Independent Timber Importers v Mercantile Mutual Insurance

Independent Timber Importers Pty Ltd (the appellant) sought to recover under a policy of insurance issued by Mercantile Mutual Insurance Ltd (the respondent). The dispute concerned whether the policy extended cover to a subsidiary company, Timber Holdings Pty Ltd, which was owned and controlled by the same individual who owned and controlled the appellant. The appellant argued that the policy, properly construed, covered its subsidiary, while the respondent contended that the policy's wording excluded such cover. The matter proceeded to the Full Federal Court of Australia.

The Full Federal Court was required to determine the proper construction of the insurance policy, specifically whether the wording of the policy extended cover to a subsidiary company owned and controlled by the insured individual. A further issue arose regarding the admissibility and weight of extrinsic evidence, including the subsequent conduct of the parties, in interpreting the policy. The court also considered whether an inference could be drawn against the appellant for failing to call a particular witness.

The court held that the policy's language, when read as a whole, did not extend cover to the subsidiary company. It found that the phrase "companies owned or controlled by an individual" was intended to refer to companies owned or controlled by the *insured individual*, not companies owned or controlled by the *insured entity*. The court also ruled that extrinsic evidence, including the subsequent conduct of the parties, was inadmissible to resolve any ambiguity in the policy, as the wording was sufficiently clear. The *contra proferentem* rule was deemed inapplicable because the ambiguity, if any, was not solely attributable to the insurer. Furthermore, the court held that the inference under *Jones v Dunkel* did not arise from the failure to call a witness, as the matters in question had not been put to the opposing witnesses.

The appeal was dismissed with costs.