Branch v AXA Insurance Australia Limited - [2001] WADC 27

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: BRANCH -v- AXA INSURANCE AUSTRALIA LIMITED [2001] WADC 27

CORAM: COMMISSIONER GREAVES

HEARD: 9 & 10 JANUARY 2001

DELIVERED : 16 FEBRUARY 2001

FILE NO/S: CIV 4691 of 1999

BETWEEN: NEIL DOUGLAS BRANCH
Plaintiff
AND
AXA INSURANCE AUSTRALIA LIMITED (ACN 007 214 155)
Defendant

Catchwords:

Insurance - Insurance contract - Failure to comply with duty of disclosure - Whether insurer would have entered into contract if insured had disclosed convictions - Whether claim fraudulent

Legislation:

Insurance Contracts Act 1984 s 13, s 21(1), s 28(1)

Result:

Judgment for plaintiff

Representation:

Counsel:

Plaintiff: Mr M E Herron
Defendant: Mr D J Martino

Solicitors:

Plaintiff: Gibson & Gibson
Defendant: Srdarov Richards Burton

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Thompson v Government Insurance Office of NSW, unreported; SCt of NSW; 50131 of 1993; BC9402653; 15 June 1994
Burns v MMI-CMI Insurance Ltd (1994) 8 ANZ Insurance Cases 61-287
Twenty-first Maylux Pty Ltd v MMI (Aust) Ltd (1990) 6 ANZ Insurance Cases 60-954
Evans v Sirius Ins Co Ltd (1986) 4 ANZ Insurance Cases 60-755
Lumley General Insurance Ltd v Delphin (1990) 6 ANZ Insurance Cases 60-986
Delphin v Lumley General Insurance Limited (1989) 5 ANZ Insurance Cases 60-941
Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1989) 166 CLR 606
FAI General Insurance Co Ltd v Hendry Rae and Court (1993) 10 WAR 322

COMMISSIONER GREAVES: In 1998, the plaintiff insured his Nissan Patrol against loss or theft under a contract of insurance with the defendant. The contract of insurance was made partly orally, partly in writing and partly by implication comprising an oral quotation, a written proposal and subsequent schedule of insurance, and the written terms and conditions of the defendant's standard form of commercial motor vehicle policy. It is common cause that the contract between the parties in this case is a contract of insurance governed by the Insurance Contracts Act 1984 ("the Act"). Section 13 of the Act provides:
"A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith."
Section 21(1) of the Act provides:
"Subject to this act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to be insured, being a matter that:
(a)the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
(b)A reasonable person in the circumstances could be expected to know to be a matter so relevant."
The plaintiff appointed Kevin Forest of Australian Insurance Services Pty Ltd as his agent to arrange the insurance cover for his vehicle. On 8 May 1998, Mr Forest faxed a motor vehicle cover note/request form to Mr Tonzing on behalf of the defendant (Exhibit 17). That form asked the question whether the plaintiff had any previous claims for this class of insurance, to which Mr Forest answered "hit roo in another vehicle and wrote it off 10/97." Mr Forest also stated that the plaintiff had "no adverse history" as a driver.
In the proposal form which the plaintiff signed on 21 May 1998 (Exhibit 1), the plaintiff was asked the following question:
"Traffic offences and convictions:
Have you or has any person who will drive the motor car:
(a)Been convicted of a motoring offence (other than parking) or received notice of intended prosecution in the past five years?
(b)Been disqualified from driving?"
To each of the questions in par (a) and par (b), the plaintiff answered "No".
By par 9 of the substituted defence, the defendant alleges that the plaintiff did not disclose to the defendant certain traffic offences. The plaintiff admits by his reply convictions for unlawful damage in 1985, disorderly conduct in 1986, giving a false name and resisting arrest in 1987, receiving in July 1987, stealing in July 1987, stealing in September 1987 and unlawful damage in July 1995. He also admits that he was disqualified from driving for three months for careless driving in 1985 and for eight months for driving under the influence of alcohol in 1986. By par 6 of his reply, the plaintiff alleges further that the defendant knew of the plaintiff's convictions in 1985 for careless driving and 1986 for driving under the influence of alcohol from the plaintiff's disclosure in an earlier proposal form of 4 November 1996 in relation to another vehicle. The plaintiff also pleads that the present proposal form (Exhibit 1) required information in relation to such matters only in the past five years. He asserts that pursuant to s 21(2)(d) of the Act compliance with any duty of disclosure was waived by the defendant in respect of such matters. The plaintiff denies the misrepresentations alleged and that he has been in breach of his duty of disclosure pursuant to s 21 of the Act.
I find the plaintiff was convicted of the offences to which he admits. I find also that the plaintiff was convicted in 1986 of driving without a licence, in 1987 of unauthorised use of a motor vehicle, in 1992 of driving without a licence, in 1996 of crossing double white lines, and in 1997 exceeding the speed limit (see Exhibits 9 and 14).
I find that the plaintiff did not disclose the prior convictions to which I have referred to the defendant at the time he obtained a cover note and in his subsequent proposal. I find that in 1996 the plaintiff disclosed to the defendant his conviction of driving under the influence of alcohol in 1986 although not his conviction for careless driving in 1985. He also disclosed two motor vehicle collisions in 1987 and 1989 (see Exhibit 5).
In my opinion, pursuant to s 21(1) of the Act the plaintiff had a duty to disclose to the defendant before the relevant contract of insurance was entered into every matter known to the plaintiff relevant to the decision of the defendant whether to accept the risk and if so, on what terms. I find that the plaintiff's previous convictions were matters known to the plaintiff to be relevant to the decision of the insurer or were matters which a reasonable person in the circumstances could be expected to know to be matters so relevant.
The issue which then requires consideration under s 28 (1) of the Act is whether the defendant would have entered into the contract of insurance if the plaintiff had disclosed his previous convictions. In this regard, the onus is upon the defendant to establish on the balance of probabilities that it would not have been prepared to provide insurance on any terms if the breach had not occurred. Counsel for the defendant submitted that in deciding whether the defendant would have entered into this contract had the breach not occurred in relation to the plaintiff's convictions, the Court should have regard to the evidence from the defendant's representatives whether they subjectively believed they would have declined to provide the cover had they known the true position, and also to the objective circumstances. I accept that submission.
Counsel for the defendant submitted that the subjective evidence of Mr Tonzing, and the objective evidence as appearing from the cover note/request form (Exhibit 17), the defendant's underwriting manual, Mr Tonzing's evidence that a strict approach was being taken at that time in relation to motor insurance, and Mr Tower's evidence, all demonstrate that the policy would not have been issued had the breach not occurred. I do not accept that submission. In my opinion, the evidence of Mr Tonzing and Mr Tower in this regard is unconvincing. Mr Tonzing said that he read Exhibits 1 and 17 at the time. He was asked whether he would have written this cover if he had known that on 26 July 1995 the plaintiff had a conviction for unlawful damage and he replied:
"At the time at UAP our motor portfolio wasn't running overly well, so every policy that come in was very strict to our guidelines, so with that extra accident, no, no, it would'nt have got through."
Mr Tonzing gave this evidence in a most diffident fashion. Likewise in his evidence in relation to the plaintiff's traffic convictions in 1992, 1996 and 1997, he seemed to suggest that each of the convictions was not serious but the cumulative effect would have required consideration. Quite sensibly he also suggested that the older the convictions the less significance they had. Mr Tonzing was referred to the defendant's underwriting instructions manual (Exhibit 20) which expresses among other things the "company philosophy not to accept risks where the applicant has within the last ten years been charged with or convicted in relation to any offence involving actual or threatening damage to property, loss of property, theft or dishonesty or any kind of drug offences." In cross-examination, Mr Tonzing said that as an isolated offence, he would have given careful consideration to the conviction in 1995 for unlawful damage. He was asked whether he would have sought an explanation about the circumstances behind it and he replied "No, maybe not." It is to be observed that the 1995 conviction was the only conviction involving damage to property in the ten years prior to the proposal.
Mr Brian Towers was the branch manager for the defendant at the relevant time. He said that the 1995 conviction would have been referred to management in the Eastern States. I found Mr Towers' evidence to be more equivocal than that of Mr Tonzing. He was prepared to accept, however, that he would have made inquiries into the circumstances of the 1995 conviction.
In my opinion, this evidence does not establish the subjective opinion of the defendant's representatives relied upon. Objectively, it seems to me open to conclude and I so find that the plaintiff's convictions in 1992, 1995, 1996 and 1997 were not on the evidence in their nature such that they reflected a poor risk for the insurance proposed. Otherwise, the defendant knew of the plaintiff's previous claims and they likewise do not objectively reflect, in my opinion, a poor risk. I conclude, therefore, that the defendant would have entered into the contract if the plaintiff's breach had not occurred, and that accordingly the defence on this ground fails.
The plaintiff's vehicle disappeared in unknown circumstances from the car park of the Justice Nightclub in Joondalup on 4 May 1999. It has not been recovered. His evidence is that he parked the vehicle and locked it. He and a friend went to a movie at the Joondalup Greater Union Cinema and when they returned the vehicle had disappeared. The plaintiff said he had no knowledge of the circumstances of its disappearance. Without more, this evidence is, in my opinion, sufficient to lead to a reliable inference that the vehicle was stolen. The defendant pleads, however, that the claim made by the plaintiff under the contract of insurance in respect of the alleged theft was made fraudulently. It is made on the evidence that the plaintiff reported the theft to the Joondalup Police at 11.00 pm on 4 May 1999, while other evidence suggests that the screening of the movie which the plaintiff attended finished at 11.10 pm. The evidence of the plaintiff was that he and his friend remained at the theatre until completion of the movie. The defendant alleges that in these circumstances the plaintiff could not have done what he claims to have done consistently with those times and that the Court should conclude that the claim of theft is a fabrication. In my opinion, the evidence is not capable of supporting such a serious conclusion. In my opinion, the only conclusion which is open on the balance of probabilities is that the vehicle was stolen and I so find.
Accordingly, in my opinion, the plaintiff has discharged the burden upon him and the defendant has failed to establish that he is entitled to avoid liability under the contract of insurance. Accordingly, in my opinion, the plaintiff is entitled to judgment in the sum of $34,000. I will hear counsel on the orders to be made.