Colella v Hannover Life Re of Australasia Ltd (Ruling)
[2013] VCC 990
•16 August 2013
31
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
DAMAGES AND COMPENSATION LIST
GENERAL DIVISION
Case No. CI-10-00664
| CESARIO COLELLA | Plaintiff |
| v | |
| HANNOVER LIFE RE OF AUSTRALASIA LTD (ABN 37 062 395 484) | Defendant |
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JUDGE: | HIS HONOUR JUDGE O'NEILL | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19, 20, 21, 22, 25, 26 February 1 March 2013 | |
DATE OF RULING: | 16 August 2013 | |
CASE MAY BE CITED AS: | Colella v Hannover Life Re of Australasia Ltd (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 990 | |
RULING
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Subject: TOTAL AND PERMANENT DISABLEMENT INSURANCE CLAIM
Catchwords: Plaintiff successful in claim under superannuation policy for total and permanent disablement benefit – entitlement of plaintiff to interest – entitlement of plaintiff to costs – whether on a party-party or indemnity basis.
Legislation Cited: Insurance Contracts Act 1984 (Cth), s57; Insurance Contracts Regulations 1985; County Court Civil Procedure Rules 2008
Cases Cited:BHP Billiton Olympic Dam Corp Pty Ltd v Steuler Industriewerke GmbH (No 3) [2012] VSC 414
Ruling: Plaintiff entitled to interest and costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Bingham | Maurice Blackburn |
| For the Defendant | Mr D Christie | Moray & Agnew |
HIS HONOUR:
Preliminary
1 I gave judgment for the plaintiff on 17 June 2013[1] in relation to his claim for a total and permanent disablement benefit under a policy held with the defendant.
[1]Colella v Hannover Life Re of Australasia Ltd [2013] VCC 620
2 This ruling concerns the entitlement of the plaintiff to interest pursuant to s57 of the Insurance Contracts Act 1984 (Cth) and as to costs.
3 The plaintiff is entitled to interest at a rate specified by the Insurance Contracts Regulations 1985 for a period from the date upon which it was unreasonable for the defendant to have withheld payment of the benefit due under the policy, and the day upon which payment is made. There is a dispute between the parties as to the date from which it was unreasonable for the defendant to withhold payment. The plaintiff submits interest ought be paid from 26 November 2008, some seven months after the first claim was lodged by the plaintiff’s solicitors with the defendant. The defendant contends that it was not until 22 May 2012, after substantial amendment to the Statement of Claim by the plaintiff, that it was in a position to make a determination as to whether to accept or reject the claim.
4 Claims were made by the plaintiff’s solicitors on his behalf for the benefit under the policy to be paid on five separate occasions: 21 April 2008 (“the first claim”), 3 April 2009 (“the second claim”), 16 June 2009 (“the third claim”), 20 April 2011 (“the fourth claim”) and 16 March 2012 (“the fifth claim”). Each claim was supported by documentation, and on the occasion of each new claim, further documents were provided by the plaintiff.
5 In relation to costs, on 27 February 2012, the plaintiff made a “Calderbank offer” by which he indicated he would be prepared to accept $130,000, making no claim as to interest, and for the plaintiff to bear his own legal costs. The offer was less than his entitlement under the policy, was expressed in clear language, and foreshadowed an application for solicitor-client or indemnity costs. Again, according to the defendant, the real issue is that it was not until May 2012 that the defendant was in a position to properly assess the plaintiff’s case, following the amendment of his Statement of Claim, and further, that in any event, it was not unreasonable for the defendant to refuse the offer, as it was not until the trial conducted in February 2013 that the full nature, extent and strength of the plaintiff’s case became known to it.
6 This matter first came on for trial before his Honour Judge Wischusen on 22 and 23 March 2012 (“the first trial”) and was adjourned from that date.
7 This ruling requires an examination of the circumstances under which the matter was adjourned at the first trial, the material before the defendant to enable it to make an assessment of the plaintiff’s claim and offer to resolve the proceeding, and the conduct of the defendant in rejecting the plaintiff’s claims.
The first trial
8 I have read the transcript of proceeding before his Honour Judge Wischusen on 22 and 23 March 2012. According to the transcript, Mr Bingham opened the case on behalf of the plaintiff. There was then a response by Mr Christie, on behalf of the defendant. At the outset, Mr Bingham indicated that if the plaintiff was successful in his claim, he would ask the Court to remit the matter for further decision by the insurer.[2] It was further clear that there were aspects of the plaintiff’s Statement of Claim which required “tidying up”.[3] Also, it became apparent that there were a number of documents which had been provided by the plaintiff’s solicitors to a trustee, ING Custodians Limited,[4] which had not been passed on to Hannover. As the discussions between counsel and the bench progressed, it emerged that there were some twenty-three documents, said to be significant to the issues to be determined, which had not been provided to the defendant and thus had not been taken into account in its decisions.[5] It was not until the first trial that the defendant indicated these documents had not been provided, notwithstanding that the original Statement of Claim, issued in February 2010, particularised each of the documents which were said to be provided to the defendant in support of each of the respective claims and which included the documents referred to. Mr Christie, in submissions before his Honour, said that what appeared to have occurred was that the documents were provided to the trustee, who did not then forward them on to the defendant.
[2]Transcript (“T”) 34
[3]T53-56
[4]ING Custodians was the trustee of the superannuation fund and originally the first defendant in the proceeding
[5]T71
9 From the discussion between his Honour and Mr Christie,[6] it was acknowledged that the defendant had a duty of utmost good faith towards the plaintiff to properly and comprehensively review all the material upon which its opinion was to be based. His Honour commented that the defendant ought, by its Defence, have responded that it did not have the material referred to in the plaintiff’s Statement of Claim when it made its decision. His Honour referred to r 13.07 of the County Court Civil Procedure Rules 2008. It is clear there is an obligation upon a party to make clear in its defence that a claim by the opposite party may not be maintainable, or might take the other party by surprise. If the material had not been provided to the defendant as the plaintiff’s Statement of Claim alleged, it was clearly a matter that ought to have been pleaded. With respect, I agree with the comments made by his Honour.
[6]T82-84
The Plaintiff’s claim as to interest
10 The claim of the plaintiff to interest in accordance with the Insurance Contracts Act 1985 turns upon the date from which it was unreasonable for the insurer to deny payment under the policy.
11 According to paragraph 14 of the defendant’s Defence to the Amended Statement of Claim, filed 24 May 2012,[7] it admits that on or about 21 April 2008, it received and considered a range of documents set forth in support of the plaintiff’s first claim for total and permanent disablement. Amongst this material was the following:
[7]Court Book (“CB”) 34
· Medical report of the treating general practitioner, Dr R McClelland,[8] which described in brief the condition of the plaintiff’s right knee and the history of hospital admissions. The post-operative course in respect of the surgery conducted in January 2007 was said to be “poor”. The following question was asked:
[8]CB 132-133
Q:“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?---
A:No.
Q:If no, please give detailed reasons
A.Opinion of orthopaedic surgeon.”
· Taxation returns over the years 2005 to 2007. These returns would have indicated that the income derived from the plaintiff’s farming activities was modest, and there were losses over those years.
· Medical report from Dr McClelland of 4 August 2008.[9] This report noted Dr McClelland considered, as at 17 January 2007, the plaintiff was unable to work because of his right knee problem. It described the medication he was taking. It said:
[9]CB 252-253
“I understood that Mr Colella’s work as despatch manager had him needing to move around the despatch area and the transfers from chair were painful. Movements on the forklift he described as being extremely difficult to the point of being dangerous… I understand from Mr Colella that the farm work that involved tractor work or even walking on uneven ground was becoming progressively more difficult because of the difficulty in his knee.”
(sic)
· Surveillance report of 12 August 2008[10] and accompanying video surveillance. It is clear from the video surveillance, and the report, that the plaintiff walked with an obvious limp. According to the report, the plaintiff was said to push a wheelbarrow “full of firewood”. This is not the case when the surveillance video is viewed. As stated in my Reasons for Judgment,[11] there is nothing inconsistent between the plaintiff’s claimed disability and what is depicted in the video. Quite to the contrary, the plaintiff moves with a pronounced limp and in a relatively slow and careful manner. The activities in which he is engaged are modest. If anything, what is seen is consistent with the plaintiff’s injury and complaints.
· Medical report of Dr James Rowe, occupational physician, of 13 October 2008.[12] According to the report, the plaintiff complained of continued right knee pain and swelling, with limited mobility. The plaintiff said he could not squat nor kneel. Dr Rowe observed the surveillance video which he noted showed the plaintiff walking with a marked limp but was not shown to squat or kneel nor climb stairs. He was of the opinion the plaintiff had “severe degenerative osteoarthritis of the right knee with more than likely multiple internal derangements of the right knee”.[13] He said the plaintiff was fit for some work and was not totally incapacitated. He said the plaintiff could work in a sedentary position and possibly he could work as a despatch manager if there was no driving involved. Dr Rowe said the plaintiff had a part-time capacity, providing heavy lifting was not required and provided prolonged standing or walking was not required. He might need some re-training and re-education, but did have a capacity for employment. He said there were certain forklifts the plaintiff had the capacity to drive “but he does not have the capacity to stand for long periods, walk long distances or lift heavy weights … so there are obviously restrictions placed upon him and he is a candidate for rehabilitation and re-education. … .”[14]
[10]CB 272-284
[11]Colella v Hannover Life Re of Australasia Ltd (supra) at paragraphs [153]-[155]
[12]CB 285-90
[13]CB 288
[14]CB 289-290
12 Despite reference in the medical report of Dr McClelland to the plaintiff having undergone surgery by Mr Kiellerup and that the opinion of an orthopaedic surgeon was a matter to be taken into account in determining whether the plaintiff would ever be able to work again, apparently the defendant did not seek an opinion from Mr Kiellerup. It is difficult to understand why the defendant did not obtain such a report, or ask his solicitors to provide one, given the defendant’s obligation to act reasonably and fairly and to have due regard to the interests of the plaintiff. It was obvious from the medical material at this time that the plaintiff had a serious and degenerate condition in his right knee. The opinion of the plaintiff’s general practitioner was that the plaintiff would never work in employment for which he was reasonably fitted by education, training or experience. Careful observation of the surveillance video showed nothing more than the plaintiff engaged in very light and undemanding activities and walking with a pronounced limp.
13 Dr Rowe was retained by the defendant to examine the plaintiff as at October 2008. He confirmed the serious nature of the plaintiff’s injury. While he did say the plaintiff was not totally incapacitated for work, it was clear that any return to work by the plaintiff was subject to significant restrictions. These included that the plaintiff could not stand for long periods nor walk long distances. It referred to the fact that the plaintiff may need some re-training or re-education in order to have a work capacity.
14 Given the nature of the defendant’s duty towards the plaintiff, it was not appropriate for it to rely upon only those aspects of the material before it which were most suited to a denial of the plaintiff’s claim. In failing to seek or obtain material from the plaintiff’s treating orthopaedic specialist, it acted unreasonably. It ought to have had very significant reservations about the plaintiff’s capacity to undertake any work given the seriously degenerate condition of his knee, in particular in the light of what was depicted in the surveillance film. It ought to have enquired as to the plaintiff’s training and experience to determine what employment the plaintiff may be suited for.
15 By letter of 8 January 2009, the defendant wrote to the trustee advising the plaintiff’s claim was refused. Amongst the reasons given were the following:
· The defendant had reviewed all available medical evidence.[15]
[15]CB 296
· The medical evidence suggested the plaintiff was not fit for labouring, but would be fit for sedentary-type work, specifically as a despatch manager with no driving involved.
· The video surveillance showed the plaintiff walking with a marked limp but that he had the capacity to ride a motorbike, push a wheelbarrow filled with gravel, walk and bend over. These activities substantiated the view that the plaintiff had a capacity to be involved in “a non-sedentary role, albeit at a reduced level”.[16]
[16]CB 296
· The plaintiff’s taxation returns indicated that “it is clear from the figures contained within the returns that Mr Colella continues to be involved in his farm and despite the fact there was a net loss in relation to same, he continues to be involved in activities relating to the farm. The expenses for the year ending 2007 totalling $139,610 clearly demonstrate that Mr Colella’s farm is operational.”
· On the totality of the evidence, the defendant said the plaintiff suffered a knee condition which precluded him from working full time in a manual-type role, but there were factors which did not support his claim for being totally and permanently disabled, including:
§ the activities observed on surveillance
§ his continual involvement on the farm
§ the report of Dr Rowe
· Accordingly, the claim was declined.
16 There are a range of incorrect and inaccurate assessments and statements in this opinion. As previously stated, the assessment of the video surveillance is comprehensively flawed. There is nothing in the taxation returns to suggest that the plaintiff continued to be involved in activities on his farm. The sum of $139,610 referred to reflected a written down asset value, and not expenditure. From the opinion of Dr Rowe, the defendant “cherry picked” those aspects which suited its purpose. There was no reference to the fact that the plaintiff may have to be re-trained. There was no reference to the opinion of Dr Rowe that the plaintiff could not work where he was required to stand or walk for long periods. According to the letter, there was no information sought from the employer as to the exact nature and extent of the plaintiff’s previous duties. There was no assessment made as to what realistic employment the plaintiff would be capable of.
17 The decision of the defendant at this point was unreasonable given its duty to the plaintiff. At the very least, it ought to have sought further information, in particular, a report from the treating orthopaedic surgeon.
18 This conclusion is strengthened by the view of the trustee, expressed in a letter of 3 April 2009[17] that it disagreed with the defendant’s decision. It refers to the opinion of Dr Rowe and that there is no “real world likelihood” of the plaintiff obtaining suitable employment. It referred to the activities shown on surveillance at the plaintiff’s farm. It noted difficulties with the plaintiff climbing in and out of a forklift. It suggested, on a balanced assessment, the plaintiff was “totally and permanently disabled” within the meaning of the policy. In my view, that opinion was correct. At the time of assessment, that is, January 2009, and on the material available to it, in my view, the plaintiff met the definition contained within both limbs of the policy. Even if there was some uncertainty in that regard, then further material ought to have been sought, in particular, a report from the treating orthopaedic surgeon. The defendant’s decision to refuse the claim as at January 2009, was unreasonable. I will allow interest from 8 January 2009.
[17]CB 298-299
Costs
19 On 27 February 2012, the plaintiff’s solicitors served a “Calderbank” letter indicating a preparedness to accept resolution of the claim on terms less favourable than the ultimate determination. The plaintiff seeks solicitor-client, alternatively, indemnity costs, from that time.
20 I bear in mind the legal principles referred to in the defendant’s submissions, in particular, the principles established by Habersberger J in BHP Billiton Olympic Dam Corp Pty Ltd v Steuler Industriewerke GmbH (No 3).[18]The key issue is whether it was unreasonable for the defendant to reject the offer. The mere fact that the end result was more favourable to the plaintiff does not give rise to a presumption that a special costs order ought be made. It is one of the matters to be taken into account.
[18][2012] VSC 414 at paragraphs [59]-[67]
21 The defendant makes the following submissions:
· There was a very marked change in the plaintiff’s case from the original Statement of Claim of 19 February 2010, to the Statement of Claim amended by order of his Honour Judge Wischusen on 7 May 2012. The plaintiff’s claim constituted “an entirely new case” by reason of the amendments.
· The twenty-three “essential” documents were not provided to the defendant until after the first trial.
· As a result of discussion in the first trial, the plaintiff made a further claim, the fifth claim, containing a range of new documents and material upon which the plaintiff relied.
· There was oral evidence given at the trial which the defendant did not have the opportunity to assess, and which was significant in the determination of the proceeding.
22 The contention by the defendant that it was not in a position to assess the oral evidence until trial has no merit. Every litigant faces the uncertainties of litigation. Evidence which was thought to be supportive of a particular case is successfully challenged in cross-examination. New matters arise in the course of evidence and have to be dealt with. Such are the vagaries of litigation.
23 Of significance, in my view, are the flaws in the defendant’s decision-making process going back to the time of the first claim. The defendant “cherry picked” evidence which suited its contention that the plaintiff’s claim for total and permanent disability ought be rejected. It did not act reasonably and fairly and give due consideration to the interests of the plaintiff. Its attitude to the plaintiff’s claim became evident at the time the first claim was made, and continued through until the final and fifth claim in 2012.
24 It is correct that the plaintiff’s Statement of Claim was substantially amended in May 2012, and that after the first trial, the plaintiff made a further claim with additional documents provided. The amendments were largely to answer the claim of the defendant that it had not received the twenty-three documents and to plead the fifth claim and refusal. As referred to above, I am of the view the defendant ought to have pleaded in its Defence that it had not received documents which the plaintiff referred to as having been provided to the trustee. I am further satisfied that as at the date of the offer, February 2012, the defendant had in its possession sufficient material to determine the claim, and it ought to have determined it in favour of the plaintiff. In fact, that was so from January 2009. All throughout the period the various claims were made, the defendant relied upon inappropriate information, misinterpreted materials and failed to obtain at least one important medical opinion.
25 In all these circumstances, in my view, it is appropriate that the defendant pay the plaintiff’s costs on the appropriate scale up to a date fourteen (14) days after the date of the offer, namely 13 March 2012, and that thereafter, the defendant pay the plaintiff’s costs on an indemnity basis. This includes the costs reserved by his Honour Judge Wischusen in respect of the first trial.
26 I shall consult counsel as to the appropriate orders.
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