Gaiform Pty Ltd & Ors v Suncorp Insurance and Finance

[1994] HCATrans 201

~

~ -.~t·,

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B37 of 1993

B e t w e e n -

GAIFORM PTY LTD

Applicant

and

JENNIFER MAXINE EHRET and

GORDON LINDSAY VICTOR EHRET

Second Applicants

and

SUNCORP INSURANCE AND FINANCE

Respondent

Application for special leave

to appeal

Gaiform 1 11/2/94

MASON CJ

TOOHEY J

MCHUGH J

TRANSCRIPT OF PROCEEDINGS

FROM BRISBANE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 11 FEBRUARY 1994, AT 10.15 AM

Copyright in the High Court of Australia

MR J.F. CURRAN:  May it please the Court, I appear for the

applicants.	(instructed by Whitehead Morwood &
Payne)

MR S.C. WILLIAMS. QC:  May it please the Court, I appear

with my learned friend, MR M.W. FORDE, for the

respondent. (instructed by Quinlan, Miller &

Treston)

MASON CJ: Yes, Mr Curran.

MR CURRAN:  Your Honours, most of my argument is contained

in the written summary and the supplementary

summary which is before you. The supplementary

summary was necessary because of the need to draw

to your attention matters which were not raised in

the application book to which it was necessary to

make reference in order to give an ample reply to

matters raised in my learned friend's summary.

However, I did discern from my learned friend's

summary that there was going to be some argument

over the facts.

I would like briefly if I may to submit that

my learned friend's summary of the facts is wrong

in certain respects. He says at paragraph 2 that

certain findings were made by the trial judge at

page 16, lines 14 to 18, and he asserts a certain

purpose on the part of the respondent. But this

sentence in its entirety is not what my learned
friend says in his outline, but is really a finding

of a belief as to certain matters.

If I can just repeat what is said at page 16,

line 14, His Honour the learned trial judge says:

The evidence of Mr Krisanski establishes

that the 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.

So what His Honour is saying is that it is a belief

as to two matters: one, the ownership of the

assets of the restaurant and, secondly, that was

the purpose of the policy - not as my learned

friend says. Paragraph 3 of my learned friend's

outline -

MASON CJ: But how does that help you?

MR CURRAN:  Because it is my case that Mr Krisanski went

there with the purpose of insuring the restaurant

and hence the owner of the restaurant. The fact

that he was told that the two Ehrets were the

owners and not told about the company is not

Gaiform 2 11/2/94

central to the point at issue. It was my case that

both parties intended to insure the owner and that
by mistake my clients, the second applicants, were

erroneously nominated on the proposal form.

MASON CJ: Yes, but this sentence brings out the fact that the parties intended to insure Miss Ehret and her father in the belief that they were the owners of the restaurant. That was the common intention of the parties at the time and that is the real

obstacle that you face.

MR CURRAN:	Yes, but, Your Honour, the first thing she said to Mr Krisanski when he arrived was, "I want to
insure the restaurant".  Then the mistake was made
about who was the owner, but she went through all
of the objects in the restaurant and said, "Look, we have to insure that; we have to insure that."
The net effect was that the restaurant was not
insured because it was put in the names of the
wrong people.  Mr Krisanski agreed that his purpose
in going to the restaurant was to insure the owner
of the restaurant.

MASON CJ: Yes, but the problem is though, and I repeat it,

the common intention of the parties was that the

policy should be taken out in the name of

Miss Ehret and her father.

MR CURRAN: That is true, Your Honour, but that -

MASON CJ:  Now, your proposition must be that you can

succeed in obtaining rectification as a remedy

notwithstanding that you are seeking to go behind

the common intention of the parties.

MR CURRAN:  Not quite, in my submission, Your Honour. The

dominant common intention was to insure the

restaurant. They made a mistake as to the identity

of who was the owner of the restaurant.

MASON CJ:  But that is the problem. Does rectification lie

where you are seeking to go behind the common

intention with respect to the identification of the

parties as they are named in the instrument?

MR CURRAN: In my submission, yes, Your Honour.

MASON CJ: Well, do you have any authority for that

proposition?

MR CURRAN:	Two Court of Appeal decisions, one of Queensland and one of South Australia, Your Honour.
MASON CJ:	The South Australian one does not support you, in

my view, because there the common intention was

that Austcan should be insured, as

Gaiform 11/2/94

_.Chief Justice King found in his judgment. That is

my reading of the case.

MR CURRAN: With the greatest respect, Your Honour, Austcan

Investments was not the party nominated as the

insured party when the policy was entered into in

that case. At page 350 His Honour the learned

trial judge was -

unable to find that Alexander Stenhouse,

acting as the plaintiff's insurance broker,

ever told Sun Alliance that the owner and

proposed insured of the Mile End property was

the plaintiff. Nor has it been established,

in my opinion, by means of any other evidence

in the case, that the plaintiff's interest in

that property was brought to the insurer's

attention before the fire. The argument that

Sun Alliance intended simply to insure the

owner, whoever that might be, and whether

identified or not, is untenable.	The case for
rectification ..... fails.

Your Honours, that was the argument there that

succeeded at first instance. That is the argument

that is against me, and that is the argument that

has been overturned by two supreme court appeal

decisions.

Can I take you then to develop what I have

just said to the appeal decision, in which

Chief Justice King gave the decision. He said, if

I might take Your Honours to the bottom of

page 357, the last paragraph:

The policy was never indorsed to show

Austcan -

that is the party for whom rectification was sought

to be substituted -

as an insured party. Austcan claimed that a

contract of insurance between it and the
insurer arose from the documents which were

exchanged and the common intention which is to

be inferred from them. To the extent

necessary the formal policy and indorsements

thereon should be rectified to show Austcan as

a party. The insurer contended that the

evidence does not disclose any knowledge by

the insurer of Austcan or any basis for an
inference that the insurer intended, or must

be taken to have intended, to contract with

Austcan.

If I can pause here, Your Honour, at the time when

the contract was entered into, a different company

Gaiform 11/2/94

in the Austcan group had been nominated as the

insured party.

MASON CJ: But if you look at page 360, the top paragraph,

there, Chief Justice King found that there was an

agreement between Austcan and the insurer, and he

said that agreement came into existence as a

result, of course, of dealings between the parties.

It is entirely different from this case, Mr Curran.

MR CURRAN: With the greatest respect, I have to submit the

contrary, Your Honour. Can I take the point that

in that case, and can I take you page 358 at the

top:

None of the persons who negotiated the

insurance, either on behalf of the broker or
the insurer, were called as witnesses. It is

necessary to determine the issues by reference

to the documents and what is to be inferred

from them.

Now, just pausing here, the same was the case with

the Full Court decision in Elders Lensworth. No

one from the defendant to called to give evidence

of what his true intention was. That has to be

contrasted with the case here where Krisanski, the

insurer's representative, freely admitted that his purpose was to insure the owner of the restaurant.

Now, the same appears toward the bottom of page

358, the last paragraph, beginning:

It is true that the name Austcan Investments

Pty ltd at no time prior to fire appeared on

the policy or any of the relevant documents.

It is clear, however, that from February 1984

onwards, the broker -

now that is the owner's agent -

intended to obtain insurance of the Mile End

property and -

and this is important, I submit,

the insurer intended to cover that property.

So, it is on all fours with my case here, I submit.

Both parties intended to insure the subject

property but, by mistake, the wrong party was

nominated as the insured party, and this is

important. His Honour, down the bottom, found that

it was a:

fair and probable inference from the

documents ..... that the insurer was indifferent

to the identity of the particular company

Gaiform 11/2/94

which it was insuring and was willing, and

intended, to insure such of the McLean

companies as owned each particular property

insured.

If I can pause there, His Honour the learned trial

judge found and accepted Mr Krisanski's evidence

that if he had been told that the company was to be

the insured party, he would have endorsed - noted

it on the policy as an interested party. But he

was not told.

His Honour the Chief Justice, in the case to

which I am referring - and this is important here -

says at the top of page 359:

That this was the true state of mind of

the parties receives confirmation from events

which occurred after the fire.

And, then on the rest of the page - I will not
repeat it - but they refer to evidence which
indicated that the insurer really intended to
insure the party for whom rectification was sought.
Down the bottom, the last line of page 359,

Their Honours say:

It seems to me that these events

occurring after the fire provide striking confirmation that the insurer intended to insure whichever of the McLean companies owned

the respective properties mentioned in the

endorsement.

Now, Your Honours, the facts here are just so

strong in favour of that intention being attributed to the insurer in this case, namely, that after the

fire they paid the owner of certain chattels,

namely Kimberley, which was the lessor of them, to

Gaiform. Their own documents reflect - there is a
deed of discharge - their own deed of discharge

reflects that they intended to insure the

properties which were the subject of a chattel

lease agreement to Gaiform.

Now, if Gaiform was not the insured party, but

the Ehrets were, they were not bound to pay a

penny, but the parties had agreed, by their

pleadings, and my clients relied on that agreement,

that the insurer was legally bound to pay Kimberley

the money in partial discharge of its obligations

under the policy. Much reliance, I would submit,

is placed upon that.

MASON CJ: What do you say about the principle referred to

at the foot of pages 28, 29 of the application book

Gaiform 6 11/2/94

in the quotation from Williston on Contracts by

Mr Justice Pincus?

MR CURRAN:  In my submission, Your Honour, that is not

supported by the authorities - - -

MASON CJ:  It is supported by the decision of this Court in

Maralinga.

MR CURRAN:  Yes, but, in my submission, if that principle is

advanced to deny the Court an opportunity to

correct the name of a party with whom it was

intended to contract and who it was agreed would be

the contracting party, then the principle, in my

submission, is inaccurate.

MASON CJ: But do I understand you to say that if that be

the principle, it should be qualified so that there

is an exception where the mistake relates to the

name of a contracting party? Is that what you are

submitting?

MR CURRAN: I do not know that I need to go that far,

Your Honour. I would prefer to rest on the basis

that if the common intention of the parties is to

ensure a person having a particular legal capacity
and by mistake that that party is not identified
correctly in the contract, then the Court will
correct the matter in order to reflect the party's

true intentions.

If I can take Your Honour a little bit

further.	Page 29 of the book then refers to
Whiteside.	Now, Whiteside is one of the decisions

which is referred to in that New South Wales

Medical Defence Union case, and here, if I may, I

would refer to my written outline of argument,

page 5 points. This case brings to bear the

question of whether:

Rectification is also available where words

were purposely used or omitted but in the

mistaken belief that they bore a different
meaning from their correct meaning as a matter

of construction.

Then there is reference at page 747 of that

decision to Re Butlin's Settlement, and if I may

quote:

rectification is available not only in a case

where particular words have been added,

omitted or wrongly written as the result of

careless copying or the like. It is also

available where the words of the document were

purposely used but it was mistakenly

considered that they bore a different meaning

Gaiform 7 11/2/94

from their correct meaning. ns a matter of true

construction.

MASON CJ: There is doubt as to the correctness of that

proposition.

MR CURRAN:  Yes, Your Honour. It does have a fair amount of

support, including Whiteside, and the cases there

referred to.

MASON CJ: There are two cases referred to in Whiteside but

the principle appears to relate to cases where the

parties were agreed upon the use of words having a

legal significance, and those words did not give

effect to the common intention that they had.

MR CURRAN:  In my submission, that principle is apt here.

The words "Ehret and Ehret" were used in the

mistaken belief that they were the owner of the

restaurant.

MASON CJ: But they are not "words" really; they are names

rather than words. There would be another question

as to whether or not this principle, if correct,

extended to the wrongful naming of parties.

MR CURRAN: Well, there are two appellate decisions of the

supreme court, which I have referred to; not only

Austcan, but the Elders Lensworth case, in which

the court rectified an agreement in order to change

and insert the correct name of the party, and they

are, I would submit, in direct conflict with this

particular decision. They cannot be reconciled.

If you look at Mr Justice Davies argument, he says, you cannot have rectification because Krisanski

believed that the owners were Ehrets and, further

more, Your Honour, and this is another point which

is important - - -

McHUGH J: But that is the distinction with Austcan, is it

Propriety Limited was involved with the McLean	not? Austcan - there was a whole history; the insurance company had got a note that Austcan
properties - - -

MR CURRAN:	Only after the fire, Your Honour.
McHUGH J:	No, beforehand.
MR CURRAN:	I think there were companies in the McLean group

mentioned; I am not sure that it was one of them

though, Your Honour.

McHUGH J: Well, I think it was; if you look at page 358 of

the report, about point 5, and the statement:

Gaiform 11/2/94

At that point, although the companies named

did not include Austcan, it must have been

apparent to the insurer that the properties

insured were owned by various companies

through the medium of which Mr McLean was

conducting his affairs.

MR CURRAN: That is my point, Your Honour. Austcan - the

real party it substituted, was not mentioned.

McHUGH J: Yes, but if you go two lines further, you see

that the insurer had a copy of a note, which
indicated that Austcan was one of the properties in

the group.

MR CURRAN:  But that note, I think, did not come into their

possession until later, Your Honour. Well, I am

not sure about that, but maybe it is not crucial.

What is crucial here is that Their Honours - and I

have strayed from my outline a bit - the

Court of Appeal, rejected evidence of what had

happened after the event, which demonstrated that

the real intention of the parties was to insure the

company Gaiform, rather than Ehrets; that

Their Honours ruled that it was irrelevant. Now

that cuts across the entire approach upon which

Austcan and Lensworth were predicated. In both

those cases the court sought to elicit what the

true intention of the parties was, and it looked at

evidence which bore on that matter and, in my

submission, that evidence clearly established that

the parties intended to contract with the party

that was rectified and applying that argument here

to my client here.

Your Honour, it is, in my submission, clear

that Miss Ehret intended to insure the company;

some attack was made on that in my learned friend's

outline of argument, but the trial judge clearly

accepted that and he made the comment, "But she did

not make it clear".

McHUGH J: But there is a distinction, is there not, between

the situation where somebody intends to insure

whoever the owner is but makes a mistake, and the
case where somebody insures a person, mistakenly
believing that person is the owner. In the second

class of case, there is no case for rectification, is there, because the parties did intend to insure a particular person but they were mistaken as to

the character of that particular person?

MR CURRAN:  Yes. Can I take that one step further,

Your Honour? Suppose we had got that, but then later on we have got clear, unambiguous evidence

that the party really did intend to insure that the

one for whom rectification was sought. There is

Gaiform 9 11/2/94

unequivocal evidence of that. If we have got that,

in my submission,· that is probative, it is strong

evidence, it has been accepted in the NSW Medica.l

Defence Union case, it has been accepted in Winks v

Heck, it was the whole manner in which the court in

Austcan and Elders Lensworth approached the matter.

They looked for evidence of intention, and to rule

out that evidence of intention just because it occurred after the event, in my submission, is

wrong.

McHUGH J:  Your time is up, Mr Curran.

MR CURRAN:  Yes, Your Honours. I will depart, but I would

ask you to take into account the scenario that I

mentioned at page 3, paragraph (b) of my outline.

That is an example of when the adoption of the

Court of Appeal's reasoning will, in my submission,

lead to a very unfair situation arising.	They are
not confined to that particular example.	You

might, for example, have a situation where a multi-

million project is on foot and during the course of

it the owner becomes insolvent but the head

contractor is wealthy. However, by a mistake, the

sub-contractors contracted with the head

contractor, but the name Straw was put in by

mistake - - -

MASON CJ:	You have exceeded your time, Mr Curran.
MR CURRAN:	Thank you, Your Honour.
MASON CJ:	The Court need not trouble you, Mr Williams.

Having regard to the findings of fact made by

the trial judge, which were upheld by the judges in

the Court of Appeal, we do not consider that the
present case is a suitable vehicle for the

determination of any question of general principle.

refused. The application for special leave is therefore

MR WILLIAMS:  I am instructed to ask for costs, Your Honour.

MASON CJ: Yes. Mr Curran, you do not oppose an order for

costs?

MR CURRAN:  No, Your Honour.

MASON CJ: Thank you. The application is refused, with

costs.

AT 10.38 THE MATTER WAS ADJOURNED SINE DIE

Gaiforrn 10 11/2/94