Are the liabilities under contract FC3A liabilities in Australia?
162 Faraday submits that contract FC3A was a contract of insurance made in Australia. In the alternative, Faraday submits that a proposal was accepted in Australia, within the meaning of s 31(4)(a), in respect of contract FC3A. A crucial element of this alternative submission is that "acceptance" of a proposal in the sense required by s 31(4)(a) does not require communication of the acceptance.
163 Contract FC3A was entered into in 1997 and renewed in 1998. I have found it difficult to determine the precise facts relating to the formation of contract FC3A and its renewal. The evidence is diffuse, unclear and incomplete. Windeyer J made no factual findings in this connection. It was not necessary for him to do so as he considered that s 31(4) was not an exhaustive definition of "liabilities in Australia" and he resolved the question whether contract FC3A gave rise to liabilities in Australia in favour of Faraday by reference to the general law.
164 AssetInsure contends that contract FC3A was entered into outside Australia and Faraday contends that it was entered into within Australia. I do not propose to attempt to resolve this question (beset as it is by evidential difficulties) as I have concluded, for the reasons that follow that a proposal, in respect of contract FC 3A, was accepted in Australia.
165 It is common ground that, both in respect of 1997 and 1998, NCRA performed acts in Australia whereby it accepted an informal proposal made in respect of contract FC3A. Faraday contends that, in both years, NCRA communicated that acceptance to brokers in Australia acting on behalf of Faraday. In the alternative, Faraday argues that the acceptance of a proposal within the meaning of s 31(4)(a) required only an act of acceptance and did not require communication of the acceptance. It is common ground that in this sense (that is, without communication of the acceptance) NCRA accepted the proposal in Australia. Faraday submits that, by such acceptance, it was established that contract FC3A was a contract in respect of which a proposal was accepted within the meaning of s 31(4)(a).
166 AssetInsure argues, firstly, that s 31(4)(a) required the acceptance of a formal proposal. Secondly, AssetInsure contends that the acceptance of a proposal within the meaning of s 31(4)(a) required communication of the acceptance. Thirdly, AssetInsure disputes that the acceptance of the proposal was communicated within Australia, and contends that NCRA communicated its acceptance to brokers acting on behalf of Faraday outside Australia.
167 I do not agree with the submission that a formal proposal was required to satisfy the section. Section 31(4)(a) refers merely to the acceptance of a "proposal," and "proposal" is not qualified in any way. As I have said above, I see no reason why an informal proposal should not fall within the section. It is common knowledge that, particularly in regard to reinsurance, informal proposals are accepted which give rise to valid contracts of insurance, and there is nothing to suggest that such informal proposals were intended to be excluded from the operation of s 31(4)(a).
168 I turn now to AssetInsure's argument that acceptance of a proposal as contemplated by s 31(4)(a) requires the communication of the acceptance.
169 According to the general law, a contract of insurance would, ordinarily, be constituted by an offer and acceptance and, for such a contract to be made in Australia, the acceptance would have to be communicated to the offeror in Australia. If the same requirement were to be applied to a proposal accepted in Australia, there would be no difference in the elements, contemplated by s 31(4)(a), required to establish the making of a contract of insurance (including reinsurance) in Australia and the acceptance of a proposal in Australia.
170 Putting the matter in another way, if the words "in respect of which a proposal was accepted" mean "in respect of which the acceptance of a proposal was communicated", then "a contract in respect of which a proposal was accepted in Australia" would add nothing to the phrase, in s 31(4)(a), "a contract of insurance (including reinsurance) made in Australia" (as the place where the contract of insurance would be made would be the place at which the acceptance of the offer would be communicated).
171 In my view, the legislature intended to differentiate between a contract of insurance (including reinsurance) made in Australia, on the one hand, and, on the other, a proposal, in respect of such a contract, accepted in Australia. The distinction, it seems to me, has to lie in the fact that, to fall within s 31(4)(a), conduct constituting acceptance would not necessarily include the communication of an act of acceptance.
172 In my view, for the purposes of s 31(4)(a), the acceptance of a proposal does not require the communication of the acceptance. Accordingly, I accept Faraday's contention that contract FC3A, both in respect of the years 1997 and 1998, is a contract of insurance in respect of which a proposal was accepted in Australia. I would add that this conclusion is consistent with the conclusion to which I have come in regard to the question whether the issuing of a policy is a bilateral or unilateral act.
173 I turn now to the question whether contract FC3A is a contract that does not fall within s 31(4)(a)(i) or s 31(4)(a)(ii).
174 Contract FC3A relates only to a liability contingent upon an event that can happen only outside Australia. It follows therefore that for contract FC3A to fall outside s 31(4)(a)(i) the liability to which it gives rise must be a liability that NCRA has undertaken to satisfy in Australia.
175 NCRA's liability under contract FC3A is, of course, a contractual liability and whether or not NCRA has undertaken to satisfy its liability under contract FC3A in Australia depends upon the terms of that contract.
176 Contract FC3A does not record an express undertaking by NCRA to make payment of its liability in terms thereof at a particular place. Nor is there anything in the terms of contract FC3A that gives rise to an implied undertaking to make payment at a particular place.
177 The general rule under the general law is that "the debtor must seek his creditor and must pay him" (per Neville J in Drexel v Drexel [1916] 1 Ch 251 at 260). In Earthworks and Quarries Ltd v F T Eastment & Sons Pty Limited [1966] VR 24 Dean J said (at 26):
"It has long been settled, at least since Sheppard's Touchstone , that prima facie where a contract or bond is silent as to place of payment, it is for the debtor or obligor to seek out his creditor or obligee and the debt is payable where the creditor or obligee is found. But there is said to be one qualification of this rule, namely, that where the creditor is outside the Kingdom there is no such necessity, and the debtor is excused from following him abroad. The only question is the nature of such exception. But the issue should be stated more broadly. The place of payment depends on the place which, in the absence of express provision in the contract, it should be held from all the circumstances the parties should be taken as impliedly intending. The whole matter is explained with his customary lucidity by Cussen, J, in Gosman v Ockerby [1908] VLR 298, at pp 305-6; 14 ALR 186, at p 188, in a passage quoted by O'Bryan, J, in Durra v The Bank of New South Wales [1940] VLR 170; [1940] ALR 151. Cussen J, said:
'I think … there is some misapprehension with regard to the application of the rule as to the obligation of the debtor to seek out his creditor. There are two entirely distinct classes of cases. In one class the question is one of jurisdiction dependent upon the proper construction of the contract in regard to the place where payment of money is to be made. You look at the contract and the circumstances existing where it was entered into, and if you rightly conclude that the place of payment is Victoria, or some place in Victoria, and if through the default of the debtor the money is not paid, there is prima facie a breach within the jurisdiction. One of the circumstances which may have to be taken into consideration in deciding on the answer to this question is the residence or place of business of the creditor, but except to this extent the alleged rule that the debtor must seek out his creditor is of no importance in this class of cases. The other class of case is that which does not deal with obligations under a contract, but deals with the excuses for non-performance of a contract. If you find that there is an obligation to pay money somewhere in the State of Victoria the debtor is bound to pay in this country, and, if necessary, to seek out his creditor. But if the creditor refuses to take the money, or goes away and leaves no one behind to receive it, the debtor is excused. He is not bound to follow the creditor to a foreign country.'
The authorities appear to me entirely to support this statement …
In many of these cases the plaintiff, who lived in the jurisdiction, had gone to a place outside the jurisdiction and made a contract there to do work in that place, and it was held that the implied obligation on the defendant was to pay him where he lived."
178 In Shallay Holdings Pty Ltd v Griffith Co-operative Society Ltd [1983] VR 760 Beach J approved the statement by Dean J in Earthworks and Quarries Ltd.
179 There is nothing in contract FC3A that displaces the general rule that "the debtor must seek his creditor and must pay him".
180 In written submissions Faraday contends:
"NCRA, which had its sole office in Sydney, undertook to satisfy all claims under … FC3A at its office in Australia and from its bank accounts, also located in Sydney (Affidavit of Patrick Corkery, 6 March 2002, paras 7-12)".
181 The evidence of Mr Corkery, however, does not establish such an undertaking. Mr Corkery's testimony is simply to the effect that the method by which NCRA paid claims was through either an Australian dollar account or a foreign currency account held at NCRA's bank in Sydney. Mr Corkery's evidence of the practice of NCRA (and his testimony goes no further than that) does not prove that there was an undertaking by NCRA to pay Faraday under contract FC3A in Australia.
182 Next, Faraday submits:
"[A]t least for FC3A a term may be implied by custom or usage that it was to be satisfied by payment to the local placement broker."