Supreme Court New South Wales Medium Neutral Citation: Prepaid v Atradius (No.2) [2014] NSWSC 21 Hearing dates: 09/12/2013 Decision date: 07 February 2014 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Judgment for defendant. Reserve costs. Catchwords: INSURANCE - Insurance Policy - Non-disclosure and misrepresentation - Whether insurer entitled to reduce liability to nil on basis of non-fraudulent misrepresentation - whether proved on balance of probabilities that insurer would not have issued a policy - Application of Insurance Contracts Act 1984 (Cth), s 28(3) Legislation Cited: Insurance Contracts Act 1984 (Cth) Cases Cited: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 347 Jones v Dunkel (1959) 101 CLR 298 Prepaid v Atradius [2012] NSWSC 608 Prepaid v Atradius [2013] NSWCA 252 Category: Principal judgment Parties: Prepaid Services Pty Limited (Plaintiff) Optus Mobile Pty Limited (Second Plaintiff) Virgin Mobile (Australia) Pty Limited (Third Plaintiff) Atradius Credit Insurance NV (Defendant) Representation: Counsel: NC Hutley SC / DA McLure (Plaintiffs) CRC Newlinds SC / TM Mehigan (Defendant) Solicitors: Minter Ellison (Plaintiff) Allens (Defendant) File Number(s): 2009/298684 Judgment 1HIS HONOUR: The defendant (Atradius) issued a trade credit insurance policy (the policy) in favour of the plaintiffs (collectively, Optus). In broad terms, the policy insured Optus against the insolvency of one of its major debtors, a company known as Bill Express Limited (BXP), and against BXP's failure to pay amounts owing to any of the plaintiffs. BXP became insolvent during the currency of the policy. Optus made a claim. Atradius denied liability on a number of grounds. 2As a result of my decision at first instance ([2012] NSWSC 608) and of the Court of Appeal therefrom ([2013] NSWCA 252), the only live question is whether, pursuant to s 28(3) of the Insurance Contracts Act 1984 (Cth), Atradius is entitled to reduce its liability under the policy to nil, on the basis of non-fraudulent misrepresentation. That question has been remitted for retrial (see at [63] below). 3Atradius' position is that, had the proper disclosures been made, it would not have issued a policy at all. It did not submit that a policy would or might have issued, but on different terms. The only issue argued on the remitter was whether or not, had proper disclosure been made, Atradius would have issued the policy that in fact was issued. Background 4To understand how the remitted question arises, I propose to incorporate, as paragraphs of these reasons rather than as quotations, paras [5] to [24], [128] to [138] and [192] to [204] of my earlier reasons. 5The plaintiffs are all Australian subsidiaries of a Singaporean company, Singtel Optus Pty Ltd (Singtel). The second plaintiff (Optus Mobile) and the third plaintiff (Virgin Mobile) operate telecommunications networks within Australia. They sell access to that network to businesses and consumers. 6The first plaintiff (PPS) acts as an agent of Optus Mobile to sell access to the Optus Mobile telecommunications network. 7In December 2005, PPS and Optus Mobile made a "sub-agency agreement" with BXP. A form of written agreement was prepared, but never executed. There is no doubt, however, that an agreement was made on the terms set out in the unexecuted draft. 8On 10 December 2004, Virgin Mobile entered into a "distribution agreement" with BXP. That agreement was in writing and executed by the parties to it. 9Under the sub-agency agreement, PPS, as agent for its disclosed principal Optus Mobile, provided electronic data to BXP which, when decrypted, was capable of being delivered to consumers as what were known as "e-vouchers". The term "e-voucher" is commonly used, and I shall use it, to describe, as well, the encrypted information provided to BXP. 10BXP operated a retail distribution network throughout Australia. It controlled more than fourteen thousand point of sale terminals which were physically located in the premises of small retailers and service stations. A consumer who wished to buy access to the telecommunications network operated by Optus Mobile or Virgin Mobile could use a BXP terminal to pay an agreed price, presumably by way of debit or credit card. When the payment was authorised, the consumer would receive a printed receipt, which recorded the information on an e-voucher. That information comprised, or included, a personal identification number (PIN). When the consumer entered the PIN into his or her mobile phone, the amount of air time for which the payment had been made would become available. 11The electronic data, or e-vouchers, supplied by PPS to BXP pursuant to the sub-agency agreement comprised batches of PINs. (Thus, functionally, the expressions "e-voucher" and "PIN" are interchangeable for the purposes of this dispute.) The PINs represented in effect various denominations of amounts of air time. The information was delivered to BXP in encrypted form. Upon receipt of the information, BXP would decrypt it so that the PINs became accessible. Optus Mobile would then activate the PINs. Once the PINs had been activated, BXP distributed them electronically to its terminals throughout Australia. 12BXP kept records of all PINs that were sold. It collected the revenue (less commissions payable to the retailers). PPS would access BXP's computer system, obtain from it details of all the PINs that had been sold over a defined period of time and invoice BXP for the net value of those PINs. BXP was required to remit the amount so invoiced, less its own commission, within 21 days. 13The evidence suggested that BXP sold between $5 and $6 million worth of Optus Mobile pre-paid airtime weekly. There is no doubt that BXP was very important to Optus Mobile, and that Optus Mobile was very important to BXP. It was suggested that BXP accounted for something like 40% of all Optus Mobile's sales of pre-paid airtime during the currency of the sub-agency agreement. There is no doubt that the solvency of BXP depended, among other things, on its continuing business relationship with Optus Mobile. 14As well as making pre-paid airtime available through PPS to BXP, Optus Mobile also "sold" it direct to BXP. There is, to put it mildly, a lack of evidence as to the contractual basis upon which Optus Mobile did so. The pleaded case for Optus Mobile was that it supplied data, representing e-vouchers, to BXP "under the Sub-Agency Agreement, in respect of certain outlets": Amended Commercial List Statement (ACLS), para 7. The terms of supply were said to be 30 days from a monthly statement listing invoices delivered during the course of the month. In effect, that would mean payment terms of 30 to 60 days. 15Supplies by Optus Mobile direct to BXP related, it would seem, to distribution by BXP through major retailers such as K-Mart, Harvey Norman and Coles. There is some evidence of the way in which such supplies were effected, in the sense that the invoices were proved and a Mr Nolan of Optus Mobile gave evidence to the effect that, to his knowledge, the form of the invoices reflected in substance the contractual arrangements. It will be necessary to return to that evidence in dealing with the "scope of cover" issues and the course of dealings between Optus Mobile and BXP from 2003 to 2008. 16Under the distribution agreement made between Virgin Mobile and BXP, a substantially similar business was carried on, but on a very much smaller scale. The only significant difference, I think, is that the terms of payment under the distribution agreement were 7 days from the date of invoice. 17BXP was habitually late in paying PPS under the sub-agency agreement. There was some disagreement as to the extent of its tardiness. 18PPS and Optus Mobile became dissatisfied with BXP's performance of its obligations under the sub-agency agreement. On 24 April 2008, their solicitors demanded that BXP pay forthwith all amounts then owing. BXP did not comply. Later on the same day, PPS and Optus Mobile, again through their solicitors, gave written notice terminating the sub-agency agreement. The ground of termination assigned was: ... history of continually and habitually breaching [BXP's] payment obligations ... culminating in its current and ongoing failure to pay amounts which are due ... and/or a repudiation at common law ... 19They relied also on the asserted fact that BXP "is insolvent within the meaning of s 95A of the Corporations Act". 20Notwithstanding the termination, PPS and Optus Mobile did not attempt to recover, or deactivate, all the PINs that had been supplied to BXP but which had not been onsold to consumers. On the contrary, they permitted BXP to continue to sell at least some of those PINs. Further, and with the consent of Atradius, they entered into a "standstill agreement" with BXP under which they continued to supply PINS to BXP upon the basis that payment would be made on or prior to delivery (COD sales). 21Virgin Mobile did not terminate its distribution agreement with BXP, even after Optus and PPS acted to terminate the sub-agency agreement. Virgin Mobile continued to supply PINs to BXP, including on credit terms, up until the time when administrators were appointed to BXP, on 8 July 2008. The unpaid invoices in respect of which Virgin Mobile claims indemnity under the policy are dated 1 and 11 July 2008. 22Eventually, PPS and Optus Mobile recovered some of the unsold PINs, and ceased to trade with BXP. BXP went into administration and then into liquidation. 23The plaintiffs claim that BXP is indebted to them for amounts in excess of $62 million. The limit of indemnity under the policy is $30 million. If Atradius is liable under the policy, that liability is for 90% of the loss, or a maximum of $27 million. 24It is not necessary to go into the details of the business relationship between Virgin Mobile and BXP. It is accepted that the debts in respect of which Virgin Mobile claims under the policy fall within the scope of the policy. For that reason also, it is not necessary to summarise, or quote from, the terms of the distribution agreement. The proposal 25On 5 July 2007, Mr Stuart Anderson of the broker sent an email to Mr Blair McQuade of PPS enclosing, among other things, a draft of the proposal form. Mr McQuade was then the senior commercial manager of PPS and, either then or shortly after, acted as its managing director for a time. Mr McQuade had substantial responsibility within PPS and the Optus companies generally for placing the insurance. 26The draft proposal sent by Mr Anderson to Mr McQuade on 5 July 2007 included a question three, inquiring as to experience with the "Buyer". The word "Buyer" (with or without an initial capital letter) is used by Atradius to denote the entity whose payment obligations to the insured are the subject of insurance. To divert for a moment: some trade insurance policies may be a "whole of account" insurance, under which all debts owed to the insured (or all debts over a certain minimum) are insured. Others may insure some selected portion of the insured's debtors: for example, the top 5 or the top 10. A third alternative is what was known as "single buyer" insurance, where the obligations of one debtor only are the subject of the insurance. The form of proposal was designed for this third alternative. 27Mr Anderson had inserted some proposed answers to some of the questions within section 3 of the draft proposal. I set out that part of the proposal form as it was sent to Mr McQuade on 5 July 2007: 3. Your experience with the buyer What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates, and dates of cleared funds? Have you ever experienced any difficulties in certification procedures or payment delays in dealings with this buyer? If so, please provide details. No Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Do you sell to any related companies which are related to the buyer? If so, which ones? No Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No 28Mr McQuade and Mr Anderson met on 21 August 2007. Mr Anderson brought to the meeting a revised draft proposal form, updated from the version earlier sent to Mr McQuade. 29Mr McQuade discussed the revised proposal form with Mr Anderson and made some handwritten changes to it. Following the meeting, Mr Anderson took the form (with Mr McQuade's handwriting on it) away. 30I set out section 3 of the revised proposal form. The material that is underlined was written on the proposal form by Mr McQuade at the meeting of 21 August 2007: What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates of cleared funds? Highest outstanding balance = $27M (PPS) $5m (Virgin) $6M (Optus) (Approx) Credit Terms now 21 days with weekly settlement Customers has not been 7 days from due date VMA Terms, Optus terms. Have you ever experienced any difficulties in certification procedures or payment delays in dealings with this buyer? If so, please provide details. No, up to 7-10 days on occasion. Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Yes, in bringing them from 28-21 days. Do you sell to any related companies which are related to the buyer? If so, which ones? No Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No Have you ever purchased credit insurance before on this buyer? If so, please name the insurance provided and state whether any claims were made. No 31The next day, Mr Anderson sent an electronic copy of the proposal form, purportedly updated to reflect what had been discussed the day before, to Mr McQuade. Mr McQuade read through the form and made changes to it. It seems to be common ground that, in all, he made 83 changes. Many of those changes related to parts of the form other than section 3; but he made 11 changes in all to section 3. Most of the changes generally, and all but one in relation to section 3, were what Mr McQuade described as "formatting". Specifically, he converted the answers to each question to italics, so that they could be distinguished from the question. The only change of substance was to insert the words "seven days Virgin" in relation to Credit Terms. 32As corrected (or formatted) by Mr McQuade, section 3 read as follows: 3. Your experience with the buyer What is your previous experience with this buyer, including total sales, highest outstanding balances, credit terms, due dates, and dates of cleared funds? Highest outstanding balance = $27M Prepaid, $5M Virgin, $6M Optus Approx. Credit Terms. 21 days with weekly settlement for Prepaid and Optus, 7 days Virgin Customers has traded 7-10 days from due date on occasion. Have you ever experienced any difficulties in certification procedures or payment delays in dealing with this buyer? If so, please provide details. Yes - in reducing payment terms from 28 days to 21 days Have you ever extended or rescheduled a due date or changed the terms of payment after shipment to this buyer, or put this buyer on a payment plan? If so, please provide details. No Do you sell to any related compaines which are related to the buyer? If so, which ones? No Do you have other exposures to this buyer which are separate from the contract to be insured? If so, for what amount? If these other exposures are insured or otherwise secured, please provide details. No Have you ever purchased credit insurance before on this buyer? If so, please name the insurance provider and state whether any claims were made. No 33After making those changes, Mr McQuade printed out the form, signed it and, presumably, returned it to Mr Anderson. 34Mr McQuade's affidavit evidence did not refer to making changes to the form before he signed it. He said (affidavit sworn 21 December 2010, para 60) simply that Mr Anderson sent him a revised draft of the proposal, which he signed. Mr McQuade was asked in chief whether he wished to make any corrections to para 60, and did so by correcting subpara (a). However, in cross-examination, he revealed that he had also made changes to the form of the document that had been sent to him by Mr Anderson on 22 August 2007. He accepted that by his affidavit he was saying that the form of proposal that he signed was the form emailed to him by Mr Anderson (T314.41-.44), but added that he "formatted" the document (T315.3). Mr McQuade's evidence as to why he did not notice what he had said in his affidavit were errors in the document that he signed, and make changes, was less than convincing (see, generally, T315 and following). The answers said to be false, misleading or incorrect 35Atradius pointed to three incorrect answers in the proposal form that Mr McQuade signed which, it said, were false and knowingly so. Taking them in the order in which they appear in the form, the first is the answer that BXP "has traded 7-10 days from due date on occasion". The second is the statement that the difficulties in payment delays experienced were "in reducing payment terms from 28 days to 21 days". The third is the answer "no" to the question concerning, among other things, "a payment plan". Atradius' business 36To understand the parties' submissions, it is necessary to know a little about the way that Atradius carried on its business. 37Atradius seems to have its base in the United Kingdom, with offices in London and Cardiff. It operates in more than 40 countries worldwide. Mr Mark Magee, who is the senior manager of Atradius' special products analysis's team, said that Atradius writes approximately 30% of all trade credit insurance policies written globally. 38Because the business of Atradius is insuring credit liabilities, its underwriting processes involve two separate strands. One, referred to as credit underwriting, involves an assessment of the risk against which insurance is sought. As I have noted already, those risks may be "whole of account insurance" or "single buyer insurance" or something in between. For example, a company may wish to ensure its top 5 or top 10 debtors against default. 39Single buyer policies are also known as special products. It is of course of key significance to Atradius to assess the buyer whose obligations are to be the subject of the insurance, so as to form an estimate of the risk. 40The second strand of underwriting is called "policy underwriting". That includes contact with the proponent or broker; assessment of the risk from a commercial (as opposed to a credit) perspective; settling the terms of the policy; reviewing the terms on which the proponent contracts; and settling the premium. 41For single buyer insurance, both credit underwriting and policy underwriting are engaged. In Australia, Atradius employs personnel responsible for credit analysis (for the purpose of credit underwriting), for credit underwriting and for policy underwriting. 42Atradius' regional offices are responsible for analysis of buyers within their jurisdiction. In the present case, because BXP was an Australian (listed) company, the Sydney office of Atradius was responsible for monitoring its financial performance. A "buyer owner" was assigned to monitor the position of BXP, and its performance was monitored by the local credit committee, frequently referred to as the "LCC". The responsibilities of the LCC include fixing, for each buyer, a review limit (frequently referred to as an "RL") specifying the total amount of insurance that could be written, worldwide, to cover the obligations of that buyer. 43As a matter of course, credit underwriters and policy underwriters in regional offices of Atradius were given authority limits. When the subject policy was underwritten, Mr Peter Athaide was the credit underwriter in the special products division in Australia. Mr Athaide could approve policies with a limit of cover for a single buyer of €5m, provided that the RL was not exceeded. Applications for a higher limit of cover required the approval of Mr Magee in Cardiff. 44At the relevant time, Ms Shaw was a policy underwriter in the special products division of Atradius in Australia, and held the position of head of special products for Australia. She reported to Ms Johnson in London, who was director, special products, for Northern Europe and the Asia - Pacific Region. 45Ms Shaw had an approval limit of either $5m or €5m. (The evidence and submissions on this point are not entirely clear, but since the amount for which Optus sought insurance in respect of BXP comfortably exceeded either limit, the point need not be pursued.) Thus, in respect of the subject transaction, Ms Shaw was required to seek the approval of Ms Johnson. 46I mention at this point that there appears to have been some confusion between Ms Shaw and Ms Johnson in relation to the latter's approval. Ms Shaw thought that she had obtained this approval at some stage during the process of communication with Ms Johnson. Ms Johnson did not think that she had given approval at that time. But on any view, the policy was written. And on any view, when Ms Johnson later came to Australia, she either authorised or ratified the policy underwriting decision that Ms Shaw had made. I do not think that anything turns on this. 47Thus, the following points emerge from the evidence (and I shall confine these conclusions to the Sydney office of Atradius): (1) policy underwriting decisions were made either by or under the supervision of Ms Shaw, up to her approval limit; if that approval limit were exceeded, Ms Shaw would seek and obtain the consent of Ms Johnson up to her approval limit. (2) RLs for particular buyers were set by the LCC, and reviewed from time to time on the basis of information and analysis provided by the buyer owner. (3) Credit underwriting approvals, within the overall RL, were made by Mr Athaide up to his approval limit; if that limit were exceeded, Mr Athaide would seek and obtain the approval of Mr Magee up to his approval limit. (4) A single buyer policy would not be issued unless both policy and credit underwriting approvals were in place. 48Some of the submissions for Optus appeared to conflate the differing processes within Atradius. However, in my view, the evidence shows that the distinctions between policy and credit underwriting, and between the limit-setting function of the LCC and the approval function of the credit underwriter or Mr Magee, were significant, and were observed in the day to day operations of Atradius. The application of s 28(3) 49Section 28(3) of the Insurance Contracts Act operates if an insurer is not entitled to avoid a contract of insurance by reason of a failure to disclose, or a misrepresentation, by the insured. It provides that: ... the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made. 50The operation of that provision was explained by Meagher JA, in the Court of Appeal, as follows at [71]: [71] This provision requires an inquiry as to the position the insurer would have been in if the relevant misrepresentation had not been made. It is the same as would be made if the insurer was claiming damages for misrepresentation in the amount by which it seeks to have the insured's claim reduced. Accordingly, it must establish on the balance of probabilities what it says its position would have been if the misrepresentation had not occurred. That is so notwithstanding that the hypothesis upon which the reduction of liability is based is not an historical fact. By its defence Atradius claimed it was entitled to reduce its liability to nil because it would not have entered into any policy which would have covered all or part of the appellants' claim. Accordingly, it was necessary for the primary judge to determine whether Atradius had established on the balance of probabilities that it would not have issued a policy to the appellants which would have provided any insurance of the BXP defaults. 51Meagher JA then summarised at [72] to [74], from my much more verbose account, the way in which Atradius underwrote business. Since the way in which his Honour set the matter out provides an appropriate framework for the analysis that follows, I set out those paragraphs: [72] Before considering how the primary judge addressed that question, it is necessary to say something about the structure of the underwriting business of Atradius. Credit insurance may be written in respect of one, some or all of the customers to whom an insured extends credit. The insurance of one customer ("single buyer" insurance) was undertaken within Atradius' special products division. The underwriting of that insurance involved two strands - "credit underwriting" and "policy underwriting". The former was concerned only with the financial assessment of the creditworthiness of the buyer, in this case BXP. The latter was concerned with the assessment of the overall risk, taking into account the proposed insured's credit management policies and trading history with that buyer, and with the settling of the terms of the policy and premium: [196]. [73] The credit analysis of BXP was undertaken by Atradius' Sydney office because that company traded in Australia. A "buyer owner" was assigned to BXP. Its ongoing financial position was monitored by that officer and the local credit committee or "LCC". Mr Choo was the designated "buyer owner" for BXP. The LCC's responsibilities included specifying the credit insurance limit or "RL" for each buyer. The RL was the maximum amount of insurance that could be written by Atradius on a worldwide basis to cover the obligations of that buyer. In the case of BXP that limit was fixed at A$30m. [74] Before credit insurance could be issued, approval from a duly authorised underwriter in each of the credit and policy underwriting strands was required. Ms Shaw was the senior policy underwriter in the Australian special products division. She did not, however, have sufficient authority to approve the insurance of BXP with an RL of A$30m. She had to obtain the approval of her superior in Atradius' London office, Ms Johnson. Mr Athaide was the senior credit underwriter in the special products division in Australia. He also did not have sufficient authority to approve the insurance of BXP. That authority had to be given by Mr Magee who was a senior manager in Atradius' Cardiff office. 52It will be seen from what his Honour said at [74] that the policy underwriting approval process required Ms Shaw in Australia to make a recommendation to Ms Johnson in London, and for Ms Johnson, if she though fit, to give her approval. Likewise, Mr Athaide in Australia did not have authority to give credit underwriting approval. That task fell to Mr Magee, in Cardiff. 53Of those four policy and credit underwriters, only three - Ms Shaw, Ms Johnson, and Mr Magee - were called. My earlier findings 54In understanding the evidence and my conclusions, one must bear in mind that the actual signed proposal form, including the misrepresentation as to payment plans, was submitted after approval in principle had been given by each of the two underwriting strands that existed within Atradius. Ms Shaw had recommended to Ms Johnson that approval be given. Ms Johnson had either given, or thought that she had given (or Ms Shaw thought that Ms Johnson had given), approval in principle. Mr Magee had given approval in principle. 55The signed proposal document was received only after all investigations had been completed, and all necessary approvals had been obtained in principle. The signed proposal document was needed so that the underwriting processes could be completed and the policy could issue. 56I have set out at [35] above the incorrect answers in the proposal form. Only the third - the answer "no" to the question concerning, among other things, "a payment plan" - remains relevant. A correct answer to that question would have stated that on three separate occasions, Optus had put BXP on a payment plan; that on two of those occasions BXP had not complied with the terms of the payment plan; and that it was only on the third, and last, occasion that BXP did comply. 57Against that background, I set out my findings as to what each of Ms Shaw, Ms Johnson and Mr Magee would have said or done had the correct disclosure been made in the signed proposal document: (1) Ms Shaw (at [226], [227]): [226] I conclude, based on my overall acceptance of Ms Shaw's evidence that: (1) had the proposal form made the disclosures that should have been made (for the form to be accurate and truthful) in relation to payment plans, Ms Shaw would have noticed them; and (2) in those circumstances, Ms Shaw would not have signed off on the issue of a policy, but would have contacted Ms Johnson to see if the information that, hypothetically, had been disclosed made any difference to the policy underwriting approval that had been given. [227] Thus, I conclude, the non-disclosure was material at least in relation to Ms Shaw, and that to the extent that Ms Shaw was responsible for the issue of the policy, she would not have permitted the policy to be issued without seeking the approval of her superiors. (2) Ms Johnson (at [232], [233]): [232] Thus, I accept this aspect of Ms Johnson's evidence, and conclude based on it that had the correct position in relation to payment plans been disclosed, she would have either revoked or in effect suspended the policy underwriting approval that she thought that she had been given. Putting the matter in terms of Ms Shaw's evidence, I am satisfied if a correct answer had been given in relation to payment plans: (1) as I have said, Ms Shaw would have noticed this and referred it to Ms Johnson; and (2) upon that referral, Ms Johnson would have made sure that the policy did not issue at least until the matter had been more thoroughly investigated. [233] The second conclusion draws attention to the fact that, as the evidence ultimately demonstrated, final responsibility for a decision would have rested with Mr Magee. That is because the information that should have been (but was not) disclosed was relevant to the credit underwriting process in particular, and Mr Magee was for present purposes the senior person, having the relevant authority to approve (or to withhold approval). (3) Mr Magee, (at [234] to [236]): [234] The third witness called who gave evidence on this point was Mr Magee. Mr Magee said, in substance, that if the relevant material had been put to him (being the documents that show the negotiation and existence of the payment plans) he would not have underwritten the policy unless satisfied as to certain matters (see his statement dated 2 November 2010, paras 42 to 47). I note that, in paras 47 of his statement, Mr Magee said (as Ms Shaw had said in her oral evidence) that he regarded payment plans as a serious matter. [235] I set out para 45 of Mr Magee's statement (which sets out the conclusions he would have reached based on a review of the documents evidencing the payment plans) and paras 46 and 47 (which set out his evidence as to his reaction to those conclusions and the reasons for it): [45] If I had reviewed this information prior to the time the Policy was issued I would have concluded that: (a) Prepaid had entered into a number of payment plans with Bill Express; (b) Prepaid was in contact with Bill Express about Bill Express' inability to pay its debts on time; and (c) Bill Express' payment problems were ongoing. [46] If, prior to the time the Policy was issued, I was informed that Prepaid had entered into payment plans, I would not have underwritten the Policy unless I was absolutely satisfied that: (a) there were reasons to explain why Prepaid had put Bill Express on payment plans that were unconnected with the financial position or Bill Express; or (b) the issue which caused Prepaid to enter into the payment plans with Bill Express had been finally resolved and were very unlikely to recur; and (c) the customer had improved their internal credit control procedures to spot potential payment problems as early as possible so that these could be dealt with in the most effective way possible. [47] The reasons that I would not have underwritten the Policy are otherwise the same as those I have set out in paragraph 40 above, the only difference being that I regard entering into payment plans as even stronger evidence of a high insolvency risk or future problems, because there is rarely any explanation for a payment plan other than that the buyer does not have the financial resources to pay its debts on time. [236] I accept this aspect of Mr Magee's evidence. Indeed, I accept Mr Magee as a witness who, in general, sought to give truthful and accurate evidence. I do so notwithstanding that, as Mr Gleeson pointed out in submissions, that there were aspects of his evidence where he overstated matters and then had to resile to a certain extent. I do not regard those matters as impairing Mr Magee's credibility. On the contrary, I regard his willingness to make concessions, when confronted with a good reason to do so, as supporting my conclusion that he sought to give truthful and actual evidence. 58Since Mr Magee's para 47 refers back to his para 40, I set that out: 40. If I was not confident that the reasons explaining the late payments were unconnected with the financial position of Bill Express, then I would not have underwritten the Policy. This is because: (a) I regard a history of late payments and inability to pay debts on time as evidence of a high insolvency risk or future problems which I would not be prepared to underwrite; (b) there would have been a high probability of continued payment problems which would require additional monitoring and control on our side which is time better served on underwriting new risks; (c) if the Policy was written and there were subsequent serious problems, we would need to submit reports to a higher authority within Atradius and explain why we would have underwritten a policy with these features, which may open questions about the team's underwriting skills; and (d) the country capacity available to Special Products would be better used on a transaction which had a greater probability of running smoothly and Atradius coming off the risk cleanly. 59I found, further, that Mr Magee's approval was essential and central (at [238]): [238] In this context, I do not accept that Mr Magee's position or function was of some secondary or minor kind. On the contrary, he was the senior person in the credit approval stream of the special products division, just as Ms Johnson was the senior person in the policy underwriting stream. (In each case, of course, there were limits of authority, and higher authorities residing elsewhere; but the particular proposal did not invoke the need to go beyond Mr Magee and Ms Johnson.) In the ordinary way, material relevant to credit underwriting approval should have gone to Mr Magee. Had it done so (and I am satisfied that a correct answer, disclosing the existence of the payment plans, would have done so), then his central significance becomes clear. 60On the basis of those findings, I reached two conclusions. The first was that, had proper answers been given in relation to payment plans, Atradius would not have issued the policy when it did (at [240]): [240] In all the circumstances, I am satisfied, and conclude, that if correct answers had been given in relation to the question asking for details of payment plans, Atradius would not have issued the policy when it did. I conclude further that in this respect Atradius did rely on the answers that were in fact given, in deciding to issue the policy. 61The second conclusion was that what might have happened had the correct answers been given was "a matter of speculation" (at [242]): [242] What might have happened, if the correct answers had been given, is a matter of speculation. I incline to the view that, as Mr Magee said, a policy might have been issued (on unspecified terms and at an unspecified premium rate) had there been given an explanation, satisfactory to Mr Magee, of the payment plan issue. But since the evidence and submissions did not cover that point, it is unnecessary to go further. 62With the invaluable aid of hindsight analysis, the last sentence of [242] could have been expressed more clearly. What I think it says, and certainly what I intended it to say, is that the evidence and submissions did not address the point as to what alternative policy might have been issued, "on unspecified terms and at an unspecified premium rate", had Mr Magee's concerns, as expressed in those paragraphs of his statement that I have set out above, been addressed in a way satisfactory to him. And as I have noted already, the question was not whether some alternative policy, on different terms, might have issued; it was, rather, whether the policy that was actually issued would have issued at all. The scope of the question remitted 63Meagher JA described at [91] the analysis required for the question arising under s 28(3) of the Insurance Contracts Act. His Honour then described, at [92], the question remitted for retrial. I set out those paragraphs: 91 This evidence is relevant to whether, on the balance of probabilities, Atradius would not have issued a policy. Whilst the appellants had the evidentiary burden of establishing that they would have provided further information which sought to explain the position in relation to the payment plans, the onus of proving on the probabilities that such a policy would not have issued remained on the respondent. Whether that burden had been discharged required consideration of the evidence referred to above. The primary judge has not done that. I do not read his Honour's observation at [242] as a finding that the probabilities were that no satisfactory explanation would have been forthcoming and resulted in the issue of a policy. His Honour's statement that what might have happened "is a matter of speculation" is inconsistent with the making of such a finding. 92 The conclusion that the respondent was entitled to reduce its liability to nil should be set aside. As that question will involve the further consideration of the evidence of witnesses about whom the primary judge made credit findings, it should not be determined by this Court. The relevant authorities are referred to in [52] above. The appellants submit that the retrial should be before a judge other than the primary judge because it may require an assessment of Mr McQuade's credit, in circumstances where his Honour has already addressed that subject, albeit in the context of dealing with the fraud allegations. I do not agree that it is likely to involve such an assessment. The retrial should be before the primary judge. It will require reconsideration of what might have happened, including on the hypothesis that further information had been provided to Atradius. The primary judge has not addressed that question taking into account the evidence referred to above. In that respect the position is similar to that in Tomasetti v Brailey [2012] NSWCA 399 at [64] (Macfarlan JA, McColl and Campbell JJA agreeing). The primary judge is not to be asked to reconsider an issue that has already been decided. He is being asked to complete a task that remains incomplete. Furthermore, in the way the trial was conducted Mr McQuade's hypothetical participation in the provision of further information was peripheral at best and there was no real challenge to his evidence on that subject (which in any event consisted of only one paragraph of an affidavit). It is not suggested that the need to consider the evidence of Mr Magee, of whom the primary judge made favourable observations as to his credit, is a reason that the retrial should not occur before his Honour. 64The "evidence referred to above" (Meagher JA at [91], [92]) included: (1) my findings as to the way in which Atradius conducted its credit underwriting business; I have set out my findings on this topic at [37] to [48] above, and Meagher JA's summary at [51] above; (2) my conclusions as to the evidence of Ms Shaw, Ms Johnson and Mr Magee; I have set out those findings, and related findings, at [57], [58] above; (3) evidence adduced by Atradius and Optus as to what was likely to have occurred, in the hypothetical world based on the assumption that Optus had disclosed the three payment plans and the failure of BXP to comply with two of them; and (4) evidence given by Mr Magee, in cross-examination and re-examination, in relation to inquiries that he would have caused to be made, and his reaction to further information that might have been put before him, in that hypothetical world. Other evidence relevant to s 28(3) 65I turn to the third and fourth categories of evidence just referred to. 66Once Mr Magee had set out in his statement his conclusions on and reactions to the payment plans that in fact had been made between Optus and BXP, Optus put on evidence, from Mr McQuade and another manager, Mr Stephen Naven. 67Mr Naven was at the relevant time general manager, credit management, for the Optus group. His functions included the provision of "credit management analysis, reporting and oversight to the Optus group executive... ". 68What he was asked to assume, and what he sought to do, is set out in paras 7 to 9 of his affidavit sworn 21 May 2010: 7. I have been asked to assume that in August 2007, the plaintiffs had disclosed to Atradius that: (a) BXP had consistently paid invoices after the due date; (b) PPS had placed BXP on 'payment plans' in November 2005, August 2006 and February 2007. 8. I understand that Atradius contends that if that information had been disclosed to it, Atradius would have advised the plaintiffs that it would not have been prepared to enter into the contract of insurance unless it was satisfied that there were reasons to explain why PPS had put BXP on a payment plan that were unconnected with the financial position of BXP. If that decision had been communicated to Mr McQuade, in accordance with our normal operating procedures and communication channels I would have expected him to advise me of it and seek my assistance with preparing a response. 9. Set out below is the analysis I believe I would have prepared on the credit-worthiness of BXP, had I been asked to prepare one for use in negotiations with Atradius in August 2007. 69Mr Naven prepared a credit analysis relating to BXP in August 2006, and another in July 2007. Thus, as one might expect, a hypothetical further analysis that he might have prepared in August 2007, in an attempt to deal with Atradius' concerns, "would have covered the same points" as did his analysis of July 2007, but "in more detail in order to justify my conclusion that BXP would be able to meet its debts to the Optus group in the short to medium term" (affidavit, para 12). 70Mr Naven referred to and in some detail analysed the material that he thought he would have consulted to carry out the hypothetical exercise and reached the following conclusion (at para 38): 38. Overall, my assessment of BXP in August 2007 would have been that it was a low risk of becoming insolvent in the short to medium term. The objective financial data showed an overall trend of improvement. Although the delays in payment and the imposition of payment plans give off a first impression of a company suffering from a cash flow problem, my assessment would have been that these 'problems' were a direct product of PPS insisting on payment within 21 days, when the likelihood is that many of BXP's debtors would be paying on 30 day terms. 71I will refer to Mr Naven's evidence of what he would have done and disclosed as "the Naven material". 72Mr Magee replied to this evidence, and the further evidence of Mr McQuade set out at [75], [76] below, in a statement dated 7 April 2011 (verified at trial). At para 38 of that statement, he summarised his reaction as follows: 38. If, prior to the time the Policy was issued, I had been provided with the Naven Analysis and the McQuade Analysis, this would not have persuaded me to approve the Policy. The main reasons for this are: (a) if I become aware that a potential insured has entered into payment plans with a buyer, in my judgment as a credit underwriter, this is a clear indicator that a company is experiencing financial difficulties. If I had been told that Prepaid had entered into payment plans, in order to approve a limit for a policy covering Bill Express debt, I would have required strong, concrete evidence that the payment plans were not the result of financial difficulties in Bill Express; (b) on the basis of the Naven and McQuade Analyses, I would not have been confident that the payment plans and late payments weer unconnected with the financial position of Bill Express; and (c) I would have remained extremely concerned about the fact that Prepaid had agreed payment plans with Bill Express and that Bill Express had to borrow money to finance those payment plans. 73Mr Magee explained his concerns in more detail in paras 40 and 41. He then summarised his thought processes at para 42 as follows: 42. I would have regarded Bill Express as a risk that should not be underwritten because there was an unacceptably high risk of a loss under the Policy which covered both protracted delay in paying debts and insolvency. 74I accept Mr Magee's evidence. 75Mr McQuade set out his concerns as to BXP at para 64 of his affidavit: 64. At the time of applying for the policy, my concern (which I thought was shared by the other key managers) about BXP was based on a number of factors. First and foremost, it was the amount involved. The Optus Group was invoicing BXP over $5 million a week. Once a payment was overdue by 1 day (ie 22 days since invoice), BXP would have a total debt to Optus of over $20 million (ie $15 million from the previous 3 weeks plus $5 million for the current week). If BXP did get into solvency trouble, the debt would get out of control very quickly because at any time BXP held a substantial quantity of PINs on consignment. Secondly, BXP did not have a substantial asset base and what it did have was secured in favour of its financiers. BXP could not offer security. Thirdly, because BXP did not have a substantial asset base and because the Optus Group was unsecured, our recovery would be limited if BXP went into insolvency. 76Mr McQuade also dealt, although briefly, with what he would have told Atradius if "asked... to explain my views about BXP's credit-worthiness" at para 66: 66. If I had been asked by Atradius to explain my views about BXP's credit-worthiness, I would not have confirmed myself to pointing out that BXP had regularly paid after the due date (see paragraph 53 above) or that I had concerns about BXP's access to working capital. A proper analysis of BXP is more sophisticated than that. In addition to the matters I have referred to above, I would have pointed out that: (a) although BXP regularly paid a few days after the due date, it always paid in the end; (b) BXP was likely to be viable in the short to medium term because all the major Australian telecos depended on BXP and Epay to distribute their products. Withdrawing support to BXP would result in disruption to the telcos' revenue stream; (c) BXP's cash flow problems were in part the consequence of its rapid and successful growth. The longer BXP continued to trade, the more likely it was that its cash flow position would improve, because its non-recurrent capital costs should reduce over time; (d) BXP had taken steps to address the cash flow shortages by seeking and obtaining funding from financiers; (e) BXP had a valuable supply network for e-Vouchers, which included major retailers such as Coles. 77As Meagher JA said at [92], "Mr McQuade's hypothetical participation in the provision of further information [would have been] peripheral at best". I do not think that Mr McQuade's views add anything of substance to the Naven material. Accordingly, in what follows, I focus on the Naven material and Mr Magee's reaction to it. 78Although Ms Shaw's position is of less significance, her view, based on the material that Mr Naven and Mr McQuade said they would have furnished, was that it would not have led her to change her decision to recommend that Atradius not proceed with the policy. She said that she would not issue the policy unless she obtained express instructions to do so from both Ms Johnson and Mr Magee. She commented that she regarded the matters in issue as being primarily questions of credit analysis, and thus, ultimately, for Mr Magee to decide (affidavit sworn 6 May 2011, para 50). I accept that evidence. 79Mr Magee was cross-examined on his evidence. Much of the cross-examination consisted of putting to him what further inquiries and assessments he might have caused to be undertaken. As Meagher JA said at [87], the cross-examination "did not directly challenge Mr Magee's evidence that the analyses of Mr Naven and Mr McQuade would not have persuaded him to approve the policy. Instead it was suggested that he would have taken into account the views of others". 80I set out that passage of Mr Magee's cross-examination (T273.45-275.26): Q. You were heavily dependant upon the technical skills of your team to analyse the current information, being the accounts, plus any further information which might arise before the risk actually incepted? A. Yes. Q. You were not going to second guess the decision of the Australian Local Credit Committee? A. That is true. Q. And, indeed, you considered them much better placed to assess this risk than you, given their knowledge of the local conditions? A. Yes. Q. And had any adverse information needed to be looked at after 26 July, the people you would have expected to do the task would have included Mr Athaide? A. Yes. Q. Mr Choo, as the buyer/owner? A. Yes. Q. And the Local Credit Committee? A. And, also, Joanne Shaw as well, as the special product underwriter. Q. And, possibly, people in Cardiff as well? A. Yes. Q. And what would have occurred in that situation is, some form of analysis or written report would have been provided to you for your consideration? A. Yes. Q. And if the Local Credit Committee of Australia remained comfortable with the risk in the light of any further information, that would have been a very significant factor in your thinking? A. Yes. Q. Indeed, because you were not in the business of second guessing them, if they looked at the further adverse information and maintained the overall limit, most probably, you would have kept your decision intact as well? A. Yes. Q. Now, could you go to your statement of April 2011? You give some evidence from paragraph 33 and following about how you might have responded if certain additional information had been placed before you? A. Yes. Q. Would you accept that, as a procedural matter, if additional information had arisen after 26 July, the steps that you would have expected to be taken would be these. First of all, Mr Athaide would need to redo his assessment of the buyer and tell you whether he maintained his positive recommendation? A. Yes. Q. Secondly, it would have become even more important to ensure that the submission you were asking him for was actually done, as opposed to forgotten in the paperwork? A. Yes. Q. Thirdly, you would have wanted Mr Choo, as the buyer/owner, to update his analysis of the buyer? A. Yes. Q. And you would have been particularly interested in whether his risk rating of 6 out of 10 remained, or moved in an unfavourable, or favourable direction? A. I would be more interested if it moved unfavourable? Q. I'm sorry? A. I would be more interested if it was an unfavourable move. Q. Yes. 5 or 4 wouldn't matter, but 7 would start to be trouble you? A. Yes. Q. If Mr Choo remained, essentially, intact around the 6 level, that would have given you considerable comfort in maintaining the decision you had made? A. Yes. Q. If he was in the 7 or 8, you would have needed to look more closely at his further work? A. Yes. Q. And given the matter had gone to the Australian local credit committee, you would have been very interested to see what view they had formed? A. Additional material, yes. 81Mr Magee was then shown a document which he was asked to assume was "a summary of the payment plans... an accurate summary of the information which [he] didn't have at the time" (T275.32-.35). It was not common ground that the document did in fact have the character ascribed to it. (One reason why that is so appears from the re-examination to which I refer at [88] to [90] below.) The document was admitted into evidence on the limited basis that it would help to explain this passage of Mr Magee's cross-examination. 82The cross-examiner sought to lead Mr Magee to the conclusion that, had he been given the information comprised in that document and had it been investigated, it might have caused him to form "a substantially different view that there is a significant risk of [BXP] deteriorating during the course of [the] policy period" (T278.45-.49). Mr Magee said that there were two questions, of which this was only one (T278.50-279.11): A. No, there are two questions; that is one of them. My first question, as I said, would be, is this the insured we want to insure, is this the insured we want to take as a customer because the basis of our underwriting for Bill Express rested heavily on the performance between and the close relationship between Optus and Bill Express and given the size of Optus to Bill Express and Bill Express' desire to it needs Optus to provide the PINS, you would expect Optus to have the upper hand. This is not something I would expect Optus to enter into. You would have to talk to Optus to find out, did they put the customer on stop shipment. Did they put Bill Express on stop shipment. What did they do to get their PINS out into the market and was there an adverse public outcry when you go to a petrol station and how they dealt with that. This would have started with Optus first. 83In case it is not clear, "the insured" is Optus. Plainly enough, Mr Magee was referring to the requirements set out at para 46 of his first statement (see at [57(3)] above). 84That reading of Mr Magee's evidence is confirmed by the following passage (T279.27-.38, in answer to my questions): Q. Have I understood you correctly, Mr Magee, the creditworthiness of the buyer, Bill Express, is one matter of concern? A. Yes. Q. And the efficiency of the insured, Optus, as a creditor chasing up its accounts and so on is another matter of concern? A. Yes. Q. And that even if, on ultimate analysis, the information doesn't detract from the assessment of the buyer, nonetheless, if it shows that the creditor was lax in its credit management policies, that would be a separate cause for concern? A. Yes. 85There was some challenge to the last answer. I do not think that it showed that Mr Magee's concerns, as to Optus' credit management policies, would have been alleviated (T279.42-280.34): Q. On that separate matter, that would be for investigation and one available conclusion would be that the November exercise involved the creditor properly identifying that the matter had gotten beyond the 21 days and taking steps to ensure that the debtor came back within the 21 days within a relatively modest period and that would be evidence of proper control by the creditor over the relationship, it would be a positive, I put it to you? A. I think Q. Will you accept that or not? A. Not on the point you have got [sic] raised. There is the middle point, which is the BXP promise to pay five million by 20 December, that gives me cause for concern because of the overdue 3.9 million, which is over 7 days. So for what we believe Bill Express to be, a cash generative company, that 3.9 million might be a blip and you would expect it within the next week. Then to say it comes to 22 November, doesn't give you the credit, that Optus actually have the muscle and power to control the suppliers, which is a concern. Q. Well, these are matters of circumstance and degree; would you accept? A. Yes. Q. It would be relevant to know if, in that intervening period between November and December, each of the other payments was made on the 21 days, as it was required? A. Yes. Q. And that would be a positive factor if, in essence, the deal was, we will be holding you to the 21 days for each of our weekly settlements and we are giving you, perhaps, a degree of indulgence in giving you till December for the 3.9 million, but we will require by then that everything be brought back to 21 days? A. I am assuming here this 5 million by the 20th would have been one of their weekly payments and not a separate payment plan, is that the right subject? HIS HONOUR Q. A moment ago in an answer I thought I heard you say 22 November. Did you mean, referring to paragraph 3, 22 December? A. 22 December. Sorry, your Honour. So it is this five million that would cause me some concern because if the 3.9 million was overdue and they gave them until 22 December to pay it, that is a long time, but you might have a reasonable explanation for that, but it is the five million in the middle which implies that there is not one overdue, there is going to be multiple overdues during this period, then you have to question what their process is internally. 86Mr Magee was asked about inquiries that he might have caused to be made, and meetings conducted, in an attempt to understand the financial position of BXP. It was then put to him that, making certain assumptions as to BXP's payment history, the information that would come out was "broadly consistent with what he knew in fact". I will not set out the question, because without the underlying document it is rather hard to follow. But Mr Magee's answer (T286.2-.6) is instructive, because it reinforces what I regard as the significance, to his thinking, of what he had said at para 46(c) of his first statement: A. I would say this gives me greater concern of Optus as the insured as opposed to Bill Express, the buyer. If Optus as predominant party in this wanted to reduce its terms with Bill Express and couldn't do, that would imply to me there is something wrong at the Optus level. To make that decision and then not to enforce it, is not a good sign for credit management. 87The further cross-examination of Mr Magee on this point did not take up, let alone challenge in any direct way, his comment that "it is not a good sign for credit management". 88In re-examination, Mr Magee was asked to read an email of 20 December 2006. That email had been referred to in para 9 of the "payment plans" document shown to Mr Magee, on which he had been cross-examined (see at [81] above). The summary of the email given in that document said merely that it was "a list of requirements to reduce BXP's indebtedness", and that Optus required three payments of $3 million to be made by 1 March, 1 April and 1 May 2007 "by way of additional security", in addition to the usual weekly payments. 89In addition to the summary that Mr Magee had been given, the email stated (after setting out the required additional payments): If any of these [additional 3 x $3 million] payments are [sic] not made by the due dates [sic], then the following actions will be triggered: (1) 30 days notification of a Margin reduction of .25% will be given. If payment is not received within this 30 day period then: (2) the Margin reduction will be enacted, and a Letter of Demand issued. If the payment is not received within 30 days of the Letter of Demand being issued, then (3) [Optus] will review supply of products to [BXP] with the most likely outcome being [Optus] will cease supply of Products. 90Mr Magee gave the following evidence (T300.11-.30): Q. Can I ask you to assume that in addition to what you have been asked to assume in paragraph 9 you actually had all of the information set out in the email? A. Yes. Q. And can you also assume that at some stage the first two steps in the action plan referred to at the very bottom of the fax were actually implemented, that is there was a margin reduction and there was a letter of demand issued? A. Yes. Q. If you add those assumptions to the ones you made when Mr Gleeson was asking you questions, does it change any of your answers? A. I think it's more likely we would not have spoken to Optus, we would not have taken this policy on. Q. Why do you say that? A. Having read this email it is clear that this is a debt, this is a company where Optus has severe concerns about, it's trying everything it can to manage its relationship and it's not working and so the credit insurance is its fall back and that's not the type of policy we would write or a type of risk we would take on. 91Ms Johnson said that if she had been given the additional information, she would have sought Mr Magee's comments. However, she said, from her perspective, the Naven material would not have her to conclude that the policy should be approved. In cross-examination, she accepted that if Mr Magee had reviewed the material and expressed a favourable view on it, then (T205.6-.7): Depending what other information was available to me. If that was the only information, I would probably accept Mark's point of view. 92There is nothing in Mr Magee's evidence in chief or in cross-examination to support the conclusion that he might have expressed to Ms Johnson the favourable views that were put to her, and in respect of which she gave that qualified concession. The parties' submissions 93The evidence of Mr Magee, taken in conjunction with that of Ms Shaw and Ms Johnson, could be thought to lead to the conclusion that, had the proper disclosure been made and had Mr Magee's concerns been responded to as Mr Naven and Mr McQuade said would have happened, the policy would not have issued. However, Mr Hutley of Senior Counsel, who appeared with Mr McLure of Counsel for Optus on the further hearing, submitted that this evidence told only part, and an insufficient part at that, of the whole story. 94Mr Hutley's submissions involved two principal elements: (1) first, based on Mr Magee's evidence in cross-examination, Mr Magee would not have dealt with the hypothetical further information purely by himself, but would have caused investigations and inquiries to be made by others, including Ms Shaw, Mr Choo and Mr Athaide; and (2) secondly, none of those persons gave evidence as to what inquiries they would have made or what they would have done, or recommended, in response to information received as a result of those inquiries. (Ms Shaw was called to give evidence; Messrs Choo and Athaide were not, although it was common ground that a witness statement of Mr Athaide had been served.) 95Thus, Mr Hutley submitted, because Atradius had not described the inquiries that it would have caused to be made, in response to the Naven material, Optus had been denied any opportunity of saying what response it would have made to those inquiries. It followed, Mr Hutley submitted, that Mr Magee's evidence of his reaction to the Naven material was not conclusive, because it did not take into account all available material. On the contrary, Mr Hutley submitted, Mr Magee would not have made any decision until inquiries had been made and answered and he had considered whatever was provided in response to those inquiries. 96The essential case for Optus is encapsulated in the following extract from Mr Hutley's oral submissions (T23.50-24.23): They were in the perfect position to call everybody to say from the beginning, to have led evidence-in-chief from Mr Magee to say, I wouldn't have done this myself, I would have been involved in the process. I would have directed my concerns down to Mr Chuah [sic] and Mr Athaide and I would have requested Mr Chuah [sic] and Mr Athaide to go to BXP and raise it. I would have requested Mr Chuah [sic] to accompany Ms Shaw and go to Optus and ask questions. That is what I would have done. I would be expecting reports from them. The one would have got evidence from Ms Shaw and Mr Chuah [sic]. Had I been requested to go to Optus and ask questions, these are the questions I would have asked and this is what I would have produced, a summary was taken, your Honour will recall that there was evidence that they did not say, I will produce written documents to Mr McQuade. He anticipated one. You would have had some chain of title. There also would have been evidence of what they would have gone to BXP to find beyond that which they knew. You would have then had a coming back of informed counter factual enquiries which would then have been put to Mr McQuade. He said, and I will go to the detail after a lengthy discourse from him, if they did maintain their credit rating it was very important to have them still maintain their recommendation, which was very important to have, and spoke to BXP. He had not had a report from them about their borrowing with BXP to date and which BXP had given a detailed explanation as to what their problems were. 97In summary, and paraphrasing Mr Hutley's oral submissions (there is no need to give references), Mr Hutley submitted that Mr Magee had been "crippled in the evidence he has given" because it was based only on a "deracinated" version of the relevant facts on which, in the counterfactual universe, he would have been required to reach a conclusion. 98Mr Hutley submitted that Mr Magee's position could be summarised to the following effect: (1) Mr Magee was heavily dependent on his team in Australia; he would not have second-guessed the LCC; he thought the LCC was much better placed than he to assess the risk, because of their knowledge of local conditions; (2) Mr Magee would have required investigations to be undertaken by Ms Shaw, Mr Athaide, and Mr Choo; and would have expected those results to be further considered by the LCC; (3) if the LCC remained comfortable with the risk in the light of any further adverse information, that would have been very significant to Mr Magee; (4) if the LCC, having looked at the further information, had maintained its overall credit limit of $30 million, Mr Magee would probably have adhered to his original decision; and (5) Mr Magee would have expected Mr Athaide to say whether he maintained his positive recommendation. 99In those circumstances, Mr Hutley submitted, Atradius did not call key personnel, including Mr Choo and Mr Athaide. He submitted that the Court should not draw in favour of Atradius inferences that otherwise might be available from the probabilities, objectively viewed, in circumstances where the relevant evidence had not been led (see for example Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 347 at [255]). 100Further, Mr Hutley submitted, the Court should draw a Jones v Dunkel inference from the unexplained failure of Atradius to call Mr Athaide, Mr Choo and other members of the LCC (Jones v Dunkel (1959) 101 CLR 298). In those circumstances, Mr Hutley submitted, the Court could be more comfortable in drawing inferences contrary to the interest of Atradius, if otherwise those inferences were available on the evidence. 101Mr Newlinds of Senior Counsel, who appeared with Mr Mehigan of Counsel for Atradius, submitted that the starting point was that Mr Magee was the relevant decision-maker within Atradius in relation to the issue of the particular policy. That is undoubtedly correct. 102Mr Newlinds referred to my acceptance (at [235]) of the evidence given by Mr Magee in his first statement, at para 46, as to the matters on which he would require (to paraphrase Mr Magee's words) "absolute satisfaction". The first two of those were alternatives: that there were reasons, that were unconnected with the financial position of BXP, to explain why Optus had put BXP on payment plans; or that the issues which had led to the making of the payment plans had been finally resolved and were very unlikely to recur. The other matter, which was cumulative, was that Optus had improved its internal credit control procedures, so as to enable it to detect potential payment problems as early as possible. 103Mr Newlinds submitted that the information hypothetically put forward by Optus, in the Naven material, might be considered to have sought to address the first two (alternative) requirements. It did not, he submitted, address the third. Thus, Mr Newlinds submitted, the process of further, back and forward, inquiry contemplated by Optus in its submissions would not have assisted. 104Mr Newlinds submitted that, in any event, the process of inquiry apparently contemplated by Optus was inappropriate. As Mr Newlinds (not unfairly) characterised it, the effect of Optus' submissions was that Atradius should have proved through relevant witnesses, including Mr Magee, Ms Shaw, Mr Athaide and Mr Choo, the further inquiries that it would have made; and Optus should then have been allowed to prove the responses that, in the hypothetical world, it would have made to those inquiries. Mr Newlinds submitted that on this basis, the process envisaged by Optus would involve further exchanges of evidence, with Atradius responding hypothetically to the hypothetical further information that Optus said it would have supplied, Optus responding hypothetically to each further response from Atradius, and so on until, at some point, the parties or the Court cried "enough". 105In essence, Mr Newlinds submitted, Atradius, through Mr Magee, had stated its concerns. Optus, in answer to those stated concerns, had put on evidence of what, in the hypothetical universe, it would have told Atradius. If that material did not satisfy the concerns advanced by Atradius (and, Mr Newlinds submitted, Mr Magee should be accepted when he said that it did not), that was the end of the matter. 106Mr Newlinds laid stress on the fact that the material supplied by Optus did not address the issue on which Mr Magee said he would require absolute satisfaction, in para 46(c) of his first statement, as to improvement in Optus' internal credit control procedures. 107Further, Mr Newlinds submitted, the Court should not disregard Mr Magee's evidence, where it had not been put squarely to him that: (1) the information contained in the Naven material was sufficient to alleviate his concerns; or (2) such further material as might have been produced, on further inquiry, could not have alleviated his concerns. 108Mr Hutley responded to the second point by observing, not inappropriately, that leading counsel then appearing for Optus could hardly have been expected to cross-examine Mr Magee on the impact, on his thought processes, of hypothetical information obtained in response to hypothetical inquiries where the nature of those hypothetical inquiries had not been detailed and, accordingly, Optus had been given no opportunity to state the hypothetical responses to them. Decision 109I start with the proposition that, as I recorded at [236], "I accept Mr Magee as a witness who, in general, sought to give truthful and accurate evidence". 110I add to that the impression that I recorded at [237]: [237] Further, Mr Magee presented as a careful, competent and experienced senior credit underwriter. I have no doubt that he was thoroughly conversant with the relevant material. I have no doubt that he was aware of the significance of payment plans. I have no doubt, had a correct answer been given in relation to payment plans and had that been conveyed to him (as it should have been), he would have acted as he said, in para 46 of his statement dated 2 November 2010, he would do. 111It follows from what I have said that, unless material provided to Mr Magee, in answer to the concerns expressed by him in para 46 of his first statement, had given him the level of satisfaction that he required in response to those concerns, he would not have approved the underwriting of the policy. That means, as I think is clear, that he (being the person whose credit approval was required) would not have given that approval. In case the point has been lost, I point out that both policy underwriting (Ms Johnson having the requisite authority) and credit underwriting (Mr Magee having the requisite authority) were required. The absence of either meant that the policy would not issue. 112What, then, were the requirements, in respect of which Mr Magee required absolute satisfaction? The first (reading the two alternative requirements together) was as to BXP's financial position: either that it be shown that the payment plans were unconnected with BXP's financial position, or that the problems in BXP's financial position that had led to the plans had been resolved, and were very unlikely to reoccur. 113Optus' evidence as to the information that, hypothetically, it would have provided must have been directed to those concerns. That is why Mr Naven described the analysis that he would have undertaken of BXP's financial position. And that is why Mr Naven said that he would have expressed the overall conclusion stated at para 38 of his affidavit, which I have set out at [70] above. 114I do not think that Mr McQuade's riff on the credit-worthiness of BXP adds anything of present moment. 115The first point to note is that the assessment made by Mr Naven, and the reasoning process leading to it, were not sufficient to provide Mr Magee with the level of satisfaction that he required. That is what he says at para 38 of his second statement (see at [72] above). I do not accept Mr Hutley's submission that Mr Magee's views were formed upon a "deracinated" version of the facts. On the contrary, those views were formed after consideration and analysis of the material that, in the hypothetical universe, Optus said it would have supplied to Atradius. 116I accept of course, as Mr Magee said, that he would have relied on inquiries to be made by, and information to be obtained and passed on from, those in Australia. But there is no reason to think that inquiries might have improved the position stated by Mr Naven. On the contrary, it seems to me, acceptance of Mr Naven's evidence (and I do accept it) entails the consequence that it represents the best case that Optus could put forward to persuade Atradius to accept the risk, in the light of the (hypothetically disclosed) existence of three payment plans, two of which had not been complied with. 117In this regard, it is instructive to look at what Mr Magee said he required, and contrast it with what Mr Naven said he would have provided. Mr Magee wanted to be "absolutely satisfied" of the matters set out at para 46 of his first statement. Looking at (a) and (b), the Naven material does not explain (a) in any way. On the contrary, it accepts that the payment plans were connected with the financial position of BXP, and seeks to demonstrate that the financial problems which had led to the payment plans had been resolved. 118What Mr Magee wanted, however, was absolute satisfaction that there had been a final resolution of those problems, and that they "were very unlikely to recur". The most that Mr Naven was prepared to say (and I do not say this critically of him) was that his overall assessment of BXP was "that it was a low risk of becoming insolvent in the short to medium term". 119The contrast between that somewhat guarded assessment, and the degree of satisfaction required by Mr Magee, is obvious. That, no doubt, is why Optus has put its case on the basis that Mr Magee's evidence should have taken into account not just the material that, hypothetically, Mr Naven would have provided, but also the further material that, hypothetically, Optus would have provided in response to the hypothetical further inquiries of Ms Shaw, Mr Athaide or Mr Choo. But why should I infer that Optus could have put the position any more strongly than, after due consideration, Mr Naven felt able to do? 120As I have said, I think that Mr Naven's evidence should be taken as stating the position, from Optus' perspective, in as positive a way as was consistent with obligations of honesty. Thus, I do not think, and certainly am not prepared to infer, that upon further inquiry being made (by hypothesis, because of the less than satisfactory nature of the information hypothetically provided), some further and reassuring nuggets of information might have been obtained. 121In his second statement dated 7 April 2011, Mr Magee set out the reasons why the Naven material was (or would have been) insufficient to satisfy his concerns (as expressed at para 46 of his first statement). Optus did not put on further evidence to meet the criticisms of the Naven material that Mr Magee advanced. Nor was Mr Magee cross-examined on the basis that his concerns were not genuinely held, or that they were factually, logically or otherwise unsound. Instead, as I have noted, the approach taken was to suggest that Mr Magee would have caused further inquiries to be made, and obtained further information, and acted on the whole of whatever the outcome might have been. 122The significance of the matter referred to by Mr Magee in para 46(c) of his first statement, as to Optus' credit control procedures, appears clearly and consistently from his cross-examination. I have set out some of the relevant passages already. It was never put to Mr Magee that this was not a matter of key importance to him. Nor was it put to him that the material that had been supplied was sufficient to alleviate it. On the contrary, as the references already given show, it is clear that Mr Magee regarded that concern as remaining a live issue notwithstanding the material through which he was taken in cross-examination, on the basis that, hypothetically, it would have been supplied to him. 123I referred at [90] above to evidence given by Mr Magee in re-examination, as to what his decision would have been had he been given the full terms of the email of 20 December 2006 and certain further information regarding it. On analysis, Mr Magee's response reflects both his concern as to the credit-worthiness of BXP (para 46(a), (b) of his first statement) and his concern as to the credit control procedures of Optus (para 46(c)). And it is clear from his answers that disclosure of that material would have caused him to form the view that the risk should not be accepted: "That's not a type... of risk we would take on". 124That response confirms that if Optus had made the disclosure which, hypothetically, Mr Magee was asked in cross-examination to assume would have been made, and had provided the underlying documents referred to and information relevant to them, then the risk would not have been accepted. This aspect of Mr Magee's evidence is to the effect that he was not satisfied either that BXP was a buyer for whose obligations Atradius was prepared to accept responsibility or that Optus was a proponent that Atradius would want to insure. 125I regard it as significant that the cross-examination of Mr Magee, as to the email of 20 December 2006, was based not on the text of the email, but on the "deracinated" summary of it in the "payment plans" document. That fortifies my acceptance of the evidence given in re-examination when Mr Magee was given an opportunity to read the document. 126The other, and equally decisive, point is that there is nothing in the Mr Naven material that could be regarded as capable of meeting the second substantial requirement of Mr Magee: that he be absolutely satisfied of improvements in Optus' internal credit procedures so as to enable it to pick up problems very early in the piece. That may explain why the cross-examination of Mr Magee did not challenge directly his evidence that the Naven material would not have persuaded him to issue the policy. 127I am fortified in my ultimate acceptance of this aspect of Mr Magee's evidence by the absence of a direct challenge to it. If it were intended to put a submission that, in light of the answers that were obtained in cross-examination on this point, the evidence could not be correct and should not be accepted, that should have been put squarely. 128In essence, Mr Magee did say what he himself would have done (more accurately, decided) based on the Naven material. The failure to challenge that evidence directly undermines in a fundamental way the basis of Optus' case, as summarised in the first paragraph of transcript quoted at [96] above. 129Thus, I do not think that it is necessary to consider what further inquiries might have been made, what responses might have been given, what if any further inquiries those responses might have provoked, and so on through an ever-branching maze of hypothetical inquiry and response. Mr Magee stated his concerns. Optus sought to answer them. Mr Magee said that the answer was insufficient. His reasons for saying that were not challenged directly, and in any event appear to be sound. And the material proffered in any event simply did not address one of his requirements. 130Returning to the way that Meagher JA put it at [91], Optus established, through the Naven material (and, to the extent that it adds anything, Mr McQuade's evidence as to his view of BXP's financial position), the further information that it would have provided in relation to payment plans. Atradius has proved, substantially through Mr Magee, what its response would have been to that further information. It is plain that the further information was not sufficient to satisfy Mr Magee. Indeed, if the assumptions as to that information which he was asked to make were accurate (and I find that they were), that information would have persuaded him that BXP was a buyer that Atradius did not want to insure. 131To my mind, the way that Optus has run this aspect of its case (and I do not intend to be disrespectful in putting matters this way) is to put up a smokescreen, so as to attempt to disguise the obvious reality that BXP was, at the relevant time, a most unappealing credit risk (as Optus itself recognised), and that the best that Optus could say about BXP had been shown to be insufficient to meet the concerns expressed by Atradius. 132In essence, the case for Optus is that Atradius should have continued to make further inquiries until those inquiries produced the result that at first, left to its own devices and applying the appropriate resources of responsible management, Optus had been unable to achieve. I do not think that that is the process which s 28(3) of the Insurance Contracts Act imposes on an insurer seeking to discharge the burden of proof that the subsection casts on it. Conclusion 133The remitted question should be answered by saying that I find, on the balance of probabilities, that if the proposal had given truthful and complete answers in respect of the payment plans, Atradius would not have issued the policy. I repeat that there has been no evidence or submission addressed to the question of whether some alternative policy might have been issued, or on what terms. 134It follows that there should be judgment for Atradius on Optus' claim. 135Since the parties wish to be heard on the question of costs (and because the Court of Appeal has remitted the question of costs for further determination) I shall give directions for written submissions on costs, and fix a date for the hearing of oral submissions if the parties so desire. Orders 136Direct entry of judgment for the defendant on the plaintiffs' claim. 137Direct each party to serve on the other and provide to my Associate, by 28 February 2014, a statement setting out the orders as to costs that it seeks and the reasons why such orders are sought. 138Stand proceedings over to 9:30am on 7 March 2014 before me for directions. ********** 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: 07 February 2014