Insurance—Loss of contents insurance—Theft—Proposal—Non-disclosure of material fact—Withholding of information likely to affect acceptance—Statutory power of court to excuse failure by insured to observe or perform term or condition of insurance contract—Term or condition—Common law duty of disclosure—Election—Lack of knowledge of facts giving right to avoid policy—Insurance Act 1902 (N.S.W.), s. 18.
Decisions
MASON, BRENNAN, DEANE and DAWSON JJ. This is an appeal from a unanimous decision of the Court of Appeal of the Supreme Court of New South Wales dismissing an appeal from a judgment of Rogers J. in an action by the appellants, Mr. and Mrs. Khoury, claiming indemnity under a houseowner's and householder's insurance policy issued to them by the respondent Government Insurance Office of New South Wales ("the insurer"). At first instance, four issues arose: (1) whether there had been a material non-disclosure by the appellants; (2) whether the insurer had elected to affirm the policy; (3) whether the appellants were entitled to relief under s.18 of the Insurance Act 1902 (N.S.W.), as amended; and (4) quantum. Rogers J. held that the insurer was entitled to avoid the policy ab initio by reason of a material non-disclosure at the time the policy was effected and gave judgment in its favour.
2. The appellants carried on business as clothing manufacturers on the ground floor of a two-storey building in the Sydney suburb of Revesby. They lived in the upper storey of the building with their children of whom three were in their late teens and early twenties. These three children worked, on a regular basis, in the appellants' business which included the manufacture and sale of clothing. By a proposal made to the insurer and dated 30 October, the appellants sought insurance cover for the contents of their residential premises, including a gold bangle which was listed as a special item. A policy was issued in accordance with the proposal on 29 March 1980. It was stated to be effective from 15 November 1979 until 15 November 1980. On 24 February 1980 the gold bangle, certain other items of jewellery, cash, old coins and a silver tea service, were stolen from the premises. The appellants made a claim under the policy. The parties agreed, in light of the facts found by Rogers J., that the amount of the loss was $36,400.
3. On 4 June 1980 Mr. Khoury was visited by a Mr. James, a loss assessor and investigator employed by the insurer. After discussions with Mr. Khoury, Mr. James prepared a typed statement which Mr. Khoury signed. The statement included the following passage:
"During recent months I did incur some financial losses, this was not connected with my business but one of my Sons, unbeknown to me became involved in gambling and he lost considerable sums of money, which were as a consequence of a number of sales of our…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Khoury v Government Insurance Office (NSW) [1984] HCA 55
Case
[1984] HCA 55
Decision Date
CaseChat Overview and Summary
Khoury v Government Insurance Office (NSW) was a case heard before the High Court of Australia. The dispute concerned the extent of the Government Insurance Office's (GIO) liability to indemnify Mr. Khoury, the appellant, for damages awarded against him in a motor vehicle accident claim. Mr. Khoury had been involved in an accident where his vehicle collided with a motorcycle, resulting in injuries to the motorcyclist. The GIO, as the compulsory third-party insurer, had indemnified the motorcyclist for their injuries. However, the GIO sought to recover a portion of this payout from Mr. Khoury, alleging that his negligence was the sole cause of the accident and that they were entitled to recover from him under the relevant legislation.
The central legal issue before the High Court was whether the GIO, as the compulsory third-party insurer, could recover from its insured, Mr. Khoury, the amount it had paid to the injured third party. Specifically, the court had to determine if the GIO was subrogated to the rights of the injured motorcyclist against Mr. Khoury, or if the GIO's statutory obligation to indemnify Mr. Khoury precluded such a claim. The question also involved the interpretation of the relevant provisions of the *Motor Vehicles (Third Party Insurance) Act 1942* (NSW) and the common law principles of indemnity and subrogation in the context of compulsory insurance.
The High Court held that the GIO was not entitled to recover from Mr. Khoury. The Court reasoned that the statutory scheme of compulsory third-party insurance imposed a primary obligation on the insurer to indemnify the insured against liability for death or bodily injury caused by or arising out of the use of the motor vehicle. This statutory indemnity was intended to protect the insured from such liabilities. The Court found that the GIO's attempt to recover from Mr. Khoury was inconsistent with this statutory purpose and effectively undermined the indemnity provided by the Act. The Court distinguished the situation from ordinary insurance contracts where subrogation might apply, emphasizing that the compulsory nature of this insurance created a different legal relationship.
Consequently, the High Court dismissed the GIO's appeal, upholding the decision of the lower court. Mr. Khoury was therefore not liable to reimburse the GIO for the moneys paid to the injured motorcyclist.