Darshn v Avant Insurance Limited
[2021] FCA 706
•25 June 2021
FEDERAL COURT OF AUSTRALIA
Darshn v Avant Insurance Limited [2021] FCA 706
File number: NSD 1390 of 2020 Judgment of: MOSHINSKY J Date of judgment: 25 June 2021 Catchwords: INSURANCE – professional indemnity insurance – claims made and notified policy – where insured doctor was joined as a defendant to a class action after the policy period in contract of insurance – where insurer refused the doctor’s claim for indemnity on the ground that no “claim” as defined in the policy had been made during the period of cover – whether a “claim” was made during the policy period – whether the insured gave notice in writing of facts that might give rise to a claim within the meaning of s 40(3) of the Insurance Contracts Act 1984 (Cth) – whether the insurer acted in breach of its duty of utmost good faith Legislation: Acts Interpretation Act 1901 (Cth), s 15AA
Federal Court of Australia Act 1976 (Cth)
Insurance Contracts Act 1984 (Cth), ss 12, 13, 14, 40, 54
Civil Procedure Act 2005 (NSW), ss 157, 158, 161, 168-170
Cases cited: AIG Europe Ltd v Woodman [2017] Lloyd’s Rep IR 209
Antico v CE Heath Casualty Insurance Ltd (1995) 8 ANZ Ins Cases ¶61-268
Antico v CE Heath Casualty & General Insurance Ltd (1996) 38 NSWLR 681
Antico v Heath Fielding Australia Pty Ltd (1997) 188 CLR 652
Australian Securities and Investments Commission v TAL Life Ltd (No 2) (2021) 389 ALR 128
Bank of Queensland Ltd v AIG Australia Ltd [2019] NSWCA 190
Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1
Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378
CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1
Delor Vue Apartments CTS 39788 v Allianz Australia Insurance Ltd (No 2) (2020) 379 ALR 117
Dillon v RBS Group (Australia) Pty Ltd (2017) 252 FCR 150
Dyczynski v Gibson (2020) 381 ALR 1
East End Real Estate Pty Ltd v CE Heath Casualty & General Insurance Ltd (1991) 25 NSWLR 400
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Esined No 9 Pty Limited v Moylan Retirement Solutions Pty Ltd (No 2) (2020) 353 FLR 1
Ethicon Sàrl v Gill (2018) 264 FCR 394
FAI General Insurance Co Ltd v Australian Hospital Care Pty Ltd (2001) 204 CLR 641
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503
Gosford City Council v GIO General Ltd (2003) 56 NSWLR 542
Guild Insurance Ltd v Hepburn (2015) 18 ANZ Insurance Cases ¶62-046; [2014] NSWCA 400
Icon Co (NSW) Pty Ltd v Liberty Mutual Insurance Company Australian Branch trading as Liberty Specialty Markets [2020] FCA 1493
Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43
Maxwell v Highway Hauliers Pty Ltd (2014) 252 CLR 590
McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402
Morgan, in the matter of Brighton Hall Securities Pty Ltd (in liq) [2013] FCA 970
Newcastle City Council v GIO General Ltd (1997) 191 CLR 85
Prepaid Services Pty Ltd v Atradius Credit Insurance NV (2013) 302 ALR 732
Quintis Ltd (Subject to Deed of Company Arrangement) v Certain Underwriters at Lloyd’s London Subscribing to Policy Number B0507N16FA15350 [2021] FCA 19
Rickhuss v The Cosmetic Institute Pty Ltd [2018] NSWSC 1848
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362
Westpac Banking Corporation v Bell Group (in liq) (No 3) (2012) 44 WAR 1
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 241 Date of last submissions: 22 June 2021 Date of hearing: 19 and 20 April 2021, 11 and 12 May 2021 Counsel for the Applicant: Mr G Donnellan with Ms K Morris Solicitor for the Applicant: William Roberts Lawyers Counsel for the First Respondent: Mr MT McCulloch SC with Ms T Berberian Solicitor for the First Respondent: Carter Newell Lawyers Counsel for the Second Respondent: Mr MA Jones SC with Mr A Byrne Solicitor for the Second Respondent: Gilchrist Connell ORDERS
NSD 1390 of 2020 BETWEEN: SRI BALAKRISHNAN DARSHN
Applicant
AND: AVANT INSURANCE LIMITED
First Respondent
MEDICAL INSURANCE AUSTRALIA PTY LIMITED
Second Respondent
ORDER MADE BY:
MOSHINSKY J
DATE OF ORDER:
25 JUNE 2021
THE COURT ORDERS THAT:
1.Within 14 days, the applicant and the first respondent file any agreed minute of proposed orders to give effect to these reasons and in relation to costs.
2.If the applicant and the first respondent cannot agree, then within 21 days, each of the applicant and the first respondent file and serve a minute of proposed orders and an outline of submissions (of no more than five pages) in support of those orders.
3.The second respondent have liberty to apply, within 28 days, if it wishes to apply for an order for costs against the first respondent.
4.Paragraph 7 of the orders made on 11 May 2021 be vacated.
5.Subject to further order, for a period of 10 days, the Court’s reasons for judgment are to remain confidential to the applicant, the first respondent and the legal representatives of the second respondent, and not to be published to the public.
6.Within seven days, the applicant and the first respondent are to inform the chambers of Justice Moshinsky whether there is any concern as to confidentiality as to any part of the reasons for judgment.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MOSHINSKY J:
Introduction
The applicant (Dr Darshn) is a registered medical practitioner practising as a cosmetic surgeon. In the period January 2015 to January 2018, Dr Darshn performed breast augmentation surgery (BAS) at premises owned or occupied by The Cosmetic Institute Pty Ltd (TCI) or one of its subsidiaries.
Dr Darshn held professional indemnity insurance with the first respondent (Avant) during the period 27 September 2011 to 30 June 2019. He then changed insurers and, for the years ended 30 June 2020 and 30 June 2021, held professional indemnity insurance with the second respondent (MIGA).
In June 2020, Dr Darshn was joined as a defendant to a representative proceeding in the Supreme Court of New South Wales brought by a Ms Rickhuss against TCI and other defendants (the TCI Proceeding or the TCI class action). The proceeding had been commenced in 2017. In June 2020, Dr Darshn and 10 other surgeons were added as defendants to the proceeding. Dr Darshn sought indemnity under his insurance policies in respect of his legal costs and any liability in respect of the TCI Proceeding. Initially, he claimed indemnity from Avant. However, Avant refused his claim for indemnity on the ground that no “claim” as defined in the policies had been made against him during any of the periods of cover. Each of the Avant policies was (what may be conveniently described as) a “claims made and notified” policy. Dr Darshn then sought indemnity from MIGA. However, MIGA refused his claim for indemnity on the basis of various exclusions in the applicable MIGA policy.
Dr Darshn then commenced the present proceeding against both Avant and MIGA, seeking declaratory and other relief.
On the first day of the hearing, counsel for Dr Darshn and senior counsel for MIGA informed the Court that the proceeding as between Dr Darshn and MIGA had been resolved on the basis that Dr Darshn’s claims against MIGA would be dismissed with no order as to costs. Orders to this effect were then made (subject to MIGA reserving the right to seek costs as against Avant). It is not necessary to say anything more in these reasons about Dr Darshn’s claims against MIGA.
In brief outline, the key background facts relating to Dr Darshn’s case against Avant are as follows.
On 28 June 2017, Dr Darshn gave written notice to Avant of a complaint that had been made to the Health Care Complaints Commission (HCCC) against him by a former TCI patient, who I will refer to as “Ms M”, concerning BAS performed by him at TCI premises (Ms M’s Complaint). Avant accepted Dr Darshn’s claim for indemnity in relation to Ms M’s Complaint. The complaint was subsequently resolved favourably to Dr Darshn. Ms M is within the represented class in the TCI Proceeding.
In September 2017, the TCI Proceeding was commenced against TCI, certain TCI subsidiaries and Dr Eddy Dona, the surgical director of TCI and a director of certain TCI subsidiaries. At this stage, Dr Darshn was not named as a defendant to the proceeding.
On 20 March 2018, Dr Darshn gave written notice to Avant of a proceeding that had been commenced by a Ms Scotford against Dr Darshn, TCI and others in the District Court of New South Wales (the Scotford Proceeding). Avant accepted Dr Darshn’s claim for indemnity in respect of the proceeding, and appointed Makinson d’Apice Lawyers (MDL), a firm of solicitors, to act on Dr Darshn’s behalf in the proceeding. Ms Scotford fell within the represented class in the TCI Proceeding, but subsequently opted out of the TCI Proceeding.
In January 2019, the plaintiffs in the TCI Proceeding served a subpoena to produce documents on Dr Darshn. Subpoenas in substantially the same terms were also served on other surgeons who had performed BAS at TCI clinics. The subpoena was expressed in broad terms, seeking many categories of documents. The breadth and terms of the subpoena suggested that the surgeons upon whom it had been served might be joined as defendants to the TCI Proceeding.
In February 2019, MDL communicated with Avant in relation to the Scotford Proceeding. In the course of these communications, MDL provided Avant with information about the TCI Proceeding and stated that there was a substantial overlap between the Scotford Proceeding and the TCI Proceeding.
On 18 February 2019, Dr Darshn telephoned Avant’s Medico-Legal Advice Service and obtained advice regarding the subpoena.
On 22 March 2019, Dr Darshn again telephoned Avant’s Medico-Legal Advice Service. He raised two matters: first, that he had received a letter from solicitors in relation to a proceeding against him brought by a Ms Summers-Hall (the Summers-Hall Proceeding); secondly, he again discussed the subpoena that he had received from the plaintiffs in the TCI Proceeding.
At this time, Avant already had a copy of the subpoena (or, more accurately, a subpoena in substantially the same terms as the subpoena served on Dr Darshn) as Avant was the insurer for other surgeons who had been served with such a subpoena.
During the call, and in a subsequent email, Avant suggested that Dr Darshn provide a copy of the subpoena in case he needed further advice about it. However, he did not do so.
During the call, Dr Darshn sent an email to Avant with a copy of the solicitors’ letter in relation to the Summers-Hall Proceeding. Avant accepted Dr Darshn’s claim for indemnity in respect of the Summers-Hall Proceeding, which was subsequently settled.
On 30 June 2019, Dr Darshn ceased to hold insurance with Avant. On 1 July 2019, he commenced to hold insurance with MIGA.
In June 2020, Dr Darshn and 10 other surgeons were joined as defendants to the TCI Proceeding. Various steps have since taken place in the TCI Proceeding.
As outlined in paragraph 28 of his amended concise statement, Dr Darshn relies on the following six alternative contentions or grounds in support of his claim against Avant. They are as follows:
(a)By giving Avant written notice of Ms M’s Complaint, Dr Darshn gave Avant written notice of a “claim” within the meaning of the applicable Avant policy, being a claim which continues to be advanced by the lead plaintiffs in the TCI Proceeding on Ms M’s behalf. This notification entitles him to indemnity in relation to the TCI Proceeding (including payment of his legal defence costs) under the applicable policy (First Contention).
(b)By the communications between MDL and Avant, Dr Darshn (by his agent, MDL) notified Avant in writing of facts which might give rise to claims against him in the TCI Proceeding such that s 40(3) of the Insurance Contracts Act 1984 (Cth) operates to prevent Avant from denying liability under the 2017-18 and/or 2018-19 Avant policies (Second Contention).
(c)By notifying Avant of Ms M’s Complaint, Ms Scotford’s claim and/or Ms Summers-Hall’s claim (by themselves or in conjunction with his oral notification of his receipt of the subpoena in the TCI Proceeding): Dr Darshn provided written notice to Avant of facts that might give rise to a claim against him as soon as was reasonably practicable after he became aware of them; accordingly, s 40(3) operates to prevent Avant from denying liability under one or more of the 2016-17, 2017-18 or 2018-19 Avant policies (Third Contention).
(d)By notifying Avant orally of the subpoena in the TCI Proceeding: Dr Darshn provided notice to Avant of facts that might give rise to a claim against him as soon as was reasonably practicable after he became aware of them for the purposes of s 40(3); and, in the absence of any prejudice to Avant from Dr Darshn’s failure to provide that notice in writing, s 54 and/or s 14 of the Insurance Contracts Act operate to prevent Avant from relying on the requirement of writing in s 40(3) in order to avoid liability (Fourth Contention).
(e)Avant acted in breach of its duty of utmost good faith under s 13 of the Insurance Contracts Act because it:
(i)acted arbitrarily or unfairly in refusing Dr Darshn’s claim for indemnity (while accepting the claims of other surgeons who notified Avant of the TCI Proceeding claims in relevantly indistinguishable circumstances);
(ii)failed to advise or inform him during his telephone calls with its Medico-Legal Advice Service that he was required to send it the subpoena in order to be covered for any claim related to the TCI Proceeding; and/or
(iii)failed to advise him clearly in writing before he entered into his 2017-18 and 2018-19 policies of the effect of s 40(3), as required by s 40(2)
(Fifth Contention).
(f)On a proper construction of the 2017-18 and/or 2018-19 Avant policy: Ms M’s Complaint, Ms Scotford’s claim and/or Ms Summers-Hall’s claim (on the one hand) and the TCI Proceeding (on the other) arose out of a series of related single acts, errors, omissions or occurrences and, accordingly, are to be treated as a single “claim” under the policy in force at the date the first of the series of related claims commenced (Sixth Contention).
In closing submissions, counsel for Dr Darshn did not press the third aspect of the Fifth Contention, namely the alleged contravention of s 40(2) of the Insurance Contracts Act.
For the reasons that follow, I have concluded that Dr Darshn’s Second Contention is substantially made out. In light of that conclusion, it is not strictly necessary for me to consider the other contentions. However, for the sake of completeness I have considered the other contentions. I consider that the Fifth Contention is made out. I reject the other contentions.
Procedural matters
The proceeding was commenced by originating application supported by a concise statement. These documents were subsequently amended. The final versions of the relevant documents are: Dr Darshn’s amended originating application dated 5 March 2021; Dr Darshn’s amended concise statement dated 30 April 2021; Avant’s amended concise statement dated 7 May 2021; and Dr Darshn’s concise statement in reply dated 26 March 2021.
By his amended originating application, Dr Darshn seeks declarations and orders to the following effect (as well as interest and costs) as against Avant:
(a)a declaration that, upon the proper construction of his insurance policies for the 2017-18 year and the 2018-19 year, and in the circumstances that have happened, Avant is obliged to indemnify him in respect of amounts for which he becomes liable to pay as compensation for civil liability (civil liability amounts), and legal defence costs, in respect of the TCI Proceeding;
(b)in the alternative to paragraph (a), declarations that:
(i)Dr Darshn’s failure to give written notice (or any notice) to Avant of the claims (or facts and circumstances that might give rise to claims) against him in the TCI Proceeding during the period of insurance did not prejudice Avant’s interests in any way;
(ii)by operation of s 54(1) of the Insurance Contracts Act and in the premises of paragraph (i), Avant may not refuse to indemnify him for civil liability amounts and legal defence costs in respect of the TCI Proceeding by reason only of Dr Darshn’s failure to give notice to it in writing (or any notice) of the claims (or facts and circumstances that might give rise to claims) against him in the TCI Proceeding during the period of insurance;
(iii)in the alternative to paragraphs (i) and (ii), by operation of s 54(1), Avant’s liability to Dr Darshn for civil liability amounts and legal defence costs in respect of the TCI Proceeding is to be reduced by an amount that fairly represents the extent to which its interests were prejudiced as a result of Dr Darshn’s failure to give written notice of the claims (or facts and circumstances that might give rise to claims) against him in the TCI Proceeding during the period of insurance.
(c)Further or in the alternative, declarations that:
(i)Avant’s refusal to indemnify Dr Darshn in relation to civil liability amounts and legal defence costs in respect of the TCI Proceeding is in breach of Avant’s implied contractual duty of utmost good faith set out in s 13 of the Insurance Contracts Act;
(ii)further or alternatively, by relying on the first paragraph under the heading “3. How Claims Work” in the insurance policies (the claim notification provision) in denying indemnity to Dr Darshn, Avant failed to act with the utmost good faith, contrary to s 14 of the Insurance Contracts Act; in the premises, Avant may not rely on the claim notification provision in order to deny indemnity to Dr Darshn.
(d)An order for specific performance requiring Avant:
(i)to pay Dr Darshn’s legal defence costs that have been reasonably paid by him to date in respect of the TCI Proceeding; and
(ii)subject to the terms of the applicable Avant policies, to indemnify Dr Darshn in relation to all future civil liability amounts and legal defence costs in respect of the TCI Proceeding.
(e)In the alternative to paragraph (d):
(i)an order requiring Avant to pay Dr Darshn all legal defence costs that have been reasonably paid by him in respect of the TCI Proceeding, less an amount that fairly represents the extent to which its interests were prejudiced as a result of Dr Darshn’s failure to give written notice (or any notice) of the claims (or facts and circumstances that might give rise to claims) against him in the TCI Proceeding;
(ii)an order requiring Avant to indemnify Dr Darshn in relation to all future civil liability amounts and legal defence costs in respect of the TCI Proceeding, less a proportion of those amounts fairly representing the extent to which its interests were prejudiced as a result of Dr Darshn’s failure to give written notice (or any notice) of the claims (or facts and circumstances that might give rise to claims) against him in the TCI Proceeding; and
(iii)damages for breach of contract.
The hearing of this proceeding commenced on 19 April 2021. However, the bulk of the time on that day and the next was occupied with resolving an issue of legal professional privilege that had arisen shortly before the hearing. Having resolved that issue, it was necessary to adjourn the hearing for several weeks to enable certain documents to be produced by Avant to Dr Darshn. The hearing resumed on 11 May 2021 and concluded the next day. Effectively, the hearing of the proceeding occupied two days, namely 11 and 12 May 2021.
The evidence
Dr Darshn relied on three affidavits that he affirmed, dated 23 December 2020, 25 March 2021 and 28 April 2021. Dr Darshn was cross-examined.
Dr Darshn also tendered a large number of documents.
Avant relied on:
(a)an affidavit of Tracy Pickett, a senior solicitor employed by Avant who works in Avant’s Medico-Legal Advice Service, dated 12 March 2021;
(b)an affidavit of Kate Gillman, the head of Avant’s Medico-Legal Advice Service, dated 15 March 2021; and
(c)an affidavit of Kate Martin, a solicitor, dated 20 April 2021.
Ms Pickett and Ms Gillman were cross-examined. Ms Pickett gave evidence by video conference from Queensland.
Ms Martin was not cross-examined. Her affidavit was initially read in the context of the privilege issue referred to above. It was subsequently agreed between the parties that it should form part of the evidence in the substantive proceeding.
Avant also tendered one document.
I make the following observations about the evidence given by the witnesses.
Dr Darshn had a poor recollection of the relevant events. Some of his evidence was internally inconsistent. I place little weight on his written and oral evidence.
Ms Pickett was an excellent witness. She answered questions clearly and directly. She made clear what she did and did not recall. I generally accept her evidence.
Ms Gillman also gave evidence in a clear and direct manner. She made sensible concessions, which enhanced her credibility. I generally accept her evidence.
Factual findings
Dr Darshn
Dr Darshn is a registered medical practitioner practising as a cosmetic surgeon in Australia.
During the period from 27 September 2011 to 30 June 2019, he held professional indemnity insurance with Avant.
The Avant policies
For present purposes, the focus is on the policies Dr Darshn held with Avant for the 2016-17, 2017-18 and 2018-19 years (each policy commencing on 1 July of one year and concluding on 30 June of the following year). Of these, copies of the policies for the latter two years are in evidence. The case proceeded on the basis that there is no relevant difference between the terms of the two policies and, further, that the policy for the 2016-17 year was in substantially the same terms. It will be sufficient, therefore, to refer to the terms of the 2018-19 policy.
The 2018-19 policy is headed “Avant Practitioner Indemnity Insurance Policy”. It is labelled “Version 6.0” and dated 1 July 2018. An overview of the types of cover appears on a page headed “A quick summary of your cover”. This indicates that there are three categories of cover:
(a)civil liability (Part A of the policy);
(b)disciplinary and other matters (Part B); and
(c)communicable disease cover and away from work costs (Part C).
For present purposes, the focus is on Part A of the policy.
Section 2 of the 2018-19 policy is headed “What we cover”. Within section 2, there is a section dealing with coverage under Part A (civil liability). This includes the following clause (clause 2):
Healthcare in private practice
If you have declared private billings, then we will cover you for amounts which you become legally liable to pay as compensation for civil liability, in addition to legal defence costs, in respect of claims made against you in the policy period in relation to healthcare in private practice.
If you have declared private billings as part of your application, cover for healthcare in private practice has been added to your policy.
No issue is raised regarding the requirement in the opening words of this clause, namely that Dr Darshn had declared private billings.
Clause 2 of the policy needs to be read with a number of definitions set out in the definition section of the policy. The word “claim” is defined as follows:
A demand for compensation or damages in relation to healthcare which:
a) is first made against you during the policy period; and
b) you tell us about in writing during the policy period.
The expression “healthcare” is defined as follows:
a)any care, treatment, advice, service or goods provided by you in respect of the physical or mental health of a patient;
b)a medical examination, medical report or medical opinion prepared by you at the request of a third party, such as a lawyer, insurer or statutory body;
c)you providing education, giving a paid or unpaid presentation or address or providing medical advice or information that is published, including in a newspaper, textbook, journal, video, mobile application or blog;
d)any care, treatment, advice, service or goods provided by you to a person in an emergency that is necessary to stabilise that person or to prepare that person for transfer; or
e)you acting in an administrative capacity.
In relation to (a), (b), (c), and (e) above only to the extent that it is associated with your category of practice.
The word “patient” is defined as:
A person who has received, is receiving or is due to receive, medical care and/or treatment. This may also include the patient’s family.
Also relevant is the expression “legal defence costs”, which is defined as follows:
The necessary and reasonable costs of investigating, defending or settling a claim made against you and covered by this policy.
It is not necessary to refer in detail to Parts B and C of the policy. However, I note that Part B included, in clause 8.6, coverage in relation to a subpoena to produce medical records.
After Part C, there is a section headed “General exclusions”. For the sake of completeness, I set out clause 14.1, because it is referred to in a section of the policy that is quoted later in these reasons. Clause 14.1 is in the following terms:
14. We will not cover you in connection with:
14.1 Prior or pending claim or circumstances
any claim or circumstances which might give rise to a claim or request for indemnity, which:
a)you knew about or a person in your position ought reasonably have known about and thought might result in a claim or allegation being made against you;
b)you notified us, or failed to notify us, of before the policy period commenced; or
c)you notified, or ought reasonably to have notified to another insurer before the policy period commenced.
Section 3 of the 2018-19 policy is headed “How claims work”. This section includes the following terms are relevant for present purposes:
Claims made and notified policy
This policy operates on a claims made and notified basis. It covers you for claims (including legal defence costs) made by patients and other third parties against you and which you notify to us within the policy period when the healthcare giving rise to the claim occurred after the retroactive date.
Every claims made and notified policy has a retroactive date. For a claim to be covered under Part A of the policy, the healthcare you provided which lead to the claim must have occurred after the retroactive date. The retroactive date is a date in the past and could be before the inception of this policy. The retroactive date that you have agreed with us can be found on your policy schedule.
Part B of the policy provides legal fees and other expenses for disciplinary and other matters, tax audit cover and cover for a loss of documents. The clauses require that the matter or proceedings are commenced and notified to us in the policy period.
This policy does not provide cover in relation to:
•claims against you arising from healthcare that occurred prior to the retroactive date;
•claims against you, or facts that may result in claims against you, notified to us after the end of the policy period;
•claims made, threatened or intimated against you prior to the policy period; or
•facts or circumstances of which you first became aware prior to the policy period, and which you knew or ought reasonably to have known had the potential to give rise to a claim or request for indemnity under this policy.
…
Continuous cover
If you, before the policy period, first become aware of facts or circumstances that might give rise to a claim or request for indemnity and you decide not to notify us of these facts or circumstances, then, notwithstanding clause 14.1, we will cover you where:
a)we continued without interruption to be your professional indemnity insurer from the time you knew or ought reasonably to have known of the facts or circumstances that might give rise to a claim or request for indemnity to the date you actually notified us;
b)had you decided to notify us when you first became aware of the facts or circumstances, you would have been covered under the policy in force at that time; and
c)your decision not to notify us when you first became aware of the facts or circumstances was not fraudulent non-disclosure or fraudulent misrepresentation.
Our liability to indemnify you is limited to the extent we would have been obliged to indemnify you under the terms and conditions of the policy in effect at the time you knew or ought reasonably to have known of the facts or circumstances that might give rise to a claim or request for indemnity.
If we are obliged to indemnify you pursuant to this clause, we may reduce our liability to you by the amount of any prejudice we suffer as a result of your decision not to notify us at the time you knew or ought reasonably to have known of the facts or circumstances that might give rise to a claim or request for indemnity.
How much we will pay
a)subject to an automatic policy reinstatement, the most we will pay for any one claim or request for indemnity under this policy, and in the aggregate for all claims and requests for indemnity during the policy period, is the maximum sum insured listed on your policy schedule. For communicable disease cover or if you opted to have the away from work optional cover, these sub-limits will be paid in addition to the sum insured.
b)any sub-limit that applies to a cover is the most we will pay against that cover for any one claim or request for indemnity and in the aggregate for all claims or requests for indemnity during the policy period for that cover. Any sub-limit will be specified in the PDS, the policy schedule or within the clause providing cover.
c)under Part B and Part C, the sum insured and any sub-limit are inclusive of legal defence costs. Under Part A, the sum insured is exclusive of legal defence costs.
d) the sum insured and any sub-limit are inclusive of the deductible.
e)nothing in this policy operates to increase the sum insured or any sub-limit under Part B or Part C of the policy.
f)all claims or requests for indemnity under this policy, which arise from, or are attributable to, a single act, error, omission or occurrence or series of related single acts, errors, omissions or occurrences, will be treated under this policy as one claim or one request for indemnity.
g)where more than one sub-limit applies to a claim, the amount payable for the claim under each sub-limit in the aggregate shall not exceed the highest applicable sub-limit.
…
You must notify us of a claim
You must notify us in writing as soon as practicable of any claim. If you do not notify us of a claim as soon as practicable, you may not be covered under this policy and your right to indemnity may be prejudiced.
…
Conduct of claims or requests for indemnity
You agree that we have the conduct of a claim or request for indemnity covered under this policy including its investigation, pursuit, defence, avoidance, reduction or settlement and we may do so in your name.
We may defend or settle a claim, complaint or matter as we think fit. You may defend any claim or request for indemnity which we believe should be settled but we will not pay any more in relation to that claim or request for indemnity than we would have been required to pay if it had been settled or resolved as we believed it could or should have been.
We will appoint the lawyer or other person
We will appoint the lawyer or other person to provide services to us for the benefit of you. When we appoint the lawyer or other person, we do so in our own capacity and not as an agent for you.
The lawyer or other person appointed by us supplies services to us and not to you for the purposes of the Goods and Services Tax (GST). We are entitled to claim a GST input tax credit on services supplied by the lawyer or other person.
We do not accept responsibility for the lawyer or other person
We do not accept any responsibility for anything done or not done by the lawyer or other person. He or she is not our agent or employee. We make no representation of any kind about the lawyer’s or other person’s ability.
You must cooperate
You must cooperate with the lawyer or other person in resolving the claim or request for indemnity in a satisfactory, timely and cost-effective way. In particular, you must:
a)give us and the lawyer a full and truthful account of the relevant facts;
b)give us and the lawyer any relevant information or documents in your possession that he or she asks for;
c)obtain any other relevant information or documents that you can;
d)execute any documents we or the lawyer reasonably ask you to; and
e)attend any meetings we or the lawyer reasonably ask you to.
You agree at your expense to give us, the lawyer or other person all information, documents and assistance we reasonably require and cooperate fully with us, the lawyer or other person.
You further agree to waive any claim for legal professional privilege or confidentiality to the extent only that the privilege or confidentiality would otherwise prevent the lawyer from disclosing information to us. The lawyer will keep us properly informed on all relevant matters.
Ms M’s Complaint (notified to Avant in June 2017)
On 28 June 2017, Dr Darshn notified Avant in writing of Ms M’s Complaint. He did this by sending an email to Avant on that day with the subject line “Notification of incident form”. The email stated: “Hi my notification of incident form. Other docs will follow”. A PDF document was attached to the email. It may be inferred that this was the completed incident form.
On 29 June 2017, the next day, a claims manager at Avant emailed Dr Darshn, requesting a number of documents, including the patient’s complaint to the HCCC. A copy of that document, which it may be inferred was provided by Dr Darshn to Avant, is included in the materials before the Court. The complaint was made on a three-page form, which was completed by hand. In section 4 of the complaint (headed “My complaint”) Ms M provided the following details of her complaint in response to the questions on the form:
Provide a short summary of your complaint. It is useful to include what happened, when it happened and who was involved. If you need more space, please attach a separate page to the back of this complaint form. Please also attach any relevant documents you have.
I had breast agumentation with The Cosmetic Institute July 15th 2015 with Dr Dash. After the 6 weeks of healing I noticed they were severly uneven (one dramatically lower than the other). Contacted The Institute and booked in to have revision surgery to fix it up, free of charge. Had surgery 5th July 2016. Same again after healing they are still uneven and the right pocket isn’t tight enough holding the implant securely. I’ve contacted again, made an appointment seen Dr Dash for him to say it’ll cost $3,000 to try make them even and make that pocket tighter so the implant doesn’t have so much movement. Also trying to bring them closer together so I have cleavage, hoping to fix the double bubble on the left breast by tightening the pocket, sowing them in place higher.
The main issues I am concerned about are:
Breast being uneven.
Right pocket not holding implant securely
Double bubble on left breastMassive gap between my breast (no cleavage)
As a result of my complaint I want:
This surgery to correct the issues with no charge, or at the very least half the cost their quoting me. After the revision surgery this should have been resolved but it hasn’t.
I have approached the health service provider about my complaint – Yes
$3,000 to try fix them. (The Cosmetic Institute South Port Queensland), 98 Marine Parade, South Port, QLD 07 5613 2000.
(Errors in original.)
Avant accepted Dr Darshn’s claim for indemnity in relation to Ms M’s Complaint.
On 21 November 2017, Ms M’s Complaint was finalised favourably to Dr Darshn.
The TCI Proceeding (as commenced in September 2017)
On 14 September 2017, the TCI Proceeding was commenced in the Supreme Court of New South Wales. At this stage, Dr Darshn was not a defendant to the proceeding. The first plaintiff was Ms Rickhuss. In addition, there were four other plaintiffs (all former patients who received BAS at TCI clinics). The defendants were: TCI; The Cosmetic Institute Parramatta Pty Ltd (TCI Parramatta); TCI Bondi Junction Pty Ltd (TCI Bondi); TCI Southport Pty Ltd (TCI Southport); and Dr Dona (said to be the surgical director of TCI, TCI Parramatta, TCI Bondi and/or TCI Southport, and a director of TCI Parramatta, TCI Bondi and TCI Southport).
The TCI Proceeding was a representative proceeding pursuant to Pt 10 of the Civil Procedure Act 2005 (NSW). The group members were described in paragraph 2 of the statement of claim as follows:
The group members are persons who:
(a) Had breast augmentation surgery (BAS) at the following premises:
(i)Smith Street Parramatta, New South Wales (TCI Parramatta Premises);
(ii)Hollywood Avenue, Bondi Junction, New South Wales (TCI Bondi Premises);
(iii)Suite 1, 98 Marine Parade, Southport, Queensland (TCI Southport Premises);
(iv)Burwood Road, Concord, New South Wales (Concord Private Hospital);
(v)Chetwynd Road, Guildford, New South Wales (Holroyd Private Hospital).
(b)Had BAS performed by surgeons who were the servants and/or agents of the first, second; third or fourth defendants (TCI Surgeons);
(c)Had BAS performed by a TCI Surgeon trained by, or under the supervision of, the fifth defendant in accordance with accreditation and training contracts between the TCI Surgeons and the first, second, third and/or fourth defendants;
(d)Had BAS using the “One Size Fits All” Approach (refer to paragraph 21);
(e)Had BAS performed under anaesthesia administered by anaesthetists who were the servants and/or agents of the first, second, third and/or fourth defendants (TCI Anaesthetists); and,
(f)Suffered injury, loss and damage as a result of undergoing BAS.
The above group description referred to the “One Size Fits All” approach. That expression was defined in paragraph 21 of the statement of claim in the following terms:
The BAS performed at TCI Parramatta, TCI Bondi, TCI Southport, Concord Private Hospital and Holroyd Private Hospital for or on behalf of The Cosmetic Institute, TCI Parramatta, TCI Bondi and/or TCI Southport adopted the following approach (the One Size Fits All Approach):
(a)Pre-operative consultations were conducted, and advice provided to plaintiffs and group members, in the absence of an appropriately qualified and trained surgeon;
(b)Surgery was performed by TCI Surgeons under anaesthesia provided by TCI Anaesthetists;
(c)The surgery was performed using bilateral infra-mammary incisions;
(d)Round textured Allergan silicone implants were implanted;
(e)Implants were inserted into subpectoral pockets and/or using a dual plane approach;
(f)The same technique was used irrespective of:
(i)Differences in the size or shape of the plaintiffs’ and group members’ breasts;
(ii)Whether plaintiffs’ and group members’ breasts were tuberous or ptotic; or,
(iii)Whether different or additional surgical approaches and techniques were indicated, such as mastopexy.
(g) At TCI Parramatta Premises and TCI Bondi Premises:
(i)Surgery was performed by TCI Surgeons under local anaesthesia and twilight sedation provided by TCI Anaesthetists;
(ii)Surgery was performed without general anaesthesia;
(iii)The same surgical technique was used irrespective of whether general anaesthesia was required so as to enable different or additional surgical approaches.
Paragraph 23 of the statement of claim alleged that the defendants had made a series of representations.
Paragraph 25 of the statement of claim set out the common questions of law and fact as follows:
The questions of law or fact common to the claims of group members are:
(a)Whether the TCI Surgeons acted on behalf of, through, or in connection with the first, second, third or fourth defendants?
(b)Whether the TCI Surgeons made the Representations to the plaintiffs and group members?
(c)Whether the defendants made the Representations to the plaintiffs and group members?
(d)Whether BAS was performed negligently by the TCI Surgeons?
(e)Whether the defendants:
(i)contravened s 60 of the ACL;
(ii)breached their duty under the common law to exercise due care and skill in performing BAS;
(iii)breached a warranty implied by law into the agreement that BAS would be performed with due care and skill;
(iv)contravened a guarantee that BAS would be fit for purpose implied into the agreement by s 61(2) of the ACL?
(f)Whether the representations were misleading representations with respect to future matters for the purposes of s 4 of the ACL?
(g)Whether the representations were misleading or deceptive and in contravention of ss 18, 29(1)(b) and 29(1)(m) of the ACL?
(h)Whether the representations were negligent representations?
(i)Whether the fifth defendant devised, designed, implemented, supervised and conducted the training of TCI Surgeons?
(j)Whether the fifth defendant recommended to the first, second, third and/or fourth defendants that the TCI Surgeons be accredited to perform BAS?
(k)Whether the fifth defendant authorised the accreditation of the TCI Surgeons to perform BAS?
(l)Whether the fifth defendant devised, designed, supervised and implemented the One Size Fits All Approach to BAS?
(m)Whether the first defendant controlled and directed the provision of BAS services and facilities to the plaintiffs and group members by the second, third and fourth defendants?
(n)Whether the adoption of the One Size Fits All Approach to BAS was negligent?
Paragraph 81 of the statement of claim alleged that the defendants breached their duties of care:
The defendants breached their duties of care to the plaintiffs and group members by:
(a)Recommending BAS in accordance with the One Size Fits All Approach;
(b)Performing BAS in accordance with the One Size Fits All Approach;
(c)Failing to inform the plaintiffs and group members that they were at an increased risk of requiring revision surgery in the future;
(d)Failing to engage adequately qualified, trained, experienced and accredited surgeons to perform BAS;
(e)Failing properly to train the TCI Surgeons;
(f)Failing properly to supervise the TCI Surgeons;
(g)Devising and implementing the Defendants’ System of BAS;
(h)Devising and implementing the Defendants’ System of BAS including the TCI Facilities, TCI Surgeons, TCI Anaesthetists, the One Size Fits All Approach to BAS, and the Pre-Surgery Consultations;
(i)Failing to properly supervise the TCI Anaesthetists;
(j)Failing to regularly review and/or revise the Defendants’ System of BAS;
(k)Failing to implement adequate infection control procedures for BAS;
(l)Failing to maintain and review infection control procedures for BAS;
(m)Failing in the planning and performance of BAS to consider differences in the anatomy of the plaintiffs and group members;
(n)Failing to provide adequate review and follow up of the plaintiffs and group members following BAS;
(o)Failing to decline to perform BAS in circumstances where BAS was considered technically difficult;
(p)Failing to decline to perform BAS in circumstances where BAS in the absence of maxtopexy or other different or additional surgical techniques were indicated;
(q)Recommending and/or performing BAS when they knew or ought to have known that performing BAS without general anaesthetic and under twilight sedation and local anaesthetic would result in patients experiencing pain and moving during the surgery thereby increasing the risk of BAS Complications;
(r)Failing to inform the plaintiffs and group members that performing BAS without general anaesthetic and under twilight sedation and local anaesthetic would increase the risk of BAS Complications;
(s)Recommending and/or performing BAS when they knew or ought to have known that performing BAS without general anaesthetic and under twilight sedation and local anaesthetic would result in patients experiencing pain and moving during the surgery which would, in turn, require the administration of increasing cumulative doses of local anaesthetic thereby increasing the risk of BAS Complications;
(t)Failing to inform the plaintiffs and group members that performing the surgery without general anaesthetic and under twilight sedation and local anaesthetic would result in patients experiencing pain and moving during the surgery which would, in tum, require the administration of increasing cumulative doses of local anaesthetic thereby increasing the risk of BAS Complications.
The Scotford Proceeding (notified to Avant in March 2018)
On 1 February 2018, the Scotford Proceeding was commenced in the District Court of New South Wales. The plaintiff was Ms Scotford. The defendants were: Dr Darshn; TCI; TCI Parramatta; and Dr Dona.
On 20 March 2018, Dr Darshn sent an email to Avant giving notice of the Scotford Proceeding.
Avant accepted Dr Darshn’s claim for indemnity in respect of the Scotford Proceeding, and instructed MDL to act on Dr Darshn’s behalf in the proceeding. This occurred on or about 23 March 2018. The evidence includes a letter of that date from Avant to Dr Darshn in relation to the Scotford Proceeding. The letter included the following statements:
We recently received correspondence from you on 21 March 2018 regarding the patient’s civil claim.
I have been appointed as Claims Manager and as such, I will be responsible for the overall direction and strategy of this claim.
I have also instructed Makinson d’Apice Lawyers to act on your behalf in this matter and a solicitor will be in contact with you shortly to discuss the claim further.
…
Avant will conduct the claim on your behalf. You will be consulted and kept informed at all appropriate stages and whilst your views will be taken into account, Avant is responsible for the management of the claim.
On the same date, 23 March 2018, Nicholas Regener, a partner of MDL, sent an email to Dr Darshn in relation to the Scotford Proceeding. The email stated:
Dear Dr Darshn
I have been appointed by Avant to represent you in … these proceedings.
When is a suitable time for us to discuss the claim?
Nicholas Regener
The statement of claim in the Scotford Proceeding alleged negligence by the defendants. The pleading of negligence referred to the adoption of a “one size fits all approach”, the expression that had been used in the TCI Proceeding statement of claim. In paragraph 21 of the statement of claim in the Scotford Proceeding, the following particulars were provided:
Particulars of Precautions that Ought to Have Been Taken
(a)Ensured that an adequate pre-operative assessment was given whereby the risks associated with the surgery were properly explained;
(b)Ensured that the selection of implant type, placement and size was the correct option for the Plaintiff, rather than a “one size fits all approach”;
(c)Ensured that the First Defendant had proper training in the assessment of the Plaintiff, implant selection and operative technique;
(d)Ensured that the First Defendant used proper operating technique to avoid “button-holes” and “burns” resulting in tissue loss and contributing to the risks of infection;
(e)Ensured that anti-sepsis or proper anti-sepsis was provided;
(f)Ensured that proper anaesthetic sedation was provided;
(g)Ensured that the Plaintiff’s implant position was checked in an “up-right” position during the surgical procedure;
(h)Ensured that “implant sizers” were used to determine the correct size and position of the implant pocket;
(i)Ensured that the Plaintiff was afforded proper post-operative care;
(j)Ensured that all revisionary procedures were performed with senior surgical input and assistance;
(k)Ensured that the Plaintiff wasn’t subjected to multiple surgeries, removal and reinsertion of the implant so as to avoid the consequences of capsular contraction necessitating capsulectomy and explantation;
(l)Ensured that any or any proper procedures were in place for discussion of adverse outcomes with peers and/or the Fourth Defendant, so as to avoid further unnecessary procedures.
The expression “one size fits all approach” was also used in the particulars under paragraph 26 of the statement of claim in the Scotford Proceeding. Those particulars were as follows:
Particulars of Breach of Duty of Care
(a)Failed to exercise reasonable care for the safety of the Plaintiff;
(b)Exposed the Plaintiff to a foreseeable risk of injury which could have been avoided by the exercise of reasonable care;
(c)Failed to take the precautions identified in paragraph 20 above;
(d)Recommended and performed BAS in accordance with a “one size fits all” approach;
(e)Failed to provide proper anaesthetic sedation;
(f)Failed to engage adequately qualified, trained, experienced and accredited surgeons to perform BAS;
(g)Failed to properly supervise surgeons performing BAS;
(h)Failed to ensure that surgeons performing BAS were appropriately skilled in their operating technique;
(i)Failed to review and/or revise the Defendants’ system of BAS;
(j)Failed to implement, maintain and/or review any or any adequate infection control;
(k)Failed to provide adequate post-operative care;
(l)Failed to ensure adverse outcomes were appropriately discussed between peers and/or the Fourth Defendant.
Paragraph 30 of the statement of claim in the Scotford Proceeding alleged that TCI and TCI Parramatta had made a series of representations. These were expressed in substantially the same terms as the representations alleged in the TCI Proceeding.
The subpoena in the TCI Proceeding (January 2019)
In early or mid-January 2019, under cover of a letter from Turner Freeman (the solicitors for the plaintiffs in the TCI Proceeding) dated 7 January 2019, Dr Darshn received a subpoena to produce documents issued by the plaintiffs in the TCI Proceeding. The schedule to the subpoena, which identified the documents sought, was expressed in broad terms. It is relevant for the purposes of the present proceeding to understand the breadth of the subpoena. I therefore set out the schedule to the subpoena in full:
TAKE NOTICE that in this subpoena:
A.‘Document’ has the same meaning as that in the Evidence Act 1995 (NSW), namely “document means any record of information, and includes:
(a)Anything on which there is writing; or
(b)Anything on which there are marks, figures, symbols or perforations having a meaning to persons qualified to interpret them; or
(c)Anything from which sound, images or writings can be reproduced with or without the aid of anything else; or
(d)A map, plan, drawing or photograph.”
B.‘Defendants’ means each of the named defendants in the proceedings, being The Cosmetic Institute Pty Limited (ACN 153 061 155), The Cosmetic Institute Parramatta Pty Limited (ACN 144 469 036), TCI Bondi Junction Pty Limited (ACN 165 531 895), TCI Southport Pty Ltd (ACN 605 603 423) and Eddy Dona, either individually or jointly with one or more of the other named defendants.
C. ‘Complications’ means one or more of the following:
(a)The creation of inappropriate pockets into which the implants were inserted;
(b)Malpositioning of the implants:
(c)Ripping of the implants:
(d)Excessive tissue trauma;
(e)Haemorrhage;
(f)Infection:
(g)Scarring:
(h)Wound dehiscence;
(i)Contracture of the implant capsule;
(j)Local anaesthetic toxicity leading to cardiac arrest, pneumothorax and death: and,
(k)Breast implant-associated anaplastic large-cell lymphoma.
D.‘The Premises’ means one or more of the following that were operated by the named Defendants:
(a)Smith Street Parramatta, New South Wales (TCI Parramatta Premises);
(b)Hollywood Avenue, Bondi Junction, New South Wales (TCI Bondi Premises);
(c)Suite 1, 98 Marine Parade, Southport, Queensland (TCI Southport Premises);
(d)Burwood Road, Concord, New South Wales (Concord Private Hospital);
(e)Chetwynd Road, Guildford, New South Wales (Holroyd Private Hospital).
E.‘Doctors’ means one or more of the surgeons or anaesthetists performing breast augmentation surgery or anaesthetic services for breast augmentation surgery at the Premises as defined in paragraph D above in the period 7 June 2010 to 14 September 2017, including:
(a)The following doctors:
(i)Dr Farheen Ali;
(ii)Dr Napoleon Chiu;
(iii)Dr Sri Darshn;
(iv)Dr Chi-Vien Duong also known as Dr Charles Duong;
(v)Dr James Francis Christopher Kenny also known as Dr Jim Kenny;
(vi)Dr Daniel Kwok;
(vii)Dr Victor Lee;
(viii)Dr Van Nguyen;
(ix)Dr Niroshan Sivathasan;
(x)Dr Anh Huy Tang;
(xi)Dr Charles Wong.
(b) The following anaesthetists:
(i)Dr C Ashes;
(ii)Dr Constantine Arali also known as Dr Con Arali;
(iii)Dr Elalingam;
(iv)Dr A. Fang;
(v)Dr S Fong;
(vi)Dr Anna Freney;
(vii)Dr Gregory Hackman;
(viii)Dr Hill;
(ix)Dr T. Holliday;
(x)Dr Rosa Hou;
(xi)Dr Sam Judelman;
(xii)Dr Kabir;
(xiii)Dr John Kerdic;
(xiv)Dr Kitman Lam;
(xv)Dr Jong Chan Lee;
(xvi)Dr Frederick Luang-Dart Lee;
(xvii)Dr Erez Ben-Menachem;
(xviii)Dr P Mohammadieh;
(xix)Dr Jonathon Riley;
(xx)Dr Derek Rosen;
(xxi)Dr Thomas Russell;
(xxii)Dr Sanjay Satchi;
(xxiii)Dr Sui;
(xxiv)Dr Peter Tam.
F. ‘The Period’ means 7 June 2010 to 14 September 2017.
G. ‘BAS’ means breast augmentation surgery.
The documents or things you must produce are as follows:
1. All documents, or copies of documents, recording information of:
(a)the method of BAS performed at the Premises,
(b)the method of anaesthesia and sedation used for BAS at the Premises,
(c)the reasons for using the method of BAS at the Premises,
(d)the reasons for using the method of anaesthesia and sedation for BAS at the Premises,
(e)the training and accreditation of the Doctors in the performance of BAS at the Premises,
(f)the supervision of the Doctors performing BAS at the Premises,
(g)the training of the Doctors in the method of anaesthesia and sedation used for BAS at the Premises,
(h)the supervision of the Doctors using the method of anaesthesia and sedation for BAS at the Premises,
(i)the performance of mastopexy prior to or at the same time as BAS at the Premises,
(j)criteria for the selection of patients to undergo BAS at the Premises,
(k)the type or manufacturer of breast implants to be used in BAS performed at the Premises,
(l)the reasons for using the breast implants identified in (k) above for BAS at the Premises,
(m)the suitability of the breast implants identified in (k) above for BAS performed at the Premises,
(n)patient management after the performance of BAS at the Premises,
(o)warnings provided to patients about the Complications prior to undergoing BAS at the Premises,
(p)warnings provided to patients about the risks associated with the method of anaesthesia and sedation used for BAS at the Premises,
in the Period.
2. All documents, or copies of documents, recording information of:
(a)the method of BAS performed at the Premises,
(b)the method of anaesthesia and sedation used for BAS at the Premises,
(c)the reasons for using the method of anaesthesia and sedation for BAS,
(d)the reasons for using the method of BAS at the Premises,
(e)training and accreditation in BAS performed at the Premises,
(f)supervision of BAS performed at the Premises,
(g)training in the method of anaesthesia and sedation used for BAS at the Premises,
(h)supervision of the method of anaesthesia and sedation used for BAS at the Premises,
(i)the performance of mastopexy prior to or at the same time as BAS at the Premises,
(j)criteria for the selection of patients to undergo BAS at the Premises,
(k)the type or manufacturer of breast implants used in BAS performed at the Premises,
(l)the reasons for using the breast implants identified in (k) above for BAS at the Premises,
(m)the suitability of the breast implants identified in (k) above for BAS performed at the Premises,
(n)patient management after the performance of BAS at the Premises,
(o)warnings provided to patients about the Complications prior to undergoing BAS at the Premises,
(p)warnings provided to patients about the risks associated with the method of anaesthesia and sedation used for BAS at the Premises,
(q)instructions or directions about BAS performed at the Premises, or
(r)instructions or directions about the method of anaesthesia and sedation used for BAS at the Premises
provided to you by any of the Defendants in the Period.
3.All documents, or copies of documents, provided to patients who underwent BAS at the Premises in the Period which record information of:
(a)the BAS to be performed at the Premises,
(b)the reasons for performing the proposed BAS at the Premises,
(c)warnings of the Complications,
(d)risks associated with the method of anaesthesia and sedation used for BAS at the Premises,
(e)the reasons for using the method of anaesthesia and sedation for the BAS to be performed at the Premises,
(f)contraindications to the BAS to be performed at the Premises,
(g)the circumstances in which BAS is performed after or at the same time as mastopexy,
(h)whether mastopexy was surgery that was available to be performed at the Premises prior to or at the same time as BAS,
(i)contraindications to the method of anaesthesia and sedation used for BAS at the Premises,
(j)the method of anaesthesia and sedation that will be used for any proposed BAS,
(k)the post-operative management or care that will be provided,
(l)the post-operative steps the patient should take themselves,
(m)the type or manufacturer of the implant that will be used in the BAS,
(n)the reasons why any particular type of implant would be used in the BAS,
(o)the quality of the service to be provided to the patient at the Premises.
4.All documents, or copies of documents, recording information of complaints made by:
(a)you to any of the Defendants about training. supervision, representations made to patients about the suitability of breast augmentation surgery for them, the type of surgery being performed on patients, the type of implants being used, or the Complications,
(b)patients who had undergone BAS at the Premises to you about the result of their surgery, the type of surgery performed, the type of implant used, or representations made by the Defendants about the quality of surgery offered or results that would be achieved with the surgery,
in the Period.
5.All documents, or copies of documents, recording information of infection control policies or procedures used at the Premises in the Period.
6.All documents, or copies of documents, recording information of the terms of service between you and the Defendants in the Period.
7.All documents, or copies of documents, recording information of the termination of any contract for services between you and the Defendants in the Period.
8.All invoices, or copies of invoices, issued by you to the Defendants during the Period.
9.All documents, or copies of documents, recording information of the number of BAS procedures performed by you at the Premises in the Period on a daily, weekly or yearly basis.
10.All documents, or copies of documents, recording information of complication rates for BAS performed by you at the Premises in the Period.
11.All documents, or copies of documents, recording information of audits, including the results of any audits, carried out into the outcomes from BAS performed by you at the Premises in the Period.
12.All documents, or copies of documents, recording information of the rate of revision surgery for patients who underwent BAS performed by you at the Premises in the Period.
13.All documents, or copies of documents, recording information of revision surgery performed by the fifth defendant on patients who underwent BAS performed by you at the Premises in the Period.
14.All documents, or copies of documents, recording information of any advertising campaign or advertising material published by the Defendants to be available to the public in any form in the Period.
15All documents, or copies of documents, recording information of advertising or marketing strategies for the Defendants in the Period.
16.All documents, or copies of documents, recording information of how the cost of BAS to be offered to patients at the Premises was calculated in the Period.
17.All documents, or copies of documents, recording information of the job descriptions, defined responsibilities and roles of:
(a)The surgical or medical director,
(b)The director of nursing,
(c)The post-operative manager,
(d)The general manager,
(e)The chief executive officer,
(f)The operations manager, and
(g)The marketing manager or director of marketing
of the Defendants in the Period.
18.All documents, or copies of documents, recording information of the licensing, accreditation and certification of the Premises, including under the Private Health Facilitation Regulation 2010 for the performance of BAS and/or the administration of anaesthesia on patients undergoing BAS in the Period.
19.All documents, or copies of documents, recording information of compliance or noncompliance with the requirements of any regulatory, licensing or quality control body in relation to the performance of BAS and/or the administration of anaesthesia at the Premises in the Period.
20.All documents, or copies of documents, recording information of advertisements published by the Defendants for applications by doctors to become accredited for and to perform BAS or administer anaesthesia for BAS at the Premises in the Period.
21.All documents, or copies of documents, recording information of your qualifications, and your training and experience in BAS and/or in the administration of anaesthesia and sedation used in BAS in the period prior to 14 September 2017.
22.All documents, or copies of documents, recording information of the existence of any data or library maintained or operated by the Defendants in the Period relating to:
(a)the risk of injury and complications of BAS,
(b)the risk of injury and complications to patients undergoing BAS at the Premises,
(c)the availability of measures to minimise and/or obviate the risk of injury and/or complications from BAS,
(d)the availability of measures to minimise and/or obviate the risk of injury and/or complications in patients undergoing BAS at the Premises.
It appears from the materials in the Court Book that, at about the same time, other surgeons who had worked at TCI clinics received subpoenas to produce documents issued by the plaintiffs in the TCI Proceeding. The materials in the Court Book include:
(a)an email from [Dr 1] dated 29 January 2019 giving written notice to Avant of receipt of such a subpoena and providing a copy of (at least part of) the subpoena;
(b)an email from [Dr 2] dated 7 February 2019 giving written notice to Avant of receipt of such a subpoena and providing a copy of (at least part of) the subpoena; and
(c)an email from [Dr 3] dated 18 February 2019 giving written notice to Avant of receipt of such a subpoena and providing a copy of the covering letter from Turner Freeman.
On or about 8 February 2019, Avant instructed counsel to advise as to whether there were grounds to challenge the subpoenas ([REDACTED]).
Correspondence between MDL and Avant (February 2019)
As noted above, MDL were appointed by Avant to act on Dr Darshn’s behalf in the Scotford Proceeding. Pursuant to the terms of the insurance policy, Avant had the conduct of the matter.
On 4 February 2019, Mr Regener of MDL sent an email to Judith Soo of Avant in relation to the Scotford Proceeding. Mr Regener’s email forwarded an email of the same date from Yeldham Price O’Brien Lusk (YPOL), the firm of solicitors acting for the third defendant in the Scotford Proceeding. It seems that the third defendant was now Certain Underwriters at Lloyds subscribing to policy 04012 (referred to as “Newline” in YPOL’s email). The email from YPOL was sent at 9.15 am and stated that the firm’s client would be seeking a three-week adjournment of a directions hearing that was due to take place that day in the Scotford Proceeding. The reasons for seeking the adjournment, which were set out in YPOL’s email, related to the overlap between the Scotford Proceeding and the TCI Proceeding (referred to as the “Group Proceeding” in YPOL’s email). [REDACTED]:
[REDACTED]
As indicated in the above extract, attached to YPOL’s email was a judgment of Garling J in the TCI Proceeding. The judgment was: Rickhuss v The Cosmetic Institute Pty Ltd [2018] NSWSC 1848, which had been delivered on 4 December 2018.
MDL’s email to Avant (forwarding YPOL’s email and the attached judgment of Garling J) stated as follows:
[REDACTED]
The references in the email to various paragraphs are to paragraphs in the judgment of Garling J.
The judgment of Garling J in the TCI Proceeding related to two notices of motion that had been filed by the defendants to that proceeding. The first had been filed by the first to fourth defendants, referred to as the “TCI parties”. This motion primarily sought an order that the proceedings not continue as a representative action under Pt 10 of the Civil Procedure Act. Other relief was also sought, including the striking out of a number of paragraphs in the statement of claim. The second notice of motion had been filed by Dr Dona. This sought similar orders. Dr Dona also sought an order that the proceeding in its entirety be dismissed or the pleading struck out.
The judgment of Garling J contained a description of the claims made in, and the progress of, the TCI Proceeding at [4]-[26]. It is useful to set this out:
Main Proceedings
4The representative proceeding was commenced by Statement of Claim filed on 14 September 2017.
5The group members are defined in the Statement of Claim as being persons who underwent breast augmentation surgery at various premises associated with first to fourth defendants in NSW (Parramatta, Bondi Junction, Concord and Guildford) or Queensland (Southport).
6The second to fourth defendants are subsidiaries of the first defendant. The second defendant, The Cosmetic Institute Parramatta Pty Ltd (in liq), entered into liquidation on or about 5 October 2016. Leave to proceed against it has been granted.
7The fifth defendant is a registered medical practitioner practising as a plastic and reconstructive surgeon who was a director and the beneficial shareholder of the second, third and fourth defendants, and who is and was the surgical director of the TCI parties. It is also alleged that he devised the method of breast augmentation utilised by the TCI parties, and to have trained and supervised doctors at TCI who performed these surgeries.
8It is alleged that group members were operated on and administered anaesthesia by servants and/or agents of the first, second, third or fourth defendant. These surgeons and anaesthetists may be referred to as TCI Surgeons and TCI Anaesthetists, respectively. It is further alleged that several of the group members were operated on by TCI Surgeons trained by, or under the supervision of, the fifth defendant, in accordance with accreditation and training contracts between TCI Surgeons and the first, second, third or fourth defendants.
9The Statement of Claim pleads that the system of breast augmentation surgery performed at the premises of the TCI facilities (TCI Parramatta Premises, TCI Bondi Premises, TCI Southport Premises, Concord Private Hospital and Holroyd Private Hospital) from 2012 had the following characteristics:
(1)Inadequate infection control procedures during the surgeries;
(2)Inadequate capacity to access urgent surgical or medical assistance in the event of emergencies arising during surgeries;
(3)In respect of the second defendant and the third defendant’s premises, no capacity to legally administer general anaesthesia; and no licence to admit patients and provide medical, surgical or other prescribed treatment within the meaning of ss 4(1), 12(2), 33 and 41(1) of the Private Health Facilities Act 2007.
10The Statement of Claim pleads that the plaintiffs and group members each individually:
(1)accessed promotional material published by the defendants on their website or on social media sites;
(2)attended at a TCI premises for one pre-surgery consultation with a TCI surgeon and/or cosmetic consultant who was the servant or agent of the TCI parties. The consultations occurred on average between one day and two months prior to each plaintiff or group member’s breast augmentation surgery and cost $150;
(3)underwent breast augmentation surgery at the premises of the TCI parties; and
(4)suffered a complication during surgery or post-operatively.
11The group members are alleged to have been operated on using the so-called “One Size Fits All Approach”, a phrase coined by counsel for the plaintiffs. This approach is said to have increased the risk of 11 particularised complications of breast augmentation surgery, including haemorrhage; excessive tissue trauma; infection; scarring; and local anaesthetic toxicity, leading to cardiac arrest, pneumothorax and death.
Causes of Action
12The claims of the group members are made both at common law in negligence, and in statutory causes of action arising from the Australian Consumer Law (“ACL”) contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“CC Act”).
Negligence
13It is alleged that the defendants owed the plaintiffs and group members a duty to exercise reasonable care and skill in the provision of advice about, and in the performance of, breast augmentation surgery, and that the defendants breached this duty of care by failing to exercise reasonable care and skill to avoid the foreseeable risk of complications. The defendants are said to have so breached their duties of care in 20 particularised ways.
14As a result, it is alleged that each plaintiff and group member suffered injury, loss and damage as a result of undergoing breast augmentation surgery.
15Further and in the alternative, the plaintiffs alleged that the defendants knew or ought to have known that the plaintiffs and group members would act in reliance on 36 particularised representations by consenting to and undergoing the surgeries. Therefore, defendants are said to have owed a duty to take reasonable care in making those representations.
Consumer Law
16The plaintiffs also allege breaches of the ACL, and in particular, the consumer guarantee provisions in ss 60, 61(1) and 61(2) of the ACL.
17It is pleaded that breast augmentation surgery is a “service” (of a kind ordinarily acquired for personal use) within the meaning of s 3 of the ACL, which was supplied to the plaintiffs and group members as consumers within the meaning of s 3 of the ACL. The surgeries were therefore services provided in trade or commerce within the meaning of s 4 of the CC Act and s 2 of the ACL.
18By reason of the defendants’ system of breast augmentation surgery, the surgeries “acquired” by the plaintiffs and group members are said to have been in breach of the guarantee for the supply of services with due care and skill, and the supply of services which were reasonably fit for their purpose. Further, it is pleaded that the surgeries were not of the nature, quality, state or condition that might reasonably be expected to achieve the results advertised and sought (including enlargement of a woman’s breasts, improvement of the aesthetic appearance of a woman’s breasts, and increased self-esteem and confidence).
19The breaches of those consumer guarantees are said to be failures, or major failures, within the meaning in s 268 of the ACL.
20By reason of these failures, the representations made by the defendants to the plaintiffs and group members are said to be misleading representations with respect to future matters (ACL, s 4), misleading or deceptive conduct (ACL, s 18), and, further or in the alternative, false or misleading representations (ACL, s 29(1)(b), s 29(1)(m) and/or s 34).
Common Questions
21As required by s 161(1)(c) of the Civil Procedure Act, the Statement of Claim includes a statement of the common questions of law or fact which the plaintiffs allege will arise in the course of the hearing of the group proceedings. It is unnecessary to set out in detail these common questions.
22The Statement of Claim does not differentiate between whether the questions are of law or fact. However, most of the common questions of fact go to the relationship between the TCI Surgeons and the first to fourth defendants, whether the first defendant controlled and directed the activities and services offered to the plaintiffs and group members by the second to fourth defendants, and whether an extensive list of representations particularised in the Statement of Claim were made to the plaintiffs and group members by the TCI Surgeons or any of the defendants.
23A further four identified common questions of fact relate to the role of the fifth defendant in designing, devising, supervising, training and accrediting the TCI Surgeons, including in their alleged use of the “One Size Fits All Approach” to the undertaking of breast augmentation surgery.
24The common questions of law identified by the Statement of Claim relate to whether the defendants breached their common law duty to exercise due care and skill in performing breast augmentation surgery, including whether the adoption of the “One Size Fits All Approach” was negligent; whether any representations made by the defendants were misleading with respect to future matters, or misleading and deceptive, or breached a guarantee, for the purposes of the ACL; or whether the representations were negligent representations.
25In the course of the hearing of the Motions, in light of the fact that none of the defendants have filed any defence, no additional common questions were identified. It might be reasonably anticipated that the defence will raise matters of fact and law which would be common.
Defences
26The proceedings are presently at a preliminary stage. The defendants have not yet filed Defences. No further interlocutory steps have as yet been taken.
After setting out the parties’ submissions, Garling J considered those submissions at [73]-[107]. In his Honour’s view, there were a number of important common questions arising from the claims of the plaintiffs and group members (at [74]-[77]). In his Honour’s view, those questions shared a factual or legal matrix and were relevant to the claims of the plaintiffs and group members. His Honour then turned to whether the interests of justice favoured the proceeding remaining as a representative action, concluding that they did (at [106]). Garling J dismissed both notices of motion.
On 7 February 2019, Sangeeta Sharmin of MDL sent an email to Ms Soo of Avant in relation to the Scotford Proceeding. The email was in the following terms:
[REDACTED]
Dr Darshn’s first conversation with Avant (18 February 2019)
On 18 February 2019, Dr Darshn telephoned Avant’s Medico-Legal Advice Service and spoke with Ms Pickett. The Medico-Legal Advice Service is a service offered by Avant to its members. Members can call a 24-hour telephone line to seek legal advice relating to their practice.
To the extent that there were differences between Dr Darshn’s account of this conversation and the account of Ms Pickett, I prefer the account of Ms Pickett. In addition to the reasons given at [32] and [33] above, Ms Pickett’s account was supported by a contemporaneous file note of the conversation, together with evidence of her usual practice in relation to such conversations.
During the call, Dr Darshn informed Ms Pickett that he had received a subpoena from Turner Freeman, but had not responded to it. Dr Darshn told Ms Pickett that the subpoena was returnable on 22 February 2019.
In accordance with her usual practice, Ms Pickett advised Dr Darshn that the subpoena was a court order and could not be ignored, and that he must respond to the subpoena.
In accordance with her usual practice, Ms Pickett directed Dr Darshn to the schedule to the subpoena to identify the documents being sought. Dr Darshn informed Ms Pickett that the subpoena sought invoices from a previous company.
Ms Pickett informed Dr Darshn that his response should set out all of the documents that he was producing in response to the subpoena. Ms Pickett gave him some sample wording for the email.
Ms Pickett did not ask Dr Darshn to provide a copy of the subpoena to Avant and Dr Darshn did not do so.
Ms Pickett did not ask Dr Darshn who the parties to the proceeding were.
To the extent that Dr Darshn gives evidence that he asked Ms Pickett whether he was part of the class action and whether he should be worried about the class action, I do not accept that this formed part of the conversation. For the reasons given earlier, I prefer Ms Pickett’s account of the conversation to Dr Darshn’s.
Dr Darshn’s second conversation with Avant (22 March 2019)
On 22 March 2019, Dr Darshn again telephoned Avant’s Medico-Legal Advice Service. This time he spoke with Ms Gillman.
To the extent that there were differences between Dr Darshn’s account of this conversation and the account of Ms Gillman, I prefer the account of Ms Gillman. In addition to the reasons given at [32] and [34] above, Ms Gillman’s account was supported by a contemporaneous file note of the conversation.
Dr Darshn informed Ms Gillman that he had received a letter from Don Cameron & Associates (a firm of solicitors) threatening to enter default judgment in a court proceeding if no response was received by a certain date, and that the due date had already passed. Ms Gillman asked Dr Darshn to send the letter to her, and he did so during the telephone call.
The letter from Don Cameron & Associates, which was dated 11 March 2019, related to the Summers-Hall Proceeding, in which Don Cameron & Associates were acting for the plaintiff. The letter did not attach the statement of claim. The letter stated:
I refer to the Statement of Claim in the above matter which was personally served upon you on 19 November 2018. I hold an affidavit of service to that effect.
More than 28 days have passed since service and I note you have failed to file a defence.
I am instructed to enter default judgment against you unless you file a defence within seven days of this letter.
Dr Darshn said to Ms Gillman that he had no recollection of receiving the statement of claim and that he would have sent it to Avant if he had received it. Ms Gillman’s file note includes: “Possibility it was served on another dr at clinic who looks like him but who has now left. Clinic has no recollection of matter.” It may be that words to this effect were spoken by Dr Darshn during the conversation.
Ms Gillman provided some advice to Dr Darshn regarding how he should respond to the correspondence. She told him that she would refer his email directly to the Claims team to ensure they were aware of the threat of default judgment and to assess whether the claim fell under Dr Darshn’s policy.
Dr Darshn then raised a second issue with Ms Gillman, referring to a call he had placed to Avant’s Medico-Legal Advice Service in February 2019 regarding a subpoena he had received from Turner Freeman. Dr Darshn said that he had sent the invoices called for by the subpoena to Turner Freeman. Reference was then made to the fact that the documents should have been produced to the court rather than to Turner Freeman. Ms Gillman’s file note records: “Explained should have gone to the court”. This may be a reference to something Turner Freeman had explained to Dr Darshn and he told Ms Gillman during the call.
During the call, Ms Gillman became aware that the proceeding in which the subpoena had been issued was the TCI class action. Ms Gillman was already aware of the existence of the TCI class action and of the fact that Turner Freeman were acting for the plaintiffs. Ms Gillman knew about these matters from reading stories in the media about the class action, and from speaking with Paul Tsaousidis (the head of Avant’s NSW legal department) about the proceeding. Ms Gillman knew that the defendants to the proceedings were various TCI entities and Dr Dona. She was broadly aware of the allegations in the TCI class action, and knew that these included that there was a one-size-fits-all system and that the TCI entities had made various representations to their patients that were said to be misleading or deceptive.
During the call, there was discussion of the fact that Avant had been contacted by other doctors who had received subpoenas in the TCI Proceeding. Dr Darshn said that he was aware that other doctors had received advice from Avant about the subpoenas, but that he had nothing significant to produce, only a few invoices.
Ms Gillman gave evidence (which I accept) that, at the time of the conversation with Dr Darshn, she was already aware of the subpoena in the TCI class action (which had been served on other doctors who were insured by Avant), but could not recall if she had actually seen it. Ms Gillman gave evidence (which I accept) that she was aware, from talking to Mr Tsaousidis about it, that the subpoena was very broad and unusually long. Ms Gillman gave evidence (which I accept) that Mr Tsaousidis had a copy of the subpoena.
During the call, Ms Gillman suggested that Dr Darshn send Avant a copy of the subpoena so he could be included in a list of other colleagues in case further advice was required. However, he did not do so.
To the extent that Dr Darshn gives evidence that he asked Ms Gillman whether he was part of the class action, I do not accept that this formed part of the conversation. It does not fit with Ms Gillman’s evidence (which I accept) that he was aware that he was not a defendant to the class action. I also do not accept Dr Darshn’s evidence that he asked whether he should be worried about the class action. This does not fit with the logic of the conversation as described in Ms Gillman’s evidence.
On 22 March 2019, following the telephone conversation with Dr Darshn, Ms Gillman sent an email to Avant’s National Claims Acceptance team, Stephanie Penney (who worked in Avant’s Claims team) and Mr Tsaousidis. The first part of the email was addressed to Ms Penney and the National Claims Acceptance team and related to the letter Dr Darshn had received regarding the Summers-Hall Proceeding. The second part of the email was addressed to Mr Tsaousidis and related to the subpoena. In that part of the email, Ms Gillman stated:
Dr D also got a subpoena from Turner Freeman. He had a few invoices but sent them directly to Turner Freeman not the Court. I have asked him to send us his email / subpoena so I can send them to you and he can be added to your list. Apparently his colleagues have been very complementary (sic) of the help you have been providing them.
(Emphasis added.)
Dr Darshn submits that Avant’s reliance on the requirement of notice in writing of “claims” under the terms of the policy, or of “facts that might give rise to a claim” within the meaning of s 40(3), involves a breach of its duty of utmost good faith, with the consequence that:
(a)Avant is prevented by operation of s 14 from relying on the provisions of the contract of insurance to deny the claim for indemnity;
(b)further or alternatively, Dr Darshn is entitled to specific performance based on Avant’s breach of a term of the insurance contract implied by law by operation of s 13.
Avant’s submissions may be summarised as follows. Avant submits that it has not been demonstrated as a matter of fact that there was any capricious, unreasonable or arbitrary conduct on the part of the insurer; ss 13 and 14 do not give any additional right to coverage, nor to damages that are equivalent to coverage, but merely operate in circumstances where the insurer has made a decision not to cover where there is an obligation to cover, or where the insurer has handled a claim incorrectly.
Avant submits that: the comparison sought to be made between Dr Darshn and the other doctors does not exist; in the case of [Dr 3], who is perhaps arguably the closest comparator, [Dr 3] gave notice in writing by an email which attached the subpoena he had received together with a list of his patients “just in case” a claim was made against him; Avant accepted this as being notice for the purpose of s 40(3).
Avant makes the following further submissions:
(a)As a matter of statutory construction, s 40(3) deals exclusively with the potential benefits available to those insureds who notify in writing facts that may give rise to a claim. Section 40(2) contains the requirement for an insurer to inform the insured in writing of the effect of s 40(3). There is no scope for the application of s 13 as an adjunct or an alternative to the benefits conferred by those express provisions.
(b)The type of conduct which s 13 seeks to ameliorate is conduct that can fairly be described as containing an element of capriciousness, bad dealing or a lack of clean hands. There is nothing in the matters relied on by Dr Darshn in his submissions that could conceivably come within the ambit of s 13.
(c)Dr Darshn seeks to reverse the effect of s 40(3) and to place an onus on an insurer, during a telephone conversation, to divine both the “facts” and the likelihood of a claim, to make a link between the two, and to exhort an insured to provide a notification to which s 40(3) applies according to its terms.
(d)Dr Darshn’s submissions elide two important matters. Dr Darshn’s communication concerned the receipt by him of a subpoena in proceedings to which he was not a party. That is a regular occurrence for the Medico-Legal Advice Service staff. Dr Darshn was advised to send the subpoena in if he wanted help with it. On his own evidence, he did not want to incur any costs by making a notification of any sort. At no time did Dr Darshn provide any information in the telephone call that should have alerted Ms Gillman as to facts that might give rise to a claim being made against Dr Darshn. Dr Darshn knew the procedure that Avant followed when he notified claims or sought advice from the MLA.
(e)The facts and circumstances relied on in Dr Darshn’s submissions are ethereal, unconnected, and unable to support the weight of the submission made. A number of unconnected facts or legal contentions, such as the fact that Avant’s Medico-Legal Advice Service staff were legally qualified and that it was a free legal advice service, do not combine to create “strands in a cable” sufficient to support an inference of fact or a submission based on the existence of that fact: cf Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 at [98].
(f)Dr Darshn’s submissions misstate the context in which the conversations occurred. There was no retainer of Avant through the Medico-Legal Advice Service. It was a free legal advice service. The circumstances did not create a relationship of solicitor and client, much less one in which a potential conflict of interest might arise. Until Dr Darshn sought to make a claim after the policy period had expired, and without having availed himself of the ability to notify circumstances that might give rise to a claim, he and Avant were not in conflict.
In light of my conclusion, above, that the Second Contention is substantially made out, it is not strictly necessary to determine the other contentions. However, as already indicated, I consider it appropriate to do so for the sake of completeness.
Had I not formed the view that the Second Contention is substantially made out (that is, that s 40(3) operates in the circumstances of this case), I would have concluded that, in all the circumstances, Avant’s denial of Dr Darshn’s claim for indemnity in respect of Ms Sanchez’s claim against him in the TCI Proceeding, and the legal defence costs associated with defending her claim in the proceeding, constituted a breach of Avant’s duty of utmost good faith. I note in particular the following aspects of the facts and circumstances, which would have been apparent to Avant in considering Dr Darshn’s claim for indemnity.
First, Dr Darshn called Avant’s Medico-Legal Advice Service twice in early 2019. It is the second conversation that has greater relevance for present purposes as the TCI Proceeding was expressly referred to in that conversation. Although Avant was aware of the nature of the TCI Proceeding, and of the terms and breadth of the subpoena in the TCI Proceeding, Avant did not advise or inform Dr Darshn (during the conversation or in the days or weeks following the conversation) of the effect of s 40(3) of the Insurance Contracts Act and that he needed to send Avant a copy of the subpoena if he wanted to be able to rely on s 40(3) in the event that he was joined to the TCI Proceeding.
Avant held out its Medico-Legal Advice Service as providing advice, not only in relation to claims that may need to be notified, but also facts that might give rise to a claim (see [100] above).
Although the 2015-16 Avant policy contained, on page 9, a statement about the effect of s 40(3), neither the 2017-18 policy nor the 2018-19 policy contained any like statement. The 2015-16 policy was issued some years before the relevant conversation (which took place in 2019). I was not taken to any other document by which Avant informed Dr Darshn of the effect of s 40(3).
It is true that Avant, both during the conversation and in a subsequent email, suggested that Dr Darshn send Avant a copy of the subpoena. However, the reason given for doing so was: in case he needed “further advice”. At that stage, he had already provided documents in response to the subpoena and it was not apparent that he needed any further advice. The position would likely have been very different had Avant informed Dr Darshn of the effect of s 40(3) and that he needed to send the subpoena to Avant if he wanted to be able to rely on s 40(3) in the event that he was joined to the TCI Proceeding.
Secondly, at or about the time of the second conversation, Avant was aware of the nature of the TCI Proceeding and of the possibility, if not the likelihood, that the TCI surgeons might be joined as defendants to the proceeding. In February 2019, Avant had received emails from MDL that provided details about the TCI Proceeding. Key aspects of those emails have been summarised at [155](a) to (d) above. As noted in [156] above, the correspondence from MDL to Avant described the nature of the TCI Proceeding and the causes of action and common questions in that proceeding. It was clearly apparent that many of the causes of action were open to being deployed against the TCI surgeons (such as Dr Darshn) as well as the TCI entities.
Thirdly, at the time of the second conversation, Avant had a copy of the subpoena (or, more accurately, a subpoena in substantially the same terms as the subpoena received by Dr Darshn) as other doctors insured by Avant had been served with such a subpoena and had provided a copy to Avant. The subpoena was expressed in far broader terms than a usual subpoena to produce documents. The subpoena conveyed the possibility, if not the likelihood, of the TCI surgeons being joined as defendants to the TCI Proceeding.
Fourthly, Avant appears to have adopted the position (in my view correctly) that if an insured doctor who received the subpoena in the TCI Proceeding provided a copy of the subpoena to Avant, this would constitute the giving of notice in writing to Avant of “facts that might give rise to a claim” against the insured for the purposes of s 40(3) in relation to a claim against the doctor in the TCI Proceeding. It appears to be the case that Avant accepted [Dr 3’s] claim for indemnity on the basis of his sending Avant a copy of the covering letter attaching the subpoena in the TCI Proceeding, suggesting that Avant considered this notification to suffice for the purposes of s 40(3). (Although Avant submits that [Dr 3] sent Avant a copy of the subpoena itself and a list of patients, that submission does not have a reference to any evidence to make good that factual proposition.) Further, in Avant’s letter dated 1 September 2020, refusing Dr Darshn’s claim for indemnity (see [120] above), in the context of discussing s 40(3) and the requirement that the notice be in writing, Avant noted that “[y]ou did not provide the subpoena to us”. This also tends to suggest that Avant has adopted the position that sending it a copy of the subpoena in the TCI Proceeding would constitute the giving of notice of “facts that might give rise to a claim” against the insured for the purposes of s 40(3). The relevance of this point is that, had Dr Darshn been advised to send Avant a copy of the subpoena for the purposes of s 40(3), and consequently done so, Avant would likely have considered him entitled to the benefit of the provision.
The authorities discussed above indicate that an insurer’s statutory obligation to act with utmost good faith may require the insurer to act, consistently with commercial standards of decency and fairness, with due regard to the interests of the insured: see, eg, CGU v AMP at [15] per Gleeson CJ and Crennan J. Having regard to the matters referred to above, which would have been apparent to Avant in considering Dr Darshn’s claim for indemnity, in my view Avant’s statutory obligation to act with utmost good faith required it to grant him indemnity with respect to Ms Sanchez’s claim in the TCI Proceeding and the associated legal defence costs. In my opinion, having regard to the four matters set out above, it was unfair and unreasonable not to do so. The first matter is that the effect of s 40(3) was not made apparent to Dr Darshn at or about the time of the second conversation. The second and third matters combine to show that Avant was already aware of the TCI Proceeding and the possibility, if not the likelihood, that Dr Darshn might be joined as a defendant. The fourth matter shows that the relevant step that Dr Darshn would have needed to take to be covered was merely to send Avant a copy of the subpoena.
Insofar as Avant submits that, as a matter of statutory construction, there is no scope for s 13 to operate beyond the terms of s 40(2) and s 40(3), I do not accept that submission. Section 12 makes clear that the duty of utmost good faith is not to be read down by the subsequent provisions of the Insurance Contracts Act.
Insofar as Avant submits that the type of conduct that s 13 seeks to ameliorate is conduct that can fairly be described as containing an element of capriciousness, bad dealing or a lack of clean hands, I consider this to take too narrow a view of the duty. It is unhelpful to seek to substitute other words such as these for the statutory language. Further, as Allsop CJ stated in Delor Vue at [347], “[i]t is not appropriate to seek to define the standard within s 13”.
For these reasons, had I not concluded that the Second Contention was substantially made out (that is, that s 40(3) operates in the circumstances of this case), I would have concluded that Avant breached its duty of utmost good faith in rejecting Dr Darshn’s claim for indemnity.
The Sixth Contention
Dr Darshn’s Sixth Contention is that, on a proper construction of the 2017-18 policy and/or the 2018-19 policy, Ms M’s Complaint, Ms Scotford’s claim and/or Ms Summers-Hall’s claim (on the one hand) and the TCI Proceeding (on the other) arose out of a series of related single acts, errors, omissions or occurrences. Accordingly, it is contended, they are to be treated as a single “claim” under the policy in force at the date the first of the series of related claims commenced.
This contention is based on (what Dr Darshn describes as) the ‘aggregation clause’ in the Avant policies. The relevant term is paragraph (f) under the heading “How much we will pay” (see [46] above). For ease of reference, paragraph (f) is set out again:
all claims or requests for indemnity under this policy, which arise from, or are attributable to, a single act, error, omission or occurrence or series of related single acts, errors, omissions or occurrences, will be treated under this policy as one claim or one request for indemnity.
Dr Darshn’s submissions in relation to this contention can be summarised as follows:
(a)Each of the relevant Avant policies includes an ‘aggregation clause’ in terms which commonly appear in policies of this sort.
(b)Generally, these provisions are enlivened where there is a “unifying factor” that enables two or more separate claims to be treated as a single claim under the contract: Bank of Queensland at [1], [9]-[10]; see also Lloyds TSB General Insurance Holdings Ltd v Lloyds Bank Group Insurance Co Ltd [2003] 4 All ER 43. In particular:
(i)where a clause makes reference to a “series” of acts, this is typically construed as a reference to “a number of events of a sufficiently similar kind following one after the other in temporal succession” (Bank of Queensland at [10]);
(ii)a reference to “related” acts generally implies “some inter-connection between the matters or transactions, or in other words that they must in some way fit together”, which is in turn an “acutely fact sensitive exercise” (Bank of Queensland at [12], quoting AIG Europe Ltd v Woodman [2017] Lloyd’s Rep IR 209 at [22]); and
(iii)a distinction is to be drawn between aggregation clauses where the unifying factor is an act as compared to a cause, with the latter typically being a broader concept (Bank of Queensland at [14]).
(c)In the present case, the relevant clause is typical of the latter type of clause, with the unifying factor being whether the successive claims “arise from, or are attributable to, a single act, error, omission or occurrence or series of related single acts, errors, omissions or occurrences” (emphasis added).
(d)This criterion is fulfilled here given the systemic causes and allegedly common causes of loss pleaded; these are pleaded in near identical terms in the individual claimants’ proceedings and in the TCI Proceeding.
Avant’s submissions in response can be summarised as follows:
(a)Dr Darshn has simply misunderstood and misapplied the aggregation clause.
(b)There is no doubting the principles discussed in Bank of Queensland and the cases cited therein, but that is not to say that the aggregation clause somehow has the effect of requiring Avant to indemnify the applicant in respect of the TCI Proceeding.
(c)As was made plain in Bank of Queensland, each aggregation clause must be construed within the commercial contract of insurance in which it appears and within the scope of the relevant facts.
(d)Disputes as to aggregation clauses arise when a claim for indemnity is made after the determination of the proceedings and questions arise as to whether one or more deductibles is payable or whether the aggregate limit has been reached.
(e)Aggregation clauses are clauses which determine whether several related claims fall to be determined as one claim. The relationship depends on the wording of the aggregation clause and the claims that are said to be subject to it.
(f)The aggregation clause cannot be used in the way in which Dr Darshn contends, in order to somehow convert his incomplete oral notification of the receipt of the subpoena into a claim, in respect of which Avant is liable to indemnify.
In my view, the aggregation clause in the Avant policies (set out above) cannot be used in the way that Dr Darshn seeks to use it, that is, to assist him in satisfying the notification requirements under the policy. The aggregation clause needs to be read in the context of the other paragraphs that appear under the heading “How much we will pay”. Read in context, it is apparent that the aggregation clause – paragraph (f) – is concerned with matters such as deductibles and the aggregate limit of cover; it is not concerned with notification of a claim.
Accordingly, the Sixth Contention is not made out.
Conclusion
For the reasons set out above, I have concluded that the Second Contention is substantially made out.
In the course of closing oral submissions, senior counsel for Avant submitted that some of the relief sought by Dr Darshn was premature in that no civil liability in the TCI Proceeding had yet been established. Further, it was submitted that, in the event that Dr Darshn was entitled to cover in respect of the TCI Proceeding, the insurer may take over the conduct of the claim. It was also submitted that, on the proper construction of the Avant policies, there was no obligation to cover legal defence costs at this stage; it was submitted that an obligation to cover legal defence costs would only arise, if at all, at the conclusion of the TCI Proceeding. Therefore, it was submitted, the Court should not order specific performance in respect of legal defence costs. It was accepted that, if I concluded that Avant had an obligation to indemnify Dr Darshn in respect of the TCI Proceeding (either because there was a “claim” within the meaning of the policy, or because s 40(3) was satisfied), the Court could make a declaration (T269).
Insofar as Avant submits that, even if Dr Darshn is entitled to cover in respect of Ms Sanchez’s claim in the TCI Proceeding, an obligation to cover legal defence costs would only arise, if at all, at the conclusion of the proceeding, I do not accept that submission. The insuring clause (clause 2), set out at [39] above, relevantly states that “we [the insurer] will cover you [the insured] for amounts which you become legally liable to pay as compensation for civil liability, in addition to legal defence costs, in respect of claims …” (emphasis added). As set out in [43] above, “legal defence costs” is defined as meaning “[t]he necessary and reasonable costs of investigating, defending or settling a claim made against you and covered by this policy”. Reading these provisions in context, and having regard to the commercial purpose of the insurance policy, I consider it clear that the insurer’s obligation is to provide cover for legal defence costs as and when they are incurred, rather than only at the conclusion of a legal proceeding. Otherwise, the insured could be out of pocket for a very large sum of money for a long period of time. This would be contrary to the context and commercial purpose of this policy of professional indemnity insurance, which is to alleviate that potential financial burden.
I will give the parties a short period of time to consider these reasons and confer in relation to the appropriate form of orders to give effect to these reasons, and costs. I will therefore make orders that:
(a)within 14 days, Dr Darshn and Avant file any agreed minute of proposed orders to give effect to these reasons and in relation to costs; and
(b)if Dr Darshn and Avant cannot agree, then within 21 days, each of Dr Darshn and Avant file and serve a minute of proposed orders and an outline of submissions (of no more than five pages) in support of those orders.
If there is an issue between Dr Darshn and Avant as to the form of orders or costs, I would propose to deal with this on the papers unless either party requests a hearing, in which case I will schedule a hearing.
I will also make an order that MIGA have liberty to apply, within 28 days, if it wishes to apply for an order for costs as against Avant (see [5] above).
I certify that the preceding two hundred and forty-one (241) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky. Associate:
Dated: 25 June 2021
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