Australian Provincial Assurance Association Limited v Producers and Citizens Co-operative Assurance Company of Australia Limited [1932] HCA 34

High Court of Australia|1932-07-01|Before: McTiernan JJ, Evatt J, Australian P

[AN PROVINCIAL ASSURANCE ATION LIMITED . P e fs Derenvant,

ATIVE ASSURANCE COMPANY OF AUS-; Responvent. RALIA LIMITED 4 ; F 4 ; PLamntirr,

ON APPEAL FROM THE SUPREME COURT OF NEW SOUTH WALES.

original assurance "basis of the contract" - Statement by original assured 1939, 1e~Settlement of claim by reassured - ' Settlement" clause in policy of -

Whether settlement binding on reassurer - Materiality of misrepre- Sypxev,

'The respondent issued a policy of assurance on the life of C. for the sum of 000 which recited that it was made in consideration of an application, pictn Mt statements and declaration "which together with the conditions indorsed *"¢ MeTiernan are hereby made part of the contract." One of the statements referred 'to was a "personal statement" by C. in which, to a question "Have you required medical advice within the last five years?" he replied "Once," and particulars of the one occasion. The respondent then made a proposal reassurance with L., another assurance company. The proposal, after 'Teciting the desire of the respondent to effect a reassurance "in accordance with his proposal and the stipulations in the policy to be issued in pursuance hereof," ke and agreed "that this proposal and declaration together with the d copies and particulars as to health . . . of the life proposed Ube the basis of the contract . . . and that if any untrue statements been made or any material information withheld the contract shall

be void." The proposal for assurance and the personal statement by 0, attached. L, then issued a reassurance policy which recited that the had made a proposal and a statement, "and has also lodged with the co copies of the personal statement and medical report relating to the re original assurance, and this proposal has been accepted by the dire 'There was no express incorporation of any of these documents in the policy, operative clause was a promise to pay the sum of £1,000 subject to cert stipulations, and provided, inter alia, that "if any material information have been withheld or omitted from the proposal and statement above m tioned, or from the documents therein referred to, or if any material misn sentation shall have been made in the said proposal and statement or oth documents, then this policy shall be null and void." 'The policy bon

following indorsement: " It is hereby understood and agreed that the with written policy is a reassurance of portion of the amount assured under ti same life in the " respondent "company whose settlement in the event claim shall be binding on the" L. " company up to an amount being portion of the claim or claims paid in connection with the same life." C's death, which occurred whilst both policies were in operation, it was lished that the answer given by him in his personal statement as above | incorrect, he having, in fact, sought and obtained medical advice on than four occasions during the period in question. The respondent p claim under the policy of assurance and thereupon claimed to be reimbut by the appellant, to which company the rights and obligations of L. transaction had been transferred by a novation. Although it did not the bona fides of the respondent's payment, the appellant declined to the ground that C.'s personal statement was part of the basis of the contr and that the untruth and omissions were in respect of material matters.

Held as follows : - (1) By Rich, Starke, Dixon and McTiernan JJ. (Evatt J. dissenting), t

the contract of reassurance was contained in the policy alone, and did n consist of the policy plus the proposal and the documents attached tl

(2) By the whole Court, that the declaration in the proposal for re did not constitute an agreement collateral with the policy.

(3) By the whole Court, that the indorsement on the policy of re did not override the other stipulations in the policy.

(4) By Rich, Starke, Dizon and McTiernan JJ., that the respondent's right to recover depended upon the question of fact whether the answer in personal statement amounted to a material misrepresentation and to withholding or omitting of material information, which had not been dete

Australian Widows' Fund Life Assurance Society Ltd. v. National Life Association of Australasia Lid., (1914) A.C. 634, applied.

Decision of the Supreme Court of New South Wales (Full Court) : and Citizens Co-operative Assurance Co. of Australia Lid. v. Australian P vincial Assurance Association Ltd., (1931) 31 S.R. (N.S.W.) 544, re

from the Supreme Court of New South Wales. H.C. or A. May 1926 Katie Madoline Lucy Coventry of Camperdown, ais

New South Wales, assured the life of her husband, Andrew Avsrrattax ventry, a grazier, aged sixty-three years, with the Producers pestle pense

s Co-operative Assurance Co. of Australia Ltd. in the seas ih

of £2,000 payable to her immediately on satisfactory proof of %

Tn a " personal statement" made on 22nd May to the axp Crnzzxs officer of the Company, by the husband, he answered, in ates ASSURANCE

sly to the question "Have you required any medical advice "(O,"¢y ithin the last five years ? " that once, two or three years previously, a d visited Dr. Blackburn at Macquarie Street, Sydney, for the s - - e of an overhaul, and had been given a bottle of medicine. he eighth question was : "Are there any other circumstances ected with your health, habits, occupation, or otherwise, which to be communicated in order to enable the directors to judge rly of the risk of assuring your life? If there be such, please to them, as concealment of material fact is fatal to the validity e policy." This question he answered in the negative. hen he made a declaration that all the statements made by him e true. On 14th June, the premium having been paid, the y issued to Mrs. Coventry a policy of assurance expressed

th the conditions indorsed hereon are hereby made part of the "" Some days prior to such issue, however, the Company, e of its own forms, made a proposal for reassurance in respect

ventry's life to the Life Insurance Co. of Australia Ltd., the um to be reassured being £1,000. After setting out certain relevant

ulars the proposal proceeded : - " Copies of particulars as to habits and age of the life proposed (contained in the original

. . + to the Producers and Citizens Co-operative e Company of Australia Limited and other documents ed therewith) are forwarded herewith. Declaration. - Being us of effecting a reassurance with the Life Insurance Company iia Limited on the above-named life for the benefit of the rsand Citizens Co-operative Assurance Company of Australia in accordance with this proposal and the stipulations in

H.C. or A. the policy to be issued in pursuance hereof, I declare and agree tl a this proposal and declaration, together with the attached copi

Avsrrauian and particulars as to health, habits and age of the life proposed shall sib be the basis of the contract between Life Insurance Company AssociatlON Aystralia Limited and the Producers and Citizens Co-operal

ea ees Assurance Company of Australia Limited, and that if any u

axp Crrvexs statements shall have been made or any material informat Reese withheld, the contract shall be void and all moneys paid on a AssvRAXCE thereof shall be forfeited. Signed at Sydney this fourth day

Co. oF Avstratta June 1926. Signature for the Producers and Citizens Co-op

a Assurance Company of Australia Limited - P. H. Morton." The policy of reassurance, which was issued by the Life In Co. of Australia Ltd. on one of its own forms, recited : - * Whi the Producers and Citizens Co-operative Assurance Company | Australia Limited . . . (hereinafter called the assured) hai made a proposal and statement dated the fourth day of June 1926,

to the Life Insurance Company of Australia Limited (hereina called the Company) for a reassurance on the life of Andrew Obai Coventry grazier (hereinafter called the person assured) and

also lodged with the Company copies of the personal stater

said assured has paid the sum of £93 10s. as the premium on

policy up to and inclusive of the thirty-first day of May 1927 and has agreed to pay a further sum of £93 10s. on the first day of of each succeeding year until the death of the within person assi The policy witnessed that "the Company" would, subject

payment of premiums as and when due, and satisfactory evident of the death, age and identity of "the person assured," and production of the policy, " pay to the assured or its assigns the sw of £1,000. . . . Provided that if any material information sha have been withheld or omitted from the proposal and staten above mentioned, or from the documents therein referred to, any material misrepresentation shall have been made in the proposal and statement or other documents, then this policy be null and void and all premiums paid thereon shall be fo fe

as for all purposes deemed to be dated Ist June 1926, appeared the following indorsement : - " It is hereby understood and agreed that the within written policy is a reassurance of portion of the int assured under the same life in the Producers and Citizens itive Assurance Company of Australia Limited, whose ment in the event of a claim shall be binding on the Life e Company of Australia Limited up to an amount being a

by the Producers and Citizens Co-operative Assurance Company ustralia Limited not exceeding the face values of this and any reassurance policy in connection with the same life issued by Life Insurance Company of Australia Limited to the Producers Citizens Co-operative Assurance Company of Australia Limited in force at the date of the claim, the said proportion being the of the total sums assured under the policies issued as reassur- upon the same life by the Life Insurance Company of Australia ited to the Producers and Citizens Co-operative Assurance mpany of Australia Limited which shall be in force at the date 'claim to the total sums assured under the one or different policies 0 1 the same life in force at the date of claim in the Producers and Co-operative Assurance Company of Australia Limited.

G. Richard Sewell, pro Secretary - Sydney, 15th June 1926." Tt was admitted that, by novation, the rights and obligations of he Life Assurance Co. of Australia Ltd. in respect of the transaction duly taken over by the Australian Provincial Assurance \ tion Ltd. Andrew Oban Coventry died while the assurance and reassurance rein operation. Evidence then became available that his answers the questions contained in the personal statement, as shown were untrue; and that, on the contrary, he had, on 6th April 3 and 24th May 1925 visited Dr. Blackburn for the purpose of ining medical advice, which advice he, to some extent at least, | not act upon, and also, for the same purpose, he had visited Bryden, then practising at Armidale, on 7th June 1922 and 20th

thstanding this evidence, a claim for £2,000 made by the

under her policy was settled by the Producers and Citizens 'Yor, xEvimt, 23

AUSTRALIAN PROVINCIAL ASSURANCE ASSOCIATION Lrp. v. Propucers AND CITIZENS Co- OPERATIVE ASSURANCE Co. or AUSTRALIA Lrv.

proposal of the respondent, dated June 4th, gave particulars "life," of the sum to be reassured (£1,000), of the amount e premium and of the amount of the risk retained by the ondent (£1,000). It was stated that the risk was to date from Ist, 1926. With the proposal were included '' copies of par- asthe health, habits and age of the life proposed " contained 0 proposal of Mrs. Coventry to the respondent, together documents connected with the proposal. The proposal as follows -

AUSTRALIAN PROVINCIAL ASSURANCE ASSOCIATION Lop. v Propucers

of her husband Andrew Oban Coventry. On May 22nd, axp Crrmexs

v. Propvucers AND CITIZENS Co- OPERATIVE ASSURANCE Co. oF AUSTRALIA Lr.

pany of Australia Limited on the above-named life for the benefit Producers and Citizens Co-Operative Assurance Company of Australia in accordance with this proposal and the stipulations in the policy to be in pursuance hereof, I declare and agree that this proposal and declarat together with the attached copies and particulars as to health, habits and. the life proposed shalll 'be the basis of the contract between Life : Company of Australia Limited and the Producers and Citizens Co-open

shall have been made or any material information withheld, the contract be void and all moneys paid on account thereof shall be forfeited."

It is admitted that, by novation, the rights and obligatic the Life Insurance Co. of Australia in respect of the tran were duly taken over by the appellant.

Ferguson and Rogers JJ. held, the appellant's liability to pay { amount of reinsurance is established by a clause indorsed up

The first question which arises is whether the stipulation ¥ was indorsed upon the policy entitles the respondent to jud of £1,000, inasmuch as by payment in full the respondent settled Mrs. Coventry's claim under her policy. The stip was as follows : -

"Tt is hereby understood and agreed that the within written policy reassurance of portion of the amount assured under the same life in the P ducers and Citizens Co-operative Assurance Company of Australia whose settlement in the event of a claim shall be binding on the Life In Company of Australia Limited up to an amount being a proportion 0 claim or claims paid in connection with the same life by the Prodi Citizens Co-operative Assurance Company of Australia Limited not ing the face values of this and any other reassurance policy in with the same life issued by the Life Insurance Company of Australia to the Producers and Citizens Co-operative Company of Australia and in force at the date of the claim, the said proportion being the the total sums assured under the policies issued as reassurances U same life by the Life Insurance Company of Australia Limited to ducers and Citizens Co-operative Assurance Company of Australia

h shall be in force at the date of claim to the total sums assured under the 'or different policies on the same life in force at the date of claim in the ers and Citizens Co-operative Assurance Company of Australia Limited."

he main part of the policy is headed " Reassurance Whole ! ance Policy," but what the reinsurer promised, in the cy itself, was to pay the sum of £1,000 to the respondent payment of the agreed premiums and upon satisfactory proof "death, age and identity" of A. O. Coventry. Such a e is not indicative of reinsurance at all and there was no provision preventing the respondent from settling a claim 000 by Mrs. Coventry by payment to her of (say) £1,000, and still recovering the full £1,000 from the reinsurer under the ite policy. But that would not have been a true sharing of risk between the two insurers. On the other hand, there was no in the main body of the policy which expressly debarred the Company from saying to the respondent : - '* You paid wentry, but, under your policy, you were not liable to pay anything. We merely assured your 'liability' to her, but as

stipulation addressed itself to such possibilities for the e of excluding them. The £1,000 promised to be paid was ht into due relation to the risk assumed by the respondent e same life. Any settlement by the respondent with Mrs. y was to " be binding on" the reinsurer, so that the latter ny could not question or bring into controversy, either the y of the respondent to Mrs. Coventry or the precise quantum liability. But any such settlement by the respondent was

liability, fixed by working out a proportion of claims actually by the respondent in connection with the same life. The

e of the policy of reinsurance) plus the face value of any ance policy issued to the respondent by the reinsurance iy in relation to the same life, if such policies were in force » date of claim. The fraction was to be that borne to the total

: 0 the same life carried by the respondent at the date of claim,

AUSTRALIAN PRovinctaL ASSURANCE ASSOCIATION Lrv. v. Propucers AND CITIZENS Co- OPERATIVE ASSURANCE Co. oF AUSTRALIA Lrp.

v. Propucers AND CITIZENS Co- OPERATIVE ASSURANCE Co. oF AUSTRALIA Lrp.

by the then total reinsurances of the "life" by the res] with the reinsurer.

As a result of this stipulation the following consequences v¢ ensue. If Mrs. Coventry increased the insurance with the respond from £2,000 to £4,000, and the reinsurance Company did not ag to take over any part of the added risk, the fraction would from one-half to one-quarter. In such a case the amount by the reinsurance Company to the respondent would be, not £1, but one-fourth of the claims paid by the respondent, so that if respondent settled for £2,000, such settlement would then be as such up to one fourth of £2,000, i.e., £500. .

The majority of the Supreme Court held that the stip made the mere fact of the respondent's paying a claim und own policy, something which entitled it to be paid a proporti part by the reinsuring Company. But it is conceivable that respondent might, for many good reasons, see fit to meet a cl: In such a case the reinsurer, it is said, could not rely upon th that (say) the death resulted from an aeroplane accident all liability in such a case was excluded by a special clause of the pol of reinsurance.

I cannot think that the indorsed condition should be so constr On the contrary, its main purpose was to cut down the main ¢ tractual liability to pay to the respondent £1,000 in the ever A. O. Coventry's death, by having regard to the amounts actu: paid on the risks by the respondent. For not only might the resp¢ dent pay in full although not liable at all to Mrs. Coventry, might pay nothing or very little, although liable at law to p

of the respondent to Mrs. Coventry under its policy, irreley the question of liability as between the two insurance compani The result was to be this: if the respondent paid, its liability top Mrs. Coventry could not be questioned by the reinsurer. B the other hand, the amount paid, not the amount properly p by the respondent, was to afford the true basis for quantifyi reinsurer's liability to the respondent.

I am of opinion that the respondent was not enabled stipulation to say to the reinsurer : " Although, in the events wh

happened, your policy excludes any liability on your part to H.C. or A.

is, we have paid on the life and that binds you to pay us your "aa

vin any event." It follows that the respondent was not entitled Avsrrauias PRoviNcraL

ve judgment entered for it, and the Full Court's order should 4scunaxce F ASSOCIATION

Lrp. general question of the liability of the reinsurer remains to oP cos ; i ; RODUCERS rmined by the various provisions of the contract of reinsurance, asp Crrzexs Co- dit is to these I now turn. $ aed s the respondent contractually bound by its declaration of June ger ser

, is its contractual liability to the appellant determinable mi Se lely by reference to the various clauses of the policy ?

ie recital has been set out in full. It shows clearly that the was intended, not to constitute any departure from, but in strict accordance with, the proposal. 'This proposal," ie recital, '* has been accepted by the directors." Payment of proposed premium of £93 10s. had been made before the policy The declaration attached to the proposal of June 4th d that the respondent was desirous of reinsuring " in accordance is proposal and the stipulations in the policy to be issued in

er, pana that such issue would also be an acceptance of the s contained in the proposal. Therefore, so far as the is concerned, its own proposal and declaration con- prove its knowledge that the assurance effected would be

|, of which the declaration was a very prominent part. 'tights and obligations of the parties should therefore be tained by giving effect, not only to the actual stipulations of

policy, but to any additional promises contained in the declara- . The actual word " incorporated" is not used in the policy 'to introduce the provisions of the proposal into the totality contractual rights and duties. But "incorporated" only

H.C. or A. signifies that the one agreement is embodied in two or n

cea documents. That embodiment is otherwise expressed in the : Avsrratiay instance, but I think it is sufficiently expressed. eee' The declaration contains, on the part of the respondent, a dee eo tion (a) that the particulars of the life proposed shall be the basis

v the "contract," and (b) that if any untrue statements " shall PRopucEers

axp Crrzexs been made " the contract shall be void. The phrase " the contract

eccaivta refers to the whole agreement to be evidenced by the proposal 7

eer One view which found favour with the majority of the Sy

___ Court should perhaps be referred to. Halse Rogers J. (1) was of opin

Pratty- that "the two alleged contracts cannot stand together," bi

the defendant Company's reliance upon the promise contained

declaration amounts to a wider claim to be able to reject clai

than that accorded by the policy. This view proceeds upon t suggestion that there were two contracts between the parti

collateral to the other. That hypothesis was rejected by his Hone

who said: "I find it hard to believe that the parties to a commerd

transaction of this sort intended their relations to be govel

but one only, evidenced by the two documents each of which re to the other. The declaration in the proposal stated and that both would operate concurrently. His Honor said "the issue of that policy, seeing that it was not in the prec terms contemplated by the declaration, was really a counter and when such counter offer was accepted, the policy be 1 effective contract and what was done by way of preliminary tiation ceased to have effect " (3). J But, as has been shown, the reinsurance was effected and inte to be effected, in pursuance of the proposal and not as d from it, "'in accordance with this proposal and the stipulatio the policy to be issued in pursuance hereof." This state the respondent in the proposal is to be taken not only in the! of the fact that, in the case of insurance companies, written propo

(1) (1931) 31 S.R. (N.S.W.), at p. (2) (1931) 31 8.R. (N.S.W.), at 563. 561. (3) (1931) 31 S.R. (N.S.W.), at p. 562.

fr ently, by reference or otherwise, linked up with a policy H. © oF A. e the complete record of the transaction, but also in the light re e fact that, in the present transaction, each party seems to Avsrratian

ve been well acquainted with the other's particular form of

In Thomson v. Weems (1), a case of life insurance, the assured oprnanve d a statement " that this declaration shall be the basis of the "8SU™48°®

between me and the . . . company; and that if ae yuntrue averment has been made . . . the assurance" shall co vat J.

be absolutely null and void" (2). But the policy also recited the wation, stating that it was "the basis of this assurance," and ere was a proviso in the policy that if anything averred in the ration was untrue the policy shall be void. sonv. Weems (1), therefore, does not raise the same question this case. But Lord Blackburn pointed out (3), in passages often that it was competent for contracting parties, " if both agree and sufficiently express their intention so to agree," to make the existence of immaterial matters a "condition precedent to e inception of any contract." He added that in policies of marine , any statement of a fact bearing upon the risk undertaken he written policy, " by whatever words and in whatever place," 48, prima facie at least, something compliance with which was a dition precedent to the attaching of the risk (4). He did not that the rule as to construction of marine policies was also cable to life policies, but concluded that, in the then case, the th of the particulars was warranted, seeing " that it is expressly din the policy, as well as in the declaration itself, that the declara- 'shall be the basis of the policy " (4). d Watson (5) discussed the case of Life Association of Scotland v. (6). In that case, it appeared that the proposal for assurance ned a declaration by the deceased and an undertaking by her at if any untrue statement were made therein or in the answers

Cas. 67 (4) (1884) 9 App. Cas., at p. 684. Cas., at p. 680. (5) (1884) 9 App. Cas., at pp. 692, Cas., at p. 683. 693.

v PropucErs AND CITIZENS Co- OPERATIVE ASSURANCE Co. oF AUSTRALIA Lrp.

Lord Watson pointed out that the conclusion of the Cour Foster's Case (2) was merely that Mrs. Foster's answer untrue. "A very different question," added Lord Watson, " have arisen for decision in that case if the assured had, in the which she submitted as the basis of assurance, affirmed was not, ' at the time,' affected with hernia " (3).

In Dawsons Ltd. v. Bonnin (4) the answer to a question a: the proposal form was untrue, but there was no declaration bj assured in the proposal form that the statements were true or to the basis of the contract, or that, if untrue, the contract sho uld void. But the policy itself recited that the proposal " shall b basis of this contract and be held as incorporated herein." decision of the House of Lords was that the truth of the state in the proposal, whether material or not, was a condition 0 liability of the insurer.

Lord Dunedin was of opinion that the statements in the pro having been made the "basis of the contract and inco therewith," were " contractually material." Dealing with the "basis" he said: "It tnust mean that the parties held that the statements are fundamental - i.e., go to the root of the contrac and that consequently if the statements are untrue the conti not binding " (5). Lord Dunedin also said that no direct auth governed the case, because in the previous cases " there was eit a statement signed by the proposer that his answers to the questi¢ put to him were true, and that he warranted them to be true; there was a clause in the policy that if any of the statements W untrue the policy was to be void" (5).

(1) (1884) 9 App. Cas., pp. 692, 693. (3) (1884) 9 App. Cas., at pp. 698, (2) (1873) 11 Maeph. (Ct. of Sess.) (4) (1922) 2 A.C, 413. me: 351. (5) (1922) 2 A.C., at p. 435.

h regard to the case of Dawsons Lid. v. Bonnin (1), it seems d Dunedin either thought or assumed that it was sufficient e prior representations of fact "contractually material " if ey were contained in the proposal, and (2) it was proved that al was accepted and (3) the assured signed a declaration | that the representations were true, that they were

e Court of Session judgments, that of Lord Anderson seems ve met with the approval of the House of Lords (see per Lord (2)). Lord Anderson said :- -

'was maintained for the pursuers that the above statement was merely ntation because (1) it was not expressly said to be a warranty, and

by the insured. It seems to me that it is well decided that there is a third of case in which a statement of the insured in a proposal form must with as if it were an express warranty, that, namely, in which the ments made in the proposal form are made the basis of the contract of e" (Dawsons Lid. v. Bonnin (3) ).

perusal of the arguments and judgments, both in the Court of mand the House of Lords, rather suggests that it was accepted e Judges that the above-mentioned opinion or assumption

| Dunedin was correct. Lord Dundas, for instance, said : - 'the next place, I think that the cases cited by the Lord Ordinary, and 'decisions, establish that where, in a contract of insurance (e.g., as in" on v. Weems (4) ), " the insured has subscribed a declaration at the foot filled-in proposal form, which is declared to be the basis of the contract, | which imports that the statements made by him are true, and that if any true statement has been made, or necessary information withheld, the ct shall be null and void, then that declaration, taken in connection ith the policy, constitutes an express warranty of the truth of the answers given; and accordingly, if an answer be false, there is no room for

hand of the insured ; it is only in the policy (which he does not subscribe) we find that the proposal shall be the basis of the contract, and be held rporated therein. I am not, as at present advised, prepared to accept Ordinary's assumption that the legal position is the same. It seems that it may well be that there is a material difference between a case the present and such cases as those cited by the Lord Ordinary " (5).

ip (3) (1821) SG, S11, at pp. 513, 514 (4) ( ) Cas, 671. PAG) (1921) 8.Cx'at p. B18.

1932, we AUSTRALIAN PRovinctat ASSURANCE ASsocrATION Lap.

s of the contract," and that, if they were untrue, the ayp Crrzexs

ey "Tn the cases, however, referred to by the Lord Ordinary as appl A eee view taken by him, it appears that there was a declaration signed by 'PROVINCIAL insured on the proposal form to the effect that his answers to the qu ASSURANCE put were true, and that, if any of his statements were untrue, then the po Association ian aa should be void" (1). Bre In Australian Widows' Fund Life Assurance Society Ltd. v. Natio ODUCERS anv Crrzexs Mutual Life Association of Australasia Ltd. (2) there was a re

ae in the policy of reinsurance that the appellant society had

See to accept the proposal of the respondent association, and the Judiei

eee Committee was not satisfied that the effect of this recital was t aD. : incorporate in the policy all the terms of the proposal for reinsura

"The recital may very well mean that the directors of the society

determined to accede to the application of the respondent society for a

of reinsurance, leaving the terms on which such policy was granted to

specified in the ordinary way in the policy itself. According to the p

recital the policy is to incorporate the statements contained in the p and not the proposal itself" (3).

It will be noted that, in this case, the denial by the Privy Co of the "incorporation " in the policy of the proposal itself, as tinct from the statements contained in the proposal, was made i relation to a statement in the proposal that it was understood th in accepting the risk under the reinsurance, the appellant socie did so on the same terms and conditions as those on which th respondent had granted the primary policy. It was emph that the express terms of the policy of reinsurance " are in a

every respect different from the terms of the original policy " (4) In that case the Privy Council was not concerned with any st question as we have before us at present. They refused to dr the inference that the mere recital in a policy of the acceptance a proposal, of itself and by itself, operated to incorporate in policy everything contained in the proposal. But, in the p case, the policy repeats many of the terms of the proposal and isn contradictory of any of them. And the only question is wheth the declaration by the respondent that the statements conta the proposal were true and were the basis of the contract, is (1) (1921) 8.C., at p. 520. (3) (1914) A.C., at p. 641; 17 OL:

(2) (1914) A.C. 634; 17 C.L.R. 657. at p. 662. (4) (1914) A.C,, at p. 642; 17C.L.R., at p. 663.

recognition. In other words, the case of the appellant does depend upon the mere fact of the recital in the policy of the of the proposal, except for the purpose of negativing the ion that the policy represents any departure from the declara- proposal that the statements made were to be contractually

rmline, in delivering the judgment of the Privy Council, rested ease upon a declaration contained in the proposal to the effect "this proposal is the basis of the contract and is to be taken a the policy and (if accepted) the particulars are to be d express and continuing warranties furnished by or on behalf

'The case accordingly," says the judgment, "is one of express warranty. fin point of fact the answer is untrue, the warranty still holds, notwithstanding hat the untruth might have arisen inadvertently and without any kind of Secondly, the materiality of the untruth is not in issue; the parties ng settled for themselves - by making the fact the basis of the contract, and giving a warranty - that as between them their agreement on that subject d all inquiry into the issue of materiality " (2). it is true, as has been pointed out in the Supreme Court, policy contained a proviso to the effect that the proposal be considered as relevant to and incorporated in the policy. ardian Assurance Co. v. Condogianis (3).) But the Privy neil judgment is not expressed to be founded in any way proviso, and it treats the terms of the declaration in the signed by the assured as binding upon him because the nts therein made became part of the contract between the es and were therefore contractually material. e case of Joel v. Law Union and Crown Insurance Co. (4), a life insurance, the assured made two declarations prior to of the policy. The first declared that the particulars e true, and "that this proposal and declaration shall be of the contract." There was also a second declaration

answers given to a doctor were true, but such declaration

2.A.C. 125; 29 C.L.R. 341. (3) (1919) 26 C.L.R. 231, at pp. 234, I)2A.C.,atp. 129; 29C.L.R., 235, per Barton J. (4) (1908) 2 K.B, 431, 863.

Ww AUSTRALIAN PRovINcIAL ASSURANCE ASSOCIATION Lap. v PRODUCERS

In Condogianis v. Guardian Assurance Co. (1) Lord Shaw of axp Crrmexs Co-

H.C. or A. did not state that the answers were to form part of the basis 0

AUSTRALIAN "The first question is one of construction, and, in my opinion, of PROVINCIAL able difficulty, and I express my opinion thereon not without some d AssURANCE The policy, which was dated November 4, 1902, was absolute in its AssoctaTIox and contained no reference either to the proposal form or to the an . the questions: but, in my opinion, having regard to the decision of We Propucers Duarris (1), this would be immaterial if, by agreement between the p

AND CrrizENs Co- im operative It was unsuccessfully contended by the insurance company

ene the truth of the answers by the assured to the questions

ae in the second declaration, was also made part of the basis of 1 Emus, contract. The Court of Appeal agreed with Lord Alverstone the truth of such answers was not warranted or made a ¢

of the insurance. Vaughan Williams L.J., after stating the

"TI cannot agree. If the insurance office meant this, it lay on them { so plainly. It would have been very easy to have stated plainly that answers were to be the basis of the contract, but this is not done " (3).

the questions were made the basis of the contract and were untrue in fact

from the fact that the questions were answered, and that the party inter declared that his answers were true. This is only what a witness doe he declares he has given true evidence. He is stating his belief, and not m a contract " (4).

Buckley L.J. said in relation to the first declaration : - "The document dated October 27, 1902, provides that the proj declaration shall be the basis of the contract. I do not assent to Mr. argument that it results from this that nothing else was to be the basis contract, and I cannot find in Lord Cranworth's judgment in A Fitzgerald (5) anything to support the contention that it does. The q is one of construction. It does not follow, because contractually two facts to be the basis of the contract, that no other facts are to be added to, to form part of, the basis" (6).

And he said later : - "But, secondly, I am of opinion that the facts stated in the docum October 31, 1902, are not contractually added to the facts which = the basis of the contract" (7).

"There is in all this nothing which makes the applicant's answers document the basis of the contract" (7).

(1) (1856) 11 Ex. 493 ; 156 E.R, 925, (5) (1853) 4 H.LC., at p. 50 (2) (1908) 2 K.B., at 'p. 437. ER., at pp. 558, 559. (3) (1908) 2 K.B., at p. 874. (6) (1908) 2 K-B., at vp, 8 (4) (1908) 2 K.B., at pp. 886, 887. (7) (1908) 2 K.B., at p. 804.

ippeal were of opinion that if the statements referred to in the rey:

d declaration had been declared therein to be the " basis of Avsrrataw

5 oe A ProvixctaL ," judgment would have been given for the insurance Asovninen

ny, although neither of the declarations was referred to in eas y itself. Accordingly most of the debate centred around '.

h 4 : Propucens question whether the statements referred to in the second ayp Cirmexs

ition were made foundational or basic or root statements ean as those referred to in the first declaration. oe

Dalgety & Co. v. Australian Mutual Provident Society (2) ee J. held that a statement in a proposal for life assurance - - tat "the proponent agrees that the answers or statements shall "" basis of the contract,' does not amount to a " warranty "

the statements made in answer to questions are in fact correct.

Where it is arranged that the statements shall be the ' basis of the contract,' _ this prima facie refers to matters preliminary to the real contract, even in _ insurance contracts, unless the statements have a contractual obligation attached to them by the policy or formal contract " (3).

y opinion the word " basis " has come to acquire a meaning h which this statement of the law cannot now be reconciled. In any rent the word does not stand unaided in the proposal and declara- contained in the present case. Despite the great weight to be toall judgments of Cussen J., I do not think it can be reconciled ith the Court of Appeal's reasoning in Joel's Case (1), which, in opinion, this Court should follow.

en J. seems to base his opinion upon Whelton v. Hardisty Tn that case the defendants were three directors of the West- and General Life Assurance Association. The plaintiffs med a proposal form which gave certain particulars of the risk

red, and then added that "we . . . do hereby declare that believe the above particulars and statements are true" (5). Policy recited that the plaintiffs were interested in the life of » Jodrell, and had delivered the proposal with the particulars n referred to, and that the defendants had " thereupon "

2K.B, 863, (4) (1857) 8 E. & B. 232; 120 BR. V.L.R.481; 30A.L.7.4. 86.

V.L.R., at p. 502; 30 (5) (1857) 8 E. & B., at p. 243; 120 E.R., at p. 91.

H.C. or A. undertaken the proposed insurance. Counsel for the plaintiffs

1932, "The usual course in life insurance is to append to the propo

Avustrauian . . . a declaration that the statements are absolutely true, PROVINCIAL

'Assurance that if they are not true the policy shall be forfeited " (1).

pepeooranion The appeal to the Exchequer Chamber was upon motion

judgment non obstante veredicto and the terms of the proposal,

Propecers np Crrexs having been set out in the relevant pleadings, were not before t

palin Court. But that being so, the assumption upon which the app

AssvRAXCE turned was that there was no undertaking in the proposal

Avstralta supporting the insurer's case, an assumption that was in

Lr. correct. Martin B. said : - " Upon the record, therefore, it does not appear that any stipulation was, usual, introduced, that the statement in question should be the basis of th contract " (2).

He said further : - "The cases cited for the defendants, to show that the representation, wl fraudulent or not, if merely untrue, avoided the contract, failed to show such a rule applied to life policies, unless the policy contained a direct 0 that the truth of such representation was to be the basis of the policy" (3). a

Willes J. said : - : "The mere recital of such a statement in the policy would not alter the g law, or convert such statement from a mere matter of representation into a condition precedent " (4).

"The truth of the statement by the plaintiffs is not a condition precedent to the liability of the defendants upon the policy. It is clearly not a cond precedent in terms; and I agree with my brother Martin that, in the ab of any express stipulation in the instrument containing such statement, m the truth of it a condition precedent, we ought not to adopt that construetio except upon very clear indications that it was the intention of the contracting parties that the statement should have that effect " (5).

It is clear that the members of the Court of Exchequer

were not concerned with such a case as the present. The fou

showed three facts, namely, (1) that, in the proposal form, insured made a declaration containing statements as to the health of the life assured, which were not true in fact; (2) that

(1) (1857) 8 E. & B., at pp. 247, 248 ; (3) (1858) 8 E. & B., at p. 2975 1 120 E.R., at p. 93. ER., at p. 111.

(2) (1858) 8 E. & B, 285, at p. 297; (4) (1858) 8 E. & B., at p. 2995 120 E.R. 106, at pp. 110, 111. E.R., at p. 1.

(5) (1858) 8 E. & B,, at pp. 299, 300; 120 E.R., at p. 112,

proposal form containing such statements ; and (3) that there mes 48 no other mention of the proposal in the policy. AUSTRALIAN PROVINCIAL

ot only did counsel for the plaintiffs rely upon the absence of Assuxasce

g in the proposal form containing a declaration that if "**¢°s7™*

statements were made, the policy should be forfeited ; but v.

ell B. rather suggests that if the "instrument containing ax Crrmens ich statement " had made the truth of the statement a condition aaa

eedent to liability, the defendants would have succeeded. The "A°B4°® rd "instrument" may as well refer to the proposal form as AvsTssuia o the policy itself. At any rate, it was not necessary to consider

esuch as the present, so that Wheelton v. Hardisty (1) is not an

directly in the appellant's favour, because there, not only did the ition attached to the proposal state that the particulars n should form the basis of the contract and that if untrue allega- were made the policy should be void, but the policy itself also a proviso that if any " false "' statements had been made " in or it" the obtaining of the insurance, the policy should be void, he insurance company was successful, the ground of decision being fact that the proviso in the policy was applicable to statements 'the proposal which were untrue though neither material nor

_ "Nothing, therefore, can be more reasonable than that the parties entering "into that contract should determine for themselves what they think to be "material, and if they choose to do so, and to stipulate that unless the assured " answer a certain question accurately, the policy or contract which they _ are entering into shall be void, it is perfectly open to them to do so, and his false answer will then avoid the policy. Now it appears to me, my Lords, 'that that is precisely what has been done here. The parties entering into the assurance have so stipulated. 'The basis of our contract shall be your 'answering truly these two questions.' There were a great many others ; but, putting those aside, they say the basis of the contract between us shall be that you shall answer truly those two questions, and if you do not answer 'them truly the policy shall be void."

observation seems to refer to the declaration rather than to

@ proviso in the policy. But the Judges who were summoned to

SE. & B, 232; 120 ER. (2) (1853) 4 H.L.C. 484; 10 E.R. 551. 58) 8 B&B. 285; 120 ER. (3) (1853) 4 H.L.C., at p. 503; 10 E.R., at pp. 558, 559.

PRopUCERS AND CITIZENS Co- OPERATIVE ASSURANCE Co. oF AUSTRALIA Lro.

aid the House of Lords left the point open because Baron said (1) : - "This question does not appear to us to turn upon the well-known dit hi between warranties and representations laid down by Lord Mansfeld, n upon the point whether the declaration above mentioned was either a part

the contract binding between the parties independent of the policy, or mean

to be referred to by it. The proviso is clearly a part of the express contra between the parties, and on the non-compliance with the condition stated

It is here that a difficulty may be considered. In the present

the last condition of the policy was as follows : - "Provided that if any material information shall have been wit omitted from the proposal and statement above mentioned, or from th documents therein referred to, or if any material misrepresentation shall been made in the said proposal and statement or other documents, policy shall be null and void and all premiums paid thereon shall be fot

to the Company." And it has been contended that this condition would not b

(i.e., suppressed) ; the condition repeats that, but also avoid the event of material information being omitted (i.e., not dis The condition avoids the contract in the case of " material" representation. But the last part of the proposal seeks to in the case of "any untrue statement " having been made.

The apparent contradiction can, I think, be resolved by p regard to the fact that the promises, both in the condition and proposal, are hypothetical in form. Each declares that in the of a stated event the contract (or policy) shall be void. A there is some overlapping in the description of the supposed eve the more satisfactory way of regarding the transaction is to deel: avoidance of the policy upon the happening of any one of the sup posed events. é

At any rate the cases of Dawsons Ltd. v. Bonnin (2) and dogianis v. Guardian Assurance Co. (3) seem to indicate that maxim Expressio unius est exclusio alterius is hardly applicable te case where avoidance of a policy of insurance is expressed tor

At a glance

Court

Decision date

Before

Source

Judgment (259 paragraphs)