Farrell v National Mutual Life Association of Australasia Ltd [1990] QSCFC 80 [1991] 2 Qd R 624

10 30 40 50 60 IN THE SUPREME COURT OF QUEENSLAND Lx-FULL COURT BEFORE : Appeal No. 2841& of 1987 Mr. Justice McPherson Mr. Justice Moynihan Mr. Justice Byrne BRISBANE, 9 NOVEMBER 1990 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: EAMON THOMAS FARRELL (Plaintiff) - and - Respondent THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant JUDGMENT MR. JUSTICE McPHERSON: In my opinion the appeal and the cross appeal should each.be dismissed with- costs. I am authorised by Mr. Justice Byrne to say that he agrees with those orders and to publish his reasons, which I do . . * I agree with those reasons and with the reasons about to be published by my brother Moynihan. - MR. JUSTICE MOYNIHAN: I agree with the order proposed for the reasons which I publish. MR. JUSTICE McPHERSON: The orders are: appeal dismissed with costs; . cross-appeal dismissed with costs. - Govt. Printer, Qid. "^108o i 10 20 30 40 50 60 1 [1990] QSCFC 80 -- 1 of 36 -- ] 1 10 I think it is the proper view with those'orders that the costs of the application to stay, if they were reserved, ought to be costs in the appeal which would mean that we would order that the appellant pay the respondent's costs of and incidental to the application for a stay. The order will be as I have stated. 10 ’ 20 20 30 30 40 40 50 50 60 60 Winter, Qld. 2 -- 2 of 36 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT WRIT NO. 2841 A OF 1987 BETWEEN : EAMON THOMAS FARRELL (Plaintiff) Respondent AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant McPHERSON SPJ MOYNIHAN J BYRNE J Reasons for judgment delivered by Moynihan J and Byrne J on the 9th November, 1990. McPherson SPJ concurring with the reasons of Moynihan J. All concurring as to the orders "APPEAL DISMISSED WITH COSTS INCLUDING RESERVED COSTS OF APPLICATION FOR STAY. CROSS APPEAL DISMISSED WITH COSTS." -- 3 of 36 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 2841 A of 1989 Mr. Justice McPherson Mr. Justice Moynihan Mr. Justice Byrne BETWEEN : EAMON THOMAS FARRELL (Plaintiff) Respondent AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant JUDGMENT - MOYNIHAN J. Delivered the 9th day of November, 1990. Counsel: R.V. Hanson Q.C. with him A. Philippides for the Appellant. N.M. Cooke Q.C. with him R.S.M.G. King and M.M. Varitimos for the Respondent. Solicitors: Henderson Trout for the Appellant. Cranston McEachern & Co. for the Respondent. Hearing date: 17th and 18th April, 1990. -- 4 of 36 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 2841A of 1989 BETWEEN: EAMON THOMAS FARRELL (Plaintiff) Respondent AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant JUDGMENT - MOYNIHAN J. Delivered the 9th day of November, 1990. Anthony George Robert Humphrey was an insurance canvasser on behalf of the appellant. In June 1982, at Humphrey's instigation, the respondent made a proposal for disability insurance which the appellant ultimately accepted and pursuant to which it issued a disablement policy dated 26 November, 1982. One of the questions posed by the proposal was as to the appellant's "actual or average weekly income (taken over the past 12 months - see note)". The note was to the effect that "income" meant income received from personal exertion "net of business expenses but before personal deductions and income tax." The same concern with income was reflected in an "Occupational History Questionnaire" associated with the proposal which asked in respect of "average weekly income". In each case the figure of $700.00 was supplied in respect of the query and it may be accepted that the figure constituted a misrepresentation. -- 5 of 36 -- 2 The respondent claimed on 11 October, 1983 and 15 August, 1985 on the basis that he was disabled in terms of the policy. The appellant paid benefits totalling $20,329.60 under the policy in respect of the claims but subsequently notified the respondent that no further benefits were payable from 14 November, 1986. Relevantly for present purposes the appellant's position was that on account of the misrepresentation in respect of the respondent's income it was entitled to avoid the policy. Other issues such as whether the respondent was disabled in terms of the policy do not arise on this appeal. The respondent sued the appellant claiming moneys due and owing under the policy from the cessation of payment by the appellant to the date of judgment, interest on that sum and a declaration that the appellant was bound by the terms of the policy and that the respondent was entitled to claim the benefits thereunder. As the latter claim reflects the appellant's obligations under the policy may continue until the respondent attains the age of 65. The action was tried with a jury and the jury's verdict was taken in terms of answers to a number of specific questions posed for its consideration. The jury answered that the appellant held out Humphrey as its agent "for the purpose of obtaining information to be written into the proposal and questionnaire". Having found to the effect that the respondent's average weekly income "net of business expenses but before personal deductions and income tax" was not in fact $700.00 the jury found that the answers to that effect in the proposal and the questionnaire were not correct and not true . The jury found that the answer of -- 6 of 36 -- 3 $700.00 in the proposal and/or questionnaire was a misrepresentation. It went on to find that the respondent did not know at the time that the statement was made that it was untrue and that the information supplied by the answer was not material to the appellant's acceptance of the risk. The jury made other findings some of which are irrelevant to the issues arising on this appeal and others of which it will be necessary to mention later. In the meantime after hearing submissions from counsel the learned trial judge entered judgment for the respondent against the appellant in the amount of $36,887.03 as the amount of the respondent's entitlement from the date of cessation of payment pursuant to the policy to trial together with interest. He also declared that the appellant was bound by the terms of the policy and that the respondent was entitled to claim benefit thereunder. He dismissed the appellant's counterclaim and ordered it to pay the respondent's costs . The appellant appeals on the following grounds 1. The jury's finding that the defendant held out Humphrey as its agent for the purpose of obtaining information to be written into the proposal and associated documents was against the evidence and/or unsupported by the evidence. It is convenient to postpone setting out ground 2 of the notice of appeal until I come to deal with it and it is convenient to defer that until the other grounds of appeal have been dealt with . 3. The trial judge was wrong in law in holding that the 'basis' clause in the policy did not incorporate the proposal in the policy. 4. The findings of the jury as to untrue answers in the proposal occupational history questionnaire -- 7 of 36 -- 4 was not material to the acceptance of the risk as against the evidence and the weight of the evidence. The respondent cross appeals seeking judgment in the amount of $39,927.57 in lieu of $36,887.03 on the basis that the trial judge wrongly held that the benefits otherwise payable to the respondent under the policy were to be reduced by amounts received by the respondent in part time employment and that the trial judge was wrong in concluding that the plaintiff had engaged in any "profession or occupation" within the meaning of the policy. The evidence lead at the trial indicated that, having been employed as a jeweller for many years, in about September 1981 the respondent commenced work as a jeweller on his own behalf essentially doing repair and other work sent to him by retail jewellers. The issue of the policy of disability insurance to which I have referred was initiated by the appellant's canvasser Humphrey who knew the respondent and who succeeded in engaging his interest in respect of such insurance. The proposal was filled in by Humphrey and signed by the respondent, he had a limited capacity to read and write, after (as the jury found) Humphrey read to the respondent the "declaration" portion of the proposal. On the version of events reflected in the jury's answers to the questions posed for its consideration the figure of $700.00 was arrived at by Humphrey on the basis of figures contained in the respondent's bank deposit book which was provided by him to Humphrey and of estimates made by Humphrey (based on his experience and observation) of the respondent's expenses. It -- 8 of 36 -- 5 will be recalled that the proposal form asked in respect of actual or average weekly income taken over the past 12 months . The evidence was that the respondent had commenced business on his own account from about September 1981 . The proposal was made in June 1982. In this context in the course of his evidence Humphrey acknowledged that the $700.00 "represented an estimate (by Humphrey) for the next 12 months". As I have said the jury found that the respondent did not know that the statements made in the proposal and the occupational history statement in respect of income was untrue. It also found that Humphrey did not disclose to the respondent that the information required was "the net business income before tax for the preceding 12 months" and that the answer $700.00 was not a "fair recording" by Humphrey of information given him by or on behalf of the respondent. The jury went on to find that Humphrey knew at the time of receiving the proposal that the $700.00 answers in the proposal and the occupational history questionnaire were not true. Two of the grounds of appeal, the first and the fourth are in respect of findings made by the jury. A finding of fact by a jury can be set aside only if there is no evidence to support it or no evidence on which a reasonable jury properly instructed could have made the relevant finding; Clarke v. Trevilyan (1963) Q.W.N. 11 citing Hocking v. Bell (1945) 71 C.L.R. 430 particularly per Dixon J. at 497. The first ground of appeal is against the jury's finding that the appellant held Humphrey out as its agent for the purpose of obtaining information to be written into the proposal and questionnaire. It was not contended, at least as I understood -- 9 of 36 -- 6 it, that there was no evidence capable of sustaining such a finding. Rather it was said that the inference to be drawn from such evidence was negatived by the wording on the declaration in the proposal which, it will be recalled, the jury found to have been read to the respondent by Humphrey. The ground of appeal thus was that the finding of the jury was against the weight of the evidence and unreasonable and should therefore be set aside. It is material to set out the declaration in full:- "DECLARATION 1 . i/We the insured named in the schedule above apply to the National Mutual Life Association of Australasia Ltd. (hereinafter called the' Association) for a Policy of Insurance being your current Policy issued in respect of the Table and Class referred to in the schedule below. 2. i/We acknowledge that the basis of the Contract for the grant of such Policy is this Proposal and all Statements, Declarations and Agreements made by or on behalf of the Life Insured. 3. i/We understand that the insurance will not commence until the Proposal has been accepted by the Association and the premium has been paid. 4. i/We declare that the answers to the questions set out above are correct and true and I/we acknowledge responsibility for their completeness and accuracy whether the answers have been written in by me/us or by another person on my/our behalf. i/we understand that the Policy will be issued upon the faith of the correctness of the answers. Any information given to any person (including an agent of the Association) assisting the Insured or the Life Insured to complete this proposal shall not be treated as information communicated to the Association unless such information is stated in writing in this proposal." The document provided at the foot of the last page above the respondent's signature that:- "My answers to the questions above are correct and true and I acknowledge responsibility for their completeness and accuracy whether the answers have been written by me or another person on my behalf. I understand that the Policy will be issued upon the -- 10 of 36 -- 7 faith of the correctness of the answers. Any information given to any person (including an agent of the Association) assisting the Life Insured to complete this proposal shall not be treated as information communicated to the Association unless such information is stated in writing on this proposal ." The appellant's argument in respect of the first ground of appeal, as I have indicated, accepts that there was evidence for and against the finding the jury was asked to make. The jury was thus confronted with a pure question of fact; Wadi Mohammed v. Mohammed Bakksh (1929) L.R. 57 Ind. App. (J.C.) 86 at 92 cited by Dixon J. in Hocking v. Bell (ante). The fact of the declaration and the jury's finding that it was read to the respondent does not to my mind constitute such a preponderance of evidence against the jury's finding as to make it unreasonable. There was for example evidence that Humphrey was armed with a business card in a format approved by the appellant which the appellant encouraged him to use in the course of canvassing for business. It described Humphrey as representing the appellant. Humphrey gave evidence to the,effect that he made observations as to how the respondent was operating his business and he took note of the fact that he "did not think that expenses would be very much". He said that on occasion he provided additional information to the appellant over and above the specific information sought by a proposal form based on observations he had made. He said that there was space on most proposal forms for agent's notes and if there was not there was provision for an inter office memo. He agreed that the company would expect an agent such as himself to provide it with any additional relevant information based on observations. As I have indicated the first ground of appeal in my view therefore fails. -- 11 of 36 -- 8 Ground four of the grounds of appeal is against the jury's finding (5(b)) to the effect that the answer of $700.00 in respect of the respondent's weekly income was not material to the acceptance of the risk. It was submitted that the evidence on the question of materiality could lead to only one finding - that the statement of average weekly earnings was material to the acceptance of the risk. I have already set out the terms of the declarations forming part of the proposal for disability insurance. It is material to note that the occupational history questionnaire concluded with a declaration signed by the respondent that:- "The answers given above are complete and true and I understand that this Supplementary Personal Statement will form part of the basis of the contract for the desired Insurance on my life." The policy of itself provided "THE BASIS OF THIS CONTACT is the proposal for this Policy and all statements, declarations and agreements made in writing by the Insured or the Life Insured in relation thereto and any written notice or consent given as hereinafter provided." For the sake of completeness it is convenient to mention that cl. 16 of the policy relevantly provided "Notwithstanding anything expressed or implied in this Policy or Schedule to the contrary, (a) the National Mutual may subject to law cancel this Policy in the event of breach of warranty, misrepresentation or non disclosure by the Life Insured if material to the risk." Oral evidence bearing on the question of materiality was given by one Simpson who was at the relevant time manager of the disability underwriting and claims area of the appellant's New South Wales branch and the person ultimately responsible for the assessment of the respondent's proposal and recommending its -- 12 of 36 -- 9 acceptance. Simpson's evidence included evidence to the effect that from the outset the appellant considered, and ultimately imposed, a change of occupation clause for the reason, among others, to protect its position should the respondent's earnings be effected adversely to the appellant's interest by change of occupation. Simpson was asked whether, in assessing the proposal, he took any notice of the figure of $700.00 said to be the average weekly income. He replied that he did:- "... mainly to make sure that we were comfortable with the level of income for that particular type of occupation and occupational history. The second aspect is that the maximum benefit we will allow is based on a ratio against his average weekly income. So we would have checked that the weekly benefit was not more than 75% of his income." He went on to say that the proposed weekly benefit of $300.00 was well within the maximum allowable benefit for the respondent's occupation and income disclosed in the proposal. It was the benefit figure upon which the premium was calculated. Simpson said he "would not have been troubled" if the income was as low as $400.00 per week because that would have still been within the 75 percent level with a $300.00 weekly benefit. He was asked as to his attitude if he had been told that the actual average weekly income was less than $300.00 per week and he said that would have raised a couple of concerns. In light of the fact that the respondent had only been recently self employed then the appellant would have undertaken an investigation of the stability of the business. That situation did not however arise. In cross examination Simpson agreed that a policy required a claimant to establish his average weekly income for the 12 months prior to the disability was such as to satisfy the 75 -- 13 of 36 -- 10 percent benefit requirement. This he agreed had the consequence that the appellant was not exposed to paying more than 75 percent of the average weekly income net of business expenses "no matter what was said on the proposal form". He said he did not regard the appellant as exposing itself to a risk in this context only that it was "exposing itself to argument". Simpson's evidence was not in my view such as to leave open only one finding on the question of materiality. Put shortly, among other things, it left open a view that the appellant, through Simpson, regarded its position as adequately protected by the change of occupation clause and by the limitation on benefit effected by the 75 percent provision "no matter what was said on the proposal form" . What was to be made of the evidence was of course a matter for the jury and I do not regard it as having been demonstrated that its finding was unreasonable. It is convenient to turn to the third ground of appeal which is that the trial judge was wrong in law in holding that the "basis" clause in the policy did not incorporate the proposal in the policy. I have set out earlier the relevant provisions of the proposal, the accompanying personal statement and the policy. In this case there is a basis clause in the policy. Thus it is not a case where the appellant seeks to rely on a clause incorporated into the policy by a document antecedent to or separate from the policy itself. Moreover it is not a case in which it was argued that, for example, there was some inconsistency between the basis clause in the policy clause and the provisions of the proposal or accompanying documentation rendering the clauses ineffective. -- 14 of 36 -- The question here is rather whether the express terms of the policy are adequate to lead to the consequence that the truth of the statements contained in the proposal documents is a condition of liability of the insurer independently of any question of materiality; Deaves v. C.M.L. Fire and General Insurance Co. Ltd. (1978-1979) 1 43 C.L.R. 24 per Mason J. at 63-64 and Dawsons Ltd, v. Bonnin (1922) 2 A.C. 413 at 422-423, Thompson v. Weems (1884) 9 App.Cas. 671 at 684 and Australian Provincial Insurance Association Ltd, v. Producers and Citizens Co-Op. Insurance Co. of Australia Ltd. (1932) 48 C.L.R. 341. The latter case was of some significance in the proceedings below and was relied on before this Court. It is necessary to say something about it. Australian Provincial Insurance was a case of an action brought by an insurer against a reinsurer. For the reinsurer to succeed in its defence it was necessary for it to show that the proposal and declaration preceding the original policy of insurance had been made the basis of the policy of reinsurance. The reinsurer relied on a proviso contained in the policy issued by it that:- "Provided that if any material information shall have been withheld or omitted from the proposal and statement abovementioned, or from the documents therein referred to, or if any material misrepresentation shall have been made in the said proposal and statement or documents, then this policy shall be null and void and all premiums paid thereon shall be forfeited to the company." It was held that this provision did not manifest any intention that any premises, conditions or stipulations contained in the proposal should form part of the contract of reinsurance. The proviso exposing the policy to annulment and avoidance and the other consequences referred to above were said to refer to the proposal and statement for that purpose "but not for any -- 15 of 36 -- promissory or contractual provision that the document might contain"; see per Dixon J. (with whom Rich J. agreed) at p. 360. In this case I should have thought that the basis clause in the policy itself which I have set out above and which is contained in the policy was sufficient to relevantly incorporate the proposal and the answers in it in the policy. The appellant has therefore made out the third of its grounds of appeal . I turn now to consider the second ground of appeal which is: - "The trial judge erred in law in refusing to enter judgment for the defendant on the plaintiff's claim and the defendant's counterclaim in the light of the findings of the jury that :- (a) Humphrey did not disclose to the plaintiff that the information required was the net business income before tax for the preceding 12 months; (b) the answer $700.00 in the proposal and questionnaire was not a fair recording by Humphrey of information given to him by or on behalf of the respondent; (c) Humphrey knew at the time of receiving the proposal that the $700.00 answers were not true ' thereby preventing the knowledge of Humphrey from being imputed to the defendant'". This ground of appeal gives rise to a consideration of what is seen as the rather vexed question of the extent to which the knowledge of a canvasser is to be imputed to the insurer who issues a policy of insurance consequent upon a proposal in the completion of which the canvasser played a role. The high point of the insurer being shielded from knowledge gained by a canvasser is probably the much considered decision of the Court of Appeal in Newsholme Brothers v. Road Transport and General Insurance Co. Ltd. (1929) 2 K.B. 356. Newsholme came before the Court on a case started by an arbitrator. It arose out of a -- 16 of 36 -- 13 proposal form signed by a partner in the appellant firm. In fact the answers were filled in by the insurance company's canvasser, were declared to be true and to be the basis of the contract. Confronted with a claim on the policy the insurance company discovered that some of the answers in the proposal form were untrue and repudiated liability under the policy. The insured's response was that the agent had been told the true facts when filling in the proposal form. It had been found by the arbitrator that the canvasser was given the correct answers to put in the form. The arbitrator also found that the duties of the canvasser were to canvass for insurance, to obtain duly completed and signed proposals and to receive premiums but that he had no authority to complete a proposal form himself. The Court of Appeal held that the insurance company was entitled to void the policy. Scrutton L.J. said that in writing down the answers given orally by the applicant the canvasser was acting as the agent or amanuensis of the applicant for insurance. He could not be an agent of the company for the purpose of completing the proposal and consequently any mistake or error in writing down the answers was not perpetrated by the agent in the performance of any duty to the insurance company. Hence the canvasser's knowledge could not be imputed to the insurer. In the course of his judgment Scrutton L.J. remarked that the arbitrator "will not find that Willey (the canvasser) had authority from the company to fill up the form and will not find what the usual terms and conditions are". Greer L.J. also remarked on the absence of a basis for concluding that the canvasser was authorised on the insurer's behalf to receive the relevant information. -- 17 of 36 -- 14 I mentioned earlier that Newsholme (supra) is a much considered case. In Blackley v. National Mutual Life Assurance of Australasia Limited (1972) N.Z.L.R. 1038 (Court of Appeal) at p. 1051 Turner P. catalogued a number of the cases on the imputation of knowledge to an insurer reported up to that time in terms of it being held or not held that disclosures made by an insured to an agent of the insurance company could deem to have been made to the company. I do not however find it necessary to undertake a similar examination of the cases because it seems to me that each case must depend on its particular circumstances. In fact a convenient point of departure is provided by the learned author's of MacGilliray and Parkington on Insurance Law (8th Edition) where in para. 848-9 they say:- "If, however, the insurers wish to avoid the contract of discovering the truth, and the assured wants to hold them to it, then the issue of imputed knowledge comes into the picture. As a general rule the knowledge acquired by an agent in the course of his duties is imputed to his principal, so that the latter is estopped from denying that he knows the matters in question. The assured, therefore, may claim that he gave accurate and complete information about the risk to the agent dealing with him on the part of the insurers, and, as the agent was in possession of the true facts, the insurers are in law estopped from saying that they were mislead, ... In order that the assured may claim the benefits of this rule he needs to show three things: the person acting as agent was in fact an agent of the insurer; he acquired knowledge of the matters in dispute of the ordinary performance of his duties as agent; the agent was not acting for his own private ends in fraud to the principals." The third of these considerations may immediately be eliminated from contention so far as this appeal is concerned. It is also (i) (ii) (iii ) -- 18 of 36 -- 15 to be borne in mind, as is pointed out by Giles J. in N.R.M.A. v. Howie-Proussart (1988) 7 Motor Vehicle Report 405 at 414, that is not necessarily inconsistent that a person filling in a proposal on behalf of the insured is a representative of the insurer for the purpose of receiving information in respect of the risk. It seems to me that the point is that in the present case, in the context of the other findings to which I have earlier referred and of the circumstances in which the jury may be taken to have found Humphrey arrived at the figure of $700.00, the jury has found that the appellant held Humphrey out as its agent "for the purpose of obtaining information to be written into the proposal and questionnaire". In the performance of that function Humphrey obtained the information which led to his writing the offending figure into the proposal and questionnaire. The jury has moreover found that the answer was not a "fair recording" by Humphrey of information given him by and on behalf of the appellant and that Humphrey knew that the answers in the proposal and occupational history in respect of the $700.00 were not true. In other words it found Humphrey knew the true position. The relevant information therefore was acquired by Humphrey in the ordinary performance of his duties as an agent of the appellant to the extent of ostensible authority to obtain "such information" to be written into the proposal and questionnaire - which is what.was done. Ground two of the notice of appeal in my view therefore fails and the appeal should be dismissed. It is now necessary to consider the cross-appeal. It will be recalled that this was to the effect that the trial judge -- 19 of 36 -- ought not to have deducted the sum of $1,890.57 earned by the respondent from part time work. This was put on the basis that the consequence contended for by the respondent followed the proper construction of cl. 6 of the contract of insurance coupled with the jury's finding that at the relevant time the respondent was "totally disabled". Alternatively, it was submitted that the activity engaged in by the respondent (doing hosing at a school) was not capable of amounting to an occupation. Clause 6 of the policy provides "6. If, immediately following a period in respect of which the Insured has been entitled to receive the Benefit, the Life Insured engages in any ' profession or occupation but as a result of the disability in respect of which the Benefit is payable his earnings are at a weekly rate (hereinafter called his Post-disability Income) that is less than his Average Weekly Income, the National Mutual will pay to the Insured such proportion of the Benefit as the shortfall from time to time in the Life Insured's Post disability Income bears to his Average Weekly Income. Such payment shall be made for a period not exceeding the balance of the Maximum Accident or Sickness Benefit Period, as the case may be, referred to in the Schedule." The policy defines "totally disabled" to mean suffering total disablement and defines "total disablement" as follows "The continuous inability of the Life Insured by reason solely of injury or sickness (i) (a) during the first two years of any one period of disablement to perform each and every normal duty of his usual occupation and (b) during the remainder of such period of disablement to perform each and every gainful occupation for which he is or may become reasonably fitted by eduction, training or experience and (ii) not engaging in any gainful occupation or employment except as provided for in Condition 6 of this policy." -- 20 of 36 -- In my view the activity engaged in does constitute an occupation in terms of cl . 6 and the learned trial judge correctly construed cl. 6 by reading it to the effect that once an insured engages in an occupation in which he earns money albeit that he might be entitled to receive a benefit pursuant to the policy the money has to be brought to account. Alessi v. National Mutual Life Association of Australasia Limited (unreported Supreme Court of Western Australia 1201/82, Wickham J., 27 July, 1982) was concerned with the rather different point of whether an insured was prevented from engaging in any occupation for which he was fitted by his knowledge, training, status and abilities. I would therefore dismiss the cross-appeal. -- 21 of 36 -- IN THE SUPREME COURT OF QUEENSLAND FULL COURT No. 2841 A of 1989 Before the Full Court Mr. Justice McPherson S.P.J. Mr. Justice Moynihan Mr. Justice Byrne BETWEEN : AND: EAMON THOMAS FARRELL (Plaintiff) Respondent THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant JUDGMENT - BYRNE J. Delivered the 9th day of November, 1990. CATCHWORDS : Counsel: R.V. Hanson Q.C. with him A. Philippides for the appellant N.M. Cooke Q.C. with him R.S.M.G. King and M.M. Varitimos for the respondent Solicitors: Henderson Trout for the appellant Cranston McEachern & Co for the respondent Hearing dates: 17th, 18th April, 1990 -- 22 of 36 -- IN THE SUPREME COURT OF QUEENSLAND No. 2841A of 1989 BETWEEN: EAMON THOMAS FARRELL (Plaintiff) Respondent AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (Defendant) Appellant JUDGMENT - BYRNE J. Delivered the 9th day of November, 1990. Eamon Farrell was a jeweller by trade. Anthony Humphrey made his living by commissions earned from The National Mutual Life Association of Australasia Limited ("National Mutual") on new business he procured. Farrell and Humphrey first met in 1980. At that time Farrell worked in Canberra earning less than $200.00 per week. Later on he secured better paid employment. By about September, 1981 Farrell had a weekly pre-tax income of about $300. Then he began to carry on his trade alone, working from a workshop at home. His customers were other Canberra jewellers . On 30th June, 1982 Farrell signed a proposal for disability insurance addressed to National Mutual. At the time, he was aged 34 and married with six children. Humphrey had persuaded him that he needed a disability policy. Farrell, as Humphrey knew, was barely literate. So Humphrey decided on the answers to questions in the insurer's standard form and wrote them in. The proposal asked: "What is your actual or average weekly income? -- 23 of 36 -- 2 (taken over the past 12 months - see Note)". Humphrey wrote in "$7.00". The note said: "Income means income received from personal exertion net of business expenses but before personal deductions and income tax". The answer "$700" was false. Farrell was injured in mid-September, 1983. Afterwards, he claimed a benefit under the policy National Mutual had issued on 26th November, 1982. His claim was admitted and in the next three years more than $20,000 was paid to him. Then, on 26th November, 1986, National Mutual wrote saying there would be no further benefits. The letter justified the decision as one based on medical advice that Farrell was fit to work as a manufacturing jeweller. In July, 1987 Farrell instituted proceedings to establish his entitlement to a continuing benefit. Three months later, National Mutual wrote again. This letter identified another basis for declining the benefit, viz. the misrepresentation made by the answer "$700". Farrell's action to establish his right to the disablement benefit was tried with a jury. The jury answered specific questions. Judgment was entered for Farrell in accordance with the jury's responses. The jury found that the answer "$700" in the proposal was - (i) a misrepresentation; (ii) not material to the risk insured against; (iii) known by Humphrey to be untrue when he took Farrell's signature to the proposal; and (iv) not a "fair recording" by Humphrey of information actually given to him by Farrell and his wife. -- 24 of 36 -- 3 These findings involved an acceptance of the evidence of Farrell and his wife. They testified that Humphrey filled in the proposal after asking Farrell some questions. According to Farrell, Humphrey asked about earnings but did not enquire about business related expenditure. Humphrey, the Farrells had said, was shown Farrell's bank statements recording deposits between 17th March and 20th June, 1982 - three of the nine months since Farrell became self-employed. Those records disclosed the income earned in that three months . Humphrey calculated that the deposit books showed average weekly takings at about $700. Humphrey did not attempt to explain that the "Note" required attention to pre-tax receipts after deduction of business expenses. Nor, said Farrell, did he mention that the proposal form asked about an income figure averaged over a year. Rejecting Humphrey's evidence, the jury made this finding: that Humphrey did not disclose to Farrell "that the information required was the net business income before tax for the preceding 12 months." Humphrey realised that there were business expenses. So there was a satisfactory basis for the jury's conclusion that Humphrey appreciated that his answer "$700" was false. Indeed, although Humphrey gave a different account of his discussions with Farrell, Humphrey explained the $700 figure as a prediction as to the future - an "estimate for the next 12 months from 30/6/82 ..." The $700 figure was Humphrey's invention; and when he put it in the proposal he knew that it was not true. An important issue is whether Humphrey's knowledge that the "$700" answer was false could properly be imputed to National Mutual . Were Humphrey the agent for the purpose of knowing the -- 25 of 36 -- 4 true facts concerning Farrell's "average weekly income ..." National Mutual must be taken to have appreciated the falsity of the $700 response when it issued the disability policy. If so, although by the policy the proposal was to be the "basis" of the contract of insurance, the misrepresentation could not be availed of by the insurer to repudiate the policy: Mevers and Paddington Motor Service Ltd v. Dalgety & Co Ltd (1926) 26 S.R. (NSW) 195; NRMA Insurance Ltd v. Howie Poussart (1988) 7 M.V.R. 405, 411-3; MacGillivray and Parkington On Insurance Law (8th ed., 1988) p. 353. The jury was asked a question directed to whether Humphrey had ostensible authority to receive for National Mutual information concerning the true facts: "Did National Mutual hold out . . . Humphrey for the purpose of obtaining information to be written into the proposal and questionnaire?" The jury answered "Yes". The trial was conducted on the basis that the jury was to decide whether National Mutual had held Humphrey out to Farrell as a person to whom information concerning the proposal might be communicated on behalf of National Mutual; that is to say, as ostensibly its agent for such a purpose. In summing up to the jury the learned trial Judge said: "If you think that Mr Humphrey ... was ... armed by the company ... in such a way as to suggest that he was acting on behalf of the company in telling Mr Farrell how to fill out the form and in receiving such information as Mr Farrell might give him, then you could find that the company held him out as a representative for this purpose. If you find that, then the company could not later say that it did not have whatever information Mr Humphrey actually got in that capacity from Mr and Mrs Farrell . . . You need to consider whether the company held Mr Humphrey out as its agent for this purpose... -- 26 of 36 -- 5 It may be thought that it would be unfair and unrealistic to treat Mr Humphrey, a person not on the company's staff, as someone authorised to receive information on behalf of the company above what is written into a proposal form. Especially is this said to be so in Mr Hanson's submission when he draws attention to the declaration on the face of the proposal which on the evidence (was) actually read out to Mr Humphrey. The last sentence of the declaration contains these words: 'Any information given to any person (including an agent of the Association) assisting the insured ... to complete this proposal shall not be treated as information communicated to the Association unless such information is stated in writing in this proposal. 1 That is a submission to which you give due weight... The real question ... is 'Did National Mutual allow Mr Humphrey to present a position in which he might ordinarily be expected by outsiders to have authority to receive the necessary information?1 " Farrell's knowledge of the declaration supported National Mutual's contention that Humphrey was not its agent for any relevant purpose. However, it did not conclusively establish the point in its favour. This was accepted before us and, as the case was fought, was beyond challenge. National Mutual did not plead that the declaration precluded the attribution to it of Humphrey's knowledge that the average weekly income was not $700. Farrell's amended reply had alleged that National Mutual was estopped from relying on the falsity of the "$700" answer, pleading that (i) Humphrey knew the response to be untrue; and (ii) his knowledge was National Mutual's. A rejoinder was delivered. It did not set up an estoppel based on Farrell's awareness of the declaration's terms - something which, if it were to be relied on, should have been pleaded: Laws Holdings Ptv. Ltd, v. Short (1972) 46 A.L.J.R. 563, 571. In these circumstances, Farrell's knowledge of the declaration did not mean that his relations with National Mutual were necessarily -- 27 of 36 -- 6 presumed to have been conducted on an agreed or assumed state of facts which denied that Humphrey's knowledge was the insurer's: cf . Con-Stan Industries of Australia Ptv. Ltd, v. Norwich Winterthur Insurance (Australia) Limited (1986) 160 C.L.R. 226, 244-5. Nor was any case of estoppel by representation or by negligence arising from Farrell's having signed the proposal with its printed acknowledgement that "any information given to any person (including an agent of the Association) assisting the Life Insured to complete this proposal shall not be treated as information communicated to the Association unless such information is stated in writing on this proposal" raised by a pleading: see O'Loan v. The Yorkshire Insurance Co Ltd [1926] St.R.Qd. 177; Newsholme Brothers v. Road Transport and General Insurance Co Ltd [1929] 2 K.B. 356; Sutton Insurance Law in Australia and New Zealand pp. 128-48. No doubt this decision is explained by Farrell ' s near illiteracy: cf. O'Connor v. Kirby & Co [1972] 1 Q.B. 90, 99; Maye v. Colonial Mutual Life Assurance Society Ltd (1924) 35 C.L.R. 14, 34. In short, Farrell's awareness of the declaration mattered only as a piece of evidence the jury was to take into account in deciding the scope of any ostensible authority in Humphrey to receive pertinent information on National Mutual's behalf. The jury determined that Humphrey was National Mutual's agent for the purpose of Farrell's communicating information concerning his financial circumstances. That conclusion, if supportable, disposes of this appeal. Such a finding of fact can only be set aside if there is no evidence to support it or no evidence on which a reasonable -- 28 of 36 -- 7 jury, properly instructed, could have made the finding: Clark v. Trevilyan [1963] Q.W.N. 11; Mechanical and General Inventions Company Ltd v. Austin [1935] A.C. 346. It was not suggested that there was no evidence to sustain the finding. Rather it was said to be "against the evidence and unreasonable": cf. Hocking v. Bell (1945) 71 C.L.R. 430, 498-500. The declaration is the foundation of the contention. The declaration, it is said, completely negated any inconsistent impression concerning Humphrey's authority that may have preceded its being read to Farrell. So this argument runs, once the declaration was pronounced Humphrey could not thereafter have been seen as someone to whom Farrell might convey information for the insurer. The jury will have appreciated that the reading of declaration was significant: Facer v. Vehicle & Accident Insurance Co [1965] 1 LL.Rep. 113; Birds Modern Insurance Law (2nd ed., 1988) p. 113. The learned trial Judge's directions drew attention to its potential to counteract the appearance of Humphreys's authority to act for National Mutual which its own conduct had otherwise created. It is convenient to describe that conduct now. National Mutual printed business cards for Humphrey. The words on it were approved by the insurer. At the top, in large print, were the words "National Mutual" and its logo. The card said in terms that Humphrey was "representing" National Mutual. It carried his business address and telephone number. The address was National Mutual Centre, Darwin Place, Canberra where Humphrey worked with employees of the insurer. Humphrey was -- 29 of 36 -- 8 encouraged to use the card to attract business. It was shown to Farrell. The card and Humphrey ' s possession of blank forms of proposals all prominently carrying the insurer's name contributed to an impression that Humphrey had the ostensible authority found by the jury. Of course the words of the declaration were capable of being regarded as adequately communicating to Farrell that Humphrey was not National Mutual's agent to receive information concerning the proposal. And, if a reasonable jury must have treated that disclosure as sufficient fairly to apprise Farrell of such a restriction on his authority, the finding cannot stand: Western Australian Insurance Co Ltd v. Davton (1924) 35 C.L.R. 355, 376-7. In my opinion, however, the jury was entitled to decide as it did. National Mutual had encouraged Humphrey to represent himself as having the authority to act for the insurer in taking the proposal. As Isaacs A.C.J. once said of another canvasser for policies of insurance, Humphrey was presented as "the ear and hand of the company in writing the answers and taking the proposal": Maye at p. 37. The jury's conclusion involves that the reading of the declaration to Farrell was in all the circumstances insufficient reasonably to dispel the appearance of Humphrey's authority. This was a tenable view. The jury had to consider, amongst other things, the effect National Mutual's conduct had created in holding Humphrey out as its representative and the impact the reading of the declaration ought to have had on Farrell's understanding of Humphrey's authority. All considered, it was open to the jury to decide that enough of the initial appearance lingered on after the -- 30 of 36 -- 9 declaration was read to justify the inference that Humphrey, when he took the signed proposal, had ostensible authority to receive the relevant information for National Mutual. The determination that Humphrey was the agent of National Mutual in writing the answer "$700" should not be disturbed. So far I have considered whether Humphrey was clothed with ostensible authority to receive information. Perhaps Humphrey had actual authority to do so. In practice, Humphrey was expected to provide any additional information he acquired material to the company's decision whether to accept the risk. He was to state on the proposal itself or in an accompanying inter-office memo any further information of importance. Such a responsibility is consistent with express obligations assumed by Humphrey to National Mutual. By cl. 4 of the instrument which appointed him, Humphrey was to "keep and render to the Association a just and true account of all work done hereunder and of all proposals taken by you" . It may therefore have been Humphrey's duty to place his knowledge of Farrell's circumstances at the disposal of National Mutual. If this obligation was indeed an incident of his engagement, his knowledge of the falsity of the "$700" answer might perhaps have been imputed to National Mutual on the footing that, subject to presently immaterial exceptions, a principal is taken to know a fact known to his agent which is material to the agency and which the agent had a duty to communicate to the principal: Blackley v. National Mutual Life Association of Australasia Limited [1972] N.Z.L.R. 1038; Deaves v. C.M.L. Fire & General Insurance Co Ltd (1979) 143 C.L.R. 24, 37; Western Australia v. -- 31 of 36 -- 10 Watson [1990] W.A.R. 248, 281; Watts v. Perry and the National Insurance Co of New Zealand Ltd [1972] 1 N.S.W.L.R. 73, 81; Bowstead on Agency (15th ed, 1985) pp. 412-7. This possibility, however, was not discussed before us and I will not express any opinion on it. Judgment was entered for Farrell in accordance with the jury's findings. But National Mutual complains that those answers established its entitlement to judgment. The second ground of appeal is this: "The learned trial Judge erred in law in refusing to enter judgment for the Defendant upon the Plaintiff's claim and the Defendant's counterclaim in the light of the findings of the jury that:- (a) Mr Humphrey did not disclose to the Plaintiff that the information reguired was the net business income before tax for the preceding twelve (12) months; (b) the answer "$700.00" in the proposal and questionnaire was not a fair recording by Mr Humphrey of information given to him by or on behalf of the Plaintiff; (c) Mr Humphrey did know at the time of receiving the proposal, that the "$700.00" answers in these documents were not true, thereby preventing the knowledge of Humphrey from being imputed to the Defendant." The point is founded on an observation of Scrutton L.J. in Newsholme Brothers where, in discussing the implications for the attribution to an insurer of information acquired by a canvasser from a proponent for a policy of insurance, that eminent Judge said (at 375): "If the answers are untrue and he knows it, he is committing a fraud which prevents his knowledge being the knowledge of the insurance company" . -- 32 of 36 -- 11 The matter was first mentioned after the jury returned with its verdicts. Counsel for National Mutual then moved for judgment based, as he put it, "on the findings of the jury". In rejecting the application, the learned trial Judge said: "I do not know that a finding of fraud necessarily follows from this particular finding of the jury, particularly in the context of the summing up. I also suspect that this further issue which you have derived from the jury's finding is one which itself needed identification before or during trial, and of course those particular issues were not isolated for consideration . . . for particular findings of the jury ." National Mutual's pleadings had not touched upon a case that Humphrey acted in fraud of it. And, as his Honour's remarks reveal, the trial was not conducted on the basis that the jury was to consider whether Humphrey, in writing in the answer "$700", acted for his own private ends in fraud of his principal. The omission is readily explicable by tactical concerns. Humphrey was called for National Mutual. His evidence contradicted the versions given by the Farrells of the events preceding Farrell's signing the proposal. Humphrey denied any wrongdoing on his part and, not surprisingly, National Mutual called no evidence to prove misconduct by him. Perhaps it was also decided not to raise the point because National Mutual held no confidence in its legal merits. After all, the contention had to confront the proposition expressed by Earl Loreburn in Lloyd v. Grace, Smith & Co [1912] A.C. 716 in this way (at 725): "if the agent commits the fraud purporting to act in the course of business such as he was authorised, or held out as authorised, to transact on account of his principal, then the latter may be held liable for it": see also Mave at p. 38 -- 33 of 36 -- (Isaacs A.C.J.) and p. 40 (Rich J.); Armagas Ltd v. Mundoaas S . A . [1986] A . C. 717, 780-1 ; Bell v. Australian Eagle Insurance Co. Ltd. (1990) 6 A.N.Z. Insurance Cases 60-983 at p. 76, 550. Whatever the reason, the issue was not agitated until after the verdicts were in. Plainly its resolution might possibly have been affected by facts not elicited at the trial. So it is too late to raise the point now: Coulton v. Holcombe (1986) 162 C.L.R. 1, 7-8. The second ground of appeal fails. This conclusion makes it unnecessary to consider another basis on which the judgment was supported, viz. that, although the policy incorporated the proposal as its "basis", cl. 16(a) of the policy only allowed cancellation for misrepresentation where it was "material to the risk"; and the jury had found the answer "$700" was not material (a finding which, as the reasons of Moynihan J. reveal, was open) . This brings me to the cross-appeal against the deduction from the benefit of amounts earned in part-time work at a local school. The deduction, it is said, is opposed to the jury's finding that Farrell was totally disabled throughout the time he earned that money ($1,890.57) working as a groundsman. The policy provided for the payment of a benefit "in the event of the Life Insured being Totally Disabled." "Totally Disabled" was defined to mean "total disablement". "Total Disablement", as defined, means: "the continuous inability of the Life Insured by reason solely of injury or sickness (i) (a) during the first two years of any one period of disablement to perform each and every normal duty of his usual occupation and -- 34 of 36 -- 13 (b) during the remainder of such period of disablement to perform each and every gainful occupation for which he is or may become reasonably fitted by education, training or experience and (ii) not engaging in any gainful occupation or employment except as provided for in Condition 6 of this policy." Condition 6, which carried the side note "recovery benefit after total disablement" provided: "6. If, immediately following a period in respect of which the Insured has been entitled to receive the Benefit, the Life Insured engages in any profession or occupation but as a result of the disability in respect of which the Benefit is payable his earnings are at a weekly rate (hereinafter called his Post-disability Income) that is less than his Average Weekly Income, the National Mutual will pay to the Insured such proportion of the Benefit as the shortfall from time to time in the Life Insured's Post disability Income bears to his Average Weekly Income. Such payment shall be made for a period not exceeding the balance of the Maximum Accident or Sickness benefit Period, as the case may be, referred to in the Schedule." The relevant provisions might, with advantage, have been differently worded. Yet when the definition of "total disablement" (particularly cl. (ii)) and condition 6 are read together it is apparent that the cross-appeal cannot succeed. As defined, "total disablement" expressly assumes that such a state may exist even though an insured is then engaged in an occupation earning income "as provided for in condition 6 of this policy". Accordingly, employment of the nature mentioned in condition 6 is consistent with the insured's being entitled to some benefit on the footing that he is "totally disabled". -- 35 of 36 -- Condition 6 applies here. After he became entitled to a benefit under the policy, Farrell engaged in the occupation of groundsman. But the injuries which created the disability according the right to receive the benefit persisted. As a result of that continuing disability, Farrell's earnings were less than his "average weekly income", as that expression was defined. National Mutual thereupon became obliged to pay the amount stipulated for by condition 6. I would dismiss the appeal and the cross-appeal with costs in each case. -- 36 of 36 --