MILLER & ASSOCIATES INSURANCE BROKING PTY LTD APPLICANT
AND
BMW AUSTRALIA FINANCE LIMITED RESPONDENT
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 29 September 2010 M69/2009
ORDER
1. Special leave to appeal granted.
2.Amended draft notice of appeal dated 19 January 2010 treated as filed in the appeal, and appeal treated as instituted and heard instanter and allowed with costs.
3.Set aside the order of the Court of Appeal of the Supreme Court of Victoria made on 11 June 2009 and, in lieu thereof, order that the appeal to that Court be dismissed with costs.
On appeal from the Supreme Court of Victoria
Representation
J J Gleeson SC with G Crafti for the applicant (instructed by Minter Ellison)
A C Archibald QC with M A Robins for the respondent (instructed by Francis V Gallichio Lawyers)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited
Trade practices – Misleading or deceptive conduct – Non-disclosure – Representation by supply of certificate of insurance and/or non-disclosure of nature of insurance – Whether provision of certificate by insurance broker to experienced premium lender misrepresented cancellability of underlying policy – Whether failure of broker to inform lender in terms that policy was non-cancellable constituted misleading or deceptive conduct.
Appeal – Powers of appellate court – Review of trial judge's findings of fact – Where finding allegedly based on mistaken understanding of agreed fact and inferences arising from it – Whether finding "glaringly improbable" or contrary to "compelling inferences".
Practice and procedure – Filing of submissions – Respondent filed submissions after hearing outside terms of leave granted – Whether permissible to file supplementary written submissions after hearing without leave.
Words and phrases – "misleading or deceptive conduct".
On 2 October 2000, Consolidated Timber Holdings Ltd ("CTHL") made an application to a financier, BMW Australia Finance Limited ("BMW"), for an insurance premium funding loan in respect of an insurance policy. In making the application, CTHL had retained the services of an insurance broker, Miller & Associates Insurance Broking Pty Ltd ("Miller"). CTHL owned and managed plantations in Australia and overseas. The policy in respect of which it sought a premium loan was a non-cancellable cost-of-production insurance policy ("the policy") dated 7 September 1999, which had been issued by HIH Casualty and General Insurance Limited ("HIH") to Plantation Management Corporation Ltd ("PMC") and St George Bank Limited. PMC was, at the relevant time, being acquired by CTHL. After a convoluted process characterised by error and mismanagement, BMW provided the funding to CTHL in the amount of $3.975 million in December 2000. $1,264,758.40 was repaid by CTHL. The balance was not repaid and was never recovered. A detailed account…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31
Case
[2010] HCA 31
Decision Date
CaseChat Overview and Summary
Miller & Associates Insurance Broking Pty Ltd (Miller) appealed to the High Court of Australia against a decision of the Court of Appeal of the Supreme Court of Victoria. The dispute concerned allegations of misleading or deceptive conduct by Miller, an insurance broker, in its dealings with BMW Australia Finance Ltd (BMW), a premium lender. BMW had provided a loan to fund an insurance policy for a client of Miller, and subsequently suffered a significant loss when the policy proved to be non-cancellable and did not provide adequate security.
The High Court was required to determine whether Miller engaged in misleading or deceptive conduct contrary to the *Trade Practices Act 1974* (Cth) by providing BMW with a certificate of insurance and failing to disclose that the underlying policy was non-cancellable. This involved considering whether the provision of the certificate, in the context of the information provided and not provided, misrepresented the nature of the insurance policy to an experienced lender like BMW. The Court also considered the powers of an appellate court to review a trial judge's findings of fact, particularly where those findings were alleged to be based on a mistaken understanding of agreed facts.
The High Court reasoned that the HIH certificate, when provided to BMW, did not convey a misrepresentation about the character of the policy. The Court found that the primary judge's conclusion that BMW's officers had understood the policy to be cancellable based on the certificate was not supported by the evidence, and that their understanding was driven by their eagerness to approve the loan rather than by the information presented. The Court held that a party providing a document containing a true but incomplete statement may engage in misleading conduct if the recipient is thereby misled into believing the statement is complete. However, in this instance, the Court concluded that the provision of the HIH certificate, even with its omissions, did not constitute misleading or deceptive conduct. The Court also noted that BMW had been provided with a copy of the policy itself, which they failed to read.
The High Court allowed the appeal, setting aside the order of the Court of Appeal and dismissing BMW's appeal to that Court with costs.
Orders
Orders of the court
1. Special leave to appeal granted.
2. Amended draft notice of appeal dated 19 January 2010 treated as filed in the appeal, and appeal treated as instituted and heard instanter and allowed with costs.
3. Set aside the order of the Court of Appeal of the Supreme Court of Victoria made on 11 June 2009 and, in lieu thereof, order that the appeal to that Court be dismissed with costs.
Background
Background to the litigation
It is difficult to state the way in which BMW's claim was put without providing some detail about the factual background. The factual background In 2000, BMW's premium funding department comprised Mr Reynolds, National Insurance Manager, Mr Jones, Manager, Insurance Products, Ms Warnecke, a junior trainee, and an insurance consultant. Its annual turnover was around $300 million and involved the making of loans in amounts ranging from $1500 to $60 million. Most of these loans were made to fund premiums for cancellable policies. It does not appear to have been BMW's practice to obtain additional security when lending with respect to cancellable policies. Approximately 25 per cent of all loans were for non-cancellable policies of which most were workers' compensation policies. When lending with respect to non-cancellable policies, BMW protected itself against loss under its credit risk insurance which was underwritten by HIH Casualty and General Insurance Limited ("HIH"). There was evidence of BMW's practice in assessing premium loan applications. BMW would submit a quotation to the borrower's broker. If the quotation was acceptable to the client, BMW sent a loan application and direct debit authority to the broker for execution by the client. BMW required the return of the executed application and authority, together with a copy of the policy or the policy schedule or an invoice in order to show the underlying policy, before it carried out credit and corporate inquiries. If the answers to these inquiries were satisfactory, BMW would approve the loan and remit the loan funds to the broker. BMW required the first instalment payment in advance of the draw-down of the loan funds. In August 2000, Miller was acting as broker for Plantation Management Corporation Limited ("Plantation Management"), a company which Consolidated Timber was then in the process of acquiring. Miller was retained to obtain a premium loan in respect of a cost of production policy between HIH, St George Bank Limited ("St George") and Plantation Management. The policy insured Plantation Management against the insolvency of its growers and St George against Plantation Management's insolvency. The initial overture to BMW in connection with the proposed loan was made by Mr Merton, Managing Director of Insurance Finance Australia Pty Ltd ("IFA"), which firm was working in conjunction with Miller. Mr Merton and Mr Reynolds were friends and they shared a long-standing professional association. Mr Merton had introduced a large number of clients to BMW. His dealings with BMW in respect of this loan proposal were conducted as agent for Miller. Mr Merton telephoned Mr Reynolds seeking a quotation for a premium loan of $3.975 million for Consolidated Timber. The proposal was for the loan to be drawn down in three payments in October of 2000, 2001 and 2002 and to be repaid in 30 monthly instalments. Mr Merton explained that Miller, a company which he described as being well-established overseas but fairly newly established in Australia, was Consolidated Timber's broker.
Evidence
Evidence Before The Court
BMW's loss at 8 March 2001, including interest, was $2,797,691.55. The oral evidence Mr Reynolds and Mr Jones gave evidence in BMW's case. Each said that he had understood from reading the HIH certificate that it had been issued in respect of a cancellable policy. Both claimed that they did not understand the cost of production policy contained in the bundle to have had anything to do with the proposed loan. Each maintained that he would not have authorised the loan had he known that the insurance was not property insurance that was capable of providing BMW with security for its loan. Alistair Mitchell, a man with lengthy experience in insurance broking and premium financing, gave expert evidence in BMW's case. He said that the cancellability of insurance is a matter understood by brokers to be of critical importance to premium lenders. In Mr Mitchell's opinion, a prudent broker would not have provided the HIH certificate without informing the lender that it related to a non-cancellable cost of production policy. Miller called no oral evidence in its case.The primary judge's findings The primary judge noted that the events had occurred seven years before the trial. He considered that there was a good deal of reconstruction in the evidence of Mr Reynolds and Mr Jones. He found that neither had subjected the HIH certificate to a careful analysis. They had seen the word "properties" on the certificate and leapt to the conclusion that the policy concerned property and that it was cancellable. His Honour considered that neither conclusion was conveyed by the HIH certificate but rather that they were conclusions driven by Mr Reynolds' and Mr Jones' keenness to put the loan in place and by "their generally careless attitude"[54]. [54][2007] VSC 379 at [34]. The finding that Mr Reynolds and Mr Jones had concluded from reading the HIH certificate that the underlying insurance was cancellable was qualified by the further finding[55]:"In my view, had they been pressed at the time, they would have truthfully answered an inquiry as to the cancellability of the policy that the policy was an unusual one and that they could not be sure and, further, that it was probably cancellable."[55][2007] VSC 379 at [34]. His Honour found that Mr Jones had been truthful when he told Ms Meth that he was not sure about the underlying insurance but that he had an invoice or a certificate and that the policy "could be for four properties"[56]. It will be recalled that this conversation took place after Mr Jones had read the HIH certificate. [56][2007] VSC 379 at [36]. The primary judge rejected the evidence of Mr Reynolds and Mr Jones that they had not understood that the cost of production policy was connected to the proposed loan[57]. Robson AJA (with whose reasons in this respect Neave JA agreed) overturned this finding. His Honour did so because he accepted BMW's submission that the finding was based on a mistaken understanding of an agreed fact and the inferences arising from it[58]. The agreed fact was that the copy of the policy contained in the bundle was the policy underlying the HIH certificate. It was an agreement that said nothing about the state of mind of BMW's officers.[57][2007] VSC 379 at [55]-[56].[58](2009) 15 ANZ Insurance Cases ¶61-811 at 77,555 [168].
Decision
Reasons for decision
FRENCH CJ
HEYDON, CRENNAN AND BELL JJ
Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete.Conclusions On the approach taken by Neave JA and Robson AJA, the HIH certificate conveyed a misrepresentation about the character of the policy. On that premise, Miller's failure to provide information about the nature of the policy was not necessary for their Honours' characterisation of its conduct in supplying the HIH certificate. In any event the premise was wrong for the reasons set out in the judgment of Heydon, Crennan and Bell JJ[46]. [46]See below at [85]-[87]. If, as Ashley JA held, the HIH certificate did not convey a representation, the question then is what did Miller's "silence" add? Ashley JA said of the HIH certificate[47]: "It was ambiguous. It neither plainly identified the insurance as ordinary property insurance, nor plainly identified the contrary. Miller knew that it did not relate to ordinary property insurance, and should be taken to have known that the insurance was non-cancellable. It knew the importance of insurance being cancellable to a premium funder. Those circumstances meant, in my opinion, that it was misleading for Miller to stay silent and not communicate to [BMW] a relevant situation which the HIH certificate tended to obfuscate. It cannot be said, for the reasons which I have stated, that provision of the copy policy satisfied the requirement that the uncertainty be cleared up."[47](2009) 15 ANZ Insurance Cases ¶61-811 at 77,527 [20]. As already explained, the preceding was not a statement that the HIH certificate was ambiguous in the sense that it was capable of being read as conveying, inter alia, a representation that the policy was a cancellable property insurance policy. Such a proposition could not sit with his Honour's rejection of the view of the other members of the Court of Appeal that the HIH certificate conveyed that representation. Given that the HIH certificate could not be read that way, the provision of further information would not have excluded a misleading construction. But his Honour having found, in the sense that the primary judge found, uncertainty in the meaning of the HIH certificate, he effectively found Miller was subject to a "requirement that the uncertainty be cleared up"[48]. Like the "strict responsibility" of which Robson AJA spoke, that duty travelled beyond the limits of the statutory prohibition. In our opinion, in the circumstances of the case, the alleged failure of Miller to volunteer information about the policy could not be said to have constituted misleading or deceptive conduct. In the event, a copy of the policy was put in the hands of BMW, who simply did not read it. [48](2009) 15 ANZ Insurance Cases ¶61-811 at 77,527 [20].
Ratio Decidendi
Legal Principle Established
Established by:
FRENCH CJ,
HEYDON, CRENNAN AND BELL JJ