'The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough.'" ( Wardley , supra, as cited in Commonwealth v Cornwell , supra, at [16].)
28 The exact date on which Clucor defaulted is not disclosed in the evidence. It is described as mid-2004 in paragraph 13 of the statement of claim. But the default of Clucor on the loan is not the point at which Provident first suffered non-negotiable loss. The loan was always intended to be bridging finance to secure the completion of construction, pending settlement of the sales of units. The first time at which damage was suffered was when the purchasers of the units defaulted. Knowledge of the default and damage is not necessary, but actual damage was. It may be that, at that time, the loss was not measurable and may have first become measurable after the market price of the units was ascertained. But the preferable view is that the tort was complete when default occurred at which time, there was actual and measurable damage, first occasioned on the default of the purchaser, the calculation of which became certain when the market value was known.
29 Whatever be the ultimate finding of the trial judge as to the date upon which damage was first occasioned, it is at least more than arguable that the tort was not complete until after 1 July 2004. In those circumstances, the happening of the event that gave rise to the claim for damages was in the year during which insurance cover existed. It would seem that in a "claims made" policy, it is not only the happening of the event that must occur during insurance cover, but the making of the claim against the insured. In this case, the two events coincide (in terms of years).
30 The letter of 4 May 2005 from Provident to Mr Gould is plainly a claim by Provident against Mr Gould (and/or his firm) as a consequence of which there was a liability in Lexon to indemnify against the liability (subject to any other exclusion): see Triden Properties Ltd v Capita Financial Group Ltd (NSWCA, Clarke, Scheller and Powell JJA, 15 November 1995, unreported). Further, on 24 May 2005, Mr Gould notified Lexon of a claim on it in relation to this liability. That also was a notification within the year for which insurance cover operated.
31 As a consequence, subject to the issue of dishonesty, to which the Court will now turn, s 6 of the Act allows the Court to join Lexon as a party.
Exclusion on account of dishonesty
32 The second aspect upon which Lexon relies to oppose its joinder to the proceedings under s 6 of the Act is that Lexon does not have a liability to pay damages or compensation in relation to these events, because the terms of Clause 5(e)(v) of the insurance policy, recited above, exclude liability brought about (directly or indirectly) by the dishonest or fraudulent act or omission of Mr Gould. Lexon submit that the conduct of Mr Gould is plainly and unarguably dishonest and/or fraudulent and therefore no liability attaches and s 6 of the Act cannot be invoked to join it as a party to the proceedings.
33 The evidence before the Court, at this interlocutory stage, includes a statement by Mr Gould in which he alleges: that he acted for Mr Taylor, or entities associated with him, for a period of 1 year and this purchase was the first occasion on which he so acted; that the contracts for sale were prepared in blank, the details to be inserted by another person not associated with Mr Gould's firm; that he did not act for the purchasers, although he witnessed the execution of one or more of the contracts; that he did not write each of the memoranda on which Provident relies (and suggests, in that regard, that some of those memoranda are forgeries). In particular, Mr Gould alleges that the "irrevocable authority" of 27 November 2003 and the 'undertaking' of 28 November 2003, to which reference has been made above, are each a forgery.
34 Lexon submits that a person who had received the communications from Mr Gould (even if confined to those which he acknowledges as his) would ordinarily understand that the monies were held on trust and the amounts to which Mr Gould referred were Australian dollars and/or held in legal tender. They point out that to hold a deposit in an account, other than a solicitors' trust account, is a breach of the law and a breach of ordinary conveyancing practice.
35 There is little doubt, albeit that the Court presently does not have before it evidence that would be adduced at trial, that the case for misleading and deceptive conduct is very strong. However, that is not the test for dishonesty. It may be that, at trial, Mr Gould will not be believed if he protests that he did not know what he asserted was not true, but the test is subjective. In McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402, the Full Court of the Federal Court of Australia had occasion to look at the meaning of the term "dishonesty" in an exclusion clause of the kind on which Lexon now relies. Her Honour Kiefel J (then a member of the Federal Court) (with whom Stone J and Allsop J, as he then was, agreed) said:
"[33] MDRN submitted that dishonest conduct, of which the policy speaks, must be deliberate in the sense that there was an intention on the part of Mr Blackadder to deceive. Knowing that statements were false and might deceive, but being reckless or careless about whether they might have that effect was not enough. So much may be accepted. …