Mobis Parts Australia Pty Ltd v XL Insurance Company SE

The appeal concerned a dispute between Mobis Parts Australia Pty Ltd (Mobis) and XL Insurance Company SE (XL) regarding an insurance policy. Mobis sought rectification of the policy, alleging a common intention that a €10 million hail limit, present in a master policy for an international insurance program, was mistakenly omitted from the Australian local policy. The case also involved issues concerning the measure of indemnity under business interruption insurance, specifically whether the cost of replacement referred to costs actually incurred and how accounting provisions for depreciation should be treated in assessing loss of gross profit. Further, the court considered the meaning of physical loss and uncertainty for constructive total loss under property insurance.

The Court of Appeal was required to determine several key legal issues. Firstly, it had to decide whether Mobis had established a sufficient common intention and mistake to warrant rectification of the Australian local policy to include the €10 million hail limit. Secondly, the court was asked to interpret the scope of the measure of indemnity, particularly whether the cost of replacement under the policy referred to actual expenditure or a broader concept. Thirdly, the court had to consider the correct method for assessing loss of gross profit under business interruption insurance, including the treatment of depreciation provisions. Finally, the court was to determine the appropriate costs orders, including whether an unsuccessful insurer should bear the costs of successful insurers under related policies.

The Court of Appeal reasoned that rectification requires proof of a common intention that was not accurately reflected in the written instrument due to a mistake. It applied established principles of equity concerning common intention and mistake, distinguishing between a unilateral mistake and a common mistake. Regarding the measure of indemnity and business interruption insurance, the court analysed the policy wording and relevant legal principles to determine the meaning of "cost of replacement" and the proper calculation of loss of gross profit, considering whether accounting provisions for depreciation constituted sums saved. The court also considered the meaning of "loss by deprivation of possession" and "uncertainty" in the context of property insurance. The court ultimately made orders directing the parties to file agreed short minutes of order for the disposal of the appeal and cross-appeal, including as to costs, or to lodge their respective draft minutes and submissions if agreement could not be reached.