Gates, Jeffrey Kenneth v City Mutual Life Assurance Society Ltd

[1983] FCA 13

CATCHWORDS

T r a d e P r a c t l c e s - Sta t emen t s i n b reach of s .52 and s . 53 (g )

o f T r a d e P r a c t i c e s Act 1974 - Whether making of statements

is c o n s i s t e n t w i t h f o r m a t l o n of c o n t r a c t - Veasure o f

damages f o r b r e a c h o f P a r t I V o f t h a t Act.

Cont rac t - Whether o r a l s t a t e m e n t s were mere r e p r e s e n t a t i o n s

o r c o n s t i t u t e d a c o n t r a c t c o l l a t e r a l t o a w r i t t e n c o n t r a c t .

T r a d e P r a c t i c e s Act 1974 - s e c t l o n s 52, 5 3 ( g ) , 8 2 , 8 7 .

Fede ra l P roceed ings (Cos t s ) Act 1981 - s e c t i o n 6.

JEFFREY KENNETH GATES v . THE CITY MUTUAL LIFE ASSURANCE

SOCIETY LIMITED

No. G170 of 1982

THE CITY MUTUAL LIFE ASSURANCE	SOCIETY	LIUITED	v .
JEFFREY KENNETH GATES

No. G173 of 1982

Fox, Lockhar t , and F l tzgera ld JJ.

i 18 February 1983

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Sydney.

I N THE FEDERAL COURT OF AUSTRALIA )

No. G 1 7 0 of 1982

NEW SOUTH WALES DISTRICT REGISTRY j

1 No. G 1 7 3 of 1982

GENERAL D I V I S I O N )

No. G 1 7 0 of 1982

BETWEEN :

JEFFREY KENNETH GATES

Appel lant

AND :

THE CITY MUTUAL L I F E ASSURANCE

SOCIETY LIMITED

R e s p o n d e n t

No. G 1 7 3 of 1982

BETWEEN :

THE CITY MUTUAL L I F E ASSURANCE

SOCIETY LIMITED

Appel lant

AND:

JEFFREY KENNETH GATES

Respondent

, O R D E R .

JUDGES MAKING ORDER. Fox, L o c k h a r t a n d Fitzgerald JJ.

MADE:	WHERE	Sydney.
-	DATE :	18 February 1983.

n

I N NO. G170 OF 1982 THIS COURT ORDERS THAT:

1. The appea l be d i smissed .

2. The a p p e l l a n t p a y t h e r e s p o n d e n t ' s cos t s of

t h e a p p e a l .

I N NO. G173 OF 1982 THIS COURT ORDERS THAT:

1. The appea l be a l lowed.

2 .	The	d e c l a r a t i o n s	a n d	orders	o f	E l l i c o t t	J.	be
set	a s i d e .

3. I n l i e u t h e r e o f :-

(a) t h e p r o c e e d i n g s b e f o r e hlm be d i smis sed ;

(b) t h e r e b e no o r d e r as t o t h e costs of t h o s e

p r o c e e d m g s .

4 . The r e s p o n d e n t p a y t h e a p p e l l a n t ' s c o s t s o f t h e

appea l .

5. The respondent be g ran ted a c o s t s c e r t i f i c a t e

pursuant t o s . 6 of t he Fede ra l P roceed ings (Cos t s )

__ Act 1 9 8 1 l i m l t e d t o t h e f l r s t d a y o f h e a r i n g o f

t h e a p p e a l .

IN THE FEDERAL COURT OF AUSTRALIA	)
)

NEW SOUTH WALES DISTRICT REGISTRY	)	NO. G 170 OF 1982
)	NO. G 173 OF 1982
GENERAL DIVISION	)

BETWEEN: JEFFREY KENNETH GATES

Appellant

AND :	. . . . . . . . . . . . . . . . . . . .	ASSURANCE SOCIETY LIMITED
THE CITY MUTUAL LIFE

Respondent

BETWEEN:	. . . . . . . . . . . . . . . . . . . .	THE CITY MUTUAL LIFE
ASSURANCE SOCIETY LIMITED

Appellant

AND : JEFFREY KENNETH GATES

Respondent

CORAM: FOX, LOCKHART AND FITZGERALD JJ.

18 FEBRUARY 1983

REASONS FOR JUDGMENT

THE COURT Each of the parties has appealed to thls Court from a

ludgment of a single Judge of this Court (Ellicott J.) dellvered on 14

September 1982. His Honour found that on the faith of statements made

to him by one of the agents of the City Mutual Life Soclety Limited

("CML"), Jeffrey Kenneth Gates arranged for a superannuation pollcy

whlch he had already taken out with CML, to be extended to include

total dlsability cover, and had that cover lncluded In a new life

policy which he took out at about the same tlme with CML, paying In

each case extra by way of premlum. The total dlsablllty cover under

the policles in fact only entltled Mr. Gates to payment if CML

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accepted him as incapacltated to such an extent as to render him

unllkely ever to be able to attend to any galnful professlon,

occupatlon or employment. In this, and In all other respects, the

pollcies accorded wlth the written proposals made to CML by Mr. Gates.

However. after resolving a confllct of evidence in favour of Mr.

Gates, his Honour found that statements had been made to him to the

effect that, under the total disability cover, the full amount insured

would be payable to hlm if he suffered an in~ury or illness which left

him physically incapable of carrying on hls occupation as a

self-employed builder.

Mr. Gates was injured and the learned primary Judge found

that the injury left him physically incapable of carrying on his

occupation as a self-employed builder. The injury did not, however,

render him lncapacitated to such an extent as to render him unlikely

ever to be able to attend to any gainful profession, occupation or

employment. CML refused to pay Mr. Gates under the policies. He

brought these proceedlngs to recover loss or damages under S. 02 of

the Trade Practices Act 1974 (“the Act“) on the basls that the

statements constltuted breaches of S . 52 and sub-s. 5 3 (g) of the Act.

He also claimed damages for breach of a contract whlch he alleged

conslsted of CML‘s representatlons plus the written policles. He

claimed the sums insured and other amounts particularlsed In his

Further Amended Statement of Claim as follows:-

“PARTICULARS OF DAMAGE

To wages pald to employ other persons to replace the

Applicant in hls busmess $11,000.00

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To estlmated loss of income whlch would have otherwise been compensated for by payments of benefits under the

policies $60,000.00

Forced sale of interest in Restaurant business estimated

$130,000.00

To monies lost due to mortgagee's sale of villa homes

$15,000.00"

CLAIM IN CONTRACT

The primary Judge held th at Mr. Gates was entitled to F laymen .t

by CML of the amounts payable under the policies as damages for breach

of contract. Although satisfied that the statements were

representations whlch contravened S. 5 2 and sub-s. 5 3 (g) of the Act,

his Honour held that they amounted to what he described as a

collateral warranty or contract, because they constituted promises by

CML to pay the total disablllty beneflt to Mr. Gates if he suffered an

in]ury whlch rendered him physically incapable of carrying on his

buslness as a builder. It was submitted by counsel for CML, in our

view correctly, that these findings were inconsistent.

His Honour went on to say:-

"In the circumstances of thls case I do not think there can be any real doubt, on the evidence, I have accepted, that the partles intended the statements...to have

contractual effect. The nature and effect of the

disability cover belng offered by the respondent was

discussed, the applicant asked that what Mr. Rainbird

was saylng about it be checked, it was in fact confirmed

to the applicant and the applications for disability

benefit were clearly signed on the falth of those

statements. The only proper inference to draw, in my

view, from those facts is that it was intended that the statements made about the cover should have contractual

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effect. ... Here the parties contracted on the basis that

the beneflts would be payable if the appllcant suffered

an lnjury which forever rendered him physically

incapable of carrying on his buslness as a builder.

The applicant dld in fact sign applications for total

disability benefits, in relation to each policy, which

were subsequently accepted by the respondent and which

contained a provision for payment which was different,

indeed, much narrower. The proper legal interpretation

of these events is in my view that there was a

collateral contract under which the applicant agreed to

enter lnto the contracts of insurance so constltuted and

paid a premium thereunder in consideratlon of the

respondent agreelng to pay disability benefits to the

applicants in the circumstances represented by	Mr.
Rainbird on its behalf."

Notwithstandlng our respect for his Honour's legal

interpretation of the relevant events we do not agree with it.

CML's relevant contractual obligation 1s an obligation to

make payment to Mr. Gates in certain circumstances. It was for that

obligation that the premiums were given as consideration. It is that

obligation which Mr. Gates says was breached. The source of that

obllgatlon was, and was always intended to be, the insurance pollcies

and not some other agreement entered into with Mr. Gates by CML's

agent on behalf of CML. The statements by the agent were not a

promlse to make payment In dlfferent circumstances from those provided

for in the pollcles but a representatlon as to the circumstances in

whlch, under the pollcies, the obligation to make payment would arise.

What was sald was not promissory and was moreover lnconsistent with the terms of the applications signed by Mr. Gates.

LOSS OR DAMAGE UNDER THE TRADE PRACTICES ACT

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As has already been stated, the primary Judge was satisfied that

contraventions of S. 52 and sub-s. 53 (g) of the Act were established

and made declarations to that effect. His findings in this regard

were not disputed. However, his Honour declined to make an order for

damages on that basis. He expressed the view that S . 82 of the Act

would not entitle Mr. Gates to recover any more than a refund	of the
premlums paid for the total dlsability cover. He continued:-

"This rellef, however, would have to be accompanied by

an order varying policy No. 909837" (superannuation

policy) "and varying or rescinding policy No. 438249"

(life policy). "I do not propose to make orders to this

effect, first because the applicant has not asked for

them and secondly because I am satisfied, for reasons I

shall now explain, that the applicant is entitled	to
recover the amounts payable under the policies".

Mr. Gates' damages claim under the Act was formulated on the

basls that, by reason of CML's contraventions of the Act, he was

entltled to recover from CML the amounts to whlch he would have been

entitled under the policies had the representations been correct,

together with the amount of all losses which he clalmed to have

sustalned in consequence of being deprived of those monies. The

primary Judge descrlbed the evidence as to these consequentlal claims

as unsatisfactory, and that is plalnly the case. However, that	is,
in the circumstances, of no significance.

As his Honour recognized, there has not been a universally

applicable definltlve statement of the appropriate measure of damages recoverable in connection with the breach of a provislon of Part IV of

the Act. Probably It is better that some flexlbllity is rnaintalned.

Certainly, there is scope for debate as to the inter-relationship

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between s s . 82 and 87 of the Act. However, S . 87 like S. 82 is

concerned with loss or damage "by" the offending conduct and It is

sufflcient for present purposes to observe that, in this case, the

question 1s not how much better off Mr. Gates would have been if the statements had been true but how much worse off he 1s by reason of

having taken the steps which he dld in reliance on the statements.

No attempt was made by Mr. Gates to prove a claim for damages

on the correct basis. The premiums paid for total disability cover

were qulte small. There is nothlng to suggest that the limited cover

which Mr. Gates received for those premlums was worth less than he

pald. The only step proved to have been taken by Mr. Gates in

reliance upon the statements was the payment of the additional

premlums. There was no evidence that, but for the statements, he

would have cancelled the exlstlng superannuation pollcy or omitted to

acqulre the new life policy. Indeed, such an addltional policy was

required by Mr. Gates In connection with a proposed borrowing from a

finance company. Further, there was no evldence that cover in the

terms of the statements made to him was available from CML or any

other insurance company or as to the premium which would, In such a

case, be payable for that cover, or as to Mr Gates' willingness to pay

such a premium. The inference seems inescapable that, but for the

statements, Mr. Gates would have proceeded exactly as he dld save that

he would not have paid extra for total dlsability cover. The

insurance policies remaln on foot.

We accordingly agree wlth the prlmary Judge that Mr. Gates'

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clalm for damages under the Act was not made out.

Other points were argued some of which were disposed of in

argument. Some points raised by CML do not need consideration in view

Of Our COnClUSiOn that it is entitled to succeed. Before us Mr. Gates

presented his own argument although he told us that he had been

offered Legal Aid. He had been legally represented at first instance.

His submissions on the appeal have been considered but call for no

further reference. Nothing he said indicated that some basis might

exist for a different result in these proceedings.

At first instance Mr. Gates succeeded in establishing

contraventions of the Act and In establishing a claim in contract. He

obtained a substantial award for breach of contract, but not all that

he wished. He failed to obtain an award under S. 8 2 . The findings

favourable to him ln relation to contraventions of the Act still

stand. We are of the opinlon that there should be no order as to the

costs of the trial. Mr. Gates must pay CML's costs of the appeals.

There were two separate appeals. Mr. Gates' appeal has

failed. CML's appeal has succeeded on a question of law. The

proceedings before this Court were considerably lengthened by Mr. Gates' resort to matters which were either irrelevant or had nothing to do with CML's appeal. Mr. Gates own costs in relation to the appeals would not be large. However, the Court 1 s of opmion that it would be approprate for the Attorney-General to authorize a payment

under S . 6 of the Federal Proceedings (Costs) Act 1981 to Mr. Gates in

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pursuance of this Court's order, limited to the costs	of the first
day's hearing before thls Court.

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