Consideration of Primary Judgment
46 As I have made clear in [39] and [40] above, I do not regard the question of whether, prior to the conclusion of the contract, Dawes informed Mr Roth of his duty of disclosure to be of significance in relation to the outcome of this appeal as the answers Mr Roth gave in his Proposal Form amounted to a misrepresentation. It is therefore unnecessary for me to say any more about that question or to add to what I have said in paras [12] and [16] as to the time and manner in which interim and final contracts of insurance were concluded.
47 That leaves for consideration the questions, first, of fraud and, secondly, of whether the supply of correct information by Mr Roth would have made any difference to Dawes' attitude in the sense contemplated by s 28(1) of the Insurance Contracts Act (see [41] above).
48 Dawes' submissions on appeal as to fraud had two limbs. One was that the primary judge had misunderstood the concept of recklessness and had imposed an impossibly high hurdle for the insurer to surmount. For the reasons I have given in [42-44] above I do not consider that his Honour misunderstood the test to be applied. It is true that the test represents a "high hurdle" but that is of the nature of an allegation of fraud which involves a mental element not required in the case of carelessness or negligence.
49 The other limb to the submission was that the primary judge's finding was "glaringly improbable" (Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [29]). This submission recognised that the primary judge's finding that Mr Roth was careless but not fraudulent was founded in large measure upon his assessment of Mr Roth's credibility. Dawes' contention was to the effect that Mr Roth's explanation for his incorrect answers in the Proposal Form defied common sense and could not rationally have been accepted. What was proffered as the best illustration of this was the following evidence given by Mr Roth in cross-examination:
"Q. Well, you read the question at question 2 under 'driver history', 'had a driver's licence refused, suspended or special conditions imposed or been disqualified from driving' and you specifically ticked the "No" box, didn't you?
A. Yes, I did.
Q. And in order to tick the "No" box you had to have read the question?
A. Yeah, I misread the question.
Q. Well, you read the question, didn't you?
A. I did read the question briefly.
Q. Yes and what is it about the question "Had a driver's licence cancelled or suspended" that you didn't understand?
A. I misread the time period.
Q. "Have you or any of the named drivers in the last ten years", what time period did you think it referred to?
A. Like I said, I didn't give it careful consideration. I thought it was referring to the shorter time period than ten years.
Q. Right. Five years?
A. Yeah, I thought it said five years.
Q. Your licence had been suspended four years previously, hadn't it?
A. Yeah, I was under the impression it was considerably longer than that, or at least, certainly at least five years but more so five or six years.
Q. Could I suggest to you, sir, that you answered the question deliberately knowing that had you answered them correctly you wouldn't have been given insurance?
A. That's not correct.
Q. Could I suggest to you you answered them in the way that you did on this proposal knowing full well that other insurers had refused to insure you because of your driving record and your claims history?
A. That's incorrect."
50 In my view it was open to the primary judge to accept evidence such as this as a rational explanation for the incorrect answers given and as indicating carelessness, but not fraud, on Mr Roth's part.
51 Accordingly, I do not consider that the challenge to the primary judge's finding on fraud is well founded.
52 Likewise, I consider that the challenge to the primary judge's finding (see [45] above) that Dawes would not have acted differently if correct answers had been given, fails. Put shortly, the onus was on Dawes as the insurer to prove that it would have acted differently in the hypothetical circumstances, it called Mr Garnett to attempt to discharge that burden of proof and, following extensive cross-examination, Mr Garnett's evidence was not accepted.
53 The onus of proof under s 28 is upon the insurer because the insurer needs to show that it has a remedy made available to it by s 28. To succeed in a defence based upon s 28, the insurer must, in the absence of fraud, show that its liability would have been less if the misrepresentation (or failure to disclose) had not occurred (subsection 3).
54 As was the case in relation to the issue of fraud, the primary judge's decision was based to a significant extent upon the credibility, of a witness, in this instance, Mr Garnett. The primary judge expressed adverse views as to Mr Garnett's credibility. He said that he was "not impressed by Mr Garnett as a witness as he seemed to be, in hindsight", attempting to support Dawes' case "whether there was any fault of the insured or not more so than a reliance upon driving record" (see [45] above) and that Mr Garnett's evidence was "self serving, given in retrospect to justify his legal position" (see [45] above).
55 His Honour attached some significance to the fact that Mr Garnett and his staff did not see as important, discrepancies between the answers Mr Roth gave in the telephone conversation and those which he gave in the Proposal. The first discrepancy was that when asked in the telephone conversation whether he had ever lost his licence Mr Roth had said that such an event had occurred "about eight years ago" (see [8] above) whereas he did not mention that matter in his Proposal Form. The relevant Proposal question was however limited to the last ten years and, as Mr Garnett pointed out in cross-examination, after the telephone conversation Mr Roth may have thought about the incident and concluded that it was further in the past. The second discrepancy comprised the disclosure in the telephone conversation of a fine for exceeding the speed limit by less than 15 kilometres an hour which was not disclosed in the Proposal. Again, as Mr Garnett pointed out in cross examination, the insurer might reasonably have thought that this discrepancy could be explained by some further checking having been done by Mr Roth. Nevertheless, in my view the primary judge was entitled to take this matter into account. Whilst the insurer might reasonably have speculated that there were possible explanations for the discrepancies, it was open to the primary judge to consider that the absence of enquiry by the insurer as to whether there were in fact explanations tended to indicate that the insurer was not paying much regard to the disclosures. I do not therefore consider that the primary judge's regard to the discrepancies vitiated his rejection of Mr Garnett's evidence (see [32] and [45] above) that proper disclosure by Mr Roth of his driving record would have led to rejection of the proposed insurance rather than simply the charging of a greater premium by the making of adjustments under the "Second Chance Scheme" (see [31] above).
56 Another aspect of Mr Garnett's evidence (see [33] above) was that Mr Roth fell within clause [8] of the "Declined Risks" section of the Underwriting Guidelines (see [27] above) because he had had three or more claims "from any cause in the last three years" and that the proposed insurance would have been declined on that basis if full information had been supplied. The list of claims in [21] above reveals that Mr Roth had had three claims in the previous three years, but that none appear to have been his fault. In two cases his parked vehicle was run into and, in the third, another vehicle reversed into his. Mr Garnett contended in evidence that these three "not at fault" claims would, if known to him, have caused him to reject Mr Roth's Proposal for Insurance.
57 The primary judge took the view that Mr Garnett was "far more interested in obtaining the premium than he was in rigorous review of information provided by the plaintiff and/or the risk" (page 18). He also said the following:
"I also think that an ordinary person would have difficulty in accepting the number of claim forms would be of major relevance to an insurer even when they do not involve fault on behalf of the driver or owner and a no claim bonus of sixty per cent has been allowed and accepted and an excess of 10,000 to $15,000 set in relation to this policy." (at page 18)
58 This was a view which I consider that it was open to the primary judge to reach. It was not inconsistent with common sense or rational thinking for his Honour, in circumstances where after lengthy cross-examination he had generally formed an adverse view of Mr Garnett's evidence, to reject Mr Garnett's evidence that the existence of three previous claims in relation to accidents in which Mr Roth had not been at fault would have caused the proposed insurance to be declined. Particularly was this so when Mr Garnett gave evidence that acceptance or rejection of insurance was a matter for his discretion notwithstanding the terms of the Underwriting Guidelines and when Mr Woodlands gave evidence (the admissibility of which was not challenged on appeal) that "not at fault" incidents such as these would be of "little or no materiality given their minor nature and as they were outside the control of the plaintiff".