General Accident Insurance Asia Ltd v Sakr & Ors

Court of Appeal (NSW)|2001-10-03|Before: Giles JA, Hodgson JA, Sperling J

Reported Decision : (2001) 11 ANZ Ins Cas 61-508 [2001] ACL Rep 235 NSW 15

CITATION : General Accident Insurance Asia Ltd v Sakr & Ors [2001] NSWCA 402 FILE NUMBER(S) : CA 40877/00 HEARING DATE(S) : 3 October 2001 JUDGMENT DATE : 15 November 2001

PARTIES : General Accident Insurance Asia Ltd - Appellant Mohamed Sakr & Ors - Respondents JUDGMENT OF : Giles JA at 1; Hodgson JA at 75; Sperling J at 81

LOWER COURT JURISDICTION : District Court LOWER COURT 1345/99 FILE NUMBER(S) : LOWER COURT Delaney DCJ JUDICIAL OFFICER :

COUNSEL : J Duncan - Appellant C J Millard - Respondents SOLICITORS : Deacons - Appellant Stewart Bell, Parramatta - Respondents CATCHWORDS : INSURANCE - duty of disclosure - insurer told property had been unoccupied for some time - was asked to delete loss of rent and public liability cover - later renewal - no inquiry as to present position - waiver of further compliance with duty of disclosure - no failure to disclose unoccupation - fire damage - cost of repair - whether allowance for betterment - on facts, no allowance. Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399; British Traders' Insurance Company Ltd v Monson (1964) 111 CLR 86; C E Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Commercial Union Assurance Company of Australia Ltd v Beard (1999) 47 NSWLR 735; Fire & All Risks Insurance Co Ltd v Rousianos (1990) 19 NSWLR 57; CASES CITED: GRE Insurance Ltd v QBE Insurance Ltd (1985) VR 83; Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd (1970) 1 QB 447; Lambert v Cooperative Insurance Society Ltd (1976) 2 LL R 485; Liga Knitting Mills v Lombard Insurance Co Ltd (1984) 3 ANZ Ins Cas 60-551; Lucas v The New Zealand Insurance Co Ltd (1983) 1 VR 698; Malcolm E Walker & Sons Ltd v Co-operative Fire & Casualty Co (1966) 58 DLR (2d) 10; Manufacturers' Mutual Insurance Ltd v John H Boardman Insurance Brokers Ltd (1994) 179 CLR 650; Mercantile Mutual Insurance (Australia) Ltd v Gibbs (2001) WASCA 221; Vintix Pty Ltd v Lumley General Insurance Ltd (1992) NSWLR 627. DECISION : Appeal dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40877/00 DC 1345/99

GILES JA HODGSON JA SPERLING J

GENERAL ACCIDENT INSURANCE ASIA LTD v SAKR & ORS Judgment

1 GILES JA: The respondents bought 271-273 Darling Street, Dubbo ("the property") in May 1994. There were two shops and an attached residence on the property. One shop was used as a hairdresser's premises, and the other shop with the attached residence was used as a sandwich shop. Through a broker or agent, Westpac Insurance Services (Brokers) Ltd, the respondents took out a cover note with the appellant, then known as NZI Insurance Australia Ltd. The cover was $200,000 on the buildings, $23,000 for loss of rent and $500,000 for public liability, and the cover note recorded that the property was "Occupied as hairdresser/sandwich".

2 The respondents completed a proposal for insurance, and the appellant issued an insurance policy for the period 1 June 1994 to 1 June 1995. Neither the proposal nor the policy schedule was in evidence. The premium was $1,347.82. The policy was then renewed for the period 1 June 1995 to 1 June 1996. The evidence did not disclose the communications between the appellant and the respondents by which the renewal was made.

3 On 29 April 1996 the appellant sent to the respondents a renewal invitation, stating that it would renew their insurance for the period 1 June 1996 to 1 June 1997 upon payment of the premium. From other evidence, the premium was about $1,340. The renewal invitation, which by the terms of the policy would become the policy schedule, included - "**Fire & specified perils policy (please see notices 1, 2 & 3 overleaf) 0001 Property insured Sum insured Building $200,000 Loss of rent $23,000

Occupied as hairdresser Situated at 271-273 Darling St Dubbo 2830

4 The sandwich shop and residence had fallen vacant in December 1994. The hairdresser's shop had fallen vacant in July 1995. From July 1995 the property had been unoccupied.

5 In the latter part of June 1996 the first respondent, Mr Mohamed Sakr, telephoned the appellant in order to exclude from the cover loss of rent and public liability. His conversation with an officer of the appellant is critical to this appeal, and I will return to it. He was told that the reduced premium was $970, and that amount was paid on 1 July 1996. The evidence did not include an amended renewal invitation, or even indicate that an amended renewal invitation was sent in order to stand as the policy schedule.

6 On 13 June 1997 the appellant sent to the respondents another renewal invitation, stating that it would renew their insurance for the period 1 June 1997 to 1 June 1998 upon payment of the premium. The premium was $990.32. The apparent discrepancy that the renewal invitation was sent nearly two weeks after the expiry of the cover was not explained in the evidence. The renewal invitation included - "** Fire & specified perils policy (please see notices 1, 2 & 3 overleaf) 0001 Property insured Sum insured Building $200,000

Occupied as hairdresser Situated at 271 - 273 Darling St Dubbo 2830 ** An excess will also apply to malicious damage and ** ** earthquake claims. For details, please refer to ** ** your policy wording. ** Excess$100 Additional occupation: Sandwich shop Residential dwelling"

7 The property had remained and was still unoccupied. Although the evidence did not give a date, in due course the premium was paid. There were no other communications between the appellant and the respondents in relation to the renewal.

8 On 27 September 1997 the property was damaged by fire. The residence was partly destroyed and extensively heat and smoke affected, the former sandwich shop was damaged and affected by heat, smoke and water, and the former hairdresser's shop received lesser damage of the same kind.

9 The respondents claimed under the insurance. By a letter to Mr Sakr dated 17 February 1998 the appellant declined to pay "as our inquiries have revealed that the Insured premises have remained unoccupied since December of 1995".

10 Subsequent correspondence left the parties at issue, and the respondents sued the appellant in the District Court. In reasons published on 24 October 2000 Delaney DCJ found for the respondents, and there was judgment in their favour for $104,000 plus $28,080 interest.

11 There were three issues on appeal. The first was whether the appellant had validly avoided the contract of insurance for the period 1 June 1997 to 1 June 1998, or could have its liability under that contract reduced to nil, because the respondents had failed to comply with their duty of disclosure in relation to the occupation of the property. The second was whether the appellant was not liable for the damage to the property because the respondents had not given to it written notice required by a condition of the contract of insurance, being notice of an alteration after the commencement of the contract whereby the property became unoccupied and so remained for a period of more than 30 days. The third was whether the $104,000 was erroneous because it passed over two available lower figures and made no allowance for betterment. Failure to comply with the duty of disclosure 12 By s 21(1) of the Insurance Contracts Act 1984 ("the Act") an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter known to the insured which a reasonable person in the circumstances could be expected to know to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; but disclosure is not required of a matter that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know (s 21(2)(c), or as to which compliance with the duty of compliance is waived by the insurer (s 21(2)(d). By s 28 of the Act, if the failure to comply with the duty of disclosure is fraudulent the insurer may avoid the contract, but if the insurer is not entitled to avoid the contract its liability in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred.

13 At the trial the respondents contended, and the appellant denied, that the unoccupancy of the property had been made known to the appellant by Mr Sakr in the conversation in the latter part of June 1996. Delaney DCJ held that the unoccupancy had been made known. His Honour did not specifically address compliance with the duty of disclosure at the time of the June 1997 renewal, as distinct from the time of the June 1996 renewal, and appears to have elided the two renewals and treated the disclosure in June 1996 as disclosure for the June 1997 renewal; possibly, however, he regarded the disclosure at the time of the earlier renewal as creating knowledge of the appellant carried forward to the time of the later renewal. His Honour said that "[t]here was clearly no fraud" in the case. On the assumption of failure to disclose the unoccupancy, he was critical of the evidence of Mr Mark Stig, through whom the appellant sought to establish that disclosure would have caused it to decline to renew the policy. He found that it was more likely than not that, had there been disclosure, the policy would have been renewed on the same terms and conditions but with a slight increase in premium. In substance, therefore, his Honour was of the opinion that there had not been failure to comply with the duty of the disclosure, and that even if there had been such failure the appellant's liability to the respondents would remain save for a small amount representing the increase in premium.

14 The first question is the disclosure made in June 1996. It is necessary to bear in mind that Mr Sakr's first language is Arabic, and Delaney DCJ noted that he had "an imperfect knowledge and grasp of the English language being his second language".

15 A letter to the appellant dated 20 October 1998 was written for Mr Sakr by a friend, and was translated back to Mr Sakr by his son. In asking that the appellant reconsider its rejection of the respondents' claim, Mr Sakr said - "I believe it was between June 20 and 26, 1996, that I rang and spoke to a 'Yvonne' at your Sydney office and explained to her that the building was now unoccupied, so I no longer needed lease profitability, workers compensation, or public liability cover because the property was vacant, and so to reduce my premium payments accordingly. This subsequently occurred as my premium fell to $990.32, and neither then nor subsequently did NZI Insurance seek a formal statement from me in writing. Your company knew the premises were unoccupied by virtue of subsequent reduced future premiums."

16 A reply from the appellant dated 29 October 1998 affirmed the appellant's rejection of the claim, but indicated that there had been a communication from Mr Sakr in mid-1996 - "We have a record, in July, 1996, of your request to amend the policy cover by deletion of Public Liability cover and Loss of Rent. This is the reason your premium was reduced. There is no record of your request to consider cover on the basis the building was unoccupied." 17 The appellant called no evidence from whoever took Mr Sakr's request to amend the policy cover, and disputed whether it was or could have been someone called Yvonne. Nonetheless, there was clearly a communication, and it involved exclusion from the cover of loss of rent and public liability. The record referred to in the letter of 29 October 1998 was not in evidence.

18 In a letter written by the respondents' lawyers dated 21 January 1999 in connection with a dispute resolution process between the appellant and the respondents, it was said - "In June, 1996, Mr Mohamed Sakr telephoned 'Yvonne' an employee at the Sydney office of NZI Insurance in relation to the policy renewal he had received for the period 1/6/96 to1/6/97 - see attachment 'B" for the renewal. The telephone call was made from the office of the Westpac Banking Corporation at Merrylands and was in words to this effect: Mr Sakr: 'I am telephoning about the policy renewal you have sent me on the policy for my property in Dubbo, policy number 47 E83665VUS. There is no tenant in the property at the moment. I don't think I want loss of rent insurance any longer. Also, public liability is not important because there is no-one there. How much is the cheque to pay for the insurance?' Yvonne: 'I will remove these items from the policy. Your new premium is $990.'"

19 Mr Sakr gave oral evidence of the conversation described in these letters.

20 Through an interpreter, Mr Sakr first said that he went to Westpac "to pay the policy". He was told that Westpac no longer acted as broker or agent, and that he should telephone the appellant. He telephoned from Westpac's premises, and - "A. … I spoke to the lady and I told her that the property was empty for a while now and there was no one living there and that's why I wanted to cancel the insurance for this damage for the rent. 'How much do you want me to pay?'. Before I used to pay $1300 something. She told me now I should pay $970. Q. Who told you? A. I ask her, what's her name and she told me her name is Yvonne."

21 Mr Sakr had spoken to Yvonne in English. He was then asked to say in English what he said to Yvonne, and answered - "A. Okay. We say hello on the telephone. She say 'NZI, Yvonne speaking', first. I say, 'who I speak to?' She say, 'Yvonne'. I say, "All right Yvonne the property is long time empty. Don't want to keep the policy as the same because it is empty, nobody in it. Please I want cancel the lease rent because no one live there and that policy damage'. She say, 'Public Liability?' I say, 'Yes'. She say "all right, we cancel it'. I say, 'How much I have to pay?' She say - I think the cheque is, that is the cheque I give it to the bank before I move from the bank, that's $970, that's the cheque I write at that time. After I left, my writing, this is my writing and I show it ---"

22 According to Mr Sakr, he did not know the English word "occupied" or what it meant. His daughter translated for him when he took out the cover note, and when he received the first renewal invitations he simply paid the amounts they stated.

23 In cross-examination it was put to Mr Sakr that his oral evidence differered from what had been written in the letters of 20 October 1998 and 2 January 1999, in that in his oral evidence he said that he told Yvonne that the property "was empty for a while now" and "is long time empty", but the letters had said only that it was "now unoccupied" and "[t]here is no tenant in the property at the moment". Mr Sakr said that he told his friend that the property had been empty for a long time, and that "I didn't pay notice or I didn't attention to what is written here". He said that he told the same thing to his lawyers, but they did not write it down, and that what he said in his oral evidence was correct.

24 The findings of Delaney DCJ were not as explicit as they might have been. His Honour delivered a reserved judgment, but recorded that he gave it without the benefit of a transcript and from the notes he took at the time of the hearing. It is again to be regretted that the court reporting services available in the District Court do not adequately meet its needs, so that his Honour did not have the benefit of a transcript when making his findings.

25 His Honour said - "In any event, the real issue in this case, which was whether or not between June 20 and 26 1996 the plaintiff whilst at the Westpac Bank spoke to on the telephone a person called Yvonne at the Sydney office of the defendant. I have not the slightest hesitation in accepting the plaintiff Mr M Sakr's evidence on this point. I believe he was a truthful man in his evidence. I believe that he sought to give evidence about his recollections, so far as he could with the assistance of an interpreter, which was calculated to assist the court in coming to a conclusion as to what in fact had occurred. The defendant sought to avoid that result by suggesting that there was no one called Yvonne at the premises of the defendant at the time that the plaintiff made the call. However, the evidence disclosed that there was an Yvonne, although in a different section. I am satisfied that whether the person's name was Yvonne, as the plaintiff deposed he was told or some other person, that he spoke to a person in relative authority in the office of the defendant and advised the person at the time that he sought the alteration of the premium that the building was then unoccupied. I am satisfied that upon that being told to the insurer, the insurer without further inquiry, further request or further information being sought, renewed the premium, renewed the policy at a reduced premium in accordance with that conversation."

26 A little later his Honour referred to the letter of 21 January 1999 and set out the paragraph set out earlier in these reasons, and said - "I find that more likely than not the conversation to which I have already referred occurred between Yvonne in terms not dissimilar to this, as the plaintiff Mr Sakr deposed to during the course of giving evidence. There was of course some difference in the wording that he gave in evidence to that which appears in some of these documents. However, he was discussing a matter that had occurred some years before and he gave his evidence through an interpreter. I take these matters into account in coming to the conclusion that the Plaintiff gave his evidence in a straight forward and truthful manner and that in a general sense I accept his evidence, although the specific details of it may, due to the effluxion of time, have been altered. Nevertheless, the main matter is clear, that he spoke to Yvonne, told her the premises were unoccupied, asked for a reduction of premium and this then occurred."

27 Later again his Honour said - "The plaintiff made during the course of his evidence admissions against his own interests. He, I find, acted in accordance with his understanding of his obligations and did notify the defendant before entering into the renewal of the policy during the period when the fire occurred of the fact that it was unoccupied. No further inquiry about this matter was made by the defendant, who accepted the premium."

28 The appellant accepted on appeal that there had been a telephone conversation in June 1996 between Mr Sakr and one of its employees, thought by Mr Sakr to be called Yvonne. It accepted that Mr Sakr indicated that he did not want loss of rent or public liability cover, and that the employee calculated and advised Mr Sakr of a reduced premium taking account of the reduced cover. But it submitted that Delaney DCJ's finding was limited to disclosure that the property was "now" or "at the moment" unoccupied, and that there was a failure to disclose that there had been partial unoccupancy since December 1994 and complete unoccupancy from July 1995. On the evidence of Mr Stig, the appellant said, this extended unoccupancy and the concomitant prospect of future unoccupancy were relevant to its decision whether to accept the risk, and had they been disclosed it would not have renewed the policy.

29 I do not consider that Delaney DCJ took so limited a view of what Mr Sakr said to the person he thought was called Yvonne. It is true that his Honour used language of unoccupancy at the time, saying that Mr Sakr told the person that "the building was then unoccupied" and that "the premises were unoccupied". He did so, however, in the context of finding that there had been a communication between Mr Sakr and the appellant in June 1996, and that contrary to the appellant's position in the letter of 29 October 1998 the communication had included reference to unoccupation. It was not necessary in that context to state more fully what had been said about unoccupation.

30 For what was said about unoccupation more fully, his Honour began by accepting that Mr Sakr was a truthful man in his evidence. He found that the conversation was "in terms not dissimilar to" the conversation set out in the letter of 21 January 1999, thereby indicating that he did not limit the conversation to there being no tenant in the property "at the moment", and found the further content of the conversation by the important words, "as the plaintiff Mr Sakr deposed to during the course of giving evidence". This, in my opinion, was an acceptance of the account of the conversation given by Mr Sakr in his oral evidence, including his explanations for the way the letters of 20 October 1998 and 29 January 1999 were written. The acceptance was subject to the effect of time on "specific details", but even at this point his Honour repeated his opinion of Mr Sakr as a credible witness and said that "in a general sense" he accepted his evidence.

31 If this view of the findings of Delaney DCJ be correct, then in June 1996 the appellant was told that the property had been unoccupied for a while or for a long time. For that reason, the appellant was told, the respondents did not want cover for loss of rent or public liability, which plainly conveyed that the unoccupancy was likely to continue. The June 1997 renewal brought a fresh contract of insurance rather than the extension of an existing contract (see for example C E Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 545-6; Manufacturers' Mutual Insurance Ltd v John H Boardman Insurance Brokers Ltd (1994) 179 CLR 650 at 657-8; Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 414), and there was a fresh duty of disclosure at that time (see Lambert v Cooperative Insurance Society Ltd (1976) 2 LL R 485 at 487; Mercantile Mutual Insurance (Australia) Ltd v Gibbs (2001) WASCA 221 at [28]). But the knowledge imparted to the appellant in June 1996 carried forward to the June 1997 renewal, and was acted upon by the appellant in that the cover in the renewal invitation did not include loss of rent or public liability. The references to occupation in the renewal invitation of 13 June 1997 were not an indication of the appellant's knowledge, because they were plainly a consequence of inadequate record keeping whereby earlier references were perpetuated despite what Mr Sakr had told the appellant in June 1996 - indeed, they were inaccurate in the previous renewal invitation even on the limited conversation as accepted by the appellant in the appeal.

32 Neither in June 1996 nor in June 1997 did the appellant make further enquiry of the respondents to find out for how long the property had been unoccupied. In June 1997 the appellant had reason to believe that the property had been unoccupied for a further year in addition to whatever the time of unoccupation prior to June 1996 might have been. It did not enquire whether there had been any change as to occupancy. If there was not knowledge in the ordinary sense of the word (Commercial Union Assurance Company of Australia Ltd v Beard (1999) 47 NSWLR 735), any deficiency in the appellant's knowledge of the period and currency of unoccupancy was in my opinion due to its waiver of (further) compliance with the duty of disclosure within s 21(2)(d) of the Act. The Act in this respect, in my view, reflects the common law position discussed in, for example, Liga Knitting Mills v Lombard Insurance Co Ltd (1984) 3 ANZ Ins Cas 60-551 at 78,258-9 and the cases there cited; see also MacGillivray on Insurance Law 9th ed, para 17-78; Sutton, Insurance Law in Australia, 3rd ed, para 3.31; Law Reform Commission, Insurance Contracts, LRC 20, para 161.

33 In my opinion, therefore, the respondents did not fail to comply with their duty of disclosure.

34 Even if the conversation in June 1996 had been limited to the terms set out in the letter of 21 January 1999, in my opinion the result would have been the same. The appellant was told that there was no tenant in the property as at June 1996, and that that was why the respondents no longer wanted cover for loss of rent and public liability. What the appellant was told conveyed that it was expected that the property would be unoccupied for some time in the future. By the renewal invitation of 13 June 1997 the appellant invited renewal without cover for loss of rent and public liability, connoting that it was proceeding on the basis that the property was still unoccupied. The respondents had not sought cover for loss of rent and public liability, or told the appellant that the position as disclosed in June 1996 had changed. Even if without knowledge that the property had been unoccupied for a long time prior to June 1996, the appellant's knowledge in June 1997 was such that unoccupancy for the year since June 1996 should have been present to its mind, yet it made no inquiry of the respondents. Further compliance by the respondents with the duty of disclosure in relation to unoccupancy was waived by the appellant.

35 In my opinion, therefore, the first issue on appeal should be determined adversely to the appellant. It is unnecessary to deal with the question of fraud, or with whether the appellant's challenge to the finding, on the assumption of failure to disclose the unoccupancy, that it was more likely than not that had there been disclosure the policy would have been renewed on the same terms and conditions but with a slight increase in premium. It should be said, however, in fairness to Mr Sakr, that I can see no proper basis on which it could have been held that failure to comply with the duty of disclosure was fraudulent; and in fairness to Mr Stig, that Delaney DCJ appears to have taken an unduly critical view of his evidence and to have described him as partisan and biased in favour of the appellant without proper justification. It does not follow that, on a more moderate approach to Mr Stig's evidence, the appellant would have overturned the finding. Failure to give written notice of alteration 36 The general conditions in the policy included, against the marginal note "Alteration of Risk" - "The Company may elect to cancel these Policies within the terms of the Cancellation Clause and/or shall not be liable for loss, destruction or damage to any Property Insured or liability to Third Parties caused or contributed to by any alteration after the commencement of this Contract - (a) in the trade or manufacture carried on, or whereby the nature of the occupation or other circumstances materially affecting the Risk Insured be charged in such a way as to increase the risk of loss, destruction, damage or injury; or

(b) whereby the Building insured or containing the Property Insured becomes unoccupied, and so remains for a period of more than thirty (30) days, or

(c) whereby Your interest ceased except by will or operation of law unless You shall give written notice to the Company of such alteration prior to the alteration becoming effective and its being allowed by endorsement to these Policies."

37 In its defence as filed the appellant pleaded this condition, and "that the Building was unoccupied for more than 30 days and that the plaintiffs did not give written notice to the Company of such alteration prior to the alteration becoming effective and the alteration was not allowed by endorsement to the Policy". The appellant's submissions before Delaney DCJ included that there had been "breach of that term", and that the appellant was entitled to refuse to pay the respondents' claim because, within s 54(2) of the Act, the failure constituting the breach could reasonably be regarded as being capable of causing or contributing to the loss by fire damage.

38 Delaney DCJ did not satisfactorily deal with this submission. In my opinion, however, the condition does not avail the appellant.

39 The condition is concerned with alteration of risk, in the present case specifically with the property becoming unoccupied and remaining unoccupied for more than 30 days. It has no application where the property was unoccupied at the commencement of the contract of insurance. Faced with this, the appellant submitted that because the renewal invitation became the policy schedule and stated that the property was "Occupied as hairdresser" and had the additional occupation "sandwich shop/residential dwelling", the property had to be taken to have been occupied as at the commencement of the contract of insurance. It followed, the appellant said, that on the commencement of the contract of insurance there was immediate alteration to unoccupancy and the requirement of written notice was enlivened.

40 There was some difficulty in explaining why the references to occupation in the policy schedule meant that the property had to be taken to be occupied as at the commencement of the contract of insurance. It was suggested that it was by an implied term, with invocation of the well known requirements for implication of a term in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346-7. No such implied term was pleaded in the appellant's defence, and in any event in my opinion the requirements could not be satisfied. It was suggested that there was a warranty by the respondents that the property was occupied in the manner stated in the policy schedule. Again this was not pleaded, and no basis was put forward for holding that the respondents so warranted. It was finally suggested that an estoppel arose whereby the appellant and the respondents were obliged to take the property to be occupied at the commencement of the contract of insurance. Again this was not pleaded, and the facts necessary for such an estoppel were not litigated; if it is conceivable that there could be an estoppel, it is not open to the appellant to assert it at this stage in the proceedings.

41 The second issue on appeal should also be determined adversely to the appellant. The $104,000 42 The evidence in relation to the respondent's damages, that is, as to what the appellant had been obliged to pay or do under the policy, was quite limited. So were the submissions to Delaney DCJ

43 The appellant appointed a loss assessor. The loss assessor obtained from Neil O'Connor Constructions as an "estimate of reconstruction of the building" an itemised description of works to be performed and a price, described as "Total Cost To Rebuild To Original Status", of $98,080. Note 2 in the estimate said that required works not visible on inspection had not been allowed for. The loss assessor then obtained prices from two other builders, said to be based on the Neil O'Connor Constructions scope of works, of $103,000 and $104,210. In a letter dated 24 December 1997 the loss assessor provided copies of all three prices to Mr Sakr. The respondents tendered the letter of 24 December 1997 and the prices, all of which were admitted without objection. There was no other evidence in relation to repair cost.

44 The appellant tendered a valuation of the property by Mr Robin Gardiner obtained on behalf of the respondents when they purchased it in 1994. The valuation was dated 24 April 1994, was said to be "a reasonable assessment of the current market value, encumbered by the two leases for mortgage security purposes", and was $135,000. It was admitted without objection. Although it was not in the appeal papers, it seems that the appellant also tendered a valuation of the property by Mr T R Somerville dated 12 October 1999, by which the value of the property if repaired would be approximately $153,000. Delaney DCJ was told in the appellant's opening that the property was sold unrepaired in December 1999 for $45,000. There was no evidence to that effect, but as appears from the respondents' submissions later set out the sale for that amount was common ground.

45 The appellant also tendered a letter dated 1 November 1995 in which Ms Leane Wilton, who had inspected the property with a builder in late 1995 with a view to leasing the former sandwich shop and residence, recorded her opinion that the property was in a bad state of repair and described some of the things she (or more likely the builder) found wanting. The letter was tendered for purposes other than as going to damages, was objected to, and was admitted over objection. Ms Wilton was not cross-examined. There was, however, no evidence linking whatever could be gleaned about the state of repair of the property in November 1995 from the letter of 1 November 1995 with the repairs the subject of the prices obtained in late 1997.

46 The respondents' submission to Delaney DCJ was - "MILLARD: Well your Honour it seems to me that there's two possible bases upon which to assess damages and they come in at about the same figure. One is the way that your Honour said might be the appropriate way, analogist [sic] to the pest inspection cases, and that is to determine what the value of the property was. The valuation report that was tendered indicates that the property as repaired would be valued at approximately 153,000 and the evidence was - and I think my friend and I agrees [sic] on this aspect - that the property was sold for 45,000, so that leaves the damages of around the mark of a hundred and five, 108,000, which is not totally out of the ball park that is represented by the reports provided by the builders. Your Honour can I say in relation to those reports, that they were reports that had been provided to the insurance company and they're not reports that have been obtained by the plaintiffs, your Honour, so we would suggest that they are accurate representation of what the repairs would be."

47 The appellant had said in opening that "the better method of assessment is the value of repairs providing a factor for betterment or discounting for betterment arriving at an indemnity value". Its submissions to his Honour were - "If I can turn to damages, your Honour, the basic proposition in relation to damages to put a plaintiff into the position it would have been in for but for the breach, there is a fire. If the plaintiff is otherwise entitled he would have been entitled to have the fire damage repaired. Your Honour has three quotes. They range from $98,000 --- HIS HONOUR: To a hundred and four don't they? DUNCAN: To a hundred and four, but they cover the same territory, your Honour. There is nothing to distinguish the three and in the circumstances there's no reason to choose anything but the least expensive of the three. Now if that was done and the premises were repaired to that extent, it is clear that that would involve an over-compensation to the plaintiff because this is a building where we know that its unimproved value is around about forty-five, $50,000, and according to the last valuation that was tendered by the plaintiff, the building with the premises rebuilt would be worth about $150,000, so therefore the value of a new building is in the order of about $100,000-odd, so $100,000 worth of repair is a substantial repair to these premises and would involve a very substantial betterment getting new for the substantially dilapidated old. Now your Honour doesn't have expert evidence as to the value of the betterment but nevertheless it is clear that to award the plaintiff if they otherwise be entitled to the amount $98,000 would involve a substantial over-compensation, your Honour has the ability to do the best that the Court can in the circumstances to make an estimate of the amount of betterment involved and by reason of the fact that $100,000 I submit represents a pretty substantial rebuild of the premises, that your Honour would in the circumstances would have no difficulty in finding that betterment would be in the order of 50 per cent."

48 Delaney DCJ said - "I find that in failing to pay the amount claimed by the plaintiffs as a consequence of the fire the defendant breached its contract with the plaintiffs and is liable to pay the plaintiffs damages for the reasonable repair of the premises. The evidence led by the plaintiffs about this issue was a document from Central West Assessing Dubbo. There was also a document, being a valuation report from Mr T R Somerville. The valuation report was prepared for the plaintiffs after an inspection of the premises on 6 October 1999. The valuation was dated 12 October 1999. The plaintiffs claimed the restoration of the premises in accordance with the quotation for repairs from the Central West Assessing Dubbo. The total cost claimed, and this is an document dated 24 December 1997, was $104,210. I am satisfied on the balance of probabilities that the figure therein set out is a figure which represents the cost and the reasonable cost at that date of the restoration of the property. Mr Duncan said that it was necessary for me to choose the least expensive form. He said that I should not accept as a basis for restoration the amount of the valuation. I consider that to take into account the matters that I have referred to, that it is appropriate to allow the plaintiff the amount of $104,000 for the restoration of the property."

49 By the general insuring clause in the policy the appellant agreed "to indemnify [the respondents] or otherwise pay [the respondents] in respect of" the insured loss. In the insuring clause specific to the fire and specified perils policy the appellant promised that if the property insured was destroyed or physically damaged by the insured perils it would "pay to [the respondents] the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such Property or any part thereof". There was then a basis of settlement clause, relevantly reading - "(a) On Buildings, Machinery and Plant and all other Property and Contents (other than those specified below): The Company may at its option pay to You the value of the Property at the time of the Damage or reinstate, replace or repair the damaged Property less a reduction for wear and tear and betterment provided that if the 'Reinstatement or Replacement Conditions' and/or 'Extra Cost of Reinstatement Conditions' are indicated in the Policy Schedule the Company may at its option and in accordance with the Reinstatement or Replacement and Extra Cost of Reinstatement Extensions set out herein, reinstate, replace or repair any damaged item or pay the cost of such reinstatement, replacement or repair."

50 The policy schedule did not indicate any reinstatement or replacement conditions or extra cost of reinstatement conditions.

51 The insuring clause specific to the fire and specified perils policy gave some content to the general insuring clause, and the basis of settlement clause should then have given further content to the agreed obligation of the appellant and entitlement of the respondents. Regrettably, but typically of an insurance policy, the basis of settlement clause is not well framed and does not fit well with the preceding provisions.

52 First, the basis of settlement clause gave the appellant an option to reinstate, replace or repair, apparently meaning having the work of reinstatement, replacement or repair carried out as distinct from paying to the respondents the cost of reinstatement, replacement or repair. But the words "less a reduction for wear and tear and betterment" then appeared to qualify that option, which does not seem to make sense if there is no question of payment to the respondents.

53 The appellant submitted that the option should be read as an option to pay the cost of reinstatement, replacement or repair less a reduction for wear and tear and betterment, with the other option being to pay the value of the property at the time of the damage. I do not think this can be accepted. A reinstatement option is common, see for example CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 396-7 and Sutton, Insurance Law in Australia, 3rd ed, para 15.149 et seq. The last few lines of the basis of settlement clause clearly distinguished between reinstatement, replacement or repair on the one hand and payment of the cost of reinstatement, replacement or repair on the other hand, and it would have been remarkable if the former words when used earlier in the clause were not used in the same sense as when later used.

54 The respondent's submissions did not really address the problem. The respondents accepted what they described as the appellant's submission that its liability under the policy "sounds in the payment of money on an indemnity basis, rather than in some obligation to otherwise repair or reinstate the premises". The appellant did so submit, but more is necessary.

55 It is possible that the words "less a reduction for wear and tear and betterment" could have qualified reinstatement, replacement or repair, if reinstatement, replacement or repair by the appellant could have been by the appellant arranging for the reinstatement, replacement or repair but paying for that work in part and leaving the respondents to pay for the rest. That is so impractical that I do not think it can seriously be countenanced. In my opinion, the preferable interpretation of the basis of settlement clause is that the words "less a reduction for wear and tear and betterment" were inappropriately placed in the clause, and should be taken to have qualified the option of paying the value of the property at the time of the damage. Put another way, the words qualified what preceded them to the extent they sensibly could, and they could sensibly have qualified only the first option. That left the option to reinstate, replace or repair to operate according to its terms, supplemented if there were the further conditions.

56 In the present case the option to reinstate, replace or repair can be put aside. In the letter of 24 December 1997 the loss assessor said that the basis of settlement would be "based on the cheapest quotation which has been submitted by Mr Neil O'Connor". This excluded the option of reinstatement, replacement or repair. As I have said, the appellant in opening accepted payment of the value of repairs as the better method of assessment, and the appellant did not submit to Delaney DCJ, or on appeal, that the amount it had been obliged to pay was or turned on the cost to it of reinstatement, replacement or repair if it had chosen to reinstate, replace or repair. If there was an election to be made, the appellant elected against the option to reinstate, replace or repair.

57 Secondly, the option in the basis of settlement clause to pay the value of the property at the time of the damage, if taken at face value, would have required payment of full value less a reduction for wear and tear and betterment even if the property was only damaged. It was to be compared with the equivalent option in the insuring clause specific to the fire and specified perils policy, which had the alternatives of payment of the value of the property at the time of its destruction and payment of the amount of the damage: there was an apparent disconformity between the basis of settlement clause and the clause to which it should have given content.

58 The appellant submitted that the policy was not a valued policy, but provided for indemnification only, and that reading the policy as a whole the option in the basis of settlement clause meant payment providing indemnity for the damage to the property rather than the full value of the property if the property was only damaged. Reference was made to British Traders' Insurance Company Ltd v Monson (1964) 111 CLR 86 at 92-4. The respondents accepted this.

59 Thirdly, the scope of the qualifying words "less a reduction for wear and tear and betterment" on which the appellant relied so heavily is not clear. The value of property in the sense of exchange value mentioned below will normally not need such a qualification, because the exchange value will not leave room for a deduction for wear and tear or betterment. If there is payment of repair cost in order to provide indemnity for damage to property, such a deduction may be appropriate, and the inclusion of the qualification thus tends to confirm the meaning of the basis of settlement clause accepted by the parties. How otherwise the qualification will have effect it is not necessary to explore.

60 The question in the present case becomes, what amount represents the value of the property, understood as what amount will provide indemnity for the damage to the property, with any appropriate reduction for wear and tear and betterment?

61 In Fire & All Risks Insurance Co Ltd v Rousianos (1990) 19 NSWLR 57 the policy provided that the insurer would pay to the insured "the value of the Property at the time of the happening of its destruction or the amount of such damage". Gleeson CJ said (at 65) that the ordinary meaning of the word "value" is clear, and that - "It means 'exchange value' that is to say, the price in cash or in kind, which would be obtained for the property in question in an arm's length dealing between a willing but not anxious seller and a willing but not anxious buyer".

His Honour did not accept that "value" means "market value", because there may not be a market from which value can be ascertained, and said (at 68) that the true principle is that the method of ascertaining value "must conform to the fundamental entitlement of the insured to indemnity" and that subject to that "the issue is one of fact".

62 The property in Fire & All Risks Insurance Co Ltd v Rousianos was a chattel, and it was destroyed rather than damaged. Value is more complex when the property is a building. There is normally not an exchange value for a building separately from the land on which it stands, and as the alternative of payment of "the amount of such damage" in Fire & All Risks Insurance Co Ltd v Rousianos shows exchange value may well not reflect the insured's entitlement to indemnity (but no more than indemnity) where the property has been damaged rather than destroyed.

63 In Lucas v The New Zealand Insurance Co Ltd (1983) 1 VR 698 the policy wording was relevantly the same as the policy wording in Fire & All Risks Insurance Co Ltd v Rousianos. Buildings bought as an investment and let as an income-earning asset were damaged by fire. Crockett J said (at 701-2) - "4. In determining the value of the property lost it must be borne in mind that it is not the value in an abstract sense that is to be assessed, but the value of the property to the insured. That is to say it is the insured's actual loss that is recoverable: see Canadian National Fire Insurance Co v Colonsay Hotel Co., [1923] 3 DLR 1001. So, if the insured should have a house property on the market for sale at a stipulated price at the time of its destruction by fire then the "real value" to the insured of the property, and so the measure of his loss, is that price (less the site value) and not the cost of its replacement: Leppard v Excess Insurance Co Ltd, [1979] 1 WLR 512; [1979] 2 All ER 668. Or, should the insured of a house property be intending at the time of its being destroyed by fire in the near future to demolish the house in preparation for the development of the site, then the value of the house to the insured may be little more than the value of salvages materials upon its demolition: Falcon Investments Corporation (N.Z.) v State Insurance General Manager, [1975] 1 NZLR 520. On the other hand, the property in question may have a value to the insured beyond the market value because it was held by him for the purpose of using and enjoying it as a house--see Bowen LJ in Castellain v Preston, at p. 400--or in carrying on his business: Grant v Aetna Insurance Co (1862) 15 Moo 516, at pp 518-9; 15 ER 589, where there is set out the direction given to the jury the correctness of which in this connection was not challenged on appeal to the Privy Council. In such cases, the insured can be granted the full indemnity to which he is entitled only if there is such restoration as to permit his continued use and enjoyment of the property or its use in the carrying on of his business. The cost of reinstatement is the measure of indemnity in such circumstances even though that cost may be in excess of the market value.

It is often more likely that where the loss is partial only, then, indemnification will require payment of the cost of repairs. Theoretically this cost should be the same as market value, but experience shows that this is rarely so--even if some allowance is made on the "new for old" principle (which it is not suggested should be applied in this case). For the purpose of assessing the correct indemnity to be made the determination of whether a loss is total or partial is a question of fact: see Ivamy, Fire and Motor Insurance, 3rd ed., pp 164-9; Sutton,Insurance Law in Australia and New Zealand, (1980) para 15.64; and Elcock v Thomson, [1949] 2 KB 755, at p 764 [1983] 1 VR 698 at 701.

How then should the question that now calls for an answer be resolved in the light of the foregoing propositions? The defendant contends that the actual loss suffered is no more than the difference between the value of the property before and after the loss. Although the extent of that difference is in contest it is common ground that it is less than the cost of reinstatement. It was argued that the property not only had a market value before and after the fire but in fact must in the circumstances be taken to be readily marketable. If the plaintiffs were now to sell their property the proceeds from sale together with a sum representing the differential in value would enable purchase of similar investment premises with a value the same as that which the damaged premises possessed before the fire. Even assuming the ready marketability of premises of this nature I am of opinion that this suggested method of assessing the plaintiffs' measure of loss is inappropriate.

Again, it is common ground that the cost of reinstatement is greater than the pre-fire value of all the improvements on the land. This does not mean that the loss was total. In my opinion, having regard to the extent of the buildings that remain undamaged and usable, the loss arising from the fire was clearly a partial loss only. As a matter of business practicality, I would have expected, not that that which remains standing should be demolished, but that the damaged portion should be repaired. Moreover, having regard to the nature of the property's use it must be taken to have formed the plaintiffs' business, or at least part thereof. It may be inferred that they do not want to sell the property. They want it repaired so as to continue to conduct it to its optimum extent as an income-producing asset. As such, at all material times, it has been "a going concern". It is not replaceable by purchase on the market of another property in the sense that most merchandise or goods may be so replaced. The plaintiffs' property may, as their counsel contended, be taken to have its own features and characteristics. It had its own potential for capital gain. Its own location no doubt was related to a particular ability to ensure that the premises were tenanted to the satisfaction of the plaintiffs. The location may also be taken to have its own convenience to the plaintiffs as owners.

In my view on the facts of this case the actual loss to the plaintiffs is the cost of repairs necessary to reinstate the fire-caused damage."

64 That value may be measured by repair cost has often been accepted, see for example Sutton, Insurance Law in Australia, 3rd ed, paras 15.135-7 and cases there noted. In CIC Insurance Ltd v Bankstown Football Club Ltd at 397 it was said, citing Lucas v The New Zealand Insurance Co Ltd and GRE Insurance Ltd v QBE Insurance Ltd (1985) VR 83 at 105, that in a suitable case the appropriate measure of indemnity to an assured may be the cost of reinstatement and that "[t]his may be so where market value before and after the occurrence of the risk does not provide an accurate measure of the loss".

65 The respondents' submissions before Delaney DCJ took up market value before and after the fire and alternatively the cost of reinstatement. The appellant's position before his Honour was that repair cost with an allowance for betterment should be adopted. It should be inferred that the respondents held the property for investment, and although the property had not been occupied for over two years it was not suggested to Mr Sakr that it had a value to the respondent only as a piece of land for immediate sale. Delaney DCJ's assessment of damages by taking repair cost as the appropriate measure of indemnity was open to his Honour, and the appellant can not now complain of it. In order to satisfy the respondents' entitlement to indemnity, the respondents had to be restored to their position at the time of the loss, that is, to be paid the cost of repairs to the property to the maximum limit of the policy, subject only to a deduction for betterment.

66 In Vintix Pty Ltd v Lumley General Insurance Ltd (1992) 24 NSWLR 627 at 634 I said, in a passage not affected in the appeal reported as Lumley General Insurance Ltd v Vintix Pty Ltd (1991) 24 NSWLR 652 - "Insurance law has long recognised that where a building or chattel is replaced or repaired allowance may have to be made for betterment. A new building or chattel, or a building or chattel restored to its original state, will usually be an improvement on the building or chattel in its condition at the time it was destroyed or damaged, although this will not always be so. In marine insurance, custom has fixed an allowance of one-third "new for old" which is said to be deductible (Pitman v Universal Marine Insurance Co (1882) 9 QBD 192; see Marine Insurance Act 1909 (Cth) s 74), but in other insurance there is no such convention. It is necessary in each case to determine whether there has been any betterment for which an allowance should be made. This must, of course, defer to the terms of the policy, for example, many policies provide for reinstatement regardless of betterment." 67 In Vintix Pty Ltd v Lumley General Insurance Ltd both parties took the approach of estimating the cost of repair of the damaged building, but the insurer submitted that there should be an allowance for betterment because the insured would end up with a building worth more than the undamaged building. There was agreement on the figure representing the increase in value. For the reasons given at 634-7 I declined to translate from the assessment of damages in a claim in tort to the construction and application of a policy of insurance the rejection of an allowance for betterment in Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd (1970) 1 QB 447, and held that there should be the allowance for betterment.

68 It is a question of fact whether an allowance for betterment should be made in order that the insured not receive more than indemnity. In Malcolm E Walker & Sons Ltd v Co-operative Fire & Casualty Co (1966) 58 DLR (2d) 10 an allowance for betterment was not made because, although there was evidence that the insured would have got a better building, "a better building does not necessarily mean a building of greater value" (at 14). In the present case there was no direct evidence that the property when repaired would have had a greater value than in its condition as at 25 September 1997. A comparison of the valuation of 24 April 1994, $135,000, with the valuation of October 1999, about $153,000, did not without more provide evidence that the respondents would have a building of greater value, as the higher figure could have been the product of increased values over five years: the appellant did not submit to the contrary. As I have said, the evidence of the condition of the property tendered through Ms Wilton was not related to the repairs the subject of the prices obtained in late 1997, and it is not self-evident from those prices that the repairs would so improve the property from its condition as at 25 September 1997 that it would have an increased value. Certainly the price of Neil O'Connor Constructions did not suggest marked improvement in the property, because it was for rebuilding "To Original Status".

69 The appellant submitted before Delaney DCJ that a building of greater value should be inferred from comparison between the cost of repairs (say, $104,000) and the difference between the valuation of 12 October 1999 (about $153,000) and the sale price in 1999 ($45,000). It does not seem to me that the comparison calls for the conclusion, it being a matter of common experience that expenditure on a building does not necessarily increase the value of the real property. On appeal it referred also to the estimate in the valuation of 24 April 1984 of the cost of replacement of the buildings on the property ($120,000), and submitted that the repairs following the fire damage would have involved "a very substantial repair and almost getting close to a rebuild of the premises". That does not mean betterment.

70 While it may be generally accepted that the repairs would have improved the property over its condition as at 25 September 1997, I do not think the evidence warranted the finding that it would have had a greater value. The appellant finally submitted, then, that the property was necessary for the respondents positively to establish, as part of making out their claim, that the repairs would not give rise to betterment, or that the betterment would appropriately be allowed for in a particular amount, and that in those circumstances they failed to do so. It should be noted that, if correct, this would mean that the respondents would fail entirely in the proceedings because they had not proved their claim: it would not be a case of the 50 per cent reduction for which the appellant contended before Delaney DCJ and, initially, on appeal.

71 I do not think the submission should be accepted. It is correct that the respondents as claimants had to establish their damages, and so had to establish what the appellant had been obliged to pay or do under the policy. There had to be an appropriate reduction for wear and tear and betterment. But the basis of settlement clause did not compel a reduction: a reduction was required only if, on betterment principles, more than indemnity would be provided to the respondents. The damages had to be determined on the evidence which both sides saw fit to lead, and if on the evidence a finding that the property after repairs would have had a greater value than in its condition as at 27 September 1997 was not warranted, a reduction was not required. The cost of repairs represented the respondents' damages.

72 It remains to consider whether Delaney DCJ erred in not taking the lowest of the three prices. His Honour did not take the exact amount of the highest price, $104,210. After acknowledging the submission that he should "choose the least expensive form", he found damages of $104,000. Although his Honour did not refer to it, he may well have had in mind Note 2 in the price of Neil O'Connor Constructions. None of the prices was a fixed price, and some increase could be expected. It was necessary for his Honour to find the probable cost of repair, and he may have treated the three prices as a range and gone to the higher end of the range in order best to do so. I see nothing wrong in this, and if it is not what his Honour did then the figure at which he arrived was nonetheless appropriate.

73 The third issue on appeal so also be determined adversely to the appellant. Orders 74 In my opinion the appeal should be dismissed with costs.

75 HODGSON JA: I agree with the orders proposed by Giles JA and with his reasons in relation to the first two issues he discusses.

76 In relation to the third issue, concerning the $104,000.00, I agree with the reasons of Giles JA except in relation to his comment that, if it was necessary for the respondents positively to establish that the repairs would not give rise to betterment or that betterment would appropriately be allowed for in a particular amount, failure to do so would mean that the respondents failed entirely in the proceedings. I would prefer to approach the question of betterment in the following way.

77 As stated by Giles JA, the onus was on the respondents to prove their damages, relevantly the cost of reinstatement or repair less a reduction for wear and tear and betterment. There was evidence of the cost of certain works, expressed in substance as being reinstatement to original condition. There was no challenge to this description of the works, by objection to evidence or cross-examination or otherwise. In those circumstances, the primary judge was entitled to take this as evidence of the cost of reinstatement to the state of the property before the fire, and not renovation to some improved state of the property.

78 To put the same proposition a different way, an evidentiary onus was cast on the appellant to prove some betterment for which a reduction should be made. There was some evidence from which an inference of betterment might have been drawn, but it was not an appealable error not to draw such an inference.

79 If, contrary to the above, the primary judge was not entitled to proceed on the basis that there was no betterment, the result in my opinion would not be that the respondents would fail entirely. The situation would be one where a judge would have to do his or her best on the basis of inadequate material, erring within the area of uncertainty against the party responsible for the deficiency of evidence.

80 However, for the reasons given, I agree with the result proposed by Giles JA.

81 SPERLING J: I agree with the orders proposed by Giles JA and substantially with his reasons. My only qualification relates to the question of betterment.

83 The insurer's obligation was to "pay to [the respondent] the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof".

84 There was no question of the insurer reinstating the property in this case. It was a case of damage rather than destruction. And "the amount of such damage" means a payment sufficient to indemnify against the loss caused by such damage.

85 The basis of settlement clause (quoted in Giles JA's judgment) had no application to the present case, as I read it. The proviso did not operate because the conditions referred to in the proviso were not indicated in the policy schedule. The wording which preceded the proviso was not applicable because it deals only with payment of "the value of the property" - that is, for destruction - or the insurer reinstating, replacing or repairing the property - which did not occur.

86 It is a strange result to have a basis of settlement clause apply to destruction of property but not to damage to property, but the language seems to me to be intractable.

87 I would also say, in passing, that, were the clause applicable, I would not construe the phrase "less a reduction for wear and tear and betterment" as qualifying "the value of the property at the time of the damage". The words have been accidentally misplaced or accidentally included. I do not think it is possible to say which is the case.

88 So, what of the question of betterment where there is simply an obligation to make a payment sufficient to indemnify against the loss caused by damage to property?

89 In such a case, I would regard evidence of the cost of repair as prima facie evidence of the payment necessary and sufficient to indemnify against such a loss. An evidentiary burden then shifts to the insurer to establish that payment of the cost of repair would exceed an indemnity for the loss.

90 For the reasons given by Giles JA, there was no persuasive evidence in the present case that payment of the cost of repair would exceed an indemnity for the loss. _____________

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