Plaintiffs v Defendants

CONTRACT - Meaning - 'directly or indirectly' - 'arising' - 'vicinity' - Coxe v Employers Liability Assurance Corporation Ltd [1916] 2 KB 629, Quintano v B W Rose [2008] NSWSC 793; (2009) 15 ANZ Ins Cas 61-805, Walton v National Employers Insurance Association [1973] 2 NSWLR 73, Hi-Fert Pty Ltd and Another v Kiukiang Maritime Carriers Inc and Another [1998] FCA 1485; (1998) 159 ALR 142 applied.

INSURANCE - Interest on claims - s 57 of Insurance Contracts Act 1984 (Cth).

Hamish Austin KC with Andrew Cameron and Jessica Apel

For the First Defendant (Arch Underwriting at Lloyd's (Australia) Pty Ltd)

For the Second Defendant (Chubb Insurance Australia Limited)

For the Third Defendant (The Underwriting Member of Syndicate 2003 at Lloyd's of London)

For the Fourth Defendant (Berkshire Hathaway Specialty Insurance Company (ACN 600 643 034))

1 The plaintiffs in proceeding S ECI 2021 01559 (the 'Transit Proceeding') and S ECI 2021 01815 (the 'AMFR Proceeding') operated pubs, bars and/or restaurants in greater metropolitan Melbourne in 2020 when COVID‑19 impacted upon public health and upon the Victorian economy.

2 The first case of COVID‑19 in Victoria (and Australia) was confirmed on 25 January 2020.

3 In order to limit the spread of COVID‑19, beginning on 23 March 2020 directions were issued (the 'Directions') under s 190 and s 200 of the Public Health and Wellbeing Act 2008 (Vic) (the 'PHW Act') causing the venues operated by the plaintiffs, or parts of those venues, to close.

4 The venues were closed for two periods of time, between 23 March 2020 and 31 May 2020 ('First Lockdown') and 8 July 2020 and 4 October 2020 ('Second Lockdown').

5 Each of the plaintiffs in the Transit and the AMFR Proceedings was at that time insured under an Industrial Special Risks Policy (the 'Transit Policy' or 'AMFR Policy' respectively). Each of the defendants was an insurer under those Policies, the terms of which, excluding the schedules thereto ('Schedules') , were relevantly identical (collectively, the 'Policies').

6 In these reasons, capitalised terms are used to refer to terms that are either capitalised or defined in the Policies. Unless otherwise stated, references to the Policy are to the Transit Policy.

7 Section 1 of the Policy provides indemnity for physical loss, destruction or damage during the period of insurance at the 'Situation', being the insured Premises at which each of the pubs, bars and restaurants are located. Section 2 provides indemnity for business interruption in the event any building used by the Insured at the Premises is physically lost, destroyed or damaged during the period of insurance and the Business carried on by the Insured is 'interrupted or interfered with'. In that event the defendants agree to pay the amount of 'Loss' (as that term is defined in the Policies) resulting from such interruption or interference in accordance with the applicable 'Basis of Settlement'.

8 The Policy contains endorsements applicable to all sections including extension CLOSEXB4. The plaintiffs rely on CLOSEXB4 to found their claim to be indemnified in respect of Loss resulting from the closure of the insured Premises during the two lockdowns. The outcome of the plaintiffs' claims turns on the proper construction of endorsement CLOSEXB4 and on factual evidence relevant to the construction of the endorsement for which they contend.

9 The defendants in the Transit proceeding denied indemnity on 29 January 2021. In the AMFR proceeding the defendants refused to indemnify the plaintiffs in response to a letter dated 12 May 2021 in which the plaintiffs stated their intention to lodge a claim under the AMFR Policy.

10 CLOSEXB4 extends the cover provided under the primary indemnity in Section 2 of the Policy such that loss from specified events in CLOSEXB4 are insured perils. It is appropriate to reproduce CLOSEXB4 in full:

CLOSEXB4 CLOSURE BY ORDER OF A PUBLIC AUTHORITY

Loss as insured by this policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Premises or other premises in the vicinity of the Premises by order of a competent public authority directly or indirectly arising from infectious or contagious human disease occurring at such premises shall be deemed to be loss resulting from damage to property used by the Insured at the Premises.

However, this extension will not indemnify Loss resulting from interruption of or interference with the Business directly or indirectly arising from or in connection with Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be a quarantinable disease under the Quarantine Act 1908 and subsequent amendments.

11 There have been earlier cases concerning whether industrial special risk policies respond to claims for indemnity for business losses sustained as a result of government action in response to the COVID‑19 pandemic. The leading Australian cases are the decisions of the Federal Court in Swiss Re International SE v LCA Marrickville Pty Ltd,[1] at first instance per Jagot J, and on appeal, LCA Marrickville Pty Ltd v Swiss Re International SE,[2] per Moshinsky, Derrington and Colvin JJ (together, the 'LCA litigation') and in Star Entertainment Group Ltd v Chubb Insurance Australia Ltd[3] at first instance per Allsop CJ and on appeal, Star Entertainment Group Ltd v Chubb Insurance Australia Ltd,[4] (together the 'Star litigation'), a decision of the Full Federal Court comprised of the same members of the Court who presided in the LCA Appeal.

12 Recently Osborne J of this Court delivered judgment in Princess Theatre Pty Ltd v Asvar Insurance Ltd.[5] While the Star litigation and the Princess Theatre litigation dealt with the construction of single policies of insurance, the LCA litigation dealt with ten different policies and extensions. The clauses considered in the LCA litigation were each concerned with the occurrence of disease at or within a specified distance of insured premises, as was the clause under consideration in the Princess Theatre litigation. In none of the earlier cases was the Court called upon to consider an extension clause in the same terms as CLOSEXB4.

13 The parties agree CLOSEXB4 is, or is like, a 'hybrid clause', described in the following terms by the Commercial Court of the United Kingdom in FCA v Arch Insurance (UK) Limited:[6]

this terminology is only to be taken as a convenient means of referring to certain policy terms, which refer both to restrictions imposed on the premises and to the occurrence or manifestation of a notifiable disease.

14 A number of the clauses considered in the LCA litigation were 'hybrid' clauses. As stated by Derrington and Colvin JJ in the LCA Appeal, a characteristic of such clauses is:[7]

the sequential nature of the separate elements of the insured peril with the final elements (e.g. the restriction on the use of premises) being that which most effectively causes the loss... However, the preceding elements in their consecutive occurrence are also important.

15 The present dispute is focussed on the proper construction of the very lengthy first sentence in CLOSEXB4. Before turning to the first sentence it is important to say something about the second sentence which begins with the word 'however'. The second sentence contains an exclusion that operates if the Policy otherwise responds by reason of the first sentence.

16 The second sentence states the extension will not indemnify Loss resulting from interruption or interference with the Business directly or indirectly arising from or in connection with any disease declared to be a 'quarantinable disease' 'under the Quarantine Act 1908 and subsequent amendments'.

17 On 16 June 2016 the Quarantine Act 1908 (Cth) was repealed and the Biosecurity Act 2015 (Cth) came into force. The Biosecurity Act 2015 (Cth) does not provide for declarations of 'quarantinable diseases'. It provides that in certain circumstances a disease may be determined to be a 'listed human disease'.[8] On 21 January 2020 COVID‑19 (or, more specifically, 'human coronavirus with pandemic potential') was determined to be a listed human disease under the Biosecurity Act 2015 (Cth).[9]

18 In HDI Global Specialty SE v Wonkana No 3 Pty Ltd,[10] the New South Wales Court of Appeal considered policies of insurance which excluded cover in the case of any circumstance involving 'quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments'.[11] The Court of Appeal held the words 'and subsequent amendments' do not extend to or include the Biodiversity Act which was a separate Act.[12]

19 Returning to the first sentence in CLOSEXB4, the plaintiffs put their case on the basis they suffered Loss otherwise falling within the terms of the Policy resulting from interruption of or interference with their Business directly or indirectly arising from the closure of their Premises. They make no claim for Loss resulting from interruption of or interference with their Business directly or indirectly arising from the closure of other premises in the 'vicinity' of their Premises.

20 The plaintiffs accept they must prove 'such facts as bring the claim within the terms of the insurer's promise'.[13] They do not seek to satisfy CLOSEXB4 by demonstrating that their Business Premises were closed as a result of the presence of infectious or contagious disease at their Premises. Their claim is for Loss due to the closure of their Premises by reason of the occurrence of COVID‑19 at premises in the vicinity of their Premises.

21 The defendants submit and the plaintiffs accept their claims are based on two premises:

(a) The constructional premise: CLOSEXB4 applies where an Insured suffers Loss resulting from interruption of or interference with the Business arising from closure of the whole or part of the Premises by order of a competent public authority arising from COVID‑19 occurring at other premises in the vicinity of the Premises; and

(b) The factual premise: the relevant orders arose from COVID‑19 occurring at premises in the vicinity of the Premises.

22 The defendants submit the plaintiffs' case fails because the constructional premise is not made out. Separately, assuming the correctness of the plaintiffs' constructional premise, the evidence does not establish that any (let alone all) of the Directions arose from COVID‑19 occurring at premises 'in the vicinity of the Premises'.

23 While the constructional and the factual premises are in issue, a number of matters are not in issue. First, the defendants admit each of the plaintiffs is an Insured under the Policy. Second, the defendants admit each of the plaintiffs is the operator of the venues alleged. Third, the defendants accept the plaintiffs have each suffered Loss resulting from interruption of or interference with their Businesses. Fourth, there is no contest that interruption of or interference with the Businesses directly or indirectly [arose] from 'closure' of the whole or part of the Premises by Directions issued by the Chief Health Officer or authorised officers under ss 190 and/or 200 of the PHW Act. Fifth, there is no dispute the Directions were in each instance an 'order of a competent public authority'.

24 The plaintiffs conceptualise CLOSEXB4 as comprising three elements. The defendants adopt the same approach. The three elements are:

(a) (first element): There was Loss resulting from interruption of or interference with the plaintiffs' Business;

(b) (second element): The interruption or interference directly or indirectly arose from closure or evacuation of the whole or part of the plaintiffs' Premises or other premises in the vicinity of the Premises by order of a competent public authority; and

(c) (third element): The relevant order referred to was directly or indirectly arising from infectious or contagious human disease occurring at such premises.

25 The parties approached the proper construction of CLOSEXB4 from quite different perspectives.

26 The plaintiffs submitted first, that the causal link which must be established is more broadly expressed than those in issue in the test cases in the LCA litigation. None of the clauses considered by Jagot J finds a close analogue with CLOSEXB4. CLOSEXB4's requirement that the 'closure order' be 'directly or indirectly arising from infectious or contagious human disease' is similarly worded to the clauses in test cases 8 and 9 in the LCA litigation.[14] However, in each of those cases the relevant occurrence of 'human infectious or contagious diseases' was required to have been 'at the Business Premises'.[15] Second, none of the clauses considered by Jagot J provided cover where the closure of premises was contingent upon the occurrence of infectious disease 'in the vicinity of the Premises'. Each of the clauses considered in the LCA litigation required the occurrence of disease to be at or within a specified distance of insured premises. Third, CLOSEXB4 contains a further broadening mechanism in its opening words: 'Loss as insured by this policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation ...'.

27 In their written opening, the primary case for the plaintiffs was that the 'vicinity' of the Premises encompasses the entirety of the State of Victoria. In oral opening, the plaintiffs abandoned their primary case. Their focus switched to their 'secondary case', that 'vicinity' is Greater Metropolitan Melbourne and to their tertiary case that 'vicinity' connotes the Local Government Area ('LGA') in which the insured Premises is located.

28 The plaintiffs' case is that properly construed CLOSEXB4 provides indemnity for loss resulting from interruption of Business directly or indirectly arising from closure of the insured Premises by order of a competent public authority directly or indirectly arising from occurrences of COVID‑19 at other premises in Greater Melbourne, alternatively occurrences of COVID‑19 within the LGAs in which each of the Insured Premises are located.

29 The defendants submit CLOSEXB4 is a narrowly defined peril against the occurrence of which they agreed to grant indemnity. The first sentence in CLOSEXB4 identifies a 'sequential and composite' insured peril.[16] Composite because it includes several different elements, sequential because each element must be identified and satisfied in order for the plaintiffs to be entitled to indemnity.

30 The defendants' case is that indemnity is provided under CLOSEXB4 where an Insured has suffered Loss resulting from interruption of or interference with their Business arising from one of two alternatives:

(1) closure or evacuation of the Premises by order of a competent public authority arising from infectious or contagious human disease occurring at those Premises; or

(2) closure or evacuation of other premises in the vicinity of the Premises by order of a competent public authority arising from infectious or contagious human disease occurring at those other premises in the vicinity of the Premises.

31 The defendants submit the plaintiffs have not made a claim that engages either limb of CLOSEXB4 that as a result the plaintiffs have not established any basis for indemnity.

32 For the reasons in section F, the constructional premise for which the plaintiffs contend is not made out. For the reasons discussed in section G, the so called factual premise, which also involves its own constructional issues is not made out.

33 On 5 March 2024, the parties filed a detailed Joint Chronology in each proceeding. The facts stated in the Joint Chronology are agreed facts for the purposes of the proceeding pursuant to s 191 of the Evidence Act 2008 (Vic).

34 On 7 March 2024 the parties filed a Statement of Agreed Facts relating to COVID‑19. On 19 March 2024 the parties filed a Supplemental Statement of Agreed Facts concerning the size of the relevant LGAs, what constitutes 'Greater Melbourne' as that term was used in Area Directions (No. 3) and related matters. Both statements recorded the agreement of the parties that the facts stated were not disputed for the purposes of s 191 of the Evidence Act 2008 (Vic). The 7 March 2024 statement is subject to the qualification that the parties do not agree that all of the facts in the statement are relevant.

35 The trial was conducted on the basis of the Joint Chronology and on the basis of the two Statements of Agreed Facts subject to the qualification in the 7 March 2024 statement.

37 The conduct of the trial was economical and efficient and the submissions were of a high standard.

38 The defendants divided up the presentation of submissions concerning the issues in dispute so as to avoid duplication.

39 Arch had the carriage of argument concerning the constructional premise and the primary argument concerning the factual premise. Lloyds advanced submissions concerning the proper construction and application of the Basis of Settlement. Chubb advanced submissions concerning the application of sub-limits and deductibles. Berkshire advanced submissions relating to the plaintiffs' claim for interest pursuant to s 57 of the Insurance Contracts Act 1984 (Cth), alternatively, s 60 of the Supreme Court Act 1986 (Vic).

40 With the exception of the treatment of Pay-Roll (as that term is defined in the Policies) in the determination of Uninsured Working Expenses in the AMFR Proceeding where Chubb adopted a subtly different position from the other defendants each defendant adopted the submissions of the other.

41 In addition to tendering documents in the Transit Proceeding the plaintiffs relied on lay evidence contained in a witness statement of Antony Jackson amended following objections, and refiled dated 25 March 2024. Mr Jackson is a director of the first plaintiff in the Transit proceeding, Transit Pty Ltd, which owns and operates the Transport Hotel. He is also the sole director of the second plaintiff in the Transit proceeding, Notting Hill Tavern Pty Ltd, which owns and operates the Notting Hill Hotel.

42 In addition to tendering documents in the AMFR Proceeding, the plaintiffs relied on lay evidence contained in the witness statement of Jonathan Sherren, amended following objections and refiled on 25 March 2024. Mr Sherren was the sole director and secretary of each of the eight plaintiffs in the AMFR Proceeding.

43 Neither witness of fact was required for cross-examination.

44 The parties relied on expert evidence as to quantum. The plaintiffs filed an expert report of Mr Andrea De Cian dated 9 May 2023 in each proceeding. Chubb filed an expert report of Mr Ryan Carruth dated 1 December 2023 in each proceeding. Mr De Cian and Mr Carruth ('the quantum experts') prepared a joint expert report in each proceeding dated 9 February 2024. Supplementary joint reports were prepared in each proceeding dated 20 March 2024. These reports were followed by further supplementary joint expert reports dated 26 March 2024.

45 On 27 March 2024 the parties filed an Amended Agreed List of Key Issues for Determination ('the 27 March 2024 list') current at that date including the competing responses of the parties regarding liability issues:

(1) Did the Plaintiffs suffer loss "resulting from interruption of or interference with [each] Business" within the meaning of endorsement CLOSEXB4? (The parties agree that the answer is "yes".)

(2) If yes to (1), did the interruption of or interference with each Business "directly or indirectly [arise] from closure or evacuation of the whole or part of the Premises ... by order of a component public authority" within the meaning of endorsement CLOSEXB4? (The parties agree that the answer is "yes" in respect of the periods 23 March to 31 May 2020 and 8 July to 4 October 2020.)

(3) If yes to (2), did the order of a competent public authority "directly or indirectly [arise] from infectious or contagious disease occurring at such premises" within the meaning of endorsement CLOSEXB4? In particular:

(a) Upon the proper construction of endorsement CLOSEXB4, is each of the Plaintiffs entitled to be indemnified for loss resulting from interruption of their Business directly or indirectly Case: S ECI 2021 01815 Filed on: 19/03/2024 09:44 AM arising from closure of "the Premises" by order of a competent public authority directly or indirectly arising from infectious or contagious disease occurring at "premises in the vicinity of the Premises"? (The Plaintiffs say "yes"; the Defendants say "no".)

(b) If yes to (3)(a), as a matter of fact, were the Premises closed by order of a competent public authority directly or indirectly arising from COVID‑19 occurring at premises in the vicinity of the Premises? (The Plaintiffs say "yes"; the Defendants say "no".)

(4) Are the Plaintiffs entitled to be indemnified for any loss suffered after 4.00 pm on 1 October 2020 (in S ECI 2021 01559 (Transit Proceeding)) and 30 September 2020 (in S ECI 2021 01559 (AMFR Proceeding)) such that they are able to claim loss up to and including 4 October 2020?

(5) In the event the Policy responds, does the "annual aggregate" sub-limit of $500,000 (in the Transit Proceeding) and $350,000 (in the AMFR Proceeding), as identified in the relevant Policy Schedule for "Infectious or Contagious Diseases; Vermin; Pests or Defective Sanitary Arrangements; Food or Drink Poisoning; Murder, Suicide", apply?

(6) If the sub-limit applies, is the sub-limit and any indemnity payable to the plaintiffs limited by the term "annual aggregate" and, if so, in what way?

(7) In the event the Policy responds, whether the 48-hour time deductible for any claim or series of claims applies?

(8) In the application of the "Savings clause" should:

(a) JobKeeper or other government subsidies be taken into account and, if so, in what way?

(b) rental abatements required by law be taken into account and, if so, in what way?

(c) any other savings, whether by way of commercial accommodation or otherwise, be taken into account and, if so, in what way?

(9) Should the references to "Damage" in the "Savings clause" and "Adjustments clause" in the Basis of Settlement in Section 2 be construed as the "Insured Peril" and, if so, when did the "Damage" occur?

(10)(8) Should the Transit Policy be construed as requiring Pay-Roll Expenses and COGS to be deducted as uninsured working expenses in the calculation of Gross Profit?

(11)(9) Should the AMFR Policy be construed as requiring Pay-Roll Expenses and COGS to be deducted as uninsured working expenses in the calculation of Gross Profit?

(10) In both the AMFR Proceeding and the Transit Proceeding how should the remaining differences in calculation between the experts be resolved?

(12) Are the declared values in the Transit Policy for 12 months or 24 months?

(13)(11)Is interest to be awarded under section 60 of the Supreme Court Act 1986 (Vic) or section 57 of the Insurance Contracts Act 1984 (Cth)?

(14)(12)If interest is awarded under section 57 of the Insurance Contracts Act 1984 (Cth), from what date is interest payable and at what rate?

46 The quantum experts gave evidence concurrently. They adopted their joint reports. In accordance with an agreed protocol, cross-examination was limited to four topic areas for each of the two proceedings relating to calculation of savings:

(a) March 2020 pro-rating (vs all of March 2020);

(b) Items excluded from calculation;

(c) Government waivers (liquor licence fees and payroll); and

(d) Calculation of COGS (average vs percentage).

47 The issues narrowed during the course of the trial. On 3 April 2024 the parties filed a Statement of Agreed Position - Quantum.

48 During closing submissions on 4 and 5 April 2024 the parties advised agreement had been reached on a number of quantum issues and that other quantum issues, while not agreed, do not require determination as part of the trial.

49 Following the trial, the parties filed an agreed Joint Tender List which lists 847 documents comprising the evidence cross-referenced to the transcript and submissions.

C. The Insured Venues and the Periods of Insurance

50 In the Transit Proceeding there are two relevant venues: the Transport Hotel and Public Bar at Federation Square (Melbourne CBD) and the Notting Hill Hotel (Notting Hill). The Transport Hotel and Public Bar at Federation Square is located in the City of Melbourne. The Notting Hill Hotel is located in the City of Monash.

51 In the AMFR Proceeding there are eight relevant venues; The Deck Brighton (Brighton), The King Hotel (previously known as El Coco) (Melbourne CBD), the Nixon Hotel (Docklands), True South (Black Rock), the Metropol (which, prior to 18 May 2020, was in St Kilda), Hotel Brighton (Brighton), Melbourne Central Lion (Melbourne CBD) and Bank on Collins (Melbourne CBD).

52 In the AMFR Proceeding the Deck Brighton, the Hotel Brighton and True South are located in the City of Bayside, the King Hotel (previously known as El Coco), the Nixon Hotel, the Melbourne Central Lion and Bank on Collins are located in the City of Melbourne, and the Metropol (which ceased operations on 18 May 2020) was located in the City of Port Phillip.

53 The periods of insurance for the Transit plaintiffs and AMFR plaintiffs overlap and are as follows:

(a) Transit Proceeding - from 4.00 pm on 28 February 2020 to 1 October 2020 with an indemnity period of 24 months beginning with the occurrence of the damage; and

(b) AMFR Proceeding - from 4.00 pm on 30 September 2019 to 30 September 2020 with an indemnity period of 18 months beginning with the occurrence of the damage.

54 In both cases the Placing Slip constitutes the Schedule to the Policy. The Placing Slip names the Insured, defines the Business and the Situation or Premises. In the case of Transit the 'Business Description' is in the following terms:

All activities of the Insured, principally, but not restricted Hotel Operators and/or owners, including Gaming, Accommodation, Restaurant, Bistro Operators, Pub Tab, Bottleshop, Conference Facilities, Property Owners & Occupiers and all other activities incidental thereto or for which the Insured may be or may become engaged.

55 The Transit Placing Slip uses the expressions 'Situation and/or Premises', interchangeably. It specifies sub-limits of liability including, by way of example, in relation to Section 1, burglary and/or theft (other than money) $100,000, and in Section 2, 'Infectious or Contagious Diseases; Vermin, Pest or Defective Sanitary Arrangements: Food or Drink Poisoning: Murder, Suicide (Annual Aggregate) $500,000'. The Placing Slip also identifies 'deductibles' including in respect of, 'Infectious or Contagious Diseases; Vermin, Pest or Defective Sanitary Arrangements: Food or Drink Poisoning: Murder, Suicide (Annual Aggregate) 48 hours'.

56 The Transit Placing Slip identifies 'Declared Values' for each Situation, including the two venues the subject of the Transit Proceeding as at 1 October 2019. Concerning the Transit/Transport/Taxi Situation under section 2: consequential loss; gross profit $14,610,000 and wages $2,772,000 are specified. Concerning Notting Hill Tavern, gross profit $5,924,000 and wages $1,746,923 are specified.

57 At the start of the trial there was an issue about whether the Transit Declared Values for gross profit and wages in the Placing Slip are for 12 months or whether they are for the indemnity period of 24 months. That issue has been resolved. Item 12 struck through in the 27 March 2024 list reflects that resolution. The parties now agree the Transit Declared Values are for 24 months. In the case of the AMFR Policy, the Schedule specifies the Declared Values are for 18 months.

58 The Policies are made up of a combination of standard terminology and bespoke exclusions and endorsements.

59 The CLOSEXB4 endorsement reflects a deliberate decision to extend the cover for business interruption beyond the cover otherwise provided for in the Policies which is dependent upon the occurrence of physical loss or damage by deeming Loss falling within CLOSEXB4 to be Loss resulting from damage to property used by the Insured at the Premises.

60 As stated by the Full Court in the Star Appeal:

In such context, where, as here, particular memoranda are used to expand or limit the scope of the indemnity afforded by the principal indemnity it may be inferred that the parties have turned their minds to particular topics or types of risk and drafted appropriate memoranda to deal with each such instance.

61 So much is plainly the case here. The issue for determination is what are the metes and bounds of the endorsement and does the extension of indemnity for which the endorsement provides respond in the factual circumstances under consideration.

62 The Policy proper begins with 'IMPORTANT INFORMATION' stated to be applicable to all parts:

This Policy incorporates the Schedule, Sections, Definitions, Conditions, Exclusions, Endorsements, Memoranda and Warranties (if any) and any other terms herein contained which are to be read together and any word or expression to which a specific meaning has been given in any part of this Policy shall bear this meaning wherever it may appear unless such meaning is inapplicable to the context in which the word or expression appears.

...

Provided that the total liability of the insurer(s) at any one Situation shall not exceed the appropriate Limit or Sub-Limit(s) of Liability as stated in the Schedule or such amount(s) as may be substituted therefore by endorsement or memorandum hereon or attached hereto and that each insurer specified shall only be liable to contribute to any loss covered by this Policy that proportion of the loss as is specified beside its name.

63 The insuring clause for business interruption, headed 'Section 2 - Consequential Loss' is relevantly in the following terms:

In the event of any building or any other property or any part thereof used by the Insured at the Premises for the purpose of the Business being physically lost, destroyed or damaged during the period of insurance by any cause or event not hereinafter excluded (loss, destruction or damage so caused being hereinafter termed "Damage") and the Business carried on by the Insured being in consequence thereof interrupted or interfered with, the Insurer(s) will, subject to the provisions of this Policy including the limitation on the Insurer(s) liability, pay to the Insured the amount of loss resulting from such interruption or interference in accordance with the applicable Basis of Settlement.

64 The Basis of Settlement clause in section 2 limits consequential loss to three items. Item 1: Loss of Gross Profit; item 2: Claim Preparation Fees; and item 3: Pay‑Roll. Items 1 and 3 are the subject of claim in the Transit proceeding. There is no separate claim in the AMFR proceeding for item 3, Pay-Roll. The sole item of claim in that proceeding is for loss of Gross Profit. There is no issue in either proceeding concerning item 2, Claim Preparation Fees.

65 The Basis of Settlement clause relevantly provides:

Item No. 1 - Loss of Gross Profit

The insurance under this item is limited to actual loss of Gross Profit due to: (a) Reduction in Turnover, and (b) Increase in Cost of Working, and the amount payable as indemnity thereunder shall be:

(a) in respect of Reduction in Turnover:

The sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover.

...

Less any sum saved during the Indemnity Period in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced in consequence of the Damage.

Provided that if the Declared Value of Gross Profit at the commencement of each Period of Insurance be less than the sum produced by applying the Rate of Gross Profit to the Annual Turnover (or its proportionately increased multiple thereof, where the Indemnity Period exceeds 12 months), the amount payable hereunder shall be proportionately reduced.

...

Item No. 2 - Claim Preparation Fees

...

Item No. 3 - Pay-Roll

66 As appears from item 1, in the Basis of Settlement clause, there are two elements involved in the calculation of loss of Gross Profit. The first element (a): Reduction in Turnover; the second element (b): Increase in Cost of Working. There is no claim in either proceeding for loss due to Increase in Cost of Working. That element of any potential claim may be put to one side. In both proceedings the plaintiffs claim loss of Gross Profit due to Reduction in Turnover.

67 Item 1(a) of the Basis of Settlement clause specifies the method by which Reduction in Turnover is to be calculated. Reduction in Turnover is represented by the sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover. A number of the integers in the calculation are defined terms.

68 From that calculation there is to be a deduction in respect of 'any sum saved' during the Indemnity Period 'in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced in consequence of the Damage'.

69 When calculating the Reduction in Turnover the 'Rate of Gross Profit' is a critical integer. That expression is defined, as is 'Gross Profit':

RATE OF GROSS PROFIT

The rate of Gross Profit earned on the Turnover during the financial year immediately before the date of the Damage.

GROSS PROFIT

The amount by which:

(a) the sum of the Turnover and the amount of the Closing Stock and Work in Progress shall exceed;

(b) the sum of the amount of the Opening Stock and Work in Progress and the amount of the Uninsured Working Expenses as set out in the Schedule.

Note: The amounts of the Opening and Closing Stocks and Work in Progress shall be arrived at in accordance with the Insured's normal accountancy methods, due provision being made for depreciation.

70 The rate of Gross Profit is the Rate of Gross Profit earned on turnover during the previous financial year. 'Turnover', 'Annual Turnover' and 'Shortage in Turnover' are defined:

TURNOVER

The money (less discounts, if any allowed) paid or payable to the Insured for goods sold and delivered and for services rendered in course of the Business at the Premises.

SHORTAGE IN TURNOVER

The amount by which the Turnover during a period shall, in consequence of the Damage, fall short of the part of the Standard Turnover which relates to that period.

ANNUAL TURNOVER

The Turnover during the 12 months immediately before the date of the Damage.

71 A further integer in the calculation of reduction in Turnover is 'Standard Turnover'. 'Standard Turnover' is defined not by reference to a financial year. It is defined as follows:

STANDARD TURNOVER

The Turnover during that period in the 12 months immediately before the date of the Damage which corresponds with the Indemnity Period.

72 The calculation of 'Gross Profit' requires the calculation of the amount by which the sum of the Turnover and the amounts of Closing Stock and Work in Progress exceed the sum of the amount of the Opening Stock and Work in Progress and the amount of the Uninsured Working Expenses set out in the Schedule. No Uninsured Working Expenses are set out in the Schedule to either of the Policies.

73 The parties, including Chubb in closing submissions, agree that in the case of the Transit Policy, as a matter of construction even though there is no reference to Uninsured Working Expenses in the Schedule, Pay-Roll should be treated as an Uninsured Working Expense. As a result of Chubb's acceptance that Pay-Roll is an Uninsured Working Expense for the purposes of the Transit proceeding that issue no longer needs to be addressed.

74 In the AMFR proceeding the parties, with the exception of Chubb, agree that as a matter of construction of the AMFR policy, Pay-Roll is not an Uninsured Working Expense. Chubb agrees Pay-Roll is not an Uninsured Working Expense, not as a matter of construction of the AMFR Policy, but for the purposes of the AMFR proceeding. As a result, that issue no longer requires determination in the AMFR proceeding.

75 While an issue at the outset of the trial, the parties now agree that Cost of Goods Sold (COGS) although not identified in the Schedule to either Policy as an Uninsured Working Expense, is an Uninsured Working Expense in the case of both Policies. That issue now being agreed, it no longer requires determination.

76 The memoranda to section 2 of the Policy includes the following, to which reference was made by Arch in support of its construction submissions:

PREMISES IN THE VICINITY (PREVENTION OF ACCESS)

Loss as insured by this Policy resulting from interruption of or interference with the Business in consequence of damage to property in the vicinity of the Premises caused by a peril, damage as a result of which is insured hereunder, which shall prevent or hinder the use thereof of access thereto, whether the Premises or property of the insured therein shall be damaged or not, shall be deemed to be loss resulting from Damage to property used by the Insured at the Premises.

Loss as insured by this Policy resulting from interruption of or interference with the Business in consequence of damage to property in the vicinity of and forming part of or contained in the complex of which the Premises forms part caused by a peril, damage as a result of which is insured hereunder, which results in a cessation or diminution of trade due to temporary falling away of potential custom whether the Premises or property of the Insured therein shall be damaged or not shall be deemed to be loss resulting from Damage to property used by the Insured at the Premise.

77 Within the Policy, at the outset of the section headed 'Pace Hospitality Agreed Endorsements Applicable to All Sections', being a reference to all sections of the endorsements prepared by Pace but not to the Policy proper, the following appears:

ENDORSEMENT ATTACHING TO AND FORMING PART OF INDUSTRIAL SPECIAL RISK INSURNACE [SIC] POLICY

(Headings have been included for ease of reference and it is understood and agreed that the policy and endorsements are not to be interpreted by reference to such headings.)

Notwithstanding anything contained herein to the contrary, it is hereby declared and agreed that the following endorsements are made to the policy.

78 In addition to endorsement CLOSEXB4 the directive concerning headings has application to other endorsements including endorsement REPELXB4, the subject matter of which appears to intersect with the subject matter of CLOSEXB4. The final sentences of both endorsements are relevantly identical:

REPELXB4 INFECTIOUS OR CONTAGIOUS DISEASE; VERMIN, PESTS OR DEFECTIVE SANITARY ARRANGEMENTS; FOOD OR DRINK POISONING; MURDER, SUICIDE.

Loss as insured by this Policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Insured Premises by order of a competent public authority consequent upon:

(i) human infectious or contagious disease manifested by any person whilst at the Insured Premises;

(ii) the outbreak of a notifiable human infectious or contagious disease in humans occurring within the immediate vicinity of the Insured premises;

(iii) vermin or pests or defects in the drains or other sanitary arrangements at the Insured Premises;

(iv) poisoning directly caused by the consumption of food or drink provided on or from the Insured Premises;

(v) murder or suicide occurring in or at the Insured Premises;

shall be deemed to be the loss resulting from Damage to property used by the insured at the Insured Premises. Perils exclusion 4(a) shall not apply to the cover granted by this endorsement.

However, paragraphs (i) and (ii) will not indemnify Loss resulting from interruption of or interference with the Business directly or indirectly arising from or in connection with Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be a quarantinable disease under the Quarantine Act 1908 and subsequent amendments.

79 Endorsement DZONEXS4 extends cover provided under section 2 of the Policy concerning loss resulting from access to the Business Premises being prevented or hindered by deeming certain loss to be loss to which the interference with access cover in section 2 has application:

DZONEXS4 LOSS OF ATTRACTION - GENERAL AREA

The second paragraph of the memorandum headed Premises in the Vicinity (Prevention of Access) is extended to include the following clause:

Any loss resulting from interruption of or interference with the Business in consequence of Damage to property within a 5 kilometre radius of the Premises which results in a cessation or diminution of the Insured's trade or normal business operations, shall be deemed to be loss resulting from Damage to property used by the Insured at the Premises.

80 The principles of construction are not in dispute.

81 In its opening submissions Arch helpfully summarised the principles by reference to the decisions in the LCA litigation and the Star litigation. Paragraphs 82-85 that follow are directly taken from those submissions.

82 The language used by the parties in a contract of insurance must be interpreted objectively, by considering what the language adopted by them would mean to a reasonable businessperson in the position of the parties.[17] The question for consideration is not what each of the parties meant to say, but rather what is the objective meaning to be attributed to the words they have used to express what they have agreed.[18]

83 In the absence of a contrary intention, the construction of a commercial instrument will be approached on the basis that the parties intended to produce a commercial result and constructions that make for commercial nonsense or would work commercial inconvenience should be avoided. However, minds may differ as to the commerciality of a particular outcome. Therefore, reasoning by reference to commerciality has its limits.[19] In particular, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent one for one of the parties to have agreed.[20]

84 The policy should be construed as a whole.[21] That requires a substantive intellectual process of evaluating the degree of operative coherence and consistency between a proffered construction and the instrument's other terms.[22] An 'iterative process', involving 'checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences', 'enables a court to assess whether either party's preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity'.[23]

85 Application of the contra proferentem rule is a last resort.[24] Having undertaken the orthodox process of construction, the court does not elect between whichever construction is favoured 'by the narrowest of margins'. The rule only applies where, after ascertaining the literal or grammatical meanings and evaluating them against the text, context and purpose of the contract, there is insufficient basis for choosing between competing constructions.[25]

86 The plaintiffs submit that as stated by the Full Court in the Star Appeal when construing the Policy as a whole, '[t]here must be due regard to the overall nature of the instrument, the nature of the transaction or dealing that it records and its commercial purpose as evident from considering all of its terms'.[26] The defendants agree. In its written closing Arch submitted:

While Arch's focus is therefore on CLOSEXB4, it is important to read the Policy as a whole[27] and to construe it so that 'all [of] its components form a single coherent commercial instrument'.[28] In particular, that requires a process of evaluating the degree of operative coherence and consistency between a proffered construction and the instrument's other terms.[29] An 'iterative process', involving 'checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences', 'enables a court to assess whether either party's preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity'.[30]

87 While there is agreement upon the importance of construing the Policy as a whole, as earlier mentioned, the parties agree it is convenient to break up the analysis of CLOSEXB4 into three interlocking elements.

88 The plaintiffs submit that while reading the clause sequentially is important for the purposes of understanding what is necessary to establish connecting features between each of the elements, ultimately the clause has to be construed as a whole. It is not appropriate to stop at a point during the reading and say the clause can only have one meaning, it is necessary to read on.

89 They submit the LCA Appeal Decision emphasises the need for close attention to be paid to the language of a clause conferring coverage for a complex peril, including the degree of causal relationship that is necessary. In this case, the relevant expression of the causal nexus is 'directly or indirectly arising from'.

90 The endorsement responds when the order of a competent public authority arises 'directly or indirectly' from infectious or contagious human disease occurring at 'such premises' being a reference to disease. That is, COVID‑19, either at the insured Premises or at other premises in the vicinity of the Premises. 'Such premises' as an expression has a referential effect, looking back to the premises that are referred to earlier.

91 'Premises', as used throughout CLOSEXB4, should take its ordinary meaning, 'the property forming the subject of a conveyance' or 'a house or building with grounds, etc., belonging to it'.[31] But that is not to say that an occurrence of COVID‑19 must occur within a building to have occurred 'at' the premises. As Jagot J said in the LCA first instance decision:[32]

... Premises may or may not involve only a building. Turner v York Motors Pty Ltd [1951] HCA 52; (1951) 85 CLR 55 at 75; 58 ALR (CN) 1054 does not suggest that premises may not include more than a building. On this basis, depending on the facts, there may be an occurrence of COVID‑19 at the premises without there being an occurrence of COVID‑19 within a building. It depends on the nature of the premises.

92 It is sufficient for the nature of the other premises to be identified (in this case, including residential premises, hospitals, medical clinics and hotels).

93 The requirements of the CLOSEXB4 endorsement are satisfied if the occurrence of cases of COVID‑19 inside the relevant vicinity, together with cases occurring outside the relevant vicinity, were causes of the making of the orders of the competent public authority.

94 The plaintiffs submit the words 'directly or indirectly arising from' in both the second and the third elements of CLOSEXB4 expand the requisite causal nexus beyond a proximate cause.

95 They refer to Quintano v BW Rose Pty Ltd[33] where Brereton J considered whether a claim was excluded because it was one 'arising from' the insolvency of any insurer or reinsurer. His Honour relevantly held:

[7] The words 'arising from' require that there be some causal connection between the claim and the specified matter, but the requisite nexus is satisfied by a less proximate relationship than that required by the phrase 'caused by' [GIO (NSW) v R J Green & Lloyd Pty Ltd [1966] HCA 6; (1966) 114 CLR 437, 443 (Barwick CJ), 445 (Menzies J), 447 (Windeyer J)]. ...

[8] It will satisfy the requirement that a claim 'arise from' a matter, if it originates in, springs from, or has its foundation in, that matter ... . A cause of action arises from a set of material facts, proof of which found the cause of action. Similarly, a claim arises from the underlying facts that, if established, justify the claim. In my view, a claim can be said to arise from a matter - at least - if it has a foundation in that matter, so that the matter is one of the underlying facts that, if they exist, together justify the claim.

96 One of the clauses examined by Jagot J in the LCA first instance decision was the clause in issue in NSD144/2021 Guild Insurance Ltd v Gym Franchises Australia Pty Ltd ('Guild v Gym Franchises'):[34]

...closure or evacuation .... by order ... arising directly or indirectly from ... human infectious or contagious diseases or the discovery of an organism likely to result in human infectious or contagious disease at the Business Premises ...

97 Her Honour referred with approval to the judgment of Lords Hamblen and Leggatt JJSC in Arch who observed that policy language such as 'directly or indirectly caused by' may indicate that a looser form of causal connection will suffice than would normally be required.[35] Her Honour quoted with apparent approval from Coxe v Employers' Liability Assurance Corporation Ltd[36] to the effect that the words 'directly or indirectly' exclude a requirement for a proximate cause and 'a more remote link in the chain of causation is contemplated than the proximate and immediate cause', accepting that 'a line must be drawn somewhere'.[37] Concerning the clause in issue in Guild v Gym Franchises compared to other clauses under consideration, her Honour said:[38]

In NSD144/2021 Guild and Gym Franchises, however, the causal connection required is much looser, being 'arising directly or indirectly from'. In that case, the difference is substantive, as indirect causation would encompass a far more expansive causal chain.

98 The plaintiffs submit that there can be more than one proximate cause. As long as the occurrences of COVID‑19 inside 'the vicinity' had a non-incidental and non-tenuous causal role in the making of the Directions, that will be sufficient. They rely on the following statement by Jagot J in the LCA first instance decision:[39]

... It is not that an order cannot relate to areas inside and outside of the radius. It is also not that the order must be a result solely of circumstances inside the radius. It is that the circumstances inside the radius must be a cause of the order, even if circumstances outside of the radius are also a cause of the order (see further below) and the relevant cause in this case is not the risk or threat of COVID‑19 but the fact of an outbreak or likely occurrence of COVID‑19 as specified. In the present case no inference can be drawn that the circumstances inside the radius were a cause of the order in any sense. ...

99 It is sufficient for the Direction to be 'a cause' of the Loss rather than the Direction being that which 'most effectively' causes the loss as submitted by the defendants.

100 On the facts they submit CLOSEXB4 is triggered because there were occurrences of COVID‑19 at premises in the vicinity of the Insured Premises which contributed to the threat of the spread of COVID‑19 which was 'a cause' of the Directions.

101 They submit these cases are distinguishable from Guild v Gym Franchises because:

(a) there is evidence there were occurrences of COVID‑19 at premises in the vicinity of the Insured Premises;

(b) there is evidence the relevant decision-makers considered relevant occurrences of COVID‑19 in the making of the Directions, including those which had occurred at premises in the vicinity of the Insured Premises; and

(c) occurrences of COVID‑19 within the local community ('the vicinity') fuelled the making of Directions 'to limit the spread' of COVID‑19 from those cases.

102 The plaintiffs submit the phrase 'such premises' as it is used in CLOSEXB4 does not require the site of the occurrence of the disease and the site subject to closure to be the same premises. Consistent with its ordinary meaning 'the person or thing, or the persons or things, indicated' the term 'such' identifies the premises previously indicated.

103 They contend it is not in dispute that 'such premises' is capable of referring to both 'the Premises' or 'other premises in the vicinity'. The difference in position is that, contrary to the defendants' submissions, 'such premises' is a composite expression which on its ordinary meaning, refers to the premises indicated. It is not to be narrowed by reference to which of the two types of premises at which disease must have been present. If the operation of the endorsement was intended to be so confined the clause would have been split.

imposed two distinct and independent forms of indemnity, namely one arising from closure, evacuation and disease all occurring at the Insured's premises and one arising from closure, evacuation and disease occurring at another premises in the vicinity, that would have been reflected in the drafting of the endorsement.

105 The word 'or' does not split the indemnity provided by the endorsement into two separate indemnities. The better reading of the words 'such premises' indicates either class of premises previously referred to. If the insurer wished to provide two distinct and independent indemnities, the insurer could have split them out, not merged them together into one composite collection of words.

106 Contrary to the defendants' submissions, the term does not reflect any delineation of CLOSEXB4 into two independent limbs of coverage. 'Such premises' operates to refer to the classes of closed premises previously indicated, with the result that CLOSEXB4 can respond where there is a closure of 'the Premises' and the relevant occurrence of the disease was (1) at 'the Premises', or (2) at 'other premises in the vicinity of the Premises'. CLOSEXB4 could be triggered where the closed premises (whether 'the Premises' or 'other premises in the vicinity'), is the same premises at which the disease occurs; but it is not necessary that they be the same premises.

107 To the extent there may be two different types of indemnity, as contended for on behalf of the defendants, the use of the words 'such premises' draws those separate forms of indemnity back together. There must be a link between the closure or evacuation and the cause. The cause is tied to the expansive expression, disease occurring at either category of premises. As a composite peril, the clause must be construed as a whole.

108 While accepting that instead of 'such premises' the clause could have said 'occurring at the Premises or other premises in the vicinity of the Premises', the plaintiffs contend the words 'such premises' have the same effect.

109 The plaintiffs submit the following textual indicators support their construction:

(a) The term 'or' is used repeatedly in CLOSEXB4 to posit alternatives (i.e. 'closure or evacuation', 'whole or part of' and 'the Premises or other premises of the vicinity'). However, when describing the locations at which COVID‑19 must occur, a deliberate choice has been made to use the composite term 'such premises' rather than distinguishing between 'the Premises' or 'other premises in the vicinity'. The use of this different language within the endorsement suggests that 'such premises' should not be construed as delineating between two alternative limbs of indemnification.

(b) If there were two independent (and separate) limbs of indemnification within CLOSEXB4, it was open to the Insurers to make this clear, such as by using separate sub-paragraphs to delineate between those two limbs (as is done in other provisions). There are no sub-paragraphs in CLOSEXB4.

110 The plaintiffs submit the comparison undertaken by the defendants with REPELXB4 does not assist the argument that 'such premises' creates two separate limbs of indemnification such that the disease must occur at the same premises that is closed by order of the public authority. At best, as context, REPELXB4 cancels out both constructions.

111 There is potential for overlap with REPELXB4 which extends to paragraphs (i) and (ii) of that endorsement. CLOSEXB4 provides a broader, more flexible form of coverage in respect of occurrences of infectious or contagious human disease. That is consistent with the fact that CLOSEXB4 is concerned solely with closure by reason of disease while REPELXB4 deals with various other express limbs of coverage, specified perils such as vermin, pests, defects, poisoning, murder or suicide. In contrast to REPELXB4 which has numerous sub-paragraphs, CLOSEXB4 has almost a distributive approach with 'or's everywhere gathered together by the words 'such premises'.

112 The plaintiffs submit the fact the Policies are 'no stranger' to providing cover where loss is suffered by a business as a result of circumstances arising at another premises (e.g. the 'Premises in the Vicinity (Prevention of Access)' shows that there is no commercial nonsense inherent in their construction: to the contrary, it supports that construction.

113 Finally, the plaintiffs submit the expression 'such premises' should be construed contra proferentem against the Insurers. Accepting that the rule is one of last resort, if the construction of the expression 'such premises' cannot be resolved by applying the usual rules of construction, then the contra proferentem rule must favour the plaintiffs, a proposition not affected by the fact an insurance broker was involved.[40]

114 Arch on behalf of the defendants submit there are two circumstances in which an Insured may be entitled to indemnity, either because the insured suffered Loss because its Premises were closed by order of a competent public authority (the first limb), or because it suffered Loss because other premises in the 'vicinity' of the Premises were closed by such an order (the second limb). Two distinct and independent indemnities are reflected, in the language of the clause - in particular, from the use of the disjunctive 'or' in the expression '... the Premises or other premises in the vicinity of the Premises'.

115 Arch submits the plaintiffs did not attempt to undertake a word by word, or phrase by phrase analysis of the way in which the endorsement works. The plaintiffs' approach to the words 'Premises or other premises in the vicinity of the Premises' does not involve an analysis of CLOSEXB4 which gives a value or meaning to each of the words in the form in which they exist.

116 Arch structured its submissions by reference to the three interlocking elements of CLOSEXB4. It submits the second limb of the second element of CLOSEXB4 is significant in order to understand and apply the third element and to properly construe what is meant by 'such premises'.

117 Arch proffered as an example of the second limb the owner of a bakery (the Insured) located at Premises next to a supermarket (premises in the vicinity of the Premises) who might suffer Loss resulting from interference with its Business directly or indirectly arising from closure or evacuation of the supermarket by order of a competent public authority directly or indirectly arising from infectious disease occurring at the supermarket, and be entitled to be indemnified under the Policy with respect to that loss.

118 Arch and the defendants acknowledge that each of the plaintiffs has suffered loss resulting from interruption of or interference with its Business.

119 Arch placed significance on the use of the word 'or' in the second element of CLOSEXB4. Where there are alternatives, separated by the word 'or' there might be two claims both of which fall within the endorsement.

120 'Closure' and 'evacuation', separated by 'or' are alternatives. There might be one claim for Loss arising from evacuation and another for Loss arising from closure but both claims would not exist at the same time. If the Insured was required to evacuate the Premises and then the Premises were closed, the losses would be sequential. Assuming the Loss otherwise fell within the endorsement, the Insured could make a claim for Loss arising from evacuation and then a claim for Loss arising from closure.

121 Arch submits one of the most significant disjunctive 'or's in the second element is the separation 'of the Premises' and the 'other premises in the vicinity of the Premises' read together with the preceding language. The word 'or' where used before the words 'other premises in the vicinity of the Premises' signifies an alternative. In turn the words 'other premises in the vicinity of the Premises' is qualified by the words that have gone before. That is, Loss resulting from interruption or interference with the Business arising from the closure or evacuation of the other premises.

122 If there was a case of COVID‑19 occurring at the Premises that closed the Business at the Premises and there was also a case of COVID‑19 at other premises in the vicinity causing those premises to close, the insured could not make two claims. That is because there would not be a Loss that flowed from both events. Circumstances could not be envisaged where if the insured's Business was interrupted or interfered with by the closure of its Premises, there would be additional or separate Loss due to closure as a result of COVID‑19 at premises in the vicinity of those Premises.

123 The insured Premises need not be the premises that are closed in order for the endorsement to have application. However what is required for indemnity to be available is that the premises that are closed must be the same premises at which the infectious or contagious disease occurs.

124 Arch submits the words, 'directly or indirectly arising from' add little where they appear in both the second and the third element of CLOSEXB4 and that they may be dispensed with for the purposes of construction. Their purpose is to shut out a potential argument if the word 'indirectly' was not included that in order to be recoverable, Loss must arise directly. The words 'directly or indirectly' are used to ensure that no person can say that in considering the order of a competent public authority closing or requiring the evacuation of premises that the closure or evacuation has to arise directly rather than indirectly. Provided the causal link is there between the order of the competent authority and the closure or evacuation, the endorsement ensures the Policy responds.

125 The word 'vicinity', referring to 'the vicinity of the premises', is concerned with the close physical relationship between the premises. It is the measure of that physical relationship that will be relevant to the question of whether the closure of the premises in the vicinity of the Premises, in the example discussed, the supermarket, has in fact caused the Loss of which the baker complains.

126 Arch submits the concept of 'vicinity' stipulates a relationship of proximity between the Premises and other premises, rather than a relationship of proximity between Premises and the occurrence of infectious disease. It submits the plaintiffs misread CLOSEXB4, in this respect. The endorsement does not, as the plaintiffs imply, 'provide... cover' where the closure of Premises arises from the occurrence of infectious disease 'in the vicinity of the Premises'.

127 As to context, Arch submits CLOSEXB4 is distinct from:

(1) REPELXB4, which in sub-paragraph (ii) stipulates a relationship between the Premises and the outbreak of infectious disease (the outbreak must be in the 'immediate vicinity' of the Premises); this is different from the way in which CLOSEXB4 operates;

(2) various clauses at issue in the FCA v Arch litigation and in the LCA litigation which stipulated a relationship between the insured premises and the occurrence or outbreak of disease (the occurrence etc. must within a radial distance of the premises).

128 Arch submits CLOSEXB4 is similar to various other clauses at issue in the LCA litigation, which embodied a similar expression to the first limb of CLOSEXB4 (i.e., closure of the insured Premises arising from the occurrence or outbreak of disease at the insured Premises). The only relevant difference is that CLOSEXB4, unlike the clauses at issue in the LCA litigation, incorporates a second limb (i.e., closure of premises in the vicinity of the insured Premises arising from the occurrence of disease at those other premises).

129 Arch submits that understanding the disjunctive limbs of the second element of CLOSEXB4 is the key to construing the third element.

130 Arch agrees with the plaintiffs that the word 'such' where it refers to 'such premises' has a referential operation. It refers to the 'premises' hitherto referred to, being the 'premises' the closure or evacuation of which caused the interruption of or interference with the Business (be they the Premises, or the premises in the 'vicinity' of the Premises), which in turn caused the Loss.

131 This does not mean 'such premises' is to be 'construed' as 'mean[ing] only the plaintiffs' premises'. Rather, it reflects the sequential and composite terms of CLOSEXB4, and the fact that the second element has two limbs.

132 Where an Insured claims that it suffered Loss resulting from interruption of the Business arising from closure of the Premises, to be entitled to indemnity the insured must establish that the order of the competent public authority arose from COVID‑19 occurring at those Premises.

133 Where an Insured makes a claim for Loss caused by closure of 'other premises in the vicinity of the Premises', the Insured must establish: first, that 'other premises' have been closed by order of a competent public authority because of the 'occurrence' at those premises of an infectious or contagious disease; and second, that the Insured has suffered loss resulting from interruption of or interference with its Business arising from the closure of those 'other premises'. Not only must the 'other premises' be in the 'vicinity' of the Insured's Premises, the closure of those particular 'other premises' must cause the interruption or interference with the Business that (in turn) causes the Insured's loss.

134 'Such' premises is a reference to the premises that are the subject of both the closure and also the site of infectious human disease. Applying the provisions to an actual claim, and working through the words of the endorsement, by the time you get down to the words 'such premises' you already know which premises are being referred to, whether they are the insured's Premises or premises in the vicinity of the Premises. You already know because you already know what has been closed or evacuated. This analysis reinforces recognition of the narrow scope of CLOSEXB4 because it is apparent that it is the closure or evacuation of the 'other premises' that causes the Business interruption and therefore the Insured's loss, not the occurrence of infectious disease at those premises.

135 Arch submits the plaintiffs' mistake is to read CLOSEXB4 as if what is relevant is the presence of COVID at premises in the vicinity of the Premises. However it is not the presence of the infectious disease that causes the loss to which the policy responds by reason of the endorsement, it is the closure of the other premises. The loss occurs because insured Premises are in the vicinity of the closed premises.

136 Arch submits its construction is reinforced by two contextual considerations. First, the structure of CLOSEXB4, which indemnifies an Insured for Loss resulting from interruption of or interference with the Business arising from an event (closure or evacuation by order of a competent public authority) affecting:

(2) other premises in the vicinity of the Premises,

137 Subject to irrelevant exceptions, Section 2 similarly indemnifies the Insured for loss resulting from interruption of or interference with the Business arising from an event (physical damage to property) affecting:

(2) 'property in the vicinity of the Premises', which shall prevent or hinder the use thereof or access thereto; or

(3) 'property in the vicinity of and forming part of or contained in the complex of which the Premises forms part', which results in a cessation or diminution of trade due to a temporary falling away of potential custom.

138 Secondly, Arch's construction better coheres with the apparent intention of the parties that may be gleaned from the terms of REPELXB4, which relevantly provides (emphasis added by Arch):

Loss as insured by this Policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Insured Premises by order of a competent public authority consequent upon:

(i) human infectious or contagious disease manifested by any person whilst at the Insured Premises;

(ii) the outbreak of a notifiable human infectious or contagious disease in humans occurring within the immediate vicinity of the Insured premises;

...

shall be deemed to be loss resulting from Damage to property used by the Insured at the Insured Premises. ...

139 Arch submits there is substantial overlap between the indemnity given by the first limb of CLOSEXB4, and the indemnity given by sub-paragraph (i) of REPELXB4. However, sub-paragraph (ii) of REPELXB4 does separate work from CLOSEXB4:

(1) the concept of 'vicinity' is used in CLOSEXB4 to stipulate a relationship of proximity between the Premises and other premises (and not, as the plaintiffs' imply, a relationship of proximity between the Premises and the occurrence of infectious or contagious human disease);

(2) the concept of 'immediate vicinity' in sub-paragraph (ii) of REPELXB4 is used to stipulate a relationship of proximity between the Premises and the outbreak of a notifiable human infectious or contagious disease.

140 On the plaintiffs' construction despite REPELXB4 only providing indemnity where a competent public authority responds to an outbreak of disease in the immediate vicinity of the Premises, CLOSEXB4 would provide indemnity in circumstances where a competent public authority responds to a mere occurrence rather than an outbreak of disease in the vicinity of the Premises, rather than the immediate vicinity. The plaintiffs' construction would result in CLOSEXB4 performing a task that it is not intended to do despite REPELXB4 performing a similar task but being more difficult to satisfy.

141 Arch submits that even if the plaintiffs' construction of CLOSEXB4 is an available one having regard to the text of the endorsement in isolation (which is denied), it is an unattractive construction given the apparent intention of the parties reflected in REPELXB4 to limit the availability of indemnity resulting from interruption etc. of the Business arising from closure etc. of Premises by order of a competent public authority in response to infectious etc. disease in the 'community' (in a broad sense).

142 Arch further submits that the plaintiffs' construction would give rise to anomalous consequences. It would mean that - despite REPELXB4 only providing indemnity where a competent public authority responds to an 'outbreak' of 'notifiable human infectious or contagious disease' in the 'immediate vicinity' of the Premises - CLOSEXB4 would provide indemnity where a competent public authority responds to a mere 'occurrence' (rather than 'outbreak') of any 'human infectious or contagious disease' (rather than a 'notifiable' such disease) in the mere 'vicinity' of the Premises (rather than in the 'immediate vicinity' of the Premises), so long as the 'occurrence' is at premises.

143 It is important to pay primary attention to the text of CLOSEXB4, to consider the words and phrases used in the context of the Policy as a whole, so far as practicable construing the endorsement so that all of its components form part of a single coherent commercial instrument.[41]

144 CLOSEXB4 contains a series of elements each of which must be satisfied in order for the Insured to be entitled to indemnity. The structure of the endorsement is one where the elements are required to operate in a causal sequence. It is necessary to examine the text of the interconnected elements in their correct causal sequence.[42] Breaking the clause into the three elements identified by the parties provides a convenient framework for sequential analysis.

145 When undertaking that analysis, consistent with the observations by Derrington and Colvin JJ in the LCA Appeal, an 'iterative process' is required.[43] That involves 'checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences', so as to enable an assessment of 'whether either party's preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity'.[44]

Element 1: 'Loss as insured by this policy resulting from interruption of or interference with the Business'

146 Element 1 is agreed to be satisfied in the case of both Policies. However, because of its use of the conjunction 'or', a feature of the other two elements, because of the need to consider the more contentious parts of the endorsement in context, and because construction of CLOSEXB4 requires a consideration of the endorsement as a whole the text of element 1 warrants separate consideration.

147 Element 1 provides the Loss which is recoverable is a loss 'as insured by this policy'. The reference to 'insured by this policy' makes it plain that all of the requirements of the Policy, including those of the endorsement must be satisfied in order for the Loss to be recoverable.

148 In element 1 'or' is used to distinguish between loss 'resulting from' two alternative ways in which Loss, if otherwise falling within the endorsement is recoverable. The first is a Loss 'resulting from interruption of... the Business'; the second is a 'Loss resulting from ...interference with the Business'. If either of those criteria are satisfied, element 1 is satisfied.

149 The 'or' in element 1 is positioned to connect alternatives with the greater of the alternatives, 'interruption of', mentioned first and the lesser alternative, 'interference with' mentioned second. The same pattern is repeated in a number of instances where 'or' is used to identify alternatives in elements 2 and 3 of the endorsement.

Element 2: 'directly or indirectly arising from closure or evacuation of the whole or part of the Premises or other premises in the vicinity of the Premises by order of a competent public authority'

150 Provided the other elements of the endorsement are made out, Loss that arises 'directly or indirectly', from 'closure or evacuation' of 'the whole or part of the Premises or other premises in the vicinity of the premises' will be recoverable.

151 Consistent with the drafting of element 1, the greater of the alternatives separated by the word 'or' is consistently placed first and the lesser of the alternatives is consistently placed second. That is, 'closure' before 'evacuation'; 'directly' before 'indirectly', 'the whole' before 'part'.

152 The first alternatives in element 2 are 'directly or indirectly arising'.

153 I accept the plaintiffs' submission that the words 'directly or indirectly arising from' expand the requisite causal nexus beyond a proximate cause and that, as stated in Coxe,[45] a more remote link in the chain of causation is contemplated than the 'proximate and immediate' cause. While a 'line must be drawn somewhere',[46] I also accept the plaintiffs' submission that there can be more than one cause.

154 The second set of alternatives in element 2 is 'closure' or 'evacuation'. Either the closure or evacuation of the whole of the Premises, or the closure or evacuation of part of the Premises. There are further operative alternatives, the closure or evacuation of 'other premises in the vicinity of the Premises'.

155 It is not necessary in order to satisfy element 2 that the Premises themselves be closed or evacuated. Element 2 will be satisfied if the element 1 Loss directly or indirectly arises from the closure or evacuation of the Premises, or part thereof. Element 2 will separately also be satisfied if the Loss directly or indirectly arises from the closure or evacuation of 'other premises in the vicinity of the Premises'.

156 To refer to the defendants' example, if the Premises is a bakery and there is a 'closure or evacuation' of the bakery, which results in Loss, assuming the other requirements of the endorsement and the Policy are satisfied, that Loss will be recoverable. In the alternative, if the Premises, being a bakery, is part of a small shopping centre with a supermarket as its anchor tenant, the closure or evacuation of the supermarket would constitute the closure or evacuation of premises in the vicinity of the bakery Premises. If the closure or evacuation of the supermarket were to result in Loss to the bakery 'directly or indirectly arising' from the closure of the supermarket, assuming the other elements of the endorsement and the Policy are satisfied, that Loss will be recoverable.

157 From the perspective of the Insured, they will pass through the necessary hurdles towards indemnity in element 2 of CLOSEXB4 if they satisfy either the first alternative or the second alternative at each step but what is important for the purposes of the proper construction of the endorsement is that at each step there are alternatives.

158 By way of example, elements 1 and 2 will be satisfied, taking the 'lesser' alternative, if there is Loss which satisfies the other elements of the Policy resulting from interference with the Business indirectly arising from the evacuation of other premises in the vicinity of the Premises.

159 If the bakery suffers Loss resulting from interference with its Business indirectly arising from the evacuation of the nearby supermarket, for example between the hours of 7:00 am and 8:00 am on a Friday morning, if the requirements of the Policy are otherwise satisfied, the bakery will be entitled to be indemnified in respect of that Loss.

160 The word 'or' is used consistently throughout element 2 and CLOSEXB4 more broadly to create a dichotomy, to adopt the language of senior counsel for Arch, 'like a light switch'. If the bakery Premises are themselves evacuated, assuming all other requirements are satisfied, the Loss that arises from that evacuation will be indemnified. If other premises in the vicinity of the Premises are also evacuated at the same time that will not result in another Loss. However, if the supermarket premises are evacuated between 7:00 am and 8:00 am, and at 11:00 am the bakery Premises are evacuated or closed, assuming the requirements of the endorsement are otherwise satisfied, the baker is entitled to be indemnified for Loss resulting from each of those circumstances.

161 The words in element 2 'by order of a competent public authority' refer back to the 'closure or evacuation of the whole or part of the Premises or other premises in the vicinity of the Premises'. If either the Premises or other premises in the vicinity of the Premises are closed or evacuated by order of the competent authority, then the Policy as extended by the endorsement if otherwise satisfied will respond.

162 This aspect of the peril insured against is the closure or evacuation of the whole or part of the Premises or the closure or evacuation of other premises in the vicinity of the Premises by order of a competent public authority. If either category of premises is closed or evacuated by order of competent public authority then, if the other elements in the endorsement are satisfied, the Insured is entitled to be indemnified.

163 I agree with Arch that based on the text there are in effect, two limbs of element 2. The first limb, Loss resulting from closure or evacuation of the Premises itself. The second limb, Loss resulting from the closure or evacuation of other premises in the vicinity of the Premises.

164 I do not agree with the plaintiffs' submission that if there were two independent and separate limbs of indemnification within CLOSEXB4 the insurers could have been expected to have made that clear by using separate sub-paragraphs to delineate between those two limbs as done in REPELXB4. Unlike REPELXB4, CLOSEXB4 does not contain numbered paragraphs. The first paragraph of the clause is instead one very long sentence in which alternatives separated by 'or' are a recurrent feature.

165 I note that in the course of their opening the plaintiffs accepted that if the correct construction of element 2 of CLOSEXB4 was that it provides for two separate limbs then that is the end of their case.

166 Returning to the text of CLOSEXB4, the endorsement will not respond merely because there is an order of a competent public authority for the closure or evacuation of 'other premises'. For the Policy to respond where the order is not an order relating to the Premises themselves, the order must be for the closure or evacuation of other premises 'in the vicinity of the Premises'. 'Vicinity' is used to describe the relationship of proximity between the 'other premises' and the 'Premises' which must be satisfied in order for the endorsement if otherwise satisfied to respond.

167 Contrary to the plaintiffs' submissions, 'the vicinity' is not a reference to the location of infectious or contagious human disease. Rather, the vicinity is a reference to the relationship between the other premises and Premises.

168 Consistent with a sequential nature of the separate elements in the endorsement and the decision of the Supreme Court in FCA v Arch applied by Osborne J in Princess Theatre,[47] the question as to whether there is infectious or contagious human disease found in element 3 does not arise for consideration unless and until one or other of each of the requirements of element 2 (together with one or other of the requirements in element 1) is first satisfied.

Element 3: directly or indirectly arising from infectious or contagious human disease occurring at such premises

169 Element 3 is a separate element which must be satisfied, in addition to elements 1 and 2, in order for the Insured to be entitled to indemnity.

170 Viewed as a discrete element, for CLOSEXB4 to respond it is necessary that the order of a competent public authority 'directly or indirectly' arises from infectious or contagious human disease occurring at 'such premises'. Upon that being demonstrated, together with the other requirements of the endorsement being met, the Loss shall be deemed to be a loss resulting from damage to property used by the Insured at the Premises.

171 It is common ground that 'such premises' is capable of referring to Premises, or to premises in the vicinity of the premises, in element 2.

172 The purpose of the reference to 'such premises' in element 3 is to link the premises (whether 'Premises' or 'other premises in the vicinity of the Premises') which have been closed or evacuated to which reference is made in element 2 with the premises at which the infectious or contagious human disease has occurred. It must be the same premises, whether the 'Premises' or 'other premises in the vicinity of the Premises'. If that link is established, provided the other elements in the endorsement are met, the Policy will respond.

173 The plaintiffs submit the reference to 'such premises' while for convenience described as part of element 3 has the effect that the endorsement refers to either class of premises previously referred to and that the word 'or' does not split the indemnity into two separate streams of indemnity, one relating to the Premises, the other relating to premises in the vicinity of the Premises. They submit if the insurer wished to provide two distinct and independent indemnities, it could have split them out, not merged them together into one composite collection of words 'such premises'.

174 I do not agree with the plaintiffs' submission that the words 'such premises' in element 3 draw the two separate forms of indemnity in element 2 back together. The words 'such premises' refer back to the particular premises, of which there are two categories, in element 2. If the draftsperson had intended to give the endorsement the scope of operation for which the plaintiffs contend that could have been achieved by continuing the alternative wording approach adopted elsewhere in the endorsement. That is, by substituting for the words 'at such premises' in element 3 the words 'either at the Premises or at other premises in the vicinity of the Premises'. If that had been done the plaintiffs' construction argument would have been correct. However, it was not done. I do not agree with the plaintiffs submission that the words 'such premises' have the same effect as if it had been done. I consider the fact the alternative wording approach to which I have referred was not continued in section 3 to be a deliberate choice on the part of those involved in drafting CLOSEXB4.

175 While the plaintiffs contend the words 'such premises' in element 3 support a construction that provides for indemnity in circumstances where Loss results from the closure of the Premises due to the presence of COVID-19 at other premises in the vicinity of the Premises, no clear pathway in support of that construction was articulated in submissions on behalf the plaintiffs and I am unable to discern one.

176 The plaintiffs' argument is not supported by the text of the endorsement read sequentially. For the clause to respond it is necessary in order to satisfy element 2 for the insured to either demonstrate there has been closure or evacuation of the whole or part of the Premises or there has been the closure or evacuation of other premises in the vicinity of the Premises. The question of whether or not the closure or evacuation directly or indirectly arises from infectious or contagious human disease occurring at 'such premises' only falls for consideration in the correct causal sequence and must be considered and answered separately once the insured has satisfied element 2 in one or other of the ways to which I have referred.

177 I accept the plaintiffs' submission that it is necessary to construe CLOSEXB4 as a whole and I note their caution that it is not appropriate to stop at any point during the reading, it is necessary to read on. However, the 'reading on' must proceed sequentially. When element 3 of CLOSEXB4 and the reference to 'such premises' is being considered, that consideration is not in a vacuum. It is both informed by and linked to what has preceded it in element 2. In element 2, there are two alternative categories of premises that need to have been closed or evacuated the Premises or other premises in the vicinity of the Premises. 'Such premises' separately refers back to these alternatives. The infectious or contagious human disease in element 3 at 'such premises' must occur at the same premises that has been closed or evacuated.

178 To suggest the reference to 'such premises' in element 3 has the effect of removing the requirement for a link between the Premises or the premises in the vicinity of the Premises which have been closed or evacuated and the occurrence of infectious or contagious human disease at those premises, as is a necessary plank in the plaintiffs construction argument, is giving the words 'such premises' too much work to do.

179 Although the plaintiffs sought to place reliance on the contra proferentem rule, as they correctly acknowledge, that rule is a rule of last resort.[48] It is only to be applied where, after ascertaining the literal or grammatical meanings and evaluating them against the text, context and purpose of the Policy and the endorsement, there is insufficient basis for choosing between competing constructions.[49]

180 I do not consider it necessary to have regard to the contra proferentem rule. If it were necessary to have regard to the rule, the application of it does not assist the plaintiffs. CLOSEXB4 forms part of the section of the policy beginning on page 26 with the heading, repeated on each page thereafter including on the page where CLOSEXB4 is located, 'PACE HOSPITALITY AGREED ENDORSEMENTS APPLICABLE TO ALL SECTIONS'. Pace is the broker for the insureds. CLOSEXB4 was drafted by Pace and was proffered by it to the insurer defendants by emails dated 7 May 2019. If it were necessary to apply the contra proferentem rule contrary to the plaintiff submissions, it could not be applied in their favour.

181 As all parties accept, irrespective of whose construction of CLOSEXB4 is preferred, there is at least some and potentially substantial or complete overlap between the indemnity given by the first limb of CLOSEXB4 which is concerned with the Premises and sub-clause (i) in REPELXB4. Sub-clause (i) of REPELXB4 states:

Loss as insured by this Policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Insured Premises by order of a competent public authority consequent upon

(i) human infectious or contagious disease manifested by any person whilst at the Insured Premises...

182 Comparing CLOSEXB4 and sub-clause (i) of REPELXB4, while there is clear overlap between the two endorsements, in order for it to be engaged, sub-clause (i) of REPELXB4 requires that the infectious or contagious disease be 'manifested' by a person whilst at the Insured Premises.

183 There is also at least potential for overlap between CLOSEXB4 and sub-clause (ii) of REPELXB4. Sub-clause (ii) of REPELXB4 responds when the order of the competent public authority arises consequent upon the outbreak of a notifiable human infectious or contagious disease occurring within the 'immediate vicinity' of the Insured Premises and the requirements of the endorsement are otherwise satisfied.

184 Both CLOSEXB4 and REPELXB4 refer to loss to the Business as a result of the presence of infectious or contagious human disease. However, REPELXB4 is not only concerned with that type of peril. It deals in addition in its other sub-clauses with loss due to vermin or pests or defects in the drains or other sanitary arrangements at the Insured Premises, poisoning directly caused by the consumption of food or drink provided on or from the Insured Premises and murder or suicide occurring in or at the Insured Premises.

185 As Allsop CJ observed in the Star first instance decision, 'that there may be overlap between different clauses of a policy does not require the business person to give meaning to the different clauses to eliminate their overlap with refined precision'.[50]

186 While there is clear overlap between CLOSEXB4 and sub-clause (i) of REPELXB4 it is unnecessary to deal with that overlap with precision when only CLOSEXB4 is in issue in the proceeding. It is sufficient to note that there are differences in scope between the sub-clause (i) of REPELXB4 and CLOSEXB4 in particular due to the 'manifested' requirement in REPELXB4.

187 There is a further distinction between CLOSEXB4 and sub-clause (i) of REPELXB4. The causal requirements are not the same. That is also the case concerning sub-clause (ii) of REPELXB4. In both (i) and (ii) of REPELXB4 what is required is that the order of the competent public authority is 'consequent upon' the relevant event. In CLOSEXB4 the second limb of element 2 (being the limb that responds to the closure or evacuation of 'premises in the vicinity of the Premises') responds when the order of the competent public authority directly or indirectly arises from the event specified. 'Directly or indirectly' requires a much less stringent causal connection than 'consequent upon'.

188 So far as sub-clause (ii) of REPELXB4 is concerned, it is directed to a different peril than CLOSEXB4. Sub-clause (ii) of REPELXB4 is directed to Loss due to closure or evacuation of the Premises by order of a competent public authority 'consequent upon' the outbreak of a notifiable human infectious disease 'occurring within the immediate vicinity of the insured premises'. The REPELXB4 'immediate vicinity' requirement is one which is directed to the relationship between the location of the Premises and the location of the disease. In CLOSEXB4 the reference in element 2 of the endorsement to the 'vicinity' is a reference to a different relationship of proximity, the vicinity between the Premises and other premises. It is no part of REPELXB4 to be concerned with Loss arising from the closure or evacuation of other premises in the vicinity of the Premises as is the concern of the second limb of CLOSEXB4.

189 As noted earlier, in (ii) of REPELXB4 'immediate vicinity' is used to limit the required relationship of proximity between the premises and the place where the outbreak of a notifiable disease has occurred. In the second limb of element 2 in CLOSEXB4 'vicinity' is used to impose a requirement of proximity between the Premises and the 'other premises in the vicinity of the Premises' that are closed or evacuated.

190 While it is not necessary to construe sub-paragraphs (i) and (ii) of REPELXB4, the construction of CLOSEXB4 for which Arch contends leads to a more harmonious outcome than that for which the plaintiffs contend. That is because Arch's approach to CLOSEXB4 avoids the scope of cover conflict between 'vicinity' and 'immediate vicinity' in sub-clause (ii) of REPELXB4 that is a consequence of the plaintiffs' construction of CLOSEXB4.

191 When considering CLOSEXB4 in context, particularly for assistance with the interpretation of the word 'vicinity', attention was directed to the provision in the Memoranda to Section 2 of the Policy headed 'Premises in the Vicinity (Prevention of Access)'. That section of the Policy refers to Loss to the Business resulting from interruption of or interference with the Business in consequence of damage to property 'in the vicinity of the Premises' limiting access to the Premises. The same Memorandum separately provides indemnity for Loss resulting from interruption or interference with the Business in consequence of damage to property 'in the vicinity of and forming part of or contained in the complex of which the Premises forms part caused by a peril'. The first limb of this Memorandum deals with loss due to interference with access to the Premises. The second limb deals with loss in consequence of damage to property in the vicinity of the Premises. There is no overlap or uncertainty between those provisions and CLOSEXB4.

192 For the reasons discussed in section F, I do not accept the constructional premise for which the plaintiffs contend.

193 As was made clear by the plaintiffs in opening, the construction for which the defendants contend, the construction that in essence I have accepted, is of decisive import. That is so because the plaintiffs do not seek to advance a case that they suffered loss falling within either the first or the second limb of element 2 of CLOSEXB4. When CLOSEXB4 is construed as I have found is the case, the case the plaintiffs propound is not one that comes within the language of the endorsement. It is a case based on loss resulting from interruption of or interference with a Business due to the presence of cases of COVID‑19 at premises in the vicinity of the Premises. This is not a loss which on my analysis of CLOSEXB4 falls within its terms. The plaintiffs' construction of CLOSEXB4 having been rejected, the plaintiffs' case fails.

194 Because I have rejected the plaintiffs constructional premise it is unnecessary to consider their factual premise. Namely, that the Directions arose from COVID‑19 occurring at other premises in the vicinity of the Premises.

195 However, if I am wrong to reject the plaintiffs' constructional premise it is necessary to determine the competing arguments concerning the 'factual premise', a premise which involves not only factual questions but also questions of construction.

196 There are two key constructional questions within the factual premise. The first concerns what is meant by 'premises in the vicinity of the Premises' in CLOSEXB4. That question arises due to the plaintiffs' case that the reference to 'the vicinity' in the second element of CLOSEXB4 is a reference either to Greater Melbourne, or the LGAs in which the premises the subject of claims in the proceedings are located.

197 The second question that arises on the plaintiffs' construction of CLOSEXB4 concerns the causal requirement, 'directly or indirectly arising', so far as the order of a competent public authority is concerned.

The incidence of the disease and the Directions

198 The basic factual chronology concerning the initial detection of COVID‑19 in Australia and in Victoria and the initial responses by government and health authorities within and beyond Australia are not controversial and were agreed between the parties. As largely recorded as part of the background in Section A:

(a) On 25 January 2020, Australia confirmed its first case of COVID‑19, a man from Wuhan who had travelled from Guangdong to Melbourne on 19 January 2020.

(b) On 29 January 2020, Novel coronavirus 2019 (2019‑nCov) was added as a notifiable condition in Schedules 3 and 4 of the Public Health and Wellbeing Regulations 2019 (Vic).

(c) On 30 January 2020, the WHO declared the outbreak of COVID‑19 a 'Public Health Emergency of International Concern'.

(d) On 11 March 2020, the WHO made the assessment that COVID‑19 can be characterised as a pandemic.

(e) On 16 March 2020, Minister for Health, the Honourable Jenny Mikakos MP, declared a State of Emergency in Victoria under the Public Health and Wellbeing Act 2008 (Vic).

(f) On 18 March 2020, the Commonwealth Governor-General made the Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) Declaration 2020 (Cth) which stated the following:

Human coronavirus with pandemic potential is an infectious disease:

(a) that has entered Australian territory; and

(b) that is fatal in some cases; and

(c) that there was no vaccine against, or antiviral treatment for, immediately before the commencement of this instrument; and

(d) that is posing a severe and immediate threat to human health on a nationally significant scale.

(g) on 23 March 2020 the first 'Direction', being the Non-essential Business Closure Direction issued pursuant to s 190(1)(a) and s 200(1)(d) of the Public Health and Wellbeing Act 2008 (Vic) ('Direction No. 1'), was issued.

199 The Directions relevant to the First Lockdown which began with Direction No. 1 extended through to Restricted Activity Direction No. 8 on 24 May 2020 ('Direction No. 8') with effect until 11:59 pm on 31 May 2020.

200 Noting the words used by the public authority will likely identify the reasons for the Direction it is important to reproduce relevant parts of Direction No. 1. There were no changes in the stated purpose from the Direction No. 1 through to Direction No. 8.

201 Direction No. 1 (and the subsequent Directions up to and including Direction No. 8) was issued with the stated purpose

to prohibit the operation of non-essential businesses and undertakings in order to limit the spread of Novel Coronavirus 2019.

202 Direction No. 1 prohibited a person who owned, controlled or operated a non-essential business or undertaking in Victoria from operating that business or undertaking between noon on 23 March 2020 and midnight on 13 April 2020. A non-essential business or undertaking included a business characterised by a pub, bar, or club that supplied alcohol under a general licence, an on-premises licence or a club licence.

203 Just as the stated purpose of the later Directions relevant to the First Lockdown was identical, the impact of the restrictions imposed on each of the licensed premises the subject of the proceedings by the later Directions was also relevantly the same.

204 The final Direction relevant to the First Lockdown, Direction No. 8 prohibited a person who owned, controlled, or operated a licensed premises in Victoria from operating that premises for the period beginning at 11:59 pm on 25 May 2020 and ending at 11:59 pm on 31 May 2020.

205 The Directions relevant to the Second Lockdown, 8 July 2020 - October 2020, began with Restricted Activity Directions (Restricted Areas) issued on 8 July 2020 ('8 July 2020 Direction'). As in the case of the Directions issued during the First Lockdown, leaving to one side 'Area Directions' also issued during this period, the text of each Direction issued during the Second Lockdown and relied on by the plaintiffs included an identical statement of purpose as the statement of purpose in Direction No. 1. The effect of the Directions during the Second Lockdown on licensed premises within the restricted areas was relevantly the same as the Directions in place during the First Lockdown.

206 The last two Directions that were issued during the Second Lockdown were Restricted Activity Directions (Restricted Areas) 9 and 10, issued on 13 September 2020 and 27 September 2020 respectively, both of which imposed restrictions on licensed premises ending at 11:59 pm on 11 October 2020.

207 On 30 September 2020 at 4:00 pm, the period of insurance under the AMFR Policy ended. On 1 October 2020 at 4:00 pm, the period of insurance under the Transit Policy ended.

208 The word 'vicinity' is used in sections 1 and 2 of the Policy and in endorsements CLOSEXB4, REPELXB4 and DZONEXS4. It is not defined in the Policy itself or in any of the endorsements in which it is used.

209 The Macquarie Dictionary relevantly defines 'vicinity' as follows:

1. the region near or about a place; the neighbourhood or vicinage.

2. the state or fact of being near in place; proximity; propinquity.

210 The plaintiffs approached the meaning of 'vicinity' by reference to the dictionary definitions of words themselves used by the Macquarie Dictionary to define 'vicinity':[51]

(a) neighbourhood: 'the region near or about some place of thing; the vicinity';[52] and

(b) region: 'one of the administrative divisions into which a territory or country, as Italy, is divided'.[53]

211 They submit when read together, these definitions contemplate that 'the vicinity' may encompass an area which is formally defined by reference to more than just its bare physical characteristics. They submit that properly construed in context and applied to each of the Insured Premises, 'the vicinity' encompasses the Greater Melbourne region or, alternatively, the LGAs in which each venue was located.

212 They submit 'vicinity' in CLOSEXB4 describes the relationship between 'the Premises' and 'other premises'. While the relationship is necessarily physical there is nothing to suggest 'vicinity' is intended to be narrow, localised or to refer to a fixed geographical construct. Rather, as an undefined term, 'vicinity' is an 'elastic concept'.[54] The area it encompasses may change in a particular context.

213 The plaintiffs submit this elasticity of meaning is evident having regard to the ways in which 'vicinity' and other descriptors of physical relationships are used in the Policies:

(a) Section 1 states the Insured will be indemnified for 'costs and expenses necessarily and reasonably incurred for the purpose of extinguishing fire at or in the vicinity of the property hereby Insured'. As section I is limited to cover for physical loss, destruction and damage and the relevant sub-paragraph is concerned with fire damage, that necessarily requires 'vicinity' in section 1 to convey a narrower meaning of physical proximity within which physical damage might be caused by a fire.

(b) The 'Premises in the Vicinity (Prevention of Access)' Memoranda to Section 2 provides cover for business interruption 'in consequence of damage to the property in the vicinity of and forming part of or contained in the complex of which the Premises forms part ...'. This necessarily requires a degree of physical proximity such that physical damage to the property may result in interruption to the Business.

(c) The requisite degree of physical proximity for 'vicinity' in section 2 requires the other property to be in the same complex as the Premises or by application of endorsement DZONEXS4, 'within a 5 kilometre radius of the Premises'. This concept of vicinity may overlap with, but is not necessarily the same as the way in which 'vicinity' as used in section 1.

(d) Sub-paragraph (ii) of REPELXB4 concerns orders 'consequent upon ... the outbreak of a notifiable human infectious or contagious disease in humans occurring within the immediate vicinity of the Insured Premises'. Like CLOSEXB4, REPELXB4 is concerned with a peril that is entirely unrelated to physical damage. However, in REPELXB4 ' vicinity' is narrowed by the adjective 'immediate'.

214 The plaintiffs submit that as CLOSEXB4 is not concerned with physical damage and the ordinary meaning of 'vicinity' contemplates regions or districts, the relative difference in size between LGAs to which the defendants have drawn attention does not prevent the term 'vicinity' being interpreted and applied in that way. The 'absurd results' the defendants contend are produced by the plaintiffs' interpretations of 'vicinity' are the expected outcome of the delineation of any boundary.

215 The plaintiffs submit the 'jurisdictional concepts' label sought to be employed by Arch to describe the way they frame their 'vicinity' case is apt to distract from the fact that 'vicinity' will always require the identification of a physical location, area, region or district and that in such cases, a boundary must be set. If it is correct to say the plaintiffs' interpretation of 'vicinity' encompasses jurisdictional concepts, it does so by reference to jurisdictional concepts defined by geographical boundaries. Such an approach is consistent with the accepted ordinary meaning of 'vicinity', when read with the definitions for associated terms. In this regard, the LGAs which comprise Greater Melbourne, and the boundaries of those LGAs, are capable of ready ascertainment by reference to maps.

216 The plaintiffs drew attention to the agreement of the parties on the following:

1. The term "Greater Melbourne" as used in the Area Directions (No. 3) is comprised of the municipal districts of:

1. Banyule City Council
2. Bayside City Council
3. Boroondara City Council
4. Brimbank City Council
5. Cardinia Shire Council
6. Casey City Council
7. Darebin City Council
8. Frankston City Council
9. Glen Eira City Council
10. Greater Dandenong City Council
11. Hobsons Bay City Council
12. Hume City Council
13. Kingston City Council
14. Knox City Council
15. Manningham City Council
16. Maribyrnong City Council
17. Maroondah City Council
18. Melbourne City Council
19. Melton City Council
20. Monash City Council
21. Moonee Valley City Council
22. Moreland City Council (Merri-bek City Council)
23. Mornington Peninsula Shire Council
24. Nillumbik Shire Council
25. Port Phillip City Council
26. Stonnington City Council
27. Whitehorse City Council
28. Whittlesea City Council
29. Wyndham City Council
30. Yarra City Council
31. Yarra Ranges Shire Council
32. The Population of greater Melbourne as per the 2021 Census was 4,917,750.1

1. The size of the Bayside LGA is 37.4 km².
2. The size of the Monash LGA is 81 km².
3. The size of the Port Phillip LGA is 21 km².
4. The size of Greater Melbourne is 8808.6784 km².

217 The plaintiffs submit the nature of the insured peril must inform the construction and application of 'vicinity' in a given case. CLOSEXB4 is concerned with the potential ramifications of occurrences of contagious diseases, which must have been understood by those drafting the Policies to have the potential to have far-reaching consequences for the insured, with geographical areas swiftly engulfed depending on the characteristics of the disease.

218 Arch submits the ordinary meaning of 'vicinity' is 'the region near or about a place'. That meaning coheres with the view of the United Kingdom High Court in FCA v Arch as to the meaning of 'vicinity' in policies that did not give the term a 'specifically defined and extended meaning'.[55]

219 Contrary to the plaintiffs' construction, the ordinary meaning does not entail or suggest that 'vicinity' connotes either of the two jurisdictional concepts, 'Greater Melbourne', or the LGA in which the Premises are located. The proposition that, in certain contexts and for certain purposes 'region' might mean an area defined by jurisdiction (e.g., 'one of the administrative divisions into which a territory or a country such as Italy is divided'), neither entails nor 'gravitat[es] towards' the proposition that 'vicinity' has that connotation in CLOSEXB4.

220 Arch submits the use of the word 'vicinity' elsewhere in the Policy and in the endorsements does not support the plaintiffs construction:

(a) Where 'vicinity' relative to the Premises or property insured appears in section 1 the context means it could not sensibly mean either of the two jurisdictional concepts posited by the plaintiffs. It means a relationship of close geographic proximity.

(b) 'Vicinity', relative to the Premises, appears twice in the 'Premises in the Vicinity' Memorandum to Section 2. Section 2 indemnifies for loss resulting from interruption of or interference with the Business arising from certain physical damage to property in the 'vicinity' of the Premises which prevents or hinders the use of or access to the Premises, or which results in a cessation or diminution of trade due to a temporary falling away of potential custom. It would be absurd, and would serve no discernible commercial purpose, to suggest that 'vicinity' in these contexts means an arbitrary jurisdictional boundary (such as the LGA in which the Premises are located).

(c) 'Vicinity', as part of the composite expression 'immediate vicinity', relative to the Premises, also appears in paragraph (ii) of REPELXB4. Given both the collocation of CLOSEXB4 and REPELXB4 and their similar subject matter, the root concept of 'vicinity' must mean the same thing in these two Endorsements. It would be anomalous if the word had its ordinary meaning in REPELXB4, albeit qualified by the adjective 'immediate', but a different (jurisdictional) meaning in CLOSEXB4. While 'immediate vicinity' might mean an area that is, as a matter of degree, particularly 'near or about the place', there can be no gradations of the plaintiffs' posited jurisdictional concepts. Premises are either within or outside 'greater Melbourne' or an LGA or not; it makes no sense to qualify either concept by the term 'immediate'.

221 Responding to the submission that, because in DZONEXS4 'there is an express reference to a '5 kilometre radius', that 'indicat[es] that the parties did not wish the premises in CLOSEXB4 to be reduced to some arbitrary measure of distance' Arch submits:

(a) If anything, DZONEXS4, which extends the second paragraph of the 'Premises in the Vicinity' Memorandum to Section 2 reinforces Arch's argument.

(b) DZONESX4 does not suggest that 'vicinity' in that endorsement is to be 'construed' as meaning either of the two jurisdictional concepts posited by the plaintiffs.

(c) If the parties had wished CLOSEXB4 to identify a jurisdictional area, the parties could have done so readily (i.e., by using the term 'the State or Territory' or the 'local government municipality'). They did not do so, instead, using the term 'vicinity', which should be given its ordinary meaning.

(d) The plaintiffs' various alternative 'constructions' of 'vicinity' are apt to cause 'arbitrary' results, and there is no apparent basis upon which the Court could select which of the plaintiffs' two alternative jurisdictional concepts is the correct 'construction' of 'vicinity'.

222 The defendants submit there is no discernible, rational purpose served by construing 'vicinity' on the basis that it identifies some area defined by jurisdiction that is not identified expressly in the Policy or that can be ascertained by any legitimate process of implication, but which the plaintiffs argue 'greater Melbourne' or, alternatively, the LGA in which the Premises are located.

223 The plaintiffs' construction is apt to work a commercial nonsense. For example, it would make no commercial sense that CLOSEXB4:

(a) would apply to an Insured who has Premises on the western side of Punt Road (in the Melbourne LGA) in relation to an occurrence of infectious disease at the Flemington Racecourse (also in the Melbourne LGA) about 7.5 kms away; but

(b) would not apply to that same Insured in relation to an occurrence of infectious disease at premises directly on the other side of Punt Road (in Yarra LGA or Stonnington LGA, depending on whether the Premises are north or south of the Yarra River) only about 20m away.

224 Each of the LGAs comprising 'Greater Melbourne' are of varying sizes and population densities, ranging from Yarra City Council (21 km2) to Yarra Ranges Shire Council (2,467 km2). It is clear that the dimensions of each of the LGAs comprising 'Greater Melbourne' are irregular, and represent arbitrary or 'random' boundaries that have significance only for the reach of the Council's statutory powers.

225 When it is recognised that the 'competent public authority' with power to issue an order closing or evacuating premises arising from infectious or contagious human disease may emanate from higher governments (i.e., from a State Government or, potentially, the Commonwealth Government) there is no sense in the notion that 'vicinity' means an aggregation of LGAs ('Greater Melbourne') or the LGA in which Premises are located. No discernible commercial purpose is served by construing the word 'vicinity' in CLOSEXB4 in this way.

226 As the parties agree, where it is used in CLOSEXB4 'vicinity' denotes the region near or about a place. In this case, the vicinity of the Premises. As the plaintiffs accept, 'vicinity' requires the identification of a physical location, area or region.

227 I consider 'the vicinity' in CLOSEXB4 is objectively intended to refer to the first of its ordinary dictionary meanings. The reference to 'vicinity' is a reference to 'near or about, in the neighbourhood of' the Premises. The text of CLOSEXB4, 'premises in the vicinity of the Premises', makes it plain that 'vicinity' is concerned with physical proximity.

228 There is nothing in the text that indicates an intention to read into the word 'vicinity' a defining feature that is not a naturally occurring geographic feature. To introduce what is fairly described by Arch as a jurisdictionally based characteristic (either LGAs or the aggregation of LGAS) to limit what is meant by 'the vicinity' is not supported by words 'premises in the vicinity of the Premises'. The text of the CLOSEXB4 endorsement does not otherwise employ jurisdictional concepts and nor are jurisdictional concepts relevant to or to be used in determining 'vicinity' where reference is made to 'vicinity' elsewhere in the Policy and in the endorsements.

229 To adopt the plaintiffs approach to 'vicinity', would require a finding that those responsible for drafting the endorsement intended to give 'vicinity' a different meaning in CLOSEXB4 to the meaning 'vicinity' has in sections 1 and 2 of the Policy and in endorsements REPELXB4 and DZONEXS4. The plaintiffs have not identified any reason why those involved would objectively have intended 'vicinity' to have a different meaning in CLOSEXB4, and I do not consider that it does.

230 There is a further and fundamental problem with the construction for which the plaintiffs contend. Their approach is not consistent with 'vicinity' denoting geographic proximity in a uniform manner and is predictive of anomalies.

231 Artificial boundaries imposed on 'vicinity' by reference to State borders (as was the plaintiffs' initial primary case), Greater Melbourne or LGAs, would mean that 'vicinity' is to be determined based on jurisdictionally defined non-geographic limitations. In the case of Albury-Wodonga, a state based approach would mean a case of COVID- 19 in Albury would not be in the 'vicinity' of Wodonga, just across the Murray River, but a case of COVID‑19 on Phillip Island would be. In the case of Greater Melbourne, premises at one extremity of Greater Melbourne would be 'premises in the vicinity of Premises' at the other extremity of Greater Melbourne, but premises across the road from the Premises, but in a different LGA outside Greater Melbourne, would not.

232 The same issue arises when LGAs are used as the basis to delineate what is in and what is not in the vicinity of the Premises. As is the example given by Arch, premises on one side of Punt Road marking a municipal boundary would not be 'premises in the vicinity of the Premises' if the Premises are on the other side of Punt Road and in a different LGA. In contrast, premises much more remote from the Punt Road Premises and at the other extremity of the municipality would be premises in 'the vicinity' of the Premises. A construction that gives rise to anomalies and does not accord with commercial imperatives is not to be preferred.[56]

233 There is the additional problem that if LGA boundaries are used to determine what constitutes 'the vicinity', a change in the municipal boundaries as occurred within relatively recent times with municipal amalgamations will cause a change in what is or is not in 'the vicinity'.

234 The fact the plaintiffs initially put up three alternatives for what is meant by the 'vicinity' and at trial two remain, highlights a problem with their construction. Which of the alternatives is the court to adopt and, why? The plaintiffs did not identify a principled basis for choosing between their two contended for alternatives.

235 I accept the submission by Arch that it is not permissible to reason back from the presence of cases of COVID‑19 actually recorded in order to determine what is or is not in the 'vicinity' of the Premises. However, no other basis to select between the two jurisdictionally based approaches was advanced by the plaintiffs at trial.

236 For the reasons discussed, the meaning of 'vicinity' in CLOSEXB4 for which the plaintiffs contend is rejected. A jurisdictionally defined 'vicinity' is not a 'vicinity' to which the Policy responds. That being so, the plaintiffs having put their case squarely on that construction of 'the vicinity' and having framed their evidence accordingly, even if the plaintiffs otherwise are entitled to succeed, in both proceedings they fail.

The causal requirement directly or indirectly arising: the plaintiffs' submissions

237 The plaintiffs submit the causal requirement that the Directions 'directly or indirectly ar[ose] from' occurrences of COVID‑19 is established because there were occurrences of COVID‑19 at premises in the vicinity of the Premises which contributed to the overall case numbers which gave rise to the threat or risk of the spread of COVID‑19 which was a cause of the Directions.

238 They submit the threat or risk of the spread of COVID‑19 was reflected in the nature of the restrictions imposed by the Directions, restrictions described in the Department of Health and Human Services ('DOH') documents as 'physical distancing' directions, with stated objects including to 'limit the spread of COVID‑19 by preventing person-to-person transmission'.

239 Each Direction was given by the Chief Health Officer or authorised officers vested with authority under the PHW Act ('Decision-makers'). The DOH prepared covering briefs which were provided to the Decision-makers recommending the Directions be made attaching public health advice which informed the recommendations.

240 The plaintiffs submit that where there is a risk of the spread of COVID‑19 it is axiomatic that existing occurrences of the disease and their locations must contribute to that risk. Existing occurrences of COVID‑19 in the lead up to each Direction included occurrences at premises in Greater Melbourne, including the relevant LGAs.

241 The plaintiffs submit the COVID‑19 Summaries relied on by them pursuant to s 50 of the Evidence Act 2008 (Vic) ('Summaries') provide direct evidence that a person was at identified premises on the identified date while infected with COVID‑19. The business records which underpin the Summaries state that a person was diagnosed at, presented to, or was admitted to an identified hospital with COVID‑19 on an identified date. Each entry records 'an event or case' of COVID‑19 on the specified dates at specified premises.

242 The plaintiffs rely on a number of categories of documentary evidence to establish the Directions arose indirectly from occurrences of COVID‑19 at premises in the vicinity of the Premises:

(a) Contemporaneous 'COVID‑19 Intelligence' and 'Outbreak summaries', sent to the Decision-makers in the lead up to the Directions containing details of case numbers, locations of new cases and outbreaks including those in Greater Melbourne and in the relevant LGAs.

(b) Covering briefs to the Decision-makers, some of which expressly recorded the 'Basis for the proposed Directions' including statements such as inter alia '[t]he current data (including information in the COVID‑19 Intelligence' and 'Outbreak Summaries') shows that infection rates have continued to rise and, of significance, there are 75 cases in Victoria with an unknown source' or 'shows that the continuation of current measures intended to contain the pandemic is still required'.

(c) The text of each Direction including the stated purpose.

(d) Public records and documents identifying occurrences of COVID‑19 summarised in the Summaries.

(e) Entries summarised in the Summaries from documents produced by the DOH and Healius Pathology recording the date of diagnoses and the 'place of residence provided by the tested person ... at the time of testing' and 'patient postcode, provided usually by the patient at the time of collection of the sample' (collectively, the 'residential postcode data').

243 The plaintiffs submit the Court should infer that there were occurrences of COVID‑19 at premises referred to in the residential postcode data because it is more probable than not that people infected with COVID‑19 would return to their residential address following a positive diagnosis. That is, for reasons including that it was an offence not to comply with the Directions restricting movement and requiring persons diagnosed with COVID‑19 to self-isolate.

244 They submit the evidence is sufficient to satisfy the requisite causal requirement that the Directions 'indirectly ar[ose] from' COVID‑19 at premises in the vicinity of the Premises. The occurrences of COVID‑19 were a material underlying fact which predicated or had a non-co-incidental or non-tenuous link with the risk of spread, being a cause of the Directions. For each Direction, there is evidence the Decision-maker considered the cumulative cases of COVID‑19 in Victoria (including at premises in Greater Melbourne and in the relevant LGAs) and that those cases were contributing to the risk of spread of COVID‑19. The plaintiffs submit this evidence, in combination with evidence that the risk of spread of COVID‑19 was a cause of the Directions satisfies the causal requirement in CLOSEXB4.

245 Concerning proof and the inferences that should be drawn the plaintiffs refer to Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited where Lee J observed that:[57]

... it is also true that where there is no direct evidence of a fact that a party bearing the onus of proof seeks to prove, 'it is not possible to attain entire satisfaction as to the true state of affairs': ... In such a case, the law does not require proof to the 'entire satisfaction' of the tribunal of fact . Indeed, a party may advance a case relying on circumstantial evidence, on the basis that collectively viewed, a combination of proven facts can provide a sufficient basis for inferring the ultimate fact to be proved.

246 And to Marriner v Australian Super Developments where the Court of Appeal held:[58]

The questions of whether an inference is open as a matter of probability and whether that inference is the more probable one are to be determined by considering the combined weight of all the relevant established facts rather than by considering each fact sequentially and in isolation from the other facts.

The causal requirement directly or indirectly arising: the defendants' submissions

247 The defendants submit the fact Decision-makers were aware of the existence of cases in particular locations or LGAs does not mean that the Directions 'arose', directly or indirectly, from 'occurrences' at 'premises' in the vicinity of Premises required to be closed.

248 They submit the fact Directions 'on their face' were made for the purpose of 'limiting the spread' of COVID‑19 or addressing the public health risk posed by COVID‑19 does not mean that the orders 'arose' from the 'occurrence' of COVID‑19 at 'premises' in the LGAs at which the Premises were located.

249 They further submit that even if 'vicinity' is properly construed as the LGA in which the Premises are located, it is not established that the Directions 'arose', whether directly or indirectly, from 'occurrences' of COVID at 'premises' in the LGAs in the vicinity of the Premises. That is because the evidence does not establish that the location of specific cases in Victoria - or indeed any 'occurrences' of COVID‑19 at 'premises' that were to be closed or that were at 'premises' within the same LGA as 'Premises' that were to be closed had any significance to the making of the Directions.

250 The defendants submit the decisions in the LCA litigation establish that:

(a) Whether CLOSEXB4 applies does not turn on a question of fact of whether COVID‑19 has occurred at premises in the 'vicinity' of the Premises; rather, it turns on why the Decision-makers acted as they did.

(b) The plaintiffs must establish by evidence the Decision-makers acted as they did because of their knowledge or belief as to occurrences of COVID‑19 at 'premises' in the 'vicinity' of the Premises. That is a narrower and more prescriptive requirement than that they acted as they did simply because of occurrences in the 'vicinity' of the Premises.

251 The defendants submit the underlying flaw in the plaintiffs' approach is a failure to identify a coherent explanation as to why the relevant Directions were made, and then to tie that explanation to the terms of CLOSEXB4.

252 Direction No. 1 on 23 March 2020 closed every 'non-essential business or undertaking' across the whole of Victoria. That is the case despite the then available information indicating there was only a small number of persons who had been diagnosed with COVID‑19, such persons predominantly located in metropolitan Melbourne. Adapting the language of the Full Court in the LCA Appeal: 'the [Directions] were State-wide and applied despite the evidence disclosing an absence [of] an outbreak [or occurrence] in each and every locality around [Victoria]'.[59]

253 These matters strongly suggest the Directions were made precisely for the reasons stated, namely, to 'limit the spread of Novel Coronavirus 2019', and did not 'arise' from any particular occurrences of COVID‑19 at any particular location (let alone at any particular 'premises'). Once again adapting the language of the Full Court in the LCA Appeal:[60]

the object of the directions imposing restrictions on businesses and movement across the State can more readily be seen as the prevention of the spread of the virus and the possibility of outbreaks, rather than in response to the authorities having perceived the existence of outbreaks [or occurrences] [at premises in the vicinity of premises to be closed].

254 The brief to Dr van Diemen, the Deputy Chief Health Officer and one of the key Decision-makers, that preceded the 23 March 2020 Direction No. 1 states as follows under the heading 'Part C - PHW Act' and 'Mandatory considerations':

We have reviewed the Chief Health Officer's advice to the Minister outlining the reasons for the recommendation that a state of emergency be declared in Victoria which allows for the exercise of additional powers.

255 The defendants submit there is no evidence that the CHO based his 15 March 2020 advice to the Minister on the particular location of cases of COVID‑19 (let alone whether there were occurrences at 'premises' in the 'vicinity' of premises that were later closed). The highest the CHO advice rises as to the incidence of COVID‑19 is 'that as at 13 March 2020, there have been 38 confirmed cases of 2019‑nCov in Victoria and that as at 6 March 2020 there were 10 confirmed cases of 2019‑nCov in Victoria'.

256 Assuming Dr van Diemen (when she made Direction No. 1 on 23 March 2020) or the CHO (when he issued his 15 March 2020 advice) was aware of the existence of particular occurrences at particular locations in 'greater Melbourne' or in any one or more of the LGAs in which the Premises are located, Direction No. 1 on 23 March 2020 nevertheless closed businesses across the whole of Victoria. There was (for example) no evidence there had been any occurrences of COVID‑19 at Mallacoota.

257 The defendants submit that it cannot sensibly be said that the closure of (hypothetical) Premises of an Insured in Mallacoota arose (directly or indirectly) from COVID‑19 at other premises in the 'vicinity' of those Premises. And yet the plaintiffs must contend that, entirely fortuitously, an Insured whose Premises happen to be located in particular LGAs where there had at that stage been occurrences of COVID‑19 could be indemnified under CLOSEXB4. Such an outcome is anomalous and unattractive.

258 Arch submits its approach avoids these anomalous consequences. Direction No. 1 on 23 March 2020 and later Directions closing business premises across the State were made prophylactically to 'limit the spread' of COVID‑19. While it may be accepted the Directions were made to 'limit the spread' of COVID‑19 from existing cases it does not follow that the orders 'arose', whether 'directly or indirectly', from an 'occurrence' (or 'occurrences') of COVID‑19 at particular 'premises'.

259 Arch submits the issue may be tested in the following way. Assume, counterfactually, that there had been a case of COVID‑19 at a location in LGA 'X' rather than at a location in any of the LGAs in which the Premises at issue are located, that fact could not realistically have made any difference as to whether Dr van Diemen would have made the order. She would have done exactly the same thing: she would have made an order closing businesses across the State in order to 'limit the spread' from existing cases (wherever in Victoria those cases were located). Arch submits the counterfactual illustrates that the location of a case of COVID‑19 at one location in Victoria or another, or indeed at one premises in Victoria or another, was irrelevant to the making of the orders. The precise location of cases in Victoria, and whether that place was 'premises' in the 'vicinity' of premises to be closed had no significance to the relevant question of causation (and that is so, whether causation is conceived of as a 'chain' or as a 'net' as contended for by the plaintiffs or otherwise).

The First Lockdown: the plaintiffs' submissions

260 The plaintiffs submit by giving each of the first four Directions in accordance with the DOH's recommendations, it can be inferred that Dr van Diemen had regard to the CHO's 15 March 2020 advice. The CHO Advice recorded that, as at 13 March 2020 there had been 38 confirmed cases of COVID‑19 in Victoria. Amongst other things, it advised on the estimated number of infections, hospitalisations, intensive care unit admissions and deaths from COVID‑19 based on modelling and the transmissibility of the disease and the threat that posed to Victorians and the healthcare system. The 38 confirmed cases as at 13 March 2020 (which included cases with residential postcodes in each of the relevant LGAs and Greater Melbourne) were a sufficient contributing cause to the threat of the spread of COVID‑19 to satisfy the language of CLOSEXB4.

261 For the remaining Directions given in the First Lockdown, a separate public health advice document informed the DOH's recommendations that the Directions be given. By giving each of the remaining Directions, it can be inferred Dr van Diemen had regard to the matters in the cover brief and the Attachment D public health advice. The cover briefs for those Directions referred to 'current data' under the 'PART B - Basis for the proposed Directions' heading. From around 11 May 2020, the cover briefs included a section headed 'Existing status of 2019‑nCov pandemic in Victoria' which reported on existing case numbers, their source, the effect of current measures on the spread of the virus and current modelling. Attachment D also reported on matters, such as the current cumulative cases of COVID‑19. The plaintiffs submit it is significant that the cumulative numbers of COVID‑19 cases were recorded in a sub-section under the heading 'Reasons for enhanced interventions' or 'Reasons for easing restrictions' in those documents.

262 In addition, from 12 April 2020, Dr van Diemen received emails headed 'COVID‑19 Intelligence' on an almost daily basis which provided an update including as to the number of confirmed cases, new cases, cases with unknown sources of acquisition, confirmed cases in health workers and cases in mandatory quarantine.

263 From 19 May 2020, Dr van Diemen received 'Outbreak summaries' on an almost daily basis which provided an overview of key outbreaks and new cases associated with those outbreaks.

264 The plaintiffs submit the evidence referred to establishes that in giving the Directions during the First Lockdown Dr van Diemen had regard to the cumulative number of cases in Victoria and 'current data' summarised in each of the COVID‑19 Summaries.

265 For the First Lockdown, the plaintiffs rely on the cumulative occurrences of COVID‑19 from 25 January 2020 up to the day before each Direction during the First Lockdown was given to evidence that the cases and 'current data' considered by Dr van Diemen in giving each Direction included occurrences of COVID‑19 at premises in the vicinity of the Insured Premises - i.e. occurrences of COVID‑19 at premises in Greater Melbourne, including each of the relevant LGAs. The evidence on which the plaintiffs rely regarding each of the Directions was summarised in an aide memoire provided to the Court.

266 The plaintiffs submit that if 'vicinity' is found to encompass Greater Melbourne, it is sufficient that the occurrences of COVID‑19 in Greater Melbourne contributed to the State-wide response to the threat of the spread of COVID‑19 reflected in the First Lockdown Directions. Similarly, if 'vicinity' is found to mean each of the LGAs in which the plaintiffs' venues were located, the State-wide response was being driven by occurrences in Greater Melbourne, which in turn includes each of the relevant LGAs.

267 The looser causal nexus required by 'directly or indirectly arising from' means it is sufficient that the occurrences in Greater Melbourne (including those in the relevant LGAs) are a contributing cause of the Directions, which is more than tenuous or is an underlying fact which, existing with other facts, has sufficient causal connection.

The First Lockdown: the defendants' submissions

268 The defendants submit that assuming the plaintiffs' constructional premise is correct, and assuming that 'vicinity' means the LGA in which the Premises are located, the plaintiffs must nevertheless establish that the Directions of Dr van Diemen made on 23 March 2020 'arose' from occurrences of COVID‑19 at premises in the relevant LGAs. As the Full Court held in the LCA Appeal, this requirement 'cannot be glossed over'.[61]

269 The defendants submit the plaintiffs' case is apt to do exactly that. On the plaintiffs' construction, the causal nexus required by CLOSEXB4 requires that the Direction closing the Premises 'arose' from infectious disease occurring at 'premises' in the same LGA as the 'Premises'. However, on no reasonable view of the evidence could a finding be made that Direction No. 1 on 23 March 2020, or later Directions, were made because of the occurrence of COVID‑19 at 'premises' in the same LGAs as the Premises. Rather, the Directions were made because of the existence or prevalence of COVID‑19 in the Victorian community more generally (whether at 'premises' or otherwise), and the consequent risk posed to the whole Victorian community if businesses were not closed and movements not restricted.

270 Each of the Directions made during the First Lockdown period was expressly stated to be made for an identical purpose to the first: to 'limit the spread' of COVID‑19. The briefs to the Decision-maker on each occasion (noting the redactions) consistently suggest the Directions were made for the same prophylactic purpose (i.e., to reduce risks arising from COVID‑19 in the State generally, which risks were seen as likely to be mitigated by the Directions). None of the Directions were made on the basis that COVID‑19 had occurred at every single one of the 'Premises' that were closed, or at 'premises' within the 'vicinity' of every such 'Premises'.

The Second Lockdown: the plaintiffs' submissions

271 The plaintiffs submit the Directions during the Second Lockdown represented a more targeted response to a problem centralised in Greater Melbourne. While the Second Lockdown Directions are part of a broader State-wide response to COVID‑19, they only applied to the 'Restricted Area', which at all relevant times included 'greater Melbourne'.

272 The plaintiffs submit it should be inferred that by giving each of the Second Lockdown Directions, the relevant Decision-maker had regard to the matters in the cover brief and the Attachment D public health advice, including the recorded cumulative cases of COVID‑19.

273 Each cover brief for the Second Lockdown Directions contained a section headed 'Existing status of 2019‑nCov pandemic in Victoria' that included observations about community transmission of the virus, the confirmed cumulative number of cases in Victoria (often broken down into 'metropolitan Melbourne' and 'regional Melbourne') and recent outbreaks. As an example, the cover brief to the Restricted Activity Directions (Restricted Areas) stated that 'the situation had further worsened, with a significant increase in cases occurring in Restricted Areas in particular' and included a summary of new and existing cases as at 7 July 2020.

274 The public heath advice documents for the Second Lockdown Directions reported on the cumulative cases of COVID‑19 in Victoria and included a sub-section headed 'Trends across Metropolitan Melbourne' (or similar) reporting on whether there had been a new case in those LGAs in the previous fortnight. For example, the 'Attachment D - COVID Additional Directions 8 July' document stated:

Based on the most recent analysis at 6 July, geographic areas within the North-West Corridor within metropolitan Melbourne continue to represent the highest areas of concern. In addition, there are signs of a sub-section on transmission described, in general terms, the locations of key outbreaks and discussed the nature of the sources of transmission (e.g. "family and social related", "public housing" and "industry-related such as aged-care, health care and food security").

...increasing risk across metropolitan areas that are outside of this corridor. Every metropolitan LGA, except one, has had a new case confirmed within the last fortnight. ... Based on close to doubling case rate over 14 day period, increasing spread of infections across multiple postcodes, and early indicators of risk in other parts of Metropolitan Melbourne, indications are that the current postcode approach is not aggressive enough to effectively contain the spread. It is proposed that Stay and Home and Restricted Activity Directions are extended to all postcodes within the 31 LGAS across Metropolitan Melbourne. The expansion of restrictions to this geographic area is needed to urgently supress growth and spread of the virus.

275 The 'Part 2: New Directions and advice rationale' section linked the current circumstances in Greater Melbourne to the need to impose the restrictions in the proposed Directions.

276 During the Second Lockdown, the Decision-makers received more detailed 'COVID‑19 Intelligence' and 'Outbreak summaries' documents most days, including in the lead up to each Direction. The 'COVID‑19 Intelligence' emails began reporting on new cases from the previous day by postcode and LGAs, often including details of occurrences of COVID‑19 at premises in the Greater Melbourne, including the relevant LGAs.

277 In relation to the Second Lockdown, the plaintiffs rely on the cumulative occurrences of COVID‑19 from 2 July 2020 up to the day before each Second Lockdown Direction to evidence that the existing occurrences of COVID‑19 considered by the Decision-maker included occurrences of COVID‑19 at premises in the vicinity of the Insured Premises - i.e. occurrences at premises in Greater Melbourne, including each of the relevant LGAs.

278 Therefore, the plaintiffs submit, the Second Lockdown Directions at least 'indirectly ar[ose] from' occurrences of COVID‑19 at premises in Greater Melbourne or for that matter, each of the LGAs comprising Greater Melbourne (including Melbourne, Monash and Bayside LGAs).

The Second Lockdown: the defendants' submissions

279 The defendants submit the analysis concerning the Second Lockdown does not differ materially.

280 They accept the Directions during this period closed premises initially (from 8 July 2020) only within certain 'restricted areas' including 'greater Melbourne', before later (from 6 August 2020 to 16 September 2020) extending to the State of Victoria. Tighter restrictions were imposed (initially) on Greater Melbourne and the Shire of Mitchell and then (from 6 August 2020) on just Greater Melbourne, because of what was identified in the applicable 'Area Directions' as being the 'higher prevalence of, or risk of exposure to, 2019‑nCov' in those areas.

281 The Direction that triggered the second 'lock-down' period (made on 8 July 2020) closed every pub, bar and club etc. in the 'restricted area', which at that stage comprised Greater Melbourne and the Shire of Mitchell. That is so, despite the facts not indicating that there had been a new case in every LGA within the last fortnight. The same was true when the next set of orders were made on 19 July 2020. Once again adapting the language of the Full Court in the LCA Appeal: 'the [Directions] ... applied [across 'greater Melbourne'] despite the evidence disclosing an absence of an outbreak [or occurrence] in each and every locality around ['greater Melbourne']'.[62]

282 The defendants submit that as was the case in relation to the 'first lock-down', the Directions giving effect to the 'second lock-down' were made for the reasons stated in the Directions, namely, to 'limit the spread of Novel Coronavirus 2019'. The Directions did not 'arise' from any particular occurrences of COVID‑19 at any particular location (let alone at any particular 'premises').

283 The defendants accept that although the prevalence of COVID‑19 was greater within the 'restricted areas' than outside, and that this was considered by the Decision-makers taking a more restrictive approach to those areas, the Court should nevertheless not find that those orders 'arose' from COVID‑19 having occurred at every single one of the 'Premises' in the 'restricted areas' that were closed, or at 'premises' within the 'vicinity' of every such 'Premises'.

Were the Directions 'arising from' disease occurring at such premises?

284 The key difference separating the parties on this issue is that the plaintiffs submit the Directions arose from disease occurring in the vicinity of the premises whereas the defendants submit the Directions were not as the result of a reaction to the presence of disease but rather as a prophylactic, a preventative or protective response to the threat of disease.

285 Earlier COVID‑19 related litigation did not need to consider the meaning of a clause where the entitlement to indemnity depended as one of the elements upon the Directions 'directly or indirectly arising' from the presence of the disease. In a very different context, in Walton v National Employers' Insurance Assn,[63] Bowen JA said in respect of an entitlement to indemnity 'arising out of negligence in the conduct of the insured business as stockbrokers' that he took the words 'arising out of' to mean originating in or springing from'.[64] His Honour went on to point out that 'arising' was a wider connector than 'for' or 'based upon'.[65]

286 In another context, concerning the jurisdiction of arbitrators in Hi‑Fert Pty Ltd and Another v Kiukiang Maritime Carriers Inc and Another,[66] Beaumont J said:

It appears that there is no English authority on the words 'arising from' in the present kind of context ...

In my opinion, for our purposes the key expression in the provision is the preposition 'from'. In the present context this preposition is used to show the origin of something: see the Cambridge International Dictionary of English.

287 Taking these cases together, and focusing on the language of CLOSEXB4, in order to be entitled to indemnity, it is necessary the Directions directly or indirectly originated in or 'spring from' the presence of COVID‑19 at premises in the vicinity of the Premises. On the plaintiffs' case, cases of COVID‑19 in Greater Melbourne or in the relevant LGAs.

288 The parties agree that proof of the causal requirement is to be 'objectively determined by what the authority did, what it said about it at the time, and the contemporaneous circumstances known by, or inferred to be known by, the authority at the time ...'.[67]

289 In the LCA Appeal Derrington and Colvin JJ said: [68]

[i]n the ordinary course, it would be reasonably apparent why an authority has acted to cause premises to be closed. ... '[I]t is likely that the words used by the public body when imposing any intervention will identify the reasons for its actions.' In particular, '[i]f the restrictions are imposed as a result of an outbreak of a notifiable disease at ... premises, it is most probable that this would be made clear in any notification.'

290 The defendants submit that proving the Decision-maker knew or believed there were occurrences of COVID‑19 at 'premises' in the 'vicinity' of the Premises does not prove that the fact and circumstance of that occurrence was why the authority acted as it did. They refer to the LCA Appeal where it was held that 'proof that that there were cases of COVID‑19 within the 5 km radius did not prove that the orders resulted from an outbreak or occurrence of that disease in that area'.[69]

291 However, the passage relied on in the LCA Appeal did not involve a clause which included the words 'directly or indirectly'. It was concerned with narrower wording, orders 'as a result of ... outbreak or discovery'.[70]

292 As Derrington and Colvin JJ observed in the LCA Appeal, at first instance Jagot J concluded that clauses of this nature operated such that if on the face of the instrument such as a Direction, an explanation was provided as to the reason for its making, there would need to be a good reason to attempt to go behind it for the purposes of ascertaining some additional or alternative foundation.[71]

293 I agree with the Full Court and with Jagot J that the starting point in most cases must be the terms of the Directions made and any accompanying contemporaneous explanatory material.[72] Where, as here, the clause in question includes the words 'directly or indirectly', I accept it is, in addition, necessary as is the plaintiffs' case, to look more broadly at information and documents drawn to the attention of relevant Decision-makers to determine whether this aspect of the elements required in order for indemnity to be available is satisfied.

294 In the LCA Appeal, it was held that proving there were cases of COVID‑19 within the designated area, a five kilometre radius, did not prove the orders 'resulted from' an outbreak or disease in that area.[73] However, the text of clause CLOSEXB4 does not require the plaintiffs to establish the Directions 'resulted from' COVID‑19 at premises in the vicinity of the Premises. On the plaintiffs' construction, CLOSEXB4 requires them to establish the Directions 'directly or indirectly' arose from a belief on the part of the Decision-maker that there were cases at premises in the vicinity of the Premises.

295 As Derrington and Colvin JJ said in the LCA Appeal:[74]

It is necessary in each case to identify the precise nature of the cause referred to, the precise result to which it is to be associated, the degree of causal relationships that is necessary, all according to the language used for the particular provision.

296 The best evidence of why each Direction was made is found in the Directions themselves. None of the Directions in effect in either the First or Second Lockdown periods make any reference to cases of COVID‑19 in Greater Melbourne or in the relevant LGAs. The stated purpose of each of the Directions 'to limit the spread of COVID‑19' provides no support for a finding that the Directions arose 'directly or indirectly' from COVID‑19 cases in the vicinity of the Premises.

297 The decision-making that led to each of the Directions by the various Health Officers followed the same general pattern in respect of the two lockdown periods. In each case the relevant Decision-maker was provided with a briefing note.

298 For the most part the briefing documents themselves, which were prepared by legal officers, were heavily redacted. However they did in the unredacted part, refer to the relevant attachments.

299 In addition to being provided with a briefing note or internal departmental advice, in the period between each of the Directions from 13 April 2020 each of the Decision makers who issued the Directions received copies of the daily 'intelligence briefings' which listed new and earlier cases of COVID‑19 including on a municipality basis. From 19 May 2020, Decision-makers were also provided with 'outbreak summaries'.

300 It is the plaintiffs' case, and I accept, that it may be inferred that the information to which I have referred concerning cases which was updated between Directions was taken into account by the relevant Decision-makers when determining to issue new Directions. However, that is a different question to whether or not the Directions or any of them arose 'indirectly' because of cases of COVID‑19 either in Greater Melbourne or in the LGAs.

301 The first Direction issued on 23 March 2020 by Dr van Diemen followed the receipt by her of a brief from General Counsel which referred to earlier advice from the CHO to the Minister. After recording the advice to the Minister was regarding a declaration of a state of emergency under 198 of the PHW Act, the 15 March 2020 advice stated:

I advise that there is a serious, and potentially catastrophic, risk to public health arising from Covid - throughout the State of Victoria.

302 The background section of the advice included that the CHO had been informed that as at 13 March 2020 there have been 38 confirmed cases of COVID-19 in Victoria and that as at 6 March 2020 there were 10 confirmed cases of COVID‑19 in Victoria and that projections indicate there will be approximately 170 confirmed cases in Victoria by 20 March 2020 with approximately 1400 close contacts requiring tracing by that date.

303 In opening the plaintiffs referred to the composition of those cases; prior to 24 March 2020 cases in the City of Melbourne, in the City of Monash, and the City of Bayside and in the City of Port Phillip. However, they did not say how information about those cases was taken into account by Dr van Diemen when making the 25 March 2020 Direction. There is nothing in the documents to suggest that particular cases at particular locations, whether in Greater Melbourne or in the relevant LGAs, were by reason of those locations, directly or indirectly taken into consideration by the Decision-maker.

304 In explaining her reasons for advice to the Minister to declare a state of emergency, Dr van Diemen reported:

1. The primary focus of my advice is on health impacts of 2019‑nCov to the Victorian community.
2. My advice has considered the current evidence on the protection of numbers of people impacted, seriousness of the threat, how widespread the threats is throughout the Victorian community, whether action is required now, the likely outcome to human health from not taking action, how many people may be impacted from not taking action, the health and social consequences for not taking action - including to certain categories of the population including our most vulnerable, and what available effective measures may be put in place to effectively manage the health threats identified.

305 A key feature of the advice is its consideration of the threat to the Victorian healthcare system and to Victorians as a whole. Under the heading 'Location, immediacy and seriousness of the threat to the health of persons', the following statement is made:

[...] The threat existing to the entire population regardless of location.

306 That statement is inconsistent with the location of particular cases, whether in 'Greater Melbourne' or in the LGAs being a cause of the first Direction.

307 After further Directions made on 25 and 26 March 2020 and 30 March 2020, the next Direction was made on 7 April 2020. From this date the content of the brief to the Decision-maker changed. The brief included a reference to 'evidence that has been relied on' being a reference in that instance to internal advice 'Cabinet-in-confidence' dated 7 April 2020.

308 The plaintiffs submit that the 7 April 2020 advice, which referred to the number of cases in Victoria at the time, was prepared in the context of information about hotel quarantine cases all located in the Melbourne LGA. They rely on evidence of cases between 30 March 2020 and 6 April 2020 in the City of Melbourne, Monash, Bayside and the City of Port Phillip.

309 It is correct that Attachment D to the 7 April 2020 advice under the heading 'Part 2: Reasons for enhanced interventions' refers under sub-heading '3. Current circumstances' to the 1135 reported cases at that date. However, the break-up of those reported cases makes no reference to their reported locations.

310 From the date of the next direction on 13 April 2020 the Decision-maker received intelligence briefings in relation to new cases and a brief which referred to Attachment D, the Cabinet-in-confidence internal advice. The intelligence briefings referred to the total number of cases, but not to their geographic location within the State. That includes, no reporting of the location of cases in enforced hotel isolation, although that separate category of cases was reported on.

311 On 24 April 2020, there was a further advice concerning additional Directions, 'Cabinet-in-confidence' which was Attachment D to a brief provided to Dr van Diemen. That lengthy and detailed advice included a report on current cases, but made no reference to cases in Greater Melbourne or in particular LGAs.

312 The plaintiffs submit that prior to the 13 April 2020 Direction there were cases in each of the municipalities of Melbourne, Monash, Bayside and Port Phillip and that in the lead up to each of the later Directions during the period of the First Lockdown, the Decision-makers continued to receive 'intelligence briefings' in relation to the most recent cases which included information about the location of those cases. From 19 May 2020 a summary of information concerning 'outbreaks' was also provided.

313 A review of the documents relied on by the plaintiffs like the earlier intelligence briefings and advices, provides no support for a finding that particular cases in particular locations were directly or indirectly taken into account by the Decision-makers.

315 The Directions during the First Lockdown applied on a State-wide basis. Accepting as Jagot J said in LCA first instance decision, that 'directly or indirectly' may indicate that a looser form of causal connection will suffice than would normally be required, as mentioned earlier, her Honour also said, 'a line must be drawn somewhere'.[75] It would be within that line to find that the presence of cases of COVID‑19 in the State of Victoria had a non-incidental and non-tenuous role in the making of Directions with the stated purpose of 'limiting the spread' of the virus within the State, the jurisdictional boundary to which the Directions might extend. However, to infer the Directions indirectly arose from the existence of cases in the particular location of either Greater Melbourne or the relevant LGAs crosses the line. There is a coincidence at a State level between the extent of operation of the Directions and the geographic location of cases. No such coincidence exists concerning either Greater Melbourne or the LGAs.

316 I do not accept the submission that even though 'a cause' is sufficient, the existence of cases in Greater Melbourne is sufficient to establish that the Directions made during the First Lockdown or any of them indirectly 'arose' from the existence of cases in that defined location. The same is the case concerning the LGAs.

317 The Directions in place during the First Lockdown were for the stated purpose of 'prohibiting the operation of non-essential businesses and undertakings in order to limit the spread' of COVID‑19. However, the fact that was the stated purpose does not answer the factual question of whether the Directions directly or indirectly arose from disease occurring at such premises.

318 The advice to the Minister that preceded the 23 March 2020 direction referred to information about the number of cases in Victoria, the projected growth in cases and the number of 'close contacts'. I accept that in circumstances where the health advice and later internal department memoranda referred to the number of cases in Victoria that the fact of COVID‑19 cases in Victoria at least to that extent was an indirect cause of the Directions. There is, however, no evidence that the actual location within Victoria of particular cases was a cause of any of the Directions made and in force during any part of the First Lockdown period.

319 It is one thing to say that cases in the State of Victoria to which the Directions during the First Lockdown had uniform application were indirectly a cause of those Directions. It is quite another to say that cases at premises in the vicinity of the Premises, being particular cases at particular premises within Greater Melbourne or the relevant LGAs, were an indirect cause of the Directions.

320 Accepting the indirect evidence relied on by the plaintiffs in the form of the COVID intelligence and outbreak summaries and assuming the information summarised in the Summaries was available to the Decision-makers, there is no evidence that an awareness by the Decision-makers of an occurrence or occurrences of COVID‑19 at premises in the vicinity of the Premises (Greater Melbourne or the LGAs) was directly or indirectly why the Decision-makers acted as they did.

321 The Directions in place during the First Lockdown were made on a State-wide basis, perhaps making understandable the plaintiffs' primary but abandoned position that 'vicinity' is a reference to the State of Victoria. However, that is not the case for which the plaintiffs now contend. There is nothing to link the presence of cases of COVID‑19 in the geographic, or jurisdictional areas of Greater Melbourne or in the nominated LG's as a direct or indirect cause of the Directions at any time relevant to the First Lockdown.

322 The Second Lockdown began following an interregnum on 8 July 2020. In the period to which the Second Lockdown relates, from 8 July 2020 through to 4 October 2020, the Directions distinguished between Greater Melbourne, the Shire of Mitchell and other parts of regional Victoria.

323 The drafting approach adopted was to refer in the gazettal of the 9 July 2020 Direction to 'Restricted Area' which picked up an earlier definition of 'Restricted Area' in Area Direction No. 3. The definition of 'Restricted Area' was 'Greater Melbourne' which includes each of the municipalities relevant to each of the venues the subject of two proceedings together with the Shire of Mitchell. The Shire of Mitchell is not directly relevant to issues in the proceedings as there are no venues within that Shire that are in issue.

324 The advice from the Acting General Counsel to Dr van Diemen ahead of the 8 July 2020 Direction recommended the reissue of Directions 'to limit the spread of Novel Coronavirus 2019 (2019‑nCov) to reintroduce Stage 3 restrictions to Metropolitan Melbourne and the Shire of Mitchell'. The advice expressly referred to 'a significant increase in cases occurring in Restricted Areas in particular', with the proposed restrictions 'being issued for the purpose of enforcing stricter social distancing practices in Restricted Areas in light of recent outbreaks in those areas'. Further:

1. Unlike the Stage 3 restrictions the Restricted Area Restrictions are targeted at areas where the virus is circulating at higher levels ...

325 The 19 July 2020 advice from the Director of Legal Services to Dr Finn Romanes, Deputy Public Health Commander, contained a statement in almost identical terms. It expressly referred to the number of confirmed cases in 'metropolitan Melbourne' and the number of confirmed cases in 'regional Victoria'. Attachment D dated 19 July 2020 provided a report concerning the 'current situation' separately, noting the increased spread and risk with 'metropolitan Melbourne' continuing to represent the highest areas of concern. An analysis of data from the LGAs in Restricted Areas was reported upon. Trends in new cases across metropolitan Melbourne and the Mitchell Shire were reported compared to trends across 'regional Victoria'. 'Part 2: New Directions and advice rationale' reported that:

As almost all (98%) cases over the last 2 weeks remain in the Restricted Area, advice of the CHO is that ... restrictions continued to be required for metropolitan Melbourne and the Mitchell Shire to mitigate public health risk...'

326 I accept the plaintiffs' submission that the evidence relied on, including that to which I have expressly referred, supports a finding that the cumulative number of cases in Greater Melbourne, albeit referred to in some of the documents as 'metropolitan Melbourne', was an indirect cause of the Second Lockdown Directions. That is reflected in the distinction between the restrictions imposed during this period concerning the Restricted Areas compared to the absence of similar controls in regional areas in the State and by the express statements in the documents mentioned that link the number of cases in the Restricted Area, including Greater Melbourne with the need to differentially impose restrictions.

327 Although reported case data did include data on an LGA basis, the documents relied on by the plaintiffs do not support a finding that the incidence of cases in the same LGAs as the Premises were an indirect cause of the Directions.

328 It follows that if the plaintiffs' construction argument as to the meaning of 'vicinity' is accepted as correct, and I do not proceed on that basis, then the Directions during the Second Lockdown indirectly arose from cases in the vicinity of the Premises, i.e., cases in Greater Melbourne.

329 To recap, because I do not agree with the plaintiffs that the 'vicinity' of the Premises is properly construed as a reference to cases anywhere else in Greater Melbourne, the plaintiffs fail on this point. If I am wrong as to the meaning of 'vicinity', they succeed in relation to this issue concerning the Second Lockdown only.

H. Quantum, Sub-limit and Deductibles issues remaining

330 The 3 April 2024 Statement of Agreed Position - Quantum records:

(a) As a matter of construction of the Policy in the Transit Proceeding, Pay-Roll is an uninsured working expense;

(b) It is agreed for the purpose of the AMFR Proceeding, Pay-Roll is an uninsured working expense;

(c) It is agreed Cost of Goods Sold (COGS) is an uninsured working expense for the purposes of both Policies;

(d) The quantum experts have calculated loss in the Second Further Joint Reports in:

(i) The Transit Proceeding, on the basis that COGS is an uninsured working expense, to be in the range of $3,667,798 - $3,888,582;

(ii) the AMFR proceeding, on the basis that Pay-Roll is not an uninsured working expense and COGS is an uninsured working expense, to be in the range of $1,250,859 - $1,371,964.

(e) As a matter of principle, the Court should determine how the following matters are to be calculated for the purpose of assessing loss:

(i) March 2020 pro-rating: whether sums saved in the month of March 2020 should be pro-rated based on the numbers of days during the month for which the closure orders applied.

(ii) Excluded amounts: whether the following items should be excluded from the sum saved calculation:

(C) cleaning costs, laundry costs and promotional costs.

(iii) Government waivers: whether liquor licence fees and payroll tax waivers should be a sum saved.

(f) If liability is established in the Proceeding(s), the Court will not be able to immediately quantify the loss. It may be the case that any outstanding matters relating to quantum can be agreed between the parties.

(g) However, if this cannot occur, further calculations from Mr De Cian and Mr Carruth may be required with respect to:

(i) the Court's findings in relation to those matters of construction and principle in paragraphs 1(b) and 1(e) above; and

(ii) their assessment of the 'Basis Period', as referred to in the Second Further Joint Reports.

331 During closing addresses the parties advised agreement had been reached on a number of these issues and that only a limited number of issues require determination. In addition, there remained outstanding issues concerning Sub-limits and Deductibles under the Policies.

332 As the plaintiffs have failed to establish an entitlement to indemnity, it is unnecessary to deal with these issues. However, as they were argued, and in case they may become relevant hereafter, I will deal with them briefly. When doing so, I proceed on the basis of agreement between the parties that what is required is to determine the contested issues as a matter of principle and that the Court will not be able to quantify the amount to be paid under the Policies. In default of agreement on quantification, further calculations may be required to be undertaken by the quantum experts.

333 Following agreement concerning the status of COGS and Pay-Roll, if the plaintiffs are entitled to indemnity, and I have found they are not, in the case of the Transit proceeding, the plaintiffs are entitled to between $3,667,798 (Mr Carruth) and $3,888,582 (Mr De Cian) and in the case of the AMFR proceeding, to between $1,250,859 (Mr Carruth) and $1,371,964 (Mr De Cian).

334 The quantum issues remaining all relate to the calculation of 'any sum saved during the Indemnity Period' to which reference is made in 'Item No. 1 - Loss of Gross Profit' in the Basis of Settlement clause of the Policy.

335 Information concerning costs for the month of March 2020 was not available on a daily basis. Mr De Cian considered it reasonable to assume that behaviours of the public, aware of the threat of COVID‑19 from January 2020 when the WHO made its declaration were impacted by awareness of the virus and that the businesses of the plaintiffs were therefore affected by the damage even before the Damage Period. In that circumstance he believed it appropriate to assume a linear or pro rata reduction across the month of March. Mr Carruth did not agree with that approach. In his opinion such an approach would bring the cost reductions outside the policy. He considered it was more consistent to allocate costs reductions to the nine day period where the business were closed. To do so achieved a matching between the period in which turnover was reduced and the period in which costs were reduced.

336 To illustrate the impact of the competing approaches, assuming a saving of $100 for the month of March 2020, the approach of Mr De Cian was to pro-rata that amount across 31 days. The approach of Mr Carruth was to pro-rata the $100 saving across the days of closure only beginning on 23 March 2020.

337 Lloyds on behalf of the defendants submit that neither of these approaches is correct. It submits the correct method is to apportion the savings in accordance with the percentage reduction in turnover for March, represented by the percentage of the reduction in turnover attributable to the closure of the Premises in the last nine days in March.

338 Item 1(a) in the Basis of Settlement clause refers to the sum produced by applying the Rate of Gross Profit to the amount by which Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover. The reference to 'less any sum saved' is a reference to 'any sum saved during the Indemnity Period'. The definition of 'Indemnity Period' in Section 2 relevantly states 'the period beginning with the occurrence of the Damage ...'.

339 I prefer Mr Carruth's approach in relation to this issue. It is consistent with the definition of 'Indemnity Period' that the period to which the sum saved should be attributed begins with the occurrence of the Damage, in this case upon closure on 23 March 2020. I do not consider there is a proper basis to apportion the reduction in costs to a period that includes dates prior to 23 March 2020. I agree that a consistency of approach is called for between turnover and cost. Although, as discussed by Mr De Cian, there may have been impact upon behaviours of the public and therefore on the plaintiffs' Businesses prior to 23 March 2020 due to knowledge of the pandemic, there is no basis to conclude that savings in relation to expenses relate to the whole or any part of the period prior to closure and prior to the period of the First Lockdown.

340 De Cian did not include certain fixed cost line items as savings. One such item was described in the variation analysis between the experts as repairs and maintenance 'general'. Mr De Cian considered that repairs and maintenance were deferred and that increased expenditure on these items when trading resumed between October 2020 and December 2020 following the Second Lockdown meant that there was in fact no saving. Mr Carruth did not agree.

341 Another example referred to by Mr De Cian concerned cleaning contractors and bank charges of the Notting Hill venue. Mr De Cian treated these items as a standard sums saved. For that reason, he considered no adjustment was warranted.

342 Both experts agree and Lloyds submit that it is necessary to separately investigate and to consider each cost item separately. I also agree that is the case.

343 In relation to repairs and maintenance, I prefer the evidence of Mr De Cian. I accept that given the increase in this category of expenditure following the Second Lockdown that on the available evidence it is appropriate to regard this category of expense as deferred rather than saved. On the other hand, bank charges and cleaning contractor expenses, other categories of excluded expenses considered by the quantum experts and upon which they reported, relate to different activities. I consider the treatment by Mr De Cian of both of these items is correct. Bank charges and cleaning contractor expenses represent sums saved during the periods of lockdown.

344 While the Lloyds submissions also refer to laundry and promotional costs, in the table headed 'Variance analysis between experts calculations - Notting Hill' to which attention was directed, those items are not shown as items upon which the experts disagreed. I accept Lloyds' submission that no determination should be made concerning these or other fixed cost line items.

345 This item relates to liquor licence fees and payroll tax, waived by the State during time periods that include both lockdowns. Mr De Cian was instructed not to include savings on these items. Mr Carruth did not receive instructions to make any particular assumption. He separately identified both items but considered it was a matter for the Court to decide.

346 As noted by Lloyds in its written opening, in the LCA Appeal, Derrington and Colvin JJ held that as the criteria for Jobkeeper payments were financial ones, they did not depend on whether or not there had been an outbreak of COVID‑19 within 20 kilometres of the premises of the Business and they were not 'sums saved' for the purposes of the policy.[76]

347 As acknowledged by Lloyds in its submissions, the clause in this case is sufficiently similar to that considered in the LCA Appeal, and the waiver of liquor licence fees and payroll tax are also not relevantly location dependent such that it is appropriate to apply the same reasoning as the Full Court.

348 While I note the defendants' final reservation of their rights concerning the decision of the Full Court should this matter go on appeal, applying these decisions in the LCA Appeal,[77] Government waivers of licence fees and payroll tax are not 'sums saved' for the purposes of the Policies.

349 The preamble to both Policies includes the following:

Sub-Limits of Liability

The liability of the Insurer shall be further limited in respect of any one loss or series of losses arising out of any one original source or cause at any one Situation as set out hereunder: The Sub-limits of Liability apply in excess of any applicable Deductible.

350 The Schedules to both Policies include various sub-limits under the heading 'Section 2 - Consequential Loss Sub-limits of liability'. In both Schedules one item is described as 'Infectious or Contagious Diseases, Vermin, Pest or Defective Sanitary Arrangements; Food or Drink Poisoning; Murder, Suicide (Annual Aggregate)'. In the case of the Transit Policy, the sub-limit specified against this item is $500,000; in the case of the AMFR Policy, the sub-limit specified is in the following terms $350,000.

351 Both Policies contain an endorsement providing for the application of a Deductible. Each Policy also contains the following endorsement:

APPLYXS4 Application of Deductibles

Deductibles shall apply to the Limits and Sub-Limits of Liability in accordance with the Schedule but the Limits and Sub-Limits of Liability shall only be applied in excess of the relevant deductible.

352 Chubb framed the sub-limits issues in their written opening:

(a) Firstly, whether the sub-limit for 'Infectious or Contagious Diseases' applies only to the REPELXB4 Endorsement (the plaintiffs' position) or to both the REPELXB4 Endorsement and the CLOSEXB4 Endorsement (the defendants' position).

(b) Secondly, the proper construction of the 'Infectious or Contagious Disease' sub-limit having regard to both the preamble to the Sub-Limits section of the Policy Schedule and the description of the sub-limit as an 'Annual Aggregate' sub-limit.

353 Concerning the sub-limit, Chubb submits that as a matter of substance cover for business interruption caused by 'Infectious or Contagious Disease' is available under both REPELXB4 and CLOSEXB4. The plural 'diseases' in the Schedule appears to reflect two separate sources of Infectious or Contagious Disease cover, both of which are subject to the sub-limit and the deductible. Chubb submits the adjectives 'annual' and 'aggregate' qualify the sub-limit such that if cover arises under the REPELXB4 or CLOSEXB4 endorsement, the combined maximum exposure of the defendants for 'Infectious or Contagious Diseases' is $500,000 Annual Aggregate for Transit and $350,000 Annual Aggregate for AMFR.

354 The plaintiffs submit each of the Sub-Limits is referrable to a distinct subject matter to be found in earlier provisions of the wording. For example, the reference to 'Claims Preparation Costs' ($200,000 in the Transit Policy) is tethered to the subject matter of the provision granting indemnity for same. Noting the express directive in both the Policy itself and the endorsement that the Policy and endorsements are not to be construed by reference to headings, the plaintiffs submit that contrary to the position put by Chubb, the sub-limit argument does not rise or fall with impermissible reliance on headings.

355 The plaintiffs endorse and adopt Chubb's submission that:

Where a sub-limit corresponds to an extension of coverage provided by an endorsement, the sub-limit and deductible will apply not because of a symmetry between the wording of the deductible and the wording of an endorsement heading but rather because of a symmetry between the language of the sub-limit and deductible and the substantive terms of the endorsement.

356 In its opening submissions, Chubb provided a table showing the working of CLOSEXB4, the words of REPELXB4 and the wording of the sub-limit in the Schedule, extracted in full below (emphasis added by Chubb).

Loss as is insured by this Policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Premises or other premises in the vicinity of the Premises by order of a competent public authority directly or indirectly arising from infectious or contagious human disease occurring at such premises shall be deemed to be loss resulting from damage to property used by the Insured at the Premises.

Loss as is insured by this Policy resulting from interruption of or interference with the Business directly or indirectly arising from closure or evacuation of the whole or part of the Insured Premises by order of a competent public authority consequent upon:

(i) human infectious or contagious disease manifested by any person whilst at the Insured Premises;

(ii) the outbreak of a notifiable human infectious or contagious disease in humans occurring within the immediate vicinity of the Insured premises;

(iii) vermin or pests or defects in the drains or other sanitary arrangements at the Insured Premises;

(iv) poisoning directly caused by the consumption of food or drink provided on or form the Insured Premises;

(v) murder or suicide occurring in or at the Insured Premises;

shall be deemed to be loss resulting from damage to property used by the Insured at the Insured Premises. Perils Exclusion 4(a) shall not apply to the cover granted by this endorsement.

[paragraph about Quarantine Act exclusion omitted]

Infectious or Contagious Diseases; Vermin, Pest or Defective Sanitary Arrangements; Food or Drink Poisoning; Murder, Suicide (Annual Aggregate)

357 The plaintiffs submit that while there is complete symmetry between the language of the Sub-limit and REPELXB4, that is not the case concerning CLOSEXB4. They submit Chubb seeks to displace the clear symmetry by reliance on the use of the plural 'diseases' in the Schedule rather than the singular 'disease':

... This appears to reflect that there are two separate sources of the Infectious or Contagious Disease cover which are both subject to that sub-limit and deductible - that is, the CLOSEXB4 Endorsement and the REPELXB4 Endorsement.

358 The plaintiffs submit this ignores the fact that REPELXB4 itself has two separate sub-paragraphs dealing with cover relating to infectious or contagious disease. The drafter's choice of the plural is readily understood in that context, even if it appears unnecessary. In any event, recourse to the use of the plural 'diseases' can hardly displace the obvious symmetry which exists supporting the position that the relevant Sub-Limit applies only to REPELXB4.

359 The plaintiffs submit that as not all aspects of the coverage conferred by the Policies are subject to Sub-Limits, the absence of a Sub-Limit in respect of CLOSEXB4 is unremarkable.

360 Concerning the issue of deductibles, the plaintiffs submit that just as there is no applicable sub-limit in the case of CLOSEXB4, there is no deductible. Chubb and the defendants do not agree.

361 The Policies provide for both dollar value deductibles and a 48-hour time limit. Chubb submits that as there are two separate claims, one for each lockdown, the 48-hour deductible is to be applied to each claim.

362 The plaintiffs do not accept that 'all claims are subject to a deductible'. They submit it would be correct to say that, reading the 'Deductibles' section of the Policy Schedules, that all Section 1 claims for material damage are subject to a monetary deductible and some claims under Section 2 are subject to a 48‑hour deductible.

363 While there is not complete symmetry between the language of REPELXB4 and the language in the Schedule concerning the sub-limit, I am in no doubt the Sub-limit applies to REPELXB4. Both parts (i) and (ii) of REPELXB4 refer to infectious or contagious disease. Part (iii) refers to vermin or pests and defects in sanitary arrangements; part (iv) refers to poisoning caused by food or drink; part (v) refers to murder or suicide. Not only is there a general correspondence between the language in REPELXB4 and the Schedule, the sequence of items mentioned in the Schedule follows that of the endorsement. The reference to 'diseases' plural is consistent with the Sub-limit applying to parts (i) and (ii) of REPELXB4.

364 None of this symmetry exists between the Schedule and CLOSEXB4. I consider the Sub-limit has no application to CLOSEXB4. The Schedule does not impose Sub-limits with respect to all endorsements. When it refers to a Sub-limit of $1,000,000 relating to 'Prevention of Access' in the Transit Policy, the language used is broad and not particularly specific. When it refers to the Sub-limit for infectious or contagious disease, the approach is quite different. It is specific. It corresponds closely to the language of REPELXB4. There is nothing in the Schedule to refer back or to link it to CLOSEXB4. The Sub-limit has no application to a claim under CLOSEXB4.

365 If the Sub-limit were to apply to CLOSEXB4, I accept the annual aggregate limits of $500,000 for Transit and $350,000 for AMFR would apply.

366 The reference in the Schedules to the 48-hour deductible are preceded by the same language as adopted in the Schedules concerning the Sub-limits. The Schedules refer to 'Infectious or Contagious Diseases' etc. For the same reasons as apply concerning the Sub-limits, there is no deductible to a claim in the case of CLOSEXB4.

367 In their written opening the plaintiffs initially claimed interest under s 60 of the Supreme Court Act 1986 (Vic) as well as under s 57(1) of the Insurance Contracts Act 1984 (Cth). In oral closings the plaintiffs abandoned their claim to interest under s 60 of the Supreme Court Act 1986 (Vic).

368 The effect of s 57(1) is that a person entitled to be paid an amount under a policy has an additional right to interest on that amount. Pursuant to s 57(2), the period in respect of which interest accrues commences on the day from which it was unreasonable for the insurer to have withheld payment.

369 The plaintiffs submit 29 January 2021 is the date from which interest began to accrue in the Transit proceeding as it was on that date that Colin Biggers & Paisley, acting on behalf of the underwriters, wrote to the solicitors for the Transit plaintiffs informing them that 'cover is ... not available under [CLOSEXB4]'.

370 The plaintiffs submit 19 May 2021 is the date from which interest began to accrue in the AMFR proceeding. 19 May 2021 is seven days after the date on which the solicitors for the AMFR plaintiffs wrote to the Claims Manager at PACE Insurance Pty Ltd, notifying him of their intention to lodge a claim. The 19 May 2021 letter referred to CLOSEXB4 and to the 'inability of its Insurers and its customers to fully utilise its premises'.

371 Submissions concerning the plaintiffs' claims for interest were made by Berkshire on behalf of all defendants. It submits the period in respect of which interest accrues pursuant to s 57(1) of the Insurance Contracts Act 1984 (Cth) commences only on 'the day from which it was unreasonable for the insurer to have withheld payment of the amount...' (s 57(2)). It is for the Court to determine that date. The question of reasonableness is to be judged 'by reference to the true position in respect of the claim with allowance to be made for the insurer to have a reasonable period of time within which to investigate the claim and consider its position'. Factors affecting the reasonable period of time include where the insured has pursued a claim of a different nature to that notified to the insurer or pleaded.[78] It may also be relevant that the insured failed to provide information reasonably required by the insurer to investigate the claim.[79] The question is 'when a reasonable insurer would have accepted and quantified the claim, having regard to any actual limitations as to when the necessary information became available'.[80]

372 Berkshire submits that allowing a reasonable period of time within which to investigate the claim and consider the position, it was not unreasonable to have withheld payment on 29 January 2021 in the Transit proceeding, and on 19 May 2021 in the AMFR proceeding:

(a) First, the correspondence relied upon by the plaintiffs did not articulate the factual claim now advanced with reliance upon CLOSEXB4.

(b) Besides referring to CLOSEXB4, at no point in the correspondence relied on by the plaintiffs did the solicitors identify the parameters, integers or bases of their (now) claims. For example, the correspondence did not identify the closure periods now relied upon, or - indeed - any periods over which that plaintiff's Business had been relevantly closed for the purposes of CLOSEXB4. It did not identify the orders, made by a competent public authority, that had compelled closure.

(c) At no point in the correspondence was there any contention that orders had directly or indirectly arisen from the occurrence of COVID‑19 at the Premises, or even at premises within the vicinity.

373 Berkshire submits with specific reference to the Transit notification, in contrast to the claim at trial, the claim expressly articulated in the 23 November 2020 email was to the effect that closure was ordered as a general prophylactic. CLOSEXB4 was referred to only in so far as it applied further to occurrences at the Premises.

374 Separately, Berkshire submit the plaintiffs' correspondence failed to provide information reasonably required to investigate the claims. In particular, the plaintiffs did not provide information that there had been occurrences of COVID‑19 at the Premises, or in the vicinity; or that closures had been ordered because of such occurrences.

375 With specific reference to the AMFR proceeding, the date of unreasonableness advanced by the plaintiffs is only seven days after the letter of 12 May 2021. Even if the letter was not subject to the deficiencies referred to, on no view was seven days the period of time which a reasonable insurer would require to investigate and consider the claim.

376 Finally, Berkshire submits the plaintiffs do not identify amounts purportedly withheld. Section 57 expressly operates by reference to the day from which it was 'unreasonable for the insurer to have withheld payment of the amount...' (emphasis added by Berkshire); not by reference to the denial of a claim for indemnity. Apart from failing to identify the amount, the plaintiffs fail to identify any basis upon which the defendants might have quantified the claims, by 29 January 2021 in the Transit proceeding, and 19 May 2021 in the AMFR proceeding.

377 The plaintiffs' response to the final point is to submit the fact that there was not precise quantification of the loss in 2020 or 2021 is not determinative. They referred to the decision of Beach J in Australian Pipe & Tube Pty Ltd v QBE Insurance (Australia) Ltd (No 2).[81]

378 Transit notified of its claim by email from its solicitors dated 23 November 2020. Under the hearing 'Basis for the claim', paragraph 16 of the email referred to CLOSEXB4 providing cover for loss resulting from interruption to or indifference with the Insureds' Business:

arising from a closure of the business by order of a public authority due to an infectious or contagious human disease occurring at the business.

No details of monetary loss were referred to in the email.

379 The 29 January 2021 letter in response from the solicitors for the underwriters advised the underwriters had determined the Policy does not respond. The reasons for the declinature followed. Included in those reasons concerning CLOSEXB4 was the statement:

On the facts and circumstances currently known ... there was no manifestation of COVID‑19 at the Venues or in the immediate vicinity. The Insureds' Premises were not directed or ordered to close because there was someone at the Premises with COVID‑19 or there was an outbreak in the immediate vicinity.

380 In light of the manner in which the basis of claim was articulated in the 23 November 2020 email, it being the fact that there was no case of COVID‑19 at any of the Insured Premises, I consider the reason given by the underwriters in the 29 January 2021 letter in response was not 'unreasonable'. It was directly in response to the basis of claim and it was accurate. I reject the plaintiffs' submission that interest pursuant to s 57(1) of the Act commenced to run in the case of the Transit Policy from 29 January 2021. It is unnecessary to identify an alternative date pursuant to s 57(2) from which it was unreasonable for the insurer to have withheld payment of the amount.

381 The AMFR notification was by letter dated 12 May 2021 from Gadens. In its introduction the detail of the claim asserted the Insured was provided cover by clauses in the Policy including CLOSEXB4. The letter did not refer to the occurrence of COVID‑19 at or in the vicinity of the Insured Premises, nor did it articulate why endorsement of CLOSEXB4 was engaged. Under the 'Basis of claim' heading it said:

1. The inability of the insured and its customers to fully utilize its premises as a result of the restrictions referred to above (a reference to restrictions in place from February 2020) is deemed to be loss resulting from damage to property used by the Insured.

382 The reply on 29 July 2021 from Colin Biggers + Paisley set out detailed reasons why the Underwriters had determined the Policy does not respond. In ss 3.5-3.9 of the letter detailed reasons were given as to why in the opinion of the Underwriters each of the elements 1-3 of CLOSEXB4 were either not satisfied or were only partially satisfied. Section 5(a) of the letter invited the Insured to provide further information they would like the Underwriters to consider.

383 Given the broad brush nature of the 12 May 2021 claim notification I do not regard a period of 7 days as a reasonable time for the insurer to respond, as is the premise of the AMFR reliance on 19 May 2021 as the date from which s 57(1) interest should accrue. I do not consider the information provided on 12 May 2021 was sufficient to enable the insurer to investigate the claim within a 7 day window. When the insurers did respond on 29 July 2021 via their solicitors the response was a detailed and considered response. It invited the provision of further information.

384 It is sufficient for present purposes to find that in the event the AMFR claim was otherwise entitled to succeed, interest pursuant to s 57(1) did not begin to accrue on 19 May 2021. As with the Transit claim, it is unnecessary to identify an alternative date pursuant to s 57(2) from which it was unreasonable for the insurer to have withheld payment of the amount.

385 For the reasons discussed the claims by the plaintiffs in both the Transit Proceeding and the AMFR Proceeding are dismissed.

386 Unless any party should contend for a different costs order I will order the plaintiffs in both proceedings pay the defendants' costs including reserved costs on a standard basis.

387 Should any party contend for a different costs order then that party shall file and serve submissions of no more than 4 pages in support of its costs contention by no later than 4:00 pm on 30 August 2024. Any submissions in response, also not exceeding 4 pages, shall be filed and served by 4:00 pm on 6 September 2024. I anticipate determining any further costs issues on the papers.

ARCH UNDERWRITING AT LLOYD'S (AUSTRALIA) PTY LTD (ACN 139 250 605)

CHUBB INSURANCE AUSTRALIA LIMITED (ACN 001 642 020)

BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY (ACN 600 643 034)

AMFR HOLDINGS PTY LTD T/AS THE DECK BRIGHTON (ACN 151 810 436)

NIHO PTY LTD T/AS THE NIXON HOTEL (ACN 610 928 339)

JSAL PTY LTD ATF JSAL INVESTMENT TRUST (ABN 90 326 084 500)

HBBS PTY LTD ATF HBBS INVESTMENT TRUST (ABN 16 448 102 201)

MCLI PTY LTD T/AS MELBOURNE CENTRAL LION (ACN 633 282 603)

BONC PTY LTD T/AS BANK ON COLLINS (ACN 633 167 183)

ARCH UNDERWRITING AT LLOYD'S (AUSTRALIA) PTY LTD (ACN 139 250 605)

CHUBB INSURANCE AUSTRALIA LIMITED (ACN 001 642 020)

BERKSHIRE HATHAWAY SPECIALTY INSURANCE COMPANY (ACN 600 643 034)

[1] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 ('LCA first instance decision').

[2] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 ('LCA Appeal').

[3] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2021] FCA 907; (2021) 396 ALR 590 ('Star first instance decision').

[4] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 ('Star Appeal).

[5] Princess Theatre Pty Ltd v Asvar Insurance Ltd [2024] VSC 33 ('Princess Theatre').

[6] FCA v Arch Insurance (UK) Limited [2020] EWHC 2448 (Comm) ('FCA v Arch') [242].

[7] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [162].

[8] Biosecurity Act 2015 (Cth) ss 9 and 42.

[9] Biosecurity (Listed Human Diseases) Amendment Determination 2020 (Cth).

[10] HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) NSWSCA 296; [2020] NSWCA 296; (2020) 104 NSWLR 634.

[11] HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) NSWSCA 296; [2020] NSWCA 296; (2020) 104 NSWLR 634 [15].

[12] HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) NSWSCA 296; [2020] NSWCA 296; (2020) 104 NSWLR 634 [2], [38]-[47], [120]-[121].

[13] Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; (2010) 240 CLR 444 [28].

[14] NSD144/2021: Guild Insurance Ltd v Gym Franchises Australia Pty Ltd and NSD145/2021: Guild Insurance Ltd v Michael (t/as Illawarra Paediatric Dentistry).

[15] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461, 35.

[16] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [119] (Derrington and Colvin JJ).

[17] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [8].

[18] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [10].

[19] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [11].

[20] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [66] (Derrington and Colvin JJ).

[21] Star Entertainment Group [2022] FCAFC 16; (2022) 400 ALR 25 [14]; LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ).

[22] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [58] (Derrington and Colvin JJ).

[23] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ).

[24] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [89] (Derrington and Colvin JJ).

[25] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [102] (Derrington and Colvin JJ).

[26] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [14].

[27] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [14]; LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ).

[28] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [4].

[29] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [58] (Derrington and Colvin JJ).

[30] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ).

[31] Macquarie Dictionary (online at 2 April 2024) 'premises' (defs 2(a) and (b)); Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [947]; LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [703].

[32] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [831].

[33] Quintano v BW Rose Pty Ltd [2008] NSWSC 793; (2009) 15 ANZ Ins Cas 61-805.

[34] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461, 495.

[35] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [46].

[36] Coxe v Employers' Liability Assurance Corporation Ltd [1916] 2 KB 629, 633-4 ('Coxe').

[37] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [47].

[38] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [52].

[39] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [284].

[40] Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [35], [1078].

[41] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2022] FCAFC 16; (2022) 400 ALR 25 [4] and [14]; LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57].

[42] FCA v Arch Insurance (UK) Limited [2020] EWHC 2448 (Comm) [97], [214], [216] and [267]; Princess Theatre Pty Ltd v Asvar Insurance Ltd [2024] VSC 33 [83]- [84].

[43] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ) (citations omitted).

[44] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [57] (Derrington and Colvin JJ) (citations omitted).

[45] Coxe v Employers' Liability Assurance Corporation Ltd [1916] 2 KB 629.

[46] Coxe v Employers' Liability Assurance Corporation Ltd [1916] 2 KB 629, 633-634.

[47] FCA v Arch Insurance (UK) Limited [2020] EWHC 2448 (Comm) [97], [214], [216] and [267]; Princess Theatre Pty Ltd v Asvar Insurance Ltd [2024] VSC 33 [83]-[84].

[48] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [89].

[49] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [102].

[50] Star Entertainment Group Ltd v Chubb Insurance Australia Ltd [2021] FCA 907; (2021) 396 ALR 590 [166].

[51] Macquarie Dictionary (online at 18 March 2024) 'vicinity' (def 1).

[52] Macquarie Dictionary (online at 18 March 2024) 'neighbourhood' (def 1).

[53] Macquarie Dictionary (online at 18 March 2024) 'region' (def 5).

[54] FCA v Arch Insurance (UK) Limited [2020] EWHC 2448 (Comm) [406].

[55] FCA v Arch Insurance (UK) Limited [2020] EWHC 2448 (Comm) [406].

[56] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 at [51] (French CJ, Nettle and Gordon JJ).

[57] Uniting Church in Australia Property Trust (NSW) v Allianz Australia Insurance Limited [2023] FCA 190 [347]-[348] (citations omitted).

[58] Marriner v Australian Super Developments [2016] VSCA 141 [75].

[59] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [576].

[60] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [580].

[61] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [719] (Derrington and Colvin JJ).

[62] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [580].

[63] Walton v National Employers' Insurance Assn [1973] 2 NSWLR 73 .

[64] Walton v National Employers' Insurance Assn [1973] 2 NSWLR 73, 83.

[65] Walton v National Employers' Insurance Assn [1973] 2 NSWLR 73, 83.

[66] Hi‑Fert Pty Ltd and Another v Kiukiang Maritime Carriers Inc and Another [1998] FCA 1485; (1998) 159 ALR 142.

[67] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [168]; Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [88]-[89].

[68] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [700] (Derrington and Colvin JJ).

[69] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [297] (Derrington and Colvin JJ), [21], [33] and [35] (Moshinsky J).

[70] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [296], [297]; Swiss Re International SE v LCA Marrickville Pty Ltd [2021] FCA 1206; (2021) 394 ALR 461 [257].

[71] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [296].

[72] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [297].

[73] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [297] (Derrington and Colvin JJ), [21], [33] and [35] (Moshinsky J).

[74] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [112].

[75] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435.

[76] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435, [461] (Derrington and Colvin JJ).

[77] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435.

[78] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 (Derrington and Colvin JJ); Fitzgerald v CBL Insurance Ltd [2014] VSC 493, [428], [438], [439] (Sloss J).

[79] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [248], [255] (Derrington and Colvin JJ).

[80] LCA Marrickville Pty Ltd v Swiss Re International SE [2022] FCAFC 17; (2022) 290 FCR 435 [255] (Derrington and Colvin JJ).

[81] Australian Pipe & Tube Pty Ltd v QBE Insurance (Australia) Ltd (No 2) (2018) 20 ANZ Insurance Cases 62-184.