Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 Hearing dates: 18 March 2013 Decision date: 01 November 2013 Before: Beazley P at [1]; McColl JA at [2]; Meagher JA at [244] Decision: (1) Confirm the leave given to Horsell on 18 March 2013 to amend the amended notice of appeal to include ground 8 in terms of the further amended notice of appeal. (2) Appeal and cross-appeal dismissed. (3) Appellant pay the costs of the respondents (Dive Two, Mr Todd and Liberty) of the appeal and cross-appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: INSURANCE - construction of insurance policy - insuring clause - whether first and second respondents entitled to indemnity from third respondent - policy cover for claims arising "in connection with the Insured's Business" - injury and damage caused during recreational boat trip - whether trip in connection with insured's business INSURANCE - construction of insurance policy - exclusion clause - dangerous navigation - Crimes Act 1900 s 52B - whether second respondent's conduct "criminal act or omission" for purposes of exclusion clause - whether act needs to be intentional NEGLIGENCE - insurance broker - duty of care - retainer - whether insurance broker failed to advise of deficiencies in policy Legislation Cited: Civil Liability Act 2002 Crimes Act 1900 Crimes Act 1958 (Vic) Insurance Contracts Act 1984 (Cth) Motor Traffic Act 1909 Cases Cited: Australian Associated Motor Insurers Ltd v Wright (1997) 70 SASR 110 Australian Aviation Underwriting Pty Limited v Henry (1988) 12 NSWLR 121 Australian Breeders Co-Operative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 BHP Billiton Iron Ore Pty Ltd v National Competition Council [2008] HCA 45; (2008) 236 CLR 145 Burrows v Rhodes [1899] 1 QB 816 Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; (2007) 69 NSWLR 120 CGU Insurance Ltd v Porthouse [2008] HCA 30; (2008) 235 CLR 103 Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 Charter Reinsurance Co Ltd v Fagan [1997] AC 313 Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 Elkateb v Lawindi (1997) 42 NSWLR 396 Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57 Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513 Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 898; [1967] 2 Lloyd's Rep 1 Fraser v The Irish Restaurant & Bar Company Pty Ltd [2008] QCA 270 Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1990) 6 ANZ Ins Cas ¶61-012 Gibb v Commissioner of Taxation (Cth) [1966] HCA 74; (1966) 118 CLR 628 Gilmore v AMP General Insurance Co Ltd (1996) 67 SASR 387 Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 Halford v Price [1960] HCA 38; (1960) 105 CLR 23 Hatfield v Health Insurance Commission (1987) 15 FCR 487 HP Mercantile Pty Ltd v Commissioner of Taxation [2005] FCAFC 126; (2005) 143 FCR 553 James v British General Insurance Co Ltd [1927] 2 KB 311 Jiminez v The Queen [1992] HCA 14; (1992) 173 CLR 572 Johnson v American Home Assurance Company [1998] HCA 14; (1998) 192 CLR 266 Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 King v The Queen [2012] HCA 24; (2012) 245 CLR 588 Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 McBride v The Queen [1966] HCA 22; (1966) 115 CLR 44 McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) [2011] NSWCA 315; (2011) 81 NSWLR 690 Mersey Docks and Harbour Board v Henderson Brothers (1888) 13 App Cas 595 Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556 Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad [1989] HCA 32; (1989) 167 CLR 219 Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149 QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166 R v Brown [1996] 2 WLR 203; [1996] 1 All ER 545 R v Coventry [1938] HCA 31; (1938) 59 CLR 633 R v De Montero [2009] VSCA 255; (2009) 25 VR 694 R v Jurisic (1998) 45 NSWLR 209 R v Khazaal [2012] HCA 26; (2012) 86 ALJR 884 R v Orcher [1999] NSWCCA 356; (1999) 48 NSWLR 273 R v Reynolds [2010] NSWSC 691 R v Warner (1991) 25 NSWLR 382 RAA-GIO Insurance Ltd v O'Halloran [2007] HCATrans 688 RAA-GIO Insurance Ltd v O'Halloran; Australian Kitchen Industries Pty Ltd v O'Halloran [2007] SASC 245; (2007) 98 SASR 123 Ramco Ltd v Weller Russell & Laws Insurance Brokers Ltd [2008] EWHC 2202 (QB); [2009] Lloyds Rep IR 27 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336 Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 56 FCR 236 Sydney Local Health Network v QY [2011] NSWCA 412 Taciak v Commissioner of Australian Federal Police (1995) 59 FCR 285 Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 Thomas v State of New South Wales [2008] NSWCA 316 Tinline v White Cross Insurance Association Ltd [1921] 3 KB 327 Transfield Services (Australia) Pty Ltd v Hall; Hall v QBE Insurance (Australia) Pty Ltd [2008] NSWCA 294; (2008) 75 NSWLR 12 Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181 Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226 Watts v Perry [1972] 1 NSWLR 73 Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 Xerri v Kingmill Pty Ltd [1998] NSWSC 573; (1998) 25 MVR 569 Y.Z. Finance Co Pty Ltd v Cummings [1964] HCA 12; (1964) 109 CLR 395 Texts Cited: D Derrington and R Ashton, Law of Liability Insurance, 2nd ed (2005) LexisNexis Butterworths K Lewison and D Hughes, The Interpretation of Contracts in Australia (2012) Thomson Reuters (Professional) Australia Limited K Sutton, Insurance Law in Australia, 3rd ed (1999) LBC Information Services Second Reading Speech for the Crimes (Dangerous Driving) Bill, Victorian Legislative Assembly, Parliamentary Debates (Hansard), 3 June 2004 Second Reading Speech of the Hon Michael Egan MLC, Criminal Legislation Further Amendment Bill, New South Wales Legislative Council, Parliamentary Debates (Hansard), 17 April 1996 Category: Principal judgment Parties: Horsell International Pty Ltd - Appellant/First Cross-Defendant Divetwo Pty Ltd - First Respondent/Cross-Claimant William Todd - Second Respondent/Cross-Claimant Liberty Mutual Insurance Co - Third Respondent/Second Cross-Defendant Representation: Counsel: S Donaldson SC with G M Drew - Appellant Dr C J Birch SC with P Lowson - First and Second Respondents J Sexton SC with D Macfarlane - Third Respondent Solicitors: Clyde & Co - Appellant Slater & Gordon - First and Second Respondents Riley Gray-Spencer - Third Respondent File Number(s): CA 2012/73365 Publication restriction: No Decision under appeal Citation: Lane v Dive Two Pty Ltd [2012] NSWSC 104 Date of Decision: 2012-02-24 00:00:00 Before: Adamson J File Number(s): SC 2008/289706 HEADNOTE [This headnote is not to be read as part of the judgment] Dive Two Pty Ltd ("Dive Two"), the first respondent, conducted a scuba diving business. On 29 July 2006, Mr William Todd, the second respondent and sole director of Dive Two, was navigating a vessel owned by Dive Two when it collided with a fishing boat driven by Mr Rian Lane, the plaintiff. Mr Lane was seriously injured. At the time of the accident, Mr Todd was engaged in a recreational boat trip. Mr Todd pleaded guilty to the offence of dangerous navigation causing grievous bodily harm in s 52B(3)(b) of the Crimes Act 1900. Mr Lane commenced proceedings against Dive Two and Mr Todd for negligence. Dive Two and Mr Todd cross-claimed against Liberty Mutual Insurance Company ("Liberty"), the third respondent, seeking an indemnity against their liability to Mr Lane under a policy of insurance between Dive Two and Liberty. In the event that the policy was found not to respond, Dive Two and Mr Todd cross-claimed against the insurance broker that placed the policy, Horsell International Pty Ltd ("Horsell"), the appellant, for damages commensurate with any award to Mr Lane. Mr Lane's claim was settled and judgment was ordered against Dive Two and Mr Todd. The cross-claims were then litigated. The primary judge dismissed the cross-claim against Liberty on the basis that the policy did not respond but upheld the alternative claim against Horsell for damages for negligence and breach of contract. Horsell appealed against this decision contending the policy did apply and, in any event, that it did not act negligently or in breach of contract. By way of cross-appeal, Dive Two and Mr Todd submitted that if Horsell's appeal as to the construction of the policy was upheld, they were entitled to be indemnified by Liberty. By notice of contention, Liberty challenged the primary judge's ruling that an exclusion clause in the policy which excluded liability for any "criminal act or omission" did not apply. The appeal raised three issues for determination: (1) Whether the claim fell within the insuring clause of the policy; (2) Whether the claim was excluded by reason of the exclusion clause in the policy; and (3) Whether Horsell was liable for negligence or breach of contract. The Court dismissed Horsell's appeal, Dive Two and Mr Todd's cross-appeal. It also ordered that Horsell should pay the costs of Dive Two, Mr Todd and Liberty of the appeal and cross-appeal. Held per McColl JA and Meagher JA (Beazley P agreeing) In respect of (1) (i) The insuring clause provided that the policy covered liability for compensation payable as a result of a claim against the insured for injury and/or damage arising "in connection with the Insured's Business". In construing the insuring clause, the definition of the term "Insured's Business" has to be read into the operative text of the policy: [158], [262]. The ordinary meaning of the words "Insured's Business" is also relevant to the construction of the insuring clause: [159], [264]. Principal cases considered: Halford v Price [1960] HCA 38; (1960) 105 CLR 23; Gibb v Commissioner of Taxation (Cth) [1966] HCA 74; (1966) 118 CLR 628; Gilmore v AMP General Insurance Co Ltd (1996) 67 SASR 387; Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216; Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101; Sydney Local Health Network v QY [2011] NSWCA 412. (ii) The primary judge's unchallenged finding was that the trip in which Mr Lane was injured was a recreational one: [72]. There was not a sufficient connection between the activity engaged in and the "Insured's Business" for the claim to fall within the insuring clause: [178], [263]. Principal cases considered: HP Mercantile Pty Ltd v Commissioner of Taxation [2005] FCAFC 126; (2005) 143 FCR 553; RAA-GIO Insurance Ltd v O'Halloran; Australian Kitchen Industries Pty Ltd v O'Halloran [2007] SASC 245; (2007) 98 SASR 123; Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390; R v Khazaal [2012] HCA 26; (2012) 86 ALJR 884. In respect of (2) (i) The term "criminal act or omission", construed in the context of the phrase in which it appears and the nature and object of the contract, refers only to an intentional criminal act or omission: [272]. Principal cases considered: Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513; Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 898; [1967] 2 Lloyd's Rep 1; Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500; Australian Aviation Underwriting Pty Limited v Henry (1988) 12 NSWLR 121; Xerri v Kingmill Pty Ltd (1998) 25 MVR 569. (ii) The offence of dangerous navigation under s 52B(3) of the Crimes Act 1900 is determined objectively and does not require the offender to have intended the results of the act: [200], [269]. It was open to the primary judge to find that Mr Todd's conduct was not intentional: [221], [270]. The primary judge did not err in concluding that the exclusion clause did not operate to exclude the claim: [230], [275]. Principal legislation and cases considered: Crimes Act 1900 ss 52A, 52B; McBride v The Queen [1966] HCA 22; (1966) 115 CLR 44; R v Warner (1991) 25 NSWLR 382; Jiminez v The Queen [1992] HCA 14; (1992) 173 CLR 572; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579; R v De Montero [2009] VSCA 255; (2009) 25 VR 694; R v Reynolds [2010] NSWSC 691; King v The Queen [2012] HCA 24; (2012) 245 CLR 588. In respect of (3) (i) Horsell owed a duty to Dive Two both in contract and tort to exercise all reasonable care and skill in advising and placing the policy: [236] per McColl JA. Horsell was negligent in failing to make clear to Dive Two and Mr Todd that the policy did not cover liability arising from activities that were not connected to Dive Two's business: [239], [279]. Principal cases considered: Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556; Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57; Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1990) 6 ANZ Ins Cas ¶61-012; Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; (2007) 69 NSWLR 120; Ramco Ltd v Weller Russell & Laws Insurance Brokers Ltd [2008] EWHC 2202 (QB); [2009] Lloyds Rep IR 27; Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 (Comm). Judgment INDEX BEAZLEY P: 1 McCOLL JA: 2 Statement of the case 7 BACKGROUND 14 Dive Two and the PADI Asia Pacific Watertight Liability Insurance Programme 14 Insurance contracts entered into by Dive Two/Mr Todd 24 (a) The Watertight Policy 24 (b) Hull insurance 35 Summary: policies held 43 Events following 2003 45 The Master Policy 53 THE PRIMARY JUDGMENT 64 Was the Claim Covered under the Policy's Insuring Clause? 64 Was the Claim Excluded by Reason of Exclusion Clause 7.24? 77 Was Horsell Liable for Breach of Contract or Negligence? 81 ISSUES ON APPEAL 97 SUBMISSIONS 101 Horsell's submissions: construction of the Policy (grounds 1 and 2) 101 Dive Two's submissions: construction of the Policy (grounds 1 and 2) 109 Liberty's submissions: construction of the Policy (grounds 1 and 2) 112 Liberty's submissions: construction of clause 7.24 112 Dive Two's submissions: construction of clause 7.24 122 Horsell's submissions: retainer/duty issue (grounds 6 and 7) 129 Dive Two's submissions: retainer/duty issue (grounds 6 and 7) 135 CONSTRUCTION OF THE POLICY 151 General principles 151 The insuring clause 158 Ambit of the appeal on the exclusion clause issue 179 Operation of the exclusion clause 191 The nature of the offence of dangerous navigation 193 The decisions in Henry and Xerri 204 Conclusion: operation of clause 7.24 219 LIABILITY OF HORSELL 231 Relationship between Horsell and Dive Two 232 Duty of an insurance broker 234 ORDERS 242 MEAGHER JA: 243 Issues in the appeal 252 Construction and application of the insuring clause 256 Construction and application of exclusion clause 7.24 266 Breach of duty and negligence of Horsell 276 1BEAZLEY P: I have had the advantage of reading in draft the reasons of McColl JA and of Meagher JA. I agree with both of their Honour's reasons. I agree with the orders proposed by McColl JA. 2McCOLL JA: Mr William Todd, the second respondent and sole director of Divetwo Pty Ltd ("Dive Two"), the first respondent, was navigating a dive vessel owned by Dive Two when it collided with a fishing boat owned by Rian Lane (the "plaintiff") on 29 July 2006. Mr Lane was seriously injured. He commenced proceedings against Dive Two and Mr Todd (hereafter referred to as "Dive Two" unless the context requires they be differentiated) to recover damages in respect of his injuries. Pursuant to a policy of insurance (the "Policy") placed by Horsell International Pty Ltd ("Horsell"), the appellant, an insurance broker, Dive Two cross-claimed against Liberty Mutual Insurance Company ("Liberty"), the third respondent, seeking indemnity in respect of any damages that might be awarded to the plaintiff. Dive Two also cross-claimed against Horsell to recover damages commensurate with any award to the plaintiff in the event it was found the Policy did not respond. 3The plaintiff's case was settled (on a basis which resulted in a judgment against both Dive Two and Mr Todd). The issues raised by the cross-claim were then litigated. 4Adamson J dismissed Dive Two's claim against Liberty on the basis that the Policy did not cover the accident. However, her Honour awarded Dive Two damages against Horsell for negligence and breach of contract for failing to warn it of the deficiencies in the Policy: Lane v Divetwo Pty Ltd [2012] NSWSC 104. 5Horsell appeals against this decision contending the Policy did apply and, in any event, that it did not act negligently or in breach of any retainer. By way of cross-appeal, Dive Two and Mr Todd submit that if Horsell's appeal as to the construction of the Policy is upheld, they are entitled to be indemnified by Liberty. By notice of contention Liberty challenges the primary judge's ruling that an exclusion clause (7.24) in the Policy did not apply. 6For the reasons which follow I am of the view that Horsell's appeal and Dive Two's cross-appeal should be dismissed and that Liberty's notice of contention should be rejected. Statement of the case 7On 29 July 2006, the plaintiff sustained serious injuries when Dive One, a 7.5 metre aluminium dive vessel owned by Dive Two and driven by Mr Todd, collided with his fishing boat on the Myall River. Dive Two carried on a scuba diving business trading under the business name "Dive One". 8When the accident occurred, Mr Todd was taking a group of passengers for an afternoon boat trip. The purpose of the trip was contested at trial. However, it was uncontested that none of the six people on the boat trip went scuba diving or swimming that afternoon and that there was no scuba gear on the boat: primary judgment (at [74], [82]). 9Mr Todd was charged with, and pleaded guilty on 6 November 2006 to, the offence of dangerous navigation occasioning grievous bodily harm in s 52B(3)(b) of the Crimes Act 1900 in respect of the accident: primary judgment (at [11] - [13]). He was sentenced on 24 September 2007 and required to enter a bond for two years: primary judgment (at [11] - [13]). He was also charged with what the primary judge described (at [12]) as "a lesser charge of negligent navigation in breach of Water Traffic Regulations s 3(1)", however it was common ground before her Honour and in this Court that the dangerous navigation offence was the relevant offence for the purposes of determining whether cl 7.24 applied. 10The details of the s 52B(3)(b) charge recorded in the Court Attendance Notice as set out by her Honour (at [11]) were: "... between 4:00 pm and 5:50 pm on 29/07/2006 at Hawks Nest [Mr Todd] did dangerously navigate a vessel, to wit, 'Dive One' a 7.45 m aluminium dive vessel, when it was involved in an impact occasioning grievous bodily harm to Rian Lane, and at the time of impact the said William Andrew Todd was navigating the vessel at a speed dangerous to other persons." 11As I have said, the plaintiff's claim against Dive Two was resolved by the second day of the hearing of the matter before Adamson J. Her Honour ordered judgment for the plaintiff on 7 February 2012 in a specified sum: primary judgment (at [3]). 12Dive Two cross-claimed against Liberty and Horsell for the following sums: (a) the amount of the judgment given in favour of the plaintiff and the plaintiff's costs as agreed or assessed; (b) compensation paid in respect of damage to the boat with which Dive One collided ($5,500); and (c) legal costs Mr Todd paid for representation in respect of the criminal charges arising from the collision ($11,275). 13Dive Two contended that it was covered by the Policy for the amounts it was liable to pay the plaintiff and, if the Policy did not cover that liability (and some other incidental sums referred to in [12] (b) and (c)), Horsell had acted in breach of retainer and/or its duty of care to Dive Two in advising and placing the Policy. BACKGROUND Dive Two and the PADI Asia Pacific Watertight Liability Insurance Programme 14The Professional Association of Diving Instructors is a recreational diving association whose members include dive instructors, dive masters, dive resorts, dive shops and dive educational facilities. PADI Asia Pacific Pty Ltd ("PADI") provides services to members of the Professional Association of Diving Instructors throughout the Asia Pacific region. Members of the Professional Association of Diving Instructors have the opportunity to join the PADI International Resort and Retailer Associations ("IRRA"). 15Dive Two was incorporated in February 2002. Mr Todd, who became the sole director of Dive Two from around August 2002, joined PADI in his personal capacity in or about April 2002. Dive Two became a member of PADI and joined the IRRA around six months later. 16Horsell had been the insurance broker for PADI since about 2001: primary judgment at [151]. According to the evidence of Mr Gavan Keith Duffy, a director of Horsell, Horsell was authorised, in accordance with an agreement "issued" by PADI in around January 2005 (the "Horsell agreement"), to negotiate and effect certain insurance policies in the name of PADI and all members who elected to be covered: primary judgment at [159]. The Horsell agreement was not formally executed but, it was accepted at trial and on appeal, was treated as binding by both Horsell and PADI. 17Clause 2 of the Horsell agreement relevantly provided: "Engagement and Appointment of HI [Horsell International] For the term of this agreement PADI: 2.1 Appoints HI as their official insurance broker to manage and arrange any of its own Insurance requirements. 2.2 Authorises HI to negotiate and effect the insurance policies listed in SCHEDULE 1 PART 1 in the name of PADI and all members electing to be covered by any of those policies. 2.3 Authorises HI to offer members other insurance products, policies and services listed in SCHEDULE 2, which will receive the endorsement of PADI. ..." 18The Schedules referred to in cls 2.2 and 2.3 provided: "SCHEDULE 1 PART 1 - INSURANCE POLICIES 1. PADI MEMBERS WATER TIGHT INSURANCE PLAN Criminal Defence/Broadform Liability/Professional Indemnity Personal Accident and Equipment 2. PADI DIVE CENTRES & RESORTS MEMBERS WATER TIGHT INSURANCE PLAN Broadform Liability/Professional Indemnity ... SCHEDULE 2 PART 1 - INSURANCE POLICIES All classes, types and forms of insurance policies (excluding Travel) and services. PART 2 - ADMINISTRATION FEES As agreed from time to time in writing between the parties." 19Although "issued" in January 2005, it is apparent from what follows that the Horsell agreement embodied the manner in which PADI and Horsell had conducted their relationship for some years prior to its preparation and, relevantly, during the period Mr Todd and Dive Two were members of PADI. 20Horsell developed an insurance policy for PADI called the PADI Asia Pacific Watertight Liability Insurance Programme (the "Watertight Policy") with the professed aim of making it easier for PADI's members to obtain competitively priced insurance. In or about late 2002, Horsell negotiated a master policy of insurance with Liberty. The master policy expired on 30 September every year. Horsell also negotiated renewal terms annually with Liberty on behalf of PADI. 21PADI's marketing department handled the renewal of the Watertight Policy and the forwarding of information about it to PADI members. Horsell only had direct contact with PADI's members about the Watertight policy in limited circumstances. However, as is apparent from cl 2.3 of the Horsell agreement, Horsell was also authorised to market other insurance products to PADI members. It had direct contact with PADI members, including Dive Two, in that context. 22Horsell designed and paid for marketing materials including a brochure describing the policy that bore PADI's and Horsell's logos. PADI distributed the brochures to its members: primary judgment [174]). 23The brochures issued in respect of the 2004/2005 and 2005/2006 years identified as a benefit of the policy "liability of water craft up to 12 metres in length" and answered the frequently asked question: "Does the public liability policy cover the liability of the dive boats we own and operate?", "Only if the vessel is under 12 metres in length ...": primary judgment (at [161]). Insurance contracts entered into by Dive Two/Mr Todd (a) The Watertight Policy 24In his 17 May 2011 trial statement, Mr Todd said that he was aware at the time he started his business that he needed to have adequate public liability insurance for the activities associated with Dive One. He accordingly made enquiries with PADI about insurance coverage. He said that he spoke with the Coordinator for PADI IRRA in or around April 2002 and was informed that the Watertight Policy would cover him for all public liability issues. He also said he discussed the policy with the local Area Manager of PADI who said words to the following effect: "The [Watertight Policy] will cover you for anything that you need. You won't need any other insurance." 25Dive Two's first amended statement of cross-claim ("FASCC") alleged: "52. On or about June 2002 Dive Two and/or Mr Todd retained Horsell to advise them as to the insurance cover they should obtain in regard to the business of Dive Two and the use by it of its vessel. ... 55. Horsell represented to Dive Two and/or Mr Todd that: (a) the Watertight Policy provided adequate public liability insurance (b) there was no need to have separate public liability insurance through the boat insurance. PARTICULARS Facsimile dated 3 March 2003 from Horsell to Mr Todd with quotation for Dive Boat insurance. 56. In consequence of the giving of the advice referred to in paragraph 55 above Horsell undertook a duty of care to Dive Two and/or Mr Todd to ensure that the advice given by him was accurate as to the adequacy of the insurance which he proposed. 57. Mr Todd relied on that representation and cancelled, or did not renew, public liability insurance attached to his boat insurance." 26I assume the date referred to in paragraph 52 of the FASCC refers to what appears to have been Mr Todd's first engagement with Horsell when, on 26 June 2002, he took out "personal insurance" issued by Horsell in the form of the Watertight Policy to cover his liability as Dive Master/Instructor. This policy originally covered the period from 1 July 2002 to 31 December 2002 but was renewed annually until at least 2007. 27At the end of 2002, Mr Todd received a letter on Horsell's letterhead dated 23 December 2002 enclosing the 2003 Watertight Policy Application. The letter described the benefits of the Policy, including that it provided "[c]over for hull liability up to a maximum boat length of 12 metres". At around the same time, he received a brochure from PADI entitled "2003 PADI Watertight Insurance Programme - Information for PADI Asia Pacific Members". The brochure bore both PADI and Horsell's logos and included the latter's address and contact details. 28Under the heading "Other Insurance Policies", the brochure advised the reader to "contact Horsell International if you would like more information about the following insurance policies, which have been designed specifically for PADI members". One of the policies so identified was "Boat Insurance". 29Mr Todd contacted the PADI Area Manager again after receiving these documents and enquired about the coverage of the Watertight Policy. He said the Area Manager said words to the following effect: "The Watertight Policy is a 'complete package'. You won't need to do anything else in regards to public liability. Your boat is less than 12 metres in length, you will have coverage for any public liability arising from the boat on top of coverage for public liability attached to the activities you undertake on the boat". 30Mr Todd then took out the Watertight Policy for the period 31 December 2002 to 30 September 2003. The policy insured Dive One, which, it will be recalled was Dive Two's business name, for "professional liability, public and products liability and criminal defence costs". 31Mr Todd received a renewal letter dated 25 September 2003 from Horsell which stated that the Watertight Policy provided: "Third Party Liability coverage for all owned vessels up to 12 metres in length whilst used in connection with the following activities: Diving, Snorkelling, Swimming, Fishing, Whale Watching and Site [sic, as in original] Seeing Activities." 32Mr Todd renewed the policy in September 2003, then annually until at least 30 September 2007. 33 Mr Todd said that as he had the Watertight Policy he did not renew the comprehensive hull insurance policy he had with Associated Marine Insurers Agents which included public liability coverage: (see [36] below). He said he "understood [he] would have complete coverage under the new policy." 34Horsell was paid a broker's fee of $612.26 in respect of the Watertight Policy Dive Two held for the period from 1 October 2005 to 30 September 2006: primary judgment at [159]. (b) Hull insurance 35Dive Two bought Dive One, which was 7.5 metres long, in or about March or April 2002. Dive One was then located in Melbourne. Mr Todd insured the boat prior to having it transported on a trailer from Melbourne to Nelson Bay through Roderick Insurance Brokers ("Roderick"). Roderick arranged a Pleasure Craft Insurance - Commercial Hull Policy for Dive One through QBE/Mercantile Mutual Marine Insurance with an insurance period from 13 April 2002 to 13 April 2003. This policy did not include public liability insurance. 36On 11 October 2002 Mr Todd cancelled the Commercial Hull Policy arranged for Dive One's transport to Nelson Bay. He took out a comprehensive hull insurance policy for the boat arranged through Roderick with Associated Marine Insurers Agents Pty Ltd (CAU/Zurich) for the period 13 September 2002 to 13 March 2003. This policy provided public liability insurance up to $5,000,000. 37At the time he had the conversations with the PADI representatives (see [24] above), Mr Todd said he was told that Horsell also offered "an insurance policy to cover the boat itself", that he would "save money by joining all of the policies together and that there would be no loopholes as [he would] be fully covered". 38On 3 March 2003, Mr Todd sent Horsell a Boat Quote Request seeking a quote for hull insurance cover for Dive One. Against the heading on the request form "Advise any Non Diving Related Activities", he inserted "Bush Walkers, Sight Seeing". On 3 March 2003 Horsell sent Mr Todd a facsimile with a quotation for Dive Boat Insurance which relevantly stated: "Please note that we have not quoted Liability for the vessel as the PADI Watertight Policy provides coverage for Liability for vessels up to 12 metres in length for activities associated with Diving, Swimming, Sightseeing, Whale Watching and Fishing." 39Mr Todd accepted the quote and took out hull insurance for Dive One in the form of the PADI IRRA Dive Boat Insurance Policy from 13 March 2003. He paid Horsell a total of $744.32 for the cover which included a broker's fee of $75. 40On 17 September 2004 Horsell sent Dive Two a letter in respect of the dive boat insurance which was about to expire. The letter attached Horsell's tax invoice with renewal terms and invited Dive Two to remit payment to Horsell if it wished to renew the policy. The letter also stated: "Please be aware that your boat insurance does not include liability insurance. If you have a PADI Asia Pacific Watertight Liability Policy then you have liability cover for all vessels up to 12 metres in length whilst used in connection with the following activities: Diving, Snorkelling, Swimming, Fishing, Whale Watching and Site [sic, as in original] Seeing." 41In his trial statement Mr Todd said: "My vessel was less than 12 metres in length therefore I understood that I was covered by the PADI Asia Pacific Watertight Liability Policy and I did not use the vessel for activities outside those terms. This had always been my understanding and was further cemented following receipt of the letter from Horsell." 42Mr Todd renewed the hull insurance policy for the period 30 September 2004 to 30 September 2005. The renewal fees included a $50 broker's fee. He renewed the hull insurance policy again for the 30 September 2005 to 30 September 2006 year, again through Horsell directly. Summary: policies held 43In summary, from 2003 until Mr Todd closed his business in 2007, Mr Todd/Dive Two held three separate insurance policies through Horsell: (1) Personal insurance through the Watertight Policy to cover his Dive Master/Instructor activities, operative from 1 July 2002 and renewed until at least 2007 (see [26] above); (2) Business insurance through the Watertight Policy to cover the activities of Dive Two, operative from 31 December 2002 and renewed until at least 2007 (see [30] - [32] above); and (3) Hull insurance through the PADI IRRA Dive Boat Insurance Policy to cover Dive One, operative from 13 March 2003 and renewed until at least 2007 (see [39] - [42] above). 44In his trial statement Mr Todd said that based on, among other matters, the 3 March 2003 Horsell facsimile, he believed he was "fully covered for public liability insurance in relation to the use of the boat Dive One". Events following 2003 45On 30 September 2004, Mr Todd received a copy of the 2004/2005 PADI Watertight Insurance Programme Brochure which listed as a benefit of the policy "[l]iability of watercraft up to 12 metres in length". The following appeared in the section dealing with "Common Questions": "Does the public liability policy cover the liability of the dive boats we own and operate? Only if the vessel is under 12 metres in length. Most boat policies have a separate liability coverage. Horsell International can arrange insurance for vessels over 12 metres in length." 46On 24 August 2005, Liberty sent an email to Horsell attaching and setting out the proposed renewal terms for the Watertight Policy for the period of insurance from 30 September 2005 to 30 September 2006. The terms included the following (primary judgment at [45]): "Wording: Liberty International Underwriters base form CLM03.02 plus Endorsements as expiring. Endorsements: ... 2. Watercraft inclusion for craft up to 12 meters ..." 47In late August or early September 2005, PADI sent its members a brochure entitled "2005/2006 PADI Asia Pacific Watertight Liability Insurance Programme", which stated that the coverage for public and products liability included "[l]iability of watercraft up to 12 metres in length": primary judgment at [45]. It included substantially the same question and answer in the "Common Questions" section as appeared in the 2004/2005 brochure. Mr Todd received that brochure. 48Both the 2004/2005 and 2005/2006 brochures had the same getup as the 2003 brochure. Each also stated: "This brochure is for illustration purposes only and is subject to the full terms, conditions and exclusions of the policy wordings." 49On 26 September 2005, PADI sent Mr Todd a letter which said the Watertight Policy included "[c]over for watercraft liability up to a maximum boat length of 12 metres": primary judgment at [45]. 50On 31 October 2005, a Certificate of Insurance on PADI's letterhead was issued in respect of Dive One for the period 1 October 2005 to 30 September 2006. The letterhead included the words "Underwritten by Liberty International Underwriters" and "Scheme Insurance Managers: Horsell International Pty Ltd". 51The Certificate described the Insured as "Dive One" and the Cover as "Professional Indemnity, Public & Products Liability [and] Criminal Defence Costs". It showed the category of member as "Dive Store" and that the total premium included a broker fee of $612.26. It also stated: "This Certificate of Insurance is issued as part of a master policy arranged by PADI Asia Pacific. This certificate is subject to the terms and conditions of the policy." 52Mr Todd did not receive a copy of the Master Policy. The Master Policy 53The Master Policy was nominally in three sections but, in substance, constituted two sections: primary judgment (at [15]). Sections A & B were described as a "Combined General & Products & Professional Liability Policy". Section C of the Policy governed "Legal Expenses". 54Clause 1 of sections A & B provided: "1. Insuring Clause Subject to the terms of this Policy, [Liberty] will pay to or on behalf of the Insured all sums which the Insured shall become legally liable to pay by way of compensation as a result of a Claim(s) both first made against the Insured and notified to [Liberty] during the Period of Insurance for Injury and/or Damage in connection with the Insured's Business." (Emphasis added) 55Clause 2.3 defined "claim" or "claims" as follows: "2.3 'Claim' or 'Claims' means: 2.3.1 Any writ, statement of claim, summons, application or other originating legal or arbitral process, cross claim, counter-claim or third or similar party notice issued against or served on the Insured; or 2.3.2 Any written claim or allegation against the Insured which may result in Injury and/or Damage." 56Paragraph 2 of the Policy Schedule provided: "INSURED: PADI Asia Pacific and individual members, dive centers [sic, as in original] and resorts and others as agreed" 57Paragraph 4 of the Policy Schedule provided that the "Insured's Business" was "[a]s defined in the policy wording under 'Scuba Diving'". Clause 2.11 in the policy wording defined "Scuba Diving" in the following terms: "'Scuba Diving' means principally incorporating class and water based learning activities and modules including first aid training and certification, including the determination of standards by the accrediting agency and all activities relating to training, instructing, observing and control of recreational scuba diving. This includes all activities relating to snorkelling, skin diving, swimming, recreational surface supplied air, servicing, hiring and repairing of equipment and sales of related products, tours of reef by glass bottom boats (under 12 metres), transportations of people from one Island to another, bird watching, guided tours of Island when not diving, jungle and/or bush walking, fishing, underwater photography and/or video, whale watching, scuba doos, beach games." 58Paragraph 9 of the Policy Schedule provided: "This policy is a master policy schedule and each Insured entity is insured separately for their respective rights and interests as if this policy was issued individually for all terms, conditions and policy limits." 59Clause 3 provided that the indemnity granted by the Policy extended to: "Any director ... of the Insured ... but only while acting within the scope of their duties in such capacity ... Provided always that all such persons ... shall, whilst not being a party to this contract, observe fulfil and be subject to the terms of this Policy (insofar as they can apply) as though they were the Insured." 60The relevant exclusions to the Policy were found in cl 7 as follows: "This Policy does not cover liability directly or indirectly caused by, arising out of or in any way connected with: ... 7.18 Ownership, maintenance, operation, possession or use by or on behalf of the Insured of: ... 7.18.2 Any watercraft which exceeds twelve metres in length ... 7.24 Any alleged or actual fraudulent, dishonest, malicious, wilful or criminal act or omission of the Insured or any person covered by Clause 3 of this Policy." 61Clause 1 of Section C provided: "Subject to the Limit of Indemnity, [Liberty] will indemnify the Insured for Legal Costs and Expenses incurred by the Insured in the course of scuba diving and related activities at or in: 1.1 Defending a criminal prosecution; or 1.2 Pleas of mitigation for a criminal defence against the Insured ..." 62Pursuant to cl 3.9 of Section C, Liberty was not liable for claims in respect of: "Legal services arising out of any dishonest, fraudulent, malicious or deliberate act or omission of the Insured. Provided that this exclusion 3.9 shall only apply where a judgment establishes that the Insured was guilty of any such dishonest, fraudulent, malicious or deliberate act or omission. ..." 63Clause 4.5 of Section C provided: "Section C and the relevant part of the Combined General & Products Liability Policy shall be read together as one contract and any word or expression to which a specific meaning has been given shall bear such specific meaning wherever it may appear unless such meaning is clearly inapplicable in the context in which the word or expression appears;" THE PRIMARY JUDGMENT Was the Claim Covered under the Policy's Insuring Clause? 64Liberty contended that it was not liable to indemnify Dive Two under the Policy because: (1) The claim did not fall within the insuring clause because it did not arise "in connection with the Insured's Business"; and (2) The claim was excluded by reason of exclusion cl 7.24 because: (a) It involved a criminal act as evidenced by Mr Todd's plea of guilty to the charge of dangerous navigation occasioning grievous bodily harm under the Crimes Act s 52B(3)(b); and (b) Mr Todd was not covered for his legal costs in relation to the criminal proceedings as he was not acting in the course of his duties at the time of the accident. 65Liberty also relied upon the following matters of background knowledge as relevant to the construction of the insuring clause: primary judgment (at [49]): "(1) the policy was for members of a commercial organisation, PADI. It was not a policy for members of the public generally or for a broad range of users of watercraft. The policy was only available to PADI members and the membership of PADI comprised only persons and entities with a business or commercial interest in scuba diving which principally involved instruction; (2) the terms of this policy were not contained in a compulsory standard form, such as are found in, for example, statutory policies (such as compulsory third-party motor vehicle, or barristers' professional indemnity, with the wording approved by the Government) or industry standard terms (such as Institute Yacht Clauses); (3) different underwriters take different attitudes to the risks they are prepared to cover; (4) liability policies for pleasure craft (meaning recreational use of watercraft) were available and known to be different to 'commercial' or 'business' liability cover; (5) the cover arranged by Horsell for PADI members over a number of years was not limited to insureds who owned or used watercraft in relation to their business. That is, the policy was available to members of PADI whose business activities involved scuba diving, as defined in the policy, whether or not the instructor involved use of watercraft. Not only did the extended definition of scuba diving as defined in clause 2.11 of the policy include many activities for which watercraft are not required but the policy was also available to instructors, dive shop owners and dive masters; and (6) insurers have a legitimate commercial interest in distinguishing between business and private/recreational risks. As this incident demonstrates, recreational use may more readily involve distractions and inadvertence whereas business use is more likely to be subject to regulation and to be taken more seriously by an operator conscious of business reputation." 66In the event that Dive Two was not entitled to claim indemnity from Liberty, Horsell denied that it was negligent and that there was any relevant contract of retainer, or that, if there was, it was breached, or even if it was, that any such breach caused Dive Two's loss: primary judgment (at [6]). 67The primary judge accepted (at [66]) Liberty's submissions concerning the construction of the insuring clause. Those submissions included (primary judgment at [50]) that the insuring clause and cl 2.11 operated together, first, to identify the nature of the business insured and, secondly, to require that the occurrence giving rise to the claim was sufficiently connected with that identified business. Her Honour held (at [66]) that the insuring clause imposed two requirements, that "the activity must be in some way related to recreational scuba diving and [that] it must be 'in connection with the Insured's Business'". Her Honour found that although the term "Insured's Business" was a defined term, those words were not irrelevant to the construction of the insuring clause as a construction that disregarded the requirement that there be a connection with the business was at odds with the Policy. Accordingly she concluded that a trip along the Myall River conducted for private purposes unconnected with the business did not fall within the insuring clause. 68The primary judge accepted (at [68]) that the words "in connection with the Insured's Business" were apt to include the promotion of the business, as "the words 'in connection with' ought be read as extending the scope of the noun they precede, ... ought not be read narrowly [and] merely require[d] a relationship between one thing and another [which was] real and not merely tenuous". Her Honour considered that this threshold would be met if she was satisfied that the purpose of the trip was the promotion of Dive Two's scuba diving business. 69Her Honour rejected (at [70] - [72]) a submission made by Horsell to the effect that the endorsement to the Policy (originally set out in the quotation renewal terms Liberty sent Horsell in August 2005: see primary judgment (at [45])) to cover "[w]atercraft inclusion for craft up to 12 meters", could assist in resolving any ambiguity in the Policy. In her Honour's view (at [70]) "the somewhat sparse wording of the endorsement [was] wholly inadequate to support the contention that it was designed to provide public liability cover for boats up to 12 metres without any of the qualifications in insuring clause 1". Her Honour considered (at [72]) that the quotation was of historical significance only and that the purpose of the endorsement was to make it clear that boats less than 12 metres in length would not be covered by an exclusion clause ([7.18.2], see primary judgment (at [22])) which applied to boats of greater length. 70There was a substantial factual issue about the purpose of the boat trip which was relevant to whether the insuring clause applied having regard to her Honour's conclusion that a promotional trip would fall within its ambit. 71The primary judge did not accept Mr Todd's evidence in his trial statement that there were two reasons he had had for inviting two people whom he believed to work at the local high school, together with their spouses, on a trip on Dive Two's boat. They were that he wanted to expand Dive Two's business to include more of the local market and that he wanted to thank his guests for the business that they had already referred to Dive Two: primary judgment (at [75] - [76]). 72In the course of Mr Todd's cross-examination it became apparent that he had given six versions as to the purpose of the trip from that given to the police shortly after the collision to his trial statement. Her Honour concluded (at [76]) that the latest version was designed to further his interests and could not be relied upon. She found (at [90]) that Mr Todd had "concocted" the suggestion that he was seeking to promote the business to advance his interests when indemnity was being declined and held that the first version Mr Todd gave to the police was correct, namely that the trip was a recreational one, which was not made in connection with the business. There is no challenge to her Honour's factual findings in this respect. 73Her Honour, accordingly, rejected (at [91]) Mr Todd's evidence about the trip, or the surrounding circumstances unless it was corroborated or it amounted to a statement against interest. She otherwise accepted his evidence about the insurance he had taken out, as she concluded that evidence was "unaffected by the motive that affected his credibility in relation to the purpose of the trip": (at [92]). 74Her Honour rejected (at [94]) Dive Two's alternative submission that the activity was in connection with Dive Two's business because it was conducted with an asset of the business, occurred in the vicinity of the locations where Dive Two conducted its scuba diving business and the boat was navigated by the same person as when it was engaged in the business activities of Dive Two. She held that there was an implicit dichotomy between "private" and "business" activities arising from the use of the word "Business" in the insuring clause. While accepting the question of connection was one of fact and degree, her Honour also did not consider that "Mr Todd's use of Dive One in a location proximate to Dive Two's usual business operations [was] sufficient to establish a connection for the purposes of the insuring clause": (at [95]). 75The primary judge rejected the third way Dive Two sought to put its case, namely that it was sufficient to conclude that the claim arose in connection with its business if Mr Todd discussed his business with his guests and this discussion would tend to have the effect of promoting the business. Her Honour held (at [99]) that even if she accepted Mr Todd's evidence that he mentioned his business to the people on the boat in the course of the trip, this did not convert a social situation to an event "in connection with the business". Her Honour also rejected (at [100]) a submission that there was a sufficient connection as the trip involved "sightseeing". 76Accordingly, the primary judge concluded (at [101]) that the Policy did not respond to the claim. Was the Claim Excluded by Reason of Exclusion Clause 7.24? 77Clause 7.24 (see [60] above) excluded "liability directly or indirectly caused by, arising out of or in any way connected with ... [a]ny alleged or actual fraudulent, dishonest, malicious, wilful or criminal act or omission of the Insured or any person covered by Clause 3 of this Policy." If that exclusion applied, Dive Two could not succeed against Horsell: primary judgment (at [115]). 78The primary judge made the following findings about the circumstances of the accident for the purpose of determining whether cl 7.24 applied: "141 I find that Mr Todd was barely aware of the presence of the other boat until immediately prior to impact. He had little chance to slow his boat or avoid the collision. Had he cleaned the salt from the windscreen, his visibility and range of vision would have been significantly greater. Having regard to his compromised vision, he was driving at an excessive speed. 142 There is, however, no suggestion that Mr Todd intended the collision or intended the plaintiff any harm. Immediately following the collision he acted so as to safeguard the other passengers and save the plaintiff, who had been seriously injured. His conduct, although criminal and having serious consequences, was not intentional." 79Liberty challenges the latter finding insofar as it submits on the question of the application of exclusion cl 7.24, that Mr Todd's conduct, while not deliberate or intentional in the sense that he was trying to hurt the plaintiff, was nevertheless deliberate and intentional in the sense that he must have known he was travelling at a dangerous speed in the circumstances. 80The primary judge applied Hope JA's reasoning in Australian Aviation Underwriting Pty Limited v Henry (1988) 12 NSWLR 121 (at 126) ("Henry") concerning the circumstances in which a limitation should be read into "the ordinary meaning of the words 'from an insured person's own criminal act'" and held: "145 What each of the other words in clause 7.24 has in common is intention. Although an act may be criminal without any intent at all, criminal acts, like torts, can be classified as intentional or otherwise. The term 'criminal acts' is broad and, in a sense, arbitrary since it depends on legislative choice and may cover acts of considerable seriousness or relatively trivial infringements without any requirement of intention. Because the words 'criminal act' appear at the end of a list where the preceding words have in common an element of intention, I consider that they should be read down to include only those criminal acts that are intentional. 146 I consider the ejusdem generis rule to provide some guidance too, notwithstanding that the words 'other' or 'etc' are not used at the end of the list and notwithstanding that 'criminal acts' constitute a separate category in the exclusion clause. However, where, as here, there is a list of a number of items, the meaning of a term, particularly a general one as I find 'criminal acts' to be, is more readily ascertained by reference to the list as a whole (see, in the context of statutes, Pearce, Statutory Interpretation in Australia (2011), at [4.24]). 147 The effect of this construction is that it is immaterial that the degree of lack of care exhibited by Mr Todd was greater than mere negligence. The exclusion clause does not exclude cover in the instant case because the criminal act committed by Mr Todd was not intentional. This analysis is consistent with both Henry and Xerri. In the former case, the words 'criminal act' were read down to exclude non-intentional criminal acts because of its context and because it was the insurer's wording and therefore the contra proferentem rule applied. In the latter case, the exclusion clause applied because its terms specifically covered the claim and there was no basis to read down the words of the exclusion. 148 Although it does not matter for the purposes of my consideration, I was not persuaded by Mr Birch's argument that clause 3.9 assists his construction of exclusion clause 7.24. There may be good reason why an insurer would be prepared to cover criminal defence costs, except where they arise out of 'any dishonest, fraudulent, malicious or deliberate act or omission of the Insured' but not be prepared to indemnify an insured for claims arising from criminal acts of the insured per se. Different words are used in clause 3.9 of Section C than are used in clause 7.24. I do not think that the comparison between them provides any particular warrant for importing the requirement that the criminal acts or omissions excluded by clause 7.24 be intentional." Was Horsell Liable for Breach of Contract or Negligence? 81The question of Horsell's liability arose, accordingly, because the insuring clause, on her Honour's construction, meant the Policy did not respond to the claim and the claim was not otherwise excluded: primary judgment (at [150]). 82The primary judge rejected a submission by Horsell that it was not open to Dive Two to submit that Horsell was guilty of negligent misstatement when its pleading and particulars merely alleged a failure to advise. Her Honour described Dive Two's pleaded case as being that Horsell "made positive representations in the past which [Dive Two] relied upon" and that "[w]hen it came to the relevant year, [they] allege that Horsell failed to advise them that the insurance cover they obtained was inadequate": primary judgment (at [154]). 83Dive Two's case against Horsell was that Horsell gave advice to the members of PADI in Australia, including Dive Two, regarding the nature and extent of liability insurance that it could procure for them and, too, that it advised Dive Two directly as to the extent of coverage of the Watertight Policy. It relied upon the brochures Horsell designed and paid for on behalf of PADI, the Horsell agreement and advice Horsell gave to Dive Two in exchanges of correspondence: primary judgment (at [158] - [162]); see also [21] - [22] and [31] - [40] above. Those communications, it was contended, either "gave rise to an implied contract of retainer with Horsell, which contained a term implied by law that the broker will exercise reasonable care and skill in respect of a contract for the provision of brokering services" (primary judgment at [163]) or, a duty to take reasonable care in the circumstances, the scope and content of which was commensurate with the implied retainer: primary judgment (at [164] - [166], [168]). Dive Two contended that had Horsell given advice that identified the deficiencies in the policy Mr Todd would have maintained a further liability policy attached to his hull insurance and that insurance would have protected him from the plaintiff's claims: primary judgment (at [168], [170]). 84Horsell denied there was any retainer between it and Dive Two or that it breached any duty of care: primary judgment (at [171] - [175]). It also invoked s 5D(1) of the Civil Liability Act 2002 and argued that Dive Two had not established it would have acted any differently if advised that the Policy did not, or would not, cover "sightseeing" or the use of watercraft for no reward. Horsell contended that if the primary judge was disinclined to accept Mr Todd's evidence as to the purpose of the trip, her Honour should also reject Mr Todd's evidence on causation: primary judgment (at [177] - [178]). 85The primary judge concluded that the circumstances surrounding the relationship between PADI and its members, and Horsell, were sufficient to create a contract of retainer and impose a duty of care on Horsell. Her Honour found that PADI had engaged Horsell to advise it and its members on appropriate insurance cover and, by implication, to warn it and its members where cover was inadequate or doubtful: primary judgment (at [179]). 86Her Honour found (at [180] - [181]) that Horsell had made the following representations: (1) By refusing to quote on a liability policy for Dive One in the 3 March 2003 facsimile because the liability to third parties was said to be covered by the policy, Horsell was effectively advising that Dive Two did not need a liability policy for the vessel. [It was common ground on appeal that this finding related to the exchange of correspondence between Mr Todd and Horsell in March 2003 (see [38] - [39]) above)]. Her Honour also found that Mr Todd was not warned of the limitation that appeared in the insuring clause in the Master Policy that it "covered matters 'in connection with the Insured's Business'"; and (2) The Watertight Policy brochure Horsell issued intimated to readers that the Policy would provide public liability insurance for boats less than 12 metres in length, and did not warn potential policy holders that not all activities undertaken in such boats would be covered by the Policy. 87The primary judge considered that it was incumbent on a reasonably competent broker, in circumstances where the broker had earlier advised a client that it did not need public liability insurance for its boat, to advise the client of the limitation of the policy, namely that it would not cover all activities undertaken in such boats but only those related to scuba diving and associated activities which were conducted in connection with its business. Furthermore, her Honour found that such broker ought to have advised the client that Protection & Indemnity Insurance for boats was available and could be obtained to cover risks not covered by the Watertight Policy. Accordingly she concluded that Horsell was negligent and in breach of its implied retainer by failing to warn Dive Two of a potential deficiency in the Policy which could have been rectified by Dive Two obtaining the policy it had previously held to cover public liability in respect of Dive One: primary judgment (at [182]). 88The primary judge accepted (at [183]) that it was usual in such cases to have evidence from a broker deposing to the standards expected of a reasonably competent broker. However, her Honour found that such evidence was not required where it was obvious, as she considered it to be, that the words "in connection with the Insured's Business" in the insuring clause would put a reasonably competent broker on notice that there was at least a substantial risk that private, non-business activities would not be covered by the Policy. 89Mr Todd said at trial that based on the conversations he had with the PADI Area Coordinator and Area Manager, the 3 March 2003 Horsell facsimile and the brochures he received when renewing the Watertight Policy, that he believed he was "fully covered for public liability insurance in relation to the use of the boat Dive One." He also said he did not renew the hull insurance with Associated Marine Insurers Agents which had a public liability component as he had the Watertight Policy and understood that he would have "complete coverage under [this] policy." 90The primary judge accepted Mr Todd's evidence. Her Honour made the following findings: "186 I accept Dr Birch's submissions that Mr Todd had shown himself to be prudent and conservative when it came to obtaining insurance. His evidence, which I accept, as to the various policies of insurance that he took out on behalf of Dive Two and on his own account (including in respect of his role as Dive Master) from time to time shows that he was risk averse as far as his business was concerned. He arranged insurance for the boat when he transported it from Victoria to New South Wales. When the business started to operate, he obtained business insurance. He also appreciated that he would need public liability insurance in respect of the boat. 187 I accept Mr Todd's evidence that he cancelled the Protection and Indemnity aspect of the hull insurance as a result of advice given by an employee of PADI. This advice was reiterated in the PADI Watertight brochures that were written and published by Horsell, extracts of which are set out above. 188 I find that had Mr Todd been advised that there was a risk that the Watertight Policy would not cover him for public liability if he used the boat for purposes unrelated to scuba diving and associated activities, or unconnected with the business of Dive Two, he would have taken out public liability insurance for the relevant period to cover the activities of Dive One." 91There was evidence that such insurance was commercially available at the relevant time at a cost that was broadly commensurate with the premium of other policies that Mr Todd had taken out and accordingly her Honour found that, in substance, Mr Todd would have taken out such a policy if properly advised about the cover of the Watertight Policy: primary judgment (at [189]). 92There is no challenge to her Honour's finding (at [187]) about why Mr Todd cancelled the hull insurance he held prior to March 2003. 93In determining that Horsell's negligence caused Dive Two's loss through Liberty's justified denial of indemnity, the primary judge was satisfied that Horsell's negligence was a necessary condition of the occurrence of harm, and that it was appropriate for Horsell's liability to extend to such harm: primary judgment (at [190]); s 5D(1), Civil Liability Act. 94As the primary judge had found that the sole reason Liberty was not liable to indemnify Dive Two was because the claim did not arise "in connection with the Insured's Business", her Honour considered that a public liability policy associated with the boat that did not have that limitation would have responded to each of the three aspects of Dive Two's claim: primary judgment (at [191]). 95Her Honour awarded Dive Two the three sums sought in the cross-claim being: (1) The amount of the judgment in favour of the plaintiff; (2) $5,500 compensation for damage to Dive One; and (3) $11,275 in respect of Mr Todd's legal representation. 96Horsell was ordered to pay Liberty and Dive Two's costs of the proceedings: Lane v Dive Two Pty Ltd (No 2) [2012] NSWSC 209. ISSUES ON APPEAL 97At the outset of the hearing, Horsell sought leave to file an amended notice of appeal. The Court ruled that proposed amended ground 3 could not be relied upon, while Horsell no longer pressed ground 4. Horsell was granted leave to proceed with the amended notice of appeal which then contained the following grounds (numbered as in the document, but omitting grounds 3 and 4): (1) The primary judge erred (at [66]) in construing the insuring clause of the policy as requiring that the claim in respect of which indemnity is sought must be in some way related to "recreational scuba diving". (2) The primary judge erred (at [66]) in construing the insuring clause of the policy as requiring that the claim in respect of which indemnity is sought must be "in connection with the Insured's Business". (5) The primary judge erred (at [101]) in holding that the policy did not respond to the claim. (6) The primary judge erred (at [182]) in finding that the appellant was negligent and in breach of its implied retainer by failing to warn the Insured of a potential deficiency in the policy. (7) The primary judge erred in finding that any breach of duty of care by the appellant or breach of any term of an implied retainer caused the first respondent and/or the second respondent to suffer loss. 98Dive Two filed an amended notice of cross-appeal. In the event that the Court upheld paragraphs 6 and 7 of Horsell's notice of appeal, Dive Two relied on Horsell's grounds of appeal on the issue of the construction of the insuring clause. Dive Two also relied on the following grounds of appeal: (1) The primary judge erred (at [95]) in finding that the use of the dive boat, Dive One, in a location proximate to Dive Two's usual business operations was not sufficient to establish a connection with the business for the purposes of the insuring clause; (2) The primary judge erred (at [99]) in finding that a discussion of the business by Mr Todd during the trip was insufficient to convert the trip into an event "in connection with the business"; (3) The primary judge erred (at [100]) in finding that it was not sufficient that the trip was for "sightseeing" to bring the trip within the insuring clause; (4) The primary judge erred in holding (at [70]) that the endorsement in paragraph 2 of the quotation did not assist in resolving any ambiguity in the policy; (5) The primary judge erred (at [94]) in finding that it was insufficient to establish a connection with the Insured's Business that an asset of the business was used by a director of the business who was also a Dive Master; and (6) The primary judge erred in construing the insuring clause of the policy by finding that the policy did not respond in circumstances where the insured's loss arose from use of the insured's dive boat to conduct a sightseeing trip on the Port Stephens Inlet and Myall River. As can be seen grounds (1) and (5) are substantially the same. 99Liberty filed a notice of contention asserting that the primary judge's decision should be affirmed on the ground that cl 7.24 of the Policy operated so as to exclude the claim by Dive Two and/or Mr Todd. 100In the course of the hearing of the appeal, Horsell sought leave to further amend its amended notice of appeal to add a ground complaining about the primary judge's decision about the operation of cl 7.24 of the Policy. That application became a matter of controversy which I deal with in that part of these reasons dealing with the exclusion clause: see [179] ff below. SUBMISSIONS Horsell's submissions: construction of the Policy (grounds 1 and 2) 101Mr S Donaldson SC who appeared for Horsell on appeal but not at trial, with Mr G M Drew, submitted that the primary judge erred in finding that the insuring clause imposed two preconditions to cover, namely, that the activity out of which the claim arose must be in some way related to "recreational scuba diving" and "in connection with the Insured's Business". 102Mr Donaldson accepted that the primary judge was correct to read the words of the definition of "Scuba Diving" into the insuring clause in lieu of the expression "Insured's Business". References to his submissions in the following should be understood to refer to that approach to the insuring clause. 103However, Mr Donaldson argued that the primary judge was in error in concluding that the "label" the "Insured's Business" was an aid to the construction of the definition. Such an approach had the impermissible effect of altering the meaning of the Policy and introduced a qualification to Dive Two's cover that did not find expression in the Policy wording. 104Mr Donaldson submitted, accordingly, that the Policy covered liability arising in respect of claims in connection with all the matters referred to in the definition of "Scuba Diving", irrespective of the purpose for which they were undertaken, provided that they were activities of the insured. 105He emphasised the generality of the description of activities in the insuring clause. Thus, "Scuba Diving" was said to "principally incorporate" activities of a certain description "including" activities related to recreational scuba diving, but also encompassed an extensive and disparate list of specified activities, many of which were not necessarily connected with recreational scuba diving. 106Mr Donaldson submitted that the words "all activities relating to ... recreational scuba diving" in the second sentence of the insuring clause did not dominate the first part of the clause such that the preceding activities had to be related to recreational scuba diving. Such an interpretation would have a perverse effect, he argued, of potentially excluding cover for damage resulting from class and water based learning activities unless they were so related. Rather, he contended, the effect of the insuring clause was that the range of activities attracting cover principally incorporated "class and water based leaning activities", but extended to a broad range of potentially related activities, which included, but did not necessarily involve, recreational scuba diving. 107Mr Donaldson's next principal submission was that the insuring clause did not require that the activity must be undertaken in the course of the conduct of a business. He first argued that the primary judge failed to attach sufficient significance to the fact that the definition of "Insured's Business" did not incorporate any of the features conventionally associated with the concept of carrying on a business. Rather, the parties chose to define the term in a way that did not reflect its conventional meaning. He emphasised that the plain and natural meaning of the wording did not require that the activity giving rise to a claim be carried on systematically with a view to profit. He repeated the argument advanced in support of his first principal submission that the label attached to the definition did not justify rewriting the scope of cover more narrowly than the broad range of activities that could be expected to be undertaken in the course of the business. 108Finally, Mr Donaldson submitted that there was a sufficient connection between the activity out of which the claim arose (transporting people in Dive Two's boat) and the activities covered by the insuring clause. Although the named activities did not include sightseeing trips, transporting people by boat was a routine activity associated with water-based learning activities and recreational scuba diving and might be associated with other named activities such as bird watching, beach walking and beach games. Dive Two's submissions: construction of the Policy (grounds 1 and 2) 109Dr C J Birch SC who appeared for Dive Two at trial and on appeal with Ms P Lowson, adopted Horsell's submissions regarding the construction of the insuring clause. He argued that instead of the two requirements the primary judge imposed upon the insuring clause, the provision was to be construed by reference to the definition of "Scuba Diving". 110Dr Birch argued it was not correct, as Liberty contended, to construe the insuring clause as having the general meaning that the term "Insured's Business" should be added as a qualification to each of the terms in the definition of "Scuba Diving". This was because the language at paragraph 4 of the schedule clearly countenanced a substitution of the definition of "scuba diving" for the term "Insured's Business". Furthermore, he contended that the label "Insured's Business" did not assist in resolving ambiguities regarding the construction of cl 2.11, such as whether it included sightseeing, and that the separation between private purposes on the one hand and business purposes on the other was inapt insofar as Dive Two was a corporate entity. 111Alternatively, Dr Birch also submitted that there was a sufficient connection between the claim and Dive Two's business because Dive One was the vessel used by the business for its usual dive boat operations and, at the time of the accident, it was being skippered by one of the business' usual dive boat operators, Mr Todd. Further, the accident resulted from the use of Dive One by an operator in regard to an activity in which the business usually engaged, sightseeing on the Myall River. Liberty's submissions: construction of the Policy (grounds 1 and 2) 112Mr J Sexton SC, who appeared on appeal and at trial with Mr D Macfarlane, embraced the primary judge's construction of the insuring clause. He contended that the primary judge correctly interpreted the Policy by treating the definition as an explanation of what was to be construed as the "Insured's Business". 113Mr Sexton also submitted that the definition of "Scuba Diving" could not be read into the insuring clause without any regard to the term, "Insured's Business" and that Horsell's submissions failed to engage with her Honour's discussion (at [66]) of the significance of the defined term. Liberty's submissions: construction of clause 7.24 114Liberty submitted that even if the Court found that the primary judge erred in the construction of the insuring clause so that, to that extent, the Policy extended to Dive Two's claim, nevertheless the claim was excluded by virtue of cl 7.24 on the basis that the offence of dangerous navigation which gave rise to the claim was caused by Dive Two's criminal acts or omissions. 115First, Mr Sexton submitted that the offence of dangerous navigation with which Mr Todd was charged involved an appreciable risk of injury or death to the public over and above that ordinarily associated with navigating a vessel, including mere negligent navigation, and that, having regard to the way the analogous offence of dangerous or culpable driving had been characterised in Jiminez v The Queen [1992] HCA 14; (1992) 173 CLR 572 (at 579) and R v De Montero [2009] VSCA 255; (2009) 25 VR 694 (at [75]) an insurer could properly want to exclude such conduct from the risk. 116Secondly, Mr Sexton submitted that it would be wrong to treat dangerous navigation as an offence of negligence as s 52B(3) did not use the word "negligently". He argued that the s 52B(3) offence was relevantly identical to the offence of dangerous driving causing grievous bodily harm in s 52A of the Crimes Act. He pointed out that the Victorian Court of Appeal had placed dangerous driving between negligent and culpable driving on a spectrum of wrongdoing: R v De Montero (at [11] - [14], [26]). 117Thirdly, Mr Sexton sought to distinguish Henry on the basis that the words used in cl 7.24 were broader than in the exclusion clause in that case. He argued cl 7.24 specifically adverted to the intentional criminal conduct embodied in the phrase "fraudulent, dishonest, malicious, wilful", and that the expression "criminal act" was intended to exclude from cover activities which were criminal yet did not necessarily fall within the preceding words. He submitted that Xerri v Kingmill Pty Ltd (1998) 25 MVR 569 ("Xerri") was a better guide to the interpretation of the Policy than Henry. 118Fourthly, Mr Sexton argued that the following points McHugh JA made in his dissenting judgment in Henry (at 130 - 132) concerning culpable driving of a motor vehicle also applied to dangerous navigation in the context of cl 7.24: that a criminal act is any act or omission prohibited by the State, that the words "criminal act" are not confined to acts of conscious wrongdoing and that culpable driving was such a serious offence that it was a criminal act for the purpose of the policy even when it was the product of inadvertence or negligence by the driver. 119Fifthly, Mr Sexton submitted that the phrase "directly or indirectly caused by, arising out of or in any way connected with [any criminal act or omission]" in cl 7.24 was strongly indicative of a meaning which would extend to negligent or inadvertent conduct. He also contended that the words preceding "criminal act or omission" ("fraudulent, dishonest, malicious, wilful") should be read disjunctively, so that "or" should not be construed to mean "and". 120Sixthly, Mr Sexton submitted that even though Mr Todd's conduct was not deliberate or intentional in the sense that he was trying to hurt the plaintiff, it was nevertheless deliberate and intentional in the sense that he must have known he was travelling at a dangerous speed in the circumstances. He argued that the primary judge focused on the wrong intention, in considering whether Mr Todd intended to cause the collision or harm the plaintiff, rather than considering his intention to travel at a dangerous speed in the circumstances. He submitted that Mr Todd knew the speed he was travelling at and knew about the problems with visibility caused by the build up of salt on his windscreen. 121Finally, Mr Sexton submitted that the primary judge erred in her application of the maxim noscitur a sociis on the basis that as most, if not all, fraudulent, dishonest and malicious acts were also criminal acts, the word "criminal" in cl 7.24 would have little or no work to do if it was read down to apply only to intentional or deliberate conduct. Dive Two's submissions: construction of clause 7.24 122Dr Birch, in essence, repeated the submissions that succeeded at trial as to the operation of cl 7.24: see primary judgment (at [116] ff). In short, he argued that cl 7.24 had to be read in light of the contract as a whole and with regard to its commercial purpose and effect. He submitted that a public liability insurance policy for a dive operator must have been intended to respond to circumstances where there had been conduct by the insured that could give rise to liability, which would commonly be negligent conduct by the insured or its officers or employees. In that light, he contended, the insured would be substantially deprived of any benefit from the Policy if negligent acts were excluded. 123Secondly, Dr Birch submitted that when construed in the context of the phrase in which it appeared ("any alleged or actual fraudulent, dishonest, malicious, wilful or criminal act or omission of the insured ...") it was apparent the word "criminal" connoted conduct with an element of intent, whereas Mr Todd's action had been one of unintentional negligence. 124Thirdly, Dr Birch submitted that it was not significant that construing "criminal act" to refer only to intentional or deliberate acts would limit its sphere of operation, considering the overlap between terms such as "fraudulent", "dishonest" and "wilful". He contended that the Policy did not clearly manifest an intention not to use words that were synonyms or overlapped in meaning, considering that the term "fraudulent" itself was probably subsumed within the term "dishonest". 125Fourthly, Dr Birch submitted that the primary judge did not err in applying Henry to read down the word "criminal" to exclude acts of negligence, notwithstanding that they were also criminal. 126Fifthly, Dr Birch referred to exclusion cl 3.9 in Section C of the Policy (see [62] above). He submitted that it would be anomalous if the insured could be covered for legal expenses in relation to a plea in mitigation for dangerous navigation (as the conduct was not "dishonest, fraudulent, malicious or deliberate") but not indemnified for a damages claim. 127Sixthly, in response to Liberty's submissions that Mr Todd's conduct was deliberate and intentional, Dr Birch argued it was insufficient to suggest that the mere fact Mr Todd knew the speed at which he was travelling constituted the requisite knowledge. He contended that travelling at a dangerous speed in the circumstances was not an act which intrinsically would require a defendant to be conscious that his speed was unsafe at the time unlike, for example, illegal racing. Further, the relevant circumstances for these purposes included foreknowledge of whether there were people who could be endangered by his conduct. He emphasised that the primary judge made no finding that Mr Todd must have known he was travelling at a dangerous speed in the circumstances, and, indeed, that her Honour's finding that his conduct was "not intentional" was inconsistent with any such assertion. He also said there was no evidence suggesting that Mr Todd was aware that his conduct posed a risk, considering that he was found to have been "barely aware of the presence of the other boat until immediately prior to impact." 128Finally, Dr Birch submitted that, accepting that exclusion clauses are to be construed contra proferentem, the present was a clear case in which "criminal act or omission" should be read down. He argued that where a broad reading of "criminal act or omission" could exclude a large portion of potential claims from indemnity, Liberty should bear the burden of making it clear that its reference to criminal acts included those involving mere negligence or strict liability regulatory offences. Horsell's submissions: retainer/duty issue (grounds 6 and 7) 129Horsell submitted that the evidence provided no adequate basis for the primary judge's findings that there was a contractual relationship between it and Dive Two or that it breached any duty it owed to Dive Two arising out of any failure to provide advice to the effect that the Policy would not cover liabilities arising from activities bearing no connection with Dive Two's PADI membership or the conduct of its diving-related business. 130First, Horsell submitted that the trial judge erred in finding an implied retainer, as there was no evidence evincing any intention of Horsell and Dive Two to enter into any legal relationship. Rather, it contended, it was PADI which engaged Horsell to provide services. 131Secondly, Horsell submitted that the communications passing directly between Dive Two and itself and Dive Two's payment of a brokerage fee to it did not support the finding that a contract existed between them, where these events were referable to the contract between PADI and Horsell. 132Accordingly, Horsell argued that, absent a supportable finding that there was a retainer, no basis existed for a finding that there was either a contractual duty or a co-extensive duty in tort. It pointed out that the primary judge had not considered the alternative question of whether, absent a contract, the relationship between Horsell and Dive Two was such as to give rise to a duty on its part to take steps, in the nature of giving a warning, to ensure Dive Two did not suffer economic loss. Horsell submitted that the case was not pleaded or run on that basis and that, in any event, the outcome would have been no different had it been. 133Alternatively, Horsell submitted that if it did owe a duty of care to Dive Two to warn of "legal pitfalls" associated with its insurances, the evidence did not support a finding that the duty was breached. It argued first that there was nothing inherently inadequate about a policy providing cover only for claims arising out of the conduct of a business; secondly it contended nothing in the communications to which the primary judge referred or the surrounding circumstances suggested Dive Two could reasonably have understood cover was being obtained for accidents arising from Mr Todd's private, social activities. 134Alternatively Horsell submitted there was no basis for the finding that a reasonably competent broker ought to have recognised both that the insured anticipated broader cover than that for which the Policy provided and that the Policy did not provide it in any event. Dive Two's submissions: retainer/duty issue (grounds 6 and 7) 135Dive Two submitted that its case at trial had clearly been put on the basis of either a breach of retainer or a breach of duty of care. They contended that the primary judge decided the case on that basis: see primary judgment (at [168], [179]). 136Dive Two submitted that the primary judge had found both that there was a contract of retainer and a duty of care. 137Dive Two submitted that a duty of care existed because Horsell had offered advice and acted in such a manner that a reasonable person in its position would conclude Horsell was looking after its interests. 138Dive Two submitted that it was not essential to their case that it establish there was a retainer with Horsell, having regard to their duty of care case. However it submitted that there was ample evidence to support the primary judge's finding that there was a retainer and a duty of care. 139Dive Two argued that the Horsell Agreement was consistent with Horsell undertaking the role of broker each time it acted on behalf of a PADI member or undertook to advise a PADI member, whether collectively through product brochures or individually through correspondence. They also relied on the fact Dive Two paid Horsell a broker's fee for arranging the Policy for the 1 October 2005 - 30 September 2006 year. 140They contended that the Horsell agreement provided a framework within which it was anticipated that individual PADI members would not only receive services from Horsell, but would also provide consideration by paying brokerage commission. 141Next, Dive Two submitted that Horsell breached the retainer or breached its duty of care in the following circumstances. 142First, Dive Two had no access to the Master Policy and relied on statements Horsell made about it, including in the brochures and correspondence to which I have already referred. They also relied on the specific advice sought in March 2003. 143Secondly, they contended that Horsell was aware that the activities of dive centres included sightseeing activities and represented to Dive Two and PADI members in the 25 September 2003 renewal letter ([31] above) that the policy covered such activities (among others) for water craft up to 12 metres in length. 144Thirdly, Dive Two relied on the statement in Horsell's 3 March 2003 facsimile (see [38] above), providing a quotation for dive boat hull insurance which stated that the Policy provided "coverage for liability for vessels up to 12 metres in length for activities associated with diving, swimming, sightseeing, whale watching and fishing". 145Fourthly, Dive Two argued that if there was any ambiguity about the nature of the cover dive centre operators required in respect of vessels under 12 metres, it was incumbent on Horsell unambiguously to identify the insurance needed. They submitted there was no evidence Horsell obtained, or had in place, any process by which it could obtain details of the activities Dive Two undertook in Dive One. 146Fifthly, Dive Two submitted that Horsell had not advised them following the September 2003 correspondence that the Policy cover had changed to exclude sightseeing. 147Sixthly, Dive Two submitted that the March 2003 correspondence demonstrated Mr Todd was addressing the issue of public liability cover for Dive Two as did Mr Todd's reliance on Horsell's advice in releasing the hull insurance in March 2003. 148Seventhly, Dive Two argued that a reasonably competent broker in Horsell's position could have been expected to realise that the Policy was inadequate in its coverage of non-diving activities. 149Eighthly, Dive Two submitted Horsell did not take appropriate steps to compare the wording of the Policy with the documents (brochures, correspondence, tax invoices and renewal documents) which advised as to the nature of the cover. 150Furthermore, Dive Two submitted that it was not to the point whether a reasonably competent broker would have anticipated the precise line of reasoning applied by the primary judge, but whether sufficient doubt attended upon the proper construction of the Policy that they should have had the doubt removed by re-wording the Policy or advising their client of the risk. They argued that one of Horsell's functions as a broker was to save those it was advising from being in a position where they were dependent on complex reasoning to determine their insurance cover, or to alert them to the risks to which the insuring clause exposed them. CONSTRUCTION OF THE POLICY General principles 151A policy of insurance is a commercial contract and should be given a businesslike interpretation having regard to the language used by the parties, the commercial circumstances the document addresses, and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 (at [22]) per Gleeson CJ; see also (at [73] ff) per Kirby J; Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522 (at [15]) per Gleeson CJ, McHugh, Gummow and Kirby JJ. 152Preference should be given "to a construction supplying a congruent operation to the various components of the whole": Wilkie v Gordian Runoff Ltd (at [16]). Wherever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that such would not have been intended by the parties: Johnson v American Home Assurance Company [1998] HCA 14; (1998) 192 CLR 266 (at [19](1)) per Kirby J. 153The task of construing the policy is to discover what the parties meant from what they have said: Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 (at 109) per Gibbs J. It is not the court's role "to force upon the words a meaning which they cannot fairly bear [as this would] substitute for the bargain actually made one which the court believes could better have been made": Charter Reinsurance Co Ltd v Fagan [1997] AC 313 (at 388) per Lord Mustill. 154However, in an exceptional case where "something has clearly gone wrong with the language so as to interpret it in accordance with the ordinary rules of syntax makes no commercial sense ... a court is entitled to depart from the ordinary meaning to give effect to what objectively speaking the parties intended": McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) [2011] NSWCA 315; (2011) 81 NSWLR 690 (at [18]) per Bathurst CJ (Macfarlan JA and Sackville AJA agreeing); see also Vero Insurance Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181 (at [40]) per Meagher JA (Beazley P and Simpson J agreeing). 155The Policy was described, relevantly, as a "Professional Liability Policy". The essence of liability insurance is to indemnify the insured against liability arising from the insured's negligence or fault: D Derrington & R Ashton, Law of Liability Insurance, 2nd ed (2005) LexisNexis Butterworths ("Derrington & Ashton") (at [1.15]). In the present case, the brochure sent by PADI to Mr Todd contemplated coverage for professional liability arising from the breach of professional duty in respect of "liability arising from negligent acts, errors or omissions whenever or wherever committed ... in connection with scuba diving and related activities". 156Horsell sought to rely upon the contra proferentem principle at trial on the question of the construction of the insuring clause, a proposition Liberty opposed on the basis that the wording for the definition of "Scuba Diving" was proffered by Horsell, as agent for the insured, not by Liberty: see primary judgment (at [46] - [47]); Halford v Price [1960] HCA 38; (1960) 105 CLR 23 (at 30) per Dixon CJ (with whom Menzies J agreed); (at 34) per Fullagar J. As the primary judge accepted Liberty's submissions on the issue of construction, I infer her Honour did not have recourse to the contra proferentem principle. 157However Liberty accepted in its written submissions on appeal that the contra proferentem principle applied to the construction of exclusion clauses and that "the burden of showing that the facts of a case attract the operation of [cl 7.24] rests on the insurer": Australian Breeders Co-Operative Society Ltd v Jones [1997] FCA 1405; (1997) 150 ALR 488 (at 562) per Lee J. I have proceeded on that basis, accordingly, in relation to the exclusion clause. The insuring clause 158In order to construe the insuring clause the words of the definition of "Insured's Business" had to be read into the operative text of the Policy: see Halford v Price (at 26 - 27) per Dixon CJ; Gibb v Commissioner of Taxation (Cth) [1966] HCA 74; (1966) 118 CLR 628 (at 635) per Barwick CJ, McTiernan and Taylor JJ; Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 (at [103]) per McHugh J; Gilmore v AMP General Insurance Co Ltd (1996) 67 SASR 387 (at 391) per Cox J. 159However that approach did not, as the primary judge, in my view, correctly held (at [66]), render the label "Insured's Business" irrelevant to the construction of the insuring clause. As her Honour said the label was part of the context in which the insuring clause was to be construed: K Lewison and D Hughes, The Interpretation of Contracts in Australia (2012) Thomson Reuters (Professional) Australia Limited (at [5.11]). Secondly, words used as labels, as Lord Hoffman explained in Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101 (at [17]), are "usually chosen as a distillation of the meaning or purpose of a concept intended to be more precisely stated in the definition." In such cases the language of the defined expression may help to elucidate ambiguities in the definition or other parts of the agreement. In the sense last referred to, the definition operates by way of explanation rather than synonymous expansion: see Sydney Local Health Network v QY [2011] NSWCA 412 (at [49] per Campbell JA. 160It is necessary to have regard to the structure of the insuring clause, including its importation of the definition clause. 161In so far as is relevant, the definition clause uses two verbs, "means" and "includes", each with different connotations. Generally, "the adoption of the definitional structure 'means and includes' indicates an exhaustive explanation of the content of the term which is the subject of the definition, and conveys the idea both of enlargement and exclusion": BHP Billiton Iron Ore Pty Ltd v National Competition Council [2008] HCA 45; (2008) 236 CLR 145 (at [32]) per Gummow, Kirby, Hayne, Heydon, Crennan and Kiefel JJ. Thus, an exhaustive definition "indicat[es] that its object is the whole of its subject" whereas a non-exhaustive definition enlarges "what otherwise are the contents of the class which has been so identified": Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 56 FCR 236 (at 266 - 267) per Gummow J. 162The sense in which either expression is used cannot be determined mechanically, but must depend upon "the true construction of the entire provision in which the word appears": Y.Z. Finance Co Pty Ltd v Cummings [1964] HCA 12; (1964) 109 CLR 395 (at 402) per Kitto J. 163Critically, however, as is made apparent by the use of the exhaustive "means" at the outset of the clause, the primary meaning of the "Insured's Business" is "Scuba Diving". Although in the definition of "Scuba Diving" the word "means" is immediately followed by the word "principally", that does not deprive the word "means" of its exhaustive effect in relation to "scuba diving". Rather, "principally" clearly qualifies "incorporating", recognising the drafting difficulty of identifying every activity which might be encompassed by scuba diving. 164The matters of inclusion which follow "means" fall into two categories. The first, in the first sentence, are bracketed both by the initial reference to "Scuba Diving" and the closing words "recreational scuba diving". It is tolerably apparent that that sentence is intended to incorporate activities which might be regarded as directly or incidentally (in the sense referred to at [166]) related to scuba diving. 165In the second sentence the words "includes" and "relating to" have an enlarging effect in the sense previously referred to. Thus, many of the activities in the second sentence do not readily, if at all, fall within the class constituted by the ordinary understanding of "scuba diving" or related activities, for example "bird watching, guided tours of Island when not diving, jungle and/or bush walking, ... whale watching ...[and] beach games". However as the qualification to "guided tours" indicates, all are activities which the definition contemplates may be undertaken as part of a scuba diving business. 166Furthermore, the purport of the non-exhaustive words "principally", "including" and "includes", in my view, is that the insuring clause does not contain a finite list of activities covered by the Policy. The Policy would cover activities that are incidental to "scuba diving" or the other activities expressly referred to in the definition, albeit that such incidental activities are not found in the definition, as long as they are consistent with the "essential nature" of the business: see Watts v Perry [1972] 1 NSWLR 73 (at 82) per Asprey JA (Jacobs JA agreeing); Transfield Services (Australia) Pty Ltd v Hall; Hall v QBE Insurance (Australia) Pty Ltd [2008] NSWCA 294; (2008) 75 NSWLR 12 (at [178] - [179]) per Campbell JA. 167Thus, I would not accept, with respect, the first sense in which the primary judge construed the insuring clause (at [66]), namely that "the activity must be in some way related to recreational scuba diving", if by that finding her Honour contemplated that the activity which gave rise to the claim had to have been in some manner related to recreational scuba diving in the strict sense of that term. 168Accordingly, it is not to point that sightseeing is not specifically referred to in the insuring clause. It is, in my view, an activity which could be regarded as incidental to "scuba diving" or the other activities expressly referred to in the definition such as "tours of reef by glass bottom boats (under 12 metres), transportations of people from one island to another, bird watching, guided tours of island when not diving, jungle and/or bush walking, fishing, underwater photography and/or video [and] whale watching". It is a larger question, and one which on the facts and my conclusion in relation to the second question it is unnecessary to decide, whether a sightseeing expedition such as that Mr Todd undertook on the day in question would fall within the incidental class. It may suffice, for example, if the sightseeing trip was undertaken for business purposes and the business asset, Dive One, was used for the expedition. However, on her Honour's findings, that is not what occurred. 169Going to the second construction issue, her Honour was correct, in my view, in concluding (at [66]) that the activity which gave rise to the claim had to be "in connection with the Insured's Business". 170The phrase "in connection with" in the insuring clause is a relational term, whose operation will depend upon the context in which it appears: R v Khazaal [2012] HCA 26; (2012) 86 ALJR 884 (at [31]) per French CJ; see also in Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 ("Kostas") (at [24]) per French CJ. It is a "'prepositional phrase' of indefinite content" (Kostas at [24]), but may be said to be of considerable width, satisfied by a link or an association summed-up in the phrase "having to do with": Elkateb v Lawindi (1997) 42 NSWLR 396 (at 402) per Giles CJ Comm D; see also Derrington & Ashton (at [3-122]). 171Nevertheless, while the words "may have a very wide operation they do not usually carry the widest possible ambit, for they are subject to the context in which they are used, to the words with which they are associated and to the object or purpose of the statutory provision in which they appear": Hatfield v Health Insurance Commission (1987) 15 FCR 487 (at 491) per Davies J; referred to with approval by Spigelman CJ (with whom Grove and Sully JJ agreed) in R v Orcher [1999] NSWCCA 356; (1999) 48 NSWLR 273 (at [31]). 172The question that remains in a particular case is what kind of relationship will suffice to establish the connection contemplated by the statute: Taciak v Commissioner of Australian Federal Police (1995) 59 FCR 285 (at 295) per Sackville J. However, the relationship must be relevant, so that "usually a remote connection would not suffice"; the "sufficiency of the connection or association will be a matter for judgment which will depend, among other things, upon the subject matter of the enquiry, the legislative history, and the facts of the case": HP Mercantile Pty Ltd v Commissioner of Taxation [2005] FCAFC 126; (2005) 143 FCR 553 (at [35]) per Hill J (Stone and Allsop JJ agreeing). 173As the primary judge accepted (at [53]), and the parties did not controvert, statements made about the meaning of the phrase "in connection with" in a statutory context, also apply to the interpretation of commercial contracts: see Thomas v State of New South Wales [2008] NSWCA 316 (at [19] - [21]) per Campbell JA; Fraser v The Irish Restaurant & Bar Company Pty Ltd [2008] QCA 270 (at [43]) per Muir JA. 174The relational words "in connection with" also operate to widen the ambit of the cover beyond the activities expressly referred to in the insuring clause while, at the same time, requiring, as the primary judge found, that an activity must have a connection with the insured's business before it comes within the terms of the Policy. 175As I have said, the primary judge accepted the interpretation of the insuring clause for which Liberty contended. In summarising Liberty's submissions, her Honour recorded (at [49], see [65] above) the matters of background knowledge it relied upon as relevant to the question of construction. Her Honour did not explicitly take those matters into consideration, although to have done so is consistent with her conclusion that the activity the subject of the claim had to be "in connection with the Insured's Business". 176The matters of background knowledge were relevant to understanding the commercial circumstances the Policy addressed and the objects it was intended to secure, at least to the extent that they may be regarded as knowledge common to both parties to the policy: see Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 (at [10]) per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 (at 352) per Mason J (Stephen and Wilson JJ agreeing). However, it is not apparent that Dive Two would have had knowledge of the matters of background knowledge Liberty relied upon. Further, even though it knew the Policy was arranged through PADI for its members to cover claims arising out of its business activities, as I explain later in these reasons when dealing with Horsell's liability, it was wrongly advised as to the ambit of the Policy's cover. I would not accordingly take the matters of background knowledge Liberty relied upon at trial into account in determining the ambit of the insuring clause. 177However absent those matters of background knowledge, and taken in the context of the Policy as a whole, the relationship contemplated by the words "in connection with" is at least that the activity which gives rise to the claim made against the insured must, at least, have to do with the insured's business. 178On the primary judge's findings of fact, the trip in which the plaintiff was injured bore no such connection. It is not to point, as both Mr Donaldson and Dr Birch argued, that the trip was of the sort Dive Two could have engaged in as part of its business or that an asset of the business was used and one of its employees was engaged on the trip. Mr Todd was not engaged in any function associated with Dive Two's business at the time of the trip. The mere fact he was using Dive One did not convert a social engagement into a business activity: cf RAA-GIO Insurance Ltd v O'Halloran; Australian Kitchen Industries Pty Ltd v O'Halloran [2007] SASC 245; (2007) 98 SASR 123 (at [30]) per Duggan J (Nyland and Kelly JJ agreeing); special leave refused: RAA-GIO Insurance Ltd v O'Halloran [2007] HCATrans 688. Ambit of the appeal on the exclusion clause issue 179Liberty's notice of contention raised the question whether, even if the primary judge erred in her construction of the insuring clause, nevertheless the policy did not cover Dive Two by virtue of cl 7.24. It submitted the primary judge had erred in determining that cl 7.24 did not apply in the circumstances of the accident. 180At trial, Liberty had argued that cl 7.24 excluded Dive Two's claim to indemnity because any liability was caused by the "criminal act or omission" of Mr Todd. It relied upon the fact that Mr Todd had pleaded guilty to the offence of dangerous navigation occasioning grievous bodily harm (s 52B(3)(b), Crimes Act) in respect of the accident. 181The question whether cl 7.24 applied to Liberty's advantage was no longer relevant following the primary judge's conclusion that the Policy did not cover the activity in which Dive Two was engaged at the time of the accident. However, the primary judge said (at [115]) that if the exclusion clause applied, Dive Two could not succeed against Horsell. It was in that context that she embarked upon its interpretation. 182Horsell's notice of appeal as originally filed and, indeed, as it stood after it was permitted to amend it on the morning of the appeal hearing, did not contain any ground of appeal which sought to challenge her Honour's conclusion that cl 7.24 did not apply. Dr Birch initially accepted that the trial had proceeded on the basis that if Dive Two had been unsuccessful on the cl 7.24 issue, they could not prove that their loss arose from Horsell's negligence. However he subsequently resiled from that concession. 183In the course of argument the fact that Horsell had not challenged the cl 7.24 finding was raised. Mr Donaldson's response to the proposition that Horsell had not challenged the primary judge's construction was to say that it had adopted Liberty's submissions on this point in its written submissions on appeal. That is so, however unsupported by any ground of appeal, did not alert Dive Two to the significance of so doing. Indeed, Horsell did not advance any submissions either in writing or orally to support even its seventh ground of appeal concerning causation. 184Mr Donaldson also sought leave to amend the amended notice of appeal to include a ground which squarely raised the issue concerning the operation of cl 7.24 and its causal relevance to Horsell's liability in negligence. At the end of the appeal hearing, the Court granted Horsell leave conditionally to further amend the amended notice of appeal to add such a ground of appeal, that conditional leave being subject to whether Dive Two could establish that it would be prejudiced by such amendment. 185Pursuant to the Court's direction, Horsell forwarded to the Court a proposed further amended notice of appeal which proposed a new ground eight in the following terms: "(8) The trial judge erred in failing to find that: (a) cl 7.24 of the Policy operated so as to exclude the claim by the first and/or second respondents; and (b) the plaintiffs have not established that they suffered any loss consequent on the appellant's breach of duty or breach of retainer." 186In Dive Two's written submissions opposing leave being given to Horsell to advance the proposed new ground eight, Dr Birch submitted that Horsell had not advanced a case at trial that cl 7.24 (or any other exclusion in the Policy) broke the nexus between any negligent conduct on its part and Dive Two's loss. He accepted that the primary judge had proceeded on the assumption that if the insuring clause did not respond, Dive Two could not succeed against Horsell if cl 7.24 applied, however said that her Honour did so absent any submission from any party raising that issue. 187Dr Birch said it was appropriate for her Honour to determine the proper construction of cl 7.24 as it was an issue between Dive Two and Liberty. He submitted that had Horsell sought to argue at trial that cl 7.24 operated to break the causal nexus in the manner embodied in proposed ground eight, Dive Two would have been on notice about the need to adduce evidence directed to the availability of insurance without a clause to the effect of cl 7.24. Dive Two sought the opportunity, if Horsell was given leave to rely upon proposed ground eight, to make submissions based on the evidence which was adduced at trial about the availability of alternative insurance without a cl 7.24 equivalent. Horsell opposed Dive Two being given that leave, in addition to making other submissions it is unnecessary to recount concerning matters of pleading. 188The short answer to this controversy is that Dr Birch's original concession was correct. It is the case that Horsell's written submissions on causation were limited to the proposition that Dive Two had not established that it would have acted differently if advised, in substance, about the actual cover of the Policy. However, in the course of Dr Birch's oral submissions at the end of the trial, the primary judge reminded him of what he had said in his opening, namely "that if [the claim] is within the insuring clause, but I find one of the other reasons for Liberty's non-payment, you lose", to which he responded: "Correct. If your Honour was to say it was within the insuring clause, but it was excluded by 7.24, then we don't say the broker was at fault because he should have gone and got a policy that didn't have a 7.24 exclusion in it." 189The primary judge clearly based her statement (at [115]) about the significance of the operation of cl 7.24 in terms of Horsell's potential liability on that exchange. 190Accordingly, I would confirm the leave given to Horsell on 18 March to amend the notice of appeal as it sought, and, further, in light of Dr Birch's statement to the primary judge, reject his submission that Dive Two should be able to make submissions about the availability of alternative insurance without a cl 7.24 equivalent. Operation of the exclusion clause 191The "interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity": Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 (at 510) per Mason, Wilson, Brennan, Deane and Dawson JJ; Nissho Iwai Australia Ltd v Malaysian International Shipping Corp, Berhad [1989] HCA 32; (1989) 167 CLR 219 (at 227); Selected Seeds Pty Ltd v QBEMM Pty Ltd [2010] HCA 37; (2010) 242 CLR 336 (at [29], [34]) ("Selected Seeds"). If a question arises as to whether, and to what extent, words must be read down, that question too must be determined as a matter of construction, from the context in which the words appear: Henry (at 125 - 126) per Hope JA (Priestley JA agreeing). 192In construing an exclusion clause, the court will take into account the principle that it would not give effective business operation to a contract if an exclusion clause inappropriately circumscribed the cover provided by the insuring clauses: Legal and General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 (at 394) per Kirby P; (at 402 - 403) per Glass JA; (at 405) per McHugh JA (Glass JA agreeing); Transfield Services (Australia) Pty Ltd v Hall; Hall v QBE Insurance (Australia) Pty Ltd (at [191]) per Campbell JA; (at [238]) per McClellan CJ at CL (Beazley JA agreeing). The nature of the offence of dangerous navigation 193At the time of the accident, s 52B(3) of the Crimes Act provided: "(3) Dangerous navigation causing grievous bodily harm A person is guilty of the offence of dangerous navigation causing grievous bodily harm if the vessel navigated by the person is involved in an impact occasioning grievous bodily harm to another person and the person navigating the vessel was, at the time of the impact, navigating the vessel: (a) under the influence of intoxicating liquor or of a drug, or (b) at a speed dangerous to another person or persons, or (c) in a manner dangerous to another person or persons. A person convicted of an offence under this subsection is liable to imprisonment for 7 years." 194The offence of culpable driving under s 52A of the Crimes Act was introduced in 1974 and replaced by a revised s 52A offence of dangerous driving in 1994: R v Jurisic (1998) 45 NSWLR 209 (at 226) per Spigelman CJ. The s 52B offence of culpable navigation was inserted into the Crimes Act in 1983 and the "legislature adopted pari passu the terminology" of the culpable driving offence: R v Warner (1991) 25 NSWLR 382 (at 385) per Carruthers J. In 1996 the offence of "culpable navigation" in s 52B of the Crimes Act was amended to that of "dangerous navigation" to be consistent with the offence of "dangerous driving" in s 52A: Second Reading Speech of the Hon Michael Egan MLC, Criminal Legislation Further Amendment Bill, New South Wales Legislative Council, Parliamentary Debates (Hansard), 17 April 1996 at 93. 195Thus the offence of dangerous navigation mirrors the offence of dangerous driving; further, it is "specifically designed to deal with unintended fatal consequences": R v Reynolds [2010] NSWSC 691 (at [50], [59]) per Grove J ("Reynolds"). 196Liberty relied upon two authorities concerning dangerous driving offences to demonstrate that the nature of the conduct inherent in a conviction for such an offence was the sort an insurer would exclude from the cover afforded by a liability policy: see [115] above. 197The first was Jiminez v The Queen (at 579 - 580) where the plurality (Mason CJ, Brennan, Deane, Dawson, Toohey and Gaudron JJ) held (footnotes omitted): "The manner of driving encompasses 'all matters connected with the management and control of a car by a driver when it is being driven'. For the driving to be dangerous for the purposes of s 52A there must be some feature which is identified not as a want of care but which subjects the public to some risk over and above that ordinarily associated with the driving of a motor vehicle, including driving by persons who may, on occasions, drive with less than due care and attention. ... But it should be emphasized, and it must always be brought to the attention of the jury, that the condition of a driver must amount to something other than a lack of due care before it can support a finding of driving in a manner dangerous to the public. Driving in that condition must constitute a real danger to the public. As Barwick C.J. said in McBride v The Queen: 'The section speaks of a speed or manner which is dangerous to the public. This imports a quality in the speed or manner of driving which either intrinsically in all circumstances, or because of the particular circumstances surrounding the driving, is in a real sense potentially dangerous to a human being or human beings who as a member or as members of the public may be upon or in the vicinity of the roadway on which the driving is taking place.' It follows that for a driver to be guilty of driving in a manner dangerous to the public because of his tired or drowsy condition that condition must be such that, as a matter of objective fact, his driving in that condition is a danger to the public.'" 198The second was R v De Montero (at [75]) where the Court (Ashley, Redlich and Weinberg JJA) said: "75 Since Coventry was decided, it has been customary to distinguish departures from the proper standard of care as may be regarded as ordinary risks of the road, even if they would found a civil action, and dangerous driving which exposes other road users to such risks, as 'any reasonable person in the situation of the driver ought to recognise as a real danger to the public'." 199De Montero was overruled in King v The Queen [2012] HCA 24; (2012) 245 CLR 588 which considered the elements of the offence of dangerous driving causing death under s 319(1) of the Crimes Act 1958 (Vic). The plurality (French CJ, Crennan and Kiefel JJ) traced the history of statutory provisions dealing with culpable driving causing death and dangerous driving causing death: King v The Queen (at [22] ff). The relevance of that analysis to s 52B(3) is manifest from the latter's legislative history: see [194] above. 200The plurality in King v The Queen considered (at [31] - [34]) the jurisprudence concerning s 52A of the Crimes Act, including Jiminez v The Queen. Their Honours pointed out (at [31]) that R v Coventry [1938] HCA 31; (1938) 59 CLR 633 (at 637 - 638) established the test for dangerous driving as an objective one, a test reflected in the High Court's decisions in McBride v The Queen [1966] HCA 22; (1966) 115 CLR 44 and Jiminez v The Queen, both of which related to the offence of culpable driving causing death under s 52A of the Crimes Act. 201After setting out the legislative history of s 52A of the Crimes Act the plurality continued (footnotes omitted): "32 ... In McBride, Barwick CJ said of the criterion in s 52A: This imports a quality in the speed or manner of driving which either intrinsically in all circumstances, or because of the particular circumstances surrounding the driving, is in a real sense potentially dangerous to a human being or human beings who as a member or as members of the public may be upon or in the vicinity of the roadway on which the driving is taking place. The Chief Justice's observation was expressly approved by the plurality in Jiminez, which was concerned with s 52A of the Crimes Act 1900. 33 In Barwick CJ's discussion, in McBride, of the term 'speed or in a manner dangerous to the public' the Chief Justice also said: This concept is in sharp contrast to the concept of negligence. The concept with which the section deals requires some serious breach of the proper conduct of a vehicle upon the highway, so serious as to be in reality and not speculatively, potentially dangerous to others. This does not involve a mere breach of duty however grave, to a particular person, having significance only if damage is caused thereby. [Emphasis added.] 34 In its decision in R v Buttsworth in 1983 the Court of Criminal Appeal of New South Wales treated the offence under s 52A as 'a species of negligent driving of less gravity than negligent driving appropriate to manslaughter'. Buttsworth was referred to in a footnote by the plurality in Jiminez, but to support the proposition that the level of risk engendered by dangerous driving must be greater than that ordinarily associated with the driving of a motor vehicle. Jiminez does not support the proposition that negligence is an element of driving at a speed or in a manner that is dangerous to the public. Consistently with that view, the Court of Criminal Appeal of New South Wales in R v LKP held that momentary inattention can, depending upon the circumstances of the case, constitute driving in a manner dangerous to the public for the purposes of s 52A. The Court of Criminal Appeal held that Coventry, McBride and Jiminez all stand together. Buttsworth was not referred to in that decision. Nor was it referred to by the Court of Criminal Appeal in its decision in R v Saunders in 2002. In that case an appeal against a conviction for dangerous driving causing death was allowed on the basis that the trial judge did not elucidate to the jury 'the concept of dangerous driving as distinct from negligent driving'. In Gillett v R McClellan CJ at CL, with whom Sully and Hislop JJ agreed, in a case involving an accused who drove while suffering from the medical condition of epilepsy, said: The relevant question is whether the manner of driving, the condition of the vehicle, or the condition of the driver as a matter of objective fact made the driving a danger to the public. That is not a question which assumes that some species of criminal negligence less than that necessary to make out manslaughter is an element of driving in a manner or at a speed which is dangerous to the public." 202After considering the jurisprudence concerning the offence of culpable driving causing death (King v The Queen (at [35] ff), the plurality turned to the offence of dangerous driving causing death or serious injury in s 319 of the Crimes Act (Vic) of which the Attorney-General said in the Second Reading Speech for the Crimes (Dangerous Driving) Bill, Victorian Legislative Assembly, Parliamentary Debates (Hansard), 3 June 2004 at 1798: "To establish this offence the prosecution will not be required to prove criminal negligence, which is required to prove culpable driving causing death. Rather, to establish the new offence, the prosecution will have to prove that the accused drove at a speed or in a manner dangerous to the public having regard to all the circumstances of the case, and by doing so, caused the death of or serious injury to another person." 203The plurality said (footnotes omitted): "38 The ordinary meaning of 'dangerous' is '[f]raught with or causing danger; involving risk; perilous; hazardous; unsafe'. It describes, when applied to driving, a manner or speed of driving which gives rise to a risk to others, including motorists, cyclists, pedestrians and the driver's own passengers. Having regard to the ordinary meaning of the word, its context in s 319 and the purpose of s 319, as explained in the Second Reading Speech, negligence is not a necessary element of dangerous driving causing death or serious injury. Negligence may and, in many if not most cases will, underlie dangerous driving. But a person may drive with care and skill and yet drive dangerously. It is not appropriate to treat dangerousness as covering an interval in the range of negligent driving which is of lesser degree than driving which is 'grossly negligent' within the meaning of s 318(2)(b) of the Crimes Act. The offence created by s 319 nevertheless takes its place in a coherent hierarchy of offences relating to death or serious injury arising out of motor vehicle accidents. It is not necessary to that coherence that the terms of the section be embellished by reading into them a requirement for proof of some species of criminal negligence." (Emphasis added) 204The plurality held that de Montero was wrongly decided in the following respect (footnotes omitted): "39 In De Montero the Court of Appeal held that a jury should be told 'that while dangerous driving necessarily involves criminal negligence, it need not, like culpable driving, be grossly negligent, but ... must involve a serious breach of the proper management or control of a vehicle on the roadway.' That observation, with respect, misstated the concept of dangerous driving causing death by requiring an element of negligence. As the plurality said in Jiminez, in relation to s 52A of the Crimes Act 1900: 'For the driving to be dangerous for the purposes of s 52A there must be some feature which is identified not as a want of care but which subjects the public to some risk over and above that ordinarily associated with the driving of a motor vehicle, including driving by persons who may, on occasions, drive with less than due care and attention. [Emphasis added]'" The decisions in Henry and Xerri 205In Henry the deceased died in a motor vehicle accident after a collision which the primary judge found occurred because of his inadvertent failure to keep a proper lookout and keep his car on the correct side of the road so as not to drive it into the path of oncoming traffic. Three people in a car travelling in the opposite direction were also killed in the collision. The primary judge assumed that, on the facts he found, the deceased's conduct amounted to the offence of driving his motor vehicle in a manner which was dangerous to the public, which constituted the offence of culpable driving pursuant to s 52A of the Crimes Act: Henry (at 123). 206The deceased was insured with Australian Aviation Underwriting Pool Pty Ltd (the insurer) under a personal accident policy. The respondents, his legal personal representatives, sought to claim under the policy in respect of his death. The insurer relied upon an exclusion clause that excluded cover for death resulting from "suicide or attempted suicide or intentional self-injury, or from deliberate exposure to exceptional danger ... or from an Insured Person's own criminal act". 207The Court of Appeal (Hope and Priestley JJA; McHugh JA dissenting) held that death resulting from "an Insured Person's own criminal act" did not include death resulting from negligent or inadvertent acts. 208Hope JA first considered (at 123 - 124) the principle of public policy "that if an act is manifestly unlawful, or the doer of it knows it to be unlawful, as constituting either a civil wrong or a criminal offence, he cannot maintain an action for contribution or for indemnity against the liability which results to him therefrom" (Burrows v Rhodes [1899] 1 QB 816 (at 828) per Kennedy J) and its application to cases where claims were made under accident policies in respect of death or injuries caused by motor vehicle accidents. In the latter context, in Tinline v White Cross Insurance Association Ltd [1921] 3 KB 327 and James v British General Insurance Co Ltd [1927] 2 KB 311, the court had held that as, in substance, most motor accidents were due to the breach by the driver of some enactment, the circumstance that the action of the insured was negligent, albeit grossly negligent, but not intentional took the case outside the application of the relevant public policy, so that the insurers were liable. 209Hope JA observed (at 124) that those decisions showed that "the law, and in particular the law relating to insurance, has distinguished between intentional crimes and crimes which are not intentional but are the consequence of negligence, however gross." 210Hope JA (at 124) held that the primary judge (Ducker DCJ) was correct in concluding that the exclusion clause did not extend to criminal acts which were negligent and inadvertent. He reached that conclusion by reference to the context in which the exclusion clause was found, namely a "Personal Accident Policy" covering injury caused by an accident, one of the most common ways in which such an injury may occur being in a motor vehicle accident, often resulting from the breach by a driver of an enactment. In those circumstances he held (at 125) that "some limitation should be read into the ordinary meaning of the words 'from an insured person's own criminal act'" and (at 126) that the appropriate limitation was one excluding "negligent or inadvertent criminal acts". 211Hope JA also applied (at 126) the maxim noscitur a sociis having regard to the fact that all the other acts covered by the exclusion clause (suicide, intentional self-injury and deliberate exposure to exceptional danger) were intentional acts, which would "not be established if they were the result of negligence, however gross, or inadvertence". His Honour also applied (at 126) the contra proferentem rule, concluding that the context "point[ed] strongly against [excluding cover for] acts which are merely negligent or inadvertent", and that "if the exception was intended to exclude liability in such cases, it should be stated in the policy in clear and unambiguous language." 212Priestley JA (at 127) accepted that the "words 'criminal act' have no single fixed meaning [and] carry different meanings to different people which vary according to the context in which they are used." His Honour agreed with Hope JA's contextual analysis of the words of the exclusion clause. In his view, there was nothing in the exclusion clause which compelled the idea that it encompassed "every single act that might fall within any definition of criminal." His Honour was also influenced in reaching his conclusion by the probability that the insurer was aware of the various judicial decisions on similar policy clauses, so that "having chosen not to express the policy in words that make the matter clear, [the insurer] ha[d] left the exclusion in a form which it knows may be read in the way in which it was in fact read by the trial judge in this case." 213In his dissenting judgment, McHugh JA held (at 131) that "[a]ny act punishable by law which ordinary people would regard as serious wrongdoing is ... a criminal act for the purpose of this policy." His Honour held (at 131 - 132) that the conduct of dangerous driving causing death met this threshold, considering the serious consequences of the act and the penalty of a term of imprisonment of up to five years which the law attaches by reason of its consequences. In his Honour's view (at 131) if "the policy intended to apply only to deliberate wrongdoing ... it would have said so", particularly as the exclusion clause otherwise referred to "intentional self-injury" and "deliberate exposure to exceptional danger". He concluded (at 133) that "it is enough to say that the dangerous driving of the deceased was an offence punishable by law and ... when it caused the death of three other persons, ordinary people would regard it as a serious wrongdoing [so that it] was, therefore, a 'criminal act' within the meaning of the policy." 214In Xerri, the appellant's motor vehicle was extensively damaged in a collision with a hire car owned by the respondent (a car rental firm) when the driver of the hire car did a U-turn across the path of the appellant's vehicle. The driver of the hire car died as a result of the collision. 215The appellant sued the respondent for the damage to his vehicle pursuant to s 51(1) of the Insurance Contracts Act 1984 (Cth). The Car Rental Agreement contained conditions touching insurance which, by the time the case came to the Court of Appeal, had been held to be a contract of (liability) insurance capable of attracting s 51(1), a finding which was not challenged: Xerri (at 571) 216The case came to the Court by way of a stated case in which the magistrate found (Xerri at 571): "On the evidence before me, there is sufficient [evidence] for me to find, on the balance of probabilities, that the deceased was intending to do a 'U' turn at the time and had in fact commenced that procedure. The manner in which he performed that manoeuvre was negligent. On 13 August 1992 the deceased caused the motor vehicle collision which occurred between the Mitsubishi and the plaintiff's vehicle in that the deceased drove the Mitsubishi in breach of provisions of the Motor Traffic Act and/or Motor Traffic Regulations ... " 217The respondent relied on exclusion clause 4(f) which provided that the "[v]ehicle must not be used or driven in contravention of the provisions of the Motor Traffic Act". Mason P (with whom Handley and Sheller JJA agreed) held (at 573) that the magistrate's findings to the effect that the negligent act of the deceased when he did a "U" turn across the path of the appellant's vehicle entailed breaches of s 4(1) of the Traffic Act 1909 (negligent driving) as well as regs 72A and 73 of the Motor Traffic Regulations were capable of being described as contraventions of the provisions of the Motor Traffic Act 1909, and fell "squarely within" cl 4(f). Although his Honour accepted that the effect of that conclusion was that "the 'damage insurance' proffered by the respondent to the deceased was unavailable in the very circumstances where one would expect it to be required" he held "the stringency of a contractual exclusion condition is not in itself a reason for ignoring that condition". 218Mason P also rejected the appellant's attempt to invoke the principle of public policy which Hope JA had found persuasive in Henry, finding (at 574) that "the present case does not involve this situation, because the deceased's conduct, albeit criminal, simply took him outside of the closely confined and largely illusory insurance cover." 219Mason P discussed Henry in the following terms (at 574): "[Henry] provide[s] no support for the proposition that the court can avoid the terms of the policy by finding that an unintentional crime was involved. Henry recognises that an exclusion clause inserted by an insurer will be read contra proferentem, and applies that principle by reading down an exclusion relating to death resulting from 'an insured person's own criminal act' so as not to apply where that criminal act was negligent or inadvertent: see also Australian Associated Motor Insurers Ltd v Wright (1997) 10 ANZ Ins Cas 74137. But Henry does not go any further. While the mere fact that a person commits a crime does not preclude reliance upon insurance cover, at least where the crime is unintentional (Gardner v Moore [1984] AC 548), it would be entirely fallacious to invert this into the proposition that commission of an unintentional crime brings an insured within the cover of a policy that clearly excludes conduct of the relevant type." (Emphasis added) Conclusion: operation of clause 7.24 220In my view the primary judge did not err in concluding that cl 7.24 did not operate to deny Dive Two cover had the insuring clause extended to the circumstances of the claim. Her Honour's reasons for reaching that conclusion are compelling (see [80] above). 221Mr Sexton is correct in arguing that negligence is not an element of the s 52B(3) offence. However that was also true of the offence the deceased committed in Henry. The approach that case sanctions is to look at the circumstances which give rise to the claim and determine whether in those circumstances, even though they constitute an offence, they are covered by the exclusion. 222Thus, while negligence is not an element of the s 52B(3) offence, as the foregoing analysis makes clear, negligence, such as momentary inattention, may and, in many if not most cases will, underlie such an offence: see Jiminez v The Queen (at 579); King v The Queen (at [34], [38] - [39]). That is the gravamen, in my view, of the primary judge's findings (at [141] - [142]) concerning the circumstances in which Mr Todd committed the offence. Even though her Honour concluded (at [147]) that "the degree of lack of care exhibited by Mr Todd was greater than mere negligence", it was open to her to find that the criminal act he committed was not intentional. 223Next, I accept that the words in cl 7.24 are to be read disjunctively, that is to say as if "or" appeared between each category of conduct which precedes "criminal act or omission". However that does not, in my view, deprive the other words in the clause of their contextual significance. In particular, it does not mandate the conclusion that whereas an element of intention is inherent in each of the preceding matters in the "list" of acts or omissions cl 7.24 excludes from cover, that element is not required for an excluded "criminal act or omission". 224It "is not a satisfactory mode of arriving at the meaning of a compound phrase to sever it into its several parts and to construe it by the separate meaning of each of such parts when severed": Mersey Docks and Harbour Board v Henderson Brothers (1888) 13 App Cas 595 (at 599 - 600) per Lord Halsbury. Liberty's disjunctive argument commits the fallacy of "treat[ing] the words of an English sentence as building blocks whose meaning cannot be affected by the rest of the sentence [whereas] ... [t]he unit of communication by means of language is the sentence and not the parts of which it is composed [and] [t]he significance of individual words is affected by other words and the syntax of the whole": R v Brown [1996] 2 WLR 203 (at 218); [1996] 1 All ER 545 (at 560) per Lord Hoffmann; applied in Collector of Customs v Agfa-Gevaert Ltd [1996] HCA 36; (1996) 186 CLR 389 (at 397). The Policy has to be "read in its totality, commercially and sensibly": QBE Insurance Australia Ltd v Vasic [2010] NSWCA 166 (at [37]) per Allsop P (Giles and Macfarlan JJA agreeing). 225While the list of acts or omissions referred to in cl 7.24 may each refer to an alternative excluded activity, that does not mean they do not form a class from which the intention of the exclusion can be discerned. Rather they are all adjectivally connected to the words "act or omission" so as, as the primary judge found (at [146]) to share the characteristic or "genus" of the preceding conduct, which was that of intention. 226In my view, the opening words of the exclusion clause ("directly or indirectly caused by, arising out of or in any way connected with") do not assist with the construction of cl 7.24. They are directed at the degree of causal connection between the act giving rise to the claim and the excluded matter. They do not, in my view, enlarge the meaning of the acts or omissions referred to in cl 7.24. Rather, the focus has to be on reading the exclusion in the context of the Policy as a whole, "giving due weight to the context in which the clause appears": Selected Seeds (at [29]). 227The construction of the exclusion clause which found support in Henry reflects the general principle that an insurer does not as a general rule intend to cover loss deliberately created by an insured particularly where it amounts to the commission of a crime or fraud: see Fire and All Risks Insurance Co Ltd v Powell [1966] VR 513 (at 517, 519 - 523) per O'Bryan and Pape JJ; (at 527) per Smith J; Australian Associated Motor Insurers Ltd v Wright (1997) 70 SASR 110 (at 118) per Matheson J; and see generally K Sutton, Insurance Law in Australia, 3rd ed (1999) LBC Information Services (at [14.1], [14.11] - [14.14]). 228In my view, it would require a precise identification of the nature of the criminal act which would warrant indemnity being denied to exclude Liberty's obligation to indemnify the insured for an offence which could be founded on momentary inattention. The clause in the Xerri policy fell within that description - that used in the present case does not. Rather it substantially repeats the language of the Henry clause. In this light it is significant to recall that one of the reasons Priestley JA found comfort in supporting Hope JA's construction of the exclusion clause was (at 127 - 128) the fact that the insurer would have been aware of the courts' approach to treat exclusion clauses worded at the level of generality of the Henry policy as requiring intentional conduct, yet left the exclusion clause in a form which it knew may be read that way. Accordingly, in his Honour's view, it should bear the burden of the courts' continuing to apply that construction. His Honour's reasoning applies with equal force to a Policy which was drafted about 14 years after Henry was decided. 229Finally on the question of construction, having regard to the context in which the exclusion clause appears, and having regard to the essence of liability insurance (see [155] above), it would, in my view, be repugnant to the commercial purpose of the Policy to construe it to exclude cover for acts of negligence, albeit that they sounded in criminal liability, bearing in mind that the "failure to foresee dangers is one of the commonest grounds of liability in negligence": Fraser v BN Furman (Productions) Ltd [1967] 1 WLR 898; [1967] 2 Lloyd's Rep 1 (at 12) per Diplock LJ. 230There is an element of sophistry in Mr Sexton's submission that Mr Todd's conduct was intentional because he knew the speed he was travelling at and knew about the problems with visibility caused by the build up of salt on his windscreen. As much can be said of the acts or omissions which constitute most negligent acts - it does not prevent them being characterised as negligent in the sense of a breach of a duty of care or, relevantly in this case, a contravention of s 52B(3). The focus of that offence is whether, objectively determined, the speed at which he was navigating Dive One was dangerous to the plaintiff: Jiminez v The Queen (at 579) approving McBride. Thus the primary judge was correct in considering whether Mr Todd intended the consequences of the speed at which he was driving, rather than whether he merely intended to drive at that speed with reduced visibility. 231In my view the primary judge did not err in concluding that cl 7.24 did not operate to exclude Dive Two's claim for indemnity. LIABILITY OF HORSELL 232Whether the claim against Horsell was characterised as arising from a retainer between it and Dive Two or from a duty of care it owed Dive Two, it was essentially based on Dive Two's contention that Horsell failed to exercise reasonable care and skill in advising it as to the terms of the Policy, its adequacy for Dive Two's purposes and failing to advise of the necessity to obtain additional public liability insurance to cover use of Dive One that did not fall within the insuring clause. As such its claim for damages against Horsell fell to be determined in accordance with Part 1A of the Civil Liability Act: s 5A(1), Civil Liability Act. Neither party contended that the outcome of the appeal turned on the application of any particular provision of the Civil Liability Act. The primary judge appears to have considered the issue of causation by reference to s 5D of the Civil Liability Act. There was no submission that her Honour ought not to have done so or that she misapplied it. As I have observed, there was, in any event, despite ground seven in the notice of appeal, no submission challenging her Honour's causation finding. Relationship between Horsell and Dive Two 233In my view there was a contract of retainer between Dive Two and Horsell pursuant to which Horsell acted as Dive Two's insurance broker to arrange both the Policy and Dive Two's hull insurance for the insurance years 2003/2004, 2004/2005 and 2005/2006. Dive Two paid Horsell a broker's fee in respect of each of the policies it took out for those insurance years. 234I am also of the view that Horsell owed Dive Two a duty of care insofar as it advised of the terms of the Policy and the hull insurance. In the latter respect, in particular in March 2003, it was dealing directly with Dive Two as its insurance broker in response to an inquiry about insurance not within the umbrella of what I will loosely call the PADI scheme. However it advised Dive Two about the ambit of the cover it needed for its hull insurance, in the context of advising Dive Two what the Policy covered. Duty of an insurance broker 235The obligations of an insurance broker were succinctly stated in Caldwell v JA Neilson Investments Pty Ltd [2007] NSWCA 3; (2007) 69 NSWLR 120 per Ipp JA (Mason P and Hodgson JA agreeing): "103 There is considerable authority to the effect that an insurance broker must use reasonable skill and care to ascertain its customer's needs by instructions or otherwise: see, for example, Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541 at 555 to 556, Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd (1982) 2 NSWLR 57 at 62. A broker must use reasonable care and skill to procure the cover that the customer has asked for, either expressly or by implication. If the broker cannot obtain what is required, it must report in what respects it has failed and seek the customer's alternative instructions Youell v Bland Welch & Co Ltd (The "Superhulls Cover" Case (No 2)) [1990] 2 Lloyd's Rep 434 at 445, Harvest Trucking Company Ltd v P B Davis [1991] 2 Lloyd's Rep 638, Aneco Reinsurance Underwriting Limited (In Liq) v Johnson & Higgins Ltd [1998] 1 Lloyd's Rep 565 at 590." (Emphasis added) 236The content of an insurance broker's duty includes an obligation to ensure the client's policy is suitable for the purpose for which it is sought as Blair J explained in Ground Gilbey Ltd v Jardine Lloyd Thompson UK Ltd [2011] EWHC 124 (Comm) as follows: "73 In short, a broker owes his client a duty to take reasonable steps to obtain a policy which clearly meets his client's needs and is suitable for the client. An aspect of that is that the client should not be exposed to an unnecessary risk of legal disputes with the insurer ... The broker owes his client a duty to draw to the client's attention any onerous or unusual terms or conditions, and should explain to the client their nature and effect. After the risk has been placed, the continuing duty is exemplified by HIH Casualty & General Insurance Ltd v JLT Risk Solutions Ltd in which Longmore LJ stated that, 'an insurance broker who, after placing the risk, becomes aware of information which has a material and potentially deleterious effect on the insurance cover which he has placed is under an obligation to act in his client's best interest by drawing it to the attention of his client and obtain his instructions in relation to it' ([2007] EWCA Civ. 710 at [116])." (Emphasis added) 237The duty is owed both in contract and tort to exercise all reasonable care and skill in advising the clients and in respect of obtaining appropriate insurance cover; that duty required the broker "so far as possible, to obtain insurance coverage which clearly and indisputably meets its clients' requirements": Ramco Ltd v Weller Russell & Laws Insurance Brokers Ltd [2008] EWHC 2202 (QB); [2009] Lloyds Rep IR 27 (at [14] - [15]) per David Donaldson QC, sitting as a Deputy High Court Judge; see also Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149 (at 167) per Brennan J. 238Even if the client gives ambiguous instructions to the broker "in circumstances where if they had the meaning put upon them by the broker they left the client substantially under insured ... it [is] the duty of the broker both to clarify the instructions and to draw the attention of the client to the consequences of giving effect to them if they had the meaning that the insurer put upon them": Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1990) 6 ANZ Ins Cas ¶61-012 (at 76, 635) per Gleeson CJ (Kirby P agreeing). The broker's duty of care does not extend to having to expound the law to the insured, but it does extend to pointing out the legal pitfalls for the insured where these might arise in the course of effecting a valid insurance cover: Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd [1982] 2 NSWLR 57 (at 65) per Hutley JA. The primary judge (at [182]) applied Hutley JA's statement in Fanhaven Pty Ltd v Bain Dawes Northern Pty Ltd. 239In this respect Horsell must have realised, or the circumstances were such that it ought to have realized, that Dive Two intended to act upon the information or advice Horsell gave in respect of the insurance it sought in relation to Dive Two and that that was in connection with some matter of business or serious consequence. Further, the circumstances were such that it was reasonable in all the circumstances for Dive Two to seek, or to accept, and to rely upon what Horsell said: Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556 (at 571) per Barwick CJ. His Honour's statement was approved in Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 (at [47]) per Gleeson CJ, Gummow and Hayne JJ; see also Gaudron J (at [73] - [78]). 240As Dive Two submitted, it had no access to the Master Policy, a matter of which Horsell knew, or ought to have known. In any event, even if it had, it was Horsell's obligation as insurance broker to ensure Dive Two understood the Policy only covered it for matters covered by, or reasonably incidental to, the insuring clause. Horsell should have appreciated when Dive Two made an inquiry in March 2003 about a hull policy which included public liability, that that inquiry reflected the fact that Dive Two may use its boats for trips not connected with its business. In any event, had the inquiry been ambiguous in this respect, it was a matter for it to clarify the cover Dive Two sought. Instead it advised Dive Two in its response to the request for hull insurance that the Policy provided "coverage for liability for vessels up to 12 metres for activities associated with diving, swimming, sightseeing, whale watching and fishing". That was, in my view, a representation that was not limited to activities conducted in connection with Dive Two's business. Mr Todd was entitled to rely upon it, as he did, as a representation that the Policy extended to non-business use of his boats. 241As I have said, there is no effective challenge to the primary judge's causation finding but, in any event, I would be of the view that her Honour's finding was amply open on the evidence. In order to succeed on causation, Dive Two had to establish that the negligence was a necessary condition of the occurrence of the harm it suffered and that it is appropriate for the scope of Horsell's liability to extend to the harm so caused: s 5D(1), Civil Liability Act. 242In my view the evidence as to Mr Todd's determination to have full insurance cover for Dive One amply supported her Honour's conclusion in the light of all relevant circumstances that had he been properly advised about the limits on the cover available under the Policy, he would have taken out the hull insurance Horsell otherwise could have arranged: s 5D(3), Civil Liability Act. Orders 243I propose the following orders: (1) Confirm the leave given to Horsell on 18 March 2013 to amend the amended notice of appeal to include ground 8 in terms of the further amended notice of appeal. (2) Appeal and cross-appeal dismissed. (3) Appellant pay the costs of the respondents (Dive Two, Mr Todd and Liberty) of the appeal and cross-appeal. 244MEAGHER JA: On 29 July 2006 an aluminium dive vessel owned by the first respondent (Dive Two) collided with a fishing boat driven by Mr Lane. The dive vessel was being navigated by the second respondent (Mr Todd), the sole director of Dive Two. The collision occurred on the Myall River near Winda Woppa. Mr Lane was seriously injured. He brought proceedings for negligence against Dive Two and Mr Todd. Those proceedings were settled. Dive Two and Mr Todd sought an indemnity against their liability to Mr Lane under a contract of insurance between Dive Two and the third respondent (Liberty). 245That insurance had been arranged by the appellant insurance broker (Horsell). Dive Two was a member of the Professional Association of Diving Instructors. PADI Asia Pacific Pty Ltd (PADI Asia Pacific) is a company formed to provide services to the members of that association. It made an arrangement with Horsell which permitted Horsell to promote and market insurance products to members of the association. Pursuant to that arrangement Horsell promoted and marketed what was described as the "PADI Asia Pacific Watertight Liability Insurance Programme". 246That insurance was effected with Liberty, which issued a policy described as a "Master Combined General & Products & Professional Liability, Claims Made and Notified" policy. That policy named PADI Asia Pacific and "individual members, dive centers and resorts and others as agreed" as insured. Horsell as "scheme insurance manager" issued certificates of insurance to individual members who required insurance. Those certificates evidenced a contract of insurance between Liberty and the member on the terms of the master policy. The insurance in question was for the period from 1 October 2005 to 30 September 2006. 247Dive Two and Mr Todd sought an indemnity from Liberty under insuring clause 1 in Sections A & B of the policy. That clause provided: "... [Liberty] will pay to or on behalf of the Insured all sums which the Insured shall become legally liable to pay by way of compensation as a result of a Claim(s) both first made against the Insured and notified to [Liberty] during the Period of Insurance for Injury and/or Damage in connection with the Insured's Business." The "Insured's Business" was described in the schedule to the master policy as "defined in the policy wording under 'Scuba Diving'". The definition of "Scuba Diving" is extracted by McColl JA at [57]. Dive Two was described in the certificate issued by Horsell as a member of the association in the category known as "DiveStore". 248Mr Todd also relied on cl 3.1 which extended the benefit of the insuring clause to: "3.1 Any Director, Executive Officer or Worker of the Insured, ... but only while acting within the scope of their duties in such capacity and excluding Instructors, Assistant Instructors, and Dive Masters working for a store unless otherwise agreed." 249The primary judge dismissed the claims of Dive Two and Mr Todd to an indemnity and upheld their alternative claim against Horsell for damages for negligence: Rian Lane v Divetwo Pty Ltd [2012] NSWSC 104. Her Honour rejected their claim under the policy on the basis that it only indemnified in respect of Dive Two's liability to pay compensation for injury or damage occurring "in connection with" its business of "Scuba Diving". The primary judge held that, at the time of the accident, Mr Todd was navigating the dive vessel in the company of his wife and four friends on a private pleasure trip and not for any purpose connected with the conduct of Dive Two's business. That conclusion was sufficient to defeat each of their claims. In addition, Mr Todd was not within cl 3.1 because at the time of the accident he was not acting in his capacity as a director of Dive Two. 250Liberty also argued that it was not liable because of the operation of cl 7.24. That clause excluded from the cover provided by cl 1 liability "directly or indirectly caused by or arising out of ... any alleged or actual fraudulent, dishonest, malicious, wilful or criminal act or omission of the Insured". Horsell supported Liberty's argument in relation to the operation of that exclusion. It did so because it was accepted before the primary judge that if this exclusion had applied Dive Two and Mr Todd could not recover damages from Horsell for negligence. That involved a concession by Dive Two and Mr Todd that in the performance of its duty of care Horsell could have arranged cover which extended to non-business use of the dive vessel and included an exclusion to the effect of cl 7.24. 251The primary judge held that this exclusion did not apply because the words "criminal act or omission" referred only to a criminal act or omission which was intentional. Although Mr Todd had pleaded guilty to the offence of "dangerous navigation", it was not an element of that offence that he intended the collision or intended that Mr Lane suffer any harm. His conduct, "although criminal and having serious consequences, was not intentional": [142]. 252Finally, the primary judge held that Horsell was negligent in failing to advise Dive Two and Mr Todd that the so called "Watertight" policy only covered activities using the dive vessel which were undertaken in the course of Dive Two's dive instruction business. Had Mr Todd received such advice he would have taken out public liability insurance for the relevant period to cover non-business activities of the vessel: [182], [188]. Issues in the appeal 253There are three issues in the appeal. They concern the construction and operation of the insuring clause, the construction and operation of exclusion clause 7.24 and whether Horsell was liable in negligence for failing to advise Dive Two and Mr Todd that the policy did not cover all activities of the dive vessel. 254Horsell challenges the primary judge's conclusion as to the construction and operation of the insuring clause (grounds of appeal 1, 2 and 5) and her Honour's findings that it was negligent (ground of appeal 6) and that its negligence caused loss (ground of appeal 7). It also challenges the holding that exclusion clause 7.24 did not apply (ground of appeal 8). Horsell was granted leave to rely on that ground at the commencement of the hearing of the appeal. At that time the operation of the exclusion clause was already raised as an issue by Liberty's notice of contention, which sought to support the primary judge's conclusion that it was not liable on the additional basis that the exclusion applied. 255By their cross-appeal, Dive Two and Mr Todd also challenge the primary judge's conclusion as to the construction and operation of the insuring clause (grounds of cross-appeal 1(a), (b) and (e) and 2(b), (c), (f), (g) and (h)). They do so against the possibility that Horsell's appeal in respect of that issue is successful, in which event they argue that, subject to the application of the exclusion clause, they are entitled to judgment against Liberty. They also do so against the possibility that Horsell's challenge to the finding of negligence against it is otherwise successful. 256It is convenient to deal with these issues in the order in which they arise: the construction and operation of the insuring clause, the construction and application of the exclusion and the question of Horsell's negligence. Construction and application of the insuring clause 257The directly relevant provisions of the policy are the insuring clause, the reference to the "Insured's Business" in the schedule and the definition of "Scuba Diving" in cl 2.11. 258Before considering these provisions, it is necessary to record the primary judge's findings as to the circumstances in which Mr Lane was injured. Her Honour's relevant findings were as follows. Mr Todd picked up his wife and two other couples shortly after 1.20pm on 29 July 2006 and took them on a sightseeing tour along the Myall River. He had spent the morning with two separate groups of divers. Those earlier activities were undoubtedly part of Dive Two's dive instruction business. The trip along the river was a recreational one for purposes not connected with that business. The primary judge rejected Dive Two's case that the or an express purpose of the trip was to thank Mr Todd's guests for business already referred to the business or to promote the business to them. Her Honour found that the true position was, as Mr Todd told the police following the accident, that the vessel "was being used in a recreational activity": [80], [90]. 259In my view the primary judge did not err in construing the insuring clause as requiring that the injury or damage which is the subject of the liability to pay compensation against which an indemnity is sought, must be or happen "in connection with" the insured's scuba diving business activities. Those activities at least include activities within the definition of "Scuba Diving" provided they are undertaken in the conduct of that business: esp at [66]-[68]. It is not necessary to decide in this case whether they would also include activities which, whilst not so described, are incidental to the business being undertaken. 260The meaning to be given to the insuring clause is that which reasonable persons in the position of the parties would be taken to have intended, giving primacy to the language they have used and taking into account the context in which the agreement was made. Here that context includes, as was stated in the marketing and information brochure distributed in relation to the insurance, that it had been "designed exclusively" to cover the activities of the dive centre and resort member categories of the association. 261The promise made is to indemnify against sums which an insured is legally liable to pay "by way of compensation". The requirement that the insured become legally liable "as a result of" a Claim first made against the insured and notified to Liberty during the period of insurance describes the event which must occur during the policy period so as to attract cover. The insuring clause concludes with two phrases: "for Injury and/or Damage" and "in connection with the Insured's Business". The second, which is the critical provision in this case, qualifies the first and requires that there be a connection between the "Injury and/or Damage" and the "Insured's Business". The use of the preposition "for" to introduce the first suggests that read together they qualify "compensation" rather than "Claim(s)". So understood, the insuring clause relevantly indemnifies against legal liability to pay compensation for personal injury happening in connection with the "Insured's Business". 262The purpose of the requirement for the connection between the injury or damage and the "Insured's Business" is to define and limit the scope of the activities of the insured which are the subject of the liability insurance. As the authors of Derrington and Ashton, The Law of Liability Insurance 2nd ed (2005) Lexis Nexis observe at 8-235: "... it is common for the policy to limit the scope of the activities of the insured for which indemnity will be provided, and it then becomes necessary to determine the scope of the liability that is covered in this way and whether the liability of the insured comes within the limits of that scope. Plainly, such a limitation is justified since the insurer's assessment of the risk and, if cover is provided, of the rate of premium, is made on its understanding of the nature of the business which the proposal specifies. This limitation may relate to a particular business, to particular activities of it, or even a particular venture of a business, or to the performance of a particular contract between the insured parties ...". 263The first letters in the expression "Insured's Business" are capitalised to indicate that the expression is further defined or explained elsewhere in the policy. In addition, each of the words in that expression has an ordinary meaning. A "business" refers to activities conducted in some organised fashion directed to an identified end, which is usually the making of a profit. The Schedule to the master policy states that "Insured's Business" is "As defined under 'Scuba Diving'". In that statement "Business" is used in its ordinary sense and "Insured's" refers to the specific insured covered under the master policy. When the definition is applied, the statement in the Schedule is that the insured's business is Scuba Diving which principally incorporates "class and water based learning activities and modules ..." and includes "all activities relating to snorkelling, skin diving, swimming, recreational surface supplied air, ...". 264When those activities are undertaken by the insured as part of its business, liabilities for injury or damage happening in connection with them are covered under the insuring clause. The activities in which Mr Todd was involved on the afternoon of 29 July 2006 did not answer that description because they were not undertaken in the course of, or as part of, Dive Two's business. 265The construction contended for by Horsell and Dive Two requires that the definition of "Scuba Diving" be substituted for the words "Insured's Business" in the insuring clause so as to require only that there be a connection between an activity within that definition and the injury or damage which is the subject of the liability of the insured to pay compensation. On that basis it is argued that there was a sufficient connection between the injuries sustained by Mr Lane and "Scuba Diving" because the boat was being used for, among other things, sight-seeing. That construction treats the definition of "Scuba Diving" as being of the expression "Insured's Business", that expression being used only as a label. However, as the above analysis shows, the expression "Insured's Business" is not used as a label which is to be replaced in the insuring clause with the definition of "Scuba Diving". Each of the words in the expression "Insured's Business" has its ordinary meaning and the defined term, "Scuba Diving", is used to describe in detail the activities which are agreed to be within the insured's business of "Scuba Diving". 266The primary judge correctly rejected the arguments of Dive Two and Horsell concerning the application of the insuring clause. Construction and application of exclusion clause 7.24 267At the commencement of the hearing of the appeal, Horsell sought and was granted leave to amend its notice of appeal to challenge the primary judge's conclusion as to the operation of this exclusion. Dive Two and Mr Todd opposed that application. However, because the case at trial was conducted on the basis recorded by the primary judge at [115], and the issue was already raised by Liberty's notice of contention, Horsell was permitted to argue that the primary judge erred in concluding that the exclusion did not apply. 268The relevant part of cl 7.24 is set out above. It excludes from the indemnity liability arising out of or in any way connected with any "alleged or actual" act or omission which is "fraudulent, dishonest, malicious, wilful or criminal". The primary judge, applying similar reasoning to that adopted by Hope and Priestley JJA in Australian Aviation Underwriting Pty Ltd v Henry (1988) 12 NSWLR 121, construed the adjective "criminal" as referring only to an intentional or conscious act or omission, the doing of which constituted a crime. Her Honour reasoned: "[145] What each of the other words in cl 7.24 has in common is intention. Although an act may be criminal without any intent at all, criminal acts, like torts, can be classified as intentional or otherwise. The term 'criminal acts' is broad, and, in a sense, arbitrary since it depends on legislative choice and may cover acts of considerable seriousness or relatively trivial infringements without any requirement of intention. Because the words 'criminal act' appear at the end of a list where the preceding words have in common an element of intention, I consider that they should be read down to include only those criminal acts that are intentional." 269As her Honour observed, that conclusion was not inconsistent with this Court's later decision in Xerri v Kingmill Pty Ltd (1998) 25 MVR 569 because the exclusion clause in that case applied in the event that the motor vehicle was "used or driven in contravention of the provisions of the Motor Traffic Act". Here the operation of the exclusion does not turn upon whether there has been a contravention of a statute or the commission of an offence but rather, as was also the position in Henry, it turns upon whether the liability arises or is connected with the doing of a "criminal" act. 270The elements of the offence of dangerous navigation under s 52B(3) of the Crimes Act 1900 are navigating a vessel in a manner which is dangerous to another person or persons and an impact with another vessel or person or object which causes grievous bodily harm to a person. The offence is one of "strict liability" in the sense that the culpability of the offender lies not in having intended the results of his or her action, but in having navigated a vessel, which is involved in an "impact occasioning grievous bodily harm", at a speed or in a manner dangerous to another person or persons. Whether navigation of a vessel answers that description is to be determined objectively and by reference to whether in the circumstances the act of navigating was in a real sense potentially dangerous to another person or persons: McBride v The Queen [1966] HCA 22; 115 CLR 44 at 49-50 per Barwick CJ; King v The Queen [2012] HCA 24; 245 CLR 588 at [32]-[33] per French CJ, Crennan and Kiefel JJ. Although negligence may, and in many cases will, underlie the offence of dangerous navigation, it is not an element of the offence and a person may navigate with care and skill and yet still navigate dangerously: King at [38]. 271As I have already noted, the primary judge found at [142] that there was no suggestion in the evidence that Mr Todd had intended the collision or to harm or injure Mr Lane. Her Honour concluded that his conduct "although criminal and having serious consequences, was not intentional". It followed that cl 7.24 did not apply: [149]. I agree with that conclusion. 272The question of construction concerns the meaning of the adjective "criminal" when used in this exclusion clause. As each of the judgments in Henry recognises, unless read down the description "criminal act" is capable of referring to any act involving a breach of the law to which is attached penal sanctions enforceable by court proceedings. Such acts may not involve any conscious or intentional conduct or conduct which ordinary persons would regard as criminal in the sense that it constitutes serious wrongdoing deserving of punishment. 273There are in my view two principal considerations which support the conclusion that when used in cl 7.24 "criminal act or omission" means an intentional or conscious act the doing of which constitutes a crime. Each of these considerations assists in identifying the meaning which reasonable persons in the position of the parties should be presumed to have intended from the language they have used. 274First, the epithet "criminal" is one which, when used to describe conduct, is likely to be understood by ordinary persons to refer to serious misconduct involving as an element some conscious or intentional wrongdoing: Henry at 129-130 per McHugh JA. Here it is used as part of a collection of words to describe conduct which attracts the operation of the exclusion. Each of the other words - "fraudulent, dishonest, malicious, wilful" - describes a state of mind which must accompany the relevant act or omission. In relation to each that state of mind is one involving intentional or conscious conduct directed to a specific end or having a particular quality. In addition, the meanings conveyed by some of those words and "criminal", understood as describing conscious or intentional wrongdoing, overlap, indicating that when used in this collection of words it is to be understood in that sense. 275Secondly, the purpose of the liability cover provided by Sections A & B of the master policy is to indemnify an insured against liability to its clients and others for acts of negligence and inadvertence which occur in the course of the conduct of its business in so far as it relates to scuba diving and related activities. In that context the parties should not be presumed, in the absence of clear words, to have intended to exclude from cover conduct which, whilst resulting in serious injuries, involves acts of negligence or inadvertence. For that reason where there is more than one available meaning or, as in this case, means of reading a provision down, the one to be preferred is that which gives the policy a sensible interpretation taking into account the purposes it was intended to secure: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 at [22]; CGU Insurance Ltd v Porthouse [2008] HCA 30; 235 CLR 103 at [43]. An example of the application of this principle is to be found in Fraser v BN Furman (Productions) Ltd, Miller Smith & Partners (A Firm) Third Party [1967] 1 WLR 898 at 905. There, a condition requiring that the insured "take reasonable precautions" was read down and as requiring only that the insured avoid recklessness. That decision has been applied on a number of occasions, including by this Court in Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 and Vero Insurance Ltd v Power Technologies Pty Ltd [2007] NSWCA 226. 276For these reasons in my view the primary judge did not err in concluding that cl 7.24 would not have applied, in the circumstances in which Mr Lane was injured, to exclude any obligation to indemnify Dive Two and Mr Todd. Breach of duty and negligence of Horsell 277Horsell had arranged the business liability insurance of Dive Two under the Watertight policy from 31 December 2002. In March 2003 it also arranged insurance of the dive vessel. At the time that insurance was arranged Mr Todd was advised by Horsell that it had not quoted liability cover for the vessel as the "PADI Watertight Policy provides coverage for Liability for vessels up to 12 metres in length for activities associated with Diving, Swimming, Sight-seeing, Whale Watching and Fishing". That statement was not qualified so as to make clear that the liability cover only applied if those activities were conducted as part of the business of the insured under that policy. That hull insurance was renewed through Horsell for periods to 30 September 2006. 278Unqualified statements to the same effect were made by Horsell in the marketing brochure which preceded the renewal of the Watertight policy in each of the years after 2002. Under the heading "Public and Products Liability", that brochure described the cover as including liability "for bodily injury or damage to property as a result of an occurrence during the period of insurance" and as extending to "Liability of water craft up to 12 metres in length". In addition, under the heading "Common Questions" the question whether the policy covered "the liability of the dive boats we own and operate" was answered: "Only if the vessel is under 12 metres in length. Most boat policies have a separate liability coverage. Horsell International can arrange insurance for vessels over 12 metres in length". 279Dive Two's vessel was less than 12 metres in length and Mr Todd gave evidence that he thought it was covered under the Watertight policy provided that he used it for activities which included swimming and sight-seeing. He did not understand that those activities excluded activities not undertaken in the course of Dive Two's business. 280In these circumstances I agree, for the reasons given by the primary judge and McColl JA, that Horsell was negligent in not making clear to Dive Two and Mr Todd that the liability insurance which had been arranged did not extend to liability arising from recreational activities not engaged in as part of Dive Two's business. The primary judge found that had Mr Todd received advice to that effect he would have taken out public liability insurance to cover the non-business activities of the dive vessel: [188]. The challenge to that finding, although made by ground of appeal 7, was not the subject of written or oral submissions. The finding was justified on the evidence which included that prior to March 2003 Mr Todd had arranged, through a separate broker, hull and liability insurance of the vessel. 281Horsell's appeal and the cross-appeal of Dive Two and Mr Todd should be dismissed. In circumstances where that cross-appeal was brought as a reasonable and necessary response to Horsell's appeal, and that appeal has been unsuccessful, it is my view that Horsell should pay the costs of all of the other parties (Dive Two, Mr Todd and Liberty) of the appeal and cross-appeal. Accordingly I agree with the orders proposed by McColl JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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: 01 November 2013