QBE Insurance (Australia) Limited v Wesfarmers General Insurance Limited

Albion Insurance Company Ltd v Government Insurance Office of NSW (1969) 121 CLR 342 Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500 Drayton v Martin (1996) 67 FCR 1 El Hayek v Vasic [2010] NSWSC 634. CASES CITED : Hope v Bathurst City Council (1980) 144 CLR 1 Our Town FM Pty Ltd v Australian Broadcasting Pty Ltd (1987) 16 FCR 465 QBE Insurance Australia Limited v Vasic [2010] NSWCA 166 Selected Seeds Pty Ltd v QBEMM Pty Ltd [2009] QCA 286. Transfield Pty Ltd v National Vulcan Engineering Insurance Group Ltd [2002] NSWSC 830

TEXTS CITED : Derrington & Ashton, The Law of Liability Insurance 2nd ed (2005) Lexis Nexis Butterworths

PARTIES : QBE Insurance (Australia) Limited (P) Wesfarmers General Insurance Limited (D)

COUNSEL : A.J. Meagher SC with J. Gleeson (P) C. Adamson SC with A. Horvath (D)

SOLICITORS : A.R. Connelly & Company (P) DLA Phillips Fox (D)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

2010/208525 QBE INSURANCE (AUSTRALIA) LIMITED v WESFARMERS GENERAL INSURANCE LIMITED

JUDGMENT 1 HIS HONOUR: By a further amended summons filed in court on 28 July 2010, QBE Insurance (Australia) Limited ("QBE") claims that it is entitled to a declaration that upon the true construction of the Rural Plan Policy of Insurance No. 03RPL2002243 dated 24 June 2002 ("the Wesfarmers policy"), Wesfarmers General Insurance Limited ("Wesfarmers"), the defendant, is liable to indemnify Mrs Josslyn Vasic in relation to specified Supreme Court proceedings. QBE also seeks a declaration that it is entitled to contribution from Wesfarmers. 2 The matter tendered for determination centred upon whether dual insurance existed between a policy issued by QBE and the Wesfarmers policy with respect to Mrs Vasic, both of which QBE claims responded to the claim made against her by Mr Ahmed El Hayek. 3 I have determined, for the reasons which appear below, that QBE is entitled to the declaration it seeks because the Wesfarmers policy responds to provide indemnity to Mrs Vasic with respect to the claim made by Mr Ahmed El Hayek.

Cognate proceedings 4 Principal proceedings: Mr Ahmed El Hayek ("the plaintiff") has brought proceedings, by a statement of claim filed on 2 June 2006, against Mrs Vasic ("first defendant") and Mr Charles Fairey ("second defendant"), claiming damages for negligence arising out of serious injuries he sustained on 4 July 2003 whilst in the course of a visit to Mulga Creek Station, Byrock, in western New South Wales, near Bourke. The property is owned by the first defendant and managed by her brother, the second defendant.

5 The plaintiff was born on 20 May 1987 and accordingly was a little over 16 years old at the time of his visit to the property. He pleads that he visited the property in the company of his father, Mr Ibrahim El Hayek, who intended to hunt feral animals. 6 The relevant factual allegations in the statement of claim as to how the plaintiff's injury was sustained are as follows: "6 In approximately December 2000, the defendants agreed to allow a group known as 'Inland Hunting' to source sporting shooters to have accommodation and use of the property for the purposes of hunting.

7 On 3 rd July 2003, the plaintiff with his father attended the property and made contact with the second defendant.

8 At that time an amount of money was paid to the second defendant for accommodation and hunting.

9 Immediately or soon thereafter, the second defendant directed the plaintiff and his father to the shearers' quarters being the accommodation provided to the plaintiff and his father.

10 At or about 4.30am on 4 July 2003 the shearer's quarters caught alight.

11 At that time the plaintiff was asleep in the shearers' quarters.

12 As a result of the fire the plaintiff suffered severe injury, loss and damage as particularised in the Statement of Particulars filed herewith." 7 The plaintiff claims that the defendants were negligent in a variety of ways, any one or more of which caused his injuries. A number of the particulars of negligence refer to the state of the shearers' quarters. It is suggested that the defendants were negligent because the electrical wiring in the shearers' quarters was not inspected or adequately maintained, there were no smoke detectors installed in the shearers' quarters, there were no fire extinguishers installed in the shearers' quarters, and that there was no adequate or recognisable fire screen to surround the fire place in the shearers' quarters. Additionally, there are allegations which seem to relate to the appropriateness of allowing the plaintiff, and his father, to sleep in the shearers' quarters and the reasonableness of so doing. Finally there are allegations of negligence against the second defendant for failing to provide any immediate adequate first aid for, or care and attention to, the injuries of the plaintiff. 8 By their defence, the two defendants dispute that they were negligent and deny that they were in any way liable with respect to the fire which occurred and the injuries which were sustained. 9 In paragraph 6 of their defence of 5 March 2007, the defendants plead that the injuries to the plaintiff: "Were wholly caused by the negligence of his father Ibrahim El Hayek, and that the negligence of the said Ibrahim El Hayek severed any causal connection between any act or omission on the part of the defendants and the happening of any injury." 10 Particulars of that negligence are provided which in various ways assert that the plaintiff's father, Mr Ibrahim El Hayek, created the risk of injury to the plaintiff by the misuse of fire and flammable substances in the vicinity of the plaintiff. 11 The principal proceedings have not yet been heard and determined. Accordingly, there has been no judicial determination of the factual circumstances surrounding the occurrence of the fire and the causes of the plaintiff's injuries. The allegations in paragraph 6 of the defendant's defence have not been tested or determined. 12 First Insurance Proceedings: On 9 June 2010, the Court ordered that there be decided as a separate question before the hearing of the principal proceedings, a number of issues which related to the claim made by the defendants, Mrs Vasic and Mr Fairey, for indemnity from QBE and Mercantile Mutual Insurance (Australia) Limited ("MMI") under a contract for insurance 63A138551PLB ("the QBE policy") issued by QBE and MMI to the defendants with respect to the property at Mulga Creek Station Byrock. 13 On 15 June 2010, I delivered judgment in which I held that the QBE policy responded to the plaintiff's claim and that Mrs Vasic and Mr Fairey were entitled to indemnity under that policy: El Hayek v Vasic [2010] NSWSC 634. 14 An application for leave to appeal, and the appeal, were heard concurrently by the NSW Court of Appeal on 24 June 2010. The Court made orders on that day granting QBE leave to appeal from my decision and dismissing the appeal with costs. On 15 July 2010, the NSW Court of Appeal published its reasons: QBE Insurance Australia Limited v Vasic [2010] NSWCA 166. 15 The contents of those judgments adequately explain the issues debated between the parties at that time. 16 After the orders were made by the NSW Court of Appeal dismissing QBE's appeal to that Court, but before reasons were delivered, QBE commenced these proceedings by a summons originally filed on 28 June 2010.

QBE's Claim for Contribution 17 QBE's further amended summons claims relief based upon an asserted right to contribution from Wesfarmers as insurers of the same risk.

18 The nature of a claim for contribution was identified by the High Court of Australia in Albion Insurance Company Ltd v Government Insurance Office of NSW (1969) 121 CLR 342 at 345, where Barwick CJ, McTiernan and Menzies JJ said: "There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved. It began in the second half of the eighteenth century with Lord Mansfield's decisions with respect to marine insurers and there is no doubt that it now applies generally to insurance which provides the insured with an indemnity … The doctrine, however, only applies when each insurer insures against the same risk, although it is not necessary that the insurances should be identical … The essential element for contribution is that, whatever else may be covered by either of the policies, each must cover the risk which has given rise to the claim. There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured's loss or liability." 19 In the same decision, Kitto J (with whom Windeyer J agreed), said at p 362: "What attracts the right of contribution between insurers, then, is not any similarity between the relevant insurance contracts as regard their general nature or purpose or the extent of the rights and obligations they create, but is simply the fact that each contract is a contract of indemnity and covers the identical loss that the identical insured has sustained; for that is the situation in which "the insured is to receive but one satisfaction" (to use Lord Mansfield's expression) and accordingly all the insurances are "regarded as truly one insurance" …" 20 QBE relies on the fact that as of 4 July 2003, when the fire the subject of the principal proceedings occurred, the first defendant, Mrs Vasic, but not the second defendant, Mr Fairey, was insured by the Wesfarmers policy. 21 It claims that both of the QBE policy and the Wesfarmers policy cover the same risk, which is the risk which has given rise to the plaintiff's claim. 22 Wesfarmers denies QBE's right to contribution because it submits that insurance cover did not exist under the Wesfarmers policy for the risk which has given rise to the plaintiff's claim.

Relevant Facts 23 The parties agreed on some of the facts, and some remained in dispute. The agreed facts are as follows: "1. Ahmed El Hayek has brought proceedings in the Supreme Court claiming damages from Josslyn Vasic and Charles Fairey for negligence arising out of injuries sustained on 4 July 2003 at Mulga Creek Station, Byrock (the property), a rural property of 42,000 acres near Bourke, NSW. 2. At the time of the incident, the property was owned by Mrs Vasic and managed by Mr Fairey. 3. On 3 July 2003, Ahmed El Hayek attended the property in the company of his father, Ibrahim El Hayek, who made contact with Mr Fairey. Ibrahim El Hayek paid an amount of money to Mr Fairey for accommodation and for use of the property for the purpose of hunting. 4. Ibrahim El Hayek was a licensed shooter, and was visiting the property for the purpose of hunting for feral animals. 5. Ahmed El Hayek and his father were shown by Mr Fairey to the shearers' quarters being the accommodation available to them for the night of 3 July 2003. 6. At about 4:30 am on 4 July 2003, a fire started in the shearers' quarters. At the time, Ahmed El Hayek was asleep in the shearers' quarters. 7. Ahmed El Hayek suffered personal injury caused by the 4 July 2003 fire. 8. QBE has been found liable to indemnify Mrs Vasic and Mr Fairey in respect of Ahmed El Hayek's claim in the Supreme Court proceedings. 9. At the time of the fire, Mrs Vasic was insured by Wesfarmers under Rural Plan Insurance Policy number 03 RPL 2002243 (Wesfarmers policy). 10. The terms of the Wesfarmers policy are contained in the following documents: 10.1 Wesfarmers "Renewal Schedule" for policy No. 03 RPL2002243 with attached Certificate of Insurance covering: 10.1.1 Risk 001/001 Standard Home; and 10.1.2 Risk: 001/004 Farm legal liability; 10.2 Wesfarmers 'Alteration Schedule' for policy No. 03 RPL2002243 with attached Certificate of Insurance covering: 10.2.1 Risk 001/007 Farm property damage; and 10.2.2 Risk: 001/008 Standard Home; 10.3 Rural Plan booklet (containing wordings for 16 different policies). 11. At all material times Paul Blenkhorn was an agent of Wesfarmers." 24 The facts which were not agreed deal with two discrete areas. The first area is the nature and extent of the activities on Mulga Creek Station. The second area is what facts exist which are permissible to be taken into account, by way of extrinsic or surrounding facts when considering the proper interpretation of the Wesfarmers policy. It is convenient if I address the nature and extent of the activities on Mulga Creek Station at this stage of the judgment. The other factual issue will be dealt with in due course.

Activities on Mulga Creek Station 25 The evidence about what occurred on Mulga Creek Station leading up to 4 July 2003 is to be largely derived from Ex D - the Statement of Charles Fairey. He had lived on the property and managed it since 1999. 26 His evidence established the following:

(b) At the time of purchase by Mrs Vasic in 1999, there was a shearing shed and shearers' quarters erected on the property;

(c) Wild pigs, goats and foxes were a problem on the property because they caused damage to improvements, because they ate and trampled crops, and because they damaged fences;

(d) The control of feral animals was necessary because of the damage they did to the property;

(e) The shooters who came onto the property assisted with the control of feral animals;

(f) Since 1999, about 200 head of sheep have been run on the property, and as well, under what seems to be an agistment arrangement, another farmer had also run sheep and cattle on the property;

(g) Various crops including wheat, barley, oats and canola have at different times been cultivated on about 200 acres of the property;

(h) He was approached in late 2000 by the owner of an organisation called Inland Hunting to permit shooters to hunt on the property. The general arrangements for such shooters were that they would pay a deposit to Inland Hunting, and the balance of the cost for staying on the property directly to Mr Fairey. The shooters were accommodated in either the shearers' quarters or else permitted to camp. There was a price differential between the two options.

(i) Between 2001 and 4 July 2003, shooters came to the property about once a month, usually for a weekend. Occasionally friends of Mr Fairey would come to the property to shoot and they stayed either at the house or in the shearers' quarters;

(j) The money paid by the shooters who visited the property was used by Mr Fairey to contribute to the costs of improving the property. 27 In a proposal form for the insurance (Ex 4) which appears to have been completed by Mrs Vasic, she described the use of the shearers' quarters in the following way: "Used occasionally to house guests and paying visitors". 28 This is a description which is consistent with the statement of Mr Fairey. 29 In light of the fact that Mr Fairey's statement was not challenged in cross-examination, and the consistency of the description given by Mrs Vasic with his statement, I propose to accept the evidence of Mr Fairey as to the nature of, and extent of, the activities on Mulga Creek Station.

The Wesfarmers Policy 30 The Wesfarmers policy existed under a single contract which was called a Rural Plan. 31 Wesfarmers offered its Rural Plan which consisted of 16 different and separate insurance policies covering most of the range of day to day farm business activities and, as well, some private needs for insurance. Each potential insured chose which of the policies in the Rural Plan provided the particular coverage they wanted. A premium was then calculated by Wesfarmers, and a Certificate of Insurance issued which identified the individual policies which had been taken up. 32 The general conditions of the Rural Plan which applied to all policies were then called up, together with the specific provisions of the policies which the insureds elected. 33 The certificates of insurance issued by Wesfarmers showed that at the relevant time the first defendant had taken out the policies which were called:

(a) 001/001 - Standard Home which referred to the homestead on the property;

(b) 001/004 - Farm Legal Liability with a limit of indemnity of $5M;

(d) 001/008 - Standard Home which referred to the building described as the "shearers' quarters". This policy also provided personal legal liability coverage with a limit of indemnity of $20M. 34 The policies which are relevant for this proceeding are the Farm Legal Liability policy (001/004) and the Standard Home policy relating to the shearers' quarters (001/008), but more particularly the personal legal liability coverage which attached to this policy. 35 It is necessary then to go to the terms of the general conditions and the specific conditions applicable to those policies to understand the nature and extent of the insurance policies which are here relevant.

Rural Plan - General Conditions 36 The general conditions included the following: " The agreement between you and us

Your Rural Plan is a legal contract between you and us. We agree to give you the insurance set out in the policies you have selected for the premiums paid by you. The insurance is only for those policies for which you have certificates of insurance and only for the period of insurance shown on the certificates.

The proposal form and any documents and statements which you send us to obtain the insurance are relied on by us in deciding whether or not to insure you and on what terms." 37 The general conditions also note that in all parts of the Rural Plan when the word "you" is used it means "the person or entity shown on the certificate of insurance as the insured". 38 The general conditions do not include as a common feature, any articulation of the definition of "farm business" or any like term.

Rural Plan - Farm Liability Policy 39 The summary of the cover provided by the Farm Liability policy is to: " … give you protection against your legal liability for harm caused to others in connection with your farm business". 40 The Farm Liability policy includes the following: " What are you insured against?

Your farm liability policy insures you against legal liability to pay compensation for:

personal injury damage to property, caused by an occurrence.

Your policy only covers you if the occurrence happens:

during the period of insurance; and in connection with the farm business; and anywhere in the world … " 41 This policy defines farm business as: "Farm business means the business shown on the certificate of insurance and carried on by you at the farm premises. It also includes functions held at the farm premises.

Some examples of functions are dances, weddings and receptions." 42 Certain exclusions exist to the Farm Liability policy. Wesfarmers did not submit that, if this policy responded, it relied upon any of these exclusions to deny indemnity to the first defendant. 43 However, QBE relied on these exclusions as an aid to construction of what was included within the coverage of the policy. Exclusion 8 is in this form: " What is not insured? Your policy does not insure you for any claim: …. 8. Firearms

for personal injury or damage to property caused by or arising directly or indirectly from any activity involving the use of a firearm, unless the injury or damage to property is directly caused by use of the firearm by you or by someone you have agreed to pay to use the firearm". 44 Exclusion 9 was expressed in this way: " 9. Sport and recreation … for personal injury to a paying guest or any person staying with or visiting the guest and caused by or arising directly or indirectly from any activity involving that person riding: - an animal … … for personal injury or damage to property suffered by any person and caused by or arising directly or indirectly out of that person participating in: - any activity involving … … - hunting on horseback. … "

Rural Plan - Standard Home Policy 45 This policy commences with the statement: "… Our standard policy for home insurance gives you protection against many of the common events that can cause damage to your home or its contents". 46 In the circumstances of this case, there is no need to set out the terms of the coverage of the policy, because neither party referred to, nor did they rely upon, the terms of this policy. 47 However, the Certificate of Insurance indicates that as well as the coverage under the Standard Home policy with respect to the shearers' quarters, that policy also included coverage for personal legal liability. It is accordingly necessary to identify the terms of that policy.

Rural Plan - Personal Legal Liability Policy 48 This policy commences with this statement: "This policy gives you protection against your legal liability for harm caused to others". 49 The policy includes the following: " What are you insured against? Your policy insures you and your family against legal liability to pay compensation for: bodily injury, death or illness, loss or damage to property, caused by an accident that occurs during the period of insurance. Your policy covers you and your family: as the owner of your home if you have insured your home buildings with us; … " 50 To properly understand this policy, it is necessary to read the reference to "home" as though it was a reference to the shearers' quarters. 51 The policy includes the following exclusions: " What is not insured? Your policy does not insure you or your family against any claim for: bodily injury, death or illness, or loss or damage to property, caused by or arising directly or indirectly from: … you or your family's business or occupation." 52 This policy does not contain any definition of the term "farm business". 53 There is no dispute between the parties that the policies to which I have referred above were in existence at the time of the fire on Mulga Creek Station nor that, subject to their terms and conditions, they respond to the plaintiff's claim.

Principles of Interpretation and Construction of the Wesfarmers Policy 54 In El Hayek v Vasic [2010] NSWSC 634 at [31]-[34], I discussed the principles of construction applicable to policies of insurance. 55 Those principles are equally applicable here. 56 In short, in approaching the construction of a policy of insurance (and any commercial document), the Court must ascertain the meaning which the document would convey to a reasonable person where that reasonable person has all of the background knowledge available to the contracting parties. The Court must also have regard to the purpose and object of the transaction. 57 It is also necessary to bear in mind that the terms of an exclusion clause in a policy may help to elucidate the extent of the coverage clause. The function of an exclusion clause is to restrict and shape the cover otherwise afforded. A liability of the insured coming within an exclusion is not within cover, even though it might otherwise come within the description of the operative clause: Derrington & Ashton, The Law of Liability Insurance 2nd ed (2005) Lexis Nexis Butterworths, para 10-1; Transfield Pty Ltd v National Vulcan Engineering Insurance Group Ltd [2002] NSWSC 830 at [22] and [34], per McClellan J.

Extrinsic Facts 58 Before turning to the interpretation of the relevant policies, it is necessary to have regard to any extrinsic or surrounding facts established by the evidence, which may be relevant to the policy. 59 The principles which attend the question of surrounding circumstances were reviewed and restated by the NSW Court of Appeal in the appeal in the first insurance proceedings. Allsop P said: "35. It is clear from the binding Australian authorities that the scope of the surrounding circumstances, knowledge of which is to be attributed to a reasonable person in the situation of the contracting parties (not one or some only of them), is to be understood by reference to what the parties knew in the context of their mutual dealings. As Lord Wilberforce said, this does not involve a species of constructive notice. Constructive notice implies a degree of enquiry by reference to some external standard. Just because something is available to be found does not make it relevant, if the parties did not know of it. The reasonable person may be taken to know of things that go beyond those that the parties thought to be important or those to which there was actual subjective advertence by the parties. Further, the circumstances may include such things as the legal context to the transaction, especially if a market is involved. Nevertheless, the scope of the relevant material is necessarily bounded by the objective task of the reasonable person giving meaning to the words used by the parties in the circumstances in which the contract came to be written, by reference to what the parties knew ..." 60 The evidence which may be regarded as constituting surrounding circumstances can be taken from the evidence of Mr Blenkhorn. Mr Blenkhorn, at the time the Rural Plan was entered into, was the relevant Area Manager for Wesfarmers. He was also in business on his own account. 61 His evidence was that he had no independent recollection of the transaction by which the first defendant obtained her insurance. However, he was able to say by reference to various of the documents in the file what, on the probabilities, having regard to his usual practice, and the practice which then existed in the office, is likely to have occurred. 62 The sequence of events leading to the obtaining of the insurances seems to be this:

(a) A telephone call was made by Mr Bart Vasic, the husband of the first defendant, to arrange for immediate cover for Mulga Creek Station by way of a Cover Note.

(b) A conversation occurred during the telephone call in which no specific disclosure was made about conducting any form of activity, whether constituting a separate business or not, by way of hunters being accommodated on the property, and paying a fee for both the accommodation and being allowed to hunt on the property ("the subject activity").

(c) Mr Blenkhorn's general understanding of properties in NSW rural areas was that ordinarily activities would include cereal cropping and/or grazing cattle or sheep. He said that he understood that feral animals may be a problem and that hunting them was one typical way of effectively controlling them.

(d) On 21 July 2000, shortly after the telephone call, Mr Blenkhorn sent to Mrs Vasic, a facsimile to which was attached a Cover Note for various policies under the Rural Plan and two pages of a Certificate of Insurance. The Cover Note no. 658 was expressed to be valid for 14 days from 21 July 2000 and included the following:

"This document is a Cover Note that gives you insurance cover for the valid period shown … Please complete and sign this document and the Proposal/Questionnaire and send them to us. We will use the answers in deciding whether to insure you and anyone else to be insured under the policy, and on what terms."

(e) Mr Blenkhorn has no recollection of what he was told about the particular activities being undertaken on Mulga Creek Station. However, the description of the business which he had given on the Certificate of Insurance which accompanied the Cover Note is in this form: "Farm Type: 13 Type of Farm: CROPPING FARM (NOT CANE) Size of Farm: 16000 Hectares." No evidence was led about the meaning of "13" as a description of the farm type, nor of the meaning which Wesfarmers attached to the phrase "Cropping Farm (not cane).

(f) As can be observed, once a Cover Note, was arranged, it was a requirement of Wesfarmers that a proposal be completed by the insured and then returned. If the proposal did not match the risk which was understood to be covered by the Cover Note, then that discrepancy would be detected either by Mr Blenkhorn, or else by one of the Wesfarmers' administrative staff who worked in his office, when it was received and read.

(g) On 6 November 2000, a letter was sent by Mr Blenkhorn to the first defendant seeking the return of the signed Cover Note and the completed Insurance Proposal.

(h) A completed and signed Rural Plan Proposal/Questionnaire was received by Wesfarmers on 29 January 2001. Mr Blenkhorn has no recollection of receiving the signed proposal.

(i) The Proposal/Questionnaire did not include any questions which sought any detail by way of a further description of the nature and type of activities being carried on by the first defendant on Mulga Creek Station.

(j) The Proposal disclosed the following material in the section headed "General Information for Additional Home 2." (which related to the shearers' quarters): "2. Is the building unoccupied, tenanted, or any part of it used other than as a private residence? 'Yes'. If yes, give details: 'Used occasionally to house guests or paying visitors'."

(k) Mr Blenkhorn had no recollection of whether he saw the Proposal when it was returned to Wesfarmers on 29 January 2001. The document does not bear a stamp or any other mark indicating that it was referred to either Mr Blenkhorn or his superior who was located in another office. In accordance with his usual practice, if the Proposal had contained anything unusual or out of the ordinary, it would have been brought to Mr Blenkhorn's attention or else referred to his superior. I am satisfied that this did not happen in this case. I conclude that Wesfarmers knew of the contents of the Proposal and did not regard those contents as out of the ordinary or unusual. In other words, nothing in the Proposal fell outside the Rural Plan policies which were selected.

(l) Mr Blenkhorn said that the completion of the proposal was a necessary element in the process of an insured getting insurance. Wesfarmers would cancel cover if it did not receive a signed Proposal which was a significant step in the process of confirming insurance. In those circumstances, it seems to me to be almost a matter of certainty that the contents of the proposal satisfied Wesfarmers that there was no deviation from the indemnities offered by the Cover Note.

(m) On 6 August 2002, Mr Bart Vasic on behalf of his wife, Mrs Vasic, wrote to Wesfarmers enclosing a series of photographs of various improvements on the property. The letter was in response to a request of Wesfarmers, although the contents of that request are not in evidence. Renewal of the previous insurance was sought in the letter. The photographs disclosed that the shearing shed had been in operation and was storing wool which had been shorn from sheep but not yet baled. They also disclose that the shearers' quarters were being used for living in, with at least a bed with bed clothes on it being visible, and fresh food in the kitchen area of that building;

(n) After receipt of this letter, there is no correspondence from Wesfarmers to Mrs Vasic which, in any way suggests any inconsistency with the existing insurance. 63 In considering these surrounding circumstances, whilst I will bear them all in mind when considering the proper interpretation of Wesfarmers policy, the matters which appear to me to be of principal importance are:

(a) Wesfarmers did not seek any detailed description of the range of activities being carried out on the farm;

(b) Wesfarmers did not regard the fact that the shearers' quarters were being used to occasionally house guests or paying visitors as falling outside the extent of the cover which it had provided; and

(c) The description given to the type of farm on the Certificate of Insurance was selected by Wesfarmers and was apt to cover a farming operation which included activities which were additional to cropping.

Indemnity - Farm Liability Policy 64 QBE submits that this particular policy covers the events giving rise to the plaintiff's claim against Mrs Vasic. It points to the following bases for that submission:

(a) The subject activity was a part of the farming business carried on at the property and would fall within the description on the Certificate of Insurance: "Cropping Farm (not cane)";

(b) The subject activity, if it was not an integral part of the business being carried on within the description "Cropping Farm (not cane)", then it was an activity which was incidental to that description, ie, it was cognate to but not precisely within the description provided in the policy, and so coverage, in accordance with ordinary insurance principles, would exist;

(c) The phrase used with respect to the occurrence, namely, that it has to happen " … in connection with …" the farm business, is a phrase of broad interpretation and sufficient to capture what here occurred; and

(d) In the alternative to (a), if there were more than one activity on the farm, one of which is covered by the description of the business "Cropping Farm (not cane)" on the Certificate of Insurance, and if the activity generating the liability for the insured is an inextricable mixture of both activities, then the insurer is obliged to cover the events giving rise to liability. 65 Wesfarmers submitted that the subject activity carried out for commercial reward was a business separate and distinct from the "Cropping Farm (not cane)" description of the business given in the Certificate of Insurance. Since it was a separate business, Wesfarmers submitted that the policy did not extend to cover it. It further submitted that, although the phrase " … in connection with …" had a wide connotation, no reasonable construction of that phrase in context would allow for a conclusion that the fire occurred in connection with the farm business of cropping. 66 It is necessary in order to determine these conflicting submissions to consider what constitutes a business and whether the subject activity constituted a business, which was separate and distinct from the cropping farm business, carried on on the property. 67 Whilst in the Rural Plan there are various definitions of the phrase "farm business" such as:

(a) At pp 13 and 51 of the Rural Plan - "Farm business means the business carried on by you at the farm premises";

(b) At pp 27 and 31 of the Rural Plan - "Farm business means the business shown on the certificate of insurance"; and

(c) At p 34 of the Rural Plan - "Farm business means the business shown on the certificate of insurance and carried on by you at the farm premises. It also includes functions held at the farm premises. … "

there is no specific definition of what is meant by the term "business". Rather it seems to be used in a way which suggests that it is a word of common usage and understanding. 68 It is therefore a matter of determining, as a question of fact, using a common understanding of the word, whether the subject activity was part of the farming business as submitted by QBE or else a separate and distinct business as contended for by Wesfarmers. 69 QBE drew attention to the decision of the High Court of Australia in Hope v Bathurst City Council (1980) 144 CLR 1. In that decision, at pp 8-9, Mason J held that in using the ordinary or popular meaning of the word, the following activities fall within the description "business": "… activities undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit as a continuous and repetitive basis." 70 As well, at p 9, Mason J referred to these elements as having relevance: The activity had a permanent character which had been carried on without interruption for over 10 years; Customers had been sought by advertising; The appropriate financial records were kept; The land, although small, was put to its best potential use; and The activity was genuine and real. 71 In Hope, Gibbs and Stephen JJ, at pp 3-4, noted that the mere fact that an activity was small in scale did not disqualify it from being a business. 72 In considering the decision in Hope, it is necessary to bear in mind that the statements were made within a specific context which was an exercise in the interpretation of the meaning of s 118(1) of the Local Government Act 1919. Noting that context, nevertheless, the judgments are of some assistance and guidance in the task with which I am confronted. 73 It is not possible to formulate a closed list of indicia as to what constitutes a business. The indicia which seem to me to be relevant to a determination of the question in this case include:

(a) Whether the subject activity is separate and distinct from all of the other activities which constitute the farming business;

(b) The frequency with which the subject activity occurs;

(c) Whether the subject activity is conducted in an area of the farm which is exclusively devoted to that activity or whether it is conducted in an area used for more than one activity;

(d) Whether in order to run the subject activity, it is necessary for there to be a separate organisational structure, including employees which controls the way in which the subject activity is conducted;

(e) Whether the subject activity is regarded internally as a separate "profit centre" in the sense that separate accounts are kept, the income and expenditure is accounted for separately to other income and expenditure on the farm, and whether there is a separate business name or a separate ABN for the subject activity;

(f) Whether the subject activity is a "going concern" engaged in for the purpose of a profit on a continuous and regular basis; and

(g) Whether there are any steps taken by way of advertisement or other marketing such as signage, advertising and the like, to promote the subject activity as a business and distinguish it from the farming activity undertaken on the Mulga Creek Station. 74 Ultimately, although these indicia may be relevant, it is a matter for the Court in each individual case to make an assessment of the extent and degree to which the subject activity is undertaken as a separate activity from other activities on the farm, and hence whether it can be described as a separate business. 75 The extent of the evidence about the subject activity did not include any accounting evidence by way of profit and loss accounts or balance sheets, nor any evidence of what the tax returns of the first defendant (if any) showed. There was no evidence tendered of any separate marketing or promotional activities, and the evidence of the continuous and regular nature of the process was that hunters visited about once a month usually for a weekend. This suggests that the activity was not continuous but rather would be properly described as intermittent. 76 Such income as there was from the subject activity was deployed for the benefit of, by way of improvements to, the farm. There is no evidence that there was any expenditure on the subject activity in addition to that being expended on the farming business. On the contrary, the sense which I obtained from the evidence was that the second defendant managed to undertake the activity as a part of his ordinary course of being a manager of the farm and it seemed to require little additional time. 77 The totality of this evidence, and the description of the interaction between the farming business and the subject activity in combination suggests that there was only one business being undertaken. 78 Counsel for Wesfarmers sought in submission to articulate one additional basis for a finding that the businesses of farming on the one hand, and the subject activity on the other, were separate and distinct. 79 She submitted that whilst the shooting of feral animals may ordinarily be a part of the farming business, where conducted by employees of the farm or else contractors retained to do so who were being paid by the farming business, that was not so with respect to hunters who paid to visit the property and undertake the hunting. The discriminating feature upon which counsel relied was the nature and extent of control which may be administered by the owner or manager of the farm business over the subject activity. She argued that in the first two categories to which I have referred the farm owner or manager would have complete control over the activity of the shooters. They would be able to indicate when and where the shooting was to take place and in respect of what animals. Counsel argued that this was not so with respect to hunters who, having paid their money to come onto the property, would then be free to roam without control and shoot as they wished. 80 This argument was initially attractive. But upon analysis I do not think that there is any significant difference between the degree of control which the farm owner or manager is capable of exercising in any of the three categories. Where a person pays to come onto the property, the farm owner or manager, by reason of ownership of the property and also by reason of granting permission to enter the property, is capable of controlling how, when, where and what the visitors shoot. I do not think that any of these things are beyond the capacity for control of the farm owner or manager. They would simply be imposed as conditions upon the entrant onto the property. If the entrant did not comply with the conditions it would be open to the farm owner or manager to invite the entrant to leave. 81 Analysed in that way, I am not persuaded that the nature and degree of control is a discriminating feature, nor that there is any real difference in the degree of control in any of the categories as Wesfarmers submitted. 82 In this case, I am satisfied that the control of feral animals was a necessary activity for the proper and ongoing management of, and maintenance of, the "Cropping Farm" business, on Mulga Creek Station. 83 That it was viewed in this way is clear from the evidence of Mr Fairey. That it was viewed in the same way by Wesfarmers can be inferred from the fact that Mr Blenkhorn, the relevant Area Manager for Wesfarmers, had an understanding that the shooting of, and the control of feral animals, was likely to be conducted on a property in the Bourke region in 2000, and when the Proposal form was sent, as required, to Wesfarmers to confirm the insurance which had been issued under a Cover Note, Wesfarmers accepted the Proposal form without taking any further action to enquire about the disclosed paid accommodation activity in the shearers' quarters to amend or alter in any way the insurance cover which had been issued. 84 It is important, so it seems to me as well, that the insured was not asked any specific question on the Proposal which would lead to the indication of what percentage or proportion of the farm income came from other on-farm activities, and generally what place the other activities bore in the farming business. Such material would have been necessary if cover was intended to be confined in the way that Wesfarmers now argues. 85 Accordingly I am satisfied that the activity upon which the plaintiff, Mr Ahmed El Hayek, and his father, Mr Ibrahim El Hayek, were engaged at the time the fire occurred, was an activity which formed part of the farm business, described as "Cropping Farm (not cane)" being undertaken by Mrs Vasic. 86 That being so, I am satisfied that Wesfarmers is obliged to indemnify Mrs Vasic under the farm legal liability policy. 87 Even if I had not been satisfied that the subject activity was an integral part of the farm business, the claim by Mr Ahmed El Hayek upon Mrs Vasic would in my view still have been covered by the policy. This is because the personal injury sustained by Mr Ahmed El Hayek was caused by an occurrence, namely the fire in the shearers' quarters, which was " … in connection with …" the farm business. 88 Although it must depend on the context, the phrase "in connection with" is one of broad meaning and wide connotation requiring merely a relationship between one thing and another: Selected Seeds Pty Ltd v QBEMM Pty Ltd [2009] QCA 286 at [22]; Drayton v Martin (1996) 67 FCR 1 at 32 per Sackville J; Our Town FM Pty Ltd v Australian Broadcasting Pty Ltd (1987) 16 FCR 465 at 479 per Wilcox J. 89 The coverage clause is directed to the issue of whether the occurrence is connected to the farm business. Here, the occurrence was connected to the farm business because the fire took place in the shearers' quarters which was one of the farm buildings used for the purpose of the farm business in which Mr Ahmed El Hayek was accommodated as a paying guest. This was the activity described on the Proposal as one of the uses to which the shearers' quarters was put. 90 The occurrence took place whilst the farm business was being undertaken. In short, the occurrence happened on the farm, whilst the business was in existence and during a disclosed activity. There is a sufficient causal connection. 91 In those circumstances, it seems to me that the width of the coverage clause is sufficient for Wesfarmers to be obliged to indemnify Mrs Vasic for the claim made by Mr Ahmed El Hayek. 92 In light of these two conclusions, it is unnecessary for me to analyse the balance of the submissions by QBE as to how this policy may otherwise respond.

Indemnity - Personal Liability Policy 93 Wesfarmers accepts that under the primary coverage clause the events which occurred on the farm leading to the plaintiff's injuries would ordinarily be covered. But that concession was properly tempered by reference to the exclusion clause. It was the submission of Wesfarmers that the exclusion was enlivened in this case and that accordingly indemnity under the personal liability policy was not available. 94 Counsel for Wesfarmers accepted that Wesfarmers bore the onus of persuading the Court that the exclusion clause was effective. 95 An exclusion clause is to be construed according to its natural and ordinary meaning taken in the context of the contract of insurance as a whole. When appropriate, in the event of ambiguity, the clause ought be construed contra proferentem: Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500 at 510. 96 Wesfarmers submitted, and I accept, that the commercial rationale for this exclusion is described in Derrington & Ashton, The Law of Liability Insurance 2nd ed (2005) Lexis Nexis Butterworths at 11-486, in this way: "The basic purpose of this is to exclude claims related to the insured's business since their cover should be separately rated and appropriately qualified." 97 It may be noted that in this policy, and specifically where the words are used in the exclusion clause, there is no particular definition of the word "business". 98 My satisfaction that the subject activity was part of the cropping farm business means that so long as the exclusion clause "you or your family's business" includes the cropping farm business, then the exclusion would be capable of application. 99 Senior counsel for QBE accepted that this result would follow: T69.

100 In all of those circumstances I am satisfied that the exclusion clause is capable of applying. However before concluding finally that the exclusion clause is effective to deny indemnity, it is necessary to determine a factual issue, namely, whether the bodily injury suffered by Mr Ahmed El Hayek was one " … caused by or arising directly or indirectly from …" the farming business. 101 If that factual finding is made then it follows that coverage would not be available under the personal liability policy. 102 The parties were agreed that the determination of this factual question would need to abide the evidence and factual findings in the principal proceedings. Accordingly, I will refrain from proceeding at this stage to make any factual findings as to whether the bodily injury was of a kind falling within the exclusion.

Summary 103 I am satisfied that the activity of accommodating, as paying guests, licensed shooters for the purpose of hunting feral animals was a part of the cropping farm business conducted by Mrs Vasic on Mulga Creek Station at Byrock. 104 I am satisfied that the Farm Liability Policy issued by Wesfarmers on part the Rural Plan responds to provide cover to Mrs Vasic for Mr Ahmed El Hayek's claim relating to that activity. 105 I am further satisfied that I should make the appropriate declarations and orders to give effect to my conclusions. 106 At the request of the parties, I will provide counsel with the opportunity to formulate the declarations and orders to give effect to these conclusions.

(1) The parties are to lodge short minutes of order with my Associate by 6pm, Thursday, 5 August 2010 which are either agreed, or else which represent the declarations and orders for which each party contends.

(2) Adjourn the proceedings to 9.30am on Friday, 6 August 2010.

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