Dowsley v Westpac Life Insurance Services Ltd
[2013] NSWSC 1208
•30 August 2013
Supreme Court
New South Wales
Medium Neutral Citation: Dowsley v Westpac Life Insurance Services Ltd [2013] NSWSC 1208 Hearing dates: 18/06/2013 Decision date: 30 August 2013 Jurisdiction: Common Law Before: Rothman J Decision: (1) A declaration that on a true construction of the contract of insurance between the plaintiffs, Lisa and Garry Dowsley, and the defendant, Westpac Life Insurance Services Ltd, the aforesaid plaintiffs have exercised their right to buy-back the first plaintiff's Death Benefit under the terms of the policy of insurance (No Y0532784) to reinstate the full Death Benefit as it existed prior to the payment of the Living Benefit.
(2) An order that the defendant, Westpac Life Insurance Services Ltd, perform its obligations under the aforesaid contract of insurance by reinstating the first plaintiff's Death Benefit under the aforesaid policy, subject to the payment of appropriate premiums calculated in accordance with the policy.
(3) The defendant pay the plaintiffs' costs of and incidental to the proceedings, as agreed or assessed.
Catchwords: CONTRACT - insurance - contra preferentem - reinstatement of Death Benefit to full value by exercise of contractual right at first and second anniversary of payment of trauma insurance - meaning of "within 30 days of" to include request made before anniversary date - each reinstatement power to operate independently Legislation Cited: Associated Dominions Assurance Society Pty Ltd v Balmford [1950] HCA 30; (1950) 81 CLR 161
Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500
Dodds v Walker [1981] 1 WLR 1027
Ex parte Fallon (1793) 5 TR 283
Forster v Jododex Aust Pty LTd [1972] HCA 61; (1972) 127 CLR 421
Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41
Lamont v Heron [1970] HCA 47; (1970) 126 CLR 123
Lester v Garland (1808) 15 Ves 248; [1803-1813] 33 ER 748
Mission Corporation Ltd v Telecom Auckland Ltd [1994] 2 NZLR 357
Moschi v Lep Air Services Ltd; Lep Air Services Ltd v Rolloswin [1973] AC 331
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pilcher v Logan (1914) 15 SR (NSW) 24
Prowse v McIntyre [1961] HCA 79; (1961) 111 CLR 264
STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd (No 2) [2010] FCA 1240
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Ward v Walton [1989] 66 NTR 20; (1989) 99 FLR 21
Williams v Burgess (1840) 10 LJQB 10Cases Cited: Limitation Act 1981 (NT) Category: Principal judgment Parties: Lisa Dowsley (First Plaintiff)
Garry Dowsley (Second Plaintiff)
Westpac Life Insurance Services Ltd (Defendant)Representation: Counsel:
R de Meyrick (First and Second Plaintiffs)
R Cavanagh SC (Defendant)
Solicitors:
Beston Macken McManis (First and Second Plaintiffs)
HWL Ebsworth (Defendant)
File Number(s): 2011/244338 Publication restriction: None
Judgment
The issue before the Court relates to the proper construction of an insurance contract and is relatively confined. Lisa and Garry Dowsley (hereinafter, "the plaintiffs") entered into a contract of insurance, covering trauma and life events. An event occurred which triggered the trauma insurance cover, which was paid by the defendant, Westpac Life Insurance Services Ltd (hereinafter, "Westpac Insurance").
In summary, the insurance contract provides that once a trauma payment (hereinafter, "the Living Benefit") has been made under the policy, the entitlement under the life policy (hereinafter, "the Death Benefit") is reduced by the amount of the trauma payment, subject to a buy-back provision. Also in summary form, the buy-back provision is a provision that allows the insured to reinstate, subject to a number of conditions, the full value of the life insurance policy and, in particular, the Death Benefit. The issue between the parties is whether the plaintiffs are, at this stage, capable or entitled to exercise the power to buy-back the full value of the life policy (or whether they have initiated the contractual right to do so).
Facts
The issue, as described above, is essentially one of construction. Nevertheless, in order to determine the entitlement of the plaintiffs to exercise their rights to buy-back the full value of the life insurance payment, the Death Benefit, it is necessary to recite some more detailed facts.
In January 2003, the plaintiffs took out a life insurance policy with Westpac Insurance. The insurance policy was one policy for both the plaintiffs but, in relation to the first plaintiff, commenced 31 January 2003, and, in relation to the second plaintiff, commenced 28 February 2003. The policy was renewable on the anniversary of its commencement.
In early 2004, Lisa Dowsley, the first plaintiff was diagnosed with cancer, which, at the time, was said to be terminal. She was diagnosed with non-Hodgkin's lymphoma.
On 6 April 2004, the plaintiffs lodged a claim for the Living Benefit under the policy. By letter dated 9 June 2004, Westpac Insurance wrote to the plaintiffs enclosing a cheque for $517,487.05 in settlement of the claim. The letter advised of the effect of the payment on the Death Benefit in the following terms:
"As per your policy document, we have now removed the Living Benefit and the Death Benefit and Total and Permanent Disablement Benefit have been reduced by an equivalent amount of the Living Benefit claim paid. Therefore your Death and Total and Permanent Disablement Benefit have been removed.
However, twelve calendar months after the payment of your Living Benefit you may request to buy-back 50% of your Death Benefit, without any evidence of your health. Following twenty-four months of the claim payment, if you have accepted the first offer you may then request the remaining 50% of the Death Benefit."
Westpac Insurance remarked in the letter that the policy in relation to Mr Dowsley had remained unchanged and notified Mr and Mrs Dowsley of the new premium, reduced on account of the unavailability of the Death Benefit and Total and Permanent Disablement Benefit. The evidence of Mrs Dowsley was that in or about early June 2004, after the claim for the Living Benefit had been lodged, but before the cheque had been received, she had a conversation with John Motu, a Senior Claims Officer at Westpac Insurance. The conversation was said to be in the following terms:
"First plaintiff: 'I definitely want to buy-back the Death Benefit. I will write you a letter if that's what you require.'
JM: 'No, you can't do that. You have to wait 12 months before you can ask for the buy-back.'"
On 19 August 2005, according to the evidence of Mr Dowsley, he received a telephone call from a person identifying himself as an employee of Westpac Insurance. During the course of that conversation the Death Benefit buy-back procedure was discussed. Apparently on that date a number of conversations were held, after which Mr Dowsley was concerned that he and/or Mrs Dowsley had missed the deadline for making a request for the buy-back. Mr Dowsley asked to speak to a former employee, Archie, with whom they had wished to deal. They were told he was unavailable or not, any longer, working as a Westpac Financial Consultant.
As a consequence of that conversation, Mr and Mrs Dowsley sent, by facsimile, a letter. The letter was sent and received on 19 August 2005. In summary, the letter restated the effect of conversations with John Motu at the commencement of the policy, with Archie at an earlier time and the intention of Mr and Mrs Dowsley to exercise the buy-back option (so described).
The aforementioned letter of 19 August 2005, sent by Mr and Mrs Dowsley to Westpac Insurance and/or Westpac Financial Services, was the first written advice from the plaintiffs that they wished to exercise the capacity to buy-back the Death Benefit under the policy arrangements.
Between 19 August 2005 and 1 November 2005 there were, as is obvious from the letter from Westpac Insurance dated 1 November 2005, a series of discussions between the plaintiffs and Westpac Insurance, for the purpose of investigating the conversations and correspondence between the parties and the capacity of the plaintiffs to buy-back the Death Benefit.
On 1 November 2005, Westpac Insurance wrote to Mr and Mrs Dowsley. In part, it indicated that the attitude of Westpac Insurance was that its records disclosed that the payment of the Living Benefit was issued on 11 June 2004. Westpac Insurance's position was therefore that the anniversary date of the payment was 11 June 2005 and the written request for a buy-back was required by 11 July 2005.
Apparently, in the course of the investigation of the issues raised by Mr and Mrs Dowsley, Westpac Insurance investigated the circumstances of telephone conversations with individuals in its employ or representing it and, the letter stated, those records disclosed that telephone calls were made on 16 September 2005. Given the letter of 19 August 2005, the necessary inference is that earlier telephone calls were made to Westpac Insurance, in addition to those made on 16 September 2005.
The letter of 1 November 2005 then asked Mr and Mrs Dowsley whether there are other matters that they wished to bring to the attention of Westpac Insurance that may affect their decision not to allow the buy-back of the Death Benefit.
As a consequence of that request, Mr and/or Mrs Dowsley sent to Mr Motu copies of telephone records indicating calls made to the Westpac Financial Consultant on or about 5 May 2005, allegedly, on issues to which these letters related. On 14 March 2006, Westpac Insurance informed Mr and Mrs Dowsley that their request for the buy-back of the Death Benefit for Mrs Dowsley was refused.
On 2 May 2006, Mr Dowsley, on his and his wife's behalf, wrote to Westpac Insurance seeking a review of that decision. A review was also sought and/or a complaint made to the Financial Industry Complaints Service Ltd (hereinafter, "FICS").
The response from FICS was that it was unable to deal with a complaint the dollar value of which exceeds $250,000 and therefore, given that the amount in dispute is $517,000, they were unable to deal with the issue.
The reference in the foregoing to "Archie" is a reference to Mr Archie Figueira, who gave evidence in the proceedings. Mr Figueira does not deny a conversation with Mr Dowsley in May 2005, but cannot recall the conversation. If a conversation of the kind occurred, namely a request or expression of intent to buy-back the Death Benefit, Mr Figueira accepts that he would have suggested Mr Dowsley contact Westpac Insurance. Nevertheless, notwithstanding a stated practice of always making a file note of matters discussed in telephone conversations, there was no file note of a conversation to this effect.
Neither counsel suggested that any of the witnesses were deliberately lying, prevaricating or dissembling. Further, I consider that each of the witnesses were honest and were giving their best recollection, after the years had passed, concerning conversations that, at the time, may not have been particularly noteworthy.
There is an issue not addressed in the foregoing facts. There is a slight discrepancy in relation to the dates upon which the payment was made.
As earlier stated, the covering letter purportedly enclosing the cheque for the Living Benefit was dated 9 June 2004. The record of Westpac Insurance, according to the letter of 1 November 2005, was that the cheque issued on 11 June 2004.
While it is secondary evidence of records, the affidavit of Mr Dowsley states that their bank records indicated that the cheque was banked on 16 June 2004. In the foregoing, I make no criticism of either party or any witness.
It seems that the letter was written on 9 June 2004. The cheque was drawn on 11 June 2004 and sent with the covering letter. It was received, I find, on 16 June 2004 and banked on that day.
The anniversary date for the receipt (and payment) of the Living Benefit is therefore 16 June 2005, and not 11 June 2005, as stated by Westpac Insurance in its letter of 1 November 2005. Nothing turns on any discrepancy. As a consequence, the anniversary of the payment date was 16 June 2005 and 30 days thereafter was 16 July 2005, which was a Saturday, and would have the consequence that the last day "within 30 days" of the anniversary date was 16 July 2005, which would require the first notice, on the above view, no later than close of business on Monday 18 July 2005. Nothing in those proceedings turn on whether the 30-day period could conclude on a Saturday or Sunday.
The second anniversary date is 16 June 2006 and 30 days thereafter would be 16 July (a Sunday) and the time limit would expire on 17 July 2006.
Contract of insurance
The contract of insurance is in the form of a policy document crafted by or on behalf of Westpac Term Life addressed to Mr and Mrs Dowsley as clients. The opening page includes a schedule and it is headed "THINGS TO READ FIRST".
The form in which the insurance policy was taken out, as may be clear from the foregoing, was that benefits other than the Death Benefit were insured. Relevantly, it is only necessary to deal with the Living Benefit.
Other benefits were available, including terminal illness benefit and disability benefit. As is made clear from the schedule, there is a section of the Living Benefit proposal which deals with what happens to the insured after the insurer pays them the Living Benefit and a section dealing with the capacity of the insured to buy-back the Death Benefit.
The contract must be read as a whole. Nevertheless, the most relevant provision, and the clause in issue in these proceedings, is clause 31 of the contract. It is in the following terms:
"31 You can buy-back the death benefit
31.1 Twelve calendar months after we pay the living benefit for any illness or condition except Angioplasty, you can increase the then death benefit for that Insured Person by up to 50% of the living benefit you were paid. Twelve calendar months later, you can increase the death benefit to bring it to the level that applied under the policy before we paid the living benefit. We do not need to receive details of the Insured Person's health.
31.2 We put the following conditions on buy-back:
- you cannot buy-back more than the living benefit we have paid;
- you can index this death benefit, provided we are still offering you indexation (see clause 40);
- the same underwriting assessment and exclusion clauses that we applied to the Insured Person's death benefit will apply to the buy-back benefit;
- you must continue to meet any minimum premium rules that we set;
- you must request the buy-back in writing within 30 days of the applicable anniversary of the payment of the living benefit The offer lapses and will not be re-offered if we do not receive a written request within 30 days of the applicable anniversary of the payment of the living benefit."
It is unnecessary, for present purposes, to reiterate those provisions which prescribe the amount that must be paid in order to take advantage of the buy-back proposal if that choice is made. It is sufficient for present purposes to summarise that the buy-back arrangement involved the insured exercising the option granted to it by clause 31.1 of the Contract and paying premiums based upon the increased (or reinstated) Death Benefit (either reinstated to some part or the whole of the amount already paid by way of Living Benefit).
Principles of construction
The commencement point for the construction of a contract rests in the proposition that the law of contract is part of the law of obligations. In theory, at least, parties agree on the basis and/or source of the obligations each of them has in their relationship. The contract is the source of the obligations freely entered into between the parties, usually for a commercial purpose: see Moschi v Lep Air Services Ltd; Lep Air Services Ltd v Rolloswin [1973] AC 331 at 346-347, per Lord Diplock.
Where, as here, the contract is in writing, the task of the Court in construing the terms of the contract is the determination of the intention of the parties from the written terms of their bargain. In other words, the contract is determined objectively not subjectively: Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 351, per Mason J (with whom Stephen and Wilson JJ agreed); Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 62; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179.
In Toll v Alphapharm, supra, the High Court (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) said:
"[40] This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."
The foregoing approach is based, essentially and theoretically, on the capacity of the parties to negotiate a contract.
In circumstances where there is an ambiguity, particularly in circumstances where there is a significant discrepancy or imbalance between the bargaining power of the parties to the contract, the courts have strictly applied certain conditions and, in the case of insurance contracts (and other contracts), construed a contractual term strictly against the party that drafted (or proffered) the contract.
The rule, however, applies only where there is an ambiguity to be resolved, in which case it is resolved in favour of the party that did not proffer the contract: Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at 510, where the Court (Mason, Wilson, Brennan, Deane and Dawson JJ) was dealing with the construction of an exclusion clause.
Here, the contract of insurance was proffered by Westpac Insurance. If there be ambiguity in clause 31, it should be construed against Westpac Insurance.
The construction of the clause
Clause 31 of the insurance contract has already been recited. Leaving aside the so-called "plain English" style and ascribing to the first person pronoun the identification of Westpac Insurance and to the second person pronoun the identity of Mr and Mrs Dowsley, the issue that arises is what is its ordinary and grammatical meaning, bearing in mind the purpose which it serves.
The clause confers a discretion on a person who has been paid a Living Benefit to overcome the effect of the reduction in the Death Benefit that results from the payment of the Living Benefit. That is, unambiguously, the purpose which clause 31 serves.
The clause imposes conditions on the insured. The clause provides that "Twelve calendar months after" the Living Benefit is paid, the insured can increase the then Death Benefit for the insured person that has received the Living Benefit by up to 50 per cent of the amount of Living Benefit that was paid.
Clearly, the first sentence of clause 31.1 confers a discretion on the insured. If the right to buy-back were to be exercised, it requires the insured to increase the Death Benefit and to specify the amount (up to 50 per cent of the Living Benefit) by which the amount of insurance should increase.
The second sentence of clause 31.1, also unambiguously, allows the insured to increase the Death Benefit to bring it to the previous level under the policy before the payment of the Living Benefit.
The foregoing discretionary exercise (either one or both) does not require a medical check or details of the insured person's health. In other words, it is a means by which a person who has suffered a significant trauma, for which a Living Benefit has been paid, after 12 months and 24 months is able to exercise a discretion to reinstate the full Death Benefit (or up to the full Death Benefit).
Clause 31.2 imposes conditions. It is unnecessary to repeat them, as they are self-explanatory. The last of the conditions is the only contentious one.
The last condition requires that the insured must (note the mandatory terminology) request the buy-back in writing within 30 days of the applicable anniversary of the payment of the Living Benefit. The applicable anniversary is either 12 calendar months after the Living Benefit or a further 12 months later.
The issue between the parties is whether the terms of the policy should be strictly construed to require a request to be made in writing and whether the terms of the policy allow the second option to be effected even though the first has not been.
The terms on which the parties have agreed is that the exercise of the discretion must be in writing (see the last dot point in subclause 31.2 of the contract). The second aspect, which also requires strict compliance, is that the request be "within 30 days of the applicable anniversary". That anniversary is the anniversary of the payment of the Living Benefit. The payment of the Living Benefit occurred on 16 June 2004. As earlier stated, the first anniversary (12 calendar month anniversary) of that date was 16 June 2005 and the second anniversary was 16 June 2006.
The term "within" is generally used, in relation to time, to signify the date (or time) by which a requirement or act must occur. In calculating the period, where a commencement date or event is specified, the date of the event is excluded, as are fractions of a day: Forster v Jododex Aust Pty LTd [1972] HCA 61; (1972) 127 CLR 421; Lester v Garland (1808) 15 Ves 248; [1803-1813] 33 ER 748; Dodds v Walker [1981] 1 WLR 1027; Lamont v Heron [1970] HCA 47; (1970) 126 CLR 123; Prowse v McIntyre [1961] HCA 79; (1961) 111 CLR 264; STX Pan Ocean Co Ltd v Bowen Basin Coal Group Pty Ltd (No 2) [2010] FCA 1240 at [50].
Further, the word "of" in the context of a phrase "within 30 days of" has long been considered to mean "after": Ex parte Fallon (1793) 5 TR 283; Mission Corporation Ltd v Telecom Auckland Ltd [1994] 2 NZLR 357; Williams v Burgess (1840) 10 LJQB 10; at least insofar as it limits the time within which conduct or an event must occur.
In Associated Dominions Assurance Society Pty Ltd v Balmford [1950] HCA 30; (1950) 81 CLR 161, Fullagar J, at 183, differentiated between a construction given to descriptions of time when, on the one hand, the description defined a period at the expiration of which an act may be done, and, on the other hand, the description defined a period within which an act must be done. His Honour said:
"But it is clear, I think, that significance is attached to such expressions as 'at least' or 'not less than' only in cases where the immediate purpose of the prescription of a time is to define a period on the expiration of which an act may be done, and not in cases where the immediate purpose is to define a period within which an act must be done. In the former class of case the prescribed number of days must elapse between two acts or events. In the latter class of case the act must (unless a contrary intention appears) be done before the expiration of the last of the prescribed number of days (see, e.g. Radcliffe v Bartholomew and Armstrong v Great Southern Gold Mining Co. In the latter case Griffith C.J. said:-'When you talk of doing a thing within a period of a certain number of days, it is quite clear that the end of the last day is the furthest limit. It is impossible to say that a thing required to be done within seven days is done within seven days if done on the eighth day, and it is impossible to make any alteration of the limit by adding the word "clear"'. In the case of s 55 of the Life Insurance Act it is plain that the immediate purpose of the prescription of a period is to fix a time within which cause must be shown. It follows that the last day on which cause may be shown is the fourteenth day after the date of the notice."
The currently relevant clause refers to Westpac Insurance receiving "a written request within 30 days of the applicable anniversary". The condition is to ensure that Westpac Insurance is aware of the exercise of the buy-back power within a reasonable period of its availability. The fundamental question is: Is a request made and received prior to the relevant anniversary date a request made and received "within 30 days of" that date?
The issue, in a different context, was considered by the Northern Territory Court of Appeal in Ward v Walton [1989] 66 NTR 20; (1989) 99 FLR 21. The context was the Limitation Act 1981 (NT), which required institution of proceedings within 12 months of the ascertainment of the facts by the plaintiff. The writ issued before the plaintiff ascertained the facts. Asche CJ (with whom, relevantly, Gallop and Rice JJ agreed) said, at 24:
"Clearly the mischief the Act seeks to prevent is undue delay in bringing an action after the ascertainment of material facts by the plaintiff. For clarity, and to remove any doubts as to what the legislature regards as undue delay, a period of 12 months is specified. But if action has already been instituted surely the mischief has already been prevented. If a creditor says to his debtor, 'You must pay me within 12 months', and the debtor replies 'I paid you last month', (and proves it), surely the obligation is discharged. For what the creditor really means is, 'You must pay me before the expiration of 12 months'. No other significance then attaches to the expression 'within 12 months'.
So far as the Oxford English Dictionary defines 'within' in temporal terms, those definitions are as follows:
'In the limits of (a period of time); most usually, before the end of, after not more than; also, since the beginning of, not more than ... ago; or generally between the beginning and end of, in the course of, during.'
Clearly some of those definitions favour the appellant, ('before the end of'), some, the respondent ('during'). In the context, however, and to avoid an otherwise absurd result I consider that the former meaning is appropriate. For it seems to make good sense for the court to be satisfied that 'the action was instituted within' (that is, before the end of or not later than) '12 months after the ascertainment of those facts by the plaintiff'.
A reading of 'within' as meaning 'before the end of' appears in Earl of Morton's Trustees v MacDougall [1944] SC 410. In that case the Agricultural Holdings (Scotland) Act 1923 (UK) provided that compensation for damage done to his crops by game should not be recoverable by a tenant from his landlord 'unless notice in writing of the claim, together with the particulars thereof, is given to the landlord within one month after the expiration of the calendar year ... in respect of which the claim is made'. On 16 December 1942 a tenant sent to his landlords notice in writing of a claim for compensation for damage done to his crops by game in the year 1942. It was contended that the notice was invalid as not being sent during the month of January 1943. It was held by the majority (Lord Mackay dubitante) that the notice was good. Lord Justice - Clerk Cooper said (at 443):
'It is to be noted that the words are "within one month" and not "within the month". According to its normal significance, as evidenced by the dictionaries, "within" when applied to a period of time most usually means "before the end of" ... It seems to me that that is a sufficient meaning to give to the words of the statute - in other words to read them as prescribing a time limit on the expiry of which, if the claim and particulars have not been given, the claim will prescribe.'
In R v IRC; Ex parte Knight [1973] 3 All ER 721, s 103(2) of the Taxes Management Act 1970 (UK) provided that:
'Proceedings for the recovery of any penalty from any person in connection with or in relation to any tax covered by any assessment may, where any form of fraud or wilful default has been committed by him or on his behalf in connection with or in relation to that tax, be commenced at any time within three years from the final determination of the amount of tax covered by the assessment ... .'
The commissioners commenced proceedings under this section before a final determination had been made. It was contended by the taxpayer that the proceedings were premature. The Court of Appeal rejected that argument, holding, inter alia, that on the true construction of the subsection the words 'within three years' mean that proceedings may be commenced at any time 'not later than' the expiration of three years from the final determination: see Russell LJ (at 727) applying Earl of Mortons Trustees v MacDougall."
Given that the day of the event (the anniversary) is not included in the 30 days, one way of testing the proposition that only a written notification received after the anniversary date would be effective is to ask what would have happened if, on the anniversary date, Mr or Mrs Dowsley notified Westpac Insurance of the exercise of the buy-back option? It must have been within the objective contemplation of the parties that a notification on that date would have complied with the condition.
Therefore, the 30 day period prescribes the last day by which an act must be done. An exercise of the buy-back option at any time before the expiry of the 30 day limit will satisfy the condition. In the same way as applied in Ward v Walton, supra, a request written and received prior to the applicable anniversary date satisfies the requirement that the request be written and received "within 30 days of" the anniversary date.
I am comforted in the foregoing by the manner in which the term "receive" has been construed. Prima facie, it has been used to mean "actually get into their hands": Pilcher v Logan (1914) 15 SR (NSW) 24, at 27 per Harvey J. Thus, correspondence sent and received before the applicable anniversary date is, even in the period between the anniversary date and 30 days thereafter, "received".
The term "within 30 days of the applicable anniversary", which is part of the conditions on the buy-back, does not require a construction that means from the anniversary date until 30 days after the anniversary date. However, the increase in the Death Benefit cannot occur until the anniversary date, notwithstanding the earlier receipt of the request.
Was such a request made? And what was its effect?
I make it clear that the evidence as to the terms of the conversation between Mr or Mrs Dowsley and agents or employees of Westpac Insurance (or some other corporation in the Westpac group) are, in my view, irrelevant in determining the satisfaction of the conditions in the contract for buy-back. The condition requires notification to Westpac Insurance in writing. A discussion, if there were one, is irrelevant for present purposes.
Further, the purpose of the clause is relatively clear. A serious injury having been suffered by an insured and a Living Benefit having been paid by Westpac Insurance, the insured is entitled to increase the Death Benefit by the amount it was otherwise reduced. Westpac, however, requires that the person (in the case of a buy-back up to 50 per cent) will have survived 12 months from the date on which the serious illness occasioning the Living Benefit was paid the Living Benefit.
In order to increase the Death Benefit to its prior level (i.e. its level before the payment of the Living Benefit) the insured must survive two years. This gives some protection to Westpac Insurance that it, in effect, would not be required to pay the benefit twice in a very short period, without having received any, or any substantial, insurance premiums. Further, Westpac Insurance need to be informed relatively quickly of the exercise of the buy-back option.
Westpac Insurance has calculated that the capacity to pay a further two years' premiums will suffice for the calculation referred to immediately above.
Mrs Dowsley has survived the two years. On 19 August 2005, a request was made in writing for buy-back of the Death Benefit. The question that arises is whether that request, or that request coupled with other documents, satisfied the conditions in the insurance contract.
The Court is required to examine further the terms of clause 31.1.
That which is required in relation to the second 12 month anniversary (i.e. the anniversary that is 12 calendar months later than the first 12 calendar month anniversary) allows the insured to "increase the Death Benefit to bring it to the level that applied under the policy before [Westpac Insurance] paid the Living Benefit". There is no reference in relation to the second calendar month anniversary to a limit of 50 per cent. By a proper construction of the clause, there could not be a 50 per cent limit on the amount that the Death Benefit could be increased at the time of the second anniversary.
At the first anniversary (or within 30 days thereof) the insured is entitled to increase the Death Benefit by up to 50 per cent. Thus, an insured could, at the 12 month anniversary, increase the Death Benefit by one per cent of the Living Benefit already paid.
Nevertheless, a proper construction of clause 31.1 would allow, on the foregoing hypothetical, at the second anniversary (or within 30 days thereof) for the insured to increase the Death Benefit by a further 99 per cent to "bring it to the level that applied under the policy before [Westpac Insurance] paid the Living Benefit".
As a consequence of the foregoing construction, which, I add, is relatively clear, the second anniversary increase is not confined to 50 per cent of the Living Benefit that had been paid. There is, assuming, as I must, that the appropriate premiums for the two year period would be required to be paid, no purpose served by reading down that which can occur at the second anniversary by making it a condition of the exercise of the discretion or power that some amount (up to 50 per cent) had been exercised at the first anniversary.
In other words, while the usual situation would likely be that an insured who desired to buy-back the Death Benefit would exercise that contractual right at the first anniversary and increase the Death Benefit by 50 per cent (or a sum approaching that) of the Living Benefit that had already been paid and subsequently (i.e. at the second anniversary) increase the Death Benefit by a further 50 per cent, that is not a necessary arrangement.
An insured can increase the Death Benefit by one per cent at the first anniversary and 99 per cent at the second anniversary. Likewise, 12 months after the first anniversary (or within 30 days thereof) an insured can exercise the contractual power to buy-back the Death Benefit and bring it to the level that applied prior to the payment of the Living Benefit.
The two anniversary dates allow for different and independent options to be exercised. The contractual right to buy-back the Death Benefit to reinstate the full amount of the previously paid Living Benefit operates regardless of whether a partial reinstatement was effected at the time of the first anniversary. The timing of that "second option" is set by reference to the timing of the availability of the "first option", but the "options" or "powers" operate independently.
The written request by Mr Dowsley was received (i.e. was in the possession of) Westpac Insurance within 30 days of the second anniversary of the payment of the Living Benefit. As earlier explained, that it was received significantly before the 30 days does not render that condition unsatisfied. On the contrary, the earlier receipt of a written request of the appropriate kind would satisfy the condition that Westpac Insurance receive it within 30 days of the applicable anniversary.
However, there is a requirement (the last dot point of subclause 31.2) that the insured "must request the buy-back in writing within 30 days of the applicable anniversary" and the question still remains whether that has occurred.
A receipt by Westpac Insurance satisfies the first sentence of the last dot point of subclause 31.2 within 30 days of the applicable anniversary. The fact, if it be the fact, that a letter was written 31 days before the applicable anniversary and received by Westpac Insurance two days after the applicable anniversary would not fail to satisfy the last dot point of subclause 31.2.
The request of 19 August 2005, being in the possession of Westpac Insurance "within 30 days of the applicable anniversary", satisfies the last dot point in subclause 31.2.
I turn then to the letter of 19 August 2005. The letter expresses a desire "to take up the buy-back option" on the insurance policy. It expresses the view that the request for the buy-back "option" should be made within 30 days of the benefit being paid.
This latter view is incorrect. The 30 days' period runs from an anniversary (either the first or second).
The letter of 19 August 2005 does not request an amount by which the Death Benefit would be increased by operation of the "buy-back option". Further, the necessary inference from the terms of the letter of 19 August 2005 is that only that which was available within 30 days of the first anniversary was the subject of request. It is clear from the terms of the letter that the letter did not purport to seek to utilise the capacity to buy-back that which is said to arise on the second anniversary (or within 30 days thereof).
By letter dated 2 May 2006, Mr Dowsley requested, again, that Westpac Insurance resolve the dispute with regards to the buy-back option and consent to FICS reviewing the issue.
The basis upon which Westpac Insurance was required to give permission for FICS dealing with the matter was that the amount in dispute was above FICS's "jurisdictional" limit. The amount in dispute was said to be $517,000. $517,000 was the total buy-back and equivalent to the Living Benefit. Thus, the amount in dispute to which FICS had regard was not 50 per cent of the Living Benefit, but the full amount of the Living Benefit.
There is substantial correspondence between the parties thereafter. At this stage the Court must be concerned with the proper interpretation of the correspondence and not with the terms of the contract.
At least by the time Westpac Insurance received Mr Dowsley's letter of 2 May 2006, enclosing, as it did, the letter from FICS, it could be under no illusion that Mr Dowsley (on his and Mrs Dowsley's behalf) was requesting a buy-back of $517,000, being, in round terms, the amount of the Living Benefit paid on 16 June 2004.
Thus, by 16 June 2006, Westpac Insurance had received a written request for buy-back to bring the Death Benefit back to the level it was before the payment of the Living Benefit (see the last dot point of subclause 31.2).
For the foregoing reasons, the conditions for the buy-back have been satisfied and a written request was made and received, within 30 days of the second anniversary date, to increase the Death Benefit to bring it to the level that applied under the insurance policy before Mr or Mrs Dowsley were paid the Living Benefit. As a consequence, the insured, Mr and Mrs Dowsley, are entitled to buy-back the policy, the only condition on which is the payment of the appropriate premiums.
The Court makes the following orders:
(1) A declaration that on a true construction of the contract of insurance between the plaintiffs, Lisa and Garry Dowsley, and the defendant, Westpac Life Insurance Services Ltd, the aforesaid plaintiffs have exercised their right to buy-back the first plaintiff's Death Benefit under the terms of the policy of insurance (No Y0532784) to reinstate the full Death Benefit as it existed prior to the payment of the Living Benefit.
(2) An order that the defendant, Westpac Life Insurance Services Ltd, perform its obligations under the aforesaid contract of insurance by reinstating the first plaintiff's Death Benefit under the aforesaid policy, subject to the payment of appropriate premiums calculated in accordance with the policy.
(3) The defendant pay the plaintiffs' costs of and incidental to the proceedings, as agreed or assessed.
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Decision last updated: 30 August 2013
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