An assured is bound to disclose to the insurer, before an insurance contract is concluded, every material circumstance which is known to him, and if he fails to make such disclosure the insurer may avoid the contract1. Similarly, every material representation made by the assured to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue, the insurer may also avoid the contract2. If a court is satisfied on the evidence that an undisclosed circumstance was material, or a misrepresentation made during the course of negotiations was material, it has no option but to avoid the contract, if that is the insurer’s wish. This is an absolute common law right. Principles of equity give the court no discretion concerning the relief to be granted.

In the context of marine insurance, the Marine Insurance Act 1906 codified the common law rules which helped to identify what must be disclosed and what need not. In the absence of inquiry by the insurer, an assured need not disclose, among other things, any circumstance which is known or presumed to be known to the insurer and any circumstance as to which information is waived by the insurer, and in each case it is a question of fact whether any particular undisclosed circumstance be material or not3. As a further guide, it is provided that just as the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him, so too the insurer is presumed to know matters of common notoriety or knowledge and matters which an insurer in the ordinary course of his business as such ought to know4.

After 70 years of debate, the Court of Appeal ruled ten years ago5 that in defining what is meant by the word “material” in a marine insurance context in the Marine Insurance Act 1906 Parliament was doing no more than inserting in its code of marine insurance law what it regarded as the general rule of all insurance law. It follows that the meaning to be ascribed to the word “material” in this context is of very wide and general application.

The Marine Insurance Act provides that every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium or determining whether he will take the risk. The Act gives an identical definition in the case of representations: “A representation is material which would influence …”6. What, then, is meant by the words “which would influence the judgment of a prudent insurer?” These words fell to be explained in an English court for the first time since