Deaves v CML Fire and General Insurance Co Ltd

[1979] HCA 12

HIGH COURT OF AUSTRALIA

Gibbs A.C.J., Stephen, Mason, Jacobs and Murphy JJ.

DEAVES v. C.M.L. FIRE AND GENERAL INSURANCE CO. LTD.

(1979) 143 CLR 24

26 March 1979

Insurance—High Court

Insurance—Fire insurance—Proposal—Request for particulars of other insurance—Proposal form stating proposal to be basis of insurance—Policy issued without term making proposal basis of insurance—Question in proposal—Whether answer incorporated in policy—Condition that written notice be given of other insurance—Breach—Consequence—Information given by proposer to insurer's agent—Answers filled in by agent—Non-disclosure of material fact—Policy issued to mortgagor and mortgagee—Right of mortgagor to cancel policy without mortgagee's consent—Loss—Election—Actions instituted for same loss against two insurers on different policies—Judgment in one action. High Court—Appeal from State Supreme Court—Proceedings involving claim to civil right amounting to more than $20,000—Appeal in proceedings in &hich at time of judgment and of giving notice of appeal amount of more than $20,000 involved—Subsequent payment of part of amount of loss reducing unpaid amount to less than $20,000—Judiciary Act 1903 (Cth), s. 35 (3) (b)*. * (1979) 143 CLR at p 34.

Decisions

1979, March 26.
The following written judgments were delivered:-
GIBBS A.C.J. On 16th November 1971 the appellants, V. J. and D. L. Deaves, who are husband and wife, purchased a service station at Amberley in Queensland. As security for the payment of the purchase money, the vendors, Mr. and Mrs. P. H. Willis, were given a mortgage over the land and a bill of sale over the plant and equipment. One of the conditions of the mortgage was that the appellants should keep the property insured in the name of the mortgagees against loss or damage by fire. The bill of sale also contained a covenant to insure. On 12th February 1972 the State Government Insurance Office (Queensland) ("S.G.I.O.") issued a policy of fire insurance which showed the insured as
"DEAVES, Vincent James &Dawn Lynette (JO) WILLIS, Percival Hartwell &Esme Muriel (M)". According to the policy, the abbreviation "JO" meant joint owners and the abbreviation "M" meant mortgagee. The period of insurance was from 16th November 1971 to 16th November 1972. The property insured, and the sum insured in respect of each item of that property, were as follows:

Building of cafe, service station and dwelling $15,000 Machinery and/or plant therein 4,000 Stock-in-trade therein 2,000 All electric motors therein 300 --------- Total $21,300 ---------

By cl. 3 of the special conditions, the liability of S.G.I.O. in respect of each item was not to exceed "the sum insured by each item of the policy". The policy contained the following conditions:

"3. The Insured shall give notice in writing to the Office of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such insurance or insurances be stated in or endorsed on this Policy by or on behalf of the Office before the occurrance of any loss or damage, all benefit under this policy shall be forfeited. . . . 5. This Insurance may be terminated at any time at the request of the Insured, in which case the Office will retain the customary short period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Office, on notice to that effect being given to the Insured, in which case the Office shall be liable to repay on demand a ratable proportion of the premium for the unexpired term from the date of the cancelment. . . . 10. If at the time of any destruction or damage to any property hereby insured, there be any other subsisting Insurance or Insurances, whether effected by the Insured or by any other person or persons, covering any of the property, the Office shall not be liable to pay or contribute more than its ratable proportion of such destruction or damage . . ."

This policy was renewed from time to time and was in force on 31st May 1974. (at p30)

2. Towards the end of 1973 Mr. Deaves decided that he was in a position to increase the amount of his insurance, which he said was taken out originally only to cover the interest of the mortgagees. He endeavoured to arrange for an agent of S.G.I.O. to call upon him for this purpose, but no one did so. Later a canvasser from a company associated with the respondent, C.M.L. Fire and General Insurance Company Ltd. ("C.M.L."), came to see Mr. Deaves in an attempt to persuade him to increase the amount of his life insurance, and Mr. Deaves spoke to the canvasser about his fire insurance. It was arranged that a representative of C.M.L. should call upon him, and one did call, in about April or May 1974. Mr. Deaves told the representative that he was insured with S.G.I.O., that he wanted to increase the amount insured but that S.G.I.O. had not come out to see him as he had requested. The representative produced a form of proposal, asked Mr. Deaves the questions that appeared on it and filled in the answers. Mr. Deaves then signed the form, which bears date 7th May 1974. One of the questions in the form of proposal was as follows:

"Give particulars of sum already insured with this and other Insurers on identical property proposed to be insured under this proposal."

The answer to this question as written by the representative was "N/A", which apparently was intended to mean "Not Applicable". The proposal contained the statement that "all questions on this proposal not replied to are to be deemed answered in the negative". It also set out, above the proponent's signature, the following declaration:

"I DO HEREBY DECLARE AND WARRANT that the answers and particulars given above are in every respect true and correct, and I have not withheld any information likely to affect the acceptance of this Proposal; and I agree that this Prosposal and Declaration shall be the basis of the Contract between the Company and myself; and I further agree to accept the Company's Policy subject to the terms, conditions and memoranda to be contained therein, endorsed thereon or attached thereto."

When he signed the proposal, Mr. Deaves gave to the representative a cheque for the amount of the premium. He said to the representative: "Am I covered from today because I would like to go in and cancel the policies at the S.G.I.O.?" The representative told him that he was covered. It is possible that a cover note was issued on 30th April 1974, but that is immaterial. (at p31)

3. The proposal stated the names of Mr. and Mrs. Deaves as those in which the policy was to be made out. There is no direct evidence that Mr. Deaves had the authority of his wife to sign the proposal on her behalf, but this was not an issue raised by the pleadings. In fact C.M.L. proceeded to issue a policy in the names of the appellants; it was dated 14th May 1974 and covered a period of twelve months from 30th April 1974. The service station and contents were insured for a total of $30,000, itemized as follows:
Building including landlord's fixtures and fittings $20,000
Stock in trade and merchandise 3,000 Machinery and plant 5,000 Business and office equipment, furniture, unused stationery, etc. 2,000 --------- Total $30,000 --------- The policy did not contain any provision warranting the truth of the answers contained in the proposal or declaring that the proposal should be the basis of the contract. Condition 1 of the C.M.L. policy was in the following terms:

"This Policy shall be voidable in the event of misrepresentation, misdescription or non-disclosure in any material particular."

Condition 3 of the C.M.L. policy was in exactly the same terms as condition 3 of the S.G.I.O. policy except that the word "Company" appeared in lieu of the word "Office". Condition 10, in so far as it related to contribution, was also in the same terms as condition 10 of the S.G.I.O. policy, again with the substitution of "Company" for "Office". The C.M.L. policy did not mention the interest of the mortgagees - indeed Mr. Deaves did not tell the representative of C.M.L. that the property was mortgaged. No written notice was given to S.G.I.O. of the fact that the insurance with C.M.L. had been taken out. However, some time after the proposal for insurance with C.M.L. had been completed, Mr. Deaves went to the office of S.G.I.O. and informed an employee of that office that he wished to cancel his policies with S.G.I.O. He had, in addition to the policy already mentioned, two other policies with which we are not concerned. Mr. Deaves was given some forms to sign and he signed them. The form which he signed in respect of the relevant policy is dated 31st May 1974 and omitting formal parts it reads: "Please Cancel above Policy any refund to above address." He later received from S.G.I.O. a refund in respect of the premiums paid on the two other policies, but he received no refund in respect of the premium paid on the relevant policy. When he enquired from S.G.I.O. he was told that "they had to get permission from Percy Willis for it to be cancelled". Mr. Deaves did not inform Mr. or Mrs. Willis of his intention to cancel the S.G.I.O. policy or of his attempt to do so. It seems that S.G.I.O. intended to write to Mr. Willis, and indeed may have done so, although Mr. Willis received no letter from them. Mr. Deaves did not receive any notification that the S.G.I.O. policy had been cancelled. It appears that S.G.I.O. took no further steps to effect its termination before 4th August 1974. Mr. Deaves did not notify C.M.L. that the S.G.I.O. policy remained on foot. On 4th August 1974 the service station was destroyed by fire. (at p32)

4. Claims were made on both insurers under the two policies but both refused to pay. Thereupon two actions were commenced. Action No. 506 of 1976 was begun on 2nd March 1976 by Mr. and Mrs. Willis and Mr. and Mrs. Deaves as plaintiffs against S.G.I.O. claiming indemnity under the S.G.I.O. policy. In that action S.G.I.O. pleaded that it was not liable to indemnify the plaintiffs for two reasons, (1) that the plaintiffs had failed to give notice in writing to S.G.I.O. of the C.M.L. policy; and (2) that Mr. and Mrs. Deaves had on 31st May 1974 terminated the S.G.I.O. policy. C.M.L. was bought into this action as a third party. Action No. 929 of 1976 - the proceeding in which this appeal arises - was commenced on 14th April 1976. In that action Mr. and Mrs. Deaves claimed indemnity under the C.M.L. policy and C.M.L. defended the action on a number of grounds which it will be necessary to consider. The two actions were ordered to be tried together. On 18th May 1977 Andrews J. gave judgment in both actions. He held that the proposal formed the basis of the contract with C.M.L., notwithstanding that there was no recital to that effect in the policy, that the answer to the question relating to other insurances was untrue and that the appellants had not proved that the representative of C.M.L. was other than their agent for the purpose of filling in answers to questions in the proposal form. He held that the result of not furnishing a true answer to the question in the proposal was to avoid the C.M.L. policy. He further held that the S.G.I.O. policy had not been cancelled. In these circumstances condition 3 of the S.G.I.O. policy did not apply (since no policy had been effected with C.M.L. within the meaning of that condition) but condition 3 of the C.M.L. policy provided an additional reason for giving judgment for C.M.L. It should be added that the learned trial judge found that Mr. Deaves was quite honest as a witness, and made no attempt to deceive anybody. In accordance with these findings, he gave judgment for C.M.L. in action No. 929. In action No. 506 he held S.G.I.O. bound to indemnify the plaintiffs and found in favour of C.M.L. in the third party proceedings. He assessed the amount of the plaintiffs' loss as follows:
Building $23,522
Machinery and plant 3,987 Stock in trade 2,408 --------- Total $29,917 --------- He included in the amount of machinery and plant $23.20 in respect of lost cheque books and stationery; in the S.G.I.O. policy, unlike the C.M.L. policy, there is no item expressly covering a loss of stationery, etc. Having regard to the limits to the liability in respect of each item fixed by special condition 3 of the S.G.I.O. policy, he gave judgment for the plaintiffs in action No. 506 against S.G.I.O. for $20,987 plus interest. (at p33)

5. An appeal was brought to the Full Court of the Supreme Court by S.G.I.O. in action No.506 and by Mr. and Mrs. Deaves in action No. 929. Both appeals were dismissed. On 24th October 1977, Mr. and Mrs. Deaves gave notice of appeal to this Court from the judgment of the Full Court in action No. 929. An appeal was also instituted by S.G.I.O. in action No. 506 and that appeal does not seem to have been formally abandoned. However on 6th April 1978 S.G.I.O. wrote informing C.M.L. that it did not intend to proceed with its appeal. S.G.I.O. has since discharged by payment the judgment given in action No. 506. (at p34)

6. Before us the respondent applied, out of time, for leave to file a notice of objection to the competency of the appeal. Having regard to the finding of Andrews J. already mentioned, the total value of the property insured at the time of the loss was $29,917 (to which no doubt should be added $23.20) of which the maximum amount recoverable under the C.M.L. policy, assuming it to have been valid, would appear to have been $26,395; that was because the value of the building exceeded the amount of $20,000 itemized in the policy. However, it was submitted, since $20,987 had already been recovered from S.G.I.O., the amount in issue on the appeal was only about $6,000. Perhaps it should be added that the interest of Mr. and Mrs. Willis in the property was found to be $18,626, so that if the C.M.L. policy covered only the interest of Mr. and Mrs. Deaves the amount involved would be considerably less than $20,000. It was therefore said that there was no right of appeal. (at p34)

7. Under s. 35 (3) of the Judiciary Act 1903 (Cth), as amended, subject to an immaterial exception:
". . . an appeal may be brought as of right from a final judgment of a Full Court of the Supreme Court of a State given or pronounced -
(a) for the sum of $20,000 or upwards; or (b) in any proceedings in which the matter in issue amounts to or is of the value of $20,000 or upwards or which involve directly or indirectly a claim, demand or question to or respecting any property or any civil right amounting to or of the value of $20,000 or upwards." In the present case, where the judgment appealed from was given in favour of the defendant, we are concerned only with par. (b). In action No. 929 the appeal is brought from a final judgment of the Full Court in proceedings in which the amount claimed, according to the pleadings, was $30,000. If the amount by which the appellants are prejudiced by the judgment is to be determined by what they claim, that is of course the end of the objection. Further, the amount of the loss alleged to be covered by the indemnity exceeded $20,000. It was not right to say that the fact that there was a claim against S.G.I.O. for indemnity against part of the loss meant that the amount in issue in the C.M.L. proceedings was reduced by the amount claimed from S.G.I.O. It was disputed that S.G.I.O. was liable, and the claim against C.M.L. to be paid the full amount of the loss was made on the assumption that S.G.I.O. would escape liability. The fact that the interest of the appellants in the property was worth less than $20,000 is immaterial, since the appellants' claim was to recover the full value of the property lost, no doubt on the basis that the C.M.L. insurance was intended to enure for the benefit of the mortgagees as well as for the benefit of Mr. and Mrs. Deaves. At the time judgment was pronounced, and also at the time when the notice of appeal was given, the proceedings involved directly a claim to a civil right amounting in value to more than $20,000. The appeal was therefore competent. The fact that S.G.I.O. has subsequently made a payment in respect of part of the loss cannot retrospectively invalidate the appeal. It is unnecessary to consider further the effect of s. 35 (3) since in my opinion an objection to competency would be bound to fail. The application to file a notice of objection should accordingly be refused. (at p35)

8. A further contention made on behalf of the respondent may conveniently be noticed before proceeding to the substance of the appeal. It was said that the judgment in action No. 506 gave rise to an issue estoppel. Certainly in that action the court did determine, as between the parties to this appeal as well as between other parties, that S.G.I.O. was, and C.M.L. was not, bound to indemnify the appellants, but that determination had not been made before the issues were decided in action No. 929: judgment in both actions was given at the same time. However, it is unnecessary to consider the rules relating to issue estoppel, because as argument proceeded counsel for the respondent made it clear that they were relying not on that doctrine but on the principle of election discussed in Petersen v. Moloney. In that case it was said (1951) 84 CLR 91, at pp 102-104 : ". . . it is a well-settled principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election." (at p35)

9. It was submitted that the appellants' claims against S.G.I.O. and C.M.L. were in the alternative, and that by obtaining judgment against, and accepting payment from, S.G.I.O. the appellants were debarred from recovering from C.M.L. The principle on which the cases discussed in Petersen v. Moloney (1951) 84 CLR 91, at pp 102-104 , rest is that there "must not be more than one judgment where there is only one antecedent obligation"; in other words, there cannot be two judgments in existence for the same debt or cause of action: cf. Kendall v. Hamilton (1879) 4 App Cas 504, at p 515 . In the two actions brought in the present case two quite distinct causes of action were asserted - one based on a contract with S.G.I.O. and one on a contract with C.M.L. As a matter of law S.G.I.O. and C.M.L. were not liable in the alternative: a person who has effected two policies of insurance may, in the event of loss, recover from both insurers, although he cannot recover more than the total amount of his loss. It may be that the effect of condition 3 in both policies is that the appellants cannot succeed against both insurers, but that is a matter to be decided in each action and it does not mean that there is only one obligation which can be given effect by only one judgment. For these reasons the argument of the respondent that the judgment in action No. 506 debarred the appellants from recovering from C.M.L. cannot be accepted. (at p36)

10. C.M.L. raised three main defences to the appellants' action: (1) the proposal formed the basis of the policy, and there had been a breach of the warranty which it contained, which was expressed by the letters "N/A" and had the same force as if it were incorporated in the policy; (2) there was a non-disclosure of two material circumstances, viz., that the property was the subject of another insurance and that the property was mortgaged; and (3) condition 3 of the policy was broken. Notwithstanding the conclusions reached in the Supreme Court, I am not persuaded that the first and second of these defences should prevail. The policy did not expressly incorporate the proposal, but C.M.L. relied upon the authorities which are cited in MacGillivray and Parkington on Insurance Law, 6th ed. (1975), par. 815, for the following proposition:

"In marine insurance it is a statutory rule that an express warranty must be stated in the policy or incorporated into it by words of reference appearing in the policy itself, and this is only fair to the assured who would perhaps otherwise forget, if not possessing a copy of the proposal form, what he had warranted in it. This does not now appear, however, to be the general rule in non-marine insurance, where it is sufficient for an insurer to obtain the signature of the applicant to a declaration saying that, 'This proposal is to serve as the basis of the contract,' whereupon the warranty is an effective term of the contract of insurance even if not expressly mentioned in the policy when that is issued."

The learned authors go on to say that it is not clear what the rationale for this practice is. The decision of this Court in Australian Provincial Assurance Association Ltd v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. (1932) 48 CLR 341 would appear to establish that a policy of non-marine insurance cannot be regarded as having incorporated a declaration in a proposal, simply because the insured has signed the declaration; see also Kazacos v. Fire and All Risks Insurance Co. Ltd. (1970) 92 WN (NSW) 397, at pp 400-401 . We were not referred to any provision of the policy, or other circumstances of the case, that might have supported the conclusion that the declaration was incorporated in the policy in the present case. The question whether there was a failure to disclose the existence of the S.G.I.O. insurance depends on whether the knowledge of the representative who discussed the matter with Mr. Deaves can be imputed to C.M.L., and it appears to me that in the circumstances to which I have referred it was the duty of the representative to place at the disposal of C.M.L. the knowledge that came to him as a result of the conversation. It is true that Mr. Deaves did not disclose the existence of the mortgage, but the authorities suggest that persons seeking insurance are not bound, in the absence of a specific question, to disclose that the property is subject to mortgage (see MacGillivray and Parkington, op. cit., par. 783) and no evidence was led in the present case to suggest that Mr. Deaves was questioned on the point. However, for the reasons which will appear, it is unnecessary for me to express a final conclusion on any of these matters. (at p37)

11. The real obstacle in the path of the appellants is provided by condition 3. It is not in contest that the appellants did not give to C.M.L. written notice of the insurance effected with S.G.I.O. or that particulars of the S.G.I.O. insurance were not stated in or indorsed on the policy by or on behalf of C.M.L. It was argued by counsel for the appellants that since both policies contained the same condition, the two conditions were mutually destructive, so that both insurers were liable, subject to ratable contribution. This argument was based on Weddell v. Road Transport and General Insurance Co. Ltd. (1932) 2 KB 563 , a decision followed in Austin v. Zurich General Accident and Liability Insurance Co. Ltd. (1944) 2 All ER 243 . In Weddell's Case the claimant held a policy of motor car accident insurance which contained an extension clause covering relatives and friends of the claimant while driving his car, "provided that such relative or friend is not entitled to indemnity under any other policy". The policy also contained a ratable contribution clause, which, however, was expressed to be subject to the provision already mentioned. The claimant's brother also held a motor car policy, which was extended to cover him while driving a car not belonging to him, "if no indemnity is afforded the insured by any other insurance". There was no ratable contribution clause in that policy. The brother was injured while driving the claimant's car, and it was held that the claimant's insurer was liable. Rowlatt J., speaking of the extension clauses, said (1932) 2 KB, at p 567 :

"In my judgement it is unreasonable to suppose that it was intended that clauses such as these should cancel each other (by neglecting in each case the proviso in the other policy) with the result that, on the ground in each case that the loss is covered elsewhere, it is covered nowhere. On the contrary the reasonable construction is to exclude from the category of co-existing cover any cover which is expressed to be itself cancelled by such co-existence, and to hold in such cases that both companies are liable, subject of course in both cases to any rateable proportion clause which there may be."

The clauses there considered were different from condition 3 in the present case. In Weddell's Case the condition contained in each policy exempted the insurer from liability for a specific loss if an indemnity against that loss was afforded by another insurance. To avoid the unjust result that neither insurer would be liable, the provision was construed as not applying where the other insurance contained a similar provision, for in such a case neither policy afforded "indemnity" within the meaning of the other. (at p38)

12. Condition 3 on the other hand does not prohibit double insurance, or exempt the insurer from liability if double insurance exists, but requires the insured to disclose in writing any other insurance and requires particulars therof to be stated in or indorsed on the policy by the insurer, and avoids liability unless those things are done. The effect of such a condition was considered in Steadfast Insurance Co. Ltd. v. F. &B. Trading Co. Pty. Ltd. (1971) 125 CLR 578 . In that case, during the term of a policy of fire insurance which contained a condition identical with condition 3, a cover note was issued by another insurer (Queensland Insurance) with respect to the same risk. The cover note was expressed to be "subject to the terms and conditions of this company's policy", and the policies issued by Queensland Insurance also contained a condition in the same terms as condition 3. No notice in writing was given to either insurer. The property was destroyed by fire and it was held that the insured had not lost the benefit of the first policy. The reasons for this conclusion were as follows. First, it was held, an insurance is "effected" within the meaning of a clause such as condition 3 only when what has been done attaches risk of loss to another insurer; in other words, if the contract with the other insurer contains a condition whose effect, in the circumstances, is that that insurer is at no time liable to indemnify the insured, the making of that contract is not the effecting of an insurance within the meaning of condition 3 (1971) 125 CLR, at pp 581-582; 587-589 . Secondly, the effect of condition 3 was that because the claimants did not give Queensland Insurance notice of the earlier policy, Queensland Insurance was at no time under a liability to indemnify the claimants, so that the obtaining of the cover note did not constitute the effecting of an insurance covering the property issued under the earlier policy. Condition 3 was therefore no answer to the claim under the first policy (1971) 125 CLR, at pp 583-584; 587-589 . It was submitted on behalf of the appellant that the fact that a cover note only was issued in that case distinguished it from the present case. The fact that a cover note was issued raised an additional question, viz., whether the cover note was subject to condition 3, or at least to that part of the condition which required written notice to be given, but once that question had been answered in the affirmative the fact that the second contract was in the form of a cover note was immaterial. The case is direct authority for the proposition that in the present case, unless the S.G.I.O. policy had been cancelled, the failure to give notice in writing of that insurance to C.M.L., and to state or indorse the particulars in or on the C.M.L. policy, entailed the consequence, subject to any question of waiver, that C.M.L. did not become liable under its policy - the condition on which its liability depended would not have been fulfilled in those circumstances. On this view, condition 10, providing for contribution, is to be reconciled with condition 3 by regarding the former condition as applying to other insurances of which notice has been given, and particulars of which have been stated in or indorsed on the policy. It further follows of course that condition 3 of the S.G.I.O. policy provided no answer to a claim on that policy, since no insurance had subsequently been effected. (at p39)

13. The question that then arises is what was the effect of the attempted cancellation of the S.G.I.O. policy on 31st May 1974. It is perfectly clear that Mr. Deaves had no authority to act on behalf of Mr. and Mrs. Willis in cancelling the S.G.I.O. policy. So far as Mr. and Mrs. Willis were concerned, the cancellation could not be effective, and the policy remained on foot. However, if the policy was terminated in so far as it insured the interest of Mr. and Mrs. Deaves, it might be possible to say that condition 3 provided no answer to C.M.L. That is because although condition 3 speaks of an insurance effected "covering any of the property hereby insured" it should be understood as referring to another insurance on the same interest: see Western Australian Bank v. Royal Insurance Co. (1908) 5 CLR 533, at pp 551, 559-560, 563-564 ; Portavon Cinema Co. Ltd. v. Price and Century Insurance Co. Ltd. (1939) 4 All ER 601, at p 604 ; North British and Mercantile Insurance Co. v. London, Liverpool, and Globe Insurance Co. (1877) 5 Ch D 569 and Scottish Amicable and Heritable Securities Association Ltd. v. Northern Assurance Co. (1883) SC 11 (R) 287 . A policy in favour of the mortgagees alone would not cover the same interest as a policy in favour of the mortgagors, unless the latter policy was intended to be for the benefit of the mortgagees and they had an interest in it. If therefore Mr. Deaves had cancelled the S.G.I.O. policy in so far as it applied to himself and his wife, and if Mr. and Mrs. Willis had no interest in the C.M.L. policy, there would at the time of the loss have been no other insurance covering any of the property insured within the meaning of condition 3. On those two assumptions, condition 3 would not have prevented Mr. and Mrs. Deaves from recovering under the C.M.L. policy. (at p40)

14. However, in my opinion the purported termination by Mr. Deaves of the contract of insurance with S.G.I.O. was entirely ineffective. It goes without saying that one party to a contract cannot bring it to an end at will unless the contract itself permits that to be done. By condition 5 of the S.G.I.O. policy the insurance might be terminated "at the request of the insured". The insured were Mr. and Mrs. Deaves and Mr. and Mrs. Willis, but no request was made by or on behalf of Mr. and Mrs. Willis. (at p40)

15. It is true that the policy was not one of joint insurance so far as the "joint owners" on the one hand and the mortgagees on the other were concerned. Of course Mr. and Mrs. Deaves had a joint interest, and so did Mr. and Mrs. Willis, but the interests as between Mr. and Mrs. Deaves and Mr. and Mrs. Willis were diverse, and this meant that the policy was a composite one, insuring the two sets of parties in respect of their respective interests: General Accident Fire and Life Assurance Corporation Ltd. v. Midland Bank Ltd. (1940) 2 KB 388 . It may be assumed, without deciding, that for certain purposes, e.g., payment of the indemnity, the word "insured" in the policy should be regarded as meaning the insured "for their respective rights and interests", although those words do not appear in the policy. In my opinion it does not follow that some of the insured may terminate the policy so far as it affects their respective rights and interests without the consent of the other insured. On termination the insurer is entitled, under condition 5, to retain the customary short period rate for the time the policy has been in force. There is nothing in the policy to indicate the values of the respective interests of the mortgagees and the owners, and there are therefore no means of determining how much of the premium should be attributed to one group of interested parties and how much to the other. The amount to be refunded to Mr. and Mrs. Deaves, if they cancelled the policy so far as it concerned their interest, was therefore not susceptible of calculation by the insurer. Further, although the policy is a composite one, all four insured are parties to it; the policy may embody two insurances, but it constitutes one contract. It would be contrary to principle to allow one insured to withdraw from a contract of insurance, thus leaving the insurer bound to indemnify another insured only - a liability the insurer might not have been prepared to assume, if it had been proposed in the first place. In my opinion a termination under condition 5 can only be effected at the request of all the insured or at the option of the insurer. In the present case Mr. and Mrs. Willis never did consent to the termination - indeed they were unaware that it was proposed. S.G.I.O. made it clear that the consent of Mr. and Mrs. Willis was necessary before the termination could be effected, and neither terminated the policy, nor did anything that could reasonably have been understood as amounting to its termination. (at p41)

16. The S.G.I.O. policy was, in my opinion, never terminated, but was still binding and effective at the date of the fire. It follows that no liability under the C.M.L. policy ever arose, unless C.M.L. waived condition 3 of the policy. I am not altogether sure that the question of waiver is now open for consideration, since it was not pleaded in the appellants' reply, and it does not appear that evidence was directed to it in the Supreme Court. I have in any case reached the conclusion that the appellants cannot succeed on that issue. The representative of C.M.L. was aware of the existence of the S.G.I.O. policy, but had been given to understand that Mr. Deaves intended to cancel it. The statement by the representative that Mr. and Mrs. Deaves were covered immediately was made after Mr. Deaves had said that he wanted to go in and cancel the S.G.I.O. policy. Since no mention had been made to the representative of the existence of a mortgage, the representative had no reason to assume that the consent of anyone else was required before the cancellation could be made effective. The nature of the doctrine of waiver was examined in Craine v. Colonial Mutual Fire Insurance Co. Ltd. where the Court said (1920) 28 CLR 305, at p 326 :

"'A waiver must be an intentional act with knowledge' . . . First, 'some distinct act ought to be done to constitute a waiver' . . . ; next, it must be 'intentional', that is, such as either expressly or by imputation of law indicates intention to treat the matter as if the condition did not exist or as if the forfeiture or breach of condition had not occurred; and, lastly, it must be 'with knowledge', an essential supported by many authorities . . . "

It is no doubt correct, speaking generally, to say that "The making or acknowledgement of the contract with knowledge of other insurance would be a waiver of the breach" : MacGillivray and Parkington, op. cit., par. 1997. If the knowledge of the agent is imputed to C.M.L., that company knew, at the time the proposal was made and the premium was paid, that another insurance was subsisting. If a cover note was issued on 30th April 1974, there might then have been a waiver of the requirement contained in condition 3 that notice in writing should be given of the earlier insurance. In those circumstances the insurer would have intended to waive compliance with the condition, on the understanding that the earlier policy would be terminated. However, Mr. Deaves did not inform C.M.L. that the S.G.I.O. policy had not been terminated. There is no evidence from which it is possible to infer that when the policy was issued C.M.L. knew or had means of knowledge that Mr. Deaves had failed to carry out his expressed intention to cancel the S.G.I.O. policy, and that that policy was still subsisting. If there was a cover note, which created a binding insurance, it was of course superseded by the policy which, however, was not issued with knowledge of the continued existence of the S.G.I.O. insurance. It is not possible to infer that by issuing the policy C.M.L. indicated an intention to treat the matter as if it were not a condition of its liability that particulars of any other insurance should be stated in or endorsed on the policy, before the occurence of the loss or damage. It would not be right in my opinion to conclude that there had been a waiver by C.M.L. when the policy was issued or at any time thereafter. (at p42)

17. For these reasons I am constrained to the conclusion that condition 3 of the policy had the effect that C.M.L. never came under any liability to Mr. and Mrs. Deaves. I reach this conclusion with some regret. Mr. Deaves was somewhat dilatory, and he was oblivious of his obligations to Mr. and Mrs. Willis, but on the evidence there is nothing to suggest that he was intentionally deceitful. However, the condition of C.M.L.'s liability, expressed in condition 3, was not satisfied. (at p43)

18. I would dismiss the appeal. (at p43)

STEPHEN J. In 1974 Mr. and Mrs. Deaves were the owners of a service station at Amberley, in Queensland. Early in that year they decided to increase the amount of existing insurance cover on their service station. Mr. Deaves visited the local office of their fire and public risk insurers, the S.G.I.O., and was told that a representative would call to arrange for an increased cover. No-one called, despite a second visit by Mr. Deaves to the S.G.I.O. office, but a representative from another insurance company, the C.M.L., did call, for a quite different purpose: to see if Mr. Deaves wished to increase the amount of a policy on his life issued by the C.M.L. Mr. Deaves declined but, being dissatisfied with the lack of response from the S.G.I.O., he asked the C.M.L. representative whether his company had "fire cover and that sort of thing for the shop", mentioning the S.G.I.O.'s failure to send a representative to see him. According to Mr. Deaves the C.M.L. representative replied that his company did "have fire policies and public risk and that" but that he personally attended only to life insurance; however he would get another representative who did deal with such policies to call on the Deaves. (at p43)

2. A week or so later another C.M.L. representative called at the service station, armed with a fire insurance proposal form and other forms, and talked to Mr. Deaves about insurance cover. Mr. Deaves told him of his wish to increase the total amount of his existing fire and public risk cover on the service station and the S.G.I.O.'s failure to attend to his request that someone from that office call to arrange for an increase in the cover afforded by his existing S.G.I.O. policies. They discussed the allocation of cover and several proposal forms were then filled in by the representative. (at p43)

3. Contained in the fire insurance proposal was the following request for information:

"Give particulars of sum already insured with this and other Insurers on identical property prosposed to be insured under this proposal."

In the space provided in the proposal for a response to this request the representative wrote "N/A", an abbreviation for "not applicable". What caused the representative to so describe this request for particulars does not expressly appear from the evidence. The C.M.L. called no evidence about any aspect of the transaction and Mr. Deaves, who did give evidence, could only say that while the representative was filling in the proposals he questioned Mr. Deaves from time to time about the particulars to be inserted in them, Mr. Deaves supplying answers to those questions and then signing the proposals when they had been completed by the representative. He had no recollection of that particular item in the fire insurance proposal or of any question about it. Mr. Deaves said to the representative "Am I covered from today because I would like to go in and cancel the policies at the S.G.I.O.?" He was told he would be covered by C.M.L. from that day. He then and there paid the premiums for the policies to be issued by C.M.L. and received a receipt. It does not appear whether then or later he received any cover note from C.M.L. The S.G.I.O. fire policy which Mr. Deaves intended to cancel showed as the insured Mr. and Mrs. Deaves as joint owners and a Mr. and Mrs. Willis as mortgagees but Mr. Deaves does not appear to have appreciated this fact or at least to have attached any significance to it. He did not mention it to the C.M.L. representative. Mr. and Mrs. Willis were in fact mortgagees of the service station property. (at p44)

4. Some time after the visit by the C.M.L. representative, perhaps as long as a month afterwards, perhaps only a day or so later, Mr. Deaves called at the S.G.I.O. office again, said that he wished to cancel the S.G.I.O. policies and signed forms presented to him for that purpose. In the form he signed relating to the fire policy he wrote "Please cancel above policy any refund to above address". The form bears date, in another's hand, "31st May 1974" and contains a reference, in its heading, to the fire policy here in question. Because he did not subsequently receive any return of part premium from S.G.I.O. in respect of this policy, as he did for other of the cancelled policies, he later spoke to the S.G.I.O. office by telephone and was told that S.G.I.O. had to get permission from the mortgagees of the service station property before that policy could be cancelled. He was neither asked to nor did he do anything himself about obtaining the mortgagees' consent, nor did he inform C.M.L. about any of this. Whatever S.G.I.O. may have sought to do about obtaining the consent of the mortgagees, it proved abortive since Mr. and Mrs. Willis in fact heard nothing from S.G.I.O. (at p44)

5. Some months later the Deaves' service station burnt down and they immediately claimed on their C.M.L. fire policy. Then followed many months' delay while the C.M.L., although not rejecting the claim, neither paid under it nor accepted any liability in respect of it. What appears to have concerned the C.M.L. was the concurrent existence of two fire policies over the property, their own and the original S.G.I.O. policy, coupled with the fact that the S.G.I.O. policy insured not only the Deaves' interest but also that of the mortgagees. This latter fact was, in a sense, the cause of the former since it was the existence of the mortgagees' interest that caused the S.G.I.O. to refrain from giving immediate effect to Mr. Deaves' notice of cancellation of the S.G.I.O. policy. Ultimately, almost a year and a half later, the C.M.L. asserted, apparently for the first time, that the Deaves lacked an insurable interest in the service station because the amount of indebtedness owed by them to Mr. and Mrs. Willis, and secured by mortgage over the service station, exceeded the value of the property insured. Although persisted in for some time, this contention seems later to have been abandoned in favour of other grounds for resisting the Deaves' claim to indemnity. These new grounds ultimately became the defences upon which the C.M.L. relied when sued by the Deaves. (at p45)

6. The action against C.M.L. which is the subject of this appeal was the second of two which, in 1976, the Deaves instituted in the Supreme Court of Queensland. Earlier that year they and Mr. and Mrs. Willis joined in proceedings against S.G.I.O., claiming under the fire policy issued by it, that is to say, under the original policy in respect of which Mr. Deaves had given the purported cancellation notice. The two actions were heard together, C.M.L. being joined by S.G.I.O. as a third party in the action against it, seeking contribution from C.M.L. The Deaves and Mr. and Mrs. Willis succeeded in their action against S.G.I.O. but the Deaves failed in their action against C.M.L., which was also successful in its defence of the third party claim made against it. Appeals by S.G.I.O. and by the Deaves were dismissed by the Full Court and it is from the dismissal of the Deaves' appeal in their action against C.M.L. that they now appeal to this Court. S.G.I.O. has not appealed from the order of the Full Court and the Deaves' judgment against it has been satisfied by payment. (at p45)

7. As mentioned earlier, two main grounds of defence are relied upon by C.M.L. The first relies upon the response of "N/A", not applicable, made to the request in the proposal for particulars of other sums insured on the service station. The second, not wholly unconnected since it also relates to the continued existence of the S.G.I.O. policy, relies upon condition 3 of the C.M.L. policy, under which all benefit is declared forfeit if default be made in notification to C.M.L. of any other insurances upon the property insured. I go first to the question raised by the response "N/A", appearing in the proposal. (at p46)

8. The first step must be to determine what was conveyed by "not applicable" when inserted, in abbreviated form, in the C.M.L. proposal, and for this purpose I put aside for the moment the fact that it was the C.M.L.'s own representative who was the author of the phrase. The words themselves are a simple, although unexplained, assertion that the request for particulars does not apply to the Deaves' proposal for fire insurance. Being unexplained, they convey no more than that, although they necessarily give rise to speculation, not as to their meaning, which is clear, but as to what lies behind it: as to why this request for particulars should be inapplicable to the proposal in question. (at p46)

9. Be that as it may, the response "not applicable" did not, in my view, amount to a negative response either in form or in substance. It did not convey the meaning that no sum was already insured on the property. That fact was, no doubt, one of the several possible reasons which, as a matter of speculation, might be thought to lie behind the stated inapplicability but it is no more than that. In fact, of course, it is clear that the author of the phrase, the C.M.L. representative cannot have had that in mind as constituting the reason for inapplicability: on the contrary, a fact uppermost in his mind must have been the existence of S.G.I.O.'s insurance cover, which he now had the opportunity of replacing with cover provided by his own company. (at p46)

10. The response "not applicable" not itself amounting to the negative statement that there was no sum already insured on the property, the question arises whether the response may nevertheless be deemed to be such a negative statement. In the margin of the proposal appears, in large type, the words "Any questions on this proposal not replied to are to be deemed answered in the negative". Even assuming in favour of the respondent that these words extend not only to questions duly phrased in interrogative terms, but also to a request for information worded, as here, in the imperative, this is not a case of a question "not replied to". A reply was in fact provided and the form which it took left no room for the operation of this deeming provision, which would have resulted in a deemed response bearing a quite different meaning - Saunders v. Queensland Insurance Co. Ltd. (1931) 45 CLR 557, at p563 per Starke J., per Dixon J. (1931) 45 CLR, at p 567 and per Evatt J. (1931) 45 CLR, at pp 569-570 . I may add that it is, in any event, by no means clear what would be the effect of any deemed "answer in the negative" when what is in issue is a request for particulars rather than a direct question. To say this is, perhaps, only to suggest that it may be unduly generous to C.M.L. to make the assumption in its favour to which I have referred in the opening words of this paragraph. (at p47)

11. The result is, therefore, that neither expressly nor by a process of deeming can it be said that the response "not applicable" amounted to a statement that no other insurance existed in respect of the Deaves' service station. Accordingly it did not constitute a misrepresentation to that effect. Nor was it any misrepresentation according to the meaning which it truly bears; that is, as a statement that the particulars sought were, for some unspecified reason, not applicable to the Deaves' proposal for insurance. To the extent that Mr. Deaves was in any way competent to declare that the particular information sought by C.M.L. was inapplicable, he can but have been expressing his own view as to its applicability, a view which C.M.L. might not, of course, have shared, although its representative, who supplied the answer, no doubt did. The statement seems to me, from its very nature, to be no more than an expression of opinion, capable of involving a misrepresentation only if the opinion so expressed was not honestly held - Anderson v. Pacific Fire and Marine Insurance Co. per Willes J. (1872) LR 7 CP 65, at p 69 . In fact the statement appears to have reflected quite accurately Mr. Deaves' state of mind, nothing in the evidence would support a view to the contrary; the policies inquired about were, after all, policies which, as he then thought, he was about to cancel. (at p47)

12. It should not pass unnoticed that if the response, "N/A", attracted any attention when the proposal found its way to the offices of C.M.L., the slightest inquiry from its representative would have revealed the reason for the alleged inapplicability. Whether any such inquiry was made must remain unknown since C.M.L. chose to call no evidence on any aspect of the transaction. (at p47)

13. If the response "not applicable" involved no misrepresentation it matters not whether, as a result of the declaration and warranty clause appearing in the proposal and despite the absence of any "basis clause" in the policy itself, that response in fact became a contractual condition of the policy of insurance. If it did, it was not untrue and gave rise to no breach of condition. Accordingly it is unnecessary for me to say anything concerning the seeming divergence between English authority and that represented by the decision of this Court in Australian Provincial Assurance Association Ltd. v. Producers and Citizens Co-operative Assurance Co. of Australia Ltd. (1932) 48 CLR 341 . (at p48)

14. In my view, the statement that the seeking of particulars as to other insurance was "not applicable" did not become any the less true when, some considerable time after the proposal was furnished to C.M.L., it became known to the Deaves that there was some hold-up in the cancellation of the S.G.I.O. fire policy, due to the need for the mortgagees' consent. It is clear from Mr. Deaves' evidence that he did not appreciate the very real interest which the mortgagees had in retaining insurance, in their names, over the mortgaged premises. Consequently, to him the news that their consent to the cancellation of the S.G.I.O. fire policy was necessary appears to have represented no real impediment to his plan to cancel the S.G.I.O. policy but only a factor which explained the delay in his receipt from S.G.I.O. of the refund of part premium. (at p48)

15. No doubt one element which went to make up the unspecified reason lying behind the response "not applicable" was the belief of the Deaves that it lay within their power to cancel the S.G.I.O. policy. On the view which I take of the representation involved in the Deaves' response it matters not whether that belief was in fact correct in law, since it formed no part of the response itself, being no more than an element going to make up the reason which prompted that response. (at p48)

16. Misrepresentation aside, there remains the question of non-disclosure. Since this was a proposal for insurance the Deaves were obliged to disclose all matters material to the acceptance of the risk or to the fixing of the premium. In the present case any doubt as to the materiality of the existence of other insurance is, I think, answered by the fact that C.M.L. in its proposal expressly made its existence the subject of a request for particulars - Glicksman v. Lancashire and General Assurance Co. Ltd. (1925) 2 KB 593, at p 609 per Scrutton L.J. and, on appeal, per Viscount Dunedin (1927) AC 139, at p 144 . While this may not be conclusive - see Babatsikos v. Car Owners' Mutual Insurance Co. Ltd. (1970) VR 297, at pp 306-307 per Pape J., it is enough in the present case: as Cussen J. said in Dalgety &Co. Ltd. v. A.M.P. Society one may be one's own juryman in obvious cases of materiality and this is such a case. No evidence is necessary to establish that, whatever be the appropriate criterion of materiality and whether involving the prudent insurer or the reasonable proponent for insurance, the existence of a substantial degree of double insurance is a material circumstance. (at p49)

17. Most relevant to the issue of non-disclosure is, of course, the fact that, far from there having been either active concealment or passive failure to disclose on the part of the Deaves, they went out of their way to thrust upon C.M.L. knowledge of the relevant fact, that the service station was already insured by S.G.I.O. Mr. Deaves first informed the C.M.L.'s life policy representative of the fact in explaining why he was seeking fire cover from C.M.L. That this information found its way to the administration of C.M.L. may be inferred, in the absence of evidence suggesting an alternative explanation, from the subsequent visit by the second C.M.L. representative. To him a disclosure of the existence of the S.G.I.O. cover was also made. Its details may not have been conveyed but at least the fact that it was for a lesser amount than was to be sought from C.M.L. is made clear. Indeed, it may be inferred that the response "not applicable" which that representative supplied in filling in the proposal was occasioned by his knowledge of the S.G.I.O. cover combined with his knowledge of the Deaves' stated intention of cancelling that cover after cover with C.M.L. had been established. (at p49)

18. In these circumstances the evidence refutes the suggestion that there was non-disclosure by the Deaves of the existence of insurance cover provided by the S.G.I.O. policy. To say this is not, I think, to run counter to the findings of fact of the primary judge. As I read his judgment his Honour did not direct his mind to the question of the authority of the C.M.L. representatives to receive on behalf of C.M.L. relevant information from Mr. Deaves. His Honour set out passages from Mr. Deaves' evidence and said of them that they constituted no proof that the C.M.L.'s fire policy representative was other than the Deaves' agent "for the purpose of filling in answers to questions in the proposal form". His Honour had earlier observed that the onus lay on the Deaves of showing that the C.M.L. representative "was in fact acting on behalf of C.M.L. so as to bind it" and so as to make his knowledge that of C.M.L. itself, adding that proof of "authority to issue cover notes, waive payment of premiums and issue receipts, does not alone, discharge such an onus". His Honour relied upon Jumna Khan v. Bankers and Traders Insurance Co. Ltd. (1925) 37 CLR 451, at p 454 and Biggar v. Rock Life Assurance Co. (1902) 1 KB 516, at pp 524-525 in support of these propositions. On appeal, Hoare J., who alone dealt with this aspect, seems to have taken a somewhat similar view, saying that no inference might be drawn that the representative was "in effect the agent for the insurer as to the knowledge of the insurer relating to the existing insurance" because there was not sufficient evidence to that effect. (at p50)

19. Jumna Khan's Case is no authority for the proposition for which it is thus cited. In that case the insurance company's agent obtained the appellant's signature to a blank form of proposal and, having sent him away without asking him any questions at all, then had his own clerk fill in the blank proposal. As filled in, it answered in the negative questions concerning previous fires and concerning fire risk having previously been declined. On both counts the answers were untrue. The policy which issued stated that the particulars in the proposal, to which the insurance was made subject, should be deemed to have been inserted or furnished by the assured. Both in this Court and when the case was earlier on appeal in the Full Court of the New South Wales Supreme Court sub. nom. Bankers and Traders Insurance Co. v. Jumna Khan (1925) 25 SR (NSW) 422 no question arose of whether knowledge of the agent, gained from the appellant, might be attributed to the insurer and this for the good reason that the agent had gained no relevant knowledge but, as Higgins J. observed (1925) 37 CLR, at p 454 , had simply put into the proposal "some statement as having been made by the plaintiff which was not made by him". The case was in no way concerned with an agent's authority to receive, on behalf of the insurer, information from the applicant for insurance relevant to the risk. It turned rather upon the question whether the agent or his clerk might be the insurer's agent in filling in the proposal form. It decided, consistently with much earlier authority, that in doing so they acted as the appellant's agent, so that the insurer could not itself be fixed with responsibility for false statements in the proposal. (at p50)

20. Jumna Khan's Case is just such a case as those discussed in MacGillivray and Parkington on Insurance Law, 6th ed. (1975), pars 946-948, of which Biggar's Case is a leading example. A conflict of authority, represented on the one hand by Bawden v. London, Edinburgh and Glasgow Assurance Co. (1892) 2 QB 534 and on the other by Biggar's Case and by Scottish and United States decisions to the like effect, for some time existed concerning insurers' agents who, while having knowledge of the true position, incorrectly fill in for an intending insured a proposal form which the latter signs. In Newsholme Brothers v. Road Transport and General Insurance Co. Ltd. (1929) 2 KB 356 these cases were analyzed in detail by Scrutton L.J. and by Greer L.J. They may be seen to turn on the fact that the assured had signed the proposal containing the untrue information. Because of this fact the agent's knowledge of the truth could not be imputed to the insurer, if for no other reason than because, having signed the proposal "which contains statements in fact untrue, and a promise that they are true, and the basis of the contract . . . (the applicant for insurance cannot thereafter) escape from the consequences of his negligence by saying that the person he asked to fill it up for him is the agent of the person to whom the proposal is addressed" (1929) 2 KB, at p 376 , per Scrutton L.J. Greer L.J. said of such a case (1929) 2 KB, at p 382 "notice to the agent whose duty was to obtain a signed proposal form and send it to the company, was not notice to the company of anything inconsistent with the signed proposal form, and that in filling up the form, whether he mistook the instructions of the insured, or whether he intentionally filled in something different from what he was told, he was not acting as the agent of the company, but as the agent of the insured". (at p51)

21. In the present case there was communication to the C.M.L. representative of the facts relating to the S.G.I.O. policy and that communication was unaffected by any untruthful statement contained in the proposal signed by Mr. Deaves. While the agent may have lacked authority from the C.M.L. to fill up the proposal on behalf of the Deaves he nevertheless received, as a part of his function as a representative of C.M.L., information from them relevant to the risk. Having received such information, and the signed proposal not being contradictory of it, the C.M.L. is to be treated as itself possessing that knowledge: an applicant for insurance, having made a disclosure to the insurer's agent, "has a right to expect that the agent will transmit to the insurers all that he has been told and that the agent will do so accurately" (Hardy Ivamy, General Principles of Insurance Law, 3rd ed. (1975), p. 520). (at p51)

22. The position in a case such as the present is illustrated by Golding v. Royal London Auxiliary Insurance Co. Ltd. (1914) 30 TLR 350 a case typical of the fact situation encountered in the Jumna Khan class of cases but with one added ingredient sufficient to differentiate it from them: after the agent had incorrectly filled in the proposal (in doing which he was held to be acting as the applicant's agent), the applicant noted the error and informed the agent of it before issue of the policy. The agent forgot to pass on this factual correction to the insurer, yet the insurer was held to be fixed with knowledge of the truth because it was one of the duties of the agent to convey the applicant's answers, including a corrected answer, to the insurer. That was enough to prevent the insurer from relying upon the falsity of the original answer which appeared in the proposal, despite the fact that answers in the proposal formed the basis of the policy and if untrue would, regardless of their materiality, avoid the policy. (at p52)

23. This not being a case in which the response written into the proposal by the C.M.L. representative was either untrue or otherwise contradictory of what the intending assured told him, the difficulties for a plaintiff who has signed such a proposal, either in blank or after it is completed, and has thereby adopted as his own the incorrect information which it conveys, do not arise. The contrast between such cases and the present case is made by Hardy Ivamy, op. cit., p. 523, when, after dealing with such cases, he says:
"Different considerations apply where the proposal, as filled up by the agent, contains no false statements, but the insurers seek to avoid the policy on the ground that some further fact ought to have been disclosed. In this case, the basis of the contract, so far as it rests upon the proposal, is not affected. If the fact has been disclosed to the agent by the proposed assured, or has otherwise come to the agent's knowledge in the course of his employment, there does not seem to be any valid reason why the agent's knowledge should not be imputed to the insurers. Though the agent, in filling up the proposal, may go outside the scope of his authority and become for that purpose the agent of the proposed assured, he remains for all the purposes of his employment the agent of the insurers. The proposed assured is entitled to assume that the agent knows what ought to be stated and what may be omitted, and it is submitted that the proposed assured is not responsible for the agent's failure to pass on the information to the insurers, notwithstanding the fact that the proposal has been filled up by the agent." (at p52)

24. It follows, in my view, that C.M.L. must be treated as having knowledge of the existence of a policy issued by S.G.I.O. and providing fire cover in respect of the service station. That knowledge was, it is true, coupled with knowledge of the intention on the part of the Deaves to cancel the S.G.I.O. fire policy. But no change ever occurred in the subsequent intentions of the Deaves such as might require to be communicated to the other contracting party. At all times until the happening of the fire the Deaves intended to cancel the S.G.I.O. policy, all that ever changed was their expectation of early implementation of that intention. The need for the mortgagees' consent was understood by them as a delaying factor, but as no more than that. (at p52)

(5) The appellants' failure to inform the respondent that there was a mortgage on the property does not defeat them. An insurer operating in Australia must know that most properties are mortgaged; the appellants were not asked about any mortgage; there was no deliberate concealment of any fact known by the appellants to be material; there was no breach of faith on the part of the appellants. (at p76)

3. Duties of disclosure arise from the doctrine of uberrima fides. The duty to act in the utmost good faith is not confined to the insured or proposed insured, it applies also to the insurer or proposed insurer (see Distillers Co. Bio-Chemicals (Australia) Pty. Ltd. v. Ajax Insurance Co. Ltd., Stephen J. (1974) 130 CLR 1, at pp 27-31 ; Halsbury's Laws of England, 3rd ed., vol. 22, pp. 110, 185, 193-194). If not disclosing a mortgage when no question is asked about it and there is no deliberate concealment enables an insurer to escape liability, then the protection for which many innocent consumers pay premiums is destroyed. If there is a breach of faith, then it is on the part of the insurance company in denying liability on such a point (see R. A. Hasson, "The Doctrine of Uberrima Fides in Insurance Law - A Critical Evaluation" Modern Law Review, vol. 32 (1969), p. 615. MacGillivray and Parkington on Insurance Law, 6th ed. (1975), p. 783 suggests there is no substance in the point.
(6) The respondent was not entitled to rely upon condition 3 of its policy which requires:
"The Insured shall give notice in writing to the Company of any Insurance or Insurances already effected, or which may subsequently be effected, covering any of the property hereby insured, and unless such notice be given and the particulars of such Insurance or Insurances be stated in or endorsed on this Policy by or on behalf of the Company before the occurrence of any loss or damage, all benefit under this Policy shall be forfeited." (at p76)

4. The policy with the S.G.I.O. was a composite policy insuring the appellants in respect of their interests and the mortgagees in respect of their interests (see General Accident Fire &Life Assurance Corporation Ltd. v. Midland Bank Ltd. (1940) 2 KB 388 ). (at p76)

5. Condition 5 provides:

"This Insurance may be terminated at any time at the request of the Insured, in which case the Office will retain the customary short period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Office, on notice to that effect being given to the Insured, in which case the Office shall be liable to repay on demand a rateable proportion of the premium for the unexpired term from the date of the cancelment."

In my opinion, condition 5 provided for termination of the insurance at the request of the appellants so far as it related to their interest. Such a reading is consistent with reading "the insured" in other clauses as meaning "each of the insured in respect of his interest". (at p77)

6. For example, condition 3 of the S.G.I.O. policy should not be read to mean that if either the appellants or the mortgagees had effected another insurance and not given notice, this would result in the forfeiture of all benefit under the policy to both the appellants and the mortgagees. The expression, "the insured", is to be read distributively. Therefore, the appellants were by their request capable of bringing about a termination of the policy in respect of their own interest, without affecting the interest of the mortgagees. If the insurer were not content with that, condition 5 gave it the option of terminating the insurance. I find nothing in the policy to detract from this conclusion. The rights inter se of the appellants and the mortgagees do not affect the question. The determination of what should be retained as the customary short period rate for the time the policy had been in force was contemplated as capable of ascertainment. The amount to be refunded to the appellants would depend, in the absence of agreement, on the ascertainment of the respective interests of the appellants and the mortgagees. (at p77)

7. The appellants, being capable of terminating the insurance in respect of their interests, did so. The request by the appellants for termination was unequivocal. The consequence on the rights inter se of the appellants and the mortgagees is not in point. Presumably, unless the insurer exercised its option to terminate, the mortgagors would continue to be insured in respect of their interests, and presumably, until the insurance lapsed if the premiums payable in respect of that interest were not paid. (at p77)

8. The majority of the Court hold otherwise on this point and, therefore, the appellants lose. (at p77)

9. The respondent insurer appears to have taken every possible point to avoid paying this modest claim although there is no suggestion that the appellants have acted other than reasonably and honestly with it. The existing state of insurance law is so favourable to insurers that any insurance company can easily frame its proposal forms and policy in such a way that only an extremely wary proponent will be able to recover. This has been tolerable only because, in general, insurers have not taken advantage of their superior position. If they have drafted documents to the disadvantage of the proponent, they have in practice generally refrained from insisting on their strict legal rights where the proponent has acted reasonably and honestly. (at p78)

10. This case shows that the ordinary person cannot always rely upon this practice, even when dealing with a large reputable insurance company. If the course taken in this case becomes common, every householder and small business man will need to be guided at every step of even a modest insurance transaction by an expert insurance consultant or counsel. (at p78)

11. Elsewhere, insurance law has developed to give much more protection to the consumer (see Keeton, Basic Text on Insurance Law (1973)). In Australia, legislative intervention seems desirable to redress the balance (see "Insurance Contracts", Australian Law Reform Commission Discussion Paper No. 7, 1978 and also The Law Commission (U.K.) Working Paper No. 73" Insurance Law and Non-disclosure &Breach of Warranty). (at p78)

12. The appeal should be allowed. (at p78)

Orders

Appeal dismissed with costs.