Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14

High Court of Australia Gibbs C.J. Mason, Wilson, Brennan and Dawson JJ. Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14

ORDER Appeals dismissed with costs.

Cur. adv. vult.

The Court delivered the following written judgment:—

1986, April 11 Gibbs C.J., Mason, Wilson, Brennan and Dawson JJ.

The first action which is the subject of the present appeal concerns the legal relationships which existed between three companies during 1977 and 1978: an insurer — Norwich Winterthur Insurance (Australia) Ltd. ("Norwich"); an assured — Con-Stan Industries of Australia Pty. Ltd. ("Con-Stan"); and an insurance broker — originally Bedford Insurances Pty. Ltd., but later Bedford Insurances (Australia) Pty. Ltd. The precise legal identity of the broker is of no importance in this case and, unless otherwise indicated, we shall refer to it generically as "Bedford". The second appeal concerns a different assured (Elastic Rail Spike Co. (Aust.) Pty. Ltd.) but, as the issues raised are materially identical, that appeal must stand or fall with the success of the first appeal. It will therefore be convenient to confine discussion to the issues as they affect Con-Stan.

The principal issue arising for consideration is whether an insurer may recover outstanding premiums from an assured who has already paid them to his insurance broker, but which the broker has failed to pass on to the insurer. In contracts of marine insurance the matter is governed by s. 59 of the Marine Insurance Act 1909 Cth which provides, in terms which are declaratory of the common law governing such contracts, that unless otherwise agreed, where a marine policy is effected on behalf of the assured by a broker, the broker is directly responsible to the insurer for the premium. The necessary corollary is that an insurer has no recourse against the assured if the broker defaults on payment of the premium. The question that must be decided in this appeal is whether a similar principle applies to general non-maritime insurance.