FEDERAL COURT OF AUSTRALIA PC Case Gear Pty Ltd v Instrat Insurance Brokers Pty Ltd (in liq) [2020] FCA 137 File number(s): VID 336 of 2018 Judge(s): ANDERSON J Date of judgment: 19 February 2020 Catchwords: CONTRACTS – insurance brokerage – where insurance broker engaged by client on annual basis – where client operates business supplying computer hardware and software – where broker advised on risks and procured cover – consideration of nature and terms of retainer – where client paid settlement sum to settle claims of copyright infringement by third party – where client could not recover settlement sum under insurance policies due to exemption for copyright infringement – whether broker breached contractual duty to act with reasonable skill and care NEGLIGENCE – insurance broker – whether broker failed to act with reasonable skill and care by making insufficient inquiries of the client's business – whether broker failed to act with reasonable skill and care by failing to identify, and advise client of, risk of copyright infringement INSURANCE – obligations of an insurance broker – expert evidence on the conduct of a reasonably competent insurance broker generally, and in the circumstances of client in present case DAMAGES – causation – whether breach of contract and tort by insurance broker caused payment of settlement sum by client – whether client would have obtained relevant cover but for broker's breach – reasonableness of settlement sum paid by client – remoteness – mitigation – loss of opportunity – contributory negligence – whether client's failure to raise risk of copyright infringement negligently caused own loss – whether client's actions comprising alleged breach of copyright negligently caused own loss Held: insurance broker breached duties owed to client in contract and tort to act with reasonable skill and care by failing to identify risk of copyright infringement and advise client – client entitled to damages in the amount of settlement sum paid to third party Legislation: Australian Securities and Investments Commission Act 2001 (Cth) Civil Liability Act 2002 (NSW) Copyright Act 1968 (Cth) ss 115(2), (3), (4) Corporations Act 2001 (Cth) Judiciary Act 1903 (Cth) s 79 Wrongs Act 1958 (Vic) Pt V, ss 26, 26(1), 26(1)(a), 52, 62(1), 62(2), 63 Wrongs (Amendment) Act 2000 (Vic) Cases cited: Ackland v Commonwealth of Australia [2007] NSWCA 250; (2007) Aust Torts Reports 81-916 Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 Anderson v Eric Radio & TV Pty Ltd [1965] HCA 61; 114 CLR 20 Aneco Reinsurance Underwriting Ltd v Johnson & Higgins Ltd [2011] UKHL 51; [2001] 2 All ER (Comm) 929 Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1 BNP Paribas v Pacific Carriers Ltd [2005] NSWCA 72 Brooklyn Lane Pty Ltd v MIC Australia Pty Ltd [2001] VSC 33; 11 ANZ Insurance Cases ¶61-487 Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; 161 CLR 653 Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; 69 NSWLR 120 Carradine Properties Ltd v DJ Freeman & Co (a firm) (1982) 126 Sol J 157; (1982) 5 Const LJ 267 Caswell v Powell Duffryn Associated Collieries Limited [1940] AC 152 Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] 2 NSWLR 7 Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; 160 CLR 226 DOQ17 v Australian Financial Security Authority (No 3) [2019] FCA 1488 Elilade Pty Ltd v Nonpareil Pty Ltd [2002] FCA 909; 124 FCR 1 Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57 Ferrcom Pty Ltd v Inbush (NSW) Pty Ltd (1997) 9 ANZ Insurance Cases ¶61-339 Fine's Flowers Ltd v General Accident Assurance Co of Canada (1977) 81 DLR (3d) 139 Geoffrey W. Hill & Associates (Insurance Brokers) Pty Limited v Squash Centre (Allawah North) Pty Limited (1990) 6 ANZ Insurance Cases ¶61-012 Gibbs Holdings Pty Ltd v Mercantile Mutual Insurance (Australia) Limited [2000] QCA 254; [2002] 1 Qd R 17 Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 (Comm) Horsell International Pty Ltd v Divetwo Pty Ltd [2014] NSWCA 368; 18 ANZ Insurance Cases ¶61-991 Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613 Joslyn v Berryman [2003] HCA 34; 214 CLR 552 Kotku Bread Pty Ltd v Vero Insurance Ltd [2012] QSC 109 La Trobe Capital & Mortgage Corp Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; 190 FCR 299 Marvin Manufacturers (Aust) Pty Ltd v Chambers of Manufactures Insurance Limited & Ors (1992) 7 ANZ Insurance Cases ¶61-122 McNealy v The Pennine Insurance Co Ltd [1978] 2 Lloyd's Rep 18 Messagemate Aust Pty Ltd v National Credit Insurance Brokers (Pty Ltd) [2002] SASC 327; 85 SASR 303 Mount Isa Mines Ltd v Pusey [1970] HCA 60; 125 CLR 383 Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556 Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] HCA 59; 157 CLR 149 Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd [1981] VR 981 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768; 196 ALR 257 Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2017] FCAFC 102 Rosenberg v Percival [2001] HCA 18; 205 CLR 434 Rybak v Senneh Pty Ltd [1996] NSWCA 460; (1997) ANZ Conv R 74 at 78–9 Sali & ors v Metzke & Allen [2009] VSC 48 Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Strategic Property Holdings No 3 Pty Ltd v Austbrokers RWA Pty Ltd [2012] NSWSC 1570 TC Industrial Plan Pty Limited v Robert's Queensland Pty Limited [1963] HCA 57; 180 CLR 130 Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 Tosich v Tasman Investment Management Ltd [2008] FCA 377; 250 ALR 274 Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321 Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited [1998] HCA 38; 192 CLR 603 Wyndham City Council v Terra Culture Pty Ltd [2018] VSC 81 Wyong Shire Council v Shirt [1980] HCA 12; 146 CLR 40 Date of hearing: 9-11, 25 September 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 216 Counsel for the Plaintiff: Mr J F Richardson Solicitor for the Plaintiff: Hope & Co Lawyers Counsel for the Defendant: Mr A M J Meagher Solicitor for the Defendant: Sparke Helmore ORDERS VID 336 of 2018 BETWEEN: PC CASE GEAR PTY LTD (ACN 099 808 072) Plaintiff AND: INSTRAT INSURANCE BROKERS PTY LTD (ACN 088 119 297) (IN LIQUIDATION) Defendant JUDGE: ANDERSON J DATE OF ORDER: 19 FEBRUARY 2020 THE COURT ORDERS THAT: 1. Within 7 days, the parties are to file orders by agreement giving effect to the reasons for judgment or, if no agreement is reached, written submissions (of no more than five pages) as to the form of final relief to be ordered. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS VID 336 of 2018 BETWEEN: PC CASE GEAR PTY LTD (ACN 099 808 072) Plaintiff AND: INSTRAT INSURANCE BROKERS PTY LTD (ACN 088 119 297) (IN LIQUIDATION) Defendant JUDGE: ANDERSON J DATE OF ORDER: 24 FEBRUARY 2020 THE COURT ORDERS THAT: 1. The time by which the parties are required to file written submissions (of no more than five pages) as to the form of final relief to be ordered (including costs) is extended to 4pm on 4 March 2020. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS VID 336 of 2018 BETWEEN: PC CASE GEAR PTY LTD (ACN 099 808 072) Plaintiff AND: INSTRAT INSURANCE BROKERS PTY LTD (ACN 088 119 297) (IN LIQUIDATION) Defendant JUDGE: ANDERSON J DATE OF ORDER: 4 March 2020 THE COURT ORDERS BY CONSENT THAT: 1. The defendant pay damages to the plaintiff in the sum of $250,000.00. 2. The defendant pay interest to the plaintiff pursuant to section 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth), in the sum of $44,030.06. 3. The defendant pay the plaintiff's costs of and incidental to the proceeding, including any reserved costs: (a) as between party and party up to and including 4.00 p.m. on 14 March 2019; (b) on an indemnity basis thereafter. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. TABLE OF CONTENTS Introduction and summary [1] Background [8] PCCG's business [8] Insurance retainer with Instrat [14] The renewal process [21] Key aspects of the insurance plans [27] Renewal in 2015 [30] Purchase of cyber risk and management liability insurance [36] The Microsoft claim [42] Settlement of the Microsoft claim [49] Subsequent insurance [54] Proceedings in this Court [56] PCCG's claims [56] Instrat's defence [58] Legal issues for determination [60] The trial [63] Expert evidence [67] Obligations of a reasonably competent insurance broker [70] Extent of Instrat's compliance with its obligations [72] Mr Parnell [73] Mr Ellison [80] Factual findings [84] Credibility of key witnesses [87] Key findings [88] Absence of discussion regarding risk of copyright infringement [89] Breach of contract and duty of care [99] Obligations of an insurance broker [100] Instrat's breaches [111] Causation [130] Relevant principles [131] Availability of cover for loss [134] PCCG's actions but for Instrat's breach [137] Reasonableness of PCCG's settlement [145] Conceptual framework [146] Characteristics of a reasonable settlement [151] Reasonableness of the settlement in the present case [161] Conclusion on causation [169] Remoteness [170] Damages [175] Mitigation of loss [176] Loss of opportunity [180] Contributory negligence [187] Relevant principles [189] PCCG's failure to inform Instrat of risk [195] PCCG's failure to prevent unauthorised use of licences [204] Conclusion [213] REASONS FOR JUDGMENT ANDERSON J: Introduction and summary 1 PC Case Gear Pty Ltd (PCCG) carries on a business as a supplier of computer hardware and software. A focus of PCCG's business is personal computers that are specially designed and assembled with components for the purposes of playing computer games. PCCG also assembles computers based on a customer's specific design request. 2 PCCG's business includes selling computers with Microsoft Corporation's Windows operating system (Windows) pre-installed. Prior to 2016, PCCG purchased certain licences for Windows from a third party distributor and installed them on computers prior to sale. However, in January 2016, those licences were the subject of a letter of demand from Microsoft alleging breach of copyright by PCCG in relation to the licences (Microsoft claim). PCCG subsequently settled this claim by, amongst other things, paying an amount of $250,000 (settlement sum) to Microsoft. 3 From 2009 until 2016, during which the Microsoft claim was made, PCCG retained Instrat Insurance Brokers Pty Ltd (now in liquidation) (Instrat) as its insurance broker. Each year, at least one representative of Instrat met with PCCG to discuss the business' insurance cover. Instrat would advise PCCG of its major recommendations. As a consequence, Instrat prepared and provided annual insurance plans to PCCG and procured for PCCG the cover described in those plans. However, the plans expressly excluded cover for copyright infringement. The result was that PCCG was covered for its defence costs in respect of the Microsoft claim, but was not covered for the payment of the settlement sum to Microsoft. 4 PCCG now sues Instrat for breach of contract and in negligence. PCCG alleges, broadly, that Instrat failed to act with reasonable skill and care by failing to advise PCCG of the availability of cover for copyright infringement. PCCG claims that it has suffered loss and seeks to recover damages from Instrat in the amount of the settlement sum. Instrat, however, denies liability. It says that it did not breach its duties to PCCG or, alternatively, that PCCG's particular loss was not caused by its breach, or was otherwise not reasonably foreseeable by the parties. Instrat finally contends that any damages award should be reduced due to PCCG's own contributory negligence. 5 My conclusion, as explained in detail below, is that Instrat acted negligently by failing to properly advise PCCG of its exposure to copyright infringement so as to enable PCCG to make an informed decision regarding that exposure. A reasonably competent insurance broker in the position of Instrat would have discerned a risk of copyright infringement from the nature of PCCG's business and raised that risk, and options to address that risk, with PCCG. However, Instrat failed to do so. If that risk had been raised by Instrat, my view is that PCCG would have taken out relevant insurance cover, which was readily available for businesses in PCCG's position. 6 As a result, Instrat is liable to compensate PCCG for the amount of the settlement sum. As explained below, the payment of that sum by PCCG to Microsoft was, as a matter of law, caused by Instrat's breach. Contrary to Instrat's submission, the settlement by PCCG of the Microsoft claim, including the amount of the payment under the terms of compromise, was reasonable in the circumstances. Moreover, there is no merit in the argument that PCCG's own negligence wholly or partly caused its loss. In the context of their relationship, it was not PCCG's responsibility to highlight for Instrat the risks that PCCG faced. And, finally, there is insufficient evidence to establish that PCCG's original use of the Windows licences, which became the subject of the Microsoft claim, was negligent. 7 PCCG is accordingly entitled to damages of $250,000 from Instrat. Background PCCG's business 8 PCCG commenced operations in 2000. PCCG operates an online business, selling and distributing, amongst other things, computer hardware, accessories and software. PCCG now sells approximately 4,500 products. PCCG's website allows customers access to all of PCCG's products, software and services. In addition, the website identified at all relevant times that PCCG provided, amongst other things, the following services: (a) data storage, processing and warehousing; (b) hardware maintenance and installation; and (c) IT&T consulting, helpdesk and network support. 9 PCCG is also known in the industry as a "value-added reseller". This refers to the fact that PCCG takes manufactured parts from other suppliers, puts them together as a package (including software installation) and tailors them to a customer's needs. In this way, PCCG is different from a traditional retailer of computers. During the relevant periods, PCCG purchased approximately 20 per cent of its hardware and software directly from manufacturers, with the balance coming from third party distributors. 10 As indicated, one of the key areas of business for PCCG is gaming computers, which are designed and assembled by PCCG for the purposes of playing computer games. Gaming computers are comprised of a case, a motherboard, and an operating system, as well as various other components such as the central processing unit, memory and hard drive. The motherboard will be from any one of several suppliers. The price to customers for the computer package is determined by aggregating the retail price of the components, adding a build fee (representing the labour costs of assembling the computer) and then an adjustment depending on what is considered to be a competitive retail price. 11 The operating system in the computers sold by PCCG are always from Microsoft. Windows is a proprietary system created, owned and distributed by Microsoft. To install Windows on its gaming computers, PCCG is required to purchase licences, which it does from Microsoft approved distributors or sub-distributors. PCCG has never purchased Windows licences directly from Microsoft. 12 Windows licences can be purchased in two ways. The first is a "Full Packaged Product" (FPP) licence, which is a physical packaged copy of Windows (which could be contained on a CD, DVD or a USB stick) and a sticker containing the product activation key. This is a more "user friendly" version of Windows, as it allows the end user to reinstall the program if there are any problems, and also to reinstall it on another computer should the end user upgrade their computer. 13 The second way a Windows licence can be purchased is with an "Original Equipment Manufacturer" (OEM) licence, which contains an envelope containing an installation disc and a sticker with the activation key. The OEM licence is intended for use by experienced system builders. The envelope does not contain any literature on how to install the software and, unlike the FPP licence, the OEM licence does not allow for the software to be reinstalled. As PCCG completes the installation of Windows before the gaming computer is shipped to the customer, those computers utilise OEM licences of Windows. Insurance retainer with Instrat 14 During the relevant periods, lnstrat was the holder of an Australian financial licence pursuant to the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), and the provider of general insurance products advice. Instrat is now in liquidation, with the company members resolving to wind up the company on 9 January 2018. 15 Prior to 2009, James Cameron (Mr Cameron), the managing director of PCCG, obtained insurance for PCCG without the assistance of an insurance broker. However, from 2009 until 2016, PCCG retained Instrat to advise in relation to, and effect, liability insurance (insurance retainer). Luke Prior (Mr Prior) was Instrat's principal contact for PCCG for the duration of this retainer. Mr Prior had been recommended to Mr Cameron as an experienced insurance broker with knowledge of the IT industry. 16 Mr Cameron decided to retain Instrat because, as PCCG's business was growing very quickly, he was concerned that he did not have the time, nor the expertise, to understand what insurance cover was required by the business. Mr Cameron was also concerned with the increases in the level of stock on hand and wished to insure against stock losses, damage to stock, burglary and protection of PCCG's business premises. In 2009, when PCCG first retained Instrat to give advice, Mr Cameron informed Mr Prior that PCCG was an online retailer that sold computer hardware and software, and that PCCG also provided advice in respect of hardware components, the installation of software and the compatibility of products for the customer's application. 17 Mr Cameron gave evidence that, when he first met Mr Prior, he gave instructions to the effect that PCCG wanted "to be insured for best practice". However, Mr Cameron accepted in cross-examination that it was possible that he was only using the phrase "best practice" because he had adopted that phrase in written notes made by him in 2016, being seven years after PCCG first retained Instrat and a year after the final annual meeting between PCCG and Instrat in 2015. In these circumstances, and given that PCCG did not rely on this particular evidence to inform the nature of the insurance retainer, I disregard this aspect of Mr Cameron's evidence. 18 Mr Prior gave evidence that, when PCCG first retained Instrat, Mr Cameron had taken him around PCCG's warehouse for the purpose of providing Mr Prior with an understanding of PCCG's business. Mr Prior also explored PCCG's website to obtain an understanding of the products being sold by the business. Mr Prior understood that the business sold computer hardware and software through its website and that the business built computers to the specifications of its customers. Mr Prior's understanding was that only a small percentage of PCCG's turnover related to the building of the computers. However, Mr Prior accepted that he was not aware that PCCG was providing IT&T consulting, IT helpdesk and IT network support. Mr Prior's understanding was that PCCG's business was more in the nature of retail. He did not understand that it was also involved in consulting and a value-added reseller service. 19 Mr Prior acknowledged that he held discussions with Mr Cameron about third party suppliers and imported goods. However, Mr Prior said that the purpose of those conversations was limited to ascertaining the business' exposure as a manufacturer of imported goods, which had a direct bearing on the public liability premium and the cover available. 20 Mr Prior's evidence was that he was predominately focused at this time on the amount of the software purchased by PCCG and the fact that it was being imported from overseas. His focus was less around the risk of copyright infringement. Mr Prior accepted, however, that selling goods obtained from third party suppliers (i.e. not the manufacturer) exposed PCCG's business to the risk of copyright infringement. Mr Prior's evidence was that copyright infringement was a risk of greater significance to software consultants, technicians and developers. He said that copyright infringement is not usually a significant risk to IT retailers, particularly those selling predominantly hardware, because they do not typically offer software products themselves. Mr Prior's view was that PCCG was exposed to some risk of copyright infringement but that the exposure was less because they were retailing as opposed to altering software. The renewal process 21 Around July or August each year, Mr Prior would arrange for a meeting with Mr Cameron to discuss PCCG's insurance cover (referred to below as the "annual meetings"). The annual meetings always took place at PCCG's offices. Mr Prior would always attend, often with a colleague. Mr Prior would ask general questions about the business. In particular, Mr Prior asked about the proportion of items imported by the business in comparison with the proportion that the business sourced domestically. There was also discussion about the particular location from which the business sourced its products. Mr Prior described the objective of these meetings as ensuring that Instrat provided cover that was going to meet PCCG's needs, and to ensure that Instrat was properly informed as to the business that PCCG was undertaking. 22 Following the annual meetings, Mr Prior would provide PCCG an insurance plan. Each plan was in the same format. The insurance plan would record the premiums payable for the coming year, the sums insured, and would also include certain "Major Recommendations", which was a topic of discussion at each annual meeting. Mr Prior explained that the major recommendations were based on what he identified as "holes" in PCCG's insurance cover. The insurance plan also listed a range of "Uninsured Exposures", as discussed further below. 23 The identification of the "Major Recommendations" in the insurance plans were based on Mr Prior's experience in servicing similar clients in the IT industry. Mr Prior had advised a number of clients in the IT industry including importers, consultants, software engineers and software developers. For companies that were selling computers and providing advice to end users about what computers to purchase, Mr Prior would generally recommend a combined professional indemnity and public liability policy. This form of policy would cover a range of risks, claims for negligent professional advice, loss of data, claims for licence breaches and, potentially, claims for copyright infringement. 24 Similar to his assessment of PCCG's business at the start of the insurance retainer, Mr Prior accepted that, during each year thereafter, there was an exposure to claims for copyright infringement. However, Mr Prior thought that this risk was low, and was less of an exposure because, according to his understanding, the business was simply on-selling software. Mr Prior's understanding was that PCCG was a legitimate retailer that sold licensed versions of Windows with some of the computers that it sold. In these circumstances, Mr Prior was of the opinion that breach of copyright was only a minimal risk. 25 Mr Cameron gave evidence that at no time during the insurance retainer did Mr Prior, or any other representative of Instrat, explain to Mr Cameron, or any other representative of PCCG, either what copyright cover was and its relevance to PCCG's business, or that PCCG was uninsured for the risk of copyright infringement. Mr Prior did not recall any discussion about copyright infringement either. Mr Cameron additionally said that at no time did Mr Prior discuss with him, nor did he take him through, the "Uninsured Exposures" section of the insurance plan that, as discussed below, identified copyright infringement as one of the uninsured exposures. Mr Prior's evidence was that he would highlight that the "Uninsured Exposures" section was part of the insurance plan, but did not go through each uninsured exposure. 26 Mr Cameron expressed that, when he was provided a copy of the annual insurance plan after the annual meeting, he did not review the plans (and, in particular, did not read the list of uninsured exposures). He took the plans simply as a summary of the recent meeting. Key aspects of the insurance plans 27 Although the evidence of Mr Cameron and Mr Prior was that the insurance plans were settled annually during the insurance retainer (which commenced in 2009), there was only four insurance plans in evidence, namely those plans for the following periods: (a) 31 July 2012 to 31 July 2013; (b) 31 July 2013 to 31 July 2014; (c) 31 July 2014 to 31 July 2015; and (d) 31 July 2015 to 31 July 2016 (2015-16 insurance plan). 28 The insurance plans were materially in the same form. As explained, the "Major Recommendations" section outlined the key recommendations by Instrat in relation to the insurance cover that PCCG ought to consider obtaining. Although the content of the major recommendations altered slightly from year to year, the common recommendations by Instrat were public liability insurance, fire and/or business interruption insurance, management liability and directors and officers liability insurance, product recall insurance and marine cargo insurance. 29 The "Uninsured Exposures" section of the insurance plans listed a range of classes of insurance (typically around 50 different classes) for which PCCG was uninsured. The excluded classes of insurance were wide-ranging, and included oddities (from PCCG's perspective) such as "Aviation Hull & Liability", "Crop", "Livestock" and "Marine Hull". Most relevantly for current purposes, the "Uninsured Exposures" section of each insurance plan included the following exclusion: Infringement of Copyright or Patent Provides you with protection against being sued for such infringements, including amounts awarded by courts. Renewal in 2015 30 In early August 2015, Mr Prior and his colleague, Jordi Dower (Ms Dower), attended PCCG's offices for that year's annual meeting. On this occasion, Ms Dower asked questions regarding the PCCG group's financial performance, as well as undertaking a questionnaire with Mr Cameron. Discussion at the meeting included that in relation to the level of stock on hand and the maximum sum to insure against theft and burglary. 31 By the time of this meeting, PCCG's business had grown to earn a total annual revenue of approximately $80 million. As of 2015, the business was selling about 4,000 products. The vast majority of PCCG's sales comprised the sale of computer hardware and software for the customer to assemble or install into existing gaming systems or "ready to ship" gaming computers based on PCCG's own designs. Nearly all goods sold by PCCG were subject to copyright laws. All the gaming computers sold by PCCG required an operating system and the only operating system sold by PCCG was Windows. The sale of Windows was one of the top five products sold by PCCG. 32 As indicated, Mr Cameron's evidence was that he never asked Mr Prior, or anyone else at Instrat, for cover in relation to copyright infringement. Mr Cameron said that he relied upon Instrat to advise him of the types of cover that PCCG ought to acquire given the risks faced by the business. Mr Cameron said that the risk of copyright infringement was not discussed at the annual meeting in 2015. 33 Mr Prior's evidence about the annual meeting in 2015 was that it occurred on or about 10 August 2015 and lasted for approximately half an hour. Mr Prior explained that he was particularly concerned that PCCG was at risk in respect of management liability, as PCCG had not accepted his previous advice and recommendations to procure a management liability policy. Mr Prior was also concerned that PCCG faced a risk of cyberattacks that could shut down PCCG's website, and therefore cause substantial disruption and loss to PCCG's business. Mr Prior understood that the Christmas period was a particularly busy time for PCCG's business, and was becoming more concerned about the lack of cyberattack policy as Christmas approached. Mr Prior raised these concerns with Mr Cameron at the meeting. 34 Mr Prior gave evidence that he did not recall raising the risk of copyright infringement at the meeting in August 2015. He also accepted that he did not specifically take Mr Cameron to the "Uninsured Exposures" section of the insurance plan that expressly excluded cover for copyright infringement. Mr Prior said that his role as a broker was to highlight major risks. He said that it was impossible to eliminate all risks and that, as a broker, he concentrated on exposure that could have a catastrophic impact on the business. Consistent with his evidence regarding previous renewals, Mr Prior accepted that PCCG's business was exposed to a risk of a breach of copyright because it sold computer software, but his understanding was that PCCG did not alter the software (and just installed it in computers). This meant, in Mr Prior's view, that the extent of the risk of copyright infringement was lesser than if changes were being made by PCCG to the software. 35 Mr Prior also accepted in cross-examination that he was not aware at this time that PCCG's business provided IT consulting services or a valued-added reselling service. For instance, in the course of examination-in-chief, Mr Prior was taken to the "Brooklyn policy" (as introduced below at [55]), being the IT liability cover that PCCG procured after the end of its insurance retainer with Instrat. Part of Mr Prior's evidence included the following: [COUNSEL FOR PCCG:] But you haven't looked at this, or the equivalence, have you?---I didn't – I didn't provide an option on a IT liability cover. HIS HONOUR: And why was that, Mr Prior?---Again, my understanding was that it was more retailing – online retailing and I thought the exposure was more around public liability and, probably more importantly, the importing and being deemed a manufacturer of these products. And my main concern from a liability point of view was a bit of hardware coming into the country that caused a fire or something like that and damage to property and potentially being liable for that. I – I didn't understand that the business was so involved in the consulting and the value-added reselling service. That's the first I'm hearing of that term. Purchase of cyber risk and management liability insurance 36 Two major concerns raised by Mr Prior at the meeting in August 2015 were certain risks faced by PCCG that could be covered by cyber liability and management liability insurance. Consistent with these discussions, the major recommendations section of the 2015-16 insurance plan added a new (but brief) section, which read as follows: Extensions Very Important in your Industry: Cyber Liability (We would recommend extending your policy to include this cover) Tax Audit (We would recommend extending your policy to include this cover) 37 Instrat had in fact advised PCCG to take out management liability insurance since 2012, but PCCG had declined to take out cover. Mr Cameron and Emma Quigley (Ms Quigley), PCCG's operations manager, explained that this was because the business was initially much smaller, and that they were the only two people making major decisions for the business. As a result, they felt that such cover was unnecessary. However, as the business grew, and they started to hire a management team, the need for such cover became greater. 38 On 12 August 2015, two days after the annual meeting, Ms Dower sent Mr Cameron an email that attached a proposal form in relation to the management liability insurance. Ms Dower had completed basic information in the form, but requested that Mr Cameron complete the remaining questions. However, there was no immediate response from Mr Cameron. 39 Mr Cameron recounts that, as Christmas approached in 2015, he held a conversation with PCCG's warehouse manager, in which the manager expressed his concern that he could be personally sued for matters such as negligence, unfair dismissal or discrimination. On 10 December 2015, Mr Cameron emailed Mr Prior the following: Have just been informed that warehouse manager can be fined up to $250k in negligence. Can you please advise if we could mitigate this risk, as it seems unfair. 40 In response, Mr Prior and Ms Dower again raised with Mr Cameron the cyber risk and management liability insurance policies available to PCCG. 41 On or about 23 December 2015, Mr Cameron instructed Mr Prior to purchase the cyber risk and management liability insurance policies. Mr Prior consequently arranged for Instrat to purchase a Chubb management liability policy (Chubb policy) and a cyber insurance policy with DUAL, with an effective start as at 23 December 2015. Relevantly, the Chubb policy covered PCCG for defence costs in defending, investigating, settling or appealing any claim against the business up to $250,000. The Microsoft claim 42 Prior to 2016, in approximately 15 years of operation, PCCG had never been subject to an allegation or claim of copyright infringement. Indeed, Ms Quigley said she and Mr Cameron had never discussed the risk of a copyright infringement prior to the Microsoft claim. 43 On 8 January 2016, PCCG received notification of a claim for damages from Microsoft Corporation and its Australian subsidiary, Microsoft Pty Ltd, (collectively, Microsoft) in respect of an alleged breach of copyright by PCCG. The Microsoft claim concerned PCCG's purchase from a Microsoft sub-distributor, LJ IT Service & Consultation Pty Ltd, of Windows licences that: (i) were only available for use in "refurbished" (i.e. second hand) computers; (ii) were sold at a lower price; and (iii) were only available to companies that are members of Microsoft's "Authorised Refurbisher Program". However, PCCG did not trade in "refurbished" computers and, according to the evidence of Mr Cameron, PCCG was unaware of this category of licences as the distinction was not apparent from the stickers (or loose certificates of authenticity). It transpired that there were 4,000 such licences that had been installed as a component of PCCG customers' computers. 44 On the same day, Mr Cameron emailed Mr Prior and Ms Dower. He attached the letter of demand from Microsoft's solicitors, Holman Webb Lawyers, and sought Instrat's advice about how to claim under PCCG's insurance policies. 45 On 11 January 2016, Mr Prior and Casey Caldera (Mr Caldera) of Instrat attended PCCG's offices to discuss the Microsoft claim with Mr Cameron. Mr Caldera had begun transitioning into Mr Prior's role at Instrat in late 2015, although Mr Caldera had no interaction with PCCG until around the time of this meeting. Mr Prior and Mr Caldera advised Mr Cameron that the Microsoft claim would be covered by the Chubb policy, however, because of the coincidental timing of the claim (only a short period after PCCG had taken out the Chubb policy), the issue needed to be escalated to Chubb's assessor. 46 Over the subsequent months, Instrat engaged with Chubb on behalf of PCCG. Mr Cameron's evidence was that at no time during this period did Instrat indicate to PCCG that coverage would be limited to defence costs, as ultimately transpired. Ms Quigley, who had day-to-day responsibility for the Microsoft claim on behalf of PCCG, and Mr Cameron remained of the belief that the only issue to be resolved with Chubb was the coincidental timing of the claim. 47 On 11 April 2016, Instrat forwarded to Mr Cameron a letter from Chubb to Instrat which confirmed that PCCG would be covered for its defence costs in respect of the Microsoft claim, but would not be covered for any other loss "based upon, arising from or in consequence of any actual or alleged assertion or infringement of copyright". 48 On or about 6 May 2016, Mr Caldera suggested that Instrat put in a claim under PCCG's separate liability policy with Zurich in respect of the Microsoft claim. That claim was soon thereafter lodged with Zurich. However, on 11 May 2016, Zurich rejected PCCG's claim to indemnification under that policy. Settlement of the Microsoft claim 49 After receiving the Microsoft claim on 8 January 2016, PCCG responded to the claim with the assistance of its lawyers, Clayton Utz. Over the next nine months, Clayton Utz had ongoing communications with Microsoft's solicitors regarding the claim. In broad terms, Microsoft claimed that the relevant licences purchased by PCCG were unauthorised and therefore the installation of those licences onto the computers sold by PCCG was unauthorised. Microsoft expressed that it was entitled to damages under s 115(2) of the Copyright Act 1968 (Cth) (Copyright Act) in relation to PCCG's alleged breach of copyright. According to initial communications, Microsoft's solicitors contended that the appropriate damages award ought to be calculated by reference to the full recommended retail price of each certificate, being $178. As such, according to Microsoft, the starting position for any financial settlement between the parties would be a payment by PCCG to Microsoft in excess of $700,000. 50 PCCG responded that it had no reasonable grounds for suspecting that its use of the Windows licences constituted an infringement of Microsoft's copyright. PCCG consequently argued (but Microsoft denied) that Microsoft would not be entitled to damages for any infringement by reason of the defence under s 115(3) of the Copyright Act. For reference, that provision provides as follows: Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not. 51 The subsequent discussions and negotiations between the parties centered on PCCG's entitlement to rely on the defence under s 115(3), the availability of additional damages under s 115(4) and, to the extent damages were available, the appropriate calculation of the damages owed by PCCG to Microsoft. 52 Throughout this period, a series of offers of compromise were made by each party. The terms of the compromise discussed by the parties included an amount payable by PCCG to Microsoft, although the quantum was in dispute. On 11 March 2016, Microsoft said it would accept $360,000. On 24 March 2016, and later on 31 May 2016, PCCG offered $130,000. On 11 April 2016, and then on 28 June 2016, Microsoft said it would accept $320,000. 53 On or around 26 September 2016, PCCG settled the Microsoft claim. This required, amongst other things, the payment by PCCG to Microsoft of $250,000. In accordance with the terms of settlement, PCCG paid the settlement sum in five instalments as follows: (a) $50,000 on 6 October 2016; (b) $50,000 on 3 November 2016; (c) $50,000 on 2 December 2016; (d) $50,000 on 4 January 2017; and (e) $50,000 on 1 February 2017. Subsequent insurance 54 On 11 April 2016, Mr Cameron had instructed Instrat to cancel PCCG's cyber liability insurance policy. In May 2016, Mr Cameron contacted Tom Knox of Business Insurance Specialist Pty Ltd (BIS) to transfer PCCG's insurance brokering from Instrat. Mr Knox, having considered PCCG's business and the existing insurance policies, made recommendations in a report dated 21 July 2016. The recommendations were accepted by PCCG, and BIS put in place a suite of insurance policies for PCCG, including business insurance, cyber liability and privacy protection insurance, ISR insurance, management liability insurance, marine transit insurance and motor vehicle insurance. 55 Mr Knox also recommended that PCCG take out professional indemnity and liability insurance. Mr Knox's report expressed that "[a] significant reason for adding Professional Indemnity coverage is the extensions this coverage includes, such as Unintentional Breach of Copyright". With the IT sector in mind, Mr Knox identified four suitable policies for this purpose, all of which were available at the time of the annual meeting between PCCG and Instrat in August 2015. PCCG ultimately settled on purchasing a "Combined Information Technology Liability Insurance Policy: Professional Indemnity and Liability Insurance" with Brooklyn Underwriting (Brooklyn policy). Relevantly, the Brooklyn policy covered PCCG for the risk of unintentional infringement of the intellectual property of third parties. Proceedings in this Court PCCG's claims 56 PCCG commenced proceedings in this Court against Instrat on 23 March 2018. PCCG claims, in summary, that Instrat breached its insurance retainer, and was otherwise negligent by failing to advise PCCG of the availability of cover for copyright infringement (which would have provided cover against the Microsoft claim). PCCG seeks to recover the loss it suffered as a result of Instrat's breaches, being the settlement sum paid by PCCG to Microsoft. 57 PCCG also initially alleged contraventions by Instrat under the ASIC Act and the Corporations Act 2001 (Cth) for misleading and deceptive conduct. However, counsel for PCCG advised the Court during final address that PCCG no longer pressed its statutory claims. Instrat's defence 58 Instrat denies that it breached the insurance retainer or was negligent in providing the advice leading to the 2015-16 insurance plan. In particular, Instrat asserts that it is likely that the risk of copyright infringement was discussed at sometime between the parties, but that no witness can remember it due to the elongation of time. According to Instrat, it is mostly likely that Mr Cameron considered the risk of copyright infringement, but characterised it as minor because, at that time, PCCG had not faced a copyright infringement claim and, in Mr Cameron's view, PCCG only sourced its products from reputable suppliers. 59 Instrat further contends that, even if it did breach its duties to PCCG, then PCCG's loss (the payment of the settlement sum to Microsoft) was not caused by Instrat because, even if PCCG had been appropriately advised, PCCG would not have taken out any relevant insurance cover. Instrat additionally argues that the loss was not caused by Instrat, or was otherwise not reasonably foreseeable, because the settlement reached by PCCG was unreasonable. Instrat finally argues that any liability owed to PCCG should be reduced by reason of PCCG's contributory negligence. Instrat says that PCCG's original unauthorised use of the Windows licences was negligent, as was its failure to inform Instrat about the risk of copyright infringement to PCCG's business. Legal issues for determination 60 The parties provided a statement of agreed facts and a list of legal issues shortly prior to trial. As mentioned, PCCG no longer pursues its statutory claims for misleading and deceptive conduct. The remaining causes of action are PCCG's claim in contract and tort. 61 It was common ground between the parties that, under the terms of the insurance retainer, Instrat was required to exercise all due care and skill of a competent provider of general insurance products in advising PCCG in relation to the appropriate liability insurance for its business. It was also common ground that, in providing these services, Instrat owed PCCG a duty to exercise due care and skill. 62 According to the parties, the legal issues in dispute could be distilled to the following questions: [1]. Did Instrat breach its duty of care and/or its contractual obligation as PCCG's insurance broker by failing to advise in relation to and/or procure for PCCG insurance for breach of copyright? [2]. If the answer to question (1) is yes: a. was PCCG's loss reasonably foreseeable? b. is PCCG required to prove the settlement sum it paid to settle the Microsoft claim as reasonable, and if yes, has it done so? c. has PCCG failed to mitigate its loss in a way that effects its entitlement to damages or compensation from Instrat? d. is PCCG in the circumstances of this case entitled to damages for loss of the opportunity to purchase the copyright insurance cover? [3]. If PCCG is prima facie entitled to damages or compensation from Instrat, should Instrat's liability be reduced pursuant to its claim for contributory negligence against PCCG? The trial 63 The trial of PCCG's claims was held on 9, 10 and 11 September 2019, with the parties returning on 25 September 2019 for closing addresses. 64 A court book was tendered on behalf of PCCG. The court book contained a range of documents, the authenticity of which were not in dispute. 65 PCCG called Mr Cameron and Ms Quigley to give lay evidence by affirming their witness statements and giving further oral evidence. PCCG also tendered an affidavit of Mr Knox. Instrat in turn called Mr Prior and Mr Caldera to give lay evidence by affirming their witness statements and giving further oral evidence. Except for Mr Knox, each of these witnesses were cross-examined. The material aspects of the lay evidence has been summarised above. An assessment of the credibility of these witnesses, in addition to an analysis of their evidence, is set out below, starting at [84]. 66 Each party also called an expert in support of their respective cases, as now discussed. Expert evidence 67 In Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 (Provincial Insurance), Kirby P expressed (at 556) that it will ordinarily be necessary for a court to receive expert evidence to determine what a reasonably competent insurance broker would have done in particular circumstances. In the present case, Lyndon Parnell (Mr Parnell) was called by PCCG and Paul Ellison (Mr Ellison) was called by Instrat. Mr Parnell and Mr Ellison each provided reports outlining their opinions on certain questions, and also provided a separate joint report that outlined the areas of their agreement and disagreement. Both experts also gave oral evidence concurrently in a "hot tub" format, which enabled the critical differences between their opinions to be highlighted and explored. 68 Both experts had significant experience and expertise. Mr Parnell has over 50 years' experience working in the insurance industry, both in the public and private sectors. Mr Ellison has over 40 years' experience working in the insurance industry, including extensive experience in the insurance broking sector. 69 The experts were asked a range of questions, both in advance of trial and at trial, regarding the duties and obligations of a reasonably competent insurance broker generally and whether, based on the material provided, Instrat met those duties and obligations on the facts of the present case. Obligations of a reasonably competent insurance broker 70 The experts largely agreed on the general obligations of an insurance broker. For instance, in their joint report, the experts expressed that they agreed that the obligations of a reasonably competent insurance broker included the following: • An insurance broker when instructed to arrange insurance should make reasonable enquiries as to his client's needs. The role of the reasonably competent broker will then ideally be expressed in a Retainer. • The client's needs include an analysis of the risk exposures associated with the particular industry and specific business. • The insurance broker has a duty to attempt to offer a programme of insurance suitable to the client's business and its particular needs. • The insurance broker has a duty to follow the client's instructions and arrange appropriate cover and maintain it in force and to attend to the renewal of insurances effected by him. • The insurance broker has a duty to take reasonable steps to ensure effective and appropriate cover is offered to the client. • The insurance broker has a duty to advise the insured of any relevant exclusions or limitations under the policy. • The relationship between an insurance broker and his insured is usually that of a professional insurance broker and a lay client. It is the insurance broker's role is to collect such information regarding the nature of the insured's business so as to offer the client appropriate and effective insurance cover. • Every [qualified practicing insurance broker] as part of their qualifications and training would have been educated of the above principals and obligations. … • We agree that Unintentional Breach of Copyright Insurance can usually be procured as an additional protection in IT Liability insurance policies which main function is to provide Professional liability protection and Product liability protection. 71 The general obligations of an insurance broker at common law are discussed below, starting at [100]. Extent of Instrat's compliance with its obligations 72 The experts were in disagreement, however, in relation to the responsibility of an insurance broker in the position of Instrat to make reasonable enquiries in the circumstances of Instrat's retainer with PCCG. They were also in disagreement about the degree of risk of copyright breach that a reasonably competent insurance broker in the position of Instrat would have identified in the context of PCCG's business. The ultimate result of their disagreement was that Mr Parnell believed that, in the circumstances of the present case, and based on the material provided to him, Instrat did not perform its duties to PCCG with reasonable skill and care, while Mr Ellison's view was to the contrary. A summary of their evidence is set out below. Mr Parnell 73 Mr Parnell's view was that Instrat did not meet its obligations as a reasonably competent insurance broker because Instrat failed to arrange appropriate and effective insurance cover for PCCG, including cover for copyright infringement. Mr Parnell's explanation as to how he reached that conclusion was as follows. 74 Mr Parnell expressed that an insurance broker needs to make enquiries sufficient to understand the nature of the client's business and the likely risks to which the business is exposed (a general obligation with which Mr Ellison agreed). To demonstrate, Mr Parnell accessed PCCG's website to ascertain the nature of its business. The website identified that the business provided services including data storage, hardware maintenance and installation, IT helpdesk, IT consulting, value-added retail sales and customised hardware and software as an integrated product. 75 Mr Parnell stated that, having identified the nature of the products and services sold by PCCG, a reasonably competent broker would then ask PCCG further questions to better understand the risks to which the business was exposed. By way of example, Mr Parnell said that, in respect of data storage, he would want to know what contracts existed with PCCG's clients, and whether there was any limit on liability. In respect of the IT help desk, Mr Parnell said that he would wish to know the type of advice that was being provided. He would moreover seek to understand what the value-added retail sales were, and what advice was being given with respect to the integration of various components to produce a customised product for the client. 76 Mr Parnell expressed that these enquiries would have led a reasonably competent broker to understand that PCCG's business was part of the IT industry, and to consequently consider insurance policies specifically designed for that industry. According to Mr Parnell, these policies would provide traditional professional indemnity insurance in addition to product liability insurance and cover for copyright infringement. Mr Parnell said that the Brooklyn policy was an example of a combined IT industry policy that would have provided appropriate insurance cover for PCCG, including cover for copyright infringement. 77 Mr Parnell's view was that PCCG faced a high degree of risk associated with unintentional breach of copyright. This was because PCCG's business involved the purchase, sale, distribution and installation of copyright protected products, such as Windows and other licensed software. Where a business has such a principal focus on the use of products subject to copyright, there was, in the opinion of Mr Parnell, an ongoing risk of unintentional breach of copyright. 78 In the opinion of Mr Parnell, an objective risk analysis of PCCG's business would have identified the high risk and potential consequences of a copyright breach. PCCG faced a higher risk of breach of copyright as it obtained its software, including Windows, from third party distributors (rather than directly from the manufacturer). In Mr Parnell's experience, software purchased from third parties have a higher risk of being unauthenticated, which equates to a higher risk of copyright infringement. A breach of copyright carries the risk of being sued for damages. In the circumstances of the present case, Mr Parnell viewed that Instrat should have brought the significant risk of copyright infringement to the attention of PCCG to enable PCCG to make an informed decision as to whether it wished to procure cover in relation to that risk. 79 Mr Parnell was particularly critical of the insurance plans provided by Instrat. Mr Parnell expressed that, for the purposes of explaining to the client the classes of risk for which the client's business was uninsured, it was insufficient to simply include a section at the back of the insurance plan headed "Uninsured Exposures", and then alphabetically list the uninsured exposures whether or not they were relevant to the particular client's business. In Mr Parnell's opinion, a reasonably competent broker would instead have specifically identified for the client the risks that were uninsured, and discerned whether any of them were risks for which the client sought cover. Mr Ellison 80 Mr Ellison, in contrast to Mr Parnell, did not view that Instrat had failed to meet its obligations as a reasonably competent insurance broker in the circumstances of the present case. In Mr Ellison's opinion, a reasonably competent broker, after conducting an appropriate assessment of PCCG's business, would not have considered that there was a major risk of PCCG being subject to a claim for breach of copyright. His view was that breach of copyright insurance would normally be purchased by organisations involved in the creation of patents or other intellectual property. 81 Mr Ellison expressed the opinion that breach of copyright insurance normally only covers claims for "inadvertent" or "unintentional" breach of copyright and excludes claims arising from wilful behaviour. Mr Ellison said that insurance against inadvertent or unintentional breach of copyright is available in Australia, but usually only as an extension to other liability policies, such as those in relation to directors and officers liability, management liability, professional indemnity liability and IT liability insurance. 82 Mr Ellison noted that IT liability policies were developed to cover a gap in the market that had appeared in relation to professionals who would mix their professional advice with the sale of computer hardware and software. To meet the requirements of the IT industry, insurance underwriters developed policies which would provide combined protection of general liability, product liability, professional indemnity liability and indemnity against inadvertent or unintentional breach of copyright. 83 In relation to the circumstances of the present case, however, Mr Ellison's view was that, where PCCG sold computers online for gaming, and otherwise provided a facility to people to customise computers and purchase software to enable the computer to operate, there was a very low risk to PCCG of copyright infringement. Mr Ellison said that, as far as he was aware, there were minimal copyright claims made against small and medium enterprises in Australia. Moreover, in contrast to Mr Parnell, Mr Ellison did not think there was an increased risk of copyright infringement claims in circumstances where PCCG purchased Windows software from third party distributors (and not directly from Microsoft). Factual findings 84 The critical factual questions in dispute involve determining what was said by PCCG to Instrat, and vice versa, from the start of the insurance retainer in 2009 until the Microsoft claim in January 2016. This determination is important because it informs, most fundamentally, the nature and extent of the insurance retainer. That in turn facilitates a determination of whether Instrat met the expectations of that retainer. 85 The passage of time since the commencement of the insurance retainer poses difficulties in identifying what was discussed between the parties. By the time of trial, over a decade had elapsed since the start of the retainer. Moreover, as noted, the only insurance plans in evidence were those commencing on and from 31 July 2012. 86 Most of the material aspects of the lay evidence—notably that of Mr Cameron and Mr Prior—is summarised above in the course of outlining the background facts. However, there remains various ambiguities or inconsistencies in the evidence as to what was communicated between the parties. This section outlines my assessment of the credibility of the key witnesses and summarises my key factual findings having regard to the evidence presented at trial. Credibility of key witnesses 87 The central witnesses at trial were Mr Cameron and Mr Prior. Mr Cameron presented as an honest witness. Although his recollection was imperfect, he impressed me as a witness who attempted his best to recall events that had occurred as far back as 2009. Likewise, Mr Prior also presented as an honest witness who did his best to recall past events. He made appropriate concessions when he could not recall the detail of matters discussed at meetings with Mr Cameron. In my assessment, however, Mr Cameron had a clearer and more detailed recollection of the relevant events. I accept Mr Cameron's evidence in preference to Mr Prior's evidence on the critical conversations concerning the insurance retainer, the renewal process and the annual meeting in 2015. Key findings 88 Based on the evidence presented at trial, my key findings are as follows: (a) Mr Cameron, on behalf of PCCG, relied upon Mr Prior, on behalf of Instrat, to provide PCCG with advice in relation to the risks that PCCG's business faced, and to recommend insurance policies which would indemnify the business against those specific risks. Thus, the relationship extended beyond a specific request to procure insurance (as was the case, for example, in Gibbs Holdings Pty Ltd v Mercantile Mutual Insurance (Australia) Limited [2000] QCA 254; [2002] 1 Qd R 17 (see [93] per Mackenzie J)); (b) throughout the period from the commencement of the insurance retainer in 2009 until (and including) the renewal of the 2015-16 insurance plan, Instrat had a general retainer that obliged Instrat to provide PCCG with advice as to the risks to which PCCG's business was exposed. The purpose of this advice was to enable PCCG to make an informed decision about its insurance requirements, and place PCCG in a position to instruct Instrat about the insurance cover which PCCG sought Instrat to procure on its behalf. In my view, there were sufficient similarities in the evidence of Mr Cameron and Mr Prior to draw this conclusion about the nature of the insurance retainer. This conclusion is moreover consistent with the ongoing format of the insurance plans since 2012, which promoted Instrat's "Major Recommendations"; (c) at the commencement of the insurance retainer, Mr Prior searched PCCG's website and identified that PCCG was an online retailer of computer hardware and software and other equipment. Mr Prior was aware that the business of PCCG had an exposure to a risk of copyright infringement, but he thought that exposure was low because PCCG predominantly resold hardware and software. Mr Prior was not aware that PCCG in fact installed software in the computers sold by the business. Neither was he aware of the form of advice being provided by PCCG at its helpdesk, or that PCCG was also providing IT&T consulting and IT network support; (d) at no time from the commencement of the insurance retainer until the Microsoft claim, did Mr Cameron discuss or raise with Mr Prior the exposure of PCCG's business to the risk of copyright infringement. Nor did Mr Cameron instruct Mr Prior to effect insurance cover for PCCG against copyright infringement. That was a risk that Mr Cameron had not turned his mind to. From the commencement of the insurance retainer, Mr Cameron's concern was primarily focussed on the rising level of stock on hand as PCCG's business grew and, accordingly, PCCG obtained insurance protection against stock losses, burglary and protection of PCCG's business premises; (e) conversely, at no time from the commencement of the insurance retainer until the Microsoft claim, did Mr Prior discuss or raise with Mr Cameron that, in Mr Prior's opinion, there was a risk (albeit a low one) to PCCG's business of a claim for copyright infringement. That was not a risk that Mr Prior ever identified as one of a range of risks to which PCCG's business was exposed; and (f) the information which Instrat obtained at the annual meetings from 2010 to 2015 was generally limited to asking questions about the financial performance of PCCG's business in addition to the location from which PCCG sourced computer hardware, software and other equipment. Absence of discussion regarding risk of copyright infringement 89 It is necessary to further explain my finding that the risk of copyright infringement was not discussed between Mr Cameron and Mr Prior during the relationship between PCCG and Instrat. 90 Instrat argued that I ought to draw an inference from the facts that it was more probable than not that the risk of copyright was discussed at some point in the relationship between PCCG and Instrat. This was so despite the relevant witness saying that it was not, or that they did not recall whether it was discussed. Instrat submitted that it was most likely that Mr Prior asked questions about copyright infringement risk, but that Mr Cameron dismissed it as a minor risk because, at that time, PCCG had not been the subject of any allegation of copyright infringement. According to Instrat, the evidential bases for this inference included that: (a) Mr Prior held appropriate qualifications and had relevant experience, suggesting that he knew what inquiries he should make; (b) Mr Prior had a number of clients in the IT industry, including importers, consultants, software engineers and software developers, and was cognisant of their insurance cover; (c) Mr Prior was aware of the availability of copyright insurance and had procured such cover for other clients; (d) Mr Prior undertook inquiries of Mr Cameron about PCCG, which suggests that he fulfilled his obligations dutifully and conscientiously; (e) Mr Prior's understanding of the consequence of the risk posed by internationally sourced products was similar to Mr Parnell's evidence, as relied on by PCCG; (f) Mr Prior's evidence was that he considered breach of copyright to be a risk to PCCG (albeit a low risk); (g) the duration and frequency of conversations between Mr Prior and Mr Cameron suggested that they had detailed discussions about the risks to PCCG's business; and (h) Mr Cameron's memory was unreliable and aspects of his evidence were not credible. 91 In the absence of documentation of the conversations between Mr Cameron and Mr Prior, and any specific record of the terms of the retainer (beyond what may be inferred from the insurance plans), it is necessary for me to make findings and, where appropriate, draw inferences from the evidence about what occurred between PCCG and Instrat. As Instrat observes, that task is made difficult by the passage of time and the differences in recollection of Mr Cameron and Mr Prior. 92 I accept that, as highlighted by Instrat, Mr Prior had experience as an insurance broker, that he had a number of clients in the IT industry, and that he was aware of the availability of copyright insurance. But accepting this does little more than to identify what was expected of Mr Prior. It cannot be reasonably inferred that, because Mr Prior should have raised, or ordinarily raised, copyright infringement with similar clients, Mr Prior actually did raise that matter with PCCG in the present case. 93 Additionally, Mr Prior's approach to undertaking his role, including him gaining an understanding of PCCG's business, and making an assessment of the risks faced by PCCG, does not greatly assist in answering the question as to whether Mr Prior discussed the risk of copyright infringement with Mr Cameron. It is that specific question that is crucial in the present case because it is the alleged failure of Mr Prior to raise that risk that constitutes the alleged negligence pleaded to have caused PCCG's loss. 94 It appears that the inference which Instrat seeks for me to draw largely relies on the formation of a negative view of Mr Cameron's credibility. It was said by Instrat that aspects of his evidence were not credible, including that: (a) Mr Cameron said he was not aware that pirated and unlicensed goods were sometimes sold in the industry, despite having operated an IT retail business for 15 years prior to the Microsoft claim; (b) Mr Cameron said that his understanding in December 2015 was that the management liability policy would "cover everything", despite knowing that PCCG already held other insurance policies; and (c) Mr Cameron said that, had Mr Prior advised him that PCCG was not covered by insurance for a claim such as the Microsoft claim, he would have asked Instrat to immediately effect cover for that risk. Instrat said that this evidence was not credible because Mr Cameron's actions prior to the Microsoft claim, where he gave policies considerable attention and was not keen to spend additional money, suggested that he was unlikely to have done so. 95 In respect of the first two criticisms, I accept that there were occasions at trial where the language used by Mr Cameron to respond to questions was imprecise. There were also occasions when Mr Cameron appeared overly eager to provide answers as to the likelihood of events having occurred, rather than relying on his personal recollection of those events. I take these matters into account. As to the third criticism, I do not accept that this aspect of Mr Cameron's evidence impugns his credibility. This evidence relates to a question of fact to be determined on the evidence (as addressed below). 96 Regardless of these observations, I reiterate my general impression that Mr Cameron presented as an honest witness who attempted his best to recall the events that had occurred. To the extent that Mr Cameron provided answers regarding PCCG's past operations that may be surprising for the head of a successful and enduring organisation such as PCCG, my view is that these answers may, with respect, reflect commercial and legal naivety in the earlier years of the business, rather than anything that would impugn the trustworthiness of his evidence. I accordingly reject Instrat's attacks on Mr Cameron's credibility. 97 In my view, the evidence given by Mr Cameron and Mr Prior, combined with the insurance plans starting from 2012, is sufficient to enable me to form a view, on the balance of probabilities, about what occurred. Contrary to Instrat's submission, my view is that it is more probable than not that the risk of copyright infringement was not discussed by Mr Cameron and Mr Prior during the course of the insurance retainer. 98 Mr Cameron's evidence was that the risk of copyright infringement was not discussed at any time. He gave clear and unequivocal evidence on that issue. In contrast, the evidence of Mr Prior was vague. He could not recall any discussion in respect of copyright infringement. On this matter, I prefer and accept the evidence of Mr Cameron to that of Mr Prior. I accordingly find that the risk of copyright infringement was not discussed between Mr Cameron and Mr Prior during PCCG's relationship with Instrat. Breach of contract and duty of care 99 The nature of the relationship between PCCG and Instrat has been considered above. Having regard to that relationship, it is necessary to outline the general obligations of an insurance broker before considering whether Instrat met those obligations in the circumstances of the present case. Obligations of an insurance broker 100 The duties of an insurance broker to a client are described in great detail elsewhere: see, for example, Derrington D K and Ashton R S, The Law of Liability Insurance (3rd ed, LexisNexis Butterworths, 2013) at [2-126]-[2-139] and Enright W I B and Merkin R M, Sutton on Insurance Law (4th ed, Thomson Reuters, 2015) Ch 5. The key aspects of those duties are summarised below. 101 To start, it is elementary, but central, to observe that Instrat was a "company which carries on an independent business of placing insurances upon the instructions of clients and whose basic relationship of agency is with the client": Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd [1981] VR 981 at 985 per Lush J, quoted in Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; 69 NSWLR 120 (Caldwell) at [106] per Ipp JA, with Mason P and Hodgson JA agreeing. Thus, Instrat was the agent of the insured, PCCG, not the insurer: Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited [1986] HCA 14; 160 CLR 226 at 234 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ. 102 An insurance broker in this position will owe duties to its client concurrently in contract and in tort: Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] HCA 59; 157 CLR 149 at 167 per Brennan J; Provincial Insurance at 556 per Kirby P; see, for example, Messagemate Aust Pty Ltd v National Credit Insurance Brokers (Pty Ltd) [2002] SASC 327; 85 SASR 303 (Messagemate) at [88] per Williams J. However, tort law will not impose any additional duty on the broker beyond the scope of the contractual retainer: see Sali & ors v Metzke & Allen [2009] VSC 48 at [14] per Whelan J, citing Astley v Austrust Ltd [1999] HCA 6; 197 CLR 1 (Astley) at 22 (see [47]) per Gleeson CJ, McHugh, Gummow and Hayne JJ and Townsend v Roussety & Co (WA) Pty Ltd [2007] WASCA 40; 33 WAR 321 at [116] per Buss JA, with Wheeler and McLure JJA agreeing. 103 The nature and content of an insurance broker's duty to the client will accordingly depend on the instructions given by the client to the broker: Marvin Manufacturers (Aust) Pty Ltd v Chambers of Manufactures Insurance Limited & Ors (1992) 7 ANZ Insurance Cases ¶61-122 (Marvin Manufacturers) at 77,611-12 per Vincent J; Messagemate at [83]. However, as a starting point, any contract between broker and client carries with it a term implied by law that the broker will exercise reasonable skill and care: Messagemate at [83]. Accordingly, within the broker's area of responsibility, the broker must exercise reasonable care and skill in the performance of its duties: Marvin Manufacturers at 77,611 per Vincent J, quoted in Brooklyn Lane Pty Ltd v MIC Australia Pty Ltd [2001] VSC 33; 11 ANZ Insurance Cases ¶61-487 (Brooklyn Lane) at [33] per Balmford J. There are various aspects to this obligation. 104 An insurance broker must use reasonable skill and care to ascertain the client's needs by instructions or otherwise: Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57 (Fanhaven) at 62 per Reynolds JA, with Moffitt P agreeing; Caldwell at [103], quoted in Horsell International Pty Ltd v Divetwo Pty Ltd [2014] NSWCA 368; 18 ANZ Insurance Cases ¶61-991 (Horsell) at [235] per McColl JA, with Beazley P and Meagher JA agreeing. Unless the scope of the broker's role is not otherwise confined, this requires the broker to become sufficiently familiar with the client's business: see Fine's Flowers Ltd v General Accident Assurance Co of Canada (1977) 81 DLR (3d) 139 (Fine's Flowers) at 149 per Wilson JA, with Blair JA agreeing. The process of obtaining instructions will involve taking reasonable care to inform the client as to the availability of certain forms of insurance cover to ensure that the client considers these matters and then provides instructions as to the types and levels of cover that it wishes to secure: Elilade Pty Ltd v Nonpareil Pty Ltd [2002] FCA 909; 124 FCR 1 (Elilade) at [100]-[101] per Mansfield J. 105 Where there is disparity in expertise between the insurance broker and client, it is incumbent on the broker to make appropriate inquiries, not for the client to anticipate what the broker ought to do: Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] 2 NSWLR 7 (Claude Ogden) at 32 per Macfarlan J. Moreover, where a broker has a recurring retainer with a client, the broker has a duty to inquire about matters of which it has not made adequate inquiry in the past: see Kotku Bread Pty Ltd v Vero Insurance Ltd [2012] QSC 109 (Kotku Bread) at [215] per Applegarth J. 106 A reasonably competent insurance broker will have an understanding of the general principles of insurance law and agency: Messagemate at [85]. The broker's duty, however, does not extend to having to explain the law to the insured, but it does include highlighting the legal pitfalls for the client where these might arise in the course of effecting valid cover: Fanhaven at 65 per Hutley JA, cited in Geoffrey W. Hill & Associates (Insurance Brokers) Pty Limited v Squash Centre (Allawah North) Pty Limited (1990) 6 ANZ Insurance Cases ¶61-012 (Geoffrey Hill) at 76,767 per Kirby P; Provincial Insurance at 556 per Kirby P and Horsell at [238]; see also, for example, Strategic Property Holdings No 3 Pty Ltd v Austbrokers RWA Pty Ltd [2012] NSWSC 1570 at [96]-[97] per Stevenson J. 107 Where the client provides ambiguous instructions to the insurance broker and the client would consequently be left substantially under insured if those instructions (according to the broker's understanding) were undertaken, the broker has a duty to highlight to the client the consequences of putting those instructions into effect and confirm the instructions: Geoffrey Hill at 76,765 per Gleeson CJ (with Kirby P agreeing), quoted in Horsell at [238]; see also Geoffrey Hill at 76,768 per Mahoney JA. 108 Once the client has instructed the insurance broker to obtain certain cover, the broker must use reasonable care and skill to procure the cover requested: Geoffrey Hill at 76,767 per Kirby P; Provincial Insurance at 555-556 per Kirby P; Brooklyn Lane at [34]; Caldwell at [103]; Horsell at [237]. The broker must ensure that the policy is suitable for the purposes for which it is sought by the client: Horsell at [237]. If the broker cannot obtain the cover requested, it must report this to the client and seek the client's alternative instructions: Caldwell at [103], quoted in Horsell at [235]; see also Fine's Flowers at 149 per Wilson JA, with Blair JA agreeing. 109 An insurance broker is not required to explain in detail the effect of each term of an insurance contract: Marvin Manufacturers at 77,611. However, the broker should draw the client's attention to any onerous or unusual terms, and should explain to the client the nature and effect of those terms: Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 (Comm) at [73] per Blair J, quoted in Horsell at [236]. 110 Ultimately, the insurance broker must provide the client with "advice and assistance to enable it to make an informed decision about its insurance requirements, and to instruct [the broker] about what insurance cover to procure on its behalf": Elilade at [101]. However, except for particular circumstances, a broker will not owe a client a general duty to prevent loss or risk of loss: Marvin Manufacturers at 77,611, quoted in Kotku Bread at [214]. In other words, a broker's responsibility does not require it to recommend or obtain a "bullet proof" policy: Messagemate at [84]. Instrat's breaches 111 In my opinion, Instrat breached its duties in contract and tort to exercise reasonable skill and care in three key respects. 112 First, Mr Prior, on behalf of Instrat, failed to make adequate enquiries to understand the nature of the risks to which PCCG's business was exposed. He failed to do so upon commencement of the insurance retainer in 2009, and did not rectify that understanding in subsequent years. Although Mr Prior conducted some investigation into the nature of PCCG's business, including by touring the business' premises and surveying PCCG's website, it ultimately appears that he did not ask sufficient questions of Mr Cameron to obtain a thorough understanding of the nature of the business. 113 In this regard, the evidence establishes that Mr Prior was unaware of various aspects of PCCG's business. For instance, he did not know the type of advice that was being provided by PCCG at its helpdesk. Nor did Mr Prior appreciate that PCCG was also providing IT&T consulting and IT network support. However, critically for current purposes, Mr Prior failed to appreciate that PCCG's business involved the reselling of software that PCCG installed on computers that were then sold to its customers. 114 Second, Instrat failed to sufficiently identify and characterise the exposure of PCCG's business to the risk of copyright infringement. Consistent with Mr Parnell's expert evidence, and contrary to that of Mr Ellison, I accept that an insurance broker in the position of Instrat, exercising reasonable care and diligence, would have identified the major exposure of PCCG's business to the risk of copyright infringement. This followed from, amongst other features of its business, PCCG installing Windows on computers that it subsequently sold online. 115 The risk of copyright infringement was increased by PCCG purchasing Windows from third party resellers and not directly from Microsoft. I accordingly accept Mr Parnell's expert evidence that the purchase of software from third parties heightens the risk of potential exposure to a claim for copyright infringement. This is because PCCG does not control, or have awareness of, all of the steps between the initial sale by Microsoft to the third party reseller and the on-sale of that software to PCCG. This risk may be further aggravated where the third party reseller is based overseas (such as the supplier of the unauthorised licences in the present case). 116 With this knowledge, an insurance broker in the position of Mr Prior, exercising reasonable skill and care, would have made further enquiries of the nature of PCCG's business. Had Mr Prior sufficiently investigated the nature of PCCG's business, and asked the questions that a reasonably competent broker in his position would have done, my view is that he would have identified that PCCG's business was one that was exposed to a major risk of a claim for copyright infringement. 117 Third, Instrat failed to raise with PCCG the fact that PCCG was not covered for the risk of copyright infringement, being a risk that was expressly excluded in the "Uninsured Exposers" section of each insurance plan. It is useful to explain this failure by reference to previous case law. 118 McNealy v The Pennine Insurance Co Ltd [1978] 2 Lloyd's Rep 18 (McNealy), a decision of the Court of Appeal of England and Wales, involved a plaintiff, Mr McNealy, who was a property repairer and a part-time musician. Mr McNealy sued, relevantly, two insurance brokers for damages after his comprehensive insurance policy did not cover him in relation to injuries that he and a passenger suffered in a car accident. He had instructed the brokers to effect a comprehensive insurance policy on his car. The insurer's underwriting instructions, of which the brokers were aware, set out a list of risks which were not acceptable, including that of whole or part-time musicians. Mr McNealy, in reply to a question from one of the brokers as to his occupation, said that he was a property repairer. After Mr McNealy was involved in the car accident, the insurance company—The Pennine Insurance Co Ltd—denied liability on the basis that the plaintiff was a part-time musician, which had not been disclosed to the insurer. 119 The Court of Appeal held that the insurance brokers were liable to indemnify the plaintiff in circumstances where the brokers knew that cover for a part-time musician was excluded, and this was a material fact that ought to have been disclosed to the insurer. Lord Denning MR, writing the lead judgment, expressed his conclusion (at 20) as follows: It was clearly the duty of the broker to use all reasonable care to see that the assured, Mr. McNealy was properly covered. An obvious step in the course of doing his duty would have been to say to Mr. McNealy: The Pennine will not cover you if you are a full or part-time musician, a bookmaker, a jockey, or anything to do with racing. He ought to have gone through the whole list with Mr. McNealy and said: You are not going to be accepted if you are one of these categories because, if you are, the insurance company can get out of it. I am afraid the broker did not do his duty. He did not go through that list with Mr. McNealy at all. He simply asked him what was his occupation, and Mr. McNealy said "property repairer". The broker ought to have gone on and asked: "Have you ever been or are you a full or part-time musician?", and the answer would certainly have been "Yes". On the answer being "Yes", the broker should have said: It is no good trying to insure with the Pennine. You had better go to one of the companies who are ready to insure full or part-time musicians, but that will no doubt be at a higher premium. The broker did not do that at all. In other words, he did not do all that was reasonable to see that Mr. McNealy was properly covered. This passage was quoted by Ipp JA, with Mason P and Hodgson JA agreeing, in Caldwell at [104]. 120 Shaw LJ expressed (at 21) similar reasons to Lord Denning: … it was within the knowledge of the broker that there were numerous categories and classes of persons who were not acceptable to the intended insurers. One of them was part-time musicians. It seems to me that this was so special a category that specific questions should have been put to the proposer to see whether he fell within that or any other unacceptable category. There would have been no great difficulty or trouble in doing this because the broker need only have read the list of unacceptable activities to the proposed assured, and by this simple means he could have safeguarded the interests of the proposer whose agent he was. 121 Waller LJ likewise held the following (at 21): It was clearly [the broker's] duty, in my view, to make as certain as he reasonably could that the plaintiff, Mr. McNealy, came within the categories acceptable to the Pennine Insurance Co., and the only way in which he could properly do that, in my opinion, was to show him the list and probably go through it with him to make sure that the plaintiff understood that he had to be outside those particular risks, because they are headed "Risks not acceptable", and there is a reminder to brokers that anybody falling "within any of the undernoted categories . . . is not acceptable". If he had done that, it is in my view unlikely that Mr. McNealy would not have said: "I do play the guitar part-time", and the whole of the facts would have come out. 122 The approach in McNealy has been applied by Australian courts. In Provincial Insurance, Kirby P, in the course of summarising the duties of an insurance broker, stated the following (at 556): 5. It is especially important that an insurance broker should go through with the insured the list of exceptions in the policy secured. This should be done in order to afford the insured, who may fall within an exception, the opportunity to request deletion of the exception upon payment of a higher premium or cover with another insurer: McNealy v Pennine Insurance Co Ltd [1978] 2 Lloyd's Rep 18 at 20 … 123 This passage of Kirby P was subsequently applied in Elilade in a decision by Mansfield J in this Court. The applicant insured in Elilade—Elilade Pty Ltd—claimed that its insurance broker and agent—Nonpareil Pty Ltd— negligently failed to advise it about procuring flood insurance after severe rainstorms in Katherine in the Northern Territory had caused damage to stock, plant and premises of the applicant's business. The broker had not expressly raised with the insured that the proposed insurance cover did not have flood insurance. 124 The broker in Elilade accepted that it owed the insured a duty in contract and tort to take reasonable care in the performance of its function. However, the broker relevantly argued that, in the circumstances of that case, it was not required to positively advise the insured to procure flood cover and, further, that its duty of care did not require it to inform the insured that the insurance cover it had under the policy excluded cover for damage caused by flood. Mansfield J disagreed. 125 Mansfield J held that the broker had breached its duty to the insured to provide advice and assistance to enable the insured to make an informed decision about its insurance requirements. His Honour's conclusion on this point was as follows: [100] … I did not perceive Mr Cielens [i.e. an insurance broker at Nonpareil] to have asserted that Nonpareil had no advisory responsibility in respect of Elilade. In my view, given my findings as to the relationship between Elilade and Nonpareil, Nonpareil in contract and in tort was obliged to take reasonable care to inform Elilade as to the availability of certain types of insurance cover, so as to ensure that Elilade considered and then gave considered instructions to Nonpareil about what types and levels of insurance cover it wished to secure. … [103] In my view, Nonpareil in the proper performance of its duty to Elilade was required to raise expressly with Elilade whether it required flood insurance, and to make it aware that flood was exempted from the defined events under the policy. Elilade was undertaking a new business enterprise. Nonpareil, through its previous dealings with [certain directors of Elilade], was aware that they were not well-experienced in addressing the insurance requirements of the business. It knew that there was a not insignificant risk of flooding in Katherine. Indeed, it sought to inform its clients of that risk by displaying in its office the brochure "Flooding in Katherine"' referred to above … [104] Without giving any oral notification to Elilade of the risk of flooding in Katherine, or raising at the meeting on 10 July 1996 that the insurance cover proposed to be obtained exempted flood from the risks covered, Mr Cielens as I have found proceeded to secure insurance including the flood exemption. He did not point out the exemption. In Provincial Insurance, Kirby P (with whom Mahoney and Priestley JJA agreed) said at 556: "It is especially important that an insurance broker should go through with the insured the list of exceptions in the policy secured. This should be done in order to afford the insured, who may fall within an exception, the opportunity to request deletion of the exception upon payment of a higher premium or cover with another insurer . . .'" Kirby P's comments must be seen in the context of the facts of that case, rather than as laying down an absolute rule to apply whatever the circumstances. His Honour did not purport to do so. Nevertheless, those remarks do confirm the desirability of an insurance broker upon whom an insured is relying to make a decision as to appropriate insurance cover to properly inform the insured of relevant exceptions in the policy. (Emphasis added.) 126 As Mansfield J warned in [104], there is no absolute rule that an insurance broker must, in every circumstance, walk through a list of exemptions from cover with the insured. The exact scope and nature of the duty is determined by the facts of each case. This will be informed by, amongst other relevant considerations, the expertise and experience of the broker, the history of the relationship between the broker and client, the communications between the broker and client from time to time, the nature of the client's activities and the expertise and experience of the client. Having regard to these considerations, my view is that the analysis in Elilade is analogous to the present case. 127 Although PCCG in 2009, unlike the applicant in Elilade, was not undertaking a "new business enterprise", PCCG was not experienced in addressing the insurance requirements of the business. That is why PCCG engaged Instrat. To adopt the wording of Mansfield J at [100] of Elilade, Instrat was engaged to inform PCCG as to the availability of certain types of insurance cover, so as to ensure that PCCG considered and then gave considered instructions to Instrat about what types and levels of insurance cover it wished to secure. The circumstances were such that it was reasonable for Mr Cameron to rely upon the advice given by Mr Prior: see Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; 122 CLR 556 at 571 per Barwick CJ, quoted in Tepko Pty Ltd v Water Board [2001] HCA 19; 206 CLR 1 at [47] per Gleeson CJ, Gummow and Hayne JJ and [76] per Gaudron J. 128 For current purposes, the key aspects of the insurance plans prepared and settled by Instrat were the "Major Recommendations" and "Uninsured Exposures" sections. As found above, Mr Prior would highlight and discuss with Mr Cameron the contents of the former section, but there was no discussion of the exemptions listed in the latter section. For the purpose of identifying a breach of Instrat's duties to PCCG, it is unnecessary to conclude that Mr Prior should have taken Mr Cameron through all of the list of exemptions in the "Uninsured Exposures" section, although I observe that the discussion in McNealy (as cited with approval by Kirby P in Provincial Insurance and the New South Wales Court of Appeal in Caldwell) appears to favour that approach. In the circumstances of the present case, it is sufficient to conclude that Instrat, in order to comply with its duties to PCCG, was required to expressly raise with PCCG that it faced a risk of copyright infringement, and to make PCCG aware that such cover was exempted under the insurance plan. 129 The risk of copyright infringement should have been brought to the attention of Mr Cameron. Mr Prior should have provided advice as to the insurance policies that would provide PCCG with the insurance cover to meet that risk. It may have been a stand-alone policy to indemnify for copyright infringement or a policy developed for the IT industry which combined product liability, professional indemnity and insurance against the risk of a claim for copyright infringement. Such policies were available on the market, as discussed further below. The failure of Mr Prior to advise of the risk of copyright infringement resulted in PCCG not being in a position to make an informed decision as to whether to take out insurance to protect itself against that risk. This amounted to a breach of the insurance retainer and of the duty of care owed by Instrat to PCCG. Causation 130 The only loss sought to be recovered by PCCG from Instrat was the $250,000 settlement sum paid by PCCG to Microsoft. For PCCG to obtain damages from Instrat for that loss, PCCG must establish that the payment of the settlement sum was caused by Instrat's breaches of the insurance retainer and its duty of care to PCCG. Relevant principles 131 The onus is on the plaintiff to demonstrate the causal link between the breaches of duty by the defendant and the losses suffered by the plaintiff: Unity Insurance Brokers Pty Limited v Rocco Pezzano Pty Limited [1998] HCA 38; 192 CLR 603 (Unity) at [5] per Brennan CJ and [22] per McHugh J; s 52 of the Wrongs Act 1958 (Vic) (Victorian Wrongs Act). Some general principles in relation to the establishment of causation of loss were summarised by French CJ, Hayne and Kiefel JJ in Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; 247 CLR 613 as follows: [43] The proper identification of damage should usually point the way to the acts or omissions which were its cause. Causation is largely a question of fact, to be approached by applying common sense to the facts of the particular case. This is not to deny that value judgments and policy have a part to play in causation analysis at common law … [44] … courts are no longer as constrained as they once were to find a single cause for a consequence and to adopt an "effective cause" formula. Courts today usually recognise that there may be wrongdoers whose acts or omissions occur successively, rather than simultaneously, and who may be liable for the same damage, even though one may be liable for only part of the damage for which the other is liable. [45] The law's recognition that concurrent and successive tortious acts may each be a cause of a plaintiff's loss or damage is reflected in the proposition that a plaintiff must establish that his or her loss or damage is "caused or materially contributed to" by a defendant's wrongful conduct. It is enough for liability that a wrongdoer's conduct be one cause. The relevant inquiry is whether the particular contravention was a cause, in the sense that it materially contributed to the loss. Material contribution has been said to require only that the act or omission of a wrongdoer play some part in contributing to the loss. (Citations omitted.) 132 Similarly, as explained in the context of insurance brokers by McHugh J in Unity at [22]: To succeed in its claim …, the insured must show that the difference "resulted from the breach" of the insurance brokerage contract. The question then is whether the breach by the broker caused or contributed to the loss of the difference. Whether one event caused or resulted from another is determined in legal proceedings by applying common sense criteria and not philosophical or scientific theories of causation. 133 In Provincial Insurance, Kirby P stated at 556 that, for the insured to prove that a breach by an insurance broker of its duty of care to the insured caused the relevant loss, this will usually require "proof that the insurance policy obtained by the broker does not cover the risks that have occurred and that proper care and skill would have ensured that a policy was obtained which did cover those risks". This necessarily involves an assessment of a counterfactual scenario centring on the hypothetical conduct of the insured had the broker not breached its duties: see Ferrcom Pty Ltd v Inbush (NSW) Pty Ltd (1997) 9 ANZ Insurance Cases ¶61-339 at 76,732 per Cole JA, with Beazley and Cohen JJA agreeing and Tosich v Tasman Investment Management Ltd [2008] FCA 377; 250 ALR 274 at [80] per Gyles J. The relevant question is what would PCCG have done if properly advised and warned, and not what a reasonable person would have done: Rosenberg v Percival [2001] HCA 18; 205 CLR 434 (Rosenberg) at [24]-[25] per McHugh J and [87] per Gummow J. Availability of cover for loss 134 Before forming a view of PCCG's hypothetical actions, it is necessary to confirm that there existed policies that were capable of covering the loss suffered by PCCG, being the settlement sum paid to Microsoft as a result of the claims of copyright infringement made against PCCG. 135 To start, I am satisfied that the alleged breach of copyright by PCCG was an inadvertent breach. In this regard, I reject the submission by Instrat that correspondence from Microsoft's solicitors, which alleged deliberate and intentional infringement by PCCG, and the failure of PCCG to call evidence from its solicitors to explain the basis of the settlement of the Microsoft claim, meant that the court cannot be satisfied of the basis on which the claim was settled. Having considered the evidence, my view is that the allegations from Microsoft's solicitors were simply putting their client's case at its highest during the course of negotiations. The evidence presented to me in relation to PCCG's acquisition of the unauthorised licences establishes that PCCG's breach of Microsoft's copyright was inadvertent. 136 There is no dispute as to whether sufficient insurance cover for inadvertent breaches of copyright was available in August 2015 (being the timing of the annual renewal immediately prior to the Microsoft claim). It was accepted by both experts, Mr Parnell and Mr Ellison, that, as a general proposition, insurance cover is available for inadvertent breaches of copyright. Mr Prior was also aware of policies that offered such cover, and had previously recommended such policies to other clients who had a large turnover attributable to consultancy advice and professional services. Moreover, it appears that the Brooklyn policy (being the policy subsequently obtained by PCCG upon the advice of Mr Knox) was available in August 2015 and provided cover for copyright infringement. I am accordingly satisfied that there were policies capable of covering the loss now claimed by PCCG. PCCG's actions but for Instrat's breach 137 Instrat contends that, even if cover for copyright infringement had been sufficiently raised or recommended by Instrat, the Court should not find that PCCG would have ultimately procured such cover. 138 This aspect of Instrat's argument corresponds with the conclusion reached in Elilade, where, despite the broker's breach of duty (as discussed above at [123]-[125]), Mansfield J was not satisfied that, had the exemption for flood insurance been adequately raised by the broker, the insured would have instructed the broker to obtain appropriate insurance cover: Elilade at [115]-[120]. Although that conclusion was strongly fact-specific, relevant considerations to which Mansfield J had regard included: (a) the form of insurance that the insured had previously obtained from another insurer; (b) the assessment of the relevant risk that would hypothetically have been given by the insurer; (c) the recommendations that would hypothetically have been given by the broker to the insured; (d) the degree of concern that the insured held for the relevant risk; (e) the insured's budgeted allowance for insurance cover; and (f) the price of the policy that would have covered the relevant risk. 139 Returning to the present case, Instrat argues that the past actions of PCCG (and, in particular, Mr Cameron) suggest that PCCG was unlikely to have instructed Instrat to effect copyright insurance. In support of this submission, Instrat highlighted the following evidence: (a) the risk of copyright infringement was not a risk that Mr Cameron was concerned about prior to the Microsoft claim. In this regard, Mr Cameron and Ms Quigley gave evidence that, in approximately 15 years of operation prior to the claim, PCCG had never been subject to an allegation or claim of copyright infringement; (b) Ms Quigley gave evidence that she and Mr Cameron had never discussed the risk of a copyright infringement prior to the Microsoft claim; (c) Mr Cameron gave evidence that PCCG had a reputation of being above board and squeaky clean; and (d) Mr Cameron's approach to considering and purchasing insurance was that he did not spend the money on insurance unless some reason existed to cause him to consider that the insurance cover was necessary. 140 Instrat moreover contended that it was not credible for someone in Mr Cameron's position, having operated an online IT retail business for 15 years, to not be aware of the risk of copyright infringement. Instrat submitted that Mr Cameron's evidence on this issue called into question his credibility. However, as explained above at [95]-[96], I reject this attack on Mr Cameron's credibility. I accept Mr Cameron as an honest and reliable witness. 141 Mr Cameron explained that the reason for engaging Instrat, and specifically Mr Prior, was to ensure that PCCG was provided with insurance advice on the risks associated with operating an online computer store (a large component of which was selling licensed software and various other components the subject of copyright). Mr Cameron gave evidence that, given the discussions he had with Mr Prior at the annual meetings, which focussed on the "Major Recommendations" as set out in the respective insurance plans, he would have expected that any exposure to a claim such as the Microsoft claim would have been specifically brought to his attention so that he could, on behalf of PCCG, have made an informed choice about the risks involved. Mr Cameron expressed in his witness statement, as tendered at trial, that, had Mr Prior advised him that PCCG was not covered for a claim such as the Microsoft claim, he "would have asked him to immediately effect cover to ensure that PCCG was adequately covered". 142 My view is that, having regard to all the evidence presented to me, if Instrat had bought the risk of a potential claim for copyright infringement to the attention of Mr Cameron, then, on the balance of probabilities, Mr Cameron would have appreciated the significance of the exposure of the business to such a claim and made the decision to purchase insurance to indemnify PCCG against such a risk (at least up to the value of $250,000). I reach that conclusion for the following reasons: (a) the clear and unequivocal evidence of Mr Cameron that, had he known about the exposure of PCCG's business to the risk of a claim for copyright infringement, he would have instructed Mr Prior to obtain appropriate insurance to cover copyright infringement; (b) Mr Cameron was mindful to procure insurance to protect against risks which PCCG's business faced. Although it is clear that Mr Cameron exercised independent judgment in deciding (against Instrat's recommendations) not to take out management liability insurance until late 2015, this approach was adequately explained by both Mr Cameron and Ms Quigley as based on PCCG's progression as an enterprise; and (c) once Mr Cameron became aware of the exposure to the risk of a copyright claim after the Microsoft claim was served in January 2016, he instructed his new insurance broker, Mr Knox, to effect cover to protect the business against a claim for copyright infringement, and PCCG subsequently obtained protection under the Brooklyn policy. 143 I acknowledge, and have taken into account, that the weight of these considerations should not be overstated given the benefit of hindsight. PCCG's actions have to be assessed according to its state of knowledge as at the relevant time, being the renewal of the insurance retainer in 2015. It is true that, at that point in time, no claim for copyright infringement had been made against PCCG. I nonetheless accept Mr Cameron's evidence that, had he known about the exposure of PCCG's business to the risk of copyright infringement, he would have instructed Mr Prior to obtain insurance cover to protect against such a risk. 144 For these reasons, I am satisfied that, but for Instrat's breach of the insurance retainer and its duty of care, PCCG would have purchased insurance that would have covered it against the Microsoft claim and indemnified it for the settlement sum paid to Microsoft. Reasonableness of PCCG's settlement 145 A further basis on which Instrat denied that PCCG was entitled to damages was on the basis that PCCG had failed to prove that the settlement reached with Microsoft was reasonable. Before turning to the facts underpinning that settlement, it is useful to explain the conceptual bases on which the reasonableness of the settlement may influence PCCG's entitlement to damages. Conceptual framework 146 Although, by the time of final submissions, the parties accepted that PCCG was required to establish that the reasonableness of the settlement, there was limited discussion about the conceptual basis upon which that was to affect PCCG's entitlement to damages. 147 From one perspective, the reasonableness of a settlement by a plaintiff with a third party may be relevant to the conclusion as to whether the defendant caused a payment subject to that settlement. For instance, a settlement sum paid by a plaintiff to the third party may be so exorbitant such that the payment can no longer be characterised as being the result of the defendant's breach. Instead, the payment of the sum would be characterised as the result of the plaintiff's own conduct in the course of the negotiations with the third party. In these circumstances, the legal responsibility for the payment of the settlement sum would no longer be attributed to the defendant. 148 Second, the reasonableness of a settlement sum may also be relevant to the remoteness of the loss by the contracting parties. Although the possibility of a plaintiff paying an amount to a third party to compromise a dispute will, by itself, be a natural consequence of breach of the contract, the conduct of the plaintiff in reaching that compromise may, in principle, be so unreasonable such that, to apply the test in contract law (see Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; 161 CLR 653 (Burns) at 673 per Brennan J), the loss may no longer be considered to either arise naturally from such breach of contract, or have reasonably been in the contemplation of both parties at the time they made the contract as the probable result of a breach. That said, the mere fact that the defendant did not contemplate the precise extent of the damage suffered by plaintiff does not disentitle the plaintiff to damages: see Mount Isa Mines Ltd v Pusey [1970] HCA 60; 125 CLR 383 at 402 per Windeyer J and Alexander v Cambridge Credit Corp Ltd (1987) 9 NSWLR 310 at 365-6 per McHugh JA, cited in Romero v Farstad Shipping (Indian Pacific) Pty Ltd (No 3) [2017] FCAFC 102 at [87] per Allsop CJ, Rares and McKerracher JJ. 149 Third, the reasonableness of a settlement may also be relevant to the quantification of loss. Applied to the present case, this is because PCCG will be effectively debarred from recovering the loss to the extent that Instrat can prove that PCCG unreasonably failed to mitigate its loss. For example, if Instrat could prove that, in light of all the circumstances, unreasonable conduct of PCCG led to PCCG accepting a settlement sum (and therefore incur a loss) beyond what it should have, then PCCG's recoverable damages will be reduced to the extent that it failed to reduce its loss: see Unity at [3] per Brennan CJ. 150 Cases to consider the preclusion or reduction of damages due to the alleged unreasonableness of settlements by a plaintiff do not always clearly distinguish between these potentially intertwined forms of analysis: see, for example, the criticism by McHugh J in Unity at [29] and [31]. In the present case, it is unnecessary to attribute any unreasonableness to one or more forms of analysis because, as will be explained, my view is that the settlement reached by PCCG with Microsoft was not unreasonable for the purposes of either the causation, remoteness or mitigation of PCCG's loss. Characteristics of a reasonable settlement 151 It is convenient to explain the characteristics of a reasonable settlement by reference to the High Court's 1998 decision in Unity. That case also involved breaches of duties owed by an insurance broker to a client, although factual dissimilarities mean that the consideration of the reasonableness of the settlement sum in Unity occurred in circumstances different from the present case. 152 The insurance broker in Unity negligently failed to disclose the insured's claims history to the insurer. After the insured's premises were damaged by fire, the insurer refused to pay the full amount which would have been payable under the policy if not for the non-disclosure. The insured brought proceedings against both the insurer and the broker. The insurer paid the insured a sum to settle their dispute. The amount was less than the amount that the insured would have recovered under the policy that the broker ought to have arranged. The insured claimed the balance from the broker. 153 At trial, the insured called no evidence from any officer or employee of the insurer. There was accordingly no direct evidence adduced by the insured of what effect, if any, full disclosure to the insurer of the insured's claims history may have had on that insurer. In these circumstances, the broker submitted that the insured had failed to demonstrate what the position of the insurer would have been if the true claims history of the insured had been disclosed. Accordingly, so the broker submitted, the insured had failed to establish that it had suffered any loss as a result of the broker's breach of duty. 154 The decision of the High Court centred on the appropriate method to calculate the loss of the insured, and the evidential means by which that loss may be proven. The majority of Brennan CJ, McHugh and Hayne JJ (with Gummow and Kirby JJ dissenting) held that the insured's damages should be calculated according to the difference between what the insured would have recovered under the policy the broker ought to have arranged and the amount that the insured recovered under the settlement, as long as the settlement reached by the insured was reasonable. As expressed by Hayne J (at [134]), to subject the broker to liability based upon a settlement that is found to be reasonable is not unjust. And it is not unjust even though there may well have been a range of figures within which settlement could reasonably occur and even though the decisions whether to settle and at what figure to settle are decisions over which the broker has no control. It is always necessary to recall that the broker was in breach of duty. There is no injustice in leaving the wrongdoer to bear the consequences of the decisions made in response to that wrongdoing by the party harmed - so long as those decisions are reasonable. 155 In BNP Paribas v Pacific Carriers Ltd [2005] NSWCA 72, Handley JA, having considered the judgments in Unity, stated the following (at [17]): A party relying on a settlement as proof of his loss has the onus of proving that it was reasonable. This requires proof not only that the result was reasonable but also that the negotiations were conducted with proper care and skill. The settlement must reflect the plaintiff's true prospects of success if the proceedings had been conducted with care and skill because otherwise it will merely reflect his impaired prospects. 156 Returning to Unity, each justice in the High Court wrote separate judgments. For the purposes of determining whether or not a settlement should be characterised as reasonable, the following principles may be discerned: (a) the reasonableness of the settlement must be judged objectively, not subjectively: ibid at [6] per Brennan CJ and [129] per Hayne J; (b) the reasonableness of the settlement must be judged by reference to material available to the parties at the time of the compromise: ibid at [7] per Brennan CJ and [130] per Hayne J; (c) there is no single answer to the question "for what amount was it reasonable to compromise this claim"; there will be a range of answers: ibid at [132] per Hayne J; and (d) characterising a settlement as reasonable or not will almost always require consideration of the chances of the parties succeeding in their respective claims or defences. The prediction of likely outcomes must always be imperfect and imprecise: ibid at [132] per Hayne J. 157 The majority justices each considered the relevance of the legal advice provided to the insured (leading to the settlement of the claim) to the reasonableness of the settlement sum obtained by the insured from the insurer. Brennan CJ expressed the following (at [6]): Evidence of the advice which the insured received to induce it to accept the settlement is not proof in itself of the reasonableness of the settlement advised. The factors which lead to the giving of the advice are factors relevant to the reasonableness of the settlement but the only relevance of advice given by the insured's legal advisers to settle is that it tends to negative the hypothesis that the insured acted unreasonably in accepting the settlement. 158 McHugh J stated the following (at [35]): … in most cases where the settlement is made on legal advice, the evidence of the relevant legal advisers is vital. This is because the risk involved in the litigation and the reasoning which led to the settlement are the factors that will determine whether or not the settlement was reasonable. If an unreasonable settlement is made on bad legal advice, the innocent party's remedy is against the legal adviser, not the contract breaker. 159 Hayne J then expressed the following: [129] … whether a party to litigation received advice to settle may be important in deciding whether that party's conduct was reasonable but, standing alone, the fact that a litigant was advised to settle at a particular figure reveals little or nothing about whether the settlement reached was reasonable. This is not to say that evidence may not be led that such advice was given and adopted; it may. But evidence of that kind does not conclude the issue. What will usually be much more important is the reasoning that supported the advice that was given for that will ordinarily reveal why it was thought reasonable to compromise the claim as it was. … [135] … It may be that calling legal advisers to give evidence about the settlement may present some question about legal professional privilege but I do not accept that the evidence of the advisers would be irrelevant or inadmissible. Often it is the advisers who will be best placed to give evidence about the matters that were taken into account in deciding to settle the case and it is they who may well be able to deal with such matters as what investigations had been made or why particular investigations had not been pursued. Sometimes there may be questions about the course of negotiations: why was this offer accepted; why was no counter offer made? Sometimes that course of negotiations may reveal why a settlement was reached when it was reached and that, in turn, may bear upon whether it was reasonable. Again, it will be those who conducted the negotiations, often the legal advisers, who will be able to speak of these matters. [136] Considerations of legal professional privilege are not the only considerations that may affect the evidence that may be led. If the settlement has been reached at a mediation, the rules under which the mediation was conducted, whether rules of court or privately agreed rules, may restrict what may be revealed about what occurred at the mediation. But that may mean only that the reasonableness of the settlement reached may have to be demonstrated without resort to that material. … 160 On the facts of Unity, the majority did not disturb the concurrent findings by the trial judge and the Full Court of the Supreme Court of Western Australia that the settlement by the insured with the insurer was reasonable, even where the insured's legal advisers had not given evidence in support of the settlement: ibid at [8] per Brennan CJ, [36]-[41] per McHugh J and [137]-[146] per Hayne J. Reasonableness of the settlement in the present case 161 My view is that, for the following reasons, the settlement by PCCG of the Microsoft claim, including the amount of the settlement sum paid to Microsoft pursuant to that compromise, was reasonable. 162 The evidence regarding the reasonableness of PCCG's settlement with the Microsoft claim relevantly included the following: (a) Microsoft made an initial claim against PCCG of approximately $700,000 (based on a retail price of $178 per unit and the infringement involving 4,000 Windows licences); (b) PCCG had no defence to Microsoft's allegation that PCCG had infringed Microsoft's copyright; (c) the only issue in dispute between Microsoft and PCCG was whether or not a court would find that PCCG, whilst subjectively unaware it was infringing Microsoft copyright, would nonetheless be found objectively to have acted unreasonably. As explained, this issue relates to PCCG's entitlement to the defence under s 115(3) of the Copyright Act, which was extracted above at [50]. This issue informed the substance of the negotiations between Microsoft and PCCG's lawyers. 163 Ms Quigley had conduct of the Microsoft claim on behalf of PCCG. She gave evidence that, on 5 August 2016, she held a telephone conference with Clayton Utz, the solicitors acting on behalf of PCCG in respect of the Microsoft claim, to discuss the strategy to be adopted at a mediation to be conducted between PCCG and Microsoft later that day. Clayton Utz's advice was that PCCG should attempt to negotiate a reasonable settlement as it appeared that Microsoft was likely to pursue the matter to trial. 164 As a consequence of the mediation, a settlement was reached by which, amongst other things, PCCG would pay Microsoft damages of $250,000. Before executing the settlement agreement, Ms Quigley said that she and Mr Cameron were advised by Clayton Utz that Microsoft's offer was an excellent result for PCCG taking into account that Microsoft had initially demanded payment of about $700,000, and that it was highly likely that Microsoft would pursue the matter to trial, which would result in PCCG incurring significant legal costs. Ms Quigley explained that PCCG decided to accept the settlement because of: (a) the reduced quantum of the settlement sum (compared to the initial amount demanded by Microsoft); (b) Microsoft's apparent willingness to take similar disputes to trial; (c) the costs associated with undertaking the trial; (d) the risk the a court would find against PCCG; and (e) the consequent risk that Microsoft could have determined that PCCG was no longer able to sell Microsoft's products. 165 Instrat's challenge to PCCG's entitlement to damages did not directly impugn the reasonableness of actions taken by PCCG in the course of negotiations with Microsoft. Indeed, Ms Quigley was not challenged on her evidence as to the reasonableness of the settlement, nor in relation to Clayton Utz's advice to this effect. Instead, Instrat argued that, as PCCG had not called evidence from Clayton Utz regarding the settlement, PCCG had failed to establish the reasonableness of the settlement in the sense required to satisfy the elements of causation and remoteness. Invoking the statement of McHugh J in Unity at [35]—that "in most cases … the evidence of the relevant legal advisers is vital"—Instrat contended that it was necessary for PCCG to have presented evidence from the relevant solicitors at Clayton Utz to prove the underlying reasoning behind the settlement. PCCG's failure to adduce this evidence meant, in Instrat's submission, that PCCG had failed to prove its entitlement to damages. 166 I reject Instrat's submission. Although the existence and content of any legal advice supporting a settlement will logically be relevant to the reasonableness of that settlement, such evidence is not necessary to establish the reasonableness of the settlement. It may be, as McHugh J suggested in Unity, that "in most cases" the evidence of legal advisers is central. But this does not exclude the possibility that, in some cases, alternative evidence of the circumstances surrounding the settlement negotiations, and the actions of the parties to that compromise, will be sufficient to establish the reasonableness of the settlement. 167 The reasoning behind PCCG's determination to settle the Microsoft claim on the terms agreed is clear from the evidence provided by Ms Quigley and Mr Cameron, and the communications between the solicitors for PCCG and Microsoft preceding the compromise. It is clear from this evidence that PCCG had infringed Microsoft's copyright. Based on the number of Windows licences infringed, and the price of the licences, Microsoft was initially seeking damages of over $700,000 (although the amount claimed reduced in the course of the negotiations). PCCG was advised by Clayton Utz of Microsoft's willingness to take similar disputes to trial. If the matter did proceed to trial, the likelihood of a court accepting that PCCG was entitled to rely on the defence in s 115(3) of the Copyright Act was inherently uncertain. Added to these considerations was the centrality of Microsoft's products to PCCG's business. As noted, the only operating system sold by PCCG was Windows. The sale of Windows was one of the top five products sold by PCCG. Thus, the value of the ongoing relationship with Microsoft was not an insignificant consideration for PCCG. 168 In these circumstances, the payment to Microsoft of the settlement sum of $250,000 was, judged objectively and having regard to the material available to PCCG at the time of the compromise, a reasonable action to be taken by a party in the position of PCCG. This conclusion is justified by the evidence presented at trial. In the present case, it was not obligatory for PCCG to call the solicitors from Clayton Utz to give evidence to establish the reasonableness of the settlement. I am accordingly satisfied that PCCG's settlement of the Microsoft claim was reasonable. Conclusion on causation 169 For the reasons expressed above, PCCG's loss—comprising the payment of the settlement sum to Microsoft—was, as a matter of law, caused by Instrat's breach of the insurance retainer and its duty of care to PCCG. Remoteness 170 For PCCG to obtain damages from Instrat, PCCG must establish that the payment of the settlement sum was a reasonably foreseeable form of loss. This is so in relation to damages recoverable for breach of contract (Burns at 672-3 per Brennan J; Unity at [24] per McHugh J) and in negligence (Wyong Shire Council v Shirt [1980] HCA 12; 146 CLR 40 at 44-8 per Mason J, with Stephen and Aickin JJ agreeing). 171 It was plainly foreseeable by the parties, both as at the commencement of the insurance retainer in 2009 and at the time of the annual renewal in 2015, that, should Instrat breach its duties to PCCG, PCCG may face a claim by a third party as a result of that breach, and that PCCG may be required to pay an amount to the third party to compromise that claim. 172 The foreseeability of this form of loss follows from the general nature of a contractual relationship. As expressed by McHugh J in Unity at [33], "[a]s a general rule, a contract breaker must be taken to have reasonably contemplated that its breach may force the innocent party into litigation with third parties and that the innocent party may conclude that it is in its best interest to compromise the third party's claim". Likewise, in the context of a relationship between an insurance broker and client, Hayne J expressed the following (at [119]): Plainly it was within the contemplation of insured and broker, at the time that the insured retained the broker, that if the broker did not perform its task with reasonable skill and care, the insured may obtain a policy of insurance the enforceability of which, in accordance with its terms, was open to doubt and that this may cause loss to the insured. However the appropriate limit of what is to be regarded as within the contemplation of the parties is stated, the possibility of this kind of loss was within the contemplation of the parties. According to the kind and the strength of the doubts about enforceability, the insured may be unable to enforce the policy at all, or may be able to enforce it only by incurring costs to do so, whether those costs be the costs of litigation or other costs. Again, having regard to the kind and the strength of those doubts, and such matters as the costs of seeking to enforce the policy, the insured and the insurer may compromise any dispute about its enforceability. All of these outcomes must, in my view, be regarded as being within the reasonable contemplation of the insured and broker at the time of making the contract of retainer. No question arises, then, about whether the damage suffered by an insured which has compromised its claim against its insurer on a policy that is of doubtful enforceability is too remote. (Citations omitted.) 173 Moreover, for the reasons set out above in relation to the causation of PCCG's loss, there is no basis for Instrat to argue that the payment of the settlement sum by PCCG to Microsoft was not reasonably foreseeable on the basis that the settlement reached by PCCG was unreasonable. 174 For these reasons, PCCG's loss was a form of loss that was reasonably foreseeable by the parties. Damages 175 There were three issues posed by the parties for consideration in relation to the quantification of damages, being: (a) did PCCG fail to mitigate its loss in a way that affects its entitlement to damages or compensation from Instrat? (b) is PCCG, in the circumstances of the present case, entitled to damages for loss of the opportunity to purchase the copyright cover? (c) should Instrat's liability be reduced for contributory negligence of PCCG? Each issue is now considered in turn. Mitigation of loss 176 In order to recover damages for the settlement sum paid to Microsoft, PCCG was obliged to act reasonably to mitigate that loss: Unity at [3] per Brennan CJ. The onus rests on Instrat to prove that PCCG acted unreasonably for these purposes: TC Industrial Plan Pty Limited v Robert's Queensland Pty Limited [1963] HCA 57; 180 CLR 130 at 138 per Kitto, Windeyer and Owen JJ; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768; 196 ALR 257 at [83] per Callinan J. 177 The closing written submissions filed by Instrat baldly asserted that PCCG "appears to have failed to mitigate its damage by failing to recover against the supplier of the product". This claim was unsubstantiated and Instrat did not adduce any evidence on the question of mitigation. 178 The only evidence in relation to the third party supplier of the Microsoft licences was from Ms Quigley, who said that Microsoft had asked for information from PCCG in relation to the third party supplier in the form of invoices and arrangements so that Microsoft could pursue the third party supplier. Microsoft had not recovered any compensation from the third party as at the time of PCCG's settlement of the Microsoft claim. 179 In these circumstances, Instrat has failed to make out any allegation that PCCG failed to mitigate its loss. Moreover, I note for completeness that, for the reasons set out above in relation to the causation of PCCG's loss, there is no basis to conclude that PCCG failed to mitigate its loss because the settlement reached by PCCG was unreasonable. Loss of opportunity 180 The closing written submissions filed on behalf of PCCG expressed that PCCG's loss and damage is in the nature of a loss of opportunity to acquire the appropriate insurance that would have indemnified it for the Microsoft Claim. The proper measure of damages for a breach by a broker will be the recovery of the sum the hypothetical insurer would have paid but for the broker's negligence. The case cited for the last proposition was Aneco Reinsurance Underwriting Ltd v Johnson & Higgins Ltd [2011] UKHL 51; [2001] 2 All ER (Comm) 929 at [40] per Lord Steyn. 181 It is necessary to address the first sentence of this extract from PCCG's closing written submissions. Although it is correct, informally speaking, that Instrat's breach deprived PCCG of the opportunity to make an informed choice as to its insurance cover, it is misleading (and unnecessary for PCCG's purposes) to characterise PCCG's loss as a "loss of opportunity" (or "loss of chance") in the sense commonly referred to in assessing damages for breach of contract or in negligence. 182 The concept of a "loss of chance" is ordinarily invoked where a defendant's breach has deprived the plaintiff of a chance to obtain some benefit, either where that benefit was directly contemplated by the parties, or where the probable result of the breach is that the plaintiff was deprived of the chance of deriving a benefit from beyond that relationship. In those circumstances, where it is difficult to quantify the loss of the plaintiff, damages will commonly be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff obtaining the benefit, had the plaintiff not been deprived of that chance: see, generally, Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 349-50 per Mason CJ, Dawson, Toohey and Gaudron JJ. 183 In the present case, however, the particular damage claimed by PCCG is not the loss of a chance. It is instead a loss already incurred by PCCG. By executing the settlement agreement with Microsoft, PCCG became contractually obliged to pay (and subsequently did pay) the settlement sum of $250,000. In these circumstances, there is no difficulty in quantifying the loss suffered by PCCG, and the principles regarding the quantification of damage for loss of a chance are inapposite. 184 In this regard, it is important to distinguish between the questions of causation and quantification of damage: see La Trobe Capital & Mortgage Corp Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; 190 FCR 299 at [81]-[82] per Finkelstein J. The nature of PCCG's lost opportunity to obtain the relevant insurance cover has already been factored into the assessment of whether Instrat's breach caused PCCG's loss. As considered above, it was necessary to determine the availability of relevant cover in the market, and to assess what PCCG's actions would have been but for Instrat's breach. To this extent, hypothetical events have already influenced PCCG's entitlement to damages. However, there is no need in the present case to calculate PCCG's loss by reference to the probability of a future event. 185 Notwithstanding these remarks, the ultimate thrust of PCCG's submission (regarding the proper quantification of damage) is correct. Returning to first principles, the general rule "governing the assessment of compensatory damages in both contract and tort is that the plaintiff should receive the monetary sum which, so far as money can, represents fair and adequate compensation for the loss or injury sustained by reason of the defendant's wrongful conduct": Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; 174 CLR 64 at 116 per Deane J. In relation to a breach of contract, this generally attempts to place a plaintiff in the position that it would have occupied had the defendant's breach not occurred: see ibid at 80 per Mason CJ and Dawson J. 186 In the present case, these principles are satisfied by quantifying PCCG's loss by reference to the sum that a hypothetical insurer would have paid PCCG but for Instrat's breach of the insurance retainer and duty of care owed to PCCG. Based on the analysis above, the hypothetical insurer would have indemnified PCCG for the $250,000 amount paid to settle the Microsoft claim. Contributory negligence 187 Instrat finally argues that its liability should be reduced due to PCCG's own contributory negligence. Instrat raises two bases for its allegation that PCCG negligently contributed to its own loss: (1) that PCCG failed to raise the risk of copyright infringement with Instrat (at the start of the insurance retainer or subsequently). Instrat says that, in all likelihood, PCCG was aware of the risk that it may purchase goods not properly licensed for the purposes it used them for. In these circumstances, according to Instrat's submission, PCCG ought to have reviewed the annual insurance plans and realised that it was uninsured for breaches of copyright. PCCG should have then informed Instrat about that risk and requested protection for the risk; and (2) that PCCG negligently failed to check the purpose for which the use of the Windows licences the subject of the Microsoft claim were authorised. In Instrat's submission, a reasonable person in the position of PCCG would have ensured that the licences were used for their authorised purpose. As a result, all, or a significant percentage, of the fault in PCCG selling the wrongly licenced goods lies with PCCG, not the third party supplier. 188 Instrat says that these failures were breaches of PCCG's duty to protect itself and that, accordingly, Instrat's liability should be reduced, either fully or by such proportion that the Court deems just and equitable. Relevant principles 189 The conduct giving rise to Instrat's breach of duties occurred in the State of Victoria. Section 26 of the Victorian Wrongs Act, which deals with liability for contributory negligence, accordingly applies by virtue of s 79 of the Judiciary Act 1903 (Cth): see, in relation to the Civil Liability Act 2002 (NSW), DOQ17 v Australian Financial Security Authority (No 3) [2019] FCA 1488 at [179] per Perry J. 190 Relevantly for current purposes, s 26(1) of the Victorian Wrongs Act provides as follows: 26 Liability for contributory negligence (1) If a person (the claimant) suffers damage as the result partly of the claimant's failure to take reasonable care (contributory negligence) and partly of the wrong of any other person or persons— (a) except as provided in section 63, a claim in respect of the damage is not defeated by reason of the contributory negligence of the claimant; and (b) the damages recoverable in respect of the wrong must be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage. 191 Section 63 of the Victorian Wrongs Act, as referred to in s 26(1)(a), provides that, "[i]n determining the extent of a reduction in damages by reason of contributory negligence, a court may determine a reduction of 100% if the court thinks it is just and equitable to do so, with the result that the claim for damages is defeated". 192 For the purposes of Part V of the Victorian Wrongs Act (which contains s 26), a "wrong" means … an act or omission that— (a) gives rise to a liability in tort in respect of which a defence of contributory negligence is available at common law; or (b) amounts to a breach of a contractual duty of care that is concurrent and co-extensive with a duty of care in tort. 193 Section 26(1) of the Victorian Wrongs Act and the above definition of a "wrong" were inserted into that Act by the Wrongs (Amendment) Act 2000 (Vic) to counter the High Court's 1999 decision in Astley, which held by majority that equivalent apportionment provisions in South Australia were not applicable to actions in contract whether or not the plaintiff has, or could have, also sued in tort: see Mr Hulls (Attorney-General), Wrongs (Amendment) Bill 2000 Second Reading Speech, 5 October 2000, Victorian Parliamentary Debates, Legislative Assembly at 946-7. The result of the amendment was that contributory negligence could act as a total or partial defence to a breach of contractual duty, so long as that duty is "concurrent and co-extensive with a duty of care in tort". In the present case, although the elements necessary to establish an entitlement to damages differ in contract and tort (Astley at [47]), PCCG's duty to exercise reasonable skill and care was co-extensive in both contract and tort. 194 In Astley, the majority stated that, "[a]t common law, contributory negligence consisted in the failure of a plaintiff to take reasonable care for the protection of his or her person or property": ibid at [21] per Gleeson CJ, McHugh, Gummow and Hayne JJ. This overarching principle continues despite statutory modification: see s 62(1) of the Victorian Wrongs Act. The conduct of the plaintiff will be judged on an objective basis: ibid, s 62(2). The onus is on the defendant to prove that the plaintiff's negligence contributed to the plaintiff's loss: Anderson v Eric Radio & TV Pty Ltd [1965] HCA 61; 114 CLR 20 (Anderson) at 43 per Windeyer J; Joslyn v Berryman [2003] HCA 34; 214 CLR 552 at [18] per McHugh J. It should also be recalled that causation is central to the defence of contributory negligence: Ackland v Commonwealth of Australia [2007] NSWCA 250; (2007) Aust Torts Reports 81-916 at [138] per Ipp JA, citing Caswell v Powell Duffryn Associated Collieries Limited [1940] AC 152 at 165 per Lord Atkin. That is, for an award of damages to be reduced on the basis of the plaintiff's negligence, that negligence must be a cause of the plaintiff's relevant loss. PCCG's failure to inform Instrat of risk 195 Instrat first alleges that PCCG negligently contributed to its own loss by failing to raise the risk of copyright infringement with Instrat. 196 It may be accepted that the failure by a client to communicate a relevant fact to a professional may constitute contributory negligence: Wyndham City Council v Terra Culture Pty Ltd [2018] VSC 81 at [321] per Vickery J, citing Carradine Properties Ltd v DJ Freeman & Co (a firm) (1982) 126 Sol J 157; (1982) 5 Const LJ 267, as quoted in Rybak v Senneh Pty Ltd [1996] NSWCA 460; (1997) ANZ Conv R 74 at 78–9 per Priestly JA, with Beasley AJA and Brownie JA agreeing. However, given the general nature of the insurance retainer in the present case, and the allocation of responsibilities which that retainer implicitly entailed, this allegation by Instrat must be rejected. It is useful to illustrate by reference to the 1992 decision of Vincent J in the Supreme Court of Victoria in Marvin Manufacturers. 197 The insurance broker in Marvin Manufacturers arranged contract works insurance for the insured with the first defendant insurer. When that policy came up for annual renewal, the broker changed the plaintiff's policy to be with the second defendant insurer. After weather damage was sustained to works under construction by the insured, the insured made claims for indemnity upon each of the insurers. However, each insurer denied liability. The insured sued the insurers and the broker. 198 Vincent J held that the insurance contracts with the insurers did not cover the insured's loss, but held that the broker was liable in negligence by reason of the insured finding itself without insurance cover. Although the subject of contract works insurance was initially raised by the insured, his Honour found that the initial inquiry should have made it clear to the broker that the insured "had no experience with this type of insurance and, indeed, that it was for that very reason that advice and assistance were sought": ibid at 77,612. 199 In response to an argument that the insured had contributed to its own loss, Vincent J concluded as follows (at 77,612): I do not consider that it would be appropriate to make a finding of contributory negligence against the Plaintiff. With respect to the argument that the Plaintiff failed to provide clear or adequate instructions to that defendant, in my view it is not to the point, that relevant information was not provided when as it would appear clear was the case, it was neither sought nor was its relevance drawn to the Plaintiff's attention by the party which had been engaged to act on its behalf and upon the skill and judgment of which, it must have been appreciated, the Plaintiff was relying. 200 Similar comments are apposite in the present case. Although Mr Cameron had previously procured insurance on behalf of PCCG, when he first approached Instrat he was uncertain of PCCG's precise insurance needs, other than sharing a broad concern regarding the increasing stock held by the business. And, unlike what occurred in Marvin Manufactures, Mr Cameron did not specifically raise a concern regarding the particular form of risk that eventuated. 201 As determined above, Instrat breached its contractual and tortious duties owed to PCCG by failing to raise the exposure of PCCG's business to a risk of copyright infringement. To reach that determination, I found that Mr Cameron was not aware of PCCG's exposure for risk of copyright infringement until the Microsoft claim in 2016. I also found that Mr Prior did not discuss or raise with Mr Cameron the risk to PCCG's business of a claim for copyright infringement. 202 Subject to PCCG providing sufficient information to enable Instrat to perform its role, it was not PCCG's responsibility to highlight to Instrat the risks faced by the business for which PCCG sought cover. According to the evidence presented, the insurance retainer imposed general obligations on Instrat to provide PCCG with advice in respect of the risks to which the business was exposed. The purpose of this advice was to enable PCCG to make an informed decision about its insurance requirements, and place PCCG in a position to instruct Instrat about the insurance cover which PCCG wished Instrat to procure on its behalf. As such, the heart of this relationship was PCCG's reliance on Instrat's own skill and judgment. It was incumbent on Instrat to make appropriate inquiries, not for PCCG to anticipate what Instrat ought to do: see Claude Ogden at 32. 203 Although I accept that there is no absolute rule that contributory negligence cannot arise where the relevant loss sustained by the plaintiff is the kind of loss against which the defendant should have protected the plaintiff, in the present case it was "proper for [the] plaintiff to rely on the defendant to perform its duty": Astley at [30]. The argument that PCCG negligently contributed to its own loss, and that Instrat's own responsibility ought be reduced as a result, because PCCG failed to inform Instrat of the risks to PCCG's business, fails to recognise, and is inconsistent with, the nature of the very duties which Instrat owed to PCCG in contract and negligence. There is accordingly no failure by PCCG in this respect to protect its own interest in a manner that would reduce its entitlement to damages. PCCG's failure to prevent unauthorised use of licences 204 Instrat finally argues that PCCG negligently contributed to its own loss by failing to prevent the unauthorised use of the licences the subject of the Microsoft claim. 205 Upon first impression, there is attraction to this argument. The fact that PCCG had not subjectively considered the risk of copyright infringement prior to the Microsoft claim does not preclude the conclusion that a reasonable person in the position of PCCG would have ensured that the licenses were used for their authorised purpose, or at least implemented further mechanisms to reduce the risk of unauthorised use. Given the nature of the business engaged in by PCCG, the unauthorised use of the licences that led to the Microsoft claim, albeit unintentional, may potentially be viewed as a lapse in reasonable conduct by PCCG. 206 As Instrat observes, there is minimal evidence about the particular efforts that were undertaken by PCCG to minimise or eliminate the risk of authorised use of the licences. Evidence from Ms Quigley in cross-examination included the following: [COUNSEL FOR INSTRAT:] … you are aware, from your position, that the software you purchase and sell needs to be licenced properly?---Yes. Yes. And is it you who is responsible for insuring that within the business?---No. Who is responsible for that?---Our purchasing team. Okay. So, neither you nor, I take it, is Mr Cameron directly responsible for that?---No. No. But presumably, as the operations manager, you're responsible for ensuring that that's done properly, and all tasks done by the purchasing team are done properly?---I audit their work, yes. … 207 The cross-examination of Ms Quigley moved to other topics before returning to PCCG's auditing processes: [COUNSEL FOR INSTRAT:] … And you said earlier in evidence that you audit your purchase team?---Yes. And did you audit your purchase team prior to this incident arising?---Yes. And how often did you audit them?---Periodically. It changes depending on how busy we are and if we have – taking on a new supplier, for example, or a new brand. So, it's not programmed in to happen once a week or once a month, or - - -?---No. It's from time to time as you feel the need?---Correct. And those periods of time might be in – between some audits might be much longer than they are at other times?---Yes. And that's still the case?---Yes. And you sell how many products, would you estimate?---We have around 5000 active skews. Yes. And you conduct your audit on all of them?---Different product groups at different times. And your products, do you do them by random samples?---Basically, we have a calendar, so we will go through brands or product types or by supplier for those different periods and we will have a look at things like margin mix and the products available. And you do that yourself?---Yes. Yes. On your own?---No. You do it with Mr Cameron?---Yes. 208 Shortly afterwards, the cross-examination turned to the impact that the Microsoft claim had on the auditing processes. Ms Quigley's evidence was as follows: [COUNSEL FOR INSTRAT:] I suggest to you that the risk of breach of copyright occurring is quite low in your business?---It's difficult to quantify because we rely on third party suppliers and their suppliers vary from time to time. It's impossible for us to quantify that risk. But you agree the risk is not significant enough for you to increase the number of audits you perform?---Correct. Even in light of this incident, your evidence is you haven't increased the number of audits you perform?---Correct. 209 Mr Cameron's evidence did not address the specific auditing processes undertaken by PCCG. He conveyed, however, that PCCG's greatest protection from the risk of purchasing unauthorised licences was to buy from trusted suppliers. In relation to the acquisition of the licences that gave rise to the Microsoft claim, Mr Cameron gave the following evidence in cross-examination: [COUNSEL FOR INSTRAT:] I understand that when you purchase software you ensure that it's properly licenced?---We hadn't even – it hadn't even crossed our minds that this sort of thing could happen. So, you didn't check prior to this incident?---Well, you could argue that we did check because we were buying from a trusted supplier who actually had come from one of the largest distributors and then he was the country manager for a leading video – graphics card brand. He had been in the industry for five to – at least five years. He was well known. And the crux of it, we – as soon as – these are little certificates of authenticity – little stickers, sorry. You put it on there and when you actually install it you actually have to type something in at the Microsoft website. You have to type in the code. There was no indication that these were of a refurbisher program or anything like that. We figured, you know, it's going to throw an alert or it's going to say – well, it didn't even cross our mind to even suspect that because this was a trusted supplier, but they acted or behaved in exactly the same manner that our normal stock would act or behave. To us the only difference was you're buying a sticker and not a sticker plus disc, and we didn't need the disc. 210 The closing written submissions filed on behalf of Instrat expressed the following about this form of alleged contributory negligence on the part of PCCG: 128. As has already been discussed in these submissions, Mr Cameron gave evidence that by purchasing from trusted suppliers [PCCG] took sufficient care to negate the risk of an infringement of copyright. As already set out, Mr Cameron's evidence that he did not know that pirated or unlicenced goods were sold in the IT industry is not credible. Mr Cameron also accepted, as did Ms Quigley, that [PCCG's] customers relied on it to sell properly licenced goods, in this case software. 129. Little detail was provided by Ms Quigley as to how often and how fulsome the auditing undertaken by [PCCG] was to ensure goods were properly licenced. The court cannot be satisfied it was done to a reasonable standard. 130. In all likelihood, [PCCG] was aware of the risk that it may purchase goods not properly licenced for the purposes it used them for. It should have checked to ensure it was using them for the purpose they were licenced for, as Microsoft asserted in the Microsoft Claim. The fault for selling incorrectly licenced goods therefore in all probability lay with [PCCG], not the supplier who sold the software to them. Although Mr Cameron and Ms Quigley did not accept that when it was put to them, the inference should be drawn from the matters above that all the fault, or a significant percentage of the fault in selling the wrongly licenced goods, was [PCCG's] mistake and not anyone else's. 211 It may be that PCCG could have done more to ensure it was not using the relevant licences for unauthorised purposes. But, for current purposes, the problem for Instrat is that the lack of evidence regarding PCCG's internal auditing processes works against Instrat, not in its favour. This is because the onus of proving that a plaintiff's conduct contributed to its own loss rests on the defendant. Thus, the burden in the present case was on Instrat to adduce evidence to support any contention that PCCG's own negligence had wholly or partly caused its own loss. However, Instrat's argument inverts the onus of proof. This is evident from paragraph 129 of Instrat's closing written submissions, as extracted above, which stated that, given Ms Quigley had not adequately explained PCCG's auditing processes, "[t]he court cannot be satisfied it was done to a reasonable standard". 212 Given the lack of direct evidence, Instrat was ultimately asking the court to draw an inference that PCCG had acted negligently by engaging in unauthorised use of the licences such that the quantum of damages ought to be reduced: see paragraph 130 of Instrat's closing written submissions, as extracted above. Although it may be possible in some cases to discharge that onus solely by reference to the evidence adduced on behalf of the plaintiff (Anderson at 43 per Windeyer J), my view is that the evidence on this issue is insufficient to justify such an inference in the present case. For these reasons, Instrat's claim of contributory negligence against PCCG fails. Conclusion 213 For the reasons set out above, PCCG has successfully established that it is entitled to damages from Instrat to compensate PCCG for the payment of the settlement sum to Microsoft. 214 My answers to each of the questions posed by the parties for determination are as follows: (1) Did Instrat breach its duty of care and/or its contractual obligation as PCCG's insurance broker by failing to advise in relation to and/or procure for PCCG insurance for breach of copyright? Yes. (2) If the answer to question (1) is yes: (a) was PCCG's loss reasonably foreseeable? Yes. (b) is PCCG required to prove the settlement sum it paid to settle the Microsoft claim as reasonable, and if yes, has it done so? PCCG is required to prove that Instrat's breach caused PCCG's loss, and that the loss was reasonably foreseeable. The reasonableness of the settlement sum paid by PCCG to settle the Microsoft claim was relevant to establishing those elements of its causes of action. On the facts, the settlement by PCCG was reasonable, and PCCG is successful in satisfying those elements. (c) has PCCG failed to mitigate its loss in a way that effects its entitlement to damages or compensation from Instrat? No. (d) is PCCG in the circumstances of the present case entitled to damages for loss of the opportunity to purchase the copyright insurance cover? It is misleading to characterise PCCG's entitlement to damages as based on the loss of an opportunity. Nevertheless, PCCG is entitled to damages by reference to the sum that a hypothetical insurer would have paid PCCG but for Instrat's breach of the insurance retainer and duty of care owed to PCCG. That sum is $250,000. (3) If PCCG is prima facie entitled to damages or compensation from Instrat, should Instrat's liability be reduced pursuant to its claim for contributory negligence against PCCG? No. 215 As PCCG has been successful in its claims against Instrat, Instrat will pay PCCG's costs of, and incidental to, the proceeding, including any reserved costs. 216 I direct that, within 7 days, the parties are to file orders by agreement giving effect to these reasons for judgment or, if no agreement is reached, submissions of no more than five pages as to the form of final relief to be ordered. I certify that the preceding two hundred and sixteen (216) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anderson. Associate: Dated: 4 March 2020