Federal Court of Australia

Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206

File number(s):

NSD 132 of 2021, NSD 133 of 2021

NSD 134 of 2021, NSD 135 of 2021

NSD 136 of 2021, NSD 137 of 2021

NSD 138 of 2021, NSD 144 of 2021

NSD 145 of 2021, NSD 308 of 2021

Judgment of:

JAGOT J

Date of judgment:

8 October 2021

Catchwords:

INSURANCE – business interruption insurance – COVID-19 – test cases – pandemic cover – hybrid clause – prevention of access clause – disease clause – catastrophe clause – competent government or statutory authority – outbreak – occurrence – discovery of an organism – at the premises – within a specified radius of the premises – by order of authority – competent authority – as a result of order of an authority – order – insured peril – causation – proximate cause – uninsured peril – same underlying cause or fortuity – interruption or interference – loss – adjustments – trends in the business – third party payment – indemnity for loss – reduction of loss – interest – utmost good faith.

STATUTORY INTERPRETATION – s 61A Property Law Act 1958 (Vic) – application to Acts of the Commonwealth – whether Biosecurity Act 2015 (Cth) a re-enactment with modifications of Quarantine Act 1908 (Cth) – s 61A applies to Victorian Acts only Biosecurity Act 2015 (Cth) not a re-enactment with modifications of Quarantine Act 1908 (Cth).

STATUTORY INTERPRETATION – s 54(1) of the Insurance Contracts Act 1984 (Cth) – meaning of “some act of the insured or of some other person” – requires some act of a person who has a relevant connection to the insured or the policy Director of Human Biosecurity is a stranger to the policy under the Biosecurity Act 2015 (Cth) Director of Human Biosecurity is a stranger to the policy and the insured – s 54(1) does not apply.

Legislation:

Biosecurity Act 2015 (Cth) ss 42, 51, 475, 476, 477(1)

Biosecurity (Consequential Amendments and Transitional Provisions) Act 2015 (Cth) Sch 1

Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth) ss 5, 6

Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth)

Coronavirus Economic Response Package Omnibus (Measures No 2) Act 2020 (Cth)

Fair Work Act 2009 (Cth) s 789GA

Insurance Contracts Act 1984 (Cth) ss 13(1), 14(1), 37, 54, 57, 71

Judiciary Act 1903 (Cth) s 79

National Health Security Act 2007 (Cth) s 11

Quarantine Act 1908 (Cth) ss 2B(1), 2B(2), 4, 13(1)(ca), 35A

Appropriation Bill (No. 5) 2019-20 (Cth)

Appropriation Bill (No. 6) 2019-20 (Cth)

Biosecurity (Consequential Amendments and Transitional Provisions) Bill 2014 (Cth)

Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020 (Cth)

Explanatory Memorandum, Biosecurity Bill 2014 (Cth)

Explanatory Memorandum, Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Bill 2020 (Cth)

Government Sector Finance Act 2018 (NSW) s 5.7

Health Practitioner Regulation National Law (NSW) ss 11, 23-25, 31, 31A, 32, 35, 41, 41B-41D

Public Health Act 2010 (NSW) ss 7, 81, Sch 2

Human Rights Act 2019 (Qld) s 38

Public Health Act 2005 (Qld) ss 64, 70, 315, 319, 362B, 362D

Public Health Regulation 2005 (Qld)

University of Queensland Act 1998 (Qld) s 32

Acts Interpretation Act 1915 (SA)

Emergency Management Act 2004 (SA) ss 3, 23(1), 24A, 25

South Australian Public Health Act 2011 (SA) ss 63, 87, 90

Acts Interpretation Act 1890 (Vic) s 27(1)

COVID-19 Omnibus (Emergency Measures) Act 2020 (Vic) s 15(4)

COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (Vic)

Interpretation of Legislation Act 1984 (Vic) ss 4(4), 16, 17, 38

Property Law Act 1958 (Vic) s 61A

Public Health and Wellbeing Act 2008 (Vic) ss 198, 199, 200(1)(b), 200(1)(d)

Public Health and Wellbeing Regulations 2019 (Vic)

Cases cited:

Antico v Heath Fielding Australia Pty Ltd [1997] HCA 35; (1996) 188 CLR 652

Anti-Doping Rule Violation Panel v XZTT [2013] FCAFC 95; (2013) 214 FCR 40

Australian Casualty Co Ltd v Federico [1986] HCA 32; (1986) 160 CLR 513

Australian Pipe & Tube Pty Ltd v QBE Insurance (Australia) Limited (No 2) [2018] FCA 1450

Australian Securities and Investments Commissioner v TAL Life Limited (No 2) [2021] FCA 193; (2021) 389 ALR 128

Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026; [1996] 3 All ER 517

Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 AC 266

Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2013] WASC 386

Board of Trade v Hain Steamship Co Ltd [1929] AC 534

Bonython v Commonwealth [1951] AC 201

Browne v Dunn (1893) 6 R 67

C E Heath Casualty & General Insurance v Grey (1993) 32 NSWLR 25

Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 423; (2006) 14 ANZ Ins Cas 61-700

CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1

Chapmans Ltd v Australian Stock Exchange Ltd [1996] FCA 474; (1996) 67 FCR 402

Charter Reinsurance Co Ltd v Fagan [1997] AC 313

Commissioner of Taxation (NSW) v Mutton (1988) NSWLR 104

Commonwealth of Australia v Aurora Energy Pty Ltd [2006] FCAFC 148; (2006) 235 ALR 644

Coxe v Employers’ Liability Assurance Corporation [1916] 2 KB 629

Dalby Bio-Refinery Ltd v Allianz Australia Insurance Limited [2019] FCAFC 85

Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500

Day v Adam; Ex parte Day [1989] 2 Qd R 9

DRJ v Commissioner of Victims Rights (No 2) (2020) 103 NSWLR 692; [2020] NSWCA 242

East End Real Estate Pty Ltd v CE Health Casualty & General Insurance Ltd (1991) 25 NSWLR 400

Eichmann v Commissioner of Taxation [2020] FCAFC 155

FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd [2001] HCA 38; (2001) 204 CLR 641

Federal Commissioner of Taxation v Silverton Tramway Company Ltd [1953] HCA 79; (1953) 88 CLR 559

Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448 (Comm)

Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1

George Hudson Ltd v Australian Timber Workers’ Union (1923) 32 CLR 413

Glynn v Margetson & Co [1893] AC 351

Government Insurance Office of New South Wales v RJ Green & Lloyd Pty Limited (1965) 114 CLR 437

Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53

Greentree v FAI General Instance [1998] NSWSC 544; (1998) 44 NSWLR 706

Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd [2002] NSWSC 1006; (2003) 12 ANZ Ins Cas 61-553

Hannover Life Re of Australasia Ltd v Farm Plan Pty Ltd [2001] FCA 796

HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296

Health Care Complaints Commission v Reid [2018] NSWCATOD 162

Hill v Villawood Sheet Metal Pty Ltd [1970] 2 NSWR 434

HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342

Hyper Trust Limited t/as the Leopards Town Inn & Ors v FBD Insurance plc [2021] IEHC 78

Hyper Trust Limited t/as the Leopards Town Inn & Ors v FBD Insurance plc (No 2) [2021] IEHC 279

In re an Arbitration between Calf and the Sun Insurance Office [1920] 2 KB 366

In re Coleman’s Depositories Ltd and Life & Health Assurance Association [1907] 2 KB 798

Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (in liq) [2007] VSCA 223; (2007) 18 VR 528

Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24; (2004) 218 CLR 89

Jan de Nul (UK) Ltd v Axa Royale Belge [2002] EWCA Civ 209; [2001] 1 Lloyd’s Rep 583

Jennifer B Nguyen v Travelers Casualty Insurance Company of America, 2021 WL 2184878 (W.D. Wash. May 28, 2021)

Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282; [2012] 2 Qd R 337

Karlsson v Griffith University [2020] NSWCA 176; (2020) 103 NSWLR 131

Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622

Kooragang Cement Pty Ltd v Bates (1994) 35 NSWLR 452

Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited [2005] NSWCA 66; (2005) 13 ANZ Insurance Cases 61-643

Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207

Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350

Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126

Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126

Lojinska Plovidba v Transco Overseas Ltd (The Orjula) [1995] 2 Lloyds Rep 395

Margetson v Glynn [1892] 1 QB 337

Maxwell v Highway Hauliers Pty Ltd [2014] HCA 33; (2014) 252 CLR 590

McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579

McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402

Mitchell v Latrobe Regional Hospital [2016] VSCA 342; (2016) 51 VR 581

Munro Brice & Co v War Risks Association Ltd [1918] 2 KB 78

National Insurance Company of New Zealand Limited v Espange (1961) 105 CLR 569

Newcastle City Council v Royal Newcastle Hospital [1957] HCA 15; (1957) 96 CLR 493

Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCAFC 119

Orient-Express Hotels Ltd v Assicurazioni Generali SA [2010] Lloyd’s Rep IR 531

PMB Australia Ltd v MMI General Insurance Ltd & Ors [2002] QCA 361

Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV [2013] NSWCA 252; (2013) 302 ALR 732

Price v Spoor [2021] HCA 20; (2021) 95 ALJR 607

Promenade Investments Pty Ltd v State of New South Wales (1992) 26 NSWLR 203

Queensland Bulk Water Supply Authority t/as Seqwater v Rodriguez & Sons Pty Ltd [2021] NSWCA 206

R&B Directional Drilling Pty Ltd (in liq) v CGU Insurance (No 2) [2019] FCA 458; (2019) 369 ALR 137

Ralph Lauren Corporation v Factory Mutual Insurance Company, 2021 WL 1904739 (D.N.J. May 12, 2021)

Ranicar v Frigmobile Pty Ltd [1983] Tas R 113

Re Anti-Cancer Council of Victoria; Ex Parte State Public Services Federation [1992] HCA 53; (1992) 175 CLR 442

Re Bradley and Essex and Suffolk Accident Indemnity Society [1912] 1 KB 415

Re Zurich Australian Insurance Limited [1998] QSC 209; [1999] 2 Qd R 203

Renmark Hotel Inc v Federal Commissioner of Taxation [1949] HCA 7; (1949) 79 CLR 10

Reseck v Federal Commissioner of Taxation (1975) 133 CLR 45

Rizeq v Western Australia [2017] HCA 23; (2017) 262 CLR 1

Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228; (2020) 149 ACSR 484

Seery & Anor v John R Carr and Assoc (SCNSW, unrep, 3 November 1995)

Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340; (2017) 19 ANZ Ins Cas 62–158

Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907

Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [2020] FCAFC 137; (2020) 381 ALR 648

Teele v Federal Commissioner of Taxation (1940) 63 CLR 201

The Sun Fire Office v Hart (1889) 14 App Cas 98

The Trust Company (Nominees) Ltd v Banksia Securities Ltd (receivers and managers appointed) (in liquidation) [2016] VSCA 324

Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15; (2016) 239 FCR 12

Turner v York Motors Pty Ltd (1951) 85 CLR 55

Vero Insurance Pty Ltd v Australian Prestressing Services Pty Ltd [2013] NSWCA 181

Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; (2010) 240 CLR 444

Wayne Tank and Pump Co Ltd v Employers’ Liability Assurance Corporation [1974] QB 57

Western Australian Turf Club v Federal Commissioner of Taxation [1978] HCA 13; (1987) 139 CLR 288

Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522

Wonkana, Rockment, Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448 (Comm)

Woolworths Ltd v Lister [2004] NSWCA 292

WorkPac Pty Ltd v Rossato [2021] HCA 23

Worth v HDI Global Specialty SE [2021] NSWCA 185

XL Insurance Co SE v BNY Trust Company of Australia Limited [2019] NSWCA 215; (2019) 20 ANZ Insurance Cases 62-211

Yanner v Eaton [1999] HCA 53; (1999) 201 CLR 351

Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370; (2016) 93 NSWLR 561

Periodicals:

Davies M, “Proximate Cause in Insurance Law (1996) 7 ILJ 135

Division:

General Division

Registry:

New South Wales

National Practice Area:

Commercial and Corporations

Sub-area:

Commercial Contracts, Banking, Finance and Insurance

Number of paragraphs:

1152

Date of hearing:

6-15 September 2021

Counsel for the Applicant in NSD 132 of 2021:

Mr D Williams SC, Mr R Glover and Mr N Riordan

Solicitor for the Applicant in NSD 132 of 2021:

DLA Piper Australia    

Counsel for the Applicant in NSD 133 and 134 of 2021:

Mr I Jackman SC, Mr P Herzfeld SC and Mr J Entwistle

Solicitor for the Applicant in NSD 133 and 134 of 2021:

Allens

Counsel for the Applicant in NSD 135 and 136 of 2021:

Mr E Muston SC and Ms A Smith

Solicitor for the Applicant in NSD 135 and 136 of 2021:

Clyde & Co    

Counsel for the Applicant in NSD 137 and 138 of 2021:

Mr B Walker SC, Mr T Marskell and Mr HR Fielder

Solicitor for the Applicant in NSD 137 and 138 of 2021:

Wotton & Kearney Lawyers    

Counsel for the Applicant in NSD 144 and 145 of 2021:

Mr E Muston SC and Mr J Simpkins

Solicitor for the Applicant in NSD 144 and 145 of 2021:

Clyde & Co    

Counsel for the Respondents in NSD 132, 133, 134, 135, 136, 137, 144 and 145 of 2021:

Mr S Finch SC, Mr A Pomerenke QC, Mr D Wong

and Ms N Wootton

Solicitor for the Respondents in NSD 132, 133, 134, 135, 136, 137, 144 and 145 of 2021:

Clayton Utz    

Counsel for the Respondent in NSD 138 of 2021:

Mr AJH Morris QC, Mr VG Brennan and Mr B McGlade

Solicitor for the Respondent in NSD 138 of 2021:

Corney & Lind Lawyers    

Counsel for the Applicant in NSD 308 of 2021:

Mr I Pike SC and Mr T Boyle

Solicitor for the Applicant in NSD 308 of 2021:

Dentons

Counsel for the Respondent in NSD 308 of 2021:

Mr JP Slattery QC and Mr DF McAloon

Solicitor for the Respondent in NSD 308 of 2021:

Kelly Hazell Quill Lawyers    

Table of corrections

11 October 2021

In paragraph 88, the word “the” has been inserted in the fourth line after “I would also conclude that”, the word “he” has been replaced with the word “the” in the sixth line, and the word “sad” has been replaced with the word “said” in the seventh line.

11 October 2021

In paragraph 238, the subparagraph numbering has been changed from (4), (5), (6) to (1), (2), (3).

11 October 2021

In paragraph 288, the word “and” has been inserted in the second last line before “(d) accordingly, the risk to public health”.

11 October 2021

In paragraph 347, the word “lige” has been replaced with the word life” in the third line.

11 October 2021

In paragraph 380, the word “Gravel” has been replaced with the word Travel” in the last line.

11 October 2021

In paragraph 595, the word “applies” has been replaced with the word “apply” in the last line.

11 October 2021

In paragraph 616, the word “in” has been inserted in the fourth last line after “but the presence”.

11 October 2021

In paragraph 637, subparagraph (6), the word “other” has been inserted after “the 23 March 2020 direction but not the”.

11 October 2021

In paragraph 758, arrows have been inserted as follows: “an outbreak of COVID-19 within the radius caused the directions the directions caused other businesses to close the closure of the other businesses caused a precipitous decline in Visintin’s trade as a result of the precipitous decline in Visintin’s trade Ms Visintin closed

the Visintin premises.”

ORDERS

NSD 132 of 2021

BETWEEN:

SWISS RE INTERNATIONAL SE

Applicant

AND:

LCA MARRICKVILLE PTY LIMITED ACN 601 220 080    

Respondent

NSD 133 of 2021

AND BETWEEN:

INSURANCE AUSTRALIA LIMITED

Applicant

AND:

MERIDIAN TRAVEL (VIC) PTY LTD

Respondent

NSD 134 of 2021

AND BETWEEN:

INSURANCE AUSTRALIA LIMITED

Applicant

AND:

THE TAPHOUSE TOWNSVILLE PTY LTD    

Respondent

NSD 135 of 2021

AND BETWEEN:

ALLIANZ AUSTRALIA INSURANCE LIMITED

Applicant

AND:

MAYBERG PTY LTD    

Respondent

NSD 136 of 2021

AND BETWEEN:

ALLIANZ AUSTRALIA INSURANCE LIMITED

Applicant

AND:

THE STAGE SHOP PTY LTD (FORMERLY VISINTIN PTY LTD)

Respondent

NSD 137 of 2021

AND BETWEEN:

CHUBB INSURANCE AUSTRALIA LIMITED

Applicant

AND:

PHILIP WALDECK

Respondent

NSD 138 of 2021

AND BETWEEN:

CHUBB INSURANCE AUSTRALIA LIMITED

Applicant

AND:

MARKET FOODS PTY LTD

Respondent

NSD 144 of 2021

AND BETWEEN:

GUILD INSURANCE LIMITED

Applicant

AND:

GYM FRANCHISES AUSTRALIA PTY LTD

First Respondent

DOUGLAS REASON

Second Respondent

NSD 145 of 2021

AND BETWEEN:

GUILD INSURANCE LIMITED

Applicant

AND:

DR JASON MICHAEL (T/A ILLAWARRA PAEDIATRIC DENTISTRY)    

Respondent

NSD 308 of 2021

AND BETWEEN:

QBE INSURANCE (AUSTRALIA) LIMITED

Applicant

AND:

DAVID COYNE IN HIS CAPACITY AS LIQUIDATOR OF EDUCATIONAL WORLD TRAVEL PTY LTD ACN 006 888 179 (IN LIQUIDATION)

First Respondent

EDUCATIONAL WORLD TRAVEL PTY LTD ACN 006 888 179 (IN LIQUIDATION)

Second Respondent

order made by:

JAGOT J

DATE OF ORDER:

8 october 2021

THE COURT ORDERS THAT:

1.    The separate questions be answered as set out in the reasons for judgment in Swiss Re International Se v LCA Marrickville Pty Limited (Second COVID-19 insurance test cases) [2021] FCA 1206 published today (the judgment).

2.    In all proceedings other than NSD133/2021 (Insurance Australia v Meridian Travel), the parties confer and notify the chambers of Justice Jagot by 4.00pm on 12 October 2021 by email: (a) whether any party wishes to be heard further in respect of the making of declarations in each matter as proposed in the judgment, or (b) if not, the terms of any declaration and other orders the party proposes should be made.

3.    In proceeding NSD133/2021 (Insurance Australia v Meridian Travel), the parties confer and notify the chambers of Justice Jagot by 4.00pm on 12 October 2021 by email whether any further directions should be made in the proceeding before hearing of any appeal.

4.    Leave to appeal be granted to all parties in each proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    INTRODUCTION

[1]

2    COVID-19

[9]

3    GENERAL PRINCIPLES

[21]

3.1    Construction

[21]

3.2    Causation

[40]

3.3    Causation in FCA v Arch UKSC

[52]

3.4    Other important matters

[83]

3.4.1    Occurrence/outbreak and risk/threat

[83]

3.4.2    Role of an authority in hybrid clauses

[84]

3.4.3    Occurrence and outbreak

[89]

3.4.4    Common words in policies

[97]

4    THE PROVISIONS OF THE POLICIES

[98]

5    THE SECTION 61A ISSUE

[101]

5.1    Background

[101]

5.2    Proper law of the policies

[107]

5.3    Relevant facts

[114]

5.4    Discussion

[121]

5.4.1    The issues

[121]

5.4.2    Meaning of “an Act or a provision of an Act” in s 61A

[125]

5.4.3    Repeal and re-enactment?

[152]

5.4.4    The timing issue

[172]

5.4.5    Express contrary intention?

[174]

5.4.6    Effect of operation of s 61A

[176]

5.4.7    Conclusion

[180]

6    NSD132/2021: SWISS RE INTERNATIONAL V LCA MARRICKVILLE

[181]

6.1    Agreed background

[181]

6.2    Policy provisions - cover

[196]

6.3    Hybrid clause – 9.1.2.1 and 9.1.2.4

[199]

6.3.1    Introductory comments

[199]

6.3.2    The exclusion provision

[204]

6.3.3    Section 54 Insurance Contracts Act

[215]

6.3.4    Effect of exclusion in cl 9.1.2.1 on cll 9.1.2.5 and 9.1.2.6

[233]

6.3.5    Clauses 9.1.2.1 and 9.1.2.4

[255]

6.3.5.1    …“at the Situation”

[255]

6.3.5.2    Competent public authority

[256]

6.3.5.3    “…as a result of outbreak or discovery of likely to result in the occurrence

[257]

6.3.5.4    Closure or evacuation by order

[315]

6.3.6    Conclusions about cl 9.1.2.1

[326]

6.4    Clause 9.1.2.5

[331]

6.5    Clause 9.1.2.6

[341]

6.6    Answers to questions – cover

[355]

6.7    Policy provisions – causation, adjustment and basis of settlement

[362]

6.8    Causation, adjustment and basis of settlement

[363]

6.8.1    Causation and adjustment

[363]

6.8.2    Basis of settlement – amounts saved

[382]

6.8.2.1    JobKeeper

[386]

6.8.2.2    NSW Government grants

[405]

6.8.2.3    Rental waiver from landlord

[408]

6.8.2.4    Franchisor relief

[410]

6.9    Interest

[413]

6.10    Answers to questions – causation etc

[415]

6.11    Conclusions

[418]

7    NSD133/2021: INSURANCE AUSTRALIA V MERIDIAN TRAVEL

[422]

7.1    Agreed background

[422]

7.2    Policy provisions

[437]

7.3    Introductory comments

[439]

7.4    Clause 8(c) – the disease clause

[448]

7.5    Clause 8(d)(1) – the hybrid clause

[453]

7.6    Causation and adjustment

[478]

7.7    Third party payments

[506]

7.8    Interest

[515]

7.9    Answers to questions

[516]

7.10    Conclusions

[521]

8    NSD134/2021: INSURANCE AUSTRALIA V THE TAPHOUSE TOWNSVILLE

[523]

8.1    Agreed background

[523]

8.2    Policy provisions

[542]

8.3    Introductory comments

[544]

8.4    Other evidence

[558]

8.5    Clause 7 – prevention of access

[560]

8.5.1    Does cl 7 extend to diseases?

[560]

8.5.2    If cl 7 applies to diseases

[564]

8.5.2.1    A result of the threat of damage to persons within a 50 kilometre radius

[564]

8.5.2.2    Preventing or restricting access

[575]

8.6    Clause 8 – hybrid clause

[587]

8.6.1    As a result of

[587]

8.6.2    Outbreak?

[594]

8.6.3    Closing premises

[601]

8.7    Causation and adjustment

[606]

8.8    Third party payments

[619]

8.9    Interest

[630]

8.10    Answers to questions

[632]

8.11    Conclusions

[636]

9    NSD135/2021: ALLIANZ V MAYBERG

[638]

9.1    Agreed background

[638]

9.2    Policy provisions

[649]

9.3    Introductory comments

[653]

9.4    Clause 6ai – hybrid clause

[664]

9.5    Endorsement – prevention of access clause

[674]

9.6    Causation and adjustments

[683]

9.7    Third party payments

[690]

9.8    Interest

[695]

9.9    Answers to questions

[696]

9.10    Conclusions

[701]

10    NSD136/2021: ALLIANZ V THE STAGE SHOP (VISINTIN)

[703]

10.1    Agreed background

[703]

10.2    Policy provisions

[711]

10.3    Introductory comments

[714]

10.4    Clause 4(b) – a quasi-hybrid clause

[727]

10.5    Endorsement – prevention of access

[761]

10.6    Causation and adjustments

[774]

10.7    Third party payments

[778]

10.8    Interest

[784]

10.9    Answers to questions

[785]

10.10    Conclusions

[790]

11    NSD137/2021: CHUBB V WALDECK

[792]

11.1    Agreed background

[792]

11.2    Policy provisions

[806]

11.3    Introductory comments

[808]

11.4    Clauses 1(a) and (b) – hybrid clauses

[819]

11.5    Causation and adjustments

[835]

11.6    Interest

[841]

11.7    Answers to questions

[842]

11.8    Conclusions

[847]

12    NSD138/2021: CHUBB V MARKET FOODS

[850]

12.1    Agreed background

[850]

12.2    Other facts

[853]

12.3    Policy provisions

[859]

12.4    Introductory comments

[862]

12.5    Extension B item 1

[904]

12.6    Extension B – item 3

[926]

12.7    Extension B – item 4

[935]

12.8    Extension C

[937]

12.9    Causation and adjustments

[962]

12.10    Third party payments

[964]

12.11    Interest

[968]

12.12    Answer to questions

[969]

12.13    Conclusions

[970]

13    NSD144/2021: GUILD V GYM FRANCHISES

[973]

13.1    Agreed background

[973]

13.2    Policy provisions

[984]

13.3    Introductory comments

[986]

13.4    Clause (c) – the hybrid clause

[993]

13.5    Causation and adjustments

[1010]

13.6    Third party payments

[1013]

13.7    Interest

[1015]

13.8    Answers to questions

[1016]

13.9    Conclusions

[1019]

14    NSD145/2021: GUILD V DR MICHAEL

[1021]

14.1    Agreed background

[1021]

14.2    Policy provisions

[1031]

14.3    Clause (c) – the hybrid clause

[1033]

14.4    Causation and adjustments

[1058]

14.5    Third party payments

[1060]

14.6    Interest

[1062]

14.7    Answers to questions

[1063]

14.8    Conclusions

[1065]

15    NSD308/2021: QBE V COYNE (EWT)

[1067]

15.1    Agreed background

[1067]

15.2    Policy provisions

[1076]

15.3    Additional facts

[1078]

15.4    Introductory comments

[1082]

15.5    Clause 3(c) – the hybrid clause

[1085]

15.6    Causation and adjustments

[1131]

15.7    Interest

[1141]

15.8    Answers to questions

[1142]

15.9    Conclusions

[1148]

16    OTHER MATTERS

[1150]

JAGOT J:

1.    INTRODUCTION

1    These proceedings are the second test case authorised to be taken by the Australian Financial Complaints Authority (AFCA) in accordance with cl A.7.2(b) of AFCA’s Complaint Resolution Scheme Rules. The proceedings concern the proper construction and application of provisions in business interruption insurance policies. The issue is whether the policies apply to losses claimed to have been suffered by various businesses as a result of the effects of the COVID-19 pandemic in 2020.

2    In each case: (a) the insurer is the applicant and the insured is the respondent, (b) the insured has made a claim under the policy, (c) the insurer has not paid the claim, (d) by the proceeding it commenced the insurer seeks declarations to the effect that the insured is not entitled to indemnity under the policy or, alternatively, that if the insured is entitled to indemnity under the policy, the insured’s loss is to be determined in a particular manner, and (e)  the insured seeks declarations or findings to the effect that the insurer is liable to indemnify the insured.

3    The proceedings have been expedited. The parties have co-operated to ensure that, to the extent possible, the issues of construction can be resolved on the basis of agreed facts. As it has not been possible for all relevant facts to be agreed, the parties proposed an order for separate determination of the issues of construction, mindful of the need for these reasons for judgment to be founded upon a justiciable dispute ripe for determination. To this end, on 24 September 2021, I made the following order:

2.    Pursuant to Rule 30.01, the following questions be heard in these proceedings separately from and subsequent to the issues identified in the “List of Issues for Determination” filed on 21 July 2021:

Would the answer to any of such issues which necessarily involve consideration of:

a. the location, prevalence or transmission of COVID-19 cases; and/or

b. the characteristics and transmissibility of COVID-19; and/or

c. in the case of LCA Marrickville only, the alleged “conflagration or other catastrophe”;

be different if evidence were adduced of documents which are sought in the subpoenas issued as at 24 August 2021 (or any further subpoena issued in terms no wider than the subpoenas issued to that date) and expert evidence based on those documents and the expert’s own knowledge and/or expert evidence in relation to (c) above? In the event and to the extent that the answer is “yes”, what is the answer to that issue?

4    While most of the evidence is documentary, affidavits are also in evidence. The parties agreed that the rule in Browne v Dunn (1893) 6 R 67 should be taken not to apply. No party is to be precluded from putting a proposition contrary to evidence in an affidavit merely because the proposition was not put to the deponent of the affidavit. By exchange of detailed submissions in advance of the hearing all parties are on notice of the scope of the dispute and, accordingly, no unfairness is involved in adopting this course. Further, I ordered that evidence in one proceeding is evidence in each other proceeding.

5    It is also common ground that while the insurers are the applicants, it is the insureds which are propounding facts said to engage the liability of the insurers to indemnify them. In these circumstances, it is for the insureds to prove “such facts as bring the claim within the terms of the insurer’s promise”: Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; (2010) 240 CLR 444 at [28] citing Munro Brice & Co v War Risks Association Ltd [1918] 2 KB 78 at 88.

6    For the reasons given below I consider that, other than in proceeding NSD133/2021 (Insurance Australia and Meridian Travel), none of the insuring clauses in any of the policies apply in the circumstances. This conclusion would not be affected by any further evidence.

7    Accordingly, I would propose to make declarations to the effect that in each proceeding other than proceeding NSD133/2021 (Insurance Australia and Meridian Travel) the insurer is not liable to make any payment in response to the claim. In NSD133/2021 (Insurance Australia and Meridian Travel) an insuring clause in the policy (referred to as an infectious disease clause as it requires the outbreak of an infectious disease within a 20 kilometre radius of the insured situation) is satisfied on the agreed facts. However, it has not been proved (and may be impossible to prove) in that case that the insured peril was a proximate cause of any interruption or interference with the business. Meridian Travel will be given an opportunity to consider its position given these reasons for judgment.

8    I have answered the separate questions in each proceeding insofar as possible. The separate questions, as discussed below, tend to obscure rather than expose important aspects of the operation of the policies. Given the nature of the proceedings as a test case, I have also set out views assuming my primary conclusions about the proper construction of the provisions of the policies are wrong.

2.    COVID-19

9    On 31 December 2019, the World Health Organisation (WHO) was informed of a series of cases of “pneumonia of unknown etiology” detected in Wuhan, Hubei Province, China.

10    On 9 January 2020, the WHO announced that initial information about the cases of pneumonia in Wuhan provided by Chinese authorities pointed to a coronavirus as a possible pathogen causing this cluster. “Severe acute respiratory syndrome coronavirus 2” (SARS-CoV-2) is the infective agent that causes COVID-19. SARS-CoV-2 is an organism.

11    On 19 January 2020, the first person with COVID-19 entered Australia. This was announced on 25 January 2020.

12    On 21 January 2020, “Human coronavirus with pandemic potential” was determined to be a listed human disease under the Biosecurity Act 2015 (Cth).

13    From 6 February 2020, “Human coronavirus with pandemic potential” has been listed on the “National Notifiable Disease List” under the National Health Security Act 2007 (Cth). COVID-19 is the name given to the disease and SARS-CoV-2 is the name given to the virus that causes the disease.

14    On 11 March 2020, the WHO described COVID-19 as a pandemic.

15    People with COVID-19 may be highly infectious before their symptoms show. Even people with mild or no symptoms can spread COVID-19.

16    There is presently no cure for COVID-19. From 25 January 2020 when the COVID-19 was first detected in Australia there was no vaccine for COVID-19. A vaccination program commenced in Australia on 22 February 2021 and is ongoing.

17    The COVID-19 virus spreads primarily through the small liquid particles expelled by a person infected with COVID-19 when they cough, sneeze, speak, sing, or breathe heavily.

18    The WHO has reported that SARS-CoV-2 spreads mainly between people who are in close contact with each other, typically within 1 metre (short-range). However, the virus can also spread in poorly ventilated and/or crowded indoor settings, where people tend to spend longer periods of time. This is because aerosols remain suspended in the air or travel farther than 1 metre (long-range).

19    A person can become infected with COVID-19 if they inhale or ingest a “sufficient load” of these liquid particles to cause infection, which can occur through: (a) close contact with an infectious person, (b) contact with droplets from an infected person’s cough or sneeze, or (c) touching objects or surfaces that have droplets from an infected person and then touching their mouth or face.

20    Coronaviruses mutate frequently.

3.    GENERAL PRINCIPLES

3.1    Construction

21    A number of the parties provided convenient summaries of the principles applicable to the construction of contracts of insurance. Those summaries are adopted and adapted as follows.

22    “Contracts of insurance are to be construed according to the same principles of construction that are applied to commercial instruments in general”: Swashplate Pty Ltd v Liberty Mutual Insurance Company trading as Liberty International Underwriters [2020] FCAFC 137; (2020) 381 ALR 648 at [58].

23    “[T]he policy is to be given a businesslike interpretation, paying attention to the language used by the parties in its ordinary meaning, and to the commercial, and where relevant, the social purpose and object of the contract, in the context of the surrounding circumstances, including the market or commercial context in which the parties are operating, by assessing how a reasonable person in the position of the parties would have understood the language. Preference is to be given to a construction supplying a congruent operation to the various components of the whole”: Todd v Alterra at Lloyds Ltd (on behalf of the underwriting members of Syndicate 1400) [2016] FCAFC 15; (2016) 239 FCR 12 at [42].

24    “[A] policy of insurance is assumed to be an agreement which the parties intend to produce a commercial result … as such, it ought to be given a businesslike interpretation being the construction which a reasonable business person would give to ita construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit”: Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCAFC 119 at [33].

25    “[T]he Court gives effect to the common intention of the parties as manifested in the language they have chosen. It requires a consideration of the language used in the instrument, the circumstances addressed by the instrument and the commercial purpose or object that the instrument secures, and it requires a consideration of the instrument as a whole”: Swashplate at [60].

26    In Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126 the principles were expressed in these terms:

The working out in a coherent and congruent fashion of the operation of a market specific insurance policy requires a businesslike interpretation to bring about a commercial result based on what a reasonable business person would have understood the policy to mean: Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640 at 656–657 [35]. The principle that a policy is to be construed so as to avoid it “working commercial inconvenience”: Zhu v Treasurer (NSW) [2004] HCA 56; 218 CLR 530 at 559 [82] and so as to bring about commercial efficacy and reflect common sense: Gollin & Co Ltd v Karenlee Nominees Pty Ltd [1983] HCA 38; 153 CLR 455 at 464 is to be given concrete operation, not passing lip-service. To the extent that words used in an insurance policy have the capacity for broader or narrower operation, such constructional choice or ambiguity will be resolved by appreciating the context, including the market, in which the parties are operating, and the extent to which a reading of the words may produce commercial inconvenience or commercial efficacy as part of the ascription of meaning that would be made by a reasonable businessperson considering the language used, the surrounding circumstances known to the parties and the commercial purpose or objects of the policy as a whole to be secured: Electricity Generation Corp 251 CLR at 656–657 [35]; Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715 at 737 [10]. It should always be recalled, however, that a broad or a narrow meaning of a policy may only reflect the breadth or the narrowness of cover that has been purchased by the premium: cf Australasian Correctional Services Pty Ltd v AIG Australia Limited [2018] FCA 2043 at [17].

27    In the first COVID-19 insurance test case, HDI Global Specialty SE v Wonkana No. 3 Pty Ltd [2020] NSWCA 296, Meagher JA and Ball J said:

[18] Construing a written contract involves determining the intention of the parties as expressed in the words in which their agreement is recorded. As Lord Wright said in Inland Revenue Commissioners v Raphael [1935] AC 96 at 142: “It must be remembered at the outset that the court, while it seeks to give effect to the intention of the parties, must give effect to that intention as expressed, that is, it must ascertain the meaning of the words actually used”.

[19] That task is to be approached objectively. The meaning of the words used must be ascertained by reference to what a reasonable person would have understood the language of the contract to convey: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [40]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35]. That is because the objective theory of contract requires that the legal rights and obligations of the parties turn “upon what their words and conduct would reasonably be understood to convey”: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34], citing Lord Diplock in Gissing v Gissing [1971] AC 886 at 906 and Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 502.

28    Their Honours continued in these terms:

[21] Where the written contract evidences the terms on which a financial product or service is offered for acquisition, the meaning of its language is to be construed from the perspective of a reasonable person in the position of the offeree, in this case the prospective insured. This analysis was adopted in Australian Casualty Co Ltd v Federico (1986) 160 CLR 513; [1986] HCA 32.

[30] There remains the contra proferentem rule which provides that any ambiguity in a policy of insurance should be resolved by adopting the construction favourable to the insured: Halford v Price (1960) 105 CLR 23 at 30; [1960] HCA 38; Darlington Futures [Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500] at 510; Johnson v American Home Assurance (1998) 192 CLR 266 at 275 (Kirby J, dissenting); [1998] HCA 14; McCann [McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579] at [74]. The justification for the rule is that the party drafting the words is in the best position to look after its own interests, and has had the opportunity to do so by clear words. It ought only be applied for the purpose of removing a doubt, and not for the purpose of creating a doubt, or magnifying an ambiguity: Cornish v Accident Insurance Co Ltd (1889) 23 QBD 453 at 456 (Lindley LJ).

[31] With acceptance of the principle that ambiguity can be resolved by reference to the surrounding circumstances, the contra proferentem rule is now generally regarded as a doctrine of last resort. However, it continues to have a role to play in insurance and other standard form contracts. That is so for two reasons. First, by their nature, standard form contracts are not negotiated between the parties, and the surrounding circumstances relevant to the entry into one contract or another are less likely to shed much light on the meaning of the written words. Secondly, the contra proferentem rule complements the principle that standard form contracts should be interpreted from the point of view of the offeree. The offeror has the opportunity to, and should, make its intentions plain. The point was made by Dixon CJ (at 30) in Halford v Price, citing with approval the following statement in Halsbury’s Laws of England (Butterworth & Co, 3rd ed, 1958) vol 22, p 214:

The printed parts of a non-marine insurance policy, and usually the written parts also, are framed by the insurers, and it is their language which is going to become binding on both parties. It is therefore their business to see that precision and clarity is attained and, if they fail in this, any ambiguity is resolved by adopting the construction favourable to the assured …

29    In Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance [2020] FCAFC 228; (2020) 149 ACSR 484 Besanko, Derrington and Colvin JJ said at [54]:

However, disputes as to contractual interpretation necessarily imply that the ordinary meaning of the words used do not satisfactorily expose any clear construction and, in part, those opposing constructions can sometimes be assayed by reference to the commercial result which they produce. In Onley v Catlin Syndicate [Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) [2018] FCAFC 119; (2018) 360 ALR 92] (at 100 – 101 [33]), the Full Court identified the principles on which insurance policies are construed, emphasising an approach that kept in mind that they are commercial agreements which the parties intend will produce a commercial result, consistent with a businesslike interpretation. In this respect, the context in which the policy is entered into, to the extent to which it is known by both parties, will assist in identifying its purpose and commercial objective: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 [22] per Gleeson CJ; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 (Mount Bruce Mining v Wright Prospecting) [47]; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 [19] per Allsop P; Evolution Precast Systems Pty Ltd v Chubb Insurance Australia Ltd [2020] FCA 1690 [25]. Nevertheless, considerations of the commerciality of any particular construction must be confined to their proper place. In Mount Bruce Mining v Wright Prospecting at 117 [50], French CJ, Nettle and Gordon JJ observed:

Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption “that the parties … intended to produce a commercial result”. Put another way, a commercial contract should be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”.

This approach was recently applied by the Court of Appeal in New South Wales in Wonkana at [54] per Meagher JA and Ball J; [124] – [125] per Hammerschlag J, to the effect that an interpretation is commercial if it is not commercially absurd. In other words, the topic of commerciality of a particular construction is relevant only when the lack of commerciality is so pronounced that it will indicate that some different construction must have been intended.

30    Consistent with this approach their Honours said this at [56]:

Therefore, references to a commercial result are not intended to invite a consideration of the actual financial consequences for each of the parties of a particular construction in the events which have occurred by the time that a dispute arises. Such inquiries would quickly descend into an assessment with hindsight as to what a fair and reasonable contract might provide given the circumstances that have unfolded. It would be contrary to the very certainties that the law of contract seeks to provide as to the allocation of risks, rights and obligations, if the meaning of agreements were to be adjudicated by reference to such an imprecise foundation.

31    These observations are consistent with the general principle of contractual construction emphasised in WorkPac Pty Ltd v Rossato [2021] HCA 23 at [63] citing Charter Reinsurance Co Ltd v Fagan [1997] AC 313 at 388 that “it is not a legitimate role for a court to force upon the words of the parties’ bargain a meaning which they cannot fairly bear [to] substitute for the bargain actually made one which the court believes could better have been made”.

32    Similarly in McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 Kirby J summarised the applicable principles at [74] as including:

2 …Without the authority of statute, no court is authorised to attribute a different meaning to the words of a policy simply because the court regards the meaning as otherwise working a hardship on one of the parties.

4 … Courts now generally regard the contra proferentem rule (as it is called) as one of last resort because it is widely accepted that it is preferable that judges should struggle with the words actually used as applied to the unique circumstances of the case and reach their own conclusions by reference to the logic of the matter, rather than by using mechanical formulae. Nevertheless, dictionaries, facts and logic alone will sometimes not provide an answer to the contest before the court. In those cases:

“it is not unreasonable for an insured to contend that, if the insurer proffers a document which is ambiguous, it and not the insured should bear the consequences of the ambiguity because the insurer is usually in the superior position to add a word or a clause clarifying the promise of insurance which it is offering”.

33    In Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at 510 the High Court said:

the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.

34    In Dalby Bio-Refinery Ltd v Allianz Australia Insurance Limited [2019] FCAFC 85 the Full Court of the Federal Court said at [32]:

…though one needs to be careful with reliance on the contra proferentem rule, especially when there has been an evident degree of negotiation of the policy, if there are two genuinely available alternatives preference should be given to one that limits rather than expands the exclusion. That is not to approach the matter other than as dictated by the Court in Darlington v Delco 161 CLR at 510.

35    A number of the insurers sought to exclude the potential operation of the contra proferentem rule on the basis that the insureds were represented by brokers. However, I consider that the insurers remained the profferers of the policies. In Commonwealth of Australia v Aurora Energy Pty Ltd [2006] FCAFC 148; (2006) 235 ALR 644 at [41] North and Emmett JJ said:

Some reliance was placed by the parties before the primary judge on the doctrine expressed in the maxim verba chartarum fortius accipiuntur contra proferentem – the words of an instrument should be understood more strongly against the party advancing them. That maxim has nothing to do with the fortuity as to which of the parties actually composed the language in question. The construction of a promise in the common law does not depend upon who drafted the language. The maxim means simply that a promise is to be construed contrary to the interests of the person who makes the promise, irrespective of who the drafter might have been. The ‘proferens’ is, essentially, the promisor under the provision in question, whoever composes the language. The rationale for the maxim is that a party should look after its own interests in agreeing to make a promise. In the event of ambiguity, the promise is to be construed against the promisor.

36    There is also no basis upon which it could be concluded that any policy exhibits an “evident degree of negotiation”: Dalby at [32]. I do not accept that the contra proferentem rule is excluded from operating in respect of any policy. However, it remains a rule of last resort. It cannot be used to introduce ambiguity where there is none. It is only if ambiguity exists that the rule may have some role to play. It is only if there are “two genuinely available alternatives” that preference should be given to one that “limits rather than expands the exclusion”: Dalby at [32]. Otherwise, ambiguities are to be resolved according to the applicable general principles which include the contra proferentem rule.

37    The parties also referred extensively to other decisions, including (in particular) Wonkana, Rockment, Financial Conduct Authority v Arch Insurance (UK) Ltd [2020] EWHC 2448 (Comm) (FCA v Arch EWHC), Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1 (FCA v Arch UKSC), as well as Hyper Trust Limited t/as the Leopards Town Inn & Ors v FBD Insurance plc [2021] IEHC 78 (Hyper Trust No 1), and Hyper Trust Limited t/as the Leopards Town Inn & Ors v FBD Insurance plc (No 2) [2021] IEHC 279 (Hyper Trust No 2). Given the use that was sought to be made of the other decisions, particularly FCA v Arch UKSC, certain observations in other cases identified by the respondent in NSD308/2021 should be noted.

38    In In re Coleman’s Depositories Ltd and Life & Health Assurance Association [1907] 2 KB 798 at 812 Buckley LJ said “[t]he question is one of construction, and upon such a question authorities are of little or no value. Authorities may determine principles of construction, but a decision upon one form of words is no authority upon the construction of another form of words. In In re an Arbitration between Calf and the Sun Insurance Office [1920] 2 KB 366 at 382 Atkin LJ made the same point, saying “…on a question of construction I protest against one case being treated as an authority in another unless the language and the circumstances are substantially identical”. In Australian Casualty Co Ltd v Federico [1986] HCA 32; (1986) 160 CLR 513 the High Court expressed the same view, saying at 525 that the task of construction required:

…a consideration of what the words of the policy convey, as a matter of contemporary language read in the context of the whole policy, to a reasonable non-expert in this country. If that meaning is plain, it can be of but limited significance if, at other times and in other places, other courts, however eminent, have held that similar words in other policies were to be construed as having had some different meaning.

39    I also consider that the issues in dispute are not to be answered at the level of generality inherent in submissions made by the insurers such as “the policy is not intended to cover/exclude from cover the effects of a pandemic”. Rather, consideration of the meaning of the relevant clauses of the policy is required without pre-conceptions about pandemics one way or another. I do not consider that the Full Court in Rockment intended to suggest otherwise when they said at [59] that:

Cover for loss arising from the consequence of a pandemic disease could for an insurer be, as in the case of pollution, a high risk which would normally be excluded: Derrington D and Ashton R, The Law of Liability Insurance (3rd ed, LexisNexis, 2013) 10-2 p 1828: or specifically included only at an appropriately priced premium. The risk could be heightened by the indeterminacy of the period during which a highly infectious disease might disrupt business and, consequently, the amount of loss which the insured might suffer. In this sense, a construction which makes the presence of Avian Influenza or of the emergency the trigger of the Exclusion reasonably promotes its purpose. Conversely, that reasonably commercial purpose is not advanced by a construction which would confine the Exclusion to a narrow operation in relation to the presence of a highly infectious disease.

40    At [63] in Rockment the Full Court said “Courts could expect that insurers are not likely to offer high-risk cover for matters such as pollution or pandemics, save pursuant to express provisions”. These observations, however, were made in the context of close consideration of the relevant provisions in the policy in issue in Rockment. They were not made as a free-standing statement of principle. The insureds’ arguments in the present case are that the express provisions of the policies provide cover in the circumstances relevant to each insured. Whether that is so or not is not to be answered by applying any pre-conceived statement of general principle and without consideration of each relevant provision of each policy.

3.2    Causation

41    The insurance policies use various words to describe the causal relationship which must exist between the elements of the insured perils (in consequence of, consequent upon, as a result of, likely to result in, caused by, caused by or results from, resulting from, in direct consequence of, arising from, leading to, arising directly or indirectly from). The elements of the insured perils also require other relationships to exist which are not causal, such as temporal relationships (for example, during), spatial relationships (for example, at a location, within a specified radius), physical relationships (such as preventing, restricting), and substantive relationships (for example, by order).

42    In FCA v Arch UKSC at [320] Lord Briggs JSC said:

The question whether particular consequential harm to a policyholder is subject to indemnity is as much a part of the process of interpreting their bargain as is the identification of the insured peril. It is therefore a quite distinct process from, for example, applying the law about causation and remoteness of loss for the purpose of identifying the harm liable to be made good by tortfeasors to their victims. In terms intelligible to non-lawyers, the question is: for what loss have the parties agreed that the insurers should compensate the policyholders as the result of the occurrence of the insured peril? Both the insured peril and the covered loss lie at the very heart of the contract of insurance, and the process of construction requires that they be addressed together.

43    Where a required relationship is causal, it is generally accepted that the parties to a policy of insurance intend that a proximate causal relationship will suffice even if the cause must be “direct”. A proximate causal relationship involves a search for a “real”, “effective”, “dominant” or “most efficient” cause, even if there are other proximate causes. Depending on the words used, something less than a proximate causal relationship may also suffice (particularly if the contemplated causal requirement may be either direct or indirect). I have kept this in mind below where I refer to “cause” rather than proximate cause.

44    In Lasermax Engineering Pty Limited v QBE Insurance (Australia) Limited & 2 Ors [2005] NSWCA 66; (2005) 13 ANZ Insurance Cases 61-643 McColl JA (with whom Ipp and Tobias JJA agreed) summarised the applicable principles in these terms:

(1)    [i]n the law of insurance it early became, and has remained, the rule to look to the proximate and not the remote cause of loss or damage in order to determine the liability of underwriters (causa proxima non remota spectatur) [the immediate cause, and not the remote cause, is to be considered]: [39];

(2)    in this context, the words “proximate cause” and “direct cause” came to be used interchangeably: [41];

(3)    as Gibbs CJ said in Federico at 521 “… the words ‘caused by an accident’ naturally refer to the proximate or direct cause of the injury, and not to a cause of the cause, or the mere occasion of the injury”: [42];

(4)    proximate in this context meant proximate in efficiency rather than in time: [44];

(5)    the proximate cause rule was not divorced in the cases from the terms of the particular policy under consideration but was based upon the inferred common intention of the parties and would not apply if it would defeat the manifest intention of the parties: [45]; and

(6)    it is consistent with this approach that the proximate cause rule is capable of applying even where the word “directly” expressly qualifies the word “cause” in a policy: [46].

45    In Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340 at [77] Allsop CJ summarised the relevant principles as follows:

The causal inquiry in insurance law is directed to the proximate cause of the relevant loss or damage. This means proximate in efficiency, not the last in time: Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 at 369 per Lord Shaw; Global Process Systems Inc v Syarikat Takaful Malaysia Berhad (The “Cendor MOPU”) [2011] UKSC 5; 1 Lloyds Rep 560 at 564 [19] per Lord Saville and 568 [49] per Lord Mance. A proximate cause is determined based upon a judgment as to the “real”, “effective”, “dominant” or “most efficient” cause: see Leyland Shipping [1918] AC at 370 per Lord Shaw; Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57 at 66 per Lord Denning MR. What is the proximate cause is to be decided as a matter of judgment reached by applying the commonsense knowledge of a business person or seafarer: see The “Cendor MOPU” [2011] l Lloyds Rep at 564 [19] per Lord Saville and 568 [49] and 576 [79] per Lord Mance. There does not need to be a single dominant, proximate or effective cause of loss or damage: McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; 157 FCR 402 at 430 [90]. In City Centre Cold Storage Pty Ltd v Preservatrice Skandia Insurance Ltd (1985) 3 NSWLR 739 (referred to in McCarthy 157 FCR at 430 [90]), Clarke J at 745 approached the question as follows:

… to determine in the first instance whether there is one effective cause. But, recognising that in the present case there are a number of contributing causes, I do not propose straining to isolate one if it seems to me that two or more causes operated with approximately equal effect.

46    In FCA v Arch UKSC Lord Hamblen and Lord Leggatt JJSC observed at [162] that:

Many different formulations may be found in insurance policy wordings of the required connection between the occurrence of an insured peril and the loss against which the insurer agrees to indemnify the policyholder… We do not think it profitable to search for shades of semantic difference between these phrases. Sometimes the policy language may indicate that a looser form of causal connection will suffice than would normally be required, such as use of the words “directly or indirectly caused by”: see e g Coxe v Employers’ Liability Assurance Corpn Ltd [1916] 2 KB 629…. But it is rare for the test of causation to turn on such nuances. Although the question whether loss has been caused by an insured peril is a question of interpretation of the policy, it is not (unlike the questions of interpretation of the disease, hybrid and prevention of access clauses considered above) a question which depends to any great extent on matters of linguistic meaning and how the words used would be understood by an ordinary member of the public. What is at issue is the legal effect of the insurance contract, as applied to a particular factual situation.

47    In Coxe v Employers’ Liability Assurance Corpn Ltd [1916] 2 KB 629 Scrutton J said at 633-634:

…to all policies of insurance…the maxim causa proxima non remota spectator is to be applied if possible. The immediate cause must be looked at, and not one or more of the variety of the causes which if traced without limit might be said to go back to the birth of the assured. For that reason, when there are words which at first sight go a little further they are still construed in accordance with that universal maxim.

The words … “caused by” and “arising from” do not give rise to any difficulty. They are words which always have been construed as relating to the proximate cause… But the words which I find it impossible to escape from are “directly or indirectly”. …I find it impossible to reconcile them with the maxim causa proxima non remota spectator…I am unable to understand what is an indirect proximate cause …the only possible effect which can be given to those words is that the maxim…is excluded and that a more remote link in the chain of causation is contemplated than the proximate and immediate cause.

But a line must be drawn somewhere.

48    Similarly, in Star Entertainment Group Limited v Chubb Insurance Australia Ltd [2021] FCA 907 Allsop CJ noted that “[t]he relational prepositional phrase resulting from is wider than a proximate cause, requiring a common sense evaluation of a causal chain: Kooragang Cement Pty Ltd v Bates (1994) 35 NSWLR 452 at 463-464”. See also Davies, M ‘Proximate Cause in Insurance Law’ (1996) 7 Insurance Law Journal 135 in which the author said “[w]here the policy uses the words “results from” or “resulting from”, it is not enough that the insured peril merely creates a predisposition for the loss to occur, but it is sufficient if there is an unbroken causal chain between peril and loss and if the peril provides the relevant causal explanation of the loss”, citing Kooragang Cement.

49    In FCA v Arch UKSC Lord Hamblen and Lord Leggatt JJSC continued at [168]:

The question whether the occurrence of such a peril was…the proximate (or “efficient”) cause of the loss involves making a judgment as to whether it made the loss inevitable - if not, which could seldom if ever be said, in all conceivable circumstance - then in the ordinary course of events. For this purpose, human actions are not generally regarded as negativing causal connection, provided at least that the actions taken were not wholly unreasonable or erratic.

50    It is now orthodox that there may be more than one proximate cause of loss: McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402 at [88]-[92] per Allsop J (as he then was). As his Honour also explained, where there is more than one proximate cause of an event it is necessary to consider if the policy excludes cover for one of the proximate causes, referring to Wayne Tank and Pump Co Ltd v Employers’ Liability Assurance Corporation [1974] QB 57. His Honour identified that:

(1)    when an argument as to causation arises in respect of rival causes under a policy of insurance, the first task of the Court is to look to see whether only one of the causes can be identified as the proximate or efficient cause: [91];

(2)    if, applying common-sense principles and recognising the commercial nature of the insurance policy that is the context of the question, two causes can be seen as proximate or efficient, the terms of the policy must then be applied to those circumstances: [91];

(3)    if there are two concurrent causes one falling within the policy, the other simply not covered by the terms of the policy, the insured may recover: [91];

(4)    if there are two concurrent causes, one falling within the policy, the other excluded from the policy, consideration must be given to the principle in Wayne Tank: [92];

(5)    Wayne Tank concerned concurrent and interdependent causes (in that neither cause would have caused the loss but for the other cause), one within the policy and one excluded by the policy. Effect was given to the terms of the contract by applying the exclusion. This can be seen as a result of the fact that the concurrent causes were interdependent: [96];

(6)    more difficulty will arise in a case involving independent concurrent causes one of which is within the policy and the other of which is excluded: [104]; and

(7)    it is “always essential to pay close attention to the terms of any policy and the commercial context in which it was made, for it is out of these matters that the answer to the application of the policy to the facts will be revealed”: [104]; and

(8)    “[o]nce one concludes that, as a matter of construction of the contract, the insurer and insured have agreed that the cover does not extend to any loss caused by a particular cause, and that the loss was caused by that cause, the policy’s lack of response can be seen as evident. It is only if one concludes that the parties have agreed that the policy will not respond if the excluded cause must be the sole cause, for the existence of a concurrent and not excluded cause to be relevant. Again this is a question of construction of the policy”: [114].

51    The same approach is taken in FCA v Arch UKSC at [171]-[176].

52    In the present matter, other than in one case, NSD144/2021 Guild and Gym Franchises, none of the parties drew any distinction between the different causal connectors used in the various insuring provisions. They proceeded on the basis that the principle of proximate cause applied. In those cases, even if a somewhat lesser causal connection than proximate cause would suffice, that lesser causal standard could make no difference to the conclusions reached. The common-sense approach to causation in those cases indicates that there is not the requisite causal connection. In NSD144/2021 Guild and Gym Franchises, however, the causal connection required is much looser, being “arising directly or indirectly from”. In that case, the difference is substantive, as indirect causation would encompass a far more expansive causal chain.

3.3    Causation in FCA v Arch UKSC

53    The parties relied on those parts of the reasoning in FCA v Arch UKSC which suited their purposes.

54    FCA v Arch UKSC contains much which is useful. However, it is necessary to recognise that their Lordships’ reasoning depended on the proper construction of specific insuring clauses in the context of the policies as relevant in that case.

55    The relevant context in FCA v Arch UKSC includes that the United Kingdom has a unitary system of government. Relevant actions were taken by the UK Government and others taken applied, for example, to the whole of the United Kingdom, the whole of England, or the whole of Wales: see FCA v Arch UKSC at [9]-[35]. Further, England and Wales are small in area and densely populated. At [179] Lord Hamblen and Lord Leggatt JJSC said:

As the FCA has pointed out, the area described by the disease clauses which refer to a radius of 25 miles of the business premises is an area of a little under 2,000 square miles. To put this in perspective, this is bigger than any city in the UK, more than three times the size of Surrey, roughly the combined size of Oxfordshire, Berkshire and Buckinghamshire, and around a quarter of the area of Wales. The FCA produced a map to show that the whole of England can be covered, more or less, by just 20 circles each with a 25-mile radius. Nevertheless, if - as the insurers submit - the relevant test in considering the Government measures taken in March 2020 is to ask whether the Government would have acted in the same way on the counterfactual assumption that there were no cases of Covid-19 within 25 miles of the policyholder’s premises but all the other cases elsewhere in the country had occurred as they in fact did, the answer must, in relation to any particular policy, be that it probably would have acted in the same way. As already mentioned, the court below found as a fact (at para 112 of the judgment) that the Government response was a reaction to information about all the cases of Covid-19 in the country and that the response was decided to be national because the outbreak was so widespread. In these circumstances it is unlikely that the existence of an enclave with a radius of 25 miles in any one particular area of the country which was so far free of Covid-19 would have led to that area being excepted from the national measures or otherwise have altered the Government’s response to the epidemic. That in turn means that in the vast majority of cases it would be difficult if not impossible for a policyholder to prove that, but for cases of Covid-19 within a radius of 25 miles of the insured premises, the interruption to its business would have been less.

56    It is an important part of the context of the decision in FCA v Arch UKSC that the outbreak of COVID-19 in the United Kingdom was “so widespread”. It is in that context that their Lordships observed that:

Thus, in the present case it obviously could not be said that any individual case of illness resulting from Covid-19, on its own, caused the UK Government to introduce restrictions which led directly to business interruption. However, as the court below found, the Government measures were taken in response to information about all the cases of Covid-19 in the country as a whole. We agree with the court below that it is realistic to analyse this situation as one in which “all the cases were equal causes of the imposition of national measures” (para 112).

57    They continued in these terms

[181] We agree with counsel for the insurers that in the vast majority of insurance cases, indeed in the vast majority of cases in any field of law or ordinary life, if event Y would still have occurred anyway irrespective of the occurrence of a prior event X, then X cannot be said to have caused Y. The most conspicuous weakness of the “but for” test is not that it wrongly excludes cases in which there is a causal link, but that it fails to exclude a great many cases in which X would not be regarded as an effective or proximate cause of Y….

[182] It has, however, long been recognised that in law as indeed in other areas of life the “but for” test is inadequate, not only because it is over-inclusive, but also because it excludes some cases where one event could or would be regarded as a cause of another event.

58    At [190] their Lordships made this fundamental point:

Whether an event which is one of very many that combine to cause loss should be regarded as a cause of the loss is not a question to which any general answer can be given. It must always depend on the context in which the question is asked. Where the context is a claim under an insurance policy, judgements of fault or responsibility are not relevant. All that matters is what risks the insurers have agreed to cover. We have already indicated that this is a question of contractual interpretation which must accordingly be answered by identifying (objectively) the intended effect of the policy as applied to the relevant factual situation.

59    In other words, the text and the context of the particular policy is determinative.

60    Their Lordships also said this at [195]:

We do not consider it reasonable to attribute to the parties an intention that in such circumstances the question whether business interruption losses were caused by cases of a notifiable disease occurring within the radius is to be answered by asking whether or to what extent, but for those cases of disease, business interruption loss would have been suffered as a result of cases of disease occurring outside the radius. Not only would this potentially give rise to intractable counterfactual questions but, more fundamentally, it seems to us contrary to the commercial intent of the clause to treat uninsured cases of a notifiable disease occurring outside the territorial scope of the cover as depriving the policyholder of an indemnity in respect of interruption also caused by cases of disease which the policy is expressed to cover. We agree with the FCA’s central argument in relation to the radius provisions that the parties could not reasonably be supposed to have intended that cases of disease outside the radius could be set up as a countervailing cause which displaces the causal impact of the disease inside the radius.

61    This passage is critical to understanding the reasoning in FCA v Arch UKSC about causation in respect of the actions of the UK Government. It discloses that the Court assumed or was confronted with a material number of cases of COVID-19 inside and outside of the relevant areas. On this basis, to infer that each and every case (both inside and outside the area) was an equally effective cause of the actions of the UK Government is rational. Given the facts in FCA v Arch UKSC of: (a) a small in area and densely populated country, (b) a national outbreak of COVID-19, (c) material numbers of cases inside and outside of the specified areas, their Lordships reasoned that: (d) even if there were no cases within the specified areas the UK Government would still have taken the actions it did including in respect of those areas, and (e) by inference, the cases inside the specified areas would also have caused the UK Government to take the actions it did, at the least in respect of those areas. The issue was one of two concurrent sufficient causes of the UK Government actions.

62    In the present case, the policies were all made in the context of the Australian constitutional system. The Australian constitutional system is a federal system. The Commonwealth Government and the State and Territory Governments have their own fields of operation. The State and Territory Governments, in accordance with their constitutional mandates, act for the good governance of the State or Territory. The actions the Commonwealth Government is empowered to take are different from the actions the State and Territory Governments are empowered to take. The parties to the policy must be taken to have understood this fact.

63    In the context of the COVID-19 pandemic, the kinds of actions the Commonwealth Government was empowered to take included banning and restricting international travel and banning and restricting Australian residents from leaving Australia. The kinds of actions the State and Territory Governments were empowered to take included requiring businesses in the State or Territory to cease operating, requiring certain premises in the State or Territory to close, and requiring certain premises in the State of Territory to regulate the number of persons on the premises.

64    The policies were also made in the geographical context of Australia. Australia is large and in many areas is sparsely populated. A 5, 25 or 50 kilometre radius around premises may or may not include a densely populated area. The parties to the policy must also be taken to have understood this fact.

65    Further, and as the evidence discloses, the factual context of the presence of COVID-19 cases in Australia in 2020 was different from the widespread outbreak that occurred in the United Kingdom. The agreed facts include this information about cases of COVID-19 in Australia. The numbers are cumulative. The table does not distinguish between cases associated with community transmission, overseas acquisition, interstate acquisition or cases acquired or located in hospital, hotel quarantine or self-isolation.

66    Given the total population of Australia (say, 26 million people) it is apparent that it could not be said that the occurrence of COVID-19 cases in Australia was widespread. The numbers do indicate, however, the highly contagious nature of COVID-19.

67    As noted, it is also apparent in FCA v Arch UKSC that it was a given that there were cases of COVID-19 within the area identified by the policies (the radius as specified). This is apparent from the reasoning in FCA v Arch UKSC at [179]-[197]. The existence of cases of COVID-19 inside and outside of the specified areas (defined by a radius around the premises) was part of the assumed or undisputed context. On that basis, the actions of the government could be tested by asking would the government have acted as it did if there were no cases within the radius, to which their Lordships’ answer in the circumstances was “yes”. It is this fact which made the “but for” test inapplicable. The underlying fact which is also assumed in this reasoning is that there were enough cases of COVID-19 within the specified radius to have caused the Government to take the same actions with respect, at the least, to that area: see, in particular, the last sentence of [195] set out above.

68    None of these facts or assumptions apply in the present case. The context is materially different from that which underpins this aspect of the reasoning in FCA v Arch UKSC. As will be explained, it cannot be concluded in the context of these matters that each and every known case of COVID-19 in any location in a State was an equally effective cause of the State government actions (in contrast to the threat or risk to each and every person in a State presented by known and unknown cases of COVID-19 given its highly contagious nature).

69    There is another important distinction between the circumstances in FCA v Arch UKSC and the present case. As noted, the context in FCA v Arch UKSC was events which justified the description of “the national outbreak of Covid-19”: [219]. On that basis, Lord Hamblen and Lord Leggatt JJSC said at [220]:

It seems to us that, having correctly identified the fortuity covered by the insurance as a situation in which all three interconnected elements are present, the court erred by adopting a test which does not reflect that fortuity. The effect of “stripping out” all three elements in considering what the position of the business would have been but for the occurrence of the insured peril is to ask what its position would have been if none of those elements had occurred - including, as the court said, the national outbreak of Covid-19. That, however, is to treat the insured peril as being, not the risk of all three elements occurring (in causal sequence), but the risk of any one or more of the elements occurring. That would include a situation where there was an outbreak of a notifiable disease which caused interruption and loss to the business but which did not lead to any restriction being imposed that resulted in inability to use the premises. That is not the indemnity which the insurer agreed to give.

70    This may readily be accepted; to do otherwise would be to re-write the insuring provisions.

71    Their Lordships continued to examine the causal requirements of the insuring provisions in these terms:

[227] Once it is recognised that the approach for which Hiscox contends logically requires assuming in the counterfactual scenario the imposition of all the restrictions which were in fact imposed by the Government but that those restrictions did not require the insured premises to close, it can readily be seen that this approach is just as open to criticism as that of the court below. That is because it treats the insured peril as the risk that, if there was an outbreak of a notifiable disease sufficiently serious to lead a public authority to impose restrictions, the only effect of those restrictions (and of the outbreak of disease) would be to cause business interruption through inability to use the insured premises. On Hiscox’s interpretation of its policy wording, to the extent that the imposition of the restrictions and/or the outbreak of disease would have caused business interruption anyway even if the policyholder had remained able to use the premises, the interruption is not covered by the policy. In the present case the indemnity is thus confined on this interpretation to loss that would have been avoided if Covid-19 and its consequences, including the imposition of the Government restrictions, had all occurred as they actually did save that the policyholder had (uniquely) been allowed to keep its premises open. No reasonable policyholder would have understood the insurance cover which it was getting to be insurance against such a narrow and fanciful risk. If Hiscox’s interpretation were correct, it would make the public authority clause in the Hiscox policies a wholly uncommercial form of insurance which we cannot imagine that any insurer would see any sense in offering or that anyone running a business would see any sense in buying.

[239] We agree and consider the underlying explanation to be that, where insurance is restricted to particular consequences of an adverse event (such as in this example the discovery of vermin in the premises) the parties do not generally intend other consequences of that event, which are inherently likely to arise, to restrict the scope of the indemnity.

[243] The conclusion we draw is that, properly interpreted, the public authority clause in the Hiscox policies indemnifies the policyholder against the risk (and only against the risk) of all the elements of the insured peril acting in causal combination to cause business interruption loss; but it does so regardless of whether the loss was concurrently caused by other (uninsured but non-excluded) consequences of the Covid-19 pandemic which was the underlying or originating cause of the insured peril.

[244] This interpretation, in our opinion, gives effect to the public authority clause as it would reasonably be understood and intended to operate. For completeness, we would point out that this interpretation depends on a finding of concurrent causation involving causes of approximately equal efficacy. If it was found that, although all the elements of the insured peril were present, it could not be regarded as a proximate cause of loss and the sole proximate cause of the loss was the Covid-19 pandemic, then there would be no indemnity. An example might be a travel agency which lost almost all its business because of the travel restrictions imposed as a result of the pandemic. Although customer access to its premises might have become impossible, if it was found that the sole proximate cause of the loss of its walk-in customer business was the travel restrictions and not the inability of customers to enter the agency, then the loss would not be covered.

72    Their Lordships applied the same analysis to the trends in business clauses which required the loss to be calculated on a basis taking into account the trends and circumstances affecting the business excluding the insured peril. Their Lordships said:

[268] How then are the trends clauses to be construed so as to avoid inconsistency with the insuring clauses? In our view, the simplest and most straightforward way in which the trends clauses can and should be so construed is, absent clear wording to the contrary, by recognising that the aim of such clauses is to arrive at the results that would have been achieved but for the insured peril and circumstances arising out of the same underlying or originating cause. Accordingly, the trends or circumstances referred to in the clause for which adjustments are to be made should generally be construed as meaning trends or circumstances unrelated in that way to the insured peril.

287 For the reasons given, we consider that the trends clauses in issue on these appeals should be construed so that the standard turnover or gross profit derived from previous trading is adjusted only to reflect circumstances which are unconnected with the insured peril and not circumstances which are inextricably linked with the insured peril in the sense that they have the same underlying or originating cause. Such an approach ensures that the trends clause is construed consistently with the insuring clause, and not so as to take away cover prima facie provided by that clause.

[288] We therefore reach a similar conclusion to the court below, by a slightly different route. We consider, as they did, that the trends clauses do not require losses to be adjusted on the basis that, if the insured peril had not occurred, the results of the business would still have been affected by other consequences of the Covid-19 pandemic.

73    In the present case, the insurers maintained that this approach should not be adopted. Rather, the “but for” the insured peril approach in Orient-Express Hotels Ltd v Assicurazioni Generali SA [2010] Lloyd’s Rep IR 531 should be applied. For reasons which will be given, I consider the approach to causation and trends in business clauses in FCA v Arch UKSC to be compelling.

74    However, the persuasiveness of this aspect of their Lordships’ reasoning depends on the fact of the cause or underlying fortuity giving rise to the insured peril being the same as the cause or underlying fortuity giving rise to the uninsured peril. It is the identity of those two matters which enabled it to be concluded that requiring causation of loss and the circumstances affecting the business to exclude the effects of the COVID-19 pandemic would make for “a wholly uncommercial form of insurance”: FCA v Arch UKSC at [227]. Once there is not sameness or identity between the cause or underlying fortuity giving rise to the insured peril and the cause or underlying fortuity giving rise to the uninsured peril, there is nothing uncommercial in a policy operating to require that causation of loss and the circumstances affecting the business be assessed, including the effects of the uninsured peril.

75    On the facts in FCA v Arch UKSC the insured perils, as already noted, were characterised as the “national COVID-19 pandemic”. This made sense in the factual and legal context in the United Kingdom. In the Australian context, however, we have the Commonwealth Government exercising Commonwealth powers and the State and Territory Governments exercising State and Territory powers. The criteria for the exercises of these powers are different and the geographical application of the exercise of these powers is also different. Further, on the facts in Australia, it is not possible to identify the cause of all exercises of governmental power at the same level of generality as in FCA v Arch UKSC as the “national COVID-19 pandemic”.

76    As will be explained, in respect of relevant Commonwealth Government actions the uninsured peril was the existence of COVID-19 cases overseas and the threat this presented to Australia by reason of persons (including travelling Australian residents) from overseas entering Australia. In respect of State actions, the uninsured peril was the existence of COVID-19 cases in the State (known) and the associated threat or risk of COVID-19 to persons (from cases both known and unknown) across the State as a whole.

77    In respect of relevant Commonwealth Government actions it is not possible, in my view, to characterise the cause or underlying fortuity giving rise to the insured peril and the cause or underlying fortuity giving rise to the uninsured peril as the same. Nothing in the text or context of the insuring provisions supports the conclusion that the cause of the insured peril is able to be characterised as the existence of COVID-19 cases overseas and the threat this presented to Australia by reason of persons (including travelling Australian residents) from overseas entering Australia.

78    I have reached a different conclusion in respect of the actions of the State Governments. In each case I have concluded, on the facts, that the cause of the State Government action was the existence of COVID-19 cases in the State (known) and the associated threat or risk of COVID-19 to persons (from cases both known and unknown) across the State as a whole. This characterisation has a number of important consequences.

79    First, it means that, on the basis of the facts, it has not been possible to conclude that any State Government action was caused by, or resulted from, or was in consequence of, the existence of any case of COVID-19 at the location or within area required by the insuring provisions. To the extent any insuring provision required the action of an authority to be caused by, to result from, or be in consequence of an occurrence or outbreak of COVID-19 at a specific location or within a specified area, I have been unable to reach such a conclusion. In particular, on the facts of each case, I am unable to conclude that each and every case of COVID-19, including any case within the area required by the insuring clause, was an equally effective cause of the taking of the State Government action.

80    Second, it means, on the basis of the facts, that I have concluded that the relevant State Government actions were caused by the existence of COVID-19 cases in the State (known) and the associated threat or risk of COVID-19 to persons (from cases both known and unknown) across the State as a whole. That is, I infer that the State Governments acted because they knew cases of COVID-19 existed in certain locations in the State (but not every location in the State) and because they considered that there was a threat or risk of COVID-19 to persons (from cases both known and unknown) across the State as a whole.

81    On this basis, in my view, the State Government actions were caused by or resulted from or were in consequence of the threat or risk of COVID-19 to persons in each and every part of the State including, logically, at or within the location or area required by the insuring provisions. Accordingly, an insuring provision requiring the action of the authority to be caused by or result from or be in consequence of the threat or risk of infectious or contagious disease at a location or within a specified area is satisfied, as the threat or risk to each and every person is an equally effective cause of the action of the State Government.

82    Third, in dealing with the application of the principles of causation and trends in business clauses to the assessment of loss, this distinction between Commonwealth and State means that in the case of action of the Commonwealth Government the cause or fortuity underlying the insured perils is different from the cause or fortuity underlying the uninsured perils. The insured perils concern action of an authority caused by, resulting from or in consequence of infectious or contagious diseases at a location or within a specified area. That is not the same as the cause of the uninsured peril if that uninsured peril involves the actions of the Commonwealth Government, involving actions caused by the existence of COVID-19 cases overseas and the threat this presented to Australia by reason of persons (including travelling Australian residents) from overseas entering Australia.

83    These latter considerations matter (albeit in different ways) in NSD133/2021 Insurance Australia and Meridian Travel, NSD135/2021 Allianz and Mayberg, and NSD308/2021 QBE v Coyne (EWT).

3.4    Other important matters

3.4.1    Occurrence/outbreak and risk/threat

84    It will also become apparent that there is an important distinction to be drawn between insuring provisions which depend on an occurrence or outbreak of an infectious or contagious disease within an area and insuring provisions which depend on the threat or risk of an occurrence or outbreak of an infectious or contagious disease within an area. The two concepts are different. Care must be taken not to elide the difference between the two. In particular, as will be explained, where the geographical area is large and the relative number of cases of COVID-19 within the community has been small (at least compared to the widespread outbreak described in the United Kingdom in FCA v Arch UKSC), there is a difference between assessing whether government actions were taken in response to the actual outbreak or occurrence of COVID-19 within a specified area and assessing whether government actions were taken in response to the threat or risk of the spread of COVID-19 across a wide area such as a State.

3.4.2    Role of an authority in hybrid clauses

85    Another important matter is that hybrid clauses depend on the actions of an authority of some kind. Generally, the action must be a result of an occurrence or outbreak of an infectious or contagious disease. In this context, it is important to recognise that the focus of the insuring clause is on the action of the authority. That action must result from the disease. There is a difference between an action resulting from a thing (a disease) and the existence of the thing (the disease). An action of an authority can result from a disease even if the authority is mistaken about the disease.

86    As discussed below, while I would not conclude that the parties to an insurance policy intended that the actions of an authority taken arbitrarily, capriciously or in bad faith would determine liability under the policy, subject to those matters, where parties have made an insuring provision depend on the action of an authority resulting from some or other thing, they have effectively committed themselves to accept the view of the authority about the thing. This is important because, while the thing in question (the disease) must logically exist before the action for the action to result from the thing, explaining a required causal sequence as starting with the objective existence of the thing (the disease), as the insureds do in these matters, is inaccurate because it suggests that it is the objective existence of the thing (the disease) which is determinative. It also suggests that the parties contemplated that they would be able to go behind the action of the authority to determine whether the authority was right or wrong about there being an occurrence or an outbreak of the disease.

87    I do not accept that this is how the insuring clauses were intended by the parties to operate. It does not accord with the language used (usually, action resulting from [disease as specified]) which, in its terms, focuses upon the reason the authority took the action. It does not accord with a common-sense and business-like interpretation of the provisions. The provisions are intended to operate where an authority takes action because of a thing which causes the interruption or interference to the business which causes loss. If an authority acts because of a thing, and the action does interrupt or interfere with the business, and loss is in fact suffered, on what basis could it be inferred that the parties to the policy intended to exclude loss merely because, acting in good faith, the authority is subsequently able to be proved to have made a mistake? In my view, there is no commercially sensible basis upon which it could be concluded that cover was to be excluded, subject only to some clear indication in the policy to the contrary. As noted, I accept that actions of an authority which have been taken arbitrarily, capriciously or in bad faith may not ordinarily have been intended by the parties to be covered, but those concepts are irrelevant in the present case.

88    For this reason, evidence of facts not known to an authority or not relied on by an authority in deciding to take action are likely to be of little use. In such provisions, it is the actions of the authority and what those actions in fact resulted from which are of central importance. Given the nature of the provisions as part of a contract of indemnity I would also conclude that the parties intended that the causal requirement (an action of an authority resulting from some or other thing) would be objectively determined by reference to what the authority in fact did, what it said about what it did at the time it took the action, and the contemporaneous circumstances as may be inferred to have been known to and considered by the authority at the time it acted. The parties could not have intended that they would be able to identify the subjective state of mind of the authority or, as I have said, that they would be able to go behind what the authority did to prove that the authority was wrong.

89    Accordingly, the question of what the actions of an authority resulted from is best answered by reference to what the authority did, why the authority said it did what it did, and other contemporaneous explanations and circumstances casting light upon the actions of the authority. It is not answered by subsequent unearthing of facts or opinions not known to or considered by the authority at the time it took the actions.

3.4.3    Occurrence and outbreak

90    The context within which these words appear will determine their meaning.

91    Absent a textual or contextual indicator that the words should be taken to be interchangeable, they have a different meaning. The meaning is disease dependent.

92    For COVID-19 key facts are: (a) COVID-19 is highly contagious in a non-controlled environment (that is, not in a hospital, quarantine or isolation), (b) people are likely to be infectious with COVID-19 before they become aware of symptoms, and (c) accordingly, the risk to public health was not from known cases of COVID-19 alone but was also from unknown cases of COVID-19.

93    These facts may be inferred to have been known to relevant authorities within Australia before they took action relating to COVID-19.

94    In a hybrid clause, the focus is not on the objective existence of an outbreak or occurrence of COVID-19 but on the causal relationship between the action of the authority and the circumstances relating to COVID-19 which caused the authority to act.

95    An “occurrence” of COVID-19 would mean an event or case of COVID-19 in any setting. That is, it would not matter if the case of COVID-19 was in a controlled environment (such as a hospital, quarantine or isolation). The fact that the risk of transmission of COVID-19 would be low due to the controlled setting would be immaterial.

96    An “outbreak” of COVID-19 would require more than an “occurrence” of COVID-19. The difference between my conclusions and the submissions of the insurers is that the insurers contended that an “outbreak” of COVID-19 requires a confirmed case of transmission in the community (that is, in a non-controlled setting) of COVID-19. I consider that an “outbreak” of COVID-19 requires only a case of active (that is, infectious) COVID-19 in the community (that is, in a non-controlled setting).

97    The requirement proposed by the insurers of at least a confirmed case of community transmission of COVID-19 does not reflect the fact that there is a probability that a person with active COVID-19 in a non-controlled setting will transmit the disease to other persons who are not able to be identified. Given the agreed facts about COVID-19, in every such case (of a case of active COVID-19 in a non-controlled setting), transmission to an unknown person is more probable than not. In the context of a contractual arrangement I would not infer that the parties to the policy intended that anything more than probabilistic reasoning would be required. I consider that in this regard the reasoning in FCA v Arch UKSC at [69] is not reflective of the nature of COVID-19 and the fact that it may be taken that the parties intended the insuring provisions to operate depending on the nature of the disease relevant to the particular case.

3.4.4    Common words in policies

98    Apart from these matters, it is important not to generalise because the same word may have a different meaning depending on the context within which the word appears. Recognising this, I will confine myself to the following further observations which relate to the terms of the particular policies under consideration (and which are subject to any contrary contextual indicator):

(1)    “closure” of premises/a situation in the context of “closure or evacuation of” the premises/a situation, in the ordinary course, would extend to closure of a part of the premises or situation;

(2)    “closure” of premises/a situation in the context of “closure or evacuation of” the premises/a situation is different from the prevention, restriction or hindrance of access to the premises/situation. Closure requires that the whole or part of the premises/situation be closed off from entry by persons who otherwise would ordinarily be entitled to enter and remain on the whole or that part of the premises/situation;

(3)    “closure” of premises/a situation in the context of “closure or evacuation of” the premises/a situation does not require physical impossibility of access to the whole or part of the premises/situation;

(4)    “closure” of premises/a situation in the context of “closure or evacuation of” the premises/a situation does not require that each and every person is prohibited from entering and remaining upon the whole or part of the premises/situation. It requires that persons who would otherwise be entitled to do so, not be able to do so. This is to be applied in a common-sense way. As such, if a premises/situation involves a business catering to the public and the public is not able to enter and remain upon the whole of the premises/situation or a part of the premises/situation, the premises/situation may well be closed in whole or part;

(5)    the insuring provision will dictate whether the closure may be voluntary or compelled. Where the required closure is “by order” of an authority the closure must be compelled or required by the order. “By” in this context ordinarily means “required by” and “caused by” and not just “caused by”;

(6)    closure of premises/a situation is different from closure of a business. However, it is not possible to apply any pre-conceived concept that a “mere” restriction on the operation of a business does not require a closure of the premises/situation. Whether the action of the authority does require closure of the premises/situation or not will depend on the facts;

(7)    in the ordinary course, a restriction on the number of people who may enter and remain on premises at any one time does not involve closure of premises/a situation;

(8)    an order of an authority which “prevents”, “restricts” or “hinders” access to premises/a situation ordinarily would not require a physical (as opposed to a legal) prevention, restriction or hindrance of access to the premises/situation;

(9)    in the ordinary course, a restriction on the number of people who may enter and remain on premises at any one time does involve prevention, restriction or hindrance of access to the premises/situation;

(10)    a competent authority or body means an authority or body competent to take the action contemplated by the insuring clause;

(11)    a “public authority”, “statutory authority”, “government authority”, “civil authority”, “lawful authority” or the like, in the context of the insuring provisions, means an authority, body or person authorised or empowered to take the action by reason of an Act, regulation or instrument of any kind under an Act, regulation or instrument, the action having some essentially public as opposed to private character. It does not mean an authority, body or person authorised or empowered to take the action by reason of a private arrangement such as a contract or by-laws of a body corporate;

(12)    an “outbreak” of a disease takes its meaning from the nature of the disease. In the case of COVID-19 there can be an “outbreak of COVID-19 within a specified area if there are active (in the sense of contagious) cases of COVID-19 within the community in that area who are not in a controlled setting (such as a hospital or isolation or quarantine), whether or not it can be proved that such a person transmitted COVID-19 to another person within the area. This is because of the highly contagious nature of COVID-19 (as evidenced by its rapid progress to worldwide pandemic status);

(13)    an organism is “discovered” if it is found or ascertained; and

(14)    whether the discovery of an organism must be at the premises/situation or not depends on the wording of the particular provision. No generalisation is possible.

4.    THE PROVISIONS OF THE POLICIES

99    The insureds identified the relevant provisions of the policies as falling within four classes:

(1)    hybrid clauses: these provide cover for loss from orders/actions of a competent authority closing or restricting access to premises, but only where those orders/actions are made or taken as a result of infectious disease or the outbreak of infectious disease within a specified radius of the insured premises;

(2)    infectious disease clauses: these provide cover for loss that arises from either infectious diseases or the outbreak of an infectious disease at the insured premises or within a specified radius of the insured premises;

(3)    prevention of access clauses: these provide cover for loss from orders/actions of a competent authority preventing or restricting access to insured premises because of damage or a threat of damage to property or persons (often within a specified radius of the insured premises); and

(4)    a catastrophe clause: this provides cover for loss resulting from the action of a civil authority during a catastrophe for the purpose of retarding the catastrophe.

100    As will become apparent, while these classifications identify something that the provisions within each class have in common, there are differences between the words used in different policies, including policies issued by the same insurer.

101    The following tables summarise some of the key differences of the provisions. There are other differences, identified in the reasons relating to each matter, including in the cover clauses and the exclusions.

HYBRID CLAUSES

Required action

Required cause

Required location

Swiss Re and LCA Marrickville

closure or evacuation of the whole or part of the Situation by order of a competent public authority

as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease

at the Situation or within a 5 kilometer [sic] radius of the Situation

Insurance Australia and Meridian Travel

closure or evacuation of Your Business by order of a government, public or statutory authority consequent upon

the discovery of an organism likely to result in a human infectious or contagious disease

at the Situation

Insurance Australia and The Taphouse

any legal authority closing or evacuating all or part of the premises as a result of

the outbreak of an infectious or contagious human disease

occurring within a 20-kilometre radius of your premises

Allianz and Mayberg

any legal authority closing or evacuating all or part of the Premises as a result of

the outbreak of an infectious or contagious human disease

occurring within a 20-kilometre radius of Your Premises

Allianz and The Stage Shop (Visintin)

interruption or interference with Your Business due to closure or evacuation of the whole or part of the Premises during the Period of Insurance

as a result of the outbreak of a notifiable human infectious or contagious disease

occurring within a 20 kilometre radius of the Premises

Chubb and Waldeck

interruption of or interference with the Insured Location in direct consequence of the intervention of a public body authorised to restrict or deny access to the Insured Location directly arising from an occurrence or outbreak …and leading to restriction or denial of the use of the Insured Location on the order or advice of the local health authority or other competent authority

Notifiable Disease

or the discovery of an organism likely to cause Notifiable Disease

at the premises

Chubb and Market Foods

interruption of or interference with the Insured Location in direct consequence of the intervention of a public body authorised to restrict or deny access to the Insured Location directly arising from an occurrence or outbreak of any of the followingleading to restriction or denial of the use of the Insured Location on the order or advice of the local health authority or other competent authority

Notifiable Disease

or the discovery of an organism likely to cause Notifiable Disease

at the premises

Guild and Gym Franchises

the closure or evacuation of the whole or part of the Business Premises by order of a competent government or statutory authority arising directly or indirectly from

human infectious or contagious diseases or the discovery of an organism likely to result in human infectious or contagious disease

at the Business Premises

Guild and Dr Michael

the closure or evacuation of the whole or part of the Business Premises by order of a competent government or statutory authority arising directly or indirectly from

human infectious or contagious diseases or the discovery of an organism likely to result in human infectious or contagious disease

at the Business Premises

QBE and Coyne (EWT)

closure or evacuation of all or part of the premises by order of a competent government, public or statutory authority as a result of…

which shall prevent or hinder the use of your building or access thereto, or results in a cessation or diminution of trade due to temporary falling away of potential customers

a human infectious or contagious diseases

N/A

PREVENTION OF ACCESS CLAUSES

Required action/effect

Required cause

Required location

Swiss Re and LCA Marrickville

prevents or hinders the use of or access to the Situation whether any property of the Insured shall be the subject of Damage or not

the action of any lawful authority attempting to avoid or diminish risk to life or Damage to property

within 5 kilometres of such Situation

Insurance Australia and The Taphouse

preventing or restricting access to your premises or ordering the evacuation of the public

caused by any legal authority… as a result of damage to or threat of damage to property or persons

within a 50-kilometre radius of your premises.

Allianz and Mayberg

preventing or restricting access to Your Premises or ordering the evacuation of the public… provided the prevention of access or restricted access to the Premises extends for a continuous period greater than 48 hours

caused by legal authority… as a result of Damage to or threat of Damage to property or persons

within a 50-kilometer radius of Your Premises

Allianz and The Stage Shop (Visintin)

prevents or restricts access to the Premises… provided that the prevention of access or restricted access to the Premises extends for a continuous period greater than 48 hours

caused by an order of any legal authority…[that] result[s] from threat of damage to property or persons

within 50 kilometre radius of the Premises

Chubb and Market Foods

loss resulting from Business Interruption to property: (a) of a type insured by this Policy; and (b) at the locations described in points 1. to 8. directly below:

1. damage to any property within 50 kilometres of any Insured Location, which will prevent or hinder the access to or use of the Insured Location; or

3. property in any commercial complex of which the Insured Location forms a part or in which the Insured Location is contained which results in cessation or diminution of Your trade or normal business operations due to a falling away of potential custom; or

4. any legal authority preventing or restricting access to an Insured Location or ordering the evacuation of the public due to damage or a threat of damage to property or persons within 50 kilometres of any Insured Location.

INFECTIOUS DISEASE CLAUSES

Required action/effect

Required cause

Required location

Insurance Australia and Meridian Travel

the occurrence of any of the circumstances set out in this Additional Benefit shall be deemed to be Damage to Property used by You at the Situation

the outbreak of a human infectious or contagious disease

occurring within a 20 kilometre radius of the Situation

CATASTROPHE CLAUSE

Required action/effect

Required cause

Required location

Swiss Re and LCA Marrickville

the Insurer will indemnify the Insured in accordance with the provisions of Clause 10 (Basis of Settlement) against loss resulting from the interruption of or interference with the Business, provided the interruption or interference

is in consequence of… the action of a civil authority during a conflagration or other catastrophe for the purpose of retarding same

N/A

5.    THE SECTION 61A ISSUE

5.1    Background

102    Three of the proceedings involve issues about the construction and application of s 61A of the Property Law Act 1958 (Vic). Section 61A provides that:

Where an Act or a provision of an Act is repealed and re-enacted (with or without modification) then, unless the contrary intention expressly appears, any reference in any deed, contract, will, order or other instrument to the repealed Act or provision shall be construed as a reference to the re-enacted Act or provision.

103    Section 61A is relevant because in NSD133/2021 Insurance Australia and Meridian Travel, NSD137/2021 Chubb and Waldeck, and NSD308/2021 QBE and Coyne (EWT), the insurers contend that: (a) the proper law of the contracts of insurance is the law of Victoria, (b) accordingly, s 61A of the Property Law Act applies to the contracts of insurance, (c) by operation of s 61A the reference in the exclusion provisions of the contracts of insurance to a “quarantinable disease under the Quarantine Act 1908 (Cth), now repealed, is to be construed as a reference to a “listed human disease under the Biosecurity Act 2015 (Cth), the Biosecurity Act being a re-enactment with modifications of the Quarantine Act, and (d) as a result, loss resulting from COVID-19, a listed human disease under the Biosecurity Act, is excluded from the scope of the cover under the contracts of insurance.

104    The exclusions which are relevant to the s 61A issues are as follows:

105    NSD133/2021 Insurance Australia v Meridian Travel policy:

Policy Schedule

Under Section 2 – Business Interruption, Additional Benefit 8[sic] is deleted and replaced with the following:

8 Murder, suicide or disease

The occurrence of any of the circumstances set out in this additional benefit which shall be deemed to be Damage to Property used by You in the Situation.

(c) The outbreak of a human infectious or contagious disease occurring within a 20-kilometre radius of the Situation.

(d) Closure or evacuation of Your Business by order of a government, public or statutory authority consequent upon:

(1) the discovery of an organism likely to result in a human infectious or contagious disease at the Situation;

Cover under Additional Benefits 8(c) and 8(d)(1) does not apply in respect of Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments.

106    NSD 137/2021 Chubb v Waldeck:

SECTION 2 – BUSINESS INTERRUPTION

Definitions

Wherever appearing in this Section 2 – Business Interruption, the following definitions apply:

Notifiable Disease means illness sustained by any person resulting from food or drink poisoning or any human infectious or human contagious disease, an outbreak of which the competent local authority has stipulated must be notified to them. Notifiable disease does not include any occurrence of any prescribed infectious or contagious diseases to which the Quarantine Act 1908 as amended applies.

Extension C: non damage

1. Infectious Disease, Murder and Closure Extension

Cover is extended for loss resulting from interruption of or interference with the Insured Location in direct consequence of the intervention of a public body authorised to restrict or deny access to the Insured Location directly arising from an occurrence or outbreak at the premises of any of the following:

a) Notifiable Disease, or

b) the discovery of an organism likely to cause Notifiable Disease.

leading to restriction or denial of the use of the Insured Location on the order or advice of the local health authority or other competent authority.

107    NSD308/2021 QBE v Coyne (EWT) policy:

3. Prevention of access

The indemnity under this section is extended to include interruption or interference with your business in consequence of:

c. closure or evacuation of all or part of the premises by order of a competent government, public or statutory authority as a result of a human infectious or contagious diseases [sic]. However there is no cover for highly pathogenic Avian Influenza or any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended) irrespective of whether discovered at the location of your premises, or out-breaking elsewhere,

which shall prevent or hinder the use of your building or access thereto, or results in a cessation or diminution of trade due to temporary falling away of potential customers.

5.2    Proper law of the policies

108    In NSD308/2021 QBE and Coyne (EWT) the parties agree that the proper law of the policy is the law of Victoria so that s 61A of the Property Law Act potentially applies to the policy.

109    In NSD133/2021 Insurance Australia v Meridian Travel and NSD137/2021 Chubb and Waldeck the insureds do not concede that the proper law of the policy is the law of Victoria. In both matters the parties agree that the relevant principle is that the applicable law is to be determined by reference to the legal system with which the transaction has its closest and most real connection: Bonython v Commonwealth [1951] AC 201 at 219.

110    In NSD133/2021 Insurance Australia and Meridian Travel the insured submitted that while it (the insured) is located in Victoria, the intermediary is identified as being in Sydney and IAG’s registered office is in Sydney, NSW.

111    In NSD137/2021 Chubb and Waldeck the insured submitted that while the insured premises are in Victoria and Mr Waldeck is a resident of Victoria, the insurer is located in NSW.

112    I am satisfied that in both cases the proper law of the contract of insurance is the law of Victoria.

113    In NSD133/2021 Insurance Australia and Meridian Travel: (a) the renewal schedule identifies the insurer’s location as in Victoria, and (b) the renewal schedule identifies the insured situations as in Victoria. While the postal address of the insured is identified as that of its intermediary in Sydney, the closest and most real connection between the contract of insurance and the legal system is the legal system of Victoria. Victoria is the location of the insured, the insurer as identified in the contract, and the insured premises. As to the location of the insurer, while the policy identifies the insurer as located in Sydney, Melbourne, Brisbane, Perth and Adelaide, the policy schedule records the location of the insurer for this policy is located in Melbourne.

114    In NSD137/2021 Chubb and Waldeck the contract of insurance identifies the insurer as located in Sydney. The policy schedule identifies that: (a) the insured is Mr Waldeck, agreed to be resident in Victoria, (b) the broker is located in Victoria, and (c) the insured location is in Victoria. In these circumstances, again, the legal system with the closest and most real connection to the contract of insurance is Victoria.

5.3    Relevant facts

115    The Quarantine Act was repealed on 16 June 2016 “at the same time as section 3 of the Biosecurity Act 2015 commences”: Sch 1 to the Biosecurity (Consequential Amendments and Transitional Provisions) Act 2015 (Cth).

116    The Biosecurity Act, ss 3 to 645, commenced on 16 June 2016: s 2.

117    COVID-19 was not a disease declared to be a quarantinable disease under the Quarantine Act (as amended) before its repeal.

118    COVID-19 was declared to be a listed human disease under s 42 of the Biosecurity Act on 21 January 2020: Biosecurity (Listed Human Diseases) Amendment Determination 2020.

119    In NSD308/2021 QBE and Coyne (EWT), the policy commenced on 6 January 2020 and remained in force until 6 January 2021.

120    In NSD133/2021 Insurance Australia and Meridian Travel, the policy commenced on 22 February 2020 and remained in force until 22 February 2021.

121    In NSD137/2021 Chubb and Waldeck, the policy commenced on 28 March 2020 and remained in force until 28 March 2021.

5.4    Discussion

5.4.1    The issues

122    As a result of the claims of the insureds for interest under s 57 of the Insurance Contracts Act 1984 (Cth) no issue was raised concerning the potential application of s 61A of the Property Law Act by reason of the proceedings being within federal jurisdiction. The reasoning in Rizeq v Western Australia [2017] HCA 23; (2017) 262 CLR 1 at [105] applies. Section 61A is a law “having application independently of anything done by a court. It is squarely within State legislative competence and outside the operation of s 79 of theJudiciary Act 1903 (Cth).

123    The issues about s 61A are whether: (a) “an Act or a provision of an Act” includes a Commonwealth Act or provision of a Commonwealth Act, (b) the Quarantine Act and provisions of that Act as specified in the policies have been repealed and re-enacted with modifications in the Biosecurity Act, (c) s 61A applies only to Acts or provisions of Acts repealed and re-enacted after the contracts were entered into, (d) the terms of the policies disclose an express contrary intention to the application of s 61A, and (e) the application of s 61A has the effect for which the insurers contend in any event.

124    These issues arise in the context of the decision in Wonkana, which the insurers do not challenge in these proceedings. In Wonkana the NSW Court of Appeal held that the reference in a policy excluding cover for “diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908 and subsequent amendments” could not be construed as extending or referring to “diseases determined to be listed human diseases under the Biosecurity Act”. For policies to which the law of Victoria applies the insurers seek to rely on s 61A to operate so that the references in the policies to the Quarantine Act are to be construed as references to the Biosecurity Act.

125    I do not accept the insurer’s arguments. Section 61A does not operate in respect of the exclusion provisions in the three policies in issue.

5.4.2    Meaning of “an Act or a provision of an Act” in s 61A

126    There is no definition of “Act” in the Property Law Act.

127    Section 38 of the Interpretation of Legislation Act 1984 (Vic) provides that:

In all Acts and subordinate instruments, unless the contrary intention appears—

“Act” means an Act passed by the Parliament of Victoria;

“Commonwealth” means the Commonwealth of Australia;

“Commonwealth Act” means an Act passed by the Parliament of the Commonwealth;

128    Section 4(4) of the Interpretation of Legislation Act effected amendments to Acts mentioned in the Schedule which included, at paragraph 2, the insertion of what is now s 61A of the Property Law Act after s 61 of the Property Law Act. The Explanatory Memoranda relating to the Interpretation of Legislation Bill 1984 said:

Clause 2 of the Schedule amends the Property Law Act 1958 by making provision with respect to the construction of references in deeds, contracts, wills, orders and other instruments to Acts that have been repealed and re-enacted. The provision is similar to that made by clause 16(a) with respect to Acts and subordinate instruments. Section 7(1) of the Acts Interpretation Act 1958 contained a similar provision with respect to all documents.

129    Section 16 of the Interpretation of Legislation Act provides that:

Where an Act or a provision of an Act is repealed and re-enacted (with or without modification) then, unless the contrary intention expressly appears -

(a) any reference in any Act or subordinate instrument to the repealed Act or provision shall be construed as a reference to the

re-enacted Act or provision; and

130    Section 16 may be contrasted with s 17 of the Interpretation of Legislation Act which in these terms:

(1) A reference in an Act to that Act or to any provision of that Act or to any other Act or to any provision of any other Act or to any subordinate instrument or provision of a subordinate instrument shall, unless the contrary intention appears, be construed—

(a) if the Act, subordinate instrument or provision in question has been amended, as a reference to the Act, subordinate instrument or provision as amended and in force for the time being;

(b) if the Act, subordinate instrument or provision in question has been re-enacted or re-made (with or without modification), as a reference to the Act, subordinate instrument or provision as re-enacted or re-made and in force for the time being;

(c) if the Act, subordinate instrument or provision in question has been re-enacted or re-made (with or without modification) and subsequently amended, as a reference to the Act, subordinate instrument or provision as re-enacted or re-made and as subsequently amended and in force for the time being; and

(d) if the Act, subordinate instrument or provision in question has been repealed and not re-enacted or re-made, as a reference to the Act, subordinate instrument or provision as in force immediately before its repeal.

(2) In this section -

(a) a reference to an Act includes a reference to—

(i) a Commonwealth Act; and

(ii) an Act or Ordinance of another State or of a Territory;

(b) a reference to a subordinate instrument includes a reference to an instrument of a legislative character made or to be made under or pursuant to the provisions of—

(i) a Commonwealth Act; and

(ii) an Act or Ordinance of another State or of a Territory.

131    This legislative history indicates that the Victorian Parliament, in enacting s 61A, intended the reference in s 61A to “an Act or a provision of an Act” to mean an Act or a provision of an Act of the Parliament of Victoria. This is apparent from the fact that: (a) s 61A was enacted at the same time as Interpretation of Legislation Act including ss 16 and 17, (b) s 16(a), like s 61A, deals with repeal and re-enactment of Acts, (c) s 16 may be contrasted with s 17 in that s 16 does not contain an internal definition of “Act” and, accordingly, unless a contrary intention appears the definition of “Act” in s 38 applies in s 16 (“Act” means an Act passed by the Parliament of Victoria), (d) s 17 applies to amendment, re-enactment, re-making and repeal of an Act, but not the repeal and re-enactment or re-making of an Act, and (e) s 17 contains an internal definition of “Act” which extends to Commonwealth Acts.

132    This context exposes a legislative choice made by the Parliament of Victoria in the making of the Interpretation of Legislation Act and insertion of s 61A in the Property Law Act. The apparent legislative choice is that, subject to a contrary intention:

(1)    in an Act or subordinate instrument (s 16 of the Interpretation of Legislation Act) and in a deed, contract or instrument (etc) (s 61A of the Property Law Act) a reference to a repealed and re-enacted Act or provision is to be construed as a reference to the re-enacted Act or provision if the Act is an Act of the Parliament of Victoria,

(2)    in an Act, provision of an Act or subordinate instrument (s 17 of the Interpretation of Legislation Act) a reference to an amended, re-enacted and re-made Act, provision of an Act or subordinate instrument is to be construed as a reference to the Act, provision of the Act or subordinate instrument as amended, re-enacted or re-made including an Act, provision of an Act or subordinate instrument of the Commonwealth and all other States and Territories, and

(3)    in an Act, provision of an Act or subordinate instrument (s 17 of the Interpretation of Legislation Act) a reference to an Act, provision of an Act or subordinate instrument which has been repealed and not re-enacted or re-made is to be construed as a reference to the Act, subordinate instrument or provision as in force immediately before its repeal.

133    In other words, the Parliament of Victoria has chosen to treat a reference in a deed, contract or instrument (etc) (s 61A of the Property Law Act) and in an Act or provision of an Act (s 16 of the Interpretation of Legislation Act) to a repealed and re-enacted Act or provision of an Act as a reference to the re-enacted Act or provision only if the Act or provision is a law of the Parliament of Victoria. It has chosen to take a more expansive approach in s 17 of the Interpretation of Legislation Act to a reference to an Act, provision of an Act, or subordinate instrument to an Act, provision of an Act, or subordinate instrument which has been amended, re-made or re-enacted or repealed, but not repealed and re-enacted. Other than for the latter, repeal and re-enactment, s 17 operates with respect to Acts, provisions of acts and subordinate instruments of the Commonwealth Parliament and all State and Territory Parliaments.

134    Given the legislative history and content of these provisions, it must be taken that the choice made by the Victorian Parliament was deliberate. Effect must be given to that choice which works no absurdity. The contrary arguments of the insurers, discussed below, are not persuasive.

135    The fact that s 17(2) of the Interpretation of Legislation Act was inserted in 1993 by the Interpretation of Legislation (Amendment) Act 1993 (Vic) does not support the cases for the insurers. Had the Victorian Parliament wished to extend the operation of s 16 of the Interpretation of Legislation Act at that time, and thus also s 61A of the Property Law Act which was recognised at the time of its enactment to be a corresponding provision to s 16, then the Victorian Parliament could have done so, but did not.

136    The issue is not the capacity of the Victorian Parliament to have enacted a corresponding provision to s 17(2) in s 61A. The Victorian Parliament undoubtedly could have done so. The issue is the legislative choice which it can be discerned the Victorian Parliament made in enacting s 61A as it is.

137    Nor is the fact that that earlier legislation may have operated differently material in this case. The insurers pointed to the fact that s 27(1) of the Acts Interpretation Act 1890 (Vic) provided that “[w]here any Act mentioned in the Second Schedule to this Act or any Act passed after the commencement of this Act repeals and re-enacts with or without modification any provisions of a former Act, references in any other Act or document to the provisions so repealed shall unless the contrary intention appears be construed as references to the provisions so re-enacted” and did not define “Act” and thus (the insurers said) was not confined to Victorian Acts only (in contrast to s 25 which referred to “[t]his Act and every other Act to be passed by the Legislature of Victoria”). Similarly, “Act” was not defined in the Acts Interpretation Act 1915 (Vic), Acts Interpretation Act 1919 (Vic), Acts Interpretation Act 1928 (Vic), or Acts Interpretation Act 1958 (Vic).

138    The meaning of “Act” under these previous incarnations of the Interpretation of Legislation Act are not material. The earlier legislation had to refer to Acts of different Parliaments because those Acts were in force in Victoria. The later Acts made their own legislative choices, as did the Interpretation of Legislation Act in 1984. The Interpretation of Legislation Act represents its own legislative scheme including the insertion of s 61A into the Property Law Act. The legislative choice made by the Parliament of Victoria in 1984 and not subsequently relevantly amended must be given effect.

139    The legislative history does not disclose a contrary intention for the purposes of s 38 of the Interpretation of Legislation Act. The fact that the Victorian Parliament enacted the Interpretation of Legislation Act in 1984 and, in so doing, introduced a limitation on the meaning of “Act” which had not previously been part of earlier iterations of the legislation does not evince a contrary intention for the purposes of s 38. To the contrary, it evinces an intention that the (new) limitation of the meaning of “Act” should apply. To adapt the submissions for QBE, in this legislative context, there are “powerful reasons” for concluding that s 61A (like s 16 of the Interpretation of Legislation Act) was intended to operate by reference to the confined definition of “Act” in s 38 of the Interpretation of Legislation Act. The provisions as enacted expose careful consideration of the scope of s 61A and ss 16 and 17. Insofar as s 17 is concerned that legislative choice was changed in s 17 by the introduction of s 17(2) in 1993, but no such change was made to ss 61A or s 16. As the submissions for Coyne (EWT) put it:

Adopting the approach in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 (at 223-224), if the references to “Act” in s 61A were intended to include Commonwealth Acts, “it would have been a simple matter to say so”. Section 17(2)(a) of the Interpretation of Legislation Act is an instance of where that was done.

140    The insurer’s submission that there was no need to amend s 61A in 1993 because it was never intended to be confined to Victorian Acts is mere speculation.

141    The inconvenience to which the insurers refer does not provide a sufficient reason to depart from the apparent meaning of the provisions in question. Potential inconvenience in the operation of s 61A, by reason of its operation to update references to Acts and provisions made by the Victorian Parliament but not Acts and provisions and by other Parliaments including the Commonwealth, is insufficient to establish a contrary intention. For one thing, the potential inconvenience appears exaggerated. In Wonkana itself the outcome was not that the exclusion had no meaning at all. It was simply that the exclusion operated according to its terms to refer to the repealed Quarantine Act. That was undesirable from the insurer’s perspective on the facts in Wonkana, but it did not render the clause unworkable. In any event, as the submissions for Coyne (EWT) explained:

The onus of showing that a “contrary intention appears” for the purposes of s 38 of the Interpretation of Legislation Act is on the party asserting it… [Anti-Doping Rule Violation Panel v XZTT [2013] FCAFC 95; (2013) 214 FCR 40 at [92].] In Deputy Commissioner of Taxation (NSW) v Mutton (1988) NSWLR 104, Mahoney JA identified potential circumstances that might enable a Court to determine that a contrary intention appears to displace a definition such as “where the definition provides that one thing shall be done and the Act or section in question provides that another shall be done”, “if, were the definition to be applied, the provisions of or the procedure established by the section would not appropriately work” or “if the result of the application of the definition to a section results in the operation of the section in a way which clearly the legislature did not intend”.

the Victorian Parliament legislated a particular ambulatory consequence for references to Victorian legislation in certain documents that were subject to Victorian law there is nothing, “difficult” or “unexpected and capricious” about such an interpretation.

142    As it was also submitted for Coyne (EWT):

[The insurer’s] submission to the effect that Victoria has had a provision similar to s 61A which applied to Commonwealth Acts since 1890 is highly doubtful. For instance, QBE seeks to rely on s 27(1) of the Acts Interpretation Act 1890 (Vic) and the fact that the word “Act” was not a defined term in that act as supporting a submission that “s 27 was not limited to Victorian legislation only”. However, in 1890 the Commonwealth of Australia did not exist such that there were no Commonwealth Acts to which that provision could possibly have been intended to apply.

Further, even for the most recent legislation to which QBE refers which preceded s 61A of the Property Law Act, being s 7(1) of the Acts Interpretation Act 1958 (Vic), it is by no means clear that the legislature intended the reference to “Act” in that provision to refer to anything other than Victorian Acts. Indeed, a reading of the Acts Interpretation Act 1958 (Vic) as a whole clearly suggests that where that Act uses the term “Act”, it is referring to Acts passed by the Parliament of Victoria.

143    Contrary to the insurer’s submissions, it cannot be accepted that a contrary intention for the purpose of s 38 should be found because otherwise the legislative purpose of s 61A would be frustrated or because of the object, subject matter or history of the enactment (that is, of s 61A): DRJ v Commissioner of Victims Rights (No 2) [2020] NSWCA 242; (2020) 103 NSWLR 692 at [10]. The legislative purpose cannot be assumed to be effecting an ambulatory operation of all Acts, whether made by the Victorian Parliament or otherwise, where the Act is referred to in a relevant document. That is the legislative purpose that the insurers wish the Victorian Parliament had adopted. It is not the legislative purpose evinced by the statutory provisions themselves. Nor, for the reasons already given, do the object, subject matter or history of the enactment indicate any contrary intention to the conclusions above.

144    QBE’s submission that the Victorian Parliament could not have extended s 16 of the Interpretation of Legislation Act to Acts of Parliaments other than the Parliament of Victoria misses the point.

145    First, there is no such constraint in respect of s 61A which could have been amended in 1993 when s 17(2) was added if the Victorian Parliament had so wished.

146    Second, if the Victorian Parliament had so wished, it could have amended s 16 to ensure that the references to Act or provision of an Act in the preamble to the section (but not (a) or (b)) were not confined to Victorian Acts, which would not have involved any Constitutional problem.

147    The relevant point is: (a) s 61A was enacted as part of the Interpretation of Legislation Act, (b) s 38 of the Interpretation of Legislation Act defined Act in a confined manner unless the contrary intention appears, (c) no contrary intention is apparent from the history, text or context of s 61A and, to the contrary, the history, text and context of s 61A all support the application of the definition in s 38 to the word “Act” in s 61A, and (d) when the Victorian Parliament amended s 17 by introducing s 17(2) in 1993 it could also have amended s 16 and s 61A but did not do so.

148    It may be accepted that as Chubb said, in enacting s 61A, “the Parliament of Victoria can be taken to have known that it operated as part of a federal system of government with legislation of the other states and territories as well as the Commonwealth necessarily having some effect or operation on contracts whose proper law was that of Victoria”. The inescapable fact is that, in that context, the Victorian Parliament chose to confine s 61A and s 16 to Acts of the Victorian Parliament. Chubb’s invocation of the proposition that when “dealing with beneficial legislation, the Court is free to depart from literalism to secure the intent of the relevant legislature” assumes that the Victorian Parliament intended something different from what it said without any apparent justification for so concluding.

149    Contrary to George Hudson Ltd v Australian Timber Workers’ Union (1923) 32 CLR 413 at 436-437 it cannot be said that there is any “manifest intention” that “Act” in s 61A mean something other than an Act made by the Parliament of Victoria.

150    Contrary also to Eichmann v Commissioner of Taxation [2020] FCAFC 155 at [40] (citing Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622 at 638), the meaning of “Act” in s 61A for which the insurers contend is not consistent with the “actual language used” or “fairly open” on the text.

151    Accordingly, s 61A of the Property Law Act does not apply to the Quarantine Act and Biosecurity Act.

152    It is only necessary to consider the other submissions about s 61A if this conclusion is incorrect.

5.4.3    Repeal and re-enactment?

153    There is no doubt that the Quarantine Act has been repealed and the Biosecurity Act has replaced that Act. The Explanatory Memorandum to the Biosecurity (Consequential Amendments and Transitional Provisions) Bill 2014 (Cth) provided that the Billmakes transitional and consequential provisions to support the commencement of the Biosecurity Bill as it replaces the Quarantine Act 1908 … as the Commonwealth’s primary biosecurity legislation”. This is consistent with the Explanatory Memorandum to the Biosecurity Bill 2014 (Cth) which says that “Australia’s biosecurity risks have changed significantly since the Quarantine Act was first drafted over a century ago. Shifting global demands, growing passenger and trade volumes, increasing imports from a growing number of countries and new air and sea craft technology have all contributed to a new and challenging biosecurity environment”. As noted, the substantive provisions of the Biosecurity Act came into force on the repeal of the Quarantine Act.

154    Accordingly, the issue is whether the Biosecurity Act is a re-enactment with modifications of the Quarantine Act within the meaning of s 61A of the Property Law Act.

155    The New South Wales Court of Appeal considered a provision similar to s 61A (68(3)(a) of the Interpretation Act 1987 (NSW)) in Woolworths Ltd v Lister [2004] NSWCA 292. The issue was identified as whether the changes between the repealed and new legislation “are so radical that they cannot properly be characterised as modifications”: at [15]. At [17]-[18] Handley JA cited Sugerman P in Hill v Villawood Sheet Metal Pty Ltd [1970] 2 NSWR 434 at 437-438 as follows:

The next question is whether the repealed enactment is ‘re-enacted, without or without modification’ by the 1962 Act. This … is a question of substance and not of form. It is not necessary … that the re-enactment should be in words identical with those of the repealed ‘enactment’ or contained in a section whose contents are identical with those of the section in which the repealed ‘enactment’ was to be found. The 1962 Act deals substantially [with] the same subjects as the repealed Act, but the wording used to achieve the same or similar ends and the distribution of subject matters amongst sections are not always identical.

The remaining question … is … whether the effect of this difference is, not that there has been a re-enactment of the repealed enactment with modification, but rather that what is to be found in the 1962 Act is an entirely new and different enactment which is not a re-enactment at all of anything contained in the 1912 Act … this is entirely a question of first impression … The relevant definition of ‘modification’ in the Shorter Oxford Dictionary is ‘the action of making changes in an object without altering its essential nature’. Here the essential nature of the object in question, which is a power to make regulations, is not altered … the enactment contained in the 1962 Act is not something entirely new and essentially different from the repealed enactment … It is a re-enactment thereof with a modification.

156    In Karlsson v Griffith University [2020] NSWCA 176; (2020) 103 NSWLR 131 Payne and White JJA applied Woolworths at [24]. At [22] they said:

It is apparent from a comparison of the two Acts here in question that the 1955 Trade Marks Act, in a broad sense, was re-enacted in 1995, albeit with extensive modifications to take account, in particular, of international developments in trade marks since the 1955 Act. The purpose of both Trade Marks Acts is to provide for the registration of trade marks and to set out the rights deriving from registration of a trade mark. In the 1995 Act, some changes have been made to reflect international trends toward uniformity and some attempts have been made to simplify language and to replace terms in the old legislation with simpler ones.

157    Their Honours also said at [24]:

…despite these additional provisions (e.g. dealing with collective trade marks), and approached in the same way as Handley JA approached a similar problem in Woolworths v Lister, the Trade Marks Act 1995 is not an entirely new and different enactment. The 1995 Act does not alter the essential nature of the Trade Marks Act 1955. It deals at a high level with essentially the same subject matter to achieve the same or similar ends, namely, the regulation of trade marks.

158    In Day v Adam; Ex parte Day [1989] 2 Qd R 9 at 10-11 a similar approach was taken, recognising the issue is one of substance not form, and that the mere fact that the new legislation was successor legislation in a “loose sense” did not mean that it was a re-enactment of the repealed legislation given that it involved a “completely new statutory scheme and approach”.

159    As submitted for Coyne (EWT), based on the authorities, a new Act will involve a re-enactment of a repealed Act, if it:

deals substantially with the same subject matter to achieve the same or similar ends”, cannot be described as an “entirely new and different enactment”, does “not alter the essential nature” of the previous enactment and is not “so radical an alteration” to the previously existing legislation as to not fall within the meaning of the term “modification” being “the action of making changes in an object without altering its essential nature”.

160    The policies refer to “any other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments”, “of any prescribed infectious or contagious diseases to which the Quarantine Act 1908 as amended applies”, and “any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended)”. The primary issue, accordingly, is whether the Biosecurity Act as a whole is a re-enactment with modifications of the Quarantine Act. The alternative approach, to ask whether a provision or provisions of the Biosecurity Act, is or are a re-enactment with modifications of provisions of the Quarantine Act which declare or apply that Act to a disease may also be legitimate.

161    I do not consider the Biosecurity Act to be a re-enactment of the Quarantine Act. While the Biosecurity Act is successor legislation dealing in part with the same subject-matter, it is too different from the Quarantine Act to be anything other than an entirely new enactment. In Wonkana Hammerschlag J said:

[106]… while its [the Biosecurity Act’s] structure is different to the Quarantine Act, its objects of protecting against biosecurity risks align with those of the Quarantine Act. It is plain that the Biosecurity Act replaced the Quarantine Act, albeit that it has a more extensive reach in terms of its subject matter than the Quarantine Act.

[121] …The two enactments regulate the same subject matter and have the same general objects, but by different standards and procedures.

162    The Explanatory Memorandum for the Biosecurity Bill 2014 (Cth) highlights the differences between the two Acts, saying (pp 8-10):

The Bill contains new powers that allow for the management of a wider range of pests and diseases already present in Australian territory, such as fruit fly, which can adversely affect a wide range of fruit crops grown in Australia, and noxious weeds which might pose a threat to agricultural industries or the environment. The Bill also extends the coverage of existing powers so that some of the biosecurity risks posed by invasive pests can be more effectively managed.

The Bill also modifies key operational provisions from the Quarantine Act that impose an unnecessary regulatory burden and are not required to manage biosecurity risks effectively. For example, the Quarantine Act does not allow goods to be unloaded from a conveyance automatically when it arrives in Australia. The Bill allows the goods to be unloaded, unless an officer instructs otherwise.

a number of policies included in the Bill do not exist under the Quarantine Act. This includes the new powers in Chapter 6 and the enforcement provisions in Chapter 9.

163    The Minister’s Second Reading Speech for the Biosecurity Bill (27 November 2014, Hansard p.13426-13427) also exposes the differences between the new Act and the repealed Act, referring to: (a) the need for a “new regulatory frameworkto provide for a safe and seamless transition of people and goods across Australia’s borders … The century-old Quarantine Act was written in a completely different world, when today’s technology was not conceived”, (b) the Bill providing processes “for managing the threat of a serious communicable disease to human health will be better aligned with modern science”, (c) the Bill modernising “overly complex regulatory provisions and administrative practices under the Quarantine Act”, (d) the introduction of a new scheme to manage Commonwealth-industry partnerships, known as the approved arrangement scheme, (e) the Bill introducing “a new range of enforcement options”, and (f) the Bill containing “new powers to address the risk posed by people and companies”.

164    Comparison between the two Acts shows that, amongst other things: (a) the Quarantine Act had no provisions equivalent to Ch 6 of the Biosecurity Act which contains provisions addressing the management of biosecurity risks posed by diseases or pests that may be in or on goods or premises in Australian territory, (b) the Quarantine Act had no provisions equivalent to Ch 7 of the Biosecurity Act which contains provisions for the Director of Biosecurity or the Director of Human Biosecurity to approve proposed arrangements enabling biosecurity industry participants to carry out activities to manage biosecurity risks associated with specified goods, premises or other things, and (c) Chapter 9 of the Biosecurity Act provides a range of enforcement options more extensive than those the subject of Part VIA of the Quarantine Act.

165    The provisions dealing with diseases are also different between the Quarantine Act and the Biosecurity Act.

166    Under the Quarantine Act: (a) s 13(1)(ca) provided that the Governor-General may by proclamation declare a disease to be a quarantinable disease, (b) no criteria were specified for the making of such a declaration, (c) s 2B(1) provided for the Governor-General to proclaim the existence of an epidemic or the danger of an epidemic if satisfied that an epidemic caused by a quarantinable disease or danger of such an epidemic exists, (d) by s 2B(2), upon the issue of such a proclamation, the Minister may give directions and take action as he or she thinks necessary to control and eradicate the pandemic or to remove the danger of the epidemic by quarantine measures and measures incidental to quarantine, (e) s 4 provided for quarantine measures including measures to isolate and segregate human beings and having as their object the prevention or control of the introduction, establishment or spread of diseases or pests that will or could cause significant damage to human beings, animals, plants, other aspects of the environment or economic activities, and (d) s 35A provided for the quarantine of persons who had been on board a vessel that had a case of a “communicable disease” even if the disease had not be proclaimed a quarantinable disease.

167    Under the Biosecurity Act: (a) s 42 provides that the Director of Human Biosecurity (the person who occupies, or is acting in, the position of Commonwealth Chief Medical Officer), after consulting with the chief health officer (however described) for each State and Territory and the Director of Biosecurity, may determine that a human disease is a “listed human disease” if the Director considers that the disease may be communicable and cause significant harm to human health, (b) s 51 permits the Health Minister to impose biosecurity measures once a “listed human disease” is declared (a biosecurity measure is also a civil penalty provision), provided the Health Minister is satisfied that the biosecurity measure is appropriate and adapted to prevent, or reduce the risk of, the disease entering, or emerging, establishing itself or spreading in, Australian territory or a part of Australian territory, (c) s 475 provides that the Governor-General may declare that a human biosecurity emergency exists if the Health Minister is satisfied that a listed human disease is posing a severe and immediate threat, or is causing harm, to human health on a nationally significant scale and the declaration is necessary to prevent or control the entry of the listed human disease into Australian territory or a part of Australian territory or the emergence, establishment or spread of the listed human disease in Australian territory or a part of Australian territory, and (d) s 476 provides that during a human biosecurity emergency period, the Health Minister may give any direction, to any person, that the Health Minister is satisfied is necessary to prevent or control the entry of the declaration listed human disease into Australian territory or a part of Australian territory, the emergence, establishment or spread of the declaration listed human disease in Australian territory or a part of Australian territory, or to prevent or control the spread of the declaration listed human disease to another country, or to give effect to a recommendation made to the Health Minister by the World Health Organization under Part III of the International Health Regulations in relation to the declaration listed human disease.

168    In these circumstances I accept the submissions for the insureds that: (a) the process for determining that a disease is a “listed human disease” under the Biosecurity Act is entirely new and different and represents a radical alteration to the process for declaring that a disease is a “quarantinable disease” under the Quarantine Act, (b) the person making the determination as to whether a disease is a listed human disease under the Biosecurity Act is different from the person declaring that a disease is a “quarantinable disease” under the Quarantine Act, (c) the criteria for making the declaration are different, and (d) the legislative consequences of being a “listed human disease” under the Biosecurity Act are different.

169    On this basis I do not consider that the Biosecurity Act is a re-enactment with modifications of the Quarantine Act. It is successor legislation to the Quarantine Act dealing with some of the same subject-matter in a new and different manner and new subject-matter. The insurers contentions that this involves a triumph of form over substance and does not give effect to the beneficial nature of s 61A are not accepted. As to form and substance, both the form and substance of the statutes are different. The differences are too extensive and fundamental to constitute the re-enactment with modifications of the Quarantine Act. The Biosecurity Act is not the Quarantine Act in a modern drafting style. It is conceptually and substantively different. As to the beneficial nature of s 61A, its beneficence extends only to Acts which are repealed and re-enacted with modifications. If that conclusion cannot be reached, the provision does not operate.

170    I accept, however, that the fact that certain diseases identified as quarantinable diseases under the Quarantine Act are not identified as listed human diseases under the Biosecurity Act (cholera and rabies specifically) is immaterial. Both Acts enabled different diseases to be identified from time to time. It is the difference in the substantive provisions of the two Acts which leads to the conclusion that the Biosecurity Act is not a re-enactment with modifications of the Quarantine Act, but is a new Act.

171    The same conclusion applies to the provisions of the Biosecurity Act for listing human diseases. Those provisions are not a re-enactment with modifications of the provisions of the Quarantine act relating to proclaiming quarantinable diseases. They are new provisions.

172    For these reasons, if “Act” in s 61A included an Act of the Commonwealth, s 61A of the Property Law Act does not operate so that any reference to the Quarantine Act in the policies in issue is to be construed as a reference to the Biosecurity Act.

5.4.4    The timing issue

173    The insureds (or some of them) contended that s 61A applies only if the Act or provision is repealed and re-enacted after the date of the contract of insurance. The argument is that s 61A is a savings provision (which it is in a sense, but might be more accurately described as an updating provision). Where a provision exists at the time of the entry into the contract, it is said that s 61A saves that common intention should the provision be repealed and re-enacted after that date. Where, however, the provision has been repealed before the contract is entered into, it is said that “it is no longer safe to presume that the parties objectively intended a different statute or particular statutory provision (then already in existence) to govern the terms of their contractual relationship”. As a result, it is said that “[s]uch an interpretation would not support the apparent purpose or object of s 61A, being the “saving” function described in Explanatory Memoranda relating to the Interpretation of Legislation Bill 1984”.

174    I do not accept this argument. Section 61A operates “unless the contrary intention expressly appears”. The argument is concerned with the attribution of intention to the parties to the contract rather than the construction of s 61A. Nothing in s 61A indicates that it is to operate by reference to the temporal relationship between the contract and the repeal and re-enactment of the Act or provision. Section 61A says nothing about the time of entry into the “deed, contract, will, order or other instrument”. There is no basis for reading into the section a restriction so that it applies only to such instruments entered into after the date of the relevant repeal and re-enactment.

5.4.5    Express contrary intention?

175    As noted, s 61A applies “unless the contrary intention expressly appears”. The argument for the insureds is that as the parties to the policy chose to refer to quarantinable diseases under the Quarantine Act when they could have referred to listed human diseases under the Biosecurity Act that evidences an express contrary intention in the requisite sense explained in Mitchell v Latrobe Regional Hospital [2016] VSCA 342; (2016) 51 VR 581 at [64] (that is, “expressly” means plainly, clearly, or by necessary implication).

176    I do not accept this argument. It assumes that the policies are to be construed on the basis that the insurer and insured both knew that the Quarantine Act had been repealed and re-enacted in the Biosecurity Act. That assumption cannot be made. No evidence supports it as an objective surrounding circumstance within which the policies were agreed. Without that assumption, there is nothing in the policies which indicates a contrary, let alone and express contrary intention to the effect that s 61A should not apply. The reference in the policies to “and subsequent amendments”, “as amended”, and “(as amended)” do not evince any contrary intention.

5.4.6    Effect of operation of s 61A

177    The insureds (or some of them) contended that even if they are incorrect as to each of the above propositions, s 61A does not assist the insurers because inserting the words “Biosecurity Act” into the policies where “Quarantine Act” appears renders that part of the policies meaningless. The policies refer to “other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments”, “any prescribed infectious or contagious diseases to which the Quarantine Act 1908 as amended applies”, and “any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended)”. The argument is that there are no quarantinable diseases declared by or prescribed infectious or contagious diseases under the Biosecurity Act.

178    I would reject this argument to the extent it was made (if at all) in respect of the Chubb v Waldeck policy. This is because that policy refers to “any prescribed infectious or contagious diseases to which the Quarantine Act 1908 as amended applies”. If s 61A applies I would have no difficulty in reading the reference to “prescribed” as adding nothing to the requirement that the Biosecurity Act apply to the disease – that is, a listed human disease under the Biosecurity Act would be construed as within the meaning of the phrase as to be construed by operation of s 61A, “any prescribed infectious or contagious diseases to which the Biosecurity Act 2015 (Cth) as amended applies”.

179    The argument is more cogent in respect of the Insurance Australia and Meridian Travel policy and the QBE and Coyne (EWT) policy. In the former if s 61A applies, the provision in the policy would read “any other diseases declared to be quarantinable diseases under the Biosecurity Act 1915 (Cth) and subsequent amendments”. In the latter if s 61A applies, the provision in the policy would read “any disease declared to be a quarantinable disease under the Biosecurity Act 1915 (Cth) (as amended)”. There are no such diseases. The provisions are parts of exclusions from the scope of the indemnity. The fact that there may be no exclusion to that extent does not mean that the provision, construed in accordance with its ordinary meaning, is absurd in the sense described in Wonkana at [50]-[54], [117], [124]. On the ordinary meaning of the language it is not apparent how the provisions in these policies, construed as required by s 61A, identify any diseases. Leaving aside s 61A itself, I am unable to discern a legitimate process of construction by which “disease(s) declared to be quarantinable diseases” would be read to mean “diseases determined to be a listed human disease”.

180    Section 61A, however, cannot be left aside. It refers to the repeal and re-enactment with modifications of an Act and a provision of an Act. If s 61A applies, then it would be necessary to read the references to “quarantinable disease” under the Quarantine Act as references to the provision of the Quarantine Act enabling such a declaration to be made. Section 61A, if it applies, must direct attention to the re-enactment of that provision with modifications which can only be s 42 of the Biosecurity Act and its mechanism for determining listed human diseases. The fact that this process is somewhat tortured reinforces my conclusion that the Biosecurity Act is not a re-enactment of the Quarantine Act with modifications. But in this part of these reasons I am assuming s 61A applies – so it then applies to both the Quarantine Act and any provision of the Quarantine Act which has been repealed and re-enacted with modifications. The fact the policy clauses do not refer to any section of the Quarantine Act is immaterial. There is such a section. It was repealed. And on the necessary assumption it was re-enacted with modifications. As a result, the clauses in the policies would all be read as referring to listed human diseases under the Biosecurity Act if s 61A applies.

5.4.7    Conclusion

181    Section 61A of the Property Law Act does not apply to the three policies discussed above as contended for by the insurers. This is because: (a) the reference to “Act” in s 61A means an Act of the Parliament of Victoria in accordance with s 38 of the Interpretation of Legislation Act, and the Quarantine Act is a law of the Parliament of the Commonwealth, and (b) the Biosecurity Act is not a re-enactment with modifications of the repealed Quarantine Act.

6.    NSD132/2021: SWISS RE INTERNATIONAL V LCA MARRICKVILLE

6.1    Agreed background

182    LCA Marrickville is an insured (being an additional named insured) under a “Vertex Industrial Special Risks” Policy P23089.04-00 placed with Swiss Re.

183    The LCA Marrickville policy comprises: (a) a policy schedule and attached Endorsements dated 17 July 2019; and (b) a policy wording described as “Vertex Industrial Special Risks 0818” dated August 2018.

184    The LCA Marrickville policy was issued on 17 July 2019 for the period 30 June 2019 to 30 June 2020 4.00pm local time.

185    LCA Marrickville is a laser therapy clinic. The business offers services such as laser hair removal, cosmetic injectables and skin treatments.

186    On 26 March 2020, the Public Health (COVID-19 Gatherings) Order (No 2) 2020 (NSW) came into effect.

187    On 1 June 2020, the Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 3) 2020 (NSW) came into effect.

188    On 7 December 2020, the Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 7) 2020 (NSW) came into effect.

189    LCA Marrickville made a claim through a letter dated 3 July 2020 addressed to Aon Risk Services Australia under the LCA Marrickville policy.

190    On 9 July 2020, Swiss Re acknowledged the claim.

191    On 29 September 2020, Swiss Re declined to indemnify LCA Marrickville in respect of its claim.

192    On 18 October 2020, LCA Marrickville requested that Swiss Re reverse its declinature and confirm indemnity under the LCA Marrickville policy.

193    On 21 October 2020, Swiss Re provided a partial response to LCA Marrickville's letter of 18 October 2020.

194    On 26 October 2020, LCA Marrickville filed a complaint in respect of Swiss Re’s declinature with AFCA.

195    On 17 November 2020, Swiss Re notified LCA Marrickville that Swiss Re’s Internal Dispute Resolution (IDR) review of its declinature decision was underway.

196    On 27 November 2020, Swiss Re confirmed its position following completion of its IDR review and declined indemnity for LCA Marrickville's claim under the LCA Marrickville policy.

6.2    Policy provisions - cover

197    The key provisions of the LCA Marrickville policy relating to cover are below.

1 Definitions

1.2    Business means the business as specified in the Schedule carried on by the Insured at the Situation

1.3    Damage (with Damaged having a corresponding meaning) means physical loss, damage or destruction.

1.16    Property Insured means all tangible property both real and personal of every kind and description belonging to the Insured or for Damage to which property the Insured is legally responsible or for which the Insured has assumed responsibility to insure prior to the occurrence of any Damage

1.18    Situation is the Situation or Situations shown in the Schedule. Where the Situation specified in the Schedule is other than a single address, each separate address at which the Property Insured is located shall be one Situation for the purposes of this Policy, particularly in relation to the Limit of Liability and Sub-Limits of Liability.

Section 1 – Property Insurance

Section 2 – Interruption Insurance

9.1    The Insurer will indemnify the Insured in accordance with the provisions of Clause 10 (Basis of Settlement) against loss resulting from the interruption of or interference with the Business, provided the interruption or interference:

9.1.1    is caused by Damage occurring during the Period of Insurance to:

[identified buildings, property and vehicles].

…;

9.1.2    is in consequence of:

9.1.2.1    closure or evacuation of the whole or part of the Situation by order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease or consequent upon vermin or pests or defects in the drains and/or sanitary arrangements at the Situation but specifically excluding losses arising from or in connection with highly Pathogenic Avian Influenza in Humans or any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015;

9.1.2.2    murder or suicide or attempted suicide or violent crime or armed robbery occurring at the Situation;

9.1.2.3    injury, illness or disease arising from or likely to arise from or traceable to foreign or injurious matter in food or drink provided from or on the Situation;

9.1.2.4    any of the circumstances set out in Sub-Clauses 9.1.2.1 to 9.1.2.3 (inclusive) occurring within a 5 kilometer radius of the Situation;

9.1.2.5    the action of a civil authority during a conflagration or other catastrophe for the purpose of retarding same;

9.1.2.6    the action of any lawful authority attempting to avoid or diminish risk to life or Damage to property within 5 kilometres of such Situation which prevents or hinders the use of or access to the Situation whether any property of the Insured shall be the subject of Damage or not,

occurring during the Period of Insurance. Such events shall be deemed to be loss caused by Damage covered by Section 2 of this Policy. Furthermore Clauses 12 and 13 shall not apply to the cover provided by this Clause 9.1.2.

198    The Situation is defined in the Policy Schedule to mean the head office units at St Leonards and elsewhere in Australia including contract sites where the Insured has property or carries on business, has goods or other property stored or being processed or has work done. On the agreed facts, this means LCA Marrickville’s store located at Shop 45, Marrickville Metro Shopping Centre, 20 Smidmore Street, Marrickville NSW 2204. The Policy Schedule also provides a Business Description, being the “provision of laser hair removal, skin treatments, cosmetic injection…”. It is not in dispute that the store comprises six treatment rooms, a reception area and waiting room area and storage space, with a floor space of approximately 98 square metres. Of that area, 77 square metres is open to the public, with 21 square metres used for storage and not open to the public.

199    The Sub-Limits of Liability in the Policy Schedule for cl 9.1.2.1 include for “infectious diseases limited in the aggregate” - $500,000.

6.3    Hybrid clause – 9.1.2.1 and 9.1.2.4

6.3.1    Introductory comments

200    The cover in cl 9.1.2.1 (of itself and as extended by cl 9.1.2.4) is subject to the exclusion of “losses arising from or in connection with highly Pathogenic Avian Influenza in Humans or any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015”.

201    It may be accepted that cl 9.1.2.1 is not concerned with physical damage to property. Contrary to LCA Marrickville’s submissions, this does not mean that the context provided by the Policy and Policy Schedule as a whole, including the fact that Section 1 is concerned with damage to property, is irrelevant. While each policy is to be determined on its own terms, the overall context of a provision is relevant to its meaning: Star at [172]. That overall context may show that the policy functions as a coherent and integrated whole or that the policy comprises a patchwork of overlapping and potentially inconsistent provisions. Observations to the latter effect are policy dependent. It was the terms of the particular policy under consideration which caused Hall J to say in Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2013] WASC 386 at [67]:

The policy document presents as being the product of a mix and match exercise. It is a collection of various different documents variously entitled conditions, memoranda, schedule and exclusions. This makes the policy document very difficult to read. The impression I have is that having gathered together the various component parts no-one has made an effort to ensure that they can be read together as a coherent whole. This is notwithstanding the invocation at the start of the policy to read the various parts together.

202    The observation of Allsop CJ in Star at [166] that the fact of “overlap between different clauses of a policy does not require the business person to give meaning to the different clauses to eliminate their overlap with refined precision” is of broader application. Again, however, meaning ultimately depends on text and context. To the extent the insureds sought to propound construing provisions in isolation from their context, their submissions must be rejected. This does not mean, however, that they are necessarily incorrect about the proper construction of the various provisions in the different policies.

203    LCA Marrickville provided an accurate summary of the relevant orders. They are:

(1)    the 26 March 2020 Public Health (COVID-19 Gatherings) Order (No 2) 2020: This order provided that “business premises that are spas, nail salons, beauty salons waxing salons, tanning salons, tattoo parlours or massage parlours” “must not be open to members of the public”: cl 7(1)(i);

(2)    the 1 June 2020 Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 3) 2020: This order provided for particular “Restricted premises”. Those types of premises were subject to the “limitation on the number of persons that may be on the premises at any time”, “the condition that no person may be on the premises as part of an individual group of more than 10 person”, and “any other restrictions set out” in the Schedule. Item 16 of Schedule 1 described “Business premises that are used for nail salons, beauty salons, waxing salons and tanning salons”. The limitation on the number of persons on premises was “[t]he lesser of” “10 customers and the business’s staff members”; or “the total number of persons calculated by allowing 4 square metres of space for each person (including staff members) on the premises”. These premises were subject to the further restriction of “Must have a COVID-19 Safety Plan”: cll 5(1) and 5(3); and

(3)    the 13 June 2020 Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 3) 2020: This order was in the same terms as the 1 June 2020 order, but provided that the number of persons that could be on “Business premises that are used for nail salons, beauty salons, waxing salons, tanning salons, spas, tattoo parlours and massage parlours” was the lesser of 20 customers, excluding staff members or “the total number of persons calculated by allowing 4 square metres of space for each person (including staff members) on the premises”: cl 5(1), Schedule 1, item 16.

204    Otherwise, and as noted, I do not consider that the fact that a broker was involved on behalf of the insured in procuring the policy undermines the operation of the contra proferentem rule. The insurer remains the profferer of the contract of insurance. There is no evidence of the negotiation of any term of the policies.

6.3.2    The exclusion provision

205    It is logical to consider the exclusion provision first (“but specifically excluding losses arising from or in connection with any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015”).

206    When the policy was entered into COVID-19 was not a listed human disease under s 42 of the Biosecurity Act. Relevantly, (a) COVID-19 was determined to be a “listed human disease” by the Commonwealth Director of Human Biosecurity under s 42 of the Biosecurity Act on 21 January 2020, (b) COVID-19 was listed as a “notifiable disease” under s 81 and Schedule 2 of the Public Health Act 2010 (NSW) on 21 January 2020, and (c) COVID-19 was made a “national notifiable disease” under s 11 of the National Health Security Act 2007 (Cth) on 6 February 2021.

207    It was not suggested that anything turned on the fact that cl 9.1.2.1 refers to a disease being “declared” to be a listed human disease when, under the Biosecurity Act, there is no declaration but rather a determination. I accept that the making of a determination under s 42(1) of the Biosecurity Act must be taken to be a declaration as provided for in cl 9.1.2.1.

208    It is apparent that cl 9.1.2.1 distinguishes between a notifiable disease (which is not defined) and a listed human disease under s 42 of the Biosecurity Act. There are no criteria for the identification of a disease as a notifiable disease under the State Public Health Act. Notifiable diseases under the Public Health Act include infectious and non-infectious diseases (such as cancer and cystic fibrosis). In contrast, there are criteria for listing human diseases under s 42 of the Biosecurity Act, one of which is that the disease must be communicable and another of which is that the Director of Human Biosecurity must consider the disease may cause significant harm to human health. Similarly, the identification of a national notifiable disease under s 11 of the Commonwealth National Health Security Act is contingent on the Minister considering that an outbreak of the disease would be a public health risk, which indicates the disease must be communicable.

209    Leaving aside the concept of a “national notifiable disease” (as opposed to a notifiable disease which is the term used in cl 9.1.2.1) it is apparent that the clause is extending cover to orders resulting from notifiable diseases but excluding cover for orders resulting from listed human diseases. This distinction, in the context of the Public Health Act and the Biosecurity Act, makes sense. The diseases capable of being notifiable diseases under the Public Health Act are far more extensive than those capable of being listed human diseases under the Biosecurity Act. Further, in fact, the diseases which are notifiable diseases extend beyond the diseases which are listed human diseases and include such diseases as diphtheria, Legionnaires’ disease, leprosy, measles, and pertussis (whooping cough).

210    On this basis, I consider that the reference to “notifiable disease” in this policy means a notifiable disease under the Public Health Act and not a national notifiable disease under the National Health Security Act. This is because: (a) the expression used in cl 9.1.2.1 is notifiable disease not national notifiable disease, (b) the distinction between notifiable diseases and listed human diseases under the Biosecurity Act makes sense if notifiable diseases are those regulated by NSW legislation given that many diseases, including contagious diseases, may be made notifiable diseases, and (c) the fact that there may be overlap between notifiable diseases and listed human diseases (which there is, including for COVID-19) does not undermine the rationality of the distinction given that many other contagious diseases would not satisfy the criteria for being made a listed human disease under the Biosecurity Act.

211    LCA Marrickville contended that the exclusion applies only to, relevantly, listed human disease determined under the Biosecurity Act as at the date of inception of the policy. The contention involves these elements: (a) the exclusion refers to “declared” which is not prospective, (b) the parties could have qualified “declared” by reference to “from time to time” but did not, (c) commercial considerations favour a static rather than an ambulatory construction as an ambulatory construction means that neither insures nor insureds would have certainty as to the scope of the exclusion, and (d) it is no answer to say that if “declared to be a listed human disease” is to be given a static construction, so must “notifiable human infectious disease”, as the text and context is different and there is no temporal context to the words “notifiable human infectious disease”.

212    I do not accept LCA Marrickville’s submissions. The relevant temporal requirement is an order of the requisite character causing loss during the Period of Insurance. The use of the word “declared” does not mean “declared” as at the inception of the policy. It means declared during the Period of Insurance. If so declared, loss arising from or in connection with the declared disease which would otherwise be within cll 9.1.2.1 or 9.1.2.4 is excluded. In the present case COVID-19 was declared to be a listed human disease under the Biosecurity Act before the making of any order by a competent public authority. As a result, the exclusion operated at all times.

213    It is not to the point that there is no reference to “from time to time” qualifying the word “declared”. In context, “declared” is tied only to the Period of Insurance. The policy speaks to losses occurring during the Period of Insurance from the specified circumstances (in effect, the order). The exclusion also speaks to circumstances in existence or which come into existence during the Period of Insurance. Commercial considerations do not favour a static construction. Commercial considerations are neutral. While it may be said that the parties would like to know the scope of the exclusion at inception of the policy, it may equally be said that they did not intend the cover to extend to declared diseases arising during the Period of Insurance. The fact that highly Pathogenic Avian Influenza in Humans is a known exclusion is no warrant for reading the reference to “any disease(s) declared to be a listed human disease” as confined to such diseases listed at the time of inception of the policy. The reference to “any” as the qualifier of “disease(s)” provides another indicator to the contrary. It encompasses the unknown at the time of inception of the policy. From a commercial perspective there are different levels of certainty. Knowing the diseases excluded is one kind of certainty. Knowing that diseases of a particular type (that is, declared) are or will be excluded is another type of certainty. The text and context do not support construing the clause as if it provided the first level of certainty. “Notifiable human disease” takes the same temporal connection. The disease must be a notifiable disease during the Period of Insurance and at the time the order of the competent public authority is made.

214    It is clear from the terms of cl 9.1.2.1 that the relevant causal connection is between the order and the disease and that the exclusion applies to an order as a result of, relevantly, an infectious or contagious disease declared to be a listed human disease under s 42 of the Biosecurity Act. The kind of causal considerations which underpinned the answer to the separate question in Rockment do not arise. In that case cover was excluded for a claim which is “directly or indirectly caused by or arises from, or is in consequence of or contributed to by” the human biosecurity emergency declared under the Biosecurity Act. As such, a claim “somehow causally connected to a human disease specified in a declaration of a human biosecurity emergency” was not necessarily excluded as the required causal connection was between the claim and the emergency, not the disease: at [69].

215    Accordingly, if (as in the present case) an order results from any infectious or contagious disease declared to be a listed human disease under s 42 of the Biosecurity Act then the exclusion operates. The orders in the present case each resulted from such a disease. The title of the orders should be sufficient to prove that fact but if more is required the orders record that the grounds for making the order include the risk to public health from COVID-19: cl 4.

6.3.3    Section 54 Insurance Contracts Act

216    LCA Marrickville contends that if the exclusion is engaged then s 54(1) of the Insurance Contracts Act 1984 (Cth) applies. Section 54 provides:

(1)     Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person, being an act that occurred after the contract was entered into but not being an act in respect of which subsection (2) applies, the insurer may not refuse to pay the claim by reason only of that act but the insurer’s liability in respect of the claim is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced as a result of that act.

(2)     Subject to the succeeding provisions of this section, where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim.

217    According to LCA Marrickville the decision of the Director of Human Biosecurity to list COVID-19 as a “listed human disease” is an “act of some other person”, by reason of which the policy would, but for s 54, permit Swiss Re to refuse to pay its claim.

218    There is no doubt that the Biosecurity (Listed Human Diseases) Amendment Determination 2020 (Cth) is in terms the act of a “person”, stating “I, Professor Brendan Murphy, Director of Human Biosecurity, make the following legislative instrument”. But this does not mean that the Director of Human Biosecurity is “some other person” within the meaning of s 54(1) of the Insurance Contracts Act.

219    In C E Heath Casualty & General Insurance v Grey (1993) 32 NSWLR 25 at 47 the NSW Court of Appeal said “some other person” must be “a person who is entitled to a benefit under the policy”. Giles CJ Comm Div referred to C E Heath in Seery & Anor v John R Carr and Assoc (SCNSW, unrep, 3 November 1995), saying “Some other person in s54(1) can not refer to anyone in the world, and must refer to a person interested in the contract of insurance either as a party thereto or as a beneficiary thereunder by reason of s48(1)”. In Antico v Heath Fielding Australia Pty Ltd [1997] HCA 35; (1996) 188 CLR 652 at 669-670 the High Court said:

The legislation is expressed in broad terms and, on its face, there is no reason why the omission of the insured may not be a failure to exercise a right, choice or liberty which the insured enjoys under the contract of insurance. In any event, the act or omission may be that of a third party, “some other person”, who is unlikely to be a party to the contract of insurance in question.

220    In Greentree v FAI General Instance [1998] NSWSC 544; (1998) 44 NSWLR 706 at 723-724, in the context of explaining that because “act” is defined in s 54(6) to include an “omission, Handley JA said:

In my opinion it is used in s 54 in its secondary sense and refers to the failure of the insured or someone else to perform an act for the benefit of the insured under the policy. The other person need not be an agent of the insured. It may for example be the post office which fails to deliver a letter promptly or at all, or a facsimile transmission service which breaks down with the same result. The word does not cover failures to act by others having no relevant relationship or connection with the insured, whose interests are adverse to the insured.

Thus in my opinion the failure by the claimants, Mr and Mrs Greentree, to claim against the insured while any of the relevant policies were in force was not an omission within s 54(1).

221    In Hannover Life Re of Australasia Ltd v Farm Plan Pty Ltd [2001] FCA 796 Lee J said at [35] that “the provisions of s 54(1) of the Insurance Contracts Act 1984 (Cth) prevent the Insurer from refusing to pay the claim where the omission of the Trustee to pay the relevant premium is relied upon by the Insurer as the ground for refusal to pay the claim”.

222    In Maxwell (in his capacity as the authorised nominated representative on behalf of various Lloyds underwriters) v Highway Hauliers Pty Ltd [2013] WASCA 115; (2013) 298 ALR 700 the failure of the insured’s drivers to complete a relevant test was the act (being an omission) of some other person within the meaning of s 54(1): at [82], [118]-[122].

223    Having regard to the reasoning in these cases I agree with Swiss Re that while the “other person” need not be a party to the contract of insurance in order to fall within the scope of s 54(1), the person must have a relevant connection to the insured or the policy, whether as a beneficiary under the policy or by having some function in the performance of the insured’s obligations under it. The Director of Human Biosecurity is a stranger to the policy. The Director has no connection with the insured nor any obligation under the policy. The Director’s making of the Biosecurity (Listed Human Diseases) Amendment Determination 2020, accordingly, is not an “act of some other person within the meaning of s 54.

224    The observations in Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV [2013] NSWCA 252; (2013) 302 ALR 732 at [140] about the purpose of s 54 (“54 was intended to prevent reliance upon temporal exclusions, such as those considered in these two cases, as well as other provisions which operated, because of an act or omission occurring after the insurance was entered into, to suspend cover or entitle the insurer to deny a claim irrespective of whether the insurer had suffered any prejudice as a result: Law Reform Commission Report No 20, esp paras 217, 229 and Appendix A, cl 54, notes 3 and 4; and Explanatory Memorandum, paras 177 to 182”) do not support a contrary conclusion. Notably, the pilot in Johnson v Triple C Furniture & Electrical Pty Ltd [2010] QCA 282; [2012] 2 Qd R 337 was connected to the insured and the obligation (to fly only if holding a particular licence) was required by the policy. On that basis, the conclusion in that s 54 did not apply to the omission of the pilot to hold the required licence is difficult to comprehend. But that is not the present case.

225    Nor is the fact that s 54 is concerned with substance and not form (East End Real Estate Pty Ltd v CE Health Casualty & General Insurance Ltd (1991) 25 NSWLR 400 at 403-404, Antico at 673) material to the resolution of the dispute issues in the present case. The requirement to focus on substance is not in dispute.

226    Swiss Re noted that in FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd [2001] HCA 38; (2001) 204 CLR 641 at [41] the High Court said:

Section 54 does not permit, let alone require, the reformulation of the claim which the insured has made. It operates to prevent an insurer relying on certain acts or omissions to refuse to pay that particular claim. In other words, the actual claim made by the insured is one of the premises from which consideration of the application of s 54 must proceed. The section does not operate to relieve the insured of restrictions or limitations that are inherent in that claim.

227    In Maxwell v Highway Hauliers Pty Ltd [2014] HCA 33; (2014) 252 CLR 590 the High Court said:

[23] The Insurers sought support for their argument from a statement of the plurality in FAI that the section “does not operate to relieve the insured of restrictions or limitations that are inherent in [the] claim”. They misapply that statement in equating its reference to restrictions or limitations that are inherent in a claim with any restriction or limitation on the scope of the cover that is provided under the contract. A restriction or limitation that is inherent in the claim which an insured has in fact made, in the sense in which the plurality in FAI used that terminology, is a restriction or limitation which must necessarily be acknowledged in the making of a claim, having regard to the type of insurance contract under which that claim is made.

[24] Thus, as explained in FAI, the making of a claim under a “claims made and notified” contract necessarily acknowledges that the indemnity sought can only be in relation to a demand made on the insured by a third party during the period of cover. The section does not operate to permit indemnity to be sought in relation to a demand which the third party omitted to make on the insured during the period of cover but made after that period expired. Similarly, the making of a claim under a “discovery” contract, of the type in issue in FAI itself, necessarily acknowledges that the indemnity sought can only be in relation to an occurrence of which the insured became aware during the period of cover.

[25] The making of a claim under an “occurrence based” contract, the type of insurance contract in the present case, necessarily acknowledges that the indemnity sought can only be in relation to an event which occurred during the period of cover. That restriction or limitation is inherent in a claim which is made under such a policy

228    Swiss Re submitted that:

The claim brought by LCA Marrickville in these proceedings must necessarily acknowledge the nature and type of disease in the making of the claim, namely, that it is one that is sufficiently serious to be “notifiable” under cover, but not one that is so serious as to be “listed” under the Commonwealth legislation.

Accordingly, the promulgation of the legislative instrument by which the listing of a disease occurs is not a relevant act for the purposes of section 54 of the [Insurance Contracts Act (ICA)] because it merely marks out the bounds of the claim, which must be acknowledged when the claim is made in the description of the seriousness of the relevant disease.

229    I agree with this conclusion, although I am not persuaded that the cases on which Swiss Re relied go so far. The reason I agree with the submission is that the making of the listed human disease determination has nothing to do with the insurer, the insured or the policy. The determination is a wholly extraneous circumstance which, if it occurs during the Period of Insurance and causes loss, is excluded from the scope of the indemnity. Whether that is characterised as a limitation inherent within the claim or not, the exclusion operates so that there is no occurrence during the Period of Insurance in respect of which any claim can be made.

230    Swiss Re also noted that s 54(2) provides that where the act could reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract, the insurer may refuse to pay the claim. The act is the making of the determination. According to Swiss Re because the policy and legislative response to COVID-19 occurred on a co-ordinated basis throughout Australia, including the orders on which LCA Marrickville relies for the operation of cl 9.1.2.1, COVID-19 being made as a “listed human disease” could reasonably be regarded as being capable of causing or contributing to the loss claimed by LCA Marrickville.

231    I am not persuaded by this argument. The loss in respect of which cover is provided by cl 9.1.2.1 (and cl 9.1.2.4) must result from an order of the relevant kind. The determination under s 42 of the Biosecurity Act cannot reasonably be regarded as being capable of causing or contributing to a loss in respect of which insurance cover is provided by the contract. As LCA Marrickville submitted the listing under the Biosecurity Act “says nothing at all about what any State government may do in response to outbreak or risks within its own jurisdiction”.

232    Accordingly, s 54(1) of the Insurance Contracts Act does not apply because the making of the determination under s 42 of the Biosecurity Act by the Director of Human Biosecurity is not the act of some other person by reason of which Swiss Re may refuse to pay LCA Marrickville’s claim within the meaning of s 54(1).

233    To the contrary, the exclusion in cl 9.1.2.1 applies according to its terms.

6.3.4    Effect of exclusion in cl 9.1.2.1 on cll 9.1.2.5 and 9.1.2.6

234    Swiss Re contended that properly construed the loss resulting in consequence of an order as a result of “any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015” cannot be within the scope of cll 9.1.2.5 (the conflagration or other catastrophe clause) or 9.1.2.6 (the prevention of access clause).

235    Swiss Re’s argument is that: (a) the policy must be read as a whole, so as to give the insuring promise in cl 9.1.2 a congruent application, (b) the Court should prefer a construction which gives each aspect of the clause a consistent operation, rather than one which would render parts of it nugatory or ineffective, (c) cl 9.1.2.1 represents the parties’ specific agreement as to the basis on which cover in respect of the business interruption by reason of a relevant order by a public authority as a response to disease will be advanced, (d) cll 9.1.1.1 and 9.1.2.4 are subject to the specific $500,000 sub-limit but the other clauses are not, and (e) as a result, the specific agreement contained in the disease/hybrid clause (including the Biosecurity Act exclusion), cl 9.1.2.1, as to the types of disease capable of attracting cover represents the parties’ specific agreement as to those matters and should prevail over any general provisions which follow.

236    In Chapmans Ltd v Australian Stock Exchange Ltd [1996] FCA 474; (1996) 67 FCR 402 at 411 Lockhart and Hill JJ said:

It is an elementary proposition that a contract will be read as a whole giving weight to all clauses of it, where possible, in an endeavour to give effect to the intention of the parties as reflected in the language which they have used. A court will strain against interpreting a contract so that a particular clause in it is nugatory or ineffective, particularly if a meaning can be given to it consonant with other provisions in a contract. Likewise where there are general provisions in a contract and specific provisions, both will be given effect, the specific provisions being applicable to the circumstances which fall within them.

237    In Greencapital Aust Pty Ltd v Pasminco Cockle Creek Smelter Pty Ltd [2019] NSWCA 53 Leeming JA said:

It is settled law that, as Sackville AJA said in Park v Murray Irrigation Ltd [2018] NSWCA 166 at [79], “a conflict between apparently inconsistent provisions is to be resolved on the basis that one provision qualifies the other and, hence, both have meaning and effect”. In Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (1993) 178 CLR 379 at 386-387; [1993] HCA 40, the High Court explained that the principle was an aspect of the general rule that an instrument must be read as a whole. The same point was made in Chapmans Ltd v Australian Stock Exchange Ltd (1996) 67 FCR 402 at 411

238    LCA Marrickville referred to The Trust Company (Nominees) Ltd v Banksia Securities Ltd (receivers and managers appointed) (in liquidation) [2016] VSCA 324 at [53]. In that case the Victorian Court of Appeal considered the proper construction of a trust deed. The trust deed was to be construed as a contract: [35]. The Court said:

(1)    the principle traditionally called generalibus specialia derogant, or its obverse generalia specialibus non derogant, by either of which specific provisions will be given effect in preference to general provisions, or specific provisions are given greater weight than general provisions applying to the same subject matter, has been described as reflecting ‘sound common sense’. On the other hand, when it is open to debate which provision is the more general and which the more specific, the utility of the principle is correspondingly limited. Hoffman LJ made the converse point in William Sindall plc v Cambridgeshire County Council [[1994] 1 WLR 1016, 1024], that the ‘rule is particularly apposite if the effect of general words would otherwise be to nullify what the parties appear to have contemplated as an important element in the transaction’: [46];

(2)    Margetson v Glynn [1892] 1 QB 337 illustrates the importance of an objective or purposive analysis, rather than one which approaches the general/specific distinction in purely linguistic terms: [51]. On appeal Lord Herschell LC also looked at ‘the main object and intent of the contract’ and limited ‘the general words used, having in view that object and intent’: Glynn v Margetson & Co [1893] AC 351 at 355: [52]; and

(3)    the approach taken in Margetson v Glynn suggests that the resolution of the question of construction now before the Court lies, not in identifying a specific and a general provision and then applying the principle giving the specific provision precedence, but in determining whether either of the competing provisions, taken alone, gives effect to an object important to the transaction which the trust deed embodies: [53].

239    LCA Marrickville submitted that the exclusion provision in cl 9.1.2.1 had no effect on the operation of the other clauses (leaving aside cl 9.1.2.4, the radius extension) as: (a) the parties chose, specifically, to only constrain cl 9.1.2.1 by the Biosecurity Act exclusion, (b) the argument is difficult to reconcile with the fact that cl 9.1.2.3 also relates to “disease” relating to food or drink provided on the premises, but is not limited by any exclusion referable to the Biosecurity Act, (c) each of the clauses have different terms and fields of operation and one is not more specific than another, (d) the clauses deal with overlapping subject-matter, (e) there is no strict rule of construction that the specific prevails over the general, and any interpretive presumption is weak, and (f) Swiss Re’s submission suffers from the fallacy that the insured peril is “human infectious or contagious disease” and that therefore cover for business interruption losses consequent upon such disease is limited to the disease/hybrid clause (cll 9.1.2.1 and 9.1.2.4). However, the insured peril in each of these clauses is the “order” so that the exclusion of losses arising in connection with a particular disease does not have anything to say about whether there is cover under another clause which relates to action of an entirely different kind.

240    I consider that the focus of these submissions is too narrow. The issue is not whether the exclusion provision in cl 9.1.2.1 has the effect of excluding “any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015” from cover under the other clauses. It is whether the other clauses can apply to losses arising from or in connection withany disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015”. This question involves consideration of all of the clauses as a whole.

241    Having regard to the applicable principles I consider that cll 9.1.2.1 and 9.1.2.4 exclusively provide for loss as a result of outbreak of a notifiable human infectious or contagious disease or bacterial infection or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease where cl 9.1.2.3 is not applicable. That is, construing cl 9.1.2 as a whole it is apparent that cl 9.1.2.3 deals with the circumstance of, relevantly, disease from or traceable to food or drink at the Situation. Clause 9.1.2.3 is specific to that circumstance. If the disease in question from or traceable to food or drink provided from or on the Situation was also a listed human disease under the Biosecurity Act, cl 9.1.2.3 would operate according to its terms. This is because cl 9.1.2.3 is focused on the subject-matter of disease from or traceable to food or drink at the Situation. Put in linguistic terms, cl 9.1.2.3 is a specific provision which operates independently from cl 9.1.2.4. That is not to say that circumstances might not engage cl 9.1.2.1 (as extended by cl 9.1.2.4 or otherwise) and cl 9.1.2.3. They might. The issue would then be the proximate cause of the loss, which might be one, the other or both circumstances.

242    The same cannot be said of cll 9.1.2.5 or 9.1.2.6. They deal with the same subject-matter as cl 9.1.2.1 (and cl 9.1.2.4). The subject-matter is loss resulting from the actions of an authority (public, civil or lawful – the focus of all is the legal capacity of the authority to take the action in issue). Insofar as the actions of an authority in respect of a disease is concerned the loss covered is loss in consequence of an order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease or discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease. The more general subject-matter of cl 9.1.2.5, if it is construed as capable of including disease at all (as to which see below), would be inconsistent with the specific provision of cl 9.1.2.1 because it would not: (a) be confined to notifiable diseases, (b) require an order of the authority, (c) require the order to involve closure or evacuation of the whole or part of the Situation, (d) exclude highly Pathogenic Avian Influenza in Humans or any disease(s) declared to be a listed human disease pursuant to 42(1) of the Biosecurity Act 2015, or (e) be subject to the sub-limit on liability in aggregate of $500,000.

243    The same conclusion applies to cl 9.1.2.6 for the same reasons. Loss in consequence of the action of the lawful authority under cl 9.1.2.6, insofar as disease is concerned would not: (a) be confined to notifiable diseases, (b) require an order of the authority, (c) require the order to involve closure or evacuation of the whole or part of the Situation, (d) exclude highly Pathogenic Avian Influenza in Humans or any disease(s) declared to be a listed human disease pursuant to 42(1) of the Biosecurity Act 2015, or (e) be subject to the sub-limit on liability in aggregate of $500,000.

244    In other words, construing cll 9.1.2.5 and 9.1.2.6 as applying to diseases generally would expunge the careful distinction drawn by cl 9.1.2.1 between notifiable diseases and listed human diseases. That distinction would be meaningless. So too would the requirement for an order of an authority resulting from a notifiable disease. The inconsistency between the provisions would be profound. The result would not be reasonable and commercial operation of this part of the policy. The presence of cl 9.1.2.1 (and cl 9.1.2.3) in this part of the policy would be pointless.

245    I have considered that cl 9.1.2.1 applies to an authority responding to an outbreak of disease and cl 9.1.2.6 applies to a risk to life. I accept that this gives clause 9.1.2.6 a potentially wider field of operation than cl 9.1.2.1 when it comes to actions by an authority as a result of a disease. This does not cause me to conclude that cl 9.1.2.6 applies to the risk to life from a disease and that cl 9.1.2.1 applies to the actual outbreak of a disease. All of the identified incongruities would remain. Further, why would the parties have intended to treat authority action differently (and more expansively) in the case of a perceived risk of an outbreak of a disease and a perceived actual outbreak of disease? The fact that cl 9.1.2.6 deals with mere risk reinforces the conclusions reached that the clause does not apply to diseases at all.

246    Further, the policy, specifically cl 9.1.2, does not indicate that it involves bolted on provisions irrespective of their coherence or congruence as a whole. Rather, the provisions indicate a confined and structured approach to the extensions of cover. To construe cll 9.1.2.5 and 9.1.2.6 as applying to actions of an authority in response to a disease without the requirements of cll 9.1.2.1 or 9.1.2.3 being satisfied would be to render the specific provisions of cll 9.1.2.1 or 9.1.2.3 nugatory. To avoid that incoherence cll 9.1.2.5 and 9.1.2.6 should be construed as not extending to the subject-matter covered by cll 9.1.2.1 and 9.1.2.3.

247    LCA Marrickville’s contrary arguments are not persuasive: (a) the presence of the Biosecurity Act exclusion in cl 9.1.2.1 alone indicates that cll 9.1.2.5 and 9.1.2.6 were not intended by the parties to apply to diseases, as does the sub-limit on liability for diseases, (b) cl 9.1.2.3 is specific and self-contained and operates according to its terms, (c) cl 9.1.2.1 is more specific than cll 9.1.2.5 and 9.1.2.6, (d) as a matter of construction, there can be overlap between cll 9.1.2.3 and 9.1.2.1, but not cll 9.1.2.5 and 9.1.2.6 and cl 9.1.2.1, (e) in this context, the interpretative presumption is not weak, and (f) the insured peril in cl 9.1.2.1 does include the order but it is an order resulting from the disease as described. The better analysis is that cl 9.1.2.1 identifies the extent which cover for disease other than in cl 9.1.2.3 is provided – that is, disease as described resulting in an order as described but not within the exclusion as described.

248    I also do not accept that the relationship between the provisions involves mere tautology or redundancy in the sense described in Teele v Federal Commissioner of Taxation (1940) 63 CLR 201 at 207. There is a difference between mere tautology or redundancy (common in insurance policies and legal documents of all kinds, Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1999] 1 AC 266 at 274) and incoherence and incongruence. If construed as LCA Marrickville contends, the relevant provisions would suffer from profound incoherence and incongruence. Given the careful structuring of the provisions, it cannot be concluded that this was what the parties intended. Nor is what is involved in this case “mere surplusage”, as referred to in Wonkana at [44]. Nor, for that matter, do I consider that the contra proferentem rule, which is a rule of last resort, has any material role to play. The construction issues are able to be resolved by the application of orthodox principles of construction.

249    Nor do I accept the submission that as the provisions have different fields of operation cll 9.1.2.5 and 9.1.2.6 should not be read as applying to diseases. It is the fact that cll 9.1.2.1 and 9.1.2.3 apply specifically to diseases, subject to specific restrictions, which supports reading cll 9.1.2.5 and 9.1.2.6, which are not subject to those restrictions, as not applying to diseases.

250    As Allianz submitted in respect of analogous circumstances, the policy must be read as a whole: Zhang v ROC Services (NSW) Pty Ltd [2016] NSWCA 370; (2016) 93 NSWLR 561 at [89]. Further, the observations of Leeming JA in HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342 at [134] are apt:

it is trite that the contract must be construed as a whole, with a view to the legal meaning reflecting a measure of internal coherence: thus ‘preference is given to a construction supplying a congruent operation to the various components of the whole’: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16]. In a case such as the present, where the difficulties are real, that involves what Lords Neuberger and Mance have described as an ‘iterative process’ – ‘checking each of the rival meanings against the other provisions of the document and investigating its commercial consequences’: see Re Sigma Finance Corp (in administrative receivership) [2009] UKSC 2; [2010] 1 All ER 571 at [12], and see Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900 at [28] and Richmond v Moore Stephens Adelaide Pty Ltd [2015] SASCFC 147 at [98]. Lord Grabiner has, in my view rightly, regarded this as ‘fundamental’: ‘The iterative process of contractual interpretation’ (2012) 128 Law Quarterly Review 41 at 45-49 and 61. The process of working through the consequences of the competing literal or grammatical meanings enables a court to assess whether either party’s preferred legal meaning gives rise to a result that is more or less internally consistent and avoids commercial absurdity.

251    Reading cll 9.1.2.5 and 9.1.2.6 as applying to diseases, given the text, context and purpose of the policy, would be commercially absurd.

252    It is also not the case that this conclusion depends on the fact that more than one insuring clause is engaged. A circumstance may readily fall within more than one insuring clause. The issue here is that if LCA Marrickville is correct the relevant provisions do not merely overlap, they become incongruent.

253    Accordingly, insofar as loss is consequent on the action of an authority resulting from disease, cll 9.1.2.5 and 9.1.2.6 are incapable of being engaged. The loss is either within the scope of cl 9.1.2.1 (as expanded by cl 9.1.2.4) or cl 9.1.2.3 or it is not.

254    As will be explained in the other cases, I reach the same conclusions for similar reasons. There is also another consideration which reinforces these conclusions. It is notable that the hybrid clauses concern human infectious or contagious diseases. The requirement in the policies other than the Chubb policies is for an order or action of an authority involving closure or evacuation of the premises/situation. The Chubb policies extend to restriction of the use of premises all other policies require “closure or evacuation”. Leaving aside the Chubb policies, a requirement for the closure or evacuation of the premises/situation in the case of an order resulting from a human infectious or contagious diseases makes sense. It reflects the intention that persons who would otherwise ordinarily be entitled to enter and remain on the premises are precluded from doing so, thereby achieving the object of restricting the spread of the human infectious or contagious disease.

255    The prevention or restriction of access clauses concern damage or the threat or risk of damage to persons or property, not diseases. Providing cover for the effects of a prevention or restriction of access from damage or the threat or risk of damage to persons or property, in this context, makes sense. The damage or threat of damage contemplated is not of a kind that would spread such as in the case of a human infectious or contagious diseases. The inaptness of the concept of “damage” or the threat of “damage” to persons to apply to the risk presented by a disease reflects the fact that the contemplated damage or risk of damage is physical injury or death from physical injury and not the kind of harm caused by a human infectious or contagious diseases (even though that may also involve death).

6.3.5    Clauses 9.1.2.1 and 9.1.2.4

6.3.5.1    …“at the Situation”

256    In my view the words “at the Situation” in cl 9.1.2.1 qualify “outbreak of a notifiable human infectious or contagious disease” and “discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease”. They do not qualify the “discovery of an organism”. That is, an organism may be discovered which is not at the Situation. If that discovered organism would be likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation, the clause may be engaged. I consider this the proper construction because: (a) the words “at the Situation” in cl 9.1.2.1 do not qualify “any discovery of an organism”, but qualify instead the entire phrase “any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease”, and (b) requiring discovery of the organism would make the requirement of “likely to result in” unnecessary because the organism, by definition, must be one likely to result in an infectious or contagious disease so that if such an organism is discovered at the Situation the requirement of “likely to result in” would be superfluous. The same reasoning applies to cl 9.1.2.4 which expands the relevant area to a 5 kilometre radius around the Situation.

6.3.5.2    Competent public authority

257    There is no dispute that the orders in question are orders of a competent public authority.

6.3.5.3    “…as a result of outbreak or discovery of likely to result in the occurrence

258    The issue is whether the orders (or any of them) were as a result of “outbreak of a notifiable human infectious or contagious disease” or “discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease” at or within a 5 kilometre radius around the Situation.

259    LCA Marrickville (and other insureds) relied on two approaches – the first textual and the second evidentiary. The textual approach relies on the text of the orders and extrinsic material explaining the reasons why they were made. The second relies on proof of the existence of COVID-19 within the 5 kilometre radius around the Situation.

260    LCA Marrickville conceded that none of the orders relied upon “are specific enough to identify an outbreak in the terms used in the second line of 9.1.2.1. That is, within 5 kilometres of LCA Marrickville”. That is, the textual approach does not enable an inference to be drawn that any of the orders were as a result of “outbreak of a notifiable human infectious or contagious disease” or “discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease” at or within a 5 kilometre radius around the Situation.

261    As Swiss Re submitted, the difficulty is that the insureds have otherwise explained why the textual approach is correct. In short, given the context and text of the insuring clauses, if an authority has made an instrument and the instrument explains on its face why it was made, there would need to be good reason to attempt to go behind the face of the instrument to ascertain if it might be inferred that some other reason was the or a cause of the making of the instrument. As it was put for Taphouse: (a) it is unlikely an insured could obtain evidence as to an authority’s reasons for acting, (b) even if the insured could obtain that evidence, statutory instruments usually speak for themselves, (c) as with a statute, a statutory instrument evinces its intention by the language used, and (d) it is not permissible to contradict the language of the instrument.

262    Accordingly, if the order itself identifies why it has been made, either expressly or by implication, I doubt that a search for contrary or supplementary evidence is likely to be able to yield anything useful. If the order does not identify why it has been made, either expressly or by implication, then other evidence may be useful, provided it is evidence about what he authority knew and considered at the time it made the orders.

263    I should record that I accept the insured’s submission that it is not necessary for an insured to prove any objective fact as to the existence of the relevant disease for a provision such as cl 9.1.2.1. The relevance of the objective fact as to the existence of the relevant disease is mediated through the order. This is because the relevant objective facts are the existence of the order and whether it resulted from the specified circumstances. The objective fact of the existence of the specified circumstances may assist in enabling inferences to be drawn about the cause of the order, but that is all.

264    In particular, an authority can wrongly issue an order and the requirements of cl 9.1.2.1 may nevertheless be satisfied. If it were otherwise cover could be denied even if the order merely because the authority made some kind of error that was reasonably open to it and discovered only subsequently. For example, assume a closure order resulting from the discovery of legionella in an air conditioning system. The premises are ordered to be closed while testing is carried out. The testing shows that the legionella bacteria are present but are inactive and harmless (which may not be scientifically possible but the point is still good). The order resulted from the authority considering that the legionella bacteria were likely to result in the occurrence of a notifiable human infectious or contagious disease” at or within a 5 kilometre radius of the Situation. Clause 9.1.2.1 would be satisfied even if the testing subsequently proved that the bacteria was not in fact likely to result in the occurrence of a notifiable human infectious or contagious disease” at or within a 5 kilometre radius of the Situation.

265    It could not be taken that the parties intended that the insured would not be covered for acts of an authority in good faith which can objectively be characterised as resulting from the nominated circumstances even if it can be subsequently proved that the authority was in error. While there may be some limits to this conclusion, such as an order issued arbitrarily or capriciously or in bad faith, no such considerations on the part of any authority arise in the present case (or any of the cases).

266    In Rockment at [36] the Full Court noted that:

Whilst it may not be useful to divert attention to the myriad alternative circumstances on which the clause might operate, it is true that a construction which connects the operation of the Exclusion to an objectively discernible fact has a degree of commercial rationality. But that is not what the Exclusion says, which is the primary consideration. In any event, a construction which identifies the relevant causal element as being the emergency state of affairs which is the subject of a declaration also attaches to an objective element.

267    I consider this supports the view I have reached. The objectively discernible fact is the making of the order which must be a result of the identified circumstances. The clause, in effect, submits the parties to the actions of the relevant authority as the required objective fact. This makes far more commercial sense than requiring the parties to ascertain (and potentially dispute) the existence or non-existence of the identified circumstances, including by reference to matters that were not known to or considered by the authority when it made the orders.

268    By the clause the parties are evincing a common intention that the objective actions of the authority determine the availability of cover. The parties must be taken to have understood that an authority with the requisite power would be bound to act lawfully and on a rational basis. But this does not mean that: (a) an authority might not later be proven to be wrong, or (b) subsequently available information proving more than the authority knew or more than the authority acted upon can be relevant. The parties are stuck with the actions of the authority taken in the circumstances known to the authority at the time as the determinant of cover. This is a commercially rational and sensible resolution of the operation of the clause.

269    This is important because it exposes why the various causal sequences which the insurers provided for assistance are fraught. The causal sequences all start with the identified or specified circumstance as if that has to exist as a matter of objective fact. That is not so for the reasons given. The start of the relevant causal sequence for hybrid clauses is the making of the order by the authority. It is true that the cause for the making of the order must be as identified by the clause (so that the circumstance must exist before the order) but that does not mean that the parties are able to go behind the order to prove the authority wrong or to prove that another order, in different terms and for different reasons, could have been made.

270    This all said, one way or another, the insured must prove that the order resulted from the specified circumstances. The starting point (and, in my view in most cases, at least where the reason for the order is apparent on or may be inferred from the face of the order and accompanying extraneous material, the finishing point as well) must be the terms of the order and any accompanying contemporaneous explanatory material.

271    The orders were made under s 7 of the Public Health Act. Section 7 applies if the Minister considers on reasonable grounds that a situation has arisen that is, or is likely to be, a risk to public health and enables the Minister to by order give such directions as the Minister considers necessary to deal with the risk and its possible consequences, including by declaring any part of the State of NSW a public health risk area and in that event to reduce or remove any risk to public health in the area, to segregate or isolate inhabitants of the area, or to prevent, or conditionally permit, access to the area.

272    As noted, the orders identify the grounds for concluding that there is a risk to public health in cl 4. Clause 4 records that:

It is noted that the basis for concluding that a situation has arisen that is, or is likely to be, a risk to public health is as follows—

(a) public health authorities both internationally and in Australia have been monitoring international outbreaks of COVID-19, also known as Novel Coronavirus 2019,

(b) COVID-19 is a potentially fatal condition and is also highly contagious,

(c) a number of cases of individuals with COVID-19 have now been confirmed in New South Wales, as well as other Australian jurisdictions, [including by means of community transmission].

273    The words “including by means of community transmission” did not appear in the 26 March 2020 order but do appear in subsequent orders including that of 1 June 2020.

274    The Explanatory Note to the 26 March 2020 order records that the object of the order is to “make further provision to deal with the public health risk of COVID-19 and its possible consequences”.

275    Given this, I am unable to accept that the orders on which LCA Marrickville relied were as a result of anything in fact occurring at or within 5 kilometres of the Situation. They resulted from the Minister’s concern about the public health risk COVID-19 presented to the State of NSW as a whole. There is a crucial difference between the “risk” or “threat” of an outbreak of COVID-19 and an outbreak of COVID-19. While the risk or threat is based on the existence of COVID-19 in some locations (not every location) in the State, it is only the risk or threat which relates to the State as a whole (and every person in the State). The existence of COVID-19 in certain locations (that is, the outbreak or occurrence of COVID-19) does not relate to the State as a whole.

276    The fact that the Situation and the area within 5 kilometres of the Situation is within NSW does not mean that it can be said that the orders resulted from COVID-19 at the Situation or within the 5 kilometre radius. To so conclude would be to render the causal connection between the order and the 5 kilometre radius around the Situation meaningless. The causal connection identified by the words “as a result of” link the order and circumstances within the 5 kilometre radius.

277    The text of the orders is inconsistent with any inference that the orders were a result of anything to do with the existence of COVID-19 (as an outbreak or otherwise) within the 5 kilometre radius. The orders resulted from the circumstances relating to COVID-19 in NSW generally. Those circumstances included: (a) the existence of COVID-19 in certain locations within NSW (but not at every location within NSW), and (b) the risk or threat of the spread of COVID-19 within NSW from both known and unknown cases of COVID-19.

278    LCA Marrickville submitted that the “fact that the threat was recognised to exist both inside and outside the radius does not matter. What matters is that the orders were in response to an outbreak in the relevant area, which includes the radius”. Importantly, and as noted, cl 9.1.2.1 is not about the threat or risk of disease. It is about an order as a result of an outbreak of a disease or discovery of an organism likely to result in the occurrence of a disease. This is an important difference from cl 9.1.2.6 which is focused on the action of an authority to avoid or diminish risk. The inference of recognition by the authority of an outbreak or discovery of the required kind within the radius cannot be drawn. Such reasoning might be legitimate for an order concerning a smaller area, but it is not legitimate when the order resulted from circumstances in the whole of NSW. As noted, if that were sufficient, the Situation and the radius have no work to do in respect of the requirement of causality between the order and the disease.

279    The conclusion which must be reached on the textual approach is that the orders were not a result of an outbreak of disease at the Situation or within a 5 kilometre radius of the Situation or discovery of an organism likely to result in the occurrence of disease at the Situation or within a 5 kilometre radius of the Situation. The circumstances within the radius in terms of an outbreak or likely occurrence of a disease (as opposed to a risk or threat of disease across NSW as a whole) were not a proximate or any other kind of cause of any of the orders. The textual approach should be the end of the matter.

280    Proof of the fact of cases of COVID-19 at the Situation or within the 5 kilometre radius of the Situation before the orders were made does not prove that the orders resulted from an “outbreak” or “occurrence” of COVID-19 at the Situation or within the 5 kilometre radius of the Situation as it does not prove that the Minister may be inferred to have: (a) known of that circumstance before making the order, unless the proof is contemporaneous documents of which it may be inferred the Minister was aware (such as contemporaneous NSW Health records provided to the Minister), (btaken into account that circumstance before making the order, or (c) acted in part on the basis of that circumstance. For this reason, the possibility of further non-contemporaneous epidemiological evidence being adduced is beside the point.

281    As discussed, the FCA v Arch and Hyper Trust cases take a different view but that is because those cases considered areas which included the majority of the population centres in each country. As Insurance Australia submitted:

as part of their reasoning, Lord Hamblen and Lord Legatt rejected a submission that ‘but for’ was a minimum requirement for causation. Their Lordships accepted that a ‘but for’ test was a relevant causal inquiry in the ‘vast majority of insurance cases’, but held it was not a necessary pre-condition to a finding of causation in all cases: at [181]-[183]. IAG does not contest this statement as a matter of principle. It accepts that under Australian law the ‘but for’ test is not the sole or minimum requirement to establish causation under an insurance contract. Indeed, as recognised in FCA v Arch at [187], Allsop J’s decision in McCarthy [McCarthy v St Paul International Insurance Co Ltd [2007] FCAFC 28; (2007) 157 FCR 402] (being a case concerning the recoverability of defence costs incurred in respect of two claims, only one of which was insured) is one example where the Court has been willing to find loss was caused by a particular event even though the ‘but for’ test could not be satisfied. The inefficacy of a ‘but for’ test in cases of multiple sufficient causes is well known.

it is important to have regard to the reason why a ‘but for’ test was not applied in FCA v Arch. The specific reason given (at [179]) was that a 25-mile radius (being the relevant radius in the disease clauses there being considered) covered a significant proportion of England and Wales. This meant, in turn, that it would be a difficult if not impossible task for the insured to demonstrate that, but for the cases of COVID-19 within the particular 25-mile radius of its insured premises, the relevant government restrictions would not have been introduced and the interruption to business would have been any less: at [179]. The prior case law on concurrent causes was distinguished expressly on this basis: at [180] (‘The facts of the present case are distinguishable in this respect from the facts in the cases referred to above…’

finally, at [190], Lord Hamblen and Lord Legatt made the important observation that:

Whether an event which is one of very many that combine to cause loss should be regarded as a cause of the loss is not a question to which any general answer can be given. It must always depend on the context in which the question is asked. Where the context is a claim under an insurance policy, judgements of fault or responsibility are not relevant. All that matters is what risks the insurers have agreed to cover.

282    In particular, there is a fallacy in the argument for LCA Marrickville that if “the risk exists within the radius, and the order is made in response to it, it is a red herring to say it might also exist outside that radius”, referring to FCA v Arch UKSC at [194] as follows:

The parties to the insurance contracts may be presumed to have known that some infectious diseases including, potentially, a new disease (like SARS) can spread rapidly, widely and unpredictably. It is obvious that an outbreak of an infectious disease may not be concerned to a specific locality or to a circular area delineated by a radius of 25 miles around a policyholder’s premises. Hence no reasonable person would suppose that, if an outbreak of an infectious disease occurred which included cases within such a radius and was sufficiently serious to interrupt the policyholder’s business, all the cases of disease would necessarily occur within the radius. It is highly likely that such an outbreak would comprise cases both inside and outside the radius and that measures taken by a public authority which affected the business would be taken in response to the outbreak as a whole and not just to those cases of disease which happened to fall within the circumference of the circle described by the radius provision.

283    The first fallacy is that the submissions confuse the concepts of outbreak/occurrence of COVID-19 with the risk or threat of COVID-19. The insured peril in cl 9.1.2.1 is the fact of an outbreak or the fact of discovery likely to result in the occurrence of disease at or within the 5 kilometre radius of the Situation. It is not the risk or threat of COVID-19 at or within the 5 kilometre radius of the Situation. It is not the risk or threat of COVID-19.

284    The second fallacy is that the proposition assumes the result, that the order(s) were made in response to circumstances within the radius. The reasoning in FCA v Arch UKSC, if applied in the present case, would also assume how the policy is to operate. It is not that an order cannot relate to areas inside and outside of the radius. It is also not that the order must be a result solely of circumstances inside the radius. It is that the circumstances inside the radius must be a cause of the order, even if circumstances outside of the radius are also a cause of the order (see further below) and the relevant cause in this case is not the risk or threat of COVID-19 but the fact of an outbreak or likely occurrence of COVID-19 as specified. In the present case no inference can be drawn that the circumstances inside the radius were a cause of the order in any sense. Accordingly, the submission for LCA Marrickville that the “parties cannot reasonably be supposed to have intended that risks to life outside the particular radius could be set up so as to displace coverage” goes nowhere. Coverage only exists if the order with the requisite causal connection to the area within the radius exists. If it does, the fact that there may also be a causal connection to areas outside of the radius would not “displace coverage”. In the present case, however, the requisite causal connection (as a result of) cannot be identified.

285    The insureds relied on FCA v Arch in respect of the meaning of “outbreak”. Swiss Re submitted that an “outbreak” in the context of disease involves a sudden eruption, breaking out or an outburst of that disease and that a single instance of disease, or multiple instances with no connection to a common cause, does not constitute an “outbreak” within the ordinary meaning of the word. In FCA v Arch UKSC Lords Hamblen and Leggatt JJSC, with whom Lord Reed PSC agreed said at [69]:

Nor for that matter could an outbreak of disease be regarded as one occurrence, unless the individual cases of disease described as an outbreak have a sufficient degree of unity in relation to time, locality and cause.

286    This was said in the context of a policy which referred to an “occurrence” and not an “outbreak” of disease.

287    In the present case there is a textual indicator that “outbreak” in cl 9.1.2.1 takes the same meaning as “occurrence”. The order must result from either an outbreak of disease or the discovery of an organism likely to result in an occurrence of disease (at the Situation etc). There is no rational reason, in this context, to distinguish between the two circumstances. In fact, it would be irrational for there to be cover for an order resulting from discovering an organism likely to result in an occurrence of the notifiable disease at the Situation or within the radius and no cover for an order resulting from an actual occurrence of the notifiable disease at the Situation or within the radius merely because the occurrence does not have a sufficient degree of unity in relation to time, locality and cause to be classed as an “outbreak”. The inference to be drawn is that cl 9.1.2.1 is treating “outbreak” as synonymous with “occurrence”. An occurrence of a notifiable disease is an “event” of such a disease being “something which happens at a particular time, at a particular place, in a particular way”: Axa Reinsurance (UK) plc v Field [1996] 1 WLR 1026 at 1035.

288    Even if this incorrect, I do not accept that the reasoning in FCA v Arch UKSC at [69] is applicable. The issue in cl 9.1.2.1 is not whether there was in fact an outbreak of a disease as required. It is whether the authority made the order(s) as a result of what it considered to be an outbreak of the disease. I would infer that the Minister made the orders as a result of what he perceived to be an outbreak or outbreaks of COVID-19 in certain locations in NSW and the associated risk of COVID-19 across NSW. I reach this inference based on these circumstances: (a) the orders apply to the whole of NSW indicating that the Minister perceived a serious risk to human health, (b) it should be inferred that the Minister knew about the agreed facts relating to COVID-19 set out in section 2 above, (c) as such, it should be inferred that the Minister knew both that COVID-19 is highly contagious in a non-controlled environment (that is, not in a hospital, quarantine or isolation) and that people were likely to be infectious with COVID-19 before they became aware of symptoms, and (d) accordingly, the risk to public health was not from known cases of COVID-19 alone but was also from unknown cases of COVID-19.

289    These facts about COVID-19 mean that it is unlikely the Minister acted as he did because of a mere “occurrence” as opposed to an “outbreak” of COVID-19.

290    But for the textual indicator in cl 9.1.2.1, however, I would accept that there is a difference between an “outbreak” of COVID-19 and an “occurrence of COVID-19.

291    Absent the specific context of cl 9.1.2.1, an “occurrence” of COVID-19 would mean an event or case of COVID-19 in any setting. That is, it would not matter if the case of COVID-19 was in a controlled environment (such as a hospital, quarantine or isolation). The fact that the risk of transmission of COVID-19 would be low due to the controlled setting would be immaterial.

292    Absent the specific context of cl 9.1.2.1, an “outbreak” of COVID-19 would require more than an “occurrence” of COVID-19. The difference between my conclusions and the submissions of the insurers is that the insurers contended that an “outbreak” of COVID-19 requires a confirmed case of transmission in the community (that is, in a non-controlled setting) of COVID-19. I consider that an “outbreak” of COVID-19 requires only a case of active (that is, infectious) COVID-19 in the community (that is, in a non-controlled setting).

293    I reach my conclusion on the basis of the same facts identified above, namely: (a) COVID-19 is highly contagious in a non-controlled environment (that is, not in a hospital, quarantine or isolation), (b) people are likely to be infectious with COVID-19 before they become aware of symptoms, and (c) accordingly, the risk to public health was not from known cases of COVID-19 alone but was also from unknown cases of COVID-19.

294    In other words, with a known highly contagious disease like COVID-19 the risk of transmission by a person with active COVID-19 in the community (that is, in the non-controlled setting) is so high that it may readily be inferred that, in any such case, the person probably had transmitted COVID-19 to persons unknown before the person realised they had COVID-19. On this basis, proof of the fact of a person with active COVID-19 in the community (that is, in the non-controlled setting) is sufficient to prove an “outbreak” of COVID-19. The approach of the insurers involves ignoring the probability that a person with active COVID-19 in a non-controlled setting will transmit the disease to other persons who are not able to be identified. In the context of a contractual arrangement I would not infer that the parties to the policy intended that anything more than probabilistic reasoning would be required.

295    This also reflects my view that the parties must be taken to have intended that whether or not there is an “outbreak” is disease dependent. COVID-19 is one kind of disease, as described above. For other diseases, a confirmed case in a non-controlled setting may not be an “outbreak” of the disease.

296    I note that in Hyper Trust No 1 at [143] McDonald J said:

…“outbreak” is capable of consisting of a relatively small number of cases or, where the pathogen is particularly serious, a single instance of disease.

297    As discussed, for COVID-19, I agree.

298    I also consider that it would be unreasonable and uncommercial to confine the meaning of “outbreak” to a confirmed case of community transmission from one person to another person within the area. Because I consider “outbreak” to be disease dependent, I cannot see how it could be concluded that an action of an authority would not result from an outbreak of COVID-19 merely because the authority knew of a person within the community and in the area (and not in a controlled environment) with an infectious case of COVID-19, but did not know the person had in fact infected another person with COVID-19 in the area. The idea that only an action of an authority taken after the authority knows of community transmission of COVID-19 in the area is the result of an outbreak of COVID-19 is untenable given the highly infectious nature of the disease and the obvious risk of unknown cases of COVID-19. The authority must consider the capacity for community transmission in the area to be present, but not necessarily the fact of community transmission, for there to be an outbreak of COVID-19.

299    I would reach the same conclusion if the issue of an “outbreak”, under the policy was a matter for me to determine as an issue of objective fact (in contrast to a question whether the action of the authority was a result of an outbreak). In the case of a disease as contagious and potentially serious as COVID-19, the presence of a person within the community and in the area (and not in a controlled environment) with an infectious case of COVID-19 is an outbreak of COVID-19. It is an outbreak of COVID-19 because, unless the person is in a controlled environment, the disease is so readily transmissible and potentially serious. This is not to convert a potential “outbreak” into an “outbreak”. It is to recognise that for a disease such as COVID-19 one active case in an uncontrolled setting is itself an “outbreak” of COVID-19.

300    This conclusion, I note, is consistent with the position of the Australian Government Department of Health CDNA (Communicable Diseases Network Australia) National Health Guidelines for Public Health Units which outlines minimum standards for the surveillance, contact-testing and management of COVID-19. The document defines an outbreak of COVID-19 as a single confirmed case of COVID-19 in the community. While the document was issued in May 2021, well after the events in question, it discloses that there is (and, by inference, was at the relevant time) a rational basis for an authority to consider that a single case of COVID-19 within the community constitutes an outbreak of COVID-19, provided that case is infectious while in the community. In terms of a clause depending on the actions of an authority, rationality of the action is sufficient.

301    As the insureds said, this makes sense given the following: (a) COVID-19 is a new and deadly virus that was not known to exist in humans before 2019, (b) the severity and virulence of COVID-19, (c) at the relevant times there was no vaccine or cure for COVID-19, and (d) the previously expected number of cases of COVID-19 would have been zero.

302    I recognise that the issue involve an inference about or attribution to an authority of a reason for acting. It is not possible to know whether the authority subjectively characterised the circumstances as an “outbreak” or an “occurrence” of COVID-19. This supports the conclusion that a commercially rational interpretation of the policy involves focusing on the action of the authority and a process of drawing inferences from that action and circumstances known to the authority at the time about the reasons for its actions as a matter of objectively inferred or objectively attributed fact.

303    This said, I agree that if the focus of the clause was the objective fact of an outbreak of COVID-19 then: (a) as noted, one case of COVID-19 in controlled circumstances such as quarantine, isolation or a hospital would not be an outbreak of COVID-19, and (b) as a practical matter, proving an outbreak of COVID-19 within the radius requires a person with COVID-19 capable of communicating COVID-19 to be present within the radius other than in a controlled situation such as quarantine.

304    It is not relevant, however, that guidelines about other diseases (Commonwealth Department of Health’s ‘Guidelines for the public health management of gastroenteritis outbreaks due to norovirus or suspected viral agents’, last updated in 2010) require “[t]wo or more cases of diarrhoea and/or vomiting in a 24 hour period in an institution or among a group of people who shared a common exposure or food source should be suspected as constituting an outbreak and an assessment or investigation commenced”. This is a different disease and what constitutes an outbreak, in my view, is disease dependent.

305    LCA Marrickville submitted that, on the agreed facts:

…there were at least 19 COVID-cases as at 23 March 2020 that recorded postcodes wholly within the radius. There were 132 cases recorded in LGA’s partly within the radius, and the Court can safely infer that it is more probable than not that at least some of those cases were within the radius. As is conceded by Swiss Re, at least 9 of the infections wholly within the radius had a likely source of infection within Australia. This is plainly sufficient, in the context of a disease of the characteristics, seriousness and virulence as COVID-19, to constitute an “outbreak” at that time and within the radius.

306    As I have said, in the context of actions of an authority, whether or not the cases of COVID-19 were the result of transmission within the 5 kilometre radius is sufficient but not necessary insofar as the requirement for an “outbreak” is concerned. Having COVID-19 and being infectious in non-controlled circumstances within the 5 kilometre radius is what is necessary because that fact alone proves the probability of transmission to other persons even if those other persons are not known or the fact of such transmission cannot be proved. An “outbreak” is not confined to cases of COVID-19 within the radius springing from one common source or multiple sources within the radius. It is the presence of a person with COVID-19 capable of being transmitted to another person who is not in a controlled situation such as quarantine, isolation or a hospital and who is within the radius that is required. I thus reject the submission of Swiss Re that there must be a unity of time, location and cause, in effect, involving multiple contemporaneous transmissions from a cause originating at, and between persons located at the Situation or within the radius at the time of transmission.

307    I note that the evidence discloses that by 23 March 2020 there were 832 cases of COVID-19 in NSW. As noted, of those total cases, 132 cases had a usual place of residence in a local government area partly within the 5 kilometre radius of the Situation and 19 had a usual place of residence in a postcode within the 5 kilometre radius of the Situation.

308    The issues, however, are that: (a) there is no evidence from which it would be inferred that the evidence of persons with COVID-19 within the radius had anything to do with the making of the orders, and (b) if this is wrong, the available evidence discloses only the usual place of residence of the person with COVID-19 and not that the person was within the radius when infectious with COVID-19 or was within the community (as opposed to being in controlled circumstances such as a hospital, in isolation or in quarantine).

309    Swiss Re submitted that the evidence does not “establish where a person was during their infectious period, or at any time, when that person had COVID-19 – i.e., whether the person was in hotel quarantine, hospital quarantine, wholly compliant with directions to quarantine at home or in the community and if so, for what periods and at what locations”. This is true. But the evidence does establish that nine cases were “locally acquired” as opposed to “overseas”. I infer this means those nine cases were acquired within Australia. I accept that I do not know that any one of these nine people were within the radius while they were capable of transmitting COVID-19 to another person. I also accept that I am unable to draw this inference as LCA Marrickville proposed, based on the available evidence.

310    For there to be an outbreak of COVID-19 within the radius there would need to be evidence of a person with COVID-19 in an non-controlled setting and capable of transmitting COVID-19 within the radius. There is no such evidence and no evidence capable of supporting a rational inference to this effect.

311    LCA Marrickville contended that this cannot be correct as it is too difficult to prove and the policy should be given a reasonable commercial operation. The problems with this submission are that, first, it supports the primary “textual” approach to determining whether the action of an authority resulted from the identified matter as discussed above (with which I agree) and, secondly, that it assumes cl 9.1.2.1 applies to: (a) a nationwide pandemic which is the very kind of disease most likely to be excluded by the biosecurity exclusion, and (b) an order which applies to the whole of NSW in response to a pandemic rather than an order resulting from an outbreak of a notifiable disease within the radius (whether or not it started within the radius or spread from elsewhere into the radius).

312    I do not repeat this level of detail below when dealing with the concept of an “outbreak” of COVID-19 in the context of other polices, but it forms part of my process of reasoning in each relevant case.

313    The alternative requirement is the discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the radius. There is no dispute that SARS-CoV-2, the cause of COVID-19, is an organism. As noted, I do not consider that the organism itself must be discovered at the Situation or within the radius. It must be discovered at a location so as to make it likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the radius.

314    LCA Marrickville accepted that in this context “likely” means more likely than not or probable. On this basis, the evidence must enable an inference of likelihood of an occurrence of COVID-19 at the Situation or within the 5 kilometre radius. For this inference to be drawn there must be evidence of the order resulting from a person with COVID-19 and capable of communicating the disease at the Situation or within the 5 kilometre radius. There is no such evidence. I do not accept, however, that “this limb is not established merely by the discovery of a person infected with COVID-19 having been present either at the Situation or within the Radius”, as Swiss Re would have it, provided that the person with COVID-19 is capable of communicating the disease to others (that is, they are still contagious).

315    As discussed, however, all of the above is theory only because the requirement is that the order of the authority result from either an outbreak of a notifiable human infectious or contagious disease at the Situation or within the radius or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the radius. As noted, this is not proved by evidence of person(s) with COVID-19 at the Situation or within the radius or in the vicinity of the radius. It is proved by evidence of the reasons for the authority making the order. This is best proved by the terms of the order for the reasons already given. In the present case, by necessary implication, the orders disclose that they were not made as a result of an outbreak or occurrence of COVID-19 at the Situation or within the radius or in the vicinity of the radius. I do not see how further evidence, expert or otherwise, can alter that position.

6.3.5.4    Closure or evacuation by order

316    A further requirement is that there must have been closure or evacuation of the whole or part of the Situation by order of a competent public authority. As noted, the policy distinguishes between the Situation (defined in the Policy Schedule to mean the head office units at St Leonards and elsewhere in Australia including contract sites where the Insured has property or carries on business, has goods or other property stored or being processed or has work done) and the Business (cl 1.2 - the business as specified in the Schedule carried on by the Insured at the Situation).

317    Swiss Re contended that for the requirement of closure to be satisfied “the “Situation” (being the physical premises identified in the Schedule) must be unable to be accessed or occupied in any way”. I disagree. The requirement is for closure of the whole or part of the Situation. At the least, inability to access a part of the Situation will satisfy the requirement.

318    It may be accepted that the requirement is not concerned with the manner in which the Business may be carried on at the Situation. It may also be accepted that “closure”, like evacuation, is concerned with the physical presence of people. What I do not accept is that any restriction on the manner of operating the Business is necessarily incapable of also constituting a closure of the whole or part of the Situation. Whether that is so or not will depend on the nature of the restriction imposed by the order, the nature of the premises, and the nature of the business being conducted on the premises.

319    I do not consider that Cat Media Pty Ltd v Allianz Australia Insurance Ltd [2006] NSWSC 423; (2006) 14 ANZ Ins Cas 61-700 at [59]-[60] dictates a contrary conclusion. In that case Bergin J stressed the need for physical closure of the premises and said that closure did not encompass mere cessation of manufacture on the premises. So much may be accepted. But whether there has been closure of the Situation or not must depend on the inferred common understanding of the parties as to the nature of the Situation and permissible access to it. In the case of LCA Marrickville, the Situation was used for a business accessible by the public for beauty treatment. That Situation could be closed (and was closed) by an order, in substance, preventing the public from accessing the Situation.

320    In the present case, the 26 March 2020 Public Health (COVID-19 Gatherings) Order (No 2) 2020 directed that “the following must not be open to members of the public”, and listed “business premises that are … beauty salons”: cl 7(1)(i). This restriction did not merely restrict the operation of LCA Marrickville’s business. It required the business premises to be closed. The fact that the focus of the order is “business premises” and not “business” reinforces that the effect of this order is to close the premises which necessarily involves closure of the Situation. In this case there was one Situation at Marrickville which was within the meaning of a beauty salon as identified in the order. Clause 7(1)(i) of the 26 March 2020 order required it to close. That satisfies the requirement of cl 9.1.2.1 for closure of the Situation by the order. Even if a person could still access the office component of the Situation, that part of the Situation comprising the publicly accessible space was closed to the public. This is sufficient.

321    Swiss Re submitted that, if contrary to is case, the Situation was closed by order on 26 March 2020 then the 15 May 2020 Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 2) 2020 (NSW) had the effect of ending that closure. That order added a proviso to cl 7(1)(i) “(except for the retail sale of goods and gift vouchers, including gift vouchers for services redeemable at a later date).

322    By this exception it may be inferred that a member of the public could enter part of the Situation to purchase such goods and vouchers. It does not alter the fact, however, that cl 7(1)(i) otherwise required the business premises “not be open to members of the public” when, ordinarily, members of the public would be able to access the six treatment rooms for treatment. On this basis, it must again be inferred that at least part of the premises (being part of the Situation) remained closed.

323    The 15 May 2020 order, contrary to Swiss Re’s submissions, did not constitute a mere restriction on the manner in which the business could be conducted. It required that part of the premises, in which treatment of the public would ordinarily be carried out, be closed to the public. While, in theory, retail sales might have been conducted from a treatment room, no such inference would be drawn when the premises involved a reception and a waiting area as well as six treatment rooms. The obvious inference which must be drawn is that the public were permitted to access the reception area to conduct any retail sale but not the treatment rooms where the public would have no legitimate reason to be other than for treatment.

324    The 1 June 2020 order enabled the part of the Situation ordinarily accessible by members of the public for treatment to again be accessible for treatment but subject to the restriction of the number of people being the lesser of 10 customers and 4 square metres of space for each person (including staff members) on the premises and a COVID-19 safety plan.

325    Contrary to LCA Marrickville’s submissions I do not accept that the “same logic” applying to the earlier orders applies to the order of 1 June 2020. The 1 June 2020 order did not have the effect of closing the whole or any part of the business premises (as defined in the 1 June 2020 order in cl 3(2)). By cl 5(1) and Schedule 1 to the 1 June 2020 order it restricted the number of persons who may access the premises as identified. In my view, that did not involve closure of the whole or part of the Situation. Under the 4 square metre rule the premises could accommodate a total of 24 people so that the premises could accommodate only the 10 customers and staff (being the lesser number). There is no evidence that LCA Marrickville had to close any part of the premises to comply with the 1 June 2020 order. There is no evidence that LCA Marrickville had to prevent any person from entering the premises to comply with the 20 June 2020 order. On this basis it cannot be concluded that there was any closure of the whole or part of the Situation by the 1 June 2020 order.

326    The same conclusion must apply to the 13 June 2020 order which increased the number of persons who could be on the premises to the lesser of 20 customers or the total under the 4 square metre rule.

6.3.6    Conclusions about cl 9.1.2.1

327    The exclusion in cl 9.1.2.1 applies. Accordingly, cl 9.1.2.1 (as expanded by cl 9.1.2.4) does not apply.

328    Alternatively, the orders did not result from either outbreak of a notifiable human infectious or contagious disease or bacterial infection at the Situation or within 5 kilometres of the Situation or discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within 5 kilometres of the Situation. In my view, this conclusion could not be affected by further evidence because it is apparent from the face of the orders.

329    Alternatively, there is no evidence from which it may be inferred that there was an outbreak of a notifiable human infectious or contagious disease or bacterial infection at the Situation or within 5 kilometres of the Situation or discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within 5 kilometres of the Situation. While this could be overcome by evidence showing that one person with COVID-19, while contagious, was at the Situation or within 5 kilometres of the Situation and was not in controlled circumstances it would not satisfy the requirement that the order(s) resulted from this fact so there is no utility in obtaining such evidence.

330    The Situation was closed by order of a competent public authority from 26 March until 1 June 2021. On and from 1 June 2021 the Situation was not closed in whole or part by any order.

331    Properly construed, the presence of cll 9.1.2.1 and 9.1.2.4 and 9.1.2.3 in the policy means that cll 9.1.2.5 and 9.1.2.6 cannot apply to the actions of an authority relating to diseases. By necessary implication, diseases are excluded from those provisions.

6.4    Clause 9.1.2.5

332    If my conclusion above that cl 9.1.2.5 cannot apply to actions of an authority relating to diseases by reason of cll 9.1.2.1, 9.1.2.4 and 9.1.2.3 is wrong, then in any event I consider that cl 9.1.2.5 has nothing to do with diseases.

333    The relevant actions must be “during a conflagration or other catastrophe for the purpose of retarding same”. While those words in theory, could include actions to prevent the spread of an infectious disease they should not be so construed. Leaving aside cll 9.1.2.1, 9.1.2.4 and 9.1.2.3, the operative words are “conflagration or other catastrophe” and “retarding”. I accept that a pandemic is a “catastrophe” in its ordinary sense: Star at [172]. While the policy is not directly analogous to that in Star, aspects of the reasoning in Star are relevant: (a) the operative words “conflagration or other catastrophe” and “retarding” suggest a physical event, in that a conflagration is a “large and destructive fire” (Macquarie Dictionary Online), (b) the catastrophe must be an “other catastrophe” and “retarding” means slowing, delaying, hindering or impeding (Macquarie Dictionary Online), and (c) the linking of “other catastrophe” with “conflagration” indicates that the other catastrophe is to be of a kind similar to a conflagration, which involves a physical event.

334    As in Star at [171] the “words “other catastrophe” do assist in understanding that the “catastrophe” is physical or apt to create physical damage. In The Sun Fire Office v Hart (1889) 14 App Cas 98 at 103–104, it was said:

It is a well-known canon of construction that where a particular enumeration is followed by such words as “or other”, the latter expression ought, if not enlarged by the context, to be limited to matters eiusdem generis with those specially enumerated. The canon is attended with no difficulty, except in its application. Whether it applies at all, and if so, what effect should be given to it, must in every case depend upon the precise terms, subject-matter, and context of the clause under construction.

335    In Lend Lease Real Estate Investments Ltd v GPT RE Ltd [2006] NSWCA 207 Spigelman CJ said:

[30] The general principle of the law of interpretation that the meaning of a word can be gathered from its associated words – noscitur a sociis – has a number of specific sub-principles with respect to the immediate textual context. The most frequently cited such sub-principle is the ejusdem generis rule. The relevant sub-principle for the present case is the maxim propounded by Lord Bacon: copulatio verborum indicat acceptationem in eodem sensu – the linking of words indicates that they should be understood in the same sense. As Lord Kenyon CJ once put it, where a word “stands with” other words it “must mean something analogous to them”. (Evans v Stevens (1791) 4 TR 224; 100 ER 986 at 987. See also W J Byrne (ed) Broomes Legal Maxim (9th ed) Sweet and Maxwell, London (1924) pp373-374.)

[31] However, as Lord Diplock put it in Letang v Cooper [1965] 1 QB 232 at 247:

“The maxim noscitur a sociis is always a treacherous one unless you know the sosietas to which the socii belong.”

336    Here, the group is defined by being like a “conflagration”. That is a physical event requiring physical action to be retarded. A pandemic is not like a conflagration.

337    For these reasons cl 9.1.2.5 does not apply.

338    If these conclusions are incorrect, then I accept that the orders are actions of a civil authority during a catastrophe (the COVID-19 pandemic) to retard that catastrophe so that cl 9.1.2.5 applies.

339    While I accept Swiss Re’s submission that “the Conflagration/Catastrophe Clause does not respond to any action of a civil authority that is taken before a relevant conflagration or other catastrophe manifests, including action taken in an attempt to prevent the conflagration or other catastrophe from occurring in the first place”, on the evidence, the catastrophe of the COVID-19 pandemic started in Australia by no later than 20 March 2020 when Australia closed its borders to all non-citizens and non-residents. Further, by that time:

(1)    the Prime Minister had announced on 13 March 2020 that “[b]ased on the expert medical advice of the Australian Health Protection Principal Committee (AHPPC), Commonwealth, State and Territory governments have agreed to provide public advice against holding non-essential, organised public gatherings of more than 500 people from Monday 16th March 2020 The recommendation to advise against non-essential, organised public gatherings of more than 500 people is precautionary and designed to reduce community transmission of COVID-19 in Australia” (that is, there was already community transmission in Australia);

(2)    the Prime Minister had announced on 16 March 2020 that:

A significant step-up to Australia’s national response to the Coronavirus COVID-19 pandemic has been endorsed by the National Cabinet, comprising the Prime Minister, State Premiers and Territory Chief Ministers.

Based on the advice of the Australian Health Protection Principal Committee (AHPPC), the National Cabinet agreed that our core objective now is to slow the outbreak of COVID-19 in Australia by taking additional steps to reduce community transmission. We must ensure our health system can care for the most vulnerable, in particular the elderly and those with pre-existing conditions.

To help stay ahead of the curve, the Australian Government has imposed a universal precautionary self-isolation requirement on all international arrivals, effective as at 11:59pm Sunday 15 March 2020;

(3)    the Prime Minister had also announced on 16 March 2020 that:

The Australian Government has also banned cruise ships from foreign ports (including round trip international cruises originating in Australia) from arriving at Australian ports for an initial 30 days, effective as at 11:59pm Sunday 15 March 2020.

This restriction will help avoid the risk of a cruise ship arriving with a mass outbreak of the virus and putting significant pressure on our health system;

(4)    on 20 March 2020 the Prime Minister also announced that:

Every Australian government is focused on slowing the spread of coronavirus to save lives.

The Prime Minister, state and territory Premiers and Chief Ministers met today for the National Cabinet and agreed to further actions to protect the Australian community from the spread of coronavirus (COVID-19).

The Chief Medical Officer provided the latest advice on the spread of COVID-19 globally and nationally. Leaders noted that Australia has one of the most comprehensive testing regimes in the world with over 100,000 Australian tests for COVID-19 having been undertaken. While the majority of COVID-19 cases in Australia continue to be from Australians returning from overseas, there have been a number of local outbreaks.

Every Australian has a part to play in slowing the spread of coronavirus.

All leaders reiterated the importance of Australians strictly adhering to social distancing and self isolation requirements, in particular for those who are unwell and for returned travellers. Not adhering to self isolation requirements when you are unwell puts the lives of your fellow Australians at risk;

and,

(5)    on 18 March 2020 the NSW Minister for Health provided a COVID-19 update for NSW announcing that:

NSW has moved to immediately ban non-essential indoor gatherings of 100 or more people as part of tough new national measures to curb the spread of COVID-19 in the community.

Health Minister Brad Hazzard said he has today signed an Order under the emergency powers of the Public Health Act 2010 to protect its citizens in line with advice from health experts, as the number of diagnosed cases in the State increased to 267, including a fifth death related to COVID-19.

“Banning non-essential indoor gatherings of 100 or more people is a safety measure recommended by the National Cabinet,” Mr Hazzard said.

“Most importantly, the community needs all of us to practise social distancing and vigilantly practise safe hand hygiene measures moving forward.”

Following advice from the AHPPC, the National Cabinet was unanimous in its decision to implement these health restrictions.

340    It will also be noted that the linking requirement in cl 9.1.2.5 between the action and the catastrophe is temporal (during) and not causal (as a result of). Accordingly, consideration of the cause of the action is immaterial.

341    Accordingly, if the COVID-19 pandemic is a catastrophe within the meaning of cl 9.1.2.5 (which I do not accept), the orders were made during the catastrophe for the purpose of retarding the catastrophe as required.

6.5    Clause 9.1.2.6

342    If my conclusion above that cl 9.1.2.6 cannot apply to actions of an authority relating to diseases by reason of cll 9.1.2.1, 9.1.2.4 and 9.1.2.3 is wrong, then in any event I consider that cl 9.1.2.6 has nothing to do with diseases.

343    The relevant actions must be of an authority to avoid or diminish risk to life within 5 kilometres of the Situation which prevents or hinders the use of or access to the Situation whether any property of the Insured shall be the subject of Damage or not. While the clause makes clear that the insured peril is not property damage, in the context of cll 9.1.2.1, 9.1.2.4 and 9.1.2.3, I do not accept that the clause is capable of applying to actions of an authority in response to a disease.

344    If I am wrong again, I accept that the making of the orders constituted actions of a lawful authority attempting to avoid or diminish risk to life within 5 kilometres of the Situation. I do not agree with Swiss Re that “there must be a demonstrable risk to life or Damage to Property within the limited geographical area (here, within 5 kilometres of the Situation), and the relevant action relied upon must be targeted to reducing that particular risk”. This is incorrect because all that is required is that the action of the authority is an attempt to avoid or diminish risk to life within 5 kilometres of the Situation. This does not mean that the action must result from the attempt to avoid or diminish risk to life within 5 kilometres of the Situation. There is no causal requirement between the risk to life within 5 kilometres of the Situation and the action, at least not in the sense that the action must result from the perceived existence of the risk within 5 kilometres of the Situation. If the action can be reasonably described as an attempt to avoid or diminish a risk to life within 5 kilometres of the Situation then it does not matter that the action is also capable of being reasonably described as an attempt to avoid or diminish risk to life outside of 5 kilometres of the Situation. The geographical requirement in cl 9.1.2.6 is thus different from the geographical requirement in cll 9.1.2.1 and 9.1.2.3.

345    Further, there is no causal requirement (as a result of) between the action and the risk. The action must simply involve an attempt to avoid or diminish the risk. Again, accordingly, the cause of the action does not arise for consideration.

346    The 26 March 2020 order, in its own terms, is an attempt to avoid or diminish risk to life in each and every part of NSW. This is clear from cl 4 which refers to COVID-19 being a potentially fatal condition which is also highly contagious and that a number of cases have been confirmed in NSW. It is also clear that cl 7(1) applies to the whole of NSW including the area within 5 kilometres of the Situation. The same may be said of the 1 and 13 June 2020 orders. In the 1 June 2020 order cl 4 is in the same terms as the 26 March 2020 order with the addition of the words “including by means of community transmission” in cl 4(c). Clause 5(1) applies to the whole of NSW. The 13 June 2020 order merely amends the 1 June 2020 order.

347    It is fanciful to suggest that in making the orders the Minister was not attempting to avoid or diminish risk to every life across the whole of NSW. As noted, the threat or risk to each and every life in NSW is a proximate or equally effective cause of the making of the order. This is sufficient to satisfy the clause because it necessarily includes an attempt to avoid or diminish the risk to life within the 5 kilometre radius. Swiss Re’s submission that the clause “is not engaged if the relevant action is directed to a risk to life existing elsewhere” ignores the fact that an attempt may be to avoid or diminish such risks over a large area, such as the whole of NSW, whether or not the risk exists or is likely to exist within the 5 kilometre radius.

348    It is wrong to import into the clause a requirement that there be proved to be a risk to life within the 5 kilometre radius before the action is taken. This is because the requirement is simply that the authority take the action attempting to avoid or diminish the risk. The authority may later be proved to be wrong about the risk but that is immaterial. This is why I cannot accept Swiss Re’s submission that:

A state-wide authority response to address a state-wide or national risk to life is outside the proper ambit of the clause. It would involve reading the clause without the geographic limitation which is one of its essential features. The geographical nexus is required both in respect of the risk and the response to the risk.

349    As discussed: (a) an attempt by an authority to avoid or diminish a risk to life across the whole of NSW is also an attempt to avoid or diminish that risk in each and every part of NSW, (b) effect is given to the geographic limitation by requiring the action to be an attempt to avoid or diminish that risk within the 5 kilometre radius but that does not mean the attempt must relate only to the area within the 5 kilometre radius, (c) the geographical limitation also operates through the requirement that the action “prevents or hinders the use of or access to the Situation”, and (d) the geographical nexus is not part of the existence of an objective fact. It is part only of the attempt by the authority, soundly based on objective facts or not.

350    There is no inconsistency between this approach to cl 9.1.2.6 and cl 9.1.2.1. The difference is that in cl 9.1.2.1 the order must result from the specified existing circumstances within the 5 kilometre radius. In the case of a NSW-wide order that causal requirement is difficult to satisfy and is not satisfied in the present case. The requirement in cl 9.1.2.6 is different. The action need not be the result of existing circumstances within the 5 kilometre radius. The action needs only to be an attempt to avoid or diminish a risk to life within the 5 kilometre radius. A NSW-wide order of the kind made in this case can readily be inferred to be an attempt to avoid or diminish the risk to life in each and every part of NSW including within the 5 kilometre radius. The requirements are different and thus the results are different.

351    There is a further requirement that the action prevents or hinders the use of or access to the Situation. The 26 March 2020 order prevented and hindered the use of and access to the Situation (see the discussion above). The 1 and 13 June 2020 orders did not prevent access to the Situation but they did potentially hinder the use of the Situation by imposing the limits on the number of persons who could be in the Situation. I say these orders potentially hindered the use of the Situation because there is no evidence that they in fact hindered the use of the Situation. For that to be so there would need to be evidence that the 10 (then 20) person limit on customers meant that LCA Marrickville could not use the Situation to provide some service that it otherwise could and would have provided.

352    Swiss Re’s submissions to the contrary are unpersuasive. Swiss Re said:

The Business Closure Direction did not render access or use of the “Situation” (being the physical premises) impossible or subject to obstacles that were particularly difficult to overcome. Rather, it was a limitation on the nature of the business that may be conducted while it was in force. As outlined above, the Policy does not insure against the risk that a particular business may not be able to be carried on, or a particular service may not be able to be provided.

353    This is fallacious. The 26 March 2020 prevented the use of the Situation altogether for its purpose of providing beauty treatments. It did not merely limit the nature of the business that could be conducted from the Situation. It prevented any use of the Situation for the business. It also prevented access to the Situation by any member of the public. That was a prevention of access to the Situation.

354    While I accept that the subsequent orders did not prevent access to the Situation (or, at the least, there is no proof of any such prevention of access), they undoubtedly had the potential to hinder its use as described above. In this regard, “hinder” means something less than “prevent”. “Hinder” means to check, to retard, to be an obstacle or impediment. The restriction on numbers of customers at any one time may have hindered the use of the Situation.

355    For these reasons, if I am wrong and cl 9.1.2.6 can apply to actions of a lawful authority relating to a disease, then: (a) the order of 26 March 2020 prevented and hindered access to the Situation, and (b) the subsequent orders may have hindered the use of the Situation.

6.6    Answers to questions – cover

356    Some of the agreed questions obscure the focus of the clauses on the actions of an authority and otherwise lack utility given the operation of the clauses as a whole. I answer them as best as I can below.

357    1 Disease Clause (9.1.2.1) (page 31):

On the proper construction of the Disease Clause:

(a) Did the “Authority Response-LCA Marrickville” cause “closure … of the whole or part of the Situation”?

Answer: in respect of the order of 26 March 2020, yes. In respect of the orders of 1 and 13 June 2020, no.

(b) Was there a closure or evacuation of the whole or part of the Situation?

See 1(a) above.

In assessing:

(i) “closure”, must there be physical prevention of access to the Situation (or part of it), or is it sufficient there was a restriction of LCA Marrickville’s use of the Situation (or part of it) for its Business and if so, what restriction?

(ii) “evacuation”, must there be a physical removal of persons from the Situation (or part of it), or is it sufficient if there was a restriction of LCA Marrickville’s use of the Situation (or part of it) for its Business and if so, what restriction?

As to (i), there must be physical prevention of access to the Situation (or part of it) to those who would otherwise be able to obtain access (for example, members of the public).

As to (ii), this does not arise, but the answer would be yes.

(c) Was there an “outbreak” of COVID-19 at the Situation?

This cannot be answered on the evidence.

(i) Does a single person infected with COVID-19 entering the Situation constitute an “outbreak”?

Not necessarily. If the person is able to communicate COVID-19 to other people and is within the community (in the sense of not being in a controlled environment such as quarantine, isolation or a hospital) then, given the nature of COVID-19 and the associated probability of transmission including to persons unknown, a single person infected with COVID-19 entering the Situation who is in a non-controlled setting would constitute an “outbreak” of COVID-19.

(ii) With what degree of prevalence do instances of COVID-19 have to occur at the Situation (or elsewhere) in order to constitute an “outbreak” at the Situation?

See (c)(i) above.

(iii) Does the outbreak have to occur at the Situation or can it occur:

A. at the Situation and elsewhere and, if so, where?

B. elsewhere but not at the Situation and, if so, where?

This does not arise. The requirement of cl 9.1.2.1 is an order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4). This depends not on objective facts but on the cause of the making of the order. The required cause must be an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4).

If yes to (c), was the “Authority Response-LCA Marrickville” “a result of” that “outbreak”?

No.

(e) Was there a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19] … at the Situation”?

On the current evidence, no. However, this does not arise for the reasons set out at 1B above.

(i) Does SARS-CoV-2 have to be discovered at the Situation or is it sufficient if it is discovered elsewhere and, if so, where?

No. If SARS-CoV-2 is discovered elsewhere but is likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius that requirement of cl 9.1.2.1/9.1.2.4 will be satisfied. To satisfy the requirement of likelihood, however, evidence of a person with COVID-19 who is capable of communicating the disease to another person within the radius will be required. However, this does not arise for the reasons set out at B above.

(ii) Does SARS-CoV-2 have to be likely to result in the occurrence of COVID-19 at the Situation or is it sufficient if it is likely to result in the occurrence of COVID-19 elsewhere and, if so, where?

SARS-CoV-2 must be likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius.

(f) Was the “Authority Response-LCA Marrickville” “a result of” a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19] … at the Situation”?

No.

(g) What if any “interruption” or “interference” occurred “in consequence of” any “closure … by order of a competent public authority”?

None.

(h) What is required for there to be an “occurrence” of COVID-19?

A single case of COVID-19 is an occurrence of COVID-19.

358    2 Biosecurity Act exclusion (clause 9.1.2.1) (page 31)

(a) Is COVID-19 a disease “declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015”, in circumstances where it was determined to be a listed human disease after the Policy inception date and during the Policy Period?

Yes.

(b) If yes to (a), does section 54 of the Insurance Contracts Act 1984 (Cth) (ICA) have the effect that the insurer cannot refuse to pay LCA Marrickville's claim by reason only of the determination and can only reduce its liability to the extent that its interests were prejudiced as a result of the determination?

No.

(c) {Swiss Re version; LCA Marrickville does not agree}: If yes to (b), was LCA Marrickville’s loss caused or contributed to by the determination?

This does not arise.

(d) {LCA Marrickville version; Swiss Re does not agree}: If yes to (b), could the determination reasonably be regarded as being capable of causing or contributing to LCA Marrickville’s loss?

This does not arise.

(e) If yes to (c) and/or (d), to what extent is Swiss Re entitled to refuse to pay the claim?

This does not arise.

(f) If yes to (b) but no to (c) and/or (d), what prejudice, if any, to Swiss Re resulted from the determination and to what extent (if any) should Swiss Re’s liability in respect of the claim be reduced?

This does not arise.

(g) If the Biosecurity Act exclusion does apply to exclude LCA Marrickville’s loss from cover under the Disease Clause and the Expansion Clause, can such loss be considered for cover under the Catastrophe Clause and/or the Prevention of Access Clause?

No.

359    3. Expansion Clause (9.1.2.4) (page 31):

On the proper construction of the Expansion Clause:

(a) Issues 1(a), (b), (g), (h) and (i) and 2, above also arise in the context of the Expansion Clause.

The same answers apply as set out above expanded to the 5 kilometre radius.

(b) Was there an “outbreak” of COVID-19 within a five kilometre radius of the Situation?

This cannot be answered on the evidence.

In particular:

(i) Does a person infected with COVID-19 entering, or residing in, the area within five kilometres of the Situation constitute an “outbreak”?

Not necessarily. If the person is able to communicate COVID-19 to other people and is within the community (in the sense of not being in a controlled environment such as quarantine, isolation or a hospital) then, given the nature of COVID-19 and the associated probability of transmission including to persons unknown, a single person infected with COVID-19 entering the Situation who is in a non-controlled setting would constitute an “outbreak” of COVID-19.

(ii) With what degree of prevalence do instances of COVID-19 have to occur within five kilometres of the Situation (or elsewhere), or what other characteristics must such instances have, in order to constitute an “outbreak” within a five kilometre radius of the Situation?

See (b)(i) above.

(iii) Does the outbreak have to occur within a five kilometre radius of the Situation only or can the outbreak occur outside a five kilometre radius of the Situation as well and, if so, where?

This does not arise. The requirement of cl 9.1.2.1 is an order of a competent public authority as a result of an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4). This depends not on objective facts but on the cause of the making of the order. The required cause must be an outbreak of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4) or any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation (or within the 5 kilometre radius under cl 9.1.2.4).

(c) Was the “Authority Response-LCA Marrickville” “a result of” an outbreak of COVID-19 within a five kilometre radius of the Situation?

No.

In particular, must the relevant order be made in direct response to the specific outbreak within a five kilometre radius of the Situation or is it sufficient if the relevant order is made in response to, or to prevent, the spread of COVID-19 more broadly (e.g. on a regional, state or nationwide scale)?

This depends on the terms of the order.

(d) Was there a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19]” within a five kilometre radius of the Situation?

On the current evidence, no. However, this does not arise for the reasons set out at 1B above.

(i) Does SARS-CoV-2 have to be discovered within a five kilometre radius of the Situation or is it sufficient if it is discovered elsewhere and, if so, where?

No. If SARS-CoV-2 is discovered elsewhere but is likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius that requirement of cl 9.1.2.1/9.1.2.4 will be satisfied. To satisfy the requirement of likelihood, however, evidence of a person with COVID-19 who is capable of communicating the disease to another person within the radius will be required. However, this does not arise for the reasons set out at 1B above.

(ii) Does SARS-CoV-2 have to be likely to result in the occurrence of COVID-19 within a five kilometre radius of the Situation, or is it sufficient if it is likely to result in the occurrence of COVID-19 elsewhere and, if so, where?

SARS-CoV-2 must be likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the 5 kilometre radius.

(e) Was the “Authority Response-LCA Marrickville” “a result of” a “discovery of [SARS-CoV-2] likely to result in the occurrence of [COVID-19]” within a five kilometre radius of the Situation?

No.

360    4. Catastrophe Clause (9.1.2.5) (page 31):

On the proper construction of the Catastrophe Clause:

(a) {Swiss Re version; LCA Marrickville does not agree}: Was the outbreak of COVID-19 a “conflagration or other catastrophe”?

No.

(b) {LCA Marrickville version; Swiss Re does not agree}: Was COVID-19 and its impact a “conflagration or other catastrophe”?

No.

(c) When did any such “conflagration or other catastrophe” commence and end?

If COVID-19 is a catastrophe within cl 9.1.2.5 it commenced in NSW no later than 20 March 2020.

(d) Was the “Authority Response-LCA Marrickville” an “action of a civil authority” implemented “for the purpose of retarding” the “conflagration or other catastrophe”?

No.

(e) What “interruption” or “interference” occurred “in consequence of” any “action of a civil authority”?

None within the meaning of cl 9.1.2.5.

361    5. Prevention of Access Clause (9.1.2.6) (page 31):

On the proper construction of the Prevention of Access Clause:

(a) Was there a “risk to life … within five kilometres of [the] Situation”?

This does not arise. The requirement is action of a lawful authority attempting to avoid or diminish a risk to life within 5 kilometres of the Situation. There is no requirement to prove as an objective fact a risk to life within 5 kilometres of the Situation.

(i) Does the “risk to life” have to exist within five kilometres of the Situation only or can the “risk to life” exist in areas further then five kilometres from the Situation as well and, if so, where?

See (i) above.

(ii) Must the relevant order be made in direct response to the specific “risk to life” within five kilometres of the Situation, or is it sufficient if the relevant order is made as part of an attempt to “avoid or diminish risk to life” of a broader scope (e.g. on a regional, state or nationwide scale)?

There is no requirement in this regard other than action of a lawful authority attempting to avoid or diminish a risk to life within 5 kilometres of the Situation. It does not matter is the authority is also attempting to avoid or diminish a risk to life outside 5 kilometres of the Situation.

(b) Was the “Authority Response-LCA Marrickville” taken in an attempt to avoid or diminish the identified “risk to life”?

No, because cl 9.1.2.6 does not apply to actions of an authority relating to a disease. If this is wrong, yes.

(c) Was access to or use of the Situation prevented or hindered?

Yes. The 26 March 2020 order prevented access to and prevented the use of the Situation. The 1 and 13 June 2020 orders hindered use of the Situation.

In particular, must the use of or access to the Situation for any purpose be prevented or hindered or is it sufficient for use of or access to the Situation for the purposes of LCA Marrickville’s Business, to be prevented or hindered?

It is sufficient if use of or access to the Situation for the purposes of LCA Marrickville’s Business, is prevented or hindered.

(d) What, if any, “interruption or interference” occurred “in consequence of” any “action of any lawful authority”?

None because cl 9.1.2.6 does not apply to an authority’s action in response to a disease.

(e) {LCA Marrickville presses for the underlined words in this paragraph} To what extent would LCA Marrickville’s access to or use of the Situation have been prevented or hindered, regardless of the lawful authority’s action, and to what extent (if any) does this affect indemnity?

This does not arise.

362    6. Clause 9.1.2 (page 31):

On the proper construction of clause 9.1.2:

(a) Is Swiss Re’s obligation to indemnify an “Insured” in respect of loss resulting from the interruption of or interference with the “Business” in consequence of closure or evacuation of the whole or part of the “Situation” by order of a competent public authority as a result of:

(i) an outbreak of a notifiable human infectious or contagious disease; or

(ii) any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease,

confined to the terms of the Disease Clause and the Expansion Clause (as it applies to the circumstances of the Disease Clause)?

Clauses 9.1.2.5 and 9.1.2.6 do not apply to actions of an authority in response to a disease.

6.7    Policy provisions – causation, adjustment and basis of settlement

363    The key provisions of the LCA Marrickville policy relating to causation, adjustment and basis of settlement are:

Section 2 – Interruption Insurance

8. Definitions

8.2 Gross Profit means the amount by which:

the sum of the Turnover and the amount of the closing stock and work in progress shall exceed the sum of the amount of the opening stock and work in progress and the amount of the Uninsured Working Expenses as set out in the Schedule.

(The amounts of the opening and closing stocks and work in progress shall be arrived at in accordance with the Insured’s normal accountancy methods, due provision being made for depreciation. Where insured expenses are included in the Insured’s stocks and work in progress such amounts shall be excluded for the purpose of the Gross Profit Definition.)

8.3 Gross Rentals means the money paid or payable to the Insured by tenants in respect of rental of the Situation and for services rendered by or on behalf of the Insured.

8.4 Gross Revenue means the money paid or payable to the Insured for services rendered (and good sold, if any), which shall include the money paid or payable to the Insured by tenants (including amounts for services rendered to tenants and expenses from tenants) in respect of rental or lease of the Situation unless Item No. 3 (Gross Rentals) is shown in the Schedule as insured in the course of the Business at the Situation. If Item No, 4 (Insured Payroll) is shown in the Schedule as insured then Gross Revenue shall not include Payroll, Payroll being separately insured under Item No. 4.

8.5 Indemnity Period means the period beginning with the occurrence of the Damage and ending not later than the number of months specified in the Schedule thereafter during which the results of the Business shall have been affected in consequence of the Damage.

8.8 Payroll means the remuneration (including but not limited to payroll tax, fringe benefits tax, sick pay, bonuses, overtime, commission, holiday pay, workers' compensation insurance premiums, accident compensation levies, superannuation and pension fund contributions, long service leave pay, and the like) paid to all employees of the Insured other than employees who form part of corporate services being services provided to more than one operation/branch of the Insured. The Payroll for these employees being insured under Item 1 (Gross Profit) or Item 2 (Gross Revenue) as applicable.

8.9 Rate of Gross Profit means the proportion which the Gross Profit bears to the Turnover during the financial year immediately before the date of the Damage.

8.10 Rate of Payroll means the proportion which the Payroll bears to the Turnover during the financial year immediately before the date of the Damage.

8.12 Standard Gross Rentals means the Gross Rentals during that period in the twelve months immediately before the date of the Damage which corresponds with the Indemnity Period (appropriately adjusted where the Indemnity Period exceeds twelve months).

8.13 Standard Gross Revenue means the Gross Revenue during that period in the twelve     months immediately before the date of the Damage which corresponds with the Indemnity Period (appropriately adjusted where the Indemnity Period exceeds twelve months).

8.14 Standard Turnover means the Turnover during that period in the twelve months immediately before the date of the Damage which corresponds with the Indemnity Period (appropriately adjusted where the Indemnity Period exceeds twelve months).

8.15 Turnover means the money (less discounts if any allowed) paid or payable to the Insured for goods sold and delivered and for services rendered in the course of the Business conducted at the Situation.

Adjustments shall be made to the Rate of Gross Profit, Standard Turnover, Standard Gross Revenue, Standard Gross Rentals and Rate of Payroll as may be necessary to provide for the trend of the Business and for variations in or other circumstances affecting the Business either before or after the date of the Damage or which would have affected the Business had the Damage not occurred, so that the figures as adjusted shall represent as nearly as may be reasonably practicable the results which, but for the Damage, would have been obtained during the relative period after the Damage occurred.

10. Basis of Settlement

10.1 Item No. 1 (Loss of Gross Profit Due to Reduction in Turnover and Increase in Cost of Working)

The Insured is indemnified with respect to loss of Gross Profit calculated in the following manner, namely:

10.1.1 in respect of reduction in Turnover, the sum produced by applying the Rate of Gross Profit to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover; and

10.1.2 in respect of Increase in Cost of Working, the additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Turnover which, but for that expenditure, would have taken place during the Indemnity Period in consequence of the Damage, but not exceeding the sum produced by applying the Rate of Gross Profit to the amount of the reduction thereby avoided.

10.1.3 There shall be deducted from the amounts calculated in 10.1.1 and 10.1.2 any sum saved during the Indemnity Period in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced as a consequence of the Damage (excluding depreciation and amortisation).

6.8    Causation, adjustment and basis of settlement

6.8.1    Causation and adjustment

364    This section assumes my conclusions about cll 9.1.2.1, 9.1.2.5 and 9.1.2.6 are wrong. It assumes that those clauses are satisfied in this case.

365    The required causal sequence is:

Clause 9.1.2.1 (and 9.1.2.4) or 9.1.2.5 or 9.1.2.6 (the insured peril) is satisfied

In consequence of the insured peril there is interruption of or interference with the Business

        

That interruption of or interference with the Business results in loss.

366    Swiss Re contended that it is loss resulting from the insured perils in cl 9.1.2 which is covered and not loss resulting from the effects of the COVID-19 pandemic generally and that, even if the insured peril is established to be a proximate cause of the loss (as opposed to the loss being caused by the COVID-19 pandemic), the adjustment clause operates to require the quantification of loss to be adjusted to “provide for the trend of the Business and for variations in or other circumstances affecting the Business”.

367    By cl.9.1.2 “events” are deemed to be loss caused by Damage. While the reference to “loss caused by” here is probably redundant, the meaning is clear enough - the events in cl 9.1.2 are taken to be Damage which may cause interruption of or interference with the Business which may cause loss, and if so, the loss is covered “in accordance with the provisions of Clause 10 (Basis of Settlement)” which includes the adjustments clause.

368    In FCA v Arch UKSC Lord Hamblen and Lord Leggatt JJSC at [237] said:

The other sense in which the elements of the insured peril are inextricably connected is that those elements and their effects on the policyholder’s business all arise from the same original cause - in this case the Covid-19 pandemic. It is inherent in a situation where the elements of the peril insured under the public authority clause occur in the required combination to cause business interruption that there has been an occurrence of a notifiable disease which has led to the imposition of restrictions by a public authority. It is entirely predictable and to be expected that, even if they had not led to the closure of the insured premises, those elements of the insured peril would have had other potentially adverse effects on the turnover of the business. We have already expressed our view that it would undermine the commercial purpose of the cover to treat such potential effects as diminishing the scope of the indemnity. The underlying reason, as it seems to us, is that, although not themselves covered by the insurance, such effects are matters arising from the same original fortuity which the parties to the insurance would naturally expect to occur concurrently with the insured peril. They are not in that sense a separate and distinct risk.

369    Their Lordships continued as follows:

[243] The conclusion we draw is that, properly interpreted, the public authority clause in the Hiscox policies indemnifies the policyholder against the risk (and only against the risk) of all the elements of the insured peril acting in causal combination to cause business interruption loss; but it does so regardless of whether the loss was concurrently caused by other (uninsured but non-excluded) consequences of the Covid-19 pandemic which was the underlying or originating cause of the insured peril.

[244] This interpretation, in our opinion, gives effect to the public authority clause as it would reasonably be understood and intended to operate. For completeness, we would point out that this interpretation depends on a finding of concurrent causation involving causes of approximately equal efficacy. If it was found that, although all the elements of the insured peril were present, it could not be regarded as a proximate cause of loss and the sole proximate cause of the loss was the Covid-19 pandemic, then there would be no indemnity. An example might be a travel agency which lost almost all its business because of the travel restrictions imposed as a result of the pandemic. Although customer access to its premises might have become impossible, if it was found that the sole proximate cause of the loss of its walk-in customer business was the travel restrictions and not the inability of customers to enter the agency, then the loss would not be covered.

370    As to the trends (or adjustment) clauses in that case, their Lordships said:

[251] All the sample policy wordings considered in these proceedings contain clauses of a kind generally known as trends clauses. Such clauses are part of the standard method used in insurance policies that provide business interruption cover for quantifying the policyholder’s financial loss… It is the insurers’ contention that the trends clauses have the effect that they are not liable to indemnify policyholders for losses which would have arisen regardless of the operation of the insured perils by reason of the wider consequences of the Covid-19 pandemic.

[252] In so far as such an argument is relied upon as excluding the loss from cover as a matter of “but for” causation it has been addressed above. The remaining question is whether, and if so how, the trends clause in the policies affects the position.

[259] In considering the proper interpretation of the trends clauses, we would emphasise the following points.

[260] First, the trends clauses are part of the machinery contained in the policies for quantifying loss. They do not address or seek to delineate the scope of the indemnity. That is the function of the insuring clauses in the policy.

[261] Second, in accordance with the general principle referred to earlier…, the trends clauses should, if possible, be construed consistently with the insuring clauses in the policy.

[262] Third, to construe the trends clauses consistently with the insuring clauses means that, if possible, they should be construed so as not to take away the cover provided by the insuring clauses. To do so would effectively transform quantification machinery into a form of exclusion.

[268] How then are the trends clauses to be construed so as to avoid inconsistency with the insuring clauses? In our view, the simplest and most straightforward way in which the trends clauses can and should be so construed is, absent clear wording to the contrary, by recognising that the aim of such clauses is to arrive at the results that would have been achieved but for the insured peril and circumstances arising out of the same underlying or originating cause. Accordingly, the trends or circumstances referred to in the clause for which adjustments are to be made should generally be construed as meaning trends or circumstances unrelated in that way to the insured peril.

371    In so concluding the UK Supreme Court decided Orient-Express was wrong. The Court observed that Orient Express: (a) was decided on the basis of the arguments advanced, (b) was confined to an appeal on a question of law arising in an arbitration, and (c) was the subject of a further appeal which settled: at [304]-[310].

372    In the Hyper Trust cases the Courts took the same approach to these issues.

373    The purpose of an adjustments clause was explained by Beach J in Australian Pipe & Tube Pty Ltd v QBE Insurance (Australia) Limited (No 2) [2018] FCA 1450 at [114]-[115]:

114 The adjustment subclause is designed to give purpose to the principle of indemnity under the policy. As stated in Roberts H, Riley on Business Interruption Insurance (10th ed, Thomson Reuters, 2016) at 48:

Without this clause the policy cannot be regarded as fulfilling the basic principle of an insurance that is to indemnify, because the turnover, charges and profits which would have been realised during a period of interruption are hypothetical and never capable of absolute proof. By the use of this clause it is possible to make adjustments in a loss settlement to produce as near as is reasonably possible a true indemnity for an insured’s loss, albeit within a restricted period, i.e. the maximum indemnity period and also limited to the sum insured.

The other circumstances clause seeks to accommodate all such influences on the business that would have occurred but for the incident itself. This may seem like an enormous, if not insurmountable challenge, but to ignore all these factors and merely rely on the previous year’s trading would lead to a lottery in which the insured was either over or under indemnified.

115 Further, as was stated in Honour WB and Hickmott GJR, Honour and Hickmott’s Principles and Practice of Interruption Insurance (4th ed, Butterworths, 1970) at 444:

It is essential to ascertain as accurately as practicable the hypothetical results which the business itself would have produced apart from the fire or other peril happening, as to determine what adjustments to the rate of gross profit, the annual turnover and the standard turnover figures would be equitable.

374    As to causation, if, contrary to my conclusions, cll 9.1.2.1 (and 9.1.2.4), 9.1.2.5 or 9.1.2.6 are satisfied, then it may be accepted that in the case of LCA Marrickville there is some evidence of loss and that the loss resulted from interruption of or interference with the Business. The issue is whether the loss resulted from interruption of or interference with the Business in consequence of the insured peril.

375   There is evidence from which it could be inferred that LCA Marrickville suffered loss resulting from interruption of or interference with the Business in consequence of the insured peril. LCA Marrickville's profit and loss statements show gross profit declined from $XXXX in February 2020 to $XXXX in March 2020, $XXXX in April 2020 and $XXXX in May 2020 be compared with its gross profit of $XXXX in March 2019, $118,744.81 in April 2019 and $XXXX in May 2019. In particular, it is common sense that the required closure of the Situation between 26 March 2020 and 1 June 2020 involved interruption of or interference with the Business in consequence of the insured peril.

376    In the case of LCA Marrickville it would be difficult to suggest that being required to close the Situation to members of the public between 26 March and 1 June 2020 would be other than a proximate cause of LCA Marrickville’s loss. The fact that there may be another proximate cause of some part of the loss (such as the effect of COVID-19 generally or other orders requiring people to stay at home) does not change the fact that the insured peril is itself a proximate cause of the loss. Lord Hamblen and Lord Leggatt JJSC exposed the causation fallacy in FCA v Arch UKSC at [182]:

It has, however, long been recognised that in law as indeed in other areas of life the “but for” test is inadequate, not only because it is overinclusive, but also because it excludes some cases where one event could or would be regarded as a cause of another event. An example given by Hart and Honoré in their seminal treatise on Causation in the Law, 2nd ed (1985), p 206 is a case of two fires, started independently of each other, which combine to burn down a property: see Anderson v Minneapolis, St Paul & Sault Ste Marie Railway Co (1920) 146 Minn 430; Kingston v Chicago & Northwestern Railway Co (1927) 191 Wis 610. It is natural to regard each fire as a cause of the loss even if either fire would by itself have destroyed the property so that it cannot be said of either fire that, but for that peril, the loss would not have occurred. Another example, adapted from the facts of the decision of the Supreme Court of Canada in Cook v Lewis [1951] SCR 830, is a case where two hunters simultaneously shoot a hiker who is behind some bushes and medical evidence shows that either bullet would have killed the hiker instantly even if the other bullet had not been fired. Applying the “but for” test would produce the result that neither hunter’s shot caused the hiker’s death - a result which is manifestly not consistent with common-sense principles.

377    As Insurance Australia put it, their Lordships reasoned that:

where the elements of the insured peril and their effects on the insured’s business all arose from the same original cause (there, the COVID-19 pandemic) then other potentially adverse effects arising from that cause were matters arising ‘from the same fortuity’ which the parties to the insurance would naturally expect to occur concurrently with the insured peril. In that case, there was not ‘a separate and distinct risk’ but rather consequences of the same event ‘which are inherently likely to arise’: at [237], [239]. The insured was therefore indemnified against the risk of all elements of the insured peril acting in causal combination to cause the business interruption loss (A-›B-›C-›D), regardless of whether the loss was concurrently caused by other (uninsured but non-excluded) consequences of the COVID-19 pandemic which was the underlying cause of the insured peril: at [243]-[244].

378    Their Lordships applied the same reasoning to the trends causes in FCA v Arch UKSC. It is true that reference was made in FCA v Arch UKSC to the trends clause being a machinery provision separate from the insuring clause. That cannot be said in the present case where the indemnity is expressed in cl 9.1 as being “in accordance with the provisions of Clause 10 (Basis of Settlement)”. Nevertheless, the provisions of cl 10 are concerned with quantification. The mere fact that the reference to the required quantification is embedded in the insuring clause does not change its essential nature as a method of calculating loss. If cll 9.1.2.1 (and 9.1.2.4), 9.1.2.5 or 9.1.2.6 were satisfied then the effect of the trends clause would be to confine the effect of the indemnity so as to exclude losses in consequence of the same underlying cause as the insured peril.

379    As in FCA v Arch UKSC, the trends clause cannot be construed as requiring an adjustment for circumstances involving the same cause of loss as the insured peril. As a matter of construction of the policy, when the adjustments clause refers to adjustments to “provide for the trend of the Business and for variations in or other circumstances affecting the Businesswhich would have affected the Business had the Damage not occurred, so that the figures as adjusted shall represent as nearly as may be reasonably practicable the results which, but for the Damage, would have been obtained during the relative period after the Damage occurred” they cannot be taken to have intended that the same underlying cause of insured and uninsured loss would be such a circumstance. Rather, such circumstances are intended to refer to matters which would have affected the business other than those central to those of insured peril (in the sense that the existence of COVID-19 was central to all of the actions of the authorities in the present case). The fact that the adjustments clause uses a “but for” requirement of causation is not sufficient to displace the persuasiveness of the reasoning in FCA v Arch UKSC if, contrary to my view, the insuring clauses are satisfied.

380    Consistent with this reasoning, I am unable to accept the insurers’ submissions to the effect that, where a provision uses a “but for” requirement (as the adjustments clause in this case does), it would be to re-write the policy to conclude that the Damage only must be disregarded and the effects of COVID-19 generally must be taken into account as a circumstance that would have affected the business if the Damage had not occurred. The parties could not have intended that an uninsured circumstance which is also the same underlying cause of the Damage must be taken into account as a circumstance of the business under the adjustments clause. The emphasis here must be on the sameness of the underlying causes of the insured peril and the uninsured peril. The will depend, in part, on the nature of the insured peril. My point is that, depending on the nature of the insured peril, the concept of “all effects of COVID-19 generally” may not be the same underlying cause as the insured peril. This issue arises, for example, in the Meridian Travel case below.

381    In this regard I would not accept the submission of Insurance Australia as follows:

In the present case, however, it may not make a great difference whether the FCA v Arch or Orient Express approach is adopted. The question under the FCA v Arch approach is what constitutes the ‘same originating cause’ and whether the insured peril and the concurrent cause are truly concurrent, and equally efficacious, proximate causes of the loss suffered. As has been explained above, in FCA v Arch it was held that the relevant cover provided indemnity for government action in response to each and every occurrence of COVID-19. It was therefore straightforward to reason that the ‘original cause’ of the insured peril was the COVID-19 pandemic. Here, the cover responds to an ‘outbreak’ of COVID-19 or a specific threat of damage to persons, in each case within a defined radius. The underlying cause of government action in response to those perils is not the COVID-19 pandemic. It is the localised occurrence of the disease. Applying the Supreme Court’s reasoning, the trends or circumstances that must be ignored when undertaking the counter-factual analysis are therefore at most those that arise from the specific outbreak or threat and not the broader impacts of the pandemic.

382    I would not accept this reasoning in the present case because the necessary assumption I am making is that (contrary to my conclusions) at least one of the insuring clauses is satisfied. On that basis, it must be taken that there is the relevant causal connection between circumstances within the radius and the relevant authority. If this were the case then, given the nature of the relevant action of the authority relied upon, it would follow that circumstances both within and outside of the radius had caused the authority’s actions. Accordingly, the fact of all the cases of COVID-19 within NSW would be a proximate cause of the actions of the authority. The reasoning in FCA v Arch UKSC would then apply. As I have said, however, this kind of reasoning of Insurance Australia operates at an earlier stage in the analysis – determining whether the actions of the authority bear the required causal relationship to circumstances within the radius.

6.8.2    Basis of settlement – amounts saved

383    A further issue is the amounts saved clause, cl 10.1.3. Swiss Re contended that cl 10.1.3 requires to be deducted from the amount payable any sum saved in respect of such of the charges and expenses of the Business payable out of Gross Profit as a consequence of the Damage. According to Swiss Re this means that any sums received by way of governmental support in response to COVID-19 in the form of JobKeeper or otherwise. Swiss Re also submitted that this would be the case irrespective of cl 10.1.3 based on general principles applicable to contracts of indemnity. For this purpose Swiss Re adopted the submissions of Insurance Australia.

384    LCA Marrickville received JobKeeper payments, rental waiver from its commercial landlord, relief from its franchisor, and NSW Government grants.

385    As a general proposition, I do not accept LCA Marrickville’s submission that the concept of “losses suffered” involves a false premise. By cl 9.1 Swiss Re agreed to indemnify LCA Marrickville “in accordance with the provisions of Clause 10 (Basis of Settlement) against loss resulting from the interruption of or interference with the Business…”. The concept of loss qualifies the application of cl 10. Further, cl 10.1 itself provides that the “Insured is indemnified with respect to loss of Gross Profit calculated in the following manner”. As observed in Wallaby Grip at [30] and [31] “[i]ndemnity insurance involves payment for the loss actually suffered by the insured”, and “it is necessary for an insured under a contract of indemnity insurance to prove the extent or amount of the loss claimed, but this is because the indemnity concerns only actual loss”.

386    The fact that none of the integers of cl 10 refer to third party payments is beside the point. As discussed below, if those payments represent savings within cl 10.1.3 then they must be taken into account. If they represent payments reducing LCA Marrickville’s loss they must also be taken into account. However, contrary to Swiss Re’s submissions, this is not because any of the payments fall within “Turnover” (as the payments were not “moneypaid or payable to the Insured for goods sold and delivered and for services rendered in the course of the Business conducted at the Situation”). It is because of the terms of cl 10.1.3 and the general law in respect of an indemnity. Nor is it because LCA Marrickville might otherwise gain a “windfall”. The issue is to be decided by reference to the operative provisions of the policy and the general law applying to an indemnity not notions of windfall gains.

6.8.2.1    JobKeeper

387    LCA Marrickville accepted the summary of the Commonwealth JobKeeper program provided by Insurance Australia. That summary is set out below.

388    The Commonwealth payment known as JobKeeper was introduced as part of a package of four Acts: (a) the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (Cth), (b) the Coronavirus Economic Response Package Omnibus (Measures No 2) Act 2020 (Cth), (c) the Appropriation Bill (No 5) 2019-20 (Cth), and (d) the Appropriation Bill (No 6) 2019-20 (Cth).

389    An entity was eligible to participate if, as at 1 March 2020: (a) the entity carried on business in Australia or was a non-profit body that pursued its objectives principally in Australia, and (b) the entity’s turnover has reduced by a relevant percentage ((i) 15 per cent – where the entity is a registered charity (other than certain educational institutions), (ii) 30 per cent – where the employer’s aggregated turnover is less than $1 billion, or (iii) 50 per cent – where the employer’s aggregated turnover is at least $1 billion): Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (Cth) s7-8.

390    To be eligible to receive the JobKeeper payment, an employer was required to pay an eligible employee a total of $1,500 (pre-tax) in each fortnight for which the employer was claiming the entitlement during the period March to September 2020. The $1,500 could include amounts that were salary sacrificed into superannuation as well as amounts dealt with in any other way on behalf of the employee as a substitute for their salary and wages (e.g. other salary packaging arrangements such as certain fringe benefits). Payments were then made to the employer monthly in arrears. During the extension phase of JobKeeper (28 September 2020 – 28 March 2021), the payment was tapered and targeted to those businesses that continued to be significantly affected by the economic downturn. Businesses were required to reassess their eligibility with reference to their actual turnover: Coronavirus Economic Response Package (Payments and Benefits) Rules ss 10, 15, 13, 7(c) and 8B.

391    The object of the Coronavirus Economic Response Package (Payments and Benefits) Act in s 3 “is to provide financial support to entities directly or indirectly affected by the Coronavirus known as COVID-19”.

392    The Explanatory Memorandum that accompanied the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 and Coronavirus Economic Response Package Omnibus (Measures No. 2) Bill 2020 stated (p 12):

The Government’s consolidated package of $320 billion represents fiscal and balance sheet support across the forward estimates of 16.4 per cent of annual Gross Domestic Product. The support is designed to help businesses and households through the period ahead. This significant action has been taken in the national interest and has been updated in the light of the broader and more prolonged impact of the Coronavirus outbreak.

The package provides timely support to workers, households and businesses through a difficult time. Building on the previous measures, this package will support those most severely affected. It is also designed to position the Australian economy to recover strongly once the health challenge has been overcome.

393    The Explanatory Memorandum continued at p 34:

2.8 Under the JobKeeper Payment, businesses significantly impacted by the Coronavirus outbreak will be able to access a subsidy from the Government to continue paying their employees. This assistance will help businesses to keep people in their jobs and re-start when the crisis is over. For employees, this means they can keep their job and earn an income – even if their hours have been cut.

2.9 The JobKeeper Payment is a temporary scheme open to businesses impacted by the Coronavirus. The JobKeeper Payment will also be available to the self-employed. The Government will provide $1,500 per fortnight per employee for up to six months. The JobKeeper Payment will support employers to maintain their connection to their employees. These connections will enable business to reactivate their operations quickly – without having to rehire staff – when the crisis is over.

394    I do not accept the submissions for LCA Marrickville that amounts received by it under the JobKeeper program are not within the scope of cl 10.1.3 (any sum saved during the Indemnity Period in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced as a consequence of the Damage).

395    LCA Marrickville said that while the purpose of JobKeeper is linked to the effect of COVID-19 it is not linked to the insured peril. I disagree. The reasoning as set out above in respect of causation and the adjustments clause must apply. Just as the proximate case of COVID-19 generally would not defeat the provision of the indemnity on the grounds of causation and the adjustments clause, the fact that the purpose of JobKeeper is to limit the adverse effects of COVID-19 does not mean that the causal requirement in cl 10.1.3 is not satisfied. LCA Marrickville received JobKeeper as a consequence of the Damage. The payments of JobKeeper would be a sum saved within the meaning of cl 10.1.3.

396    LCA Marrickville said that the purpose of JobKeeper was to assist employees, not businesses referring to the Coronavirus Economic Response Package Omnibus (Measures No. 2) Act which introduced Part 6-4C to the Fair Work Act 2009 (Cth). Section 789GA provides “[t]he purpose of this Part is to assist employers who qualify for the JobKeeper scheme to deal with the economic impact of the Coronavirus… This Part authorises an employer who qualifies for the JobKeeper scheme to give a JobKeeper enabling stand down direction to an employee (including to reduce hours of work)”. Section 789GB records the object of the part, which is to “(a) make temporary changes to assist the Australian people to keep their jobs … (b) help sustain the viability of Australian businesses… (c) continue the employment of employees; and (d) ensure the continued effective operation of occupational health and safety laws… (e) help ensure that, where reasonably possible, employees: (i) remain productively employed … and (ii) continue to contribute to the business of their employer. LCA Marrickville submitted that these provisions demonstrate that the payments were intended to assist employees – workers – and not the business. And it is all the more clear they are not linked to the losses of small business, or to the losses arising from the insured peril.

397    This submission is too reductive. The scheme was intended to assist businesses and workers. And it assisted workers by assisting businesses to pay the workers’ wages. In so doing the scheme both provided support to businesses and saved the businesses money in the form of wages that the business otherwise would have to pay. The scheme reduced losses of eligible businesses by subsidising their wages bill. While the Commonwealth may not have subjectively characterised this as compensatory scheme it had the effect and inferred purpose of compensating eligible business for losses that would otherwise be suffered – the cost of wages while revenue was suppressed by COVID-19 and all of its consequences (including authority actions).

398    The fact that the scheme does not explain its interaction with insurance policies is immaterial. That is a consequence of the objective character of the scheme and the provisions of each policy.

399    Further, LCA Marrickville cannot have it both ways. It cannot maintain, on the one hand, that the effects of COVID-19 are to be disregarded in assessing the circumstances of the business and, on the other hand, exclude the operation of cl 10.1.3 in respect of payments made to it in response to COVID-19.

400    Insurance Australia submitted that the same outcome would be reached irrespective of a provision such as cl 10.1.3 based on general principle. As a contract of insurance is a promise to indemnify loss, an insurer is only required to pay an amount by way of compensation for losses that the insured has (as a matter of fact) actually suffered. Insurance Australia submitted that under general law the issues are: (a) the intention of the person who made the voluntary payment to the insured, (b) if the person intended to compensate for the loss, the insurer is entitled to recover the payment, and (c) if the person intended to benefit the insured personally to the exclusion of the insurer, the insurer is not entitled to recover the payment.

401    This follows the reasoning in Insurance Australia Ltd v HIH Casualty & General Insurance Ltd (in liq) [2007] VSCA 223; (2007) 18 VR 528 (Insurance Australia v HIH Casualty) culminating in the conclusion at [159] that:

There is a broad principle, applicable at least in insurance law and torts law, that credit need not be given by an injured party for moneys received by it which are not to be characterised as extinguishing or reducing that party’s loss, but are rather to be characterised as having been received independently of right of redress.

402    Insurance Australia also referred to Worth v HDI Global Specialty SE [2021] NSWCA 185 at [179] in which the NSW Court of Appeal said:

In Globe Church Incorporated v Allianz Australia Insurance Ltd (2019) 99 NSWLR 470; [2019] NSWCA 27, this Court (Bathurst CJ, Beazley P and Ward JA; Meagher and Leeming JJA dissenting) held that an insurer’s promise to indemnify is to be understood as a promise “to hold harmless against loss” rather than as a promise on the happening of the insured event to make a payment reflecting the damage suffered as a result of that event, in accordance with the policy and within a reasonable time. An insured’s claim, in the judgment of the majority in Globe Church, is accordingly a claim to unliquidated damages which arises immediately on the happening of the insured event, “albeit that the amount necessary to make good the loss is to be calculated in accordance with the basis of settlement clause in the policy” (at [209]). That reflects the position in England at common law: see eg Sprung v Real Insurance (UK) Ltd [1999] 1 Lloyd’s IR 111; Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2017] AC 1; [2016] UKSC 45.

403    For these reasons Insurance Australia must be right that the insureds are not entitled to a “precise contractually agreed calculation” even if that calculation demonstrably exceeds the loss it has actually suffered and that the principle against double recovery applies. As Insurance Australia submitted, this is the same logic that underpins the law of subrogation (and recoupment), pursuant to which an insurer who indemnifies is entitled to receive the proceeds of an action against any third-party in respect of the same loss.

404    I accept the submissions of Insurance Australia to this effect:

the Commonwealth’s purpose in making the ‘JobKeeper’ payment was to compensate businesses for losses they would otherwise suffer by continuing to pay employee wages, in circumstances where they may be suffering a downturn in business revenue. This is the very form of loss for which business interruption insurance provides cover, and the payments are therefore in the category of payments that are generally taken to reduce the amount of the indemnity.

Further, there is no suggestion that ‘JobKeeper’ was intended to be retained by the insured to the exclusion of their insurer. The relevant explanatory materials make no mention of insurance arrangements. There is therefore no basis to assume that the legislature intended recipients of ‘JobKeeper’ payments to receive both those payments and business interruption insurance payments in respect of the same loss.

On this basis, ‘JobKeeper’ payments must be taken into account for the purposes of calculating the loss recoverable. They reduce the loss suffered …and any amounts paid by the insurer in respect of those expenses would be a windfall gain….

405    I do not accept LCA Marrickville’s submission that the general indemnity principle does not apply because the Basis of Settlement provisions specify how loss is to be assessed. Further, while the Commonwealth’s purposes were multiple, it must be accepted that one if its purposes was, as Insurance Australia submitted, to enable eligible businesses to save on the cost of wages, thereby achieving its objective of keeping eligible businesses afloat and maintaining the employment relationship between the businesses and their staff. The fact of multiple purposes does not prevent the characterisation of the purpose of the payment as intended to compensate for the loss.

6.8.2.2    NSW Government grants

406    LCA Marrickville received payments under grants from the New South Wales State Government in respect of COVID-19, which took the form of a $XXXX grant and a $XXXX grant under s 5.7 of the Government Sector Finance Act 2018 (NSW), being the “Small Business COVID-19 Support Grant” and the Small Business COVID-19 Recovery Grant”.

407    Section 5.7(1) of the Government Sector Finance Act provides that a Minister may, if satisfied that there are special circumstances or circumstances of a kind prescribed by the regulations, authorise an amount to be paid to a person on behalf of the State (an “act of grace payment”) under this section even though the payment is not otherwise authorised by or under law, or required to meet an obligation.

408    While LCA Marrickville had regard to the guidelines for eligibility for determining whether these payments were intended to reduce its loss, in my view s 5.7 is determinative. Whatever the guidelines regulating eligibility these are act of grace payments. I am unable to accept that the NSW Government intended these payments to be other than acts of grace, in the sense of merciful beneficences to eligible businesses by the NSW Government. On this basis, I could not conclude that the NSW Government intended these payments to be taken into account by way of reduction of the insured’s loss under an applicable contract of indemnity. Rather, these payments were received independently of the right of redress under the policy. That is their essential character as act of grace payments. Nor does the payment represent an amount saved within the meaning of cl 10.1.3. As a result, I do not accept that an assessment of LCA Marrickville’s loss (if one of the insuring clauses is applicable) would have to allow for these amounts.

6.8.2.3    Rental waiver from landlord

409    LCA Marrickville received rental relief in accordance with the “National Cabinet mandatory code of conduct—SME commercial leasing principles during COVID-19”. LCA Marrickville submitted that “insofar as the intention of the grantor (the lessor) is relevant, none of the material demonstrates an intent to compensate for losses arising from the closure of its premises but rather due to the effects of COVID-19. This means that it ought be taken into account if the catastrophe clause responds (LCA Marrickville only), but not if the other clauses respond”.

410    I disagree. Consistent with the reasoning above, LCA Marrickville cannot have it both ways. Both under cl 10.1.3 and general law LCA Marrickville must account for the amounts it saved by reason of the fact that it did not pay rent or the full amount of rent it was required to pay. It does not matter that the rental relief was caused by COVID-19 rather than the insured peril – they arise from the same underlying cause. The same underlying cause if essential to the Damage. On that basis, the rental relief cannot be disregarded in assessing LCA Marrickville’s loss (assuming one of the insuring clauses responds, contrary to my conclusions).

6.8.2.4    Franchisor relief

411    LCA Marrickville received relief from its franchisor, being an $XXXX reduction from March 2020 in royalty fees, and a $XXXX reprieve on management fees in April and May 2020.

412    I am not persuaded that a letter from the franchisor after the event on 27 March 2020 is relevant.

413    I agree with LCA Marrickville, however, that these cost reductions were not provided by the franchisor to compensate for LCA Marrickville’s loss due to COVID-19. From the nature of the payments it must be inferred that the discount on royalties was to assist the business to survive and the discount on management fees was to allow for the reduction in required services from the franchisor and to assist the business to survive. If cl 10.1.3 were not part of the policy I would not conclude that LCA Marrickville would need to offset these savings against any losses. However, cl 10.1.3 is part of the policy. Both reductions are savings which, consistent with the approach taken above, were able to be made because of COVID-19 which would be a central element of the insured peril if one of the insuring clauses applied. On that basis, cl 10.1.3 would require these savings to be taken into account in assessing LCA Marrickville’s loss.

6.9    Interest

414    Section 57(1) of the Insurance Contracts Act provides that where an insurer is liable to a person an amount under a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with s 57. By s 57(2) the period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on, in effect, payment being made.

415    If, contrary to my conclusions, Swiss Re was liable to pay any amount to LCA Marrickville under the policy then I do not accept that it was unreasonable for Swiss Re to withhold payment from the date on which it denied the claim. As Swiss Re submitted: (a) the case is part of a test case proceeding with the co-operation of insurers, insureds, ACFA and other regulators, (b) AFCA agreed to this proceeding being dealt with as a test case, (c) LCA Marrickville has been providing material to supplement and, in part, has changed the basis for its claim as part of this proceeding, and (d) it was not unreasonable for Swiss Re to deny cover in the circumstances which involved sufficient complexity to become the subject of the test case and would not be unreasonable for it to await the outcome of the test case (including any final determination on appeal).

6.10    Answers to questions – causation etc

416    These questions are also not well adapted to the actual operation of the clauses of the policy. To the extent possible I answer the questions below.

417    7. Causation, Adjustment and Basis of Settlement

If clause 9.1.2 of the Policy responds, on the proper construction of the adjustment clause (being the clause in the last sub-paragraph of Clause 8 on p. 29 of the Policy):

(a) Was there any interruption of or interference with LCA [Marrickville]’s Business in consequence of the relevant insured perils in the Disease Clause, the Expansion Clause, the Catastrophe Clause or the Prevention of Access Clause?

While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, it should follow that there was interruption of or interference with LCA Marrickville’s Business in consequence of the relevant insured perils in the applicable clause. The fact that LCA Marrickville may also have suffered loss generally from the existence and risk of COVID-19 in NSW would not mean that the action of the authority would not also be a proximate cause of LCA Marrickville’s on the facts.

(b) What adjustment of the Rate of Gross Profit, Standard Turnover, Standard Gross Revenue, Standard Gross Rental and Rate of Payroll is necessary to provide for the “trend” of the Business, “variations” affecting the Business and/or “other circumstances” affecting the Business.

While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the adjustments clause does not require any adjustment to be made for the existence and risk of COVID-19 in NSW as it is an essential cause of the Damage.

(c) How, if at all, does adjustment take into account the effect that COVID-19 had on the Business (other than the effect of the “Authority Response–LCA Marrickville”).

While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the adjustments clause does not require any adjustment to be made for the existence and risk of COVID-19 in NSW as it is an essential cause of the Damage.

(d) To what extent should account be made for grants, subsidies, abatements or other benefits received by LCA Marrickville when assessing its entitlement to be indemnified for its loss (if any) including but not limited to JobKeeper, other payments made to it by a Commonwealth or State Government and rental relief or rebates?

While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, LCA Marrickville, either under the general law or cl 10.1.3 would have to account for payments received under the JobKeeper scheme, by way of rental relief, and franchisor relief. It would not have to account for the act of grace payments received from the NSW Government.

If clause 9.1.2 of the Policy responds, on the proper construction of the Basis of Settlement clause (clause 10):1

(e) What is the date of the ‘Damage’?

While the question does not arise I note that, if I am wrong about the proper construction of any of the insuring clauses, the date of the Damage would be the date of the first action by an authority satisfying an insuring clause, which would be 26 March 2020.

(f) {LCA Marrickville does not agree that issue (f) should be included in this test case because the factual premise for this issue will be the subject of a separate loss assessment process} To the extent interruption of, or interference with, LCA Marrickville’s business was caused by different matters comprising the “Authority Response-LCA Marrickville”, to what extent is the resulting loss (if any) to be aggregated for the purposes of applying a limit, deductible and any other conditions of cover?

Insufficient submissions were made to enable this issue to be answered.

418    8. Interest

(a) Is interest payable by Swiss Re pursuant to section 57 of the ICA?

No.

(b) If yes to paragraph (a), from what date is any such interest payable?

This does not arise. If it did arise, interest would be payable from the date of final determination of this proceeding is Swiss Re is liable to pay under the policy.

6.11    Conclusions

419    The policy does not apply to the circumstances of LCA Marrickville’s claims. This does not result from inadequate evidence, but from the proper construction of the relevant clauses of the policy. Specifically:

(1)    the exclusion in cl 9.1.2.1 (any disease(s) declared to be a listed human disease pursuant to subsection 42(1) of the Biosecurity Act 2015) applies so that cl 9.1.2.1 cannot be engaged;

(2)    if the conclusion in (1) is wrong, in any event the relevant orders of the competent public authority were not as a result of an outbreak of a notifiable human infectious or contagious disease or bacterial infection at the Situation or within the radius or as a result of any discovery of an organism likely to result in the occurrence of a notifiable human infectious or contagious disease at the Situation or within the radius, so cl 9.1.2.1 is not engaged;

(3)    the premises were closed by order of a competent public authority from 26 March 2020 until 1 June 2020;

(4)    properly construed cll 9.1.2.5 and 9.1.2.6 do not apply to actions of an authority in response to a disease which is exclusively regulated by cll 9.1.2.1 and 9.1.2.4 (as well as cl 9.1.2.3);

(5)    if the conclusion in (4) is wrong, in any event the orders do not constitute the action of a civil authority during a conflagration or other catastrophe for the purpose of retarding same as required by cl 9.1.2.5; and

(6)    if the conclusion in (4) is wrong, the orders do constitute the action of any lawful authority attempting to avoid or diminish risk to life within 5 kilometres of such Situation which: (a) in the case of the 26 March 2020 order, prevents and hinders the use of or access to the Situation, and (b) in the case of the 1 June 2020 and 13 June 2020 hinders the use of the premises.

420    If my conclusions that the insuring clauses are not engaged is wrong, then:

(1)    the order of 26 March 2020 would be a proximate cause of some loss;

(2)    the other orders may be the proximate cause of some loss;

(3)    the fact that the existence and risk of COVID-19 in NSW is also likely to have been a proximate cause of the same loss is immaterial as the causation requirement will be satisfied provided that the orders are also the proximate cause of loss;

(4)    the effects of the existence and risk of COVID-19 in NSW on the business do not have to be taken into account as a circumstance that would otherwise have affected the business under the adjustments clause; and

(5)    the savings resulting from JobKeeper, rental waivers and franchise cost relief have to be accounted for under cl 10.1.3 and otherwise under the loss provisions.

421    As further evidence cannot affect these conclusions, subject to any observations of the parties, I would make the declaration Swiss Re sought as follows:

Declare that the respondent is not entitled to indemnity under the policy of insurance P23089.04-00 issued on or about 17 July 2019 in response to the claim under the policy for indemnity first made in July 2020.

422    I would also dismiss the respondent’s cross-claim.

7.    NSD133/2021: INSURANCE AUSTRALIA V MERIDIAN TRAVEL

7.1    Agreed background

423    Meridian Travel is the insured under a “Steadfast Office Pack Policy” 15T4227893 placed with Insurance Australia Ltd trading as CGU Insurance (CGU) (Meridian Travel policy).

424    The Meridian Travel policy comprises: (a) a renewal schedule issued on 17 February 2020, and (b) the Steadfast Office Pack Policy wording.

425    The Meridian Travel policy was issued on 17 February 2020 for the period 22 February 2020 to 22 February 2021 4:00pm.

426    Meridian Travel is located at 159 Burgundy Street, Heidelberg, Victoria, 3084 (Meridian premises).

427    From 13 April 2020 to 11 May 2020, Stay at Home Directions (No 4) to (No 6) entered into force and extended the First Victorian Lockdown to 31 May 2020. On 24 May 2020, the Stay at Home Directions (No 7) entered into force and ended the First Victorian Lockdown at 11:59pm on 31 May 2020.

428    On 8 July 2020, the Area Directions (No 3) entered into force.

429    Between 10 July 2020 and 18 October 2020, the Stay at Home Directions (Restricted Areas) (No 2) to (No 19) and Area Restrictions (No 4) to (No 9) entered into force.

430    On 12 February 2021, the Stay Safe Directions (Victoria) (No 14) entered into force.

431    Since 25 March 2020, Meridian Travels customers have been unable to leave Australia without first obtaining an exemption under the Biosecurity (Listed Human Diseases) Amendment Determination 2020.

432    On 15 July 2020, Meridian Travel made a claim under the Meridian Travel policy via a telephone call to CGU.

433    On 11 August 2020, CGU denied indemnity for Meridian Travels claim.

434    On 18 August 2020, Meridian telephoned CGU and requested that CGU’s decision to deny indemnity be reviewed by CGU’s customer relations team.

435    On 18 August 2020, Meridian received an email from CGU confirming that Meridian Travels claim would be reviewed by CGU’s customer relations team.

436    On 28 August 2020, CGU upheld its decision to deny indemnity for Meridian Travels claim.

437    On 9 September 2020, Meridian Travel lodged a complaint against CGU with AFCA.

7.2    Policy provisions

438    The key provisions of the Meridian Travel policy are below (noting that cl 8 is substituted by the policy schedule for cl 2, there being no dispute that the “Additional Benefit 8” in the policy schedule is to be read as a reference to “Additional Benefit 2”).

General definitions

Business means:

all activities stated in the Schedule including:

a) the ownership and occupation of the Business Premises by the Insured;

b) the provision of any sponsorship, charitable donations, or attendance at any charitable event or gala;

c) canteen, social, sports, welfare, child care services or other activities for the Insured’s employees;

d) first aid, fire and ambulance services provided by the Insured for the Insured’s own internal purposes; and

e) private work undertaken by employees for any director, partner, officer or executive of the Insured.

Damage (with ‘Damaged’ having a corresponding meaning) means physical loss, damage or destruction.

Property Insured means buildings, contents, specified items, stock, total contents, tobacco, cigars, cigarettes, and items listed on the Schedule and used in Your Business.

Situation means the locations set out as the situation in the Schedule.

You’, ‘Your’, ‘Yours’, ‘Insured’ means the person or entity named in the Schedule as the insured.

Section 1

Property

Section 2

Business Interruption

Cover

If the Business carried on by You is interrupted or interfered with as a result of Damage occurring during the Period of Insurance, to:

1.    Property Insured under any of the following sections of this Policy:

2.    Property at the Situation, used by you but not owned by You:

We will, after taking account any sum saved during the Indemnity Period in respect of such charges and expenses of the Business as may cease or be reduced in consequence of the interruption or interference, indemnify You in respect of the loss arising from such interruption or interference in accordance with the settlement of claims clause to the sum insured expressed against the relevant item on the Schedule, where the Schedule notes that cover has been selected.

Definitions

Adjustment means adjustment as necessary to provide for the trend of the Business and variations in, or other circumstances affecting, the Business, either before or after the date of occurrence of the Damage, or which would have affected the Business had the Damage not occurred, so that the figures thus adjusted represent, as nearly as may be reasonably practicable, the results that, but for the Damage, would have been obtained during the relative period after the Damage.

Indemnity Period means the period beginning with the date of the occurrence of the Damage and ending not later than the last day of the period specified in the Schedule, during which the results of the Business are affected as a consequence of the Damage.

Revenue means the money paid or payable to You for services provided (and stock in trade, if any, sold), in the course of operation of Your Business at the premises.

Standard Revenue means the Revenue earned within that period during the twelve (12) months immediately before the date of the Damage which corresponds with the Indemnity Period. (Court Book, A.0108)

Settlement of claims

Item 9 – Gross revenue

This item is limited to loss of Revenue and increase in cost of working. The amount payable as indemnity under this item will be:

a) in respect of loss of Revenue, the amount by which the Revenue earned during the Indemnity Period falls short of the Standard Revenue in consequence of the Damage; and

b) in respect of increase in cost of working, the additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the loss of Revenue which, but for the additional expenditure, would have taken place during the Indemnity Period in consequence of the Damage. However, Our payment will not exceed the amount of reduction in Revenue thereby avoided, less any sum saved during the Indemnity Period in respect of such charges and expenses of Your Business payable out of Revenue as may cease or be reduced in consequence of the Damage.

Additional benefits

This section is extended to include the following additional benefits.

Unless expressly stated in the additional benefit, additional benefits 1 to 13 inclusive are payable provided that the sum insured expressed against the relevant item in the Schedule is not otherwise exhausted.

For additional benefits 1 to 9 inclusive We will pay You (depending on the part of the section which is applicable to You) for:

e) Item 9 Gross Revenue,

resulting from interruption or interference with Your Business as a result of Damage occurring during the Period of insurance to, or as a direct result of:

2. Murder, Suicide or Disease

the occurrence of any of the circumstances set out in this Additional Benefit shall be deemed to be Damage to Property used by You at the Situation.

(a) Murder or suicide occurring at the Situation.

(b) Injury, illness or disease caused by the consumption of food or drink provided and consumed at the Situation.

(c) The outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation.

(d) Closure or evacuation of Your Business by order of a government, public or statutory authority consequent upon:

(i) the discovery of an organism likely to result in a human infectious or contagious disease at the Situation; or

(ii) bomb threat; or

(iii) vermin or pests at the Situation; or

(iv) defects in the drains or other sanitary arrangements at the Situation.

(e) Shark or crocodile attack occurring within a 20-kilometre radius of the Business Premises during the Period of Insurance.

Cover under Additional Benefits 2(c) and 2(d)(i) does not apply in respect of Highly Pathogenic Avian Influenza in Humans or any other diseases declared to be quarantinable diseases under the Quarantine Act 1908 and subsequent amendments.

439    The policy schedule identifies the business as “Travel Agency Services (Excluding Tour Operators)”. It identifies the Situation as 159 Burgundy Road, Heidelberg, Victoria. It is agreed that the fact that this incorrectly refers to “Road” instead of “Street” is immaterial.

7.3    Introductory comments

440    Insurance Australia relied on s 61A of the Property Law Act to read the exclusion as applying to COVID-19 as a listed human disease under the Biosecurity Act. For the reasons already given, I have rejected that argument. Accordingly, the exclusion to cl 8(c) and 8(d)(1) does not apply.

441    The parties referred to cl 8(c) as the disease clause or extension. They referred to cl 8(d) as the hybrid extension. It will be noted that cl 8(c) does not refer to any action by an authority. Clause 8(c) concerns the objective fact of an outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation. Observations made elsewhere in these reasons about provisions which depend on the action of the authority being a result of some identified circumstance (such as an outbreak of a disease), and not as a result of the objective fact of an outbreak of a disease, are inapplicable to cl 8(c). However, as explained below, the interruption or interference with the business must be a result of the fact of the outbreak as specified. That causal requirement is not satisfied by subsequent evidence proving the existence of an outbreak within the 20 kilometre radius. It is proved by the contemporaneous circumstances as they existed at the time of the alleged interruption or interference from which the loss claimed arises.

442    The occurrence of the outbreak as specified in cl 8(c) is “deemed to be Damage to Property used by You at the Situation”. This is a reference back to item 2 of the Cover section (2. Property at the Situation, used by you but not owned by You). Accordingly, the relevant condition to cover is if the Business carried on by You is interrupted or interfered with as a result of [the occurrence of the circumstance set out in cl 8(c)] occurring during the Period of Insurance …We will… indemnify You in respect of the loss arising from such interruption or interference”.

443    The same logic applies to cl 8(d) except that clause involves closure or evacuation of Your Business by order of a government, public or statutory authority consequent upon one of the specified matters. Consistent with my reasoning elsewhere, the circumstance in cl 8(d)(1) (the discovery of an organism likely to result in a human infectious or contagious disease at the Situation) are concerned not with whether the authority is right or wrong about the organism or its likelihood of resulting in infectious or contagious disease at the Situation, but with the character of the authority’s actions - that is, whether the authority itself made or gave the order closing or evacuating the business consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation. As such, again, subsequent evidence of the existence of such an organism at the Situation not known to the authority at the time it made the order is immaterial.

444    Under cl 8(c) the outbreak must occur within the 20 kilometre radius of the Situation.

445    Under cl 8(d)(1) the requirement is not an order consequent upon the discovery of an organism at the Situation. The requirement is an order consequent upon the discovery of an organism [anywhere] likely to result in a human infectious or contagious disease at the Situation. This is because the words “at the Situation”, as a matter of ordinary English, qualify the whole of the preceding phrase and not the words “discovery of an organism”.

446    Meridian Travel operated a travel agency business. International bookings comprised approximately 90% of Meridian’s revenue (of which approximately 65% comprised international tours and international cruises), and the domestic bookings the remaining 10% of revenue.

447    Meridian Travel relied on and summarised the effect of the following instruments of authorities for the purposes of cl 8(d)(1):

(1)    the 25 March 2020 Biosecurity (Human Biosecurity Emergency) (Human Coronavirus with Pandemic Potential) (Overseas Travel Ban Emergency Requirements) Determination 2020 (Cth). This instrument was made under 477(1) of the Biosecurity Act and prohibited an Australian citizen or permanent resident from leaving Australia without an exemption;

(2)    the March 2020 to May 2020 Stay at Home Directions. These directions imposed lockdowns in Victoria for the period between 30 March 2020 and 31 May 2020. These were orders to “address the serious public health risk posed to Victoria by Novel Coronavirus 2019” by requiring everyone in Victoria to limit their interactions with others by: (a) restricting the circumstances in which they may leave the premises where they ordinarily reside; and (b) placing restrictions on gatherings. In effect, persons in Victoria were prohibited from leaving their home other than for a few specified reasons;

(3)    the July 2020 to October 2020 Stay at Home (Restricted Areas) Directions and October 2020 Stay Safe Directions (Melbourne). These directions imposed lockdowns in Victoria for the period between 8 July 2020 and 27 October 2020. Like the March 2020 to May 2020 Stay at Home Directions, these were orders to “address the serious public health risk posed to Victoria by Novel Coronavirus 2019”. Again, they did this by requiring everyone in Victoria to limit their interactions with others by: (a) restricting the circumstances in which they may leave the premises where they ordinarily reside; and (b) placing restrictions on gatherings. In effect, persons in Victoria were prohibited from leaving their home other than for a few specified reasons. The directions provided that they were to be read with, relevantly, various Restricted Activity Directions which, in substance, restricted certain businesses from operating; and

(4)    the February 2021 Stay Safe Directions. These directions imposed lockdowns in Victoria for the period between 12 and 17 February 2021 in the same manner as the earlier directions.

448    The Overseas Travel Ban was made by the Commonwealth Health Minister. The Victorian directions were made by the Victoria Deputy Chief Health Officer under s 200(1)(d) of the Public Health and Wellbeing Act 2008 (Vic). There is no dispute that both are a government, public or statutory authority as required by cl 8(d)(1).

7.4    Clause 8(c) – the disease clause

449    For the purpose of this proceeding, Insurance Australia accepted that there was an outbreak of COVID-19 within 20 kilometres of Meridian Travel’s premises by no later than 30 March 2020, saying that the real issue is whether this was the proximate cause of Meridian Travel’s loss. This concession is based on the agreed facts which at [60] show that a radius of 20 kilometres from Meridian Travel’s premises captures the majority of metropolitan Melbourne. Further, at [63] the agreed facts record that there were approximately 29 cases attributed to the local government areas wholly within the radius and 38 cases attributed to the postcodes wholly within the radius. Based on this data, these numbers then increased exponentially from around 23 March 2020.

450    Meridian Travel contended that there was an outbreak of COVID-19 within the radius by 1 March 2020. Paragraph 63 does not prove that there was an outbreak of COVID-19 within the radius by 1 March 2020. I consider that “outbreak” takes the meaning already identified above. That is, contrary to Insurance Australia’s arguments, a single case of a person with and capable of communicating COVID-19 in the community and within the radius is an outbreak of COVID-19. Paragraph 63 of the agreed facts does not prove that the 9 cases of COVID-19 in Victoria (five postcodes wholly within the radius) were in the community and within the radius.

451    Based on the evidence I am unable to find that there was an outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation before 30 March 2020 (a finding made possible because of Insurance Australia’s concession). If anything depends on the difference between 1 and 30 March 2020 as the start of the outbreak within the meaning of cl 8(c) I will make that clear.

452    Otherwise, I would not infer from the evidence that the outbreak ceased by February 2021 as Insurance Australia proposed. If anything depends on the date at which the outbreak ended I will also make that clear.

453    For these reasons, cl 8(c) applies on the facts of this case from 30 March 2020 to at least the beginning of February 2021.

7.5    Clause 8(d)(1) – the hybrid clause

454    For the reasons already given, I do not accept that the organism must be discovered at the Situation. The words “at the Situation” qualify everything that precedes them which includes the likelihood of the discovered organism resulting in a human infectious or contagious disease at the Situation. They do not qualify the discovery of the organism itself. There is a fallacy apparent in Insurance Australia’s submission that:

the proper construction of the phrase is that the thing that must be discovered ‘at the Situation’ is ‘an organism likely to result in a human infectious or contagious disease’. That is, the organism itself must be discovered at Meridian’s premises.

455    The submission inverts the wording so the phrase “at the Situation” appears at the beginning. This is not how the clause is worded and the change fundamentally affects the natural reading of the expression. As Meridian Travel submitted:

(1)    the discovery is conditioned, not by a requirement as to where it occurs, but rather by whether it is “likely to” have the result specified in the clause;

(2)    Insurance Australia’s construction lacks commercial sense. It would deny cover if the organism was discovered next door, even though the organism was “likely to result in a human infectious or contagious disease at the Situation”. A government order responsive to this circumstance would be just as likely to cause interruption or interference to the business as an order responsive to a discovery of an organism at the Situation;

(3)    the reference to “an organism” is neutral. There is no difficulty in the notion that it is referring to an organism likely to result in disease;

(4)    the limitation in cl 8(d)(2) and (3) to the Situation does not give rise to any incongruity with cl 8(d)(1) which deals with a different subject-matter;

(5)    there is no problem with the meaning of “discovery” which means simply “finding” or “ascertaining”. It can be inferred that SARS-CoV-2 has been “discovered” at a location if a person with SARS-CoV-2 is found or ascertained to have been at that location during an infectious period. The issue is one of the order being consequent upon the composite phrase being satisfied;

(6)    the disease clause, cl 8(c), does not indicate to the contrary. Clause 8(c) operates upon an actual outbreak of disease within the radius. The hybrid clause has a different focus – a government order consequent upon discovery of an organism likely to cause disease. The focus is on the order and the organism. Disease may or may not follow. There may never be any outbreak of disease. A purpose of the government order would likely be to endeavour to prevent an outbreak. The clauses thus provide different cover. Each should be applied in accordance with its terms (as, I note, there is no incongruity between the two); and

(7)    the counterfactual inherent in the concept of “likely to” directs attention to what is likely given the organism in its natural state, uncontrolled by government intervention.

456    It does not matter that there is a further requirement that the order be consequent on the discovery of an organism likely to result in disease at the situation. Insurance Australia rhetorically asked “then what is the geographical limit of the clause? Could it be triggered if the organism was discovered at the other end of the street? In another suburb? In another city? In another country? The effect of Meridian’s construction is that there will almost certainly be a debate in each case as to whether the relevant order is in response to a discovery that was ‘likely’ to result in disease at the Situation”.

457    This overlooks the fact that the requirement is for an order of the requisite kind (that is, involving Closure or evacuation of Your Business) resulting from discovery of an organism involving that likelihood. The issue is effectively resolved by the action of the authority. If it considers the likelihood requirement satisfied, it may issue the order. If it does not, it will not issue the order. It is not for the parties to collaterally challenge the order or the authority’s basis for it.

458    Otherwise, it is agreed that severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), being the infective agent that causes COVID-19, is an “organism”: agreed facts at [2].

459    The required closure by order of the authority is closure of the business (not the premises from which the business is conducted, in contrast, for example, to the Taphouse policy below). The business is the “Travel Agency Services (Excluding Tour Operators)” identified in the policy schedule conducted from the Situation. It must not be overlooked, however, that the business is defined to include “all activities stated in the Schedule including the ownership and occupation of the Business Premises by the Insured”.

460    Insurance Australia accepted that the closure or evacuation of physical business premises may constitute a closure or evacuation of the business in certain circumstances, but also submitted that in the event of closure of the premises it would need to be proved that the “business is unable to continue at different premises”. Given that the business includes the occupation of the business premises I would not go so far. I would accept that closure of the business premises may or may not involve closure of the business depending on the nature of the business and the premises required for its operation.

461    As to the requirement of closure of the business, I consider that the clause covers the closure of a business in part or whole. This is reinforced by the fact that the definition of business includes all activities stated in the Schedule. For example, assume the schedule identified the business as Travel Agency Services (Including Tour Operators). In that event, an order requiring closure of the Tour Operators part of the business would be a closure of that part of the Business. As a matter of ordinary English the business includes parts of the business. If a part of the business is closed this may involve a closure of the business satisfying cl 8(d)(1). In the case of a business identified as Travel Agency Services (Including Tour Operators), I consider that an order requiring closure of the Tour Operators part of the business would be a closure of that part of the business in a sense which could satisfy cl 8(d)(1). The same would not be true in respect of, for example, a single indivisible business such as a newsagency. An order preventing the sale of one product line at the newsagency, such as cigarettes, could not constitute closure of the business in part or whole. The operation of the requirement of closure, accordingly, depends on the facts.

462    The Overseas Travel Ban prevented an Australian citizen or permanent resident from leaving Australian territory as a passenger on an outgoing aircraft or vessel without an exemption: cl 5. It also prevented an operator of an outgoing aircraft or vessel from leaving Australian territory with any person who is an Australian citizen or permanent resident on board unless that person had an exemption: cl 6. The Overseas Travel Ban came into effect on 25 March 2020.

463    The Overseas Travel Ban did not close any part of Meridian Travel’s business. It imposed obligations on Australian citizens and permanent residents and on operators of an outgoing aircraft or vessel. It did not impose any obligations on Meridian Travel. It had the consequence that an Australian citizen or permanent resident would not use Meridian Travel to make international travel bookings (unless they had an exemption) but that does not mean the Overseas Travel Ban closed any part of Meridian Travel’s business. The fact that international bookings had comprised approximately 90% of Meridian Travel’s revenue and the Overseas Travel Ban had the effect of curtailing or destroying Meridian Travel’s business does not mean that the business, or part of it, was closed by an order as required by cl 8(d)(1). This is not affected by the evidence of the director and owner of Meridian Travel that customers were unable to make bookings. An inability to make bookings (assuming inability, in contrast to the fact that customers would not make bookings unless they had an exemption) is not the same as the closure of the part or the whole of Meridian Travel’s business. Nor is it affected by evidence of the director and owner that as a result of all of the orders relied upon Meridian Travel shut its premises on 8 July 2020. As the director and owner also said, Meridian Travel’s employees started working from home on that day. In other words, Meridian Travel’s business continued to remain open and did not close.

464    The fact that demand for international travel from customers in Australia may be inferred to have disappeared as a result of the Overseas Travel Ban does not satisfy the requirement for closure of a business by order of an authority in cl 8(d)(1). As Insurance Australia pointed out Meridian Travel continued to operate its business after the Overseas Travel Ban; for example: (a) on 16 May 2020, Meridian Travel promoted a virtual information session via Facebook which focused on Australian Coach Touring and invited participants to: “Explore 4-22 day tours within Australia & over the ditch in beautiful New Zealand”, (b) on 1 September 2020, Meridian Travel promoted a flight over Antarctica on the Qantas 787 Dreamliner via Facebook and directed customers to contact Meridian Travel for more information, and (c) on 23 October 2020, Meridian Travel promoted Chimu Adventure charter flights via Facebook noting: “These flights do not cross state or international borders so no quarantine required!”.

465    The Overseas Travel Ban, it may be inferred, would have had a devastating effect on Meridian Travel’s revenue. What cannot be concluded is that the Overseas Travel Ban involved closure of the business by order of an authority.

466    Similarly, the lockdown directions did not close the whole or part of Meridian Travel’s business. The evidence of the director and owner that as a result of all of the orders relied upon Meridian Travel shut its premises on 8 July 2020 does not prove that by the lockdown directions Meridian Travel’s business was closed in whole or part. The fact that the lockdown directions may be inferred to have undermined demand for that part of Meridian Travel’s business involving domestic travel (because they prevented Victorians from leaving their usual place of residence other than in limited circumstances) does not mean that by the directions a part or the whole of Meridian Travel’s business was closed.

467    The operation of the lockdown directions may be contrasted with the operation of the 23 May 2020 Non-Essential Business Closure Direction (Vic). That direction required that certain businesses “must not operate” in Victoria between 23 March and 13 April 2020. A travel agency was not such a business. The lockdown directions, in contrast, were not directed to the operation of any business. They were directed to people in Victoria. They provided that people in Victoria must not leave the premises where they ordinarily reside other than for limited reasons. People could leave their premises for work but only if it was not reasonably practicable for the person to work from their premises.

468    It is not possible to conclude that Meridian Travel’s business, in whole or part, was closed by any of the lockdown directions.

469    Clause 8(d)(1) also requires that the order of the authority be consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation.

470    If I am wrong that the qualifier “at the Situation” qualifies the likelihood of the disease and not the discovery of the organism, then it is common ground that there was in fact no discovery of COVID-19 or SARS-CoV-2 at Meridian Travel’s premises. More to the point it could never be rationally concluded that any of the orders were consequent upon such discovery.

471    If I am right that the qualifier “at the Situation” qualifies the likelihood of the disease and not the discovery of the organism then the issue is whether or not the orders (or any of them) were consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation. In this regard, there can be no doubt that all of the Victorian directions were orders consequent upon the discovery of the SARS-CoV-2 in Australia (the International Travel Ban) and in Victoria (the lockdown directions).

472    To my mind, however, the notion that the Overseas Travel Ban was consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation is nonsensical. The Overseas Travel Ban was made under s 477 of the Biosecurity Act which required the Health Minister to be satisfied (relevantly) that the requirement is necessary to prevent or control the entry of the declaration listed human disease into Australian territory or a part of Australian territory or the emergence, establishment or spread of the declaration listed human disease in Australian territory or a part of Australian territory. The fact that it may be inferred that the Health Minister was trying to prevent the entry of COVID-19 and the emergence, establishment or spread of COVID-19 to any part of Australian territory does not mean that the Overseas Travel Ban was consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at each and every part of Australia including the Situation or at the Situation. The discovery of an organism likely to result in a human infectious or contagious disease at the Situation must be a cause of the order in the sense discussed elsewhere in these reasons. I cannot infer that the likelihood of COVID-19 at the Situation had anything to do with the Overseas Travel Ban.

473    I do not accept Meridian Travel’s submission to the contrary that the terms of s 477(1) of the Biosecurity Act and the explanatory statement that the Overseas Travel Ban “is in response to the COVID-19 pandemic, which continues to represent a severe and immediate threat to human health in Australia and across the globe, and it has the ability to cause high level of morbidity and mortality and to disrupt the Australian community socially and economically” mean that the Overseas Travel Ban:

may thus be regarded as conveying that it was made in consequence of the discovery of the organism that causes COVID-19, being an organism likely to result in the spread of COVID-19 throughout Australia. The determination thus accords with an assumption on the part of its maker that, uncontrolled by government intervention, the organism is ultimately likely to result in the spread of COVID-19 to places including the Situation.

474    The fallacy is causal in nature. It is that the Health Minister’s undoubted concern that COVID-19 may spread across or throughout Australia (logically, including the Situation) means that a cause of the order was the likelihood of COVID-19 at the Situation. That likelihood could not be inferred to have been a cause of the Overseas Travel Ban. This is not merely because the “but for” test would not be satisfied (that is, would the Overseas Travel Ban have been made but for the likelihood of COVID-19 at the Situation? Answer, yes). It is because I am unable to accept that a real or even any kind of cause of the Overseas Travel Ban was the Health Minister considering that otherwise, it was likely that COVID-19 would occur: (a)  at each and every part of Australia, which would logically include the Situation, or (b) at the Situation. The focus of cl 8(d)(1) is not about the authority acting because of the risk that COVID-19 presents to people. It is different from clauses of that type. Clause 8(d)(1) focuses on the fact of discovery of an organism and the likelihood of disease therefrom at the Situation.

475    As to the lockdown directions, the same type of reasoning applies. The context of those orders was the concern of the authority about a risk to the health of every Victorian from COVID-19 as evidenced by:

(1)    198 of the Public Health and Wellbeing Act which permits the Minister to “declare a state of emergency arising out of any circumstance causing a serious risk to public health”;

(2)    s 199 of the Public Health and Wellbeing Act which provides that where there is a state of emergency, the Chief Health Officer may authorise certain authorised officers to exercise any of the public health risk powers and emergency powers. Two of those powers are the power to restrict movement of any person or group of persons within the emergency area (200(1)(b)) and to give any other direction that the authorised officer considers is reasonably necessary to protect public health (200(1)(d)). These were the powers pursuant to which the lockdown directions were made; and

(3)    the content of the directions as, on each occasion a lockdown direction was made, the relevant direction provided that:

(a)    its purpose was to address the serious public health risk “posed to Victoria”;

(b)    it required “everyone in Victoria” (or in respect of the restricted areas directions, “everyone who ordinarily resides in the Restricted Area”) to limit their interactions; and

(c)    the requirement to stay home applied to a “person who is in Victoria” (or in respect of the restricted areas directions, a “person who ordinarily resides in the Restricted Area”).

476    The problem is that I am unable to accept that any of the directions were consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at each and every part of Australia including the Situation. As such, it does not follow that the directions expose an assumption that “uncontrolled by government intervention, the organism is ultimately likely to result in the spread of COVID-19 to places including the Situation”.

477    As this is the conclusion which follows from the terms of the instruments and their contemporaneous context, for the reasons already given, I do not accept that evidence of the organism and its spread around the Situation is material. There is no suggestion that such information was a cause of any of the orders of the authorities.

478    For these reasons, cl 8(d)(1) is not satisfied and would not be satisfied even if further evidence about the location and prevalence of COVID-19 near the Situation became available.

7.6    Causation and adjustment

479    The causal requirement for cl 8(c) is the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation (deemed to be Damage) occurring during the Period of Insurance and as a direct result of which the business is interrupted or interfered with and from which loss arises – in which event the insurer will indemnify the insured in accordance with the settlement of claims clause.

480    The “direct result” requirement, as Insurance Australia correctly accepted, involves the concept of proximate cause.

481    Given the nature of Meridian Travel’s business, without other evidence, I am unable to infer that the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation was a proximate or any other kind of cause of Meridian Travel’s loss. This is because I do not know what part of Meridian Travel’s business was from walk-ins and what part was from telephone or internet contact. Meridian Travel’s claim could not extend to any loss from that part of its business involving sales by telephone or internet contact. This is because, for that part of the business, the reasoning in FCA v Arch UKSC at [281]-[286] would apply. That is, any assessment of loss must be confined to the “those activities of the business which were interrupted by the operation of the insured peril”. That part of the business involving sales of overseas and domestic travel by telephone or internet contact could not have been interrupted by the insured peril under cl 8(c). Given the lack of focus on this issue in the hearing I would be prepared to hear the parties further about it if appropriate.

482    Further, 90% of Meridian Travel’s business was international travel. The Overseas Travel Ban must have been a, if not the sole, proximate cause of Meridian Travel’s loss of revenue from international travel bookings. Similarly, to the extent that 10% of Meridian Travel’s business was domestic travel, the lockdown directions must have been a, if not the sole, proximate cause of Meridian Travel’s loss from domestic travel bookings.

483    The critical issue here is the nature of Meridian Travel’s business. Assume all the other circumstances were the same but Meridian Travel’s business was a typical suburban restaurant drawing much of its custom from within the 20 kilometre radius. In that event the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation may well be a proximate cause of loss even if other proximate causes of loss also existed (such as stay at home orders arising from the same underlying cause). In those circumstances the relevance and commercial sense of the reasoning about causation and trends in FCA v Arch UKSC is best exposed. Assume also the making of a stay at home order as a result of the outbreak of the human infectious or contagious disease occurring within a 20 kilometre radius of the Situation. The reasoning in FCA v Arch UKSC is that, construed commercially as it must be, the parties could not have intended that consequences of the same disease affecting the same area (such as a stay at home order) would be excluded from cover. The nature of the disease as a pandemic or not would not be relevant in this example provided that there was an outbreak of the disease within the 20 kilometre radius. That is, the fact that the outbreak might extend well beyond the 20 kilometre radius, in this example, is immaterial. This is because there is no requirement for anything other than the outbreak of the disease within the 20 kilometre radius.

484    I find this aspect of the reasoning in FCA v Arch UKSC persuasive because I agree that, in the example given, the commercial unreasonableness of the contrary result is clear. To exclude cover where the insured peril is a proximate cause of the loss merely because another proximate cause of loss arising from the very same circumstances exists makes no sense provided that the other proximate cause of loss is not itself clearly excluded from cover.

485    This exposes a further separate issue. Assume Meridian Travel can prove that the insured peril in cl 8(c) was a proximate cause of some loss. The issue which causes me concern is whether it could be said, consistently with the logic of the reasoning about causation and trends in FCA v Arch UKSC, that various actions of the Commonwealth Government were caused by the same underlying fortuity as the insured peril. I have in mind, in particular, the Overseas Travel Ban and the ban on cruise ships from foreign ports visiting Australia.

486    I have no conceptual difficulty with the proposition that an action, such as a State-wide closing or restriction on certain business premises operating, or a State-wide stay at home requirement because of the presence of COVID-19 in the State and the associated risk of the spread of COVID-19 throughout the State, involves the same underlying cause as the effects otherwise of the fact of the presence of COVID-19 in the State and the associated risk of the spread of COVID-19 throughout the State (including the area within the radius or at the insured situation). This is because the underlying cause is the presence or risk of COVID-19 in the State in all cases (including the area within the radius or at the insured situation). I find the reasoning in FCA v Arch UKSC about causation and trends clauses (subject, of course, to the particular wording of the trends clause) persuasive in such circumstances because it seems artificial, contrived and commercially irrational to attempt to distinguish between the insured and uninsured perils.

487    I do have a conceptual difficulty with the application of this form of reasoning to Commonwealth actions such as the Overseas Travel Ban and the ban on cruise ships from foreign ports visiting Australia. These actions are focused not on the presence of COVID-19 in the State and the associated risk of the spread of COVID-19 throughout the State (including the area within the radius or at the insured situation). They are focused on the presence of COVID-19 overseas and the risk that an overseas traveller coming to Australia may bring COVID-19 into any part of Australia. While any part of Australia includes the area within the radius of, or at, the insured Situation, there is a real difference between such action and State-wide action involving closing, or placing restrictions on, certain businesses and/or stay at home requirements.

488    The underlying fortuity in the case of the Commonwealth action is not the same as the underlying fortuity of the presence of COVID-19 in the State and the associated risk of the spread of COVID-19 throughout the State (including the area within the radius or at the insured Situation). The underlying fortuities involve different subject-matter (the presence of COVID-19 overseas and the risk that an overseas traveller coming to Australia may bring COVID-19 into Australia). The fortuity underlying the Commonwealth actions involves only the most tenuous causal connection with the requirement of the insured peril for an outbreak of disease within the radius.

489    In these circumstances to identify the underlying fortuity as simply COVID-19 generally”, in my view, is logically unsatisfactory. The reasoning in FCA v Arch UKSC about the same underlying fortuity in the context of determining the cause of loss and the application of the trends clauses to loss, to my mind, is compelling because it is based on the fact that the insured and uninsured perils can truly be said to arise from the same underlying cause. Once the underlying causes become distant in any way from the insured peril, as in the case of the Overseas Travel Ban and the cruise ship ban compared to cl 8(c), I do not see how it can be said to be artificial, contrived and commercially irrational to distinguish between the insured and uninsured perils.

490    The problem becomes particularly acute when, as in this case, the insured peril is the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation. The Overseas Travel Ban and the cruise ship ban, in reality, have nothing at all to do with the underlying cause of the insured peril. For these reasons, I would not apply the reasoning in FCA v Arch UKSC about causation and trends to the effects of the Overseas Travel Ban and the cruise ship ban or other Commonwealth actions of the same or similar kind.

491    In any event, if, as in this case, it cannot be concluded that the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation was a proximate or any other kind of cause of Meridian Travel’s loss, the issue of concurrent causes of loss does not arise. That is, the reasoning in FCA v Arch UKSC about causation and trends clauses and the same underlying fortuity does not arise.

492    Contrary to Meridian Travel’s submissions, FCA v Arch UKSC at [244] is relevant. Lord Hamblen and Lord Legatt JJSC there said:

This interpretation, in our opinion, gives effect to the public authority clause as it would reasonably be understood and intended to operate. For completeness, we would point out that this interpretation depends on a finding of concurrent causation involving causes of approximately equal efficacy. If it was found that, although all the elements of the insured peril were present, it could not be regarded as a proximate cause of loss and the sole proximate cause of the loss was the Covid-19 pandemic, then there would be no indemnity. An example might be a travel agency which lost almost all its business because of the travel restrictions imposed as a result of the pandemic. Although customer access to its premises might have become impossible, if it was found that the sole proximate cause of the loss of its walk-in customer business was the travel restrictions and not the inability of customers to enter the agency, then the loss would not be covered.

493    The relevant interpretation here is as explained at [243] that the policy gave indemnity:

…against the risk (and only against the risk) of all the elements of the insured peril acting in causal combination to cause business interruption loss; but it does so regardless of whether the loss was concurrently caused by other (uninsured but non-excluded) consequences of the Covid-19 pandemic which was the underlying or originating cause of the insured peril.

494    The propositions of relevance are that, first, the concept of the underlying or originating cause of the insured peril (also referred to as the “same underlying fortuity) is relevant only when there are proximate concurrent causes. The concept cannot transform a matter which is not a proximate or any other kind of cause of loss (such as the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation) into a proximate or any other kind of cause of loss. Second, while the example at [244] concerns a form of hybrid clause and not a disease clause, the reasoning holds good. If the sole proximate cause of the loss is something other than the insured peril, then there is no cover.

495    It is for Meridian Travel to prove that the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation was a proximate or any other kind of cause of its loss: PMB Australia Ltd v MMI General Insurance Ltd & Ors [2002] QCA 361 at [17]-[23].

496    I am unable to infer that the outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation was a proximate or any other kind of cause of any of Meridian Travel’s loss on the current state of the evidence.

497    Even if there was an outbreak of a human infectious or contagious disease occurring within a 20 kilometre radius of the Situation by 1 March 2020 I would not infer from the current evidence that any decline in Meridian Travel’s revenue resulted from that fact. By that time, a number of events had occurred likely to cause a decline in Meridian Travel’s revenue including: (a) various Commonwealth travel restrictions on foreign nationals entering Australia indicating the presence of COVID-19 internationally, (b) the imposition of self-isolation requirements on persons arriving in Australia, (c) agreements about banning non-essential gatherings in the National Cabinet, and (d) the ban on cruise ships from foreign ports arriving at Australian ports, when a large part of Meridian Travel’s business involved international cruises.

498    Contrary to Insurance Australia’s submissions, the causal requirement for cl 8(d)(1) does not begin with the fact of discovery of an organism. As discussed in respect of Taphouse, this approach tends to obscure the fact that the clause is focused on the making of an order consequent upon the discovery of an organism likely to result in disease at the Situation. The problem with putting the discovery of an organism at the start of the causal chain is that it suggests that the objective fact of the discovery of an organism likely to result in disease at the Situation must exist. To the contrary, and as elsewhere discussed, the required objective fact is the order consequent upon the discovery of an organism likely to result in disease at the Situation. This is not to say that contemporaneous evidence of the circumstances as they existed when the order was made is irrelevant. They may be relevant if the order does not disclose the reason for its making (which is unlikely). But it does mean, as I have said, that subsequent evidence, not known to or considered by the authority when it made the order about the circumstances at the time the authority made the order, is immaterial. Subject to some possible irrelevant exceptions (such as an order made arbitrarily, capriciously or in bad faith), the order is to be taken at face value in deciding whether the clause applies.

499    Accordingly, the relevant starting point is the order not the objective fact of discovery of an organism likely to result in disease at the Situation. There must be an order consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation by which the business is closed (deemed to be Damage) occurring during the Period of Insurance and as a direct result of which the business is interrupted or interfered with and from which loss arises – in which event the insurer will indemnify the insured in accordance with the settlement of claims clause.

500    If my conclusion that cl 8(d)(1) does not apply is wrong and each of the instruments satisfies that clause then, given the nature of Meridian Travel’s business, the Overseas Travel Ban may well have caused loss to Meridian Travel in respect of its international travel business. I would also accept that the lockdown directions which applied to Victoria as a whole or to an area within which the Meridian Travel business was located may have caused Meridian loss in respect of its domestic travel business.

501    However, it has not been proved that the Overseas Travel Ban or lockdown directions were in fact a cause of any loss. Further and consistent with the reasoning above, the actions of other governments and the presence of COVID-19 overseas would not be the same underlying cause as the insured peril in cl 8(d)(1). As discussed, in my view, it cannot be said that the actions of overseas governments and others in respect of the presence of COVID-19 outside Australia involves the same underling cause as the insured peril in cll 8(c) or  8(d)(1). On this basis Insurance Australia would be right that the following other effects of COVID-19 could not be disregarded:

(1)    commencing from the end of January 2020, travel destinations around the world beginning to impose restrictions on travel, including closing ports to cruise ships and borders to international travellers;

(2)    cruise ship operators voluntarily suspending operations in response to those international restrictions;

(3)    from mid-February 2020, increasing negative publicity surrounding the risk of the spread of COVID-19 on cruise ships and internationally; and

(4)    from 15 March 2020, the cruise ship ban introduced by the Commonwealth government.

502    I also consider that, as Insurance Australia in part submitted:

(1)    the Overseas Travel Ban is not an insured peril and there was no causal connection between the introduction of that ban and an outbreak of COVID-19 within 20 kilometres of Meridian Travel’s premises or the discovery of an organism likely to cause COVID-19 at Meridian Travel’s premises;

(2)    the Overseas Travel Ban is not a proximate cause of Meridian Travels claimed losses because Meridian Travel had already lost the core of its business by reason of the uninsured events identified above which occurred before the Overseas Travel Ban;

(3)    this is not a case of an “over-determined” or “over-subscribed” result, or where a series of events combine to produce a particular result but no individual event was either necessary or sufficient by itself. The correct analogy as in FCA v Arch UKSC at [182] is that one hunter has shot and killed the hiker and then another hunter has shot the dead body. In such a case, the first shot is the only proximate cause of the loss; and

(4)    the underlying cause of the Overseas Travel Ban is not the same as the underlying causes of the insured perils in cll 8(c) and 8(d)(1). To characterise the underlying cause as “the effects of COVID-19 generally wherever” is too broad.

503    The same reasoning would apply to the lockdown orders.

504    The definition of adjustment does not apply to the basis of settlement provisions (in common with Taphouse, discussed below). There is no rational and commercially sensible way to qualify the basis of settlement provisions by reference to the definition of adjustment. My reasoning in respect of Taphouse below applies in this regard. This said, as with Taphouse, the indemnity only operates in respect of loss. Further, under the basis of settlement provision the amount payable depends on the amount by which the Revenue earned during the Indemnity Period falls short of the Standard Revenue in consequence of the Damage.

505    Consistently with my reasoning in respect of Taphouse below, to the extent that the cause of any loss is unconnected to the underlying cause of the insured peril, the causal requirement means that loss in consequence of some other unrelated circumstance does not form part of the amount agreed to be paid by way of indemnity. Otherwise, I see nothing in this policy which would mean I am unable to conclude that the parties here intended to exclude cover in respect of the consequences of the same underlying cause as the existence of the insured peril (again, as reasoned below in relation to Taphouse). As noted, the insured peril is not “COVID-119 generally”. It is the presence and risk of COVID-19 across Victoria.

506    As explained in the Taphouse case below, the indemnity period starts on the occurrence of the Damage (which must mean the insured peril) and ends when the results of Meridian Travel’s business cease to be affected as a consequence of the Damage, such period not exceeding 12 months.

7.7    Third party payments

507    Meridian Travel received JobKeeper payments, the Federal COVID-19 Consumer Travel Support Program payments, the Victorian Government’s Support Fund, and a rental waiver from its landlord. It did not receive an ATAC grant.

508    As in the Taphouse case below, the cover is predicated on the taking into account of “any sum saved during the Indemnity Period in respect of such charges and expenses of the Business as may cease or be reduced in consequence of the interruption or interference”. The general law principles applicable to indemnity also apply (see the discussion above and in relation to Taphouse below)

509    The reasoning in Taphouse below applies to the JobKeeper payments and the rental waiver. They reduced Meridian Travel’s loss and must be taken into account.

510    Meridian Travel and Insurance Australia provided a summary of the Federal COVID-19 Consumer Travel Support Program. The program was introduced by the Industry Research and Development (COVID-19 Consumer Travel Support Program) Instrument 2020 (Cth), made under the Industry Research and Development Act 1986 (Cth).

511    The program provided travel agents and tour arrangement service providers with funding to help them remain viable. The grant was intended to provide funding for expenditure that assisted them to continue to trade and process refunds and credits to Australian consumers for travel they were unable to undertake due to the impacts of COVID-19. There have been two rounds of this program, with the first launched on 14 December 2020 and closed on 13 March 2021, and the second launched on 2 May 2021 and closed on 12 June 2021. Each round of the program involved a one-off grant of between $1,500 and $100,000 in the first round, and a subsequent grant of between $7,500 and $100,000 in the second round.

512    To be eligible, a travel agent or tour operator had to meet a number of requirements including having an annual turnover starting from $50,000 up to a maximum of $20 million, and having received a JobKeeper payment. Applicants were also required to declare that they would make best endeavours to retain staff and meet their obligations to process refunds and travel credits to Australian consumers.

513    Meridian Travel noted that the instrument provides that the “purpose of the program is to alleviate the negative economic impacts of the coronavirus known as COVID‑19 on the travel industry by providing immediate, short‑term financial support to travel agents, and tour arrangement service providers, that qualify for the JobKeeper scheme”: s 5(2). Meridian Travel said this dispels any suggestion that the payment is intended to compensate for losses caused by the insured peril.

514    I agree. The program is not readily characterised as one to reduce the losses of affected businesses, specifically travel agencies. It is more in the nature of a mercy payment for an industry hit hard by the effects of COVID-19. The payment was not made to reduce the losses suffered by the business. Unlike JobKeeper the payment was not a wage subsidy. While applicants were required to declare that they would make best endeavours to retain staff and meet their obligations to process refunds and travel credits to Australian consumers the very fact that the requirement was framed as a best endeavours clause indicates that the intention of the payment was a cash injection to assist the business to survive rather than a payment to reduce loss. As a result, I would not consider that Meridian Travel has to account for Federal COVID-19 Consumer Travel Support Program payments in any assessment of the amount to be paid to it by way of indemnity.

515    Meridian Travel and Insurance Australia provided a summary of the Victorian Government Support Fund. These payments were part of the “Economic Survival Package to Support Businesses and Jobs” announced by the Victorian Government on 21 March 2020, and were made by way of payroll tax refunds for the 2019-20 financial year. The grants were made “to help Victorian businesses and workers survive the devastating impacts of the coronavirus pandemic”. Consistent with my reasoning above, I characterise this as a form of mercy payment, and not a payment to reduce Meridian Travel’s loss. As such, I would not consider that Meridian Travel has to account for Victorian Government Support Fund payments in any assessment of the amount to be paid to it by way of indemnity.

7.8    Interest

516    The reasoning below in relation to Taphouse applies. Insurance Australia has not unreasonably withheld payment under s 57 of the Insurance Contracts Act. It would not be unreasonable for Insurance Australia to withhold payment until a final determination of this case decides that Insurance Australia is so liable.

7.9    Answers to questions

517    The questions are not framed in terms that accurately disclose the relevant issues. Nevertheless I will do my best to answer them.

518    NSD 133 of 2021 Insurance Australia (CGU) and Meridian

519    9. Disease extension (policy schedule, paragraph (c) of the “Murder, Suicide or Disease” clause (page 5)):

(a) Did an occurrence of an outbreak of COVID-19 occur within a 20 kilometre radius of the Situation? If so, when?

Yes. The outbreak occurred by no later than 30 March 2020. Further evidence may prove that the outbreak occurred earlier, by 1 March 2020.

520    10. Evacuation and Closure extension (policy schedule, paragraph (d)(1) of the “Murder, Suicide or Disease” clause (page 5)):

(a) Was Meridian’s Business closed or evacuated by order of a government, public or statutory authority by reason of the “Authority Response-Meridian”?

No

(b) If yes to (a), were those orders consequent upon the discovery of an organism likely to result in a human infectious or contagious disease at the Situation?

This does not arise but, if it did, the answer would be no.

(c) {CGU disputes the inclusion of issues (c)-(f)} Did the discovery have to occur at the Situation or could it have occurred elsewhere and, if so, where?

Clause 8(d)(1) requires only that the order be consequent on discovery of an organism (anywhere) likely to result in a human infectious or contagious disease at the Situation.

(d) If the outbreak or discovery had to occur at the Situation, did it so occur at the Situation?

There is no requirement that the outbreak occur at the Situation – see cl 8(c). There is no requirement that the organism be discovered at the Situation – see cl 8(d)(1). It is agreed that there was no outbreak of COVID-19 or discovery of the SARS-CoV-2 organism at the Situation.

(e) What is required for there to be an “occurrence” of an outbreak [of] COVID-19?

The “occurrence” of an outbreak of COVID-19 means any event of that kind. An outbreak of COVID-19 is the occurrence of a single case of COVID-19 while a person is in the community (that is, not in a controlled environment such as quarantine, isolation or a hospital) and who is capable of communicating COVID-19 to another person.

(f) What is required for there to be the “discovery” of SARS-CoV-2?

A “discovery” means finding or ascertaining the existence of SARS-CoV-2. It can be inferred that SARS-CoV-2 has been “discovered” at a location if a person with SARS-CoV-2 is found or ascertained to have been at that location during an infectious period.

521    11. Causation, adjustments and loss (page 21):

If it is found that the Disease extension and/or the Evacuation and Closure extension responds to Meridian’s claim:

(a) Was there any interruption of or interference with Meridian’s Business which was a direct result of the relevant insured perils?

There is no evidence as yet from which I would infer that the insured perils were a proximate cause of any interruption of or interference with Meridian’s business.

(b) If yes to (a), what losses claimed by Meridian resulted from that interruption of or interference with its Business?

This question cannot be answered on the current evidence.

(c) {CGU disputes the inclusion of this issue (c)} Is the term “Adjustment” in the Business Interruption section of the policy applicable to the calculation of Meridian’s claim, having regard to the definitions used in the “Settlement of Claims” clause in the Business Interruption section of the policy.

No.

(d) {CGU version; Meridian does not agree}: Should any adjustment be made to Meridian’s business interruption loss by reference to uninsured events relating to the COVID-19 pandemic?

Adjustments should not be made to Meridian’s business interruption loss by reference to uninsured events caused by the same underlying fortuity as the insured peril. The fortuity underlying the insured peril is not “COVID-19 generally” but the presence and risk of COVID-19 in Victoria”. Adjustments should otherwise be made to Meridian’s loss.

(e) {Meridian version; CGU does not agree}: Should any adjustment be made to Meridian’s business interruption loss by reference to events (other than the insured perils) relating to the COVID-19 pandemic?

Adjustments should not be made to Meridian’s business interruption loss by reference to uninsured events caused by the same underlying fortuity as the insured peril. The fortuity underlying the insured peril is not “COVID-19 generally” but the presence and risk of COVID-19 in Victoria”. Adjustments should otherwise be made to Meridian’s loss..

(f) What loss is payable in accordance with the terms of the policy?

This question cannot be answered on the current evidence.

(i) Are JobKeeper or other government subsidies to be taken into account in the assessment of any loss and, if so, in what way?

JobKeeper – yes.

Federal COVID-19 Consumer Travel Support Program – no.

Victorian Government Support Fund – no.

Meridian would have to account for the full amounts paid to it under these schemes as operating to reduce its loss.

(ii) Should rental abatements be taken into account in assessing recoverable loss?

Yes.

(iii) On what dates did the indemnity period/s start and end?

The indemnity period starts on the occurrence of the Damage (which must mean the insured peril) and ends when the results of Meridian’s business cease to be affected as a consequence of the damage, such period not exceeding 12 months.

(iv) Further quantum issues may be raised when Meridian provides the information that has been requested by CGU.

Noted.

(g) {Meridian disputes the inclusion of subparagraph (f), as those issues should not be included in this test case in circumstances where CGU has denied indemnity and because the factual premise for these issues will be the subject of a separate loss assessment process} Has Meridian:

(i) provided sufficient information for CGU to determine any amount payable under the policy; and/or

Not to my knowledge.

(ii) failed to respond to reasonable requests for information from CGU?

Not to my knowledge.

(h) If it is found that the policy responds and CGU is liable to pay an amount to Meridian, from what date is interest under section 57 of the ICA payable?

The issue whether Meridian can establish that the insured peril in 8(c) was a proximate cause of any of its loss remains unanswerable on the current state of the evidence. On the current state of the evidence, Meridian has not proved that to be the case. As a result, s 57 has not yet been engaged.

7.10    Conclusions

522    For these reasons:

(1)    it is agreed that from no later than 30 March 2020 there was an occurrence of an outbreak of COVID-19 within a 20 kilometre radius of the Situation within the meaning of cl 8(c);

(2)    as yet there is no evidence from which it would be inferred that the insured peril in cl 8(c) was a proximate or any other kind of cause of any interruption to or interference with Meridian’s business and from which loss arose;

(3)    if it can be proved that the insured peril in cl 8(c) was a proximate or any other kind of cause of any interruption to or interference with Meridian Travel’s business and from which loss arose then the existence of other proximate causes of loss arising from the same underlying cause (the presence and risk of COVID-19 in Victoria) would not exclude cover or diminish Meridian Travel’s loss. The Overseas Travel Ban and cruise ship ban do not involve the same underlying cause as the insured peril in cll 8(c) or 8(d)(1);

(4)    there is an issue about whether there was any interruption to or interference with that part of Meridian Travel’s business involving telephone and internet sales. Meridian Travel has not proved any interruption to or interference with that part of Meridian Travel’s business involving telephone and internet sales from the insured perils;

(5)    Meridian Travel’s business was not closed by order of an authority within the meaning of cl 8(d)(1);

(6)    if this is wrong, (2) and (3) above apply also in relation to the insured peril in cl 8(d)(1);

(7)    in assessing loss Meridian Travel would have to account for payments received under the JobKeeper program and rental payments saved, but not for payments received under the Federal COVID-19 Consumer Travel Support Program or the Victorian Government Support Fund; and

(8)    s 57 of the Insurance Contracts Act does not yet apply.

523    In these circumstances I would not presently make the declaration that Insurance Australia seeks. Meridian Travel should have the opportunity consider its position and where it wishes to try to prove that the insured peril in cl 8(c) was a proximate cause of any loss.

8.    NSD134/2021: INSURANCE AUSTRALIA V THE TAPHOUSE TOWNSVILLE

8.1    Agreed background

524    Taphouse is the insured under a “Business Insurance Policy” number 15T8202892 (Taphouse policy) placed with CGU.

525    The Taphouse policy comprises: (a) a renewal schedule issued on 24 September 2019, and (b) the Business Insurance Policy wording.

526    Taphouse is located in the City Lane Arcade, 373 Flinders Street, Townsville City, Queensland 4810 (Taphouse premises).

527    Taphouse operates a craft beer bar and restaurant.

528    On 23 March 2020, the Non-essential Business Closure Direction came into effect.

529    On 29 March 2020, the Home Confinement Direction came into effect.

530    On 15 May 2020, the Non-Essential Business, Activity and Undertaking Closure Direction (No. 10) came into effect.

531    On 1 June 2020, the Restrictions on Businesses, Activities and Undertakings Direction came into effect.

532    On 3 July 2020, the Restrictions on Business, Activities and Undertakings Direction (No. 3) came into effect.

533    On 24 July 2020, the Restrictions on Business, Activities and Undertakings Direction (No. 5) came into effect.

534    On 17 November 2020, the Restrictions on Business, Activities and Undertakings Direction (No. 9) came into effect.

535    On 24 March 2020, Taphouse made a claim via email under the Taphouse policy.

536    On 25 March 2020, Rob Langan of Bayinsure (Taphouse’s broker) made a telephone call to CGU Insurance claims department and was advised that the claim had not been received. Mr Langan lodged Taphouse’s claim over the telephone and received the claim number “CGU202468420”.

537    On 25 March 2020, CGU acknowledged the claim.

538    On 26 March 2020, Bayinsure forwarded the email transmitted on 24 March 2020 to CGU.

539    On 7 April 2020, CGU provided its “interim response” denying cover.

540    On 17 June 2020, CGU declined Taphouse’s claim.

541    On 30 June 2020, Bayinsure requested a review of CGU’s indemnity decision.

542    On 10 July 2020, CGU confirmed its position declining cover.

8.2    Policy provisions

543    The key provisions of the Taphouse policy are below.

General definitions

Business means your business, occupation, trade or profession.

Premises means the premises at the situation shown in the schedule.

Schedule means the schedule document that we give you that attaches to and forms part of your policy.

You, your or yours means the person(s) or parties shown as the insured in the schedule, including all subsidiary companies, organisations and entities incorporated in Australia in which the insured has a controlling interest (exceeding 50%) engaged in the business described in the schedule and not for any other purpose or activity.

Section 1

Property

Section 2

Business Interruption

Definitions

Adjustment means adjustment as necessary to provide for the trend of the business and variations in, or other circumstances affecting, the business, either before or after the date of occurrence of the damage, or which would have affected the business had the damage not occurred, so that the figures thus adjusted represent, as nearly as may be reasonably practicable, the results that, but for the damage, would have been obtained during the relative period after the damage.

Adjustment shall also be made for any variation of normal trading during the indemnity period from increased sales of low margin goods.

Damage or Damaged means accidental physical damage, destruction or loss. Damaged has a corresponding meaning to damage.

Gross Profit means the amount by which the sum of the turnover and the amount of the closing stock and work in progress, exceeds the sum of the opening stock and work in progress and the amount of the uninsured working expenses.

The amount of the opening and closing stocks will be arrived at in accordance with Your normal accounting methods, due provision being made for depreciation.

Indemnity Period means:

1.    starts with the occurrence of the damage, and

2.    ends not later than the number of weeks or months stated in the schedule after the date of the damage during which the results of your business are affected as a consequence of the damage.

Insured damage means:

1    In relation to your property, insured damage means damage to your property when both the property that is damaged and the cause of the damage are covered by:

a)    your policy

Interruption means interruption or interference.

Rate of Gross Profit means the rate of gross profit, expressed as a percentage, earned on the turnover during the financial year immediately before the date of the damage.

Standard Turnover means the turnover during that period in the twelve (12) months immediately before the date of the damage which corresponds with the indemnity period (appropriately adjusted where the indemnity period exceeds twelve or is less than (12) months).

Turnover means the amount (less discounts allowed) paid or payable to you for goods sold and delivered, and for services rendered in the course of your business at the business premises.

Cover

If the business carried on by you is interrupted or interfered with as a result of insured damage occurring during the period of insurance, we will after taking account any sum saved during the indemnity period in respect of such charges and expenses of the business as may cease or be reduced in consequence of the interruption or interference, indemnify you in respect of the loss arising from such interruption or interference in accordance with the Basis of settlement clause, where the schedule notes that cover has been selected.

Basis of settlement

In the event of a claim for an item specified below, We will pay

1. Gross profit

a) the amount produced by applying the rate of gross profit to the amount by which the turnover during the indemnity period in consequence of damage falls short of the standard turnover, and

b) the additional expenditure necessarily and reasonably incurred by you for the sole purpose of avoiding or minimising the reduction in gross profit during the indemnity period in consequence of the damage, but not exceeding the reduction in gross profit thereby avoided.

If, during the indemnity period, services are rendered other than at the premises, for the benefit of the business, either by you or by others on your behalf, the money received or receivable in respect of those services will be brought into account in arriving at the amount of the gross profit during the indemnity period.

Extensions of cover

This section is extended to include the following additional benefits. Additional benefits 1 to 11 inclusive are payable provided that the sum insured expressed against the relevant item(s) in the schedule is not otherwise exhausted.

We will pay you (depending on the part of the section which is applicable to you) for:

a)    Item 1 Gross profit,

resulting from interruption of or interference with your business as a result of insured damage occurring during the period of insurance to, or as a direct result of:

7. Prevention of access by a public authority

We will pay for loss that results from an interruption of your business that is caused by any legal authority preventing or restricting access to your premises or ordering the evacuation of the public as a result of damage to or threat of damage to property or persons within a 50-kilometre radius of your premises.

8. Murder, Suicide & Infectious Disease

We will pay for loss that results from an interruption of your business that is caused by:

a) any legal authority closing or evacuating all or part of the premises as a result of:

i. the outbreak of an infectious or contagious human disease occurring within a 20-kilometre radius of your premises, however, there is no cover for highly pathogenic Avian Influenza or any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended) irrespective of whether discovered at the location of your premises, or out-breaking elsewhere

ii. vermin or other animal pests at the premises, or

iii. hygiene problems associated with drains or other sanitary arrangements at the premises

iv. bomb threat at or to the premises.

b) poisoning directly caused by the consumption of food or drink provided on the premises, and

c) murder or suicide occurring at or near the premises.

544    In the policy schedule the business is described as “Bar operation”. The insured “Situation” is Lot 4, City Lane, 343 Flinders Street Townsville Queensland 480 (being the site of The Taphouse craft beer bar and restaurant). The policy schedule also identifies that the cover taken out was “Insurance Advisernet Business Insurance” and that Taphouse had, relevantly, included “Section 2 - Business Interruption” as part of its cover (on a gross profits basis). Taphouse also included coverage under Section 1 (“Property”) and a series of other specific cover sections.

8.3    Introductory comments

545    As Taphouse submitted, it is apparent that the agreement is for the insurer to pay the insured for the relevant item resulting from interruption of or interference with the business as a direct result of the specified matters in 1 to 11. There is no requirement for insured damage. This said, I do not accept that cll 1 to 11 are free-standing insuring clauses merely because they begin with the words “we will pay for…”. The clauses are to be read as extensions to the cover otherwise provided in section 2 which involves cover for insured damage. To refuse to read cll 1 to 11 as extensions providing additional benefits (that is, additional to the benefits relating to insured damage) would be to ignore the text and context of the extensions of cover provision. Accordingly, while I accept that cll 7 and 8 are not tethered to property damage, they are part of a policy the focus of which is property damage. The text of the relevant provisions is to be construed in accordance with the principles identified above and without pre-conceived notions of what the parties might or might not have intended, including with respect to a pandemic.

546    Taphouse contended that the following actions of an authority satisfy cll 7 and 8 except that it accepts that the 29 March 2020 Home Confinement Direction does not satisfy cl 8 (referred to as the hybrid clause, whereas cl 7 is referred to as the prevention of access clause):

(1)    the 23 March 2020 Non-Essential Business Closure Direction. This direction provided that a person who “owns, controls or operates a non-essential business or undertaking in the State of Queensland must not operate the business or undertaking”. The term “non-essential business or undertaking” was defined to mean “registered and licensed clubs, licenses premises in hotels” and “restaurants, cafes, fast-food outlets, food courts (together retail food services) except for provision of food or drink by way of provision of takeaway or hotel room service”;

(2)    the 29 March 2020 Home Confinement Direction. Part 1 of the direction had as its stated purpose to “prohibit persons from leaving their residence except for permitted purposes; and groups of more than two persons who are not members of the same household from gathering in any place except for permitted purposes”. Clause 6 provided that a “person who resides in Queensland must not leave their principal place of residence except for, and only to the extent reasonably necessary to accomplish, the following permitted purposes”. The permitted purposes included “to obtain food or other essential goods or services”. That term was defined as “food and other supplies, and services, that are needed for the necessities of life and operation of society, such as food, fuel, medical supplies and other goods”. As Insurance Australia noted, this direction was only in force from 29 March 2020 to 2 April 2020. There was no further “lockdown” in Queensland during the policy period;

(3)    the 15 May 2020 Non-Essential Business, Activity and Undertaking Closure Direction (No. 10). This order provided that a “person who owns, controls or operates a non-essential business, activity or undertaking in the State of Queensland … must not operate the business, activity or undertaking” subject to particular exceptions in cl 8. That clause defined “non-essential business, activity, or undertaking” as the “business, activity, undertaking, premises or place” listed in Column 1, subject to the exception in Column 2 of that Clause. “Restaurants” and “pubs, registered and licensed clubs, RSL clubs, licensed premises in hotels and bars” were each listed in Column 1. The “exceptions” provided that those premises could provide “seated dining” for up to 10 patrons at a time, with no more than one patron per 4 square metres and social distancing observed. Alcohol could be served only in accordance with seated dining, with “no bar service”;

(4)    the 1 June 2020 Business, Activities and Undertakings Direction. This order provided that a “person who owns, controls or operates a restricted business, activity or undertaking in the State of Queensland” may “operate the business, activity or undertaking” only “to the extent permitted in Column 2 of the table at paragraph 14”. That column provided that “restaurants” and “pubs, registered and licensed clubs, RSL clubs, licensed premises in hotels and bars” could operate for up to 20 seated patrons a time, in compliance with a COVID Safe Checklist with no more than one patron per 4 square metres and social distancing observed. In addition, alcohol could only be provided when patrons were seated, with “no bar service”;

(5)    the 3 July 2020 Restrictions on Business, Activities and Undertakings Direction (No. 3). This order provided that a “person who owns, controls or operates a restricted business, activity or undertaking in the State of Queensland” may “operate the business, activity or undertaking” “in accordance with the restrictions listed in Column 2 of paragraph 16, and on the basis that the “occupant density” is no more than one person per 2 square metres (up to a total of 50 people) for venues or spaces of 200 square metres or less;

(6)    the 24 July 2020 Restrictions on Business, Activities and Undertakings Direction (No. 5). This order provided that a “person who owns, controls or operates a restricted business, activity or undertaking in the State of Queensland” may “operate the business, activity or undertaking” “in accordance with the restrictions listed in Column 2 of paragraph 17”, and on the basis that the “occupant density” is no more than one person per 2 square metres (up to a total of 50 people) for venues or spaces of 200 square metres or less. The restrictions listed in Column 2 required that the “restaurants” and “bars” could operate for seated patrons only; and

(7)    the 17 November 2020 Restrictions on Business Activities and Undertakings Direction (No. 9). This order provided that a “person who owns, controls or operates a restricted business, activity or undertaking in the State of Queensland” may “operate the business, activity or undertaking” “in accordance with the restrictions listed in Column 2 of Schedule 1”, and on the basis that the “occupant density” is no more than one person per 2 square metres.

547    These directions are each statutory instruments made under the Public Health Act 2005 (Qld). They are made under s 362B of that Act by the Chief Health Officer. There is no dispute that the Chief Health Officer is a legal authority under cll 7 and 8.

548    Taphouse is correct that the issue is not whether, as a matter of objective fact, it can prove the existence of a threat of damage to persons within the 50 kilometre radius (cl 7) or the outbreak of an infectious or contagious human disease occurring within the 20 kilometre radius (cl 8). The issue is whether a legal authority prevented or restricted access to the premises as a result a threat of damage to persons within the 50 kilometre radius (cl 7) or closed the premises as a result of the outbreak of an infectious or contagious human disease occurring within the 20 kilometre radius (cl 8). The authority might be wrong but if the elements of each clause are satisfied that is sufficient. As noted above, there may be some limits to this conclusion (such as an authority acting arbitrarily, capriciously or in bad faith) but no such issue arises in the present case.

549    Taphouse is also correct that it is first necessary to consider the terms of the directions in order to ascertain if they result from the specified circumstances. If the directions or accompanying contemporaneous explanatory material, on their face, explain the circumstances from which the directions result then, as discussed, I doubt any other evidence could undermine the inferences which should be drawn from the terms of the directions or the related explanatory material.

550    Taphouse is also right that, as a result of the reasoning in Wonkana which is not challenged in this case, it must be taken that the parties to this policy intended by cl 8 to exclude only a static and certain list of existing diseases declared under the former Quarantine Act. They did not intend by cl 8 or otherwise to exclude new diseases not so listed and not constituting highly pathogenic Avian Influenza.

551    Taphouse also summarised the relevant legislative background. That summary may be adopted. Chapter 8 of the Public Health Act is headed “Public health emergencies”. A “public health emergency” is defined in s 315 as “an event or a series of events that has contributed to, or may contribute to, serious adverse effects on the health of persons in Queensland”. Section 319 permits the Minister to declare a “public health emergency” by signed written order if satisfied “there is a public health emergency” and that “it is necessary to exercise powers under this chapter to prevent or minimise serious adverse effects on human health”. On 29 January 2020, the Queensland Minister for Health made a declaration pursuant to s 319 of the Public Health Act. The declaration said:

I, Steven Miles MP, the Queensland Minister for Health and Minister for Ambulance Services, am satisfied there is a public health emergency due to an outbreak of the coronavirus ‘2019 n-CoV’ within China, its pandemic potential due to cases spreading to other countries and the public health implications within Queensland resulting from recently arrived travellers from the epicentre of the outbreak.

To help control the threat and prevent or minimise serious adverse effects on human health in Queensland additional emergency powers will be required by the Queensland Government. Therefore, by this order, I declare a public health emergency under the Public Health Act 2005 in all of Queensland.

This order is effective immediately and ends at midnight on Thursday, 6 February 2020.

552    This order has been extended and remains in force.

553    On 19 March 2020, the Public Health Act was amended by the Public Health and Other Legislation (Public Health Emergency) Amendment Act 2020 (Qld). The amendments involved the insertion of a new Pt 7A entitled “Particular Powers for COVID-19 Emergency”. The term “COVID-19 emergency” was defined in s 315 as “the public health emergency declared by the Minister on 29 January 2020 under s 319(2), as extended and further extended under s 323”. Section 326B was introduced into the Act. This conferred the new power to make a “public health direction” on the Chief Health Officer in the following terms:

(1)    This section applies if the chief health officer reasonably believes it is necessary to give a direction under this section (a public health direction) to assist in containing, or to respond to, the spread of COVID-19 within the community.

(2)    The chief health officer may, by notice published on the department’s website or in the gazette, give any of the following public health directions:

(a)    a direction restricting the movement of persons;

(b)    a direction requiring persons to stay at or in a stated place;

(c)    a direction requiring persons not to enter or stay at or in a stated place;

(d)    a direction restricting contact between persons;

(e)    any other direction the chief health officer considers necessary to protect public health.

(3)    A public health direction must state:

(a)    the period for which the direction applies; and

(b)    that a person to whom the direction applies commits an offence if the person fails, without reasonable excuse, to comply with the direction.

554    The Explanatory Notes that accompanied the Bill for the Amending Act said that that “COVID-19 represents a significant risk to the health and wellbeing of many Queenslanders” and that the Bill ensured there was “clear legal authority to make the interventions necessary to mitigate the spread of COVID-19 in the community”. With specific reference to the amendments to the Public Health Act, the Explanatory Notes confirmed that it was necessary to “strengthen the powers of the Chief Health Officer and emergency officers appointed under the Act to implement social distancing measures, including regulating mass gatherings, isolating or quarantining people to assist in containing the spread of COVID-19”. The “policy objectives” referred to the declaration of COVID-19 as a “global pandemic”, and the cases as at 18 March 2020, being “414 confirmed cases of COVID-19 and five confirmed deaths, with 94 confirmed cases in Queensland”. The statement of compatibility required under s 38 of the Human Rights Act 2019 (Qld) said:

[R]ates of infection are quickly and steadily rising, with 94 confirmed cases in Queensland as of 17 March 2020. Experience abroad underscores that voluntary containment measures are inadequate to arrest the spread of COVID-19 and that governments must proactively pursue more prescriptive approaches to respond effectively to this unprecedented public health emergency.

555    On each occasion that a direction comprising the Authority Response-Taphouse was made, it was expressly stated to apply to either “the State of Queensland” or to a person who “resides in Queensland”. On each occasion, the Chief Health Officer of Queensland stated that:

Further to this declaration, l, Dr Jeannette Young, Chief Health Officer, reasonably believe it is necessary to give the following directions pursuant to the powers under s 362B of the Public Health Act 2005 to assist in containing, or to respond to, the spread of COVID-19 within the community.

556    On each occasion, the Chief Health Officer also referred back to the declaration by the Minister for Health of a public health emergency in relation to COVID-19, and its emergency area of “all of Queensland”. As noted, this was made “to help control the threat or minimise serious adverse effects on human health in Queensland”.

557    Otherwise, Insurance Australia is correct that subsequent orders in 2021 cannot be relevant given the period of the policy which expired on 23 September 2020.

558    The policy of insurance discloses that Taphouse obtained the policy through a broker. As discussed above, Insurance Australia remains the profferer. The principles identified in Wonkana at [30]-[31] apply. Further, and contrary to the submissions of Insurance Australia, there is no basis to infer that the brokers proposed any terms included in the policy.

8.4    Other evidence

559    There is unchallenged evidence that the Taphouse premises has 43.5 square metres of outdoor space and 72.5 square metres of indoor space open to the public, and a total floor space, including areas not accessible to the public, of 131 square metres.

560    Taphouse’s liquor licence provided that Taphouse could have seating for not more than 60 patrons and that a total of 100 patrons only, seated or standing, could be on the premises. Before 28 March 2020 Taphouse did not provide any takeaway food or alcohol services. Taphouse closed its premises to the public on 23 March 2020. By 28 March 2020 Taphouse had obtained a licence enabling it to serve takeaway tap beer and adapted so that it could provide takeaway food. Taphouse opened on 28 March 2020 to provide takeaway tap beer and takeaway food. In compliance with the subsequent directions Taphouse also permitted 10 seated dining patrons from 22 June 2020, 20 seated dining patrons from 1 June 2020, 50 seated dining patrons from 3 July 2020 and bar service allowing patrons to purchase alcohol while standing, ceased bar service on 24 July 2020, resumed bar service on 3 October 2020, and permitted 58 seated dining patrons from 17 November 2020.

8.5    Clause 7 – prevention of access

8.5.1    Does cl 7 extend to diseases?

561    As a matter of construction of cl 7 in the context of cl 8, I consider that cl 7 does not apply to diseases which, instead, are regulated exclusively by cl 8. I reach this conclusion on the basis that the operation of the policy would otherwise involve profound incongruence and incoherence and not mere redundancy or tautology. I infer that the parties could not have intended that cl 7 would apply to an authority preventing or restricting access to the premises under cl 7 where the threat of damage to persons is from a disease. This is because, if that were so: (a) the requirement in cl 8 for an authority to close or evacuate the premises by reason of a disease would be circumvented, (b) the 20 kilometre radius in cl 8 would be circumvented and the 50 kilometre radius in cl 7 would apply, (c) the limitation in cl 8 to infectious or contagious human diseases would not apply, and (d) the exclusions of highly pathogenic Avian Influenza or any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended) in cl 8 would not apply to the circumstances in cl 7.

562    Further, the concept of “damage” to a person in the sense of “damage” used in the policy (accidental physical damage, destruction or loss) is not particularly apt to describe any form of harm to humans be it from physical injury or disease. The use of this word in “threat of damage to…persons” tends to suggest that the clause is concerned not with disease but with a kind of threat that could physically damage a building as well as a person. The harm which diseases cause to a person, while physical, does not fall readily and naturally within the concept of damage as it used in this policy. Contrast this with the harm caused by physical injury to a person, which does more readily and naturally accord with the concept of damage as it used in this policy.

563    I am not persuaded by the submissions for Taphouse that cll 7 and 8 have different terms and fields of operation so that cl 8 may respond to circumstances to which cl 7 does not depending on the nature of the disease. Taphouse said, assume the outbreak of a disease within the premises that is not perceived by the legal authority to give rise to a threat of physical damage to persons, but nonetheless warrants closure or evacuation of the premises. The problem with this is that: (a) if damage includes the effects of disease, then the example is merely rhetorical – it may be asked, in what circumstance would an authority close premises due to a disease which causes no harm to people, and (b) all of the inconsistencies of operation identified above remain – none are resolved by reference to this hypothetical. Consistently with this, the fact that cl 7 deals with threats and cl 8 deals with outbreaks does not lead to a different conclusion. To treat threats from diseases more expansively than outbreaks of diseases tends to reinforce that cl 7 was not intended to apply to diseases at all.

564    It is correct that there is no express limitation on the nature of the “threat” in cl 7. The limitations are contextual. First, the threat must be of damage to property or persons. Second, as a result of the reference to “damage” and “property or persons”, it is apparent the threat must be apt to cause accidental physical damage, destruction or loss. Third, as a result of consideration of the relationship between cll 7 and 8, it is apparent that the concept of damage should not be construed as extending to harm to human health from disease. This does not involve the rewriting of the parties’ bargain and the allocation of risk upon which the insurance contract (and premium paid) was based, as referred to in Liberty Specialty Markets v Icon Co (NSW) Pty Ltd [2021] FCAFC 126 at [152]. At [152] the Full Court identified that the task involved was to work out “in a coherent and congruent fashion” the operation of a policy of insurance so as to bring about commercial efficacy and reflect common sense”, understanding that “a broad or a narrow meaning of a policy may only reflect the breadth or the narrowness of cover that has been purchased by the premium”.

8.5.2    If cl 7 applies to diseases

8.5.2.1    A result of the threat of damage to persons within a 50 kilometre radius

565    If this conclusion is incorrect and cl 7 is capable of applying to diseases then, as noted, I agree with Taphouse that the next issue is whether the directions involve an authority preventing or restricting access to the premises as a result of the threat of damage to persons within a 50 kilometre radius of the premises. I agree also with Taphouse that the first consideration in this regard must be the terms of the directions themselves and any contemporaneous accompanying explanatory material.

566    Taphouse’s argument is that because the directions, on their own terms, apply to and were made in response to the threat of COVID-19 across the whole of Queensland they were necessarily made as a result of the threat of damage to persons within a 50 kilometre radius of the premises. I agree. A threat or risk of COVID-19 is different from the fact of an outbreak or occurrence of COVID-19. This difference is important in comparing cl 7 (which involves a threat) and cl 8 (which involves an outbreak).

567    The fact that the directions resulted from the threat of damage to persons across the whole of Queensland is clear from the facts on which Taphouse relied, namely, that:

(1)    315 of the Public Health Act defines “public health emergency” as “an event or series of events that has contributed to, or may contribute to, serious adverse effects on the health of persons in Queensland”;

(2)    319 permits the Minister to declare a “public health emergency” by signed written order if satisfied “there is a public health emergency” and that “it is necessary to exercise powers under this chapter to prevent or minimise serious adverse effects on human health”;

(3)    on 29 January 2020, the Queensland Minister for Health made a declaration pursuant to s 319 of the Public Health Act stating that: (a) he was satisfied that there was a “public health emergency” ( “an event or series of events that has contributed to, or may contribute to, serious adverse effects on the health of persons in Queensland”), (b) the declaration was being made “[to] help control the threat and prevent or minimise serious adverse effects on human health in Queensland”, and (c) the public health emergency existed “in all of Queensland”;

(4)    on 19 March 2020, the Public Health Act was amended to include a definition of “COVID-19 emergency” as “the public health emergency declared by the Minister on 29 January 2020” and all of the directions were made under this legislation and therefore are to be taken as having been made as a result of this threat;

(5)    the 23 March 2020 direction provided that the public health emergency area specified in the order is for “all of Queensland” to “assist in containing, or to respond to, the spread of COVID-19 within the community” and applied to the State of Queensland; and

(6)    the subsequent directions were also made on the same basis.

568    As discussed, in the context of a requirement for a threat or risk of damage, if that extends to harm from a disease, I would infer that the threat or risk to each and every person in Queensland from COVID-19 was an equally effective cause of the actions of the Chief Health Officer.

569    It is not to the point that Taphouse has not proven community transmission of COVID-19 within 50 kilometres of its premises. It would not be to the point if there was no evidence of COVID-19 within 50 kilometres of the premises. This is because it is clear from the terms and context of the directions that they resulted from the threat of harm to persons from COVID-19 (for this purpose, assumed to be a threat of damage) throughout Queensland. The mere fact that the threat was considered by the Chief Health Officer to exist throughout Queensland does not mean that the threat was not considered to exist in respect of persons within 50 kilometres of the premises. Clause 7 is not like cl 8 which requires the authority’s action to be the result of the outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of the premises. If an act results from a threat of harm from a disease over a wide geographical area, such as a State, then it likely results from a threat of harm (damage) to persons within each and every part of that wide geographical area. The nature of COVID-19 as a highly infections and potentially fatal disease supports the conclusion that the Chief Health Officer made the directions as a result of such a threat to persons in each and every part of Queensland.

570    On this basis, I infer that the proximate cause of the directions was the Chief Health Officer’s view that the directions were required to protect each and every person in Queensland from COVID-19. The threat or risk to each person is an equally efficacious cause of the actions taken as the threat or risk to every other person. It does not matter that it cannot be proved that there was community transmission of COVID-19 within the radius.

571    I would agree with Insurance Australia, however, that after the event epidemiological evidence would be irrelevant. Such evidence cannot have been a causal factor for the authority taking the action. I do not agree that the stated purpose of the directions to “assist in containing, or to respond to, the spread of COVID-19 within the community” means that the intention of the Chief Health Officer was to “respond” to identified instances of COVID-19 and “contain” the virus within the geographical areas in which it was then prevalent. If that had been so, I would infer that the directions would have been far more geographically targeted. The fact that the directions were State-wide supports the inferences available from their terms; that the Chief Health Officer considered that the outbreak was present (whether she knew where or not) and involved a threat to each and every person across the whole of Queensland. The fact that the context of the directions was the National Cabinet meeting on 22 March 2020 involving an announcement of the intention to “slow the spread”, “better prepare the health system” and “flatten the curve” does not suggest to the contrary. It is consistent with the view of an outbreak that, without the directions, the virus could involve a threat to every person within Queensland. The lack of any specific reference to Townsville in the directions or otherwise is immaterial in this context. The causal requirement in cl 7 is satisfied.

572    The fact that the directions after 29 March 2020 involved an easing of restrictions is immaterial. The threat to each and every person in Queensland from COVID-19 including each and every person within the 20 kilometre radius of the premises remained proximate causes of the directions.

573    I also accept Taphouse’s submissions that:

(1)    cl 7 does not require an outbreak or even an occurrence of a disease within a 50 kilometre radius of the premises;

(2)    there need not be community transmission of a disease at all or within a 50 kilometre radius of the premises for action to be taken as a result of a threat of damage to persons within that 50 kilometre radius; and

(3)    the authority need not be right that there is a threat of damage to persons within a 50 kilometre radius of the premises – the action need only be a result of that threat as understood to exist by the authority.

574    In this case, there is evidence of a threat of damage to persons within a 50 kilometre radius of the premises before the making of the directions. As discussed, I do not consider this evidence to be material because the issue is not the objective existence of the threat, but the actions of the authority in relation to a threat as perceived by the authority at the time it took the action. To make this kind of evidence material, there would need to be evidence that it was known to and relied upon by the Chief Health Officer in making the directions. There is no such evidence. In any event, Taphouse identified that:

Prior to 24 March 2020, the publicly available data indicates 4 cases of COVID-19 attributed to the Townsville HHS. The material subpoenaed from the Townsville HHS establishes that there were in fact 11 confirmed cases of COVID 19 who tested positive in that region and that at least some of them were infectious in the community. The data establishes that all except one had a usual place of residence within 50 kilometres of the Taphouse premises. Noting the manner in which COVID-19 spreads from person to person, and the severe human health consequences it can have, the Court can be satisfied that there was in fact a threat of damage to persons within that radius prior to 24 March 2020.

575    As noted, there is no suggestion that the directions were arbitrary, capricious or in bad faith. On that basis, the causal relationship between the threat to each and every part of Queensland, which the Chief Health Officer must be inferred to have perceived, and the directions which must be taken at face value, and are sufficient to satisfy the causal requirements of cl 7, if it applies at all to diseases.

8.5.2.2    Preventing or restricting access

576    In my view, access to premises is prevented if the persons ordinarily entitled to enter the premises are no longer physically permitted to do so. Access to premises is restricted if it becomes materially more difficult for the persons ordinarily entitled to enter the premises to do so. In both cases, the prevention or hindrance must be caused by a legal authority as a result of the specified threat. The terms are concerned with physical access to the premises (the act of entering the premises) just as evacuation is concerned with leaving the premises. Clause 7 does not require, however, that the cause of the preventing or restricting access itself be physical. The required cause is the action of a legal authority.

577    In the case of Taphouse, the persons ordinarily entitled to enter the premises included members of the public. If the directions prevented or restricted the public from entering the premises then they satisfied the requirements of cl 7 (assuming it applies to diseases). As discussed previously, there is no necessary and clear distinction between an action of an authority which prevents or restricts access to premises and an action which impacts upon how the insured’s business is operated within the premises. An action which impacts upon how the insured’s business is operated within the premises may also prevent or restrict access to premises. It all depends on the nature of the action and of the premises. If an action is properly characterised as concerning nothing more than what people may do once they have entered premises then it would be the case that the action does not prevent or restrict access to the premises. But whether or not the directions in this case can be so characterised is not answered by any pre-conceived distinction between an action preventing or restricting access and an action merely regulating conduct once access has been obtained.

578    While cl 7 refers to “your premises” the parties would not be taken to have intended that the prevention or hindrance of access of the relevant kind applying only to part of a premises would be excluded from cover. It may well be that the clause would not be engaged if an immaterial part only of the premises was unable to be accessed but it cannot be accepted that by “your premises” the parties did not have in mind each and every part of the premises which are ordinarily accessible. In FCA v Arch UKSC Lord Hamblen and Lord Leggatt JJSC said:

[151] In our view, for essentially the same reasons as given in relation to Hiscox 1—4, the Arch wording may, depending on the facts, cover prevention of access to a discrete part of the premises and/or for the purpose of carrying on a discrete part of the policyholder’s business activities. We agree with Arch that prevention means stopping something from happening or making an intended act impossible and is different from mere hindrance. In both the situations contemplated, however, access to a discrete part of the premises or access to the premises for a discrete purpose will have been completely stopped from happening.

[152] The example of the restaurant which offers a takeaway service illustrates the commercial sense of this interpretation. The distinction drawn by Arch, and accepted by the court below, between continuing to operate such a service (where it is said that there would be no prevention of access or inability to use the premises) and starting a new takeaway service after closing the restaurant for dining is an unsatisfactory and arbitrary distinction. It is also illogical. If the premises can be put to such use, then it can be said that there is an ability to use them and that access to the premises for the purposes of carrying on the policyholder’s business is not prevented. A more realistic view is that there is prevention of access to (and inability to use) a discrete part of the premises, namely the dining area of the restaurant, and prevention of access to (and inability to use) the premises for the discrete business activity of providing a dining in service.

579    Insurance Australia submitted that this reasoning was not persuasive in relation to the Taphouse policy. I disagree.

580    As discussed, the reference to “your premises” must include each and every part of the premises so that if access to part only is prevented or restricted, the clause may be engaged. The fact that cl 8 refers to “all or part of the premises” should be taken to be a mere case of redundancy in cl 8. Had those words not appeared, it would have been natural to read “your premises” in cl 7 as meaning each and every part of “your premises”. The specific reference to this in cl 8 should not be used to deprive the phrase of its natural meaning. As noted, redundancy is common in insurance policies. I would not infer that the parties intended cl 8 to apply to each and every part of the premises and cl 7 to apply to only a prevention or hindrance of access to the whole of the premises. There is no logical basis for that distinction. Applying such a distinction would involve a linguistic rigidity which is inapt for this policy which exhibits redundancy in multiple places (for example, the extensions of cover read with the additional benefits, if read literally, make no sense – but the literal reading is to be avoided).

581    I do accept, however, that the prevention or hindrance of access is not the same as an inability to use premises, at least in the sense that an inability to use might result from a prevention or hindrance on access, but also might not. For example, in the case of premises such as Taphouse, the purpose of which is to provide food and drink to the public, a direction requiring Taphouse to close to the public would involve a prevention of access to the premises (because the public ordinarily entitled to access the premises would be prevented from doing so) even if staff and contractors could enter the premises for other purposes. Insurance Australia accepted that cl 7 is concerned with the access of the public to Taphouse, given the nature of the premises. Again, everything depends on the character of the action of the authority and of the premises. Conceptual distinctions between prevention of access and prevention or restriction of use may not be helpful if they distract from the proper characterisation of the action of the authority and its impact on the particular premises.

582    Clause 7 must be construed in the context of the policy as a whole including the nature of the insured premises. On this basis the 23 March 2020 direction, in my view, prevented the public from accessing the premises. For the period when Taphouse had no capacity to provide takeaway service (23 to 28 March 2020), the 23 March 2020 direction required that the business not operate at all. To comply with the direction Taphouse was required to close its premises to the public and did so. A requirement not to operate a business other than in a manner in which the business cannot operate, in circumstances where the business is the provision of food and drink to members of the public to be consumed within the premises (as for Taphouse), is in substance a requirement preventing the public from accessing the premises. The fact that the direction permitted takeaway food and drink is immaterial given that Taphouse could not provide takeaway food and drink between 23 and 28 March 2020.

583    The fact that Taphouse could provide takeaway food and drink from 28 March 2020 does not alter my conclusion. Access to the premises for all members of the public who would otherwise be entitled to enter and remain on the premises to consume food and drink remained denied. This access was prevented. At the least access was restricted. Persons who wished to enter the premises to consume food and drink were prevented from doing so. They could only enter for the purpose of buying and collecting takeaway food and drink. It is not fatal to the application of the clause that there is no evidence as to the part of the premises from which members of the public could obtain their takeaway food and drink. The material fact is that the public, ordinarily entitled to enter and remain on the premises to consume food and drink, could no longer do so. They could enter and remain on the premises only for the confined purpose of paying for and collecting their takeaway food and drink. This is sufficient to engage the clause.

584    I do not accept that the 29 March 2020 order was no more than a restriction on the use of premises in the sense that all the direction did was to prevent people from sitting down to consume their food and drink. The direction prevented people from entering the premises for any purpose other than paying for and collecting their takeaway food and drink. They could not remain on the premises after competing these actions. They were required to leave the premises or Taphouse would have contravened the order. Their access to the premises was thereby prevented and restricted.

585    The same can be said of all of the other directions which took effect during the period of the policy other than the 29 March 2020 direction. I do not accept that the 29 March 2020 direction prevented or restricted access to the premises. That direction prohibited people from leaving their residence except for nominated purposes which included obtaining food. While the effect of this direction may well have been to reduce the number of people coming to Taphouse for takeaway food and drink the direction cannot be characterised as one preventing or hindering access to the Taphouse premises. It had nothing to do with the Taphouse premises. The causal link to the Taphouse premises is too remote and tenuous to be satisfied by the 29 March 2020 direction.

586    The other directions, however, all prevented and restricted members of the public from entering the Taphouse premises by restricting the number of persons who could be present on the premises at any one time below that which could have been present leaving aside the direction. By this means persons who would have been able to enter and remain on the premises could no longer do so. Those persons were thereby prevented from entering the premises.

587    I do not accept the submissions for Insurance Australia to the contrary. The directions are different from the usual maximum occupancy requirements governments impose. Taphouse was already subject to maximum occupancy requirements. The directions imposed requirements as a result of the threat of damage to persons from COVID-19 (assuming I am wrong about the relationship between cll 8 and 7). The requirements prevented persons who otherwise would have been entitled to enter the premises and remain thereon to consume food and drink from doing so. I accept that the mere fact a direction has the effect of reducing the number of people on premises would be insufficient to engage cl 7. But if the effect is to prevent a person who would otherwise be able to enter the premises from doing so then that aspect of cl 7 is satisfied.

8.6    Clause 8 – hybrid clause

8.6.1    As a result of

588    Consistent with the reasoning above, the directions were made as a result of the threat or risk of harm to human health across the whole of Queensland by reason of COVID-19. It cannot be inferred, however, that the directions were a result of an outbreak of an infectious or contagious human disease occurring within a 20-kilometre radius of the premises.

589    As discussed, I do not see the different conclusions reached about cll 7 and 8 to be inconsistent. An action directed at protecting human health across a wide area such as a State (such as closing certain premises across a State) would ordinarily be taken to be a result of a perceived risk of harm to each and every person in the State if the action is not taken. By this means a clause which focuses on a risk of harm at premises or within a specified radius of premises is satisfied because the causal link is between the action and each and every person in the State. The risk to each person is a proximate cause of the action. However, an action directed at protecting human health across a wide area such as a State (such as closing certain premises across a State) would not ordinarily be taken to be a result of an outbreak of a contagious disease within a 20 kilometre radius of the premises. The causal link required between the risk of harm and the specified radius of premises is not satisfied. Putting it another way, it could not be said that any outbreak of COVID-19 within the 20 kilometre radius was a proximate (in the sense of real or efficacious) or, indeed, or any other kind of cause of the directions.

590    As discussed, this has nothing to do with the concept that an outbreak might exist both within and outside of a radius. If that is the case, and it can be said that the outbreak within the radius is a cause of the action, the causal requirement in cl 8 would be satisfied. The extension of the outbreak beyond the radius or the existence of other outbreaks beyond the radius would be immaterial. This is one reason why I do not accept any generalised notion of the policies not providing cover for pandemics. The problem for Taphouse is that the same material on which it relied to prove that the directions resulted from the perceived risk of harm to each and every person in Queensland also establishes that those directions had nothing to do with a perceived outbreak of COVID-19 within a 20 kilometre radius of its premises. This is so whether “outbreak” means a single occurrence of COVID-19 or multiple occurrences unified in time and space involving community transmission within the radius.

591    Contrary to Taphouse’s submissions, the contextual material and directions referred to above do not support the inference that there was an outbreak of COVID-19 across the whole of Queensland. The context exposes that the focus was cases of COVID-19 within Queensland which had the potential to spread across the whole of Queensland. There was no sense in which the authorities were saying that there was an outbreak of COVID-19 in each and every part of Queensland. The directions were made to prevent that possibility, not as a result of the authorities having perceived that to be the existing fact. Clause 8 does not respond to action as a result of the risk of an outbreak of a contagious disease within a 20 kilometres radius of the premises. It requires the action to result from the fact perceived by an authority of an outbreak within that radius. There is no hint in the directions or the context within which they were made that they resulted from a perceived outbreak of COID-19 within a 20 kilometre radius of the premises.

592    The fact that the Minister said in the statement of compatibility (referred to above) that “rates of infection are quickly and steadily rising, with 94 confirmed cases in Queensland as of 17 March” says nothing about the circumstances within a 20 kilometre radius of the premises. Nor does the fact that the directions were to “assist in containing, or to respond to, the spread of COVID-19 within the community”.

593    Taphouse’s so-called secondary argument that there was evidence of an outbreak of COVID-19 within a 20 kilometre radius of the premises does not assist it. As noted, even if there was such evidence, it does not assist in proving that the directions resulted from those matters. Accordingly, it may be accepted that the evidence discloses that: (a) there were people with COVID-19 whose usual place of residence was within a 20 kilometre radius of the premises, and (b) some of those cases were a result of community transmission occurring somewhere. Even if there was evidence of community transmission within the radius that still would not prove that the directions resulted from that fact. In other words, as reasoned in other cases, the fact or not of COVID-19 or community transmission of COVID-19 within the required area is not material if the authority’s actions did not result from those facts.

594    In any event, the evidence discloses that Queensland Heath’s records show that by 23 March 2020 there were 319 cases of COVID-19 in Queensland. Of that total, only 4 cases were within the Townsville Hospital and Health Service (HHS) region which extended well beyond the 20 kilometre radius. There is no evidence that the material subpoenaed from the Townsville HHS showing 11 cases within that region was known to the Chief Health Officer at the time of the making the directions. Whether it be 4 or 11 cases, the evidence does not support the conclusion that the cases within the radius (the number of which remains unknown) were an equally effective cause of the making of the directions.

8.6.2    Outbreak?

595    The Taphouse policy uses only the word “outbreak”. It does not use that word interchangeably with “occurrence”. That said, I remain of the view that what constitutes an “outbreak” of a disease depends on the disease, and my conclusions in NSD132/2021 Swiss Re and LCA Marrickville about the meaning of an “outbreak” of COVID-19 apply.

596    In respect of a policy such as that of Taphouse it depends on how the authority taking the action should be inferred to have characterised the disease. In accordance with my general approach to the provisions in issue, I do not accept that the parties intended that they would need to go behind the terms of or apparent explanation for action by an authority. What the authority says and does in taking the action is determinative (subject, perhaps, to concepts of arbitrary, capricious and bad faith actions as discussed above). For example, if an authority says it is taking action as a result of an outbreak of a contagious disease then subsequent evidence showing that: (a) the disease was not contagious or as contagious as the authority believed, or (b) there was no outbreak of the disease because, of its nature, a single case of the disease could not involve an outbreak, then I do not consider that anything in the relevant clauses contemplates that either party would be able to deny the fact of action or what it resulted from.

597    As I have reasoned above, a single case of COVID-19 within the community within an area capable of communicating COVID-19 to another person and not in a controlled environment (such as quarantine, isolation or a hospital) is a proper foundation for an authority to consider that there is an outbreak of COVID-19 within that area. If I was determining the existence of an outbreak of COVID-19 in an area as a matter only of objective fact it would be sufficient for there to be a person with and capable of communicating COVID-19 to be within the community (that is, not in a controlled situation such as quarantine, isolation or a hospital) and within the area.

598    It should be inferred that the Chief Health Officer, in making the directions, considered that there was an outbreak or outbreaks of COVID-19 in Queensland. This is not to say that the Chief Health Officer made the direction as a result of an outbreak of COVID-19 within a 20 kilometre radius of the premises. She did not. Nor is it to say that the Chief Health Officer considered that there was an outbreak of COVID-19 in each and every part of Queensland. That inference is also not open on the face of the directions or their contemporaneous context. As Insurance Australia submitted, the inference that must be drawn is to the contrary – the Chief Health Officer considered that there was an outbreak or outbreaks of COVID-19 in Queensland in various locations (not all of which, in my view, the Chief Health Officer would have considered she knew) and the directions were the result of an intention to confine the outbreak to those locations and for the outbreak not to spread to other locations across Queensland. There is no evidence from which it can be inferred that the area within the 20 kilometre radius of the premises was one of those locations the Chief Health Officer considered to be subject to an outbreak of COVID-19 or that her actions resulted from such an outbreak.

599    I do not agree with Insurance Australia that a single case of COVID-19 in the community is incapable of being an outbreak of COVID-19 within the meaning of the clause, subject to my observations that it is the actions of an authority rather than the objective fact which is the required focus. On this basis:

(1)    “outbreak” is not otiose in cl 8 if it applies to a single instance of a contagious disease – the clause covers all infectious or contagious human diseases except those expressly excluded. The word “outbreak” simply takes its meaning from the particular disease in question, or more accurately, from the authority’s consideration of the particular disease in question;

(2)    for the reasons already given, I do not accept the approach adopted in FCA v Arch UKSC determines the meaning of “outbreak”;

(3)    I consider that there would be an outbreak of COVID-19 within the 20 kilometre radius if it could be proved that there was a single case of a person in the community (that is, not in a controlled environment) with and capable of transmitting COVID-19 within the radius; and

(4)    an outbreak of COVID-19 does not require proof of multiple active cases of COVID-19 within the defined radius occurring at or around the same time and that those cases have a common cause, being the uncontrolled transmission of the virus from one person to another within the defined radius.

600    As I have emphasised, however, this is all a matter of theory because the issue is the action of the authority and what it resulted from, not the facts with respect to the existence of people with COVID-19 within the radius.

601    In the event that all of this reasoning is wrong, I note that there is evidence that: (a) the Townsville HHS region extended up to 325 kilometres from Townsville, and (b) there were 31 cases of COVID-19 attributed to the Townsville HHS in the period from January 2020 to May 2021 of which 30 are classified as “overseas acquired” and one is classified as “interstate acquired”, none are classified as “locally acquired – contact known”, none are classified as “locally acquired – no known contact”, and none are classified as “under investigation”. There is no evidence, however, that there was a single case of a person within the 20 kilometre radius who was in the community with COVID-19 at a time when the person was capable of communicating the disease to others.

8.6.3    Closing premises

602    The action of the authority must involve the closing or evacuation of all or part of the premises. The requirement of closing the premises is to be considered in the context of the policy as a whole including the nature of the insured premises, being a restaurant and bar, which are ordinarily accessible by the public for the purpose of consuming food and drink on the premises. Further, the fact that the directions are focused on the operation of the business does not mean they are incapable of requiring closure of the premises or part of the premises.

603    Insurance Australia submitted that the “choice of the narrower words of ‘closure’ and ‘evacuation’ (rather than ‘restricting’) in the hybrid extension should be considered a deliberate choice that limits the clause to government orders that physically shutter all or part the business premises or require its patrons to leave”. This submission goes too far. A closure may be effected by a requirement that a business cease operating or operate only in a particular way if it is necessary, in order to comply with the requirement, for the insured to prevent persons who would otherwise be entitled to enter and remain on the premises from doing so. Closure is thus dependent on the nature of the authority’s requirement and the nature of the premises. I would accept that the prevention of access by the insured must be necessary to comply with the government requirement. A voluntary decision of an insured to close the whole or part of its premises would not satisfy cl 8. However, in the case of Taphouse, its closure of the premises in response to the 23 March 2020 direction was not voluntary. It could not provide take-away food and drink and therefore could not operate at all until it had made arrangements enabling it to provide take-away food and drink.

604    On this basis the 23 March 2020 direction closed the premises by not permitting the public to access the premises other than for takeaway food and drink which Taphouse could not provide until 28 March 2020. If the requirement of the direction as it applies to the insured is to prevent the business from operating at all then the direction has closed the premises because persons ordinarily would be entitled to enter and remain on the premises only pursuant to the implied licence resulting from the operation of the business. If the business is not operating because of the direction, no member of the public would be entitled to enter and remain on the premises. The premises are closed to them by the legal authority. The circumstances are not analogous to Cat Media which involved a manufacturing premises. In that context, it could not be concluded that the required cessation of manufacturing closed the premises: [60]. A restaurant and bar is different. The public may ordinarily enter and remain on the premises under an implied licence to do so while the business is operating. An order requiring the business not to operate closes the premises to those members of the public. The fact that the owner and others may enter and remain on the premises for purposes other than operating the business (such as arranging for the business to prove take-away food and drink) does not mean the premises are not closed. They are closed – to all of the person who would ordinarily be entitled to enter and remain on the premises.

605    From 28 March 2020 until the next relevant direction it is possible (but not proved) that the 23 March 2020 direction closed the premises to any member of the public who would otherwise have been entitled to access the premises for the purpose of consuming food and drink on the premises. I say the 23 March 2020 direction possibly had the effect of closing the premises in whole or part because the existing evidence does not permit that conclusion to be reached. However, it may be that evidence could be adduced to the effect that the public could access only parts of the premises to obtain their takeaway food and drink. Closure of any part of the premises to comply with the 23 March 2020 direction, be it the bar area, the seating area, the toilet facilities or any other area which the public could ordinarily access, in my view, would constitute closure of that part of the premises.

606    I am not persuaded that the subsequent directions would have closed the premises in whole or part. While it is the substantive effect of the directions, not their form, which is relevant the directions involved a mere restriction on the number of people who could enter and remain on the premises. This is a restriction on or hindrance to access to the premises, but it is not a closure of any part of the premises. It would not be a potential closure of any part of the premises unless in order to comply with the direction Taphouse in fact had to (rather than chose to) prevent access by the public to some part of the premises they would otherwise ordinarily be entitled to enter. There is no evidence suggesting this to be the case.

8.7    Causation and adjustment

607    Insurance Australia submitted that:

The elements of the prevention of access and hybrid extensions when set out in their correct causal sequence are as follows: (A) an outbreak of disease or threat of damage to property or persons, which causes (B) an order of a public or legal authority, which causes (C) the prevention or restriction of access or closure of the premises, which causes (D) an interruption or interference with the insured’s business that is the direct cause of financial loss. This can be expressed diagrammatically (see FCA v Arch at [26]), with each arrow representing a causal connection, as follows:

A-›B-›C-›D

608    This tends to obscure the fact that what is required is an action of an authority of the relevant type which results from the specified circumstances. It tends to suggest that the specified circumstances must in fact exist rather than that the action must result from the specified circumstances which indicates that it is the state of mind of the authority which is relevant, which should be determined objectively based on the acts and statements of the authority at the time it takes the action.

609    If my conclusions above to the effect that cll 7 and 8 do not apply are incorrect, then I would be prepared to infer that Taphouse suffered some loss that results from an interruption of its business caused by a legal authority: (a) preventing or restricting access to the premises, and/or (b) closing all or a part of the premises. I would accept that the directions other than the 29 March 2020 would constitute a proximate cause of the interruption of the business because they directly impacted on the capacity of members of the public to enter and remain on the premises. There is also evidence of decreased turnover after the directions which I would infer was the result of the proximate case of the insured peril.

610    I agree that the reference to “damage” in the definition of “standard turnover”, in the context of the relevant extensions of cover, must be read as a reference to the insured peril as in FCA v Arch UKSC at [257]. Thus, the standard turnover is to be assessed by reference to the 12 months immediately preceding the first direction because, on the facts of this case, the direction resulted in immediate closure of the premises and thus loss. In theory, however, the date of the loss from the insured peril may differ from the date of the action. Further, the indemnity period, as defined, starts on the date of the loss caused by the insured peril and not later than 12 months later or the date during which the results of the business are affected as a consequence of the loss.

611    I agree also that the amount to be paid includes the amount produced by applying the rate of gross profit to the amount by which the turnover during the indemnity period in consequence of damage falls short of the standard turnover. If the proximate cause of this difference between turnover and standard turnover is the interruption of the business in consequence of the insured peril, then the loss provision responds.

612    Insurance Australia submitted that while the basis of settlement clause does not refer to any requirement for an adjustment (as defined) nevertheless adjustment as defined is required because the loss covered is in “consequence of” the insured peril. Insurance Australia said: (a) this is a necessary result of the contract being one of indemnity, and (b) it would otherwise be incongruent with the other basis of settlement provisions, such as loss of payroll which, by referring to the definition of “shortage in turnover” includes the requirement of “after adjustment”, and there is no rational basis upon which the parties to the contract would agree that this form of settlement was to be adjusted (up or down) but the “Gross profit” calculation was not.

613    The fact, however, is that the adjustments provision does not apply, in terms, to the basis of settlement for gross profit. That it does not do so may or may not be rational, but it does not do so. To apply it to the basis of settlement for gross profit would be to re-write this part of the policy. But this conclusion as explained below, does not matter given the causation requirement.

614    The adjustments requirement operates on the hypothetical circumstances to allow for the trend of the business and other circumstances affecting the business either before or after the date of the damage (the loss caused by the insured peril) which would have affected the business had the damage not occurred. Insofar as these matters are embedded in the standard turnover for the 12 month period before the damage occurs then they will determine the amount of the standard turnover. If they are not embedded in the standard turnover, however, the basis of settlement for gross profit requires the amount to be paid to be the amount produced by applying the rate of gross profit to the amount by which the turnover during the indemnity period in consequence of damage falls short of the standard turnover. If the insured peril is not a proximate cause of the shortfall at all then the amount produced will be zero. If the insured peril is not a proximate cause of some part of the shortfall then the amount produced cannot include that part. If there are multiple proximate causes of the shortfall, one of which is the insured peril, then the amount produced will be the whole of the shortfall. As discussed, if there are multiple proximate causes of the shortfall, one of which is the insured peril and one of which is an excluded peril, the policy may or may not evince an intention to exclude coverage in those circumstances: McCarthy at [96].

615    Taphouse does not confront the fact that the basis of settlement clause for gross profit itself requires the difference in turnover to be a consequence of the damage. In my view, at least to the extent that the cause of any loss is not the same as the underlying cause of the insured peril, the causal requirement means that loss in consequence of some other unrelated circumstance does not form part of the amount agreed to be paid by way of indemnity.

616    Otherwise, for the reasons already given, I see nothing in this policy which would lead to a different view from that reached in FCA v Arch UKSC. As in that case, I am unable to conclude that the parties here intended to exclude cover in respect of the consequences of the same underlying cause as the existence of the insured peril. That is, as Taphouse submitted, I am unable to accept that the parties intended that the consequences of the particular adverse event which are inherently likely to arise (because they are the reason the authority makes the order in the first place) should then restrict the scope of the indemnity. This would be destructive of the very indemnity provided under the policy. It follows that the words “in consequence of” in the basis of settlement clause for gross profit, in my view, should be construed as extending to the insured peril and the circumstances giving rise to the insured peril, which in this case is not “COVID-19 generally” but the presence in and risk of COVID-19 throughout Queensland. Again, however, this depends on the underlying causes of the concurrent causes of loss being the same at a level of granularity which is apt to properly characterise the cause of the insured peril.

617    As discussed, I do not accept that this involves re-writing the policy as opposed to construing the policy. First, the policy has to be construed to mean “the insured peril” rather than damage in the basis of settlement clause for gross profit to the extent it applies to cll 7 and 8 in any event. Second, as in the present case, the relationship between the insured peril (the actions of the authority as described) and the underlying cause of the insured peril may be so close as to make any distinction between the two artificial and spurious; in the present case the underlying causes of the insured and uninsured perils, the presence and risk of COVID-19 throughout Queensland, are identical. Third, as in the present case, it could not otherwise be concluded that the insured peril was not a proximate cause of loss.

618    Consistently with my reasoning above, I would apply this approach to both the requirement for causation (that is, that the loss be in consequence of the insured peril) and the operation of the adjustments clause (if it applied to gross profits separately from the causation requirement, which I consider it does not).

619    Otherwise:

(1)    the 23 March 2020 direction required Taphouse’s closure until 28 March 2020. But for the 23 March 2020 direction Taphouse would have continued operating and could not do so because it had no capacity to serve takeaway food and drink which the direction permitted. This does not mean that the 23 March 2020 did not require Taphouse’s closure until 28 March 2020;

(2)    it would still be necessary to confine the amount to be paid to the loss in consequence of the insured peril and the circumstances underlying the existence of the insured peril, which cannot be assessed; and

(3)    Taphouse would have the onus of proving its loss as a consequence of the insured peril and the circumstances underlying the existence of the insured peril: PMB at [17]-[23].

8.8    Third party payments

620    Taphouse received the Commonwealth’s JobKeeper payment, the Commonwealth’s Cash Flow Boost, the Queensland Government’s COVID-19 Grant, and rental waivers or abatement from its landlord.

621    I do not accept that the general cover clause in section 2 of the policy does not apply to the loss claimed relating to cll 7 and 8. That is, I do not accept that those clauses are self-contained insuring provisions. They are to be read subject to the cover provision. While I accept that this involves repetition and redundancy if the provisions are read literally, this is readily resolved by reading the words “[w]e will pay” in cll 7 and 8 as we will pay in accordance with the cover provision which in turn provides for quantification in accordance with the applicable basis of settlement provision. As a result, the requirement in the cover provision (after taking account any sum saved during the indemnity period in respect of such charges and expenses of the business as may cease or be reduced in consequence of the interruption or interference) applies to the indemnity provided.

622    I do not accept that the concept of the loss suffered introduces a false premise. It is clear from the terms of the cover provision and cll 7 and 8 that the provisions respond to loss caused by the interruption to the business. As reasoned above, if there is a third party payment by way of reduction of the loss then, on general legal principles, that is to be taken into account. This results from the nature of a contract of indemnity, not the definition of turnover which does not include third party payments of the type under consideration.

623    Further, the amount saved provision is also potentially applicable. If the amount paid by a third party means that an expense of the business is reduced, then that reduction must be taken to be in consequence of the interruption or interference unless the payment is incapable of being so characterised. Again, an insured cannot have it both ways. If the cover extends to the circumstances underlying the insured peril, then the expenses saved must also extend to the circumstances underlying the insured peril.

624    For the reasons already given, JobKeeper payments reduce the insured’s loss and expenses in the form of saved wages’ payments. The rental relief reduces the insured’s loss and expenses in the form of saved rent payments.

625    The Commonwealth’s Cash Flow Boost is described by Taphouse and Insurance Australia. The “Cash Flow Boost” was provided under the Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Act 2020 (Cth). Sections 5 and 6 of the Cash Flow Boost Act provide for a “Cash Flow Boost” for eligible businesses. The boosts were delivered as credits in the business’ activity statement system and were generally equivalent to the amount withheld from wages paid to employees for each monthly or quarterly period from March to June 2020. In practice, this meant that the business kept the amounts they had withheld from payments (e.g. for PAYG tax) for these periods. The payments were “intended to support employment by providing Commonwealth support for employers through the tax system”: Explanatory Memorandum, Boosting Cash Flow for Employers (Coronavirus Economic Response Package) Bill 2020 (Cth). As Insurance Australia submitted:

As with the ‘JobKeeper’ payment, the ‘cash flow boost’ was plainly intended to be a replacement for cashflow lost during the pandemic. It was additional revenue to help employers maintain staff and continue their business activities. This, again, is the form of loss that is at the core of business interruption insurance. There is also no indication that the Commonwealth (acting through the Australian Taxation Office) intended that the insured should retain the payments to the exclusion of the insurer. These payments should accordingly be taken into account in the assessment of loss.

626    I do not accept that the payments under the Commonwealth’s Cash Flow Boost were not intended to compensate businesses for loss in the form of wages that had to be paid to retain employees as employees. The fact that the intention was to do so by supporting employment by providing Commonwealth support for employers through the tax system does not mean that the Commonwealth was not intending to reduce the losses of businesses.

627    The Queensland COVID-19 grant program was established over two separate rounds, the first round running from 19 May 2020, and the second round running from 1 July 2020, each remaining open until the funding allocation has been exhausted. The available grant amount was a minimum of $2,000 and up to a maximum of $10,000 per eligible small or micro business. Taphouse identified that the accompanying guidelines record that:

(1)    the grant forms part of the Queensland Government’s Worker Assistance Package, which aims to assist employees and businesses who have lost their jobs or incomes as a result of the COVID-19 pandemic” and will “assist small businesses in Queensland with a payroll less than $1.3 million who have been forced into hibernation, or those who have experienced a significant structural adjustment or forced re-pivoting of their business operations as a result of the pandemic”; and

(2)    the grant aims to see small and microbusinesses:

(a)    prepare for the safe resumption of trading in the post COVID-19 recovery;

(b)    access digital technologies to rebuild business operations and transition to a new way of doing business;

(c)    respond to online opportunities, where possible, to sustain employment and maintain potential for longer-term growth;

(d)    upskill and reskill business owners and staff to benefit from new technologies or business models;

(e)    embrace business diversification to adapt and sustain operations; and

(f)    create or retain employment.

628    While a business could use the funds for any purpose associated with the business including paying wages and rent, I am unable to conclude that these grant payments were intended to reduce the insured’s loss, despite a cause of the payment being the loss of income businesses had suffered. They were specific payments for any business related purpose. They were payments to assist a business to jump-start operations when they were permitted to do so. They were payments to support, but not to compensate the business. They were akin to the act of grace payments that occurred in NSW. They are not akin to the JobKeeper and Cash Flow Boost payments which were both supportive and compensatory in nature.

629    The savings clause must also be considered, however. I do not consider that clause operates in respect of the Queensland COVID-19 grant program payments as those payments were not an amount saved in respect of any expense of the business.

630    For these reasons under both general law and the savings provision, Taphouse would have to account for JobKeeper payments, the Commonwealth’s Cash Flow Boost, and rental waivers or abatement from its landlord. Neither the general law nor the saving provision would require Taphouse to account for the Queensland Government’s COVID-19 Grant payments.

8.9    Interest

631    Consistent with the reasoning above, Insurance Australia has not unreasonably withheld payment under s 57 of the Insurance Contracts Act. The observation in Australian Pipe at [291] is inapplicable. Beach J there said:

Under s 57(2), the period in respect of which the insurer is required to pay interest commences on the day on which it became unreasonable for the insurer to refuse to pay the claim. An objectively determined reasonable period is to be given to the insurer to investigate the claim and determine its position. But where that position constitutes a refusal to pay the claim, in circumstances where a court has held that a liability to pay the claim does exist, such refusal cannot relevantly extend this period to the point of adjudication, regardless of whether that position was formed and held bona fide (see Fitzgerald & Anor v CBL Insurance Ltd [2014] VSC 493 at [415] and [416] per Sloss J). In short, the award of interest is to be calculated taking into account a reasonable time for completion of the insurer’s investigation of the claim.

632    This does not apply because I have not found that Insurance Australia is liable to pay the claim. As such, it would not be unreasonable for Insurance Australia to withhold payment until a final determination of this case decides that Insurance Australia is so liable.

8.10    Answers to questions

633    The questions are not framed in terms that accurately disclose the relevant issues. Nevertheless I will do my best to answer them.

634    12. Disease clause (clause 8, page 23):

(a) Was all or part of Taphouse’s premises closed or evacuated by any legal authority by reason of the “Authority Response-Taphouse”?

No.

(b) If yes to (a), was that closure or evacuation as a result of the outbreak of COVID-19 occurring within a 20 kilometre radius of Taphouse's premises?

No.

635    13. Prevention of access (POA) clause (clause 7, page 23):

(a) Does the POA clause apply to an outbreak of COVID-19 in light of the separate disease clause?

No.

(b) If yes to (a), did the “Authority Response-Taphouse” involve any legal authority preventing or restricting access to Taphouse’s premises or ordering the evacuation of the public?

This does not arise. If it did, then yes, except for the 29 March 2020 order.

(c) If yes to (a) and (b), were those orders as a result of damage to, or the threat of damage to, property or persons within a 50 kilometre radius of Taphouse's premises?

This does not arise.

(d) {CGU disputes the inclusion of this paragraph} Alternatively to (c), how are the words “as a result of … damage to or threat of damage to … persons” to be construed? In particular:

(i) Does the “threat of damage” have to exist within 50 kilometres of the premises only or it exist in areas further than 50 kilometres from the premises as well and, if so, where?

The threat of damage within the 50 kilometre radius must be a proximate cause of the action of the authority. It may be such a cause if the authority considers the threat exists anywhere provided it also considers it exists within the 50 kilometre radius.

(ii) Must the relevant order be made in direct response to the specific “threat of damage” within 50 kilometres of the Situation, or is it sufficient if the relevant order is made as a result of “threat of damage” both within the radius and of a broader scope (e.g. on a regional, state or nationwide scale)?

See (i) above.

636    14. Causation, adjustments and loss (page 19)

If it is found that the Disease clause and/or the POA clause responds to Taphouse's claim:

(a) Does the interruption of or interference with Taphouse’s business have to be “a direct result” of or “result from” or be “caused by”, the relevant insured perils, and if not, what is the relevant test?

The insured peril has to be a proximate cause of the interruption of or interference with Taphouse’s business.

(b) Was there any interruption of or interference with Taphouse’s business which satisfies the test of causation identified in the answer to (a)?

No. If, however, I am wrong about the application of cll 7 and 8 then Taphouse has proved some loss (reduced turnover evidence) which should be inferred to be result of the relevant proximate cause.

(c) If yes to (b), what losses claimed by Taphouse resulted from that interruption or interference of Taphouse’s business?

This cannot be answered on the evidence but the loss would exclude savings from the JobKeeper payments, the Commonwealth Cash Flow Boost and rental waivers or abatement from Taphouse’s landlord, but not the Queensland Government’s COVID-19 Grant.

(d) {CGU disputes the inclusion of this issue (d)} Is the term “Adjustment” in the Business Interruption section of the policy applicable to the calculation of Meridian’s [sic, Taphouse’s] claim, having regard to the definitions used in the “Settlement of Claims” clause in the Business Interruption section of the policy.

No, but the loss must be in consequence of the damage.

(e) {CGU version; Taphouse does not agree}: Should any adjustment be made to Meridian’s [sic, Taphouse’s] business interruption loss by reference to uninsured events relating to the COVID-19 pandemic?

Not if the uninsured events are a result of the same underlying cause as the insured peril, in this case being the presence and risk of COVID-19 in Queensland.

(f) {Taphouse version; CGU does not agree}: Should any adjustment be made to Meridian’s [sic, Taphouse’s] business interruption loss by reference to events (other than the insured perils) relating to the COVID-19 pandemic?

See (e) above.

(g) What loss is payable in accordance with the terms of the policy?

See (c) above.

(i) Are JobKeeper or other government subsidies to be taken into account in the assessment of any loss and, if so, in what way?

See (c) above.

(ii) Should rental abatements be taken into account in assessing recoverable loss?

Yes

(iii) On what dates did the indemnity period/s start and end?

The indemnity period started on the date Taphouse suffered loss from the insured peril and ended 12 months later provided that Taphouse’s business continued to be affected as a consequence of the insured peril.

(iv) Further quantum issues may be raised when Taphouse provides the information that has been requested by CGU.

Noted.

(h) {Taphouse does not agree that this issue be included in this test case in circumstances where CGU has denied indemnity and because the factual premise for these issues will be the subject of a separate loss assessment process} Has Taphouse:

(i) provided sufficient information for CGU to determine any amount payable under the policy; and / or

(ii) failed to respond to reasonable requests for information from CGU?

These questions cannot be answered.

(i) If it is found that the policy responds and CGU is liable to pay an amount to Taphouse, from what date is interest under section 57 of the ICA payable?

This does not arise, but it would not be unreasonable for Insurance Australia to withhold payment unless and until it is finally determined to be liable to make payment in this proceeding.

8.11    Conclusions

637    For these reasons:

(1)    cl 7 does not apply to diseases which are exclusively regulated by cl 8;

(2)    if cl 7 applies to diseases then all of the directions were made as a result of a threat of damage to persons within a 50 kilometre radius of the premises as provided for in cl 7;

(3)    if cl 7 applies to diseases then the directions, other than the 29 March 2020 direction, prevented or restricted access to the premises;

(4)    if cl 7 applies to diseases then the directions caused an interruption to Taphouse’s business which caused it loss;

(5)    cl 8 does not apply as the directions were not a result of the outbreak of an infectious or contagious human disease occurring within a 20-kilometre radius of the premises;

(6)    if cl 8 applies then the 23 March 2020 direction but not the other directions resulted in the closure of all or part of the premises;

(7)    if cl 8 applies then the directions caused an interruption to Taphouse’s business which caused it loss;

(8)    the provisions of the policy do not require loss from the underlying cause of the presence and risk of COVID-19 in Queensland to be disregarded in assessing loss because that is the same underlying cause as the existence of the insured peril; and

(9)    in assessing loss, allowance would need to be made for loss to be reduced by the amounts of JobKeeper payments, the Commonwealth Cash Flow Boost and rental abatements and waivers, but not the payments under the Queensland Government’s COVID-19 Grant scheme.

638    As further evidence cannot affect these conclusions, subject to any observations of the parties, I would make the declaration Insurance Australia sought as follows:

Declare that the applicant is not liable to indemnify the respondent under extensions 7 or 8 of the respondent’s business insurance policy 15T8202892 in response to the respondent’s claim first made in March 2020.

9.    NSD135/2021: ALLIANZ V MAYBERG

9.1    Agreed background

639    Mayberg is the insured under a “Business Pack insurance policy number 141AN06566COM placed with Allianz (Mayberg policy).

640    The Mayberg policy comprises: (a) an insurance schedule issued on 24 November 2019, and (b) the Business Pack Product Disclosure Statement and Policy Document.

641    The period of insurance under the Mayberg policy is 24 November 2019 to 4:00pm 24 November 2020.

642    Mayberg has four locations in Queensland: (a) Shop 24, 2-34 Bunker Road, Victoria Point 4165; (b) 66-68 Bloomfield Street, Cleveland 4163; (c) 681 New Cleveland Road, Gumdale 4154; and (d) 64 Tingal Road, Wynnum 4178 (Mayberg premises).

643    On 24 March 2020, Mayberg made a claim under the Mayberg policy via Rob Langan of Bayinsure (Mayberg’s broker).

644    On 27 March 2020, Allianz sent a letter to Bayinsure rejecting the claim.

645    On 30 March 2020, Bayinsure sent an email to Allianz disputing Allianz’s rejection.

646    On 31 March 2020, Allianz sent a letter to Bayinsure maintaining that the claim was not covered.

647    On 3 April 2020, Bayinsure sent an email to Allianz again disputing its denial of the claim.

648    On 11 April 2020, Bayinsure sent an email to Allianz requesting the matter be escalated to Allianz’s internal dispute resolution (IDR) team.

649    On 13 May 2020, Allianz sent its IDR response maintaining its denial of the claim.

9.2    Policy provisions

650    The key provisions of the Mayberg policy are below.

General definitions

Business means Your Business, occupation, trade or profession as shown in the Schedule.

Endorsement means an individual endorsement document that We give You that attaches to and forms part of Your Schedule. An Endorsement varies the terms and conditions of the Policy.

Premises means the premises stated as Situation in the Schedule.

Schedule means the schedule document that We give You that attaches to and forms part of Your Policy.

We, Us, Our means Allianz Australia Insurance Limited AFS Licence No. 234708, ABN 15 000 122 850 of 2 Market Street, SYDNEY NSW 2000.

You, Your, Yours, Yourself means either the person or the entity named as Insured in the Schedule, including all subsidiary companies, organisations and entities in which the Insured has a controlling interest but only to the extent that each of them is engaged in carrying on the Business or activities which are substantially of the same kind or related to that Business. For the purpose of this definition, a “controlling interest” shall, in the case of a company, mean the beneficial ownership of shares carrying more than 50% of votes capable of being cast

Our Agreement

Subject to all of the terms and conditions contained in Your Policy…, We will provide You with the cover shown in the Cover Sections of Your Policy up to the amounts shown in the Schedule or other limits shown in Your Policy.

Business Interruption

-    Income

Definitions

Damage or Damaged means accidental physical damage, destruction or loss.

Income means:

1.    income received from the renting or leasing of any part of the Premises including monies paid by the lessee as outgoings under the terms of the rental or leasing agreement; and

2.    income from Your Business at the Premises for goods sold, work done, electrical power generated and sold, services rendered or any Government approved incentives, subsidies or market development allowances You are entitled to in relation to Your Business, less:

a.    working expenses for freight, packing, bad debts, and the purchase of goods, materials, components, or Stock;

b.    any other Uninsured Working Expenses; and

c.    Payroll if this is shown in the Schedule.

Indemnity Period means the period that starts on the date of the Damage and ends not later than the number of weeks or months stated in the Schedule after the date of the Damage during which the results of Your Business is affected as a consequence of the Damage.

Insured Damage means:

1.    In relation to Your property, Damage to Your property when both the property that is Damaged and the cause of the Damage are covered by:

a.    Your Policy under one or more of the following Cover Sections:

i.    Fire – Gold;

ii.    Burglary;

iii.    Money;

iv.    Glass;

v.    Business Special Risks;

vi.    Electronic Equipment – Part A (Material Loss or Damage); or

b.    another insurance policy that insures Your property and names You as the insured. Provided that:

i.    We receive written confirmation of the extent of cover from the insurer who issued this other policy; and

ii.    cover for both the property that is Damaged and the cause of the Damage would have been covered under one of the Cover Sections shown in 1.a. above had that Cover Section formed part of Your Policy.

Where the Damage is below the Excess applicable under any insurance mentioned in 1.a. and 1.b., such Damage shall be deemed to be Insured Damage and covered for the purpose of this definition.

2.    

a.    in relation to property referred to in this Cover Section under the heading Extensions of Cover, Damage to such property located in Australia; and

b.    in relation to property referred to in this Cover Section under the Optional Extensions of Cover, Insured Damage means Damage to property located in Australia at the premises of the specified customers and specified suppliers who are shown in the Schedule of this Cover Section.

Provided that this Damage would have been covered under one of the Cover Sections shown in 1.a. above had such property been insured under that Cover Section as part of Your Policy when the Damage happened.

Interruption means interruption or interference.

Loss of Income means loss or reduction of Your Income that occurs during the Indemnity Period.

Cover

We will pay in accordance with the Basis of Settlement, for Loss of income that results from an interruption of Your Business caused by any Insured Damage that happens at the Premises.

Provided that this Insured Damage happens during the Period of Insurance shown for this Business Interruption – Income Cover Section.

Basis of Settlement

1.    Loss of Income

Loss of Income will be calculated by subtracting the Income earned during the Indemnity Period from the Income You would have earned during the Indemnity Period had the Damage not occurred.

Provided that the Income You would have earned during the Indemnity Period had the Damage not occurred:

a.    will be calculated by reference to the Income for:

i.    a period of the same duration as the Indemnity Period that starts a year prior to the date of the Damage; or

ii.    a period of Your normal Business operations that corresponds most closely to the Indemnity Period if Your Business has operated for less than a year at the start of the Indemnity Period; and

b.    will be adjusted to take into account any:

i.    trends of the Business and other influences that would vary the Income;

ii.    variation of normal trading whereby Income is maintained during the Indemnity Period from increased sales of low margin goods;

iii.    changes to how Stock, materials, finished goods or partially finished goods are used, purchased or sold including salvage sales of Stock following Insured Damage; and

iv.    savings made during the Indemnity Period that reduce the cost of running Your Business.

Extensions of Cover

Provided that the total Sum Insured shown in the Schedule for this Cover Section is not exceeded:

6. Murder, Suicide and Infectious Disease

We will pay for Loss of Income that results from an Interruption of Your Business that is caused by:

a.    any legal authority closing or evacuating all or part of the Premises as a result of:

i.    the outbreak of an infectious or contagious human disease occurring within a 20-kilometre radius of Your Premises, however, there is no cover for highly pathogenic Avian Influenza or any disease declared to be a quarantinable disease under the Quarantine Act 1908 (as amended) irrespective of whether discovered at the location of Your Premises, or out-breaking elsewhere;

ii.    vermin or other animal pests at the Premises; or

iii.    hygiene problems associated with drains or other sanitary arrangements at the Premises;

b.    poisoning directly caused by the consumption of food or drink provided on the Premises; or

c.    murder or suicide occurring at or near the Premises.

The definition Insured Damage does not apply to this Extension of Cover.

651    The Schedule includes:

Endorsement

Prevention of Access 48 hours minimum interruption

The Extensions of Covers 8. Prevention of Access and 9. Prevention of Access by a Public Authority under Business Interruption Income Cover Section and 6 Prevention of Access and 7, Prevention of Access by a Public Authority under Business Interruption Weekly Income Cover Section are deleted and replaced by following:

Prevention of Access

We will pay for Loss of Income that results from an Interruption of Your Business that is caused by Insured Damage:

a.    to any property within a retail complex when Your Business is located within a multi-tenanted retail complex; or

b.    to property in the vicinity of the Premises which shall prevent or hinder the use or access the Premises, for a continuous period greater than 48 hours.

Prevention of Access by a Public Authority

We will pay for Loss of Income that results from an Interruption of Your Business that is caused by legal authority preventing or restricting access to Your Premises or ordering the evacuation of the public as a result of Damage to or threat of Damage to property or persons within a 50-kilometer radius of Your Premises provided the prevention of access or restricted access to the Premises extends for a continuous period greater than 48 hours.

652    Under the Schedule the Situations are at four locations in Queensland, 64 Tingal Road, Wynnum, Queensland 4178, Shop 5, 66-68 Bloomfield Street, Cleveland, Queensland 4163, Victoria Point Shopping Centre, Shop 24E, 2-34 Bunker Road, Victoria Point, Queensland 4165, and Shop 3, 681 New Cleveland Road Gumdale, Queensland 4154.

653    In respect of all situations the classes of insurance taken under the policy are identified in the Schedule as Liability, Business Interruption, Fire, Burglary (other than for Situation 4), and Glass.

9.3    Introductory comments

654    Mayberg specialised in the cleaning of corporate, casual and formal wear, as well as offering an alterations service, with 80% of its business for corporate and special occasion dry-cleaning, and dry-cleaning of professional work attire being the most popular service. Mayberg also provided a commercial dry-cleaning and laundry service and its commercial customer base included local and national customers (such as Qantas), heavy industrial and mechanical, education and the medical sector.

655    Clause 6ai is a hybrid clause. It depends on any legal authority closing or evacuating all or part of the premises as a result of the outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of the premises. The observations above in relation to the primary objective fact being the action of the authority apply.

656    The exclusion in cl 6ai does not apply, in accordance with the reasoning in Wonkana.

657    The specification that “[t]he definition Insured Damage does not apply to this Extension of Cover ensures that loss is not confined to loss of “income that results from an interruption of Your Business caused by any Insured Damage that happens at the Premises” in accordance with the principal cover clause. In the Basis of Settlement, Damage must also mean the insured peril.

658    As a result, for cl 6ai, the indemnity operates in respect of loss that results from an Interruption of Your Business that is caused by the insured peril in cl 6ai which is to be calculated in accordance with the Basis of Settlement clause.

659    The Endorsement includes the second-mentioned prevention of access clause. The prevention of access clause operates in respect of Loss of Income that results from an Interruption of Your Business that is caused by a legal authority preventing or restricting access to Your Premises or ordering the evacuation of the public as a result of Damage to or threat of Damage to property or persons within a 50 kilometre radius of Your Premises. The observations above in relation to the primary objective fact being the action of the authority apply.

660    As a result, for the Endorsement, the indemnity operates in respect of loss that results from an Interruption of Your Business that is caused by the insured peril in prevention of access clause which is to be calculated in accordance with the Basis of Settlement clause.

661    The minimum period of interruption of 48 hours is immaterial on the facts of the case.

662    Mayberg identified the relevant actions of an authority as:

(1)    the 19 March 2020 Mass Gathering Direction. This directed a person who owns, controls or operates premises in Queensland not to allow a non-essential mass gathering of 500 persons or more to occur on the premises. It also prevented persons from organising or attending such a gathering;

(2)    the 19 March 2020 Non-essential Indoor Gatherings Direction. This directed a person who owns, controls or operates premises in Queensland not to allow a non-essential indoor gathering of 100 persons or more to occur on the premises. It also prevented persons from organising or attending such a gathering;

(3)    the 23 March 2020 Non-essential Business Closure Direction. This required persons who own, control, or operate a non-essential business or undertaking in Queensland not to operate the business or undertaking;

(4)    the 25 March 2020 Border Restrictions Direction. This required persons (with limited exceptions) arriving in Queensland from interstate to self-quarantine for 14 days;

(5)    the 29 March 2020 Home Confinement Direction. This required all people to stay in their homes except for shopping for essentials, medical or health care needs, exercise (with no more than one other person), providing care or assistance to an immediate family member, or work and study (if it was not possible to work or learn remotely);

(6)    the 14 May 2020 Non-essential Business, Activity and Undertaking Closure Direction (No 10). This required persons who own, control, or operate a “non-essential business, activity or undertaking” in Queensland not operate that business, activity or undertaking (other than online); and

(7)    the Restrictions on Business, Activities and Undertakings Directions (No 1), (No 3), (No 5), (No 6), and (No 9). These directions imposed restrictions on the manner in which a “non-essential business, activity or undertaking” in Queensland could be operated. Businesses, Activities and Undertakings could generally operate, but with physical/social distancing requirements.

663    The directions were made by the Chief Health Officer under s 362B of the Public Health Act. As noted, directions are each statutory instruments. There is no dispute that the Chief Health Officer is a legal authority as referred to in the hybrid and prevention of access clauses. The relevant legislative background and context is the same as that discussed in respect of Taphouse above. In summary, the directions applied to the State of Queensland and were made in the context of the Ministerial declaration to “help control the threat or minimise serious adverse effects on human health in Queensland”.

664    The policy of insurance discloses that Mayberg obtained the policy through a broker. As discussed above, Allianz remains the profferer. The principles identified in Wonkana at [30]-[31] apply.

9.4    Clause 6ai – hybrid clause

665    Mayberg’s business was not a non-essential business as referred to in the directions. As a dry-cleaning/laundry business, Mayberg was always permitted to operate.

666    The requirement of an authority closing all or part of the premises is not satisfied. Mayberg virtually conceded this to be so. As Allianz submitted:

None of those directions were imposed directly on Mayberg, and indeed Mayberg does not contend that it was ordered by the government to close or evacuate the Premises. Rather, it claims that there was a “closing or evacuating” of “all or part of the Premises” in that the Stay-at-home Directions “closed off” the Premises to Mayberg’s customer base and the public; the Social Distancing Rules caused a “closure” of part of the Premises; and the Border Restrictions had the effect of “disabling Mayberg from servicing its customer base”

667    Mayberg said that there is “force in these submissions. Perhaps all that can be said against them is that it may be open to conclude that the social distancing requirements constitute a closure of a part of Mayberg’s premises. This would be consistent with the reasoning in Hyper Trust a reasonable person would understand closure to extend to closure of a part of the business”.

668    Mayberg’s business is not a restaurant or bar which might ordinarily accommodate numerous people. It is a dry-cleaner/laundry. There is no evidence that any person who might otherwise have entered and remained on Mayberg’s premises could not do so by reason of any of the directions. The affidavit of Ms Hopper, Mayberg’s operations manager, said that due to its size customers had to wait outside the Victoria Point store. Ms Hopper does not say this occurred at any other store. It should be inferred that it did not occur at those other stores. On this basis, it could not be said that, on either a restrictive or expansive view of the concept of “closing”, the directions closed any part of Mayberg’s premises at those three other stores. In respect of the Victoria Point store a requirement that customers wait outside (I infer to collect or complete laundry or dry cleaning) does not mean that the premises were closed. The premises continued to operate for their intended purpose.

669    Consistent with the reasoning in relation to Taphouse, none of the directions were a result of the outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of Mayberg’s premises. The facts that: (a) the public health emergency was “in all of Queensland”, and (b) the directions made by the Chief Health Officer applied to “all of Queensland” and were to made to “assist in containing, or to respond to, the spread of COVID-19 within the community” does not mean that any of the directions were a result of the outbreak of an infectious or contagious human disease occurring within a 20 kilometre radius of Mayberg’s premises (whatever meaning is given to “outbreak”).

670    Consistent with the reasoning in relation to Taphouse, the so-called secondary argument of the existence of an outbreak of COVID-19 within the radius is of no assistance. That is, the fact or not of COVID-19 or community transmission of COVID-19 within the required area is not material if the actions of the authority did not result from those facts.

671    Allianz accepted that:

(1)    as to Situations 1 and 4, before 23 March 2020:

(a)    there were at least two people with COVID-19 who had been within the 20 kilometre radius;

(b)    there were at least two people with COVID-19 who were not self-isolating whilst within that radius after having contracted COVID-19 but prior to being diagnosed with COVID-19; and

(c)    there were at least two people with COVID-19 who were not self-isolating whilst within that radius during a period in which they were capable of infecting another person with COVID-19;

(2)    the 20 kilometre radius around Situation 2 is located partly within the Metro South HHS and partly within the Metro North HHS, although each of the Metro South HHS and Metro North HHS are larger than the 20 kilometre radius around Situation 2. By 23 March 2020, there were 319 cases of COVID-19 in Queensland, with 63 new cases in the Metro South HHS in that week; and

(3)    the 20 kilometre radius around Situation 3 is located entirely within the Metro South HHS, although the Metro South HHS is larger than the 20 kilometre radius. By 23 March 2020, there were 319 cases of COVID-19 in Queensland, with 63 new cases in the Metro South HHS and 76 new cases in the Metro North HHS in that week.

672    The problem is th