsworth initialled the alteration although he did not actually sign or date the certificate. It is not clear when this certificate passed through the chain to Dallas but both certificates were produced by Sorema on discovery.

47 These facts make it plain that Citilink provided public liability cover for Samac and its associates in April 1998 by renewing the Daravel cover, by endorsing it to Samac and its associates as from 23 April 1998 and by increasing the limit of the liability to $10,000,000. I am satisfied that, well before Mr Komene was injured on 3 July 1998, Citilink had provided cover for the new proprietors of the Grand Hotel and that Citilink had taken sufficient steps to demonstrate that it provided that cover as agent for Sorema under the authority conferred on it by the cover note of 7 January 1998.

48 In the appeal, a great deal of attention was given to Citilink’s sloppy paperwork. Much weight was placed by counsel for Sorema on the fact that no bordereau specifically requested a change of name from Daravel to Samac and its associates. In my opinion, it matters not that Citilink failed to write into a bordereau a request for the change of the name of the insured. Citilink sent on the Certificate of Insurance which set out the details of the new owners of the Grand Hotel and described them as the insured. In any event, the public liability cover was, as the cover note of 7 January 1998 required, taken out in association with the Lloyd’s property cover. That cover, as from April 1998, was in the name of Samac and its associates, as Citilink, IUA and Dallas were well aware. It is unrealistic to consider that, after 23 April 1998, Daravel was the insured in relation to the public liability policy when, after that date, Daravel had no interest in the hotel and it was the new owners, Samac and its associates, who had sought the cover.

49 Counsel for Sorema contended that the facts disclosed that the only public liability policy taken out in relation to Samac and its associates was the increased cover from $5,000,000 to $10,000,000. The cover for the first $5,000,000 remained, according to counsel, in the name of Daravel. Such a conclusion is so commercially unreal, it cannot be contemplated.

50 I should emphasise that the question is not whether Citilink did all its paperwork efficiently and well but whether Citilink acted under the authority it had by the cover note of 7 January 1998 to bind Sorema to provide public liability insurance for Samac and its associates. Sorema is bound by the actions of its agent, whether the agent does its work efficiently or inefficiently. The issue is whether Citilink acted under its authority and undertook, on behalf of Sorema, to provide public liability insurance cover for Samac and its associates. In my opinion, the facts show convincingly that Citilink did bind itself and Sorema to provide that cover. The fact that Citilink represented to the insured that the cover was a Lloyd’s cover does not diminish the point that Citilink had been asked to provide cover and it acted under authority to provide that cover with Sorema.

51 It was never suggested that Citilink had authority to bind Lloyd’s with respect to the placing of public liability cover. On the other hand, it was never contested that it had express authority to bind Sorema with respect to that type of cover up to a limit of $10 million. Nor was it contested that it had bound Sorema with respect to the public liability cover of $5 million provided to Daravel. Given that the Daravel premium and the additional premium paid by Samac and its associates were received by Dallas, it is inescapable, as Citilink intended and the cover note issued by Dallas on 7 January 1998 contemplated, that Citilink effectively bound Sorema in the provision of $10 million cover to Samac and its associates.

52 The facts as I have found them accord with notes written by Mr Holdsworth of Citilink to Mr Hakim of I&S. In a note of 5 May 2000, Mr Holdsworth said:-

“My files and memory reveal the following:-

1) Initial cover incepted 19/1/98 to 99 (Both Property and Liability) via IUA (Auckland) to London Brokers

2) Liab. Insurers - Trenwick

3) Liab Cert No. LL1463

4) Liab Prem paid to IUA in April 9 bordereaux.

5) On 23/4/98, both covers endorsed to cover new Owners/Occupiers of Hotel.

6) Endorsements completed (with changes to S.I’s with IUA (Auckland)

7) Both Prop & Liab. covers remained in force for new Owners and were current as at 3.7.98.”

53 In a later note of 11 May 2000, Mr Holdsworth said:-

“9) In CONCLUSION, yr. Client was insured by Trenwick – documents were lodged with I.U.A. and prem. paid. – The covers were never cancelled.”

54 The records in evidence are a little more uncertain than Mr Holdsworth suggested. Nevertheless, it is comforting that the basic facts, as I have outlined them, accord with the facts as Mr Holdsworth has stated them. In the note of 11 May 2000, Mr Holdsworth referred to the fact that the covers were never cancelled. This was presumably a response to a letter in evidence from Mr Paul Kenna, Corporate Counsel for AIS Insurance Brokers Pty Ltd. In the letter of 4 May 2000, Mr Kenna wrote:-

“We have made enquiries with Trenwick International Limited regarding this property. A policy of insurance for the Grand Hotel Wyong naming as insured a company unrelated to the companies referred to in your facsimile was cancelled on the 22 April 1998 and a pro-rata refund paid. I have confirmation from the broker involved. No record of any further placement is held by Trenwick International Limited.”

55 In my opinion, the evidence before the Court shows that Mr Kenna’s view, that the Daravel policy was cancelled on 22 April 1998, was wrong. It was on or after 22 April 1998 that the Daravel policy was renewed as from 19 January 1998. It was renewed for a full twelve months. Mr Kenna’s reference to the pro-rata refund suggests that Daravel may have been reimbursed by Citilink for three-quarters of the year’s premium, the reimbursement being paid out of the premium which Samac and its associates had paid to Citilink. Whether Citilink received a premium from Daravel for the property and public liability covers is not known; but probably the premium was received. It would be quite consistent with the facts for a partial refund to have been paid out of the premium received from Samac and its associates.

56 The trial judge was not satisfied that public liability cover from Lloyd’s had not been obtained. He referred to the fact that Mr Holdsworth had not been called as a witness and that only letters written by Mr Holdsworth were placed in evidence. However, a facsimile from Lloyd’s Australia Ltd, dated 17 May 2000, is in evidence. It is clear from that letter that attempts had been made to trace any possible liability cover taken out with Lloyd’s but that no such cover had been found. The letter stated, inter alia, “There appears to be no evidence of a liability binder with Lloyd’s operating” at the relevant time. In the absence of any indication that Citilink sought to or had authority to bind Lloyd’s, I have no difficulty in concluding that there was no Lloyd’s cover. His Honour was impressed by the fact that Citilink represented to I&S that the total cover was with Lloyd’s. In my opinion, that representation was a deliberately false representation made because Citilink did not wish to disclose that it represented an unauthorised foreign insurer. That representation is not significant evidence that Citilink ever sought to bind Lloyd’s. Its binder was with Sorema through Dallas.

57 Counsel for Sorema submitted that there could be no contract of insurance as between Sorema and Samac and its associates for the latter understood that they were obtaining cover with Lloyd’s. Relying upon the ordinary principles of contract and the objective theory of contract, counsel submitted that the focus should be on the making of the contract and not on the subsequent coming into existence of declarations. Counsel submitted that, as Citilink represented that it was providing Lloyd’s cover and as the insured understood that they were obtaining Lloyd’s cover, then no contract could have come into existence as between the insured and Sorema.

58 The position is, however, that Citilink was the agent of Sorema through the binder of 7 January 1998, which Dallas had issued. It wrote the cover on Sorema in favour of Samac and its associated companies. That transaction constituted a contract as between Sorema, on the one hand, as insurer, and Samac and its associates, on the other, as the insured. No doubt, Samac and its associates had an entitlement to repudiate the contract for fraud, for Citilink, which was Sorema’s agent, had misled them as to the identity of the insurer. However, they did not repudiate the contract. They sought, and were entitled, to enforce it.

59 In my opinion, when a party seeks insurance from a broker and that broker, having the authority of an insurer, binds the insurer in favour of the party seeking insurance, a contract between the insurer and the insured will ordinarily come into force, notwithstanding that the broker may have breached the instructions which the insured party gave. Here, there was an insurance contract and consideration given by the insured to the insurer.

60 An insurance contract has many features different from those of an ordinary contract. Frequently, an insured has no contact with the insurer. Insurance cover can have some of the attributes of a product. It is provided by an insurer but acquired by an insured from another, such as a broker, who deals in the type of insurance which is sought.

61 Thus, in Siu Yin Kwan v Eastern Insurance Co. Ltd [1994] 2 AC 194, an undisclosed principal was held to be entitled to sue on a policy of insurance notwithstanding that the insurer had no knowledge of the principal and understood the insured to be the company which was so named in the policy. At p 207, Lord Lloyd noted that, while the development of the law with respect to undisclosed principals may seem anomalous, since it ran counter to fundamental principles of privity of contract, nevertheless it was justified on grounds of commercial convenience.

62 In Trident General Insurance Co. Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, it was held by Mason CJ, Wilson, Toohey and Gaudron JJ, Brennan, Deane and Dawson J dissenting, that a person, who fell within the description of “The Insured” in a policy of insurance, was entitled to sue on the policy notwithstanding that that person had provided no consideration to the insurer. Their Honours recognised the inconsistency between this conclusion and the ordinary principles of contract.

63 I may say that, as Samac and its associates were the persons described in the certificate as “The Insured” and, as they had provided consideration being the premium which Dallas as Sorema’s agent had received, the facts of the case are very much closer to an ordinary contractual situation than the facts of either Siu Yin Kwan or Trident. In any event, the facts of the case fall within the principle enunciated in Trident. Insurance cover was provided by Sorema and Samac and its associates were named as the insured parties. They were entitled to sue on the cover notwithstanding any perceived lack of privity as between them and the insurer.

64 Furthermore, the argument based on lack of privity loses much of its force when regard is had to the fact that the closure notes, dated 17 April 1998, which I&S sent to Citilink and on which Citilink acted, specified the details of the cover required but did not specify that the cover must be a Lloyd’s cover. This is not a case where the insured had made it clear that they were unwilling to accept cover from any insurer other than Lloyd’s.

65 The substance of the matter is that Samac and its associates, through I&S, entered into legal relations with Citilink to provide insurance cover. Citilink, as agent for Sorema, provided that cover. In my view, Sorema was bound by the acts of its agent and cannot take advantage of any deception in which its agent engaged. See Lloyd v Grace Smith and Co. [1912] AC 716 at 738.

66 I am therefore of the view that the appellants are entitled to judgment against Trenwick International Limited, which is the representative of Sorema. As I understood counsel, judgment is sought for the amount of the judgment given in favour of Mr Komene, plus the interest thereon to which Mr Komene is entitled. As I understood counsel, under this head of claim, it is not sought to recover any of the costs involved in establishing liability.

67 The appellants are entitled to a declaration that I & S Insurance Broking Group Pty Limited breached s 52 of the Trade Practices Act, 1974 (Cth) by issuing the misleading Certificate of Currency. The issue of damages will have to be reserved to be determined by the District Court of New South Wales should circumstances arise which show that the appellants have incurred some loss which they seek to recover from I&S.

68 The costs of the hearing below and the costs of the appeal should follow the usual course.

69 I would direct the parties to bring in short minutes of the orders which they propose consistent with this judgment within 7 days. As the issues of damages and costs were not fully debated during the hearing of the appeal, I would reserve the liberty to the parties to raise any matter which they wish to raise with respect to these issues within 7 days of the date of this judgment. Arrangements for any further hearing or directions with respect to these issues are to be made through the Associate of Tobias JA.

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Last Modified: 10/21/2003