Ferrcom Pty Limited v Commercial Union Assurance Co of Australia Limited

[1992] HCATrans 100

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No Sll0 of 1991

B e t w e e n -

FERRCOM PTY LIMITED

Appellant

and

COMMERCIAL UNION ASSURANCE CO

OF AUSTRALIA LIMITED

Respondent

BRENNAN J

DEANE J

DAWSON J

GAUDRON J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 3 APRIL 1992, AT 10.17 AM

Copyright in the High Court of Australia

Ferrcom(2) 1 3/4/92

MR D.J. HIGGS:  May it please the Court, I appear with my

learned friend, MR I.J. McGILLICUDDY, for the

appellant. (instructed by Lamrocks)

MR v. BRUCE, QC:  May it please the Court, I appear with my

learned friends, MR K.E. LINDGREN, QC and

MS J.S. GLEESON, for the respondent. (instructed by

A.R. Connolly & Co.)

MR HIGGS:	Your Honours, if I could hand up an outline of the appellant's submissions, and I understand that
a bundle of documents has already been handed to
Your Honours in a black folder.

BRENNAN J: Thank you. Yes, Mr Higgs.

MR HIGGS:  Your Honours, this appeal turns on a question of

law. The question of law is, what is the approach

to be taken by courts to reduce a claim under an

insurance policy by an insured in circumstances to

which section 54(1) of the Insurance Contracts Act

applies? Section 54 is to be found in Part V of

the Act. It deals with the contract and to

post-contractual matters. It is to be contrasted

with section 28(3) in particular and Part IV of the

Act that deals with pre-contractual matters.

Section 28 deals with remedies for nondisclosure

and misrepresentations.

At the very threshold of section 54, in order for section 54(1) of the Act to apply, there has

had to have been an act by the insured that, but

for the section, would have taken away the

insured's right to claim under the policy In the

circumstances of this case it is common ground that

there was a material non-disclosure after the

contract of insurance was entered into.

The material non-disclosure was registration

of a crane as a motor vehicle.	The terms of the
policy did not prohibit registration of the crane.

However, condition 1 of the policy provided in general terms that anything that was material

should be notified by the insured to the insurance

company.

The crane, previously to the accident which

occurred at Darling Harbour, was on the Parliament

House site in Canberra and at the time the policy

was taken out it was unregistered. The insurer

issued a policy that was entitled an unregistered

mobile crane policy. In order to drive or bring

the crane from Canberra to Sydney it was registered

and for a while was driven on public roads. When

it finally came to the Darling Harbour site it

remained on the site for a couple of days and was

Ferrcom(2) 2 3/4/92

not on a public road and overturned. It is that
damage that the insured claimed indemnity for under

the policy.

Section 54 is divided into two parts.

Subsection (1) deals with any act of the insured

that does not fall within subsection (2).

Subsection (2) provides that in the event of the

act being an act which:

could reasonably be regarded as being capable
of causing or contributing to a loss in

respect of which insurance cover is provided -

then, subject to subsection (3), the insurer is

entitled to refuse the claim; in other words, the

right that is taken away by subsection (1), the

right of avoidance for a material non-disclosure,

does not apply in the event of it being reasonably

arguable that it contributed to the loss, but

again, subject to subsection (3) and

subsection (4). Subsection (3) provides that if:

no part of the loss that gave rise to the

claim was caused by the act, the insurer may

not refuse to pay the claim by reason only of

the act.

So put shortly, the regime that is set up by

section 54 is that you distinguish between acts

which could reasonably be regarded as contributing

to the loss. If it could not be reasonably so

regarded, you go to subsection (1). If it could be

so reasonably regarded, you go to subsections (2)

to (4) of the Act. Prima facie, the insurer is

entitled to avoid the claim subject in effect to

the insured's right to prove that it in fact had no

causal connection, and in the event of there being

no causal connection, it is, as it were, an all or
nothing situation.

There is no reference or consideration to any

prejudice of the insurer in that situation. He is

obliged to pay the claim. In the event, under
subsection (4), of the act being partially
responsible for the loss, there is a proportionate

reduction in the right on the part of the insurer

to pay up the claim. This is a case that fell

within subsection (1).

The material act of non-disclosure in this

case was the failure on the part of the insured to

notify a registration and, as I understand it from

the arguments below, that is common ground.

In the event of there being such an act, as I

have mentioned before, the right to avoid the

Ferrcom(2) 3 3/4/92

policy is prohibited by reason of subsection (1)
but thereafter there is a rider which provides that
the insurer's liability in respect of the claim -
and I am picking up the words of the section in the

last three lines of subsection (1):

but his liability in respect of the claim is

reduced by the amount that fairly represents

the extent to which the insurer's interests

were prejudiced as a result of that act.

In our submission, that is a broad discretion

conferred upon a court, a discretion that calls for

a value judgment to be made by a court, and it is

one that is limited by and defined by reference to

firstly, an emphasis that the starting point at

which the court begins, the starting point for the

court, is that the right to avoid the policy or to

refuse to pay the claim is abolished. Secondly -

and I understand this to be common ground from the

arguments below - the onus of proof in establishing

the requisite prejudice is upon the insurer.

Thirdly, it is the insurer's interests which

are to be considered. It is not a situation where

the court, as some legislation provides, is to

strike a balance between both the interests of the

insurer and the insured but save to this extent,

save to the extent that considerations of fairness

which are imported into the discretion by the words

ttfairly representstt would, in considering the
insurer's interests, also compel, for that

consideration to be fair, to take into account the

insured's interests. But we concede that it is
limited.

It is nextly limited, in other words, that the

extent to which the claim is to be reduced is only
by reference to the prejudice to the insurer's

interests, that were as a result of that act. It

is not the prejudice that is a result of the loss,

or as a result of the risk or the exposure to an	increased risk, following upon the act coming to
fruition. And we would submit, with respect, that
it is a convenient starting point to compare what
we would submit is an intentional difference on the
part of the legislature to the test provided for in
section 28.

In section 28, as I have mentioned beforehand,

the legislature provides for remedies to an insured

and an insurer, in the event of there being a

pre-contractual misrepresentation or

non-disclosure. Section 28 raises this

distinction. In the event of there being a

fraudulent misrepresentation the insurer may avoid

the contract, and that is provided for in

Ferrcom(2) 4 3/4/92

subsection (2). However, in the event of the

misrepresentation having no bearing upon whether or
not the insurer would have entered into the
contract for the same premium or on the same terms
and conditions, even if the insured has failed to

comply with his duty to make full disclosure, the

right to avoid the policy is abolished. That is

provided for in subsection (1).

However, if the insured does not fall within subsection (1), that gives to him the benefit of

this abolition of the right on the part of the
insurer to avoid the contract. The remedy provided

to the insurer is provided for in subsection (3)

which maintains that the insurer is still not

entitled to avoid the contract, but the test there

is picked up in the last four words of

section 28(3). The direction by the legislature

there is that, in respect of the claim, it is
reduced to the amount that would have placed him -

the insurer - in a position in which he would have

been if the failure had not occurred, or the

representation had not been made. And we would,

with respect, submit that that is a different test

to a reduction in the claim measured by reference

to an amount that fairly represents the extent of
the insurer's interests that were prejudiced as a

result of a post-contractual act.

DAWSON J: What does "prejudice" mean there?

MR HIGGS: "Prejudice", Your Honour, we would submit - - -

DAWSON J: It does not mean loss, it does not mean damage.

MR HIGGS:	Your Honour, the word "prejudice", in our submission, imports notions, at least, of
objectivity, reasonableness and validity. It
includes, in its definition to be found in the Shorter Oxford English Dictionary:

to injure or impair the validity of (a right,

claim -

and that definition is to be found on page 27 of

the bundle of documents that I have handed up to

Your Honours.

DAWSON J: In that sense, it means prejudge.

MR HIGGS:  Your Honour, our submission, shortly is that you

firstly confine the word "prejudice" to look at the

impairment to the validity of any claim that arose

as a result of the act. So you look at the

prejudice to the insurer at the time the material

non-disclosure occurred.

Ferrcom(2) 5 3/4/92

The next point is that you also, from the

terms of section 54, we would submit, with respect,

find that the definition of the word "prejudice'' is limited and limited in this way: at the very least

it does not involve any consideration that the

insurer has lost his right to avoid the policy

because at the threshold of section 54 that right

has had to have existed for the provisions of

section 54(1) to be invoked. If, in fact, it ever

was part of what the insurer's prejudice was, you

would always have the claim reduced to nil.

Thirdly, we say that the starting point in

determining prejudice is that the policy is in
existence and the insurer has an entrenched
liability thereunder and there is support for that

proposition to be found in Advance (NSW) Insurance

Agency Limited v Matthews, 166 CLR 606.

DEANE J:  Mr Higgs, what is the provision that protects the

insured in a case that comes within the second part of 28(1), that is where a misrepresentation did not matter?

MR HIGGS:	In the event of the misrepresentation not mattering, my understanding is, Your Honour, that
subsection (1) protects him because - - -

DEANE J: Subsection (1) says, the section:

does not apply where the insurer would have

entered into the contract -

anyway. There must be some provision somewhere,

you would think, which catches up that situation.

MR HIGGS:  Your Honour, section 33 of the Act provides that:

The provisions of this Division are exclusive of any right that the insurer has otherwise than under this Act in respect of a failure by

the insured to disclose a matter -

and there is no provision in the Act that entitles

him to avoid the policy with respect to general

insurance other than that provided for in

section 28 and being subject to the general

discretion in the case of a fraudulent failure to

comply.

DEANE J: What I had in mind was a non-fraudulent

misrepresentation -

MR HIGGS:	I appreciate that, Your Honour.
DEANE J:	- - - in circumstances where, even though at

common law it entitles the insurer to refuse to pay

Ferrcom(2) 6 3/4/92

by reason of terms of the policy, it appears that

he would have issued the policy on the same terms

anyway. It probably does not matter for this case.

I was just looking for the provision to complet~

the picture of the Act.

MR HIGGS:  Your Honour, the best that I can do at the moment

is explain to you in this way.

DEANE J:  I think your answer, as Justice Gaudron points out

to me, I think your reference to section 33 does

provide the answer.

MR HIGGS: If Your Honour pleases. Furthermore, in

Matthews's case, that I have just referred

Your Honours to, the Chief Justice and

Justices Dawson, Toohey and Gaudron, in considering

those provisions held that it was a complete code

and the reference to that is to be found at
page 615 at about half-way down the page, and in

coming to that conclusion relied upon the

provisions of section 33. That part:

The evident intention of the legislature is to replace the antecedent common law

regulating non-disclosure, misrepresentations

and incorrect statements by insured persons

before entry into a contract with the

provisions of Pt IV.	To that extent Pt IV is
a statutory code -

BRENNAN J:  Mr Higgs, do I understand your submission on

section 54(1) to go to this extent, that the

interests that one looks at under that section as being insurers' interests exclude the right to go

off risk or to take advantage of a condition of

liability or otherwise to go off risk?

MR HIGGS:  Your Honour, in our submission, the discretion

conferred by section 54(1) is a broad one, and it

is one in respect of which there can be no binding

principles, only general principles. We submit

that, prima facie, if a premium can be calculated

for the increased exposure to a risk that an

insurer finds himself in because of a material
non-disclosure, if it can be measured, then, before

you get to that evaluation that involves

determining what the amount is that fairly

represents that prejudice, you look at the word
prejudice and the interests of the insurer that are

relevant are the interests that are prejudiced as a

result of the Act.

Now, in this particular case, the prejudice

that arose because of the material non-disclosure

was that the insurer was exposed to the increased

risk of damage occurring to this crane whilst

Ferrcorn(2) 7 3/4/92

travelling on a public road. There is evidence

about the increased premium and the increased

excess that would be charged by reference to that

increased risk and it is only referable, in the

• evidence, to the crane being driven on the road and

to the crane being driven on a public street in

circumstances where the driver might find himself

in an unfamiliar situation.

BRENNAN J: It just seems to me that that approach is

leaving out of account the words "as a result of

that act".

MR HIGGS: Well, Your Honour, the next step in the argument

is this: that when the act occurs, firstly, the

prejudice that the insurer finds himself in is that

he does not actually suffer a loss, he is exposed

to the risk, and even if there is a significant

possibility that in the circumstances peculiar to

the case he would have cancelled the policy, what

the Act does is call upon the court to put an

amount of money on that risk.

DAWSON J:	On what risk?
MR HIGGS:	On the risk of being exposed to - - -
DAWSON J:	The risk of a claim.
MR HIGGS:	A claim, that is right.  And when you come to put

an amount of money on it, what better amount of

money to put on it than the very amount of money

that insurance companies put on that risk, day in,

day out. That is, the premium.

DAWSON J:  You do this calculation at the time of the

prejudice, on your argument, which is the time of

the omission or act.

MR HIGGS: Because it would, in our submission, with

respect, be nonsensical to suggest that the

prejudice to the insurer's interests do not arise
until the loss actually occurs.	The prejudice

arises when the act occurs. In other words, I am

picking up what Your Honour said.

McHUGH J: Is it your submission that the section proceeds

upon an hypothesis that the policy would have

continued?

MR HIGGS: Yes, Your Honour.

McHUGH J: Is that essential to your argument?

MR HIGGS: No, Your Honour. In the event of the Court, in

considering the possibilities, determining that the policy would not have continued, you still have the

Ferrcom(2) 8 3/4/92

insurer being confined to the word "prejudice" and the prejudice that flows from the act. So even if

there is a possibility or even a probability in the

circumstances of a case that the insurer would
cancel the policy, when you take the various parts, the "fairly represents", the "insurer's interests", the "prejudice" that flows from the act, not from a policy that may or may not be known to the insured,

that would lead to a cancellation of the insurance

contract.

But the prejudice is confined and is defined

by reference to the act, so it is not essential on

my argument that on the preponderance of the

possibilities or the probabilities that one of the

matters that might flow on the evidence from the

act is that the policy would have been cancelled.

GAUDRON J:  Mr Higgs, where is it that the insurance company

gets the right to cancel, having regard to your

answer to Justice Deane by reference to section 33?

MR HIGGS:  The right to cancel, Your Honour, is found in clause 3(a)(2) of the policy which -

GAUDRON J:  No, I am not asking you about the policy. I am

asking you what in the Act preserves any right in

the policy in view of what you said relating to

section 33.

MR HIGGS: 

I am sorry, Your Honour. Section 33 does not

apply to section 54. Section 33 is part of Part IV
and it only relates to section 28 for relevant

purposes.  The quick answer to Your Honour's

question is this, that by section 59 of the Act,

the insurer is entitled to have in its policy a

clause which provides for cancellation. It is that

type of clause that was found in this particular

insurance policy.  The clause is, I hope,

conveniently extracted in the bundle of documents

that I have handed up to Your Honours and is to be

found on page 4 of the bundle. 

GAUDRON J: Yes, thank you.

BRENNAN J:  Mr Hicks, I am still a little puzzled by your

previous answer to me and your answer to

Justice McHugh. Let it be assumed that the

relevant Act, apart from section 4, conferred upon

the insurer a right to go off risk. If there be

any prejudice to the insurer's interests, how can

one determine what those interests are except by

assuming that that right is not susceptible of

exercise?

MR HIGGS:  Your Honour, in our submission the word

"prejudice" does cover an ambit of rights that are

Ferrcom(2) 9 3/4/92

impaired or taken away because of the Act. Now, in

the circumstances of this case, let us assume that
the probabilities, if that be the relevant test and

we say it is not, but if the probability is that
the insurer would have gone off risk by exercising

his rights under clause (3(a)(2), that you still

have this situation, that the act of non-disclosure

occurs, it perhaps exposes the insurer to an
increased risk of a claim, and it also means that

having known of it, in the normal course of events,

he would have cancelled the policy.

But the contract is still on foot. He has to give the requisite 30 days notice to exercise that

right, and at that point in time, true though it is

that one of the things, one of the rights that are

impaired is his right to cancel the policy pursuant

to a contractual term that is permitted under the

Act, firstly, in concert with that he continues to

be at an increased risk, that is another prejudice

that he suffers. So, I concede that, to some

extent, there are a number of prejudices that the

insurer suffers, one of which is the one that

Your Honour propounded.

But when the judge comes to determine the

relevant prejudice, we would submit, with respect,

that he has a discretion because it is a value

judgment, and if Your Honour is against me on that,

in any event, the prejudice is predicated upon the

basis that the insurance policy continues and, in

any event, it calls upon the court to put an amount

of money on it.

BRENNAN J:	The question was not inconsistent with your argument, I thought, rather I was trying to tease
out what your argument was because it seems to me
that if one once concedes that some prejudice other
than the right to go off risk is involved and falls
for evaluation one must then proceed to make that evaluation on the footing that one does not take
into account the right to go off risk.
MR HIGGS:	No, Your Honour.

BRENNAN J: And, indeed, if one looks at this condition that

one has here and sees, for example, if the policy

had said that a liability is - well, I suppose it

does say that, it says "conditional upon

notification in due time", so that in the event of
non-notification the eventuality does not give rise

to a liability under the policy. Does not one

simply say, "Well, that's what 54 says goes the

other way now"?

MR HIGGS:  That is so.

Ferrcom(2) 10 3/4/92

DAWSON J:  I think you did give the answer, but I do not

know that you have made it as definite as it might be: faced with two possible prejudices, one, that

you lost a right to go off risk; on the other

hand, that you lost the right to the increased

premium of the policy being continued, why does the judge choose the latter rather than the former? Is the only answer that the section is predicated upon the continuance of the policy?

MR HIGGS:  No, there are more answers to it than that,

Your Honour.	We say it is a value judgment and we
say - - -

DAWSON J:  I do not understand why it is a value judgment,

what values do you employ -

MR HIGGS:	Because in the definition of "prejudice" there is this notion of -
DAWSON J:	Of fairness.
MR HIGGS:	- - - fairness.

DAWSON J: But why is it fairer to choose one over the

other?

MR HIGGS:  At the time the act occurs and the prejudice is

invoked, you should not, in our respectful

submission, have regard to that which we now know,

with hindsight, namely the loss. Because if you

factor that into the considerations, in terms of

trying to determine what the amount of the

prejudice is in dollars and cents, with the benefit

of hindsight, it will always be the amount of the

claim. That is why the legislature confines the

prejudice to being that that comes about as a

result of the act.

At the time the prejudice arises, immediately

after the act, the only real prejudice that the

insurance company is in is this: there is an

increased risk that a loss over and above that
which they envisaged, perhaps, will occur. It is

not necessarily going to occur by reference to

normal standards whereby premiums are struck and

the basis upon which insurance proceeds. The

probabilities are that the risk will not occur.

But there is a risk and he has lost the opportunity

because of that increased exposure of charging a

greater premium and getting a greater profit.

DAWSON J:	He also lost the risk of cancelling the policy.
MR HIGGS:	He has lost that but in terms of - but then again, hand in hand with that, he then loses the
opportunity of not making a profit. That flows

Ferrcom(2) 11 3/4/92

from the extra premium. And when coming to

evaluate which is the more relevant prejudice and

coming to determine, as the court must, that it has to have put on it a dollar and cents figure, in our

respectful submission, if a premium can be

calculated it is the appropriate course because

that is the very amount of money that day in, and
day out is the value that the respondent itself

puts on this risk.

McHUGH J: Assuming you can calculate the premium, is it

possible to approach the whole problem by

determining the proportion between the actual

premium and the hypothetical premium and using that

proportion then to reduce the amount that would

have otherwise been payable under the policy? In

other words, if the premium would have been $100,

and you have paid $50, you reduce the amount of the

loss by 50 per cent.

MR HIGGS: Well, Your Honour, that comes then to what the

fair amount is. We would say no, that the

preferred course simply is to entitle the insurer
to have an increased premium for this reason: in

the circumstances of this case, if there had been

any causal relationship between the act and the

actual loss, then the insurer would not be liable

at all.

So the very thing that causes this increased

premium to be calculated, the very increased risk

that, on the evidence, justifies the increased

premium, is a risk, if there be a causal

connection, to which the insurer is never exposed

because of the provisions of subsections (2) and

( 3) and ( 4) .

We do not argue that it is not within the

trial judge's discretion to award that increased

premium because, as a matter of evaluation, he

considers the possibilities and determines that

despite the fact that they are not exposed to the

risk because of the provisions that succeed

subsection (1) in section 54 that he would not be

actually exposed to the risk, that considering the

possibilities and doing the best that he can, that

is the fairest way of striking the fair amount.

McHUGH J: It does not seem very fair from the insurer's

point of view after the fact to say, "Well, here

you are, we'll give you a few dollars extra for the

premium".

MR HIGGS: But, Your Honour, it is not after the fact or the

loss that is relevant; it is the prejudice that

they suffer at the time of the act, not the loss.

I assume that what Your Honour Mr Justice McHugh is

Ferrcom(2) 12 3/4/92

saying, the fact, the loss. Well, it comes back to

the argument that I have already put to

Your Honour, that it is confined to the prejudice

that arises as a result of the act, not the loss.

It certainly is not designed - section 54(1) is not

designed, as section 28(3) is, to put the insurer

back into the position that he would have been had

the non-disclosure not occurred.

DEANE J:  How could section 54(3) ever apply in a case of

non-disclosure?

MR HIGGS:  It does not apply to non-disclosure, Your Honour.

Well, it applies to - I am sorry, I have

misunderstood Your Honour's question. With respect

to post-contractual non-disclosures, one

illustration might be this: the insured has an

unregistered crane - - -

DEANE J: Well, assume in this case the crane fell over

between Canberra and Sydney and that was what the

claim was about, 54(3) would not apply to it, would

it?

MR HIGGS:  No, it would not, in that situation, because

driving on a public road could contribute to the

loss or it may have.

DEANE J:  The relevant act is the admission by

non-disclosure, which means that 54(3) gives no
solace to the insurer at all in a case of
non-disclosure, because it will never be the

non-disclosure that causes the loss giving rise to

the claim. If your argument be right, it will

always be what was not disclosed.

MR HIGGS:  I think that that is so, Your Honour. An

illustration as to how section 54(3) would work is

not a non-disclosure case; it would be a situation,
for example, where it was a term and condition of

the insurance policy that the crane not be

registered and then the relevant act would not be

the non-disclosure, it would be the actual

registration. And then you would have a situation

perhaps where the crane, whilst on a public street,

was lifting and it falls over. It is reasonably

arguable the traffic within the vicinity caused the

crane to turn over.

DEANE J: But that leads to the question Justice McHugh

asked you. I mean, say, for example, you have one

hundred insureds who all start using dynamite and

do not disclose it and the risk is one chance in

one hundred, the insurer is going to be liable for

the one chance in one hundred where things go

wrong, but he is only going to get one premium,

Ferrcom(2) 13 3/4/92

because he is never going to find out about the 99

that did not go wrong.

MR HIGGS: Well, Your Honour, in that situation there would

be available to the insurer to lead evidence that

the premium could not be struck.

DEANE J: Yes, I see the force in that.

MR HIGGS:  But that is not the case here, because the

evidence was that the insurer, albeit reluctantly,

would strike a premium.

DEANE J:  I mean, assume that there is a dynamite exclusion

on the basis of one chance in one hundred, you can

not lead that evidence.

MR HIGGS:  Your Honour, the evidence that I was envisaging

was evidence to the effect that because of my

particular situation, because of this insurance

company's business and the fact that there is no fund of premiums that we can have resort to that

has a sufficiently appropriate nexus for me to

legitimately dip into that fund of premiums to meet

the claim, then in that situation the premium

cannot be calculated.

That would in part involve considerations as

to whether or not the risk that actually did occur

was sufficiently connected with the class of risk

for which the insurer had received premiums for
other accidents. In the circumstances of this

case, we say the risk that actually eventuated, and

apart from matters of form, was the very same risk

that this policy covered this insured for.

DEANE J:  I follow that, but what I am really asking you is:

on your argument, can he say, in the case of

disclosure of this sort of thing, "I cancelled the
policy. That being so, the only way of adjusting

the situation to suit the facts of this case is to

treat me as cancelling the policy, because

otherwise I'll be landed with the policy where

something goes wrong, but I'll never know about the

policy where nothing goes wrong".

MR HIGGS:  The best way I can answer that is the way that I

have already answered Your Honour, I think. It

comes down to a consideration as to whether or not

it is fair, given the risk that had occurred.

GAUDRON J: It may be a question of practice, may it not.

If in the case of notification the insurer

invariably cancels, that is one thing. If the

situation has never previously occurred, then it

may be the situation which you have answered to

Justice Deane, "Well, I just don't have any pool of

Ferrcom ( 2 ) 14 HIGGS 3/4/92

premiums. I haven't done it, but that's what I

would do, no matter", and then this situation which

is not invariable, although - - -

MR HIGGS:  Let me be frank: we would concede, for the

purposes of this argument, that there was a real
chance that this insurer would have gone off risk,

and that is why the facts of this case so starkly

throw up the problem, this interpretation problem. that that is not the whole answer because even if

the insurer would invariably go off risk, if his business is sufficiently connected with the risk that they actually did insure under the policy

then, we would submit, with respect, that when you

come to determine the fair amount, or the amount

that fairly represents, you still can strike the

increased premium as being the appropriate amount.

One of the reasons why that is fair, we would

submit, is this: the insurance company is the

author of the policy. It is the insurer that has

control over the terms and conditions of the policy

that he offers, and in the circumstances of this

case the appellant had an insurance policy that did·

not prohibit registration, it so could have easily
have prohibited registration if the insurer wanted

to do so for the purposes of this unregistered

mobile crane policy, and in that situation, we say

that although it does not quite amount to an

estoppel it is another factor that the trial judge takes into account in evaluating what the relevant prejudice is, what the relevant fair amount is.

DAWSON J: But you would concede, would you, that if there

were no policy with an increased premium available,

so that the only alternative was to go off risk,

the result would be different, it would be as it is

in this case?

MR HIGGS:  I think that I agree with Your Honour, if I could

just word it so that I am not making some

devastating concession. If, for this particular

insurer, on an objective test, it is just not available to him to strike a premium then the

result would be different.

DAWSON J: But if he could, and did, on occasions issue

policies of this sort with an increased premium

then, you say, fairness requires the result for

which you contend.

MR HIGGS: That is so; Your Honour.

BRENNAN J: What do you mean by not available to him to

strike a premium?

Ferrcom(2) 15 3/4/92

MR HIGGS:  Because of the type of business that he is

involved in and because the risk that he insures

does not have a sufficient nexus with the risk and

the loss that actually did occur. For example, if
there was no prohibition under a policy for an

insured to change his motor car into an aeroplane -

it is an absurd example - but in that situation an

insured would be hard-pressed to say that the

accident that occurred to the aeroplane is

sufficiently associated or connected with the risk

of loss that occurs day in and day out with the

motor vehicles.

BRENNAN J: What of the case where the insurer says, "But

for some idiosyncratic view of mine, I never want

to be on risk, for example, if dynamite is to be

used", even though many other insurers do issue a

policy with an additional premium in the event of

the use of dynamite.

MR HIGGS:  Your Honour, in our submission, it depends upon

the other type of insurance cover that this

particular insurer provides and as to whether or

not there is a sufficient nexus between the loss

that could occur because of dynamite and the other

types of loss that they actually do provide cover

for. In other words, it does not entirely depend

upon the idiosyncratic practices of the insurer.

It depends upon whether there is a sufficient nexus

to justify that particular insured, consequent upon
the loss, being able to dip into the pool of

premiums that is created for the type of policy

that they do offer day in and day out.

But, in the event of it being shown that there

is not a sufficient nexus then it would be a

situation where the prejudice is not the increased

premium, it is liability for the risk or the lost

chance to cancel.

McHUGH J:  Do you deny that you can take into account the prejudice? loss itself in determining the question of

MR HIGGS:	Yes.
MCHUGH J:	You do?
MR HIGGS:	Yes.
MCHUGH J:	The section uses the words "as a result of that

act". It does not say the defendant's interests

were prejudiced "at the time of that act", it says

"as a result of that act". It is a causal rather

than a temporal relationship.

Ferrcom(2) 16 3/4/92

MR HIGGS:  Our submission with respect to that is this,

Your Honour: the words "as a result of" should be

confined to that temporal sense because at the time

the act occurrs there is a prejudice that arises.

What happens thereafter is not, say, prejudice as a

result of the act, it is loss because of the risk

occurring.

DAWSON J: That is, presumably, why the word "prejudice" was

used instead of the word "loss".

MR HIGGS:  Yes, and it is because of the distinction that is

drawn by the legislature between the rights - the

measure of recompense that is provided for in

section 54(1) as compared with section 28(3).

In support of the proposition, the prejudice

is to be measured on the footings that the
existence of the policy and the insurer's liability

thereunder is entrenched. If I could just simply

refer Your Honours to page 622 of Matthews' case

where Justice Deane deals with section 28(3).	At
the top of page 622, His Honour said that:

Section 28(3) does not offer an indirect means

of avoiding a policy. Its starting point is

the existence of the policy and the insurer's

entrenched liability under it. Its operation,

in a case to which it applies, is to reduce

the amount of that liability.

Then it goes on to provide that prima	facie that is
the amount of the additional premium.	And we would
submit, with respect, a fortiori that	applies to
section 54(1).

Corning back - I do not mean to labour it, but

at the time the act occurs, you look at what the

prejudice is. We would, with respect, submit that at that time it would not be open to a trial judge

to say that the prejudice is the full amount of any
loss that is claimed, it is to be measured by reference to that passage by reference to the increased premium.

Your Honours, the other submission that we

would like to make before corning, as I have, to the

way in which the discretion is limited and defined

by reference to each part of section 54(1), is to,

before that, stand back and to consider the basis

upon which this evaluation of the prejudice should

proceed.

In our respectful submission, the way in which

that evaluation is to occur is by reference to the

test that was laid down in Malec's case, but in

this situation what the trial judge is doing is

Ferrcorn{2) 17 3/4/92

assessing hypothetical events and, as provided for

in Malec, 169 CLR 638, it is a misconception of the

evaluation that is to occur if a trial judge were

to make findings on the balance of probabilities as

though the prospect were something that had

occurred in the past. That would be a

misconception of the process of the evaluation.

If I could just quickly take Your Honours

firstly to the judgments of Justices Brennan and

Dawson, at page 639, towards the bottom:

Hypothetical situations of the past are

analogous to future possibilities: in one case

the court must form an estimate of the
likelihood that the hypothetical situation

would have occurred, in the other the court

must form an estimate of the likelihood that

the possibility will occur. Both are to be

distinguished from events which are alleged to

have actually occurred in the past.

And then there is the passage for Lord Diplock in

Malec v McMonagle that is cited, and then going on: In assessing the plaintiff's earning capacity

in the present case, what had to be evaluated

was the prospect that the deteriorating back

condition would have precluded him from

engaging in gainful employment had he not

contracted brucellosis.	An evaluation of that
prospect had to be made.	To make a finding on

the balance of probabilities as though the
prospect were something that had occurred in
the past was to misconceive the process of

evaluation.

In our submission, that is the test rather than

embarking upon a determination as to what would

have occurred on the balance of probabilities. It

is the possibilities that have to be considered

with respect to what can only be described as past

hypothetical events, namely what would have

happened if the material on disclosure would have

occurred.

And, likewise in the judgment of

Justices Deane, Gaudron and McHugh. We would

submit, with respect, that the same test, not only

in relation to future, but past hypothetical

events, is set out concisely at pages 642 to 643

under the heading "Assessing Damages for Future or

Potential Events".

In this particular case, with respect, the

members of the Court of Appeal in approaching the

evidence misconceived what it was that

Ferrcom(2) 18 3/4/92

Mr Justice Giles had done at first instance.

Mr Justice Giles did not make findings on the

balance of probabilities.	He, with respect, in our
submission, applied the proper test.	He simply

took into account that there were various

possibilities and conceded that he was in a

position of uncertainty.

In particular, His Honour's findings in that

regard are set out in his judgment at pages 464

through to 466 of the appeal book. His Honour made

reference to the evidence of the insurer's

Mr Hughes, and the fact that there was this

endorsement, ME35A, that excluded risk in the event

of a crane overturning if the crane was registered.

His Honour declined to conclude that had Ferrcom

known of this exclusion clause, that they would

have done nothing. That is to be found at 464,

lines 19 to 22.

As I understand it - and no doubt my learned

friend will correct me if my assumption in this
regard is wrong - it is not in issue that Ferrcom
would have wanted cover against the risk of this

crane turning over. The evidence and the debate on

the evidence turns on whether or not Ferrcom, the

insured or its agent would have been astute enough

to have appreciated this exclusion clause and to

have shopped around and sought cover elsewhere,

because in the findings by His Honour

Mr Justice Giles, Mr Green, who was the director of

Inbush, who His Honour found to be the insured's agent, had been asked by Mr Ferrarese, the managing

director of the insured, to notify the insured of

registration and to fix up the insurance. The

evidence is that Mr Green had failed to do that.

So there is cogent evidence there that, at least from the insured's point of view, he wanted

cover. The issue on the evidence was whether or

not he would have been astute enough to have

obtained that cover in the event of the material

non-disclosure not having occurred.

But for the balance of Mr Justice Giles's

judgment, with respect to the facts, His Honour

does take into account the fact that there was a

real possibility that the insurer would have gone

off risk because, on the facts of the case, the

evidence from Mr Hughes, the officer in charge of

the insurance policy, was that he would not waive
this exclusion clause with respect to registered

cranes unless, amongst other things, there was an

insistence or an agitation for the exclusion clause
to be taken away and, in addition to that, there

was a broker that the insurance company perceived to be proper in their eyes, in the sense that the

Ferrcom(2) 19 3/4/92

broker sent them a lot of work, as would convince
them to waive this exclusion clause.

So, but for a proper broker, in the eyes of the insurer, agitating for this exclusion clause to

be waived, as His Honour found there was a risk

that the insurer would have only offered cover with

this exclusion clause, that that may or may not

have been accepted by the insured, he might have shopped elsewhere for another insurance company.

But be that as it may His Honour took into account

that this was a possibility. And he does not make

findings on the balance of probabilities, the

findings are set out at 464 line 7 through to 466

line 6, where His Honour also defines the

prejudice. In our respectful submission, in

striking the amount that fairly represents, it is a

wide discretion, it is not one that would be upset

easily on appeal; it is not one in respect of

which there are firm guidelines; and it has not

been demonstrated that the discretion has

miscarried.

McHUGH J:  You say it is a fairly wide discretion, and I

understand that, but is it a case of assessing the

damage which the insurer has suffered, do you

assess it on a basis that you might assess damages
in a case for breach of contract where there is a

loss of a chance or something along those lines?

MR HIGGS:  Your Honour, there is that possibility but it

depends on the evidence, and on the evidence of

this case the only damage that, we would submit, is relevant is the increased premium. It is an amount

of money that this particular insurance company

concedes was a proper premium for this particular

increased risk. One could envisage, perhaps, that

there are cases where that approach is not one that

would properly compensate, or be a proper value,

for that particular insurer for the reasons that I

have mentioned beforehand.

That is a problem that is dealt with by the courts day in, day out in quantum meruit cases.

There is, with respect, we would submit, a convenient passage in Pavey and Matthews v Paul,

162 CLR 221, at 263 to 264, from the judgment of

Justice Deane. There, His Honour deals with what

are quantum meruit for particular circumstances

should be - it is at about point 5 of the page:

What the concept of monetary restitution involves is the payment of an amount which

constitutes, in all the relevant

circumstances, fair and just compensation for

the benefit or "enrichment" actually or

constructively accepted. Ordinarily, that

Ferrcom(2) 20 3/4/92

will correspond to the fair value of the

benefit provided (e.g. remuneration calculated

at a reasonable rate for work actually done or
the fair market value of materials supplied).

In some categories of case, however, it would be to affront rather than satisfy the

requirements of good conscience and justice

which inspire the concept or principle of

restitution or unjust enrichment to determine

what constitutes fair and just compensation

for a benefit accepted by reference only to
what would represent a fair remuneration for

the work involved or a fair market value of

materials supplied. One such category of case

is that in which unsolicited but subsequently

accepted work is done in improving property in

circumstances where remuneration for the

unsolicited work calculated at what was a

reasonable rate would far exceed the enhanced

value of the property.

So, you have there a general rule that it is the

fair market rate, but depending on the evidence and

the circumstances there can be exceptions to that

rule.

His Honour then went on, over to page 264 to

give the example there of where work had been done

at the request of the owner under a contract that

was not enforceable because of section 45 of the

Builders Licensing Act, that there being a rate

provided for in the contract and, as I understand

His Honour's judgment, that perhaps is another

exception, that it is the rate provided in the

contract rather than the fair market rate that

would be the appropriate measure.

I realize that analogies are always imperfect

but, in our submission, that is the approach, with

respect, to be adopted here. You look at the fair

market rate, by reference to what the increased

premium would be, but you always have in mind the

particular insurer and whether or not, as in those

examples, there should be an exception to it.

Further in support of the construction that we

contend for, Your Honours, if I could just quickly

refer Your Honours to the bundle of documents and,

in particular, to page 24 of the bundle where there

is an extract from the Law Reform Commission report

on the Insurance Contracts Act. In paragraph 228,

to be found at page 139 of the report, there is to

be found the recommendations made by the commission

in relation to contractual obligations as opposed

to precontractual remedies and non-disclosures,
that being the reference to what is now Part V of

of the Act and is to be found on page 17 of the

Ferrcom(2) 21 3/4/92

bundle that is the heading for the topic, namely

Contractual Obligations.

In the recommendations on page 24 of the

bundle, the report provides, in effect, that - I am

reading from line 2 at the top:

A test based on causation, whether formulated

as a limitation on the right of termination or
as the criterion for the award of damages, is

clearly preferable where the insured's conduct

is of a type that may cause or contribute to a

loss.

Then there is a discussion about whether or not -

what is the remedy to the way in which damages are

to be approached. If you go down to about point 4:

That condition would only be satisfied if the

second of the Law Commission's criteria were

to be collapsed into a simple test of

causation - and that was ruled out by the Law

Commission itself. Proportionality would

overcome the first of the problems of the Law

Commission's approach, but it would still deny

full recovery in many cases where full

recovery seems appropriate. The Commission

has concluded that the only satisfactory

solution is a combination of two tests.	Where
the conduct of the insured might, in

principle, have caused or contributed to a

loss, a causal connection approach should be

adopted.

And they are there talking about the measure of

damages and they are there talking about what has

come to be subsections (2), (3) and (4) of

section 54.

As between termination and damages in these

cases, there may not be a great deal to

choose.

remedy in those rare cases where the insured's But damages provide a more flexible

conduct caused or contributed to only a part

of the loss. Given the insured's superior

knowledge concerning the circumstances of most

losses, he should bear the burden of proof.

Where the insured's conduct could not, in

principle, have caused or contributed to the

loss, the insurer should also be limited to a

right to damages. Those damages should be

assessed by reference to ordinary contractual

principles. That would, presumably, involve
an application of the principle of

proportionality.

Ferrcom(2) 22 3/4/92

Now, the principle of proportionality is dealt with

often in the report and I will take you to where the definition of that principle is in a moment, but it in effect provides for the increased

premium, but the principle of proportionality is

based on the French model and it is the increased

premium. The report then goes on to say:

The Commission recognises that, in some cases,

that principle might be difficult to apply.

But it believes those difficulties are

justified by the need to strike a fair

balance ..... The actual test should be stated

in terms of prejudice to the insurer.	Damages
should be measured by reference to the
prejudice the insurer has suffered as a
consequence of the insured's conduct.	As in
the case of misrepresentation and non-

disclosure, the right to damages should be

exercisable only by way of reduction of a

claim.

Now, the principle of proportionality is expressly

rejected by the Commission as being the appropriate

test in relation to pre-contractual acts of
non-disclosure or the misrepresentation. If I

could just quickly take Your Honours to pages 9

and 10 of the bundle. That is a section of the

report that deals with non-disclosure and

misrepresentations, Part IV of the Act. At the

bottom of page 9:

Assessing Damages

Proportionality: ..... several

methods ..... First, normal contractual

principles might be used. On this approach,

the misrepresentation or non-disclosure would

notionally be treated as a term of the

contract of insurance. An insurer would be

entitled to recover such damages as would

compensate it for the loss it had suffered as

a consequence of the breach of that notional

term. Normally, those damages would be the

difference between the cost to the insurer of bearing the risk it had agreed to bear - that is, the cost of the risk if the representation

were true or the fact which was not disclosed
were false - and the cost to the insurer of

bearing the actual risk - that is, the cost of bearing the risk given that the representation

was false or the fact not disclosed was true.

This appears to be the rationale behind the

principle of proportionality -

And then what goes on after that definition of the

principle is a discussion as to whether or not it

is appropriate, and in relation to pre-contractual

Ferrcom(2) 23 3/4/92

misrepresentations and non-disclosure, the doctrine

is rejected, and that is to be found -

McHUGH J:  But I notice that they say at about seven lines

down:

Under French law, for example, an insurer is

obliged to pay the proportion of the claim which the actual premium paid bears to the

premium which would have been payable if the

material facts had been disclosed.

Now, is that the principle of proportionality that

they are talking about?

MR HIGGS:  No, Your Honour. There are a number of

variations to that basic principle of
proportionality that we submit is defined in the

report in that Part that I have just read to

Your Honours, and then there is - I am sorry,

Your Honour. Is Your Honour reading immediately

after that? Would Your Honour just bear with me.

McHUGH J: About seven lines down:

Under French law, for example, an insurer is

obliged to pay the proportion of the claim which the actual premium paid bears to the

premium which would have been payable if the

material facts had been disclosed.

So, that seems to be very much like the

illustration I gave you earlier: if the premium

was $50, you paid $50 and it should have been $100

you get 50 per cent of the claim or the loss.	Now,
is that what they are talking about?

MR HIGGS:  Your Honour, I must say that I did not perceive

it to be so but, quite frankly, on that being

pointed out, it may be. Your Honour, if that is

correct then we would adopt that as a fall-back

position in terms of making the adjustment. But I

must say that I understood the principle of

proportionality to be the difference in the premium

as defined in that part of the report that I read

out.

DAWSON J:  The French position would seem to be pursuant to

an express provision?

MR HIGGS:  And, as I understand it, it is an amendment to

what is generally perceived to be the doctrine of

proportionality, it is an amended version of it.

In any event, on page 13, in the four lines

immediately above the heading, Means of

Evasion,paragraph 195, that is where you find the commission rejecting the doctrine of

Ferrcom(2) 24 3/4/92

proportionality with respect to pre-contractual

representations.

McHUGH J: Yes, I know, but the passage that you referred us

to, what page was that where they were discussing

the - - -

MR HIGGS:	The first passage, Your Honour?
McHUGH J:	The recommendations, was it?
MR HIGGS:	No, that is on page 24 of the bundle.

McHUGH J: Page 24, yes.

MR HIGGS:  Paragraph 228.

MCHUGH J: It says:

Those damages should be assessed by reference

to ordinary contractual principles. That

would, presumably, involve an application of

the principle of proportionality.

MR HIGGS:  Your Honour, throughout the whole report, the

commission expressly disavows that doctrine as

being an appropriate measure of damage.

McHUGH J: But judging from what I have just read here, only

as a sole test. I mean, there was a causal

connection theory put forward, that was rejected

because it does not deal with some cases;

proportionality put forward, it was rejected. But

what they do on page 24 of the bundle of documents

is to sort of have an amalgam of them both.

MR HIGGS: That is so, Your Honour, and that is the reason

for the two classes of those contractual acts to be
found, firstly, in subsection (1) and then in

subsections (2), (3) and (4). Section 54 perhaps

has this anomaly: in relation to events that one would have thought are more pertinent or relevantly	culpable to the loss that actually occurs, provided	the insured discharges the onus that is placed upon
it under subsection (3) to show that although it is
reasonably arguable that that non-disclosure might have caused the accident, in fact, it did not, then there is no adjustment by reference to the
insurer's interests at all.
Yet, when you come to the provisions of subsection (1), which we would submit at first
blush would seem to be less culpable relevantly,
there is that adjustment to be made.

McHUGH J: But that overlooks the point that Justice Deane

made and that is the question of the statistical

Ferrcom(2) 25 3/4/92

correlation between risk and losses. It may be that there is no causal connection between this

particular case and the premium, but then one has

to look at the whole picture.

GAUDRON J: There never will be a causal connection in

subsection (1), will there?

MR HIGGS:	No.
BRENNAN J:	And the real difficulty with it lies in the perception by the commission. It was possible to
refer to ordinary contractual principles in
assessing something under a section which abolished ordinary contractual principles.
MR HIGGS:	Yes, and you have a situation where you have

varying degrees of weight to be given to the

matters to be taken into consideration when you

determine the amount that it fairly represents.

There are the wide words to be found in

subsection (1) and we would submit, with respect,

also, that there is some guidance in looking at the

words to be found in subsections (2) and (3), that
you do take into consideration as a factor that is
not decisive, as opposed to it being a decisive
factor in subsections (2) and (3), as to whether or

not there is a causal connection or the degree of

that connection. But it is only a factor.	They
are our submissions, Your Honours.

BRENNAN J: Thank you, Mr Higgs. Mr Bruce.

MR BRUCE: Could I hand to Your Honours, if I may, an

outline of the respondent's submissions. In

relation to section 54(1) of the Act, as has just

been indicated, there is no causal connection

between the act and the event giving rise to the

claim under the insurance policy.

BRENNAN J: Perhaps you should give us a moment to look at

your outline.

MR BRUCE: If Your Honour pleases.

BRENNAN J: Yes, Mr Bruce?

MR BRUCE:  Our primary submission is that what is involved

in an application of section 54(1) is an

ascertainment of the actual prejudice sustained by
the actual insurer involved in the claim. If

Your Honours go to the section, the terms of it

are, so far as we would respectfully submit, that

the section should be read as follows, that it is

based upon the continued existence of an insurance

policy because at the time of the - if there is a

non-disclosure at the time of the event giving rise

Ferrcom(2) 26 3/4/92

to the claim, the policy has not been ended as a
result of any provision contained in the terms of

the policy.

For example, in the present case, if the

registration had occurred as it did in May 1987 and

it was made known to the insurer, then if the

insurer did not terminate pursuant to that

notification, that would be the end of any claim

which the insurer may have. If the insurer was not

aware of the fact of registration, then the policy

would have continued, the insurer not being in a

position to exercise any rights which it had under

the policy.

The section commences to operate when there is

an event which gives rise to a claim. So that at

the time the exercise of determining the prejudice

to the insurer takes place, the claim to pay moneys

has crystallized and the parties are aware that

there is a sum of money which may be payable to the

insured.

If Your Honours go to the section, the terms

of the section when they use the word "prejudice",

in our respectful submission, are wholly

appropriate for determining a sum in relation to a

contractual situation. The insurer has been

prejudiced, in our respectful submission, by being

left in a position where it is liable for the

payment of a known sum of money and when one comes

to determine what is an amount which fairly

represents the extent to which the insurer's
interests were prejudiced - past tense, not

prospectively - one takes into account the actual

circumstances of the actual insurer so that, we

would respectfully submit, if the insurer had a

policy of never insuring the type of risk which was

sought to be covered by the changed circumstances,

then one would say they are prejudiced by having to

pay the claim because had they known they would

never have been liable for it.

If the degree of certainty of the obligation

to pay, if the true circumstances were known to

them, was a less than 100 per cent certainty, then

that reduced factor is a chance which is taken into

account in determining what is said to be an amount

which fairly represents the extent of the prejudice

and it becomes a factual inquiry in each case to

determine what were the circumstances of each case,

what was the situation of each insurer and what it

would have done in each particular circumstance.

Your Honour, it is our respectful submission

that that is the proper construction and the proper

approach that the Court should take when it is

Ferrcom(2) 27 3/4/92

called upon to determine what is the amount of the

prejudice.

McHUGH J:  But even on that approach you would not look at

the matter in terms of the balance of

probabilities, would you?

MR BRUCE:	No, Your Honour, but in arriving at a fair amount a tribunal, or whoever is making the determination,
must take into account the factors and must apply them in a way which is apparently proper, so that
if all the undisputed evidence was that had this
insurer known it would not have borne the cover,
full stop, then a determination that its loss was, for example, some hypothetical increased premium
would on its face, in our respectful submission, be
a misapplicatio~ of the material before the
tribunal, so that its determination would be
subject to review as a jury trial.
BRENNAN J:	What if the facts were that the particular insurer in the particular case always went off risk
unless there was a 5 per cent loading put on the
premium?
MR BRUCE:	In that case, Your Honour, it would no doubt be 5

per cent.

BRENNAN J: 

What then is the difference between your

approach to the construction of the section and the
appellant's?

MR BRUCE: 

Your Honour, the approach is different in this

way, that in our respectful submission you look at

what the particular insurer would have done. What

is being put on behalf of the appellant is that one

does not necessarily do that, but one arrives at a

hypothetical figure, taking into account some

nebulous pool of premiums which have been

accumulated in respect of insurance other than

insurance which is effected with the 5 per cent

additional premium, as in Your Honour's example.

So that we are saying that you must have a proper

factual examination rather than the partially

factual, partially hypothetical approach taken by -

submitted to Your Honours by the appellant.

When one comes to look at the factual

circumstances of this case, what the evidence, in
our respectful submission, shows, was that there

was a policy of not issuing policies - I should not

say that. The policy of the insurance company was

not' to effect insurance of registered motor cranes

without the rider which excluded liability for

overturning. That was subject to the rider and put

in evidence as a possibility, no more than that,

and the person giving evidence on behalf of the

Ferrcom(2) 28 3/4/92

respondent said that he had been asked on numerous

occasions - on a number of occasions - to issue

policies without such a rider and he had refused,

and there was no evidence that in fact the company

had ever issued it. But he said, and the evidence

is, that there was a possibility that, in effect,
if the right person asked then it would be granted

and, with respect, anyone truthfully giving

evidence in a commercial situation must have given

that evidence.

If one has a good client who is providing a

flow of - or a good broker who is providing a large

flow of business to an insurer, then plainly, with

respect, common sense would show that it would be

likely that he would be able to extract more

favourable terms than a one-off approach from a man

in the street or, alternatively, a broker who had

no significant business. But the evidence, in our

respectful submission, establishes that it is no

more than a possibility that it could be issued

without that rider.

McHUGH J:  Mr Bruce, supposing the trial judge had found

that there was a 90 per cent probability that your

client would have cancelled the policy, would that

mean that the amount would be reduced by

90 per cent?

MR BRUCE:  Your Honour, if that were the case he would then

have to form an assessment of what was the amount by which our interest were prejudiced, and it may

be 10 per cent or it may be some lesser sum. But

what his conclusion then would have been, that
there would only be a 10 per cent chance that we

would have stayed on risk, and if he came to that

conclusion, it is our respectful submission that he
could not possibly conclude that the measure of our

prejudice was simply an increase in premium and,

perhaps, a small increase in excess. The question

becomes a balancing exercise, but taking into

account all the factors.

If I may go back to the actual factual

situation in this case: evidence (a) was that the

company had a policy of not issuing policies

without the rider, (b) that they had not done it,

(c) that they would not have done it with the

particular broker who was acting on behalf of the

insured appellant, and there was no effective

cross-examination about that and His Honour, the

trial judge, accepted that evidence.

The next step is that in order to obtain the

possibility of an insurance policy without the

rider, it would have been necessary for the insured

to change brokers and for that broker to obtain the

Ferrcom(2) 29 3/4/92

concession from the insurer of deleting the rider.

The evidence shows that, after this accident, after

the claim, after the rejection of the claim, the

new broker Hernrns Cassell who, on the evidence,

would have been likely to have obtained an

indulgence had they pursued it, effected insurance

of registered cranes which had the overrider, and

there is nothing to suggest that there was any

attempt by the insured or by its broker to have

that overrider removed. So that the actual

situation, so far as the insured was concerned, was

that when he has effected insurance with this

company with full knowledge of the requirement for

it to have an overrider, he accepted that, and that

was in 1988. His Honour, with respect to him, did

not advert to that at any stage in his judgment,

and it is our respectful submission that when

His Honour, at the first instance,

Mr Justice Giles, directed himself to the

questions, he did not take into account the full

circumstances.

If I could, very quickly, with Your Honours'

permission, take Your Honours to page 464 of

volume II of the appeal book where His Honour dealt

with this matter - perhaps if I could refer

Your Honours to page 463, the whole of that page

ends with His Honour saying:

This evidence of Mr Hughes was in

substance unimpaired by cross-examination.

Ferrcom endeavoured to show that CU had

insured the crane or other crane at different

times without endorsement ME35A, but did not

succeed in that endeavour.

In fact, the evidence was to the contrary. The

evidence showed that they had insured them with the

rider when they knew of the fact that the insurer

required such a rider.

DEANE J: Mr Bruce, is there any explanation in the evidence

of why the endorsement excluded overturning in

circumstances where an unregistered crane could

lawfully be used?

MR BRUCE: There does not appear to be, no, Your Honour, but

there is evidence that the underwriting of such

matters is a technical matter; people with

expertise deal with it.

DEANE J: But it could be that registered cranes have a

variety of sites that unregistered cranes do not.

MR BRUCE: There are all sorts of physical possibilities for

adopting that stand, Your Honour.

Ferrcom(2) 30 3/4/92

GAUDRON J:  I thought there was something about that risk

normally being covered by some other form of - - -

MR BRUCE:	Yes, by a contractor's risk policy, I think it may have been, Your Honour, but I will look that
up.
GA~DRON J:	I think that was given as the reason for the exclusion.
MR BRUCE:	Or why they would accept that exclusion, I think

it may be, Your Honour, but they were still covered

by obtaining other insurance. If I could then go,

Your Honours, to 464. His Honour says at line 7:

In assessing the fair representation of the extent to which CU's interests were

prejudiced it seems to me that it is proper,

if not necessary, to do more than simply

conclude that CU would have gone off risk by

cancelling the policy had the notification

been given to it. Regard must also be paid to
what Ferrcom would have done if told by CU,

upon notification having been given, that CU

would no longer cover the crane. There was no

direct evidence of this. However, I think I

can infer that Ferrcom would have asked CU for

the terms on which it would cover the crane,

and upon being told that it would provide

cover by way of the commercial motor vehicle

policy but with endorsement ME35A, would have

enquired as to the terms on which that

endorsement would be dispensed with. Cover

against loss or damage through overturning is
clearly a vital aspect of the cover required

for a crane, and I decline to conclude that

Ferrcom would have done nothing.

With respect of His Honour, it is our

respectful submission that His Honour was in error

in that portion of his judgment because, as

His Honour said, there was no direct evidence of
what they would have done.	No one from Ferrcom
said what they would have done.	No one from

Ferrcom said that they sought insurance against

overturning. There is not a word of evidence to

indicate that they sought that cover. And, with

respect to His Honour, there is nothing, in our

respectful submission, from which it would be open

to infer that they would have made these inquiries,

bearing in mind their conduct in 1988 when they

accepted insurance with the rider.

It was put to you by my learned friend that

the appellant had sought this cover. With respect,

the evidence does not go to that point. What it

goes to, in our respectful submission, is that the

Ferrcom(2) 31 3/4/92

broker, Mr Green, informed the appellant that if
the vehicle was to be registered they would need to

inform the insurer. Pursuant to that advice,

Ferrcom informed Mr Green, Mr Green did not pass

that information along or effect alternative

insurance. But there is nothing to indicate that

Ferrcom was conscious of the terms of a registered

insurance policy - an insurance policy for

registered cranes, other than it was aware that it

was a different policy. And there is nothing to

indicate, in our respectful submission, that there

was any desire to obtain the insurance which was

excluded by ME35.

His Honour then goes on, at line 23:

At that stage Ferrcom may have gone to

another insurer, or it may have pressed CU.
What is uncertain is whether or not the
enquiries made by Ferrcom of CU would have
revealed to it that if it went to a broker of
appropriate standing in the eyes of CU it

would be able to obtain cover, at an increased

premium and with an increased excess, without

the endorsement, whether or not that being

revealed to it it would have obtained cover

from CU through such a broker, and whether or

not in lieu of its doing so it would have
obtained cover from another insurer. There

are other insurers in the market, but I do not

know the terms they would have offered.

So there was no evidence that there was insurance

available in the market-place against overturning.

There was no evidence from which, in our respectful submission, His Honour could conclude that there

was any probability or possibility that an inquiry

of Commercial Union would have disclosed to the

appellant that he could have got this insurance,

which they did not want to issue, by going to

someone other than Mr Green.	And, with respect to
His Honour, it would be our respectful submission	that the inference that one would draw, properly,
from that material, would be that he would not be
informed that by changing brokers he could get a
policy which the company did not want to issue.

McHUGH J: But, is not the onus on you to negative that?

MR BRUCE:	Yes, Your Honour - I am sorry, when I say yes, the policy on the respondent, with respect, is to
say what would have happened. That does not, in
our respectful submission, mean that His Honour can
hypothesize that if he had come and talked to us we
may have told him something.  It was never put to
anyone in cross-examination and, with respect to
His Honour, it is simply speculation when he has

Ferrcom(2) 32 3/4/92

come to deal with the matter that there may have

been some communication.

There is no material upon which His Honour

could conclude that the particular appellant would

have derived information from the respondent which

would have enabled him to select the broker who

could have got him the terms, a policy without this

rider. There is just nothing and it is not, with

respect, an onus upon the respondent to have

adduced evidence that if he had come and asked we

would have told him nothing, when the evidence from

the appellant is that at no stage did he ever

inquire as to the removal of this even when he was

aware that it existed.

GAUDRON J:  Does not that rather sophisticate notions of

onus of proof and evidentiary onus, and your

evidence was that there was a way in which you

might have done something and the question to be
answered in the way indicated in Malec was, "Well,

what were the probabilities?".

MR BRUCE: With respect, Your Honour, we do not dispute that

there is some possibility that he may have obtained

the insurance. We cannot do that on the state of

the evidence, but the state of the evidence does

not leave it open, in our respectful submission, to

conclude that he would probably have done that.

GAUDRON J:  No, it is not a question of what the appellant

probably would have done, it is a question of what

you probably would have done.

BRENNAN J: Only in certain circumstances, with respect.

GAUDRON J:  No, in the circumstance where the evidence was

that you allowed for a possibility otherwise.	Your
evidence allowed for a possibility otherwise.

MR BRUCE: With respect, Your Honour, there must be, in any

commercial transaction, if an added ingredient is

added to the cake, the possibility of a particular
event occurring.	The added ingredient added to the

cake is a broker who provided business to the

respondent.

GAUDRON J: Well I was wondering about that; the notion of

special deals really does mean that you must limit

fairly exactly to the calculation of the money

amount, does it not?

MR BRUCE:  I am sorry, I do not quite follow that.

GAUDRON J: Well, if one were to make a fair assessment of

the prejudice rather than an assessment of an

amount that fairly represents the prejudice, you

Ferrcom(2) 33 3/4/92

presumably would not take into account that he
might have been deprived by reason of his

unfortunately having a broker not in quite as good

standing as others.

MR BRUCE:  No, Your Honour, with respect; you take into

account the fact of the broker that he had.

GAUDRON J: Well, that is what I was saying. You can do

that because "fairly" refers to the amount of money

that is calculated, not the prejudice.

MR BRUCE:	Yes, Your Honour; you have to look at exactly what his situation was and then work out fairly
what sum of money represents the prejudice to the
insurer as a result of the events that occur.

Your Honours, the particular matter I was

dealing with was, in effect, His Honour's

conclusion at lines 21 and 22, where His Honour

said:

I decline to conclude that Ferrcom would have

done nothing.

With respect to His Honour, there was no material

from which that conclusion could have been reached

and the evidence, with respect to His Honour, was

to the contrary.	He then goes on to say they
could:

have gone to another insurer, or it may have

pressed CU. What is uncertain -

and I have dealt with that. And His Honour then

goes on, in the first paragraph at line 8 on

page 465:

I ask myself how section 54(1) is to be

applied when I am left in this state of

uncertainty. It seems to me that attention

must be concentrated upon the prejudice to CU

to which section 54(1) refers.

And that involves, in our respectful submission,

looking at the situation, a claim having been made,

the sum of money sought to be recovered from the

insurer crystallized and looking at the particular

circumstances of Commercial Union and, as I

indicated in response to His Honour

Mr Justice Brennan, we do not dispute that if the

practice of the insurer was to issue a policy at an increased premium, then the increased premium would

be the prejudice.

DEANE J:  You do not, in those circumstances, seek the

proportionality argument?

Ferrcom(2) 34 3/4/92

MR BRUCE:  No, Your Honour.

DEANE J:  Why not? I am not suggesting you should, I am

just interested as to why you would not be.

MR BRUCE:  Your Honour, with respect, it would appear to us

that the prejudice that is suffered, if one takes

the situation where a policy is on foot, is the

failure to collect the premium which would have

been attributable to that policy; it is not the

consequence of paying more money than would have

been paid. Because the act that is relied upon is

not a diminished premium already collected. The

act relied upon is some act which would have given

a right to the insurer to decline liability.

McHUGH J: But why is there not a prejudice that you are, for example, at twice the risk for the amount of

premium that you have paid, so that the amount of

your liability is twice that which it ought to be?

MR BRUCE: With respect, I accept that, Your Honour.

Provided that actual error or calculations came to

that, that would, with respect, be correct and I am

in error.

DEANE J: Well, except this seems to have far-reaching

consequences in the insurance industry. If it has

not been put below, and we are not really informed

about all the implications of it, should we

not - - -

MR BRUCE: It has never been argued, Your Honour.

DEANE J: Should we not steer well clear of it in this case?

MR BRUCE: Not if it is advantageous to me, Your Honour, but

I cannot suggest that it has been argued anywhere

else in the course of the progress of this case.

DEANE J: Because there is obviously great force in the

notion that if non-disclosure will never, as it

were, bring you within subsection (3), there is an

element of real unfairness in simply talking about

an increased premium instead of attributing the
risk by reference to what was paid as a proportion

of what should have been paid.

MR BRUCE:  Yes, Your Honour, but it has not been argued at

any stage in this case.

DEANE J: One can see why. This seems to have been an all

or nothing approach, in the Court of Appeal,

anyway.

MR BRUCE:  Indeed, I think the whole way, with respect,

Your Honour.

Ferrcom(2) 35 3/4/92

BRENNAN J: Is it right to say that that approach - that is

the French approach, if I understand it correctly -

was considered and rejected by the commission?

MR BRUCE:  It appears to have been rejected by the

commission, yes, Your Honour.

BRENNAN J: For this area?

MR BRUCE:  No, for precontractual, and then they, in one

line, having said that you determine this amount by

ordinary contractual principles, they say

presumably the principle of proportionality would

apply.

BRENNAN J:  I must say that those are words of ex·- ·isite

obscurity.

MR BRUCE: That depends, I suppose, Your Honour, en one's

ability to read French. His Honour, on page 465,

line 8 and following, refers to a "state of

uncertainty", that uncertainty being what the

insured may have done if he was aware that his

policy would be limited in the way it was. With

respect to His Honour, while there may be an

inability to conclude what he would have done,
there is nothing from which His Honour could

conclude that he would have sought to have this

insurer continue to insure him with the rider

removed and that His Honour really, with respect to him, came to deal, at 465, based on a misconception

of the way he should deal with it. What he did was

simply, at line 16, say:

I consider that I should conclude that the

prejudice to its interests as a result of the

failure of Ferrcom to notify the registration

of the crane was not that it remain on risk in

relation to damage to the crane from

overturning, but that it remained on risk

without having received the additional premium

or imposed the increased excess of which

Mr Hughes spoke. That is the real extent of

its damage and the real measure of its

damages.

And His Honour advances no reasons for reaching

that situation and, in our respectful submission,

there was no basis upon which His Honour could have

reached that conclusion on the state of the

evidence because, in our respectful submission, on

any view of it the best that the insured ever had

was some remote chance, if he changed his broker

and the broker made demands upon the insurer of

getting a policy at an increased premium. So an

increased premium was the high-water mark of what

could be recovered. Any diminution in a

Ferrcom(2) 36 3/4/92

100 per cent certainty must mean that the prejudice

to the insurer increased. So that His Honour could

not, in our respectful submission, have come to the

conclusion, properly, that he has come to at that

page.

So that when one reaches a conclusion, which

we would respectfully submit Your Honours should,

that this conclusion is in error, then one looks at
the material and says, "What is the appropriate

amount" or sends it back for it to be determined

otherwise. And what we would submit to

Your Honours is that there is an amount to which

the insured is entitled as a fair estimate of its
prejudice, which approximates the amount of the

claim. There may be some minor discounting for the

minor - we would submit is minor - chance of the

policy being issued without the cover or without

the rider, I should say, with respect to

Your Honours.	And His Honour says at the top of
466:

The burden lies on CU to show the prejudice to

its interests, that is, to show the position

it would have been in but for the failure to

notify, and it has not been shown that it

would have been in any worse position than on

risk but with additional premium and an

increased excess.

With respect to His Honour, that misconceives the

evidence when you have the undisputed evidence that

it would not issue it in a situation where the

insured proceeded with its present broker.	And it
was proceeding with its present broker.	He made

the claim pursuant to this policy. In those

circumstances His Honour, in our respectful

submission, must be in error.

GAUDRON J: Mr Bruce, could I just take you back? When you

said there might be some minor adjustment, do I

take it that it has been common ground all along

that the adjustment is to be foregone if,	on a
proper analysis, there should be - - -

MR BRUCE:  No, Your Honour, there has been no agreement to that effect.

GAUDRON J: Because, I mean, one would have thought that,

strictly, one aspect of this would be to value the

right to cancel.

MR BRUCE:  At the time of the claim coming in.

GAUDRON J: Yes. Well, I do not know, the time does not

matter, but one aspect that might have to be

Ferrcom(2) 37 3/4/92

adjusted for is the premium already paid, or the

proportion of the premium already paid.

MR BRUCE:  I think, Your Honour, the premium already paid

was taken into account in the figures which were

arrived at as being the amount which the respondent

recovered.

GAUDRON J:  Yes, and it might be, for example, in a

particular case you would come to the conclusion

that the value of that was 80 per cent, say, or
some percentage of it, but this case has never been

run, I take it, on the basis of valuing the right

to cancel.

MR BRUCE:  It has been run on the basis, Your Honour, that

the loss of the right to cancel was a prejudice and

the prejudice was valued at the amount of the

claim. I think that would be a fair way to put it,

Your Honour.

GAUDRON J:  Or could it be said it has been run on the basis

that, in the circumstances of this case, if there

had - that if one came to value the right to

cancel, they said it was to be valued on the basis

that it would have been exercised?

MR BRUCE:	Yes, I would have to say that, Your Honour, yes.
DEANE J:	What then would you say - and this is just a

hypothetical question - if one were to take the

view that, in a case such as this, the correct

approach was to ascertain the probabilities and if,

for example, one were of the view there was a
70 per cent or an 80 per cent chance of

cancellation but a 20 per cent chance of no

cancellation, no endorsement, that you should apply

that?

MR BRUCE: That there should be, in that case, a reduction

to some extent from a valuation - - -

DEANE J: Well, 80 per cent.

MR BRUCE: There would be a reduction of the claim by

80 per cent, yes.

DEANE J:  And then, as to the 20 per cent, if you followed

through Justice McHugh's questions, you would

adjust the 20 per cent by reference to the

increased premium and the appropriate risk.

MR BRUCE:	Yes, that could
DEANE J:	Now, that does not seem to have been contemplated

in the judgments below. Is that because it was

never put that way?

Ferrcom(2)	38	3/4/92
MR BRUCE:	No, never been adverted to, Your Honour.	But the

case preceded really, at first instance, with

His Honour Mr Justice Giles determining what he

perceived to be the factual situation where

Commercial Union was not in any worse position than

if it had got an increased premium.	We say that
that is in error on the evidence before him.	The
Court of Appeal dealt with it and the majority

decision there was that His Honour was in error

factually and the proper approach was that, for all

practical purposes, it would have been cancelled.

DEANE J: Well, I mean one can fully understand why counsel

of the appellant would take that approach and that

what I was putting to you would not, in the

circumstance of this case, lead to a result that

would in any way have been satisfactory from their

point of view.

MR BRUCE:  No, certainly not, Your Honour, but it has never

been run, no matter whose advantage it was for.	I
think, Your Honours, that is all I wish to put to
Your Honours.

BRENNAN J: Thank you, Mr Bruce. Mr Higgs.

MR HIGGS:  My learned friend submitted that there was no

evidence that the appellant wanted cover of the

type that ME35A excluded. There is no evidence to

the effect that Mr Ferrarese said, "I wanted cover

against overturning", except to this extent: at

page 448 line 9, Mr Justice Giles found

Mr Ferrarese to be a witness of truth.
Mr Ferrarese's statement is to be found at page 188

of the appeal book wherein he made reference to

having a vague notion that he needed to have the

crane insured because it was leased, and at

page 191 of the appeal book there is evidence about

him telling Mr Green, of registration, that he

needed to have the insurance fixed up.	At lines 23
to 27, the conversation was:

Ferrarese:  "We are going to re-register the

two mobile cranes that are covered by the

Commercial Union.	Can you fix up the
insurance?"

Green: "I'll fix it up".

And of course, at that time, there was the cover

against overturning. And there was also evidence

that Mr Green did not fix it up, and that is to be

found at page 194 at paragraph 43 of the statement.

Mr Green told Mr Ferrarese that he had a problem

because he had not notified the insurer of

registration as he should have.

Ferrcom(2) 39 3/4/92

At page 60 of the transcript, lines 10 to 12,

there was evidence that Mr Ferrarese trusted

Mr Green. He had trusted Mr Green to alter the

insurance policy and there was reference to him not

appreciating that there was a vital difference

between the crane being registered and

unregistered.

At lines 19 through to 27 on page 60, perhaps

these answers by Mr Ferrarese demonstrate his
appreciation or lack of appreciation of the finer

detail of an insurance cover that was needed for

the crane. He was asked:

Q. Going back to what I asked you before, as

at March 1987 so far as you were concerned

within your organization you did not

appreciate whether you had insurance for a

registered vehicle or an unregistered vehicle,

is that right? A. No, if the crane tipped it

has to be repaired.

Q. Because you had insurance? A. That is

right.

Q. That approach to your insurance business

remained pretty much the same until this

accident happened? A. Basically, yes.

In our submission, the overall impression from the

evidence, that His Honour was entitled to draw an

inference, was to this effect, that Mr Ferrarese

wanted the crane covered;	he had cover against
overturning;	he basically relied on Mr Green to

effect that cover; he trusted Mr Green; he

understood that if the crane was damaged it would

be covered. The duty that Mr Green was found to

have breached in failing to effect the insurance

cover meant that although Mr Ferrarese may not have applied his mind to the finer detail of what it was with respect to every particular event that was

covered, that he wanted a comprehensive insurance

cover for this particular crane - - -

BRENNAN J:  He wanted cover against overturning?

MR HIGGS: Against overturning.

BRENNAN J: But why as part of this policy?

MR HIGGS:  He had it already as part of the policy.

BRENNAN J: Yes. If it was no longer available under this

policy, then one might have to seek elsewhere for

~t?

Ferrcom(2) 40 3/4/92

MR HIGGS:  Your Honour, in the event of this policy being

cancelled and a new policy, hypothetically, being

offered with the exclusion, then I cannot cavil

with the suggestion that there is a significant

possibility, at the very least, that perhaps

Mr Green would not have been so astute as to shop

around for appropriate cover. But, with respect to

my friend's submission that Mr Ferrarese did not
want this cover, and that there was no evidence by

reference to which an inference of that type could

be drawn, we say that there is evidence to the

effect that he did want the cover. He might have been let down by Mr Green but he, himself, wanted

the cover.

The various findings are - there is a good

summary to support this conclusion that Mr Green

was told to cover the crane after registration,

that is to be found at 514 line 17 to 18 in the

judgment of Mr Justice Priestley. Ferrcom, that is

the insurer, told its agent of the proposed

registration. I have already referred Your Honour

to that evidence, and it is referred to, variously, in Mr Justice Giles's judgments at page 448 lines 3

to 7, lines 445 lines 5 to 16. The instructions

were certain enough to be acted upon by Mr Green.

Mr Justice Giles found that at page 449 lines 18 to

20. Inbush, Mr Green's company, was not Commercial

Union's agent - Mr Justice Giles's judgment again,

445 line 25, and that but for section 54 and the

trial judge's findings as to that sheeting home

liability to Commercial Union, Mr Green would have

been liable to Ferrcom, that he was in breach of

his duty, and that is to be found at page 471

lines 5 to 17.

My learned friend also submitted that there

was evidence of cover being obtained about 10 to 12

months after the accident with respect to

registered cranes in relation to which there was

this exclusion clause. There is evidence of that

and, with respect, we submit that as to what

Ferrcom did 10 months later in relation to other

insurance policies can have little bearing or

little relevance upon a determination as to what

Ferrcom would have tried to do with respect to this

particular crane.

Mr Justice Priestley in his judgment rejects

that evidence as being relevant to the
consideration as to what Ferrcom would have done
with respect to this policy by looking to what they

did 12 months later on. That is to be found at

page 533, lines 16 to 21, of the appeal book.

My learned friend also submitted that there

was no evidence that there was cover of this type

Ferrcom(2) 41 3/4/92

available, that is cover against the risk of the

crane overturning, with respect to registered

vehicles. If I could simply adopt what

Justice Gaudron said, that there is Mr Hughes'

evidence.

GAUDRON J:  Where will I find that precisely?

MR HIGGS:  I can give Your Honour that reference. Firstly,

Your Honour asked for the explanation as	to why
there was particular cover. There is Mr	Enshaw's

statement at 320 of the appeal book. industry with respect to hook cover and how insurers differ. It is not uncommon for insurers

to differ in their approach when coming to insure

cranes as a motor vehicle, as opposed to an
operating tool. Also that evidence is referred to

in the judgment of Mr Justice Priestley at

page 530, line 7, to page 531 - my note is line 43,

but that must be wrong, I think.

GAUDRON J: Yes, page 530, line 20 to page 531, line 40, I

think.

MR HIGGS:  43, yes. The evidence was that there was an

exclusion clause, ME35A, with respect to registered

cranes that excluded risk for overturning. There

was evidence that he, himself, he as a particular

officer of the insurer, invariably would not waive

that exclusion clause, but there was not any

evidence that the company itself never waived

ME35A, it was only his practice, and that is

referred to in the judgment of Mr Justice Priestley

at 534, lines 11 through to 14.

The evidence in relation to that policy, we

would submit, is conveniently summarized in the

judgment of Mr Justice Giles, page 462, line 20 to

page 464, line 6. It is again repeated in the

judgment of Mr Justice Priestley at about 525, and

they are the only notes that I have of the

references to that evidence in the appeal book,

Your Honour.

Finally, in our submission, if our alternate

submission be right, which I adopt, I hope, during

the course of argument in response to a question

put to me by Justice McHugh, and that the French

model be the appropriate test, the onus is always

on the insurer to claw back what is prima facie

their obligation under the policy, that is to pay

the claim and if that onus has not been discharged,

then it is to their detriment rather than to the

appellants.	They are our submissions,
Your Honours.

Ferrcom(2)	42	3/4/92
BRENNAN J:	Thank you, Mr Higgs.	The Court will consider

its decision in this matter and will adjourn until

10.15 on Tuesday next.

AT 12.42 PM THE MATTER WAS ADJOURNED SINE DIE

Ferrcom(2) 43 3/4/92