Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : BADAT v DTZ AUSTRALIA (WA) PTY LTD [2006] WASC 13

Appeal - Contract law - Construction of contract - Whether respondent failed to comply with contractual obligations - Turns on own facts

Appeal - Waiver - Whether the appellants waived their right to have the respondent effect all appropriate insurance cover over the appellant's property - Whether the appellants knew that the property was uninsured at all material times - Turns on own facts

Trade Practices Act 1974 (Cth), s 52

1 STEYTLER P: I have read the reasons for decision of McLure JA. I agree with them, subject only to one reservation. This relates to the question whether a contractual obligation that is part of the respondent's non-severable consideration for the appellants' obligation to pay for its services can be classified as solely for the appellants' benefit for the purposes of the operation of waiver. It seems to me that, in this case, the waiver is one that would apply not only to the appellants' right to enforce performance of the obligation in question but also to any consequential right arising from non-performance of that obligation. In those circumstances it seems to me to be at least arguable that the rights were solely for the appellants' benefit and, consequently, susceptible to being waived. However, because no argument was addressed to that specific issue, and because it is unnecessary to decide the point, I prefer to leave the question open.

2 McLURE JA: The appellants appeal from the decision of Templeman J dismissing their claim in contract arising out of the respondent's failure to effect insurance cover for the improvements on the appellants' property at 432 Murray Street, West Perth (Murray Street property). The appellants are the registered proprietors of the Murray Street property which they hold on trust for the Yasmeen Family Trust. The commercial building on the Murray Street property was destroyed by fire on 29 July 2001. It was uninsured. At the time of the fire the respondent (DTZ) was the managing agent of the Murray Street property pursuant to a written agreement dated 28 November 2000 between the appellants and DTZ (agency agreement).

3 The appellants claimed damages for breach of contract, negligence and breach of s 52 of the Trade Practices Act 1974 (Cth). The learned trial judge found that DTZ had not complied with an express term of the agency agreement requiring it to effect insurance cover for the Murray Street property (cl 3.1.4) but that the appellants had waived their right to have the insurance effected by DTZ. The trial judge also dismissed the tort and trade practices claims.

4 The primary issues in the appeal are whether DTZ had indeed failed to comply with cl 3.1.4 (ground 1 of DTZ's notice of contention) and, if so, whether the appellants could and did waive their rights under that clause (ground of appeal 1). Other issues include the adequacy of the trial judge's reasons for finding that the appellants knew the Murray Street property was uninsured (ground of appeal 2) and the correctness of a number of the trial judge's provisional findings on the issue of damages (grounds of appeal 3 to 7).

5 It is of assistance to consider the facts and findings made by the trial judge against the backdrop of the express terms of the agency agreement.

6 Clause 2 relates to the duration of the agency agreement. It provides that the appointment of the agent shall commence on 1 January 2001 for a term of 2 years.

7 Clause 3.1 identifies DTZ's duties, powers and authority. The agency agreement relevantly provides:

3.1 The Agent agrees to use due diligence and best endeavours on behalf of the Client in the exercise of the following duties, powers and authorities and the agent shall:-

3.1.1 Collect all rents ...

3.1.2 Pay when due water rates, local authority rates and land tax and obtain reimbursement where appropriate from the lessees;

3.1.3 Negotiate rent reviews, new leases, extensions of leases, options of renewal ... as and when the same shall be appropriate pursuant to instructions given from time to time by the Client;

3.1.4 Effect all appropriate insurance cover for the improvements of the property and shall arrange for reimbursement and payment of premiums by lessees, where appropriate;

3.1.5 Negotiate leases for the occupation of any vacant space in the building in accordance with the instructions of the Client;

3.1.6 Terminate leases and tenancies with the consent of the Client ...

31.7 Deposit promptly all monies collected in the course of management of the building or otherwise incidental thereto in a trust account and may if necessary endorse any cheques or negotiable instruments drawn in favour of the Client for the deposit into such bank account;

3.1.8 Remit to the Client in such manner as may be agreed between them all monies held in a trust account and not required for the payment of disbursements in connection with the management of the building;

3.1.9 ...

3.1.10 ...

3.1.11 Notify the Client promptly and in writing of any substantial or major items of expenditure required in connection with the management of the building and in this respect the Agent shall secure the prior approval of the Client to all expenditure in excess of the amount shown in Item 6 of the Schedule in respect of any one item other than for monthly or recurring operating charges and/or emergency repairs required to protect the property from damage or to maintain the essential services.

8 Item 6 in the Schedule is left blank. DTZ was entitled to be paid management fees and was authorised to deduct those fees from rental moneys collected (cl 6.1 and cl 6.2).

9 Clause 9 relates to the agent's indemnity and provides:

9.1 The Client indemnifies the Agent against any and all actions, suits, demands, claims, costs or other expenses brought against or made upon the Agent or incurred arising out of this appointment.

10 The appellants' former agent for the Murray Street property was Richard Ellis (Western Australia) Pty Ltd (Richard Ellis). Richard Ellis, through insurance broker AON Risk Services Australia Ltd (AON), arranged insurance cover for the Murray Street property for 12 months from 27 July 1999 (the first policy). The cover included property insurance to a limit of $2.5 million, loss of rental income insurance to a limit of $190,000 and public liability insurance of $10 million.

11 It is accepted that the first-named appellant, Mr Badat, had authority to act for and on behalf of the appellants. The trial judge found that as at 2 November 2000 (1) Mr Badat knew that the first policy had fallen due for renewal, the cost to renew that policy ($10,045) and that the renewal premium had not been paid; and (2) Mr Badat did not want to pay the amount sought.

12 At Mr Badat's request, Richard Ellis through AON sought a reduction in the level of insurance cover. The cost of the reduced cover (the second policy) was $5,578. The cover was (relevantly) confined to property insurance to a limit of $1.8 million and liability insurance of $10 million. The trial judge found that Mr Badat regarded that as too expensive and thought he could obtain appropriate insurance at a cost of $1,500 - $2,000. It was because Mr Badat regarded the insurance cover as too expensive that he contacted Mr Frank Mattaboni at DTZ. Mr Badat had first contacted Mr Mattaboni in August 2000 about the possibility of DTZ managing the Murray Street property and two BP service stations owned by the appellants. Mr Mattaboni was a consultant in DTZ's agency division.

13 The trial judge found that on 28 November 2000 Mr Badat telephoned Mr Mattaboni and asked him to obtain a quote for fire insurance of $1 million and public liability insurance of $10 million for the Murray Street property. Mr Badat's instructions to Mr Mattaboni were to the effect that the Murray Street property was uninsured and that he expected to pay between $1,500 and $2,000 for insurance.

14 On 11 December 2000, AON issued a notice of cancellation of the second policy. Mr Badat received the notice of cancellation but did not forward it to DTZ.

15 On 19 December 2000, Mr Mattaboni telephoned Deborah Ulerick of insurance brokers Elkington Bishop Molineaux Insurance Brokers Pty Ltd (EBM) and asked for an indicative quote for insurance cover of $1 million with public liability cover of $10 million. On the same day, Ms Ulerick orally advised Mr Mattaboni of indicative prices for such cover from Zurich Australia Ltd (Zurich). The indicative prices were $3,465 for fire insurance of $1 million and $594 for public liability cover of $10 million. Mr Mattaboni then telephoned Mr Badat and provided him with the information. Mr Badat asked for details of the cover to be sent to him. The trial judge found that Mr Badat did not give any instructions to Mr Mattaboni to proceed. In a facsimile from Mr Mattaboni to Mr Badat on 21 December 2000, Mr Mattaboni inquired whether Mr Badat had 'thought about the insurance?'.

16 Mr Badat was absent overseas between 14 January 2001 to 3 February 2001. The trial judge found that Mr Mattaboni did not confirm acceptance of Ms Ulerick's quote of 19 December 2000 until 19 January 2001 when he sent a facsimile of that date. The trial judge said:

I think he realised on that date that he had done nothing to resolve the outstanding insurance question. He knew the Murray Street property was uninsured and that Mr Badat was overseas. I infer that he (somewhat belatedly) realised that the situation required urgent attention. Hence his request for written confirmation that day [146].

17 The trial judge found in essence that Mr Mattaboni acted without Mr Badat's instructions. Ms Ulerick issued a cover note and sent a blank proposal form to Mr Mattaboni under cover of a letter dated 23 January 2001 which DTZ received on 25 January 2001. It is a feature of Ms Ulerick's correspondence that although she addressed the letters to the appellants, she generally sent them to DTZ's address with the salutation 'Dear Frank'.

18 On 19 February 2001, Mr Mattaboni sent a facsimile to Mr Badat in which he said inter alia:

Lastly, EBM ... have sent a follow up to the insurance proposal for the [William Street property]. You will recall that you took details away to read and execute. Please confirm your agreement and execution of the proposal form.

19 Mr Badat said he first saw a proposal form at a meeting with Ms Ulerick on 13 March 2001. The trial judge did not resolve this conflict.

20 DTZ heard nothing from Mr Badat about insurance for the Murray Street property. On 8 March 2001, Mr Mattaboni sent a letter by mail to Mr Badat's home address. He enclosed EBM's invoice for $3,958.62 and said he was enclosing the proposal form for completion and return. The 'invoice' in fact provided detailed particulars of the scope and cost of the proposed insurance. Mr Badat said he had not seen this letter. The trial judge made no finding on the matter because it was common ground that there was a meeting between Mr Badat and Ms Ulerick at the appellants' Great Eastern Highway property on 13 March 2001 where the proposal form was completed.

21 The meeting was arranged after a discussion between Ms Ulerick and Mr Mattaboni at which it was agreed between them that Ms Ulerick would contact Mr Badat direct. Ms Ulerick's evidence was that at the meeting on 13 March 2001 she went through the Zurich proposal form with Mr Badat, having partially completed it in advance. She said she completed the balance of the proposal form after reading each question to Mr Badat and receiving his responses. Ms Ulerick explained to Mr Badat the under-insurance clause and cautioned him that the sum insured might be inadequate. She said Mr Badat signed and dated the form confirming that all was correct and that he understood it. The proposal was for property cover of $1 million. The 'no' box was ticked in relation to rental income insurance. At that meeting Mr Badat also raised insurance matters relating to the appellants' other properties including a property owned by the appellants in Great Eastern Highway. Ms Ulerick took the completed proposal form with her when the meeting ended.

22 On 19 March 2001, Ms Ulerick wrote another 'Dear Frank' letter to the appellants at DTZ's address. In her letter she said she was enclosing a copy of the completed proposal form for the Murray Street property. She noted that it had been completed in Mr Badat's presence and asked that he check it thoroughly to ensure that all was correct. DTZ received the letter on 20 March 2001. In fact Ms Ulerick enclosed the original proposal form not a copy. The trial judge found that the document was placed on DTZ's files and not forwarded to Mr Badat and that the most probable explanation for DTZ's failure to send the proposal form was that it was overlooked.

23 Mr Badat did not make any payment in respect of insurance for the Murray Street property. In explaining why he made no payment, Mr Badat's evidence was that he had relied on various statements and representations made to him by a Mr Robinson. Mr Robinson was a property manager at DTZ. He was too unwell to attend to give evidence at the trial. A written statement was admitted under s 79C of the Evidence Act 1906 (WA). Mr Badat's evidence was to the effect that after his meeting with Ms Ulerick on 13 March 2001 he had two telephone conversations with Mr Robinson in March 2001 in the second of which, Mr Robinson advised him that the old AON policy taken out by Richard Ellis was valid until July 2001 and there was no need to review the insurance arrangement until then when a comprehensive policy could be arranged which included all Mr Badat's properties. The trial judge rejected Mr Badat's evidence of what he was told by Mr Robinson in these calls.

24 On 9 April 2001 EBM issued a final reminder for payment of the insurance relating to the Murray Street property in an amount of $3,958.62. The reminder stated:

We do not appear to have received your remittance for the policy detailed below. Please remit within 10 days or the policy will lapse accordingly.

25 The reminder notice was addressed to Mr Badat at DTZ where it was received on 10 April. Mr Mattaboni transmitted it by facsimile to Mr Badat on the same day. Mr Badat acknowledged receiving this reminder and gave evidence that he spoke to Mr Robinson by telephone about it and Mr Robinson told him that he should ignore it and confirmed and reassured Mr Badat that the original AON policy had been reinstated by AON and that the property was insured under that policy until 27 July 2001. The trial judge rejected Mr Badat's evidence on this subject. He accepted Ms Ulerick's evidence that Mr Robinson telephoned her on 23 April 2001 and asked whether she had heard anything about obtaining the premium from Mr Badat. Ms Ulerick told him she had not and that she would keep trying to contact him.

26 The trial judge also accepted Ms Ulerick's evidence that on 17 April 2001, Mr Badat orally instructed her to send all insurance related documents to his home address and to deal with him direct on all of his insurances.

27 Ms Ulerick gave evidence that she also spoke to Mr Badat in May 2001 and asked where the proposal forms and premiums were. The trial judge accepted Ms Ulerick's evidence that Mr Badat answered her inquiry by saying that he was sorting out a problem arising from the fact that Richard Ellis had paid for the AON policy and that he had two lots of insurance for the William Street property. Mr Badat told Ms Ulerick he intended to sort the matter out and then speak to her again. The trial judge described Mr Badat's answer to Ms Ulerick's inquiry as disingenuous, it being improbable that Mr Robinson would have been pursuing payment from Mr Badat, through Ms Ulerick, on 23 April while at the same time telling Mr Badat to ignore the final reminder.

28 On 22 May 2001, EBM issued a cancellation notice in relation to the insurance policy for (inter alia) the Murray Street property. Mr Badat acknowledged receiving the notice of cancellation. The trial judge found that Mr Badat was expecting the notice because he knew that the invoice for the Murray Street property had not been paid.

29 At the end of May 2001, Mr Badat asked AON for a quote to insure both the Murray Street property and the Great Eastern Highway property. On 1 June 2001, AON provided Mr Badat with a quotation 'to reinstate cover'. The quotation was for property insurance to a limit of $1.5 million. On 14 June 2001, AON sent a follow up facsimile asking Mr Badat whether he required reinstatement of cover. Mr Badat did not reinstate the insurance cover before the fire.

30 DTZ pleaded that the agency agreement had been varied so as to oblige it to pay to the appellants all moneys collected in the course of management of the Murray Street property. The trial judge found that Mr Badat was always concerned to be paid promptly but that his concern could not be elevated to a variation of the agency agreement. He also said that for the defence to succeed it would be necessary for DTZ to prove, not only that it agreed to pay all rental income to Mr Badat, but also that the appellants agreed that DTZ need not pay for insurance out of those moneys. That was never put to Mr Badat and could not, according to the trial judge, be inferred from the evidence.

31 DTZ also pleaded that cl 3.1.4 of the agency agreement 'was varied, or alternatively waived' so that the appellants assumed sole responsibility for effecting insurance cover for the Murray Street property and released DTZ from its obligations pursuant to cl 3.1.4 of the agreement. The trial judge concluded that the evidence did not support any finding of a variation. There is no challenge to that conclusion.

32 As to the construction of the agency agreement, the trial judge held that: (1) cl 3.1.4 imposed an obligation on DTZ to effect all appropriate insurance, which included an obligation to make the payment necessary to obtain that insurance; (2) cl 3.1.4 imposed on DTZ an obligation either to pay the insurance premium itself or to make those payments from moneys held by DTZ on trust for the appellants; (3) the payment of an insurance premium pursuant to cl 3.1.4 is not expenditure 'required in connection with the management of the building' nor an 'operating charge' for the purposes of cl 3.1.11; (4) in any event, a requirement that DTZ first seek the appellants' approval for expenditure on insurance is inconsistent with the obligation in cl 3.1.4 and thus cl 3.1.11 had no application. As a result of these findings the trial judge did not determine the consequences of Item 6 being left blank or make a finding as to whether the appellants approved the proposed expenditure on insurance.

33 The appellants and DTZ accepted at trial that the insurance premium for insurance cover under cl 3.1.4 was expenditure required 'in connection with the management of the building'. The trial judge's reasons for his contrary conclusion are as follows:

I do not think that the existence or otherwise of insurance has anything to do with the management of the building. Put another way, the manner in which a building is managed by an agent on behalf of the owner will be no different, whether or not the building is insured against loss by fire [251].

34 The trial judge's construction of the phrase is also linked with his conclusion that an obligation to seek approval under cl 3.1.11 would be inconsistent with cl 3.1.4. These construction issues are inter-related and it is appropriate to start with the meaning of cl 3.1.4.

35 It is not in dispute that the lessee of the building on the Murray Street property (FILA) was not contractually liable to pay for, or contribute to, the cost of insurance of the building.

36 The parties' submissions as to the proper construction of cl 3.1.4 have to be considered in the context of some basic principles of insurance law. An insured can obtain interim cover from an insurer (known as a cover note) pending the insurer's consideration of the applicant's proposal and entry into a final contract of insurance. The proposal is a contractual offer. An insurance contract is a contract uberrimae fidei which means each party owes a duty of utmost good faith. This duty is the source of an insured's duty to disclose all material facts at the time of entry into the insurance contract. The vehicle for disclosure in this case was the Zurich proposal form. A principal can as a matter of law authorise an agent to enter into an insurance contract on his or her behalf.

37 The appellants contended that cl 3.1.4 imposed a duty on DTZ to enter into a contract of insurance for and on behalf of the appellants with an insurer and to pay the premium in connection therewith from the appellants' money held on trust or (as a fall back position) from its own pocket. The appellants also contended that 'appropriate' insurance should cover the reinstatement cost of the building and the loss of rental income for a reasonable period.

38 DTZ contended that cl 3.1.4 did not authorise the appellants to sign the Zurich proposal form. That is in substance a claim that DTZ did not have the power to make a contractual offer and thus enter into a contract of insurance for and on behalf of the appellants. I do not accept DTZ's submission. Clause 3.1.4 is the source of DTZ's authority as well as the source of its duty to effect (obtain) insurance cover on behalf of the appellants. The clause authorises (but does not oblige) DTZ to enter into an insurance contract on behalf of the appellants. The appellants may, at DTZ's request, sign the relevant proposal form.

39 However, the duty in cl 3.1.4 is not absolute or unconditional. For example, DTZ could not complete the proposal form unless and until the appellants provided DTZ with all necessary information required to discharge the appellants' duty of disclosure. Thus, DTZ's duty is dependent or conditional on the appellants complying with their implied contractual duty to cooperate in the provision of full and accurate information for disclosure to the potential insurer: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, 607.

40 Where the performance of a duty in cl 3.1 is conditional or dependent on the act of a third party over whom DTZ has no control (whether it be the appellants, the tenant or any other person) there can be no unconditional duty. By way of illustration, DTZ cannot collect the rent if the tenant refuses to pay. In circumstances where achievement of the contractual objective such as rent collection and effecting insurance depends upon the co-operation of a third party, the agent's duty is confined to exercising due diligence and best endeavours to achieve that objective.

41 The agent's duty under cl 3.1.4 is to obtain 'appropriate' insurance cover. What is appropriate is a matter for judgment. By inference, both parties appear to accept that, subject to the applicability of cl 3.1.11, the test of appropriateness is objective. The appellants called an expert witness, Mr Cockle, who gave evidence that a managing agent might reasonably be expected to obtain insurance covering the replacement cost of the building under management and loss of net income. DTZ did not challenge Mr Cockle's evidence, relying instead on cl 3.1.11. The agreed cost of replacement of the building on the Murray Street property at 30 June 2001 was $1,676,000. Ms Ulerick had cautioned Mr Badat that property cover of $1 million might be inadequate, given the location and size of the premises. The unchallenged evidence is that the Zurich insurance cover was not objectively 'appropriate'. This brings me to the construction of cl 3.1.11.

42 To conclude as the trial judge did that the obligation to obtain prior approval under cl 3.1.11 is inconsistent with cl 3.1.4 is to beg the question. The issue is whether the duty in cl 3.1.4 is subject to cl 3.1.11. The language in which the parties have chosen to express their agreement is neutral. However, when considered in the context of the commercial nature and purpose of the agency agreement, the compelling conclusion is that cl 3.1.4 is subject to cl 3.1.11. The reasonable commercial expectation of a landlord and managing agent would be that the landlord retain control over substantial and major items of expenditure which he is required to fund, whether directly or indirectly.

43 Further, in my respectful opinion the trial judge erred in concluding that a premium for insurance under cl 3.1.4 is not expenditure in connection with the management of the building. The sole purpose of the agency agreement was to retain DTZ to manage the building on the William Street property. All actions that DTZ was required or empowered to take or perform under the agency agreement are in connection with the management of the building, including the duty under cl 3.1.4.

44 The decision to leave Item 6 of the Schedule blank means, as a matter of construction, that the prior approval of the client is required for all expenditure that is properly characterised as a substantial or major item of expenditure required in connection with the management of the building. There is no formal challenge to the trial judge's finding that expenditure on insurance is not within the exclusion for monthly or recurring operating charges.

45 Where the relevant tenant is under no liability to pay or contribute to the insurance premium, a cost in the range of $3,465 to $10,045 is a substantial and major item of expenditure required in connection with the management of the building. That is between 2.16% and 6.26% of the gross annual rental at the relevant time.

46 In summary, DTZ's duty under cl 3.1.4 is subject to obtaining the appellants' prior approval to proposed expenditure before incurring a liability to pay the insurance premium. As the evidence demonstrates, the size of an insurance premium depends on the scope and level of the insurance cover. Having regard to the unchallenged evidence of Mr Cockle, supported by that of Ms Ulerick, the Zurich insurance was not appropriate. The cost of 'appropriate' insurance must have been no less than $5,500. By his conduct both before and after the commencement of the agency agreement, Mr Badat made it unequivocally clear to DTZ that he did not and would not approve expenditure necessary to secure 'appropriate' insurance.

47 We were not addressed on the test of what is 'appropriate' cover. If the test is wholly objective, the failure to approve expenditure for appropriate cover would thereby relieve the agent of any further obligations under cl 3.1.4. If the test is wholly objective, the appellants must fail because I have concluded that the only available inference from the evidence is that Mr Badat did not and would not approve expenditure necessary to secure appropriate insurance.

48 However, if cl 3.1.4 entitles (not requires) the client to determine and instruct the agent as to what is appropriate and the client elects to assume that responsibility, one of two things may happen. If the client determines and instructs the agent as to what is appropriate and approves the expenditure for that cover the agent must complete its obligations under cl 3.1.4 to effect that insurance. If, notwithstanding the assumption of responsibility for determining what is appropriate, the appellants do not determine or instruct the agent as to what is appropriate the agent has no relevant duty.

49 The trial judge did not expressly direct his attention to these matters. However, his findings as to Mr Badat's conduct as a whole, compel the following inferences. First, as and from the commencement of the agency agreement, Mr Badat elected to assume responsibility for determining and instructing DTZ as to what he regarded as appropriate insurance cover. Secondly, the appellants did not instruct DTZ that the Zurich insurance was appropriate or approve the payment of the insurance premium for the Zurich insurance. At the time of giving instructions, Mr Badat had advised DTZ of the level of expenditure that was acceptable to him ($1,500 - $2,000). It was significantly below the cost of the Zurich insurance. At no time did Mr Badat positively approve the Zurich premiums either in the telephone conversation on 19 December 2000 or in response to DTZ's letters of 21 December 2000, 19 February 2001, 8 March 2001 or EBM's final reminder of 9 April 2001. Mr Badat persisted in his refusal to pay the premium when the evidence established that Mr Badat and DTZ were acting on the basis that the appellants, not DTZ, would pay any premium thereby ensuring Mr Badat had ultimate control of what, if any, insurance was effected. Mr Badat was aware from prior experience that non-payment of a premium resulted in the insurance lapsing. Further, by mid-April 2001 Mr Badat had assumed the sole responsibility, to the exclusion of DTZ, for insurance which is further borne out by his conduct in requesting a further quote from AON in May 2001. On his own evidence, Mr Badat had no intention of approving expenditure by DTZ on, or himself directly paying, the Zurich insurance premium. It is significant in Mr Badat's defence was not that DTZ was obliged to pay the premium for the Zurich insurance but that he failed to pay the premium because of misleading conduct by Mr Robinson. Any significance that the signing of the proposal form may have had in isolation is overwhelmed by his conduct as a whole. I would uphold the notice of contention.

50 Although it is not necessary to address the issue of waiver, I propose to deal with aspects of it.

51 Notwithstanding the controversy surrounding the existence of an independent doctrine of waiver and its overlap with estoppel, the unchallenged finding of the trial judge was that DTZ had not pleaded or litigated an estoppel claim.

52 There being no challenge to the dismissal by the trial judge of the variation claim, this appeal raises for determination the question whether there is an independent doctrine of waiver distinct from estoppel (and election). There is a conflict of authority on that issue. This court's considered position is that a majority of the High Court (Brennan, Toohey, Gaudron & McHugh JJ) in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 accept that there is an independent doctrine of waiver: Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290 [48] (Steytler P). That remains my understanding of the majority position in Verwayen.

53 However, there remains the question of the nature and scope of the independent doctrine of waiver in a contractual context. Verwayen concerned the waiver of a statutory provision. I have been considerably assisted on this subject by the discussion in Greig and Davis, The Law of Contract 120 - 157, 375 - 376 and 706 - 708; Fifth Cumulative Supplement 11 - 17.

54 The first significant point is that waiver is temporary in the sense that, unlike variation, it does not alter the terms and conditions of the contract but only prevents the enforcement of the relevant contractual right. Thus, a party may dispense with the performance of a condition of a contract but leave the original contract unaffected so that the party could at a later time insist on compliance in the future with the contractual obligation: Phillips v Ellinson Bros Pty Ltd [1941] HCA 35; (1941) 65 CLR 221, 243 - 244 (Williams J). Waiver involves unilateral action by one party to the contract.

55 According to Greig and Davis (123), subject to one exception, the court will not allow a waiver to bring about a substantial change in the terms and operation of the contract. So, for example, it has been said that waiver can operate in relation to the mode and manner of performance of a contractual obligation: Phillips v Ellinson (244). Waiver is often relied on in building and construction disputes where there has been a failure to comply with the manner and form requirements in relation to variations. The exception identified by Greig and Davis is where the term or condition is solely for the benefit of the party waiving it: Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537; Gange v Sullivan [1966] HCA 55; (1966) 116 CLR 418; George v Roach [1942] HCA 22; (1942) 67 CLR 253.

56 The appellants' primary position is that there is no independent doctrine of waiver. The appellants' fall-back position was to the effect that whatever the scope of any independent doctrine, there was no waiver in this case because the only conduct relied on by the trial judge was Mr Badat's failure to pay the premium for the Zurich insurance. As that conduct was consistent with cl 3.1.4, it could not provide the basis for a waiver.

57 In his discussion of waiver the trial judge refers on a number of occasions to the fact that, knowing the Murray Street property was uninsured, Mr Badat decided not to pay for insurance. However, it is apparent from [279] that the trial judge did not confine his consideration to Mr Badat's failure to pay the premium. The trial judge said:

... Mr Badat elected not to pay the premium: he elected to take the risk arising from the fact that the Murray Street property was uninsured. And he elected to deal personally with insurance matters relating to all relevant properties. He thereby adopted a position inconsistent with his later assertion that he had expected DTZ to insure the property.

58 The evidence overwhelmingly supports the trial judge's finding that Mr Badat elected to deal personally with insurance matters relating to the Murray Street property. The evidence establishes that at all material times before and from the commencement of the agency agreement, Mr Badat assumed responsibility for all significant matters relating to insurance of the Murray Street property, including determining what was an acceptable level of expenditure, the closely related matters of the scope and level of insurance, whether or not to insure the Murray Street property at all and the payment of any premium.

59 There remains the issue of whether the facts permit a conclusion of waiver. Neither party addressed the court on the precise scope of the independent doctrine if it exists or whether cl 3.1.4 was of a type that could be waived. In particular, the appellants did not contend that the obligation in cl 3.1.4 was not solely for the benefit of the appellants or that it effected a substantial change to the agency agreement.

60 As the result of the appeal does not depend on the question of waiver and as neither party made submissions on whether the clause was a type that could be waived, I do not propose to determine those issues. However, I propose to state my provisional views.

61 First it is necessary to identify what it is that is said to be waived. On the assumption that all relevant conditions were satisfied, DTZ had an obligation to effect insurance and the appellants had a correlative contractual right to enforce that obligation. The waiver is of the appellants' right to enforce that obligation. This is not a case of election between alternative and inconsistent legal rights. The obligation to effect insurance is part of DTZ's consideration for the agency agreement and on that basis I am inclined to the view that waiver would bring about a substantial change to the operation of the agency agreement. That being so, the appellants can only waive DTZ's performance if its duty to insure under cl 3.1.4 is solely for their benefit. On my reading of the authorities, the exception is not expressly stated to be confined to contingent conditions where neither party has undertaken to be liable for the contingency. The question is whether a contractual obligation that is part of the non-severable consideration for the putative waivor's obligation to pay management fees can be classified as solely for the waivor's benefit. It must be the case that DTZ could not be prevented from performing its contractual obligation if it chose to do so. However, DTZ did not, and was not seeking to, perform the obligation. I am not here suggesting there is a need to prove detriment or reliance (which is estoppel).

62 It is also necessary to consider whether there are, or may be, other actual or potential contractual consequences from the failure to perform the obligations in cl 3.1.4. As DTZ's obligations under the agency agreement are entire, it would not be entitled to any part of its remuneration if the failure meant the agency agreement was not substantially performed. I doubt it has that consequence, but if it did, that would clearly be a detriment to DTZ. The likely response is that the waiver would apply not only to the appellants' right to enforce performance of cl 3.1.4 but also to any consequential right arising from non-performance. In that way, it may be said the waiver is of rights solely for the waivor's benefit. However, I have reservations about focussing on the nature of the right waived instead of the nature of the obligation affected. The relevant issue as identified in the authorities is whether the term or condition is solely for the benefit of the waivor. I am inclined to the view that the focus should be on the nature of the obligation waived and because the obligation in cl 3.1.4 is both substantive and directly linked with a reciprocal obligation to pay a benefit to DTZ, it is not solely for the benefit of the appellants.

63 There is no merit in the appellants' contention that the trial judge failed to give adequate reasons for finding that Mr Badat knew that the Murray Street property was uninsured. The finding was based on a careful and reasoned assessment by the trial judge of all the evidence with due regard to relevant inconsistencies, objective probabilities and Mr Badat's credibility. His reasons and reasoning are compelling. Applying the well-known test in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118, there is no arguable basis for overturning the finding which is based in part on the trial judge's assessment of Mr Badat's credibility. I agree with Le Miere AJA that ground of appeal 2 should be dismissed.

64 These grounds depend on the appellants successfully resisting the notice of contention and then overturning the trial judge's finding that Mr Badat instructed DTZ that the building insurance was to be at a level of $1 million and that he did not want insurance cover for loss of rental income. I have concluded that the appellants did not instruct DTZ that the Zurich insurance was appropriate or approve the expenditure for that insurance. If that is incorrect, then the only alternative conclusion is that the challenged finding is supported by the clear weight of the evidence, including Mr Badat's instructions to DTZ to obtain quotes for insurance at the specified scope and level, what Mr Badat told Ms Ulerick on 13 March 2001 and his execution of the proposal form. These grounds are without merit and should be dismissed.

65 Grounds 4 and 5 address the question of how to assess damages if the finding as to Mr Badat's instructions as to the scope and level of insurance are overturned. As there is no merit in the challenge to that finding, it is unnecessary to address those matters.

66 I would uphold the notice of contention and dismiss the appeal.

67 LE MIERE AJA: The appellants as trustees of the Yasmeen Family Trust (Trust) are the owners of a property at 432 Murray Street, West Perth. On 29 July 2001 the commercial building erected on the Murray Street property was destroyed by fire. It was then uninsured.

68 At the time of the fire, the respondent was the appellants' managing agent pursuant to a written agreement made between the parties on 28 November 2000 (the management agreement). The management agreement imposed on the respondent an obligation to 'use diligence and best endeavours' on behalf of the appellants to in the exercise of its duty to 'effect all appropriate insurance cover for the improvements of the property'. The appellants contended that the respondent breached this obligation and that it is therefore liable to pay damages to the plaintiffs, such damages representing the cost of reconstructing the building on the Murray Street property and the loss of rent during the period of reconstruction. The appellants contended, in the alternative, that the respondent was negligent and engaged in misleading and deceptive conduct.

69 The respondent denied liability. It contended that the appellants required all rental monies to be paid to them, without deduction, and that the appellants 'assumed sole responsibility for effecting insurance cover' for the Murray Street property, thereby releasing the respondent from its obligations pursuant to the management agreement.

70 The learned trial judge found, in effect, that the respondent had failed to carry out its contractual obligation to effect appropriate insurance cover for the improvements of the property. His Honour found that at all material times Mr Badat, the first named appellant, knew that the building was uninsured. The learned trial judge found that the conduct of Mr Badat amounted to a waiver, on behalf of the Trust, of its right to have the insurance effected by the respondent and that was a complete answer to the appellants' claim. The learned trial judge found that the respondent's failure to send to Mr Badat a proposal form (to which I will refer later in these reasons) demonstrated a lack of care and diligence in the performance of its duties but that the respondent's conduct did not cause the appellants any loss. The trial judge found that there was no substance to the appellants' claim that the respondent engaged in misleading or deceptive conduct. For those reasons, the trial judge dismissed the appellants' action.

71 The appellants now appeal against that decision. Ground 1 asserts that the learned trial judge erred in fact and in law in finding that the appellants waived the obligation of the respondent under the management agreement to effect all appropriate insurance cover with respect to the Murray Street building. Ground 2 is that the trial judge erred in fact and in law in failing to give adequate reasons for finding that at all material times Mr Badat knew that the Murray Street building was uninsured. Grounds 3 to 7 relate to the trial judge's provisional assessment of damages. Before considering the grounds of appeal I will set out the factual background and the findings of the learned trial judge to the extent that is necessary. The trial judge rejected the evidence of Mr Badat in relation to a number of important matters. I will refer to the evidence of Mr Badat only where it is necessary or helpful to do so.

72 Mr and Mrs Badat are the trustees of the Yasmeen Family Trust. Although Mrs Badat is a trustee, she has played no part in the Trust's commercial activities. She was not involved in any of the dealings with the respondent.

73 Mr Badat commenced purchasing property at about the time the Trust was established in 1996. The trial judge found that he did so with monies his mother loaned to the Trust for that purpose. The accounts for the Trust disclosed a loan of $1,405,000 as at 30 June 1997 and the amount of the loan increased to $4,248,000 by 30 June 2001. Mr Badat's first property investments on behalf of the Trust were two BP service stations in Port Hedland and Girrawheen for which the Trust paid $460,000 and $720,000 respectively. Mr Badat subsequently purchased a residential property in Carlisle which became the family home. Mr Badat purchased three other residential properties in Mrs Badat's name. On 26 March 1998 Mr Badat purchased the Murray Street property for $1,830,000 on behalf of the Trust. In 1999 Mr Badat purchased a block of residential units at 60 Great Eastern Highway, Rivervale, on behalf of the Trust for $1,350,000. In addition to investments on behalf of the Trust, Mr and Mrs Badat purchased the property at 134 Star Street, Carlisle, adjacent to their home in August 2003. The Badats then demolished the house and commenced the construction of three units. The object of the investment is to sell the units separately at a profit. In June 2004 Mr Badat purchased a number of properties in Rockingham. Mr Badat proposed to develop the properties and sell them in order to generate a profit. The trial judge found that Mr Badat's self description as a businessman was an accurate description and that the evidence about his property investments, both personal and on behalf of the Trust, demonstrated that Mr Badat was by no means naive when dealing with property and related matters.

74 The Murray Street property consisted of a two level building of approximately 1,422 square metres standing on a 931 square metre site. When the Trust purchased the property in 1998 the ground floor was let to Brashes Pty Ltd pursuant to a lease which expired on 31 July 1998. The lower ground floor was let to Rowe & Jarman Pty Ltd pursuant to a lease expiring 30 April 1999.

75 When the Trust acquired the property the vendor's management agent was Richard Ellis (Western Australia) Pty Ltd. That company changed its name subsequently to C B Richard Ellis (WA) Pty Ltd. I shall refer to it generally as 'Richard Ellis'. On 11 March 1998 the plaintiffs, as trustees of the Trust, entered into a management agency agreement with Richard Ellis in relation to the Murray Street property.

76 At the time the appellants became the registered proprietors of the Murray Street property it was insured through insurance brokers AON Risk Services Australia Ltd (AON).

77 The management agency agreement between the appellants and Richard Ellis imposed an obligation on Richard Ellis to 'arrange building insurances renewals thereof as and when [Richard Ellis] is given written instructions thereto by [the appellants]'. The Murray Street property was managed initially by Mr Lincoln Paul Delahunt, who was then an associate director of Richard Ellis.

78 On 13 August 1999 Mr Delahunt sent a facsimile to Mr Badat consisting of a letter and the retransmission of a facsimile he had received from AON setting out the proposed terms for the renewal of the insurance on the property. The total cost of that cover was $8,322.78. The period of insurance was 12 months from 27 July 1999. Mr Delahunt said in his letter that he intended to pay the premium out of the income to be derived from the new tenant of the Murray Street property. That was FILA Sport Oceania Pty Ltd (FILA) which leased the ground floor of the property for five years from 1 September 2000. Although the management agency agreement authorised Richard Ellis to pay insurance premiums only on receipt of written instructions, the trial judge found that Mr Badat did not provide written instructions but telephoned Mr Delahunt and instructed Richard Ellis to make the payment.

79 Mr Delahunt was assisted in his management of the Murray Street property by Ms Allesandra (Sandra) Mead Watkins. During the first half of 2000 Ms Watkins took over the management of the Trust's properties from Mr Delahunt, albeit under his supervision.

80 On 24 July 2000 AON wrote to Mr Delahunt attaching an invoice relating to the renewal of the insurance policy for the Murray Street property. The total amount of the charge was $10,045.97; this was a substantial increase over the cost of insurance for the previous year. No payment was made to AON in respect of this invoice. There is no evidence that Richard Ellis informed Mr Badat that the invoice had been received until Ms Watkins referred to it in the standard monthly report for September 2000. The report was sent to the appellants under cover of a letter dated 10 October 2000. In the report Ms Watkins said:

I have the insurance premium for the premise[s], would you like me to forward it to you so that you can pay it direct or use the rental remittance for November to cover it, the amount is $10,045.97.

The trial judge found that Mr Badat read the whole of the monthly report, notwithstanding Mr Badat's evidence that he did not read that part of the report which referred to the insurance.

81 On 26 October 2000 Ms Watkins sent to Mr Badat a letter together with copies of facsimiles she had received from AON which included the relevant invoices. The trial judge found that Mr Badat received Ms Watkins' letter of 26 October 2000 and its attachments. The trial judge inferred that there had been some communication between Mr Badat and Ms Watkins in which he had requested the relevant documents, not so that he could pay the premium himself but so as to see how the amount of $10,045.97 could be justified.

82 Mr Badat met with Ms Watkins on 2 November 2000. The trial judge did not accept in full the evidence of either Mr Badat or Ms Watkins concerning what occurred at the meeting. The trial judge found that there was a discussion about a possible overlap of insurance cover on the Murray Street property between the AON policy and the insurance effected by FILA. The trial judge accepted Mr Badat's evidence that he was dissatisfied with Ms Watkins' management of the Murray Street property and that he raised with her matters of concern to him. The trial judge accepted Ms Watkins' evidence that she was concerned about the fact that the insurance premium was outstanding and that Mr Badat had said he would pay it. The trial judge found that as at 2 November 2000 Mr Badat knew that the AON policy for the insurance of the Murray Street property had fallen due for renewal, that the cost of renewal was $10,045.97, that Mr Badat knew that the premium had not been paid and that he did not want to pay the amount sought.

83 On 7 November 2000 AON produced a statement of account addressed to Mr Badat. It showed an outstanding amount of $10,061.08, which included $10,045.97 in respect of the renewal of the commercial policy of the Murray Street property. The invoice bore a stamp saying 'URGENT'. Also stamped on the invoice were the words: 'Cover will be lapsed due to non-payment at 4 pm 20/11/00'. The trial judge found that Mr Badat received the Aon invoice of 7 November 2000, despite his evidence to the contrary. The trial judge found that as at about 7 November 2000 Mr Badat knew that the insurance cover for the Murray Street property would lapse unless payment was made by 20 November 2000. The trial judge also found that Mr Badat had no intention of paying the premium or authorising Richard Ellis to pay. That is because he had already told Ms Watkins the policy was too expensive and he was waiting for her to provide him with quotes, as she had said she would in her most recent monthly report.

84 On 8 November 2000 Richard Ellis sent its monthly report for October under cover of a letter signed by Ms Watkins and Mr Delahunt. In the report Ms Watkins wrote:

As requested I will reduce the cover of the current premium and have the policy requoted by AON. I will forward to you the revised policy once it has been amended.

85 On 28 November 2000 AON sent Ms Watkins by facsimile a letter and a revised invoice for insurance on the Murray Street property in an amount of $5,578.27. The tax invoice contained a transaction description in the following terms:

This policy is renewed for a further 12 month period with effect from 27 July 2000 and replaces invoice I0899194.

86 The invoice referred to was that which charged Mr Badat with the amount of $10,045.97. The client coverage summary attached to the tax invoice showed that the limit of liability had been reduced from $3 million to $1.8 million. Mr Badat received a copy of the invoice. Mr Badat's evidence was that at about the same time he received from Richard Ellis a copy of an invoice from AON dated 28 November 2000 which cancelled the original AON policy and credited an amount of $10,045.97. Mr Badat said in his evidence that he assumed from the fact that he had been given a credit of $10,045.97 that Ms Watkins had organised a new AON policy with reduced cover because of the overlap of cover with the FILA policy. He said he assumed also, from the reference to the credit, that Richard Ellis had paid that premium previously. He said he assumed that the further premium of $5,578.27 would be paid from that credit, and that the balance of the credit would be refunded by AON. He said that he did not know that Richard Ellis had not paid the premium to AON. The trial judge did not accept that evidence. The trial judge found that Mr Badat regarded the invoice of $5,578.27 as too expensive and for that reason he contacted Mr Mattaboni at the respondent.

Respondent takes over management of property

87 The trial judge accepted Mr Badat's evidence that he was dissatisfied with Richard Ellis in general and Ms Watkins in particular. The trial judge accepted Mr Badat's evidence that he met Mr Robinson and Mr Mattaboni in August 2000 at the respondent's offices. Mr Robinson was the respondent's property manager. On 12 September 2000 Mr Mattaboni wrote to Mr Badat enclosing management agreements for the three properties discussed and proposing to take over the management from 1 October 2000. He enclosed also a draft letter dated 11 August 2000 which he had prepared for Mr Badat's signature to inform Richard Ellis of the respondent's appointment in its place. The trial judge found that Mr Badat did not sign and return the agreement.

88 The trial judge found that the agreement appointing the respondent as the managing agent for the Murray Street property was made on 20 November 2000, the date it bears. In the agreement the date on which the respondent was to take over the management of the various properties was 1 January 2001.

89 On 22 November 2000 Mr Mattaboni had prepared a letter for Mr Badat to send to Richard Ellis to inform it of the respondent's appointment and to request various documents relating to the Murray Street property and the BP service stations. The letter was received by Richard Ellis on 24 November 2000. However, Richard Ellis did not respond to it. The respondent did not receive the relevant documents from Richard Ellis until January 2001.

90 The trial judge found that on 28 November 2000 Mr Badat telephoned Mr Mattaboni and asked him to obtain a quote for fire insurance of $1 million, and public liability insurance of $10 million for the Murray Street property.

91 On 11 December 2000 AON issued a notice of cancellation of the second policy. The notice was in the form of an invoice showing a credit in an amount of $5,528.27. Under the heading 'Cancellation', the invoice contained the statement: 'This policy is cancelled with effect from 28 July 2000 due to non payment'. Mr Badat said he received the notice from AON and forwarded it to Mr Mattaboni. The trial judge did not accept Mr Badat's evidence that he sent the notice to the respondent. The trial judge accepted that Mr Badat was not concerned about the cancellation. Although he knew the Murray Street property was uninsured he was expecting the respondent to obtain the quotes he had sought on 28 November 2000.

92 Mr Mattaboni wrote to Mr Badat on 12 December 2000 to inform him that the respondent had not received any documents relating to the Murray Street property or the BP service stations from Richard Ellis, although two letters had been sent. He asked Mr Badat to make available copies of the respective leases for photocopying 'as the first of January is fast approaching ...'. The trial judge found that Mr Badat did not deliver any such documents.

93 Although Mr Mattaboni had said in his letter of 29 November 2000 that 'we are proceeding to obtain quotes', the trial judge found that he did not do so until 19 December 2000. On that day he telephoned Elkington Bishop Molineaux Insurance Brokers Pty Ltd (EBM) and spoke to Ms Deborah Ulerick and asked for 'an indicative quote'. Mr Mattaboni told Ms Ulerick that cover of $1 million was required for the Murray Street property with a public liability cover of $10 million. Mr Mattaboni told Ms Ulerick that the Murray Street property was not insured. Ms Ulerick then telephoned several insurers to obtain the information required by Mr Mattaboni. She considered that the cover offered by Zurich Australia Ltd (Zurich) was the most appropriate. During the afternoon of 19 December 2000, Ms Ulerick telephoned Mr Mattaboni and gave him the indicative prices. The trial judge found that on 19 December 2000 Mr Mattaboni sent a facsimile to Mr Badat bearing the date '219/12/00'. The facsimile set out the information provided by Ms Ulerick and included the statement 'currently not insured'.

94 The trial judge found that on 19 December 2000 Mr Mattaboni telephoned Mr Badat to inform him of the EBM quote.

95 Mr Badat travelled to Mauritius on 14 January 2001 returning on 3 February 2001. It was Mr Badat's evidence that in early January he received a telephone call from Mr Robinson who said he had received all the documents requested from Richard Ellis but was still awaiting statements and balances. According to Mr Badat, Mr Robinson told him that the Murray Street property was insured. The trial judge accepted that Mr Badat had a conversation with Mr Robinson in which he was told about the budget. However, the trial judge did not accept that Mr Robinson told Mr Badat that the Murray Street property was insured.

96 On 19 January 2001 Mr Mattaboni sent a facsimile to Ms Ulerick. The facsimile said:

You would recall my earlier phone calls where you quoted us ball park figures for the following insurance, which we subsequently confirmed acceptance to.

Fire only $1 million Quote $3,465.44

Public liability $10 million Quote $594.00

The insurance was to be taken out in the names of:

Mohamed Ahmed Badat and Yasmeen Badat as trustees for the Yasmeen Family Trust.

We have not received confirmation that the insurance has since been placed and need your confirmation of this in writing today please.

97 The trial judge found that Mr Mattaboni did not confirm acceptance of Ms Ulerick's quote of 19 December 2000 until 19 January 2001 when he sent the facsimile. He realised on that date that he had done nothing to resolve the outstanding insurance question. He knew the Murray Street property was uninsured and that Mr Badat was overseas. He realised that the situation required urgent attention.

98 Upon receipt of the facsimile of 19 January 2001 Ms Ulerick telephoned Mr Mattaboni and confirmed the details of the cover. She also telephoned Zurich and spoke to Mr Wayne Cousins to confirm that the terms would hold. Mr Cousins gave Ms Ulerick information which allowed her to issue a cover note.

99 The trial judge noted that it is a feature of Ms Ulerick's correspondence that although she addressed the letters to 'A & Y Badat' she sent them to the respondent's address. Further, the salutation was always 'Dear Frank'. The trial judge said it was not clear whether Mr Mattaboni realised the letters were not intended for him but were written to Mr and Mrs Badat.

100 On 5 February 2001 Ms Ulerick wrote a 'Dear Frank' letter to Mr and Mrs Badat at the respondent's address, in which she noted that EBM had not received the proposal form and sought 'urgent attention' to the matter. There were telephone conversations between Ms Ulerick's assistants and Mr Mattaboni on 20 and 27 February and on some date in March 2001. The substance of the conversations was that Mr Mattaboni said he would follow up the matter with Mr Badat.

101 There was a meeting between Mr Badat and Ms Ulerick at the Great Eastern Highway property on 13 March 2001. The meeting was arranged after a discussion between Ms Ulerick and Mr Mattaboni at which it was agreed between them that Ms Ulerick would contact Mr Badat direct. The trial judge accepted the account of the meeting given by Ms Ulerick. Her evidence is that she went through the Zurich proposal form with Mr Badat, having partially completed it in advance by writing the basic information such as Mr Badat's name and address. Ms Ulerick completed the balance of the proposal form after reading each question to Mr Badat and receiving his responses. Mr Badat confirmed that he wanted the building insured for $1 million with accidental damage cover of $10 million and he did not want to insure for loss of rental income. Mr Badat signed and dated the proposal form confirming that all was correct and that he understood it. Ms Ulerick took the completed proposal form with her when the meeting ended.

102 On 19 March 2001 Ms Ulerick wrote a 'Dear Frank' letter to Mr and Mrs Badat at the respondent's address. In her letter Ms Ulerick said that she was enclosing a copy of the completed proposal form for the Murray Street property. She noted that it had been completed in Mr Badat's presence and asked that he check it thoroughly to ensure that all was correct. The trial judge found that in fact Ms Ulerick enclosed the original proposal form, not a copy. The document was placed on the respondent's file and not forwarded to Mr Badat. The trial judge found that the most probable explanation for the respondent's failure to send the proposal form to Mr Badat is that it was overlooked. The trial judge made that finding notwithstanding that Mr Mattaboni - when asked in cross-examination whether his reason for not sending the proposal to Mr Badat was that he knew the Zurich cover was only intended to be a temporary matter while Mr Robinson was sorting out the insurance issue concerning AON - said that that may have been the case.

103 On 23 March 2001 Ms Ulerick wrote to Mr and Mrs Badat at their home address. In the letter Ms Ulerick informed Mr and Mrs Badat about the results of her enquiries about insurance for rental properties, personal home and contents insurance, and the Great Eastern Highway property. She enclosed a letter of appointment. Mr Badat did not respond to Ms Ulerick's letter of 23 March 2001. Not having heard from him by early April, Ms Ulerick attempted to contact him by telephone on 3 and 4 April. On 4 April Mr and Mrs Badat signed and dated the EBM letter of appointment and inserted a commencement date of 5 April 2001. It was posted to EBM which received the document on that date. Mr Badat did not, however, make any payment in respect of insurance for the Murray Street property.

104 In explaining why he made no payment, Mr Badat contended that he relied on various statements and representations made to him by Mr Robinson in the course of telephone conversations with Mr Robinson shortly after his meeting with Ms Ulerick on 13 March 2001 and on or about 29 March 2001. The learned trial judge did not accept Mr Badat's evidence.

105 On 9 April 2001 EBM issued a final reminder for payment of the insurance relating to the Murray Street property in an amount of $3,958.62. This was in relation to cover of $1 million for the building. The document contained the words:

We do not appear to have received your remittance for the policy detailed below. Please remit within 10 days or the policy will lapse accordingly.

The reminder notice was addressed to Mr Badat at the respondent's office, where it was received on 10 April. Mr Mattoboni transmitted it by facsimile to Mr Badat.

106 Mr Badat's evidence was that he received the document on or about 10 April. Mr Badat's evidence was that he spoke to Mr Robinson by telephone about the final reminder and Mr Robinson told him that Mr Mattaboni had sent the document to him and that he should ignore it. Mr Badat said Mr Robinson again confirmed and reassured him that the original AON policy had been reinstated by AON and that the property was insured under that policy until 27 July 2001. The trial judge did not accept Mr Badat's evidence that Mr Robinson had made those statements to him.

107 Ms Ulerick spoke to Mr Badat in May 2001 and asked where the proposal forms and premium were. Mr Badat said that he was sorting out a problem arising from the fact that Richard Ellis had paid for the AON policy and that he had two lots of insurance. Mr Badat said that he intended to sort the matter out and then speak to her again. The trial judge found that Mr Badat's answer to Ms Ulerick's enquiry was disingenuous because the trial judge found that it could not have been based on anything Mr Robinson had said to Mr Badat.

108 Insurance for the Great Eastern Highway property had been arranged by Richard Ellis through AON. Mr Badat asked Ms Ulerick to arrange insurance on that property during the course of their meeting on 13 March 2001. In Ms Ulerick's letter of 23 March 2001 she informed the appellants that EBM had obtained alternative cover with CGU Insurance for a premium of $1,309.77 in respect of the Great Eastern Highway property. On 17 April 2001 Ms Ulerick wrote direct to the appellants at their home address enclosing an invoice and a proposal form for completion in relation to the Great Eastern Highway property. On 17 April Ms Ulerick received a telephone call from Mr Badat who asked her to send all documents to his home address and to deal with him direct on all of his insurances. When Ms Ulerick spoke to Mr Badat, apparently in early May, she asked him about all the outstanding proposal forms. These included the proposal for the Great Eastern Highway property. The trial judge accepted the evidence of Ms Ulerick that despite her attempts to speak to Mr Badat from 17 April onwards she was unable to contact him, except for the occasion in late April or early May to which I have referred, until some three months later.

109 On 22 May 2001 EBM issued cancellation notices in relation to the Zurich policy for the Murray Street property and the CGU policy for the Great Eastern Highway property. Mr Badat said that he recalled receiving the notices at the time. Mr Badat said they were not of concern to him because, based on his conversations with Mr Robinson, he was expecting both policies to be cancelled. The trial judge found that Mr Badat was expecting the cancellation notices because he knew the respective invoices had not been paid and not because of anything said to him by Mr Robinson.

110 At the end of May 2001 Mr Badat asked AON for a quote to insure both the Great Eastern Highway and Murray Street properties. On 1 June 2001 Ms Roberts-Henfrey of AON sent a facsimile to Mr Badat in which she set out the quotations. The trial judge found that Mr Badat knew that the quotations were to reinstate cover. On 14 June 2001 Ms Roberts-Henfrey sent Mr Badat a follow up facsimile to ask him whether he required reinstatement of cover for the Great Eastern Highway and Murray Street properties. It was Mr Badat's evidence that he forwarded a copy of Ms Roberts-Henfrey's facsimile of 1 June 2001 to Mr Mattaboni. The trial judge did not accept that evidence and found that Mr Badat did not produce the quotation to Mr Robinson and Mr Mattaboni until the day of the fire.

111 The Murray Street property was destroyed by fire on 29 July 2001.

112 The appellants' case in contract is based on the management agreement between them and the respondent. Clause 3 of the management agreement provides:

3.1 The Agent agrees to use due diligence and best endeavours on behalf of the Client in the exercise of the following duties, powers and authorities and the agent shall:-

3.1.1 Collect all rents including minimum, variable, special and percentage rentals and all amounts due in respect of electricity or other fuels supplied promptly as and when the same shall fall due and are payable and shall give valid receipts therefor;

3.1.2 Pay when due water rates, local authority rates and land tax and obtain reimbursement where appropriate from the lessees;

3.1.3 Negotiate rent reviews, new leases, extensions of leases, options of renewal, options to purchase, rights of first refusal, assignments of leases, surrender of leases, as and when same shall be appropriate pursuant to instructions given from time to time by the Client;

3.1.4 Effect all appropriate insurance cover for the improvements of the property and shall arrange for reimbursement and payment of premiums by lessees, where appropriate;

3.1.5 Negotiate leases for the occupation of any vacant space in the building in accordance with the instructions of the Client;

3.1.6 Terminate leases and tenancies with the consent of the Client and shall sign and serve in the name of the Client all such notices as may be appropriate;

3.1.7 Deposit promptly all monies collected in the course of management of the building or otherwise incidental thereto in a trust account and may if necessary endorse any cheques or negotiable instruments drawn in favour of the Client for deposit into such bank account;

3.1.8 Remit to the Client in such manner as may be agreed between them all monies held in the trust account and not required for the payment of disbursements in connection with the management of the building;

3.1.9 Advise the Client promptly in writing of the service upon the Agent of any Writ, Summons, Plaint, Subpoena or other legal document including any notices, letters or communications setting out or making claims upon the Client or the building;

3.1.10 Observe strictly any special conditions or instructions set forth in the Schedule;

3.1.11 Notify the Client promptly and in writing of any substantial or major items of expenditure required in connection with the management of the building and in this respect the Agent shall secure the prior approval of the Client to all expenditure in excess of the amount shown in Item 6 of the Schedule in respect of any one item other than for monthly or recurring operating charges and/or emergency repairs required to protect the property from damage or to maintain the essential services.

113 The appellants' case is that in breach of cl 3.1.4 of the management agreement the respondent failed to effect appropriate insurance cover on the Murray Street property in that the respondent failed to effect any insurance cover for loss or destruction by fire or loss of rental income as at 29 July 2001.

114 There is an issue between the parties as to the extent of the obligation imposed on the respondent by cl 3.1.4. The appellants say that on its proper construction, cl 3.1.4, read together with cl 3.1.7 and 3.1.8, require the respondent to take out insurance cover for the term of the management agreement for the reinstatement cost of the building on the Murray Street property in respect of loss or destruction by fire and for the loss of rental income for a reasonable period until the improvements were rebuilt and relet. The appellants contend that these provisions imposed on the respondent an obligation either to pay the premiums itself or to make those payments for monies held by the respondent on trust for the appellants.

115 The respondent contends that the management agreement precluded it from paying the premium out of rent, without Mr Badat's prior approval. This contention is based on cl 3.1.11 of the management agreement, which requires the respondent to notify the appellants of any substantial or major items of expenditure required in connection with the management of the building and to secure the prior approval of the appellants to all expenditure in excess of the amount shown at item 6 of the schedule, except for certain specified expenditures.

116 The trial judge found that cl 3.1.11 does not apply to the payment of an insurance premium and consequently the appellants' approval is not required prior to the payment of an insurance premium. The trial judge found that the obligation imposed on the respondent by cl 3.1.4 includes an obligation to make the appropriate payment necessary to obtain insurance and that obligation would be inconsistent with the requirement first to seek the client's approval. The trial judge accepted the appellants' construction of cl 3.1.4 of the management agreement. The trial judge found that the respondent had failed to effect all appropriate insurance cover for the improvements of the property. The trial judge found that the appellants were entitled to succeed in contract unless the respondent established one of its pleaded defences.

117 The respondent put forward a number of defences to the appellants' claim in contract. The respondent contended that after the management agreement was signed it was varied orally and by conduct so that the respondent paid and was obliged to pay to the appellants all monies collected in the course of the management of the Murray Street property without deductions. Secondly, the respondent pleaded that, by reason of the matters pleaded in [4] of its defence, cl 3.1.4 of the management agreement was varied or waived so that the appellants assumed sole responsibility for effecting insurance cover for the Murray Street property and accordingly released the respondent from its obligations pursuant to cl 3.1.4. It was further alleged that the appellants engaged their own insurance brokers directly, that is EBM, to obtain the relevant insurance cover.

118 The trial judge summarised the matters pleaded by the respondent in [4] of its defence as follows:

• On 28 November 2000, Mr Badat informed Mr Mattaboni that the Murray Street property was uninsured and requested him to obtain quotes for his approval;
• Mr Mattaboni obtained estimates from EBM for insurance of the Murray Street property on or about 19 December 2000;
• The estimates were approved orally by Mr Badat on or about 11 January 2001;
• On or about 11 or 19 January, [the respondent] instructed EBM to obtain an interim policy of insurance with Zurich;
• On or about 25 January, EBM sent an invoice in the sum of $3,958.62 for the Zurich policy to [the respondent], which in turn, sent the invoice to the [appellants] for payment;
• The [appellants] failed to pay the premium for the Zurich policy or to complete the proposal form;
• By letter dated 8 March, [the respondent] sent Mr Badat a further invoice from EBM and a further proposal form for completion and return;
• On or about 13 March, Mr Badat completed and executed an insurance proposal form in the presence of Ms Ulerick;
• On or about 9 April, EBM sent [the respondent] a final reminder notice requesting payment of the premium for the Zurich policy and [the respondent] forwarded that notice to the plaintiffs by facsimile on 10 April;
• On 17 April, Mr Badat orally appointed Ms Ulerick of EBM to act as the plaintiffs' insurance broker in respect of all their domestic and commercial properties and requested EBM thereafter to send all documentation in relation to such insurance to the plaintiffs at their home address, and requested EBM to deal direct with Mr Badat in relation to those matters;
• The [appellants] did not pay the premium for the Zurich policy which, on or about 22 May 2001 was cancelled.

119 The trial judge found that it was not open to the respondent to rely on any estoppel-based waiver.

120 The trial judge referred to the decision of the High Court in Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 and in particular to the statements of Gaudron J:

It is the assertion of inconsistent rights that is generally understood to be at the heart of what is called 'election' (481); and

I shall continue to use the word 'waiver', using it in the present context to signify deliberate action or inaction which has resulted in a changed relationship to which the parties will be held whether or not detriment is actually established (485).

121 The trial judge found that the appellants had a contractual right to require the respondent to effect appropriate insurance on the Murray Street property. However, Mr Badat acted so inconsistently with that right - and did so intentionally - as to make it unfair to the respondent, and hence, unjust, for him to assert an inconsistent position. His Honour stated that his findings of fact did not accord precisely with the allegations pleaded in [4] of the respondent's defence but there was a common theme: that knowing the Murray Street property was uninsured, Mr Badat decided not to pay for insurance. His Honour found:

Mr Badat must have known that the failure to pay the relevant premium would lead inevitably to cancellation of the temporary cover, as it had in the past. In other words, Mr Badat elected not to pay the premium: he elected to take the risk arising from the fact that the Murray Street property was uninsured and he elected to deal personally with insurance matters relating to all relevant properties. He thereby adopted a position inconsistent with his later assertion that he had expected the respondent to insure the property [279].

122 His Honour concluded that Mr Badat's conduct amounted to a waiver, on behalf of the Trust, of its right to have the insurance effected by the respondent and that was a complete answer to the appellants' claim [284].

123 The respondent admitted that it owed the appellants a duty of care to exercise appropriate skill, care and diligence in the performance of their agency. The appellants say that the respondent breached that duty by not affecting appropriate insurance. The trial judge found that Mr Badat waived the appellants' contractual right to have the respondent effect insurance on the Murray Street property and therefore there was no substance to the claim in negligence.

124 The trial judge was troubled by one matter: when Ms Ulerick sent the respondent the completed proposal form prepared on 13 March 2001 and signed by Mr Badat, the respondent did not forward it to him as Ms Ulerick had requested. His Honour considered that the respondent's failure to send the proposal to Mr Badat demonstrated a lack of care and diligence in the performance of its duties. However, his Honour found that the respondent's conduct did not cause the appellants any loss. There was no evidence that Ms Ulerick had told Mr Badat she would send him the completed proposal. Nor was there evidence that Mr Badat was expecting to receive it. His Honour considered that Mr Badat's position would have been the same whether or not he received the proposal.

The appellants' claim based on misleading and deceptive conduct

125 The appellants claimed that five representations were made to them on behalf of the respondent which constituted misleading and deceptive conduct within the meaning of s 52 of the Trade Practices Act 1974 (Cth). The trial judge found that two of the representations were made by the respondent but were not misleading or deceptive. His Honour did not accept that any of the other representations were made.

Respondent's notice of contention - the construction of cl 3.1.4

126 By a notice of contention the respondent asserts that the trial judge erred in law in finding that the true construction of cl 3.1.4 of the management agreement, read together with clauses 3.1.7 and 3.1.8, required the respondent to effect insurance over the Murray Street property and imposed on the respondent an obligation either to pay the premium itself or to make those payments from monies held by the respondent on trust for the appellants without the appellants' prior approval.

127 Clause 3.1 of the management agreement provides, in part:

The [respondent] agreed to use due diligence and best endeavours on behalf of the [appellants] in the exercise of the following duties, powers and authorities and the [respondent] shall:

3.1.4 effect all appropriate insurance cover for the improvements of the property and shall arrange for reimbursement and payment of premiums by lessees, where appropriate.

128 The respondent submitted, in effect, that the obligation of the respondent was to do all that it reasonably could in the circumstances to effect appropriate insurance cover for the building. That is, the duty to achieve the stated objective is not strict, the respondent is only required to do all that it reasonably can. The respondent submits that Mr Badat's express instructions to the respondent were complied with and followed up, that is, $1 million property insurance was obtained by cover note. There was nothing more the respondent could reasonably and practicably have done within the scope of their authority or instructions to effect that insurance. It was necessary for the appellants to complete the proposal form that was sent to them. There could be no insurance in place until and unless the proposal form was completed. Furthermore, it was submitted that the management agreement did not permit the respondent to pay the premium from rent receipts without the appellants' prior approval. Mr Badat, on behalf of the appellants, did not require or expect the respondent to actually effect the insurances, but only to arrange quotations and/or cover notes.

129 The appellants submitted that the respondent's duty was not merely to use its best endeavours. Its obligation to effect all appropriate insurance was expressed in absolute terms: the respondent 'shall effect all appropriate insurance cover'. The appellants submit that the use of the words 'to use due diligence and best endeavours' in cl 3.1 does not cut down the obligation to achieve the relevant result, in this case to effect all appropriate insurance cover. The obligations to use due diligence and best endeavours, and to achieve the stated results, are accumulative. The respondent must do each of the things in cl 3.1, and in so doing must use due diligence and its best endeavours. Some of the duties listed, for example those under cl 3.1.3 and cl 3.1.5 (to negotiate various agreements), are given additional content by the obligation to use due diligence and best endeavours. But the obligation to use due diligence and best endeavours does not cut down the obligation to achieve the result stated in cl 3.1.4 or in cl 3.1.1, cl 3.1.2, cl 3.1.6, cl 3.1.7, cl 3.1.8, cl 3.1.9, cl 3.1.10 or cl 3.1.11. The appellants submit that given the fundamentally absolute nature of most of the duties referred to in cl 3.1, it is clear that the respondent was obliged to carry them out.

130 At trial the appellants contended that the respondent was obliged to effect appropriate insurance cover for the Murray Street property and that that obligation required the respondent either to pay the premiums itself or to make those payments from monies held by it on trust for the appellants. The respondent contended that the management agreement precluded it from paying the premium out of rent without Mr Badat's prior approval. That contention is based on cl 3.1.11 of the management agreement.

131 The trial judge held that an insurance premium does not fall within the expenditures described in cl 3.1.11: that is, the payment of insurance premiums is not an 'expenditure required in connection with the management of the building'. Thus, his Honour held that cl 3.1.11 had no application: the respondent was not obliged to secure the prior approval of the appellants to the payment of the insurance premiums before paying them. His Honour held that the obligation imposed on the respondent by cl 3.1.4 to effect all appropriate insurance cover for the improvements of the property was not qualified or affected by cl 3.1.11.

132 I do not agree with his Honour that the payment of insurance premiums is not an expenditure required in connection with the management of the building.

133 By the management agreement the appellants appointed the respondent to be its exclusive managing and leasing agent for the property. Clause 3 set out the duties of the respondent. One of those duties is to effect all appropriate insurance cover for the improvements of the property. Effecting insurance was a duty of the respondent in the course of, and as part of, its management of the building. The payment of insurance premiums by the respondent in the discharge of its duty to effect all appropriate insurance cover for the improvements of the property is properly described as expenditure required in connection with the management of the building.

134 Clause 3.1.4 obliges the respondent to effect all appropriate insurance cover for the improvements of the property. To 'effect' means to 'bring about': Brown L, The New Shorter Oxford English Dictionary (4th ed, 1993). Thus, the literal meaning of the clause is that the respondent is under a duty to bring about the result that there is appropriate insurance cover for the building. However, the clause must be interpreted in a practical and realistic way and in light of its setting. It is not within the power of the respondent to complete and sign a proposal form. There would be no breach of the duty by the respondent if it did everything possible to arrange insurance but was unable to obtain cover because the appellants refused or neglected to sign the proposal form when pressed to do so by the respondent. The duty of the respondent was to effect insurance cover: that is, the respondent had to bring about the result that the building was insured. This result is subject to the appellants doing anything that was required of them which could not be done by the respondent, when pressed to do so by the respondent.

135 The duty of the respondent extends to paying the premiums out of trust funds or from its own funds. Clause 3.1.8 authorises the respondent to pay disbursements in connection with the management of the building from the trust fund but cl 3.1 taken as a whole does not evidence an intention that expenditure by the respondent in connection with the management of the building is to be confined to payments from the trust fund. For example, cl 3.1.2 requires the respondent to pay due rates and taxes and obtain reimbursement from tenants where appropriate. The obligation of the respondent is to pay the rates and taxes when they are due. The obligation is not conditioned upon prior receipt of sufficient funds from the appellants or in the trust account. The obligation imposed by cl 3.1.4 is to effect all appropriate insurance cover. Clause 3.1.11 requires the respondent to notify the appellants of certain items of expenditure and secure the prior approval of the appellants but does not provide for the respondent to obtain the necessary funds from the appellants before making the payment.

136 The construction of cl 3.1 that I have outlined is not an impractical or uncommercial interpretation of the clause. One would expect a professional property manager to retain sufficient funds in the trust account to meet expected expenditures, such as insurance premiums, or, at worst, reimburse itself for such expenditures from monies collected in the course of management of the building and deposited into the trust account.

137 The obligation of the respondent was to effect appropriate insurance cover: that is, to bring about the result that appropriate insurance cover was in place. The respondent was required to pay the premium from its own funds if there were insufficient funds in the trust account. The respondent was required to notify the appellants of the premium and obtain the approval of the appellants before making the payment.

138 The respondent obtained a quote from EBM and confirmed acceptance of that quote on 19 January 2001. Mr Badat subsequently signed the proposal form and Ms Ulerick sent the signed proposal form to Mr Mattaboni of the respondent on or about 19 March 2001. Thereafter the respondent did not forward the proposal form to Mr Badat for him to check and return to EBM as Ms Ulerick had requested. The respondent did not pay the premium. The respondent did not effect appropriate insurance cover as required by the management agreement. The appellants are entitled to succeed in their contract claim unless the respondent's defence of waiver is made out.

139 The trial judge found that the appellants, by their conduct, waived the right of the Trust to have the respondent effect all appropriate insurance cover on the building. The first ground of appeal is that the trial judge erred in law and in fact in making that finding.

140 A party whose conduct indicates that a particular contractual right will not be enforced may be taken to have waived that right.

141 Whether there is an independent doctrine of waiver, separate and distinct from the law of contract and doctrines of estoppel and election, is a matter on which judicial opinions have been divided. In Verwayen two justices of the High Court, Mason CJ and Deane J, doubted the existence of a separate doctrine of waiver and accordingly dealt with the respondent's (plaintiff's) plea that the Commonwealth had waived its right to rely on certain defences as if it were the same as the further plea of estoppel by representation. The other five justices of the court accepted that there is an independent doctrine of waiver, and each of them dealt with the plea of waiver as one which was separable from that of estoppel. In 'Waiver by Agencies of Government of Statutory Procedural Requirements' [1998] UNSWLawJl 62; (1998) 21(3) University of New South Wales Law Journal 711, Enid Campbell says that the opinions of these five justices (Brennan, Dawson, Toohey Gaudron and McHugh JJ) do not disclose a common, coherent view of the elements of this independent doctrine of waiver and that the justices were in agreement only in relation to the following elements:

(a) That which is waived must be a legal right possessed by the party alleged to have waived it, and that right must be one which exists solely for the personal or private benefit of that party.

(b) Rights being capable of being waived are not limited to those cases where a person holds alternative rights which are inconsistent with one another.

(c) A party may be held to have waived a right notwithstanding that he or she is not estopped from exercising it. In particular a person may be held to have waived a right possessed by him or her notwithstanding that it is not shown that another party has acted in reliance on the act of waiver and would incur detriment if the first party were allowed to assert the right alleged to have been waived (712).

142 In Freshmark Ltd v Mercantile Mutual Insurance (Australia) Ltd (1994) 2 Qd R 390, 404 Dowsett J (with the agreement of McPherson JA) said that the better view is that there is no independent doctrine of waiver separate from estoppel or election. In Mowie Fisheries Pty Ltd v Switzerland Insurance Australia Ltd (1996) 140 ALR 57, 80 Tamberlin J said that in his opinion the reasons of the majority of the High Court in Verwayen support the view that there is no independent doctrine of waiver as distinct from election, variation of contract or estoppel. On appeal to the Full Court in Switzerland Insurance v Mowie (1997) 144 ALR 234, 266 Beaumont J referred to the statement of Dowsett J in Freshmark with apparent approval.

143 In John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1998) 10 ANZ Insurance Cases 61- 407 Chesterman J distinguished Freshmark and said:

A party to a contract for whose benefit a provision is inserted has always been entitled not to insist on its performance but to treat the contract as otherwise in tact. 'Waiver' is the term usually applied to such an occurrence. In this sense waiver seems to me to have survived the Commonwealth of Australia v Verwayen (1990) 170 CLR 394. See at 406 per Mason CJ; 425 per Brennan J, 449 per Deane J, 491, 497 per McHugh J. There is nothing in Verwayen which casts doubt on Perri v Coolangatta Investments Pty Ltd [1982] HCA 29; (1982) 149 CLR 537. In that case Gibbs CJ (at 542) and Brennan J (at 565), with whom Stephen J agreed, held that a condition in a contract for the benefit of one party could be waived by that party. I think that waiver is, in the sense described, still a principle recognised by the law (74474).

That decision was affirmed on appeal: John Connell Holdings Pty Ltd v Mercantile Mutual Holdings Ltd (1999) 10 ANZ Insurance Cases 61- 454.

144 In Lewis v Cook [2000] NSWSC 191; (2000) 18 ACLC 490 the defendants submitted that by passing a resolution to forgive a loan owing by a related company, a company committed an intentional act with knowledge of abandoning its right to recover any part of the debt and had therefore waived its right of recovery. Austin J referred to broad formulations of a general doctrine of waiver found in the judgments of Knox CJ, Isaacs and Starkey JJ in Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; (1920) 28 CLR 305 and Latham CJ in Grundt v Great Boulder Pty Ltd Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641 and said that, formulated in that broad way, a general doctrine of waiver would encroach upon the operation of other legal principles - especially those relating to estoppel, election and variation and release of contracts - unless some limitations were recognised. His Honour referred to Verwayen and said that the High Court in Verwayen's case permitted principles of waiver to operate independently of the law of estoppel and election but only in a very limited field. His Honour continued:

[30] Mason CJ ([Verwayen] at 406-7) and Dawson J (at 451-3) (with whom Deane J agreed on this point at 431) took the view that most cases of 'waiver' were upon proper analysis cases about equitable estoppel or the doctrine of election. Mason CJ recognised (at 404) that statutory rights might be conferred in such a way that they can be abandoned unilaterally.

[31] McHugh J took the view (at 491) that most of the cases purporting to apply a general doctrine of waiver are really cases of contract, estoppel or election. However, he identified some anomalous cases which stand outside the categories of election, contract and estoppel. He said (at 497) that these cases support the principle that:

where the existence of a statutory right depends upon the fulfilment of a condition precedent, a person entitled to insist on the fulfilment of that condition may dispense with its compliance unless it is enacted for the benefit of the public, and that person will be held to have waived compliance with a condition if he or she knowingly takes or acquiesces in the taking of a subsequent step in the course of procedure laid down by the statute after the time for the other person to fulfil the condition has passed.

[32] Similarly, Brennan J (at 423) identified a limited doctrine of 'waiver' operating outside the realms of contract, election and estoppel in cases where statutory rights are introduced solely for the benefit of one party.

[33] Gaudron J identified a special principle flowing from Wilson v MacIntosh [1894] AC 129, which deals with taking inconsistent positions rather than the assertion of inconsistent rights (and therefore is not an instance of election) and presumes the existence of detriment (and therefore is not an instance of estoppel).

[34] Only Toohey J was prepared to allocate any significant scope to the concept of waiver. In his view waiver has a role to play (at 471) and is a notion of 'respectable lineage' (at 468). Quoting from the judgment of Mason J (as he then was) in Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 655, he identified two categories, mainly cases where a person is precluded from asserting one legal right when he is entitled to alternative rights inconsistent with each other, and cases where a person is precluded from raising a particular defence to a claim against him. Toohey J saw the first category as a form of election, and suggested the name 'waiver' is best reserved for the latter (at 472).

[35] Mason CJ said (at 404) that 'an existing legal right is not destroyed by mere waiver, in the sense of an express or implied intimation that the person in whom the right is vested does not intend to enforce it', and said that in such a case something in the nature of an election or an estoppel is required in the absence of consideration. As I read the judgments, none of the other judges in the Verwayen case disagreed with those propositions. A law of waiver survives Verwayen's case only in limited fields and well outside the facts of the present case.

145 In Randall v Aristocrat Leisure Ltd [2004] NSWSC 411 Einstein J referred with approval to the statement by Austin J in Lewis v Cook (citing Mason CJ in Verwayen) that an existing legal right is not destroyed by mere waiver, in the sense of an express or implied intimation that the person in whom the right is vested does not intend to enforce it and that in such a case something in the nature of an election or an estoppel is required in the absence of consideration.

146 In Wiltrading (WA) Pty Ltd v Lumley General Insurance Ltd [2005] WASCA 106; (2005) 30 WAR 290 [40] - [48] Steytler P discussed the doctrine of waiver and at [48] referred to the debate as regards the fate of waiver as an independent doctrine since Verwayen. Steytler P, with whom McLure JA agreed, said:

[48] However, the use of [the term waiver] in order to describe the situation in which a party has chosen not to insist on the performance of a provision inserted in a contract for its benefit ... does seem to have survived Verwayen (see (at 423 - 424) per Brennan J; (at 449) per Deane J; (at 451) per Dawson J; (at 468) per Toohey J; (at 485) per Gaudron J; (at 497) per McHugh J) and, in that sense, waiver is still a principle recognised by the law.

...

[50] Whatever may be the position as regards the current operation of the doctrine of waiver, and whether the issue is looked at as one of election or waiver (although, because of the discharge from liability is automatic, there seems to be no election to make, only a decision whether or not to treat the policy as having revived: see Clarke (at 516), it follows from the authorities to which I have referred that there must, at least, have been an unequivocal act with knowledge of the relevant facts.

147 In Commodore Homes WA Pty Ltd v Goldenland Australia Property Pty Ltd [2007] WASC 146 [38] Beech J said that he agreed with the reasoning and conclusion of Austin J in Lewis v Cook. Beech J referred to the discussion by Steytler P in Wiltrading and at [35] said that the specific context in which the doctrine of waiver appears to continue to have a role were identified by Steytler P in Wiltrading at [48] and by McHugh J in Verwayen at (497).

148 My review of the authorities to which I have referred leads me to the conclusion that principles of waiver continue to operate independently of the law of estoppel and election but only in limited circumstances.

149 The trial judge held that it was not open to the respondent to rely on any estoppel or estopel-based waiver because the respondent had not pleaded a case of waiver in the sense of estoppel. There was no allegation of any representation to the respondent by Mr Badat nor of any detrimental reliance by the respondent on the appellants' alleged assumption of responsibility or engagement of EBM. Indeed, it is not even pleaded that the respondent knew of those matters. The allegations of fact relied on cannot support a case of estoppel. However, the trial judge found that the respondent had raised a case of waiver in the sense of an intentional act done with knowledge whereby a person abandons a right by acting in a manner inconsistent with that right. The trial judge specifically referred to the statement of Gaudron J in Verwayen (485) that her Honour would continue to use the word waiver to signify a deliberate action or inaction which has resulted in a changed relationship to which the parties will be held whether or not detriment is actually established. The learned trial judge held that the facts as found established waiver. His Honour said:

Mr Badat must have known that the failure to pay the relevant premium would lead inevitably to cancellation of the temporary cover, as it had in the past. In other words, Mr Badat elected not to pay the premium: he elected to take the risk arising from the fact that the Murray Street property was uninsured. And he elected to deal personally with insurance matters relating to all relevant properties. He thereby adopted a position inconsistent with his later assertion that he expected [the respondent] to insure the property [279].

In these circumstances, it is, I think, unnecessary to consider whether [the respondent] acted in reliance on Mr Badat's conduct or acted to its detriment in failing to effect appropriate insurance. Applying the law as I find it in Verwayen, I am satisfied that Mr Badat's conduct amounted to a waiver, on behalf of the Trust, of its right to have the insurance effected by [the respondent]. This, in my view, is a complete answer to the [appellants'] claim [284].

150 The waiver as found by the trial judge was of a legal right possessed by the appellants: that is, the legal right which is the corollary of the respondent's contractual obligation to effect appropriate insurance cover. That right existed solely for the benefit of the appellants. Rights capable of being waived are not limited to those cases where a person holds alternative rights which are inconsistent with one another (see Enid Campbell op cit). In Verwayen Gaudron J identified a principle flowing from Wilson v MacIntosh [1894] AC 129 which deals with taking inconsistent positions rather than the assertion of inconsistent rights. In this case, the appellants adopted a position which was inconsistent with the respondent being obliged to effect appropriate insurance cover.

151 The appellants, through Mr Badat, had knowledge of the relevant facts. Mr Badat knew that the building was uninsured. He knew that the respondent, in response to his request that it obtain a quote for fire insurance of $1 million and public liability insurance of $10 million, had obtained, through EBM, a quote from Zurich. Mr Badat met with the insurance broker's representative, Ms Ulerick, and completed the proposal form in the absence of any representative of the respondent. Mr Badat gave his instructions for the insurance he required directly to Ms Ulerick in the absence of a representative of the respondent. Mr Badat knew that subsequently the premium had not been paid and the policy had been cancelled. Mr Badat then asked AON for a quote for insurance on the Murray Street property. He did that without informing the respondent. In effect, Mr Badat knowingly permitted the Zurich policy to be cancelled and then, without informing the respondent, obtained a quote for reinstatement of cover from AON but did not effect reinstatement of the policy.

152 In Wiltrading Steytler P said that waiver required an unequivocal act with knowledge of the relevant facts [50]. In this case, the respondent relies upon a number of acts or course of conduct. The respondent pleads that the appellants waived the benefit of cl 3.1.4 of the management agreement by reason of the matters pleaded in [4] of its defence.

153 I have set out at [118] the trial judge's summary of the matters pleaded by the respondent in [4] of its defence.

154 The trial judge found that those allegations were substantially true, although the assertion that Mr Badat approved the estimates obtained by Mr Mattaboni from EBM was somewhat overstated.

155 The trial judge found that Mr Badat elected not to pay the premium for the Zurich policy and he elected to deal personally with insurance matters relating to the Murray Street property. His Honour found that Mr Badat, on behalf of the appellants, thereby adopted a position inconsistent with their right that the respondent effect appropriate insurance on the Murray Street property. His Honour found that Mr Badat's conduct amounted to a waiver, on behalf of the trust, of its right to have the insurance effected by the respondent.

157 On 28 November 2000 Mr Badat asked Mr Mattaboni to obtain quotes for fire insurance of $1 million and public liability insurance of $10 million for the Murray Street property. On 11 December 2000 AON issued a notice of cancellation of the insurance policy effected by Richard Ellis. Mr Badat knew that the Murray Street property was then uninsured. On 19 December 2000 Mr Mattaboni informed Mr Badat that he had received from EBM a quote for insurance cover. On 21 December 2000 Mr Mattaboni sent a letter by facsimile to Mr Badat in which he asked Mr Badat 'have you thought about the insurance?' On 13 March 2001 Mr Badat met with Ms Ulerick. During the meeting Mr Badat signed the proposal form insuring the building for $1 million with accidental damage cover of $10,000. On or about 10 April Mr Badat received a facsimile copy of a final reminder notice from EBM. The notice informed Mr Badat that EBM had not received the premium for the policy and that if it was not paid within 10 days the policy would lapse. On 17 April Mr Badat asked Ms Ulerick to send all documents to his home address and to deal with him direct on all of his insurances. From that date onwards Ms Ulerick sent documents to Mr Badat's home address and not to the respondent. Accordingly, on 17 April Mr Badat knew that if the premium was not paid within 10 days the policy would lapse and that EBM would send all further communications concerning the insurance to him and not to the respondent. On 22 May EBM issued cancellation notices in relation to the Zurich policy. Mr Badat received the notice and knew that the Murray Street property was not insured. Those findings justify the conclusion that Mr Badat waived the right for the respondent to effect insurance on the Murray Street property, and choose to himself take responsibility and control of insuring or not insuring the property.

159 Ground 2 is that the learned trial judge erred in fact and in law in failing to give adequate reasons for finding that at all material times Mr Badat knew that the Murray Street property was uninsured.

160 A trial judge has a duty to give adequate reasons for decision. In Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 the court said:

[28] Reasons need not be lengthy and elaborate: Ex parte Powter; Re Powter (1945) 46 SR (NSW) 1 at 5; Beale (at 443); nor do they need to refer to all the evidence led in the proceedings: Mifsud v Campbell (1991) 21 NSWLR 725 at 728. However, relevant evidence should be referred to (albeit not necessarily in detail) and, where there is conflicting evidence of significance to the outcome, both sets of evidence should be referred to. Where one set of significant evidence is preferred over another, the trial Judge should set out findings sufficient to explain why: Beale, (at 443). Similarly, where a dispute involves a form of 'intellectual exchange, with reasons and analysis advanced on either side', the Judge 'must enter into the issues canvassed before him and explain why he or she prefers one case over the other': Flannery, (at 382).

[29] Inadequacy of reasons does not necessarily amount to an appealable error. An appeal court will only intervene when no reasons have been given in circumstances in which they were required, or when the inadequacy is such as to give rise to a miscarriage of justice: Beale (at 444). Nor does an appealable error arising from inadequate reasons necessarily result in a new trial. The appeal court is entitled to consider the matter and, if it can do so (where, for example, only one conclusion is reasonably open on the available evidence), it may itself decide the matter: Beale (at 444).

161 Mr Badat's case on the issue of knowledge was that at all material times up to the time of the fire he believed that the Murray Street property was insured under a policy of insurance arranged by Richard Ellis through AON. The appellant's case was that his belief was based on what he had been told by Mr Robinson.

162 Mr Badat's evidence, on the issue of knowledge, was that on or about 29 March 2001, and again on 10 April 2001, Mr Robinson told Mr Badat that he had ascertained that the Murray Street property was insured under a policy of insurance arranged by Richard Ellis through AON. On that basis, there was no need to proceed with the Zurich policy. Mr Badat's evidence was that the Zurich policy was initially arranged by the respondent through EBM as an interim policy only, while the respondent verified the status of the AON policy.

163 The trial judge made a number of findings of fact in relation to Mr Badat's knowledge that the Murray Street building was uninsured. His Honour found that Mr Badat received and read the Richard Ellis September 2000 report which stated that the insurance premium was due for the Murray Street property. Accordingly, Mr Badat knew that the premium for the renewal of the insurance for the property had not been paid. Mr Badat received the letter from Ms Watkins dated 26 October 2000 enclosing the AON invoice. His Honour drew an inference that some communication between Mr Badat and Ms Watkins had taken place in which Mr Badat had requested the relevant documents so as to see how the amount of $10,045.97 could be justified. It was open to his Honour to draw that inference. His Honour found that Mr Badat received the AON invoice of 7 November 2000 which stated: 'Urgent - cover will be lapsed due to non-payment at 4 pm on 20/11/00'. Accordingly, his Honour found that as at about 7 November 2000 Mr Badat knew that the insurance cover for the Murray Street property would lapse unless payment was made by 20 November 2000. Mr Badat did not instruct Richard Ellis or the respondent to pay the AON premium. He did not claim to have done so. On 1 June 2001 Mr Badat received a facsimile from AON that stated: 'As discussed I confirm quotations to reinstate cover for your two properties are as follows ...'. One of the quotations related to the Murray Street property. On or about 14 June 2001 Mr Badat received a further facsimile from AON which stated: 'Further to my fax of 1 June 2001 I look forward to hearing from you if you require reinstatement of cover for 60 Great Eastern Highway, Rivervale and 432 Murray Street, Perth'.

164 The trial judge found that Mr Badat's conduct immediately after the fire was inconsistent with him believing that the property was insured through AON or that Mr Robinson had told him that the property was insured through AON. Mr Badat took the AON quotation of 1 June 2001 to a meeting with Mr Volk, Mr Robinson and Mr Dumbrell of the respondent on the day of the fire. He also took the Trust's cheque book. His Honour found that such conduct was consistent with Mr Badat knowing at that time that the Murray Street property was uninsured and that his only hope of salvaging the situation was to make belated payment in respect of the only insurance then available, that offered by AON. Furthermore, his Honour found that if Mr Robinson had made the statements attributed to him by Mr Badat, it is probable that as soon as Mr Badat discovered, after the fire, that the Murray Street property was uninsured, he would have made an immediate complaint to the effect that he had been mislead by Mr Robinson. However, Mr Badat did not do so.

165 The learned trial judge gave coherent and logical reasons for his finding that Mr Badat knew at all material times that the Murray Street property was not insured.

166 On appeal the appellants submitted that at trial they had expressly relied on, amongst other things, three matters of objective fact that were consistent with Mr Badat's evidence as to what he had been told by Mr Robinson:

(a) Firstly, Mr Badat had completed the proposal form for the Zurich policy and given it to Ms Ulerick on 13 March 2001, and she sent the completed proposal form to the respondent by letter of 19 March 2001, but that original proposal form was then placed on the respondent's file and was not forwarded to Mr Badat;

(b) Secondly, the respondent received a letter from Zurich of 16 May 2001 advising of Zurich's intention to cancel the policy if the premium was not paid for. The respondent retained the original of that letter and did not send it to Mr Badat or communicate with him about its contents;

(c) Thirdly, the trial judge accepted that in late April/early May 2001 Mr Badat told Ms Ulerick that he was sorting out some form of problem where Richard Ellis had paid AON for the commercial building insurance, and that it appeared he had two lots of insurance for the building.

167 A finding of fact by a trial judge may be set aside upon appeal where incontrovertible facts or uncontested testimony demonstrate that the judge's conclusions are erroneous or where it is concluded that the judge's decision was glaringly improbable or contrary to compelling inferences in the case: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. The 'three matters of objective fact' relied upon by the appellants do not demonstrate that the trial judge's finding concerning Mr Badat's knowledge that the Murray Street property was uninsured are erroneous or that his Honour's decision was glaringly improbable or contrary to compelling inferences. I will address each of the 'three matters of objective fact' relied upon by the appellants.

168 Mr Mattaboni's evidence-in-chief was that he believed he kept a file copy of the proposal form and sent the original to Mr Badat as was his usual practice. When it was put to him in cross-examination that the original proposal form was on the respondent's file, Mr Mattaboni conceded that he had not sent the original to Mr Badat. It was then put to him that he had put the original on the file. Mr Mattaboni did not accept that. He said he did not know if he put it there or not, it could have been Mr Robinson. When it was put to him that the reason he did not send the original proposal form to Mr Badat was because he knew that the Zurich cover was only a temporary matter whilst Mr Robinson was sorting out the insurance issue concerning AON Mr Mattaboni responded: 'I don't know that. That may have been the case'.

169 The learned trial judge made the following finding concerning that evidence:

[174] Mr Mattaboni gave the evidence set out above towards the end of his cross-examination, after he had been in the witness box for the better part of a day. By then, it was apparent that his recollection was poor. My impression of him was that he had become somewhat disinterested in the proceedings. His answer was not responsive to the question, which was directed to 'his' reason for not sending the proposal form to Mr Badat. I did not regard the second sentence of Mr Mattaboni's answer to be a considered response. I had the impression it was given on the basis that anything was possible. I therefore place no weight on that evidence.

[175] In my view, the most probable explanation for [the respondent's] failure to send the proposal form to Mr Badat is that it was overlooked.

170 It was open to the trial judge to make the finding that he did. His Honour had the advantage of observing Mr Mattaboni give evidence and was exposed to the whole of the evidence. An appeal judge reading the transcript cannot conclude that the trial judge was wrong in his assessment of Mr Mattaboni's evidence on that point. The learned trial judge concluded that, having regard to the evidence of the surrounding circumstances, the most probable explanation for the respondent's failure to send the proposal form to Mr Badat is that it was overlooked. His Honour was entitled to make that finding.

171 As to the Zurich letter of 16 May 2001, the appellants submit that the learned trial judge did not deal with it at all. The appellants submitted that the respondent's failure to act on the Zurich letter of 16 May 2001 was consistent with Mr Badat's evidence that Mr Robinson had told him there was no need to proceed with the Zurich policy. There was no evidence from the respondent as to the reason for that failure. It was submitted that an inference ought to have been drawn against the respondent. It was submitted that the duty to give adequate reasons required the trial judge to reconcile the respondent's conduct with his finding as to knowledge but his Honour had failed to do that. Further, it was submitted that the fact that the respondent had failed to deal with, or inform Mr Badat of two important letters going to the status of the insurance was relevant to the trial judge's finding that the respondent had simply overlooked sending the proposal document to Mr Badat after 19 March 2001.

172 It is not necessary for a trial judge to refer to every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance: Beale v Government Insurance Office (1997) 48 NSWLR 430, 443 (Meagher JA). The evidence went no higher than that the Zurich letter of 16 May 2001 had been received by the respondent and was on the respondent's file and the respondent had not forwarded the letter, or a copy of it, to Mr Badat. There was no evidence that Mr Robinson had received the letter or was responsible for the letter, or a copy, not being forwarded to Mr Badat. The letter would not cause Mr Robinson, or any reader, to believe that the property was insured. To the contrary, it would lead a reader to believe that if the premium was not paid the property would become uninsured within 14 days. The receipt of the letter by the respondent and its failure to forward it, or a copy, to Mr Badat does not lead to any compelling inference that Mr Robinson believed the Murray Street property was insured and had made statements to that effect to Mr Badat on 29 March and 10 April 2001. The fact is not of such significance that the failure of the trial judge to discuss and analyse it leads to the inference that the judge overlooked the evidence or failed to give it proper consideration.

173 As to Mr Badat's conversation with Ms Ulerick in late April/early May 2001, the learned trial judge found that Mr Badat's answer was disingenuous because:

(a) his Honour was not persuaded that it could have been based on anything Mr Robinson told him; and

(b) it is improbable that Mr Robinson would have been pursuing payment from Mr Badat through Ms Ulerick on 23 April while at the same time telling Mr Badat to ignore the final reminder.

174 The appellants submitted that the reasoning behind the first matter was circular because Mr Badat's conversation with Ms Ulerick itself went to the question of what Mr Robinson had told Mr Badat. The appellants submitted that the second matter relied upon by the learned trial judge was based on a finding not supported by any evidence. It was submitted that there was no evidence that Mr Robinson had been pursuing payment. Accordingly, it was submitted that the reasons given by the trial judge for the finding of disingenuity were wrong, the trial judge had given no proper consideration to the issue and no explanation how it can be properly reconciled with the finding that Mr Badat knew that the property was uninsured. Furthermore, it was submitted that the finding of disingenuity was glaringly improbable and contrary to the compelling inference that Mr Badat's statement to Ms Ulerick was true because Mr Badat had no reason to mislead Ms Ulerick at that time, being well prior to the date of the fire, and before any dispute arose. It was submitted that his Honour gave no reason why Mr Badat needed to 'deflect' Ms Ulerick's enquiry at that time. Neither was it suggested to Mr Badat in cross-examination: it was not put to Mr Badat that he lied to Ms Ulerick in that conversation or that he had any reason to do so. The appellants submitted that the probable and compelling inference is that at the time Mr Badat had no reason to mislead Ms Ulerick nor to deflect any enquiry, and that his statement to Ms Ulerick reflected his genuine belief: namely, that the Murray Street building was insured.

175 It is necessary first to refer to Mr Badat's evidence. On 10 April 2001 Mr Badat received the EBM final reminder of 9 April 2001 which stated that EBM had not received the premium and requested payment within 10 days failing which the policy would lapse. Mr Badat's evidence was that he spoke to Mr Robinson by telephone about the final reminder. He said that Mr Robinson told him that the original AON policy had been reinstated by AON, that the property was insured under that policy until 27 July 2001, that Mr Badat should not worry about the reminder and that Mr Robinson would contact Mr Mattaboni and tell him to ignore the document until the AON renewal came up in July 2001.

176 At [205] the trial judge said that he did not accept Mr Badat's evidence for the reasons he had given for not accepting Mr Badat's evidence that on or about 29 March 2001 Mr Robinson had told Mr Badat that the old AON policy taken out by Richard Ellis was valid until July 2001 and that there was no need to review the matter until then. His Honour said that, viewed objectively, there was no basis on which Mr Robinson could properly have made any of the statements attributed to him by Mr Badat [187]. His Honour went on to express further reasons for not accepting Mr Badat's evidence concerning his telephone discussion with Mr Robinson on or about 10 April 2001. His Honour said that Mr Badat's evidence was inconsistent with Ms Ulerick's evidence, which his Honour accepted, that Mr Robinson had telephoned her on 23 April 2001 and asked whether she had heard anything about obtaining the premium from Mr Badat.

177 His Honour was correct to find that it is inconsistent for Mr Robinson to have told Mr Badat on or about 10 April 2001 that he should disregard the final reminder notice from EBM because the property was insured by AON until 27 July 2001 and then on 23 April ask Ms Ulerick's whether she had heard anything about obtaining the premium from Mr Badat. His Honour gave adequate reasons for finding that Mr Badat's statement to Ms Ulerick was disingenuous.

178 There were conflicting cases whether Mr Badat knew that the Murray Street property was uninsured at all material times prior to the fire. There was conflicting evidence and conflicting arguments. The trial judge set out material findings of fact and conclusions, or ultimate findings, of fact. His Honour set out how he came to his findings to accept the respondent's case in preference to that of the appellants on the question of the appellant's knowledge that the property was uninsured. In short, his Honour gave adequate reasons for decision. Ground 2 is not made out.

179 As the appeal does not succeed on the issue of liability, it is not strictly necessary to consider the grounds of appeal concerning damages. Nevertheless, I will briefly state my conclusion on the remaining grounds of appeal, all of which relate to damages.

180 There were two aspects to the appellants' claim for damages. First, the appellants claimed the capital cost of rebuilding. Secondly, the appellants claimed the loss of rent until the building was rebuilt. The learned trial judge found that had there not been a waiver the respondent would only have been liable for failing to effect the insurance which Mr Badat actually required, which his Honour found to be $1 million building costs and no loss of rent. His Honour found that Mr Badat required insurance in the sum of $1 million only. His Honour found:

[306] On Ms Ulerick's evidence (which I accept) as reflected in the proposal form signed by Mr Badat on 13 March 2001, he did not require insurance cover for loss of rental income.

[307] The same point arises in relation to the plaintiff's claim for damages to compensate the Trust for the cost of rebuilding the Murray Street property. On the view I take [the respondent] could be liable for no more than $1 million under this head. That was the extent of the insurance cover required by Mr Badat.

His Honour had earlier found that on 28 November 2000 Mr Badat had asked Mr Mattaboni to obtain a quote for fire insurance of $1 million.

181 The appellants submit that the proper measure of the appellants' damages was such amount as would have put them in the position they would have been in if the respondent had effected all appropriate insurance. The appellants submit that what Mr Badat 'actually required' was irrelevant to the proper measure of damages.

182 The contractual obligation was to 'effect all appropriate insurance cover for the improvements of the property'. Counsel for the appellants conceded that the appellants have the right to determine the scope and level of insurance cover and once they had done that the obligation of the respondent was to effect that insurance. Furthermore, counsel submitted that Mr Badat approved the scope and level of insurance required by completing the proposal form.

183 Mr Badat in effect determined the scope and level of the insurance cover required by the appellants by the instructions he gave to Ms Ulerick and completing the proposal form which Ms Ulerick subsequently forwarded to the respondent.

184 The 'appropriate insurance cover' was the $1 million fire insurance. Ground 3 is not made out.

185 Counsel for the appellants submitted that if ground 3 was not established then grounds 4 to 7 fall away because grounds 4 to 7 go to some findings made by the trial judge as to how to asses damages if they are more than $1 million. Having found that ground 3 is not made out it is not strictly necessary to consider the further grounds. However, I will briefly state my conclusion in relation to each of those grounds.

186 At the date of trial the appellants had not rebuilt the building. The cost of rebuilding as at 30 June 2001 was $1.676 million and the cost of rebuilding as at 31 October 2005 was $2.498 million. The issue was whether the appellants ought to have mitigated their loss by taking steps to refinance the rebuilding of the building in 2001. The learned trial judge found that the appellants had not mitigated their loss.

187 The issue in relation to mitigation was whether or not the appellants could afford to borrow monies to rebuild. The learned trial judge considered the evidence, including the financial capacity of the appellants before arriving at his conclusion. In my view the learned trial judge was entitled to arrive at his conclusion and was not in error in doing so. Ground 4 is not made out.

Ground 5 - dispensation of the onus of proof

188 Ground 5 is that the learned trial judge erred in finding that it was not appropriate to require the respondent to discharge the onus of proving that the appellants had failed to mitigate their loss. The appellants submit that it was wrong in principle for his Honour to relieve the respondent of its burden of proof on the allegation of a failure to mitigate.

189 The appellants, correctly, submitted that the respondent bore the onus of proving that the appellants had failed to take reasonable steps in mitigation. The trial judge so directed himself and then stated:

However, I do not think it appropriate to require the [respondent] to discharge that onus until [the appellants] has made a full and frank disclosure of its financial position. In the present case, for the reasons set out above, I am not satisfied that [the appellants] have done so [322].

190 The appellants submit that it is implicit in that finding that, notwithstanding earlier findings, the trial judge found that the respondent had not discharged its onus of proof on mitigation. I do not accept that submission. The learned trial judge found at [316] that the appellants had the capacity to access funds to rebuild the Murray Street property.

191 Furthermore, his Honour's observations about the accuracy of the financial statements prepared for the Trust were explained by his Honour and were justified. His Honour in effect rejected Mr Badat's assertion that the Trust could not afford to rebuild because it was impecunious. His Honour's finding was in effect that the appellants chose not to rebuild for reasons other than impecuniosity. That was the issue at trial concerning mitigation. Ground 5 is not made out.

192 The basement of the building was vacant at the time of the fire. Mr Thomason gave evidence that it could be let at a rental of $45,000 per annum (inclusive of outgoings). The trial judge held that Mr Thomason's evidence was inadmissible on the ground that his opinion was based on comparable rentals which were not disclosed. The appellants submit that the trial judge was in error and that Mr Thomason's opinion as to market rent was not based on any specific comparable leases but rather on his general body of experience.

193 Counsel for the appellants led evidence from Mr Thomason as to the basis of his opinion as follows:

[COUNSEL] Could you tell his Honour what's the process by which you arrived at that opinion?

...

[WITNESS] In essence, what we do in terms of assigning a value or a rental rate in this case to a property is obviously have regard for its age, its presentation, and basically where the dollar value comes from in terms of putting a rental estimate on a property is from the level of experience that we have and the transactions that we undertake within the retail market in the CBD. Our company does over 300 transactions a year. 25 to 30 per cent of those are CBD and strip retail.

[JUDGE] It's comparables really?

[WITNESS] Correct, comparable evidence. The annexures to the report were basically there for myself as a level of comfort to a point as the rental ranges that we were working in based upon what I was asked to report on which was the basement in its pre-destruction state and the new premises after construction completed.

[COUNSEL] All right. I will come to the annexures in a moment. His Honour used the expression comparable leases I think.

[WITNESS] Comparable rents.

[COUNSEL] And you agreed with that expression?

[WITNESS] Correct.

[COUNSEL] By that are you referring to specific examples of leases or are you referring to your general body of experience, or something else?

[WITNESS] Just general body of experience and what we call comparable rents or market rents for that space for that premises.

[COUNSEL] When you say 'we', who do you mean?

[WITNESS] Kym Thomason, Lease Equity.

[COUNSEL] But I want to be clear about this: are there any specific leases or other transactions that you have relied on, or is it simply based on a general body of knowledge?

[WITNESS] No, it's market knowledge, as I call it.

194 The learned trial judge had the advantage of hearing and observing the witness give his evidence. The learned trial judge was entitled to find that Mr Thomason had based his opinion on comparable evidence but that his report did not refer to any specific comparables. This ground is not made out.

Ground 7 - loss of rental income from basement

195 This ground is that the trial judge erred in finding (to the extent that he did so) that the appellants' damages should include no allowance for the loss of rent from the basement of the building. The appellants submitted that it is not clear whether his Honour rejected the claim for loss of rent for the basement altogether, or assessed that loss on the basis of lost rent of $32,000 per annum. The appellants submitted that on any view the trial judge ought to have allowed some damages for the loss of opportunity to let the basement because the basement clearly had some rental value. It had previously been let for $32,000 per annum.

In my view, all that can be said in relation to the basement, is that, until February 2000, it was let at $32,000 per annum. Presumably, its rental value thereafter was of that order. However, it would be impermissible for me to speculate so as to fill this gap in the evidence [305].

His Honour concluded that all that was established by the evidence was that until February 2000 the basement had been let at $32,000 per annum. His Honour said that in effect it might be presumed that after that date the basement continued to have a rental value of that order but there was no evidence to that effect and it would be mere speculation to so conclude. His Honour made no error in making that finding. Ground 7 is not made out.

197 For the reasons stated the appeal should be dismissed.