Reported Decision: (2007) 14 ANZ Insurance Cases 61-746(2007) Aust Torts Reports 81-908
New South Wales
Court of Appeal
CITATION: CGU WORKERS COMPENSATION (NSW) LIMITED (ACN 003 181 002) v GARCIA [2007] NSWCA 193 HEARING DATE(S): 7 March 2007, 8 March 2007
JUDGMENT DATE:
10 August 2007JUDGMENT OF: Mason P at 1; Hodgson JA at 159; Santow JA at 160 DECISION: Appeal allowed. CATCHWORDS: CONTRACTS – General contractual principles – construction and interpretation of contracts – implied terms – other cases – implied term of good faith - TORTS – Miscellaneous torts – other cases – tort of good faith – whether there exists a tort of good faith – coherence with statute and statutory scheme of insurance – Workers Compensation Act 1987, Workplace Injury Management and Workers Compensation Act 1998 - WORKERS’ COMPENSATION – Assessment and amount of compensation – discontinuance of payments – generally – where a number of reports favourable to worker and two reports not favourable to worker – where insurer relies on unfavourable reports to cease payments – Workers Compensation Act 1987, Workplace Injury and Management Act 1998 LEGISLATION CITED: Accident Compensation Act 1985 (Vic)
Civil Liability Act 2002
Civil Procedure Act 2005
Insurance Contracts Act 1984 (Cth)
Workers Compensation (General) Regulation 1995
Workers Compensation Act 1987
Workplace Injury Management & Workers Compensation Act 1998CASES CITED: Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Anns v Merton London Borough Council [1978] AC 728
Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd [1990] 1 QB 818
Banque Financiere de la Cite SA v Skandia (UK) Insurance Co Ltd; Westgate Insurance Co Ltd [1991] 2 AC 249
Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd [1990] 1 QB 665
Bennett v Jones [1977] 2 NSWLR 355
Breen v Williams (1995) 186 CLR 71
Brodie v Singleton Shire Council (2001) 206 CLR 512
Burger King Corporation v Hungry Jacks Pty Ltd [2001] NSWCA 187
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25
Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Distillers Co Bio-Chemicals (Australia) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1
Edwards v Attorney General (2004) 60 NSWLR 667
Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-112
Employer’s Mutual Indemnity (Workers Compensation) Ltd v A Donald Pty Ltd (NSW Court of Appeal, Priestley, Cole, Stein JJA, 23 October 1997)
Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228
F & K Jabbour v Custodian of Israeli Absentee Property [1954] 1 WLR 139
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22
Gibson v Parkes District Hospital and Anor (1991) 26 NSWLR 9
Gimson v Victorian WorkCover Authority [1995] 1 VR 209
Graham…
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Details
- Case
- [2007] NSWCA 193
- Decision Date
CaseChat Overview and Summary
CGU Workers Compensation (NSW) Ltd appealed to the Court of Appeal of New South Wales against a decision of the District Court. The dispute concerned the discontinuance of workers' compensation payments by CGU to Mr. Garcia. CGU had relied on two medical reports that were not favourable to Mr. Garcia's claim to cease payments, despite a number of other reports being favourable. The appeal concerned the interpretation of the relevant Workers' Compensation legislation and the conduct of the insurer in discontinuing payments.
The Court of Appeal was required to determine whether the insurer, CGU, had acted in breach of an implied term of good faith and reasonable conduct in its dealings with Mr. Garcia. A further issue was whether a tort of "good faith" existed in Australian law, and if so, whether it applied in the context of workers' compensation insurance schemes. The court also considered the proper interpretation of the *Workers Compensation Act 1987* and the *Workplace Injury Management and Workers Compensation Act 1998* in relation to the discontinuance of payments.
The Court of Appeal held that an implied term of good faith and reasonable conduct exists in contracts of insurance, including workers' compensation insurance. The court reasoned that the insurer's reliance on unfavourable medical reports to cease payments, without adequately considering or addressing the favourable reports, demonstrated a failure to act in good faith. The court rejected the existence of a standalone tort of good faith, finding that the existing contractual implied term was sufficient to address the conduct in question. The court found that CGU had breached its contractual obligations.
The appeal was allowed, and the decision of the District Court was set aside.
The Court of Appeal was required to determine whether the insurer, CGU, had acted in breach of an implied term of good faith and reasonable conduct in its dealings with Mr. Garcia. A further issue was whether a tort of "good faith" existed in Australian law, and if so, whether it applied in the context of workers' compensation insurance schemes. The court also considered the proper interpretation of the *Workers Compensation Act 1987* and the *Workplace Injury Management and Workers Compensation Act 1998* in relation to the discontinuance of payments.
The Court of Appeal held that an implied term of good faith and reasonable conduct exists in contracts of insurance, including workers' compensation insurance. The court reasoned that the insurer's reliance on unfavourable medical reports to cease payments, without adequately considering or addressing the favourable reports, demonstrated a failure to act in good faith. The court rejected the existence of a standalone tort of good faith, finding that the existing contractual implied term was sufficient to address the conduct in question. The court found that CGU had breached its contractual obligations.
The appeal was allowed, and the decision of the District Court was set aside.
Orders
Orders of the court
Appeal allowed.
Background
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Evidence
Evidence Before The Court
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Decision
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Ratio Decidendi
Legal Principle Established
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