New South Wales Supreme Court CITATION : Frewin v Emmdale Sports Club Incorporated & Anor [2005] NSWSC 966 HEARING DATE(S) : 23 September 2005 JUDGMENT DATE : 30 September 2005 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Malpass at 1 DECISION : The separate question set forth in schedule A to the notice of motion filed on 14 March 2005 is answered in the negative; a declaration is made in terms of 6(b) of the cross-claim; costs are reserved; the exhibit may be returned. CATCHWORDS : Small business policy - alleged inconsistency between policy and earlier letter - consensus as to exclusion - construction of policy and rectification. Robert John Frewin (Plaintiff) PARTIES : Emmdale Sports Club Incorporated (First Defendant) GIO General Limited (Second Defendant) FILE NUMBER(S) : SC 20812/95 Mr J E Rowe (Plaintiff) COUNSEL : Mr M White (Second Defendant) Stacks/Goudkamp (Newcastle) (Plaintiff) SOLICITORS : Phillips Fox (Second Defendant) LOWER COURT JURISDICTION : - 7 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass 30 September 2005 20812 of 1995 Robert John Frewin v Emmdale Sports Club Incorporated & Anor JUDGMENT 1 His Honour: The first defendant was a statutory body constituted pursuant to the Associations Incorporations Act 1984. The second defendant is an insurer. In July 1989, the insurer issued a small business insurance policy to the first defendant for the period 1 July 1989 to 1 July 1990. 2 On or about 2 September 1989, the first defendant organised and conducted a gymkhana on the Emmdale Gymkhana Ground. The plaintiff participated in a horse race during that gymkhana and suffered personal injury. He contends that the injury was occasioned by negligence on the part of the first defendant. 3 In 1995, the plaintiff commenced these proceedings. The claim as now presented is that which is propounded in the second further amended ordinary statement of claim filed on 26 October 2004. 4 The court has been informed that the first defendant has ceased to exist as a legal entity. Whilst the second defendant is yet to file a defence, a cross-claim was filed in court on 23 September 2005. 5 On that day, a hearing took place of two separate questions. The questions arose by reason of dispute as to the cover extended by the policy. One question concerns the proper construction of the policy. The other question concerns a matter of rectification. It is a question that only needs to be decided should the second defendant fail on the construction question. 6 The matter in issue between the parties is whether or not the policy covers participants in the gymkhana. The precise question that is sought to be answered is that set forth in schedule A to a notice of motion filed by the second defendant on 14 March 2005. It is in the following terms:- Whether the Second Defendant is liable, under the terms and conditions of its Small Business Insurance Policy SB 1130131 for the period 1 July 1989 to 1 July 1990 issued to the Emmdale Sports Club Inc, to indemnify the First Defendant for injury sustained by the Plaintiff on 2 September 1989 on the facts pleaded in the Second Further Amended Ordinary Statement of Claim (which facts will be assumed to be true for the purposes of the separate determination only). 7 The claim for rectification is propounded in the cross-claim. The relief sought therein is as follows:- (a) an order for rectification of the Policy schedule by insertion of the words "Endorsement 13" in section 6 under the heading "Endorsements Applicable to Specified Businesses" on page 2; (b) a declaration that on the facts pleaded by the Plaintiff, the First Defendant is not entitled to indemnity from the Cross-Claimant under the Policy; and (c) costs. 8 The second defendant read a number of affidavits. Two were sworn by Lester Collis Hoy (who was a commercial consultant working in the Dubbo office for the second defendant). Two of the affidavits were sworn by Terry McGuiness (who was the small business manager for the Orange office of the second defendant. The remaining affidavit was sworn by Reginald Douglas Millar (another employee of the second defendant, who was a systems manager in 1989). The plaintiff did not adduce any evidence. 9 The plaintiff did take objection to part of the material. There was a general objection on the basis that there was no ambiguity in the policy. There were specific objections concerning the admissibility of office practice (these were disallowed). No objection as to form was pressed. 10 The material was received into evidence. It was common ground that the court was not really in a position to rule on all matters until it had a better understanding of the case and the dispute between the parties. 11 In early 1989, discussions took place between Mr Elliott (on behalf of the first defendant) and Mr Hoy concerning insurance for the first defendant. 12 In March 1989, Mr Hoy prepared a premium calculation which he sent to the Orange office for approval. On 31 March 1989, Mr McGuiness approved the calculation. 13 A letter dated 4 April 1989 (signed by Mr Hoy) was sent to Mr Elliott. It notified him of the quotation. It contained the following:- Note: Participants are excluded from cover granted under this policy. 14 The first defendant responded by letter dated 26 June 1989. It contained, inter alia, the following:- I refer to our recent communications and attach a completed proposal form for our new Public Liability policy. Our cheque for $525.65 is attached as quoted in your letter of 4th April. … … … Total cover for all activities is required from the 1/7/89. 15 The letter attached a completed proposal form. It contained, inter alia, the following:- Activities and/or processes involved: Running of annual gymkhana and race day. Also a campdraft and any other function approved by committee. 16 The cheque was received by the second defendant and banked. Mr Hoy sent the underwriting file to the Orange office and on 5 July 1989, the Orange office received the documents (which included the two letters and the proposal). The insurance was approved by Mr McGuiness on 7 July 1989. 17 On 28 July 1989, the policy was issued. It presents as a "small business insurance policy". 18 It contained, inter alia, the following:- THE POLICY The Schedule, and any endorsements thereon, shall be considered one document and any word or expression to which specific meaning has been given in any of the them shall bear such meaning throughout. THE PROPOSAL is incorporated in and forms part of this Policy and the statements and declarations made therein are the basis of this Contract. 19 The relevant section of the policy was section 6 (which dealt with public liability). 20 Section 6 of the policy contained, inter alia, the following:- Endorsements applicable to Specified Businesses (Will only apply where so indicated in The Schedule or in other documentation issued by the GIO) … … … 13) SHOWGROUNDS and SPORTING EVENT ORGANISERS Section 6 does not cover claims - a) by or on behalf of any participant in any contest or event organised by the Insured; b) arising directly or indirectly out of or caused by or in connection with firearms, missiles of any kind, explosives or combustibles. 21 There was no endorsement on the schedule to the policy (in relation to the exclusion contained in endorsements or otherwise). 22 The affidavit of Mr Millar contains the following:- 11 I recall that, during and prior to 1989, a participant's exclusion (endorsement 13) was not an automatic or mandatory underwriting requirement of the Public Liability policy section of the GIO Small Business Insurance Policy. However, this type of exclusion was routinely applied as part of an underwriting approach for policies involving high hazard risks, such as a gymkhana. Annexed hereto and marked "E" is a copy of the GIO Small Business Insurance Policy Wording as it stood in 1989. 12 In light of the correspondence between Emmdale and Lester Hoy, the Policy schedule has been issued in error by Dorothy Deck by her having failed to record endorsement 13 under Section 6 in the Schedule. 23 The primary position adopted by both parties is that there is no ambiguity. The second defendant does argue ambiguity as a fall back position. The plaintiff says that there is inconsistency between the earlier letter and the policy. The second defendant contends that there is no such inconsistency. 24 It seems to me that a consensus was reached between the parties in terms to be found in the letter dated 4 April 1989. This was the cover that was approved by the second defendant. It does not seem to me that there is anything in the letter dated 26 June 1989 or the proposal that is inconsistent with such a position. 25 In my view, there was a common intention that participants would be excluded from the insurance cover. 26 The plaintiff relies on what was said in Sutton (Insurance Law in Australia 3rd Edition LBC) at paragraph 9.88 p769:- If there is no ambiguity in the policy, but an inconsistency exists between the wording of the policy and that in the proposal or other earlier document, the policy, in the absence of evidence to the contrary, is to be regarded as expressing the true intention of the parties: Izzard v Universal Insurance Co Ltd [1937] AC 773 at 779-780. 27 The defendant contends that the present case is distinguishable. In my view, that is correct. 28 I do not see any relevant ambiguity in the policy. I am not satisfied that there is inconsistency between the letter dated 4 April 1989 and the policy. I consider that the letter dated 4 July 1989 falls within the expression "or in other documentation issued by the GIO" and was thereby incorporated into the policy. 29 Accordingly, the answer to the question set forth in schedule A is in the negative. 30 I am satisfied that it was the common intention of the parties that participants would be excluded from the cover. If there had been any failure to give effect to that intention, it would have been the product of a mistake on the part of the insurer. If it had been necessary to order rectification, it is my view that the second defendant would have been entitled to that relief. Orders 1. The separate question set forth in schedule A to the notice of motion filed on 14 March 2005 is answered in the negative; 2. A declaration is made in terms of 6(b) of the cross-claim; 3. Costs are reserved; 4. The exhibit may be returned. ********* 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.