Mr O'Reilly
207 Mr O'Reilly was an impressive witness. I found him to be honest and careful in giving his evidence; he was willing to make concessions and was responsive in his answers, and notwithstanding the remove from the relevant events by effluxion of time, he appeared to have a clear recollection of the events of which he spoke. To the extent his evidence was sought to be impugned by Liberty, such challenges did not lead me to believe that I should reject any particular aspect of his evidence. My favourable impression as to the manner in which he gave his evidence generally was enhanced by his frank and somewhat self-critical reflections as to his misunderstanding of the operation of the policy at the time he said he contacted Mr Burgess.
208 In response to a question from me, Mr O'Reilly indicated that the preparation of his affidavit was initially led by him after he was interviewed by the solicitors for Icon in respect of his recollections, and was unassisted in that preparation by any contemporaneous documents. He confirmed that he had, in the course of the preparation of his affidavit, adverted to the terms of the Liberty Policy, but indicated that at the time he first gave instructions, he had an independent recollection of Conditions 8 and 16 without being assisted by looking at that policy. I accept this evidence.
209 I further accept, and it was indeed uncontroversial, that Mr O'Reilly understood, at all relevant times, the nature of the standard practice concerning the two types of usual annual cover that was available the construction insurance industry, either on a turnover or contracts commencing basis.
210 As I have noted, Liberty placed great emphasis in its submissions on Mr O'Reilly's purported misunderstanding of the operation of the policy, in support of its submission that he could not have held the Contracts Commencing Intention. It was first said that, although Mr O'Reilly knew that the third party liability policy referred to turnover, "he was prepared to ignore" that fact because he thought (erroneously) that Condition 15 operated to make the policy "contracts commencing". It further submitted that in fact, Mr O'Reilly concluded that Condition 8, which referred to calculation of premium based on turnover, simply "did not apply" for the purposes of the Liberty Policy. Insofar as this submission was an attempt to show some confusion on Mr O'Reilly's part inconsistent with him holding the requisite common intention, I do not accept it. To my mind, the submission amounts to no more than an assertion that Mr O'Reilly's intention in relation to the operation of the policy was erroneous, not that he did not hold that intention in the form in which he attested. Further, the submission in effect ignores the established fact that the parties' agreed that Condition 8 did not operate according to its terms.
211 Liberty made two further submissions in respect of Mr O'Reilly's purported confusion as to the operation of the Liberty Policy. Liberty first submitted that Icon's contention that Mr O'Reilly understood the Liberty Policy to have covered defects liability periods "fails to appreciate the important distinction between the effect of a contract as executed and the advantages that might be available under a contract depending on what the parties do." Reliance was placed in support of that submission upon a passage from the judgment of McLelland AJA in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329. In that case, his Honour, who had written a brief judgment concurring with Sheller JA, observed the following (at 345):
In general, the remedy of rectification of an instrument is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way. In this context "effect" means the legal and factual operation of the instrument according to its true construction, but does not include legal or factual consequences of the operation of the instrument of a more remote, or collateral, kind (for example, its liability to stamp duty).
(Emphasis added in Liberty's closing submissions).
212 It was that second emphasised statement of McLelland AJA that formed the basis of Liberty's submission. On that submission, under the Liberty Policy as executed Icon was already permitted to obtain cover during the defects liability period: it could have kept renewing the annual policy; it could have sought an extension of the endorsement beyond the construction period; or it could have sought run off cover in September 2017, when its final Liberty policy expired. It took none of those steps. Accordingly, "the advantages that might be available" under the Liberty Policy were said to be the ability of Icon, in one of the three above ways, to obtain cover for the defects liability period. Although it was not articulated precisely, it appeared the submission proceeded on the basis that it therefore followed that such advantages are merely "remote, or collateral" advantageous "consequences of the operation" of the Liberty Policy, rather than being the legal and factual effect of the Liberty Policy according to its true construction.
213 This submission fails upon close inspection, in particular when it is recognised how the principle referred to by McLelland AJA has been considered in the authorities. Upon setting out that quote from McLelland AJA in its submissions, Liberty omitted the final words, being "(for example, its liability to stamp duty)". As Tadgell JA observed in Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd [2001] VSCA 2; (2001) 3 VR 526 (at 529-30 [10]) in relation to McLelland JA's statement:
It is as well to understand that the unintended legal effect that it was held to be appropriate to remove by an order for rectification was not the attraction of a liability of the instrument to stamp duty: that was merely a collateral consequence of the unintended legal operation of the misapprehended meaning of the words that were used.
214 Indeed, as the detailed review of the authorities by the Victorian Court of Appeal in CA & CA Ballan Pty Ltd v Oliver Hume (Australia) Pty Ltd [2017] VSCA 11; (2017) 55 VR 62 (Redlich, Tate and Ferguson JJA) demonstrates, the cases in which the principle referred to by McLelland AJA have been applied, have, in many cases, concerned statutory fiscal advantages to be gained from the document as rectified. In that case, the Court of Appeal referred with approval to a passage from the decision of Ashcroft v Barnsdale [2010] EWHC 1948 (Ch), with which Liberty's reference to "advantages that might be available" under a contract bears a close resemblance. Judge Hodge QC (sitting as a judge of the Chancery Division) in that case had relevantly said (at [16]):
So long as a mistake relates to the meaning or effect of a document (rather than the consequences of, or the advantages to be gained from, entering into it), relief may be available even though the actual words of the document were deliberately adopted by the parties.
(Emphasis added).
215 The Court will not grant rectification of a document "merely because it fails to achieve the fiscal objectives of the parties to it" (at [17] emphasis in original). Relevantly, what is required where the advantage of the contract is in issue is that there is an issue capable of being contested between the parties that will affect their rights. In that connexion, it can be seen that a fiscal advantage devoid of such an issue would truly be a collateral or remote consequence of the type referred to by McLelland AJA: see also Racal Group Services v Ashmore [1995] STC 1151 (at 1157); Wills v Gibbs [2007] EWHC 3361 (at [26] per Rimer J); GE Capital Finance Australasia Pty Ltd v Federal Commissioner of Taxation [2011] FCA 849; (2011) 219 FCR 420 (at [119] per Gordon J).
216 It appears to me that the purported "advantages" pointed to by Liberty are not collateral or remote. The rights of the parties would be affected by a decision to order rectification. If rectification were not ordered, the manner by which the parties agreed to conduct their dealings, where Icon declared and paid a premium in relation to projects commenced during the period of the relevant policy, would not entitle Icon to obtain cover inclusive of the defects liability period, whereas if rectification was ordered, it would. Indeed, the operation of the Liberty Policy in the way Icon seeks to have it rectified goes to the heart of subject matter and purpose of that policy, being the extent to which cover is provided to Icon.
217 The second submission was concerned more directly with the formation of Mr O'Reilly's intention. In broad summary, it was submitted that Icon cannot establish with precision its own intention through Mr O'Reilly, because there was an error underlying the formation of his intention due to his misinterpretation of the Liberty Policy. Liberty said that Mr O'Reilly's understanding generally of the third party liability policies it provided Icon, and the evidence adduced in cross-examination of Mr O'Reilly in respect of the MDCW policy, was "so confused as to be almost meaningless", characterised by "imprecision", "looseness", "incoherence" and a "muddled interpretation" of the policy.
218 It will be noticed that the evidence Liberty adduced from and brought to the attention of Mr O'Reilly was directed to establishing Mr O'Reilly's confusion between the operation of the two policies Icon entered into with Chase. The evidence relied upon said to establish Mr O'Reilly's confusion I have set out (at [165]-[167]) above. In that respect, the evidence was, at least partially, marshalled for the purpose of casting doubt upon Mr O'Reilly's account (or at least his understanding) of his conversations with Mr Burgess. As I have mentioned, those conversations are of signal importance.
219 I must say that I initially found it somewhat unusual, given the importance of the operation of the policy to Icon, that Mr O'Reilly did not confirm in writing shortly after those purported conversations, either by email or by some form of contemporaneous note, what had passed between them. In response to a question from me as to why this did not occur, Mr O'Reilly accepted that the conversation was one of some significance, but noted that although it had become significant now, in the light of what Mr Burgess had explained to him, at the time he did not appreciate its significance because that explanation had made the position obvious. However, as I have set out (at [164]) there was an email dated 19 September 2012 from Mr O'Reilly to Mr Burgess, eight days after the purported conversation, which Mr O'Reilly expressly noted in its introductory words was written "following on from our many conversations". Mr O'Reilly stated in that email that Austbrokers was replacing Icon's existing insurance with a programme delivered by Chase which was "Contracts Commencing". Although that email did not, in terms, refer to the specific conversation between Mr O'Reilly and Mr Burgess on 11 September 2020, nor was it immediately contemporaneous, for reasons I will further explain, I am satisfied that it supports the notion that that conversation occurred in the terms described by Mr O'Reilly.
220 I believe Mr O'Reilly's evidence as to both the conversations between him and Mr Burgess and also his evidence concerning the preparation of his affidavit, and to my mind, this latter evidence supports a finding that he had a clear recollection of the relevant conditions. I also accept Mr O'Reilly was genuine in his answers as to why he did not write a more contemporaneous note of the conversation, and his evidence (at [169]) as to why he did not entreat Chase to amend the policy wordings. Moreover, no contrary account of the relevant conversation was put to Mr O'Reilly, nor was it put to him that his evidence of the conversation was false. In circumstances where, as I will detail below, I have found that Liberty knew the nature of what Mr Burgess' evidence would have been had he been called, this forensic decision to challenge Mr O'Reilly by highly experienced counsel is of significance: see Chong v CC Containers Pty Ltd [2015] VSCA 137; (2015) 49 VR 402 (at 461-2 [202]-[203] per Redlich, Santamaria and Kyrou JJA), quoting R v MAP [2006] QCA 220 (at [57] per Keane JA).
221 Icon submitted that Mr O'Reilly's evidence concerning the conversations with Mr Burgess formed the basis of the fact that he held the Contracts Commencing Intention. Nevertheless, as Liberty correctly submitted, the Court should not merely accept what a party says was their intention, but instead consider and weigh admissible evidence probative of that intention, which must be manifested in some way by the parties' words and conduct. Any conclusion on common intention is a matter of what inferences may be drawn from that evidence.
222 In this respect, much was also made by Liberty of the invoices of Austbrokers sent to Icon and its closing instructions to Chase in support of the submission that Mr O'Reilly's understanding of the two policies was confused. It may be accepted that Austbrokers' inclusion of the details of the MDCW policy in those documents is curious, but I do not think that fact bears the consequence that Liberty submits. Both the MDCW policy and the Liberty Policy were provided to Icon in tandem, quoted and invoiced together by Chase. There is no doubt Mr O'Reilly viewed it as essentially one programme. This explains Mr O'Reilly's evidence that his email to Mr Burgess of 19 September 2012 (see [164] and [219]) was referring to his intention that the third party liability policy was to be a contracts commencing policy, notwithstanding that the email can be read as referring to both policies. Accepting, as I do, that Mr Burgess identified to Mr O'Reilly that the liability policy operated as a contracts commencing policy through the mechanism of Condition 15, it is understandable that Mr O'Reilly proceeded on the basis of treating the elements of each policy somewhat interchangeably. It was not, of course, good practice to provide the client with elements of the MDCW policy in a quotation with respect to the liability policy, but this does not negate the fact that the reason for Mr O'Reilly doing so was his understanding that the policies were in effect "exactly the same" in the relevant respect.
223 Of course, on the instrument as executed, he was wrong. However, it must be borne in mind that Icon's claim relates to a mistake as to the effect of the Liberty Policy as executed. In Carlenka, the Court was faced with the question whether rectification may granted where the mistake is as to the document's effect rather than as to its contents. Through a careful review of the authorities, Sheller JA (at 343-4, with whom Mahoney AP and McLelland AJA agreed) held that rectification was available in such circumstances, so long as the common intention for the claimed legal effect was "clearly predominant" over the legal effect of the document on its true construction: citing Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 (at 406 per Hodgson J). Further, his Honour quoted (at 343) with approval the judgment of Thomas J in Winks v W H Heck & Sons Pty Ltd [1986] 1 Qd R 226, a decision of the Full Court of the Supreme Court of Queensland. In that case, Thomas J (with whom Shepherdson J agreed) had said (at 237):
In the present case, by common mistake, the writing failed to express the agreement accurately, and in these circumstances the fact that the plaintiff also read the document erroneously does not matter. Such a double error may frequently arise in a rectification suit.
(Emphasis added).
224 This presents an answer to Liberty's submission concerning Mr O'Reilly's confusion. So long as the parties held a common intention as to the legal effect of the document that was inconsistent with its true effect, it matters not that the parties misinterpreted its legal operation. It is that common misinterpretation, contrary to the true agreement, which grounds the equity.
225 I further accept that, provided with the endorsements and email confirmations as to cover sent by Chase, Mr O'Reilly was not concerned that those communications did not refer to the defects liability period because he believed that the effect of the Liberty Policy was that that period was always covered. This belief accords not only with the commercial realties but with his further evidence, which I accept, that the reason for his reference in the emails to Icon to the Liberty Policy remaining in place "until Practical Completion is achieved", and for Austbrokers' requests for extensions on certain projects when a practical completion date was looming, was that he believed it was not necessary to refer to the defects liability period; the practical completion date was the only relevant variable. The evidence further establishes that those extension requests were a reflection of Mr O'Reilly's cognisance of the maximum construction period, which was 36 months for any one project.
226 The evidence further establishes that Mr O'Reilly's intention was formed immediately prior to Icon's entry into the policy with Liberty in September 2012, and continued throughout the course of the party's dealings, including up to and inclusive of the entry into the Liberty Policy. I accept Mr O'Reilly's evidence that the Aon report (see [171]) reinforced his belief and intention in the operation of the Liberty Policy. Further, Austbrokers' project-specific certificates of insurance, issued to Icon, its annual quotations slips and its project-specific email declarations, sent to Chase, which all refer to the 12 month defects liability period, are compelling evidence that Mr O'Reilly's continued intention was that the policy was to operate as a contract commencing policy.
227 Finally, as I noted to counsel for Liberty during their closing address more generally in relation to its submissions in respect of Mr O'Reilly, although Liberty submits that Mr O'Reilly did not hold the relevant intention, it did not directly challenge Mr O'Reilly on the proposition that he subjectively believed that he was obtaining cover inclusive of the defects liability period.
228 Accordingly, I find that Mr O'Reilly held the Contracts Commencing Intention, and that therefore that intention is to be attributed to Icon.