Brown v Hannover Life Re of Australasia Ltd - [2020] FCA 1391

FEDERAL COURT OF AUSTRALIA
Brown v Hannover Life Re of Australasia Ltd [2020] FCA 1391

File number: NSD 1353 of 2019

Judgment of: ALLSOP CJ

Date of judgment: 28 September 2020

Catchwords: INSURANCE – Insurance Contracts Act 1984 (Cth) – interest on claims – where insurer liable to pay to a person an amount under a contract of insurance – whether insurer liable to pay interest on the amount to that person – period in respect of which interest payable – date from which unreasonable for insurer to have withheld payment of the amount

Legislation: Insurance Contracts Act 1984 (Cth) s 57

Cases cited: Bankstown Football Club Limited v CIC Insurance Limited (unreported, Sup Ct, NSW, Cole J, 17 December 1993)

Division: General Division

Registry: New South Wales

National Practice Area: Commercial and Corporations

Sub-area: Commercial Contracts, Banking, Finance and Insurance – Insurance List

Number of paragraphs: 129

Date of last submissions: 17 April 2020

Date of hearing: Determined on the papers

Counsel for the Applicant: A Katsoulas

Solicitor for the Applicant: Firths - The Compensation Lawyers

Counsel for the Respondent: I S Wylie

Solicitor for the Respondent: William Roberts Lawyers

ORDERS

NSD 1353 of 2019

BETWEEN:
YVETTE BROWN (a pseudonym)

Applicant

AND:
HANNOVER LIFE RE OF AUSTRALASIA LTD (ABN 37 062 395 484)

Respondent

JUDGE:

ALLSOP CJ

DATE OF ORDER:

28 SEPTEMBER 2020

THE COURT ORDERS THAT:
1.Within 14 days, after consultation with the respondent, the applicant file draft short minutes to give effect to the reasons published today.
2.Liberty to both parties to apply to deal with any dispute concerning the orders to be made.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
ALLSOP CJ:

By proceedings commenced in this Court on 19 August 2019 the applicant seeks an order that the respondent, Hannover Life Re of Australasia Ltd, pay interest pursuant to s 57 of the Insurance Contracts Act 1984 (Cth) on a lump sum payment paid by it to the applicant on 21 January 2015. The applicant’s claim is that it was unreasonable for the respondent to have withheld its payment to her until that time. The respondent denies that allegation and asserts that the timing of its payment was reasonable in the circumstances.
The policy in question was a group life insurance policy issued to the proposer, United Super Pty Limited as trustee of the Construction and Building Unions Superannuation Fund (CBUS). I will refer to United as the Trustee.
The applicant’s claim requires detailed examination and discussion of her medical condition over a number of years. For this reason prior to delivery of judgment I ordered that the file be anonymised by giving the applicant a pseudonym and by anonymising the names of her treating doctors. I will refer to the applicant as Ms Brown.
The parties have agreed a chronology and filed an agreed bundle of documents and requested the matter be dealt with on the papers. If I may respectfully say of the legal practitioners involved, they approached the matter in the list with commendable efficiency and expedition. No expert evidence was led by either side. I do not criticise that course of action. The matter is able to be decided by reference to the medical opinions that were before the respondent insurer.
Background
From April 2004 to 30 March 2012, Ms Brown was employed full-time by a company which is unnecessary to name. Ms Brown was a skilled clerical worker (described by the employer as “moderately manual”) whose duties were described by the employer (Bundle: 94) as “all computer related duties including typing letters, correspondence, excel spreadsheets, accounts, receivables, payroll, filing, filling stock”. It is not in dispute between the parties that, pursuant to her superannuation arrangements, Ms Brown was entitled to certain benefits including coverage under the policy.
It is also not in dispute that, sometime after cessation of her employment with her employer, the applicant became entitled to payment of a lump sum benefit as a result of her Total and Permanent Disablement as that phrase was defined under the policy (TPD). That TPD benefit was duly paid by the respondent to Ms Brown on 21 January 2015.
Issue in dispute
The issue in dispute between the parties concerns the reasonableness of the timing of the TPD benefit paid by the respondent to Ms Brown. Specifically, the question before the Court is: Upon the proper construction of s 57 of the Insurance Contracts Act, on and from what date (if any) did it become unreasonable for the respondent to have withheld payment of the TPD benefit?
Section 57 of the Insurance Contracts Act deals with interest in the following terms:
(1)Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section.
(2)The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days:
(a)       the day on which the payment is made;
(b)the day on which the payment is sent by post to the person to whom it is payable.
(3)The rate at which interest is payable in respect of a day included in the period referred to in subsection (2) is the rate applicable in respect of that day that is prescribed by, or worked out in a manner prescribed by, the regulations.
(4)This section applies to the exclusion of any other law that would otherwise apply.
(5)      In subsection (4):
law means:
(a)       a statutory law of the Commonwealth, a State or a Territory; or
(b)       a rule of common law or equity.
Ms Brown submits that it became unreasonable for the respondent to have withheld payment once it had received all materials necessary for it to assess her TPD claim under the policy and once a reasonable time for it to review and determine her claim had expired. In her submission, it became unreasonable for Hannover to have withheld payment on and from 21 December 2012: a period of 10 business days after receipt of her completed application and relevant medical evidence certifying her as TPD under the policy (Applicant Submissions at [16]-[20]). She therefore claims interest on the TPD benefit from 21 December 2012 up to and including 21 January 2015, being the date on which payment was made to her by the respondent (Applicant Submissions at [38]), or such date beyond which the Court finds that it was unreasonable to withhold payment.
The respondent rejects that submission and submits that interest is only payable if the applicant establishes that it was unreasonable for Hannover to have withheld payment prior to the date the benefit was in fact paid, being 21 January 2015, and implicitly when that date was. It submits that it was not unreasonable to pay Ms Brown when it did (Respondent Submissions at [3]).
The policy
The policy contained the following relevant provisions. Clause 2 provided for the payment of benefits including TPD benefits. There was no debate that Ms Brown was a relevant insured person for the purposes of the application of the policy. Total and Permanent Disablement was defined in various ways, but relevantly for Ms Brown’s condition and circumstances it was defined as follows:
Part 2 – Unlikely to Return to Work:
The Insured Person is unable to follow their usual occupation by reason of Illness or Injury for 3 consecutive months and in our opinion, after consideration of medical or other evidence satisfactory to us, is unlikely ever to be able to engage in any Regular Remuneration Work for which the Insured Person is reasonably fitted by education, training or experience.
The phrase “Regular Remuneration Work” was defined as follows:
means an Insured Person is engaged in regular remuneration work if they are doing work in any employment, business, profession or occupation. They must be doing it for reward, or the hope of reward of any type. The Insured Person is also considered to be engaged in regular remunerative work if they are on Employer Approved Leave.
The phrase “Agreed Benefit” was defined as follows:
means, in relation to an Insured Person, the amount of cover that is in force as specified in the Appendix under Item 11 of the Schedule and the terms of The Policy.
There was no debate before me as to the relevant sum involved.
The liability to pay turns on the formation of an opinion by Hannover. Such opinion must be formed reasonably and in good faith. Those broad obligations are to be assessed by reference to the circumstances of each case. But it can be said that they involve a reasonable degree of despatch in the addressing of the issue and the formation of the relevant opinion.
The relevant task is thus to ascertain when the opinion (that was formed) should reasonably and in good faith have been formed such that thereafter to withhold payment was unreasonable for s 57(2). Put another way at what point was it unreasonable not to have formed the opinion (that was formed) such that withholding payment past such point was unreasonable. We are dealing with what is the outer boundary of a reasonable time in all the circumstances in which to form the relevant opinion, being after consideration of medical or other evidence the opinion that Ms Brown is unlikely ever to be able to engage in regular remunerative work in any employment, business, profession or occupation for reward of any type for which she is reasonable fitted by education, training or experience, and then to pay Ms Brown.
The position is to be distinguished from circumstances where the court can determine empirically, by reference to legal principle, objective evidence and standards in the policy, when liability in point of law and fact arose. In such circumstances, even if there was a bona fide dispute about liability, once there is a finding that there was liability, the section operates to entitle interest. The insurer must be taken to have known of the obligation as ultimately determined, even though the insurer may bona fide have held another (mistaken) view. In Bankstown Football Club Limited v CIC Insurance Limited (unreported, Sup Ct, NSW, 17 December 1993), Cole J said the following at 3-4:
In my view, section 57 is directed to a determination of the point of time at which empirically, it can be stated that it was unreasonable to decline to make payment. That decision is not to be determined simply by a determination of whether or not there was a bona fide dispute regarding the entitlement to payment. It is rather to be determined by a finding as to whether or not there was liability.
If there was liability found and the insurer to pay, then the presumption must be that the insurer would be deemed to know of that obligation as ultimately determined, even though it may bona fide have held a different view at all times prior to determination, at least at the first instance level, in relation to the question of liability.
A reasonable period is to be given to the insurer to investigate and determine its position but if it adopts an incorrect position in relation to its obligation to pay under the policy, that, in my view, does not mean that simply because that incorrect position is adopted on a bona fide basis, it becomes reasonable for the insurer to decline to pay the sums otherwise due. That seems to me to be correct interpretation of section 57(2), particularly in the circumstances of section 57(1) of the Act, where the insurer is liable to pay to a person an amount under a contract of insurance.
The approach of Cole J has received general agreement. It is unnecessary to discuss the matter any further. This case is not the position of an insurer reasonably, but wrongly, taking a position that can be shown to be empirically wrong. The question is not: Was Ms Brown relevantly disabled in December 2012? Rather, the question is: What is the point of time past which it was unreasonable for the respondent not to form the opinion that it did referable to Pt 2 of the definition? The question is not whether the court finds a defence reasonably mounted was wrong. It is a question of looking to all the circumstances to see at what point in time it could be said that failure to form the opinion and then pay was unreasonable.
There was no issue in the proceeding that the kind of clerical duties described in the report of her employer is the only occupation or employment for which Ms Brown was and is reasonably fitted by her education, training or experience.
The following objective history of the claim must be assessed against this question. Simplifying the definitions, Hannover, acting reasonably, must pay when it forms an opinion, after consideration of medical or other evidence (reasonably) satisfactory to it, that Ms Brown was unlikely ever to be able to engage in any employment for which she was reasonably fitted by education, training or experience.
Relevant medical history
The applicant, who was born in 1975, has been under the care of her general practitioner, Dr K for many years. In October 2004, she began to see a rheumatologist, Dr H for symptoms of polyarthritis (Bundle: 105-106).
On 23 May 2006, Dr H wrote to Dr K to advise that it was probable Ms Brown was developing rheumatoid arthritis (Bundle: 108).
From September 2008, Dr B was Ms Brown’s consulting rheumatologist (Joint Chronology at [6]).
On 4 December 2008, Dr B reported that Ms Brown’s arthritis was “increasing in its intensity” and that “[c]onsidering that she is young and she is in the early stages of rheumatoid arthritis” he was “very keen to aggressively treat” it (Bundle: 110). At the same time, Dr B noted that the treatment of Ms Brown’s condition was proving problematic because she could not tolerate high doses of a range of conventional anti-rheumatic medications including methotrexate, leflunomide and salazopyrin. As a result of her low tolerance to these medications, Dr B advised Dr K that he would be exploring the possibility of biologic therapies (Bundle: 110).
Dr B next issued a report on Ms Brown’s condition on 23 February 2011 (Bundle: 111). Over the course of that year, Dr B issued a number of subsequent reports detailing Ms Brown’s varying treatments and noting their efficacy with varying success (Bundle: 112-116).
On 31 January 2012, Dr B conducted a review of Ms Brown using Skype. Following that consultation, he reported that “[Ms Brown’s] arthritis is in flare again and she emailed me after experiencing distressing pain for a while. I think we have to introduce a biologic therapy for this lady”. Dr B again noted Ms Brown’s intolerance to high doses of methotrexate as a barrier to treatment (Bundle: 117).
On 9 February 2012, Dr B reviewed Ms Brown’s condition again. At that time, he reported: “[Ms Brown] emailed me because of worsening symptoms. We decided to start a biologic therapy and she is going to start etanercept therapy 50 mg weekly.” (Bundle: 118).
On 30 March 2012, Ms Brown ceased her work and employment with her employer (Joint Chronology at [16]). She ceased work because of her arthritic condition.
Ms Brown’s claim for an insured TPD benefit
In early April 2012, Ms Brown first notified the CBUS of her disablement (Bundle: 70). She inquired about her eligibility for an insured TPD benefit. In June 2012, she was provided with various materials. At this time (and until December 2012) Ms Brown dealt with “CBUS administration”.
In support of her claim, Ms Brown completed and submitted the following forms, issued to her by the Trustee, each dated 12 June 2012:
·a ‘Total and Permanent Disablement Claim – Member’s Statement’, in which Ms Brown declared that she was “[u]nable to work because of Rheumatoid Arthritis” and that her disability prevented her from completing any of the ordinary duties of her occupation (Bundle: 89);
·an ‘Education, Training & Experience’ form (Bundle: 92); and
·an ‘Occupational History’ form (Bundle: 93).
The Trustee received Ms Brown’s completed forms on 31 August 2012 (Joint Chronology at [19]).
On 12 June 2012, an employee of her employer completed an ‘Employer’s Statement in connection with a claim for a Disablement Benefit’ in a form prescribed by the respondent (Bundle: 94-95). In it, the employee declared that Ms Brown had ceased work with her former employer because she was “[u]nable to perform duties because of illness” (Bundle: 94). He also stated that during the term of her employment the applicant performed “[a]ll computer related duties including typing letters, correspondence, excel spreadsheets, accounts receivable, payroll, filing, filling stock” (Bundle: 94). The Trustee received the completed Employer’s Statement on 3 September 2012 (Joint Chronology at [20]).
September 2012 report of Dr B
On 17 September 2012, Dr B completed a ‘Confidential Medical Report’ in a form prescribed by the respondent. In it, Dr B relevantly made the following remarks in answer to questions which are in bold (Bundle: 96-97):
2. On what date did the claimant become completely unable to perform all the normal duties of his/her occupation?
31/5/12.
...
4. Please state the history of the illness or injury, including the exact nature and severity of the condition and give particulars of any treatment which has been necessary, including dates where relevant. Please also provide full details and results of any tests performed. Please give full details of the current condition.
Mrs. [Brown] suffers from severe rheumatoid arthritis. She is currently on etanercept and methotrexate injections and her disease is still symptomatic.
…
9. At the current time, can the claimant do his/her normal job?
No.
…
If ‘No’ which work duties is the claimant unable to perform?
Due to ongoing arthritic symptoms even on the maximum doses of tolerable anti-rheumatic medications, Mrs [Brown] cannot function normally at work.
10. If you do NOT expect the claimant to EVER return to his/her normal work do you think he/she will EVER be able to do a job for which he/she is reasonably fitted by education, training or experience?
No.
…
If ‘No’ please give details reasons:
Mrs. [Brown] has had problems with multiple medications previously. Her disease is still affecting her at the maximum amount of medications.
It is to be noted that the two questions in question 10 reflect the cover in Part 2 of the TPD definition. The doctor’s answers were unequivocal, albeit short.
Dr B’s September 2012 report was received by the Trustee on 20 September 2012 (Joint Chronology at [21]).
On 5 October 2012, the Trustee wrote to Dr K (the treating doctor) asking that she provide a complete copy of all clinical notes and records held by her medical practice with respect to Ms Brown (Bundle: 98-100). Dr K duly provided, and the Trustee received sometime later in October 2012, copies of, those records – including the reports of Dr H and Dr B up to and including May 2012 (Joint Chronology at [22]; Bundle: 105-120).
November 2012 report of Dr B
Also on 5 October 2012, the Trustee wrote to Dr B stating that “[f]or the purposes of giving further consideration to [Ms Brown’s] claim, additional information is required” and requesting that Dr B provide a medical report addressing several discrete questions regarding her prognosis and capacity for work (Bundle: 101-103).
On 28 November 2012, Dr B duly issued a report in response to the Trustee’ request (Bundle: 122-124). In it, after giving a history of treatment of Ms Brown, Dr B made the following remarks in response to questions of the Trustee (Bundle: 123-124):
Full details of the member’s current treatment and current condition (including the extent, severity and specific nature of the symptoms), as well as whether any further treatment is proposed and/or likely to result in any further improvement.
When I last saw her in May, she still complained of significant joint pain graded 5 out of 10 and also skin tenderness. She experiences nausea due to methotrexate therapy. She is currently on methotrexate injection 7.5mg weekly with Leucovorin, hydroxychloroquine 200mg and weekly etanercept injections. Depending on her future state, use of other biologic agents may be considered in future.
Your opinion on the member’s short-medium term (3-6 months) and long-term (6-12 months) prognosis.
Mrs. [Brown] is struggling along due to her rheumatoid arthritis. Her disease is partially controlled with medication but, by no means, completely. I do not anticipate a change of circumstances in a foreseeable future.
Your opinion on the member’s capacity for work as an administration assistant or work in any other occupation reasonably suited on the basis of her education, training and experience.
Due to pain symptoms, excessive tiredness and nausea associate[d] with methotrexate therapy, it will be very difficult for Mrs. [Brown] to continue to work.
Your opinion as to whether Ms [Brown] will ever be able to return to work as an administration assistant or in any other occupation reasonably suited on the basis of the member’s education, training and experience. If you do not consider the member will ever return to work, please outline your reasons for this by providing objective medical evidence.
It has been challenging to treat this patient due to her intolerance to many medications. Her condition is stable but precarious at present. It is not advisable for her to exert herself to prevent worsening of her arthritis and side-effects of the medications employed to treat her arthritis.

These questions and answers should be read in the light of the September Report of Dr B. That said the answers to the last and second last questions are somewhat equivocal, but read in the light of the history of Ms Brown, appear to be elaborations as to why it is unlikely that she would ever return to work being the answer previously given to question 10 in the report of September.
A file note from the respondent’s records shows that on 10 December 2012 the respondent received (under cover of a letter from the Trustee dated 4 December 2012 (Bundle: 69)) the documents hitherto provided to the Trustee in relation to the applicant’s TPD claim, including: claim forms, responses provided by the applicant and the employer, and medical reports from Dr H and Dr B (including Dr B’s September 2012 report and the November 2012 report) (Bundle: 64).
The process of assessment and associated communications was undertaken by the Trustee and the respondent; but I would infer that from December 2012 the respondent was kept informed on a timely basis by the Trustee of any relevant information in relation to the claim.
Independent medico-legal assessment by Dr Whittaker
A file note dated 14 December 2012 shows that, after receipt of the materials, the respondent resolved to obtain its own independent medico-legal assessment of the applicant to further assess her medical condition and capacity for work (Bundle: 64). In that entry, an employee of the respondent made the following remarks (Bundle: 64):
Fairly young member who is suffering rheumatoid arthritis. She has been battling this disease since 2005. She is on fairly strong medication and has been able to cope working up until March 2012.
Former employer states she had a number of days off due to her condition leading up to DLW [Day Last Worked].
Report from Dr [B] (Rheumatologist) is brief on fitness for work any duties. Member is covered 4 units professional cover and has worked as Admin Ass for many years.
Suggest IME [Independent Medical Evaluation] from Rheumatologist.
The decision to have an independent assessment was both reasonable and promptly taken. That said, the remarks of the employee can be said not to reflect fully the history of Ms Brown’s condition revealed by the medical history.
On 17 December 2012, the Trustee (through a ‘Claims Assessor CBUS administration’) wrote to a rheumatologist, Dr Whittaker of Assess Medical Group, requesting that he examine Ms Brown and provide a full report of his findings, including answers to several discrete questions posed by the Trustee (Bundle: 125-126).
On 4 February 2013, the applicant attended the medical assessment by Dr Whittaker. On 7 February 2013, only three days later Dr Whittaker provided a 12 page report (Bundle: 129-140). In it, he made a number of relevant remarks. First, after reciting a detailed history of Ms Brown’s condition based on his review of all relevant medical records (Bundle: 130-134), under a heading titled ‘Current Status’ Dr Whittaker remarked (Bundle: 134-135):
Ms [Brown] advised me that she had pain involving all MCPJs and, to a lesser degree, PIPJs of hands.
There is pain in the right 5th DIPJ, where she has an early Heberden node consistent with nodal osteoarthritis.
She has generalised bilateral wrist pain, possibly a little more pronounced on the right.
For the last six months, she has had lateral right elbow pain.
At the moment, her shoulders are good but can flare to the point of needing help with dressing, etc.
She has bilateral groin and lateral hip pain, particularly worse over the last 12 months.
Her knees are generally good, although she has had several episodes of swelling in the knees over the last year.
She has intermittent bilateral ankle pain and swelling.
There is bilateral MTPJ pain, which is maximal between the right 3rd and 4th toes and bilateral PIPJ toes pain with occasional swelling. She advised me that this limits her walking.
Secondly, under a heading titled ‘Summary and Assessment’, Dr Whittaker remarked (Bundle: 137-140):
Ms [Brown] is a 37-year old lady who has developed sero positive rheumatoid arthritis and currently this is moderately well controlled on various DMARDs, as indicated under “Present Treatment”. She advised me that, since commencing Etanercept, her joint symptoms had improved and her fatigue and improved considerably.
I note that she commenced Etanercept in approximately February 2012 and, despite her reporting an improvement since being on this medication, she ceased work in late March 2012.
Over the last year or so, I note that she prefers to avoid leaving the home and clearly there is some issue regarding this as, when discussing it during the consultation, she began to cry.
Although Ms [Brown] continues to have some symptoms and signs suggestive of a mildly active inflammatory arthritis, her situation is unchanged and possibly somewhat improved since commencing Etanercept and you will note that it was over this period that she ceased work.
Thirdly, Dr Whittaker set out answers to the specific questions posed by the Trustee in its letter to him dated 17 December 2012 (Bundle: 125-126 and 137-140):
1. Medical condition, results of investigations and your diagnosis.
Ms [Brown] has sero positive rheumatoid arthritis, which is non-erosive on X-ray and MRI. This diagnosis is supported by the investigation results.
2. Details of all treatment undertaken including medication etc., currently being undertaken, response to treatment and what effect this treatment is having on relieving the condition. Is the member compliant with treatment? Is any additional treatment required?
…
Ms [Brown] advised me that she had had a response to Etanercept, particularly with regard to her fatigue and, to a lesser extent, her joint symptoms. Despite this, I note that it was over this period that she ceased work.
The reason for this is unclear.
However, I do note that it was over this period that she also began to isolate herself more.
She is compliant with her treatment.
I would recommend assessment by a psychiatrist.
3. Further treatment – whether you consider any other investigation or treatment is warranted. If further treatment is necessary what improvement would you expect as a consequence of that treatment. (What steps, measures, tests or treatment are likely to improve Mrs [Brown]’s condition and facilitate a return to work?)
If Ms [Brown] continues to have some ongoing rheumatoid arthritis disease activity, then consideration could be given to switching to an alternative anti-TNF agent or one of the other biologic agents that are now available for management of rheumatoid arthritis.
At this stage, Ms [Brown] requires no further investigations.
Ms [Brown]’s treatment to date has been appropriate, although she still has a lot of ongoing symptoms and some abnormalities on clinical examination that suggest that there is some ongoing low-grade disease activity. Consideration could be given to switching her anti-TNF to an alternative anti-TNF or another biologic agent.
This may lead to an improvement in her inflammatory joint symptoms, although I note that may of her symptoms have been reported in the context of no synovitis evident clinically.
I would also recommend assessment by a psychiatrist.
4. What would be the main impediment affecting the member’s return to work?
In my opinion, Ms [Brown]’s impediment with regard to returning to work is a combination of her persisting inflammatory joint symptoms and a more recent disorder that has rendered her essentially housebound.
I note that she ceased working over a period where she had just commenced the biologic agent Etanercept and has reported that there was some improvement in her symptoms and, in particular her fatigue. Hence, it is unclear why she ceased work at this time.
Psycho-social/psychiatric conditions warrant consideration.
5. In your opinion is Mrs [Brown]’s condition improving, stabilising or deteriorating? Please provide details.
In my opinion, Ms [Brown]’s condition is stable and further improvement could be expected with switching her biologic agent and managing any psychosocial issues.
6. What is the prognosis for the medium-term (3-6 months) and long term (6-12 months) in respect of Mrs [Brown]’s medical condition and return to work prospects?
The prognosis is the next 3-6 months is for likely ongoing symptoms that would prevent Ms [Brown] from returning to work.
The long-term prognosis is good, particularly as she has had rheumatoid arthritis for 8-10 years and, despite this, there is no evidence of erosive disease on X-ray or MRI.
Switching to an alternative biologic agent and management of psycho-social factors is also likely to be beneficial.
…
8. In your opinion, is the member currently unfit, due to sickness or injury, to do their normal job as an administrative assistant on a full-time or part-time basis? If so, please specify the duties of the occupation, which cannot be performed.
From a physical perspective, it is my opinion that Ms [Brown] is currently fit to undertake her normal job as an Admin Asssistant on a part-time basis. On the whole, inflammatory arthritides such as rheumatoid arthritis improve with activity and worsen with inactivity. Hence, undertaking word duties, etc., are likely to be beneficial with regard to her symptoms.
I would not suggest a return to full-time work until her rheumatoid arthritis comes under better control and any psycho-social factors have been thoroughly assessed and managed.
9. When might the member be fit to return to work?
I would recommend re-assessment in six months time.
10. If you do not expect Mrs [Brown] to return to work as an Administrative Assistant, could you suggest any other job suitable to the member’s education, training and experience that may be able to be undertaken now and in the future. If you consider the member will never return to the workforce, please give detailed reasons of your opinion.
In my opinion, Ms [Brown] should be physically capable of returning to her work as an Admin Assistant in the future. I note that she has had no other work experience and has no further qualifications beyond Year 12.
The contents of the Whittaker Report especially the answers to questions 5, 6, 8, 9 and 10 gave a reasonable basis for not forming the opinion in Part 2 of the TPD definition at this time. That said, much of what Dr Whittaker said was conditional. There had been a long history of pain and Ms Brown’s consulting rheumatologist (Dr B) was clear in his views. I will say something more of the report in due course.
Supplementary medical reports from Dr B and Dr K
On 18 February 2013, at the request of the respondent (Bundle: 141) the Trustee wrote to Dr B (Bundle: 142-143) and Dr K (144-146) providing the Whittaker Report and seeking their comment on certain aspects of the Whittaker Report. Specifically, Dr B and Dr K were asked to respond to the following questions:
1. What is your overall opinion on the report from Dr Whittaker?
2. Do you agree that Mrs [Brown]’s symptoms have improved since commencing Etanercept?
3. Dr Whittaker believes from a current physical prospective [sic], that Mrs [Brown] would be capable of part-time admin work. Do you agree?
4. Do you believe that the member has some psycho-social issues? If so, how is this being managed and assessed?
5. Dr Whittaker has also stated when addressing Mrs [Brown]’s fitness for full-time work that re-assessment of her situation should be looked at again in 6 months. Do you agree with this?
This was a prompt, reasonable and fair response to the views of Dr Whittaker: to obtain promptly the views of Ms Brown’s treating doctors.
On 12 March 2013, Dr K issued her report in answer to the questions posed by the Trustee (Bundle: 147). In it, she stated:
1. Overall I agree with Dr Whittaker’s report regarding her physical issues. However, after further review of the patient and discussion with her regarding any psychological issues, I am not convinced she is significantly depressed etc.
She may be suffering from some depression related to the chronic nature of her condition and the long term possibility there will never be a full recovery.
2. Her symptoms have improved since start of Etanercept.
3. She is possibly capable of some part time work, however due to the fluctuating nature of her arthritis symptoms, she feels any work as an added strain on her arthritis at present.
4. She has some emotional issues related to the chronic nature of her condition with limited long term prognosis. She, however does not have any other psycho social issues in her life.
5. It is unlikely that she will ever return to full time work. Hence, reassessment for full time work is unlikely to be helpful.
On 16 April 2013, Dr B issued his report in answer to those same questions (Bundle: 151-152). In it, he stated:
What is your overall opinion on the report from Dr Whittaker?
I agree with Dr Whittaker’s assessment regarding the diagnosis (seropositive rheumatoid arthritis) and Mrs. [Brown]’s current state (mildly active, non-erosive arthritis). I also agree that disability caused by her inflammatory arthritis is quite severe in Mrs. [Brown] considering relatively mild, but nevertheless positive physical findings. I would be extremely careful to change the biologic therapy in this lady as there is no guarantee that another biologic agent will achieve superior outcome compared to her current therapy of etanercept and considering extreme degree of side effects that Mrs. [Brown] has experienced with a number of medications. For example, Mrs. [Brown] was quite unwell with pancytopenia caused be leflunomide. This lady does not tolerate a lot of medications.
Do you agree that Mrs [Brown]’s symptoms have improved since commencing Etanercept?
Mrs. [Brown] has improved a fair bit since she was put on etancercept therapy. She was running out of the option when we decided to try etanercept and her arthritis caused a great deal of distress prior to starting the medication. However, she continues to experience significant pain symptoms even after starting biologic therapy and, on occasions, she required substantial amount of prednisone therapy up to 10mg daily. Her condition had reached to such a state that she could no longer handle her work duties.
Dr Whittaker believes from a current physical perspective, that Mrs [Brown] would be capable of part- time admin work. Do you agree?
I feel that Mrs. [Brown] has significant disability due to arthritic symptoms. The main issue is pain as she has non-deforming disease. She still has evidence of mild degree of synovitis in multiple joints and this ongoing arthritis activity causes a lot of distress to the patient resulting in significant disability. I do not think Mrs. [Brown] will be able to cope with regular work duties even at the part-time level.
Do you believe that the member has some psycho-social issues? If so, how is this being managed and assessed?
I am not aware of social issues but I concur with Dr. Whittaker in that Mrs. [Brown] may have psychological issues exacerbating her disability. It may be related to difficulty achieving decent disease control and also problems associated with many medications. Formal psychological assessment may be helpful.
Dr Whittaker has also stated when addressing Mrs [Brown]’s fitness for full-time work that re- assessment of her situation should be looked at again in 6 months. Do you agree with this?
Considering lack of distinctive damages to her joint structures, a reassessment may be a reasonable thing to do. I would recommend psychological assessment first to look into confounding factors. A reassessment in 6 months may be too early but another assessment in 12 months may be a reasonable thing to do.
I will come to the issue of part-time employment under the policy, but at this point Dr Whittaker thought that Ms Brown was currently fit to undertake her normal job on a part-time basis; Dr K (her treating general practitioner) thought she was possibly capable of some part-time work; and Dr B (her consulting rheumatologist) did not think she was capable of part-time work.
On 24 April 2013, following receipt of Dr K’s report, the following file note was made in the records of the respondent: “[A]gree to issue PF [procedural fairness] letter based on part-time capacity normal duties” (Bundle: 63).
The same day, the respondent wrote to the Trustee requesting that it issue to Ms Brown a ‘procedural fairness letter’, which was to include: (i) the definition of ‘Total and Permanent Disablement’ under the policy, pursuant to which her claim would be assessed: (ii) a copy of that same letter from the respondent to the Trustee; and (ii) all documentation hitherto obtained by the respondent in relation to her claim, “so as to ensure that the member is afforded procedural fairness” and so as to give Ms Brown the opportunity to provide “any further relevant evidence or submission that the member would like to provide” (Bundle: 149-150).
On 1 May 2013, the respondent received a copy of Dr B’s report (Bundle: 63).
On 2 May 2013, the Trustee duly furnished its procedural fairness letter to the applicant and gave her until 2 June 2013 to provide any further evidence she wished to submit in regards to her claim (Bundle: 153-155).
It is to be noted that the letter from the respondent to the Trustee of 24 April 2013 and of the Trustee to Ms Brown identified a policy reference and terms somewhat different to the policy terms contained within the agreed bundle. It is unnecessary to deal with this further as it does not appear determinative in any way. The essence of the entitlement was correctly set out though it was accompanied by a lot of other material which might have been somewhat distracting.
On 3 May 2013, the respondent emailed the Trustee to request Dr B’s report be provided to Ms Brown as part of its affording her procedural fairness (Bundle: 156). The same day, the following entry was made in the respondent’s file notes (Bundle: 63).
Although Dr [B] agreed [with] Dr Whittaker’s assessment regarding the diagnosis and current state, he was of the view that the claimant will be unable to cope [with] regular work duties. Even at a part time level. However, Dr [B] also agreed that a re-assessment in 12 months would be reasonable to determine the claimant’s capacity to return to full time work, [which] would more likely imply a potential capacity for work after further recovery.
In an undated letter marked as received by the Trustee on 3 June 2012, Ms Brown provided a personal statement in relation to her claim (Bundle: 158-162) and enclosed a number of photographs showing physical aspects of her condition (Bundle: 163-185). Whilst not medical evidence, the letter of Ms Brown was evocative of the pain and stress in which her condition placed her. It brought home to the respondent insurer the reality of the need for careful and diligent attention to the assessing of Ms Brown’s position and the need for reasonable despatch in coming to any relevant opinion for the purposes of indemnity under Part 2 of the definition of TPD.
First deferral of Ms Brown’s claim
File notes from the respondent show that on 20 June there was a referral to a ‘claims conference’ (presumably within the respondent, there being no evidence). It was held on 21 June 2013. The ‘advice’ of the conference was to defer Ms Brown’s claim for six months and to “to get a specialist opinion herewith” (Bundle: 62).
On 27 June 2013, a file note entry shows that the respondent resolved its position to defer assessment of the applicant’s claim for 6 months (Bundle: 62). The same day, the respondent wrote to the Trustee explaining its decision, as follows (Bundle: 186-187):
We understand from the information supplied, that the Member is a 37 year old Administration Assistant who is suffering from ongoing issues with regards to her rheumatoid arthritis.
Dr Ross Whittaker (Rheumatologist) opined in his report dated 7 February 2013 that the Member from a physical perspective, is capable, of part-time admin assistant duties. Dr Whittaker points out that the long term prognosis is good considering the fact she has had this condition for 8-10 years and, despite this, there is no evidence of erosive disease on X-ray or MRI. Dr Whittaker believes re-assessment in a further 6 months is beneficial when looking at the full-time work capacity of the Member.
Dr [K] (GP) notes in his report dated 12 March 2013 that the Member is possibly capable of part-time work, however, it is unlikely she will ever return to full-time work[.]
Dr [B] (Rheumatologist) in his report dated 16 April 2013 believes the Member will not cope with regular work duties even at a part-time level. However, he does acknowledge the lack of distinctive damages to her joint structures, and that a reassessment may be the reasonable thing to do. He opines that 6 months may be too early however 12 months may give a better indication on her future work prognosis.
Given the evidence of the above three medical practitioners, we consider the Member claim for TPD is not yet clarified.
We would appreciate it if the Trustee would consider this proposal to defer the assessment of this claim for 6 months from today’s date.
We will address the Member’s condition with a further request from her own treating rheumatologist in 6 months’ time. We will of course consider any further relevant evidence or submission the member would like to provide.

On 10 July 2013, the Trustee informed Ms Brown of the respondent’s proposal to defer assessment of her claim by six months, stating (Bundle: 188):
The Insurer has requested that your claim be deferred for a period of 6 months, at which time further evidence would be obtained to determine if you meet the definition of Total and Permanent Disablement.
This request has to be considered by the CBUS Trustee, who will look at whether they view this request as reasonable, taking into consideration all the circumstances surrounding your medical condition and your TPD claim.
You should shortly receive an update in writing from the team handling this stage of your claim (which is not my area). I hope that this will answer any questions you may have, but if not, please do not hesitate to contact me and I will do my best to help.
There was no evidence directed to the examination by, or view of, the Trustee of the reasonableness of the request.
Further evaluation and second deferral of applicant’s claim
In late November 2013, a file note entry shows that the respondent reopened its assessment of Ms Brown’s claim and requested that the Trustee obtain a further report from Dr B (Bundle: 62).
After the respondent requested the Trustee to do so, on 19 December 2013, the Trustee wrote to Dr B requesting that he provide an updated medical report addressing several discrete questions in order to give further consideration to Ms Brown’s claim (Bundle: 194-195). On 29 January 2014, Dr B issued a further report in response to that request, in which he made the following remarks (Bundle: 196-197):
1. Please provide full details of the member’s treatment and condition (including the extent, severity and specific nature of the symptoms) from 16 April 2013 to date.
I saw Ms [Brown] twice since 16 April 2013. When I saw her on 13 June 2013, her condition was stable except for mild tremor and we decided to continue with methotrexate 7.5 mg weekly, hydroxychloroquine 200 mg daily, prednisone 5 mg daily, etanercept injection 50 mg weekly and tramadol 100 mg daily. She was reviewed again on 12 December 2013. Unfortunately, her condition got worse by that stage. Hydroxychloroquine was discontinued after a review by her ophthalmologist, Dr. Glen Fernando when a suspicion was raised regarding possible optic nerve problem. Her arthritis became worse after cessation of hydroxychloroquine even though the blood test still showed low inflammatory markers. She had to increase prednisone dose to 10 mg daily. We decide to change her biologic therapy to adalimumab injection 40 mg second weekly. Unfortunately, she developed large injection site skin lesion which developed into generalized rash and she e-mailed me. It sounds like she had a delayed-type of hypersensitivity reaction to adalimumab therapy and I will shortly review her. It is probable that we may need to change her biologic therapy again.
2. Is any further treatment proposed and/or likely to result in any further improvement?
We need to change the biologic therapy used to treat her rheumatoid arthritis. Theoretically, the change may result in improvement of her condition but as she has had major reactions to a number of anti-rheumatic therapies, a great deal of care needs to be taken to avoid major problems with new medications.
3. Your opinion on the member’s short- medium term (3-6 months) and long-term (6-12 months) prognosis.
Her short to medium term prognosis is uncertain as we are in the process of changing her biologic therapy. Because of the psychological effect of her disease and problems associated with various therapeutic manoeuvres, I am not certain of her long term prognosis. If her disease can be brought under complete control with new biologic therapy and she is coping well psychologically, she can achieve much better function if there is minimal permanent damage to her joint structures.
4. Your opinion on the member’s capacity for work as an administration assistant or work in any other occupation reasonably suited on the basis of her education, training and experience.
At present, I do not believe she can cope with work duties unless her disease is brought under better control.
5. Your opinion as to whether Ms [Brown] will ever be able to return to work as an administration assistant or in any other occupation reasonably suited on the basis of her education, training and experience. If you do not consider that Mrs [Brown] will ever be able to return to work please outline your reasons for this by providing objective medical evidence.
Provided that she does not develop major structural damages, she will be able to function reasonably normally if her rheumatoid arthritis is better controlled. However, she never achieved sufficient disease control mainly due to her problems associated with various mediations which were sometimes potentially life-threatening. We can only determine her capability to work after further therapies are tried and see the effects of them on her and her disease.
On 10 February 2014, an entry was made in the respondent’s file notes which stated: “The report from [Dr B] is guarded and the claimant’s prognosis is subject to further treatment. We should therefore defer the claim.” (Bundle: 61)
The same day, the respondent again wrote to the Trustee stating that: “Given the evidence of her treating specialist, we consider the Member’s claim for TPD is not yet clarified” and requesting that the Trustee consider its proposal to defer assessment of the applicant’s claim for a further six months, at which time it would again “address the Member’s condition with a further request from her own treating rheumatologist” (Bundle: 200). File notes for the respondent show that the Trustee agreed with that proposal on 1 April 2014 (Bundle: 61).
It was not until 29 July 2014 that the Trustee wrote to the applicant to advise that it had agreed with the respondent’s decision to defer assessment of her claim for a further six months. The letter stated as follows (Bundle: 203-204):
We write as a follow up to previous correspondence, in which we advised that your claim had been referred to the Fund Trustee for consideration.
You will recall the Insurer of the Fund, HLRA resolved to defer your claim for a period of six months. In particular, the Insurer noted the opinion of Dr [B], Consultant Physician and Consultant Rheumatologist who advised in the medical report dated 29 January 2014 that:
“Her short to medium term prognosis is uncertain as we are in the process of changing her biologic therapy”
“We can only determine her capability to work after further therapies are tried and see the effects of them on her and her disease”
The Trustee reviewed all the evidence relevant to your claim along with the report noted which included all documents previously associated with your claim.
After consideration of all the evidence provided in support of your claim, the Trustee resolved to agree with the Insurer’s decision to defer your claim for a period of six months.
We will continue to keep you updated on the progress of your claim once the deferral period has expired.
Should you have any queries regarding this matter, please do not hesitate in contacting the Insurance and Claim Services department on 1300 722 152.
Shortly after that time, Ms Brown retained solicitors to act on her behalf in relation to her claim under the policy (Applicant Submissions at [33]).
Subsequent developments and December 2014 report from Dr B
A file note entry made in the respondent’s records shows that on 19 August 2014, the respondent reopened its assessment of Ms Brown’s claim (Bundle: 61).
On 25 August 2014, an employee of the respondent emailed the Trustee requesting that it seek the following information from Ms Brown and Dr B in order to give further consideration to her claim (Bundle: 205):
1. Full name and contact details of any other medical consultant (apart from Dr [B]) and /or medical facility attended since 10 February 2014 to date.
2. Any attempts of return to work, or any occupational duties performed in any capacity (whether or not for reward) since 10 February 2014.
3. If the member hasn’t consulted any other specialist apart from Dr [B], please arrange an up to date report from member’s treating Rheumatologist, Dr [B].
On 2 September 2014, the Trustee wrote to the applicant’s solicitors noting that the deferral period had expired and requesting that, in order to give further consideration to her claim, the applicant provide the further information about her medical condition and capacity for work requested by the respondent in its 25 August 2014 email (Bundle: 206).
In response to that request, on 10 September the applicant’s solicitors wrote to the Trustee to advise that “[i]t is our client’s instruction that she has been seeing the same doctors for her rheumatoid arthritis being Dr [B] and Dr [K]” and that she had “not attempted any return to work or any occupational duties performed in any capacity since ceasing work.” (Bundle: 207).
On 23 September 2014, a file note was made in the records of the respondent which stated: “Confirmation Dr [B] is still treating member and that she has not returned or attempted a RTW [Return to Work] in any capacity. Manish has instructed a follow up report by Dr [B] to be requested.” (Bundle: 61).
On 6 October 2014, the Trustee wrote to Dr B requesting that he provide a further medical report addressing a number of specific questions for the purposes of assessing Ms Brown’s claim (Bundle: 209-210).
In the meantime, in a letter dated 25 August 2014 Ms Brown’s solicitors had written to Dr B seeking clarification and confirmation of his opinion in his previous reports. That letter relevantly stated the following (Bundle: 223-224):
I…enclose herewith your medical attendance statement dated 17 September 2012. I also note that you provided reports to the insurer dated 28 November 2012, 16 April 2013 and 29 January 2014.
I note that in your Medical Attendant’s Statement [sic] you expressed the opinion that in answer to question 10 that it was unlikely she would ever be able to do a job for which she is reasonably fitted by education, training or experience.
At this time, we are enquiring whether it is still your opinion on the balance of probabilities that as at September 2012 it was “unlikely that Mrs [Brown] would ever be able to do a job for which she is reasonably fitted by education, training and experience”.
…
If you are of the opinion that this is still correct could you kindly state your opinion as follows:
“In my opinion on the balance of probabilities Mrs [Brown] is unlikely ever to be able to do a job for which she is reasonably fitted by education, training or experience as at September 2012.”
Could you kindly provide brief reasons such as fluctuating symptoms and disabilities, would not be able to hold down a permanent job without suffering flare ups or aggravations which may take her out of the workforce etc.
On 30 October 2014, Dr B responded to the solicitors by way of a letter which stated as follows (Bundle: 225):
This is to certify that Mrs. [Brown] suffers from rheumatoid arthritis affecting her function significantly. When I last saw this lady on 16 October 2014, she was affected by significant fatigue and pain in her hands, shoulders, hips and knees. She had difficulty moving wrists and ankles, walking on uneven surface and lifting and grasping objects. She does not feel coping at work as an admin assistant as she cannot sit for a prolonged period, do filing or type extensively. Her condition has not changed greatly for the past 2 years since I wrote a report in September 2012. She is receiving maximum anti-rheumatic therapy considering various side effects caused by different medications.
In my opinion, in her current state, on balance of probability, Mrs. [Brown] is unlikely ever to be able to do a job for which she is reasonably fitted by education, training or experience as at September 2012.
On 7 November 2014, Ms Brown’s solicitors wrote to the Trustee enclosing the 30 October 2014 letter from Dr B and stated (Bundle: 213-214):
As you can appreciate the report that we have commissioned clearly outlines that our client meets the definition of Total and Permanent Disablement from six months after she ceased work. You therefore have no other alternative than to accept this claim immediately.
The report we provide you will make your report redundant as our client’s treating doctor is of the opinion that our client meets your definition of Total and Permanent Disablement.
In the same letter, Ms Brown’s solicitors also enclosed a ‘Client Statement’ dated 16 September 2014 in which Ms Brown recorded, among other things, the impact of her condition on everyday life and her prospects of future employment (Bundle: 215-222).
On 19 November 2014, Mr Andrew Kelly of the respondent emailed the Trustee acknowledging its receipt of Dr B’s 30 October 2014 letter from Ms Brown’s solicitors, and added: “Before we make any decision on the claim, can we confirm that Dr [B] has our request and at what stage he is up to in providing the report?” (Bundle: 229).
The same day, a file note entry was made in the respondent’s records which summarised the contents of Dr B’s 30 October 2014 letter to Ms Brown’s solicitors and which added (Bundle: 65):
In short, we had deferred this claim based on the claims conference undertaken in 2013 and given IME at that time felt the member had a part-time capacity.
We have now asked for the treating doctor – Dr [B] to provide a detailed update regarding her decision. As yet this request remains outstanding. In the meantime the solicitors have also had Dr [B] provide a brief report …
Before making a decision I have asked for the fund to update us on our detailed request to Dr [B]. It does appear Dr [B] will certify her TPD but I will have to discuss with Management on any decision given the large SI[.]
On 15 December 2014, the respondent emailed the Trustee to seek an update on the status of Dr B’s report (Bundle: 232).
On 22 December 2014, Dr B issued the supplementary report requested by the Trustee (Bundle: 235-236). The report was received by the respondent on 6 January 2015 (Joint Chronology at [45]). In that report, Dr B responded to the specific questions posed by the Trustee in its 6 October 2014 letter, which included the following remarks:
2. Is any further treatment proposed and/or likely to result in any further improvement?
Due to her problems with multiple medications in the past, increasing or changing medications in this lady is very difficult. Unless there is an absolute need and she is not coping, I do not intend to change her medications.
3. Your opinion on the member’s short- medium term (3-6 months) and long-term (6-12 months) prognosis.
Her disease has been characterized by a background disease of mild to moderate severity interrupted by flares causing severer [sic] symptoms. Her neurological condition hasn’t helped the situation this year. I do not anticipate that her condition will change greatly in short-medium or medium-long term.
4. Your opinion on the member’s capacity for work as an administration assistant or work in any other occupation reasonably suited on the basis of her education, training and experience.
I do not think she can perform her duties as an administration assistant due to her ongoing symptoms. There are objective indications of disease activities such as swollen tendons requiring cortisone injections and mildly elevated inflammatory markers and also objective features of erosion and synovitis in the recent foot MRI scan.
5. Your opinion as to whether Ms [Brown] will ever be able to return to work as an administration assistant or in any other occupation reasonably suited on the basis of her education, training and experience. If you do not consider that Mrs [Brown] will ever return to work please outline your reasons for this by providing objective medical evidence.
Mrs. [Brown] suffers from rheumatoid arthritis affecting her function generally. She is affected greatly by significant fatigue and pain in her hands, wrists, shoulder, hips, knees and feet. She has difficulty moving wrists and ankles, walking on uneven surface and lifting and grasping objects. She does not feel being able to cope at work as an admin assistant as she cannot sit for a prolonged period, do filing or type extensively. Her condition has not changed greatly for the past few years. She is currently taking maximum anti-rheumatic therapy considering various side-effects caused by different medications. In my opinion, in her current state, on balance of probability, Mrs. [Brown] is unlikely ever be able to do a job for which she is reasonably fitted by education, training or experience.
On 19 January 2015, a file note entry was made in the respondent’s records summarising Dr B’s December 2014 report and stating: “As per review on 19.11.2014, we have an additional update from treating rheumatologist Dr [B] who supports her inability to return to any meaningful employment based on her ongoing condition. Refer to management to pay 4 units on non-manual cover.” (Bundle: 65-66).
Payment of the TPD benefit to Ms Brown
On 21 January 2015, the respondent wrote to the Trustee to advise that it had approved Ms Brown’s TPD claim and credited the sum of $386,000 in full settlement thereof in accordance with the terms of the group life insurance policy (Bundle: 239; Joint Chronology: [46]).
On 27 January 2015, the Trustee wrote to Ms Brown’s solicitors to advise that her claim had been approved by the respondent (Bundle: 240-242). The Trustee’s letter stated a ‘Total Benefit’ of $430,631.25, representing a ‘Tax Free Component’ of $336,534.45 and ‘Taxable Component’ of $94,096.80. The ‘Effective date of calculation’ was stated as 27 January 2015.
On 11 February 2015, Ms Brown’s solicitors wrote to the Trustee acknowledging receipt of its 27 January 2015 letter and requesting that, “[a]s our client’s claim for total and permanent disablement benefits has been accepted can you please refund all premiums, on all relevant accounts, paid since the date of incapacity and provide an exit statement from each account” (Bundle: 247-248).
On 17 February 2015, the Trustee wrote to Ms Brown’s solicitors confirming payment of Ms Brown’s benefit via EFT for the total amount of $423,897.19 into her solicitors’ trust account (Bundle: 255-256).
On 13 April 2015, Ms Brown’s solicitors wrote to the respondent claiming interest pursuant to s 57 of the Insurance Contracts Act on her TPD benefit of $386,800 from 20 December 2012, being three months from its receipt of Dr B’s September 2012 Report to the date of its payment of her claim, being 21 January 2015 (Bundle: 260-261).
On 6 May 2015, the respondent wrote to the Trustee stating its position that it has no liability to pay interest in the circumstances as “[i]t was reasonable for [the respondent] not to have admitted the claim until a detailed report from Dr [B] was received on 6 January 2014. [sic]” (Bundle: 262).
On 21 May 2015, the respondent wrote to the Trustee to inform it that it denied any liability to pay Ms Brown’s claim for interest, on the basis that “[i]t was reasonable for [the respondent] not to have admitted the claim until a detailed report from Dr [B] was received on 6 January 2015.” (Bundle: 266; Joint Chronology at [52]).
On 25 May 2015, the Trustee wrote to Ms Brown’s solicitors advising that the respondent had denied her claim for interest (Bundle: 266; Joint Chronology at [53]).
On 19 August 2019, the applicant commenced these proceedings (Joint Chronology at [54]).
The parties’ submissions
The applicant’s submissions
The applicant submits that, under s 57(2) of the Insurance Contracts Act, the respondent’s liability to pay interest on her TPD benefit arose once it had received her claim for the benefit and a reasonable period of time for it to investigate and determine the claim had expired (AS at [18]).

The applicant’s primary submission is that the respondent became liable to pay interest on and from 21 December 2012: a period of 10 business days after it had received her completed application and supporting medical evidence that was, in her view, reasonably necessary for it to investigate and determine its liability to pay the benefit under the policy (Applicant Submissions at [16]-[18]). The applicant’s primary submission is based on the following premises:
First, as to reasonably necessary supporting medical evidence, the parties agree that the respondent received Ms Brown’s completed application and supporting materials on 10 December 2012 (Applicant Submissions at [17]; Joint Chronology at [25]). Those supporting materials relevantly included Dr B’s September 2012 Report and his November 2012 Report. The applicant submits that, with the benefit of these medical reports before it, no further medical inquiries were reasonably necessary for Hannover to determine the claim: Dr B had expressly certified the applicant TPD in his September 2012 Report and this conclusion was “unequivocally supported” by his November 2012 Report (Applicant Submissions at [14], [16]-[18]).
In the applicant’s submission, in assessing liability to pay the benefit the respondent “need do no more than review the material before it” (Applicant Submissions at [18]). Hence, from the totality of evidence before it as at 10 December 2012, it was, in her view, reasonable for the respondent to have promptly concluded that she was TPD within the policy definition and that liability to pay the benefit had thus arisen (Applicant Submissions at [17]-[18]); Applicant Submissions in Reply at [1]).
Secondly, as to timing of the payment, the applicant submits that a period of 10 business days was a reasonable window for Hannover to investigate and determine her claim because cl 8.15 of the Life Insurance Code of Practice “provides 10 business days as the maximum time period for an insurer to notify an applicant of a decision regarding a claim” (Applicant Submissions at [19]). While not yet implemented in December 2012, the Code of Practice was subsequently adopted by the respondent and therefore, she submits, an insurer, acting reasonably, ought to have determined her claim within that timeframe (Applicant Submissions at [19]).
In the alternative to the 21 December 2012 date, the applicant submits that the respondent’s liability to pay interest arose on and from 16 April 2013 (Applicant Submissions at [29]). As set out above, following its initial receipt of Ms Brown’s application and supporting medical evidence, the respondent resolved to obtain an independent medical assessment of her condition which culminated in the Whittaker Report of 7 February 2013.
After being duly provided to her treating physicians for comment, Dr K issued her response to the Whittaker Report on 12 March 2013 and Dr B his on 16 April 2013. In the applicant’s view, both responses served to reaffirm that Ms Brown was TPD as defined by the policy (AS [25]-[29]). Hence she submits that, by 16 April 2013, the respondent had exhausted all reasonable investigations concerning its liability to pay and — with the benefit of the totality of evidence then before it — ought promptly to have been satisfied that it was liable to make payment to her. Accordingly she submits, in the alternative, that it became unreasonable for Hannover to have withheld payment of the benefit on and from 16 April 2013 (Applicant Submissions at [29]).
Finally, and again in the alternative, Ms Brown submits that interest should accrue from 19 November 2014 at the very latest, being the date the respondent received Dr B’s 30 October 2014 letter confirming that she was TPD as defined under the policy (Applicant Submissions in Reply at [4]; Applicant Submissions at [37]).
The respondent’s submissions
In its defence, the respondent denies all failures to act reasonably alleged by the applicant and says it was reasonable for it to make payment to her when it did on 21 January 2015 (Defence at [15]; Respondent Submissions at [3(a)]).
The respondent further rejects Ms Brown’s construction of s 57(2) of the Insurance Contracts Act and says that interest is only payable if she can establish that it was unreasonable for Hannover to have withheld payment prior to the date it was made (Respondent Submissions at [3(b)]).
In this respect, the respondent challenges the applicant’s submissions on a number of bases:
First, the respondent says that, as a matter of fact, it acted reasonably in assessing and determining Ms Brown’s claim as it did, in particular by (Respondent Submissions at [20]):
(a)promptly considering the claim on receipt in December 2012;
(b)promptly seeking and obtaining an IME report in February 2013 in what, it says, was an “absence of consistent evidence of TPD”, including Dr B’s November 2012 Report;
(c)giving at least interim weight to the IME report, and considering the applicants’ treating doctors’ further reports in April and May 2013, as well as the applicant’s evidence of June 2013, before deferring assessment of the claim for six months on 27 June 2013;
(d)calling for further evidence prior to the expiry of that six month period and, based on evidence from Dr B, deferring assessment for a further six months on 10 February 2014, given that Dr B was, in its view, “not certain of the applicant’s medium or long term prognosis and could only determine her capability to work after further therapies were tried”;
(e)having not received any further evidence, request or report in the further six month period, requesting an updated report from Dr B in August 2014 and following up that request from September to December 2014; and
(f)promptly following receipt of Dr B’s report of 6 January 2015, forming its opinion and deciding to admit the claim on 19 January 2015, and paying it by 21 January 2015.
Secondly, whereas Ms Brown’s submissions centre around the contention that 10 business days is a reasonable period of time to investigate and determine a claim (following receipt of any reasonably necessary medical evidence), the respondent says that there is no such “standard” reasonable period: every case will turn on its facts and it was not unreasonable for it to act as it did in the particular circumstances of this case (Respondent Submissions at [3(c)-(d)]). It says that the Code of Practice did not apply at the time but, in any case, the applicant has misstated the effect of cl 8.15 which states: “Once we have all the information we reasonably need and have completed all reasonable enquiries to assess your claim, including your response to the evidence we are basing our decision on if we have presented this to you, we will let you know our decision on your claim within ten business days” (Respondent Submissions at [3(d)]).
Thirdly, and in any event, the respondent says that Ms Brown’s submissions are wholly incorrect as a matter of contract or law, because:
(a)Hannover was entitled, under the policy, to require the applicant to attend any medical examinations arranged at its discretion, including an IME (Respondent Submissions at [8]);
(b)Hannover’s obligation to pay a benefit was explicitly subject to proof being provided to its satisfaction, and to the applicant attending any medical examinations arranged at its discretion (Respondent Submissions at [9]);
(c)in order for its obligation to pay to arise, Hannover was required to form the opinion, after consideration of medical or other evidence satisfactory to it, that the applicant was TPD (Respondent Submissions at [10]); and
(d)as a matter of law, the duty of good faith owed by Hannover to the plaintiff, including to act reasonably, did not require it to prefer the opinion of treating doctors over consulting doctors (Respondent Submissions at [11]).
In this respect, the respondent submits that the Court should not infer that it acted unreasonably at any time prior to 21 January 2015 merely because it formed the requisite opinion for liability on 19 January 2015. To the contrary, it says, the conclusion reasonably reached on that date, and Hannover’s process leading up to it, underscore the conclusion that it was not unreasonable for it to withhold payment prior to 21 January 2015 (Respondent Submissions at [24]).
Finally, the respondent rejects Ms Brown’s submission that the Trustee acted as its agent. It says that the Trustee was alleged to be its agent for the first time in the applicant’s submissions, and that she cannot now seek to make Hannover responsible for any action or inaction of the Trustee in circumstances where she has chosen not to make any claim against the Trustee nor any allegation of agency or otherwise of Hannover’s responsibility in her originating application or concise statement (RS at [3(f)]).
Consideration and disposition
The question as to when it became unreasonable for the respondent not to form the opinion called for by the indemnity clause in Part 2 of the definition of TPD requires a careful examination of the handling of the file and the claim. Two issues appear to have been the source of some delay to act on what was an unequivocal view of Dr B in September 2012: the first was the possibly of part-time work raised by Dr Whittaker in February 2013. He said that Ms Brown was fit for such; Dr K said she was possibly capable of it. Dr B said she was not. The second source of delay was the possibility of improvement through further therapies referred to by Dr B in January 2014.
No submission was put that the consideration of part-time work was irrelevant or unreasonable. The definition in Part 2 is “any Regular Remunerative Work” (emphasis added). I am not prepared to consider that this was irrelevant to the definition or unreasonable to consider it.
Ms Brown’s condition was plainly difficult for her. The duty to come to the relevant opinion was affected by the insurer’s duty of good faith. That duty involves the consideration of the position of an insured such as Ms Brown undergoing a stressful and painful condition. It does not call for a decision different to that which is proper to be made, but it does call forth the need for proper despatch in consideration of the difficult position of the insured person. The insurer can put weight on the apparently rational views of a consultant medical practitioner retained by it; but it also must give weight to treating and consulting practitioners of the insured to the extent that their views are rational and apparently well-founded, with the advantage of close familiarity with their patient. Here the respondent had comprehensive and detailed opinions of Dr B and Dr K. Their views were of significant assistance and were of practitioners who had treated Ms Brown for some considerable period of time.
Dr Whittaker’s opinion reasonably gave the respondent pause for thought about Ms Brown’s condition. Nevertheless, there was a certain inconsistency in the short to medium-term prognosis of three to six months of not being able to return to work, but somehow being presently fit for part-time work. He stated her long-term prognosis was good, but really gave no basis for that conclusion and indicated that she “requires no further investigations” (Bundle: 138). There was the implication that psychological overlay may be the problem, although he recognised she had been housebound for some time.
Properly, the respondents sought the views of the treating doctors, Dr B (consulting rheumatologist) and Dr K (general practitioner) about Dr Whittaker’s report. Dr K (see [50] above) was clear in her response: it was unlikely that Ms Brown will ever return to full-time work. The psychological issues were rejected. Albeit she recognised that Ms Brown had suffered from depression (hardly surprising, one would have thought, if I may respectfully say). Dr K was open to the possibility of “some part time work” (Bundle: 147).
Dr B in April 2013 (see [51] above) said that it would be reasonable to reassess Ms Brown for full-time work in 12 months’ time. This view qualified his short September 2012 report and his view in November 2012 that “it will be very difficult for [her] to continue to work” (Bundle: 123).
Looking at the material in about June 2013 when the respondent insurer did, it was not unreasonable not to come to a final (and irrevocable) opinion as called for by Pt 2 of the definition. The deferral was not unreasonable. That said, a balanced view of her treating doctor and consultant rheumatologist gave little concrete basis for any likelihood of future work capacity.
At the end of 2013 Dr B’s views were sought again. No further opinion was sought from Dr Whittaker. There was now, properly, a clear reliance upon the treating consulting rheumatologist’s views about Ms Brown. Dr B’s views in January 2014 (see [66] above) were that Ms Brown could not cope with work duties unless her disease was “brought under better control” and that this could only be assessed and her capacity for work only be assessed “after further therapies [were] tried and [we] see the effects of them…” (Bundle: 197). The likelihood however was expressed as ‘theoretical’: see in particular the answer to question 2 in the report ([66] above).
There was a basis for considering a further deferral in February. This deferral for six months is important. I am not prepared to conclude that it was unreasonable not to reach the relevant opinion at this point. Dr B’s views held out some possibility of recovery and (full-time) work albeit likely improvement was at best theoretical. But the history and obvious distress of Ms Brown and her condition required prompt attention to resolve the issue. The respondent could only reasonably understand the position from Dr B’s report that Dr B held out a possibility, but was far from hopeful. Inexplicably, the Trustee did not convey the February decision to defer to Ms Brown until July.
Eight months (on 6 October 2014) passed before Dr B was requested by the Trustee (at the request of the respondent) to give another opinion. Before Dr B answered this letter, his views expressed to the solicitors for Ms Brown were passed on to the respondent in November 2014. The respondent was not prepared to act on this until it received a reply from Dr B for its request for an updated opinion. When Dr B’s confirmatory report was received the respondent reached the opinion entitling receipt of payment by Ms Brown.
The resolution of the proceeding is not easy. One can sympathise with Ms Brown if she had a suspicion that she was being ‘strung along’ by the insurer. I do not make that finding against the respondent. In all the circumstances, there was a reasonable basis for some reconsideration of Dr B’s clear, but short initial views in 2012. The respondent was not bound to accept Dr B’s September 2012 views nor the November views within 10 days or any particular and precise time period. It was entitled to seek and receive its own professional assistance. But it was required to act reasonably, timeously and in good faith. These requirements called for an appreciation of the need for a degree of despatch in the decision, if that were at all possible. This is so, in particular, because of the obvious distress that delay can cause someone who can no longer work and is suffering from chronic pain.
Looking at the whole of the period from January 2014 to January 2015, and eschewing hindsight, I am of the view that the respondent should have acted earlier than it did. It arranged for the Trustee to request another opinion from Dr B in October 2014. This was about 8 months after Dr B’s report was considered by the insurer in early February. By early November the respondent had Dr B’s now unequivocal views in the report to the solicitors that had been sent.
Looking at the year as a whole, it was incumbent upon the respondent promptly to resolve Ms Brown’s position. She had not worked since March 2012. Her claim was made in June 2012. Whatever precise legal arrangements between CBUS Administration and the respondent were, the former had carriage of the early claim handlings. Ms Brown was distressed and obviously in real pain. There was no suggestion in the slightest of malingering. There was some question of depression but that is hardly surprising given her relatively young age and her condition. Her condition had not been able to be successfully brought under control for a number of years: by January 2014, after a history of some years and about two years of not being able to work. The likelihood of improvement was expressed by her consulting rheumatologist as theoretical. Whilst some further time after January 2014 may not have been unreasonable given the expression of the theoretical possibilities by Dr B, the time was plainly approaching for an insurance decision based on medical evidence about a lack of likelihood to ever work again. Showing proper despatch, the respondent could have had its answer from Dr B as to the unlikelihood of Ms Brown ever working again by the end of September. That would have provided a further six months for Dr B to assess treatments. If he had been asked in August, after six months, what his views were he would have been able to give them, and on the timings revealed by the balance of the correspondence, he would have given his views by mid- to late-September 2014. The respondent would then have had the views of Dr B which were by then clear (see Dr B’s report of 30 October 2014 provided to the solicitors).
It is impossible and unnecessary to examine each individual step taken in 2014 and early 2015 and seek to criticise whether something should have be done weeks or days earlier. An overall approach is required and appropriate. Given Ms Brown’s history, evident condition and all the circumstances, greater despatch was necessary in 2014 than was shown by the respondent in order for the respondent to reasonably respond to the necessity to reach an honest and reasonable opinion called for by the policy. If that despatch and recognition for the position of Ms Brown had been shown, the respondent would have called for Dr B’s views in August, been given them by mid to late September, and been in the position to make the decision that it in fact made in January 2015, in mid-October 2014.
It was, in my view, unreasonable not to have reached its decision by that time.
My conclusion is that Ms Brown is entitled to interest calculated under s 57 of the Act from 15 October 2014 to 21 January 2015.
The parties should attend to the calculation of this sum for interest and submit an agreed order.
As to costs, I have implicitly rejected the applicant’s primary case based on the views of Dr B in 2012. However, the applicant has had a measure of success. The matter was handled with efficiency in the list. I considered whether I should only award a proportion of Ms Brown’s costs given the reasonably confined time in which withholding payment was unreasonable. However, it was necessary for her to adduce the whole of the evidence that was led, and the work of the submissions and preparation had to be put in to achieve this modest result. In the end, I consider it just that Ms Brown have her costs.
The parties should bring in short minutes to reflect these reasons, including any interest due under s 51A of the Federal Court of Australia Act 1976 (Cth).

I certify that the preceding one hundred and twenty-nine (129) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop.
Associate:
Dated: 28 September 2020

File number:	NSD 1353 of 2019
Judgment of:	ALLSOP CJ
Date of judgment:	28 September 2020
Catchwords:	INSURANCE – Insurance Contracts Act 1984 (Cth) – interest on claims – where insurer liable to pay to a person an amount under a contract of insurance – whether insurer liable to pay interest on the amount to that person – period in respect of which interest payable – date from which unreasonable for insurer to have withheld payment of the amount
Legislation:	Insurance Contracts Act 1984 (Cth) s 57
Cases cited:	Bankstown Football Club Limited v CIC Insurance Limited (unreported, Sup Ct, NSW, Cole J, 17 December 1993)
Division:	General Division
Registry:	New South Wales
National Practice Area:	Commercial and Corporations
Sub-area:	Commercial Contracts, Banking, Finance and Insurance – Insurance List
Number of paragraphs:	129
Date of last submissions:	17 April 2020
Date of hearing:	Determined on the papers
Counsel for the Applicant:	A Katsoulas
Solicitor for the Applicant:	Firths - The Compensation Lawyers
Counsel for the Respondent:	I S Wylie
Solicitor for the Respondent:	William Roberts Lawyers

JUDGE:	ALLSOP CJ
DATE OF ORDER:	28 SEPTEMBER 2020