Waterhouse v Deputy Federal Commissioner of Land Tax, South Australia [1914] HCA 16

17 C.L.R.] OF AUSTRALIA.

policy itself, what would be its effect? As already pointed out the expressed terms of the policy of re-assurance are in almost every respect different from the terms of the original policy. It would be contrary to all sound canons of construction to reject or modify the expressed terms of the policy in order that it might be made to conform to the general words of the clause in question. Such clause would almost necessarily be construed as if it were prefaced with the words " except as herein otherwise provided." It would be only less difficult to maintain that the effect of the clause was to introduce into the policy of re-insurance provisions relating to (a) application of surrender value towards payment of premiums in arrear, or (b) forfeiture of premiums already paid, if the basic conditions of the contract were not fulfilled, or (c) the allowance of days of grace. But it is enough to say that the incorporation in the policy of the clause in question cannot be allowed to contradict the express provisions of the policy. And yet this is in reality exactly what the respondent Association contends for and exactly what has been allowed in the High Court of Australia and the Full Court of Victoria. The somewhat ambiguous words "by whom in the event of claim settlement will be made" are construed as meaning that if the respondent Association acting reasonably and in good faith admit, and settle, its own liability under the original policy, the appellant Society is bound by such admission and settlement, and is liable under its own independent contract of re-insurance, notwithstanding the fact that according to the express terms of such contract, no liability has in fact arisen. Sir Samuel Griffith C.J. appears to have been fully aware of the difficulty involved in so construing and giving effect to the words in question, and he endeavours to meet this difficulty in the following way :—In his opinion although the prima facie meaning of the clause which makes the statements which the jury found to be false the basis of the contract, is to make the liability of the appellant Society conditional on the truth of such statements, yet this primd facie meaning is controlled by the incor- poration in the policy of the clause contained in the document of 2nd January 1908. In reality, he says, it is not the truth of the statements which is made the basis of the contract but the fact that the statements were made, so that there is no contradiction