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CITE

Unreported Judgment
Appeal Determined (QCA)

Michail v Australian Alliance Insurance Co Ltd[2013] QDC 284Dorney QC DCJ
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Michail v Australian Alliance Insurance Co Ltd[2013] QDC 284

DISTRICT COURT OF QUEENSLAND

CITATION:	Michail v Australian Alliance Insurance Co Ltd [2013] QDC 284
PARTIES:	RODNEY MICHAIL (plaintiff) v AUSTRALIAN ALLIANCE INSURANCE COMPANY LIMITED (ACN 006471 709) (defendant)
FILE NO/S:	292/12
DIVISION:	Civil
PROCEEDING:	Claim
ORIGINATING COURT:	District Court at Brisbane
DELIVERED ON:	19 November 2013
DELIVERED AT:	Brisbane
HEARING DATE:	28, 29, 30 October 2013; 12 November 2013
JUDGE:	Dorney QC DCJ
JUDGMENT AND ORDERS:	The judgment of the Court is that there be judgment for the defendant against the plaintiff. It is ordered that submissions on costs, if any, be filed, and served, by 4pm 22 November 2013.
CATCHWORDS: LEGLISLATION: CASES CITED:	Insurance – duty of disclosure – “eligible contracts” – whether waiver – whether breach – whether, if breach, reduction of liability should be to “nil” – whether premium recoverable Insurance Contracts Act 1984 (Cth) ss11, 21, 21A, 22, 26, 27, 28, 33, 69 Insurance Contracts Regulations 1985 (Cth) regs 2B, 3 Evidence Act 1977 (Qld) ss 95, 98, 102 Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1989) 166 CLR 606 Anderson v Aon Risk Services Australia Ltd [2004] QSC 49 Australian Associated Motor Insurers Ltd v Ellis (1990) 54 SASR 61 Australian Securities and Investments Commision v Hellicar [2012] HCA 17 Ayoub v Lombard Insurance Co (Aust) Pty Ltd (1989) 97 FLR 284 Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735 CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 DF Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597 Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd [2002] NSWSC 1006 Hallmark-Mitex Pty Ltd v Rybarczyk [1998] QCA 254 Jones v Dunkel (1959) 101 CLR 298 Markovina v R (No 2) (1997) 19 WAR 119 McCabe v Royal & Sun Alliance Life Assurance Australia Ltd [2003] WASCA 162 Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd [1999] 1 Qd R 279 Morris v Warrian & Anor [2003] QDC 9 Orb Holdings Pty Ltd v Lombard Insurance Company (Australia) Ltd [1995] 2 Qd R 51 Palios Meegan and Nicholson Holdings Pty Ltd v Shore (2010) 108 SASR 31 Permanent Trustee of Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514 QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd [2003] NSWCA 356 R v Kelsey [1982] Crim LR 435 R v Patel [2009] QSC 166 Rosenberg v Percival (2001) 205 CLR 434 Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd [2003] QCA 182 Suncorp General Insurance Ltd v Cheihk [1999] NSWCA 238
COUNSEL:	A J Greinke for the plaintiff K F Holyoak for the defendant
SOLICITORS:	Morgan Conley for the plaintiff Barry Nilsson for the defendant

Introduction

[1]
On 6 May 2011 a motor vehicle insured with the defendant, Australian Alliance Insurance Company Ltd (“AAI”), while being driven by the plaintiff, Mr Michail, left a public road, entered a boat ramp, and then became partly submerged in seawater (in the State of Queensland). AAI admits that the actual loss and damage sustained by the vehicle as a consequence of it being driven into that body of water on that day amounted to a “total loss” within the meaning of the relevant insurance contract.

[2]
That insurance contract was entered into on 19 July 2010 between AAI, as insurer, and Mr Michail, as insured. As admitted in the pleadings, Shannons Limited (“Shannons”) acted as AAI’s agent, under a binder, and as its “authorised representative” in all material acts and conduct concerning the insurance. The motor vehicle was a 2005 Aston Martin DB9 Volante F1 convertible V12. The insurance contract bore policy number SCM006101516, for an “agreed value” of $250,000.00, with an agreed excess of $2,500.00. Not relevant to the issues here, the terms of the insurance contract were later varied, effective at 25 October 2010.

[3]
As outlined by the plaintiff’s counsel at the beginning of the trial and expanded on by the defendant’s counsel during submissions - and confirmed by all relevant pleadings being amended (and filed pursuant to leave) in the first two days of the trial - what remained for this Court to decide were two primary issues. The first was whether the insured (Mr Michail) failed to comply with his duty to disclose (or made a misrepresentation) under the Insurance Contracts Act 1984 (Cth) (“ICA”). Secondly, if there was such a failure of the insured’s duty to disclose (or he made such a misrepresentation), is the insurer (AAI) able to reduce its liability pursuant to s 28(3) of the ICA and, as a subsidiary issue, whether that ought to be reduced to “nil”? Since no issue was raised by the plaintiff concerning any non-compliance by the defendant with its statutory obligation to “inform” the plaintiff of his duty of disclosure, it will not be further investigated.

Relevant legislation

[4]
Section 11(1) of the ICA, the interpretation provision, provides that a “duty of disclosure” means the duty referred to in s 21.

[5]
Section 22(1) of the ICA provides that the insurer shall, before a contract of insurance is entered into, “clearly inform” the insured in writing of the general nature and effect of the “duty of disclosure” and, if s 21A applies to the contract, also clearly inform the insured in writing of the general nature and effect of s 21A. Section 22(2) then provides that, if the regulations prescribe a form of writing to be used for informing an insured of the matters referred to in subsection (1), the writing to be used may be in accordance with the form so prescribed.

[6]
An insured’s initial duty of disclosure is, as noted, contained in s 21 of the ICA. Section 21(1) provides that, subject to the ICA, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:

(a)
the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or

(b)
a reasonable person in the circumstances could be expected to know to be a matter so relevant.

[7]
Relevantly, s 21(2)(d) of the ICA states the duty of disclosure does not require the disclosure of a matter as to which compliance with the duty of disclosure is waived by the insurer. Furthermore, s 21(3) provides that where a person either failed to answer, or gave an obviously incomplete or irrelevant answer to, a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.

[8]
For eligible contracts of insurance, there are specified matters which are the subject of the duty to disclose. It is not in contest that the insurance policy here is, pursuant to s 21A(9) of the ICA an “eligible contract of insurance” within the meaning given in reg 2B of the Insurance Contracts Regulations 1985 (Cth). Section 21A(2) provides that the insurer is taken to have waived compliance with the duty of disclosure in relation to the contract unless the insurer complies with either s 21A(3) or s 21A(4). Relevantly here, s 21A(3) covers where, before the contract is entered into, the insurer requests the insured to answer one or more specific questions that are relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. Since s 21A(5) did not feature in the final submissions, no attention will be paid to it here. As for the position of the insured, s 21A(6) provides that if the insurer complies with s 21A(3) and, in answer to each question referred to in s 21A(3), the insured discloses each matter that is both known to the insured and a reasonable person in the circumstances could be expected to have disclosed in answer to that question, the insured is taken to have complied with the duty of disclosure in relation to the contract.

[9]
Misrepresentations are dealt with in Division 2 of Part IV. Neither s 26 nor s 27 of the ICA was relied upon by the plaintiff in his pleadings. Section 26(2) was raised by the defendant in its written submissions. It provides that a statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. But any reliance on the whole of s 26 was disclaimed in oral submissions by the plaintiff.

[10]
The remedies for non-disclosure and misrepresentation are provided for in Division 3 of Part IV of the ICA. Section 33 provides that the provisions of Division 3 are exclusive of any right that the insurer has otherwise than under the ICA in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement.

[11]
For general insurance, s 28 of the ICA (in Division 3) is the relevant remedial provision. By s 28(1), s 28 applies where the person who became the insured under a contract of general insurance upon the contract being entered into failed to comply with the duty of disclosure or made a misrepresentation to the insurer before the contract was entered into; but does not apply where the insurer would have entered into the contract, for the same premium and on the same terms and conditions, even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into. According to Davies JA in Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd,^[1] the only situation in which an insurer will have “no remedy” in such circumstances will be where the insurer would, in any event, have entered into the contract for the same premium and on the same terms and conditions: at footnote 19. Importantly here, s 28(3) states that, if the insurer is not entitled to avoid the contract, the liability of the insurer in respect of a claim is reduced to the amount that would place the insurer in a position which the insurer would have been if the failure had not occurred or the misrepresentation had not been made.

[12]
As for the giving of information to an insured, s 69 of the ICA contains ways in which such information may be able to be given orally. Though no issue remains about such giving, it provides a useful background to understanding the evidence. In particular, s 69(1) states that where, by reason of a provision of the ICA, information in relation to a contract of insurance is to be or may be given in writing to a person before the contract is entered into and it is not reasonably practicable for the information to be so given in writing, but it is reasonably practicable for it to be so given orally, the provision shall be “deemed” to have been complied with if the information is so given orally and the information is also given in writing within 14 days after the day on which the contract was entered into. Relevantly here, s 69(1A) states that, if an insured may, because of subsection (1), be informed orally of the matters referred to in subsection 22(1) and the regulations prescribe a form of words to be used in giving the information orally, the information may be given using the prescribed form of words. For present purposes, reg 3(1)(c) states the form of writing that may be used to inform an insured of the matters mentioned in s 22(1) of the ICA is, for an eligible contract of insurance, the form set out in Part 3 of Schedule 1. Further, reg 3(2) states that the words that may be used to inform an insured orally of the matters mentioned in s 22(1) of the ICA for an eligible contract of insurance are set out in Schedule 2.

Relevant authority

[13]
Concerning the insurer’s obligation to inform the insured of the insured’s duty of disclosure, it has been held, in Australian Associated Motor Insurers Ltd v Ellis,^[2] that if the notice given by the insurer is explicit and along the lines of the prescribed form, the insurer will have fulfilled the statutory obligation. Obviously, the onus of proof in respect of the insurer’s compliance with s 22 of the ICA and the insured’s failure to comply with s 21 and s 21A lies on the insurer: see, for instance, Suncorp General Insurance Ltd v Cheihk.^[3] It is also clear that the onus to establish the right of the insurer to rely upon s 28(3) of the ICA is also on the insurer: see Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd.^[4]

[14]
As a survey of the legislation has revealed, for there to be a duty of disclosure, a matter must be “known” to the insured. In Permanent Trustee of Australia Ltd v FAI General Insurance Co Ltd (in liq)^[5] the majority (McHugh, Kirby and Callinan JJ) stated that “knows” means considerably more than “believes” or “suspects” or even “strongly suspects” at 531 [30]. Also importantly, they stated that, to answer the description that s 21(1)(a) of the ICA requires, the matter must be a matter that is not only relevant to the decision of the insurer whether to accept the risk and, if so, on what terms, but also one that the insured “knows to be such a matter”: at 531 [30]. In light of that later decision, the reference to knowledge and inference in Midaz, while accepted as correct, depends on particular findings of fact in that case: see, for instance, per Pincus JA, at 282-283. As was held by the New South Wales Court of Appeal in Commercial Union Assurance Co of Australia Ltd v Beard,^[6] whether a matter is known is a question of fact for the judge (or jury).

[15]
In terms of what matters are “known”, Palmer J in Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd^[7] - in a passage which was referred to on appeal only by Sheller JA^[8] - held that the obligation to disclose something “known” can attach only to something which, at the time for disclosure, a person actually has in his (or her) consciousness or else something which exists in some record or other source of information which the person actually knows about and to which the person has access, exemplifying this by reference to knowledge of a driving license number as being known even though the person cannot recite it offhand where the person actually knows that he (or she) has one which can be readily found. No different approach to knowledge can be countenanced for s 21A.

[16]
With respect to the determination of what s 21(1)(b) covers in the reference to a “reasonable person in the circumstances”, in CGU Insurance Ltd v Porthouse,^[9] Gummow, Kirby, Heydon, Crennan and Kiefel JJ stated that the statutory test for disclosure focuses on the “reasonable insured”, not the “prudent insurer”, thereby operating, first, by reference to the actual knowledge of the insured and, secondly, by reference to what “a reasonable person in the circumstances could be expected to know”, observing that the latter statutory phrase has been interpreted as meaning that one should take into account only factors which are “extrinsic” to the insured, such as the circumstances in which the policy was entered into, rather than “intrinsic” factors such as the individual idiosyncrasies of the insured: at 118 [52]. It was further concluded that the ultimate question under s 21(1)(b) turns upon a consideration of a reasonable person’s state of mind, not the insured’s state of mind: also at 118 [52]. Accordingly by such a provision, the insurer is protected against claims where the insured’s disclosure is inadequate because the insured is unreasonable, idiosyncratic or obtuse and the insured is protected from exclusion from cover, provided he or she does not fall below the standard of a reasonable person in the same position: at 118 [53].

[17]
In terms of the expectation referred to in s 21(1)(b) of the ICA, it is possible to discern two lines of inquiry, with the first being whether the insured “knew”, and the second being whether a reasonable person in the circumstances could be expected to know, with both questions being questions of fact. Although stated slightly differently, the tests in s 21A(6)(b) must be approached analogously.

[18]
It is not disputed that, with respect to Queensland, Orb Holdings Pty Ltd v Lombard Insurance Company (Australia) Ltd^[10] has held that s 28(3) of the ICA entitles an insurer to refuse to make payment under its contract of insurance in a case where the contract remains in existence but, if the insured had not failed to comply with its duty of disclosure or had not made a misrepresentation, the insurer “would not have entered into it”. The plaintiff referred to McCabe v Royal & Sun Alliance Life Assurance Australia Ltd^[11] which – though by reference to s 29 - stresses the importance of the necessary finding that the insurer “would not have been prepared to enter into (the) contract ... on any terms”: at [36]. But that is subtly different terminology from what s 28(3) uses, as interpreted in Orb Holdings.

[19]
In terms of analysing the decision of the insurer whether to accept the risk, two particular aspects should be mentioned. The first is that the majority of the High Court in Permanent Trustee concluded that the words “accept the risk” were the “key” words, which were to be contrasted with other phrases such as “to enter into a contract of insurance” or “to renew a contract of insurance”, meaning that the focus of attention is upon the “risk” (being the particular insurance hazard): at 531-532 [32]. It was further concluded that the assessment of the risk (being that insurance hazard) was susceptible to objective ascertainment: at 532 [32]. It must be stressed that the examination was of the wording of s 21 of the ICA. But acceptance of the risk is at the heart of the application of s 28(3) in any case concerned with reducing the liability to nil. Obviously, the fact that a matter for disclosure is the subject of questions for a proposed insurance may assist in the determination as to whether a matter is relevant to the decision of a particular insurer on whether to accept the risk and, if so, on what terms. In several cases, the existence of questions in, for instance, a proposal form relevant to the matter for disclosure has proved to be a factor of some importance in the process of determination: for example, see Ayoub v Lombard Insurance Co (Aust) Pty Ltd.^[12]

Witnesses

[20]
The credibility of witnesses in this case is significant, not least because one of the primary issues (namely, the issue of disclosure by the insured, as well as the issue of misrepresentation) needs to be resolved in circumstances where there is considerable disparity in evidence between Mr Michail (and his supporting witness) and the employees of AAI. Furthermore, as to the second primary issue of reduction of liability by the insurer, the significant witness for AAI was subject, unsurprisingly, to a vigorous cross-examination concerning his assertion that, as the insurer’s representative who would decide whether AAI would have insured at all, such insurance would not have been offered if the insured’s duty to disclose had been fulfilled, or the misrepresentation was not made.

[21]
In the plaintiff’s case, both Mr Michail and James Jason Nakhla were called to give evidence.

[22]
For the defendant, Paul Arthur Lang, Vincent Tucci and Janine Drummond were called to give evidence. I reject the suggestion that, because they wore “work” uniforms to Court, they appeared “in order to protect the insurer’s interest”. No suggestion was made to any one of them that he or she, in consequence, gave biased evidence. And no other basis was successfully investigated for asserting biased evidence rather than no, or inadequate, or faulty, recollection. As for the absence of transcripts of their telephone recordings, Mr Lang’s evidence establishes that, while Suncorp “now” has such a system in place, in 2010 a much lower number were recorded (which did not include either of these).

Mr Michail

[23]
Mr Michail, who was born on 3 September 1979, was, at the material time, and still is, a finance broker in a business conducted as “1800Approved” and also the owner of car dealerships. He stated that on 14 July 2010 he authorised Mr Nakhla to phone AAI “to set up the policy for me”. Mr Michail gave evidence that he was within earshot of Mr Nakhla and heard the “majority” of what he said. Mr Michail stated that Mr Nakhla handed the telephone to him after the latter had stated Mr Michail’s date of birth, the vehicle to be insured, that he wanted a quote and a certificate of currency, and after mentioning “sort of, that I had had some infringements and some fines”. Mr Michail gave evidence that when he then spoke to the AAI representative they spoke about his name, his date of birth, the vehicle he was buying and other cars that he had owned. Mr Michail’s evidence-in-chief acknowledged that he had been asked “some questions” about his “criminal history, bankruptcy, license suspension, traffic fines, finance”. In particular, he stated that he recalled that he was asked a question whether he had a suspension in the last five years, to which he answered, “yes, but I’m not sure exactly how long, and he asked me was that for drink driving, and I said definitely not, no, not drink driving.” Mr Michail then stated that he was asked whether it was just an “accumulation of demerit points” to which he said, “yeah, just some demerit points, I’ve had a couple of fines for being on the phone and things like that”, further stating that the AAI representative then stated, “Okay, no problem, and he continued on from there”. With respect to whether he had had any claims, Mr Michail stated that he was asked that by reference to “the last five years”, to which Mr Michail stated, “no”. Mr Michail further stated that he was not asked anything else about his history in terms of his driving record and was not asked to provide a copy of his driving history to AAI.

[24]
Mr Michail’s examination-in-chief also dealt with his knowledge of the contents of the written record of his driving history for the five year period up to mid-July 2010: see Exhibit 1; pp 98-100.

[25]
The second major aspect of Mr Michail’s evidence dealt with his conversation with a further representative of AAI (on what was accepted to be 19 July 2010). He conceded that he spoke to a female, though he stated that she did not ask him anything about his driving history, confirming only his name, date of birth and address.

[26]
In cross-examination, Mr Michail accepted that the business conducted under the name of 1800Approved was owned by Aus Loans Pty Ltd, of which he had been a director and secretary since June 2008. He conceded that the website of that business had claimed to be “one of Australia’s leading finance and insurance brokers”, though he was adamant that only a very small portion of the business was for car insurance. He accepted that he had “brokered” car insurance on behalf of clients with insurers such as Swann Insurance, Avea, Suncorp, Club Marine and Nautilus, although he was adamant that he did not “run insurance businesses himself”, disclaiming any suggestion that he was one of “those insurance experts” referred to by Aus Loans Pty Ltd on its website. Additionally, Mr Michail admitted that he was an authorised representative of 24/7 Road Services Pty Ltd, that he had an Australian Financial Services License and that the company was a warranty company “that sells after market extension warranties”.

[27]
During cross-examination, when taken to his then understanding of the duty of disclosure, Mr Michail stated that he understood that it required questions which are asked of a person who is seeking insurance “to be fully and honestly answered” and that he knew in 2010 the questions which were relevant to an insurer’s decision whether to take on the risk being offered or not. In particular, he stated that he understood that, in 2010, a person who was seeking insurance, if they failed to answer questions put to them by an insurer accurately, that such insurer may subsequently avoid any insurance policy which was then offered to that person. He further admitted that such answers to such questions (as were asked) were to be both to the best of his knowledge and to be accurate. He also stated that, because of his experience with insurance brokerage and doing deals with insurers, he had a “particular” understanding that questions which an insurer might ask him would be relevant to the decision of the insurer whether to offer insurance or not.

[28]
With respect to a prospective insured’s driving history, Mr Michail accepted that a representative of an insurer may ask questions about license suspensions and cancelations of the prospective driver of the vehicle and that questions about traffic infringements in a driving history were matters of importance to an insurer. It is also clear from the many further questions that were put to Mr Michail that he understood that the relevant 2005 Aston Martin was an expensive motor vehicle, had a V12 engine and had a maximum speed “(p)ossibly over 300” (acknowledging that to be 300 kph).

[29]
When cross-examined about his actual driving history (as detailed in Exhibit 1; pp 98-100), Mr Michail acknowledged that the offences with respect to using a hand held mobile phone were ones where he had been “pulled over” by a police officer. That applied, as well, for other offences for which he received three demerit points. He acknowledged that he had a SPER account because when he was “very young” he was “a bit more of a reckless driver” and “had accumulated some fines”, although he stated that he “had grown and learnt from it”. Mr Michail admitted that his recollection in 2010, whilst it may not have been of a particular number, would have been that he had several traffic infringements in the five years preceding that, although he asserted that he could not recall any exact dates. In particular, he answered, when asked that, if he were to be asked a question about traffic infringements, he would remember that he had a particular busy period of activity with traffic offences in the year 2006 but that, as to that exact date period, “no I would not”. Further, he stated that he would not remember that it was five in the course of one year. He also stated, when asked about a recollection of being warned that he was about to lose his license if he did not correct his driving habits, in 2007, he said “I don’t recall it in detail, no, I am sorry.”

[30]
In cross-examination, Mr Michail was taken through each and every one of those relevant entries in the traffic history for the five years prior to mid-July 2010 which appear in Exhibit 1 (pp 99-100). It is unnecessary for me to go through them all, although some reference has been made, immediately before, to some of them. What has to be looked at carefully is the general tenor of those answers, particularly as they would impinge upon his actual knowledge and recollection of them, as at mid-July 2010, especially in light of his examination-in-chief regarding that. To this end, after conceding that his license was suspended for three months and that those three months expired on 20 May 2008, he stated that he “would remember not having the ability to lawfully drive on a road for three months”, being “not something (he) would readily forget” (especially for a car enthusiast like himself). His answers, when questioned about specific offences, were quite detailed, particularly remembering that, although there were some traffic infringements which he disputed as being his, he accepted them as applicable to him (being related to “camera fines”). Ignoring, for the moment, answers concerning conversations put to him which were stated to have been had with Mr Tucci and Ms Drummond, he eventually was forthright in answering that in 2010 he knew that he had more than four traffic offences in the last five years. Furthermore, he expressly conceded that he knew, on 14 July 2010, that he had had a “cancellation” of his license, though he maintained that he stated that fact to Mr Tucci but he “was unsure whether it was within or outside the five year period”. He stated that he “didn’t recall” that two years “earlier” than mid-July 2010 he had had his license suspended for three months, stating that he did not recall it being in 2008 (at the relevant time in 2010).

[31]
Before expressing a conclusion on Mr Michail’s credit, it is clear from the matters put in cross-examination to him about his conversations with Mr Tucci and Ms Drummond that he disputed almost all of the propositions that were put to him concerning specific questions asked by those two AAI representatives regarding his driving history, particularly concerning traffic infringements and license cancelations and suspensions. It is instructive that when confronted with an actual transcript of a conversation with a further representative of AAI, Suzanne Tolhurst, that he had on 16 May 2011 (following the motor vehicle accident earlier that month) – and before obtaining his Traffic History dated September 2013 – he, without qualification, answered “no” to the question whether, “in the past six years, have you ever had your license cancelled or suspended?”. (The six years, of course, would include the five years prior to mid-July 2010 and the approximate one year subsequent to that.) I was asked, during oral submissions to listen to the CD recording of this conversation and to note the hesitation of Mr Michail before his answer to this question and to later ones about accidents and claims. In so doing, I was struck by the fact that Mr Michail had given reflective thought, though brief, to his answers but still answered with an unqualified negative response. I detected no confusion on his part: rather the answers given were deliberate (if expressed with a little exasperation). When further cross-examined at trial on that answer, admitting it to be “incorrect” or “inaccurate” or “untrue” (if “without intent”), though asserting that he was “rattled” by the period, he eventually stated that it was “correct” to say that he gave an (unqualified) negative answer even though he “did not know” whether or not, in his mind at that time, the (very) suspension which he was aware of did occur within the six year period or not. Later answers to further questions does not undermine that discernible willingness on Mr Michail’s part to creatively remember. The contrast between those parts of the Protect system which were not disputed as accurately recording information supplied by Mr Michail and the very limited section that was (namely, the actual traffic history) strongly suggests that the Protect record is correct and Mr Michail’s recollection is faulty.

[32]
Although my conclusion must, necessarily, be at least partly based upon acceptance of the evidence given by Mr Tucci and Ms Drummond concerning the matters of disputed conversations with them by Mr Michail (because of the inherent unlikelihood of both those employees, for the same insurance policy contract, being wrong in the basis for their recollection of what was entered by them in the Protect system in respect of the driving history following each of their conversations with Mr Michail, especially where I have otherwise accepted their credibility in their own right), I was quite unimpressed with the responses Mr Michail gave in cross-examination concerning his very poor recollection – according to his own version of events – of his own five year “Traffic History” prior to mid-July 2010 and of the six years prior to mid-May 2011. In particular, I find it quite difficult to believe his actual recollection in 2010 of the suspension of his license at a time which was just over two years prior to mid-July 2010, much less of the three offences which occurred from late December 2008 to mid-August 2009, was as limited as he claimed.

[33]
Accordingly, except where Mr Michail’s evidence coincides with some documentary record that I otherwise accept (for example, Exhibit 9, though that, as discussed later, has slight negative consequences for credit anyway), particularly where there is a conflict in recollection between him and the persons from AAI to whom he spoke at material times, I find great difficulty in accepting that he is in any way an accurate historian.

Mr Nakhla

[34]
This witness was, both at mid-July 2010 and at trial, a finance broker being a “contractor” to 1800Approved. In cross-examination, he explained that he was self-employed, owning his own business, though using the license of 1800Approved to perform his daily tasks, for which he had a (limited) license himself. In answering in cross-examination a question as to Mr Michail not being his boss, he answered “no, not essentially”, stating that, because he was organising the finance for the Aston Martin, he rang AAI about insurance for Mr Michail’s vehicle because the latter was “busy”, although admitting that he was not too busy later on to promptly take the phone from him.

[35]
In examination-in-chief, Mr Nakhala asserted that he gave to the representative of AAI Mr Michail’s date of birth, address, a brief run down of his history in regard to motor vehicle driving, Mr Michail’s history in cars of a similar nature, but that, “once the person on the phone asked me for his speeding offences or speeding tickets”, he “handed the phone to” Mr Michail “after saying that there may have been something in the past but I don’t (know)”. He asserted that he heard the conversation had by Mr Michail on the phone with the AAI representative in which Mr Michail confirmed his name, address and date of birth and that he then “started going into his driving history with them”, “saying something along the lines of – you know, talking about tickets – or speeding tickets of the past, but I don’t – I don’t remember too much more other then that”, adding that he could not recall anything further “at this point”. In cross-examination on these aspects, he stated that, while Mr Michail was a few metres away, Mr Michail was on his mobile phone speaking to someone else at the time when he was speaking to AAI. Further, after admitting that he had no basis at all to say that the traffic offences which Mr Michail had were minor, he admitted that he possibly had stated that to the AAI representative. Yet again, although he admitted that he was standing next to Mr Michail “the whole time because (he) needed (his) phone back”, he did not pay attention “to everything he was saying, but he did start going into his history” (although he could “not exactly” remember much else than “talking about fines”). When it was put to him that no such discussion occurred between Mr Michail and the AAI representative during which Mr Michail mentioned “something about the accumulation of demerit points”, he answered, “Okay”.

[36]
Although there was, in re-examination, some clarification of an even later answer in which Mr Nakhala stated that the answer, “Okay if you say so”, meant that the cross-examiner could say “whatever he liked” but that Mr Nakhala “disagreed with that”, I have significant difficulty accepting Mr Nakhala’s evidence when it is so abundantly short on detail on what happened over three years ago and is directly contradicted by Mr Tucci (who, as I will later conclude, I accept as a credible witness). In particular, it is difficult to accept that two persons who clearly acknowledged their familiarity with the business of being a broker would have asked, on the one hand, and agreed, on the other hand, that somebody other than the person who knew the exact details relevant to the obtaining of an insurance policy (where the driver’s history was acknowledged to be relevant) over such an expensive and unusual motor vehicle would seek insurance, adopting such an off-hand way of obtaining insurance. This is particularly so where, for his part, Mr Michail readily acknowledged that he had a duty of disclosure and that it extended to such matters as his “Traffic History”.

[37]
Accordingly, again, unless there is some information contained in some relevant document which supports the evidence given my Mr Nakhala, I am unwilling to accept him as an accurate historian either.

Mr Lang

[38]
Mr Lang was, at trial, the national quality manager of Shannons Insurance (which is a “brand” within the Suncorp group of companies, though operating under its own trading license). In mid-July 2010, he had just become the eastern regional manager. Some criticism has been directed to the absence of Mr Lang’s superior, the Executive Manager, Mr Julian Benton. But even to call in aid Jones v Dunkel,^[13] a basis would need to be laid that the real decision-maker in mid-July 2010 for this contract of insurance was not Mr Lang but Mr Benton or that, through the evidence of Mr Lang, it was not simply speculative that Mr Benton could have given relevant evidence about Mr Lang’s hypothetical decision-making: see Australian Securities and Investments Commision v Hellicar.^[14] There was no basis for drawing any inference that Mr Benton would have given evidence adverse to Mr Lang, or to the defendant’s case: see Hellicar at [168] - [169]. Mr Lang stated that the reason that Shannons was different from other insurers within the Suncorp group was that Shannons identified its target market by the individuals rather than the items that those individuals owned, thereby insuring “motor enthusiasts” rather than the vehicles that they actually owned – that being “very much” a particular “corporate philosophy” at Shannons. He stated that, in 2010, there was a data input computer system for quotations and policies in existence that Shannons called the “Protect system” (“Protect”). The system gave Shannons the ability not only to store policy details but also to prepare quotations, as well as to store endorsements and records of those endorsements, and the accounts on policies, being a system also used for quoting for new business. After noting that, as a niche insurer, Shannons had a fairly flat structure in that in his position (as eastern regional manager requiring him to look after the eastern seaboard) he had reporting to him team leaders in the various branches and underwriters who reported to those team leaders. Such underwriters were known as “MEUs” (referring to the expression “motor enthusiast underwriter”). Such underwriters were not on commission but were employees only.

[39]
Although I will canvass Mr Lang’s evidence in detail later concerning his conclusions about non-acceptance of the relevant risk in this case, for the purpose of determining general credibility and reliability, it is sufficient at this time to note that I accept that he was a person who gave his evidence openly – even if some clarification had to be sought on certain issues because of a confusion of understanding of some questions put to him – and without guile. I accept that he readily acknowledged what he could not answer and was adamant about those matters that his true recollection permitted him to be.

[40]
Accordingly, I accept that he was an accurate historian and that he gave his evidence in a forthright and believable way, particularly concerning aspects of the non-acceptance by AAI of any relevant insurance policy in mid-July 2010 covering this Aston Martin, if he were to have been appraised of the full Traffic History of Mr Michail, even accounting for those aspects that would not be relevant concerning the terms of Shannon’s “unacceptable” proposals.

Mr Tucci

[41]
Mr Tucci was a MEU and was, in July 2010, at the “gold” level in a system where there was an inductee level, a bronze level, a silver level, a gold level, and a platinum level. As at August 2013, he had been employed at Shannons for 10 years, starting at the silver level and having progressed by then to the platinum level. His evidence discussed the details of the Protect system, explaining each of the relevant computer screen displays, including the method of entry to each such screen and the method of exiting each. With respect to particular screens, he gave evidence about the way in which he would have framed relevant questions (including questions concerning accidents or claims in the last five years, traffic infringements in the last five years and license cancelation or suspension in the last five years). With respect to events that happened on 14 July 2010, Mr Tucci readily stated that he had “a vague - … brief recollection of the conversation” with Mr Michail. It is accepted that he, honestly, would have had “literally thousands of calls” in the time between then and the trial. But he did state that he remembered the particular quote because “it was a special car”, “it was a nice car” and he had “driven one before”. His recollection was that he asked Mr Michail personally questions “from the very start – from the very first screen – the client enquiry screen”. Furthermore, he stated that he recorded the information provided by Mr Michail as soon as Mr Michail gave him “the answers”. The fact that he summarised some of those answers, sometimes in his own words, when adding his “message” at the end of the screens’ entries, reinforces, rather than undermines, his assertions of accuracy, even though acknowledging that any such summary did “not need to be recorded”, especially where his explanation was that it “would show that you had not missed anything... in terms of those underwriting questions”. Although I will, next, deal in detail with the actual answers identified by Mr Tucci on 14 July 2010, I accept that the “screen dumps” or “screen prints” from the Protect system entered by him on 14 July 2010 (contained in Exhibit 8) were, pursuant to s 95 of the Evidence Act 1977, not only authentic but also recorded a summation in a “Y” or “N” format of answers in it. Mr Tucci had stated that he “inputted it as soon as (he) was given an answer”. In particular, Mr Tucci stated that Mr Michail did not mention to him at all: that he had had any license suspensions; that he had had an accumulation of demerit points; or that he had “suffered” any traffic infringements. More particularly, in dealing with the screen that contained the ability to place “messages” – which, after closing, could not be amended, though it could be added to once the screen was “exited” – he entered the words “clean record”, responding that he had written that “because (of) the client disclosing the clean driving record to (him)”. Mr Tucci added that it was important to record the words, “clean record”, because it would have been assumed that the inquirer was a good risk “because he had a clean slate, perfect driving record, which makes the risk better for the company”. He stated that he read the “duty of disclosure” to Mr Michail and that it was “accepted” by him.

[42]
It was put to Mr Tucci in cross-examination that his prospects of promotion would be enhanced by writing policies such as the one in question. Given that Mr Tucci was not on commission (and any benefit the “experience” might give him was expressed in the freely volunteered terms of “quite possibly” only), and considering that I have otherwise generally accepted that he gave his answers as best he could (in particular, not taking up an opportunity presented to him in re-examination to possibly explain what he had written in his own hand, on 14 July 2010, which might have been interpreted as “fine” or might have been interpreted as “fin” - as a shorthand form of “finance” - accepting neither), I conclude that he was recording his recollection as accurately as he could, though obviously such recollection was based upon the entries that he had made. There was no other identified motive for him to depart from his recording of previous answers “incorrectly”, when finalising his “message”. It therefore falls to be now considered whether I accept that the entries that he did make were truly accurate summaries of responses to information that had been given to him by Mr Michail. For the reasons already addressed, including that it appears to be a highly unlikely circumstance that if Mr Michail did mention both a “suspension” and “demerit points” that Mr Tucci would have left those responses unexplored (given the importance of them in the guidelines and in the Protect system), I accept that he did enter accurate summations of responses that he was given at the material time.

Ms Drummond

[43]
Ms Drummond was also a MEU, having been employed, by the time of trial, by Shannons for 13 years. She was at the gold level and had been so for five years. She had started at the silver level. She gave evidence of her position and her training, as well as her experience. No objection was made to her giving evidence (for example, on the basis of some unpleaded case). Her “evidence” (arguably beyond what was “material”) was pleaded in the defendant’s Rejoinder. It obviously went to “disclosure” or misrepresentation at a time before the insurance contract was entered into. It obviously was partly reliant on Exhibit 8 to which no objection was, eventually, pressed. When detailing what occurred on 19 July 2010, having earlier explained her own understanding of the workings of the Protect computer system, she stated that she “revisited” questions about license suspensions, asking questions about speeding fines, driving infringements and any loss of license in the last five years to that time. She also stated that she “revisited” questions about insurance refusals or cancelations. She stated that she did not recall the actual conversation with Mr Michail on 19 July 2010 but that, going through the screen details (Exhibit 8), she could “see that (she) did, yes”. She also referred to messages that she put into the message screen on 19 July 2010 concerning the issuing of the insurance policy.

[44]
Ms Drummond was forthright in answering that: she did not have any specific recollection of the actual answers that she was given; the questions that she asked were those that she asked every time that she did a quote; and, if certain answers had been “other than ‘no’”, she would have referred such answers to the manager - but she had not done so on the one occasion that she spoke to Mr Michail.

[45]
I will, as with the other witnesses, review Ms Drummond’s evidence in some further detail when dealing with an analysis of the issues in dispute. For the moment, it is sufficient for me to conclude that: I accept that she was a technician of the middle order of underwriters at the time that she was an authorised representative of AAI (working under the trading name of Shannons); I accept that she gave her evidence as best that she could; and that I accept that she, also, had no particular reason at all to enter responses other than those which were an accurate summary of that which she had been told by Mr Michail. Accordingly, I conclude that she was a credible, and reliable, witness in giving her evidence, despite her lack of any real recollection of 19 July 2010 other than that which she was able to discern from her own answers entered into the relevant screens on the Protect system (as shown by Exhibit 8).

Use of computer records

[46]
This analysis is primarily concerned with Exhibit 8, although it impinges on Exhibit 9 (which will be discussed later).

[47]
Exhibit 8 was tendered pursuant to s 95 of the Evidence Act (1977). It is in Part 6. By s 95(1), in any proceeding where direct oral evidence of a fact would be admissible, any statement contained in a document produced by a computer tending to establish that fact shall, subject to Part 6, “be admissible as evidence of that fact”, if certain conditions existed. By reason of the course taken in this trial, it is unnecessary to consider those conditions. It is difficult to see how the principles of “similar fact” or propensity evidence assist here, other than on the narrow basis of Mr Tucci’s and Ms Drummond’s own evidence of their habits in the use of the Protect system and the phrasing of questions. For example, they do apply to the exercise of reasonable skill: see R v Patel.^[15] Even approaching the issue of relevance in a civil context, the explicit rejection by Gummow J (as he then was) in DF Lyons Pty Ltd v Commonwealth Bank of Australia^[16] resonates here. As analysed by McGill SC DCJ in Morris v Warrian & Anor,^[17] where what is in question is what was precisely said on a particular occasion, the evidence of other conversations would not tend to prove the making of particular statements in a particular conversation, thereby differing from a standard statement being made in all cases, including the particular case: at [8]-[9]. Since each relevant witness did have a standard practice of phrasing the question in, essentially, the same way, I accept this approach in this case, but only as it applies to such phrasing of “standard questions” (where the Protect records contain general headings of inquiries to be made). To that extent it is evidence as to habit (which is discussed, further, below).

[48]
Thus, on its face, a document tendered pursuant to s 95 of the Evidence Act is admissible evidence. But it should be noted that s 95 is subject to certain other provisions. In particular, s 98(1) states that the court may, in its discretion, reject any statement or representation notwithstanding that the requirements of Part 6 are satisfied with respect thereto, “if for any reason it appears to be inexpedient in the interest of justice that the statement should be admitted”. Where, as here, the two persons who made the relevant entries in Exhibit 8 (Mr Tucci and Ms Drummond) were called to give evidence, it is difficult to see why it would be so inexpedient, particularly when what is being authenticated and made admissible by s 95 are entries made in business records in a system (Protect) about which Mr Lang gave extensive evidence and where such evidence was not, at least as to the recording and security of data entered into it, challenged successfully in any material way.

[49]
Additionally, s 102 of the Evidence Act states that, in estimating the weight (if any) to be attached to a statement admissible as evidence by Part 6, regard shall be had to all the circumstances from which an inference can reasonably be drawn as to the accuracy or otherwise of the statement, including –

(a)
the question whether or not the statement was made, or the information recorded in it was supplied, contemporaneously with the occurrence or existence of the facts to which the statement or information were made; and

(b)
the question whether or not the maker of the statement, or the supplier of the information recorded in it, had any incentive to conceal or misrepresent the facts.

[50]
So, what is to be made of the evidence given by Mr Tucci and Ms Drummond concerning those entries? In this particular case, especially given the findings that I have already outlined on credibility, I conclude that the information recorded in Exhibit 8 was supplied contemporaneously with the occurrence to which the information relates. Additionally, given my findings on credibility, there is no reason to conclude that either Mr Tucci or Ms Drummond had any incentive to conceal or misrepresent the facts relevant to the information that they recorded.

[51]
But for s 95 of the Evidence Act, it may well be argued to be the case, in each instance, that both of those witnesses were not be able to rely upon Exhibit 8 for purposes of refreshing their memory, considering that they either had no, or at least very little, recollection of making the entries themselves. Even so, there are decisions, exemplified by R v Kelsey^[18] in the English Court of Appeal, where a person had dictated a registration number of a motor car to a third party (where that third party had not seen the motor car), which show, although such a note was held to be inadmissible as evidence of the number since it was hearsay, that it could be used by the person who dictated it, even though he could not remember the number, to “refresh” his memory. It must be conceded that in Markovina v R (No 2)^[19] it was held that such a result was in the nature of an absurdity: at 130-131. Nevertheless, it is unnecessary to consider any such potential problem here because of the effect of s 95. What must be considered is whether the oral evidence given by Mr Tucci and Ms Drummond so undermines the acceptance of the evidence of the facts in Exhibit 8 that it loses its prima facie statutory effect of having weight of some significance. Any such outcome depends upon the application of sections 98 and 102 of the Evidence Act. But the evidence that both those witnesses gave (concerning the questions), to the effect that it was their habit to phrase them in that way, the regularity of that, and the habit of a single way for the entry of the summation of the information provided, has led me to the conclusion stated above (i.e. its weight is not diminished). Concerning the outcome that might otherwise apply, as surveyed by Byrne and Heydon in their loose-leaf text Cross on Evidence (Australian Edition),^[20] the question can best be approached by analysing the circumstances where someone who does not recollect an event might yet have no doubt that it occurred. As so characterised by the authors, where a person vouches for the regularity of that person’s habits, in the absence of anything to lead that person to suppose that the person might have broken that habit on the day in question, a case can be described as one of “reconstruction” and of a kind which counts as personal knowledge for the purpose of the rule that witnesses must have personal knowledge of the facts to which they testify. (See, also, the analysis by Gray J in Palios Meegan and Nicholson Holdings Pty Ltd v Shore.)^[21] The authors distinguish that from the case of reconstruction where the witness lacks personal knowledge of the matters testified to because it does not spring from the regularity of the witness’s habits. But the “habit” that I accept is the phrasing of questions that led to the answers recorded by Mr Tucci and Ms Drummond in the Protect system. I reject any submission which seeks to characterise answers (e.g. given by Mr Michail) given on different occasions, in different contracts, to partly different questions, as admissible “similar fact” evidence, though I do take them into account concerning credibility.

[52]
Thus, in conclusion, I determine that the combination of the effect of s 95 of the Evidence Act and the evidence of Mr Tucci and Ms Drummond proves, to the required level of satisfaction, that the entries made by each of them in Exhibit 8 are an accurate summation of the evidence with which they were provided in July 2010 by Mr Michail.

Limits of use of Exhibit 9

[53]
It was candidly conceded on behalf of the defendant that it had not been pleaded that any answer to any question regarding a refusal of insurance was a relevant matter concerning non-disclosure.

[54]
In its written submissions, the defendant attempted to use Exhibit 9 as relevant an answer contended to have been given to Mr Tucci by Mr Michail on 14 July 2010 to the effect that he had not been refused insurance prior at any time. The plaintiff objected, when the defendant sought to tender Exhibit 9, to any use of it whatsoever, objecting on the basis that because the contents of it had been put to the plaintiff in cross-examination “to attack his credit”, no admission at all was permissible. I admitted it into evidence - subject to the later hearing of extended arguments about any wider relevance - as an indication of the basis upon which those statements in cross-examination were put to the plaintiff, being “appropriate for that purpose”, remarking that, as I saw it, “it adds nothing to what was put to him”. Immediately after the tendering of Exhibit 9 counsel for the defendant contended that the basis of its admissibility was not only as to explaining what was specifically put to the plaintiff on credit but “more importantly” that ten speeding fines, in five years, had led to an insurance proposal being declined and that therefore, a basis upon which it was being tendered was as a business record “for its testimonial value”. However, the problem with it being tendered as a “business record” is that, unlike Exhibit 8, no concession was made by the defendant that, for example, the conditions in s 95(2) of the Evidence Act had been met.

[55]
It also needs to be remarked that the entry was made by Tanya Zidlea who was not, at trial, then currently employed by Shannons and not called by the defendant as a witness.

[56]
Having reserved the issue of wider use, I will now rule on each of the grounds upon which the defendant seeks to have the document so used for more than a challenge to credit. It must be remarked with respect to credit that Mr Michail did admit the substance of what he volunteered to the defendant that is contained in Exhibit 9 (when cross-examined at a time when it was not admitted as an exhibit for any purpose). As used simply for credit, the fact that Exhibit 9 was created on 5 March 2002 – more than eight years prior to the questions and answers of mid-July 2010 – means that it has very little effect in so far as I am concerned in discrediting Mr Michail’s credit generally, where it is simply to be contrasted with the entry of the letter “N” to a relevant entry made at that later time by Mr Tucci in response to a question about whether any insurance had been cancelled or refused. Even if one were to take into account in this aspect the answer given by Mr Michail to Ms Tolhurst on 16 May 2011 about whether Mr Michail ever had insurance declined or refused or special terms imposed – giving a negative answer to that – again, I take it to be nothing substantial in terms of credit generally, particularly where he admitted the “event” (in cross-examination).

[57]
To the extent to which, apart from the actual contents of Exhibit 9, the credit of Mr Michail is affected by the circumstances of the event itself, the 2002 matters (which Mr Michail readily admitted concerned ten speeding fines in the five years to 5 March 2002, during which time he had also lost his license) might be difficult to believe as matters which he did not remember at all as being the basis for a refusal of insurance with this very insurer, even though it was a considerable time earlier. Nevertheless, especially where there is no evidence that Mr Michail did not approach other insurers at the time, perhaps one of which did not refuse him insurance, I conclude that any inconsistency is of minor moment only.

[58]
Turning, then to the various ways beyond credit that the defendant has wished to use Exhibit 9, I have reached the following conclusions.

[59]
First, it is not probative of the accuracy of the manual entries by Shannons’ MEUs on the actual Protect record, which is Exhibit 8, because it is impermissible to use Exhibit 9 for that purpose. That is, just because one answer is conceded by Mr Michail in general cross-examination to have been correctly recorded, it cannot be held that that is probative of the accuracy of the remainder of Exhibit 8. No similar fact analysis stretches that far.

[60]
Secondly, and similarly, Exhibit 9 cannot be used as a basis for some “similar fact” conclusion regarding the accuracy of all recordings of answers orally given and then entered into the Protect System.

[61]
Thirdly, Exhibit 9 cannot be used to support a line of reasoning that the answer recorded in Exhibit 8 of a negative response to any insurance refusal “would have led to a request for disclosure of the traffic history” of Mr Michail. To be used in that way it would, as I have earlier observed, have been required to be pleaded, particularly, as an aspect of non-disclosure, if not “surprise”.

[62]
Fourthly, Exhibit 9 cannot be used as actual evidence of the use of the Guidelines in the refusal of the policy for this case. While it is undoubtedly true that the record itself, and Mr Michail’s answers in cross-examination, support the fact that the insurance was declined due to fines and a loss of license, given the changing nature of the Guidelines and given the lack of any examination of the person who entered the record on 5 March 2002 and, perhaps, any other person who may have been consulted as well – particularly when there was no disclosure by the defendant of anything concerned with the record created on 5 March 2002 – it means that it cannot be used for this purpose either, particularly as some example of there being no call for any discretion to be exercised for a refusal of insurance.

[63]
In summary, it was not capable, in the circumstances, of fulfilling the requirements of being a business record and, therefore being “testimonial” in its own right. But even if it had, its deficiencies (judged in light of ss 98 and 102 of the Evidence Act) would not sustain it as having any weight (apart from specific admissions made by Mr Michail in cross-examination with respect to parts of it). And even if it was given some weight, it could not be used by the defendant in the ways propounded, for the reasons surveyed above. It, therefore, remains simply admitted for the record of which was put to Mr Michail in questions as to credit.

Plaintiff’s “knowledge” of his traffic history (and its objective extent)

[64]
As already analysed, s 21A(6) of the ICA requires the disclosure, in answer to each specific and relevant risk question, of “each matter that is known” to the insured and that “a reasonable person in the circumstances could be expected to have disclosed in answer” to each such question. As the authorities reveal, the determination of whether a matter is known is a question of fact for this Court in light of what the statute requires and in light of what is meant by “know”.

[65]
So far as Mr Michail’s traffic history in the five year period prior to mid-July 2010 is concerned, it is discernable, even from that evidence which Mr Michail gave, if not from paragraph 13 of the Reply to the Third Amended Defence, that he knew that there were infringements and that he knew that there was, at some time, a suspension of his license resulting from the accumulation of demerit points. In particular, he acknowledged in evidence that he knew that he had more than four traffic offences in the “last” five years up to mid-July 2010. The answers that Mr Michail gave in his evidence at trial which go to this aspect of knowledge can be differentiated, for the moment at least, from the answers that Mr Tucci said that he gave. For present purposes, the Court has to make an investigation of whether Mr Michail had the relevant knowledge, then determine whether a reasonable person in such circumstances could be expected to disclose that matter in answer to any question that it finds was asked. It cannot be that a mere allegation (by AAI) of the potential width of such knowledge precludes the Court’s own determination of its extent.

[66]
Thus, given the answers that Mr Michail proffered at trial, it can be concluded that he actually had, in his consciousness, knowledge that there was in some record or other source of information the exact detail of what he stated that he had that knowledge about, and that he could, and was entitled to, obtain. Any suggestion that he did not relevantly “know” of the five year span of some (relevant) traffic history was not disputed. That he stated that he was “ignorant” of “camera infringements” occurring a significant time before his conversation with Mr Tucci may not be able to demonstrate “no knowledge” especially where such fines were paid (even by an automatic system such as SPER provided), since, if the legislative provision were to require presently conscious knowledge of every detail of a generally “known” traffic history particularly in the case of “eligible” contracts for car insurance, easy avoidance of the duty of disclosure would be open, particularly for persons with significant histories and “bad” memories. While inferences of the type canvassed in Midaz are excluded, inferences as to the extent of actual knowledge from other acts established about such knowledge are permissible on ordinary “circumstantial case” reasoning. Nevertheless, as canvassed later, it is unnecessary to include such infringements in determining whether knowledge is established to the requisite degree. As for what a reasonable person in the circumstances could be expected to disclose in answers given, considering what has been found to be the confined nature and limited extent of the questions, such answers would be those canvassed next (although in a consideration of s 21 of the ICA).

[67]
As indicated, if it were to be held that s 21 of the ICA had application and if it were to be found that there had been a failure by Mr Michail to answer, or there had been an obviously incomplete, or irrelevant, answer, the next step would involve a determination of whether Mr Michail knew that the content of his relevant traffic history was a matter relevant to the decision of the insurer, or whether a reasonable person in the circumstances could be so expected to know: see s 21 of the ICA. The cross-examination of Mr Michail shows an obvious understanding by him, personally, of what the insurer wanted in this case. It is therefore unnecessary to consider, in any great detail, the alternative case of the non-idiosyncratic reasonable person. But if a consideration were to be made of such a person, given the circumstances of the cost, power and risk involved where a car such as this Aston Martin was concerned, Mr Michail’s relevant traffic history as “known” to him, particularly given the analysis which follows next (revealing significant traffic infringements and at least one suspension) in the relevant five year period, would be a matter that a reasonable person in the circumstances could be expected to know to be a matter to be relevant to the decision of this insurer whether to accept the risk and, if so, on what terms – or, in terms of s 21A(6)(b), could be expected to have disclosed in answer to the questions requested to be answered.

[68]
Given the explanation advanced by Mr Michail concerning the “SPER APPLIED” suspension on 29 June 2010, arising from a problem with a change of the numbering of his credit card that was used to pay such fines as did accumulate, that particular suspension, if so explained to an insurer, and accepted (as it ought here), would not be of itself a matter relevant to the decision of the insurer in this case, despite Mr Lang’s view that any “suspension” would be viewed by Shannons as such. It also suffers from the anterior problem of not being proved to have been within Mr Michail’s knowledge at the material times. In contrast, the suspension (by reason of demerit points) for three months effected on 20 February 2008 would be a relevant matter and is a relevant matter that he “knew”. Further, even postulating that the offence for 15 July 2007 concerning the driving of a vehicle having equipment that did not comply with vehicle standards as being something about which a reasonable person could not be expected to answer (it being within his knowledge from the detail of his own evidence), and putting to one side a similar offence on 11 January 2009 (both attracting one demerit point each), there still were, within the five year period, eight other infringements and one suspension which were “known” and “disclosable”. Additionally, even if a reasonable person could not be expected to answer positively in response to the circumstance of the driver/insured not paying “much attention” to whether a speeding ticket issued as a result of a speed camera infringement was directly attributable to that driver (and thereby be arguably inferred to be within knowledge as something worthy of sorting out) – which, in the absence of any acceptable proof that it was not, would give rise to that expectation – there, indisputably, were still more than four traffic infringements and one suspension within the relevant five year period that Mr Michail “knew” and were required to be “disclosed”. Though to describe them all as “minor” and “represent(ing) (a) low insurance risk”, in the absence of any insurance evidence of an express nature concerning “risk” to a niche insurer such as Shannons, assumes an answer not otherwise established. It is not without significance the plaintiff’s counsel, during cross-examination of his client, conceded that Mr Michail had “recalled at the time he spoke to the insurer all but two of those fines”, such that he “did remember these particular fines”. That, of course, was in addition to his knowledge of the “earlier” suspension in the five year period.

[69]
So what does Mr Michail’s traffic history, objectively, reveal (objectively being also used in terms of what Mr Michail might misrepresent by the canvassed negative responses, as at mid-July 2010)? Although AAI has pleaded that each entry was relevant, and influential for reduction of liability to nil, it is not necessary that the Court should also accept all such entries did have such a respective characteristic in order to reach its own conclusions. Apart from the suspension on 29 June 2010, all the remaining entries were relevant matters for misrepresentation (consequent upon acceptance of the evidence of Mr Tucci and Ms Drummond).

Plaintiff’s non-disclosure (and any waiver)

[70]
Given that this (then proposed) insurance was an eligible contract of insurance, waiver potentially arises if the insurer, through its relevant representative, failed, before the contract of insurance was entered into, to request the insured to answer one or more specific questions that were relevant to the decision of the insurer whether to accept the risk and, if so, on what terms: see s 21A(2). From the findings on credibility that I have reached and the further findings below, no such waiver occurred.

[71]
Following upon the conclusions that I have reached concerning credibility, I do not accept that Mr Michail, either within Mr Nakhala’s earshot or not, mentioned either infringements, fines or any suspension, much less that he (Mr Michail) had accumulated demerit points. Rather, consistently with the answer Mr Michail gave to Ms Tolhurst, I accept that in all answers that he gave to Mr Tucci relevant to his driving history he answered, “No”. In particular, I accept that Mr Tucci’s entries into the fields in the various screens in the Protect system were accurate transpositions of a summary of the answers to specific questions that Mr Tucci asked. Consequently, I find that negative responses were given specifically to the following (with respect to what was called the “nominated driver”, or “TD” screen questions): if he had had any accidents or claims in the last five years; if he had any traffic infringements or speeding fines in the last five years; and if he had his license cancelled or suspended in the last five years?

[72]
Additionally, I accept the evidence of Ms Drummond that she did ask “review” questions concerning those mentioned aspects of Mr Michail’s driving history. In particular, I find that she was given negative answers by Mr Michail to questions posed by her about: whether he had any criminal convictions in the last five years; whether there was any bankruptcy or receivership; and, specifically with respect to the “nominated driver, or TD”, screen, whether there were any accidents or claims in the last five years or any speeding fines, driving infringements or losses of license in the last five years?

[73]
Accordingly, - and especially where the plaintiff’s oral submissions included the concession that, if Mr Michail did relevantly say, “No”, then “knowledge” is shown on the plaintiff’s own case - I find that relevant oral questions were asked within the meaning and terms of s 21A(3) of the ICA and that Mr Michail did not disclose, in response to them as required by s 21A(6), relevant matters that were known to him, being relevant matters that a reasonable person in the circumstances could be expected to have disclosed in answer to each such question. This is because, with respect to the traffic history, I find that each and every one of the questions concerning Mr Michail’s traffic history were reasonable, non-idiosyncratic and clear in terms of their relevance to the insurance sought. I hold that the wording of s 21A, particularly s 21A(6), in the context of the legislation (particularly noting the terms of s 22 and s 21), means that the “non-disclosure” for the purposes of s 21A does not require a consideration of s 21, for this case at least (where I have found specific questions to be canvassed and responsive answers given). If this were not so, the insured would be subjected to the wider obligations under that earlier provision simply because of a “failure” to respond, for example, from what he “knew”. But, were it to have been necessary, I would have found that Mr Michail did not act in accordance with his duty of disclosure contained in s 21 of the ICA. And, finally, were it to have been necessary, I would have found that there was no waiver within the statutory meaning of s 21(3) (as discussed above), because I reject any evidence that Mr Michail or Mr Nakahla gave which might, otherwise, be interpreted as a failure to answer or as an obviously incomplete or irrelevant answer concerning Mr Michail’s traffic history, even if one were to overcome the interpretative problem arising from “a question included in a proposal form” (emphasis added).

[74]
In summary, Mr Michail failed to comply with his duty to disclose under the ICA for at least the six offences for which three demerit points were assigned, as well as one suspension within the relevant five year period.

Misrepresentations

[75]
During oral submissions, it was expressly conceded by the plaintiff that no reliance was being placed for his case upon s 26 of the ICA. This meant that the plaintiff was not seeking a finding that the defendant had not discharged its onus with respect to s 26(2) of the ICA. It, thus, has the consequence that any misrepresentation is not to be viewed in terms of Mr Michail’s knowledge, or what a reasonable person in the circumstances could be expected to have by way of knowledge, that the statement would have been relevant to the decision of the insurer whether to accept the risks, and if so, on what terms. Rather, any statement so found to have been made is simply to be adjudged on its truth or falsity.

[76]
It was also readily conceded during oral submissions by the plaintiff that a rejection of the evidence of Mr Michail with respect to what he asserted in evidence that he told Mr Tucci on 14 July 2010 means that there would be relevant non-disclosure. Thus, that concession must equally mean that there would have been a misrepresentation concerning Mr Michail’s driving history at least as wide as the relevant non-disclosure. Arguably, it would be as wide as all entries in the traffic history exhibited, even if an aspect (such as the “suspension” on 29 June 2010 by SPER) of that history is contestable for s 28(3) purposes.

[77]
I accept the submission of the defendant (concerning any misrepresentation) that any positive finding concerning the negative answers to the questions asked by Mr Tucci concerning Mr Michail’s driving history leads naturally and inexorably to the implied positive representation of the truth of the opposite conclusion: see the discussion in CCP Australian Air Ships Ltd v Primus Telecommunications Pty Ltd.^[22] I also accept the further submissions that the implied positive representations (namely, that the plaintiff had a “clean record” in relation to his driving history, that he had not committed any traffic offences, and that he had not had his driver’s license suspended): were in fact untrue; were not and could not have been made on the basis of any belief which Mr Michail had (where Mr Michail gave no evidence of any such belief); and were not and could not have been a belief that a reasonable person in the circumstances would have held – assuming that s 26(2) were to be in play.

[78]
Accordingly, because of the conclusions that I have reached concerning Mr Michail’s evidence - which I have comprehensively rejected - I find that the misrepresentations were made in the manner that I have just canvassed.

Reduction in insurer’s liability?

[79]
As already canvassed, s 28(3) of the ICA applies where the person who became the insured under the contract of general insurance, upon the contract being entered into, failed to comply with the duty of disclosure or made a misrepresentation to the insurer before the contract was entered into. There can be no doubt in this case that any such failure or any such misrepresentation occurred before the contract was entered into on or about 19 July 2010.

[80]
From the conclusions that I reached earlier, Mr Michail failed to comply with his duty of disclosure and made misrepresentations in this particular case. Consequently, an examination of s 28(3) must be undertaken.

[81]
The onus on AAI to establish its right to rely, successfully, upon this provision means that Mr Lang’s evidence – since he is the person identified by the defendant as AAI’s decision maker for this matter at the “hypothetical” time – needs careful scrutiny. He was cross-examined extensively but, as I have also earlier observed, I have found him to be a credible witness. The legal principles applicable to hypothetical fact finding was canvassed in Hallmark-Mitex Pty Ltd v Rybarczyk^[23]: per Chesterman J (as he then was), at [45]. This requires findings, from the evidence presented, what the decision-maker would have subjectively done, noting Gummow J’s attention to the inherent difficulties in the task, including the interplay of materiality with causation: in Rosenberg v Percival.^[24]

[82]
Thus, it is not only credibility that is important here but an examination of whether it can be concluded that Mr Lang’s evidence leads to the relevant satisfaction concerning causation about the extent to which AAI would have a liability to pay a calculable amount (so as to place it in the position that it would have been in if the failure of Mr Michail’s duty of disclosure, or the misrepresentations, had not occurred), bearing in mind the aspect of materiality.

[83]
Central to this outcome are two factors. The first is the extent to which Mr Lang had any residual discretion if the “mandatory” guidelines imposed by AAI, through the medium of “Shannons National Underwriting Guidelines” (Version 8.6), applied. Necessarily, if he had such a discretion, an examination needs to be undertaken of the way in, and extent to, which that discretion would have been exercised in the present circumstances. Secondly, and obviously related to the first, there is the factor of what those Guidelines dictated so far as the decisions of all of AAI’s representatives acting as underwriters could make at that time in 2010.

[84]
As to the important factor of what course would AAI (through Shannons) have taken if faced with proper disclosure and proper representations, two courses need to be analysed. Analysing the specific evidence given by Mr Lang (in particular) about “requiring” a traffic history in a wide variety of hypothetical “disclosures” and “representations”: for non-disclosure, it is probable that a full five-year driving history of Mr Michail would have been sought (either by full disclosure in an acceptable form or by the written history itself) and that no policy would have issued without considering it; and, for misrepresentation, it is probable that there would have been a full consideration of the full written history. It is inescapable that reliance would have been placed on the content of all such history however so revealed, since not only common sense but also the underwriting practices of Shannons – which I have accepted were followed – point to nothing else as a consequence. Equally inescapable from the defendant’s evidence is that the non-disclosure, and the misrepresentations found, induced this policy originally, as amply demonstrated by the message content (and explanation of it) placed by Mr Tucci (in exhibit 8) concerning Mr Michail’s “clean record”.

[85]
The relevant Guidelines became Exhibit 5. According to Mr Lang, that version, Version 8.6, was in operation as at July 2010. The fact that Mr Lang was part of a “Team” which reviewed the guidelines from time to time does not mean that the apparent mandatory nature of them was not real him as well as to staff junior to him. And there was no suggestion to Mr Lang that any statistical bases that he mentioned were so flawed (either in general, or as applicable here) that they were, for instance, valueless. In its introduction, contained in Section 1, it states that underwriting is a process of assessing risks and classifying them according to their degree of insurability, so that appropriate rates and policy terms may be assigned. It also states that that process includes rejection of those risks that do not qualify or where the risk is unacceptably high. Lastly, in the introduction, it states that an underwriter is a “technician” trained in evaluating risks and determining rates and coverage for them. Then, importantly for present purposes, Section 1.1 states, among other things, the following:

where a risk is deemed to be “referable” due to certain risk attributes (e.g. driver history) which is outside the normal underwriting guidelines, these risks “must” be referred to staff with gold level and above underwriting authority;
where a risk is deemed to be “unacceptable”, it “must” be declined.

[86]
A “NOTE” to Section 1.1 states that the guidelines are not intended to cover “all” scenarios, and staff who are unsure about whether to accept a risk should communicate with a staff member with gold level and above authority level.

[87]
In Section 2.1, it is stated that Shannons “must be able to demonstrate that company guidelines are followed”. In particular, Section 2.4.1 states that, occasionally, it will be necessary to request the customer to provide further information (e.g. driving history record). It goes on to state, that, in these cases, a Protect quote should be processed recording all appropriate information and messages “but no written quote should be sent until all information is obtained”. With respect to drivers of the vehicle, Section 3.1 states that all drivers “should be listed” on the policy and that “we require their driving history to fully assess the risk”. Lastly, this particular sub-section states that driving offences do not refer to parking infringements but that they do include any conviction or charge that led to loss of points and/or a fine, whether it has been recorded, is under investigation, or is the subject of current proceedings.

[88]
The most important operative part of the Guidelines for present purposes is that set out in Sections 17 and 18, dealing with, respectively, “authority levels” and “referable” and “unacceptable” risks. Turning, first, to Section 18: it states that, where risk is deemed to be “referable” due to certain risk attributes (e.g. driver history) which is outside the normal underwriting guidelines, these risks “must” be referred to staff with gold authority level or above, for consideration, and that policy messages should clearly reflect the outcome of the referral process. Where a risk is deemed to be “unacceptable”, it “must” be declined, and policy messages should clearly reflect the outcome of the process. Mr Lang, in his evidence, stated that those provisions were mandatory and did not give rise to any discretion when the word “must” was used. The reference by Mr Lang to the effect that “guidelines are guidelines ... not rules” was given in answer to a question containing a clause to the effect, “where you don’t obviously fall within those guidelines”. Quite obviously, with respect to a “referable” risk, any discretionary considerations are left to be considered higher up the authority level claim. Concerning, in particular, driving offences in the last five years, the primary position, according to the Guidelines, is that the risk is “unacceptable” if, relevantly, there is more than one loss of license or suspension or, for drivers older than 25 years (which would include Mr Michail), there are more than eight traffic infringements and/or offences (excluding parking fines). With respect to “referable” risks, this section of the Guidelines applies that to the following: one loss of license or suspension or, for drivers older than 25 years old, four to eight traffic infringements and/or offences (excluding parking fines). It is also important that a relevant footnote (determined by an asterisk) – in dealing with the tables of referable and unacceptable risks – contains a statement that, where a risk involves two or more “referable” risks in the driving offences’ category, it is “deemed” to be “unacceptable”. A specific example is given of a licence suspension and four to eight traffic infringements.

[89]
Turning, then, to Section 17: this involves a consideration of authority levels. It states that an individual should not exceed an individual’s level of authority “under any circumstances”. In particular, with respect to Mr Lang’s position at the relevant time of being a regional manager, his was the first level of authority at which a MEU could authorise an “agreed value” for a car at $1m (or above). In the relevant Table there is a reference to “Referable/Unacceptable Risks” with an express referral to a “Special note below”. On its face, the “Special” note below does not apply to any of the present circumstances. But what, then, is to be made of the reference to “Referable/Unacceptable Risks”? On the face of Sections 17 and 18, there is inherent tension between the authority to deal with “unacceptable” risks and the apparently mandatory provision stating that “unacceptable” risks “must be declined”. When Mr Lang was taken to this aspect in cross-examination, the answer first given was that, within certain constraints, there were some things “that I can’t approve, whether I like it or not”. The answer immediately following that one was a positive answer to the question that if, on the face of the Guidelines, the risk falls into the “unacceptable” risk category, it can only be dealt with, and approved by, him (or a person who sits above him). Later on in that cross-examination, when taken to a State-to-State difference, he gave a negative answer to the question that such would be something, for example, that a person senior like himself could take into account in looking at the overall risk in relation to an “unacceptable” risk as specified in the Table. After some further questioning, he stated that his discretion “doesn’t extend to everything”.

[90]
On the following day, I sought clarification of what was meant by those answers. When asked by me about the evidence that he gave that the discretion that he was authorised to exercise may apply even where there are “unacceptable” risks, he responded that there are particular risks that are underwritten from time to time which may “not be impacted by an unacceptable performance or history within the guidelines”, providing, as an example, “an unregisterable race car”. When, then, he was further cross-examined, he gave a negative answer to the question – which was more a proposition – that when he stated that Mr Michail would not have been given insurance his “grounds” did “not take (into) account your discretion or your authority”. Thereupon, in re-examination, when he was asked whether the circumstances of Mr Michail’s driving history, as known to him in evidence before the Court, fell into any category where he, in fact, had a discretion - often I overruled an objection to this question - he stated that they did not, adding that this was because “they are clearly in excess of the acceptable”. In elaboration of that, he gave a negative answer to the question about whether his authority or discretion extended to circumstances such as Mr Michail’s, adding that, “I don’t believe so because that driving history directly impacts on the risk that we’re being presented with”.

[91]
Though the plaintiff has argued that Mr Lang had a discretion even for “unacceptable” risks which fell within the Table in Section 18 dealing with driving offences, I do not take that to be the actual import of his evidence. The Guidelines, both on their face and as undertaken as a working document by Shannons’ underwriters, including Mr Lang, strove for a consistency in application. This appears, in a relevantly strong way, when dealing with the risks attendant on the issue of driving offences. The mandatory nature of the non-acceptance of risks which fall within the category of “unacceptable” risks - or at least with respect to any driving history - does not, on my understanding of the evidence, allow for discretionary application, despite the potentially equivocal wording in Section 17. But even if there was some residual discretion unappreciated by Mr Lang, given the materiality of Mr Michail’s driving history as I have analysed below, I would find that the consistency which was striven for by Shannons would have justified an exercise of relevant discretion to refuse to accept the risk, particularly in circumstances where the High Court - though admittedly with respect to s 21 of the ICA - has focused upon the words, “accept the risk”, determining that they were “key” words.

[92]
The fact that not all of Mr Michail’s history and background was negative as to the assessment of risk does not negate the fact that, in this case, I find that Shannons (as agent) would not have entered into the contract of insurance with Mr Michail if he had disclosed in mid-July 2010 at least the six offences for which three demerit points were assigned, as well as the one earlier suspension (see [74] of these Reasons). On other findings that I have made, both disclosure and non-misrepresentation would have revealed the full driving history for the period. Though unnecessary for my actual decision here, it provides an even stronger ground of refusal (even ignoring the June 2010 “suspension”). And I further find that if the misrepresentations had not been made, exactly the same outcome would have prevailed in the circumstances that I have found: see [76] of these Reasons.

[93]
A consideration of other “grounds” is not necessary in this particular case where this ground relied upon would, of itself, have proved decisive for this insurer at this time in 2010. That is, while Mr Lang had authority to “load a premium”, or to effect reinsurance, I do not accept that any such course was open in this case, it certainly not being a case of “laying off” part of the risk (there being no basis for its utility here) or being a case where there was some credible suggestion that some loading could have been calculated which would actuarially meet the particular risk with respect to the “agreed value” of $250,000.00 for total loss.

[94]
Because Mr Michail’s driving record, on either analysis of non-disclosure or misrepresentation (and taking into account only those aspects that were adjudged to be essential for each), falls directly within a risk involving two or more “referable” risks in the list of driving offences, deeming the combination to be “unacceptable”, I accept that Shannons, acting as the relevant agency for AAI, has established, to the relevant satisfaction of the Court, that it would not have insured, at the material time in July 2010, Mr Michail at all, if disclosure of that driving history had occurred, or if the misrepresentations about that history had not been made. On the authority of Orb Holdings, AAI is thereby entitled to refuse to make a payment with respect to this claim under this contract of insurance.

Refund of premium?

[95]
The premium paid by Mr Michail pursuant to the relevant policy of insurance was, as was open to him on his election, paid monthly. The expiry date of the policy was 19 July 2011. The relevant event occurred on 6 May 2011, with the plaintiff making a claim in early May 2011.

[96]
Although there is evidence that the monthly amount payable was $269.50, there is no evidence at all before me about whether or not the plaintiff paid any amount after early May 2011. Nevertheless, since the consideration for the policy was the annual amount of $3,234.00 and since the plaintiff has claimed upon the policy, it is a reasonable inference to draw that the relevant premium paid by the plaintiff to the defendant was $3,234.00.

[97]
During oral submissions, I raised the point (in retrospect, probably inadvisably) that neither party had addressed the issue of the possible refund of the premium. Certainly, it was not claimed in either the Claim or the Further Amended Statement of Claim, but even so, the defendant had come to the stage of submissions prepared to address the issue, even if not holding instructions to concede that there was an obligation, either in law or equity, to repay the premium amount.

[98]
Neither party was able to identify any authority whereby any detailed contextual consideration of this matter was undertaken. The defendant did refer me to Anderson v Aon Risk Services Australia Ltd,^[25] a decision of Philip McMurdo J. As was, correctly, pointed out to me, the defendant/insurer in that case conceded that, if it succeeded on the basis of misrepresentations, it “should refund the premium”: at [83]. On the outcome of the trial (where the plaintiff’s claim for indemnity was dismissed), the contract of insurance was held not to have been avoided by the defendant and that, accordingly, the defendant was entitled to refuse indemnity without repaying the premium, in circumstances where the defendant’s concession that it would have to repay the premium was only upon the basis of misrepresentation and the operation of s 28(3) of the ICA.

[99]
Since the plaintiff, though meekly, pressed the claim for the refund of the premium, no substantial argument was addressed to me as to why it should occur, other than a contention that a reduction of liability in respect of a “claim” was contended not to, expressly, accept that the reduction of liability was “under” the insurance “contract”. I do not see such a distinction in the wording of s 28(3) itself, particularly where the introductory words refer to the circumstance of the insurer being “not entitled to avoid the contract or, being entitled to avoid the contract … has not done so”. As s 28(3) expressly references, s 28(2) gives the right to an insurer to “avoid” the contract if the failure to comply with the duty of disclosure was fraudulent or the misrepresentation was made fraudulently.

[100]
The only additional argument pressed was one which seems to be based simply on the concept of fairness. That is, that if there is a reduction to “nil”, then that would be placing the insurer in a position in which the insurer would have been if the failure had not occurred or the misrepresentation had not been made and, according to Orb Holdings follows upon an insurer being found, hypothetically, not to have undertaken to insure the risk at all. The problem with that conclusion is that its premise is a hypothetical matter and therefore involves no legal, or restitutionary, basis for repayment in an exhaustive statutory code: see Advance (NSW) Insurance Agencies Pty Ltd v Matthews^[26] (though the High Court did not entirely rule out resort to the former common law); and s 33 of the ICA.

[101]
Any solution, consequently, must be found within the meaning of s 28(3) of the ICA itself. But, as just analysed, its premise is either non-entitlement to avoid or non‑election to avoid. I reject any solution that, rather than reducing the liability with respect to the “claim” to nil, I should reduce it to the premium sum (or reduce it to nil, then add on the premium), since that would not answer the question that s 28(3) posits in the absence of avoidance.

[102]
At common law, where a contract of insurance was avoided by an insurer relying upon innocent misrepresentation or innocent non-disclosure, there almost invariably arose an obligation to refund the premium because it “mostly results in (the contract) being set aside ab initio” with (restitutio in integrum to the pre-contractual position).^[27] Where the avoidance was in respect of a fraudulent misrepresentation, such an obligation did not arise. But in both cases there was an avoidance. This was distinguished from simply a “repudiation” of the claim itself, where the contract remained binding, as the contract does here, since the determination is of “liability” for an “amount” in respect of a claim. Section 28(3) of the ICA seems to speak to this circumstance.

[103]
While it would be otherwise “fair”, I cannot see any statutory basis for holding that the premium is refundable by repayment. If the Legislature had wished to provide for this outcome, it could easily have provided, as it did in s 29(3), concerning life insurance, for such avoidance.

[104]
Given the fact that Counsel for the plaintiff, when this was raised, “clear(ly)” intimated that there may be “other issues which might wash up if my client weren’t to win this case”, and given that I am not convinced of the sustainability of a claim for such a refund on the necessarily limited arguments presented to me, it is preferable to have any determination made at some later time, particularly where no pleading amendment to the effect was made.

Conclusion (and costs)

[105]
Accepting that relevant non-disclosure and misrepresentation have been proved and finding that the defendant would not have insured at all as causatively linked to such proof, there should be judgment for the defendant in the proceeding. I have also determined that there should be no judgment for the repayment of the premium. Accordingly, costs should be the defendant’s costs of the proceeding. But since the plaintiff’s written submissions contain a wish to be heard on costs, I will provide for that.

Footnotes

[1] [2003] QCA 182.

[2] (1990) 54 SASR 61.

[3] [1999] NSWCA 238 at [14].

[4] [1999] 1 Qd R 279 at 284.

[5] (2003) 214 CLR 514.

[6] (1999) 47 NSWLR 735.

[7] [2002] NSWSC 1006 at [56].

[8] QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd [2003] NSWCA 356 at [28].

[9] (2008) 235 CLR 103.

[10] [1995] 2 Qd R 51 at 58.

[11] [2003] WASCA 162.

[12] (1989) 97 FLR 284.

[13] (1959) 101 CLR 298.

[14] [2012] HCA 17 at [165].

[15] [2009] QSC 166 at [97].

[16] (1991) 28 FCR 597.

[17] [2003] QDC 9.

[18] [1982] Crim LR 435.

[19] (1997) 19 WAR 119.

[20] D Byrne & JD Heydon, LexisNexis, Cross on Evidence (Australian Edition), Vol 1 (at service 161) [17230].

[21] (2010) 108 SASR 31 at 41, 42-44; [78], [81]-[84].

[22] [2004] VSCA 232 at [15], [23]-[28].

[23] [1998] QCA 254.

[24] (2001) 205 CLR 434 at 461–464 [87]–[91].

[25] [2004] QSC 49.

[26] (1989) 166 CLR 606.

[27] see “The Law of Liability Insurance” (Derrington and Ashton) [2nd ed (3rd ed being imminent)] at 13-283.

Editorial Notes

Published Case Name:
Rodney Michail v Australian Alliance Insurance Co Ltd
Shortened Case Name:
Michail v Australian Alliance Insurance Co Ltd
MNC:
[2013] QDC 284
Court:
QDC
Judge(s):
Dorney QC DCJ
Date:
19 Nov 2013

Litigation History

Event	Citation or File	Date	Notes
Primary Judgment	[2013] QDC 284	19 Nov 2013	The plaintiff made a claim on his insurer for the total loss of his Aston Martin car. The insurer defended on the basis that had the plaintiff complied with his duty of disclosure it would not have insured him. Judgment for the insurer: Dorney QC DCJ.
Primary Judgment	[2013] QDC 305	02 Dec 2013	Plaintiff ordered to pay 85% of the defendant’s costs of the proceeding: Dorney QC DCJ.
Appeal Determined (QCA)	[2014] QCA 138	06 Jun 2014	Appeal dismissed with costs: McMurdo P, Gotterson JA, Dalton J.

Appeal Status

Appeal Determined (QCA)

Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
Advance (NSW) Insurance Agencies Pty Ltd v Matthews	View on:JADE(1989) 166 CLR 606	2 citations Jump To Cite 1 - (1989) 166 CLR 606 Cite 2 - (1989) 166 CLR 606
Anderson v AON Risk Services Australia Ltd	[2004] QSC 49	2 citations Jump To Cite 1 - [2004] QSC 49 Cite 2 - [2004] QSC 49
Associated Motor Insurers Ltd v Ellis	(1990) 54 SASR 61	2 citations Jump To Cite 1 - (1990) 54 SASR 61 Cite 2 - (1990) 54 SASR 61
Australian Securities and Investments Commission v Hellicar	View on:JADE[2012] HCA 17	2 citations Jump To Cite 1 - [2012] HCA 17 Cite 2 - [2012] HCA 17
Ayoub & Another v Lombard Insurance Co (Aust) Pty Ltd	(1989) 97 FLR 284	2 citations Jump To Cite 1 - (1989) 97 FLR 284 Cite 2 - (1989) 97 FLR 284
CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd	View on:JADE[2004] VSCA 232	2 citations Jump To Cite 1 - [2004] VSCA 232 Cite 2 - [2004] VSCA 232
CGU Insurance Ltd v Porthouse	View on:JADE(2008) 235 CLR 103	2 citations Jump To Cite 1 - (2008) 235 CLR 103 Cite 2 - (2008) 235 CLR 103
Commercial Union Assurance Co of Australia Ltd v Beard	View on:NSWLR(1999) 47 NSWLR 735	2 citations Jump To Cite 1 - (1999) 47 NSWLR 735 Cite 2 - (1999) 47 NSWLR 735
Hallmark-Mitex Pty Ltd v Rybarczyk	[1998] QCA 254	2 citations Jump To Cite 1 - [1998] QCA 254 Cite 2 - [1998] QCA 254
Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd	View on:JADE[2002] NSWSC 1006	2 citations Jump To Cite 1 - [2002] NSWSC 1006 Cite 2 - [2002] NSWSC 1006
Jones v Dunkel	View on:JADE(1959) 101 CLR 298	2 citations Jump To Cite 1 - (1959) 101 CLR 298 Cite 2 - (1959) 101 CLR 298
Lyons Pty Ltd v Commonwealth Bank of Australia	(1991) 28 FCR 597	2 citations Jump To Cite 1 - (1991) 28 FCR 597 Cite 2 - (1991) 28 FCR 597
Markovina v R (No 2)	(1997) 19 WAR 119	2 citations Jump To Cite 1 - (1997) 19 WAR 119 Cite 2 - (1997) 19 WAR 119
McCabe v Royal & Sun Alliance Life Assurance Australia Ltd	View on:JADE[2003] WASCA 162	2 citations Jump To Cite 1 - [2003] WASCA 162 Cite 2 - [2003] WASCA 162
Midaz Pty Ltd v Peters McCarthy Insurance Brokers Pty Ltd	[1999] 1 Qd R 279	2 citations Jump To Cite 1 - [1999] 1 Qd R 279 Cite 2 - [1999] 1 Qd R 279
Morris v Warrian	[2003] QDC 9	2 citations Jump To Cite 1 - [2003] QDC 9 Cite 2 - [2003] QDC 9
Orb Holdings Pty Ltd v Lombard Insurance Company (Australia) Ltd	[1995] 2 Qd R 51; [1994] QCA 155	2 citations Jump To Cite 1 - [1995] 2 Qd R 51 Cite 2 - [1995] 2 Qd R 51
Palios Meegan and Nicholson Holdings Pty Ltd v Shore	(2010) 108 SASR 31	2 citations Jump To Cite 1 - (2010) 108 SASR 31 Cite 2 - (2010) 108 SASR 31
Permanent Trustee Australia Limited v FAI General Insurance Company Limited (In Liquidation)	View on:JADE(2003) 214 CLR 514	2 citations Jump To Cite 1 - (2003) 214 CLR 514 Cite 2 - (2003) 214 CLR 514
QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd	View on:JADE[2003] NSWCA 356	2 citations Jump To Cite 1 - [2003] NSWCA 356 Cite 2 - [2003] NSWCA 356
R v Kelsey	[1982] Crim LR 435	2 citations Jump To Cite 1 - [1982] Crim LR 435 Cite 2 - [1982] Crim LR 435
R v Patel	[2009] QSC 166	2 citations Jump To Cite 1 - [2009] QSC 166 Cite 2 - [2009] QSC 166
Rosenberg v Percival	View on:JADE(2001) 205 CLR 434	2 citations Jump To Cite 1 - (2001) 205 CLR 434 Cite 2 - (2001) 205 CLR 434
Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd	[2003] QCA 182	2 citations Jump To Cite 1 - [2003] QCA 182 Cite 2 - [2003] QCA 182
Suncorp General Insurance Ltd v Cheihk	View on:JADE[1999] NSWCA 238	2 citations Jump To Cite 1 - [1999] NSWCA 238 Cite 2 - [1999] NSWCA 238

Cases Citing List of cases on Queensland Judgments citing this Judgment

Case Name	Full Citation	Frequency
Michail v Australian Alliance Insurance Company Ltd	[2014] QCA 138	2 citations
Seilers Transport Pty Ltd v McGrath	[2016] QDC 75	2 citations

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Michail v Australian Alliance Insurance Co Ltd[2013] QDC 284