Hendry Rae and Court v FAI General Insurance Company Limited

This matter came before the High Court of Australia on an application for special leave to appeal. The applicant, Hendry Rae and Court, sought to appeal a decision of the Full Court concerning a dispute over an insurance policy issued by the respondent, FAI General Insurance Company Limited. The core of the dispute revolved around whether the insurance policy, as issued, responded to a "strategic minerals claim" given certain undisclosed prior notifications.

The legal issues before the High Court concerned the proper interpretation of section 28 of the relevant legislation, which deals with the effect of misrepresentations or non-disclosures in insurance contracts. Specifically, the applicant argued that the majority of the Full Court had addressed the wrong question in determining the insurer's liability. The applicant contended that the correct question was whether the insurer, FAI, would have issued a policy on the terms it did, had it known the true facts, notwithstanding the absence of a reference to a prior notification in the proposal form.

The applicant accepted the Full Court's finding that a policy issued on terms responding to the strategic minerals claim was a policy issued on different terms to one that did not. They also accepted the respondent's contention that its standard form documentation was relevant to determining what FAI would have done had it known the true facts. The trial judge had found, after considering all circumstances including evidence from the respondent's underwriter (which he did not accept), that a policy would have been issued on the same terms as it was in fact issued, even if FAI had been aware of the prior notification. The applicant's special leave application focused on the argument that the Full Court majority had misdirected themselves by considering what the operation of the policy would have been had the proposal form been completed differently, rather than the question of whether FAI would have issued the policy on the terms it did, had it known the true facts.