Capital Plumbing Service Pty Ltd v F.M.L Assurance Ltd

[1986] FCA 363

J ! CATCHWORDS

INSURANCE - policy of life insurance - whether contract of

insurance - whether parties proceeded past the stage of

pre-contractual negotiaton - proposal for pollcy of llfe

insurance and benefits on disablement - whether acceptance of

offer in proposal - whether counter-offer.

CAPITAL PLUMBING SERVICE PTY LIMITED V. F.M.L. ASSURANCE LIMITED

No. A.C.T. G1 of 1986

Northrop, Gallop and Jackson JJ.

26 August 1986

Canberra

' !

IN THE FEDERAL COURT OF AUSTRALIA	)
AUSTRALIAN CAPITAL TERRITORY

NO. A.C.T. G 1 Of 1986

DISTRICT REGISTRY

DIVISION GENERAL 1

ON APPEAL from the Supreme Court	of
the Australian Capital Territory

BETWEEN:

CAPITAL PLUMBING SERVICE

PTY LIMITED

' Appellant

AND : F.M.L. ASSURANCE LIMITED

Respondent

MINUTES OR ORDER

JUDGES MAKING ORDER: NORTHROP, GALLOP AND JACKSON JJ.

DATE OF ORDER: 26 August 1986

WHERE MADE:	CANBERRA
THE COURT ORDERS THAT:

1. The appeal be dismissed.

2 . The appellant pay to the respondent its costs of the

appeal.

Note:	Settlement and entry of orders is dealt with in Order 36
of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) )

AUSTRALIAN	C PITAL	ERRITORY	1
) No. A.C.T. G 1 of 1986

REGISTRY	DISTRICT	1
)

DIVISION GENERAL )

ON APPEAL from the Supreme Court of

the Australian Capital Territory

BETWEEN: CAPITAL PLUMBING SERVICE

PTY LIMITED

Appellant

AND : F.M.L. ASSURANCE LIMITED

Respondent

CORAM :	NORTHROP, GALLOP AND JACKSON	JJ.
DATE :	26 AUGUST 1986.
PLACE :	CANBERRA

REASONS FOR JUDGMENT

THE COURT:

The appellant sued the respondent in the Supreme Court of

the Australlan Capital Terrltory, claiming that the respondent

was the insurer and the appellant the insured under a policy of

life assurance upon the life of Colin Raymond Mills. Mr Mills

had dled on 10th February 1977 and at the time of his death and

at all material times prior thereto was a director of the

appellant, a family company	engaged in business in the Australian
Capital Territory.

-2 -

' l

The primary Judge was of the view that no contract of

insurance had been entered into, the parties not having proceeded

past the stage of pre-contractual negotiation. Accordingly he

gave judgment for the respondent	and it is from that decision the
appellant now appeals.

The events which are said to have given rise to the

contract of insurance commenced, as the primary Judge found, in

about 1973 when the deceased and his wlfe met Robert Arthur

Irvine who was an employee of Federation Insurance Limited, a

company which had an association wlth the respondent and in at

least some respects acted as the respondent's agent. After their

first meeting and before the events to which we shall now turn,

the deceased and Mrs Mills had had some dealings with	Mr Irvlne
in relation to insurance.

The events critical for present purposes, however,

commence after that time and in particular on 18th October 1976

when Mr Mills with the aid of Mr Irvine prepared a document which

we shall call "the proposal" which is accepted by the parties,

although the manner in which it is completed 1s in some respects

inapt, as being a proposal by the appellant to the respondent for

insurance in respect of the life of the deceased. We say "in

respect of" because the precise nature of the policy sought to be

effected is a matter which is in issue, and to that issue we

shall now turn.

-3-

The proposal was one which in form appeared apposite to a

policy of"1ife assurance to be effected by a family company on the life of its principal working director. The form bore the

general description "PROPOSAL FOR LIFE ASSURANCE" and it was

\

divided into a number of parts including the following:-

(a) "STATEMENT BY PROPOSED LIFE ASSURED";

(b) "STATEMENT RELATING TO PROPOSER IF OTHER THAN

PROPOSED LIFE ASSURED" ;

(C)

"PERSONAL STATEMENT to be completed by Proposed

Life Assured if Proposal 1 s for ASSURANCE WITHOUT

MEDICAL EXAMINATION".

In the first of those parts there was contained a

statement as to the "Princlpal Sum Assured" which was that the

"Type of Assurance" was to be "LDTA with partlcipatlon In

profits", that the amount of the insurance was to be $30,000.00

and that the total premlum was to be $167.60. The term "LDTA"

refers to Llnear Decreasing Term Life Assurance and the prlmary

Judge found that the meaning of that expression was:-

"that the term be 20 years, the Initial term assurance be

$30,000 on death and the inltlal insurance on

disablement be $30,000 also with an annual decrease in

respect of each of death and disablement of $1,500. The

nature of the policy in respect of which the proposal

was made then becomes clear. For a modest premium It

was to provide the relatively large sum of $30,000 on

death or $30,000 on disablement should elther of those

events take place in the first year. As each year

passed the sum payable on either of those events was lessened by one twentieth of the original sums payable or that proportion whlch each year bore to the term of 20 years proposed. "

-4-

2 :

It should be noted that one feature which emerges from

the terms of the proposal is that it did not anywhere state that

a policy providing a benefit to the appellant in the event of

disablement of Mr Mills, as distinct from his death, was In

contemplation. The amount indicated in the proposal as the

premium would have conveyed such an indicatlon to one familiar

with the rates of premium then applicable but it was in any event

agreed before the primary Judge that he might "take it as common

ground" that the proposal was for	both a life policy and for
benefits on disablement.

We should also add that at the time of making the

proposal the appellant had in mind that it would also seek to

effect superannuation benefits for the deceased and that its

contribution in that regard would be a sum of $300.00 per year.

As we have said earlier the proposal was dated 18th

October 1976 and on 23rd November 1976 the respondent sent o

Federation Insurance Limited a memorandum in the following terms:-

"We advise that Mr C.R. Mills is medically A/OR, however,

due to his aviation pursuits Disablement benefits have

been declined.

The annual premium for a sum assured of $30,000 will now

be $138.50. Alternatively, the annual premium originally calculated (i.e. $167.60) will now purchase a sum assured of $36,690.

Would you please let us know the Company's intentions in

this connection and also obtain a letter from the Company

acknowledging that LDTA will now be "death only". "

-5-

'!

The New South Wales Manager of Federation Insurance

Limited on 26th November 1976 then sent to Mr Irvine a memorandum stating:-

"We will appreciate your advices in terms of the

following enquiry sheet. Please complete where

indlcated, detach, and return to thls office."

The enquiry sheet contained the following:-

"We advise that Mr C.R. Mills has beem accepted at

ordinary rates but due to his aviation pursuits

disablement benefits have been declined.

The annual premlum for a sum assured of $30,000 without disability benefits will be $138.50. Alternatively, the original annual premium (including disabllity benefits)

was $167.60 and this will now purchase	a sum assured of
$36,690 without disability benefits.

Would you please obtain a letter from the Company acknowledging that the decreasing temporary assurance will now be a death cover only, also whether the sum assured is to be $30,000 for a premium of $138.50 or $36,690 with an annual premium of $167.60."

The document to which we have just referred was shown to

Mr Mills by Mr Irvine and the ultimate question for determination

is whether the communicatlon to the appellant of the contents of

that document constitutes an acceptance by the respondent of the offer contained in the proposal. If it dld not constitute such

an acceptance, but was a counter-offer, it is not argued that any

later events gave rise to a contract as, for example, by

acceptance of the counter offer.

It seems to u s clear that the learned trial Judge was

L

-6 -

> I

correct in taking the view that in these circumstances no

concluded agreement had been arrived at. Whether the proposal

should or should not be treated as including the proposal for

.	superannuation benefits - the primary Judge regarded It as being common ground before him that it should, but that appeared not to be so before u s - it is apparent that the proposal for life assurance should be treated as a proposal for a policy of life
assurance whlch included, for an additional premlum of about
$30.00 annually, provislon for benefits on disability. That
proposal was never accepted but what was said was that the respondent was prepared to issue a policy of life assurance
containing - no provision for benefits on disability. There is
nothing in the proposal to suggest that the terms of the proposal were to be treated as a number of separate offers, each capable of acceptance notwithstanding rejection of the other. In these
circumstances, and notwithstanding the careful argument of Mr

Williams to the contrary, it is impossible to be satisfied that any contract of insurance was arrived at.

It is thus unnecessary to deal with the other grounds

relied on by the respondent to support the judgment below.

The appeal should be dismissed.

c

- 7 -

I certify that the six ( 6 )

preceding pages are a true copy of

the Reasons for Judgment of

their Honours Mr Justice Northrop,

.	Mr Justice Gallop and Mr Justice Jackson. Associate: i) v.
Date: 26 August 1986
Counsel for the Appellant: Mr R.E. Williams
Solicltors for the Appellant: Snedden, Hall & Gallop
Counsel for the Respondent: Mr P. Sheils Q.C. with Mr Nash
Solicitors for the Respondent: Higglns Sollcltors
Date of hearing: 16th July 1986