Leonardo v Auckland City Council HC Auckland CIV 2007-404-1352

[2008] NZHC 2615

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-1352

BETWEEN  JOHN WILLIAM LEONARDO AND SUSAN ANNE LEONARDO Plaintiffs

ANDAUCKLAND CITY COUNCIL First Defendant

ANDWILLOTT DESIGN LIMITED Second Defendant

ANDKEVIN HILLIAM Third Defendant

CONTINUED Hearing:  24 September 2008

Appearances: Mr Neutze for Applicant (Third Third Party) Mr Gould for Fourth Defendant

Judgment:      8 October 2008 at 3 p.m.

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [Application by Third Third party for order striking out statement of claim by Fourth Defendant]

This judgment was delivered by me on

08.10.08 at 3 pm, pursuant to

Rule 540(4) of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Counsel:

Brookfields, (Mr D Neutze), P O Box 240, Auckland

Mr K Gould, Barrister, P O Box 1011, Auckland

LEONARDO V AUCKLAND CITY COUNCIL AND ORS HC AK CIV 2007-404-1352  8 October 2008

ANDBACCUS CONSULTANCY LIMITED Fourth Defendant

ANDMAN SHING LEE AND CHAN YEN YEUNG

Fifth Defendant

ANDJOHN DOBIER Sixth Defendant

ANDPAUSMA WROUGHTIRON LIMITED Seventh Defendant

ANDBARFOOT & THOMPSON LIMITED First Third Party

ANDRAY VOIGHT TRADING AS COMPASS INSURANCE BRO9KERS

Second Third Party

ANDQBE INSURANCE (INTERNATIONAL) LIMITED

Third Third Party

Background

[1]      This litigation concerns an allegedly non-watertight residential building.  The fourth defendant (“the respondent”) is the incorporated vehicle for an engineering practice carried on by a Mr Sansom.  Mr Sansom is a director of the respondent.

[2]      The background to the proceeding is that the respondent took out a policy for professional indemnity insurance with the applicant.  The circumstances in which it did so were as follows. On 16 May 2003 Mr Voigt of Compass Insurance Brokers, which is a party to the proceeding, sent to the respondent an insurance proposal for completion by the respondent.  The respondent carries on business as an engineering consultant.   Compass had acted as the insurance broker for the respondent since

2001.   As a result of the proposal which the respondent completed and gave to Compass  for  submission  to  the  applicant,  a  policy  of  professional  indemnity insurance between the applicant as insurer and respondent as insured, came into effect 4 July 2007, effective until 4 July 2008.

[3]      In terms of the policy, the applicant agreed to indemnify the respondent for any valid claim subject to the terms of the policy.  Coverage under the policy was stated to be limited to design and consultancy services only.  The capacity in which the respondent was insured was as “engineering consultants”.

[4]      There is no dispute that the contract of professional indemnity insurance came into existence and that the respondent was insured under it for claims up to a limit of indemnity of $4,000,000.

[5]      In or about September 2007 the respondent received notice that the plaintiff in this proceeding would be bringing a claim against it arising out of defects in a residential building situated in the suburb of Orakei, which the plaintiff had purchased.  The plaintiffs’ claim against the respondent arose out of an inspection of the house property which the respondent carried out on their behalf in June 2004.  As part of the report which the respondent prepared for the purchasers, and which was dated 29 June 2004, the plaintiff reported that the moisture content readings that had been taken gave “no indication of dampness”.  The plaintiff alleges that the report was wrong and that the respondent had been negligent in preparing it.

[6]      The plaintiff issued proceedings against a number of defendants including the respondent.   The respondent then joined Mr Voigt, trading as Compass Insurance Brokers, and the applicant, QBE Insurance (International) Limited, as third parties.

[7]      When the respondent received the claim in September 2007 it referred it to Compass who, in turn, relayed the claim to the applicant.  On 20 September 2007, the  applicant  wrote  to  the  respondent  (care  of  Compass)  declining liability and making express reference to the limitation of liability “under the Building Defects Exclusion”.  That clause of the policy provided as follows:

Building Defects Exclusion

QBE  shall  not  be  liable  in  respect  of  any  claim  alleging,  arising  directly  or indirectly out of:

A.        the  failure  of  any  building  or  structure  to  meet  or  conform  to  the requirements of the New Zealand Building Code contained in the First Schedule to the Building Regulations 1992 or any applicable New Zealand Standard (or any amended or substituted regulation or standard) in relation to leaks, water penetration, weatherproofing, moisture, or any effective water exit or control system;

OR

B.         mould, fungi, mildew, rot, decay, gradual deterioration, micro-organisms, bacteria, protozoa or any similar or like forms, in any building or structure.

Pleadings

[8]      The amended statement of claim by the respondent sets out three bases upon which the respondent seeks to establish liability against the applicant.  The first is that the applicant indemnified the respondent’s consultancy practice in respect of the type of matters that are the subject of the claim that has been brought against the respondent.  An issue that arises in connection with that claim is whether in fact the insurance policy that was admittedly entered into covered the situation from which the claim arose or whether an exclusion of liability clause applied.  The next cause of action alleges that the applicant is vicariously responsible for negligent misstatement made by the broker with the pleaded statement being in the following form:

5.AT a precise time unknown to the Fourth Defendant, but sometime in June, 2003 and before the Policy was entered into as between the Fourth Defendant and the Third Third Party, the Second Third Party telephoned Mr Samson and advised that the Building Defects Exclusion related only to works which the Fourth Defendant may undertake  to  a  leaky  building  and  did  not  affect  the  Fourth

Defendant’s  relating  to  the  Fourth  Defendant’s  consultancy  and advice practice.

[9]      The third cause of action asserts that the broker, in making the representation set out above, did so as the agent of the applicant and that the applicant ‘is estopped from denying the representation’.

[10]     The applicant now applies to strike out the respondent’s claim against it and as well it seeks summary judgment against the respondent.   The grounds of the application are:

(a)QBE does not have any liability under the insurance policy by virtue of the "Building Defects Endorsement";

(b)       QBE is not vicariously liable for any negligent statement made by the second third party (Compass) to the fourth defendant (Baccus) as at no stage did Compass act for Baccus during the negotiation of any contract of insurance or make any representation within the scope of actual or apparent authority of QBE;

(c)       a  professional  indemnity  policy  which  did  not  have  a  Building Defects Exclusion along the lines of the endorsement in this policy of insurance, was unobtainable at all material times by engineering consultants such as Baccus.

First issue:  does the Building Defects Clause exclude liability under the policy?

[11]     The essence of Mr Neutze’s submission is stated in the following extracts from his synopsis:

1.2As to the first cause of action, the claim by Baccus against QBE for breach  of  the  professional  indemnity  policy  has  no  prospect  of success due to the Building Defects Exclusion in the policy which excludes liability for any claim alleging, arising directly or indirectly out of, or in respect of, in effect, leaky buildings and water ingress in buildings.

1.3There is no possible doubt that the plaintiffs' claim against Baccus arises directly or indirectly out of a leaky building; it all relates to a leaky building and the cost of repairing the leaks and the alleged failure by Baccus to identify the leaks when it carried out a pre- inspection building report for the plaintiffs.   So, the first cause of action cannot succeed.

[12]     Mr Gould referred me to the evidence of Mr Sansom who deposed that when he completed the proposal for insurance cover he stated in at least two parts of the proposal form that the work of his practice involved ‘conditions surveys buildings’; and that in another part of the proposal he stated that this was some 50% of his practice’s work.

[13]     Mr Gould pointed out that in another part of the proposal,  Mr Sansom had responded to a question as to what he considered to be the primary and major loss exposure in the following terms:

The consultancy is considered to be expert in the above fields and if there is risk exposure it would be in the area of unintentional inadequate or mistaken advice.

[14]     The ‘above fields’ included the ‘conditions surveys buildings’.

[15]     As to the first issue, it is my view that the building defects endorsement excludes liability.   The alleged negligence for which the respondent seeks to be indemnified by the applicant resided in giving a negligently prepared report concerning water ingress into the house property that the plaintiffs purchased.  As such, it is a claim ‘arising directly or indirectly out of’ the failure of the building or structure to meet proper standards in relation to leaks, water penetration and weatherproofing etc.     The activity out of which the respondent’s claim arises is within the literal purview of the exclusion clause. That literal meaning is reinforced by wider considerations of context, as I now attempt to explain.   The purpose of including such a provision in the contract seems to be that activities which involve work providing services in relation to leaky buildings is a hazardous undertaking. The principal hazard lies in the fact that water penetration problems are often concealed or latent and the existence of the problem is hard to detect.   That is particularly so in an inspection that takes place in a non-invasive way, that is, the inspection does not involve opening up the building.  This risk was well-known in

2007.

[16]     The respondent’s area of practice involved activity in this hazardous area.  It was not the only type of activity that the respondent carried on but it was a very significant part of its practice.   If there was any doubt about what the Building

Defects Exclusion clause meant (and I do not entertain any) the background consideration of the work type which the respondent was involved in would be a relevant circumstance that would be available to assist in construing the provision. The proposal that the respondent submitted clearly raised matters of risk arising out of inspection of buildings.  One of the most obvious kinds of risks would be failing to detect that a building was subject to water penetration.   Given that aspect of background, when the insurance company sought to exclude liability ‘arising directly or indirectly out of’ lack of watertightness of a building, it seems beyond argument that the parties must have contemplated that the exclusion would extend to and include a negligent failure to identify a watertightness problem in a building during the course of carrying out a survey of the condition of the building.

Second issue:  did the statements that the broker allegedly made result in the insurance company being liable notwithstanding the exclusion clause?

[17]     The case for the defendant is that the broker, Mr Voigt, made statements to Mr Sansom which bound the applicant and which had the effect of either varying the terms of the insurance contract or which estop the applicant from enforcing the exclusion clause.

[18]     Mr Gould reminded me of the evidence given by Mr Sansom which was in the following terms:

9.Sometime later (the precise time I do not recall) Mr Voight (sic) telephoned me to advise that he had spoken to ‘QBE’ and that the Building  Defects  Exclusion  related  only  to  works  which  my Company undertook to a leaky dwelling and did not affect my Company’s policy relating to consultancy and advice practice.

10.Relying upon Mr Voight’s (sic) advice, I accepted the Policy as tendered by QBE and paid the premium.

11.For the subsequent years the Policy was renewed upon the same terms, including the Building Defects Exclusion.

[19]     “Mr Voight” referred to Mr Voigt, the principal of Compass Insurance, the second third party.

[20]     Mr Voigt’s evidence was rather different from that of Mr Sansom.  He said that he had “negotiated professional indemnity insurance on behalf of Baccus with QBE for Baccus’ business as an engineering consultant since 2001”.  He said that in or about June 2002 Mr Sansom telephoned him seeking clarification of the meaning of the Building Defects Exclusion and had asked him what effect the exclusion had. Mr Voigt said he told Mr Sansom he would look at it and get back to him.  He then reviewed the relevant documents and about two weeks later called Mr Sansom.  He said:

5.… I advised that taking into account his current work and type of reporting to  clients  it  was  hard to see  how  the  clause  could  be applied to him.  My understanding of his work at that stage, based on   his   proposal   declarations,   was   that   he   did   engineering calculations to do with commercial/domestic/concrete structures/bridges and detailed reports on building conditions/engineering and structures that had defects and problems. These reports were used, for example, by owners of the properties to establish liability in respect of defective construction and for court cases.   I note for example on page 2 of the supplementary questionnaire that is exhibit “B” to Mr Sansom’s affidavit, he states that 100% of his work is “remedial consultancy”.

[21]     He said that at no time did Mr Sansom tell him that he was involved in pre- purchase property inspections and that if he had this would have ‘immediately raised alarms with me because an insured carrying out that type of work is really putting his “head on a block”’.

[22]     Mr  Voigt  said  that  for  the  purposes  of  negotiating  renewals  of  the respondent’s insurance he considered himself at all times to be acting “as agent for Baccus on whose behalf I was arranging insurance”.

[23]     Mr Neutze was critical of certain aspects of Mr Sansom’s affidavit.  He said that the first indication that the respondent had ever given that it was going to allege that Mr Voigt told Sansom ‘he had spoken to QBE’ came in the affidavit of 18

September 2008.   Mr  Neutze was  of  the  view  that  the  Court  should  view  this evidence with suspicion because it had involved a claim that had been made very late in the piece.  I do not agree.  I consider that Mr Gould is correct in saying that there is no cause to give details of the evidence of discussions between Mr Voigt and Mr Sansom until this application was brought.

[24]     Assuming that the conversation was in the terms that Mr Sansom described, it is necessary to examine what effect it might have on the outcome of the present application.  It was the applicant’s position, consistent with what Mr Voigt said, that Compass was the agent of the insured and not of QBE.  This, Mr Neutze submitted to me, was relevant because it was necessary for me to consider questions of agency, having regard to the fact that the respondent intended to rely on s 10 of the Insurance Law  Reform  Act  1977  (“the  Act”).    The  first  issue  that  arises  is  whether  the exclusion clause in the insurance contract was effective to exclude liability for the respondent’s claim.   If that question is answered in the affirmative, it is then necessary to examine the contentions made that Mr Voigt gave certain assurances that the exclusion only related to construction activities or works which the respondent undertook.

[25]     The answer that the respondent provided to the applicability of the exception clause in the insurance contract is contained in the passages from the affidavit of Mr Sansom which I have set out above at [18]

[26]     Much of the argument that I heard was concerned with whether Mr Voigt had the necessary mandate from the insurance company to make statements on its behalf which would bind it as to the effect of the exclusion clause.

[27]     On another view of matters, though, the deposition by Mr Sansom could establish that Mr Voigt was merely the conduit in relaying to the insured the views of the insurance company as to the applicability of the exception clause.  So rather than the issue of whether the statements bound the insurance company depending upon the authority of Mr Voigt to make them, the real question is whether his evidence establishes to a sufficient level of cogency for the purposes of a summary judgment application that QBE said that the exception clause would exclude liability only in those cases where the claim arose out of remedial work that the respondent did to a leaky building rather than to consultancy and advice in relation to such a building.

[28]     However,  the  respondent  did  not  attempt  to  defend  the  application  for summary judgment on this ground but rather nailed its colours to the mast of Mr

Voigt’s purported agency to bind the insurance company.   In the end, just what approach is adopted may make little practical difference.

Section 10 Insurance Law Reform Act

Introduction

[29]     The next issue is whether the discussion that Mr Sansom said he had with Mr Voigt affected the terms on which the applicant contracted with the respondent or gave rise to an estoppel which precludes the applicant from denying liability.  These issues call for a consideration of s 10 of the Act which provides:

10.      Salesman, etc, to be agents of insurer

(1)       A representative of the insurer who acts for the insurer during the negotiation of any contract of insurance, and so acts within the scope of his actual or apparent authority, shall be deemed, as between the insured and the insurer and at all times during the negotiations until the contract comes into being, to be the agent of the insurer.

(2)       An insurer shall be deemed to have notice of all matters material to a contract of insurance known to a representative of the insurer concerned in the negotiation of the contract before the proposal of the insured is accepted by the insurer.

(3)       In this section the term representative of the insurer includes any servant or employee of the insurer and any person entitled to receive from the insurer commission or other valuable consideration in consideration for such person's arranging, negotiating, soliciting, or procuring the contract of insurance  between  a  person  other  than himself and such insurer."

Was the broker the agent of the insurance company?

[30]     While there is little doubt that Compass/Mr Voigt was a representative of the insurer, that on its own does not assist the respondent.  It is still necessary to enquire if the person whose actions or words are said to bind the insurer was an agent of the insurer. Sub-paragraph (2) does not require proof of agency, it is true.  But the effect of sub-paragraph (2) is to deem the insurer to have knowledge of matters that the representative had.    It  goes no further than that.   It does not make the insurer responsible for the statements or actions of the representative generally. In order for section 10 (1) to apply, the ‘representative of the insurer’ must have actually been an

agent of the insurer and acted within the scope of his actual or apparent authority as such an agent.

[31]     Mr Neutze referred me to the following quote from Principles of Insurance Law in New Zealand and Australia (Kelly and ALL Kelly and Ball, Butterworths, Sydney, Wellington, 1991), where it is stated:

The general rule recognised by the courts is that a broker is the agent of the insured rather than the insurer.  In Rozanes v Bowen [1928] 32 Li LR98,

101, Scrutton LJ stated that:

…in the case of marine insurance there is not the slightest doubt, and never has been the slightest doubt, that the broker is not the agent of the underwriter.

The general rule is not limited to cases of marine insurance.   It applies equally in relation to non-marine insurance (Anglo-African Merchants Ltd v Bayley [1969] 1 Li R 268, 279).

[32]     The foregoing extract is supported by New Zealand authority:  see Gaunt v

Gold Star Insurance Co Ltd  [1991] 2 NZLR 341, 345 where Gallen J said:

The second defendant was an insurance broker. It was not an employee or directly an agent of the first defendant and at common law the law is clear that an insurance broker is the agent of the person seeking insurance, not the insurance company from whom insurance is sought: see Anglo-African Merchants  Ltd  v  Bayley  [1970] 1 QB 311, 322; Norwich  Winterthur Insurance (Australia) Ltd v Con-Stan Industries of Australia Pty Ltd (1983)

2 ANZ Insurance Cases 77,912.

[33]     While Gallen J’s decision was reversed on appeal, the appeal decision turned on other issues and what Gallen J said on the law as to whether brokers were agents of insurers was accepted by the Court of Appeal.

[34]     Section 10 does not affect the question of whether a broker is the agent of an insurer; it is confined to the consequences that will flow once such an agency has been established.

[35]     It is necessary to bear in mind that the statements about the authority of brokers which are contained in the authorities discussed in the passage from Principles of Insurance Law in New Zealand and Australia, summarise the “general

rule”.  Whether that rule applies in this case requires a consideration of the principles of agency law which I will undertake next.

Actual authority?

[36]     If the broker was acting as the agent of the insurance company in this case, that conclusion will be arrived out because the broker possessed actual authority or ostensible authority.   I shall deal first with actual authority.

[37]     The affidavit evidence which the applicant has filed expressly negatives the existence of any authority on the part of Mr Voigt to bind the insurance company by saying that the Building Defects Exclusion clause applied only in circumstances where the applicant was involved in construction of the building, as opposed to reporting on the condition of an existing building.

[38]     There was no direct communication between the insured (the respondent) and the insurance company (the applicant) in this case.

[39]     From the respondent’s point of view, any conferment of authority can only be based upon what Mr Voigt allegedly told Mr Sansom.  I will first briefly consider what the law requires in order for actual authority to be established.

[40]     The first point is that any representation of actual authority must emanate from the principal: Armagas Ltd v Mundogas SA; The Ocean Frost [1986] 2 All ER

385.  In that case Lord Keith of Kinkel in his speech said:

The truth clearly was that they relied on the knowingly false representation made by Mr Johannesen, in implementation of his fraudulent conspiracy with Mr Magelssen, that  the  latter  had  obtained  specific  authority  from Mundogas. Mr Magelssen purported to conclude the charterparty in Copenhagen on 19 June 1980, and may thus be taken to have made a direct representation of his own that he was empowered to do so. But no representation by Mr Magelssen can help Armagas. It must be in a position to found on some relevant representation by the responsible management of Mundogas as to Mr Magelssen's authority: see Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 1 All ER 630 at 645–646, [1964] 2 QB 480 at 505 per Diplock LJ.

[41]     To the same effect is the following passage from Savill v Chase Holdings

(Wellington) Ltd [1989] 1 NZLR 257 at 314:

It follows that neither Chase Holdings nor Mr Savage had authority to give the undertaking of 29 May on Chase Corporation's behalf. A similar situation arose in Armagas Ltd v Mundogas SA [1986] AC 717. It had been suggested that an agent, having no ostensible authority to make a contract, had such authority to notify approval by his company's Board. At pp 733-

734 Robert Goff LJ said:

"[The] submission suffers, in my judgment, from the same defect as the reasoning of the judge, in that it confuses reliance by a third party on a representation by the principal that the agent had authority with an assumption by the third party that it would in the circumstances be safe to rely on the agent's representation that he had authority."

[42]     A live issue therefore, is whether actual authority can be based on the words of the putative agent.   In my view the Freeman & Lockyer line of cases does not block that possibility.

[43]     But the issue in this case of whether the broker was authorised needs to be separated  out  from  the  issue  of  how  the  defendant  would  prove  that  he  was authorised to make the statement that the insurance company in effect agreed that the defects exclusion clause only applied to cases of construction, and not to work done as a consultant or evaluator.  The only evidence that the respondent can point to that there was an actual authorisation of the broker was the conversation which Mr Sansom had with the broker in which Mr Sansom alleges the broker conveyed to him the company’s view about the scope of the defects clause.  The first possibility is that Mr Sansom has correctly reported the conversation.  A second possibility is that he has  correctly reported  the  conversation  but  in  fact  the  broker  did  not  have  the communication he said he did with the insurance company.   A third possibility is that Mr Sansom has not correctly reported the conversation.  If Mr Sansom is correct about the conversation it may be some evidence that the company communicated with the broker in the terms alleged.   If the company did communicate with the broker as alleged, then in the context in which that conversation took place, it must have been apparent to the insurance company that Mr Voigt as broker would communicate with the client the insurance company’s views.   If all of that was established, then the respondent could fairly claim that the insurance company actually clothed Mr Voigt with its authority to be its spokesman to pass on the limited effect that it was only going to rely on the Building Defects Clause in limited circumstances.

[44]     In other words there is some evidence in this case that the broker had the authority of the insurance company to say what he did about the limited effect of the exclusion clause.  To that extent, it seems to be different from cases such as Armagas Limited where the only evidence of authority came from the fraudulent agent himself and that was the limit of the evidence of authority.

[45]     The next step is to enquire what effect the foregoing reasoning has in the context of this case, which is an application by the defendant for summary judgment. I intend to be guided by the decisions of the Court of Appeal and the Privy Council in the cases of Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2NZLR 298 and Jones v A-G [2004] 1NZLR 433(PC), and particularly the following passage from Jones v A-G which makes reference to the Westpac case:

… But it is clear, applying the guidance given by the Court of Appeal in Westpac, that summary judgment should not be given for the defendant unless he shows on the balance of probabilities that none of the plaintiff's claims can succeed. That is an exacting test, and rightly so since it is a serious thing to stop a plaintiff bringing his claim to trial unless it is quite clearly hopeless.

[11]     In the opinion of the board, this exacting test is not satisfied in this case. The appellant may, or may not, succeed in establishing his version of events at trial. It cannot, however, be said at this stage that he cannot do so, and if the outcome of the action is potentially dependent on the facts found it is inappropriate to give summary judgment for the defendant. The board is persuaded that the Court of Appeal, in reaching a contrary view, gave less than proper weight to the conflict of evidence between the appellant and the constable, treating as uncontradicted evidence which was in truth very strongly contradicted, and attributing to the appellant an admission which he did not make. It is unnecessary to explore a number of other questions which were the subject of detailed consideration in the Courts below.

[46]     The  case  that  the  respondent  mounts  against  the  summary  judgment application is not strong.   But on a consideration of the summary judgment application overall, I cannot conclude that the respondent’s case in the area of actual authority is “hopeless”.

Ostensible authority?

[47]     Gallen J discussed ways in which a representation giving rise to ostensible authority might arise in his judgment in Gaunt v Gold Star Insurance [1991] 2

NZLR 341, 347:

It  is  clear  it  is  a  form of  estoppel  by  representation.  In  the  context  of insurance law an illustration is to be found in the decision of Derham v Amev Life Assurance Co Ltd (1981) 2 ANZ Insurance Cases 77,526. In that case the insurer had authorised the printing of business cards bearing its name and the name of the person who it was alleged was ostensibly an agent. The persons concerned had issued an interim receipt for payment on a printed form bearing the name of the insurer and also had letter heads, memo pads and notification forms supplied by the insurer and bearing its name. It was held the insurer was bound by the actions of the person concerned.

In this case the only factor upon which the plaintiff could initially rely is the fact that Mr Young was able to produce a proposal form, specifically that of the first defendant and it is suggested that possession of such a form is an indication  that  the  first  defendant  had  a  sufficient  relationship  with  Mr Young or the second defendant to make it reasonable for an outsider such as the plaintiff to assume that there was an actual agency.

While I am prepared to accept that most members  of the  public  would assume that Mr Young did have the necessary authority, for the principle to apply it is necessary to establish the first defendant had in some way acted so as to lead to a misconstruction on the part of the plaintiff and which would amount to an estoppel in terms expressed by Diplock LJ. I do not think that the   mere   possession   of   a   proposal   form   could   constitute   such   a representation. A broker might very well have proposal forms for a number of companies. The fact that it is a proposal form would tend to suggest that it is an initiation of negotiations for cover rather than the provision of cover itself and is not I think enough. It certainly does not come anywhere near the situation which was disclosed in Derham v Amev Life Assurance Co Ltd. However there is another aspect of the matter which has some significance. The proposal form indicates the period of insurance which it is intended to cover, that is, 26 May 1988 to 26 May 1989. The application itself is dated

27 May 1988.]

[48]     There is no element similar to those which Gallen J mentioned, present in this case.  Whether or not the respondent can claim that it is arguable that the broker/Mr Voigt was the agent of the applicant, comes back, again, to the question of the significance of the words that Mr Sansom claims Mr Voigt stated in the conversation that I mentioned in an earlier part of this judgment.

Summary

[49]     I conclude that the respondent may be able to establish that Mr Voigt told Mr Sansom that he, Mr Voigt, had referred the question of the scope of the building defects clause back to the insurance company and that he received the reply that the clause would only apply to actual construction work.   If the occurrence of that conversation cannot be ruled out, then it is possible that the respondent can establish

that Mr Voigt had the actual authority of the insurance company to make the concession that he did. Whether Mr Voigt’s remarks concerning the scope of the exclusion  clause,  and  whether  his  views  were  actually  reflective  of  what  the insurance company told him, are not questions that can be resolved on an application for summary judgment.

Conclusion

[50]     For all of the above reasons, I consider that the applicant has not satisfied the requirements  of  r  136(2)  to  show  that  none  of  the  causes  of  action  in  the respondent’s statement of claim can succeed.

[51]     The application is therefore dismissed.

[52]     I have not set out separate reasons why the strike out application should be dismissed but that result follows for much the same reasons that my decision on the summary judgment application is based on.

[53]     The parties should let me have brief memoranda not exceeding three pages on the matter of costs within ten working days of the date of this judgment.

J.P. Doogue

Associate Judge