Reported Decision : (2001) 11 ANZ Ins Cas 61-506 [2001] ACL Rep 235 NSW 13 New South Wales Court of Appeal CITATION : GIO General Limited v Wallace [2001] NSWCA 299 FILE NUMBER(S) : CA 40090/00 HEARING DATE(S) : 31 August 2001 JUDGMENT DATE : 23 October 2001 PARTIES : GIO General Limited (Appellant) Lawrence Aston Wallace (Respondent) JUDGMENT OF : Priestley JA at 1; Heydon JA at 2; Hodgson JA at 71 LOWER COURT JURISDICTION : District Court LOWER COURT DC 2847/98 FILE NUMBER(S) : LOWER COURT P R Bell DCJ JUDICIAL OFFICER : COUNSEL : Mr J G Duncan (Appellant) Mr G T Johnson (Respondent) SOLICITORS : Abbott Tout (Appellant) Brian Muir & Company (Respondent) CATCHWORDS : Contracts - Insurance Law - Insurance contracts - Insured's duty of disclosure - Scope of duty - Whether duty breached - Insurer's duty to inform insured about duty of disclosure - Whether duty breached - Where residential premises insured - Where business use of premises increased - Where insured received threats and minor property damage - Insurance Contracts Act 1984 (Cth), ss 11, 21, 22 and 28- ND LEGISLATION CITED : Insurance Contracts Act 1984 (Cth) Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 Delphin v Lumley General Insurance Ltd (1989) 5 ANZ Insurance Cases 60-941 CASES CITED: Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 153 ALR 529 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 Suncorp General Insurance Ltd v Cheihk (1999) 10 ANZ Insurance Cases 61-442 DECISION : See paragraph 70 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40090/00 DC 2847/98 PRIESTLEY JA HEYDON JA HODGSON JA 23 October 2001 GIO GENERAL LIMITED v WALLACE Contracts - Insurance Law - Insurance contracts - Insured's duty of disclosure - Scope of duty - Whether duty breached - Insurer's duty to inform insured about duty of disclosure - Whether duty breached - Where residential premises insured - Where business use of premises increased - Where insured received threats and minor property damage - Insurance Contracts Act 1984 (Cth), ss 11, 21, 22 and 28 The respondent ("the plaintiff") owned premises with another person. From December 1987 to December 1988 the premises were insured with the appellant insurer ("the defendant") under a home building insurance policy, which was renewed annually thereafter. On the original insurance proposal it was written by the insured that the use of the property was as a "private home" and that part of the home would be used for business purposes for "storage of equipment only". In 1991 the premises were visited and inspected by an employee of the defendant in relation to an insurance claim for wind damage. From about 1992 there was a significant increase in the use of the premises for the purposes of the plaintiff's wood chipping/tree surgeon business. The plaintiff moved the business office, some machinery and inflammable liquids onto the premises. He also began using the premises for wood storage, the parking of trucks and the sale of wood. In late 1992 or early 1993 a workers compensation claim was made against the plaintiff by an employee. The employee made ambiguous threats towards the plaintiff. The plaintiff also experienced minor damage to property and anonymous threats. As a result the plaintiff contacted the police, his solicitor, his insurance broker and an accountant, but not the defendant. The insurance policy was reworded in February 1994 and the defendant claimed that a copy of the re-worded policy was sent to the plaintiff with the annual Renewal Notice in December 1994. In 1995 the premises were damaged by a fire, for which the plaintiff was not responsible. The defendant denied any duty to indemnify the plaintiff on the basis that the plaintiff had breached his duty of disclosure under s 21(1) of the Insurance Contracts Act 1984 (Cth) by not disclosing the change in business activities and the receipt of threats before the 1994 renewal. That sub-section provided: " Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: …… (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant." The plaintiff sued the defendant. The trial judge held that the plaintiff had not breached s 21(1), and that in any event the defendant had breached s 22(1), which provided: " The insurer shall, before a contract of insurance is entered into, clearly inform the insured in writing of the general nature and effect of the duty of disclosure …." Verdict and judgment were entered for the plaintiff, and the defendant appealed. Held by Heydon JA (Priestley JA and Hodgson JA concurring), allowing the appeal: 1. The trial judge erred in holding that the plaintiff did not breach his duty of disclosure under s 21(1)(b). a. "Under s 21(1)(b) it is necessary, in judging what a reasonable person could be expected to know, to take into account the circumstances affecting the actual insured, but the ultimate question turns on what could be expected of a reasonable person's state of mind, not on the insured's state of mind". Heydon JA at [22]. b. In relation to the change in business use, the language of the 1994 policy contemplated use of the premises for business purposes. However, this does not prevent reasonable persons from being expected to know that a change in the level of business use (involving the stockpiling of wood) is relevant to their insurer's decision whether to accept the risk. Although the premises were inspected by the defendant in 1991, the business activity therein had grown very substantially by 1994, and that inspector was a claims investigator not an underwriter. c. In relation to the receipt of threats and the occurrence of damage to property, they were serious and had the capacity to concern the plaintiff enough to contact the police, his solicitor, his insurance broker and an accountant. Therefore, a reasonable person could be expected to know that the threats were relevant to the defendant's decision whether to accept the risk. 2. The defendant did not breach its duty under s 22 to "clearly inform the [plaintiff] in writing of the general nature and effect of the duty of disclosure". a. The 1994 policy and Renewal Notice did come to the plaintiff's attention. Even if they had not come to his attention, they came to the attention of his office administrator. b. The requisite informing does not need to have occurred at a particular time before the contract was entered into. There was a single course of dealing between the parties from the time of the original policy onwards. At the start of this single course of dealing in 1987, the plaintiff was clearly informed in writing of his s 21 duty, by the proposal he signed and by the 1987 policy. 3. The defendant's liability should be reduced to nil under s 28(3), which relates to the liability of an insurer when the insured has breached their duty of disclosure. a. Although the trial judge did not make findings on s 28(3), this did not cause a substantial wrong or miscarriage which would justify a re-trial on the issue under Pt 51 rule 23(1) of the Supreme Court Rules. b. This Court is capable of accepting the trial evidence of an employee of the defendant to the effect that the insurance policy would not have been renewed had the plaintiff fulfilled his duty of disclosure. O R D E R S 1. Appeal allowed. 2. The orders of the court below are set aside. 3. In lieu of the orders of the court below, verdict and judgment for the appellant with costs. 4. The respondent is to pay the appellant's costs of the appeal except in relation to paragraph 8 of the Notice of Appeal. 5. The appellant is to pay the respondent's costs of the appeal in relation to paragraph 8 of the Notice of Appeal. 6. The respondent is to have a certificate, if entitled, under the Suitors Fund Act 1951. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40090/00 DC 2847/98 PRIESTLEY JA HEYDON JA HODGSON JA 23 October 2001 GIO GENERAL LIMITED v WALLACE Judgment 1 PRIESTLEY JA: Subject to the same comments as those made by Hodgson JA, I agree with Heydon JA's reasons. I agree with the orders proposed by Heydon JA. 2 HEYDON JA: This is an appeal by leave against a verdict and judgment for the plaintiff in the sum of $96,712.88 entered by P R Bell DCJ on 27 January 2000. Leave was also granted to cross-appeal, but the cross-appeal has been discontinued. Background 3 In 1987 the plaintiff and a Mr Doyle purchased land known as 39 Anderson Road, Mortdale. On 17 April 1995 the premises were damaged by a deliberately lit fire. The plaintiff was not responsible for the fire. The premises were insured under a policy first entered with the defendant for the period 3 December 1987-3 December 1988. It may be said, speaking neutrally and without prejudice to certain arguments of the plaintiff to be considered below, that the policy was renewed annually thereafter. The first renewal named Mr Doyle as one of the insured persons, but from 25 January 1989, at the apparent request of the plaintiff, Mr Doyle's name as an insured person was deleted and did not appear thereafter. The trial judge made the following findings about the proposal: "Aided by Mr Wallace, Mr Doyle completed a home building insurance proposal (a copy is Ex. B and the original is Ex. 1). Although it is undated but date stamped '1 DEC 1987' (sic), the period for which insurance was sought was stated as '3.12.87 to 3.12.88' (sic). In respect of the question concerning the property 'what is it used as' the reply was entered 'private home'; and the question 'will any part of the home be used for business purposes' the reply was 'yes', and detailed as 'storage of equipment only'. Next to this last reply is an asterisk and in the right hand space above the words 'OFFICE USE ONLY' appears more handwritten material adjacent to an asterisk. I am satisfied that an officer of the defendant made enquiries and obtained the information comprised in the words 'chain saw, ladders, grinders general tools' all of which are bracketed with the words 'used for business stored in garage'. To the right of those words are further words 'Insured phoned for form and was not advised re photos of back and other bldg (sic). R & R accepted but photos will be forwarded when residence taken up –' together with a further entry '4.19 pm – photos have been brought in and attached'. This referred to 6 photographs that became Ex. 2. These photographs show a residential building, with a large car port adjacent to which contains a roller door entry into an enclosed back section. There are open grassed areas in the front and at the rear of the house. … I am satisfied on the balance of probabilities that the plaintiff had knowledge of the contents of the original insurance proposal as well as of the content of the other handwritten and photographic material." 4 The trial judge made the following findings about events after 1987: "The plaintiff operated a wood chipping/tree surgeon business. Whilst initially the office was located at Hurstville (see Exhibit E2 which clearly states the 'offices' to be at Hurstville), the plaintiff thinks it was in 1992 when the office was moved into a partitioned off portion of the residence [i.e. the insured premises]. The business activities then reached the stage where there were complaints from the local council about the parking of the vehicles on the footpath and complaints from neighbours about the height and amount of wood stacked at the front of the house. Indeed, there was so much wood or wood product stored at the front of the house that the front door was never used, the house being accessed through the car port. In 1994 the plaintiff received notification from the council to clean up the property and reduce the amount of timber stored on it. Another source of complaint was the noise generated by the use of the wood mulching machine which was kept at the premises. In October 1991 a wind storm caused damage to the shed and factory portion of the car port. This was the subject of a householders insurance claim (Exhibit F). The outside of the property was inspected and photographed (Exhibit R) by a Mr Nelson on behalf of the defendant. The presence of vehicles, machinery and the storage of wood is clearly visible from these photos. The claim was paid by the defendant without any objection. Additionally to receiving complaints from neighbours the plaintiff was the subject of a workers compensation claim by an employee in late 1992 or early 1993. This employee made a comment to Mr Wallace to the effect 'mysterious things can happen' which caused sufficient concern for the plaintiff to contact his insurance broker and his solicitor. After receiving advice he did not take the matter further, and said he 'did not think to tell his insurer'. In 1994, but at an unknown time, Mr Wallace became aware of other threats allegedly emanating from this employee or persons close to him. At Easter of 1994 he observed what appeared to be fire damage to a tyre of his tipper truck, which was parked outside the property. Although reported to the police no official action was ever taken. The plaintiff thought this was before hearing of the threats. Also during 1994 the plaintiff received some nuisance telephone calls and there was one episode of some graffiti sprayed on the bucket of his cherry picker. None of this was reported to the G.I.O. From the evidence of Mr Wallace and Mr McLean the following activities occurred on the property after the commencement of the policy:- - there was a separate office maintained inside the house with a permanent employee working 5 days per week, and the business itself also had two other full time employees, - the operation of the business included the presence of trucks, - kept at the property were a log splitter, a stump grinder, a wood mulcher, - a factory area was maintained in the enclosed space behind the roller door in the car port, where inter alia, chain saws were sharpened, and - the welding, repairing and maintenance of items of machinery occurred, - in connection with the maintenance of machinery and vehicles various combustible liquids such as oils, cleaning and brake fluids and petrol were stored in the car port or enclosed factory area in containers ranging from 500 mls through 20 litres to 44 gallons, - the tree surgeon's business conducted on the premises included the sawing and splitting of large logs into saleable sized pieces of firewood, - the sale of firewood and mulch took place. None of this was in existence at the time of the original proposal and none of it was ever indicated on an insurance renewal." 5 The trial judge described these events as constituting "a major increase in the use of the premises in Mr Wallace's business". 6 This Court was taken to evidence supporting these findings and indicating how radical the changes in the use of the premises were. For example, the sale of firewood commenced in 1990; its availability was publicised by means of a trailer containing a sign advertising firewood for sale placed at the end of Anderson Road and by local newspaper advertising; the customers would drive trailers or cars up to the bays constructed on the premises in 1990. Though the plaintiff obtained consent from the Council and from some of his neighbours to the building of unloading bays in 1990 in order to store tree mulch, the neighbours not surprisingly began to protest as the scale of the plaintiff's operations, many of which were noisy, increased. There were photographs in evidence revealing that in 1987 the buildings on the premises and the grounds on which the buildings stood were typical of a fibro dwelling in suburban Sydney built in 1949. There was a carport. The grounds were not unattractive, and consisted of simple but neat lawns with shrubs. In late 1990 most of the front area, hitherto grassed, was concreted. Over the years until the time of the fire in 1995 massive piles of wood came to be placed in the area in front of the cottage. By 1991, the piles were over two metres high. By 1995, they were four metres high. Numerous motor vehicles such as trucks, vans, cars and trailers were also evident in the 1995 photographs, though the plaintiff did not admit ownership of or responsibility for all of them. The evidence revealed that on the premises there were two 44 gallon drums of hydraulic oil, at least 290 litres of oil and 60 litres of petrol. While the defendant was eliciting evidence in cross-examination of the plaintiff about the inflammable fluids, the trial judge challenged that course despite the absence of objection by the plaintiff. The defendant said that it relied on the evidence to show not that the fluids were a source in themselves of increased risk, but that they illustrated changed business activity. This is not an easy distinction to apply; but even if the evidence about inflammable fluids is read only as going to the business activity issue, it points strongly against the plaintiff's case. 7 One other finding about the threats should be noted. The trial judge said that the plaintiff "gave evidence that he did, in fact, advise his insurance broker, so he obviously turned his mind to that aspect" (i.e. to whether the plaintiff's property insurer would regard the threats as relevant). 8 The trial judge initially made the following findings about the documents relevant to the renewal of the policy for the period 3 December 1994-3 December 1995: "The plaintiff identified Exhibit K as the front of the copy of the Renewal Notice for the period '03 DEC 1994 to 4PM 03 DEC 1995'. Through John McLean [an officer of the defendant], Mr Duncan tendered the original document, with both sides, as Exhibit 3. Mr McLean stated that there had been a rewording of the insurance policy in February 1994 and that a copy of that reworded policy would have accompanied the Renewal Notice Exhibit 3 in December 1994. In his evidence Mr Wallace said he could not recall ever seeing a copy of that renewal notice. When asked whether he knew each time the policy was renewed he had to tell the G.I.O. of any changes in circumstances, Mr Wallace repeated that all he knew was to sign the cheque and send it away. However, the office manager Mr Kennelly said that he generally collected the mail, and in relation to the insurance renewal he wrote out the cheque for Mr Wallace to sign and that when Mr Wallace signed that cheque he would see the renewal notice. Mr Kennelly did not pay this particular Notice himself, otherwise it would have 'paid' written by him on it. I find that Mr Wallace had received the copy of the renewal notice with the reworded copy of the policy which accompanied it." 9 This appears to be a distinct finding, supported by convincing reasoning, that the plaintiff personally received both the renewal notice and the reworded policy. The finding had been prefigured earlier. It was repeated a little later in the course of the trial judge's rejection of the defendant's s 21(1)(b) contentions in relation to business use. However, the trial judge made a contradictory finding later, not supported by any reasoning. In dealing with the submission by the defendant that it had complied with its duty under s 22 clearly to inform the plaintiff of his duty to disclose under s 21 by sending to him the reworded policy accompanying the renewal notice which stated that duty, the trial judge said: "The highest this evidence reaches is Mr McLean's assertion that a copy of the new reworded policy would have been sent out with the 1994 Renewal Notice. Mr Kennelly, who said he opened the mail, was not asked whether he had ever seen such a policy. The focus on his evidence was upon processing/payment of the Renewal Notice. Although I find that Mr Wallace did see the Renewal Notice, there is no basis upon which I can reasonably find that he was ever aware, let alone saw, the reworded 1994 policy." The trial judge then said: "In the absence of a finding that Mr Wallace was aware of this Policy I am unable to accept this submission." Despite the plaintiff's contentions to this Court that there was no contradiction, it is inescapable that there was. The earlier finding is to be preferred. 10 The defendant denied any duty to indemnify the plaintiff under the policy on the ground that the plaintiff had breached his duty of disclosure under s 21(1) of the Insurance Contracts Act 1984 (Cth). That sub-section provides: "Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant." 11 The defendant argued to the trial judge that the plaintiff breached his duty both under s 21(1)(a) and s 21(1)(b) by failing to disclose before the renewal at the end of 1994 the extent of his business activities at the premises and the fact that threats had been made to him. The trial judge rejected these arguments on various grounds. 12 The plaintiff also argued that the defendant was not entitled to rely upon any non-disclosure under s 21 because the defendant had failed to comply with s 22(1). It provides: "The insurer shall, before a contract of insurance is entered into, clearly inform the insured in writing of the general nature and effect of the duty of disclosure … ." By reason of s 22(3), if the defendant failed to comply with s 22(1), the fact of that non-compliance was to deprive the defendant of the capacity to exercise a right in respect of any failure by the plaintiff to comply with the duty of disclosure unless (which the defendant did not establish) the plaintiff's failure was fraudulent. Though, in view of his conclusions in relation to s 21, it was not strictly necessary for the trial judge to have considered s 22, he adopted the sensible course of doing so. He concluded that the defendant had failed clearly to bring the duty of disclosure to the plaintiff's attention. Section 21: The trial judge's reasoning 13 The trial judge dealt with the s 21 issues as follows: "The defendant submits that Mr Wallace failed to disclose before the 1994 renewal, the extent to which his business activities were conducted, and failed to disclose the existence of threats. He breached his duty under s 21(1)(a) because he acknowledged that he was aware that the use of the premises for business purposes was particularly relevant; it was a question raised in the original proposal and further detail was provided. He also breached his duty under s 21(1)(b) because the type of enquiry raised in the original proposal was such that he could be expected to know of the relevance of the matter ( Prime Forme Cutting Pty Ltd and Ors v Baltica General Insurance Co Ltd and Anor (1991) 6 ANZ Insurance Cases 61-028), and he should also have expected to tell the insurer of the threats. On behalf of the plaintiff Mr Walmsley's primary submission is that there has been no failure to comply with s 21. Actual knowledge, not suspicion or belief, is required under s 21(1) ( Permanent Trustee Australia Ltd and Anor v FAI General Insurance Ltd ) 153 ALR 529. Actual knowledge does not extend to something forgotten (at p.508). As to the extent of business use the defendant is relying upon questions in the 1987 proposal and a renewal in 1994. Mr Wallace's evidence of knowledge was of a time 7 years previous to the renewal. Whilst Mr Walmsley does not dispute that the renewal is a new contract, he submits that there were no questions relating to business use associated with it and so Mr Wallace's knowledge as at 1994 has not been established so as to cause a breach by non disclosure. Plaintiff's counsel also submitted that there was no reason for Mr Wallace to consider the extent of business use, because the policy Exhibit 12 (i) made specific reference to 'Business, Trade or Profession' in the Definitions, (ii) by excluding 'Tools of Trade' there was implicit recognition that a business, trade or profession might be carried on at the premises, (iii) similarly there was exclusion of legal liability arising from 'the use of a portion of the Building as a surgery or office' and (iv) under 'General Exclusions' the carrying on of a business is expressly excluded from insurance cover. Thus the use of the property for business purposes was envisaged. As Hodgson CJ in Equity in Permanent Trustee Australia (supra) at p 580 said, 'It was not enough that the reasonable person might be expected to think the matter was relevant. The matter must be such that a reasonable person could be expected to know it was relevant.' Accordingly there was no basis for his considering that the more extensive use of the premises in his business was a matter that he could be expected to know (as against suspect, believe or think) was relevant. Additionally, Mr Walmsley submits, there was the successful 1991 wind damage insurance claims when the premises were inspected by Mr Nelson on behalf of the defendant. Photographs were taken by him showing the extent of activity outside the house, which was not substantially different from the 1994 situation. This is part of the 'circumstances' referred to in s 21(1)(b). Therefore, as to s 21(1)(a), in the absence of any specific enquiry in a document from the insurer as to change of circumstances, it was reasonable to conclude that he had forgotten the 1987 questions by 1994. Also, as the 1994 policy made it clear that some form of business could be conducted on the premises, it could not be said he could be expected to know the extended use of the premises was a matter relevant and as the defendant was aware, in 1991, of the visible use of the property, there was no failure to comply with s 21(1)(b). Whilst it is very clear that there was a major increase in the use of the premises in Mr Wallace's business, the standard that has to be reached by an insurer in establishing non compliance with the duty of disclosure is knowledge. That is a high standard, but this is understandable given the consequence of complete relief from providing indemnity if that standard is reached (vide s 28(3) of the Act and the evidence of Mr McLean that insurance would not have been renewed). The arguments advanced by the plaintiff in relation to all of the above matters are, in my view, well founded and I accept them. The defendant has therefore failed to establish non compliance with the duty of disclosure in relation to the extent of business use. The second aspect of non disclosure relates to the receiving of the threats. Mr Duncan for the defendant here relies upon s 21(1)(b) of the Act. He submits that the threats were associated with the business, that they were repeated, that they could lead to harm to the property. In those circumstances a reasonable person would be expected to know of their relevance to the insurer of the property. The question really comes to whether Mr Wallace would be expected to know that his property insurer would regard the matter as relevant. Mr Wallace gave evidence that he did, in fact, advise his insurance broker, so he obviously turned his mind to that aspect. Indeed, he also consulted a solicitor. The evidence in relation to the threat in relation to the noise appears to be a 'one off' affair. As to the other threats no direct action has ever been linked to anyone. Mr Duncan referred to Chapman v Greater Midwest Insurance Pty Ltd (1981) 1 NSWLR 479 in which case Yeldham J held the non disclosure of threats constituted a breach of the duty. However in that case there were instances of actual and substantial damage to the insured's property. As Giles JA observed in the New South Wales Court of Appeal in the unreported decision of Suncorp General Insurance Limited v Cheihk delivered 16 July 1999 at paragraph 40 (although in relation to s 22 of the Act), 'It will always be a question of fact and degree'. The same applies here. On the evidence of what did, in fact, happen, I am unable to accept that the recipient of the threats, as a reasonable person, to his property made in the context of an employer/employee dispute, would turn his mind to his duty to disclose to the property insurer what he knows to be relevant to the decision of the insurer as to acceptance of the risk. This is a much higher standard than what was involved in his advice to his insurance broker." Section 21(1)(a): general 14 Some of the arguments on behalf of the defendant may be dealt with briefly. 15 The first was an attack on the trial judge's statement that actual knowledge was required under s 21(1). The defendant submitted: "His Honour wrongly cited (relying on such) a passage out of Permanent Trustee Australia Limited v The FAI General Insurance Co Limited (1998) 44 NSWLR 186 as reported in 153 ALR 529, such passage appearing at 580 of that ALR report as representing the reasons for judgment of Hodgson CJ in Equity. However, at 580, Hodgson CJ in Equity was merely setting out argument put before him by Senior Counsel. … It was wrong to import the word 'actually' (as a qualifier of 'knows') into the provisions of Section 21(1) of the Act: Commercial Union Assurance Co of Australia Limited v Beard (1999) 47 NSWLR 735 at 745." This submission is rejected. Even though the passage in Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 153 ALR 529 at 580 is part of counsel's argument, at 582-3 Hodgson CJ in Eq said: "'Known' in s 21(1) means more than suspected or believed. What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term 'known'." When the trial judge contrasted "actual knowledge" with "suspicion or belief", he was doing no more than applying the test which was correctly formulated by Hodgson CJ in Eq and which was approved by this Court on appeal: Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at [41]-[54]. The passage from Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 at 745 relied on by the defendant is as follows: "… Pt IV of the Act is a statutory code which replaces the common law. Nevertheless, the terms 'known' and 'knows' are used in their common law sense. Their primary denotation refers to that which is actually known; but it would be wrong to import the word 'actually' into a provision such as s 21." Whatever distinction there might be for some purposes between "knowledge" and "actual knowledge", in the present case there is nothing which flows from it. Even if, which is not decided, the trial judge erred in speaking of "actual knowledge", it was a harmless error. 16 A second submission of the defendant was that the trial judge erred in saying: "the standard that has to be reached by an insurer in establishing non compliance with the duty of disclosure is knowledge. That is a high standard … ." The defendant submitted: "His Honour erred in holding that Section 21(1) of the Act requires the insurer: … .2 to prove to a 'high standard' non-compliance with the duty of disclosure … . While the onus of proof lies upon the Appellant in establishing non-compliance with s 21(1), the standard of proof is the ordinary civil standard; it is wrong to treat it as a high standard." The trial judge was not applying a standard of proof to the fact to be proved (knowledge) which was higher than the ordinary civil standard of proof. He was merely pointing out that the fact to be proved (knowledge) is something which it is harder to prove than suspicion or belief, even on the ordinary civil standard of proof. 17 There is a further reason why each of these arguments can be put aside. They relate essentially to s 21(1)(a), and the defendant's case under s 21(1)(a) should be rejected on the merits for the following reasons. 18 So far as non-disclosure of threats is concerned, the form of the trial judge's reasons for judgment suggests that this was not argued below in relation to s 21(1)(a). The defendant did not positively suggest on appeal that it did argue the matter in relation to s 21(1)(a). Certainly the defendant did not argue the matter before this Court. 19 So far as non-disclosure of changes in the business is concerned, the trial judge did not make any finding to the effect that the plaintiff knew that the changes in the business were relevant to the decision of the defendant whether to accept the risk and, if so, on what terms. It is true that the trial judge's reasoning on s 21(1)(a) is not satisfactory. It consists only of the following: "as to s 21(1)(a), in the absence of any specific inquiry in a document from the insurer as to change of circumstances, it was reasonable to conclude that [the plaintiff] had forgotten the 1987 questions by 1994." However, for the defendant to succeed on s 21(1)(a) in this Court, it would be necessary for it to identify admissions by the plaintiff which, taken with the rest of the evidence, supported an inference of relevant knowledge on the part of the plaintiff. The plaintiff was cross-examined as follows: "Q. You knew that the GIO policy was just a home building policy didn't you? A. Yes. Q. And over the years the way you used your home and the carport and the workshop changed, didn't it? A. Changed in as far what do you mean, in which way? Q. When you first purchased the home? A. Yes. Q. You had a number of tools associated with your business that you stored in the workshop? A. Yes. Q. You didn't have any business trucks at that stage? A. No. Q. You didn't have a log splitter? A. No. Q. You didn't have a mulcher? A. No. Q. You didn't employ anyone to work from your home full time? A. No. Q. In at least those respects the way you used your home for your business changed over the years, didn't it? A. Yes. Q. By the time of the fire you were using your home much more for business purposes than you were using it at the time when you first took out the GIO policy, that's right isn't it? A. Yes. Q. You never told GIO about any of these changes did you? A. No. Q. The original proposal covered you for a policy period for a year from December 1987 to December 1988, is that right? A. Yes. Q. And you subsequently renewed that policy continually up to the time of the fire, is that right? A. Yes. Q. And periodically, perhaps yearly, GIO would send you renewal notices, is that right? A. Yes. Q. And you would receive those from time to time, is that right? A. Yes. Q. And when you received them you knew that GIO was offering you to extend your home buildings policy for a further period of time? A. I can't say that I saw it, I only sign the cheques. [This is an answer not accepted by the trial judge.] Q. The gentleman's name who you employed to work in your office full-time, his name is Kennelly. A. Yes. Q. Can you remind me when you first employed him? A. It was 1991 I think, '91 or '92. Sorry, you are talking prior to that. Q. Well certainly prior to when you employed him in either 1991 or 1992, you received and saw the renewal notices from time to time from GIO, is that right? A. Yes. Q. And each time you received them you knew that GIO was offering you a further period of insurance for your home building, is that right? A. Yes. Q. And in that renewal notice that you would receive there was an indication of the amount that your house was offered to be insured for? A. Do I remember the amount. Q. Well each time you received such notice of renewal notice, it always had on it an amount that was being offered as the sum insured for your house? A. For the premium? Q. Yes? A. Yes. Q. There was an amount telling you how much you would have to pay for the premium, is that right? A. Yes. Q. And there was also an indication as to what the sum insured was, is that right? A. If it was on there it was on there, I can't - - Q. And each time you received one of those documents you knew that if there was any change to your circumstances that could affect that policy you should tell GIO about it, didn't you? A. I didn't know you had to change it, all I looked at was the amount, GIO, write the cheque and sent it away. (emphasis added) Q. You knew that when you took out the proposal GIO was concerned about whether or not the home was to be used for business purposes, you knew that didn't you? A. Yes. Q. You knew that that was something the GIO wanted to know about? A. Yes. Q. And you knew that you had to answer that question when you first took out the policy, didn't you? A. Yes. Q. And you knew that when you first took out the policy you told GIO that the home would be used for the storage of equipment only? A. Yes. Q. And over the years after you first took out a policy you started to use your home for something more than the storage of equipment only, didn't you? A. Yes. Q. And you never told GIO about that change did you? A. Relating to the office? Q. Well relating to anything that was different from the way you were using it at the start in relation to business, to the way that that changed? A. Right, yeah. Q. The fact that you knew the GIO was concerned about the extent of business use of your home when you first took out the policy indicated to you didn't it that you ought to tell them about any change to that business use each time a renewal came along, didn't it? A. Can you rephrase that, sorry? Q. You knew when you first took out the policy the GIO wanted to know about the extent if any, to which the home was to be used for business? A. Yes. Q. And you knew that GIO would want to know about any change to that business use, didn't you? A. No, well I wasn't aware of it no. If there were any changes, I just thought it was – we, I acknowledged that I used it for business, use it for private and business. (emphasis added) Q. You acknowledged that you told GIO initially that it was for the storage of equipment only? A. Yes. Q. And you acknowledge and accept that in the years after that you have used the premises for business purposes more than storage of equipment only? A. Yes. Q. So you knew that GIO each time it was renewing your policy still believed that to the extent that your home was being used for business purposes it was for the storage of equipment only? A. Yes." 20 Let it be assumed that if favourable answers had been given to all the questions they would have supported the defendant's contentions. The fact is that the fourth last answer, which is emphasised, is unfavourable to, because it is inconsistent with, the case which the defendant seeks to make on s 21(1)(a). So is the earlier answer which was emphasised above. If the defendant is to succeed in this Court, it must persuade this Court to disbelieve those answers. The halting and confused nature of the latter part of the fourth last answer excites scepticism about the first part. The trial judge was understandably critical of the plaintiff's candour and carefulness as a witness. The trial judge was also critical of the fact that the plaintiff made extensive claims in relation to the damaged condition of the premises when material improvements could have been effected with little effort. Further, about one third of the way through the passage quoted, the plaintiff admitted receiving renewal notices, but denied seeing them. At three places the trial judge indicated disbelief in that denial (Red 26V-27D, 31M and 38M). That untruth, coming immediately before the answers which have to be disbelieved if the defendant is to succeed on s 21(1)(a), casts a question mark over those answers. But notwithstanding these circumstances, this Court should not disbelieve a specific part of the plaintiff's evidence without having seen him. A trier of fact is entitled to accept parts of a witness's evidence even if other parts are rejected. A trier of fact is entitled to do this in part by reason of a judgment as to the manner in which the witness gave evidence. There may have been some aspect of the way in which the plaintiff gave his evidence about the changes in the business which could justify a trier of fact in accepting his evidence even if on the face of it that evidence may appear dubious. While a question might arise whether a new trial should be ordered in view of the trial judge's failure to make findings about and give reasons for his conclusions on s 21(1)(a), in view of the outcome of other arguments advanced by the defendant it is not necessary to consider that question. 21 It is therefore not necessary to deal with the arguments of the plaintiff supporting the trial judge's conclusions on s 21(1)(a). 22 Accordingly the appeal, so far as it is based on s 21(1)(a), fails. Section 21(1)(b): general 23 The defendant submitted that the trial judge had misconstrued s 21(1)(b) by assuming that it called for an examination of what the plaintiff could be expected to know to be relevant and not that it called for an examination of what a reasonable person could be expected to know to be relevant. The defendant submitted that the fallacy could be seen in the use of the words "he" or "Mr Wallace" in the following five passages of the trial judge's reasons for judgment (Red 33B-G, 34J-K, 34U-W, 36B-C and 36P-R): "[The plaintiff] also breached his duty under s 21((1)(b) because the type of enquiry raised in the original proposal was such that he could be expected to know of the relevance of the matter ( Prime Forme Cutting Pty Ltd and Ors v Baltica General Insurance Co Ltd and Anor (1991) 6 ANZ Insurance Cases 61-028), and he should also have expected to tell the insurer of the threats. … there was no basis for his considering that the more extensive use of the premises in his business was a matter that he could be expected to know (as against suspect, believe or think) was relevant. … Also, as the 1994 policy made it clear that some form of business could be conducted on the premises, it could not be said he could be expected to know the extended use of the premises was a matter relevant … The question really comes to whether Mr Wallace would be expected to know that his property insurer would regard the matter as relevant. … On the evidence of what did, in fact, happen, I am unable to accept that the recipient of the threats, as a reasonable person, would turn his mind to his duty to disclose to the property insurer what he knows to be relevant to the decision of the insurer as to acceptance of the risk." (emphasis added) The defendant submitted that in these passages the trial judge "merged the distinct considerations required" under s 21(1)(a) and s 21(1)(b). While, as the plaintiff submitted, one or two of these passages, taken in isolation, are capable of a benevolent reading conforming to the true construction of s 21(1)(b), taken as a whole, the passages reveal that the defendant's submission is correct. Section 21(1)(a) looks only to what the insured knows. Section 21(1)(b) looks, not to what the insured knows, but to what "a reasonable person in the circumstances could be expected to know". Under s 21(1)(b) it is necessary, in judging what a reasonable person could be expected to know, to take into account the circumstances affecting the actual insured, but the ultimate question turns on what could be expected of a reasonable person's state of mind, not on the insured's state of mind. 24 The defendant submitted that the trial judge also erred in applying s 21(1)(b), because he examined whether a recipient of the threats acting reasonably "would" be expected to know them to be relevant to the defendant. The defendant submitted that the true test was that enunciated in an article written by Mr Justice Derrington and R Ashton, "What have they done to the Common Law? Disclosure and Misrepresentation" (1988) 1 Insurance Law Journal 1 at 3, in the following terms: "Some attention should be focused upon the element that such a person 'could be expected' to have that knowledge, and not that he would be expected or should be expected to have it. Obviously the phrase adopted is the least onerous of the three, importing the sense of possibility as the level which need only be attained in order to satisfy the standard. Conversely, there is also present in the formula an element of expectation. The question is not whether a reasonable person could have the knowledge, but whether he could be expected to have the knowledge. There is a real difference. This factor tends to make the test somewhat more onerous in that expectation implies at least probability. The application of the formula could be encapsulated in the question: is it reasonably possible that a reasonable person would probably (or most probably) know of the relevance of the fact." Judge Keall appears to have applied that test in Delphin v Lumley General Insurance Ltd (1989) 5 ANZ Insurance Cases 60-941 at 76,135-76,136. It is not necessary to decide whether that test is correct, because the result here would be the same whether the test is as stated by the learned authors or whether "could" means "would" or "should". Section 21(1)(b): change in business 25 The trial judge rejected the application of s 21(1)(b) by accepting two arguments advanced by the plaintiff. The first turns on the terms of the 1994 policy. The second relates to a visit to the premises by an insurance loss assessor acting for the defendant in 1991. 26 The first of the plaintiff's arguments which the trial judge accepted was put thus: "Plaintiff's counsel also submitted that there was no reason for Mr Wallace to consider the extent of business use, because the policy Exhibit 12 (i) made specific reference to 'Business, Trade or Profession' in the Definitions, (ii) by excluding 'Tools of Trade' there was implicit recognition that a business, trade or profession might be carried on at the premises, (iii) similarly there was exclusion of legal liability arising from 'the use of a portion of the Building as a surgery or office' and (iv) under 'General Exclusions' the carrying on of a business is expressly excluded from insurance cover. Thus the use of the property for business purposes was envisaged. As Hodgson CJ in Equity in Permanent Trustee Australia (supra) at p 580 said, 'It was not enough that the reasonable person might be expected to think the matter was relevant. The matter must be such that a reasonable person could be expected to know it was relevant.' Accordingly there was no basis for his considering that the more extensive use of the premises in his business was a matter that he could be expected to know (as against suspect, believe or think) was relevant." The argument was accepted by the trial judge in the following words: "as the 1994 policy made it clear that some form of business could be conducted on the premises, it could not be said [the plaintiff] could be expected to know the extended use of the premises was a matter relevant … ." This passage is difficult to understand. Taken in its terms, the passage invites the response that one cannot infer from the fact that the policy contemplates the use of the premises for business purposes, even though the cover is limited, that a reasonable person could not be expected to know that a change in the level of business use was relevant to the decision of the insurer whether to accept the risk. In the course of argument, the following benevolent construction of the passage was proposed: "since the insured knew that the insurer knew that business could be conducted on the premises and because damage to business fixtures and fittings was not covered, an increase in the use of the premises for business could not be relevant to the risk covered by the policy in regard to the domestic use of the premises." If that is what the trial judge meant, the reasoning is not satisfactory. That is because it in effect denies, but states no reason for denying, the conclusion that a reasonable person would be expected to know that an increase in business activity could be relevant to the risk of damage to the part of the premises used as a dwelling. An expansion of the business in a way which increases the risk of fire through the stockpiling of wood is a matter which a reasonable person could be expected to know to be relevant to the decision of the insurer whether to accept the risk of insuring the premises in their domestic use because the business use was intimately mixed up in the domestic use. 27 The second argument on change of business use in relation to s 21(1)(b) which the trial judge accepted was recorded thus by the trial judge: "there was the successful 1991 wind damage insurance claim when the premises were inspected by Mr Nelson on behalf of the defendant. Photographs were taken by him showing the extent of activity outside the house, which was not substantially different from the 1994 situation." The trial judge accepted this argument in the following words: "as the defendant was aware, in 1991, of the visible use of the property, there was no failure to comply with s 21(1)(b)." 28 There are several answers to this argument. First, whatever the size of the business activity in 1991, it had grown very substantially even from that base by 1994. It experienced that growth without any disclosure by the plaintiff to the defendant when each policy was renewed. In short, the activity in 1994 was substantially different from the activity in 1991. Secondly, though Mr Nelson's photographs, and his inspection of the outside of the premises, showed storage of logs and mulch at the front of the premises, they did not show such important features as the separate office with a permanent employee inside the house, the factory area in the enclosed space behind the roller door in the carport where chainsaws were sharpened and the welding, repair and maintenance of machinery took place, or the inflammable materials inside the shed. Thirdly, no business activity in the form of log-splitting, sawing, mulching or selling of wood and mulch was taking place at the time of Mr Nelson's visit. Fourthly, storm damage which Mr Nelson was inspecting was roof damage to the shed: there was no reason to enter the buildings or the storage area at the rear. Fifthly, Mr Nelson was a claims investigator, not an underwriter. He doubtless had his mind on what damage had been caused, not on what activities had been or should have been disclosed on policy renewal. Finally, Mr McLean, an officer of the defendant, gave the following evidence in cross-examination about Mr Nelson's photographs: "Q. The photographs, assuming they're taken in 1991, Mr McLean suggest don't they that there was a considerable degree of activity being carried on from those premises in connection with fire wood? A. No, well to me what it suggests is that there is a substantial amount of wood stored away from the house and at the front of the property. There's nothing else there to suggest to me that there is anything else being carried on from that property. It's something, the storage of wood, which you would associate with someone being a tree surgeon by way of the cherry picker kept on the nature strip out the front of the property. Q. And you say that if you had seen those photographs of the premises in 1991 you'd have been happy enough to continue to insure that house on the assumption that there was the business of tree surgery being carried on there? A. Well not the business of tree surgery being carried on from the property. I'm not saying that. All I'm saying is that the storage of that wood there confirms that the person's occupation is that of a tree surgeon. Q. And it's suggestive of the fact that first of all a large amount of cartage has been involved in getting the wood there? A. Yes. Q. And in cutting it up? A. Well there's nothing to suggest that it's being cut up on that premises, all it is is that it's being stacked there. Q. And the photographs are suggestive, aren't they, of there being large vehicles and devices in connection with the business being kept at the premises? A. I don't know what you mean by devices. There is a truck parked in the driveway and a cherry picker on the nature strip. I can't decipher any other – other what any other equipment is there." This illustrates the disparity between what Mr Nelson observed and what the overall position was both in 1991 and 1994. 29 But even if some weight should be given to Mr Nelson's visit, the trial judge's conclusion that s 21(1)(b) does not apply must be rejected. An examination of whether a reasonable person "in the circumstances" could be expected to know that a change from residential use to partly residential and partly business use was a matter relevant to the decision of the defendant whether to accept the risk must isolate what the crucial "circumstances" are. In cross-examination the plaintiff admitted knowing at the time he filled in the proposal in 1987 that the defendant was concerned about whether the premises were to be used for business purposes, and knew that the defendant wanted to know about that. (That knowledge can only have come from the note on the proposal form, appearing before a group of questions about the property insured, stating: "It is essential to the acceptance, premium rate and terms of this insurance that the following questions be fully answered.") The plaintiff admitted knowing that each time the defendant renewed the policy, it believed that the premises were only being used for business purposes to the extent initially disclosed in answer to questions appearing below the note just referred to, namely for the storage of equipment. It may be inferred from a manuscript note appended by an officer of the defendant and linked by asterisk with the written answer signed by the plaintiff that the "equipment" being stored comprised chainsaws, ladders, grinders and general tools, and that that manuscript note was made after a conversation with the insured person. The plaintiff admitted that over the years the premises had been used for business purposes going beyond the disclosed storage of equipment. 30 The plaintiff knew that in 1987 a simple domestic cottage stood on the premises, that the defendant was concerned about whether the premises would be used for business purposes, and that the only disclosed use was storage of a small number of tools which might be in many households. By 1994 the plaintiff knew that a major business was being conducted from the premises. Any reasonable person in the circumstances in which the plaintiff was could be expected to know that the change in business activity was a matter relevant to the decision of the defendant to accept the risk on each renewal of the policy. Section 21(1)(b): threats 31 The defendant commenced by pointing out various errors in the trial judge's initial findings about the threats. The trial judge said that in Easter 1994 the plaintiff "observed what appeared to be fire damage to a tyre of his tipper truck, which was parked outside the property". In fact the plaintiff said in chief that it was in the carport inside the property. The trial judge said that the plaintiff received "some nuisance telephone calls". In fact at least one of them was much more serious than that. 32 The trial judge's treatment of threats in relation to s 21(1)(b) was as follows: "Mr Duncan for the defendant here relies upon s 21(1)(b) of the Act. He submits that the threats were associated with the business, that they were repeated, that they could lead to harm to the property. In those circumstances a reasonable person would be expected to know of their relevance to the insurer of the property. The question really comes to whether Mr Wallace would be expected to know that his property insurer would regard the matter as relevant. Mr Wallace gave evidence that he did, in fact, advise his insurance broker, so he obviously turned his mind to that aspect. Indeed, he also consulted a solicitor. This evidence in relation to the threat in relation to the noise appears to be a 'one off' affair. As to the other threats no direct action has ever been linked to anyone. Mr Duncan referred to Chapman v Greater Midwest Insurance Pty Ltd [1981] 1 NSWLR 479 in which case Yeldham J held the non disclosure of threats constituted a breach of the duty. However in that case there were instances of actual and substantial damage to the insured's property. As Giles JA observed in the New South Wales Court of Appeal in the unreported decision of Suncorp General Insurance Limited v Cheihk delivered 16 July 1999 at paragraph 40 (although in relation to s 22 of the Act), 'It will always be a question of fact and degree'. The same applies here. On the evidence of what did, in fact, happen, I am unable to accept that the recipient of the threats, as a reasonable person, to his property made in the context of an employer/employee dispute, would turn his mind to his duty to disclose to the property insurer what he knows to be relevant to the decision of the insurer as to acceptance of the risk. This is a much higher standard than what was involved in his advice to his insurance broker." 33 The defendant made the point that these passages embody the trial judge's persistently fallacious construction of s 21(1)(b) in not paying regard to the objective character of the test. The defendant then submitted that there was a substantial body of threats of a significant kind. They were threats which the plaintiff rightly took seriously. They were directed not only to his person but also to the insured property. They were made because of the business use the plaintiff was making of his property. The plaintiff said he was "getting hassles from everywhere", but a large proportion of the "hassles" came from threats of three kinds. The first kind were threats from neighbours who were angry at the noise of wood cutting and mulch manufacture, the size of the piles of wood, and the large numbers of vehicles. (For example, one neighbour told the plaintiff while he was making a lot of noise using his mulch machine that he would get him because of the noise.) The second kind were threats from an aggrieved former employee, his family and his friends, made directly to the plaintiff and also to his sister. The third kind consisted of anonymous telephone calls. Some threats, like the anonymous telephone calls, the fire, the graffiti painted on one of the plaintiff's vehicles and the letting down of a tyre, could not be linked with any particular source. These threats caused the plaintiff to notify not only the police, an insurance broker and a solicitor, as the trial judge noted, but also an accountant. 34 In cross-examination the plaintiff accepted that the neighbour who told the plaintiff he would get him "came up and spoke quite close to [his] face in a very threatening manner". He treated that "as a serious threat" and "was a little bit frightened". The disgruntled ex-employee left "with an argument". That "continued on as a bit of a feud between [the plaintiff's] family and [the employee's] family and associates over a number of years". An employee of the disgruntled ex-employee said to the plaintiff's sister: "We're going to get you and your brother, are going to blow him up". The plaintiff was "a little bit worried about it, a little bit concerned". One of the telephone callers said: "Someone's going to be paying on the property", and the plaintiff understood this to be a threat to the insured premises. This made him "a bit scared". While these threats were made over a two year period, some were made in the period between Easter 1994 and the renewal of the policy in December 1994. 35 The plaintiff submitted that the question was one of fact and degree and that it was open to the trial judge to conclude as he did by reason of the number of people involved, the fact that some threats were anonymous, the fact that they were spread over time, and the fact that there was no damage to the premises themselves. 36 The evidence summarised above, however, demonstrates that the threats constituted a matter known to the plaintiff which a reasonable person could be expected to know to be relevant to the decision of the defendant whether to accept the risk on each renewal of the policy. Some were threats to maim or murder the plaintiff. All the threats emanated from the plaintiff's business use of the premises. Some were threats to damage the premises badly ("Someone's going to be paying on the property"). More minor damage was in fact done to the plaintiff's business assets by way of apparent threat, such as letting a tyre down, setting fire to a tyre on a vehicle in the carport, and spraying graffiti on a vehicle. Mortdale is not a suburb whose reputation is such as to suggest that threats of the types received by the plaintiff were either a normal part of life or not to be taken seriously. Some of the threats were in fact taken sufficiently seriously to frighten the plaintiff and to cause him to report them to the police, to a solicitor, to an insurance broker and to an accountant. A reasonable person could be expected to know that they were also relevant to the decision of the defendant whether to accept the risk. Section 22 37 The trial judge's observations on s 22 were as follows: "A further argument has to be considered on the issue of liability. Section 22 of the Act headed 'Insurer to inform of duty of disclosure' requires the insurer, before the insurance contract is entered into, to clearly inform the insured in writing of the general nature and effect of the duty of disclosure. On the reverse side of the 1994 Renewal Notice (Exhibit 3) there is a statement of duty of disclosure which substantially repeats the wording of s 21(1). Mr Duncan relies upon this as bringing the need of disclosure to the plaintiff's attention, and as the document came to his hands, therefore to his knowledge. Counsel for the plaintiff submits that this is printed on the back of what is, on the face of it, a bill to pay. There is nothing directing attention to the contents on the back of it, as was adverted to in a similar situation that was considered in Suncorp General Insurance Limited v Cheihk [unreported, 16 July 1999]. As Giles JA said in paragraph 38, 'Clarity was required not only in the contents of the note by which information was conveyed but also by the manner in which the note conveying the information was made known.' Although there was only a one line reference in the document in that case, the principle is equally applicable in the present one. Mr Walmsley submits that the insurer has failed to discharge the burden of proof on this issue. The consequence of this is that the defendant is unable to rely upon the failure to comply with s 21 (vide Suncorp General Insurance Limited to Cheihk (supra)). Insofar as s 22 is concerned I also accept the plaintiff's submissions. The test of clarity is not satisfied. Insofar as s 11(10) is concerned, although I accept the defendant's submission, I am of the view that, ultimately, it does not assist the defendant, because I have found there was no failure to disclose in any event. In those circumstances it becomes unnecessary to consider Mr McLean's evidence as to what the insurer would have done if there had been disclosure. The arguments above relate to the back of the Renewal Notice; however Mr Duncan also submits that there was a further notice of the duty given to Mr Wallace in the reworded Policy which accompanied this Notice. The highest this evidence reaches is Mr McLean's assertion that a copy of the new reworded policy would have been sent out with the 1994 Renewal Notice. Mr Kennelly, who said he opened the mail, was not asked whether he had ever seen such a policy. The focus on his evidence was upon processing/payment of the Renewal Notice. Although I find that Mr Wallace did see the Renewal Notice, there is no basis upon which I can reasonably find that he was ever aware, let alone saw, the reworded 1994 policy. The relevance of this finding is that the 1994 policy also contained, and in more detailed language, a statement of the insured's duty to disclose. In his submissions Mr Duncan relies upon this as also satisfying the insurer's obligation under s 22. In the absence of a finding that Mr Wallace was aware of this Policy I am unable to accept this submission. I note Mr Walmsley's submission that the deletion of Mr Doyle as a party to the insurance contract brought about a novation (which was challenged by Mr Duncan in reliance upon Toikan International Insurance Broking Pty Ltd v Plasteel Windows Australia Pty Ltd (1988) 15 NSWLR 641), thus requiring a new notice of duty of disclosure. However Mr Duncan's submission is that there was new notice, on the back of the 1994 renewal notice. As I have held against Mr Duncan on that point, and in favour of the plaintiff in relation to disclosure, I do not see any need to consider these submissions further." 38 The defendant contended that it had carried out its s 22 duty "clearly [to] inform the [plaintiff] in writing of the general nature and effect of the duty of disclosure" in various ways, each of which separately, but certainly all of which together, satisfied the duty. The defendant relied on s 11(9)-(11) of the Act. Section 11(9)(b) provides: "Subject to subsection (10), a reference in this Act to the entering into of a contract of insurance includes a reference to: (b) in the case of any other contract of insurance – the making of an agreement by the parties to the contract to renew, extend or vary the contract; or" Section 11(10)(a) and (b) provide: "Notwithstanding subsection (9): (a) subject to paragraph (c), where, after the commencement of this Act and at or before the original entering into, or the renewal, extension or reinstatement, of a contract of insurance, the insurer has given information to the insured as required by section 22, 35, 37, 40, 44, 49, 68 or 71A, the requirement by that section to give information to the insured shall be deemed to be satisfied at or before any subsequent renewal, extension or reinstatement of the contract; (b) sections 22 and 40 do not require an insurer to give information to the insured at or before a variation of the relevant contract of insurance except where the variation is involved in a renewal, extension or reinstatement of the contract; and" Section 11(10)(c) is irrelevant. Section 11(11) provides: "Where a provision of this Act requires anything to be done before a particular contract is entered into, it is sufficient compliance with that provision if that thing is done at the time when the contract is entered into." 39 The defendant thus contended that any information given to the plaintiff before the 1987 policy was issued, or before any renewal up to and including the 1994 renewal, could satisfy s 22 even though it was not given immediately before the 1994 renewal. 40 In chronological order, the instances on which the defendant relied to demonstrate that the plaintiff was clearly informed of the duty of disclosure were as follows. 41 First, the proposal signed by the plaintiff in December 1987 stated in paragraph 1, at the top of the first page: "1. YOUR DUTY OF DISCLOSURE Before you enter into this contract of insurance with GIO every matter that you know or could reasonably be expected to know, is relevant to GIO's decision whether to accept the risk of the insurance and if so on what terms. You have the same duty to disclose those matters to GIO before you renew, extend, vary or reinstate the contract of insurance. Your duty however does not require disclosure of any matter (i) that diminishes the risk (ii) that is common knowledge (iii) that GIO knows, or in the ordinary course of its business, ought to know (iv) as to which compliance with your duty is waived by GIO in writing. NON-DISCLOSURE If you fail to comply with your duty of disclosure, GIO may be entitled to reduce its liability under the contract in respect of a claim or may cancel the contract. If the non-disclosure is fraudulent, GIO may also have the option of avoiding the contract from its beginning." Paragraph 10, at the foot of the second page, contained a declaration signed by the plaintiff, which opened with the words: "I declare that I have read and understood the duty of disclosure (Section 1) … ." The form of s 22 information appearing on the proposal corresponds very closely with the form prescribed by clause 3(a) of, and appearing in the Schedule to, the Insurance Contracts Regulations, made pursuant to s 22(2) of the Act. 42 Secondly, the 1987 policy, in the material appearing immediately after the table of contents, said: "YOUR DUTY OF DISCLOSURE Before you enter into this contract of insurance with GIO, you have a duty to disclose to GIO every matter that you know, or could reasonably be expected to know, is relevant to GIO's decision whether to accept the risk of the insurance and, if so, on what terms. You have the same duty to disclose those matters to GIO before you renew, extend, vary or reinstate this contract of insurance. Your duty however does not require disclosure of any matter (i) that diminishes the risk (ii) that is common knowledge (iii) that GIO knows, or in the ordinary course of its business, ought to know (iv) as to which compliance with your duty is waived by GIO in writing. NON-DISCLOSURE If you fail to comply with your duty of disclosure, GIO may be entitled to reduce its liability under this contract in respect of a claim or may cancel the contract. If your non-disclosure is fraudulent, GIO may also have the option of avoiding this contract from its beginning." This material, too, corresponded very closely with the form prescribed by the regulations. 43 Thirdly, each year from 1988 to 1994, the plaintiff received a renewal notice. The 1994 notice contained a notice about the duty of disclosure, and it could be inferred that each of the renewal notices in 1988-1993 contained such a notice. The 1994 notice said on the back: "Your Duty of Disclosure Before you enter into this contract of insurance with GIO General Limited ACN 002 861 583 (GIO General), you have a duty to disclose to us every matter that you know, or could be reasonably be expected to know, is relevant to our decision whether to accept the risk of the insurance and, if so, on what terms. You have the same duty to disclose those matters to the GIO General before you renew, extend, vary or reinstate the contract of insurance. Your duty, however, does not require disclosure of any matter: (i) that diminishes the risk (ii) that is common knowledge (iii) that GIO General knows, or in the course of its business, ought to know (iv) as to which compliance with your duty is waived by GIO General in writing. Non-disclosure If you fail to comply with your duty of disclosure, GIO General may also have the option of avoiding the contract from its beginning." The material under "Non-disclosure" does not comply with the form set out in the Regulations. It also differs from the form of disclosure used in the 1987 proposal and the 1987 contract. The trial judge three times found that the plaintiff (despite his denial) saw the 1994 renewal notice, and if he saw the 1994 renewal notice he is likely to have seen the others as well. 44 Fourthly, the 1994 policy on pages 2 and 3 stated: "Legal Requirements This Policy is a legal agreement between You as policyholder and us, Your insurer. You must provide us with all the information we need to be able to consider Your application fully THIS IS YOUR DUTY OF DISCLOSURE Under the Insurance Contracts Act 1981. You have a duty before You enter a contract of general insurance to disclose to the insurer every matter that You know, or could reasonably be expected to know, is relevant to the insurer's decision whether to accept the risk of insurance and if so on what terms. You have the same duty to disclose those matters before You renew, extend, vary or reinstate this contract of insurance. Your duty however does not require disclosure of any matter:- a) that diminishes the risk b) that is common knowledge c) that we know, or in the ordinary course of our business, ought to know d) as to which compliance with Your duty is waived by us in writing If you fail to comply with Your Duty of Disclosure, we may be entitled to reduce our liability under this Contract in respect of a claim or may cancel the Contract. If the non disclosure is fraudulent, we may also have the option of avoiding this Contract from its beginning." 45 The plaintiff, after rightly pointing out more than once that the burden of proving compliance with s 22 lay on the defendant and not on the plaintiff, attempted to meet the defendant's s 22 arguments in the following way. 46 First, the plaintiff said that the 1987 proposal was irrelevant because it led only to a contract between the plaintiff, Mr Doyle and the defendant. The 1994 policy was a different contract because of the novation effected when Mr Doyle was removed as an insured in 1989. 47 Secondly, the plaintiff submitted that the 1987 policy, all renewal notices up to but not including the 1994 renewal notice, and all policies up to but not including the 1994 policy were irrelevant. This was because the 1994 policy was different from the 1987 policy, and because the 1987 policy wording had been revised in August 1988, March 1991, July 1992 and August 1993. (This was not an argument advanced at the trial.) 48 Thirdly, the plaintiff submitted that the 1994 policy was irrelevant because it did not come to the personal attention of the plaintiff. 49 Fourthly, the plaintiff submitted that the 1994 renewal notice did not comply with s 22 because, as the trial judge in effect said, material on the back of what was ostensibly simply a bill without anything on the front drawing the attention of the reader to the back could not amount to compliance with s 22. The plaintiff relied on Suncorp General Insurance Ltd v Cheihk (1999) 10 ANZ Insurance Cases 61-442. 50 Fifthly, the plaintiff submitted that the 1994 renewal notice did not fully explain the effects of non-compliance with the duty to disclose under s 21. (This argument was not advanced at the trial either.) 51 The defendant did not contend that the arguments not advanced at the trial could not be advanced to this court. 52 The first argument based on novation is unattractive. The novation was effected at the request of the plaintiff, not the defendant. The novation by itself did not alter either the obligations imposed on the plaintiff or the rights enuring to the plaintiff. It merely terminated relations between the defendant and Mr Doyle. However, it is not necessary to decide on the merits of the novation argument. 53 The second argument was not supported by any analysis of the changes in contractual wording. While both the 1987 and the 1994 policies were in evidence, the other policies containing changed wording were not. The argument must rest on the proposition that the effect of s 11(9)-(10) is that the provision of s 22 information before earlier renewals of the contract satisfies s 22, but the provision of s 22 information before renewal of the contract which has since been varied does not. If that proposition is sound, it would be necessary to see whether the changed wording in fact changed the substance of the relevant obligation. There are some "changes" – of format, or heading, or arrangement – which must be too trivial to cause any contract so "changed" to be a variation of the old. It might surprise industry participants if other routine, but less trivial changes, like increases in premium or in excess levels, caused a variation, not a renewal. While the ultimate burden did not lie with the plaintiff, a tactical or demonstrative burden did, and the plaintiff did not seek to demonstrate in detail that the changes effected a variation. However, it is not necessary to decide on the merits of this argument. 54 The third argument, that the 1994 policy did not come to the plaintiff's attention, must be rejected for two reasons. First, early in the reasons for judgment in three places the trial judge found that it did, and he gave sound reasons for that conclusion. That conclusion was not some casual passing remark which can simply be ignored: it was used by the trial judge against the defendant as an essential reason for rejecting the defendant's s 21(1)(a) argument on change of business. The later statements of the trial judge saying that the plaintiff did not receive the 1994 policy are unreasoned and wholly unconvincing. Secondly, even if, contrary to what has just been said, the plaintiff personally did not see the 1994 policy, Mr Kennelly did, and notice to Mr Kennelly would be notice to the plaintiff. Mr Kennelly was the plaintiff's employee. He was the office administrator. He had responsibility for collecting mail, opening mail containing renewal forms from insurance companies, writing out cheques for the plaintiff to sign, and writing out the plaintiff's financial records. Mr Kennelly was not asked whether he had seen the 1994 policy. However, the 1994 policy was unquestionably received at the plaintiff's business. The plaintiff sued on it. While the defendant, rather than the plaintiff, tendered it, the policy was tendered from "the Bundle of Plaintiff's Documents pages 38-52 inclusive", according to the trial judge. That suggests that the plaintiff had possession of it. Further, the plaintiff's contention that it should succeed on the 1994 policy entails the admission that he was party to it. For the plaintiff to be party to it, he must have received it. It would have been despatched with the 1994 renewal form in the ordinary course of the defendant's business, according to the uncontradicted evidence of Mr McLean; and the 1994 renewal form was certainly received by Mr Kennelly, even though he did not personally sign the cheque paying the premium. 55 The fourth argument of the plaintiff is highly questionable. It is a commonplace of business for documents to have writing on both sides. It is a commonplace of insurance business for s 22 information to be placed on the back of renewal forms. The failure to have words on the front of the renewal form directing the reader to the back is not fatal in the sense that no rule of law requires this. If there were such a rule of law, given that a s 22 disclosure can be made in the contract of insurance itself (s 11(11)), there would have to be words on the first page of the contract of insurance referring to the relevant parts within; that would be an extreme outcome. On the facts of Suncorp General Insurance Ltd v Cheihk (1999) 10 ANZ Insurance Cases 61-442, this Court reached the conclusion that s 22 had not been complied with. On the facts of this case, it is not clear why it has not been. However, it is not necessary to base any conclusion about whether the defendant has shown compliance with s 22 on the fate of this argument. 56 The fifth argument of the plaintiff was the 1994 renewal notice did not comply with s 22. The argument pointed out that the renewal notice only said: "If you fail to comply with your duty of disclosure, GIO General may also have the option of avoiding the contract from its beginning." The plaintiff submitted that this did not contain whatever anterior proposition the word "also" pointed to. The renewal notice did not use words like those appearing in the prescribed form stipulated in the Regulations, or the 1987 proposal, or the 1987 policy, or the 1994 policy: "If you fail to comply with your duty of disclosure, GIO General may be entitled to reduce its liability under the contract in respect of a claim or may cancel the contract." In effect the renewal notice elided the two sentences appearing under "non-disclosure" in the prescribed form stipulated in the Regulations. The question is whether s 22 requires only information of the nature and effect of the duty of disclosure, or whether it requires also information about the consequences of breach of that duty. There is a dictum supporting the latter view in Suncorp General Insurance Ltd v Cheihk (1999) 10 ANZ Insurance Cases 61-442 at [40]. Even if the latter view is correct, the defendant submitted that the non-disclosure notice in the 1994 renewal notice was not defective because it conveyed the worst that could happen, and the lesser was conveyed in the greater. It is undesirable to decide what the true construction of s 22(1) is in this case, and what steps are sufficient to comply with it on its true construction, if it is possible to decide the case on other grounds. Since it is possible to do so, the merits of the fifth argument need not be considered. 57 The plaintiff did not contend that if he received the 1994 policy the information in it was not sufficient in content, or sufficiently prominent, to inform him "clearly" of the duty of disclosure. Nor did the plaintiff contend that for the defendant to show that it had informed the plaintiff "clearly" of the duty of disclosure, it was necessary for the defendant to show that the plaintiff had been personally conscious of the information about the duty of disclosure: that was an idea raised in argument, attacked by the defendant, but not embraced by the plaintiff. In those circumstances the trial judge's finding that the plaintiff received the 1994 policy personally is fatal to the plaintiff's s 22 argument. And even if the plaintiff did not personally receive it, it must have been received by the plaintiff's business in the person of Mr Kennelly, and that is sufficient. 58 There is a further reason for rejecting the plaintiff's s 22 arguments. Section 22(1) requires only that the insurer clearly inform the insured of the duty of disclosure "before a contract of insurance is entered into". Section 22(1) does not say how long before the contract is entered that clear information must be given. Here there was a course of dealing from 1987 on between two parties, the plaintiff and the defendant. At one stage Mr Doyle was also a party, but his departure does not affect what the defendant informed the plaintiff of. That course of dealing dealt with only one subject – the insurance of the plaintiff's premises. The course of dealing may have been effectuated not through one contract renewed seven times, but through a series of contracts, some of them variations, some of them renewals. But it was in substance a single course of dealing. Each "contract" and each document relating to the course of dealing bore the same number, H4011486. Some of the plaintiff's arguments accepted that in substance there was a single course of dealing. Thus Mr Nelson's visit in 1991 would have been of no relevance if there were in truth a new contract or renewal in 1992 and another new contract or renewal in 1993. The cross-examination of Mr McLean to suggest that despite the plaintiff's non-disclosure, he would have been favourably treated on making proper disclosure because he was an old customer would have diminished force if in truth there had only been various disconnected contracts between the plaintiff and the defendant. At the start of the single course of dealing it is beyond question that the plaintiff was clearly informed in writing of his s 21 duty in two ways – the proposal which he signed and the 1987 policy. Counsel for the plaintiff did not submit that those disclosures, if initially effective, became ineffective on the ground that the plaintiff might have forgotten about them by 1994 in the same way that, according to the trial judge, he had forgotten the 1987 questions. The significance of the 1987 proposal was highlighted when the 1994 policy was issued, because it stated on page 1 that the first component of the contract of insurance was "Your Proposal", and, as counsel for the plaintiff agreed on instructions, the only proposal was the 1987 proposal. Section 28(3) 59 Section 28 of the Act provides: "(1) This section applies where the person who became the insured under a contract of general insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into. (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. (3) If the insurer is not entitled to avoid the contract or, being entitled to avoid the contract (whether under subsection (2) or otherwise) has not done so, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made." 60 The trial judge did not deal with the application of s 28 because he found that the plaintiff had not failed to comply with the s 21 duty of disclosure. 61 The defendant submitted that if this Court agreed with its submissions on ss 21 and 22, it followed that liability under s 28(3) should be reduced to nil. This was because of the evidence of Mr McLean. Mr McLean gave the following evidence in chief: "Q. Yesterday Mr McLean I also asked you some questions about the underwriting position in relation to disclosure of business use and the extent of business use. Like yesterday I want you to assume the questions that I will ask you this morning will be related to the period of December 1994 at the time of the last renewal in respect of the policy that's in issue before this Court. I want you to assume that at that time in respect of Mr Wallace's premises at 39 Anderson Road, Mortdale, that these matters applied. From those premises, Mr Wallace was conducting a business of a tree surgeon which included these features. In association with that business, from the insured premises he ran an office within the premises that was maintained and staffed by a full time employee five days per week during the [hours] of 9 to 5. That otherwise involved in the business apart from Mr Wallace full time and that employee in the office full time, there were two other full time employees. That from the shed of the premises there was the storage of quantities of petrol in the order of up to 60 litres in jerry cans. Quantities of various types of oils stored in 44 gallon drums and 20 litre containers. That there were commercial quantities of fertiliser and peat moss stored at the premises from time to time. That from the premises there was the sawing and splitting of large logs into saleable sized pieces of firewood for sale. From the premises there was performed the mulching of wood and tree cuttings for sale. That there was the commercial sale from the premises of the firewood so produced and the mulch so produced. That from the premises there was performed the fuelling with petrol of items of petrol driven machinery. That on the premises from time to time welding, repairing and maintenance of items of machinery occurred. Are those matters Mr McLean matters that GIO would wish to know about in considering whether or not to renew the policy in December 1994? A. Yes, those matters are of importance because the household insurance department is in the business of insuring domestic risks only and anything that goes away from that we would need to know about. Q. So you say yes you would like to know about those matters because they go to your underwriting consideration. The next question I ask you Mr McLean is this. If those matters had of been disclosed to the GIO at the time of renewal in December '94 either to a branch or otherwise, what would have happened? A. If they had been disclosed to the branch, the branch would have referred those or the situation scenario to Parramatta where I'm located, would have been referred to myself. Q. And if that matter had of been referred to you with those matters being disclosed, what decision would you have taken? A. The decision would have been definitely not to issue renewal on that policy. Q. Mr McLean are matters in the nature of threats made to individual insureds under household policies or threats to the – I withdraw the question. Are threats in the nature of some sort of violence to the insured or the insured's premises matters that are relevant to the consideration of GIO whether or not to issue a policy for building insurance or to renew a policy for building insurance? A. Yes, depending on what the threat is. We would need to know about it. Just normal – just common sense tells you that there is always neighbourhood disputes across the fence but where there are substantial threats, that would increase the risk of insuring a property. We would need to know about those. … Q. Mr McLean, the assumption is that there were no less than three anonymous telephone calls in the nature of threats. That in one there was a threat to blow up the insured, in another there was a threat to pay out on the property and in another there was a threat to get the insured. In addition to those matters, I want you to assume this. That over the one or two – sorry. During and over the one or two years before the renewal in question, that the plaintiff had received several complaints from neighbours concerning noise associated with his business operation emanating from the premises, concerning the storage of wood and tree clippings on the footpath, concerning the amount of wood and tree clippings stored on the premises. In addition to that, I want you to assume that in that same period, one particular neighbour had personally confronted the plaintiff and in a threatening way in close physical proximity to the plaintiff had threatened to get the plaintiff arising out of the plaintiff making substantial amounts of noise from his business operation emanating from the premises. In addition to that, I want you to assume that over that same period of time there was an ongoing dispute between the plaintiff and a former employee arising out of which there had been no less than two separate occasions in which threats to the plaintiff had emanated, one being personally made by the employee at the insured's premises during which the employee said he was going to get the plaintiff and one being relayed to the insured by the insured's sister and that particular threat being in the nature of a threat being made by an employee of the former employee saying that they were going to get the sister and the insured. In addition to that I want you to assume that in the same period that on one occasion the insured had discovered that a piece of business machinery parked under the carport had had one of its tyres set on fire. Mr McLean are those matters that are relevant to the consideration of GIO at December 1994 whether or not to renew the policy? A. Yes, those matters as you have described would be relevant in our decision on whether to renew that policy. … Q. I want you to assume that those – that that additional inquiry or questions were asked and that in response to that, you were told about the nature of the business and what you were told were the items that I previously asked you to assume, that list of matters including the office and the extent of the nature of the business operation. Now if those matters had of been disclosed at that time in association with the further inquiry, what would have happened? A. Well the renewal would not have been offered because the risk would have increased from that of a normal domestic dwelling. Q. That decision, is that a decision that would have been made by you or by some one else? A. That decision would have been made by myself. Q. So if those type of matters had of been disclosed at a branch, it would have been referred to head office to yourself? A. Yes it would have. Q. Mr McLean, I want to take you back to the scenario that I asked you to assume concerning the threats. In that scenario apart from the threats I ask you to assume that also disclosed to you were the existence of complaints from neighbours. If what was disclosed to you on renewal in December 1994 was only the matters of threat that I have outlined to you, but at that same time, there was no separate disclosure of the disputes being held with neighbours, what would have happened? A. Well the end result would have still been the same. Some one saying that they are going to pay out on the property, that they are going to blow up the insured. Matters like that definitely increase the risk – it's different from a normal domestic risk and the renewal would not have been offered. Q. The mere disclosure of the existence of threats, does that lead – sorry, is it the case that by itself that does not cause a refusal of insurance? A. Well it puts you on inquiry as to why the threats were made and then further investigations would have revealed what the operations were from that property and the end result would have been that we wouldn't have offered renewal." 62 In cross-examination Mr McLean agreed that a general medical practitioner might well use a building as both residence and surgery and still receive cover under a policy of the type which the plaintiff had. Mr McLean agreed it was common for Sydney residences to have petrol filled lawnmowers, and that that would not cause the defendant to refuse cover. Mr McLean said he had not conducted any survey of the basis on which the defendant had rejected proposals for insurance of domestic premises which were to be used for business purposes, because proposals were generally destroyed after twelve months in view of space problems. He said he personally had not rejected any such proposal between 1990 and 1994. He said that if the change in use had been disclosed he would have rejected the proposal outright without further inquiry, though he would have made inquiries had the threats been disclosed. After lengthy and not unsuccessful cross-examination designed to move Mr McLean towards an acceptance of the discretionary nature of underwriting, of the fact that minds may honestly differ about it, and of the possibility that inquiries about the length of time a customer had been with the defendant would be made, Mr McLean denied that if the disclosures which the plaintiff ought to have made had been made there would have been any difference of underwriting opinion: "I can't see anyone disagreeing on whether to not renew this policy". In general it may be said that the cross-examination did not in any way cut down Mr McLean's evidence in chief about the change in business use, and it succeeded only in establishing some qualifications about the threats which were not injurious to his credit. 63 On the appeal the plaintiff accepted that Mr McLean was not cross-examined to suggest that the plaintiff would have been offered cover after disclosing what he should have disclosed, but at a higher premium. Nor did the plaintiff at the trial give evidence of what higher premium he might have been prepared to pay. 64 The plaintiff submitted that because of the trial judge's failure to make findings on the s 28(3) issue, if the defendant succeeded in other respects there would have to be a new trial. Whether Mr McLean's evidence should be accepted raised credit questions on which, according to the plaintiff, it was not appropriate that this Court should rule. 65 Part 51 rule 23(1) of the Supreme Court Rules provides: "(1) The Court of Appeal shall not order a new trial: (a) on the ground of misdirection, non-direction or other error of law; (b) on the ground of the improper admission or rejection of evidence; (c) where there has been a trial before a jury, on the ground that the verdict of the jury was not taken upon a question which the trial judge was not asked to leave to the jury; or (d) on any other ground, unless it appears to the Court of Appeal that some substantial wrong or miscarriage has been thereby occasioned." 66 Here the "ground" on which a new trial would be ordered is the trial judge's failure to make findings about s 28(3). Did that failure occasion some substantial wrong or miscarriage? Counsel for the plaintiff on the appeal said that if there were no order for a new trial, he would have to ask this Court to make findings adverse to Mr McLean's credit, and he did not think he could do this. That is understandable. There is nothing in the trial judge's reaction to Mr McLean's evidence as it was being given suggesting criticism of it. While the trial judge intervened to stop one non-responsive answer, he did not otherwise rebuke Mr McLean. Counsel for the defendant said, without contradiction, that no submission was made at trial on behalf of the plaintiff challenging Mr McLean's credit, and that proposition is supported by the firm but non-pejorative style of cross-examination employed by the experienced senior counsel who represented the plaintiff at the trial. Though the trial judge criticised the evidence of the plaintiff, he made no criticism of any other witness, and his findings about the plaintiff's receipt of the renewal notices and the 1994 policy rest in part on an acceptance of Mr McLean's evidence on the standard procedure of the defendant. The trial judge's findings about the changes in business activities at the premises are based in part on Mr McLean's evidence. The trial judge referred to "s 28(3) of the Act and the evidence of Mr McLean that insurance would not have been renewed" as a justification for the requirement that the plaintiff prove knowing non-compliance with the duty of disclosure: whether or not that was the right test, the trial judge's reasoning reveals some provisional acceptance of Mr McLean's evidence. (The acceptance is provisional only, because a little later the trial judge said that because of the defendant's failure on s 21 issues "it becomes unnecessary to consider Mr McLean's evidence as to what the insurer would have done if there had been disclosure".) In short, the trial judge's approach to Mr McLean's evidence in his reasons for judgment is not hostile and indeed is favourable. There is nothing in Mr McLean's evidence which could cause this Court to doubt Mr McLean's veracity or reliability. His veracity was not challenged by the cross-examiner. His reliability was tested, but not shaken. And in giving evidence he appeared to make all just concessions. Nor is there anything in Mr McLean's evidence which would cause this Court to think that the trial judge erred in his apparent acceptance of Mr McLean's evidence that insurance would not have been renewed. In the circumstances the trial judge's failure to make fuller or more explicit findings on that subject does not represent a substantial wrong or miscarriage in view of this Court's capacity to accept his evidence. 67 Mr McLean's evidence should be accepted by this Court. Acceptance of it leads to the conclusion that the defendant's liability should be reduced to nil. 68 In the course of the argument in this Court, the question was raised whether, if disclosure years before the relevant contract of the matter which the plaintiff ought to have disclosed would have caused an anterior contract not to have been entered, it was still possible for the defendant to rely on the non-disclosure in relation to the relevant contract. However, the plaintiff did not advance any argument on this point as a means of preventing the application of s 28(3). Orders 69 The plaintiff sought the costs thrown away as a result of having answered the defendant's written submissions on paragraph 8 of the Notice of Appeal, that ground having been later abandoned on 25 July 2001. The defendant put no argument to the contrary of that application, and it should be granted. 70 The following orders are proposed: 1. Appeal allowed. 2. The orders of the court below are set aside. 3. In lieu of the orders of the court below, verdict and judgment for the appellant with costs. 4. The respondent is to pay the appellant's costs of the appeal except in relation to paragraph 8 of the Notice of Appeal. 5. The appellant is to pay the respondent's costs of the appeal in relation to paragraph 8 of the Notice of Appeal. 6. The respondent is to have a certificate, if entitled, under the Suitors Fund Act 1951. 71 HODGSON JA: I agree with Heydon JA, subject to the following comments. 72 The question whether a reasonable person in the circumstances could be expected to know a matter to be a matter relevant to the decision of an insurer whether to accept a risk and if so on what terms, within the meaning of s.21(1) of the Insurance Contracts Act 1984 (Cth), is itself a question involving the drawing of inferences from primary facts; and in my opinion, where this Court is satisfied that, on the primary facts as found by the primary judge and/or plainly established by the evidence, the primary judge was in error in not drawing such an inference, the Court can and should draw that inference. For the reasons given by Heydon JA, the matters of changes to the business use of the subject premises and the threats to the respondent were matters falling within s.21(1)(b). 73 On the question of compliance with s.22, I agree with Heydon JA that s.22(1) does not require that the informing of the insurer take place at any particular time before the contract of insurance is entered into. However, this does not mean that if this has happened at any time in the past, s.22(1) must be satisfied: otherwise, s.11(10) would be otiose in its application to s.22. 74 In my opinion, what is required by s.22(1), unaffected by s.11(10), is that the information provided before entry into the contract should be such as to clearly inform the insured, as at the time of entry, of the general nature and effect of the duty of disclosure. In considering whether this is the case, the whole history of information-providing can be considered. 75 The effect of s.11(10) is to make it unnecessary to re-comply with s.22 in relation to renewals, extensions and reinstatements, at least if they do not involve a variation of the contract. I prefer not to rule in this case on whether the removal of one insured or minor alterations of the terms would amount to variations. For reasons give by Heydon JA, the whole history of provision of written information to the insured was such as to clearly inform the insured, as at the time of entry into the relevant contract, of the general nature and effect of his duty of disclosure. 76 I agree with the orders proposed by Heydon JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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