Davis v CGU Insurance Ltd

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court: Civil)
DAVIS & ANOR v CGU INSURANCE LTD & ANOR
[2009] SASC 220
Judgment of The Full Court
(The Honourable Chief Justice Doyle, The Honourable Justice Vanstone and The Honourable Justice Layton)
30 July 2009
INSURANCE - OTHER INDEMNITY INSURANCES - PROPERTY DAMAGE OR LOSS - GENERALLY
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
The appellants purchased a property bordering Lake Albert - extending into the lake was a large wooden jetty - the jetty was situated on Crown land - after signing the contract for sale, the appellants learned that there was a dispute over ownership of the jetty - the appellants took a domestic buildings and contents policy with the first respondent through an insurance agency, the second respondent - the policy read in part that the property set out in a schedule was insured "only if you own or are liable for the property" - there was doubt as to whether the policy was of such a nature as to respond to damage to the jetty because it referred to domestic buildings, and because the jetty was on Crown land - the appellants advised the second respondent that there was a dispute about ownership of the jetty - in this context the appellants were informed both orally and in writing that the jetty was "covered" by their policy - after the jetty was partially removed the first respondent rejected the claim for indemnity - the appellants contend that they were entitled to indemnity on a plain reading of the terms of the insurance contract.
Held: words in policy to be interpreted in accordance with ordinary English meaning - appellants unable to prove that they held a better title to the jetty than anyone else - appellants unable to demonstrate that they owned, or were liable for, the jetty - further failed to prove that representations of the respondents varied the contract so as to render first respondent liable to indemnify - claim in contract fails.

ESTOPPEL - ESTOPPEL IN PAIS - THE REPRESENTATION - IN GENERAL
ESTOPPEL - ESTOPPEL BY CONVENTION
Appellants claim first respondent estopped from denying that it is not liable under the insurance contract - claim based on estoppel by representation and especially on estoppel by convention.
Held: claim for estoppel by representation only to be found when there is a clear and unambiguous statement of that which the representor is estopped from denying - representations to be assessed objectively - representations to be understood as acknowledging that jetty was to be treated as a domestic building for the purposes of the insurance contract - unreasonable to interpret representations that first respondent abandoning requirement of ownership - similarly, no conventional understanding about ownership to support a claim of estoppel by convention - estoppel claim fails.
Appeal dismissed.
Insurance (Agents & Brokers) Act 1984 (Cth) s 16, referred to.
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325; The Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878; The August Leonhardt [1985] 2 Lloyds Rep 28 CA, applied.
Grundt & Ors v The Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641; National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548, discussed.
Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355; Legione v Hatley (1983) 152 CLR 406; Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40, considered.

DAVIS & ANOR v CGU INSURANCE LTD & ANOR
[2009] SASC 220
Full Court: Doyle CJ, Vanstone and Layton JJ

DOYLE CJ: I would dismiss the appeal. I agree with the reasons of Vanstone J for dismissing the appeal. There is nothing that I wish to add to those reasons.
VANSTONE J: This appeal is against the decision of a District Court judge dismissing the appellants’ claim, under an insurance policy, for indemnity for damage to a jetty situated on Crown land and dismissing their claim for breach of contract against the agent who negotiated the policy on their behalf.
Background
The appellants, Ms Davis and Mr Morcombe, purchased from a mortgagee in possession a large house upon land bordering Lake Albert. Extending into the lake from the foreshore in front of the house was a substantial wooden jetty with an associated pipeline and a pump providing water for irrigation purposes. The jetty was on Crown land. Although the advertising material referred to the jetty and pump, the contract for sale did not include them. It specifically excluded from the sale the licence to occupy the land on which the jetty stood.
Soon after the contract was signed the appellants learned of a dispute over ownership of the jetty and pump. The appellants took the view that they had acquired those items. The appellants arranged an insurance cover note and later took a domestic household insurance policy with an insurance company, the first respondent (“CGU”) through the second respondent, an insurance agent (“BankSA Insurance”). The policy was for insurance of domestic buildings and contents. It provided that the property set out in its schedule was insured “only if you own or are liable for the property”. While the jetty and pump were not originally mentioned in the schedule, there is no dispute that in subsequent discussions between the appellants and BankSA Insurance’s representative, Mr Lindsay, it was agreed that the policy would “cover” those items.
There was a long delay prior to settlement on the property. On occasions, both before and after settlement occurred, persons claiming a title to the jetty and pump removed parts of them. On the first such occasion, the missing pump and jetty pieces were recovered. On the second occasion the appellants made a claim on the policy. That claim was still being assessed at the time when the policy was about to lapse. In the context of a renewal of the policy and with knowledge of a competing claim for the jetty, Mr Lindsay assured each appellant that the items were “covered”. After the policy was renewed the jetty and pump were removed entirely by others. The respondent, CGU, rejected the claim for indemnity.
The issue at trial and on appeal was whether the trial judge should have found that the requirement under the contract, of ownership, had been met, or whether, having regard to the terms of the assurances given to the appellants by Mr Lindsay, the contract had been varied so as to dispense with such a requirement or that, by reason of those assurances, the respondents were estopped from denying that the appellants owned or were liable for the jetty.
The judgment under appeal
The appellants’ first contention was that they were entitled to indemnity on a plain reading of the terms of the insurance contract.
The claim was put on two alternative bases, namely that the statements made by Mr Lindsay to the appellants to the effect that the items were “covered” effected a variation to the terms of the policy, or, in light of those statements, the respondents were estopped from denying that the appellants were liable under the policy to indemnify the appellants. The respondents’ position was that the appellants could not demonstrate a title to the jetty and pump superior to that of any other and therefore the appellants could not be said to have been the owners of, or liable for, the jetty and pump.
The judge found that it was implicit in discussions between the appellants and Mr Lindsay, that cover for the pump and jetty would only be extended if the appellants could otherwise bring themselves within the terms of the policy, which they could not. He considered whether the appellants owned or were liable for the jetty and pump as was required by the policy.
The judge found that the appellants did not own the jetty or pump. Ownership had not passed to them under the contract of sale. Nor had it passed to them from the Crown (which made no claim to it). He found that neither the registered proprietor at the time of sale (Ms Cummings) nor the holder at the time of the contract of the licence over the Crown land on which the jetty stood (Mr Tomanis) had conferred ownership upon the appellants. The appellants had not established that the jetty or pump had been abandoned and had thereafter passed to them. Accordingly, the appellants did not have an entitlement to indemnity under the policy.
In relation to the appellants’ alternative claim – that the policy incorporated certain written and oral statements made by one or other of the respondents to the effect that the jetty and pump were insured – the judge found that none of the matters pleaded could be said to effect a contractual change in the policy. Having found that the parties were at cross-purposes when discussing the extent of the cover of the policy, those discussions could not have led to an understanding that the terms of the policy had been varied.
In respect of the appellants’ claim that by reason of the same representations the respondent CGU was estopped from denying that it was not liable under the insurance contract, the judge held that neither respondent had induced the appellants to assume that CGU would indemnify them from loss resulting from the actions by the other claimants. Whilst the judge accepted that the appellants had such a belief, he found that it “did not reasonably arise from the conduct or statements of either of the defendants”: [59].
The appeal
At the commencement of the argument on the appeal, Mr R J Whitington QC, for the appellants, announced that insofar as the judgment under appeal concerned the pump, the appeal would not be prosecuted.
It should be noted that before the trial judge there was little dispute regarding factual matters, as distinct from inferences to be drawn.
The claim under the contract
The policy booklet which, with a schedule, comprised the terms of the contract entered into between the appellants and CGU, included the following at page 7:
Section 1:
DOMESTIC
BUILDINGS
AND DOMESTIC
CONTENTS
What is insured
The property set out on your schedule is insured if it is destroyed, lost or damaged. It is insured only if you own or are liable for the property.
<If you only insure domestic buildings, the cover provided for destruction, loss or damage does not apply to domestic contents.
<If you only insure domestic contents, the cover provided for destruction, loss or damage does not apply to domestic buildings.
Your domestic buildings and domestic contents are insured while at your situation. Cover for your domestic contents while away from your situation is not provided unless we say so.
In another section, at page 9 of the booklet, the events giving rise to liability were specified, including as follows:
Cover 1 – Listed Events
We will cover your domestic buildings and domestic contents, shown on your schedule, for the events listed below. There must be damage or loss from one of these events to the domestic buildings or domestic contents for you to make a claim:
¾ Fire or explosion.
…
¾Theft. This cover does not apply if the theft is from any part of the domestic buildings which you share with another person who is not insured under this policy. This cover does not include theft by a tenant.
…
¾Deliberate or intentional acts. This cover does not include theft and does not apply if the deliberate or intentional act is done by a tenant.
…
The cover note, or schedule, dated 28 February 2002, included the following details for insurance in the period 21 December 2001 to 21 December 2002:

Class of Policy:    Farm Insurance

Insurer:            CGU INSURANCE LIMITED ABN 27 004 478 371

  485 Latrobe Street, Melbourne   Vic   3000

The Insured:     Robin Davis

COUNTRY CLASSIC INSURANCE SCHEDULE

Situation:    Lot 1&2 Campbell Road, Meningie

DOMESTIC BUILDINGS & CONTENTS             Excess $100

Construction: Brick

Listed Events

Interested Party:           Commonwealth Bank

Buildings: …………………………

Total Sum Insured:

SUM INSURED

$600,000

$600,000

EXCESS

$100

Indemnity Conditions Apply

This premium is now payable by monthly instalments of $64.16

The appellants claim that the judge interpreted the clause in Section 1: “It is insured only if you own or are liable for the property” too literally and restrictively. They say that the intention of both parties was that the word “own” should incorporate the appellants’ interest in and use of the jetty. They contend that they had a sufficient interest in the jetty to insure it. Senior counsel argued that the appellants’ rights “to a licence and under a licence to be conferred, were rights in equity sufficient to permit [them] to say, colloquially: “We own the jetty”. It was put that the words “own or are liable for” were wide enough to encompass such an interest.
In my view the judge correctly found that the words in the policy fell to be interpreted in accordance with their ordinary English meaning.
Moreover, the case of the appellants on the contract did not turn on their failure to demonstrate ownership of the jetty in the strict sense. It was not the case of the respondents, either at trial or upon the appeal, that improvements situated on Crown land could never be “owned” as that word was used in the policy document. Rather, the appellants were unable to demonstrate that they had a better title to the jetty than anyone else. It can be assumed for these purposes that the appellants had an expectation that in due course they would be granted a Crown licence to the land on which the jetty was situated. However, the licence itself would not confer any proprietary interest in the jetty. For that reason, even if it were assumed that after settlement the licensee, (since February 2002 Ms Cummings), held the licence for the appellants as a constructive trustee, that would not avail the appellants. Additionally, on the evidence before the judge, it seems that a previous owner of the land, either Ms Cummings or Mr Tomanis, had a title superior to that of the appellants. I have already referred to the judge’s findings in relation to that matter. I consider that those findings justified the judge’s conclusion that the appellants failed to prove that they owned, or were liable for, the jetty.
Suggested variation of contract
In the alternative, the appellants’ claimed that the policy was varied by a number of representations and letters – to the effect that the jetty and pump were “covered” – so that, even if the appellants could not bring themselves within the words “own or are liable for” as used in the contract as initially struck, there was a variation effected to those terms, such as to require CGU to indemnify them for the loss of the jetty and pump. This, say the appellants, flowed from the respondents’ words and conduct, viewed objectively. The judge accepted that the appellants believed that they had such an indemnity. The appellants contend that, viewed objectively, this was the effect of the respondents’ words and conduct and the judge should have found so.
I shall deal in more detail later with the actual words and conduct in issue. For the present it is sufficient to say that I agree with the judge that neither respondent intended, at any time, to effect a variation of the contract such that the appellants would be indemnified for loss of the jetty, irrespective of the terms of the written contract. As at 21 December 2002, when a renewal of the policy was effected, most of the relevant representations and conduct had already occurred. If the respondents had intended by those words to change the basis of the agreement, then it is hardly likely that the policy would have been renewed in the same terms. Moreover, it appears that CGU did nothing to acquaint itself with the competing claims for ownership over the jetty. If it were to be undertaking an indemnity in relation to an entirely new risk, then it is highly likely that it would have explored the parameters of that risk before so acting.
Estoppel
I turn then to the central argument advanced upon the appeal.
In the statement of claim the reference to estoppel appears at paragraph 29(c) as follows:
29.     The plaintiffs claim against CGU on the following bases:
(a)     … pursuant to the insurance contract; or …
(aa)    … for breach of the insurance contract, or …
(b) … s 82 of the Trade Practices Act …; or …
(c)CGU is estopped from denying that it is not liable under the insurance contract.
(d)Interest, …
Before the trial judge the appellants relied on the expression of the principle of estoppel by representation by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 413, as follows:
The nature of an estoppel in pais is well established in this country. A party who induces another to make an assumption that a state of affairs exists, knowing or intending the other to act on that assumption, is estopped from asserting the existence of a different state of affairs as the foundation of their respective rights and liabilities if the other has acted in reliance on the assumption and would suffer detriment if the assumption were not adhered to.
As recorded earlier, the judge found that there was no inducement by the respondents to the appellants to assume that CGU would indemnify the appellants for loss of the jetty consequent upon the actions of Ms Cummings and others claiming an interest through her. He accepted that the appellants held such a belief, but not that it reasonably arose from the statements or conduct of the respondents.
Representations relied on as giving rise to an estoppel by representation need to be clear and unambiguous and are to be assessed from an objective standpoint. Handley KR, Estoppel by Conduct and Election (Sweet and Maxwell, 2006, London) at 4-002 refers to several authorities in support of these propositions including Low v Bouverie [1891] 3 Ch 82 and MCI WorldCom International Inc v Primus Telecommunications Inc [2004] 2 All ER (Comm) 833 CA, 844. Handley quotes Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890, 902:
To constitute an estoppel a representation must be clear and must unambiguously state the fact which, ultimately, the maker is to be prevented from denying.
In Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 at 374-375, Isaacs ACJ, with whom Gavan Duffy J agreed, made the following observations:
The word “representation” is not to be understood in any rigid sense. In the domain of estoppel it includes an inference from conduct – per Lord Shand in Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203 at 217; and this is exemplified in Yorkshire Insurance Co v Craine (1920) 28 CLR 305, (1922) 2 AC 541, 31 CLR 27. The word “unambiguous” is explained by Kay LJ in Low v Bouverie (1891) 3 Ch 82 at 113, the word and its explanation occurring on the same page. The Lord Justice says: “It is essential to show that the statement was of such a nature that it would have misled any reasonable man, and that the plaintiff was in fact misled by it”. Bowen LJ at 106 says: “It must be such as will be reasonably understood in a particular sense by the person to whom it is addressed”. This is confirmed in George Whitechurch Ltd v Cavanagh (1902) AC 117 at 145 by Lord Brampton and in Bloomenthal v Ford (1897) AC 156 at 166 by Lord Hershell.
In Legione v Hatley (1983) 152 CLR 406 at 435-436, Mason and Deane JJ emphasised that a representation must be clear and unambiguous, citing the same passage of Dayton. To similar effect is the statement of Dodds-Streeton J, speaking for the Victorian Court of Appeal in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [134]:
Thus from an early stage, a representation in estoppel was to be assessed by how it would reasonably be understood by the addressee in the context of the surrounding circumstances.

Mr Whitington QC preferred to characterise the common law estoppel, which he said arose, as estoppel by convention. Relying on the judgment of Dixon J in Grundt & Ors v The Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641 and Handley KR, Estoppel by Conduct and Election at 115ff, he argued that where parties, by words or conduct, mutually adopt, as the conventional basis of a transaction, an assumption as to a state of affairs (which may extend to legal rights) and the parties rely on such an adoption in entering the contract and act to their detriment (which may be found in the very entry into the contract) both are estopped from unjustly departing from that conventional assumption for the purposes of that transaction.
Handley contrasts the approach to construction of a statement said to found an estoppel by representation with that to be employed for estoppel by convention: 4-002 and 8-001ff. He expresses the view (8-011) that because “an ad hoc convention is mutual there is not the same need for its terms to be clear and unambiguous. The convention, like a contract, must be construed and its true meaning is that decided by the Court”.
It was put that there was no need to prove any belief in the truth of the assumption, or that the departure from it was unconscionable. Mr Whitington QC argued that it “was open to the parties to adopt a conventional assumption that the jetty was owned for the purpose of insurance, even though they both knew it wasn’t”. He suggested that the repeated assurances of Mr Lindsay to the effect that the jetty was “covered” by the policy satisfied the requirement that the assumption was communicated. In terms of the appellants’ states of mind as to ownership, Ms Davis’ evidence was that she always believed that she and Mr Morcombe were the owners. Mr Morcombe maintained that, although he did not own the jetty in the same way as the property itself was owned, he had an entitlement to it. His evidence was that he would not have renewed the policy without the assurance Mr Lindsay gave. The detriment, according to Mr Whitington’s argument, was the very entry into the contract on the strength of the assurances and the loss of opportunity to seek an injunction to stop Ms Cummings and others from interfering with the jetty.
On this analysis, the critical issues which arise include whether, on a proper construction of the assurances given by Mr Lindsay, the parties mutually adopted any assumption as the conventional basis of the transaction (and in particular the renewal) and if so, the critical features of that assumption. Its critical features, or terms, need particular attention, because they would dictate what (if anything) the respondents would be estopped from denying. It seems that it could not be as widely cast as paragraph 29(c) of the Statement of Claim to the effect that they were estopped from denying liability. Other, more realistic possibilities of what might be drawn from the communications are that the parties agreed to adopt an assumption that:
(1)the appellants owned or were liable for the jetty within the meaning of the policy (as Mr Whitington QC argued); or
(2)the fact that the jetty was situated on Crown land did not preclude ownership of it, within the meaning of the policy and therefore that the appellants could, given certain factual circumstances, become the owners of, or liable for, the jetty within the meaning of the policy; or
(3)the domestic buildings and contents policy was suitable as a vehicle by which to insure the jetty.
Only possibility (1), if mutually adopted as the conventional basis of the contract, could give rise to the estoppel contended for by the appellants.
A further issue which arises is whether the mutuality underpinning the conventional assumption demands a meeting of the minds, as opposed to, merely, conduct which would suggest to a reasonable observer that the parties had proceeded on such an assumption.
In Republic of India v India Steamship Co Ltd (No 2) (The Indian Grace) [1998] AC 878 at 913 Lord Steyn stated the relevant principle in the following terms:
It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared by them both or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed fact or law if it would be unjust to allow him to go back on the assumption … It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention.
It seems clear that what is required is “some mutually manifest conduct by the parties which is based on a common but mistaken assumption”: The August Leonhardt [1985] 2 Lloyds Rep 28 CA, 34-35. That this type of estoppel is said to have had its origins in estoppel by deed, leading to a recognition that the recitals in informal documents could be binding as estoppels (Handley at 8-002) indicates that an agreement or preparedness to proceed on the assumed basis must be demonstrated. The statement of principle by the New Zealand Court of Appeal in National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548 at 550, formulated after a survey of the leading English and Australian authorities, makes this clear. I set out the statement in its entirety but points 2 and 3 are directly relevant.
(1)The parties have proceeded on the basis of an underlying assumption of fact, law, or both, of sufficient certainty to be enforceable (the assumption).
(2)Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction.
(3)Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them.
(4)The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding.
(5)The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption;
(6)In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.
In Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46, McPherson J, speaking for the Full Court, required “demonstrable acceptance” of the assumption. He said:
The word “conventional” in this context carries connotations of agreement, not necessarily express but to be inferred, or at least a demonstrable acceptance of a particular state of things, as the foundation for the dealings of the parties.
Where the convention concerns legal rights, what must be shown is that the party making a concession evinces by his conduct that he is abandoning the right to later go behind the concession: The Indian Grace at 914 per Lord Steyn.
The conduct said to found an estoppel
It is now necessary to examine the history of the dealings between the appellants and respondents in order to understand the factual context in which an estoppel is said to have arisen.
On 21 December 2001 the first appellant, Ms Davis, entered into the contract to buy Campbell Park from the mortgagee in possession. The registered proprietor of the land at that time was Ms Cummings. As mentioned, in February 2002 she was granted a Crown licence in respect of the land upon which the jetty was situated, but at the time the contract was struck a Mr Tomanis held the licence. Although the advertising material presented by the land agent had referred to the jetty, the contract made no mention of the jetty or pump.
On the same day Ms Davis spoke to her husband, Mr Morcombe, on the topic of insurance. At his suggestion, Ms Davis rang Mr David Lindsay, with whom Mr Morcombe had previously dealt. She asked him to arrange insurance for the property. At the time of the trial she had no actual memory of mentioning the jetty to him, although she described the property at his request. Further to that last point, about a year later, in an internal memorandum, Mr Lindsay noted that when the cover had been arranged, the jetty had been discussed and “it was confirmed that cover included the jetty as part of the building cover”.
Within a week or so of signing the contract, Ms Davis received a letter from Ms Cummings, which advised her, among other things, that the jetty did not form part of the property which Ms Davis had contracted to buy and that the jetty was licensed in her name and that the mortgagee in possession had no claim to the jetty.
On about 18 January 2002 Ms Davis received a letter from solicitors acting for P J Balnaves Nominees Pty Ltd advising that their client had a “leasehold interest in the property”. Mr Balnaves, who appears to have been a controller of that entity, claimed an unregistered leasehold interest, predating Ms Cummings’ acquisition of the property. A dispute over the claimed lease led to a delay of some months in the appellants settling on the property. It appears that, through Ms Cummings and interests associated with Mr Balnaves, a Mr Rogers later claimed ownership of the jetty and pump. In their letter to Ms Davis, the Balnaves solicitors enclosed a facsimile letter, apparently sent to the mortgagee of the property, asserting that there was a written Memorandum of Lease dated 10 August 1999 executed by Ms Cummings and their client.
On 1 February 2002 the Minister for Environment and Heritage issued to Ms Cummings a licence over the land on which the pump stood and from which the jetty extended, being that comprised in Portion of Section 682 in the Hundred of Barker. The licence was expressed to be “held in conjunction with ‘CT 5063/917’”. The licence bore the following endorsement:
This licence is issued subject to the conditions attached hereto. It is not a title to the land nor does it convey any rights of ownership in the land. It is merely a right to occupy the land for the purposes stated herein.
On 12 February 2002 Mr Porcaro of CGU, who had inspected the property, wrote a memorandum to Mr Lindsay noting that:
The property is located on the western side of Lake Albert facing south. The property has its own jetty (reasonable condition/wood construction) on the Lake which is visible from the front of the main homestead
On 28 February 2002 BankSA insurance issued a tax invoice, also described as a “cover note”, for insurance cover dating back to 21 December 2001. The insurance was described as “domestic buildings and contents”.
On 23 March 2002 Ms Davis visited the property and found that the jetty had been damaged by the removal of railings on it and that the pump had gone. She reported the matter to the police. She also rang Mr Lindsay to report the incident. She said that she wanted to make sure that both jetty and pump were covered under the policy. Asked if she recalled what Mr Lindsay had told her, Ms Davis said only that her “understanding from that conversation was that they were”.
On 12 April 2002 a written application to CGU for insurance was made by the appellants. It bore the handwriting of both appellants. In a section headed “Specified Aboveground Farm Improvements” were listed the jetty and various pumps. Those entries appeared to have been deleted by crossing them out and the evidence was that Mr Morcombe wrote against that section the following:
See BankSA inspection and attached Commonwealth Bank valuation.
On 11 June 2002 the settlement for the sale of the property occurred. On 18 June 2002 the appellants applied for the transfer to themselves of the licence.
After settlement and before Ms Davis moved in on 16 July 2002, parts of the jetty and the pump were recovered from a neighbour’s property. This appears both in Ms Davis’ evidence and in a letter written by Mr Morcombe to the claims consultant of CGU on 21 April 2004. Subsequently, the damage to the jetty was made good and the pump restored to its position. The same document records that on 31 July 2002, whilst remedial work was being performed on the jetty on the appellants’ instructions, Mr Rogers attended at the scene with another man and directed the workers to cease work. Ms Davis attested to these events in her evidence. She said Mr Rogers told her that the jetty was his. He said he was going to come back with workers and remove it. Ms Davis said that on the same day she telephoned Mr Lindsay. He told her that the jetty and pump were “covered”. She related in evidence that she had told Mr Lindsay of Mr Rogers’ claim. She said:
A.I spoke with Mr Lindsay at BankSA and told him about the visit from Mr Rogers.
Q.In the course of that call was anything said about the jetty.
A.I asked him about overall coverage for the jetty and the pump.
Q.What, if anything, did he say.
A.He said that it was covered.
Q.Was anything said about Mr Rogers’ assertion about which you’ve given evidence that he owned that asset.
A.In the conversation with Mr Lindsay I told him verbatim what Mr Rogers had said to me, and Mr Rogers had said to me ‘That is my asset’.
Q.Do you recall if anything else was said about the pump.
A.Give me a minute please, I can’t recall.
…
A.Clearly during the phone call I had on 31 July with Mr Lindsay we discussed the pump and I asked for it to be endorsed on the policy, which it has been, and it says that it’s a 10 horse power Grundfos pump.
She went on to say that Mr Lindsay asked her to describe the pump. She went down to the pump shed and noted the label on it and then advised him of the details. She said when she asked him about the jetty and its cover, he said “that it was covered under the normal household insurance”. A document from the second respondent entitled “Endorsement” seems to relate to such a conversation. In this pro forma document were noted by Mr Lindsay the details relating to the pump, though not the jetty. Those same details later found their way into a CGU document addressed to the plaintiffs dated 8 August 2002, headed “Endorsement Schedule”, and also comprising an invoice. The relevant part is reproduced:

SECTION

INTEREST/PROPERTY INSURED

SUM INSURED

PREMIUM

SECTION 2 – FARM PROPERTY
TYPE OF COVER – LISTED EVENTS
EXCESS - $100
SITUATION AS ABOVE
MORTGAGEE AS ABOVE

SPECIFIED FARM IMPROVEMENTS
GRUNDFOS 10HP ABOVE GRND PUMP $4000

TOTAL SPECIFIED FARM IMPROVEMENTS $4000 $1.63

Again, it will be noted, no mention of the jetty is made.

Thus, almost eight months after entering into the contract for purchase of the property and arranging insurance cover; after two episodes of damage or interference with the jetty and pump and conversations with Mr Lindsay following both episodes; after a written application for insurance and receipt of the “Endorsement Schedule”, the appellants still had no written confirmation that they had any insurance cover over the jetty.
On 16 September 2002 Mr Haslam, Senior Property Officer, Crown Lands SA, wrote to Ms Cummings on the letterhead of the Environment and Heritage Department. In the letter he recognised the licensee’s right to sell the jetty and to remove it. He advised:
I have recently received correspondence from a Mr Allen Rogers concerning the removal of a pump and jetty from Section 682 Hundred of Baker.
Portion Section 682 is held by you pursuant to Licence to Occupy 18983 for grazing, pump and pipeline and jetty purposes.
I understand that you have sold the improvements located on the land to Mr Rogers for removal from the site.
This correspondence is to advise you that following removal of the improvements the site must be rehabilitated to a safe and natural state. The responsibility for this rehabilitation rests with you as the licensee.
Once the improvements have been removed please advise this office to enable the licence to be cancelled, or alternatively arrange a transfer of the licence to the new adjoining owners.
On the following day Mr Haslam wrote to the appellants advising that their application to have the licence transferred to themselves could not be granted, as it was not signed by the existing licensee, Ms Cummings. Mr Haslam noted that he was “aware that the licensee has sold the improvements (jetty and pump) to a third party for removal”. He suggested that the appellants approach the existing licensee again. In a further letter by Mr Haslam dated 25 September 2002, this one being addressed to the appellants’ solicitor, Mr Solomon, Mr Haslam recorded his view – presumably that of the Minister – that the jetty was the property of the licensee. He advised:
As a result of your correspondence, I have discussed the issue with the Manager Crown Lands SA for confirmation and comment.
I now wish to formally re-iterate my previous advice that improvements located on the subject land are owned by the licensee (J Cummings). A decision to either transfer ownership of the improvements, remove the improvements, or sell the improvements (for removal) rests with the licensee.
Whilst condition LCO215 applies specifically in the event of termination, the clear intention is to permit the licensee to remove the improvements and rehabilitate the land. It is therefore not the Department’s intention to intervene in that process if that is the intention of the licensee.
Similarly if an application is received to transfer the licensed land to your client, that application will be processed accordingly.
I interpolate that Mr Whitington QC questioned the authority of Mr Haslam to write on these issues. However, what can be drawn from Mr Haslam’s letters is, at least, that the Crown was making no claim to ownership of the jetty.
In October 2002, two men attended at the property and dismantled much of the jetty. Ms Davis described how this occurred, over a number of hours. Ms Davis said she advised Mr Lindsay of these events and said that she wished to file a claim.
A “property claim report” filled out and signed by Ms Davis on 23 October 2002 was lodged. Against the description of the items for which a claim was made, Ms Davis described herself and Mr Morcombe as “owner”. As mentioned, in evidence she explained that, throughout the chain of events, she believed herself and Mr Morcombe to be the owners of the pump and jetty and she communicated that to Mr Lindsay. It does not appear from the evidence of Ms Davis that, in her conversations with Mr Lindsay, she referred to, or gave any credence to, any contrary view.
Later she met with an insurance assessor, Mr Stevens, of Crawford International Loss Adjusters, who had been engaged by CGU. That appears to have occurred on 14 November 2002. Ms Davis gave evidence that during that meeting she told Mr Stevens the full history of events concerning the jetty and pump.
Mr Stevens compiled a report, dated 25 November 2002, for CGU. It was addressed to CGU and was marked to the attention of claims officer, Karen Glazbrook. On its cover sheet, the report referred to the “Cause” as “Theft of external water pump and part of a timber jetty”. In the introduction, the author wrote:
1.2The claim is a relatively complicated matter and involves the theft of a Grundfos water pump and the partial dismantling/theft of a timber jetty adjoining the property.
1.3The person alleged to be responsible for the loss is a Mr Allen Rogers. He has advised the Insured that the pump and jetty were sold to him by Peter Balnaves, the defacto partner of the property’s previous owner, Jane Cummings.
Further into the report is a reference to the location of the items, being on Crown land. Mr Stevens records:
2.2A timber frame and corrugated iron clad shed enclosing a water pump and the timber jetty are erected on Crown land adjoining Lake Albert.
There are further references to Crown land including the following:
5.5The jetty adjoins Crown land of which the Insured is the lessee. [This was incorrect.] We have been advised that the Insured is not classified as the owner of the jetty and that it is available for use by all members of the community. At this stage we are unsure as to who paid to erect the jetty and the party that is responsible for its repair/maintenance.
Under the heading “Policy Liability” Mr Stevens raised a question as to whether the jetty could come within the terms of the policy. He said:
6.4In respect to the jetty, we are currently endeavouring to obtain further details concerning ownership and responsibility for its repair/maintenance. We are concerned that it does not fall within the definition of domestic buildings and that it is not the intention of the policy to indemnify the Insured for loss/damage to this item.
Thus, it can be seen that Mr Stevens was concerned, not only with the question of ownership of the jetty and the significance of it being on Crown land, but also with whether a domestic buildings policy was apt to provide insurance cover for it.

Ms Davis gave evidence to the effect that she spoke to Mr Lindsay ahead of the expiry of the policy in December 2002. She said that she wanted confirmation in writing that the jetty was insured and that Mr Lindsay said he would write a letter to that effect. That evidence was in these terms:
Q.Before renewal did you have any discussions with BankSA or CGU about the policy.
A.Yes, we did.
Q.Can you tell the court what those discussions were.
A.I spoke with David Lindsay because I wanted confirmation in writing that the jetty was insured.
Q.And what if anything did he say.
A.He said that he would do that. He would do –
Q.Do what.
A.Excuse me, that he would write a letter confirming that the jetty was insured.
Q.And did you subsequently receive a letter about that.
A.Yes, I did.
In cross-examination she gave the following evidence:
Q.When you came to renew the policy in December 2002 and you rang and asked Mr Lindsay [for] confirmation that the jetty was covered, the pump had gone of course, you knew that you were seeking to renew the policy in the terms that had been supplied to you the year before.
A.Would you ask the question again please?
Q.When you rang Mr Lindsay in December 2002 which was about the time when the policy was due to be renewed – have you got the dates right.
A.Just give me one moment please. Yes.
Q.You knew the policy was about to be renewed in the same terms and conditions as the policy booklet that had been provided to you some time before.
A.Yes.
Q.And you were simply seeking confirming having regard to those terms and conditions the jetty would be noted as covered on the policy.
A.Correct.
This evidence gives no support to the argument that Ms Davis envisaged any alteration to the terms of the policy. The letter spoken of was indeed written by Mr Lindsay and dated 2 January 2003. I shall return to set out its terms.
However, prior to the provision of that letter and on 19 December 2002 Mr Morcombe spoke with Mr Lindsay. This occurred soon after a conversation between Mr Morcombe and Mr Stevens, the insurance assessor, in which Mr Stevens had said that he did not know whether the jetty was covered under the policy or not. Mr Morcombe described the conversation with Mr Lindsay as follows:
I reminded him of a conversation that he had had with [Ms Davis] which I believed had taken place because [Ms Davis] had told me it had. So I said to Lindsay ‘You’ve previously told [Ms Davis] that the jetty’s covered. Is it or isn’t it? I need an answer’, and I told him about what had happened that previous day. I went through the sequence again, I wanted to know whether it was covered or not. Here’s a man saying he’s going to take it away and suggest[ing] I might pay him some money not to, so I was a bit keyed up and so I explained to Lindsay what had happened that day and he said he recalled the conversation that he had had with [Ms Davis] in which he told [Ms Davis] ‘Yes, the jetty is covered’ and he said he would get a letter to me. I said ‘Thank you, that’s my understanding but I want it in writing please’ and so he said he would get a letter to me.
Ms Davis and Mr Morcombe gave evidence that in the absence of an assurance that the renewed insurance would cover the jetty, they would not have renewed the policy.
On 20 December 2002 the appellants were advised by letter from Ms Jarvis, Property Officer, Crown Lands SA, that one month’s notice of cancellation in relation to the licence held by Ms Cummings had been given. Ms Jarvis wrote that, following cancellation, any new application for a licence would be considered.
On 21 December 2002 the policy was renewed. On 2 January 2003 Mr Lindsay wrote to Ms Davis, as promised, in the following terms:
Dear Robbie,
Following recent discussions with Neville, we confirm that the jetty is covered under the domestic property (section 1) section of the policy.
CGU have advised that they wish to specify the jetty on the policy, and have requested a separate value. Can you please advise of the sum insured required.
Also can you please confirm in writing the general condition of the jetty.
I will await your advices in due course.
Yours faithfully,
(signed)
David Lindsay
Area Manager
Rural Insurance
Ms Davis answered the queries in respect of the value and condition of the jetty by letter dated 8 January 2003.
I digress to observe that in my view, Mr Lindsay’s statement in the letter that the jetty is covered under the domestic (section 1) section of the policy is the best evidence of the representation actually made on behalf of the respondents by Mr Lindsay. This was a clear reference to page 7 of the policy booklet, the relevant part of which was set out much earlier in these reasons. The stipulation as to the insured owning or being liable for the property is set out at the commencement of section 1.
On 11 and 15 January 2003 the jetty was dismantled by a number of men, including Mr Balnaves. The upper timbers were removed and the pylons, insofar as they could be extracted from the lakebed, were also removed. Ms Davis reported the matter to various people, including Mr Lindsay. It does not appear that an additional claim was lodged in relation to the final incident of damage and removal. No point seems to have been taken about this.
On 15 January 2003 the loss adjuster, Mr Stevens, furnished a further report to CGU, again marked to the attention of Karen Glazbrook. Having referred to various sources, including the contract for sale of the property, correspondence from Crown Lands SA and a copy of an invoice issued by Ms Cummings to Mr Rogers for the sale of the jetty and pump, Mr Stevens expressed the view that “it is not the intention of the policy to respond to a claim of this nature”.
On 4 February 2003, the claims officer, Ms Glazbrook, wrote to the appellants advising that the claim for indemnity would be rejected. She said:
We have now received the assessor’s report outlining the circumstances surrounding your claim. The information provided to us details the situation that you are in regarding legal ownership of the jetty and the pump. Although they have been taken from you, they have not actually been stolen.
The Country Classic Insurance policy that you hold with us covers loss or damage following an event that is listed in your policy booklet such as fire, burglary or water damage. There is no listed event that will cover a contractual argument of this type.
On 19 February 2003 CGU issued a Statement of Account to the appellants. Although the Grundfos pump was specified under the heading “Interest/Property Insured; Section 2 – Farm Property”, the jetty was not mentioned under that or any other of the categories set out.
In a letter dated 26 February 2003, Ms Glazebrook attempted to further clarify the situation. She advised that “the jetty was in fact covered by your insurance policy”. She went on to say that no defined event, as contemplated by the policy, had occurred. She wrote:
For a claim to be accepted by an insurer one of the defined events listed in your policy must have occurred which resulted in loss or damage to property (ie. fire, burglary). In this instance, and whilst we do sympathise with your situation, no event which is covered by the policy has occurred.
Presumably she was referring to the lack of any listed event, such as theft. I might say that the reason given for rejecting the claim could have been more clearly stated. It is unnecessary to debate the nice question as to whether something may be stolen from a person who does not own it. There is much to be said for the view that, at common law, larceny is an offence against possession, rather than ownership. But, as explained earlier, the position of the respondents at trial, if not earlier, is that the appellants did not own and were not liable for the property, as required by the policy. This was, not because the jetty was on Crown land and not because the appellants were not, until later, the licensees of that land, but because one or more others had superior title to it.
As a matter of completeness I mention that on 5 March 2004 the Minister for Education and Conservation issued a licence to the appellants in relation to the relevant Crown land, the commencement date of which was 1 February 2004.
Analysis
Although the evidence did not clearly establish as much, I am prepared to assume for the purposes of this decision that at all relevant times the respondents knew that the jetty was on Crown land, and, that, at least from March 2002, the respondents knew that there was a dispute over ownership of it, though not one in which the appellants gave any credence to the competing claim.
It is clear from undisputed evidence that on several occasions, orally (including 23 March, 31 July, and 19 December 2002) and in writing (endorsement schedule 8 August 2002 and letter dated 2 January 2003) the appellants were informed that the jetty was “covered under the domestic property (Section 1) section of the policy”, or simply “covered” under their policy.
To found an estoppel by representation, there must be a clear and unambiguous statement of that which the representor is said to be estopped from denying. Mr Lindsay was asked a question like: “Are we covered?” It was reasonable to interpret that question as meaning: “Are these insured items?” His response is to be assessed as it would reasonably be understood, in its proper context, by the person to whom it is said. In my view, Mr Lindsay’s statement is to be understood only as acknowledging that the jetty will be treated as a domestic building for the purposes of the contract. I consider it would be unreasonable to interpret the statement as binding CGU to a position where an important term of the policy was to be abandoned and CGU was to be obliged to indemnify for damage, without regard to the appellants’ ability to prove that they owned or were liable for the jetty.
The appellants emphasise that the oral and written assurances were given in the context of particular events, namely certain others claiming the right to remove the jetty, and that this colours the assessment of those assurances. In my mind, that this is true does not change the result of the objective assessment of the statements. They were made in a context where, over a long period, the appellants were intent on obtaining confirmation that their policy was of such a nature as to respond to damage to the jetty. There was never any discourse between Mr Lindsay and the appellants as to the genuineness or validity of the claims of Balnaves and Rogers. Ms Davis never had doubt that she and Mr Morcombe owned the jetty. Ms Davis never sought any assurance from Mr Lindsay to the effect that Balnaves’ and Rogers’ claims could not affect the right to recover under the policy. The controversy about ownership of the jetty was simply not discussed. There is no reason to interpret Mr Lindsay’s assurances as addressing, let alone clearly making a concession about, the policy’s requirement for ownership.
Referring back to the earlier discussion of estoppel by convention, the appellants must demonstrate that, by this conduct, CGU manifested an agreement or preparedness to proceed on the basis that the appellants “own[ed] or [were] liable for” the jetty, in terms of the policy. There was no express acceptance that the appellants owned the jetty within the meaning of the policy. Is it to be implied? Again, the task of assessing the statements and context in which they were made is to be carried out objectively.
I consider that the appellants’ claims to the benefit of estoppel by convention are weaker. In plain terms, there was no conventional understanding about ownership. At best for the appellants, Mr Lindsay’s statements could be interpreted as accepting, for the purposes of the contract, that the fact that the jetty was on Crown land was not, of itself, something that precluded a right to indemnity under the policy or (more strongly) that the domestic buildings and contents policy was suitable as a vehicle by which to insure the jetty.
Putting it differently, I can see no evidence of Mr Lindsay adopting any assumption at all on the question of ownership of the jetty. One could theorise that he might have taken at face value the assertions of the appellants that they owned the jetty, but it is quite another matter to interpret his statements as accepting and adopting the appellants’ several assertions as a basis or platform for ongoing contractual relations.
In my view, the argument that the respondents are estopped from denying ownership fails, whether cast as estoppel by representation, or by convention.
Appellants’ claim of breach of duty by BankSA Insurance
At trial, the appellants claimed that BankSA Insurance acted in breach of s 16 Insurance (Agents & Brokers) Act 1984 (Cth) by failing to advise the appellants that it was an agent for the first respondent, as opposed to an insurance broker. Mr Morcombe’s evidence was that, had he been aware of that, he would have sought independent advice as to insurance on the property and that accordingly, he lost the chance to secure effective insurance on the jetty and pump.
The judge found that, even if there were a breach of such duty, nothing flowed from it, because evidence which the judge accepted proved that no insurer would have “provided a policy extending cover to the jetty and pump where damage to or removal of same was caused by parties who asserted ownership in respect of that property”. That was a finding open to the judge on the basis of concessions made in the cross-examination of Mr Parnell, a former insurance broker and underwriter called by the plaintiffs as an expert on insurance. In essence, Mr Parnell conceded that, had full disclosure been made of all aspects of the competing claims to ownership of the jetty, then it was very likely, if not inevitable, that a condition would have been placed on any insurance obtained, excluding damage resulting from the actions of Rogers or Balnaves.
However, there was no proved breach of duty, because the judge found that the respondents’ understanding of what the appellants sought by way of insurance cover was a reasonable one and further found that “BankSA Insurance therefore effected the insurance it was instructed to procure”.
Trade Practices Act and misleading conduct
The appellants alleged that CGU breached s 52 of the Trade Practices Act 1974 (Cth) in that Mr Lindsay’s statements to the effect that the jetty was “covered” were misleading and induced the appellants to believe that indemnity would be granted irrespective of the terms of the policy. In my view this contention fails for the same reasons as the other arguments already dealt with. The representations were not misleading and did not induce such a belief in the appellants.
Conclusion
The appellants have not made good any of the grounds of appeal. The appeal must be dismissed.
LAYTON J: I agree that the appeal should be dismissed and for the reasons given by Vanstone J.

[2009] SASC 220

30 July 2009

Key Legal Topics

Areas of Law

Insurance Law

Legal Concepts

Contract Formation

Breach of Contract

Compensatory Damages

Estoppel by Convention