Go Ahead, Disprove My Case! – Section 52 Of The Wrongs Act 1958 (Vic), Hypothetical Counterfactuals And The Onus Of Proof

The Supreme Court of Victoria has confirmed that where a defendant, in cases brought under section 52 of the Wrongs Act 1958 (Vic), raises a hypothetical counterfactual on the question of causation, the onus is on the plaintiff to prove every element of its own case, including proving that hypothetical counterfactual ought not be accepted.

Danbol Pty Ltd v ACN 007 198 343 Pty Ltd [2026] VSC 305 22 May 2026

Key background facts

The defendant was the plaintiff’s (insured) insurance broker. The insured was at all material times the owner of a large warehouse property (Property).

The insured held an Industrial Special Risks insurance policy which was due to expire at 4pm on 24 August 2018.  The policy described the insured’s business as “Property Owner (Tenant: manufacture, storage and transport of timber pallets and reconstituted logs, production of woodchips & mulch) and any other associated activities of the Insured” (Policy).

From about June 2018, the Property was occupied by Delacor Pty Ltd (Tenant); the permitted use of its tenancy was the warehousing and storage of pallets and bottles.

Before 24 August 2018, the broker advised Pen Underwriting (acting under a binder on behalf of the Policy’s insurer, Swiss Re) (Pen) that the Property was being used to store pallets and gas bottles. On the morning of 24 August 2018, Pen advised the broker that the insurer was unwilling to offer renewal terms (specifically, there was confusion as to whether gas bottles were being decommissioned at the Property) but offered a 14 day extension of the Policy whilst the insured sought cover with another insurer, on the condition that the insured pay a small premium (Extension Offer). The broker did not advise the insured of the Extension Offer, but advised it of the insurer’s concerns as to the gas bottles.

The evidence established that Delacor’s use of the Property changed at some point between the afternoon of 24 August 2018 and the afternoon of 29 August 2018, to include the bulk (unsafe) storage of flammable chemicals at the Property (Change of Use).

On 27 August 2018 (apparently after taking instructions from the insured), the broker advised Pen that gas bottles were processed and decommissioned before their arrival at the Property. The insured’s instructions to the broker were based on representations made to it by Delacor.

On 29 August 2018, Pen offered to renew the Policy for a further 12 months, on terms including that:

• the commencement date would have been 4pm on 24 August 2018;
• gas bottles were decommissioned before arriving at the Property; and
• cover was subject to a satisfactory site survey.

(Renewal Offer)

On 30 August 2018, a fire occurred at the Property, which took 17 hours to control and nearly two weeks to finally extinguish (Fire). Critically, as at the time of the Fire, the broker had not advised the insured of either the Extension Offer or the Renewal Offer, nor had it accepted either offer in the insured’s behalf.

The insured unsuccessfully attempted to sue the insurer under the Policy. It then brought an action in negligence against the broker for failing to notify it of and/or accept on its behalf the Extension Offer and/or the Renewal Offer, seeking an amount equal to the amount of indemnity that would have been recoverable had insurance cover been in place at the time of the Fire (approximately $10M).

Parties' arguments

At trial, it was undisputed that the broker acted negligently by failing to advise the insured of the Extension Offer and/or the Renewal Offer.

The primary issue at trial was whether the broker’s conduct was causative of the insured’s loss, including whether sections 28 and/or 54 of the Insurance Contracts Act 1984 (Cth) (Act) would have operated to relieve the insurer from liability under the Policy for the Fire. The broker argued that even if: 

• the Extension Offer had been accepted, the insurer would not have been liable under the Policy in circumstances where at the time of the Fire, the Change of Use had occurred; or
• the Renewal Offer had been accepted, the insurer would not have been liable under the Policy in circumstances where the insured had misrepresented the use made of the Property before commencement of the hypothetical policy.

The insured argued that: both counterfactuals were irrelevant, it was entitled to accept the Tenant’s representations as to its business activities, and that the Change of Use occurred after the commencement of the hypothetical policy (pursuant to an acceptance of the Extension Offer and/or the Renewal Offer). Additionally, the insured argued that in circumstances where: 

• the broker argued that the insurer would have been entitled to decline cover; and
• insurers bear the onus of proving that exceptions or exemptions apply to a claim for indemnity, or a defence of misrepresentation under Act,

the broker bore the relevant onus of proof.

Court's decision

On the onus of proof issue, the Supreme Court of Victoria found in favour of the broker. His Honour held, in effect, that:

• In circumstances where the insured’s pleading alleged that it suffered loss and damage as a result of the broker’s negligence, and that the insurer would have paid it $9.8M had the Extension Offer and/or the Renewal Offer been accepted, a critical element of the insured’s case was a counterfactual necessary to enable it to recover the loss and damage alleged.
• Proof of the facts which underpin the counterfactual are an element in the causative chain which must be proved by a plaintiff.
• Whilst the insured’s argument that insurers bearing the onus of proof, where they seek to rely upon exceptions or exemptions to a claim for indemnity or a defence of misrepresentation under the Act, was generally correct, it did not apply in cases where the dispute was between the broker and an insured.

Ultimately, his Honour went on to find in favour of the insured, having otherwise found that:

• The insured would have promptly accepted the Extension Offer and the Renewal Offer had it been aware of them.
• Having regard to the Change of Use, the insured was unable to prove that an alteration of use exclusion contained in the Policy was inapplicable in relation to the Fire. As a result, the insured could only succeed if it could establish that it could rely upon section 54 to circumvent the operation of that exclusion.
• However, in circumstances where:
  • the relevant “act”, for the purposes of section 54 of the Act, was Delacor’s Change of Use, rather than the insured’s failure to notify its insurer of the Change of Use; and
  • the Change of Use occurred between 24 and 29 August 2018;
    
    the insurer would have been:
    
    
  • able to rely upon section 54 of the Act since the Change of Use occurred after the hypothetical insurance policy would have been entered into, had the Extension Offer been accepted; but
  • unable to rely upon section 54 of the Act since the Change of Use occurred before the hypothetical insurance contract would have been entered into, had the Renewal Offer been accepted.
• On the question as to whether the insurer would have been able to decline cover on the basis that the insured had misrepresented to the insurer the use of the Property, his Honour found on the evidence that:
  • at the time that the insured made the relevant representations to the insurer (via the broker) on 27 August 2018, the Change of Use had not yet occurred, and the insured was not aware of the Change of Use; and
  • there was no reason for the insured to have apprehended that Delacor was being untruthful when it advised the insured as to the use of the Property, such that the insured was not required to go beyond that advice.

Key takeaways

Whilst section 54 of the Act had an unique role to play in relation to the outcome of this case, the decision confirms that where a plaintiff alleges that an actual state of affairs would have been avoided but for the negligence of a defendant, that plaintiff bears the onus of proving all elements of its own counterfactual and effectively disproving any counterfactual that might be raised against it by that defendant.

As to the aspects of the decision which relate to sections 28 and 54 of the Act, they are largely predictable having regard to the factual findings that his Honour made. Of interest is the identification of the relevant “act” for the purposes of section 54 in light of the facts of this case, and noting that “act” can be one of a third party and not the insured itself.

What this means for you

In terms of brokers, they need to be sure that whenever there are any issues with renewing cover for an insurer, they tell that insured everything and avoid situations where that client's risks go uninsured, even for a day.

In terms of insurers and brokers the case:

• is a significant win in negligence claims (which do not involve section 54 of the Insurance Contracts Act) because it confirms that the evidential onus on plaintiffs is significantly higher than previously thought; and
• confirms that the evidential bar that an insured needs to defeat a defence under section 28(3) of the Insurance Contracts Act is fairly low.

Originally published 03/06/2026.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.