Alex is a director and the CEO of Stylux Appliances Pty Ltd ("Stylux"). The company retails electrical appliances. The company attends to delivery of the products to the customers' homes and for that purpose they maintain a fleet of 10 trucks.
Alex wants to insure all the trucks and their cargo in case there is an accident during deliveries. Alex asks another director namely Pamela to arrange the insurance.
Pamela contacts Echidna Insurance Ltd ("Echidna") and that company emails her a proposal form. The form asks for disclosure of the driving history of all the Stylux drivers. Pamela emails all the drivers and asks them for details of any previous convictions or infringement notices for driving offences and also for details of previous accidents. The drivers all reply giving details of speeding offences and red light offences and some minor collisions.
On the basis of those emails Pamela completes the proposal form and gives it to Alex. They discuss the matter and then Alex signs the proposal form and it is sent to Stylux. Stylux accepts the proposal and issues an insurance policy.
Three months later one of the Stylux trucks overturns on Botany Road at Redfern and its load of dishwashers is damaged and the truck is a write-off. Two other vehicles and a shop are also damaged. Stylux makes a claim on the policy. Echidna investigates and then advises Stylux that one of their drivers has two convictions for drink driving and driving whilst disqualified and that these matters had not been disclosed on the proposal and so the claim would not be paid.
Alex and Pamela seek your advice. You should explain to them :
1. What is the duty of disclosure ?
2. What is the duty of "utmost good faith" ?
3. The Insurance Contracts Act 1984 has modified the harshness of the common law in this area. Explain how Stylux might be able to take advantage of sections 22, 23, 26, 27 and 31 of the Insurance Contracts Act 1984 to sue Stylux and recover some of the insurance money. Your answer must be supported by sections and cases.