Poole v Chubb Insurance Company of Australia Ltd

[2014] NSWSC 1832

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:	Poole v Chubb Insurance Company of Australia Ltd [2014] NSWSC 1832
Hearing dates:	18 August - 2 September and 21 - 24 October 2014
Decision date:	19 December 2014
Jurisdiction:	Equity Division - Commercial List
Before:	Stevenson J
Decision:	Insured entitled to indemnity
Catchwords:	INSURANCE - indemnity - directors and officers cover - whether insured entitled to indemnity for legal costs incurred at an ICAC hearing - whether insured knew that submission made to Government Department false or misleading - whether insured knew that public inquiry into grant of mining exploration licence likely - whether insured fraudulently in breach of duty of disclosure - whether insured fraudulently misrepresented the position when answering questions in proposal; EVIDENCE - allegation of fraudulent misrepresentation and non-disclosure - onus - whether clear and cogent proof established - whether Jones v Dunkel inferences to be drawn where case of fraud sought to be established in part from documentary and circumstantial evidence
Legislation Cited:	Coal Mine Health and Safety Act 2002 Evidence Act 1995 Insurance Contracts Act 1984 (Cth) Mining Act 1992
Cases Cited:	Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1987) 4 ANZ Ins Cas 60-813 Australian Securities and Investments Commissions v Hellicar [2012] HCA 17; 247 CLR 347 Blatch v Archer (1774) 1 Cowp 63 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Briginshaw v Briginshaw (1938) 60 CLR 336 Chamberlain v R (No. 2) (1984) 153 CLR 521 CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 Derry v Peek (1889) 14 App Cas 337 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447 Jones v Dunkel (1959) 101 CLR 298 Maynard v Goode (1926) 37 CLR 529 Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd [1999] 1 Qd R 279 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 Newey v Westpac Banking Corporation [2014] NSWCA 319 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 Palmer v Dolman [2005] NSWCA 361 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Plasteel Windows Australia Pty Ltd v CE Heath Underwriting Agencies Pty Ltd (1990) 19 NSWLR 400 Prepaid Services Pty Ltd v Atradius Credit Insurance NV [2013] NSWCA 252 Rejfek v McElory [1965] HCA 46; 112 CLR 517 Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 Vines v Australian Securities & Investments Commissions [2007] NSWCA 75; 73 NSWLR 451
Texts Cited:	K Sutton, Insurance Law in Australia, (3rd ed, 1999) N Seddon, R Bigwood and M Ellinghaus, Chesire & Fifoot Law of Contract, (10th Edition 2012, LexisNexis Butterworths) J D Heydon, Cross on Evidence
Category:	Principal judgment
Parties:	Andrew John Poole (Plaintiff) Chubb Insurance Company of Australia Ltd (Defendant)
Representation:	Counsel: A P Coleman SC with J E Curtin (Plaintiff) A Leopold SC with T M Mehigan (Defendant) Solicitors: Horton Rhodes (Plaintiff) Clyde & Co (Defendant)
File Number(s):	SC 2013/336778

TABLE of contents

Introduction	1
Decision	13
General background	16
Obtaining an exploration licence for coal	22
DCM resolved to seek direct allocation of an exploration licence	25
DCM sought and obtained a direct allocation of the Exploration Licence - overview	28
The proposals for insurance, policies issued and notification of circumstances likely to give rise to a claim	34
The proper construction of the question at cl 9(f) in the proposals	44
Waiver of the duty of disclosure with respect to the DCM policy?	53
Chubb's case - overview	62
The "Misleading Submission" case	64
The "EL Grant Controversy" case	66
The non-disclosure and misrepresentation alleged	67
Non-disclosure	67
Misrepresentation	72
Alleged relevance of the "Misleading Submission" and the "EL Grant Controversy"	74
"Fraudulent" non-disclosure and misrepresentation	76
Causation	77
Mr Poole's case	78
Non-disclosure	78
Misrepresentation	81
A case based on documents and cross-examination of Mr Poole	85
Mr Poole's credit	106
Mr Maitland's "relationship" with the Minister	119
Mr Poole's knowledge of the "relationship" between Mr Maitland and the Minister	126
Relevant statutory provisions and legal principles	133
The statutory test of relevance under the ICA	136
"Fraud"	143
Onus	154
The facts in detail - events leading to the Submission	156
Late 2006	159
15 January 2007 Meeting	168
The Palese Information Memorandum	171
Direct allocation or nothing	185
The training mine "angle"	191
Mr Maitland's meeting with the Minister	195
15 February 2007 request for consent to apply for an exploration licence	211
DCM board meeting 28 February 2007	217
Mr Maitland's meeting with the Minister's staff of 8 March 2007	222
Board meeting 3 April 2007	227
21 November 2007 meeting	238
30 November 2007 "Shareholder Briefing" note	264
Drafting the Submission	269
Mr Poole's review of the draft Submission	288
Board meeting 29 January 2008	294
Purchase of the land	299
"Without huge profits"	300
10 March 2008 Westpac note	304
18 March 2008 request for consent to apply for an exploration licence	310
The Submission	313
Departmental consideration of the Submission	332
21 August 2008 - Ministerial consent granted	341
The September 2008 Information Memorandum	355
NBN Nine News story	391
Mr Maitland's return from China	401
Mr Lewis's review of the Submission	403
Mr Ransley's email of 25 September 2008 - "promises made in the past" & "whole new level of public scrutiny"	410
Mr Maitland's email to Mr Tudehope of 25 September 2008	413
DCM 29 September 2008 application for the Exploration Licence	417
The Minister's 5 December 2008 offer of an exploration licence	425
23 December 2008 board meeting	430
The "Info Memo"	432
Revelation that access had been granted to all seams	436
January 2009 visit to China	451
Possible "back-door listing"	468
Further reports from Dr Palese	471
January 2009 - public controversy developing?	475
Falling out between Mr Ransley and Mr Maitland?	484
Mr Maitland removed as director of DCM	487
Press publicity - the "brewing controversy"	498
Jerrys Plains Community Q&A	503
Jerrys Plains' community meeting 25 August 2009	514
DCM proposal for insurance	534
NuCoal 23 November 2009 option to purchase shares in DCM	536
Prospectus	538
NuCoal proposal for insurance	545
The "Misleading Submission" case	547
(1) Statements about a "training mine"	555
What was said and was it false or misleading?	555
(2) Statement that the training facility was forecast to be "cost neutral"	576
What was said and was it false or misleading?	576
(3) Statements about the size of the coal resource	583
What was said and was it false or misleading?	583
Mr Poole's knowledge - saleable v mineable tonnes	603
The September IM	627
The Application	634
The events of 24 December 2008	638
(4) Statements about the size of the operation - a "small to medium" operation	644
What was said and was it false or misleading?	644
(5) Statements about the "Strategic Alliance"	656
What was said and was it misleading or deceptive?	656
Mr Poole's knowledge about the "Strategic Alliance"	666
(6) Statements about the rigour of the process of locating a site	676
What was said and was it false or misleading?	676
Mr Poole's knowledge	681
Conclusions as to Chubb's "Misleading Submission" case	684
The "EL Grant Controversy"	687
The 16 September 2008 NBN Nine News Story	698
Mr Ransley's 25 September 2008 email ("about to reach of whole new level of public scrutiny")	701
Mr Barns' note of 19 January 2009	711
Removal of Mr Maitland as director of DCM	715
The July 2009 press publicity	718
Jerrys Plains' Q&A and community meeting	725
Conclusion	731
Further matters for consideration	733
Which policy responds to Mr Poole's claim?	735
Extension 2H of the DCM policy	737
Exclusion 4A(i) of the NuCoal policy	740
Quantification of Mr Poole's claim	744

Judgment

Introduction

1. The plaintiff, Mr Poole, seeks indemnity under directors' and officers' liability policies issued by the defendant, Chubb Insurance Company of Australia Ltd, to Doyles Creek Mining Pty Ltd ("DCM") and NuCoal Resources NL.

1. Mr Poole is a former director of DCM and NuCoal and sues as an "Insured Person" under both policies.

1. Mr Poole seeks payment from Chubb of legal costs of $658,745.16 incurred by him in the course of an inquiry conducted by the Independent Commission Against Corruption ("ICAC") into the granting of Exploration Licence No. 7270 (the "Exploration Licence" or "EL") to DCM. Each of the policies provides cover for "Legal Representation Expenses" including reasonable "Defence Costs" incurred on account of attending a "Formal Investigation". Chubb does not dispute that the costs incurred by Mr Poole at ICAC fall within these definitions.

1. Chubb denies however that it is liable to indemnify Mr Poole by reason of Mr Poole's alleged fraudulent non-disclosure and misrepresentation of certain matters relating to the grant of the Exploration Licence to DCM, which I discuss in detail below. The misrepresentation is said to arise from the answer "no" given to certain questions in the relevant proposal forms. No alternative claim of innocent non-disclosure or misrepresentation is made; indeed, such a claim has, in terms, been eschewed.

1. Chubb advances no other basis upon which to deny Mr Poole's claim for indemnity.

1. Chubb contends that, if it is liable to indemnify Mr Poole that liability arises under the DCM policy, and not the NuCoal policy.

1. Chubb accepts that by reason of cl 6 in the DCM policy and cl 7 in the NuCoal policy it is not entitled to avoid the policies, even if it establishes fraudulent non-disclosure or misrepresentation. However, if Chubb does make out those allegations, its liability to indemnify Mr Poole is excluded under cl 6 of the DCM policy, and under the NuCoal policy it is entitled to seek a reduction of its liability to indemnify Mr Poole so as to place it in the same position it would have been had the fraudulent non-disclosure or fraudulent misrepresentation not been made: s 28(2) of the Insurance Contracts Act 1984 (Cth) ("the ICA").

1. In relation to each policy, Mr Poole accepts he is a party to each of the insurance contracts and an insured within the scope of s 21(1) of the ICA. He accepts he had a duty of disclosure but denies that he has acted in breach of that duty or that, so far as he was concerned, the answers given in the proposal forms were wrong.

1. I am aware that Mr Poole has appeared before ICAC; in these proceedings he seeks to recover from Chubb the legal costs he thereby incurred. I am also aware that the issues before ICAC concerned the same broad factual matters as those before me. I was informed from the bar table that many of the documents in the Court Book were sourced from the ICAC inquiry.

1. Such report as ICAC may have published is, however, not before me. That is because it is not admissible to prove any fact relevant to the issues I must determine. I am bound to apply the rules evidence; ICAC is not. Counsel, quite properly, were assiduous to avoid any reference to such findings as ICAC may have made about the events in question before me.

1. I must determine Mr Poole's case on the basis of the evidence before me and not on the basis of findings that may have been made by a tribunal not bound by the rules of evidence and which may have been able to consider material not in evidence in these proceedings.

1. I have been greatly assisted by the detailed and careful submissions made by Mr Coleman SC, who appeared with Ms Curtin, for Mr Poole and Mr Leopold SC, who appeared with Mr Mehigan, for Chubb. Much of what follows, especially as to background and other uncontroversial matters (including as to legal principles), is drawn, with gratitude, from those submissions.

Decision

1. Chubb has failed to satisfy me that Mr Poole has engaged in either fraudulent non-disclosure or fraudulent misrepresentation.

1. It follows that Mr Poole is entitled to indemnity. I accept Chubb's submission that such indemnity arises under the DCM policy, and not the NuCoal policy.

1. Mr Poole is entitled to judgment for the amount of his costs before ICAC, together with interest and costs.

General background

1. Mr Poole holds a Bachelor of Commerce and a Master of Business Administration. He is a fellow of the Australian Society of Certified Practising Accountants. Prior to his involvement with DCM, Mr Poole was, amongst other positions, Chief Financial Officer and Company Secretary of Bradken Ltd.

1. In late 2006, Mr Poole and Mr Craig Ransley agreed to establish a business which would consolidate a number of smaller companies servicing the mining sector. To that end, in November 2006, Mr Poole caused DCM (then known as ResCo Services Pty Ltd) to be incorporated. He also caused to be incorporated another company, then known as Rosa Holdings Pty Ltd. That company later changed its name to ResCo Services Pty Ltd. I shall refer to it simply as "ResCo".

1. Mr Poole was the sole director of DCM until 15 February 2007. On that date Mr Ransley and Mr John Maitland became his co-directors. Mr Maitland had until recently been the National Secretary of the Construction, Forestry, Mining and Energy Union ("CFMEU") and had recently been appointed Chairperson of the NSW Coal Competence Board. Mr Poole ceased to be a director of DCM on 9 August 2012.

1. Interests associated with Mr Poole's family were the largest shareholders in DCM from 2007 until the acquisition of DCM by NuCoal in the circumstances I describe below. In February 2008 interests associated with Mr Poole controlled some 23.22 per cent of the shares in DCM.

1. In late 2009 and early 2010, the shareholders of DCM implemented what the parties described as a "back door" ASX listing of DCM. That transaction involved the shareholders of DCM giving to a listed but suspended company, which came to be known as NuCoal, the option to acquire all of their shares in DCM upon re-quotation of the listed entity.

1. Mr Poole was a director of NuCoal from 5 February 2010 to 26 April 2012 and realised significant profits from the "back door listing".

Obtaining an exploration licence for coal

1. In New South Wales, in order to mine land within a "mineral allocation area" (which, in the case of coal, is the whole of the State) it is necessary to obtain a mining lease under the Mining Act1992. Only the holder of an exploration licence is able to apply for a mining lease of land within a mineral allocation area (s 51(3) of the Mining Act).

1. Any person may apply for an exploration licence (s 13(1) of the Mining Act) but an application that relates to a "mineral allocation area" may only be made with the consent of the Minister of the Mineral Resources (s 13(3); at all relevant times Mr Ian Macdonald ("the Minister")).

1. The NSW Government's "Guidelines for Allocation of Future Coal Exploration Areas" stated at the relevant time that "normally" allocations for exploration licences are made on a competitive basis. However, the Minister has a discretion to make a direct allocation of an exploration licence without competitive tender (ss 22 and 23).

DCM resolved to seek direct allocation of an exploration licence

1. As I discuss below, on 15 January 2007, Mr Poole, Mr Maitland and Mr Ransley first met to discuss a possible coal mining project at Doyles Creek.

1. Mr Poole was clear in his evidence before me that he, and the other directors of DCM, were only prepared to proceed with the Doyles Creek project if DCM could obtain an exploration licence by direct allocation from the Minister. They were not prepared to cause DCM to participate in a competitive tender.

1. The "differentiating factor" (to adopt an expression used by Mr Coleman in his submissions) that the DCM board resolved to adopt in order to persuade the Minister to allocate directly an exploration licence to DCM (rather than require DCM to go through a tendering process) was to include in the proposed venture an underground "training mine".

DCM sought and obtained a direct allocation of the Exploration Licence - overview

1. On 15 February 2007, Mr Maitland, on behalf of DCM, wrote to the Minister seeking the Minister's consent under s 13(3) of the Mining Act for DCM to apply for an exploration licence at Doyles Creek and said that DCM's objectives included the development of a training mine.

1. Preparation of a formal submission seeking the Minister's consent to an application by DCM to apply for an exploration licence commenced in late 2007.

1. Ultimately, DCM lodged a detailed submission ("the Submission") with the Department of Primary Industry ("the Department") on 18 March 2008.

1. On 21 August 2008, the Minister invited DCM to apply for an exploration licence.

1. DCM made that application (addressed to The Mining Registrar (Coal)) on 29 September 2008.

1. On 5 December 2008, the Minister offered DCM the Exploration Licence. It was formally issued by the Department on 10 December 2008.

The proposals for insurance, policies issued and notification of circumstances likely to give rise to a claim

1. On 8 October 2009, DCM submitted a proposal for insurance to Chubb for directors' and officers' cover. The proposal form was completed by Mr Peter Logvyn, as the Chief Financial Officer of DCM.

1. The proposal posed the following question at cl 9(f):

"Is any person proposed for coverage cognisant of any facts or circumstances which:

(i) he or she has reason to suppose might afford valid grounds for any future claim(s) such as would fall within the scope of the proposed coverage?

(ii) indicate the probability of any such claim(s)?

It is agreed that if such facts or circumstances exist, any claim, action or proceeding arising therefrom is excluded from the proposed coverage.

If the answer to any one of the questions in 9, is yes, please attach details." (emphasis in original)

1. Adjacent to each of sub paragraphs 9(f)(i) and (ii) was a box marked "yes" and "no". Mr Logvyn answered each of these questions by ticking "no".

1. Mr Poole said that Mr Logvyn did not consult him about what answers should be given to these questions and, indeed, that he was unaware that DCM had proposed for insurance in October 2009 (see [535] below). Mr Poole accepted however that, had he been consulted by Mr Logvyn, he would have approved the answers given by Mr Logvyn.

1. The DCM policy incepted on 9 November 2009 and went into run-off from 30 June 2010. By an endorsement issued on 28 April 2010 Chubb granted a 12 month "extended reporting period" (to 30 June 2011). By a further endorsement issued on 13 July 2011, Chubb granted a further 72 month "extended reporting period" (effectively a period of run-off) effective retrospectively from 30 June 2010 to 30 June 2017.

1. On 4 February 2010, NuCoal submitted a proposal of insurance to Chubb for directors' and officers' cover. The proposal form was completed by Mr Glen Lewis, then a Director of DCM. The proposal form was in the same form and posed the same questions as set out at [35] above. Mr Lewis answered each of the questions by ticking the "no" boxes.

1. Mr Poole accepted that he was consulted about the NuCoal proposal and approved the answers given by Mr Lewis.

1. The NuCoal policy incepted on 16 February 2010, was extended to 30 June 2011 and then renewed to cover the period 1 July 2011 to 30 June 2012, renewed to 30 June 2012.

1. On 29 December 2011, both DCM and NuCoal gave Chubb notice of circumstances likely to give rise to a future claim, namely the decision by the NSW Government to refer to ICAC certain allegations concerning the Exploration Licence.

1. On 26 October 2012, Mr Poole gave Chubb notice that he had been summonsed to give evidence and produce documents to ICAC in relation to the inquiry.

The proper construction of the question at cl 9(f) in the proposals

1. Two questions concerning the proposals arose in the course of argument. In view of the overall conclusion to which I have come, it is not necessary that these questions be answered. However, I will deal with them, albeit briefly.

1. The first question concerns the proper construction of the question posed by cl 9(f) of the DCM and NuCoal proposals.

1. Clause 9(f) called for revelation of circumstances of which "any person proposed for coverage" was "cognisant". A person is only "cognisant" of something if that person knows or is aware of that thing. I would thus read "cognisant" as meaning "actually knows". I did not understand Chubb to submit to the contrary.

1. The debate between the parties was whether the question at cl 9(f) was directed to known facts or circumstances that might reasonably be supposed by the insured as affording "valid grounds for a future claim" against the insured, as opposed to known facts which might reasonably be supposed as affording "valid grounds for a future claim" by the insured for indemnity under the policy.

1. The matter is to be determined objectively by reference to what a reasonable person would have understood the terms to mean; see for example, most recently Newey v Westpac Banking Corporation [2014] NSWCA 319 at [84] per Gleeson JA (with whose conclusions Basten and Meagher JJA agreed) citing the familiar cases of Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40].

1. The most recent statement by the High Court on the question is in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 447 where French CJ, Hayne, Crennan, Kiefel JJ said at [35]:

"...this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'." (citations omitted)

1. The question in cl 9(f) refers to "future claim(s) such as would fall within the scope of the proposed coverage". That language suggests to me that the parties intended that what was to be disclosed were facts or circumstances such as would give rise to any such claim: that is a "valid" claim for indemnity by the insured under the proposed policy. And whether or not the insured thought that the claim being made against him or her was itself a "valid" claim.

1. If an insured's obligations, when answering the question in cl 9(f), was to disclose facts or circumstances relevant only to what the insured had reason to suppose might afford "valid" grounds for a future claim against him or her, the question would not call for disclosure of a claim which an insured knew was about to be made against him or her but which the person insured reasonably thought to be hopeless. The coverage under the policy was to include representative costs and defence costs. It would extraordinary if an insured, knowing of the certainty of a proposed claim, but believing it to be without merit, could successfully propose for insurance cover including defence costs in relation to such a claim, without disclosing the claim.

1. In those circumstances, in my opinion, reasonable business people in the position of the parties would understand the question in cl 9(f) to require an assessment by a prospective insured of whether facts and circumstances of which he or she was "cognisant" might reasonably give rise to a claim for indemnity under the policy (including, in this case, for defence costs) whether or not the claim being made against the proposed insured was thought by the insured, or was in fact, "valid".

Waiver of the duty of disclosure with respect to the DCM policy?

1. The second question arises from the identity of the person who signed the DCM proposal.

1. Chubb's proposal forms (including that for the DCM policy) concluded with the statement:

"DECLARATION AND SIGNATURE

The undersigned authorised officers of the Applicant declare that to the best of their knowledge and belief the statements set forth herein and all attachments and schedules hereto are true and immediate notice will be given should any of the above information alter between the date of this proposal and the proposed date of inception of the insurance. Although the signing of the proposal does not bind the undersigned, on behalf of the Applicant and its Directors and Officers, to effect insurance, the undersigned agree that this proposal and all attachments and schedules hereto and the said statements herein shall be the basis of and will be incorporated in the policy should one be issued.

The undersigned, on behalf of the Applicant and its Directors and Officers, acknowledge that the Statutory Notice contained herein has been read and understood.

This proposal must be signed by the Applicant's Chairman of the Board, Managing Director or Chief Executive Director."

1. Below his signature on the DCM proposal Mr Logvyn wrote "CFO Doyles Creek Mining" making clear that the proposal was not signed by DCM's Chairman of the Board, Managing Director or Chief Executive Director.

1. Mr Coleman submitted that:

"The failure by the insurer to insist on the proposal...being signed by one of the required and specified directors of DCM means that there has not been an answer to any of the questions asked nor a declaration as to the truth of them."

1. Mr Coleman drew attention to s 21(3) of the ICA which provides that:

"(3) Where a person:

(a) failed to answer; or

(b) gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter."

1. Mr Coleman submitted that:

"By reason of s 21(3) therefore, the insurer is deemed to have waived compliance with the duty of compliance in respect to the matter the subject of the questions."

1. I do not accept that submission.

1. The provision in the proposal that it "must be signed" by the nominated person was a provision for Chubb's benefit. Chubb was able to, and evidently did, waive its benefit (see generally N Seddon, R Bigwood and M Ellinghaus, Chesire & Fifoot Law of Contract, (10th ed 2012, LexisNexis Butterworths) at [20.13] citing Maynard v Goode (1926) 37 CLR 529; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418).

1. In these circumstances, I do not accept that the consequence of Chubb issuing the DCM policy on the basis of the proposal signed by DCM's Chief Financial Officer (rather than the Chairman of the Board, Managing Director or Chief Executive Director) has the consequence that DCM either "failed to answer" the relevant question or "gave an obviously incomplete or irrelevant answer" for the purposes of s 21(3).

Chubb's case - overview

1. In substance, Chubb's case of fraudulent non-disclosure or misrepresentation is founded on two circumstances which, in its closing submissions, it described as the "Misleading Submission" and the "EL Grant Controversy".

1. The manner in which Chubb puts its case in closing submissions was as follows.

The "Misleading Submission" case

1. Chubb's "Misleading Submission" case is based on the Submission of 18 March 2008.

1. In its closing submissions, Chubb summarised its case concerning the Submission as follows:

(1)   the Submission contained statements about the size of the coal resource at Doyles Creek and about DCM's business objectives and other matters which were misleading and/or false;

(2) the inclusion of those false and misleading statements in the Submission was intended to provide "apparent justification" for the exercise by the Minister of a discretion under s 13(3) of the Mining Act to invite DCM to make an application for the Exploration Licence rather than invite tenders for the Exploration Licence under s 14 of the Mining Act. Chubb alleges that this conduct was dishonest;

(3)   Mr Poole knew of that dishonesty, and approved the Submission and its delivery to the Department. In particular, Mr Poole knew that the Submission understated the only independent appraisal DCM had (that of a geologist, Dr Guy Palese) as to the size of the coal resource at Doyles Creek, both as to estimated tonnage and as to the statement made in the Submission that Doyles Creek had the potential to support in a "small to medium" coal mining operation; and

(4)   Mr Poole also knew that the Submission falsely stated that the primary focus of DCM's business objectives was the development of a training mine. Chubb claims that Mr Poole knew that the development of a training mine was incidental to DCM's primary objective of developing what could be presented to investors as a medium to large commercial coal mining operation yielding profits substantially in excess of those necessary to sustain a training mine. Chubb also alleges that Mr Poole also knew that the Submission misleadingly exaggerated the extent of a "Strategic Alliance" of local business interests said to be supportive of a training mine.

The "EL Grant Controversy" case

1. In its closing submissions, Chubb summarised its case concerning the "EL Grant Controversy" as follows:

(1)   During the course of 2009 Mr Poole knew there was an "emerging public controversy" (including press reports and a meeting of a local action group known as "Jerrys Plains Minewatch") about the circumstances of the grant of the Exploration Licence to DCM which controversy, at that time, focused on two matters:

(a)   first, the nature of the relationship between the Minister and Mr Maitland. Chubb contends that Mr Poole knew that Mr Maitland was appointed Chairman of DCM in order to utilise his personal and political connections (including with the Minister) in connection with the endeavours of DCM to procure the Exploration Licence;

(b)   second, whether DCM's stated primary business objective of developing a training mine concealed its "real primary objective" of developing what could be presented to investors as a major commercial coal mine.

(2) Chubb alleges that Mr Poole knew that, arising from this "emerging public controversy" there was a possibility of an investigation by ICAC into the circumstances of the grant of the Exploration Licence and that in view of the "huge profits" the DCM shareholders (including Mr Poole) made from the "back door listing" referred to at [20] above, it was "obvious that those who had already expressed concerns about the circumstances in which the EL was granted to DCM may agitate for some form of investigation or inquiry".

The non-disclosure and misrepresentation alleged

Non-disclosure

1. Chubb alleges that Mr Poole acted in breach of his duty of disclosure (as set out in s 21 of the ICA; see [133] below) for two reasons.

1. First, Chubb claims, Mr Poole knew that the Submission contained false and misleading statements. Chubb contends that it follows that Mr Poole knew that fact to be relevant to Chubb's decision whether to accept the risk; alternatively that a reasonable person in Mr Poole's position could be expected to know it was relevant.

1. Second, Chubb alleges that Mr Poole knew the matters said to comprise the "EL Grant Controversy".

1. Chubb alleges that arising from those facts Mr Poole "knew there was a possibility of an investigation by ICAC into the circumstances of the grant of the EL" to DCM and knew that this was a matter relevant to Chubb's decision whether to accept the risk.

1. Alternatively, Chubb alleges that whether or not Mr Poole subjectively believed a formal investigation was likely, a reasonable person in his position could be expected to know that the facts constituting the "EL Grant Controversy" were relevant to Chubb's decision whether to accept the risk.

Misrepresentation

1. Chubb also alleges that Mr Poole approved the answer "no" given to question at cl 9(f) in the proposal forms and thus represented to Chubb that he was not "cognisant" of any facts or circumstances which he had reason to suppose might afford "valid grounds" for a future claim by him under the policies.

1. Chubb alleges that such representation was false because he was aware that the Submission contained false and misleading statements and was aware of the facts comprising the "EL Grant Controversy" and had "reason to suppose" either of those matters might give rise to a claim for indemnity.

Alleged relevance of the "Misleading Submission" and the "EL Grant Controversy"

1. Chubb contends that the "Misleading Submission" is relevant for two reasons, outlined in its closing submission as follows:

(1)   First, the alleged fact that Mr Poole had approved an important business document containing statements he knew to be false and/or misleading, and that he was aware of DCM's dishonest purpose in respect of the Submission, demonstrated impropriety and a propensity for dishonesty which was itself relevant to a Directors and Officers insurer, as it went to the "moral hazard" associated with the risk.

(2)   Second, the fact that the Submission was false and misleading (and inconsistent with the equivalent statements in the NuCoal Prospectus) meant that there was basis for a formal investigation into the circumstances of the grant of the Exploration Licence to DCM.

1. Chubb contends that the "EL Grant Controversy" was relevant because it "revealed the possibility of a formal investigation or inquiry into the circumstances of the grant of the Exploration Licence and/or a claim arising out of those circumstances".

"Fraudulent" non-disclosure and misrepresentation

1. Chubb contends that:

(1)   Mr Poole knew the matters set out above;

(2)   Mr Poole knew those matters were relevant to a Directors and Officers insurer and consequently any non-disclosure "must have involved knowing fraud"; or

(3)   a reasonable person in the circumstances would have known those matters were relevant and Mr Poole recklessly failed to disclose the matters. Mr Poole was, Chubb contends, "consciously indifferent" to disclosure because he "closed his mind to, or did not care about" compliance with his duty of disclosure or the truth or falsity of the answers in the proposal forms.

Causation

1. Chubb contends that had Mr Poole complied with his duty of disclosure (or answered "yes" to the relevant questions in the proposals and provided details of the circumstances) Chubb would not have entered into either policy or would have excluded any claim arising out of the circumstances of the grant of the Exploration Licence to DCM.

Mr Poole's case

Non-disclosure

1. So far as concerns the Submission, Mr Poole's case was simple. His position is that, at all relevant times, he believed that every statement in the Submission was true.

1. His case was thus, in effect, that if the Submission was false or misleading, that was not a matter "known to" him for the purpose of the chapeau to s 21 of the ICA; and that accordingly no duty of disclosure was enlivened.

1. So far as concerns the "EL Grant Controversy", Mr Pool accepted that he knew the facts relied on by Chubb as constituting that "Controversy" but that he did not believe there was any prospect of those facts giving rise to any form of public inquiry; and that, as I understand his case, no reasonable person in his position would have come to a different conclusion or would have thought that the facts relied on by Chubb could be relevant to Chubb's decision to accept the risk.

Misrepresentation

1. As I have said, Mr Poole said he did not know of, or approve of Mr Logvyn's completion of the DCM proposal (but that he would have approved of Mr Logvyn's answers, had he been asked). Mr Poole accepted he approved of Mr Lewis's answers in the NuCoal proposal.

1. In any event, Mr Poole's case was that, so far as he was concerned, the question at cl 9(f) was correctly answered "no" in both cases.

1. In the case of the Submission that was because he believed every statement in the Submission to be true and was thus not "cognisant" of any facts or circumstances that he had reason to suppose might give rise to a claim.

1. So far as concerns the "EL Grant Controversy" that was because the facts of which he was "cognisant" did not cause him to suppose, and did not give him reason to suppose that there would be a public inquiry and thus did not give him reason to suppose he might need to make a claim under the policy.

A case based on documents and cross-examination of Mr Poole

1. The allegations Chubb makes are very serious. Chubb called no witnesses to prove these matters. Chubb has sought to make out these allegations based on documentary evidence, and cross-examination of Mr Poole. That cross-examination extended over six hearing day and was, to say the least, comprehensive. I heard no evidence on these questions from any of Messrs Macdonald, Maitland, or Ransley (or anyone else but Mr Poole).

1. As will become clear from what follows, there were many other people involved in preparation of the Submission and in subsequent events leading to the issue of the Exploration Licence. Some of those people were employed by DCM, but others were, and are, independent professionals. If, as Mr Leopold submitted, the Submission was a "deeply misleading" document, and that Mr Poole knew this was so, it is hard to escape the conclusion that other persons, more directly involved in the preparation of the Submission than Mr Poole, must also have known of the Submission's flawed nature.

1. As Mr Coleman submitted on behalf of Mr Poole:

"The gist of the allegations made by Chubb, although couched as a fraudulent non-disclosure and misrepresentation case against Mr Poole, effectively requires the Court to conclude that all of the abovementioned people were involved in a deliberate and lengthy conspiracy to mislead the New South Wales Government and Department of Primary Industries by submitting knowingly false information to them for the purposes of the direct allocation of the [Exploration Licence] with the intent of then selling their share of the venture (through a listing or otherwise) at great profit".

1. To a very significant extent, Chubb's case turns on inferences it contends should be drawn from documents. Mr Leopold's cross-examination of Mr Poole was focused on documents created between 2007 and 2009. Few of those documents were created by Mr Poole. There was in evidence one note taken by Mr Poole at a meeting and a number of emails sent by Mr Poole. However, most of the documents on which Mr Poole was cross-examined were created by others. These included emails copied to Mr Poole and diary notes of meetings which Mr Poole attended (including meetings characterised by Mr Leopold as being "seminal" or "critical").

1. I admitted those diary notes by making what became known as the "Diary Note Ruling". This was a ruling under s 136 of the Evidence Act 1995 in the following terms:

"Admitted only as evidence that a meeting took place on the date identified; that the people identified in the note were present at the meeting; and that at that meeting something was said or something happened that caused the author of the note to make the record that he or she made".

1. Mr Poole was also closely cross-examined on various drafts of the Submission, the Submission itself and information memoranda prepared after the Submission was created. Mr Poole was not the author of any of those documents (although he reviewed and commented on some of them).

1. It is a serious matter to allege fraud, especially in a case largely based on circumstantial evidence. It is true, as Chubb submitted, that in an appropriate case serious allegations can be proved by "circumstantial evidentiary facts" and "inference and circumstances" (per Ipp JA, with whom Spigelman CJ agreed in this respect, in Vines v Australian Securities & Investments Commissions [2007] NSWCA 75; 73 NSWLR 451 at [811] citing Dixon CJ in Briginshaw v Briginshaw (1938) 60 CLR 336 at 366). A case based on circumstantial evidence must, of course, be determined by assessing the weight of all the circumstances put together (Palmer v Dolman [2005] NSWCA 361 at [41]; Chamberlain v R (No. 2) (1984) 153 CLR 521 at 535-536). However, care must be exercised in coming to conclusions of fraud in such circumstances.

1. I accept Mr Leopold's submission that I should not view individual pieces of evidence in isolation and that I should draw conclusions as to what, overall, Mr Poole knew from the totality of the evidence. Nonetheless, as I set out below, I must make a decision about Mr Poole's knowledge of each of the matters that Chubb contends he knew. That decision will take into account the particular circumstances of each occasion but also my assessment of Mr Poole's credit generally.

1. From time to time, Chubb has sought to draw implications from documents (prepared by persons other than Mr Poole) in circumstances where, had the author of the document, or another person involved or named in the document given evidence, more light may have been shone on the actual course of events.

1. Thus Chubb submitted:

"Fraud can, and often will, be found by drawing inferences from circumstantial evidence (see, for instance, Palmer v Dolman [2005] NSWCA 361 at [39]; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5). A case based on circumstantial evidence must be determined by assessing the weight of all the circumstances put together (Palmer at [41], Chamberlain v R (No. 2) (1983) 153 CLR 521 at 535-536).

The rules in Jones v Dunkel (1959) 101 CLR 298 and Blatch v Archer (1774) 1 Cowp 63 at 65 will have some role to play in this case. With very few exceptions, the additional witnesses who might have been called to explain the events relating to the Submission and the proposals for insurance are in Mr Poole's 'camp' (in particular, Mr Ransley, Mr Stevenson [a solicitor, to whom I refer below], Mr Lewis, Mr Ireland [a mine manager, to whom I refer below] and Mr Logvyn)."

1. In Australian Securities and Investments Commissions v Hellicar [2012] HCA 17; 247 CLR 347 the matter for consideration by the High Court was ASIC's failure to call evidence from a witness that it was plainly in a position to call. The plurality (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said at [165]:

"Disputed questions of fact must be decided by a court according to the evidence that the parties adduce, not according to some speculation about what other evidence might possibly have been led. Principles governing the onus and standard of proof must faithfully be applied. And there are cases where demonstration that other evidence could have been, but was not, called may properly be taken to account in determining whether a party has proved its case to the requisite standard. But both the circumstances in which that may be done and the way in which the absence of evidence may be taken to account are confined by known and accepted principles...".(emphasis in original)

1. In Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121 Gaudron J at [51] cited with approval the following passage from Cross on Evidence at [1215]):

"[T]he rule [in Jones v Dunkel] only applies where a party is 'required to explain or contradict' something. What a party is required to explain or contradict depends on the issues in the case as thrown up in the pleadings and by the course of evidence in the case. No inference can be drawn unless evidence is given of facts 'requiring an answer'." (citations omitted)

1. Gaudron J went on to say at [53]:

"A Jones v Dunkel inference can only make certain evidence more probable. It 'cannot be used to make up any deficiency of evidence'." (citing Menzies J in Jones v Dunkel at 312)

1. Mr Poole was faced with a very lengthy and exacting document based cross-examination over six days. Very often, the particular implications sought to be drawn from documents could only have become apparent to Mr Poole when he heard the manner in which Mr Leopold opened the case or when he was confronted with the document in the witness box.

1. Chubb's Jones v Dunkel submission really amounts to the proposition that once Mr Poole was able to see just what Chubb sought to make of the documentary material, Mr Poole should have embarked in a case in reply by calling the persons who created the documents, or were mentioned in them (for instance Mr Maitland, Mr Ransley and Mr Stevenson) and that his failure to do so should lead to an inference that those witnesses were unable to give evidence supportive of his case. I do not accept that proposition. This is a fraud case, and although a fraud case can be proved from circumstantial evidence, it was for Chubb to make good the very serious allegations it made against Mr Poole by clear and cogent admissible evidence. It was not for Mr Poole to "explain" that he had not behaved as Chubb contends; it was for Chubb to prove he had. It was not for Mr Poole to "contradict" inferences that might be available from documents by calling their author, or others named in them.

1. If more than one inference is available from documents tendered by Chubb, or if some documents leave important questions unanswered, the result will be that Chubb has failed to discharge its burden of proof. Chubb cannot, in effect, throw the burden of clearing up ambiguities or unanswered questions on Mr Poole by use of a Jones v Dunkel submission.

1. Consideration of Chubb's contentions concerning the allegedly misleading nature of the Submission, and Mr Poole's knowledge of that matter, requires a detailed consideration of the events from late 2006 to 18 March 2008 (when the Submission was delivered). It also involves consideration of events thereafter as there are documents produced by DCM (information memoranda prepared to attract investment in the project) and by NuCoal (the relevant Prospectus) which, Chubb contends, cast light on the manner in which the project was depicted by DCM in the Submission.

1. Likewise, consideration of the matters surrounding the "EL Grant Controversy" requires a detailed consideration of events, particularly, in 2009, considered against the backdrop of earlier events.

1. Of course, what is critical about these matters is what Mr Poole made of them, and thus what was his actual state of knowledge concerning their nature at the time DCM and NuCoal proposed for insurance with Chubb.

1. For those reasons, it is necessary for me to review, in some detail, the course of events.

1. I should also make some preliminary observations about Mr Poole's credit.

Mr Poole's credit

1. As I have said, Chubb called no witnesses on this aspect of the case. Apart from giving evidence himself, nor did Mr Poole. Mr Poole was cross-examined over six days. The cross-examination was, as was submitted on Mr Poole's behalf, exhaustive and unrelenting. It was certainly thorough.

1. Chubb submitted that Mr Poole was an "intelligent and resilient witness keenly aware of the forensic task before Chubb" and that I should conclude that Mr Poole gave "in many important respects, unreliable and dishonest evidence".

1. In closing submissions, Chubb was particularly critical of Mr Poole's professed lack of recollection of the details of meetings and communications. Chubb described this evidence as being "often implausible".

1. Mr Poole was being cross-examined about very particular aspects of events, particularly meetings and communications which, for the most part, occurred in the two year period commencing January 2007.

1. What was being put to Mr Poole throughout that cross-examination was that he had behaved dishonestly. It is unsurprising that, in those circumstances, he often presented as being cautious in answering questions.

1. I observed Mr Poole carefully over the period of his cross-examination. Overall, and with only minor exceptions (see for example [480ff] below), I gained the impression that Mr Poole was doing his best to give as honest an account of matters as his recollection allowed. He did not appear to be a person who was, deliberately, giving false evidence. I found the manner in which he gave his evidence as being measured and thoughtful.

1. Mr Poole consistently and repeatedly said that he believed that every statement in the Submission was true (both at the time it was first provided to the Department on 18 March 2008, and when it was attached to DCM's formal application for the Exploration Licence on 29 September 2008) and that it did not occur to him that there might be a public inquiry about the circumstances in which the Exploration Licence was granted.

1. These are not matters about which Mr Poole could be mistaken. Accepting that many years have passed since the events in question, and that Mr Poole's recollection of much of the detail was, as he said, poor, Mr Poole was clear in his evidence about these matters.

1. For Chubb to succeed on its claims, I would have had to have an "actual persuasion of the mind" (see [154] below) that I should not accept this evidence and that I should find that, from the beginning to the end of his evidence, Mr Poole was deliberately giving a false account of his state of mind.

1. For the reasons I discuss in detail below, I do not have an "actual persuasion of the mind" that this was the case.

1. When considering Mr Poole's evidence about these two critical matters, I have borne in mind that although DCM's sole business activity during the relevant period was directed to obtaining the Exploration Licence, Mr Poole was principally involved in acquisitions for ResCo Services. As Mr Coleman submitted, although DCM's main activities during the two year period from January 2007 to December 2008 were the drafting of the Submission, and the obtaining of support from and commitment to the project from community members and organisations, Mr Poole was not directly involved in either of those activities. Mr Poole did attend various meetings, including DCM board meetings, arranged capital raisings for DCM and read draft versions of the Submission. Otherwise, his focus was on ResCo's business.

1. I have also borne in mind Mr Poole's evidence that, prior to January 2007, he had had no experience in the coal mining industry and no knowledge of the process required to apply for an exploration licence. That evidence was not challenged.

1. I will deal with particular challenges made by Chubb to the credibility of Mr Poole's evidence as to particular events in the course of my analysis of those events.

Mr Maitland's "relationship" with the Minister

1. In the proceedings, much was made by Chubb of the "nature of the relationship" between Mr Maitland and the Minister, the alleged "political connection" between the two and Mr Maitland's alleged "easy access" to the Minister and his staff. In its closing submissions, Chubb submitted that there was a "close personal and professional relationship" between Mr Maitland and the Minister, and that Mr Poole knew this.

1. Chubb's pleaded case is that DCM, with Mr Poole's knowledge and consent:

"Deployed the close personal and professional relationship between Maitland and the Minister for the purpose of seeking to procure the exercise of discretion by the Minister to grant the EL by direct allocation without the usual competitive tender process."

1. Before me there was no direct evidence of any such "relationship", "connection" or "access". The evidence upon which Chubb relies comprises inferences it contends should be drawn from documents.

1. Critically, what Chubb does not contend in these proceedings is that the Minister behaved improperly (let alone corruptly) in directly allocating the Exploration Licence to DCM. Chubb has, in terms, eschewed any such suggestion. Mr Leopold stated very clearly that this was no part of Chubb's case.

1. Indeed, it is central to Chubb's case that the Submission made to the Department in response to which the Minister invited DCM to apply for, and ultimately issued the Exploration Licence, was misleading and dishonest.

1. Thus, in closing oral submissions, Mr Leopold said:

"...we do say the submission was expressed in false or misleading terms in order to seek to persuade the Minister to exercise that discretion favourably to DCM, to justify departure by the Minister from what was known to be the usual competitive tender process...

We do say the Department was against direct allocation and in support of a competitive tender process...and that the Department affirmatively recommended that the competitive tender process be undertaken...

The Minister might have been duped by the submission or persuaded by the submission and accepted all the falsities in it, or he may have been; we just don't know, but it's perfectly possible that he was duped by it and persuaded by it, and we don't say otherwise. It's simply no part of our case as to whether he was duped or not duped, acted properly or improperly...".

1. As I set out below, the evidence reveals that after the Submission was received by the Department on 18 March 2008, officers of the Department recommended that the Minister consider a competitive allocation process rather than a direct allocation of an exploration licence. As I have set out above, the Minister nonetheless invited DCM to apply for an exploration licence and ultimately allocated one directly, and without a competitive tender. There is not any evidence before me as to why the Minister took this course. There is no evidence such as would justify me concluding that the Minister took this course because of any personal or professional relationship with Mr Maitland or as a result of any private or unrecorded communication from Mr Maitland.

Mr Poole's knowledge of the "relationship" between Mr Maitland and the Minister

1. Mr Poole denied knowing of any "relationship" between Mr Maitland and the Minister. At one point Mr Poole said:

"They virtually didn't know each other, as I understand it."

1. However, earlier Mr Poole agreed that he knew that Mr Maitland dined occasionally with the Minister during the course of DCM's endeavours to procure the Exploration Licence.

1. Mr Poole said that, prior to Mr Maitland becoming chairman of DCM, he had only heard his name "in passing".

1. Mr Poole said that it was Mr Ransley who suggested Mr Maitland be chairman and that:

"...when the training mine was introduced, the concept a little bit later, it became obvious, certainly in my mind, that Mr Maitland was the best qualified to take the running of that particular part of the business."

1. Mr Poole also said:

"He was well networked and I suspect he knew his way around the network and the politicking, yes...I had no direct experience of Mr Maitland...but I suspected then that after 40 years in the trade union movement he probably would know his way around, yes...I figured he would probably know his way around it - have a rather large connection, network connection".

1. The course of events described below makes it clear that Mr Poole became aware that Mr Maitland became the direct point of contact between DCM, the Department and, through it, the Minister.

1. However, the evidence before me does not establish any basis to conclude that Mr Poole knew of any connection between Mr Maitland and the Minister such as would cause him to give credence to suggestions in the press and otherwise (that I discuss below) that the Minister granted the Exploration Licence to DCM as a "favour" to Mr Maitland.

Relevant statutory provisions and legal principles

1. Section 21 of the ICA is in the following terms:

"The insured's duty of disclosure

(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:

(a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or

(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.

(2) The duty of disclosure does not require the disclosure of a matter:

(a) that diminishes the risk;

(b) that is of common knowledge;

(c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or

(d) as to which compliance with the duty of disclosure is waived by the insurer.

(3) Where a person:

(a) failed to answer; or

(b) gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter."

1. Section 26 of the ICA is, relevantly, in the following terms:

"Certain statements not misrepresentations

(1) Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.

(2) A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms."

1. Section 28 of the ICA is in the following terms:

"General insurance

(1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into.

(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.

(3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made."

The statutory test of relevance under the ICA

1. The following statements of principle are largely taken from counsels' submissions. In view of the overall conclusion to which I have come, not all are relevant, but I set them out in deference to the care with which counsels' submissions were prepared.

1. It is common ground that the knowledge referred to in the chapeau to s 21 ("every matter that is known to the insured") is actual knowledge (for example, Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1987) 4 ANZ Ins Cas 60-813 at 74, 992 per Young J (as his Honour then was) and Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd [1999] 1 Qd R 279 per Pincus JA (with whom Moynihan and Byrne JJ agreed) at 281).

1. The statutory test of relevance requires that, in relation to matters actually known to Mr Poole that, either:

(1)   Mr Poole knew such matters to be relevant to Chubb's decision whether to accept the risk (and if so on what terms) (s 21(1)(a)); or

(2)   a reasonable person in Mr Poole's circumstances could be "expected to know" those matters to be so relevant (s 21(1)(b)).

1. As I have sought to emphasise in these reasons, it was no part of Chubb's case that the Minister had granted the Exploration Licence to DCM as a "favour" to Mr Maitland or to any of his "mates".

1. Chubb did submit that DCM had "deployed" what it alleged to be a "close personal and professional relationship" between Mr Maitland and the Minister to "steer the process politically" (to use the words from Mr Ransley's email of 22 January 2009 referred to at [485] above). Chubb submitted that it should be inferred that Mr Maitland was "recruited specifically" for that task.

1. But Chubb did not, and on the evidence could not, take the further step of alleging that the relationship between Mr Maitland and the Minister was so "close" (personally or professionally) that the Minister had exercised his discretion to allocate directly the Exploration Licence as a "favour" to Mr Maitland or DCM.

1. Absent that allegation, or any evidence that could provide a basis for that allegation, I cannot see how it can be said that anyone in Mr Poole's position could reasonably have believed, following the last of the incidents upon which Chubb relies (the Jerrys Plains Minewatch meeting) that there was any sensible prospect of there being a public inquiry.

1. Whatever it was that led to the ICAC inquiry is not a part of the evidence before me.

1. I will turn briefly to each of the incidents on which Chubb relies.

The 16 September 2008 NBN Nine News Story

1. The inquiries received by Mr Dries from the NBN Nine representative prior to the story going to air evidently concerned a suggestion that the "training mine is used as a diversion to assist with the obtaining of the licence and will then be dumped as a concept once the licence is granted" (see [392] above).

1. As I have said, that suggestion was misconceived as the training mine could not be, and so far as the evidence reveals, has not been "dumped as a concept" as it was to become, and did become a term of the grant of the Exploration Licence.

1. The story that went to air concerned "environmental" matters. There is nothing in the evidence to suggest that "environmental" matters might have led to a public inquiry concerning the grant of the Exploration Licence.

Mr Ransley's 25 September 2008 email ("about to reach of whole new level of public scrutiny")

1. On 25 September 2008 Mr Ransley sent an email to Mr Maitland, Mr Poole and others which included the statement that "this project is about to reach a whole new level of public scrutiny".

1. Mr Ransley's email was primarily directed to DCM's relationship with members of the "Strategic Alliance".

1. It is not clear to me from the email why, or in what context, Mr Ransley thought a "new level of public scrutiny" would come about.

1. The matter could not be explored with Mr Ransley as he was not called as a witness.

1. Mr Poole said he could not recall seeing this email but accepted that, in the normal course, he would have read it.

1. Mr Ransley's observation must have conveyed to Mr Poole the obvious proposition that, with the grant of the Exploration Licence imminent, it was likely that there would be some "public scrutiny" of the fact that the Exploration Licence had been granted without competitive tender.

1. Mr Ransley's email also mentioned that promises had been made, seemingly to members of the "Strategic Alliance" "that we will not be fulfilling".

1. Chubb submitted that both these matters "might engender controversy and inquiry".

1. I have found that Mr Poole did not at this, or any time, believe that any false and misleading statement had been made in the Submission. And, of course, Chubb does not contend that the Minister behaved improperly by inviting DCM's application to apply directly for an exploration licence.

1. In those circumstances, I cannot accept that Mr Poole should have inferred from Mr Ransley's observation that a formal inquiry was on the horizon.

Mr Barns' note of 19 January 2009

1. I have set out my findings about this email above at [475] to [483].

1. The critical aspect of Mr Barns' note is the report that the Minister's office had been receiving messages from individuals who said they believed that the Exploration Licence was granted to DCM "as a favor [sic]" to Mr Maitland. As there is no evidence or suggestion before me that the Minister did exercise his discretion to grant to DCM the Exploration Licence "as a favour" to Mr Maitland it must follow that there is no basis to suppose that Mr Poole entertained any suspicions to the contrary.

1. Indeed Mr Barns' email contained a record of assurances conveyed by the Minister's Chief of Staff to Mr Barns that "everything relating to this application is strictly in accordance with the relevant Acts and Regulations".

1. I see nothing in Mr Barns' note, even if read together with Mr Ransley's 25 September 2008 forecast that the project was about to reach "a whole new level of public scrutiny" as giving Mr Poole any basis to suppose there might be a public inquiry.

Removal of Mr Maitland as director of DCM

1. I have dealt with this matter at [487] to [497] above.

1. For the reasons set forth in those paragraphs, I am not persuaded that the evidence permits the conclusion that Mr Maitland was removed as director of DCM "to get him out of the public eye". I accept Mr Poole's explanation for Mr Maitland's departure.

1. Accordingly, I see nothing in the circumstances to give Mr Poole any reason to suppose a public inquiry was likely.

The July 2009 press publicity

1. The publicity in the Sydney Morning Herald and on the ABC News on 20 and 23 July 2009 was more pointed.

1. The press reported accusations that the Minister had done "more favours for mates" by approving the direct allocation of the Exploration Licence to DCM and reported related complaints that the project was being falsely promoted as a training mine.

1. The opposition industry spokesman was quoted as suggesting that the timing of the announcement of the grant of the Exploration Licence (said to have been Christmas Eve in 2008) was "suspicious" and "sneaked out" in a press release.

1. These were doubtless serious allegations but any foundation for giving credence to them is not made out in the evidence before me.

1. It was not Chubb's case that the Minister had granted the Exploration Licence to DCM as a "favour" to DCM or to any "mate" (whether Mr Maitland or anyone else).

1. There is thus no room, on the evidence before me, for any conclusion that Mr Poole harboured any such suspicion. Quite properly, Mr Leopold did not put any such proposition to Mr Poole.

1. In those circumstances I cannot conclude that Mr Poole should have seen that there was any significant prospect of a public inquiry.

Jerrys Plains' Q&A and community meeting

1. I have dealt with this matter at [503] to [533] and, in particular, with Chubb's submissions concerning Mr Ransley's email of 27 July 2009 (in which he said he had attempted to keep Mr Maitland "right out of it for now so as to limit political attack"), the question asked by the Jerrys Plains Minewatch group concerning the "Minister?" and "ICAC?" and the answers given by DCM to the meeting of the Minewatch group to those questions.

1. Whatever may have been Mr Ransley's reasons for wanting to keep Mr Maitland "right out of it now so as to limit political attack", and assuming that those reasons were related to the publicity in the Sydney Morning Herald and on the ABC News on 20 and 23 July 2009, the fact is that Mr Maitland attended the Jerrys Plains Minewatch meeting and subjected himself to questions from the floor.

1. The question concerning "ICAC?" in the Minewatch Q&A, was not pursued at the meeting and, after the meeting, on the evidence before me, there was no further controversy, whether in the press, or by the Minewatch group concerning DCM or the grant of the Exploration Licence. As I have said, on the evidence, the controversy disappeared in just over a week.

1. In those circumstances I am not persuaded to reject Mr Poole's evidence that he did not, subjectively, believe that there was any prospect of there being a public inquiry about the circumstances in which the Exploration Licence was granted. Nor am I persuaded that any reasonable person in his position would, on this evidence, come to a different conclusion.

1. I do not consider that the "huge profits" (Chubb's expression: see [66(2)] above) that Mr Poole may have anticipated making, or in fact made from the "back door listing" of DCM takes the matter any further.

1. As I have said, whatever it was that in fact led to the ICAC inquiry is not in evidence before me.

Conclusion

1. In those circumstances, my conclusion is that Chubb has failed to make out both the "Misleading Submission" and the "EL Grant Controversy".

1. It follows that Chubb has failed to establish that Mr Poole acted in breach of his duty of disclosure and failed to establish that Mr Poole was "cognisant" of any facts or circumstances which he had reason to suppose might afford a valid claim for a future claim by him under either the DCM or NuCoal policies.

Further matters for consideration

1. It follows from these conclusions that there are a numbers of issues raised by the parties that it is not necessary for me to decide.

1. One further matter which must be considered, however, is whether Mr Poole's entitlement to an indemnity is under the DCM policy or the NuCoal policy.

Which policy responds to Mr Poole's claim?

1. I accept Chubb's submission that it is the DCM policy covering the period 9 November 2009 to 30 June 2010 (with an Extended Reporting Period to 30 June 2017) that is the policy which responds to Mr Poole's claim.

1. This conclusion is a consequence of the proper construction of Extension 2H of the DCM policy and by reason of Exclusion 4A(i) ("the Prior Notice" exclusion) in the NuCoal policy.

Extension 2H of the DCM policy

1. Extension 2H of the DCM policy provides for an "Extended Reporting Period" in respect of conduct occurring before 30 June 2010. A notification made in the Extended Reporting Period is deemed to be made in the policy period immediately preceding the commencement of the Extending Reporting Period; that is the period to 30 June 2010.

1. Documents produced by DCM's insurance broker suggest that DCM's request for run-off cover under the DCM policy was made at the same time as NuCoal proposed for the NuCoal policy; that is as part of a package.

1. In those circumstances I accept Chubb's submission that it must have been the intention of the parties that, if a notification were to be made under Extension 2H of the DCM policy, a notification in relation to the same event could not be made under the NuCoal policy. I accept Chubb's submissions that reasonable people in the position of the parties would not be taken to have intended that there could be notification under two policies. That would serve no sensible purpose.

Exclusion 4A(i) of the NuCoal policy

1. Exclusion 4A(i) of the NuCoal policy is in the following terms:

"[Chubb] shall not be liable for Loss in respect of any Claim...based upon, arising from, or in consequence of any fact or circumstance if notice of such fact or circumstance has been given under any policy or coverage section of which this Coverage Section is a renewal or replacement or which it may succeed in time...".

1. Documents produced by DCM's insurance broker make clear that the NuCoal policy was intended to provide Directors and Officers coverage from 30 June 2010 in respect of the activities of the new entity from that date and that the DCM policy was placed into run-off in relation to events prior to that date. That being so, I accept Chubb's submission that the NuCoal policy either "succeed[ed] [the DCM policy] in time" or was a "replacement" of it for the purpose of Exclusion 4A(i).

1. Mr Poole gave notice to Chubb of the ICAC inquiry on 29 December 2011, purportedly under both policies. Under Extension 2H of the DCM policy, that notification was deemed to have been given in the policy period expiring on 30 June 2010; that is prior to the inception of the NuCoal policy.

1. For those reasons, my conclusion is that Mr Poole's entitlement to indemnity is under the DCM policy. In view of the conclusions to which I have come, I do not find it necessary to decide whether Mr Poole's entitlement to indemnity is under what Mr Coleman described as being the "Initial Contracts of Insurance" as opposed to the "2011 Contracts".

Quantification of Mr Poole's claim

1. Mr Poole has incurred legal costs in the sum of $658,745.16 in the course of the ICAC inquiry.

1. Mr Poole's entitlement is for indemnity in respect of "Defence Costs" which is defined to include:

"...reasonable costs, charges, fees (including but not limited to legal counsels' fees and experts' fees) and expenses...".

1. In the course of argument Mr Leopold suggested that Chubb might seek to have an assessment made of the reasonableness of the fees that Mr Poole incurred at ICAC.

1. There has been no order for the separate determination of that issue. There has already been a 16 day hearing during the course of which Chubb could have adduced evidence on the topic.

1. Nonetheless, I will now hear submissions from the parties as to whether there should be a reference out (or some other assessment) of the reasonableness of the fees that Mr Poole has incurred.

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Decision last updated: 19 December 2014