Green v AMP Life Ltd - [2005] NSWSC 370

No judgment structure available for this case.

Reported Decision:
(2005) 13 ANZ Insurance Cases 90-124

New South Wales

Supreme Court

CITATION:
Green v AMP Life [2005] NSWSC 370

HEARING DATE(S): 21-22/2/05; 24/2/05; 24/3/05

JUDGMENT DATE :

6 May 2005

JURISDICTION:
Equity

JUDGMENT OF:
Campbell J

DECISION:
Plaintiff's claim dismissed. Declaration of terms in which insurance policy has been amended.

CATCHWORDS:
INSURANCE - life insurance - whether a disability income protection policy not necessarily of more than three years duration is a life policy - CONTRACT - whether variation of contract agreed - whether defendant estopped from asserting variation to contract agreed - TRADE PRACTICES - misleading and deceptive conduct - alleged to arise from terms in which notification of acceptance for insurance given - DAMAGES - circumstances in which a person insured under a policy providing periodical payments during disability can recover a lump sum for loss of future benefits under the policy - INSURANCE - group insurance policy taken out by trustees - consideration of nature of legal rights of person insured under such a policy - DAMAGES - assessment of damages for personal injury - RECTIFICATION - when available

LEGISLATION CITED:
Industrial Relations Act 1996
Insurance Contracts Act 1984 (Cth)
Jurisdiction of Courts (Cross-vesting) Act 1987
Life Insurance Act 1995 (Cth)
Trade Practices Act 1974 (Cth)

CASES CITED:
AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655
AMP Financial Planning v Green [2004] NSWSC 1099; (2004) 51 ACSR 693
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
Broadlands Properties Ltd v Guardian Assurance Co Ltd (1984) 3 ANZ Ins Cas 60-552
Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 79 ALJR 308
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Cullen v Trappel (1980) 146 CLR 1
DTR Nominees Proprietary Limited v Mona Homes Proprietary Limited & Anor (1978) 138 CLR 423
Farrow Mortgage Services Pty Ltd (in liquidation) v Slade and Nelson (1996) 38 NSWLR 636
Galaxidis v Galaxidis [2004] NSWCA 111
GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631
Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832
Malec v JC Hutton Proprietary Limited (1990) 169 CLR 638
NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740
Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182
Todorovic v Waller (1981) 150 CLR 402
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

PARTIES:
Gary Sydney Green - Plaintiff/Cross-Defendant
AMP Life Limited - First Defendant/First Cross-Claimant
Roger Patterson - Second Defendant/Second Cross-Claimant
John Kelly - Third Defendant/Third Cross-Claimant
Kevin McLean - Fourth Defendant/Fourth Cross-Claimant

FILE NUMBER(S):
SC 3268/04

COUNSEL:
M J Heath - Plaintiff/Cross-Defendant
N Perram - Defendants/Cross-Claimants

SOLICITORS:
Malcolm J Wright - Plaintiff/Cross-Defendant
Mallesons Stephen Jaques - Defendants/Cross-Claimants

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

6 MAY 2005

3268/04 GARY SYDNEY GREEN v AMP LIFE LIMITED & ORS

JUDGMENT

HIS HONOUR:

Nature of the Claim

1 The plaintiff had the benefit of a policy of insurance (“the Policy”) which was underwritten by the first defendant (“AMP”). Under it, the plaintiff was entitled to receive periodical payments if he became unable, through illness, to carry out his usual occupation. He became unable to carry out his usual occupation, and was paid benefits under the Policy for two years. The insurer then ceased paying benefits, claiming to be entitled to do so because the illness from which the plaintiff was suffering was a type of mental illness, and there was a two year limitation on benefits where inability to carry on the occupation of an insured arose from a mental illness.

2 The plaintiff seeks either a payment of the present value of the benefits which would accrue due to him under the Policy to age 65 (the date when benefits under the Policy cease), or alternatively a declaration that the Policy remains on foot. The plaintiff also sues AMP for misleading and deceptive conduct contrary to section 52 Trade Practices Act 1974 (Cth). He sues the Trustees who held the Policy for, inter alia, the benefit of the plaintiff, alleging that the Trustees have breached their fiduciary obligations towards him.

3 AMP, by cross-claim, seeks a declaration that the Policy contains the two year limitation on benefits, or alternatively rectification of the Policy to include such a limitation in it.

Factual Background to the Dispute

4 The plaintiff was an agent of AMP between 20 April 1976 and 5 April 2002. In that capacity he marketed insurance policies underwritten by AMP. Between 1986 and 2002 he was also a representative of AMP Financial Planning Pty Limited, and in that capacity carried on business as a financial planner.

5 For the whole of the time he was an AMP agent, the plaintiff was a member of the Australasian Association of AMP Society Agents (“the Association”).

The Trust

6 The second, third and fourth defendants (“the Trustees”) have been the trustees of a trust known as the Income and Agency Protection Plan (“the IAP Plan”) at all relevant times. That Plan is established under a trust deed made on 11 April 1997, to which the second defendant, the third defendant and a Mr Max Kinnersley were the only parties. That Deed contained the following provisions:

“1. ESTABLISHMENT: By this deed (Deed) the Trustees intend to constitute a trust (Trust) known as the Income and Agency Protection Plan (“the IAP Plan”) to purchase and own a policy of insurance that will provide income protection in the event of disability (“the Policy”) for the benefit of Participants. Each Participant is bound by this Deed. The Trustees are appointed as the Trustees of the Trust and consent to the appointment.

2. VESTING: All property of the Trust which consists of the Policy vests in the Trustees on trust for the Participants.

3. TRUST PROPERTY: The Trustees must hold the Trust Property as one undivided trust fund which is separate from, and not available to meet liabilities of any other trust. … Within the Trust the Trustees will purchase and own the Policy.

4. PARTICIPANT’S BENEFICIAL INTEREST: A Participant has a beneficial interest in the Trust as a whole, not in parts (whether or not identified with any Strategy) or single assets. A Participant may neither interfere with, nor exercise rights or powers of, the Trustees in respect of any Trust Property, Trust Liability or obligation and has no right to lodge any caveat affecting any Trust Property.

5. APPLICATIONS: A person intending to join the Plan and become an insured under the Policy must provide an application in a form acceptable to, and any other information reasonably required by, the insurer and pay the application money, to the insurer (Application Money). The Application Money must be not less the sum required from time to time to meet premiums for the insurance cover for the Participant under the Policy. The Trustees may reject any application or contribution without giving any reason. A Participant’s interest in the Trust is created on amounts paid or consideration so transferred. …

…

7. POWERS: Subject to this Deed, the Trustees have within and outside Australia all the powers in relation to the Trust, Trust Property and Trust Liabilities, that it is legally possible for a natural person or corporation to have. In addition, the Trustees may exercise any powers conferred by law including to implement a Participant’s directions.

…

9. DISCRETION: The Trustees may determine whether to exercise and the manner, mode and time of exercise of their powers in their absolute discretion.

…

13. FORM OF BENEFITS: Benefits are payable to a Participant or Participant’s dependants as provided by the Policy and are determined only by the insurer in accordance with the Policy.”

Participants

Insurer means the provider of the Insurance Policy.”

7 Pursuant to a Supplemental Deed made on 22 September 1999, Mr Kinnersley retired as a trustee of the Trust, and the fourth defendant was appointed as a trustee in his place.

The Policy Document

8 At some stage the then trustees of the IAP Plan took out with AMP an insurance policy of the type contemplated by the Trust Deed. The precise date they did so does not emerge from the evidence, but the Policy was one which commenced on 1 January 1996. The Policy came to be embodied in a document dated 16 May 1997. It contained the following provisions:

“In consideration of the contributions made in accordance with Clause 3, AMP will, subject to the conditions and provisions of this Policy, pay to the Member the benefits provided in this Plan …

CONDITIONS

1.1 In this Policy

…

“Application Form” means such form as may be issued to the Policyowner by AMP from time to time for use in respect of such Advisers …as the Policyowner intends to nominate for cover under this Policy.

…

“Member” means an individual who is an Adviser … who has been accepted by AMP for cover under this Policy. To be a Member, an Adviser … must be a financial member of the Australasian Association of AMP Society Agents.

…

“Benefit Ceasing Date” means the day before the sixty-fifth birthday of the Member for Personal Exertion Cover …

“Plan” means the AMP Agents’ Association Income and Agency Protection Plan created by the Trust Deed.

“Policyowner” means the Trustees for the time being of the Plan.

“Review Date” means the Commencement Date and the first day of January in each subsequent year or such other date as agreed by the Policyowner and AMP.

…

“Total Disablement” of a Member means disablement occurring on or prior to the Member’s Benefit Ceasing Date resulting from injury or illness as a result of which he or she is completely and continuously unable to carry out his or her usual occupation as an adviser, provided that -

(a) the Member remains under the regular care and attention of a legally qualified medical practitioner in relation to that injury or illness; and

(b) the Member does not carry out any remunerative work.

“Totally Disabled” has a corresponding meaning.

“Waiting Period” means the period of either four weeks or thirteen weeks, as chosen at the time of application or varied in writing subsequently, which must elapse between the Date of Disablement and the day from which the monthly benefit in respect of Total Disablement become payable.

…

2.1 The Policyowner shall nominate to AMP such Advisers … as are eligible to apply to become Members and the Policyowner shall supply such information relating to such Advisers … as may be required by AMP for the purposes of this Policy. After considering such information and such other evidence as it considers appropriate AMP shall determine whether and, if so, in what amount and on what terms AMP shall grant any insurance in respect of an Adviser … and shall notify the Policyowner accordingly.

2.2 AMP will insure each Member for the benefits as described in Clause 4.

2.3 An Adviser … shall become a Member under this Policy on being accepted by AMP as such in accordance with Clause 2.1 and the insurance in respect of the Member shall commence from a date forthwith.

2.4 Insurance in respect of a Member shall continue in force until the first to occur of the following:

(a) termination of this Policy; or

(b) the Member ceases to be a member of any class of Advisers … who are eligible for insurance under this Policy; or

(c) a contribution or instalment of a contribution in respect of such Member’s insurance under this Policy has become due and remained unpaid for a period of thirty (30) days; or

(d) subject to Clause 7, the Member ceases (otherwise than on account of Total Disablement or Partial Disablement) to be actively engaged in work on a full time basis as an Adviser …PROVIDED THAT, for the purpose of this paragraph, a Member shall be deemed to be actively engaged in work on a full time basis as Adviser or Specified Employee during any specified period of leave of absence (not exceeding twelve (12) months) granted of which the Policyowner gives notice to AMP in advance and which AMP agrees is to be deemed to be active service ; or

(e) the survival of the Member to the Member’s Benefit Ceasing Date.

CONTRIBUTIONS

3.1 Subject to the other provisions of this Clause, each Member accepted on AMP’s standard terms shall in respect of each year commencing on a Review Date contribute to the Plan the premium applicable to the annual benefit levels chosen by the Member in his or her Application Form (or as otherwise agreed between the Member and AMP) relating to that Review Date.

Contributions are payable semi-monthly at the rate of one twenty fourth of the annual amount.

…

3.6 AMP will deduct all amounts payable by a Member as his or her contributions to the Plan … from commission earnings, other remuneration or other income of the Member … and apply these amounts in terms of this Policy.

…

Total Disablement Benefit

In the event of the Total Disablement of a Member and provided the Member remains Totally Disabled for the whole of the Waiting Period, AMP will pay to the Member the monthly benefit calculated as follows:

A. One twelfth of the level of benefit the Member chooses in his or her application, representing no more than 85% (being 75% plus 10% for superannuation benefit) of Average Net Income over the previous two financial years as at the time of the most recent Review Date provided:

(a) the maximum benefit payable to the Member will be $20,000.00 per month unless a higher amount has been agreed in writing between AMP and the Member; and

(b) that level of benefit is substantiated by appropriate supporting documentation.

4.2 The percentage and the amounts referred to in Clause 4.1 may from a Review Date be altered by AMP, subject to negotiation with interested parties (including but not limited to the Policyowner and ABOM), and the altered percentages and amounts will apply in respect of the benefit payable where a Member becomes Totally Disabled on or after the date on which the alteration takes effect.

4.3 The benefit payable in accordance with Clause 4.1 shall commence to accrue after the expiration of the Waiting Period PROVIDED THAT a benefit shall be payable under the Plan only if the Member becomes Totally Disabled -

(a) after acceptance by AMP of his or her written application to become a Member; and

(b) on or prior to the Benefit Ceasing Date.

4.4 If a benefit is payable to a Member and if the benefit payments continue for a period greater than twelve consecutive months, the amount of the monthly benefit payable after the first twelve payments will be increased annually during the continuance of the period of Total Disablement. The amount of each such increase will be a percentage of the amount of the monthly benefit paid at the end of the previous twelve month period, such percentage being the lesser of -

(a) ten per cent; and

(b) the percentage change in the most recently published CPI over the period of the preceding twelve months.

…

6.1 If the Member becomes Partially or Totally Disabled, AMP shall, subject to the other provisions of this Policy, pay or apply the benefit payable under the Plan to or for the benefit of the Member in such manner as the Member determines.

Death Benefit

If a Member dies whilst receiving the Total or Partial Disablement Benefit, Crisis Benefit or the Accreditation Benefit, a benefit equal to three times the Total Disablement Benefit will be paid to the Member’s estate as a Death Benefit.

…

PROOF AND NOTICE OF CLAIMS

The amounts hereby contracted to be paid shall become payable on proof of the age, identity and Total … Disablement … of the Member being furnished to the reasonable satisfaction of AMP provided that: [benefits are not payable in two circumstances not presently relevant.]

…

TERMINATION BY AMP

AMP may at any time give the Member at least three months’ notice in writing of its intention to terminate either or both of the following obligations, namely,

(a) to accept any further Advisers … as Members’ and/or

(b) to increase the benefits in respect of Members

but the termination of such obligations shall not affect AMP’s liability under this Policy in respect of the benefits payable under the Plan at the date of expiry, of such notice on the lives of Advisers … who are Members at such date.

DISCHARGE

AMP’s liability under this Policy shall be discharged by payment to the Member of the amounts hereby contracted to be paid.

9 Thus, the Policy was one whereby contributions were payable by a Member direct to AMP, benefits were payable by AMP direct to a Member, and the payment of Members was not dependent upon the formation of any opinion or exercise of any discretion by the Trustees. A person became insured under the Plan by the Trustees nominating that person to AMP, and AMP then deciding whether it would grant any insurance in respect of that person. The Trustees, as the “Policyowner”, had ongoing functions of agreeing with AMP on whether, and if so when, there would be any Review Date other than on the first of January on any year, nominating Advisers to AMP for membership, supplying information to AMP concerning such nominees, and taking part in negotiations with AMP under Clause 4.2 concerning any changes in the percentage of Average Net Income, and the number of dollars, which can be insured for as benefits under the Policy.

Operation in Practice of the Plan

10 Even though AMP was the insurer under the Policy, it had reinsured its risk to the extent of ninety percent with Swiss Re Life and Health Australia Limited (“Swiss Re”), under a quota share reinsurance treaty. AMP consulted with Swiss Re concerning premiums, terms and conditions, and claims management relating to the Policy.

11 After the terms of the Plan were finalised the Trustees and Swiss Re agreed that the terms of the Plan would be reviewed in three years (that is, in 1999).

12 It was the practice of AMP to not make a copy of the insurance policy available to Members of the Plan, or to people applying to become Members of the Plan. Instead, AMP produced from time to time a document called a Customer Information Brochure (“CIB”) which it made available to such people. A CIB sought to state in plain English the benefits which were available under the Plan, and to give some information about how the Plan operated. As well, it contained some worksheets to assist an applicant to decide how much cover he or she should apply for, and an application form.

Start of Negotiations to Introduce Limitation on Mental Illness Benefits

13 In early March 1999 Mr Roger Patterson, and Mr John Kelly (two of the Trustees) met with Mr Jeff King of Swiss Re, to discuss the review of the Plan which was due in 1999. Mr King agreed to extend the terms until 30 June 1999 to allow further negotiations.

14 From July 1998 to April 2000 Mr Stuart Campbell was the Manager, Group Risk Products for AMP. Management of the Plan was part of his responsibilities.

15 On 20 May 1999, at a meeting attended by Mr Patterson and Mr Kelly on behalf of the Trustees, and Mr Jeff King and others on behalf of Swiss Re, Mr King tabled a letter setting out Swiss Re’s proposals to amend the Plan. There were two proposed topics for amendment. One of them was introduction of a two-year limitation on claims arising from mental and nervous causes. The letter contained a draft clause which provided for such a two-year limitation, subject to benefits continuing after two years if the insured continued to be hospitalised. Mr King told the Trustees that the claims experience on the Plan was unacceptably high to Swiss Re. He presented some figures to the effect that, concerning the two agency plans which AMP then had on foot, the percentage of mental illness claims was forty percent, and the average duration of claims for mental illness was substantially higher than for causes other than mental illness. Mr King told the Trustees that there was a market trend to an inclusion of a mental illness limitation.

16 Mr Kelly said that the definition of “mental disorder” proposed by Swiss Re was too broad. He also said he would like to see some evidence of the market trend that Mr King had mentioned. Swiss Re made it clear at the meeting that the wording was open to discussion, and offered to provide evidence of the market trend. The Trustees understood that AMP had not favoured such a clause in the past, and that AMP’s agreement would be needed.

17 Mr Ian Laughlin, Head of Customer Solutions at AMP Financial Services, had previously been the person at AMP with whom Swiss Re had dealt concerning the Plan. Initially Swiss Re approached him about AMP’s attitude to Swiss Re’s proposal for amendment. He asked Mr Campbell in or about May 1999 to take over the negotiations with Swiss Re and the Trustees.

June 1999 Meetings

18 In June 1999 Mr Campbell met with Mr O’Carra and Mr King, both from Swiss Re, on several occasions. In the course of those discussion, Mr King said that the proportion of claims from mental causes exceeded the industry average, and the average duration of those claims was longer than some industry experience statistics would lead one to expect. He said that Swiss Re would not renew the reinsurance agreement unless the Policy terms were amended to limit benefits for mental illness claims with effect from 1 January 2000. He proposed that benefits be limited to the greater of two years or the period of hospitalisation. No specific policy wording to impose the limitation was then discussed.

19 Mr Campbell stated AMP’s position: AMP was unlikely to offer the insurance without majority reinsurance support, and he hoped they would be able to agree on insurance terms that were also acceptable to Swiss Re and the Trustees. He said that the Trustees’ agreement would be needed to any changes before they could be implemented, and as well there would need to be a more detailed review of the claims experience to demonstrate the extent of the problem and justify the proposed solution.

20 On 23 June 1999 Mr Campbell had a telephone conversation with Mr Patterson. He passed on the news that Swiss Re would not continue reinsuring the Policy unless the terms were amended, and summarised Swiss Re’s proposal about what the amendments should be. Mr Patterson said he would probably accept it, subject to actuarial analysis to support Swiss Re’s assertions. Mr Campbell told Mr Patterson that AMP agreed with the proposal, and would not continue with the Policy without reinsurance.

21 On 29 June 1999, Mr Campbell emailed Mr Laughlin, outlining the amendments to the benefit terms which Swiss Re proposed, and enquiring whether (a) given his past involvement Mr Laughlin accepted the changes, and (b) who else in AMP he should contact to “get sign off”.

22 On 30 June 1999 Mr Laughlin wrote a note on Mr Campbell’s email, “Stuart, I am comfortable”, and that was passed on to Mr Campbell.

Negotiations July to Mid October 1999

23 On 12 July 1999 Mr Campbell wrote to Mr O’Carra, as follows:

AMP Agents Association – Disability Insurance: Modified Benefit Design

I am writing to confirm that the product changes proposed by Swiss Re in Jeff King’s letter of 20 May 1999 are acceptable from AMP’s perspective. The changes have the support of our product management team, our underwriting and claims team and our legal team.

I understand that you will be obtaining separate confirmation and support from the trustees of the AMP Agents’ Association.

As discussed at our recent meeting on 28 June, we will work towards implementing these new terms with effect from 1 January 1999. [sic]

In the meantime, I believe the next step is for you to perform an experience analysis and advise new premium rates, recognising the positive effect of the benefit design modifications. I look forward to hearing from you when you have preliminary results to discuss.”

24 On 23 September 1999 Swiss Re wrote to AMP saying:

You may remember that I wrote to you at this time last year, formally terminating the above reassurance agreement with effect from 1 January 1999, pursuant to the terms of Article 9 of the agreement.

Subsequently, ongoing negotiations between Swiss Re and AMP resulted in an agreement in principle to modify the extent of the cover and review the pricing of the arrangement. However, as these negotiations continued far longer than expected, Swiss Re agreed in July of this year to support AMP using the existing benefit and pricing structure until 31 December 1999.

As we have not yet finalised the revised structure of the scheme, I am again writing to you to give formal notice of Swiss Re’s intention to terminate the agreement effective 1 January 2000.

Discussions are ongoing and we are confident we can develop a mutually acceptable and sustainable contract for the future. We are hopeful therefore that this notice of termination is merely a formality, and look forward to a more profitable arrangement in the years to come.”

25 On 20 September 1999 Mr Campbell had sent to Swiss Re a draft for an amended CIB. The amendments which he proposed were ones which aimed to bring the brochure up to date, in various respects not including the two topics on which Swiss Re wanted the plan amended. Mr O’Carra wrote to Mr Campbell on 24 September 1999 saying “I do not think we should proceed on the basis of the CIB in its current form, as this would simply increase the agent’s expectation that the cover may continue without amendment next year.” Mr O’Carra stated his belief that agreement had been reached on the two amendments that Swiss Re sought, and that the pricing of the insurance required review. He continued, “As Swiss Re’s participation in this scheme in future is unlikely to be possible without all of the above amendments, we feel it would be imprudent to circulate it in its current form”. He went on to give some statistics concerning the claims experience under the Policy, concerning both the proportion of total illness claims which were mental illness claims, and the average duration of mental illness claims, and how in each of those respects the claims experience under the AMP policy was worse than the industry averages. He gave some preliminary calculations which showed Swiss Re as making a loss of around $400,000 from reinsuring the scheme between 1996 and 1999.

26 Mr Campbell sent a copy of that letter to Mr Corrigan, Executive Manager of AMP Agents’ Association, under cover of a facsimile dated 27 September 1999. That facsimile referred to the Trustees having approved of the draft CIB which Mr Campbell had prepared, but which Swiss Re had said it did not want to have distributed. Mr Campbell told Mr Corrigan, “Swiss Re have indicated they will only support the current terms to 31 December 1999 and will seek to agree new terms to apply from 1 January 2000.” Mr Campbell proposed a meeting should occur on 14 October 1999 “to discuss and agree the terms to apply from 1 January 2000”.

27 An AMP internal memorandum written by Mr Campbell on 28 September 1999 recorded that Swiss Re “… are finalising new premium rates and insurance terms to apply from 1 Jan 2000.”

28 Also on 28 September 1999 Mr Corrigan sent a fax to Mr Patterson, Mr Kelly and Mr Kevin McLean (the third Trustee) informing them of the meeting which was to take place on 14 October 1999, and saying:

“Stuart will ask Swiss Re to provide a draft of the new plan at least one (1) week prior to the meeting. I’ll forward a copy of that wording to you as soon as a copy is received in this office.”

29 On 5 October 1999 Mr Campbell replied to Swiss Re’s letter of 23 September 1999 (para [24] above), which gave formal notice of intention to terminate the reinsurance agreement. He said:

“You will be aware of my ongoing negotiations with Sean O’Carra and Jeff King to establish new terms. I have already formally accepted the benefit design modifications they proposed. Sean and his team are currently completing an experience analysis with the intention of advising new premium rates, recognising the positive effect of the benefit design modifications. Upon receipt of their revised premium rates, we plan to jointly meet with the trustees of the AMP Agents’ Association on 14 October to finalise these new terms.

We look forward to renewing this treaty, on terms acceptable to all parties, with effect from 1 January 2000.

…

I will continue to work with Sean O’Carra and Jeff King to implement new terms and renew the reinsurance agreement with effect from 1 January 2000.”

30 On the evening of 7 October 1999 Mr O’Carra sent an email to Mr Campbell which discussed the revised premium rates, and attached a draft of a new CIB, which included a limitation of benefits to two years or the period of hospitalisation for any injury or sickness arising in connection with any mental disorder. As the wording of that portion of the CIB changed somewhat, it is not necessary to set it out here.

31 Later on 7 October 1999 Mr Campbell wrote a letter to Mr Corrigan, which he sent on 8 October 1999. It said:

“… I now have the proposed new terms for this insurance. These new terms have been proposed by Swiss Re Life & Health and are supported by AMP Life. We intend for them to take effect from 1 January 2000.

We plan to meet with you, the trustees and Swiss Re at your office on 14 October, to discuss and hopefully agree these new terms.

I am pleased to enclose the following documents in preparation for the meeting:

· copy of the new Customer Information Brochure (CIB), now being rolled out, effective from 1 October 1999 to 31 December 1999.

· a marked up document, showing Swiss Re’s suggested changes to the CIB to reflect the proposed new terms

· an agenda for the meeting on 14 October 1999.

Could you please circulate this information to the other trustees and invite them to join us at the meeting on Thursday 14 October.

I will circulate this information to the other attendees from AMP Life and Swiss Re.

Thanks for your help. I look forward to our meeting and to confirming the terms to apply from 1 January 2000.”

32 The enclosure in that letter was a draft customer information brochure, which included provisions imposing a limit of two years or the period of hospitalisation for any injury or sickness arising out of, or in connection with, any mental disorder. As some amendments were made after that date to the wording by which that benefit limitation was imposed, it is not necessary to set out its terms.

33 On 11 October 1999 Mr Campbell wrote to Mr Corrigan enclosing what he described as “a copy of the new premium rates, to take effect from 1 January 2000.” He said that the rates:

“… allow for the proposed changes to the insurance terms, as outlined in the attachments to my letter dated 7 October.

AMP Life supports the new premium rates.

Could you please circulate this information to the other trustees, in preparation for our meeting on Thursday 14 October?

I will circulate this information to the other attendees from AMP Life and Swiss Re.”

The Meeting of 14 October 1999

34 On 14 October 1999 there was a meeting attended by Mr Campbell and Mr Boner from AMP, Mr O’Carra and Mr King from Swiss Re, Mr Corrigan from the AMP Agents’ Association, and the three Trustees. The agenda for the meeting on 14 October 1999 (which appears from a footer to have been prepared on 7 October 1999) included the item “new terms from 1 January 2000 – draft wording provided by Swiss Re”.

35 Before the meeting on 14 October 1999, the Trustees met privately with Mr Corrigan. Mr McLean, in particular, expressed dissatisfaction with both the principle, and certain details, of the mental illness limitation.

36 By the time of that meeting the Trustees had all received a copy of the draft CIB which Mr Campbell had sent to Mr Corrigan. There was no separate document which identified precise clauses of the Policy which it was proposed would be amended, nor the precise wording of those amendments to the policy document.

37 Mr Campbell gives evidence, which I accept, that the meeting included the following:

“KING: “We can’t continue reinsuring this Plan on the current terms. Claims experience has been very poor [at this point he referred to the claims analysis as set out in his letter of 24 September 1999]. We propose the two year limitation. AMP supports this proposal and we believe its in the best interests of the members of the Plan.”

BONER: “AMP supports the proposal.”

KELLY: “I’m disappointed that it has come to this but we need to recognise that for us to continue with the Plan we may need to do it on restricted terms because we don’t want a couple of claims spoiling the arrangement for the whole membership.”

The wording of the limitation as expressed in the CIB and the new premium rates were then discussed. There was considerable discussion about the definition of mental disorder.”

38 Some of that “discussion about the definition of mental disorder “emerges from the minutes of the meeting, which include the following:

“The proposed marked up document, showing Swiss Re’s suggested changes to the CIB to reflect the proposed new terms was outlined by S Campbell.

…

“moved”

S Campbell agreed to make that alteration in the CIB and policy document from 1 January, 2000.”

39 What was meant by the reference to “moving up” chronic fatigue syndrome and fibromyalgia was that the form of the CIB which was being discussed at the meeting had a paragraph saying:

“The benefit period is limited to the maximum of two years or the period of hospitalisation for any injury or sickness arising out of or in connection with any mental disorder.”

40 That paragraph was followed by another paragraph which began:

…“

“arising out of or in connection with any mental disorder, chronic fatigue syndrome or fibromyalgia”

41 The meeting also included discussion of the means by which the new terms would be communicated to members of the Plan.

42 Mr Campbell’s evidence, which I accept, continued:

“At the end of the meeting one of the trustees, I believe it was John Kelly, said words to the effect “the trustees agree to the proposed limitation on benefits for mental disorders as stated in the draft CIB tabled at the meeting”.”

43 One of the Trustees, whose identity Mr Campbell cannot recall, asked “can we be advised when a claim has reached the two year limitation?”. Mr Boner replied “we will notify the Trustees if the two year limitation applies to any claims made after 1 January 2000.” At the end of the meeting Mr Campbell said:

“I will revise the Plan document to reflect the agreement on the limitation on benefits for mental disorders. The wording to use in the Plan document should be the same as the wording agreed for inclusion in the CIB.”

44 Mr Campbell’s notes of the meeting, written up soon after it, includes the entries:

“2. New wording.

a) 2 year exclusion

We agreed claims manager should notify Trustees if any claims arise where the 2 year mental disorder clause will apply.

Same words into policy document.”

“Premium Rates”

“new rates allow for 2 yr limitation”

Events 14 October 1999 to end 1999

45 After the meeting of 14 October, the Trustees spoke with Mr Campbell and Mr Boner of AMP about the possibility of finding another reinsurer who would reinsure the Policy without the two-year limitation on claims for mental disorders. At some stage (it is not clear whether it was in this meeting or not) Mr McLean of the Trustees was told that no other reinsurer would take on the Plan.

46 On 15 October 1999 Mr Campbell sent an email to numerous people within AMP which said:

“I’m pleased to let you know that we have agreed new product terms and premium rates for this salary continuance plan for AMP advisers. The new terms take effect from 1 January 2000.

Swiss Re were threatening to withdraw their 90% reinsurance support for this business. But we met with the AMP Agents Association trustees yesterday and resolved all issues to everyone’s satisfaction.

Heres an update of where we are up to:

1. New CIB – now in place

· we’ve updated and completely redesigned the CIB to match the AMP look

· it’s now available, it’s current until 31 December 1999

· PDF format, meaning no expensive typesetting and offset printing

· will soon be on the Adviser Infonet

2. New Terms Agreed

· to take effect from 1 January 2000

· introduced a 2 year limitation on benefits due to any mental disorder

· Swiss Re continue to carry 90% of the risk and provide the full claims management service

…

Next Steps

· rollover the CIB and incorporate new terms and rates, to be effective 1 January 2000 (I’ve already kicked this off with Peter Richardson)

· update the policy document (I’ll be talking with Amanda Findlay in Legal)

· inform members of the changes (I’m meeting with the Agents’ Association to jointly agree how to do this)

· CSD to perform the annual review and update of insured amounts (working with Sean Boner to achieve this).

It’s great to have the future of this plan resolved. We have confirmed Swiss Re’s support and the AMP Agents’ Association has signed off the new terms and premiums. Onwards …”

47 On 22 October 1999 Mr Campbell sent to Mr Corrigan a draft of the proposed new CIB. That draft described itself on the front cover as “Issue 5 – issued 1 January 2000. Expires 31 December 2000”. Mr Campbell said:

“The trustees signed off Issue 4 only 4 weeks ago, and the new premium rates, terms and their wording were agreed at our meeting with the trustees on 14 October. Consequently, I am anticipating that the trustees will be comfortable with the proposed first draft of Issue 5.

…

Could you please circulate this draft to the trustees for their preliminary signoff.”

“moving up”

48 Also on 22 October 1999, Mr Corrigan sent to each of the Trustees a copy of that revised draft of the new CIB, under copy of a memorandum saying:

“Stuart Campbell left the revised draft of the new CIB at this office today, with a request for the Plan Trustees to consider the wording prior to sign-off.

The plan is to have the CIB ready for distribution to members during the last week of November 1999.

and let Roger know your comments by Monday 1 November 1999

49 Also on 22 October 1999 Mr Campbell sent a copy of the then current draft of Issue 5 of the CIB to Mr O’Carra, with a request for feedback by Monday, 1 November 1999.

50 There were some minor subsequent changes to that draft of the CIB, insofar as it related to the mental illness limitation. Those changes involved moving a paragraph of text from one place in the document to another, and correcting an error in the portion of the brochure headed “Recurrent Disablement” which had said that there was a two year limitation on claims for mental illness, and had not mentioned the possibility that benefits for mental illness could go on longer if the member was hospitalised. There were no changes of substance. All those changes were made prior to 17 November 1999.

51 On 17 November 1999 Mr Campbell sent the then current draft of the CIB to Mr Corrigan, and to Mr O’Carra. On 23 November 1999 Mr King told Mr Campbell he was happy with the CIB as drafted. Also on 23 November 1999 Mr Corrigan telephoned Mr Campbell saying he had spoken to each of the trustees and they agreed with the final draft of the CIB. He said “you have sign-off”.

52 On 23 November 1999 Mr Campbell executed a document entitled “Sign Off Certificate”. AMP’s internal procedures required such a certificate to be completed before a standard form document relating to insurance is issued. That certificate is a form which identifies various topics concerning which information is required, followed by a blank. Following the part of the form which identifies the project in question, Mr Campbell wrote “CIB Rollover”. His certification was that issue number 5 of the CIB met the requirements of AMP, the Trustees, and Swiss Re, and was in order for implementation.

53 Also on 23 November 1999 Mr Campbell issued an instruction for a copy of Issue 5 of the CIB to be sent to every member of the Plan, along with the annual review letter which was due to be sent to those members. He also gave an instruction that that mail-out include a document which included the following:

“Important Notice to Members

AMP Agents’ Income & Agency Protection Plan
Changes From 1 January 2000

New Insurance Terms

This notice advises members of changes to the terms and conditions for insurance through the Income & Agency Protection Plan (the Plan). The changes take effect from 1 January 2000 and apply to all insured members.

Full details of the insurance terms applying from 1 January 2000 are outlined in the Customer Information Brochure (CIB) Issue 5. A copy of this CIB is enclosed with this notice.

New Insurance Premium Rates

From 1 January 2000, new premium rates will apply to your insurance through the Plan. These premium rates result from a review of the emerging claims experience from the Plan over recent years.

The table below gives a summary of how the new rates compare to the current rates.

…

Limitation On Claims Due To Mental Disorders

For new claims commencing on or after 1 January 2000, we have introduced a clause to limit payment of benefits relating to mental disorders. We will pay the claim (while the member continues to be disabled) for the greater of the period of hospitalisation or 2 years.

This change is necessary to ensure ongoing premiums and benefits for all members can be maintained at competitive levels.

…

Why Did We Make These Changes

We have made these changes to ensure the benefits and premium cost remains competitive and attractive for all members.

By making these small changes to the benefits provided, we have been able to secure ongoing group insurance support, avoid dramatic premium increases and continue the automatic acceptance of insurance for new members.”

“Trustees”

54 On 1 December 1999 Mr Campbell instructed an AMP officer to lodge a copy of the new CIB with the Australian Securities and Investment Commission, which was duly done.

55 Section 116(1) Life Insurance Act 1995 (Cth) provides:

“(1) A life company must not issue policies of a particular kind unless the appointed actuary has given the company written advice about:

(a) the proposed terms and conditions on which policies of that kind are to be issued; and

(b) the proposed basis on which the surrender value of policies of that kind is to be determined; and

(c) if the policies provide for benefits to be calculated by reference to units—the proposed means by which the unit values are to be determined.”

56 On 30 December 1999 Mr Craig Lamb, an actuary, gave written advice, which stated that it was under section 116. He identified the topic of the advice as:

“changes to the pricing and terms and conditions for the Income & Agency Protection Plan. The changes are designed to address a decline in the profitability of the Plan.

The changes will take effect from 1 January 2000”.

“I am satisfied that the terms and conditions of this product are adequately described in the:

· Customer Information Brochure

· The Policy Document.”

57 Earlier, on 2 December 1999, Mr Campbell had notified various people within AMP of developments since his email of 15 October 1999. It included the statement that since then he had:

“updated the policy document. It’s with Swiss Re (who carry 90% of the risk) for sign off.”:

Relevant Terms of CIB Issue 5

58 CIB Issue 5 includes the following relevant provisions:

“How To Apply

The only way to apply for membership of the AMP Agents’ Association Income and Agency Protection Plan is to complete the Application form at the very back of this brochure and forward it to:

Expiry

This brochure is current until 31 December 2000. It cannot be used after that date.

…

Key features statement

This Key Features Statement follows guidelines set by the Australian Securities and Investment Commission. It will help you to decide whether this policy meets your needs, and to compare the policy with others you may be considering.

…

Benefits

Payment on Disablement

We will pay you a monthly benefit if you suffer an illness or injury which results in your continuous inability to carry out your usual occupation and which lasts beyond the selected waiting period. The benefit is payable monthly in arrears until age 65, and is conditional upon you remaining under the regular care and attention of your doctor in relation to that illness or injury and not carrying out any remunerative work.

The benefit period is limited to a maximum of 2 years or the period of hospitalisation for any injury or sickness arising out of or in connection with any mental disorder, chronic fatigue syndrome or fibromyalgia – for more information refer to “Benefit Limitations” on page 7.

…

Recurrent Disablement

We will waive the waiting period if a disablement recurs from the same or a related cause within 6 months of previous benefits being payable. The disablement periods will be added together when determining the benefit payment period. At the end of that period, no further benefit will be paid for the same disablement (or related cause) until you have returned to full-time work for at least 6 months.

For disablement arising out of or in connection with any mental disorder, chronic fatigue syndrome or fibromyalgia, the overall maximum benefit period is the greater of 2 years, or the period of hospitalisation.

…

Policy Information Statement

A Policy Information Statement will be sent to you showing personalised details of the policy you have selected.

…

Trust Deed

The Plan is owned by Trustees under a Trust Deed. The Trustees have chosen to purchase a policy with AMP to provide income protection to advisers. This brochure is a summary of the policy’s main provisions. The wording of the Policy Document will always be regarded as the final authority should any dispute arise concerning the application of the Plan features. You also have rights under the Trust Deed.

…

Benefit Limitations

The benefit period is limited to the maximum of 2 years or the period of hospitalisation for any injury or sickness arising out of or in connection with any mental disorder, chronic fatigue syndrome or fibromyalgia.

Mental disorder means any disorder classified in the Diagnostic and Statistical Manual of Mental Disorders current as at the date of disability. Such disorders include, but are not limited to, anxiety, depression, adjustment disorders, stress, mental exhaustion, anorexia nervosa, bulimia, psychiatric complications of physical disorders, drug or alcohol abuse, obsessive/compulsive syndrome, behavioural disorders, somatization disorders or any complications thereof. …”

59 The brochure also included an application form which began:

“The application form is part of the AMP Income & Agency Protection Plan Brochure issue 5 dated 1 January 2000. It is only valid from 1 January 2000, and it expires on 31 December 2000. Applications signed after the expiry date will be declined. Any application received more than 21 days after the expiry date will also be declined.”

“Agreement and Declaration”

“I agree that … I have received and read the AMP Income & Agency Protection Plan Customer Information Brochure Issue 5 dated 1 January 2000.”

Events Re Policy Amendment 2000 and After

60 It was not until 2000 that Mr Campbell spoke to an in-house lawyer at AMP, Ms Findlay, about amending the policy document. On 31 May 2000 he said to her that the changes should be handled by the same procedure as a CIB update, thus, she should instruct Minter Ellison to undertake the drafting (and also update the CIB at the same time) then formal sign-off should be obtained from interested parties, then a variation to policy document issued.

61 While various of the people responsible for the Plan at the AMP, and the Trustees, realised from time to time that the Policy wording had not been signed-off on, nothing was done to sign off on a set of words which, in terms, amended the Policy until after these proceedings were begun.

62 These proceedings were begun on 4 June 2004. On 5 August 2004 someone from AMP signed the following document:

“ MEMORANDUM OF ALTERATION
AMP ADVISERS’ ASSOCIATION INCOME
AND AGENCY PROTECTION PLAN
DATED 16/5/97 – TABLE CODE 637 (“the Policy”)

By agreement with the Trustees of the AMP Advisers’ Association Income and Agency Protection Plan, the Policy is amended with effect from 1st January 2000 by:

1. inserting the following definition in clause 1.1:

“Mental Disorder” means any disorder classified in the Diagnostic and Statistical Manual of Mental Disorders current as at the date of disability.

2. substituting “$250,000” for “$1,000,000” and “5 years” for “8 years” where they appear in clause 5.2B.

3. deleting the existing clause 6.2 and inserting the following:

“6.2 Monthly benefits payable in accordance with this Plan shall accrue on a daily basis and shall be paid at monthly intervals in arrears. Benefits shall cease to be payable on the earlier of:

(a) the date the Member ceases to be Partially or Totally Disabled or dies; or

(b) the Member’s Benefit Ceasing Date; or

(c) where the Member is Partially Disabled, one (1) year from the end of the Waiting Period; or

(d) where the Member’s disablement arises out of or in connection with any Mental Disorder, chronic fatigue syndrome or fibromyalgia (and notwithstanding anything in this policy to the contrary), the date the Member ceases to be hospitalised or the date monthly benefits have been paid for two (2) years (whichever is the later).””

Plaintiff’s Application for Membership

63 At some time during the year 2000 the plaintiff received a copy of CIB Issue 5. On 18 December 2000 the plaintiff filled out and signed a copy of one of the application forms at the back of the CIB Issue 5. He applied for personal exertion cover at the rate of $100,000 per annum. He posted that application on 3 January 2001, to the Trustees, at the address indicated on the application form.

Did the Plaintiff Send a Second Application Form on 15 January 2001?

64 The plaintiff gives evidence that on 15 January 2001 he received a telephone call from a person who introduced herself as Denise Smith of AMP Group Claims – Life and Disability. He says that she said to him:

“We have received your application for Income Protection Cover under the AMP Agents Association Income and Agency Protection Plan. However the form that you completed was part of the Customer Information Brochure which expired on 31 December 2000 and is therefore out of date. AMP have not yet issued a new Customer Information Brochure for 2001. However I will fax you another application form. When you receive this you should complete this and then sign and date this January 2001 send it back to me.”

65 AMP disputes that any such conversation occurred, and that any such document was signed and sent. Apart from its possible marginal relevance to the plaintiff’s credit, I cannot see how anything turns on whether this evidence of the plaintiff is right. After all, there is no dispute that the plaintiff had a complete copy of Issue 5 of the CIB, or what, apart from its date, the contents of the application form were. However, as the parties have litigated the issue, I will decide it.

66 AMP maintains a separate file relating to each Member of the Plan. The entire file relating to the plaintiff was tendered, and it contains no application form dated 15 January 2001. The only application form in it is the one dated 18 December 2000, which also bears a date in the plaintiff’s handwriting “3/1/00 [sic]”, and is a photocopy. It contains a letter from Denise Smith (a Claims Officer – Group Claims at AMP) to Swiss Re dated 18 January 2001, attaching an application and personal statement from Mr Green, and asking for it to be assessed. There is only one personal statement in the file, which is dated 15 January 2001, and which Mr Green accepts he sent on or about that date.

67 No CIB to replace Issue 5 had been approved in January 2001. It was only on 26 February 2001 that the Trustees agreed for a new CIB to be released.

68 I cannot see any sense in the statement which the plaintiff attributes to Ms Smith. Even though Issue 5 of the CIB had expired on 31 December 2000, the plaintiff had signed his application before the expiry date, and (if what the plaintiff attributes to Ms Smith is true) AMP had received it within the 21 days after 31 December 2000 during which applications on the form in Issue 5 of the CIB had to be received to be eligible for acceptance. Absolutely nothing would be achieved by getting the plaintiff to sign and send back a copy of precisely the same application form that AMP already had a copy of. Even though there is a note in the plaintiff’s handwriting ”sent again 15/1/01” on the plaintiff’s copy of the application form, it is not clear when that note was put on it. Also, the plaintiff kept a copy of the personal statement which he submitted to AMP on 15 January 2001, but not of any second application form.

69 In my view, it is more likely than not that the plaintiff is mistaken in thinking that he filled out and sent a second application form. Insofar as that involves a finding that part of the plaintiff’s evidence is incorrect, I do not regard the giving of that incorrect evidence as anything other than the sort of mistaken recollection that everyone suffers from, from time to time. I do not regard it as detrimental to his credit.

The Defendant Accepts the Plaintiff as a Member

70 After AMP had received and considered various medical reports which it requested, it wrote to the plaintiff on 10 May 2001 saying that his claim “has been assessed standard effective the 31 August 2000”. That letter enclosed a single-page document headed “2001 IAPP Individual Member Cover Details”. It was a standard form, which had provision for being filled out to give certain personal details which identified a member and when he had entered the Plan. It said, “Date of Entry to IAPP: 04/05/2001”. It then had three separate sections, relating to the three different types of cover which were available under the Plan. Concerning each type of cover, there was provision for the form to state the sum insured, the monthly benefit, the premium rate, the annual premium, and the semi-monthly premium. In relation to each of the types of cover there was a brief statement of when the benefit was payable. Concerning the agency profit cover, the statement was “benefit is payable for 12 months after disablement to age 65 (provided your register has been sold)”. Concerning the agency losses cover, the statement was “benefit is payable for 12 months after your waiting period (provided your register has not been sold)”. The plaintiff had not applied for those types of cover, so the cover details showed each amount relating to those types of cover as being zero. Concerning personal exertion cover, the form stated “benefit is payable after your waiting period to age 65 (except for new advisers who are restricted to a 1 year benefit).” As the plaintiff had applied for personal exertion cover, the sum insured, monthly benefit and premium amounts were stated.

The Plaintiff’s Claim on the Policy

71 In October 2001 the plaintiff was diagnosed as suffering from an illness which his doctor described as “severe dysautonomia, depression anxiety and panic attacks”. He made application to AMP for payment of a Total Disablement Benefit, and that claim was accepted. The plaintiff’s illness has never required him to be hospitalised. AMP accepts that his medical condition continues to be one which makes him unfit to carry out the usual duties of his occupation. However, it ceased paying benefits to him after two years.

166 I would not adopt that method of proceedings, however. The percentages which Dr Leong gave are percentages of the entire population of people with a depressive illness who respond after one or other of the four lines of treatment has been given to them. They do not take into account factors which exist in the case of the plaintiff, that his illness is of around three and one half years standing, that a significant stressor in the form of his litigation is likely to continue for at least some time into the future, and that the longer someone has suffered a depressive illness the less chance they have of recovering. The only use I make of the 35% figure is in concluding that any lump sum assessment of damages of less than 35% of the net present value of the total benefits which the plaintiff would receive if he were to receive benefits under the Policy until age sixty-five, would be too small.

167 As well, though, in assessing damages on a lump sum basis, one would need to take into account the chance of his recovering at some time before he reaches sixty-five, but not forthwith. If that chance were to eventuate, he would have received payments under the Policy until the time of his recovery, but not afterwards. A way of assessing that figure, and giving weight to the time at which, before he reaches sixty-five, he might recover, is to treat it as a percentage of the total amount of money which would have been payable under the Policy if he did not recover at all before reaching sixty five. In the absence of any other method having been suggested to me, I shall adopt that method.

168 If damages for the future were to be assessed on the basis of a loss of a chance, I would assess them by treating the plaintiff as though, if he lives to sixty-five, the gross amount of money he has lost is 75% of the total amount which would have been paid under the Policy had benefits been payable under it to the plaintiff until he reached sixty-five.

169 In quantifying that figure the escalation of benefits, under Clause 4.4 of the Policy, would need to be taken into account. As well, the prospect of the plaintiff receiving a death benefit, under Clause 10.8, if he were to die before reaching sixty-five, would need to be taken into account in an overall assessment of damages. There is no evidence to suggest that the plaintiff has anything other than the statistically normal chance of a man of his age dying before sixty-five.

170 The defendant submits that the damages would also need to have other discounts applied to them to take account of the income tax which would have been payable if the plaintiff had received periodical payments under the Policy (Cullen v Trappel (1980) 146 CLR 1), a discount factor to ascertain its net present value (Todorovic v Waller (1981) 150 CLR 402), and a discount to reflect the possibility that the plaintiff may die before reaching sixty-five (Todorovic v Waller (1981) 150 CLR 402). There are no factual issues dependent upon weighing of evidence or assessment of witnesses involved in deciding the validity of these arguments, and making such application of them as is appropriate. The factual findings I have made so far concerning damages should put the Court of Appeal into an appropriate position to carry out the remaining steps in assessment of damages, if it were to decide I was wrong both on liability, and on damages assessed on this basis being available in principle at all.

Rectification

171 In case I am wrong in the conclusion I have come to concerning liability, I make findings relevant to AMP’s claim to have the policy document rectified. Rectification is an equitable remedy which enables a document which sets out legal rights in a way different to the way the parties intended, to be corrected so as to give effect to their intention. Insofar as rectification is granted of contracts, it is only of those contracts which were intended by the parties to be wholly expressed in writing, or of those parts of the partly written contract which were intended to be expressed in writing.

172 The type of intention which is relevant to the equity of rectification, is the subjective intention of the parties. Thus evidence is admissible in a rectification case of what a party intended to agree to when he entered a particular contract: NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 at 751, 752; Farrow Mortgage Services Pty Ltd (in liquidation) v Slade and Nelson (1996) 38 NSWLR 636 at 642; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 332; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 164, [27]. Usually, the parties to the contract must have a common subjective intention before rectification can be granted. There are also certain limited categories of case, not relevant to the present, where rectification can also be obtained in a case of unilateral mistake: Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th ed, para [26-075].

173 Mr Campbell’s subjective state of mind is manifest from his actions, in treating the amendments as having been effectively made from 1 January 2000. As well, though, his express evidence, about his understanding prior to 1 January 2000 was “I expected that the terms were in place and it was a matter of process to document it in the policy document”.

174 Mr McLean agreed that he understood that in the normal course proposed amendments to a policy document would be sent to a lawyer for drafting, that he would expect to see any proposed draft amendments, and:

“Q. In your capacity as a trustee in the normal process of the matter you would have expected to have seen circulated to you draft amendments to the policy?
A. That’s correct.

175 He denied, however, that the purpose of the Memorandum of Alteration was to limit the plaintiff’s claim,

“because we believed that had been put in place prior.

I know you keep talking about Mr Green, but that wasn’t of importance to us. The importance was that we were facilitating what was put in place back in October 1999.”

176 Mr McLean said that, so far as the plaintiff was concerned, “I don’t believe that he had an entitlement beyond two years.” Mr McLean’s understanding was that changes to the policy would take effect on 1 January 2000, and that once the CIB had been issued, “the policy document would follow in that format”.

177 Mr Patterson also understood that there would have to be some consequential amendments to the policy document, and that he would be shown proposed amendments to the policy document. His evidence was:

“I did expect that the policy document would be amended to reflect the agreement that we’d reached”

“to confirm what we’d agreed over that period during 1999”

“A … My understanding was that Mr Green’s situation highlighted the fact that the agreed changes to the policy had not been formally implemented in the policy wording.

“… I believed that the alteration would bring the policy wording into line with the agreed changes to the policy, yes, with an effect from 1 January 2000.”

178 Mr Kelly agreed that a policy document was the critical document between a consumer and an insurance company. He said the understanding of the Trustees was that:

“… the memorandum of the policy document had been prepared, but in accordance with what we’d agreed at the end of ’99.”

179 He agreed that in the normal course he would have expected the policy document changes to be made in tandem with the CIB changes, and would have expected to see drafts of a policy document. He said that:

“… The trustees agreed the clause that was put to them at the end of 1999 but reserve the right to continue to negotiate the terms beyond that because the facts were the plan would not be continued after the end of 1999 unless that clause was included. We agreed to include that clause but reserved the right to continue to debate the issue in the interest of the members.”

“My understanding was the terms of the plan had been changed [with] effect 1 January 2000.”

“I didn’t think we were making a change. I believe we were simply confirming a change that was already made effective July and which members of the plan had been operating under since January 2000.”

“July”

180 I conclude that the Trustees, and AMP, each had a subjective intention that the amendment to the Plan concerning the limitation on mental illness benefits would take effect from 1 January 2000. They also had a subjective intention that that amendment would be given effect to by an appropriate written amendment to the policy document being made. It was not the subjective intention of any of them, however, that no such amendment to the terms on which insurance was offered under the Plan would be effective until such a document had been executed. These conclusions do not lead, however, to a conclusion that the Policy document should be rectified. This is because, following the making of the agreement to vary the Policy, it was not the intention of the parties that their contract was one which was one expressed in writing, so far as that variation is concerned. They intended that their contract would become one expressed in writing, but that is not the same thing.

1. Plaintiff’s claim dismissed.

2. Declare that the insurance policy known as the “AMP Agents’ Association Income and Agency Protection Plan” between AMP Life Limited and Roger Patterson, John Kelly and Kevin McLean as trustees of the AMP Agents’ Association Income and Agency Protection Plan was amended with effect from 1 January 2000 by:

(a) inserting into clause 1.1 following the definition of “Member” the following words:

“Mental Disorder” means any disorder classified in the Diagnostic and Statistical Manual of Mental Disorders current as at the date of disability.

(b) substituting “$250,000” for $1,000,000” and “5 years” for “8 years” where they appear in clause 5.2B.

(c) deleting the existing clause 6.2 and inserting the text:

(a) the date the Member ceases to be Partially or Totally Disabled or dies; or

(b) the Member’s Benefit Ceasing Date; or

(c) where the Member is Partially Disabled, one (1) year from the end of the Waiting Period; or

(d) where the Member’s disablement arises out of or in connection with any Mental Disorder, chronic fatigue syndrome or fibromyalgia (and notwithstanding anything in this policy to the contrary), the date the Member ceases to be hospitalised or the date monthly benefits have been paid for two (2) years (whichever is the later).”

3. Cross-Claim otherwise dismissed.

**********

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Citations

Green v AMP Life Ltd [2005] NSWSC 370

Most Recent Citation

Montclare v Metlife Insurance Ltd [2015] VSC 306

Cases Citing This Decision

9

Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65

Green v AMP Life Limited [2005] NSWCA 354

RHG Mortgage Securities Pty Ltd v Elektra Purchase No 19 Ltd [2009] NSWSC 258

Cases Cited

16

Statutory Material Cited

5

AMP Financial Planning v Green [2004] NSWSC 1099

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60

Galaxidis v Galaxidis [2004] NSWCA 111

CITATION:	Green v AMP Life [2005] NSWSC 370
HEARING DATE(S):	21-22/2/05; 24/2/05; 24/3/05
JUDGMENT DATE :	6 May 2005
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
DECISION:	Plaintiff's claim dismissed. Declaration of terms in which insurance policy has been amended.

CATCHWORDS:	INSURANCE - life insurance - whether a disability income protection policy not necessarily of more than three years duration is a life policy - CONTRACT - whether variation of contract agreed - whether defendant estopped from asserting variation to contract agreed - TRADE PRACTICES - misleading and deceptive conduct - alleged to arise from terms in which notification of acceptance for insurance given - DAMAGES - circumstances in which a person insured under a policy providing periodical payments during disability can recover a lump sum for loss of future benefits under the policy - INSURANCE - group insurance policy taken out by trustees - consideration of nature of legal rights of person insured under such a policy - DAMAGES - assessment of damages for personal injury - RECTIFICATION - when available
LEGISLATION CITED:	Industrial Relations Act 1996 Insurance Contracts Act 1984 (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987 Life Insurance Act 1995 (Cth) Trade Practices Act 1974 (Cth)
CASES CITED:	AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655 AMP Financial Planning v Green [2004] NSWSC 1099; (2004) 51 ACSR 693 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Broadlands Properties Ltd v Guardian Assurance Co Ltd (1984) 3 ANZ Ins Cas 60-552 Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 79 ALJR 308 Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Cullen v Trappel (1980) 146 CLR 1 DTR Nominees Proprietary Limited v Mona Homes Proprietary Limited & Anor (1978) 138 CLR 423 Farrow Mortgage Services Pty Ltd (in liquidation) v Slade and Nelson (1996) 38 NSWLR 636 Galaxidis v Galaxidis [2004] NSWCA 111 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832 Malec v JC Hutton Proprietary Limited (1990) 169 CLR 638 NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182 Todorovic v Waller (1981) 150 CLR 402 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
PARTIES:	Gary Sydney Green - Plaintiff/Cross-Defendant AMP Life Limited - First Defendant/First Cross-Claimant Roger Patterson - Second Defendant/Second Cross-Claimant John Kelly - Third Defendant/Third Cross-Claimant Kevin McLean - Fourth Defendant/Fourth Cross-Claimant
FILE NUMBER(S):	SC 3268/04
COUNSEL:	M J Heath - Plaintiff/Cross-Defendant N Perram - Defendants/Cross-Claimants
SOLICITORS:	Malcolm J Wright - Plaintiff/Cross-Defendant Mallesons Stephen Jaques - Defendants/Cross-Claimants