Max Hams & 1 Ors v CGU Insurance Limited

Mr M Cashion SC, Mr RG Forster SC, Mr J Lawrence (Plaintiffs) COUNSEL : Mr PW Taylor SC, Mr RA Cavanagh (Defendant) Mr SD Rares SC, Mr J Stoljar, Ms T Catanzariti (Australian Security and Investments Commission as amicus curiae) Maurice Blackburn Cashman (Plaintiffs) SOLICITORS : Deacons (Defendant) Australian Security and Investments Commission (as amicus curiae) CATCHWORDS : Insurance - Policies - Contract of Insurance - Indemnity under insurance policy - Damage caused by inundation of water - Whether inundation constituted a 'flood' within the terms of the policy - Policy excluded cover for 'flood' where: "Flood means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or run-off of surface water from surrounding areas" - Expert hydrological evidence - Meaning of the word 'lake' - Proximate cause - Wayne Tank principle: If a loss has two or more proximate or effective causes and at least one cause is excluded from cover, the insurer is not liable - Insurance Contracts Act 1984 (Cth) [ICA] - Proper construction of the words "clearly informed the insured in writing (whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise)" - What must an insurer do to clearly inform the insured in writing of the provisions of the insurance contract within the meaning of s 35(2) of the ICA - Whether the test is whether in all the circumstances the insurer has clearly informed the insured of the relevant provision, such that the mere provision of a document containing the relevant provisions is insufficient to discharge the insurer's obligation if the supply of that document did not of itself clearly inform the insured of his or her obligations - Whether the requirement on the insurer under s35(2) is satisfied in every case by the supply to the insured of a document containing the relevant provisions, as may be suggested by the words in parentheses immediately following the words "clearly informed the insured in writing" in s35(2) - What is the operation and effect of s 35 of the ICA in circumstances in which the damage was caused by a number of proximate causes, one of which was excluded from cover - Holding that: (1) The words in parentheses in section 35 (2) "whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise" are likely in most circumstances to result in the provision of such a document in and of itself satisfying the requirement to clearly inform - (2) There may however be special circumstances in which the complexity of or confusions within the document containing the relevant provisions (which one would expect would usually be the Insurance Policy itself) could be such that the mere provision of the Policy did not establish that the insurer had effectively informed the insured of relevant limitations Crown Lands Act 1989 (NSW) Insurance Contracts Act 1984 Insurance Contracts Regulations 1985 Native Vegetation Conservation Act 1997 (NSW) LEGISLATION CITED : Soil Conservation Act 1938 (NSW) South Eastern Water Conservation and Drainage Act 1992 (SA) Statute Law (Miscellaneous Provisions) Act (No.1) 1985 No.65 (Cth) Statute Law (Miscellaneous Provisions) Act (No. 2) 1985 No. 193 (Cth) Water Conservation Act 1936 (SA) Water Resources Act 1989 (Qld) City Centre Cold Store Pty Limited & Anor v Preservatrice Scandia Insurance Limited (1985) 3 NSWLR 739 Dodson v Grew (1767) Wilm 272 Re Bolton; ex parte Beane (1987) 162 CLR 514 Fell v Fell (1922) 31 CLR 268 GIO General Limited v Wallace [2001] NSWCA 299 Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 ALJR 307 HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498 Jordan v De George 341 US 223 (1951) Keener v Sharp 95 S.W. (2d) 648 CASES CITED : K Sika Plastics Limited v Cornhill Insurance Co Limited [1982] 2 NZLR 50 Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60 Lumley General Insurance Limited v Delphin (1990) 6 ANZ Ins Cases 60-986 National & General Insurance Co Limited v Chick [1984] 2 NSWLR 86 Oakleaf v Home Insurance Ltd (1958) 14 DLR (2d) 535 Petersen v Union des Assurances de Paris IARD (1995) 8 ANZ Ins Cases 61-244, Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cases 61-366 Provincial Assurance Australia Pty Limited v Consolidated Wood Products Pty Limited (1991) 25 NSWLR 541 State Chamber of Commerce and Industry v Commonwealth (1987) 163 CLR 329 Suncorp General Insurance Limited v Cheihk [1999] NSWCA 238 Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57 DECISION : The claim to indemnity with respect to the Homestead is made out. The claim to indemnity with respect to the hangar is not made out. The proper construction of section 35 of the Insurance Contracts Act 1984 (Cth) is dealt with. The parties are granted leave to address further submissions on any claim or matter arising from the above findings which may not have been dealt with. Subject to that, short minutes are to be brought in by the plaintiffs.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50022/01 Max Hams & 1 Ors v CGU Insurance Limited JUDGMENT

The Proceedings 1 The plaintiffs hold the perpetual lease on a property known as Koralta Station which covers 24,676 hectares and lies approximately 100 kilometres northeast of Broken Hill. The homestead, shearers' quarters and other buildings are located within a geographical feature known as the Koralta depression. 2 The following description given by Mr Hams serves as a convenient overview outline: "The Koralta homestead and other buildings are located at the side of the Koralta depression which is best described as valley approximately 4 kilometres long, 700 metres wide, on average, with an uneven floor which creates 3 sumps where water collects after a heavy thunderstorm or a lot of rain has fallen. The northern end of the depression is open and joins land which rises about 1 metre per kilometre. This slightly sloping land extends for 20 kilometres or so away from the homestead. Trees grow over much of the floor of the depression as well as native grass vegetation.

Approximately 3 kilometres north east of the Koralta homestead is a large depression with the local name of Scour Lake. The sump in the bottom of Scour Lake is oval shaped and flat bottomed…

To the north west of Koralta homestead is another depression. The centre of the depression is located approximately 8 kilometres from the homestead. The depression is approximately 2 kilometres wide and 3 kilometres long. On the southeastern corner of this depression is a small choke formed by 2 small ridges almost joining together but leaving an opening with a width of approximately 11 metres wide...

Situated further to the northwest, approximately 10 kilometres from the homestead, is a depression known as Canegrass Swamp. This depression is situated in the corner where Coogee Lake Station, Waterbag Station and Koralta Station join. It is approximately 1.5 kilometres in diameter and has a depth of approximately 2-2.5 metres of water…

Approximately 20 kilometres to the west of the Koralta homestead is Treloar Creek which drains into Coogee Lakes located to the north west of Koralta Station. The final section of the creek runs through Langidoon Station to the west of Koralta Station.

Approximately 16 kilometres to the north west of Koralta Station [are] Coogee Lakes which consist of one large lake and a series of small lakes." [Affidavit 1 June 2001 - paragraphs 5, 7 - 11] 3 On 20 and 21 February 2000, exceptionally heavy rain fell in the area in and around and surrounding the Koralta depression. Evidence was given that the probability of the occurrence was approximately 1 in 2000. The buildings and equipment located on Koralta Station were progressively inundated as the water level within the depression rose. 4 The plaintiffs held and made a claim pursuant to a "RuralPak Gold" policy of insurance No. 351 766886304 issued by the defendant ["the policy"]. The property insured under the policy included farm dwellings, buildings and machinery. Considerable destruction, loss and damage was occasioned to the property so described. These proceedings are brought by the plaintiffs pursuant to the policy claiming to recover an indemnity in respect of the damage and loss so occasioned. The booklets containing detail of the policy wording 5 The policy was taken out in 1995 and renewed annually. Relevantly a renewal covered the period 28 April 1999 to 28 April 2000. Two booklets ["the policy booklets"] containing detail of the policy wording had been sent to Mr and Mrs Hams, the first booklet being received apparently in 1995 [transcript page 62] and the second booklet being received prior to the inundation the subject of these proceedings. The booklets appear to be identical and were marked as exhibits P 7 (i) and (ii) respectively. They were kept with the business records at Koralta. The terms of the Policy 6 The policy contained the following provisions: "The Buildings and Contents as shown in the Schedule are insured against destruction, loss or damage caused by an Accident or Misfortune except: … 2. destruction, loss or damage caused by: (a) Flood, storm surge, the action of the sea, tidal wave, high water or tsunami" 7 The term "Flood" was defined in the policy as follows: "Flood means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or run-off of surface water from surrounding areas." 8 The defendant has denied liability on the basis that:- · the policy excludes destruction, loss or damage caused by flood; · the damage was caused wholly, or in the alternative partly, by flood.

The doctrine of proximate cause 9 The parties are agreed that this Court is bound as a matter of stare decisis to accept the following as the relevant principles which are to be applied: · If a loss has two or more proximate or effective causes and at least one cause is excluded from cover the insurer is not liable: Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57; Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cases ¶61-366 ("the Wayne Tank principle"). · If a loss has two or more causes, and loss from one is insured against and none of the others is expressly excluded, the insured is entitled to recover: HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 at 612B. 10 As outlined in the defendant's overviews submissions two bases are put forward for the refusal of indemnity as follows: " Flooding from External Source

Rain commenced on the morning of Sunday, 20 February. By 0230 on Monday, 21 February 230mm had fallen. The rain stopped later that morning at about 0800. A total of about 230mm of rain had fallen. That amount of rain was the equivalent to the annual rainfall for the area.

Before the last rain fell the water level in the Koralta depression had already risen to flood the Hams' aircraft hangar. After the rain stopped, and between about 8.30 and 9.00 a.m. the Plaintiffs heard water roaring from the northwest (Robert Hams, 1 June 2001, paragraph 21). They observed an approaching body of water over 300 metres wide. This water entered the Koralta depression.

Water continued to flow into the Koralta depression throughout the rest of the day. By about 1000 the shearers' quarters were flooded. By about 1800 water first entered the homestead.

The defendant maintains that water that flowed into the Koralta depression during the Monday included water that had escaped from external creeks, in particular, Treloar Creek. The defendant contends that satellite images demonstrate the flow of water from Treloar Creek into the Koralta depression by no later than 1100 on Tuesday 22, February 2000. The defendant also contends that the best estimates of the water that was likely to have entered the Koralta depression before the entry of the water from Treloar Creek, could not have flooded the homestead.

Accordingly, the water that entered the plaintiff's buildings and specifically the plaintiffs' homestead was either (i) a mixture of water from Treloar Creek (and other creeks) and run off from the local catchment district or (ii) water from the local catchment that entered the homestead only as a result of the presence of Treloar Creek water within the Koralta depression.

In accordance with Peterson v. Union des Assurances de Paris IARD (1995) 8 ANZIC 61-244 liability is excluded under the Policy because, even if any of the water that actually entered the buildings originated as "run off, it only inundated the plaintiffs' buildings because of the water that escaped from Treloar (and other) Creeks."

Escape of Water from Lakes within the Koralta Depression

There were three "dry" lakes within the Koralta Depression. Topographical maps consistently record them. Satellite images, and photographs show them containing water periodically. In the ordinary course of events water entering the Koralta Depression would preferentially fill these lakes. In the case of a massive inflow, the lakes would overflow and tend to flood the rest of the depression.

This is what occurred with the massive rainfall on 20/21 February. The plaintiffs' buildings were inundated after the three lakes filled and after the water level rose elsewhere in the depression because water continued to enter it.

This dictates conclusion that inundation of the plaintiffs' property was caused by flood within the meaning of the Policy. The inundation of the buildings followed the escape of water from the three lakes within the Koralta Depression. That causal relationship is satisfied irrespective of whether the water which actually inundated the plaintiffs' property had ever been within the natural confines of any of the three lakes. Once water escaped from the confines of those lakes, any water entering the Koralta Depression could not flow, as it normally would, into them. Any inundation the additional water caused itself "followed" the escape of water from the lakes and therefore falls within the policy exclusion: Provincial Assurance Australia Pty Limited v Consolidated Wood Products Pty Limited (1991) 25 NSWLR 541 at 564; K Sika Plastics Limited v Cornhill Insurance Co Limited [1982] 2 NZLR 50." [emphasis added] The plaintiffs' case in overview submissions 11 The plaintiffs' case was that the evidence would establish that by the time the water within the depression peaked at about 10.00am on Wednesday 23 February 2000, the sources of the water were: · Rain and run-off from within the Koralta depression; · Water which had travelled over land from the Treloar Creek which was located to the west and possibly also; · Water from Lake Scour to the Northeast. 12 On the plaintiffs' case the real issue is as to the timing of the arrival of the water from those respective sources. 13 The plaintiffs' primary case is that as at that time, the highest flooded building (the Homestead) was inundated by water, namely by 6.00pm on Monday 21 February, the only source of the water within the depression was rainfall and run-off within the Koralta depression. On the plaintiffs' case the consequence is that the "Flood" exclusion does not entitle the defendant to deny liability under the policy. Section 35 of the Insurance Contracts Act 1984 14 The plaintiffs have an alternative case which is put insofar as the holding may be that the defendant was entitled to refuse indemnity under the policy by reason that the destruction, damage or loss to the plaintiffs' property fell within the exclusion of cover where such damage was caused by "Flood" as defined. This alternative case is that by operation of section 35 of the Insurance Contracts Act ("ICA") and the Insurance Contracts Regulations 1985, the defendant is precluded from relying on the flood exclusion insofar as the policy provides cover for destruction, loss or damage to the plaintiffs' "Home Building" (as defined in sub regulation 2 of the Regulations) and "Contents" (as defined by sub regulation 2 of the Regulations). 15 Put shortly, the plaintiffs' alternative case is: · the policy was a prescribed contract for the purposes of s35 of the Insurance Contracts Act, [cf regulations 9, 13, Insurance Contracts Regulations 1985]; · "flood" is a prescribed event within the meaning of s35(1) of the ICA [cf regulations 10, 14, Insurance Contracts Regulations 1985]; · prior to entry of the policy the defendant did not clearly inform the plaintiffs in writing that the policy excluded destruction, loss or damage caused by flood; · consequently, the defendant cannot by reason of s35 refuse to indemnify the plaintiffs in respect of the damage. 16 A pleading issue was reserved and is dealt with below 17 The defendant's response is that even assuming that section 35(1) ICA applies, the Defendant has satisfied section 35(2) ICA. The defendant claims to have provided the Insured with (i) a notice that "flood" was not covered, (ii) a copy of the policy wording. The provision of such documents are said to satisfy the requirements of Section 35(2): GIO General Limited v Wallace [2001] NSWCA 299; Section 11(10) ICA.

18 The defendant's also assert that: · Mr & Mrs Hams knew that flood was excluded from the insurance; · Mr & Mrs Hams knew that flood was excluded from the insurance. 19 The parties have now agreed quantum pursuant to the policy. The Evidence Description of site and locality 20 Both parties put forward a large volume of evidence in relation to the topographic layout of the district in which Koralta is located and many maps, charts, diagrams, photographs, satellite images and analyses were tendered. These went to the central factual issue which was litigated in terms of the identification of the proper source of the water which had inundated the Homestead by 6.00pm on 21 February 2000. 21 Albeit that the evidence put forward by both parties was not identical in relation to the general description of site and locality, it seems to me that a sufficiently clear general overview picture may be taken from the following sections of the reports of Mr McConnell, an expert called by the plaintiffs and Dr Porter, an expert called by the defendant: "(a) …. The landscape is ancient and has experienced millions of years of geomorphic or landform development to the extent that there are no longer any regularly defined watercourses leading from high land to major river systems. Rather, there are a number of short watercourses that drain to ephemeral lake systems, eg. Treloar Creek draining to Coogee Lake, Scopes Range Creek draining to Blue Lake, etc. Other creeks of note are Acacia Creek, Big Bilpa Creek and Little Bilpa Creek. (b) There is a generalised overland flow pathway tending southwards in parallel with the Darling River which lies about 100km to the east. The defined watercourses within the region surrounding Koralta drain into the overland flow pathway south or downstream of Koralta except for Treloar Creek and Coogee Lake. Thus only the defined watercourses of Treloar Creek and Coogee Lake have the potential to affect Koralta… (c) Treloar Creek is the closest identified watercourse feeding into the overland flow pathway north of Koralta. Its own overflow pathway is 23 km long and feeds through Canegrass Swamp and an adjacent unnamed swamp before passing overland to the Koralta buildings. There are no defined watercourses shown on currently available mapping within 20 km to the north or northeast of the Koralta homestead towards 'Waterbag' and 'Boorungie'. Two small unnamed intermittent lakes lie to the north and east of the homestead. One acts as a sink for runoff from 'Waterbag' and the other as a sink for runoff from 'Glenora'. Another depression, Canegrass Swamp lies halfway between Koralta homestead and Coogee Lake. There are also a number of other shallow depressions surrounding Canegrass Swamp. These swamps will delay the progress of overland runoff whilst they fill prior to any chance of overflowing… (d) The 1:250,000 Broken Hill Land Systems Series shows Koralta Homestead in a land unit described as "Small lakes in red country with local catchments. Beds of cracking or non-cracking clays and solonised brown soils, with sandy surface deposits around shorelines… lunettes of sandy solonised brown soils, often shallow overlying calcrete." This small landscape unit encompasses the depression in which Koralta Homestead is located and Scour Lake to the north. All of the other land units surrounding Koralta are classified as "Sandplains" or "Dunefields" with very low topographic relief. (e) On a regional scale, Koralta is located in the Bancannia Trough, a broad landscape depression aligned NNW - SSE. Within the trough there is little landscape relief, and the flat plain features many depressions. At Koralta, the width of the Trough below elevation 150 m AHD is approximately 25 km. Higher ground, often hilly, is found to the west and east of the Bancannia Trough. During episodic runoff events, runoff is channelled towards the Bancannia Trough in creeks from both sides. When flowing, these generally terminate in lakes and claypans. A map of the district is shown in Figure 2.1. (f) There is a very gentle slope to the south along the Bancannia Trough, and further south Acacia Creek can flow through to the Darling River. Treloar Creek enters the plain west of Koralta station, and normally terminates in Coogee Lake. Treloar Creek has a large catchment of almost 400 km ² , and conveys runoff from as far as 55 km west of Koralta. Ramparts Creek enters the plain NNE of Koralta near Waterbag homestead. It has a medium-sized catchment of approximately 140 km² upstream of Waterbag homestead, which drains from the Ramparts Hills. These are an area of rock outcrops and shallow, stony soils. Ramparts Creek often terminates in claypans south of Waterbag homestead. (g) Like many arid zone creek and river systems, the termination of flow after a storm episode depends on the volume of runoff produced. When larger volumes of runoff are produced, lakes and claypans overflow. The geomorphology of the landscape then often features a series of lakes or pans which fill progressively as the flow continues and the volume of contributing runoff increases. This behaviour is exhibited by both Treloar Creek and Ramparts Creek. In the case of Treloar Creek, with sufficient creek inflow Coogee Lake overflows and can spill to the north and south-east, where other lakes are located which then fill in turn. In the case of Ramparts Creek, a long series of claypans exist south of Waterbag homestead, and these will fill sequentially as creek inflow continues. These lead to Scour Lake, and if there is sufficient volume of runoff this would fill Scour Lake. If Scour Lake spills, runoff will continue into the depression surrounding Koralta homestead and fill the lakes there." The Evidence as to the water inundation 22 The close evidence as to the water inundation generally focused across the period from Sunday 20 February 2000 at about 10:30am when light rain was first experienced travelling through the following days up to about 23 February 2000 when Mr and Mrs Hams were evacuated from the property. The convenient course is to treat with this evidence on a day-to-day basis: Sunday 20 February 2000 23 Mr Hams gave the following evidence: "On Sunday, 20 February 2000 at approximately 10.30am, it began raining lightly. By approximately 6.00pm, I measured 37 millimetres of rain in the rain gauge. The rain continued and grew heavier. At approximately 9.00pm, 75 millimetres of rain was recorded. The rain continued all night and when it stopped at approximately 8.00am on Monday, 21 February 2000, a total of 226 millimetres had fallen. [I interpolate to note that Mrs hams generally gave evidence to like effect]

During the night, surface water from surrounding areas began running towards the homestead and buildings. The water ran from surrounding paddocks towards the lowest point in the area, the Koralta Depression. By 6.00am, I measured the water depth in the hangar was 10-20 centimetres deep. The water was relatively clear in colour and running into the area around the Koralta buildings at a rapid rate." [Affidavit 1 June 2001] Monday 21 February 2000 24 Mrs Hams gave evidence that at about 8.00am the rain stopped and that there was water lying around some of the buildings from the rain and the run off from the surrounding paddocks. Her evidence was that about 100 metres North of the wool shed the water was knee deep. 25 Mr Hams gave the following evidence: "Between approximately 8.30am and 9.00am on Monday, 21 February 2000, Judith and I could hear water roaring from the north west. We walked towards the noise and saw a body of water over 300 metres wide approaching the buildings, approximately 100 metres north of the wool shed. Judith and I walked through the water which was almost knee deep and appeared to be increasing in depth.

During the morning Judith and I frantically worked to prevent the water entering the homestead. I sandbagged the fence while Judith put possessions on the table tops and ferried electrical goods and photographs up the hill to the woolshed which is approximately 2 metres above the ground. We also tried to save the contents of the shearer's quarters. We lifted up the carpets which we placed on tables along with other items.

At approximately 10.00am, water started entering the shearer's quarters. At approximately 12.30pm, water had entered the house yard. At about 6.00pm, the water entered the house. Throughout the day Judith and I tried to save as many possessions as we could. We evacuated the house and spent the evening in the wool shed." [Affidavit 1 June 2001 paragraph 21] 26 In his later affidavit he gave the following evidence:

"When I described a "body of water over 300 metres wide approaching the building, approximately 100 metres north of the woolshed", I was describing what I saw when Judith and I were returning from our walk to Scour Lake . Initially Judith and I walked from the Koralta buildings until we could see down into Scour Lake. We were approximately 10 metres above the water level at that time. While walking back from Scour Lake, we walked through the woolshed paddock. About 100 metres north of the woolshed I was surprised by the amount of water we had to walk through. It was over 300 metres wide and almost knee-deep. The water was quite clear. As I walked through this water I looked towards the northwest, and saw sheet water flowing from the higher ground into the lower level of the Koralta Depression where we were. The sheet water flowing from the higher ground into Koralta Depression was similar to a wide, but low, waterfall. The colour of the water was relatively clear and the flow steady. The image I saw created an impression of a "wall of water". There was no wave action. It was not an advancing "flood front", as stated at paragraph 5.11 and page 21 of the Porter Affidavit. There was a roaring noise coming from the inflow of the surface water run-off into the Koralta Depression. [Affidavit 9 September 2001 paragraph 5] 27 Mr Hams had completed a Property Claim Report which included a statement dated 21 March 2000 in relation to which his evidence concerning the events of the Monday had included that at 8:30am: "We could hear water roaring so we walked up to have a look about 2 km away. Could[sic] see a huge body of water coming towards us". 28 Under cross-examination Mr Hams gave evidence to the following effect: "Q. But about 8.30 you did hear roaring water? A. That's correct Q. And where were you when you heard it? A. We are on the-on our walked up towards Scour Lake and my recollection, we were just north of the house tank. We passed the house tank and heading up towards, on the high ground, up towards Scour Lake and I could hear the noise" [transcript page 38] 29 During his cross-examination Mr Hams departed from the version of events to which he had deposed in his affidavits, now giving evidence that he and his wife were already on the walk when he heard the water roaring. The approximate detail of the loop, which he and his wife had walked, had been sketched by him on Exhibit P3. His evidence now [transcript page 42] was that he and wife had left home at about 8.00am and they walked south and went around the house dam and had been on the walk for about half an hour when they could hear the water roaring. He could not explain how his 21 March 2000 statement was incorrect but suggested that the typing had all been changed from time. He accepted that the matter was quite important and that he had never attempted to correct the 21 March 2000 statement. 30 Under cross-examination his evidence was that he had been able to hear the roaring sound once he and his wife had walked approximately 400 or 500 metres past the house dam towards Scour Lake. They were still approximately 1 kilometre from Scour Lake and walking on the high-end ridge to the lake. When they first heard the roaring sound they were not able to see Scour Lake and the water which was already behind them had not been roaring. Generally the land in front of where they were standing obscured them from any view of the water. [transcript page 40] 31 Mr Hams gave evidence to the following effect in relation to what he saw when he reached Scour Lake: "Q. And how far above its [Scour Lake's] normal confines were you standing when you and your wife were looking. A. Approximately 8 to 10 m… on the high ground. Q. And how far was the water in Scour Lake, below the normal confines? A. At that stage it would have had one to one and a half metres of water above the floor level of the Lake." [transcript page 41] 32 Mr Hams evidence was that he was standing approximately 8 to 10 metres away from the water and was able to give an accurate measure that the water was one and a half metres deep "because the fence line runs - that is outside the normal confines, it was well outside Scour Lake at the fence. It comes in the fence at about 2 metres deep and it was still well away from the fence at that time" [transcript page 41]. The water in Scour Lake was making considerable noise but this was not the noise of roaring which he had heard. Water was clearly running into Scour Lake. 33 Mr Hams also gave evidence that he and his wife headed back to the north of the wool shed and coming back they could hear more noise coming from the wool shed. They had come back quite a way. And the other noise had finished. From memory Mr Hams and his wife were 400 to 500 metres east from the wool shed, the Scour Lake noise had stopped and he could then hear the noise from another lot of water coming from the wool shed. At the time he first heard this noise he was already walking in water in low areas but the water was not flowing but standing still in the low depression for example. There was also water in the gutters, service water run off. 34 Mr Hams gave evidence to the following effect: " Q. And as you walked from Scour Lake to the point where you were when you first heard the new-what I will call 'the new roar'? A. Yes. Q. You walked through water behind you? A. In the depression, A. yes. Q. And it was flowing? A. No. A lot of that was stopped, it was water which couldn't go anywhere, it was laying in low, in low areas. Q. The first part of that answer you said a 'lot of it had stopped', didn't you? A. I'm not sure what I said now, but you asked me had the water stopped flowing and I said, no, it stopped down off the depression and where we walked, it was just off the high depression. Where we walked, once you come down off the ridge, it was on low flat type country, and it is small undulations like that, and there's lot of water lying in the depression… Q. And is there any water at all in the distance, that you walked from Scour Lake to where you first heard the noise, where any of the water that you are walking through is flowing towards the depression any, at all? A. There is some gutters until we hit the main body of water. Q. Now, so you hit the main body of water. What I want to know is in the depression that you walked through up until you heard the noise, were any of them knee deep? A. Not at that time, no… The roaring wasn't coming from near the wool shed, it was coming from where it was dropping in the depression, about a km or south (sic) out from the north west… Q. And was this noise sort of a relatively sudden thing that occurred? A. No. Q. What was it? A. No it gradually changed, the noise from Scour Lake water almost ceased and it was a lower rumbling noise for a start, and when it got closer, it was distinct that it was water roaring… … we were heading to the wool shed and it was to the side [about a km]… Q. And it was obscured from trees? A. As we heard it, yes, but as we got closer we could see it. Q. As you got closer to what? A. The body of water. Q. Between you and the shed, the water wasn't roaring ? A. It wasn't roaring, it was moving and making a more too tight (sic) noise, it wasn't roaring, that's not where the roaring was coming from. Q. . The roaring was coming from the water a km away A. Approximately, may be 800 metres" [transcript page 49] 35 Mr Hams gave evidence to the following effect: " Q. I want to ask you about the roaring water to the north of where you were standing. That's 800 meters to a kilometre away? A. That's to the edge of the depression. Its total slopes tend to drop almost like a little waterfall down into the depression…

Q. The water that you can hear roaring, the source of the noise?… that was 800 meters to a kilometre away? A. Where the roaring was coming from, A. Yes Q. You're still…. 800 metres from the wool shed when you first hear the noise? A. When we hear it, yes. Q. That's 800 metres, is that 800 metres north? How far north of the wool shed were you? A. We were actually … at the north east from the wool shed when we first heard the noise and it would have been 800 metres or a km in the north-easterly direction from the wool shed when we first heard the second roaring noise… Q. So you're 800 metres north east? A. Yes. Q. The roaring noise is 800 metres north west of you? A. No, north west of the wool shed Q. What I want to know is how far from you? A. About 800 meters to a km from us.. Q. And it is away from you in which direction, northerly direction? A. No, north of west. Q. So it is north west of you 800 meters to a km from you? A. Approximately, yes" [transcript page 53 - 54] Tuesday 22 February 2000 36 An important satellite image [Exhibit P3] was captured at approximately 11:13am on 22 February 2000. It became the subject of the closest attention during the hearing. In order not to interfere with the image, a number of transparencies were overlaid upon the image and the various witnesses who were taken to the image marked the transparencies. The interpretation of the image was also the subject of expert evidence particularly that given by Professor Forster. Some assistance is gained by comparing a satellite image captured on 27 January 1994. 37 Mr Hams gave the following evidence: "At approximately 7.00am on Tuesday, 22 February 2000, the water depth in the house was knee deep. At about 8.00am I was present when Judith took a photograph of the water level near the homestead. Exhibited to me at the time of swearing this Affidavit and marked "RMHEX7" is a copy of the photograph. I have marked on the photograph steel bands on the tank in the background which is located next to the wool shed. Three metal bands are visible on this tank and the water level was approximately 10 centimetres below the top of the third band from the top of the tank.

The colour of the water was relatively clear, however at about 9.00 - 9.30am, I noticed that reddish coloured water began to appear from the north west.

At approximately 9.30-10.00am, an aircraft circled the buildings and I had a conversation by UHF radio to the occupants of the plane, my sister, Ruth Sandow, and her husband Jonathan Sandow.

At about midday on Tuesday another aircraft circled the Koralta buildings and I had a conversation by UHF radio with William Bryan Clarke of Kayrunnera Station. Mr Clarke gave a description of water which he expected to arrive at Koralta.

At approximately 11.00pm on Tuesday night, dirty water arrived at Koralta." 38 Mrs Hams evidence was that the water level continued to rise slowly throughout the evening and that at 11.00 pm: "the water, which we could see by torchlight, appeared to be dirtier". 39 Mr Sandow, who is Mr Hams brother-in-law and lives at Pimpara Lake Station, piloted an aircraft on the Tuesday in an endeavour to make contact with Mr and Mrs Hams to render assistance. He deposed in his affidavit of 12 June 2001 inter alia as follows:

"On Tuesday, 22 February 2000 I was a pilot in command of an aircraft that departed Koonawarra Station to fly in a south westerly direction to Koralta Station… the rear of the aircraft.

I intended to fly the aircraft directly over the Koralta homestead. Due to the immense amount of water in the region I actually flew past the homestead without recognising it. The first recognisable feature of the landscape was the road which ran east of Little Topar Station to Koralta homestead. I circled the aircraft to fly in a northerly direction using the partially visible road as a guide.

At about 10.00am I saw the red roof of the shearer's quarters and the rooves of the other buildings including the homestead at Koralta. I flew the aircraft over the buildings, completing several circuits of the area, flying between 500 to 1,000 feet. Visibility on the day was very clear. The water level on the shearers' quarters was approximately 18 inches below the guttering. The water level on the grader parked alongside the hangar was approximately 6-10 inches below the top of the bonnet of the grader. I estimated that the water surrounding the grader to be six feet in depth.

I recall the colour of the water around the homestead was very clear, however, there appeared to be brown water streaming in under the gate on the road from Cane Grass Tank, about a kilometre and a half north west of the house.

Whilst circling over the homestead I made radio contact on the UHF radio and spoke to Max Hams. I turned the intercom on in the plane so that David and Ruth could hear Max speaking.

During the course of the conversation, Max also said that he was concerned about his sheep. I flew the aircraft in a westerly direction and located the sheep to the west of the house. Many of the sheep were on small islands between mulga flats. The colour of the water on the flats was clear.

I flew the aircraft back to the vicinity of the homestead area and circled the buildings several times. Ruth took photographs of the homestead and the surrounding buildings. I contacted Max Hams again on the UHF radio to advise him that the stock appeared to be okay.

As it was not possible to land the aircraft because of the substantial amount of water, I proceeded to fly back to Pimpara Lake Station at approximately 330 ° north. As we flew from the immediate vicinity of the Koralta Station, I recall seeing a body of water flowing from the north east of Koralta Station. There were large bodies of water to the north of Koralta, some of the water was red and some of it was clearer." 40 Mrs Sandow who was also in the plane gave evidence inter alia as follows: "The visibility on the day was clear and I took two cameras with me to take photographs.

There was an immense amount of water in the region. So much so that we originally flew over Koralta Station without realising it. It wasn't until Jonathan noticed the road running to the east of Little Topar Hotel that we realised that we had flown past Koralta homestead. Jonathan turned the aircraft around and then used the road from Little Topar as a guide to Koralta homestead.

At about 10.00am I saw the red roof of the shearer's quarters and the roof of the homestead. Jonathan flew the aircraft over the homestead and completed several circles of the area. The homestead, shearer's quarters, hangar and workshop were completely surrounded by deep water. The shearer's quarters was immersed up to the approximately one foot below the guttering. The tank located beside the hangar was immersed up to approximately one foot from the top of the tank. The water level was approximately one foot from the top of the fence at the homestead. The tailpipe on the house dam was floating and only the wheel and a short length of the tower of the windmill was visible. There was no sign of the banks of the Koralta house dam.

From the air it was possible to see different colours of water. Around the house and the sheds and in front of the shearing shed was a long narrow body of light coloured water. The toilet out from the shearing shed was roughly central in this stretch of clear water. Red water was moving around the shearers quarters towards the house. There were bands of red water on top of the clear water to the east, moving in from the north west. It appeared to be passing the eastern side of the house and entering a narrower area to the south.

Jonathan made radio contact with Judith first and had a brief conversation. When Jonathan spoke to Max he turned the intercom on in the plane so David and I could hear Max speak. During the course of this conversation, Max said, words to the effect, "The water is about a foot below the engine room at the shearing shed. The red water arrived about half and hour before"…

We then flew towards Pimpara Lake Station, in a north westerly direction. I recall seeing a large body of water, red in colour, approaching at about 45° north east to our flight path not far from the homestead area. It was an unusual body of water and I am aware that there are no creeks in that direction." Wednesday 23 February 2000 41 Mr Hams gave the following evidence:

"At approximately 10.00am on Wednesday, 23 February 2000 when Judith and I were evacuated the water level was virtually static, that is, I was measuring the water depth and observed that the water level had almost stopped rising. Exhibited to me at the time of swearing this Affidavit and marked "RMHEX8" is a photograph taken recently of the wool shed tank. The high water mark is clearly visible and is approximately 30 centimetres above the top of the third metal band which I have indicated on Exhibit RMHEX7. In my estimation, the difference between the high water mark shown on Exhibit RMHEX7 (taken at 8.00am on 22 February 2000) and the water level in Exhibit RMHEX8 is 40 centimetres. At its peak the water was approximately 2.3 metres at the shearer's quarters and approximately 1 metre in the house." 42 Mrs Hams gave evidence that throughout the morning the water level continued to rise but at a very gradual rate and that by the time she and her husband were evacuated at 10.00am the water level had almost stopped rising.

Friday 25 February 2000 43 Mr Hams evidence was that throughout the period he did not observe the Koralta depression to overflow but its boundaries did spread to the north as it filled with water run off from surrounding areas. He did not observe the Scour Lake depression to overflow. On 28 February 2001 he observed that the depressions had joined. Additional evidence from Mr Hams 44 Mr Hams further evidence was that: "On or about 13 April 2001 I measured the depth of Scour Lake depression to be 3.4 metres. The high water mark is 2.9 metres above this, making it a total depth of 6.3 metres at its peak in February 2000.

During April 2000 I observed the depression referred to in paragraph 8 above extended to about three kilometres long and two kilometres wide with an average of two to three metres in depth. There were still dry sticks laying on the floor of the choke.

On 10 March 2000, I observed that Canegrass Swamp (see paragraph 9) was filled with water to about 1.5 kilometres in diameter and one metre below its overflow level of between 2-25 metres. I did not observe the depression to fill or overflow." [Affidavit 1 June 2001 paragraph is 31-33] 45 In his subsequent affidavit of 9 September 2001 Mr Hams gave evidence that:

"Canegrass Swam did not fill to its capacity and did not overflow during the inundation of water in February 2000. On 10 March 2000, I observed that the water depth in Canegrass Swamp was about 1 metre below its overflow level of approximately 3 to 3.5 metres. At that time, the water level had receded approximately 15 centimetres from the peak water level." Origin of the water which inundated the property The experts' evidence 46 Evidence was given by a number of experts called by both parties. Mr McConnell 47 Mr McConnell, who gave evidence for the plaintiffs, is a consulting civil engineer with very extensive qualifications and some 30 years experience in river, coastal and hydraulic engineering. His curriculum vitae includes: "His technical expertise lies in analytical and field investigations of physical processes, conceptual and detail design and physical and computer modelling. Project experience has included shoreline stabilisation and development, environmental impact and protection studies, fisheries habitat mitigation, coastal and river sediment studies, marine structures, and river training and crossings." Dr Porter 48 Dr Porter who gave evidence for the defendant has a PhD from Monash University and has had some 33 years of professional experience in water engineering and flood hydrology. His curriculum vitae establishes that he has managed numerous projects on flood plain management and undertaken numerous flood studies and investigations of flood related matters. His curriculum vitae includes: "He was a Principal Hydrologist with the Victorian Rural Water Corporation from 1993 to 1995 until the Corporation was privatised, and he subsequently led groups on Surface Water Investigations and then in Floodplain and River Management with Sinclair Knight Merz. He has managed projects on floodplain management in NSW, Victoria and WA, and has undertaken numerous flood studies and investigations of flood-related matters. In 1999 he advised the Ministry of Water Resources in China on national policy on flood control and management on behalf of the World Bank and AusAid, and he is about to contribute to the formulation of a new State floodplain management strategy fro Western Australia." Dr Markar 49 Dr Markar who gave evidence for the defendant obtained a Bachelor of Science (Engineering) degree with first-class honours in Sri Lanka, has a PhD from Monash University and has had very extensive experience in relation to hydrologic and hydraulic systems and assessments of flooding behaviour. He has had extensive computer modelling experience. Professor Forster 50 Professor Forster who gave evidence for the plaintiffs is the Visiting Professor in the School of Surveying and Spatial Information Systems at the University of New South Wales having previously been the Director of the Centre for Remote Sensing and GIS. He has been involved in consulting teaching and research in satellite remote sensing for 25 years and has a PhD in this field from the University of New South Wales. He has a very impressive curriculum vitae having published over 100 research papers and consultancy reports, on many occasions dealing with complex projects generally concerning or involving interpretation of satellite imagery. Purpose of the inquiry 51 Both parties engaged in a series of complex analyses generally putting a number of alternatives in support of the respective cases broadly outlined in the early overview set out in this judgment. In final address these cases moved slightly. 52 It is necessary to approach the factual inquiry bearing in mind the context in which the inquiry arises. 53 The examination of the totality of the evidence naturally requires a careful assessment of the evidence given by the experts. This is a case in which that assessment is particularly difficult primarily because of the underlying complexity of the sundry formulae used by the experts and their often radically differing interpretation: · of the nature and extent to which a modelling analysis may be seen as reliable · of the validity of alternative input into the modelling analysis · of the satellite images and of the contemporary photographs 54 Likewise the experts disagreed either entirely or in part as to many of the following matters: · the extent of the relevant catchment contribution areas of significance. · when Treloar Creek overtopped, · the height of over topping , · the precise flow route from Treloar Creek following overtopping, · the capacity of Treloar Creek · when Treloar Creek arrived at the Koralta depression, · assumed flow heights following the breaching of the banks of Treloar Creek. 55 Each party claimed a lack of objectivity in the expert evidence adduced from the other. Limitations as to scientific analysis 56 It is absolutely plain from the progression of the evidence generally to be found in their several reports that each of Mr McConnell, Dr Porter and Dr Markar varied their opinions in material respects as the case progressed. While several explanations were given for the adjustment and shifting of positions taken in these reports I was left with the clear impression that for all the analyses, figures, graphs, statistics, modelling results and attempts to interpret water coloration, the matter is simply very far from being certain in terms of a scientific analysis. Time and time again the point which seemed to be made by the expert witnesses was to the effect that there were severe limitations in terms of the resources made available to them for the study and some significant problems in terms of aspects of their evidence where they had either not visited the site at all or had only been in a position to view certain parts of the local topography. 57 Hence Dr Porter had not been on Koralta Station at all as he never went over the fence line. He was able to say that he had been on the country adjacent to it "which has a similar appearance in satellite imagery" although he accepted that the local catchment was located almost entirely in Koralta Station. [transcript 25 March 2002 page 62] 58 Dr Markar accepted that it would have been preferable to undertake a different type of modelling in terms of a hydraulic model "with proper survey data of the entire area.. [which] would explain different directions the water would flow…" [transcript 287]. His evidence was that the analysis had not made any attempt to predict exactly where the overflows would have occurred or how much would have occurred as part of the study. There was very little data to calibrate the model: "Without calibration, you are guessing to an extent. You are making a judgment to an extent.." [transcript 287] The defendant's written submissions 59 The defendant's written submissions in final address moved from an outline of the analysis into submissions going to the probabilities and referring to factual considerations in relation to the evidence adduced from the experts. Mr Taylor SC supplemented these submissions in oral address to an extensive degree. Factual findings sought by the Defendants 60 The defendant which has accepted that it bears the onus of establishing that the subject loss or damage was caused by "inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, as the result of a natural phenomena on which has some element of violence, suddenness or largeness about it." [see the first section of the Policy definition of "Flood"] [transcript 20 March page 126, 26 March pages 33, 34], contended for the following factual findings: "- Essential factual findings 1. The water level in the depression when the first building (the hangar) was inundated was caused by water that had escaped from the lakes within the Koralta depression itself.

2. The water level in the depression when the shearers' quarters were inundated was caused by water that had escaped from · the lakes within the Koralta depression itself · Treloar Creek.

3. The water level in the depression when the homestead was inundated was caused by water that had escaped from · the lakes within the Koralta depression itself · Treloar Creek · Scour Lake.

• Supplementary factual findings 4. Any water that entered the Koralta depression following rainfall would preferentially fill the "lakes" within the Depression. None of the buildings could have been inundated until the volume of water exceeded, and thus "escaped" from, the "normal confines" of those "lakes".

The Treloar Creek overflow started well before midnight on the evening of Sunday 20 February 2000.

The Treloar Creek overflow is likely to have first arrived at Koralta between 12 and 14 hours after the overflow started. That arrival, fits appropriately with the Ham's observation of a "roaring" wall of water seen by them entering the depression at about 0930 on 21 February 2000.

Scour Lake overflowed during the course of Monday 21 February 2000 sometime after Mr & Mrs Hams observed water "roaring" into it, when it already contained 1.5 metres of water, at about 0900 that morning.

The water that actually entered the house, whatever its ultimate precise origin, did so because of the causal presence of water that had escaped in the manner contended for in paragraphs 1 to 3 above.

Water from both Treloar Creek and Scour Lake entered the depression during Monday 21 February 2000." 61 Notwithstanding that it is necessary to return to these matters in the courts findings below it is convenient even at this stage to set out the defendants written submissions: " Policy interpretation - see Exhibit P1 tab 9 Policy interpretation - see Exhibit P1 tab 9

1. Interpretation of the policy exclusion is assisted by adopting a shorthand description of its relevant parts. We will set out the exclusion wording and explain the "shorthand" descriptors.

2. The exclusion is for destruction, loss or damage caused by "flood", where "flood" is defined to mean

Description Exclusion Wording the "escape requirement" "... inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, the "cause requirement" as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it, the "declaration" but does not mean the "equipment qualification" inundation by water from fixed apparatus, fixed tanks, fixed pipes the "run off qualification" or "run off of surface water from surrounding areas"

3. The "escape requirement" and the "equipment qualification" are mutually exclusive:- 3.1 "apparatus" and "tanks" are the only words in the "equipment qualification" whose ordinary meaning could conceivably bring them within the class of "reservoir" or "dam" referred to in the "escape requirement" 3.2 but since the "escape requirement" refers to "normal confines" it is highly unlikely to include "apparatus" and "tanks" that have real and fixed, as distinct from "normal", confines, 3.3 the apparent intention to confine the "escape requirement" to escape from natural water storage is confirmed by the fact that the definition of "apparatus" and "tanks" specifically excludes "lakes, reservoirs or dams": see Exhibit P1 tab 9 clause 2(a) . 4. Water that escaped from apparatus might also find its way into, and thereafter escape from, the normal confines of a watercourse of the kind referred to in the "escape requirement". But it could not sensibly be contended that the "equipment qualification" was intended to address, and to provide indemnity in, such a situation. If such an apparatus leakage occurred, a natural phenomenon which caused a subsequent escape of water from a natural watercourse, and its resultant damage, would not give rise to an indemnity. It could not sensibly be contended that the original "tank" source of (part of) the water would prevent the exclusion from applying. The triggering of the "cause requirement" necessarily implies that the "tank" water had become mixed with other water, and could not thereafter be described as water "from fixed apparatus". 5. It follows that the "equipment qualification" is wholly explanatory of the "escape requirement" and does not limit its operation. 6. The "run off qualification" is also exclusive of the "escape requirement". "Escape" means both "leaving" and also "avoiding" in the sense of "failing to enter" [Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 564; K Sika Plastics Ltd v Cornhill Insurance Co Ltd [1982] 2 NZLR 50]. Accordingly, "flood" waters present at any particular place may have 3 relevant origins. These are: 6.1 water that has come from a specific creek or lake overflow location and source (either remote or local) 6.2 water, running off from surrounding areas, that cannot enter its intended lake, reservoir, dam, river, creek or navigable canal destination

6.3 water, running off from surrounding areas, that has no lake, reservoir, dam, river, creek or navigable canal destination.

7. The first alternative can readily be seen as falling within the "escape requirement" and unaffected by the "run off qualification". The third alternative cannot fall within the "escape requirement". The second alternative requires more careful consideration. 8. The second alternative assumes run off water has an intended watercourse destination but cannot enter it. Water of that characterisation satisfies the "escape requirement". The "run off qualification" does not suggest this impeded water should be treated, for policy purposes, as retaining its "run off" character and thus outside the exclusion. 9. The "run off" qualification is concerned with the causal reason why the water was present on the property and the reason why it caused the inundation from which damage resulted. If the reason the run off caused inundation was the fact that it could not continue flowing to, or had been forced out of, or away from, the normal confines of its intended destination, then the resulting inundation has been caused by "flood". It has been caused by water that cannot properly be characterised as "run off". Accordingly, the "escape requirement" and the "run off qualification" are simply mutually exclusive concepts. Causation - inundation "following escape" Causation - inundation followingescape 10. The evidence unambiguously establishes that the inundation occurred as a result of a large natural phenomenon - the unprecedented rainfall of 20 and 21 February 2000.

11. The water inundated the buildings following its "escape" from "lakes" within the Depression.

12. Although Mr Hams referred to them as "sumps" there is no doubt that 12.1 they were the preferential water collection areas within the Koralta Depression

12.3 had normal confines that stopped well short of the inundated buildings. Factual findings - "any lake ... creek ..." 13. The things Mr Hams referred to as sumps were "lakes" within the meaning of the policy wording.

14. The fact that they did not often hold water is irrelevant. No one would contend that the fact that an Australian creek was dry, or is dry most of the time, precludes its classification as a "creek". The Todd River, for example, is a notorious example of a potentially dangerous and fast flowing Australian inland river - which just happens to be a dry gravel bed most of the time. Lake Eyre is in a similar position. So too, no-one in this case does, or could sensibly, contend that Treloar Creek is not a creek - though it too is dry except after recent train. 15. The essence of the characterisation of a creek or lake is whether it does exhibit the material characteristics at the relevant time.

16. The characteristics of a "lake" is that it is a place where a significant body of water can collect and where it is surrounded by other land. The "sumps" satisfy that description. They are 16.1 identified as lakes on the topographical maps 16.2 identified as lakes within the most recent soil conservation classification 17. Alternatively, the place described by Mr Hams as "Scour Lake" clearly satisfies the description of a "lake". It is 17.1 the discharge point of recognised watercourses 17.2 it is ringed by vegetation consistent with the fact that it regularly holds water 17.3 it is a large area 17.4 it regularly holds water. 18. Alternatively, Treloar Creek obviously satisfies the "escape requirement" in the policy definition. Cause and "proximate cause" 19. The critical causal question is whether the damage was caused by "inundation following the escape of water ...".

20. The question of causation is to be determined by the commonsense evaluation of the relevant facts. The last causal event to occur will usually be an effective contributing cause, especially where it has a cumulative and independent origin:: [Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350] National & General Insurance Co Limited v Chick [1984] 2 NSWLR 86 at 97 City Centre Cold Store Pty Limited & Anor -ats- Preservatrice Scandia Insurance Limited (1985) 3 NSWLR 739 at 744F to 745A, B Petersen & Anor v. Union des Assurances de Paris IARD (1995) ANZ Ins Cases 61-244 at 75249, (1997) 9 ANZ Ins Cases 61-366 at 77034. 21. Causation, including the identification of a "proximate cause", is not a binary analysis. Multiple causes may contribute effectively to the loss - and if one is excluded the policy does not respond: Petersen at 75749, Wayne Tank v. Employers liability Insurance (1974) QB 57; City Centre Cold Store at (1985) 3 NSWLR at 744G Sutton on Insurance Law in Australia (3rd Ed, para 15.10) Proximate Cause- Question of Fact 22. The inundation of water followed the escape of water from a creek or lake because 22.1 alternatively, the water that fell in, or flowed into, the depression following the 20 & 21 February 2000 rain, would normally have been collected in, and confined to, the three lakes within the depression. All the buildings lay outside the "normal confines" of those "lakes": see Exhibit PX1 tab8; PX1 vol2 tab32 photo2 ; Tcpt D228 10-20 22.2 water entering the depression from the contiguous areas flowed down the eastern side of the depression - initially entering the first lake.

22.3 when the first lake reached the level of the higher ground at the south-east corner of the first lake, it overflowed into the second lake. Thereafter it flowed into the second lake.

22.4 only after the level in all three of the first, second and third lakes reached the same level (i.e., the level of the "high ground" between the first and second lakes) could the overall level of water within the depression rise again:

22.5 as the water continued to flow into the eastern side of the depression it pushed the water level higher until the buildings were inundated by water. 23. When the progress and process of inundation is understood in this way, the conclusion follows that the inundation of the buildings followed the escape of the water from the natural confines of the lakes within the depression: Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 564; K Sika Plastics Ltd v Cornhill Insurance Co Ltd [1982] 2 NZLR 50. Escape - the alternative to the "any lakes" contention 24. The water level in the Koralta depression only rose to a sufficient level to inundate the buildings (other than the hangar) following the escape of water from Treloar Creek and Scour Lake ."

The plaintiffs' submissions 62 The plaintiffs furnished the Court with a written overview of outline submissions and addressed those submissions from the bar table. The convenient course will be to refer to those submissions as and when appropriate in the reasons for judgment which follow. Findings of fact 63 It seems to me convenient to commence with the general question of the filling of the sumps and to then move on to some of the tangible evidence commencing with some of the relevant photographs taken early on the Tuesday, and the analysis of the satellite image taken shortly thereafter also on the Tuesday. Filling of the sumps 64 It is convenient to annex Mr McConnell's diagram [Annexure "A"] with survey detail which was Annexure DMCR6 to his affidavit of 20 March 2002 to this judgment. 65 It is quite plain on the evidence that at some material point in time on the Monday, the three sumps within the Koralta depression commenced to fill and filled. In all likelihood the progression was as outlined by Mr Lawrence of Counsel: " The water level in sump 2, [and] sump 3 was lower than the water level in sump 1 because most of the inflow into the Koralta Depression was coming into sump 1, and the physical process that was going on from three o'clock in the afternoon when the water levels in the depression settled down was that the water was filling up sump 2 and sump 3, and until sump 2 and sump 3 were full up to the level of the divide, then the observed water level in sump 1 was not rising. Once the sumps had filled, then we had a contiguous water body throughout the whole depression, and then the rise continued." [Transcript 27 March and 81] 66 On the evidence there was some high ground which divided the first and second sumps so that anything which fell in an area south of the high ground would collect in the lower sumps and anything which fell in the northerly area would collect into the first sump. Run-off to the sump's 67 I accept as correct Mr Taylor's submission that on the evidence there would be run off from the area to the north above the first sump. In that regard I am satisfied from the evidence that the normal course of run off for water draining from the northern to north eastern part of the depression is preferentially towards the southern and the south eastern side of the depression. The photographs which Dr Porter took [D13] show the water tending to collect on the southern side and all of the evidence suggests that the preferential flow path tended towards the south eastern side of the depression. Whilst it is not possible to be absolutely precise about the matter a sufficient evidentiary basis exists for the finding that the preferential flow is towards the south eastern side of the depression. [See defendant's submissions transcript 26 March page 20]. 68 There is a question as to whether the filling of the sumps occurred only by reason of the rain as well as the catchment area run off or whether water from Treloar Creek and/or from Scour Lake contributed to the sump filling. It is clear from Mr McConnell's survey data that each of the sumps will receive a certain amount of run-off from surrounding areas by way of natural catchment. So much was accepted by the defendant in oral submissions [transcript 26 March page 19]. As Mr Taylor accepted [transcript page 19]: "There is going to be some rain from the immediately contiguous areas, and it's going to include some run-off close to the southern rim of the depression and, indeed, all way around it, so that in the top area, for example, of the depression above the sump one is going to have some run-off in that area". 69 I return to the matter below. The analysis of clearwater being moved sidewards 70 Mr Taylor relied initially upon a careful examination of the second photograph to be found in Exhibit PX1 Volume 1 behind tab 11. This was a photograph taken by the Sandows at about 9.30am ["the 9.30am photograph"] on the Tuesday. It is taken to the north west. Mr Taylor relies at the same time upon the photograph taken by Dr Porter [Exhibit D13] in March 2001 and which shows the way the water lies in the depression. The submission is that the 9.30am photograph quite clearly shows up three different hues of watercolour. The submission is that the only hue which could qualify as clear water comes out as a light blue colour in the top outline of the ring of water. An examination of this 9:30am photograph appears to bear out Mr Taylor's submission. The submission is that on the evidence the Court should hold that it was only this light blue colour water which constituted the clear local run-off and should be found to have been the water which arrived early. The submission is then that this is the water which must have been in the depression at an earlier stage. By reference to Dr Porter's photograph, Mr Taylor's submission is that as water fills the depression it lies and connects on the eastern side. The submission is that for the blue colour water to have arrived in the position shown in the 9:30am photograph it had to have been the first water to arrive and had to have been pushed sidewards out of the depression as more water entered the depression. Water is said to have come into the depression travelling down the eastern side and then to have displaced water in a westerly direction as the depression filled. The submission is that on the evidence the Court should find that the mechanism of fill of the water collecting areas within the depression was that over time incoming water would shift the resident water sideways. In this fashion the initial submission put by Mr Taylor was that it was water which had been in the depression which was pushed sideways out of the sump(s) hence inundating the property. [Transcript 12 - 15]. 71 In this fashion Mr Taylor initially put the stand-alone nature of the submission in terms of the sumps being properly regarded as 'lakes' for the purpose of the policy. A finding of the type contended for would presumably satisfy the defendant's 'escape' analysis. The Satellite Image 72 Professor Forster's evidence in relation to the image the subject of his first report included the following: " Interpretation of the Satellite Image 25. The interpretation provided here is based solely on the interpretation of the spectral response as shown on the satellite image. From maps supplied in the reports of Drs Porter and Markar, maps supplied in the report by David McConnell dated the 25th May 2001, and the affidavit of Robert Hams with accompanying air photo, dated the 1st of June, 2001, it is apparent that the Koralta Station homestead and associated buildings are located in the north west corner of the Koralta Depression. The satellite image acquired at 11.13am on the 22nd of February 2000, shows that a main stream of flood waters originating from the Treloar Creek had reached the Koralta Depression and was sweeping along the eastern side of the depression and extending partly into its southern and south western arm . It can be seen on the image, by the north-south boundary between bright blue and dark blue water, that the sediment loaded flood water had not reached the western end of this arm at the time of the image . Also apparent is that this sediment laden water is adjacent to and moving across an interface, in a south westerly direction, with water that had originated from Scour Lake. The water originating from Scour Lake is seen to have a lower level of sediment load when compared to the waters originating from Treloar Creek . This moving water is pulling some of the water from the Scour Lake originating waters into its flow at the southern end of the interface of the two water bodies. To the north of the interface the water is shown as a dark blue Vee and is thus fairly clear water.

26. The western edge of the sediment laden flow is shown very clearly on the image and there is a distinct body of clear water on the western edge of the Koralta Depression . It is apparent that at the time of the image the flood driven, sediment laden water had not reached the clear water on the western edge of the depression , which on the basis of the history of the event would have resulted from rising water caused by surface run-off. Run-off water would generally have a much lower sediment load than flood water and would be much clearer, and thus dark blue on the image . 27. Based on this interpretation and the estimated position of the Koralta homestead and out-buildings, the water that inundated these buildings prior to approximately 11.00am on the 22nd of February 2000, was surface run-off water and not flood water. Summary of findings · The water that inundated the homestead and out-buildings (at their estimated location) prior to 11am on the 22nd February 2000 was surface run-off water and not sediment laden flood water. · Both Dr Porter and Dr Markar, from the evidence provided, have only limited qualifications and experience to interpret the satellite image. · The satellite image is authentic, and was acquired from an appropriately authorised organization and was processed according to standard practice. · The contents of the data contained on the satellite image were not proven in the reports of Drs Porter and Markar, and they did not establish whether proper and acceptable digital image processing techniques were used. [From Professor Forster's first report annexed to his affidavit of 2 November 2001] 73 Professor Forster gave evidence to the following effect: "Q. Could you please first of all give a general description of the means by which you interpret the imagery, in terms of its kind and colour, and the significance attached to colour in the imagery? A. Well, one first has to give a brief description of how the radiation sunlight interacts with the water. On the surface of the water you can get, depending upon wave action, some mirror light or specular-type response, and some diffuse response from the surface.

Some mirror light or diffuse reflection from the surface. The sunlight then passes into the water, and depending upon what is in the water organic, inorganic, sediment and so forth, you can get volume scattering within the body of the water, not unlike the sunlight coming through the atmosphere. And then you can also get bottom reflectance, depending upon the depth of the water, and they will all respond and then pass back up through the water and be transmitted to the sensor system, which might be on the aircraft or satellite platform. Because of the different properties of water and soil and vegetation, they respond differently or reflect differently at different wave lengths. Basically vegetation, obviously as we know, has a high visible green response but it has a very high new infrared response. Water, on the other hand, has a high response through the blue green and then starts to drop through the red wave lengths and is very low, what is called the near infrared, middle infrared, just on the longer wavelength than visible red. And so the sort of response you get in clear water is that you get virtually maximum penetration around the.5 to.6 micrometres, which is virtually in the middle of the visible wave lengths. And if you have a sediment load in the water you will get volume scattering, and the response in that particular wavelength region will become quite high, and much higher than a clear water or deep water response, and it is virtually nearly directly correlated with the amount of sediment load. So the satellite image itself was taken - well it has got seven bands, but you can only display three because you have only got blue, green and red to display it with, so that in this particular case the image is band 2 of what is called LandSat, the thermatics map, and band 2 is approximately in the middle of the visible, about.5to.6, which is where you get maximum penetration for very clear water. The other two bands were in the near infrared, that is into the middle, middle infrared, and they give very low response for water in most cases; although, if there is some vegetation or organic material, emergent grasses or something coming out of the water you can get some new infrared response. So basically it means that the darker the water indicates the deeper the water or the lack of sediment load. The brighter the blue - because this particular band is coloured blue - there is an increase in sediment load. So basically the image would show that the very light blue has a high sediment load, and as it decreases to darker blue it has a lower sediment load. But in most cases most natural water has some sediment load, very fine particles, plus organic material and so on, and if there is no sediment load you can get some bottom reflectance, depending upon the clarity of the water and the depth of the water." [transcript pages 249,250] 74 Professor Forster had given the opinions in his reports by reference to a copy of Exhibit P3 which was of a lower quality. During the course of the hearing he had an opportunity to examine Exhibit P3 albeit that some overlays had been placed upon the exhibit during the taking of evidence from other witnesses. He was furnished during the hearing with a copy of the original which became Exhibit P3A and was permitted to refer to this document (or as necessary to refer back to P3). Although during the course of his evidence in chief he confused Caingrass swamp (which he referred to as "Cain grass Lake"], when corrected on this subject during cross-examination his opinions were no different. 75 Professor Forster's evidence included the following: "Q. Then can you please proceed to give us your interpretation of the colours that you see within the Koralta depression? A. The colours in the Koralta depression show a very strong body of water flowing through it of high sediment load, but in the area surrounding the homestead it shows a very low level of sediment load, possibly some bottom reflectance and some natural organic or inorganic material in the water, but it would be a very low level of sediment or other material, not comparable with the strong sediment load in the water that is coming from Treloar Creek.

HIS HONOUR: Q. Is that because of the deep blue, darker blue versus the light blue, or for a number of reasons? A. Yes. The sediment in the water, it is like a volume, and it is the same as radiation coming through the atmosphere. It hits all the molecules in the atmosphere and scatters light through blue. In this case it comes through and scatters by the small particles, and they are bouncing off each other and giving a very strong response through the water surface. It does not necessarily mean that it goes to any particular depth, that sediment. It could be only in the first half metre of the body of water or even less. It is just a very strong response, and the sediment load is very strongly related, correlated with the amount of blueness, which is in fact the response in band 2, which has been put on with a blue pen, so just looking at the blue, that is the imagery or the response in that particular wavelength.

LAWRENCE: Q. The colour that you see in the lighter blue within the Koralta depression, how does that relate to the lighter blue colours that you see in the section further to the west which you would understand is the overflow length of, overflow path from Treloar Creek? A. Well it shows a very extensive area, at the time of this image, that there is still a large body of water with sediment load west of, northwest of Koralta depression, so it is extending merely back to Treloar Creek. So it is only - there does not seem to be any exactly on Treloar Creek, but it is not far away that there is still a very large body of sediment-laden water flowing towards the east." [transcript 251-252]………" "There was a report or suggestion that this water flowed from Canegrass Creek overland into unnamed lakes to the south-west. There is no indication of any sediment-laden water flowing from Canegrass Creek to these lakes here. He also said that the overflow from these lakes then flowed on eventually into the Koralta depression. In this area here there is no evidence of sediment-laden water flowing from these lakes at all in this area. There is a strong flow around the western side here, but it would indicate to me that the only possible water that could get into Koralta depression coming from Treloar Creek would have been in these lower stream lines here (indicated). So about probably two-thirds of the water that flowed from Treloar Creek would not have actually reached down to here at all. There is no evidence of it passing down through these channels…." " Q. Can you just give your interpretation of the water conditions at Scour Lake, bearing in mind this is 11.13am on Tuesday, 22 February? A. It appears in Scour Lake that there has been a flow of water with a sediment load, not as high as coming from Treloar Creek, it is a much darker colour, and there is an indication of a small amount of that sediment-laden water being drawn into the flow from Treloar Creek into the Koralta depression but it has got a much lower sediment load and it is much more dispersed within that lake, apart from a small triangular section to the, on the western edge of the lake." [transcript 253] "Now, you have commented in your report on the point that you see there, that" "Dr Porter has refined the catchment area defined by Mr McConnell as using information obtained from the February 2000 satellite image". "Now, what is your comment on the usefulness of satellite imagery and defined catchment areas?" "A. The satellite image is not the three-dimensional representation of the earth surface, and therefore unless you have a detailed topographic survey I would doubt that it would add anything further, apart from possibly showing the boundaries or the interface between the and water, but that may not be the edge of the catchment anyway, and even quite, with wet soil, can have a darkish appearance because of a low response in a near infrared. I would, as a surveyor, be loathe to refine catchment areas on the basis of a satellite image of that form.

Q. And finally, Professor Forster, I take you to paragraph 3.04?….. it talks about "The local depression storages were distributed to the top five sub statements, based on their distribution as evident from the satellite image". Are you able to comment on that point? A. I would just make the same comment as before, that the satellite image is not a three-dimensional representation of the surface. So without detailed topographic information I doubt it would add anything to the assessment of the catchment areas, but if it did it would be a very course set of information that it provided.

Q. And is satellite imagery of any assistance in determining the depths of water within a depression? A. The current studies - and it depends obviously on the resolution of the systems and we now have satellites down to half a metre resolution, so, but this is a 30 by 30 metre cell so that is 900 square metres; in the Great Barrier Reef they were able to do studies of depth below water and a whole range of exercises, but you would be loathe to quote to any better than, say, plus or minus three or four or five metres. It is still a very course estimate because; it is so dependent upon any sediment load or organic material in the water, and also the nature of the bottom surface. If it was very dark, black material or vegetation you would be getting a different response. So for an area with exactly the same bottom surface, exactly the same conditions in water, and exactly the same sun angle hitting the surface, you could make reasonable estimates of depth but, again, I would not quote to more than plus or minus three or four metres.

TAYLOR: Q. A cell 30 by 30 is the resolution of the satellite image; this one in particular? A. It is not the resolution. The cell is from, it is the digital response values given to a 30 by 30 metre cell, but because of what is called a point spread function of a sensor, the radiation spread through the sensor what they call an effective resolution, which is somewhat larger than that, probably 50 by 50 square metres.

Q. Should his Honour understand from that that what one sees in the image an interpretation of an area of the ground 50 by 50, and that interpretation is presented in colour? A. No. Interpretation is something that humans do. The actual satellite image does not interpret anything." [Transcript 254-255] "Q. So that if one thinks in lay terms the electromagnetic response is going to be a value of the predominant features within that 50 by 50 area? A. Yes. The predominant features within that area would be, it is essentially averaging the response over that. Well it is averaging it over 30 by 30, but it also gets additional response from surrounding that particular picture element because of the spreading function of the sensor itself." [Transcript 256]

"Q. And your evidence that you gave about Canegrass Swamp is now to be understood, in the light of your assumption, that the dark blue circle area was Canegrass Swamp, not the feature that has been identified on exhibit P 3? A. I would agree if that is Canegrass Swamp, then what I said about flowing from Canegrass Swamp to the lakes to the south-west is not correct, but it also still means that the water flowing to that area did not pass through the lakes to the south-west into the Koralta depression….

Q. In the last two sentences you express an opinion about the water from Treloar Creek pulling some of the water from Scour Lake? A. Yes.

Q. What assumptions do you make to express that opinion? A. Just the nature of the colours of the sediment load and the stream pattern of Treloar Creek and the slight flow pattern of Scour Lake water into the Koralta depression.

Q. Did you assume that Scour Lake was itself flowing? A. No. I assumed that it was relatively static water, because of the spread of the sediment in the lake, but some of that water may have been pulled from Scour Lake because of the fairly strong flow of water passing to its western side.

Q. …. Did you assume that there was any flow from Scour Lake initiated by Scour Lake itself? A. No, I didn't assume that.

Q. Did you make an assumption that Scour Lake was itself not discharging water, except for the influence of the Treloar Creek water? A. I am not an expert to say that. I am not a hydrologist. From my observation of the interpretation, there was appeared to be some of the sediment-laden water in Scour Lake being pulled along the edge of the strong stream flow pattern from Treloar Creek.

Q. Isn't the safer conclusion to express merely that there is a difference in the sediment load of the water from the two sources? A. You may like to say that. No, I didn't assume that.

Q. But isn't that a more prudent conclusion to draw than that one set of water is pulling the other set of water? A. Well, if one is moving and the other is stationary, and there is a slight indication of a directional movement of the sediment flow in Scour Lake, it would seem more prudent to suggest that some was being pulled into the pattern. I would not accept that your view was more prudent than mine.

Q. But you answered that question stating an assumption: If the water in Scour Lake is stationary, didn't you? A. No, not particularly. I just--

Q. I am afraid you did answer the question in that way? A. I said that it appeared to be stationary because of the load or the spread of the load sediment in that lake.

Q. And that is a critical assumption that you make in order to express your conclusion that the Treloar Creek water is pulling the water from Scour Lake, isn't it? A. It was an observation. It is not a critical point.

Q. Can I go then to paragraph 26 of your report. In the second sentence where you say: "It is apparent that at the time of the image the flood driven sediment-laden water had not reached the clear water on the western edge of the depression". That conclusion needs to be understood, in the light of your comments about the predominant response from the 50 metre by 50 metre area, doesn't it?

A. Yes." [transcript 257-259] "HIS HONOUR: Q. I would just like to ask Professor Forster a question or two, if you don't mind coming down here (counsel, his Honour and witness approached end of bar table to location of map). In your report attached to the affidavit of 2 November 2001 in paragraph 26, which you have been asked some questions about, you say: "The western edge of the sediment-laden flood is shown very clearly on the image and there is a distinct body of clear water on the western edge of the Koralta depression". Which distinct body of clear water were you there referring to? A. This water here (indicated).

Q. Then you say: "It is apparent that at the time of the image the flood driven sediment-laden water had not reached the clear water on the western edge of the depression", you are halfway through a sentence there. Now can you just point out to me why you say that that is apparent, and by reference to exhibit A3 or exhibit A3 A - I am sorry P 3 A, can you show me which sections had you in mind, as you refer to the type of the image and clear water on the western edge of the depression in that part of your sentence. In short, can you point it out to me and speak to it, that the sediment--? A. The edge of the sediment-laden water is this very distinct line between the darker blue and the lighter blue, and I made the assumption that there is a very, lower level of sediment level in here (indicated) or some bottom reflectance from the area surrounding the Koralta Homestead, so that the water surrounding Koralta Homestead, which I understand would be here (indicated) has a very low level of sediment and would not appear to be to derived from sediment-laden water of the Treloar Creek, which is this coming through from over here (indicated).

HIS HONOUR: It might be appropriate to borrow the red pen again and have Professor Forster just circle, if you don't mind, that section that you have been referring to so the transcript will record it, if you do not mind?…

Q. You have now simply drawn a broken line in what is almost equivalent to an arrow shape, it has got a head that looks more like a snake - perhaps for the transcript…perhaps initials and an arrow might help...Initials are BCF.

Q. Now I have one other question for you. In relation to the matters that counsel cross-examining you raised in terms of the 50 by 50 and so forth issues, to what extent is your sentence "It is apparent..." that in your expert judgment either remains the case or should be considerably discounted? A. The 50 by 50 metres really does not even show on this scale of image because it would be a very small area, because of the scale of the image, but it is indicating that the predominant response in that cell was not coming from sediment-laden water, in the case of the dark blue, and was coming from sediment-laden water for all of the area that is still showing here at 11.13am on the morning of the 22nd." [transcript 259- 260] The roaring noise 76 The defendant's submission was that, as I understood it, the first version of the occurrence given by Mr Hams was correct. In my view that submission is one of substance. In any event it represents my finding. Between 8.30 am and 9.00am Mr and Mrs Hams could hear water roaring from the north west. They walked towards that noise and saw a body of water over 300 metres wide approaching the buildings approximately 100 metres north of the wool shed. In the 21 March Claim Report it had been put as follows: "We could hear water roaring so we walked up to have a look about 2 km away. Could[sic] see a huge body of water coming towards us". 77 The defendant's submission was that on the probabilities the roaring wall of water was most likely to be the result of the arrival of the Treloar Creek water. Even here the defendant in submissions counselled caution: "TAYLOR: The probability that the defendant contends for is that the roaring wall of water that is still a kilometre away from Mr Hams when he sees it is most likely to be the result of the arrival of the Treloar Creek water . Now, one needs to be a little bit careful about that because if the water in front of him is still clear and still local run off, there is likely to be a process involved having regard to the flow paths of some combination of continuing local run off and the Treloar Creek water as well. HIS HONOUR: But is this on the assumption that by then Scour Lake has to be full?

TAYLOR: No, because Mr Hams has just left Scour Lake at 9 o'clock in the morning. He said nothing about water coming into it from the local catchment or from anywhere else and has it one and a half metres full.

HIS HONOUR: So it can still take considerable volume and the assumption then is that the Treloar Creek run-off water is simply not going into Scour Lake but is coming through the dogleg and coming down into the depression, is that right?

TAYLOR: Yes. One needs to be careful about saying just because Scour Lake has got one and a half metres of water in it that it can take a lot more because there is not detail topographical evidence about what the volume of water is in Scour Lake, if it has got one and a half metres depth in it." [Transcript 26 March Page 28-emphasis added] 78 Mr McConnell was unable to suggest that any special significance could be given to these observations by Mr Hams. However very importantly Dr Markar has relied upon these observations and the assumption that there was a wall of water about two feet deep and about 200 to 300 metres wide and that the water level started rising rapidly and continued for a number of hours as a critical parameter underlying his computer modelling exercise. The matter was the subject of cross-examination at pages 20-39 of the transcript of 25 March. Importantly Dr Markar assumed that a 5.5 hour period between rainfall measurements had included a constant rainfall which is apparently standard practice in hydrological modelling [transcript 25 March page 38]. Yet Dr Markar accepted that it would be most unlikely that the rainfall would be constant over that period. He did not look at what influence rainfall variations in the model might have had [transcript 25 March page 38]. He had not looked at the temporal radiation within the relevant period. He gave evidence to the following effect: "Q. I put this question before, but it is a very important question and I put it to you that you have decided the basis upon which you would validate your computer model is what you call the observed event at about 9 o'clock on the Monday morning rather than matching your model output to the higher recorded levels that came later? A. The first point you made was a critical - is a critical bit of information used, yes.

Q. So that was - that is your calibration against the observed event at 9 o'clock on the Monday morning? A. That is a key thing, a key factor . The other factors, as I explained before, are looking at the range of parameters, like, initial loss range, the impact of depression storage. I looked at sensitive analysis of a number of parameters and I ended up with the set of parameters which I thought was most appropriate.

Q. Yes, I understand that. It is not just the key, is it? It is the central focus of your analysis to get a significant increase of volume inflow at 9 o'clock on the Monday morning, isn't it? A. Not at 9 o'clock, at around that time. Q. That is what you were aiming for. That is the basis of your calibration, isn't it? A. Correct. [Transcript 25 March Page 33] 79 I accept as of substance Mr Lawrence's submissions · that Dr Markar's calibration process in his computer model was critically designed to match recorded water levels in the Koralta depression until midday on the Monday and was conditioned by reliance upon the evidence of Mr Hams relating to a roaring noise of an unquantifiable water movement. · that the underlying premise which is unstated in the report and requires very careful analysis indeed [the submission was that the premise was unsubstantiated] was that water would come from elsewhere to fill the depression up to the Homestead floor. · That despite the significance of various parameters on model results, Dr Markar did not test the possibility of rainfall variability in explaining variations in model output, namely, fluctuations in rate of rise of water level. 80 Returning for a moment to the first and the second versions of the roaring noise, ultimately they may not throw up any particularly significant differences save for the timing. Whilst I do not suggest that Mr Hams has otherwise than a present genuine recollection of the events taking place in the fashion put by him in the witness box, it is not uncommon for a litigant or witness to later come to genuinely believe that an occurrence or event took place at a different time or in a different manner to that which had in fact taken place. This is likely what occurred here. The high probabilities are that the much closer to contemporaneous earlier versions were correct. Catchment area ability to generate sufficient run off to result in the Homestead inundation by 6.00pm Monday 21 February without contribution of water from elsewhere? 81 The plaintiffs' counsel strongly contended as follows: · That the local catchment, containing neither lakes nor creeks, has the necessary attributes, such as catchment area and topography, to be able to generate sufficient run off sufficiently quickly to submerge the Homestead by 6.00pm on the Monday without any water appearing from elsewhere · That the volume of run off generated within the local catchment was sufficient to account for water which inundated the buildings up to and including the Homestead floor located at RL 130.3. 82 A comparison of some of Mr McConnell's working papers to be found in Exhibit P11 [and in particular the 'Depression Volume' graph with Figure 1 from Mr McConnell's first report of 25 May 2001] substantiates, as it seems to me, the proposition that the volume required to fill the Koralta depression to the Homestead floor was 4800 megalitres ["ML"]. Annexed to this judgment is an annotated version of the Depression Volume graph which makes the point [Annexure "B"]. 83 I further accept that the total area of the local catchment may be assumed at 65.1km². So much appears from paragraph 2.04 of Dr Markar's report of 1 February 2002: " 2.1a Local Catchment Area 2.04. Due to the sparseness of available data, there is some uncertainty on the extent of the local catchment area draining to the Koralta depression. Both Mr McConnell and Dr Porter have estimated the boundaries of the local catchment for their respective analyses (see Figure 2.1). The survey undertaken by Mr McConnell appears to be insufficient to accurately define the local catchment boundary and the source of data used by Mr McConnell for his catchment definition is not known. Dr Porter has refined the catchment area defined by Mr McConnell using information obtained from the February 2000 satellite image (Personal Communication). The catchment areas estimated by Mr McConnell and Dr Porter are 60.7km² and 65.1km² respectively. It was assumed that the larger and the more recent catchment definition of Dr Porter was more accurate and was adopted for this study." Depression storage input to the model 84 The term 'depression storage' is apparently a term of art referring to the volume of water generated within the local catchment which in the present case would arrive in the Koralta depression. [Transcript 27 March page 46] 85 I accept that the total rainfall over the local catchment from 20-21 February 2000 was 229 mm. So much appears from the report of Dr Markar of 1 February 2002 page 5, table 2.2:

" 2.2 RAINFALL DATA 2.07 There is only 1 rainfall station within the local catchment and that station is located at the Koralta Homestead. A total of 229 mm rainfall was recorded at the Koralta Homestead during 20-21 February 2000. Table 2.2 shows the temporal variation of rainfall recorded at Koralta. Table 2.2 Koralta Rainfall Temporal Variation, 20-21 February 2000 ________________________________________________________ Date Time (Hours) Cumulative Rainfall (mm) ________________________________________________________ 20/02/2000 1030 0 20/02/2000 1830 38 20/02/2000 2100 75 21/02/2000 0230 221 21/02/2000 1030 229 _______________________________________________________"

[I note that the cumulative rainfall figure has commonly been rounded to 230 mm in the various reports] 86 It seems to me than that the full volume in the local catchment may be accepted as having been: 65.1 x 229, that is to say 14,908 ML. This is more than three times the volume of water required to flood the depression up to the floor level of the Homestead. 87 Dr Markar performed a computer modelling study of the local catchment dealing with this in his sequential reports. If one turns to page 3 of his report of 21 March 2002 it is apparent that the top curve represents the run off from the catchment in units of cubic meters per second, the central figure represents the run off volume generated by the model where Dr Markar has adopted a figure of approximately 3000 ML, derived from Dr Porter's assumed depression storage [in fact a closer examination of the horizontal line in figure 5.1 (b) of Dr Markar's February 2002 report would seem to indicate the correct figure at 3200 ML - see annexure "C" to this judgment. I shall refer to the figure adopted by Dr Markar by way of the depression storage figure as "Dr Markar's depression figure". 88 Figure 4.1 (c) on page 3 of Dr Markar's 21 March 2002 report is critically dependent upon the middle figure 4.1 (b). In short, as one may expect, a function of a lower depression storage figure will be reflected in the water level predicting a lower inflow. As already stated, it is apparent that Dr Markar produced his best estimate of flows into the Koralta depression based on a depression storage of approximately 3000 ML. Genealogy of Dr Porter's estimates of local catchment runoff 89 It is well worth looking at the genealogy of Dr Porter's estimates of run-off from the local catchment. 90 His first report dated 14 June 2001 at pages 24 and 25 gave the basis for that figure at 8000ML on the most reasonable loss assumption: " B. "Local Catchment" Runoff 1. Estimation of Volume or Runoff from Local Catchment: Rainfall depth (estimate): 230mm Loss assumptions: (a) low: 30 mm plus 1.5 mm/h (b) most reasonable: 50 mm plus 2 mm/h (c) high: 70 mm plus 2.5 mm/h Local catchment area: 60.7 km² (maximum) Volume of runoff: under assumption (a): 9,950ML under assumption (b): 8,010 ML under assumption (c): 6,070 ML Conclusion: A reasonable conclusion is that approx. 8,000 ML would have entered the Koralta depression from local area runoff without being intercepted by a lake or stream." 91 Next one moves to Dr Porter's report of 6 February 2002 where one finds the following paragraph: " In the northern part of the local catchment, where active flow is still continuing, the inundated area visible exceeds that which would be inundated when flow has just ceased. By assuming that between 40% and 60% of the area visibly inundated would remain inundated when flow ceases, and again assuming average depths of inundation of 0.3m and 0.5m, it is estimated that between 1,560 ML and 3,910 ML of runoff from rainfall on the northern part of the local catchment would be captured in surface depressions. In total, it is estimated that between 3,920 ML and 7,850 ML of runoff from local rainfall would be captured in surface depressions and could not enter the Koralta depression. The lower end of this estimated ranged exceeds 50% of the estimated maximum volume of the Koralta depression. It is apparent that a substantial volume of local catchment runoff would be intercepted by shallow depressions in the landscape before reaching the major depression at Koralta." 92 This is an important aspect as it seems to me of Dr Porter's revised opinions. It must not be forgotten that he had not had the opportunity to visit and had not in fact visited the site. He had flown over the site and had taken photographs. The point is that in this section of his report, he endeavours to estimate the volume of run off from local rainfall which would be captured in surface depressions so as not to be in a position to enter the Koralta depression. Here he makes a judgment as to the interception of a substantial volume of local catchment run off by shallow depressions in the landscape before reaching the major depression at Koralta. It seems to me that this judgment can only be regarded as questionable and extremely subjective. However the net effect of the new integer is to substantially reduce his estimate of the total volume run off from the local catchment from 8000 ML down to a range of between 740 and 4660 ML, in anyone's terms a radical reduction of close to a 50% to 100% range. 93 It seems to me that there is considerable substance in Mr Lawrence's submissions to the effect that further central problems in respect of Dr Porter's assumptions, concern his estimate of the average depth of depression storage of 300 to 500 mm representing a maximum depth at the centre of the depression of 450 to 750 mm. If Dr Porter's estimate were correct the maximum depth of water at the centre of the depression would have been one metre. Dr Porter was not able to give any particular anecdotal basis by way of photographs, site visits or otherwise for selecting such a figure. Mr McConnell's evidence was that from the debris marks that he had observed around the area his best estimate of the general level of depth of water was a range of 200 - 300 mm. These are all difficulties which are of a type perhaps pervasive in any analytic exercise but which make the point that so much of the hydrologic model developed by Dr Markar for the local catchment of the Koralta depression was critically dependent upon input from Dr Porter's figures, which figures depend upon several highly subjective opinions and inferences which may or may not be inaccurate to an extent capable of severely distorting Dr Markar's model which uses the figures as input. 94 It is next important to examine very closely figure 5.1 from Dr Markar's report of 21 March 2002. This ultimately revised figure (following the shift in opinions expressed in earlier reports) sets out what Dr Markar regarded as the curve which most closely matched the record levels. This is where it became clear from the cross-examination of Dr Markar that the basis for his calibration was an attempt to match the output of the model to the observed events, it being the case that the critical observed event which he relied upon was the roaring noise and the wall of water identified by Mr Hams. If one looks at the black diamonds recorded on revised figure 5.1 in Dr Markar's report of February 2002, it seems that his primary concern was with the second and third black diamonds which deal respectively with the 6.00am water level in the hangar at 129 m AHD and the approximately 9.00am similar level at the hangar-intending to show a fairly steady water level over that period. The fourth diamond appears to be the shearers quarters at about noon on the Monday where the level is at approximately 129.7m AHD . And the fifth diamond deals with the level at the Homestead at approximately 6.00pm of 130.3 m AHD. 95 Focussing upon Dr Markar's figure 5.1, insofar as the black line corresponding to an assumed 3920 ML Depression Storage figure is concerned, it seems clear that the line does not have a fit with the fifth diamond point. However the exercise engaged in when Mr McConnell, through the plaintiffs' counsel, asked for the model to be rerun upon the basis of a 2000 ML depression storage input, has led to the green line upon Exhibit p15 which certainly does seem far better to match the observed water levels ["the interpolation"]. That green line curve relies upon a storage value of approximately 5200 ML (see figure 5.1 (b) in Exhibit P15). The relevant interactions within figure 5.2 (a), (b) and (c) 96 Certainly Dr Markar had clear analytic reservations as to the approach taken by Mr McConnell in producing a figure of 2000 ML as Depression Storage [translating into 5200 ML] as a best fit approach. In this regard it is important to have a clear understanding as to precisely how the revised figure 5.2 is modelled and as to the interactions between figure 5.2 (a), (b) and (c). 97 Figure 5.2 (a) is a depiction of the variation of inflow as a rate coming into the depression. 98 Figure 5.2 (b) is a depiction of the rise of variation or change in storage volume within the depression. It records the running increase in volume overtime. 99 Figure 5.2 (c) (which is directly derived from the relationships between the storage volume and the water level in the depression), is a depiction of the equal and variation ponded water levels within the depression, essentially depicting the level to which the water has risen within the depression. 100 The times shown within each of these figures are directly correlated so that one can run a vertical line down across all of the figures to look at a particular point in time. 101 Dr Markar emphasised the significance particularly of figure 5.2 (a) which, as I understood his evidence, constitutes the critical output from the model in terms of the inflow volume. The black line particularly is intended to record that in the early hours of the Monday morning there was a rapid rise of water and then a relatively steady period at about 9.00am and then a higher inflow and a second burst coming in. Hence the blue line in figure 5.2 (a) shows the relative period of steadiness as much shorter and the sudden sharp rise commencing at about 6.00am rather than 9.00am. And the red line shows the inflow in altogether different terms. 102 The initial loss parameters in figure 5.2 (a) referred to the initial loss of rainfall prior to run off being generated. 103 The objection by Dr Markar to the interpolation is that it is said to be entirely inappropriate to look at one part of the curve in isolation from the others. The model simply records model results and the critically revised figure 5.2 (c) is importantly derived from the inflow graph 5.2 (a). 104 In any event Dr Markar clearly accepted that a critical aspect involved the anecdotal evidence that up to the early hours of Monday morning there was a rapid rise of water and that there was a relatively steady period prior to the level beginning to rise rapidly again. He was also prepared to accept that the initial loss figures were not objective figures but simply represented opinions. It seems that the initial loss figures were selected based on experience and the previous work carried out [transcript at 25 March page 31]. 105 Albeit that the detailed cross examination of Dr Markar involved his steadfast adherence to the proposition that the subject interpolation namely on the selection by Mr McConnell of a 2000 ML figure as Depression Storage [translating into 5200 ML], represented an entirely inappropriate approach to take bearing in mind the way in which the computer model had been constructed, that cross-examination served to further confirm to my mind the very severe limitations which inhere in an attempt to produce a hydrographic computer model where there are so many uncertainties. 106 In the circumstances where so much reliance is placed upon the computer modelling exercise it seems to me salutary to note just how much may turn upon the reliability of a particular piece of suggested data. For this and other reasons concerned with the ease with which it is possible to alter the input into the computer model in order to suit a particular postulate, this is a case in which I have not been prepared to accept the computer modelling process as by any means having the very high probative value which the defendant sought to suggest. Certainly the model is a tool and stands as a part of the general evidentiary materials to be weighed in the balance - but it is no more than that. The short-comings in the modelling process are clear. Dr Markar clearly conceded that assumptions may have been invalid [see as one only example of such a concession - transcript 22 March at page 286]. General catchment areas Treloar Creek overflow 107 The plaintiffs contended the time of arrival of the Treloar Creek overflows into the Koralta depression was 7.00pm on the Monday evening based upon the estimate given by Mr McConnell of travel time of 19.5 hours and earliest commencement of overflow at 11:30pm on the Sunday evening. 108 No person witnessed the commencement of the Treloar Creek overflow. The closest anecdotal evidence was given by Mr Johnston who lived at Langidoon Station which bordered the Western boundary of Koralta Station. Treloar Creek runs through Langidoon. Mr Johnston did not inspect Treloar Creek on the afternoon of the Sunday. He gave evidence as to the two locations at which Treloar Creek would normally flood. 109 His evidence was that the creek passes by 1 kilometre to the north of Langidoon Homestead. The property airstrip is further to the north on the other side of the Creek and is about another 750 m from the Homestead. On the morning of the Monday at around the same time when he checked the rain gauge at about 9.00am he saw that the creek had overflowed during the night between the house and the airstrip and was still out over its banks about 150 m on the other side of the normal creek banks. From the house area it was only possible to see about 600 to 700 m along the length of the Creek. The whole of the length of the creek he could see was outside its banks. 110 His evidence included: "Q. You measured the rainfall at Langidoon in the period in question from Sunday to Monday to Tuesday, did you not? You took rainfall measurements? A. Rainfall measurements from the Sunday to Monday morning, I think it was at approximately 9am.

Q. So you took a measurement at 9am on Monday morning? A. Yes.

Q. What time did you make the measurement on Sunday, if you took a measurement? A. There would have been a measurement on Sunday; it would have been taken roughly 7.30 to 8 …pm.

Q. Was it raining at 7.30pm? A. No, it started to rain a little after that. It would have been raining a bit after 8.

Q. And how hard was it raining after 8 o'clock? A. It wasn't raining mad teeming rain, but it was raining very, very thickly as in like tropical rain…

Q. So you didn't leave the house between the rain gauge measurements between 7.30pm on Sunday and 9 o'clock on Monday morning? A. Yes, well, we would have been out before - a little bit before 9 o'clock on Monday morning…so that would have been approximately the time when the gauging was taken…

Q. The rain that you said was falling during that night, have you experienced anything like that before at Langidoon? A. There has been rain similar to it before back in 1974 when there was a tropical disturbance down near there. It was very similar, but not to that extent over that period of time.

Q. So this rainfall on the Sunday night, early hours of Monday morning, was something that's outside your normal range of experience; would you agree with that? A. I would agree with that. That's near enough to our annual rainfall there in 24 hours.

Q. You were not able to make any observations of the river over that period, were you?…

Q. …you made no observations of the river at all between the period of 7.30 and 8 o'clock on Sunday evening? A. No.

Q. And 6 o'clock on Monday morning? A. No….

HIS HONOUR: Q. In your second affidavit you say that you saw on the morning of Monday, at the same time as you checked the rain gauge, that the creek had overflowed during the night between the house and the airstrip. You may have said this earlier, but I was wanting to know approximately when you would have seen that? Did you tell us earlier what time you believe you would have checked the rain gauge and seen what you say there that you saw about the creek overflowing? A. Would have been approximately the same time as when I checked the rain gauge, 8.30 to 9 o'clock on the Monday morning.

Q. And presumably…there is no way that you would be able to know whether the creek overflowed an hour before you checked the rain gauge or during the early morning hours of the evening before, you just would not know; is that correct? A. I would not know where the - the place in question where it overflowed was three kilometres further down stream from the Langidoon homestead area.

Q. Well, I understand that that's the case in respect of the distance, but when you say that you saw that the creek had overflowed during the night between the house and the airstrip, you're talking about a different section of the creek, correct? A. Yes, that's the section directly opposite the house area.

Q. And really my question was intended to relate to that, ie, that section between the house and the airstrip. As I understand it, you would simply not be able to assist in relation to when the creek had overflown first in order to be as it was when you looked at it? It could have happened at 7 in the morning, it could have happened at 3am and so on, correct? A. That is correct.

Q. There [are] no indications one way or the other? A. No.

Q. But is it more likely that it happened a while before, or just before you checked the rain gauge? A. It would be a while before we checked the rain gauge because the water had started to recede, so it had peaked." [Transcript 22 March pp 267-269] 111 Here again there were several movements in the opinions expressed by Mr McConnell as well as Dr Porter. 112 It seems clear that the key determinant in the time the creek overflow would arrive at the Koralta depression is the time of commencement of the overflow. 113 The earliest time of commencement of the overflow based upon Dr Porter's estimates of bank full capacity is 11.30pm on the Sunday. So much is apparent from the annotated version of Exhibit P13 [Annexure "D"]. Mr McConnell first adopted a discharge figure of one hundred cubic metres per second which gave a time of overtopping up to 1:30am on the Monday but then moved this figure to 400 cubic metres per second which brought the time back to midnight. He had not had the benefit of looking at the site and seeing the photographs. 114 Dr Porter on the other hand did have the advantage of investigating the site and taking photographs and arrived at an estimate of bank full capacity of between 333 and 407 cubic metres per second. The midpoint of this estimate ["Dr Porter's midpoint"] gives one a discharge value of 360 cubic metres per second. Looking at the annexure "D" one ends up with the time of overflow commencement at midnight on the Sunday. 115 Although Mr Taylor spent considerable time upon evaluating, in submissions, the significance of the change in estimate of bank full capacity, particularly in respect of the increased time of duration of overflow, the annexure makes reasonably plain that the duration of overflow does not really have a significant effect on the issue in question. For example, if one takes a discharge value of 400 cubic metres per second, one would have a time of commencement of overflow at midnight and a time of completion of the overflow at 7.00am on the Monday morning which would be about seven hours. If one takes 350 cubic metres per second as the discharge value, the time of duration of overflow may be seen to increase. 116 The plaintiff contends that the first overflow occurred at about midnight on the Sunday and in this respect accepts Dr Porter's midpoint. Generally the midnight contention relies upon Mr McConnell's evidence in combination with Dr Porter's second report. Mr McConnell was provided with the channel dimensions from Dr Porter and was able to identify and slope on the longitudinal slope on the channel and from that he was able to apply the Manning's end formula to arrive at the velocity and hence the discharge that would flow within the channel without overtopping. That was the basis of the approach taken by Mr McConnell. Dr Porter had in his second report described a channel with quite significantly different characteristics to those first taken into account by Mr McConnell and Mr McConnell becoming seised of the change, took the approach that the change was not so significant in magnitude as to change his earlier conclusions. 117 During address Mr Lawrence shortly explained the position as follows: "HIS HONOUR: There is a difference in the point in time when the peak overflows and the range of points of time when it may overflow as between initial loss at 50 and initial loss at 100, but it wouldn't matter whether it was 500, in which case it overflowed on the higher initial loss in the early hours of the morning and continued to overflow for some hours until some time round about 4.00 a.m., or if one was looking at 400, then the overflow starts a little earlier and continues for a little longer, but the number of hours of concern in Mr McConnell's opinion was not sufficient to warrant any radical change by reference to Dr Porter's change in capacity and the configuration of the creek. Is that it?

LAWRENCE: That's correct, your Honour, and his lack of great concern on that issue. I mean, given that he wasn't able to make his own assessment of the situation on the ground because he had estimated the time of travel from the point of overflow to the Koralta Depression at 19.5 hours. Now, you can see that with a break-out point, a break-out time of about midnight, it gets it into the Koralta Depression at 7.30 on the evening of the Monday….

LAWRENCE: So that was the basis upon which Mr McConnell didn't pursue the issue." [Transcript 27 March page 63] 118 Mr Lawrence in effect submitted that there was no substance in the changes made by Dr Porter to his calculations which brought forward the time of overflow to within 8.00pm and 11.00pm on the Sunday. The submission was that this exercise upon careful examination disclosed the following reasons for the court not being able to rely upon the exercise: · There was no calculated basis for bank full capacity of 300 square metres per second; · There was no calculated basis for soil variability; · There was no calculated basis for temporal pattern variations; · Dr Porter placed reliance upon anecdotal evidence which upon examination is either unreliable or did not support his conclusions. 119 In my view there is substance in these submissions. 120 It seems clear that Dr Porter's report of 6 February 2002 on page 3 is unreliable in several ways. The page in question reads as follows: "1.2.5 The catchment modelling undertaken by Water Studies is certainly higher relevant as it provides a means for approximate quantification of what may have occurred in the streams with potential to contribute to the inundation of the Koralta depression. It remains very approximate and is only indicative, however, and too much accuracy should not be ascribed to the outcomes presented. The processes taking place in the catchments are more complex, and are spatially variable depending on the physical characteristics of the surface upon which rainfall fell and the characteristics of the rainfall itself.

1.2.6 Given the association of upland areas with shallower soils and lower losses, it is my opinion that initial losses of 100mm as assumed in one of the sensitivity tests by Water Studies are inappropriately high for the catchment of Treloar Creek upstream of the effluent channel. Initial losses of 50 mm, as assumed in the alternative loss assumption, may even be too high. Australian Rainfall and Runoff (1987, p.122) recommends initial losses of only 15 mm for the "arid zone" of New South Wales with mean annual rainfall < 300mm - however it must be emphasised this is a regional, design loss rate for a very large region and it cannot be expected to apply accurately for a particular location or a specific storm.

1.2.7 For an initial loss of 50 mm, the model indicates that the discharge in Treloar Creek would have exceeded the creek capacity of approximately 300m³/s for a duration of about 10 hours from around 2300 h on February 20, 2000. There are, however, a number of reasons to believe that this assumed bankfull discharge would have been exceeded earlier than 2300 h: o The spatial variability of soil conditions (and losses from rainfall) mean that some parts of the catchment with lower losses would contribute runoff earlier than the mean for the catchment. When different parts of the catchment begin contributing runoff at different times, the commencement of rise of stream stage begins earlier and the transition from zero flow is less abrupt. o The observation by the landholder at Langidoon that the creek was running near bank-full at sunset on February 20. Assuming sunset to be 2000 h, the model predicts a low flow of approximately 25 m³/s at that time and predicts zero flow at 1900 h. This anecdotal evidence supports the contention that the model underestimates flows on the rising limb of the hydrograph. The assumed bankfull discharge of 300 m³/s could therefore be expected to occur earlier than the model indicates. o The assumed temporal pattern was adopted from observations made at Koralta. The other observations made at Tirlta and presented in the Water Studies' report exhibit higher rainfall intensities in the early part of the storm. This temporal pattern would bring forward the rising limb of the hydrograph.

1.28 Having consideration of these factors, it is most likely that overtopping of the right bank of Treloar Creek commenced some time between 2000 h and 2300 h on Sunday, February 20. If the creek was near bank full at sunset as has been stated, the rapid rise in stream stage would have initiated overbank flow quite soon thereafter." [emphasis added] 121 Paragraph 1.2.5 certainly makes the point that the catchment modelling remains very approximate and is only indicative and that too much accuracy should not be ascribed to the outcomes presented. This supports the proposition that the whole of these analyses are generally suspect for the reason that subtle changes in the parameters relied upon can make significant differences to the ultimate opinions as to timing. 122 The reference in paragraph 1.2.7 to the observation by Mr Johnston that the creek was running near bank full at sunset on February 20 is simply incorrect. That was not the evidence. I would doubt that it was an appropriate inference to necessarily be drawn. The matter is simply unclear. A contra inference cannot be excluded. 123 As to 'bank full capacity' the following sets out portion of Dr Porter's cross-examination: "Q. If you come across - if you take the 400 cubic metres per second discharge and come across horizontally, what time do you get when that line intersects the hydrograph, that's the upper hydrograph? A. It appears about midnight on that curve… Q. Dr Porter, you think that it actually overflowed at an earlier time than that, don't you? A. I believe that's a most probable - it most probably did, yes. Q. And you rely, do you not, on anecdotal evidence to arrive at that conclusion… A. Partly. Q. …And you refer in your second report at paragraph 1.2.7… to the landowner at Langidoon as being in a position to cast some light upon this situation - in other words, the point of time of overflow of Treloar Creek? A. Yes

Q. And you say that: The reckoning by the landholder at Langidoon that the creek would be running near bank full at 2000 hours on February 20th. And then you go on in the third sentence to say: This anecdotal evidence supports a contention that the model underestimates flows on the rising limb of the hydrograph. Is that correct? A. That is correct. Well, that's one reason, yeah. That's one out of three… Q. I'm just referring to this anecdotal evidence, Dr Porter. A. Yes. Q. And then our last sentence: The assumed bank fall discharge of 300 cubic metres per second could therefore be expected to occur earlier than the model indicates… Q. Where does that figure of 300 cubic metres per second come from Dr Porter? A. That was my initial estimate of the bank full discharge. Subsequently that was revived to 333 upwards for the bank full condition, and I'm also aware of the fact that the effluent channel actually leaves the channel a little bit below bank full and that the channel dimensions decrease in the downstream direction, so I've taken all those things into account. Q. But where do you explain the fact, your assumption, that the overflow from the channel occurs at less than bank full capacity in your report? A. I haven't referred to that . Q. Well, you just told me that. I would like to see if I can find it in your report? A. Ys, that's one of the things I just told you. That is correct. It's not in the report. Q. I see. A. I saw an effluent channel out there which allows water to escape below bank full channel. Q. I see. Did you make any calculations in that regard? Did you take any measurements to verify - - A. No, I didn't measure the dimensions of the effluent channel. Q. So you came up with a figure of 333 to 407 by calculation and then you have adopted a figure of 300 cubic metres per second. A. I had adopted 300 in my first report. I found when I used Manning's end value in the second report that my figures weren't that much different." [Transcript 25 March 2002 pp53-54]

124 There seems also to be real reason for doubt as to Dr Porter's manner of dealing with soil variability. He relied upon a view of the creek from Langidoon Homestead downstream and upon a flight over a larger part of Treloar Creek. In answer to whether he was able to assess the spatial variability of soil conscience from a flight his evidence was that he could see that the catchment was not homogeneous. He gave evidence to the following effect: "Q. But were you able from the air to be able to assign any sort of values to soil characteristics? A. Yes, in a sense, only a limited sense , but in the hilly country further upstream it appeared that the soils would be shallower" [Transcript 25 March 2002 page 58] 125 As transcript page 58 of 25 March 2002 Dr Porter makes plain he performed no calculations in relation to temporal pattern: "Q. And then in your third point there, you talk about the assumed temporal pattern? A. Yes. Q. And you are suggesting that the rainfall data that you have inspected leads you to the conclusion that because of the temporal pattern, then this would bring forward the rising then of the [hydrograph], is that right? A. I knew that the model had used the temporal pattern from Koralta and I also knew that the temporal pattern would vary over the extent of the catchment, so it would not be entirely representative of the total catchment. There was some other evidence from (inaudible). Although that is not within the Treloar catchment, it is in the same region that experienced the heavy rainfall and I was able to compare the temporal patterns from those two pieces of evidence, which was all that we had. Q. Did you do any calculations in that regard to the temporal pattern? A. Not calculations, no." 126 Ultimately Dr Porter made the point in cross-examination that his view had not been that the overflow took place at Treloar Creek at 8.00pm but rather "I think I said it could have been as early as that". He then, at transcript page 59, gave evidence to the following effect: " Q. Sometime between 2000 and 2300 on Sunday. That is at page 3 of your report? A. Well, you know, I accept that, so those times are earlier than indicated by the model and the first and third dot points that I have, they support the contention that it would have occurred rather earlier than the model indicates, which assumes uniform conditions over the entire catchment- most unrealistic but that is all we have to go on in hydrology quite often " 127 It seems to me that there is real substance in the submissions of Mr Lawrence critical of Dr Porter's approach: "And the final point in relation to the channel capacity, and it also comes into the next point when we talk about the overland flow path between Treloar Creek and Koralta Depression, is that Mr Porter has returned to the topographic maps on several occasions and has gone through the process of measuring distances of channels with different types of equipment to arrive at estimates of bed slope, to such an extent that he can arrive at an estimated bed slope to three or four significant figures. In other words, that's 0.000 and then followed by four digits.

Now, it is my submission that it is simply not open to a - it is not a procedure that would be open to, ought to be open to, a well qualified expert in this area.

Now, given that, and Mr McConnell has given evidence, and it is supported as a standard, that these estimates of longitudinal gradient profiles are based on measurements between contours which have intervals between them of at least 10 metres and in some cases 20 metres.

Now, the standard level of accuracy assigned to any one contour is plus or minus 25 per cent of the contour interval. This means it's theoretically possible that the actual distance between two contours can vary between five metres and 15 metres in vertical elevation.

So the approach of going through this exercise and using different types of equipment, curvimeters, and remeasuring the line is, in my submission, an exercise that is simply not - it is an attempt to come up with data that can't be supported on the evidence.

So here we have Dr Porter trying to bring forward the time of overflow up to four hours earlier than the time indicated by Dr Markar's model. But following along that on the same proposition of the travel time from overflow from Treloar Creek down to the Koralta Depression, Dr Porter has assumed in his calculations… the constant depth of 500 millimetres all the way from Treloar Creek overflow to the Koralta Depression.

He has made observation on the bank of Treloar Creek from debris marks marginal of a depth of from 500 to 600 millimetres. He has no information available to him in relation to the flow path on "Koralta Station", and a very significant part of that 19.5-kilometre travel distance from Treloar Creek to Koralta Depression lies within the "Koralta Station".

The only other figure that he …adopted in those calculations was a figure of 500 millimetres that was provided by Mr Johnston when talking about the removal of the fence line on the property boundary, and he said that he had observed a 500-millimetre depth…

Mr McConnell was able to supply the information that essentially the depth of flow measured around a fence before it breaks is not the same as the depth of normal flow, and the point being that as floodwaters flow into the fence they carry debris, they back up material against the fence, the water level rises behind the fence to provide the load on the fence to break it, and it was Mr McConnell's estimate that the normal depth of flow in the vicinity of the fence was more like 400 millimetres.

…Dr Porter's estimated depths of depression storage within the local catchment give rise to, and in conjunction with his figure of 500 millimetres depth of flow, give rise to maximum depths waist high, about a metre, and, in my submission, there is nothing in the evidence to support that figure.

So that in the figures that have been prepared by Dr Porter he comes up with a much shorter time of travel from Treloar Creek to "Koralta Station" based mainly on the fact that he has got, in my submission, a much higher depth of flow than is possible to conclude from any data presented or from the observations of Mr McConnell, who spent some four days there in the area, going around the whole area with his survey and making observations…

And also Dr Porter has gone back to his data to refine the figures and gradually try and decrease the time of travel by playing with the third or the fourth significant figure in a slope which generally has a magnitude of 0.000, or starting with three zeros. And he has taken a curvimeter and he has gone along that distance and he has really made a very stout effort to do all he can, in my submission, to reduce the travel time and bring the time of arrival of water to the creek, and again I would bring up whether this, in fact, is really an expression of analytical integrity and perhaps also jealous regard for unstated premise." [Transcript 27 March 2002-pages 68-69] 128 On the evidence Dr Porter did not inspect the flow path within Koralta Station and took no account of "leakage" from the flow path northwards with the effect of gradually reducing flows from west to east. I accept that his refinement of overflow distances may well have been inappropriate due to small scale mapping inaccuracies. I accept that his assumption of the depth of flow being constant at 500 mm in the overland flow path may well be unreliable. If these were over-estimates then the net result leads to higher velocities and hence shorter travel time. 129 In the result the court is left with very considerable difficulty in assessing the strength of the defendant's contention that the experts evidence may be regarded as reliable in proving that the Treloar Creek overflow arrived at the Homestead before 6.00pm on Monday.

130 The matter is then even more complicated when one endeavours to deal with the somewhat inconsistent approaches taken by the experts to the question of the flow path taken by the Treloar Creek overflow. During the course of the hearing I asked whether if one assumes that one had one or two very tiny toy boats which commenced their voyage at the Treloar Creek overflow, those boats, or either of them, would have ended up in Scour Lake or elsewhere and if so then where. The matter was not able to be clarified during the course of evidence. Mr Taylor referred to the question as "the 64 dollar question". And this not the least because the satellite image was not taken at 6.00pm on Monday.

131 The matter was highlighted by Mr Taylor in oral submissions as follows: " HIS HONOUR: And just while we are standing here, where one is looking at Treloar Creek from the perspective that there is some evidence that water may have escaped from the natural water path that the overflow of the creek would take and not continue on towards Scour Lake, I think Dr Porter said that if I put one of my two little boats on the Treloar Creek water and tried to follow it, one could find that they both ended up in Scour Lake or one could find that one of them took off to the side along the catchment, the other one continued on to Scour Lake and so on.

Taking the boat which would leave the path and not get into Scour Lake but would make its way into the depression, where are the places on this exhibit D10 where that little boat might turn into the depression short of Scour Lake?

TAYLOR: Dealing with the question of escaping water going sideways, we don't confine ourselves to the proposition that all the local water catchment, the clear water, had got into the depression and then was moved sideways. The satellite image is just as consistent with there being a continuing flow path from the local catchment area consistent with Dr Markar's model, and in that sense if the dark rim one can see coming in from the north-western catchment area still represents an active flow, that water has escaped itself because it can't move into the preferential area of flow on the south and south-eastern side of the depression. It can't get into the normal confines of where the lake would be.

So there are two ways we are putting that part of the escape argument. But dealing with Scour Lake, it is probably better to look at that analysis with Mr McConnell's scale map again because it is more informative than surmises from the satellite image.

HIS HONOUR: But, in general terms, there ought to be some ability to show me on one or other of P3 or D10, where this little boat which may not get into Scour Lake may have taken off towards the depression earlier, having originated in Treloar Creek. There must be a limited number of places along the way that could have happened.

TAYLOR: Well, the scenario, as I understand Mr McConnell's and Dr Porter's evidence and Mr Hams', if we look at Mr Hams' dogleg turn, Your Honour can just make out in one of the earlier - just lift part of Mr McConnell's catchment overlay. One can now see Mr Hams' dogleg turns just to the west of the neck leading into Scour - first of all leading into the depression area and then Scour Lake to the right. So he has got his Scour Lake initials there, and the depression here, and there is the dogleg. Now, the difficulty that one has with the satellite image in contemplating flow into Scour Lake is that it is simply not occurring.

HIS HONOUR: Let's just start on the one you are holding up, the transparency in relation to Treloar Creek… Treloar Creek is clearly defined in the red far to the left and then we have these blue lines for the, as it were, water course or channel, correct?…

HIS HONOUR: Where are my two little boats floating along, Mr Taylor?

TAYLOR: Well, if we look at the two competing versions of the flow paths, you either have the boats anywhere within the blue northern and southern boundaries that Mr McConnell identified as the flow path, but wherever they are, they end up between Mr Hams' parallel 3 o'clock turn.

TAYLOR: If you look at Dr Porter's flow paths on exhibit P3A, you can have the two boats anywhere on the orange, black or purple flow paths but, again, they come to the same dogleg turn and then they either take the path on the south-western boundary of the depression rim or they take the path directly through the dogleg turn and head generally in the direction of Scour Lake.

What one then has is the 64 dollar question as to whether or not they enter Scour Lake or they don't. The satellite image is not consistent with any flow into Scour Lake occurring at the time the image was taken and so then one is left to look at Mr McConnell's map and assess the probability of entry having regard to the greater detail one can see in that topographical map and having regard to what seems to be the uncontradicted fact, namely, that when Mr Hams saw Scour Lake at 9 o'clock in the morning, there is no evidence from him to suggest any water was flowing from the local catchment area into Scour Lake.

HIS HONOUR: Well, this question of the 64 dollar question and what, for example, Professor Forster's evidence was about water and whether or not it went into Scour Lake, are you able to just remind me of what he said and what others have said to the contrary about that?

TAYLOR: Well, my recollection of Professor Forster's evidence was merely that the water that was in Scour Lake seemed to be less turbid than the water that had a more clearly defined flow path from the Treloar Creek area. Now - and he also made some observations about water being pulled from Scour Lake.

Now, with the greatest of respect to Professor Forster, the very fact that water in Scour Lake is less turbid in appearance even on the satellite image than the water flowing from Treloar Creek, one would have thought, is far more consistent with the conclusion that none of the Treloar Creek water got into Scour Lake than that it did." [Transcript pages 24 et seq on 26 March] 132 Whilst I readily accept the difficulties involved in terms of the interpretation and weight to be given to the Tuesday Satellite image, at the least Professor Forster, who clearly has an enormous amount of experience in interpreting satellite images, has now given expert evidence to the effect that in the analyses which he has identified the water which inundated the Homestead and outbuildings prior to the time when the Satellite Image was taken was surface run-off water not sediment laden flow water. His evidence was that by reference to the coloration, a distinct body of clear water on the western edge of the depression could be seen such that at the time of the image the flood driven, sediment laden water had not reached the clear water on the western edge of the depression. Run off water would have had a much lower sediment load than flow water and would be much clearer, and thus dark blue on the image. It does not seem to me appropriate that this evidence simply be disregarded. To the contrary it lends further credence to the plaintiffs' case and provides a further basis for simply holding that the defendant failed to discharge their onus of proof. Catchments of Ramparts and Boorungie Creeks 133 The next question which arises is whether the catchments of Ramparts and Boorungie Creeks above Scour Lake have the necessary attributes, in terms of catchment area and topography, to have been able to generate sufficient run off to fill Scour Lake sufficiently quickly to enable Scour Lake to overflow into Koralta Depression before 6.00pm on the Monday. This is a particularly difficult question. 134 The plaintiffs strongly contend that there is an inadequate data base to permit the court to make any reliable findings based upon any meaningful estimates of the volume of run-off or the time of arrival of relevant waters at Scour Lake or the time of overflow of Scour Lake. In my view there is substance in the plaintiffs' submission to this effect. In effect when one returns to the general approach of both parties, this matter does not seem to have received anything like the attention given to the Treloar Creek issue. One returns also to the modelling process by Dr Markar and to the major determinant in that process having been depression storage. As Mr Lawrence put the matter at transcript 27 March 2002 page 83 - 84 in final submissions: "LAWRENCE: And it's in relation to the validity of the computer modelling exercise, and if I go to line 14 - we are on page 41 - the question:

Q. Did you ask Dr Porter to supply those results, those figures?

By which I meant the depression storage figures, and I had previously noted that he had put into the model depression storage of zero and 5,000 megalitres, and he said:

Oh, no. There were a couple of hypothetical numbers just to look at. This was all done in a hurry the day after I got the new data, so I sort of put a few numbers in to see what we could get out, and no sensitive relationship was done.

You had a quick look at all this and you came up with a couple of numbers to put in for the depression storage too.

He said, "Yes, I put up zero, nothing, and another number and, yes, correct."

"And that, your Honour, is suggestive that there's no credence should be placed on this modelling exercise. It goes to consistent, accurate objectivity and integrity. What he's saying there is he was asked to do something and he sort of picked a couple of numbers out of the air, 1,000 and 5,000, plug in the model and saw what came out. And what came out is quite a range of options depending on what numbers you put in. You could get time of overflow commencement of Scour Lake any time between 4.15 p.m. and 2245 hours on the Monday.

Now, the same process that I've put to your Honour in relation to Dr Markar's modelling exercise of the Koralta Depression, if we look at all the number of qualifications that you can put on the modelling exercise of the Koralta Depression and relate them to his modelling exercise for Scour Lake, my submission is that the results are of no value at all and based on assumptions with no basis." Further parameters of significance 135 During the final addresses it became reasonably clear that the defendant places very considerable reliance indeed upon the proposition that the evidence established quite plainly that: · Prior to 3.00pm on the Monday, there had been "several hours of static level in the water levels around the Homestead" [defendant's written submissions paragraph 11 at page 4]; · At about 3.00pm on the Monday, the water levels around the Homestead had started to rise again and did so "at the same rate" as they had been rising until shortly after lunchtime [transcript of final address 27 March at page 85]. 136 The defendant's central proposition is then that the evidence given by Dr Porter and by Dr Markar is seen to be soundly based because there was a vastly increased area to fill and this could only be increasing at the same rate as the levels had increased much earlier in the day, if additional sources of water were contributing over and beyond local catchment waters. The proposition is that one could not have the levels rising at the same rate as the earlier levels had risen if all that was occurring was that local catchment waters were responsible. 137 The defendant relies in support of this analysis and submission upon the evidence of Mr Hams [transcript 19 March at pages 63-66]. It is certainly true that this evidence establishes that during the morning from about 9:30am water appears to have been rising, it entering the shearers quarters at about 10.00am and entering the house yard at about 12:30pm. The evidence also established that during this time at least until the water reached above floor level in the shearers quarters, Mr Hams was working at a frantic pace in endeavouring to save as much as was possible from the shearers quarters. It is also true that Mr Ham's evidence was that the water entered the house yard by about 12.30pm and that during the afternoon there was a time when the level stopped rising as quickly for something like two to three hours and then started to rise again at something like about 3.00pm or 4.00pm. It is also true that Mr Hams' evidence was that it then rose at approximately the same speed or rate at which it had been rising prior to when it had stabilised below the house. However it is important to recognise, although the defendants submissions did not seem to accept this as reliable evidence, that Mr Hams in giving evidence as to why the level had risen from about 3.00 or 4.00pm at the same rate as it had earlier in the day, put the matter as follows: " There is a reason for that…. Because, you recall my description of the depression I mentioned about three sumps and high ground in between, it rose to the level of the high ground between first [sic] and second sump that was held, and that is held below the level of the house, for only some hours, before going over the rise between first [sic] and second sumps and flowing out to the areas, the level of the depression." [Transcript 19 March page 66] 138 Although this was not put to me in submissions, I can accept that the defendant may have had in mind that this evidence of Mr Hams could not be accepted in terms of any suggestion that he had hydrological specialised knowledge of the type which clearly each of Mr McConnell, Dr Markar and Dr Porter had. However, although I do not recall the defendant addressing in terms of some further evidence which Mr Hams also gave, it must not be forgotten that this further evidence [at transcript page 68] involved first hand evidence that Mr Hams had actually, after lunch, walked down and personally observed the overflow which had already commenced to run and was then running into the second sump. This is important evidence and it seems to me may legitimately be regarded as supporting a finding of the type for which the plaintiffs contended, namely that the physical process which had occurred during the early afternoon when the water levels appeared static was that water was filling out sump 2 and then sump 3 and once those sumps were full up to the level of the divide and all the sumps were then completely filled such that a contiguous water body existed, the rise continued. Mr Lawrence, as an aide-memoire in submissions, had prepared a longitudinal profile by way of an output from the survey mapping produced by Mr McConnell which makes the point and is annexed hereto [Annexure "E"]. To my mind the first hand evidence from Mr Hams of his actual observations should be regarded as reliable. That evidence gives credence to and supports a finding that at least for a period of time during the bracket of time generally regarded by Dr Markar as particularly important for his modelling assumptions, it simply cannot be assumed that there remained a constant static level in the water levels around the Homestead [that is to say that the rate of inflow had stopped]. As earlier observed, it only takes subtle variations in the assumptions input into the model, for dramatically different results to be produced. 139 Further the evidence relating to the order and the filling of the three sumps as well as the inferences as to timing makes suspect the defendant's proposition that the only explanation for the steady increase in rate later in the afternoon, could be that additional sources over and beyond local catchment waters were coming in. And even if those waters were already coming in, the all important question is, when precisely did they arrive? And how did they affect the waters which they met? These are all matters of real difficulty, the fact being that for all the time and effort expended by the parties in the close analyses and modelling and statistics and theorising, this is not a case in which the matter may be viewed 'in terms of coffee spoons'. 140 Whilst there is very real difficulty in endeavouring to treat with questions of lay interpretation of the inferences to be drawn from observations as to the water coloration, it has to be recalled that Mr and Mrs Hams both gave evidence that it was approximately 11.00pm on the Tuesday night when 'dirty' water had arrived at Koralta - apparently in contradistinction to the reddish coloured water which began to appear from the north west at about 9.00am to 9.30am on that day. Mr and Mrs Sandow were flying above the property and at about 10.00am Mrs Sandow noticed that red water was moving around the shearers quarters towards the house and that there were bands of red water on top of the clear water to the east, moving in from the north west which appeared to be passing the eastern side of the house and entering a narrower area to the south. Mr Hams had actually said in radio contact with Mr Sandow, that the red water had arrived about one and a half hours earlier. Mrs Sandow gave evidence that from the area she had been able to see different colours of water. Around the house and the sheds and in front of the shearing shed there had been a long narrow body of light coloured water. The toilet out from the shearing shed was roughly central in this stretch of clear water. As before, I do not see that this evidence is inconsistent at all with the proposition that waters from outside the local catchment had neither arrived nor contributed to the waters which entered the Homestead at 6.00pm on Monday. As before, if anything the matter remains highly debatable, meaning that the defendant does not succeed in having discharged its relevant onus of proof. The roaring noise 141 The significance of the roaring noise is yet again a matter of some real debate. Mr McConnell in cross-examination was not prepared to accept that the evidence of a lay person in regard to a noise coming from any real distance could be relied upon for any special or particular or discernible reason. And as already mentioned, even Mr Taylor in final submission (although generally contending that the probability was that the roaring wall of water which was still a considerable distance away from Mr Hams when he saw it, was most likely to be the result of the arrival of the Treloar Creek water) submitted that one should be cautious before drawing that conclusion for the reason that if the water in front of Mr Hams was still clear and still local run off, there was likely to be a process involved having regard to the flow paths, of some combination of continuing local run-off as well as Treloar Creek water. In all the circumstances it seems to me that special caution requires to be given to the extent to which the Court may infer that the roaring noise must have come from the arrival of Treloar Creek water. This is not to diminish in any sense the evidence of the body of water about knee deep and up to 200 to 300 metres wide. Ultimate Holding 142 As it seems to me, the Court is thrown back to the essential onus of proof. Leaving aside the question of the definition of the word "lake" for the purposes of the defendant's so-called 'lake' submission, I am simply not satisfied that on the balance of probabilities the defendant has established that the waters which inundated the Homestead at 6.00pm on the Monday and for the next few hours (a) emanated from the arrival of waters which had 'escaped' from Treloar Creek nor from the arrival of waters having 'escaped' from Scour Lake; or (b) did so because of the causal presence of such waters. 143 In short, leaving aside the 'lake' submission, the defendant has failed to establish that on the balance of probabilities the damage caused by the waters which inundated the Homestead at 6.00pm on the Monday and for the next few hours was caused by "flood" in terms of inundation following the escape of water from the normal confines of Treloar Creek or Scour Lake. Were the sumps ' lakes' within the meaning of the Policy provision? 144 The parties were at issue as to the meaning of the word "lake" within the Policy definition of "Flood". 145 A number of approaches taken during argument commenced with a close examination of dictionary definitions. It is convenient to commence with referring to these: · Macquarie Dictionary (2nd ed) (1991) and (3rd ed) includes the following: "Lake" :… "(1) a body of water (fresh or salt) of considerable size, surrounded by land.. (2) some similar body of water or other liquid." · The new Shorter Oxford English Dictionary (1993) includes the following: "Lake"…"(2) A large body of water entirely surrounded by land…" · Black's Law Dictionary (7th ed) includes the following: "Lake"... "A large body of standing water in a depression of the land or basin supplied from the drainage of an extended area." 146 Associated questions include whether or not all or some of the following terms would qualify as candidates for inclusion in the proper meaning within the construction of the Policy, of the word "lake": lagoons, swamps, marshes, wetlands or other bodies of still water. So much may be discerned from an examination of sundry statutory definitions including: · Crown Lands Act 1989 (NSW), section 172 (1): "Lake includes a permanent or temporary lagoon or similar collection of water not contained in an artificial work." · Native Vegetation Conservation Act 1997 (NSW) section 4 (1): "Lake includes a lagoon, wetland or other body of still water, whether permanent or temporary." · Soil Conservation Act 1938 (NSW), section 3: "Lake includes a lagoon, swamp or other collection of still water, whether permanent or temporary, not being water contained in an artificial work." · Water Resources Act 1989 (Qld), section 2: "Lake includes… a lagoon, swamp, marsh or other natural collection of water, whether permanent or intermittent.." · South Eastern Water Conservation and Drainage Act 1992 (SA), section 3: "Lake means a natural lake and includes a natural lagoon, swamp, marsh or spring." · Water Conservation Act 1936 (SA), section 5: "Lake means any lagoon, swamp, marsh, Lake, or other collection of still water, whether the supply of still water is permanent or temporary, and where it is found above or beneath the surface of the ground." 147 Clearly special caution is necessary before being in a position to use definitions to be found in statutes. Arguably the very reason for including an extended definition for example of the word "lake" in a statute is that absent such definition, the usual meaning of the word may be taken to exclude, rather than to include, things such as "swamp" or "marsh". On the other hand certain definitions in statutes follow very closely the ordinary meaning of certain words. 148 Counsel for the defendant also cited Keener v Sharp 95 S.W. (2d) 648, a 1936 decision of the Springfield Court of Appeals in Missouri where the following passage appears: "A lake is an inland body of water of considerable size, occupying a natural basin or depression in the earth' s surface below the ordinary drainage level of the region. Whether a sheet of water is to be classed as a lake, or marsh, swamp or bog, it is necessary to take into account the comparative depth or shallowness of the water, its permanence or liability to dry down and refill according to the season, the main source of supply, whether streams or springs or surface drainage…" 149 The Macquarie Dictionary (3rd ed) definition of "swamp" includes.. "(1) a piece or tract of wet spongy land; marshy ground; an area of still, often stagnant water.. (2) a tract of soft, wet the ground having a growth of certain kinds of trees, but unfit for cultivation". 150 The plaintiffs relied inter alia upon a report [Exhibit P10] by the Soil Conservation Service of New South Wales entitled "Western Lands Lease Management Plan" apparently dated 1979 and describing Koralta. Of relevance is the section entitled "Playas and Basins" which classifies the so-called sumps as "Land Class 5B-Treeless Swamp Floors": "This land class comprises very small areas of treeless swamps, which hold water for longer periods than the areas of land class 5A. [I interpolate that this Land Class is defined as "Box Flats and Swamp Margins"] They are frequently surrounded by areas of land class 5A. The heavy clay soils of these swamps have a strongly self mulching surface and develop extremely deep cracks when the soil is dry. They are not susceptible to erosion.

The swamp floors are treeless but about half of the area supports very dense stands of nitre goosefoot, with some lignum and canegrass…" 151 The plaintiff relied upon the evidence given by Mr Hams that before February 2000 the most water that he had ever seen in the "sump [which I take it was intended to mean 'sumps' ] of the Koralta depression referred to in paragraph 5 above, was approximately 60 cm deep following heavy thunderstorms in the summer of 1992, 1993". [Paragraph 16-affidavit 1 June 2001]. 152 In House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498 Mason P said in relation to use of dictionaries: "It has been said that "words are only pictures of ideas upon paper": Isaacs J in Fell v Fell (1922) 31 CLR 268 at 276, citing Wilmot CJ in Dodson v Grew (1767) Wilm 272 at 278; 97 ER 106 at 108. Jackson J once remarked that "dictionaries are the last resort of the baffled judge": Jordan v De George 341 US 223 (1951) at 234.

Nevertheless, dictionaries are frequently used, and this approach to statutory interpretation has support from the highest authority: see, eg, State Chamber of Commerce and Industry v Commonwealth (1987) 163 CLR 329 at 348. Few judges emulate Lord Wilberforce, who never used dictionaries for the purpose of determining the common understanding of words and shut his ears if they were referred to in court: see Bennion, Statutory Interpretation: a Code, 3rd ed (1997) Butterworths, London at 946.

A dictionary may not offer a reasonably authoritative source for describing the range of meanings of a word, including obsolete meanings. Dictionaries recognise that usage varies from time-to-time and place-to-place. However, they do not speak with one voice, even if published relatively concurrently. They can illustrate usage in context, but can never enter the particular interpretative task confronting a person required to construe a particular document for a particular purpose. I agree with the following remarks of Judge Randolph of the United States Court of Appeals for the District of Columbia Circuit: "Dictionaries, Plain Meaning and Context in Statutory Interpretation" (1994) 17 Harvard Journal of Law and Public Policy 71 at 72:

citing…dictionaries creates a sort of optical illusion, conveying the existence of certainty - or 'plainness' - when appearance may be all there is. Lexicographers define words with words. Words in the definition are defined by more words, as are those words. The trail may be endless; sometimes, it is circular. Using a dictionary definition simply pushes the problem back." "… 153 I approach the issue upon the basis that: · "Dictionaries are not a substitute for the judicial determination of the interpretation and then construction of statutes and other documents": Life Insurance Company of Australia Ltd v Phillips (1925) 36 CLR 60 at 78 per Isaacs J. [cited by Mahoney JA in Provincial Insurance v Consolidated Wood (1991) 25 NSWLR 541 at 560]. · "The meaning of the words used in a statute or document is not merely the sum of the individual meanings of the words used, ascertained from dictionaries. To adapt the much cited comment of Holmes J, a word is the skin of a living thought, and it is the thought which the court must ascertain and apply." [Provincial Insurance at 560]. · Approaches to dictionary definitions require particular care, there being no single authoritative dictionary such that the court ought not improperly restrict itself by a reference to one dictionary and not another. Further it is usual although not determinative, to refer to a dictionary of the relevant country. [Provincial Insurance at 561] 154 The evidence before the court including: · the photographic evidence; · Exhibit P11 [see page 2 and cross reference to page 1]; · The survey material exhibit DMCR 6 to the affidavit of Mr McConnell of 20 March 2002; · The evidence given by Mr Hams;

strongly suggests to me that upon the proper construction of the Policy the subject sumps do not fall within the description "lakes". The reasons for this holding (which is ultimately no more than a matter of impression derived from all of the evidence) are essentially as follows: · Common to most definitions of the word "lake" is a description as to the size of the relevant body of water, whether it be "considerable" or "large". Whilst for fairly obvious reasons it is not practicable or possible to endeavour to define in the abstract, whether a particular body of water has sufficient size to qualify as being a "lake" with the meaning of the Policy, it seems to me that none of these sumps are of sufficient size to so qualify. · Likewise the comparative shallowness of the water as well as we evidence concerning how these sumps are generally normally dry [or "only intermittently wet" - paragraph 24 - report of Mr McConnell of 29 August 2001] constitutes yet a further integer confirmatory of the above finding. 155 It does not seem to me to be of real assistance to speculate as to whether the sumps may more appropriately be referred to as 'swamps', or 'treeless swamp floors' or only as 'some other collection of still water not being a lake'. Suffice it to say that not every treeless swamp will necessarily fail to satisfy the definition of a "lake" within the meaning of the Policy. However in this case these sumps do not so qualify. 156 I note also that Dr Porter in his June 2001 report sought to draw a distinction between 'lakes' and 'claypans' when referring to water being able to "pond in depressions (lakes and claypans) from local run off". [Paragraph 2.6, 2.7]. In that regard Dr Porter put the matter as follows: "The distinction between lakes and claypans relates to the potential maximum depth of water which can be ponded, which in turn relates to the duration for which water may be ponded. In general, claypans are shallow and retain water for only short periods (ie they are ephemeral). By comparison, lakes may hold greater depths of water and could retain water for longer durations." [Paragraph 2.7] 157 I note that the Macquarie Dictionary (3rd ed) defines "claypan" as "a depression in the ground of hardened impervious clay which retains water". Mr McConnell however appears to doubt the purpose of making this distinction. [Report 29 August 2001 at paragraph 17] In the result I am not assisted by this suggested distinction although I note the emphasis given to the "heavy clay soils of these swamps" in the above described Soil Conservation Service Western Lands Lease Management Plan. "Normal Confines" 158 The plaintiffs submitted that on the evidence the appropriate holding is that the sumps have no "normal confines" and this for the reason that in contradistinction to Exhibit D6 which was a photograph taken in March 2001 of Scour Lake showing a line of trees [evidence of Mr McConnell -transcript page 215] recording the normal confines of that lake, no such "normal confines" are apparent on the evidence [as for example Exhibit D13 being a photograph of water within the northernmost sump] in relation to these sumps. The submission was that these sumps essentially comprise a large bowl shaped depression where surface water, when within the sumps, would lie at the bottom and that there was simply no part of the sumps which could be defined as the normal confines. [transcript of address page 16 - 27 March 2002]. One of the photographs in evidence which on the evidence was taken in about 1999, is to be found behind tab 8 in exhibit PX 1 and serves to depict the circumstance where the northernmost sump was totally dry. Plainly fairly healthy vegetation was apparent. But the photograph does it seems to me support the proposition that it is not possible to identify the normal confines of the sump. Returning to the wording of the Policy the following analyses seem to be open: · Upon the proper construction of the relevant provision, a body of water which otherwise may have been properly described as a "lake", cannot be so described within the meaning of that word in the policy, if the relevant body of water simply does not have any normal confines and/or · Even if these sumps are properly described as "lakes" within the meaning of the policy, the escape of water from these 'lakes' cannot be categorised as an escape of water from their normal confines, there's simply being no such normal confines. 159 In my view each of these approaches have substance and should be accepted as viable alternative analyses. Meaning of "escape" 160 I reject the plaintiffs' submission that upon its true construction the word "escape" as used in the flood exclusion, only applies where water was at one time within a lake. To my mind the reasoning of Mahoney JA in Provincial Assurance is pervasive and any event arguably binding upon a first instance judge. Notwithstanding the slight differences in the wording of the provision there being construed, the same approach requires to be taken in relation to the present provision: "For the exclusion to apply, it is not necessary that the precise water which escaped from the water course or canal be identified as having actually entered the insured's premises. The exclusion is of loss or damage " occasioned by or happening through" the inundation of normally dry land "by water escaping… from…." a water course or canal. If, by reason of the inundation of normally dry land by water so escaping, other water was forced into the insured's premises and occasioned loss or damage, that would, in my opinion, be loss or damage "occasioned by or happening through" the escape caused by such a flood". [ Provincial Assurance Australia Pty Limited v Consolidated Wood Products Pty Limited (1991) 25 NSWLR 541 at 564] 161 Had the courts decision in relation to the proper construction of the word "lake" been otherwise such that the sumps fell within the meaning of that word, my view would have been that once all or some of the water which in the ordinary course of events would have fallen into the sumps vertically (or being surface water run off from surrounding areas, would have collected in the sumps), could not be accommodated within the sumps, that water, whether or not some of it had at one time been within the sumps, in ordinary and natural language should be regarded as escaping or as overflow. This approach seems consistent with the holding in K Sika Plastics Limited v Cornhill Insurance Co Limited [1982] 2 NZLR 50 where policies had indemnified the insured in respect of "destruction or damage to the property insured directly due to - Water not being water which through flood had overflowed beyond the normal boundaries of river, watercourse, lake or sea". After extremely heavy rainfall flooding damaged the plaintiffs' premises and equipment. Water had come down the gorge in a torrent. The cumulative rainfall had been so heavy that the normal banks of the stream could not accommodate all the water that would otherwise have entered them either directly from rainfall or run off. The insurer was held not liable under the policies. Cooke J put the matter as follows: "There is no dispute that the damage to the plaintiff's premises and equipment was through flooding. The issue is as to the remaining words of the clause already read. In ordinary and natural language, I think that a watercourse is said to overflow its normal banks when all the water that would otherwise drain or fall into it cannot be contained in it because it is full. All the surplus water is then overflow, no matter whether or not some of it has at one time been within the banks and then forced out. The question is one of the ordinary use of words rather than one of law, but the approach just mentioned obtains some support for Oakleaf v Home Insurance Ltd (1958) 14 DLR (2d) 535 in the Ontario Court of Appeal, where the obstruction of a drain by debris and its consequent inability to accommodate all the water discharged by a downpipe was regarded as resulting in "overflow". Porter CJO said at pp 537 - 538: "I agree with the trial Judge that there was 'overflow'. This is not a technical word but one which is in common ordinary use. It should be interpreted in its broadest sense. I think that it obviously applies to water flowing over the window sill as happened in this case." ([1982] 2 NZLR at 53) Submission that the whole of the Koralta Depression forms one "lake" 162 It does not seem to me that this submission is one of substance. And this by reason of the above described general definitions of the word "lake". In no one's terms can it be suggested that the whole of the Koralta Depression comprises a large body of standing water, as distinct from a depression containing within it the three sumps to which reference has been made. And in any event there was some evidence of dry land trees within the Depression [for example the annotation to photograph 6 behind tab 29 of Exhibit PX volume 2]. Causation and "proximate cause" 163 Clearly enough the critical causal question is whether the damage was caused by "inundation following the escape of water…". I accept that the question of causation is to be determined by the commonsense evaluation of the relevant facts. I further accept that the last causal event to occur will usually be an effective contributing cause, especially where it has a cumulative and independent origin: Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350; National & General Insurance Co Limited v Chick [1984] 2 NSWLR 86 at 97; City Centre Cold Store Pty Ltd v Preservatrice Scandia Insurance Ltd (1985) 3 NSWLR 739 at 744-745; Petersen v Union des Assurances de Paris IARD (1995) ANZ Ins Cases 61-244 at 75249, (1997) 9 ANZ Ins Cases 61-366 at 77034. 164 I further accept that causation, including the identification of a "proximate cause" is not a binary analysis. Clearly multiple causes may contribute effectively to the loss-and if one is excluded the policy does not respond: Petersen at 75749; Wayne Tank v Employer's Liability Insurance (1974) QB 57; City Centre Cold Store at 744; Sutton on Insurance at law in Australia (3rd ed, paragraph 15.10). 165 My own view is that on the evidence it is reasonably likely that within several hours of 6.00pm on the Monday, water external to the local catchment and arriving in all likelihood from Treloar Creek and possibly also from Scour Lake became contributors to the damage to the Homestead. In any event Mr Taylor very responsibly made clear that in the event of such a finding the defendant could not on the available evidence submit that the damage to the Homestead would have been caused by any event which was not the subject of cover. This was because as Mr Taylor put it: "Your Honour will recall the cross-examination by Mr Cavanagh of Mr Sinclair which was dealing with this issue of whether or not the damage is caused by the instant wetting or by the prolonged wetting. Now, frankly, I think we would have to concede that the end result of Mr Sinclair's evidence is that he would say once there was a significant wetting of the water, then there is likely to be some deterioration to floorboards and there is going to be some damage, and I think we would have to accept that, as the evidence stands, we could not persuade Your Honour that if water got a foot above the relevant floor level, the inundation would be so transitory that it was only the inundation that occurred subsequently that caused the damage. That is true in relation to the homestead." [Transcript 26 March page 77] 166 On my findings Mr Taylor has correctly summarised the effect of the evidence given by Mr Sinclair [see in particular transcript pages 108.50, 109.40, 109.55]. In those circumstances the damage to the Homestead was caused by the initial inundation which on my findings constituted an event which was the subject of cover. The word "caused" is used in terms of the cause which was proximate in efficiency, the real, effective or dominant cause. 167 In that regard and by reason of my findings the doctrine of proximate cause has no relevance to be question of damage caused to the Homestead. 168 The defendant takes a different stance insofar as the hangar is concerned. It was the first building affected - water flowed into it from 6.00am on the Sunday. Mr Taylor put the matter as follows: "Mr Sinclair's evidence doesn't deal with the hangar and, of course, the construction of the hangar is not timber floors, timber posts or anything else and, with respect, we would submit that the evidence simply does not establish that the hangar was damaged by its initial inundation. It is much more likely that the damage to the hangar was as a result of the prolonged inundation, and in relation to that we submit that the prolonged inundation is undoubtedly equally contributed to, if not predominantly contributed to by the extra inflow of water and that in relation to the hangar, any damage there is not able to be attributed solely to the inundation from its initial flooding." 169 I accept this as a submission of substance. The evidence does not establish that the hangar was damaged by its initial inundation only. On the evidence it is in fact far more likely that the damage to the hangar was as a result of the prolonged inundation. The prolonged inundation was comprised of the initial inundation which did not follow the escape of water from the natural confines of any lake or creek but rather occurred by reason of run off of surface water from surrounding areas as well as by the subsequent inundation which did follow the escape of water from Treloar Creek. Insurance Contracts Act

170 Insofar as the damage to the Homestead is concerned the above findings make the Insurance Contracts Act issue essentially academic for the reason that the damage to the Homestead was not, on my holding, caused by "inundation following the escape of water from the natural confines of any lake, reservoir, dam, creek or navigable canal, as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it". I accept as correct the defendant's analysis that the two sections of the definition of "Flood" are mutually exclusive. The inundation of and damage occasioned to the Homestead was by run-off of surface water from surrounding areas. 171 If I be wrong in the above holding it is necessary for the Insurance Contracts Act claims made by the plaintiffs to be dealt with and I intend to reach findings in that regard. The hangar issue requires such findings in any event. Evidence in relation to the Insurance Proposals and Policy The Proposal 172 Mrs Hams gave evidence that on 28 April 1995 she had attended a meeting with Mr Milde to discuss her husband's and her insurance policy which was being changed to the Elders Ruralpac Gold Insurance Policy. During the course of this meeting Mr Milde checked the insurance policy to ensure that all the items were covered and she signed the "insurance policy" [in fact the proposal] on behalf of her husband and herself. 173 A deal of evidence and close cross-examination was addressed to the precise form in which the proposal which she had clearly signed on 28 April 1995 had been in at the time of signing of the document. 174 One commences with an examination of the blank form of proposal which became Exhibit D4. This form is in a booklet. The booklet is designed to permit a foldout section which appears at the end of the booklet to be torn out along a serrated edge. That section includes: · a page on which is to be found "Part D-Motor Cycles", "Premium Calculations", and details for completion by "Office Use Only". · a page on which is to be found a questionnaire generally dealing with disclosures relating to motor Insurance. · a page headed "Elders Farm Motor Insurance Proposal" which includes "Part A-Cars and Station Wagons". · a page including "Part B-Goods Carrying Vehicles" and "Part C-Agricultural Vehicles &c." 175 The earlier pages of the booklet may be described as follows: · The cover page is simply headed "Proposal". On the reverse side of the Cover Page is a page divided into two sections. The first section is headed "Extract from the Insurance Contracts Act 1984". This identifies the duty of disclosure and the effect of nondisclosure. It is in the following terms: "Under the terms of the Act we advise you about the following: Your Duty of Disclosure Before you enter into a contract of general insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984, to disclose to the insurer every matter that you know, or could reasonably be expected to know is relevant to the insurer's decision whether to accept the risk of the insurance and, if so, on what terms. You have that same duty to disclose those matters to the insurer before you renew, extend, vary or reinstate a contract of general insurance. Your duty however does not require a disclosure of matter: · that diminishes the risk to be undertaken by the insurer; · that is of common knowledge; · that your insurer knows, or in the ordinary course of his business, ought to know; and · as to which compliance with your duty is waived by the insurer. Non-Disclosure If you fail to comply with your duty of disclosure, the insurer may be entitled to reduce his liability under the contract in respect of a claim or may cancel the contract. If your non-disclosure is fraudulent, the insurer may also have the option of avoiding the contract from its beginning." · The second section is headed "Important Notices" and commences: "This Policy does not cover expense, loss or damage caused by or in any way attributable to Flood." · Following the cover page and its reverse already described, the booklet again appears to have a cover page entitled "Elders Ruralpak Gold Insurance Proposal" including general details such as period of Insurance and detail of proposers and going on to commence with "Section 1-Farm Dwellings". The following sections then continue on following pages and in due course one comes to a page with a "Questionnaire and Declaration" section which has a number of questions for answer and the declaration. The declaration section comprises the proposer's declaration that: "(a) the particulars and statements are true, correct and complete, and contain all information known to me/us. (b) to the best of my/our knowledge and belief the property to be insured is in a sound state of repair and the sums proposed for Insurance represents the full value thereof. (c) I/ we agreed to accept the insurance subject to the terms, exclusions, conditions and limitations of the Company's policy. (d) I/ we have received the Important Notices under the Insurance Contracts Act 1984…." 176 Aside from the very close cross-examination as to precisely what the examination of the several documents which went into evidence disclosed [these including on the evidence of Mrs Hams, the photo copy comprising 6 pages which she had been given by Mr Milde to take away - Exhibit P9], the critical part of the cross-examination and of her evidence related to whether or not she had been given or shown the reverse side of the Proposal front cover sheet with the two sections including that dealing with "Important Notices". She was quite clear that she had neither been shown nor handed this page. Nor had Mr Milde told her that there was an exclusion in that the policy did not cover expense, loss or damage caused by or in any way attributable to flood. [Transcript 119]. 177 Her cross-examination included the following: "Q. At the end of that occasion, you came away with a copy of the proposal, did you not? A. I came away with this document that he photocopied for me.

Q. This document you've just referred to is the bundle of pages that is clipped together and comprises exhibit D2/I and D2/II? A. Yes.

Q. You took that away? A. Yes.

Q. And D2/II, would you agree with me, is a photocopy of a completed booklet section? A. Yes, it is, but some of the pages have been written on after I've - after it's been photocopied.

Q. I accept that. But when you were with Mr Milde, he completed the proposal? A. Yes.

Q. Then-- A. He photocopied the relevant pages.

Q. -- he photocopied the relevant pages and gave it to you? A. Yes.

Q. Because the proposal in its completed form was to be submitted to the insurer? A. Well, he was doing that on our behalf.

Q. Yes, but you wouldn't keep the original proposal? A. I didn't have it.

Q. And you took a copy? A. Only what was given here.

Q. And can I suggest to you that when you were filling out the proposal and Mr Milde was filling out the proposal and speaking to you, at some stage or other he detached the cover and gave the front copy of the cover to you? A. No, he didn't.

Q. You see inside the front copy of the cover is a heading "Important Notices"? A. Yes.

Q. And you'll see it says: "The policy does not cover expense, loss or damage caused by or in any way attributable to flood"? A. Yes, I can see that.

Q. You know from Mr Milde's affidavit he says he told you that there was such an exclusion? A. I can't recall him telling me that.

Q. And he also says that, as part of his usual practice, he would have torn the proposal back and front sheet cover off and given you the front page notice? A. No, he didn't.

Q. You don't recall that? A. No, I don't.

Q. Is it the situation that you don't recall or you're certain that it didn't happen? A. I'm certain that it didn't happen.

Q. And what makes you certain about that? A. Because I had it in the file at home. I had all of that together in the file. [Transcript 118-120] 178 In my view this evidence may be regarded as reliable notwithstanding the evidence given by Mr Milde which is to the contrary. The point is that it could very well have been that Mr Milde during the process of photo copying the proposal for Mrs Hams had simply failed to pass the all-important cover page and its reverse to her. Regardless of what Mr Milde now recalls as having been his then practice, the fact is that Mrs Hams kept the relevant materials in a file and this document not being in that file, the Court may infer was never received. 179 The balance of the very close cross-examination as to why different versions of the Proposal had different markings did not seem to me to amount to any particular matter of special significance. Sundry changes to the original document as signed appear to have occurred but it is very difficult to work out precisely when or how these changes occurred and none of them seems to be of particular materiality. 180 Mrs Hams' further evidence in her affidavit of 5 June 2001 was to the following effect: "The flood exclusion clause was never explained to me by any insurance representative from either CGU or Elders. At no time during the course of the meeting on 28 April 1995…or at any other time, did Peter Milde explain the flood exclusion clause to me. In late March or April 1999, Max and I attended a meeting in Broken Hill with Mike Jewitt of Elders. During the course of the meeting, Mr Jewitt went through the insurance policy checking the insured value for each of the items insured. The policy was amended to include the airstrip. At no stage during the course of this meeting or any time after this meeting, did Mr Jewitt discuss or mention the flood exclusion clause. At no time did I receive any correspondence from any insurance representative in writing informing us of the operation of the flood exclusion clause. In particular, I was never advised in correspondence or in any meeting what was meant by the phrase "natural phenomena which has some element of violence, suddenness or largeness about it." I was not advised in any correspondence or in any meeting that if damage was caused by both water run off and water escaping from the natural confines of any lake, reservoir, dam, river, creek, or navigatable(sic) canal, then we would not be covered. I did not know that to be the case." Evidence given by Mr Milde 181 Mr Milde deposed in his affidavit of 8 March 2002, as is common ground, that up until April 1995 the plaintiffs had held two separate policies covering the property. One policy was an accidental damage policy which covered the contents of the Homestead. The second policy was a defined events policy which covered the Homestead and farming operation. In April 1995 those policies were cancelled and the Ruralpak Gold policy was taken out. 182 His evidence referred to the blank proposal form provided to clients taking out Ruralpak Gold policies in April 1995.

183 He had clearly encountered real difficulties in recalling the events on the occasion when Mrs Hams had signed the proposal. In the first sentence of paragraph 3 of his affidavit of 8 March 2002 he had deposed that annexure A to that affidavit was a true copy of the proposal which she had signed on that day. In fact the annexure was not a true copy of that proposal but was a copy of the document which she had signed also including a number of alterations and additions. 184 He could not recall all of the details of the meeting which he had had with "Mr and/or Mrs Hams" at the time they took out the Ruralpak Gold Policy. The very wording of the 1st sentence of paragraph 4 of his affidavit makes plain that he could not recall whether or not he had met Mr and Mrs Hams together or only one of them or which one. Yet by the time he ascended the witness box he had a recollection that it was only Mrs Hams whom he had seen. 185 He gave evidence that it had not been his usual practice to give a copy of the proposal to an insured. It was very rare for someone to ask for a copy. If that would happen he would personally have photocopied such a document. 186 His affidavit evidence was that his usual practice was to complete the proposal whilst still part of the booklet and to remove the front cover of the proposal form, after it had been completed, and to give the cover to the client to keep before forwarding the rest of the form to Commercial Union. On his evidence this meant that the client retained the "Important Notices" on the inside of the front cover. 187 His further evidence was that his usual practice at the time was to also discuss with a client the scope of the insurance cover before a Ruralpak Gold proposal was completed. His evidence included: "In the course of discussions with clients such as Mr and Mrs Hams, who had held a policy which provided defined event cover for their farm prior to taking out their Ruralpak Gold Policy, it was my invariable practice to give advice in words to the following effect: "You are moving to an accidental damage policy now. It covers you for most things, but there are three main exceptions. They are war, both conventional and nuclear, and flood."" [Affidavit 18 March 2002] 188 Under cross-examination he gave evidence to the following effect: "Q. Now, Mr Milde, when you swore your affidavit, you had in your mind a distinction, did you not, between what was your usual practice and what was your invariable practice - did you not? A. I had in my mind what was my usual practice.

Q. And by "usual practice" did you mean that it was, as the word suggests, usually what you did? A. Yes.

Q. And it follows from that, does it not, that if a particular practice was something that you usually did, there were occasions when you didn't do that? A. Possible.

Q. Well, you would accept the possibility that in some cases you didn't follow what you describe as your usual practice? A. I may not have.

Q. And you simply in all truthfulness cannot tell the court whether in any particular case dealing with Mrs Hams you did or did not follow your usual practice? That's correct, isn't it? A. Well, that could be the case. It's a number of years ago.

Q. Yes. And to be perfectly honest, you simply can't remember whether in this case you did or did not follow the practice you described in paragraph 4 of your affidavit? A. It's the usual thing that I do, but that could be quite possible.

Q. It's quite possible that you didn't follow it at that time? A. It's possible, but I don't believe that I would have done that…. Q. You refer to "war, conventional and nuclear, and flood"? A. Yes.

Q. And they are the only three things you mentioned? A. I always mention the accidental damage policy has many exceptions which are in the policy, but the main three are war and flood.

Q. And why did you mention those two or three as distinct from others? A. They are the big things that can happen that are not paid.

Q. Well, you certainly don't suggest that they are required to be mentioned because they are likely to happen, do you? Nuclear war was not something you would normally discuss with a farmer taking out a policy in Broken Hill in 1995, was it? A. I always mention war, whether it be nuclear or conventional, and flood." [Transcript 25 March pp 4 - 10] 189 Mr Milde readily accepted that the actual document which Mrs Hams had signed had been materially altered after she had signed it insofar as the names of the Proposer(s) were concerned. It is clear that whiteout has been used along the relevant line which at the time the proposal was signed had read "RM & JD Hams". The completed version has a different spacing between "RM and JD" and in fact now reads "RM, JD K & A Hams". Although evidence was given by Mr Milde in relation to a note on Commercial Union notepaper dated 28 April 1995 which referred to the additional "K & A Hams", Mr Milde could not recall the particular conversation which he may have had with the underwriters about the matter. It was not unusual as I understood his evidence, for alterations to the proposal to take place at the client's instance. 190 I am left with the clear impression that on the probabilities the evidence given by Mrs Hams may be regarded as reliable for the reason that she kept a file and kept within it all the material documents. The critical cover page with the reverse signed extract and important notices section was not to be found in that file on her evidence. Whilst of course she has a very material interest in the result of these proceedings, having observed her in the witness box it is my view that she was a credible witness.

Evidence given by Mr Jewitt 191 Mr Jewitt is an insurance agent employed at Elder's Insurance Limited and has worked in Broken Hill since 1999. In the year preceding the 'floods' [the word is used in a colloquial sense in the sentence] the subject of these proceedings he had only dealt with Mr and Mrs Hams on one occasion. In his affidavit evidence he deposed that on the evening of either the 21st or the 22nd February 2000 Mr Hams had telephoned him and the conversation had included the following: Mr Hams : "It's awful. Just water everywhere. We've had 11 inches in a short time, everything's under except the woolshed. I realise its flood, but I would hope that Commercial Union will look after us. We've been loyal clients for a long time." Mr Jewitt : "I know Max. I have reported the situation and am waiting for confirmation of when an assessor can be arranged. When would it be possible to get someone on the ground there." 192 Later in the conversation Mr Jewitt had said words to the following effect: "I cannot say one way or the other whether or not you have a claim. Wiser men then you or I will decide. However, if the water came from a creek, dam or the like, it will be viewed as flood and excluded from cover". 193 He had deposed that at no time during the conversation did Mr Hams question him as to whether or not the policy covers the flood damage. 194 Mr Jewitt also gave evidence that in about March 2001 he had a further conversation with Mr Hams who had said to him words to the effect: "All we knew we weren't covered for flood because after Katherine, we checked our policy wording" . 195 Mr Jewitt had understood the reference to be a reference to the floods in Katherine, Northern Territory in January 1998. 196 Mr Jewitt had no note of the first conversation. He was not clear as to the precise date. He understood that Mr Hams had been telephoning from Derungie station to which they had been evacuated so that the conversation, it would seem, although Mr Jewitt did not seem to necessarily accept this, must have taken place on about the Wednesday. He could not be certain of his reference to "11 inches" and accepted that this may have been a reference to "9 inches". 197 He gave evidence that between the two conversations which he had deposed to, there had been a number of other discussions with Mr Hams and some written communications. He accepted that as he understood Mr Hams, he was of the view that the defendant was liable to pay for the last. After the denial of the claim Mr Hams had clearly indicated that the insurance company was not in his opinion entitled to decline cover on the grounds that damage was caused by flood. Mr Hams had explained to Mr Jewitt well prior to March 2001 that on his understanding the damage was due to run-off of surface water. Mr Hams also suggested that the water could not have got to Koralta from Treloar Creek. 198 Mr Jewitt gave evidence to the following effect: "Q. In addition to that as the reason why the insurance company was obliged to make good the damage, did he not also tell you that his understanding was that it could not be a flood within the meaning of the policy because in his understanding the water had not escaped from the creek within the meaning of the word "escape". He told you that was what he believed? A. He may well have, yes, sir.

Q. And did he not also tell you as yet another reason that it was his understanding that the exclusion did not cover inundation by means of watercourses and that in this case the inundation, the damage, was caused by means of a watercourse? Did he put that to you as well? A. Yeah…. Q. And did he also put to you that it was his understanding that if the damage was caused by the run-off of surface water the loss was insured? A. Yes. Well, mine (ie my view) also." [Transcript 25 March pp 22 - 23] The Policy 199 The policy was taken out in 1995 and renewed annually. Relevantly a renewal covered the period 28 April 1999 to 28 April 2000. Two booklets ["the policy booklets"] containing detail of the policy wording had been sent to Mr and Mrs Hams, the first booklet being received apparently in 1995 [transcript page 62] and the second booklet being received prior to the inundation the subject of these proceedings. The booklets appear to be identical and were marked as exhibits P 7 (i) and (ii) respectively. 200 Mr Hams gave evidence that he first read the policy soon after it was originally received, read it again in about early 1998 soon after the Katherine floods specifically seeing whether there was a flood cover and what the wording said. He gave evidence to the following effect: "Q . You understood this did not cover a flood event? A. Year's Q. And you understood that if there was a flood event, then the policy would'nt cover a flood event? A. Under certain circumstances. If you read the exclusion there are certain things not excluded from cover… Q. … What did you think you were covered for in terms of flood damage? A. If the water came over the surrounding areas and we would be covered. If it came out of a watercourse, probably would be covered. Q. Covered? A. Possibly covered, yes. Q. What do you mean "possibly"? A. That was my understanding. The watercourses are not mentioned in the exclusion. Q. If it came out of Scour Lake and inundated the house, would not be covered? A. If it came out of the lake we were not covered, that is correct. Q. Came out of Treloar Creek? A. Not covered. Q. If it came out of Canegrass Creek? A. Yes, covered…. That would be my understanding

Q. May we take it you never asked anybody from CGU for any explanation as to whether you were covered by water coming from Scour Lake? A. That's correct" [Transcript 19 March 2002 pp 73 - 74] The Policy booklets in detail 201 A careful examination of the policy booklets is important: · Page 1 is headed "Extract From Insurance Legislation" and worded precisely the same as the initial section on the reverse side of the front cover of the Proposal earlier outlined. In short it explains the duty of disclosure and the effect of nondisclosure. It also includes a heading "Important Notices" which relevantly differs from the similar section to be found on the reverse side of the front cover of the Proposal earlier outlined. This section commences inter alia by stating that the Policy does not provide cover "in relation to destruction, loss, damage or liability in respect of which [the insurer] is prohibited by law from providing insurance cover". No reference is made in this section to the Policy not covering expense, loss or damage caused by or in any way attributable to Flood. It will be recalled that that had been the wording of the 'Important Notice' section on the reverse side of the front cover of the Proposal. · Page 2 comprises an index which outlines the structure of the booklet. The index has four headings: Section No; - Title; - Item No; - Page No. · Pages 3 - 6 are described in the Index as "Introduction to your Policy" and are not given a section number in the index. The pages deal with: · Our Agreement · General Definitions · General Conditions · General Exclusion · Claims Procedure · Pages 7 - 38 then set out the nine discrete 'sections'. Whilst the format is not identical across each of the sections one commonly finds each section commencing with Definitions as a heading and then a heading entitled "Cover". A third common heading appears to be "Limitations". There are then a number of disparate headings as appropriate to each section. A number of the sections are internally divided into 'parts'. In short the reader who travels through the whole of the booklet may very easily have difficulty in finding his/her way through the sundry details, sections and parts and subheadings. · From time to time as one travels through the booklet one finds a rectangular section sketched in with a border which is in bold ["rectangular" or "boxed" sections]. These rectangular sections seem to be quite often a form of instruction or assistance. An example is the rectangular section within Section 6 which reads: "Claims Procedure-Please refer to Items 5, 6 and 7 for details of Your obligations in the event of a claim" Another example is the rectangular section within Section 8 which reads: "The events that you have selected to insure are shown in the Schedule" · Pages 7 - 15 are headed "Section 1 Farm Dwelling (s). The Section has a number of subsections, some of which are divided into a number of parts. Section 1 for example commences with Parts A and B -'Building and Contents-Definitions'. The Definitions section deals with Part A concerning "Buildings" and Part B concerning "Contents". There is then a Section entitled "Cover". Other Headings to be found include "Limitations", "Additional Benefits", "Excess (applicable to Building and Contents)", "Settlement of Claims". One then comes to Part C which is headed "Liability-Owner and Occupier" and includes the following "(Applies only when the insurance is effected under Parts A or B of this Section)". One then comes to "Exclusions-Part C". One then comes to Part D "Valuables" which then has headings dealing with "Definitions", "Cover", "Limitations" and "Settlement of Claims". · Page 9 within Section 1 dealing with "Farm Dwellings" under the heading "Cover" reads as follows: "Cover The Buildings and Contents as shown in the Schedule are insured against destruction, loss and damage caused by any Accident or Misfortune except: 1. lightning or thunderbolt unless there is visible evidence of damage to the building. 2. destruction, loss or damage caused by: (a) flood, storm surge, the action of the sea, tidal wave, high water or tsunami. Flood means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal, as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it, but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or run-off of surface water from surrounding areas. Fixed Apparatus, Fixed Tanks and Fixed Pipes means equipment, appliances or materials designed and constructed for a particular use involving liquid, receptacles or structures made of any material designed for holding liquid and so constructed to allow the liquid to be stored and removed in any required quantity, and hollow devices of any shape, made of any material, and so constructed to allow easy passage of liquid to another area. They include items such as taps, pumps, filters or the like containing moving parts, toilet pans, shower recesses, tiled floors with drainage holes, aquariums, pipes, storm water, sewerage seepage or open spoon drains, household roof or street guttering. They do not include bowls, vases or similar small receptacles, nor lakes, reservoirs or dams. Note the Exclusion above. Flood cover is NOT automatically included in this policy. Special application may be made if you require such cover. (b) subsidence, settling, shrinkage, heavage or any movement of earth (other than earthquake or consequent upon bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes). (c) erosion. (d) storm, rainwater or wind to all gates, fences and walls made of wood, brush, fibro or the like, shadecloth, swimming pool covers, solar covers or plastic liners. (e) mildew, atmospheric or climatic conditions (other than storm). (f) water entering the Buildings through an opening in the wall or roof made for the purpose of alterations, additions, renovations or repair. (g) rust, corrosion, gradual depreciation, wear or tear. (h) vermin or insects. (i) any process of cleaning involving the use of chemicals other than domestic household chemicals. (j) inherent defects, faulty workmanship, structural defects or faulty design. (k) deliberate, intentional or malicious acts of tenants and/or their visitors." · Page 20 is headed "Section 5 Farming Continuation Expenses" · Pages 21, 22, 23, and 24 seem to collect some relevant provisions which relate to Sections 2,3,4 and 5. Hence one finds the heading at the top of page 21: "Defined Events-Sections 3,4 and 5" which extends up to and includes page 22. Page 23 is headed "Additional Benefits-sections 2,3,4 and 5". Page 24 is headed "Settlement of Claims-Sections 2,3,4 and 5" · Importantly there are to be found on page 21 in 2 separate places, rectangular bordered or 'boxed in' portions. This page relevantly includes the following: "Defined Events - Sections 3, 4 and 5 You are insured for destruction loss or damage caused by the following defined events but only to the extent detailed in the Table of Cover (Item 36) and in accordance with the appropriate Policy section. 1. Fire, Lightning or Thunderbolt. 2. Explosion. 3. Storm but not destruction, loss or damage: (a) caused by storm surge, by the action of the sea, tidal wave, high water or by tsunami. (b) caused by Flood which means inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it, but does not mean inundation by water from fixed apparatus, fixed tanks, fixed pipes or surface water run-off from surrounding areas. Note the Exclusion above. Flood cover is NOT included in this policy. Special application may be made if you require such cover. (c) caused by subsidence, settling, shrinkage, heavage or any movement of earth unless caused by Earthquake or consequent upon bursting, leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes. (d) due to erosion however caused. (e) to all gates, fences and retaining walls and other walls which do not form part of the structure of Farm Buildings. (f) from water seeping, percolating or otherwise penetrating into buildings as a result of structure defects, faulty design or faulty workmanship in their construction. (g) caused by water entering buildings through an opening in the wall or roof made for the purpose of alterations, additional, renovations or repair. (h) to property in the open air unless such property comprises or forms part of a permanent structure designed to function without the protection of walls or roofs. 4. Bursting, Leaking, Discharging or Overflowing of fixed apparatus, fixed tanks or fixed pipes used to hold or to carry liquid of any kind. Fixed Apparatus, Fixed Tanks and Fixed Pipes means equipment, appliances, or materials designed and constructed for a particular use involving liquids, receptacles or structure made of any material designed for holding liquids and so constructed to allow the liquid to be stored and removed in any required quantity, and hollow devices of any shape, made of any material, and so constructed to allow easy passage of liquid to another area. Included are items such as taps, pumps, filters or the like containing moving parts, toilet pans, shower recesses, tiled floors with drainage holes, pipes, storm water sewerage seepage or open spoon drains, household roof or street guttering. Not included are bowls, vases or similar small receptacles. This Policy does not cover any damage caused by or contributed to by leaking, discharge or overflowing of any lake, reservoir or dam. 5. Aircraft or other aerial devices or articles dropped from them, and sonic boom." The pleading issue 202 The plaintiffs in their Reply pleaded inter alia as follows: "Prior to entry into the Policy, the defendant did not sufficiently and clearly inform the plaintiffs in writing that the Policy would not provide them with insurance cover in respect of the happening of the event namely the destruction of, loss or damage to the Homestead and the Contents caused by "Flood" as defined by the Policy. Particulars The defendant did not inform the plaintiffs in writing of the meaning or effect of the phrase "natural phenomenon which has some element of violence, suddenness or largeness about it"; The defendant did not inform the plaintiffs in writing that in the event that destruction, damage or loss was caused by Accident and Misfortune and Flood (as defined by the Policy) then cover would not be provided In the premises, in the event that the Defendant establishes that the destruction, damage or loss to the Homestead and the Contents was caused by "Flood" as defined in the Policy, such that insurance cover would not otherwise be provided thereunder, then by operation of subsection 35 (1) of the Act the defendant may not refuse to pay the plaintiffs an amount sufficient to indemnify them for that property up to the respective limits stated in the schedule to the Policy." 203 During final address the plaintiffs' counsel, Mr Forster SC, sought to rely, as part of the plaintiffs' case that the plaintiffs were not informed of the operation of the Wayne Tank principle, upon the fact that the second boxed in section on page 21 of the policy had been included whereas no similarly worded boxed in section had been included on page 9. The submission further elaborated towards the conclusion of the oral address on 27 March was that, as I understood it, the particulars and the way in which the matter had been litigated had entitled the plaintiffs to rely upon the whole of the policy in the sense that the comparison between the two boxed in sections could be considered by the Court as part of the evidence indicating the absence of any or any clear information about the Wayne Tank principle. 204 Mr Taylor whilst accepting that the plaintiffs were clearly entitled to litigate the proposition that the defendant had not informed them at all of the operation of the Wayne Tank principle, contended that neither the pleading nor the particulars nor the manner in which the matter was litigated entitled the plaintiffs to rely upon the second boxed in section on page 21 in support of the proposition that the manner or wording or placement within the policy, of the boxed in sections to be found on pages 9 and 21, constituted misleading or confusing information which upon examination showed that the defendant could be seen to have failed to clearly inform the insured of the information in question. Mr Taylor submitted that had he been aware that the plaintiffs would rely in this fashion upon these boxed in sections, he would clearly have cross-examined Mr and Mrs Hams in relation to these sections and particularly, the boxed in section secondly appearing on page 21. 205 In my view the plaintiffs were entitled to rely, in the fashion for which they contend, upon the whole of the policy and its wording including the positioning and wording of the boxed in sections referred to above. There can be no doubt but that a central issue in the case always concerned the plaintiffs' allegation that they were not clearly informed in writing of the Wayne Tank principle. Those words do not, however, appear squarely in the Reply. However the way in which the case was opened, including the defendant's assertion in answer to the section 35 (2) case to the effect that the defendant had provided the insured with a copy of the policy wording: "[t]he provision of such [Policy] satisfies the requirements of section 35 (2)," [see also the written submissions of ASIC MFI 1], the way in which the case was litigated, as well as the terms of the Reply, as it seems to me, entitle the plaintiffs to put the matter in the fashion for which they contend. The second of the particulars does have a degree of lack of clarity. But the fundamental point is that the whole question of the extent to which, whether by furnishing the insured with a notice that "Flood" was not covered, or with a copy of the policy wording, the defendant had satisfied section 35 (2), was clearly litigated and it was squarely put to the insured in cross-examination they had been aware of the 'flood' exclusion. The boxed in section on page 9 was specifically adverted to in Mr Taylor's cross-examination [transcript 20 March page 124]. The policy documents were put into evidence. The fact that the insured had carefully read the Policy documents was elicited. It does not seem to me that it is not now open to the plaintiffs to rely upon any aspect of the policy document in support of their case that the provision of the policy did not satisfy the requirements of section 35(2) (which case is accepted as having been pleaded to the extent at least that they have always sought to prosecute a case that they had not been given any clear information in writing of matters including the Wayne Tank principle). 206 Therefore I approach the issue in the manner put in the alternative by Mr Taylor, namely that if the Court was to hold that the plaintiffs were entitled to so put at least one part of their case, the defendant relies upon the second of the boxed in sections on page 21 as clearly explaining the Wayne Tank principle. 207 For the reasons given below, the plaintiffs' case in this regard is rejected.

Dealing with the Insurance Contracts Act issues 208 It is convenient to commence with a brief examination of the relevant provisions. 209 Division 1 of Pt V of the Insurance Contracts Act 1984 (Cth) relevantly introduced: · section 35, dealing with notification of certain provisions applying to claims under a prescribed contract where the event the happening of which gave rise to the claim is a prescribed event in relation to the contract ; · section 37 dealing with notification of unusual terms of a kind not usually included in contract of insurance, not being prescribed contracts. 210 Subsections (1) and (2) provide as follows:

"35(1) Where - (a) a claim is made under a prescribed contract; and

(b) the event the happening of which gave rise to the claim is a prescribed event in relation to the contract,

the insurer may not refuse to pay an amount equal to the minimum amount in relation to the claim by reason only that the effect of the contract, but for this subsection, would be that the event the happening of which gave rise to the claim was an event in respect of which - (c) the amount of the insurance cover provided by the contract was less than the minimum amount; or (d) insurance cover was not provided by the contract. 35(2) Subsection (1) does not have effect where the insurer proves that, before the contract was entered into, the insurer clearly informed the insured in writing (whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise) or the insured knew, or a reasonable person in the circumstances could be expected to have known - (a) where the effect of the contract, but for subsection (1), would be that the liability of the insurer in respect of a claim arising upon the happening of the event would be less than the minimum amount - what the extent of the insurer's liability under the contract in respect of such a claim would be; or

(b) where the effect of the contract, but for subsection (1), would be that the insurer would be under no liability in respect of such a claim - that the contract would not provide insurance cover in respect of the happening of that event."

Central Issues of principle 211 The central issues of principle are: · what must an insurer do to "clearly inform the insured in writing" of the provisions of the insurance contract within the meaning of s35(2) of the ICA? · the operation and effect of s35 of the ICA in circumstances in which the damage was caused by a number of proximate causes, one of which was excluded from cover. Legislative History 212 On the first reading speech of the Insurance Contracts Bill 1984 on 29 May 1984, the equivalent wording of s 35(2) quoted above was: "he clearly informed the insured in writing or the insured knew, or a reasonable person in the circumstances could be expected to have known…" [the "insurer" was referred to as "he"]

213 Hence the words in the parentheses did not appear in the original bill. The Explanatory Memorandum for the Bill explained that: "An insurer should be free to market policies which offer less than the standard cover provided the insured's attention is drawn to the limitations or a reasonable person in the circumstances could be expected to have been aware of them. The insured is able to make an informed choice and the requirement of notification is likely to have little, if any, adverse effect on the marketing of insurance or the diversity of cover offered ." 214 The Memorandum noted that the main reforms of the Bill included "notification of unusual terms of the contract and certain terms limiting the insurer's liability" and that the main purposes of the Bill are: "to improve the flow of information from the insurer to the insured so that the insured can make an informed choice as to the contract of insurance he enters into and is fully aware of the terms and limitations of the policy." 215 The second reading speech for the Insurance Contracts Bill 1984 included: "The Bill recognises that the insured is often less well-informed than the insurer. Accordingly, unless the insurer has already done so, the Bill requires it to give the insured a copy of the policy document where the insured makes a written request for it…Other clauses in the Bill require the insurer to give the insured notice of the effect of particular terms in the contract if such terms are included…"

216 On the subject of standard cover the following was said: "Should the insurer seek to provide less than the minimum cover provided by the standard cover - for example, by excluding liability for loss caused by earthquake - he will be required, under clause 35 of the Bill, to prove at the outset that he gave notice to the insured, or that the insured knew or could reasonably be expected to have known that he would be entitled to a lesser cover" 217 Before the date of commencement of the Act which came into force on 1 January 1986, there were two relevant amendments made to s35. 218 The first amendment is found in the Statute Law (Miscellaneous Provisions) Act (No. 1) 1985 No.65 (Cth), where the words "(whether by providing the insured with a policy document in relation to the contract or otherwise)" were inserted after "in writing".

219 The Explanatory Memorandum for that Bill explains that the amendment derived from: "the existence of some degree of uncertainty on the part of insurers as to whether they need to provide a special notice, which specifies the extent of any deviation from the standard cover to be prescribed by regulation, in addition to the policy document itself. The amendment makes it clear that an insurer's requirement to notify the insured can be satisfied by providing a copy of the policy document itself, subject to that document clearly informing the insured of the extent of the cover provided. " [emphasis added]

220 The second amendment to s35 was made under the Statute Law (Miscellaneous Provisions) Act (No. 2) 1985 No. 193 (Cth) which provided that the words: "policy document in relation to the contract" (added in the first amendment) be omitted and substituted with: "document containing the provisions, or the relevant provisions, of the proposed contract".

221 The Explanatory Memorandum for that Bill noted that the proposed amendment was to:

"make clear that the information an insurer is required to provide to an insured before a contract is entered into can be conveyed by various means, including a document containing the provisions of the proposed contract." [Circulated by authority of the Minister representing the Attorney-General, 1985, p20] 222 It was noted in the Memorandum that the amendment was to come into operation on the day on which the Insurance Contracts Act 1984 came into operation.

223 The Insurance Contracts Act followed a report produced by the ALRC in 1982 titled Insurance Contracts [ALRC 20, 1982]. In the report, the Commission discusses the common problem in the insurance industry of incomprehensible contracts: "The problem is at its worst for the substantial proportion of the insuring public made up of persons for whom English is not their mother tongue. Even if the language used were intelligible to the average insured, he would often face an insurmountable obstacle in the form in which the relevant information is set out. That information may be contained in a combination of any two or more of the proposal form, the preamble, the definition section, clauses dealing with exclusions or conditions and the schedule of the policy. Extraordinary ingenuity and dedication are required if the insured is to succeed in putting together the pieces of the puzzle… The great majority of insureds have little understanding of the precise nature of their cover." [Ibid, p22] 224 Reference was made to Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 ALJR 307 at 308 where Mason J. described a policy as a "jumble of ill-assorted documents expressed in that distinctive style which insurance companies have made their own".

225 The Report recommended that insurance policies be written in simpler language. It referred to some American States, which have passed legislation requiring that policies be written in readily intelligible language, for example New York and Massachusetts [Ibid, p22]. In New York, policies have to be pre-cleared and must:

"be written in a clear and coherent manner, and wherever practicable … use words with common and everyday meanings to facilitate readability and to aid the insured or policy holder in understanding the coverage provided." [Insurance Law (N.Y.) s 142-a(1)] 226 The Insurance Code (Massachusetts) and the Insurance Law (N.Y.) have incorporated a readability formula into their legislation called the Flesch Readability Formula [see footnote 27, p23]. It is a test made up of samples taken from the text of the relevant documents, using different factors such as the average number of words and syllables per sentence [See footnote 28, p23]. The incorporation of such a formula was considered by the ALRC, who eventually rejected the possibility of setting standards of comprehensibility for insurance policies [see p27]. Likewise, the commission noted that the proposal that summaries "of the nature of the cover and of the general provisions of insurance law" be subject to a system of pre-clearance had proved "particularly controversial" [see page 27]. The Commission apparently accepted expert advice that the formula should be used with caution, as it may be inaccurate. However, the ALRC expressed the view that insurers should be encouraged to simplify their policies and to use techniques such as the Flesch test, or other techniques such as the Paraphrase Test or a Content Tested by Questions Test.

227 The ALRC reasoned that adequate protection of the insured could be achieved by providing for standard cover in certain classes of insurance [see p27]. In those cases, the insurer would be required to provide to the insured with information on certain matters of importance: "In the absence of agreed standards of comprehensibility, any requirement can only be stated in general terms. Where information is required to be brought to the insured's attention, that information should be supplied in clear language." [See p27]

228 The ALRC was of the view that the law in 1982 did not provide adequate protection of insureds, who were often unaware of what the exact cover of their insurance policy and the limitations on the risks covered. They identified a clear need for the imposition of standard cover in five fields of insurance: household, motor vehicle, personal accident and illness, consumer credit and travel insurance. They recommended that standard cover should be prescribed by legislation in these fields. [See p44] 229 However, the ALRC recognised that an insurer should be free to market policies, which offer less than the prescribed standard cover. In this case, the insurer must draw the insured's attention to the lesser cover and identify the nature of the relevant diminution in cover [See p45]. It was of the view that if the insurer failed to do so, "the contractual terms should be overridden to the extent to which they provide cover which is less than the standard ." [Ibid]

230 There was an objection that if the insurer was required to draw attention to all the terms, which derogate from the standard cover, the document doing so may be as large as the policy document itself. If the policies remain unread, so will the warnings concerning the limits on standard cover. [see p45]

231 The ALRC reasoned that this objection was defective for 2 reasons: "First, the standards concerning legibility and comprehensibility of notices required by this report would reduce the factors which inhibit reading and comprehension of existing policies. Secondly, the length of the notification, which would be required would bear no resemblance to a full policy document…. All limitations upon standard cover could be notified in general terms, not by detailed definitions. Even if, despite the criticisms made in this report, the model policy were to be persevered with by an individual insurer, it should be able to produce a document of no more than one page which adequately drew to the insured's attention the relevant derogations from standard cover. It is true that some insureds would not read this document. It is also true that some would not understand it. But the insurer would have discharged its duty to act in the utmost good faith towards intending insureds… An insured could no longer reasonably complain of the limitations contained in the contract which he had purchased." [See p45 - 46]

232 Later, the ALRC in dealing generally with notification of exclusions from standard cover noted that: "the aim of the recommendations is not to provide insureds with every piece of information necessary for fully informed choice. To require this would be to impose significant additional burdens on insurers and to run the risk of confusing many insureds, resulting in their being less, rather than better, informed . The commission does not question the desirability of educating insureds about insurance. But that is not a matter for recommendation in this report. The present concern is a limited one: to protect insureds against unusual and unexpected limitations on cover. " [at page 46] [emphasis added] 233 It was noted that the risk of loss through flood was included in the standard cover. Apparently, a particular objection was raised over this inclusion. It was said to be irrelevant for most insureds, and that those for whom it was relevant were already aware of the need to purchase it separately [See p47, footnote 59]. The ALRC dismissed this objection, pointing out that "the rarity of freak flooding is of little consolation to those affected" and reasoned that even in areas where flood is a recurrent risk, many insureds are ignorant of the relevant exclusion [Ibid]. 234 Ultimately absent ambiguity, the proper construction of section 35 of the ICA requires to be determined by the statutory text [cf Re Bolton; Ex Parte Beane (1987) 162 CLR 514 per Mason CJ, Wilson and Dawson JJ at 518, Gaudron J. at 547. Dealing with the issue 235 Clearly an initial issue concerns the operation and effect of the words "clearly informed the insured in writing" appearing in s35(2) of the ICA and, in particular: · whether the test is whether in all the circumstances the insurer has clearly informed the insured of the relevant provision, such that the mere provision of a document containing the relevant provisions is insufficient to discharge the insurer's obligation if the supply of that document did not of itself clearly inform the insured of his or her obligations; or · whether the requirement on the insurer under s35(2) is satisfied in every case by the supply to the insured of a document containing the relevant provisions, as may be suggested by the words in parentheses immediately following the words "clearly informed the insured in writing" in s35(2): see Sutton Insurance Law In Australia, 3rd ed, LBC, 1999, paragraph 9.34, but cf n77. 236 The words "clearly informed the insured in writing" and the words in parentheses immediately following them in s35(2) have apparently not been considered in any reported case. 237 The words "clearly inform the insured in writing" appearing in s22(1) of the ICA were considered in Suncorp General Insurance Limited v Cheihk [1999] NSWCA 238, where it was held (at paragraph 14):

"The requirements under s22(1) of the [ICA] is for the insurer to 'clearly inform' the insured in writing of the nature and effect of the duty of disclosure. The onus of so proving is on the insurer: Lumley General Insurance Limited v Delphin (1990) 6 ANZ Ins Cases 60-986 at 76,565. I also accept that 'inform' means 'to make known': see at 76,571. The general nature and effect of the duty of disclosure must be 'clearly' made known to the insured in writing. The adverb 'clearly' is a plain English word and its ordinary meaning would convey the need for some precision in the making known of the relevant duty:" per Stein JA, with whom Meagher JA agreed. 238 In Suncorp General Insurance v Cheikh it was held that the supply to the insured of a statement of the duty of disclosure on the reverse side of a certificate of insurance, without appropriate cross-referencing or highlighting, failed to "clearly inform" the insured of his duty of disclosure. 239 In its written submissions ASIC contended, and I accept as correct, that it follows that for the purposes of s22(1) of the ICA, the mere supply to the insured by the insurer of a document containing the relevant provisions may not be sufficient to discharge the insurer's obligations under s22(1) if, in all the circumstances, the document failed clearly to inform the insured of his or her obligations. 240 ASIC went on to submit that it also follows that, in the absence of the words in parentheses immediately following "clearly informed the insured in writing" in s35(2), the same reasoning and analysis would apply to s35(2), with a similar result. I accept that this proposition is correct. 241 The next and critical question is whether the words in parentheses in s35(2), "whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise", mean that the provision of such a document will in and of itself satisfy the requirement clearly to inform. 242 In my view the words in parentheses in section 35 (2) "whether by providing the insured with a document containing the provisions, or the relevant provisions, of the proposed contract or otherwise" are likely in most circumstances to result in the provision of such a document in and of itself satisfying the requirement to clearly inform. There may however be special circumstances in which the complexity of or confusions within the document containing the relevant provisions (which one would expect would usually be the Insurance Policy itself) could be such that the mere provision of the Policy did not establish that the insurer had effectively informed the insured of relevant limitations. This was effectively the substance of the submission put to the court by ASIC. 243 Hence I accept as correct the proposition that the words in parentheses mean that providing a document containing the provisions is one of a number of mechanisms by which an insurer may clearly inform the insured. In each case the content of the document and all of the circumstances of its provision would need to be considered in order to determine if the insurer had effectively informed the insured of the limitation. 244 I certainly do not accept that as a general rule it would be incumbent upon an insurer to provide along with a document containing the provisions, either a text on insurance law or an annotated Policy identifying and explaining either the general principles of insurance law or the principles dealing with the proper approach to the construction of Policy provisions. The fact is that the principles which underpin the law of insurance are often complex in the extreme and it could not be the case, as it seems to me, that a condition precedent to an insurer establishing that it had clearly informed the insured in writing of the relevant limitation, required the insurer to annotate the Policy by reference to principles of insurance law. 245 ASIC submitted and I accept that a number of factors support this construction of s35(2). 246 First, if the legislature had intended: "that the requirements of s35(2) could be met in all cases by the provision of a document containing the relevant provisions; or

that the words in parentheses in s35(2) should qualify the preceding words "clearly informed the insured in writing"",

the provision would have said so in clear terms. 247 Secondly, to the extent that there is any ambiguity, this interpretation better promotes the purposes of the ICA: "The basic purpose of the [Insurance Contracts] Bill is to improve the flow of information from the insurer to the insured so that the insured can make an informed choice as to the contract of insurance he enters into and is fully aware of the terms and limitations of the policy; and to provide a uniform and fair set of rules to govern the relationship between the insurer and the insured": [Second Reading speech, Hansard, House of Representatives, 29 May 1984 at p2329] 248 On my findings the circumstances presently before the court are such that the mere provision by the defendant to the insured of the Policy, succeeded as a mechanism by which the defendant clearly informed the insured of the nature and extent of the "Flood" exclusion. The plaintiffs' reliance upon the second 'boxed' in section on page 21 of the policy 249 I reject as misconceived the proposition that the effect of: · the inclusion of the second of the boxed in sections on page 21 of the policy; and · the failure of the insurer to incorporate a similar inclusion into page 9 of the policy;

has the result that the insurer has failed to " clearly inform " the insured in writing of the nature and effect of the "Flood" exclusion. It is simply not the case that a reasonable person in the position of the insured who received a copy of the policy may be expected to have been confused. It is misconceived to suggest that such a person may have read into (that is to say interpreted): · the inclusion of the second boxed in section under the "Defined Event - Sections 3, 4 and 5"; and · the failure at the same time to include a similar boxed in section under "Cover" portion of Section 1,

as meaning that it was only in so far as sections 3, 4 and 5 were concerned, that the policy would not cover any damage caused by or contributed to by the overflowing of any lake. 250 The misconception behind this approach is quite simply that the second boxed in section to be found on page 21 deals only with an aspect of the paragraph numbered 4 on that page. All that the boxed in section achieves is to notify the insurer that insofar as the leaking, discharging or overflowing of fixed apparatus, fixed tanks or fixed pipes used to hold or carry liquid of any kind is concerned, the policy does not cover any damage caused by or contributed to by leaking, discharge or overflowing of any lake, reservoir or dam. In short, the second boxed in section on page 21 neither seeks to, nor addresses nor is placed in a position such as to suggest that it relates to, the flood exclusion in Section 1. Nor could it be said that a reasonable person in the position of the insured who received a copy of the policy may be expected to have been so confused. Failure of the insurer to inform the insured of the Wayne Tank principle 251 Further submissions advanced by ASIC dealt with the relation between section 35 and the doctrine of proximate cause and were to the following effect: "ASIC is of the view, and formally submits, that the Wayne Tank principle is not, or should not be, law in Australia. However ASIC also respectfully draws the Court's attention to the decisions of the Court of Appeal in Petersen v Union des Assurances de Paris IARD (1997) 9 ANZ Ins Cases paragraphs 61-366 and HIH Casualty & General Insurance Ltd v Waterwell Shipping Inc (1998) 43 NSWLR 601 at 612B, and does not seek to develop this submission at present.

The question arises however whether s35 places any obligation on the insurer to inform the insured of the operation of the Wayne Tank principle.

ASIC submits that in a circumstance in which: · the contract of insurance is a prescribed contract within the meaning of s35(1)(a) of the ICA; · the event the happening of which gave rise to the claim is a prescribed event within the meaning of s35(1)(b); · the said event has competing proximate causes, one of which is excluded from cover under the contract, with the consequence that pursuant to the Wayne Tank principle the insurer would, in the absence of s35(1), not be liable; · s35(1) will operate to prohibit an insurer from refusing to pay an amount equal to the minimum amount unless pursuant to s35(2): · the insurer has clearly informed the insured in writing; or · the insured knew or a reasonable person in the circumstances could be expected to have known, · of the operation and effect of the Wayne Tank principle.

In reality there will be few occasions on which the insured knew, or in all the circumstances a reasonable person could be expected to have known, of the operation and effect of the Wayne Tank principle: see, for example, Consumer Understanding of Flood Insurance: A report by ASIC, June 2000, a copy of which report is annexed to the affidavit of Conrad Gray affirmed 5 March 2002 and marked "CNG1"

As noted above, one of the basic policies of s35 and the ICA generally to ensure that consumers of insurance services make an informed choice in respect of their contracts of insurance and are fully aware of the terms and limitations of the policy.

It is entirely consistent with that policy, and the language of s35, that an insured should not rely on the Wayne Tank principle to refuse a claim unless it has taken proper steps clearly to inform the insured before the contract was entered into of the operation and effect of the Wayne Tank principle.

It might be argued, against this submission, that s35(1) does not apply because in the circumstance described the right to refuse to indemnify arises by reason of the common law, namely the Wayne Tank principle, and is not "the effect of the contract" contemplated in s35(1).

However such an argument is too restrictive an interpretation of the words "the effect of the contract" in s35(1). First, reference to "the effect" of the contract suggests that regard should be had to the operation and effect of the contract in all the circumstances, not just to the letter of the terms and conditions of the contract. Secondly, and in any event, in the circumstance contemplated the operation of the Wayne Tank principle is enlivened only by reason of an exclusion in the contract. It follows that the refusal to indemnify is by reason of the "effect of the contract" within the meaning of s35(1).

To the extent that there is any doubt, the words "effect of the contract" in s35(1) should be construed beneficially, and consistently with the purpose of the ICA described above." 252 I accept that the Wayne Tank principle is binding upon this Court. 253 I reject however, as incorrect, the submission that section 35 of the ICA places an obligation upon the insurer to inform the insured of the operation of the Wayne Tank principle. 254 Standing back from the detail the plaintiffs and ASIC are effectively submitting as follows: · The policy excludes destruction, loss or damage caused by flood; · "Flood" was defined in terms of: · what it meant ("inundation following the escape of water from the normal confines of any lake, reservoir, dam, river, creek or navigable canal as the result of a natural phenomenon which has some element of violence, suddenness or largeness about it") ["the inclusionary section of the definition"] ; · and what it did not mean ("inundation by water from fixed apparatus, fixed tanks, fixed pipes or run- off of surface water from surrounding areas") ["the exclusionary section of the definition"]. · The policy did not spell out what would be the position if relevant destruction, loss or damage was caused both by an event falling within the inclusionary section of the definition and by an event falling within the exclusionary section of the definition; · In such a circumstance if the effect of the principles of law laid down by courts is that if a loss has two or more proximate or effective causes and at least one cause is excluded from cover, the insurer is not liable ["the relevant principle"], section 35 (1) will operate to prohibit an insurer from refusing to pay an amount equal to the minimum amount unless pursuant to section 35 (2): · The insurer had clearly informed the insurer in writing of the relevant principle; or · The insurer knew or a reasonable person in the circumstances could be expected to have known of the relevant principle. 255 It seems to me that considerable significance requires to be paid to the meaning to be attributed to the use within section 35 (2) of the words "the provisions, or the relevant provisions, of the proposed contract", and of the words "effect of the contract". 256 The ALRC specifically addressed the question of possible prejudice to both insurer and insured where a particular approach "may lead to the abandonment of technical wordings which have been subject to a history of judicial interpretation" [at page 26]. The Act is concerned with the obligation of an insurer to clearly inform the insured in writing of the relevant provisions in the proposed contract. An insurer complies with such an obligation by doing precisely that. Ultimately whether a particular event is one which falls within the cover provided in the policy is a matter which requires to be determined upon a number of parameters generally including: · An ascertainment of what were the terms of the contract of insurance-usually determined by production of the policy document. (A wide variety of expressions may be found in different policies. Of relevance here are the sundry different approaches taken in the wording of policies insofar as the "causation" element is concerned ["the pivotal term"]. To name some (but a few) of the alternatives it is sufficient to mention policies which provide that cover will be furnished if the loss or damage was "occasioned by" or "flowed from" or "happened through" or was "directly due" to the event which occurred); · The factual question of what was the event in respect of which the claim for cover is made; · The legal question of the proper construction of the terms of the contract of insurance insofar as relevant to the claim for cover ["construction issues"]; · The question as to what loss or damage was occasioned by or flowed from or happened through or was directly due to the event which occurred - the outcome depending upon both a question of law (the proper construction of the pivotal term), and a question of fact (the application of that construction to the facts); · A variety of matters of principle which obtain in relation to insurance issues concerning disparate subjects including onus of proof, approaches to causation, matters concerning insurance intermediaries and their obligations either as agents of the insured or of the insurer and any number of other issues generally treated with by texts on insurance law ["matters of principle"]. 257 Clearly a crucial step concerns the application of the relevant principles to the special facts matters and circumstances concerning the event in respect of which the insured has made the subject claim for cover. Common experience is that the application of the relevant principles constitutes a matter of particular complexity. An example concerns the application of the principle that the proximate cause of a loss is the cause which is proximate in efficiency; the "real", "effective" or "dominant" cause. It is possible for there to be two or more "dominant", " effective" and thus proximate causes: City Centre Cold Store Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739. Where two or more independent factors combine to cause a loss, the court must determine, as a question of fact, which of the causes is dominant, if it is able to do so. However, the court should not "strain to find a dominant cause if there are two causes both of which are properly described as effective causes of the loss": Wayne Tank at 72. 258 The Act uses the words "the effect of the contract" in section 35 (2) in the sense of the requirement that the provisions of the insurance contract have been clearly spelled out: · in a document containing the provisions of the proposed contract; or · in a document containing the relevant provisions of the proposed contract; or · otherwise in writing. 259 That is all that is required. The words "the provisions or the relevant provisions of the proposed contract" are not concerned with the interstices of the fine and complex approaches taken by courts to questions of law or of mixed fact and law related to insurance law. 260 Insofar as the submission advanced by the plaintiffs and by ASIC extends to suggest that section 35(2) requires the insurer to do more than to clearly inform the insured in writing of the relevant provisions of the insurance contract, as for example by entering into the field of annotating the policy by explanations of construction issues and/or of matters of principle, or of the application of principle, the submission is rejected. Ultimate s.35 (2) findings 261 The material finding is that upon the proper construction of section 35 (2) of the ICA the mere provision by the defendant to the insured of the policy in this case succeeded as a mechanism by which the defendant "clearly informed the insured in writing" of the relevant "effect of the contract" in terms of the nature and extent of the "Flood" exclusion. 262 In the result the plaintiffs have not succeeded in establishing an entitlement to an indemnity under the policy in respect of the damage and loss occasioned to the hangar. The loss to the hangar had two proximate or effective causes, one of which was excluded from cover in which circumstance the insurer is not liable by operation of the Wayne Tank principle. Relevant knowledge by the insured/whether a reasonable person in the circumstances could be expected to have had the relevant knowledge 263 It is appropriate to add that on my findings on the evidence and notwithstanding their reading of the whole of the policy, neither Mr nor Mrs Hams knew of the nature and effect of the Wayne Tank principle. 264 The bald proposition that on the evidence they are shown to have known that flood was not covered and/or not automatically included in the policy [transcript 19 March page 72.37/transcript 20 March page 124.33] by no means establishes that Mr or Mrs Hams knew of the nature and effect of the Wayne Tank principle. To the contrary Mr Hams understood that if the water came over the surrounding areas they would be covered but if they came out of Scour Lake or Treloar Creek they would not be covered. On my findings he did not know that damage occasioned both by reason of surface water run-off from surrounding areas as well as by inundation following the escape of water from the normal confines of a lake or creek, would not be covered. On my findings Mrs Hams likewise did not know that damage so occasioned would not be covered. 265 Further on my findings a reasonable person in the circumstances could not have been expected to have known: · of the nature and effect of the Wayne Tank principle; · in particular that damage occasioned both by reason of surface water run-off from surrounding areas as well as by inundation following the escape of water from the normal confines of a lake or creek , would not be covered. Short minutes of order 266 The parties are granted leave to address further submissions on any claim or matter arising from the above findings which may not have been dealt with. Subject to that, short minutes are to be brought in by the plaintiffs.

I certify that paragraphs 1 - 266 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 12 April 2002

          Susan Piggott
          Associate
  12 April 2002

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