Reported Decision : (2003) 12 ANZ Insurance Cases 61-553 New South Wales Supreme Court CITATION : Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd & Anor [2002] NSWSC 1006 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2810/02 HEARING DATE(S) : 9 to 11 October, 2002 JUDGMENT DATE : 29 October 2002 Hammer Waste Pty Ltd - Plaintiff PARTIES : QBE Mercantile Mutual Limited - First Defendant OAMPS Insurance Brokers Limited - Second Defendant JUDGMENT OF : Palmer J A.F. Fernon - Plaintiff COUNSEL : T.D. Castle - First Defendant M.S.M. White - Second Defendant Ron Kramer Associates - Plaintiff SOLICITORS : PricewaterhouseCoopers Legal - First Defendant Phillips Fox - Second Defendant CATCHWORDS : INSURANCE - CONSTRUCTION - AMBIGUITY - IMPLIED TERM - Whether liability under insurance policy excluded upon true construction of ambiguous words in excess clause - whether liability excluded by implication of term. HELD: Liability not excluded except by clear express terms - contra proferentem rule to be strongly applied against insurers who take advantage of ambiguous words and implied terms to deny liability - principles discussed - no implied term because contrary to express term. INSURANCE - GOOD FAITH - whether insurer acting in good faith in taking such points - INSURANCE - DUTY OF DISCLOSURE - "MATTER KNOWN" - Insured does not know matter requiring disclosure because insured's agent forgets to inform insured of relevant fact - agent not conscious that it has forgotten to inform insured - whether agent "knows" matter relevant to insurer's decision - what is meant by "matter known" for purposes of s.21(1) Insurance Contracts Act (Cth). SUBROGATION - Whether insurer entitled to declarations as to enforcement of rights of subrogation before insurer has paid out in full its liability under the insurance policy. EQUITY MAXIMS - Maxim "equity regards as done that which ought to be done" explained. INDEMNITY COSTS - Whether insurer who relies upon ambiguous words and implied terms in its insurance policy in order to deny liability is acting in good faith - whether indemnity costs against unsuccessful insurer in such circumstances is appropriate. LEGISLATION CITED : Insurance Contracts Act 1984 (Cth) - s.13, s.21, s.28 Marine Insurance Act 1909 (Cth) - s.24 - Anderson v Fitzgerald (1853) 4 HL Cas 484; 10 ER 551 - Australian Casualty & Life Ltd v Hall (1999) 151 FLR 360 - Ayoub v Lombard Insurance Co (Aust) Pty Ltd (1989) 5 ANZ Ins Cas 60-933, 97 FLR 284 - Burke v LFOT Pty Ltd (2002) 187 ALR 612 - Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 - Etherington & Lancashire & Yorkshire Accident Insurance Co, In re [1909] 1 KB 591 - Fowkes v Manchester & London Assurance Association (1863) 3 B&S 917; 122 ER 343 CASES CITED : - Halford v Price (1960) 105 CLR 23 - Lindsay and Ors v CIC Insurance Ltd (1989) 16 NSWLR 673 - Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14 - Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR 186; (2001) 50 NSWLR 679 - Provincial Insurance Co Ltd v Morgan [1933] AC 240 - Santos Ltd v American Home Assurance Co (1986) 4 ANZ Ins Cas 60-795 - State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 - Woolfall & Rimmer Ltd v Moyle [1942] 1 KB 66 - Meagher, Gummow & Lehane "Equity: Doctrines and Remedies" (3rd Ed) DECISION : Plaintiff entitled to declarations against First Defendant as sought; First Defendant's Cross Claim against Second Defendant dismissed. Introduction 1 Mr and Mrs Wilson carry on business in a small way as garbage removalists through their company, Hammer Waste Pty Ltd ("Hammer"). Mr Wilson drives the truck and Mrs Wilson looks after the paperwork. They have always been careful to see that their truck was properly insured. 2 Since at least 1995 the truck used in Hammer's business had been insured with Mercantile Mutual (Australia) Ltd ("MMI"). The initial insurance policy had been arranged through insurance brokers, OAMPS Insurance Brokers Ltd ("OAMPS"). In October 1999, pursuant to a joint venture agreement, QBE Mercantile Mutual Limited ("QBE") came into existence. QBE took over all the insurance of MMI, including the insurance policy for Hammer's truck. A new standard form policy for this type of heavy haulage vehicle insurance was issued and, when the insurance for Hammer's truck was renewed in July 2000, the insurance was in the form of QBE's new policy ("the Policy"). 3 In November 2000, Mr and Mrs Wilson decided to employ a young man, Mr Neil Winstanley, to help Mr Wilson with the driving of the truck. Mrs Wilson knew from previous experience in employing another casual driver that a document called a Driver's Declaration had to be submitted to the insurer. She rang OAMPS and asked it to send her a Driver's Declaration form. She received the form, Mr Winstanley filled it in, he and Mr Wilson signed it and it was promptly returned to QBE. 4 On 17 November 2000 Mr Naghten, a senior underwriter of QBE, rang Ms Leahey, the responsible person at OAMPS, and informed her that Mr Winstanley was "not acceptable to us" because he had only two months' experience in driving trucks of the class owned by Hammer and was therefore "outside our selection criteria" . Mr Naghten confirmed this advice later the same day by a facsimile to Ms Leahey in which he concluded "please ensure our mutual client is advised of this matter" . 5 Ms Leahey says that on 27 November 2000, she rang Mrs Wilson and told her that QBE had rejected Mr Winstanley as a driver. Mrs Wilson denies that she was ever informed of that fact. No written confirmation of Mr Winstanley's rejection by QBE was ever sent by OAMPS or QBE to Mrs Wilson. Mr and Mrs Wilson say that, having heard nothing further from QBE or OAMPS after submitting the Driver's Declaration form, they assumed that there had been no problem with Mr Winstanley's Driver's Declaration and they therefore continued to permit Mr Winstanley to drive the truck on some days to relieve Mr Wilson. 6 Unfortunately, on 21 August 2001 the truck was involved in a serious accident. Two people were killed, the truck was severely damaged, and there was considerable damage to other vehicles as well. The driver of the truck at the time of the accident was Mr Winstanley. 7 Shortly after the accident, Hammer notified QBE of a claim under the Policy. On 31 August 2001, QBE wrote to Hammer denying liability on the ground that Mr Winstanley was not covered under the Policy "as cover was declined in respect to this person … on the basis of his only having 2 months' driving experience in vehicles of this class and as such was outside our underwriting selection criteria" . 8 Damage to the truck cost about $61,000 to repair and Mr and Mrs Wilson have had to mortgage their home to pay for these repairs. In addition, Hammer has received from third parties property damage claims totalling about $108,000. 9 On 22 May 2002, Hammer commenced proceedings against QBE seeking a declaration that QBE was liable to indemnify it under the Policy in respect of claims arising out of the accident. By an Amended Statement of Claim, Hammer added a claim against QBE for damages for breach of contract and joined OAMPS as Second Defendant, claiming declarations in the alternative that OAMPS negligently breached a duty of care owed to it in failing to advise it of QBE's refusal of Mr Winstanley's Driver's Declaration and seeking consequential relief. QBE has cross claimed against OAMPS alleging that, if it has any liability to Hammer under the Policy, it is entitled to be subrogated to Hammer's rights against OAMPS or is entitled to contribution from OAMPS. It also claims that if OAMPS was its agent for the communication to Hammer of the rejection of the Driver's Declaration, OAMPS breached its duty of care and is liable to it in damages. 10 The parties have prepared an Agreed Statement of Issues, which may be summarised thus: i) whether, on the true construction of the Policy, QBE was entitled to decline to cover the truck while Mr Winstanley was driving it; ii) whether, on the true construction of the Policy, Hammer was required to disclose to QBE prior to the renewal of the Policy for the 2001/02 year that Mr Winstanley was a regular driver of the truck and, if so, whether the consequences of its failure to make that disclosure are to reduce the liability of QBE to nil; iii) whether QBE or OAMPS ever advised Hammer of QBE's decision on 17 November 2000 to reject Mr Winstanley's Driver's Declaration and, if not, whether OAMPS breached any duty of care to Hammer or QBE resulting in loss; iv) whether, in respect of any liability which QBE has to Hammer, QBE has any right of subrogation or contribution against OAMPS and, if so, to what extent; v) whether Hammer has yet suffered any loss in respect of the damage to the truck which occurred on 21 August 2001. The factual issue 11 There is really only one fact in contention, namely, whether or not Ms Leahey informed Mrs Wilson in a telephone conversation on 27 November 2000 that QBE had rejected Mr Winstanley's Driver's Declaration. I have come to the firm conclusion that I should accept Mrs Wilson's evidence on this issue in preference to Ms Leahey's, for the following reasons. 12 I accept Mrs Wilson completely as a witness of truth whose recollection is reliable. Mrs Wilson struck me as a careful and prudent lady who, although not sophisticated in business, is nevertheless alert, intelligent and meticulous in attending to those matters which she knows require attention. She recollected that a Driver's Declaration was required when Hammer had employed a casual driver some years previously and, in November 2000, she made a point of ringing OAMPS to request it to send to her a declaration form for Mr Winstanley. She ensured that the form was completed and returned promptly to OAMPS. 13 Bearing in mind that Hammer's truck was the only means of livelihood for Mr and Mrs Wilson, I am satisfied that Mrs Wilson was concerned that there should be no problem with the truck's insurance. She says that, if OAMPS had advised her that there was any difficulty with the Driver's Declaration, she would have recollected it clearly and would have acted upon it by stopping Mr Winstanley from driving the truck. Her evidence is plausible and inherently probable, and she was not swayed from it in cross examination. 14 Ms Leahey's evidence is, by contrast, inherently improbable. Although she says that she now has an actual recollection of having told Mrs Wilson of QBE's rejection of the Driver's Declaration, she had no such actual recollection a year ago. In a memorandum which Ms Leahey prepared for her superiors on 31 August 2001, after the claim from Hammer had been notified, she said: " 27/11/2000. I called the client (Jan Wilson) to confirm details of the new driver. She confirmed that Win was born on 11/01/1977, and so his age was 23 years of age. She also confirmed that he had only been licensed 2 months and that he would only be occasionally driving the vehicle as her husband Colin was the main driver. 27/11/2000 (I think – I did not write a different date on my file notes following the above conversation with the client, and so I think it was on the same day). I referred the new driver to the underwriter again. I had researched the policy wording and argued with the underwriter that had they not received or sighted the driver declaration, they would have automatically covered any claims this driver was involved in. Under the policy wording, an additional $2,000 excess would apply to claims involving "Undeclared Drivers". The underwriter agreed with this, I suggested first that a $2,000 excess apply to the new driver and when the underwriter turned this down, suggested a $5,000 excess. The underwriter also turned this suggestion down. It is at this point that unfortunately my file notes end. It would be part of my normal procedure to verbally advise the client of the underwriter's comments, and then to confirm this [in] writing. I believe that I did verbally advise the client of these comments, though whether in my initial conversation with them [or] following the second attempt with the underwriter, I am unsure. I must say though, that I have no recollection of putting anything in writing to the client. Naturally I am mortified by my lack of file notes and failure to prove or adequately remember that I complied with normal procedures." 15 During her conversation with Mrs Wilson on 27 November 2000, Ms Leahey made a note on a copy of the fax which Mr Naghten had sent her on 17 November. The note contains only details of Mr Winstanley's date of birth and driving particulars; there is no mention of any statement to Mrs Wilson that QBE had rejected the Driver's Declaration. There is an additional note of a further conversation with Mr Naghten on 27 November in which Ms Leahey apparently tried to persuade him to accept the Driver's Declaration on condition that an additional $2,000 excess applied. 16 The content of Ms Leahey's note on 27 November, coupled with the later report to her superior quoted above, strongly suggest that Ms Leahey did not tell Mrs Wilson on 27 November that the Driver's Declaration had been rejected; at that time she hoped to obtain information from Mrs Wilson which she could use to change Mr Naghten's mind. However, when Mr Naghten did not change his mind Ms Leahey simply forgot to convey that information to Mrs Wilson. This inference is supported by two circumstances. The first is that Ms Leahey says that at that time she and the other members of her team were under a great deal of pressure of work. The second is that Ms Leahey obviously forgot to follow her usual practice of confirming such rejections to the client in writing. If she forgot to confirm the rejection to Mrs Wilson in writing, it is inherently likely that she also forgot to confirm the rejection verbally. 17 For these reasons, I am satisfied that Hammer was never informed prior to the accident on 21 August 2001 that Mr Winstanley's Driver's Declaration had been rejected by QBE. The construction of the Policy 18 Hammer says that the Policy does not contain any term excluding cover if the truck is driven by a driver in respect of whom a Driver's Declaration has been submitted and rejected by QBE. On the contrary, it says, the Policy expressly provides that the only consequence of that circumstance, on the facts of this case, is that it must pay an additional $1,000 excess in respect of the claim. 19 QBE concedes that, on the facts of this case, none of the exclusions expressly contained in the Policy deny cover in the case of a driver whose Driver's Declaration has been rejected. However, it says, cover is excluded in such a case as a matter of construction of the excess liability clause. 20 The following are the relevant provisions of the Policy: " 2.1 Property Damage (a) We will cover the amount you may be held legally liable to pay for accidental damage to property belonging to others caused by or arising out of:– (i) the use of your vehicle …; … (v) any person who is driving, using or in charge of your vehicle with your permission as if they were you and provided they are not entitled to indemnity under any other policy or statute and provided such cover is not otherwise excluded ; [emphasis added] …" " 4.1 Excesses … (a) Standard Excess You will have to contribute the first amount of every claim. This is shown on the schedule as the Standard Excess. Where your vehicle is a rigid body vehicle with a gross vehicle mass exceeding 12,000 kilograms, the standard excess will be increased by 100% where the conditions as stated in 4.1(b)(ii) or 4.1(b)(iii) apply" (It is common ground that Hammer's truck was a rigid-bodied vehicle with a gross vehicle mass exceeding 12,000 kilograms.) " (b) Age Excess/Inexperienced Excess applicable to vehicles with a gross vehicle mass less than 12,000 kilograms In addition to the Standard excess, you will have to contribute an Age excess or inexperienced driver's excess if at the time of the accident giving rise to a claim the person driving your vehicle:– … (ii) between the ages of 21 and 25; or (iii) is aged 25 or more but has not held an Australian driver's licence for two or more years for the type of vehicle being driven at the time of the accident. The amounts of the Age or Inexperienced driver's excesses are shown in the schedule. …" (It is also common ground that Mr Winstanley was 24 at the time of the accident.) " (c) Undeclared Driver Excess – except where exclusion [6.34] applies In addition to the standard excess shown on the schedule, the following excesses apply: Only applicable where the gross vehicle mass of the vehicle exceeds 12,000 kilograms – … One thousand dollars ($1,000) if at the time of the accident your vehicle is a rigid body vehicle and is being driven by or is in the charge of any person from whom we have not received and accepted a Drivers Declaration; These above mentioned excesses will not apply where a driver has a minimum of 2 years experience driving the same type of vehicle and has not been charged or convicted of any driving offence in the last 5 years excluding speeding offences, however the Excess(s) will apply if in the last five years, the Driver's Licence was lost due to the accumulation of speeding offences or where there have been any accidents where the driver was at fault." " 5.1 You must comply with all conditions Should you fail to comply with any of the following conditions we may be entitled to:– (a) cancel the policy; or (b) treat your policy as if it never operated; or (c) reduce or refuse to pay a claim. … 5.3 Before you renew your policy , you must tell us if: (a) there are any changes to the regular drivers you have told us about; … If you do not tell us, we may be entitled to:– (d) charge you an extra premium or impose a higher excess as would have applied; or (e) deny all or part of your claim." " Section 6 – Exclusions This policy does not cover:– … 6.34 loss of or damage to your vehicle or liability where the gross vehicle mass exceeds 12,000 kilograms and we have not received and accepted a Driver's Declaration and any of the following conditions occurred in the last 5 years:– the driver has had 2 or more claims where they were at fault; or the driver has lost their Driver's Licence for negligent driving, culpable driving or dangerous driving, or the driver has been convicted of or charged with drug use, driving under the influence, or exceeding the prescribed concentration of alcohol in their blood or breath; or the driver has been convicted or charged with any criminal offence." (It is common ground that Clause 6.34 does not apply in the present case because none of the bullet point conditions is met.) The schedule to the Policy states that cover in respect of the truck is $144,000 or market value whichever is the lesser, the Standard Excess for the purposes of Clause 4.1(a) is $1,440, the limit for liability to third parties for the purposes of Clause 2.1(a)(i) is $10M, and that "excesses and other conditions" apply as per "the broker's closing". The amounts of the "Age or Inexperienced driver's excesses" referred to in Clause 4.1(b) of the Policy were stated in the broker's closing at $800 in respect of drivers under 21, $600 in respect of drivers over 21 and under 25, and $600 in respect of drivers over 25 with less than 2 years' driving experience. 21 Mr Castle, who appears for QBE, submits that Mr Winstanley was not an "Undeclared Driver" for the purposes of Clause 4.1(c) so that the truck would have been covered by the Policy subject only to a penalty excess. An "Undeclared Driver", Mr Castle says, is a driver whose Driver's Declaration has not yet been received by QBE at the time of the accident or, if it has been received, has not yet been accepted. In contradistinction, he says, a driver whose Driver's Declaration has actually been received and rejected by QBE at the time of the accident is a "rejected driver". Mr Castle then says that a "rejected driver" is excluded from cover under the Policy because it was Mr Naghten's understanding, and Ms Leahey's as well, that the Policy did not apply to such a driver. I am unable to accept that submission, for the following reasons. 22 The Policy itself does not draw the distinction between an "Undeclared Driver" and a "rejected driver" which Mr Castle seeks to draw. The words "Undeclared Driver" are merely a heading inserted for convenient reference at the beginning of Clause 4.1(c). That heading cannot override the substantive provisions of the clause. The clause itself does not refer to a "rejected driver": it provides a penalty excess if the Driver's Declaration is not "received and accepted" . The clause does not apportion different consequences according to which of three separate and distinct circumstances may occur, namely, a Driver's Declaration is not received at all by the time of the accident, or it is received and accepted, or it is received but not accepted. 23 In my opinion, the phrase "not received and accepted" refers to only one circumstance, namely, that at the time of the accident there is no acceptance by QBE of the Driver's Declaration, regardless of whether that non-acceptance was because the Driver's Declaration had not been received or because it had been received but declined. The clause provides that if a Driver's Declaration is not accepted, for whatever reason, then there is only one consequence: the $1,000 excess applies unless the driver has a minimum of two years' relevant driving experience and has not been charged or convicted as provided. 24 This construction is, in my view, supported by the provisions of Clause 2.1(v) which provides cover where any person is driving the vehicle with the insured's permission provided that such cover is not otherwise excluded . That term must be read, together with Clause 4.1(c), as meaning that every permitted driver is covered, subject to any relevant excesses, unless one of the exclusions in Clause 6 applies. The only exclusion relevant for consideration is Clause 6.34 which expressly excludes cover where both of two conditions apply: first, QBE has not received and accepted a Driver's Declaration; and second, any of the specified circumstances have occurred in the five years prior to the accident. It follows as a corollary, in my view, that cover is not excluded if one of the conditions applies but not the other. As I have noted, QBE accepts this construction of Clause 6.34 and has conceded that it does not operate to exclude cover in the present case. 25 An insurance policy, usually being a contract of adhesion provided by the insurer to the insured in printed form on a 'take it or leave it' basis, is not to be construed so as to allow the insurer to escape liability by means of any ambiguity which the ingenuity of its lawyers may tease from the words of the policy. If liability is to be excluded in any particular circumstance, then that circumstance and the exclusion must be expressed in the policy so clearly "that he who runs can read" ; otherwise, the insurer is held to the indemnity: per Lord St Leonards in Anderson v Fitzgerald (1853) 4 HL Cas 484, at 510; 10 ER 551. Courts have long enunciated that principle: see, e.g., Fowkes v Manchester & London Assurance Association (1863) 3 B&S 917, at 925 per Cockburn CJ and at 929 per Blackburn J; 122 ER 343; Woolfall & Rimmer Ltd v Moyle [1942] 1 KB 66, at 73 per Lord Greene MR; Provincial Insurance Co Ltd v Morgan [1933] AC 240, at 250 and 255. 26 That principle is merely an application of the established doctrine that policies of insurance are to be construed "contra proferentem" : the Courts set their face against an insurer who, having drafted the terms of the policy which are imposed on the insured and having received premiums under that policy, possibly for years, then insists on construing an ambiguity in the terms in such a way as to deny liability. There are many strong judicial statements to this effect: see e.g. per Farwell LJ in In re Etherington & Lancashire & Yorkshire Accident Insurance Co [1909] 1 KB 591, at 600; Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14, at 22 per Isaacs J; Halford v Price (1960) 105 CLR 23, at 34 per Fullagar J. 27 That ambiguity in an insurance policy cannot operate to disadvantage the insured is a principle which is just as much to be applied by the Courts today as it ever was; perhaps more so when, by means of lavish advertising campaigns, insurance companies seek to foster in the minds of the public a comfortable belief that insurance will protect one from practically all of the vicissitudes of life. Insurance companies and their legal advisers must remind themselves of this long-established and clear principle of law before denying a claim on the basis of an exclusion which is not clear and express and before contesting that claim in the Courts. They must remind themselves that a contract of insurance contains an implied term requiring the insurer to act towards the insured with the utmost good faith in respect to any matter arising under it: s.13 of the Insurance Contracts Act 1984 (Cth) ("ICA"). 28 If insurance companies and their advisers do not bear these principles in mind, if they come to Court seeking to construe an exclusion out of ambiguous words or by recourse to implied terms, they may well face not only an adverse judgment almost out of hand, but also an indemnity costs order. This is so because it is notorious how dependent upon insurance many people are in order to protect them from the financial disaster that all kinds of insurable misfortunes can bring. If an insurance company denies liability on the basis of ambiguous wording or implied terms in the policy, necessitating a Court case to resolve the issue, the lives and wellbeing of those insured may be destroyed before the case is concluded, particularly if they are of modest means: a victory for the insured may, in the end, provide Pyrrhic indeed in human terms. 29 The Courts do not remain indifferent to reprehensible behaviour on the part of a party to litigation, whether that behaviour occurs in the genesis of the dispute or in the conduct of the litigation. The Court may express its disapproval of such behaviour in the form of an indemnity costs order. Insurers and their advisers need to weigh this consequence carefully before they rely upon ambiguous words or implied terms in an insurance policy in an attempt to exclude cover and deny liability. 30 I turn now to Mr Castle's submission that Mr Naghten and Ms Leahey understood the Policy to exclude cover in the case of a "rejected driver". Mr Castle did not explain how their understanding was relevant to the construction of the words of the Policy, and I am unable to see any basis upon which it could be relevant. It is, perhaps, superfluous to add that Mr Naghten admitted that prior to rejecting Hammer's claim he had read the terms of QBE's Policy "only in a cursory way" , that he had not read it at all before advising QBE to reject Hammer's claim, and that he had advised rejection of the claim simply because Mr Winstanley had less than two years' relevant driving experience, although that was not a circumstance within any of the exclusion clauses in the Policy. Mr Naghten said that, as far as he was concerned, the fact that Mr Winstanley had less than two years' relevant driving experience was enough to exclude liability "regardless of what the Policy said" . When Mr Naghten was asked in cross examination for his understanding of how Clause 4 of the Policy worked, he displayed an obvious unfamiliarity with the clause. It seemed highly probable to me that he had never read the Policy or the clause with any degree of attention at all before he went into the witness box. 31 For these reasons, I am of the opinion that on the true construction of Clause 4.1(c), cover is not excluded under that clause where, as in the present case, a Driver's Declaration has been received and declined by QBE. The effect of QBE's rejection of Mr Winstanley's Driver's Declaration is that under Clause 4.1(a) Hammer must pay the standard excess of $1,440 as well as an increase in the standard excess of 100% because the truck was a rigid-body vehicle with a gross vehicle mass exceeding 12,000 kg and Mr Winstanley was 24 years of age at the time of the accident. Under Clause 4.1(c), Hammer must also pay a further $1,000 excess because Mr Winstanley's Driver's Declaration had not been accepted by QBE. In total, Hammer must pay excesses amounting to $3,880. Whether an implied term 32 Mr Castle submits, in the alternative, that there must be implied in the Policy in order to give it business efficacy a term to the effect that cover is excluded where a Driver's Declaration is received and not accepted by QBE. I am unable to accept that submission, primarily for the reason that such an implied term is inconsistent with the express terms of the Policy. Clause 6.34 expressly states that non-acceptance of a Driver's Declaration will lead to exclusion of cover only when one of four specified circumstances has occurred in the previous five years. It would be inconsistent with the terms of Clause 6.34 to imply a term in the Policy which effectively deletes all the words in Clause 6.34 which follow the words "Driver's Declaration" so that the clause reads simply: "This Policy does not cover … loss of or damage to your vehicle or liability where the gross vehicle mass exceeds 12,000 kg and we have not received and accepted a Driver's Declaration" . 33 If it were necessary, I should add that in the light of the provision for an excess contained in Clause 4.1(c), I am unable to see how the implication of the suggested term is either equitable, necessary to give business efficacy to the Policy, or so obvious that it goes without saying. Breach of Policy condition 34 By paragraph 49 of its Further Amended Notice of Grounds of Defence, QBE alleges that it was entitled to assume, and did assume, that by reason of its rejection of Mr Winstanley's Driver's Declaration, Hammer would terminate the services of Mr Winstanley or would arrange for other insurance. By paragraph 50, it alleges that by reason of this assumption Hammer's conduct in continuing to employ Mr Winstanley as a driver without arranging other insurance was "a change to the regular drivers you have told us about" within the meaning of Clause 5.3(a) of the Policy. Paragraph 51 alleges that Hammer failed to notify QBE of this "change to the regular drivers" at the time of renewal of the Policy for the period 31 July 2001 to 31 July 2002, whereby Hammer breached Clause 5.3(a) of the Policy. Paragraph 54 alleges that by reason of Hammer's breach of Clause 5.3(a), QBE is entitled to deny liability under the Policy. 35 In my opinion, this defence is entirely artificial and without substance: it completely ignores both the facts and the plain words of the Policy. 36 The facts are that prior to November 2000, Mr Wilson was the only regular driver of the truck, as QBE knew. In November 2000, Hammer notified QBE of a change to the regular drivers of the truck when it sent the Driver's Declaration for Mr Winstanley. Neither in its pleaded Defence nor its submissions has QBE contended that the Driver's Declaration did not operate to notify a change of regular drivers. Both Mr Wilson and Mr Winstanley remained as regular drivers of the truck at all times thereafter until the accident in August 2001. 37 Accordingly, there simply were no changes at all to the regular drivers notified to QBE between November 2000 and July 2001, when the Policy was renewed. That QBE declined Mr Winstanley's Driver's Declaration did not have the effect of "de-notifying" him as a regular driver, nor did it change the fact as to who were the regular drivers of the truck: all that non-acceptance of the Driver's Declaration did was to require Hammer to pay a further excess under Clause 4.1(c) if Mr Winstanley continued to drive the truck and to subject Hammer to the risk of an exclusion of cover if there was an accident while Mr Winstanley was driving and any of the circumstances specified in Clause 6.34 were then met. 38 It is a perversion of the words of Clause 5.3(a) of the Policy to say that, because QBE assumed that there was a change to the regular drivers when there was no such change, a failure to correct QBE's wrong assumption was, therefore, in itself a "change to the regular drivers". What was Hammer's notice to QBE under Clause 5.3(a) supposed to say: "We notify you that there has been no change in the regular drivers of the truck since you rejected Mr Winstanley's Declaration in that Mr Winstanley is still driving the truck but because you may think that Mr Winstanley is not still driving the truck we are notifying you that there has been a change in the regular drivers in that Mr Winstanley is still driving the truck" ? Lewis Carroll may have made something of such a notice, but I must confess that I am not equal to the task. 39 This defence fails completely. Failure to disclose 40 By paragraph 53 of the Further Amended Notice of Grounds of Defence, QBE alleges that the conduct of Hammer in continuing to employ Mr Winstanley to drive the truck, after receipt by Hammer through its agent OAMPS of notice that QBE had rejected Mr Winstanley's Driver's Declaration, was a matter either that Hammer knew to be a matter relevant to QBE's decision whether to assume the risk or that a reasonable person in the circumstances would be expected to know was a matter relevant to that decision. The particulars to that paragraph refer to paragraph 3 of an Acknowledgment on the Driver's Declaration signed by Mr Wilson in the following terms: "Acknowledgment by the Insured. Rigid Trucks – Please note … 3. That cover is not granted to any vehicle whilst the vehicle is being driven by a person with less than 2 years' experience driving rigid trucks or any person under 21 years of age." 41 It is to be observed at once that paragraph 3 of the Acknowledgment on the Driver's Declaration does not reflect any term in the QBE Policy issued to Hammer. In fact, this Driver's Declaration form was one which had previously been used by MMI in relation to one of MMI's earlier policies. If anything, paragraph 3 of the Acknowledgment was a misrepresentation to Hammer as to the terms of its Policy with QBE. 42 Paragraph 54 of the Further Amended Notice of Grounds of Defence alleges: "By reason of [the allegation in paragraph 53] and the assumption of [QBE that Hammer would terminate Mr Winstanley's services or arrange other insurance because of its rejection of his Driver's Declaration] the failure of [Hammer] to inform [QBE] at the time of renewal of the Policy … that it was continuing to employ Mr Winstanley to drive the Vehicle was a breach of [Hammer's] duty of disclosure under s.21 (ICA)." 43 Paragraph 56 alleges that if Hammer had disclosed to QBE at the time of renewal of the Policy in July 2001 that Mr Winstanley was still driving the truck, QBE would not have renewed the Policy at all or would have renewed it only upon terms that liability was excluded whilst Mr Winstanley was driving. 44 Paragraph 57 alleges that by reason of these circumstances the liability of QBE is reduced to nil under s.28(3) ICA. 45 Section 21(1) ICA is in the following terms: " 21. The insured's duty of disclosure (1) 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." 46 There are three prerequisites to the imposition of a duty of disclosure under s.21(1) ICA. The first is that there exists a "matter" which is relevant to the insurer's decision; the second is that that matter is known to the insured; the third is that the insured knows that the matter is relevant to the insurer's decision or, if the insured does not know, then a reasonable person in the circumstances could be expected to know that it was relevant. 47 The first question which arises is: what is the "matter", relevant to QBE's decision to renew the Policy, which existed at the time of Hammer's obligation to disclose? According to paragraph 53 of the Further Amended Notice of Grounds of Defence, the "matter" was that Hammer continued to employ Mr Winstanley to drive the truck after Hammer's agent, OAMPS, had received advice of QBE's rejection of Mr Winstanley's Driver's Declaration. However, paragraph 54 obliquely alleges an additional necessary element in the relevant "matter", namely, that QBE assumed that Hammer would terminate Mr Winstanley's services on receipt of notice that his Driver's Declaration had been rejected. Indeed, if this factor is not part of the "matter", it is difficult to see how the other two factors alleged in paragraph 53 could have made the "matter" one which it was necessary to disclose since at the heart of the alleged duty of disclosure is the proposition that it was incumbent upon Hammer to disabuse QBE of the false assumption upon which QBE was going to renew the Policy. 48 For the purposes of the following analysis, I will accept that the "matter" which is comprised of the elements alleged in paragraphs 53 and 54 of the Further Amended Notice of Grounds of Defence was relevant to QBE's decision to renew the Policy, so that the first prerequisite can be taken as satisfied. 49 The next question is: was that "matter" known to Hammer? Hammer itself, of course, knew one third of the "matter" in that it knew that Mr Winstanley was driving the truck in July 2001, but it did not know the other two thirds of the "matter", namely, that in November 2000 OAMPS had received advice of QBE's rejection of Mr Winstanley's Driver's Declaration and that QBE had assumed wrongly that that rejection had caused Hammer to terminate Mr Winstanley's services. 50 Section 21(1) ICA imposes a duty to disclose a "matter known", not a "matter which ought reasonably to be known". Constructive knowledge, while it finds a special place in contracts of marine insurance (see s.24(1) Marine Insurance Act 1909 (Cth)), has no place in the law relating to contracts governed by the ICA. As Davies A-JA said in Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735, at 745: "… 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. The section does not use it. The terms 'known' and 'knows' are used in their ordinary sense. Whether a matter is known is a question of fact." 51 The third of the "matter" which Hammer knew in July 2001 could not in itself have been of any relevance to QBE's decision to renew the Policy. All Hammer knew was that it had sent to QBE Mr Winstanley's Driver's Declaration, that Ms Leahey had made an enquiry from Mrs Wilson to obtain Mr Winstanley's date of birth and frequency of driving the truck, and that after that it had heard nothing further about the matter at all. Any reasonable person in those circumstances would have been entitled to believe that QBE had been notified that Mr Winstanley was to be a regular driver of the truck and that it had no objection. 52 Accordingly, in so far as the knowledge of Hammer itself is concerned, the requirements for the duty of disclosure under s.21(1) ICA alleged in paragraphs 53 and 54 of the Further Amended Notice of Grounds of Defence fail at the second step because Hammer did not know the whole of the "matter" which is alleged to be relevant. 53 In the course of his final submissions, Mr Castle sought leave to amend paragraph 53 of the Further Amended Notice of Grounds of Defence by inserting an allegation that Hammer knew the "matter" through its agent, OAMPS. I declined to grant leave to amend at that late stage in the trial for reasons which I gave in an ex tempore judgment. Mr Castle, however, submits that strictly speaking the amendment was not necessary because the knowledge of an insured's agent is, in law, imputed to the insured: he relies on cases such as Lindsay and Ors v CIC Insurance Ltd (1989) 16 NSWLR 673 and Ayoub v Lombard Insurance Co (Aust) Pty Ltd (1989) 5 ANZ Ins Cas 60-933 ((1989) 97 FLR 284). 54 Let me accept for the moment that OAMPS was Hammer's agent for the purpose of renewing the Policy. The question immediately arises: what did OAMPS, through Ms Leahey "know" as at July 2001, within the meaning of that word for the purposes of s.21(1) ICA? She knew that in November 2000 Hammer had sent in Mr Winstanley's Driver's Declaration and that Mr Naghten had rejected it. As I have held, Ms Leahey simply forgot to communicate that fact to Hammer. Even after the accident was notified to QBE and OAMPS in August 2001, Ms Leahey said, and I accept, that she believed that she had followed her usual practice in notifying an insured of the rejection of a Driver's Declaration. I am satisfied that in July 2001, when the Policy was renewed, Ms Leahey was not conscious of the fact that she had forgotten to notify Hammer of the rejection of Mr Winstanley's Driver's Declaration. It follows that she could not have been conscious of the consequences of her forgetfulness, namely, that QBE would have assumed that Mr Winstanley had been dismissed whereas Hammer, being in ignorance of QBE's rejection, would have continued to employ Mr Winstanley. 55 Mr Castle's submission really amounts to this: in July 2001 Ms Leahey "knew" that QBE had rejected Mr Winstanley's Driver's Declaration in November 2000, and she "knew" that QBE would have assumed that Hammer had dismissed Mr Winstanley because of that rejection; she "knew" that she had forgotten to tell Hammer of Mr Winstanley's rejection; therefore she "knew" that Hammer would, in ignorance of the rejection, still be employing Mr Winstanley; she "knew" that if QBE were not told that Mr Winstanley was still driving the truck, it would be acting on a false assumption in considering whether to renew the Policy; all of this "knowledge" of Ms Leahey must be imputed to Hammer; Hammer failed to disclose what it "knew" so that it breached its duty of disclosure under s.21(1) ICA. This submission fails for the following reasons. 56 First, Ms Leahey did not "know" in July 2001 that she had forgotten to tell Hammer of Mr Winstanley's rejection by QBE in November 2000. As the passage from Commercial Union quoted at paragraph 50 indicates, in s.21(1) ICA the word "know" is used in its ordinary sense; it implies actual, not constructive, knowledge both on the part of the insured and on the part of any agent or employee of the insured whose "knowledge" is to be imputed to the insured. The obligation to disclose something "known" can attach only to something which, at the time for disclosure, a person actually has in his or her consciousness or else something which exists in some record or other source of information which the person actually knows about and to which the person has access. So, for example, I "know" my driving licence number for the purposes of s.21(1) ICA even though I cannot recite it offhand because I actually know that it is to be found in the plastic card in my wallet. 57 In this case, I accept Ms Leahey's evidence that when she was processing the renewal of Hammer's Policy, she did not look at Hammer's file, and it did not come back to her mind that she had had a conversation with Mr Naghten in November concerning Mr Winstanley's Driver's Declaration. I am satisfied that the fact that Ms Leahey had forgotten to communicate to Hammer QBE's rejection of Mr Winstanley's Driver's Declaration was something completely absent from her consciousness at the requisite time for disclosure to QBE. Even if she had looked in the file and had seen the 17 November facsimile from Mr Naghten, it is impossible to say that she would have actually known that she had forgotten to tell Mrs Wilson about the facsimile in the telephone conversation of 27 November. Ms Leahey might have recalled her omission or she might not. The absence of a letter of advice to Hammer may have put her on enquiry, but under s.21(1) ICA constructive knowledge is not enough. Accordingly, the fact that Ms Leahey had forgotten to notify Hammer of QBE's rejection of the Driver's Declaration cannot be said to be "known" to her or to OAMPS within the meaning of s.21(1) ICA. 58 Second, Ms Leahey did not "know" that QBE had wrongly assumed that Mr Winstanley had been dismissed as a result of the rejection of his Driver's Declaration. To "know" for the purposes of s.21(1) ICA means more than to suspect, believe or assume: "What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term 'known'" : per Hodgson CJ in Eq in Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR 186, at 247; cited with approval on appeal: (2001) 50 NSWLR 679, at 688 and by the Queensland Court of Appeal in Australian Casualty & Life Ltd v Hall (1999) 151 FLR 360, at 371. 59 Mr Castle relies on the following evidence to submit that Ms Leahey "knew" that QBE had wrongly assumed that Mr Winstanley had been dismissed: " Q: As at November 2000 based upon your experience as an underwriter and a broker, where a driver was rejected in respect of a driver's declaration you would expect that an insured would not allow that driver to continue driving? A: I would not expect them to. Q: You would not expect them to continue driving? A: No. Q: You agreed with the proposition I put? A: With your statement? Q: Yes? A: Yes. Q: Based upon your experience as an underwriter, you knew that when Mr Winstanley's driver's declaration was rejected, that QBE would assume that Mr Winstanley would no longer continue driving a vehicle? A: That's right unless he was aware that to do so he would be uninsured. Q: If Mr Winstanley was still driving the vehicle for whatever reason, then you would agree with me, based on your experience, that QBE MM's assumption that Mr Winstanley was no longer driving the vehicle was wrong? A: Sorry? Q: I will put it to you again. Mr Winstanley was still driving a vehicle for whatever reason, then QBE MM's assumption which you have just referred to would be wrong; would it not? A: It would be wrong. Q: As an experienced underwriter and broker you would understand that QBE MM should be told if their understanding about Mr Winstanley driving the vehicle was wrong; would you not? A: Yeah, yeah, they should be told, yes. Q: You agree with me; don't you? A: Yes. Q: In your answer you agreed with my proposition; didn't you? A: Yes. Q: Based upon your experience as an underwriter and a broker, if Mr Winstanley was still driving the vehicle, QBE MM should have been told that their understanding about Mr Winstanley was wrong, at least at the time of the next renewal of the policy; do you agree with that? A: That QBE should be told if he was driving the vehicle? Q: Yes? A: I think so." 60 It will be seen from this passage that, in truth, Ms Leahey was not giving evidence of what she actually knew QBE had in fact assumed in this particular case; she was merely giving evidence of her general experience as an underwriter and a broker and as to what she would suppose would happen in a hypothetical situation. Her evidence was not even expressly directed to her experience in dealing with QBE as distinct from other insurers or to dealing with the relevant QBE policy which provided that Hammer's truck would still be covered while Mr Winstanley was driving, subject to the payment of additional excesses. 61 Further, Ms Leahey did not "know" that any assumption about Mr Winstanley which QBE may have made was, in fact, wrong. She did not "know" that as a result of her failure to tell Hammer of QBE's rejection of the Driver's Declaration Mr Winstanley was still driving the truck in July 2001. If anything, had Ms Leahey turned her mind to the question, she would have assumed that she had told Hammer of the rejection in accordance with her usual practice and, in the light of her general experience as a broker, she would further have assumed that Hammer would have dismissed Mr Winstanley as a driver. 62 For these reasons, I conclude that even if the knowledge of OAMPS, through Ms Leahey, can be imputed to Hammer, OAMPS did not "know", within the meaning of s.21(1) ICA, the "matter" which is alleged in paragraphs 53 and 54 of the Further Amended Notice of Grounds of Defence to be relevant to QBE's decision to renew the Policy. Accordingly, I conclude that Hammer has not failed in its duty of disclosure under s.21(1) ICA and that it is entitled to indemnity under the Policy in respect of claims arising from the accident which occurred on 21 August 2001, subject to the payment of all excesses provided in Clause 4.1 of the Policy. 63 For the sake of completeness I should make findings as to what would have been the position if Hammer had been informed in November 2000 that QBE had rejected Mr Winstanley's Driver's Declaration and QBE had been made aware, prior to renewing the Policy, that Mr Winstanley was still driving the truck. 64 I accept without reservation the evidence of Mr and Mrs Wilson that they would not have permitted Mr Winstanley to continue driving the truck if they had been told that QBE had rejected his Driver's Declaration. Mrs Wilson's evidence in this respect is entirely consistent with her careful attitude to insurance with regard to the truck, which I have earlier described. Mr Wilson also struck me as a careful man, not as adept in business affairs as his wife, but prudent nevertheless. He had an unblemished driving record and I think it inherently unlikely that he would have permitted anyone to drive the truck if it were likely to cause any insurance problem. 65 I accept also Mr Naghten's evidence that he would have declined renewal of Hammer's Policy in July 2001 if he had known that Mr Winstanley would still be driving the truck. Mr Naghten's unchallenged evidence was that QBE had adopted and was at that time still applying MMI's Underwriting Manual, although that manual applied to a previous policy of MMI which, unlike the relevant QBE policy, expressly excluded cover where a driver had had less than two years' experience driving the relevant class of vehicle. Illogical as Mr Naghten's evidence seemed to be, he adhered to it steadfastly. 66 What has happened, therefore, is that QBE has renewed a policy when it would have declined renewal had it known the true facts. But QBE cannot decline liability under the Policy simply for that reason. It must show that it did not know the true facts because of a breach of Hammer's duty to disclose those facts. For the reasons which I have given, Hammer is blameless of any breach of that duty. 67 QBE's liability has arisen because its own procedures for high volume renewal of policies exposed it to a calculated risk. It dealt with renewals by bulk process through OAMPS, agreed to accept risks and fixed premiums without first requiring the insured to complete a proposal or questionnaire in which proper disclosure of relevant matters could be elicited. No doubt such a procedure would have been time-consuming and labour-intensive and, by dispensing with it, QBE has saved itself a great deal in administrative costs. But it must accept the consequences of taking that calculated risk. It cannot deny liability under the Policy if it has accepted that Policy due to an administrative bungle for which Hammer is not responsible. Hammer's claim against OAMPS 68 By its Amended Statement of Claim, Hammer seeks declarations the effect of which is that, if QBE is held not liable to indemnify it under the Policy, in respect of the insured claims arising out of the accident on 21 August 2001, then OAMPS is liable to pay it damages equal to the amount which Hammer has paid or is liable to pay in respect of those claims. The liability of OAMPS is alleged to arise because OAMPS negligently breached a duty of care which it owed to Hammer as its agent in failing to communicate QBE's advice that Mr Winstanley's Driver's Declaration had not been accepted and that QBE did not consider that Mr Winstanley was covered by the Policy. 69 As I have found that QBE is liable under the Policy, I need not consider this alternative claim against OAMPS in great detail. However, for the sake of completeness, I set out my findings on that claim. 70 I am satisfied that OAMPS acted as Hammer's agent for the purpose of forwarding to QBE Mr Winstanley's Driver's Declaration and for the purpose of communicating to Hammer the response of QBE, if any. In acting as Hammer's agent for that purpose, OAMPS owed it a duty to act with reasonable care in communicating with QBE and in communicating to Hammer what, if anything, was QBE's response to the Driver's Declaration. 71 For the reasons which I have given above, I am satisfied that OAMPS did not communicate QBE's response to Hammer because its responsible officer, Ms Leahey, forgot to follow her usual practice due to pressure of work. Accordingly, I am satisfied that OAMPS breached its duty of care to Hammer in failing to communicate to it QBE's response to the Driver's Declaration. 72 However, the losses in respect of which Hammer seeks declarations against OAMPS are confined to those which QBE would have to pay if it were liable to indemnify under the Policy. I have found that QBE is liable to indemnify in respect of those losses so that the declarations sought by Hammer against OAMPS will not be made. However, if the Policy had not responded in the present case, I would have made declarations in favour of Hammer in the terms discussed in paragraphs 83 to 89. Subrogation 73 By its Cross Claim QBE claims two grounds for relief against OAMPS. The first is that QBE is entitled to be subrogated to Hammer's rights of action against OAMPS for breach of a contractual or tortious duty of care in failing to communicate to Hammer QBE's rejection of Mr Winstanley's Driver's Declaration. Mr Castle says that if QBE's rejection had been communicated, Hammer would have dismissed Mr Winstanley in November 2000 and the accident which occurred on 21 August 2001 would never have happened at all. Accordingly, he submits, OAMPS would be liable to Hammer for the whole of the loss arising from the accident and QBE is therefore entitled to recover the whole of that loss from OAMPS by way of subrogation to Hammer's rights. 74 QBE seeks the following in its prayers for relief: "1. Damages. 2. An indemnity in respect of all claims made by the Plaintiff against the Cross-Claimant arising out of the Accident referred to in para-graph 14 of the Statement of Claim. 3. … 4. A declaration that the Cross Claimant is entitled to be subrogated to all rights which the Plaintiff has or would otherwise have had to bring a claim against the Cross Defendant to recover the loss and damage claimed by it in the Statement of Claim filed herein." 75 Mr White, who appears for OAMPS, submits that an insurer is not entitled to exercise its rights of subrogation until it has paid the whole of the amount for which it is liable to indemnify under the policy. In this case, he says, not only has QBE not paid anything under the Policy, but it is still denying liability to pay anything. Accordingly, Mr White submits, the relief claimed by QBE is entirely premature and should be refused. 76 In response to Mr White's submission, Mr Castle does not seek to amend the terms of the relief sought by QBE. In particular, he does not seek to amend the terms of the declaration sought in order to reflect what would be the rights of the parties once QBE has paid out all claims under the Policy. Rather, he seeks to justify the terms of the relief sought by reliance upon the maxim "equity regards as done that which ought to be done" . I gather that this submission means that the Court should now regard QBE as having paid all claims payable under the Policy in respect of the accident even though the evidence does not indicate that all possible claims arising out of the accident have yet been received by Hammer, accepted or quantified. I accept Mr White's submissions and am unable to accept those of Mr Castle, for the following reasons. 77 First, the law is clear that the insurer's right of subrogation inheres from the date of the insurance contract and may be protected by injunction or declaration if the insured attempts to interfere with it or defeat it. However, the law is just as clear that the right cannot be exercised so as to put the insurer into the shoes of the insured until the insurer has paid out the whole of the loss which is insured under the policy: see State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228, at 240-241 per Barwick CJ; Santos Ltd v American Home Assurance Co (1986) 4 ANZ Ins Cas 60-795 and the authorities reviewed there by White J. The relief claimed by QBE is not by way of protection of its existing right of subrogation, it is by way of exercise of that right. Because QBE has not yet paid anything under the Policy, it is not yet entitled to any relief in aid of exercise of the right. 78 Second, the maxim "equity regards as done that which ought to be done" has no operation in the present case. The words of the maxim are deceptive if taken at face value as an absolute and unqualified principle of universal application. The true position is as explained in Meagher, Gummow & Lehane "Equity: Doctrines and Remedies" (3rd Ed) para.340. Where what ought to be done arises from a specifically performable contractual obligation, equity treats that obligation as performed by one party to the contract only in favour of the other party to the contract. 79 In other words, where A, by a specifically enforceable contract, agrees to confer an estate, interest or benefit on B, B is entitled, under the maxim, to say that, as against A, equity regards that estate, interest or benefit as already conferred. Thus, where A contracts to grant a mortgage over Blackacre to B, B can invoke the maxim against A so that A is treated in equity as already having granted the mortgage over Blackacre to B. 80 But the maxim does not apply in B's favour in respect of B's own obligation to pay the mortgage monies to A under the contract. B cannot say: "I have an obligation to pay the mortgage monies to A and I am to be regarded as having made that payment for all purposes although I have not actually done so" . The absurdity of such a proposition is readily apparent: it would mean that B could obtain an order for specific performance of A's obligation to execute and register a mortgage over Blackacre without B actually having to pay the mortgage money because B could say that equity regarded him as having already done so. 81 In the present case, QBE seeks to invoke the maxim in its own favour. It is saying that it is to be regarded as having done something which it has not actually done and which, in fact, it is refusing to do. The submission misconceives how the maxim actually operates. 82 For these reasons, QBE is not entitled to the relief which it now seeks. However, in case the matter goes further, I should give my opinion on what QBE's position would have been either if it had framed the relief sought appropriately, or if it had sought such relief after having made payment in full of all claims under the Policy arising out of the accident on 21 August 2001. 83 The question is: what is the extent of the loss which QBE would be entitled to recover from OAMPS if it were subrogated to Hammer's rights against OAMPS. As I have noted, Mr Castle submits that the extent of the loss is the whole amount that QBE has to pay out under the Policy. He says that this loss was caused by OAMPS' negligent failure to advise Hammer of QBE's rejection of Mr Winstanley's Driver's Declaration in that, had the advice been given, Mr Winstanley would have been dismissed, he would not have been driving the truck in August 2001, the accident would never have happened, and Hammer would have suffered no loss claimable under the Policy. 84 I am unable to accept this argument. It confuses causation of the occurrence giving rise to Hammer's loss – i.e, the accident – with causation of the liability to indemnify under the Policy which arises from the accident. 85 The accident itself was not caused by OAMPS' failure to advise Hammer of QBE's rejection of Mr Winstanley's Driver's Declaration, nor was it caused by Hammer's failure to dismiss Mr Winstanley as a driver. The accident was caused by the particular combination of events and circumstances, whatever they were, on 21 August 2001 which led the truck to collide with other vehicles. As far as the evidence reveals, fault for the accident has not yet been determined by any Court. 86 The rights of Hammer against OAMPS arising out of the accident – which are the only rights to which QBE can be subrogated – do not include a right to recover the whole of its losses consequent upon the accident. OAMPS did not fail to warn Hammer that Mr Winstanley was an incompetent or dangerous driver: there can be no finding that he was, because nine months before the accident he had passed his driving tests for the relevant class of vehicle. All that OAMPS failed to warn Hammer about was that if Mr Winstanley continued to drive the truck Hammer would have to pay an additional excess under Clause 4.1 if there was an accident while he was driving and that liability could be excluded if one of the conditions of Clause 6.34 of the Policy came into existence by the time of the accident. 87 Accordingly, OAMPS' failure to advise did not cause the accident in the sense that it caused Hammer to continue to employ a negligent or incompetent driver, thereby increasing the risk of an accident. The failure to advise merely caused Hammer to continue to employ a driver who exposed Hammer to the risk of a higher excess or to exclusion of cover in a certain contingency. 88 If the Policy had not responded in the present case because by the time of the accident Mr Winstanley had come to satisfy one of the exclusion conditions in Clause 6.34, then Hammer would have been entitled to recover from OAMPS what QBE would have been liable to pay if the Policy had responded. That is so because loss of cover under the Policy was all that would have been caused by OAMPS' failure to advise. Because the Policy does respond and Mr Winstanley did not fall within one of the exclusion conditions in Clause 6.34, Hammer has not suffered that loss. The only loss which it has suffered, and the only loss caused by OAMPS' negligent failure to advise, is that it now has to pay a higher excess than it would otherwise have had to pay. 89 For these reasons, if QBE had now been entitled to exercise its right of subrogation against OAMPS, I would have held that the right to recover against OAMPS was limited to the amount of the excess payable by Hammer under Clause 4.1 of the Policy. Equitable contribution 90 The second claim for relief raised in QBE's Cross Claim is equitable contribution. Paragraph 10 of the Cross Claim pleads: "Further, or alternatively, by reason of paragraphs 4 to 8 above, OAMPS is a person who is or would if sued be liable for the same loss and damage as is claimed by [Hammer] against [QBE] in these proceedings, by reason of which [QBE] is entitled to contribution or alternatively equitable contribution from OAMPS in respect of any liability which [QBE] may have to [Hammer] in these proceedings." 91 It is fair to say that this claim was dealt with by Mr Castle in a very perfunctory manner. All that was said about it in his written submissions was: "52. Alternatively, on the facts of the present case, the liability of QBEMM under the insurance contract and the liability of OAMPS for breach of its duty of care are 'coordinate liabilities' so as to generate a right to equitable contribution: Burke v LFOT Pty Ltd (2002) 187 ALR 612. QBEMM puts the formal submission that the Court ought assess 'just contribution' which reflects the greater culpability on the part of OAMPS for not ensuring that QBEMM's advice was properly communicated to the insured. Alternatively, that contribution will be assessed on a 50/50 basis." Mr Castle did not elaborate in his oral submissions. 92 I have great difficulty in understanding what this claim really means. Paragraph 10 of the Cross Claim says that OAMPS is liable "for the same loss and damage as is claimed by [Hammer] against [QBE] " . But Hammer is not claiming any "loss and damage" against QBE: it is claiming a declaration that QBE is obliged to perform its contract by indemnifying in accordance with the Policy. 93 If the claim really intends to say that OAMPS is liable to pay the claims arising from the accident just as QBE is liable to pay those claims, then it must fail. QBE is obliged to pay the claims pursuant to its contractual obligation under the Policy. OAMPS is not liable to Hammer to pay those claims because it did not cause the accident and it did not cause Hammer to lose the cover under the Policy. I think that those observations are sufficient to dispose of this claim. This case is certainly not the occasion to explore the novel question whether there can be equitable contribution as between an insurer who has to pay out under a policy, and a third party who is said to be responsible for the occurrence giving rise to the insurer's liability to pay. Whether Hammer has suffered any loss 94 Mr White submitted that Hammer had suffered no loss by reason of the accident because the repairs to the truck, amounting to some $61,000, have been paid for by Mr and Mrs Wilson, not Hammer. While Mr White did not elaborate on this submission, he did not abandon it, so that I should deal with it for the sake of completeness. 95 Mr Wilson gave evidence that at the time that the repairs had to be paid for it had insufficient funds in its bank account. Mr and Mrs Wilson had to mortgage their home to pay for the repairs. As the directors of Hammer, they intended that Hammer would repay this money and Mr Wilson has informed Hammer's accountant accordingly to enable him to prepare the relevant accounts. I accept this evidence without reservation. 96 I am satisfied that Hammer has suffered loss in respect of damage to the truck in that is has incurred a liability to repay to Mr and Mrs Wilson a loan which was used to pay for these repairs. The submission is without substance. Orders 97 The orders of the Court will be in the following terms. 98 The Plaintiff is entitled to the declaration sought in paragraph 1 of the relief claimed in the Amended Statement of Claim, subject to the deletion of the final underlined words. At present I think that those words are too wide and are unnecessary. 99 Further, the Plaintiff is entitled to declarations in terms of paragraphs 2, 3 and 4 of the relief claimed in the Amended Statement of Claim. 100 The declarations claimed in paragraphs 5 and 6 are unnecessary and will not be made. 101 The First Defendant's Cross Claim against the Second Cross Defendant will be dismissed with costs. 102 The Plaintiff seeks indemnity costs against the First Defendant. In view of the observations which I have made in paragraphs 25 to 29, this is a significant issue but it has not yet been the subject of submissions by the parties. 103 I will stand the proceedings over for a short time to enable the Plaintiff to bring in Short Minutes of Order reflecting these reasons for judgment. I will then hear argument as to costs. – oOo – Last Modified: 10/31/2002 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.