Royal & Sun Alliance Life Assurance Australia Ltd v Feeney No. Scciv-01-575

ROYAL & SUN ALLIANCE LIFE ASSURANCE AUSTRALIA LIMITED v FEENEY
[2001] SASC 294
Full Court: Doyle CJ, Perry and Bleby JJ

DOYLE CJ I have had the advantage of reading the reasons of Bleby J. I adopt his statement of the circumstances giving rise to the issue argued on appeal. I will not repeat his summary of the facts, and his description of the “Risk Products Portfolio - Customer Information Brochure” (“the Brochure”). Except in one respect, which will appear later, I agree with his analysis of the Brochure.
The issue on appeal
The Brochure contained an offer of “free Interim Cover” (the risk covered varied according to the kind of insurance applied for) to a person who delivered a completed application form. The form was at the rear of the Brochure. The free cover was available “While your application is being processed”.
It is common ground that the offer of free cover was an offer capable of acceptance so as to give rise to a contract. This is to be contrasted with the position in relation to the four kinds of insurance dealt with in the Brochure. A person interested in obtaining insurance of that kind had to complete and submit the application form, and it was then up to Royal & Sun Alliance Life Assurance Australia Limited (“Royal”) to decide whether or not to accept the application and to provide insurance. The Brochure stated that if Royal accepted the application, it would send a policy document to the applicant.
As I have said, it was common ground that in relation to free cover the Brochure contained an offer by Royal capable of acceptance by a reader of the Brochure so as to give rise to a contract. The issue before the trial Judge, and on appeal, is whether acceptance was effected by delivering to Royal a completed application form, or whether acceptance of the offer also required delivery of either “the first premium” or a completed “deduction authority”. The deduction authority was part of the application form.
The text on p 5 of the Brochure, under the heading “Interim Cover”, clearly implies that acceptance of the offer of the free cover requires the delivery to Royal of a completed application form. It does not suggest that anything more is required. Nor does a reading of the text at pp 49-50 of the Brochure, to which pages the reader of the text under the heading “Interim Cover” is referred.
The “Certificate of Interim Cover” (“the Certificate”) at p 48 of the Brochure indicates that acceptance of the offer of free cover, or at least the commencement of cover, depends upon delivery of a completed application form and delivery of payment of “the first premium” or a completed deduction authority. The whole of the Certificate is set out in the reasons of Bleby J, and the relevant part of the Certificate is under the heading “When Cover Begins”.
If the terms of the offer of free cover are to be found on pp 5, 48 and 49, the appeal should be dismissed. If the terms of the offer of free cover include p 48, the appeal should be allowed. It should be allowed because, on that basis, Mr Feeney did not do what was required to accept the offer.
The terms of the offer
The issue before the Court turns upon the correct identification of the terms or conditions on which the offer of free cover was made. There is no dispute that those terms are contained in the Brochure. The question is, in which parts of the Brochure?
In my opinion one must first decide how that question is to be answered.
The following statement appears in Halsbury’s Laws of Australia (Vol 6, Contract para [110-230]):
“Usually a person’s apparent intention will represent that person’s real intention, but the law is more concerned with the interpretation which would be placed upon the words and actions of the parties by a reasonable person, in the position of the person to whom the words or actions are addressed, than subjective intention. Accordingly, an offer must normally be interpreted in the sense in which it would reasonably be understood by an ordinary person, even though the offeror’s actual intention may have been otherwise, and no contract will result even though a party may be convinced that a contract was formed on the sending of a letter if the meaning that would be conveyed to an ordinary person by that letter was that there was no binding contract and that the matter was still open to negotiation.
Conversely, acts otherwise amounting to acceptance are not prevented from being effective because of a reservation not communicated to the other party. Moreover, it may be held that an acceptance by post is effective even though, unknown to the offeree, a letter withdrawing the offer had already been posted.” (footnotes omitted)
I accept this as an accurate statement of the law of Australia. The statement is directed to the approach to be taken when a court decides whether or not parties intended to enter into a contract. In my opinion, although I have not been able to find any authority precisely on point, the same approach is to be taken in deciding whether, in the case of a written offer capable of acceptance giving rise to a contract, a particular part of the document containing the offer is or is not a term of the offer. That this is the correct approach is suggested by the approach taken by the courts to the question of whether written matter on a ticket or on a receipt has contractual effect. In relation to such a case the following statement appears in Halsbury’s Laws of Australia (Vol 6, Contract, para [110-2080]):
“Where no memorandum is signed by the parties, the usual way by which terms are incorporated is by one party giving the other reasonable notice of the terms of the contract; that is, the party relying on the terms must show that he or she did all that was reasonable, in the circumstances of the case, to bring the terms to the attention of the other party. Most of the cases concern exclusionary terms which a party seeks to rely on in order to exclude, restrict, or qualify liability under the contract. Unless a course of dealing is proved between the parties, the notice must be given prior to or contemporaneously with entry into the contract.” (footnotes omitted)
In my opinion this statement also contains the approach to be taken to the present case. The offer of free cover, whatever its terms, is found in the Brochure. The offer was open to acceptance by delivering something to Royal. The issue is whether Royal gave Mr Feeney reasonable notice of the fact that Royal intended the contents of the Certificate to be a term of the offer.
The issue then becomes whether Royal gave Mr Feeney reasonable notice of the fact that the terms of the offer of free cover included matters found in the Certificate at p 48, as well as the relevant part of the text at p 5 and the relevant part of the text at pp 49-50.
Clearly enough, Royal gave reasonable notice that acceptance of the offer depended upon the delivery to it of a completed application form, and that other terms and conditions would be found at pp 49-50. But did it do what was reasonable to bring to Mr Feeney’s notice that other terms were to be found at p 48? Or, taking the approach of the earlier statement from Halsbury, would an ordinary person in Mr Feeney’s position reasonably understand that the Certificate at p 48 contained conditions of the offer of free cover?
This may seem an artificial approach. But it seems to me that the identification of the terms of the offer must depend upon an objective approach. It does not depend upon what Royal intended, if it were possible to identify Royal’s intention. If Mr Feeney was in fact aware of the contents of p 48, he might be fixed with notice of those contents, but the Judge found that Mr Feeney was not aware of those contents. And, if the approach is objective, it seems to me that the manner in which I have expressed the required approach is appropriate.
I emphasise this because my approach differs from that taken by Bleby J, although only slightly. His approach, as appears from paras [66 ‑ 68] of his reasons, is that a complete, effective and intelligible offer may be found at pp 5, 49 and 50 of the Brochure. The issue for him is whether, without the Certificate, “the contract loses its integrity”. If that is the correct approach, I respectfully agree with his conclusion. But in my opinion the fact that a complete, effective and intelligible offer can be found in those pages is no more than a factor to consider in deciding the question that must be answered. If such an offer could not be found in those pages, it would be difficult to conclude that there was a contract, but the fact that such an offer can be found in those pages does not answer the question which I consider must be answered. To the extent that it might be said that the contents of the Certificate should reasonably be understood as not intended to have effect as terms of the offer, even were reasonable notice given of its presence in the Brochure, I would respectfully disagree. In my opinion it is plain enough that the contents of the Certificate are intended to be conditions of the offer. The issue is whether Royal gave reasonable notice of the presence of the Certificate.
Reasonable notice
I now turn to the question of whether Royal did all that was reasonable to give notice that the terms of the offer included the contents of the Certificate. I need to say a little more about the Brochure.
The Brochure provides information about four different kinds of insurance - Term Life Insurance, Recovery Insurance, Income Protection Insurance and Business Expenses Insurance. Each type of insurance is dealt with in a separate section of the Brochure. The “Table of Contents”, which is the first two pages of text, identifies the page to which the reader should turn for information about each kind of insurance. The Table of Contents also contains subheadings giving the page number at which the reader will find information about particular aspects of each type of insurance. In relation to each type of insurance, the Table of Contents contains a subheading “Other Information on your Policy” and a page number.
In the section of the policy dealing with Term Life Insurance, and on the page containing the subheading “Other Information on your Policy”, the reader finds the reference to the free cover:
“Interim Cover
¾While your application is being processed, we provide free Interim Cover for death or TPD (if you apply for TPD cover) as a result of injury or illness. Please refer to pages 49 and 50 for further details.”
As it happens, for each type of insurance there is subheading “Other Information On Your Policy”, and under that subheading in each case there is an almost identical statement to that just set out. The only variation is in relation to the type of “free Interim Cover” provided, the type of cover being matched to the type of insurance sought by the lodgement of an application.
As can be seen, the information provided in relation to “Interim Cover” refers the reader to pages 49 and 50 of the Brochure. As Bleby J has explained, those two pages of text contain further information about the Interim Cover. In the case of Term Life Insurance, the text on those pages contains what appears to be complete information about the nature and terms of the Interim Cover in the case of an application for Term Life Insurance.
Bleby J has set out in his reasons the text on p 48 of the Brochure, which is the Certificate.
The Table of Contents on the first two pages of the Brochure is divided into six parts. There is one part for each of the four different kinds of insurance, one part for term life insurance through a superannuation fund, and a sixth part headed “Other Important Information”. In that part is the following entry:
“Certificate of Interim Cover 48”
which is followed by the item:
“Interim Cover 49”.
This is the only specific reference to the Certificate that I found in the Brochure.
As Bleby J has pointed out, there is no express reference on p 49 or p 50 to the Certificate on p 48. The expression “the period of Interim Cover” is used several times on those pages, and the cautious reader might wonder just what that meant. The cautious reader might assume that it meant the period beginning when the application was lodged with Royal, and concluding on the grant or refusal of cover. There is a reference on p 50 to “this Interim Cover Certificate”, but no indication that the reader should turn to another page to find it.
On reading p 48, and the Certificate that it contains, one finds that Royal there explains when cover begins and when cover ends, and that the expression “the period of Interim Cover” is given a more limited meaning than that which I suggested a moment ago. The reader also finds on that page the only reference that I could find in the Brochure to a requirement for the receipt by Royal of “the first premium” or a completed “deduction authority”.
In considering whether Royal has done all that was reasonable to bring to Mr Feeney’s attention the terms of the Certificate, I have regard to the fact that the Table of Contents refers to the Certificate quite plainly. It does so in a section which is separate from the four sections dealing with each type of cover, but in the same section as the reference to “Interim Cover”. On the other hand, one would not necessarily expect a Certificate to contain terms of the offer of free cover. One would usually expect a Certificate to be some kind of proof or evidence of the cover being provided. I also have regard to the fact that a person such as Mr Feeney might be interested in one type of insurance only, and might think it sufficient to read only the section of the Brochure relating to that type of insurance. A person interested only in term life insurance might read only pp 1-8, and then follow the cross-references to pp 49-50, without reading or observing the Certificate on p 48. Royal should have realised that.
All this merely highlights the fact that it is not easy to say whether or not Royal did all that was reasonable to bring to Mr Feeney’s attention the terms of the Certificate.
In the end, my conclusion is that Royal did not do all that was reasonable. There is nothing in the Brochure that suggests that one should read the whole Table of Contents. There is nothing to suggest that it is not sufficient to read the part of the Brochure dealing with the type of insurance in which one is interested. Reading that section, whichever type of cover was sought, and the material referred to at, pp 49-50, would not bring to one’s attention the contents of the Certificate. In my opinion, acting reasonably, Royal should have referred to p 48 under the heading “Interim Cover” or, somewhere on p 49 or p 50, should have included a reference to the Certificate on p 48, indicating that it contained terms of the offer.
In the end Royal’s case depends on a conclusion that notwithstanding the failure to refer to the Certificate under the heading “Interim Cover”, and the oblique nature of the references to the Certificate on pp 49-50, it suffices that Royal referred to the Certificate in the Table of Contents and that the Certificate was immediately before pp 49-50. Bearing in mind that the content and the layout of the document was under the control of Royal, and the ease with which it could have included a specific reference to the Certificate, I have come to the conclusion that Royal did not do all that was reasonable to bring the Certificate to the attention of Mr Feeney.
Conclusion
For those reasons I conclude that the contents of the Certificate were not conditions of the offer of Interim Cover made in the Brochure, and accordingly the delivery to Royal of a completed application form was an effective acceptance of the offer made. It follows from that that the appeal should be dismissed.
PERRY J. I have had the benefit of reading in draft the reasons for judgment of Bleby J, with which I am in substantial agreement.
In my opinion, having regard to the terms of the Customer Information Brochure, which, as Bleby J points out, is a lengthy document dealing with a number of different categories of insurance, an applicant for Term Life Insurance could hardly be expected to look closely at the document headed “Certificate of Interim Cover” which appears at page 48 of the brochure in order to identify the terms of the interim cover which was offered. Rather, the reader of the document who wished to be informed of the terms and conditions of “Term Life Insurance” would be likely first to read pages 1 to 5 of the brochure, in which is set out a detailed explanation of the cover provided. Within those pages the paragraph under the sub-heading “Interim Cover”, which appears under the general heading “Other Information on your Policy” and which reads:
“While your application is being processed, we provide free Interim Cover for death or TPD (if you apply for TPD cover) as a result of injury or illness. Please refer to pages 49 and 50 for further details”,
is apt to convey to the reader that it is to pages 49 and 50 of the brochure to which the reader should turn to ascertain the essential terms of the interim cover.
A perusal of those two pages indicates that they contain much detail as to the terms upon which interim cover is offered. The ordinary reader of those two pages would not think to look elsewhere in the belief that it was likely that there would be more to be explained elsewhere in the brochure.
Certainly, the single page headed “Certificate of Interim Cover” at page 48, which is not visible when the brochure is opened at pages 49 and 50, would hardly be thought to contain further terms of the interim cover, beyond those explained elsewhere, as opposed to some form of confirmation that Interim Cover had been granted. The ordinary concept of a certificate of insurance is that it is a document issued after the contract of insurance has been entered into, confirming that a policy has been issued, or at least, that cover has been granted.
I agree with Bleby J that the existence of interim cover did not depend upon the acceptance of the proposal for insurance (described in the brochure as an “Application Form”). Furthermore, I agree with Bleby J that permanent cover commenced upon acceptance by the appellant of the application and the issue of a policy. Payment of the annual premium was not a pre-condition to the issue of the policy and the acceptance of the risk. Neither was it a condition of granting the permanent cover that the first premium be submitted with the proposal.
In those circumstances, it would be a strange result indeed if the formation of the contract of insurance was not dependent upon the pre-payment of the premium, but the availability of so-called free interim cover while the application for insurance was being considered, required payment of the first premium or delivery of a deduction authority, with the application.
I agree that the appeal should be dismissed.
BLEBY J.
Background
The appellant is a provider of life and other forms of insurance. The respondent is the widow of Nigel Feeney (“the deceased”). She was the nominated beneficiary of the deceased’s superannuation fund. She succeeded in an action against the appellant in the District Court wherein she claimed payment of death benefits said to be payable under the terms of “free Interim Cover” for death provided by the appellant. This was a special cover offered by the appellant pending the processing by the appellant of an application by the deceased for Term Life Insurance.
At the time of his death the deceased was a 42 year old accountant employed by David Gary Holdings Ltd or one of its subsidiary companies. Mr Mark Thomson was a representative of Rushmore Partners, a registered insurance broker, who had had dealings with the deceased concerning personal insurance. He had given the deceased a 51 page booklet entitled “Risk Products Portfolio Customer Information Brochure” which had been issued on 16 June 1999 by the appellant, and was stated to be valid to 15 June 2000. In the back of the brochure was a detachable 20 page application for insurance intended to be completed by an applicant, the trustee of a superannuation fund if the policy was to be owned by the superannuation fund, and by an intermediary, such as Mr Thomson.

On 30 September 1999, following a discussion with Mr Thomson about the appellant’s policy, the deceased signed an application form contained in the brochure for Term Life Insurance in the sum of $500,000, and an application for membership of the Royal and Sun Alliance Superannuation Fund. The Superannuation Fund was to be the owner of the policy. It was a composite form for both applications, and had been completed by Mr Thomson and an employee of Rushmore Partners. From premium tables supplied by the appellant, the deceased was informed by Mr Thomson that the premium would be $560 per annum, although parts of the brochure made clear that the actual premium would be determined by the appellant after its assessment of the application, the deceased’s medical history and present medical condition. I will need to return in due course to a number of aspects of both the brochure and of the deceased’s completed application.
The application form was sent by Rushmore Partners to the appellant with an accompanying letter dated 1 October 1999. Before any premium was paid, and before processing of the application was complete, the deceased unexpectedly died by drowning whilst on holiday on 7 October 1999. At least, that is the date pleaded in the Statement of Claim and admitted in the Defence, although the trial Judge found that he died on 8 October. The difference is immaterial.
As the nominated beneficiary of the superannuation fund in the event of the deceased’s death, the respondent brought an action in the District Court claiming the sum of $500,000 against the appellant, alleging that there was a contract between the deceased and the appellant to provide free interim death cover whilst his application was being processed, in accordance with terms contained in the brochure. A Judge of the District Court found such a contract to exist, and gave judgment for the respondent against the appellant for $500,000 plus interest in the sum of $21,000, making a total sum of $521,000. From that judgment the appellant appeals to this Court.
The Application Form
As I have said, the application signed by the deceased was twofold. It applied for Term Life Insurance in the sum of $500,000, and for membership of the Royal and Sun Alliance Superannuation Fund. In the section of the application described as “Policy Details”, the sum to be insured was inserted, together with the amount of the annual premium of $560. There was a space to indicate, if the insurance was being taken out through a superannuation fund, who would pay the premiums, and it was indicated that these would be paid by the deceased’s employer. On the same page, it was indicated that these would be paid yearly by cash or cheque. There was an option to pay by credit card or direct debit to a bank account, but these options had not been exercised.
On the page of the application form which contained the application for membership of Royal and Sun Alliance Superannuation Fund, all details had been completed except the trustee’s acceptance of the deceased’s application for membership. On the page containing the formal declaration of the applicant, all necessary details had been completed and signed by the deceased, but there was no signature of the intended policy owner, namely the trustee of the superannuation fund.
The Risk Products Portfolio Brochure
The policy which the deceased had applied for was known as Term Life Insurance. It came with an additional optional benefit for total and permanent disablement, described in the brochure as “TPD Cover”. However, the brochure also covered other forms of insurance, namely “Recovery Insurance”, “Income Protection Insurance” and “Business Expenses Insurance”. Each of the policies was explained in separate colour coded sections of the brochure. Those sections were followed by two other sections, each bearing the same colour coding, entitled “Term Life Insurance Through a Superannuation Fund” and “Other Important Information”. The latter section covered pages 45‑51 inclusive of the brochure.
Each section of the brochure dealing with a particular form of insurance began with what was entitled a “Key Features Statement”, which was a brief description of the nature of the cover. It was followed in each case by an explanation of the nature and some of the conditions of the type of insurance concerned. In the section dealing with Term Life Insurance, on page 5 of the brochure, portion of the information read as follows:
“Other Information On Your Policy
The Application Process
¡To apply for Term Life Insurance you will need to complete the application form which is at the back of this brochure. Once we receive your application we will commence the underwriting procedure. This may involve further information (for example on your health) to be provided prior to acceptance.
Interim Cover
¡While your application is being processed, we provide free Interim Cover for death or TPD (if you apply for TPD cover) as a result of injury or illness. Please refer to pages 49 and 50 for further details.
Cover Commences
¡Cover commences once we have accepted your application. We will send you a policy document which will confirm your acceptance. You should read this document carefully, as it contains important information.”
The next paragraph noted the information that would be supplied by the superannuation fund trustee if the policy was taken out through a superannuation fund.
I will need to return to some aspects of the paragraphs just quoted, but pages 49 and 50 were contained in the “Other Important Information” section of the brochure. Page 49 was headed “Interim Cover” which, so far as is relevant, contained the following on page 49:
“The level of cover and circumstances in which we will pay vary according to the policy applied for and our standard underwriting guidelines and practices, as described below....
Term Life Insurance
If the application is for Term Life Insurance we will pay the benefit if you die during the period of the Interim Cover....
The amount paid will be the lesser of:
$500,000; or
the proposed sum insured; or
the sum insured we would accept for you under our normal underwriting guidelines....”
The description relevantly continued on page 50:
“When Benefits Will Not Be Paid
We will not pay any benefits if the application is one which we would not normally accept under our standard underwriting guidelines and practices.
Benefits will also not be paid where death or disablement is caused by:
suicide; or
intentional self-inflicted injury; or
any pre-existing condition ie an illness or other condition relating to your health:
a) of which you were, or a reasonable person in your position would have been aware at any time before the date of the application; or
b) for which you have consulted a qualified medical practitioner before the date of the application; or
participation in any occupation, sport or pastime which we would not normally cover on standard terms; or
war; or
any sickness or injury that occurs as a result of your participation in a criminal activity.
We will provide full details of the occupations, sports and pastimes which are not covered on request.
The Application Process
If during the application process we decide to offer a modified policy, your Interim Cover will also be adjusted to incorporate the modified terms. If we require an additional premium due to your medical history, occupation or pastimes, your level of Interim Cover will be recalculated (and hence reduced) based on your proposed premium. We will notify you in writing if either of these circumstances applies.
If you are eligible to make a claim under the terms of this Interim Cover Certificate then, when we underwrite your application for insurance, we will take into account any change in the state of health as a result of the event entitling you to claim during Interim Cover. The insurance applied for may be declined or have special conditions imposed as a result.”
What the “Other Information on Your Policy” on page 5 of the brochure did not refer to was a “Certificate of Interim Cover” set out on page 48 of the brochure. It was referred to in the Table of Contents of the brochure as an item in the section entitled “Other Important Information” beginning on page 45. The only other reference to the Certificate of Interim Cover in the brochure was in the last paragraph quoted above under the heading “The Application Process”, where reference was made to “.... a claim under the terms of this Interim Cover Certificate”. Page 48 of the brochure did not face pages 49 or 50. Page 49 was printed on the back of page 48, so that an inquirer reading page 5, when directed to pages 49 and 50, would not necessarily see page 48. If the inquirer read the Table of Contents he or she would see a reference to the certificate on page 48, and if page 50 were read, it might arouse curiosity as to what was meant by the reference to “this Interim Cover Certificate”.

The certificate was in the following form:

Certificate of Interim Cover
Protection while your application is being considered

Royal & SunAlliance

are pleased to provide Interim Cover for:

Insured Person  Policy Owner
                  (called you)

The amount and circumstances in
which we will pay vary according
to the kind of cover applied for as
explained overleaf.

Interim Cover is not available if
you have ever withdrawn an
application or had an application
declined for the type of policy
applied for.

       Adviser’s signature

When Cover Begins
This certificate is valid from the date we receive:
· the completed application; and
· the first premium or deduction
authority at our head office or
any state office.

When Cover Ends
This certificate provides cover for
60 days or until the application is
accepted, declined, cancelled or
withdrawn - whichever is earliest.

             John Day (Sgd)

                John Day
     Royal & SunAlliance

We rely on what you tell us

This certificate is dependent upon you and the policy
owner providing complete and truthful answers in the
application for insurance and complying with your duty
of disclosure (as shown on page 45).

NSERT CERTIFICATE WHEN JUDGMENT IS BEING FINALISED

The appellant argues that it was a condition of the policy, as contained in the Certificate, that the period of interim cover would only commence upon receipt of both the completed application and the first premium or deduction authority. As only the application form had been supplied by the deceased before he died, the terms of the Interim Cover did not apply to the deceased. The principal question to be determined on the appeal is whether that qualification on “When Cover Begins” is incorporated in and forms part of the contract of insurance.
Permanent Cover and payment of the initial premium
Some form of interim cover was offered with each of the policies described in the brochure. I have only extracted those parts relevant to an application for Term Life Insurance without TPD cover. What is clear, in relation to all of the possible policies, is that there could be no Interim Cover without the lodgement of a completed application - completed at least in sufficient detail to enable the defendant to assess the application and to decide whether to accept it or to impose special terms and conditions. In this case, the application was not complete, as it had not been completed by the intended owner of the policy, the trustee of the superannuation fund. However, that was to be a company associated with the appellant which had appointed the appellant to provide fund management, insurance and administrative services for the superannuation fund, and no point was taken as to that failure.
However, because the interim cover was only offered in association with the lodgement of an application for insurance, which I shall call for convenience “the permanent cover”, it is necessary to refer to some of the conditions associated with the granting of the permanent cover.
It was clear from the description of the application process on page 5 of the brochure, already quoted, that the granting of permanent cover was not a foregone conclusion upon the lodging of an application. It is also clear from the “Cover Commences” section on that page that the permanent cover commenced upon acceptance by the appellant of the application and the issuing of the policy document. In other words, the annual premium would operate to provide permanent cover from that date.
In the Term Life Insurance section of the brochure there was a passage relating to “Premiums, Your Payment Options and Responsibilities”. It was pointed out that the cover was maintained by the payment of premiums and the premiums were based on various factors including the sum insured, the frequency of payments, the age, sex and smoking habits of the applicant, and that a number of premium payment options were provided. That section included the following paragraph:
“¡ If you do not pay a premium, we will contact you requesting payment. You will be advised of the date when all cover will cease if the premium is not received.”
It is also clear that after lodging the application, even where the application was accompanied by what might be described as the “standard” premium, there might be additional conditions or a supplementary premium imposed by the appellant as a condition of granting the insurance. No doubt for that reason the following cooling off provisions applied, although they were exercisable whether or not an additional premium had been specified:
“Cooling Off Period
¡ There is a period of time in which you may cancel the policy without paying any charges. This is known as the ‘cooling off period’.
During this time, you should check that the policy meets your needs. The cooling off period is normally 28 days and commences from the date you receive the policy document. If this policy is being taken out by a superannuation fund trustee, the cooling off period is only 14 days.
¡ If you decide to cancel your policy in the cooling off period, you must return your policy document together with a written request to cancel the policy to our Head Office at the address listed on the back cover. Any premiums paid will be refunded to you.”
It can be seen that it was not a condition of granting the permanent cover that the first premium be submitted with the application. Indeed, the premium could not be finally determined until the application had been processed. Furthermore, in the case of Term Life Insurance, the premium could be paid either by the applicant, the applicant’s employer or by the applicant’s superannuation fund. Practical reality suggests that it was unlikely to be paid by an employer until the premium was finalised and a decision had been made by the applicant not to exercise the cooling off rights. The premium was unlikely to be paid by the trustee of a superannuation fund unless the trustee had been placed in funds by the member or the member’s employer. In the case of a simultaneous application to join the appellant’s superannuation fund, as this application was, it was unlikely that there would be a payment by anyone unless and until the applicant’s membership of the superannuation fund had been accepted. There is no evidence to suggest that this had occurred. I merely refer to these possibilities because it shows that there were many and sound reasons why the first premium might not and, in some cases, could not properly be paid until after the issue of the policy and a decision not to exercise the cooling off rights. At the same time there was nothing to prevent the tendering of the payment with the application form.
Processing of the Deceased’s application
In this case there was not a rejection of the application, in the sense of refusing to consider it, because the first premium was not paid. It is clear that there was no expectation on the part of the appellant that the first premium would necessarily be paid at the time of submitting the application. In this case, on 7 October 1999, no doubt in ignorance of the deceased’s death if it had by then occurred, the defendant wrote to Mr Thomson a standard form letter in the following terms.
“The additional information listed below is required before an accurate assessment may be completed for this application on your client.
Where appropriate, the documentation is provided for you.
Please let me know if there are any problems in completing these requirements.
* Medical exam and letter to be completed by
Dr Walsh. Please make necessary arrangements.
* Initial premium of 560- is required.”
There is no doubt, however, that prior to sending that letter the appellant had received and had begun processing the deceased’s application.
“Free” Interim Cover
The Interim Cover discussed in the brochure is described as “free” on page 5. As the Full Court of the Federal Court of Australia noted in Fraser v NRMA Holdings Ltd (1995) 55 SCR 452 at 483, on the one hand, the description “free” may be understood as meaning “without additional or marginal outlay over what is obviously being paid”, such as in the expression “buy one, get one free”. On the other hand, it may mean the provision of a product without significant loss or outgoing at all. The appellant argued that the meaning of the expression in the context of the brochure was the former. I disagree.
I have already pointed out that the permanent cover, on which the annual premium was assessed and for which it was paid, did not commence until acceptance of the application and issue of the policy by the appellant. There was, therefore, a period before that when the interim cover was to apply, when the appellant was “on risk”, and for which no premium was required to be paid.
That was the position if the policy for the permanent cover took effect. I have quoted sufficient of the brochure to show that, although it might not be contemplated at the time of lodging the application, there might never be any permanent cover in force. The application might be rejected as being outside the appellant’s underwriting guidelines. The applicant might withdraw the application before it was accepted. The applicant might exercise his or her cooling off rights. None of those events would require a payment of the premium. If a premium had been paid, the events would require the refund of the premium by the appellant. If the “free” cover offered in the brochure was to have any meaning at all, it had to be, in the case of Term Life Insurance, cover in the specified sum for a period for which no premium was payable. The only necessary consideration for the cover was the completion and lodgement of an application in the form provided by the appellant. It was not a condition of the “free” Interim Cover that permanent cover be purchased or paid for.
That being the case, it is difficult to perceive why it should, as a matter of practical reality, be a requirement that the first premium be paid or a deduction authority supplied, in order to secure the interim cover, when the premium forms no part of the consideration for that cover.
In a case such as the present, there would seem to be nothing to be gained by the appellant by requiring the payment or the deduction authority with the lodgement of the application form. Use of the money for maybe a week or two is unlikely to be a material consideration, when a deduction authority will suffice, which may not be acted on immediately. It could not be required as an indication of bona fides where the premium for the permanent cover is not required in order to process the application. It is therefore perhaps not surprising that, leaving the certificate aside, no reference is made in the brochure, where the terms and conditions are discussed, to the need to make any payment in order to secure the free interim cover. The only place where such requirement is stated is in the certificate.
Effect of the Certificate

What, then, is to be made of the certificate? The necessary promissory terms to support the contract can be seen in the extracts I have quoted from pages 5, 49 and 50 of the brochure, together with the description of the nature of Term Life Insurance generally contained in the brochure. Almost all of the terms referred to in the certificate are covered elsewhere in the brochure except the qualification relating to receipt of the first premium or deduction authority. There may be a question whether the paragraph stating when interim cover is not available is referred to either directly or by reference on those other pages. Nevertheless, it is clear from those pages that the benefits of interim cover will not be paid if the application is one which the appellant would not normally accept under its standard underwriting guidelines and practices, which would encompass most, if not all of the qualifications contained in that part of the certificate.
The fact remains that the certificate is not a necessary part of the contract such that, without it, the contract loses its integrity. On the other hand, there are a number of quite significant conditions of the Interim Cover which are contained in the text but which are not in the certificate.
In my opinion, the certificate is really no more than what it purports to be, namely a certificate, or evidence which may be used against the appellant, that the appellant has granted to the person named in the certificate the interim cover described elsewhere in the brochure. There is no less a contract for Interim Cover where, as here, the certificate is not even completed. Indeed, it would seldom be necessary for a person to rely on the certificate. Nevertheless, although contained in the brochure, it is a discrete document intended to benefit the applicant for insurance, and not the appellant.
If, as I believe, that is the true nature of the certificate, it is not to be treated as containing contractual terms, and is to be read subject to what are the true terms of the contract. It does not, when the brochure is construed as a whole, form part of the offer relating to interim cover. Given that, as I have analysed it, the only consideration necessary to secure the Interim Cover is the lodgement of a completed application form, and as the intention of the certificate is that it be relied on by the applicant, the certificate does not contain any contractual terms. The purported requirement to pay the first premium or supply a deduction authority is inconsistent with and does not form part of the contract for interim cover.
I do not consider that this conclusion is undermined by the reference, on page 50 of the brochure, to a claim being made “under the terms of this Interim Cover Certificate”. There is no specific reference to page 48, where the “certificate” occurs, and that passage can be read as referring to the relevant conditions set out in promissory terms on pages 49 and 50.
The description of the cover also refers, on page 49, to death occurring “during the period of the Interim Cover”. That is not a phrase used in the “Certificate”, although the Certificate refers to “When cover begins” and “When cover ends”. However, the period of cover can be seen from page 5 as being “While your application is being processed”, and it is clear, also from that page, that that period commences with the receipt of the Application Form contained in the brochure and ends once the application is accepted and the policy document issued. It is a necessary inference that the cover will also end if the application is withdrawn or if cover is declined.
To the extent that these considerations or the mere presence of the former certificate in the brochure might be said to introduce some ambiguity or obscurity to the otherwise clear terms of the interim cover, the contents of the brochure must be construed against the insurer who has drawn them: Halford v Price (1960) 105 CLR 23 per Dixon CJ at 30.
Mr Taylor SC, for the appellant, also argued that, in the case of ambiguity, resort should be had to the commercial background to the policy reflected in Mr Thomson’s supposed understanding that no benefit would be paid unless the first premium had been paid. I am not convinced that that was shown to be Mr Thomson’s understanding. Nevertheless, to the extent that such an understanding may be inferred from his evidence, it cannot be shown to be an understanding derived from his knowledge of this particular policy, but rather from his understanding of the nature of insurance generally.
If there were ambiguity, I would be more inclined to construe the terms of the brochure to produce a result more consistent with commercial reality and business commonsense, the approach recently adopted by the Full Court of the Supreme Court of Victoria in analogous circumstances in Murray Goldburn Cooperative Co Ltd v Cobram Laundry Service Pty Ltd [2001] VSCA 57 at [18]. As the only discernible consideration for the interim cover is the lodgement of a completed application in the prescribed form, commercial reality and business commonsense should not require any more.
I would dismiss the appeal.

[2001] SASC 294

22 August 2001