Electrona Carbide Industries Pty Ltd & Attorney General for the State of Tasmania v Baillieu Bowring (Tas) Pty Ltd

[1987] TASSC 55

TASSC A51/1987

CITATION: Electrona Carbide Industries Pty Ltd & Attorney General for the State of Tasmania v Baillieu Bowring (Tas) Pty Ltd  [1987] TASSC 55; A51/1987

PARTIES:  ELECTRONA CARBIDE INDUSTRIES PTY LTD

ATTORNEY-GENERAL FOR THE STATE OF TASMANIA

v
  BAILLIEU BOWRING (TAS) PTY LTD

TITLE OF COURT:  APPELLATE
JURISDICTION:  SUPREME COURT OF TASMANIA (FULL COURT)
FILE NO/S:  FCA 143/1987
DELIVERED ON:  16 October 1987
JUDGMENT OF:  Neasey, Cosgrove and Cox JJ

Judgment Number:  A51/1987
Number of paragraphs:  101

Serial No. 51/1987
List "A"
File No. FCA 143/1986

ELECTRONA CARBIDE INDUSTRIES PTY. LTD. & ATTORNEY GENERAL FOR THE STATE OF TASMANIA v. BAILLIEU BOWRING (TAS.) PTY. LTD.

REASONS FOR JUDGMENT

FULL COURT
NEASEY J
 COSGROVE J
COX J

16 October 1987

ORDER OF THE COURT:

Appeal dismissed.

Serial No. 51/1987
List "A"
File No. FCA 143/1986

ELECTRONA CARBIDE INDUSTRIES PTY. LTD. & ATTORNEY GENERAL FOR THE STATE OF TASMANIA v. BAILLIEU BOWRING (TAS.) PTY. LTD.

REASONS FOR JUDGMENT - FULL COURT:

NEASEY J
16 October 1987

1           Electrona Carbide Industries Pty. Ltd. ("Carbide") was until early 1981 a manufacturer of calcium carbide and acetylene carbon black at its premises at Electrona. In 1976 and 1977, Carbide had charged its undertaking and property by way of security for loans made to it by the Minister for Resources and Development, represented in these proceedings by the Attorney General ("the Crown"), and by the Australian and New Zealand Banking Group ("the Bank"). Under the two debentures held by the Crown, Carbide covenanted to insure its property subject to the debentures in the name of the Minister in an insurance office approved by the Minister in the full insurable value thereof, and to hand the policy or policies to the Minister when they came into its hands. Covenants of a generally similar nature were contained in the debenture held by the Bank. At all material times after 1976, the respondent ("Baillieu") was insurance broker for Carbide and arranged substantially all its insurances. The Crown took no part in instructions for or negotiations in regard to these insurances.

2           In October 1979, Baillieu, acting as broker for Carbide, and perhaps for the Crown and the Bank also (that is one of the disputed issues), arranged an Industrial Special Risks ("ISR.") policy in which Carbide and the Crown and the Bank were named as insured parties, and five insurance companies were named as insurers for specified percentages of the total risk, up to a combined total of $13,000,000. Each insurer was individually liable for its proportion of the risk. The period covered by the policy was from 7 September 1979 to 30 June 1980. The policy contained a cancellation clause which enabled either insured or insurers to terminate the policy at any time by tendering notice in writing to the other party, such notice to be effective at the end of 60 days from the date of receipt of the notice.

3           From the time of the institution of that policy a number of claims were made under it, the insurers apparently became dissatisfied with the risk, and by letter of 7 March 1980 the first of those companies sent a notice of cancellation to Carbide. Thereafter, another of them sent a notice to Carbide by letter dated 12 March 1980, and then, after a meeting of all the insurers, the underwriting manager of the company which had the greatest percentage of the risk, Tasmanian Government Insurance Office ("TGIO"), sent a letter to Carbide purportedly on behalf of all five insurers, giving notice of cancellation at the expiration of 60 days "unless the policy wordings are amended immediately" in certain specified ways. Baillieu, acting as broker for Carbide (whether or not for the Crown and the Bank also), and in close consultation with Carbide, disputed with the insurers that the notices of cancellation had been valid and effective, in that it was claimed that they had not been given in accordance with the terms of the cancellation clause.

4           Meanwhile, as the 60 day periods initiated by the various notices of cancellation were passing, Carbide and its broker considered the subject of additional or back–up insurance in case the policy should in fact become cancelled at the expiration of one or other of those periods. Baillieu's representative in Hobart, Mr Turner, was instructed by Carbide to test the market for the possibility of obtaining suitable alternative insurance, whilst at the same time Carbide was asserting to Mr Turner, and through him to the insurers, that the notices of cancellation had not been validly given. Mr Turner was in fact able to arrange alternative insurance with a new company, which it is sufficient to refer to here as "Preservatrice", and two of the existing insurers, "Tokio" and "Chamber of Manufacturers". All three of these required as a condition of entering into the new insurance policy, which was to extend from 4.00 p.m. on 5 May 1980 to 30 June 1980, that the old policy should be cancelled.

5           Preservatrice and the other two companies agreed to provide the new indemnity upon that and other conditions, but the risk to be covered was substantially less than was covered by the ISR policy. Discussions took place between Mr Turner and the local manager of Carbide and its Sydney managing director. Much of the contention in the present case related to the content of those discussions, but it was common ground that as an outcome, Mr Turner was instructed to and did accept the new insurance. However he also informed TGIO orally, and confirmed it by letter, to TGIO and to the other two companies not participating in the new insurance, that they would be "off risk" on the ISR policy from 4.00 p.m. on 5 May 1980. Carbide has always asserted that he had no instructions and no authority to do this, and the learned trial judge so found. It was common ground in the present action that no new policy was ever issued by the three companies, and it appears to have been at least tacitly agreed in the conduct of the present action, or at least it was not an issue, that none of the claims herein is covered by the new insurance.

6           One of the principal issues in these proceedings arose out of the appellants' claim that this communication made by Mr Turner, as a servant of Baillieu, to the insurers was made without authority from Carbide, and that his actions were therefore in breach of the brokerage agreement between Baillieu and Carbide. Nevertheless, the appellants claimed in this action, his communication had the effect of cancelling the policy as from 4.00 p.m. on 5 May 1980, because, even though he had no actual authority, he did have ostensible authority as Baillieu's agent to make it.

7           During the actual or alleged subsistence of the ISR policy, substantial damage occurred on various occasions at Carbide's plant at Electrona, and these events were claimed to come within the scope of the cover provided by that policy. The claims became the subject of dispute, and then litigation in two actions, one being that which gave rise to the present appeal. I shall refer to these two causes subsequently, wherever it is convenient, as "the first action", and "the present action".

8           The first action was commenced by Carbide against all five insurers on 22 October 1980. Later, the Attorney General joined in as a co–plaintiff. The statement of claim delivered therein, in its final form, pleaded the existence of the policy and relevant terms of it. It alleged various episodes of damage at Carbide's industrial premises, occurring on 27 October 1979, 7 February 1980, 26 February 1980, 8 March 1980, 3 April 1980, 29 May 1980, 7 and 9 days of May 1980, 20 June 1980, 25 June 1980 and 30 June 1980; all allegedly during the currency of the policy and causing damage and costs both direct and consequential covered by the risks insured. The plaintiffs alleged that the defendants were liable to indemnify them therefor, and had failed to do so.

9           The pleadings in the first action were an exhibit in the present (second) action. The defence set out therein appears to be undated, but some of its contents indicate that it was not delivered until some time in 1983. Counsel for the appellants (plaintiffs) at the trial, Mr Faulkner, in opening the present case told the learned trial judge that it was not until 1983, when the defence was delivered, that the defendant insurers (amongst many other points of defence) claimed for the first time that the policy had been cancelled on or about 5 May 1980, and that the present action was commenced after that claim was made.

10         The statement of claim in the present action alleged, inter alia, the following:–

(1)  that in breach of its duty as broker for Carbide and for the Crown, Baillieu purported to notify the insurers on or about 5 May 1980 that Carbide and the Crown had accepted cancellation of the policy, whereas they had not done so, but nevertheless such action on the part of Baillieu had the effect of cancelling the policy on or about that date;

(2)  that in so advising the insurers that they were "off risk" as aforesaid, and thereby effecting cancellation of the policy, Baillieu acted negligently as a broker, negligently in breach of its duties to Carbide and to the Crown pursuant to the brokerage contract, and contrary to their express instructions;

(3)  in consequence of these and other matters the underwriters refused to indemnify Carbide and the Crown for any of the claims relating to the incidents occurring between 5 May and 30 June 1980.

In answer to these allegations, Baillieu set up various defences, which included:–

(a)  it claimed that the insurers in the first action had indemnified the plaintiffs in respect of all the damage and losses claimed in the present action, by virtue of the fact that the plaintiffs had in the first action accepted a sum of $3,000,000 paid into court by the insurers in satisfaction of all claims made in that action, in consequence of which the plaintiffs were precluded from proceeding with the present action;

(b)   for a number of specified reasons, the damage and losses claimed were not covered by the policy;


(c)  the policy had been validly cancelled by each of the insurers who were defendants in the first action, by the service of one or more notices of cancellation; and

(d)  in any event, the plaintiffs had been fully compensated for the alleged losses by the amount accepted by them in the first action.

11         When the present action was instituted in September 1983, it must have been regarded as alternative to that brought against the insurers, in respect of losses which occurred between 5 May and 30 June 1980. That is so because the present action founds upon the proposition that the policy was cancelled on the first of those dates, whereas the first action, in relation to those losses, required the assertion that the policy remained on foot. It is also apparent, because the present action is founded partly upon them, that it was only after certain discussions took place on 3 September 1985, when all the claims in the first action were settled for the sum of $3,000,000, that the idea was conceived that it was nevertheless still possible to proceed with the present action.

12         Evidence as to those discussions was given by Mr A G Ogilvie, who was one of the solicitors for the insurers, and junior counsel with Dr Pannam for the trial of the first action. Mr Ogilvie was called as a witness in the present action by the appellants. It was sought to lead evidence from him of discussions between Dr Pannam and himself on the one side and Mr Faulkner and Mr Jackson, for the plaintiffs, on the other. Leading counsel for the respondent in the present action, Mr Gillard, objected at the trial to the admissibility of Mr Ogilvie's evidence. Protracted argument took place, and in the end it appears to have been agreed that the evidence would be heard de bene esse, which was done.

13         Mr Ogilvie said he thought there were three sets of discussions concerning settlement over a period of one or two weeks. Different amounts were discussed but no agreement reached. On 3 September 1985, the insurers paid into court a sum of $3,000,000, accompanied by a notice of payment which read:–

"Take notice that the defendant (sic) has paid into court $3,000,000.00 with a denial of liability, and says that that sum is enough to satisfy the plaintiffs' claims."

Mr Ogilvie said that on the morning of the 3rd, when the four were in the robing room, Mr Faulkner suggested that their respective clients should confer directly. DR Pannam and Mr Ogilvie declined, and then Dr Pannam said in effect, "We will tell you how we arrived at the $3,000,000. For the purposes of payment into court we have assumed that we lose every point except cancellation." He then read from a document containing a particularised list of claims. (By consent this Court was given a copy of it). There were ten claims, numbered 1, and then 4 through to 12. Claim number 9 on this sheet is the number 2 claim referred to by the learned trial judge in his reasons for judgment. For some reason, the claims numbered 8 and 9 were transposed on the sheet, so that they were out of chronological order. Number 8 related to the incident of 22 May, and number 9 to the incidents of 7 and 9 May. Mr Ogilvie went on to say that Dr Pannam had then stated in detail how the defendants arrived at the sum of $3,000,000, which, to state the matter shortly, he said was made up of the addition of claims 1, 4, 5, 6, 7, and 9. That is to say, the sum of $3,000,000 paid into court, according to Dr Pannam, was calculated substantially on the basis of adding the amounts claimed in respect of the incidents up to and including 7 and 9 May.

14         According to Mr Ogilvie's evidence, Dr Pannam went on to say that in their calculation they had excluded claims 8, 10, 11 and 12, on the basis that they occurred after the date upon which cancellation became effective, according to their view, which was 17 May, the date of expiration of the notice of cancellation written by TGIO on behalf of all the insurers. There were further discussions. Mr Faulkner asked for more, mentioning a figure of something over $4,000,000, but Dr Pannam said in effect, no, there will be no increase, and if you do not accept, any settlement after that will only be on the basis that we will deduct $10,000 for each day of trial. Mr Faulkner departed to consult his clients, and later he returned and accepted. A notice was filed by the plaintiffs, which read, "Take notice that the plaintiffs accept the sum of three million dollars ($3,000,000) paid by you into court in satisfaction of the claim in respect of which it is paid in".

15         The argument in the forefront of the respondent's case is that, in effect, the appellants' claims in the present action are not soundly based in law, in that Mr Ogilvie's evidence should be ruled inadmissible, which if it occurred would be fatal to the appellants; and in any event, the appellants' claims are subject to estoppel by application of the common law doctrine of election. The learned trial judge did not deal with these issues in his reasons for judgment, but they seem to me to be a convenient starting point in resolving the appeal.

16         The respondent's first submission is that Mr Ogilvie's evidence was led for the purpose of contradicting or varying the notice of payment into court and of acceptance, which offends the rule (stated in eg Phipson on Evidence, 13th edn., para. 38–05) that extrinsic evidence is in general inadmissible to contradict or vary judicial documents. One of the exceptions to that rule is that extrinsic evidence may in some cases be admitted to explain an ambiguity or uncertainty in a court record. Thus, in Preston v. Peeke 27 LJ QB. 424, a case relied on by the appellants, the question was whether damages had been recovered in an earlier action. The plaintiff, to prove the affirmative, produced the record in the earlier action, which showed that where there had been several counts on different causes of action, judgment had been entered generally on all. Evidence was received that the damages had in fact been given in respect of one count only. The Court held that the evidence was admissible, because it explained but did not contradict the record.

17         In the present case I doubt whether the record of payment in and of acceptance come within the rule at all, because they are not records of any judicial act or determination by the court, but simply documents filed by the parties pursuant to procedural rules. Moreover, under our Rules of Court they are in any event documents which are often likely to be uncertain and to need explanation. Our principal rule of court as to payment in is O24 r1, which provides:–

"PAYMENT INTO and OUT of COURT and TENDER

1–       (1)       Subject to sub–rule (2) of this rule, in any action, the defendant may, at any time after appearance and before the commencement of the trial upon notice to the plaintiff, pay into Court a sum of money in satisfaction of the claim or, where several causes of action are joined in one action, in satisfaction of one or more of the causes of action.

(2)       ............................................

............................................

(3)       ............................................

(a)       The notice shall be in accordance with form 3 in Part II of Appendix B; and
(b)       ..........................

(4)       ............................................

2–       (1)       Subject to rule 3, when money is paid into court under rule 1 of this Order, the plaintiff may, within 14 days of the receipt of the notice, or before the commencement of the trial, whichever is the earlier, accept the whole sum or any one or more of the sums specified in the notice in satisfaction of the claim, or in satisfaction of the cause or causes of action to which the sum or sums relate.

(2)       An acceptance under sub–rule (1) of this rule shall be by notice to the defendant in accordance with form 4 in Part II of Appendix B.

(3)       .............................................

(4)       .............................................

(5)       ............................................."

18         These rules are similar to the corresponding Victorian rules (O.22 rr. 1 and 2), but ours do not contain a sub–rule similar to O.22 r.1(4) in Victoria, which provides:–

"Specific causes of action. – Where money is paid into court under this Rule in satisfaction of one or more of several causes of action the notice of payment shall specify the cause or causes of action in respect of which payment is made and the sum paid in respect of each cause of action unless the court or a judge otherwise orders."

(See Williams, Practice of the Supreme Court of Victoria in its Civil Jurisdiction, vol 1 p1357). There is a similar rule in England – O22 r1 – see The Supreme Court Practice, 1985, p364. The purpose of such a rule is to avoid embarrassment where there are two or more causes of action and the relief claimed is cumulative – Graham v. Heinke & Co. Ltd. [1959] 1 QB 225; Williams, op cit, p1360, para 22.1.8.

19         The forms specified (in Tasmania) to be used in the case of payment in and acceptance, respectively, do not assist to clarify the meaning of O24 r1, and since it stands alone without the benefit of an additional rule such as the Victorian and English rules mentioned, it is never unlikely that notices of payment in and of acceptance will need explanation if a question arises as to their exact meaning. Under O24 r1, money may be paid in in satisfaction of "the claim", or in satisfaction of one or more of the causes of action where several are joined. In the first action, it might be considered there were a number of claims, or arguably only one claim; but there were several causes of action, since the claims were founded upon different episodes of alleged damage to plant and equipment, even though all claims were made in respect of alleged non–payment under the same insurance policy – see as to "causes of action", Read v. Brown, 22 QBD 128.

20         It would seem that under O24 r1, it is, prima facie, not in breach of the sub–rule to pay into court a lump sum in relation to "the claim", or all the claims, even where there are a number of causes of action; and so far as my knowledge goes, that has commonly been done without objection in this court. Furthermore, the notice of payment in and the notice of acceptance both complied with the relevant sub–rules. But where there is a global payment in in respect of several claims, if an issue arises it will always be a matter requiring explanation as to what "the claims" were at the time of payment in. In this case the money was paid in on the morning of trial, but a payment in may be made at any time after appearance and before the commencement of the trial, and the plaintiffs' subsisting claims might not uncommonly be varied by amendment, and the like, after payment in. Therefore, I incline to the view that the substance if not the whole of Mr Ogilvie's evidence was admissible to explain any relevant ambiguities relating to the payment in and acceptance.

21         However, these matters were not fully argued, and I do not find it necessary to express any final opinion upon this part of the respondents' argument. Instead, it is convenient to pass to the respondents' principal contention in this part of the case, expressed in the pleading that, "by reason of the foregoing, the plaintiffs having elected to accept and having received $3,000,000 in satisfaction of all their claims, are thereby precluded from proceeding with this action". The respondents thereby invoked the principle of election. For the purpose of considering that argument, I shall assume that all of Mr Ogilvie's evidence was admissible.

22         The common law doctrine of election is a concept whereby the law provides that where a person finds himself faced with a choice of taking one of two mutually contradictory, or "truly alternative", courses of action, and with knowledge of the facts pursues one to the point of obtaining a benefit under it, he will be deemed to have elected to abandon the other, and will be estopped from pursuing it. The expression, "you cannot approbate and reprobate", which comes from Scottish law, and its more homely English equivalent, "you may not blow hot and cold", are often used as touchstones of the principle, although Lord Esher, in Yarmouth v France (1887) 19 QBD 647, 653, long ago expressed his dislike of such maxims unless they are closely defined and delimited. This sentiment was referred to and affirmed by Lord Wright in Lissenden v CAV Bosch Ltd. [1940] AC 412 at p.435, and repeated in more recent times by Sir Raymond Evershed MR in Banque Des Marchands de Moscou (Koupetschesky) v Kindersley & Anor. [1951] 1 Ch. 112 at p119. The common law principle must be clearly distinguished from its counterpart in equity, which is mainly concerned with "issues arising under wills, and other instruments inter vivos" – per Viscount Maugham in Lissenden v CAV Bosch Ltd (supra) at pp. 417, 418. The expressions "approbate and reprobate" and "blow hot and cold" are equivalents, and may if properly applied be used in relation to either the common law or the equitable doctrine, even though neither maxim embodies any formal legal concept, according to Lord Atkin in the same case (supra) at p429.

23         The common law principle has been applied in various situations which differ widely in context – see Halsbury's Laws of England, 4th edn, paras 1508 and 1509, but ordinarily its application arises out of commercial relationships between two or three parties. Two–party relationships are more common in the reported cases, probably because it is in those that one of them is more likely to find himself confronted with two mutually exclusive courses of action available against the other. Examples are: as between a vendor and a purchaser, whether the vendor will choose to treat a contract of sale of property as rescinded by virtue of a failure or breach on the part of the purchaser, or will choose to affirm the contract – Tropical Traders Ltd v Goonan & Anor (1963–1964) 111 CLR 41; Sargent & Ors v AS. Developments Limited (1974) 131 CLR 634; as between insured and insurer, whether to affirm a contract of insurance or to avoid it for non–disclosure or other breach – Khoury & Anor v Government Insurance Office of New South Wales (1984) 58 ALJR 502; or whether, in relation to such a contract, to refuse a claim made out of time, or to waive that failure by exercising rights over the property involved, and the like – Craine v The Colonial Mutual Fire Insurance Co Ltd & Anor (1920) 28 CLR 305; as between banker and customer, where an order winding up a bank had been made, whether to claim that the winding–up order had not been properly made, or to affirm it by proving in the liquidation – Banque Des Marchands de Moscou (Koupetschesky) v Kindersley (supra); as between buyer and seller, in a contract for sale of goods, whether a buyer who has paid for undelivered goods should sue for damages for non–delivery, or for recovery back of the money paid, as on a claim for money had and received – cf S Kaprow & Co Limited v Maclelland & Co Limited [1948] 1 KB 618; and as between a bookmaker and a client against whom he has signed judgment, whether the client has approbated the judgment by obtaining a stay of execution under it, or whether he may nevertheless seek to set the judgment aside – Evans v Bartlam [1937] AC 473.

24         On the other hand, cases involving three parties, because of their nature, usually resolve into a question whether the party faced with election will pursue a course of action against one or other of the remaining two parties. Examples of this kind are Scarf v Jardine (1882) 7 AC 345, which is one of the classic cases in which the doctrine is expounded; Petersen v Maloney & Anor (1951) 84 CLR 91; Morel Bros & Co. Ltd. v Earl of Westmorland [1904] AC 11; Moore v Flanagan and Wife [1920] 1 KB 919; Clarkson Booker Ltd. v Andjel [1964] 2 KB 775; United Australia Limited v Barclays Bank Limited [1940] AC 1; and Verschures Creameries Ltd. v Hull & Netherlands Steamship Co [1921] 2 KB 608.

25         Whether the case involves two parties or three, the rules relating to common law election are the same. Basic to the doctrine is the proposition that its application does not depend upon the intention of the elector. As Kitto J said in Tropical Traders Ltd. v Goonan & Anor (supra) at p55, "It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or the other". Nevertheless, though the doctrine is of course well established, certain obscurities remain – Sargent & Ors v ASL Developments Ltd (supra), per Stephen J at p641. It is accordingly desirable to deal with some further aspects of the operation of the principle which have particular relevance to the present case, which involves two principal parties to an insurance contract and the agent of one of them. First, there are some cases of this kind, which involve a principal contractor's right to pursue mutually exclusive courses of action in a court of law either against the other principal or an agent of one of them, but not both, in which it has been held that pursuit of a remedy to judgment against one is that which provides conclusive evidence of election. Examples are Petersen v Maloney & Anor (supra), and Morel Bros & Co Ltd v Earl of Westmorland (supra).

26         In Petersen v Maloney, the purchaser in a house sale paid the whole of the purchase money to the vendor's agent, who failed to pay it to the vendor. The vendor sued the purchaser for the purchase money, and joined the agent on a money count. The trial judge held, wrongly as it turned out, that the agent had the vendor's authority to receive the purchase money, and judgment was entered for the vendor against the agent, but for the purchaser against the vendor. The vendor appealed, seeking that the whole of the judgment against the agent should be set aside, and in lieu, judgment entered against the purchaser. It was held that there had been no final election, because the vendor had appealed against the judgment below, and was seeking to have it set aside and a judgment against the purchaser substituted for it. The court (Dixon, Fullagar and Kitto JJ.) contrasted the case with Morel Bros. & Co. Ltd. v. Earl of Westmorland (supra), in which final judgment had been entered against a wife, as agent for her husband with authority to pledge his credit, and such entry was held to constitute an irrevocable election. In the instant case, however, the judgment was under appeal, and therefore was not final. Their Honours said:–

"In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well–settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election." (Supra, at p.102).

27         It is well settled, however, that it is not necessary that a party sue to judgment before he may be held to have elected irrevocably. It is sufficient if a benefit has been obtained by following one of two mutually inconsistent courses of conduct (unless the benefit can be returned and the status quo re–established – eg S Kaprow & Co Ltd v Maclelland & Co Limited (supra)). This is shown by Scarf v Jardine (supra), in which one partner retired from a firm, and the other carried on business with a new partner. An old customer of the firm sold and delivered goods to the new partnership after the change but without notice of it. After he did receive notice, he continued to supply the firm. He then sued the new firm, but his action was stopped by the new partners going into liquidation. He thereupon proved in the bankruptcy, and his proof was admitted but his debt not satisfied, and thereafter he sued the retired partner. It was held that the retired partner, not having notified the plaintiff of his retirement, would have been liable by estoppel, and that the new partners were liable on the facts; but that the plaintiff was debarred by election from suing the retired partner. Lord Blackburn treated the fact of suing the new partners as an unequivocal act for the purpose of election (ibid, at p361). (The respondent Jardine was the plaintiff who had sold goods to the partners. Scarf was the old partner with Rogers. Scarf retired, and Beech joined Rogers). Lord Blackburn said (supra, at p362), after referring to the fact that the plaintiff had received a payment from the new partners:–

"But then the plaintiff goes on and issues a writ against Rogers & Beech – he sues Beech. I am unable to conceive a more unequivocal act; he has thereby adopted Beech as his debtor at that time. I do not think its going to judgment or not going to judgment is material. How he could possibly do a more unequivocal act than issuing a writ against Rogers & Beech I cannot imagine."

28         Secondly, whether there has been election or not is a question of fact – Scarf v Jardine (supra), per Lord Blackburn at pp361–2; Evans v Bartlam (supra) per Lord Wright at p485; Clarkson Booker Ltd v Andjel (supra) per Willmer L.J. at p792 and Russell LJ at p795. The third case usefully illustrates both this and the previous point. The plaintiffs supplied goods and services to the defendant as principal, though unknown to the plaintiff the defendant had been acting as agent for P Ltd. The plaintiff issued and served a writ against P Ltd., but then found that company to be about to go into liquidation. Accordingly, it did not proceed further against P Ltd., but issued a writ against the defendant, and obtained judgment. The defendant appealed, contending that the plaintiff was bound by election, having regard to its original proceedings. It was held that the plaintiff had not elected by the mere institution of proceedings (cf Con–Stan Industries of Australia Pty. Ltd. v Norwich Winterthur Insurance (Australia) Ltd (1985–86) 160 CLR 226, at pp243–4). Willmer LJ discussed at length the principles applicable, and said that whether or not there has been election is a question of fact, and that in order to establish it there must be shown to have been "a truly unequivocal act taken with full knowledge of the relevant facts" – see at pp792–793. Russell LJ agreed that it is a question of fact whether there has been an election, and said:–

"The position is that in every case the external acts of the plaintiff must lead to the conclusion, as a matter of fact, that the plaintiff has settled to a choice involving abandonment of his option to enforce his right against one party. I have no doubt that in a given case this may be shown without his proceeding to the length of obtaining a judgment; indeed, if judgment is obtained against either principal or agent, this is more than election, though frequently referred to as election: the judgment supersedes the contractual right against either, and if obtained against the agent precludes action against the principal even if the plaintiff was ignorant of his existence and therefore unable to elect".

29         Further authority for the proposition that it is sufficient to ground election if the party concerned takes a benefit from his inconsistent conduct is Banque Des Marchands de Moscou (Koupetschesky) v Kindersley & Anor (supra), and Evans v Bartlam (supra), per Lord Atkin at p479. See also Spencer Bower and Turner, 3rd edn, para 336.

30         A final point which is worth making is this. The well known text work, Spencer Bower and Turner on The Law Relating to Estoppel by Representation, in the 3rd edn. co–authored by Sir Alexander Turner, at paras 333 ff, adheres to the view that "an election becomes conclusive and irrevocable only when the other party to the transaction has been notified of the election, and when that party on the faith of such notification has altered his position, in a way which would make it unjust for the elector to be allowed to resile". The learned co–author, however, then qualifies that proposition by adding the following statement:–

"But though not yet irrevocable, an election may yet be effective as between the parties, even though it has not been communicated by the elector to the other party, in a case where, though that other party has not been prejudiced, the elector has accepted a benefit which could be his only because he has followed one course rather than the other. In such a case he will not be allowed to reverse his choice and to follow the second course available, while he retains the benefit which could be his only if he followed the first course. The principle which brings about this result is sometimes stated as declaring that a man may not simultaneously approbate and reprobate, or may not 'blow hot and cold'" – ibid, at para 336, p360.

31         In fact, there are many cases (the present being one) in which communication to another party who will be affected by the election, and some consequent detriment experienced by the latter, are not appropriate to the factual context. Such cases are likely to be those in which three parties are involved, and alternative and mutually exclusive courses of action are open to one of them against either of the other two, but where the elector, having acted in circumstances amounting to election, is unlikely to find it necessary to do more than pursue the chosen course of action.

32         The case of Verschures Creameries Ltd v Hull and Netherland Steamship Co (supra) is of this kind. There, some goods were consigned for delivery to a customer in Manchester, but on the way, when they had arrived at Hull, the owners instructed the forwarding agents not to deliver them to the customer in Manchester. Nevertheless, the agents did forward the goods to Manchester, contrary to their instructions. The owners then sued the customer and recovered judgment for goods sold and delivered, and upon failing to recover under the judgment, took proceedings in bankruptcy. It was held that they could not thereafter sue the forwarding agents for negligence and breach of duty. Scrutton LJ said:–

"Certain goods were delivered to a wrong consignee. The owners of the goods might have sued for conversion. They did not do this. They 'assumpsit bring and godlike, waive the tort'. They did not sue for the value of the goods; they sued for the contract price alleging a contract to sell and a right delivery under it, and they recovered judgment on that basis. Now they propose to turn round and sue their agents on the basis of a misdelivery; … It is not easy to see why this act of the owners should enure to the benefit of the agents, who were no parties to the action for goods sold and delivered, and who have in no way altered their position in consequence of any election involved in bringing that action, but the principle is well established. A plaintiff is not permitted to 'approbate and reprobate'. ... A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn around and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction."

Bankes L.J. and Atkin L.J. (as he then was) gave judgments to the same effect, but did not deal with the specific point concerning non–communication to and absence of detriment to the agents.

33         The present appeal involves a similar kind of situation, in that if the action of the appellants in suing the insurers to the point of settlement involves a binding election not to continue the present proceedings, one would nevertheless not expect any communication to the broker, or detriment incurred by the broker as a result, to play any necessary part in the fact of election. The present law, binding for our purposes on this point, would seem to have been stated by Mason, Brennan, Deane and Dawson JJ in a joint judgment in Khoury & Anor. v Government Insurance Office of New South Wales (supra), at p506, in the following terms:–

"While actual 'prejudice to the other side' may be relevant, particularly in determining whether an election should be imputed to a person who is not shown to have made a conscious decision to elect; see, for example Sargent at 656; Tropical Traders at 55; Champtaloup v Thomas [1976] 2 NSWLR 264 at 274–275 and Scarf v Jardine (1882) 7 AC 345 at 360; it is not necessary that such prejudice be demonstrated to establish a completed election between the right to affirm and the right to avoid a contract. An election, unlike estoppel, is concerned with what a person does and not what he causes the other party to do: see, for example, Craine at 326; per Rich, Dixon and Evatt JJ in Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR. 723 at 733–735. At the latest, it is complete or 'final' when made and 'communicated' to the other party: see Newbon at 733."

This statement relates the importance of communication and detriment to irrevocability of election, rather than to its effectiveness by operation of law.

34         In the present appeal, the appellants do not dispute the content of the law relating to election, as argued by the respondents. They agree that the principle of election would apply to them if it could be shown that they had already succeeded in obtaining a benefit from the insurers in respect of the claims which they are presently making against the broker. Leading counsel for the appellants, Mr Merralls, expressed the matter in this way (transcript of argument, p.621):–

"This isn't the case of alternative claims. We would have to fail, and we would have to be seen to have failed against the underwriters in order to have any right of action at all against the brokers. The plaintiff was not called upon to elect whether to sue the broker or the insurers."

Thus, the appellants' case has been rested squarely upon the proposition that in the resolution of their case against the insurers they obtained no payment or benefit in respect of the particular causes of action which they are now pursuing against the broker. If they are wrong about that, they have no case. They seek support for their argument from three authorities.

35         The first is Kohnke v Karger [1951] 2 KB 670. That was a case of a motor accident occurring in France, the plaintiff being a passenger in the defendant's motor car when it was involved in a collision with a lorry. There were proceedings in France, which in the end resulted in an apportionment of responsibility for the accident as two thirds to the lorry driver and one third to the defendant, and an award of damages to the plaintiff. The plaintiff thereupon sued the defendant in England. The defendant denied negligence, and contended that as the plaintiff had obtained a judgment in France against the lorry driver, and had received a payment under the judgment, she could not now recover damages in England against the defendant. Lynskey J stated the question before him as being "..... whether, where there are separate causes of action against different defendants for the same damage, a judgment obtained against one of them in a foreign court which has been satisfied is a bar to proceedings against the other for the same damnum in the courts of this country" – (supra) at p676. His Lordship said that if he were satisfied that the amount recovered by the plaintiff from the lorry driver fully compensated her for her damage, her claim would be dismissed because she could not in law recover double satisfaction. But as it was, he found that the amount she had recovered in France was not sufficient to compensate her fully, and he further held that in the case before him he was not bound by the assessment of her damages made by the French court. He thereupon awarded the plaintiff an additional sum, representing the amount of her damage as assessed by him, in so far as it exceeded the amount she had recovered in France. I cannot see that the case assists the appellants in any issue arising in the present appeal.

36         The next case relied upon is Townsend & Anor v Stone, Toms and Partners (A Firm), reported in 27 Building Law Reports, 26. That was a case in which the plaintiff had a farmhouse repaired, employing an architect and a builder. Being dissatisfied with the work, he sued both. The claim against the architect was for damages in respect of defective design, failure to supervise properly, and the like. The claim against the builder was for defective workmanship, disturbance and loss of amenity, and return of moneys allegedly overpaid. Both claims were pursued concurrently, and they overlapped to some extent. The builder paid a sum into court and the plaintiff accepted it, but continued his action against the architect. The judge assessed the architect's liability, after taking into account the amount paid into court and taken out by the builder, in so far as that amount was paid in respect of damages also claimed against the architect. The plaintiff appealed, one ground being that the judge had incorrectly assessed damages against the architect.

37         The court of appeal held that the plaintiff had independent and separate causes of action against both the architect and the builder, but could only recover once the total damage suffered. The case as reported is concerned wholly with the question of double recovery, and whether the trial judge had assessed the damages correctly so as to avoid any double recovery. As with Kohnke v. Karger (supra), the plaintiff's claims were not mutually exclusive or contradictory as between the two parties sued, and no issue of election arose.

38         Thirdly, the appellants relied upon Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322. The facts were complex, but the substance was that a Swiss firm of wool buyers had been carrying on business as wool brokers in Sydney and other Australian capitals. A principal part of its business was to trade in wool futures, both as a broker and on its own account. Some of the senior employees of the firm had a strictly limited authority to engage in such trading as agents for the firm, but they greatly exceeded their authority and involved the firm in substantial losses. They also caused other losses to their employer by failing in their duty to obtain certain advances of money from clients on whose behalf they traded. A principal of the firm came to Australia to make an investigation, and as a result of that the firm sued its Sydney auditors for failure to carry out the audit contract with care and skill. Sheppard J., gave judgment in favour of the plaintiffs for a substantial sum. The defendants appealed.

39         Many issues were argued, including a question whether the trial judge had properly assessed damages. The appellants relied upon part of a long judgment in the Court of Appeal by Samuels JA which dealt with this question of assessment. The issue arose in this way. The Swiss principal of the firm, as a result of his investigation, decided that the bankers of the firm were also negligent, in addition to the auditors, in that the bankers had failed to report to it certain aspects of the operation of its bank accounts, which in a proper exercise of their duties they would have done. The claim was that if the bank had properly performed its duties, the firm would have been notified of the unauthorised trading much earlier, and would thus have avoided substantial losses. The evidence showed that the bank had made an ex gratia offer, which after some negotiation was accepted. The defendant auditors claimed in the action that the trial judge should have deducted the sum paid by the bank, since it was paid in respect of some of the same losses as were claimed against the auditors. The trial judge had declined to do so. Samuels J.A. set out a number of reasons why the trial judge had been correct in holding that the claims for which the bank had paid monetary damage were not identifiable with any specific claims made by the plaintiffs against the defendant auditors. Again, it does not seem to me that this case assists the appellants' argument.

40         That leaves the position as it was; that is, the issue is whether the appellants received monetary benefit from the insurers in respect of any of the claims which they have pursued against the broker. In my opinion, it is perfectly clear that they did. It was not a case of a settlement constituted by the payment into court and the acceptance and receipt of that payment (though even if it were the result would be the same – cf Beadon v Capital Syndicate (Limited) and Ors 58 TLR. 427; A Martin French v Kingswood Hill Ltd [1961] 1 QB 96). The payment in and acceptance were ancillary to an actual settlement arrived at after oral discussions between the parties. The payment in was merely an incident, a technical move, so to speak, in the conduct of those negotiations; and the acceptance and taking out of the money was a convenient way of concluding the settlement. The only reasonable conclusion to be drawn as a result of Mr Ogilvie's evidence, supplemented by the fact of the payment in and acceptance, is that the parties made an agreement whereby the appellants accepted $3,000,000 in full accord and satisfaction of all their claims against the insurers. There is no substance in the appellants' contention that they were in fact paid only in respect of claims 1, 4, 5, 6, 7, and 9; leaving them free to pursue claims numbered 8, 10, 11, and 12 in the present action. The arguments advanced by Dr Pannam for the purpose of persuading the appellants to accept the relevant sum in full settlement of all their claims were no more than negotiations on the way to reaching the settlement, and can in no way affect the terms of the concluded agreement. It cannot be said that any severable part of the sum accepted was referable to any specific claim. Two things cannot be gainsaid, however. They are:–

(1) The appellants did receive a very substantial financial benefit in respect of all of their claims, including those pursued in this action, although no specific amount can be allocated as having been received in respect of any one claim.

(2) There is no basis for the appellants' contention that they were paid $3,000,000 in respect of the claims other than 8, 10, 11 and 12. Nothing in Mr Ogilvie's evidence substantiates that proposition. Dr Pannam's statements that the amount offered was calculated upon a particular basis, assessing all the risks and probabilities involved in proceeding with the action, does nothing to substantiate the appellants' claim.

41         Thus, the effect is that the appellants have already received a substantial financial benefit on the basis that the insurance policy remained in existence and covering the relevant risks, from and including 5 May 1980 to 30 June 1980; whereas they seek to claim in the present proceedings damages under some of the same heads of claim upon the basis that the policy was effectively cancelled by the actions of the broker as from 4.00 pm on 5 May 1980, or thereabouts. To make such a claim is to approbate and reprobate, and brings into play the principle of common law election, so as to bar the appellants' action in the present proceedings. This is a case in which the appellants had a choice of pursuing alternative and mutually exclusive lines of action in seeking a legal remedy against either of two parties. In that respect it falls into a category similar to Banque Des Marchands de Moscou (Koupetschesky) v Kindersley & Anor (supra) and Verschures Creameries Ltd. v Hull and Netherlands Steamship Co (supra).

42         None of the matters I have dealt with so far concerns any disputed question of fact in which credibility is involved, and the conclusion I have reached is of a kind open to an appellate court, pursuant to the principles stated in Warren v Coombes & Anor (1979) 142 CLR 531.

43         This result is sufficient to dispose of the appeal, but the length, complexity and expense of the action so far have been such as to make it desirable that an opinion should be expressed upon the other main issue argued in the appeal. This is, whether the learned trial judge was right in holding that Baillieu had no ostensible authority from Carbide or the Crown to take any action to bring about cancellation of the policy as at 5 May 1980, or at any material time.

44         I have had the advantage of reading in draft form the reasons for judgment of Cosgrove J, and I agree with and adopt the statement of facts which his Honour has made therein. Therefore, in dealing with this part of the appeal, I need only refer to additional facts where necessary.

45         The appellants had some difficulty at the trial in delineating precisely how they were claiming that the broker's action in telling the relevant insurers that they were "off risk" had the effect of cancelling the policy. The final form in which they pleaded came down to a proposition that the broker's action waived compliance with the formal requirements of the policy regarding notice of cancellation by the insurers, "and thereby effected cancellation of the policy as from 4.00 p.m. on 5th May 1980". There were obvious difficulties about that contention, and the appellants were not disposed to adhere to it entirely in argument, either at the trial or on appeal. Mr Merralls argued in substance, that, while the appellants continued to rely upon the waiver argument, they contended alternatively that the broker's communication amounted to an offer to the insurers to put an end to the policy at the stipulated time, and that the insurers accepted the offer (evidenced by notifying the cancellation in their books) without signifying acceptance to the broker. Therefore, it was argued, a concluded agreement binding the insured had been made, notwithstanding the absence of communication – Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. One of the respondents' submissions on appeal was that the appellants, not having put this second argument at the trial, should be held on appeal to their argument based upon waiver. Without examining this issue in detail, I say merely that the arguments involving questions of law at the trial ranged beyond the strict bounds of the pleadings, without objection on either side, and I do not think that this contention of the respondents should succeed.

46         The learned trial judge in his reasons for judgment did not make any specific finding as to the legal effect of the broker's communication that the insurers were "off risk", but he dealt with the matter, if I read the judgment correctly, upon the assumed or hypothetical basis that the broker's communication would have effected cancellation of the policy if he had authority, express or ostensible, to bind his principal in making it. His Honour thereupon decided the case upon the basis that the broker had no such authority, express or ostensible, and therefore cancellation had not been effected. The principal ground of appeal is that the finding of no ostensible authority was wrong.

47         In examining this question, it appears to me to be essential as a first step to decide what the factual substance and legal effect were of the communication made to the broker. In doing so, I take it to be a matter of elementary understanding that in an insurance contract of this kind, the policy could only be terminated contractually by unilateral action on the part of either party pursuant to a term in the contract or policy containing a power to do so (as there was in this case), or by a fresh agreement between the contracting parties – see eg.Williston on Contracts, 3rd edn, vol. 7, Contracts of Insurance, para 920, pp607–615.

48         When one examines Mr Turner's letter of 5 May 1980, written to TGIO and the other insurers who were not continuing under the new policy, and his subsequent letter of 9 May, in which he endeavoured to cancel the effect of the first letter, it seems to me that the reasonable and probable conclusion is that he did not intend to, and did not, convey any offer to the insurers, nor did he intend to make any suggestion of waiver. The first letter said, in substance, "We wish to confirm our telephone conversation ...... in which we advised that (your company) is off risk on the above policy as at 4.00 p.m. on the 5th May 1980". The second letter said, in the relevant part, "We refer to our letter dated the 5th May 1980, in which we thought we acted correctly in informing you that you were to go off risk on the above policy on that date at 4.00 p.m". The letter of 5 May constituted, in my opinion, a unilateral representation made on behalf of his principals.

49         When these letters are examined against the background of the course of dealing which had occurred between the insured, the broker and the insurers since 1979, and particularly since the commencement of the making of claims under the policy, I have no doubt that the letter of 5 May was intended to do no more than make a communication to the insurers in accordance with what Mr Turner thought were his principals' instructions. In my opinion, the shorthand statement to the insurers, "You are off risk", in its full meaning intended to convey to the insurers a representation along the following lines, "I wish to inform you on behalf of my principals that as from 4.00 pm on 5th May 1980 they will regard the above policy as being no longer in force and effect so as to cover the insured risk, and will make no further claims under it in respect of any event occurring after that time. You are free to proceed upon that understanding". That is to say, it was a representation, made on behalf of his principals and not purporting to be in any way a communication based upon a decision of his own, that as from the stipulated time they would treat the policy as at an end. It was a representation which, if the insurers accepted it and acted upon it to their detriment, and if it was given with the actual or ostensible authority of the insured, would bind them and estop them from departing from it. (I have used the word "principals" without having dealt with yet the question whether there was one or were two).

50         I think it is clear from the evidence of Mr Eaton of TGIO., properly understood, that this is how he accepted the representation, though not unnaturally he did not appreciate correctly its legal effect. Mr Eaton made it completely clear in cross–examination that when Mr Turner told him that his company was off risk, he had no doubt that Mr Turner was acting as agent and broker for the insurers, and that he had their authority to convey that information to him. He also made it clear that he accepted the communication as being effective to cancel the policy. The fact that he accepted the representation as amounting to cancellation does not, of course, affect its true legal effect. There was no other evidence on this aspect comparable with Mr Eaton's, but his expressed view can be taken for present purposes as being probably representative of that which all the insurer representatives held. There is evidence from some of the others that after the communication was received they had entries made in their books noting the cancellation.

51         That which I understand to be the true interpretation of Mr Turner's communication was not pleaded, and of course was not the subject of appeal. However, since the decision under appeal asserted in substance that the broker had no ostensible authority to tell the insurers they were "off risk", I think I should express an opinion on that question in the light of what I have concluded was the true effect of the communication. Whether or not the broker had ostensible authority to make it depends upon the nature of the tripartite relationship between Carbide, Baillieu, and the insurers. It resolves into a question whether that relationship was such that the insurers were entitled to believe and act upon the proposition that the appellants had held Baillieu out as their agent and broker with authority to make on their behalf a representation of that kind.

52         As to the applicable rules of the law of contract governing ostensible authority of an agent, I find it necessary because of my conclusion as to the nature of Mr Turner's communication, to make only one or two brief citations. Bowstead on Agency, 15th edn, at p284, article 76, says, "Where a person, by words or conduct, represents or permits it to be represented that another person has authority to act on his behalf, he is bound by the acts of such other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no actual authority." Ostensible authority, when it is claimed to arise out of a course of conduct, must arise from what amounts to a representation made by the principal, not the agent. "To the relationship so created the agent is a stranger ..... It is irrelevant whether the agent had actual authority to enter into the contract." – Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd. [1964] 2 QB 480, per Diplock L. at p503.

53         In this case, there is, of course, no doubt that Baillieu had been acting as Carbide's broker since at least 1979, and had exercised a wide scope of authority as such broker, to the full knowledge of both the principal contracting parties. Baillieu had not only arranged the ISR. policy between the parties, but had acted as virtually the sole intermediary between Carbide and the insurers in respect of the claims made under the policy, including pressing those claims and negotiating about them, and seeking a resolution of them from the insurers.

54         Mr Turner as Baillieu's employee had, in relation to the claims, adopted a habit of sending on to T.G.I.O., as the lead underwriter, copies of his principals' letters as a method of explaining their views, instead of putting himself to the trouble of repeating them – for example, see Mr Eaton's evidence at pp190–199 of the transcript. Importantly, Mr Turner sent to TGIO. a copy of Carbide's letter to Baillieu dated 28 March 1980 (see p12), in which Carbide set out its unease about the attitude of the insurers to the claims, and raised with Baillieu the question of examining the prospects for obtaining substitute insurance. Mr Eaton, according to his evidence, was in the habit of distributing relevant correspondence to the other insurers, and so they were kept abreast of developments.

55         Mr Turner, for Baillieu, did test the market for substitute insurance, and was able to arrange it with a new company, Preservatrice, and with two of the existing insurers, on modified terms, but on the condition that the existing insurance was cancelled. I think it is a reasonable conclusion that the five existing insurers would be well aware that any insurance company which was contemplating the possibility of providing substitute insurance to Carbide in these circumstances would consider the question whether the existing policy should be cancelled, in order to avoid double insurance. It is also a reasonable conclusion that the existing insurers knew that Baillieu had or would have authority from Carbide to investigate the subject of new insurance, and was doing so, and was in fact successful in arranging new insurance. If they knew that, they would also know that in the course of these endeavours the possibility of cancelling or modifying the existing insurance must always have been a likely subject of discussion and negotiation. Two of the existing five insurers, with whom Baillieu arranged substitute insurance, obviously considered the question, and required that, in order to put the substitute insurance into operation, the old policy should be cancelled or rendered inoperative.

56         Thus, the overall nature of the tripartite relationship was such that, in my view, when Mr Turner made his communication to TGIO. and the remaining two insurers, on 5 May 1980, they had no reason to doubt and did not doubt that he was making a communication to them on behalf of his principals, and that he had authority to do so. Indeed, unless Mr Turner's evidence was positively disbelieved, of which there is no indication in the trial judge's reasons, even though his Honour did not accept the accuracy of that evidence, Mr Turner also believed, though mistakenly according to the finding, that he had that authority. Furthermore, the course of the negotiations in relation to the obtaining of substitute insurance was such that it would not have been surprising if Carbide had in fact authorised Mr Turner to go ahead with the new insurance on condition that the ISR. policy was cancelled or rendered inoperative. In result, I have no hesitation in concluding that Baillieu's employee Turner did have ostensible authority from Carbide to make his representation to the insurers in the letter of 5 May.

57         I have found it relatively easy to come to these conclusions because, on my interpretation of that representation, cancellation of the policy was not involved in it, and because, on that interpretation, Turner was doing no more than he had been doing over a substantial period; namely, acting as a post box and intermediary between the principal parties in addition to being an arranger and negotiator of new insurance. That is to say, in making his representation of 5 May, Mr Turner never intended to suggest he was communicating a decision of his own, but on the contrary was avowedly, and was understood to be, merely conveying his principals' instructions.

58         Further, I am of opinion that Baillieu, in making its communication to the insurers on 5 May 1980, was acting with the ostensible authority, not only of Carbide, but also of the Crown. Carbide, by virtue of the covenant contained in the Crown's debenture, had bound itself contractually to the Crown to insure and keep insured the property and assets which were subject to the debenture, and to keep up such insurance in the full insurable value. Thus Carbide had the Crown's authority to take all such steps as were reasonably necessary to discharge that obligation. In seeking substitute insurance after cancellation notices were received in respect of the existing policy, Carbide was not only serving its own interests but doing what its contractual obligation to the Crown under the covenant required it to do. It would be no surprise to any commercial entity reasonably well versed in obtaining and maintaining property insurance, which for present purposes both Carbide and the Crown should be inferred to be, that if the existing ISR. policy were to be replaced by substitute insurance, it would be likely to be upon some condition which avoided the subsistence of double insurance. If Carbide had in fact, in its own interests, authorised Baillieu to go ahead with the new insurance on that condition, it would have been a perfectly ordinary step, even though in this instance it thought its interests were better served by trying to keep the original policy on foot. The conclusion I reach is that the Crown, by the terms of its covenant, relied upon Carbide to take all necessary steps to maintain proper insurance; and Carbide, in holding out Baillieu as having ostensible authority to make the representation it made, was acting as an agent for the Crown for that purpose. The result is, that insofar as Baillieu was acting with the ostensible authority of Carbide, it was acting with the same authority from the Crown. On that basis, the argument made by the respondent based upon Deaves v CML (1978) 143 CLR 24 and Wasson v CAGA [1985] 2 NSWLR. 206 and Federation Insurance Ltd v Wasson, a decision handed down by the High Court of Australia on 5 August 1987, need not be further examined.

59         On the basis of the conclusions I have expressed on this part of the case so far, if the three relevant insurers had relied upon the representation made to them by Baillieu, on behalf of its principals, Carbide and the Crown, by the letter of 5 May 1980, and had suffered detriment thereby, they could have relied upon such representation and detriment to plead estoppel against the appellants in respect of any damage occurring after 5 May. Mr Gillard for the respondents argued that insofar as Mr Turner's communication of 5 May amounted to a representation to the insurers upon which they were entitled to rely, they did not in fact rely upon it, and suffered no detriment. I find this argument persuasive. The only step which the evidence shows any of the insurers took as a result of Mr Turner's letter was to make a note in their books as to the cancellation of the ISR policy. Four days later, or thereabouts, they received a further letter from Mr Turner countermanding the previous one, and stating in effect (as I infer) that he had mistaken his authority in sending it. The relevant witnesses agreed that it was a mere clerical matter to correct the entry in the respective books. None gave any evidence that he or his company took any other positive action in reliance upon Mr Turner's communication. Furthermore, as Cox J points out in his reasons for judgment, which I have had the advantage of reading in draft, the insurers in the first action never sought to rely upon any alleged representation made by Mr Turner, nor sought to have the appellants estopped thereby. It seems to me that there was no real, palpable, or positive detriment of any kind shown by the evidence, see Spencer Bower and Turner, op cit, para 111; and that accordingly, the appellants could not in appropriate circumstances have successfully pleaded an estoppel based upon Mr Turner's communication.

For these reasons, I would propose that the appeal be dismissed.

Serial No. 51/1987
List "A"
File No. FCA 143/1986

ELECTRONA CARBIDE INDUSTRIES PTY. LTD. & ATTORNEY GENERAL FOR THE STATE OF TASMANIA v. BAILLIEU BOWRING (TAS.) PTY. LTD.

REASONS FOR JUDGMENT - FULL COURT:

COSGROVE J
16 October 1987

60         The first named appellant (which I shall call "Carbide") was at all material times a manufacturer. The Attorney–General represents the Minister for Resources and Development. Following the usage of counsel, I shall refer to the him as "the Crown". The respondent (whom I shall refer to as "Baillieu") was the insurance broker for Carbide.

61         By debentures made in 1976 and 1977 Carbide charged its undertaking and property as security for the repayment of advances made by the Crown and advances made by the Australian and New Zealand Banking Group (hereafter called "the Bank") the repayment of which had been guaranteed by the Crown. At all material times the property of Carbide remained charged to the Bank and the Crown.

62         The Crown debentures contained this covenant:

"To insure and keep insured against loss or damage by fire storm and tempest such property and assets from time to time subject to this Debenture as are of an insurable nature in the name of the Minister in an insurance office approved by the Minister in the full insurable value thereof and to hand the policy or policies to the Minister when such policy or policies come into the hands of the company to be retained by the Minister during the currency of the security created by this Debenture and if the Company shall make default in keeping up such insurance the Minister may (but shall not be bound) insure the said property and assets in the full insurable value thereof. And until repayment thereof by the Company the payment thereof shall be a charge upon all and singular the property and assets intended to be mortgaged or charged by this Debenture."

63         The Bank debenture contained these clauses:

"6. The Mortgagor will insure and keep insured against loss or damage by fire and against such other risks as the Bank may require in the full insurable value in the name of the Bank with some insurance company to be approved of by the Bank such of the mortgaged premises as are of an insurable nature and will punctually pay all moneys necessary for effecting and keeping up such insurance and forthwith produce to the Bank every policy and receipt relating thereto.

26.  In the event of loss or damage by fire or otherwise the Bank alone shall have full power to make enforce and compromise every claim in respect of every insurance and to sue for recover receive and give discharges for all insurance moneys whether the policy be in the name of the Bank or the Mortgagor or both and whether the same shall or shall not cover other property as well as the mortgaged premises or part thereof And every such policy and the insurance moneys payable thereunder shall be held by the Bank as further security for the moneys hereby secured."

64         From 1976 until after the events which are the subject of this appeal the respondent placed all of Carbide's insurances. Neither the Crown or the Bank took any part in the negotiation of insurance. The Crown did not require the policies to be handed to the Minister. In October 1977 Baillieu sent to the Crown "a copy of our client's Master Fire Policy for your records". In July 1978 Mr Spinner, who was Chief Finance Officer for the Department of Industrial Development, wrote to Baillieu enquiring whether the policy had been received and asking for a Certificate of Currency. Baillieu sent him cover notes and undertook to send a Certificate when the policy was renewed. In July 1979 Mr Spinner was appointed as a government nominated director of Carbide. In September 1979, Mr Spinner again wrote to Baillieu enquiring as to renewal and asking for a certificate. In October 1979 he was advised that Baillieu's client (Carbide) had elected to insure on an "Industrial Special Risks" basis with named underwriters. In July 1980, Mr Spinner again wrote to Baillieu enquiring as to renewal and requesting a Certificate of Currency. Baillieu advised that it no longer acted as broker for Carbide. Mr Spinner gave evidence that, so far as he could ascertain, his Department had no contact with Baillieu between October 1979 and July 1980. It is common ground that neither the Crown or the Bank had any contemporaneous knowledge of any of the relevant events which occurred in the first half of 1980.

65         Until October 1979 Carbide's insurer was the Legal and General Society Ltd. The Industrial Special Risks policy issued in that month named the insured as:

"'Tasmanian Carbide Products and Electrona Carbide Industries Pty. Ltd. And The Honourable Minister for Resources and Development And the Australia and New Zealand Banking Group Ltd. FTRR and I'".

66         The subscribing insurers were Tasmanian Government Insurance Office for 30%, i.e. $3,900,000; Chamber of Manufacturers Insurance Ltd. for 25%, ie $3,250,000; National and General Insurance Co Ltd for 20%, ie $2,600,000; The New Zealand Insurance Co Ltd for 10%, ie $1,300,000 and Tokio Marine Insurance for 15%, ie $1,950,000, the total being $13,000,000. The policy provided that "Each of the Insurers shall be liable individually each for his own and not one for another for the percentage set against their own name".

67         The policy was an advantageous one for Carbide and from November 1979 up to and including June 1980 many claims were made under it. However, none of them was met before litigation commenced.

68         The policy contained a cancellation clause which read:

"7. CANCELLATION

This Policy may be terminated at any time by either the Insured or the Insurers tendering notice in writing to the other party. Such notice may be delivered personally or forwarded by registered post to the registered office of the party upon whom notice is being served and shall be effective at the end of sixty (60) consecutive days from the date of receipt of the notice.

In either case, the Insurer will retain the pro rata premium for the time the Policy has been in force."

69         By letter dated 7 March 1980 the New Zealand Insurance Company Ltd. gave notice of cancellation to be effective from 6 May 1980. By letter of 12 March, National and General gave notice of cancellation. By letter of 17 March, after a meeting of all co–insurers, Mr Eaton, the underwriting manager of TGIO gave notice in these terms:

"1. All Insurers including TGIO. (this letter should be considered notification) give notice that each line will be cancelled upon the expiration of 60 days unless the policy wordings are amended immediately to exclude categorically all claims for material damage or Consequential Loss caused to or arising from any loss or damage to any furnace internal component including electrodes, clamp connections refractory linings and any other items exposed to furnace heat."

70         Counsel agreed that, in the consideration of this appeal, no distinction should be drawn between the rights of the various underwriters. It must follow that this notice is to be regarded as the notice relied upon by the insurers, and that it supersedes any earlier notices and over–rides the notice given by Tokio on the same day. Subsequent events confirm this. This agreement has other consequences to which I will refer later.

71         On 5 May 1980, Mr Turner the managing director of Baillieu wrote to Mr Eaton in these terms:

"I.S.R. POLICY
ELECTRONA CARBIDE INDUSTRIES PTY. LTD.

We wish to confirm our telephone conversation with your Mr Geoff Eaton in which we advised that the Tasmanian Government Insurance is off risk on the above policy as at 4.00pm on the 5th May, 1980."

Similar letters were sent to other underwriters. On 9 May, Mr Turner wrote to Mr Eiszele, the General Manager of T.G.I.O. in these terms:

"We refer to our letter dated the 5th May, 1980 in which we thought we acted correctly in informing you that you were to go off risk on the above policy on that date at 4.00pm.

Our 'Client' has informed us that they do not consider that the cancellation orders have come into effect and they still believe the policy to be in force."

72         On 23 May 1980, Mr Eiszele wrote a long letter to Carbide setting out various objections to the claims at least including non disclosure of material facts in the proposal. Paragraph 6 of this letter reads as follows:

"6.  Whether the Policy has been cancelled or terminated. You are no doubt familiar with the correspondence relating to this aspect of the matter. You are also no doubt aware of your brokers letter of 5 May, 1980 to my office confirming that my office was 'off risk as at 4.00 on 5 May, 1980'. I also refer to your brokers subsequent letter of 9 May, 1980 indicating that their 'client' still believed the Policy to be in force.

In these circumstances, it is a matter of some uncertainty as to whether, and, if so, on what date cancellation or termination has occurred or will occur. My office proposes to rely on the earliest date lawfully available to it as the date upon which the risk, if any, ceased."

73         On 22 October 1980, Carbide commenced an action on the policy against the underwriters for recovery of its losses. The Crown subsequently joined in the action as a plaintiff. For convenience I will refer to the plaintiffs as "Carbide". On 3 September 1985, as the matter was about to go to trial, the underwriters paid $3,000,000.00 into Court with a denial of liability. Discussions then took place between counsel and later the same day Carbide accepted the money paid in, thus effectively settling its action against the underwriters.

74         Meanwhile, on 30 September 1983 Carbide had commenced an action against Baillieu. The Crown joined in this action also. The principal allegations made were that:

(a)  Baillieu had given incorrect answers to questions in the proposal for insurance,

(b)  Baillieu failed to disclose material facts, and

(c)  (In paragraph 16 of the Statement of Claim): "In further breach of the aforesaid agreement of agency, the defendant, without the plaintiff's authority purported to notify the underwriters in May, 1980 that the plaintiff had accepted cancellation of the policy, when the plaintiff had not done so and had not advised the defendant that it had done so. On the basis of the purported notification the underwriters claimed the policy was cancelled in May 1980".

75         It is not difficult to see these allegations as a response to the underwriter's defence. When the pleadings were finally settled (we were told that this event co–incided with counsels' closing addresses to his Honour), the only issue between Carbide and Baillieu was unauthorised cancellation, and the allegation (in what was co–incidentally also paragraph 16 of Statement of Claim) read:

" In breach of the aforesaid agreements of agency and/or negligently, the Defendant, without the Plaintiff's authority purported to notify the underwriters on or about 5th May, 1980, that the Plaintiff had accepted cancellation of the policy when the Plaintiff had not done so, whereby the policy was cancelled or or about the 5th day of May, 1980."

76         By way of particulars, Carbide pleaded that:

"In advising the underwriters that they were off risk as aforesaid the broker waived compliance with the formal requirements of the policy regarding notice of cancellation and thereby effected cancellation of the policy as from 4.00 p.m. on 5th May, 1980".

77         It is not easy to reconcile the particulars with the pleas, or internally to reconcile the particulars.

78         The reference to waiver in the pleadings strongly suggests that Carbide was alleging that Turner waived any defects in the underwriter's 17 March notice. That is not consistent with a plea of cancellation on 5 May, and counsel for Carbide had great difficulty in explaining to the learned trial judge exactly what legal consequences he claimed to have flowed from Turner's actions. However, before this court, Mr Merralls QC asserted that his case was and therefore the pleading meant that Turner's action effected a cancellation of the policy by mutual agreement on 5 May.

79         It will be seen that in order to succeed fully against Baillieu, Carbide had to show:

(a)  that the underwriter's notice of cancellation given on 17 March was ineffective;

(b)  that Turner's actions were not authorised by it; and

(c) that Turner's actions were within the scope of his ostensible authority, so as to bind Carbide (including the Crown) and the Bank and that they did so.

80         The learned trial judge did not deal with proposition (a). He found for Carbide on proposition (b) and against it on proposition (c). His finding on proposition (b) is not contested on appeal, the respondent submitting that Turner had neither actual or ostensible authority. The relevant facts are not in dispute, and counsel agreed that, depending on the inferences which it draws from those facts, this court can affirm or reverse his Honour's finding. (Warren v Coombes (1979) 142 CLR). Other issues were joined on appeal, but those may be put to one side for the moment.

81         Before dealing with the submissions put to us, it is convenient to state shortly some salient facts. They are:–

1.          Neither Carbide nor the Crown nor the Bank had any direct communication with the underwriters at any relevant time.

2.          Turner was authorised to obtain "back–up" insurance in case the cancellation notices given by the insurers were valid and effective.

3.          He arranged insurance with a combination of a new company Preservatrice, and two existing underwriters, Tokio and Chamber of Manufacturers. All three required cancellation of the existing policy as a condition of issue of the new policy.

4.          There is no evidence that the other underwriters knew of this condition and Turner did not disclose it to any of the insured.

82         The evidence as to the condition imposed by Tokio and Chamber of Manufacturers, two of the existing underwriters, creates an obstacle in my mind to counsels' insistence that no distinction is to be drawn between the positions of the various underwriters. It can only be overcome by ignoring Tokio and Chamber of Manufacturers and concentrating on TGIO, as counsel did.

83         The appellant's contention as to ostensible authority was this:

1.          The covenants authorised Carbide to obtain insurance in the names of itself, the Crown and the Bank.

2.          2 This included authority to change insurers and therefore to cancel one policy in order to obtain another.

3.          This, in turn, included authority to employ a broker to negotiate both cancellation and issue.

4.          Carbide, having actual authority from the Crown and the Bank to bestow actual authority on Baillieu was able by its actions to clothe Baillieu with ostensible authority. To put that another way, the underwriters, knowing that Carbide had negotiated the policy, on behalf of all insured, would be entitled to infer that Carbide had actual authority to cancel on behalf of all insured, and if Carbide held out Baillieu as its agent for that purpose, to accept Baillieu as such.

84         The onus lay on Carbide to prove (a) that the insured parties were bound by Turner's action and (b) that Turner's actions effectively cancelled the policy. It is necessary to examine the second of those two propositions for two reasons (a) in order to ascertain the content of Turner's alleged ostensible authority, i.e. to establish what it is that Carbide claims that it gave Turner ostensible authority to do, and (b) to see whether it is supported by the evidence. Mr Merralls, QC submitted that Turner cancelled the policy by agreeing with the underwriters to cancel it. Therefore the ostensible authority to be established is authority to enter into a binding agreement for cancellation.

85         The appellants did not contend that he obtained such authority from his firm's appointment as broker, or that the underwriters might reasonably conclude that he did. Their contention was that the use of Turner as a means of communication to the underwriter between 6 March and 5 May amounted to a representation that Turner had authority to bind the insured in the matter of cancellation. It cannot be sustained. It involves a progression from go–between to alter ego. In order to establish an enlargement of authority of that kind, it would be necessary to adduce evidence of a representation that Turner had authority to agree to cancellation, or an exercise by Turner of apparent authority enlarged to that extent, coupled with the consent or at least acquiescence of the appellants. There is no such evidence.

86         Once it is seen that the upper limit of Turner's real or apparent authority was to communicate decisions reached by his principals, his unauthorised communication amounted to no more than a wrong message. That might have had some legal effect if the underwriters accepted it as correct and, relying on its accuracy, did or abstained from doing some act, or accepted as true some purported fact from which it would be unjust to permit the appellants to depart (see Grundt v Great Boulder PK Gold Mine Ltd (1937) 59 CLR 641 at 674 per Dixon J). There is no evidence that they did so. Mr Eiszele's letter of 23 May is a fair indication of his attitude to it. His letter displays some willingness to make use of the purported cancellation but little faith in its efficacy. As Cox J points out, in reasons with which I agree, the underwriters did not at any time place any reliance on Turner's actions as evidencing cancellation or providing a basis for an estoppel.

87         I have read in draft form, Neasey J's reasons for judgment. I agree that the appellants, having prosecuted all their claims against the underwriters to settlement on the basis that Turner's actions did not effect a cancellation, could not thereafter maintain an action against their brokers on the basis that those actions did effect a cancellation.

88         However, the primary question in the appeal was the submission that the learned trial judge erred in holding that Turner had neither actual nor ostensible authority to bring the policy to an end. In my opinion, his Honour did not err, and the appeal should be dismissed.

Serial No. 51/1987
List "A"
File No. FCA 143/1986

ELECTRONA CARBIDE INDUSTRIES PTY. LTD. & ATTORNEY GENERAL FOR THE STATE OF TASMANIA v. BAILLIEU BOWRING (TAS.) PTY. LTD.

REASONS FOR JUDGMENT - FULL COURT:

COX J
16 October 1987

89         I have had the advantage of reading the reasons for judgment prepared by Cosgrove J. I adopt his Honour's statement of the facts and his nomenclature for the parties, and for the reasons advanced by him I agree with his conclusion that the appellants have failed to show either that Turner was held out by them as having the authority to bind them in the matter of cancellation of the policy or that, even had that fact been demonstrated, the insurers relied on that representation in such a way that it would have been unjust to allow the appellants to deny Turner's lack of actual authority.

90         In essence the appellants had to prove that Turner's conduct as their ostensible agent constituted in the circumstances an insuperable barrier to their recovery from the underwriters of damages in respect of events occurring after the 17 May 1980. This litigation involves no mere academic examination of the kind of conduct which might have rendered Turner the appellants' ostensible agent and of the circumstances in which that might have been relied upon by an insurer to resist payments under the policy. The reality is that the appellants instituted actual proceedings against the underwriters, the parties exchanged pleadings in an endeavour to define the issues between them and the case was resolved several years after the date of its commencement on the first day of what was anticipated to be a very lengthy trial by the acceptance of money paid into court in full satisfaction of all claims (including those the subject of the present action) brought by Carbide against them. It is against this background that the learned trial judge in this case had to be persuaded by the appellants that but for Turner's action they would have recovered damages from the underwriters for the events occurring after the 17 May 1980.

91         It is instructive to examine the pleadings in the action against the underwriters to see the legal basis upon which they relied at the start of the trial which, as it happened, was avoided by the settlement. Before doing so it is desirable to mention a few further factual details.

92         Carbide claimed in respect of 12 different "events". The first seven all occurred prior to the 5 May 1980 when Turner telephoned advice to the lead insurer and confirmed in writing that the insurers were "off risk". The remaining five were numbered in the first action as follows, although the chronological sequence was awry and one event was constituted by two separate incidents:

8.    On or about 22 May 1980: damage 2 lime kiln.

9.    On the 7 May 1980: damage to number 1 electrode bellows. On 9 May 1980: damage to number 2 electrode bellows.

10.   On or about 20 June 1980: damage to number 2 electrode.

11.   On or about 25 June 1980: damage to number 1 electrode.

12.   On or about, but not later than, 30 June 1980: damage to number 1 electrode.

In the present action they were numbered 1 to 5 and were thus referred to at pages 3 and 4 of the learned trial judge's reasons for judgment, Serial No B33/1986. Event number 8, although expressed in the statement of claim in the present action as having occurred on the 22 May 1980, is said in the earlier action to have occurred on the 29 May, although under the heading "Particulars" appears the statement "The accidental damage was first observed on the 22nd May 1980".

93         The last of several notices of cancellation given by individual insurers in March 1980 was that of the 17 March given by Tasmanian Government Insurance Office purporting to give 60 days' notice of cancellation on behalf of all underwriters. Assuming that was given in compliance with clause 7 of the policy, cancellation would be effective at the end of 60 consecutive days from the date of receipt by the insured of the notice. The letter of the 17 March 1980 was delivered to Baillieu the following day and it, or a copy of it, despatched by Baillieu to Carbide on the 18 March (see letter of 28 March 1980, Carbide to Baillieu, portion of exhibit P12). It is clear that 60 days from receipt of the notice by Baillieu or by Carbide would have expired by the date on which event 8 occurred, whether that was the 22 or 29 May 1980.

94         When traversing Carbide's claim in respect of event 8, the underwriters in their defence pleaded:–

"21(e)(iii)     The defendants were not then at risk upon the alleged 'policy'."

Particulars were sought and supplied in respect of this allegation as follows:–

"Request for Particulars dated 13th December, 1982 as to paragraph 21(e)(iii)

Particulars of:
(i)  Contracts, agreements, conditions and terms,
(ii)  Acts, facts, matters, circumstances and conduct,
(iii)  Any matters, facts or defences at law or in equity within the provisions of Order 21 Rule 17(1) of the Rules of the Supreme Court,

upon which the Defendants rely in asserting that in respect of the alleged accidental damage to number 2 lime kiln referred to in paragraph 21 of the amended Statement of Claim the Defendants were not then at risk upon the alleged Policy.

Particulars dated 16th June, 1983

(a)  The same particulars as are provided in relation to paragraph 7.
(b)  If, which is denied, the policy was ever a valid and effective policy it was validly terminated by the Defendants on or prior to the 29th May, 1980.
(c)  The Plaintiff accepted the termination of the policy and confirmed that fact in writing by, inter alia, a letter dated 5th May, 1980 from Baillieu Bowring to the first–named Defendant (Tasmanian Government Insurance Office), the third–named Defendant (National and General Insurance Co. Ltd.), and a letter dated 6th May, 1980 from Baillieu Bowring to the fourth– named Defendant (The New Zealand Insurance Co. Ltd.)."

As to particular (a) the substance of the particulars provided by reference to paragraph 7 was that the policy was null and void because of Carbide's failure to disclose material information when making the proposal. For present purposes this claim can be ignored. The essence then of the pleading by way of defence was that the underwriters had cancelled the policy before the happening of event 8. The only basis on which, according to the evidence, the underwriters could validly cancel was clause 7 of the policy. Particular (c) seems to be no more than an evidentiary "make weight". The facts pleaded, namely "acceptance of termination" and "confirmation" thereof by Baillieu do not take the matter any further. There is no reliance on ostensible authority in Turner, nor claim of estoppel against Carbide. The underwriters by their pleading rely only on termination by them.

95         The same pleading is repeated in respect of the other events including event 9 which clearly had occurred before the expiration of 60 days from the last notice of cancellation of the 17 March 1980, although arguably the notice of New Zealand Insurance Co. Ltd. dated the 7 March 1980 might have effected a cancellation pro tanto by the 7 May 1980.

96         By way of reply to the underwriter's defence, Carbide pleaded:–

"6.  As to paragraph 41 of the further and better particulars relating to paragraph 21(e)(iii) of the Defence

(a)  The plaintiff says there was no termination by events stipulated under the policy clause 7, page 26.
(b)  Baillieu Bowring (Tas.) Pty. Limited had no apparent or ostensible authority to accept cancellation as alleged.
(c)  The only method of cancellation was that in clause 7 page 26 of the policy.
(d)  The defendants have kept premiums in full."

97         While the state of the pleadings at the time the first action was settled is not decisive, and one cannot ignore the possibility that had that action proceeded amendments might have been made to admit of a change of emphasis, those pleadings must afford strong evidence of what issues would have been adjudicated on by the court. If no issue other than the efficacy of cancellation by the underwriters had been relied upon by the latter, I find it impossible to see how the learned trial judge in the present case could have found that Turner's actions constituted any obstacle to recovery by Carbide in the first action.

98         But the matter does not stop there, for Carbide in the present case chose to adduce from the underwriter's legal representative, Mr Ogilvie, who appeared as junior counsel to Dr Pannam Q.C. on their behalf and whose firm appears as solicitor on the record for the underwriters, evidence of the basis upon which they approached the settlement of the case. Mr Ogilvie said that in a meeting with the plaintiffs' counsel shortly after the payment in had been made his leader had stated that for the purposes of that payment into court "we" (presumably meaning the underwriters and/or their advisers) "have assumed that we lose every point except cancellation". He had then advised how the sum of $3,000,000 had been calculated by making what was thought to be fair and appropriate allowances for all claims up to, but not including, the events of the 22 or 29 May 1980 on the basis that by this time the contract had been effectively cancelled by the action of the underwriters. Notwithstanding therefore the action of Turner on the 5 May 1980, the underwriters had made allowance for the claim arising out of event number 9, the incidents of the 7 and 9 May. It was common ground that Carbide had in the present action abandoned any claim for damages in respect of that event on the basis that it had already been compensated therefor and could not be compensated twice.

99         When one has regard to these circumstances it is apparent that the underwriters relied not upon any activity by Turner on the 5 May, but exclusively on the efficacy of their notice of cancellation of the 17 March. If they were right to do so the appellant cannot complain for the policy allowed for unilateral cancellation and once cancelled the policy could not be relied on to sustain claims for events occurring thereafter. If they were wrong and the notice did not effect a valid cancellation, Carbide's rights under the policy continued and it could have recovered from the underwriters the sums it claimed in the second action from Baillieu. In neither event could it be said that any action by Turner had precluded Carbide from recovery.

100       I have had the advantage also of reading the reasons for judgment prepared by Neasey J. I agree with his conclusion that the sum paid by the defendant underwriters in the first action was accepted by Carbide in full satisfaction of all its claims against them and that for it to thereafter pursue what amounts to an alternative legal remedy against Baillieu brings into play the principle of common law election.

101       In my opinion the appeal should be dismissed for all these reasons.