As appears from the pleadings, just about everything that could have been in issue was in issue. The trial judge was persuaded to determine a number of questions separately because of the very large amount of time and money likely to be consumed in investigating and deciding the remaining issues. Those questions were:

1. Was a claim made within the terms of the policy and if so, when?

2. Is the Defendant estopped from denying that a claim was made by

IOOF against the Plaintiff during the period of insurance?

3. If no claim was made within the terms of the policy against the Plaintiff during the period of insurance was a claim subsequently made?

4. "Was a claim made within the terms of the policy reported by the Plaintiff to the Defendant during the period of insurance?

5. If a claim was not reported by the Plaintiff to the Defendant during the period of insurance was a claim reported subsequently?

6. If a claim was not reported during the period of insurance, but was subsequently reported, was the failure to report the claim during the period of insurance an omission within the meaning of Section 54 of the Act?

7. Did the Plaintiff, pursuant to condition 3 of the policy during the subsistence of the policy give written notice to the Defendant of an occurrence which might subsequently give rise to a claim against it for breach of professional duty by reason of any negligence whether by way of act, error or omission?

8. If the Plaintiff did not give written notice pursuant to condition 3 of the policy, was that failure an omission within the meaning of Section 54 of the Act?

9. Did the Plaintiff, pursuant to Sub-Section 40(3) of the Act during the period of insurance, give notice in writing to the Defendant of facts which might give rise to a claim against the Plaintiff?

10. Is the Defendant estopped from denying that the claim was reported during the period of insurance?"

In the result, the learned trial judge made findings adverse to the plaintiff and in consequence, gave judgment for the defendant. From that judgment, the plaintiff now appeals.

The policy issued by the respondent to the appellant was headed "PROFESSIONAL INDEMNITY POLICY" and provided:

THE COMPANY AGREES subject to the limitations, terms and conditions hereinafter mentioned or endorsed hereon:

1. To indemnify the Insured against any claim or claims for compensation first made against the Insured during the period of cover specified in the Schedule and reported to the Company during the period of cover specified in the Schedule . . .

2. The expression 'claim' shall mean the demand for compensation made by a third party against the Insured but shall not include the Insured's costs and expenses. . . .

4. A claim shall be deemed to be first made against the Insured when the Insured first receives an intimation from the third party that the Insured is being held responsible in part or in whole for a loss.

3. If during the subsistence hereof the Insured shall become aware of any occurrence which may subsequently give rise to a claim against him or them for breach of professional duty by reason of any negligence, whether by way of act, error or omission and shall during the subsistence hereof give written notice to the Company of such occurrence, then any such claim which may subsequently be made against the Insured arising out of such negligence shall for the purposes of this Policy be deemed to have been made during the subsistence hereof."

This extract is sufficient to demonstrate that the policy is a "claims-made" policy with an "occurrence notification" claus[e]. The historical development of such policies and the approach to their interpretation were discussed in a decision of the Supreme Court of Canada in 199[3]. McLachlin J, writing for the Court, said:

"In each case the courts must examine the provisions of the particular policy at issue (and the surrounding circumstances) to determine if the events in question fall within the terms of coverage of that particular policy. This is not to say that there are no principles governing this type of analysis. Far from it. In each case, the courts must interpret the provisions of the policy at issue in light of general principles of interpretation of insurance policies, including, but not limited to:

(2) the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and

(3) the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectations of the parties."

It is unnecessary in the present case to consider whether the third principle is part of Australian law.

The first issue is whether there was a claim for compensation first made against the appellant during the period of cover. That period was 20th March 1990 to 20th March 1991. In 1988 and 1989, the appellant, through Mr Verebes, had carried out 29 valuations for the IOOF or its predecessor. On 10th August 1990 the appellant notified Mr Verebes of its decision to close its valuation department and, by implication, of the termination of his employment. On 21st August 1990, a facsimile in the following terms was received on the appellant's fax machine:

We act on behalf of Independent Order of Odd Fellows of Victoria Friendly Society (formerly OST Friendly Society) in relation to their mortgage portfolio managed by McKinley Mortgages Ltd.

We note that you have provided valuations in relation to a substantial number of properties comprising our clients mortgage portfolio. We have given advice to our client that in our opinion there exists a number of grounds for legal proceedings against you in relation to the valuations.

The purpose of this letter is to put you on notice that in the event of our client sustaining a loss in relation to any of the mortgages comprising its mortgage portfolio and upon which you have prepared a valuation, our client intends to commence legal proceedings against you. We request that you advise your indemnity insurer of our clients intentions forthwith.

We further request that you inform us of the name and address of your indemnity insurer.

The appellant's first argument is that that letter constituted a claim for the purposes of the polic[y]. The learned trial judge held that it did not. He did so on the basis that "[a] claim must assert some entitlement vested in the claimant and enforceable against the recipient. An assertion of a possible future claim is not enough." He expressly did not consider "whether a letter addressed to a former employee would suffice ...."

Before us, the respondent made two general submissions in relation to the letter of 21st August 1990. They were:

(a) His Honour was correct in concluding that the letter was not a claim;

(b) in any event there was no evidence that the appellant received the letter.

It is convenient to deal first with the latter submission.

The foundation for the submission was the proposition that the onus lay upon the insured to prove not merely that the letter was received on its fax machine, but also that its contents had been "brought home" to an appropriate person acting on its behalf. For that proposition, Mr Keane QC, SG, cited a decision of the Ontario Court of Appea[l] where it was said that the words "claims made" in a policy against a solicitor's liability for professional negligence

"ought to be construed in accordance with the ordinary plain meaning of those words, which, simply stated, denote a claim that is ´made' by being notified to or otherwise brought to the attention of the person against whom it is asserted. However that is done, the essence of the making of the claim is that the substance of the claim is in fact ´brought home to' that person."

On this submission, it was said that we ought not infer the letter came to the attention of an appropriate person. This was because the first line of the address contained the name of Mr Verebes, who no longer worked for the appellant; and the appellant failed to produce the original letter in evidence or explain its absence. In this regard it is relevant to note that on 17th August 1990 both a receiver and a provisional liquidator were appointed to the appellant. No evidence was led from either of them and the matter was not referred to in the statement of Mr Novak, the principal of the appellant.

In my judgment this is far too fragile a foundation upon which to found a submission that the letter was not in fact received by the appellant. As His Honour found, Mr Verebes did not receive the letter. Its receipt at the appellant's premises was proved. I would not draw any adverse inference from the appellant's failure to lead evidence from the receiver and provisional liquidator, nor from its failure to put into evidence the original facsimile. With the appellant now being wound up, this action is being financed by the IOO[F], and run through the solicitors who wrote the letter of 21 August 1990. Why should they not rely upon the copy which they have to hand, rather than try to hunt out the original fax from the records of the receiver or the provisional liquidator? In my judgment, the proper inference is that the letter was received by the appellant.

The word "claim" has given rise to some litigation over the years in the context of policies such as the present. However the cases have generally been concerned with two issues: first, whether the word refers to claims made by the insured against the insurer or to those by a third party against the insured; and second, whether it refers to occurrences giving rise to liability or to demands received. Neither of those problems arises in the present case. The policy has been drawn with some care to avoid them. That fact emphasises the importance of construing "claim" in this policy, having regard to its context. As Kirby P and Glass J have both observed, the word when used in an insurance policy can have different meanings depending on the contex[t].

One point of distinction between the policy in the instant case and those in cases to which we were referred is the fact that "claim" has here been given an exclusive definition. That is a distinction of some importance. It does not mean that previous decisions are irrelevant; but it does indicate that our consideration should begin with the words of the definition and its applicability to the facsimile letter quoted above. Is that letter a "demand for compensation made by a third party against the Insured"?

The Oxford English Dictionary advances a number of meanings for the noun "demand". The first is clearly the most appropriate in the present context:

"An act of demanding or asking by virtue of right or authority; an authoritative or peremptory request or claim; also transf., the substance or matter of the claim, that which is demanded."

In the Macquarie Dictionary the first two definitions of the noun are "the act of demanding" and "that which is demanded". It is true that these definitions display some circularity of approach. They do, however, have one important feature in common. On the one hand, "demand" may emphasise the act of demanding. On the other, it may emphasise the subject matter of the demand.

That difference of emphasis throws light on paragraph 2. If "demand" here referred to the act of demanding, there would be an incongruity between the first clause and the second clause of the definition. Like would not be set against like; an act is not of the same class as costs and expenses. That incongruity may be avoided if the alternative meaning is adopted, i.e., the subject matter rather than the act. This requires that the expression "demand for compensation" be read as a cognate expression. So read, it becomes congruent with "costs and expenses".

Next, it should be observed that the definition uses the definite article to qualify "demand". In other words, it seems to assume that for every claim there will in fact be a demand. That will certainly be true if the emphasis is on the subject matter, for every claim must have subject matter. It would not necessarily be true if the word refers to the act of demanding. The subject matter of a claim may exist without any act of demand in respect of it.

These two features incline me toward the view that "demand" is used to refer to subject matter rather than action in the present context. It is true that neither feature is logically conclusive on the point. For example, it could be that the use of the definite article is intended to limit indemnity to cases where the third party does in fact do an act which amounts to a demand; but that would produce an odd result and be an oblique way to achieve it. On balance, it seems more likely that the definition is referring to the subject matter of the claim rather than the act associated with that subject matter.

This is not a case where one gains much enlightenment from substituting the definition into clause 1 of the Insuring Clauses. That clause simply does not seem to have been drafted with such an exercise in mind. Doing so duplicates the words "for compensation" in clause 1 and makes the words "against the Insured" in the same clause tautological. At a broader level however, there is no difficulty in reading clause 1 as obliging the respondent to indemnify the insured in respect of the subject matter of claims "first made" during the period of cover. And when one has regard to the definition of "first made" in clause 4, that view is reinforced. Under that clause, a claim is deemed to be first made when the insured first receives "an intimation" of the sort described. That clause would not sit happily with a meaning for "demand" which referred to the act of demanding. Such a meaning would allow the result that the time of making a demand could somehow relate back from the time of the act to the time of receipt of an earlier intimation. It is difficult to see what purpose would be served by such a provision. This difficulty is avoided if the clause refers to the time when the insured first received an intimation of the content of the claim. To the extent that any action is needed, receipt of an intimation is sufficient.

Did the letter amount to a claim in this sense? The respondent submitted that it fell short of being a claim because:

(a) it did not demand compensation or assert a right to compensation; and

(b) it was not made in respect of an existing loss, either purportedly or in fact.

It is true that the letter of 21st August did not particularise the remedy to which its writer implicitly asserted a potential entitlement. It is also true that the indemnity provided under the policy was only against claims "for compensation". It was however perfectly well known both to the sender of the letter and to the appellant that work had been done by way of valuation of properties in the IOOF mortgage portfolio. In that situation, it seems to me that the legal proceedings referred to must almost certainly have been for damages; and such a claim is quite properly described as one for "compensation" in this context. There is no formula which must be included in a claim by a third party. "What is required, unless the policy expressly so stipulates, is a form of demand or assertion of liability, not a formal demand or assertion of liability.["] It must be remembered that the wording is a matter quite beyond the control of the insured.

What of the fact that the letter did not allege that the IOOF had suffered any loss? Must the subject matter of the intimation include an existing loss by the third party?

In Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co, the Supreme Court of Canada said that "claims-made" policies should be examined with care to determine whether, read as a whole, they clearly transfer the risk of the long-term liability in question to the insured, and in particular that courts "should be careful not to construe ´claims-made' or hybrid policies in such as way as to exclude claims discovered by the insured during the policy period on the ground of some technical defect in the nature of the claim.["] However the Court also made it clear that each policy must be construed by reference to its own particular provisions. In the present case, there are to my mind two provisions in the policy which suggest that the subject matter communicated to the insured must include an allegation of an existing loss on the part of the third party.

The first (and most obvious) of these provisions is clause 4 of the definitions. That expressly provides that the intimation referred to is one whose content includes an assertion that the insured is being held responsible in part or in whole for a loss. I note the use of the indefinite article in the clause ("a loss"). That does not in my judgment detract from this point.

The second reason why I am inclined toward the view that an existing loss is required is the inclusion in the policy of condition 3, which is set out above. Although described as a condition, this clause is really an extension of cover. Read with the insuring clauses, it extends and clarifies the scope of the risk of long-term liability which is cast upon the insurer. It suggests that the policy distinguishes between "a claim" and "any occurrence which may subsequently give rise to a claim". There is no evident reason why these two concepts should overlap. This was the view taken by the Court of Appeals of Washingto[n] in a decision referred to without disapproval by the Supreme Court of Canad[a]. It is true that in Walker v. Pennine Insurance Co Pty Lt[d], Roskill LJ said:

"It seems to me that you can, within the present clause, have a claim by the assured for indemnity against a potential liability, long in advance of any claim against the assured by a third party being agreed or determined either as to liability or quantum or both.["]

However the clause in question in that case was very different from that under consideration here.

In the end, it is unnecessary that I express a concluded view on this point. The reason for that is that the letter of 21st August 1990 was not the last word on the subject from Higgins Teale. On 5th September 1990, those solicitors wrote to Alexander Stenhouse, the appellant's insurance broker. It seems this letter was received on 7th September 199[0]. In the course of that letter there appeared this paragraph:

"We request that you acknowledge receipt of this letter and confirm:

3. that this letter will operate as sufficient notification of a claim, full details of which will be provided in due course, under the terms of their policy, notwithstanding that the policy may subsequently lapse before a formal detailed claim is made."

Having regard to the circumstances known to both Higgins Teale and Novak Tonkin, the claim referred to in that letter, read against the background of the letter of 21st August 1990, is an existing claim, and implies an existing loss. It is not to the point that that letter, read in isolation, may not include sufficient subject matter to constitute a claim. There is no reason why the letter should be read in isolation. Nor does it make any difference that particulars of the claim were not furnished at that tim[e]. They do not have to be included.

One other argument was addressed to us on behalf of the respondent on this aspect of the case. It was submitted that no regard could be had to the letter of 5th September 1990 unless it were shown that Alexander Stenhouse "was the Appellant's agent authorised on its behalf to accept claims for compensation." The learned trial judge did not make a firm finding on the point. He said, "As to the letter of 5 September 1990 it was also not addressed to the insured, unless Alexander Stenhouse were agents for the plaintiff for that purpose, as they may well have been." His Honour seems to have considered that the question was whether there was authority to receive the claim, rather than to accept the claim, and it may be that this was the intention of the respondent's submission to us. Certainly, that is all the authority that would have been necessary.

By a letter dated 11th April 1990, the appellant wrote to Alexander Stenhouse in the following terms:

"Effective 8th February, 1990, this letter serves to appoint Alexander Stenhouse Australia as our Insurance Brokers and advisers with instructions to place the agreed covers (including specifically Professional Indemnity Insurance) on our behalf."

That letter does two things. First, it appoints Alexander Stenhouse as the appellant's insurance broker (and adviser). Second, it gives certain specific instructions for the placement of professional indemnity insurance. At the trial, an officer of Alexander Stenhouse (or Alexander & Alexander as they had by then become) gave evidence in the following terms:

"2. Alexander & Alexander have at all relevant times carried on business as insurance brokers. In that capacity they place insurance, receive claims made against their insured, notify and lodge claims with insurers, and generally act as agents for their insured. One such insured from March 1990 to March 1991 was Novak Real Estate Ltd trading as Novak Tonkin Valuations (hereinafter "Novak Tonkin")."

In my judgment, that evidence is sufficient in the circumstances to establish that Alexander Stenhouse was the agent of the appellant at the relevant time to receive claims made against it.

None of the cases cited to us involved a policy with a definition of "claim". Nonetheless, they show that, at least in the context of the scope of cover clause, the courts have dealt with the question of what amounts to a claim as one of substance and not of form. In Triden Properties Limited v. Capita Financial Group Limite[d], the insured were indemnified "against any claim or claims which may be made against them or any of them . . . . " The case was conducted on the basis that the insurer was liable only if it were shown that a claim was in fact made against the insured during the period of insuranc[e]. The third party alleged that the insured had negligently designed a building. It sent the insured a report setting out particulars of the alleged defects. It subsequently wrote to the insured in the following terms:

"Unfortunately in light of the report of Wood & Grieve Verge - Engineers the purchaser has decided not to proceed with the purchase of the building.

To avoid losing further potential purchasers it is imperative that all defects be remedied without further delay.

As previously noted whilst the building remains only partially tenanted the cost of remedial work will also be less as it will involve less disruption to tenants.

We remain committed to a commercial resolution of the problem with minimum cost to our respective companies. However you will appreciate that unless satisfactory arrangements are made for the rectification of those defects we shall be obliged to institute proceedings to protect our interests.

Subject to consideration of any comment you may put to us, we consider seven (7) days to be a reasonable period in which to finalise the rectification arrangements."

That letter was unanimously held by the New South Wales Court of Appeal to amount in the circumstances to a claim and the decision of the trial judge was upheld. Sheller J (with whom Clark and Powell JJA agreed), referred to a dictum of Steyn J defining "claim" as "the assertion by a [third party] against [the insured] of a right to some relief because of the breach by the insured of the duty referred to in the cover." He held that the letter quoted amounted to such an assertion. He quoted approvingly the trial judge's statement that the threat of legal action if the defects were not rectified was "a claim against [the insured] for damages for the defective design if [the insured] did not itself correct them.["] His Honour's view accords with that of Mahoney J (in a decision to which His Honour referred) that "claim" refers "to something in the nature of a demand . . . to satisfy a liability which [the insured] is alleged to have to a third party or, at the least an assertion or stipulation to [the insured] that he is liable so to do.["] Applied to the present case, these views support a finding that the letters of 21st August and 5th September 1990 together constituted a claim.

"2. The Insured shall as a condition precedent to his or their right to be indemnified under this Policy to [sic] give to the Company immediate notice in writing:

Question 4 in the Statement of Issues apparently refers to this condition.

Alexander Stenhouse Limited forwarded a document described as "Insurer Claims Advice" to the respondent on 25th October 1990. It seems that that document attached copies of the letters of 21st August and 5th September 1990 from Higgins Teal, though it may be that these were sent to the respondent some time between 5th and 12th September 1990. The date does not matter. The respondent neither pleaded nor argued that the notice was not "immediate notice in writing" within the meaning of condition 2. It submitted that the Insurance Claims Advice and enclosures was not a report of anything more than the terms of the letter of 21st August 1990. That submission must fail. Question 4 must clearly be answered, "Yes["].

Having regard to the foregoing findings, the other issues referred to in the statement of issues do not arise or need not be determined.

In my judgment, the appeal should be allowed. The judgment and orders made below should be set aside and in lieu thereof it should be declared that a claim was made against the plaintiff within the terms of the policy (being Document 1 in Exhibit 1) on or before 7th September 1990, and that the plaintiff gave the defendant notice of the claim in accordance with condition 2 of that policy during the period of insurance. The respondent should pay the costs of the appeal and of the hearing in the Trial Division. There should be a direction that the parties list the action before the Senior Judge Administrator for directions regarding both the future conduct of the action and proceedings under Order 99 of the Rules.

[For a discussion of the nature of such policies and the problems involved in them, as well as their interaction with parts of the ]Insurance Contracts Act 1984, see F. Hawke: "Notification of Circumstances Under Claims-made Policies: Some Observations Upon the Scope and Operation of the Insurance Contracts Act 1984 (Cth)", (1994) 6 Insurance LJ 252.

[Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co ] [1993] 1 SCR 252; 99 DLR (4th) 741.

[The appellant was for a period called Novak Real Estate Ltd and traded under the name Novak Tonkin.

Re] St. Paul Fire and Marine Insurance Co and Guardian Insurance Co of Canada (1984) 1 DLR (4th) 342 at 357 per Thorson J.A.; followed in Triden Properties Limited v. Capita Financial Group Limited, unreported, Court of Appeal NSW, CA 40356/94, 15th November 1995.

[I infer this fact from the terms of the order for costs made below.

Transport Industries Insurance Co Ltd v. NSW Medical Defence Union Ltd] (1986) 4 ANZ Insurance Cases 60-736 at pp. 74,411 and 74,416 respectively. Kirby P dissented, but this observation was not the point of dissent. See also Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co [1993] 1 SCR 252 at pp. 268-271; 99 DLR (4th) 741 at p. 751-753.

[Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co] [1993] 1 SCR 252 at p. 275; 99 DLR (4th) 741 at p. 756.

[[1993] 1 SCR 252 at 267; 99 DLR (4th) at p. 750.

Safeco Title Insurance Co v. Gannon] 774 P. 2d 30 at p. 33 (1989).

[[1993] 1 SCR 252 at p. 274; 99 DLR (4th) at p. 756.

The date of receipt is only semi-legible in the record. I will propose this date for the order in the appeal.

Thorman v. New Hampshire Insurance Co (UK) Ltd] [1988] 1 Loyds Rep. 7 at p. 12.

Evidence in chief was given by signed statements, which were tendered to the trial judge.

[Triden Properties Limited v. Capita Financial Group Limited], unreported, Court of Appeal NSW, CA 40356/94, 15th November 1995.

[In other words, despite the use of the old form of policy ("which ]may be made. . ."), it was not argued that the liability attached in respect of any claim which could have been made against the insured during the period of insurance even if in fact the claim was not made in that time: compare Gyler v. Mission Insurance Company 10 Cal. 3d 216 (1973); 514 p. 2d 1219 and see G R Masel: Professional Negligence of Lawyers, Accountants, Bankers and Brokers, 2nd ed. p. 471.

[Transport Industries Insurance Co. Ltd v. NSW Medical Defence Union Ltd] (1986) 4 ANZ Ins Cas 60-736 at p. 74,420 (emphasis added).

[As it happened, the respondent also received a letter direct from Higgins Teal dated 21st September 1990. This described the Alexander Stenhouse notification as being "of a potential claim", but that is of no consequence. The letter gave particulars of the 29 valuations involved and announced the intention of IOOF to lodge separate claims for damages in respect of each one. The appellant could not rely upon this letter as the claim because it was not copied to the appellant. Because of this letter, the respondent in fact knew more about the claim than did the appellant!