"" we Be? t CATCHWORDS INSURANCE - policy of life insurance - whether contract of insurance —- whether parties proceeded past the stage of pre-contractual negotiaton - proposal for policy of life insurance and benefits on disablement ~ whether acceptance of offer in proposal - whether counter-offer. CAPITAL PLUMBING SERVICE PTY LIMITED v. F.M.L. ASSURANCE LIMITED No. A.C.T. Gl of 1986 Northrop, Gallop and Jackson JJ. 26 August 1986 Canberra ut IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY No. A.C.T. G1 of 1986 DISTRICT REGISTRY eee eS GENERAL DIVISION ON APPEAL from the Supreme Court of the Australian Capital Territory BETWEEN: CAPITAL PLUMBING SERVICE PTY LIMITED Appellant AND: F.M.L. ASSURANCE LIMITED Respondent MINUTES OR ORDER JUDGES MAKING ORDER: NORTHROP, GALLOP AND JACKSON JJ. DATE OF ORDER: 26 August 1986 WHERE MADE: CANBERRA THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay to the respondent its costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. y IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY No. A.C.T. G1 of 1986 DISTRICT REGISTRY we ewe GENERAL DIVISION ON APPEAL from the Supreme Court of the Australian Capital Territory BETWEEN: CAPITAL PLUMBING SERVICE PTY LIMITED Appellant AND: F.M.L. ASSURANCE LIMITED Respondent CORAM: NORTHROP, GALLOP AND JACKSON JJ. DATE: 26 AUGUST 1986. PLACE: CANBERRA REASONS FOR JUDGMENT THE COURT: The appellant sued the respondent in the Supreme Court of the Australian Capital Territory, claiming that the respondent was the insurer and the appellant the insured under a policy of life assurance upon the life of Colin Raymond Mills. Mr Mills had died on 10th February 1977 and at the time of his death and at all material times prior thereto was a director of the appellant, a family company engaged in business in the Australian Capital Territory. -2- 'y The primary Judge was of the view that no contract of insurance had been entered into, the parties not having proceeded past the stage of pre-contractual negotiation. Accordingly he _gave judgment for the respondent and it is from that decision the appellant now appeals. The events which are said to have given rise to the contract of insurance commenced, as the primary Judge found, in about 1973 when the deceased and his wife met Robert Arthur Irvine who was an employee of Federation Insurance Limited, a company which had an association with the respondent and in at least some respects acted as the respondent's agent. After their first meeting and before the events to which we shall now turn, the deceased and Mrs Mills had had some dealings with Mr Irvine in relation to insurance. The events critical for present purposes, however, commence after that time and in particular on 18th October 1976 when Mr Mills with the aid of Mr Irvine prepared a document which we shall call "the proposal" which is accepted by the parties, although the manner in which it is completed 1s in some respects inapt, as being a proposal by the appellant to the respondent for insurance in respect of the life of the deceased. We say "in respect of" because the precise nature of the policy sought to be effected is a matter which is in issue, and to that issue we shall now turn. -3- The proposal was one which in form appeared apposite to a policy of life assurance to be effected by a family company on the life of its principal working director. The form bore the general description "PROPOSAL FOR LIFE ASSURANCE" and it was divided into a number of parts including the following:- (a) "STATEMENT BY PROPOSED LIFE ASSURED"; (b) "STATEMENT RELATING TO PROPOSER IF OTHER THAN PROPOSED LIFE ASSURED"; (c) "PERSONAL STATEMENT to be completed by Proposed Life Assured if Proposal 1s for ASSURANCE WITHOUT MEDICAL EXAMINATION". In the first of those parts there was contained a statement as to the "Principal Sum Assured" which was that the "Type of Assurance" was to be "LDTA with participation in profits", that the amount of the insurance was to be $30,000.00 and that the total premium was to be $167.60. The term "LDTA" refers to Linear Decreasing Term Life Assurance and the primary Judge found that the meaning of that expression was:- "that the term be 20 years, the initial term assurance be $30,000 on death and the initial insurance on disablement be $30,000 also with an annual decrease in respect of each of death and disablement of $1,500. The nature of the policy in respect of which the proposal was made then becomes clear. For a modest premium it was to provide the relatively large sum of $30,000 on death or $30,000 on disablement should either of those events take place in the first year. As each year passed the sum payable on either of those events was lessened by one twentieth of the original sums payable or that proportion which each year bore to the term of 20 years proposed." -4~ an It should be noted that one feature which emerges from the terms of the proposal is that it did not anywhere state that a policy providing a benefit to the appellant in the event of disablement of Mr Mills, as distinct from his death, was in contemplation. The amount indicated in the proposal as the premium would have conveyed such an indication to one familiar with the rates of premium then applicable but it was in any event agreed before the primary Judge that he might "take it as common ground" that the proposal was for both a life policy and for benefits on disablement. We should also add that at the time of making the proposal the appellant had in mind that it would also seek to effect superannuation benefits for the deceased and that its contribution in that regard would be a sum of $300.00 per year. As we have said earlier the proposal was dated 18th October 1976 and on 23rd November 1976 the respondent sent to Federation Insurance Limited a memorandum in the following terms:- "We advise that Mr C.R. Mills is medically A/OR, however, due to his aviation pursuits Disablement benefits have been declined. The annual premium for a sum assured of $30,000 will now be $138.50. Alternatively, the annual premium originally calculated (i.e. $167.60) will now purchase a sum assured of $36,690. Would you please let us know the Company's intentions in _ this connection and also obtain a letter from the Company acknowledging that LDTA will now be "death only". " -5- ty The New South Wales Manager of Federation Insurance Limited on 26th November 1976 then sent to Mr Irvine a memorandum stating:- "We will appreciate your advices in terms of the following enquiry sheet. Please complete where indicated, detach, and return to this office." The enquiry sheet contained the following:- "We advise that Mr C.R. Mills has beem accepted at ordinary rates but due to his aviation pursuits disablement benefits have been declined. The annual premium for a sum assured of $30,000 without disability benefits will be $138.50. Alternatively, the original annual premium (including disability benefits) was $167.60 and this will now purchase a sum assured of $36,690 without disability benefits. Would you please obtain a letter from the Company acknowledging that the decreasing temporary assurance will now be a death cover only, also whether the sum assured is to be $30,000 for a premium of $138.50 or $36,690 with an annual premium of $167.60." The document to which we have just referred was shown to Mr Mills by Mr Irvine and the ultimate question for determination is whether the communication to the appellant of the contents of that document constitutes an acceptance by the respondent of the offer contained in the proposal. If it did not constitute such an acceptance, but was a counter-offer, it is not argued that any later events gave rise to a contract as, for example, by acceptance of the counter offer. It seems to us clear that the learned trial Judge was -6- correct in taking the view that in these circumstances no concluded agreement had been arrived at. Whether the proposal should or should not be treated as including the proposal for . Superannuation benefits - the primary Judge regarded it as being common ground before him that it should, but that appeared not to be so before us - it is apparent that the proposal for life assurance should be treated as a proposal for a policy of life assurance which included, for an additional premium of about $30.00 annually, provision for benefits on disability. That proposal was never accepted but what was said was that the respondent was prepared to issue a policy of life assurance containing no provision for benefits on disability. There is nothing in the proposal to suggest that the terms of the proposal were to be treated as a number of separate offers, each capable of acceptance notwithstanding rejection of the other. In these circumstances, and notwithstanding the careful argument of Mr Williams to the contrary, it is impossible to be satisfied that any contract of insurance was arrived at. It is thus unnecessary to deal with the other grounds relied on by the respondent to support the judgment below. The appeal should be dismissed. fed I certify that the six (6) preceding pages are a true copy of the Reasons for Judgment of their Honours Mr Justice Northrop, Associate: DP 4. Date: 26 August 1986 Counsel for the Appellant: Solicitors for the Appellant: Counsel for the Respondent: Solicitors for the Respondent: Date of hearing: "Mr Justice Gallop and Mr Justice Jackson. Mr R.E. Williams Snedden, Hall & Gallop Mr P. Sheils Q.C. with Mr Nash Higgins Solicitors 16th July 1986