Summerton v SGIC Life Limited No. Scgrg-97-1630 Judgment No. S121

[1999] SASC 121

SUMMERTON & ORS  v  SGIC LIFE LIMITED
[1999] SASC 121

Civil: DOYLE CJ

Introduction

1. This is an action by the executors of the will of Mrs Vidic, who died on 29 October 1995.

2. The executors claim from SGIC Life Limited (“SGIC”) the sum of $300,000.  That amount is the sum due, in the event of death, under a policy of life insurance issued by SGIC on the life of Mrs Vidic.

3. SGIC denies liability.  It pleads that it was entitled to, and did, avoid the policy by letter on 13 November 1995.  By that letter it avoided the policy on the grounds of non-disclosure.  In its Defence it pleads that it is entitled to avoid the policy on the further ground of misrepresentation.

4. It is common ground that a contract to insure Mrs Vidic’s life was entered into.  The outcome of the case turns on the claim by SGIC that it was entitled to avoid the policy.

5. Very briefly, this is what the case is about.  Mrs Vidic submitted a written proposal to SGIC for the insurance of her own life.  On 24 May 1995 an employee of SGIC decided, on the information then available to SGIC, that it would accept the proposal and insure Mrs Vidic’s life at ordinary rates.  The paperwork took a little while.  The policy schedule that, in effect, brought a written policy into existence, was produced on 30 May 1995 and was dispatched to Mrs Vidic on 2 June 1995.  However, on Monday 22 May Mrs Vidic consulted her general practitioner and he found a swelling or mass in her abdomen that required immediate investigation.  On Tuesday 23 May he told her that the mass was a tumour of the kidney.  On the morning of Wednesday 24 May he told her that the mass was probably cancerous.  None of this was communicated to SGIC prior to the dispatch of the policy on 2 June.  It is not disputed that by 23 May Mrs Vidic had knowledge of matters that required disclosure to SGIC.

6. The executors argue that the contract was entered into on 24 May, and that Mrs Vidic was not in breach of her duty of disclosure because she had not then had a reasonable opportunity to communicate the relevant information to SGIC.  For the same reason they argue that there was no misrepresentation.  SGIC argues that the contract was not entered into until the policy was dispatched on 2 June, and that by then Mrs Vidic had had a reasonable opportunity to communicate the relevant matter.  SGIC further argues that the duty of disclosure and the issue of misrepresentation are tested as at the moment at which the contract is entered into, and that if at that time Mrs Vidic had knowledge of matters that she was obliged to disclose to SGIC, it matters not whether or not she had had a reasonable opportunity to do so.  Accordingly, SGIC submits that on the basis of the concession that on 23 May Mrs Vidic acquired knowledge of matters that required disclosure, there was a breach of the duty of disclosure and a misrepresentation.  SGIC further argues that Mrs Vidic had knowledge of matters requiring disclosure on Monday 22 May, and that there was a reasonable opportunity to communicate those matters to SGIC by the afternoon of 24 May, when the decision was made to accept the proposal.

7. The case raises the following issues.  Is the duty of disclosure a duty to disclose relevant matter within a reasonable time of acquiring knowledge of it, or a duty to disclose only if there is a reasonable opportunity to do so before the contract is entered into?  Is the duty of disclosure unqualified by reference to such matters, to be tested as at the moment which the contract is entered into?  When did Mrs Vidic acquire knowledge of matters that required disclosure?  When was the contract of insurance entered into?  Did Mrs Vidic have a reasonable opportunity to disclose to SGIC, before the contract was entered into, the relevant matters of which she acquired knowledge in the week commencing 22 May?  Similar issues arise under the issue of misrepresentation.

Facts

1. I make the following findings.

2. On 25 March 1995 Mrs Vidic completed a written proposal to SGIC for life insurance on her life.  The proposal was in a standard form.  It included a number of questions about Mrs Vidic’s health, all of which she answered.

3. The proposal form included a statement in writing of Mrs Vidic’s duty of disclosure. There was no suggestion before me that SGIC did not comply with the obligation, imposed by s22 of the Insurance Contracts Act 1984 (Cth) (“the ICA”) to inform Mrs Vidic of her duty of disclosure.

4. The proposal form included a declaration, immediately above Mrs Vidic’s signature, as follows:

   “I understand that the insurance applied for shall not become effective until this Application is accepted by SGIC in writing.”

5. The Application was forwarded to SGIC by an insurance agent, with a cheque for the first monthly instalment and with an authority for the deduction of subsequent payments from a bank account.  The Application was received by SGIC on 4 April 1995.  The cheque was banked.

6. Ms Holding gave evidence from her own knowledge, and from the records of SGIC, of the manner in which the Application was dealt with by employees of SGIC and by her.  I accept her evidence.  In what follows I will draw on that evidence.

7. At the time in question Ms Holding was employed by SGIC in the section or department that dealt with life insurance business.  She was the senior person in that section and had authority on behalf of SGIC to decide whether or not to accept a proposal for life insurance.  Her decision did not require approval by any person more senior to her.

8. Ms Holding considered the proposal on 18 April, and decided to call for certain medical reports and for the carrying out of certain medical tests.  They included an examination and report by a specialist chosen by SGIC, and a written report (without the need for an examination for that purpose) to be provided by Mrs Vidic’s usual general medical practitioner.  That was Dr Hawkes.

9. By letter dated 20 April 1995 SGIC informed Mrs Vidic of the requirement that she be examined by a specialist, and that she undergo certain routine medical tests.

10. For reasons that are not material, SGIC had not received all of the information that it sought until 24 May 1995.

11. On Sunday 21 May Mrs Vidic noticed blood in a bowel motion, and felt pain and hardness in her stomach.  I make this finding on the basis of a diary entry recorded by her on that day.  The diary was tendered before me.  I find that this was the first time that she had observed blood in a bowel motion, and the first time that she was aware of pain and hardness in the stomach.

12. Mrs Vidic made an appointment to see Dr Hawkes on Monday 22 May in the early afternoon.  She complained to him of having felt flat for about two days.  She told him of a feeling in her abdomen which he described as feeling “bloated”.  She told him that she had noticed blood in her bowel motion.  Dr Hawkes examined Mrs Vidic, and found a significant left abdominal swelling.  Dr Hawkes told Mrs Vidic that the swelling or mass should be investigated, and that an ultrasound examination should be carried out as soon as possible.  He arranged that for the following morning.  He told Mrs Vidic that he wanted to see her again as soon as possible after that.  I find that he said nothing to her that day about the possibility of cancer.

13. It is convenient to mention here that Dr Hawkes gave evidence.  I accept his evidence in all respects.  He gave his evidence carefully and clearly, and by reference to notes and other records in his possession.  He was able to be quite precise about relevant matters, and I am confident that his evidence about relevant matters is accurate.

14. On 23 May 1995 Mrs Vidic returned to Dr Hawkes’ rooms about mid-morning.  She had with her the results of the ultrasound scan.  Dr Hawkes told Mrs Vidic that the scan revealed that the swelling was a tumour of the kidney.  He told her that the situation was serious, and that further tests should be conducted immediately.  He was unsure if he told her that morning that the tumour could be cancerous.  I am unable to make a finding either way, nor is a finding on the point important to the outcome of the case.  Dr Hawkes arranged for further tests to be carried out.

15. Further tests were carried out on the morning of 24 May 1995, and Mrs Vidic again saw Dr Hawkes mid-morning with the results of those tests.  Dr Hawkes told her that the tests disclosed that the mass probably was a cancer.  Dr Hawkes had already arranged for Mrs Vidic to see a specialist urologist on 24 May.  Mrs Vidic attended him later that day, and as I understand it a firm diagnosis of cancer was then made.

16. Mrs Vidic underwent surgery in June.  Sadly, the surgery was not wholly successful.  In September 1995 Mrs Vidic underwent further surgery.  She died on 29 October 1995.  The tumour from which she suffered was described as “aggressive” or one that grew quickly.  That explains the rapid progression of events.

17. I now return to the events relating to the policy.  For convenience, I record here that none of the events of the week beginning Monday 22 May were communicated to SGIC until after the policy was dispatched to Mrs Vidic.

18. I accept the evidence of Ms Holding that the last of the medical information that SGIC wanted was received in her department at about 3.30pm on Wednesday 24 May.  Some time after then, but still that day, Ms Holding recorded in the file her decision that SGIC would accept the proposal at ordinary rates.  She had authority to make that decision.

19. Ms Holding then passed the file on for various clerical procedures to be followed.  The decision to insure having been made, it was necessary for the arrangements for the payment of the premium to be implemented, and for the policy documents to be prepared and issued.  Some of this involved the input of data into a computerised information system.

20. On Monday 29 May 1995 another employee of SGIC made certain entries into the computer system.  I find from Ms Holding’s evidence that on Tuesday 30 May 1995 the computer printed out a standard letter to Mrs Vidic, dated 29 May 1995.  That letter stated that the proposal had been accepted and that the Policy was enclosed.  That same day the computer also printed a Policy Schedule, containing policy details such as the name of the insured, the commencement date of the risk (1 June 1995), the policy number and other like matters.  The schedule was dated 29 May 1995.

21. On 30 May the schedule was checked against the original proposal and attached to a pre-printed policy document.  The Policy contains the terms on which insurance is granted.

22. I accept Ms Holding’s evidence that, according to usual procedures, on 2 June 1995 the policy and letter were either posted to Mrs Vidic or passed on to an agent for delivery to her.

23. I accept Ms Holding’s evidence that on 24 May she would have postponed a decision to accept the proposal had she known that on 21 May 1995 Mrs Vidic had noticed blood in association with a bowel motion and had noticed pain and hardness in her stomach.  I also accept Ms Holding’s evidence that on 24 May, had she known that on 23 May a tumour associated with or near Mrs Vidic’s kidney had been discovered, she would have declined or refused the Application.  It is hardly necessary to say that I accept and find that had she been aware of the diagnosis of cancer she would also have declined the proposal.

The date of entering into the contract

1. The question of when SGIC entered into a contract of insurance with Mrs Vidic is governed by the normal principles of the law of contract.

2. I referred above to the declaration in the Policy that the insurance was not to become effective until the Application was accepted by SGIC in writing.

3. The issue of a Policy is not essential to the entry into a contract for insurance.  Ordinarily, to decide when the contract comes into existence, one must look for an unqualified acceptance by one party of an offer made by the other.

4. In my opinion the natural meaning of the statement that appears in the proposal is that there would be no contract of insurance until SGIC advised the proposer in writing of the acceptance of the proposal.  I take the reference to acceptance in writing to be a reference to an acceptance communicated to the proposer.  That, in my opinion, is the natural meaning of an acceptance in writing in the present context.  However, as will appear shortly, I am prepared to assume that the statement refers to the dispatch of the acceptance to the insured, as distinct from its receipt.  In my opinion the declaration in the proposal does not refer to what I might call the actual making of the decision by SGIC, even if, as one would expect, that decision is recorded in writing in SGIC’s file.  I consider that the declaration refers to the time at which written notification for transmission to the insured has been prepared and is ready for dispatch.  It follows that on my findings the earliest time at which a contract came into existence was 30th May 1995, and the latest was about the 3rd or 4th June, when, presumably, the letter and policy document would have been received by Mrs Vidic.

5. Mr Smith QC, for the executors, submits that the contract was entered into on 24 May when Ms Holding recorded in the SGIC file that SGIC would accept the proposal at ordinary rates.

6. He pointed out that the insured was entitled to a “free-look” of fourteen or twenty-one days after receipt of the Policy.  The uncertainty about the number of days does not matter.  At any time within this period Mrs Vidic could return the policy and receive a full refund.  Mr Smith QC accepts that the usual rule is that an acceptance is not communicated until actually brought to the notice of the offerer, and so is not legally effective until that time.  He argues that the main reason for that rule is that it would be unjust to hold the offerer bound if the offerer did not know that the offer had been accepted.  He then argues that the free-look period removed the need for any such rule.  The free-look period meant that there was a period within which the insured could decline to be bound, and so it would not matter if the contract became binding at a time unknown to the insured.  It appears that the free-look period ran from the date on which the Policy was dispatched, or from the issue date.

7. I do not consider that the provision of a free-look period alters the fact that the usual rule is that an acceptance is effective when communicated, subject to the rule relating to contracts made by post.  I consider that the usual rule applies, even if in a particular case the main reason for the usual rule is not applicable.  But, to some extent, this is by the by.  The issue is, what do the words in the proposal mean?

8. Mr Smith QC further supported his submission by a reference in the documents to an acceptance of a proposal for insurance, the reference being in terms that implied that the acceptance would precede the dispatch of the Policy.  For example, the brochure that contained the printed proposal states:

   “SGIC will send you a Policy Information Statement with the Policy Document if the policy is accepted by SGIC.”

This implies that acceptance precedes the dispatch of these materials.  He argued that on 24 May Ms Holding made a decision that constituted an acceptance, and that what followed was merely clerical follow up.  He pointed out that the letter of 29 May that accompanied the policy said (referring to the policy):

“This document is the evidence of your recent application and its subsequent acceptance by SGIC.”

1. I agree that the documents do suggest that acceptance would precede the issue and dispatch of Policy and other documents by SGIC.  That, with respect, is obvious as a matter of commonsense.  As a matter of ordinary business practice, a decision to accept the proposal would precede the dispatch of Policy Documents to Mrs Vidic, and probably would precede their preparation.

2. Despite all that, I remain of the view that the declaration in the proposal refers to something that occurred later than 24 May.  By this I mean that it refers to something after the making of a decision that the proposal will be accepted, and after the recording of that decision in the files of SGIC as a basis upon which employees of SGIC can then prepare the Policy and other necessary documents.

3. I consider that the natural meaning of the reference to an acceptance in writing is a reference to the creation of a document that is, or will be, communicated to Mrs Vidic.  One would expect SGIC to want the time at which the insurance became effective to be capable of being determined objectively, and to be a time at which all of its internal checks and procedures were complete.  That points to the events of 30 May 1995 as being the earliest time at which it can be said there has been an acceptance.  In my opinion one would expect that SGIC would not wish to be bound until the Policy Schedule had been prepared and the arrangements for payment of the premium attended to.  In other words, one would expect that SGIC would not want to be bound until the paperwork was complete and at least ready for dispatch.  It is only by that stage that all of the final checks have been carried out to ensure that it is in fact appropriate to issue a policy.

4. It may therefore be that acceptance in writing took place on 30 May.  It was on that day that the Policy Schedule and covering letter were printed and checked, and an internal record was made that the Policy was “in force”.  It appears that from that time staff of SGIC would treat the contract as in existence, even though the period of risk did not begin until 1 June.  While I favour the view that the date of dispatch of the letter and Policy (2 June 1995) is the date of acceptance, I can see the force of the argument that the date of acceptance might be 30 May 1995.

5. For those reasons I conclude and find that the contract came into existence not before 30 May 1995, and probably on 2 June 1995.

6. Mr Smith QC argued in the alternative that when SGIC wrote to Mrs Vidic by letter dated 20 April 1995, requiring that she submit to a medical examination, SGIC made a counter-offer (counter to the offer made by the proposal) that subject to a favourable report as a result of the medical examination, SGIC would accept the proposal by Mrs Vidic.  He submits that the contract came into being on 24 May when the reports were received by SGIC, because those reports were in fact found to be favourable in the sense that the decision to accept the risk was then made.  In the alternative, he argued that the contract came into being on that day once Ms Holding had decided that the information in the reports was satisfactory and that the risk should be accepted.

7. I do not accept this contention.  The brochure to which the proposal was attached stated that SGIC might request a medical examination.  In view of that, the request for a medical examination cannot be seen as a rejection of the offer made and as a counter-offer.  I would so conclude even if the brochure did not refer to a possible request for a medical examination.  In my opinion it is artificial to treat the letter as a counter-proposal.  As well, the letter of 20 April said that the medical examination was required to enable SGIC “to further assess” the proposal.  Such a statement cannot be read as a counter-offer able to be accepted, so as to give rise to a contract, upon the mere receipt of a satisfactory medical report.

Matters attracting the duty of disclosure

1. It is convenient to refer only to the duty of disclosure, although there is an identical argument based on misrepresentation.  Misrepresentation arises not because of any misconduct by Mrs Vidic.  It arises simply because the information that she had provided in her answers in the proposal form was falsified by the matters which she knew as from 22 May 1995.

2. I have already said that I accept the evidence of Ms Holding that the finding of blood in Mrs Vidic’s bowel motion, the pain and feeling of hardness in the abdomen, and the knowledge that her doctor had detected a mass in the abdomen that in his opinion required investigation as soon as possible, were matters relevant to Ms Holding’s decision to accept the risk.

1. I find that a reasonable person in Mrs Vidic’s circumstances could be expected to know that these were matters relevant to the decision of SGIC whether to accept the risk. It is not necessary to explore the concept of a reasonable person for the purposes of s21(1) of the ICA: cf Twenty-First Maylux Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [1990] VR 919. I am satisfied that any reasonable person would on the afternoon of 22 May regard Mrs Vidic’s observation and what she felt, coupled with the fact that Dr Hawkes had confirmed the presence of a mass in the abdomen, and by implication made it clear that there was no reassuring explanation that he could give for its presence, and had said that it should be investigated without delay, as raising a matter that was a cause for real concern about the state of Mrs Vidic’s health, and a matter which would be regarded as of considerable significance to anyone who was considering insuring Mrs Vidic’s life.

2. On the other hand I find that the matters of which Mrs Vidic was aware before she consulted Dr Hawkes on 22 May were not matters that a reasonable person could be expected to know were relevant to a decision whether to insure her life or not.  I accept that any reasonable person would regard what Mrs Vidic noted in her diary as a cause for some concern and inquiry.  However, I consider that until Dr Hawkes had excluded the possibility of some harmless explanation and had confirmed the presence of an abdominal mass, the observations on Sunday 21 May were not themselves of such significance that a reasonable person would regard them as relevant to a decision to insure Mrs Vidic’s life.

3. As will be obvious from what I have said, I am satisfied that the further knowledge that Mrs Vidic acquired on 23 May and 24 May (by mid-morning) was knowledge of matters that a reasonable person could be expected to know would be relevant to the decision whether to insurer her life.  Mr Smith QC did not contend otherwise.

4. I also accept the evidence of Ms Holding that had she known on 24 May what Mrs Vidic knew on 22 May, after the first appointment with Dr Hawkes, Ms Holding would have deferred making a decision.  I accept her evidence that had she known on 24 May the matters known to Mrs Vidic on 23 May and 24 May, after the second and third visits to Dr Hawkes, she would have declined the proposal altogether.

5. I therefore find that SGIC would not have entered into the contract on 24 May if the matters known to Mrs Vidic on 22 May were disclosed. I find that SGIC would have declined the proposal on 24 May had the matters known to Mrs Vidic on 23 May and the morning of 24 May been disclosed to SGIC: see s29 of the ICA.

The duty of disclosure - is it qualified?

1. It follows from what I have said that Mrs Vidic failed to comply, within the meaning of s29 of the ICA, with the duty of disclosure imposed by s21 of the ICA, unless the duty of disclosure is a qualified one.

2. Section 21 provides, so far as relevant, as follows:

   “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 it 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 or 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. Mr Smith QC submits that there is a further qualification, namely that the duty of disclosure is a duty to disclose only if there has been a reasonable opportunity in all the circumstances to do so. I incline to the view that, if one were making a provision to that effect in the ICA, one would add to s21(2) a further subparagraph, providing that the duty of disclosure did not require the disclosure of matter that the insured did not have a reasonable opportunity to disclose before the contract of insurance was entered into.

4. Be that as it may, the obvious point that occurs to one contemplating s21 is that in its terms the duty of disclosure is unqualified. This is of some significance when one bears in mind that Part IV of the ICA, in which s21 is found, has been said by the High Court to be a statutory code intended to replace the antecedent common law regulating non-disclosure: Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1989) 166 CLR 606 at 615.

5. Despite that, if the duty of disclosure at common law was a duty to disclose matter material to the risk only if the proposer had a reasonable opportunity to disclose the information, I would not lightly conclude that the ICA created and imposed a stricter duty that was imposed at common law.

6. However, I can find no such qualification in relation to the common law duty.  There is no case precisely in point, but I was referred to and have considered a number of cases in which the proposer of insurance learned of material matters shortly before the time at which the contract was entered into.  In none of those cases, subject to two to which I will refer, did the court find it relevant to consider whether there had been a reasonable or sufficient opportunity to communicate these matters to the insurer.

7. It is also notable that in the cases and texts in which the duty of disclosure is considered, one finds no qualification of the duty of disclosure in terms of the duty being one to make disclosure of material matters provided that there is a reasonable opportunity to do so before the contract of insurance is entered into.  One finds frequent reference to the fact that the duty of disclosure continues to apply throughout the negotiations for the contract, and comes to an end only when the contract is concluded.  One also finds statements that if a new material fact arises between the time of the proposal and acceptance of the proposal, it must be disclosed.  It is particularly notable that in each formulation of the legal principles that I read, the duty of disclosure was stated in unqualified terms and as continuing until the time at which the contract is entered into.

8. It is not necessary to set out any extracts from the cases to which I referred, or from the texts.  I do not do so because the point is that the qualification to which I refer is not to be found.  However, for completeness I refer to the cases that I read and the texts.  They are Canning v Farquhar (1886) 16 QBD 727; Looker v Law Union & Rock Insurance Company Limited [1928] 1 KB 554; Godfrey v Britannic Assurance Company Ltd (1963) 2 LLR 515; Lee v British Law Insurance Co Ltd (1972) 2 LLR 49; R Colinvaux, Colinvaux’s Law of Insurance (7th ed, 1997) par 5-04; E Ivamy, General Principles of Insurance Law (5th ed, 1986) pp 151-157; E MacGillivray, MacGillivray on Insurance Law (9th ed, 1997) par 17-19; Lord Hailsham of St Marylebone (ed), Halsbury’s Laws of England (4th ed reissue 1994) vol 25 pars 356 and 360; K Sutton, Insurance Law in Australia (2nd ed, 1990) par 3.150.  There are, however, two cases of which I should make particular mention.

9. In Dalgety & Co Limited v The Australian Mutual Provident Society [1908] VLR 481 a proponent for life insurance answered certain printed questions relating to himself on 11 September. On 20 September the proposal was accepted subject to the payment of the premium forthwith. The insurer reserved the right to cancel the acceptance should anything to the prejudice of the life transpire in the meantime. On 22 September the proponent consulted a doctor and drew to his attention a small lump under his jaw. This lump had been previously operated on, but all concerned thought that there was no cause for concern. The doctor who was consulted on 22 September, knowing of the previous operation, was suspicious that the lump might be cancerous and recommended what was a relatively small operation as soon as convenient. This consultation was on a Saturday. On Monday 24 September the proposer drew a cheque for the amount of the premium and delivered the cheque to the defendant. On 25 September the defendant’s Board confirmed the decision to accept the proposal. That very same evening the proposer underwent the operation and a few days later a pathological condition was found to exist.

10. The insurance company later denied liability on the policy.  The case proceeded on the basis of a change of circumstances that falsified answers that the defendant had already given, but I can find no suggestion in the judgment that the same approach would not have been taken had the case turned on the ordinary duty of disclosure.

11. The judge treated the events of Saturday 24 September as material matters that should have been disclosed to the insurer, in the light of the questions that it had asked.  He then referred to the duty to disclose additional facts which could affect statements previously made or answers previously given (at 507).  He referred to the fact that the general rule was that a representation, once made, continued in force until withdrawn, and was construed as meaning that the facts represented were true at the time of making the contract (at 508).  The judge then referred to certain cases of marine insurance which suggested that where an owner had given orders for insurance to be effected by an agent in some distant place, the policy was not vitiated by non-disclosure of a material fact known to an owner and not known to the agent, if the fact became known to the owner after the instruction to insure had been sent and could not possibly, by the ordinary means of communication, have been made known to the agent or underwriter (at 508-509).  (I note that this exception to the duty of disclosure appears to be an accepted principle of marine insurance law: see Halsbury (4th ed re-issue) par 217 fn 14.)  Having referred to these cases the judge said (at 509):

    “I do not think these cases should be held to apply to the case of a person effecting an insurance on his own life who employs another merely as an extended hand or as a messenger to make a payment ...”

He went on to hold, in any event, that the proponent did have time to contact the insurance company to inform it of the matters of which he had learned on the Saturday.

1. There are a number of similarities to the present case.  It is significant that the judge in this case was not prepared to import into the law of non-marine insurance a principle that he found referred to in cases dealing with marine insurance.

2. Blackley v National Mutual Life Association of Australasia Limited [1972] NZLR 1038 is a case in which an agent received notice on 5 August 1963 that the proponent had been accepted for life insurance subject to payment of the premium. However, the proponent had been admitted to hospital on 1 August 1963 and had undergone a major operation for the removal of a brain tumour. The agent was aware of this. On 7 August 1963 the agent called on the proponent’s wife, obtained from her a cheque for the first premium and arranged for her to sign a banker’s order on the proponent’s behalf. The documents were posted to the insurance company on 8 August 1963. On 9 August the proponent’s wife was informed that the tumour was malignant. The proponent was told this on 13 August. A policy was not issued. On 15 August the company learnt of the decline in the proponent’s health, and on 22 August wrote to the proponent declining to accept the proposal. The proponent died on 5 December. The claim was brought against the insurance company on the basis that a contract of insurance had come into existence on 8 August, when the proponent’s wife posted the letter containing the bank order and other documents.

3. At trial, and on appeal, it was held that the insurance agent was an agent for the insurance company, and that disclosure of the state of the proponent’s health to him was disclosure to the insurance company.  The fact that the agent did not pass the relevant information on to the insurance company was neither here nor there.  In that respect the Court of Appeal differed from the trial judge, who had decided that the knowledge of the agent was not to be imputed to the principal because the proponent was aware that the agent would not pass the relevant information on to the insurance company.

4. It was held that a contract of insurance came into being on 8 August, and that at that time there had been full disclosure (through the agent) of all material matters.

5. There was an alternative argument for the insurance company.  It was that the obligation of disclosure continued after the conclusion of the contract, and up to the time of the issue of the policy, which had never in fact been issued.  This argument was based on a term of the proposal.  Turner P disposed of the alternative argument by holding that once the contract came into existence, the duty of disclosure was at an end.  McCarthy J referred to the condition in the proposal.  It required notification “forthwith upon their occurrence” of events occurring before the policy was issued.  He disposed of the alternative contention by holding that the requirement of disclosure was not a duty to disclose “instantaneously” and that (at 1055):

   “A reasonable opportunity to discharge the duty of disclosure must be taken as the intention of the parties.”

He held that the matter that fell for disclosure under this head, knowledge of the malignancy of a tumour removed from the proponent’s brain, was acquired by the proponent only on 13 August and that under all the circumstances there had not been an unreasonable delay on his part, in notifying the insurance company of the malignancy, before the company cancelled the policy.  The third member of the court, Macarthur J, said that the relevant matter coming to the notice of the proponent came to his notice only on 13 August, and that as the relevant date was 8 August the matter was not subject to the duty of disclosure.

1. The most one can say about Blackley is that one member of the court, as a matter of construction of the particular document in question, construed the duty of disclosure in terms similar to those for which Mr Smith QC contended in this case.

2. I do not regard that decision as throwing any light upon the nature of the duty of disclosure at common law.

3. I realise that none of the cases and recognised texts to which I have referred deal with the very point at issue here, except for Dalgety & Co Ltd v The Australian Mutual Provident Society [1908] VLR 481. The fact that there is no support in them for Mr Smith QC’s contention is not decisive. However, in my opinion it is highly significant. I consider that if there were a qualification to be imposed on the duty of disclosure, of the type contended for by Mr Smith QC, that qualification would have been recognised and identified in the cases or in the commentaries on the case law. I conclude that the common law duty of disclosure is an absolute one, in the sense that if, at the time the contract is entered into, there are material matters known to the proponent, the failure to disclose them to the insurer will give the insurer a right to avoid the contract.

4. With that background I return to the provisions of s21 of the ICA. The duty of disclosure is there stated in unqualified terms. Section 21(2) deals with matters that need not be disclosed. Had the duty of disclosure been intended to be qualified in the manner suggested by Mr Smith QC, I would have expected that qualification to appear in s21(2). That would be a natural place to identify the qualification, and the limit of the qualification.

5. The absence of any such qualification causes me to conclude that the duty of disclosure is not in that respect qualified, and I so conclude all the more readily because, as I have already said, the common law duty was likewise unqualified.

Was there a breach of the duty of disclosure?

1. On the findings that I have made there were matters known to Mrs Vidic on 24 May that were matters that attracted the duty of disclosure under s21 of the ICA, and that were not disclosed to SGIC. Matters attracting a duty of disclosure came to her attention when she consulted Dr Hawkes on Monday 22 May, on Tuesday 23 May and on the morning of Wednesday 24 May.

2. If I am wrong in thinking that the duty of disclosure is unqualified, it is still necessary to consider whether or not there was a breach of that duty.  If the duty is a duty to disclose matters known to the insured, provided that the insured had a reasonable opportunity to make disclosure before the contract is entered into, I would conclude that by 30 May 1995, and likewise by 2 June 1995, Mrs Vidic had had a reasonable opportunity to communicate to SGIC the matters referred to.  In that time she could have contacted the agent through whom the proposal was lodged, and that agent would have had adequate time to contact SGIC.  Alternatively, she could have contacted SGIC directly.  She had received the letter of 20 April from SGIC, and that letter provided a telephone number for SGIC and the name of a person whom Mrs Vidic would have realised had some knowledge of the proposal.

3. In saying this I make no criticism at all of Mrs Vidic.  I can readily imagine the impact upon her of the events that occurred on and from Monday 22 May.  But I consider that if the duty of disclosure is qualified by reference to a reasonable opportunity to make disclosure, the reasonableness of that opportunity is to be assessed in the light of the available means of communication and in the light of the time which elapses from acquiring knowledge of a matter requiring disclosure and the time at which the contract of insurance comes into being.  I do not agree that it would be appropriate to take into account the fact that, upset as she undoubtedly was, Mrs Vidic could not be criticised for failing to turn her mind to the fate of her proposal for life insurance.

4. What if the contract was, contrary to my conclusion, entered into on the afternoon of 24 May 1995?  In that event, I would still reach the same conclusion, but would now rest my conclusion wholly upon the failure to disclose to SGIC the material matters of which Mrs Vidic was aware on the afternoon of Monday 22 May when she first consulted Dr Hawkes.  I consider that there was a reasonable opportunity to inform SGIC of those matters by the afternoon of Wednesday 24 May.  I reach the contrary conclusion in relation to matters that Mrs Vidic learned on the morning of 23 May and on the morning of 24 May.

5. In what I have said so far I have dealt with the duty of disclosure, and with breach of that duty. I would reach the same conclusion on the basis of misrepresentation. Once again, I make it clear that no criticism of Mrs Vidic is intended. However, the fact is that matters that came to her notice after the completion of the proposal made statements in the proposal false, and therefore they amounted to misrepresentations. A representation by the insured is treated as a continuing representation until the contract is entered into, and there is likewise a duty to correct statements that become incorrect at any time until the time at which the contract is entered into. In relation to the issue of misrepresentation, I mention that the argument for the plaintiff also faces the difficulty of the terms in which the ICA is expressed. For the plaintiff to succeed, it would be necessary either to qualify the concept of a misrepresentation, and conclude that there was no misrepresentation unless there was a reasonable opportunity to correct a statement which had been falsified by later events, or to qualify the rights of the insurer under s29 of the SCA, being rights which flow from failure to comply with the duty of disclosure or the making of a misrepresentation.

Remedies

1. Section 29 of the ICA entitles SGIC to avoid the contract with Mrs Vidic if SGIC would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or if the misrepresentation had not been made. I find, on the basis of Ms Holding’s evidence, that if the matters of which Mrs Vidic had knowledge on 23 May and 24 May had been disclosed to SGIC, it would not have been prepared to enter into a contract with her on any terms. I also find that as of 24 May, if the knowledge that Mrs Vidic had on 22 May had been disclosed to SGIC, SGIC at that time would not have been prepared to enter into a contract of life insurance with Mrs Vidic on any terms, because, as Ms Holding said, it would have deferred a decision if it had known of those matters.

2. For those reasons I conclude that SGIC was entitled to avoid the contract of insurance when it did.

Conclusion

1. Accordingly, the claim by the plaintiff fails and judgment must be entered for the defendant.  This is an unfortunate case, and I have every sympathy for Mrs Vidic’s family, but in my opinion the case is one in which the law requires the conclusion that I have reached on the facts that I have found.