Daffy v MLC Nominees Pty Ltd and Anor

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2013 06323

KEVIN ADRIAN DAFFY	Plaintiff
v
MLC NOMINEES PTY LTD	First Defendant
- and -
MLC LIMITED	Second Defendant

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATES OF HEARING:	7 to 9, 14 to 17, 20, 21 and 23 June and 4 and 5 August 2016
DATE OF JUDGMENT:	13 October 2016
CASE MAY BE CITED AS:	Daffy v MLC Nominees Pty Ltd & Anor
MEDIUM NEUTRAL CITATION:	[2016] VSC 606

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INSURANCE – Total and permanent disability policy – Construction of definition of total and permanent disability and other provisions of policy – Plaintiff injured in the course of employment whilst covered by first schedule of policy – Plaintiff’s employment terminated prior to making a claim under policy – Insurer rejected claim on basis that plaintiff was transferred to the sixth schedule upon termination of employment and did not satisfy TPD definition under that schedule – Plaintiff entitled to have his TPD claim assessed under first schedule of policy – Plaintiff satisfied first schedule TPD definition – Insurance Contracts Act 1984 (Cth) ss 11, 48.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Brett QC and Mr D Kelsey-Sugg	Lennon Mazzeo
For the Defendants	Mr P Murdoch QC and Mr B Jellis	Norton Rose Fulbright Australia

HIS HONOUR:

Introduction

On 14 October 2010 in the course of his employment with Southern Star Designer Windows Pty Ltd (‘SSDW’), Mr Daffy suffered a prolapsed disc whilst lifting a large sliding door. At the time he was both General Manager and a 50 per cent shareholder in SSDW. He was taken to St Vincent’s Private Hospital later that evening by ambulance experiencing incandescent pain. After a period of four days hospitalisation he was absent from work for a period of approximately four weeks. There is a factual controversy about the extent to which he was able to perform his normal duties post his return to work. However, it is not controversial that on 24 May 2011 his employment was terminated during the course of a meeting with his fellow shareholders in SSDW. That termination had nothing to do with the injury or performance of his duties as General Manager. Rather, it was related to a dispute between Mr Daffy and his fellow shareholders regarding the sale of his 5 per cent shareholding in SSDW’s parent company, Southern Star Windows Pty Ltd, and the repayment to Southern Star Windows of $1.2 million credited to it in a loan account with SSDW.

Throughout his employment with SSDW, that company was a ‘Participating Employer’ in the Universal Superannuation Scheme (‘the Fund’). MLC Nominees Pty Ltd, the first defendant, is the trustee of that fund. In its capacity as trustee it took out a policy of insurance entitled the M100 Policy (‘Policy’). The insurer, MLC Limited, is the second defendant. As an employee of SSDW, Mr Daffy was automatically entitled to membership of the Fund. It is not in dispute that the benefits prescribed under the Policy in respect of Mr Daffy included a $1.5 million total and permanent disability (‘TPD’) insurance and income protection benefit of $7,187.50 per month for up to two years.[1] The precise amount of the TPD benefit varied from year to year. For the year ending 30 June 2012 the TPD benefit payable was $1,521,071.64.[2]
[1]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 8 June 2016) T224 LL17-29; Exhibit H: Court Book 777, MLC MasterKey Business Super Annual Statement to 30 June 2015.
[2]Exhibit H: Court Book 760-61, MLC MasterKey Business Super Annual Statement to 30 June 2012.

The only parties to the contract constituted by the Policy are the first and second defendants. Mr Daffy is a ‘third party beneficiary’ under the Policy, as defined in s 11 of the Insurance Contracts Act 1984 (Cth). Pursuant to s 48(1) Mr Daffy has the right to recover from MLC, in accordance with the Policy, the amount of any loss he has suffered, even though he is not a party to the contract constituted by the Policy.[3]
[3]Insurance Contracts Act 1984 (Cth) s 48(1).

The central issue in the current proceedings is whether Mr Daffy’s claim for a TPD benefit is to be determined in accordance with the First or the Sixth Schedule of the Policy. The defendants contend that immediately upon termination of his employment on 24 May 2011 Mr Daffy was transferred from the First to the Sixth Schedule. It is not in issue that the Sixth Schedule prescribes significantly more onerous TPD criteria than the First Schedule.

I have concluded that the termination of Mr Daffy’s employment did result in him being transferred from the First Schedule to the Sixth Schedule. However, his right to make a TPD claim in respect of the injury he sustained on 14 October 2010, and have that claim determined in accordance with the criteria prescribed by the First Schedule, was a benefit which had accrued as at 24 May 2011, and which was preserved pursuant to cl 27.1 of the Policy. Further, Mr Daffy satisfied the TPD criteria prescribed in Schedule 1. He was absent from his usual occupation as General Manager for six consecutive months solely through injury from late July 2011. At the conclusion of that six months he was incapacitated to such an extent as to render him unlikely to ever engage in any gainful occupation for which he was reasonably qualified. Mr Daffy lodged a TPD claim in May 2012 which was rejected by MLC in January 2013. His claim should have been accepted at that time. He is therefore entitled to an order that MLC pay him an amount equivalent to the TPD benefit under the Policy as at January 2013: $1,521,071.64.

Factual Background

The central issue in the current proceedings is whether the defendants are liable to make a payment to Mr Daffy of approximately $1.5 million in respect of his TPD claim. The resolution of this issue turns primarily on a question of construction: Was his TPD claim to be determined in accordance with the First or Sixth Schedule of the Policy?

The circumstances in which Mr Daffy sustained injury are not determinative of whether he has a valid claim. In particular, whether he does have a valid claim does not turn on whether, as Mr Daffy contends, he sustained injury in the course of his employment. What is determinative, both for the purposes of the First and Sixth Schedule of the Policy, is the seriousness of the injury.

The defendants accept that at all relevant times Mr Daffy was a member of the Fund.[4] They also accept that he sustained a L5/S1 prolapsed disc injury which resulted in him being admitted to hospital late on 14 October 2010 suffering ‘incandescent pain’.[5] Nevertheless, the defendants, in the conduct of their defence, put squarely in issue the circumstances in which Mr Daffy sustained injury. They contend that Mr Daffy did not injure himself in the course of his employment on 14 October 2010. Rather, they contend that he had hurt his back shortly beforehand, but not at work.[6] Whilst accepting that this factual controversy does not bear directly upon the question of the defendants’ liability to pay the TPD claim, the defendants contend that this matter is relevant to the assessment of Mr Daffy’s credit as a witness.[7]
[4]‘Closing Submissions of the Defendants’ dated 15 July 2016, [20].
[5]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1075 LL9–14.
[6]‘Closing Submissions of the Defendants’ dated 15 July 2016, [190]-[198].
[7]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1070 LL12–14.

I accept Mr Daffy’s account of the circumstances in which he injured his back. This finding is based on my favourable assessment of Mr Daffy’s credit as a witness, together with the corroborative, including eye witness, evidence led on his behalf.

Mr Daffy’s account of the circumstances in which he injured his back is as follows:

On 14 October I was working in the factory and I was moving a very large sliding door, one which had been made by Southern Star Windows in Geelong that they had shipped down to us for storage and I just got a massive pain through my back and I had to go back into the office.[8]

[8]Ibid (8 June 2016) T197 LL4–9.

The incident as set out above was witnessed by a factory supervisor, Rajeeva Rao. His evidence was as follows:

I saw he was working on the aluminium window and when he was lifting, I am not exactly sure, maybe when he was lifting it to the floor but all of a sudden he was holding his back and he was walking towards the office.[9]
…
I saw that he was working on the window and I saw that he was lifting that window and then when I turned back again, at that time he was walking towards the office but holding his back.[10]

[9]Ibid (16 June 2016) T568 L30 – T569 L3.

[10]Ibid T577 LL2-6.

I found Mr Rao to be an entirely credible witness. There was a slight discrepancy between his account and that of Mr Daffy in that Mr Rao gave evidence that Mr Daffy was carrying a ‘window’, but otherwise, his account is entirely consistent with Mr Daffy’s.

Mr Rao was interviewed by Bendigo Investigation Services as part of a Workcover investigation into the circumstances relating to Mr Daffy’s injury. That interview took place on 15 August 2011. A written record of the interview was tendered in evidence.[11] The record of interview includes the following:

The incident I recall was seeing Kevin and another worker by the name of Dean who was the factory supervisor/truck driver at the time lifting an aluminium sliding door from one site in the factory to another location. I recall seeing Kevin suddenly grab at his back as he was putting the door down and he immediately walked away and went into the office.[12]

Given the passage of some five years since the time when the statement was taken and his evidence in court, Mr Rao’s confusion as to whether the incident involved the lifting of a window, as opposed to a large sliding door, is understandable.

[11]Exhibit H: Court Book 860-2, Statement in the Matter of: Kevin Daffy.

[12]Ibid [6].

Mr Rao’s evidence was not challenged in any meaningful way. It was not even faintly suggested to him that he had an axe to grind against his former employer or that he was in any way beholden to Mr Daffy. I accept his evidence without reservation. He was an honest and forthright witness who was endeavouring to do his best to give an accurate account of events which had occurred more than five years ago. Mr Rao’s evidence is totally irreconcilable with the defendant’s challenge to Mr Daffy’s account of the circumstances in which he injured his back.

In their written submissions the defendants contend that:

Mr Rao’s evidence is of limited utility because he was in a position to make only limited observations of the plaintiff during that time.[13]

I reject this submission. Mr Rao had a direct unimpeded view of Mr Daffy immediately prior to and after the point in time when he injured his back.

[13]‘Closing Submissions of the Defendants’ dated 15 July 2016, [181].

Mr Daffy’s account was also corroborated by his sister-in-law, Cassandra Silvestri. Miss Silvestri commenced employment with SSDW as an estimator in mid 2010. Her account of the incident on 14 October 2010 is as follows:

Kevin had been out in the factory and he came in the back door, from the factory into the office, and he said to Allison and I that “I’ve really hurt my back”… He was a light greyish, white colour and he had beads of sweat pouring down his face.[14]
…
After he explained the pain and the look on his face, Allison and I both had made comment [sic] to Kevin that, “You look very, very unwell.” Allison suggested that Kevin go home. Kevin did leave earlier that day due to the pain and the next day we discovered that Kevin was taken to hospital via ambulance in the middle of the night.[15]

[14]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 16 June 2016) T592 LL22–28.

[15]Ibid T593 LL9–15.

During examination in chief Ms Silvestri was asked whether 14 October 2010 was a significant day in her life. Her response was as follows:

Very much so. That was quite an awful day for my husband and I. My husband’s uncle Sam had been diagnosed with – sorry, had been advised that he had pneumonia and was taken to hospital and uncle John actually had a heart attack, which was my husband’s uncle, on the same day and a family friend of mine was taken to hospital as well. So it was not a very good day for us.[16]

[16]Ibid T592 L31 – T593 L7.

As noted above, Ms Silvestri is the sister-in-law of Mr Daffy. However, Ms Silvestri gave unchallenged evidence that she has for a number of years been estranged from Mr Daffy and his wife, Christine, due to a family dispute. Prior to giving evidence on 16 June 2016 Ms Silvestri had not had a conversation of any substance with either Mr Daffy or his wife for over a year.[17]
[17]Ibid T590 LL1–2.

Ms Silvestri’s evidence was not meaningfully challenged in cross-examination. It is to be noted that, as set out above, Ms Silvestri’s account of the aftermath of the incident on 14 October 2010 includes a reference to ‘Allison’. This is a reference to Allison Laurens-Tearle. At the time Ms Silvestri gave her evidence it was apparent from material which had been filed by the defendants in advance of the hearing that they proposed to call Miss Laurens-Tearle to give evidence inconsistent with the account provided by Ms Silvestri. As with Mr Rao, Ms Laurens-Tearle had provided a statement to Bendigo Investigation Services as part of a Workcover investigation into the circumstances of Mr Daffy’s injury. That statement was in the Court Book filed in advance of the hearing.[18] The contents thereof were totally inconsistent with the account provided by Ms Silvestri. At the conclusion of Ms Silvestri’s cross-examination I raised with Mr Jellis (who appeared with Mr Murdoch QC for the defendants) his failure to put to Ms Silvestri the inconsistency between her account and that which had been provided by Ms Laurens-Tearle.[19]
[18]Exhibit H: Court Book 863-67, Statement in the Matter of: Kevin Daffy.
[19]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 16 June 2016) T617 LL5-30.

Ms Silvestri was subsequently recalled for the purposes of further cross-examination. The inconsistencies between her evidence and that to be led by Ms Laurens-Tearle were put to her.[20] Ms Silvestri emphatically rejected Ms Lauren-Tearle’s account, the substance of which will be set out below.
[20]Ibid T618 LL8-24; Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 20 June 2016) T828 L16 – T833 L16.

For present purposes, it is sufficient to record my conclusion that Ms Silvestri was an entirely credible witness. She gave her evidence in a forthright and direct manner. She displayed a very clear recall of the events of 14 October 2010. As set out above, this was plainly a significant day in her life. Further, although Ms Silvestri is Mr Daffy’s sister-in-law, I accept her unchallenged evidence that she is presently estranged from both Mr Daffy and his wife. Wherever there is any inconsistency between Ms Silvestri’s evidence and that given by Ms Laurens-Tearle, I have no hesitation in preferring the evidence of Ms Silvestri.

The defendants contend that Ms Silvestri gave ‘exaggerated evidence’.[21] I reject this submission. Her account of the immediate aftermath of the incident on 14 October 2010 is entirely consistent with the observations one would expect in respect of Mr Daffy given he had just suffered a prolapsed disc.
[21]‘Closing Submissions of the Defendants’ dated 15 July 2016, [181].

Ms Laurens-Tearle gave evidence that she was employed by SSDW as an administration manager from about 2007 until mid 2011 when the business of SSDW was closed down. Ms Laurens-Tearle’s evidence was that in October 2010:

there was a time he did come in with – it looked like he hurt his back because he was walking slightly – like this.[22]
…
I just looked at him and said, “You look like you are in pain” and then we were just talking about, yes, that he hurt his back or got a sore back and I actually talked to him about a chiropractor that I, yes, used to see.[23]

[22]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 21 June 2016) T932 L31 – T933 L2.

[23]Ibid T933 L31 – T934 L4.

Ms Laurens-Tearle gave evidence that she recommended to Mr Daffy that he go and see a chiropractor that Ms Laurens-Tearle had consulted.[24] It is not in dispute that on 8, 11 and 13 October 2010 Mr Daffy did attend a chiropractor, Dr Pratt, on the recommendation of Ms Laurens-Tearle. Mr Daffy’s evidence, however, is that following two consultations with the chiropractor he was pain free.[25] This is confirmed by Dr Pratt’s notes.[26] The notes of the consultation on 11 October 2010 record Mr Daffy as being ‘[l]ot better’. The notes of 13 October 2010 record Mr Daffy as being ‘[b]etter’.[27]
[24]Ibid T934 LL6-10.
[25]Ibid (8 June 2016) T196 L26 – T197 L3.
[26]Exhibit H: Court Book 2252, Clinical Notes.
[27]Ibid.

Ms Laurens-Tearle’s evidence is that following her discussion with Mr Daffy in which she recommended he attend a chiropractor, ‘over a few days he became a lot better’.[28]
[28]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 21 June 2016) T956 L31 – T957 L1.

Ms Laurens-Tearle had no recollection of Mr Daffy having returned to the office from working on the factory floor on 14 October 2010 and being in severe pain.[29] Her evidence was that she had ‘never heard that before’.[30] Ms Laurens-Tearle denied that both she and Ms Silvestri had seen him and both suggested that he go home.[31]
[29]Ibid T957 LL2–4.
[30]Ibid L7.
[31]Ibid LL6-9.

Mr Paul Gray did not give evidence. However, there is no issue that Mr Gray is the majority shareholder in Southern Star Windows Pty Ltd, which in turn was a 50 per cent shareholder in SSDW. The dispute between Mr Daffy and Mr Gray regarding the manner in which he was to be paid the $1,050,000 for his 5 per cent stake in Southern Star Windows Pty Ltd was a source of dispute between Mr Daffy and Mr Gray, and played a pivotal role in his ultimate termination as an employee of SSDW.

Ms Laurens-Tearle agreed that she is a very close friend of Mr Gray.[32] She also agreed that Mr Gray is a very close friend of her father’s,[33] and that she has known Mr Gray all of her life.[34]
[32]Ibid T947 L31 – T948 L1.
[33]Ibid T948 LL18-19.
[34]Ibid L17.

SSDW was shut down shortly after the termination of Mr Daffy’s employment.[35] Nearly all of the employees of SSDW were made redundant. The exceptions were Ms Laurens-Tearle and Mr Meehan, a sales representative, and one other employee. They were offered ongoing employment with Southern Star Windows at a factory in Hallam. In her new role Ms Laurens-Tearle was provided with a company car which she had not previously had when employed at SSDW.[36]
[35]Ibid T930 LL13–14.
[36]Ibid T948 L20 – T949 L12.

Ms Laurens-Tearle gave evidence in Mr Daffy’s serious injury application in the County Court which was heard in November 2014. In those proceedings Ms Laurens-Tearle gave evidence that she had no recollection of the events between Mr Daffy’s first chiropractic appointment on 8 October 2010 and his admission to hospital on 14 October 2010.

During the serious injury application Ms Laurens-Tearle had given evidence that her memory of the events of October 2010 was poor.[37]
[37]Ibid T955 LL27–28.

In the current proceedings, Ms Laurens-Tearle gave the following evidence regarding Mr Daffy’s condition between his first visit to the chiropractor (8 October 2010), and the day of injury:

He was walking better than what he was before he went to the chiropractor. Then he sort of – you could tell he was still in pain but he was a bit straighter and a bit slower but, yes, not jumping through hoops.[38]

[38]Ibid LL20–24.

When it was put to Ms Laurens-Tearle that she now seemed to have an extremely clear memory her response was:

That’s just – that’s what happened.[39]

[39]Ibid LL25–26.

Mr Brett QC, who appeared with Mr Kelsey-Sugg for Mr Daffy, put to Ms Laurens-Tearle that there was an inconsistency between her evidence in the serious injury application of having had a poor memory of the events of October 2010 and not having any recollection of Mr Daffy between 8 October and 14 October 2010, compared to the evidence that she was providing in the current proceedings. Her response was:

Not then but I have thought about it. I went back through my steps because that was something I didn’t even – because I don’t think about it every day. That was something that I just ---[40]
…
Yes. Just because I have had time to, like, go back and re-step what actually happened… Not reconstruct but think about what I may have missed or what actually happened.[41]

[40]Ibid T956 LL14–18.

[41]Ibid LL24–29.

There is a direct inconsistency between the evidence provided in the current proceedings and that which was given by Ms Laurens-Tearle in the serious injury application. On the one hand, Ms Laurens-Tearle conceded in November 2014 that she had a poor or no recollection of the events between 8 and 14 October 2010 insofar as they related to Mr Daffy. On the other hand, in the current proceedings Ms Laurens-Tearle purported to have a clear recollection of the events and Mr Daffy’s condition.

Mr Daffy’s Workcover claim form is in evidence.[42] The claim form records that Mr Daffy reported his injury on 14 October 2010 to Ms Laurens-Tearle and Ms Silvestri. The form was provided to Ms Laurens-Tearle on 29 July 2011 and Ms Laurens-Tearle signed the form on that date. Ms Laurens-Tearle gave evidence that at the time she signed Mr Daffy’s Workcover claim form she was aware that she had been identified as a witness.[43] Ms Laurens-Tearle gave evidence that subsequent to 29 July 2011 she was directed by Vivian Bridges, an employee of Southern Star Windows, not to sign any further Workcover claims.[44] Ms Laurens-Tearle’s conduct in signing the claim form in the knowledge that she had been identified as a witness is inconsistent with her denial of any knowledge that Mr Daffy injured his back on 14 October 2010.
[42]Exhibit C: Workcover worker’s claim form signed by Mr Daffy, dated 29 July 2011.
[43]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 21 June 2016) T950 LL21–24.
[44]Ibid T951 LL18–19.

Ms Laurens-Tearle was also interviewed by Bendigo Investigation Services in August 2011.[45] That statement includes the following:

In my opinion Kevin had very little involvement in the daily activities of the factory. There were times that he may have gone out to see how things were going but I do not recall Kevin ever going out to assist with any of the work.[46]

In the current proceedings Ms Laurens-Tearle accepted that this statement was not accurate. Ms Laurens-Tearle accepted that when interviewed by the Workcover investigator in August 2011 regarding the events leading up to October 2010, it was not true to say that Mr Daffy had very little involvement in the activities of the factory.[47] Ms Laurens-Tearle accepted that she made a statement directly adverse to Mr Daffy’s interests.[48]

[45]Exhibit H: Court Book 863-67, Statement in the Matter of: Kevin Daffy.

[46]Ibid 864, [9].

[47]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 21 June 2016) T962 LL14–17.

[48]Ibid LL25–27.

The defendants contend that ‘Ms Laurens-Tearle provides the best evidence because her account was objective, made fair concessions and demonstrated a good recall of the relevant events’.[49] I reject this submission. First, Ms Laurens-Tearle is a close personal friend of Mr Gray. Second, after the closure of SSDW she received ongoing employment with improved conditions (a company car) whilst nearly all other employees of SSDW were terminated. Third, there is direct inconsistency between her evidence in the serious injury application proceedings in November 2014 and that which Ms Laurens-Tearle gave in the current proceedings. Fourth, she now concedes that a statement which she provided to a Workcover investigation was untrue. Fifth, her denial of any knowledge of Mr Daffy having injured his back on 14 October 2010 is inconsistent with her signing the Workcover claim form which identified her as a witness. Finally, there is the issue of Ms Laurens-Tearle’s demeanour in the witness box. Ms Laurens-Tearle presented as a most unimpressive witness. She trailed off when giving answers to questions. She did not maintain eye contact with anybody in the Court. She appeared extremely uncomfortable and ill at ease when giving her evidence. Even after making due allowance for the stress which confronts any witness giving evidence in Supreme Court proceedings, I have concluded that Ms Laurens-Tearle was not a reliable witness. I do not accept Ms Laurens-Tearle’s testimony wherever it conflicts with the evidence given by Mr Daffy, Ms Silvestri and Mr Rao.
[49]‘Closing Submissions of the Defendants’ dated 15 July 2016, [181].

The defendants contend that Mr Daffy’s evidence that he injured his back following a single catastrophic lift of a sliding door at work should be rejected.[50] I reject this submission. I accept the evidence of each of Mr Daffy, Mr Rao and Ms Silvestri regarding the injury and its immediate aftermath on 14 October 2010. To the extent that the defendants rely upon the contrary evidence of Ms Laurens-Tearle, I reject that evidence.
[50]Ibid [190].

In the aftermath of his injury on 14 October 2010, Mr Daffy was absent from the workplace for approximately one month. There is some divergence in the evidence as to the exact period of time Mr Daffy was absent. Ms Laurens-Tearle estimated the time off work at ‘two to maybe three weeks’.[51] Mrs Daffy estimated that Mr Daffy was off work for four to five weeks.[52] Ms Silvestri said that it was ‘at least’ or ‘in excess of’ three weeks.[53] Mr Daffy estimated ‘four to five weeks’ or ‘at least a month’.[54] Mr Meehan worked as a sales representative in the office at SSDW alongside Mr Daffy, Ms Laurens-Tearle and Ms Silvestri. He was called as a witness by the defendants. He gave evidence that Mr Daffy was away for ‘three weeks, maybe a month’.[55]
[51]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 21 June 2016) T938 LL7–9.
[52]Ibid (16 June 2016) T626 LL14–15.
[53]Ibid T594 LL11–14.
[54]Ibid (8 June 2016) T201 LL5–9.
[55]Ibid (23 June 2016) T988 L4.

Mr Daffy gave evidence that following his return to work up until the Christmas break he was working approximately two to three hours per day.[56] When he returned to work in January he was arriving at work at about 9 o’clock but leaving after lunch.[57] He tried to attend work as much as he could but it was not every day. It was most days.[58] Following his return to work until the time of the termination of his employment on 24 May 2011 he was not able to perform his usual duties of visiting customers at building sites and assisting on the factory floor.[59] He was never able to perform full time work.[60]
[56]Ibid (8 June 2016) T203 LL1–3.
[57]Ibid T204 L31 – T205 L2.
[58]Ibid T203 LL22–24.
[59]Ibid LL16-18.
[60]Ibid LL19-21.

The defendants contend that Mr Daffy’s evidence is:

an exaggerated account, which has been reconstructed after the event. Throughout the period from shortly after he left hospital until 24 May 2011, the plaintiff wasn’t taking the time off or working the short hours he said he was and was largely well and free of pain in a way that would allow him to work.[61]

[61]‘Closing Submissions of the Defendants’ dated 15 July 2016, [135].

In support of the contentions set out above the defendants rely upon the following matters: First, the ‘Employee Leave History’ for Mr Daffy.[62] These records include two entries for sick leave in October 2010 totalling seven days: 14 and 15 October and 18 to 22 October 2010. I do not accept that these records constitute reliable evidence of Mr Daffy’s absence from the workplace due to the injury he sustained on 14 October 2010. All witnesses gave evidence inconsistent with these records. The weight of evidence strongly supports a finding that Mr Daffy was absent for approximately four weeks after his injury on 14 October 2010. This includes the evidence in chief of Mr Meehan who was called to give evidence by the defendants. Further, there is the evidence of Mr Daffy, Ms Silvestri and Mr Meehan that after his return to work Mr Daffy continued to have days off work. If the employee records are to be believed, Mr Daffy did not have a single day of sick leave between 22 October 2010 and 24 May 2011. Such a finding would fly in the face of a significant body of evidence.
[62]Exhibit H: Court Book 2262, Employee Leave History.

Second, the defendants place particular weight upon contemporaneous notes and records of Mr Daffy’s treating neurosurgeon, Mr Paul Smith, in the period 18 October 2010 to 9 December 2010.

Paragraphs 148 to 153 of the Defendants’ Closing Submissions are as follows:

By the time of his discharge from hospital on 18 October 2010, the plaintiff’s pain had essentially resolved. He was discharged on a reducing course of steroids. Mr Smith records:
"His pain was extremely severe on admission, but responded very well to oral steroid and in fact has essentially resolved now. Having said that he is still on significant doses of steroid which will be tapered over the next 9 days."

By 4 November 2010 his pain was almost gone and he was doing quite well:
"I reviewed Kevin today. It has now been around 6 days since he stopped his steroid medication after the tapering regime and I am pleased to report that he only really has about 2 out of 10 pain now compared to the very significant pain he had on entry to hospital. He still reports that sitting induces exacerbations in the pain, but by and large he does seem to be doing quite well".

Mr Smith agreed that this indicated Mr Daffy said he had pain at a low level.
On 10 November 2010 the plaintiff consulted the rooms of Mr Smith asking if he should be doing physiotherapy or hydrotherapy to aid in his recovery.
By 9 December 2010 he was off all analgesia and was "essentially pain free":
"I reviewed Kevin today. He is off all analgesia now, and is doing really very well with regards to his right-sided sciatica. He essentially does not have any pain any longer. .. I have made a tentative appointment to see him in 3 months’ time; however if he is faring very well over the period in between there would be no reason for him to come along, and we could just touch base over the phone and save him a trip".

Mr Smith said that things were "good" with the plaintiff at that time. He agreed that by this time it was quite likely that the plaintiff’s experience of pain was by then below 2 out of 10.[63]

[63]‘Closing Submissions of the Defendants’ dated 15 July 2016, [148]–[153] (emphasis altered) (citations omitted).

The defendants contend that the histories recorded by Mr Smith as set out above ‘are irreconcilable with the plaintiff’s claim to have been unable to properly work by reason of severe pain throughout the period starting in October/November 2010 until May 2011’.[64] I reject this submission. The starting point for doing so is the unchallenged evidence that Mr Daffy was admitted to hospital in agony late on 14 October 2010 and was prescribed narcotic analgesics endone and oxycontin. No doubt compared to the pain he was in upon admission there would have been a significant improvement in his pain levels. This was acknowledged by Mr Smith during his evidence:

… an initial euphoria about the absence of extreme pain but in fact as the dust settles and one sees the patient six weeks later… patients may then reflect and realise even once that initial terrible pain has gone, they are actually very limited in their activities at home… but compared to the initial pain, it is much, much better.[65]

[64]Ibid [155].

[65]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 14 June 2016) T329 LL19–28.

If, as is suggested by Mr Smith’s clinical notes on 18 October 2010,[66] Mr Daffy’s pain had been resolved there would have been no impediment for him to have returned to work immediately thereafter. However, based on my finding that he was absent for approximately four weeks after his injury, he did not do so until mid November 2010.
[66]Exhibit H: Court Book 2009.

Further, the weight of evidence, including that of Mr Meehan, supports a conclusion that upon Mr Daffy’s return to work he continued to work reduced hours with a modified work station and was displaying clear signs of being in pain.

Mr Rao, who was an entirely credible witness, gave evidence that after Mr Daffy’s return to work:

He was not regular to the work. He was working, like – it seems like he was working as a part-time job on there.[67]

[67]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 16 June 2016) T569 L30 – T570 L1.

Mr Meehan gave evidence that upon Mr Daffy’s return to work:

instead of, like, doing an eight hour day, probably six or four hour day, five. Thereabouts.[68]

As to Mr Daffy’s work habits post the Christmas break:

It was fairly similar, as far as I can recall. There were periods when he wasn’t there. He would not be there for the day but, yes, but I couldn’t tell you how often.[69]

[68]Ibid (23 June 2016) T988 LL23-25.

[69]Ibid T990 LL10–13.

Mr Meehan’s evidence is consistent with that of Mr Daffy that post January 2011 he was working four to five hours a day as well as having some days off completely.[70]
[70]Ibid (8 June 2016) T204 L30 – T205 L2, T203 LL22–24.

Objective evidence that Mr Daffy was not pain free upon his return to work arises from the changes to his working environment. Mr Meehan gave evidence, consistent with that of Mr Daffy and Ms Silvestri, that Mr Daffy’s computer had been elevated on his desk so that he could stand up and work. Mr Meehan summed up the position succinctly:

his back was crook. It hurt him to sit down for long periods of time...[71] He was mostly standing...[72] He laid down and did some exercises flat on the back and rolled from side to side… I don’t recall seeing it a lot but I recall seeing it from time to time.[73]

[71]Ibid (23 June 2016) T989 LL3–5.

[72]Ibid LL11-12.

[73]Ibid T990 LL2–7.

Mr Meehan also gave evidence consistent with Mr Daffy that upon Mr Daffy’s return to work he had changed his car from a Toyota Hilux ute to a more comfortable sedan.[74] Mr Meehan gave evidence that when Mr Daffy was at work he was in ‘visible pain’.[75]
[74]Ibid T998 LL20–23.
[75]Ibid L31.

Ms Silvestri gave evidence that following Mr Daffy’s discharge from hospital she visited him at home:

He looked in excruciating pain. Most of the time when I would go he would be laying on the bed and I would have to actually go into their bedroom to – he was obviously clothed just laying on top of the bed, not in sleepwear, and he would just be laying flat.[76]

[76]Ibid (16 June 2016) T593 LL22–26.

Ms Silvestri’s evidence was that Mr Daffy was in a very bad state when he returned to work:

He couldn’t walk properly. He would only come for an hour, sometimes two hours. Some days three…The days that he did attend for the three hours he would often be in so much pain that we had a common room in front of our offices, an open area with just a round table and chairs and he would go and lay on the floor next to the table.[77]

[77]Ibid T594 L31 – T595 L8.

Ms Silvestri helped to set up a new work station for Mr Daffy so that he could stand at his desk and work because he was unable to sit.[78]
[78]Ibid T595 LL15–18.

This evidence, which I accept, is irreconcilable with the defendants’ contention that upon Mr Daffy’s return to work he was largely pain free. It supports the opposite conclusion.

Contrary to the evidence of Messrs Rao, Meehan, Daffy and Ms Silvestri, Ms Laurens-Tearle gave evidence that after his return to work, the hours that Mr Daffy worked ‘didn’t seem any different to what he would normally do… He would come and go just as he was, yes, when I first started’.[79] This evidence is directly inconsistent with the evidence of Mr Daffy, Mr Rao, Mr Meehan and Ms Silvestri. As with Ms Laurens-Tearle’s evidence regarding the events of 14 October 2010, I reject it.
[79]Ibid (21 June 2016) T939 LL20-24.

Insofar as the clinical notes of Mr Smith in the period October to December 2010 make reference to Mr Daffy being pain free, this is explicable for the following reasons. First, the initial euphoria of Mr Daffy having recovered from the incandescent pain that he was experiencing at the time of his admission to hospital on the evening of 14 October 2010. Second, Mr Daffy gave evidence, which I accept, that from the time of his injury he was fearful of surgery.[80] I accept his evidence that in reporting his symptoms to Mr Smith there was an element of his downplaying his pain levels reflecting his fear of surgery. Further, I accept the following assessment of Mr Daffy which was provided by Mr Smith:

He struck me as a very stoic man, actually. Even though I mentioned that he was in extraordinary pain when I first met him, I think that was because he simply was in extraordinary pain and later on when I met him I had the impression that he was really very much a non-complaining type of person and in fact, I felt that I needed to get corroborative history from his wife to truly assess how much pain he was in.[81]

[80]Ibid (15 June 2016) T457 LL26-31, (9 June 2016) T269 LL20-22.

[81]Ibid (14 June 2016) T327 L29 – T328 L5.

On 26 July 2011, Mr Daffy consulted Mr Paul Smith. Mr Smith forwarded a report of his consultation to Dr Karen Wilson, Mr Daffy’s general practitioner.[82] That report included the following:

He says that over the last few months there has been a return of elements of both right S1 radiculopathy to a much lesser extent than when he originally had, but still troubling and also troublesome lumbar back pain very suggestive of discogenic pattern pain on questioning. He is particularly troubled when sitting or standing still and certain postures in bed can aggravate things as well.[83]

[82]Exhibit H: Court Book 2008, Medical Report of Mr Paul Smith.

[83]Ibid.

I reject the defendants’ contention that Mr Daffy was pain free from 18 October until the time of the termination of his employment on 24 May 2011.

As at October 2010 Mr Daffy had invested $750,000 to acquire a 50 per cent shareholding in SSDW.[84] Mr Daffy gave evidence that after his return to work in January 2011:

I was really struggling with my back. I was – really, if I hadn’t had so much invested in the business I would probably, you know – probably wouldn’t have gone at all. I just felt under so much pressure because, you know, I had invested $750,000 in this business and felt the obligation to my family and my business partners to try and do the best I could.[85]

[84]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 8 June 2016) T188 LL8–12, T190 LL16–24.

[85]Ibid T205 LL6–13.

I accept the evidence of Mr Daffy and Ms Silvestri that post his return to work in mid November 2010 he was significantly restricted in the range of duties which he performed and the number of hours which he worked. I also accept Mr Daffy’s evidence that he was significantly motivated to continue working post mid November 2010 by reason of the significant financial investment which he had made in the business of SSDW.

Both Mr Daffy and his wife gave evidence of difficulties which he encountered post 14 October 2010 in performing the activities of daily living such as showering and getting dressed. Mr Daffy’s evidence was that his wife helped him with washing and drying his lower limbs. Every day she helps him put his underpants and pants on up to the point where he can reach them and pull them up.[86] This evidence was confirmed by Christine Daffy.[87] Mrs Daffy’s evidence is that she has had to provide this assistance from the time of the injury to the present date.[88] I accept Mrs Daffy’s evidence.
[86]Ibid T220 L14 – T221 L1.
[87]Ibid (16 June 2016) T633 L30 – T634 L10.
[88]Ibid T634 LL13–14.

Ms Silvestri gave evidence that following Mr Daffy’s discharge from hospital she visited Mr Daffy’s house on a weekly basis for a period of approximately six to eight months.[89] Her evidence was that she would regularly observe his lying flat on his back on his bed.[90] Ms Silvestri gave evidence that her sister, Christine, told her that he was not able to do any of the activities such as getting dressed and putting on a pair of shoes and that she had to help him put on his socks. Ms Silvestri’s evidence is that up until a year ago when she ceased speaking to Mr and Mrs Daffy nothing had changed in his condition.[91]
[89]Ibid T620 LL21–24.
[90]Ibid LL25–26.
[91]Ibid T621 LL8–12.

In mounting a challenge to Mr Daffy’s credit the defendants placed considerable weight on the absence of any evidence of Mr Daffy having consulted any medical practitioner during the period from early November 2010 until July 2011.[92] The defendants submitted that the absence of any medical consultation was consistent with Mr Daffy exaggerating the level of pain which he was in fact suffering during this period.[93] I do not accept this submission. First, I accept the evidence referred to above regarding the significant difficulties that Mr Daffy was experiencing both in the workplace and in the performance of the activities of daily living. Second, it is unarguable that Mr Daffy suffered a serious injury on 14 October 2010 which required a period of hospitalisation. Further, whilst in hospital he was prescribed strong pain killers: endone by Dr Wilson,[94] and oxycontin by Dr Pellizzer.[95] He was unable to return to work for a period of approximately a month. There is direct evidence from Mr Daffy corroborated by Ms Silvestri and Mrs Daffy that when he did return to work he was consistently suffering varying degrees of pain. His reduced work hours and the restricted range of duties which he performed are consistent with this. There is also evidence that during the period post November 2010 until July 2011, Mr Daffy was consuming a large quantity of over the counter pain killers. Mrs Daffy gave evidence that he was ‘chewing on painkillers like lollies’.[96] She further stated that‘[h]e was munching through painkillers. I was telling him off so much at home. I was so worried about him… He was just popping them like lollies, anything he could get his hands on’.[97]
[92]‘Closing Submissions of the Defendants’ dated 15 July 2016, [136].
[93]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1071 LL23-31.
[94]Exhibit H: Court Book 1741, Progress Notes.
[95]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 9 June 2016) T275 L31 – T276 L5.
[96]Ibid (16 June 2016) T630 LL4–5.
[97]Ibid (17 June 2016) T695 LL3–7.

The defendants’ contention that Mr Daffy was pain free during the period early November until 24 May 2011 is not supported by the evidence given by Dr McIntosh, a consultant psychiatrist who has treated Mr Daffy intermittently since 2007. Mr Daffy has a history of significant mental health issues. In early 2007, Mr Daffy suffered a serious episode of depression which resulted in his admission to a psychiatric hospital for a period of four to five weeks. This was a result of a significant adverse reaction which Mr Daffy had to a weight loss drug.[98]
[98]Exhibit H: Court Book 2132, Report of Dr McIntosh dated 25 September 2012.

On 8 October 2010 Mr Daffy consulted Dr McIntosh. This date coincides with the first occasion Mr Daffy consulted Dr Pratt, the chiropractor who had been recommended to him by Ms Laurens-Tearle. Dr McIntosh’s notes of his consultation record:

I think that Kevin has had a classical relapse in the past month or two. On this occasion, he has clearly been dysphoric, lots of anxiety, lots of foreboding, lots of concentration problems. Of course, he stopped the Zoloft back in May when he had been reasonable for a while. He has been back on it for the past few days after our phone call, and is a little better.
Overall, I think the major point of discussion relates to Kevin’s propensity towards very extreme absolutist “all or nothing” approaches. He has lost 30 or 40 kgs on a least half a dozen occasions in life, with varying exercise/dietary regimes, but the problem here is that he loses it quickly and he puts it on quickly. His approach in the last couple of years re his depression has been rather unbalanced, no exercise, a woeful diet, no activity and in my opinion, an over reliance on medication.
Kevin agrees with the above. The plan for the time being is Zoloft 100mgs for the next month or two, perhaps 50 mgs thereafter. It will be interesting to see whether he does anything on the exercise/dietary front.[99]

[99]Exhibit H: Court Book 2185, Report Dr McIntosh dated 8 October 2010.

Dr McIntosh’s handwritten notes of his consultation with Mr Daffy on 8 October 2010 also record a reference to ‘right sciatic nerve’ discomfort/pain.[100] This is consistent with Mr Daffy attending Dr Pratt that evening for the first occasion for treatment.
[100]Ibid 2186, handwritten notes of Dr McIntosh dated 8 October 2010. See also Court Book 2134, Report of Dr McIntosh dated 25 September 2012.

On 5 November 2010, Mr Daffy had a further consultation with Dr McIntosh. The timing of this consultation is significant because it is one day after Mr Daffy consulted Mr Smith. Dr McIntosh’s report of this consultation is as follows:

At this time, problems with sciatica/back pain were in the ascendency. I note that Mr Daffy had an inpatient period at St Vincent’s for 5 days under Dr Paul Smith?? [sic] He told me that he had been treated with some “steroids”, but at that stage he was on low dose Oxycontin because of his back pain. He told me that he had significant problems with paraesthesia/numbness. And whilst I thought it was appropriate for him to continue on Zoloft 100 mg for his depression, I was somewhat concerned as to the extent of his pain, the degree of his incapacity because of pain/immobility; and I was very concerned re him being on Oxycontin (opiates). I thought he was a poor candidate re staying on them long term.[101]

[101]Exhibit H: Court Book 2134, Report of Dr McIntosh dated 25 September 2012. See also Court Book 2185, Report Dr McIntosh dated 8 October 2010.

It is to be noted that Dr McIntosh’s written report of 25 September 2012, which refers to his consultation with Mr Daffy of 5 November 2010, erroneously attributed a date of February 2010. However, Dr McIntosh upon reviewing his files corrected this error and confirmed that the date of consultation was in fact 5 November 2010.[102]
[102]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 15 June 2016) T472 LL22-27.

Dr McIntosh had a further consultation with Mr Daffy on 27 April 2011. His record of this consultation is as follows:

I note that on the 27/4/2011, he presented as “fair” with regard to his depression. He told me that there had been some serious problems with regard to the dealings with one of his window business partners “the lawyers are involved”. But I found it difficult to understand what had transpired at his place of work and I note that overall, it appeared to me as though whilst Mr Daffy was somewhat stressed/frazzled because of his business problems, the major issue at that time was his immobility/his weight gain/and the ongoing pain that he was describing in his back and leg. I note that he was struggling to do much at all at this time. He was having to have significant periods of rest, and he was hardly able to exercise/walk.[103]

[103]Exhibit H: Court Book 2135, Report of Dr McIntosh dated 25 September 2012.

Dr McIntosh’s hand written notes of this consultation with Mr Daffy record him as suffering from ‘back pain/foot numbness’.[104]
[104]Ibid 2183, handwritten notes of Dr McIntosh dated 27 April 2011.

Mr Daffy had a further consultation with Dr McIntosh on 25 July 2011. Whilst this consultation post-dates the termination of Mr Daffy’s employment on 24 May 2011, it is relevant to an assessment of Mr Daffy’s physical and mental condition prior to that date. Dr McIntosh records that as at 25 July 2011:

… I thought that Mr Daffy presented in a rather compromised state. He told me that he was sleeping poorly, and that he had ongoing pain. He had issues of numbness and para-aesthesia affecting his right lower leg, and he told me that he was “living on Nurofen, Panadol and other pain killers”.
Overall, I thought that Mr Daffy at that time presented in a rather miserable/easily agitated state.
He was in chronic pain, he was describing some rather unusual events re dealings with his previously [sic] business partners, involving his phone numbers being withdrawn/difficulty accessing his car. I struggled to understand the specifics.
But overall, I thought that Mr Daffy clearly presented in a rather compromised state. He told me that he was going to see the neurosurgeon subsequently. I was still concerned about his ongoing problem of being overweight. I note that he hadn’t been able to do any specific eg. core muscle exercises, no swimming programs etc. He told me that he was struggling along at home in a rather agitated/dysphoric state “preoccupied with pain”. There were themes of hopelessness, him feeling “overwhelmed”. I note that Mr Daffy and I agreed that because of his problems with chronic pain, a change of antidepressants might be appropriate, Mr Daffy thereafter proceeding from Zoloft to some Cymbalta. I note that I was rather concerned that Mr Daffy was getting “stuck” taking oral narcotics to cope with his pain, and he and I discussed this issue at length.[105]

[105]Ibid 2135, Report of Dr McIntosh dated 25 September 2012.

Dr McIntosh’s handwritten notes of his consultation with Mr Daffy on 25 July 2011 record Mr Daffy’s statement that he had experienced nine months of back pain.[106] Mr Daffy also stated that he had a ‘fucked back’ and a ‘fucked head’.[107]
[106]Ibid 2182, handwritten notes of Dr McIntosh dated 25 July 2011.
[107]Ibid 2181.

The evidence regarding Dr McIntosh’s consultations with Mr Daffy during the period 8 October 2010 to 25 July 2011 supports the following findings of fact. First, throughout this period Mr Daffy had ongoing mental and physical health problems. Second, there is a discrepancy between the information provided by Mr Daffy to Mr Smith on 4 November 2010 regarding his pain levels and that which he provided to Dr McIntosh the following day. Mr Daffy was more forthcoming with his discussions with Dr McIntosh regarding his pain levels than was the case with Mr Smith. Third, the express statements which were made by Mr Daffy to Dr McIntosh on 5 November 2010 and 27 April 2011 regarding the pain he was experiencing at the time is inconsistent with the defendants’ contention that Mr Daffy was in fact pain free at this time. The same observation may be made in respect of Mr Daffy’s statement to Dr McIntosh on 25 July 2011 that he had been suffering back pain for nine months.

Mrs Daffy gave the following evidence of Mr Daffy’s last day of attendance at the workplace on 20 May 2011:

20 May was a Friday and that was the last day that he actually went in and he only went in for about an hour. He came home and he was in terrible pain. In fact, that week he had hardly gone in at all. There were many days that he didn’t even go in that week and he did say to me, “I don’t know how I can continue this. I don’t know how I can go on. I can’t do this job.”[108]

[108]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 16 June 2016) T628 L29 – T629 L5.

Mr Daffy gave the following evidence regarding his condition as at 20 May 2011:

I was in a lot of trouble with my back and I was just beside myself as to what I was going to do.[109]

[109]Ibid (8 June 2016) T211 LL4–6.

On 24 May 2011, Mr Daffy attended a meeting in Geelong with his fellow directors of SSDW. Mr Daffy was accompanied by his solicitor, Mr Pat Lennon. The meeting arose out of a demand by Mr Paul Gray that SSDW pay Southern Star Windows Pty Ltd an amount of $1.2 million which he contended was owed by SSDW.[110] The origins of this dispute arose out of a sale by Mr Daffy of his 5 per cent share in Southern Star Windows for $1,050,000. At the time of the sale he received $600,000 in cash – $300,000 paid directly by Southern Star Windows and $300,000 drawn on the bank account of SSDW. The remaining $450,000 was paid by way of a share transfer whereby Mr Daffy’s 20 per cent shareholding in SSDW was increased to 50 per cent. The net effect of these transactions was that Mr Daffy’s loan account with SSDW was reduced from a $300,000 balance to a zero balance, and the accounts of SSDW disclosed a $1.2 million loan account for Southern Star Windows, reflecting Southern Star Windows’ original investment in SSDW.[111]
[110]Ibid T209 LL7–10.
[111]Ibid T207 LL10–31, T208 LL11–20.

SSDW did not have $1.2 million to pay Southern Star Windows’ loan account. Mr Gray wanted a payment plan put in place to pay it back. Mr Daffy objected to this.[112]
[112]Ibid T209 LL17–28.

No resolution was reached at the meeting on 24 May 2011. Rather, Mr Daffy’s fellow directors moved to terminate his employment forthwith. He was handed a notice of termination at the conclusion of the meeting on 24 May 2011, on the letterhead of Southern Star Windows’ solicitors.[113]
[113]Exhibit H: Court Book 2261, ‘Termination of Employment’ dated 24 May 2011.

There is an issue in the proceedings as to the capacity in which Mr Daffy attended the meeting on 24 May 2011. Mr Brett submitted that he attended the meeting in his capacity as a shareholder in SSDW, not in his capacity as General Manager. [114] The defendants contend to the contrary.[115]
[114]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1149 LL18-30.
[115]Ibid T1122 LL6-27.

The fact that Mr Daffy attended the meeting on 24 May 2011 accompanied by his solicitor is an objective indicator that the purpose of the meeting was not the discharge of his normal duties as General Manager of SSDW. Plainly, an employee does not normally attend work accompanied by his legal advisor. I accept Mr Brett’s submission that Mr Daffy attended the meeting in his capacity as a shareholder and investor of SSDW. The fact that the meeting resulted in the termination of his employment does not alter this conclusion. I accept the plaintiff’s contention that he was absent from his occupation as General Manager of SSDW from 20 May 2011. This conclusion is supported by the section of the Workcover claim form completed by Mr Daffy’s employer dated 8 August 2011 and signed by Vivienne Bridges, Southern Star Windows’ Admin/Finance Manager. [116] This document contains the following entry:

EMPLOYEE TERMINATED LAST PAID 20/5/2011 ATTACHED COPY OF PAYROLL.[117]

[116]Exhibit C: Workcover worker’s claim form signed by Mr Daffy, dated 29 July 2011.

[117]Ibid.

If Mr Daffy had attended the meeting on 24 May 2011 in his capacity as General Manager of SSDW there would have been an obligation upon SSDW to have paid him salary. The payroll records for Mr Daffy are in evidence.[118] The records confirm that Mr Daffy was not paid beyond 20 May 2011.
[118]Exhibit H: Court Book 2273-4, Employee Previous Earnings: Southern Star Designer Windows Pty Ltd.

Post 24 May 2011 until the present day, Mr Daffy has not had any employment. In late July 2011 he had a further consultation with Mr Smith. The defendants concede that for a period of six months commencing late July 2011 Mr Daffy would not have been able to have attended work solely through injury/illness.[119]
[119]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1079 LL6-13.

Mr Daffy lodged a TPD claim on 29 May 2012. The claim was rejected on 29 January 2013. Mr Daffy made an application for review on 11 July 2013 which was refused on 9 September 2013. Mr Daffy made a further request for review on 10 September 2015, which was refused on 6 November 2015. The rejection of the initial claim and the applications for review was based on MLC’s application of the Sixth Schedule definition of TPD. In particular, MLC was not satisfied that Mr Daffy had suffered a total irreversible inability to perform at least two of the Activities of Daily Living.[120]

The Trust Deed and Policy

[120]See Exhibit H: Court Book 1141-2.

Introduction

Before addressing the relevant provisions of the Policy it is necessary to make some general observations regarding the drafting of the Policy.[121] Shortly stated, the drafting of the Policy is, in significant respects, of poor quality. A significant feature of the Policy is the use of defined terms. On the one hand the defendants contend that where defined terms such as ‘Occupation’ and ‘Benefit’ appear in the Policy, there must be strict adherence to the term as defined.[122] However, in the case of the Sixth Schedule definition of TPD using ‘Occupation’, the defendants contend there has been a drafting error such that ‘Occupation’ should be read as ‘occupation’.[123] Similarly, where a literal reading of cl 27.1(e) has the consequence that the Sixth Schedule is rendered inutile the defendants urge the Court to depart from a literal construction of the Policy.[124] In other instances the defendants contend that a literal reading of the Policy must be adhered to.
[121]See Exhibit H: Court Book 320, M100 Policy.
[122]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1128 LL6-14.
[123]Ibid (5 August 2016) T1279 L20 – T1280 L28.
[124]‘Closing Submissions of the Defendants’ dated 15 July 2016, [103]-[104].

The effect of the poor drafting, to which detailed reference is made below, has been to make the task of construction of the Policy difficult. In undertaking this task I have endeavoured to apply the principle succinctly stated by Beach JA in Hannover Life Re of Australasia Ltd v Colella:

First, as has been said before, a policy of insurance is a commercial contract and should be given a businesslike interpretation. Interpreting a policy of insurance (like any other commercial document) requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.[125]

[125][2014] VSCA 205, [3] (‘Hannover’), citing McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, [22]; Intergraph Best (Vic) Pty Ltd v QBE Insurance Ltd (2005) 11 VR 548, [27]; Electricity Generation Corporation v WoodsideEnergy Ltd (2014) 88 ALJR 447, [35].

The Trust Deed

MLC Nominees is the trustee of the Fund under a trust deed executed on 27 June 1999 as amended from time to time. The operative part of the trust deed was replaced by the terms set out in a deed poll dated 22 July 2010. These are set out in schedule 1 to the amending deed poll.[126]
[126]Exhibit H: Court Book 85-158, The Universal Super Scheme Amending Deed Poll.

A member of the Fund is defined in clause 1.1 as:

a person admitted as a member of the Fund and who has not ceased to be a member of the Fund.[127]

[127]Ibid 100.

The defendants admit that, at all relevant times, Mr Daffy was a member of the Fund.[128] This includes the period post termination of his employment on 24 May 2011 until the present time.
[128]‘Closing Submissions of the Defendants’ dated 15 July 2016, [15].

Clause 4(1) provides that the Trustee may establish a ‘Member Package’.[129]
[129]Exhibit H: Court Book 108, The Universal Super Scheme Amending Deed Poll.

Member Package is defined in cl 1 as:

a part of the Fund that:
(a) has been (or which is) established by the Trustee under clause 4.1;
(b)comprises the assets held by the Trustee in respect of that part of the Fund; and
(c)has terms (eg a fee structure and Investment Options) determined under clause 4.2.[130]

[130]Ibid 100.

Clause 4 of the Amending Deed Poll explains:

On the date of this deed poll, the Fund has the parts listed in Attachment 2 to this deed poll (that after this deed poll takes effect will each be called a 'Member Package').[131]

[131]Ibid 90.

Attachment two to the Trust Deed identifies each Member Package. This includes:

MLC MasterKey Business Super (incorporating MLC MasterKey Personal Super).[132]

[132]Ibid 157.

The defendants admit that at all relevant times, including the period post the termination of the plaintiff’s employment, Mr Daffy was a member of this Member Package.[133] There is no issue between the parties that post 24 May 2011 the payment of premiums for Mr Daffy’s TPD and income protection insurance has been by way of deduction from his superannuation fund account.[134] For example, for the year ending 30 June 2015 an amount of $2,643.21 was deducted from the opening account balance of $24,801.94.[135]
[133]‘Closing Submissions of the Defendants’ dated 15 July 2016, [20].
[134]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 5 August 2016) T1193 LL1-6.
[135]Exhibit H: Court Book 775, MLC MasterKey Business Super Statement for year ending 30 June 2015.

‘Insurer’ is defined as including MLC Limited.[136]
[136]Exhibit H: Court Book 100, The Universal Super Scheme Amending Deed Poll.

‘Policy’ is defined as:

a policy of insurance obtained by the Trustee in connection with the Fund or a Member Package.[137]
[137]Ibid.

The Policy

The Policy is in two parts: an amending deed and then a policy of insurance attached to that deed as Appendix 1.[138]
[138]See Exhibit H: Court Book 320, M100 Policy.

The Policy is a contract between MLC Limited and MLC Nominees Pty Ltd. The Policy was amended by an amending deed dated 14 April 2009. Pursuant to cl 3 of that amending deed, the terms of the Policy are set out in the provisions contained in Appendix 1.[139]
[139]Ibid 322.

The Policy commences with the following words:

The following provisions govern the payment of premiums by the Policy Holder and the payment of Benefits by MLC and form the contract between the Policy Holder and MLC.[140]

[140]Ibid 326.

Part 1 includes the following definitions:

Activities of Daily Living means:
(a)bathing and showering; or
(b)dressing; or
(c)moving from place to place, including into and out of bed and into and out of a chair; or
(d)eating and drinking; or
(e)using the toilet.[141]

Policy Holder means MLC Nominees Pty Limited ABN 93 002 814 959.[142]
MLC means MLC Limited ABN 90 000 000 402 AFSL 230694 whose head office is located at 105-153 Miller Street North Sydney NSW 2060.[143]
Benefit means any benefit payable under this Policy.[144]
Occupation means the Employment or activity in which the person/Member is principally Employed.[145]
Employed/Employment means a person being engaged in Full Time Employment, Permanent Part Time Employment, Fixed Term Employment or Casual Employment but does not include any person who is in Seasonal or Contract Employment. [146]

[141]Ibid.

[142]Ibid 330.

[143]Ibid 329.

[144]Ibid 326.

[145]Ibid 329.

[146]Ibid 327.

Clause 4.1 prescribes death and TPD benefits. It relevantly provides:

Death and TPD Benefits (Applicable where Death Cover and Total and Permanent Disablement Cover applies to the Member)
If, whilst this Policy is in force in respect of a Member, the Member:
(a) dies, or
(b) suffers a Total and Permanent Disability,
then subject to the provisions of this Policy, MLC will pay the Policy Holder the Sum Insured for that Member, for whichever of the above events first occurs.[147]

[147]Ibid 335.

Member is defined as follows:

Member means a member of the Fund who has been nominated by the Policy Holder and accepted by MLC for inclusion under and in accordance with the provisions of this Policy at the request of a Participating Employer or pursuant to the provisions relating to Automatic Death and TPD Cover.[148]

[148]Ibid 329 (emphasis altered).

Participating Employer is defined as follows:

Participating Employer means an employer who applies to the Policy Holder to become a participating employer of the Fund by including their employees, and employees of the employer's associated entities (where applicable), and who has nominated that its employees be provided with insurance cover under this Policy, and the Policy Holder accepts their application.[149]

[149]Ibid.

The Policy requires the automatic acceptance of a person nominated by a Participating Employer:

1.1 Automatic Acceptance
(a)MLC will automatically accept for membership any person, other than a person applying for membership as a Family Member, who:
(i)unless otherwise specified in the appropriate Schedule, was At Work on the later of the date of commencement of Employment or the date the employer becomes a Participating Employer; and
(ii)(a) is a member of the Fund; and
(b) is an employee of a Participating Employer; and
(iii)conforms to the eligibility conditions that are listed in the appropriate Schedule or agreed to between the Policy Holder and MLC from time to time; and
(iv)is nominated by the Policy Holder at the request of the Participating Employer and advised to MLC in writing, or is eligible for Automatic Death and TPD Cover.

The Policy Holder must supply an "At Work" certificate to MLC if MLC requests it.[150]
…

[150]Ibid 332 (emphasis altered).

There is no dispute that, at all relevant times, Mr Daffy was a Member because:

(a) he was a member of The Fund; and

(b) he was accepted for inclusion under and in accordance with the Policy at the request of a Participating Employer.[151]

[151]See Exhibit H: Court Book 320, M100 Policy.

Clause 21 concerns the payment of premiums by the Policy Holder in respect of a Member.[152]
[152]Ibid 347.

Clause 25 concerns claims. Clause 25.1 provides that the Policy Holder (MLC Nominees Pty Ltd) must notify MLC Limited in writing as soon as ‘reasonably practicable after it has received notice from the Member of an event entitling the Policy Holder to a Benefit’.[153] Clause 25.2 provides that if any claim is notified to MLC more than one year after the event giving rise to the claim and the delay results in MLC’s interests being prejudiced, MLC will not accept liability for that claim.[154]
[153]Ibid 348.
[154]Ibid.

Clause 26 deals with payment of benefits. It provides at 26.1:

All Benefits to be paid in respect of a Member will be paid to the Policy Holder and the Policy Holder will hold the monies for the benefit of that Member and, where applicable, in accordance with the terms of any Trust Deed.[155]

[155]Ibid.

The effect of clause 26 is that if a Benefit is payable in respect of Mr Daffy then that will be paid to MLC Nominees by MLC Limited. Read with the Trust Deed, MLC Nominees will then hold that money for the benefit of Mr Daffy and pay the money to him.

Clause 27.1 deals with cessation of liability under the Policy. It provides:

27.1Notwithstanding any other provision contained in this Policy, MLC's liability to pay any Benefits which have not already accrued in respect of a Member shall cease on the occurrence of the earlier of any of the following events:
…
(e) on the date the Member ceases to be an employee of a Participating Employer, unless the Member is covered under Schedule 3 or continues to be covered under Schedule 4 of the Policy, or with respect to a Family Member on the date the Family Member no longer meets the “Family Member” eligibility conditions unless the Family Member continues to be covered under Schedule 6 of the Policy.[156]

[156]Ibid 348-9.

Pursuant to cl 4.1, a TPD benefit will only be payable in respect of a Member if the Member ‘suffers a Total and Permanent Disability’.[157]
[157]Ibid 335.

Total and Permanent Disability is defined as follows:

Total and Permanent Disability as defined in the appropriate Schedule (where applicable).[158]

[158]Ibid 331.

The term ‘Schedule’ is defined as follows:

Schedule means the applicable Schedules issued with this Policy and updated from time to time. The Schedules set out certain terms of cover for the section of the Fund named in the heading of the respective Schedule.[159]

[159]Ibid 330.

There are thirteen Schedules to the Policy. The submissions of the parties focussed on the question of whether Mr Daffy’s claim fell to be determined by reference to the First or Sixth Schedule.

The First Schedule

The First Schedule is headed ‘Tailor Rated Plans’.[160] This is a defined term.
[160]Ibid 352.

Part 2 sets out the eligibility conditions. They include:

Subject to the terms and conditions of this Policy, Members of Funds administered by the Policy Holder are eligible for cover under this policy on such conditions as notified to MLC in the Employer's Application by each Participating Employer, and agreed to by MLC (as varied by written agreement from time to time).[161]

[161]Ibid.

Mr Daffy’s nomination by a Participating Employer for acceptance by MLC is not in issue.

The eligibility conditions include the following exclusions from cover under the First Schedule:

Unless agreed to in the Special Conditions section of this Schedule, the following persons are excluded from the specified cover under this First Schedule of the Policy:
·Persons engaged in Permanent Part Time Employment working less than 15 hours per week are not covered for Salary Continuance Benefits;
·Persons who are Family Members are not covered for Salary Continuance Benefits;
·Persons engaged in Casual Employment are not covered for TPD or Salary Continuance Benefits; and
·Persons engaged in Seasonal or Contract Employment are excluded from all cover under the Policy unless they became Members on or before 31 October 2000.[162]

[162]Ibid 352-3.

Part 3 deals with Insurable Ages. Part 4 deals with Salary Continuance Benefits. Part 5 deals with how benefits are payable.

Part 6 then defines Total and Permanent Disability as follows:

TOTAL AND PERMANENT DISABILITY OPTIONS
Total and Permanent Disability shall mean:
(a)the Member suffering the permanent loss of use of two limbs or the sight of both eyes or the permanent loss of use of one limb and the sight of one eye (where limb is defined as the whole hand or the whole foot); or
(b)the Member having been absent from their Occupation solely through Injury or Illness for six consecutive months and after which time the Member has become in MLC's opinion, after consideration of all evidence obtained, incapacitated to such an extent as to render the Member unlikely ever to engage in any gainful profession, trade or occupation for which the Member is reasonably qualified by reason of education, training or experience;
(c)a Member who is engaged in permanent employment and working less than 15 hrs per week: having been absent from their Occupation solely through Injury or Illness for six consecutive months and after which time the Member has in MLC's opinion, after consideration of all evidence obtained, suffered a total and irreversible inability to perform at least two of the Activities of Daily Living;
(d)a Member who's [sic] occupation is classified as “Home Duties”: having been incapacitated through Injury or Illness for six consecutive months and after which time the Member is rendered in MLC's opinion, after consideration of all evidence obtained, unable to ever again attend to any normal physical domestic household duties.[163]

[163]Ibid 354-5 (emphasis added).

Paragraphs 1(b) to 1(d) are subject to the following express qualification:

Where it can be clearly established to MLC’s satisfaction that the Member is Totally and Permanently Disabled MLC may pay at MLC’s discretion the Sum Insured before the end of the six consecutive month’s period of absence from their Occupation.[164]
[164]Ibid 356 (emphasis added).

The Sixth Schedule

The Sixth Schedule is headed ‘Automatic Rollover Plans’.[165]
[165]Ibid 377.

This is defined as follows:

Automatic Rollover Plan means any of the following automatic rollover plans operated as part of the Fund:
a) until 30 June 2001, UMC Personal;
b) from 30 April 2001, MLC MasterKey Personal Super; and
c) any other product which MLC agrees with the Policy Holder from time to time to include under this Policy as an automatic rollover plan.[166]

[166]Ibid 326.

Part 2 prescribes the eligibility conditions:

Existing insured Members who were covered under the First, Second, Seventh, Eighth, Ninth and Tenth Schedules who have left the employment of a Participating Employer and who have not elected to cease their insurance cover under this Policy.[167]

[167]Ibid 377 (emphasis added).

In Part 6, the following definitions of TPD are provided:

TOTAL AND PERMANENT DISABILITY OPTIONS
Total and Permanent Disability shall mean:
(a)the Member suffering the permanent loss of use of two limbs or the sight of both eyes or the permanent loss of use of one limb and the sight of one eye (where limb is defined as the whole hand or the whole foot), or
(b)a Member who is engaged in permanent employment and working more than 15 hours per week having been absent from their Occupation solely through Injury or Illness for six consecutive months and after which time the Member has become in MLC's opinion, after consideration of all evidence obtained, incapacitated to such an extent as to render the Member unlikely ever to engage in any gainful profession, trade or occupation for which the Member is reasonably qualified by reason of education, training or experience;
(c)a Member who is engaged in permanent employment and working less than 15 hrs per week: having been absent from their Occupation solely through Injury or Illness for six consecutive months and after which time the Member has in MLC's opinion, after consideration of all evidence obtained, suffered a total and irreversible inability to perform at least two of the Activities of Daily Living;
(d)a Member who is not actively employed and in MLC's opinion would have been absent from their previous or any similar occupation solely through Injury or Illness for a period of six consecutive months and after which time the Member has in MLC's opinion, after consideration of all evidence obtained, suffered a total irreversible inability to perform at least two of the Activities of Daily Living.
(e)a Member who's [sic] occupation is classified as “Home Duties”: having been incapacitated through Injury or Illness for six consecutive months and after which time the Member is rendered in MLC's opinion, after consideration of all evidence obtained, unable to ever again attend to any normal physical domestic household duties.[168]

[168]Ibid 377-8 (emphasis added).

Paragraphs 1(b) to 1(e) are subject to the express qualification:

Where it can be clearly established to MLC’s satisfaction that the Member is Totally and Permanently Disabled MLC may pay at MLC’s discretion the Sum Insured before the end of the six consecutive month’s period of absence from their Occupation.[169]
[169]Ibid 379.

The definition in subparagraph (d) is the definition against which Mr Daffy’s claim for a TPD benefit was assessed, and rejected, by the second defendant.
The consequences of Mr Daffy ceasing to be an employee of SSDW on 24 May 2011

The defendants contend that as a result of the termination of Mr Daffy’s employment on 24 May 2011, he had no right to have his TPD claim determined in accordance with the First Schedule.[170] Rather, the claim fell to be determined in accordance with the more onerous criteria prescribed by cl 6(d) of the Sixth Schedule.[171] There are two distinct bases upon which the defendants advance this contention. First, that as a consequence of the termination of his employment Mr Daffy ceased to be an employee of a Participating Employer, and MLC’s liability to make any payment under the First Schedule was thereby excluded pursuant to cl 27.1(e).[172] Second, that upon termination of his employment with a Participating Employer, SSDW, Mr Daffy ceased to have an ‘Occupation’.[173] As such, he could not satisfy the requirement in the definition of TPD in cl 6(b) of the First Schedule, that he be absent from his Occupation solely through illness or injury for six consecutive months.[174]
[170]‘Closing Submissions of the Defendants’ dated 15 July 2016, [114]-[119].
[171]Ibid.
[172]Ibid [99]-[101].
[173]Ibid [119].
[174]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 7 June 2016) T4 L25 – T5 L1.

Clause 27.1(e) of the Policy

Clause 27.1(e) provides that, notwithstanding any other provision in the Policy:

MLC’s liability to pay any Benefits which have not already accrued in respect of a Member shall cease …
on the date the Member ceases to be an employee of a Participating Employer, unless the Member is covered under Schedule 3 or continues to be covered under Schedule 4 of the Policy, or with respect to a Family Member on the date the Family Member no longer meets the “Family Member” eligibility conditions unless the Family Member continues to be covered under Schedule 6 of the Policy.[175]

[175]Exhibit H: Court Book 348-9, M100 Policy.

Clause 27.1(e) expressly provides that an eligible Member may continue to receive the benefits conferred by the Third or Fourth Schedules. The Third Schedule is titled ‘Unit Rated Plans’.[176] It prescribes a maximum TPD benefit of $100,000 for a Member aged 15 to 29, decreasing to $6,000 for a 64-year-old Member.[177] The Fourth Schedule is titled ‘Unit Rated Plan for Ex-FlexiSuper Members’.[178] It prescribes a TPD benefit identical to the Third Schedule.[179]
[176]Ibid 364.
[177]Ibid 367.
[178]Ibid 368.
[179]Ibid 371.

· Where a Member has been seriously injured, whether or not in the course of employment, it may simply not be feasible for the employer to continue to employ the Member.

· A Member with many years’ service may be employed pursuant to a contract which entitles the employer to terminate the contract by the provision of payment in lieu of notice. In circumstances where the employee has sustained a serious injury or illness, the contract of employment may be terminated forthwith by payment in lieu of notice thereby preventing the Member from remaining in employment for a period long enough for an assessment to be made of the Member’s claim under the First Schedule.

· The business of an employer may encounter financial difficulties and go into liquidation during a period which overlaps with the time when a Member is absent from employment by reason of illness or injury.

The defendants contend that examples such as those set out above are simply a consequence of the proper construction of the Policy, and that upon termination of employment the Member will have the benefit of the Sixth Schedule.[253] This contention gives insufficient weight to the significantly more onerous conditions which must be satisfied by a Member to receive a TPD Benefit under the Sixth Schedule. A Member who has sustained serious injury whilst employed by a Participating Employer, and is unlikely to ever have any capacity for gainful employment, will be denied a TPD Benefit if the injuries fall short of satisfying the onerous Activities of Daily Living criteria under the Sixth Schedule. In circumstances where a construction of the Policy is reasonably open which avoids such unjust consequences, that outcome is to be preferred.[254] The unjust consequences are avoided by construing ‘Occupation’ in cl 6(b) of the First Schedule as referring to the Member’s usual occupation immediately prior to the disabling event which gives rise to the TPD claim.
[253]Ibid T1287 LL7-10.
[254]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109; Oz Minerals Holdings Pty Ltd v AIG Australia Ltd [2015] VSCA 346, [52] (Robson AJA).

It is legitimate to have regard to the relationship of trustee/beneficiary which existed between the first defendant and First Schedule Members when considering whether the objective intention of the defendants was that, upon termination of employment with a Participating Employer, a First Schedule Member would:

· cease to have any entitlement to Disability benefits; and

· would be subject to the Sixth Schedule Activities of Daily Living criteria in respect of the illness/injury which occurred when the Member was covered by the First Schedule.

If a Member has sustained illness/injury resulting in the Member being unlikely to ever engage in gainful employment for which the Member is reasonably qualified, the extent of the illness/injury will be such that the Member’s employment is likely to be terminated prior to the six month qualifying period in cl 6(b) of the First Schedule. If, as the defendants contend, ‘Occupation’ requires an extant employment relationship between Participating Employer and Member, the disabling event entitling a Member to make a claim would also, in circumstances where employment is terminated as a result thereof, disentitle the Member to make a claim under the First Schedule. The same reasoning applies in respect of a claim for Disability Benefits.

It is unlikely that the first defendant, consistent with its obligations as trustee vis a vis First Schedule Members, could have intended that the use of ‘Occupation’ in cl 6(b) of the First Schedule would operate to prejudice Members in the manner set out above. The preferable conclusion is that the objective intention of the contracting parties was that a First Schedule Member does not cease to have an Occupation upon termination of employment with a Participating Employer.

A construction whereby ‘Occupation’ in cl 6(b) of the First Schedule means a Member’s usual occupation immediately prior to the disabling event of illness or injury is consistent with the application of established principles of construction. There is, however, ambiguity attending the meaning of ‘Occupation’ where it is used in the Policy. As the defendants contend, the use of the present tense ‘is Employed’ in the definition of Occupation is consistent with a requirement for an extant employment relationship between Member and Participating Employer. On the other hand, ‘Occupation’ is used in the Sixth Schedule where a precondition for eligibility is that a Member is no longer an employee of a Participating Employer. Further, the definition of Disability, in conjunction with the provisions of the Policy consistent with an entitlement to Disability Benefits subsisting post termination of employment, point strongly to the conclusion that a Member may have an Occupation despite no longer being an employee of a Participating Employer. Where there is ambiguity it is permissible to call in aid the contra proferentem maxim. The application of this rule of construction is justified in the present case. It weighs strongly against the construction contended for by the defendants.

Conclusion

I have concluded that upon the termination of Mr Daffy’s employment on 24 May 2011:

(i) he was automatically transferred from the First Schedule to the Sixth Schedule;

(ii) the Sixth Schedule governed his entitlement to benefits in respect of illness/injury occurring post 24 May 2011;

(iii) his right to make a TPD claim in accordance with the First Schedule in respect of the injury he sustained on 14 October 2010 was an accrued benefit within the meaning of cl 27.1 and thereby preserved; and

(iv)he did not cease to have an Occupation for the purposes of the definition of TPD in cl 6(b) of the First Schedule.

Was Mr Daffy absent from his Occupation solely through injury or illness for six consecutive months?

Mr Murdoch conceded for the purposes of the TPD definition in cl 6(d) of the Sixth Schedule that Mr Daffy would have been absent from his previous occupation as General Manager of SSDW solely through injury or illness for a period of six consecutive months commencing late July 2011.[255] This concession applies equally to cl 6(b) of the First Schedule which also contains the criteria of six consecutive months absence solely due to injury or illness.
[255]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 4 August 2016) T1079 LL6-13.

The point of contention between the plaintiff and the defendants vis a vis the First Schedule was not whether Mr Daffy had been absent for six consecutive months commencing late July 2011. Rather, the defendants took issue with the plaintiff’s contention that:

(v) Mr Daffy was absent from his Occupation as a full time General Manager for six consecutive months from 14 October 2010;[256] alternatively

(vi)Mr Daffy was absent from his Occupation as a full time General Manager for six consecutive months commencing 20 May 2011.[257]

[256]‘Final Submissions of the Plaintiff’ dated 25 July 2016, [90]-[97].

[257]Ibid [73]-[89].

It is not necessary for the plaintiff to succeed on either of these contentions in order to have a valid claim under the First Schedule. I have concluded that as at 24 May 2011, Mr Daffy had a right to make a TPD claim in respect of the injury which he suffered on 14 October 2010, and have that claim determined in accordance with the First Schedule. I have also concluded that Mr Daffy continued to have an Occupation within the meaning of cl 6(b) of the First Schedule notwithstanding the termination of his employment with SSDW. It is not a prerequisite in order to satisfy the criteria of six consecutive month’s absence solely through illness or injury that the period of absence be co-extensive with a Member’s employment with a Participating Employer. As such, Mr Daffy satisfied the criteria of being absent solely through illness or injury for the six month period late July 2011 to late January 2012. Although it is not strictly necessary for me to do so, I shall record my findings in relation to the plaintiff’s alternative contentions that Mr Daffy’s period of absence commenced on 14 October 2010, or alternatively, 20 May 2011.

I reject the plaintiff’s contention that Mr Daffy was absent for six consecutive months commencing 14 October 2010. I have concluded that for the purposes of cl 6(b) of the First Schedule, a Member is absent from their Occupation when they are totally absent at times when they would ordinarily be in attendance at work. Thus, periods of absence due to annual or sick leave, or public holidays, may be put to one side.

If a partial absence sufficed to satisfy the definition in cl 6(b), this would raise the question as to where to draw the line. If a Member worked 30 hours per week rather than 38 hours per week, would this constitute an absence? In the context of a provision prescribed in criteria for a TPD benefit, ‘absent’ should be construed as requiring a total absence during periods an employee would otherwise ordinarily be in attendance at work. Save for a period of approximately four weeks immediately following 14 October 2010, Mr Daffy was not continually absent until, at the earliest, 20 May 2011.

Earlier in this judgment I have concluded that Mr Daffy was absent from his Occupation as General Manager of SSDW commencing 20 May 2011. His attendance at the meeting with his fellow directors of SSDW on 24 May 2011 was not in his capacity as General Manager of SSDW. The fact that he was not paid on 24 May 2011 supports this conclusion.

The defendants contend that if Mr Daffy was absent from his Occupation as General Manager commencing 20 May 2011, his absence was not solely due to illness or injury.[258] The defendants contend that post 24 May 2011, any absence was at least in part because his employment had been terminated on 24 May 2011.[259] If this contention is taken to its logical conclusion, a Member who sustains injury in the course of employment and is then dismissed would never satisfy the TPD criteria under either the First or Sixth Schedule. The fact that a Member’s employment has been terminated does not preclude a finding that the Member’s absence from their Occupation is solely due to injury. Whether the Member’s absence is solely due to injury is to be determined by asking whether, but for the injury, the Member would have been absent in circumstances where the Member would otherwise have been ready, willing and able to attend work. Put another way, if Mr Daffy’s employment had not been terminated on 24 May 2011, would he have been absent for the next six months?
[258]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 7 June 2016) T4 L14 – T5 L1.
[259]Ibid T4 L25 – T5 L1.

I have referred earlier in this judgment to the evidence of Mr Daffy that as at 20 May 2011 he was having a lot of trouble with his back and was beside himself as to what he was going to do. This evidence is corroborated by Mrs Daffy. I accept the evidence of both Mr and Mrs Daffy on this point. This evidence supports a conclusion that as at 20 May 2011, Mr Daffy was nearing the end of his tether. He had for the previous six months been attending work, albeit on a restricted basis and struggling with significant pain. As well as the physical difficulties he was encountering, he was also suffering significant mental health issues as disclosed in the reports of Mr McIntosh.

Notwithstanding these findings, the evidence does not support a finding that if his employment had not been terminated on 24 May 2011, Mr Daffy would not have returned to work at any time in the following six months. Mr Daffy did not give direct evidence that he would not have returned to work post 24 May 2011 if his employment had not been terminated. I have concluded that Mr Daffy would probably have continued to attend at work for a short period of time post 24 May 2011 had his employment not been terminated. The evidence of Mr Smith to which I refer below supports a finding that Mr Daffy’s physical condition deteriorated in the few months leading up to 26 July 2011. By 26 July 2011, Mr Daffy would not have been able to attend at work, irrespective of whether his employment had been terminated.

Was Mr Daffy incapacitated to such an extent to render him unlikely to ever engage in any gainful profession, trade or occupation for which he was reasonably qualified by reason of education, training or experience?

The second defendant rejected Mr Daffy’s TPD claim by reference to the criteria in the Sixth Schedule. MLC did not form an opinion for the purposes of cl 6(b) of the First Schedule, that Mr Daffy was not incapacitated to such an extent as to render him unlikely to ever engage in any gainful trade or occupation for which he was reasonably qualified by reason of education, training or experience. Consistent with this approach, in the current proceedings, the defendants did not advance any submission that Mr Daffy had no entitlement under the First Schedule because he was not incapacitated to such an extent to render him unlikely to ever engage in any gainful profession for which he was reasonably qualified by reason of education, training or experience. Rather, the defendants conducted their case on the basis that the First Schedule did not apply to Mr Daffy because:

(vii) Upon termination of his employment Mr Daffy was automatically transferred to the Sixth Schedule;[260]
[260]See ‘Closing Submissions of the Defendants’ dated 15 July 2016, [121](d); Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 5 August 2016) T1286 LL19-23.

(viii) Upon termination of employment Mr Daffy ceased to have an Occupation within the meaning of cl 6(b) of the First Schedule;[261]

(ix) That he was not absent ‘by reason solely of injury’ until July 2011 by which time he did not have an Occupation within the meaning of cl 6(b).[262]

[261]‘Closing Submissions of the Defendants’ dated 15 July 2016, [115]-[117], [119].

[262]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 7 June 2016) T4 L14 – T5 L1; ‘Closing Submissions of the Defendants’ dated 15 July 2016, [137].

On the other hand, the plaintiff’s counsel did contend by reference to cl 6(b) of the First Schedule that Mr Daffy was incapacitated to such an extent that he was unlikely to ever engage in any gainful profession, trade or occupation for which he was reasonably qualified by reason of education, training or experience.[263]
[263]‘Final Submissions of the Plaintiff’ dated 25 July 2016, [40].

Paragraphs [34] to [40] of the Plaintiff’s Final Submissions, filed 25 July 2016 are as follows:

34.The plaintiff’s evidence regarding his ongoing pain and incapacity has been reviewed above and confirmed by Cassandra Silvestri, Christine Daffy and John Daffy.
35.The relevant medical witnesses gave evidence regarding the Plaintiff’s ongoing capacity. Dr Wilson had certified the plaintiff on 28 March 2013 as being “totally incapacitated at present to consider any type of work”. On 16 August 2013 Dr Wilson again completed a “pro-forma” document noting that the Plaintiff would not be able to return to his usual duties, similar or other duties. In a report dated 12 November 2014 Dr Wilson conceded that there might be “hopefully a more optimistic outlook physically” for the Plaintiff, but it is clear that this was a hope rather than an expectation. In oral evidence she attested that the Plaintiff was not in a position to work, that she had not been able to change that, and referred to the effects of his medication.
36.Dr McIntosh painted a vivid picture of the Plaintiff’s condition, but did not specifically express an opinion as to the Plaintiff’s capacity or likelihood of further employment. Mr Smith opined in his report of 31 March 2014 that, as at the time he had seen the Plaintiff (April 2012) he did not believe the Plaintiff “would have been able to participate meaningfully in any work role full-time and even part-time due to the amount of pain he was in. He confirmed this in oral evidence at T332, and further confirmed that if the Plaintiff’s pain had remained the same, he would have the same opinion.
37.There were four medicolegal opinions, Mr Kudelka gave a brief opinion that the Plaintiff had no –
“… current capacity for pre-injury work which involves handling heavy windows physically. He could carry out office clerical or supervisory tasks. However, his medication, which consists of addictive opiates and drugs like Lyrica which may affect his personality, would probably deleteriously affect even his capacity to do sedentary work”.

Mr R Carey opined that –
“I consider that his physical injuries (quite apart from any other issues) would make it difficult for him to undertake employment of the type he was doing, and in need [sic] of any particular type at present due to his continued pain, opiate intolerance, sitting disability, etc”.

38.Oral evidence was received from Dr David Middleton and Dr Tim Hwang, both occupational physicians. Dr Middleton had reported, as at 20 November 2015 that –
“… on the balance of probabilities Mr Daffy will remain unlikely ever to engage in any gainful profession, trade or occupation as a result of the injury on the 14^th October 2010, after which he has not returned to work”.

He confirmed this opinion in oral evidence.
39.Dr Hwang had provided reports for the Defendant in which he concluded that –
“Purely from the physical point of view, I consider that there would be a significant degree of limitation in his capacity due to pain, but the physical condition itself would not be expected to render him totally incapacitated from management type roles.
I consider that he would be expected to have a physical capacity to undertake sedentary management type duties, 3 hours, 5 days a week, providing there are sound workplace ergonomics that would enable alternating posture between sitting and standing.”

However, in oral evidence Dr Hwang conceded that this was based on his physical condition only. He further conceded that looking at the overall picture including opiate usage, depression, etc, the Plaintiff presented “in a situation where it would be difficult for him to return to work… unless there was a significant change” and that he would not be a highly attractive candidate for employment. Finally, Dr Hwang conceded that –
“I would find that someone in his position would have significant difficulty finding suitable employment in the open market unless he possessed certain skills that are highly desirable which may mitigate all those other factors”.

40.It is submitted that the overwhelming effect of all the evidence is that, properly considered, it is established that the Plaintiff is unlikely ever to engage in any gainful profession, trade or occupation for which he is reasonably qualified by reason of education, training or experience.[264]

[264]‘Final Submissions of the Plaintiff’ dated 25 July 2016, [34]-[40] (citations omitted).

The defendants filed comprehensive Reply Submissions on 1 August 2016.[265] However, those submissions did not reply at all to [34] to [40] of the Plaintiff’s Final Submissions. In the context of vigorously contested litigation, the plaintiff’s submission that he was incapacitated to such an extent that he would be unlikely to ever engage in any gainful trade or occupation for which he is reasonably qualified by reason of education, training or experience, is unchallenged. Further, it was not put to Mr Daffy, that at any time from July 2011 until the present time, he had the capacity to undertake employment for which he is reasonably qualified. Further, the defendants advanced no submission that the Court should conclude that Mr Daffy did not satisfy the TPD criteria in cl 6(b) of the First Schedule because of the possibility that Mr Daffy might have successful surgery. Rather, the defendants sought only to address, for the purpose of Schedule Six, the question of whether Mr Daffy was totally and irreversibly incapable of performing the Activities of Daily Living.[266]
[265]See ‘Reply Submissions of the Defendants’ dated 1 August 2016.
[266]See, eg, Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 9 June 2016) T250 L25 – T252 L28.

Mr Daffy’s claim for a TPD benefit was made on 29 May 2012. It was refused on 29 January 2013 on the basis that Mr Daffy did not satisfy the Sixth Schedule definition of TPD. Subsequently on 11 July 2013, and 10 September 2015, Mr Daffy made two further requests for a review of his claim. Both were rejected. Again, the rejection was based on the application of the Sixth Schedule criteria.

A question arises in the current proceedings as to the relevant datum point for MLC to form the requisite opinion, both for the purposes of the First and Sixth Schedule, as to the extent of a Member’s incapacity. There are three options. First, the opinion is formed solely by reference to the level of incapacity at the expiration of six month’s continual absence solely due to illness or injury. Thus, in the present case where the TPD claim was made on 29 May 2012 and rejected on 29 January 2013, the relevant datum point would be late January 2012, assuming a commencement date of absence of late July 2011. Second, the opinion is formed solely by reference to an assessment of the level of incapacity at the point in time the decision is actually made by the insurer; i.e. January 2013 in respect of the original TPD claim of May 2012; July 2013 and September 2015 in respect of the subsequent review requests. Third, the opinion is formed by reference to the level of incapacity at the expiration of the period of the six month’s continued absence, together with additional relevant evidence available at the time a decision is made to accept or reject a claim.

For the reasons below, I consider the third option is to be preferred. However, if I am wrong about this it makes no difference to the conclusion I have reached that Mr Daffy was incapacitated to such an extent as to satisfy the definition of TPD in cl 6(b). Whichever datum point is used, the evidence supports a finding that MLC should have formed the opinion that Mr Daffy was unlikely to ever engage in any gainful employment.

In Hannover,[267] the Court of Appeal considered an insurance policy which included the following definition of TPD:

A person suffers Total and Permanent Disablement if they,
·are unable to do any work as a result of injury or illness for 6 consecutive months and at the end of the 6 months they continue to be so disabled that he or she is in our opinion unable to resume their previous occupation at any time the in future and will be unable at any time in the future to perform any Other Occupation…[268]

[267][2014] VSCA 205.

[268]Ibid [14].

In Hannover, the trial judge concluded that as at October 2007, being the expiration of a period of six months absence, there was no occupation that the claimant was capable of performing with his disability, either on a full or part-time basis, given his education, training and experience. This approach was held to be correct.[269]
[269]Ibid [67] (Garde AJA, Ashley and Beach JJA concurring).

The defendants cite Hannover in support of the proposition that the date of assessment for the purposes of cl 6(b) of the First Schedule is the expiry of the six month period of absence from Occupation.[270] The TPD definition in Hannover is similar to the definition in cl 6(b) of the First Schedule insofar as the insurer is required to form an opinion regarding the claimant’s extent of incapacity at the conclusion of a six month period. I will follow the approach endorsed by the Court of Appeal in Hannover. As the period of absence commenced late July 2011, MLC was required to form an opinion as to whether in late January 2012 Mr Daffy was incapacitated to such an extent as to be unlikely to engage in any gainful occupation for which he was reasonably qualified.
[270]‘Closing Submissions of the Defendants’ dated 15 July 2016, [300].

There is a substantial body of evidence that supports the conclusion that in late January 2012, and until the present time, Mr Daffy was incapacitated to such an extent that he would be unlikely to ever engage in any gainful profession, trade or occupation for which he is reasonably qualified by reason of education, training or experience.

In forming the requisite opinion under cl 6(b) of the First Schedule, MLC was not confined to evidence relating to Mr Daffy’s level of incapacity in late January 2012. The Policy is a commercial contract and must be given a businesslike interpretation.[271] Both parties accepted that Mr Daffy had the right under the Policy to request MLC to review its original decision of January 2013 rejecting his TPD claim. This occurred in September 2013 and November 2015.
[271]Hannover [2014] VSCA 205, [3].

Clause 6(b) requires MLC to form an opinion regarding a Member’s level of incapacity after a Member has been absent for six consecutive months. MLC must consider ‘all evidence obtained’. Where the evidence post dates the six month period of continued absence that evidence may properly be taken into account by MLC in forming the requisite opinion. If MLC was confined to forming an opinion solely by reference to evidence concerning a Member’s incapacity at the end of the six month period of incapacity, absurd consequences could flow. There may be a significant body of medical evidence supporting the conclusion that a Member had the requisite level of incapacity at the end of the six month period of absence. However, there could also be evidence which establishes that 18 months after the Member commenced a period of absence due to injury/illness, he/she is not incapacitated to the requisite level. It would be a very strange outcome if MLC was required to ignore this evidence. This is particularly so where the Member has the right to seek a review of MLC’s rejection of a claim. In the present case, MLC’s final decision rejecting Mr Daffy’s claim was not made until November 2015. By this time there was a substantial body of evidence which was relevant to MLC’s assessment of whether Mr Daffy had the requisite level of incapacity as at late January 2012, and up to the time of the final decision in November 2015.

I have referred earlier in this judgment to Mr McIntosh’s consultation with Mr Daffy on 25 July 2011. Mr McIntosh further consulted with Mr Daffy on 7 September 2011, 24 October 2011 and 24 November 2011.

Mr McIntosh prepared a report on 25 July 2012 for Ms Zoe Stanley, a senior claims consultant with the second defendant.[272] I infer that this report was sought following the receipt by MLC of Mr Daffy’s TPD claim of 29 May 2012. Mr McIntosh recorded his findings regarding Mr Daffy throughout 2011 as follows:

I would suggest that in essence, Mr Daffy stagnated through the whole of 2011.
Despite some initial settling in his back symptoms it seemed to me as though his ongoing issues were those of pain/dysfunction/numbness – these severely exacerbated his underlying vulnerability towards depression. And my sense is that when Mr Daffy and I often attempted to discuss as to “how well” he was, he would generally suggest that he was struggling with quite significant depression and pain simultaneously. He would tell me about getting the “shakes”. I note that he was increasingly of the view that the antidepressants he had trialled previously were now no longer that helpful ie he was complaining of increasing dysphoria/more classical depressive symptoms, whilst simultaneously being profoundly affected by ongoing pain/increasing problems sleeping/increasing problems with agitation/concentration issues etc.
During this phase (ie throughout 2011) Mr Daffy was increasingly aghast that he had to be reliant on analgesics/pain killers. Initially, he was taking significant quantities of Nurofen/Panadol/Panadeine, but later on he became reliant on narcotics.
As my typed continuation notes of the 25/7/2011 suggest, I note that Mr Daffy at that time continued to present in a rather miserable/agitated state. Chronic pain was the major theme of our discussion. I note that it was Mr Daffy’s impression that “nothing in life was going well”. I thought that he presented as vague/easily irritated. I note prominent themes of anxiety/fear, with Mr Daffy literally “tormented” by his worry that if he did agree to an operative intervention, that he would be left partially paralysed/chronically dysfunctional.
Try as I may, I had trouble “inspiring” Mr Daffy to do much at all. He continued to present in a rather “stuck” state with significant issues with concentration/agitation/difficulty sleeping (because of pain) etc, etc.[273]

[272]Exhibit H: Court Book 878, Medical Report of Dr Rowan McIntosh.

[273]Ibid 879-80.

Mr McIntosh’s report prepared for the second defendant records Mr Daffy as being afflicted with a combination of chronic pain severely exacerbating underlying vulnerability towards depression. The report is particularly significant as it was prepared, I infer, specifically in response to Mr Daffy’s lodgement of his TPD claim on 29 May 2012. Thus, the report constitutes the evidence which MLC should have, but did not, had regard to for the purposes of forming the requisite opinion under cl 6(b) of the First Schedule.

On 26 July 2011, Mr Daffy consulted Mr Paul Smith. Mr Smith forwarded a report of his consultation to Dr Karen Wilson, Mr Daffy’s general practitioner.[274] That report included the following:

He says that over the last few months there has been a return of elements of both right S1 radiculopathy to a much lesser extent than when he originally had, but still troubling and also troublesome lumbar back pain very suggestive of discogenic pattern pain on questioning. He is particularly troubled when sitting or standing still and certain postures in bed can aggravate things as well.[275]

[274]Exhibit H: Court Book 2008, Medical Report of Mr Paul Smith.

[275]Ibid.

On 1 September 2011, Mr Smith had a further consultation with Mr Daffy. Again he forwarded a report of that date to Dr Wilson. The report includes the following:

He had an excellent response initially to conservative management with steroids and so forth for his acute S1 radiculopathy, however the radiculopathy has really started to gradually creep back again with increasing severity such that he is requiring significant analgesia and he is really quite troubled by the pain now. A repeat MRI has shown no significant change in L5/S1 disc prolapse on the right side and the pattern of pain is the same and I am sure this is all ongoing part of the same initial injury from late last year.[276]

[276]Ibid 2007.

By 13 March 2012, Mr Daffy was troubled by severe right radiculopathy requiring significant doses of analgesia, including oxycontin twice daily and endone.[277] Mr Smith gave the following evidence regarding the impact of the medication which was being taken by Mr Daffy upon his work capacity:

The combination of those two drugs or either of them by themselves certainly impact on a person’s sensorium. People will often be a little bit drowsy with those medications on board. These medications may affect a person’s affect. People often describe depressed mood on these medications. Significant amounts of these medications would often raise alarm bells with regard to driving safety, for instance. So they do definitely impact on your ability to concentrate at work and provide your best attention and possibly also on your mood.[278]

[277]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 14 June 2016) T397 LL27–31.

[278]Ibid T409 L31 – T410 L10.

The evidence set out above is entirely consistent with the evidence set out earlier in this judgment given by Mr McIntosh regarding the adverse impact of the medication taken by Mr Daffy upon his work capacity.

The evidence of Mr Smith in combination with that given by Mr McIntosh supports a finding that in late January 2012, Mr Daffy’s level of incapacity rendered it unlikely that he would ever engage in any gainful occupation for which he was qualified. This conclusion is reinforced by the fact that he has never worked since May 2011.

More recent medical assessments lend further support to this conclusion. In a medical report dated 31 March 2014, Mr Smith stated the following regarding Mr Daffy’s capacity to return to work:

Realistically he has been unable to participate in work properly from the time of his onset of S1 radiculopathy in October of 2010.
…
Again as his pain levels were when I last saw him I do not think that Kevin, unless management has changed, will ever be able to return to occupation [sic] for which he is suited by reason of education, training or experience.[279]

[279]Exhibit H: Court Book 1994-5, Medical Report of Mr Paul Smith.

In a report dated 22 November 2014, Dr Middleton, an Occupational Health and Rehabilitation Consultant, noted that he believed ‘that Mr Daffy is highly unlikely to recover to such an extent that returning to work for paid employment could be achieved’.[280] Further, when asked during cross-examination whether he believed Mr Daffy ‘will ever return to any profession, trade or occupation’, Dr Middleton gave evidence that in his opinion, Mr Daffy ‘will never get back to work’.[281]
[280]Ibid 1116, Medical Report of Dr Middleton. This report was provided to the insurer when Mr Daffy made a further request for review of his TPD claim on 10 September 2015.
[281]Transcript of Proceedings, Daffy v MLC Nominees Pty Ltd & Anor (Supreme Court of Victoria, S CI 2013 06323, McDonald J, 20 June 2016) T793 LL4-8.

This evidence, in conjunction with the medical assessments referred to in paragraphs [34] to [40] of the Plaintiff’s Final Submissions set out above, reinforce the conclusion that MLC should have formed the opinion that Mr Daffy was unlikely as at January 2012 to ever engage in any gainful employment for which he was qualified.

Mr Daffy is entitled to an order that MLC pay him the sum of $1,521,071.64 being the amount of his prescribed TPD benefit in January 2013 when MLC rejected his initial TPD claim. I shall provide the parties with an opportunity to make submissions on the amount of interest payable as well as costs.

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[2016] VSC 606

13 October 2016