VACC Insurance v BP Australia

New South Wales Court of Appeal CITATION : VACC Insurance v BP Australia [1999] NSWCA 427 FILE NUMBER(S) : CA 40482/98 HEARING DATE(S) : 1 July 1999 JUDGMENT DATE : 22 November 1999

VACC Insurance Co. Ltd (Appellant) PARTIES : v BP Australia Ltd (Respondent) JUDGMENT OF : Meagher JA at 1; Fitzgerald JA at 2; Brownie AJA at 43

LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : 7615/96 LOWER COURT JUDICIAL OFFICER : Bowden ADCJ

COUNSEL : A: J D Hislop QC, S G Campbell R: R A Conti QC, M L Williams SOLICITORS : A: Curwood & Partners R: Connery & Partners CATCHWORDS : Estoppel; issue estoppel; Anshun estoppel; reasonableness of conduct of party against whom estoppel raised; privies; 'approbate and reprobate'; public liability insurance policy; breach of condition of policy; contribution or indemnity under s5 of the Law Reform (Miscellaneous Provisions) Act 1946. Law Reform (Miscellaneous Provisions) Act 1946, ss5,6 ACTS CITED : Suitors Fund Act Insurance Contracts Act 1984 (Cth) Port of Melbourne Authority v Anshun P/L (1981) 147 CLR 589 Rogers v R (1994) 181 CLR 251 CSR v Cigna Ins. Aust Ltd (1997) 146 CLR 402 Brice v J H Wackerbath (Australasia) P/L; Flack & Ors (Third Parties) (1974) 2 Lloyds LR 274 Edwards v Insurance Office of Aust Ltd (1933) 34 SR (NSW) 88 Parker v Lewis [1873] 8 Ch App 1056 J N Taylor Holdings Ltd v Bond 59 SASR 432 C E Heath v Pyramid Building Society (1997) 2 VR 256 SA Housing Trust v State Government Insurance Commission (1989) 51 SASR 1 Thompson v Palmer (1933) 49 CLR 507 CASES CITED: Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Hamilton v Whitehead (1989) 166 CLR 131 Krakowski v Eurolynx Properties Ltd (1995) 130 ACRT Fraser v B N Furman (Productions) Ltd [1967] 1 WLR 898 Albion Insurance Co Ltd v Body Corporata Strata Plan No. 4303 [1983] 2 VR 339 Legal & General Ins Aust Ltd v Eather (1986) 6 NSWLR 390 Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) ATR 81-246 Blair v Curran (1939) 62 CLR 464 Munni Bibi v Tirloki Nat (1931) 58 LR Ind App 158 McIntosh & Sons Ltd (1939) 49 CLR 453 Aetna Insurance Co v Canadian Insurance Co (1994) 19 Alta LR (3d) 317 Ramsay v Pigram (1967) 118 CLR 271 DECISION : Allowed

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA40482/98 DC 7615/96

MEAGHER JA FITZGERALD JA BROWNIE AJA

1 MEAGHER JA: I agree with Fitzgerald JA. 2 FITZGERALD JA: On 27 March 1991, a petrol bowser at a BP Service Station at Moruya operated by Geselle Investments Pty Ltd ("Geselle") malfunctioned and sprayed petrol, resulting in burns to a customer, Mr Clark. 3 Mr Clark sued Geselle and the respondent ("BP") in the District Court for damages for negligence. 4 Kirkham DCJ awarded Mr Clark $171,870 damages against Geselle and BP, plus a further $25,000 exemplary damages against Geselle. 5 In finding that both Geselle and BP were liable to Mr Clark for negligence, his Honour said: "On the question of liability it seems to me that both Geselle and BP are liable to the plaintiff for his injuries. In the case of Geselle, this is so because: · Geselle was the occupier of the premises by way of a Sub-Lease from BP and as such had a duty of care to those persons such as [Mr Clark] lawfully on the premises; · Geselle knew of the potential for malfunctions in that particular pump bringing about unexpected discharges of fuel; · Geselle had arranged with Gilbarco for the pump to be serviced but in full knowledge of its fault requiring parts, continued to allow the pump to be used by self serve customers and Mrs Hyndes; · … Mrs Hyndes had been given no warning about these malfunctions and was permitted on her first day to dispense fuel using faulty equipment. In the case of BP, … the pump which was the property of BP was a hybrid and had an inherent design fault which should have been known to BP. In addition to this [BP] agreed with [Mr Clark] that if [Mr Clark] consented to a dismissal of the claim for damages against the first and third defendants and consented to a Judgement in favour of the sixth defendant, [BP] would admit liability to [Mr Clark] and the matter would then proceed, in so far as the claim against [BP] was concerned, as an assessment leaving the action against [Geselle] and [BP]. A similar course was taken in respect to the second defendant, in that leave was granted to [Mr Clark] to discontinue against that entity. In this fashion it was anticipated that the [BP] would seek contribution from [Geselle] following the entry of Judgement against both [Geselle] and [BP]. It is thus that I find that both the [Geselle] and [BP] breached their duty of care to [Mr Clark]." 6 The award of exemplary damages against Geselle was based on findings that it had notice of the malfunctioning bowser, and "[i]n spite of this knowledge which was in effect knowledge that the offending petrol bowser, in certain circumstances, would spontaneously discharge fuel, [Geselle] permitted the bowser to be used whilst it was so prone to malfunction. I regard this, given the nature of the product and its inherent dangerousness, as displaying a recklessness in the extreme …" 7 Kirkham DCJ had earlier given BP leave to proceed against Geselle for contribution or indemnity under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946. In later determining that proceeding, his Honour held that BP was 25% responsible for Mr Clark's damages Excluding his exemplary damages. and that Geselle was 75% responsible for those damages, and gave judgment accordingly. This appeal falls to be decided on the basis that his Honour's apportionment between BP and Geselle of responsibility for Mr Clark's damages was based on the findings to which reference has earlier been made. 8 At the time when Mr Clark was injured, Geselle was insured by the appellant ("VACC") under a public liability insurance policy. The material section of the policy obliged VACC to "… pay to or on behalf of [Geselle] all sums which [Geselle] shall become legally liable to pay for compensation (which expression in this section of the policy does not include punitive or exemplary damages) in respect of: "(a) Body injury … …"

However, Special Condition 3 provided: "[Geselle] shall take all reasonable precautions to prevent bodily injury … and shall take reasonable measures to maintain all premises … appliances and plant in a sound condition …"

9 Geselle did not pursue a claim under the policy against VACC, and VACC did not institute any proceeding against Geselle to establish that it was not liable to Geselle under the policy. 10 BP paid Mr Clark, and, on 6 June 1997, obtained leave from Kirkham DCJ on an ex parte application under subs 6(4) of the Law Reform (Miscellaneous Provisions) Act to commence an action in the District Court against VACC. The judgment from which this appeal is brought by VACC was given in the action which BP commenced pursuant to that grant of leave. 11 So far as presently material, s 6 of the Law Reform (Miscellaneous Provisions) Act provides: "6.(1) If any person (hereinafter in this Part referred to as the insured) has … entered into a contract of insurance by which he is indemnified against liability to pay any damages or compensation, the amount of his liability shall on the happening of the event giving rise to the claim for damages or compensation, and notwithstanding that amount of such liability may not then have been determined, be a charge on all insurance moneys that are or may become payable in respect of that liability.

(4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court have the same powers, as if the action were against the insured: Provided that, … no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the Court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, … necessary to establish that the insurer is so entitled to disclaim, have been taken.

(5) Such an action may be brought although judgment has been already recovered against the insured for damages or compensation in respect of the same matter.

(7) No insurer shall be liable under this part for any greater sum than that fixed by the contract of insurance between himself and the insured.

12 BP's action against VACC is based upon the following allegation in paragraph 7 of BP's statement of claim: "7. VACC is liable to indemnify Geselle in respect of its liability to BP."

It has been accepted by both parties in this Court that BP is entitled to succeed against VACC if, but only if, Geselle is entitled to indemnity under its policy with VACC. See, especially, subs 6(7) of the Law Reform (Miscellaneous Provisions) Act and Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399. 13 Although BP sought to debate which of it and VACC had to prove whether special condition 3 of the policy between Geselle and VACC had been complied with or breached by Geselle, that issue seems to me irrelevant. Both parties accepted that there had been a breach of special condition 3 if, but only if, Geselle did not take steps which it regarded as reasonable to avert a danger which it knew existed. See, for example, Legal & General Insurance Ltd v Eather (1986) 6 NSWLR 390. Both parties also accepted that, if Geselle breached special condition 3, it is not entitled to be indemnified by VACC under the policy, BP did not rely on s54 of the Insurance Contracts Act 1984 (Cwlth). and that, as earlier noted, in that event BP is not entitled to succeed. Conversely, BP is entitled to succeed against VACC if Geselle is entitled to indemnity under the policy. 14 The findings set out above in paragraph 6 were material not only to the exemplary damages awarded to Mr Clark but to the apportionment of Mr Clark's other damages between Geselle and BP because they bore upon Geselle's culpability in respect of those damages. See Wynbergen v Hoyts Pty Ltd (1997) 149 ALR 25, 29. It was not seriously contested by BP that, if those findings apply as between Geselle and VACC, Geselle is not entitled to be indemnified by VACC under the policy and BP's action against VACC must fail. The same result would follow if the findings set out in paragraph 6 above apply directly as between BP and VACC. 15 BP's action against VACC was not determined by Kirkham DCJ but by Bowden ADCJ. On 17 June 1998, Bowden ADCJ gave judgment in favour of BP against VACC in the sum of $128,997.50, This amount is 75% of $171,970, the amount which Mr Clark was awarded against Geselle and BP, not including the exemplary damages he was awarded against Geselle. plus interest and costs. This appeal by VACC is brought from that judgment. 16 Critical findings made by Bowden ADCJ contradicted the findings set out above in paragraph 6. Bowden ADCJ found that: "Mr Geselle had no reason other than to think that the operation was being carried out in a reasonable manner which would mean that while there may be oversights, neglect and a falling short, there would be no deliberate courting of danger and that there would be no actions in contumelious disregard of the safety of customers."

It is not in dispute that, if those findings stand, Geselle did not breach special condition 3 of the policy and this appeal must fail. 17 Shortly stated, VACC argued that, because of Kirkham DCJ's findings set out above in paragraph 6, the findings made by Bowden ADCJ set out above in paragraph 16 were not open. 18 The primary basis for VACC's argument in this Court is an alleged issue estoppel between BP and Geselle arising from Kirkham DCJ's findings set out above in paragraph 6. VACC submitted that the issue of what might be shortly described as Geselle's recklessness was conclusively determined as between BP and Geselle by those findings, Blair v Curran (1939) 62 CLR 469; Azzopardi v Bois (1968) VR 183; Aetna Insurance Co v Canadian Surety Co (1994) 19 Alberta LR (3d) 317, 334; and generally, Spencer, Bower, Turner and Handley, Res Judicata, 3rd ed, paras 182, 198 ff. and that the estoppel operates between BP and VACC as Geselle's "privy". Ramsay v Pigram (1968) 117 CLR 271; Effem Foods Pty Ltd v Travel Industries of Australia Pty Ltd (1993) 43 FCR 510, 516, 521, 526, 539, 541; Aetna Insurance Co v Canadian Surety Co (1994) 19 Alberta LR (3d) 317, 334; and, generally, Spencer, Bower, Turner & Handley, Res Judicata, 3rd ed., paras 231 and 232. According to VACC, because the findings set out above in paragraph 6 increased the amount for which Geselle is "legally liable" to BP, which either Geselle or BP is entitled to recover from VACC subject to the operation of special condition 3 of the policy between Geselle and VACC, those findings must be applied in determining whether Geselle complied with special condition 3. 19 VACC also relied on a wider principle of estoppel Cf FAI General Insurance Company Ltd v Interchase Corporation Ltd (1999) 10 ANZ Insurance Cases 61-428, at 74,818-74,819. commonly called Anshun estoppel since the decision of the High Court in Port of Melbourne Authority v Anshun Pty Ltd. (1981) 147 CLR 589. The precise scope of this principle, and its relationship with other principles, including estoppel by conduct and abuse of process, has not yet been authoritatively defined by the High Court. See, for example, Rogers v R (1994) 181 CLR 251, and CSR v Cigna Insurance Ltd (1997) 146 ALR 402. 20 One concern of the principle of Anshun estoppel is to avoid conflicting judgments, including judgments which, even if not pronounced on the same cause of action, "appear to declare rights that are inconsistent in respect of the same transaction". 147 CLR 589, 602; see also Chamberlain v DCT (1988) 164 CLR 502, 507, 512; Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332, 346; Ling v The Commonwealth (1996) 139 ALR 159, 172. However, the application of this principle even "to cases of issue estoppel is to be treated with caution." Anshun 147 CLR 598, 598-599. 21 This Court has held that the applicability of the principle of Anshun estoppel is not determined by the prospect of conflicting judgments but by the reasonableness of the conduct of the party against whom the estoppel is sought to be raised. Boles v Esanda Finance Corporation Ltd (1989) 18 NSWLR 666, 671; Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287; Ling v Commonwealth (1996) 139 ALR 159; Santara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5. Commonly, the issue of reasonableness is related to an omission to raise an issue in earlier litigation. See, for example, Rahme v Commonwealth Bank of Australia (NSWCA, unreported, 20 December 1991). However, more recent statements in the High Court suggest a different foundation for Anshun estoppel. 22 In Rogers v R, (1994) 181 CLR 251. Deane and Gaudron JJ described the principle as a "true estoppel" which has "… sometimes been conflated with considerations relevant to the various principles aimed at ensuring the final, binding, and conclusive nature of judicial determinations", such as res judicata and issue estoppel. Their Honours continued: 181 CLR 251, 275. "It may be that some cases of true estoppel resulting from the failure to raise a matter which could reasonably have been raised in earlier proceedings will also prove, on analysis, to involve an impermissible challenge to the incontrovertible correctness of the judgment given in those proceedings. Indeed, there seems to have been a conjunction of that kind in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR at pp.598-599). However, in our view, estoppel is separate and distinct from the principles which secure the final, binding and conclusive nature of judicial determinations and their conflation can only result in confusion.

23 A passage in the more recent joint judgment of Dawson, Toohey, Gaudron McHugh, Gummow and Kirby JJ in CSR v Cigna Insurance Australia Ltd (1997) 146 ALR 402. is to somewhat similar effect. Their Honours said: 146 CLR 402, 435. "… it may be that the bringing of proceedings with respect to one claim is properly to be seen, in the circumstances of the case, as an election … not to proceed on another claim …, thus giving rise to an estoppel by conduct such that it would be unconscionable for that other claim to be pursued …."

The footnote to that passage is as follows: "cf Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; 36 ALR 3 noting, however, that the judgments in that case do not proceed by reference to the ordinary principles of estoppel. See also British Airways Board v Laker Airways Ltd [1985] AC 58 at 81."

24 Apart from the present uncertainty concerning the nature and scope of Anshun estoppel, conflicting opinions have been expressed on a number of matters which are potentially relevant to the present proceeding. It is helpful to identify at least some of those matters and associated authorities. The following questions, expressed in language apposite to this dispute, assist in focussing attention on decisions which are capable of elucidating the answer to the present problem:

1. Did Geselle have any entitlement to indemnity under its policy with VACC, subject to special condition 3, in respect of Geselle's liability to BP, prior to BP obtaining judgment against Geselle? See, for example, the discussion in Derrington & Ashton, The Law of Liability Insurance , pp342 ff; see also Bayswater Car Rental Pty Ltd v Hannell (1999) 10 ANZ Insurance Cases 61-437. . 2. On a claim for indemnity under the policy by Geselle, would Geselle and/or VACC be bound by the judgment against Geselle in favour of BP? 3. Could Geselle have joined VACC as a third party in BP's proceeding against Geselle, and, if so, should Geselle have done so? Stewart v Sydney City Council; Government Insurance Office of New South Wales (Third Party) (1973) 1 NSWLR 444; Brice v J H Wackerbarth (Australasia) Pty Ltd ; Flack & Ors Third Parties (1974) 2 Lloyd's Law Reports 274; Conti v Rockwell 91985) VR 287; cf Legal & General Assurance Society Limited v Commonwealth of Australia & Precision Cranes and Hoists Pty Ltd (1985) 3 ANZ Insurance Cases 60-621; See also Bitumen & Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200; Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, 595-596. 4. Subject to obtaining the leave of the Court under subs6(4) of the Law Reform (Miscellaneous Provisions) Act , could BP have joined VACC as a defendant in BP's proceeding against Geselle and, if so, should BP have done so? Subsections 6(1) and (4), Law Reform (Miscellaneous Provisions) Act ; National Mutual Fire Insurance Co Ltd v Commonwealth (1981) 1 NSWLR 400; Government Insurance Officer of NSW v Long (1982) 2 ANZ Insurance Cases 60-496; Foxe v Brown (1985) 59 ALJR 186; Re Martin & Manitola Insurance Corporation [1987] 45 DLR (4th) 753; N Taylor Holdings Ltd (In liquidation) v Bond (1993) 59 SASR 432; C E Heath Casualty General Insurance Ltd v Pyramid Building Society (1997) 2 VR 256; Beneficial Finance Corporation Ltd v Price Waterhouse (1996) 68 SASR 19; FAI General Insurance Company Ltd v Interchase Corporation Ltd (1999) 10 ANZ Insurance Cases 61-428.

25 Obviously, neither Geselle nor BP would have a claim against VACC if BP had failed against Geselle, since there would be no relevant legal liability to found a claim for indemnity under the policy. The issue whether insured and insurer are bound by, and entitled to the benefit of, a judgment and the findings on which the judgment is based only arises when there is a judgment against an insured in favour of a third party. 26 In Brice v J H Wackerbath (Australasia) Pty Ltd; Flack & Ors (Third Parties), (1974) 2 Lloyds LR 274. Lord Denning MR stated without elaboration (1974) 2 Lloyds LR 274, 276. that, when sued by its insured, an insurer such as VACC "may challenge the finding" on which its insured's liability to a third party is founded. See also J N Taylor Holdings v Bond 59 SASR 432, 440, 441; FAI v Interchase (1991) 10 ANZ Insurance Cases 61-428, at p74,823, 74,824-74,825. However, the general view is that, subject to the provisions of particular policy, a judgment against an insured is conclusive, as a matter of contract, to establish the insured's entitlement to indemnity from the insurer in accordance with the policy. Parker v Lewis [1873] 8 Ch App 1056, 1059-1060; Post Office v Norwich Union Fire Insurance Society Ltd (1967) 2 QB 363, 373-374, 375; Cacciola v Fire & All Risk Insurance Ltd (1971) 1 NSWLR 691, 695; Aetna Insurance Co v Canadian Surety Co (1994) 19 Alberta LR (3d) 317, 336; C E Heath v Pyramid Building Society (1997) 2 VR 256, 272-273, 287-288, 291, 293-294, 295; Beneficial Finance v Price Waterhouse 68 SASR 19, 37, 55-56. The correct position was succinctly expressed by Davidson J in Edwards v Insurance Office of Australia Ltd. (1933) 34 SR (NSW) 88. After referring to Parker v Lewis, [1873] 8 Ch App 1056. his Honour said: 34 SR (NSW) 88, 94. "The real question in this action … between the insured and the company is not whether the insured … was negligent, but whether a successful claim had been made against the insured, by some person, based on an allegation of such negligence."

27 It remains to consider the position in respect of the findings on which a judgment in favour of a third party against an insured is based. 28 In J N Taylor Holdings Ltd v Bond, 59 SASR 432. the South Australia Full Court held that, unless a party to the proceeding in which judgment is given, an insurer is not bound by findings of fact upon which a judgment is given in favour of a third party against the insured. 59 SASR 432, 440, 441. Despite the reservations expressed in the Victorian Court of Appeal in C E Heath v Pyramid Building Society, (1997) 2 VR 256, 273, 294. that part of the judgment in J N Taylor Holdings Ltd v Bond 59 SASR 432. seems to me clearly correct. I cannot discern any basis upon which an insurer could be precluded from asserting a breach of policy against an insured contrary to findings of fact in a proceeding in which judgment had been given against the insured in favour of a third party. 29 While that conclusion seems to constitute a considerable obstacle to VACC's allegation of issue estoppel, it does not necessarily follow that an insured is free to relitigate against its insurer findings made against the insured in the proceeding in which the judgment in favour of a third party relied on by the insured against the insurer was given against the insured. 30 However, in South Australian Housing Trust v State Government Insurance Commission, (1989) 51 SASR 1; See also State Bank of NSW Ltd v Alexander Stenhouse Ltd (1997) Aust Torts R 81-423. Full Court of South Australia held that it was not an abuse of process for the insured to relitigate such findings against the insurer. No other ground of opposition to the insured relitigating the findings was raised by the insurer or considered by the Court. 31 BP's proceeding against VACC, which was not commenced until after BP's judgment against Geselle was given, does not seek to establish that Geselle or VACC is liable or was to BP independently of BP's judgment against Geselle, but relies for that purpose on that judgment, which is used to establish both that Geselle has a legal liability "to pay … compensation [to BP] … in respect of … bodily injury", and the amount to which BP is legally entitled. However, BP's proceeding, and Bowden ADCJ's findings set out on paragraph 16 above, contradicted the findings set out above in paragraph 6 upon which the amount of Geselle's legal liability, and BP's legal entitlements, are dependent. 32 "[A] plaintiff is not permitted to 'approbate and reprobate'". Verschures Creameries Limited v Hull & Netherlands Steamship Company Limited [1921] 2 KB 608, 612. The forecast by Lord Atkin in United Australia Limited v Barclays Bank [1941] AC 1, 32, that, following their explanation by reference to the doctrine of equitable election by Viscount Maughan in Lissenden v CAV Bosch Limited [1941] AC 412, 417 ff, references to "approbating and reprobating" would "probably … become unfashionable" has not been fulfilled. See, for example, Banque Des Marchands De Moscou (Koupetschesky) v Kindersley [1951] 1 Ch 112; Edwards v Culcairn Shire Council (1963) 64 SR (NSW) 62. In my opinion, neither Geselle nor BP can at the one time assert against VACC that Geselle is legally liable to BP for the amount of the judgment given by Kirkham DCJ in favour of BP against Geselle and dispute a matter which increased the amount of that judgment. 33 It is unnecessary for present purposes to decide whether this is part of the doctrine of estoppel in pais or an independent doctrine. Cf Cave v Mills [1862] H&N 914 [158 ER 740], 927-928 per Wilde B; Edwards v Culcairn Shire Council 64 SR (NSW) 62, 70. While the classic statement concerning estoppel in pais by Dixon J in Thompson v Palmer (1933) 49 CLR 507, 547. See also Grundt v The Great Boulder Proprietary Gold Mine Ltd (1938) 59 CLR 641, 676. relates to an inconsistent departure from an assumption which formed the basis of a past exercise of rights not an attempt to act on two inconsistent bases simultaneously, I cannot identify a difference in principle. 34 Both courses are equally unconscionable. Irrespective of whether VACC should or could have been joined in the proceeding between BP and Geselle by either BP and Geselle (or both of them), it would not be conscionable for Geselle, and it is not conscionable for BP, to allege against VACC a matter (which is established by the findings set out above in paragraph 16, while they stand) which contradicts the basis upon which the amount which BP is entitled to recover from Geselle was determined, (which is established by the findings set out above in paragraph 6). If VACC had been joined in the proceeding between BP and Geselle, a claim by either Geselle or BP against VACC would have failed. The unconscionability is reinforced if VACC could have been joined in the proceeding between BP and Geselle, in which event the present inconsistency of findings would have been avoided and, if Geselle was not reckless, the extent of its responsibility for Mr Clark's damages, as between it and BP, would have been reduced. 35 VACC also challenged Bowden ADCJ's finding set out above in paragraph 16 above, which was at the end of the following passage: "….I … have to consider whether … the insured would be bound to lose because he had not discharged the onus of showing that he had taken all reasonable precautions. I say that because it is clear that the duty is a personal duty of the insured, it is not one of any of the insured's employees.

In the case of a company insured, as is the case here, it is necessary that the failure be that of the director, more the guiding hand in the company, as distinct from that of someone who although he or she may have had a managerial function in part of the company's operations, was in no way in control. I do not regard it as sufficient that there be a failure by Mr Pike, who was then managing the particular service station, Mr Gizelle (sic) is the one who has to establish that he took reasonable precautions, or looked at another way, to establish that he did not have knowledge of the situation and deliberately elect not to do anything. Or another way, that he was grossly in dereliction of his duty in failing to be aware of the problem. He could be in breach if he became aware that Mr Pike or Mrs Hines (sic) were incompetent and did nothing about it.

I find, however, that Mr Gizelle (sic) was at the relevant time involved in the management of another service station and had employed Mr Pike for in excess of a year to manage the subject business was being sold and representatives of the new owners were engaged in a learning on the job exercise, having previously attended a course run by the oil company. From the first report of VACC's loss adjuster it is clear that Mr Gizelle (sic) was quite ignorant of any problem at the service station. Mr Gizelle (sic) had no reason other than to think that the operation was being carried out in a reasonable manner which would mean that while there may be oversights, neglect and a falling short, there would be no actions or inactions in contumelious disregard of the safety of customers."

36 There are a number of errors in those statements. 37 In the first place, the approach is flawed. While only a breach by Geselle of special condition 3 of the material portion of the policy would entitle VACC to refuse indemnity, it does not follow that Mr Pike did not represent Geselle for the purpose of determining whether such a breach occurred. In Tesco Supermarkets Ltd v Nattrass, [1972] AC 153. Lord Reid said: [1972] AC 153, 171. "Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company. Their subordinates do not. They carry out orders from above and it can make no difference that they are given some measure of discretion. But the board of directions may delegate full discretion to act independently of instructions from them. I see no difficulty in holding that they have thereby out such a delegate in their place so that within the scope of the delegation he can act as the company."

Lord Reid's statement was applied by the High Court in Hamilton v Whitehead . (1989) 166 CLR 131, 137. Further, in Krakowski v Eurolynx Properties Ltd , (1995) 130 ACRT. Brennan, Deane, Gaudron, McHugh JJ said 130 ACRT, 16. that "[a] division of function among officers of a corporation … does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them". 38 These statements are also inconsistent with BP's submission in this Court that Geselle needed to do no more in order to comply with special condition 3 of the material portion of the insurance policy than delegate responsibility for the operation of its Moruya service station to a "competent employee". In any event, there is no evidence that Mr Pike met that description. On the contrary, he knowingly permitted dangerous petrol bowsers to remain in use, including use by "self-service" customers. 39 Nor is there any evidence that Mr Geselle did not know what was being done or reasonably believed that Mr Pike was competent. Mr Geselle did not give evidence, which justified an inference that his evidence would have not have assisted Geselle or BP against VACC. Nor did any other witness give evidence which might have assisted BP on this point. 40 In my opinion, the finding in paragraph 16 above lacks an evidentiary foundation, and was wrongly made. 41 In summary, BP's proceeding against VACC should have been decided on the basis of the finding set out in paragraph 6 above, and dismissed. 42 I would allow the appeal, set aside the order made below and dismiss BP's proceeding against VACC. BP should pay VACC's costs of that proceeding and this appeal. BP should have a certificate under the Suitors Fund Act, if qualified. 43 BROWNIE AJA: The appellant (VACC) insured Geselle Investments Pty Ltd (Geselle) under a public liability insurance policy. Geselle operated a service station in Moruya, as franchisee and sublessee of the respondent (BP). Mr Clark, a customer of the service station was burnt in a fire which occurred on 27 March 1991, after a petrol bowser malfunctioned. 44 Kirkham DCJ gave judgment for Mr Clark against BP and Geselle for compensatory damages, and judgment against Geselle for an additional sum for exemplary damages. Geselle went into liquidation. BP satisfied the whole of the judgment for compensatory damages, and then sued VACC pursuant to s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act), claiming the benefit of the policy issued by VACC to Geselle. Bowden ADCJ gave judgment for BP, rejecting the proposition that Geselle was in breach of a condition of the policy which provided: "The Insured shall take all reasonable precautions to prevent bodily injury ... and shall take reasonable measures to maintain all premises furnishings fittings appliances and plant in a sound condition ..." 45 The policy contained a promise by VACC to indemnify Geselle against its legal liability "to pay for compensation (which expression ... does not include punitive or exemplary damages)". The questions raised on appeal were whether BP was estopped from denying the breach of this condition, and if not, whether breach of the condition had been independently established. 46 The "principals" of Geselle were Mr and Mrs Geselle. Geselle conducted two service station businesses, one at Moruya, and the other at Batemans Bay. Mr and Mrs Geselle worked at the latter place, and Geselle employed Mr Pike to manage the Moruya service station. He had been so employed for a year, as at March 1991. Geselle contracted to sell the Moruya service station business to Rigdart Pty Ltd (Rigdart). The contract provided that Mr Liddle and Mrs Hyndes, representatives of Rigdart, might attend at the service station, to learn about the management and the day to day running of the service station business; and, in general terms, Mr Pike showed them this. 47 Mr Pike was aware that one bowser sometimes malfunctioned. It was not designed to be used by customers serving themselves, but customers occasionally did serve themselves, and it sometimes happened that a customer replaced the nozzle on the bowser, without turning off the pump motor, so that when the next person used the bowser, petrol might be pumped out of the nozzle without warning, and without the user intending this. This had happened at least twice earlier in March 1991. A service man from Gilbarco Australia Ltd (Gilbarco), a company which serviced the bowsers from time to time, attended and noted the defect, but was unable to repair the bowser immediately, for want of the necessary parts. There is a disputed question as to whether, as part of what Mr Pike told Mrs Hyndes, he told her about this defect. 48 The accident involving Mr Clark occurred when Mrs Hyndes was about to fill the petrol tank of Mr Clark's van. She removed the nozzle from the bowser, and it started to pump petrol as she started to point the nozzle towards the van. Petrol struck Mr Clark, and then ignited. 49 Mr Clark sued Mrs Hyndes, Rigdart, Mr Pike, Geselle, BP and Gilbarco. Geselle did not appear. On the hearing, BP entered into an agreement with Mr Clark to the general effect that if Mr Clark abandoned his claim against Mrs Hyndes, Rigdart, Mr Pike and Gilbarco, BP would admit liability, and Mr Clark would proceed against it and Geselle. This happened, and on 2 August 1996 Kirkham DCJ gave the judgment mentioned in para 44. 50 On some earlier occasion his Honour granted leave to BP to file a Third Party Notice as against Geselle, claiming contribution amongst tortfeasors, and made an order for substituted service of that Notice. That claim for contribution came on for hearing some time later, after the date of Kirkham DCJ's first judgment. On this occasion Mr Geselle attended at court on behalf of Geselle. His Honour apportioned responsibility for Mr Clark's compensatory damages on the basis that Geselle pay 75% of those damages, and BP 25%. The record does not include the reasons for this decision. 51 VACC asserts that BP is estopped from denying that Geselle was in breach of the policy condition quoted above. It says that Geselle and VACC are privies, and that as between BP and Geselle, and therefore also as between BP and VACC, the judgments of Kirkham DCJ create the estoppel mentioned. BP says that there was neither a sufficient identity of issues, nor a sufficient identity of parties, to found an estoppel. 52 Kirkham DCJ made two relevant decisions. In the first, he found for Mr Clark against BP and Geselle, and awarded compensatory damages, and at the same time found for Mr Clark against Geselle, and awarded exemplary damages. In relation to that decision BP and Geselle were co-defendants, but there was no issue between them, so that no issue estoppel arose, as between them. In the second decision, his Honour dealt with BP's claim against Geselle for contribution between tortfeasors, under section 5 of the Act, and found that it was just and equitable that Geselle pay 75% of Mr Clark's compensatory damages, having regard to the extent of Geselle's responsibility for the damage. The record before us is sadly deficient, but it seems right to infer that, in coming to that conclusion, his Honour's reasoning was influenced by the same considerations that led him to decide earlier that exemplary damages should be awarded as against Geselle. 53 On that earlier occasion, his Honour said that Geselle was "on notice of the malfunctioning petrol bowser", but that in spite of that knowledge, which amounted to knowledge that the bowser would sometimes spontaneously discharge petrol, Geselle permitted the bowser to continue to be used; and he regarded this conduct, given the nature of petrol and its dangerousness, "as displaying recklessness in the extreme which ... attracts exemplary damages". 54 Earlier, his Honour had said that there was no evidence that Mr Pike or any other employee of Geselle had brought to the notice of Mrs Hyndes the difficulties, problems and dangers of which he, Mr Pike, knew; and that there was no evidence that Mrs Hyndes had been trained in the use of the equipment. I should add that all that we have before us, as to this first hearing, is a copy of the reasons for judgment, and that those reasons include references to evidence that is not before us. 55 There is even less before us as to the second hearing before Kirkham DCJ. All that we have is a series of notes of orders made, and of who appeared from time to time; and the dates of some of these notes may be inaccurate. 56 On the trial of BP's claim against VACC, BP tendered a copy of the reasons for the first judgment of Kirkham DCJ, the notes just mentioned, and a series of reports from an investigator retained on behalf of VACC. The investigator's reports included statements from Mr Pike, Mrs Hyndes and Mr Liddle, but none of them gave oral evidence. Indeed, the documents mentioned constituted the whole of the evidence adduced, going to the present issues. 57 In his statement to the investigator, Mr Pike said that he had told both Mr Liddle and Mrs Hyndes to look out for problem with the bowser, and told them how to cope with it. In their statements, neither Mr Liddle nor Mrs Hyndes denied this, or, indeed, responded at all to Mr Pike's statement, although they both said in general terms that they were unaware of any particular problem with the bowsers. The statement of Mrs Hyndes suggests indirectly that she had received some training, in that when the fire broke out, she knew what to do, and ran and did it immediately. That is, for what it is worth, and so far as one can tell from the record, the evidence before Kirkham DCJ was different to the evidence before Bowden ADCJ as to whether Mr Pike had told Mrs Hyndes anything relevant, and as to whether he had given her any training in the use of the equipment. 58 The (relevant) issue before Bowden ADCJ was whether Geselle was in breach of the condition of the policy, quoted in para 44. The proper construction of that condition was not in issue, either at the trial or on appeal. It must be construed having regard to the commercial purpose of the insurance contract: an insured may be held to be negligent, in not foreseeing some risk, or in not taking appropriate steps to avert that risk, but he insures in respect of his liability arising from that finding, and what is "reasonable" as between himself and his insurer is different to what is "reasonable" as between himself and someone injured in consequence of his negligence. To constitute a breach of the condition, he must have recognised the danger, and deliberately courted it, by taking measures he knew to be inadequate to avert it; or his conduct must have been "at least reckless, that is to say, made with actual recognition by [him] that a danger exists, and not caring whether or not it is averted": Fraser v B N Furman (Productions) Ltd [1967] 1 WLR 898 at 905-906; Albion Insurance Company Ltd v Body Corporate Strata Plan Number 4303 [1983] 2 VR 339 at 344-345; and Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390. The test is a subjective one, personal to the insured. 59 Kirkham DCJ found Geselle guilty of reckless conduct attracting exemplary damages, on the basis that Mr Pike knew of the danger, but failed to tell Mrs Hyndes of it, or to give her any training in the use of the equipment. However, BP says that this is not the same thing as saying that Geselle itself acted in breach of the condition of the insurance policy, properly construed. 60 It is of course true that as between Geselle and Mr Clark, and so far as concerns the award of compensatory damages, the negligence of Mr Pike was the negligence of Geselle's servant, but, as is common ground, this is not relevant to the present issues. 61 It is also true that in his first judgment Kirkham DCJ held that Geselle acted with the degree of recklessness apt to lead to the award of exemplary damages. That is, his Honour must be taken to have found that Geselle itself acted with this degree of recklessness: Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) ATR 81-246. The reasoning that led to this conclusion is not, perhaps, entirely clear, but his Honour seems to have treated the knowledge of Mr Pike of the existing defects in the bowser as having been the knowledge of Geselle, and the decision of Mr Pike to continue to use the bowser notwithstanding these defects as the decision of Geselle. VACC now submits that this must have been either on the basis that Geselle had wholly entrusted the management of the Moruya service station to Mr Pike, so that his state of mind became the state of mind of Geselle, or that Mr Pike can be expected to have reported matters to Mr Geselle. Again, the record before us is silent; but these seem to be the only possible bases for the finding that Geselle was liable to pay exemplary damages. 62 That is, the first judgment of Kirkham DCJ established an issue estoppel between Mr Clark and Geselle that, in one of these ways, Geselle had acted recklessly; and his Honour's second judgment established an issue estoppel as between Geselle and BP that Geselle should bear 75% of the responsibility for the compensatory damages; and the likelihood is that his Honour's reasoning in arriving at the figure of 75% was influenced by the same factors as led to his conclusion that Geselle had acted recklessly. However, the issue before Bowden ADCJ was whether Geselle had breached the policy condition, and BP contends that this is a different issue. 63 In Blair v Curran (1939) 62 CLR 464 at 531 - 533, Dixon J (as he then was) said: "A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification or its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it has merged and has no longer an independent existence, whilst in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J ... the judicial determination concludes, not merely as the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous.

In the phraseology of Lord Shaw, 'a fact fundamental to the decision arrived at' in the former proceedings and 'the legal quality of the fact' must be taken as finally and conclusively established ... But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation.

The difficulty in the actual application of these conceptions is to distinguish the matters fundamental or cardinal to the prior decision or judgment, decree or order or necessarily involved in it as its legal justification or foundation from matters which even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or groundwork of the judgment, decree or order." 64 In the same case Starke J said, at 510: "It is well settled that a judgment concludes not merely the point decided but matters which were necessary to decide and which were actually decided as the groundwork of the decision itself although not then directly the point at issue and that a judgment is conclusive evidence not merely of the facts directly decided but of those facts which are necessary steps to the decision - so cardinal that without them it cannot stand."

65 In Munni Bibi v Tirloki Nat (1931) 58 LR Ind App 158, 165-166 Sir George Lowndes, delivering the advice of the Judicial Committee, said: "That there may be res judicata as between co-defendants has been recognized by the English courts and by a long line of Indian decisions. The conditions under which this branch of the doctrine should be applied are thus stated … : 'If a plaintiff cannot get at his right without trying and deciding a case between co-defendants, the Court will try and decide that case, and the co-defendants will be bound; but if the relief given to the plaintiff does not require or involve a decision of any case between co-defendants, the co-defendants will not be bound as between each other by any proceeding which may be necessary only to the decree the plaintiff obtains.' This statement of the law has been accepted and followed in many Indian cases … In such a case, therefore, three conditions are requisite: (1) There must be a conflict of interest between the defendants concerned; (2) it must be necessary to decide this conflict in order to give the plaintiff the relief he claims; and (3) the question between the defendants must have been finally decided."

66 Can it be said, using the words of Starke J, that we know from the record that Kirkham DCJ's decision that Geselle acted recklessly, as between itself and Mr Clark, in one of the ways discussed in para 61, was so cardinal a step in his decision to apportion responsibility to Geselle of 75% of the compensatory damages, that the decision cannot stand, without his Honour's inferred finding of recklessness, by Geselle? If so, does it follow that an issue estoppel arises, to the effect that Geselle breached the policy condition? Were the three conditions mentioned in Munni Bibi satisfied? 67 In my view, it is likely that one of the issues actually raised and decided by Kirkham DCJ in his second decision was that Mr Pike had acted recklessly, as his Honour had found in his first judgment; but I do not think that it can be inferred that he needed to decide or did decide that Geselle itself had acted recklessly, in the sense that Geselle acted in breach of the policy condition, as distinct from his having decided earlier that Geselle acted recklessly, in the sense necessary to found an award of exemplary damages. The question about the policy was simply not before his Honour. 68 The ambivalence of the finding of recklessness by Geselle in the first judgment raises a difficulty now. There is a difference to be borne in mind, when deciding whether Geselle breached the policy condition, in the two possible findings: first, that Geselle was reckless because it had left the entire conduct of the Moruya service station to Mr Pike, so that his state of mind was Geselle's state of mind for the purpose of deciding whether Geselle was liable to pay exemplary damages; and secondly that Geselle was reckless because Mr Pike had reported matters to Mr Geselle, so that Mr Geselle had the state of mind necessary to support the award of exemplary damages against Geselle. 69 The second of these possible findings would be sufficient to found a finding that Geselle breached the policy condition, focussing as it does on the state of mind of Mr Geselle, one of the "principals" of the company. But the first of the possible findings would not, by itself, be sufficient, because it leaves open the possibility that although those who controlled Geselle, Mr and Mrs Geselle, had left its Moruya service station under the care of Mr Pike, they had not deputed to him the task of complying with the terms of the insurance policy. The precise question to focus upon is whether Geselle acted recklessly, in the sense discussed in para 52, and this involves examining the position of Geselle, itself. If Geselle deputed to Mr Pike the entire conduct of the Moruya service station so that, as between Geselle and Mr Clark, Mr Pike's state of mind was the state of mind of Geselle, it does not necessarily follow that Geselle had deputed to Mr Pike the task of dealing with VACC, or with the question of Geselle's compliance with the policy condition. Indeed, so far as the record shows, the policy might have covered not just the Moruya service station, but also the Batemans Bay service station; and it may be that he did not know of the policy, much less its terms. 70 I conclude that the judgments of Kirkham DCJ did not give rise to an issue estoppel as between BP and VACC, on the issue relating to the policy condition, because there was not a sufficient identity of issues. To the extent that the judgments of Kirkham DCJ dealt with matters going to the issue of compliance with the policy condition, those judgments dealt with evidentiary matters only, and not facts that were essential to a decision about compliance with the policy condition. 71 In relation to the first decision of Kirkham DCJ, it was not necessary to decide any question as between BP and Geselle, in order to give Mr Clark the relief he sought, namely compensatory damages against BP and Geselle, and exemplary damages against Geselle, so that no res judicata arose as between BP and Geselle from that decision. The principles discussed in Munni Bibi do not directly arise out of Kirkham DCJ's second decision, but for the reasons discussed in paras 25-28, there is no sufficient identity between the issues resolved by that decision, and the issues now litigated. 72 There does not appear to be any reported decision dealing directly with the question whether Geselle and VACC are privies in the relevant sense, so that there was a sufficient identity of parties, and it is necessary to approach the question as one of principle. In Cababe, Principles of Estoppel (1881), cited by Starke J in McIntosh & Sons Ltd (1939) 49 CLR 453 at 463 and by Spencer Bower, Turner and Handley, Res Judicata (3rd ed), para 231, the justification for the principle was expressed in this way: "... although the estoppel is only a personal matter between the particular parties yet to give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicted that they are their representatives in interest should likewise have the benefit of and be subject to the burden of admission. Upon any one therefore upon whom all the rights and obligations of any legal entity devolve such as an executor administrator or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact or the obligation to be subjected to, the admission; and so too upon anyone upon whom the right and obligations arising out of the particular transaction that gave rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and obligation." 73 I do not think that there was a sufficient identity of parties. In my view it could not have been predicted that Geselle was the representative in interest of VACC, nor could it have been said that all the rights and obligations of Geselle (related to Mr Clark's injuries and their consequences) would devolve upon VACC. 74 The only decided case of which I am aware that might be thought to be on the point is the decision of the Alberta Court of Appeal in Aetna Insurance Co v Canadian Insurance Co (1994) 19 Alta LR (3d) 317. At paras 32-33 Conrad JA, with whom the other members of the court agreed, said only that in his view the parties there were privies, citing an American work, Black's Law Dictionary (6 Ed) defining "privies" as follows: "Those who are partakers or have an interest in any action or thing, or any relation to another … They are of six kinds: …

'Privies', in the sense that they are bound by the judgment, are those who acquired an interest in the subject-matter after the rendition of the judgment. 'Privies' to a judgment are those whose succession to the rights of property affected occurs after the institution of the suit and form a party to it."

75 If one compares the entries in Black's Law Dictionary for "privies" and "privity", it is clear that when the learned authors spoke of privies in relation to contract, in the course of a general article describing privies, they were speaking of parties between whom where was privity of contract, in the sense in which this term in contract law, rather than privity of parties, as that expression is used in relation to the doctrine of res judicata. 76 The authors do not cite any authority for the last two sentences quoted by Conrad JA, and repeated in para 74 above; and, with all due respect, it is not correct to say that, because there is privity of contract between two people, A and B, a decision in litigation involving A in relation to something the subject matter of that contract will be the subject of a res judicata binding benefiting or burdening B: see the various factual examples cited in Spencer Bower, Turner and Handley at paras 231 - 232. 77 Further, it is well established that, for an issue estoppel to arise, the estoppel "must be mutual": Ramsay v Pigram (1967) 118 CLR 271 at 276 and 282, and Rogers v The Queen (1994) 181 CLR 251 at 267. The question might be tested this way: if there had been an express finding by Kirkham DCJ that Geselle had not been reckless, it can hardly be right to think that VACC was thereby estopped from claiming in later proceedings brought against it by BP under s6 of the Act, that there had been a breach of the policy condition, arising from recklessness on the part of Geselle. 78 VACC put its case in issue estoppel, but during the course of the hearing it embraced an alternative proposition, that there was an estoppel of the kind discussed in such cases as Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. For the reasons set out above (particularly paragraphs 67-70), I do not think that the judgment of Bowden ADCJ can be seen to contradict the judgment of Kirkham DCJ. That is, because Kirkham DCJ was concerned only with the questions litigated before him, his finding of recklessness was ambiguous in the context of the question decided by Bowden ADCJ. There might or might not have been an inconsistency, but the record does not enable one to say that there was. 79 Nor, it seems to me, can one say that BP acted unreasonably in not raising the question of Geselle's entitlement to indemnity from VACC in the litigation decided by Kirkham DCJ. So far as the record shows, at the time that Kirkham DCJ gave his second decision, BP did not know whether Geselle was insured, or with whom, or on what terms, or whether, if there was a policy, what grounds the insurer took for denying liability under the policy. Assuming unconscionability to be the test, or part of the test applicable, the same reasoning leads me to conclude that that one cannot say that BP has acted unconscionably in following the course it took. 80 There remains the question whether on the evidence before Bowden ADCJ VACC established factually a breach of the policy condition. As I have said, the evidence before Bowden ADCJ was relevantly different to the evidence before Kirkham DCJ. On the evidence before Bowden ADCJ, I do not think that one can say that, even if one rejects the statement of Mr Pike, a breach by Geselle was established, as distinct from finding that Mr Pike was grossly negligent. I do not think that the evidence shows that Geselle knew or ought to have known, at the time it might be thought to have entrusted its relevant affairs to Mr Pike, that he was other than competent. The fact that, at a later stage, he acted recklessly, does not prove the facts that VACC needs to prove here. 81 For these reasons I would dismiss the appeal with costs. However, since this is a minority view, I should add one further comment. The appeal and, it seems, the trial, were conducted on the assumption that a breach by Geselle of the policy condition meant that Geselle was not entitled to indemnity. That assumption appears to conflict with the provisions of s 54 of the Insurance Contracts Act 1984 (Cth), and I would otherwise have sought further submissions from the parties about this question. **********

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