Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd [1984] HCA 59; (1984) 157 CLR 149 (2 October 1984)

HIGH COURT OF AUSTRALIA

NORWEST REFRIGERATION SERVICES PTY. LTD. v. BAIN DAWES (W.A.) PTY. LTD. [1984] HCA 59; (1984) 157 CLR 149

Insurance - Damages - Practice

High Court of Australia
Gibbs C.J.(1), Mason(1), Wilson(1), Brennan(2) and Dawson (1) JJ.

CATCHWORDS

Insurance - Contract - Arrangements for obtaining insurance made by intermediary - Volunteer - Exclusion clause in policy - Proposal - Answer to question suggesting applicability of exclusion clause - Whether duty of care owed by intermediary to proposer - Whether breach by failure to ask or warn about exclusion clause - Policy obtained through broker - Continuous course of dealing between intermediary and broker - Duty of care owed by broker to insured - Whether breach.

Damages - Negligence - Insurance - Loss of right of indemnity - Measure of damages - Interest - Deprivation of insurance moneys - Supreme Court Act 1935 (W.A.), ss. 32, 33.

Practice - Costs - Bullock order - Joinder of insurer - Judgment against defendant in principal action - Claim against insurer dismissed with costs - Plaintiff's right of indemnity for costs against unsuccessful defendant - Whether joinder reasonable - Claims not interdependent or alternative - Discretion.

HEARING

1983, October 27, 28; 1984, October 2. 2:10:1984
APPEAL from the Supreme Court of Western Australia.

DECISION

GIBBS C.J., MASON, WILSON and DAWSON JJ. At all material times the first respondent ("Norwest") was the owner of a fishing vessel ("the Sonoma") licensed, pursuant to the Fisheries Act 1905 (W.A.) as amended, to fish in Western Australian waters. In April 1975 Norwest's banker insisted that the Sonoma, at that time uninsured, be insured. The vessel was then fishing in the area of Port Walcott in Western Australia and was in the charge of Mr. Matthews, a director of Norwest. In conversation with an employee of the appellant ("the Co-operative") at Port Walcott Mr. Matthews learned that it was possible for members of the Co-operative to obtain insurance at reduced rates through that organization. Norwest had recently become a shareholder and member of the Co-operative. Mr. Matthews then telephoned the head office of the company in Geraldton and spoke to the office manager, Mr. Murray. He stated simply that he wished to insure the Sonoma. Mr. Murray told him that could be arranged and sent him a proposal form to be completed. Mr. Matthews completed the form promptly and returned it to Mr. Murray on 14 April 1975. At that time he did not know whether the Co-operative was itself the insurer or who the underwriter or broker was to be. Mr. Murray forwarded the completed proposal form to the second respondent, the broker ("Bain Dawes"), who arranged with the insurer to have the Sonoma added to a fleet policy maintained by the Co-operative. That policy contained a clause which excluded liability in the case of a vessel which did not have a current certificate of survey issued pursuant to the provisions of the Western Australian Marine Act 1948 (W.A.) as amended ("the Marine Act"). The Co-operative and Bain Dawes both knew of the exclusion clause but unfortunately neither Norwest nor Mr. Matthews was ever informed of it. The proposal form did not mention it. The Sonoma's survey certificate had expired in March 1974 and although the annual fee had been paid promptly by Mr. Matthews at that time no survey was then undertaken and no certificate issued. In consultation with Mr. Fred Connell, the Manager and Secretary of the Co-operative, Mr. Matthews arranged for a hull survey to be undertaken while the Sonoma was slipped in Geraldton early in 1975 but other aspects of the survey remained to be completed before a certificate could issue. This was still the position in May 1975 when the Sonoma was destroyed by fire while moored at a wharf at Cossack in the Port Walcott area. The insurer, relying on the exclusion clause, declined liability.

2. Norwest sued the insurer, Bain Dawes and the Co-operative. The learned trial judge held that the insurer was entitled to rely on the exclusion clause and dismissed the claim against it. That decision has been accepted by Norwest. Norwest's claim against the other defendants was grounded both in contract and in tort. In each case it rested on an alleged failure to arrange suitable cover and alternatively on breach of a duty to warn Norwest of the exclusion clause. The trial judge dismissed the claim against both of these defendants, holding that neither of them knew or ought to have known that the Sonoma was not the subject of a current certificate of survey and that in those circumstances the fleet policy provided suitable cover and there was no obligation to warn.

3. Norwest appealed to the Full Court of the Supreme Court of Western Australia in respect of the decisions in favour of Bain Dawes and the Co-operative. The Full Court (Wickham, Wallace and Olney JJ.) unanimously dismissed the appeal in respect of Bain Dawes. In the case of the Co-operative it allowed the appeal and entered judgment in favour of Norwest in the sum of $81,468.14, this being the amount for which the Sonoma was intended to be covered under the fleet policy less the premium. The Co-operative was ordered to pay the costs of both Norwest and Bain Dawes. The Court rejected a claim by Norwest for the payment of interest from 1975 on the amount of the judgment and also a claim that the Co-operative indemnify Norwest against its payment of the costs of the insurer.

4. There are a number of issues in the proceedings in this Court. The Co-operative seeks the restoration of the decision of the trial judge. In that regard it contends not only it is not liable either in contract or in negligence but that, even if it is, Norwest failed to prove that it had suffered the damages awarded or any part of them. For its part, Norwest appeals against the dismissal of its claim against Bain Dawes and it renews its claim for interest and for a "bullock order" in respect of the insurer's costs.

5. We turn now to the appeal by the Co-operative. The existence of a contractual obligation is in issue but it is convenient first to examine the facts in the context of the negligence claim. The Co-operative concedes that it was under a common law duty of care (a) to use reasonable endeavours to obtain similar cover for Sonoma to that enjoyed by other members subject to any specific instructions or requirements made known to it by Norwest and (b) to use a reasonable degree of care and skill in such endeavours. It complains that in effect the Full Court treated it as if it were a professional broker, thereby imposing too high a duty of care. In brief, the view of the facts for which the Co-operative contends may be summarized as follows:

(a) It is admitted on the pleadings that in
January 1975 Mr. Matthews informed Mr. Connell
that the Sonoma did not then have a current
survey certificate.
survey carried out.

(c) Thereafter the Sonoma sailed from Geraldton to
Port Walcott.

(d) Between arrival at Port Walcott and April when
Mr. Matthews requested that insurance cover be
arranged the Sonoma had delivered fish to the
Co-operative's depot at Port Walcott.

(e) Nothing was said by Mr. Matthews when seeking
insurance to suggest that Sonoma was or might
be out of survey.

(f) The proposal forms completed by Mr. Matthews
did not raise any question respecting survey.
To the question "Date of last hull survey" it
contained the answer "1973", but such a survey
was good for two years and there was no reason
to suppose from reading the document that the
two years had already expired by April 1975.

(g) Although Mr. Matthews enclosed with the
proposal form the certificate of survey which
had expired in March 1974 that document was
not directly relevant to the proposal.

It is submitted for the Co-operative that the most significant fact in the whole course of events is that the Sonoma was going to sea and fishing in March and April 1975. If the Sonoma was not the subject of a current survey certificate then in so doing it was in breach of s. 43 of the Marine Act. It was not to be supposed that it was engaged in an unlawful adventure and there was no basis in those circumstances for imputing a duty to inquire or to warn.

6. On the other hand, a somewhat different picture emerges from Mr. Connell's own evidence. He explained that the Co-operative was there to protect and further the interests of its members. It had negotiated the fleet policy in about 1970 in order to secure a better deal for those members. The exclusion of liability in respect of a vessel out of survey was fundamental to the objective of securing the reduced premiums. The members were encouraged to take out insurance and the officers of the Co-operative generally kept them well advised of what was required under the terms of the policy, including the necessity of maintaining current survey certification at all times. In cross examination, Mr. Connell said that he himself was "endlessly" telling fishermen they must have a current survey certificate. Unfortunately, the system broke down where Mr. Matthews was concerned. The trial judge found that he did not know of the exclusion clause and that the Co-operative did not tell him. It is common ground that the proposal form did not carry any warning in that regard. From Mr. Matthews' point of view nothing could be more simple. The Co-operative was willing to arrange insurance as a service to its members. It seems that he was willing to leave it to them to obtain the insurance cover subject only to the requirement that it be for comprehensive and total loss with no excess. There is an express stipulation to that effect in the proposal form, though this is not in Mr. Mathews' handwriting. But there can be no doubt that the stipulation had Mr. Mathews' acquiescence. He knew nothing about any fleet policy nor the name of any proposed insurer or broker. So far as the proposal form was concerned it was consistent with the Co-operative itself being the insurer. In these circumstances, we are unable to accept the submission of Mr. Malcolm for the Co-operative that its function was no more than an intermediary, acting in a voluntary capacity, for the transmission of a proposal for insurance to the insurer via the broker. With all respect, we agree with the conclusion expressed by Olney J.:

"In my opinion the Co-op held itself out as being
prepared to arrange insurance for such of its
members who requested this to be done. This being
so the Co-op was under a duty to exercise proper
care to ensure either that it arranged insurance of
the type requested by the members or that it warned
a prospective insured of the limitations that would
be contained in any insurance cover that it
arranged for the member."

As Olney J. observed, this conclusion determines the issue of breach of duty against the Co-operative without regard to the question whether it knew or ought to have known that the Sonoma in fact was out of survey. An affirmative inference to this effect was held by Wickham and Wallace JJ. to arise from a mere perusal of the information contained in the completed proposal form coupled with the expired survey certificate. In this regard, Mr. Malcolm argues that such an inference should not have been drawn, particularly when any knowledge which came to the Co-operative from those documents was overborne by the actual knowledge of the Sonoma going to sea and fishing at material times. However, leaving aside the conclusion of Olney J. based on the general relationship between the Co-operative and its members, it would in our opinion be sufficient to give rise to a duty to inquire of Mr. Matthews whether the vessel was in survey or to warn him of the exclusion clause if the information he provided, including the expired certificate, did no more than raise a question concerning the possible relevance of the exclusion clause. Evidence relevant to the issue of the inference which was or might have been drawn from the proposal form and the expired certificate might well have been given by Mr. Murray, the office manager for the Co-operative, who received the documents from Mr. Matthews and who detached the certificate and forwarded only the proposal form to Bain Dawes. In the course of cross examination by counsel for the Co-operative of witnesses called for Norwest, questions were put which foreshadowed that Mr. Murray would be called to give evidence. However, he was not called and to that extent the Co-operative is less equipped to contest the drawing of an adverse inference from the documentation. It is also relevant to observe that the only communication with Mr. Matthews after making his request for insurance cover was a telphone call from an officer of Bain Dawes to his banker confirming that cover had been arranged. That call was made at the request of the Co-operative. On 5 May 1975 the insurer sent to the Co-operative through Bain Dawes an endorsement slip stating that the fleet policy had been extended to include the Sonoma and referring specifically to the warranty as to survey. But this was not communicated to Norwest.

7. In our opinion there is abundant evidence to support the conclusion that the Co-operative failed to take reasonable care in dealing with Norwest's request for insurance cover. It is unnecessary to consider the claim in contract.

8. The Co-operative's second ground of appeal is an attack on the Full Court's award of damages to Norwest. The trial judge found that the Sonoma went to sea and fished for several days in May, returning to its moorings some ten days or so prior to it being destroyed. In so doing Norwest was in breach of s. 43(1) of the Marine Act. Mr. Malcolm's argument is that even if the Co-operative could have arranged insurance cover for the Sonoma whilst out of survey, the vessel would by going to sea have breached the warranty of legality implied in that alternative policy by virtue of s. 47 of the Marine Insurance Act 1909 (Cth) as amended. The consequence of such a breach is that the insurer is discharged from liability as from the date of the breach of warranty (s. 39(3)), although a breach of warranty may be waived by the insurer (s. 40(3)). It is further argued for the Co-operative that in any event if suitable cover could be obtained for a vessel that goes to sea when not under survey the premium would be much higher, a matter as to which there was no evidence.

9. It seems to us that the argument based on unlawful adventure proceeds on a premise that is fundamentally unsound. Why should it be supposed that Mr. Matthews would have insisted on going to sea had the Co-operative taken reasonable care to advise him of the conditions governing effective insurance cover? The duty which was undertaken by the Co-operative in response to Mr. Matthews' request that it arrange insurance cover was to use reasonable care to ensure that the fleet cover normally provided to its members would be suitable and effective. In the circumstances of the case this called for some inquiry as to whether the Sonoma was the subject of a current survey certificate. If it were told that the vessel was not under survey, its duty then was to instruct Mr. Matthews in the fundamental importance of a current survey certificate to effective insurance over a vessel that goes to sea. Mr. Matthews said in effect that had he been told of the importance of certification to effective insurance he would have taken steps at once to try to obtain that certification. No doubt if the survey could not be completed speedily the question of some form of alternative insurance cover such as a port risks only policy would have arisen. But there is no basis whatever for imputing to the Co-operative a duty to arrange insurance to cover the Sonoma whilst and notwithstanding that it was engaged in an unlawful adventure.

10. Of course the onus of proving its damage rests upon Norwest. Therefore, in order to sustain the judgment of the Full Court, it must point to evidence showing that, on the balance of probabilities, had the Co-operative discharged its duty of care Norwest could have secured at no higher cost effective insurance cover against the risk that ultimately destroyed the Sonoma. Bearing in mind the insistence of Norwest's banker upon insurance being effected, Mr. Matthews clearly would have been under pressure to do something. The evidence shows that two possible courses were open. One was that to which Mr. Matthews himself referred, namely, efforts to finalise the survey so that the Co-operative's fleet policy would become available. With six weeks between Mr. Matthews' request to the Co-operative for insurance cover and the destruction of the vessel, one would have thought that the survey could have been completed and effective cover obtained well before the occurrence of the latter event. All aspects of the survey had been completed except the machinery and equipment inspection. The evidence suggested that Mr. Matthews was having some difficulty with the hydraulics. However, in our opinion the probabilities must have favoured the conclusion that appropriate advice by the Co-operative would have spurred Mr. Matthews on to satisfy the requirements.

11. The second possible course was to obtain temporary insurance cover against port risks only to cover the Sonoma whilst it remained at the wharf in Cossack. There was evidence from officers employed by Bain Dawes that such cover was available and for a premium which was, if anything, less than that payable under the Co-operative's fleet policy. Mr. Matthews in evidence said nothing to indicate that he would have resorted to a port risks policy in the hypothetical circumstances now under consideration. But there can be no doubt that the Co-operative would have pursued that avenue in consultation with Bain Dawes once the full circumstances were known to it. In so doing, the Co-operative would be protecting its own interests as well as those of its member Norwest because it had advanced moneys to Norwest to have repairs carried out to the Sonoma whilst it was slipped in Geraldton in January. Mr. Connell testified to the practice of the Co-operative in such circumstances to ensure that a vessel was insured in order to protect its investment. All the members of the Full Court concluded that the proper inference to be drawn from the evidence of Bain Dawes' officers was that satisfactory alternative cover would have been available to the Sonoma notwithstanding that it was out of survey. Mr. Malcolm attacks this finding as based on a misapprehension, namely, that the vessel would remain tied up at the wharf until the survey was completed. His case was that one could not find an insurer who would be prepared to cover a vessel which was going to sea without a certificate of seaworthiness, and hence in breach of the statute. It followed that Norwest's entitlement to damages rested on the valuation of its chance of obtaining alternative insurance (cf. Chaplin v. Hicks (1911) 2 KB 786). That chance was so slight as to be valueless. However, as we have already indicated, the difficulty with this approach is that it assumes that Mr. Matthews would have persisted in the unlawful adventure even if the Co-operative had handled his request for insurance cover with reasonable care.

12. Be all this as it may, we find it unnecessary to pursue the question any further because we prefer to rely on the probability to which we have earlier referred, namely, that had Norwest been apprised in April of the importance to effective insurance cover of a completed survey, the survey would have been completed and the fleet policy effectively extended to the Sonoma before the loss was suffered. It follows from that conclusion that the Co-operative's appeal must fail.

13. By its appeal, Norwest seeks the inclusion in the sum of damages awarded to it a sum representing the loss it has suffered by being deprived of the insurance moneys since 1975. It argues that if the Sonoma had been covered effectively under the fleet policy then it would either have received the sum insured from the insurer in 1975 or if it became necessary to sue the insurer it would probably have received the sum insured plus interest on that sum pursuant to s. 33 of the Supreme Court Act 1935 (W.A.). On this basis, Norwest claims that the interest is an integral part of the damages themselves. It is not merely a case of seeking interest on a sum assessed as the damages flowing from a tort. In our opinion, however it be put, the argument cannot succeed. At common law, no Court could award interest in a case such as this, whether by way of interest on damages or as damages: London, Chatham and Dover Railway Co. v. South Eastern Railway Co. (1893) AC 429; Riches v. Westminster Bank, Ld. (1947) AC 390, at pp 400-402; and cf. Halsbury (4th ed.) vol. 12, par. 1179. Authority to make such a provision must therefore be found in statute. The only provisions which are suggested as being of any possible relevance are ss. 32 and 33 of the Supreme Court Act. On its terms, s. 32 applies only to authorize a Court or jury to allow interest to a creditor "upon all debts or sums certain". Section 33 authorizes a Court or jury to give damages in the nature of interest in certain actions, none of which are applicable here. Sections 32 and 33 were repealed and a new s. 32 substituted by amending Act No. 47 of 1982. The new section enlarged the powers of the Court with respect to the payment of interest between the date when the cause of action arose and the date of judgment in terms similar to provisions now in force elsewhere in Australia (cf. s. 94, Supreme Court Act 1970 (N.S.W.)). However, this section came into force after the delivery by the Full Court of its decision on the appeals in this case and cannot assist Norwest to gain compensation for the ravages of inflation since 1975 which will have seriously denuded its damages of their real value: see Victorian Stevedoring and General Contracting Co. Pty. Ltd. and Meakes v. Dignan [1931] HCA 34; (1931) 46 CLR 73, at pp 109-111.

14. Norwest also seeks a bullock order (Bullock v. London General Omnibus Company (1907) 1 KB 264) requiring the Co-operative to indemnify it against the costs it is required to pay the insurer. Such an order may be made where the costs in question have been reasonably and properly incurred by a plaintiff as between him and an unsuccessful defendant: Johnsons Tyne Foundry Pty. Ltd. v. Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544, at p 572; Altamura v. Victorian Railways Commissioners (1974) VR 33. The making of such an order lies within the discretion of the Court. Although, in the Full Court, Norwest succeeded in its action against the Co-operative, their Honours refused to order the latter to indemnify the former against the costs of the insurer. With all respect, we do not think the Court erred in the exercise of its discretion. Norwest sued the insurer on the insurance policy. It was a straightforward action which was not interdependent with or in any real sense alternative to the claim against the Co-operative.

15. It remains to consider Norwest's appeal from the Full Court's affirmation of the trial judge's dismissal of its claim against Bain Dawes. In this regard, Mr. McCusker argues that the broker, as agent for Norwest, failed to take all reasonable steps to satisfy itself that the insurance cover sought by Norwest would be effective. In his submission, two circumstances in particular point to the existence of a duty either to inquire specifically as to whether the Sonoma was under survey or to draw attention to the exclusion clause. The first of those circumstances is that the proposal form itself contains no warning of the relevance of a current survey certificate to effective insurance. The second is that the proposal form as submitted should on perusal have raised a question as to whether the vessel was in survey because of the answer "1973" given to the question "Date of last hull survey".

16. The resolution of an issue of this kind will always depend upon the circumstances of the particular case. This case illustrates the importance of the manner in which the insurance is secured. If Mr. Matthews had consulted Bain Dawes directly, the submissions advanced by Mr. McCusker would exert great force. The decision of the Court of Appeal in McNealy v. The Pennine Insurance Co. Ltd. (1978) 2 Lloyd's Rep 18, upon which he relied, would be most persuasive. But see, also, Fanhaven Pty. Ltd. v. Bain Dawes Northern Pty. Ltd. (1982) 2 NSWLR 57. However, Mr. Matthews did not have any personal contact with Bain Dawes. He did not even know of its role in the arrangement of the insurance for the Sonoma. He consulted the Co-operative of which Norwest was a member. The Co-operative then took steps to have the Sonoma covered under a fleet policy which already covered the fishing vessels of approximately one hundred of its members. This policy had been negotiated with the insurer by the Co-operative in conjunction with Bain Dawes. There was a recognized system. A member would approach the Co-operative for insurance and would complete the proposal form. The form would then be forwarded by the Co-operative to Bain Dawes which would in turn send it on to the insurer. The exclusion clause was an important feature of the policy and the Co-operative regularly stressed its importance to the members. In these circumstances, we think it was reasonable for Bain Dawes to proceed on the basis that the Co-operative in the performance of its role of caring for its members would have made any specific inquiry that was considered necessary in a particular case and that it was sufficient for it simply to act as an intermediary between the Co-operative and the insurer consistently with any specific instructions received from the former. The fact that an officer of Bain Dawes telephoned Norwest's banker to inform him that the Sonoma was covered is immaterial to this question. That telephone call was made at the express request of the Co-operative at a time when Bain Dawes, without seeing the proposal form, had arranged temporary cover as instructed. In all the circumstances Bain Dawes was not in breach of its duty to Norwest.

17. We would dismiss both the appeal by the Co-operative and the appeal by Norwest.

BRENNAN J. The fishing vessel "Sonoma" was destroyed by fire at her berth at the Cossack Wharf in Port Walcott on 26 May 1975. At that time, her name was included in a schedule to a policy of marine insurance issued by the New Zealand Insurance Co.Ltd. ("the insurer") to the appellant ("the Co-op"). The insurance enured for the benefit both of the Co-op and of "the Name and Names of all and every other Person or Persons to whom the same doth, may, or shall appertain". An exclusion contained in the policy relieved the insurer of liability if the loss was due to a casualty occurring when an insured vessel did not possess "a current Certificate required by the Western Australian Harbour and Light Department". The Sonoma's last Survey Certificate - the certificate required by the Department - had expired on 15 March 1974, and she was not eligible for a renewed certificate until satisfactory surveys of her hull, her machinery and safety equipment and her radio had been completed. The surveys of the hull and radio had been satisfactorily completed by 7 January 1975, but the survey of the machinery and safety equipment had not been completed when she was lost. An extension of the policy to cover the "Sonoma" had been issued on 5 May 1975 with effect from 15 April 1975. The extension contained a warranty "H. & L. Department Survey and Manning". After the vessel was destroyed the insurer deleted the "Sonoma" from the policy as from 15 April 1975 on the ground that the vessel was "not in possession of Harbour and Lights Survey and thus unacceptable as commercial hull risk". The premium charged for extending the policy to include the "Sonoma" was then refunded.

2. Norwest Refrigeration Services Pty.Ltd. ("Norwest") was the owner of the "Sonoma". Mr Matthews was its managing director and principal shareholder. He was the skipper of the "Sonoma". Norwest had become a member of the Co-op and had been advanced money to slip and repair the vessel. Repairs were carried out at Geraldton on the Co-op's slip where the hull survey was completed. Then Mr Matthews decided to take the "Sonoma" from Geraldton to Port Walcott and have her machinery and safety equipment survey completed there. He arranged with Mr Fred Connell, the business manager of the Co-op at Geraldton, that the catch for the forthcoming season would be sold to the Co-op at its factory at Port Walcott.

3. Norwest's bank manager, Mr Thomas, had been pressing Mr Matthews to insure the vessel. After the vessel arrived at Port Walcott, Mr Matthews approached Mr Beau Connell, the manager of the Co-op factory in that area, about insurance. Mr Connell told him that the Co-op offered facilities to shareholder members to obtain insurance cover at a reduced premium. Mr Matthews then rang Mr Murray, the office manager of the Co-op at Geraldton, and told him that he would like to have the "Sonoma" insured forthwith. Mr Murray replied: "There is no problem whatsoever", and promised to forward a proposal form. Mr Matthews did not ask and was not told what arrangements for insurance the Co-op could make. Indeed, he thought that the Co-op might be the insurer. The cover which Mr Murray had in mind must have been the Co-op's fleet policy which the second respondent, Bain Dawes (W.A.) Pty.Ltd. ("the broker"), had negotiated with the insurer. About 100 vessels or thereabouts were insured under the fleet policy by members of the Co-op. Mr Murray did not enquire whether the vessel was in survey or whether a Survey Certificate was current, but he sent by post a proposal form for insurance. The form did not contain the name of an insurer or of an insurance broker. In fact it had been devised by the broker in consultation with the insurer for use outside Western Australia. Nevertheless it was the form used by members of the Co-op seeking insurance of their fishing vessels under the fleet policy.

4. The proposal form contained the question "Date last hull survey" and stated: "(Copy of Survey Report should be attached to this proposal)". This part of the form was not appropriate for Western Australia. In particular, it did not enquire as to the possession of a current Survey Certificate required by the Harbour and Light Department. However, in answer to the question "1973" was written, and a photocopy of the expired Survey Certificate issued by the Harbour and Light Department was attached (although it was not in fact a report on a survey). The last hull survey had, of course, taken place at Geraldton in January 1975 but that survey had not become the subject of a Survey Certificate. The proposal form contained an acknowledgment that it should be the basis of the contract between the insurer and the proposer and an undertaking to accept the insurer's policy subject to the terms and conditions contained therein. Mr Matthews signed the proposal form on 14 or 15 April 1975. At that time, not being aware of the fleet policy, he did not know that it contained a provision which excluded the insurer's liability unless the "Sonoma" possessed a current Survey Certificate. He returned the completed form to the Co-op with a note asking the Co-op to "organise" a cover note.

5. When the proposal reached Mr Murray, he forwarded it to the broker under cover of a letter which contained no information about the vessel save that "the client states that his vessel is not moored in the creek at Roebourne", a matter relevant to the excess to be carried by the insured. Mr Murray did not forward the photocopy of the expired certificate to the broker. The broker was not informed of the existence of the expired certificate or of its terms. The photocopy was returned to Mr Matthews. In the meantime, the Co-op had telephoned the broker asking that cover be obtained for the "Sonoma" and that Mr Thomas be informed as soon as cover was obtained. The broker rightly understood that the Co-op intended the "Sonoma" to be covered under the fleet policy. Mr Loader, the broker's manager, arranged by telephone for a cover note and confirmed to Mr Thomas that the "Sonoma" was held covered. Subsequently Mr Thomas passed on this information to Mr Matthews.

6. After the broker received the proposal form, it was forwarded together with proposal forms in respect of other vessels to the insurer, requesting extensions of the Co-op's policy to include the respective vessels. The insurer extended the fleet policy to include the "Sonoma", charging a higher premium than that charged in respect of other vessels covered by the policy because the insurer, having had an earlier claim in respect of the "Sonoma", thought it a greater risk than normal. The Co-op objected to the discriminatory premium, but it paid the premium to the broker. The Co-op debited Norwest's account with the amount of the premium without specifying any particulars of the insurance effected.

7. Mr Matthews knew nothing of the Co-op's dealings with the broker. However, his mandate to the Co-op had been sufficiently broad to authorize the Co-op to employ a broker to obtain insurance cover. Having regard to the terms of the fleet policy and the completed proposal form and the transmission of the proposal form by the Co-op, it must have been manifest to the broker that the Co-op was acting as agent for Norwest as well as on its own behalf in employing the broker to seek an extension of the fleet policy to include the "Sonoma". The broker and Norwest were brought into a contractual relationship which imposed on the broker a duty of care in seeking an extension of the fleet policy (see Claude R Ogden v. Reliance Fire Sprinkler Co. (1973) 2 NSWLR 7, at p 30; Atkinson v. South British Insurance (1968) NZLR 45, at pp 50-51). It owed that duty not only to the Co-op but also to Norwest, for both became clients of the broker: see Kitchen v. Royal Air Force Association (1958) 1 WLR 563. The broker did not make any enquiry of the Co-op or of Norwest to ascertain whether the "Sonoma" was in survey or whether a Survey Certificate was current.

8. After the "Sonoma" was lost and the insurer cancelled the extension of the policy, Norwest sued the insurer, the broker and the Co-op, seeking to recover the sum of $84,000. That was the amount of the cover sought in the proposal form and the amount stated in the extension of the policy issued by the insurer on 5 May 1975. Norwest sued the insurer on the policy and in the alternative it claimed $84,000 damages against either the broker or the Co-op as damages for breach of contract or as damages for negligence. The matter came on for hearing before Mr Commissioner Pidgeon (as he then was) in the Supreme Court of Western Australia, who dismissed Norwest's claims against each defendant. Norwest did not appeal against the exoneration of the insurer, but it appealed to the Full Court against the dismissal of the claims for damages. The Full Court allowed Norwest's appeal against the Co-op but dismissed its appeal against the broker. The Co-op appeals against the judgment pronounced against it; Norwest appeals against the dismissal of its appeal against the broker and it seeks an enlargement of the damages and of the order for costs against the Co-op. There are no third party proceedings between the Co-op and the broker.

9. I see no evidence of any contract between Norwest and the Co-op with respect to the obtaining of insurance. Clearly the Co-op did not contract that it would insure the "Sonoma" or that it would obtain insurance at all events. The Co-op did no more than render a gratuitous service to Norwest as one of its members. It was not carrying on a business of insurance broking. Had it been carrying on such a business it would have become bound contractually to Norwest though its remuneration would have been derived from commissions paid by the insurer (cf. Great Western Insurance v. Cunliffe (1874) LR 9 ChApp 525). There is no evidence of a contract between the Co-op and Norwest requiring the Co-op to render the service of arranging insurance for the "Sonoma".

10. Norwest's request of the Co-op to arrange insurance for the "Sonoma" following upon the Co-op's advice that it offered facilities to its shareholders to obtain insurance establishes no more than a gratuitous agency to arrange the insurance requested. Nevertheless, in carrying out its commission to arrange the cover requested, the Co-op was under a duty of care (see Wilkinson v. Coverdale (1793) 1 Esp 75 (170 ER 284)). It was bound to exercise at least the same care as a reasonably careful man of business would have exercised in his own affairs (Gomer v. Pitt and Scott (1922) 12 LlLR 115, at p 116), but it was not an insurance broker and it was not under a duty to exercise that degree of skill and competence which a broker holds himself out as possessing (cf. per Lord Diplock in Mutual Life and Citizens' Assurance Co.Ltd. v. Evatt (1971) AC 793, at p 803). The first question is whether the Co-op failed to perform its duty.

11. It took no special skill or competence for the Co-op to know that the fleet policy gave no effective cover to vessels which did not possess a current Survey Certificate. Indeed Mr Fred Connell was accustomed to reminding the members of the Co-op of the need to maintain current Survey Certificates. It took no special competence for Mr Murray to enquire whether the "Sonoma" possessed a current Survey Certificate. As Mr Murray was not called to give evidence, it is unknown whether he appreciated the significance of the expired Survey Certificate which Mr Matthews had sent to him. In the absence of any explanation from him, the proper inference to draw is that he was negligent in failing to appreciate that the "Sonoma" was not possessed of a current Survey Certificate. Had he appreciated that fact, it should have been clear to him that Mr Matthews' commission to arrange insurance could not be carried out by seeking an extension of the fleet policy to include the "Sonoma". Yet Mr Murray persisted in that course, failing to advise Mr Matthews that the Co-op could not obtain effective insurance of the "Sonoma" by that means. Once Mr Murray became aware or ought to have become aware that effective insurance could not be obtained by seeking an extension of the fleet policy, he (as the officer upon whom the performance of the Co-op's duty had devolved) ought to have told Mr Matthews of the Co-op's inability to obtain the cover requested. There is no ground for exempting a gratuitous agent from such a duty once he enters upon the carrying out of the commission entrusted to him and knows or ought to know that he cannot fulfil it. If an agent does not promptly advise his principal of a failure to obtain the insurance sought "he deprives the other of any opportunity of applying elsewhere to procure the insurance" (per Ashhurst J. in Smith v. Lascelles (1788) 2 TR 187, at p 188 (100 ER 101, at p 102)). The duty of the agent to give his principal an opportunity of applying elsewhere for cover is implicit in the agent's undertaking of the commission to obtain insurance. In Callander v. Oelrichs [1838] EngR 915; (1838) 5 Bing (NC) 58 (132 ER 1026), Bosanquet J. said (at p 65 (p.1029)):

" The jury were warranted in concluding, that if
the Defendants were to effect an insurance upon
the terms in question, they undertook to give
notice in case of failure: that undertaking
arises out of the nature of the case, and the
relation in which the parties stood to each
other: and according to the principle laid down
in Smith v. Lascelles if a merchant is led, from
previous transactions, to expect that his
correspondent will effect an insurance, he has a
right to rely on his discharging that duty,
unless he receives a letter to the contrary.
Whether that expectation arises from previous
dealings, or from an undertaking to insure in the
particular instance, can make no difference; and
Buller J. says, 'Where the merchant abroad has no
effects in the hands of his correspondent, yet,
if the course of dealing between them be such,
that the one has been used to send orders for
insurance, and the other to comply with them, the
former has a right to expect that his orders for
insurance will be obeyed, unless the latter give
him notice to discontinue that course of
dealing.'"

Although Callander v. Oelrichs was not a case of gratuitous agency, the scope of the undertaking which gave rise to the duty in that case is no different from the scope of the undertaking given by an agent who undertakes gratuitously a commission to arrange insurance. There can be no difference between the two cases once the person who has undertaken to arrange insurance knows or ought to know that he cannot fulfil the commission. No special skill or competence is then required either to advise the principal that the insurance requested cannot be obtained or to appreciate the consequences of a failure promptly to advise of that fact. The duty of the Co-op to advise may therefore be stated as Scrutton L.J. stated the duty of a contractual agent in Hood v. West End Motor Car Packing Company (1917) 2 KB 38, at p 47:

" If he is unable to procure the policy, he must at
once inform his principal of his inability to do
so."

12. In my opinion, the Co-op failed in its duty to advise Mr Matthews that it could not arrange effective cover. Thereby, the opportunity to satisfy the conditions of the fleet policy or to apply elsewhere for effective insurance was lost. In my opinion, the Co-op is liable to Norwest for such damages as Norwest may have suffered as the result of losing one or other of those opportunities. Before turning to the proof of damages against the Co-op, it is convenient to consider Norwest's claim against the broker.

13. The standard of care expected of a broker is higher than the standard expected of one who does not hold himself out as possessing a special skill. Those who, like insurance brokers, hold themselves out as possessing special skill and who invite custom to their business on that account cannot complain if, in the absence of disclaimer, they are held liable for the consequences of failing to exercise that skill in carrying out a customer's commission: see Hedley Byrne & Co.Ltd. v. Heller and Partners Ltd. [1963] UKHL 4; (1964) AC 465, per Lord Morris of Borth-y-Gest at pp 502- 503; Cherry Ltd. v. Allied Insurance (1978) 1 Lloyd's Rep 274, at p 280. But the duty of care owed by a broker relates to the doing of what the broker is employed to do. In this case, the broker carried out precisely the instruction given to it by Norwest's agent: it obtained an extension of the fleet policy to include the "Sonoma". As it was not given the photocopy of the expired certificate, the broker did not know either that the "Sonoma" did not possess a current Survey Certificate or that she was out of survey. Nor did the broker have any grounds for suspecting that that was the position. The proposal form stated that the last hull survey was in 1973, but hull surveys were known to be required every two years and there was no reason for the broker to suspect that the vessel was not still in survey in April 1975. Both the trial judge and the Full Court found that there was no negligence in the broker's ignorance and lack of suspicion of the facts which made the extension of the fleet policy an ineffective means of insuring the "Sonoma". I would respectfully agree.

14. The broker was not asked to advise whether an extension of the fleet policy was an effective means of obtaining cover for the "Sonoma". If it had been asked for that advice, or if it had been employed to obtain whatever cover was appropriate for the "Sonoma", it may have been necessary for the broker to enquire whether the "Sonoma" was insurable under the fleet policy (cf. McNealy v. The Pennine Insurance Co.Ltd. (1978) 2 LlLR 18; Fanhaven Pty Ltd v. Bain Dawes Northern Pty Ltd (1982) 2 NSWLR 57). That was not what the broker was employed to do. In the absence of acceptable evidence that a broker of reasonable skill and competence would, in the circumstances of the present case, have sought confirmation that the "Sonoma" was still in survey and possessed of a current Survey Certificate, there was no basis on which the Court could have found that such an enquiry should have been made. The Full Court was right to find that the Co-op was negligent and that the broker was not.

15. The finding in favour of Norwest against the Co-op led the Full Court to an assessment of Norwest's damages. Their Honours assessed damages in the sum of $81,468.14 being the sum for which cover was sought and for which the extension of the fleet policy provided ($84,000) less the premium charged ($2,531.86). The Co-op submits that that assessment exceeded the value of what Norwest lost in consequence of the Co-op's negligence. The Co-op's negligence was not the cause of Norwest losing cover under the fleet policy; that cover was lost by the "Sonoma" being out of survey and without a Survey Certificate. The Co-op's negligent failure to inform Mr Matthews that it had not obtained effective insurance for the "Sonoma" caused Norwest to lose an opportunity of applying elsewhere to obtain a policy which would have given it effective cover pending the obtaining of a Survey Certificate, or an opportunity of trying to have the machinery and equipment survey completed and a Survey Certificate issued so as to satisfy the conditions of the fleet policy. But the damage which Norwest suffered was the absence of effective insurance, at the time when the "Sonoma" was lost. The onus was on Norwest to prove that that damage was caused by the Co-op's negligence. It had to prove that it would have had effective insurance at the time but for the loss of one of the opportunities mentioned. It is one thing to say that it lost the opportunity to apply elsewhere for a policy, it is another thing to say that Norwest would have applied and would have obtained effective insurance before the "Sonoma" was lost. Again, it is one thing to say it lost an opportunity to have the machinery and equipment survey completed, a Survey Certificate issued and the conditions of the fleet policy satisfied before the "Sonoma" was lost, and another thing to say that those steps could and would have been taken. Before Norwest's cause of action was established it had to prove that it could have and that it would have taken steps which would have resulted in effective insurance of the "Sonoma" at the time of her loss.

16. The present case is not similar to Chaplin v. Hicks (1911) 2 KB 786 where the question was the value of a contractual right "to receive consideration ... in the distributive award of definite and material benefits" (per Dixon and McTiernan JJ. in Fink v. Fink [1946] HCA 54; (1946) 74 CLR 127, at p 143). In Chaplin v. Hicks, though the value of the contractual right could not be proved with any show of accuracy because of the contingencies affecting the plaintiff's chances of favourable consideration, the court held that the jury was entitled to assess damages in an amount more than a nominal sum. In Fink v. Fink, the contingencies were of such a different order that it was impossible to say that any assessable loss resulted from the breach of contract. But in the present case, there is no contractual right to be valued either in a substantial sum or in a nominal amount. The question is whether a specific loss sustained by Norwest - the absence of effective insurance of the "Sonoma" when she was lost - was caused by the Co-op's negligence. The immediate opportunities which Norwest lost when it was not informed of the Co-op's failure to obtain effective insurance are not themselves heads of damage to be valued as though they were compensable lost rights. They are links in an alleged chain of causation. The other links in the chain were the fact that Norwest could have obtained effective insurance elsewhere or could have satisfied the conditions of the fleet policy and the fact that Norwest would have adopted one of those courses to obtain effective insurance. A failure to prove either of those links in the chain did not mean that Norwest could recover diminished damages for loss of a chance to obtain insurance; it meant failure to establish the cause of action (cf. Sykes v. Midland Bank Executor Co. (1971) 1 QB 113 per Salmon L.J., at p 130).

17. Norwest submitted that once the Co-op was proved to have been negligent, the onus of proving the non-availability of effective insurance rested on the Co-op. That submission is contrary to principle and cannot be accepted, though some observations in Fine's Flowers Ltd. v. General Accident Assurance Co. of Canada (1977) 81 DLR (3d) 139, at p 150, tend to support it. The onus of proving its damages remained throughout on Norwest. Did it discharge that onus?

It is implicit in the Full Court's judgment that Norwest

proved its case against the Co-op, though the Full Court's findings on damages are cryptically expressed. Their Honours stated that they "assessed the damages payable by the (Co-op) at the total amount of the insured loss" and deducted "the premium that would have been paid". Wickham J. with the concurrence of Olney J. found, upon somewhat exiguous proof, that "alternative satisfactory cover" could have been obtained "for a vessel tied up at wharf awaiting survey as this one was". Wallace J. came to the same conclusion. Their Honours said that if Norwest had obtained full cover when the "Sonoma" was out of survey, the premium might have been more than the premium actually charged under the fleet policy, but they thought it "equally likely that (Norwest), had it known the position, would have obtained a merely limited cover for risks while at wharf pending survey and that the premium for this might have been less". Accordingly they thought "that we have sufficient to justify settling the damages at ... the sum of $81,468.14". I entertain some doubt whether their Honours addressed the questions whether Norwest could have and would have taken either of the courses that might have been open to it to obtain effective insurance. If their Honours did not address these questions, the matter must be remitted to them or this Court must itself make the necessary findings. The Full Court's findings were made on the printed record and, as this Court is in as good a position as the Full Court to find facts relevant to proof of damage, it is desirable to make the necessary findings.

18. There was direct evidence of Mr Matthews' willingness to take one or other or both of the protective courses open to Norwest. He said that if he had learnt that the Co-op had not effected the insurance which he had requested he would have "immediately ... fulfilled the obligation required by the bank to cover it elsewhere". It was conceded that an insurer could have been found to insure a vessel laid up awaiting survey and tied to a wharf, as the Full Court had found. To forestall a finding that Norwest would have taken that cover, the Co-op submitted that there was no evidence that an insurer could be found to insure the "Sonoma" if the "Sonoma" unlawfully put to sea without a Survey Certificate as she did between 12 and 15 May 1975. But the fact that the "Sonoma" put to sea on that occasion furnishes no ground for inferring that Mr Matthews would have taken her to sea if Norwest had been constrained to accept a policy which insured the "Sonoma" only when she was laid up awaiting survey and tied to a wharf. That question was not raised at the trial, and there is no reason to assume that Norwest would have knowingly breached the conditions of any policy that it might have obtained or, for that matter, that the insurer would necessarily have repudiated liability for the loss of the "Sonoma" on that account. There is no evidence touching this aspect of the case from which an inference against Norwest can be drawn. Indeed, the evidence as to Mr Matthews' willingness to obtain a Survey Certificate tended in favour of a finding that Norwest would have done what was required to maintain effective insurance.

19. When Mr Matthews was asked in evidence what he would have done if he had been told that the relevant policy contained a condition that Harbour and Light certification was required, he answered: "I would have automatically gone back to the Harbour and Light ... to rectify it or get some type of documentation from them, whatever the insurance company required". There was no direct evidence that a current Survey Certificate could have been obtained before the "Sonoma" was lost but it seems that the chief delaying factor would have been the rectification of some defect in the hydraulic system, which might well have been rectified in the five or six weeks available before the loss occurred. In my opinion, though the material is extremely slender, the evidence in the printed record and the concession made warrant a finding on the balance of probabilities that Norwest would have been indemnified for the loss of the "Sonoma" under some policy of insurance if it had been promptly informed by the Co-op that it had not obtained effective insurance as requested by Mr Matthews. That finding, in conjunction with evidence of Mr Matthews' desire - under pressure from Mr Thomas - to obtain cover to the extent of $84,000, warrants a finding that a policy for that amount would have been obtained. That sum is the starting point for the assessment of Norwest's damages. The Co-op did not argue that the value of the "Sonoma" when she was lost was less than $84,000. From this sum, the premium that an insurer would have charged for the notional policy had to be deducted. The amount of such a premium was not clearly proved. It is reasonable to assume that Norwest would have sought a port policy giving temporary cover while the "Sonoma" was tied up at the wharf awaiting the issue of a Survey Certificate. Though an insurer would not have fixed a premium at less than the premium charged under the fleet policy merely because the "Sonoma", tied up at a wharf, would not have been exposed to the perils of the sea, I agree with the Full Court that, in the light of all the evidence, it is reasonable to assume that the premium would not have been more than the premium charged under the fleet policy. That hypothetical premium had to be deducted from the $84,000. The Co-op did not seek to bring into the calculation of the damages other possible deductions: the profit from the fishing done by the "Sonoma" in May 1975 - which she would not have undertaken if she had been tied up at a wharf - or the notional cost of having the survey completed and a Survey Certificate issued before the "Sonoma" was lost. It follows that, in my opinion, findings which support the Full Court's assessment of damages should be made and the assessment affirmed.

20. Norwest seeks to enhance the judgment in its favour against the Co-op in two respects: it seeks an increase in the quantum of damages representing interest on the sum of $81,468.14, and it seeks a Bullock order against the Co-op in respect of the costs it has been ordered to pay the insurer and the broker. The claim in respect of interest is not a claim for interest on the damages awarded; it is in truth an appeal against the assessment of damages on the ground that the Court adopted a wrong measure of Norwest's damages. The true measure is said to be the amount that Norwest would have been entitled to recover against an insurer in respect of the "Sonoma's" loss. In an action against an insurer, interest could have been recovered and - so the argument runs - damages against the Co-op must be assessed so as to reflect that interest. There is no evidence to suggest that an insurer who was liable to indemnify Norwest for the loss of the "Sonoma" would not have adjusted the loss and settled the claim forthwith upon the occurrence of the loss without incurring any liability for interest in the net sum of $81,468.14. And so the factual foundation of the argument falls away. Omitting consideration of possible deductions in addition to the premium, no error of principle appears in an award of $81,468.14 damages.

21. Norwest's appeal against the refusal by the Full Court of a Bullock order for the costs to be paid to the broker and insurer is an appeal against the exercise of the Court's discretion (cf. Johnsons Tyne Foundry Pty.Ltd. v. Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544). In my opinion, Norwest has failed to show that the Full Court's exercise of its discretion is so unreasonable or unjust as to require this Court to substitute its own discretionary order. If it had appeared that the Co-op had induced Norwest to sue the broker by suggesting in some way that the broker had been negligent, a Bullock order would properly have been made in respect of the costs to be paid to the broker. But a factor of that kind was not present, and in my view the order made by the Full Court should not be disturbed.

22. I would therefore dismiss both the Co-op's appeal and Norwest's appeal with costs against those parties respectively.

ORDER

Appeals dismissed with costs.