Salleh Abas LP:

The question to be decided in this appeal is whether a contract of life insurance was formed, or simply whether there was an acceptance by the respondents.

The facts which gave rise to this issue are as follows:

One Azian Bte Borhanuddin (deceased) was a flight stewardess employed by Malaysian Airline System (MAS). On 4 December 1977 she was on duty in MAS flight No. MH 653 which crashed at Tanjong Kupang, Johor. All persons on board, including Azian were killed.

However, about two weeks before the crash on 21 November 1977 the deceased submitted a proposal form duly completed and signed by her to the respondents proposing to insure her life for a sum of RM50,000 with an additional accident benefit of another sum of RM50,000. The proposal form ended with a declaration containing a number of paragraphs, one of which- which is material to the appeal - is para. (c) and is as follows:

The assurance herein applied for shall not take effect unless and until a policy is issued and delivered to me on this application and the first premium thereon actually paid in full during my lifetime and good health, provided, however, that if any payment of premium is made in cash at the time of signing this application and a conditional receipt issued therefor, the terms of the receipt shall apply hereto and are agreed to.

Subsequently on 2 December 1977 the deceased paid to the respondents a cash sum of RM118 and the receipt issued by the respondents made no reference to it as being either a deposit or a premium. However, like the proposal form, the receipt also contained a condition printed on its reverse side as follows:

Conditions of Payment

Said sum is received only for the account of the Payor and the Company is in no way committed thereby to the acceptance thereof for the purpose offered nor to any action in the premises and nothing herein or connected with the receipt of said sum shall be held to waive default in payment of any premium, interest or other sum due, or to extend the time for payment of any premium interest or other sum or in any manner to affect the rights of the Company under any policy or contract of assurance or with respect to any application submitted to the company for group or individual assurance or otherwise. If the said amount be not accepted by the Company for the purpose offered it will be returned to the Payor in the usual course of business.

Any payment tendered otherwise than in cash is received for the account of the Payor, subject to collection and the receipt of actual payment by the Company.

Two days after making her cash payment she died in the crash and presumably because of her premature death the respondents did not issue any policy to her although a policy number, i.e. R55-2055202 appeared to have been allotted by being carried in the proposal form and the receipt.

When sued for the assured sums the respondents relied upon declaration (c) and maintained that there was no contract concluded, there being no policy issued and delivered as yet. In reply to this contention, the estate of the deceased contended that the deceased's proposal was accepted by the respondents when they accepted payment of RM118 from the deceased, the condition printed on the reverse side of the receipt being a noncontractual document and therefore not binding. George J overruled the submission and held that since the proposal was subject to declaration (c) and as this declaration contained a reference to the application of "terms of the receipt", the acceptance of the RM118 cash payment by the deceased must be subject to these conditions, and that consequently there could not be a waiver of the understanding between the deceased and the respondents as to the commencement of the assurance, which was to take effect only after a policy was issued and delivered and the first premium paid during her life time and good health.

With respect we differ from the view taken by the learned Judge. For the purpose of