Gaiform Pty Ltd, Ehret and Ehret v Suncorp Insurance and Finance

[1993] QCA 256

IN THE COURT OF APPEAL	[1993] QCA 256
SUPREME COURT OF QUEENSLAND

Appeal No. 207 of 1992

Brisbane

Before Davies J.A.
McPherson J.A.
Pincus J.A.

[Gaiform Pty Ltd & Ors. v. Suncorp]

BETWEEN:

Gaiform Pty Ltd

(First Plaintiff)

First Appellant

Jennifer Maxine Ehret and
Gordon Lindsay Victor Ehret

(Second Plaintiffs)

Second Appellants

- and -

Suncorp Insurance and Finance

(Defendant)

Respondent

Judgment of Pincus J.A.

Judgment delivered 15 July 1993

I have read the reasons of Davies J.A. and those of McPherson J.A. I agree with the reasons given by Davies J.A. for rejecting the contention that a question in the proposal form was answered falsely. With respect to rectification, I am in general agreement with what is said by Davies J.A.

It was contended by Mr Curran, for the appellants, that the learned primary judge did not expressly decide the issue of rectification, and that appears to me to be so. It was argued for the insurer that the judge implicitly rejected the evidence of Jennifer Ehret that she mentioned the existence and involvement of the company Gaiform Pty Ltd to the insurer's

officer, Mr Krisanski. That is uncertain, but his Honour did find that Miss Ehret did not "make it clear to Mr Krisanski that

there was a company rather than a partnership involved".

In these circumstances the only argument available to the appellants, on the question of rectification, is that both parties really intended that the interest of the proprietor of the restaurant be insured. In cross-examination, Mr Krisanski, while saying that he could not recall the company being mentioned, admitted that the object was to insure the proprietor of the restaurant. On the basis of that evidence, it was contended in effect that there was a common intention to insure the proprietor, but by an error, the names of Jennifer and Gordon Ehret were inserted in lieu of that of the proprietor - it not being appreciated, or momentarily forgotten, that Gaiform Pty Ltd

was the proprietor.

The question then arises whether the mistake is of the kind which would justify the intervention of equity. American authority quoted in Williston on Contracts, 3rd Ed., para. 1549 says :

"To justify reformation on the ground of mistake, the mistake must have been made in the drawing of the instrument and not in the making of the contract which

it evidences. A mistake as to the existing situation,

which leads either one or both of the parties to enter into a contract which they would not have entered into

had they been apprised of the actual facts, will not

justify reformation."

It is true that some English authorities are to be found which are difficult to reconcile with this general principle; they are discussed in Whiteside v. Whiteside (1950) Ch 65, and illustrate

the possibility of obtaining rectification on the basis, not that the parties did not say what they meant, but that their chosen language did not achieve the legal result they intended. Another

example of vigorous rectification to achieve the general legal result intended is to be found in the unreported part of the High Court's decision in M R Hornibrook (Pty) Limited v. Eric Newham (Wallerawang) Pty Ltd (1971) 45 A.L.J.R. 523.

Here, in my opinion, it is not possible to find that the
insurer intended to insure an entity other than those named in

the policy, even assuming in favour of the appellants that it was mistakenly thought that the Ehrets were the proprietors of the business and that the parties intended to insure the proprietor.

That was, in my view, an error in the making of the agreement, not the expression of it; rectification is not available. The parties intended to insure the Ehrets, not appreciating that the company Gaiform Pty Ltd should have been insured, as the proprietor.

I agree that the orders proposed in the reasons of Davies J.A. should be made.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 207 of 1992

Brisbane

[Gaiform Pty Ltd & ors. v. Suncorp]

BETWEEN:

GAIFORM PTY LTD

(First Plaintiff)

First Appellant

and

JENNIFER MAXINE EHRET and
GORDON LINDSAY VICTOR EHRET

(Second Plaintiffs)

Second Appellants

- and -
SUNCORP INSURANCE AND FINANCE

(Defendant)

Respondent

PINCUS J.A.
MCPHERSON J.A.

DAVIES J.A.

Judgment delivered 15/07/1993

SEPARATE REASONS FOR JUDGMENT OF PINCUS, MCPHERSON AND DAVIES

JJA. ALL AGREEING AS TO THE ORDERS MADE.

APPEAL DISMISSED WITH COSTS. ORDER THAT THE RESPONDENT PAY

THE APPELLANTS THE SUM OF $5,330.00

CATCHWORDS:	INSURANCE - Action for rectification of policy - whether first appellant should be substituted for second appellants as the insured - whether second appellants falsely answered question in the proposal form - meaning of the terms "comprising the insured" and "refused" discussed
Counsel:	Mr J. Curran for the Appellants Mr S. Williams Q.C. with him Mr M. Forde for the Respondent
Solicitors:	Messrs Whitehead Morwood & Payne for the Appellants Messrs Quinlan Miller & Treston for the Respondent
Hearing Date(s):	5 March 1993

THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 207 of 1992

Brisbane

Before Mr Justice Pincus
Mr Justice McPherson
Mr Justice Davies

[Gaiform & Ors v. Suncorp]

BETWEEN

GAIFORM PTY LTD

(First Plaintiff)

First Appellant

- and -

JENNIFER MAXINE EHRET and

GORDON LINDSAY VICTOR EHRET

(Second Plaintiffs)

Second Appellants

- and -
SUNCORP INSURANCE AND FINANCE

(Defendant)

Respondent

REASONS FOR JUDGMENT - McPHERSON J.A.

Judgment delivered 15/07/1993

I have read the reasons for judgment prepared by

Davies J.A. So far as concerns the question of rectification should be dismissed on that ground.

I have, however, reached a different conclusion on the

other matter, which is whether or not the question in the
proposal form was answered correctly. The point at issue is
whether, according to its ordinary meaning, the expression
"refused" in the particular context ("... ever been refused
insurance or had any special terms imposed?") comprehends a
unilateral termination of a contract of insurance, as well as

the declining of an offer to insure or to renew insurance.

In relation to the word "refuse" used as a verb, Black's

Law Dictionary (4th ed.) gives the meanings to "deny, decline, reject", which accords generally with meanings found in ordinary dictionaries. Putting an end to an existing contract of insurance is rejecting insurance. It involves refusing insurance to someone who is already insured, and so is

directly within the scope of the question in the proposal

form. I do not consider that the ensuing reference in the

proposal question to imposing special terms has the effect of
confining it to first insurance offers, although it may be

primarily intended to apply to cases like that.

In any event, the appeal should be dismissed with costs.

I agree with the orders proposed by Davies J.A. with respect

to return of the premium amount and interest.
IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 207 of 1992

Brisbane

Before Mr Justice Pincus

Mr Justice McPherson

Mr Justice Davies

[Gaiform Pty Ltd & ors. v. Suncorp]

BETWEEN:

GAIFORM PTY LTD

(First Plaintiff)

First Appellant

and

JENNIFER MAXINE EHRET and
GORDON LINDSAY VICTOR EHRET

(Second Plaintiffs)

Second Appellants

- and -
SUNCORP INSURANCE AND FINANCE
(Defendant)

Respondent

REASONS FOR JUDGMENT - DAVIES J.A.

Judgment delivered 15/07/1993

This is an appeal by the plaintiffs in an action in the Trial Division of this Court against a judgment dismissing that action which was against the respondent insurer for rectification of an insurance policy and for moneys claimed to be owing under that policy. The first appellant is a company which was the owner and operator of a Lebanese restaurant called "Ya Habibi in the Kazbar" in Surfers Paradise. The second appellants are shareholders and

directors of that company. The contents of that restaurant

suffered considerable damage in a fire which occurred on 2 September 1983 and the action sought to enforce a claim under that policy in respect of that damage.

The policy was issued on 28 July 1983. The Insurance Contracts Act 1984 (Cth) therefore has no application to it: s. 4(1). It

was issued in the name of the second appellants as the insured.
However, the notice of appeal did not seek judgment in their
favour; nor was it argued on appeal that they had any insurable

interest in the contents the subject matter of the claim or that in any other way they would be entitled to a judgment against the respondent. Accordingly, it is unnecessary to consider the correctness of the view that shareholders of a company have no insurable interest in its property: Macaura v. Northern Assurance

Co. Ltd [1925] A.C. 619. See however Constitution Insurance Co. of Canada v. Kosmopoulos [1987] 1 S.C.R. 2; American Indemnity Co. v. Southern Missionary College 260 S.W. 2d 269 (1953); Providence Washington Insurance Co. v. Stanley 403 F.2d 844 (1968). And see now Insurance Contracts Act, ss. 16 and 17.

The appellants are therefore unable to succeed unless the policy is rectified to substitute the first appellant for the second

appellants as the insured. For reasons which I now give, I think that that claim for rectification fails and that consequently so does the appeal. I therefore do not propose to consider a further

claim for rectification in respect of part of the amount insured.

The proposal form for the insurance, dated 13 May 1983, was signed by Jennifer Maxine Ehret, one of the second appellants, as "THE

INSURED or Authorised Agent of the Insured". It described the second appellants as "THE INSURED". It declared that the information contained in it was in every respect true and that the

proposal and declaration should be the basis of the insurance.

The policy provides:

"The Policy is issued on the basis of the particulars furnished in the written Proposal made to the office and the Proposal shall be the basis of this contract of Insurance."

In view of these facts convincing proof would be needed that the respondent intended to insure the first appellant, whatever the second appellants' intentions may have been. The respondent's officer who filled in the proposal on Ms. Ehret's instructions and in whose presence Ms. Ehret signed it was a Mr Krisanski. His

Honour made the following findings of fact in respect of his, and consequently the respondent's, intention:

"Whatever was said to Mr Krisanski, it did not register in his mind that the proposal was to be made in the name of the company. The conclusion I have reached in view of this and subsequent events referred to below is that Miss Ehret was, at the time of signing the proposal, concerned with ensuring that she had a personal cash flow and did not make it clear to Mr Krisanski that there was a company rather than a partnership involved.

... proposal was completed in the belief that Miss Ehret and her father were joint owners of the assets of the restaurant and that the purpose of the policy was to indemnify them jointly against loss."

These were findings of fact which I think his Honour was entitled to make after seeing and hearing the evidence of Ms. Ehret and Mr Krisanski. Mr Krisanski had sworn that no mention was made of the interest of any party other than Mr. and Ms. Ehret. The fact that

it was Mr Krisanski's object to insure the proprietor of the restaurant does not assist the appellants if, as appears from that evidence and those findings, Mr Krisanski did not know that the proprietor was other than the second appellants whose names appeared as the insured on the proposal form. Nor, in view of these findings, does it avail the appellants that the respondent paid Kimberley NZI Finance Limited ("Kimberley"), who were the lessors of certain property damaged in this fire, in respect of

loss or damage to their interest in that property. The payment

was made under an agreement described as a Concessions Agreement between the respondent and Kimberley (under their previous names) clause 4 of which provided:

"4. WHENEVER such loss or damage occurs and the Office is or becomes entitled to and does repudiate or deny liability therefor under any Policy to which this Agreement applies the Office will by virtue of these presents only pay to the Policy Holder an amount computed as being equal to that amount which having regard to the circumstances and to all the conditions of the Policy would have been payable by the Office to the Policy Holder under the Policy if such Policy had not been avoided by the Office."

Though the two references to "Policy Holder" appear to give rise to ambiguity, in context, it appears that the first is a reference to Kimberley, called the Policy Holder in the Agreement, and the second is a reference to the policy holder under the policy, liability under which is denied.

Plainly the respondent's liability under that clause, or more accurately its perception of its liability, is irrelevant to its intention, leading up to the making of its contract of insurance

with any of the appellants, as to who the insured would be under
that contract.

The claim for rectification into the name of the first appellant as the insured therefore fails and so too consequently does the appeal.

It is not strictly necessary for me to consider the other question argued on appeal, which can arise only if the policy is rectified; which is whether the second appellants falsely answered a question in the proposal form. However, in case this matter should go

further, I propose to decide that question which both parties

argued as the first question in the appeal. That question, which is primarily one of construction of the proposal, must be decided

on the assumption that the reference in the proposal form to the insured is a reference to the first appellant, notwithstanding

that it describes the second appellants as the insured and makes no mention of the first appellant, because rectification in this case assumes a common intention, at the time of execution of the proposal form, that the first appellant would be the insured.

The relevant question in the proposal form was:

"Has anyone comprising the INSURED either alone or jointly with others ... EVER been refused insurance or had any special terms imposed?"

That question was answered "no".

The first appellant had never, either alone or jointly with others, been refused insurance or had special terms imposed. However, Ms. Ehret had had a previous policy of insurance cancelled in circumstances which the respondent submitted and the trial judge found amounted to a refusal of insurance. It is necessary to say something of the facts with respect to that cancellation.

Ms. Ehret and her de facto husband, Phillip Abdi, had, from no later than March 1981, been the joint owners of a previous Lebanese restaurant called "Ya Habibi" at another location in Surfers Paradise. They had insured the restaurant premises with Allianz Insurance Company Limited ("Allianz") pursuant to a policy dated 29 May 1981 covering the period from 16 March 1981 to 16

March 1982. That policy contained the following term:

"(5) CANCELLATION OF POLICY. request of the Insured, in which case the Company will retain the customary short-period rate for the time the Policy has been in force. This Insurance may also at any time be terminated at the option of the Company, on notice to that effect being given to the Insured, in which case the Company shall be liable to repay on demand a ratable proportion of the Premium for the unexpired term from the date of the cancelment."

Pursuant to that clause Allianz wrote to Trigil Insurance Brokers Pty Limited ("Trigil"), who were the brokers for Ms. Ehret and Mr Abdi, on 13 January 1982 advising that arrangements were being made to cancel the policy as from 20 January 1982. At Trigil's request Allianz agreed to continue the cover until 29 January 1982. If it matters, it appears that Allianz's decision to cancel

the policy was caused by publicity about Mr Abdi's arrest, on 5 January 1982, for alleged drug offences, though it gave as its reason "an alteration in our underwriting policy". It was cancelled on 29 January 1982.

On those facts two questions of construction of the above question in the proposal form would arise if the policy were rectified.

Each, it will be recalled, must be decided on the assumption that the insured was the first appellant. The first is: was Ms. Ehret a person "comprising the INSURED" within the meaning of that phrase? And the second is: if so, was she refused insurance by Allianz when that insurer cancelled its policy pursuant to the above cl. (5)?

The first of these questions was not considered by the trial judge although he did consider the general "obligation of a corporation to disclose matters relating to those who control it which would in the case of the individual be material to the insurer in

deciding whether or not to enter into the policy". As that

general obligation is not relied on by the respondent before us
I need not consider it.

The term "comprising" in this context means, I think, "consisting of" in the sense that to comprise the insured a person must either be the insured or be one of those who together consist of the

insured. If that is correct, then Ms. Ehret was not someone

comprising the insured within the meaning of that phrase.

The second question, whether Ms. Ehret was refused insurance by Allianz when that insurer cancelled its policy, would arise only if I had answered the first question in the affirmative. Were it

necessary to decide this question, I would be inclined to construe the term "refused" in context as the rejection of an offer; that is, as requiring as a prerequisite an application for insurance

or renewal thereof. I would not be inclined to extend its meaning to include a unilateral cancellation, during its term, of a policy by the insurer.

I say this for two reasons. First, I think that that is the more natural meaning of the word in the context of insurance. Secondly, the immediate context provides some support for that meaning; the alternative "or had any special terms imposed" would ordinarily apply only as a condition of the acceptance of an offer.

I therefore conclude that the appellants did not falsely answer the above question in the proposal.

The appeal is dismissed with costs.

It was not disputed by the respondent that if the appeal was dismissed the second appellants were entitled to a refund of

premium paid by them. The amount of that premium was $2,462.83.
The respondent had sent a cheque for that sum to the second
appellants under cover of a letter dated 2 November 1983 rejecting
the claim. The appellants did not bank that cheque because they

intended to pursue that claim in this action. Consequently, the

respondent has had the benefit of interest on the above amount
since 2 November 1983.

Nevertheless, the respondent submits that it should not have to pay interest which the appellants claim on that sum. I reject that submission and order that the respondent pay to the appellants the sum of $5,330.00 being $2,462.83 together with interest at 12% from 2 November 1983 to the date of this judgment.