Was BMT entitled to an indemnity under the QBE policy?
17The insurance of the Bon McArthur group was placed by an insurance broker, AEI Brokers Pty Ltd. There was an issue before the primary judge as to the admissibility of various communications between the broker and QBE which preceded the issue by QBE of a schedule for the insurance covering the period 30 November 2005 to 30 November 2006. In my view, the primary judge did not err in admitting that material. The issues before his Honour included whether the agreement of the parties was wholly in writing and constituted by the applicable broadform wording and schedule issued by QBE or whether it was made and recorded in the earlier or subsequent exchanges between them. The various communications tendered were relevant to these issues.
18It is necessary to refer to that evidence in some detail. It indicated that for a number of years the general liability insurance of the Bon McArthur group had been written for 12 month periods expiring on 30 November of each year. On 10 December 2003, and for the period 30 November 2003 to 30 November 2004, QBE issued a policy schedule for the policy identified as No 15 1828241 PLB, which described the insured as "Bon McArthur Transport Pty Ltd, Mireau Pty Ltd", six other named corporations "and/or Australian subsidiary corporations". Those named insured included BMT. On 12 December 2003 the broker requested QBE to correct the name of the first insured to "Bon McArthur Pty Ltd not Bon McArthur Transport Pty Ltd". On 17 December 2003, QBE issued a revised policy schedule naming the insured as "Bon McArthur Pty Ltd, McArthur Corporation Pty Ltd and subsidiary corporations". As a result BMT was no longer a named insured. It also was not a subsidiary of either of the named insured.
19That policy was renewed for the period 30 November 2004 to 30 November 2005. In the renewal quotation submitted by QBE, which was accepted by the broker, in the broker's closing tax invoice to which was attached the broker's coverage summary and in the policy schedule issued by QBE, the insured were described as "Bon McArthur Pty Ltd, McArthur Corporation Pty Ltd and/or Australian subsidiary corporations". That schedule, as with the schedule issued by QBE to the broker in the previous year, stated on its first page:
"We are pleased to advise that this policy is now in force for the period shown.
The policy details are set out below and must be read in conjunction with the policy wording."
20The standard form wording applicable to the broadform liability policy issued for the 2004-2005 period was not in evidence. The version of that wording which was effective from 22 August 2005 was in evidence. It stated on its first page:
"The Policy part of this booklet contains the Policy Terms and Conditions, which detail all the terms, conditions and exclusions relating to the Policy. It forms part of your legal contract with us.
If we issue you with an insurance Policy, you will be given a Policy Schedule. The Policy Schedule sets out the specific terms applicable to your cover and should be read together with the Policy Terms and Conditions.
The Policy Terms and Conditions and the Policy Schedule we send to you form your legal contract with us so please keep them in a safe place for future reference."
21Negotiations for the November 2005 renewal of policy No 15 182841 PLB commenced in October 2005. QBE requested declarations as to estimated turnover and wages which were provided on 17 November 2005. The estimated turnover for 2005-2006 was $54M and the estimated wages for the same period were $13M. No reference was made to that turnover being generated solely or principally by BMT. Further information was requested as to estimated payments to be made to subcontractors and contractors. The evidence does not disclose what response was made to that request. By an email dated 24 November 2005, QBE provided its "renewal quotation". That quotation identified the Insured as "Bon McArthur Pty Ltd, McArthur Corporation Pty Ltd and/or Australian subsidiary corporations", identified the standard form wording to apply as the wording which had become effective from 22 August 2005 and contained details as to the description of the business insured, period of insurance, limits of liability, deductibles and premium. On 29 November 2005 the broker responded to QBE's quotation by email as follows:
"Following receipt of your terms I am pleased to confirm the renewal of the policy and would be obliged if you could bind cover accordingly.
Our renewal closing will follow in due course."
22The broker's closing tax invoice dated 29 November 2005 described the transaction to which it related:
"Insured: Bon McArthur Pty Ltd
Insured location: Australia Wide
Renewal for: Public & Products Liability Insurance
30.11.05 to 30.11.06"
Those details were followed by the broker's calculation of "the amounts due in respect of the above detailed policy transaction" and a request that if those amounts could not be agreed QBE should "contact our office immediately in order that any discrepancy can be resolved". There was attached to the invoice the broker's coverage summary which described the insured as "Mcarthur [sic] Express Pty Ltd, Bon McArthur Transport Pty Ltd and subsidiary and/or related corporations". This summary also contained a slightly different description of the Insured's business. Its second and third pages included references to the policy document, the Privacy Act, Insurance Brokers Disputes Ltd and what was described as a "Soft Dollar Disclosure". Under the heading "Refer Policy Document", the summary included the statement: "Please refer to your Policy Document for a full explanation of your policy conditions and excesses as applicable". The copy of the broker's closing tax invoice bears a date stamp 13 December 2005, suggesting that it was processed by a QBE mail room on that date.
23On 11 January 2006 QBE requested by email that the broker forward "your closing asap". On 17 January 2006 a further email was sent requesting the broker's "closing invoice". On the same day the broker responded attaching what it described as a "3rd copy of the closing that has been sent to you" and noting that this would "bring this matter to an end". The closing tax invoice and coverage summary dated 17 January 2006 were in the same terms as the earlier closing and summary dated 29 November 2005.
24On 18 January 2006 QBE issued a schedule to the broker for the renewal of the policy for the period 2005 to 2006. That schedule contained on its first page the same notation as was contained in the schedule for the 2004-2005 renewal. It named the Insured as "Bon McArthur Pty Ltd, McArthur Corporation Pty Ltd and/or Australian subsidiary corporations". The schedule was sent under cover of a letter to the broker which stated:
"Please find enclosed our duly issued renewal schedule together with a copy of the applicable policy wording.
We ask that you carefully peruse the enclosed to ensure that it reflects the intention of the contract as negotiated. Should there be any error or omission please do not hesitate to contact us."
The evidence before the primary judge did not suggest that there was any response requesting that the names of the insured be altered.
25Finally, on 13 February 2006 the broker emailed QBE a request that there be noted on the policy "an additional trading name for the Insured: McArthur Express (Victoria) Pty Ltd". The subject heading to that email was "151828241PLB McArtur [sic] Corporation". The email requested that the application be processed "at nil EP" (ie at nil extra premium). QBE responded on 16 February: "Cover confirmed we await your closing". On 16 February the broker forwarded a closing tax invoice for that alteration to the cover. In that invoice the transaction details were described as follows:
"Insured: Bon McArthur Transport Pty Ltd
Insured location: Australia Wide
It is hereby declared and agreed with effect from 13.02.06, the existing policy is endorsed to note the addition of the following trading name:
McArthur Express (Victoria) Pty Ltd"
There was attached to that closing a further coverage summary which described the Insured as "McArthur Express Pty Ltd, Bon McArthur Transport Pty Ltd, McArthur Express Pty Ltd and subsidiary and/or related corporations".
26On the basis of this evidence it was argued before the primary judge that BMT was either a named insured or a person having the benefit of the cover as a subsidiary or related corporation of a named insured. The primary judge dealt with this argument at [22]-[42] as follows. He first referred to the broker's coverage summaries dated 29 November 2005, 17 January 2006 and 16 February 2006. The descriptions of the insured in those three summaries were inconsistent with the description in the schedule issued by QBE and dated 18 January 2006. For that reason, there was "ambiguity", presumably in the sense that the language of the documents said to evidence the contract was "susceptible of more than one meaning": [24], [35]. Having identified that "ambiguity", the primary judge considered that it was permissible to look at evidence of surrounding circumstances to assist in the interpretation of the contract. Those circumstances, as described by the primary judge, were that the business insured included "transport operator", that the business was a substantial business with a turnover of $55M and that a subsequent renewal declaration dated 20 November 2006 had referred to turnover for BMT of $50.7M and wages of $13M. His Honour noted that this last circumstance was well after the policy had issued but considered it admissible and relevant not as to any question of construction but as to the question whether BMT was a party to or insured under the earlier contract: [40].
27His Honour concluded:
"[41] I also accept that if the full facts were known, it would be commercially absurd to issue a policy to Mireau given that all of its business operations had been transferred to [BMT] and I also accept that the words demonstrate the common intention that all companies involved in the group and connected with the business were intended to be covered."
On that basis the primary judge held that BMT was entitled to an indemnity under the policy. He did not address whether BMT was a named insured or entitled to an indemnity because it was otherwise within whatever was the description of the insured.
28QBE submits that the primary judge's conclusion was wrong. The parties' agreement was recorded in the schedule which it issued and the broadform policy wording. There was no ambiguity in the schedule in relation to the identification of the insured, which included subsidiaries of the named insured. Evidence was not admissible to vary or contradict the clear language of the writing which evidenced the contract. In response, Mr Caruana supports the primary judge's reasoning. The insurance agreement was not wholly in writing and it was permissible to receive evidence on that issue. Mr Caruana also argued that QBE's conduct, in accepting without comment the broker's closing tax invoice and coverage summary dated 16 February 2006, constituted an agreement varying the contract so as to include BMT as a named insured.
29Before addressing the primary judge's reasoning and conclusion, the following relevant principles should be noted. First, the ordinary rules relating to formation of contract apply to contracts of insurance. There must be an offer capable of acceptance and an acceptance of that offer which is communicated to the offeror. For there to be a binding contract, there must be agreement as to the material matters of risk, duration of cover, amount and subject of cover, the premium and the relevant terms and conditions: Allis-Chalmers Co v Maryland Fidelity and Deposit Co (1916) 114 LT 433. Whether there has been agreement as to these matters and whether the parties intended to make a binding contract upon reaching consensus, depend upon what was objectively conveyed by their words and conduct having regard to the surrounding circumstances known to them: Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95 at [25]; Pacific Carriers Limited v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22].
30Secondly, if parties have recorded their agreement wholly in writing, the parol evidence rule, subject to certain exceptions, excludes evidence of statements of intention and antecedent negotiations for the purpose of adding to, varying or contradicting the language of the written instrument: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; 149 CLR 337 at 347; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471 at [33]-[35]. Thirdly, for the parol evidence rule to apply, it first must be determined that the parties' agreement is wholly in writing. The fact that a document on its face appears to be a complete contract provides some evidence that the agreement was intended to be wholly in writing. However, evidence may be lead to prove that notwithstanding that there is such a document, the parties contract included oral terms or that the document was not intended to record the whole of their agreement: State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 191; Norwest Beef Industries Ltd v Peninsula and Oriental Steam Navigation Co (1987) 8 NSWLR 568 at 570; and Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234; 261 ALR 382 at [1], [4], [90].
31Fourthly, the exceptions to the parol evidence rule permit the admission of evidence to identify the parties to a contract or the capacity in which they have contracted in circumstances where the writing evidencing the contract does not make those matters clear. For example, in Young v Schuler (1883) 11 QBD 651 evidence was admitted directed to the question whether a person had signed an agreement only under a power of attorney or additionally on his own behalf as a guarantor. In Giliberto v Kenny (1983) 48 ALR 620 evidence was admitted to show that Mrs Kenny was acting for herself and her husband in signing a contract which in one place named her, and in another her husband, as purchaser. And in G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, in circumstances where there was no company or entity having the name of the party nominated as purchaser, evidence was admissible to show that the party was a company which proposed to change its name to that used in the contract, a fact known to the vendor.
32The written communications between QBE and the broker establish that a binding contract of insurance was made on the terms of QBE's quotation dated 24 November 2005 when the broker's unqualified acceptance of that offer on behalf of its clients was communicated to QBE by its email dated 29 November 2005. QBE's offer unambiguously identified the insured as "Bon McArthur Pty Limited, McArthur Corporation Pty Limited and/or Australian subsidiary corporations." The broker's email requested that QBE "bind cover accordingly". It was sent the day before the existing cover expired and was a request that there should be concluded immediately a contract of insurance with the named insured on terms which included the standard broadform wording.
33The broker's closing tax invoice dated 29 November 2005 contained the broker's calculation of the amounts due in respect of "the above detailed policy transaction". The description of that transaction was in terms wholly consistent with a contract having been concluded by the earlier email acceptance of QBE's quotation. That tax invoice did not announce itself as a counter offer or draw attention to any discrepancy between any of the details of the contract as made and insurance as described in the attached coverage summary. Nor was that summary a document which it was agreed would be prepared by the broker to record the terms of the contract. On the contrary, the offer as accepted included the terms of the current broadform wording. That wording stated that the insured would be given a Policy Schedule prepared by QBE and that the Policy Schedule would set out the specific terms applicable to the cover and with that wording "form your legal contract".
34Thus the parties had made a binding contract which was to be evidenced by the Policy Terms and Conditions and the schedule which QBE would send to the insurer or its broker. That occurred and it is not suggested that the terms of the schedule as issued by QBE departed in any material respect from those set out in its quotation dated 24 November 2005.
35It is not necessary to decide whether what was proposed in relation to the preparation of a formal schedule was an example of a case in which the parties had reached finality as to the terms of their bargain and intended to be bound immediately to the performance of those terms but at the same time proposed to have the terms restated in a form to which they would later bind themselves, which would be fuller but not different in effect: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 360. The facts in Youell v Bland Welch & Co Limited (1990) 2 Ll Rep 423 (esp at 425, 428, 429) provide an example, in the context of the making of a reinsurance contract in the Lloyds' market, of a contract within this class of case. See also on appeal (1992) 2 Ll Rep 127 esp at 133, 140. Once the formal policy and schedule are agreed by the parties, their terms are conclusive evidence of the contract unless and until altered by the process of rectification.
36Another possible view of what the parties here agreed was that QBE would prepare a schedule which would record and evidence the terms of the agreement which had already been made. Ordinarily, that would not permit QBE to issue a policy and schedule which departed from the earlier agreement in any material respect: see the discussion per Dixon J in Australian Provincial Assurance Association Ltd v The Producers and Citizens Co-operative Assurance Company of Australia Ltd [1932] HCA 34; 48 CLR 341 at 361; and per Jordan CJ and Nicholas J in Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR (NSW) 174 at 186-187. The facts in New Hampshire Insurance Co v MGN Ltd (1997) Ll Rep IR 24 provide an example of such a case. The contract was evidenced by an initialled slip and there was no subsequent agreement between the parties adopting a policy and schedule introducing different terms which had been issued by the unilateral act of the insurer. In that context Staughton LJ observed (at 54):
"The field of insurance may well be one where it is normal practice to make a preliminary contract and then for one party (the insurer) to send detailed terms to the other, not expecting a reply unless the other regards them as unsatisfactory. This may be what happens in ordinary life with motor insurance or householders comprehensive insurance. Often the necessary acceptance can be inferred when the insured, having received the proposed policy, pays the premium."
The preliminary contract may authorise the insurer to issue a policy in its ordinary or standard form for the relevant risk insured: Adie & Sons v The Insurance Corporation (1898) 14 TLR 544; or it may expressly authorise the insurer to alter, by the policy subsequently issued, the obligations undertaken in the preliminary contract: see Symington & Co v Union Insurance Society of Canton, Ltd (No 2) (1928) 34 Com Cas 233 at 235-236.
37The primary judge in his analysis did not address the communications between the broker and QBE in terms of offer and acceptance or note that there was no ambiguity in, or lack of correspondence between, the terms of QBE's renewal offer and the broker's acceptance of that offer on behalf of its clients. Although the broker's coverage summaries inaccurately reflected the contract, they had no contractual effect as offers or counter offers. As with the wording prepared and tendered to the underwriters by the London broker in Assicurazioni Generali SPA v Ege Sigorta AS (2002) Ll Rep IR 480, the broker in this case did no more than wrongly record the names of the parties insured under a contract which had been made. In doing so the broker did not accomplish an amended contract. There was no ambiguity or uncertainty as to the identity of the named insured in the contract made by the broker's email of 29 November 2006 and recorded in the schedule subsequently issued by QBE.
38The primary judge's observation (at [41]), that from the insured's perspective it was necessary that BMT be insured as the principal entity conducting the business, is plainly correct. However, the evidence did not suggest that QBE became aware at any relevant time before the contract was made that BMT was the principal entity conducting the business or that it was intended that it be an insured under the policy. The objective theory of contract requires that the construction of the communications constituting the offer and acceptance be determined by what reasonable persons in the position of QBE and the broker would have understood them to mean. Whilst that requires consideration of the context, it does not permit regard to uncommunicated subjective intentions which did not form part of the negotiations. For these reasons the primary judge was in error in concluding that BMT was indemnified under the QBE policy.
39It remains necessary to consider Mr Caruana's argument that there was a variation to that contract initiated by the broker's email request dated 13 February 2006. In terms, that request was only for the addition of another named insured. QBE's email dated 16 February confirmed that amendment as made. There was no request for or agreement to an amendment which included BMT as a named insured. These communications occurred after the broker had received the wording and schedule issued by QBE with its letter of 23 January 2006 requesting that the broker contact QBE if there was "any error or omission" in those documents as reflecting "the intention of the contract as negotiated". The broker's subsequent tax invoice dated 16 February 2006 did not announce itself as a request for any further amendment to the existing cover or draw attention to any discrepancy between the contract as made and varied and the insurance described in the attached coverage summary. The argument that QBE's conduct in accepting that closing invoice and summary without comment constituted an agreement to BMT's inclusion as an insured is rejected.