88 Has the plaintiff proved on the balance of probabilities there is a valid and binding contract of insurance for the two terms?
89 The defendant's attack on whether there is such a contract rests on its contention that the wrong industry classification was applied in the calculation of the premiums. It says that at law a common mistake was made. It is necessary to consider that contention. It says the application of the wrong classification has undermined the whole contract making it's operation illegal. It has resulted in an overpayment to GIO by Mammoth.
90 The ANZSIC classification applied was 01220 grain-sheep and grain-beef cattle farming. The initial basis for this was the content of the July letter.
91 The proposal form which formed part of the insurance contract was incomplete. Ellison failed to insert the ANZSIC code and specific description of Mammoth despite the fact the code and specific description allocated had been provided to Mammoth in documents sent by GIO in relation to its new premium quotation.
92 The full description of the business in the proposal as detailed by Ellison differs to some extent with the content of the July 2000 letter. However, there is nothing contained in the actual proposal to suggest that farming operations was not the main operation of Mammoth or indeed the constant operation of Mammoth.
93 In the proposal received by GIO there was nothing to suggest property development and subdivisional work was being carried on to any greater extent than the farming operations or administration/workshop functions.
94 It is necessary in the context of the industry classification to consider the evidence of Ellison and Caratti.
95 Ellison gave his evidence in a mostly confident manner. He was clear about what he considered Mammoth's predominant industry to be at the time of obtaining an insurance quotation in July 2000, namely property development and subdivision. However, during the course of the evidence it became apparent he had a variable memory.
96 In February 2002 he had made two handwritten notations on relevant documents and had sent correspondence which clearly indicated he had no recollection at all of the amendment he made in August 2000 to the insurance proposal on p 3 despite his evidence the amendment was made in order to ensure things were correct.
97 His evidence at trial was that in the initial p 3 of the proposal the $300,000 estimate of gross wages included the figure of $200,000 allocated to contractors. This does not marry with his notations which suggest the original wage estimate was in the vicinity of $500,000. This is more consistent with the $200,000 for property subdivisional work being added to the $300,000 and not being an all inclusive figure. This is also consistent with property and subdivisional work not being the predominant industry of Mammoth at that time.
98 His notations indicate and his letter of 6 February 2002 infers an estimate well in excess of $350,000. He said these notations arose through confusion and forgetfulness.
99 He gave evidence that Dominic Lupis ("Lupis") the principal of Denboer was his primary point of contact. Lupis stated that although initial approaches to GIO in relation to the insurance policy were as a result of information provided to Denboer by Ellison, the information was not provided to Lupis personally.
100 Lupis gave evidence that all documentation in relation to this particular policy had mysteriously disappeared.
101 Caratti indicated in his correspondence of 25 March 2003 that the mistake in relation to the industry classification arose partly out of Ellison's mistake. Ellison stated Denboer had never been provided with information inconsistent with subdivisional land work being the predominant industry. He accepted he was the only one dealing with Denboer over the workers' compensation insurances. It was he who had provided the figure of $240,000 used in the July letter.
102 Ellison had prepared schedules indicating the breakdown of wages and the industry in which the wages had been paid. The information was based by and large upon information provided by Caratti. These schedules were prepared between mid and late 2002 at a time when Ellison said he was aware of possible error to the industry classification. These schedules were not supplied to GIO until March 2003, well after the commencement of proceedings. In addition, an admission of liability and an offer to pay the premiums outstanding was made by Ellison on 2 July 2002, again according to Ellison when he was aware of likely error.
103 No source documents such as wage records were ever produced to support the schedules provided. There were no group certificates provided for those who had been the subject of workers' compensation claims. The Court was left not really knowing what the workers did and whether the group certificates and schedules were representative of all the workers of Mammoth. The schedules were amended during the course of proceedings to include the two workers the subject of compensation claims.
104 Prior to the two terms of insurance Caratti gave evidence the predominant industry for the group of companies was that of farming. At that time the company was involved in a number of farms. It is unclear from the evidence when the nature of the group's operations changed, if ever. Caratti was initially uncertain about the dates of the farm leases although it was clearly a subject upon which documentary evidence was available. Two insurance claims made during the initial term involved work on farms, albeit with some explanation as to the circumstances. The fact of the claims is a concern.
105 Lupis, given his experience in the insurance industry, was asked to comment on adjustments to premiums paid or to be paid on the basis of an industry category which changes as a result of a change in activities during an insurance period. Lupis indicated it was rare that activities would change. He indicated he did have some knowledge of such happenings but the only example he could give was that of Mammoth changing from an agricultural based income to a land division income. He could cite no other instances.
106 It had never been the position of Mammoth that there was a change in the industry category during the course of either term. Its position has been that during the terms it was always predominantly involved in land and subdivisional work.
107 The renewal application form dated 26 July 2001 for the further term of insurance was signed by A B Caratti and witnessed by Ellison. It declares the nature of the business as originally stated had not changed. The schedule to the policy states the business to be farming. That renewal application form sets out the actual wages paid for the initial period. The number of employees was 26 and the wages were $895,195. There is no detail provided by Mammoth as sought in the form for the class of employees, the class of work performed, contractors and subcontractors and working contractors.
108 On the face of it there were simply 26 workers within the meaning of the Act and these 26 workers were paid $895,195. On the basis of this information there was an adjustment to the premiums in accordance with cls 15, 16 and 17 of the contract contained within the policy document. The adjustment to the premium was in accordance with the information provided by Mammoth. The adjustment was confirmed by Mammoth on 23 November 2001.
109 The further term ended on 21 July 2002. There was never a like wages declaration made by Mammoth in respect of the further term.
110 Despite apparent knowledge by Mammoth of a likely material change in the information upon which the policy was based as early as June 2002 and the preparation of schedules before the end of 2002 GIO was never alerted to this as required by cl 19 of the insurance contract.
111 Forms and schedules filled in by Ellison were incomplete or carelessly completed. There were simple mathematical errors in the schedules.
112 Ellison was responsible for forwarding an insurance claim for Drayton to GIO. It was accepted that Drayton was a subcontractor and responsible for his own expenses. Ellison had been told by the farm supervisor Johnson to make the claim and he complied with this request despite knowing it was inappropriate. I formed the view that Ellison was likely to serve his employer or his work superiors despite the fact that the action may well be inappropriate or plainly wrong. Coupled with his carelessness and faulty memory I have great difficulty accepting any of his evidence.
113 It would have been of little inconvenience to provide source documents to show just how Mammoth operated. Documents such as a farm leases and wage records were said to be available and given the inconsistencies in the evidence became of crucial importance.
114 I did not find Caratti to be a credible or a convincing witness, despite having a very ready and apparently simple explanation for the inconsistencies. I do not accept the schedules accurately reflect the situation at Mammoth. Documents prepared closer to or at the time the contracts were entered into suggest a different situation.
115 I do not accept on the evidence before me that at the time the insurance contract was entered into the predominant industry of Mammoth was property development or subdivision. There is nothing that persuades me the nature of its predominant industry was anything but farming.
116 It therefore follows that, on the balance of probabilities I am satisfied that a valid and binding contract was entered into. That contract was renewed for a further term. There are unpaid premiums the calculations for which are not in dispute.
117 Despite a number of different legal concepts put to me by the defendant as to how this agreement could and should be construed, in the end, on the facts it is my view that the application of basic contractual principles adequately covers the situation.