Legge v Universal Hospitality Group Pty Ltd & Ors (No. 3)

1. [1]

   On 16 February 2011 Stephen Legge fell down the stairs at the Civic Hotel on the way to a bathroom in the basement level of the building. He sustained spinal injuries causing paraplegia. He commenced proceedings in July 2014 against Universal 1919 and James Kospetas, the occupiers and licensees of the Civic Hotel.

2. [2]

   An issue has arisen as to whether public liability insurance taken out by James Kospetas and Universal 1919 (“Universal”) should respond to this incident. Whilst the policy contained an exclusion clause for injuries that occur in or arising from a “nightclub”, it is common ground that particular exclusion does not apply to Mr Legge’s claim as he had been drinking in the public bar before using the stairs to access the bathrooms.

3. [3]

   A different basis for refusal to indemnify has been argued. The insurer, formerly Marketform Underwriting Agency Ltd now known as Neon Underwriting Limited (“Neon”), denied indemnity on the basis that there were failures to disclose and/or misrepresentations of relevant matters on the renewal form for the relevant insurance period, and that had those disclosures been made, the insurer would have declined to renew the policy.

4. [4]

   On 20 June 2019 I published Legge v Universal Hospitality Group Pty Limited [2019] NSWSC 760 in which I decided that three questions relating to that insurance are to be determined separately from any other questions in the proceedings and before the trial of the other questions in the proceedings.

5. [5]

   Those questions are:

   1. (1)

      Whether Universal breached its duty of disclosure under s 21 of the Insurance Contracts Act 1984 (Cth) (“the ICA”) by reason of the matters pleaded in paragraph 3 of Neon’s Defence to the Amended Second Cross-Claim.

   2. (2)

      Whether Universal made a misrepresentation within the meaning of s 28 of the ICA by reason of the matters pleaded in paragraph 3 of Neon's Defence to the Amended Second Cross-Claim.

   3. (3)

      Whether Neon is entitled, pursuant to s 28 of the ICA, to:

6. [6]

   Paragraph 3 of Neon’s Defence to the Amended Cross-Claim pleaded in effect that there was a duty on Universal to disclose certain relevant matters so that Neon could know whether or not to offer insurance and if so, on what terms. There were misrepresentations in the proposal form which specifically asked certain questions directed to risk which were not properly answered. Had proper disclosure been made, Neon would have declined insurance altogether.

7. [7]

   Universal denied that it misrepresented the situation, pointing to faults and ambiguities in the proposal form. To the extent that any answers were incomplete or any statements may be thought to be a misrepresentation, ss 23, 26 and 27 of the ICA provide answers that protect Universal. Universal also disputed that Neon would have refused insurance, even if Universal had disclosed all the matters Neon claims it did not disclose or sufficiently disclose, because the asserted underwriting practices of Neon’s agent ASR Underwriting Agencies Pty Limited (“ASR”), such as they were, do not support that assertion.

8. [8]

   For the reasons that follow, the questions should be answered:

   1. (1)

      No.

   2. (2)

      No.

   3. (3)

      No.

Facts

1. [9]

   The Civic Hotel comprised three story premises at 388 Pitt Street, Sydney. It was at all the relevant times a Hotel licensed under the Liquor Act 2007 (NSW). During 2010 and 2011 the Hotel had a mixed use, with the top floor comprising a restaurant and bar and the ground floor used as a public bar and gaming area. The evidence indicated that the basement level had various uses that were the subject of competing evidence, cross-examination and submission as to what those uses in fact were or ought to have been called.

2. [10]

   In his affidavit sworn 10 December 2019, James Kospetas described the basement level as a function room with a bar that was used to provide entertainment for patrons at set times and as a separate function room for hire. He stated that the function room was known as the Civic Underground and before that was known as the Civic Theatre. He stated that:

3. [11]

   On the night Mr Legge fell, a jazz band was playing in the underground part of the Civic Hotel which did not according to Mr Kospetas attract much of a crowd.

4. [12]

   On 1 April 2010 the Civic Hotel’s insurance broker, Finn Foster APB Pty Ltd, submitted a completed proposal form for “Hotel Resort/Restaurant Public & Products Liability Insurance”.

5. [13]

   A Certificate of Currency was issued on 17 June 2010 confirming that cover had been issued to the Civic Hotel for the period 17 February 2010 to 31 January 2011 with the insurer noted to be “Lloyds of London” and signed for and on behalf of ASR. No claims were notified during that period of cover.

6. [14]

   On 16 November 2010 an insurance renewal questionnaire was forwarded by a staff member at ASR to Finn Foster. That document was headed “Insurance Renewal Questionnaire Hotel/Motel/Resort/Restaurant”.

7. [15]

   The questionnaire was completed based on information provided by James Kospetas. A copy of the completed questionnaire is extracted below:

8. [16]

   A series of questions commencing with the words “Do you have” were arranged with a series of yes/no boxes and boxes for further information to be provided. Those questions addressed the following items: “childminding facilities”, “dance floor”, “dancing”, “live entertainment”, “discos”, “a cover charge”, and “Nightclub”.

9. [17]

   The only one of these items that was the subject of any clarification by way of definition was “nightclub” where the following direction appears after the word Nightclub: “Per definition on page 10 section 14.2 of the ASR Hotel/Motel/Backpacker Liability Wording”.

10. [18]

    It is common ground that there is no definition of “Nightclub” on page 10 of the policy but there is reference to “Nightclub” on page 13, a page which is headed “Information applicable to Coverage Sections A, B, C under which a heading appears “Definitions applicable to Coverage Sections A, B and C”:

11. [19]

    Somewhat confusingly, and relevantly to the dispute here, 14.2 is followed by 14.3 “Hotel and Motel” and the following wording:

12. [20]

    James Kospetas completed this form with Universal’s solicitor. In his affidavit sworn 9 March 2020, which it appears was prepared in response to the affidavit of Mr David Lawson from ASR, he further explained relevant aspects of the operation of the premises and the effect that those matters had on the way in which he answered the questionnaire.

13. [21]

    Mr Kospetas made the point that the hotel offered a variety of services over its three levels and that the hotel traded seven days a week, and at that time had approved hours of operation from 9:00am to 5:00am every day of the week although it did not always trade to 5:00am.

14. [22]

    He confirmed that the hotel had numerous spaces over the three levels available to be hired for private functions or events throughout the week. He stated that the way in which the function room and first level worked was that they were often hired out on a Friday and Saturday night by promoters for events involving DJs although occasionally the spaces were hired or used by Universal for other activities from time to time. Promoters would bring the DJs and some would collect a cover charge from the patrons attending, the promoters were responsible for providing a host and collecting the cover charge fees.

15. [23]

    The arrangement was that there was a guaranteed bar spend when promoters hired any space and sometimes Universal also charged a room hire charge. Universal took the sales from the bar and arranged for the bar staff and security guards.

16. [24]

    The primary use of the first level was as a bar and a formal hatted restaurant run by Peter Conistis and initially called Civic Dining. At some point in the relevant period, the restaurant structure changed, and Mr Conistis ran Eleni’s Bistro on the ground floor.

17. [25]

    Mr Kospetas made the following specific points in his affidavit about the questionnaire completion:

18. [26]

    The tenor and approach of the cross-examination of Mr Kospetas by senior counsel for Neon seemed to proceed on the basis that Mr Kospetas was aware, or should have been aware, that Neon would not insure the Hotel if it stated that it had some area or room that on one or some nights a week corresponded to its rather idiosyncratic definition of “Nightclub”. This was an unreasonable and unrealistic position to take, particularly as the terms of the policy made it clear that the underwriter could choose to cover those activities if requested and special arrangements were made for premises like the Civic Hotel, or take the default position, which was to exclude them. Much was also made of correspondence and development applications to council authored by others, which referred to the basement area as a “nightclub”. This was not Mr Kospetas’s term, and there is no suggestion that he adopted that term in that context, maintaining that the basement area’s diverse use, including jazz and cabaret format and events and other functions. In any event use of the word “nightclub” by others, and even by Mr Kospetas, as a short form description of some of the features and/or activities that occurred in the basement does little to inform the real questions. For that reason, Mr Ashraf the security guard’s description of what he recalled was the type of activities in the basement on some Friday and Saturday nights he observed, was of little assistance on the real issues.

19. [27]

    Mr Kospetas was on occasion non-plussed in cross-examination by the focus on the nomenclature of the space. Mr Kospetas’s focus was understandably on the multiple uses of the whole premises, which is, after all, what was to be insured at the relevant time. He presented as an honest businessman who did his best to describe the premises and activity at the Civic Hotel that occurred based on his understanding of the range and spread of functions in the three storey multi-use hotel. Any challenge to his genuineness or credibility in this regard, or in any regard, failed.

20. [28]

    The position is well reflected in this exchange towards to end of the cross-examination:

21. [29]

    Against the background of a hotel manager who also ran premises - the Vault - which was in fact licensed as a nightclub and the subject also of insurance referral by Finn Foster, there was this exchange:

22. [30]

    Ms Usher at Finn Foster forwarded the completed questionnaire to Ms Dux at ASR on 25 January 2011.

23. [31]

    On 27 November 2011 Mr Lawson, a liability underwriter at ASR, forwarded the questionnaire to Carly Cappuccio of Windsor Partners, the relevant Lloyds syndicate broker, accompanied by this email:

24. [32]

    In his affidavit executed on 12 February 2020, Mr Lawson stated that he “would have” read the questionnaire and reached certain conclusions about the Hotel based on the information. He included in his affidavit a number of assumptions he says he “would have” made which were surprising given his assertion that the questions were of “upmost (sic) importance” when considering a renewal. He stated that because the dance floor size was not stated in the questionnaire, that answer, together with answers to the other questions indicated to him that “any dance floor at the hotel must be very small”. He also decided that the handwritten reference to “DJ and cabaret” in the box requesting the description of live entertainment “indicated to me that the hotel had occasional ambient entertainment through a DJ or artist such as a singer/guitarist in a corner of the hotel”.

25. [33]

    Mr Lawson also stated in his affidavit that he referred the risk to Neon before issuing a quote because the turnover had increased by over 50%. This was incorrect. The turnover had not changed and the claims matrix required referral to London if the turnover increased over 20%. There is no evidence from Ms Cappuccio or anyone else from Neon as to why the referral was made to it and what, if anything occurred by way of processes and or decision-making at Neon’s end. The email by Mr Lawson requests referral to underwriters.

26. [34]

    A response was provided the next day from Ms Cappuccio confirming the “underwriters had agreed to ASR’s proposed renewal terms” subject to a $10,000 assault and battery excess.

27. [35]

    Mr Lawson stated in his affidavit that it was only at this stage that he provided this material and the underwriting file to Mr Sommer for approval. Mr Sommer signed the Hotel Renewal Summary and the renewal template in his role as “Senior Liability and Property Underwriter”. Mr Sommer prepared his evidence and gave answers in cross-examination based on his recollection of what he asserted were fixed practices at the time. Documentation allegedly in support of such practices was scant and inconclusive, and the procedure Mr Sommer said he would have followed, was not what occurred here.

28. [36]

    On Mr Sommer’s account, the “invariable” practice of refusing to underwrite anything that looked or smelled like a nightclub is simply not consistent with the policy documentation, or the binder, both of which allow for discretionary cover and/or referral to London in certain circumstances.

29. [37]

    I have significant doubts about the reliability of the evidence of both Mr Sommer and Mr Lawson and will return to that subject when dealing with the underwriting evidence and role of ASR.

30. [38]

    On 28 January 2011 Mr Lawson emailed Ms Usher at Finn Foster and provided a quotation for renewal terms for the Civic Hotel and attached amongst other items, a copy of the policy wording. The Policy cover was expressed to be “Broadform public and products liability” and the “occupation” of the insured was described as “licensed Hotel Including Property Occupiers Liability”. Under the Heading ‘Major Exclusions”, amongst a number of items appears “Nightclubs and or Nightclub Activities as described below”:

31. [39]

    On 31 January 2011, Ms Usher requested renewal. Cover was confirmed by Mr Lawson by email later that day, noted to be effective from that date.

32. [40]

    Whilst correspondence requesting and refusing indemnity is not within the material tendered, it is evident indemnity was sought and refused leading to Universal filing its Cross-Claim against Neon.

Insurance Contracts Act 1984 – disclosures and misrepresentations by an insured and remedies for nondisclosure and misrepresentations

1. [41]

   The ICA states its objects clearly as:

2. [42]

   Part IV of the ICA deals with disclosures and misrepresentations. Division 1 deals with an insured’s duty of disclosure:

3. [43]

   Section 22 requires the insurer to inform the insured of its duty of disclosure. There is no issue in these proceedings about that. Neon claims that it informed Universal of its duty of disclosure but in completing the questionnaire, Universal breached its duty of disclosure and misrepresented the Premises by not disclosing that it had a “nightclub”, “discos”, access to parts of the premises limited by payment of a “cover charge” and that there was “frequent” dancing and live entertainment.

4. [44]

   Universal denies that the way it completed the questionnaire breached its duty of disclosure and submitted that there must be focus on what s 21 actually requires of an insured. It also calls to its aid the clarifying provisions of Division 2 of Part IV of the ICA dealing with “Misrepresentations by Insured”.

5. [45]

   First, Universal submitted that s 21(1) requires both subjective examination of what the insured knew, and an objective examination about what the reasonable person in the circumstances of the insured would ordinarily be expected to know. As the policy clearly excluded liability arising from the activities of a nightclub on the premises, and anything arising from those activities, there was no need to disclose it as it would be irrelevant to risk and the decision to underwrite, given the policy makes it clear that unless special arrangement is made for cover of that type of “venue” within the premises, any liability arising from a “nightclub”, as per the definition set out in [18] above, is excluded.

6. [46]

   There was an incomplete answer regarding the dance floor, and no follow up inquiry, so any duty of disclosure in relation to that matter is waived by operation of s 21(3).

7. [47]

   Sections 23 and 24 provided as follows:

8. [48]

   Even if anything stated in the questionnaire could validly said to be untrue, the provisions of s 26 apply:

9. [49]

   Clearly the insurer has some role in ensuring the answers are complete and cannot passively guess or blame the insured if the insurer fails to seek clarification:

10. [50]

    Section 28 of the ICA provides for remedies for non-disclosure and misrepresentations:

11. [51]

    Neon did not assert that the failures were fraudulent and so s 28(2) is not relevant. Neon bears the onus to persuade the Court that if the relevant matters were disclosed, it would not have offered insurance at all and alternatively that the asserted misinformation and alleged absent disclosures entitle it to avoid the policy. Based on the following analyses, even if I formed the view that Universal had breached its duty of disclosure, which I have not, I was not persuaded that Neon has met its onus in either respect under s 28.

What were the underwriting policies and practices of Neon and their Australian agents ASR?

1. [52]

   The following matters were the subject of agreement in the statement of agreed facts tendered as Exhibit A:

2. [53]

   The Schedule to the Agreement between ASR and Neon was tendered (Exhibit C). The ASR Binding Authority for Hotels 2009 period included a page of information headed “Hotels (not licensed as a nightclub)”. This is followed by a series of proposed base rate calculations reflecting bar and other considerations, including the State in which the hotel is located. Limits of indemnity are referred to, with the top limit being $20 million (which is the cover that was provided to the Civic Hotel). Under the heading “Declinatures” appear the following items:

3. [54]

   Under the heading “Referral to insurers before binding” the following items are listed:

4. [55]

   There was also within that Schedule document a page headed “ASR Renewal Matrix” noted as “applicable to previously referred business only” and “for existing Marketform Accounts”. It lists a set of circumstances where, implicitly, there is no need for ASR to first obtain Marketform’s agreement to the terms and conditions for such insurances prior to any terms being indicated or bound. It provides: “Where the items above are not complied with, the coverholder must first obtain Marketform agreement to the terms and conditions for such insurance prior to any terms being indicated or bound”.

5. [56]

   Also comprising Exhibit C is the “Australian Binding Authority Endorsement” which is annotated “for use in conjunction with Binding Authority Wordings” by which the cover holder agrees to comply with various matter including things such as license requirements, compliance with codes of practice, privacy, and taxes.

6. [57]

   The Binding Authority Endorsement, dated as effective 23 June 2009, is signed by John Flower as Managing Director of ASR.

7. [58]

   Mr Lawson was not an impressive witness. His evidence was given haltingly, as if he was focused on giving tailored rather than truthful evidence. He prevaricated on important issues. He was unable to describe what would have comprised the “underwriting file” at the time. He was wrong in respect of a number of assertions he had made in his affidavit and in his answers given in cross-examination, such that I was left with the distinct impression that the reality was that no “usual practice” (if there was one), let alone, “invariable practice”, was applied to this renewal at all.

8. [59]

   The first was the error that he made regarding the reason why Universal’s renewal was referred to Neon given ASR professed (through Mr Sommer’s evidence) to have exercised all the necessary authority to bind cover and Mr Lawson’s affidavit made no reference to the referral to the Lloyds Underwriters (Neon - Ms Cappuccio):

9. [60]

   Mr Lawson was then taken to renewal terms and the wording of the Policy which stated that underwriters were permitted to cover a Hotel that included a nightclub or nightclub activity - 14.2 and 14.3. It was put to Mr Lawson that these provisions contradicted the assertions he made that cover could not be granted to a hotel that was “mixed use”:

10. [61]

    Mr Lawson agreed that renewals that were outside the matrix range had to be referred to London, based on what the Underwriting Matrix specified:

11. [62]

    Mr Lawson was then asked some questions about a Notice to Produce or Subpoena requesting underwriting files that had been served on ASR. Mr Lawson volunteered the following:

12. [63]

    Mr Lawson reported to Mr Nathan Sommer who in turn reported to Mr John Flower:

13. [64]

    Mr Lawson was asked about the contents of his email to Ms Cappuccio, and the reference he made in it to “broker is Finn Foster…”:

14. [65]

    It is evident from the following exchange, the asserted “usual practice” simply was not followed:

15. [66]

    On the strength of this, Universal submitted that Neon was obliged to call Mr Flower to give evidence as to how a “controversial matter” would have been dealt with. I do not agree that there was an “obligation” to call Mr Flower, but his absence left a hole in the evidence called that makes it difficult to accept assertions by Mr Lawson and Mr Sommer about “usual practice”, and the absence of any word from Neon and/or Ms Cappuccio leaves unexplained a relevant part of what occurred, and what was expected to have occurred if the dance floor specifications had been given, or there had been a tick “yes” to “nightclubs”.

16. [67]

    Mr Sommer was more polished, more articulate and more relaxed with giving evidence than Mr Lawson, but he too was in my view unreliable. His affidavit material put forward a template of asserted “usual practice”, but it is evident that what occurred with Universal’s renewal was not in fact dealt with that way, and the Matrix and Policy documents do not support Mr Sommer’s assertions.

17. [68]

    Mr Sommer was examined about why there was referral to London:

18. [69]

    These are significant concessions in a context where Mr Sommer and Mr Lawson first put forward a position that ASR makes all the necessary decisions within the Matrix, including automatic declinature for anything resembling a nightclub, without referral to London.

19. [70]

    Mr Sommer was asked about the ASR reporting structure:

20. [71]

    Mr Sommer gave evidence that proper underwriting practice would have required the size of the dance floor be specified and if the enquiries revealed it was more than 20 square metres, the Matrix required referral to London:

21. [72]

    The following day, Mr Sommer answered further questions in respect of the dance floor size issue:

22. [73]

    Mr Sommer was questioned about what renewals were referred to London. He said this was about 10%, and of that 10%, 50% to 60% related to renewals where the turnover had increased and the remaining 30% to 40% were where ASR sought guidance from Neon about whether cover could be given (under the terms of the Binding Agreement):

23. [74]

    Mr Sommer was questioned about specific information he had in order to be able to prepare his affidavit material. He appeared to have no knowledge of the summary of indemnity files Mr Lawson mentioned in his evidence:

24. [75]

    Mr Sommer was then taken to the Policy Renewal he signed on 28 January 2011. He agreed that the Policy Renewal document included a representation that a nightclub, or nightclub activities in a hotel could be covered and that assertion is inconsistent with the asserted “practice” of immediate declinature. Mr Sommer still insisted that was his practice and “the practice” he had been taught:

25. [76]

    I simply do not accept Mr Sommer’s or Mr Lawson’s evidence on this issue. It appeared to me to be opportunistic and not supported by ASR and Neon’s tendered documents as to what potential policy holders were informed and what the Underwriting Matrix said should occur.

26. [77]

    Mr Sommer acknowledged that there were no questions raised by him or Mr Lawson about the answer “DJ and cabaret” given in the box that asked for details regarding” live entertainment:

27. [78]

    An issue was raised about whether I should receive into evidence an affidavit of John Flower sworn 30 March 2020 in relation to the costs and difficulties associated with responding to a three paragraph subpoena seeking certain underwriting information from ASR. Universal argued that the affidavit showed a disingenuous approach to available documentation given Mr Lawson’s evidence about file searches he said had taken place and the preparation of a summary of files.

28. [79]

    Universal argued that there are three non-hearsay purposes for which the affidavit can and should be received into evidence. First, it establishes that Mr Flower was able to give evidence and the nature of the evidence he could give. Second, that it is conduct to take into account when weighing and assessing the conduct of a party to the litigation and the evidence it has chosen to present or not present. Third, the affidavit contained admissions regarding certain relevant facts, and so are exceptions to the hearsay rule under ss 60, 81 and 87 of the Evidence Act 1995 (NSW).

29. [80]

    Neon argued that the material is irrelevant and hearsay and was prepared for a pre-trial argument that was resolved between the parties, and so the affidavit should not be received.

30. [81]

    I agree with Neon’s position and decline to admit the affidavit into evidence. In any event, the status and availability of Mr Flower is already known from Mr Lawson’s evidence. The fact that some possibly relevant summary of underwriting material was prepared and not before the Court was referred to by Mr Lawson. There remains gaps in Neon’s evidence that it chose not to fill, proceeding no doubt on the basis that the evidence it had called (Mr Lawson, Mr Sommer, Mr Ashraf and the documents it tendered) was sufficient to satisfy its onus of proof. It was not.

Decision

1. [82]

   Senior counsel for Neon submitted that ticking the box “no” for the word “Nightclub” on the questionnaire was deliberately misleading in circumstances where the basement of the Civil Hotel had the physical accoutrements it had, the promoters referred to the basement area when they used it as a “nightclub”, and where it had been the subject of development applications that referred to “nightclub” in documents and descriptions (prepared by others) and submitted to Council. He submitted that the evidence proves that the basement was used in that “nightclub” format on many occasions before the questionnaire was completed. It was promoted as a “nightclub” where dancing and live music would occur. These pursuits were organised by Universal or by a promoter pursuant to arrangements with Universal, and it does not matter whether it was Universal or a promoter organising the events, Universal knew this activity in the basement corresponded with the “nightclub” definition in the questionnaire.

2. [83]

   Whether Universal in fact operated a “nightclub” as defined in the policy at the time the renewal form was submitted is but a small part of the relevant issue. The issue is whether Mr Kospetas thought that Universal had something that corresponded to that definition, and did he believe that it was relevant to the basis upon which Neon would offer insurance or would or should a reasonable person in his position think it did, and would or should such a person understand that it was relevant to whether, and if so on what basis, Neon would offer cover.

3. [84]

   On close lawyerly hindsight analysis, seizing on indicia and events and marrying them up with a forensic focus, it could be concluded that Universal had in its basement, on occasion, an event or arrangement occurring that might correspond to the definition of “Nightclub” in the policy. However that is not a proper basis on which to assess what Mr Kospetas, or a reasonable person in his position - a manager of a three storey mixed use hotel - knew or should have known. He needed the “Premises” covered. The policy professed to exclude anything with a whiff of “nightclub” associated with it, so why would Mr Kospetas, or a reasonable person in his shoes, critically evaluate a possible part of its business operation that might correspond to the definition of something automatically excluded?

4. [85]

   Further, the definition of “nightclub” is bizarre and blurs concepts in a way that introduces confusion. What, for example, comprises “permanent dancing”? Should “permanent dancing and musical entertainment” be considered together? What is meant by “the venue”? What is meant by “premises” in the context of the exclusion? What is meant by “special lighting”? (particularly where, as Mr Kospetas noted, the top floor had “mood lighting”)? How should the indicia be interpreted when the whole premises was monitored by security guards? The potential questions arising from the vagaries of expression in the “nightclub” definition are almost endless.

5. [86]

   In any event, it was made clear activities like this would not be covered. How or why, in those circumstances a reasonable person would leap to the illogical conclusion that if there was a nightclub area/attitude/activity in the hotel, the insurer would refuse to insure the whole three story premises, defies common sense. It is not what the Policy document states.

6. [87]

   I am not satisfied that there has been a misrepresentation by Universal regarding “nightclub”. Nor has there been any relevant misrepresentation regarding “disco” or “frequent dancing”. Any duty of disclosure relating to “dance floor” was effectively waived under s 21(3) because that answer was obviously incomplete, and Neon/ASR did nothing to pursue that. (I note that the same absence of information featured in the initial proposal document. It seems that too was never followed up).

7. [88]

   Even if I am wrong about that, s 26 of the ICA protects Mr Kospetas because I have concluded that his belief that there was no “nightclub” was genuinely held by him, with valid reasons, and I accept that a reasonable person in his circumstances would have held the same view, given the mixed use premises, the varying use of the basement depending on the night of the week and what, if anything, was booked to occur there, and the clumsy and confusing “definition” and status of “Nightclub” in the Policy documents.

8. [89]

   Second, I do not believe Mr Kospetas, or a reasonable person in his position, could be expected to know that those assertions in issue would be relevant to the insurer and its decision to cover the premises at all, or to issue cover on terms.

9. [90]

   It follows that Neon is not entitled to any relief under s 28 of the ICA. Even if it was, Neon has not persuaded me that it would have refused to insure the premises. The evidence on that issue was contradictory and in respect of the evidence of the underwriters, incomplete and unsatisfactory.

Conclusion

1. [91]

   It follows that the questions posed should be answered as follows:

   1. (1)

      No.

   2. (2)

      No.

   3. (3)

      No.