Federation Insurance Ltd v Wasson

High Court of Australia|1978-10-11|Before: Gaudron JJ, Toohey JJ, Kirby P, McHugh JJ, Holden P

The application of the rule of construction to the obligation to provide indemnity contained in the subject policy results in obligations owed severally to the members of the Wasson family and to C.A.G.A. as to their separate interests as lessees and lessor in the insured property, although as between the members of the Wasson family, the separate obligation was owed to them jointly.

Although it is not necessary to so decide in the present case, I conceive that an obligation to indemnify two or more persons against loss or damage to property in which they hold separate interests, even if expressed to be owed to them jointly is necessarily owed to them severally. In Halsbury's Laws of England, 4th ed., vol. 9, par 620, the rule in Slingsby's Case is said to have been "applied without regard to the language of the covenant, unless the terms of the covenant unequivocally showed a contrary intention". But in White v. Tyndall [26] Lord FitzGerald, with whom Lord Halsbury L.C. agreed, stated:

One set of words, albeit that they are used once only, expressing an obligation to indemnify different persons against loss of property in which they have separate interests, necessarily gives rise to several different obligations, for the content of the obligation is different for each of the insured, the difference being referable to their different interests. The same concept, although viewed from the perspective of promisors rather than promisees, was given expression by Parke B. in King v. Hoare [28] , in the statement that "a joint and several bond though on one piece of parchment or paper, in effect comprises the joint bond of all, and the several bonds of each of the obligors".

(1844) 13 M. & W. 494, at p. 505 [153 E.R. 206, at p. 210].

The consideration that the policy encompasses separate obligations with respect to the different insured parties, or separate insurances of the separate interests of the insured parties, does not mean that every right and obligation provided in the policy should be construed as a separate right or obligation inhering in each of the insured parties.

A transaction may involve entirely separate obligations owed to and by different persons. Such a transaction involves several different contracts, notwithstanding that transaction is embodied in one document and, in the absence of an express or implied term to the contrary, the different parties will be entitled to exercise their rights independently of each other. However, as is pointed out by Glanville Williams (op. cit., p. 44), "it is possible for some promises to be joint and other promises in the same contract to be purely several". In such circumstances there is but one contract. In the present case, it is clear that the obligation by the insured to pay the specified premium was a joint obligation: the premium was specified as a total sum without specification of proportions referable to the interests of the insured parties; it was payable by all or any of the parties, in the sense that payment by one constituted performance by all. The joint obligation as to payment of the premium constituted the policy a single contract although it effected separate insurances, and in that sense constituted a "composite policy" or "composite contract" as explained in the judgment of Mason C.J., Wilson, Dawson and Toohey JJ.

The nature of the policy, and in particular the singular nature of the contract therein embodied, provides the context within which condition 6 must be construed to ascertain whether it confers a right on one only of the insured parties to terminate the separate insurance of the separate interest of that party.

By condition 6 it is "the Policy" which may be terminated or cancelled. As noted above the policy is the written embodiment of a single contract effecting separate insurances. Condition 6 postulates termination or cancellation of the entire transaction, and not merely a component part thereof. As it is the entire insurance transaction which may be terminated by "the insured", it follows that all insured must participate in a request for its termination, for otherwise, as pointed out in the joint judgment, there would arise difficulties and uncertainties in relation to the refund of the premium, and questions of fairness both to the insurer and the non-terminating insured party.

Accordingly the Wasson family were not enabled to effect a unilateral termination of the insurance of their separate interest in the insured motor vehicle. Nor for the reasons given by Mason C.J., Wilson, Dawson and Toohey JJ. had the policy been cancelled at the time of the accident which gave rise to the present claim.

High Court of Australia Mason C.J. Wilson, Dawson, Toohey and Gaudron JJ. Federation Insurance Ltd v Wasson [1987] HCA 34

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