Permanent Trustee Australia Limited and Anor v Fai General Insurance Company Limited Matter Nos 3032/96 [1998] NSWSC 1011 - NSWSC 1998 case summary — Zoe

Parties

Applicant/Plaintiff:

# Permanent Trustee Australia Limited and Anor

Respondent/Defendant:

Fai General Insurance Company Limited Matter Nos 3032/96 \[1998\] NSWSC 1011

Legislation Cited (2)

Contracts Act 1984

Cases Cited (47)

Permanent Trustee Australia Limited and Anor v Fai General Insurance Company Limited Matter Nos 3032/96 [1998] NSWSC 1011 (1 April 1998)

Mr. Coles QC for the Permanent companies submitted that the letter of 15th October 1991 and enclosures therewith notified circumstances, namely that losses had been suffered by unitholders in the Aust-Wide trusts, and that a question had been raised whether Permanent Australia was at fault in carrying out its duties. These were circumstances which might give rise to a claim: see FAI General Insurance v. Hendry Rae & Court (1993) 7 ANZ Ins.Cas. 61-233. The present claims arose out of those circumstances, not just by reference to subject matter, but also by reason of a chain of causation: see GIO (NSW) v. R.J. Green [1966] HCA 6; (1966) 114 CLR 437 at 445; SGIC v. Stevens Brothers [1984] HCA 32; (1984) 154 CLR 552 at 555; Dickinson v. Motor Vehicle Insurance Trust [1987] HCA 49; (1987) 163 CLR 500 at 505. Mr. Coles also relied, as a notice in accordance with the policy, on the property trust schedule received by Sedgwick London on 17th October 1991. (It will not be necessary for me to consider that submission, but I very much doubt that this schedule was sufficiently explicit to amount to notice of circumstances.)

It was common ground that the insurance contracts for the period 1st October 1990 to 30th September 1991 were constituted by two placing slips, one for FAI's participation in the first excess layer, and the other for FAI's participation in the second excess layer. It was also common ground that, subject to issues of rectification, the insurance contracts for the period 1st to 30th October 1991 were likewise constituted by two placing slips. All four placing slips, near the top of the first page, had this provision: "Form: 'Follow Form' of primary wording as expiring plus amendments as per Addendum A." Expert evidence showed that the expression "Follow Form" was a well-known term of trade, meaning that an excess layer policy incorporated the wording of the policy of the lead underwriter of the primary layer, save for express amendments. Such evidence was admissible: Codelfa Construction v. State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 353; Burns Philp Hardware v. Howard Chia (1987) 8 NSWLR 642 at 645; MMI v. Withers (1988) 5 ANZ Ins.Cas. 60-853 at 75-343.

Item 11 plainly specified that the notice which Condition 1 of the insurance contracts required to be given to the underwriter was to be given to the address in Item 11: see Bond v. Hong Kong Bank of Australia (1991) 25 NSWLR 286 at 291-3; Hide & Skin Trading v. Oceanic Meat Traders (1990) 20 NSWLR 310 at 313-4; FAI General Insurance v. Perry (1993) 30 NSWLR 89 at 101; Transport Industries Insurance v. NSW Medical Defence Union (1989) 4 ANZ Ins.Cas.60-736 at 74-410-11. That this was the true construction was consistent with market practice. Evidence of market practice was relevant and admissible: see Codelfa and MMI above, Schenker & Co. Australia v. Maplas Equipment [1990] VicRp 74; (1990) VR 834 at 844-50; Trawl Industries of Australia v. Effem Foods (1992) 27 NSWLR 326 at 358-9. It was confirmed by post-contractual admissions: see White v. NZ Theatres [1943] HCA 6; (1943) 67 CLR 266; Hide & Skin Trading at 326-8; Spunwill at 304-312; Singleton v. John Fairfax & Sons (1982) 2 NSWLR 38 at 50-1.

Item 11 referred to "Sedgwick Professional Indemnity and Financial Institutions Services Limited, The Sedgwick Centre": there has never been any such company, but Sedgwick Professional Indemnity and Financial Institutions Services existed at material times as a division within the Sedgwick group, and it carried on business from the Sedgwick Centre. Accordingly, this entity was sufficiently identified by the wording in Item 11: see Nittan UK v. Solent Steel Fabrication (1981) 1 Ll.LR 633 at 637-9; Whittam v. W.J. Daniel & Co. (1962) 1 QB 271 at 277; Fitzgerald v. Masters [1956] HCA 53; (1956) 95 CLR 420 at 427; BHP Petroleum (Timor Sea) v. Griffiths (1994) 49 FCR 155.

The notice was "immediate notice" within Condition 1. The Permanent companies were not aware of the circumstances as circumstances which might give rise to a claim until 14th October, when this was pointed out at a committee of directors by the late Fred Church. Alternatively, if the Permanent companies became aware of circumstances which might give rise to a claim on 30th September 1991 when the first letters of complaint were received from unitholders, the notice was still "immediate" having regard to the size of Permanent Australia and the many matters occurring in the organisation. Immediate notice meant notice given with all reasonable speed in the circumstances: see In Re Coleman's Depositories (1907) 2 KB 798 at 807; Vines v. Djordjevitch [1955] HCA 19; (1995) 91 CLR 512 at 522; Newnham v. Baker (1989) Qd.R. 393 at 402; Farrell v. Federated Employers Insurance Association (1970) 3 AllER 632 at 635.

Mr. Coles submitted that s.54 was remedial legislation, and should not be construed narrowly: see East End Real Estate v. C.E. Heath Casualty & General Insurance (1991) 25 NSWLR 400 at 402-3; Antico v. Fielding Australia [1997] HCA 35; (1997) 146 ALR 385 at 388-9, 395-6; Akai v. The People's Insurance Co., Court of Appeal, unreported, 28/4/95 per Kirby, P. at p.12.

Section 54 was not intended to breathe life into dead policies, especially when one has regard to s.40. Here, assuming there was no claim made or notification of circumstances within a relevant policy period, there was no relevant insurance contract under which the Permanent companies could succeed in recovering from FAI. Furthermore, there was no relevant act or omission within the meaning of s.54. The decision in Perry was on all fours with the present case, and the High Court in Antico did not overrule Perry. See also GIO General v. Newcastle City Council (1996) 38 NSWLR 558; overruled Newcastle City Council v. GIO General Ltd. [1997] HCA 53; (1997) 72 ALJR 97.

Mr. Coles submitted that circumstances would not be known to the insured, within the meaning of the term, unless the insured actually knew that the circumstances might give rise to a claim, or at least unless a reasonable person in the insured's position would know this. Any ambiguity should be resolved against FAI, which was the proferens: Darlington Futures v. Delco Australia [1986] HCA 82; (1986) 161 CLR 500 at 510; Thomas National Transport (Melbourne) v. May & Baker (Australia) [1966] HCA 46; (1966) 115 CLR 353 at 376. If the retroactive clause was given any wider effect than non-disclosure is given under ss.21 and 28 of the Insurance Contracts Act, to that extent the clause would be void under s.33 of the Act.

On the attribution of fraud, Mr. Gee referred me to Lloyd v. Grace Smith [1912] UKHL 1; (1912) AC 716, where it was held that a principal was liable for the fraud of an agent within the scope of the agent's authority; and that it was not necessary that the fraud be for the benefit of the principal. Here, it was within the scope of Sedgwick Australia's authority to make arrangements for renewal of the insurance, to obtain the thirty day extension, and to leave FAI out of the following year's programme.

Mr. Gee further submitted that the fact that a witness has told untruths may support the inference that the truth would be unfavourable to the witness or interests associated with the witness: see Steinberg v. Federal Commissioner of Taxation [1975] HCA 63; (1975) 134 CLR 640 at 694-5. Mr. Gee submitted that I should find fraudulent conduct committed by Mr. Davis and by Mr. Carson.

Mr. Coles submitted that s.21 provided a statutory code which replaced the common law duty of disclosure: Advance (NSW) Insurance Agencies v. Matthews [1989] HCA 22; (1989) 166 CLR 606, at 615; Prime Forme Cutting v. Baltica General Insurance Co. (1991) 6 ANZ Ins Cas 61-028, at 76,877. Section 21 related to matters; and a matter is not just an isolated fact, but rather has to be considered within a web of surrounding circumstances which explains its significance: see Barclay Holdings (Australia) v. British National Insurance (1987) 8 NSWLR 514. FAI had formulated thirty-two matters; and it could succeed only in relation to each matter separately or all matters together. That was how its case was pleaded, and an allegation involving fraud must be distinctly pleaded. Furthermore, the matters as formulated in FAI's defence provided the basis of the evidence of FAI witnesses: they were asked to assume the existence of the matters pleaded, and were not asked to assume the existence of any combination of the matters pleaded less than the totality.

In my opinion, "known" in s.21(1) means more than suspected or believed. What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term "known". However, it must be remembered that a belief may sometimes itself be a matter relevant to the decision of an insurer. An insured may know that it has a particular belief, and know that its having that belief is relevant to the decision of an insurer, in which case that belief itself is a matter which must be disclosed. It is possible that the belief of the insured in Khoury v. GIO NSW [1984] HCA 55; (1984) 165 CLR 622 that his sons were systematically stealing from the business was a matter known to be relevant to the decision of the insurer, in which case that case could be decided under the Insurance Contracts Act in the same way as it was at general law.

(1966) 114 CLR 437

(1984) 154 CLR 552

(1987) 163 CLR 500

(1982) 149 CLR 337

(1987) 8 NSWLR 642

(1994) 36 NSWLR 290

(1991) 25 NSWLR 286

(1990) 20 NSWLR 310

(1993) 30 NSWLR 89

(1992) 27 NSWLR 326

(1943) 67 CLR 266

(1982) 2 NSWLR 38

(1956) 95 CLR 420

(1994) 49 FCR 155

(1995) 91 CLR 512

(1991) 25 NSWLR 400

(1997) 146 ALR 385

(1996) 137 ALR 146

(1996) 38 NSWLR 558

(1997) 72 ALJR 97

(1986) 161 CLR 500

(1966) 115 CLR 353

(1992) 35 NSWLR 390

(1995) 41 NSWLR 329

(1989) 16 NSWLR 673

(1989) 97 FLR 284

(1996) 40 NSWLR 543

(1975) 134 CLR 640

(1989) 166 CLR 606

(1987) 8 NSWLR 514

(1989) 17 NSWLR 697

(1984) 165 CLR 622

(1991) 2 VR 146

(1976) 15 SASR 270

Permanent Trustee Australia Limited and Anor v Fai General Insurance Company Limited Matter Nos 3032/96 [1998] NSWSC 1011

At a glance

Court

Decision date

Before

Source

Judgment (83 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (47)

Permanent Trustee Australia Limited and Anor v Fai General Insurance Company Limited Matter Nos 3032/96 [1998] NSWSC 1011 (1 April 1998)