Supreme Court New South Wales Medium Neutral Citation: Prepaid Services v Atradius [2012] NSWSC 608 Hearing dates: 27/02/2012, 28/02/2012, 29/02/2012, 01/03/2012, 02/3/2012, 05/03/2012, 06/03/2012, 14/03/2012, 16/03/2012 Decision date: 07 June 2012 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Judgment for defendant with costs. Catchwords: [INSURANCE] - policy - duty of disclosure - scope of policy - whether plaintiffs made misrepresentations to insurer - whether misrepresentations fraudulent - whether insurer relied on misrepresentations in deciding to issue policy - whether debts claimed by the plaintiffs fall within the scope of the policy - whether amount of loss claimed should be reduced for breaches of warranty under which plaintiffs were required to mitigate loss. Legislation Cited: Corporations Act 2001 (Cth) Insurance Contracts Act 1984 (Cth) Personal Property Securities Act 2009 (Cth) Cases Cited: Commercial Union Assurance Co of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR Purkess v Crittenden (1965) 114 CLR 164 Category: Principal judgment Parties: Prepaid Services Pty Limited (ACN 83 094 684 219) (First Plaintiff) Optus Mobile Pty Limited (ACN 054 365 696) (Second Plaintiff) Virgin Mobile (Australia) Pty Limited (092 726 442) (Third Plaintiff) Atradius Credit Insurance N.V. (ABN 72 009 372 595) (Defendant) Representation: JT Gleeson SC / DA McLure (Plaintiffs) CRC Newlinds SC / TM Mehigan (Defendant) Minter Ellison (Plaintiffs) Allens (Defendant) File Number(s): 2009/298684 Judgment 1On 22 August 2007, the defendant (Atradius) issued a trade credit insurance policy in favour of the plaintiffs. In very broad terms, the policy insured the plaintiffs, on its terms and up to its limit, against the failure of Bill Express Limited (BXP) to pay amounts due to any of the plaintiffs. During the period of the policy (1 August 2007 to 1 August 2008) BXP became insolvent, and the plaintiffs made a claim under the policy. 2Atradius says that it is entitled to avoid the policy for fraudulent misrepresentation, or alternatively is entitled to reduce its liability under the policy to nil if the misrepresentation were not fraudulent. Alternatively, Atradius contends that not all the debts claimed by the plaintiffs fall within the scope of the policy. Alternatively again, Atradius contends that the amount of the loss claimed should be reduced for breaches of a warranty under which the plaintiffs were required to take reasonable measures to prevent or minimise loss. There are other disputes as well. The real issues in dispute 3With one exception, the parties agreed on the real issues in dispute. The issues so agreed are as follows: Scope of the Cover 1.Did the second plaintiff (Optus Mobile Pty Ltd (Optus Mobile) trade in its own right with BXP on the terms that met the description of either item 6(i) or 6(ii) of the Policy? 1A.Are any of the invoices listed in the spreadsheet headed Unpaid Optus Invoices in the Agreed Statement of Facts covered by the Policy? A.Is the defendant's reliance on the definition of 'Contract' in the Policy in contravention of s 14 of the Insurance Contracts Act? B.To the extent that the effect of the Policy is that the defendant may refuse to pay Optus's claim by reason of the nature of the trading terms or invoicing practices of Optus, is Optus entitled to be relieved from that conduct under s 54 of the Insurance Contracts Act? 2.Are any invoices issued following termination of the sub-agency agreement on 24 April 2008 insured under the Policy? Misrepresentation and Non-Disclosure 3.Did the plaintiffs fraudulently or otherwise misrepresent the nature of the trading relationship between the plaintiffs and Bill Express Limited (BXP) in the following answers to the quoted questions in the proposal from dated 22 August 2007: "What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates and dates of cleared funds? ... Customers has traded 7-10 days from the due date on occasion Have you ever experienced any difficulties in certification procedures or payment delays in dealing with this buyer? If so, please provide details. Yes - in reducing payment terms from 28 days to 21 days Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No." A.Were the answers in the proposal capable of being misrepresentations by operation of ss 26 and 27 of the Insurance Contracts Act? 4.Did the plaintiffs fraudulently or otherwise fail to disclose that: a.BXP was (and for at least two years before entry into the Policy) consistently unable to pay its debts when they fell due; b.BXP consistently failed to pay debts on time and frequently had overdue debts exceeding $5 million; c.BXP had a working capital hole that could not be fixed by more borrowings; d.the plaintiffs regarded the situation as "very serious" and "dicey"? Waiver and Estoppel 5.Did Atradius waive any requirement for the plaintiffs to provide further disclosure of the plaintiffs' trading relationship with BXP, and their knowledge of the financial condition of BXP based on that trading relationship, other than the information provided in the proposal form? 6.Is Atradius estopped from asserting that the plaintiffs should have provided further disclosure of: a.the plaintiffs' trading relationship with BXP; and b.their knowledge of the financial condition of BXP based on that trading relationship in addition to the information provided in the proposal form? Reliance 7.Would Atradius have entered into the Policy on the same terms and conditions even if the plaintiffs had provided accurate answers to the questions in the proposal form and full disclosure? General Condition C 8.Is the sum of $5 million received from BXP on 29 April 2008 to be applied to the outstanding invoices of the first plaintiff or the second plaintiff? 9.Are the plaintiffs obliged to apply sums totalling $10,573,053 (received between 19 may and 8 July 2008) against unpaid invoices issued prior to termination of the sub-agency agreement? Breach of Warranty 10.Did the plaintiffs breach Warranty A by permitting BXP to sell eVouchers following the termination of the sub-agency agreement? 11.Did the third plaintiff (Virgin Mobile Australia Pty Limited (Virgin Mobile)) breach Warranty A have failing to terminate its Distribution Agreement with BXP (or ceasing supplies under the agreement) on or shortly after 24 April 2008? A.To the extent there has been a breach of Warranty A, are the plaintiffs entitled to relief from that breach pursuant to s 54 of the Insurance Contracts Act? 4The dispute relates to the first two issues, 1 and 1A. The plaintiffs propound the form of issue 1. Atradius propounds the form of issue 1A. I will deal with this when considering the "scope of cover" question to which those alternative formulations relate. The plaintiffs' business 5The plaintiffs are all Australian subsidiaries of a Singaporean company, Singtel Optus Pty Limited (Singtel). The second plaintiff (Optus Mobile) and the third plaintiff (Virgin Mobile) operate telecommunications networks within Australia. They sell access to that network to businesses and consumers. 6The first plaintiff (PPS) acts as an agent of Optus Mobile to sell access to the Optus Mobile telecommunications network. 7In December 2005, PPS and Optus Mobile made a "sub-agency agreement" with BXP. A form of written agreement was prepared, but never executed. There is no doubt, however, that an agreement was made on the terms set out in the unexecuted draft. 8On 10 December 2004, Virgin Mobile entered into a "distribution agreement" with BXP. That agreement was in writing and executed by the parties to it. 9Under the sub-agency agreement, PPS, as agent for its disclosed principal Optus Mobile, provided electronic data to BXP which, when decrypted, was capable of being delivered to consumers as what were known as "e-vouchers". The term "e-voucher" is commonly used, and I shall use it, to describe, as well, the encrypted information provided to BXP. 10BXP operated a retail distribution network throughout Australia. It controlled more than fourteen thousand point of sale terminals which were physically located in the premises of small retailers and service stations. A consumer who wished to buy access to the telecommunications network operated by Optus Mobile or Virgin Mobile could use a BXP terminal to pay an agreed price, presumably by way of debit or credit card. When the payment was authorised, the consumer would receive a printed receipt, which recorded the information on an e-voucher. That information comprised, or included, a personal identification number (PIN). When the consumer entered the PIN into his or her mobile phone, the amount of air time for which the payment had been made would become available. 11The electronic data, or e-vouchers, supplied by PPS to BXP pursuant to the sub-agency agreement comprised batches of PINs. (Thus, functionally, the expressions "e-voucher" and "PIN" are interchangeable for the purposes of this dispute.) The PINs represented in effect various denominations of amounts of air time. The information was delivered to BXP in encrypted form. Upon receipt of the information, BXP would decrypt it so that the PINs became accessible. Optus Mobile would then activate the PINs. Once the PINs had been activated, BXP distributed them electronically to its terminals throughout Australia. 12BXP kept records of all PINs that were sold. It collected the revenue (less commissions payable to the retailers). PPS would access BXP's computer system, obtain from it details of all the PINs that had been sold over a defined period of time and invoice BXP for the net value of those PINs. BXP was required to remit the amount so invoiced, less its own commission, within 21 days. 13The evidence suggested that BXP sold between $5 and $6 million worth of Optus Mobile pre-paid airtime weekly. There is no doubt that BXP was very important to Optus Mobile, and that Optus Mobile was very important to BXP. It was suggested that BXP accounted for something like 40% of all Optus Mobile's sales of pre-paid airtime during the currency of the sub-agency agreement. There is no doubt that the solvency of BXP depended, among other things, on its continuing business relationship with Optus Mobile. 14As well as making pre-paid airtime available through PPS to BXP, Optus Mobile also "sold" it direct to BXP. There is, to put it mildly, a lack of evidence as to the contractual basis upon which Optus Mobile did so. The pleaded case for Optus Mobile was that it supplied data, representing e-vouchers, to BXP "under the Sub-Agency Agreement, in respect of certain outlets": Amended Commercial List Statement (ACLS), para 7. The terms of supply were said to be 30 days from a monthly statement listing invoices delivered during the course of the month. In effect, that would mean payment terms of 30 to 60 days. 15Supplies by Optus Mobile direct to BXP related, it would seem, to distribution by BXP through major retailers such as K-Mart, Harvey Norman and Coles. There is some evidence of the way in which such supplies were effected, in the sense that the invoices were proved and a Mr Nolan of Optus Mobile gave evidence to the effect that, to his knowledge, the form of the invoices reflected in substance the contractual arrangements. It will be necessary to return to that evidence in dealing with the "scope of cover" issues and the course of dealings between Optus Mobile and BXP from 2003 to 2008. 16Under the distribution agreement made between Virgin Mobile and BXP, a substantially similar business was carried on, but on a very much smaller scale. The only significant difference, I think, is that the terms of payment under the distribution agreement were 7 days from the date of invoice. 17BXP was habitually late in paying PPS under the sub-agency agreement. There was some disagreement as to the extent of its tardiness. 18PPS and Optus Mobile became dissatisfied with BXP's performance of its obligations under the sub-agency agreement. On 24 April 2008, their solicitors demanded that BXP pay forthwith all amounts then owing. BXP did not comply. Later on the same day, PPS and Optus Mobile, again through their solicitors, gave written notice terminating the sub-agency agreement. The ground of termination assigned was: ... history of continually and habitually breaching [BXP's] payment obligations... culminating in its current and ongoing failure to pay amounts which are due... and/or a repudiation at common law... 19They relied also on the asserted fact that BXP "is insolvent within the meaning of s 95A of the Corporations Act". 20Notwithstanding the termination, PPS and Optus Mobile did not attempt to recover, or deactivate, all the PINs that had been supplied to BXP but which had not been onsold to consumers. On the contrary, they permitted BXP to continue to sell at least some of those PINs. Further, and with the consent of Atradius, they entered into a "standstill agreement" with BXP under which they continued to supply PINS to BXP upon the basis that payment would be made on or prior to delivery (COD sales). 21Virgin Mobile did not terminate its distribution agreement with BXP, even after Optus and PPS acted to terminate the sub-agency agreement. Virgin Mobile continued to supply PINs to BXP, including on credit terms, up until the time when administrators were appointed to BXP, on 8 July 2008. The unpaid invoices in respect of which Virgin Mobile claims indemnity under the policy are dated 1 and 11 July 2008. 22Eventually, PPS and Optus Mobile recovered some of the unsold PINs, and ceased to trade with BXP. BXP went into administration and then into liquidation. 23The plaintiffs claim that BXP is indebted to them for amounts in excess of $62 million. The limit of indemnity under the policy is $30 million. If Atradius is liable under the policy, that liability is for 90% of the loss, or a maximum of $27 million. 24It is not necessary to go into the details of the business relationship between Virgin Mobile and BXP. It is accepted that the debts in respect of which Virgin Mobile claims under the policy fall within the scope of the policy. For that reason also, it is not necessary to summarise, or quote from, the terms of the distribution agreement. 25Atradius contends that if it is not entitled to avoid the policy or to reduce its liability to nil on the ground of (fraudulent) misrepresentation, nonetheless the total amount of indebtedness to which the policy responds is a little under $27 million, which should be reduced by a little under $16 million in respect of payments made that are said to be covered by condition C of the policy, and which should be reduced further by reason of breaches of warranty. Relevant terms of the sub-agency agreement 26The sub-agency agreement was for an initial period of 12 months, which could be extended for further periods of 12 months by agreement. It would seem, although the evidence is obscure, that the relationship established by the sub-agency agreement either was extended, or was treated as in force, at all relevant times until 24 April 2008. 27By clause 3 of the sub-agency agreement, PPS appointed BXP among other things as an agent of Optus Mobile for the purpose of appointing specified retail outlets as an agent of Optus Mobile and thus selling e-vouchers to consumers. 28By clause 8, Optus Mobile agreed to supply e-vouchers and other services necessary for the operation of the system: 8.Supply of e-vouchers Optus must: (a)provide the mobile telecommunications and Internet services necessary for the operation of the pre-paid voucher services including the prepaid network platform, card database, debiting and security PIN management; (b)maintain a correct inventory of valid e-Voucher numbers; (c)ensure the validity of data printed on an e-Voucher; (d)cancel any e-Vouchers which are reported as lost, stolen or defective; (e)issue replacement e-Vouchers in accordance with applicable Optus procedures; and (f)issue refunds for e-Vouchers in accordance with applicable Optus procedures. 29By clause 9.2, BXP was required to report weekly to both PPS and Optus Mobile giving specified details of sales, and monthly giving other details. 30By clause 11.1, BXP was required to collect payments from customers and retail outlets and to hold them on trust for PPS as agent for Optus. By cl 11.2, BXP was entitled to retain its commission and was obliged to remit the balance to PPS as agent for Optus Mobile. Clause 11.5 dealt with the timing and paying of remittances and cl 11.6 with the consequences of failure to pay. Clause 11.9 provided for "security". I set out those provisions: 11.1Company to Collect Payments Company: (a)is responsible for collecting all payments from Customers and Retail Outlets for the sale of e-Vouchers; and (b)holds those payments on trust, subject to paragraph 11.1(c), for and on behalf of PrePaid Services as agent for Optus and must not use or disburse those payments other than in accordance with this Agreement; and (c)where a customer is based in South Australia, Company holds those payments as directed by Optus and must not use or disburse those payments other than in accordance with this Agreement. 11.2Commission Company: (a)may retain by way of commission for acting as Optus' agent an amount equal to the Commission Rate of the Sale Price of e-Vouchers sold by a Retail Outlet to a Customer; and (b)must remit to Prepaid Services as agent for Optus the amounts calculated in accordance with the formula in clause 11.3 at the times and in the manner determined. ... 11.5Timing of payment of Remittance (a)On a weekly basis, PrePaid Services will issue Company with an invoice (based on the information provided to PrePaid Services under clause 9.2 (Obligations of Company)) setting out the e-Vouchers sold by Retail Outlets in the previous week and the Remittance payable by Company in accordance with this clause 11. (b)Whether or not Company has received any amounts owed to it by a Retail Outlet for the sale of e-Vouchers, Company must pay PrePaid Services the Remittance (which is a debt due to PrePaid Services) within 21 days of the date of the invoice referred to in clause 11.5(a) above or within such other period as agreed between the parties (Due Date). (c)On a monthly basis, PePaid Services will issue Company with a statement showing the invoices delivered to Company in the previous month and any outstanding invoices that remain payable. 11.6Failure to pay Remittance If Company fails to pay any Remittance by the Due Date, Optus or PrePaid Services may (in addition to any other rights or remedies it may have under this Agreement or otherwise) do any one or more of the following: (a)cease to supply any further e-Vouchers to Company or any Retail Outlet until Company pays all amounts owed to PrePaid Services; (b)commence proceedings to recover the Remittance as a debt due to PrePaid Services; and (c)charge Company interest on any overdue Remittance at a rate of 2.2% above the reference rate of the Australian & New Zealand Banking Group Limited as published from time to time. ... 11.9Security Optus or PrePaid Services may at any time require Company (at Company's cost) to provide security, in a form and substance acceptable to Optus and PrePaid Services, in respect of any amounts owing by Company to Optus and PrePaid Services at any time (whether or not those amounts are due and payable). 31Clause 20 dealt with termination of the agreement. By clause 20.1(b), PPS and Optus could terminate the agreement immediately if PPS continually or habitually breached it, regardless of whether any individual breach had been remedied. Clause 20.2(b) gave PPS and Optus Mobile the right to terminate immediately if specified "insolvency related events" occurred. One of those events was that BXP should become insolvent within s 95A of the Corporations Act 2001 (Cth). 32The consequences of termination were spelled out in cl 21.1(c)). One consequence was that the appointment of BXP and retail outlets as agents of Optus would cease immediately. Another was that the sale of e-vouchers was to stop immediately unless otherwise agreed (para (d)(iii)). I set out clause 21: 21.Consequences of termination On termination or expiration of this Agreement: (a)any accrued rights or remedies of either party will not be affected; (b)Optus may (and Company must not hinder any attempt by Optus to) commence proceedings against any Retail Outlet that has failed to pay any amounts owed to Company in respect of the sale of e-Vouchers as Optus' agent; (c)the appointment of Company and Retail Outlets as Optus' agent under this Agreement will immediately terminate; (d)Company must: (i)immediately take steps to inform all Retail Outlets that their appointment as Optus' agent under this Agreement has been terminated; (ii)unless otherwise agreed by PrePaid Services ensure that each Retail Outlet shops selling e-Vouchers to Customers on Optus' behalf; (iii)immediately return to PrepPaid Services the point of sale material and all other material in Company's or a Retail Outlet's possession or control provided by PrePaid Services to Company; and (iv)immediately pay to PrePaid Services all amounts owing to PrePaid Services under this Agreement, whether or not presently due (except that, if this Agreement is terminated under clause 20.2(a), then Company must pay those amounts within 30 days after the date of termination; and (e)any provision that expressly or by implication continues, will continue. Relevant terms of the policy 33The insured under the policy were described as "Prepaid Services Pty Ltd", "Optus Mobile Pty Ltd" and "Virgin Mobile Australia". 34By Item 4, the "Buyer", the debtor whose debts were insured, was stated to be "Bill Express Limited". 35The "contracts", debts under which might be insured, were described in Item 6 as follows: Item 6:Contract(s):Sub Agency Agreement between (i) Pre Paid service Pty Ltd, Optus Mobile Pty Ltd, Optus Internet and Bill Express Limited; (ii)Optus Mobile Pty Ltd and Bill Express; and (iii)Virgin Mobile Australia and Bill Express; for open account sales of Goods insured up to twenty-eight (28) days from date of invoice. 36The reference to "Optus Internet" reflected the fact that Optus Internet Pty Limited was a party to the sub-agency agreement, in respect of the sale of pre-paid internet airtime. 37As I have said, the limit of liability was $30 million and the insured percentage of liability was 90%. It was not open to the insured to insure for the remaining 10%. 38The "Goods Insured" were described in Item 16: Item 16.Goods Insured:Recharge vouchers (e-Vouchers) containing prepaid mobile airtime prepaid internet airtime and prepaid calling card airtime 39The insuring clause provided as follows: To indemnify the Insured in the Contract Currency for the Insured Percentage of the amount of the Insured's Loss in excess of the Deductible caused directly by any act or occurrence set forth in the Causes of Loss occurring during the Policy Period and continuing from the Date of Loss for the duration of the Waiting Period. The amount payable to the Company under this Insuring Agreement will be subject always to the Maximum Limit of Liability and other applicable terms and conditions of the policy. 40Section II of the policy dealt with "causes of loss". Items 1 and 2 - insolvency and default - are relevant: 1.Insolvency The Buyer is Insolvent 2.Payment Default The failure of the Buyer, under the terms of the Contract, to pay invoiced payment obligations to the Insured in the Contract Currency on Due Date and, where applicable, the Guarantor's failure to honour its obligations in support of the Contract. 41There are a number of relevant definitions set out in Section III of the policy. They include the definitions of "Contract", "Due Date", "Gross Invoice Value", "Loss" and "Shipment". I set out those definitions (in the case of "Loss", only the relevant part, part 1): Contract means the agreement between the Insured and the Buyer identified in Item 6 of the Declarations Due Date means the date payment is required to be made by the Buyer to the Insured under the terms of the Contract, provided that this date(s) falls within the Policy Period. Gross Invoice Value means the invoice value in Contract Currency of the goods shipped under the terms of the Contract including any marine insurance, freight, or other charges paid or to be paid in Currency of the Contract by the Insured on the Buyer's behalf, (but shall not include any payments received from the Buyer prior to shipment of the goods). Loss means: 1.The Gross Invoice Value of goods shipped including interest, as specified in the Contract, if any, accrued and unpaid to the Due Date; 2.When the event giving rise to Loss is as defined in Item 3 of Article II Causes of Loss, the Contract Currency equivalent of Local Currency deposited with a bank of the Buyer's Country or other depository designated by law or administrative regulation for the acquisition and transfer of Contract Currency as payment of all or part of the sums contractually due based on the rate of exchange, applicable to the transaction on the date of deposit. Less, (a) any discounts or other similar allowances provided by the Insured to which the Buyer is entitled; (b) any amount which, prior to the time of the payment by the Company hereunder, the Insured has received from any source as or towards payment of the invoice under the Contract including realisation of any security and the net liquidated proceeds of goods recovered from the Buyer; (c) any amount which the Buyer would have been entitled to take into account by way of payment, credit, set-off or counterclaim any sums or credits which the Insured is entitled to appropriate as or towards payment of the purchase price under the Contract; (d) any expenses saved by the Insured by the non-payment of agent's commission, non-fulfilment of the Contract or otherwise; (e) any sales, value-added or other similar taxes saved by the Insured due to non-payment of the Gross Invoice Value; (f) any post-maturity or penalty interest accrued on balances unpaid after the relevant Due Date, (g) the Gross Value of any goods that were not accept by the Buyer; and (h) the amount of the Deductible. A Loss may include any direct, reasonable and necessary costs incurred in pursuing or obtaining recovery, provided such costs have been authorised in advance and in writing by the Company. 42Section V of the policy provided for "warranties". Warranties A and B are relevant: A.That it will give written notice to the Company within 15 days after becoming aware of a circumstance which could result in a Loss, to take all reasonable measures at its expense to prevent or minimise Loss, including but not limited to the termination of the shipment of all goods or performance if all services under the Contract, unless otherwise agreed to in writing by the Company, the enforcement of any security or the institution of legal proceedings against the Buyer or Guarantor, where applicable, and co-operation with the Company to effect recoveries after payment of Loss; B.That it will cease all shipments to the Buyer: 1.if the Buyer becomes Insolvent; or 2.When and for so long as the Buyer is more than thirty (30) days past due in any payment obligation to the Insured. Payment obligations that are disputed by the Buyer in writing will not be considered past due for the purposes of this paragraph. 43Section VII of the policy set out some "general conditions". General condition C, dealing with application of funds, is relevant; and so is general condition Q, dealing with recoveries: C.APPLICATION FOR FUNDS For the purpose of determining the Company's liability under this policy, all funds received by the Insured from the Buyer [as Newlinds conceded] after the Buyer is in default for any obligation shall first be applied to overdue principal and interest accrued to the Due Date and shall be applied in chronological order of Due Date(s) until payment of Loss under this policy, at which point the allocation of funds procedure set forth in paragraph Q below shall apply. No funds shall be applied to past due interest (interest accruing after the Due Date) until the outstanding overdue principal and interest accrued to the Due Date is paid in full. Q.RECOVERIES After payment of any Loss hereunder any sums which are recovered from any source less the costs of recovery thereof shall be shared between the company and the Insured in accordance with the relative proportions of insured and uninsured percentages. Where a Deductible applies, any sums recovered for any Loss retained by the Insured under the Deductible shall reinstate the Deductible the same amount. 44On 14 March 2008, Atradius issued an endorsement amending the policy in respect of the definition of "Contract" but not otherwise. The amended definition of that expression (Item 6) is as follows: Item 6:Contract(s):Sub Agency Agreement between (i) Pre Paid service Pty Ltd, Optus Mobile Pty Ltd, Optus Internet and Bill Express Limit; (ii) Optus Mobile Pty Ltd and Bill Express; and (iii) Virgin Mobile Australia and Bill Express; for open account sales of Goods Insured up to thirty days (30) days from date of invoice. 45The effect of the change was to amend the length of time for which the insured could give credit, without losing the benefit of the cover, from 28 to 30 days. That was done in recognition of the fact that Optus Mobile supplied on 30 day terms. Issues 1 and 1A: is Optus Mobile insured in respect of its unpaid invoices? 46This is the only issue the wording of which is in dispute. Optus Mobile contends for the first version of the issue. Atradius contends for the alternative version. Atradius submits that the alternative version more accurately reflects the issues arising on the "pleadings", and, further, that the first version in fact goes beyond the pleaded case for Optus Mobile. I agree with that. As I have noted already, the pleaded case is that Optus Mobile supplied e-vouchers to BXP in its own right "under the Sub-Agency Agreement, in respect of certain outlets". 47Mr Newlinds of Senior Counsel, who appeared with Mr Mehigan of counsel for Atradius, submitted that this pleading required Optus Mobile to prove supply of e-vouchers pursuant to the sub-agency agreement, not "on... terms that met the description of either item 6(1) or 6(2) of the policy". That, I think, is correct. 48The question is one of some significance, because it was a matter of concern to Atradius to know the contractual terms pursuant to which the supply was made, and under which the insured obligations would arise. That is one of the functions of the specification of the sub-agency agreement as the "Contract". So much appeared to be accepted by Mr Gleeson of Senior Counsel, who appeared with Mr McLure and Ms Roughley of counsel for the plaintiffs. He submitted that the role of the contract was both to identify the debts that were insured and to give assurance to Atradius that there would be a binding payment obligation (written closing submissions, para 17). 49Accepting that list statements and responses do not have the formality of pleadings, even in the sense in which that term is now used, nonetheless they are intended both to identify and to define, or limit, the case of the party propounding them. The case that Optus Mobile propounded through para 7 of its ACLS was that it supplied in its own right under the sub-agency agreement. I do not think that it should be permitted, at the end of the hearing, to advance an alternative case that it supplied under some other agreement or agreements, that could fall within the terms or parameters of the sub-agency agreement. Having said that, the issue of substance must still be addressed and I propose to decide the "scope of cover" issues on the substance rather than on a pleading point. 50The role of the sub-agency agreement is confirmed by the proposal, and by information provided by the plaintiffs to Atradius before the proposal was delivered. The proposal was stated to be "the basis of the insurance policy should a policy be issued and will be attached to and form part of the policy". 51In that proposal, under the heading "Your Details", the name of the proponent was stated to be: Prepaid Services Pty Ltd Including Optus Mobile Pty Ltd and Virgin Mobile (Australia) Pty Ltd 52Under Item 2, the buyer was named as "Bill Express Ltd". 53Under Item 4, which required information as to "Background of the Contract/Bond", there was a reference to: Sub-Agency Agreement Supplied. 54Under Item 5, the goods or services that were the subject of the contract were described as: Recharge vouchers containing pre-paid Mobile airtime, recharge vouchers containing pre-paid internet airtime and recharge vouchers containing international calling card airtime. 55Before the proposal was submitted, Atradius had asked for details of the contracts pursuant to which goods were sold or services supplied. It was furnished with a copy of the sub-agency agreement and the distribution agreement. It is apparent that the plaintiffs (more accurately, PPS and Optus Mobile) regarded PPS and Optus Mobile as being in substance one and the same. The parties' submissions 56Mr Gleeson submitted that it was clear, having regard to the terms of the policy and the proposal, that Optus was intended to be insured under the policy for supply in its own right. That, Mr Gleeson submitted, led to the question: what was the contract in respect of which Optus was so insured? He submitted, by reference to the policy, that it must be a contract on the terms of the sub-agency agreement, subject to variations dealing with the particular supply arrangements made between Optus and purchasers. 57Mr Newlinds submitted that it was for Optus Mobile to prove its case. That required, he submitted, that it prove the contract or contracts pursuant to which the insured debts arose. He submitted that it had not done so, and that such evidence as there was (both in the form of invoices from time to time delivered by Optus Mobile in respect of supply in its own right and in oral evidence) suggested that the supply was on terms other than those of the sub-agency agreement. 58Mr Newlinds referred to an earlier supply agreement made directly between Optus Mobile and BXP, and submitted that the evidence, such as it was, was consistent with an ongoing trading relationship effectively on the terms of that agreement. Decision 59It was common ground that Optus Mobile was insured under the policy. That could hardly be denied. As Mr Newlinds submitted (and Mr Gleeson did not dispute), Optus Mobile had an insurable interest in respect of supplies made by PPS pursuant to the sub-agency agreement. That insurable interest arose if only because Optus Mobile was the disclosed principal of PPS in relation to the supply of e-vouchers, and was entitled to receive payment for them in its own right. 60However, acceptance of the proposition that Optus Mobile has an insurable interest under or in respect of the sub-agency agreement does not take the matter very much further. It is necessary to look at the terms of the policy, and to seek to give them a construction which their language will bear that has some relevance to the commercial purpose that the parties sought to achieve by entering into the policy. 61In my view, the way in which the "Contract(s)" is (or are) specified is significant. It will be noted that there are three alternative arrangements proposed, under the rubric or chapeau "Sub-Agency Agreement between". The first is an agreement between PPS, Optus Mobile, Optus internet and BXP. The second is an agreement between Optus Mobile and BXP. The third is an agreement between Virgin Mobile and BXP. 62Each category of agreement is limited by what follows the third: that it must be an agreement "for open account sales of Goods Insured up to twenty-eight (28) days from date of invoice". 63The next point to note is that the introductory words "Sub-Agency Agreement" are applicable to, or properly descriptive of, the first category of agreement listed, but not of the third. Virgin Mobile was not a party to the sub-agency agreement. It had a separate agreement with BXP: the distribution agreement. Nonetheless, it is accepted (and rightly so) that if the policy has not been avoided, Virgin Mobile is insured under it, in its own right, for supplies to BXP on the terms of the distribution agreement. 64The third point to note is that, at the time the policy was made, Optus Mobile was supplying e-vouchers direct to BXP, and this had been disclosed to Atradius. That disclosure occurred because Atradius sought, and was given, details of the trading history between each of the plaintiffs and BXP. 65The final point to note is that, if all that were intended was to recognise the separate insurable interest of Optus Mobile under the sub-agency agreement, that would have been achieved simply by subpara (i) of the definition. Subparagraph (ii) would have been otiose. The parties knew that, under the particular sub-agency agreement, Optus was suppling e-vouchers to BXP through PPS. Thus, there was no need to make further provision for such dealings between Optus Mobile and BXP unless it were understood, or contemplated, that such further dealings might be transacted by Optus Mobile as principal. 66In those circumstances, I think, it is inappropriate to construe Item 6 of the policy as confining the "Sub-Agency Agreement" referred to in the chapeau to the particular sub-agency agreement that in fact is described in subpara (i). The parties could not have intended that, because, applied literally, it would mean that Virgin Mobile was not covered for debts arising from supplies by it to BXP under the terms of the distribution agreement. Yet, clearly, the parties intended that it should be so covered. 67In my view, the proper construction to be given to the words "Sub-Agency Agreement" in the chapeau is that they refer to: (1)the particular sub-agency agreement that is then identified in subpara (i); (2)an agreement between Optus Mobile and BXP on, or substantially on, the terms of that sub-agency agreement, as contemplated by subpara (ii); and (3)the distribution agreement made between Virgin Mobile and BXP. 68In each case, that construction is qualified by the requirement that the agreement be for open account sales up to 28 days from invoice. 69In short, the chapeau to the definition of "Contract(s)" is not intended to limit what follows only to supplies made under or pursuant to the sub-agency agreement, being the first agreement that is identified. As a matter of common sense as well as language, it must be taken to refer also to supplies made by Optus Mobile, as principal, directly on the terms of, or of similar effect to, the sub-agency agreement. 70On that basis, the question may be further refined: has Optus Mobile proved that it did supply to BXP substantially on the terms of, or terms referable to, the sub-agency agreement? 71This is where the evidence becomes even less clear. Mr Newlinds submitted, in my view with considerable force, that it was open to Optus Mobile to have called evidence of the contractual terms and dealing between it and BXP, and that, having failed to do so, the court should not be too inclined to draw inferences in favour of Optus Mobile from such evidence as there was. 72If the supply by Optus Mobile direct to BXP were on terms equivalent or referable to the sub-agency agreement, then there would have been provision, among other things, for invoices to be rendered weekly and for payment to be made within 21 days of the date of invoice. However, the evidence (such as it was) suggested that both before and after the making of the sub-agency agreement in December 2005, the course of dealings between Optus Mobile and BXP was somewhat different. (The reference to dealings before December 2005 extends no further back then about 2003, which is when the relevant witness, Mr Nolan, started to work for Optus Mobile.) 73The trading terms for Optus Mobile were not 21 days from invoice but, rather, 30 days from statement. The practice was that invoices would be sent approximately weekly; at or shortly after the end of each month, a statement would be sent collating the invoices for that month; and payment was required (but often not made) within 30 days from the date of the statement. 74Further, the invoices were addressed not to BXP but to its ultimate holding company, known as "OnQ Group Limited (OnQ), described in the invoices as "OnQ Business Services". 75Thus, such evidence as there is suggests that the supplies made by Optus Mobile direct to BXP were not made on terms referable to, or conformable with, the sub-agency agreement. 76Mr Gleeson submitted that the introduction of OnQ as the entity to which invoices were addressed was a matter of form rather than substance. I tend to think that this is correct. Such evidence as there is suggests that, although the invoices were addressed to OnQ, the amounts required to pay them (and paid in satisfaction of them) were payed by BXP, not by OnQ itself. Further, it is clear that the invoices were referable to supplies that were made through BXP to the major retailers to which I have referred earlier: K-Mart, Coles and Harvey Norman, and others. 77The invoices actually stated that the e-vouchers were "sold to outlet", with the relevant outlet (such as Coles) being identified by an alphanumeric code. That might be thought to suggest a sale direct from Optus Mobile to the outlet, with BXP acting in effect as a facilitator and collection agent. Presumably, it was BXP that had established the connections with the retail outlets, and which was able to ensure that Optus Mobile could sell its prepaid products through those retail outlets. It is clear that it was BXP that was paid by those retail outlets and, in turn, that paid Optus Mobile. 78Much of this is speculation, or conjecture (or, perhaps more neutrally, at best a matter of inference). It was open to Optus Mobile to adduce clear evidence of the terms of dealing between it and BXP. It did not do so, and gave no explanation for its failure to do so. In my view, the court should not draw inferences in its favour from such scraps of evidence as there are. Indeed, the court, should go further, and infer that such witnesses as there were who had knowledge of the contractual arrangements between Optus Mobile and BXP would not have given evidence supporting its case. See Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361 at [63] and Commercial Union Assurance Co of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 - 419. 79To paraphrase Lord Mansfield CJ in Blatch v Archer (1774) 1 Cowp 63; 98 ER 969, all evidence is to be assessed according to the power of one party to produce it and the other to refute it. In this case, the evidence of the terms of and dealings under any contract between Optus Mobile and BXP is to be assessed according to the manifest ability of Optus Mobile to adduce such evidence and the relative inability of Atradius to rebut it. 80Thus, whilst I think that on the proper construction of Item 6 of the policy, Optus Mobile was entitled to be insured for sales in its own right, or as principal, direct to BXP, on terms referable to or conformable with the sub-agency agreement (and not just explicitly made as principal under that agreement), I am not satisfied, on the evidence, that Optus Mobile has proved that it sold on such terms. On the contrary, I think, such evidence as there is suggests a significant disconformity between the terms of supply direct and the terms of the sub-agency agreement. 81There is an alternative analysis, which leads to the same outcome. Looking at the definition of "Contract(s), it may well be reasonable to think that the words in the chapeau were intended to form part of sub-para (i). The parties knew that the agreement which governed the relationship between what might be called the Optus companies on the one hand and BXP on the other was the sub-agency agreement. That agreement had been given by PPS to the broker, and by the broker to Atradius. Likewise, the Virgin Mobile agreement with BXP had been given to Atradius through the broker. Finally, the broker had been told, directly or indirectly, that Optus Mobile traded on its own account with BXP. 82On that analysis, it is not necessary to give some more general meaning to the words in the chapeau. It is sufficient to recognise that, as a matter of construction informed by circumstances known to both parties, and giving effect to what clearly was the objective intention of the parties, one of the agreements was the sub-agency agreement made between the four parties named in sub-para (i). 83On either approach to construction, the specification of a separate mode of dealing between Optus Mobile and BXP (in subpara (ii) of the definition) need not be confined to dealings on the terms of or under the sub-agency agreement. 84However, it must be confined to dealings that meet the description, or limit, imposed by the closing words of the definition. That is to say, they must be dealings "for open account sales of Goods Insured up to twenty-eight (28) days from date of invoice". 85Accepting, as a matter of construction, that Atradius and the insured intended, objectively, that contractual dealings in respect of Goods Insured between Optus Mobile and BXP would be insured even if they were not dealings under, or strictly on the terms of, the sub-agency agreement, nonetheless, they must be dealings on terms confined to 28 (later 30) days from invoice for payment. 86On the evidence, the contractual dealings between Optus Mobile and BXP, whereby Optus Mobile supplied e-vouchers direct to BXP or major retailers through BXP, did not meet that limitation. That is because they were dealings on terms of payment 30 days from date of statement. Invoices were issued weekly, and statements were issued at the end of each month. Thirty days were allowed for payment from the date of statement. Thus, depending at the point in time when the individual weekly invoices were issued, payment might be anything from 31 to 60 days from the date of invoice. Both before and after the policy endorsement was issued on 14 March 2008, dealings on those terms fall outside the scope of cover afforded by the policy. 87Each of issues 1 and 1A should be answered "no". Issues 1(A), 1(B): good faith; prejudice 88In these issues, Optus Mobile raises ss 14 and 54 of the Insurance Contracts Act 1984 (Cth). 89Mr Gleeson submitted that if I were to conclude (as I have done) that the policy on its proper construction covered Optus Mobile for sales in its own right, then it was not open to Atradius, in good faith, to submit that Optus had failed to prove sales pursuant to a contract that fell within Item 6. I do not accept that submission. 90Optus Mobile was required to prove sales on terms that fell within the insuring clause (and, thus, within the definition of "Contract(s)"), properly construed. That burden required it to prove, by preponderance of evidence, the position for which it contended see: Purkess v Crittenden (1965) 114 CLR 164 at 167 - 168. If it has not done so, it cannot be a matter of want of good faith for Atradius, as the insurer, to take the point that Optus Mobile has failed to discharge its burden of proof. 91Section 14 might have some operation where Optus Mobile had discharged the burden of proving sales on insured terms. But since it has failed to do so, the policy has not shown to be engaged, in respect of sales made by Optus in its own right to BXP. Thus, in my view, no question of good faith can arise. 92Equally, since the policy has not been shown to be engaged, no question can arise under s 54 of the Insurance Contracts Act. 93Each of issues 1(A) and 1(B) should be answered "no". Issue 2: invoices issued after termination 94At the time the sub-agency agreement was terminated, BXP was in possession of a substantial quantity of PINs, with a face value of many millions of dollars, that had not been sold to consumers and, thus, for which it had no obligation to pay. PPS was in a position to demand that those PINs be "returned". 95The concept of physical return may be inapposite to electronic data. The evidence showed that Optus in fact had both a record of and an ability to deactivate the PINs in question. There was nothing to be "returned". One question which arises is whether, having regard to the nature of the contract between PPS and BXP and the nature of the services supplied under it, the concept of return would extend to deactivation, or some other means of rendering the PINs commercially worthless and therefore removing any incentive on the part of BXP to attempt to exploit them. 96Be all that as it may, PPS negotiated two different arrangements with BXP following termination. Perhaps not in chronological order, those arrangements were as follows. They made a "standstill agreement", documented in letter form. Under that standstill agreement, PPS agreed to continue to supply PINs to BXP, but only on a COD basis. Thus, in respect of PINs supplied under the standstill agreement, PPS was paid the face value of the PINs (presumably, less commission) on or before delivery. Atradius consented to that arrangement. 97However, BXP requested in addition that it be allowed to "retain" and sell some of the PINs that had been supplied prior to termination. It explained the need for this as arising from the need to keep the distribution network - particularly, its point of sale terminals - operative and able to supply the needs of consumers until such time as the standstill agreement would kick in. Ultimately, PPS and BXP agreed that PPS could retain some of the PINs supplied to it before termination, and would "return" the others. 98One thing that is clear in this case is that at all material times Optus Mobile retained the ability to deactivate PINs that had been supplied. Obviously, there were commercial risks in doing so. For example, if Optus Mobile deactivated a PIN for which a consumer had already paid, that consumer would have justifiable grounds for complaint, and (particularly if this were to happen on a substantial scale) Optus Mobile would suffer reputational damage. 99Nonetheless, it seems to be clear on the evidence that Optus Mobile was able to reconcile its records so that, with reasonable accuracy, it could determine at week's end what, of PINs earlier supplied, remained "in stock": that is to say, that had not been sold to retail consumers. The parties' submissions 100Mr Gleeson focused his submissions on the subject matter of the insured "Loss" as defined by the policy. That definition turned attention to the "Gross Invoice Value of goods shipped". That in turn focused attention on the concept of shipment: "the date when the goods are irretrievably placed in transit to the Buyer". 101Mr Gleeson submitted that, in this case, the "goods" were irretrievably placed in shipment to BXP when: (1)the electronic data comprising the PINs that became the subject of the e-vouchers was transmitted to BXP; or (2)BXP decrypted that date and notified PPS accordingly; or (3)upon receipt of that notification, Optus Mobile activated the PINs. 102For practical purposes, there is no significant temporal distinction between these steps, and it is convenient to work on the basis that Mr Gleeson's submission should be understood to refer to the occurrence of all three steps, and thus to accommodate irretrievable shipment as occurring on completion of the third of those steps. 103Mr Gleeson submitted that once the goods were so irretrievably shipped, it mattered not that, in some circumstances, Optus Mobile could render them worthless by deactivating the PINs, or that PPS had the contractual right, in some circumstances, to have the PINs "returned" to it. 104In Mr Gleeson's submission, those matters were adequately covered by Warranty A and the insureds' general duty to mitigate loss. Thus, he submitted, the relevant parts of the policy could be made to work together and in a commercially sensible way. 105Mr Newlinds took a different approach to the concept of irretrievable shipment. He submitted that the very fact that Optus Mobile had the ability to render the PINS worthless by deactivating them demonstrated that they were never irretrievably shipped, as between Optus and BXP, until, at the earliest, the ultimate sale of a PIN to a consumer was effected. It was the "shipment" from Optus to the ultimate purchaser / consumer that Mr Newlinds submitted should be looked at. 106But Mr Newlinds' primary argument was a simple one. He put that the sub-agency agreement was on any view terminated on 24 April 2008. As the letter of termination stated, the effect of termination was to terminate the right of BXP, as the sub-agent of Optus Mobile (through PPS) to continue to sell PINs. Thus, he submitted, any sale made after termination was not a sale on the terms of the sub-agency agreement. 107Mr Newlinds submitted that one of the consequences of termination of the sub-agency agreement was that the sale of PINs could not continue to be made under it. Thus, any sales that were effected after termination (in respect of which PPS later invoiced BXP) must have been sales pursuant to some other contract or arrangement or agreement. Decision 108The difficulty in relation to this issue lies in reconciling the terms of the policy with the terms of the sub-agency agreement, taking into account (in the case of the latter) the nature of what was supplied pursuant to it. 109Clearly enough, the policy's drafting reflects a traditional form of sale of goods, under which a vendor (V) sells goods to a purchaser (P), but on credit rather than COD or equivalent terms. There is thus a credit risk, and it is that credit risk which would be the subject of insurance under the policy. In turn, the concept of shipment is straightforward, and an examination of the terms of the contract between V and P will assist in resolving the problem of when it is that the goods, the subject of the contract, are irretrievably shipped. 110For example, if title passes upon delivery, then once the process of delivery is complete the goods will be in a legal as well as a practical sense "irretrievable", because P will be both the owner and the person with the immediate right to possession of the goods. 111However, if the goods are sold subject to a reservation of title, or on the basis of a "Romalpa" clause, the goods may well be retrievable (leaving aside, since 31 January 2012, the Personal Property Securities Act regime), at any stage until payment, unless the rights of third parties intervene or some other supervening event makes them irretrievable. 112Those possibilities, and the myriad of other possibilities that may arise in the case of a sale of physical goods, will pose difficulties in themselves. However, they will be difficulties capable of resolution by careful analysis of the terms of the contract between V and P and the application of established legal principle. 113Again, if the contract between V and P is for a sale of goods on a consignment basis, under which P does not acquire title to the goods but acquires a right to possession and a right to sell them as V's agent, then the goods may be retrievable at any time until, pursuant to the contract or pursuant to some other form of authority, title in the goods passes to the ultimate buyer. It may be, of course, that if third party rights intervene in a way that does not involve performance of the contract between V and P, the goods may become irretrievable by reason of that occurring. But once more, although the questions may be difficult, they will be capable of resolution through close analysis and the application of legal principle. 114Where the contract between V and P is one for the provision of services then, in a practical sense (and probably, although it does not matter, a legal sense), the subject matter of the contract will become irretrievable once the services are performed. 115In this case, the contract under which the insured obligations arose is the sub-agency agreement (in the case of supplies by Optus Mobile through PPS to BXP) or the distribution agreement (in the cases supplied by Virgin Mobile to BXP). 116There are no physical goods that are the subject matter of any sale as between Optus Mobile and BXP, or as between Virgin Mobile and BXP. Even if either of those contracts were one for the supply of physical goods, it would not be one for supply by way of sale under which BXP obtained any proprietary interest. But it is not necessary to pursue that analogy, because, clearly enough, the contract in each case is one under which BXP acts as an agent (or subagent, in the case of the sub-agency agreement) for the vendor in bringing the vendor into a contractual relationship with the purchaser. The only "sale" that occurs is one between Optus Mobile and the purchaser, or Virgin Mobile and the purchaser, as the case may be. 117The payment obligation of BXP under each contract is not an obligation derived from a position as purchaser. It is, rather, an obligation in the nature of an obligation to account. BXP act as agent for the vendor. It passes on the subject matter of the sale (or supply) to the purchaser. It receives the consideration from the purchaser. Subject to retaining its own commission, it is obliged to account for that consideration to PPS or Optus Mobile or Virgin Mobile, as the case may be. 118Thus, had the subject matter of the supply been physical goods, there could be no question of irretrievability unless and until the goods, or an item of goods, were placed into the ownership and possession of a purchaser. Until that notional sale of notional goods occurred, Optus Mobile or Virgin Mobile, as the case may be, would have the right, upon termination of the agreement between it and BXP, to retake possession of the goods (subject, of course, to intervening rights of third parties which took priority for whatever reason). 119Analogy is at best a tool of analysis, and does not of itself dictate the resolution of the issue. Further, where analogy is used as a tool of analysis, there is a risk that the resolution of the issue may be taken from the analogy, rather than from such light as the analogy may show on the principles thrown up, the resolution of which is required to resolve the issue. In this case, nonetheless, the analogy of a sale of goods does seem to me to assist in resolving issue 2 as between Atradius, Optus Mobile and Virgin Mobile. 120As between Optus Mobile and Virgin Mobile on the one hand, and BXP on the other, there is no sale: whether of physical property, or rights, or services, or things in action. BXP is their agent, and as I have said its role is to bring them into a contractual relationship with purchasers who will avail themselves of the pre-paid access to the relevant telecommunications network represented by an individual e-voucher. Once a purchaser has paid the appropriate amount and obtained access to the telecommunications network, the transaction as between the telecommunications provider and that purchaser is complete. In a practical sense, the rights conferred by the e-voucher are irretrievable. But until that happens, the e-vouchers (or the data that is transmitted by Optus Mobile or Virgin Mobile to BXP, which in turn is recorded in individual e-vouchers) remain the property of the supplier. The only right that BXP had was a right to deal with them on the terms of the relevant contract between it and the supplier. 121Thus, it seems to me, applying the concept of shipment as best one can to the particular contracts with which this dispute is concerned, and likewise trying to accommodate the concept of irretrievability to those contracts, there is no irretrievable shipment unless and until the rights conferred by a particular PIN, as recorded in a particular e-voucher, are bought by a consumer. When that happens, the contract for sale between the supplier and that consumer is complete, and the consumer is entitled to use those rights notwithstanding any possible default of the agent. But unless and until that happens, the rights may be negated, as the evidence showed, by cancellation of the PINs. 122Because there is no sale by Optus Mobile or Virgin Mobile to BXP, and because the true obligation of BXP is more in the nature of an obligation to account, it seems to me that the insured obligation (the payment obligation of BXP to the relevant supplier) is one that arises only when, in terms of the supply agreement between the supplier and BXP, BXP becomes liable to pay. That liability arises only after the e-vouchers have been sold, and the relevant supplier has invoiced BXP for the net proceeds of sale of all e-vouchers sold during the relevant preceding period of time. 123All that is a very long-winded way of saying that, in my view, the "goods" (the e-vouchers) remain retrievable in terms of the policy unless and until a consumer buys them, and becomes entitled to the rights that they convey. They are retrievable in a legal sense because the obligation of the supplier to make the benefit of those rights available to the consumer arises only on payment by the consumer. And they are retrievable in a practical sense because PINs can (or could) be deactivated. 124Equally, because there is no sale by the relevant supplier to BXP, the payment obligation is one that arises, in terms of the supply agreement, only after the e-vouchers have been sold and the supplier invoices BXP for the proceeds of sales. 125Two things follow, in my view. First, on termination of the sub-agency agreement, Optus Mobile was entitled to deactivate the unsold PINs. Secondly, such sales of PINs to consumers as occurred thereafter were not sales on the terms of the sub-agency agreement. It follows in turn that the invoices that were issued thereafter (at least, for sales that occurred after termination) were not capable of creating insured obligations for the purposes of attracting liability under the policy. 126There was no submission that any different analysis should apply as between Virgin Mobile and BXP. Nor is there any support, in the evidence, for any such different analysis. 127It follows, in my view, that issue 2 should be answered "no". Issue 3: misrepresentation and non-disclosure The proposal form 128On 5 July 2007, Mr Stuart Anderson of the broker sent an email to Mr Blair McQuade of PPS enclosing, among other things, a draft of the proposal form. Mr McQuade was then the senior commercial manager of PPS and, either then or shortly after, acted as its managing director for a time. Mr McQuade had substantial responsibility within PPS and the Optus companies generally for placing the insurance. 129The draft proposal sent by Mr Anderson to Mr McQuade on 5 July 2007 included a question three, inquiring as to experience with the "Buyer". The word "Buyer" (with or without an initial capital letter) is used by Atradius to denote the entity whose payment obligations to the insured are the subject of insurance. To divert for a moment: some trade insurance policies may be a "whole of account" insurance, under which all debts owed to the insured (or all debts over a certain minimum) are insured. Others may insure some selected portion of the insured's debtors: for example, the top 5 or the top 10. A third alternative is what was known as "single buyer" insurance, where the obligations of one debtor only are the subject of the insurance. The form of proposal was designed for this third alternative. 130Mr Anderson had inserted some proposed answers to some of the questions within section 3 of the draft proposal. I set out that part of the proposal form as it was sent to Mr McQuade on 5 July 2007: 3.Your experience with the buyer What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates, and dates of cleared funds? Have you ever experienced any difficulties in certification procedures or payment delays in dealings with this buyer? If so, please provide details. No Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Do you sell to any related companies which are related to the buyer? If so, which ones? Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No Have you ever purchased credit insurance before on this buyer? If so, please name the insurance provider and state whether any claims were made. No 131Mr McQuade and Mr Anderson met on 21 August 2007. Mr Anderson brought to the meeting a revised draft proposal form, updated from the version earlier sent to Mr McQuade. 132Mr McQuade discussed the revised proposal form with Mr Anderson and made some handwritten changes to it. Following the meeting, Mr Anderson took the form (with Mr McQuade's handwriting on it) away. 133I set out section 3 of the revised proposal form. The material that is underlined was written on the proposal form by Mr McQuade at the meeting of 21 August 2007: What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates of cleared funds? Highest outstanding balance = $27M (PPs) $5m (Virgin) $6M (Optus) (Approx) Credit Terms now 21 days with weekly settlement Customers has not been 7 days from due date VMA Terms, Optus terms Have you ever experienced any difficulties in certification procedures or payment delays in dealings with this buyer? If so, please provide details. No, up to 7-10 days on occasion Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Yes, in bringing them from 28-21 days Do you sell to any related companies which are related to the buyer? If so, which ones? No Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No Have you ever purchased credit insurance before on this buyer? If so, please name the insurance provided and state whether any claims were made. No 134The next day, Mr Anderson sent an electronic copy of the proposal form, purportedly updated to reflect what had been discussed the day before, to Mr McQuade. Mr McQuade read through the form and made changes to it. It seems to be common ground that, in all, he made 83 changes. Many of those changes related to parts of the form other than section 3; but he made 11 changes in all to section 3. Most of the changes generally, and all but one in relation to section 3, were what Mr McQuade described as "formatting". Specifically, he converted the answers to each question to italics, so that they could be distinguished from the question. The only change of substance was to insert the words "seven days Virgin" in relation to Credit Terms. 135As corrected (or formatted) by Mr McQuade, section 3 read as follows: 3.Your experience with the buyer What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates, and dates of cleared funds? Highest outstanding balance = $27M Prepaid, $5M Virgin, $6M Optus Approx. Credit Terms 21 days with weekly settlement for Prepaid and Optus, 7 days Virgin Customers has traded 7-10 days from due date on occasion Have you ever experienced any difficulties in certification procedures or payment delays in dealing with this buyer? If so, please provide details. Yes - in reducing payment terms from 28 days to 21 days Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No Have you ever purchased credit insurance before on this buyer? If so, please name the insurance provider and state whether any claims were made. No 136After making those changes, Mr McQuade printed out the form, signed it and, presumably, returned it to Mr Anderson. 137Mr McQuade's affidavit evidence did not refer to making changes to the form before he signed it. He said (affidavit sworn 21 December 2010, para 60) simply that Mr Anderson sent him a revised draft of the proposal, which he signed. Mr McQuade was asked in chief whether he wished to make any corrections to para 60, and did so by correcting subpara (a). However, in cross-examination, he revealed that he had also made changes to the form of the document that had been sent to him by Mr Anderson on 22 August 2007. He accepted that by his affidavit he was saying that the form of proposal that he signed was the form emailed to him by Mr Anderson (T314.41-.44), but added that he "formatted" the document (T315.3). Mr McQuade's evidence as to why he did not notice what he had said in his affidavit were errors in the document that he signed, and make changes, was less than convincing (see, generally, T315 and following). The answers said to be false, misleading or incorrect 138Atradius pointed to three incorrect answers in he proposal form that Mr McQuade signed which, it said, were false and knowingly so. Taking them in the order in which they appear in the form, the first is the answer that BXP "has traded 7 - 10 days from due date on occasion". The second is the statement that the difficulties in payment delays experienced were "in reducing payment terms from 28 days to 21 days". The third is the answer "no" to the question concerning, among other things, "a payment plan". The parties' submissions 139Mr Newlinds submitted first that those answers were incorrect or, as he put it "false". Secondly, he submitted, they were false to the knowledge of Mr McQuade. Alternatively, he submitted, Mr McQuade was reckless in answering them the way he did without causing further checks to be made. 140Mr Gleeson submitted that whether or not the answers were incorrect, they were not knowingly or recklessly so. As to whether they were incorrect, he submitted that the first and second were either appropriate, or not inappropriate, to describe the trading relationship between PPS (in particular) and BXP; or, alternatively, were so vaguely and ambiguously worded as to have put Atradius on inquiry. In this context, and to look forward for a moment, Mr Gleeson submitted that it was appropriate to consider all the answers together, and not to look at them individually. 141Mr Gleeson did not submit that the answer in relation to payment plans was correct. Nor did he explain how it, standing alone, could be ambiguous. Decision 142I start with the answer: Customers has [sic] traded 7 - 10 days from due date on occasion. 143In my view, the plain English meaning of that sentence, infelicitous as its expression may be, is that the late trading referred to: (1)marked the outer limits of the extent to which BXP had been late in meeting its payment obligations; and (2)did so only "now and then", or occasionally (i.e. "irregularly and infrequently".) 144The quoted phrases come from the Australian Oxford Dictionary (2nd Edition) and relate respectively to "on occasion" and "occasional". It may be noted that, at least since the 18th century, "occasional" has connoted "incidental; casual". See Johnson's Dictionary of the English Language (1st quarto edition, 1820). 145In my view, any attempt to read the answer as referring to virtually continuous late payment, not limited to 7 to 10 days overdue, stretches the language used beyond the limits of its resistance. 146Nor is there any doubt that the answer, read as I think plainly it should be read, was incorrect. There were many occasions on which BXP traded more than 7 to 10 days late; and there were very few occasions when it did not trade at least within that range of tardiness. 147The plaintiffs called expert evidence from Ms Jennifer Hookey, an accountant and a director of the firm known as McGrath Nicol Forensic. Ms Hookey analysed the history of payments between PPS and BXP. An uncontested analysis of her evidence is that: (1)on average, BXP paid 8.5 days late. (2)of some 626 invoices listed, about 70% were paid late. (3)about one-third of those late invoices were 11 or more days late. (4)of the invoices that fell within the 1 to 10 day range, most were paid 10 days late. (5)55% of all the invoices examined were paid 10 or more days late. 148That material shows clearly the inadequacy of the answer give by Mr McQuade: in particular, the implication that payments were no more than 7 to 10 days late and, moreover, that they were only 7 to 10 days late every now and again, or irregularly or infrequently. 149I move to the answer "yes - in reducing payment terms from 28 days to 21 days". 150I do think that there is an element of ambiguity in this answer. It is unclear whether the reference to "payment terms" was intended to describe the contractual terms (which, as between PPS and BXP, were also 21 days) or the actual terms (which were more like 28 days). In context, I think that the former is the correct understanding, if only because, in relation to "Credit Terms", the answer given was "21 days with weekly settlement for pre-paid...": clearly, in context, a reference to the contractual terms of payment. 151If that is the correct analysis of the answer, then it was incorrect, because there were not, nor ever had there been, 28 day payment terms. The difficulty that had been experienced was in getting BXP to pay in accordance with the terms of the sub-agency agreement and not, as habitually it did, late. 152I turn the answer relating to, among other things, payment plans. It was common ground that the answer was incorrect. That was because, on no less than three occasions between 2005 and 2007, PPS had put BXP on a "payment plan". As Mr Newlinds submitted, the phrase "payment plan" is "an expression used to describe an arrangement between a debtor and a creditor to reduce accumulated overdue indebtedness" (written closing submissions, para 85). Mr Gleeson did not submit to the contrary. 153Nor can there be any doubt that there were, to the knowledge of PPS, three such arrangements. Each of the arrangements on which Atradius relied was described, in the documents of PPS, as a payment plan. Again, Mr Gleeson did not submit to the contrary. 154The first payment plan was negotiated on 3 November 2005. BXP was then indebted to PPS in the amount of $15.3 million, of which $11.4 million was within terms and the balance overdue by 7 days. BXP promised to pay $5 million by 20 December 2005. It did not. However, by dint of additional payments, it reduced the overdue debt to about $54,000.00 by 22 December 2005. 155The second payment plan was made in mid to late 2006. As at 12 August 2006, BXP owed PPS $19.8 million. $15.1 million was within terms. The balance was overdue by 7 days. BXP offered to make three payments, each of $3 million, within 90 days, to reduce its indebtedness to "invoice plus 14 days". Those payments were not made, but it appears that BXP did take steps to bring its debts under control. By 20 December 2006, there was about $5 million overdue. PPS required BXP to make three additional payments, each of $3 million, by March, April and May 2007, over and above what was invoiced. BXP did not do so but, at least until late February 2007, did manage to keep its overdue debt to about $5 million. 156On 22 February 2007, BXP owed PPS $26.6 million. $16.1 million was within terms and the balance was overdue. Since PPS invoiced BXP for $5 to $6 million per week (representing sales), it followed that the overdue amount represented some debt overdue by about 7 days (or 1 to 7 days) and some by about 14 days (or 8 to 14 days). 157BXP proposed to pay five additional weekly payments, each of $1 million. Those payments were made. 158Thus, there were three "payment plans". One - the last - was complied with. One was not. One - the first - was not, at least to the letter; but I think it is fair to say that there was substantial compliance. 159Nonetheless, the reality is that none of that history of payment plans was disclosed; and on the contrary, the answer given denied that there had been any such arrangements. 160Mr McQuade's evidence was that he intended the answer "customers has traded 7 - 10 days from due date on occasion" to respond to the question relating to "difficulties in certification procedures or payment delays. Further, he said, the answer "yes - in reducing payment terms from 28 to 21 days" was intended to respond to the question that asked, among other things, about payment plans. 161This aspect of Mr McQuade's evidence is supported by the handwritten changes that he had made to the draft document in conference with Mr Anderson on 21 August 2007 (see at [130] and [131] above). I accept it. 162I find it very difficult to understand how Mr McQuade, who impressed me as a careful, indeed meticulous, person, could have failed to notice the apparent errors in the final version of the proposal form that was sent to him for checking and signature. That difficulty is compounded by the fact that, clearly, Mr McQuade went carefully through the document, corrected a number of typographical and spelling mistakes, made formatting changes throughout, and then printed and signed the document without (on his evidence) noticing that the answers had been transposed. 163It was put that the great majority of the changes made by Mr McQuade were either purely formatting changes (for example, changing the printing of the answers to italic font) or correction of obvious errors (for example, correcting the spelling of "suplied" to "supplied". I do accept that the majority of the changes made by him could be so described. But, nonetheless, I find it very difficult to accept that a person giving careful attention to the form would not have noticed the changes from the handwritten draft. In saying this, I accept that Mr McQuade did not have the handwritten draft (or handwritten amended draft) with him when he checked, printed and signed the document. 164Further, it is clear that, although Mr McQuade was well aware that BXP had been a most unsatisfactory debtor, and that there had been a discussion as to whether or not the plaintiffs should cease trading with it, nonetheless he had answered the relevant questions from his memory of recent trading experience, and had not undertaken, nor caused to be undertaken, any checks of the actual payment history. 165In this context, I do not accept that anyone with Mr McQuade's knowledge of the trading history of BXP could have thought it proper to describe the habit of late payment as being "on occasion", so as to convey the impression that late payment (not of more than 7 to 10 days duration) was the exception rather than the rule; or incidental or casual. 166Finally, and given that Mr McQuade was aware that the answers provided by Mr Anderson had been shown to be inadequate, I find it difficult to accept that he could have thought it proper to check the form, but not the substance, of the proposal before he printed it, signed it and sent it off. 167I do not find that Mr McQuade signed the proposal form knowing it to be false in any respect, or that he did so intending thereby to mislead and deceive Atradius. 168There were, as I have indicated, passages of difficulty in Mr McQuade's evidence. For example, one would have expected him to refer in chief to the fact that he had considered and changed the proposal form before printing and signing on 22 August 2007. 169An explanation for this, and probably other, matters is that Mr McQuade did not have any great actual recollection of the events of which he gave evidence. His account was reconstructed from the various documents (which of course provide a useful contemporaneous record of what had been done) and from his understanding of his regular practice. But, for example, his regular practice was to read documents carefully before signing them; and if he done so on this occasion, he must have realised that the document he was signing was incorrect in important ways. If one accepts that he did not sign the document knowing that it was wrong, then it must follow that he signed it without checking it carefully: that is to say, that he signed it without following his usual procedure. In those circumstances, "usual procedure" may not be a reliable aid to memory. 170The real question is whether Mr McQuade was reckless in the way that he checked, printed and signed the proposal form. In my view, the facts justify the conclusion that he was. 171First, he had received two prior drafts of the proposal form from Mr Anderson. It was apparent to Mr McQuade that each of those prior drafts was incorrect in significant respects. Relevantly, on 21 August 2007, Mr McQuade made substantial handwritten changes to the information provided by Mr Anderson. In those circumstances, I think, common sense dictates that he should have checked the final revised document carefully, to ensure that the changes had been made faithfully, before signing it. 172Secondly, and for the reasons that I indicated a moment ago, it is apparent that Mr McQuade did not follow his usual procedure of checking the draft carefully before he signed it. Had he done so, he would have realised that it was, still, incorrect. 173Thirdly, on Mr McQuade's own evidence, it is apparent that he paid more attention to matters of form, and trivial detail, than to matters of substance. That does not seem to me an appropriate approach to a document that he must have recognised was of importance. 174Fourthly, (although this does not relate to the actual signing of the document, but rather to the mode of its preparation), I think that Mr McQuade was reckless in failing to make proper checks as to BXP's payment history. Mr McQuade knew that BXP had been a most unsatisfactory debtor. It was his responsibility to deal with BXP, and to try to bring it into line. He knew that opinions had been expressed within Optus as to the undesirability of being exposed to an unsatisfactory customer such as BXP. Mr McQuade knew, further, that the fundamental reason for taking out credit insurance was to cover the risk of default and that this was, in the eyes of senior personnel within the Singtel Group, a serious risk. (The answer given, in relation to payment history, could not possibly stand with that opinion.) In those circumstances, to answer a question as to payment history without undertaking, or causing to be undertaken, detailed investigations does was an entirely inadequate and hence entirely inappropriate course to follow. 175Fifthly, and despite Mr McQuade's protestations to the contrary, I do think that he was keenly aware that his seniors within the Singtel Group (in particular, Ms Jeann Lowe, who was the chief financial officer, based in Singapore) were extremely keen to have the insurance placed, and would be extremely displeased if it were not. Whilst I am not prepared to move from this to a conclusion that Mr McQuade deliberately allowed a false proposal form to go forward under his signature, I do think that it may have contributed to an excessive laxness in checking the draft, and a departure from his normal practice of doing so carefully. 176For those reasons, I conclude that the proposal form was wrong, and recklessly so, in respect of the first and third answers to which I have referred at [138] above. 177Further, as I have noted, on a strict reading the second answer also was incorrect. But the element of ambiguity in that answer is such as to lead me to doubt that it could be properly be characterised as one made with reckless indifference to its truth or otherwise. 178Issue 3 should be answered "yes" in relation to the first and third answers, and that the misrepresentation should be regarded as one made in each case with reckless indifference to its truth or otherwise, and thus fraudulent. Issue 4: nondisclosures 179The nondisclosures are summarised in the statement of this issue. In brief, for the reasons I have just given, this issue should be answered "yes" in relation the first two non-disclosures alleged. 180The third relates to a "working capital hole". There is no doubt that officers of BXP were aware of this, and were of the view that it could not be fixed by more borrowings. However, I do not think that the failure to disclose this can be classed as a non-disclosure, fraudulent or otherwise. It is an opinion based on analysis of the financial records of BXP. So far as PPS and its officers were concerned, Atradius had access to the same material. It was in as good as position as they were to reach conclusions about what was disclosed by that material. 181For the same reasons, I do not think that there was a non-disclosure in relation to the opinions "very serious" and "dicey". Even if the duty of disclosure is to be taken as extending to disclosure of opinions - a matter that was argued, but on which it is unnecessary to express a view - the basis on which the opinions were formed was available to Atradius, and Atradius could form its own opinions on the basis of that material. Indeed, Ms Jane Johnson of Atradius appears to have formed her own opinion, when, with some degree of litotes, she expressed the view in an email to Ms Joanne Shaw that BXP was "maybe not a jewel". Issues 5 &6: waiver and estoppel 182The plaintiffs rely on ss 21(2)(c), 21(2(d), 21(3) and 27 of the Insurance Contracts Act. Sections 21 and 27 read as follows: INSURANCE CONTRACTS ACT 1984 - SECT 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. (2) The duty of disclosure does not require the disclosure of a matter: (a) that diminishes the risk; (b) that is of common knowledge; (c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or (d) as to which compliance with the duty of disclosure is waived by the insurer. (3) Where a person: (a) failed to answer; or (b) gave an obviously incomplete or irrelevant answer to; a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter. INSURANCE CONTRACTS ACT 1984 - SECT 27 Failure to answer questions A person shall not be taken to have made a misrepresentation by reason only that the person failed to answer a question included in a proposal form or gave an obviously incomplete or irrelevant answer to such a question. 183In brief, the case that the plaintiffs seek to make out is that Atradius had sufficient information as to the financial position of BXP, from sources other than the plaintiffs or their broker. 184Alternatively, the plaintiffs submit, the answers given to the relevant questions in the proposal from were manifestly incomplete, but nonetheless disclosed a problem without disclosing the details. 185Whatever the merits of this case may be in relation to the first two answers, it can have no relevance to the non-disclosure of the three payment plans - indeed, the denial that there had been any such payment plans entered into between BXP and PPS. 186In the circumstances, I do not propose to analyse the relevant material in detail. I deal with the relevant facts when considering the question of reliance (the seventh issue). 187Atradius had become aware, well before it went on risk, that the payment history of BXP was far less satisfactory than shown by the answer to the first of the questions referred to at [138] above. In brief, Atradius had received, on 12 July 2007, a copy of BXP's management accounts as at April 2007. Those accounts were analysed, in particular by Mr Li-Ren Choo of Atradius, who was the "buyer owner". The expression "buyer owner" was used within Atradius to denote a particular employee whose responsibility it was to monitor information about a particular buyer. A simple analysis of those accounts, particularly compared to the six monthly accounts as at December 2006 and the yearly accounts as at June 2006, would have shown that BXP was trading well over 7 to 10 days late, and the extent of the delays in payment were such that it was highly unlikely to have been happening nearly "on occasion". 188Mr Newlinds submitted that this information had not come to the attention of the decision-making officers of Atradius. That does not seem to me to be relevant. It was material available to Atradius, and analysed by it. If, for whatever reason, the analysis did not make it through to the decision makers, that is hardly a matter for which BXP should be held liable. 189Further, Atradius had information which showed that the contractual payment terms for PPS were 21 days, not 28 days. Thus, it could hardly have interpreted the second of the answers referred to at [138] above as referring to an attempt to reduce the contractual terms of payments from 28 to 21 days. 190To the extent that there was a separate estoppel case raised, it was presumably based on the proposition that the answers were manifestly incomplete, and thus in effect that Atradius, having had the answers and having failed to take any further steps, was estopped from asserting their inaccuracy. It is not necessary to consider whether or not that is so for the first or second of the answers. It is manifestly incorrect for the third. There is nothing ambiguous about the word "no". 191I conclude, in the circumstances, that s 21(2)(c) applies to the first two answers referred to at [138] above but that none of the provisions relied upon in respect of these issues apply to the third. Issues 5 and 6 should be answered accordingly. Issue 7: reliance The operational structure of Atradius 192To understand the parties' submissions on this issue, it is necessary to know a little about the way that Atradius carried on its business. 193Atradius seems to have its base in the United Kingdom, with offices in London and Cardiff. It operates in more than 40 countries worldwide. Mr Mark Magee, who is the senior manager of Atradius' special products analysis's team, said that Atradius writes approximately 30% of all trade credit insurance policies written globally. 194Because the business of Atradius is insuring credit liabilities, its underwriting processes involve two separate strands. One, referred to as credit underwriting, involves an assessment of the risk against which insurance is sought. As I have noted already, those risks may be "whole of account insurance" or "single buyer insurance" or something in between. For example, a company may wish to ensure its top 5 or top 10 debtors against default. 195Single buyer policies are also known as special products. It is of course of key significance to Atradius to assess the buyer whose obligations are to be the subject of the insurance, so as to form an estimate of the risk. 196The second strand of underwriting is called "policy underwriting". That includes contact with the proponent or broker; assessment of the risk from a commercial (as opposed to a credit) perspective; settling the terms of the policy; reviewing the terms on which the proponent contracts; and settling the premium. 197For single buyer insurance, both credit underwriting and policy underwriting are engaged. In Australia, Atradius employs personnel responsible for credit analysis (for the purpose of credit underwriting), for credit underwriting and for policy underwriting. 198Atradius' regional offices are responsible for analysis of buyers within their jurisdiction. In the present case, because BXP was an Australian (listed) company, the Sydney office of Atradius was responsible for monitoring its financial performance. A "buyer owner" was assigned to monitor the position of BXP, and its performance was monitored by the local credit committee, frequently referred to as the "LCC'. The responsibilities of the LCC including fixing, for each buyer, a review limit (frequently referred to as an RL) specifying the total amount of insurance that could be written, worldwide, to cover the obligations of that buyer. 199As a matter of course, credit underwriters and policy underwriters in regional offices of Atradius were given authority limits. When the subject policy was underwritten, Mr Peter Athaide was the credit underwriter in the special products division in Australia. Mr Athaide could approve policies with a limit of cover for a single buyer of €5m, provided that the RL was not exceeded. Applications for a higher limit of cover required the approval of Mr Magee in Cardiff. 200At the relevant time, Ms Shaw was a policy underwriter in the special products division of Atradius in Australia, and held the position of head of special products for Australia. She reported to Ms Johnson in London, who was director, special products, for Northern Europe and the Asia - Pacific Region. 201Ms Shaw had an approval limit of either $5m or €5m. (The evidence and submissions on this point are not entirely clear, but since the amount for which Optus sought insurance in respect of BXP comfortably exceeded either limit, the point need not be pursued.) Thus, in respect of the subject transaction, Ms Shaw was required to seek the approval of Ms Johnson. 202I mention at this point that there appears to have been some confusion between Ms Shaw and Ms Johnson in relation to the latter's approval. Ms Shaw thought that she had obtained this approval at some stage during the process of communication with Ms Johnson. Ms Johnson did not think that she had given approval at that time. But on any view, the policy was written. And on any view, when Ms Johnson later came to Australia, she either authorised or ratified the policy underwriting decision that Ms Shaw had made. I do not think that anything turns on this. 203Thus, the following points emerge from the evidence (and I shall confine these conclusions to the Sydney office of Atradius): (1)policy underwriting decisions were made either by or under the supervision of Ms Shaw, up to her approval limit; if that approval limit were exceeded, Ms Shaw would seek and obtain the consent of Ms Johnson up to her approval limit. (2)RLs for particular buyers were set by the LCC, and reviewed from time to time on the basis on information and analysis provided by the buyer owner. (3)Credit underwriting approvals, within the overall RL, were made by Mr Athaide up to his approval limit; if that limit were exceeded, Mr Athaide would seek and obtain the approval of Mr Magee up to his approval limit. (4)A single buyer policy would not be issued unless both policy and credit underwriting approvals were in place. 204Some of the submissions for Optus appeared to conflate the differing processes within Atradius. However, in my view, the evidence shows that the distinctions between policy and credit underwriting, and between the limit-setting function of the LCC and the approval function of the credit underwriter or Mr Magee, were significant, and were observed in the day to day operations of Atradius. The significance of payment plans 205I propose to move straight to, and to deal in detail only with, this topic. The issues that were argued, on the question of reliance, went far beyond payment plans. However, the evidence of the detailed reviews carried out by the buyer owner, Mr Choo, and by the members of the LCC, satisfies me that Atradius, through those officers, was well aware of the true state of affairs in relation to the BXP's payment history. 206Further, it is clear that Mr Choo received and analysed not only the statutory annual and semi-annual accounts of BXP, but also had access to its quarterly management accounts for the three months ended 30 March 2007. Those management accounts provided further corroboration (if it were needed) of the comprehensive inability (or unwillingness) of BXP to pay its trade creditors within the agreed trading terms. 207Mr Choo and the LCC were either aware, or on that material must have been aware had they turned their minds to the question, that BXP was effectively using its trade creditors to fund its expansion. Mr Magee, when cross-examined on the relevant material, accepted that this was plain. 208Finally, Mr Magee accepted, on the basis of the relevant material, that BXP had a significant "working capital hole": a shortage of working capital to fund its operational needs and expansion. Again, if Mr Choo and the LCC were not actually aware of this, there is no doubt that they would have become aware had they turned their minds to the question. 209Thus, for this issue as for the previous issue, the real point is in relation to the non-disclosure of payment plans. The evidence of Ms Shaw 210I start with the evidence of Ms Shaw, because it was she who reviewed the proposal before the policy incepted. In my view, Ms Shaw was a witness who sought to the best of her ability to give truthful and accurate evidence. However, as she acknowledged, she was giving her evidence based not on any actual recollection of the detail but on reconstruction, based in turn partly on relevant documents that had been shown to her and partly from her recollection of her usual business practices at the time. (Ms Shaw has since left the employ of Atradius, and is employed in a senior position with an Australian bank.) 211I do not think that it matters a great deal that Ms Shaw was giving evidence based on reconstruction. There are two questions on which her evidence is of key importance. The first is whether in fact she read the proposal form, including specifically the answer in relation to payment plans. I am satisfied that Ms Shaw did in fact read it. She impressed me as a careful and conscientious person. I do not accept that she would have given the final "tick" to a substantial risk (a policy limit of $30m) without reading the proposal form, as undoubtedly her usual practice would have required. 212The second question of key significance to which Ms Shaw's evidence is relevant is: what would have happened had the truth, in relation to payment plans, been disclosed? Ms Shaw said, in substance, that if the true position had been disclosed, she would have concluded that there was a real risk that, in the future, BXP might not be able to meet its payment obligations, and that she would have reviewed her recommendation to Ms Johnson that policy underwriting approval should be given. 213In this hypothetical situation - what would have happened if the truth had been revealed? - it is clear that Ms Shaw's evidence can only be hypothetical. In this section of her evidence, she is not dealing with events that happened; and thus, whatever limitations apply, respect of past events, to evidence based on reconstruction is not relevant. 214One of the attacks made on Ms Shaw's evidence was based on the fact that she spent only a brief time - less than half an hour - reviewing the proposal and material submitted with it. That material included at least a copy of the sub-agency agreement. However, in relation to the proposal form, Ms Shaw made the point that (obviously enough) she was thoroughly familiar with the questions asked. She said, further, that the review was a matter of looking for irregularities or inconsistencies (T131.40-.46). Although that answer was given in relation to trading experience and payment patterns, it does in my view give a clue as to the way in which Ms Shaw approached her task. She was looking, not so much to ensure that the material was consistent with what she knew; but, rather, to see if anything stood up to her as being inconsistent; or if an answer were a "red flag". 215In this context, Ms Shaw said that payment plans were conceptually far more serious than payment delays. She said (T138.7-.19): ... payment plans are pretty serious. Trading experience and payment delays, you know, are your first layer of concern, but formal changing of payment plans to meet age of debt and continued a supply is a far more serious matter. 216I accept that evidence. To my mind, it accords with common sense and the probabilities. 217Ms Shaw was unable to point to any specific prior experience with disclosure of payment plans, or to any underwriting direction concerning that topic. Nonetheless, I am satisfied that she had an understanding of what was involved; and that as she said, in the passage that I have just quoted, she understood that payment plans were a matter of serious concern. 218I should deal with three specific challenges that were put to Ms Shaw (over and above the point that her evidence was based on reconstruction rather than recollection). The first was, in substance, based on the proposition that her reconstruction was influenced, unconsciously or otherwise, by her knowledge that there had been a very large loss on the policy (see, generally, T137-138). It was put specifically to her that in those circumstances her conduct in allowing the risk to go forward "is something that is, at least, capable of criticism" (T137.39). She rejected this: There is nothing in the proposal that is inconsistent with the other information that had been provided up to that point. 219I accept that evidence. I should note that it was following, and as part of, this exchange that Ms Shaw gave the evidence that payment plans were far more serious than trading experience. 220It was then put to Ms Shaw that she could not put her hindsight knowledge - that there was a very large claim on a policy that she had recommended for approval - out of mind when giving her evidence. She accepted that this was so (T138.12-.20). Her readiness to accept this confirms my impression of her as a witness who sought to be truthful. 221The second specific challenge was based on the proposition that, matters having gone as far as they did, she would not have changed her recommendation (T143.44-144.11). Ms Shaw said, and I accept, that she had no problem with reversing her recommendation. I set out that passage: Q. In all the circumstances I have put to you, you are not able to say reliably that you would have changed your position from one of active support of this policy to a recommendation that Atradius should not proceed with the policy? A. If I receive information that is adverse, whether it is on the proposal, as it was not indicated or, indeed, from some other source, then, yes, I don't have a problem whatsoever in reversing my recommendation to not proceed. Q. My question was specific. In the light of this risk and the circumstances we have addressed today and your behaviour as I have sought to characterise it with you, you can't reliably say that, in the circumstances of the additional information you identify, you would have recommended to other people within Atradius not to proceed with this policy? A. I disagree. The information, those five, six points that you made at the outset, ten, fifteen minutes ago, I agree with those conclusions and statements and assumptions in isolation, but when you receive additional information that is contrary to what you have otherwise been told, or received, be it internal or external, then, as it is, you know, sufficiently adverse, then I don't have a problem with reversing my recommendation. 222The third specific challenge was based on the proposition that Atradius was keen to gain the whole, or at least more, of the trade insurance business of Optus. There is no doubt that Ms Shaw and others saw the transaction as strengthening the relationship between Atradius and Optus (see, for example, T89.10-.14). It was put to Ms Shaw, and she agreed as a matter of fact, that the premium proposed to be charged was reduced over time, and that Atradius became aware of the possibility that Optus might take its business to a competitor, Zurich (see, generally, T88-90). 223Thus, Ms Shaw accepted that she was keen to write the policy, and to expand the relationship between Atradius and Optus (see T140.44-141.1). 224Those matters, and others, were relied upon in support of the submission that Ms Shaw could not adhere to the proposition that she would have changed her position from one of support for the policy to a recommendation that it not proceed, had the proposal form accurately answered questions 1 and 3, thus disclosing adverse information. It was in this context that Ms Johnson gave, and repeated, the answers that I have set out at [221] above. 225The submission was put that I should infer, from the evidence to which I have referred, that the decision taken by Atradius would not have altered had the questions been answered correctly. I do not accept that submission. It is inconsistent with the evidence of Ms Shaw, which I accept. It is also inconsistent with the evidence of Ms Johnson and Mr Magee, to which I turn to in a moment. 226I conclude, based on my overall acceptance of Ms Shaw's evidence that: (1)had the proposal form made the disclosures that should have been made (for the form to be accurate and truthful) in relation to payment plans, Ms Shaw would have noticed them; and (2)in those circumstances, Ms Shaw would not have signed off on the issue of a policy, but would have contacted Ms Johnson to see if the information that, hypothetically, had been disclosed made any difference to the policy underwriting approval that had been given. 227Thus, I conclude, the non-disclosure was material at least in relation to Ms Shaw, and that to the extent that Ms Shaw was responsible for the issue of the policy, she would not have permitted the policy to be issued without seeking the approval of her superiors. The evidence of Ms Johnson 228Ms Johnson said, in effect, that if the correct answers had been given in relation to payment plans, and if (as I find would have happened had that been done) Ms Shaw had referred to her the question of whether the policy should proceed, she would have declined to approve the policy. Ms Johnson gave the following reasons in support of that position (statement dated 2 November 2010, para 11): 11.The reason that I would have declined to approve the Policy is because it is my view that in a debtor/creditor situation such as that described in Jo Shaw's email to me on 17 July 2007 (at tab 1), I cannot imagine any justification for the payment plan or plans which would make the risk one I would be prepared to underwrite. Based on my understanding that the role of Bill Express was to collect and forward payments to Optus after the cards were reconciled on a monthly basis, then the existence of a payment plan indicated that Bill Express was using money collected on behalf of Optus to meet other debts or for other unknown purposes. This should, however, have been a cash-positive business. Furthermore, Optus was a critical and constant supplier who should have been able to command adherence to its payment terms. For these reasons, I would have formed the view that Bill Express was unacceptable credit risk and that the credit relationship with Optus had not been in full control considering the nature of the trade. I would have considered that the buyer's requirement for payment plans took place in a business context which simply failed to justify this. I would also have considered the repayment plans to be an alarming indication of the buyer's financial status as well as an indication of a less than rigorous credit management by the potential insured. Either of these factors alone would have made the risk fundamentally not underwritable. 229There were some difficulties in relation to Ms Johnson as a witness. In general terms, it seemed to me that she was from time to time willing to overstate matters, in a way favourable to Atradius, only to be compelled, in the course of testing, to resile to some extent. Again, there were passages in her evidence where, to my mind (both listening to her as she gave evidence and on reading the transcript later), she would not make concessions that should properly have been made. 230Nonetheless, I accept the central thrust of her evidence: that if there had been proper disclosure in relation to payment plans, she would not have accepted the risk. I say that because it seems to me to accord with common sense. Further, I do not regard the difficulties with Ms Johnson as a witness as justifying the wholesale rejection of her evidence, and I observe that the difficulties do not seem to me to impeach this central aspect of her testimony. 231Finally, in this context, to the extent that the challenge was based on the proposition that the relevant material was either known or knowable to Mr Choo and the LCC (see, for example, T208-209), that does not seem to me to have a great deal of relevance to Ms Johnson's own views, nor to her evidence as to how she would have reacted if a truthful answer had been given, and relayed to her, in relation to payment plans. 232Thus, I accept this aspect of Ms Johnson's evidence, and conclude based on it that had the correct position in relation to payment plans been disclosed, she would have either revoked or in effect suspended the policy underwriting approval that she thought that she had been given. Putting the matter in terms of Ms Shaw's evidence, I am satisfied if a correct answer had been given in relation to payment plans: (1)as I have said, Ms Shaw would have noticed this and referred it to Ms Johnson; and (2)upon that referral, Ms Johnson would have made sure that the policy did not issue at least until the matter had been more thoroughly been investigated. 233The second conclusion draws attention to the fact that, as the evidence ultimately demonstrated, final responsibility for a decision would have rested with Mr Magee. That is because the information that should have been (but was not) disclosed was relevant to the credit underwriting process in particular, and Mr Magee was for present purposes the senior person, having the relevant authority to approve (or to withhold approval). The evidence of Mr Magee 234The third witness called who gave evidence on this point was Mr Magee. Mr Magee said, in substance, that if the relevant material had been put to him (being the documents that show the negotiation and existence of the payment plans) he would not have underwritten the policy unless satisfied as to certain matters (see his statement dated 2 November 2010, paras 42 to 47). I note that, in paragraphs 47 of his statement, Mr Magee said (as Ms Shaw had said in her oral evidence) that he regarded payment plans as a serious matter. 235I set out para 45 of Mr Magee's statement (which sets out the conclusions he would have reached based on a review of the documents evidencing the payment plans) and paras 46 and 47 (which set out his evidence as to his reaction to those conclusions and the reasons for it): 45.If I had reviewed this information prior to the time the Policy was issued I would have concluded that: (a)Prepaid had entered into a number of payment plans with Bill Express; (b)Prepaid was in contact with Bill Express about Bill Express' inability to pay its debts on time; and (c)Bill Express' payment problems were ongoing. 46.If, prior to the time the Policy was issued, I was informed that Prepaid had entered into payment plans, I would not have underwritten the Policy unless I was absolutely satisfied that: (a)there were reasons to explain why Prepaid had put Bill Express on payment plans that were unconnected with the financial position or Bill Express; or (b)the issue which caused Prepaid to enter into the payment plans with Bill Express had been finally resolved and were very unlikely to recur; and (c)the customer had improved their internal credit control procedures to spot potential payment problems as early as possible so that these could be dealt with in the most effective way possible. 47.The reasons that I would not have underwritten the Policy are otherwise the same as those I have set out in paragraph 40 above, the only difference being that I regard entering into payment plans as even stronger evidence of a high insolvency risk or future problems, because there is rarely any explanation for a payment plan other than that the buyer does not have the financial resources to pay its debts on time. 236I accept this aspect of Mr Magee's evidence. Indeed, I accept Mr Magee as a witness who, in general, sought to give truthful and accurate evidence. I do so notwithstanding that, as Mr Gleeson pointed out in submissions, that there were aspects of his evidence where he overstated matters and then had to resile to a certain extent. I do not regard those matters as impairing Mr Magee's credibility. On the contrary, I regard his willingness to make concessions, when confronted with a good reason to do so, as supporting my conclusion that he sought to give truthful and actual evidence. 237Further, Mr Magee presented as a careful, competent and experienced senior credit underwriter. I have no doubt that he was thoroughly conversant with the relevant material. I have no doubt that he was aware of the significance of payment plans. I have no doubt, had a correct answer been given in relation to payment plans and had that been conveyed to him (as it should have been), he would have acted as he said, in para 46 of his statement dated 2 November 2010, he would do. 238In this context, I do not accept that Mr Magee's position or function was of some secondary or minor kind. On the contrary, he was the senior person in the credit approval stream of the special products division, just as Ms Johnson was the senior person in the policy underwriting stream. (In each case, of course, there were limits of authority, and higher authorities residing elsewhere; but the particular proposal did not invoke the need to go beyond Mr Magee and Ms Johnson.) In the ordinary way, material relevant to credit underwriting approval should have gone to Mr Magee. Had it done so (and I am satisfied that a correct answer, disclosing the existence of the payment plans, would have done so), then his central significance becomes clear. Conclusion 239I accept that Atradius was keen to gain the business of Optus, or at the very least to improve its business relationship with Optus. I accept that relevant officers within Atradius saw the subject policy as a means to gaining more business, and improving the relationship. But I do not accept that Atradius would have entered into a policy, with a substantial (if not very high) risk of a loss up to $30 million, simply to gain more business in the future. As Mr Newlinds pointed out in submissions, it would take many years of claim-free trading to make good a loss of that magnitude. 240In all the circumstances, I am satisfied, and conclude, that if correct answers had been given in relation to the question asking for details of payment plans, Atradius would not have issued the policy when it did. I conclude further that in this respect Atradius did rely on the answers that were in fact given, in deciding to issue the policy. 241Issue 7 should be answered accordingly. 242What might have happened, if the correct answers had been given, is a matter of speculation. I incline to the view that, as Mr Magee said, a policy might have been issued (on unspecified terms and at an unspecified premium rate) had there been given an explanation, satisfactory to Mr Magee, of the payment plan issue. But since the evidence and submissions did not cover that point, it is unnecessary to go further. Issue 8: application of a payment of $5 million 243Optus (which raised this issue) accepted that the sum of $5 million received from BXP on 29 April 2008 should be applied to the earliest outstanding invoices. Accordingly, this issue should be answered "yes". Issue 9: the "Angeco" payments 244This issue arises against the background referred to at [20] and [94] to [99] above. 245Once Optus and PPS terminated the sub-agency agreement, the business of BXP was unsustainable. Attempts were made to find additional funds, either by way of equity investment or by way of loan; or to sell the core business. BXP continued to trade, on the basis that (so far as Optus and PPS were concerned) sales were made on a COD basis. 246To facilitate this, a company known as Angeco Pty Ltd was introduced into the relationship. Angeco placed orders with Optus for e-vouchers. When Optus was in a position to fulfil the orders, Angeco arranged or made the COD payments required. The e-vouchers, however, were transmitted by Optus direct to BXP. BXP dealt with them in the way that it had done before termination of the distribution agreement. 247The issue relates to some seven payments. Two of them are characterised as payments made by BXP at the direction of Angeco. The other five were made by Angeco itself. 248The first payment was made on about 6 June 2008. Three weeks earlier, on 9 May 2008, BXP had paid an amount of about $2.3 million to PPS, on account of an order that BXP had placed earlier that day. PPS said that it would not fulfil that order until a new standstill agreement was negotiated. In the event, PPS did not fulfil the order and, I think, the correct analysis is that the payment remained held by PPS in escrow. Thereafter, on 6 June 2008, BXP directed PPS to apply the payment against Angeco's liability for an order that Angew had placed, in respect of which Angew was liable to pay. 249There seems to be little doubt that the payment was applied in accordance with BXP's direction. In those circumstances, it seems to me, the payment must be characterised as one made on account or towards satisfaction of a liability owed by Angeco, and not as a payment in discharge or reduction of any liability owed by BXP. 250The second payment was made on 24 June 2008. Angeco had placed orders with Optus and was liable to pay. The e-vouchers that were ordered were for delivery to BXP. Angeco directed BXP to pay the invoiced amount for the e-vouchers. BXP did so. The payment was made for the purpose of discharging, and did discharge, the liability of Angeco to make that payment. In those circumstances, again, the payment cannot be characterised as one made in reduction of any liability then owed by BXP. 251As I have indicated, the remaining five payments were made by Angeco itself. Each was made in discharge of a liability incurred by Angeco for orders placed by it. Each of those orders related to e-vouchers to be supplied to BXP. 252Mr Newlinds submitted that the payments made by Angeco to Optus were in substance payments made for and on behalf of, and thus by, BXP to Optus. Thus, he submitted, they fell to be dealt with under general condition C of the policy. 253I do not agree. On the evidence, the orders were placed by Angeco and it was Angeco that incurred the obligation to pay. True it is that, by arrangement, the orders were performed by delivery of the e-vouchers to BXP, presumably at the direction of Angeco. But that does not seem to me to matter. The significant point, in my view, is that the contract was one made between Optus and Angeco, and that it was Angeco that had the liability to pay Optus for the e-voucher that were delivered to BXP. 254There is no evidence that BXP incurred any liability, either primary or secondary, to Optus, for the e-vouchers, that were sold whilst the Angeco arrangements were in place. There is no evidence that Angeco contracted as agent on behalf of BXP, so as to make BXP liable. 255On the contrary, I think, the arrangements were put in place (for Angeco to be responsible for the payments) for least two reasons. The first was to enable Optus to have both continuing sales of airtime and an assurance of payment. The second was to enable the payments to be quarantined, to avoid any question of the order of application of those payments. That question was not only relevant in the context of the policy. It would also become relevant if, the payments not being otherwise specifically appropriated, they were dealt with as between Optus and BXP on the basis that they should be applied to the earliest outstanding obligations. If that were to happen, there could be real questions as to the ability of Optus to retain the benefit of those payments in the event that (as seems to have been the case) BXP was insolvent at the time the payments were made, and in the event that (as happened) it went into liquidation. On the structure that was adopted, no such risk existed. 256This issue should be answered "no". Issue 10: warranty A 257This issue too, and the following issue, arise against the background recited at [20] and [94] to [99] above. 258Warranty A is not clearly drafted. For present purposes, however, it required the plaintiffs, on becoming aware of circumstances that could result in a "Loss", to take reasonable measures to prevent or minimise that Loss. Those measures might include, but extend beyond, termination of the shipment of goods or performance of services under the contract with the buyer. 259Warranty A provided that Atradius might agree to the plaintiffs' acting otherwise if the circumstances engaged in the warranty arose. In this case, Atradius did consent to continued trading between the plaintiffs and BXP on the terms of the standstill agreement. However, the complaint, in relation to warranty A, relates not to trading under the standstill agreement but to the failure of the plaintiffs to take reasonable measures to recover, or otherwise render valueless and unsaleable, PINs, or e-vouchers, that had been delivered by them to BXP prior to termination of the sub-agency agreement, and which remained unsold (i.e., which had not been bought by consumers) at that date. 260At this point, I remind myself that the distribution agreement between Virgin Mobile and BXP was not terminated. On any view, however, Virgin Mobile must have been aware of the termination of the sub-agency agreement either at the time it occurred or very shortly thereafter. 261Mr Gleeson submitted that the position adopted by Optus and PPS - that BXP should return most of the stock supplied to it, but could keep some, and could buy more on a COD basis - was reasonable. In his submission, it "reasonably balanced the desire to reduce PPS and Optus's exposure to BXP, whilst still allowing it to continue to trade in the hope that its situation would improve" (written closing submissions, para 171). 262Mr Gleeson noted that Atradius agreed with the general strategy, although he accepted (correctly) that those indications of agreement were limited to trading on a "pre-payment", or COD, basis. It does not seem to me that this can be taken as some indication that Atradius consented to the wider strategy, in effect of permitting some continuity of stock supply to BXP by permitting it to hold and sell e-vouchers that had been delivered prior to termination. 263The purpose of warranty A is to impose obligations on the plaintiffs, as the insured, to take steps to reduce any insured loss once they become aware of a situation that might give rise to such a loss. Thus, it is a warranty inserted for the protection of Atradius. It is not a warranty designed to facilitate the continuation of business relationships between the plaintiffs as insured and BXP as the "Buyer" whose obligations are the subject of the insurance. 264Accordingly, it does not seem to me to be a reasonable justification, for the strategy adopted by the plaintiffs, that it might enable BXP to trade out of its situation. Their obligation was to take steps to minimise the insured loss. They believed that BXP was insolvent. They must have appreciated that there was a real risk that BXP would not be able to pay for any stock held by it, at the date of termination of the sub-agency agreement, which it "sold" to consumers thereafter. In those circumstances, it seems to me, the obvious and proper step to take, in performance of the obligations imposed by warranty A, was to require the return of unsold e-vouchers, and to take steps to cancel the PINs the subject of those e-vouchers if they were not immediately returned. 265In those circumstances, I conclude, there was a breach of warranty A. 266Mr Gleeson submitted that, if I were to come to that conclusion, there was, in any event, either no loss flowing from the breach, or alternatively a loss far less substantial than Atradius claimed. In support of this submission, he relied on an analysis of the levels of indebtedness, as between BXP and each of Optus, PPS and Virgin Mobile, at the date of termination of the sub-agency agreement and at the date when BXP fell under external administration. 267As Mr Gleeson accepted, any concluded analysis of that submission depends on findings as to who was insured under the policy, and what were the obligations insured. Since, on the conclusions to which I have come, the submission is entirely moot, and since its resolution does not depend on the resolution of any other contested issues of fact, I propose to do no more than record what I have set down and move on. 268So far, I have analysed the position in terms of the relationship between PPS and Optus on the one hand, and BXP on the other. As I have noted, the position of Virgin Mobile is factually different, since it did not take steps to terminate its distribution agreement with BXP. Since no one contended that this was of any significance, or that any different analysis applied in the case of Virgin Mobile, the conclusion that I have reached (as to breach of warranty A, although not as to any consequences) applies to it also. 269Issue 10 should be answered "yes, but it is unnecessary to reach a conclusion on the monetary consequences." Conclusion and orders 270It follows from my conclusions on issues 3, 5, 6 and 7 that Atradius is entitled to avoid the policy for fraudulent non-disclosure (of the payment plans). Alternatively, if that non-disclosure were not fraudulent, Atradius would be entitled to reduce its liability under the policy to nil. In that hypothetical situation, there is no evidence of any other, lesser, remedy that might be appropriate (see at [242] above). 271In those circumstances, there is no point in tracing through the arithmetical consequences of my conclusions on issues 1 (in either of its formulations), 2 and 8 to 11. 272It follows that the plaintiffs' claim on the policy fails. 273I make the following orders: (1)direct entry of judgment for the defendant on the plaintiffs' claim. (2)Order the plaintiffs to pay the defendant's costs of the proceedings. (3)Order that the exhibits 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. Decision last updated: 08 June 2012