El Hayek v Vasic

LEGISLATION CITED : Environmental Planning & Assessment Act 1979

Australian Provincial Assurance Association Ltd v Producers & Citizens Co-operative Assurance Co of Australia Ltd (1932) 48 CLR 341 Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Deaves v CML Fire and General Insurance Co Ltd (1979) 143 CLR 24 Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66 Legal and General Insurance Australia Limited v Eather (1986) 6 NSWLR 390 CASES CITED : Maggbury Pty Limited v Hafele Australia Pty Limited [2001] HCA 70 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Phoenix Commercial Enterprises Pty Limited v City of Canada Bay Council [2010] NSWCA 64 The Movie Network Channels Pty Limited v Optus Vision Pty Limited [2010] NSWCA 111 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Wilkie v Gordian Runoff Limited (2005) 221 CLR 522

TEXTS CITED : Derrington & Ashton, Law of Liability Insurance, 2nd Ed, para 3-122

Ahmed El Hayek (P) Josslyn Vasic (D1 & XC1) Charles Fairey (D2 & XC2) PARTIES : Ibrahim El Hayek (XD to 1st XC) QBE Insurance (Australia) Limited (XD1 to 2nd XC) Mercantile Mutual Insurance (Australia) Limited (XD2 to 2nd XC) Robert Williams & Associates Pty Limited (XD to 3rd XC)

D A Wheelahan QC with D Baran (P) COUNSEL : L King SC with R Hanlon (XCs) M McCulloch SC with A J J Renshaw (XDs) No appearances (XD to 1st XC, XD to 3rd XC)

Michael Abboud & Co (P) David Legal (Ds & XCs) SOLICITORS : XD to 1st XC - in person A R Connolly & Company (XDs to 2nd XC) No appearance (XD to 3rd XC)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

Separate Issue for Determination 1 On 9 June 2010, the Court ordered that there be decided as a separate question a number of issues which relate to the claim by Josslyn Vasic and Charles Fairey ("the Cross Claimants") for indemnity from QBE Insurance (Australia) Limited and Mercantile Mutual Insurance (Australia) Limited ("the Insurers") under a contract for insurance 63A138551PLB ("the QBE Policy") with respect to a claim made against them by Ahmed El Hayek ("the plaintiff"). 2 The questions which were determined to be heard separately, and before all other issues, are:

(1) What document or documents constituted the [QBE Policy]; (2) Whether, upon the true construction of the [QBE Policy], the Cross Claimants are entitled as against [the Insurers] to indemnity in respect of the plaintiff's claim and to indemnity in respect of the costs of the cross claimants reasonably incurred in defending the plaintiff's claim; and (3) Whether the Cross Claimants were in breach of condition 4.10(b) of the [QBE Policy]. If so, what consequence or consequences flow from such breach. 3 I have decided, for the reasons which follow, that the cross claimants are entitled to indemnity from the Insurers under the QBE Policy, and that they were not in breach of condition 4.10(b) of the policy on the proved facts.

The Plaintiff's Claim 4 The plaintiff, Ahmed El Hayek, by a Statement of Claim filed on 2 June 2006 brings proceedings claiming damages from the Cross Claimants for negligence arising out of injuries he sustained on 4 July 2003 whilst in the course of a visit to Mulga Creek Station, Byrock, a property owned by the first cross claimant, Josslyn Vasic and managed by the second cross claimant, her brother, Charles Fairey. The property was situated near Bourke in New South Wales. The plaintiff was born on 20 May 1987. He was a little over 16 at the time of his visit to the property. He visited the property in the company of his father, Ibrahim El Hayek for the purpose of hunting for feral animals. 5 In his Statement of Claim, the plaintiff alleges that he attended the property on 3 June 2003 with his father and there made contact with the second cross claimant. He pleads that at that time an amount of money was paid to the second cross claimant for accommodation and hunting. 6 He pleads that he was directed together with his father by the second cross claimant to the shearers quarters, namely a building located on the property which had formerly been used to accommodate shearers whilst they worked in their profession on the property. 7 It is appropriate to set out some paragraphs of the statement of claim. It includes the following "6 In approximately December 2000, the defendants agreed to allow a group known as 'Inland Hunting' to source sporting shooters to have accommodation and use of the property for the purposes of hunting.

7 On 3 rd July 2003, the plaintiff with his father attended the property and made contact with the second defendant.

8 At that time an amount of money was paid to the second defendant for accommodation and hunting.

9 Immediately or soon thereafter, the second defendant directed the plaintiff and his father to the shearers quarters being the accommodation provided to the plaintiff and his father.

10 At or about 4.30am on 4 July 2003 the shearers quarters caught alight.

11 At that time the plaintiff was asleep in the shearers quarters.

12 As a result of the fire the plaintiff suffered severe injury, loss and damage as particularised in the Statement of Particulars filed herewith." 8 The plaintiff claims that the Cross Claimants were negligent in a variety of ways which caused his injuries. Of importance to the issues raised on the separate hearing is the pleading of negligence in which the plaintiff asserts that the Cross Claimants were negligent, in this respect, namely: "(h) failure to obtain council approval for the change of use of the shearers quarters to tourist accommodation." 9 The Cross Claimants filed a defence in which they dispute the claims made by the plaintiff.

Agreed Facts 10 The parties agreed on a number of facts. Those agreed facts were as follows: "1 At all material times the first cross claimant, Josslyn Vasic, was the owner of Mulga Creek Station at Byrock, New South Wales, a property of approximately 42,000 acres.

2 At all material times the plaintiffs father was a licensed shooter.

3 At all material times the plaintiff was a minor and did not hold a shooter's licence.

4 At all material times the plaintiff resided at the address shown in his statement of claim, 525 Hume Highway, Yagoona, 2199, NSW.

5 On 3 July 2003 the plaintiff attended with his father at the property referred to in the statement of claim as alleged in para 7 thereof, having driven from Sydney to do so.

6 But for the occurrence of the fire on 4 July 2003 referred to in the statement of claim (para 10) the plaintiff and his father intended to remain upon the property known as Mulga Creek Station Byrock referred to in the statement of claim (para 2) having paid to do so for the purpose of the plaintiffs father engaging in hunting upon the property accompanied by the plaintiff and using the shearers quarters for overnight accommodation."

The QBE Policy 11 In the Amended Defence filed by the Insurers to the Amended Second Cross Claim, the Insurers plead with respect to the identity of the contract of insurance the following: "3 Further in relation to paragraph 2 of the Second Cross Claim the First and Second Cross-Defendants say: (a) a Policy of Insurance was issued by QBE Mercantile Mutual Limited through its agent, Concord Underwriting Agencies' (b) for the period 16 July 2002 to 16 July 2003 at 4.00pm; (c) the Policy No. was 63A138551 PLB (d) the Policy provided coverage pursuant to the QBE Mercantile Mutual Broadform Policy Wording, the Terms and Conditions of the Policy including the Schedule of Insurance and the Closing Advices; (e) and that such policy provided coverage to the Second Cross-Claimants, Josslyn Vasic and Charles Fairey subject to its Terms and Conditions as described in the documents in paragraph (f)." 12 The reference to sub-paragraph (f) of the Amended Defence which is said to describe the documents in these terms seems to be a reference to sub-paragraph (d). That is the way I shall understand it. 13 The Cross Claimants submitted that the QBE Policy consisted of a number of documents. The first document which they rely upon is Exhibit XC3 which is a closing advice dated 21 August 2002 from SSAA Insurance Brokers Pty Limited ("SSAA Brokers") to Concord Underwriting Agencies (SA) Pty Ltd ("Concord"). That document notes the cover in the following terms: "Covering the insureds for legal liability to third parties for bodily injury and/or property damage caused by an occurrence in connection with the insured's activity of allowing licensed shooters on their properties for the purpose of hunting only." 14 Exhibit XC3 also has on it a stamp and an annotation in the following terms: "Cover is confirmed from …… am/pm 21/8/02 to 4am/pm 21/9/02 according to the terms and conditions of the PLB policy …"

There is then a signature placed on the document on 21 August on behalf of the Insurers. 15 Also written on the document is a reference to the deletion of the words "property owners cover only". It is agreed between the parties that these words were not part of any policy and accordingly can be put to one side. 16 The next document upon which the cross claimants rely to form the QBE policy is Exhibit XC2. That document is a policy endorsement which nominates the policy number as 63A138551PLB and the insurance period as 17 July 2002 to 16 July 2003. It appears to be generated by Concord on 12 September 2002 and is addressed to SSAA Brokers. 17 So far as is relevant it includes the following material: "Broadform Liability

Your policy has been revised to the cover shown below and replaces any previous cover. This endorsement must be read in conjunction with your policy wording. Please check the revised cover and advise us if any further change is necessary." … The business is described as: "Business - Property Owner only" … The coverage is described in these words (in upper case):

"COVER IS FOR OWNERS OF PROPERTIES ONLY IN REGARD TO THE ACTIVITY OF ALLOWING LICENSED SHOOTERS ON THEIR PROPERTIES FOR THE PURPOSE OF HUNTING ONLY."

On page 2 of the policy endorsement, the Insured is described as "SSAA Property Owners" and includes as the 14 th of 37 individually identified property owners the Cross Claimants. 18 The third document upon which the cross claimants rely to form the QBE Policy is Exhibit XC1 which is in a standard form and is called "Broadform Liability Policy of QBE Mercantile Mutual". That document sets out a series of standard terms and conditions. 19 In the definition section of the standard Broadform Policy, one finds: "1.6 Occurrence means

an event which results in personal injury or property damage, neither expected nor intended from Your standpoint. ……

This document and each memorandum issued by Us attached, or intended to be attached, to it" 20 It is necessary to understand these extracts that "You" or "Your" in this document is read as meaning the insureds, here, the cross claimants and "We" or "Us" as meaning the insurers. 21 The coverage clause is in the following terms: "2 Coverage

In consideration of the payment to us of the amounts payable for this insurance, we will indemnify you in accordance with this policy.

(a) All sums which you become legally liable to pay by way of compensation; (b) All costs awarded against you;

in respect of personal injury or property damage happening during the period of insurance and caused by an occurrence within the territorial limits in connection with your business.

With respect to the indemnity provided by this policy we will:

(a) defend in your name and on your behalf any claim or legal action against you seeking damages on account of personal injury or property damage even if the action is groundless, false or fraudulent, and we will investigate, negotiate and settle any claim or legal action as we see fit; (b) pay all legal costs and expenses incurred by us and all interest accruing after entry of judgment until we get paid, tendered or deposited in court such part of the judgment as does not exceed the limit of liability; (c) reimburse you for all reasonable expenses other than loss of earnings, incurred in connection with the defence of a claim or legal action with our consent …" 22 There were a series of conditions in the policy. The relevant conditions were 4.10 and 4.15 which are in the following terms: "4.10 Reasonable Care

(b) Take all reasonable precautions to prevent personal injury and property damage … and ensure that your employees servants and agents comply with all statutory obligations, by-laws or regulations imposed by all relevant public authorities for the: (i) safety of persons or property; (ii) …… (iii) ……

If you fail to comply with any provision of the policy, we may refuse to pay a claim, but in any event our rights will be subject to section 54 of the Insurance Contracts Act 1984." 23 The Insurers submit that in addition to the documents which I have just described the QBE policy is constituted by a number of other documents. 24 The first of those documents is Exhibit XCM which is a proposal by the Cross Claimants for insurance dated 14 January 2001. There is no "basis" clause in any of the documents relied upon by either of the parties. A proposal is not ordinarily part of an insurance policy: Australian Provincial Assurance Association Ltd v Producers & Citizens Co-operative Assurance Co of Australia Ltd (1932) 48 CLR 341; Deaves v CML Fire and General Insurance Co Ltd (1979) 143 CLR 24, at 36 per Gibbs ACJ, at 68 per Jacobs J. I am not satisfied that Exhibit XCM is part of the QBE Policy. 25 The second document is Exhibit XCA which is a facsimile from Concord to SSAA Brokers dated 9 July 2002. This document expresses itself to be an offer of renewal. It suggests the inclusion of a number of terms, conditions or limitations on coverage which do not seem to have made their way into the later documents relied upon by the cross claimants. Nor are the specific contents of these terms and conditions relied upon by the insurers as being terms or conditions of the policy which would limit coverage in this case. An example is that this facsimile suggests that coverage be limited to so that claims caused by shooters be excluded from cover. The submissions of the insurers do not suggest any such limitation of the coverage. It seems to me, this document, at best, represents a communication in the course of pre-contractual negotiations. It does not form part of the QBE Policy. 26 The third document which the insurers submit forms part of the QBE Policy is Exhibit XCE which is a document entitled both as a Tax Invoice and a Renewal, dated 3 August 2002, from SSAA Brokers to Robert Williams & Associates Pty Limited ("RWA"). For the reasons elaborated on later in this judgement, neither SSAA Brokers nor RWA are said to be parties to the QBE Policy. Whilst RWA are the brokers for the cross claimants, SSAA Brokers are not said to be the agents of the insurers. Any statement by them cannot be made on behalf of the insurers, nor could the insurers be bound by any such statement made by SSAA Brokers. As well, a Tax Invoice represents a claim for payment of the premium outstanding for the policy. It seems to assume the existence of a policy. On its face, it does not suggest that it is part of a policy. Each of these features of this document lead me to the conclusion that it does not form a part of the QBE Policy.

27 The final document which the insurers submit forms part of the QBE Policy is Exhibit XCF which is a closing advice dated 3 August 2002 from SSAA Brokers addressed to Concord. For the same reasons as I expressed with respect to Exhibit XCE, a statement by SSAA Brokers does not bind the cross claimants. The document is addressed to the insurers agent. It is nor clear, on the evidence, what if anything the insurers did upon receiving this document. Even if SSAA Brokers were the agents of the cross claimants, the evidence does not enable a finding that the insurers did anything upon receipt of the document, either by way of accepting or else rejecting the terms of it, so as to enable a conclusion that it formed a part of the Policy. I conclude that it does not form a part of the QBE Policy. 28 I find that the QBE Policy consists only of the documents nominated by the cross claimants in their submissions, namely Exhibits XC1, XC2 and XC3. 29 I am fortified in this finding by the terms of paragraphs 2 and 3 in the Defence to the Second Cross Claim filed on behalf of the Insurers. Those paragraphs do not seem to me to require identification of any documents other than the three relied upon by the cross claimants. 30 Accordingly, the words of coverage upon which the principal issue of indemnity turns, are as follows: "… covering the Insureds for legal liability to third parties for bodily injury and/or property damage caused by an occurrence in connection with the Insured's activity of allowing licensed shooters on their properties for the purpose of hunting only."

Principles of Construction applicable to Policies of Insurance 31 In McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 589, in [22] Gleeson CJ said: "A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure."

(cited with approval by Gleeson CJ, McHugh, Gummow and Kirby JJ in Wilkie v Gordian Runoff Limited (2005) 221 CLR 522 at 529 [15]). 32 The principles to be applied in the interpretation of a policy of insurance are thus identical to the principles to be applied in the interpretation of any commercial document. 33 In approaching the construction of a policy of insurance (and any commercial document), the Court must ascertain the meaning which the document would convey to a reasonable person where that reasonable person has all of the background knowledge available to the contracting parties. The Court must also have regard to the purpose and object of the transaction: Maggbury Pty Limited v Hafele Australia Pty Limited [2001] HCA 70; (2001) 210 CLR 181 at [11], 188 per Gleeson CJ, Gummow and Hayne JJ (with whom Kirby J at [62], 205 and Callinan J at [89], 212 agreed generally on this point); Pacific Carriers Limited v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22], 462 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Phoenix Commercial Enterprises Pty Limited v City of Canada Bay Council [2010] NSWCA 64 at [148] - [151] per Campbell JA; Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66 at [34] - [35] per McColl JA. 34 In considering the knowledge of the parties it is necessary that, to be relevant, the background knowledge must be both actual knowledge and mutual knowledge. In other words, both parties must know of the factual background. Actual knowledge may be proved either by direct evidence or by inference. If facts are notorious, that may assist in drawing inferences as to the state of actual knowledge: The Movie Network Channels Pty Limited v Optus Vision Pty Limited [2010] NSWCA 111 at [97] - [106] per Macfarlan JA.

Extrinsic or Contextual Facts and Surrounding Circumstances 35 Role of various bodies: Before coming to identify and analyse the extrinsic facts or surrounding circumstances upon which the Insurers rely to assist in the construction of the policy, it is necessary for me to say a little about the various players involved with the arrangements being undertaken to effect the QBE Policy and the various documents relied upon by the Insurers. 36 Concord was the underwriting agency employed by QBE Mercantile Mutual Limited and was the agency acting for the Insurers. QBE Mercantile Mutual Limited was the agent for the two insurers which are the cross defendants to the Second Cross Claim. So much is agreed between the parties. It is in any event apparent from paragraph 3 of the Amended Defence to the Amended Second Cross Claim, the written material in Exhibit XC1 where the Insurers are identified on the first page of the Broadform Liability Policy and in the statement made at the top of Exhibit XC2 where typed on the Concord policy endorsement are the words: "QBE Mercantile Mutual Limited …… will be acting under authority given to it by the Insurers. It will be acting as agent of the Insurers not as your agent." 37 RWA is an insurance broker to whom the first Cross Claimant, Ms Vasic, resorted to obtain the policy. So much is common ground and is supported by Ms Vasic's evidence at T104.23 - 104.31. RWA was at all times the cross claimants broker, and the agent of the cross claimants. 38 SSAA Brokers was according to the statement of Robert Low (Exhibit XCH) a registered broker under the Insurance (Agents and Brokers) Act at all relevant times after 1996. From 2002, it was a majority owned subsidiary of the Sporting Shooters Association. According to Mr Low the chain of communication was as follows: "7 Concord Underwriting Agency (SA) Pty Limited was the agent of QBE Mercantile Mutual Limited. All communications to me from QBE Mercantile Mutual Limited were from Concord Underwriting Agency (SA) Pty Limitged. Bob Moore was Manager of Concord Underwriting Agency (SA) Pty Limited in Adelaide and remained Manager of Concord in Adelaide until his retirement in 2005.

8 All communications with the individual property owners went from SSAA Insurance Brokers Pty Limited to RWA Insurance Brokers. RWA was a rural broker, with contacts through the rural industry in New South Wales and Queensland." 39 The evidence does not otherwise reveal directly by whom SSAA Brokers was retained nor what the nature of its role was. 40 The insurers submitted that I should find that the role of SSAA Brokers was that it was, in accordance with common insurance practice, a "placing broker". The submission was made that, in that role, SSAA Brokers were acting for, and were the agents of, the cross claimants. 41 The evidence from which it was submitted that I would draw such a conclusion is Exhibit XCJ. That is a document dated 26 October 2001 in which SSAA Brokers write: "We confirm having placed insurance as follows ……". 42 Exhibit XCJ clearly refers to a different policy for a different year than the QBE policy. The fact that it was apparently a predecessor policy to the QBE policy does not assist in the drawing of any relevant inference. However, the fundamental difficulty seems to me to be that the mere statement that SSAA Brokers "confirm having placed insurance" is insufficient in its terms to indicate for whom it was placing the insurance nor whose agent it was in acting as it did. 43 This is a matter upon which I would have expected some direct evidence to be led. The Insurers tendered the statement of Mr Rob Low. At all relevant times, Mr Low was the principal executive of SSAA Brokers. He was the person best placed to give direct evidence as to the role of SSAA Brokers. His statement contained no evidence addressed to this issue. Instead, reliance was placed upon an inference to be drawn from Exhibit XCJ to the effect that SSAA Brokers were acting as placing brokers, and therefore the brokers for, and agents of, the cross claimants. The absence of evidence from Mr Low, whose statement was in evidence, would tell strongly against drawing the inference which the Insurers seek: see Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418E - 419C per Handley JA. 44 I am fortified in this conclusion by two things. The first is that the Insurers led no evidence to establish any industry practice addressed to the question of the function and role of a placing broker. An inference that SSAA Brokers were a placing broker would not carry with it an automatic conclusion as to what its function and role was without additional evidence. The second matter which fortifies my conclusion is that no question was asked of Ms Vasic by Mr McCulloch SC for the Insurers to suggest that SSAA Brokers was acting in the course of this transaction as her agent either because she had retained it or because RWA had retained it. 45 I am not prepared to draw an inference from Exhibit XCJ either alone, or in the context of all of the other evidence that SSAA Brokers were a placing broker with respect to the QBE Policy. It follows that I am not prepared to equate the knowledge of SSAA Brokers with the knowledge of the Cross Claimants. 46 Available Evidence: Given the necessity for mutuality of knowledge as the authorities demonstrate, not all of the material relied upon by the Insurers can be used as material demonstrating the existence of surrounding circumstances which may aid in the exercise of construction and interpretation of the QBE Policy. 47 Both of the cross claimants are named as the joint insureds under the QBE Policy. Although strictly speaking it was only necessary for the first cross claimant to be a named insured because the second cross claimant was apparently her employed manager and would have been covered as a result of the terms of the policy, because both cross claimants were joint insureds, it is necessary for the Insurers to demonstrate the knowledge of both cross claimants for the Court to have regard to it when interpreting the terms of the QBE Policy. 48 It is clear that there was an earlier policy of insurance and that was known to the cross claimants. The first completed proposal before the Court is dated 14 January 2001 (Exhibit XCM). Mr Fairey gave evidence that it was some time after he commenced living on the property in 1999 that he was approached to permit shooters to visit the property for that purpose. Permission was sought from his sister, Ms Vasic, who gave evidence that having received the request, initially rejecting the proposal, but subsequently accepting it, she arranged insurance with the Insurers for the property. Exhibit XCE (which came to the attention of RWA, the broker for the cross claimants) makes it plain that there is a renewal of a policy. Exhibit XCC proves that there was an earlier policy with an entirely different policy number which provided coverage for: THE INSURED'S (sic) FOR LEGAL LIABILITY TO THIRD PARTIES FOR BODILY INJURY AND/OR PROPERTY DAMAGE CAUSED BY AN OCCURRENCE IN CONNECTION WITH THE INSURED'S ACTIVITY IN ALLOWING HUNTERS ON THEIR PROPERTIES - PROPERTY OWNER COVER ONLY 49 The Insurers also rely upon the documents which became Exhibits XCK and XCL. These Exhibits relate to a policy of insurance obtained by the Cross Claimants from Wesfarmers Federation Insurance Limited ("Wesfarmers") for the period 21 July 2002 to 21 July 2003. The Insurers point to the fact that the cross claimants took out a policy with Wesfarmers ("the Wesfarmers policy"). Coverage under that policy was obtained for Farm Legal Liability, which excluded from coverage: " … any personal injury caused by or arising directly or indirectly from any activity involving the use of a firearm". The Insurers argue that this is a relevant surrounding circumstance as it indicates or tends to indicate that the policy issued by the Insurers was to cover a gap in the Wesfarmers' policy. 50 I do not regard the Wesfarmers' policy as a fact which is available to be taken into account in assisting with the interpretation of the QBE policy. It is sufficient for me to reach this conclusion by pointing to the absence of any evidence proving, or tending to prove, any knowledge at all resting in either the Insurers or their broker and agent, Concord, of the existence of this policy whether the insureds were the Cross Claimants or some other insureds. Although there was some evidence, to which I refer below, of a market research exercise undertaken by SSAA Brokers, even assuming that their knowledge was that of the Insureds, there is still no evidence suggesting that the contents of the Wesfarmers policy and in particular the wording of the exclusion clause was ever in fact taken into account in preparing the QBE policy. 51 Finally, in terms of surrounding circumstances, the Insurers rely upon the evidence contained in the statement of Mr Low. I have already dealt with those parts of the statement which describes the identities of the various participants and the arrangements by which the QBE Policy seems to have come about. I have not yet dealt with para 10 of the statement which is in these terms: "This insurance cover was one developed by me as Chief Executive of SSAA Insurance Brokers Pty Limited, as a gap cover insurance for the purpose of covering rural landowners for their liability for negligence to licensed shooters while out hunting on their properties. The policy was developed in the late 1990's, as it became apparent that some public liability policies excluded cover for incidents arising from the use of firearms on rural properties and excluded indemnity for the property owner's liability to licensed shooters. We did market research and noted that while approximately 80% of policies provided cover, that there was a gap in the market for the other policies, and that a new cover should be made available. The gap insurance was to provide cover in relation to liability to licensed shooters that is excluded from public liability policies held by persons owning or operating rural properties." 52 I would not be prepared to hold that the contents of para 10 of Mr Low's statement constituted a surrounding circumstance which may affect the construction of the QBE policy. 53 Mr Low is not said by the Insurers to be their agent. I have held that I am not satisfied on the evidence that he was the agent of the Cross Claimants. Consequently, his knowledge and intentions don't satisfy the requirements of mutuality of knowledge so as to be relevant. As well, the material in para 10 of his statement is largely an expression of his subjective intention and purpose and of his own conduct. It is not material which the Court is entitled to take into account in looking at surrounding circumstances: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]. Finally, the material to which he refers is not material which would ordinarily be known by or available to people who are not expert in the insurance field. The Cross Claimants did not fall into that category. I do not see that it would be reasonable to impute to them that specialist knowledge. 54 Conclusion: The highest on the evidence of surrounding circumstances which can be material to be relied upon is the contents of Exhibit XCC which demonstrates, with respect to a previous policy, that the coverage clause was different and that difference involved:

(a) the substitution of the term " … licensed shooters …" for the word " … hunters …" (b) the addition of the words: "for the purpose of hunting only"

I will take this into account in considering the construction of the policy.

Text and Meaning 55 As I have indicated earlier the text of the coverage clause is as follows: "Covering the insureds for legal liability to third parties for bodily injury and/or property damage caused by an occurrence in connection with the insured's activity of allowing licensed shooters on their properties for the purpose of hunting only." 56 There seems little difficulty in understanding the meaning of the initial words of the coverage clause. The landowners, the Cross Claimants, are covered for any legal liability which they may incur to third parties (being persons other than the Insurers and the landowners) for bodily injury and/or property damage caused by an occurrence. As indicated earlier, an occurrence is defined as an unintended and unexpected event from the point of view of the Cross Claimants. 57 The injuries sustained by the plaintiff and for which he claims, arose out of an accidental fire in the sense that the building was not deliberately set alight and certainly not be the cross claimants. It is clearly an occurrence in the sense in which that word is defined. The claim by the plaintiff seeks to make the cross claimants liable by resort to a legal cause of action and it claims bodily injury. Without the coverage clause being further defined, it is clear that the QBE Policy would respond. As I understood the submissions made by the Insurers, they would accept that conclusion. But they point to the remaining words as indicating that the coverage did not extend to the plaintiff's claim. 58 The disagreement and debate between the parties arises when considering the effect which the balance of the content of the coverage clause has when interpreting the clause as a whole, namely, "… in connection with the insured's activities of allowing licensed shooters on their properties for the purpose of hunting only." 59 The cross claimants submit that the words " … in connection with .." are well understood to be words of wide import: Derrington & Ashton, Law of Liability Insurance, 2nd Ed, para 3-122, p 226. They further submit that this phrase is sufficient to encompass anything which is reasonably incidental to the defined activities. They submit that provided that the purpose of the plaintiff and his father being on the cross claimants' property is for " … hunting only …", then any occurrence which is directly related to the hunting, including anything reasonable incidental to the hunting, such as sleeping overnight in accommodation provided on the property, is covered. 60 The Insurers submit that a narrow construction is warranted. They submit that the coverage does not include accommodation or any event outside the activity of hunting. They submit that the word " … only …" after the word " … hunting … " is a significant word of limitation with the result that unless the occurrence is causally and temporally related to hunting, then it is not within the coverage clause. 61 I do not accept that the submissions of the Insurers are correct. The coverage clause is not as narrow as they submit. 62 The coverage clause concentrates on coverage of an occurrence in connection with the defined activity. It is important to note that the defined activity relates to the conduct of the cross claimants in allowing licensed shooters on their properties for the expressed purpose. It does not relate to the particular conduct or activity of the licensed shooters whilst they are on the property. 63 In my opinion, once it is established that the licensed shooters attend the property with the subjective purpose of hunting only, then there is no reason to limit coverage by reference to the activities of the licensed shooters rather than the activity of the cross claimants in allowing them onto the property. 64 There are a number of surrounding circumstances which support this construction. The first is the remote physical location of this property: Byrock which is 700 km north-west of Sydney, 126 km north-west of Nyngan and 121 km north-east of Cobar and the many other properties covered by the same policy: eg Nymagee which is 618 km north-west of Sydney, 130 km south-west of Nyngan and 89 km south of Cobar; Hermidale which is 623 km north-west of Sydney, 56 km south-west of Nyngan and 96km east of Cobar. These are not properties which are necessarily adjacent to towns of plentiful accommodation. It is not unreasonable to contemplate that hunters who go to remote areas for hunting will need to stay on the properties where they are hunting. 65 The second is that hunting is an activity which can occupy many hours in a day, involve walking across country in often difficult conditions, can be conducted during both daylight and night time and being an outdoor activity is subject to the weather, be it hot, cold, wet or dry and dusty. It is an intrinsic part of such an activity that the participants will need to rest or sleep, shelter, and eat or drink. The construction advanced by the Insurers would require a moment by moment analysis of each of these activities to establish whether they are part of the activity of hunting. This does not seem to me to be a sensible or commercial approach to coverage, particularly since an insured would not necessarily have control over that broad range of activities and nor would an insured have all of that information readily available at the time of making a claim in order to substantiate a claim for indemnity. 66 The third matter which requires attention is whether the change in wording between policies informs the construction of the coverage clause. In my opinion the change from "…allowing hunters onto the property…" to " … allowing licensed shooters onto the property for the purpose of hunting only …" is nothing more than a clearer definition of the nature of the activity. It, without more such as the claims history which would provide some motivation to the Insurers to limit the coverage, does nothing more than more clearly define the nature of the activity. I do not accept the submissions of the Insurers that this change of wording demonstrates that the proper construction is limited in the way submitted. I accept that the word " … only …" is a word of limitation. But it has work to do. Allowing hunters onto a property without a defined purpose would mean that visitors although having that description (hunters) could engage a variety of activities without visiting for the sole purpose of hunting as the new wording suggests. 67 It is necessary to apply the construction at which I have arrived to the particular facts of the plaintiff's claim as they appear from the Statement of Claim and as they appear from the acts proved during the hearing of the separate questions.

Does the QBE Policy apply to the Plaintiff's Claim 68 The Insurers submit that the plaintiff was not a licensed shooter and therefore any claim by him does not fall within the coverage clause. I reject this submission. The coverage is for claims made by third parties (a description which fits the plaintiff). The coverage is in connection with the cross claimants activities of allowing licensed shooters onto their property. 69 The presence of the plaintiff on the property was as a part of, intimately connected with and therefore reasonably incidental to, the presence of the plaintiffs father, Ibrahim El Hayek, a licensed shooter on the property for the subjective purpose of hunting. Hunting as an activity can involve members of a group or party in undertaking activities other than firing a weapon which are a necessary part of the hunting. It is a mistake to limit participation in the activity of hunting only to those who fire weapons. I therefore do not reach the conclusion urged upon me by the Insurers that the purpose of the plaintiff, who was not a licensed shooter, could not have been hunting. It seems to me that such a description of his purpose, as well as the joint purpose of he and his father, is not only open, but is the only realistic one. 70 I reject the Insurers argument that the fact that since the plaintiff was not a licensed shooter, the QBE Policy does not respond to the plaintiff's claim. 71 The Insurers further submit that since the claim arose in the course of the plaintiff and his father sleeping overnight, and not whilst hunting, the claim falls outside the coverage clause. That submission is the consequence of the narrow interpretation which I have earlier detailed and which I have rejected as the correct construction of the QBE Policy. The plaintiff's claim, arising as it does whilst he was sleeping, is properly viewed as being within the construction of the coverage clause to which I have referred above. Namely, an occurrence in connection with his being allowed with his father onto the property as an integral part of the hunting trip which he and his father were engaged on. 72 I conclude that the cross claimants are entitled to indemnity under the QBE policy for the plaintiff's claim and their legal costs and disbursements which they have incurred in defending that claim.

Has a Breach of Condition 4.10(b) been established? 73 I turn to the next issue which needs resolution, namely whether the Insurers have established a breach by the cross claimants of condition 4.10(b). 74 It is to be recalled that condition 4.10(b) obliges the insureds under the QBE Policy to comply with all statutory obligations imposed by all relevant public authorities for the safety of persons or property. 75 The Insurers submit that this condition has been breached by the cross claimants because they were obliged under the Bourke Local Environmental Plan 1998 (Exhibit XCP) to obtain a development consent under the Environmental Planning & Assessment Act 1979 in order to allow them to permit licensed shooters to hunt, and be accommodated, on their property and to pay them for that hunting and accommodation. The insurers submit that this activity involved a change of use from the existing use for the purpose of agriculture such as to require a new development consent. 76 The cross claimants submit that no consent was required, or else it was not so clear that development consent was required so that it was not unreasonable (within condition 4.10(b) of the QBE Policy) for them to have failed to obtain any consent. 77 The facts proved about the usage of the property are few. The Mulga Creek Station was an agricultural property upon which cattle were raised and fattened either by the cross claimants themselves or else by a neighbour agisting the cattle. Crops were grown on the property, again either by the cross claimants themselves or else by a share farmer. The existence of a shearing shed and shearers' quarters on the property (which the first cross claimant estimated to be 40 or 50 years old at the time she first visited the property in 2000) suggests that at some time in the past, sheep had been reared on the property, and the wool shorn. In short, the property was used for agricultural purposes, and, I would be prepared to infer, used for agricultural purposes for a lengthy period of time. 78 The evidence about the activity of having hunters paying the cross claimants to hunt on their property, and being accommodated there in the shearers' quarters, is also in short compass. The second cross claimant gave evidence that he had first been approached in about 2000 to permit hunters to visit and stay on the property. As referred to above, on 14 January 2001, a proposal for an insurance policy was completed by the first cross claimant. I would infer from this evidence that this occurred prior to the first hunter arriving on the property. However, although the evidence was that more than one group had attended the property, there is no evidence which has addressed or proved what the extent of the usage of the property by the hunters was. There is no evidence as to the numbers of hunting parties, or hunters who visited the property between when the activity started, in about January 2001 until July 2003 when the plaintiff's accident occurred. There is no evidence as to what income was received in each of those years. It is not possible to reach any conclusion as to the intensity of the hunting activity, and how it would compare with any past hunting activity on the property. 79 The parties agreed that the property was located in Zone 1(a) ie a Rural Zone in which development for the purpose of agriculture and farm buildings was permitted without development consent. Neither party tendered any document, or other evidence, from Bourke Shire Council which proved or tended to prove what development consents (if any) existed for the property, when they were granted, and what the conditions of any of those developments were. Hence, there was no evidence as to what the approved uses of the property were. Nor was there any evidence which clearly established what the existing uses of the property were at the relevant time, which the cross claimants were entitled to continue whether those uses had been the subject of any specific consent. 80 The factual propositions, essential to the Insurers submissions, which it needed to establish are (or include) that:

the hunting and accommodation activity was not an approved or existing use;

the hunting and accommodation activity was not reasonably incidental to any approved or existing use;

the nature and intensity of the hunting and accommodation activity constituted a use of the property for a purpose which required a development consent because the provisions of the Bourke Local Environmental Plan 1998 required consent to such activity. 81 As well, even if these factual propositions are established, for the cross claimants to have been in breach of condition 4.10(b), the Insurers need to satisfy the court that the statutory obligation is one "… for the safety of persons …". 82 I am satisfied that the hunting of feral animals from time to time is an activity which is incidental to, and an ordinary part of, an agricultural use of the property. Mr Fairey gave evidence to the effect that taking care of the feral animal population was a good thing for the farm and he saw it as a necessary part of farming. I accept that evidence. 83 It is clear, as well, that the shearers quarters had been used to accommodate people on Mulga Creek Station for many years. The provision of accommodation for people who were undertaking work or activities which related to, or were incidental to, or else were a necessary part of the agricultural purpose being undertaking on the property was a use for the purpose of agriculture. 84 In the absence of any details as to the intensity of the hunting activity, I could not find that it constituted a use of land for a purpose other than agriculture, and that such usage required a development consent. 85 I am therefore not satisfied that such activity as the plaintiff and his father were engaged upon constituted an activity which required development consent from the Bourke Shire Council under the Bourke Local Environmental Plan. Accordingly I cannot be satisfied that there has been any breach of condition 4.10(b). 86 The Cross Claimants made an additional submission that the terms of the clause were such that more than mere negligence on the part of the Cross Claimants was required with respect to compliance with the applicable statutory obligations. It is strictly unnecessary for me to decide that question. However, it is appropriate that I express my views upon it. 87 The terms of condition 4.10(b), a clause which is headed "Reasonable Care", in my view oblige the Cross Claimants to take all reasonable precautions to comply with the relevant statutory obligations. The words "all reasonable precautions" bear a well settled meaning in policies of indemnity of the kind with which this case is concerned. It is well settled that those words have to be read down to give effect to the commercial purpose of the contract which is to indemnify the insured against liability for their personal negligence: see Legal and General Insurance Australia Limited v Eather (1986) 6 NSWLR 390 at 405A - 405D per McHugh JA (Glass JA agreeing 403B). 88 Even if I be in error in holding that there has not been a change of use of a kind sufficient to require development consent, and the intensity of the activity was such as to require such consent, I would not be prepared to hold that the Cross Claimants acted with sufficient disregard for their obligations under the policy and the statutory obligations to amount to a breach of this condition. My conclusion in that respect is fortified by the absence of any suggestion being made to either of the Cross Claimants in cross examination that their conduct was inappropriate and of a kind which would have amounted to be sufficient to breach their statutory obligations and their obligations under the QBE policy. 89 As well, I am far from satisfied that obtaining a development consent for the appropriate town planning purposes falls easily with the description, required by condition 4.10(b), namely that the statutory obligation was one imposed for "… safety of persons …". The statutory obligation imposed to obtain development consent is one for the orderly control of town planning. The fact that a condition on such development consent may itself relate to the safety of persons or property does not mean, in my view in interpreting the condition, that it necessarily falls within that condition. In any event, there was no evidence tendered which would support the conclusion that a bare development consent would fall within that description. 90 For all of those reasons I am not satisfied that there has been a breach of condition 4.10(b) of the QBE policy.

Conclusion 91 I conclude that the Cross Claimants are entitled to indemnity under the QBE policy with respect to the plaintiff's claim and for the costs that they have reasonably incurred in defending the claim. 92 The answers to the separate questions are as follows:

(1) The QBE policy is comprised of the documents Exhibits XC1, XC2 and XC3; (2) Upon the true construction of the QBE policy, the Cross Claimants are entitled as against the Insurers: (a) to indemnity in respect of the plaintiff's claim; and (b) to payment of their costs of the cross claim reasonably incurred in defending the plaintiff's claim; (3) The Cross Claimants were not in breach of condition 4.10(b) of the QBE policy; (4) Order the Insurers to pay the costs of the cross claimants of the separate issue and the cross claim. Reserve to the Cross Claimants leave to apply in relation to the costs that they be paid on some basis other than on the party/party basis.

23/07/2010 - Clerical error - Paragraph(s) 92

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