Scottish Court of Session Decisions

Dawsons, Limited, general contractors, Glasgow, pursuers, brought an action against H. A. V. Bonnin and others, all underwriters at Lloyds, London, defenders, for payment of the sum of £500 for the destruction by fire of a motor lorry belonging to the pursuers and insured by them with the defenders.

The following narrative of the facts of the case is taken from the opinion of the Lord Justice-Clerk—“The pursuers sue the defenders for £500, being the value of a motor car belonging to the pursuers, and insured by them with the defenders, which car was destroyed by fire during the period covered by the policy and so became a total loss. The defenders maintain that they are not liable because of misrepresentations made by the pursuers affecting the validity of the policy. In the proposal submitted by the pursuers to the defenders the following questions, inter alia, were asked and answered, as follows, viz., 1. Proposer's name—Dawsons Limited; 2. Proposer's address—46 Cadogan Street, Glasgow. 4. State full address at which the vehicle will usually be garaged—Above address. In what district will the vehicle be used—Glasgow and district. The parties are agreed that ‘above address’ means 46 Cadogan Street, Glasgow. That was the pursuers' ordinary business address. Cadogan Street is a well-known business street in Glasgow, near the centre of the city, where the buildings were substantial stone buildings. The defenders' insurance agent, who carried through on their behalf the arrangements as to the proposal was well acquainted with Cadogan Street, and thought when the negotiations were going on that the premises belonging to or occupied by the pursuers at Cadogan Street were well suited for a garage and could accommodate the car in question. Mr Starr, the pursuers' London broker, knew Cadogan Street generally and the nature of the buildings in it. In point of fact the car was never garaged in Cadogan Street, but at a farm steading some 3 or 4 miles away, but still within the Glasgow municipal boundaries, in what had originally been a hay shed, a structure consisting mainly of wood supported on iron or steel columns. This shed was used for accommodating, in addition to the car in question, petrol lorries belonging to the pursuers, and some barrels of oil or petrol. One of these petrol lorries, or the petrol used for it, it is thought, caught fire, and the resulting conflagration destroyed the shed and the insured car, which was in the shed at the time. Appended to the policy issued to the pursuers was a note in these terms:—‘ Note.—Please examine your policy and see that it is what you require.’ The policy set out at the beginning that the pursuers had subscribed and delivered to the defenders a proposal dated 22nd January 1917, ‘which proposal shall be the basis of this contract and be held as incorporated herein.’ It further set forth that it was ‘subject to the condition on the back hereof, the due observance of which is a condition-precedent to all liability of the underwriters hereunder.’ One of these conditions was in the following terms:—‘Material misstatement or concealment of any circumstance by the insured material to assessing the premium herein, or in connection with any claim, shall render the policy void.”

The defenders pleaded, inter alia—“1. The policy is void because of the untrue answer given to the question in the proposal [i.e., question 4 supra] referred to in answer 2 hereof, and because the information contained in said answer was material to the formation of the contract and misled the the defenders on a material matter.”

On 15th July 1920 the Lord Ordinary ( Anderson), after a proof, found that the policy of insurance covering the motor lorry was void because of the untrue answer given to the question in the proposal referred to in answer 2 by the defenders in the closed record; therefore assoilzied the defenders from the petitory conclusions of the summons.

Opinion.—[ After a narrative of the facts and a consideration of certain other grounds of defence]—“There remains only one other ground of defence to be considered, that, namely, which is formulated in the defenders' first plea-in-law.

As will appear later, this plea is inartistically framed, as it combines two matters, falseness and materiality, of which the latter does not necessarily demand consideration and determination.

The averments on which this plea is based are set forth in answer 2.…

Dealing, then, with the point raised in answer 2 it appears that the proposal form put the following question to the insured—‘State full address at which vehicles will usually be garaged.’ The answer given was ‘Above address.’ The earlier part of the proposal form showed that this meant ‘46 Cadogan Street, Glasgow.’ It is common ground that at the time the proposal form was signed there was no garage at that address, that there never had been a garage there, and that the pursuers had no intention of garaging their lorries there.

Prima facie, therefore, the answer given was false, and the question is what legal effect does that have upon the pursuers' claim.

If a statement made in a case of this kind is a warranty, only one issue arises—whether the statement is false. The issue whether the misstatement is also material does not arise. If the statement is a warranty and is false the policy is void.

If the statement made is merely a representation there are two issues—(1) is the statement false, and (2) was it material, i.e., did it affect the acceptance of the risk or the amount of the premium.

It was maintained for the pursuers that the above statement was merely a representation, because (1) it was not expressly said to be a warranty, and (2) there was no

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declaration of truth appended to the proposal form and signed by the insured. It seems to me that it is well decided that there is a third category of case in which a statement of the insured in a proposal form must be dealt with as if it were an express warranty, that, namely, in which the statements made in the proposal form are made the basis of the contract of insurance. That doctrine appears to me to be established by these authorities— Anderson, 1853, 4 H.L.C. 484; Thomson, 9 A.C. 671; M'Donald, 9 Q.B. 328; Mansel, 1879, 11 Ch. D. 363; Marshall, 1902, 85 L.T. 757; MacGillivray, Ins. Law, p. 284.

Now the policy set forth in its preamble that the proposal shall be the basis of the contract, and, as I have pointed out, the proposal form and answers are incorporated in the policy as part of the contract to which the pursuers were parties.

I am therefore absolved from considering the question of whether or not the statement (if false) was material.

If the statement is false it follows that the policy is void, and it only remains to be determined whether or not the statement was false.

The statement is doubtless partly true because the lorry was garaged in Glasgow, and the pursuer's counsel argued that because of this the answer was substantially true. I am unable to accept this contention. If the answer had been ‘Glasgow’ and nothing more I do not think this would really have been an answer to the question. It wouid have been almost equally helpful to have written ‘Scotland.’ To state that vehicles will usually be garaged at 46 Cadogan Street when in point of fact the intention was to garage them at Dovehill was in my opinion to make a statement which was substantially false.

The only other point taken by the pursuers' counsel was that as the statement whose accuracy was challenged was merely an expression of intention as to the future it had no binding force. It might be held that the answer referred to implied something more than a reference to the future, namely, that it suggested that the pursuers' vehicles had been in use to be garaged at 46 Cadogan Street, were then being garaged there, and would continue to be garaged at that address. Assuming, however, that the answer imported nothing more than an expression of intention as to the future there is a difference in legal consequence between a representation and a warranty. In the case of a representation it is the case that mere expression of intention has no binding force; in the case of a statement of intention which is incorporated in the contract or which is made the basis of the contract there is binding force—Anson, Law of Contract, 8th ed., p. 168.

The result is that I decide that the policy is void because the pursuers in the proposal form made a statement, forming part of the basis of the contract, which was untrue in fact. The defenders must therefore be assoilzied from the conclusions of the summons.”

The pursuers reclaimed, and argued—In all the cases referred to by the Lord Ordinary there was a declaration of the truth of the statements in the proposal form, or a warranty in the body of the contract— Anderson v. Fitzgerald, 1853, 4 A.C. (H.L.) 484; Macdonald v. Law Union Insurance Company, 1874, L.R., 9 Q.B. 328; London Assurance v. Mansel, 1879, 11 Ch. D. 363; Thomson v. Weems, 1884, 9 A.C. 671, 11 R. (H.L.) 48, 21 S.L.R. 791. Additional cases which might be cited were— Marshall v. Scottish Employees' Liability Insurance Company, 1902, 85 L.T. 757; and Yorkshire Insurance Company, Limited v. Campbell, [1917] AC 218. The fact that the proposal was made the basis of the contract did not imply a warranty of the truth of every answer contained in the proposal. There might be a representation without a warranty, but the representation to void the contract must be material to the risk under the contract and also be fraudulent. In Anderson v. Fitzgerald, cit. sup., there was an express contract for voidability, and that case did not decide that everything in the proposal when made the basis of the contract must be taken to be material as Sir George Jessel, M.R., in London Assurance v. Mansel, cit. sup., and as M'Gillivray on Insurance, founding on that case seemed to infer. The only exception to this was to be found in marine insurance, where everything written on the policy was held to be a warranty or condition-precedent. The mere fact, therefore, that the proposal form was incorporated in the policy and made the basis of the contract did not show that every answer in the proposal form was to be taken as warranted—Gloag on Contract, p. 558; Farr v. Motor Trades Mutual Insurance Society, Limited, [1920] 3 K.B. 669; Joel v. Law Union and Crown Insurance Company, [1908] 2 KB 863, per Fletcher Moulton, L.J., at p. 885; Dalgety & Company v. Australian Mutual Provident Society, 1998, Stone's Insurance Cases, vol. i, p. 177; Kerr on Fraud and Mistake, 5th ed., p. 40; Anson on Contract, 15th ed., pp. 180 and 183; Wood v. Tulloch, 1877, 20 R. 477, 30 S.L.R. 497; Reid & Company, Limited v. Employers' Accident, &c., Insurance Company, Limited, 1899, 1 F. 1031, 36 S.L.R. 825. Bell's statement in section 522 of his Principles was not a definition of warranty, and the cases cited by him did not support his proposition. It was the duty of the Court in these circumstances, before it gave effect to the respondent's contention, to be satisfied that the insured consented to the accuracy of the answers being made the basis of the contract— Anderson v. Fitzgerald, cit. sup., per Lord St Leonard at p. 507; Fowkes v. Manchester and London Insurance Association, 1863, 3 B. & S. 917, per Crompton, J, at p. 927; Hemmings v. Sceptre Life Association, Limited, [1905] 1 Ch 365. If, however, there was a warranty in the present case it was a qualified warranty in the terms of section 4 of the contract, and it was only if the statements were material that they could be held to void the contract. As to whether they were material or not the onus was on the respondent. On the evidence the test was what would affect the mind of an

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underwriter applying the ordinary principles of his business— Lonides v. Pender, 1874, 9 Q.B. 531. The proof showed that the question was simply put to show the area in which the car was to operate. It was only so far as it fixed the rate of premium that it was material and the error in question did not affect the rate of premium. In the case of Craig v. Imperial Union Accident Assurance Company, 1894, 1 S.L.T. 646, though the answers were false in the sense that they were incomplete, it was held that the falsity was not material and did not affect the contract. In the present case there was no evidence to show that this answer induced the contract.

Argued for the respondent—The representation in the present case was the basis of the contract, and it was incorporated in it. There could be no object in making a statement the basis of the contract if that statement were not true in fact. Materiality was to be presumed where the answer was the basis of the policy, and untruthfulness in such circumstances would void the policy— Adamson's Trustees v. Scottish Provident Assurance Company, 1868, 6 Macph. 442; Bell's Prin., secs. 475 and 522; Yorkshire Insurance Company, Limited v. Campbell, cit. sup., per Lord Sumner at p. 221; MacGillivray on Insurance, p. 285. When statements in these circumstances were made the basis of the contract they became conditions-precedent, or in Scotland warranties— Thomson v. Weems, cit. sup., 1884, 9 A.C., per Lord Blackburn at p. 683 and Lord Watson at p. 687; Anderson v. Fitzgerald, cit. sup., per Lord Cranworth, L.C., at p. 503; London Assurance v. Mansel, cit. sup. Insurance was a contract uberrimce fidei. Whether the statement were taken as a warranty or as a representation material to the contract the result was the same. As to whether the statement in the answer was material or not, the statement of the insurer that it was material was of primary importance— Smith v. Land and Houses Property Corporation, 1884, 28 Ch. Div. 7, per Bowen, L. J., at p. 16. The knowledge of the local agent was sufficient— Crwikshank v. Northern Accident Insurance Company, Limited, 1895, 23 R. 147, 33 S.L.R. 134.

At advising—