New Zealand Pelt Export Company Limited v Trade Indemnity New Zealand Limited [2002] VSC 570

5. The proceeding traversed a construction point under the subject insurance contract and a claim of promissory estoppel.

8. The questions to be determined are whether the plaintiff was the insured within the meaning of the policy, or alternatively whether by virtue of the defendant's knowledge and acceptance of the trading arrangements of the plaintiff and its related companies it can claim in promissory estoppel.

11. In essence it is the plaintiff's case that since it first became insured by the defendant there has been no fundamental change to the way it and its related companies have conducted their business, that these arrangements have always met with the approval of the defendant, and notwithstanding changes in insurance arrangements both in respect of a change of policy itself and changes in relevant personnel the transactions in question were of the type always covered or contemplated to be covered.

14. In response it is the defendant's case that whilst the defendant had always endeavoured to accommodate the plaintiff and recognised that its related companies shared strategies as a trading group, the details of the plaintiff and its related companies' conduct were never properly made known to the defendant, and hence it could not have been said to condone such conduct in any way that would import contractual or equitable obligations.

18. The plaintiff is part of a group of companies associated with one Brian Conroy and involved in the skin and hide trade. The plaintiff specialises in the export of pickled pelts, hides, sheep, lamb, goat and deer skins.

(a) Kidort Ltd ( a UK company) ("Kidort")

(b) Kidort Australia Ltd ("Kidort Aust")

(c) South Pacific Sheepskins Pty Ltd ("Southpac")

(d) The Melbourne Fellmongering Company Pty Ltd ("MFC")

27. As the corporate nomenclature shows the Conroy group of companies operated in the United Kingdom, Australia and New Zealand.

30. Brian Conroy has many years of experience working in the livestock and hide and skins industries. His experience made him aware of the virtues of having product sourced in different countries in order to meet with the seasonal nature of the industry and to comply with the preferences of buyers for product from different parts of the world.

33. Mr Conroy became a director of the plaintiff in 1990. At one time in 1992 he owned 50 per cent of the issued share capital in it. At the period relevant in these proceedings, that is October 1995 to August 1998, Mr Conroy was a director of the plaintiff and also Kidort and Southpac. Whilst he had completely divested his shareholder interest in the plaintiff company by 1997 he was retained by it as an adviser and a management fee was paid to Kidort for his services. He remained a director of the plaintiff until 12 May 2000.

36. The plaintiff's current directors are Mr Philip Rzoska, Mr Marc Conroy and Mr Juan Colmer. Mr Marc Conroy is the son of Mr Brian Conroy. The current shareholders of the plaintiff are Marc Conroy, Chris Conroy and Suzanne Conroy holding 10 per cent each, Mr Rzoska holding 20 per cent and a Spanish company with a long association with the Conroy group, Compiel holding 50 per cent. Chris and Suzanne Conroy are also the children of Mr Conroy.

39. Kidort and Southpac are both now in receivership.

43. The Conroy group of companies conducted their operations with a high degree of co-operation. In October 1990 the plaintiff became joint insured on a credit insurance policy Southpac held with the defendant's related entity Trade Indemnity Australia Limited ("TIAL"). In March 1992 Kidort was also added as joint insured.

46. Briefly described, a credit insurance policy is one whereby the insured is indemnified against the failure of a debtor to pay. A prescribed credit limit is fixed for a debtor and upon default and its being properly satisfied of the existence of the debt the insurer will pay the insured percentage of the loss.

49. As joint insured the three companies had the benefit of a global limit whereby each could utilise the others' unused credit limits with any one customer. This arrangement lasted until the policy was split in 1995.

52. It is not in dispute that after the split the three companies would continue to be accommodated as a group in that they would be permitted to swap any unused credit limits amongst themselves with the consent of the defendant.

55. However, it is to be observed at the outset that the notion of authorised credit swapping had no application to the circumstances prior to the splitting of the policies in 1995. Indeed the very reason for holding a joint insurance policy was that a global limit exists for the benefit of all.

58. During 1995 the three companies took out separate policies in order to obtain more favourable financial provision from their bankers. Banks and credit providers will offer finance to a customer relative to the amount of insurance cover held. Whilst it was the case that prior to the splitting of the policies in 1995 the three companies' bankers were mindful of the three companies access to global coverage and this arrangement facilitated credit provision for the three companies, the splitting of the policies ensured each access to increased credit by virtue of each being able to assign to its banker the benefit under the policy.

61. In July 1995 Westpac Trust offered to increase the plaintiff's discounting facilities, whereby it would finance the plaintiff's transactions, provided that it obtain its own credit insurance policy. This is the policy the subject of this proceeding of 21 October 1997, policy number 98/E12161/062NO1 ("the policy"). In the case of the companies related to the plaintiff, MFC took out a policy with HIH in May 1998, when this policy lapsed it was taken over by Southpac in July 1999, and in July 1999 Kidort also became insured by HIH.

64. The relevant terms of the policy are as follows. First, the insuring clause:

"In consideration of payment of the premium and other changes and subject to the terms of the policy, Trade Indemnity agrees to indemnify the insured up to the insured percentage (specified in section 3 of the schedule) of the insured loss in the event of an insured buyer failing, by reason of his insolvency or protracted default or contract repudiation, to pay the insured an insured debt. Due to payment of the premium and other charges specified in section 3 of the schedule and observance of all other terms of the policy are conditions precedent to any liability of Trade Indemnity."

68. The relevant definitions arising from this clause are as follows:

"(b) in the case of the protracted default of the insured buyer so much of the insured debt as is confirmed to Trade Indemnity by evidence of debt and is not in dispute between the insured and the insured buyer taking into account the whole of any salvage relating thereto"

" ... any buyer carrying on business in any of the Approved Countries in section 1 of the Schedule, but always excluding

(a) subsidiaries and associated companies of the insured.

(b) government departments, public authorities, nationalised undertakings, and

(c) any buyer where the permitted limit specified by Trade Indemnity is nil."

Insured debt is defined as:

"... means so much of any indebtedness arising out of the trade specified in Section 1 on the Schedule and owing by an insured buyer as does not exceed the permitted limit for that buyer and is in respect of the invoice value of goods (or the face value of the original bill where a bill of exchange is accepted by the insured buyer in respect of the invoice value of the goods) sold by the insured to the insured buyer and despatched to him within the policy period (specified in Section 2 of the Schedule) pursuant to a contract of sale providing for repayment of the debt upon the terms specified in Section 5 of the Schedule."

80. The "trade" specified in Section 1 of the Schedule is the "skins and hides" trade.

"Despatch or despatched where used in this policy shall mean that the goods have irretrievably passed out of the possession of the insured buyer for the purpose of delivery to an insured buyer".

87. There were a number of important conditions of the policy. Condition 3(a) provided:

"It shall be the duty of the insured to exercise reasonable care and prudence in granting credit to and withholding credit from an insured buyer. The insured shall take all necessary steps and use his best endeavours in consultation with Trade Indemnity to minimise any loss."

91. Condition 4 excludes transactions conducted with an insured buyer whilst an existing debt remains unpaid and undisputed.

"The insured shall no assign any rights under the policy unless Trade Indemnity's prior written agreement has been obtained and a form of assignment has been approved in writing by Trade Indemnity."

98. Condition 7 enables Trade Indemnity to reduce, cancel or vary the cover at its discretion. Condition 8 deals with the making of claims and requires notification by the claimant with the least possible delay and within six months. The claimant must also provide adequate evidence of debt. Condition 12 stipulates the policy is issued in New Zealand dollars and condition 14 the that the policy is governed by the law of New Zealand.

102. Before turning to the transactions in question it is appropriate first to briefly review of the key personnel of the defendant relevant to this proceeding.

105. Lindsay Weate was from 1988 until 1995 employed by TIAL as the Manager of the Australia & New Zealand Trade Indemnity Australia Limited Export Credit Insurance Division. He drafted the policy in question. He was compulsorily retired in around May 1995 and replaced by Terry Phillips.

108. Ray Gilbert commenced employment with TIAL in 1991. He reported to Lindsay Weate and upon Weate's departure reported to Terry Phillips. He was export operations manager with limited underwriting authority, but rather performing the function of an in-house broker and servicing the day to day needs of export clients. He left in 1997 and was replaced by Kati Armstrong, who took over the client service role in respect of the Conroy group.

112. The transactions in question all concern sales to a Turkish leather goods company Teodem. It seems Teodem was a viable company until the downturn in the Turkish leather goods industry in the wake of the devaluation of the Russian rouble in August 1998. It is unnecessary to go into any detail on the effect of the devaluation of the rouble on the industry except to say it caused the loss of a valuable market which was deleterious to the trade.

115. The sales in question to Teodem occurred in between June and August 1998. There were four relevant invoices:

(a) Invoice number 2144 for a consignment of skins received on 8 June 1998 with payment due on 9 October 1998 under a Bill of Exchange maturing on that date. It was for the amount of £49,500.00. The claim in relation to this invoice is no longer pursued by the plaintiff.

(b) Invoice number 2145 for a consignment of skins received on 9 June 1998 with payment due on 9 October 1998. .Once again for the amount £49, 500.00.

(c) Invoice number 2205 for a consignment of skins received on 31 July 1998 with payment due on 28 November 1998. The amount due was £49,304.00.

(d) Invoice number 2211 for a consignment of skins received on 8 August 1998 with payment due 5 December 1998. The amount due was £205,920.00.

121. Teodem was unable to meet those invoices at the time due and despite extensions being granted by the defendant on the advice of its underwriter who visited Turkey to assess its exposure to risk in that country. It is to be observed that to date Teodem has not been legally pursued for payment. Why this has not occurred remains unclear.

124. It may be observed however on the facts of the transactions in question, as will be described shortly, at law Kidort was the seller of the goods and therefore the contracting party with exercisable rights under the contract of sale. It is further to be observed that as ruled upon during the trial foreshadowed allegations of equitable assignment or novation by Kidort of its contractual rights to the plaintiff were clearly not available when the detail of the transactions is considered. [1]

127. There was no issue that the sales to Teodem occurred in a particular fashion. Teodem negotiated with Brian Conroy to buy product sourced in the United Kingdom. This product was duly shipped to Teodem under an invoice issued by Kidort and bills of lading also produced by that company. Subsequent to the shipping of the goods a decision was taken to transfer the sale from Kidort to the plaintiff. Hence both in fact and at law [the goods were sold CIF, that is Cost, Freight, Insurance where risk passes to the buyer at the point of lading] the goods had passed to Teodem before the plaintiff issued its invoice.

130. The transfer of sale was purportedly effected by Kidort forwarding a blank replica invoice to the plaintiff and the plaintiff then producing to its banker an identical invoice, except this time on its letterhead and relevant shipping documents in order to obtain discounted finance for the sale. It will be observed each transaction involved the production three invoices.

133. Once finance was obtained from the banker Westpac this money was then transferred to Kidort less fees and interest. The plaintiff was paid a margin on these transactions of between one and two percent.

136. Once again there is no real dispute about the objective of this course of action. It was done precisely to financially accommodate Kidort whose suppliers required payment before Kidort itself could expect payment from its buyer in Turkey. What rather is essentially in dispute is what was communicated to the defendant about these transactions, and whether the degree of communication was such that the defendant could be regarded as a properly informed party.

140. For the plaintiff Mr Conroy, whose involvement with the plaintiff has been described, was called as a witness. The plaintiff also called its current Managing Director, Mr Rzoska, Mr Charles Simon Crisp, formerly of Westpac Trust responsible for the exchange transactions of the plaintiff, Mr Peter Withiel Trevor Cash an accountant who submitted the plaintiff's claim to the defendant, and finally Mr Weate, formerly Manager of the defendant's Export Credit Insurance Division and the person who drafted the policy in question.

143. Mr Conroy gave evidence that the global trading arrangements of the three companies endured the splitting of the policies. In his witness statement and in vive voce evidence he referred to the key documents supporting this position.

146. This documentation consisted of correspondence from 1995 until 1998. Often it was correspondence between the three companies. There was also correspondence to Ray Gilbert of TIAL and a single facsimile transmission to Kati Armstrong requesting credit swapping.

149. The correspondence supported in general terms that credit swapping occurred during this period. The key documents relied on by the plaintiff were in the main from Brian Conroy to Ray Gilbert requesting the transfer of credit limits between the Conroy companies. They requested unused limits be transferred between the company group but do not go into any detail about the trading arrangements of the companies. There are documents relied upon from Brian Conroy to Ray Gilbert from 1996 and 1998 in which the link between credit swapping between the companies and their access to finance is put. This correspondence supports the fact that the defendant knew there was a connection between its preparedness to swap credit limits and the plaintiff's successfully obtaining finance.

152. This correspondence speaks of sales being `transferred to ' or `taken over by ' the plaintiff , or the plaintiff doing some `discounting for Kidort' but there is no evidence that the details of what in fact occurred were ever put to the defendant. Even the letter from Brian Conroy to Ray Gilbert of 24 August 1997 which appears to be the most explicit statement of the plaintiff's position is, notwithstanding its forthright tone, still lacking in any detail. It simply states:

"You have us over a barrel somewhat because as you know our whole banking facility structured (sic) is linked to credit insurance cover and it is clearly too late to now be touting our business around to other insurers without jeopardising our present banking arrangement".

156. There are some responses from Ray Gilbert to Brian Conroy confirming there is no problem swapping unused credit limits. There is also correspondence from Ray Gilbert which confirms his lack of underwriting authority. To reiterate, that credit swapping occurred is not at issue. I am also of the opinion that Mr Gilbert's lack of underwriting authority is not a relevant issue. There was argument by the plaintiff that it was entitled to rely upon Mr Gilbert's apparent authority, but in any event I do not consider this is an issue critical to the case at hand.

159. It was Mr Conroy's evidence that the duplication of invoices was done for two reasons. First, he said it was required by United Kingdom customs authorities for statistical purposes and, secondly, he said it facilitated import procedures in Turkey in that country's free trade zone. In fact neither of these reasons was correct. It seems he held the mistaken belief that documentation was required for these purposes from Kidort as the shipper of the goods. Mr Conroy gave no explanation as to why he believed this to be the case but simply states that in November 2000 he was informed by a director of the freight company K & L Freight that for the purposes of United Kingdom customs no such document was required, rather a plain piece of paper would have sufficed. Likewise in early 2001 Turkish shipping sources informed him that all that was required in Turkey was confirmation of a buying price for the Turkish buyer to land the goods in the free port on the letterhead on a non Turkish company.

162. It was Mr Conroy's evidence Kidort offered these sales to the plaintiff when it could not finance a sale and that the plaintiff agreed to take over these sales. The livestock and related industries trade is seasonal in New Zealand. Between June and November there is not much kill and supply to abattoirs, therefore during this period the plaintiff tended not to be fully utilising its banking facility. A facsimile transmission requesting the transfer would be sent to the appropriate person. This was Mr Rzoska for the plaintiff.

165. In respect to the transactions in question Mr Conroy spoke to Mr Rzoska by telephone and Mr Rzoska agreed to his proposals. It was his evidence that Mr Rzoska on behalf of the plaintiff could at any time have refused to accept the transfer. He did however accept in cross-examination that the defendant had no involvement in the decision.

168. Mr Conroy also accepted that the notion of credit swapping had no relevance during the period when the three companies were joint insured, that is pre 1995. He also accepted that he had not communicated explicitly the details of the transactions with Ray Gilbert. He further accepted that Kidort never invoiced the plaintiff for the skins it allegedly onsold rather it was his evidence that a standard fee of one to two percent was paid by Kidort to the plaintiff.

171. Mr Rzoska gave evidence that the plaintiff was not under the continued control of Mr Conroy and that indeed his influence over the plaintiff lessened after 1992 stating that the plaintiff pursued its own business objectives and was not merely an instrument of Mr Conroy's and Kidort's higher purpose.

174. He gave evidence of his lack of direct dealing with the defendant deposing rather that it was Mr Conroy who dealt with them.

177. He also gave evidence on the effect of the refusal of the claim on the plaintiff. Westpac Trust was the plaintiff's only financier and its withdrawal of the discounting facility for trading in May 1999 has meant the plaintiff's is no longer able to trade. Its only sale since May 1999 has been to the value of US $20, 295.00 and the sale was able to occur only because the buyer paid in advance. The plaintiff has had to liquidate stock to make payments against its debt to the bank. Westpac has also used its deposits in other accounts to off-set the debt.

180. The plaintiff is indebted to the Westpac Trust for the financing of invoices 2144, 2145 2205 and 2211 and accrued interest to the amount of £420,715.11 as at 30 April 2002.

183. In cross-examination Mr Rzoska accepted both that the plaintiff took over sales already concluded by Kidort and that the discounting of the invoices was for the benefit of Kidort. The plaintiff could not therefore be regarded as the vendor of the goods, either in fact or at law, despite a document of 21 September 1999 from Teoman Demir on behalf of Teodem confirming the plaintiff as vendor. It would seem that this document was produced precisely in response to a request to make such a statement in order to support the plaintiff's claim of 8 October 1999. It is entirely self-serving.

186. The evidence of Mr Crisp was to the effect that Westpac Trust was aware of the circumstances of the transactions and did not have a difficulty financing a sale of goods sourced by Kidort or any other company such as Southpac. It was his evidence that Mr Rzoska told him when this occurred. There was some suggestion put by Counsel for the defence that misrepresentations may have been made by the plaintiff to its banker. Mr Crisp's evidence refutes this. This issue is in any event not relevant to the current proceeding and I make no finding upon it.

189. Mr Cash gave evidence on the decline in Turkish leather following devaluation of Russian Rouble on 18 August 1998. His evidence was not tested in cross-examination and was uncontroversial. Once again evidence on the state of the Turkish leather market before and after the devaluation of the Rouble is only of relevance to the extent that it puts Teodem's failure to pay into some context. As stated Teodem's continued failure pay and in particular why it has not been legally pursued for the debts in question remains unclear.

192. Mr Weate gave evidence partially in an expert capacity on the basis of his 30 years in the industry. The gist of his evidence, in relation to the issue relevant to the proceeding that being who was the vendor of the goods, was that it was the plaintiff who was the vendor. It was Mr Weate's evidence that in the export insurance industry the source of the goods is irrelevant to determining this question. It was also his evidence that the manner in which the sales occurred was unproblematic in terms of the plaintiff's coverage. His evidence was that the issuing of an initial invoice from Kidort to Teodem and the fact that according to the shipping documents the shipper was Kidort were irrelevant. His evidence was that such documentation only served to ensure that product could be exported from the United Kingdom and was not indicative of a contract of sale between the Kidort and Teodem.

195. It will be observed that the expert evidence of Mr Weate draws a conclusion of law that is as to the legal identity of who were the contracting parties in the circumstances. It hardly needs be stated that such a conclusion is not within the province of the witness and accordingly I attach no weight to it.

198. His evidence in respect to his dealings with Mr Conroy when he was at TIAL all pre-date the splitting of the policies and as has been stated it is uncontroversial that during this period as joint insured each could access a global limit and it did not matter who traded, purchased or shipped the goods.

202. For the defendant evidence was given by Mr Ray Gilbert formerly Export Operations Manager at TIAL, Mr Dudley Bray the Manager of Claims and Compliance at QBE Insurance Australia Limited. Evidence by witness statement was given by Ms Kati Armstrong, a senior underwriter at QBE , Mr Toby Shore also an underwriter at QBE and Mr Terry Phillip the Assistant General Manager of QBE Australia.

205. It was Mr Gilbert's evidence that whilst credit swapping was permitted it was only with QBE's consent, and was on occasion refused. Mr Conroy was aware of this fact. He accepted that he knew that the three companies traded co-operatively and that product sourced in either the United Kingdom, Australia or New Zealand could be sold by any of the companies. However it was his evidence that he did not know of the specifics of the trading arrangements and the utilisation by Kidort of the plaintiff's discounting facility.

208. It was also Mr Gilbert's evidence that in his position he only had underwriting capacity in the last six to eight months of his employment, and then only up to $150,000.

211. Ms Armstrong gave evidence that after Ray Gilbert left in 1999 she assumed a client service and underwriting role in respect of the Conroy Group. She further gave evidence that credit swapping was permitted with consent and that the concern of the insurer in making this determination was not to increase its overall exposure with any one client. However, like Mr Gilbert, it was her evidence that she was at no time informed of the details of the transactions in question.

214. Mr Shore's evidence concerned a trip he made to Turkey after the collapse in the Russian rouble in August 1998 to assess QBE's exposure in that country. It was his role to devise strategies for recovery either by way of settlement or the instigation of legal proceedings. In meeting with the Teoman Demir, managing director of Teodem he was given no indication that the debt was owed to the plaintiff, rather to the Conroy group of companies. In trying to determine what to do it was Mr Shore's evidence that he requested Mr Conroy provide him with the contracts of sale which Mr Conroy failed to do.

217. It was Mr Bray evidence that he is the person at QBE who recommends whether or not a claim should be paid and that is a usual prerequisite of payment that the insured has commenced legal proceedings against a defaulting buyer.

220. It was Mr Phillips' evidence that he assumed Lindsay Weate's role in January 1995 and that Ray Gilbert was therefore under his direction. It was his evidence that he met Mr Conroy on a number of occasions but the details of the transactions were never explained to him. It was his evidence that credit swapping was permitted and in making its determination it was the concern of the insurer to avoid overall exposure to risk. It was further Mr Phillips' evidence that only someone with underwriting capacity could make this determination, pointedly not Ray Gilbert, rather Kati Armstrong or before her Toby Shore or others not figuring in this proceeding.

224. After some initial reluctance by the plaintiff to fully disclose the details of the transactions in question in its claim, little factual dispute now remains in this proceeding.

227. It is uncontroversial that credit swapping was permitted after the splitting of the policy in 1995, rather what is controversial is the detail and whether this was adequately communicated to the defendant and whether the defendant approved this.

230. It seems to me that the critical documents relied upon by the plaintiff to make out its claim do not suffice to establish knowledge on the part of Mr Gilbert or any other except in the broadest terms and in respect to issues that are not in dispute, in the main the continued permissibility of credit swapping between the Conroy group

233. The plaintiff seeks to impress upon the documents a meaning that they simply will not bear. That is from their content can be drawn on the part of the defendant an informed consent to the trading arrangements of the Conroy Group. I find the documentation relied upon cannot support this assertion.

238. The law governing the policy of insurance was that of New Zealand giving rise to a choice of law point when the claim was pursued in this jurisdiction. Counsel for both parties in their submissions focused in the main on the law of this jurisdiction despite the fact that it is clearly the case in relation to the contractual claim that the governing or proper law of the contract was that of New Zealand.

241. An express choice of law by the parties will be respected by the court where that choice is `bona fide and legal' [2].

244. In respect to the claim in promissory estoppel there is little authority on the applicable law in such a claim, however, as such a claim is founded on an actionable representation , there are analogies to be drawn with the tortious claims involving actionable representations.[3].

247. Two principles are clear in respect of tort. First, as was recently affirmed by the High Court that the substantive law to applied is the place of commission of the tort [4]. Secondly, in a case of an actionable representation the point of receipt is the place of commission.[5]

250. In the case at hand applying the above principles the law to be applied in the promissory estoppel claim is the law of New Zealand.

253. I have addressed this issue for the sake of completeness, in both the contractual and estoppel claim the law of New Zealand and the law of Victoria are fundamentally the same. Following the submissions made by the parties I will in my reasons concentrate on the law of this jurisdiction but I will also as is appropriate draw on New Zealand law. However, I observe that the defendant never challenged the forum chosen by the plaintiff.

257. It is the plaintiff's submission that in construction of the actual terms of the policy extrinsic evidence of the commercial intent of the contract and of the parties presumed common intention is admissible.

260. The leading authority on this point remains the High Court's decision in Codelfa Construction Pty Ltd v State Rail Authority[6], as was recently affirmed in Royal Botanic Gardens and Domain Trust v South Sydney City Council.[7] In the leading judgment Gleeson CJ, Gaudron, Gummow and Hayne JJ rejected argument positing a broader approach to the reception of extrinsic evidence, supported it was submitted by recent House of Lords authority.[8] Their Honours held unequivocally that unless and until at some time in the future the approach is revisited and determined differently before the High Court other Australian courts remain bound to follow Codelfa.

263. As is made clear in the judgment of Mason J in Codelfa[9] which reviewed the authorities and the relevant principles articulated therein, extrinsic evidence is only admissible where there is ambiguity in the terms of the contract. His Honour quoted with approval the pithy distinction drawn by Lord Wrenbury in Great Western Railway and Midland Railway v Bristol Corporation[10] that evidence of surrounding circumstances is admissible to resolve an ambiguity not to raise one.

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible to more than one meaning. But is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both the parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed".

270. An exception to the rule that extrinsic evidence is inadmissible where contractual language has a plain and unambiguous meaning is the admissibility of evidence to the effect that the contractual language has trade, industry or local usage which has a particular meaning to the parties involved. However, as is clear from the authorities what my be described as a specialist meaning nevertheless must have a generalised usage.[11] Some authority goes so far as to posit that the test of admissibility in these circumstances is that the particular usage must establish the same notoriety as is required for the implication of a term on the basis of custom.[12]

273. The law in New Zealand has the same threshold or premise of ambiguity for the admission of external evidence. Where the meaning of the words clear the Court must give effect to them and it is impermissible to inquire into background or contextual matters.[13]

276. The terms of the contract of insurance in question are unambiguous and indeed standard. It is the plaintiff's claim that the meaning of such terms can be stretched to take on the nature of the trading arrangements in question.

279. Such arrangements were entirely idiosyncratic and went beyond all notions of typical industry practice. They were effected in a highly unusual and indeed somewhat nefarious manner, without the consent or knowledge of the defendant.

282. The terms of the policy being clear, and the meaning sought to be imported by the plaintiff not being reflective of a generalised industry practice and usage the plaintiff's claim in contract therefore fails.

286. It is the judgment of Brennan J in Waltons Stores (Interstate) v Maher & Anor in which principles of the doctrine are formulated:[14]

"In my opinion, to establish an equitable estoppel , it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw for the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."

290. See also: The Commonwealth v Verwayen;[15] Metropolitan Transit Authority v Waverley Transit Pty Lt;[16] and The Commonwealth v Clark.[17]

293. In New Zealand the principles of equitable or promissory estoppel were articulated by the Court of Appeal in Burberry Mortgage Finance & Savings Ltd v Hindsbank Holdings Ltd.[18]

296. Briefly stated in that case the appellant sought to employ a repossession agent to seize goods over which it held first charge by way of an enforceable chattel mortgage. In the critical conversation it was held on either the plaintiff's or the receiver's account of what was said the plaintiff desisted in executing its security over the goods on the representation by the receiver that its rights would not be affected . Rent was owed on the property and the receiver proceeded despite its representation to the appellant that it would not do so to seize and sell the goods on the landlord's behalf. The plaintiff sued the receiver in equitable or promissory estoppel.

299. It was held by all members of the Court for the appellant that there had been a clear representation by the receiver that rights as between him and the plaintiff would not be affected and that he should have given reasonable notice to the plaintiff that he intended to repossess on behalf of another. The receiver's statutory and legal rights to repossess did not prevent equities arising. Nor could it be said the receiver's conduct was dishonest or even sharp dealing, in the sense he knowingly encouraged the appellant not to execute its rights in order to advantage himself by pressing his statutory right to possess on behalf of another. position.

302. In his judgment Richardson J described the case at 361 as one of `a straight forward application of the modern principles of equitable estoppel' which he then delineated as:

" It is well settled that where one party has by words or conduct made to the other a clear and unequivocal promise or assurance intended to affect the relations between them and to be acted on accordingly , then once the other party has taken him at his word and acted on it, the one who gave the promise or assurance is bound by that assurance unless and until he has given the promisee a reasonable opportunity of resuming his position. Although there are indications in some of the authorities that there must be a pre-existing contractual relationship between the parties. I am of the view that the doctrine applies in appropriate cases where there is a pre-existing legal relationship or where the promise affects a legal relationship which will arise in the future or more broadly where, as here, the promisor and promisee have interests in the same subject-matter".

306. It will be observed the formulation of His Honour whilst not matching that of Brennan J in Waltons Stores point for point nevertheless is fundamentally similar in the requirements of a representation , reliance and detriment.[19] Indeed more recent New Zealand authority has approved Waltons Stores: see National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548; Mainzeal Property and Construction Ltd v Facility Finance Ltd [2000] 3 NZLR 595; Marine Steel Ltd v The ship "Steel Navigator" [1992] 1 NZLR 77.[20]

309. Certainly in both jurisdictions it is well acknowledged that the various manifestations of modern equitable estoppel are all outgrowths of the equitable prohibition on the unconscionable assertion of legal rights.

312. I turn now to apply the principles stated by Brennan J in Waltons Stores to the case at hand. First, the assumption of a legal relationship. Here, clearly the legal relationship of insurer and insured existed but that is not to the point. The assumption of the plaintiff was that this relationship would encompass transactions of the character in question, where as has been observed at law it was clearly not the seller of the goods.

315. Secondly, whether the defendant has induced the assumption or expectation. It is the plaintiff's case that the defendant permitted the sales transactions as described. Certainly the defendant did on occasion agree to credit swapping of unused credit limits between the related companies, and in a sense this arrangement was a continuation of the recognition of the companies functioning as a trading group. As averted to the notion of credit swapping only came into operation in any meaningful sense after the splitting of the policies in 1995 and after this point in time the plaintiff's case rests on documentation which only supports the finding that the defendant whilst being requested to authorise swaps had no specific knowledge of the manner in which the related companies were doing business. Given this lack of knowledge it cannot be said that the defendant induced either through explicit or tacit approval the assumption or expectation of the plaintiff that its dealings would be covered by the policy.

318. Thirdly, whether the plaintiff has acted or refrained from acting in reliance on the assumption. The manner in which the transactions in question were carried out evince a successful strategy to accommodate the financial requirements of Kidort. Whether or not the plaintiff was able to participate in these arrangement with some degree of independence or whether its own objectives were subsumed to those of Kidort at the behest of Mr Conroy is not the critical issue, which is rather that the defendant was not properly or fully consulted and therefore cannot be said to induced reliance on the part of the plaintiff.

321. Fourthly, whether the defendant knew or intended it to do so. As considered already the defendant lacked requisite knowledge of the plaintiff's conduct.

324. Fifthly, whether the plaintiff has suffered or will suffer detriment. The detriment claimed by the plaintiff is its indebtedness to its banker and the loss of its capacity to trade due to the loss of its discount facility. The plaintiff has a claim against Kidort for this amount but as it seems Kidort is in receivership it will be unlikely to recover the amount from that company.

327. Finally, whether the defendant has failed to act avoid that detriment. It is the plaintiff's case that the defendant should pay its losses under the transactions with Teodem. However, as such transactions were beyond the coverage of the policy and the defendant did not induce the plaintiff to conduct itself in the way it did the failure to avoid detriment cannot be ascribed to the defendant. Moreso, no attempt has been made by the plaintiff to recover from Teodem.

330. The plaintiff's claim in promissory estoppel therefore fails.

334. As both claims by the plaintiff have failed it follows that the proceeding will be dismissed. I will order accordingly.

[1] See: AGC Advances Limited v FCT [1975] HCA 7; (1975) 132 CLR 175 at 190; CB Peacocke Land Co v Hamilton Milk Producers (1963) NZLR 576, 585; William Brandt's Sons & Co v Dunlop Rubber Co (1905) AC 454, 462; also Elders Pastoral Limited v Bank of New Zealand (1990) 1 NZLR 385; Commercial Factors Limited v Maxwell Printing Limited ( 1994) 1 NZLR 724 in respect of assignment and Lyth v Ault & Wood [1852] EngR 562; (1852) 7 Ex Ch. 669; 155 ER 117; Liversidge v Broadbent [1859] EngR 674; (1859) 4 H & N 603; 157 ER 978 in respect of novation.

[2] See Vita Food Products Inc v Unus Shipping Co Ltd (in liq) [1939] AC 227; 1 All ER 513; GoldAcres Ltd v Queensland Estates Pty Ltd [1969] Qd R 378; BHP Petroleum Pty Ltd v Oil Basins Ltd [1985] VR 275.

[3] See the judgment of Giles J in the News Corportation Ltd v Lenfest Communications Inc, unreported Supreme Court of New South Wales 13 August 1996 in which determining the place where the events giving rise to the estoppel arose His Honour appears to adopt such reasoning.

[4] See Regie National des Usines Renault SA v Zhang [2002] HCA 10; (2002) 187 ALR 1; and Dow Jones & Company Inc v Gutnick [2002] HCA 56 10 December 2002.

[5] See Diamond v Bank of London and Montreal [1979] QB 333; and Voth Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538.

[6] [1982] HCA 24; (1982) 149 CLR 337

[7] [2002] HCA 5

[8] Particularly the judgment of Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 All ER 98 at 114 -115 and Lord Bingham of of Cornhill and Lord Hoffman in Bank Credit and Commerce International SA v Ali [ [2001] UKHL 8; 2001] 1 All ER 961 at 965.

[10] (1918) 87 L.J. Ch 414, 429

[11] Hodgson & Hodgson v Morella Patoral Co Pty Ltd (1975) 13 SASR 51 at 62-3 Zelling J.

[12] See eg, Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435 at 448 Ipp J.

[13] See Laws of New Zealand Contract by the Honourable Justice Gallen, Dr Jeremy Finn and Ms Christine French and Benjamin Developments Ltd v Robert Jones (Pacific) Ltd [1994] 3 NZLR 189 (CA) at 203.

[16] [1991] VicRp 14; (1991) 1 VR 181, 208

[17] [1994] VicRp 66; (1994) 2 VR 333, 360

[18] [1988] NZCA 220; [1989] 1 NZLR 356

[19] Cheshire & Fifoot' Law of Contract at 56; and Estoppel by The Honourable Justice Fraser in the Laws of New Zealand.

[20] The last of these cases makes reference to the differences between the doctrine in New Zealand and Australia however these differences are not elaborated on in the judgment.