PETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH

Court of Appeal (NSW)|1993-08-24|Before: Per Mahoney JA, Mahoney JA, Sheller JA

PETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES

MAHONEY, SHELLER and Cripps JJA 24 August 1993, 20 September 1993 [1993] NSWCA 211

The appellants claimed indemnity from the respondent in relation to theft of goods from their home. The thieves entered through a steel casement window which opened on external hinges.

Are any of these security devices fitted to the building containing the 'Contents' to be insured? Answer each question by 'YES' or 'NO'.

The respondent purported to cancel the policy ab initio after the appellants' claim, saying that the answer was a material misrepresentation. It was the appellants' evidence, contested by the respondents, that the window had been secured by a padlock through an external hinge.

At trial the respondent argued that there was no "keyed window lock" present; that the appellants had misrepresented the position as to there being a lock; or that the appellants had not disclosed a material matter, being the nature of the lock.

The trial judge found that the padlock was present and fitted the description "keyed window lock", so rejected the first and second defence; but allowed the third defence because the padlock had been fitted externally - this was material to the risk and should have been disclosed.

The trial judge's acceptance that there was a padlock depended largely on a witness who had been ill. The appellants re opened their case to call him.

On appeal, the appellants argued that by insisting on a "yes" or "no" answer to the question concerning keyed window locks, the insurer waived disclosure of any other fact about the lock.

The respondent contended that the trial judge erroneously considered that to reject the appellants' evidence he had to find deliberate untruth, imposing too high a standard of proof of the absence of the padlock on the respondent; and that the appellants should not have been permitted to re open their case; and challenged the findings that there was a padlock and that the answer was not a misrepresentation.

The question combined with the imperative limited the disclosure necessary to whether keyed window locks had been fitted. the answer was sufficient. (Per Mahoney JA) That the form of the proposal limits the answer does not necessarily qualify the duty to act in good faith, but did affect the information which a reasonable proposer would be led to infer should be provided.

Although the consideration of whether there was deliberate untruth might be irrelevant, the validity of the trial judge's conclusion was not affected so as to burden the respondent with an inappropriate standard of proof. (Per Mahoney JA) It was not an error for the trial judge to rely on the possibility of deliberate untruth in deciding on the accuracy of the appellants' evidence.

The trial judge could in his discretion allow the re opening of a party's case where the interests of justice so required.

The trial judge was entitled to conclude that the padlock was present.

The trial judge was entitled to form the opinion that "keyed window locks" was not a term of art and that the answer was not a misrepresentation.

Mahoney JA I agree with the judgment of Sheller JA and the orders he proposes. However, in the view of the submissions made to the Court, I shall add some observations of my own.

The learned trial judge found for the defendant because he concluded: that, in the proposal that the plaintiffs made, they owed duty of good faith to the proposed insurer, Government Insurance Office of New South Wales ("GIO"); that that duty involved disclosure of some at least of the relevant facts beyond what was required by the proposal; that under the general law the disclosure required would include the disclosure that the keyed window lock on the window in question was on the outside and not the inside of the window; and that the failure by the plaintiffs to disclose that fact entitled the GIO to avoid the policy. Mr Maconachie QC, for the plaintiffs, contested only one proposition adopted by his Honour: he submitted that, because of the terms of the proposal form, the obligation which otherwise the plaintiffs would have had to disclose that fact did not exist. It was to that matter alone that his submissions on the appeal were directed.

The plaintiffs' submissions were essentially based upon the form of the relevant question and the answer required. These have been set out in the judgment of Sheller JA. It was the form of the answer required that provided the substantial basis of Mr Maconachie's submissions. He pointed to the fact that the only answer which the proposal form required or, as the suggestion was, permitted was "Yes" or "No". The proposal form prepared by GIO did not, he submitted, allow a qualified answer or "an answer with an explanation". The lock which, as his Honour found, had been fixed to the window had been fixed to the outside of it. It was a keyed window lock within the description in the proposal. Therefore, the answer to the question in the proposal had to be: "Yes". His Honour concluded that the duty of good faith required that that answer be amplified by the qualification or addition that the lock was on the outside and not the inside of the window. But, it was submitted, that qualification or addition was not permitted. Accordingly, the form of the answer required produced the result that good faith did not require that the qualification or addition be made to it.

It was suggested in argument that the plaintiff's position in this regard was reinforced by the fact that, when Mr Petkovski initially inquired about the proposal form, he was told by an officer of GIO that unless the form was answered strictly in accordance with the stipulations in it, it would not be accepted. However, this was not relied upon in the judge's judgment or in argument before this Court and I shall put it aside.

I find difficulty in accepting the main thrust of Mr Maconachie's argument. The fact that the form of a proposal form limits the form of the answer, and of the information, that may be given in it does not necessarily result in the qualification of the overall duty of a proposed injured to act in good faith in relation to it. The fact that the proposal form required a "Yes/No" answer to the question did not mean, I think, that the plaintiffs were completely relieved from providing any other information which otherwise would have been relevant. For example, if the fact was that, though there was a keyed window lock on the inside of the window, the lock was quite inefficient or could readily be overcome from outside by, eg,

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Mahone? JA)

moving the window, that would have been a matter of relevance which the plaintiffs would have been required to state.

However, the form of the questions and of the answers required did, I think, have an effect upon the information which the plaintiffs were required to provide as to the position of the lock. His Honour held, and it is not contested, that the fact that the lock was on the outside of the window was a relevant fact which, under the general law, the duty of good faith would require to be disclosed. But the difference between a keyed window lock on the outside and one on the inside is not something which, to a person in the position of the plaintiffs, would appear to be of immediate importance. As was stressed in argument, the issue was not whether the lock was good, bad or indifferent: the omission complained of related only to its being on the outside rather than the inside of the window. Though it must be accepted as relevant to an insurer, and a matter which the duty of good faith required to be disclosed, it is not something the significance of which would be apparent to an ordinary proposer for insurance. For example, the fact that there was a lock of a most secure kind on the outside rather than a lock of a much less secure kind on the inside might be thought by an ordinary person not to be of particular relevance.

It is in such a context that the inference to be drawn from the form of the question and answer is to be determined. In my opinion, a person in the position of a proposer would be led to infer that the GIO did not require any more information in this regard other than that there was on the window something which satisfied the description of a keyed window lock: more accurately, it would lead to the inference that the position of it was not a matter which was required to be disclosed.

The principle by which, in a particular case, the court is to be determine the effect of the form of a proposal upon the good faith of the disclosure made has not been in issue. Counsel have, in their written and oral submissions, referred to a number of cases which establish that the form of a proposal may limit what otherwise the obligation of good faith would require to be disclosed. Mr Maconachie QC submitted that the matter is to be tested according to the effect of the terms of the proposal upon "the reasonable man". But that, of course, leaves for determination how the reasonable man (or the court that measures his reactions) should "reasonably" react to what the proposal form says. I do not think that there is a single test for determining this matter. It would, I think, be sufficient if the form of the proposal would lead the proposed insured to infer that particular information or a particular act was not required. It would be sufficient if it indicated, expressly or by implication, that no further disclosure was required. Perhaps it would be sufficient if, by asking the particular questions or providing the form of the answers, the insurer directed attention away from disclosure which otherwise the proposed insured would have considered making. In considering matters of this kind, it is relevant that, for example, the fact not disclosed is something which, in the light of the proposal, it would not occur to the proposed insured to specify in the document.

In the present case, the form of the question and answer would lead a reasonable proposed insured to think that, in relation to what was otherwise a secure or sufficient lock, the fact that it was inside rather than outside was not something which the GIO desired to know.

Mr Graham QC pressed several matters specified in the Notice of Contention. In deference to his careful submissions I shall refer to two of them.

First, Mr Graham QC submitted that his Honour erred in fact in concluding that, at the relevant time, there was a keyed window lock on the outside of the window. His Honour, as he made clear, based his conclusion in this regard to a great extent upon his acceptance of the evidence of Mr Said. His acceptance of Mr Said as an accurate and credible witness was, in my opinion, affected by what he saw of the witness before him. In these circumstances, his Honour's acceptance of the witness should not be put aside except for the reasons adverted to in, eg, Abalos v Australian Postal Commission (1990) 171 CLR 167. There was not, in this case, material, such as uncontested objective evidence to the contrary, which would warrant putting aside his Honour's acceptance of Mr Said: see Voulis v Kozary (1975) 50 ALJR 59. I am conscious that his Honour's acceptance of Mr Said did not conclude the question whether, at the relevant time, the lock was on the window. It was only one matter, though an important matter, in his Honour's overall assessment of the whole of the evidence, including the evidence of the plaintiffs, Mr Kelly and Mr Said. His Honour accepted the thrust of Mr Said's evidence and concluded the lock was on the window at the time.

Mr Graham's argument suggested there was inconsistency in his Honour's acceptance of both Mr Kelly and Mr Said as credible witnesses. It is possible in a particular case, for a court to regard two inconsistent witnesses as both being, in general, accurate and credible but, on a particular point, to accept one rather than the other: in such a case the court is required to choose a conclusion inconsistent with one or the other of them. In this case his Honour saw Mr Said's evidence as leading him to the conclusion that the lock was there at the time. If Mr Said's evidence be accepted, I would come to a similar conclusion. I therefore see no error in what his Honour did in that regard.

However, Mr Graham QC called in aid the important decision of the High Court in Smith v New South Wales Bar Association (1992) 176 CLR 256. He submitted that the learned trial judge erred in a manner to which, in Smith's case, the High Court referred. His argument was generally to the following effect. Knight DCJ, in determining to accept the evidence of the plaintiffs that the lock was on the window when the insurance was effected, took into account, as he suggested, that if he rejected the plaintiffs' evidence his conclusion would be that they had deliberately misstated the position before him. Mr Graham QC submitted that this was an approach against which the High Court had, in the Smith case, warned. His argument suggested that, to find against the plaintiffs, his Honour would be required to conclude only that their evidence was wrong but not deliberately wrong and that, had he approached the matter on that basis, he would or might not have felt constrained to find in favour of them. Accordingly, the submission suggested, his Honour's approach in deciding this aspect of the matter was wrong.

As I have elsewhere said, the decision in Smith is of importance: see Bannister v Walton (Court of Appeal, 4 June 1993, not yet reported). It is important that a judge, in determining contested issues of fact, approach those issues in an appropriate manner. The opportunity of a party to contest a finding of fact is limited. The limits which have long existed upon appellate review of findings of fact, even upon a rehearing, make it of particular importance that this be emphasized. The costs of appeals is or may be substantial: the filing fee alone for initiating an appeal now ranges from $200 to $1500: see Supreme Court (Fees and Percentages) Regulation 1993, Schedule 1, CL2. The number of decisions given at trial level which proceed to appeal is small. In 1992, 1200 cases were

UAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Mahoney JA)

disposed of in the Common Law Division by hearing or otherwise. In 1992, less than 130 Notices of Appeal were subsequently filed in this Court in Common Law matters. In 1992, 572 cases were filed in the Commercial Division. In that year 60 Notices of Appeal were filed in this Court in Commercial Division matters: see The Supreme Court of New South Wales - Annual Review 1992 at 11, 19 and 26.

I agree with the submission made by Mr Graham QC that a trial judge, in deciding for one witness and against another, is not necessarily involved in deciding, as it was put, "lie or no lie". Even where, at the trial, witnesses are in direct conflict, the explanation of the conflict may be the infirmity of memory, the passage of time, or matters other than deliberate lying. And the High Court in Smith, in my respectful opinion, properly indicated that a witness's evidence may be rejected for such reasons rather than as a lie.

But, giving full weight to this, it remains that, in some cases, the question may be "lie or no lie". In the Smith case, the members of this Court concluded that the facts there were such that it was so. See New South Wales Bar Association v Smith (Court of Appeal, 9 May 1991, unreported) per Samuels JA at 30 to 31, 37 and 39, per Mahoney JA at 2 to 3 and per Meagher JA and New South Wales Bar Association v Smith (Court of Appeal, 4 July 1991, unreported) per Samuels AP at 16 to 19, per Mahoney JA at 3 to 8 and per Meagher JA at 2. See the discussion by the High Court in Smith v New South Wales Bar Association (1992) 176 CLR 256 at 268 to 269 per Brennan, Dawson, Toohey and Gaudron JJ and at 271 to 275 per Deane J. See also Bannister v Walton (Court of Appeal, 4 June 1993, not yet reported). Knight DCJ appears to have concluded that the present was such a case.

I do not think that his Honour was wrong in so concluding. A witness may, by what he says in evidence, make it clear that the choice between his evidence and that of another witness is not to be made upon the basis of infirmity of memory or passage of time. He may do this, for example, by what he says, by the detail or circumstantial nature of it, or otherwise. Or it may be inherent in the nature of the issue. In the present case, it was, I think, at least open to the judge to conclude that, if the plaintiffs' evidence was not correct, the explanation was not infirmity of memory or passage of time. What was done and when it was said to have been done, eg, the boring of a hole in the window fitting, the obtaining of a lock, the discussion with the locksmith, or about the suitability of the lock and the like, all indicated that the plaintiffs were deposing to something which they recollected as having been done very shortly before the robbery and as being relied upon very shortly afterwards in the making of a claim. The fact that they said those things happened when they did not could not, I think, be explained by saying that their memory was faulty. To an extent, the same may be said about Mr Said's evidence. I do not think that Knight DCJ was wrong in concluding, as he did, that, if the evidence of the plaintiffs and Mr Said was wrong on the issue of the lock, it was deliberately wrong. On that basis, the judge did not err in relying on that in deciding whether he was or should be satisfied of the accuracy of what they said.

Mr Graham QC then submitted that his Honour erred in allowing the plaintiffs' case to be reopened to call Mr Said. He submitted that the choice to proceed without calling Mr Said in chief was a "deliberate" choice by counsel and that therefore he should not have been permitted to take a different course at the end of the evidence. This, the submission suggested, was particularly so in the context where it was the judge himself who referred, in discussion with counsel

at the time of addresses, to the factual problems posed by the inconsistency of the evidence of the plaintiffs on the one hand and of Mr Kelly on the other.

I do not think that Mr Graham's submissions should be accepted. Counsel for the GIO did not then or before this Court suggest actual prejudice by his reason of his Honour's permission to call Mr Said. There was, I think, no injustice to the defendant by the decision. It is proper that, as a matter of general principle, a party should be required to call all of the evidence he is to call at the proper time and that he be not permitted, at the end of the evidence and in the exchanges during addresses, to change his position. It is in the interest both of the public and of individual litigants that trials be not prolonged or complicated in that way. But the professional skill of a judge involves the capacity, where justice requires, to depart from a general principle and to do what justice requires without unacceptable delay or cost. I do not see error in what the judge did in his discretionary decision in this case.

For these reasons, I do not accept the submissions in support of the matters relied upon in the Notice of Contention. It follows that the orders proposed by Sheller JA should be made.

Luben Petkovski and Lence Petkovski appeal from a decision of Judge Knight in the District Court given on 19 April 1989. His Honour gave judgment for the respondent Government Insurance Office of New South Wales in proceedings commenced by the appellants to recover from the respondent indemnity in terms of a Houseowners and Householders' Policy issued on 2 March 1984. The insurance covered loss of or damage to the contents of the appellants' house at 28 Roach Street, Arncliffe, caused by burglary, housebreaking or theft consequent thereon. The period of insurance was from 7 February 1984 to 7 February 1985. On 22 lune 1984 the premises were broken into and various of the appellants' belongings stolen. The value of the stolen belongings was $21,500. The thieves entered the premises through a steel casement type window at the rear of the house. This window opened out on external hinges at its top and bottom.

The appellants signed a proposal form for the insurance on 27 February 1984.

This proposal was expressed in the policy to be "the basis of this Contract" and to be considered as incorporated therein. On the first page of the proposal in a box which commenced with the word "SECURITY" appeared the following:

"Please note: It is essential to our acceptance of this insurance that the following question [sic] be fully answered

Are any of these security devices fitted to the building containing the 'Contents' to be insured? Answer each question by "YES' or 'NO'.

In the space provided Mr Petkovski, who completed the proposal form, wrote "YES". On the second page beside the place for signature and date appeared the following:

"T hereby warrant - that the amounts proposed above are the FULL VALUE of the property less other insurance and that the above statements are true and no matter has been misrepresented or withheld and I agree this proposal shall be the basis of the contract with the Office whose policy I agree to accept."

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Shellét JA)

The appellants made a claim upon the respondent under the policy. On 30 August 1984 the respondent wrote to Mr Petkovski:

"Due to the mis statement concerning security devices on your proposal form your policy is hereby cancelled ab initio."

The premium was returned. On the same day Maher and Associates Pty Ltd, Insurance Claims and Security Consultants, wrote on behalf of the respondent saying that the ground for declinature was the material misrepresentation on the proposal concerning keyed window locks on all accessible windows.

In his judgment Judge Knight identified three defences raised by the respondent to justify its avoidance of the policy. First it was said there were no keyed window locks on the window by which the thieves entered either on the date of the proposal or of the burglary and therefore the statement in the box "SECURITY" was false and the insurer entitled to avoid the policy. Second it was said that the appellants in the proposal had misrepresented the position as to there being a lock on the relevant window. What was meant by this is explained by the third defence that the appellants had not disclosed the true nature of the lock on the window and that as the nature of the lock was a material matter there had been a breach of their common law obligation to disclose any matter which was material to the risk.

The appellants had acquired the premises in early 1984. The purchase was settled on 29 January of that year. Mr Petkovski said that shortly after obtaining possession he went to the respondent's Miranda office to seek contents insurance. He said that he was given a form which he filled out but that someone at the office refused to accept the form because in answer to the question about keyed window locks he had written "No". He was told that if he wished to have contents insurance he had to have key operated locks on all accessible windows. Accordingly he attempted to obtain window locks but could not find one that was suitable for this particular window. He spoke to a friend and on his advice purchased a padlock. Mr Petkovski said he drilled a hole through the external hinge of the window at the bottom left hand corner and fitted a padlock through the hole with the barrel part of the padlock facing upwards. The padlock was on the outside of the window. The effect of this was to prevent the window's being opened completely, although it could be opened for a short distance. Having fitted the padlock and having fitted keyed window locks to other windows in the house he returned to the respondent's office and completed the proposal. Mr Petkovski's evidence was supported by that of a neighbour, Mr Said, who observed Mr Petkovski fitting a padlock to the bottom left hand corner of the window in question shortly after the appellants moved into the premises in early 1984. Against the respondent's opposition Judge Knight gave the appellants leave to re open their case to call Mr Said after the respondent had gone into evidence.

The issue raised on the first of the respondent's defences was whether or not the padlock device described by Mr Petkovski had been fixed to the window at the time he completed the proposal. There were a number of features about the evidence of the appellants which, in light of evidence called by the respondent, raised doubts about its truth. Judge Knight said:

"Reliance was placed on the fact that Mr Petkovski had not told the defendant about the existence of the padlock; that he had not told the insurance investigator, Mr Kelly, when Mr Kelly attended at the scene on 26 June 1984, that Mr Kelly, as he said in evidence before me, had inspected the window carefully and had not

seen any damage to the window frame, nor had he seen any holes through the hinge which would have enabled a lock to be fitted.

Mr Bennett, on behalf of the defendants, also pointed out that Mr Kelly said in evidence, and I accept, that on the occasion of the visit on 26 June 1984 to the premises, he had said to Mr Petkovski: Why didn't you fit a key lock to this window?' And Mr Petkovski had replied: 'The locksmith told me you can't fit a key lock to this type of window'. There was no mention of any padlock being fitted to the window, nor indeed, of any padlock whatsoever.

When Mr Kelly returned to the premises on 3 December 1984, he said that he put this to Mr Petkovski: 'Are you saying that a padlock was fitted as it is now at the time of the burglary?' And Mr Petkovski had said: 'Yes'. Mr Kelly had replied: Do you recall me asking you when I first visited you why you had no keyed window lock on this window?' And he indicated the window. And Mr Petkovski had said: Yes'. And Mr Kelly said: Why then do you think I asked you on that last occasion why there was no keyed window lock on the window if you'd already told me there was a padlock fitted to the outside of the window?' And Mr Petkovski said: 'I told you lots of things that you didn't write down.' And Mr Kelly said: 'Do you have the original padlock off that window?' And Mr Petkovski had replied: 'Yes, I think it is in the garage somewhere.'

That conversation was not materially disputed by Mr Petkovski except that he said that he couldn't remember saying that the padlock might have been in the garage somewhere. He said that if he, Mr Petkovski, had said that, it would have been incorrect."

In making a decision on the question of whether the padlock was fitted to the hinge of the window at the relevant time his Honour bore in mind that the onus was on the respondent to show that there was no such padlock. He said: "Further, that whilst the test is the civil standard, namely proof on the balance of probabilities, my finding that there was no padlock would involve a finding that Mr and Mrs Petkovski were lying through their teeth in court and that being so it seems to me, although Mr Bennett did not concede this, that I should have regard to the statements of the High Court in Briginshaw v Briginshaw (1936) 60 CLR 336 as to the extent of satisfaction that I must have in relation to the critical issue."

His Honour acknowledged that there were some most unsatisfactory features about Mr Petkovski's action. He accepted that Mr Kelly was a witness of both truth and accuracy and that the conversations he said took place did in fact take place in the terms in which he said they did. Moreover his Honour was satisfied that Mr Kelly did not see any holes in the hinge at the relevant time. "On the other hand he admitted quite candidly that he was not particularly looking for holes. That is no reflection on him as he had not been told about the existence of any alleged padlock." His Honour found it extraordinary that Mr Petkovski having recently had his house broken into through a particular window would not have pointed out to Mr Kelly the existence of a padlock on that window. The police constable who was called to the scene gave evidence. His report noted the method of entry but made no reference to there being any padlock on the relevant window. His evidence was that if he had been told about it or seen it he would have recorded it. Further there were questions as to the whereabouts of the lock. His Honour accepted, contrary to the evidence of Mr Petkovski, that he had told Mr Kelly that the lock was in the garage somewhere. His Honour said:

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Shell JA)

"Why such lock would not have been produced is a question that may in my view legitimately be asked. And of course one has to bear in mind that all this issue of the existence of a padlock only arose after the defendant had declined indemnity on the basis that tho relevant window was not properly secured." His Honour considered these matters to raise real doubts as to the credibility of the appellants. He continued:

"However I have to bear in mind that whilst Mr Petkovski does have some considerable command of English it is not his native language, that at the time that he spoke to the policeman and at the time no doubt that he spoke to Mr Kelly he had been the subject of a major theft, and I am not prepared, notwithstanding the real doubts raised on behalf of the defendant, to say that Mr Petkovski and his wife wore being deliberately untruthful and were in effect deceiving the court. In coming to that decision I place considerable reliance on the evidence of Mr Said. It is true, as counsel for the defendant has pointed out, that Mr Said did not give any real thought to the existence of the lock until some days ago but he was able to date the conversation he had and the observations he made of Mr Petkovski fitting the relevant lock by reference to Mr Petkovski's going into the premises. I accept Mr Said as a witness of truth. Moreover I accept that he is accurate in his observations. Those observations support Mr Petkovski and accordingly I am satisfied affirmatively that the lock was present on the relevant window at the time of the proposal and at the time of the burglary. So it follows that having found such matter affirmatively I am not satisfied that there was no such lock there. I put it to the affirmative because I would not wish it to be thought that this case was decided on the question of onus. I have approached the question of whether the lock was there or not on the basis of making a finding one way or another and I so do. Namely, that the lock was there at the relevant times."

The respondent in its notice of contention challenged this finding.

Of the second defence his Honour said that bearing in mind the terms of the proposal required the appellants to answer yes or no to the relevant questions that Mr Petkovski's answer "Yes" to the question "Are any of these security devices fitted to the building containing the contents to be insured..keyed window lock on all accessible windows" was not a misrepresentation.

"Tt seems to me that having regard to the fact that the question was framed by the defendant that it was required by the defendant to be answered 'yes' or 'no' that for a person to answer 'yes' did not in any way constitute a misleading statement or misrepresentation. The fact was that there was on the findings made by me a keyed padlock on the particular window. It may be true that the words "keyed window lock' refers [sic] to many specialist types of locks which are on the market today. However those words are not words of art, 'keyed window locks', are ordinary every day English words and it seems to me that they relate not only to the specific locks which as I have said are freely available on the market, but also to any lock which fastens a window that is operated by a key. There is therefore in my view an inherent width in the words which the answer given by Mr Petkovski falls within. Looking at it in a slightly different fashion it seems to me there is an ambiguity in the phrase, 'keyed window locks' and therefore the answer given by Mr Petkovski is to be regarded as a proper answer and not a misrepresentation, because in his case the lock that he was including in his answer was indeed a lock which operated by a key that was fastened to an

accessible window. Accordingly I am satisfied that there is no misrepresentation and it follows that the second defence must fail. "

This conclusion is also challenged in the notice of contention.

This brought his Honour to the third defence which he upheld. There was evidence before him from a Mr Norris and a Mr Salatnay, who were both employed in underwriting capacities with the respondent, that the fact that the padlock was fitted externally to the window and not internally was a matter that would have affected their minds in determining whether to accept the risk proposal and, if so, at what premium and upon what conditions. Each said that had they been aware that the padlock was fitted to the outside hinge of the window, they would not have accepted the risk. His Honour said that he was satisfied that the fact that the padlock was fitted to the outside hinge of the window would have affected the mind of a prudent insurer in determining whether he would accept the insurance and accordingly there was a material non disclosure. He said that the existence of a padlock on the outside of the window as opposed to its being on the inside rendered the padlock more accessible to any would be thief who would be able to force it with far greater ease than if it were inside or if a keyed window lock in the sense of those freely available in hardware stores were fitted. Accordingly he entered judgment for the respondent.

The appellants' argument is straightforward. Judge Knight had found that there was a lock in place at the date of the proposal and of the burglary and that the answer "Yes" to the question about keyed window locks on all accessible windows was not misleading. The appellants submitted that by insisting on the answer "Yes" or "No" to this question the insurer "waived" disclosure of any other fact relating to the window lock such as, for example, that it took the form of an external padlock. The appellants relied upon a passage in the 7th ed of MacGillivray and Parkington on Insurance Law at para626:

"Tt is more likely, however, that the questions asked (in the proposal) will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or in kindred matters to the subject matter of the questions. Thus, if an insurer asks, How many accidents have you had in the last three years?" it may well be implied that he does not want to know of accidents before that time, though these would still be material."

This passage was quoted with approval by Clarke J, as he then was, in Kyles Transport Pty Ltd v Zurich Australian Insurance Ltd (1984) 3 ANZ Insurance Cases 60 - 600 at 78,644. The passage is repeated in para646 of the 8th edition of MacGillivray and Parkington. It is a passage based largely upon the words of Asquith LJ in Schoolman v Hall (1951) 1 Lloyds Rep 139 at 143. Can it fairly be inferred from the question "Are any keyed window locks fitted on all accessible windows to the building" combined with the imperative "Answer the question by 'Yes' or 'No' " that the common law duty to disclose other material matter has been dispensed with? This has to be considered in the context of the warranty not only that the statement is true but that no matter has been withheld. I do not regard the matter as free from doubt. However consistent with authority I think the better view is that the question combined with the imperative did limit the disclosure necessary to saying whether or not keyed window locks were on

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Shellét JA)

all accessible windows. His Honour's conclusion that the appellants' answer was not a misrepresentation meant that the disclosure was sufficient.

A recent discussion of principle is found in the decision of Holland J in The State Insurance General Manager v Hanham (1990) 6 ANZ Insurance Cases 60

990. In that case the High Court of New Zealand held that a question directed to whether the person seeking insurance had been convicted by any court in connection with any offence involving a motor vehicle obviated the need to disclose the material fact that he had been convicted for offences not involving a motor vehicle. In that case his Honour at 76,607 regarded the plaintiff's reasonable interpretation of the question as setting the limits of materiality. In the present case it does not matter greatly whether the question in the proposal form be seen as delimiting what the insurer regards as material or, in my respectful opinion the better view, dispensing pro tanto with the need to disclose. According to Holland J's approach the warranty not to withhold any matter would not apply to any matter about the keyed window locks on accessible windows except whether they were fitted or not. Any other matter about them would be treated as not material. However, on the approach I prefer, material matter is not withheld if its disclosure is not required. The question and imperative do not require anything to be said about keyed window locks on accessible windows beyond whether they have or have not been fitted.

This brings me back to the grounds in the notice of contention. The attack made upon his Honour's finding that the padlock device had been fitted at the date of the proposal and of the burglary depends in the first place upon what is said to have been an error in requiring the respondent to establish that there was no padlock to the extent of satisfaction described, particularly by Dixon J, in Briginshaw v Briginshaw at 362. I doubt if it is true to say that, the appellants having given direct evidence about the installation of the padlock, a finding in favour of the respondent that the padlock had not been fitted prior to the burglary carried with it almost inevitably the conclusion that the appellants had lied about the matter. I am not convinced this is necessarily so. Mr Graham QC, who appeared for the respondent, referred us to Smith vy New South Wales Bar Association (1992) 176 CLR 256 at 268 where the difference between the rejection of a person's evidence and a finding that he or she has deliberately lied is discussed. With respect to his Honour I think it would have been better if he had not approached the matter in the way he did. The hearing before him took place nearly five years after the event. For a variety of reasons the appellants may have believed what they were saying was true even though his Honour disbelieved them. The issue remained whether the padlock was not fitted and this had to be decided on the balance of probabilities. I think the fact finding process may be distorted if on such an issue the question is presented as being whether one or other party has deliberately lied about the matter. However this may be, lam satisfied that his Honour concluded that the lock was present on the relevant window at the time of the proposal and at the time of the burglary because he accepted the evidence of the independent witness Mr Said. He said of Mr Said that he was a witness of truth accurate in his observations. Those observations supported Mr Petkovski's evidence that he had fitted the padlock before he completed the insurance proposal. I do not think the validity of his Honour's conclusion was affected, so as to burden the respondent with an inappropriate standard of proof, by the separate and to my mind irrelevant consideration of whether the appellants were being deliberately untruthful and deceiving the

court. Mr Said's evidence led his Honour not to make such a finding but it also, and this is what matters, enabled him to make the finding he did about the presence of the lock. His Honour expressly did not resolve this by saying that the respondent had not discharged the onus of showing the padlock had not been fitted. His Honour found positively that the padlock was fitted at the date of the proposal and of the burglary. Accordingly I am not satisfied that his Honour's findings on this question were tainted by the application of an erroneous standard of proof and this ground in the notice of contention fails.

The respondents also submitted that his Honour erred in permitting the appellants to re open their case to call Mr Said during the course of the respondent's case. Mr Graham argued by reference to a passage in the judgment of the High Court in Smith's case at 266 that his Honour erred because the appellants had made a deliberate decision not to call Mr Said in their own case. To support this contention we were referred to the argument put at the time the application to re open was made on the morning of the third day of the hearing. In the course of making the application the then counsel for the appellants said that it had always been intended to call Mr Said as a witness for the appellants but because of a medical condition he had been unable to come to court the previous day. Counsel said:

".. quite frankly it was through quite some pressure on my part and the good grace of Mr Said that he is here today."

We were referred to Watson v Metropolitan (Perth) Passenger Transport Trust (1965) WAR 88 at 89, where Wolff CJ said that although there was a dearth of authority as to the circumstances in which the court should re open the evidence after the trial was concluded, he considered that a court should be cautious in doing so and should admit fresh evidence of this nature only when the evidence is so material that the interests of justice require it, the evidence would, if believed, most probably affect the result, and the evidence could not by reasonable diligence have been discovered before. In my opinion the question as to whether or not in the circumstances the appellants should have been given leave to re open their case to call Mr Said was a matter in the discretion of the trial judge. The overriding principle to be applied was whether the interests of justice required that the application to do so be granted or refused; compare Brown v Petranker (1991) 22 NSWLR 717 at 728. Ordinarily, but particularly in the circumstance where the witness had been ill, I would have thought the interests of justice would favour the course that his Honour adopted unless prejudice to the other party could be demonstrated. No prejudice was suggested at the trial or on this appeal. In my opinion no ground whatever has been shown to suggest that his Honour's discretion miscarried.

Finally the respondent argued that the assertion in the answer to the question about keyed window locks constituted a misrepresentation by the appellants. The point made was that the representation was not simply that keyed window locks were fitted but that they were fitted on all accessible windows. This it was said meant that the expression "keyed window locks" was, contrary to his Honour's conclusion, a term of art. The repetition of the word "window" was said to be significant. What was represented was not merely the fitting of keyed locks on windows but keyed window locks on windows. Even so, in my opinion his Honour was entitled to come to the conclusion he did that "keyed window locks" was an expression combining everyday English words and meant a lock operated by a key that was fitted to lock a window. In my opinion this ground in the notice of contention also fails.

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Cripps JA)

In lieu thereof judgment for the appellants in the sum of $21,500 together with interest thereon calculated in accordance with s83A of the District Court Act from 30 August 1984;

The respondent to pay the appellants' costs of the hearing before Judge Knight and of this appeal.

Cripps JA This is an appeal from a decision of Judge Knight of the District Court entering judgment for the defendant (the respondent in the appeal) in an action brought by the plaintiffs (the appellants in the appeal) claiming damages for breach of contract. The appellants claimed to be entitled to be indemnified by the respondent under a Householder's Contents Policy dated 2 March 1984. The respondent declined liability and was successful at trial. It was successful because Knight DCJ found that the appellants had failed to make disclosure of a material matter at the time the Policy was entered into.

Before making that finding, the learned trial judge rejected two other defences raised by the respondent, viz that the state of the appellants' premises was not as warranted and that the appellants had misrepresented that certain locks had been fixed to the windows of the dwelling.

The respondent sought to uphold Knight DCJ's finding. If it is unsuccessful, it seeks, by a Notice of Contention, to persuade this Court that Knight DCJ ought to have upheld the two grounds of defence he rejected.

On 27 February 1984, the appellants submitted a proposal for Householder's Contents Insurance on the respondent's standard form. The proposal required information about of certain security devices. The proposal form and the answers given were as follows:

"SECURITY - Please note it is essential to our acceptance of this insurance that the following question be fully answered

Are any of these security devices fitted to the building containing the 'Contents' to be insured?

Double cylinder deadlocks on all perimeter doors? Perimeter alarm? Internal alarm?

Free standing Safe? Keyed window locks on all accessible windows? Fixed safe?

The Houseowners' and Householders' Policy No H1154982 was issued to the appellants by the respondent with respect to the contents of their house at 28 Roach Street, Arncliffe, for $40,000 on 2 March 1984 for the period 27 February 1984 to 27 February 1985.

On 22 June 1984, the appellants suffered loss when goods to the value of $21,500 were stolen from their house following a breaking and entering via a steel casement type window. The respondent's principal ground for declining liability was that there was no security device, ie no keyed window lock on the

window through which entry was affected by the burglar. The respondent alleged that the window was not locked as warranted. Upon the matter coming on for hearing, two other defences were raised, the second for the first time in final address. First, it was alleged that if there was a locking device on the window, it was not relevantly a "keyed window lock" and hence there was a false representation in the proposal form. Second, that even if there was a lock which was relevantly a key window lock, there was, nonetheless, a breach by the appellants of their common law duty to disclose a material fact to the respondent insurance company. As I have said, the respondent was unsuccessful on the principal ground relied on and the first of the two later defences. It was successful on the third defence.

In their case, the appellants said that the window had been locked by attaching a padlock to the external hinge of the casement window which could only be unlocked by a key. The casement window opened outwards and the effect of the padlock through the bottom hinge was to permit the window to be opened a very short distance.

There was a great deal of evidence concerning the existence of the lock both at the time the Policy was entered into and at the time of the break in. Those issues were determined in favour of the appellants. Furthermore, his Honour held that the affirmative answer to the question "keyed window locks on all accessible windows?" was accurate.

Mr Graham QC sought to persuade the Court, first, that it should substitute its assessment of the appellants and hold them to be untruthful or inaccurate with respect to the existence of the lock at the relevant time and, second, to reverse Knight DCJ's finding with respect to the alleged misrepresentation in the proposal. Before turning to these matters, I- will address the appellants' submissions.

Knight DCJ found that although a padlock was in existence and although that padlock fitted the description "keyed window lock" there was nonetheless a material fact which was not disclosed, viz that the lock was on the outside of the window and not on the inside of the window. There was evidence before Knight DCJ that the presence of the lock on the outside of the window may have resulted in the risk not being accepted had it been known. The question was whether the appellants had relevantly failed to disclose a material fact. Although Knight DCJ was referred to a number of decisions, he was not referred to any decisions (or at least he did not refer to any in his judgment) concerning the question whether the obligation of the appellants to disclose what was obviously a material fact was removed by the requirement of the respondent that the appellants answer the question "yes" or "no" referred to above. The question, therefore, as it would seem to me, is whether the obligation of the appellants to disclose what might otherwise be thought to be a material fact, viz the externality of the lock was eliminated by the questions asked in the proposal.

In the 8th Edition of MacGillivray and Parkington on Insurance Law at para646 at 260 concerning the effect on the duty of disclosure of questions asked in a proposal form, it is said:

"Tt is more likely, however, that the questions asked (in the proposal) will limit the duty of disclosure, in that, if questions are asked on particular subjects, and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions. Thus, if

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (CrippS JA)

an insurer asks 'How many accidents have you had in the last three years?' it may well be implied that he does not want to know of accidents before that time, though these would still be material."

Schoolman v Hall (1951)1 Lloyd's Rep 139 was concerned with non disclosure of material facts. In that case it was conceded that if there had been no proposal form there would have been a duty to disclose certain material. However, the question arose whether on its true construction the proposal form limited the duty of disclosure. Asquith LJ said:

"Tt is unquestionably plain that questions in a proposal form may be so framed as necessarily to imply that the underwriter only wants information on certain subject matters, or that within a particular subject matter their desire for information is restricted within the narrow limits indicated by the terms of the question, and, in such a case, they may pro tanto dispense the proposer from what otherwise at common law would have been a duty to disclose everything material."

A similar approach was taken by Clarke JA in Kyles Transport Pty Ltd v Zurich Australian Insurance Ltd and Anor (1984) 3 ANZ Insurance Cases 60 - 600 at 78629. The question for determination then is whether the questions as asked and the manner of asking discharged the appellants from disclosing what would have otherwise been a material fact, viz that the lock was on the outside not the inside of the house. I am of the opinion that it did. Knight DCJ held that the words "keyed window locks" were apt to describe the padlock.- That was the subject matter about which the insurer made it clear it wished information and about which it received accurate information. Accordingly, Knight DCJ erred, in my opinion, in concluding that the appellants failed to make disclosure of a material fact at the time the policy was entered into.

In its Notice of Contention, the respondent maintained that Knight DCJ erred in holding that the words "keyed window locks" were apt to include the padlock in question. The padlock was a lock which secured a window and which was operated by a key. The circumstance that it was not what was described by Mr Graham QC as a "standard window lock" (whatever that might mean) does not gainsay the conclusion of Knight DCJ.

Furthermore, I am of the opinion that this Court should not interfere with Knight DCJ's finding of fact, viz that the lock was in fact attached to the window at the time of the proposal and at the time of the robbery. Knight DCJ accepted the evidence of Mr Said, a witness called on behalf of the appellant, who said it was. Leaving to one side for the moment the question whether Knight DCJ should have permitted Mr Said to give evidence, this Court would not interfere with Knight DCJ's finding of fact otherwise than in the appropriate circumstances (see Abalos v Australian Postal Commission (1990) 171 CLR 167).

It was submitted, however, that Knight DCJ erred in permitting Mr Said to give evidence. The trial lasted two days. Mr Said did not give evidence on the first day. The appellants had arranged for him to be called but he was ill and unable to attend. Towards the end of the first day, Knight DCJ said: "The issue in this case is whether or not the padlock was there."

The next day Mr Ronzani, on behalf of the appellants, at the conclusion of the respondent's evidence in chief, asked Knight DCJ for leave to call Mr Said. A medical certificate was referred to in discussion at the time of the application (whether it was tendered or not matters not because its contents were not disputed) which supported the appellants' claim that Mr Said could not attend the

court on the previous day because he was sick. Knight DCJ allowed the evidence to be given. Mr Bennett, on behalf of the respondent, objected to the evidence being given but, after it had been, he did not seek an adjournment and he did not make any claim of prejudice. In my opinion, the decision of Knight DCJ to allow Mr Said to give evidence on the second day was a matter within his discretion and this Court should not interfere with the exercise of his judicial discretion unless it is shown to be infected by relevant error. Ordinarily, a judge does not allow a party to split his case. However, it is not the law that he may never do it. Sometimes the interests of justice demand a departure from the general rule and a judge may so order providing the party seeking dispensation shows good cause and the party relying on the rule is not prejudiced or, if he is prejudiced, the prejudice is remedied. In the present case, good cause was shown and no prejudice was claimed. Accordingly, I am of the opinion that it has not been shown Knight DCJ's discretion miscarried.

It is not clear to me what forensic purpose would be gained by the respondent had it demonstrated discretionary error. It seems to have been assumed by the respondent that if Knight DCJ had not allowed Mr Said's evidence to be given, then he probably may have had some doubt about the accuracy of the appellants' evidence because there were aspects of it suggesting they were either inaccurate or not telling the truth. But even if that were true, it would not follow that this Court would enter judgment for the respondent. This Court now knows that the trial judge considered that the appellants were truthful because, inter alia, he believed Mr Said. In these circumstances, if Knight DCJ's discretion had miscarried with respect to his decision to allow Mr Said to give evidence, this Court would have ordered a new trial when, presumably, Mr Said would give the same evidence again. It would be entirely inappropriate, in the assumed circumstances, for this Court simply to hive off Mr Said's evidence and then substitute its own view of the appellants' credibility for that of Knight DCJ.

Finally, it was submitted that Knight DCJ erred in his determination that the lock was present because of his reference to Briginshaw v Briginshaw (1936) 60 CLR 336. The short answer to the submission is that Knight DCJ did not determine the lock was present because he was not satisfied beyond reasonable doubt (or otherwise in accordance with the Briginshaw standard) that it was not present. Knight DCJ made an affirmative finding based on the evidence of the independent witness, Mr Said, that the lock was there at all relevant times.

lam of the opinion, therefore, that Knight DCJ erred in his conclusion that the appellants had failed to disclose material matter and that there is no substance in the matters raised in the Notice of Contention. Accordingly, I am of the opinion that the orders proposed by Sheller JA should be made.

In lieu thereof judgment for the appellants in the sum of $21,500 together with interest thereon calculated in accordance with s83A of the District Court Act from 30 August 1984;

The respondent to pay the appellants' costs of the hearing before Judge Knight and of this appeal.

UWAETKOVSKI v GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES (Cripps JA)

Counsel for the Respondent: PR Graham QC/JLA Bennett Instructed by: Wilshire Webb

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