Condogianis v. Guardian Assurance Company Ltd.

Lord Shaw:-

This is an appeal by special leave from a judgment of the High Court of Australia dated 19th June, 1919, allowing by a majority of two judges to one an appeal from the judgment of Hodges, J., in the Supreme Court of Victoria, dated 30th October, 1918. Isaacs, J., agreed with the judge of first instance; Barton and Gavan Duffy, JJ., from whom he dissented, decided to reverse.

The action, which was brought by the appellant as plaintiff, claimed a declaration that, under a policy of insurance of the defendant company, dated 1st March, 1918, that company was liable to pay him the loss sustained in consequence of fire which occurred on 17th April of that year and by reason of which a large part of the property insured was destroyed.

In the pleadings the defence was rested on a variety of grounds. At their Lordships' bar the learned counsel for the respondents stated that it was sufficient to rely upon one of these grounds, and that all the others might be taken as discarded. This ground was that two statements made in the proposal were untrue. One of these statements stood opposite the following, being a request for the "name in full, residence and occupation, of the person in whose name the policy is to be made out." The appellant, Nicholas Condogianis, signed his name and gave his address. There was, however, a printed note attached and clearly made a condition of the policy, to the following effect. "If not the owner, the nature of interest must be stated." The truth was that the appellant, prior to the date of the policy, had entered into a contract of partnership with one Mrs. Rachor. The deed of partnership is produced, and it appears from it that the partners are equally entitled to the profits of the concern. It further appears, however, that Mrs. Rachor's contribution to the firm's capital was of a very slender amount, and on this and other grounds the appellant maintained that his representation, which amounted to an assertion of his own ownership, was substantially true. Whether such a contention could be successfully maintained or not their Lordships do not propose to determine, as they have formed a clear conclusion upon the other ground now to be mentioned, which formed the staple part of the argument before the Board, as also of the judgments of the learned judges of the Court below.

That ground is this: Among the questions in the appellant's fire insurance proposal to the respondents was the following: "Has proponent ever been a claimant on a fire insurance company in respect of the property now proposed or any other property? If so, state when and name of company." To this the answer was given: "Yes." 1917 'Ocean.' This answer was in a literal sense true, that is to say, it was true that the proposer had, in the year 1917, made a claim against the "Ocean Insurance Co." in respect of the burning of a motor-car. He omitted, however, to state what was also the fact, namely, that in the year 1912 he had made another claim against the Liverpool and London and Globe Co., in respect of the burning of a motor car owned by him. He was paid the sum 267. 3 sh. in settlement of that claim.

It is unnecessary to state that the answer given by the appellant in the proposal falls clearly within the express declaration which is now to be quoted. The terms of that declaration are as follows :

"This proposal is the basis of the contract and is to be taken as part of the policy and (if accepted) the particulars are to be deemed express and continuing warranties furnished by or on behalf of the proponent; and any questions remaining unanswered will be deemed to be replied to in the negative. The proposal is made subject to the Company's conditions as printed any/or written in the policy to be issued hereon, and which are hereby accepted by the proponent."

The case accordingly is one of express warranty: If in point of fact the answer is untrue, the warranty still holds, notwithstanding that the untruth might have arisen inadvertently and without any kind of fraud. Secondly, the materiality of the untruth is not in issue; the parties having settled for themselves-by making the fact the basis of the contract, and giving a warranty-that as between them their agreement on that subject precluded all inquiry into the issue of materiality. In the language of Lord Eldon in Newcastle Fire Insurance Co. v. Macmorran (1815) 3 Dow. 255.

"It is a first principle in the law of insurance, on all occasions, that where a representation is material it must be complied with-if immaterial, that immateriality may be inquired into and shown; but that if there is a warranty it is part of the contract that the matter is such as it is represented to be. Therefore the materiality or immateriality signifies nothing."

This rule has been repeated over and over again, and is too well settled to be questioned: Anderson v. Fitzgerald, (1853) 4 H. L. C. 484 and the judgments of Lord Blackburn and Lord Watson in particular in Thomson v. Weems (1884) 9 App. Cas 671.

An argument was presented to the Board arising from the language used in the first condition of the policy. It is as follows :

"If there be any material misdescription of any of the property hereby insured, or of any building or place in which such property is contained, or any misrepresentation as to any fact material to be known for estimating the risk, or any omission to state such fact, the Company shall not be liable upon this Policy so far as it relates to property affected by any such misdescription, misrepresentation or omission."

It was pleaded that the materiality of the fact was thus introduced into the policy in the sense of making the materiality of every statement or answer part of the basis of the contract.It is no doubt true that a material misstatement inducing the contract would avoid it, but, their Lordships see no reason to hold that the reference to the materiality in the condition quoted is in any sense equivalent to a deletion of the warranty and declaration of the basis of the contract which the signed proposal contains. That argument is accordingly rejected.

The more serious proposition arose on the construction of the question and answer. In a contract of insurance it is a weighty fact that the questions are framed by the insurer, and that if an answer is obtained to such a question which is upon a fair construction a true answer, it is not open to the insuring company to maintain that the question was put in a sense different from or more comprehensive than the proponent's answer covered. Where an ambiguity exists, the contract must stand, if an answer has been made to the question on a fair and reasonable construction of that question. Otherwise the ambiguity would be a trap against which the insured would be protected by Courts of Law. Their Lordships accept that doctrine to the full, and no question is made of the soundness of it as set forth in many authorities, of which the judgments of Vaughan Williams Farwell, L.J. in Etherington's case, (1909) 1 K. B. 591 and Moulton, L.J. in Joel v. Law Union and Crown Insurance Co., (1903) 2 K. B. 863 are recent examples.

But upon the other hand, the principle of a fair and reasonable construction of the question must also be applied in the other direction that is to say, there must also be a fair and reasonable construction of the answer given; and if on such a construction the answer is not true, although upon extreme literalism it may be correct, then the contract is equally avoided. These principles seem to be entirely in accord with Lord Watson's view in Thompson v. Weems, (1884) 9 App. Cas 671 which was thus expressed :-

"Notwithstanding that the warranty is express there still remains for consideration what must be held to be the subject-matter of the warranty.

That is a point to be determined in each case, according to the just construction of the question and answer taken per se and without reference to the warranty given."

With these matters in view, what is a just and reasonable construction of the words in the question. "Has proponent ever been a claimant on a fire insurance company? If so, state when and name of company?''

It is not to be wondered at that this was made the basis of the contract, because insurance companies might hesitate long before entering into a contract with an insurer who had been formerly a claimant upon companies, and they would have been put upon their inquiry as to what these claims were and how they had been settled and what were the circumstances of these former transactions. The importance of the questions might be increased by the number of times in which such transactions had taken place. The argument of the appellant, however, was that it was sufficient to answer the question; "Has proponent ever been a claimant? If so, state when and name of company" by answering in the singular and giving one occasion and one occasion alone. Accordingly, if, say, several years ago a proponent had been a claimant under an insurance policy, it would be sufficient for him to mention that fact and to exclude from mention the further fact that every year since that occasion he had also been a claimant upon insurance companies for fire losses. It appears to their Lordships quite plain that this would be no good answer to the question, " Has proponent ever been a claimant? If so, state when?" In short, when that question is reasonably construed, it points to the insurer getting the benefit of what has been the record of the insured with regard to insurance claims. This was distinctly its intention and in their Lordships' opinion is plainly its meaning. To exclude, however, from that record what might in the easily supposed case be all its most important items, however numerous these might be, and to answer the question in the singular, which again in the easily supposed case might be a colourless instance favourable to the claimant, would be to answer the question so as to misrepresent the true facts and situation and to be of the nature of a trap.

On this simple ground, which is in accord with the spirit and principle of insurance law as frequently laid down, their Lordships see no occasion for interfering with the judgment of the majority of the Court below. They agree with the result arrived at by the learned Judges Barton and Gavan Duffy, JJ. They note with satisfaction that Isaacs, J., although dissenting on the point of the construction of the particular question and answer above reviewed, is in substantial agreement with those principles of insurance law to which reference has been made. When he observes that "all a Court can do, in my opinion, is to determine the limits of reasonable interpretation," that may be at once assented to. But when he proceeds, "and if the proponent has bona fide understood the question within the limits and answered it accurately, that is sufficient," their Lordships feel that dangerous ground has been reached. However great the bona fides of the proponent may be, if he has been led to impose limits upon the question to which it should not reasonably be subject, then the answer so restricted cannot be held to be a true answer. The present affords a good illustration of a case in which the question should be stated so as to raise the issue in a broader and, in their Lordships' opinion, a just and sound form. That question would be, "Could a man making a proposal for insurance fairly read the question as applying only to a single previous claim?" Their Lordships, as stated, are clearly of opinion that such a limitation would result, not in the disclosure which was truly required, but in a failure to reveal essential elements important to be known.

Their Lordships will humbly advise His Majesty that the appeal should be dismissed with costs.

Appeal dismissed.