Free, T.A. v National Mutual Life Association of Australasia Ltd and G. Creese
[1988] FCA 471
•15 Aug 1988
LIMITED DISTRIBUTION
NOT SUITABLE FOR REPORTING
JUDGMENT No. ..$J..!!..8.&-
rATCHWORDS
INSURANCE - sum assured payable in the event of total and
permanent disablement of Insured - total and permanent
disablement defined to mean that the insured has, In the
opinion of the insurer, "been wholly prevented from engaging in his professlon busmess or occupation" or from engaging "in any other profession business or occupatlon for which he is fitted by his knowledge, trainlng status and abilities" - construction of pollcy - obllgation of insurer in formation of requlsite oplnlon - mplled requirement to act reasonably.
DAMAGES - Interest on damages until judgment - wklether
avallable in Federal Court where actlon commenced before
insertion of s.51A Federal Court of Australla Act 1976 -
Centrepoint Freeholds Pty. Ltd. v Lucas (TN) Pty. Ltd. (1985)
60 A.L.R. 187.
TONY ALFRED FREE v THE NATIONAL MUTUAL LIFE ASSOCIATION OF
AUSTRALASIA LIMITED and GEOFFREY CREESE
REGISTRY
TG No 6 of 1983
Ryan J.
15 August 1988
Brisbane
,- 16.AUG 1988 ' _
FEDERAL COURT OF
AUSTRALIA
PRINCIPAL
TN THE FEDERAL COURT OF AUSTRALIA ) ) TASMANIA DISTRICT REGISTRY
) TG No 6 of 1983 )
| DIVISION | GENERAL | ) |
BETWEEN: TONY ALFRED FREE
(Applicant)
m: THE NATIONAL MUTUAL LIFE
ASSOCIATION OF AUSTRALASIA
LIMITED
(First Respondent)
- AND : GEOFFREY CREESE
(Second Respondent)
Coram: Ryan J.
Date: 15 August 1988
Place: Brisbane
REASONS FOR JUDGMENT
The applicant who is now aged thirty-six, from 1974 to
1984, carried on business in partnership with his wife as a
timber carting contractor. When he first carried on that
business he used a "MAN" truck and timber jlnker leased by
Tasmanian Forest Holdings Pty Ltd to which he was contracted to cart logs, and sub-leased to Mr Free. By 1976 the partnership entered into a lease on its own
account of a "Matk FR612" which it operated in con~unction with the "MAN" vehicle, with one truck being driven by Mr Free's brother as an employee of the partnership. Later the
"MAN" truck was traded In on a "Wyatt" vehicle.
C - 2 - In 1979 it was decided to change the "Mack" truck for a
new "Mack 612RST" to be leased from Webster Acceptance Ltd.
The purchase price of that vehicle was $82,890. When
arrangements for that lease were completed, Mr Free
approached B.R. Speers and Associates, insurance brokers, with whom he had traditionally done buslness, and requested
them to procure comprehensive insurance of the new vehicle. On 6 August 1979 the lease documents were executed and
Mr and Mrs Free signed an authority t o their bank authorizing
it t-Q pay 48 monthly instalments of rent under the lease of $1849 each. Shortly afterwards the second respondent, Mr Creese,
who was associated in some way wlth B.R. Speers and
Associates, made an unsolicited approach to Mr Free and suggested that he should procure a policy of life insurance issued by the first respondent ("National Mutual") wlth a view to ensuring that the lease on the new "Mack" truck could be paid out in the event of his being prevented by death or disability from contlnuing to drive that truck.
Mr Creese later called on Mr Free at his home and
described the policy of insurance which he considered
approprlate to Mr Free's needs. The evidence is unclear as to the precise words used by Mr Creese. Mr Free's version wa5 that the policy was described as one which "was to cover me if anything happened when I was driving the log truck and could not perform my normal duties". Mr Free already had two
i - 3 -
policies of life insurance or what he called "death cover" and was concerned, again in his own words, to have "this policy to cover me in case I could not work, and the truck would be pald off and there would be still a form of money
comlng in to live on". According to Mr Creese, he explamed the disability
cover to Mr Free by indicating that the amount Insured would
become payable if Mr Free were unable, as a result of
accident or illness, to do a similar type of lob. He elaborated by instancing that Natlonal Mutual would not
expect an insured to "go and retrain again as a carpenter or a bukcher or somethlng else that he has no prior knowledge to or tralnlng for or abilities in".
It appears that Mr Creese did not explore the types of
alternative employment which, if he remalned able to engage In them, would preclude Mr Free from recovering the sum
insured. That was probably because of a taclt assumption
that, if Mr Free were permanently disabled from driving a
truck, he would also be unable to engage in any other
similarly remuneratlve occupation. That seems to have been an assumption which Mr Free shared.
Immediately or shortly after his conversation with Mr
Creese, Mr Free, on 21 August 1979, signed a proposal to
Natlonal Mutual for a policy havmg a sum assured of $SS,OOO and, as one of Its supplementary benefits, a supplementary
. - 4 -
total and permanent disablement ("CMN") component. That
proposal was accepted by National Mutual and in due course a policy issued to Mr Free to which was attached a CMN annexure contaming the following provisions:-
"THE ASSOCIATION AGREES subject to the Policy referred to in the Schedule (heremafter called 'the Policy') and to the Conditions hereinafter
contained that if
(1) the CMN Benefit Annual Premiums are duly pald
and ( 2 ) the Total and Permanent disablement of the Life Assured (as deflned in the said Condltlons) occurs before the CMN Benefit Expiry Date
and ( 3 ) such proofs as the Directors consider
necessary to establish the Identity of the clalmant the validity of the claim
and the age of the Life Assured are
deposited with the Association together with the Pollcy duly discharged
IT WILL PAY to the Assured or the Executors
Adminlstrators or Assigns of the Assured in full
satisfaction and discharge of the aggregate of
all sums payable under the pollcy and any Annexure thereto an amount equal to all such sums
(save and except any sum payable by way of
Supplementary Accidental Death Beneflt) as would
have become payable thereunder if the Life
Assured had died at the time the disablement of
the Life Assured a s aforesaid occurred. The basis of the contract for the grant of this
Benefit is the Proposal for the Policy the
Application for thls Benefit and all Statements Declaratlons and Agreements made in writlng by or
in respect of the Life Assured in relatlon to them.
CONDITIONS
1. The CMN Benefit Annual Premium becomes due and
is payable in advance on the Commencing Date
of this Benefit and on each anniversary thereof occurring before the death of the Llfe Assured the Total and Permanent Disablement of
the Life Assured or the CMN Benefit Premlum Term Expiry Date whlchever is the earllest. 'Total and Permanent Disablement of the Life Assured' shall mean that the Life Assured has after the Commencing Date of this Benefit and
2.
in the opinion of the Association (after
conslderation of such medical and other evidence as it shall require)
(a) become disabled by bodily injury or disease to such an extent that helshe is
at the relevant time and has been
throughout he immediately preceding continuous perlod of six months wholly
prevented from engagmg (whether or not
for reward) in his/her profession business or occupation or any simllar
profession buslness or occupatlon or
from engaglng in any other profession buslness or occupatlon for which helshe
1 s fitted by his/her knowledge trainlng
status and abilities and will be so
disabled for the remainder of hislher life. "
After he and his wife acquired the new "Mack" truck, Mr
Free used it to carry timber on two trips a day from the
Gordon River to Trlabunna which requlred him to work between 16 and 17 hours a day five days a week. His weekends were spent In carrying out malntenance of the truck.
By about August or September 1980, Mr Free began to
experience severe pain in the left knee. He had earlier
consulted a Dr Gibbs, a general practitloner of Moonnh about
"knee problems" between December 1979 and February 1980. Dr
Glbbs suggested that Mr Free l05e weight which he did, reducing from 13 stone 1 lb to 11 stone 9 lbs, and prescribed
ultrasound therapy and courses of anti-inflammatory
medication. By 2 May 1980 Dr Glbbs was able to note "knees
O.K.". However, by August 1980, although hls weight had apparently remained at its reduced level, Mr Free was still
seeking treatment for his knees, and, on 10 September 1981,
i - 6 -
he consulted another general practitioner, Dr Beltz of South Hobart.
Dr Beltz ordered x-rays and blood tests to assist in
diagnosing Mr Free's condition. When he saw Mr Free again on
14 September 1981, Dr Beltz referred him to Mr Howard Bye for arthroscopy which revealed crystal deposlts within the knee
joint and some cartilage degeneration. In the light of thatinformation and the fact that a blood test lndlcated normal
uric acid levels, Dr Beltz concluded that Mr Free was
sufferlng from the fairly rare conditlon of "pseudo-gout" caused by calcium pyrophosphate crystals. Mr Free was the
first patient with this conditlon whom Dr Beltz had
encountered. Courses of anti-inflammatory medication were prescribed, as well as Zyloprim and Intra-articular steroid
in~ections all without success. Dr Beltz then referred Mr
Free to Dr Strang, a rheumatologist of Melbourne, who examined Mr Free on 12 November 1981. A report furnlshed to
Natlonal Mutual by Dr Strang on 22 March 1982 concluded with the following paragraphs:- "My comments to the doctor who sent him, Dr. Ian
Beltz, was that it was unusual for gout to start
in the knees; the usual crystal disease which affects them being calclum crystal disease, and it is difflcult to identify which crystals are involved without usmg a polarizing microscope.
My suggestion was that he be given a trial of
Indocid and if he had not had this or it upset
his drlvlnq, which was possible, then he should
have Cllnorll. There 1 s no cure for calcium crystal disease that I know of, and it 1s a matter of trylng various n n-steroldal
anti-inflammatory agents In turn and if Indocld was not suitable, then Voltaren could be given a
trlal or even enteric-coated aspirln, two tablets
.
three times dally. I said that it was apparent that he would not be able to carry on with his
lob, in his present condition of chronlc pain.
I have not heard the results of any treatment
since I wrote to the local doctor on the 26th
November, 1981, so I cannot answer the question as to the response to treatment, and, of course,
prognosis. the to Apparently meniscal degeneration was observed by arthroscopy and this
would progress inevitably. If the origin of the pain was uric acid gout, then this could be easily controlled medically but the degeneration
which has already occurred would continue with
weight bearing and passage of time. I would not agree that he is disabled to the
extent that he is wholly prevented from
performing any work. I doubt if he would be able to carry on his present occupatlon, as I stated
earlier. He would certainly be capable of
carrying out a sedentary occupation, ot
involving prolonged standing or walking or weight
lifting. If you have any questions please
address them to me. I'
Mr Free contlnued to consult Dr Beltz and, by early
1982, told him that he was no longer able to drive his truck.
That disability was consistent, in Dr Beltz's opinion, with
the persistent pain to be expected as a concomitant of calcium crystals in the knee ~oint. That p a n has not
responded to a range of analgeslcs which Dr Beltz considered
safe to recommend for Mr Free. Dr Beltz also expressed the
view that Mr Free's condltion would make It dlfficult for him
to perform "any sort of manual abour that lnvolved
squatting, bending of the knees, walking long distances - any
type of repetitive movement of the joints" or "any job that
Involved sitting for long periods of time". Dr Beltz also
expressed the oplnlon, In the llght of his subsequent
observations of Mr Free which have continued until this year, that the degeneration of his knees is progresslve.
In April 1984, Dr Beltz referred Mr Free to another
rheumatologlst, Dr Hllton Francis of Hobart. Dr Francis, who gave evidence in these proceedings, saw Mr Free on 19 April
1984, in April and June 1986, and, most recently, on 18
February this diagnosis of Mr Free's conditlon and the prognosis that the
year.
Dr Francis
confirmed
the
arlier
degeneratlon would be slowly progressive.
At about the same time as he first consulted Dr Beltz,
the pain in Mr Free's knees had become worse to the polnt
where he was restricted to one trip a day from New Norfolk to
Triabunna and return, and was compelled to engage a Mr Danny
Browning as an employee or sub-contractor to do the other trip each day. By January 1982, Mr Free's knees had further
deteriorated and he deputed Mr Brownlng to drive the truck for both of its two dally trips. By that time, Mr Free could
do little more than drive a car for short distances. His wife notified National Mutual of hls disability and recelved a clam form which was filled up and returned to National Mutual in February 1982.
It appears that Mr Free was advised that it would be at
least six months before his claim would be processed by National Mutual, and he thereupon applied for soclal security sickness benefits whlch he received in respect of the period
1 February 1982 to 22 October 1982. From 22 October 1982
until 24 February 1983 he was In receipt of a rehabilltation allowance while he underwent training in bookkeeping and
clerical work.
MK Sawyer, the chief underwriter for National Mutual,
gave evidence that most claims under Its policies were
processed within the underwrltlnq dlvision, but hat difficult and potentlally contentlous claims were referred to
a claims committee, comprising the underwriting manager, the
chief underwriter, the chief medlcal officer, the chief solicitor, the senior claims officer, a representative from
the superannuation division and the dlsabilities claims
officer. Mr Free‘s claim was treated in that way. Idhen it
was first considered, the claim file before the committee consisted of:-
(i) Mr Free’s original claim on a pro forma claim form dated 8 February 1982;
(ii) a slmllar clalm form on which only Section B had been fllled up as follows by Dr Beltz (wlth Dr Beltz‘s
answers indicated in capitals):- “1. Is this person ever likely to
be able to resume work in his normal occupation? Please glve full reasons for your above answer, including
(1) exact nature of present conditlon
( 2 ) past and present treatment for thiscondltion
( 3 ) prognosis.
CHRONIC FAIN IN BOTH KNEES WHICH IS DUE TO CRYSTAL DEPOSITS - EITHER URIC ACID OR CALCIUM CRYSTALS. SERUM URIC ACID HAS BEEN WITHIN
NORMAL LIMITS. THE CRYSTAL DISEASE IS PRODUCING A DEGENERATION OF ARTICULAR CARTILAGE (AT ARTHROSCOPY). IT IS NOT POSSIBLE TO TELL WHETHER THIS IS DUE
TO CALCIUM CRYSTALS OR WITH ACID CRYSTALS
ACCORDING TO DR STRANG WITHOUT A POLARIZING
MICROSCOPE (NOT ENOUGH JOINT FLUID TO EXAMINE) STEROID INJECTIONS ORAL ANTI INFLAMMATORY DRUGS ZYLOPRIM AND ULTRASOUND TREATMENTS HAVE NOT PRODUCED ANY IMPROVEMENT. PROGNOSIS IS
POOR IN MY OPINION.
2 . If you answered ‘No’ to
Question 1, is this person ever likely to be able to resume work
in any other job? If ‘Yes’, please give full reasons for your answer indlcatmg the type of work that could be undertaken.
PERHAPS CLERICAL WORK ALTHOUGH PROLONGED
SITTING MIGHT ALSO AGGRAVATE CONDITION.3 . If you were unable to answer the first two
questions definitely, do you consider that (1) National Mutual should seek further
medical opinlon and, if s o , from whom
or ( 2 ) another medical examination should be
held after a further period to
establish if the person is dlsabled or
not in terms of the definition?
DR R. STRANG 24 COLLINS ST MELBOURNE 3000
MR H. BYE 69 DAVEY ST HOBART.
SIX MONTHS HAVE NOT ELAPSED SINCE HE HAS DONE 4. In your oplnion, when would this person have
first become aware of the condition which led
to the clalm?
ON 10/9/81 MR FREE STATED THAT HIS KNEES HAD
BEEN ACHING €OR 2 YEARS.
5. In your opinion, could this person's condition have been caused by intentional self-lnjury or
lntentlonally contracted infection?
NO. I'
(iii) the report from Dr Strang to whlch I have already referred;
(iv) a confidential medical report from Dr Glbbs dated 19
April 1982 which gave d tails of Mr Free's consultations and treatment accorded to him between
Aprll 1978 and May 1980;
(v) a similar confidential medical report from Dr Beltz
detailing consultations and treatment between 10
September 1981 and 8 September 1981.
It appears that before the flrst meeting at which Mr
Free's claim was considered, the followlng summary of the claim was prepared by the secretary to the committee and
distrlbuted to each member:-
"CMN Claim: Tony Alfred Free Branch: Tasmania
Pollcy Number: 1542005 Commencing date: 28 August 1979
Table : IIICT15CMN
Sum Assured: $85,000 Date of Blrth: 4 March 1952 Occupatlon: Logging Contractor Disability: Chronic Knee Pain The above case was accepted at ordinary rates
death and rate X 2.5 (occupation) for CMN at
Tasmania Branch on the 28.8.79. On the 8 February 1 9 8 2 Mr Free submitted a claim
to the Associatlon under the above numbered
policy. The claim was based on Mr Free's
contention that he was T Et P D due to 'Chronic Pain in the Knees' accompanying the claim was a
report from Dr I Beltz who on examination of
claimant believed Mr Free would no longer be able to perform his normal occupation but perhaps he could do clerical work.
And a report from Dr Roderick Strang of Collins
St. Melbourne which clearly defines Mr Free's particular problems and concludes that it would
be unlikely that Mr Free could perform his
present occupation but that he certainly would be
able to carry out sedentary occupations not
involving prolonged standing, walking or weight lifting.
Historical medical evidence Indicates we were
aware of all medical history at date of
acceptance. A request as to what the claimant
has been doing, elicited that Mr 'Free has attempted to drlve his truck but he has been unable to sustaln his driving for much more than one or two days.
What is the view of the Committee here."
That first meeting was held in May 1982 and it seems
that the Committee considered that the medical evidence left
open the possibility that Mr Free was still capable of
working, and that other information suggested that he was in fact workmg. The basis for the latter conclusion seems to
have been a file note dated 22 April 1982 by Mr Marsh of
National Mutual's Tasmanlan assessing section to this effect:-
"RE I. GRANT'S COMMENTS RE EMPLOYMENT SINCE 9/61
From discussions both myself and the agent have had with Mr Free it would appear that he has made some attempt to drive his truck but has been unable to sustam work for much more than one or
two days. I'
(Mr I. Grant was the senior claims officer who acted as the
the committee resolved that further enqulries be undertaken and claims committee). Accordingly, the
secretary to
that Mr Free be placed under surveillance, after which his
claim would be discussed again. Subsequently, a report dated 14 June 1982 was obtained from a firm of private enquiry agents, Dennis J. O'Day
& Sons
of Hobart. That report, after setting out certain matters under the sub-heading "BACKGROUND" including the registration
numbers of motor vehicles observed at Mr Free's residence and the fact that he "is not in any debt in any way and never has been", concluded as follows:-
"INQUIRY:
As a 'Logger' I offered hlm a part contract in an operation I 'have
contracted to do'. Free said 'he
could do it, no problems!! 1 '
SURVEILLANCE: We have now completed 18 hours of
surveillance on an irregular basis and have found Free to be 'out and
about' but in general he appears to be running the operatlon strictly as a managerlowner.
Yesterday we managed to obtain some fllm of this man and of course he
appears quite normal bearing in mlnd he is doing simple things like
closing his swing down garage door,
walking, driving and so on.
We can tell you that the Truck & linker is operatlng at present at
place called 'Black Bobs'. This is an area of country which is heavily
tlmbered what an we call 'Hlllbilly Country'.
The area on the map will show you a
town called Ouse, in Mid Tasmania, it is quite close to there.
GENERAL : I suspect that this man is at a stage in life where he has enough
money to elther lease the Truck or
simply employ a driver however by
the way he spoke to the writer it
is my opinion that he employs a driver as he said 'Yes I could handle that!' referrlng to contract
haullng when he is finished where he is at present.
In conversation Free did say 'I don't drive much anymore!' This was
an answer asking where I could
contact him. He went on to say 'I am home most of the time!' Thls is certainly correct as we have found him very hard to film as he is doing just that! At home!
Anthony Alfred Free 1s not in
receipt of any form of Social Security.
We can tell you little more with
what time was avallable and I would doubt If indeed if we wlll unless we 'sit on' Free for a set period.
We awalt your instructions and
would hope the above is of some value to you In the interim."
That report found its way on to the flle whlch was before the claims committee together with the following file note by Mr Grant dated 13 July 1982:-
"Late PM 13.7.82 Spoke to Dennls O'Day this afternoon the film of Mr Free was 'fuzzy' he will obtain further film
at no cost within a few days I agreed that the film would need to be reshot. (Statement made by
Assessor I must say should be viewed with
suspicion) . " It appears that at some time later Dennis O'Day and
Associates obtained a second film of Mr Free engaglng In some activlty. That fllm was forwarded to Melbourne on 25 August
1982 by the Tasmanian Branch which had been unable to vlew it because it lacked a projector. Reference was made to the film in the further claim summary placed before the committee
when it finally reviewed Mr Free's claim. That summary was in the following terms:-
"As the committee will remember this claimant is a Logging contractor, who is making a claim due to
'Chronic pain in knees'. We have previously
presented all relevant medical reports. It was
decided that we should place Mr Free under
surveillance and see what his activities are at
the moment. I will project the film we have prior to discussion.
The report from Dennls O'Day is attached (not of good quality). A verbal report from Dan Marsh
advises that O'Day mentioned he is running his
business very well 'He has drivers on his trucks. He doesn't have to drive them at all'.''
The committee decided to reject Mr Free's claim and its
decision was recorded by Mr Grant in the following memorandum
dated 15 September 1982:-
"The H.O. Disability Claims Committee has viewed the film from O'Day today & reviewed the medlcal evidence we have gathered on this case. The decision taken by the committee was to refuse this claim. We believe the medical evidence from
Beltz & Strang supports this view. It would
appear that Mr Free is still running a Logging
busmess from what the Assessor has to say."
Mr Sawyer said that he believed the film to be still In
existence but he could not recall what it depicted. He also expressed the bellef that It would have played a part in the
committee's decision to reject Mr Free's claim. That declsion, he sald, was based on a view that the medical and
other evidence Indicated that Mr Free was not totally
disabled. Under cross-examination he conceded that he
commlttee did not address itself to the questlon of whether
.
Mr Free was disabled from pursuing some occupations but still
able to pursue others for which he was fitted by his
knowledge, training, status and abilities. Moreover, Mr
Sawyer had no recollection of whether he was aware that Mr Free, at the time of the committee's decision to reject his claim, was in receipt of social security benefits or that he had engaged a full-time driver to operate his truck.
As a Mutual, on 22 September 1982, wrote
result of the
commlttee's
decision
National
to Mr Free that:-
"We refer to your claim under the disablement benefits of the above Policy.
After fullest consideration of all the evldence obtained we must advise we
are not prepared to admit the clam.
The Policy will remain in force providing
valuable beneflts whilst you contlnue to pay the premiums. I'
After completing his rehabilitation trainlng, Mr Free
obtained employment as a travelling salesman selling automotive parts on commission. The drlving involved In that
work aggravated the pain in hls knee and the employment
proved unremunerative. Mr Free then undertook a business of
selling fuel additives to customers' homes, whlle hls wife
sold cosmetics on a similar basis. He then became an "Electrolux" salesman but was forced to resign that
employment on 1 September 1981 for the same reasons as compelled him to cease selllng automotive parts.
Whilst engaged in those successive occupations, Mr Free
continued the operation of his truck using first Mr Browning,
-
and then Mr Browning's brother, as the drlver, until the
truck was sold towards the end of 1984. In about 1985, Mr
Free and his wife commenced business as landscape gardenersunder the name "Allabout Landscape Supplies" in Derwent Park.
Mr Free has assisted in that business by operating a small
back hoe for about 20 hours a week. The business has also owned a "Traxcavator" which is operated at the Carlton tip by
an employed driver for three shifts a week of four hours eachunder contract to Taswaste.
For almost the whole of his working career, Mr Free has
been concerned with the servicing, maintenance and driving of motor vehicles and he holds all requisite licences to operate a very wide range of them.
By his statement of clalm the applicant pleaded the
making of the following three representatlons, apparently as
the basls of a claim in damages for contravention of 5 . 5 2 of the Trade Practices Act 1974:-
7 . The First Named Respondent by its servant or
agent the Second Named Respondent further
represented to the Applicant that the
aforesaid policy would Indemnify the
Applicant in the event that physical disability or illness prevented the Applicant
from driving hls truck to the full extent of
the policy namely $85,000.00.R.
At the aforesald time and place the Flrst
Named Respondent by its servant or agent the Second Named Respondent further represented
to the Applicant that the aforesald indemnlty
of $85,000.00 would be paid to the Appllcant
upon the production by the Applicant of a
medical certlficate stating he was permanently dlsabled from drivlng his truck. 9. At the aforesaid date and place the First
Named Respondent by its servant or agent the Second Named Respondent further represented
to the Applicant that the benefit payable
under the aforesaid disability policy would
be $85,000.00.' '
It is also pleaded that "the representations made by
the second-named respondent to the applicant were made negligently, fraudulently, deceitfully and/or recklessly with indifference to the truth". Finally, It is pleaded that "the second-named respondent wllfully and fraudulently misled the
applicant in his advice to the applicant as to the nature of and the benefits payable under the said policy of disability insurance for the purpose of obtaining business from the applicant".
The evidence does not establish the making of any
representation to the effect of that pleaded in paragraph 8 of the statement of claim. Nor is there anythlng to suggest that the representation pleaded In paragraph 9 was deceptlve or misleading.
However, the statement of claim also erects a cause of
actlon for breach of the contract constituted by the Natlonal Mutual Policy No 1542005. Damages flowing from the alleged
breach of that contract have been quantified in the sum of
$85,000. It must therefore flrst be determined whether that
cause of action has been made out. It is only If National
Mutual has properly refused Mr Free's clalm on the basis of
some construction of the policy, Inconsistent wlth that
alleged in paragraph 7 to have been represented as accorded
by National Mutual to its disability cover, that it becomes necessary to consider the cause of action under the Trade Practices Act, or the allegations
of fraud against Mr Creese.
The relevant obligatlon on National Mutual to pay to
annexure
to
the
policy
imposes
an
Mr Free the sum
assured if total and permanent disablement (as defined in the
conditions) occurs before 28 August 1994. That in turn requires reference to the deflnition in condition 2(a) which
has already been set out. The definition imports the requirement that an opinion be formed by National Mutual
(after consideration of such medical and other evldence as it shall require) that the insured has become dlsabled by bodily injury or disease to the specified extent.
It is to be implied In a contract of insurance which
makes recovery depend upon proof to the satisfaction of the insurer or its directors, or the formatlon of some opinion as
to a matter of fact, that the insurer will act reasonably In
requiring evidence and in forming the requisite oplnlon. (See e.g. Braunsteln v The Accldental Death Insurance CO (1861) 1
B & S 782; 121 E.R. 904; Harvev v Ocean Accident and
Guarantee Corporation C19057 2 I.R. 1 at 13, 19 and 2 4 . ) In this case National Mutual did not require any further medical
or other evidence after the second meeting of its claims committee to which it presumably had delegated the function
of forming the opinlon whether Mr Free had become dlsabled to
the extent required by c1.2(a) of the condltions to the CMN annexure to the pollcy. It is therefore appropriate to ask
. - 20 - whether, on the evidence before the claims committee in
September 1982, a reasonable insurer could bona flde form the opinion that Mr Free had not become disabled by the condition of hls knees to such an extent that he was then, and had been throughout the six months from March 1982, wholly prevented
from engaging in his occupation as an owner-driver of a logging truck. It was not open to the committee to form that
negative opinion by concluding that Mr Free could, for short
periods on a given day, perform some or all of the activitles
required by that occupation. For the construction of similar
provisions in insurance policles see Hooper v The Accidental
Death Insurance Company (1860) 5 H&N 546 : 157 E.R. 1297 andPocock v Century Insurance Company, Ltd. !L19603 2 Lloyd's
Rep. 150. In the latter case Mr Commissioner Molony Q.C. observed, at 154:-
"The broad test that I think must be applied in
order to understand the application of this
clause is to ask oneself: Is a man fit to go to
business? It does not mean that he has got to be
fit to spend the whole day there; it does not
mean that he has got to be fit to carry on all
the activlties which that busmess normally Involves. The questlon is: Is he fit to attend there and play a worth-while part in the conduct
of it? If the answer 1s 'No', then in the view
that I have already expressed, Clause (f)
applies, and in that sense I flnd that the
plaintiff was disabled from attending to 'busmess of any and every kind' up to the date
that has been mentioned."
On that construction of the policy, and in the light of
the medical evidence contamed in the reports of Dr Beltz and
Dr Strang, I conclude that It was not reasonably open to Natlonal Mutual in September 1982 to form the opinion that Mr Free was not wholly prevented by the condition of hls knees
.
.
from engaging In his occupation as the owner-driver of a
logging truck, or any slmilar occupatlon or business.
It does not appear that the claims committee ever
addressed itself to the question of whether Mr Free was
similarly prevented from engaging in any other profession,
business or occupation for which he was fitted by his
knowledge, training, status and abilities. That failure
compounded the breach by National Mutual of its obligation bona fide and reasonably to consider whether or not it formed
the opinlon required by c1.2(a) of the CMN annexure to thepolicy.
In my view, had the committee considered the second
questlon raised by that clause, it would have found it
necessary to identify each business or occupation other than that of owner-driver of a logging truck or something similar,
for whlch Mr Free was fitted by his knowledge, training, status and abllities. It would have been obliged in that process of identification to exclude, amongst others, menlal
occupations inconsistent with Mr Free's status as an owner-driver of a logging truck, part-tlme occupations which
attracted signlficantly less remuneratlon than he had derived
as a full-time owner-driver, occupations whlch required
substantial additional tralning, and any business or occupation whlch required a greater capltal investment than
had been necessary for hlm to carry on hls business as
owner-drlver of the "Mack" truck acquired In 1979.
.
Had it undertaken that process, the claims committee,
acting reasonably on the evidence before it in September 1982, would have formed the opinion that Mr Free was wholly prevented from engaging in any other business or occupation
other than that of owner-driver of a logging truck, for which
he was fitted by his knowledge, training, status and abilities. It 1 s true that Dr Beltz tentatively, and Dr Strang positively, indicated that Mr Free was not prevented from undertaking a clerical or other sedentary occupation.
However, there was nothing in the available evidence to suggest that Mr Free was fltted by knowledge, traming, status and abllities for any such occupation. I also conclude that had the claims committee addressed
Itself to the correct questions, even if it had required and obtained further evidence, it would have been bound, acting reasonably, to have formed the opinion that Mr Free would be
disabled in terms of the definition in cl.Z(a) of the
conditions of the CMN annexure, for the remainder of his
life. I am reinforced in that concluslon by the evldence
given in these proceedlngs of Mr Free's experiences since
September 1982, the continuing medical assessments of his
condition and my own observations of him. It could not
reasonably be suggested on the proper construction of the
definition that the operation of a back-hoe for up to twenty hours a week was an occupatlon for whlch Mr Free was "fitted by his knowledge, training, status and abllities". The fact
that he has been forced, or chooses, to engage In that occupation rather than remain completely idle does not entall
.,
. that it was one of the occupations contemplated by the definltion which would, if able to be engaged in, preclude
recovery of the sum insured.
The consequence of the breach or breaches by National Mutual of the contract of Insurance is that Mr
Free
should
recelve an award of damages represented by the amount of
$85,000 which he would have received had the contract been performed according to its terms; (Roblnson v Harman (1848) 1 Ex. 850 at 855; 154 E.R. 363 at 365).
In view of the conclusion whlch I have reached in
respect of the cause of action for breach of contract, it is unnecessary to deal further wlth the other causes of action alternatlvely relied on by the applicant. However, I should
say that the evidence did not support the allegation that Mr Creese had been guilty of fraud. The cause of action on which Mr Free has succeeded
arose before Federal Court of Australia Act 1976 by Act No. 165 of
the
commencement
of s.51A
Inserted
in
the
1984.
However, I consider, in the light of the judgment of the
majority of a Full Court of this Court in Centrepoint
Freeholds Pty. Ltd. v T.N. Lucas (TN) Pty. Ltd. (1985) 60
A.L.R. 187, that I should give effect to 5.34 or s.35 of the Tasmanian Supreme Court Civil Procedure Act 1932 and add to the judgment for $85,000 an amount of damages In the nature
of Interest from 30 September 1982 until the date of
judgment. If agreement cannot be reached on the amount of
A - 24 - b
that interest, or the rate at which it should be calculated, I shall receive written submissions on that question from
Counsel for the parties. I shall also order that National
Mutual pay the applicant's costs of these proceedings, such costs to be taxed. I certify that this and the preceding twenty-three (23) pages are a true copy of the Reasons for Judgment hereln of his Honour Mr Justice Ryan.
*TF--bG
Associate
NAME OF ACTION
: Tony Alfred Free v The National Mutual Life Assoclation of Australasia Llmited and Geoffrey Creese
NO. OF ACTION : TG No 6 of 1983 SOLICITORS FOR : Gunson, Pickard & Hann THE APPLICANT COUNSEL FOR : Mr P.W. Slicer THE APPLICANT SOLICITORS FOR : Page Seager THE RESPONDENT COUNSEL FOR : Mr D.A. Bessell THE RESPONDENT DATES OF HEARING : 22-24 February 1988
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