AON Risk Services Australia Limited v Lumley General Insurance Limited

AON Risk Services Australia Limited v Lumley General Insurance Limited - [2005] FCA 133 - FCA 2005 case summary — Zoe

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Description of the principal issues arising and background to the formulation of those issues 1 The ultimate issue arising in the proceedings is whether a contract of insurance in relation to the Parkview at Grafton ('the Parkview') in the State of New South Wales was created and in operation between the second and third applicant hotel owners and operators Rifon Pty Ltd ('Rifon') and Ardilo Pty Ltd ('Ardilo') as the insured and the respondent Lumley General Insurance Limited ('Lumley') as the insurer by the time the Parkview was destroyed by fire on the morning of 27 June 2002. Grafton, is of course a major country town located in northern New South Wales. It is an issue which may be thus simply stated, but the identification of what may have constituted any such contract and for what reasons, is a matter of difficulty and complexity. It is readily apparent, from the comprehensive written submissions of the parties, that the task of setting out adequately and accurately the background circumstances, the nature and scope of the issues arising and their implications, and the respective contentions of the parties and supporting reasons, is as difficult as may be encountered in insurance litigation. There is additionally a subsidiary issue alternatively arising as to whether Lumley engaged in misleading or deceptive conduct arising out of the circumstances giving rise to the insurance issues. 2 The first applicant AON Risk Services Australia Limited ('AON') is of course a well known insurance broker and an assignee of the causes of action of Rifon and Ardilo pleaded against Lumley. The principal claim of the applicants is that the alleged contract of insurance was brought into existence, and remained in force and effect at all material times up to and including the time of the fire, as a result of arrangements made between AON on behalf of those hotel owners and operators of the one part, and SLE Worldwide Australia Pty Limited ('SLE') as agent for and on behalf of Lumley as insurer of the other part. There is no dispute as to those respective agency relationships. The hearing of the trial was set down to commence on 3 May 2004 but by agreement of the parties actually began on the afternoon of 4 May 2004. 3 The nature and scope of the contractual arrangements in issue is complex, and fall to be understood in the light of the convention which arose historically between insurance brokers and insurance companies, in particular in relation to the insurance of country hotels, which was known in the insurance industry as bordereau. It was country hotels in Australia which were the subject of the arrangements the subject of the bordereau convention conducted by SLE with at leastAON. That history was conveniently, and I think non‑controversially, outlined in the second affidavit of Mr Carr, a divisional director of the AON Speciality Group, as follows: 'Under an old-style bordereau, the agent accepts risks throughout a certain period, and only advises the underwriter at the end of the period of the risks that have been accepted. For example, with a monthly bordereau, the agent might accept risks on the 2nd, 7th, 15th and 29th of the month, and the first that the underwriter knows of those risks is when it receives the bordereau listing the risks at the end of the month. So in that old style bordereau, the underwriter might be on risk for most of the month, without knowing it until the next bordereau comes in from the agent.' It may be readily inferred that the bordereau convention evolved at a time of communication delays and exigencies of former times. Thus the historical reason for the bordereau appears to havereflected the delay in communications between country and city on the one hand, and the need for immediate grant of insurance cover on the other. 4 Mr Carr described the operation of the arrangements in their present form, which was referred to in communications between the parties as the country hotel bordereau or scheme, or similar expressions, as follows: 'The country hotels scheme therefore required immediate notification to SLE (through the two page survey and one page declared values/limits of liability sheet) of business accepted under the scheme. I would regard a risk as bound under the scheme from the date the documents were sent through to SLE. … My expectation on 31 May 2002 in relation to the Parkview Hotel was that Owen Quinlan would simply place the risk with SLE, using the documents required under the scheme. I did not expect Mr Quinlan to ask for a quote, and then to come back to me with the quote and ask me to see if the client was happy with the quote - nor did any of those things happen.' The abovementioned Mr Owen Quinlan was at all material times employed as a broker in the Hotel Insurance Division of the AON Specialty Group. His experience in the insurance industry as a broker and liability underwriter extended back to at least 1986, though he had not long been in AON's employ at the time the subject controversy arose. In short, the applicants' case was that Lumley as underwriter was placed at risk under the bordereau in operation between AON and SLE, as the actual contracting parties for that purpose, prior or up to the time of notification to the insurer of underwriting business accepted by the insurer's broker. It would appear that an insurer would normally conduct a bordereau relationship only in circumstances of an established relationship with a broker. 5 The 'two page survey and one page declared values/limits of liability' documents above referred to by Mr Carr comprised the vehicle for information to be notified by brokers, including AON, to SLE as agent for Lumley by way of establishment of a particular bordereau. The two page survey document was headed 'Hostpack Property Information' ('Hostpack' was spelt by the parties in their written submissions, in the case of the applicants as 'Host Pack' and in the case of SLE as 'Hostpak'; the latter will be the spelling adopted in these reasons). That survey required at least some of the information to be provided which might be expected by a prospective insurer of an Australian country hotel seeking fire insurance cover. The accompanying single page document headed 'Declared Values/Limits of Liability' required details of the risks and exposures applicable to be insured and the values respectively assigned in relation thereto. Neither document contained reference to Lumley or SLE; the mark 'AON' appeared on both, which was doubtless why the AON Specialty Group placed hotel insurance risks with another insurer, as well as SLE as agent for Lumley. 6 The applicants' case for indemnity was outlined in four alternative ways as follows: i) AON acting as agent for SLE for the purpose of underwriting country hotel risks, the latter company operating as agent in turn for Lumley, effected a contract of insurance between Rifon and Ardilo as the insured and SLE as the insurer, either on 31 May 2002 or 3 June 2002, by exercising AON's authority under a bordereau agreement; or ii) a contract of insurance came into existence by virtue of AON making on 31 May 2002 or 3 June 2002 an offer to SLE (conveyed by facsimile transmission) that Rifon and Ardilo as the insured would enter into the same at such premium rate as SLE might specify, being an offer which was accepted by SLE on 3 June 2002 by way of SLE completing and re-faxing to AON the Declared Values/Limits of Liability form which had been earlier filled out and faxed by AON to SLE on 31 May 2002; iii) on 3 June 2002 SLE as agent for Lumley made an offer to AON, by virtue of completing and re-faxing to AON a declared values/limits of liability form, to the effect that Lumley would enter into a contract of insurance with Rifon and Ardilo as the insured on the basis stated in that form; that offer was accepted by AON when it commenced to process the invoice for the insurance premium to Rifon and Ardilo on or shortly after 3 June 2002, AON having already assured Rifon and Ardilo that the Parkview would be insured from that date; that unorthodox manner of acceptance by AON of the offer made by SLE was permitted by the practices historically implemented by the two parties, being practices which required that in due course, AON would advise SLE that it had accepted the offer of insurance by delivering a 'closing' to SLE in relation thereto; or iv) on 31 May 2002 AON made an offer to SLE as agent for Lumley that Rifon and Ardilo would enter into a contract of insurance with Lumley at such premium rate as SLE might specify, that offer was accepted by SLE on 25 June 2002 when it forwarded to AON a copy of AON's earlier 3 June 2002 fax of the Declared Values/Limits of Liability form filled out (to which I have described above as re-faxing) addressed to SLE, upon which appeared SLE's identification stamp (called by the applicants in the proceedings, SLE's 'button stamp'). 7 The complexity of the third and fourth alternative ways in particular are difficult to fully comprehend until more of the detail of the case and its background has been narrated. The four ways so outlined were not necessarily intended by the applicants to be read in a mutually exclusive manner. Despite the apparent complexity and differences in wording of those four descriptions of the applicants' case, there is not a substantial difference between them. Each description involved the completion of insurance arrangements between Rifon and Ardilo as the insured and SLE as agent for Lumley as the insurer by the time of the fire on 27 June 2002, and drew upon the evolution of traditional practices which had operated between SLE as agent for Lumley as insurer and AON as broker for the insured, including practices in relation to the insurance premium rating of country hotels. They were practices which appear to have reflected communication delays of former times between country and capital cities in Australia. Those practices differed from the more familiar city household and motor vehicle insurance practices and procedures involving the issue of cover notes, pending the submission of signed insurance proposals and the assessment and subsequent payment of premiums, and ultimately the issue of standard forms of insurance policies recording the conditions of indemnity in comprehensively worded detail. They were practices based rather on the proximity of evolved relationships between insurance brokers and hotel proprietors, and the relationships between those brokers and city based insurers. 8 In addition to the applicants' claims framed in contract, the applicants brought a cause of action in the alternative, pursuant to Part V of the Trade Practices Act 1974 (Cth) ('TP Act'), to the effect that the applicants were misled and deceived by Lumley's agent SLE into believing that Lumley would accept that a contract of insurance had been created by the circumstances in which SLE issued to AON SLE's critical re-faxed communication to AON on 3 June 2002 and/or SLE's subsequent re-faxed communication to AON of 25 June 2002, each such communication comprising the Declared Values/Limits of Liability single page form previously filled out by AON on behalf of Rifon and Ardilo, and by then bearing the handwriting and signature of an SLE employee Ms Prasad, together with the handwritten date of 3 June 2002, except that later re‑faxed copy was additionally impressed with SLE's so‑called button stamp. 9 As I have mentioned above, the Court was informed that by agreement (in the nature of assignment) made between AON and the second and third applicants (Rifon and Ardilo), AON acquired from Rifon and Ardilo the right to enforce their causes of action against Lumley; the applicants pointed out that since AON and the insured have sued together, the Court should not be concerned as to which of the applicants has title to the insureds' rights of action against Lumley, and further that Lumley would obtain a good discharge if the Court should enter judgment against Lumley in favour of the applicants jointly and that judgment be satisfied. It is apparent that the case is essentially and in reality brought at the instance of AON, and that the joinder of Rifon and Ardilo has occurred in order to avoid a defence in the nature of abatement. By mutual agreement of the parties, the hearing of any issue as to quantum has been deferred. 10 My brief outline above of the applicants' case is digested in considerably more detail in the applicants' comprehensive written submissions of 39 pages provided to the Court on 10 August 2004, and the respondent's even more lengthy written submissions of 48 pages provided to the Court on 20 September 2004, to which the applicants briefly rejoined in writing on 15 October 2004. These reasons for judgment are of necessity lengthy, because of the need to extract much of the documentary evidence, as well as address the comprehensive submissions of the parties. Neither party subsequently made application to address the Court orally, but I was invited to hear such oral submissions as I might require. Lumley's submissions did not conform at all in sequence to the order in which the applicants framed their contentions, and thus created considerable difficulty for the Court to conveniently determine in what ways, and to what extent, issues were purportedly joined. Unfortunately therefore the task of the Court in identifying precisely where the parties came to issue, and in what respects, became a complex task, particularly in the light of the amount of viva voce as well as documentary evidence cited by Lumley's submissions in purported answer to the applicants' submissions. 11 The opening theme of Lumley's submissions was that the Court was being asked 'to rule that the giving of a quotation for insurance can render the giver of the quotation liable as if the quotation had resulted in a valid and binding contract', yet the quotation given on 3 June 2002 by SLE to AON, so Lumley contended, 'remained unaccepted until after the fire that was the risk to be insured against'. Accordingly Lumley submitted that 'there can be no liability in those circumstances, and [Lumley] should succeed.' The applicants' response from the outset, and in my opinion correctly so, was that such opening theme did not come at least directly to issue with the applicants' case, emphasising that the applicants relied primarily upon a bordereau insurance case, and only alternatively thereto upon a case of offer and acceptance. That replication of the applicants was well founded. Lumley's lengthy submissions refrained incidentally from using the term bordereau, if at all, despite the use of that term in SLE's own communications to AON. 12 Lumley provided at the commencement of its written submissions the following opening, which is appropriate to at once record as an aid to illustrating the complexity of the issues tendered by Lumley: (i) SLE provided AON with a quotation for insurance in respect of the Parkview on 3 June 2002, but AON did not purport to accept that quotation prior to 27 June 2002, being of course the date when the Parkview was burnt down; (ii) the law does not permit an offer of insurance to be accepted after the occurrence of the risk being insured against; (iii) as a matter of ordinary contract law, an offer cannot be accepted without the acceptance being communicated by the offeree to the offeror; (iv) not only was there no communication of acceptance of the quotation by AON to SLE, AON did not communicate prior to 27 June 2002 to Rifon and Ardilo, the joint owners of the Parkview, that cover had been effected; (v) SLE delegated to AON the right to incept insurance within certain agreed parameters; the parameters were agreed in writing, as Commonwealth legislation requires; (vi) the insurance for the Parkview was outside the scope of the delegation to AON (which Lumley identified in its submissions by the description the 'Hostpak Scheme'); (vii) the applicants' principal witness Mr Carr, the divisional director of the Hotel Insurance Brokers section of AON's administration, accepted that only Mr McGovern, AON's National Manager of the Hostpak Scheme, had the necessary authority to agree with SLE as to amendments to the scope of AON's delegation; (viii) in any event, Mr Bailey, the National Property Manager of SLE, did not represent that the scope of the delegation had been amended to include insurance policies with a $5000 excess; AON did not allege such a representation at any time prior to amending its statement of claim on 29 April 2004 (being two business days before the hearing of the proceedings), and to Mr Carr's reply affidavit sworn on the day the trial was to commence; (ix) the applicants did not call evidence from Mr McGovern to contradict Mr Bailey's denial in his affidavit that there had been no amendment to the scope of the delegation to include insurance policies with a $5000 excess (such as for the Parkview); (x) knowing that only Mr McGovern could have agreed on an amendment to the scope of the delegation from SLE, AON cannot be taken to have relied, and AON did not rely, on any statement by Mr Bailey to Mr Carr as effecting an amendment to the scope of AON's delegation; and (xi) thus the applicants cannot succeed because no contract of insurance was formed before the occurrence of the risk insured against. Lumley's written submissions were thereafter re-framed into fifteen segments, and more convenience for reference, I will adopt that framework in my presentation and resolution of Lumley's submissions. 13 The reference above to Mr McGovern was to a person described in the evidence as the manager of AON's country hotel business, while his subordinate, Mr Carr, was the most senior officer of the division of the AON Specialty Group known as AON Risk Services Australia Limited. The reference above to Mr Bailey was to a senior executive of SLE by way of National Property Manager, being Lumley's principal witness in the proceedings. AON's principal witnesses in the proceedings were the abovementioned Mr Carr, and his subordinate AON employee Mr Quinlan, who had only recently joined AON from another insurance company. The contentions in (vii), (ix) and (x) above were maintained, notwithstanding that the applicants' case was presented implicitly upon the footing that all relevantly pleaded conduct on AON's part was wholly adopted and affirmed by its directors by virtue of its bringing these proceedings. In that regard, there was no challenge to AON's retainer made by Lumley in the proceedings. I should also mention at the outset that the increase of the maximum insurance excess or deductible, in relation to claims against Lumley, from a former maximum sum of $2500, for the time being to $5000, was of course per se wholly to the advantage of Lumley and correspondingly to the disadvantage of AON and its insured customers. However the applicants asserted a quid pro quo to that increased excess or deductible by way of reduction in premium rates of 20%. 14 The applicants' initial response to Lumley's outline of its case was that the same did not present a fair summary or analysis of the applicants' case, and in particular, of that perhaps most critical aspect of the applicants' case, namely the terms of what constituted by then the bordereau insurance arrangements or conventions in operation for the time being evolved between SLE on behalf of Lumley on the one hand, and AON as broker on the other, representing for instance the presently insured entities (ie Rifon and Ardilo). Thus if the applicants' bordereau case is soundly conceived, what SLE provided to AON was not a quotation for insurance in the nature of an offer of insurance, but confirmation of insurance effected, in a sense unilaterally by AON as broker, upon the footing of the crystallisation of operation of the existing insurance 'umbrella' arrangements in the nature of a convention (ie the bordereau) between AON and SLE on behalf of Lumley in relation to the insurance of country hotels in Australia. That criticism of the thrust of Lumley's case was well founded, and exemplified the extent of Lumley's frequent failure to come directly to issue with the applicants' case. Because SLE acted at all times as agent for Lumley, reference to either in these reasons can be read almost invariably to be reference to the other.

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Outline in more detail of the context (other than the detail of relevant correspondence) in which the dispute crystallised and of the nature of the dispute. 15 Prior to 30 May 2002, Rifon and Ardilo orally retained AON as their insurance broker to procure on their behalf both property and business interruption insurance in respect of the Parkview for the period 31 May 2002 to 28 May 2003. That insurance broker relationship had been already established in earlier contexts, directly or indirectly. Rifon and Ardilo had entered into a contract for the purchase of the Parkview, and completion thereof was due to occur, and subsequently did in fact occur, on 3 June 2002. The managing director of Rifon and Ardilo, Mr Kingston, sent a faxed message to AON on 30 May 2002, marked for the attention of AON's Mr Carr, which sought written confirmation that an insurance cover was by then in place, and which referred to the circumstance that the 'handover' of the Parkview was to take place on the following Monday 3 June 2002. There was never a written response to Mr Kingston's fax. It is apparent that AON had omitted or neglected to act promptly to Mr Kingston's earlier request in that regard. AON's Mr Quinlan dispatched by fax to Lumley at 5.26pm on 31 May 2002 (being a Friday) the three page AON insurance initiating process, duly filled out in detail, which I have already described, that is to say, the two pages headed 'Hostpak Property Information' and the third page headed 'Declared Values/Limits of Liability', each in the printed pro forma provided earlier by SLE to AON, and stipulated by SLE to be used for the purpose of implementation of SLE's bordereau insurance practices. Both of these forms were purportedly filled out by Mr Quinlan, upon the footing of cover purportedly to take effect from 31 May 2002 to 28 May 2003 in favour of Rifon and Ardilo as the insured in respect of the Parkview. No specific reference to SLE or Lumley appeared on either form, however as mentioned above, each had printed AON's mark. 16 At that time there was in force an underwriting agreement made on 29 June 2001 between Lumley of the first part, Pacific Underwriting Corporation Pty Ltd of the second part and SLE of the third part, for SLE to market, arrange and enter into cover in relation to the insurance risks therein described as agent for Lumley. There was no dispute in the proceedings that SLE was the agent of Lumley in all material respects for the purposes of resolution of the issues arising. Nor was there any dispute that the benefit of any such insurance arrangements was held at all material times on behalf of the applicants Rifon and Ardilo as the owners of the Parkview. It is not necessary for me to set out any of the terms of that agreement. 17 As I have foreshadowed, the applicants' case was that at the material times, the arrangements in force between AON of the one part and SLE on behalf of Lumley of the other part, in relation to the Parkview, constituted in terms a bordereau, or an agreement or convention in the nature of a bordereau. I have later set out in these reasons a description of the notion of bordereau. As further foreshadowed already, the implications of the bordereau arrangement or convention, as outlined by the applicants, were that AON on behalf of SLE was entitled to constitute or bring into existence contracts of insurance in respect of country hotels in Australia between the persons or entities having insurable interests therein, and Lumley as insurer or SLE as agent on its behalf, on the basis of a unique form of offer and acceptance effected as between AON on behalf of the insured and SLE as agent for Lumley as insurer. That process did not involve any traditional process of offer and acceptance, but took the form of nomination to the insurer of insurable risks by way of completion and submission of certain information, being information of the kind required by the two forms I have already identified, and which will later appear in these reasons, what was unique was that insurance cover was intended to take effect simultaneously with the lodgement by the broker of the nomination with the insurer. 18 The applicants' case was further that the terms of a contract of insurance of the kind into which Rifon and Ardilo were to enter as principals, per medium of AON, were acceptable to SLE in advance by reason of the existing terms and practices of the bordereau,and that therefore the critical issue to be resolved was whether or not that contract of insurance did come into existence from the outset, at the instance of AON as broker, between Rifon and Ardilo as insured and SLE as agent for Lumley as insurer. Put more specifically, was there an absence of any essential step required to be undertaken, or of the fulfilment otherwise of any essential condition to be satisfied, on the part of AON as broker for the applicants, in order to bring into existence the contract of insurance sued upon. The alleged outstanding controversial step or condition, postulated by Lumley, was described by Mr Bailey in the context of his giving the following evidence under cross‑examination, as follows: 'Just so that it is clear, all that's missing so to speak from there being an insurance on your view of things is a confirmation from AON that this quote was acceptable? --- Yes that and, obviously reading Paula Meyer's comment down the bottom as well but, yes, AON did not ask us to go on risk buying cover. I understand you infer that but putting aside that note? --- Sorry yes. All that was missing was AON's reply signifying that the quote was accepted? --- That's correct. If Mr Quinlan on 25 June [2002] had said to Ms Meyer, please bind cover, then cover would have been bound immediately? --- I am sure she would have, yes.' I will later refer in more detail to what Mr Bailey above described as 'Paula Meyer's comment down the bottom as well', referring thereby to the foot of the Declared Values/Limits of Liability form filled out by AON and faxed to SLE on 31 May 2002. Where issue was thus joined by the applicants focused upon the operation of the bordereau concept or principle in the circumstances of the case, which on the applicants' case did not require the explicit giving of any such confirmation or request for cover or acceptance of a premium quotation. 19 Ms Paula Meyer, who had been employed by SLE at the material times as an underwriter, being apparently Mr Bailey's principal subordinate, gave the following evidence to not dissimilar effect of Mr Bailey: 'It is the case, is it not, that so far as you understand SLE's practices the only thing you say is missing for there to be a binding insurance is that there was no confirmation of cover made before the fire occurred? --- That's correct. Also to that document we also issued, it was my practice to issue at the end of every month, a letter back to each state branch telling them what cover had been bound. Now just taking my question one step further for the sake of clarity, the terms of the proposed insurance of the Parkview Hotel were perfectly satisfactory to SLE had a request for confirmation of cover been made? --- That's correct, yeah. Indeed if Mr Quinlan on 25 June [2002] had asked you to confirm cover during that discussion that is something you would have done immediately? ‑‑‑ Yes I would have said okay I will check with my manager to see if we can back date it because obviously the date that cover would be required I believe was 31 May [2002] and I would have then gone back to Owen in writing and confirmed whatever date that we had accepted and agreed to go on risk … It was usually the case, was it not, where a closing of the type of exhibit A6 was received by SLE, SLE went on risk for the period of insurance stated in the closing? --- Yes that's correct.' From the perspective of the applicants, as will later be explained, there was a procedural distinction between an agreement 'to go on risk', to adopt Ms Meyer's above expression, and a so-called 'closing'. 20 The principal issue emerging, as to whether the contract of insurance propounded by the applicants did (or did not) come into existence at any material time, because of the absence of acceptance of the alleged premium quotation propounded by Lumley, and therefore of any alleged binding or confirmation of cover communicated or confirmed by AON to SLE, and in particular by Mr Quinlan of AON to Ms Meyer of SLE (and/or Ms Prasad of SLE, I would add for completeness), involved the Court's consideration of inferences which each party respectively sought to propound or draw from a great deal of viva voce testimony and documentary evidence, and in particular, at least from the applicants' primary perspective, the documentary evidence and stipulations as to the terms of the bordereau for the time being prevailing. Before summarising that material, first from the applicants' submissions, and subsequently from the respondent's submissions, and in particular the extent to which the same are controversial, I should describe the evidentiary material, being material of essentially a documentary nature, upon the basis of which the applicants contended that an enforceable contract of insurance took effect prior to the fire on 27 June 2002. 21 As already foreshadowed, the applicants asserted that pursuant to the bordereau,to the extent that the same remained in operation as between AON and SLE in relation to country hotels in Australia, AON brought into existence a contract of insurance between the insureds (ie Rifon and Ardilo) and SLE as agent for the insurer Lumley, either on Friday 31 May 2002 or Monday 3 June 2002. That outcome was said by the applicants to have resulted at least primarily by virtue of the exercise by AON of its authority under the bordereau to the extent then in operation between AON of the one part and SLE as agent for Lumley, of the other part. There was seemingly no explicit dispute at least as to the subsistence of an insurance convention between AON and SLE at the material times, the terms whereof may be gleaned from documentation emanating from SLE communications with AON. The critical issue boiled down to whether the same was activated or otherwise crystallised in operation in favour of Rifon and Ardilo, and in favour of AON as broker relevantly on their behalf, in and by the events which happened. What was primarily asserted by the applicants to have occurred, in consummation and fulfilment of that process of obtaining insurance cover, was AON's implicit confirmation, as contained in Mr Quinlan's fax on AON's behalf to SLE sent at 5.26pm on Friday 31 May 2002 to Ms Meyer of SLE, and/or as processed by Ms Prasad of SLE on that following Monday 3 June 2002, and thereupon re-faxed to AON on that following Monday, to the effect that Rifon and Ardilo would enter into a contract of insurance in relation to the Parkview at such rate of insurance premium geared at least to the risk of damage or destruction by fire, and otherwise subject to the then prevailing terms and conditions of the bordereau. 22 That AON fax of 31 May 2002 to SLE comprised, as I have earlier particularised, three pages, together with a fax cover sheet. Contained within one page of that faxed material, being the single page I have earlier identified as headed 'Declared Values/Limits of Liability', were details of the risks proposed for cover, and the respective values or sums required to be the subject of indemnity, as follows: 'Section 1 : Material Damages Declared Values for the purpose of Co-Insurance and Premium Buildings and adjoining structures $600,000 Stock in Trade and/or Merchandise $20,000 Plant machinery and all other Property and Contents $400,000 Computer Systems Records and others $200,000 Total Declared Value $1,220,000 Sub-limits of Liability Accidental Damage $25,000 Section 2 : Business Interruption Item 1 Gross revenue - Hotel only including Bistro, Bottleshop $200,000/$250,000 Gaming revenue $580,000 Professional fees $25,000 Additional Increased Cost of Working $25,000 Section 3 : Burglary/Theft - Contents including liquor, tobacco and cigarettes $10,000 Section 4 : Money Money in hand or nightsafe $15,000 Money on the Business Premises during your Normal Business Trading Hours $15,000 Money on the Business Premises outside your Normal Business Trading Hours $15,000 Money in Locked Safe $15,000 Excess Applicable to all Sections of the Policy (except Earthquake Excess which is as per Policy) $5,000 XS' Thus it may be seen that the insurance of the Parkview proposed by AON on behalf of Rifon and Ardilo, and upon the hotel building in particular, came within the $10 million limit of authority conferred by Lumley upon its employee Ms Prasad, as processor of these bordereau forms, as the total sum the subject of an approved indemnity, inclusive of the hotel building. The other two pages of that faxed material comprised the Hostpak Property Information form, which was required to be filled out in order inter alia to determine the relevantly applicable insurance premium rate. Relevant to the disputes arising was that the single page form headed 'Declared Values/Limits of Liability', submitted by AON to SLE, nominated the above excess or deductible of $5000 as applicable to all prospective insurance claims. Neither form was, nor was required to be, signed by or on behalf of Rifon and Ardilo, such was the relative extent of informality involved in the activation of the bordereau in relation to a particular risk, and reflecting no doubt as it did implicitly the proximity of the relationship between AON and SLE. I should observe in passing that although the 'Limit of Liability' space provided for in this form was left blank, nothing turned on that circumstance. 23 Comprising the other two pages of AON's fax to Lumley sent on 31 May 2002, the Hostpak Property Information form, was reference to the applicants Rifon and Ardilo, implicitly as owners and operators (or proposed owners and operators) of the Parkview, as the Insured, and to the period of insurance required, being as aforesaid 31 May 2002 to 28 May 2003. The Parkview was by then scheduled to be the subject of completion of purchase by Rifon and Ardilo on the following Monday 3 June 2002, as AON well knew. As I have mentioned, that form also was not, nor was required to be, signed by or on behalf of Rifon and Ardilo. Thereafter was set out insurance survey information concerning the structure and condition of the Parkview buildings, its fire protection equipment and various hotel operational details. Neither that Hostpak Property Information form, nor the Declared Values/Limits of Liability form, contained any explicit reference to, or the provision for, the premium or the premium rate, though it would appear that neither were required to be stated otherwise by the terms of the bordereau. Both of those two forms, comprising in all those three pages making up two unusual insurance forms, were then in current use between AON and SLE, and had been so at least since 14 January 2002, having been apparently framed by SLE. That documentation thus served a somewhat analogous function to that of the traditional and familiar insurance proposal commonly used, for instance, in household and motor vehicle insurance contexts. 24 On Monday 3 June 2002 at 2.04pm, there was re-faxed back to AON from SLE the that same single page headed 'Declared Values/Limits of Liability' as Mr Quinlan had originally faxed to SLE on the preceding Friday 31 May 2002. Apparently it was not part of the convention to adopt any similar course in relation to the Hostpak Property Information form. That 're‑faxing' was undertaken by Ms Prasad, an experienced underwriter in the employ of SLE since 1998, and one of three persons (including Ms Meyer) engaged as middle executive SLE employees in the exercise of the underwriting function on behalf of SLE, the third being a Mr Hudson. It was Ms Prasad and not Ms Meyer who thus processed those forms. Each of Ms Prasad and Ms Meyer gave evidence in the proceedings on behalf of Lumley. Before that re‑faxing occurred, Ms Prasad wrote on the single re‑faxed page headed 'Declared Values/Limits of Liability', first, at the top right hand corner, 'Attention : Owen Quinlan' (the copy in evidence did not entirely reproduce the surname 'Quinlan'), and second, just below the middle of that single re‑faxed page, in large handwriting in an available blank space, the following: 'RATE : .22% G XS : $5,000 ALL LOSSES' Underneath that handwritten material was added Ms Prasad's signature and the date '3/6/02'. The 'G' apparently stood for 'gross', and the 'XS' to 'excess', or what is also commonly referred to in insurance parlance as 'deductible'. 25 The premium rate of .22% so specified by SLE happened to be the same as that appearing in Mr Bailey's important preceding email to Mr McGovern of AON of 4 March 2002, under the heading RATES, as applicable to brick walled country hotels, not having 'Any Timber Floors', and located in towns with a full time fire brigade. However 30% of the total areas of the Parkview floors were of timber construction, the remainder of the floors being built in concrete, as had been duly disclosed in the Hostpak Property Information form submitted to SLE by AON on behalf of Rifon and Ardilo. Had the Parkview floors been wholly concrete, and not just 70%, the Parkview would have qualified prima facie for that .22% rate. On the other hand, had the floors been wholly timber, the Parkview would have qualified for a rate of .275%. The above sum of $5000 for 'excess' in relation to claims, inserted on the Declared Values/Limits of Liability form, was asserted by Mr Bailey on behalf of SLE to be outside SLE's then prevailing notified parameter, of $2500 for 'excess', as stated in his said SLE fax to AON of 4 March 2002, notwithstanding that $5000 had been nominated as the excess in the Declared Values/Limits of Liability form submitted by AON, as well as having been so assessed by Ms Prasad (ante) in her own handwriting on the copy re-faxed by her. That constituted, on Lumley's submission, a critical basis for the proposition that the Declared Values/Limits of Liability form disclosed a proposal for insurance outside the then prevailing guidelines of the bordereau. In Mr Bailey's last preceding email of relevance to the bordereau, sent by him on behalf of SLE to AON on 4 March 2002, notice had been given by SLE that its 'deductible' (ie excess) entitlement was thereby increased from $1000 to $2500. As I have earlier affirmed, an increase in the amount of a deductible (or excess) alone would involve a change solely in favour of the insurer, as necessarily therefore would have been a further increase of the excess from $2500 to $5000, as I have already foreshadowed, unless the insured was to be compensated with a premium reduction, as the applicants also contended to be the case. As foreshadowed above, Mr Bailey emphasised in his evidence however that his primary concern, at about the time insurance was sought for the Parkview, was SLE's level of premium income, which was said to be not then more than 'break even', or approximately so, and thus an increase in the deductible or excess tended to threaten the quantification of premium income. No financial material in that regard was placed in evidence by SLE. 26 As I have already indicated, by 3 June 2002, the need for AON to secure cover for the Parkview had become urgent. AON appears to have dallied in attending to the requests of Rifon and Ardilo to attend to the matter, and completion of the purchase was about to take place. Mr Quinlan testified that earlier on 3 June 2002, he had spoken to a person at SLE, who identified herself as Natasha, 're terms for Parkview', and was told by her that Ms Meyer, being the SLE addressee of AON's controversial faxed offer of 31 May 2002, was 'not in' but that she (ie Natassha) would look for the AON fax and 'pass [it] on'. Mr Quinlan made a file note bearing date 3 June 2002 in his own handwriting to that effect. The evidence of Ms Prasad was that Natasha processed new business, renewals of existing business and premiums for SLE. Apparently no one at SLE did ring back Mr Quinlan, but Ms Prasad processed the Parkview material later on that day. 27 Ms Prasad explained in her affidavit evidence of 29 March 2004 that she had departed her place of employment at SLE at 4.00pm on Friday 31 May 2002, and therefore had not seen AON's critical faxed material until the afternoon of the following Monday 3 June 2002. That material had been apparently placed in her tray by that time by Ms Meyer, the addressee at SLE of the faxed material, and there was apparently no consultation between Ms Meyer and Ms Prasad in relation thereto. Ms Prasad was an experienced insurance risk assessor at SLE. Ms Prasad said in fact that she was not advised by any other employee within SLE about the circumstances in which the AON fax had been sent to or received by SLE, nor did she talk to anyone within SLE about that faxed material before responding thereto. But as I have pointed out elsewhere in these reasons, there were only three persons then engaged by SLE to undertake the underwriting functions of office which she performed (being Ms Meyer, Ms Prasad and a Mr Hudson), and any consultation by her, at least with Ms Meyer, would have presumably been readily achievable, if thought to be appropriate. Ms Meyer had been the author of important preceding faxes of 9 and 14 January 2002 to AON (infra), headed respectively 'SLE Country Hotels Scheme' and 'SLE Country Hotel Bordereau' and copied to Mr Bailey, and the subsequent important fax from Mr Bailey to AON of 4 March 2002, headed 'Country Hotel Bordereau', had been copied to Ms Prasad. Ms Prasad had been earlier referred to as the recipient of a copy of another important fax of 2 August 2001 sent by Mr Bailey to Mr McGovern of AON, headed 'Country Hotels'. Ms Prasad, as well as Ms Meyer, can be taken therefore to have been reasonably familiar with the implications of the bordereau convention. Each of those faxes is extracted later below in more detail. 28 Ms Prasad gave the following further testimony as to the circumstances of her writing upon, signing and faxing back to AON on 3 June 2002, that single page form headed 'Declared Values/Limits of Liability' (ie one of the three critical pages faxed by AON to Lumley for processing late on 31 May 2002), containing her abovementioned handwritten words 'Rate : .22% G XS : $5000 All losses', and her signature, and of her faxing back again to AON some 22 days later, that is, on 25 June 2002, a further copy of that critical single page bearing the same words, on this later occasion additionally bearing the impression of SLE's stamp (ie SLE's 'button stamp' so described by AON) placed over her signature earlier appended to that document: 'I wrote the quotation on the AON documentation (the page headed "Declared Values/Limits of Liability"), signed the quotation and faxed it back to AON on 3 June 2002 at 14.05 hours. It did not then have the SLE Worldwide stamp on the page. I may have added the stamp later, but I cannot recall the exact circumstances of the stamping of this quotation.' The addition of the affixation of SLE's stamp was submitted by AON to have added at least a degree of authenticity to this critical document. The evidence certainly gives the inference that Ms Prasad was experienced and knowledgeable in and concerning the function she undertook on 3 June 2002 with regard to the Parkview. 29 In relation to the calculated premium rate of .22% appearing in Ms Prasad's handwriting on the re‑faxed Declared Values/Limits of Liability form, Ms Prasad responded significantly in cross‑examination as follows: 'Is there some document which was in existence at that time which indicated the basis on which you should rate this risk? --- There was the bordereau rating piece of paper that we had. Right and did you apply that? --- Yes.' Ms Prasad identified Mr Bailey's earlier mentioned email of 4 March 2002 to Mr McGovern of AON, copied to her, as the document she understood contained (at least) the terms of a bordereau arrangement between AON and SLE as in force as at 3 June 2002. Incidentally both Ms Prasad and Ms Meyer described their function as employees of SLE as 'underwriter'. 30 The following further answers in cross-examination were given by Ms Prasad in relation to that important Bailey email of 4 March 2002, (infra), and to the earlier email of 9 January 2002 from Ms Meyer to AON (supra), and to the Declared Values/Limits of Liability form which Ms Prasad re-faxed to AON on the two occasions I have identified above: 'When you looked at this document after receiving it did you understand that it set out the terms of a bordereau arrangement between AON and SLE? --- Yes. Did you use this document when you calculated the rate that you set out on page 14 of the bundle [that was, I interpolate, the AON document headed 'Declared Values/Limits of Liability']? --- That's right. I suggest to you that you started with a rate of .275 per cent because that was appropriate where there were any timber floors and the hotel was in a town with a full time fire brigade? --- That's right. You knew that there were timber floors because of the document on page 8 which you'd received which said that the floors were 30 per cent wood? --- That's right. You then applied, did you not, a 20 per cent reduction to accommodate the $5000 deductible? --- Yes (I interpolate to confirm what she actually wrote down was 'less 20% disc ($5000)') … What was it that made you give the 20 percent reduction in premium in response to the excess of $5000? --- Well I knew that AON were… aware that they could take a further 15 percent for two and a half thousand excess, and then when they asked for $5000 I just worked it out myself and gave them an extra 5 per cent off. Did Mr Bailey at any time say to you before you filled in the document … if a client or a broker is prepared to accept a $5000 deductible you should quote on the basis that the premium is reduced by 20 per cent? --- No. … Do you say in this case that the increase in the reduction of the premium from 15 per cent which was applicable to a two and half thousand deduction to 20 was just decided by you? --- Yes. When you received the documents which are at pages 8, 9 and 10 [ie I interpolate to observe, the two pages headed "Hostpak Property Information" and the third page headed "Declared Values/Limits of Liability", which I have already identified] at some time on 3 June 2002 you were satisfied, weren't you, that there was no information missing which was necessary for you to calculate the rate? --- Yes.' That Ms Prasad purportedly rationalised her premium calculation for the Parkview upon the footing, in part, of a gratuitous allowance of 'an extra 5 per cent off', was somewhat enigmatic, and did not serve to assist the credibility of Lumley's case, as will become more apparent. 31 Ms Prasad's last answer above extracted, in the light of her preceding answers, begs in reality the true commercial rationale for the premium reduction of 20% allowed by SLE in favour of Rifon and Ardilo, if it was not to accommodate the increased $5000 deductible in favour of SLE over and above the preceding $2500 deductible level specified in Mr Bailey's preceding email to AON of 4 March 2002. Moreover there remains for critical consideration in this context the matter of Ms Meyer's handwriting appearing at the foot of her email of 9 January 2002 to Mr Edwards of AON, which was copied to Mr Bailey (infra). Upon the footing of the foregoing evidence of Ms Prasad, it was submitted on behalf of AON that in this very case, Ms Prasad calculated the premium rate in reality on the basis that the bordereau for the time being, as identified by the applicants, relevantly applied, and used her record of the currently applicable bordereau rates for that purpose. There is substance in that submission, as will further emerge. 32 Ms Prasad concluded her affidavit in terms that reflected her advocacy of Lumley's case, as follows: '11. At no stage did Mr Quinlan ask me to bind cover for the Parkview Hotel. 12. At no stage did I receive any acceptance of the quotation issued for the Parkview Hotel.' That evidence begs the issue as to whether in the events which happened, cover had become bound, either by virtue of the bordereau process having been implemented, or as a matter of offer and acceptance according to the general law of contract, the former being the applicants' primary and preferred case. In order for what I have already recorded to be put into context, it will be necessary for me to refer to more evidence, particularly of a documentary kind. In that regard I would point out that the evidence in the present proceedings is difficult to present in an adequately sequential way, that is, as indeed both parties implicitly experienced in the presentation of their respective written submissions to the Court. 33 As I have earlier recorded, there was faxed back to AON from SLE on 3 June 2002 the Declared Values/Limits of Liability single page document bearing Ms Prasad's critical hand‑written endorsement 'Rate : .22% G XS : $5000 All Losses'; that occurred at 2.05 pm. Mr Quinlan's evidence was that when he received that faxed document so endorsed by Ms Prasad, 'I regarded it as confirmation that SLE had bound the cover.' It was submitted by AON that such testimony of belief on the part of Mr Quinlan was not in substance challenged in cross-examination, though I think that his belief in that regard would be relevant only to an explanation of his subsequent conduct, and would not constitute evidence of the objective fact as to whether or not SLE did thereby bind cover on behalf of Lumley in favour of AON and/or Rifon and Ardilo in conformity with the operation of the bordereau,or else by way of offer and acceptance. Mr Quinlan did not thereupon telephone SLE for confirmation to the effect that SLE had bound cover, consistently perhaps with that asserted belief on his part. In any event, Mr Quinlan '[s]ometime after 3 June 2002 … gave the fax from SLE of that date to John Charles of AON for him to prepare the account for the client for the premium,' to cite his affidavit evidence. Yet to add to the complexity of the enigmatic applicants' case, Mr Charles omitted to activate to SLE any such 'account' until after the fire. 34 The purchase of the Parkview was completed on 3 June 2002 by payment of the balance of the purchase price. Assurance had been sought and received verbally by the general manager of Rifon and Ardilo (Mr Camkin) on 31 May 2002, from either Mr Carr or Mr Quinlan (or both) of AON, to the effect that insurance covers were 'in place' as from 3 June 2002, being a request for confirmation subsequently made in writing by Mr Camkin by way of fax to Mr Quinlan of AON, and sent on 1 June 2002 in the following terms: 'I refer to our conversation yesterday (31/5/02) regarding the Park View Hotel, 93 Prince St Grafton, confirming that there will be Insurance Cover effective Monday June 3, 2002 through AON Insurance for the following: · Building and Contents · Public Liability · Fire · Burglary · Money loss Can you please ensure we receive a fax (fax number 6643 3686) of the cover note by 10.30 am on Monday June 3, 2002 as this property settles at 11.30 am on this date, with David Kingston taking ownership at this time. …' Neither Mr Carr nor Mr Quinlan rang back in order to disabuse Mr Camkin as to the accuracy of what he claimed to have been so confirmed to him. No cover note as such was however subsequently issued by SLE by or on behalf of Lumley, or otherwise. It appears that the issue of cover notes played no documentary part in the bordereau process. If the bordereau had been validly implemented on AON's part in relation to the Parkview, the contract of insurance in favour of Rifon and Ardilo would thus have been effected for the ensuing year of cover as and from 3 June 2002 (I would not impute that date as 31 May 2002, the AON faxed material not having been sent until after 5.00pm on that Friday, and thus outside business hours). 35 A matter of significance to the operation of the bordereau process, which should be at once pointed out, is that despite what was indicated by SLE's critical email of 4 March 2002 to AON as to rating of premiums applicable to country hotels, by reference to the construction material of a hotel and to the availability of local fire brigade facilities, neither the Hostpak Property Information nor the Declared Values/Limits of Liability forms stipulated for the proposer to nominate a premium rate; what was instead required to be provided was information to enable SLE to calculate the rate. That a potentially significant matter in the context of the present litigious dispute, because as AON duly disclosed in that first-mentioned form, the flooring of the Parkview was 30% timber (the remainder being concrete and thus presumably the equivalent of brick for rating purposes); moreover the second-mentioned form required the stipulation of the applicable deductible or 'excess', which AON disclosed as $5000, significantly to that subject in issue arising in the proceedings. Ms Prasad's calculations allowed for a $5000 deductible, conformably with what AON stipulated in the Declared Values/Limits of Liability form which it dispatched to SLE on 31 May 2003, and with what the applicants contended to have been accepted by them, in return for reduction in the premium rates by 20%. Ms Prasad claimed however, as appears from her evidence above extracted in some detail, that she did so only because AON '… asked for $5000'; that was a somewhat enigmatic answer, since there was no indication in the evidence that AON sought a higher deductible, implicitly to its disadvantage, at least per se. 36 Mr Quinlan also spoke of having a conversation 'on or around 31 May 2002' with Mr Carr, implicitly before he filled out Hostpak Property Information and Declared Values/Limits of Liability forms, which, after a subsequent telephone conversation with Ms Meyer of SLE, he sent to SLE on 31 May 2002 at 5.27pm by fax addressed to her. Once however Mr Quinlan received from SLE on 3 June 2002 at 2.04pm the faxed copy of the single page Declared Values/Limits of Liability form, containing the critical words 'Rate : .22% G XS : $5000 All Losses', he testified that he 'regarded it as confirmation that SLE had bound the cover'. Mr Quinlan said that he reached that conclusion against the following background: (i) on the previous Friday, he had informed SLE (and to the best of his recollection Ms Meyer, and being more likely so, since his faxed material of 31 May 2002 was addressed to Ms Meyer) that he wished to place the business with SLE, and he did not ask as such for 'a quote'; his reason for not so asking was bound up with AON's understanding of the nature and operation of the bordereau to the extent then still in operation; thus he claimed to have said to Ms Meyer '… I am not comfortable rating it. Could you please do the rating if I send you the information', to which he asserted she duly agreed (Ms Meyer for her part did not recall any such conversation); for what it may ultimately matter, the 30% timber floor factor would understandably have presented somewhat of a dilemma to Mr Quinlan, particularly in the light of the imprecise description of the Hostpak Property Information form as to 'Any Timber Floors' (my emphasis). Quite apart from the entitlement of AON and its clients to a lower-rating calculation, by reason of SLE's official confirmation of a premium discount of 15%, as specified in Mr Bailey's email of 4 March 2002 to Mr McGovern, there remained the factor, as to what he believed to have been put in place by SLE, of a further increase in the excess or deductible to $5000; (ii) under the scheme between AON and SLE, there were 'pre-agreed ratings' (that is, pricings) for different types of risk; thus he claimed that 'I did not think that I needed a quote from SLE to show to the customer, because I assumed that Mr Carr would have made it known to the customer, if the customer did not know already, what the price would be … When I asked SLE to rate the risk, it was a matter of fitting this particular Hotel into the agreed scheme,' Mr Quinlan referring thereby perhaps or apparently to the 30% timber floor component of the Parkview; and (iii) because he had previously informed SLE that 'I wished to place the risk with them, not because the risk formed part of an overall scheme, my reaction when SLE sent me a document with the rating on it, was that SLE was accepting the risk that I had offered the previous Friday'. Had SLE rejected the risk, according to Mr Quinlan, AON had the option of another insurer for its country hotel clientele, a factor which SLE relied upon conversely in support of its contention that the SLE re-faxed Declared Values/Limits of Liability form of 3 June 2003, and subsequently of 25 June 2003, were merely offers of insurance or quotations of a premium rate. 37 Nothing further of relevance appears to have subsequently occurred until on or about 25 June 2002, when Mr Quinlan had a conversation with Mr Carr in his AON office, in the course of which Mr Carr asked him whether 'the Parkview had been invoiced yet'. Mr Quinlan said that he could not then locate the Parkview file, but told Mr Carr nevertheless that the Hotel was 'on cover', and agreed that he would 'find some paperwork' so that an AON invoice could be prepared and sent to Rifon and Ardilo. Mr Quinlan thereupon obtained from SLE on that day a faxed copy of the two paged Hostpak Property Information and a further faxed copy of the one page Declared Values/Limits of Liability documents, the SLE sender or person responsible for the sending, to his recollection this time, being Ms Meyer, who did not in that context, or at any other time prior to the fire, appear to have communicated to AON anything to the effect that cover was not yet bound. That further re-faxed copy of the Declared Values/Limits of Liability form was the same as that which contained the handwritten endorsement of Ms Prasad, 'Rate : .22% G XS : $5000 All Losses', but which on this later occasion, as I have earlier mentioned, bore additionally SLE's so‑called 'button stamp' placed over Ms Prasad's earlier signature. Counsel for Lumley rejected the existence of any significance attributable to the addition of that stamp, but it may be said that to a third party, ignorant of the circumstance that the 3 June 2002 re-faxed copy was not stamped because the stamp had been temporarily mislaid by SLE, might conceivably have thought that the re-faxed copy bore some additional significance. 38 Mr Quinlan further deposed, by affidavit, against the objection of counsel for Lumley, as follows: '24. If Ms Meyer or anyone else from SLE had said something to me to the effect that cover was not bound, then, consistent with the instructions that Mr Carr had given me on 31 May 2002, to place the cover with SLE, I would have asked her to immediately bind cover. 25. When I telephoned SLE I felt somewhat embarrassed that I had mislaid the paperwork in relation to the risk. The reason that I explained to SLE my reason for needing the paperwork (that is, to invoice the client) was that I felt the need at the time to give a reason for my request for the documents to be resent.' I admitted that 'but for' category of testimony of Mr Quinlan into evidence as at least arguably explicable as to his absence of further pursuit thereafter of confirmation of cover, the weight and significance thereof being of course another matter. Similarly admissible in my opinion was Mr Quinlan's concluding paragraph of his affidavit evidence as follows: '26. If SLE had refused to bind cover, which did not occur, I would have immediately informed Mr Carr of that fact.' I should add for completeness that there was never any notification of refusal of cover on SLE's part communicated to AON at any time prior to the fire. Whether of course there occurred in fact a binding of cover in law in favour of Rifon or Ardilo (or AON on their behalf), prior to the fire on 27 June 2002, is of course the critical issue in the proceedings. 39 The remaining events not in apparent dispute, and which occurred prior to the fire on 27 June 2002 which destroyed the Parkview, were as follows: (i) although as earlier mentioned, Mr Quinlan handed AON's file to an administrative assistant Mr Charles of AON, shortly after 3 June 2002, to prepare the so-called policy closing and invoice, Mr Charles did not attend to any such documentary processing before 24 June 2002, when Mr Kingston wrote to AON to the effect that his companies Rifon and Ardilo had not yet received a cover note or premium invoice for the Parkview; as I have foreshadowed, Mr Charles did not do so until after the fire three days later; (ii) thereupon Mr Carr instructed Mr Quinlan to obtain from SLE a further copy of the Declared Values/Limits of Liability form, the previous copy having been mislaid along with the file, so that AON could invoice Rifon and Ardilo; as earlier mentioned, Mr Quinlan had already advised Mr Carr that insurance cover was in place for the Parkview; on the same day, Mr Quinlan had a telephone conversation with Ms Meyer, the terms whereof being disputed; (iii) in any event, Ms Meyer thereupon faxed to AON for Mr Quinlan's attention the further copy of Parkview's Declared Values/Limits of Liability form at 10.28am on 25 June 2002; as earlier mentioned, that faxed copy thus received by AON from SLE differed from that which AON had received back on 3 June 2002, in that as already indicated, SLE's so‑called 'button' stamp' had been placed over Ms Prasad's signature previously endorsed thereon (ie as at 3 June 2002); and (iv) Mr Quinlan calculated what he understood to be the premium amount appropriate to be invoiced to Rifon and Ardilo, being a calculation which reduced the .22% calculated by Ms Prasad (appearing of course upon the Declared Values/Limits of Liability single page form) by a further 20% discount, because he understood that such discount had been agreed as between AON and SLE, in circumstances where an insured would accept an excess of $5000 deductible in the case of any claim; Mr Quinlan did not then appreciate that in calculating the .22% which Ms Prasad had placed on the Declared Values/Limits of Liability form, that Ms Prasad had already reduced the Lumley premium rate by 20%, in arriving at her premium calculation of .22% upon the footing of the $5000 excess (see again [30] above). 40 The applicants' bordereau case, which reflected its primary position in the litigation, was to the effect that the bordereau convention in operation generally between the parties, duly crystallised by way of binding of cover in respect of the Parkview, by virtue of the events which took place on 31 May 2002 or else on 3 June 2002, the latter case involving of course the re‑faxing on 3 June 2002 to AON of the Declared Values/Limits of Liability form signed by Ms Prasad. The former would appear to be the more correct, in the light of SLE's 'Country Hotel Procedure' document, and in particular of what appeared under the heading 'AON - Acceptable Risks' (that document is later reproduced in full). Moreover the further re‑faxing of the same document by SLE to AON on 25 June 2002, by that time bearing SLE's 'button stamp', was alternatively or additionally relied upon by the applicants as indicative of completion of the process of SLE's underwriting of the risk prior to the fire which occurred two days later, or else as confirmation of a process of offer and acceptance. 41 On the same day as the fire, namely 27 June 2002, though after the Parkview had been already destroyed, AON caused to be delivered to SLE what I have already foreshadowed, and which appears to have been, a standard AON form of 'Insurer Closing - Brokerage Tax Invoice' addressed to SLE containing the following information: 'Date Issue : 27.06.02 Client Name : Parkview Hotel - Grafton Class of Insurance : Hostpack Mat Damage Period of Insurance : From - 31st May 2002 To - 28th May 2003 Policy No : (left blank) Your Proportion : 100.0000% Transaction Description : New Cover Hostpack Material Damage Insurance This document is a tax invoice… We have confirmed to our Client on your behalf the Cover as set out. If the Premium details have been inserted please indicate your acceptance of this as our closing instruction. Premium 3,160.96 Fire Service Levy 1,074.73 Premium & FSL GST) 423.57 Stamp Duty (No GST) 465.93 Brokerage 395.12 GST on brokerage 39.51 Total Amount A$ 4690.56' Both of the statements appearing above the premium etc amounts were part of a standard printed form for insertion of individual detail of an alleged insurance cover in place for the stated period of time. The applicants' case was that the timing of the 'closing' was of no adverse significance, and that on the contrary constituted a factor of significance in its favour, by reason of what appeared in SLE's Country Hotel Procedure document to be later extracted and discussed. That expression 'closing' has been already referred to in Ms Meyer's evidence extracted in [19] above. Finally I should record in this segment that by letter dated 22 July 2002, SLE's Mr Bailey wrote to AON's Mr Carr as follows: ' Parkview Hotel - Grafton Please find attached our cheque for $4,690.56 representing full refund of premium paid to SLE on the 15th July, 2002 settlement statement for the above hotel. As previously advised, SLE were not on risk for this client as cover was never bound with us.'

[34]

Areas of factual dispute between the parties as formulated by the applicants 42 Notwithstanding the complexity of the factual background or matrix, as well as the nature of the disputes, the subject of the present proceedings, the applicants contended that there were relatively few areas of at least critical, as distinct from peripheral, factual differences between the parties the subject of issue. 43 The first such factual issue was framed by the applicants to be whether the terms of the bordereau in operation between AON and SLE were orally amended, in or about March or April 2002, and thus prior to the circumstances relating to the Parkview, to the effect that AON could bind Lumley to an insurance risk, in relation to which the insured entity was prepared to accept a claim deductible or excess of $5000 in return for reducing the premium rate calculable in the context to that agreement by 20%. The applicants contended that if the Court was to find that the bordereau was amended in those ways, then the applicants are entitled to succeed in the proceedings. It will be recalled that the last relevant formal communication made by SLE to AON, namely Mr Bailey's email to Mr McGovern of 4 March 2002, stated 'To increase deductible to $2500 discount of 15% applies to above rates'. 44 The second such factual issue was framed by the applicants to be whether Mr Quinlan in fact had a conversation on 31 May 2002 with a SLE representative, being 'to the best of [his] recollection' Ms Meyer, to the effect claimed by Mr Quinlan, being the conversation which included his alleged request for her to 'do the rating' upon the footing of the Hostpak Property Information and Declared Values/Limits of Liability documents which he faxed to her on that day. The applicants contended that it was not positively put to Mr Quinlan, in the course of his cross‑examination, that the conversation so related by him did not take place. Lumley's evidence on the other hand was that Misses Meyer, Prasad and Field each stated that they did not have any such conversation, the applicants submitting in that regard that each of their respective testimonies could only be taken to mean that none of them could recall having any such a conversation. The applicants further contended that if the Court was to accept that the bordereau in operation by that time between AON and SLE included a term to the effect that the premium rate was to be reduced by 20%, in the circumstance where the insured would accept a $5000 deductible sum from claims, then AON effected the insurance cover, the existence whereof is the subject of the proceedings, by its own act pursuant to its bordereau arrangements made with SLE, and that the applicants were therefore entitled to succeed, even if the Court was not to accept Mr Quinlan's version of that alleged conversation with Ms Meyer (or any other SLE employee) on 31 May 2002. That alleged conversation of 31 May 2002 was said by AON to be only significant if the proposed insurance contract fell outside the operation of the bordereau as then in force. If the proposed insurance did fall outside the bordereau, but if the Court was to accept Mr Quinlan's evidence as to the occurrence and effect of his alleged conversation of 31 May 2002, the applicants' case was that the applicants must succeed, given the implications of Mr Quinlan's evidence that he had been instructed by Mr Carr to place the Parkview with Lumley through SLE, and further that all he needed to do was to obtain clarification of the premium rate, which he sought to do by his faxing of the documentation to SLE late on 31 May 2002. 45 The third such factual issue framed by the applicants was whether the telephone conversation between Mr Quinlan and Ms Meyer on 25 June 2002 occurred in or to the effect of the competing terms narrated by Mr Quinlan on the one hand, or by Ms Meyer on the other. As was correctly put on behalf of the applicants, the respective recollections of each of them involved areas of inconsistency. It was of course on 25 June 2002 that Ms Meyer had written on SLE's copy of the Declared Values/Limits of Liability document the following note: 'Owen rang - didn't know if this was with us. Cover is not bound. He to advised (sic) correct dates' Ms Meyer initialled the note and appended the date '25/6/02'. She testified by affidavit to having the following conversation with Mr Quinlan before doing so: 'Mr Quinlan: Have you got anything on the Parkview at Grafton? Ms Meyer: Hang on, I will go and have a look.' She said that she then went to Mr Bailey's office, where files of AON quotations and acceptances were retained for each State of Australia, and retrieved the AON (NSW) file, and then reviewed the Parkview quotation and transmission slip. Her account of her ensuing conversation with Mr Quinlan was recalled by her as follows: 'Ms Meyer: Yes, we've got it and it was quoted and faxed on 3 June. Mr Quinlan: Can you re-fax it to me because I can't find anything. Ms Meyer: Yeah, OK. Cover has not been bound. Are we supposed to be on risk? Mr Quinlan: I don't know. I will have to find out the date that cover is required from.' As I have already recounted, that further re-faxing of the Declared Values/Limits of Liability document, bearing Ms Prasad's handwritten details of 3 June 2002, with SLE's button stamp appearing over her existing signature, occurred on 25 June 2002 at 10.28 am. 46 Further as to the third issue, it was said by counsel for the applicants that the resolution of the conflict of the evidence of Ms Meyer in relation to that 25 June 2002 telephone conversation with that of Mr Quinlan was only relevant in any event to the alternative basis upon which the applicants put their case, namely that of offer and acceptance. It was the applicants' case that a contract of insurance had already been created by no later than 3 June 2002, either by AON's implementation of the bordereau,or by offer and acceptance leading to an affirmative contract of insurance effected by no later than 3 June 2002.

[35]

The contracting practices in more detail in operation between AON and SLE at the times material to the subject dispute and the implications of those practices to the circumstances giving rise to the present dispute 47 As I have already recorded, at the times material to the present dispute, there was in operation a bordereau agreement or convention between AON and SLE, the terms whereof do not appear to have been ever reduced to writing, whether by deed or agreement under hand, but are to be found to be evidenced in correspondence and the explanatory SLE document headed 'Country Hotel Procedure'. The nature and implications of the bordereau fall to be ascertained by reference to written material largely by correspondence and SLE's Country Hotel Procedure yet to be extracted in these reasons, being in essence material emailed from SLE to AON. 48 As to what therefore requires to be recorded, to be found in particular correspondence and documentation already foreshadowed but yet to be extracted, I will generally adopt the sequence set out in the applicants' written submissions. Those submissions commenced with reference to two emails of 8 July 2002, whereby SLE unilaterally brought to an end the bordereau with AON, save as to SLE's relationship with AON's Perth Office, being emails each written by SLE's Mr Bailey on 8 July 2002 and notified to various AON personnel headed 'Subject : Country Hotel Business'. By indicating the nature and extent of the processes SLE then brought to an end, some insight can be gained from SLE's communications with AON up to that time. That of 8 July 2002 reads as follows: '… wish to confirm that effective 1 August 2002, ALL business is to be sent to SLE for terms and conditions. Branches are unable to quote business from this date. Due to the number of policies involved and additional staff that SLE have employed, we will reply to all quotes/renewals within 72 hours, as long as

Minimum two page survey submitted
Details of sum insured and three year claims experience advised
Name of current underwriter and broker. SLE will advise terms and conditions or otherwise and NO cover will commence until accepted by the client and formally requested by AON. Rates will remain nett with credit terms 30 days from inception (this includes premium funding). Bordereau reports are still to be submitted by Perth office, 14 days maximum from end of month. Please ensure all relevant personnel are aware of these procedures.' The second email briefly corrected an aspect of that first email, in the following terms: 'Further to my email today, please amend 4th paragraph to read "SLE will advise terms and conditions or otherwise and NO cover will commence until accepted by the client, formally requested by AON and confirmed bound in writing by SLE".' The cross-examination of Mr Bailey upon his above emails and his responses included the following of significance: 'Now you wrote that in this email, did you not, because you were aware that prior to this time insurances had come into existence without a formal process of acceptance by the client of SLE's quote and then a formal request for cover by AON? --- That was one of the reasons that it was also done, yes, where AON would send the closing in to us, we'd process it and then we were chasing up the premium to be paid. The client hadn't accepted cover with AON and it was creating administrative problems. Do you agree that if his Honour were to look at any file of AON's or SLE's concerning a contract of insurance brought into existence after 1 August 2002 his Honour should be looking at documents which are offer and acceptance process? --- Correct. There would be no documents indicative of a bordereauarrangement after that date? --- I would suggest that should be the case, yes.' 49 The applicants submitted that the inference to be drawn from the circumstances and considerations which the foregoing SLE direction of 8 July 2002 implicitly recognised, and which part of Mr Bailey's above evidence described, was the initiative taken by SLE to terminate the prior practice whereby SLE had effectively bound cover with insured entities, or was in any event deemed to have done so, without all usual steps for imputation of the risk having been formally put in place. Mr Bailey gave the following further evidence in cross‑examination, which was described by the applicants as constituting a guarded admission supportive of those submissions: 'Now, do you agree that by 8 July 2002 you were motivated in writing the emails of that date among other things by a view that over the period of the bordereau both SLE and AON had often been lax in the procedures that they adopted to incept policies? --- I would say that not in 100 percent of instances was it probably done perfectly, no. And, let us not debate whether it was often or sometimes, there was an unacceptable level of informality about the way insurances had come into existence? --- No, I wouldn't say that. I think outside the parameters … things were done on an offer and acceptance basis. Within the parameters, because of the volume that we were talking about Australia wide, like 700 hotels in a 12 month period there was certainly potential with workloads that it didn't all occur.' The reference to 'the parameters' appears to have been the directions issued by SLE from time to time as to the terms of operation of the bordereau to thereafter apply for the time being, as between SLE and AON (and therefore of course the insureds introduced by AON to SLE). Mr Bailey's cross-examination subsequently included the following: 'What I am suggesting to you that because of whatever reason, but perhaps because of the closeness of the two businesses, sometimes insurances were created without the steps happening, first SLE quote, second AON acceptance in writing? --- At what time was this in 2002 you mean? Yes? --- That could have occurred.' 50 Mr Bailey accepted moreover that there were occasions when AON representatives would ring SLE and proffer AON's placement of its clients' cover through SLE on terms which SLE for its part might for the time being nominate. After Mr Bailey had been referred to the following passage of his affidavit evidence: 'If a risk fell within those parameters AON could automatically bind the risk without asking SLE to make an offer or acceptance of insurance. AON was required to and usually did inform SLE at the end of the month in which the risk was bound by way of a monthly bordereau. AON was required to and usually did forward to SLE the closings', he responded that he 'could not categorically say with the amount of hotels that we wrote around the country that I could say 100 percent certain that that occurred.' So much was nevertheless significant evidence, proffered of course on behalf of SLE, as to practices adopted in the dealings between SLE and AON, which were in line with the notion of bordereau postulated by the applicants. When then referred to the following further passage of his affidavit: 'For risks that fell outside the Hostpak Scheme parameters AON was required to and usually did complete a questionnaire described as a "Hostpak Property Information" sheet and provide a calculation sheet.' Mr Bailey further explained, not out of line with any of the thrust of the applicants' case, that ' … I was saying there again … that I couldn't categorically say it occurred 100 percent of the time. There would be circumstances as you intimated earlier where Mr Carr may ring me and say we're on risk and that scenario.' Mr Bailey's foregoing reference to 'the Hostpak Scheme' above was in context at least to what was otherwise described as the bordereau for the time being in operation between the parties. 51 On essentially the same or a closely related subject, Ms Meyer gave the following evidence, in the course of her cross‑examination, concerning the kind of circumstances asserted by the applicants to have been here involved: 'Did it happen from time to time that someone from AON rang you up and said AON wants to put a particular country hotel risk with SLE, its going to be with you, will you please just tell us what the rate is? - -- It did occur, but it would only be if there [were] circumstances surrounding that particular risk that the staff of AON weren't comfortable in rating or they weren't sure as to whether or not the rate would apply. So we would have a look at it and talk to them about it. In those cases you understood that SLE was going to get the business? --- Not always, because there was another player in the market of country hotels. So, like all things … as there was another player, we also knew that they were probably obtaining a quote from there to present to their client as well. But it was your experience that from time to time the employees of AON just didn't appear to be confident enough with actually how to apply the rate sheet in a given case and they would communicate with you or somebody else at SLE to … help them out? --- The staff we were dealing with at the time did not appear to be that confident with the rating structure, no. In the circumstances where you assisted AON in that way by specifying what the rate was, you understood that AON would proceed upon the basis that the rate given was a rate which SLE would enter into an insurance upon? --- That's correct, unless something significant changed with the risk that we weren't aware of beforehand or if, you know, if they wanted to increase some insurance or something like that, that would then be renegotiated.' The existence of that other 'player in the market of country hotels' was to a well known insurer identified elsewhere in the evidence as the State Government Insurance Office ('SGIO'). The applicants submitted that the procedure so described by Ms Meyer was almost precisely what Mr Quinlan said he understood represented that which was implemented between AON and SLE, and which took place in particular on 31 May and 3 June 2002 in relation to the Parkview. 52 The applicants thereafter submitted in that context also that the Declared Values/Limits of Liability form completed by AON for a former client called the Fernhill Tavern, and thereafter submitted to SLE, and which Ms Meyer signed on 13 December 2001 on behalf of SLE, was materially identical to the fax which SLE (Ms Prasad) sent to AON on 3 June 2002, save for the fact that the former related to renewal of insurance rather than new business; the following formula was written onto that standard one page form by Ms Meyer: '$1,531,000 x .22%', below which appeared her signature and the date '13/12/01.' That incident occurred about six months prior to the Parkview controversy. The applicants emphasised that Ms Meyer did not on that occasion write 'OK', or 'confirmed', or 'cover bound', or any similar statement upon the document sent in that context to AON. In other words, it was enough, for the purpose of fulfilment of what was necessary to attract the operation of the bordereau, that SLE was informally notified of an insurance thus put in place by AON with SLE. The following evidence was given by her under cross-examination at the instance of AON: '… If we go back to 1183, [of Lumley bundle of discovered documents] you agree, do you not, that by sending that document to AON you meant to indicate that AON could proceed upon that basis that SLE would accept the risk at that rate? --- Yes. And when you sent Exhibit A7 back to AON you understood that AON could proceed upon the basis that SLE would accept the risk at the rate stated? --- Yes. And in Exhibit A7 you have not written 'OK'? --- No. But nonetheless, be that as an oversight or an aberration, you agree that AON was entitled to understand Exhibit A7 when it received it in the same way as it was entitled to understand the document at page [1188] of [Lumley's] bundle? --- Yes.' The reference in the above questions to Exhibit A7 was of course to AON's Declared Values/Limits of Liability form completed by the existing owner of the Fernhill Tavern. 53 Returning to the circumstances appertaining to the Parkview, the applicants submitted that SLE by its conduct led AON to believe that even outside the established scope of the bordereau, in circumstances where SLE had indicated a premium rate that it would accept, AON could act on the basis that cover was bound, and further that a formal acceptance on AON's part was not always required. In putting that question, senior counsel for AON purported to equate a signification to the effect that the notion that 'SLE would accept the risk' equated in substance with binding cover per se. In that context, I was referred to the following further cross-examination of Mr Bailey: '… Can I just ask you about the receipt of the closing. I suggest to you that sometimes the way AON advised SLE that some quotation had been accepted was that AON simply sent to SLE a closing in the standard form? --- Yes, in some instances, yes AON would send us a closing and then we would be aware, yeah, then we were on risk. … In some cases the step of AON sending a separate statement that cover was required would be omitted and just the closing would be sent? --- Yes sometimes, yes, on some occasions. That a closing had been received, sorry. Yes and when that happened, even if it was an exceptional circumstance, SLE would accept that cover had been bound by reason of the receipt of the closing? --- That's correct. What in your understanding was the time limit for the receipt of closings that were applicable? … Firstly within the parameters of the bordereau? --- Within the parameters the closing was to be sent to us promptly and also it was to be included on a monthly bordereau that was to be sent to us from AON Perth to us in Sydney.' 54 As I have foreshadowed earlier, the change from the monthly bordereau, being what Mr Carr identified in his evidence extracted in [3] above, to the bordereau requiring immediate notification, or virtually so, appears to have occurred prior to the circumstances involving the Parkview. I refer in that regard to the following testimony of Mr Bailey given under cross-examination: 'Right, and outside the bordereau what were the time limits for receiving closing? --- We were to receive them again promptly. I am not 100 percent sure as to whether there was specific time stipulated that we must receive the closing. The main issue with us was when we received the payment of the premium. So as long as we were aware that we were on risk the cover had been bound, we would chase the closing at a particular time. I don't think at that stage that we physically said it had to be in at a certain time. But you have agreed have you not that there were some cases in an offer and acceptance context where SLE first learned that it was expected by AON to be on risk by AON delivering a closing to SLE? --- Correct, and we would go on risk from when we received the closing. … What I am suggesting to you is that sometimes as you understood it, the intent as between AON and SLE was that the cover would commence from a given date, say 1 June, even where the steps, the documentary steps, were not completed until after that date, and when they were completed cover would be from 1 June? --- Within the parameters of the scheme, yes, that would be the case. Outside the scheme it was purely a normal offer and acceptance as normal insurance practice is. … Would you agree that covers were implemented in a number of different ways and not according to a strict regime? --- I would suggest that within the parameters, yes, that that would certainly have occurred in some instances. … It was your practice, was it not, that when Mr Carr spoke to you, and you were prepared to do business, that you indicated a rate? --- Yes. And you say I understand that SLE was not on risk at that time. It was your expectation that documents would then be prepared by AON for submission to SLE and they would be made up using the rate you have nominated? --- Yeah, the rate Terry would write on that was sent to us saying, yeah a rate agree with Mark Bailey phone call, or whatever, would be sent to me. Now one of my girls, 'cause I would have written a note accordingly and placed it loosely in my New South Wales folder, if I wasn't around on holidays or whatever, so then whoever it was would be able to match the two pieces of paper together. HIS HONOUR: The rate that you quote, how long would that hold good in the absence of special indication to the contrary? In other words did you have a practice, or did you have a system, whereby when you quoted a rate those with whom you regularly dealt would know that was good for a week or a month, two months? --- There was no specific time your Honour. No there was no specific time, could be a month, could be two months. If obviously in that time I had then changed what the overall rating would be then probably supersede it. There was no specific time for the rate that I quoted verbally to Terry would last for, no.' Mr Bailey's reference to 'Terry' was of course to AON's Mr Carr. 55 That first recorded response of Mr Bailey was that closings were to be sent by AON to Lumley 'promptly', but in fact it was specified in the Country Hotel Procedure that '… stapled closings [were to be sent] by the 15th of the next month'. Thus depending on what day of a particular month cover might be bound, the closing in relation thereto would not be due for up to six weeks. In the meantime, within the parameters for instance of Mr Bailey's above testimony, SLE's premium quotations would remain open for one or two months, there being no specific or requisite time limit. 56 Ms Meyer testified that so far as she understood SLE's practices to be prevailing at the relevant times, the only material element missing in relation to the Parkview case, in order to sustain cover, was the delivery to SLE by AON of the closing. It will be recalled that AON caused to be delivered to SLE on 27 July 2002, but only after the fire early on that date, the document headed 'Insurer Closing - Brokerage Tax invoice' addressed to SLE, which has been extracted in these reasons. Ms Meyer gave the following evidence immediately prior to what I have earlier in these reasons attributed to her on that subject: 'Now if you just put aside the fact that in this case the fire happened before the closing was received, when you in paragraph 11 of your 5 May 2004 affidavit refer to "receipt by SLE of a closing" are you referring to documents like this example, exhibit A6? --- Yes.' The reference above to Exhibit A6 was to AON's said 'Insurer Closing - Brokerage Tax Invoice' addressed to SLE issued on 27 June 2002, which as earlier indicated, detailed the premium, fire service levy, GST, stamp‑duty and brokerage for the Parkview, for the period from 31 May 2002 to 28 May 2003. Ms Meyer's testimony in that regard appeared to reflect a misunderstanding at least of the text of the critical Country Hotel Procedure document attached to Ms Meyer's email of 14 January 2002 (which is later extracted in full), which addressed the process whereby cover would become bound, namely in advance of the submission of the Hostpak Property Information and Declared Values/Limits of Liability documentation by AON to SLE, and thus also in advance of the closing to occur by way of completion of subsequent formalities. I refer in particular in that regard to what appeared under the following headings of the Country Hotel Procedure, namely 'AON - Acceptable Risks' and 'AON - Closings'. 57 It was further submitted on behalf of the applicants, though in the context of discussion of its offer and acceptance alternative case, that the relevant insurance broking practices implemented between AON and Lumley also demonstrated ' … the manner of formation of contracts in the real commercial world … which cannot be analysed in terms of strict offer and acceptance, and it is necessary for the Court to infer a manifestation of mutual assent from all the circumstances.' I was referred in that regard to the reasons for judgment of Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, and in particular those reasons of Heydon JA (as he then was) at [74]-[81], where, after examination of a number of authorities relating to the difficulty of categorising all contracts into the form of offer and acceptance, his Honour postulated the following tests for determining the formation of a contract in the unusual circumstances there involved at 179: '80. If offer and acceptance analysis is not always necessary or sufficient, principles such as the general principle that a rejection of an offer brings it to an end cannot be universal. A rejected offer could remain operative if it were repeated, or otherwise revived, or if in the circumstances it should for some other reason be treated, despite its rejection, as remaining on foot, available for acceptance, or for adoption as the basis of mutual assent manifested by conduct. 81. In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?' Those principles were said to reflect the circumstances the applicants' contract case, when alternatively framed on an offer and acceptance basis, that is to say, by way of alternative to its bordereau case.

[36]

The notion of bordereau and the terms thereof in operation as between AON and SLE 58 Having outlined the nature of the contracting practices prevailing between AON and SLE, submitted by the applicants to have prevailed at the material times, it becomes next appropriate to address the submissions of the applicants specifically as to the notion of bordereau, in the context of AON's relationship with SLE at the material times,and the terms thereof in operation. 59 The meaning of bordereau was said by the applicants to equate with that of a 'binder agreement', and in an insurance context, to be defined by s 11(1) of the Insurance Contracts Act 1984 (Cth) as an authority given by an insurer to an insurance intermediary to enter into, as agent for the insurer, contracts on behalf of the insurer. I was referred by the applicants to what appears in the joint judgment of the members of the High Court in Con-Stan Industries of Australia Pty Limited v Norwich Winterthur Insurance (Australia) Limited (1985-1986) 160 CLR 226 at 234-235 (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ), where the operation of bordereau was explained and illustrated as follows: '… under the general principles of the law of agency, a broker is the agent of the assured, not the insurer … There will be rare circumstances in which a broker may also be an agent of the insurer, but the courts will not readily infer such a relationship because a broker so placed faces a clear conflict of interest between his duty to the assured on the on hand and to the insurer on the other. An agreement entered into on 1 November 1977 between Norwich and Bedford, known as a BordereauAgreement, created just such a situation. The agreement authorized Bedford to extend insurance cover in Norwich's name in certain specified categories and within specified monetary limits. Bedford was required to calculate the premiums on the insurance which it accepted on behalf of Norwich and to issue debit notes to the assured. Bedford implicitly had authority to receive payment of the premium from the assured and was required to pay that premium to Norwich, after deducting its commission, within ninety days of the end of the month in which the business was transacted.' 60 The reference above to Bedford in the context of that Con-Stan Industries dictawas to an insurance broker. A binder agreement in a bordereau insurance context would appear to involve or constitute one of the rare circumstances of dual agency above illustrated. The documentary material in evidence demonstrates AON and SLE referred to their relationship sometimes in terms of bordereau, though in written submissions, counsel for Lumley withheld from using the description bordereau, and referred instead to 'the Hostpak Scheme', not that by so doing, SLE could thereby change the essence of its relationship, and the incidents of that relationship, by so doing. Moreover as mentioned in the applicants' submissions, a broker having a binder from an insurer may also, and in the events which might happen, act outside its binder by obtaining insurance simply as agent for the insured: Kelan Pty Limited v General Accident Insurance Co Australia Limited (1987) 8 ANZ Ins Cas 61‑285 (affirmed on appeal (1997) 9 ANZ Ins Cas 61-369). A case of offer and acceptance has, of course, been put by the applicants, in the alternative to their primary case of bordereau in the present proceedings. 61 The applicants submitted that the description bordereau may in any event have two exemplifications or aspects, and that the use of the description bordereau in connection with each may be found in the earliest of the documents in evidence in which SLE purportedly set out the terms of the bordereau for the time being in operation, namely the email of 2 August 2001 from Mr Bailey of SLE to Mr McGovern of AON, which was copied to Ms Prasad, and headed Country Hotels, and which contained the following important contextual material: 'Further to our discussions last week in Melbourne and (sic) wish to propose that SLE are prepared to write Country Hotels … Australia‑wide on a bordereaubasis as follows: 1. Rateable assets up to $5,000,000 2. Burglary limit $10,000, Money limit $15,000 3. Hostpak wording excluding Flood and Fidelity 4. AON to issue certificates 5. Master policy per state to be issued 6. Survey to be forwarded with summary sheet immediately on risk 7. Monthly bordereauwith common due dates of 28 March and 28 September 8. Nil claims 3 years 9. Deductibles Cyclone above 18th parallel $10,000, between 18th and 22nd $5,000. All other losses $1000 if risk is in town with full time fire brigade, $500 all other risks 10. Minimum premiums $2,000 annual ($1750 net) or $1000 for period 11. Brokerage 12.5% We require monthly bordereau per state to be sent within 30 days of end of month and FULL payment of that bordereau by 90 days. Bordereau to contain Name, Location, Period, Assets, Rate, Premium, GST, FSL, S/D, Commission, Net Payable. We would like this to be centralised. RATES 1 2 3 Brick Walls .20% .25% .40% Any Timber floors above rates plus 25% Timber Walls .45% .60% .85% 1 Town with full time fire brigade 2 Town with volunteer brigade 3 No brigade within 25 km Loadings to above rates … I believe that we are all keen for this to proceed and look forward to your comments especially regarding the admin side.' The references to 'monthly bordereau' and the notion of 'rates' may be observed. A 'rate' reflects in premium percentage terms a five insurance risk classification, for premium assessment purposes, based upon the material components of a building. Item numbered 6 above may be observed, by reason of its component immediately on risk, which was reflective of the bordereau principle as to the broker binding cover or incepting a policy of insurance unilaterally, prior to or simultaneously with providing the detail of the risk to the insurer. The expression 'survey' is intended to involve the kind of information the subject of the two page Hostpak Property Information form. It may be seen that in this earlier exemplification of the bordereau, AON was required to particularise inter alia the rate and the premium. 62 The applicants pointed out that Mr Bailey was referring in his above SLE email to the monthly document of record which AON was at that time required to prepare, and which would list all of the insurances underwritten during the preceding monthly period, and that the notion of bordereau therefore in that context included documentation. Where however Mr Bailey first used the term bordereau in the above email of 2 August 2001, namely in the context on a bordereau basis, the applicants submitted that Mr Bailey used the same in the sense of authority, being an authority of the insurer and insured conferred on a broker to bind cover. The applicants further pointed out moreover that although the term bordereau may refer to a document to be prepared on a regular basis, for instance on a monthly basis, nevertheless 'the whole agreement or authority has come to be known as a bordereau as a general description of the arrangement.' The documentary material emanating from both parties, inclusive of the above email of 2 August 2001, read as a whole, supports that submission of the applicants. 63 The applicants next submitted that further terms of the bordereau between AON and SLE are to be found in emails and other documents which subsequently evolved, and that accordingly any requirement of the general law that the bordereau and its terms were to be reduced to writing continued to be fulfilled. In relation to the documentary material relevantly in evidence, what next followed in sequence to Mr Bailey's above email of 2 August 2001 was an email from AON's Ms Desiree Raymond (Mr McGovern's assistant) to SLE's Mr Bailey of 15 August 2001 headed 'Hostpack Material Damage - Country Hotels - SLE Facility', which addressed initially the underwriting category of offer and acceptance as follows: 'Mark - this is [an]email I intend sending to all AON Product champions in relation to the new facility… "We are now able to process these covers, using standard Hostpack Risk Code and Insurer 979 108. 1. Please note that covers placed with SLE which are NOT part of the facility are NOT to be processed on this insurer Code (use 979 101). 2. Closings are not to be issued for this facility - they will be co‑ordinated by this Branch and (sic) end of each month. 3. Credit Terms are STRICTLY 90 days and all cover ceases if unpaid to SLE by this time. 4. All covers are to be processed NETT OF COMMISSION (12.5%). 5. The facility is to be managed by applicable Product Champions in each State-ratings etc are not to be given to individual Account Execs. 6. The facility is OFFER AND ACCEPTANCE and a Questionnaire must be completed and sent to Mark Bailey at SLE with request for cover. Underwriting information, provided by SLE is as follows: Further to our discussions last week in Melbourne and (sic) wish to propose that SLE are prepared to write Country Hotels… Australia-wide on a bordereaubasis as follows:"' Thereafter followed items numbered 1 to 12 of the SLE email of the above 2 August 2001 to AON, which set out the conditions of the bordereau basis of underwriting, and which included the following: '6. Survey to be forwarded with summary sheet immediately on risk 7. Monthly bordereau with common due dates of 28 of each month … 9. Deductions… All other losses if risk is in town with full time fire brigade, $500 all other risks. 10. Discounts - Where we are able to obtain $1000 excess, SLE are prepared to grant a 15% reduction on existing rates. Where we are able to obtain $2500 excess, SLE are prepared to grant a 25% reduction on existing rates. … 'We require monthly bordereau to be sent within 30 days of end of month and FULL payment of that bordereau by 90 days. Bordereau to contain Name, Location, Period, Assets, Rate, Premium, GST, FSL, S/D, Commission, Net payable. …' Mr Bailey agreed understandably, in the course of his cross-examination, that the above extracted paragraphs numbered 1 to 6 of this email of 15 August 2001 '… related to what was proposed as an alternative facility, being in the nature of an offer and acceptance business arrangement, whereas subject to the alterations denoted 5, 7, 8 and 10 above, the items incorporated generally as those numbered 1 to 12 repeated and maintained in operation the terms of the bordereau described in the earlier email'. 64 The evolution of the terms of the bordereau in operation between SLE and AON was next reflected, according to the applicants' submissions, in an email of 9 January 2002 from Ms Meyer of SLE to Mr Edwards of AON, which was copied to Mr Bailey of SLE, and headed 'SLE Country Hotels Scheme'. That email contained inter alia the following amendments and/or additions to what in the foregoing context reflected the relationship by then in operation: 'To ensure the smooth running of this scheme the following points need to be addressed: 1. Survey to be forwarded with calculation sheet to SLE immediately you place us on risk. … 6. Also, if risk for any reason does not fit into parameters issued, you can refer to SLE for rate. … Excess of $1000 only applies to risk in Towns with full time fire brigade. Excess of $500 applies to Towns with Volunteer or Nil fire brigade. … You can increase the $500 excess to $1000 and we will allow a 15% rate discount. You can increase the $500 excess to $2,500 and we will allow a 25% rate discount. …' (I interpolate to observe again that the higher the excess or deductible sum in relation to claims, the lower the premium rate; moreover condition 1 above clearly reflected a bordereau concept) In my narrative of relevant documentation, it is convenient to draw attention to the fact, that underneath that text of the email of 9 January 2002, as placed in evidence, there appeared in what was identified later as Ms Meyer's handwriting the following: '$1000 ded inc $2500 15% rate reduction $1000 ded inc $5000 20% rate reduction' The references above to 'ded' was to deductible, and 'inc' to increased. That handwriting was strongly relied upon by the applicants, in the context of the first factual issue framed by the applicants in [43] above, to which I will later return. Mr Bailey explained that the reason why the 'rate discount' reduced from 25% to 15% in respect of deductibles (or an excess) of $2500 was because SLE 'needed more income'. 65 Next followed, by way of documentary evolution to which the applicants drew attention, was a further email from Ms Meyer of SLE to Mr McGovern of AON, again copied to Mr Bailey of SLE, which was sent on 14 January 2002. It was headed 'SLE Country Hotel Bordereau', and commenced 'As this bordereauhas now been in place for 5 months, we thought it was an opportune time to re‑assess our procedures and processing. What we found was that a lot of time was spent with duplications of closings, closing copies of entire files, obtaining correct closings that noted payments…'. Then appeared the following: 'Attached is a copy of the SLE procedures that we here have agreed to, and will be applied. These procedures outline SLE Actions and Requirements from AON. We are giving you this information so that there will be no surprises or expectations that SLE staff will just accept anything sent to us. There will be no exceptions to these procedures in how incorrect closings, missing files and payments will be handled. Please also note that from 01 February, 2002 our Credit Terms are 60 days, therefore it is imperative that everyone gets it right the first time. It is our belief that with this Procedure in place and everyone adhering to same, it will be (sic) facilitate a much smother operation of the portfolio and reduce administration costs and time for all concerned. Please review these two attachments, and contact us should you foresee any problems with compliance of same. …' Those two SLE procedural attachments comprised pro-formas of two documents to which I have already referred in these reasons, namely the two page pro forma document headed 'Hostpak Property Information' and the one page pro forma document headed 'Declared Values/Limits of Liability', each bearing the AON insignia at the top right hand corner of the page. In the light of the text of the above email of 14 January 2002, it would appear that the Country Hotel Procedure was intended to replace prior statements emanating from SLE as to the conditions of the bordereau and any alternative offer and acceptance process. 66 Also attached apparently to both of Ms Meyer's above emails, or at least that of 14 January 2002, was a two page SLE document headed 'Country Hotel Procedure'. It is a lengthy document, but because of perhaps its pre-eminence of importance, it is necessary that I set out the same in full:

[37]

'COUNTRY HOTEL PROCEDURE SLE - Renewals: Each State will be sent a listing of Hotels falling due and that are eligible to be placed onto the Country Hotel Bordereau (CHB). Respective Account Exec will be sent an advice of pending renewal and will be advised eligibility for CHB. Also supplied will be claims history and acknowledgement of Survey. If we do not have a survey on file, it will be advised and requested. AON - Acceptable Risk: Each State to fax to Mark a copy of 1) Quote/Calculation sheet (copy attached) 2) 2 Page Hostpak Property Information form (copy attached) as soon as you have bound cover. Please ensure that the Trading Name of the business in on all documents. Please ensure that all questions on Hostpak Property Information form are answered. If there are any problems/queries, SLE will address now. AON - Referrals - New Business/Renewals: To be clearly indicated on Fax. State to fax to Mark a copy of 1) Quote/Calculation sheet 2) 2 Page Hostpak Property Information form SLE will then advise rate and terms applicable. State to then confirm back to SLE if cover is or is not required. AON - Closings Insurer = SLE (not Pacific Underwriting) AON code 979 108 Client Name on Invoice to be same as Trading Name of Business on Closing Gross Revenue and Gaming Revenue to be separate sums insured under Section 2 Desiree to forward stapled closings by 15th of the next month. SLE - Match and Marry closings to Files. Three groups - File and Closing

File, no Closing
Closing, no File. SLE Action File, no Closing Email Desiree requestion copy of Closing within 7 days. Can be faxed. If not on risk, advice to be given. Closing, no File Email State, advising that we do not have a corresponding File and therefore are Not on Risk. If cover is required, accept cover from date Quote/Calculation sheet and 2 page Hostpak Property Information form to be provided. New closing also to be issued. If cover is not required - Cancellation closing to be provided. Errors - Minor eg Incorrect Deductible Altered Sub Limits Email State and advise what was bound is what will be applied in the event of a claim. Major eg Wrong inception/expiring date Incorrect premium/charges/brokerage Email State and advise to be corrected within 14 days. If no response, additional premium etc to be added to Renewal of that risk. Process as per closing. SLE - 45 days out Email AON Accounts and request confirmation of payment to be included in 90 day remittance. Provide them with Invoice number, Nett Payable and Insured Name. They will respond not paid Email State and advise that payment must be received that month paid Process and record details on Excel Spreadsheet reversed Contact Desiree and ask for replacement closing. If this new closing differs in anyway to previous, contact State. SLE - 60 Day Remittance SLE accounts to provide Property a copy of AON remittances. Remittance to be checked to ensure what closings we have processed have been paid. If different closing number but same amount, advise SLE accounts accordingly - payment to be married. If closing number we have processed has been cancelled/reversed/replaced for a different amount, email Desiree - corresponding closings to be sent to us within 7 days. Contact State if updated information required. SLE - Unpaid Unpaid in full at 60 days issue email to State advising that payment must be received in mid month remittance. If not paid by that time, cancellation letter will be issued. 90 Days Entire month should be accepted, processed, paid or cancelled.' The reference above to 'Mark' was to Mr Bailey, and to 'Desiree' was to Desiree Raymond, the assistant to Mr McGovern of AON. The reference above to 'Quote/Calculation sheet' was to the Declared Values/Limits of Liability single page document, and the reference above to '2 Page Hostpak Property Information form' was to what I have been already referring by that description. Mr Bailey agreed that the material appearing under the heading 'AON - Acceptable Risks' referred to the bordereau agreement or convention, whereas what appeared under the heading 'AON - Referrals - New Business/Renewals' referred to insurance contracts created by offer and acceptance. 67 The last of the evolving inter parties documents in chronological sequence of production, containing what the applicants contended to ultimately reflect the terms of the bordereau between AON and SLE at the times material to resolution of the issues the subject of the proceedings, comprised an email of Mr Bailey of SLE to Mr McGovern of AON of 4 March 2002, which was also copied to Ms Prasad (I have already made brief reference thereto). Headed 'Country Hotel Bordereau', that document provided as follows: 'Further to our discussions of 20 February where queries were raised in regard to 25% increase on all renewals After review as from 1 April the following rates are to apply to ALL NEW BUSINESS AND RENEWALS RATES 1 2 3

Brick Walls .22% .275% .45% 1a Any Timber Floors .275% .35% .55%
Timber Walls .50% .65% .95% 1 Town with full time fire brigade 2 Town with volunteer brigade 3 No brigade within 25 km (I interpolate to observe that those basic rates represented of course an increase above the basic rates set by SLE in its earlier email of 2 August 2001) … ABOVE RATES APPLY TO DEDUCTIBLE OF $1,000 ALL LOSSES To increase deductible to $2,500 discount of 15% applies to above rates. 25% Reduction applies to building rate where Total rateable values exceed $2,000,000. … Also as a matter of urgency can you reiterate to all concerned that closings and bordereau are to be correct and sent within 14 days of the following month. FOR ANY POLICY TO INCEPT WE REQUIRE TWO PAGE SURVEY WITH DECLARED VALUES/LIMIT OF LIABILITY PAGE SENT WITH RATES. … THESE RATES APPLY TO COUNTRY RISKS ONLY…'. Mr Bailey was unable to recall why the above email was not also copied to Ms Meyer. He confirmed that the above procedure was to be in fact applied from 1 April 2002 to all new business and renewals within the bordereau. I draw attention to the words '… and sent within 14 days of the following month', in relation to the remission of closings to SLE that period of 14 days may be compared with that of 30 days contained in Mr Bailey's earlier email to Mr McGovern of 2 August 2001, and the subsequent change to 'closings by the 15th of the next month' contained in the 9 January 2002 'Country Hotel Procedure' attachment to Ms Meyer's email of 9 January 2002 to Mr Edwards, which I have above extracted at some length. No further procedural alterations were apparently notified to AON by SLE before the Parkview was destroyed by fire on 27 June 2002. 68 In the context of the evolving so-called 'Country Hotel Procedure' terms reduced to writing, which I have reviewed, senior counsel for the applicants asserted that there was no issue between the parties that the insurance arrangements relating to the Parkview, in so far as the same reflected the bordereau, fell within the same, save for two controversial exceptions propounded by Lumley, each of which thus excluded the operation of the bordereau: (i) Lumley's case was that the highest excess or deductible permitted under the bordereau was $2500, whereas the indemnity which AON here propounded involved an excess or deductible of $5000; the applicants' response was that the bordereau was orally amended by SLE in relation to the Hotel's insurance to include an excess or deductible of $5000; and (ii) even if a $5000 excess or deductible fell within the parameters of the bordereau, there was not effectively attracted the operation of the bordereau, because Mr Bailey's email of 4 March 2002 to Mr McGovern contained the requirement 'For any policy to incept we require two page survey with declared values limit of liability page sent with rates', and the documents provided by AON to SLE did not satisfy that requirement as the notification by AON to SLE of 'rates'. It is appropriate to now address the applicants' submissions upon each of those two subjects. I should however point out that the foregoing $5000 deductible or excess issue arising is not to be divorced contextually from the issue the subject of the next following segment of these reasons for judgment, as will shortly be seen. As I have elsewhere emphasised, a major difficulty involved in the way in which Lumley has approached the resolution of this litigation has been not so much to confront those two critical issues in a discrete definitive way, but to tender issues which do not in terms necessarily address those two issues. I have already referred to the difficulty I have experienced in determining the extent and manner whereby the presentation of SLE's case has seemingly come to terms at least precisely with the issues tendered by the applicants for resolution.

[38]

The applicant's claim to amendment of the bordereau by way of 20% premium reduction from SLE as agent for Lumley in exchange or return for conceding a $5000 excess or deductibility on claims 69 It was the applicants' case that there was no issue arising between the parties to the effect that the insurance of the Parkview fell within the conditions of the bordereau, as evidenced in writing between or involving the parties. One qualification to that was whether the bordereau was amended orally prior to the fire, at the instigation of Lumley and in its favour, to include an increase of up to $5000 by way of excess or deductible in respect of claims, in lieu of that previously prevailing in the sum of $2500 as originally notified in SLE's (Mr Bailey's) email of 4 March 2002 to AON (Mr McGovern). As appears from that email, that excess was stipulated by SLE to operate in return for a 25% reduction or discount in premiums in favour of AON's clients. That amendment to the terms of the insurance arrangement between the parties propounded by the applicants is the subject of the first of the three main areas of factual issue propounded by the applicants in [43]-[45] above. Of course the higher the amount of the excess or deductible in respect of claims per se, the greater the prospective pecuniary benefit to an insurer and detriment to the insured. In framing that issue, I have of course ignored for the moment the critical handwritten detail subsequently added by Ms Meyer to the foot of that fax. 70 The applicants provided two examples of prior oral variations previously made to the bordereau between AON and SLE, in order to demonstrate that there was already in place an informal convention between the parties that variations to the bordereau could be put in place orally. The first was said by the applicants to have come into operation in January 2002. In relation to that variation, Mr Bailey stated in his affidavit evidence as follows: 'In early January 2002 SLE and AON entered into a separate and oral agreement for New South Wales concerning the renewal of Country Hotel risks where there had been no variation from the previous year', and that '[t]his agreement took place between myself, acting on SLE's behalf and Mr Carr, acting on AON's behalf.' In substance, so the applicants submitted, that earlier variation was to the effect that SLE would accept an across the board 25% premium rate increase for renewals if there was no variation otherwise in the terms of the insurance arrangements. Mr Bailey confirmed under cross‑examination that agreement as to that premium rate increase between himself and AON's Mr Carr took effect in relation to renewals due to be made in March 2002. 71 The second such variation was for an increase in the minimum premium from $2000 to $2500 to take effect after March 2002, being a variation, again in Lumley's favour, and which Mr Bailey further agreed to have occurred '… while the bordereau was still in operation', and thus before the bordereau was terminated as from 1 August 2002. 72 Addressing then the critical oral agreement propounded by the applicants the subject of the present proceedings, Mr Carr testified as to a discussion with Mr Bailey, in 'probably February/March of 2002', in which Mr Bailey said that if AON was prepared to increase the deductible to $5000, 'he would contemplate [a] 20 percent discount to apply to the premium base at that time'; the outcome was, to Mr Carr's recollection as follows: 'That the 20 percent was quite okay if we went to a $5000 deductible' … we had a facility where various deductibles were in place and if we wanted to increase those deductibles, for example from $1000 to $2500 I think at those times we had the benefit of a 15% reduction on the rating.' Mr Carr said that he could not remember whether Mr Bailey actually agreed to the proposition at the time of that discussion, but he asserted that 'I can most certainly from memory guarantee that it occurred within a space of a couple of days after that'. Mr Carr further confirmed that the $5000 deductible proposal related to country hotels, and that '… what we had with the alternative underwriter at that time was $5000 deductibles applying to metropolitan hotels'. That reference to 'the alternative underwriter' was implicitly to SGIO. Mr Quinlan's evidence on this issue, given without objection, was that Mr Carr spoke to him '…sometime prior to 31 May, saying that he had spoken to Mark Bailey at SLE and they'd agreed that we could use a 20% discount for a $5000 excess'. 73 Mr Quinlan carried out a calculation of the premium invoice value for the Parkview, involving a reduction of what Mr Quinlan believed to be the standard SLE rate by 20% in the context of a $5000 deductible or excess taking effect in exchange in favour of SLE. Hence the reference in his handwriting to '… less 20% DISC'($5000XS)' appearing in the margin of the Declared Values/Limits of Liability document originally prepared by AON and submitted to SLE. Moreover as appears at the foot of that document, Mr Quinlan had originally inserted the figure of $5000 in response to the printed words at the foot thereof reading 'Excess - Applicable to all Sections of the Policy …'. Mr Bailey denied that he had any conversation with Mr Quinlan to that latter effect, but conceded nevertheless that he had given correspondingly an internal instruction to SLE staff to allow a 20% premium reduction for an excess of $5000, his precise words in cross‑examination being 'That was an indication that I had given internally, yes', in response to the cross‑examiner's question concluding 'were there standing instructions within SLE that if AON submitted a declared values form with a $5000 deductible the premium otherwise calculable should be reduced by 20 percent?' Mr Bailey in further cross-examination in relation to this subject included the following: '… Now, you accept it must be possible, don't you, that you discussed that same subject with Mr Carr? --- I guess it's possible but it didn't occur. … I suggest you really can't be confident about this so long after the event? --- I am very confident in regard to that from back in those times … if it was it would have been agreed and what I didn't want to do … was to give a $5000 alternative across the board around the country because I didn't want our premium income reducing on individual circumstances. For certain risks we were more than happy to look at it individually but I didn't want to have our income reduced.' Having given an internal instruction to SLE employees effectively to put in place what AON contended to reflect an arrangement reached between SLE and AON, the probabilities are against the viability of Mr Bailey's above assertion '… it's possible but it didn't occur', and Mr Carr's testimony to the contrary to I think clearly to be preferred. 74 Ms Prasad for her part denied that she had been told by anyone in SLE to apply a 20% premium reduction in return for an excess of $5000, yet as I have earlier recorded, she made the incredulous claim in relation to that subject that she 'just worked it out myself', when calculating the premium rate of .22% for the Parkview which she did. She said that she used Mr Bailey's email of 4 March 2002 to Mr McGovern as her starting point for working out the rate to apply to the Parkview. I think that it defies credulity, in the light of the prevailing circumstances of policy and decision-making practices internal to SLE, for her to postulate, that she 'worked it out' herself to record, in the context in which she did, a .22% a premium rate and an excess of $5000 in respect of 'all losses' on that Declared Values/Limits of Liability form initially re-faxed by her to AON on 3 June 2002, and subsequently re-faxed again to AON on 25 June 2002. 75 The applicants' submission was that Ms Meyer's evidence was in any event to be characterised as the most determinative factor in the resolution of the factual issue concerning the extent of critical changes made to the bordereau. She agreed that it was her handwriting at the foot of her email of 9 January 2002 addressed to Mr Edwards of AON and copied to Mr Bailey of SLE and Mr McGovern of AON (supra), being the handwriting reproduced at the culmination of [64] of these reasons. As there appearing, that email contained her handwriting references inter alia to '$1000 ded inc $5000 20% rate reduction', the words 'ded' being identified in the evidence as deductible, and 'inc' as increased. She made the following critical admission in cross‑examination upon that interpolated document: '… Now is that an example … of the practice … that when Mr Bailey orally instructed you that there had been a change to the bordereau you made a note of the change on a convenient document and set out the terms of the bordereau? --- That's correct, yes … 76 Understandably therefore followed the applicants' submission that Ms Meyer's said email of 9 January 2002 to Mr Edwards of AON, in the light of what she wrote at the foot thereof, made it clear 'beyond reasonable argument' that the bordereau terms had been authentically varied to include a 20% rate reduction for a $5000 excess, and that so much was permissibly open for Ms Meyer, and her then working colleague Ms Prasad, to adopt and apply in circumstances such as the present. Moreover of course, that conclusion is substantially in line with Ms Prasad's critical handwritten note of 3 June 2002 endorsed upon the re-faxed copy of the Declared Values/Limits of Liability form filled out by Mr Quinlan and originally faxed to SLE on 31 May 2002, namely of course 'Rate : 22% G XS : $5000 All Losses'. The applicants further submitted that Ms Meyer was thereby 'clearly discussing' the terms of the bordereau when she recorded on her same email of 9 January 2002, as item numbered 1, 'Survey to be forwarded with calculation sheet to SLE immediately you place us on risk', the expression 'survey' thereby implicitly importing what was required to be provided to SLE by the Hostpak Property Information form. I should add for completeness that the applicants pointed out that 'crucially', the handwritten 'arrowed' line appearing at the foot of Ms Meyer's 9 January 2002 email purportedly connected the subject or topic of the 'typewritten' statement as to the bordereau terms of that email reading 'You can increase the $500 excess to $2500 and we will allow a 25% rate discount' to that very aspect of that handwriting at the foot thereof, namely '$1000 ded inc $5000 20% rate reduction' thereby implying the supervention of the latter in relation to the former.

[39]

The alternative case of the applicants - an insurance contract constituted by offer and acceptance 77 As foreshadowed at the commencement of these reasons for judgment, this case of the applicants, framed alternatively to that based upon the operation of the bordereau regimewas propounded to be that of a contract of insurance said to be constituted by offer and acceptance. The applicants submitted in that regard that in the events which happened, the Court should find that a contract of insurance between AON on the one hand and SLE on behalf of Lumley on the other hand was formed on 3 June 2002, for one reason on account of what was mutually accepted between AON and SLE to have by then crystallised to the extent necessary for the inception of the contract of insurance propounded by the applicants, even though the respective negotiating actions of the parties, and the communications between them, may not readily be susceptible to analysis strictly in terms of the legal theory of offer and acceptance (see again in that regard the dictum earlier cited from Brambles). 78 The applicants pointed to the following circumstances, already identified in these reasons, as establishing that a contract of insurance came into existence by way of offer and acceptance effected by and between AON on behalf of Rifon and Ardilo, and SLE on behalf of Lumley, at or by the times already identified as material to resolution issue: (i) Mr Quinlan's statement to a representative of SLE, made on or about 31 May 2002, to the effect that AON wouldput client insurance, such as that sought to be effected on behalf of Rifon and Ardilo in relation to the Parkview, with SLE, upon the basis that all that was procedurally necessary to 'close' the insurance contract was for SLE to specify the premium rate, since AON was unsure as to how to calculate the same (given at least the disclosed 30% proportion of timber flooring); to that circumstance was to be combined Ms Prasad's fax to AON on 3 June 2002, allegedly by way of acceptance of the AON offer, containing as it did of course the Declared Values/Limits of Liability form previously submitted by AON to SLE, upon which she endorsed reference to an excess of $5000 for all losses; and (ii) Alternatively, Ms Prasad's 3 June 2002 fax was, as a matter of practice, was capable of being accepted by AON and acted upon without an immediate response to SLE; it was sufficient for AON to internally accept the offer, and in due course to invoice the insureds and send the relevant certificate of insurance to Rifon and Ardilo, and to advise SLE of the acceptance by forwarding the closing on 27 June 2002. 79 The applicants acknowledged that each of those 'mechanisms' for creating a contract was 'unconventional', in that: (i) In the first case AON was agreeing implicitly to accept on behalf of its clients Rifon and Ardilo, without further response to SLE, whatever premium rate SLE would specify; and (ii) In the second case AON was agreeing implicitly to be bound, and to go on risk for its part on the basis of a deferred advice that cover had been bound at the premium rate specified. 80 The applicants submitted that there were at least two reasons why those 'unconventional procedures' for entering into a contract of insurance were 'not surprising', as follows: (i) the Parkview was an uncontroversial candidate for the subject country hotels insurance scheme, there being no suggestion in the evidence to the contrary, and there was no issue that the proposed insurance was other than acceptable to SLE; reliance was placed by the applicants on the testimonies of Mr Bailey and Ms Meyer, respectively extracted in the second segment of these reasons at [18]-[19] above, as to confirmation of cover being the only element allegedly 'missing' for the establishment of a binding insurance; and (ii) AON had no reason to expect that the premium rate to be offered by SLE would be at large, such that SLE might be anticipated to specify some unexpectedly high premium rate; rather the Court should infer that by reason of the substantial course of dealings between the parties, AON had a reasonable expectation of the likely premium rate or range of rates that SLE would specify; thus when Ms Prasad completed the Declared Values/Limits of Liability form on 3 June 2002, she claimed that she used the latest bordereau schedule of rates to calculate the premium rate, as appeared in Mr Bailey's email of 4 March 2002 to Mr McGovern (supra) in response to and in line with the excess figure of $5000 requested in Mr Quinlan's handwriting near the foot of that form (again Ms Prasad's answers in cross-examination extracted in [30] above). That total premium reduction of 20% so allowed by Ms Prasad equated of course with what appeared in Ms Meyer's handwriting endorsed at the foot of her email of 9 January 2002 already set out, albeit by purportedly a different route of calculation. The applicants submitted upon that footing that the premium rate which SLE chose to specify was 'actually precisely predictable - the only problem was that through inexperience Quinlan was not sure how to calculate the rate'. 81 The applicants further submitted that 'Lumley's witnesses accepted that … contracts of insurance were not always entered into by a conventional process of strict offer and acceptance, and also agreed that there were occasions when contracts were created in the same manner as the applicants submit a contract was created in the case of the Parkview'. The applicants placed reliance in that regard upon what I have already recorded from their submissions, by reference to the subject of the bordereau and its implications, as to circumstances when contracts of insurance may be created in substantially the same manner as the applicants asserted a contract was here brought into existence, that is, without clearly definitive circumstances of offer and acceptance (Brambles ibid). It was in that context that Ms Meyer gave evidence, corroborative of what Mr Quinlan had explained as to his own dilemma at the time, as follows: 'The staff [ie at AON] we were dealing with at the time did not appear to be that confident with the rating structure, no.' Certainly it could be said that the rating structure set out in Mr Bailey's email to Mr McGovern of AON of 4 March 2002 was not clearly definitive, for instance, as to Parkview's construction characteristic of 30% timber flooring, particularly in the context of its expression 'Any Timber Floors', to which I have earlier referred (and in relation to which the contra proferentem rule would in any event apply). Moreover in answer to the next question, Ms Meyer gave the following further evidence: 'In the circumstances where you assisted AON in that way by specifying what the rate was, you understood that AON would proceed upon the basis that the rate was a rate at which SLE would enter into an insurance upon? --- That's correct, unless something significant changed with the risk that we weren't aware of beforehand or if, you know, if they wanted to increase some insurance or something like that, that would then be negotiated …'. Reliance was placed by AON in this context upon the precedent of the Fernhill Tavern insurance underwritten by SLE at the instance of AON, in circumstances where the form was completed without the inclusion of the rateable value for the gross revenue. 82 As a 'final alternative' on this contract issue, the applicants submitted that SLE's fax of 25 June 2002, which of course continued to contain her handwritten words 'Rate : .22% G' and 'XS : $5000 All Losses', being of course the same as the earlier re‑faxed document of 3 June 2002, save for the addition of the SLE 'button stamp', constituted an acceptance of the offer originally made by AON to SLE in the form of the filled out Hostpak Property Information and the Declared Values/Limits of Liability documents faxed on 31 May 2002. Reference was made to Mr Quinlan's account of his telephone conversation with Ms Meyer on 25 June 2002 as follows: '… I then rang SLE and spoke to Paula Meyer … and would have said … I need to invoice the Parkview Hotel but I've mislaid the paperwork. Would you be able to send over a copy of your paperwork so that we can do the invoicing?', to which she was said to have responded: '… that's fine'. The transcript of Ms Meyer's version of that telephone conversation reads as follows: 'On 25 June I received a phone call from Owen and we had a conversation with words to the effect that he said to me, have you got anything on the Parkview at Grafton, to which I replied, hang on, I will go and have a look … I then resumed my conversation with Owen and said, yes, we've got it. It was quoted and faxed on 3 June. He then said to me, can you refax it because I can't find anything to which I then responded, yes, OK, are we supposed to be on risk because cover has not been bound. He then said, I don't know, I'll have to check the dates that cover is required from. And that was about the end, that was the end of the conversation, I hung up the phone…'. 83 Ms Meyer's evidence was that she thereupon wrote (and signed) a note of that conversation on 25 June 2002 as follows: 'Owen Rang - Didn't know if this was with us Cover is not bound. He to advised (sic) correct dates' Taken at least literally, the words 'Cover is not bound' could be read as Ms Meyer's recording of her own conclusion or else the intrusion of her own view. Lumley placed strong reliance on her recorded version of that telephone conversation, which contrasted significantly with Mr Quinlan's version. Ms Meyer's account was at odds with Mr Quinlan's belief recorded at [33] above, and his advice of cover to Mr Camkin recorded at [34] above, what he told Ms Meyer on 31 May 2002 (to the best of his recollection), and most importantly, what he claimed to have told Ms Meyer on that latter occasion. On any view it is difficult to rationalise Ms Meyer's note as an accurate record of anything conceivably said by Mr Quinlan in the context of objective events which had occurred prior to and including 25 June 2002. Moreover no basis for the assertion of her note 'Cover is not bound' was recorded. I have encountered significant misgivings as to the reliability, indeed credibility, of Ms Meyer's handwritten note. No evidence appears to have been adduced as to such note having been made in the course of, and in conformity with, any internal SLE system. The applicants submitted that the Court ought to prefer Mr Quinlan's version of what was purportedly said on the occasion of that telephone call which he initiated (according to both versions). As earlier foreshadowed in these reasons, the applicants' contention was (persuasively) that 'it is simply extremely improbable that if Quinlan had been told that cover was not bound he would not have immediately requested that cover be bound', and further that '[i]t would have been gratuitously reckless for him to have failed to do so'. Moreover it was further contended by the applicants that Mr Quinlan 'had every reason to believe that SLE would have bound cover had he so requested'. 84 The applicants thus submitted that Mr Quinlan could not possibly have forgotten that the purchase of the Parkview had already been completed at the beginning of the month of June 2002, that is, on 3 June 2002, and that he must therefore have understood that SLE was supposed to be on risk. Moreover Mr Quinlan telephoned Ms Meyer, in response to an instruction from Mr Carr, of course his superior at AON, in order to obtain the documentation necessary to invoice the insureds, Mr Quinlan having told Mr Carr that cover was in place. It was therefore incomprehensible in those circumstances, the applicants' submissions continued, how Mr Quinlan could have responded in those circumstances to Ms Meyer's query in terms of 'I don't know', or even 'I'll have to check the dates that cover is required from'. The least observation that could be made on Mr Quinlan's response, so recorded by Ms Meyer, is that the same was enigmatic in context to the occasion. Moreover it was equally an enigmatic statement for Mr Quinlan to have said further that he would have 'to check the dates that cover is required from'. 85 The applicants contended that the most probable reconciliation of the differences of recollection between Mr Quinlan and Ms Meyer, if reconciliation be required on the basis of mutual credibility of both witnesses, would be that when Ms Meyer wrote the note 'Cover is not bound', that was a recording of her own private conclusion that SLE was not on risk, even though she was mistaken, being a conclusion which she may understandably have reached on the basis of the information, such as it was, then available to her. The applicants further pointed out that Ms Meyer did not write something to the effect 'advised Owen cover is not bound'. Nevertheless I should record the applicants acknowledged that under cross‑examination, Ms Meyer adhered to her claim that she gave those contentious indications to Mr Quinlan, and of course she had the support of her diary note. She did not suggest, incidentally, that Mr Quinlan rang back and gave her 'correct dates', which was to have been expected if Mr Quinlan had thought AON to be personally placed in such potential jeopardy, on account of some neglect of duty on his part. 86 I have given much thought to those differing evidentiary accounts of Ms Meyer and Mr Quinlan. Each of them had apparently changed employers since the unfortunate circumstances giving rise to the present litigation. It is human nature nevertheless to adhere to an account of controversial events that would tend to demonstrate absence of mistake or error on one's own part in the course of undertaking duties of employment, particularly when performance of those duties has implications to one's business expertise and performance. I think that I should look essentially to the objective probabilities attending this contentious telephone conversation. The objective circumstances then prevailing were that Mr Quinlan had already dispatched the requisite documents to SLE specifically for Ms Meyer's attention, being the documents in principle required by SLE's underwriting system which had been purportedly filled out by Mr Quinlan, and had received back on 3 June 2002 Ms Prasad's authentication of the applicable premium rate and the excess or deductible sum involved. To have allegedly said that he 'didn't know if the insurance was with SLE' on 25 June 2002 makes no sense to me. Having assessed Mr Quinlan's demeanour, knowledge of the industry and capacity for recall, and his frankness in the course of her cross-examination, and having compared the same to Ms Meyer's tendency to advocate SLE's cause in the course of her cross-examination, and having looked at the contemporary objective realities, I would conclude that Mr Quinlan's account should be preferred to that of Ms Meyer, to the extent of material inconsistencies. Had Mr Quinlan been informed on that occasion that cover was not bound from SLE's perspective, my view of Mr Quinlan, and the straightforward way in which he testified, his long experience in the industry would have led him to ensure instantaneous cover, or virtually so, as a result of his conversation with Ms Meyer on 25 June 2002, knowing full well that the Parkview would not have been covered since completion of its purchase by Ardilo and Rifon on 3 June 2002. My preferred view is not at odds with, but consistent with, what also happened on that day, namely the further re-faxing at 10.27am of the Declared Values/Limits of Liability document bearing Ms Prasad's critical handwriting and the date 3 June 2002, and on that latter occasion as well, SLE's button stamp.

[40]

The cause of action of the applicants for misleading and deceptive conduct on the part of SLE 87 The applicants acknowledged that their claim for misleading and deceptive conduct only arose if the Court is to find, whether for some 'technical' reason connected with the terms of the bordereau, or the requirements of an offer and acceptance in the present context, that no contract of insurance of the Parkview was brought into existence before it burnt down on 27 June 2002. 88 The applicants' submissions in that alternative situation were as follows: (i) the applicants were led to believe that a contract of insurance had been created, and acted upon on that basis, by reason of AON's receipt of Ms Prasad's fax of 3 June 2002 containing the completed Declared Values/Limits of Liability form, upon which she thereupon wrote: 'Rate : .22% G XS : $5000' ALL LOSSES', and on which she placed her signature and that date; it will be recalled that Mr Quinlan's understanding, on receipt of that documentation, was that 'when SLE sent me a document with the rating on it … SLE was accepting the risk that I had offered the previous Friday'. (ii) Mr Quinlan was reasonably entitled to form that belief, given the telephone request he had made to SLE on 31 May 2002, and the form and contents (and in particular the terminology) of that 3 June 2002 fax; that conduct on SLE's part was therefore said to constitute a representation that SLE had accepted cover on the terms and at the premium rate so stated in Ms Prasad's said handwriting; (iii) Mr Quinlan had not asked Ms Prasad or anyone else at Lumley for a quotation, and it was therefore reasonable for him not to have understood the fax as constituting merely a quotation; (iv) SLE's said fax of 3 June 2002 was 'completely consistent' with the Declared Values/Limits of Liability form submitted by AON to SLE earlier on 13 January 2001 in relation to the Fernhill Tavern, to which I have already referred in these reasons and in relation to which Ms Meyer agreed 'AON could proceed upon the basis that SLE would accept the risk for the Fernhill Tavern at the rate stated' (I intrude to observe that Mr Quinlan for his part was not then employed by AON); (v) alternatively, SLE's subsequent 25 June 2002 fax of the same document, containing as it did additionally, the SLE 'button stamp', constituted a representation that SLE had bound cover on the terms appearing from that fax; and (vi) upon that footing, the Court should infer that AON had acted in reliance upon the belief that cover was bound, at least for the reason that Mr Quinlan 'simply set about the task of calculating the invoice cost and putting in motion the process of sending an invoice to the insureds.' 89 The applicants acknowledged that it may be said that if Mr Quinlan had been told that cover was not bound, he could not reasonably have acted on the basis that it was so bound. However it was pointed out by the applicants that submissions to that effect required the Court to find that Ms Meyer, by her asserted statements to Mr Quinlan, made it reasonably clear that in fact cover was not bound. Unless therefore the Court was to discount Mr Quinlan's evidence entirely, so the applicants' submissions continued, the Court should not find that Ms Meyer made the position as clearly as she claimed to the Court to have done. Instead it should be found, so the applicants further submitted, Mr Quinlan's actions were only consistent with Ms Meyer not having made the position, as she understood it to have been, sufficiently clear in those circumstances. It was therefore further submitted by the applicants that SLE's conduct in sending the 25 June 2002 fax to AON, with the addition of the so-called 'button' stamp, after the conversation took place (the applicants' emphasis) between Ms Meyer and Mr Quinlan, was likely to have misled AON into believing cover was in fact bound. Accordingly it was concluded by the applicants that the Court should infer that Mr Quinlan acted in that belief, as that was the only explanation of his subsequent conduct in not thereafter pursuing insurance cover before the Parkview was burnt down two day later. 90 I have encountered conceptual difficulty to the applicants' maintenance of this cause of action for misleading and deceptive conduct. Once the complex evidentiary circumstances upon which the bordereau and offer and acceptance cases are respectively constructed are found not to carry the contractual implications underpinning those cases, I am unable to infer with confidence the implications of the alternative misleading and deceptive conduct case of the applicants. The circumstances postulated for the establishment of the preferred causes of action of AON in contract, to the extent that the same are founded upon the implications of the 25 June 2002 fax from SLE to AON, containing of course the imprint of SLE's button stamp, are not materially different to the essence of the circumstances of this case required to constitute misleading and deceptive conduct. Once it should be found, for instance, that the 25 June 2002 fax from SLE to AON has no contractual significance to the establishment of an alleged contract of indemnity, there are forensic obstacles in the way of a realistic conclusion, in the particular circumstance of the case, as to how the same could have objectively misled or deceived AON, as recipient of that fax, into reasonably thinking that the document did have any such contractual operation. In short, if document lacked contractual significance or quality in the context in which it was transmitted by facsimile transmissions, contrary to the applicants' submissions, I have difficulty in distilling a compelling basis for the same having reasonably and realistically misled or deceived AON in any objective sense that it did so. 91 Once the view is to be taken that no misleading or deceptive conduct should be imputed to SLE's conduct based upon SLE's re-faxing exercise of 25 June 2002, the obstacles to a corresponding implication arising out of SLE's conduct based upon its re-faxing exercise earlier undertaken on 3 June 2002 can be seen to encounter greater difficulty. However in the light of my conclusions later recorded on the two critical alternative contract issues, it is unnecessary or inexpedient for me to take up further space in reasons for judgment, already very lengthy, upon the alternative case for misleading and deceptive conduct on either basis submitted by the applicants, which I will thus refrain from doing.

[42]

Mr Quinlan did no more than ask for a quotation on 31 May 2000 and that is what he received (Lumley's first submission) 93 Lumley contended that Mr Quinlan 'did not know how much the insurance would cost, and asked for a price, and that so much was understood by Ms Prasad'; that contention was founded on three propositions: (i) the content of the three page fax sent by Mr Quinlan of AON to Ms Meyer of SLE at 5.26pm on Friday 31 May 2002, comprising as it did the two page Hostpak Property Information and the one page Declared Values/Limits of Liability documents; there was of course no accompanying letter; (ii) the fact that Mr Quinlan did not know how much the insurance would cost, and thus was said to have asked for a price, it was so understood by Ms Prasad, who responded to the request; to her mind it was just like other requests for a quotation; there was no evidence of any conversation between Mr Quinlan and Ms Prasad, or he and Ms Meyer, in relation to that faxed material; prior to SLE's response thereto, those two women comprised two of the three SLE employees who undertook the processing function arising out of the submission of those pro-forma documents in any given case, and of course both testified in the proceedings; and (iii) 'a quotation is not more than an offer to treat' (Lumley citing thereby re Webster (1975) 132 CLR 270 at 282 per Barwick CJ sitting as a single Justice of the High Court); there was of course no dispute as to the existence of that principle, as such. 94 The contention is non-controversial, in so far as Mr Quinlan did seek a premium assessment or figure from SLE, in the context of AON's submission of that three page fax sent to SLE late on 31 May 2002. The issue is whether the request was justifiably 'just like other requests for a quotation', in the light of the process for which SLE had framed and provided to AON pro forma of those very documents in the first place. Or perhaps more directly relevant, in the context of the event which happened, was that price sought by Mr Quinlan for the purpose of determining whether AON would satisfy the insurance requirements of Rifon and Ardilo in relation to the Parkview with SLE as agent for Lumley or else with another insurer, and hence whether he merely sought a premium quotation in the first instance, or whether what took place occurred by way of implementation of the bordereau process? The evidence discloses of course that AON did place hotel business relevantly with SGIO, as well as with SLE, but there was no evidence that in relation to the Parkview, AON had already sought, or else proposed to seek, a premium quotation from SGIO as well. On the contrary, the conclusion clearly open to be drawn from the evidence is that AON's endeavours to obtain insurance in relation to the Parkview were wholly confined to processes initiated by AON with SLE. Moreover the evidence adduced by AON, in particular from Mr Quinlan, was that AON did not seek to obtain from SLE a premium quotation per se. It appears rather that Mr Quinlan was unable to determine the applicable rate for the Parkview from SLE's email of 4 March 2002, at least because of the 30% timber factor involved in the flooring. If there had been no such percentage factor, the rate of .22% would have apparently applied, and at least if 100% of the flooring had been made of timber, the rate of .275% would have been attracted. Whilst it is true that the rates described in that email, in so far as they refer to timber floors as distinct from timber walls, indicated a criteria for 'Any Timber Floors', thereby ambiguously, I would have thought, possibly or literally indicating the very barest of a minimal percentage or proportion on account of that prefix 'any', it is understandable in any event that Mr Quinlan would seek clarification in relation to the operation of the disclosed 30% timber factor. A reader of the email might well think that the rate of .275% would be unlikely to apply, if to take a more extreme example, the timber floor fraction was 5% (or even less) in contrast say to 95%, rather than 30%. 95 That critical three page Quinlan fax was addressed to Ms Meyer, incidentally the author of the 14 January 2002 fax to AON which had enclosed the Country Hotel Procedure instructions for an intending insured to bind cover with SLE. That procedure stipulated that the Hostpak Property Information and the Declared Values/Limits of Liability documents, once filled out of course, were to be faxed to 'Mark' (Mr Mark Bailey), 'as soon as you have bound cover', thereby indicating that binding of cover was to be effected in advance of those documents being forwarded to SLE, and by virtue of those documents being filled out completely. It is appropriate to record Ms Prasad's description of the calculations she undertook, from her perspective, which was illustrative of the potential complexity of the calculation involved in the present context (what appears below may be read with what I have already recorded from Ms Prasad's testimony in [30] above): 'Now what did you do to go about calculating the rate of .22 percent? --- I reviewed the document with the information they gave us and I basically worked out the rate because it had a brick with wooden floors with a full time fire brigade, the rate for that particular risk was .275. Then I gave a further 15 percent discount which came down .233375 and then as they asked for a 5000 excess I gave it a further five percent off which came down to .2222, then I rounded it off to .22. That's how it came (sic). Again, Ms Prasad's adoption of the figure of $5000 for the excess or deductible is significant to the applicants' case, reflecting as it did the same sum filled out by Mr Quinlan in that Declared Values/Limits of Liability form under the heading 'Excess', and being the figure the subject of the first factual issue framed by the applicants, and framed in [43] above. Why the further 15% discount was given was unclear; the most likely basis was the 30%, rather than a 100%, factor relating to timber flooring. 96 Ms Prasad further testified that after she provided information of the kind that she did on the subject occasion, it was her practice: (i) to put aside what she asserted to be a premium quotation until the broker for the insured 'came back' to her with a request for cover or to confirm cover; and (ii) if and when that occurred, to write a file note, and so inform the insurance broker on the telephone, and '… then I would also have something in writing to confirm it, which would be sent by fax'. There was no analogous example of any such subsequent file note tendered in evidence. Of course Ms Prasad's interpretation of the nature of the task with which she was confronted on 3 June 2002 is not conclusive of the true function objectively undertaken by SLE in the context of any supervening charter which operated upon the respective functions of the parties based upon SLE's restatements of the bordereau and offer and acceptance procedures made to AON since the year 2001. What was also tendered in evidence, by way of subsequent communication to AON in the present context on 25 June 2002, was the further re-faxed copy of one of the same two documents (of course the Declared Values/Limits of Liability form), which still bore her signature, the date 3 June 2002 and the handwritten rate information etc, but with the addition thereto of the SLE 'button stamp'. The circumstances in which that subsequent re-faxing took place were explained by Mr Quinlan to have occurred because he had been subsequently unable to find, for the time being, the earlier re-faxed copy of that completed form. 97 Lumley contended nevertheless in the present context as follows: (i) the applicants could not assert the existence of any confirmation of cover communicated by AON in the present case; Mr Quinlan did not assert that anyone from SLE had told him that cover had become bound, nor could he point to the existence of any written confirmation that cover was bound; and (ii) it was 'clear' that it was the practice of SLE to document even urgent covers bound by SLE in favour of AON, and further that it was 'simply implausible that the Parkview was bound as an exception to this focus on documentation'. No specific documentation in evidence was identified in support of that latter practice. In any event, those Lumley submissions did not address the significance of the practice of the bordereau convention, to the extent that it was in operation at the material times in the light of the communications from SLE to AON to which I have referred in detail, and in particular, the procedural directions of SLE prescribed by SLE's 2002 emails which I have extracted, including the Country Hotel Procedure, the two most recent (14 January 2002 and 4 March 2002) still adhering incidentally to the description bordereau. 98 Lumley next submitted, in the present context, 'more specifically, for any policy to be incepted by AON', the first of the seven matters set out in Ms Meyer's email of 9 January 2002 to Mr Edwards of AON, in order '[t]o ensure the smooth running of the scheme,' namely '[s]urvey to be forwarded with calculation sheet to SLE immediately you place us on risk', had not been satisfied by AON. Her reference to the scheme was implicitly to what appeared as the heading to that email, namely the 'SLE Country Hotels Scheme', which she paraphrased in her next email in evidence, namely that headed 'SLE Country Hotel Bordereau' and sent on 14 January 2002 to Mr McGovern. There are considerable obstacles confronting Lumley's first submission, being a submission implicitly at the very forefront of Lumley's case. This is because the insurance survey was plainly albeit implicitly to take the form of a duly completed Hostpak Property Information form, an up-dated pro-forma of which Ms Meyer emailed to Mr McGovern of AON on 14 January 2002 (and which of course Mr Quinlan filled out and faxed to Ms Meyer on 31 May 2002 along with the single page Declared Values/Limits of Liability form also filled out). The seventh of those numbered matters referred to in that email of 9 January 2002 stipulated incidentally '… if risk for any reason does not fit into the parameters issued, you can refer to SLE for a rate', thereby inferring the existence of an ascertainable rate for new business falling within 'the parameters'. To seek a premium rate in an insurance context, in particular in a context of seeking fire cover for a building being or about to be purchased, is not to be equated with seeking a premium quotation per se, but rather to be referred to a particular percentage to be applied to the disclosed or requested sum or sum to be insured. Incidentally the expression used in SLE's 9 January 2002 email, namely '…you place us on risk', imported the notion of the unilateral bordereau process and facility extended to brokers (such as AON), who were participants in the 'SLE Country Hotels Scheme', of obtaining cover forthwith at their own instance and initiative, that is to say, in advance of completion of the documentation of the bordereau process (see again the contents Country Hotel Procedure document, and in particular, what appeared under the heading 'AON - Acceptable Risks'). 99 Lumley submitted further that what appeared in Ms Meyer's subsequent email of 14 January 2002 to Mr McGovern of AON, namely '(w)e are giving you this information so that there will be no surprises or expectations that SLE staff will just accept anything sent to us', in the context of course bearing the said heading 'SLE Country Hotel Bordereau', tended to support its present contention addressed. I would think however that such warning was neutral to the critical issues that I must resolve. It was rather a warning against repetition of incomplete or inadequate presentations of insurance cover requests made to SLE by its country hotel brokers. Of course a prospective insured has a duty in law as to full and true disclosure to the prospective insurer of matters material to a risk proposed for insurance cover, though no case for material non‑disclosure relevant to the Parkview risk was pleaded by Lumley against the applicants. 100 Lumley then drew attention to what appeared in Mr Bailey's email of 4 March 2002 to Mr McGovern of AON headed 'Country Hotel Bordereau', namely '[f]or any policy to incept we require two page survey with Declared Values/Limit of Liability page sent with rates' (placing incidentally emphasis upon the latter words 'sent with rates'), and asserted that the AON fax to SLE of 31 May 2002 did not contain 'rates'. The reference to rates was doubtless to SLE premium percentage rates referrable to a hotel's walls and floors, and to the availability of local fire brigade services, as most recently exemplified in SLE's email of 4 March 2002. Therefore, so Lumley's submissions continued, '[SLE] could not incept the cover and the fact that it did not contain the rates sheet demonstrates that Mr Quinlan and AON did not intend that cover would be bound'. Reference to the 'rates sheet' could not sensibly have referred to the Hostpak Property Information document, nor the Declared Values/Limits of Liability document; yet no other document was prescribed by SLE's documented Country Hotel Procedure for completion and submission by a broker, such as AON, to SLE. What AON did provide to SLE, by its fax of 31 May 2002, comprised that Hostpak Property Information form mostly filled out, the former indicating the composition of construction of the walls and floor of the Parkview with undisputed accuracy, though not a premium percentage rate, apparently because of the circumstance, I would infer (for what it may ultimately matter) that 30%, and not the whole, of the Parkview's floors were constructed of timber. No case was raised by SLE as to any significant information not having been provided, or provided adequately, by AON in either form. Mr Quinlan had been evidently, and in my opinion understandably, unsure as to how that timber element was to be correlated or reflected into the requisite numerical rate, if at all. SLE already knew of course the insurance premium levels falling to be quantified by reference to the sums required to be insured in relation to buildings and plant, the amount of those 'sums insured' having been comprehensively inserted into the blank spaces provided for in the Declared Values/Limits of Liability form provided by AON. 101 As I have foreshadowed, the submissions of Lumley made in the context of this first issue raised by Lumley failed to come to issue with the primary case presented by the applicants, which may be described for simplicity as the bordereau case. The complexity of the factual documentary matrix tendered in the proceedings, in relation to the nature and scheme of operation of Lumley's bordereau convention for the time being in operation for country hotels, may perhaps serve to explain why Ms Prasad may not herself have fully and comprehensively perceived the implications of her task, that is to say, whether in terms of SLE's recognition and assumption of binding cover, or of SLE merely furnishing a premium quotation. Indeed her evidence seemingly reflected an inadequacy of understanding the detail and implications of the SLE documentation and information previously provided by SLE to AON. Nevertheless if Ms Prasad had paid regard to the nature of the documentation of the bordereau process, as most recently updated by SLE on 4 March 2002, and its implications, it should have been apparent to her that cover had been already bound, and that the documents so provided had been submitted in purported fulfilment of the Country Hotel Procedure documentation in force, and what AON was seeking was the premium calculation necessary to formalise the closing process further stipulated by the Country Hotel Procedure. Of course having obtained cover, AON may have looked further a field for a better rate, and indeed the Country Hotel Procedure envisaged by SLE might lose business the subject of an initial binding cover, prior to the closing of that business (that is, the closing stipulated by the 'AON - Closings' segment, which stipulated 'Desiree to forward stapled closings by 15th of the next month'). 102 Lumley's submissions also asserted that 'AON's errors were a source of frustration to SLE as both Mr Bailey and Ms Meyer pointed out in their oral evidence', and that 'SLE was forever chasing up AON's mistakes until finally on 8 July 2002 SLE withdrew AON's authority to bind cover even within the agreed parameters'. Whether that assertion was accurate was not to the point, though it may be observed that the Hostpak Property Information and Declared Values/Limits of Liability forms were hardly user friendly per se, at least without a complete understanding of their context in SLE's elliptically framed Country Hotel Procedure charter. In any event, as thereby implicitly acknowledged by the submission, there did indeed exist agreed parameters, purportedly evident in the documentation and correspondence emanating from SLE which I have reviewed in detail, and which the applicants accurately described as reflective of the historically evolved principles and practices of SLE's bordereau. That bordereau process was not brought to an end until Lumley's email of 8 July 2002 (see [48] above) doubtless sparked by SLE's exposure to controversy involving the Parkview. It was apparently a practice which had survived, to a somewhat abbreviated extent, the earlier years involving communication delays between country insurance broking locations and insurance companies' administrative offices in capital cities. It was a unique concept, built doubtless upon close relationships between large insurance companies and established brokers experienced in risk underwriting. It is somewhat enigmatic, incidentally, that Lumley's very extensive written submissions almost without exception avoided the use of the expression bordereau, despite the extent of its usage in the course of the SLE's own documentary evidence and communications. 103 For the reasons I have outlined in relation to Lumley's critical first submission, I think that the same was founded on a superficial view of the import of the bordereau process, and alternatively of the applicants' offer and acceptance case.

[43]

Mr Quinlan knew what the rules of the scheme required to incept cover and he did not comply with those rules (Lumley's second submission) 104 The theme of this Lumley submission was largely founded upon the subject of what Lumley's counsel described as 'the 4 March 2002 amendment to the scheme', referring thereby to Mr Bailey's email of that date to Mr McGovern of AON, headed 'Country Hotel Bordereau', which has been already extracted and discussed. The submission was that '[w]hen Mr Quinlan filled in the Hostpak [Property] Information sheet that he faxed to SLE at 5.26pm on 31 May 2002, the information he included came entirely from information that Mr Carr gave him by telephone, [which] included the disclosure that the Parkview had 30 per cent wood flooring … [b]ut it did not include the premium rate'. Lumley submitted therefore that '[i]t was a request for the premium rate', and nothing more. Thus the submission involved much, if not virtually all, of the ground the subject of Lumley's first submission, already rejected. I make the preliminary observation that nowhere in the Hostpak Property Information form, nor in the Declared Values/Limits of Liability form, was any request made for stipulation of the premium rate, though the latter did make provision for stipulation of the excess or deductible to apply (which of course AON completed by referring to $5000). 105 As I have already indicated, the notion of 'rate' takes its meaning from that SLE email of 4 March 2002, and from precursor procedural directions of SLE to AON, such as contained in the 'Country Hotel Procedure' form, representing as it does the percentage of an insured risk amount or sum for premium calculation purposes, having regard to the nature of the building material the subject of the hotel's construction, and the extent of fire brigade assistance in the locality of the hotel. As I have further already indicated, Mr Quinlan was understandably unsure as to the precise premium percentage applicable to the Parkview, apparently because of its 30% timber floor component. The various percentages set out in SLE's said fax of 4 March 2002 to AON could hardly be described as comprehensive or unequivocal in terms of the rate or range of rate calculations which might arise in particular cases. I see no reason why Mr Quinlan's controversial course adopted on 31 May 2002 should be differently characterised because Mr Quinlan left to SLE the calculation of the precise applicable premium rate, which of course Ms Prasad subsequently proceeded to do, and thereafter to notify to AON, albeit as SLE would have it, by way merely of a quotation. Particularly should that be so, given Mr Quinlan's telephone call to SLE (in which he thought most likely to have spoken to Ms Meyer) prior to the faxing of the requisite documentation to SLE on 31 August 2002. Moreover it was not just a matter of uncertainty as to the 30% timber flooring factor involved in relation to the Parkview. The point reached between the parties as to the rate applicable to a deductible or excess figure of $2500, referred to in SLE's email of 4 March 2002 as 15%, had become overtaken, on the applicants' case, in the context of at least discussion as to a higher deductible or excess figure of $5000 to apply in favour of SLE, and any consequential premium discount to be extended as a consequence to AON in return. 106 It was submitted by Lumley, 'further and in the alternative', that 'there was no communication by Mr Quinlan that the Hostpak information sheet was being submitted on the basis of a request to bind cover, in which case it could have been an offer capable of acceptance.' I should observe however, nor was there a communication to the effect that it was submitted for the purpose only of obtaining a premium quotation. That further or alternative submission does not come adequately to issue with the bordereau requirement that the forms filled out and submitted to SLE by AON's fax of 31 May 2002 addressed to Ms Meyer were those which SLE stipulated by the Country Hotel Procedure to be necessary to fax to SLE 'as soon as you bound cover', and with the further stipulation, albeit confined to the alternative offer and acceptance case of the applicants, that 'SLE will then advise rate and terms applicable', whereupon the broker was 'to then confirm back to SLE if cover is or is not required'. In any event, the applicants relied upon Mr Quinlan's testimony, as already foreshadowed, that he rang SLE on 31 May 2002, prior to sending to SLE the faxed material of 31 May 2002, and informed one of SLE's underwriters, to the best of his recollection Ms Meyer, that he was 'not comfortable with the rating of the Parkview and asked if she could note the rating', which she allegedly agreed to undertake; in other words, on the applicants' case Mr Quinlan did not in any event ask for a quote. As I have observed already, he inferred in his affidavit account of the incident, he was not emphatic that it was Ms Meyer to whom he spoke, and put as less preferred alternatives Ms Prasad and Ms Field. Ms Meyer denied any such conversation, as did those other two recipient candidates nominated by Mr Quinlan in order of preference of his recollection, namely Ms Prasad and Ms Field. Since it seems to have been rarely the practice of SLE's underwriting employees to keep diary notes of conversations, whether contemporaneous or at all, as was also a shortcoming in the practice of AON employees, it is not a simple task for me to determine whether any such conversation actually occurred, though I observe the objective circumstance that Mr Quinlan's critical fax of 31 May 2002 was indeed addressed to Ms Meyer. 107 Two of the three SLE employees who otherwise testified, namely of course Ms Meyer and Ms Prasad, were both cross‑examined, and of course Mr Quinlan also gave evidence and was cross‑examined, on the issue inter alia as to that alleged conversation. None of these three who gave evidence, namely Mr Quinlan, Ms Meyer and Ms Prasad, would be less than human, if he or she did not seek to defend his or her efficiency and competence, directly and indirectly, in the performance of his or her duties of employment, in the absence of independent documentary evidence as to the occurrence of the telephone call, whereof there was none. I would infer that all three had been busily involved in their respective underwriting activities on 31 May 2002, and in matters incidental thereto. None of them appeared to keep or maintain diary entries of business telephone conversations as a matter of routine, or to maintain a contemporaneous minute in relation to each underwriting task personally undertaken. All three persons struck me as anxious to defend their respective conduct as efficient employees in relation to the controversial matters the subject of the proceedings, an understandable and common reaction to be expected. Accordingly I think that my task is to determine what happened on 31 May 2002, and indeed also on the following Monday, 3 June 2002, more by reference to objectively established events, and in the light of what SLE had earlier prescribed in writing as to the underwriting processes necessary to give effect to the terms and conditions of the bordereau for the time being prevailing. 108 The Lumley heading to this present submission on its part, namely 'Mr Quinlan knew what the rules of the scheme required to incept cover and he did not comply with those rules' inherently required Lumley to identify what were those 'rules'. However Lumley did not specify what was precisely encompassed by the expression 'the rules of the scheme', until close to the culmination of this second Lumley submission, when the following contention was advanced: 'To invoke the cover at the rates quoted by SLE, AON had to either communicate their acceptance of SLE's quotation or send a closing concerning the cover'. Significantly, Lumley did not cite anything in that regard from the text of the Country Hotel Procedure document (emailed to AON of course on 14 January 2002), which referred to what was required of 'Each state'… as soon as you have bound cover', the process of binding cover thus identified being that which would involve only the broker of 'Each State' and the insured, and not at that stage SLE. Lumley submitted instead, first, that AON did not communicate its acceptance of SLE's quotation, and secondly, did not send a closing, in either case prior to the fire, nor did it include reference to the Parkview 'on each bordereau report supplied by AON to SLE in June, July or August 2002'. I have already addressed the first element of that contention in the context of Lumley's so-called first submission, which I have rejected. As to the second submission referrable to the sending of a closing, I was referred to two documentary matters; the first was a list of 'Country Bordereau 2002' closings for inter alia NSW Hotels throughout Australia, being an internal record maintained by Lumley, in which no reference appears to Parkview; the second related to the alleged delay in AON sending a 'closing' in relation to the Parkview. In response, the applicants tendered a further Lumley internal record headed 'Settlement Statement for SLE Worldwide Aust Pty Ltd … Date : 12.07.02,' under which, among several entries, appeared reference to the Parkview, and secondly referred to AON's notification to SLE of 27 June 2002 given on the same day as, but shortly after the occurrence of, the fire. 109 There was nothing however in the Country Hotel Procedure document submitted by SLE to AON which imposed a condition subsequent to cover, otherwise effectively in operation. On the contrary, a closing was only required 'by 15th of the next month, seemingly in the case of the bordereau, being the month following binding of cover, and in the case of offer and acceptance, after confirmation by the 'State' that cover was required. Lumley's concluding contention advanced in this second submission was in any event that '…the way in which the term bordereau was used is somewhat of a red herring', and that '[w]hen the evidence is examined the Court will find that AON did not take the necessary steps to bind cover to the Parkview, and nothing SLE did caused AON to be misled into believing the contrary'. I did not find that latter submission to be of assistance, or to materially advance Lumley's case. However I will need to return to the theme of the framework of Lumley's second submission in other contexts, and in particular, the context of SLE's email of 4 March 2002 which followed later to the provision by SLE to AON of the Country Hotel Procedure document. 110 In the result, I am of the view, that Lumley's second submission, as unspecifically framed, does not advance its case upon the footing the subject of Lumley's written submission specifically geared thereto, but I will return to the themes thereof in the context of my consideration of the issue generally as to inception of cover and closings.

[44]

Absent AON taking up the quotation, SLE could not know whether the business had been placed with it or with its competitor, SGIO (Lumley's third submission) 111 This submission did not seemingly come to issue on the applicants' bordereau case, but conceivably at best on the applicants' offer and acceptance case. Of course in relation to the bordereau case, SLE would not be notified of inception of cover until receipt of the Hospak Property Information and declared Values/Limits of Liability document: see Country Hotel Procedure again under the heading 'AON - Acceptable Risk'. In relation to the offer and acceptance case, see again under the ensuing heading 'AON - New Business/Renewals', which envisages that SLE must await confirmation 'if cover is required'. This third submission represented a further instance of Lumley's omission to come squarely to issues tendered by the applicants. Be that as it may, Lumley cited in the present context the following evidence of Mr Bailey, in the course of his cross‑examination, as the basis for Lumley's third submission: 'And you knew from the conversation when you gave the rate to Mr Carr that the substance of the insurance had been agreed and then it was just necessary to document it? --- Only on the basis that he actually had the business at the time. In a lot of instances he might be quoting against some other broker and just getting our terms to present to the client and another broker would be doing the same. So it wasn't the state of yes we are definitely going to pick up the business because we didn't have 100 percent success rate on picking up accounts. … I think, you'll correct me if I'm wrong, that you've told his Honour that the procedure was where the cover on an offer and acceptance basis that SLE would make an offer in the form of a quote and there would not be cover unless that quote was accepted in the form of some written acceptance by AON? --- Correct, that or a closing arriving yeah, but it would be some form of advice from AON, yes.' Without specific reference to a critical aspect of the applicants' offer and acceptance case, and to the Country Hotel Procedure documentation and to SLE's subsequent email to AON of 4 March 2002, it is not feasible to derive assistance upon a specific issue arising, merely from the citation above from Mr Bailey's evidence.

[45]

Alternatively, if the quotation on 3 June 2002 was an offer capable of acceptance it was not accepted in time because the law does not permit an offer of insurance to be accepted after the occurrence of the risk being insured against (Lumley's fourth submission) 112 Lumley's opening postulation in relation to this fourth submission, namely that '[a]n essential element of an insurance contract is that the insurance money must be payable on an event which is uncertain at the time the contract is formed', is correct in principle, as the authorities to which Lumley referred duly indicate, those being for instance Sickness and Accident Insurance Association v General Accident Corporation (1982) 19R 977 at 985 (per the Lord President), McElroy v London Assurance Corporation (1897) 24R 287 at 986 (per Lord Adam), and Prudential Insurance Co. v Commissioner of Inland Revenue [1904] 2 KB 658 at 663 (per Channel J). 113 Lumley then cited the following evidence of Mr Bailey in the course of cross-examination: 'What I'm just suggesting to you is that if SLE quoted cover from a particular inception date and then within a reasonable period that quote is accepted and it's discovered that a loss occurred before the acceptance of the quote but after the inception date then the insurance applies? --- In regard to normal offer and acceptance the answer would be no. … So you only go on risk when there's an acceptance? --- Yes, we're only on risk when the policy is accepted because if not you could easily have the stage where a publican - well, not just a pub, any person is continually going around getting quotes. They never actually have cover bound.' The thrust of that evidence again indicates that Mr Bailey was there addressing an offer and acceptance situation outside the scope of the bordereau. Lumley next cited the following cross‑examination of Mr Bailey: 'Now, do you agree that by 8 July 2002 you were motivated in writing the emails of that date among other things by a view that over the period of the bordereau both SLE and AON had often been lax in the procedures that they adopted to incept policies? --- I would say that not in 100 percent of instances was it probably done perfectly, no.' SLE's email of 8 July 2002 (extracted earlier in [48] above) purported to bring to an end the 'Country Hotel Business' effectively from 1 August 2002, and significantly, it described the new insurance regime to be implemented in the following terms: 'SLE will advise terms and conditions or otherwise and NO cover will commence until accepted by the client and formally requested by AON.' 114 Upon the foregoing basis, Lumley submitted that at the time AON purported to accept the offer of insurance on 27 June 2002 (see again [41] above), given the premium quotation of 3 June 2003 was an offer and not an offer to treat, there was no longer a risk of the hotel burning down - it had already burnt down. This submission did not indicate whether it was made in relation to the applicants' primary case, namely that of invocation of the bordereau, or was directed to the applicants' alternative case of offer and acceptance. That was not the only instance appearing in Lumley's submissions where necessarily, that distinction was not drawn. In relation to the bordereau case, the submission does not come to issue, for reasons I have earlier indicated. If it was to be considered in relation to the offer and acceptance case, then on the assumption that the AON closing document of 27 June 2002 constituted an initial acceptance of a previous offer of cover by SLE of insurance cover, there would be, without more, no utility in the document, for the reasons advanced by Lumley, namely that it was tendered too late, the Parkview having been burnt down. The issues not addressed however by Lumley are the implications of the Country Hotel Practice in that regard, appearing under the heading 'AON Referrals - New Business/Renewals : To be clearly indicated on Fax', and the concluding sentences 'SLE will then advise rate and terms applicable. State to then confirm back to SLE if cover is or is not required'. All that depends on whether there occurred offer and acceptance prior to the fire, in conformity with any one of the three ways described in [6(ii)] to [6(iv)] above. 115 Lumley's conclusion to its fourth submission was as follows: 'At the time AON purported to accept the offer of insurance on 27 June 2002 (if the quote of 3 June 2003 was an offer and not an offer to treat) there was no longer a risk of the hotel burning down - it had already burnt down'. That conclusion was referrable to AON's 'Insurer Closing - Brokerage Tax Invoice' addressed to SLE and bearing date 27 June 2002 relating to the Parkview for the period of insurance from 31 May 2002 to 28 May 2003, which I have earlier extracted at [41] above. The submission does not come adequately, much less comprehensively, to issue with the applicants' primary case I have earlier outlined as to exercise of authority under the bordereau agreement between the parties, nor with applicants' further case as to acceptance of their offer of insurance, nor with the provisions of the Country Hotel Procedure as to the time for lodging closings with SLE.

[46]

As a matter of ordinary contract law, an offer cannot be accepted without the acceptance being communicated by the offeree to the offeror (Lumley's fifth submission) 116 This fifth submission framed by Lumley was that '[e]ven if the Court were to find that the document faxed on 3 June 2002 by SLE to AON were (sic) a legal offer capable of acceptance by AON, AON did not actually accept it'. Once again, the submission does not address the primary way whereby the applicants advanced their case, namely that of bordereau based on SLE's own written material in evidence. As to the applicants' case in offer and acceptance, the document re-faxed on 3 June 2002 by SLE to AON was of course the Declared Values/Limits of Liability document by then bearing Ms Prasad's signature, her handwritten note 'Rate : .22% G $5000 All Losses' and the date '3/6/02' also written by her (though not of course on that particular occasion bearing the SLE 'button' stamp. Lumley submitted that '[t]he rate offered by SLE was not accepted by AON …', and '[s]ilence is not acceptable as conduct sufficient to accept a contract' and '[t]he fact of acceptance must be communicated to the offeror'. The submission once more did not come to issue moreover with either one of the three alternative ways with the applicants case in and acceptance which I have reproduced in [6(ii)] to [6(iv)] above. 117 It is difficult to understand how it is that Lumley's fifth submission comes to issue with the applicants' case. Nevertheless with respect to SLE's comprehensively produced written submissions, I will record below that Lumley first cited in support of the submission inter alia the judgment of a Full Federal Court (Heerey, Whitlam and Weinberg JJ) in Wenzel and Another v Australian Stock Exchange Ltd (2002) 125 FCR 570 at 583, where the following basic principle as to offer and acceptance, enunciated by Lord Romilly MR in Re National Savings Bank Association (Hebb's Case) (1867) LR 4 Eq 9 at 11-12, was adopted and applied: 'These applications for and allotments of shares must be treated upon the same principles as ordinary contracts between individuals. If A writes to B a letter of offering to buy land of B for a certain sum of money, and B accepts the offer, and sends his servant with a letter containing his acceptance, I apprehend that until A receives the letter, A may withdraw his offer and B may stop his servant on the road and alter the terms of acceptance or withdraw it altogether; he is not bound by communicating the acceptance to his own agent.' 118 Lumley disputed what it contended to have been the applicants' submission to the effect that the Court may ignore 'the need to communicate acceptance of an offer to contract' as a 'formal, technical step', and submitted that the applicants had wrongly contended that '… the need to communicate acceptance of an offer to contract was a formal technical step, whose absence a Court may ignore', and moreover that the applicants '… concede that, at the very least, acceptance had to be communicated by way of a 'closing'. Purportedly on that footing, Lumley submitted that '[a] closing for the Parkview simply was not generated until the day of the fire. That was too late to effect the insurance', again referring to AON's 'Insurer Closing - Brokerage Tax Invoice' issued on 27 June 2002. However the applicants eschewed any case to the effect that the latter document constituted in fact or reality a closing within the Country Hotel Procedure, much less constituted an acceptance of any SLE offer of insurance. Thus the Lumley submission evinced a withholding from coming directly and adequately to issue upon a critical aspect of the applicants' primary case. Nevertheless I will record below for completeness Lumley's further contention advanced in support of its fifth submission. 119 Lumley cited and discussed a number of authorities relating to the formation of contracts, and to the following principles said to have been thereby established, and to be here relevant to the resolution of the issues arising, yet not to have been satisfied on the part of the applicants (I have made incidental observations in relation to each such asserted principle below in order to indicate concerns which seem to me to arise, irrespective of Lumley's withholding from coming to issue at least explicitly with the applicants' offer and acceptance case set out in [6(ii) to (iv)] above: (i) a contract can only be formed by clear, direct and unequivocal communication that an offer has been accepted, which was 'precisely what did not happen in this case'; in the present instance, 'the applicants cannot prove that [Mr Quinlan] took the necessary steps to effect the cover'; (I interpolate to observe that acceptance of an offer may of course fall wholly or partly to be inferred by conduct, which in turn requires consideration of all of the circumstances bearing directly and indirectly upon resolution of the issues arising) (ii) despite the applicants' assertion that AON and SLE '… were informal in many of their dealings and that cover for hotel risks was often bound informally', the applicants 'have been unable to provide a single, relevant example of where that informality had in fact occurred and where cover was bound'; (this is an impractical criticism from my perspective - the present circumstances are complex enough without producing other insurance examples requiring a likely intricate analysis of additional complex matrices of fact) (iii) the Fernhill Hotel example was of no assistance, because the deductible or excess was $1000 and $5000, and was therefore '…not such a risk, as 'its deductible of $5000 took it outside the Hostpak Scheme'; moreover the Fernhill Tavern example '… does not support the [applicants'] proposition that where SLE indicated a premium rate it would accept, AON could act on the basis that cover was bound and formal acceptance was not always required'; (that observation begs of course the factual issue here to be resolved as to an excess of $5000 prevailing, which I have resolved in favour of the applicants; I have in any event chosen not to analyse the Fernhill Hotel example in an endeavour to keep these reasons within something even approaching appropriate limits) (iv) 'concrete evidence of usage' was not led by or on behalf of the applicants; (see (iv) above) (v) Brambles Holdings had no application to the present circumstances, because 'SLE did nothing to suggest that cover was bound, and Ms Meyer was explicit in her conversation with Mr Quinlan on 25 June 2002 that cover was not bound'; the Court ought not to find that Mr Quinlan spoke with Ms Meyer on 31 May 2002; (as I have elsewhere indicated, I am unable to accept Ms Meyer's version of her conversation with Mr Quinlan on that occasion; moreover the submission does not come to issue as to the way and extent the applicants relied upon the doctrine of offer and acceptance as illustrated by the Court in Brambles) (vi) '[t]he insurance contract is formed when the insurer accepts [the] insured's request for interim cover or a proposal for final cover' and '[i]n the present case, no request to bind cover was received by the insurer'; reference was made to the circumstances involved in Yona International Limited v La Reunion Francaise Societe Anonyme D'Assurances et de Reassurances and Others [1996] 2 Lloyds Rep 84 as being 'very much on point', and as evidence for the proposition that in the absence of notification, mere (my emphasis) acquiescence or inactivity can only be sufficient to constitute ratification if it amounts to clear evidence of an intention to adopt an authorised act; as was further observed in Yona '… silence or inaction may simply reflect on unwillingness or inability on the part of the principal to commit himself; (the principles there cited from the lengthy and complex reasons for judgment in Yona were not shown to be 'on point' in relation to the applicants' bordereau and offer and acceptance case set out in [6(i)] to [6(iii)] above) (vii) in the present case, '…there is simply no evidence that SLE, by waiver or otherwise, expanded the parameters of the Hostpak scheme to permit the Parkview cover to fall within AON's authority to incept the insurance'; (I do not understand the applicants to have sought to 'expand the parameters of the Hostpak scheme', whatever 'parameters' were supposedly the subject of the submissions) (viii) further as to the present case (as was said by Lumley to be the case in Yona), '… SLE had no contact with the proposed insureds, the owners of the Parkview … SLE was unaware [of] any representation (if there was one) by AON to the proposed owners of the Parkview such that it would cast a burden on SLE to disavow those communications'; '[n]o duty to speak ever arose', and '[a]t the time of the quotation SLE did not advert to the question of whether something should be done or not to deny that cover was in place, as there had been no request to confirm cover at the premium rate that SLE had quoted on 3 June 2002'; (no such representation was pleaded as an element in the bordereau or offer and acceptance case; the submission in any event raises issues out of line with the precision with which the applicants' case has been framed, based as this submission is essentially on the repetitive Lumley theme that Ms Prasad's handwritten note of 3 June 2002 was a quotation) (ix) '[i]n the present case, it is AON that seeks to rely upon its own silence or inactivity in response to a quote given (or if that not be accepted to an offer made) by SLE in much the same way as Yonasought to rely upon its own silence in respect of the offer of a policy within the insurer's version of the cut‑through clause made by Mr Harrison on behalf of the Paris Pool; [j]ust as Yonawas not entitled to rely on its silence, and its presumption, to obtain a ruling that a contract of insurance had been formed, this Court should also reject the applicants' attempt to rely on their silence in response to SLE's quotation as constituting an acceptance of an offer of insurance'; and (this is a further endeavour to equate the terms of insurance and the circumstances in Yona with the subject circumstances, and again, falls short of demonstrating a principle of insurance law governing the precise circumstances of the applicants' bordereau and offer and acceptance case) (x) [i]n Australia, the proposition that an insurer can be bound if it knows all it needs to know to cover the risk being proposed, even if the steps of offer or acceptance have not been completed, was rejected'; reference was made to Prime Forme Cutting Pty Ltd v Baltica General Insurance Co Ltd (1991) 6 ANZ Ins Cas 61-028 at 78, 878, where Tadgell J observed (inter alia) 'It may be true enough that the form of a contract of insurance is not settled, until after the insurer has undertaken the risk, but the undertaking of the risk must involve a contract made, at latest, by the time the risk is undertaken'. (So much may be accepted without qualification, subject of course for the need to pay regard to the framework of the bordereau here in operation between the parties and the particular circumstances of the applicants' offer and acceptance cases put in the alternative) In short, the lengthy (though largely repetitive) submissions above fail to come to issue with the applicants' case in any material respect. 120 Lumley next contended that the applicants' submission to the effect that there was nothing in the subject risk that was of a nature which, as a matter of course, SLE would have declined on Lumley's behalf, was not to the point. The critical issue was described by Lumley to be '…not what could have been agreed to, but rather that it was not actually agreed to', and that 'AON could not bind the Parkview risk itself simply because the Parkview risk was outside the $2500 upper limit set for the deductible under the Hostpak Scheme', and further that 'AON could incept the insurance if the deductible was no more than $2500, but only SLE could incept the insurance if the deductible was more than $2500'. All that begs the first critical issue factual framed by the applicants in [43] above as to whether the insurance cover arrangements reached between the parties involved a deductible or excess of $5000 (being of course a condition for the benefit of SLE (as agent for Lumley) as the insurer, since its losses crystallising on claim exposures are thereby reduced). It is of course true that Ms Meyer's email of 9 January 2002 contained inter alia the incentive 'you can increase the $500 excess to $2500 and we will allow a 25% rate discount', but on the applicants' case that deductible amount was of course subsequently increased to $5000, albeit upon the basis by then of a reduced premium discount to 20%. In any event of course, Ms Meyer made the significant handwritten notes at the foot of that email (ante)concerning deductibles of $2500 and $5000 respectively in favour of SLE, in return for premium rate reductions of 15% and 20% respectively in favour of AON and its client insureds. Also consistently with the applicants' case, Ms Prasad stipulated in her own handwriting, in her fax to AON of 3 June 2002, the existence of an excess of $5000 in favour of SLE for all losses which might be sustained by the applicants, in return for a premium rate of .22%, in the case of the Parkview (which had of course partial timber flooring), and implicitly re‑affirmed that situation by her further fax to AON of 25 June 2002 of the same material, on that occasion adding SLE's button stamp. Lumley's somewhat bold submission that '[a]ccordingly, there could only be an insurance by an offer and acceptance process and while on the view most favourable to the applicants, SLE made an offer (or rather invited one) AON did not take that offer (or invitation) up' appears not to have wholly addressed the significance of that conduct on SLE's part, and did not in any event come to issue with the ways in which the applicants' case was presented, as summarised in [6] above. 121 In the context of the themes of its foregoing submissions nevertheless, SLE cited at length from testimony of Mr Bailey under cross‑examination on the subject of closings, and asserted unspecifically that his testimony was consistent with the content of the critical two page document 'Country Hotel Procedure' document attached to Ms Meyer's email of 14 January 2002 to AON. I have of course earlier extracted the substantial part of that critically important SLE document. 122 It is appropriate that I reproduce the same below: 'What in your understanding was the time limit for the receipt of closings that were applicable? --- Closings were to be sent - sorry you mean within the parameters or outside the parameters? Firstly within the parameters of the bordereau? --- Within the parameters the closing was to be sent to us promptly and also it was to be included on a monthly bordereau that was to be sent from AON Perth to us in Sydney. Right, and outside the bordereau what were the time limits for receiving closing? --- We were to receive them again promptly. I am not 100 percent sure as to whether there was specific time stipulated that we must receive the closing. The main issue with us was when we received the payment of the premium. So as long as we were aware that we were on risk the cover had been bound, we would chase the closing at a particular time. I don't think at that stage that we physically said it had to be in at a certain time. But you have agreed have you not that there were some cases in an offer and acceptance context where SLE first learned that it was expected by Aon to be on risk by AON delivering a closing to SLE? --- Correct, and we would go on risk from when we received the closing. Wasn't it the practise for AON to state in the documents that it originally submitted what the period of the cover was intended to be? --- Yes in the majority of instances they would put the period of insurance on the top. That wasn't necessarily the period of insurance that the cover may ended up being. Well don't you agree with me that in fact what happened in the period up to say August 2002 is that from time to time AON would indicate a period of cover and the documentary steps necessary to implement that cover would sometimes take place after the date of inception that was required? --- Sorry, that they would request us to bind after that date you mean that was on it? Yes? --- Yes, for instance, say they had put a particular date on the copy of the thing they may ask us to bind on it, effective from two weeks later, so to speak. What I am suggesting to you is that sometimes as you understood it, the intent as between AON and SLE was that the cover would commence from a given date, say, 1 June even where the steps, the documentary steps were not completed until after that date and when they were completed cover would be from 1 June? --- Within the parameters of the scheme, yes, that would be the case. Outside the scheme it was purely a normal offer and acceptance as normal insurance practice is.' The material distinction drawn by Mr Bailey above between 'within the parameters of the scheme'and 'outside the bordereau'reflects the framework of the issues tendered by the applicants in [6] above, yet that distinction has not been addressed in the thrust of Lumley's submissions, which, as I have repeatedly observed, evinced shortcomings in addressing the issues raised by the applicants' case. Moreover Mr Bailey's evidence in relation to the differing closing provisions of the bordereau and offer and acceptance cases are largely in line with what was presented in the applicants' submissions. 123 Lumley's concluding contention, in the context of its very lengthy fifth submission, was as follows: 'In the course of cross‑examination Mr Quinlan accepted that at some time between 31 May and 27 June he realised that he ought to have said to SLE, "please bind cover" if AON wanted cover to be bound … Mr Quinlan accepted that a broker could and often did ask different insurers for quotes and that an insurer having specified a premium rate to a broker would want to know that its premium rate was acceptable to the broker and the broker's client. Mr Quinlan simply did not tell SLE that its quote for the Parkview was ever accepted'. Of course for one matter, acceptance of a quotation for a premium plays no function by way of inception of cover, in the case of an insurance risk brought within the scope of the bordereau in operation between the parties in May/June 2002, which was the applicants' primary case. In purported support in any event of the foregoing submission, counsel for Lumley cited reference to what appears in transcript pages 115-116 of the cross-examination of Mr Quinlan, the material parts thereof being as follows: 'On 31 May you asked SLE to rate the cover for the Parkview? --- Correct.' (I interpolate to repeat that such 'ask[ing]' took the form of course of the critical three page fax comprising the Hostpak Property Information and Declared Values/Limits of Liability documents in relation to the Parkview, filled out in terms of detail of the risks the subject of the property to be insured and values to constitute the sums required to be within the insured limits, and faxed by Mr Quinlan to Ms Meyer of SLE on 31 May 2002) 'And on 3 June you received a document with a .22 premium rate at $5000 deductible? --- Correct'. (such document was of course a re-faxed copy of the Declared Values/Limits of Liability document bearing Ms Prasad's handwritten notes and signature) At that point of time, as far as SLE knew you could have asked SGIO to quote? --- I don't believe so. But you don't know? --- Well, I told them I wanted to place the business with them.' (I interpolate to record, consistently with Mr Quinlan's last answer, that there was no evidence other than that SLE alone was the subject of AON's application for insurance cover on the Parkview). 'Can you say that there has not been an instance where AON as a broker has tried to get the best possible premium by obtaining a rate from different insurers? --- That probably happened in the past, yes. From time to time brokers do that don't they? --- Of course. And an insurer would want to know that its rate was the rate that the broker had accepted? --- Sorry, an insurer would want to know … An insurer having a specified a premium rate to a broker would want to know that that premium rate was acceptable to the broker and the broker's client? ‑‑‑ Yes In the case of the Parkview Hotel you never said or communicated to SLE that the premium rate was acceptable to AON and AON's client? --- Correct.' Three was no dispute of course that the premium rate of .22% denoted by Ms Prasad was acceptable to the applicants. Mr Quinlan's evidence was to the effect that he recognised the rates appearing in Mr Bailey's email to AON of 4 March 2002 (earlier substantially extracted herein) as applicable to the insurance cover he required for the Parkview, but that he wanted SLE to adjust the same, doubtless to accommodate the 30% timber floor component which he had duly disclosed to SLE. Moreover Mr Quinlan acknowledged in the Declared Values/Limits of Liability form that SLE should have the benefit of an excess or deductible of $5000. Consistently with Mr Quinlan's account of his conversation with an SLE underwriter on 31 May 2002 (whom of course he sought to alternatively identify in priority because of his uncertainty of precision as to identity), AON was seeking not a quotation which required subsequent acceptance, but cover at SLE's nominated rate, implicitly within the parameters broadly set by SLE's fax of 4 March 2002. 124 Another difficulty for Lumley's case to confront in the present context was that payment of the premium in full was stipulated by the document 'Country Hotel Procedure' to be made within 60 days, and if not so made (see page 2 of that document under the headings 'SLE - 60 Day Remittance' and 'SLE - Unpaid'), cancellation of the insurance 'will be issued'. That stipulation as to a 60 day period of cover pending payment of the premium in full was not without analogy, incidentally, to the long established and well known insurance tradition of issue of a cover note by an insurer, pending receipt of a signed insurance proposal and ultimate issue of the policy, or an 'interim certificate' in the meantime, for what that might matter.

[47]

Not only was there no communication of acceptance of the quotation by AON to SLE, AON did not communicate to Rifon and Ardilo (its customers) that cover had been accepted prior to 27 June 2002. AON did not issue a cover note to Rifon and Ardilo, even when a cover note was requested (Lumley's sixth submission) 125 This sixth submission was predicated upon the following series of events described in Lumley's written submissions and which I have reproduced below, being events not in dispute which I have largely recorded or referred to already (I have where appropriate made bracketed observations in relation to the submissions): (i) Mr Kingston, a director of Rifon and Ardilo, told Mr Carr about their proposed purchase of the Parkview in late April or early May 2002; (ii) despite being aware of the proposed purchase and of Mr Kingston's instructions to arrange insurance for the Parkview, Mr Carr was unsure whether he briefed Mr Quinlan before 31 May 2002; Mr Quinlan could not recall any interaction with either Mr Kingston, or Mr Camkin, the general manager of Rifon and Ardilo, and in particular could not recall a conversation with Mr Camkin on 31 May 2002 at 4.30pm; (iii) a file note made by Mr Camkin on Parkview stationery bearing date 13 July 2002 contained the following: 'During the week ending Sunday June 2, 2002, I contacted the office of Terry Carr on numerous occasions chasing Terry Carr re confirmation of the various insurances due to commence at 10.30am Monday June 3, 2002 for the Park View Hotel … [The Hotel was due to change ownership at 10.30am on Monday June 3, 2002] On Friday May 31, 2002 I still hadn't spoken with Terry Carr, so I tried to get hold of Owen Quinlan from his office throughout the day. At approximately 4.20pm I spoke with Owen Quinlan from Terry's office, and asked him if the matter was in hand. He advised me at that stage it wasn't and that he would organise the matter immediately. He called me back approximately ˝ an hour later and advised me the matter was in hand. I asked him to ensure we had something in writing to state that the hotel would be covered and asked me (sic) to fax me the information when available. On Sunday June 2, 2002 I hadn't received any documentation confirming cover was secured and advised David Kingston. … David asked me to fax Owen Quinlan a letter confirming our discussion on the Friday and the reassurance from Owen Quinlan (that I received verbally) that the hotel was covered by the relevant insurances. I faxed this letter to Owen Quinlan on Sunday June 2, 2002 at Terry Carr's office. During the following week I called Terry Carr's office numerous times chasing written confirmation of the matter, but was unsuccessful in receiving responses.'; (iv) at the foot of that file note there additionally appeared, '… Quinlan had told [Camkin] that as at 4.20pm Friday 31 May the Parkview was uninsured' (it will be recalled that Mr Quinlan did not fax the relevant bordereau forms to Ms Meyer of SLE until 5.26pm on 31 May 2002); (v) Mr Kingston gave evidence in his affidavit that he did not receive a cover note for the insurance (I interpolate that what Mr Kingston said precisely was '[a]fter receiving that facsimile from Mr Camkin, I heard nothing from AON … by 24 June 2002 I had still not received an invoice for the insurance for the Parkview … at that time I was putting in place arrangements for the group for the year ending 30 June 2002'); (vi) Mr Carr was certain however that he spoke with Mr Quinlan after Mr Camkin had chased him up on Friday, 31 May 2002; Mr Carr first assured Mr Camkin that everything was okay, and he then spoke with Mr Quinlan; Mr Carr conceded that when he assured Mr Camkin, he had not yet checked that everything was okay; in fact it was not and AON was not in a position to confirm cover with its customer (so Lumley submitted, and I think correctly, since as I have earlier mentioned in these reasons, AON's fax of 31 May 2002 was sent about 26 minutes after normal close of business hours on that Friday); (vii) '… simply because AON, as the broker for Rifon and Ardilo, tells Rifon and Ardilo that they have insurance is no consequence as it is no more than a report by an agent to its principal'; '[t]he fact of the report does not effect the cover as between the insurer (Lumley) and the proposed insured' (again so much may be accepted); '[o]n the uncontested evidence of Mr Kingston and Mr Camkin, the necessary communication by AON back to its clients, Rifon and Ardilo, in relation to a contract of insurance, did not occur until after the Parkview fire had occurred'; '[t]he closing for the Parkview had to be sent by 14 June 2004'; in that regard I was referred also to what appeared in Mr Bailey's email to Mr McGovern of 4 March 2002: 'Also as a mater of urgency can you reiterate to all concerned that closings and bordereau are to be correct and sent within 14 days of the following month'; and (the precise stipulation of the Country Hotel Practice reads 'Desiree to forward stapled closings by the 15th of the next month', the reference to 'Desiree' being, as earlier indicated, Mr McGovern's assistant) (viii) '[h]owever Mr Carr knew that the closing was not sent until after the fire on 27 June 2002, and the premium arrived at SLE seven days after the closing document was produced' (I have already extracted that AON document headed 'Insurer Closing - Brokerage Tax Invoice' and addressed to SLE and bearing date 27 June 2002, though the significance thereof is another matter). 126 Purportedly upon those premises, SLE's contention in relation to this segment of its submissions concluded as follows: '[p]rior to the fire there had been an oral assurance by Mr Carr to Mr Camkin that everything would be OK. That assurance was given on 31 May, before Rifon and Ardilo took over ownership of the Parkview. From 4 June, the date when Rifon and Ardilo took ownership of the Parkview and thus acquired an insurable interest, until the fire occurred, there was no communication to them that insurance had been effected. That is because the insurance had not been effected'. Once again, SLE's submission has dwelt upon certain selected circumstances, without coming to issue with the implications as to the applicants' primary basis for its case for indemnity, namely the bordereau relationship, nor the particular ways whereby the applicants' case on offer and acceptance was framed in the alternative. 127 It is thus unclear from the foregoing submissions of SLE why the conclusion there contended for by Lumley should follow. It was not asserted that any of the factual events recorded in the applicants' affidavit evidence, and in particular what was related by either Mr Carr or Mr Quinlan, was false or untrue. Moreover the submission seemingly ignores the critical events upon which at least the applicants' primary case as to bordereau, and leaving aside the applicants' case as to offer and acceptance, was founded. Though the Bailey email of 4 March 2002 to Mr McGovern stipulated that '…closings and bordereau are to be correct and sent within 14 days of the following month', that was not specified or asserted by the email to be a condition subsequent to inception of a policy of insurance; that 14 day stipulation preceded the critical (and enlarged) words of the same email, namely 'For any policy to incept we require, two page survey with declared values/limit of liability page sent with rates', which of course I have already discussed and addressed. 128 The present theme of submissions next continued by Lumley pointing to Mr Carr's testimony to the effect that Mr Kingston 'told me about a month in advance he was buying the pub', which counsel for Lumley therefore described as a communication of information about the proposed purchase of the Parkview 'in late April or early May [2002]'; Lumley submitted on that footing the '[d]espite being aware of the purchase, and Mr Kingston's instructions to arrange insurance for the Parkview, Mr Carr was unsure whether he briefed Mr Quinlan before Friday 31 May'; in any event Lumley submitted that '[f]rom Mr Quinlan's evidence it would appear that Mr Carr did not relay Mr Kingston's instructions to Mr Quinlan before Friday 31 May 2002'; however Mr Quinlan could not recall: (i) 'any interaction with either Mr Kingston or Mr Paul Camkin, the General Manager of a group of companies of which Rifon and Ardilo were part'; and (ii) 'any conversation with Mr Camkin at about [4.30pm] on 31 May 2002'. Lumley emphasised again the content of Mr Camkin's file note of 13 July 2002 (above extracted). All that background material may well have demonstrated the absence of or shortcomings in efficient and timely attention given by AON to the insurance assignment placed by Rifon and Ardilo with AON, but it does not come to issue with the applicants' primary case based on the bordereau convention, to the extent that the same remained in operation between the parties, in line with the Country Hotel Procedure, or to the applicants' case based on offer and acceptance. On the contrary, all that background material tends to provide a compelling basis for the theme of Mr Quinlan's evidence as to his critical alleged conversation with an officer of SLE on 31 May 2002, that being of course the subject of the second critical factual issue framed in [44] above. 129 Lumley's submissions referred also to Mr Kingston's affidavit evidence which I have already recorded, to the effect of not receiving the cover note, and to neither Mr Kingston nor Mr Camkin receiving any information from AON, until after the fire; Lumley repeated reference to Mr Carr's assurance to Mr Camkin, given on 31 May 2002, to the effect that '… everything would be OK', that being 'before Rifon and Ardilo took ownership of the Parkview'; Lumley repeated that the reason why there was no communication was '… because the insurance had not been effected'. Yet again the Lumley submission merely tends to support the critical theme of Mr Quinlan's evidence to which I have just referred.

[48]

Even on 25 June 2002, AON did not take steps to ensure that cover was bound (Lumley's seventh submission) 130 Lumley next referred to Mr Carr's evidence as to being informed by Mr Quinlan on 25 June 2002 that he could not find confirmation of cover, and to Mr Carr becoming thus aware '… that his assurance to his customer may not have been well founded', yet according to the Lumley submission, Mr Carr 'did not himself take any steps to ensure that the cover had been effected'. Moreover Lumley pointed to Mr Quinlan having shown to Mr Carr the Parkview file, 'or at least a piece of paper from the file', and to Mr Carr's concession generally that Mr Quinlan 'couldn't find anything'. Lumley emphasised again Ms Meyer's evidence in chief, reflected in her handwritten note at the foot of the Declared Values/Limits of Liability document re-faxed to Mr Quinlan on 25 June 2002, which I have earlier extracted, but which may be conveniently repeated in the present context of Lumley's submissions, bearing in mind its importance to Lumley's case: 'Ms Meyer: Yes, we've got it and it was quoted and faxed on 3 June. Mr Quinlan: Can you re-fax it to me because I can't find anything. Ms Meyer: Yeah, OK. Cover has not been bound. Are we supposed to be on risk? Mr Quinlan: I don't know, I will have to find out the date that cover is required from.' I have of course already referred to difficulties I have encountered as to the viability of the handwritten note of Ms Meyer in any event. Moreover the inherent inconsistency in Ms Meyer's observation thereby involved, namely 'Cover has not been bound' on the one hand, and 'Are we supposed to be on risk', on the other hand, adds an enigmatic element to the implications of that note. Yet on the same day of course, Ms Prasad re-faxed for a second time to Mr Quinlan the Declared Values/Limits of Liability documents, consistently with Mr Quinlan's evidence to the effect that he had mislaid the previously re-faxed copy sent on 3 June 2002. 131 When cross‑examined upon her controversial handwritten note of 25 June 2002, and on her evidence in chief relating thereto (as to which see [45] above), Ms Meyer said in effect that Mr Quinlan did not indicate to her on that occasion, one way or another, as to whether he thought cover had been bound; she added '… the only indication he was giving me was that they didn't have any record, well, they had lost their documentation'; Ms Meyer adhered nevertheless under cross‑examination to her evidence that she told Mr Quinlan that cover was not bound, something which she said she volunteered to him in the course of the conversation, but to which she said also Mr Quinlan did not respond one way or another. Why she chose to do so, and upon what basis, does not to my mind satisfactorily, much less convincingly, appear from her evidence. 132 On the footing of the evidence which I have recorded above, in particular concerning Ms Meyer, Lumley advanced the following propositions: (i) the fact that Mr Quinlan could not even show Mr Carr the quotation that had been sent by SLE on 3 June 2003 'is a reflection of his record keeping'; (once again Lumley's submission is predicated on the re-faxed Declared Values/Limits of Liability document, to the extent of Ms Prasad's handwriting, being a 'quotation') (ii) it was 'highly improbable that Mr Quinlan would do nothing to ensure the Parkview was insured if he had been told by Ms Meyer that cover was not bound … [yet] the evidence is uncontrovertible, Mr Quinlan did not ask for cover to be bound'; (The fact that he did not ask for cover to be bound on that occasion tends to support, rather than detract, from Mr Quinlan's testimony) (iii) at the 1 July 2002 meeting which he attended with Mr Carr and Mr Bailey, Mr Quinlan did not say what one would expect from a person who believed cover was bound, such as 'I asked that cover be bound on the 25th', or even '[b]ut the deductible was $5000 so it was part of the automatic binder'; and (the point may be acknowledged, assuming that Mr Quinlan was at least by then entirely familiar with the content and implications of the Country Hotel Procedure document, hardly a well expressed and unambiguous document) (iv) Mr Carr did not say anything to that effect in his telephone conversation with Mr Bailey on 27 June 2002, nor 'once he had a chance to look into what Mr Quinlan had done, when he and Mr Bailey and Mr Carr met on 1 July 2002'; that was because, so Lumley submitted, Mr Carr must have known from Mr Quinlan that he had not ever requested that cover be bound; thus 'the only fair inference is that no protest of cover having been bound was made to Mr Bailey, because both Mr Carr and Mr Quinlan knew that Mr Quinlan had not asked for cover to be bound. 133 The complexity of the insurance arrangements generally prevailing between the parties, and the extent of the communications that had occurred in relation to the Parkview, as will have been evident from my recitation of the evidence both documentary and oral, as well as of the submissions of the parties, render perhaps understandable Mr Quinlan's reticence to wholly commit himself to a particular position at that point in time. There was no suggestion that Mr Carr or Mr Quinlan admitted at least explicitly to Mr Bailey at any time that cover had not been bound; whether or not cover had been bound depended of course on the implications to be drawn from the complexity of the Country Hotel Procedure document, and in the light of the communications and events of further complexity that had ensued. 134 As earlier foreshadowed, Lumley submitted that I should accept Ms Meyer's version of the events and conversations of 25 June 2002, given the contemporaneity of her file note, which was relied upon by Mr Bailey in his conversations with Mr Carr on 27 June 2002 (ie the day of the fire) and 1 July 2002; on the morning of 27 June 2002, Mr Bailey said that he told Mr Carr, understandably at that stage of the discussions which had taken place up until that time: 'Yes, we certainly do have a problem here. Matter of fact 48 hours ago Owen Quinlan from your office spoke to Paula Meyer from SLE and she confirmed the note on the file, she advised cover was not bound'. Each of them on that occasion exchanged indications of intention as to making further inquiries. I have of course already indicated my views in relation to aspects of Ms Meyer's evidence, in particular in relation to her critical file note of 25 June 2002. Mr Bailey and Mr Carr met again on 1 July 2002, in the course of which neither Mr Quinlan nor Mr Carr asserted that cover had (or had not) been bound, notwithstanding, as Lumley emphasised, it would be expected that they would have thought that it was most important to do so; whether or not legal advice had been sought or obtained by AON in the meantime does not however appear. 135 I make the observation, in relation to the Lumley submissions generally in this present segment, that unlike so many insurance disputes over the years appearing in the reported cases, there does not arise here for resolution the interpretation of a carefully crafted policy of insurance, in the light of events which have happened, but rather for consideration of complex and largely informal insurance arrangements, in the sense of agreements taking the form of correspondence and other documentation not crafted by lawyers. Depending on how the bordereau might take effect in individual circumstances, or on a case by case basis, the matter of most critical importance here was what objectively took place in communications between the insurer and the insurance broker, and not what a representative or representatives of either party might have thought took place, or should have taken place, or how efficiently or inefficiently the respective parties involved may have been in the courses of action each adopted or pursued, and earlier in their framework of their governing documentation. Yet as both Mr Bailey and Ms Meyer acknowledged (see [18]-[19] above, all that became ultimately outstanding for insurance cover to take effect, from their perspective, was the request of AON to confirm cover, something which was open to have been communicated to SLE orally or by reasonable implication arising from conduct, including conduct sufficient to attract the operation of the bordereau prevailing between AON and SLE.

[49]

SLE did delegate to AON the right to incept insurance within certain agreed parameters. The parameters were agreed in writing as Commonwealth legislation requires (Lumley's eighth submission) (i) SLE's authority 136 Lumley acknowledged that there was no dispute that SLE was authorised in July 2000 by Lumley to underwrite property insurance for hotels under what Lumley referred to in its submissions as 'the Hostpak Scheme'. The so-called extent of that delegation was said to appear in the agreement in writing entered into on 29 June 2001 made between Lumley, SLE and Pacific Underwriting Corporation Pty Ltd, and in particular clause 2.2 thereof (see [16] above). Nothing however appears to turn on the terms of that agreement. All of AON's dealings relevantly were undertaken between it and SLE, and Lumley was not of course a party to the proceedings. (ii) The sub-delegation to AON 137 Lumley further referred to the underwriting arrangements between the parties which 'also allowed a sub‑delegation by SLE to AON pursuant to which AON could bind insurance that fell within specific parameters under the Hostpak Scheme'. The terms of that so‑called sub‑delegation were described by Lumley as those set out in the emails from Mr Bailey of SLE to Mr McGovern of AON on 2 August 2001 and 4 March 2002, and also in the intervening email communication from Ms Desiree Raymond of AON to Mr Bailey of 15 August 2001. To that material should be added reference to the email of Ms Meyer of 9 January 2002 to AON, which was copied to Mr Bailey, and to the Country Hotel Procedure document in particular, the latter having been prepared by SLE and attached to Ms Meyer's email of 14 January 2002 to AON (and also copied to Mr Bailey). Attention has not previously been drawn in detail in these reasons to Ms Raymond's said email of 15 August 2001 to Mr Bailey. That email disclosed that the scheme therein described was 'the new facility', whereby credit terms were to be 'strictly 90 days', upon the basis that 'all cover ceased if unpaid to SLE by this time'. It was also described by Lumley as a 'facility' by way of 'offer and acceptance', whereby 'a Questionnaire must be completed and sent to Mark Bailey at SLE with request for cover'. However it then moved to a further segment, introduced as follows: 'Further to our discussions last week in Melbourne and (sic) wish to propose that SLE are prepared to write Country Hotels … Australia‑wide on a bordereau basis'. Three of the twelve conditions which followed included 'Survey to be forwarded immediately on risk', and '[m]onthly bordereau with common due dates of 28 of each month', and '[w]here we are able to obtain $2500 excess, SLE are prepared to grant a 25% reduction on existing rates.' At the conclusion of the twelve conditions were two discrete requirements as follows: 'We require monthly bordereau to be sent within 30 days of end of month and FULL payment of that bordereau by 90 days. Bordereauto contain Name, Location, Period, Assets, Rate, Premium, GST, FSL, S/D, Commission, Net payable …' 'Rates' were prescribed in relation to brick walls, timber floors etc. Similarities to the subsequent statements as to terms of the 'bordereau' in operation between the AON and SLE may be observed, including the 'rates' provisions of Mr Bailey's email to AON of 4 March 2002, to which attention has earlier been drawn in these reasons. 138 Lumley submitted that '[e]ach term and procedure was properly documented even when first arranged orally …'. In relation to the later 4 March 2002 emailed (and latest) amendment earlier identified above. Mr Bailey gave the following evidence: 'Did you and Mr Carr at any time enter into a separate oral agreement which altered the terms of the bordereau? --- Yes I spoke to Terry in January of 2002 which I think I mentioned earlier … where we have a lot of renewals coming up due in March 2002 where I agreed with him on renewals that if there was no variation from the previous period of insurance … the price would be an increase of 25 per cent which then after that I spoke to Ross McGovern and then we formalised it on a national basis.' The inference from that evidence of Mr Bailey was that in relation to insurance operations concerning the State of New South Wales, he would negotiate terms of arrangements between SLE and AON with Mr Carr, and in relation to Australia generally, he would speak with Mr McGovern. Hence SLE's reference to 'State', for instance in the Country Hotel Procedure document. What ensued in relation to documentation of that 25% increase was Mr Bailey's email of 4 March 2002 to Mr McGovern. Lumley acknowledged that '[i]f a proposal for insurance fell within the scope of the Parameter Documents, AON did not have to put the proposal to SLE', and further that 'AON could decide that the insurance was to be granted and incept the insurance', and 'AON would then report the insurance to SLE and pay over the premium'. Those acknowledgements reflected the operational concept or notion of bordereau, in contrast to that of offer and acceptance. Lumley added that 'AON was required to and usually did forward to SLE the "closings" which were generated by AON and which set out the details of the insurances incepted by AON'. The distinction between the inception of insurance and a closing thus acknowledged by SLE, and evident for instance from the Country Hotel Procedure document, may be observed. 139 Lumley thus submitted that under what it consistently referred to as 'the Hostpak Scheme', there were specific parameters within which AON could underwrite risks, and that outside of the parameters thereof, AON was required to ask SLE to make the underwriting decision and bind cover. Lumley further submitted that SLE was entitled to refuse to underwrite a risk in circumstances outside those parameters; so much was said by Lumley to have been duly acknowledged by Mr Carr in the course of his evidence, and to my understanding was never in dispute. Those Lumley submissions the subject of this and its seventh submission thus appear to have been non-controversial in relation to the issues which I am required to resolve. (iii) The 2002 increase in premiums 140 As foreshadowed above, a so-called increase in 'rates' (that is of course a reference to premium percentage rates) took effect on 1 April 2002. Reference however in SLE's 4 March 2002 email to 'discount of 15% applies to above rates', in circumstances where an increase in the amount of the deductible or excess to $2500 would take effect, should also be observed. The point made here by Lumley in that context was that such changes were recorded in writing, in contrast to the controversial $5000 excess increase alleged by the applicants to have been later introduced in return for a 20% decrease in its favour in the premium rates then prevailing.

[50]

(iv) The Corporations Act requires the specific terms of the sub‑delegation to AON to be in writing 141 The first proposition put forward in this segment of Lumley's submissions was that the Corporations Act 2001 (Cth) contains general provisions relating to responsibility for the conduct of agents and brokers, and also contains specific provisions dealing with the receipt of premiums and other moneys, and with brokers who act under a 'binder'. That statutory expression 'binder' was described by Lumley as a special agreement whereby a broker has authority to make binding decisions on behalf of the insurer in relation to accepting proposals or settling claims. 142 The Corporations Act was said to contain in particular a specific provision dealing with cases where a financial services licensee acts under a binder. I was referred to s 916A(1) thereof (presumably that reference was intended to be to s 916E(2) as well), which was described as requiring an agent's authority to be in writing, and for the authority to provide for specific services; sub-sections 916A(1) and 916E(2) respectively reads as follows: 'A financial services licensee may give a person (the authorised representative) a written notice authorising the person, for the purposes of this Chapter, to provide a specified financial service or financial services on behalf of the licensee.' (s 916A(1)). For all purposes connected with contracts that are risk insurance products, or with claims against the insurer, in respect of which the authorised licensee acts under the binder: (a) the authorised licensee is taken to act on behalf of the insurer and not the insured; and (b) if the insured in fact relied in good faith on the conduct of the authorised licensee, the authorised licensee is taken to act on behalf of the insurer regardless of the fact that the authorised licensee did not act within the scope of the binder.' (s 916E(2)). 143 The definition of 'binder' appears in s 716A of the Corporations Act as follows: '"binder" means an authorisation given to a person by a financial services licensee who is an insurer to do either or both of the following: (a) enter into contracts that are risk insurance products on behalf of the insurer; or (b) deal with and settle, on behalf of the insurer, claims relating to risk insurance products against the insurer as insurer; but does not include an authorisation of a kind referred to in paragraph (a) that is limited to effecting contracts of insurance by way of interim cover unless there is also in existence an authority given by the insurer to the person to enter into, on behalf of the insurer and otherwise than by way of interim cover, contracts of insurance…' As has already been seen, the expression 'bind cover' was used by the parties in the context of their discussion of the procedures undertaken between them. 144 Lumley submitted that AON's authority to bind SLE, and thus SLE's principal Lumley, depended upon the 'the scope of the binder', whilst the liability of AON to Rifon and Ardilo depended upon AON's conduct. That was why, Lumley further sought to explain, 'AON has paid Rifon and Ardilo's claim, and why the court needs to determine the actual scope of the binder pursuant to which AON claims it had authority to bind SLE' without reference back to SLE, and further that '[t]o determine the scope of the binder, the Court should - in accordance with s 916A(1) and s 916E(2) - have reference to its written terms'. 145 It may be perhaps not at least literally inapt to equate an insurer, in the situation of SLE as agent for Lumley, when engaged in transactions, such as undertaken by it in the present context, with AON as broker for Rifon and Ardilo, as thereby fulfilling the notion of a financial services licensee, in that interest free credit for payment of premiums is provided for the relatively short period of time between binding cover and the time for payment of the premium to SLE. Lumley's written submissions thereafter maintained that s 916A(1) (presumably thereby intending to refer to s 916E(1)) of the Corporations Act required the authority of an agent in the position of AON to be in writing, and further that in order for the relevant services required to be undertaken by AON the subject of the bordereau, writing was also required. 146 Counsel for Lumley further submitted that s 916A (again presumably intending to refer to s 916E(1)) is consistent with the provisions of the former s 10 of the Insurance (Agents and Brokers) Act 1984 (Cth), in relation to which my attention was drawn to what was found by Williams J in MLC Life Ltd v Navari Pty Ltd (1996) 9 ANZ Ins Cas 61-332 to the effect that an insurance agent cannot hold himself out as such, unless an agreement in writing between that agent and the insurer authorises the agent to manage the class of insurance contracts in question. Counsel for Lumley pointed out that the section prohibits an insurer from permitting an agent to hold himself out as entitled to arrange a class of contracts of insurance unless an agreement in writing between the insurer and the agent permits the latter to do so. However counsel acknowledged that any failure to comply with those statutory provisions, though carrying a penalty, did not operate adversely upon the validity of the contract of insurance. Nevertheless he made the further submission as follows: 'Relevantly for this matter [Williams J] noted that the broker concerned had extensive experience acting as an insurance agent and must have known of this statutory obligation. That observation applies equally to Mr Carr in the present case. Mr Carr knew that the terms on which AON could bind SLE and thereby Lumley had to be in writing and indeed he knew that the written terms had to be agreed between Mr Bailey for SLE and Mr McGovern for AON. It is only the written terms of the binder that set out the scope of AON's authority to bind insurance.' 147 The applicants' submissions in response were fourfold as follows: (i) s 916A of the Corporations Act does not support the submission; (ii) s 916A merely provides that a financial services licensee may give a written notice of authority to its representatives; it does not require conferrals of authority to be written, and still less does it provide that an oral authority is ineffective; (iii) in any event, the decision in MLC Life, upon which Lumley purportedly relies, states in terms that 'the validity of any contract of insurance is not affected by a contravention', (being as above stated, a proposition not denied by Lumley); and (iv) further in any event, the point had not been pleaded by Lumley, as required by Order 11 rule 10 of the Federal Court Rules. Those submissions were soundly based, and lead to the conclusion that to the extent that Lumley postulated the need for the 'sub-delegation to AON' to be in writing pursuant to the Corporations Act, the same is without support from the general law. Nor in any event had any application been made to the Court on behalf of Lumley for leave to amend its pleading, much less to frame the precise terms of the defence which might be purportedly raised. In any event the legislation appears to be directed to the protection of the insured, and not the insurer and thus may not be available to be invoked by an insurer. However I will refrain from determining what are academic issues. 148 I might add moreover even if a prima facie defence on the merits could have been articulated by Lumley, I would imagine that the applicants would rejoin by pleading circumstances involving part performance, and/or perhaps estoppel or waiver.

[51]

The proposed cover for the Parkview did not fall within the specific parameters of the binder/Hostpak Scheme (Lumley's ninth submission) 149 Lumley's first proposition under this segment of its submissions was that AON was prima facie a broker, and thus an agent for Rifon and Ardilo; absent therefore a specific binder, so the proposition continued, a broker is not an agent for the insurer and cannot enter into insurance contracts on behalf of the insurer. The proposition, if correct in principle, and in the absence of writing, could undermine, if not exclude, the existence of a bordereau relationship. The proposition was not however pleaded, as I have already mentioned, nor articulated with specificity or any sound basis in reasoning, and should not be permitted to be raised so belatedly in written submission. Even if capable of being pleaded, and aside from any rejoinders conceivably available to the applicants by way of part performance or otherwise, consideration would doubtless have to be given by the applicants as to whether the correspondence comprising the emails emanating from SLE itself, to which I have above referred, at least partially extracted, and discussed, as constituting or evidencing the bordereau and its evolution up to and including Mr Bailey's email of 4 March 2002 to AON, would require to be analysed in terms of substantive fulfilment of any such requirement for writing necessary for enforceability. In any event, to postulate that AON as broker entered into any insurance contracts on behalf of SLE and/or Lumley has its own inherent difficulties, whether from a bordereau or offer and acceptance perspective. AON's principals were at least primarily Rifon and Ardilo, and the circumstance that a bordereau transaction may be attributable in operation to SLE or Lumley does not at least necessarily require any characterisation of AON as agent for either of them. 150 Lumley submitted that '[t]he new case of the applicants is that in early 2002 there was an oral variation to the binder that was not documented', namely that AON was authorised to bind cover with a $5000 deductible or excess, yet it was 'highly unlikely that parties who were used to documenting their agreements, as they did in 2001 and March 2002, would not have do so for this variation of the Hostpak Scheme's parameters', and that 'the applicants cannot point to a transaction that was actually completed at a $5000 deductible level that was bound by AON pursuant to this alleged variation'. I do not think that to be correct, since there was contemporaneous written evidence in support of the applicants' postulations, being Ms Prasad's handwritten endorsement on the re-faxed material of 3 and 25 June 2002, following upon the reference to $5000 excess in the Declared Values/Limits of Liability documentation submitted by Mr Quinlan to Ms Meyer by his fax of 31 May 2002. Incidentally Mr Bailey's following evidence tended to demonstrate an unjustifiable basis for this Lumley contention: '… were there standing instructions within SLE that if AON submitted a declared values form with a $5000 deductible the premium otherwise calculable should be reduced by 20 percent? --- That was an indication that I had given internally, yes.' Mr Bailey's explanation in that regard was that '[i]t would vary depending on the construction of the building, which in predominant cases it was a brick hotel, that would be the sort of discount that I told my people to do', and that 'if it was a timber hotel obviously no because the deductible is irrelevant from a burning down point of view', and 'there wouldn't be much of a discount if it was a timber hotel', and '[i]f it was a brick hotel, yes, we would give 20 percent.' In the present case of course, the Parkview's walls were of course disclosed by AON to SLE to be entirely of brick construction, and the floor to be of 70% concrete and 30% timber construction. In any event, the Lumley submissions asserted that 'AON was simply not given authority to bind cover with a $5000 deductible', and Mr Bailey was emphatic that he did not reach an oral agreement with Mr Carr that as an alternative to the $2500 discount, he 'would agree to a $5000 discount at a 20% rate reduction'. As I have already mentioned, a $5000 discount per se would have solely advantaged Lumley, and conversely disadvantaged any insured entity. The sole financial disadvantage to SLE (and thus to Lumley) would be the premium reduction it might be required to give as a quid pro quo for that deductible or discount excess. 151 When Mr Bailey was referred in the course of cross‑examination to the handwriting of Ms Meyer written at the foot of her email of 9 January 2002 to Mr Edwards of AON, to which of course I have earlier referred, namely:

[52]

'$1000 ded inc $2500 15% rate reduction $1000 ded inc $5000 20% rate reduction' the following thereafter appears from the transcript of his evidence: 'Did you have any discussion with her in which you, in substance, advised her that if the $1000 standard deductible was increased by either of those two steps, then the premium rate would be reduced either 15 per cent or 20 per cent as the case may be? --- Yes, that's the case …. Did you tell Ms Meyer that in the context of discussing the terms of the bordereau for the country hotel scheme? --- Yes. You meant Ms Meyer to understand that it was a term of the bordereauthat a $5000 deductible would attract a 20 per cent rate reduction? --- Well, not part of the bordereau, as an alternative to AON, that's the sort of rates they could - a discount that they could use, yes. You see, it was offer and acceptance, it could still go on the bordereau. Sorry it was offer and acceptance? --- It would still be processed under the bordereau position as against being an automatic facility because outside it would still be processed the same. That confusing testimony of Mr Bailey went some significant distance in implicit evidentiary support of the applicants' case to the effect that the parties had agreed earlier in 2002 to implement an arrangement whereby AON accepted an excess or deductible of $5000 in return for a 20% reduction in premiums. Lumley purportedly sought support from Mr Quinlan's evidence under cross‑examination as follows: 'In this particular instance you did refer to SLE for a rate, didn't you? --- I did. You appreciated that there was a $5000 excess required for the Parkview Hotel? --- Yes. And that that didn't appear on any document that you had seen that set out what the rules for the Hostpak Scheme were? --- Correct.' 152 There was no indication in the evidence that Mr Quinlan had not seen Ms Meyer's above handwritten notations, though I have already drawn attention to the circumstance that at the foot of the Declared Values/Limits of Liability form which Mr Quinlan filled in and faxed to SLE on 31 May 2002, there appeared nevertheless the following: 'Excess Applicable to all Sections of the Policy $5000 XS' And of course, Ms Prasad's response, in re‑faxing that document to AON on Monday 3 June 2002, was to place thereon prominently her handwritten endorsement as follows: 'Rate : .22%G XS : $5000 all losses' Mr Quinlan said that he inserted that reference to $5000 in the Declared Values/Limits of Liability form under the heading 'Excess' in a context of his understanding gained in the course of his employment by AON commenced in the preceding month of April 2002. Given the evidence on this issue I have already cited, it is open to be inferred that the ultimate source of his understanding was an employee or other representative of SLE. Moreover at the time Ms Prasad came to calculate the premium rate of .22% which she endorsed on the Declared Values/Limits of Liability form prepared and sent by Mr Quinlan to SLE on 31 May 2002, she agreed that she first took into account a 20% reduction in premium. Ms Prasad denied that she did so in line with what Ms Meyer wrote at the foot of Ms Meyer's email of 9 January 2002 to AON, and claimed that she initially deducted 15% by reference to an excess of $2500 only, and that thereafter she gave 'an extra 5 per cent off', not because that was what her instruction so to do, but because 'when they asked for $5000 I just worked it out myself and gave them an extra 5 per cent off'. I am not persuaded as to the credibility of that purported explanation and I do not think that she was wholly frank with the Court in that regard. She remains of course in SLE's employ, or at least did so at the time she gave her evidence. It does not make sense that she would have taken upon herself to have extended such a significant additional total percentage reduction in premium in favour of Rifon and Ardilo otherwise than on an authorised basis. Having rejected the credibility of that evidence of Ms Prasad, being evidence which reflected a tendency on her part to advocate Lumley's cause, and justification for her own conduct in the matter (a tendency I should say I did not perceive at least to any significant extent in relation to Mr Quinlan's testimony in the witness box, which was reflective more of personal embarrassment in his lack of contemporaneous note taking), I am left with evidence which, along with Ms Meyer's handwritten notes to the SLE email of 9 January 2002 to AON abovementioned, provides a measure of support for the applicants' case on the first factual issue outlined in [43] above.

[54]

The insurance for the Parkview was outside the scope of the delegation to AON under the Hostpak Scheme (Lumley's eleventh submission) 154 Lumley submitted in this context that the Parkview risk '… did not fall within the parameters because the excess (deductible) invited of Lumley was $5000, but to qualify for the Hostpak Scheme the excess (deductible) had to be no more than $2500'. Much of the substratum for this submission has been recorded earlier in these reasons. It will be recalled that the most recent reference to a bordereau excess or deductible in the written communications between the parties was to an amount of $2500, as set out in Mr Bailey's email of 4 March 2002 to Mr McGovern of AON, that being in the same context as the reference to a direction that a 'discount of 15% applies to above rates'. 155 I was referred by Lumley once more in the present context to Ms Meyer's preceding email of 14 January 2002 to Mr McGovern, to which was attached 'a copy of the SLE procedures that we have agreed to and will be applied'. What was thereby attached was the two page Hostpak Property Information pro forma and the one page Declared Values/Limits of Liability pro forma, together with the two page instruction headed 'Country Hotel Procedure'. As I have earlier indicated, the latter document was in the same form as that earlier emailed by Mr Bailey to Mr McGovern on 2 August 2001. Ms Meyer agreed that what she wrote down on that occasion was an example of her writing down an oral instruction that Mr Bailey had given her. She did not alleviate the significance of her evidence in that regard in favour of the applicants' case by her equivocation 'It's an amendment, well it's not really an amendment it is actually an enhancement…'. 156 Lumley referred to Ms Meyer's still earlier email of 9 January 2002 to Mr Edwards of AON, and asserted that her controversial handwritten notes at the foot thereof, according to her testimony, were made '… shortly after that email was sent', being an explanation not challenged by cross‑examination. Lumley contended that those notes were made for SLE to use in calculating premiums, and were solely for the use of SLE employees, but so much hardly operated to diminish the significance of that material to the applicants' case. SLE emphasised that no AON personnel ever saw that material prior to the onset of the present litigation, but that factor does not derogate from the significance of its implications in favour of the applicants' case, in particular based on the bordereau. Lumley's submissions continued in any event that 'AON had to communicate to SLE either an acceptance of the quote or a rejection of the quote', and that 'in the case of the Parkview neither happened, so a contract of insurance was not formed'. That Lumley submission falls well short of coming adequately to issue with the applicants' case. Had the Parkview fallen under the heading 'AON - Acceptable Risks', as set out in the two-page Country Hotel Procedure document, Lumley further submitted, there would have been no request by AON to SLE to 'advise rate and terms applicable'. So much was correct in principle, were it not for the existence of uncertainty by reason of the evident shortcoming in SLE's charter of rates the subject, for instance, of its 4 March 2002 email to AON. Counsel for Lumley repeated in any event that Mr Quinlan's action of faxing of the forms to SLE on 31 May 2002, without rates, was 'entirely consistent with a request for SLE to provide a quote', and further that 'AON could not rate the risk itself because AON did not have SLE's internal rating document, and AON cannot be taken to have relied upon a document that they did not have'. I do not understand the basis in the evidence in relation to any such 'internal rating document'; certainly Mr Bailey's email of 4 March 2002 purported to record and notify SLE's rates to apply from 1 April 2002. In any event, I would reject the description 'entirely consistent'. What Mr Quinlan did was at least in line with the bordereau stipulation of SLE's Country Hotel Procedure document, though on the applicants' case of course it was also in line with the offer and acceptance provisions thereof as well. What points more however to the former was that the period of insurance was stipulated by both the Hostpak Property Information and Declared Values/Limits of Liability documents of Rifon and Ardilo to commence on the same date as AON's fax, namely 31 May 2002. 157 The present contentions of SLE's counsel still raise the question as to who gave to Ms Meyer the information the subject of her handwritten notes, and in what context. In that regard, Ms Meyer agreed that what she wrote down the same on the instruction given orally to her by Mr Bailey. Moreover there remains the coincidental implications as to Mr Quinlan's insertion of reference to a $5000 excess in the Declared Values/Limited of Liability form, which he inserted of course prior to faxing that document to SLE on 31 May 2002, being the same sum as that which Ms Prasad of SLE subsequently placed on the critical Declared Values/Limits of Liability document re-faxed by her on behalf of SLE on successive occasions to AON in June 2002. His conduct in that regard is implicitly supportive of AON being aware, at the material times, of the $5000/20% premium reduction dichotomy the subject of the first critical factual issue.

[55]

AON's principal witness, Mr Carr, accepted that only Mr McGovern had the necessary authority to agree with SLE an amendment to the scope of AON's delegation under the Hostpak Scheme (Lumley's twelfth submission) 158 Lumley contended that '[t]here was no binding oral agreement to vary the written terms of the Hostpak Scheme between Mr Bailey and Mr Carr', and moreover that 'only Mr McGovern… had authority from AON to reach an agreement with SLE'. I was referred to the following cross‑examination of Mr Carr: '… the parameters of the scheme would be, at the end of the day Mr McGovern had to make that call, didn't he? --- Yes, of course, yes'. There is of course a distinction to be drawn between actual evidence of the making of an agreement and evidence as to the operation of any agreement implicitly reflective of the existence already of any such agreement. 159 Mr Bailey's testimony was to the effect that at least by January 2002, SLE was not earning enough premium income from the Hostpak Scheme, although no detail, much less financial documentation, was placed in evidence by SLE in that regard. The implications of that testimony are equivocal, in the sense that it was unclear whether the level of income the subject of concern to Lumley was gross premium income, or excess of premium income over claims paid out. SLE was said by Mr Bailey to be in any event not troubled by the levels of risk, but needed additional income generally, and hence the alleged commercial reason why SLE was said not to have agreed to an increase in the maximum deductible up to $5000, because 'at higher levels of deductible', less business would be underwritten, and that would defeat the object of commensurate increases in premium rates. Lumley accepted of course that there was no doubt that the Hostpak Scheme's 'automatic binder' was varied in January 2002, with SLE allowing AON to write risks for deductibles of up to $2500; above $2500 however, it was Lumley's case that AON did not have authority to bind cover under the bordereau scheme. Consequently, so Lumley concluded, deductibles could only be agreed between SLE and AON by way of 'ordinary offer and acceptance', in other words on a case by case basis. The applicants' offer and acceptance case purportedly reflected an offer by Lumley through Ms Prasad of a premium based on .22% gross in relation to the Parkview, and Ms Prasad's ostensible authority to have so made that offer resolved further debate or dispute on the acceptability to SLE of that .22% gross rate. These issues are also tied up with the subject of Lumley's (very lengthy handwritten page) thirteenth submission, which I will shortly address. What Lumley sought to do, by raising this issue as to the authority of AON to conclude the underwriting of the Parkview, was to obviate at the threshold the factual issues tendered by the applicants as set out in [43]-[45] above. In the light of Ms Meyer's handwritten notes at the foot of her email of 9 January 2002 to Mr Edwards of AON, and Ms Meyer's attribution of the source of that information to Mr Bailey, Lumley was seemingly driven to raising this issue as to Mr Carr's lack of authority.

[56]

Knowing that only Mr McGovern could have agreed an amendment to the scope of the delegation from SLE under the Hostpak Scheme, AON cannot be taken to have relied on a statement by Mr Bailey to Mr Carr as effecting an amendment (Lumley's thirteenth submission) 160 This Lumley submission extended into 43 paragraphs. Much of what was submitted had no or no sufficient relevance to the theme of the foregoing heading, or otherwise to any matters of significance to the issues I must resolve. Much of what was submitted was repetitive of matters I have already addressed, and moreover was purportedly or implicitly based on the transcript of evidence in the proceedings for which no specific reference was provided by Lumley. It is not of course appropriate to the Court's function to wade through a large body of transcript and documentary material in order to define or verify the existence of evidentiary support for propositions that were required to be identified by the written submissions of counsel. Other material for which transcript references were provided by Lumley in this segment did not in many instances support, or sufficiently support, the proposition or conclusion contended for by Lumley. Yet further submissions of Lumley invited merely speculative inferences to be drawn by the Court. I will endeavour to confine my observations and findings below to what I think required consideration in the light of the issues clearly arising. 161 It was contended by Lumley that although the applicants relied on this alleged oral amendment in opening their case, Mr Carr 'frankly conceded that he lacked the authority to agree a variation to the terms of the Hostpak Scheme, and was unaware of any variation that was approved by Mr McGovern', he being said to be 'the one person on the AON side who had the authority to enter into the variation'. Mr McGovern not having been called as a 'potential' witness, it was further said by Lumley that an adverse inference should be drawn against AON on the issue, pursuant to the rule in Jones v Dunkel (1959) 101 CLR 298. Mr Carr could not have expected that the variation had been agreed, so the submission ran, and could not have reasonably relied in any event merely on his conversation with Mr Bailey, as effecting such a variation. However SLE did not have available a sufficiently viable basis, at any rate to which I was referred, to lay the foundation for the operation of the principle in Jones v Dunkel; in particular, no evidence was adduced as to any conversation, for instance between Mr Bailey and Mr McGovern bearing critically upon the present issue, or as to any written material whereof Mr McGovern was the author. 162 There is a further threshold difficulty also encountered by Lumley's pursuit of issues tied up with Mr Carr's subservience of authority relevantly to that of Mr McGovern. The authority of Mr Carr to agree to the variation was implicitly affirmed by the circumstance that the present proceedings have been brought by the applicants upon the predication that the factors of a maximum $5000 deductible or excess in return for a 20% premium reduction went to the heart of the then prevailing scope of the underwriting arrangements in operation between SLE and AON. Put another way, if Mr Carr did act without the authority relevantly of Mr McGovern, AON is to be taken to have implicitly ratified and affirmed any such absence of authority by the implicit decision of its directors to bring and maintain the subject proceedings upon the footing inter alia of that factual circumstance having been in operation at all material times. As pointed out by Chitty on Contracts (Volume 1 General Principles), (28th edition) at par 9-040, '[i]f a contract is intra vires of the company but beyond the powers of the officer of the company by whom it was effected, it may be ratified by the company so as to become binding upon it', and ratification in my opinion may be implicit as well as explicit, and in the case of an implication, unequivocal conduct may suffice. Of course the fact that an officer has acted in a manner which was unauthorised may constitute some evidence against an inference that the agreement purportedly sued upon was never otherwise reached in the terms contended for by AON, but all that would involve different considerations. 163 Lumley placed strong reliance in any event on Ms Meyer's handwritten note of 25 June 2002 appearing at the foot of the re-faxed Declared Values/Limits of Liability document bearing SLE's button stamp 'Owen rang - didn't know if this was with us. Cover is not bound. He to advised (sic) correct dates'. On the assumption that the note was accurately made, in the sense of reflecting truly factual circumstances, Lumley asserted that Mr Quinlan thereupon 'realised he lacked the necessary documents', yet 'even then he took no steps to ensure that cover would become bound'. So much was speculative, and no evidentiary reference was in any event provided. The fact was that AON took a different view, and proceeded to formalise what it considered to be an authentically and authoritatively indemnified situation by the issue of the controversial AON documentation bearing date 27 June 2002 headed 'Insurer Closing - Brokerage Tax Invoice'. The fact of any timely 'closing' of the insurance or otherwise is not per se an issue arising. Despite SLE's reliance on the fact of its non-receipt of that 'Insurer-Closing - Brokerage Tax Invoice' document prior to the fire, the critical question remains as to whether cover became bound, that is to say, whether the contract of insurance sued upon was formed, prior to the fire. In that regard, the Lumley submissions appeared to conflate the concept of binding cover with that of 'closing', notwithstanding the material inherently to the contrary, the subject of SLE's critical Country Hotel Procedure two page charter, which it provided to AON for observance and implementation (as the case may be). 164 Lumley next submitted that 'Mr Bailey did not represent that the scope of the delegation under the Hostpak Scheme had been amended to include insurance policies with a $5000 excess', and that 'AON did not allege such a representation at any time prior to Mr Carr's reply affidavit sworn the week before trial, and Mr Carr's last minute attempt to allege that Mr Bailey made that representation should be rejected'. No application was however made by Lumley for an adjournment of the hearing on that account. I will shortly refer in more detail to Mr Carr's evidence on that controversial occasion. 165 Returning to the AON document of 27 June 2002 headed 'Insurer Closing - Brokerage Tax Invoice' sent on the day of the fire, Lumley submitted that '[i]n circumstances where insurance cover was bound, AON was required to and usually did provide to SLE a claims history, a survey and a document called a "closing", which it sent to SLE', yet '[i]n respect of the Parkview Hotel, AON did not send to SLE any claims history, nor a survey, nor a 'closing' prior to the fire'. As to the complaint as to an absence of claims history, in fact the Hostpak Property Information form provided for information to be provided as to 'Loss History over the last 5 years', in relation to which the written response of AON on behalf of Rifon and Ardilo was merely 'New Venture', and no issue was raised by Ms Prasad (or otherwise on behalf of SLE) as to the inadequacy of that disclosure, and there was moreover no evidence tendered in the proceedings in any event suggestive of an adverse insurance claims history of Rifon or Ardilo, or of their apparent corporate controller Mr Kingston (who incidentally was not cross-examined on behalf of Lumley upon his affidavit evidence tendered in the proceedings), or of any related companies of Rifon or Ardilo. As to the Lumley complaint of the absence of a 'survey', being the subject of a condition identified in Ms Meyer's earlier email of 9 January 2002 to Mr Edwards of AON by her requirement stated therein '[s]urvey to be forwarded with calculation sheet to SLE immediately you place us on risk', being a condition also referred to in Ms Raymond's earlier email of 15 August 2001 to Mr Bailey, I have already discussed that survey requirement, and the response of the applicants that the Hostpak Property Information sheet, brought into existence by way of a procedural condition at least subsequently by Ms Meyer's email of 14 January 2002, was an apparently updated form prescribed by SLE to fulfil the function of a so-called 'survey' for insurance purposes. 166 Another contention the subject of Lumley's thirteenth submission appropriate to record related to the disputed conversation between Mr Carr and Mr Bailey during January 2002 as to the inclusion of a $5000 deductible in relation to the so-called binder (the expression again adopted in the submissions of counsel for Lumley, though not used by the parties throughout the documentary material in evidence). Mr Bailey spoke of an indication given by him on that occasion to Mr Carr as to Lumley 'look[ing] at putting a 25 percent rate increase on at the time', and as to Mr Carr saying in response 'okay we'll do that'. Mr Bailey also spoke of a conversation he had with Mr McGovern as to 'look[ing] at overall rates for new business as well as going forward…', and of fire being the most significant 'cause of losses' being then experienced in relation to country hotels. Lumley submitted in that context that '[t]he question of AON being able to incept insurance with a $5000 deductible simply did not arise in the conversation', referring to denials by Mr Bailey of affidavit evidence of Mr Carr in that regard. 167 It is appropriate to extract at this point of my account of Lumley's submissions the evidence in chief of Mr Carr as to conversations he had with Mr Bailey, which reflected the thrust of Mr Carr's testimony on the matter of the increase in the deductible to $5000: 'What I said was that if they were prepared to increase the deductible to $5000 I would contemplate a 20 percent discount to apply to the premium base at that time … What did he (ie Mr Bailey) say to you? --- That the 20 percent was quite OK if we went to a $5000 deductible.' And that of course on the applicants' case was what was implemented in the events which happened, which Lumley claims to have been unauthorised. 168 Lumley next pointed to a number of additional matters concerning Mr Quinlan's evidentiary testimony which I will next seek to summarise below, to the extent that reference or sufficient reference thereto in these reasons has not already been made, and which may be conceivably significant to the resolution of Lumley's thirteenth submission: (i) Mr Quinlan had seen the 'deductibles' referred to in Mr Bailey's fax to Mr McGovern of 2 August 2001 and Mr Bailey's subsequent email to Mr McGovern of 4 March 2002, being deductibles of course below the presently contentious limit of $5000; (ii) Mr Quinlan 'did not follow up upon the Parkview cover either on 3 June 2002 or once he was put on notice on 25 June 2002 that the client wanted confirmation, whereupon he realised he lacked the necessary documents', and the '[w]hen he contacted Paula Meyer, he was advised that cover had not been bound with SLE, but then he took no steps to ensure that cover would become bound - consequently, cover was never bound'; and (aside from controversial aspects of Ms Meyer's evidence in this contextual area, the fact is of course that also on 25 June 2002 at 10.28am, Ms Prasad re-faxed the Declared Values/Limits of Liability form to Mr Quinlan, containing as it did, reference to the figure of $5000 for excess, in line with here earlier 're-fax' of 3 June 2002) (iii) '[i]n any event Mr Bailey did not represent that the scope of the delegation under the Hostpak had been amended to include insurance policies with a $5000 excess', and that AON did not allege such representation at any time prior to Mr Carr's reply affidavit sworn the week before trial, and Mr Carr's last minute attempt to deny that Mr Bailey made that representation should be rejected' (Of course somewhat paradoxically, as I have already recorded, Mr Bailey gave instructions to SLE employees to implement that increased excess upon the basis of a 20% reduction in premiums in favour of AON in the context I have earlier recorded, as indeed exemplified or reflected in Ms Meyer's handwriting appearing at the foot of SLE's fax to AON of 9 January 2002 (though not of course appearing on the copy of the fax transmitted by SLE to AON) 169 Lumley further pointed to the following further circumstances, in the context of its earlier seventh submission: (i) the bordereau required that AON should forward to SLE a closing setting out each risk in detail; (ii) AON was required to enter the risk on the monthly binder report that AON was to send to SLE; and (iii) AON was required to provide a weekly binder email update to SLE of new risks. Those requirements were however irrelevant to inception of insurance cover for instance under SLE's document Country Hotel Procedure provided to AON, at least under cover of Ms Meyer's email of 14 January 2002. 170 The following further contentions in sequence made by Lumley, in the context of Lumley's thirteenth submission, should be recorded for completeness, each of which, one way or another, I have already addressed or will address: (i) the Hotel risk did not fall within the parameters of the Hostpak Scheme; (ii) AON could not bind cover without seeking a quote from SLE, and that upon receiving a quote, AON could then ask SLE to bind cover, or in the alternative agree to the quote; (iii) AON did not communicate to SLE that it relied on cover being in place under the Hostpak Scheme for the Hotel; (iv) there were no written variations to the terms on which AON could bind cover that were not reduced to writing, and that the applicants could not point to evidence of any variation, other than the alleged allowance of a $5000 deductible which was not reduced to writing, and the submissions of the applicants in that regard were contrary to the evidence; and (v) AON's conduct subsequent to 3 June 2002 was inconsistent with its allegation that an insurance contract was properly formed for the Parkview. 171 I was then referred specifically to Mr Carr's testimony as follows: 'But you were proposing … $5000 for country hotels? --- If a client requested it and in the case in question that we're discussing the client had already … a $5000 deductible in place with his previous three hotels or existing three hotels prior to buying this particular hotel. … … are you saying to his Honour that there were alternative deductibles that the client could choose? --- Exactly. There was a 1000 and a 2500 already? --- Correct. … Once you made the agreement did you advise any of your subordinates? --- Yes, yes. Well, not subordinates but most certainly Ross McGovern who was out national co‑ordinator of the hotel facility throughout Australia. But did you tell any of the people who worked in AON what should happen about the new alternative deductible? --- Only my immediate team at that time. Who was that? --- Owen Quinlan …' In relation inter alia to that viva voce evidence of Mr Carr, counsel for Lumley submitted as follows: 'Mr Carr's recollection of the context of his discussion with Mr Bailey also undermined his claim that a $5000 deductible was agreed. Mr Bailey and Mr Carr did not discuss deductibles at all in the January 2002 conversation where they discussed the 25% rate increase. When Mr Carr was given the opportunity to affirm that a $5000 deductible was agreed he instead accepted that a $5000 deductible was a matter for case‑by‑case management, in other words, on an offer and acceptance basis.' That submission understated however the implications of the arrangements made between AON and SLE on behalf of Lumley which were put in place prior to 31 May 2002, and upon which AON claimed to be entitled to rely in response to Lumley's contentions, and in the light of Ms Prasad's re-fax of 3 June 2002, in so far as the same bore her handwriting, and her further re-fax of 25 June 2002, being a claim having some justification. 172 Lumley submitted that Mr Quinlan was 'quite unsure as to how to calculate the premium for the Parkview … because neither Mr Carr nor any other AON staff had briefed him on the scope of AON's authority to rate and to bind covers under the Hostpak Scheme', and that 'Mr Quinlan did not just fail to effect the cover, he incorrectly calculated the premium' in that '[h]e took the view that Ms Prasad hadn't allowed the 20 percent discount in the quotation she supplied (although in fact she had) and so took another 20% discount'. Mr Quinlan's cross‑examination in that regard was as follows: 'On your calculation (appearing in the margin to the Declared Values/Limits of Liability page re‑faxed on 25 June 2002), did you put your figure as the .22 figure as the starting figure? --- Correct.' (It will be recalled that the .22% rate applied to brick walls in a 'Town with full time fire brigade) 'You took the view that Ms Prasad hadn't allowed the 20 percent discount --- Correct … Would you agree with me that .22 is roughly 20 percent less than .275? --- I believe so. So, in effect, if the correct calculation is .275, 20 per cent has been allowed once by Ms Prasad and been allowed a second time by you which means that there was a total discount of 36 percent put through? --- If you say so. I don't know the math but I will accept that. You accept that you got the rate calculation wrong, don't you? --- It seems so, yes. You didn't tell Mr Carr that you got the rate calculation wrong did you? --- I wasn't aware of it until very recently.' All that is ultimately irrelevant however to the issue as to whether in the events which objectively happened, issue was bound in conformity with the bordereau,or as a matter of offer and acceptance (particularly in the light of the Brambles test) those issues being ultimately for objective determination. 173 In any event, Lumley submitted that '… the evidence suggests that the rate calculation was not done on 3 June 2002, but rather after the 25 June 2002 receipt of the fax from Ms Meyer, and we do not know whether he (ie Mr Quinlan) did it on the 25th, 26th, 27th or later,' thereby citing Mr Quinlan's testimony as to his absence of recall in that regard. Mr Quinlan agreed that he was unaware of 'having prepared an invoice on closing from the document of 3 June [2002]', and Lumley submitted on that footing that it 'can be inferred that he would have done so earlier if he had thought cover was bound on 3 June 2002.' I do not accept that such an inference is correctly to be drawn on that purported basis. Lumley then however submitted that 'even on Mr Quinlan's version, his was not a direct and unequivocal request to bind cover. He was simply seeking a quotation and that is what he received.' That was in context an unlikely inference which I should draw in all the circumstances, at least in so far as Mr Quinlan's intentions happened to have been late on Friday 31 May 2002. Nowhere of course was any such request for a quotation explicitly made; on the contrary, the fact was that completion of the purchase of the Parkview was due to occur on 3 June 2002, as Mr Quinlan well knew from his telephone conversation with Mr Camkin, after which in the absence of insurance, the Parkview would be wholly at the risk of destruction by fire. 174 In my opinion, the inference reasonably open to be drawn was that the documents faxed by Mr Quinlan on 31 May 2002 from SLE's office to AON constituted a request on AON's part to SLE to bind cover, and for SLE to do so irrevocably (my reference to 31 May 2002 is not intended to detract from the significance of my earlier observation that the fax was transmitted after business hours on that day). Nothing explicitly contained in the faxed material constituted a request for something other than insurance cover of the Parkview, consistently with the very purpose for which the SLE drafted forms the subject of the fax had been initially provided apparently by SLE to AON. Implicitly, that faxed material reflected the significance of the circumstances the subject of what appeared in the Country Hotel Procedure under the heading 'AON - Acceptable Risks', being circumstances relevant to inception of the risk. Part of the contents of the documentary material thus faxed, as I have earlier pointed out, affirmed that AON thereby submitted to an excess of $5000 in favour, and for the benefit, of SLE. What AON was unable to do was to specify, at least with precision, and understandably so for the reason I have earlier inferred, what premium rate was applicable to the Parkview. Hence Mr Quinlan's request, which I find was in fact made to Ms Meyer in the terms he explained, to undertake that calculation, which of course Ms Prasad attended to on 3 June 2002. I reject therefore the accuracy of SLE's unspecific description, as to the implications of the events above described, to the effect that 'Mr Quinlan knew what he had to do. He just did not do what was necessary to effect cover.' 175 The concluding contentions of Lumley made in the context of its thirteenth submission constituted an endeavour to supplement all of the foregoing aspects thereof. Lumley drew attention to what appeared in Ms Meyer's email of 9 January 2002 as item numbered 8, namely 'Also, if risk for any reason does not fit into the parameters issued, you can refer to SLE for a rate'. On that footing, Lumley submitted that '[i]f SLE quoted, it was up to AON to seek to take up the insurance… [i]t was a matter for AON how it informed its officers of the requirements'. Reference however to SLE for a rate did not operate to prevent the bordereau taking effect. Indeed nowhere in the Country Hotel Procedure did it stipulate for the need for a rate to be stated, whether in the bordereau segment headed 'AON - Acceptable Risks' or in the offer and acceptance segment headed 'AON - Referrals - New Business/Renewals : To be clearly indicated on Fax', much less of course was any such stipulation made in and by the Hostpak Property Information and Declared Values/Limits of Liability forms. 176 I was referred by counsel for Lumley to Mr Quinlan's testimony under cross-examination in relation to the contents of the Country Hotel Procedure, as follows: 'And it says there, "SLE will then… advise rate and terms applicable". Do you see that? --- Yes. That's as you understood it (sic) what happened on 3 June isn't it? --- Correct. The next step says: "State to then confirm back to SLE if cover is or is not required". That's the step you didn't take? --- Correct. You've taken that step in relation to other covers, haven't you? --- Correct. It is your evidence that you didn't realise on 31 May that you needed to take that step on 3 June? --- Correct.' That cross-examination was directed to that segment of the Country Hotel Procedure which, according to Mr Bailey's evidence under cross-examination, which I have earlier cited, related to the process of offer and acceptance and not to the bordereau.

[57]

There is no evidence that Mr Quinlan believed insurance was incepted on 3 June 2002 (Lumley's fourteenth submission) 177 Ultimately of course, whether insurance was incepted, and was so incepted on 3 June 2002, is a matter for the Court's objective conclusion; however Mr Quinlan's belief as to fulfilment of that conclusion is not necessarily irrelevant entirely to the drawing objectively of that conclusion by the Court. Lumley referred in the course of Mr Quinlan cross-examination, to the material appearing in block letters in Mr Bailey's email of 4 March 2002 reading as follows 'For any policy to incept we require two page survey with declared values/limit (sic) of liability page with rates'. The prominent addition of the words 'with rates' did not appear in the Country Hotel Procedure document under the heading 'AON - Acceptable Risks', which Mr Bailey acknowledged to relate to the bordereau, and was moreover inconsistent with its segment that immediately followed, and which was headed 'AON - Referrals - New Business/Renewals…', and which Mr Bailey acknowledged to relate to offer and acceptance (see in that regard what appears under that latter heading, namely 'SLE will then advise rate and terms applicable'). However as I have earlier observed, provision was made in the Declared values/Limits of Liability form for an amount to be inserted for 'Excess', which Mr Quinlan completed, importantly, by reference to the amount of $5000. If an important amendment was intended to be made to that comprehensive charter headed of course 'Country Hotel Procedure', I would have thought that it would have been more explanatory and 'flagged' in clarifying terms. 178 It was somewhat enigmatic for Lumley as the insurer to take this point adversely to the applicants, the problem arising largely by reason of the inadequacy of expression of SLE's drafted forms. In any event, to the extent that the same may operate effectively as an amendment to that document, consideration is necessarily to be given to whether the contra proferentem rule of construction should apply in the present insurance context. As was indicated at some length by Kirby J in his Honour's well known analysis of that rule in Johnson v American Home Assurance Co (1997-1998) 192 CLR 266 at 272-275, it will normally be obvious, from any survey of the format and content of policies of insurance that it is not an easy task for an assured person to ascertain what are her or his rights and obligations thereunder, and there is no good reason why that principle should be irrelevant to policies evidently drawn up by brokers, who are normally not legally trained. In Provincial Insurance Co Ltd v Morgan [1933] AC 240 at 252, Lord Wright referred to the difficulty faced by an assured in fitting together the disjointed parts of a contract of insurance, so as to get a true and complete conspectus of what are the assured's rights and duties, and what are acts which might involve forfeiture of insurance. There is no good reason why that principle of construction should not wholly apply adversely to insurers in relation to the inception of insurance in favour for instance of insurance brokers acting as agents for insurers (as of course here). In the present circumstances, it can scarcely be denied that the documentation provided by SLE was couched in confusingly inadequate terms, no reference at all appearing for instance in relation to the provision of 'rates' in the 'AON - Acceptable Risks' segment of the Country Hotel Procedure document provided by SLE. 179 Mr Quinlan's evidence was that he was unsure as to what rate applied in the particular circumstances of the Parkview, and understandably so in the light of the 30% timber floor component of otherwise concrete flooring, and the ambiguity of the word 'Any', which prefixed the reference to 'Timber Floors'; as to calculating the rate which he did that led him to omission of reference to a rating in his 31 May 2002 fax. Indeed Ms Prasad's confusing explanation as to how she arrived at .22% exemplified the reality of his dilemma. What appeared in Mr Bailey's email of 9 March 2002 under the heading 'Rates' could hardly be described as comprehensive in terms of insurable categories. Moreover Mr Quinlan's evidence in this context was quite emphatic; he sought to obtain cover by 3 June 2002, and understandably so, that being the scheduled date for completion of the purchase of the Parkview, whereupon the Parkview would be at the risk of Rifon and Ardilo. However he needed SLE to advise AON of the rate, implicitly to perfect the insurance cover by enabling a calculation of the premium to be made. That testimony on his part is in my opinion rightly to be accepted as authentic. In the meantime of course, he provided to SLE the Hostpak Property Information and Declared Values/Limits of Liability forms, with most blank spaces filled out comprehensively; to the extent that some blank spaces remained, SLE raised no query or complaint in response as to inadequacy, but proceeded per medium of Ms Prasad to notify the rate to apply and the amount of the excess. The applicants submitted, in my opinion rightly, that Mr Quinlan's conduct, and not his stated belief, was 'the proper focus for the Court to assess whether formulation of [a] contract occurred', and that undoubtedly is the ultimate question to be addressed. I was referred in that regard by Lumley to Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSC 1 at [103], where Gillard J said as follows: 'Whilst the court is not assisted by a party indicating what he or she had in mind at the time of the negotiations leading to the alleged contract, nevertheless the statements made, their conduct, both of act and omission, may demonstrate that there is a contract or not a contract. When parties are in dispute as to whether there is or is not a contract, in my view their actions and conduct and their statements, are all relevant to the question of whether there was in fact an agreement and whether they intended to be bound. The evidence may be something other than communications between parties and it may be that the other party is unaware of the actions of the other party which bear on the topic. For example, where there is a real dispute whether one party has accepted an offer, the doubts expressed by the offeror in an internal communication is evidence relevant to the issue of agreement. But as Gleeson CJ emphasised, one must proceed with caution in considering such evidence and making findings based on it. In the final analysis the test whether the parties have agreed is an objective one. Have the parties by their conduct and statements outwardly agreed on the same terms upon the subject matter?' Those principles fall for operation in the present context of discussion.

[60]

Conclusions 182 The issue arising between the parties to these proceedings, as to whether a contract of insurance came into existence in the events which have happened, has focused upon written and oral communications involving SLE (as agent for Lumley) as the insurer of the one part and AON as insurance broker, against a context of a charter of documentary material not usually encountered in claims by an insured against an insurer. Pre-eminent of the documentary charter is the Country Hotel Procedure which predicates two classifications of insurance, one bearing the description bordereau, and the other of offer and acceptance, being classifications which are not mutually exclusive in their respective operations. 183 The primary case of the applicants was that based on the bordereau convention. The applicants requested that if I was to find in their favour on the bordereau case, the offer and acceptance case need not be resolved at least for the time being, depending I suppose upon whether the proceedings could then proceed to assessment of the quantum of the insurance claim. I do not think it to be appropriate or expedient that the Court should address and evaluate the complexity of the facts and circumstances in evidence in any such 'split' manner on issues of liability. 184 The complexity of the factual issues involved in the context of the liability issues is such that I have found it expedient to adopt the course of expressing views and some conclusions on the testimonial evidence in the course of summarising the same, inclusively in particular of issues involving the credibility of witnesses. I will not repeat those findings in the course of formulating my ensuing conclusions, but I have borne the same in mind in what shall now follows. 185 The insurance convention of bordereau in operation between AON and SLE falls to be described rather than defined. It is a composite notion, involving the following elements exemplified mainly in the Country Hotel Procedure document of one and a half pages: (i) the binding of insurance indemnity in favour of an insured by AON as broker for that insured, being indemnity on the part of SLE as insurer (as agent for Lumley), yet in advance of notification of the contract of insurance being formalised; (ii) the subsequent notification by AON to SLE of the insurance, so incepted by AON and binding upon SLE within a specific framework of time; and (iii) the completion of the formalities of the insurance so underwritten at a subsequent point in time by way of so-called closings and payment of the premium by AON on behalf of the insured to SLE, after deduction of AON's commission. 186 The secondary case of the applicants, based on the contractual principle of offer and acceptance, is also more to be described than to be defined, again by reference to steps prescribed by way of similar notification processes to SLE to be undertaken by AON to those required to be followed in the case of bordereau, except that the offer and acceptance process of incepting insurance cover was not to crystallise in advance, in contrast to the bordereau process. A contract of indemnity to be created pursuant to the offer and acceptance process was not at least normally programmed to crystallise in operation until there had taken place consensual quantification of the premium. 187 Objectively speaking, it was to be expected that circumstances might conceivably occur where an intending insured satisfied the parameters of both of those SLE prescribed processes, and that is of course the applicants' present case. The identical initiating steps required to be undertaken by AON in order to bring about the inception of insurance in both instances, involved in the first place the completion and lodgment by AON on behalf of the insured with SLE of the Hostpak Property Information and Declared Values/Limits of Liability forms. The potential for satisfaction of both avenues for crystallisation of indemnity was prospectively open to AON to achieve, and the applicants' case is of course framed discretely in relation to each. In either case of the applicants for indemnity, the operation in favour of the insured of the contra proferentem principle of interpretation would apply where appropriate, as I have earlier indicated. 188 The convenient course is to present my conclusions in the sequence, first, as to applicants' bordereau case, and thereafter as to the applicants' offer and acceptance case. 189 It became evident in the course of the hearing that there existed varying understandings (or misunderstandings) as to the meaning and operation of the terms and conditions of the bordereau for the time being prevailing between AON and SLE. It required the circumstances of the destruction by fire of the Parkview on 27 June 2002 to expose the controversial nature and extent of those understandings (or misunderstandings), and certain shortcomings in clarity of expression of the terms used in various written communications from SLE to AON over the preceding 10 or 11 months, and in particular in the critically important Country Hotel Procedure document; those communications in evidence commenced of course with the email of SLE of 2 August 2001 to AON. In construing those terms and conditions, it is important to bear in mind the nature of the bordereau for the time being in operation, the implications thereof in the sphere of business insurance indemnity generally, its potential complexity of operation in the context of the general law of insurance, and the extent that the same may have been varied by the various written communications between SLE and AON in the sequence in which they were created. A not dissimilar observation may be made in relation to what the parties mutually intended to comprise an offer and acceptance process for crystallisation of the contract of insurance. Moreover as I have already emphasised, those communications and other documentation, emanating as they did from SLE as agent for the insurer Lumley, would be subject to the contra proferentem rule of interpretation in favour of the applicants, to the extent of relevant ambiguity. At least the bordereau arrangements had been in operation between SLE and AON for some time prior to the SLE email of 2 August 2001, and were only brought to an end by SLE, and then unilaterally, after the occurrence of the fire which destroyed the Parkview. To the extent that the bordereau arrangements may have been effectively in operation prior to their termination by SLE, and to the extent of the significance of the closing provided by AON immediately after the fire, the nature and incidents of the bordereau require first consideration in these conclusions. 190 Prior to the occurrence of the fire and at least from the time of SLE's communication to AON of 2 August 2001, the terms of the bordereau had been undergoing restatement at the instance of SLE. I draw attention to the following critically important aspects of SLE communications with AON (which have been already more fully extracted in their respective contexts): (i) emails of SLE to AON of 2 August 2001 and from AON to SLE, which included the following: 'Survey to be forwarded with summary sheet immediately on risk'; (ii) email of SLE to AON of 9 January 2002, which included the following: 'Survey to be forwarded with calculation sheet to SLE immediately you place us on risk.'; (iii) the Country Hotel Procedure emailed by SLE to AON on 14 January 2002 with the information 'Attached is a copy of the SLE procedures that we have agreed to and which will be applied', and which included the following in relation to the bordereau: 'AON - Acceptable Risks Each State to fax… a copy of

Quote/Calculation sheet (copy attached)
1 Page Hostpack Property Information form (copy attached) as soon as you have bound cover.' and in addition the following in relation to offer and acceptance: 'AON - Referrals - New Business/Renewals : To be clearly indicated on Fax. State to fax to mark a copy of
Quota Calculation sheet
Page Hostpak Property Information form SLE will then advise rate and terms acceptable. State to then confirm back to SLE if cover is or is not require.'; and (iv) email of SLE to AON of 4 March 2002, which included the following: 'Also as matter of urgency can you reiterate to all concerned that closings and bordereauare to be correct and set within 14 days of the following month. For any policy to incept we require two page survey with Declared Values/Limits of Liability page sent with rates'. 191 The case presented by Lumley, as articulated in its written submissions, tended to conflate the notion of bordereau with that of offer and acceptance. Unfortunately as I have earlier recorded, many of Lumley's submissions did not come to issue with the way in which, or to the extent to which, the applicants' framed their submissions, nor did they do so in any event sequentially to of the applicants. That has rendered the judicial task more difficult, and resulted in these reasons being more protracted than should otherwise have been the case. In the course of recording the submissions of both parties, which I have found necessary to do at some length, I have made a number of contextual observations, rather than defer from so doing cumulatively in these conclusions. 192 In my opinion, the documentation faxed by AON (Mr Quinlan) to SLE (Ms Meyer) on 31 May 2002, comprising of course the Hostpak Property Information and the Declared Values/Limits of Liability documentation, as filled out by AON, fulfilled the bordereau requirements of SLE's Country Hotel Procedure. All that was required of AON by the bordereau was the provision of that 'Quote/Calculation Sheet' and the '2 Page Hostpak Property Information form… as soon as you have bound cover', as so described in the Country Hotel Procedure, in order for crystallisation of the bordereau process to take full force and effect. The provision of a completed Hostpak Property Information document constituted the notion of a 'survey', being the expression used by the SLE emails which I have above cited. The words 'as soon as you have bound cover', where used in the Country Hotel Procedure segment relating to the bordereau, involved no formal documentary requirement (analogously for instance to the more familiar practice as to issue of an insurance cover note), other than the completion, and the subsequent dispatch, of those two forms by AON to SLE. The binding of cover for the Parkview by SLE was thus effected or put in place by the implementation, or put another way, the crystallisation of operation, of the bordereau process, in the context of course of the implicit authority given by Rifon and Ardilo to AON to incept the insurance cover in SLE's name (see again in that regard the explanation of the bordereau process and implications provided by the High Court in Con-Stan Industries earlier cited in these reasons). That unusual though apparently traditionally established underwriting process, initiated and sought to be put in place by AON in relation to the Parkview, may thus be seen to have an operation somewhat analogous to the more traditional cover note issued by an insurer. The insurance cover so bound took effect in the bordereau process immediately prior to, and in anticipation of, the receipt and completion of processing, on the part of SLE of both the Hostpak Property Information and the Declared Values/Limitation of Liability documentation. All that effected the binding of cover, at the instance of AON, pursuant to and in conformity with what appears in the Country Hotel Procedure under the heading 'AON - Acceptable Risks'. 193 It is rightly to be recognised that instructions as to the purport of operation of the bordereau, and the various other documentary stipulations, sourced and emanating as they did in and from SLE, reflected a charter of authorised underwriting based upon an already established relationship between insurer and broker, which had originated in those historical or traditional times when insurance brokers operated 'in the field' with large administrative infrastructures. It is evident that the controversial documentation which I have reviewed, containing as it did elliptical language, was not prepared by practising lawyers, but by participants in specialised fields of the insurance industry, who may be taken to have comprehended the bordereau convention for the time being in place under the auspices of SLE as agent for Lumley. One impression which I gained, in particular from the viva voce testimonies at least of Mr Quinlan and Misses Meyer and Prasad, was an absence of at least an entire understanding of the distinction between the bordereau on the one hand and offer and acceptance on the other, something for which none of them could be fairly criticised, given the extent of obscurity of expression contained in the relevant documentation which emanated from SLE. 194 Subsequently to the provision of the Country Hotel Procedure document by SLE to AON, which had occurred at least by 14 January 2002, SLE emailed AON on 4 March 2002 in the terms earlier extracted herein. As there appears, that email stipulated to AON in block letters that '[f]or any policy to incept we require two page survey with declared values/limits of liability page sent with rates', referring thereby to at least the Hostpak Property Information and the Declared Values/Limits of Liability forms. Controversy arose however as to whether the concluding words 'with rates' introduced any change to the terms of the bordereau process in operation between AON and SLE contained in the Country Hotel Procedure document, and if so, whether in the events which happened in connection with the underwriting circumstances of the Parkview, any such additional requirement was satisfied by the applicants. The expression 'rates', in the context just cited, appears of course earlier in that email, and connotes premium rates. It is not a simple task to rationalise the addition of those concluding words 'with rates', in the context of the requirement '[f]or any policy to incept we require two page survey with declared values/limit of liability page sent with rates'. The email did not purport explicitly to amend the Country Hotel Procedure document, but the issue arises as to whether it did so by implication, and if so, with what consequences for instance in the present circumstances where Mr Quinlan was presented with the dilemma of a 30% timber component in otherwise concrete floors, in the context of the wording 'Any Timber Floors'. Those circumstances apparently placed Mr Quinlan in a dilemma as to the correctly applicable rate or rate calculation to be adopted, and I would infer, with perhaps some justification. In any event, he sought clarity as to the applicable rate. Payment of the premium was not required by the bordereau process to be made at the time of faxing of those stipulated forms, but in conformity with subsequent provisions of the Country Hotel Procedure documentation respectively headed 'SLE - 45 days out', 'SLE - 60 Day Remittance' and 'SLE - Unpaid… 90 days'. 195 The word 'rates' did not appear for the first time in the context of the 4 March 2002 email to AON. It was used in the singular and plural in the earlier SLE emails to AON of 2 August 2001, 15 August 2001 and 9 January 2002. It was also used in the singular by the Country Hotel Procedure in the offer and acceptance segment, and in particular in the context 'SLE will then advise rate and terms applicable'. It is not without significance that the SLE 4 March 2002 email did not purport at least explicitly to amend the preceding 'Country Hotel Procedure' documentation, though consistently therewith, as in the case of the earlier SLE emails to AON, it emphasised the fundamental initiating procedural requirement for the submission by AON to SLE of the Hostpak Property Information and Declared Values/Limits of Liability forms. No provision was made at least explicitly by either of those forms for AON to insert a premium calculation. On the contrary, the offer and acceptance segment thereof stipulated that 'SLE will then advise rate', and also set out the procedures in relation (implicitly) to both that segment and the preceding bordereau segment. To resolve the ambiguity in my opinion thus arising by reference to the inclusion of the words 'with rates', and consistently with the subjection of SLE (as agent for Lumley) to the contra proferentem rule, I would not read SLE's email of 4 March 2002 as stipulating to the effect that the words 'with rates' implied any obligation upon AON to provide a mathematical calculation of the applicable premium rate, so long as all facts and circumstances required to make that calculation were set out in those mandatory forms required to be submitted to SLE. Given the background and context to the SLE email of 4 March 2002, it was sufficient for AON to have provided the information needed for calculation of the rates, and thus of course the premium, and AON duly did so in the case of the Parkview, as is apparent from Ms Prasad's testimony and course of conduct. No issue arose as to the accuracy of Ms Prasad's premium rate calculation of .22%, albeit the rather enigmatic way at which she first allegedly arrived at the 20% premium deduction, instead of doing so directly by reason of what the applicants contended to have represented the consensual approach (see again [43] above). Moreover as I have in any event established in these reasons, Mr Quinlan asked Ms Meyer (or else Ms Prasad or Ms Field in that sequence of preferred recall) to 'do the rating', which was thereafter undertaken by Ms Prasad. Any requirement for AON to have done so was thus dispensed with implicitly by SLE's conduct in complying with Mr Quinlan's request. 196 I am therefore of the opinion that the requirements of the bordereau were satisfied, or at least substantially so, and that fire insurance indemnity on the part of SLE as agent of Lumley in respect of the Parkview took effect for the benefit of Rifon and Ardilo, by the direction of AON, by at least 3 June 2002, being SLE's first working day after receiving AON's fax sent earlier on 31 May 2002 after 5.00pm (if not earlier on 31 May 2002 by virtue of the operation of the bordereau provisions of the Country Hotel Procedure). It was therefore by or on 3 June 2002 when the process of inception of the operation of the insurance indemnity, by SLE as agent for Lumley as insurer in favour of Rifon and Ardilo as the insured, took effect in respect of the insurable value of the Parkview, as specified in the Declared Values/Limits of Liability form. 197 In reaching the above conclusion, I have taken into account, on the basis of the evidence, and so confirm, that the terms of the bordereau in operation between the parties, at the times material to the disputes the subject of the proceedings, included the following controversial conditions, namely that: (i) SLE was entitled to a deductible or excess in the sum of $5000 in respect of all claims for indemnity; and (ii) the premium rate prevailing as between AON (and therefore for the benefit in particular of Rifon and Ardilo) and SLE was to be reduced by twenty per centum (20%); whether the documentary material so provided by AON qualified for indemnity upon the footing of the bordereau,or additionally or alternatively upon an offer or acceptance basis, which I am yet to finally address. I would therefore resolve the so-called first factual issue framed in [43] above in the affirmative, that is to say of course, in favour of the applicants. 198 In reaching the conclusions which I have thus far set out above, I would further record my finding that by reason of the events which took place on 3 June 2002, when Ms Prasad processed the Hostpak Property Information and Declared Values/Limits of Liability documents and thereafter re-faxed to AON the latter document containing her handwriting 'Rate : .22%G XS : $5000 All Losses', SLE thereby confirmed those terms to be contractually in operation between SLE and AON, being contractually in the alterative sense of completion of a process of offer and acceptance. 199 I would therefore confirm that the process unilaterally initiated by Mr Quinlan on 31 May 2002, reflecting as it did an activation of the bordereau in operation between SLE and AON in relation to the Parkview, as well as an offer to enter into a contract of insurance, did not in any event constitute the mere seeking and obtaining of an insurance premium quotation, consistently (for what it may matter) with his evidence as to his subjective intention in that regard, and moreover, as to his further evidence, which I would entirely accept, as to his conversation on 31 May 2002 with an officer of SLE preparatory to his sending the AON fax to SLE late on 31 May 2002 (that being most likely Ms Meyer as the addressee of that fax). As I have earlier recorded, Mr Quinlan was aware of the circumstance that completion of the purchase of the Parkview by Rifon and Ardilo was scheduled to take place on the following Monday 3 June 2002, and that insurance cover was required to be in force at least by no later than on that day. His long standing experience in the insurance industry would have alerted him to the adverse potential implications to Rifon and Ardilo as to completion of the acquisition of the Parkview without the requisite insurance requested by Mr Camkin being in place. Hence my finding, already foreshadowed, that Mr Quinlan did speak on 31 May 2002 to one of the three officers of SLE that he identified in his evidence, in the sequence of his preference of recall, Ms Meyer being of course his primary preference of recall. I would therefore resolve the second factual issue the subject of [44] above in favour of the applicants. 200 I should further record for completeness that neither the Hostpak Property Information form nor the Declared/Values Limits of Liability form required that AON stipulate any 'rates' therein. What those forms required AON to particularise or detail, in relation to the risk, in the case of the Hostpak Property Information form, was principally the nature of the hotel building, its construction details, its equipment relative to combating the outbreak of fire, and local fire brigade availability, those being at least the principal factors that were specifically stipulated by SLE's 4 March 2002 email to AON for the purpose of calculation of premium rates. That form did not in terms require the quantification of the premium to be paid by the broker, but rather details relevant to the risk, such as to provide to SLE the criteria for ascertainment of the applicable premium rate for at least the first year of insurance. An application of the contra proferentem rule would require that the email of 4 March 2002 be read consistently with the Country Hotel Procedure document, such that binding of cover would effectively occur by the time of submission of the Hostpak Property Information and Declared Values/Limits of Liability data to SLE. 201 Quantification of the excess or deductible in favour of SLE involved different interpretative considerations to that of premium rates. That was because the Declared Values/Limits of Liability form explicitly stipulated for the excess (or deductible) amount to be stated, and if there was no prevailing agreement for the time being in force in that regard as between SLE and AON, it could have been open to SLE to decline the insured's nominated figure, in which case the consequence might well be an absence of cover pending mutuality of agreement being reached in that regard. However as I have earlier observed, AON nominated the sum of $5000 in that form prior to the dispatch thereof by fax to SLE, which quantification SLE implicitly acknowledged by its re-faxed document containing Ms Prasad's handwriting and signature, and her explicit reference to the sum of $5000 as the excess or deductible. Given that consensus was in any event already prevailing in that regard between AON and SLE, as was of course the applicants' case, and which I have found to be correct, Ms Prasad's faxed document of 3 June 2002 (that is of course the re-faxed copy of AON's Declared Value/Limits of Liability document bearing Ms Prasad's handwriting) accurately reflected, as well as operated to confirm, the prevalence of that consensus between AON and SLE. That was because in arriving at the premium calculation of .22% specified on the re-faxed document of 3 June 2002, she first made provision for a 20% premium reduction (see again [30] above). No confirmation by way of return communication of SLE was therefore required of AON, at least by any terms of the bordereau. If no such consensus had by then been reached on the 20% premium reduction element, issues might have arisen as to whether the operation of the bordereau nevertheless took effect, at the time of faxing by AON of the required documentation, subject to a condition subsequent as to quantification of the amount of the deductible or excess, but I need not resolve any such hypothesis. 202 Essentially for reasons based upon the evidence I have reviewed on the subject of the level of deductibility or excess of the time being in force, I am of the opinion that the sum of $5000 was mutually agreed and acknowledged between the parties as the correct deductible or excess figure prevailing as at 3 June 2002, and at material times thereafter. Moreover for reasons I have also foreshadowed, I am of the further opinion that as at 3 June 2002 and at the material times thereafter, consensus was in operation between the parties, and was duly implemented by SLE per medium of Ms Prasad, to the effect that in return for AON agreeing to the increase in the deductible or excess figure to $5000, AON would be entitled to put into operation and effect a premium reduction of 20% below the premium rates for the time being prevailing in favour of SLE, to which Ms Prasad gave due effect on behalf of SLE in favour of AON when calculating and recording the rate of .22% on the face of the re-faxed Declaration of Values/Limits of Liability document, bearing of course her signature as at 3 June 2002. I therefore confirm my conclusion already foreshadowed that the bordereau took effect at least on and from 3 June 2002 in favour of the applicants in respect of the Parkview, and that the applicants are entitled to declaratory relief accordingly. 203 It is also necessary or appropriate that I resolve the second and third factual issues which I have framed in [44] above, which relates essentially or largely to Mr Quinlan's disputed telephone conversation of 31 May 2002 with either one of Ms Meyer, Ms Prasad or Ms Field, in that preferred sequence according to his testified recollection. That controversy relates to the contract issues, as distinct from the bordereau issue. As I there observed, the applicants contended that it was only necessary that I need do so, in the event that I was to determine, contrary to the conclusion which I have already reached, that the insurance contract proposed by AON on behalf of Rifon and Ardilo fell outside the operation of the bordereau for the time being in force. I have earlier summarised the evidence placed before me on the present contract issues. I have no good reason to doubt that I should accept Mr Quinlan's testimony, to the extent of any conflict relevantly with any of SLE's witnesses, on the subject as to what was said in the course of that telephone conversation, for the following reasons: (i) I was impressed with Mr Quinlan as a credible witness, who answered questions of him in cross-examination spontaneously, and without advocating AON's cause, in the course of so doing (he was no longer of course employed by AON at the time of the hearing, as was, I should further record, similarly the case with Ms Meyer); (ii) he addressed the fax of 31 May 2002 of the relevant forms to Ms Meyer alone; (iii) his telephone conversation with 'Natassha' on the morning of 3 June 2002 was consistent with his endeavours to ensure (with belated haste) that cover would be in place on the day of completion of acquisition of the Parkview; (iv) Ms Prasad's calculations of the premium rate of .22%, which she committed of course to writing upon the re-faxed material of 3 June 2002 to AON, involved a premium reduction of 20%, albeit that she asserted that she did not obtain that percentage figure from Mr Bailey (see [30] above), but merely 'decided' upon the same herself (the latter assertion to my mind impermissibly stretched her credibility, and I would not accept the veracity thereof); (v) as I have already emphasised, Mr Quinlan appreciated the need for insurance to be in place in relation to the Parkview by no later than 3 June 2002, on which day settlement of the purchase thereof by Rifon and Ardilo was scheduled to take place, and did of course take place; up to that time, Mr Quinlan appears to have been somewhat dilatory, being conduct which, as a new employee, he would obviously have not wanted to rebound to his detriment; and (vi) as I have also earlier indicated, there are credibility problems attending the accuracy of Ms Meyer's handwritten note endorsed on the SLE's retained faxed copy of Declaration of Values/Limits of Liability form; it is highly unlikely that Mr Quinlan would have said to her 'I don't know,' in response to her alleged assertion '[c]over is not bound', in the context of the objective events which, to his knowledge, had taken place on and before 25 June 2002. At least for the foregoing reasons, not necessarily cumulatively, I would further resolve the second factual issue set out in [44] above in the applicants' favour. It accords with the more likely and realistic content of the conversation between Mr Quinlan and Ms Meyer on that occasion. 204 It is appropriate in the circumstances that I should next conclude my determination the applicants' alternative case based on offer and acceptance, which was put in the three alternative ways propounded earlier in [6(ii)], [6(iii)] and [6(iv)] above. There is force in the applicants' contention that in the events which happened, the conduct of SLE in re-faxing to AON the Declared Values/Limits of Liability form on 3 June 2002 constituted an acceptance on SLE's part of an offer constituted by AON's fax of 31 May 2002. There is much to be said for the view that the substance and reality of the conduct of AON in faxing that form, and the accompanying Hostpak Property Information form, to SLE on 31 May 2002, containing the detail therein appearing, constituted (aside from bordereau implications) an offer of indemnity at such rate as SLE would calculate by reference to the prevailing 'Rates' material previously emailed by SLE to AON. Whether an offer and acceptance occurs in the course of an existing and continuing business/trading relationship needs to be analysed in that particular context, as distinct from an isolated transaction between strangers (Brambles ibid). The business relationship between AON and SLE had been in operation for many years, and was implicitly characterised by a significant measure of proximity and mutuality in relation to their dealings. Telephone communications were inferentially a feature of their business dealings. The inference clearly open to be drawn is that AON placed its portfolio of country hotels either with SLE (as agent for Lumley), or else with SGIO, to an extent not statistically in evidence, but with no other insurer. At least the number of country hotels involved in AON's dealings with SLE was significant. 205 I should add for completeness that the circumstance that AON did not submit a so-called 'closing' until shortly after the first on 27 June 2002 is no answer to the applicants' case. As appears in the Country Hotel Procedure documentation, the provision by AON to SLE of so-called 'stapled closings', at least in the case of the bordereau, and perhaps also in the case of offer and acceptance, was only required to be provided 'by 15th of the next month' after cover was bound: see what appears under the heading 'AON - Closings'. The 'closing' in relation to the Parkview was therefore not required until 15 July 2002, though the same was in fact provided on the same day as, but shortly after, the fire on 27 June 2002 (see [41] above). Therefore the submission of Lumley that the purported closing of 27 June 2002 was ineffective in operation, because of the intervention of the fire earlier on that day, confused the requirement for the submission of a closing with the earlier time of commencement of the insurable risk. 206 It follows from my foregoing findings at least upon the bordereau cause of action that the applicants are entitled to succeed. In the light of the complexity of circumstances as between AON and SLE involved in this litigation, it is appropriate (as I have foreshadowed) that I should also resolve the additional or alternative case of the applicants brought upon the footing of offer and acceptance. 207 The applicants submitted that Mr Quinlan's testimony as to what was said by Mr Quinlan on Friday 29 June 2002 to Ms Meyer (or alternatively to whom he otherwise spoke, being either Ms Prasad or Ms Field in that order of subsequent preference of his recall) was to the effect that AON wished to put the intended insurance of the Parkview with SLE, and that all that was required for him so to do was for SLE to specify the premium rate, since Mr Quinlan was unsure as to how to calculate the same. As I have already foreshadowed, it is in my opinion that his testimony in that regard should be accepted as both probable and credible (see again [36] above). As I have earlier emphasised, the circumstances which confronted Mr Quinlan by that time rendered it compelling for him to obtain cover by no later than the following Monday. Given the credibility of that testimony of Mr Quinlan, which I accept, what was effectively conveyed by Mr Quinlan on that contentious occasion was precisely to the effect contended for by the applicants, and conversely foreign or antithetical to the contention of Lumley that Mr Quinlan was 'simply seeking a quotation', and further that 'that was all he received'. 208 Alternatively it was submitted by the applicants that SLE's fax of 3 June 2002 (see again [24] above) constituted an offer by SLE, which, 'as a matter of practice'; was capable of being accepted without an immediate response by AON to SLE; thus it was said by AON that '[i]t was sufficient for AON to internally accept the offer, and in due course invoice the insureds, send the insureds the relevant certificate of insurance, and advise SLE of the acceptance by forwarding a closing'. 209 In support of either submission, the applicants submitted that each of the foregoing mechanisms for creating a contact was unconventional, in the sense that: (i) in the first case, AON was in effect agreeing to accept on behalf of its clients, without further response to SLE, whatever premium rate SLE would specify; and (ii) in the second place, SLE effectively agreed to be bound, and thus to go on risk, on the basis of a deferred advice that cover had been bound at the premium rate specified. 210 The applicants provided two reasons why the foregoing 'unconventional procedure' for entering into a contract of insurance was not surprising: (i) The Parkview Hotel was an uncontroversial subject for SLE's Country Hotel scheme, and there was no issue otherwise than that the insurance was clearly acceptable to SLE (see again in that regard Mr Bailey's concession recorded in [18] above and Ms Meyer's concession recorded in [19] above). (ii) AON had no reason to suspect that the premium rate to be provided by SLE would be at large, in the sense that it was possible that SLE would specify an unexpectedly high premium rate; rather AON had a reasonable expectation of the likely premium rate that SLE would specify (as indeed was borne out) upon the footing of the schedule of rates the subject of SLE's email to AON of 4 March 2002; put another way by AON, the premium rate which SLE would and did specify was precisely predictable, and 'the only problem was through inexperience Mr Quinlan was not sure how to calculate the rate'; (iii) Lumley's witnesses accepted that contracts of insurance were not always entered into by 'a conventional process of strict offer and acceptance', and also agreed that there were occasions when contracts of insurance were created in the same manner as the applicants submitted that a contract of insurance was created in the case of the Parkview. 211 There is clear force, in the light of the evidence which I have reviewed at length, in support of the foregoing submissions as to each of the three ways in which the applicants' offer and acceptance case. The following circumstances propounded by the applicants do tend to support at least cumulatively my preferred expression of conclusion upon the applicants' offer and acceptance case: (i) the urgency from Mr Quinlan's perspective of obtaining cover from SLE by no later than Monday 3 June 2002, when completion of the purchase was scheduled to occur, and whereafter the Parkview would be at the risk of Rifon and Ardilo; (ii) the information as to 'rates' then currently set out in the SLE email of 4 March 2002 to AON (which of course were purportedly applied by Ms Prasad) when undertaking the exercise which she did relevantly on 3 June 2002; (iii) the contention of Lumley in final submissions that Mr Quinlan merely asked for a premium quotation, and that was all he received, was divorced from reality, both in the light of the events and circumstances prevailing on 3 June 2002, which I have of course recorded in detail, and the nature of the established and existing underwriting relationship between the parties referrable to Australian country hotels through various State AON offices located throughout Australia; (iv) if Ms Meyer had in fact informed Mr Quinlan on 25 June 2002 that cover was not bound, in conformity with her handwritten note, which I do not accept as credible (ante), Mr Quinlan would obviously have immediately requested that cover be bound; as was submitted on behalf of the applicants, '[i]t would have been gratuitously reckless for him to have failed to do so'. 212 In my opinion therefore, the applicants are entitled to succeed on their offer and acceptance case, at least upon the primary or preferred basis I have articulated. 213 I have already foreshadowed that I do not think that the applicants' case for misleading and deceptive conduct has been sufficiently established in the particular circumstances of the case, and I need say little more on that issue. In short, I do not think that the re-faxed Declared Values/Limits of Liability document upon which Ms Prasad wrote on 3 June 2002 and then re-faxed to AON, and upon which she subsequently placed the button stamp and re-faxed again on 25 June 2002, could have objectively misled AON in any of the ways and to the extent contended by the applicants.

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Judgment (63 paragraphs)

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