Deaves v CML Fire & General Insurance Co Ltd

Building of cafe, service station and dwelling $15,000 Machinery and/or plant therein 4,000 Stock-in-trade therein 2,000 All electric motors therein 300 Total $21,300

By cl. 3 of the special conditions, the liability of S.G.I.O. in respect of each item was not to exceed "the sum insured by each item of the policy". The policy contained the following conditions:

3. The Insured shall give notice in writing to the Office of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Office before the occurrance of any loss or damage, all benefit under this policy shall be forfeited.

5. This Insurance may be terminated at any time at the request of the Insured, in which case the Office will retain the customary short period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Office, on notice to that effect being given to the Insured, in which case the Office shall be liable to repay on demand a ratable proportion of the premium for the unexpired term from the date of the cancelment.

10. If at the time of any destruction or damage to any property hereby insured, there be any other subsisting Insurance or Insurances, whether effected by the Insured or by any other person or persons, covering any of the property, the Office shall not be liable to pay or contribute more than its ratable proportion of such destruction or damage

This policy was renewed from time to time and was in force on 31st May 1974.

Towards the end of 1973 Mr. Deaves decided that he was in a position to increase the amount of his insurance, which he said was taken out originally only to cover the interest of the mortgagees. He endeavoured to arrange for an agent of S.G.I.O. to call upon him for this purpose, but no one did so. Later a canvasser from a company associated with the respondent, C.M.L. Fire and General Insurance Company Ltd. ("C.M.L."), came to see Mr. Deaves in an attempt to persuade him to increase the amount of his life insurance, and Mr. Deaves spoke to the canvasser about his fire insurance. It was arranged that a representative of C.M.L. should call upon him, and one did call, in about April or May 1974. Mr Deaves told the representative that he was insured with S.G.I.O., that he wanted to increase the amount insured but that S.G.I.O. had not come out to see him as he had requested. The representative produced a form of proposal, asked Mr. Deaves the questions that appeared on it and filled in the answers. Mr. Deaves then signed the form, which bears date 7th May 1974. One of the questions in the form of proposal was as follows:

Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal. The answer to this question as written by the representative was "N/A", which apparently was intended to mean "Not Applicable". The proposal contained the statement that "all questions on this proposal not replied to are to be deemed answered in the negative". It also set out, above the proponent's signature, the following declaration: I do hereby declare and warrant that the answers and particulars given above are in every respect true and correct, and I have not withheld any information likely to affect the acceptance of this Proposal; and I agree that this Proposal and Declaration shall be the basis of the Contract between the Company and myself; and I further agree to accept the Company's Policy subject to the terms, conditions and memoranda to be contained therein, endorsed thereon or attached thereto. When he signed the proposal, Mr. Deaves gave to the representative a cheque for the amount of the premium. He said to the representative: "Am I covered from today because I would like to go in and cancel the policies at the S.G.I.O.?" The representative told him that he was covered. It is possible that a cover note was issued on 30th April 1974, but that is immaterial.

The proposal stated the names of Mr. and Mrs. Deaves as those in which the policy was to be made out. There is no direct evidence that Mr. Deaves had the authority of his wife to sign the proposal on her behalf, but this was not an issue raised by the pleadings. In fact C.M.L. proceeded to issue a policy in the names of the appellants; it was dated 14th May 1974 and covered a period of twelve months from 30th April 1974. The service station and contents were insured for a total of $30,000, itemized as follows:

Building including landlord's fixtures and fittings $20,000 Stock in trade and merchandise 3,000 Machinery and plant 5,000 Business and office equipment, furniture, unused stationery, etc. 2,000 Total $30,000

The policy did not contain any provision warranting the truth of the answers contained in the proposal or declaring that the proposal should be the basis of the contract. Condition 1 of the C.M.L. policy was in the following terms: This Policy shall be voidable in the event of misrepresentation, misdescription or non-disclosure in any material particular. Condition 3 of the C.M.L. policy was in exactly the same terms as condition 3 of the S.G.I.O. policy except that the word "Company" appeared in lieu of the word "Office". Condition 10, in so far as it related to contribution, was also in the same terms as condition 10 of the S.G.I.O. policy, again with the substitution of "Company" for "Office". The C.M.L. policy did not mention the interest of the mortgagees - indeed Mr. Deaves did not tell the representative of C.M.L. that the property was mortgaged. No written notice was given to S.G.I.O. of the fact that the insurance with C.M.L. had been taken out. However, some time after the proposal for insurance with C.M.L. had been completed, Mr. Deaves went to the office of S.G.I.O. and informed an employee of that office that he wished to cancel his policies with S.G.I.O. He had, in addition to the policy already mentioned, two other policies with which we are not concerned. Mr. Deaves was given some forms to sign and he signed them. The form which he signed in respect of the relevant policy is dated 31st May 1974 and omitting formal parts it reads: "Please Cancel above Policy any refund to above address." He later received from S.G.I.O. a refund in respect of the premiums paid on the two other policies, but he received no refund in respect of the premium paid on the relevant policy. When he enquired from S.G.I.O. he was told that "they had to get permission from Percy Willis for it to be cancelled". Mr. Deaves did not inform Mr. or Mrs. Willis of his intention to cancel the S.G.I.O. policy or of his attempt to do so. It seems that S.G.I.O. intended to write to Mr. Willis, and indeed may have done so, although Mr. Willis received no letter from them. Mr. Deaves did not receive any notification that the S.G.I.O. policy had been cancelled. It appears that S.G.I.O. took no further steps to effect its termination before 4th August 1974. Mr. Deaves did not notify C.M.L. that the S.G.I.O. policy remained on foot. On 4th August 1974 the service station was destroyed by fire.

Claims were made on both insurers under the two policies but both refused to pay. Thereupon two actions were commenced. Action No. 506 of 1976 was begun on 2nd March 1976 by Mr. and Mrs. Willis and Mr. and Mrs. Deaves as plaintiffs against S.G.I.O. claiming indemnity under the S.G.I.O. policy. In that action S.G.I.O. pleaded that it was not liable to indemnify the plaintiffs for two reasons, (1) that the plaintiffs had failed to give notice in writing to S.G.I.O. of the C.M.L. policy; and (2) that Mr. and Mrs. Deaves had on 31st May 1974 terminated the S.G.I.O. policy. C.M.L. was brought into this action as a third party. Action No. 929 of 1976 - the proceeding in which this appeal arises - was commenced on 14th April 1976. In that action Mr. and Mrs. Deaves claimed indemnity under the C.M.L. policy and C.M.L. defended the action on a number of grounds which it will be necessary to consider. The two actions were ordered to be tried together. On 18th May 1977 Andrews J. gave judgment in both actions. He held that the proposal formed the basis of the contract with C.M.L., notwithstanding that there was no recital to that effect in the policy, that the answer to the question relating to other insurances was untrue and that the appellants had not proved that the representative of C.M.L. was other than their agent for the purpose of filling in answers to questions in the proposal form. He held that the result of not furnishing a true answer to the question in the proposal was to avoid the C.M.L. policy. He further held that the S.G.I.O. policy had not been cancelled. In these circumstances condition 3 of the S.G.I.O. policy did not apply (since no policy had been effected with C.M.L. within the meaning of that condition) but condition 3 of the C.M.L. policy provided an additional reason for giving judgment for C.M.L. It should be added that the learned trial judge found that Mr. Deaves was quite honest as a witness, and made no attempt to deceive anybody. In accordance with these findings, he gave judgment for C.M.L. in action No. 929. In action No. 506 he held S.G.I.O. bound to indemnify the plaintiffs and found in favour of C.M.L. in the third party proceedings. He assessed the amount of the plaintiffs' loss as follows:

Building $23,522 Machinery and plant 3,987 Stock in trade 2,408 Total $29,917

He included in the amount of machinery and plant $23.20 in respect of lost cheque books and stationery; in the S.G.I.O. policy, unlike the C.M.L. policy, there is no item expressly covering a loss of stationery, etc. Having regard to the limits to the liability in respect of each item fixed by special condition 3 of the S.G.I.O. policy, he gave judgment for the plaintiffs in action No. 506 against S.G.I.O. for $20,987 plus interest.

An appeal was brought to the Full Court of the Supreme Court by S.G.I.O. in action No. 506 and by Mr. and Mrs. Deaves in action No. 929. Both appeals were dismissed. On 24th October 1977, Mr. and Mrs. Deaves gave notice of appeal to this Court from the judgment of the Full Court in action No. 929. An appeal was also instituted by S.G.I.O. in action No. 506 and that appeal does not seem to have been formally abandoned. However on 6th April 1978 S.G.I.O. wrote informing C.M.L. that it did not intend to proceed with its appeal. S.G.I.O. has since discharged by payment the judgment given in action No. 506.

Before us the respondent applied, out of time, for leave to file a notice of objection to the competency of the appeal. Having regard to the finding of Andrews J. already mentioned, the total value of the property insured at the time of the loss was $29,917 (to which no doubt should be added $23.20) of which the maximum amount recoverable under the C.M.L. policy, assuming it to have been valid, would appear to have been $26,395; that was because the value of the building exceeded the amount of $20,000 itemized in the policy. However, it was submitted, since $20,987 had already been recovered from S.G.I.O., the amount in issue on the appeal was only about $6,000. Perhaps it should be added that the interest of Mr. and Mrs. Willis in the property was found to be $18,626, so that if the C.M.L. policy covered only the interest of Mr. and Mrs. Deaves the amount involved would be considerably less than $20,000. It was therefore said that there was no right of appeal.

Under s. 35 (3) of the Judiciary Act 1903 Cth, as amended, subject to an immaterial exception:

an appeal may be brought as of right from a final judgment of a Full Court of the Supreme Court of a State given or pronounced -

(b) in any proceedings in which the matter in issue amounts to or is of the value of $20,000 or upwards or which involve directly or indirectly a claim, demand or question to or respecting any property or any civil right amounting to or of the value of $20,000 or upwards.

In the present case, where the judgment appealed from was given in favour of the defendant, we are concerned only with par. (b). In action No. 929 the appeal is brought from a final judgment of the Full Court in proceedings in which the amount claimed, according to the pleadings, was $30,000. If the amount by which the appellants are prejudiced by the judgment is to be determined by what they claim, that is of course the end of the objection. Further, the amount of the loss alleged to be covered by the indemnity exceeded $20,000. It was not right to say that the fact that there was a claim against S.G.I.O. for indemnity against part of the loss meant that the amount in issue in the C.M.L. proceedings was reduced by the amount claimed from S.G.I.O. It was disputed that S.G.I.O. was liable, and the claim against C.M.L. to be paid the full amount of the loss was made on the assumption that S.G.I.O. would escape liability. The fact that the interest of the appellants in the property was worth less than $20,000 is immaterial, since the appellants' claim was to recover the full value of the property lost, no doubt on the basis that the C.M.L. insurance was intended to enure for the benefit of the mortgagees as well as for the benefit of Mr. and Mrs. Deaves. At the time judgment was pronounced, and also at the time when the notice of appeal was given, the proceedings involved directly a claim to a civil right amounting in value to more than $20,000. The appeal was therefore competent. The fact that S.G.I.O. has subsequently made a payment in respect of part of the loss cannot retrospectively invalidate the appeal. It is unnecessary to consíder further the effect of s. 35 (3) since in my opinion an objection to competency would be bound to fail. The application to file a notice of objection should accordingly be refused.

A further contention made on behalf of the respondent may conveniently be noticed before proceeding to the substance of the appeal. It was said that the judgment in action No. 506 gave rise to an issue estoppel. Certainly in that action the court did determine, as between the parties to this appeal as well as between other parties, that S.G.I.O. was, and C.M.L. was not, bound to indemnify the appellants, but that determination had not been made before the issues were decided in action No. 929: judgment in both actions was given at the same time. However, it is unnecessary to consider the rules relating to issue estoppel, because as argument proceeded counsel for the respondent made it clear that they were relying not on that doctrine but on the principle of election discussed in Petersen v. Moloney. In that case it was said [1] : " it is a well-settled principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election."

It was submitted that the appellants' claims against S.G.I.O. and C.M.L. were in the alternative, and that by obtaining judgment against, and accepting payment from, S.G.I.O. the appellants were debarred from recovering from C.M.L. The principle on which the cases discussed in Petersen v. Moloney [1] , rest is that there "must not be more than one judgment where there is only one antecedent obligation"; in other words, there cannot be two judgments in existence for the same debt or cause of action: cf. Kendall v. Hamilton [3] . In the two actions brought in the present case two quite distinct causes of action were asserted - one based on a contract with S.G.I.O. and one on a contract with C.M.L. As a matter of law S.G.I.O. and C.M.L. were not liable in the alternative: a person who has effected two policies of insurance may, in the event of loss, recover from both insurers, although he cannot recover more than the total amount of his loss. It may be that the effect of condition 3 in both policies is that the appellants cannot succeed against both insurers, but that is a matter to be decided in each action and it does not mean that there is only one obligation which can be given effect by only one judgment. For these reasons the argument of the respondent that the judgment in action No. 506 debarred the appellants from recovering from C.M.L. cannot be accepted.

1. (1951) 84 C.L.R. 91, at pp. 102-104. 2. (1879) 4 App. Cas. 504, at p. 515.

C.M.L. raised three main defences to the appellants' action: (1) the proposal formed the basis of the policy, and there had been a breach of the warranty which it contained, which was expressed by the letters "N/A" and had the same force as if it were incorporated in the policy; (2) there was a non-disclosure of two material circumstances, viz., that the property was the subject of another insurance and that the property was mortgaged; and (3) condition 3 of the policy was broken. Notwithstanding the conclusions reached in the Supreme Court, I am not persuaded that the first and second of these defences should prevail. The policy did not expressly incorporate the proposal, but C.M.L. relied upon the authorities which are cited in MacGillivray and Parkington on Insurance Law, 6th ed. (1975), par. 815, for the following proposition:

In marine insurance it is a statutory rule that an express warranty must be stated in the policy or incorporated into it by words of reference appearing in the policy itself, and this is only fair to the assured who would perhaps otherwise forget, if not possessing a copy of the proposal form, what he had warranted in it. This does not now appear, however, to be the general rule in non-marine insurance, where it is sufficient for an insurer to obtain the signature of the applicant to a declaration saying that, "This proposal is to serve as the basis of the contract," whereupon the warranty is an effective term of the contract of insurance even if not expressly mentioned in the policy when that is issued. The learned authors go on to say that it is not clear what the rationale for this practice is. The decision of this Court in Australian Provincial Assurance Association Ltd v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. [4] would appear to establish that a policy of non-marine insurance cannot be regarded as having incorporated a declaration in a proposal, simply because the insured has signed the declaration; see also Kazacos v. Fire and All Risks Insurance Co. Ltd. [5] . We were not referred to any provision of the policy, or other circumstances of the case, that might have supported the conclusion that the declaration was incorporated in the policy in the present case. The question whether there was a failure to disclose the existence of the S.G.I.O. insurance depends on whether the knowledge of the representative who discussed the matter with Mr. Deaves can be imputed to C.M.L., and it appears to me that in the circumstances to which I have referred it was the duty of the representative to place at the disposal of C.M.L. the knowledge that came to him as a result of the conversation. It is true that Mr. Deaves did not disclose the existence of the mortgage, but the authorities suggest that persons seeking insurance are not bound, in the absence of a specific question, to disclose that the property is subject to mortgage (see MacGillivray and Parkington, op. cit., par. 783) and no evidence was led in the present case to suggest that Mr. Deaves was questioned on the point. However, for the reasons which will appear, it is unnecessary for me to express a final conclusion on any of these matters. 1. (1932) 48 C.L.R. 341. 2. (1970) 92 W.N. (N.S.W.) 397, at pp. 400-401.

The real obstacle in the path of the appellants is provided by condition 3. It is not in contest that the appellants did not give to C.M.L. written notice of the insurance effected with S.G.I.O. or that particulars of the S.G.I.O. insurance were not stated in or indorsed on the policy by or on behalf of C.M.L. It was argued by counsel for the appellants that since both policies contained the same condition, the two conditions were mutually destructive, so that both insurers were liable, subject to ratable contribution. This argument was based on Weddell v. Road Transport and General Insurance Co. Ltd. [6] , a decision followed in Austin v. Zurich General Accident and Liability Insurance Co. Ltd. [7] . In Weddell's Case the claimant held a policy of motor car accident insurance which contained an extension clause covering relatives and friends of the claimant while driving his car, "provided that such relative or friend is not entitled to indemnity under any other policy". The policy also contained a ratable contribution clause, which, however, was expressed to be subject to the provision already mentioned. The claimant's brother also held a motor car policy, which was extended to cover him while driving a car not belonging to him, "if no indemnity is afforded the insured by any other insurance". There was no ratable contribution clause in that policy. The brother was injured while driving the claimant's car, and it was held that the claimant's insurer was liable. Rowlatt J., speaking of the extension clauses, said [8] :

In my judgment it is unreasonable to suppose that it was intended that clauses such as these should cancel each other (by neglecting in each case the proviso in the other policy) with the result that, on the ground in each case that the loss is covered elsewhere, it is covered nowhere. On the contrary the reasonable construction is to exclude from the category of co-existing cover any cover which is expressed to be itself cancelled by such co-existence, and to hold in such cases that both companies are liable, subject of course in both cases to any rateable proportion clause which there may be. The clauses there considered were different from condition 3 in the present case. In Weddell's Case the condition contained in each policy exempted the insurer from liability for a specific loss if an indemnity against that loss was afforded by another insurance. To avoid the unjust result that neither insurer would be liable, the provision was construed as not applying where the other insurance contained a similar provision, for in such a case neither policy afforded "indemnity" within the meaning of the other. 1. [1932] 2 K.B. 563. 2. [1944] 2 All E.R. 243. 3. [1932] 2 K.B., at p. 567.

Condition 3 on the other hand does not prohibit double insurance, or exempt the insurer from liability if double insurance exists, but requires the insured to disclose in writing any other insurance and requires particulars thereof to be stated in or indorsed on the policy by the insurer, and avoids liability unless those things are done. The effect of such a condition was considered in Steadfast Insurance Co. Ltd. v. F. & B. Trading Co. Pty. Ltd. [9] . In that case, during the term of a policy of fire insurance which contained a condition identical with condition 3, a cover note was issued by another insurer (Queensland Insurance) with respect to the same risk. The cover note was expressed to be "subject to the terms and conditions of this company's policy", and the policies issued by Queensland Insurance also contained a condition in the same terms as condition 3. No notice in writing was given to either insurer. The property was destroyed by fire and it was held that the insured had not lost the benefit of the first policy. The reasons for this conclusion were as follows. First, it was held, an insurance is "effected" within the meaning of a clause such as condition 3 only when what has been done attaches risk of loss to another insurer; in other words, if the contract with the other insurer contains a condition whose effect, in the circumstances, is that that insurer is at no time liable to indemnify the insured, the making of that contract is not the effecting of an insurance within the meaning of condition 3 [10] . Secondly, the effect of condition 3 was that because the claimants did not give Queensland Insurance notice of the earlier policy, Queensland Insurance was at no time under a liability to indemnify the claimants, so that the obtaining of the cover note did not constitute the effecting of an insurance covering the property issued under the earlier policy. Condition 3 was therefore no answer to the claim under the first policy [11] . It was submitted on behalf of the appellant that the fact that a cover note only was issued in that case distinguished it from the present case. The fact that a cover note was issued raised an additional question, viz., whether the cover note was subject to condition 3, or at least to that part of the condition which required written notice to be given, but once that question had been answered in the affirmative the fact that the second contract was in the form of a cover note was immaterial. The case is direct authority for the proposition that in the present case, unless the S.G.I.O. policy had been cancelled, the failure to give notice in writing of that insurance to C.M.L., and to state or indorse the particulars in or on the C.M.L. policy, entailed the consequence, subject to any question of waiver, that C.M.L. did not become liable under its policy - the condition on which its liability depended would not have been fulfilled in those circumstances. On this view, condition 10, providing for contribution, is to be reconciled with condition 3 by regarding the former condition as applying to other insurances of which notice has been given, and particulars of which have been stated in or indorsed on the policy. It further follows of course that condition 3 of the S.G.I.O. policy provided no answer to a claim on that policy, since no insurance had subsequently been effected.

1. (1971) 125 C.L.R. 578. 2. (1971) 125 C.L.R., at pp. 581-582; 587-589. 3. (1971) 125 C.L.R., at pp. 583-584; 587-589.

The question that then arises is what was the effect of the attempted cancellation of the S.G.I.O. policy on 31st May 1974. It is perfectly clear that Mr. Deaves had no authority to act on behalf of Mr. and Mrs. Willis in cancelling the S.G.I.O. policy. So far as Mr. and Mrs. Willis were concerned, the cancellation could not be effective, and the policy remained on foot. However, if the policy was terminated in so far as it insured the interest of Mr. and Mrs. Deaves, it might be possible to say that condition 3 provided no answer to C.M.L. That is because although condition 3 speaks of an insurance effected "covering any of the property hereby insured" it should be understood as referring to another insurance on the same interest: see Western Australian Bank v. Royal Insurance Co. [12] ; Portavon Cinema Co. Ltd. v. Price and Century Insurance Co. Ltd. [13] ; North British and Mercantile Insurance Co. v. London, Liverpool, and Globe Insurance Co. [14] and Scottish Amicable and Heritable Securities Association Ltd. v. Northern Assurance Co. [15] . A policy in favour of the mortgagees alone would not cover the same interest as a policy in favour of the mortgagors, unless the latter policy was intended to be for the benefit of the mortgagees and they had an interest in it. If therefore Mr. Deaves had cancelled the S.G.I.O. policy in so far as it applied to himself and his wife, and if Mr. and Mrs. Willis had no interest in the C.M.L. policy, there would at the time of the loss have been no other insurance covering any of the property insured within the meaning of condition 3. On those two assumptions, condition 3 would not have prevented Mr. and Mrs. Deaves from recovering under the C.M.L. policy.

1. (1908) 5 C.L.R. 533, at pp. 551, 559-560, 563-564. 2. [1939] 4 All E.R. 601, at p. 604. 3. (1877) 5 Ch. D. 569. 4. (1883) S.C. 11 (R.) 287.

However, in my opinion the purported termination by Mr. Deaves of the contract of insurance with S.G.I.O. was entirely ineffective. It goes without saying that one party to a contract cannot bring it to an end at will unless the contract itself permits that to be done. By condition 5 of the S.G.I.O. policy the insurance might be terminated "at the request of the insured". The insured were Mr. and Mrs. Deaves and Mr. and Mrs. Willis, but no request was made by or on behalf of Mr. and Mrs. Willis.

It is true that the policy was not one of joint insurance so far as the "joint owners" on the one hand and the mortgagees on the other were concerned. Of course Mr. and Mrs. Deaves had a joint interest, and so did Mr. and Mrs. Willis, but the interests as between Mr. and Mrs. Deaves and Mr. and Mrs. Willis were diverse, and this meant that the policy was a composite one, insuring the two sets of parties in respect of their respective interests: General Accident Fire and Life Assurance Corporation Ltd v. Midland Bank Ltd. [16] . It may be assumed, without deciding, that for certain purposes, e.g., payment of the indemnity, the word "insured" in the policy should be regarded as meaning the insured "for their respective rights and interests", although those words do not appear in the policy. In my opinion it does not follow that some of the insured may terminate the policy so far as it affects their respective rights and interests without the consent of the other insured. On termination the insurer is entitled, under condition 5, to retain the customary short period rate for the time the policy has been in force. There is nothing in the policy to indicate the values of the respective interests of the mortgagees and the owners, and there are therefore no means of determining how much of the premium should be attributed to one group of interested parties and how much to the other. The amount to be refunded to Mr. and Mrs. Deaves, if they cancelled the policy so far as it concerned their interest, was therefore not susceptible of calculation by the insurer. Further, although the policy is a composite one, all four insured are parties to it; the policy may embody two insurances, but it constitutes one contract. It would be contrary to principle to allow one insured to withdraw from a contract of insurance, thus leaving the insurer bound to indemnify another insured only - a liability the insurer might not have been prepared to assume, if it had been proposed in the first place. In my opinion a termination under condition 5 can only be effected at the request of all the insured or at the option of the insurer. In the present case Mr. and Mrs. Willis never did consent to the termination - indeed they were unaware that it was proposed. S.G.I.O. made it clear that the consent of Mr. and Mrs. Willis was necessary before the termination could be effected, and neither terminated the policy, nor did anything that could reasonably have been understood as amounting to its termination.

The S.G.I.O. policy was, in my opinion, never terminated, but was still binding and effective at the date of the fire. It follows that no liability under the C.M.L. policy ever arose, unless C.M.L. waived condition 3 of the policy. I am not altogether sure that the question of waiver is now open for consideration, since it was not pleaded in the appellants' reply, and it does not appear that evidence was directed to it in the Supreme Court. I have in any case reached the conclusion that the appellants cannot succeed on that issue. The representative of C.M.L. was aware of the existence of the S.G.I.O. policy, but had been given to understand that Mr. Deaves intended to cancel it. The statement by the representative that Mr. and Mrs. Deaves were covered immediately was made after Mr. Deaves had said that he wanted to go in and cancel the S.G.I.O. policy. Since no mention had been made to the representative of the existence of a mortgage, the representative had no reason to assume that the consent of anyone else was required before the cancellation could be made effective. The nature of the doctrine of waiver was examined in Craine v. Colonial Mutual Fire Insurance Co. Ltd. where the Court said [17] :

"A waiver must be an intentional act with knowledge" First, "some distinct act ought to be done to constitute a waiver" ; next, it must be "intentional", that is, such as either expressly or by imputation of law indicates intention to treat the matter as if the condition did not exist or as if the forfeiture or breach of condition had not occurred; and, lastly, it must be "with knowledge", an essential supported by many authorities It is no doubt correct, speaking generally, to say that "The making or acknowledgement of the contract with knowledge of other insurance would be a waiver of the breach": MacGillivray and Parkington, op. cit., par. 1997. If the knowledge of the agent is imputed to C.M.L., that company knew, at the time the proposal was made and the premium was paid, that another insurance was subsisting. If a cover note was issued on 30th April 1974, there might then have been a waiver of the requirement contained in condition 3 that notice in writing should be given of the earlier insurance. In those circumstances the insurer would have intended to waive compliance with the condition, on the understanding that the earlier policy would be terminated. However, Mr. Deaves did not inform C.M.L. that the S.G.I.O. policy had not been terminated. There is no evidence from which it is possible to infer that when the policy was issued C.M.L. knew or had means of knowledge that Mr. Deaves had failed to carry out his expressed intention to cancel the S.G.I.O. policy, and that that policy was still subsisting. If there was a cover note, which created a binding insurance, it was of course superseded by the policy which, however, was not issued with knowledge of the continued existence of the S.G.I.O. insurance. It is not possible to infer that by issuing the policy C.M.L. indicated an intention to treat the matter as if it were not a condition of its liability that particulars of any other insurance should be stated in or endorsed on the policy, before the occurrence of the loss or damage. It would not be right in my opinion to conclude that there had been a waiver by C.M.L. when the policy was issued or at any time thereafter. 1. (1920) 28 C.L.R. 305, at p. 326.

For these reasons I am constrained to the conclusion that condition 3 of the policy had the effect that C.M.L. never came under any liability to Mr. and Mrs. Deaves. I reach this conclusion with some regret. Mr. Deaves was somewhat dilatory, and he was oblivious of his obligations to Mr. and Mrs. Willis, but on the evidence there is nothing to suggest that he was intentionally deceitful. However, the condition of C.M.L.'s liability, expressed in condition 3, was not satisfied.

In 1974 Mr. and Mrs. Deaves were the owners of a service station at Amberley, in Queensland. Early in that year they decided to increase the amount of existing insurance cover on their service station. Mr. Deaves visited the local office of their fire and public risk insurers, the S.G.I.O., and was told that a representative would call to arrange for an increased cover. No-one called, despite a second visit by Mr. Deaves to the S.G.I.O. office, but a representative from another insurance company, the C.M.L., did call, for a quite different purpose: to see if Mr. Deaves wished to increase the amount of a policy on his life issued by the C.M.L. Mr. Deaves declined but, being dissatisfied with the lack of response from the S.G.I.O., he asked the C.M.L. representative whether his company had "fire cover and that sort of thing for the shop", mentioning the S.G.I.O.'s failure to send a representative to see him. According to Mr. Deaves the C.M.L. representative replied that his company did "have fire policies and public risk and that" but that he personally attended only to life insurance; however he would get another representative who did deal with such policies to call on the Deaves.

A week or so later another C.M.L. representative called at the service station, armed with a fire insurance proposal form and other forms, and talked to Mr. Deaves about insurance cover. Mr. Deaves told him of his wish to increase the total amount of his excisting fire and public risk cover on the service station and the S.G.I.O.'s failure to attend to his request that someone from that office call to arrange for an increase in the cover afforded by his existing S.G.I.O. policies. They discussed the allocation of cover and several proposal forms were then filled in by the representative.

Contained in the fire insurance proposal was the following request for information:

Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal. In the space provided in the proposal for a response to this request the representative wrote "N/A", an abbreviation for "not applicable". What caused the representative to so describe this request for particulars does not expressly appear from the evidence. The C.M.L. called no evidence about any aspect of the transaction and Mr. Deaves, who did give evidence, could only say that while the representative was filling in the proposals he questioned Mr. Deaves from time to time about the particulars to be inserted in them, Mr. Deaves supplying answers to those questions and then signing the proposals when they had been completed by the representative. He had no recollection of that particular item in the fire insurance proposal or of any question about it. Mr. Deaves said to the representative "Am I covered from today because I would like to go in and cancel the policies at the S.G.I.O.?" He was told he would be covered by C.M.L. from that day. He then and there paid the premiums for the policies to be issued by C.M.L. and received a receipt. It does not appear whether then or later he received any cover note from C.M.L. The S.G.I.O. fire policy which Mr. Deaves intended to cancel showed as the insured Mr. and Mrs. Deaves as joint owners and a Mr. and Mrs. Willis as mortgagees but Mr. Deaves does not appear to have appreciated this fact or at least to have attached any significance to it. He did not mention it to the C.M.L. representative. Mr. and Mrs. Willis were in fact mortgagees of the service station property.

Some time after the visit by the C.M.L. representative, perhaps as long as a month afterwards, perhaps only a day or so later, Mr. Deaves called at the S.G.I.O. office again, said that he wished to cancel the S.G.I.O. policies and signed forms presented to him for that purpose. In the form he signed relating to the fire policy he wrote "Please cancel above policy any refund to above address". The form bears date, in another's hand, "31st May 1974" and contains a reference, in its heading, to the fire policy here in question. Because he did not subsequently receive any return of part premium from S.G.I.O. in respect of this policy, as he did for other of the cancelled policies, he later spoke to the S.G.I.O. office by telephone and was told that S.G.I.O. had to get permission from the mortgagees of the service station property before that policy could be cancelled. He was neither asked to nor did he do anything himself about obtaining the mortgagees' consent, nor did he inform C.M.L. about any of this. Whatever S.G.I.O. may have sought to do about obtaining the consent of the mortgagees, it proved abortive since Mr. and Mrs. Willis in fact heard nothing from S.G.I.O.

Some months later the Deaves' service station burnt down and they immediately claimed on their C.M.L. fire policy. Then followed many months' delay while the C.M.L., although not rejecting the claim, neither paid under it nor accepted any liability in respect of it. What appears to have concerned the C.M.L. was the concurrent existence of two fire policies over the property, their own and the original S.G.I.O. policy, coupled with the fact that the S.G.I.O. policy insured not only the Deaves' interest but also that of the mortgagees. This latter fact was, in a sense, the cause of the former since it was the existence of the mortgagees' interest that caused the S.G.I.O. to refrain from giving immediate effect to Mr. Deaves' notice of cancellation of the S.G.I.O. policy. Ultimately, almost a year and a half later, the C.M.L. asserted, apparently for the first time, that the Deaves lacked an insurable interest in the service station because the amount of indebtedness owed by them to Mr. and Mrs. Willis, and secured by mortgage over the service station, exceeded the value of the property insured. Although persisted in for some time, this contention seems later to have been abandoned in favour of other grounds for resisting the Deaves' claim to indemnity. These new grounds ultimately became the defences upon which the C.M.L. relied when sued by the Deaves.

The action against C.M.L. which is the subject of this appeal was the second of two which, in 1976, the Deaves instituted in the Supreme Court of Queensland. Earlier that year they and Mr. and Mrs. Willis joined in proceedings against S.G.I.O., claiming under the fire policy issued by it, that is to say, under the original policy in respect of which Mr. Deaves had given the purported cancellation notice. The two actions were heard together, C.M.L. being joined by S.G.I.O. as a third party in the action against it, seeking contribution from C.M.L. The Deaves and Mr. and Mrs. Willis succeeded in their action against S.G.I.O. but the Deaves failed in their action against C.M.L., which was also successful in its defence of the third party claim made against it. Appeals by S.G.I.O. and by the Deaves were dismissed by the Full Court and it is from the dismissal of the Deaves' appeal in their action against C.M.L. that they now appeal to this Court. S.G.I.O. has not appealed from the order of the Full Court and the Deaves' judgment against it has been satisfied by payment.

As mentioned earlier, two main grounds of defence are relied upon by C.M.L. The first relies upon the response of "N/A", not applicable, made to the request in the proposal for particulars of other sums insured on the service station. The second, not wholly unconnected since it also relates to the continued existence of the S.G.I.O. policy, relies upon condition 3 of the C.M.L. policy, under which all benefit is declared forfeit if default be made in notification to C.M.L. of any other insurances upon the property insured. I go first to the question raised by the response "N/A", appearing in the proposal.

The first step must be to determine what was conveyed by "not applicable" when inserted, in abbreviated form, in the C.M.L. proposal, and for this purpose I put aside for the moment the fact that it was the C.M.L.'s own representative who was the author of the phrase. The words themselves are a simple, although unexplained, assertion that the request for particulars does not apply to the Deaves' proposal for fire insurance. Being unexplained, they convey no more than that, although they necessarily give rise to speculation, not as to their meaning, which is clear, but as to what lies behind it: as to why this request for particulars should be inapplicable to the proposal in question.

Be that as it may, the response "not applicable" did not, in my view, amount to a negative response either in form or in substance. It did not convey the meaning that no sum was already insured on the property. That fact was, no doubt, one of the several possible reasons which, as a matter of speculation, might be thought to lie behind the stated inapplicability but it is no more than that. In fact, of course, it is clear that the author of the phrase, the C.M.L. representative cannot have had that in mind as constituting the reason for inapplicability: on the contrary, a fact uppermost in his mind must have been the existence of S.G.I.O.'s insurance cover, which he now had the opportunity of replacing with cover provided by his own company.

The response "not applicable" not itself amounting to the negative statement that there was no sum already insured on the property, the question arises whether the response may nevertheless be deemed to be such a negative statement. In the margin of the proposal appears, in large type, the words "Any questions on this proposal not replied to are to be deemed answered in the negative". Even assuming in favour of the respondent that these words extend not only to questions duly phrased in interrogative terms, but also to a request for information worded, as here, in the imperative, this is not a case of a question "not replied to". A reply was in fact provided and the form which it took left no room for the operation of this deeming provision, which would have resulted in a deemed response bearing a quite different meaning - Saunders v. Queensland Insurance Co. Ltd. [18] per Starke J., per Dixon J. [19] and per Evatt J. [20] . I may add that it is, in any event, by no means clear what would be the effect of any deemed "answer in the negative" when what is in issue is a request for particulars rather than a direct question. To say this is, perhaps, only to suggest that it may be unduly generous to C.M.L. to make the assumption in its favour to which I have referred in the opening words of this paragraph.

1. (1931) 45 C.L.R. 557, at p. 563. 2. (1931) 45 C.L.R., at p. 567. 3. (1931) 45 C.L.R., at pp. 569-570.

The result is, therefore, that neither expressly nor by a process of deeming can it be said that the response "not applicable" amounted to a statement that no other insurance existed in respect of the Deaves' service station. Accordingly it did not constitute a misrepresentation to that effect. Nor was it any misrepresentation according to the meaning which it truly bears; that is, as a statement that the particulars sought were, for some unspecified reason, not applicable to the Deaves' proposal for insurance. To the extent that Mr. Deaves was in any way competent to declare that the particular information sought by C.M.L. was inapplicable, he can but have been expressing his own view as to its applicability, a view which C.M.L. might not, of course, have shared, although its representative, who supplied the answer, no doubt did. The statement seems to me, from its very nature, to be no more than an expression of opinion, capable of involving a misrepresentation only if the opinion so expressed was not honestly held - Anderson v. Pacific Fire and Marine Insurance Co. per Willes J. [21] . In fact the statement appears to have reflected quite accurately Mr. Deaves' state of mind, nothing in the evidence would support a view to the contrary; the policies inquired about were, after all, policies which, as he then thought, he was about to cancel.

It should not pass unnoticed that if the response, "N/A", attracted any attention when the proposal found its way to the offices of C.M.L., the slightest inquiry from its representative would have revealed the reason for the alleged inapplicability. Whether any such inquiry was made must remain unknown since C.M.L. chose to call no evidence on any aspect of the transaction.

If the response "not applicable" involved no misrepresentation it matters not whether, as a result of the declaration and warranty clause appearing in the proposal and despite the absence of any "basis clause" in the policy itself, that response in fact became a contractual condition of the policy of insurance. If it did, it was not untrue and gave rise to no breach of condition. Accordingly it is unnecessary for me to say anything concerning the seeming divergence between English authority and that represented by the decision of this Court in Australian Provincial Assurance Association Ltd. v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. [22] .

In my view, the statement that the seeking of particulars as to other insurance was "not applicable" did not become any the less true when, some considerable time after the proposal was furnished to C.M.L., it became known to the Deaves that there was some hold-up in the cancellation of the S.G.I.O. fire policy, due to the need for the mortgagees' consent. It is clear from Mr. Deaves' evidence that he did not appreciate the very real interest which the mortgagees had in retaining insurance, in their names, over the mortgaged premises. Consequently, to him the news that their consent to the cancellation of the S.G.I.O. fire policy was necessary appears to have represented no real impediment to his plan to cancel the S.G.I.O. policy but only a factor which explained the delay in his receipt from S.G.I.O. of the refund of part premium.

No doubt one element which went to make up the unspecified reason lying behind the response "not applicable" was the belief of the Deaves that it lay within their power to cancel the S.G.I.O. policy. On the view which I take of the representation involved in the Deaves' response it matters not whether that belief was in fact correct in law, since it formed no part of the response itself, being no more than an element going to make up the reason which prompted that response.

Misrepresentation aside, there remains the question of non-disclosure. Since this was a proposal for insurance the Deaves were obliged to disclose all matters material to the acceptance of the risk or to the fixing of the premium. In the present case any doubt as to the materiality of the existence of other insurance is, I think, answered by the fact that C.M.L. in its proposal expressly made its existence the subject of a request for particulars - Glicksman v. Lancashire and General Assurance Co. Ltd. [23] per Scrutton L.J. and, on appeal, per Viscount Dunedin [23a] . While this may not be conclusive - see Babatsikos v. Car Owners' Mutual Insurance Co. Ltd. [23b] per Pape J., it is enough in the present case: as Cussen J. said in Dalgety & Co. Ltd. v. A.M.P. Society (42c) one may be one's own juryman in obvious cases of materiality and this is such a case. No evidence is necessary to establish that, whatever be the appropriate criterion of materiality and whether involving the prudent insurer or the reasonable proponent for insurance, the existence of a substantial degree of double insurance is a material circumstance.

1. [1925] 2 K.B. 593, at p. 609. 2. [1927] A.C. 139, at p. 144. 3. [1970] V.R. 297, at pp. 306-307.

Most relevant to the issue of non-disclosure is, of course, the fact that, far from there having been either active concealment or passive failure to disclose on the part of the Deaves, they went out of their way to thrust upon C.M.L. knowledge of the relevant fact, that the service station was already insured by S.G.I.O. Mr. Deaves first informed the C.M.L.'s life policy representative of the fact in explaining why he was seeking fire cover from C.M.L. That this information found its way to the administration of C.M.L. may be inferred, in the absence of evidence suggesting an alternative explanation, from the subsequent visit by the second C.M.L. representative. To him a disclosure of the existence of the S.G.I.O. cover was also made. Its details may not have been conveyed but at least the fact that it was for a lesser amount than was to be sought from C.M.L. is made clear. Indeed, it may be inferred that the response "not applicable" which that representative supplied in filling in the proposal was occasioned by his knowledge of the S.G.I.O. cover combined with his knowledge of the Deaves' stated intention of cancelling that cover after cover with C.M.L. had been established.

In these circumstances the evidence refutes the suggestion that there was non-disclosure by the Deaves of the existence of insurance cover provided by the S.G.I.O. policy. To say this is not, I think, to run counter to the findings of fact of the primary judge. As I read his judgment his Honour did not direct his mind to the question of the authority of the C.M.L. representatives to receive on behalf of C.M.L. relevant information from Mr. Deaves. His Honour set out passages from Mr. Deaves' evidence and said of them that they constituted no proof that the C.M.L.'s fire policy representative was other than the Deaves' agent "for the purpose of filling in answers to questions in the proposal form". His Honour had earlier observed that the onus lay on the Deaves of showing that the C.M.L. representative "was in fact acting on behalf of C.M.L. so as to bind it" and so as to make his knowledge that of C.M.L. itself, adding that proof of "authority to issue cover notes, waive payment of premiums and issue receipts, does not alone, discharge such an onus". His Honour relied upon Jumna Khan v. Bankers and Traders Insurance Co. Ltd. [24] and Biggar v. Rock Life Assurance Co. [25] in support of these propositions. On appeal, Hoare J., who alone dealt with this aspect, seems to have taken a somewhat similar view, saying that no inference might be drawn that the representative was "in effect the agent for the insurer as to the knowledge of the insurer relating to the existing insurance" because there was not sufficient evidence to that effect.

1. (1925) 37 C.L.R. 451, at p. 454. 2. [1902] 1 K.B. 516, at pp. 524-525.

Jumna Khan's Case is no authority for the proposition for which it is thus cited. In that case the insurance company's agent obtained the appellant's signature to a blank form of proposal and, having sent him away without asking him any questions at all, then had his own clerk fill in the blank proposal. As filled in, it answered in the negative questions concerning previous fires and concerning fire risk having previously been declined. On both counts the answers were untrue. The policy which issued stated that the particulars in the proposal, to which the insurance was made subject, should be deemed to have been inserted or furnished by the assured. Both in this Court and when the case was earlier on appeal in the Full Court of the New South Wales Supreme Court sub. nom. Bankers and Traders Insurance Co. v. Jumna Khan [26] no question arose of whether knowledge of the agent, gained from the appellant, might be attributed to the insurer and this for the good reason that the agent had gained no relevant knowledge but, as Higgins J. observed [27] , had simply put into the proposal "some statement as having been made by the plaintiff which was not made by him". The case was in no way concerned with an agent's authority to receive, on behalf of the insurer, information from the applicant for insurance relevant to the risk. It turned rather upon the question whether the agent or his clerk might be ths insurer's agent in filling in the proposal form. It decided, consistently with much earlier authority, that in doing so they acted as the appellant's agent, so that the insurer could not itself be fixed with responsibility for false statements in the proposal.

1. (1925) 25 S.R. (N.S.W.) 422. 2. (1925) 37 C.L.R., at p. 454.

Jumna Khan's Case is just such a case as those discussed in MacGillivray and Parkington on Insurance Law, 6th ed. (1975), pars 946-948, of which Biggar's Case is a leading example. A conflict of authority, represented on the one hand by Bawden v. London, Edinburgh and Glasgow Assurance Co. [28] and on the other by Biggar's Case and by Scottish and United States decisions to the like effect, for some time existed concerning insurers' agents who, while having knowledge of the true position, incorrectly fill in for an intending insured a proposal form which the latter signs. In Newsholme Brothers v. Road Transport and General Insurance Co. Ltd. [29] these cases were analyzed in detail by Scrutton L.J. and by Greer L.J. They may be seen to turn on the fact that the assured had signed the proposal containing the untrue information. Because of this fact the agent's knowledge of the truth could not be imputed to the insurer, if for no other reason than because, having signed the proposal "which contains statements in fact untrue, and a promise that they are true, and the basis of the contract (the applicant for insurance cannot thereafter) escape from the consequences of his negligence by saying that the person he asked to fill it up for him is the agent of the person to whom the proposal is addressed" [30] , per Scrutton L.J. Greer L.J. said of such a case [31] "notice to the agent whose duty was to obtain a signed proposal form and send it to the company, was not notice to the company of anything inconsistent with the signed proposal form, and that in filling up the form, whether he mistook the instructions of the insured, or whether he intentionally filled in something different from what he was told, he was not acting as the agent of the company, but as the agent of the insured".

1. [1892] 2 Q.B. 534. 2. [1929] 2 K.B. 356. 3. [1929] 2 K.B., at p. 376. 4. [1929] 2 K.B., at p. 382.

In the present case there was communication to the C.M.L. representative of the facts relating to the S.G.I.O. policy and that communication was unaffected by any untruthful statement contained in the proposal signed by Mr. Deaves. While the agent may have lacked authority from the C.M.L. to fill up the proposal on behalf of the Deaves he nevertheless received, as a part of his function as a representative of C.M.L., information from them relevant to the risk. Having received such information, and the signed proposal not being contradictory of it, the C.M.L. is to be treated as itself possessing that knowledge: an applicant for insurance, having made a disclosure to the insurer's agent, "has a right to expect that the agent will transmit to the insurers all that he has been told and that the agent will do so accurately" (Hardy Ivamy, General Principles of Insurance Law, 3rd ed. (1975), p. 520).

The position in a case such as the present is illustrated by Golding v. Royal London Auxiliary Insurance Co. Ltd. [32] a case typical of the fact situation encountered in the Jumna Khan class of cases but with one added ingredient sufficient to differentiate it from them: after the agent had incorrectly filled in the proposal (in doing which he was held to be acting as the applicant's agent), the applicant noted the error and informed the agent of it before issue of the policy. The agent forgot to pass on this factual correction to the insurer, yet the insurer was held to be fixed with knowledge of the truth because it was one of the duties of the agent to convey the applicant's answers, including a corrected answer, to the insurer. That was enough to prevent the insurer from relying upon the falsity of the original answer which appeared in the proposal, despite the fact that answers in the proposal formed the basis of the policy and if untrue would, regardless of their materiality, avoid the policy.

This not being a case in which the response written into the proposal by the C.M.L. representative was either untrue or otherwise contradictory of what the intending assured told him, the difficulties for a plaintiff who has signed such a proposal, either in blank or after it is completed, and has thereby adopted as his own the incorrect information which it conveys, do not arise. The contrast between such cases and the present case is made by Hardy Ivamy, op. cit., p. 523, when, after dealing with such cases, he says:

Different considerations apply where the proposal, as filled up by the agent, contains no false statements, but the insurers seek to avoid the policy on the ground that some further fact ought to have been disclosed. In this case, the basis of the contract, so far as it rests upon the proposal, is not affected. If the fact has been disclosed to the agent by the proposed assured, or has otherwise come to the agent's knowledge in the course of his employment, there does not seem to be any valid reason why the agent's knowledge should not be imputed to the insurers. Though the agent, in filling up the proposal, may go outside the scope of his authority and become for that purpose the agent of the proposed assured, he remains for all the purposes of his employment the agent of the insurers. The proposed assured is entitled to assume that the agent knows what ought to be stated and what may be omitted, and it is submitted that the proposed assured is not responsible for the agent's failure to pass on the information to the insurers, notwithstanding the fact that the proposal has been filled up by the agent.

It follows, in my view, that C.M.L. must be treated as having knowledge of the existence of a policy issued by S.G.I.O. and providing fire cover in respect of the service station. That knowledge was, it is true, coupled with knowledge of the intention on the part of the Deaves to cancel the S.G.I.O. fire policy. But no change ever occurred in the subsequent intentions of the Deaves such as might require to be communicated to the other contracting party. At all times until the happening of the fire the Deaves intended to cancel the S.G.I.O. policy, all that ever changed was their expectation of early implementation of that intention. The need for the mortgagees' consent was understood by them as a delaying factor, but as no more than that.

For the foregoing reasons I conclude that there was here no want of disclosure of material information by the Deaves to the C.M.L. such as would provide any answer to the Deaves' claim under the C.M.L. policy. Although never to the forefront of the respondent's submissions, it was contended on its behalf that failure to reveal the existence of the Willis mortgage also amounted to non-disclosure. As to this, it is enough to say that the C.M.L. proposal called for no such disclosure, that there is no suggestion that Mr. Deaves was ever asked about the matter and that, in the absence of inquiry, the existence of a mortgage does not appear of itself to be a fact calling for unsolicited disclosure by an applicant for fire insurance (MacGillivray and Parkington on Insurance Law, 6th ed. (1975), par. 783, Hardy Ivamy, op. cit., p. 121).

There remains the question of condition 3 of the C.M.L. policy, which reads as follows:

The Insured shall give notice in writing to the Company of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such Insurance or Insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this Policy shall be forfeited.

The Deaves gave no such notice in writing nor were any particulars stated in or indorsed on the policy before the fire. Is, then, the consequence that all benefit under the policy is forfeited? So argues the respondent and so it has been held below. This is an outcome to which in my view a court should not lightly assent because of the result which it produces. The Deaves had made known to the C.M.L. the existence of the then current S.G.I.O. fire policy, cancellation of which would only be set in train after cover was obtained from C.M.L., and were told by the C.M.L. representative that their service station would be the subject of C.M.L. fire policy cover as from that very day. Nor was this assurance some unauthorized representation by an over-enthusiastic salesman: the C.M.L. policy when it ultimately issued in fact conformed to the representative's assurance. It provided retrospective cover from 30th April 1974, that being the date as from which the proposal form, itself dated 7th May 1974, sought cover. Presumably, it was also the date (otherwise unidentified) on which the C.M.L. fire policy representative saw Mr. Deaves. Thus the C.M.L. accepted a year's premium in respect of the twelve months from 30th April 1974 and granted cover as from that date with knowledge that at that time the S.G.I.O. policy was still current and would continue in force until the Deaves brought about its effective cancellation. It is against this background that the C.M.L.'s reliance upon want of notice in writing of the S.G.I.O. insurance under condition 3 is to be viewed.

It is to just such a situation that the law will apply doctrines of waiver and of estoppel and the requisites of each appear to have been present in the circumstances of this case as it emerges from the evidence - Hardy Ivamy, op. cit. pp. 271-278, MacGillivray and Parkington, pars 890-912, Joske and Brooking, Insurance Law in Australia and New Zealand (1975), pp. 46-51. I do not regard Mr. Deaves' delay in taking the first step towards cancellation of the S.G.I.O. policy as depriving the Deaves of the right to rely on such pleas in answer to condition 3. The evidence discloses no requirement of prompt cancellation imposed by C.M.L. as a condition of the grant of cover as from 30th April. In any event it is not clearly established, either from the oral evidence or from what may be inferred from dates on documents, that there was delay in excess of what must necessarily have been in the contemplation of the parties.

There was, of course, further considerable delay once the cancellation notice was received by S.G.I.O., due to the existence of the Willis mortgage and to the inability of the Deaves to cancel the S.G.I.O. policy, at all events to the extent to which it insured the mortgagees' interest in the service station. Neither this delay nor this inability seems to me to bear at all upon waiver or estoppel in the sene of depriving the Deaves of their right to rely upon either.

What does, I think, on this appeal prevent any such reliance is the fact that neither was pleaded nor does argument appear to have been addressed to them at the trial, despite the passing mention of waiver, in a somewhat different context, appearing in the reasons for judgment of the primary judge. In those circumstances neither can, I think, properly now be relied upon. Either, if pleaded, would have called for extensive evidence from C.M.L. and because neither was in issue in the trial, the whole course of evidence was therefore very materially affected. In these circumstances what is said in the numerous authorities reviewed in Spencer Bower and Turner on Estoppel by Representation, 3rd ed. (1977), pp. 405-408, suffices to exclude them from consideration: it was no doubt in recognition of this that counsel for the appellants founded no argument upon such grounds.

Instead, he sought to answer the respondent's reliance upon condition 3 by the citation ofSteadfast Insurance Co. Ltd. v. F. & B. Trading Co. Pty. Ltd. [34] and reliance upon what was said to be a logical extension of the principle to be deduced from that decision: Weddell v. Road Transport and General Insurance Co. Ltd. [35] was also said to exemplify the principle thus relied upon. These cases can, I think, provide no comfort for the Deaves, for the reasons appearing in the judgment of Gibbs J. in this appeal: no invocation of the equivalent of condition 3, contained in the S.G.I.O. policy, can serve to remove that policy, which had been in full force and effect for some years, from the scene. The Steadfast Insurance Case is authority for the proposition that a second and subsequent policy may be disposed of in that way because, unlike the original policy, the insurer under such second policy "is at no point of time liable to indemnify the insured" and, in consequence, the making of that subsequent policy "does not constitute the effecting of an insurance within the meaning of condition 3" [36] , per Walsh J. The same cannot be said of the original policy: on the contrary, because the subsequent policy was never "effected" for the purposes of condition 3, the original policy, the S.G.I.O. policy, was quite unaffected by what proved to be the insured's nugatory dealings with the second insurer, the C.M.L.

1. (1971) 125 C.L.R. 578. 2. [1932] 2 K.B. 563. 3. (1971) 125 C.L.R., at p. 587.

There are, no doubt, other arguments based upon interpretation of condition 3 which might be urged and which find some support from certain authorities. In Manitoba Assurance Co. v. Whitlam [37] , on very similar facts indeed, a majority of the Canadian Supreme Court held an insured entitled to recover against the later of two insurers, notwithstanding both the presence in its contract of insurance of a condition similar to condition 3 and the insured's failure to give to that second insurer notice of the existence of the first insurance. However only Davies J. founded upon a question of interpretation of the condition, rather than upon doctrines of election and estoppel by conduct, which were in point because of the second insurer's actual knowledge of the existence of the first insurer's policy. Davies J. was able to read the condition as confined to "some attempted or intended double insurance" and as not applying to the intended substitution of one policy for another, involving only some brief or accidental period of overlapping cover. His Lordship also treated the condition neither as a warranty nor as a condition antecedent to the policy attaching but as no more than a collateral stipulation, breach of which would sound only in damages. Some support for the first of these propositions may be gained from occasional dicta which describe clauses very similar to condition 3 as being concerned with double insurance: the judgments in Australian Agricultural Co. v. Saunders [38] provide instances. Attractive as this interpretation may be in its outcome, it does, I think, represent a substantial departure from accepted canons of interpretation. To treat condition 3 as only applicable in such circumstances as his Lordship indicated, the boundaries of which are inherently uncertain, is itself unsatisfactory and the interpretation as a whole, if applied to condition 3, would do violence to its clear language.

1. (1903) 34 S.C.R. (Can.) 191. 2. (1875) L.R. 10 C.P. 668.

Another, and quite different, approach to condition 3, which would also provide an effective answer to the respondent's reliance upon it, may be suggested by the judgment of Lord Denning M.R. in Lickiss v. Milestone Motor Policies at Lloyds [39] . His Lordship was there concerned with the breach of a condition requiring an insured motorist, during the currency of the policy, to give full particulars in writing of certain specified information as soon as possible after the happening of specified events. His Lordship held that, where an insurer already possessed all that information, it could not take advantage of the insured's failure to provide it. He enunciated two positions; that where insurers already had actual knowledge, derived from sources other than the insured, of a relevant fact "it would be a futile thing to require" (the insured) "himself to give them the self-same information. The law never compels a person to do that which is useless and unnecessary" [40] : that a policy condition requiring the giving of written notice was there to ensure adequate advance notice to the insurers and if the insurers in fact obtain such notice from another source "so that they are not prejudiced at all by the failure of the insured himself to tell them, then they cannot rely on the condition to defeat the claim" [41] . His Lordship also relied upon waiver. Danckwerts L.J. agreed "entirely" with Lord Denning's judgment but Salmon L.J., while agreeing in the result because of the waiver point, said that but for it he would have felt obliged to regard the case as one of breach of an absolute obligation which was a condition precedent to the insurers' liability to pay. MacGillivray and Parkington, in par. 644, describes the first of these propositions as "at variance with the established rule of strict and exact compliance with warranties", explaining it as applicable to conditions requiring the insured to perform some duty during the currency of the policy. In the only subsequent case in which these propositions appear to have been referred to, Farrell v. Federated Employers Insurance Association Ltd., Megaw L.J. [42] is most guarded in his reference to them. They do not appear to find support in the Australian authorities and in the present state of the law should not, I think, be applied to a condition such as the present condition 3.

1. [1966] 2 All E.R. 972. 2. [1966] 2 All E.R., at p. 975. 3. [1966] 2 All E.R., at p. 976. 4. [1970] 1 W.L.R. 1400, at p. 1409; [1970] 3 All E.R. 632, at p. 638.

In these circumstances only one possible answer to condition 3 seems to me to remain open to the Deaves, an answer which does not depend upon its interpretation or on any implied limitation upon its effect but rather upon a view of the facts by reference to which it operates which will result in no breach having occurred. For this to be so it will have to be said that Mr. Deaves' cancellation notice of 31st May 1974 was effective to determine the S.G.I.O. policy in so far as it insured his interest and that of his wife in the service station, while leaving insured under that policy the interests of the mortgagees. It will also have to be held that condition 3 has, as it were, an ambulatory operation, the relevant time at which to inquire whether any other policy "already effected" is in existence, of which notice should have been given, being the time of occurrence of any particular "loss or damage" insured against.

There are, I think, difficulties in each of these steps. As to the first, it may be accepted that the S.G.I.O. policy insured the separate interests of the owners and of the mortgagees. Differing views are expressed in judgments of other members of the Court as to whether it was, in those circumstances, possible for the Deaves unilaterally to cancel the insurance of their interest as owners of the property. If it was, the question remains whether they did so. The notice of cancellation purports on its face to be an outright cancellation of the policy, not limited to only one of the several interests insured under it. Yet this was surely both the intention of Mr. Deaves and the understanding of S.G.I.O. The last thing Mr. Deaves had in mind was that that policy should continue in force as to the mortgagees' interest, the Deaves continuing to be liable for premiums thereon while at the same time having to pay premiums on the new C.M.L. policy. These considerations appear to me to present substantial difficulties in giving any effect to the cancellation notice, confined to cancellation of the Deaves' interest under it.

The second step involves other difficulties. What condition 3 calls for is, inter alia, notice in writing of any insurance "already effected", that is effected before the making of a contract of insurance with C.M.L. Once it be established that there was such another insurance, in the present case the S.G.I.O. policy, there arises an obligation to give notice to C.M.L. That the other insurance is later cancelled does not affect that obligation, which arises at the time of entry into the contract of insurance with C.M.L. and subsists thereafter. To understand condition 3 in any other way is to treat it as concerned with insurances in effect as at a particular date, being some date before a relevant happening of loss or damage. But that is consistent neither with the language nor with the apparent intended operation of condition 3.

As to its language, the condition does not limit the obligation to give notice to cases of other insurances current at the time of giving notice. It is, rather, an obligation to give notice, before loss or damage, of other insurances already effected. It is no doubt referring to those policies current at date of issue of the C.M.L. policy but is not otherwise qualified in any way. It may be that so long as notice is given, and the policy is appropriately indorsed, before happening of loss or damage it will not matter that there has been previous delay in notification. But the obligation remains one of giving notice of other policies in existence at the inception of the C.M.L. insurance.

The contrary view is, I think, also inconsistent with what may be seen as the intended operation of condition 3. In so far as it deals with insurances "already effected", it is not concerned with their existence as at any date other than that upon which C.M.L. assumes risk under its policy. If at that date there exists other insurance then, upon written notice of its existence being received by C.M.L., C.M.L. has the option of forfeiting all benefit under its policy. The concern of the condition, in so far as it deals with insurances "already effected", is with other insurances in force when the C.M.L. policy itself comes into force, it is not at all concerned with and does not direct its attention to the subsequent fate of such other insurances "already effected", with how they subsequently fare, with whether they remain current or have been cancelled as at the time when any loss is suffered. The condition does, of course, also concern itself with insurances "subsequently effected" but that is quite another matter.

I am accordingly unable to regard the circumstances of this case as not involving a breach of condition 3. The C.M.L. was, I think, entitled as a matter of law to rely upon that breach, whatever may be thought of the commercial morality of doing so in the circumstances of this case.

In his reasons for judgment Gibbs J. considers in some detail two submissions urged on behalf of the respondent. The first concerns its application to pursue, out of time, an objection to competency: the second relates to what counsel for the respondent initially conceived to be a question of issue estoppel but which in the course of argument resolved itself rather into a matter of election. I agree with all that his Honour says concerning each of these matters.

The appellants, V. J. Deaves and his wife, were at all material times the owners of a property known as Dromeview Roadhouse, Warwick Road, Amberley in Queensland which was destroyed by fire on 4th August 1974. They had mortgaged the property to Mr. and Mrs. Willis, the former owners, to secure payment of part of the purchase price. By the mortgage the appellants covenanted to insure the property against loss or damage by fire, to protect the interest of the mortgagees. The moneys owing by the appellants to the mortgagees were also secured by a bill of sale over plant, equipment and stock. The appellants arranged for the issue of a policy of insurance by the State Government Insurance Office ("the S.G.I.O.") of Queensland. This policy was issued in the names of the appellants as joint owners and Mr. and Mrs. Willis as mortgagees. The policy covered the respective and separate interests of the persons named. The sum insured was $21,300, this amount being apportioned in specific sums between the building, machinery and plant, stock-in trade and electric motors.

At the end of 1973 or the beginning of 1974 the appellants decided to increase the amount of their insurance. For reasons which are not now material they did not succeed in making the necessary arrangements with the S.G.I.O. They then took out a fresh insurance with the respondent ("C.M.L."). Having made arrangements for the issue of a fresh policy by C.M.L. the appellants sought to cancel their existing policy with the S.G.I.O. It was found that the S.G.I.O. did not cancel the policy because the consent of the mortgagees to cancellation was not produced by the appellants. In the events which have happened the correctness of this finding is no longer in dispute.

As the two insurers refused to pay after the property was destroyed by fire the appellants commenced two actions in the Supreme Court of Queensland, one against each insurer. In the first action, No. 506 of 1976, the appellants and the mortgagees as plaintiffs sued the S.G.I.O., C.M.L. being joined as a third party. In the second action, No. 929 of 1976, the appellants as plaintiffs sued C.M.L. The two actions were consolidated and heard together. The primary judge found that the S.G.I.O. policy was on foot and gave judgment against the S.G.I.O. for $20,987, together with interest at 7 per cent to run from 4th August 1974 until judgment. The judge also found that there was no subsisting policy between the appellants and C.M.L. and that C.M.L. was under no liability as third party in action No. 506 of 1976 or as defendant in action No. 929 of 1976. The Full Court of the Supreme Court subsequently dismissed an appeal by the S.G.I.O. in the first action and an appeal by the appellants in the second action.

From the judgment of the Full Court in the second action the appellants have appealed to this Court in the hope of securing a larger indemnity against their loss than that provided by the S.G.I.O. policy in which the amount insured was lower than that stated in the C.M.L. policy. The S.G.I.O. has not appealed to this Court against the judgment entered against it in the first action and it actually satisfied the judgment by payment before the hearing of the appellants' appeal in the second action.

It is necessary to examine the grounds on which the Full Court based its decision against the appellants in the second action. The Full Court, taking the same view as the primary judge, held that C.M.L. was not liable to the appellants under the policy which had issued. Included in the particulars sought in the C.M.L. proposal form was information as to other insurances held by the appellants. It was found that the appellants gave an incorrect answer on this topic and that in so doing they omitted to state that they had an existing insurance with the S.G.I.O. It was held that by virtue of a provision in the proposal the correctness of the answers in the proposal formed the basis of the contract and that C.M.L. was therefore under no liability.

The appellants challenged this conclusion on several grounds: (1) That the answer was not an incorrect answer; (2) That even if it was an incorrect answer it was (a) trivial and should be disregarded or (b) not shown to be material; (3) That if the answer was incorrect and material it was nevertheless not made the basis of the contract by the provision in the proposal; and (4) That the existence of the S.G.I.O. policy was not a circumstance which entitled C.M.L. to escape liability but merely created a situation in which both insurers were bound to contribute to the appellants' indemnity.

The particulars contained in the proposal were filled in by C.M.L.'s agent after discussion with the appellant V. J. Deaves. In response to that part of the proposal which stated, "Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal." there appeared the notation "N/A". It was not in contest before us that this notation signified "Not Applicable". The margin of the proposal contained this statement - "All questions on this proposal not replied to are to be deemed answered in the negative." At the foot of the proposal, immediately before the signature of the appellant V. J. Deaves, there was a declaration and warranty in these terms:

I do hereby declare and warrant that the answers and particulars given above are in every respect true and correct, and I have not withheld any information likely to affect the acceptance of this Proposal; and I agree that this Proposal and Declaration shall be the basis of the Contract between the Company and myself; and I further agree to accept the Company's Policy subject to the terms, conditions and memoranda to be contained therein, endorsed thereon or attached thereto. Although the policy itself did not contain a similar declaration and warranty it contained a condition in the following terms:

3. The Insured shall give notice in writing to the Company of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such Insurance or Insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this Policy shall be forfeited.

The S.G.I.O. policy contained a like condition. This is a circumstance of some importance as the appellants' argument in favour of contribution by both insurers turned on the coexistence of these conditions in the two policies.

The appellants pursued a variety of approaches with a view to showing that the information given in the proposal was not incorrect. First, they submitted that the request for particulars was not a request which went to other insurances existing or on foot at the time but to insurances which were intended to be concurrent with the proposed insurance. The suggested construction is not a natural reading of the proposal; nor is it a fair or reasonable interpretation of it. The request for particulars of the "sum already insured" indicates that it is directed to existing insurances, not merely to insurance which the insured intended to run concurrently with the proposed insurance. A literal reading of this part of the proposal causes no difficulty and it is to be preferred to a construction which involves an arbitrary rewriting of the printed words.

An endeavour was made to achieve a similar result by claiming that the representative of C.M.L. who filled in the proposal form was the agent of the insurer for the purpose of stating the construction now suggested by the appellants and that C.M.L. is now bound by that construction of the request for particulars. On the assumption that the representative was the agent of the company for the purpose of explaining the meaning of the questions and requests in the proposal (Bawden v. London, Edinburgh, and Glasgow Assurance Co. [43] ; MacGillivray and Parkington on Insurance Law, 6th ed. (1975), par. 951) the evidence does not support the appellants' submission. The evidence shows that Mr. Deaves told the representative that although the S.G.I.O. policy was on foot it would be cancelled once the property was insured with C.M.L. However, the evidence does not establish that the C.M.L. representative placed an incorrect interpretation upon the request for particulars in his discussion with Mr. Deaves. The only testimony, that given by Mr. Deaves, indicates that there was a conversation about the existing S.G.I.O. insurance, but it does not indicate that the meaning or effect of the request for particulars as such was discussed between them. What happened, according to Mr. Deaves, was that the representative failed to record what he was told and instead employed the notation "N/A". Had the representative instructed Mr. Deaves that the request in the proposal related only to insurances which were intended to be kept on foot concurrently, then it is probable that C.M.L. would have been bound by its representative's statement. However, the evidence falls short of making out such a case.

The notation "N/A", conveying that the request for particulars was not applicable, would have been a correct answer if there were no insurances on foot of the kind contemplated by the request. But as the request was in my view directed to existing insurances, whether intended to be kept on foot or not, and as there was an insurance on foot the answer given was incorrect. To state that the request had no application to the circumstances in which the appellants were placed was to say that there was no existing insurance of the property.

The issue of materiality arises only if it be decided that the correctness of the answer was not made the subject of a condition of the contract of insurance. If the correctness of the answer was made a condition of the contract then C.M.L. as the insurer is entitled to escape liability, whether the answer be material or immaterial (Newcastle Fire Insurance Co. v. Macmorran and Co. [44] ; Anderson v. Fitzgerald [45] ; Thomson v. Weems [46] ; Condogianis v. Guardian Assurance Co. Ltd. [47] ). Materiality arises only in the event that the declaration and warranty at the foot of the proposal are not held to form part of the contract of insurance or that they do not make the contract conditional on the accuracy of the answers.

1. (1815) 3 Dow 255, at p. 262 [3 E.R. 1057, at p. 1060]. 2. (1853) 4 H.L.C. 484 [10 E.R. 551]. 3. (1884) 9 App. Cas. 671, at pp. 683, 687. 4. (1921) 29 C.L.R. 341; [1921] 2 A.C. 125.

In this case it is not in question that, if the declaration and warranty at the foot of the proposal formed part of the contract of insurance, their effect was to make the accuracy of the answers given a condition precedent to C.M.L.'s liability. Historically, as Viscount Haldane pointed out in Dawsons Ltd. v. Bonnin [48] , the word "warranty" seems to have acquired a wider significance in insurance law than its modern legal usage would justify and to have been employed when what was intended was a warranty amounting to a condition. However, in the present case it is not the "warranty" that is alleged to create the condition precedent but the succeeding agreement that "this Proposal and Declaration shall be the basis of the Contract " Dawsons Ltd. v. Bonnin decided that a recital in a policy that the proposal should be the basis of the contract made the truth of the statements contained in the proposal a condition of the liability of the insurer.

The controversy here turns not on the adequacy of the language, had it appeared in the policy, to create a condition precedent but on the vexed question whether the existence of a similar provision in the proposal, not expressly incorporated or referred to in the policy, forms part of the contract of insurance.

The respondent relies on the statement in MacGillivray and Parkington, 6th ed., par. 815, " it is sufficient for an insurer to obtain the signature of the applicant to a declaration saying that, "This proposal is to serve as the basis of the contract", whereupon the warranty is an effective term of the contract of insurance even if not expressly mentioned in the policy when that is issued." Of the cases cited, Duckett v. Williams [49] , Rozanes v. Bowen [50] , and the observations of Lord Alverstone C.J. in Joel v. Law Union and Crown Insurance Co. [51] support the proposition. Although the remarks of Lord Shaw of Dunfermline in Condogianis v. Guardian Assurance Co. Ltd. [52] also appear to support the proposition because his Lordship, after referring to a statement and warranty in the proposal, concluded that the case was one of express warranty, the policy itself contained a clause making the particulars in the proposal the basis of the policy [53] . Other cases frequently referred to in this connexion are equivocal because the relevant provision is to be found in the policy as well as the proposal (Thomson v. Weems [54] ), or because the policy incorporates the proposal (Hambrough v. Mutual Life Insurance Co. of New York [55] ).

1. (1834) 2 C. & M. 348 [149 E.R. 794]. 2. (1928) 32 Ll. L.R. 98, at p. 103. 3. [1908] 2 K.B. 431, at p. 437. 4. (1921) 29 C.L.R., at p. 343; [1921] 2 A.C., at p. 129. 5. (1919) 26 C.L.R. 231, at pp. 234-235; (1921) 29 C.L.R., at pp. 343-344; [1921] 2 A.C., at pp. 129-130. 6. (1884) 9 App. Cas., at p. 684. 7. (1895) 72 L.T. 140, at p. 141.

The proposition in the broad terms in which it is stated is at variance with the decision of this Court in Australian Provincial Assurance Association Ltd. v. Producers and Citizens Cooperative Assurance Co. of Australia Ltd. [56] . It demonstrates that the question whether a basis clause in a proposal forms part of the contract of insurance depends upon the circumstances of the particular case. There it was held that a proposal which contained not only an untrue statement but also a clause declaring and agreeing that the proposal and particulars "shall be the basis of the contract" did not constitute part of the contract of insurance, although the policy recited that it was made in consideration of an application, statements and declaration "which together with the conditions indorsed hereon are hereby made part of the contract". The case was complicated by the fact that the policy contained a condition avoiding liability in the event of there being a material misrepresentation in the proposal, statement or other documents. Rich, Starke, Dixon and McTiernan JJ. held that the basis clause in the proposal was neither part of the contract of insurance nor collateral to it on the ground that the policy was presumptively exclusive evidence of the terms of the parties' agreement, the circumstances not displacing this presumption.

Starke J. [57] , after referring to earlier authorities, emphasized that it is the duty of the insurer to establish clearly that the insured consented to the accuracy of the proposal being a basic condition of the policy and that no ambiguous language will suffice for this purpose. In this connexion it is of importance that the C.M.L. policy makes no reference to the proposal. Indeed, it recites that the policy is issued in consideration of the payment of the premium by the insured, thereby indicating that the contents of the proposal constitute no part of the consideration for the liability undertaken by C.M.L. An insured person who read the policy would be justified in concluding that it contained the contract of insurance in its entirety. As ordinarily he would not be given a copy of the proposal, he would be most surprised to find that it was part of the contract of insurance without reference being made to it in the policy.

It is inherently unlikely that in a situation of this kind the parties intended that their relationship should be regulated in a contract contained in more than a single document; one an instrument being a formal contract expressed on its face to be a comprehensive record of the terms of the bargain and the other an informal antecedent document, preliminary in character, containing representations. The inference to be drawn is that the parties contemplated that the proposal, if acceptable to C.M.L., would result in the issue of a policy the effect of which would be to supersede the proposal, except in so far as the policy might incorporate the contents of the proposal. C.M.L. was at liberty to incorporate the terms of the proposal in the policy. Had it done so, the terms of the proposal would have had contractual force by virtue of the language of the policy. But it chose not to do so.

What I have said is enough to dispose of the suggestion that the basis clause in the proposal formed part of the contract of insurance. There is, however, another element which tends to support this conclusion, in particular to negative the suggestion that the basis clause constituted a collateral condition. As Dixon J. said in the Australian Provincial Assurance Association Case [58] :

There appears to be some incompatibility between the conception of a main contract which creates a liability to pay a money sum and defines the events and describes the conditions upon which the liability shall depend, and a collateral agreement stipulating for the avoidance of the main contract upon another condition, which, moreover, is directed to matters dealt with in the main contract. A collateral contract cannot be admitted as good in law if it is inconsistent with the main contract (Hoyt's Pty. Ltd. v. Spencer [59] ). Condition 3 of the C.M.L. policy requiring the insured to give notice of any insurance already effected and providing that unless particulars of such insurance are indorsed on the policy before the occurrence of any loss or damage all benefit should be forfeited, makes it difficult to conclude that another and different condition on the same topic in consequence of what was contained in the proposal formed part of the contract or was collateral to it. Condition 3 contemplates that the insured might give notice of an existing insurance and have particulars indorsed on the policy at any time before the occurrence of property damage and recover his loss. Yet, according to C.M.L., the insured could not recover if the proposal contained an incorrect answer in relation to existing insurances. 1. (1932) 48 C.L.R., at p. 362. 2. (1919) 27 C.L.R. 133.

In view of my conclusion that the basis clause was not part of the contract, the issue of materiality must be decided. An incorrect answer which is trivial will not entitle the insurer to escape liability (MacGillivray and Parkington, par. 696). But there is no basis on which it can be said that an answer is trivial or immaterial when its effect is to deny the existence of other insurance which exists and which is substantial. The existence and extent of other insurance covering the property the subject of the proposed insurance is a matter of considerable importance to the insurer. It may throw light on the nature and extent of the risk - the insurer will be reluctant to assume the risk if the property is over-insured. Moreover, the information sought will, if given, arm the insurer with knowledge of his right to contribution and of the identity of the person from whom it may be recovered in the event of loss whilst the property is subject to more than one insurance.

The same considerations dispose of the contention that C.M.L. failed to discharge the onus of showing that the incorrect answer was material. The matter is so obviously relevant to the risk to be assumed by the insurer that it does not require evidence of materiality from the insurer.

The appellants' submission that the co-existence in the two policies of conditions in the form of condition 3 in the C.M.L. policy leads to the result that both insurers are bound to contribute to the loss is based on the decision in Weddell v. Road Transport and General Insurance Co. Ltd. [60] . There the respondent's motor-car accident policy extended the insurance to a relative of the insured who drove the car provided that the relative was not entitled to an indemnity for the same risk under another insurance. The respondent was sued by a third party injured by a relative of the insured, whilst the relative was driving the insured's car. The relative was insured under another policy which contained a clause indemnifying him provided that he was not entitled to an indemnity under another policy in respect of the risk. It was held that, as a matter of construction, the insurance clause excluded from the category of co-existing cover any cover that was expressed to be itself cancelled by such coexistence. The decision turned on the construction of a clause which differs in kind and in expression from the condition now under consideration. Condition 3 is indistinguishable from the condition which was recently the subject of a unanimous decision of this Court in Steadfast Insurance Co. Ltd. v. F. & B. Trading Co. Pty. Ltd. [61] , where it was held, applying Equitable Fire and Accident Office Ltd. v. The Ching Wo Hong [62] , and following Home Insurance Co. of New York v. Gavel [63] , that the insured had not lost the benefit of the first policy. The second insurance was subject to the condition that the insured should give notice of any existing insurance and, as such notice was not given, the second insurance was no more than a conditional insurance of which the insured was not required to give notice under the condition in the first policy.

1. [1932] 2 K.B. 563. 2. (1971) 125 C.L.R. 578. 3. [1907] A.C. 96. 4. [1927] 3 D.L.R. 929.

The appellants, Mr. and Mrs. Deaves, purchased a service station business and its land and buildings from Mr. and Mrs. Willis in 1971. Balance of purchase money was secured to the vendors by mortgage and bill of sale. Insurance over buildings, fixtures and chattels was effected with the Queensland State Government Insurance Office ("S.G.I.O.") by a policy dated 12th February 1972. The total sum insured was $21,300. Against the printed words "The insured" the entry was as follows:

Deaves, Vincent James & Dawn Lynette (JO) Willis, Percival Hartwell & Esme Muriel (M) .The abbreviations JO and M are explained in the printed part of the form and are to be taken to mean "Joint Owners" and "Mortgagee" respectively. Thus the policy was not a joint policy but effected separate insurances of the joint owners and the mortgagees for their respective interests (General Accident Fire and Life Assurance Corporation Ltd. v. Midland Bank Ltd. [64] ). This is of some importance and I shall return to it hereafter. 1. [1940] 2 K.B. 388.

By late 1973 or early 1974 Mr. Deaves had decided that the amount of insurance was insufficient. He called in at the S.G.I.O. at Ipswich. As a result he waited for a representative to call out at the service station but nobody came. Then a representative of the respondent ("C.M.L.") called to see him, in particular about increasing his life insurance cover with that company. He told the man from C.M.L. that he did not want more life cover but he asked whether C.M.L. had fire and similar cover for the service station. He explained that the man from S.G.I.O. had not been out to the premises. The man from C.M.L. said that that company did have fire policies and public risk, that he himself covered life insurance, and that somebody else covered the fire insurance part of the business, and that he would get somebody to call out and see Mr. Deaves. And that is what happened. Within a week or so there was somebody out to see Mr. Deaves. Mr. Deaves told the man from C.M.L. that he wanted the total cover to be approximately $35,000. He told the C.M.L. man that there was insurance with the S.G.I.O. and what had happened. They sat down and talked and worked out the cover required for the different risks - buildings, stock and plant, public risk and contents of the dwelling.

The man from C.M.L. filled out a proposal form and Mr. Deaves signed it. He asked whether he would be covered by C.M.L. from that day because, he said, if that were so, he would like to go in and cancel the policies at the S.G.I.O. The premium was worked out on the spot and he paid it to the agent.

On the proposal form there was a paragraph "Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal". Opposite this paragraph the C.M.L. man wrote "N/A" which, it is agreed, stood for "Not applicable". One question which arises is whether this answer was an incorrect answer. This would be an immediately apposite question if the answer was warranted in the policy itself to be true and correct. However, there is no warranty in the policy, only in the proposal. At least in Australia the policy itself must in some way express the incorporation of the proposal or its contents in the policy (Australian Provincial Assurance Association Ltd. v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. [65] ). The significance of the answer "Not applicable" lies in whether there has been thereby a material representation that there was no other insurance or a material non-disclosure of the existence of the S.G.I.O. insurance which was proposed to be cancelled.

The answer to the question whether or not there has been a material misrepresentation or non-disclosure cannot be given simply by determining whether or not the words "Not applicable" were a correct statement. The fact of non-disclosure and the materiality of the representation or non-disclosure must be determined from the proposal and from any other circumstances of which the insurer has notice. First, the proposal. The statement "N/A", meaning "Not applicable", is ambiguous. It may mean "not applicable because there is no such other insurance" or it may mean "The request is not applicable in the circumstances". The paragraph and the answer must be construed in the light of the circumstances known to the insured and the insurer. In my opinion there was in this case sufficient in the evidence to enable an inference to be drawn that the insurer had sent its agent to obtain a proposal for fresh insurance because the insured was not satisfied with his present insurer. In the light of that circumstance the statement "Not applicable" should be construed as a statement that the paragraph was not applicable in the circumstances of the case. And that was a correct answer. That the insurer did so send its representative can be inferred from the transmitted request and from the arrival of the C.M.L. man in response to the request. It would not be an inference which would necessarily be drawn but it gains significantly in strength from the complete absence of any evidence from the respondent insurer in rebuttal. See Jones v. Dunkel [66] . The respondent in its case called neither the man who visited Mr. Deaves and filled in the proposal nor anyone from its office to rebut the inference that it knew that the purpose of the visit to Mr. Deaves was in order to provide insurance in place of the S.G.I.O. insurance; and it could hardly be contemplated that the latter insurance would be cancelled before the new insurance was effected. This is not a case where the knowledge was only with the man from C.M.L. when he called and when he filled in the proposal. It is knowledge which can be inferred that a person or persons in authority at C.M.L. had when it directed its man to call on Mr. Deaves. This knowledge, which ought to be inferred in the absence of any evidence from the insurer that it had no such knowledge, is significant both upon the construction of the ambiguous answer in the proposal and on the primary question itself, namely, whether there was in fact a material representation or non-disclosure. There is no material non-disclosure of a fact when the insurer already has notice of that fact. Halsbury's Laws of England, 4th ed., vol. 25, par. 370 and the cases cited under note 10 to that paragraph.

I thus conclude that there was a sufficient disclosure to C.M.L. that there was insurance with S.G.I.O. which was proposed to be cancelled if and when fresh insurance was effected with C.M.L. and that the answer "Not applicable" was a strictly correct answer in the circumstances and on the construction of those words which I adopt. The disclosure assumed or inferred that Mr. and Mrs. Deaves were able to cancel that insurance with S.G.I.O. If they could not, there was either no sufficient disclosure or there was a misrepresentation, albeit an innocent one, that they were able to cancel the S.G.I.O. insurance and that there would not be a continuing double insurance by them. That brings me to the question whether Mr. and Mrs. Deaves were able to cancel the S.G.I.O. insurance. It is now necessary to recall that there were in law two separate insurances with S.G.I.O., the insurance of the interest of the joint owners and the insurance of the interest of the mortgagees, Mr. and Mrs. Willis. In the Midland Bank Case [67] , where in one policy there was insurance of separate interests of owner and mortgagee it was held that the interest of one insured could not be defeated by a breach of condition by another who was insured in respect of his separate interest. Greene M.R. said [68] :

Again, there can be no objection to combining in one insurance a number of persons having different interests in the subject-matter of the insurance, but I find myself unable to see how an insurance of that character can be called a joint insurance. In such a case the interest of each of the insured is different. The amount of his loss, if the subject-matter of the insurance is destroyed or damaged, depends on the nature of his interest, and the covenant of indemnity which the policy gives must, in such a case, necessarily operate as a covenant to indemnify in respect of each individual different loss which the various persons named may suffer. In such a case there is no joint element at all.

How, then, can there be a joint insurance, in any true sense of that phrase, of the interest of a freeholder in freehold premises and the interest of a debenture holder holding a floating charge on that mass of property, including, among other things, those premises? There is no joint risk; there is no joint interest; the measure of loss suffered by those two parties will be different, calling for a different measure of indemnity, and, accordingly, it seems to me that there is no joint element about the thing at all.

Such a policy, in my judgment, may be more accurately described as a composite policy, because it comprises, for reasons of obvious convenience, in one piece of paper the interests of a number of persons whose connection with the subject-matter of the insurance makes it natural and reasonable that the whole matter should be dealt with in one policy. I make those observations, although they are not strictly necessary having regard to the view which I have formed of the true meaning of the policy. Even if it was possible to have a joint policy in favour of those three persons - using that phrase in the sense in which Mr. Miller used it - this document is not such a policy on its true construction. The description of the insured by name, followed by the words, "for their respective rights and interests," in my judgment, read in its natural sense, indicates that these three persons, having interests which it is not material to investigate for the purpose of the document, are minded to combine in one policy and each of them to obtain cover from the underwriters in respect of his right or interest, whatever it may be - and it may vary from time to time.

He also said [69] : "How is that description" (for their respective rights and interests) "of the insured and that description of the indemnity to which they are to be entitled to be fitted into the printed form which uses the phrase "the insured"? It seems to me that, wherever the phrase "the insured" appeared in the printed part of this document, it would be wrong to treat that as meaning, as a matter of construction, all the three persons named in the endorsement. The printed words "the insured" must be construed and qualified by the words "for their respective rights and interests," and those printed words must be given a construction which will fit in with the essential nature of the contract which is being undertaken." It seems to me that everything which Greene M.R. said both on the applicable principle and on the construction of the policy is equally applicable to the policy with the S.G.I.O. The respective interests of the insured were specifically described by the code letters JO and M. Then, by cl. 5 it was provided that "This Insurance may be terminated at any time at the request of the Insured". The printed words "This Insurance" must be so construed as to refer to the insurances of the respective interests of the joint owners and the mortgagees and the printed words "the Insured" must be so construed as to refer to the respective insured in respect of their separate interests. Thus the printed cl. 5 takes effect as a clause entitling the several insured to terminate in respect of the insurance of their several interests. 1. [1940] 2 K.B. 388. 2. [1940] 2 K.B., at pp. 405-406. 3. [1940] 2 K.B., at pp. 407-408.

This right to terminate depended on the request of the relevant insured. It did not require an acceptance of that request by S.G.I.O. Therefore, in my opinion, Mr. and Mrs. Deaves were, at the time of the approach to C.M.L. and at the time of the proposal to C.M.L., able to cancel their insurance with S.G.I.O.

When in the C.M.L. proposal the request was made "Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal" that request must be read as referring to sums insured on the identical property by the proposers not by other persons, known or unknown to the proposers, who had an insurable interest in the subject matter of the insurance. Otherwise an obligation would be imposed which it might be quite outside the capacity of the proposer to satisfy. Cf. Donaldson v. Manchester Insurance Co. [70] .

Therefore, there was a disclosure to C.M.L. of the existence of insurance in respect of which there was a present intention and capacity in Mr. and Mrs. Deaves to cancel once the C.M.L. insurance was effected. The paragraph in the proposal was correctly answered as being not applicable because there was in fact that present intention and capacity to cancel the S.G.I.O. insurance once the C.M.L. insurance was effected.

On 31st May 1974 Mr. Deaves signed a document bearing the number of the policy and addressed to S.G.I.O. "Please cancel above policy." In so doing he was acting on behalf of himself and his wife as joint owners. I do not think that there can be any doubt about that. The evidence shows that Mr. Deaves had consistently in matters relating to insurance of the subject matter acted on behalf of his wife as well as himself. The document of cancellation must be read in conjunction with the policy and when it is so read it was effective to terminate the insurance of their joint interests which the policy covered. It did not cancel the insurance of the interests of Mr. and Mrs. Willis. This conclusion accords with the principles enunciated in the Midland Bank Case [71] .

The C.M.L. policy bears the typewritten date 21st August 1974 with "21st August" crossed out and "14th May" inserted in handwriting. The circumstances of this alteration were not explained and I am prepared to assume that the proposal was accepted and the policy issued on 14th May. Therefore, for a period of seventeen days after the acceptance of the proposal the S.G.I.O. insurance of Mr. and Mrs. Deaves' interest continued. The fire which destroyed the insured property occurred on 4th August 1974. Though there was no material non-disclosure to C.M.L. or misrepresentation in the proposal there was an obligation on Mr. and Mrs. Deaves either promptly to cancel the insurance with S.G.I.O. or to notify C.M.L. Once the policy issued this obligation, which may have existed in any event, was governed by an express condition of the C.M.L. policy. The policy contained condition 3 as follows:

3. The Insured shall give notice in writing to the Company of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such Insurance or Insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this Policy shall be forfeited.

During the period from the issuing of the policy and until 31st May when the S.G.I.O. insurance was cancelled, there was an obligation on Mr. and Mrs. Deaves in terms of condition 3. Further, the S.G.I.O. policy contained a similar condition so that there was an obligation on them to give notice in writing to S.G.I.O. The insurance with C.M.L. remained conditional upon notice being given that the S.G.I.O. policy was still in force in respect of their interests (see Steadfast Insurance Co. Ltd. v. F. & B. Trading Co. Pty. Ltd. [72] ) or upon termination of their S.G.I.O. insurance. 1. (1971) 125 C.L.R. 578.

Thus there may have been a breach by Mr. and Mrs. Deaves of condition 3 before 31st May, but a breach of condition 3 by the insured does not entitle the insurer at any time thereafter to claim that benefit under the policy if forfeited. Condition 3 contains its own statement of the consequences of breach. It looks to the position as it exists when loss or damage occurs and a claim under the policy arises. By that time there was no insurance of the interests of Mr. and Mrs. Deaves other than the insurance with C.M.L. Therefore the occasion for giving notice no longer existed and the provision as to the consequences of a breach of condition 3 became inapplicable.

In my view, therefore, Mr. and Mrs. Deaves were entitled to succeed in their action against C.M.L. but it is necessary to refer to certain further submissions made by counsel on behalf of C.M.L. In order to appreciate those submissions it is necessary to refer to some further facts. Mr. and Mrs. Deaves sued in the present action for a sum of $30,000, the total sum insured. In the policy this sum was broken down into four items as follows:

1. On Building including landlord's fixtures and fittings occupied as a Service Station/Cafe. $20,000.00 2. On Stock-in-Trade and Merchandise, own, in trust or on commission for which Proponent is liable whilst contained in the abovementioned building occupied as a Service Station/Cafe. $3,000.00 3. On Machinery and Plant of every description including Hand Tools whilst contained in the abovementioned building occupied as a Service Station/Cafe. $5,000.00 4. On Business and Office Equipment, Furniture, unused stationery and printed books, fixtures, fittings and movable utensils whilst contained in the abovementioned building occupied as a Service Station/Cafe. $2,000.00

The trial judge found the losses to have been as follows:

Building including landlord's fixtures and fittings $23,522.00 Stock-in-trade and merchandise 2,408.00 Machinery and Plant 3,744.00 Business and Office equipment 243.20

An action was also commenced by Mr. and Mrs. Willis and Mr. and Mrs. Deaves against S.G.I.O. for the sum of $21,300, being the total sum insured under the S.G.I.O. policy. S.G.I.O. joined C.M.L. as a third party. That action and the action out of which the present appeal arises were heard together. In that action judgment was given in the plaintiffs' favour for the sum of $20,987 with interest, and an appeal to the Full Court was dismissed. A appeal to this Court was lodged by S.G.I.O. and is apparently still pending though S.G.I.O. has given notice of intention to abandon the appeal. Upon these facts counsel for C.M.L. has sought to rely on two matters. First, it has been submitted that an estoppel or an issue estoppel has arisen. But that cannot be correct. There can be no issue estoppel unless the issue has previously been conclusively determined and it has not been so determined. As to estoppel other than issue estoppel, reliance was placed on Petersen v. Moloney [73] . However, that case turned on the principle of election of remedies against alternative defendants. No such necessity for election arises in the case of two separate insurance policies. All that the law ensures is that an insured is not indemnified beyond the amount of his loss. Otherwise the rights of action are quite distinct and the remedies are not alternative. The maximum recoverable from S.G.I.O. is less than the amount of the loss. Upon the view of the matter which I have expressed the interest of Mr. and Mrs. Deaves ceased to be insured by the S.G.I.O. when the insurance of their interest was terminated on 31st May 1974. Upon that view only the amount referable to the insured interest of Mr. and Mrs. Willis was recoverable in the action against S.G.I.O. But that does not mean that any estoppel or issue estoppel has arisen, although it may mean that the relief granted in the action against S.G.I.O. may require variation. 1. (1951) 84 C.L.R. 91.

Then it has been submitted that this appeal, although competent when it was instituted, ceased to be competent when S.G.I.O. determined not to proceed with its appeal to this Court in the other action. At that stage, it is said, the present appeal ceased to be one in proceedings where the amount involved was $20,000 or upwards. Judiciary Act 1903, s. 35 (3) (b). However, the appeal cannot cease to be competent in this manner. If the appeal was competent when it was instituted then it remains competent.

I would therefore allow the appeal with costs, set aside the judgment in favour of the respondent and in lieu thereof order judgment and costs in favour of the appellants, Mr. and Mrs. Deaves. I would remit the matter to the Supreme Court to determine the amount to which they are entitled under the policy and in the events as they shall then appear but so that the appellants are not doubly indemnified for the same loss.

The respondent's application for leave to file out of time a notice of objection to the competency of the appeal should be refused because it is futile. The appeal is competent within s. 35 of the Judiciary Act 1903, as amended, as an appeal from a final judgment given in proceedings which directly involved a claim amounting to $20,000 or upwards.

I will not repeat the history. My conclusion is that the numerous contentions advanced by the respondent to absolve itself from liability should not be accepted:

(1) The respondent's contention that the appellants were defeated by the principle of election of alternative remedies (see Petersen v. Moloney [74] ) was not well founded. The claims against the two insurers were not alternative; the two were not alternatively liable and the entry of judgment against one (the S.G.I.O.) did not constitute an election.

(2) There was no misrepresentation in the answer, "N/A", in the proposal (for the reasons given by Jacobs J.).

(3) The truth of the answers in the proposal was not a condition of the policy as there was no provision in the policy making them such a condition (see Australian Provincial Assurance Association Ltd. v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. [75] ).

(4) There was no failure to disclose matter material to the risk or to the fixing of the premium. The apparent authority of the respondent's agent extended to the receipt of information concerning the risk and the fixing of the premium. The disclosure of the existence of the S.G.I.O. policy to the agent was disclosure to the respondent.

The appellants' failure to inform the respondent that there was a mortgage on the property does not defeat them. An insurer operating in Australia must know that most properties are mortgaged; the appellants were not asked about any mortgage; there was no deliberate concealment of any fact known by the appellants to be material; there was no breach of faith on the part of the appellants.

Duties of disclosure arise from the doctrine of uberrima fides. The duty to act in the utmost good faith is not confined to the insured or proposed insured, it applies also to the insurer or proposed insurer (see Distillers Co. Bio-Chemicals (Australia) Pty. Ltd. v. Ajax Insurance Co. Ltd., Stephen J. [76] ; Halsbury's Laws of England, 3rd ed., vol. 22, pp. 110, 185, 193-194). If not disclosing a mortgage when no question is asked about it and there is no deliberate concealment enables an insurer to escape liability, then the protection for which many innocent consumers pay premiums is destroyed. If there is a breach of faith, then it is on the part of the insurance company in denying liability on such a point (see R. A. Hasson, "The Doctrine of Uberrima Fides in Insurance Law - A Critical Evaluation" Modern Law Review, vol. 32 (1969), p. 615. MacGillivray and Parkington on Insurance Law, 6th ed. (1975), p. 783 suggests there is no substance in the point.

(6) The respondent was not entitled to rely upon condition 3 of its policy which requires: The Insured shall give notice in writing to the Company of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such Insurance or Insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this Policy shall be forfeited.

1. (1951) 84 C.L.R., at pp. 102-104. 2. (1932) 48 C.L.R. 341. 3. (1974) 130 C.L.R. 1, at pp. 27-31.

The policy with the S.G.I.O. was a composite policy insuring the appellants in respect of their interests and the mortgagees in respect of their interests (see General Accident Fire & Life Assurance Corporation Ltd. v. Midland Bank Ltd. [77] ).

This Insurance may be terminated at any time at the request of the Insured, in which case the Office will retain the customary short period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Office, on notice to that effect being given to the Insured, in which case the Office shall be liable to repay on demand a rateable proportion of the premium for the unexpired term from the date of the cancelment. In my opinion, condition 5 provided for termination of the insurance at the request of the appellants so far as it related to their interest. Such a reading is consistent with reading "the insured" in other clauses as meaning "each of the insured in respect of his interest".

For example, condition 3 of the S.G.I.O. policy should not be read to mean that if either the appellants or the mortgagees had effected another insurance and not given notice, this would result in the forfeiture of all benefit under the policy to both the appellants and the mortgagees. The expression, "the insured", is to be read distributively. Therefore, the appellants were by their request capable of bringing about a termination of the policy in respect of their own interest, without affecting the interest of the mortgagees. If the insurer were not content with that, condition 5 gave it the option of terminating the insurance. I find nothing in the policy to detract from this conclusion. The rights inter se of the appellants and the mortgagees do not affect the question. The determination of what should be retained as the customary short period rate for the time the policy had been in force was contemplated as capable of ascertainment. The amount to be refunded to the appellants would depend, in the absence of agreement, on the ascertainment of the respective interests of the appellants and the mortgagees.

The appellants, being capable of terminating the insurance in respect of their interests, did so. The request by the appellants for termination was unequivocal. The consequence on the rights inter se of the appellants and the mortgagees is not in point. Presumably, unless the insurer exercised its option to terminate, the mortgagors would continue to be insured in respect of their interests, and presumably, until the insurance lapsed if the premiums payable in respect of that interest were not paid.

The majority of the Court hold otherwise on this point and, therefore, the appellants lose.

The respondent insurer appears to have taken every possible point to avoid paying this modest claim although there is no suggestion that the appellants have acted other than reasonably and honestly with it. The existing state of insurance law is so favourable to insurers that any insurance company can easily frame its proposal forms and policy in such a way that only an extremely wary proponent will be able to recover. This has been tolerable only because, in general, insurers have not taken advantage of their superior position. If they have drafted documents to the disadvantage of the proponent, they have in practice generally refrained from insisting on their strict legal rights where the proponent has acted reasonably and honestly.

This case shows that the ordinary person cannot always rely upon this practice, even when dealing with a large reputable insurance company. If the course taken in this case becomes common, every householder and small business man will need to be guided at every step of even a modest insurance transaction by an expert insurance consultant or counsel.

Elsewhere, insurance law has developed to give much more protection to the consumer (see Keeton, Basic Text on Insurance Law (1973)). In Australia, legislative intervention seems desirable to redress the balance (see "Insurance Contracts", Australian Law Reform Commission Discussion Paper No. 7, 1978 and also "The Law Commission (U.K.) Working Paper No. 73" Insurance Law and Non-disclosure & Breach of Warranty).