John Montclare v Metlife Insurance Ltd (formerly Citicorp Life Insurance Ltd) (ACN 004 274 882)

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0070

JOHN MONTCLARE	Applicant
v
METLIFE INSURANCE LTD (formerly CITICORP LIFE INSURANCE LTD) (ACN 004 274 882)	Respondent

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JUDGES:	ASHLEY, TATE and KYROU JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	28 April 2016 and 5 May 2016
DATE OF JUDGMENT:	20 December 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 336
JUDGMENT APPEALED FROM:	[2015] VSC 306 (Ginnane J)

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INSURANCE – Life insurance – Master policy – Certificates of insurance issued under master policy – Insurer accepted assumption of risk – Whether contract of insurance between insurer and applicant – Whether applicant an insured under the Insurance Contracts Act 1984 (Cth) – Whether applicant a third party beneficiary under a trust – Reconciliation of inconsistencies in documentation – Fraudulent misrepresentation – Insurance Contracts Act 1984, ss 21, 29, 48A – Leave to appeal granted – Appeal dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr P B Murdoch QC with Mr P Bingham	Maurice Blackburn
For the Respondent	Mr J Gleeson QC with Mr B Jellis	Norton Rose Fulbright Australia

ASHLEY JA
TATE JA
KYROU JA:

TABLE OF CONTENTS

Introduction and summary……………………………………………………………….…2

The applications for life insurance…………………………………………………………4

Customer Information Brochure…………………………………………………………...4

Customer Purchase Record…………………………………………………………….…..9

The first certificate………………………………………………………………………...11

Policy Information Statement…………………………………………………………….17

Bordereau report……………………………………………………………………….….19

Second certificate of insurance……………………………………………………………20

Citicorp’s master policy……………………………………………………………………24

Trust Deed…………………………………………………………………………….…..25

Master policy………………………………………………………………………….…..29

The statutory obligations………………………………………………………………….36
The judge’s reasons………………………………………………………………………….43
Grounds of appeal…………………………………………………………………………..51
What was the contract of insurance?..................................................................................52
Montclare’s submissions ………………………………………………………………....52
Metlife’s submissions ……………………………………………………………….……54
Analysis …………………………………………………………………………….…….55

Conclusion on the application for leave to appeal……………………………………...71
Conclusion on the appeal…………………………………………………………………..71

Introduction and summary

This proceeding is an application for leave to appeal from a judgment of a judge in the Trial Division[1] who held that Metlife Insurance Ltd (‘Metlife’) was entitled to avoid a contract of life insurance that Citicorp Life Insurance Ltd (‘Citicorp’) entered into with John Montclare (‘Montclare’) because of a fraudulent misrepresentation.[2] Metlife purchased Citicorp in 2005.[3] The life insured was Montclare’s partner, Graeme Shilton (‘Shilton’), who died by suicide on 22 January 2001, aged 43. On Shilton’s death Montclare claimed $1.1 million as a life insurance benefit. Metlife resisted payment because Shilton had made a fraudulent misrepresentation about his medical history before Montclare entered into the contract of insurance. The misrepresentation was taken to be, in effect, made by Montclare.[4] The judge found that Citicorp would not have entered into the same contract if the misrepresentation had not been made.[5]
[1]Montclare v Metlife Insurance Ltd [2015] VSC 306 (‘Reasons’).
[2]Ibid [757]. The trial commenced in the Supreme Court before Beach J and was heard over four days in May and June 2011. As Metlife undertook late discovery, and Montclare sought to call further evidence, the trial was adjourned out of the list. The trial recommenced before Ginnane J on 12 May 2014. The parties agreed that the evidence of some of the witnesses, given before Beach J, was to be regarded as evidence before Ginnane J. Reasons [6].
[3]Metlife is the respondent to the application for leave to appeal. References to ‘Metlife’ and ‘Citicorp’ are used interchangeably in this judgment.
[4]See [24] below.
[5]Reasons [751]. Montclare does not challenge this finding.

Montclare applies for leave to appeal on the basis that the judge erred in making the critical finding that Montclare was subject to the obligations imposed by the Insurance Contracts Act 1984 (Cth) (‘the ICA’) because he was a party to the contract of insurance and ‘an insured’ under the ICA. The foundation of the finding was that two certificates of insurance issued to Montclare were contracts of insurance to which Montclare was a party and the contracts were subject to the ICA. Montclare argues that, although the certificates give him a right to claim insurance benefits from Citicorp, the source of the insurance cover is a group life master policy (‘the master policy’) between Citicorp and Rivkin Direct Management Pty Ltd (‘Rivkin DM’), and the master policy was the insurance contract. Montclare submits that Rivkin DM acted as the trustee of the master policy with Montclare as a third party beneficiary. The parties accept that the ICA did not impose obligations of disclosure or penalties for making misrepresentations upon third party beneficiaries of life insurance policies and an insurer could not avoid a contract against a third party beneficiary because of a fraudulent misrepresentation of an insured or of the third party beneficiary. As Metlife relied at trial entirely on statutory remedies provided under the ICA, this would mean, Montclare argues, that his claim should succeed regardless of any fraudulent conduct in which either he or Shilton engaged. Montclare does not now dispute a fraudulent misrepresentation was made.

For the reasons that follow, we will grant leave to appeal and dismiss the appeal.[6]
[6]In what follows we refer to the application for leave to appeal in most instances as simply ‘the appeal’.

In our view, the contract of insurance is made up of ‘a jumble of ill-assorted documents’.[7] We consider that Montclare became a member of the group insurance scheme under the master policy despite irregularities in the process of membership. We consider that, to the extent that there was non-conformity between the application process provided for under the master policy, and the application made by Montclare, Citicorp waived any requirements with which Montclare did not comply. The certificates of insurance were issued under the master policy. While they were issued by Rivkin DM, we consider that they were issued on behalf of Citicorp, which accepted the application by Montclare for insurance and thereby agreed that insurance would be provided under the master policy in accordance with the terms of the certificates. We consider that the contract of insurance does not have its source in a single document. The contract is made up of a suite of documents, including the master policy and the certificates. Where there are inconsistencies between the master policy and the certificates (as there are) the certificates prevail. We consider that there is a direct contractual relationship between Montclare and Citicorp. The contract is tripartite, between Metlife, Rivkin DM, and Montclare. As Montclare is a party to the contract, Metlife is entitled to avoid the contract by reason of Montclare’s pre-contractual fraudulent misrepresentation, pursuant to s 29(2) of the ICA.
[7]Guardian Assurance Co Ltd v Underwood Constructions Pty Ltd (1974) 48 ALJR 307, 308 (Mason J) (‘Guardian Assurance’). See [175] below.

The applications for life insurance

In 1993 or 1994, Montclare met Shilton. They became friends and developed an intimate relationship which lasted until Shilton’s death on 22 January 2001. Shilton was born on 18 March 1957 and was a renowned classical saxophonist. He taught the saxophone at the Victorian College of the Arts (‘VCA’) and elsewhere and, in 2001, shortly before his death, was appointed head of the woodwind department at the VCA. Shilton divided his residuary estate equally between his father and Montclare. He nominated Montclare as his preferred beneficiary for his superannuation fund benefits.

Montclare gave evidence at trial that in 1998 Shilton, when he was planning to travel overseas, suggested taking out life insurance with the intention of ensuring Montclare’s financial security by nominating him as the beneficiary. Subsequently, Montclare applied for life insurance on the life of Shilton.

Customer Information Brochure

In 1998, Montclare read the Rivkin Direct Term Life Insurance[8] Customer Information Brochure (‘Customer Information Brochure’) issued by Citicorp and Rivkin DM.[9] There was evidence that the language of the documentation required the approval of Citicorp.
[8]This is sometimes referred to in the documentation as ‘Rivkin Direct Insurance’ or ‘Rivkin Direct’.
[9]Reasons [36], [88].

The foot of the cover provided that the policy was marketed by Rivkin Croll Smith Insurance Agencies Pty Ltd (‘Rivkin Croll’)[10] and the insurance cover was issued by Citicorp:

Rivkin Direct  Insurance is issued by:
is marketed by:  Citicorp Life Insurance Ltd
Rivkin Croll Smith               ACN 004 274 882
Insurance Agencies Pty Ltd
ACN 073 632 292

[10]See [11] and [29] below.

Under the heading ‘Citicorp Life Insurance’, the Customer Information Brochure stated:

Rivkin Direct is a non-participating life policy and does not share in any of the profits of Citicorp Life or its statutory funds.
Rivkin Direct Insurance is issued from the No 1 Statutory Fund of Citicorp Life Insurance Ltd.

The general information section of the Customer Information Brochure stated that Rivkin DM ‘arranged’ the insurance and linked that insurance cover to a master policy between Rivkin DM and Citicorp:

Rivkin Direct Management Pty Ltd
Rivkin Direct Insurance is arranged by Rivkin Direct Management Pty Ltd (ACN 075 486 994) under a Master Policy with Citicorp Life insurance.

Citicorp was described as ‘a subsidiary of one of the world’s leading financial institutions’. The agent for the insurance was Rivkin Croll, described as ‘an insurance agency established to sell insurance products on a non-advisory basis’. Rivkin Croll acted as an agent of Citicorp.[11] The ‘non-advisory basis’ was elaborated upon as meaning that Rivkin Croll did ‘not provide any advice as to the suitability of the product for your needs’. Rivkin Croll did not employ any sales staff and there were no commission charges. The only remuneration received for the sale of the Rivkin Direct insurance was an administration fee of $99. This was said to substantially reduce costs and the savings were passed to clients by lower premiums. The administrator of the insurance was Jacques Martin Administration & Consulting Pty Ltd (‘Jacques Martin’).
[11]See [29] below.

The Customer Information Brochure included a statement that the Rivkin Direct insurance was not a savings plan but was rather a plan for the provision of benefits upon death or terminal illness:

Rivkin Direct Term Life Insurance is not a savings plan. The primary purpose of this plan is to provide a benefit in the event of death, terminal illness, or, if selected, total and permanent disablement. If you terminate your plan at any time, you will not get anything back.

The insurance was described as ‘guaranteed yearly renewable Insurance which provides financial protection for you and your family by paying you a lump sum benefit in the event of death or terminal illness’.

The person applying for the insurance did not have to be the same person as the person whose life was insured. The details of the person whose life was to be insured had to be completed in the application form and information had to be given on the applicant:

2. The Applicant(s)
This section provides the information on the Applicant(s) of the insurance who is responsible for paying the premium. The Applicant(s) will be the person(s), company or trustee, who will receive the benefit of any claim made including, where applicable, a claim based on total and permanent disablement. It is not necessary for the applicant to be the Life Insured.

Information was given about variation of premium rates which tied the premium rate to other ‘Rivkin Direct insurances’:

Variation of Premium Rates
Premium rates are not guaranteed and can vary as a result of claims experience. You will receive written notice of any such variation which will take effect at the next annual renewal date. A variation will only be made where it applies to all Rivkin Direct insurances and will not be limited to individual policies.

The Customer Information Brochure noted that charges would be imposed but that ‘Citicorp Life undertakes not to apply any other charges without your specific consent’; it nevertheless remained in the discretion of Citicorp to alter ‘any fees and

charges’.[12] A cooling off period of 14 days was given whereby the insurance could be cancelled ‘by written request to Citicorp Life Insurance’. Inquiries or complaints about the insurance were to be directed to Citicorp and ‘Citicorp Life will endeavour to answer your inquiry or resolve your complaint very quickly’. Metlife relied on these features of the Customer Information Brochure as contemplating a direct relationship between the applicant for insurance and Citicorp.

[12]Presumably the discretion could only be exercised with respect to the charges which the Customer Information Brochure disclosed.

Under the heading ‘Information On Your Insurance’ was the statement that a successful applicant for insurance was to consider the Customer Information Brochure, the Certificate of Insurance, and the Policy Information Statement together:

When your application for Rivkin Direct Term Life Insurance is accepted, a Certificate of Insurance and Policy Information Statement will be sent to you detailing the cover selected. Please ensure that these documents are read carefully in conjunction with this Customer Information Brochure.

There was a Q&A section. The following information was provided in response to the question ‘How do I apply for Rivkin Direct Term Life Insurance?’:

AApplications can only be effected after completion of a current application form contained in this Customer Information Brochure.
This Customer Information Brochure is for the general public and provides information of a general nature outlining the benefits and other conditions of the Certificate of Insurance which is issued under the Master Policy.
Details about a policy specifically tailored for your needs or a copy of the Certificate of Insurance are available on request from Rivkin Croll Smith Insurance Agencies Pty Ltd.[13]

[13]Emphasis added.

In response to the question ‘Who should own the insurance?’ was the following:

AAs the proceeds of any insurance claim are paid to the applicant the question of who owns the insurance is vital. If the applicant is the life insured the TPD and or terminal illness benefit will be paid to the applicant/life insured. If the life insured dies the death benefit will be paid to the estate of the applicant/life insured. If the insurance is not owned by the life insured the benefit, including the TPD benefit if selected and terminal illness benefit, will be payable directly to the applicant. Before purchasing the insurance careful consideration should be given as to who should be the recipient of the benefit.

Metlife relies on this statement as evidence that the insurance for which Montclare applied recognised the applicant for insurance as the ‘owner’ of the insurance. Here the applicant was Montclare. This stands in contrast to the question of the ownership of insurance under the master policy where Rivkin DM is nominated as ‘the Policyowner’.[14] This was one of the inconsistencies Metlife pointed to between the certificates and the master policy.
[14]See [111] below.

To the question ‘Can I increase my benefits?’ the response was:

AYou can increase the benefits by lodging a variation request. The increase is subject to satisfying Citicorp Life’s medical and financial underwriting requirements. The only additional charge will be the premium rate for the additional granted cover. There is no additional administration fee. The request can be obtained from Rivkin Croll Smith Life Insurance Agencies.

The Customer Information Brochure provided that, if a medical examination was required, ‘[t]he cost … will be paid by Citicorp Life’. If financial information was required a questionnaire would be issued and the ‘questionnaire will be forwarded to you after your application has been considered by Citicorp Life’.

Inside the Customer Information Brochure was a tear-out perforated application form. In November 1998, Montclare and Shilton completed the application form, with Montclare as the applicant and Shilton as the life insured for the amount of $300,000.

The application form contained sections 4 to 13 that Shilton was required to complete. Question 9H asked: ‘Have you ever had any of the following … Mental or nervous disorder or breakdown?’. The box which was ticked said ‘NO’. The evidence was that Montclare filled in the answers to the medical questions but did so on

Shilton’s instructions.[15] The judge found that question 9H was clear and unambiguous[16] and ought to have been answered in the affirmative because Shilton had known that he had experienced depression over a number of years and depression was a mental condition or disorder within the meaning of question 9H.[17] The representation was fraudulent.[18] Pursuant to s 25 of the ICA, Shilton’s fraudulent misrepresentation had effect as though it had been made by Montclare.[19]
[15]Reasons [618]. The judge held that Montclare was engaged in a joint endeavour with Shilton to obtain life insurance and that the answers to the questions are to be regarded as representations made by Shilton as well as Montclare.
[16]Reasons [619].
[17]Ibid [630], [637].
[18]Ibid [648].
[19]Section 25 of the ICA provided: ‘Where, during the negotiations for a contract of life insurance but before it was entered into, a misrepresentation was made to the insurer by a person who, under the contract, became the life insured … this Act has effect as though the misrepresentation had been so made by the insured’. Misrepresentations by the life insured are thus attributed to the insured. The judge also found that Shilton and Montclare had made a fraudulent misrepresentation in not disclosing that they had applied to NRMA Life Ltd for life insurance cover for Shilton and had been rejected: Reasons [354]. However he found that Metlife could not prove that if this misrepresentation had not been made, Citicorp would not have entered into the contract of insurance or a contract of insurance on any terms: Reasons [358].

The application form required both the applicant and the life insured to sign it. The judge found that Shilton had not signed the application form and that Montclare had signed Shilton’s signature where it appeared on the form.[20]
[20]Reasons [295].

The application form reinforced that the applicant for insurance was to read the Customer Information Brochure because it was relevant to obtaining insurance cover:

The undersigned declares that prior to completing and signing this Application, I/We have read and retained for later perusal a current edition of the Rivkin Direct Term Life Insurance Customer Information Brochure dated 1 October 1998.

Customer Purchase Record

The Customer Information Brochure contained not only an application form but also a Customer Purchase Record which required completion.

Montclare’s Customer Purchase Record recorded the applicant as ‘John Montclare Enterprises’ and the life insured as ‘Graham Shilton’. Shilton’s first name, Graeme, was misspelt.

It provided, under the heading, ‘Important Notice’, that ‘[i]f you do not understand or you disagree with any of the information provided in this statement, you should contact Rivkin Croll Smith Insurance Agencies, or Citicorp Life’. Rivkin Croll was nominated as ‘the agent’. Under ‘Agent’s Status and Obligations’ it said: ‘We do not have an association with a Life Office’. Under ‘Declaration’ was stated: ‘We have chosen to act as an agent of the Life Office listed below’.[21] The Life Company was identified as ‘Citicorp Life’. Metlife relies on these features as confirming that Rivkin Croll was acting as an agent of Citicorp. The Customer Purchase Record further provided: ‘We are entitled to receive payment of an administration fee on the products we place with this Life Office on your behalf’.
[21]Emphasis added.

Metlife submits that the Customer Purchase Record makes it plain that the role of Rivkin Croll was to effect insurance cover for the applicant with Citicorp, and that this is consistent with the Customer Information Brochure whereby the role of Rivkin DM is to arrange that very same insurance. It argues that these are objectively discerned aspects of the arrangement which indicate that an applicant would understand that the contract of insurance was with Citicorp and that Rivkin DM’s role was that of arranging that insurance and not acting as a trustee.

The name and type of insurance Montclare applied for was described as Rivkin Direct Term Life Insurance. The amount of the cover recorded was $300,000.

The life insured had to complete a section called ‘Medical Authority’ which required the life insured to

hereby consent to Citicorp Life Insurance seeking medical information including any test results from any doctor whom at any time I have consulted prior to the date hereof and I authorise the giving of such information during the currency of the liability of Citicorp Life Insurance.

The consent section purported to bear Graeme Shilton’s signature. Metlife argued that the ‘Medical Authority’ section reinforces the existence of a direct relationship between an applicant for insurance and Citicorp.

There was evidence that in the ordinary course the application forms were sent to Citicorp for assessment, including to determine whether a medical examination of the life insured was required. Citicorp would advise Rivkin DM whether it accepted the application and, if accepted, would indicate the insurance cover it was willing to provide and confirm the premium rate.

The first certificate

A certificate of insurance with a commencement date of 21 January 1999 was issued by ‘Rivkin Direct’ to Montclare providing life insurance cover on the life of Shilton for $300,000 (‘the first certificate’). The judge considered the first certificate to constitute the first contract of insurance between Citicorp and Montclare.

The first certificate was entitled ‘Certificate of Insurance’. In the first paragraph it stated that insurance cover was provided under the master policy, namely, ‘a Master Group Life and Disability Insurance Policy’ between Citicorp and Rivkin DM. It indicated that any sum payable under the master policy would be paid by Citicorp to Rivkin DM as trustee. Rivkin DM would then pay the benefit on to the certificate holder.

The certificate provided in its Recital:

This Certificate of Insurance sets out the cover provided under a Master Group Life and Disability Insurance Policy (dated 1 October 1996) between Citicorp Life Insurance Ltd and Rivkin Direct Management. In the event of the Death, Terminal Illness or Total and Permanent Disablement (if applicable) of the Life Insured, any Benefits payable under that Policy will be paid directly by the Insurer to us as trustee. We will then pay the Benefit to you in accordance with this Certificate of Insurance.

The terms ‘We/Our/Us’ were defined as meaning Rivkin DM. The ‘Insurer’ was named as Citicorp. ‘You’ was defined as meaning the certificate holder named in the schedule, namely, Montclare. The life insured was named in the schedule as ‘Graeme John Shilton’.

Gary Ridgeway (‘Ridgeway’), the manager and sole employee of Rivkin Direct Insurance Agencies Pty Ltd (‘Rivkin DI’)[22] gave evidence that in practice amounts payable under claims were not paid to Rivkin DM, or to any trustee or intermediary, but were paid directly from Citicorp to the claimant.[23] He said:

Once the claim was put in, Citicorp took total authority and they dealt with the person who put the claim in and then paid the money directly to the client.

[22]Rivkin DM and Rivkin DI are related companies that were associated with Rene Rivkin. The original application for leave to appeal was made by Montclare against Metlife as the first respondent and Rivkin DI as the second respondent. Rivkin DI played no active role in the proceeding below, as it undertook to pay any judgment sum to Montclare. On 27 April 2016, Montclare filed a notice of discontinuance of the application for leave to appeal against the second respondent. On 28 April 2016 the Court granted leave to Montclare to discontinue against Rivkin DI and reserved Rivkin DI’s costs.

[23]Reasons [114].

The first certificate provided for a ‘free look’ period of 14 days during which Montclare could return the certificate and Rivkin DM would cancel the insurance and refund the premium:

Please check this Certificate of Insurance (including the Schedule) carefully to ensure that it meets with your requirements. If you are not satisfied you may return it to us within fourteen days from the date of receipt. We will cancel the insurance from its inception and refund in full any premiums you have paid.

The ‘Policy Cover’ was described as having been issued on the basis of the disclosures and personal statements made by Montclare and Shilton:

(a)Insurance cover will be provided under this Certificate for an initial period which commences on the Commencement Date and ends on the first Annual Renewal Date provided you have paid the ‘Total Initial Premium’ (or the first instalment) specified in the Schedule.
(b)Subject to the age limitations contained in this Certificate, we shall renew cover for further periods of one year upon receiving your request to do so accompanied by the total annual premium (or the first instalment for that year) prior to the expiry of each period of annual cover.
(c)Your entitlement to any Benefit is subject to the terms and conditions of this Certificate and any special conditions contained in the Schedule.
(d)This Certificate is issued on the basis of the information disclosed to the Insurer in the application form, as well as in the personal statements and declarations made by you and the Life Insured.
(e)All Benefits payable under this Certificate shall be paid in Australian Dollars.

The first certificate reiterated that the ‘Death Benefit’ would be paid from Rivkin DM to the policy holder (Montclare) upon the insured’s death. It said that, where such a benefit was paid, all of the insurer’s obligations under the master policy would thereby be discharged:

DEATH BENEFIT
(a)If during any period of cover the Life Insured should die, then we will pay you the Sum Insured that has been paid to us by the Insurer.
(b)Where a Death Benefit is paid it will discharge all of the Insurer’s obligations under the Master Policy and no further benefits of any kind shall be payable under this Certificate.

The terminal illness benefit and the total and permanent disablement benefit option also referred to the master policy and to the obligation on Rivkin DM to pass on the benefits it received from Citicorp. It reflected an arrangement that had a tripartite quality to it:

TERMINAL ILLNESS BENEFIT
(a) If during any period of cover the Life Insured is diagnosed as having a Terminal Illness, then we will pay you the Sum Insured or $750,000 (whichever is the lesser) that has been paid to us by the Insurer.
(b) Where a Terminal Illness Benefit equal to the Sum Insured is paid it will discharge all of the Insurer’s obligations under the Master Policy and no further benefits of any kind shall be payable under this Certificate.
(c)Where a Terminal Illness Benefit less than the Sum Insured is paid, the Sum Insured for the purpose of Death and Total and Permanent Disablement Benefits will be reduced by the amount of the Terminal Illness Benefit. Premiums will continue to be payable for Death and Total and Permanent Disablement Benefits based on the reduced Sum Insured.

TOTAL AND PERMANENT DISABILITY BENEFIT OPTION

(a) This option will only apply to this insurance where the type of cover specified in the Schedule is ‘Death and Total and Permanent Disablement Cover’.
(b)Where this option applies and during any period of cover the Life Insured should suffer from Total and Permanent Disablement, then we will pay you the Sum Insured that has been paid to us by the Insurer.
(c) Where a Total and Permanent Disablement Benefit is paid it will discharge all of the Insurer’s obligations under the Master Policy and no further benefits of any kind shall be payable under this Certificate.

An alteration to the sum insured was permissible providing the increase was acceptable to Citicorp as the insurer. The alteration took effect from the date of acceptance by Citicorp:

ALTERATION OF SUM INSURED

By notice in writing you may apply for an increase or decrease in the Sum Insured. This increase (if acceptable to the Insurer) or decrease will take effect from the date of acceptance by the Insurer with premiums being adjusted accordingly.

The first certificate set out a number of conditions under which the insurance liability ceased, including upon cancellation of ‘this insurance’ or, significantly, the cancellation of the master policy:

CESSATION OF LIABILITY
Notwithstanding any other provision contained in this Certificate, this insurance will be cancelled and the liability to pay any Benefit for which the entitlement to has not already arisen, shall cease upon the occurrence of the earliest of any of the following:
…
(d) upon cancellation of this insurance or the Master Policy for any reason.

This suggests that the master policy and the insurance cover provided to Montclare were directly linked. Cancellation of the insurance cover was not dependent upon notification by Rivkin DM to the insured; rather, if, for whatever reason, the master policy between Citicorp and Rivkin DM was cancelled, the insurance cover provided to the insured was cancelled. Montclare relies on this to emphasise the significance of the master policy to the legal relationships.

Premiums were payable to Rivkin DM:

PREMIUM
(a)All premiums are due to us in full in advance (except where we agree to accept premiums by instalments) and shall be initially calculated from the Commencement Date to the first Annual Renewal Date. Further premiums on renewal shall be calculated on an annual basis from the Annual Renewal Date in each subsequent year and will be based on the then current premium rates.
(b)Each renewal premium (or instalment of premium) must be paid within thirty days of its Due Date.

Citicorp was permitted to vary the amount of the premium payable:
The Insurer may at any time vary the amount of premiums payable upon giving 30 days written notice, provided that any variation shall be effective only from the next Annual Renewal Date.
The premium included the annual administrative fee. This could be increased by Rivkin DM.

If a policy lapsed due to non-payment of a premium, Citicorp could reinstate it on terms that it determined within its discretion:

REINSTATEMENT
Where cover provided under this Certificate has lapsed due to non payment of premium, the Insurer may reinstate the unexpired period of that cover and renew the cover within one year from the date of lapse:
(a) upon proof to the Insurer’s satisfaction as to the Life Insured’s continued good health and eligibility for cover;

(b) upon payment of the overdue premium; and
(c) upon any other terms of reinstatement determined at the Insurer’s discretion.

Claims were to be made to Citicorp together with whatever evidence Citicorp reasonably required:

CLAIMS
(a)You or your legal representative must notify the Insurer in writing as soon as is reasonably practicable of an event entitling you to a Benefit.
(b)The Insurer will not accept liability for any claim which is not notified in writing within one year after the event giving rise to the claim.
(c)It is a condition of the payment of any Benefit that you or your legal representative provide the Insurer with such evidence to substantiate the claim as the Insurer may reasonably require. This may include (at the Insurer’s expense) a post mortem examination or any medical examination conducted by a legally qualified medical practitioner appointed by the Insurer as the Insurer deems necessary.

The schedule set out relevant details of the insurance cover. It provided:

SCHEDULE
CERTIFICATE NUMBER 2094

1.     NAME OF CERTIFICATE HOLDER     JOHN MONTCLARE
2.     NAME OF LIFE INSURED  GRAEME JOHN SHILTON
3.     TYPE OF COVER  Death and Terminal Illness Cover
4.     SUM INSURED  $300,000.00
5.     COMMENCEMENT DATE                   21 January 1999
6.     ANNUAL RENEWAL DATE               The 1st day of July each year during the
currency of the insurance.

7.     INITIAL PREMIUM  Initial Premium  $ 201.25
Pro Rata Admin Fee                $   41.25
Total Initial Premium               $ 242.50
Premiums may be made by monthly instalments
The monthly instalments attract an additional cost of 6%.

8. DUE DATE The 1st day of July each year during the
currency of the insurance.

9. MAXIMUM INSURABLE AGE Age 80 for Death & Terminal Illness
10. AUTOMATIC INCREASE IN SUM INSURED ON RENEWAL
The then current Sum Insured shall be increased at each Annual Renewal Date by the percentage increase in the CPI over the previous 12 months, provided that the Sum Insured for the ensuing 12 months will not be less than it was in the previous 12 months.
11.SPECIAL CONDITIONS Nil
Signed for and on behalf of Rivkin Direct:…………………
Date of Issue: 3 February 1999

Together with the first certificate Montclare received a Policy Information Statement.

Policy Information Statement

On 3 February 1999, a letter signed by ‘Administrator, Rivkin Direct’ was sent to Montclare. It was described as the ‘Rivkin Direct Term Life Insurance Policy Information Statement’. The Policy Information Statement commenced with a summary of the details of the insurance cover obtained by Montclare:

Life Insured        -     GRAEME JOHN SHILTON
Date of Birth        -     18 March 1957
Sum Insured        -     $300,000.00
Interim Premium -     $242.50
Annual Premium -     $582.00
Certificate No      -     2094

The Policy Information Statement attached the first certificate of insurance and described it as evidence of a tripartite contract between Montclare, Rivkin DM and Citicorp:

Thank you for selecting Rivkin Direct as your choice of Term Life Insurance.
Please find attached your Certificate of Insurance which is evidence of the contract between yourself, Rivkin Direct Management Pty Ltd and the insurer, Citicorp Life. A schedule is attached to your Certificate and together these documents provide full details of your cover.

It provided that the insurance was issued from Citicorp and that Rivkin Direct did not share in any of the profits of Citicorp:

Statutory Information
Rivkin Direct Term Life Insurance is issued from the No 1 Statutory Fund of Citicorp Life Insurance Ltd ACN 004 274 882. Rivkin Direct is a non-participating life policy and does not share in any of the profits of Citicorp Life or its Statutory funds.

The Policy Information Statement also outlined various policy details, including Montclare’s period of cover and premiums. Citicorp guaranteed that the insurance cover could be renewed until Shilton turned 80.

If payment of the premium was not received by Rivkin DM within 30 days of the due date, the insurance would automatically terminate. It was reinforced in the Policy Information Statement (as was apparent in the Customer Information Brochure)[24] that a variation in claims experiences might have an effect on premium rates. Variations would only occur where they applied to all Rivkin Direct insurances and not just with respect to an individual customer:

Your premium rates are not guaranteed, which means that they may vary as a result of claims experience. A premium variation will only be made where it applies to all Rivkin Direct insurances and will not be limited to individual insurances.

[24]See [15] above.

In accordance with the Policy Information Statement, in the event of the death of Shilton, the Sum Insured would be paid to Montclare, subject to the exclusions:

Rivkin Direct Term Life Insurance Cover
Should the Life Insured die while the insurance remains in force, subject to the exclusions outlined in the certificate, the Sum Insured will be paid to you. If Life Insured is diagnosed as being terminally ill with a remaining life expectancy of less than 6 months, then the sum insured or $750,000, whichever is the lesser will be paid.
…
Exclusions
There will be no entitlement to a Death Benefit in the event of suicide occurring within 13 months of the date of commencement or reinstatement of the Insurance. A Terminal Illness Benefit will not be payable if the illness or injury arises from self inflicted injury (or complications arising thereafter).[25]

[25]Metlife did not rely on the 13 month exclusion: Reasons [5].

Included in the insurance was a 14-day cooling off period. The Policy Information Statement provided that if Montclare was unsatisfied he was to return the first certificate to Citicorp and that Citicorp would refund the premium:[26]
[26]Under the certificates the cooling off period allowed for a return of the certificates to Rivkin DM. See [40] above.

Cooling Off Period
Included in this Insurance is a special 14 day ‘Cooling Off Period’. It allows you time to check that the cover meets your needs. If you are not satisfied, you can return your Certificate of Insurance to Citicorp Life within this period and you will be refunded in full any premiums you have paid and you will not pay any charges.

Inquiries were to be directed to Citicorp:

Inquiries and Complaints
Should you have any inquiries or complaints regarding your insurance please contact Citicorp Life on (02) 9239 9832 or toll free on 1800221599 to discuss the matter. Please address any correspondence to:
The Dispute Resolution Officer
Rivkin Direct Term Life Insurance
Citicorp Life Insurance
PO Box 5305
Sydney NSW 2001

Overall, the Policy Information Statement recorded a range of rights and obligations of Montclare, Citicorp, and Rivkin DM arising from the acceptance by Citicorp of Montclare’s application for insurance on the life of Shilton.

Bordereau report

The issuing of the first certificate to Montclare was recorded in a bordereau report for January 1999 prepared by Jacques Martin.

Relevantly, the bordereau report provided:[27]
[27]In determining whether a contract exists (and therefore between whom a contract exists), it is permissible to use post-contractual conduct. This was conceded by Metlife.

RIVKIN DIRECT TERM PRODUCT: Bordereau Report for January 1999
Yearly Paid
Client No	Given Names	Client Name	Loading %	Smoker	Sex	ANB	DOB	TPD	Sum Insured	Acceptance Date	Base Ann Premium	Pro-rata Premium	Total Ann Premium	Base Net Pro-rata
2094	GJ	SHILTON	0.00	N	M	42	03/11/52	N	300,000	21/01/99	483.00	242.50	582.00	201.25
2004	KR	[redacted]	0.00	N	M	48	12/09/51	N	499,999	21/01/99	670.00	341.25	819.00	279.17
2035	R	[redacted]	0.00	N	M	55	20/06/44	N	250,000	15/01/99	742.50	350.63	841.50	309.38
1989	CG	[redacted]	0.00	N	F	32	29/06/66	Y	500,000	24/03/98	345.00	345.00	444.00	246.00
TOTAL YEARLY PAID			1,279.38	2,686.50	1,035.80
TOTAL TERM FOR JANUARY 1999				19,569.44	2,686.50	17,424.75

The bordereau report was sent to Citicorp. With respect to Shilton, it refers accurately to the number of the first certificate, the acceptance date of the application for insurance, and the sum insured, as recorded above.[28] Shilton’s date of birth is recorded inaccurately.[29] A covering letter from Jacques Martin to Citibank Ltd dated 25 February 1999 refers to a Citicorp Group Policy (CGL 2308) which is the number of the group policy assigned by Citicorp to Shilton[30] indicating that Citicorp in its business records treated Shilton as a member under the group life master policy.
[28]See [52] above.
[29]See [54] above.
[30]In an earlier fax from Ridgeway (Rivkin DI) to Citicorp the Policy No referred to with respect to Shilton is ‘2082’. At the hearing of the appeal, this was described as both wrong and ‘inexplicable’.

Second certificate of insurance

On 7 April 1999, Shilton and Montclare wrote a letter to Rivkin DM seeking to increase the insurance cover on the life of Shilton by $800,000 to $1.1 million. A Rivkin staff member telephoned Shilton after receiving the letter. Montclare participated in the call. Montclare gave evidence that the Rivkin staff member asked the questions in the insurance application form and copied information from the first application form to the second application form. The response to question 9H: ‘Have you ever had any of the following … Mental or nervous disorder or breakdown?’ was again ‘NO’.[31]
[31]Reasons [226]–[229].

On 17 April 1999, Shilton (or Shilton and Montclare)[32] submitted an application form for life insurance to the agent Rivkin Croll, the agent for Citicorp, to increase the cover to $1.1 million.
[32]Ibid [39].

Montclare received a second certificate of insurance providing for cover on Shilton’s life of $1.1 million (‘the second certificate’)[33] with a commencement date of 10 June 1999. Ridgeway gave evidence at trial that a second Policy Information Statement would have been sent to Montclare together with the second certificate.
[33]The first and second certificates are sometimes referred to as ‘the certificates’.

The second certificate had similar terms to the first certificate, with some exceptions. The title of the second certificate was ‘Life and Total Permanent Disability Insurance (Non-Group) Certificate of Insurance’.

Similarly to the first certificate, the opening paragraph of the second certificate stated that the cover set out in the certificate was provided under a master policy:

This Certificate of Insurance sets out the cover provided under a Master Group Life and Disability Insurance Policy (dated 1–10–1996) between Citicorp Life Insurance Ltd ACN 004 274 882 and Rivkin Direct Insurance Agencies Pty LtdACN 073 632 292. In the event of the Life Insured’s Death or Terminal Illness or Total and Permanent Disablement (where chosen as an option) any Benefits payable under that Policy will be paid directly by the Insurer to us as trustee. We will then pay the Benefit to you in accordance with this Certificate of Insurance.

Terence McCowan (‘McCowan’), a solicitor and director of Rivkin DI, gave evidence that the second certificate was incorrect because it referred to a master group life and disability insurance policy between Citicorp and Rivkin DI. There was no master policy between Citicorp and Rivkin DI. The second certificate ought to have referred to Rivkin DM.[34]
[34]Reasons [112].

The definitions in the second certificate also referred to Rivkin DI. It defined ‘We/Our/Us’ and ‘You/Your’ as follows:

We/Our/Us means Rivkin Direct Insurance Agencies Pty Ltd ACN 073 632 292
You/Your means the Certificate Holder named in the Schedule.

On the evidence of McCowan the reference to Rivkin DI was also a mistake; the reference ought to have been to Rivkin DM.

The certificate holder named in the schedule was Mr J Montclare.

The second certificate included what was described as an ‘Important Notice’ as to the operation of the policy:

This is not a savings plan. The primary purpose of this policy is to provide a benefit in the event of your death or total and permanent disablement (if selected). If you terminate your plan at anytime, you will not get anything back.

The reference to ‘your death’ was a further mistake as the insurance cover related to the life of Shilton, not Montclare, the certificate holder.

Inquiries and complaints could be directed to either ‘Rivkin Direct’ or Citicorp:

INQUIRIES AND COMPLAINTS
Should you have any inquiries or complaints regarding you [sic] Insurance, please contact Rivkin Direct on (02) 9232 4600 or Citicorp Life on (02) 9239 9832 or toll free on 1800 674 230[35] to discuss this matter. Please address any correspondence to:
The Resolution Manager
Term Life Insurance
Citicorp Life Insurance
GPO Box 3319
SYDNEY NSW 1005
We will endeavour to answer your inquiry or resolve your complaint very quickly. However, if you are not satisfied with our response you can contact the Financial Industry Complaints Service who will then investigate the matter with you. This service is an independent and impartial body. Their telephone number in Melbourne is (03) 9629 7050 or toll free on 1800 335 405 and they are located at 31 Queen Street Melbourne.

[35]Crossed out with pen to 1300 555 625.

The schedule to the second certificate set out the relevant details of the insurance cover:[36]
[36]Montclare gave evidence to explain the lack of any figures relating to the Initial Premium to the effect that he had misplaced the second certificate and a duplicate was provided to him.

SCHEDULE
CERTIFICATE NUMBER 2094

1.          NAME OF CERTIFICATE HOLDER        Mr J MONTCLARE
2.          NAME OF LIFE INSURED  GRAEME JOHN SHILTON
3.          TYPE OF COVER  Death, Terminal Illness Cover
4.SUM INSURED  $1,100,000.00 Term Life
5.COMMENCEMENT DATE  10 June 1999
6.ANNUAL RENEWAL DATE                   The 1st day of July each year during the currency of the insurance.
7.INITIAL PREMIUM  Initial Premium             $ 0.00
Pro Rata Admin Fee       $ 0.00
Total Initial Premium     $ 0.00

8.DUE DATE  The 1st day of July each year during the currency of the insurance.
9.MAXIMUM INSURABLE AGE                Age 80 for Death and Terminal Illness Cover
10.AUTOMATIC INCREASE IN SUM INSURED ON RENEWAL:
The then current Sum Insured shall be increased at each Annual Renewal Date by the percentage increase in the CPI over the previous 12 months, provided that the Sum Insured for the ensuing 12 months will not be less than it was in the previous 12 months.
11.SPECIAL CONDITIONS             Nil
Signed for and on behalf of Rivkin direct:…………………..
Date of Issue: 7 January 1999

The second certificate bore the same number as the first certificate. While the date on which the second certificate was issued appeared as 7 January 1999, this was a mistake as it was accepted by Citicorp on 8 June 1999.[37]
[37]Reasons [108].

The second certificate named Citicorp as the insurer. It reflected the links to the master policy and to the performance and discharge of Citicorp’s obligations under the master policy identified above as recorded in the first certificate.

In particular, similarly to the first certificate, the second certificate provided that on the death of the life insured, ‘we will pay you the Sum Insured that has been paid to us by the Insurer’, and that the death benefit would discharge all of Citicorp’s ‘obligations under the Master Policy’.[38] The terms of the ‘Policy Cover’, the ‘Terminal Illness Benefit’, and the ‘Total and Permanent Disablement Benefit Option’ were substantially the same in the first and second certificates,[39] including the recognition that sums paid by Citicorp would in turn be paid to Montclare and would discharge all the obligations of Citicorp. Alterations to the Sum Insured were dependent on the approval of Citicorp and took effect from the date of acceptance by Citicorp.[40] The liability of Citicorp for the insurance cover with respect to Shilton was to cease upon, amongst other things, cancellation of ‘this insurance’ or the cancellation of the master policy, for any reason.[41]
[38]See [42] above.
[39]See [41] and [43] above respectively.
[40]See [44] above.
[41]See [45] above.

At no stage during the application process did Montclare receive the master policy.

Citicorp’s master policy

McCowan gave evidence about the circumstances by which the Rivkin group of companies (including Rivkin DM, Rivkin DI, and Rivkin Croll) came to be involved in the insurance business. The Rivkin group of companies were associated with Rene Rivkin. During 1996 McCowan had approached Citicorp with the proposal that the Rivkin group of companies serve as the retail arm of Citicorp’s insurance business. He described Citicorp ‘as essentially an insurance wholesaler without a retail arm’.[42] Citicorp had group policies for industry groups and the proposal was for the Rivkin group of companies to be ‘just another group which did insurance through Citicorp Life’.[43] The structure of the arrangement was for Citicorp to be the insurer and Rivkin DM to be the group holder ‘who would sell sub-policies “for want of a better word” based on the master policy’.[44] He said the master policy contained the terms of insurance under which it granted cover to individuals.[45]
[42]Reasons [56].
[43]Ibid.
[44]Ibid.
[45]Ibid.

McCowan drafted the application forms which Montclare submitted to Rivkin DM.

As mentioned above,[46] Montclare submits that Rivkin DM acted as the trustee of the master policy. Rivkin DM was not registered as an insurer. It was the nominated ‘Policyowner’ under the master policy. As the nominated Policyowner, the bulk of its business was dealing with trustees of superannuation plans, employers and individuals who wished to take out life insurance with Citicorp.
[46]See [2] above.

Rivkin DM was deregistered in 2002.[47]
[47]It was common ground that no point was taken by reason of the fact that Rivkin DM was not joined to the proceeding. Joinder would have required revival of Rivkin DM.

Rivkin Croll, and later Rivkin DI, marketed the policies. They acted on behalf of Citicorp,[48] selling and promoting the renewable term life insurance product ‘Term Life and Term Life Executive Plan’. They marketed the policies by direct mail and Rene Rivkin promoted the policies on television programs.
[48]Reasons [10]. See [11] above.

Trust deed

On 30 August 1996 McCowan faxed a draft trust deed to Citicorp (‘the trust deed’). No executed trust deed was in evidence at trial. The trust deed named Rivkin DM as ‘the Trustee’. At that time, Rivkin DM was yet to be incorporated. It was not incorporated until 3 September 1996.

The trust deed was undated. In the Recitals it said:

A. The Trustee has resolved to act as trustee for the purpose of acting as the legal owner of a disability, trauma and life insurance policy or policies to be effected with such life insurance companies as the Trustee may select.
B.The Trustee has agreed to effect the said policy with the Life Office for the benefit of Superannuation Plan Trustees, Individuals and Employers who wish to jointly participate in a single disability, trauma and life insurance policy for the purpose of obtaining the terms and conditions which are normally available to trustees of large superannuation funds and large employers.
C.The Life Office has agreed to issue a group disability, trauma and life insurance policy to the Trustee on the lives of the members of superannuation funds, the trustees of which participate in the group pool established hereunder, on the lives of employees of employers that participate in the group pool established hereunder and on the lives of individuals.

NOW THIS DEED WITNESSES that the disability, trauma and life insurance policy or policies effected for the purpose of this Deed shall be held in trust by the Trustee for the trustees of superannuation funds, individuals and employers that become parties to this Deed and the said policy or policies shall be administered in accordance with the provisions set out herein. This Trust shall be known as the Rivkin Direct Disablement and Life Pooled Trust.

‘Life Insured’ was defined to mean:

the member of a superannuation fund (the trustee of which becomes a party to this Deed) or an employee of an Employer that becomes a party to this Deed or an individual who becomes a party to this Deed or an individual who becomes a party to this Deed and who becomes a life insured under the policy.

‘Life Office’ was defined to mean ‘the life insurance company with which the policy is effected’.

‘Participating Employer’ was defined to mean ‘an employer who becomes a party to this Deed pursuant to the provisions hereof’.

‘Participating Individual’ was defined to mean ‘a person who becomes a party to this Deed pursuant to the provisions hereof’.

‘Participating Trustee’ was defined to mean ‘the Trustee of a superannuation fund who becomes a party to this Deed pursuant to the provisions hereof’.

‘Policy’ was defined to mean ‘the group policy or policies effected by the Trustee pursuant to the provisions of this Deed.’

‘Trust’ was defined to mean ‘the trust established hereunder by contributions made by Participating Trustees, Individuals and Employers including the proceeds received under the Policy’.

Pursuant to cl 4, the Trustee was to effect and maintain a group disability, life and trauma insurance policy with a life insurer, amongst other things, ‘on the lives of Participating Individuals’.

4. THE POLICY
The Trustee shall effect and maintain a group disability, life and trauma insurance policy with a Life Office on the lives of the members of superannuation funds of which Participating Trustees are trustees, on the lives of Participating Individuals and on the lives of employees of Participating Employers on such terms and condition as the Trustee, in its absolute discretion, determines. If the Policy is at any time terminated, the Trustee shall immediately effect a replacement group disability, life and trauma policy. If the Policy is, at any time, terminated, the Trustee shall so advise the Participating Trustees, Individuals and Employers within fourteen (14) days of the date of such termination.

Applications by superannuation funds, employers and individuals were to be made by completing an application form attached as appendix ‘A’ to the trust deed and acceptance of applications was to lie with the Trustee:

2.APPLICATIONS BY PARTICIPATING TRUSTEES AND EMPLOYERS

Superannuation Plan Trustees who wish the members of their funds, employers who wish their employees to become lives insured under the Policy and individuals who wish to become lives insured under the Policy shall make an application to the Trustee to participate in the deed by completing the form of application in appendix ‘A’ of the Deed. If such application is accepted by the Trustee, it shall so advise the applicant Superannuation Plan Trustee or employer or individual who or which shall, thereupon, become a Participating Trustee, Individual or employer, as the case may be.

Appendix ‘A’ to the trust deed was described as: ‘Application for Participation by a Participating Trustee, Employer or Individual’. It said:

[NAME] …………………………………………………………………………….…
(hereinafter called ‘the Participating Trustee’ or ‘the Participating Employer’ or ‘the Participating Individual’ as the case may be) hereby applies to participate as an equitable owner in the insurance policy (herein called ‘the Policy’) administered by Rivkin Direct Management Pty Ltd (hereinafter called ‘the Trustee’) pursuant to the Deed dated this date made by the Trustee and to include members of the superannuation fund administered by the Participating Trustee or employees of the Participating Employer or Participating Individuals as Lives Insured under the Policy and in consideration of the acceptance by the Trustee of the Participating Trustee or Employer or individual as a participant in the equitable ownership of the Policy, the Participating Trustee or Employer or Individual undertakes to make contributions to premiums under the Policy and agrees to become a party to the Deed dated this date made by the Trustee and be bound by that Deed as if it were originally named therein.
Dated this …………….. day of ……………………… 199 …

The Common Seal of  )
……………………………….            ) ……………………………..
was affixed by the authority   )
of the Board of Directors                 ) ……………………………..
in the presence of   )
………………………………………[49]

[49]Emphasis added.

It is noteworthy that the trust deed appeared to envisage that applications would be made by Participating Individuals for themselves to become members of the scheme, as opposed to the two-headed arrangement under the master policy for Participating Persons to nominate members.[50] Participating Individuals were also to become parties to the trust deed as well as equitable owners in the insurance policy ‘administered’ by Rivkin DM. The scheme envisaged by the trust deed appeared to contemplate multi-party agreements.
[50]See [114] below. Whether, under the master policy, a person alone could apply to become a Participating Person and a member is discussed at [185] below.

The trust deed provided, in cl 7, that it was for the Trustee to make a claim under the Policy and, on receipt of the proceeds, pay them to the Participating Employer, or the Participating Trustee of the relevant superannuation fund, or to the Participating Individual or that individual’s legal representative:

7. INSURANCE PROCEEDS
Upon being advised of the occurrence of an event that is insured under the Policy, the Trustee shall make a claim under the Policy for the insurance proceeds payable in respect of that event and shall immediately, upon receipt of the proceeds of the Policy in respect of the insured event, pay the amount of those proceeds to the Participating Employer of the Life Insured or the Participating Trustee of the superannuation fund of which the Life Insured was a member or the Participating Individual or his legal personal representative.

This differed from the terms of the certificates which provided for claims to be made directly by the insured to Citicorp together with any evidence Citicorp reasonably required.[51]
[51]See [51] above.

At trial, McCowan gave evidence that an applicant for insurance did not sign the ‘Application for Participation by a Participating Trustee, Employer or Individual’ contained in appendix ‘A’, but only signed the tear-out application form included within the Customer Information Brochure, as Montclare had done.[52]
[52]See [23]–[25], and [67] above.

Montclare submitted before the judge that Rivkin DM had waived the formality of an application under the trust deed by persons who wished to become Participating Individuals. There was no evidence that either Shilton or Montclare applied to become, or became, ‘Participating Individuals’ under the trust deed.

The judge found:

[A]s no executed trust deed is in evidence and there is no evidence of Mr Shilton or Mr Montclare applying to become Participating Individuals, it is unclear how the trust deed can apply to, or assist in the identification of the legal character of Mr Montclare’s insurance cover.[53]

[53]Reasons [76].

He stated that he therefore proceeded on the basis that the trust deed, whether in the form in evidence or in another form, did not apply to the insurance cover that Montclare had obtained.[54]
[54]Ibid [77].

That finding is not under challenge on this appeal. This is despite Montclare, in his primary allegation at trial, identifying the trust deed as the first particular of the insurance provided to him under the master policy.

On the appeal Metlife relies on the absence of any executed trust deed as indicating that Montclare and Shilton never entered into the scheme of insurance provided under the master policy and that the insurance contract was, as found by the judge, comprised only by the first and second certificates of insurance.

Master policy

The master policy was issued by Citicorp to Rivkin DM with a commencement date of 1 October 1996.[55] The master policy, the ‘Citicorp Life Insurance Master Group Life and Disability Insurance Policy (Group and Non Group Members)’ was composed of the master policy document and two schedules.[56]
[55]The date is significant because, on Montclare’s argument, the master policy is the contract and Montclare’s fraudulent misrepresentation was not made until 1998 and 1999. The fraudulent misrepresentation thus could not have induced the contract.
[56]The first schedule gave the particulars of the insurance and the second schedule set out the premium rates per $1,000 differentiating between male Nonsmokers and male Smokers relative to age next birthday.

The preamble recorded that the Policyowner was to provide premiums to the insurer in exchange for payment of the individual amounts of insurance cover as set out in the policy. It provided:

In consideration of receiving from the Policyowner premiums as and when they fall due, we shall subject to these terms and conditions pay to the Policyowner the individual amounts of insurance set out in this Policy.

Rivkin DM was named in the first schedule as the ‘Policyowner’. The terms ‘we/our/us’ were defined as referring to Citicorp.

The first schedule to the master policy sets out the benefits that were potentially payable in respect of the death, terminal illness, total and permanent disablement or temporary disability of the member:

HOW BENEFITS ARE PAYABLE
1         DEATH  LUMP SUM
2         TERMINAL ILLNESS  LUMP SUM
3         TOTAL AND PERMANENT DISABLEMENT       LUMP SUM
4         TEMPORARY DISABILITY –
Temporary Disability Benefits shall be payable monthly in arrears. Temporary Disability Benefits payable for a period of less than 30 days will be payable at a daily rate of one-thirtieth of the Temporary Disability Benefit Payable.

Disability by accident benefits were only payable under cl 12.1 ‘provided that the person’s nomination for membership requested Temporary Disability Benefit cover’.[57]
[57]Metlife argues that there was no scope on the application forms completed by Montclare to request temporary disability benefit cover and this was another discrepancy between the insurance Montclare applied for and the master policy.

A person who applied to the Policyowner to participate in the master policy in respect of the life insured was a ‘Participating Person’:

Participating Person means any person (not being a Participating Employer, Participating Trustee or Participating Entity) acting in the capacity of trustee, nominee or otherwise who applies to the Policyowner to participate in this Policy by including any persons in respect of whom the Participating Person has an insurable interest as Members under this Policy.

A person who was a trustee, nominee, or otherwise of an insurance plan and who applied to the Policyowner to participate in the master policy in respect of the life insured was a ‘Participating Entity’:

Participating Entity means any person accepted by us from time to time who is acting as a trustee, nominee or otherwise of an insurance plan covering one or more lives and who applies to the Policyowner to participate in this Policy by including persons who are members of the insurance plan as Members under this Policy.

A ‘Participating Trustee’ was defined to mean a superannuation fund trustee, administrator or manager that applied to the Policyowner to participate in the policy by including members of the superannuation fund as ‘Members’ under the policy.

A ‘Member’ was defined to mean ‘a person who has been nominated by the Policyowner and accepted by us for membership in accordance with the provisions of this Policy.’ Membership in the group scheme thus depended upon acceptance by Citicorp.

The master policy drew a distinction between Group and Non Group Members. A ‘Group Member’ and ‘Group Person’ were defined as follows:

Group Member means a Group Person accepted by us for membership under this Policy.
Group Person means a person nominated by the Policyowner for membership under this Policy at the request of a Participating Trustee, Participating Employer or Participating Entity.

A ‘Non Group Member’ and ‘Non Group Person’ were defined as follows:

Non Group Member means a Non Group Person accepted by us for membership under this Policy.
Non Group Person means a person nominated by the Policyowner for membership under this Policy at the request of a Participating Person.

Clause 1.1 provided for automatic acceptance by Citicorp of any Group Person who satisfied the eligibility conditions[58] and was nominated by the Policyowner if he or she was employed and actively carrying out his or her occupation on a full time basis at the time of nomination, or was a member of a superannuation fund the trustee, administrator, or manager of which was a Participating Trustee, or was a member of an insurance plan accepted by Citicorp as nominated by a Participating Entity.
[58]The eligibility conditions were agreed conditions reflected in the Scheme Questionnaire in the First Schedule to the master policy.

By contrast with the automatic acceptance of Group Persons, the acceptance of Non Group Persons was at the absolute discretion of Citicorp. Clause 2 provided:

2. ELIGIBILITY AS MEMBERS — NON GROUP PERSONS

2.1We may accept for membership any Non Group Person nominated by the Policyowner for insurance cover (the type of cover to be nominated by the Policyowner) equal to:
(i)the Sum Insured; and/or
(ii)the Monthly Benefit (subject to the Monthly Benefit not exceeding the Maximum Monthly Benefit).

The acceptance of a Non Group Person for membership will be at our absolute discretion and on such terms and conditions as we require having regard to the Non Group Person’s state of health.
2.2To determine the Non Group Person’s state of health, a personal statement and declaration of health and any other information we reasonably require must be provided. In addition we may, in our absolute discretion, require the Non Group person to undergo a medical examination. It is acknowledged by the Policyowner that we shall be relying on the information disclosed to us in these documents and any declarations made by the person concerned in determining whether to accept the Non Group Person for membership.
2.3We will notify the Policyowner of any nomination for membership which is rejected or which will only be accepted on special terms and conditions.

Clause 3 established the date of the commencement of the risk borne by Citicorp. It stated:

3. COMMENCEMENT OF RISK

3.1Subject to payment of premium and receipt of any other certificates or information required by us, the risk we assume by reason of this Policy shall commence on and from:
(a) in respect of a Member:
(i)where a Group Person is accepted for membership under clause 1.1(a), the date of the nomination for membership;
(ii)where the person is a Non Group Person and we have notified the Policyowner that the Non Group Person will only be accepted for membership on special terms and conditions, upon receipt of notice from the Policyowner accepting those special terms and conditions.
(iii)in any other case, the date of acceptance by us for membership.

(b)in respect of cover in excess of the Automatic Acceptance Limit, the date of acceptance by us of the risk for the excess cover.

(c) in respect of a Death by Accident Benefit (see clause 6.3).
(d) in respect of a Disability by Accident Benefit (see clause 12.3).
3.2The risk we assume in relation to any person shall not under any circumstances commence prior to the Commencement Date.

Clause 4 described the extent of cover. It provided:

4. EXTENT OF COVER

4.1A Policyowner shall only be eligible to receive in respect of a Member those benefits specified on the nomination for membership. Cover is available under this Policy for Death Benefits and/or Temporary Disability Benefits. TPD Benefits are available as a rider to the Death Benefit.
Cover for Death Benefits automatically entitles the Policyowner to cover for Terminal Illness Benefits in respect of Non Group Members at no additional premium. Cover for Terminal Illness Benefits is not available for Group Members.
Cover for Death Benefits automatically entitles the Policyowner to cover for Death by Accident Benefits. Cover for Temporary Disability Benefits automatically entitles the Policyowner to cover for Disability by Accident Benefits.
4.2The payment of any Benefit under this Policy in respect of a Member shall always be subject to:
(a) the terms and conditions of this Policy;
(b) any Special Conditions; and
(c)any special terms and conditions of acceptance for membership of that Member.

Clause 5 provided, in the event of a Member’s death, for the payment by Citicorp to the Policyowner of the sum insured for that Member:

5.DEATH, TERMINAL ILLNESS AND TPD BENEFITS

5.1      If whilst this Policy is in force a Member:
(a)       dies; or
(b)       suffers from TPD,
then subject to the provisions of this Policy we will pay to the Policyowner the Sum Insured for that Member.
5.2If whilst this Policy is in force a Non Group Member is diagnosed as having a Terminal Illness, then subject to the provisions of this Policy, we will pay to the Policyowner the Sum Insured or $750,000, whichever is the lesser.
Where the Terminal Illness Benefit is less than the Sum Insured, the Sum Insured for the purpose of Death and TPD Benefits will be reduced by the amount of the Terminal Illness Benefit with premiums continuing to be payable in respect of the reduced cover.

Clause 8.1 stated that increases in the Sum Insured were provided for, in respect of both Group and Non Group Members, by way of acceptance by Citicorp of applications for increases made by the Policyowner, and took effect immediately upon acceptance by Citicorp.

Under cl 9.1 death by suicide by a Non Group Member within 13 months of the commencement of risk expressly precluded payment of the death benefit.

The payment of premiums was to be made to Citicorp within 30 days of the ‘Due Date’, that being defined in the first schedule as the first day of each month during the currency of the policy. Clause 21 provided:

21.PREMIUMS
21.1Premiums are due to us in full in advance (except where we agree to accept premiums by instalments) and shall be initially calculated for each Member from the commencement of risk in relation to that Member to the next Annual Review Date based on our then current premium rates. Further premiums on renewal shall be calculated from the Annual Review Date in each subsequent year and shall be similarly based.
21.2All premiums must be paid within thirty days of the Due Date.
21.3Premiums and premium adjustments shall be made as determined in the First Schedule. Where premiums are paid by instalments an additional premium (as notified to the Policyowner from time to time) shall be payable.
21.4If the premium cannot be calculated by reason of the inability of the Policyowner to furnish us with adequate information for this purpose, the Policyowner shall pay a deposit premium equal to the premium due on the previous Annual Review Date. The Policyowner shall then furnish us with sufficient information to enable the final premium to be assessed as soon as possible but in any event within 60 days of a request being made by us, whereupon we shall determine the final premium which shall be adjusted between us and the Policyowner within 30 days of the assessment.

Relevantly, where an entitling event arose, cl 25 provided that the payment of benefits was to be paid to the Policyowner in trust for the benefit of the relevant member:

25.PAYMENT OF BENEFITS
25.1All Benefits to be paid in respect of a Member shall be paid to the Policyowner (or a person nominated by the Policyowner) who shall hold the monies in trust for the benefit of that Member and where applicable, in accordance with the terms of any Trust Deed.
25.2All Benefits will be payable in the manner set out in the First Schedule.

The process of the payment of benefits contemplated by the master policy was thus that payments were made (via the Policyowner (Rivkin DM) who holds the money on trust) to the member, that is, the life insured (here, Shilton), not to the Participating Person. Clause 25.1 is inconsistent with the terms of the certificates (where the benefit is payable to Rivkin DM who holds the money on trust for the certificate holder, here Montclare). This suggests that Montclare’s submission that the master policy was implemented with respect to him would not have the consequence that the benefit is payable to him. Montclare submits that the terms of cl 25.1 are ‘a slip’ or oversight and that the overall scheme suggests that it was the Participating Person who was intended to receive the benefit.

Clause 28 contemplated that the group scheme would operate by the issuing of certificates. It recognised that the Participating Person would be the certificate holder and permitted the Participating Person to cancel the insurance within 14 days of receiving their Certificate of Insurance. It stated:

28. ‘FREE LOOK’ PERIOD – NON GROUP MEMBERS
If the Participating Person within 14 days of receipt of their Certificate of Insurance requests for the insurance to be cancelled, we will cancel the insurance from inception and refund any premium that has been paid.

Clause 30.1 provided that the Policyowner could cancel the policy at any time by giving written notice and Citicorp undertook to refund any premium paid by reference to the unexpired period of risk.

The judge found that, when an applicant for insurance sent a completed application form and payment to Rivkin Croll, Rivkin Croll would forward the payment to Jacques Martin.[59] Jacques Martin, in turn, would distribute part of the payment to Citicorp and part to Rivkin DI.[60]
[59]Reasons [91].
[60]Ibid.

The statutory obligations

The ICA does not contain a definition of a ‘contract of insurance’ but it does include a description of such contracts:

10 Contracts of insurance
(1)   A reference in this Act to a contract of insurance includes a reference to a contract that would ordinarily be regarded as a contract of insurance although some of its provisions are not by way of insurance.
(2)   A reference in this Act to a contract of insurance includes a reference to a contract that includes provisions of insurance in so far as those provisions are concerned, although the contract would not ordinarily be regarded as a contract of insurance.
(3)   Where a provision included in a contract that would not ordinarily be regarded as a contract of insurance affects the operation of a contract of insurance to which this Act applies, that provision shall, for the purposes of this Act, be regarded as a provision included in the contract of insurance.

A ‘contract of life insurance’ is defined in s 11(1) as meaning ‘a contract that constitutes a life policy within the meaning of the Life Insurance Act 1995’.

Section 9 of the Life Insurance Act 1995 (Cth) specifies various contracts as constituting a contract of life insurance including, relevantly, those contracts of insurance that provide for the ‘payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life’.

The ‘insured’ has a duty of disclosure imposed under s 21 of the ICA; at the relevant time s 21 provided:

21 The insured’s duty of disclosure

(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:
(a)the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or
(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.

(2) The duty of disclosure does not require the disclosure of a matter:
(a) that diminishes the risk;
(b) that is of common knowledge;
(c) that the insurer knows in the ordinary course of the insurer’s business as an insurer ought to know; or
(d)as to which compliance with the duty of disclosure is waived by the insurer.

(3)       Where a person:
(a)       failed to answer; or
(b)       gave an obviously incomplete or irrelevant answer to:
a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.

With respect to life insurance, the insurer can avoid the contract, relevantly, where the insured has made a fraudulent misrepresentation before entering into the contract. Section 29 of the ICA relevantly provides:

29 Life insurance

Scope

(1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:
(a) failed to comply with the duty of disclosure; or
(b)made a misrepresentation to the insurer before the contract was entered into;

but does not apply where:
(c)the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or
(d)the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.

…
Insurer may avoid contract
(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.
…

Before the judge Metlife successfully relied upon s 29(2) to avoid the contract of insurance on the basis that Montclare was an ‘insured’ under the contract (being a party to the contract).

Section 48 of the ICA imposes certain obligations on third party beneficiaries, with respect to their claims, in contracts of general insurance.[61] Section 48A deals with third party beneficiaries under policies of life insurance. Before amendments were made in 2013, s 48A relevantly read as follows:
[61]The pre-amended s 48 provided: ‘(1) Where a person who is not a party to a contract of general insurance is specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends, that person has a right to recover the amount of the person’s loss from the insurer in accordance with the contract notwithstanding that the person is not a party to the contract.’ (2) Subject to the contract, a person who has such a right: (a) has, in relation to the person’s claim, the same obligations to the insurer as the person would have if the person were the insured; and (b) may discharge the insured’s obligations in relation to the loss. (3) The insurer has the same defences to an action under this section as the insurer would have in an action by the insured’.

48A Life policy for the benefit of another person
(1) This section applies to a contract of life insurance effected on the life of a person but expressed to be for the benefit of another person specified in the contract (the third party).
(2) The following provisions have effect in relation to a contract to which this section applies:
(a)any money that becomes payable under the contract is payable to the third party, even though he or she is not a party to the contract;

[113]Sutton on Insurance Law, above n 81, vol 1, 752 [9.430], citing Guardian Assurance (1974) 48 ALJR 307, 308 (Mason J, with whom Barwick CJ, Menzies, Stephen, and Jacobs JJ agreed). See [4] above.

The editors go on to emphasise that the contract of insurance may be made up of the policy or certificate together with other documents affixed to it or incorporated by reference:

In this connection it should be noted that the contract of insurance comprises the policy or certificate of insurance if issued and such other documents as are affixed to it or are incorporated by words of reference in the policy itself.[114]

[114]Ibid (citations omitted).

What this suggests is that here the focus should be on the inter-relationship between the documents. It is not a matter of saying that the contract resides wholly in the certificates (as Metlife would have it) or wholly in the master policy (as Montclare would have it). We do not consider that the terms of the contract of insurance exhaustively reside in a single document. It is rather a question of discerning the relationship between the documents to identify accurately what was the contractual arrangement in existence at the relevant times and which parties did it bind.

We do not consider that the certificates exhaustively contain the terms of the contract of insurance. Some of the terms of the contract derive from statements made in the Customer Information Brochure and the Policy Information Statement. More significantly, some of the terms of the contract derive from the master policy. We consider that it is significant that the certificates make multiple references to the master policy. It is necessary to construe the master policy and the certificates together. Where the terms of the master policy are inconsistent with those contained in the certificates, the terms of the certificates prevail. The contract of insurance is thus made up of a suite or assemblage of documents, the certificates being paramount. In our view, the source of the insurance obligation upon Citicorp to pay a benefit to Montclare upon Shilton’s life arose from the certificates drawing upon the duties under the master policy.

It is clear that the master policy was not activated according to its terms. The trust deed was never executed. This had been intended to establish Rivkin DM as ‘the Trustee’ who would take legal ownership of the master policy issued by Citicorp for the benefit, relevantly, of individuals who wished to jointly participate in the master policy. The application forms annexed to the trust deed, which were intended to be the mechanism by which applications were made for life insurance under the group scheme, were not utilised. Nevertheless, Citicorp treated Shilton as if he were a member of the group scheme under the master policy (by, for example, including his details in the bordereau report) and stated on the certificates that the source of the insurance was the master policy. By this conduct Citicorp waived compliance with any requirement insofar as there was non-conformity between the application Montclare made and the application prescribed under the master policy. Thus, although the master policy was not activated according to its terms, its principal terms formed part of the contract of insurance.

Furthermore, in our view, the contract was tripartite, including Citicorp, Rivkin DM and Montclare as parties. As Montclare was a party to the contract of insurance, Metlife was entitled to avoid the contract, pursuant to s 29(2) of the ICA, by reason of Montclare’s fraudulent misrepresentation with respect to Shilton’s medical history.

The analysis which follows seeks to make good these propositions.

An analysis of those arrangements must begin with the form of the application for insurance made by Montclare. In our view, the submission of the two application forms is the only relevant conduct that has the character of an ‘offer’.

As mentioned,[115] there was no relevant application as prescribed under the trust deed in appendix ‘A’.[116] By contrast with the trustees of superannuation funds, or employers who wished for their employees to become lives insured, under the trust deed it was necessary for ‘individuals who wish to becomes lives insured’ to make an application to become a Participating Individual[117] and thereby to become ‘an equitable owner in the insurance policy administered by Rivkin [DM]’ and a party to the trust deed.[118] There was no application made by Shilton to become a ‘Participating Individual’ in accordance with the trust deed (nor any application as prescribed under the trust deed by Montclare in any capacity). Moreover, as noted, the trust deed whereby Rivkin DM was to become ‘the Trustee’ ‘for the purpose of acting as the legal owner of a disability, trauma and life insurance policy … as the Trustee may select’[119] was never executed.
[115]See [104] above.
[116]See [98]–[99] above.
[117]See [98] above.
[118]See [99] above.
[119]See [89] above.

The evidence was, as mentioned,[120] that applications for membership of the master policy were accepted on the basis of a completed tear-out application form from the Customer Information Brochure. Metlife is correct to argue that the application form contained within the Customer Information Brochure does not reflect in terms the scheme of the master policy. It does not invite an application to participate in the master policy as a Participating Person,[121] a person who applies to participate in the policy by including a person in respect of whom he or she has an insurable interest as a member. There is no mention in the application forms that the status of a member will be either as a ‘Group Member’ or ‘Non Group Member’ nor any description of the different conditions attaching to each. The application forms completed by Montclare made no reference to the general framework to be found in the master policy.
[120]See [103] above.
[121]See [114] above.

Nevertheless, there are sufficient connections between the application forms and the master policy to conclude that the application by Montclare was an application for insurance under the master policy. In our view, upon Citicorp’s acceptance of the first application, Shilton became a member of the master policy and Montclare acquired the status of a Participating Person under the master policy. Citicorp’s acceptance of the second application reinforced that status by increasing the death benefit to be paid. The connection between the applications made by Montclare and the master policy are apparent from the statements in the Customer Information Brochure that:

· the insurance cover arranged by Rivkin DM was ‘under a Master Policy with Citicorp’;[122] this reinforced the statements that the insurance ‘is issued by … Citicorp’.[123]
[122]See [10] above.
[123]See [8]–[9] above. See also [16], [22], and [56] above.

· benefits were limited to death benefits, terminal illness, or, if selected, total and permanent disablement,[124] reflecting the character of the master policy.[125]
[124]See [12]–[13] above.
[125]See [124] above. See also [75] above.

· the applicant for the insurance need not be the same person as the life insured,[126] reflecting the scheme but not the terminology of the distinction in the master policy between Participating Persons and members.[127] (However, it should be noted that the Customer Information Brochure also envisages that the applicant for life insurance may be the life insured, in which case the death benefit would be paid by Rivkin DM directly to the life insured’s estate as opposed to being paid to the applicant.[128] It is questionable whether the master policy would permit an application for participation in the policy by someone who sought membership for themselves; such a person would be both a ‘Participating Person’ and a ‘Member’ and the scheme does not sit easily with this although it can be accepted that a person is someone in respect of whom that person himself or herself has an insurable interest. Nevertheless, we consider this to be only an aspect of there being an assemblage of ‘ill-assorted’ documents and not proof that the master policy was never here pressed into service.)
[126]See [14] above.
[127]See [114] above.
[128]See [19] above.

· there was a linkage in the premium to be paid with respect to the individual insurance cover provided upon acceptance of the application and the claims experience arising under other insurance cover arranged by Rivkin DM; variations in premiums would ‘only be made where it applies to all Rivkin Direct insurances and will not be limited to individual policies’.[129] This was an indication that the policy applied for was in the nature of a group policy reflecting the character of the master policy.
[129]See [15] above. This was reinforced in the Policy Information Statement: see [58] above. This appears to be in addition to the capacity for Citicorp to vary premiums provided for under the certificates: see [48] above.

· it was necessary for an applicant for insurance to read the terms not only of the Customer Information Brochure but also of the certificate of insurance to be issued on acceptance and the Policy Information Statement, each of which made further reference to the master policy.[130]

· the benefits would be provided by the ‘Certificate of Insurance which is issued under the Master Policy’.[131]

[130]See [17] above.

[131]See [18] above.

The connection between Montclare’s application and the master policy is also apparent from the record in Citicorp’s bordereau report for January 1999 for Shilton reflecting the number of the first certificate, the acceptance date of the application for insurance (as recorded on the first certificate as the date of commencement),[132] and the sum insured.[133]
[132]See [52] above.
[133]See [64]–[65] above.

Furthermore, the certificates also record a connection to the master policy and demonstrate the inter-relationship between the obligations of Citicorp under the master policy and the entitlements to benefits pursuant to the certificates. This reveals that the master policy and the certificates are inextricably intertwined. This is apparent because the certificates state that:

· the insurance provided was ‘under a Master Group Life and Disability Insurance Policy dated 1 October 1996 between Citicorp … and Rivkin [DM]’.[134]
[134]See [37] (first certificate), and [70] (second certificate) above. The commencement date of the master policy was 1 October 1996: see [109] above.

· the payment of a death benefit, the entitlement to which was subject to the terms of the certificate, once paid ‘will discharge all of the Insurer’s obligations under the Master Policy’.[135]

· the insurance provided pursuant to the certificate was automatically cancelled if the master policy was cancelled for any reason.[136]

[135]See [42] (first certificate) and [81] (second certificate) above.

[136]See [45] (first certificate) and [81] (second certificate) above.

As the obligation to pay the death benefit lay at the heart of the life insurance purchased by Montclare, the fact that payment pursuant to the certificates discharged the obligations under the master policy is a powerful factor linking the certificates and the master policy. The payment of money was to be made to discharge the entitlements under the certificates and the obligations of Citicorp under the master policy. The certificates, construed in light of the rights and obligations of the master policy, where consistent, amount to a contract ‘that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life’[137] within the meaning of a contract of insurance under s 9 of the Life InsuranceAct.
[137]See [135] above.

The termination of the insurance because of the cancellation of the master policy, for any reason, suggests that the certificates do not stand on their own but rather have a legal operation which is affected by the existence and operation of the master policy. The certificates are incomplete in their terms. There is no statement that the certificates are to take the place of the master policy. Given the linkage to the master policy, reliance can thus be had to the terms of the master policy.[138]
[138]See [156] above.

Given these considerations, we consider that Montclare is correct to argue that the master policy cannot be considered irrelevant to the contractual arrangements between the parties.

Nevertheless, the connections also suggest that the certificates are not merely evidence of an anterior legally binding agreement between Citicorp and Rivkin DM under the master policy, in respect of which Montclare is a third party beneficiary. Rather, the certificates have a primacy in the contractual arrangement; this is reflected in the statement in the certificates that the ‘entitlement to any Benefit is subject to the terms and conditions of this Certificate’.[139] This entitlement is not merely a right to make a claim, as Montclare would have it. The entitlement under the certificates is a right to payment. Moreover, in practice, those payments when made, were made directly by Citicorp to the claimant, reinforcing the direct relationship between Citicorp and an insured.
[139]See [41] above.

While the certificates were issued by Rivkin DM, and not Citicorp, they were sent only after Citicorp had approved the applications for insurance.[140] The connections between the certificates and the master policy suggest that Rivkin DM, by issuing the certificates, was in effect acting on behalf of Citicorp in formally accepting the application by Montclare for insurance and thereby agreeing that insurance would be provided under the master policy in accordance with the conditions identified in the certificates.
[140]See [151] above.

Furthermore, the certificates do not simply reflect an agreement between Montclare and Rivkin DM; rather, the agreement is tripartite between Montclare, Rivkin DM, and Citicorp. This is apparent from:

· the definitions under the certificates of ‘We/Our/Us’ as Rivkin DM, the ‘Insurer’ as Citicorp, and ‘You’ as Montclare;[141]
[141]See [38] and [72]–[73] above.

· the discharge of Citicorp’s obligations under the master policy by payments of benefits pursuant to the certificates;[142]
[142]See [42] above.

· alterations to the Sum Insured taking effect from the date of acceptance, if forthcoming, by Citicorp without the need for any action to be taken by Rivkin DM as an intermediary;[143]
[143]See [44] above.

· as recorded in the certificates, Citicorp’s entitlement to vary the premiums due to Rivkin DM;[144]
[144]See [47]–[48] above.

· Citicorp’s entitlement to reinstate a policy that had lapsed due to non-payment of a premium to Rivkin DM on terms within its discretion;[145]
[145]See [50] above.

· the term of the certificates that claims were to be made to Citicorp;[146]

· the description in the Policy Information Statement that the first certificate ‘is evidence of the contract between yourself, Rivkin [DM] … and the insurer, Citicorp Life’.[147]

[146]See [51] above.

[147]See [55] above.

All of the surrounding indicia, including the completion of the application forms by Montclare and the issuing of the certificates by Rivkin DM once Citicorp had approved the application and indicated its willingness to assume liability for the risk associated with the life of Shilton, are consistent with a contractual analysis between three parties. In that contractual arrangement, Montclare is the applicant and an insured, Citicorp is the insurer, and Rivkin DM, whose responsibility was in substance arranging[148] the insurance, is the recipient and trustee of any benefit for Montclare as the certificate holder. We see no difficulty in Rivkin DM occupying the dual role of a contracting party and a trustee for another contracting party under the contract of insurance. The critical point is that both Citicorp and Montclare are parties to the contract of insurance and we have endeavoured to show why that is clearly so.
[148]See [10] above.

The multiple references to the master policy in the certificates and associated documentation, together with the extensive references to Citicorp in the certificates and associated documentation, and the role that Citicorp is thereby acknowledged as playing in the arrangements, render it necessary, as we have said, to construe the master policy and the certificates together. The primacy of the certificates means that, in the event of an inconsistency between the master policy and the certificates, the terms of the certificates are to prevail. This reflects the observation made by the judge above,[149] based upon Professor Clarke’s The Law of Insurance Contracts, that where the certificate is not a complete statement of the terms of the contract of insurance, it is permissible to look to the terms of the policy and, where there is conflict, the certificate prevails. Professor Clarke describes this approach in some detail:
[149]See [156] above.

15-6E Policy and Certificate
Inconsistency may be found between the terms of a master policy and certificates which have been issued to various persons intended to benefit from the master policy. For example, an employer may arrange group life or health insurance for his employees, and issues certificates to the employees. A shipper of goods in bulk may insure the bulk, but sell parts of the bulk CIF to various buyers, giving them certificates of insurance in respect of their part.
If the certificate appears to be a complete statement of the insurance contract, subject to contrary terms in the certificate, that should preclude reference to the policy at all. The first reason is the application of the parol evidence rule … especially if, as often happens, the certificate contains a statement that it shall take the place of the policy. The second reason, particularly if such a statement is found in the certificate, is that the buyer has not been given sufficient notice of the terms which are stated in the policy but not in the certificate.
If the certificate is evidently not a complete statement of the terms of the contract of insurance, the courts have compared the contents of certificate and policy and held in case of conflict, usually in favour of the insured, that the certificate prevailed. A number of arguments support this conclusion. First, the contradictions between policy and certificate create ambiguity and any ambiguity must be resolved against the insurer by construction contra proferentem. Second, in the case of cargo insurance the certificate is put into circulation as a document of international trade, which will be relied on by buyers of the goods; efficient business practice predicates that the buyer should not have to refer to the policy. So, an insurer who puts such a certificate into circulation may be estopped from denying or qualifying the terms of the certificate by reference to terms of the policy. A similar contention can be maintained in respect of other kinds of insurance. Third, the certificate should prevail, as being the later of the two documents; it has been seen as a modification of the original contract contained in the master policy.
One certificate, which may appear incomplete, is that issued under group health insurance. In the United States, the certificate has little apparent contractual importance, being no more than evidence of the holder’s right to cover provided by the master policy. Usually, the holder cannot ascertain his rights without reference to the policy. The two documents are construed together. In case of conflict, however, the certificate has been held to prevail, especially if the conflict arises from a change in the master policy which has not been notified to the holder of the certificate, or there are terms which the court can use to find an estoppel against the insurer, or if a copy of the master policy is not available to the insured.[150]

[150]Clarke, above n 89, 454–5 (emphasis added) (citations omitted).

For example, in Parks v Prudential Insurance Co of America[151] there was a contributory policy of group insurance with respect to total and permanent disability benefits between an insurer and an employer. The insurer undertook to issue certificates to the employer for delivery to each person insured under the policy setting out the insurance protection applicable under the policy. The coverage was for optional benefits upon death of the employee and optional total and permanent disablement. The premium on the plaintiff employee’s policy was deducted by the employer from the plaintiff’s salary. The premium rates were constantly going up and down from year to year. At a meeting of the majority of employees, it was resolved to omit the total and permanent disablement cover and for the employees to be insured only for life. The plaintiff was not given notice of the meeting and did not attend. After the meeting the policy was amended to omit cover for total and permanent disablement.
[151]103 F Supp 493 (ED Tenn, 1951) (‘Parks’).

The plaintiff became totally and permanently disabled. The insurance company rejected the claim on the basis of the change in policy cover before the plaintiff became disabled. The plaintiff had received two certificates informing him that he was insured ‘in accordance with and subject to the terms and conditions of its Group Policy No 1360’.[152] Each certificate provided that payments would be made upon the employee becoming ‘totally and permanently disabled or physically or mentally incapacitated to such an extent that he or she by reason of such disability or incapacity is rendered wholly and permanently unable to perform any work for any kind of compensation of financial value’.[153] No new certificates had been issued by the insurer after the meeting or the change in policy.
[152]Ibid 495–6.
[153]Ibid 496.

The Court gave judgment in favour of the plaintiff. It held that someone who holds a certificate issued under a group policy for which he or she has paid all or a portion of the premium ‘has a definite contractual relation with the insurance company’.[154] Although the primary contracting parties to the group insurance are the insurer and the employer, where ‘the insurer issues its certificates to the employees and the latter contribute a portion of the premium paid by the employer’[155] then ‘there arises a definite contract relation between the insured employees and the insurer, and the certificates become integral parts of the insurance contract’.[156] In those circumstances ‘[t]he group policy and the certificate are to be construed and enforced together’.[157] Relevantly, the Court held that in the event of a conflict or inconsistency, the certificate prevails:

Where the certificate is a part of the group policy contract, in case of a conflict between them the terms of the certificate will control as between the employee and insurer.[158]

[154]Ibid.

[155]Ibid 496–7, quoting from Smithart v John Hancock Mut Life Ins Co, 167 Tenn 513, 527, 71 SW2d 1059, 1064.

[156]Ibid 497.

[157]Ibid.

[158]Ibid.

In our view, here there is a critical conflict between the certificates and the master policy in that the Recital to the certificates provides that, on the death of the life insured, the benefit is to be paid to Rivkin DM on trust to pay the certificate holder (Montclare)[159] and cl 25.1 of the master policy provides that benefits are to be paid to the Policyowner in trust for the benefit of the relevant member (Shilton). If cl 25.1 was to prevail, the death benefit would be given to Shilton’s estate. We do not accept the argument by Montclare that the terms of cl 25.1 are ‘a slip’ and that the benefit was intended to be payable to the Participating Person (Montclare). The ordinary meaning of cl 25.1 is unambiguous and plain and the context of the scheme does not require that it be construed in the manner for which Montclare contends. Moreover, it governs a critically important issue of entitlement, namely, who is entitled to receive the benefit. It is unlikely to be an oversight. As the certificate has primacy in the event of a conflict, the effect is that, if Metlife was not permitted to avoid the contract, the death benefit would be payable to Montclare.
[159]See [36]–[38] above.

We consider that the tripartite contract of insurance was made up of a suite of documents, including the first application, the Customer Information Brochure, the Policy Information Statement, the first certificate and the terms of the master policy (where consistent). We consider that there was a second contract of insurance, a variation to the first, consisting of the second application, the Customer Information Brochure, the Policy Information Statement and the terms of the master policy (where consistent). It is convenient to refer to the contract of insurance in the singular. As we consider that Montclare is one of the parties to the contract of insurance, Metlife is entitled to avoid the contract on the basis of the fraudulent misrepresentation he made before entering into the contract.

We accept that the analysis we have adopted is a significant departure from that adopted by the judge. The judge concluded that the master policy was never implemented for Montclare; in his view ‘[t]he scheme of insurance cover upon which Mr Montclare relied was never implemented in his case’.[160] He also said: ‘In my opinion, Mr Montclare neither directly, nor through Mr Shilton, ever joined the group scheme contemplated by the master policy’.[161] On occasion he appeared to express himself inconsistently by saying that the benefits ‘were to be provided under the master policy’.[162] There are difficulties in reconciling how it could be that the ‘insurance entitlements had their source in the master policy’,[163] when, on the judge’s view, the master policy was never implemented for Montclare. On his Honour’s view, the certificates alone constituted the contract of insurance[164] and, with great respect, we have rejected that view.
[160]Reasons [160]; see [155] above.
[161]Reasons [165]; see [160] above.
[162]Reasons [156]; see [157] above.
[163]Reasons [156]; see [157] above.
[164]Reasons [160]; see [155] above.

We do not accept that there was an agreement that benefits be payable under the master policy without Montclare participating in the group scheme. We consider that the proper analysis, one which takes account of all the documentation, and seeks to reconcile that documentation, insofar as that can be done, is that the benefits were payable under the master policy because Montclare participated in the group scheme but the terms of the master policy were subject to the terms of the certificates and, in the event of conflict, were displaced by those terms.

We consider that the legal relationships here are somewhat analogous to those in Swain v The Law Society.[165] There solicitors paid premiums under the Law Society’s compulsory professional indemnity scheme and the Law Society received a part of the commission that went to the insurance brokers. The Law Society determined to use the commission for the benefit of the profession, rather than returning it to the individual solicitors paying the premiums that gave rise to the commission. Two solicitors brought a challenge on the issue of whether the Law Society was entitled to retain the commission received by it from the brokers or was accountable for the commission to solicitors.
[165][1983] 1 AC 598 (‘Swain’s case’). The judge held that the circumstances in Swain’s case, relating to a statutory scheme, were not sufficiently analogous for the reasoning to be of direct assistance: Reasons [150].

The Law Society was authorised to take out and maintain a master policy and to arrange for the issue to individual solicitors of certificates of insurance. Clause 1 of the master policy provided:

The insurers agree with The Law Society on behalf of all solicitors from time to time required to be insured by indemnity rules made under section 37 of the Solicitors Act 1974, and on behalf of former solicitors, to provide such insurance in accordance with the terms of the certificate attached hereto.[166]

[166]Swain’s case [1983] 1 AC 598, 615 (emphasis added).

Individual solicitors were required to pay the premiums ‘payable … under the master policy and certificate of insurance as they fell due’.[167] The master policy scheduled to the professional indemnity rules expressed an agreement by the insurers with the Law Society ‘on behalf of all solicitors who are, or are held out to the public as, principals in private practice … and on behalf of former solicitors’.[168] The form of the certificate of insurance commenced as follows:

This is to certify that in accordance with the authorisation granted to [London Insurance Brokers Ltd] under the master policy referred to in the Schedule by the insurers subscribing such master policy (hereinafter called ‘the insurers’) insurance is granted by the insurers in accordance with the terms and conditions following, and in consideration of the payment of the premium stated in the Schedule.[169]

[167]Ibid.

[168]Ibid.

[169]Ibid 616.

Lord Brightman construed the certificate of insurance, issued pursuant to the relevant master policy, as a contract of insurance between the insurer and the insured, the named solicitor. He said:

My Lords, it appears to me that once the master policy is in force and certificates of insurance are issued, the legal position can be analysed as follows: (1) The master policy is a contract between the insurers and The Law Society under which the insurers bind themselves to provide solicitors with insurance on the terms of the certificate of insurance on payment of the appropriate premium, and to provide insurance for former solicitors without payment of premium. (2) The certificate of insurance evidences a contract between the insurers and the named solicitor under which the insurers bind themselves to indemnify the solicitor and all others who come within the definition of the assured.[170]

[170]Ibid 616 (emphasis added).

Thus, Lord Brightman recognised a direct contractual relationship between the insurer and the individual solicitor where the solicitor was the holder of a certificate issued pursuant to the master policy. The only policy in issue was the master policy but there were individual contracts of insurance with each solicitor. The link between the master policy and the certificate was simple because the insurer undertook, pursuant to the master policy, to provide insurance to individual solicitors on the terms of the certificate.[171] The legal arrangements between Montclare, Rivkin DM, and Metlife are more complex in that the master policy set out its own terms (not by reference to the terms in the certificates) and the certificates set out separate (and sometimes conflicting) and incomplete terms. Nevertheless, the acknowledgement of the directness of the contractual relationship between the insurer and the certificate holder is significant. It supports the view that the same directness of contractual relationship exists here, albeit that the terms of the contract of insurance are not exhausted by the certificates but depend upon terms and conditions of the master policy.[172]
[171]The certificates in Parks, described at [197] above, are more analogous to the circumstances here because the certificates stated that the insurance was provided in accordance with the terms of the policy rather than, conversely, as in Swain’s case, the policy being provided in accordance with the terms of the certificates. The first and second certificates here stated that the insurance was provided ‘under’ the master policy.
[172]The Court in Swain’s case rejected the challenge that The Law Society had acted ultra vires in applying its share of the commission to the benefit of the profession as a whole. It also held that The Law Society was not acting in the position of a trustee.

In our view, despite the different analysis we have adopted, the judge here was correct in concluding that: (1) Montclare was in a direct contractual relationship with Citicorp; and (2) Metlife was entitled to avoid the contract of insurance, pursuant to s 29(2) of the ICA, by reason of the fraudulent misrepresentation Montclare made before entering into the contract. The order made by the judge, dismissing the proceeding, should not be disturbed.

Conclusion on the application for leave to appeal

The issues raised in this proceeding are complex and, in our view, it could not be concluded that the prospects of success of an appeal were fanciful. We consider that leave to appeal should be granted.

Conclusion on the appeal

We have concluded that the judge was correct in concluding that, as Montclare was a party to the contract of insurance, Metlife was entitled to avoid the contract by reason of the fraudulent misrepresentation made with respect to Shilton’s medical history, pursuant to s 29(2) of the ICA.

The appeal will be dismissed.

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[2016] VSCA 336

20 December 2016