Greinke v AAI Limited Trading as AAMI (Appeal)
[2019] ACAT 99
•13 November 2019
ACT CIVIL & ADMINISTRATIVE TRIBUNAL
GREINKE & ANOR v AAI LIMITED TRADING AS AAMI (Appeal) [2019] ACAT 99
AA 7/2019 (XD 1088/2018)
Catchwords: APPEAL – civil dispute – motor vehicle collision – insurer declined to process claim for damage – insurer stated that insurance policy had been cancelled – applicants’ claim dismissed by Original Tribunal – appeal – whether information about the contract of insurance was ‘given’ in writing by post – whether specific information about the insurer’s option to cancel the contract in specified circumstances was given to the insured orally before the contract was entered into – operation of Insurance Contracts Act 1984 – scope of duty of the ‘utmost good faith’
Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 7, 8, 26, 82
Acts Interpretation Act 1901 (Cth) ss 13, 29
Evidence Act 1995 (Cth) ss 160, 165
Evidence Act 2011 s 160
Hire-Purchase Act 1959 (Qld) ss 13, 42
Income Tax Assessment Act 1936 (Cth) ss 222AOE, 222AOF
Insurance Contracts Act 1984 (Cth) long title, ss 11, 13, 14, 22, 59, 60, 62, 63, 69, 75A
Subordinate
Legislation cited: Insurance Contracts Regulations 1985 reg 3, schedule 2
Insurance Contracts Regulations 2017 s 9, schedule 4
Cases cited: CGU Insurance Limited v AMP Financial Planning Pty Ltd [2007] HCA 36
Chen v The College of Building Ltd [2015] ACTSC 19
Deputy Commissioner of Taxation v Meredith (2005) 245 ALR 150
Fancourt v Mercantile Credits Ltd (1983) 48 ALR 1
Fox v Percy [2003] HCA 22
Greinke & Anor v AAI Limited Trading as AAMI [2019] ACAT 26
Leveraged Equities Limited v Goodridge [2011] FCAFC 3
MLC Ltd v J&W Management Services Pty Ltd [2001] VSC 241
NRMA Insurance Ltd v Yasseen [1989] NSWCA 248
Re Zurich Australian Insurance [1998] QSC 209
Scope Data Systems Pty Ltd v Goman (2007) 70 NSWLR 176
Thornton v Shoe Lane Parking Ltd [1971] 1 All ER 686
Tribunal: President G Neate AM
Date of Orders: 13 November 2019
Date of Reasons for Decision: 13 November 2019AUSTRALIAN CAPITAL TERRITORY )
CIVIL & ADMINISTRATIVE TRIBUNAL ) AA 7/2019
BETWEEN:
ANDREW JOHN GREINKE
First Appellant
GILLIAN CATHERINE DEMPSEY
Second Appellant
AND:
AAI LIMITED TRADING AS AAMI
Respondent
APPEAL TRIBUNAL: President G Neate AM
DATE: 13 November 2019
ORDER
The Appeal Tribunal orders that:
1. The appeal is dismissed.
………………………………..
President G Neate AM
REASONS FOR DECISION
Introduction
1. Andrew Greinke and Gillian Dempsey (the appellants) own a motor vehicle which was involved in a collision on 3 June 2016 while being driven by the first appellant. The vehicle sustained minor damage. On 15 June 2016, the respondent insurance company (AAMI) declined to process a claim for that damage, and informed the first appellant (Dr Greinke) that the insurance policy in relation to the motor vehicle had been cancelled.
2. The appellants commenced civil dispute proceedings in the ACT Civil and Administrative Tribunal (the tribunal) on 9 August 2018 claiming an amount of $9,052.37 (being the cost of repairs to the motor vehicle of $9,975.91 less the excess payment of $650 provided for in the contract of insurance and minus two missed instalments of their premium of $273.54) plus an amount of interest in relation to the amount claimed.
3. Their claim was heard by a senior member of the tribunal (the Original Tribunal) who published reasons for decision on 25 February 2019 in which she ordered that the application be dismissed.
4. The appellants have appealed against that decision. They contend that the Original Tribunal made various specified errors, and they seek orders that:
(a) The appeal be allowed.
(b) The decision of the Original Tribunal made on 25 February 2019 be set aside.
(c) In lieu thereof the respondent pay the applicants the sum of $9,052.37 plus interest from 23 April 2018, the filing fee of $150.00, and search fees totalling $34.10. The appellants also claim the filing fee of the appeal of $559.00.
5. AAMI submitted that the Original Tribunal made the correct decision and that none of the alleged errors identified by the appellants have been substantiated. In particular, AAMI submitted that the Original Tribunal was correct in finding that:
(a) AAMI validly cancelled the contract of insurance between it and the appellants; and
(b) AAMI had not breached its duty of utmost good faith under the Insurance Contracts Act 1984 (Cth) (ICA).
Chronology
6. The sequence of events in relation to the insurance contract is significant to the outcome of this case.
7. The information set out below is drawn from documents provided by the appellants as attachments to their civil dispute application lodged with the tribunal on 9 August 2018, and by AAMI in its response to the civil dispute lodged with the tribunal on 13 September 2018. No additional evidence was called by the appellants or AAMI at the hearing before the Appeal Tribunal.
8. The appellants insured their 2012 model motor vehicle with a comprehensive car insurance policy issued by AAMI from 2012.
9. On 6 October 2015, AAMI issued a policy renewal in respect of the appellants’ motor vehicle. The notice advised the appellants that their current policy would expire at 11:59pm on 1 November 2015 and the policy, if renewed, would be for the period of 1 November 2015 to 11:59pm on 1 November 2016. The proposed method of payment was by direct debit based on information the appellants had previously provided to the insurer. An instalment amount was nominated and the instalment was due “On or around the 1st of each month.” The policy was renewed.
10. By a document dated 5 January 2016, headed “Cancellation of your Policy,” AAMI wrote to the appellants:
This confirms your recent policy cancellation, effective 2 December 2015.
…
If you have any questions please call us on 13 22 44, where you will always speak to a real person not a machine – 24 hours a day, 7 days a week.
11. According to the appellants, that letter was received by post on or about 19 January 2016 and Dr Greinke telephoned AAMI that day. According to the appellants, he was informed that there was a missed credit card payment, and notice had been posted regarding the intention to cancel the policy. He said he had not received any such notice, and complained of the failure of AAMI to make contact by telephone or email before cancelling the policy. AAMI neither admitted nor denied that account.
12. AAMI’s record of the telephone conversation is as follows:
19/01/2016 12:43
1 **TSO** UPDATED LOYALTY DATE AND SDR STATUS FOR USER
2 ANDREW CALLED STARTED NEW POLICY, REINSTATED BENEFITS DUE TO POLICY
3 DD REJECTION ON MPA [number of policy]
4 DOD, AAA
5 OPTIONS OFFERED BUT DENIED
6 INSTALMENTS ADVISED
13. The relevant acronyms used in that record are:
AAA Advised = Script read and understood
Asked = Questions asked
Answered = Customer has answered the questions asked
DD Direct Debit
DOD Duty of Disclosure
TSO Technical Support Officer
14. An insurance policy was reissued on 19 January 2016 for the period 19 January 2016 to 11:59pm on 19 January 2017. The car insurance document was addressed to the appellants at their GPO Box. It stated that enclosed was the Certificate of Insurance and a copy of AAMI’s Product Disclosure Statement (PDS) which formed part of the contract of insurance and “should be read carefully to understand what your policy covers including the conditions, limits and exclusions that apply.” Payment was to be made by direct debit. An instalment amount was nominated and each instalment was due “On or around the 19th of each month.”
15. The Certificate of Insurance dated 19 January 2016 was three pages long. It asked the appellants to read the document to check that all the policy details were correct. It stated that AAMI relied on them to disclose “all the correct details in regards to your policy” and asked them to “read carefully the information about our Duty of Disclosure on page 3.”
16. The Direct Debit Request Service Agreement included the following statement:
5. It is your responsibility to:
• Ensure your nominated account can accept direct debits
• Ensure there are sufficient funds available in the nominated account to meet each instalment
• Advise us if the nominated account is transferred or closed, or the account details change
• Ensure that all account-holders on the nominated account agree to the debit arrangement.
6. If your direct debit is dishonoured or returned unpaid by your financial institution we may attempt to debit your account again. Your financial institution may charge additional fees for direct debit, including dishonour fees. Your PDS/SPDS explains what happens when an instalment is unpaid and when we may not accept your claim. (emphasis added)
17. The Comprehensive Car Insurance PDS was 48 pages long. It stated (on page 5) that the PDS:
…is an important legal document that contains details of your AAMI Comprehensive Car Insurance if you purchase this product from us. Before you decide to buy this product from us, please read this PDS carefully. If you purchase this product, your policy comprises of this PDS and your certificate of insurance which shows the details particular to you.
18. The following statements were made under the heading “Overdue instalments” at pages 28 and 42 of the PDS:
If you pay your premium by instalments and your instalment is overdue we can do one or both of the following:
• refuse to pay a claim if an instalment is 14 days (or more) overdue;
• cancel your policy without notifying you in advance if an instalment is 1 month (or more) overdue.
19. In a document headed “Direct Debit Decline” (and another heading “Transaction Declined”), issued on 21 April 2016 and addressed to the appellants at their GPO box, AAMI advised in relation to the monthly payment due on 19 April 2016:
Your financial provider has advised us that our debit request has not been successful.
Please contact us on 13 22 44 to supply us with your new account or card details and ensure that the monthly instalment is available.
It is important to note that if your instalment is overdue, we can do one of (sic) both of the following
• refuse to pay a claim if an instalment is 14 days (or more) overdue
• cancel your policy without notifying you in advance if an instalment is 1 month (or more) overdue
20. The appellants purchased travel insurance from AAMI. In a document headed Receipt and Tax Invoice dated 7 May 2016, Dr Greinke was advised that his “holiday is now insured with AAMI.” The period of cover was from the journey departure date of 11 May 2016 until midnight on 1 June 2016.
21. AAMI’s records include the following for 16 May 2016:
16/05/2016 19:50
7 POLICY ADMIN – 123 REPORT – INSTALMENTS ON HOLD DUE TO DD REJECT ON
8 19/04/2016 REJECTION LETTER HAS BEEN SENT, F/UP TILL 21/05/2016
9 IF NO RESPONCE [sic] FROM CUSTOMER, REMOVE HOLD AND CANCEL
22. Those records continue:
23/05/2016 13:09
10 POLICY ADMIN – 123 REPORT – REMOVED HOLD AND CANCELLED DUE TO
11 NON-PAYMENT OF INSTALMENT PREMIUM
23/05/2016
23. It appears that the first unpaid instalment, due on 19 April 2016, remained unpaid 34 days later, and that there was a second missed instalment at the time when the policy was cancelled. In circumstances where an instalment was one month (or more) overdue, the contract permitted AAMI to cancel the policy without notifying the appellants in advance.
24. The Original Tribunal recorded that the appellants gave evidence that the direct debit failure was as a result of the hacking of their credit card details, that this was the second time that this had occurred, and that while Dr Greinke had updated his credit card details with other persons with whom he had dealings he had failed to provide updated details to AAMI.
25. In a document dated 23 May 2016 headed “Cancellation of your Policy” and addressed to the appellants at their GPO box, AAMI advised:
This confirms your recent policy cancellation, effective 20 April 2016.
26. Elsewhere on the document was an entry “Cancellation Date 20 April 2016” and an amount described as “Premium Adjustment”.
27. The document continued:
If a refund is owing, this will be sent to you shortly.
If you have any questions please call us on 13 22 44, where you will always speak to a real person not a machine – 24 hours a day, 7 days a week
28. On 3 June 2016, the appellants’ motor vehicle was involved in a collision with another vehicle when both vehicles were reversing out of opposite car parks and collided with the rear of each other. An AFP crash report was prepared. Dr Greinke sent an email to [email protected] at 1:30pm that day and attached a copy of the accident report. He also attached copies of photographs showing the damage to each vehicle. He provided his telephone and email contacts “if you require any further information.”
29. AAMI’s records for 3 June 2016 at 12:00pm are as follows:
CLAIMS TRANSFERRED CALL THROUGH SAYING THEY CANT LODGE CLAIM FOR CUSTOMER CAUSE POLICY IS CANCELED .
I TANSFERRED IO BACK TO CLAIMS WHO WILL LODGE CLAIM FOR CUSTOMER AS A REJECTED CLAIM TO BE REVIEWED.
IO ALSO CONFIRMED ALL CONTACT DETAILS ON POLICY ARE CORRECT.
IO DISPUTING DIDN’T RECEIVED CANCELLATION NOTICES. I CONFIRMED THEY WERE SENT TO CORRECT ADDRESS. (errors in original)
In that record “IO” refers to “Insured.”
30. In a letter dated 15 June 2016 addressed to Dr Greinke, a Claims Review Officer of AAMI wrote:
I am writing about your recent claim for your motor vehicle.
A search of our records has failed to locate a policy which was current at the time of the loss.
Monthly premium debit for policy [number of policy] was attempted on April 20, 2016.
The attempt was not honoured by the financial institution, and correspondence was sent to the address listed on the policy at the time [GPO box] to advise you to contact us to supply your new account or card details, and that non-payment results in policy cancellation.
When no contact was made to update the payment details, this policy was cancelled on May 23, 2016, and a policy cancellation notice was sent to the same address.
We must refer you to page 28 of your Product Disclosure Statement, which states, in part:
Overdue instalments
If you pay your premium by instalments and your instalment is overdue we can do one or both of the following:
• refuse to pay a claim if an instalment is 14 days (or more) overdue;
• cancel your policy without notifying you in advance if an instalment is one month (or more) overdue.
Unfortunately, we are unable to accept your claim.
31. The letter was sent with a covering email to Dr Greinke at 11:07am on 15 June 2016.
32. On 19 June 2016, Dr Greinke sent an email to AAMI referring to his complaint regarding this claim on Friday, 17 June 2016 and continuing:
It is not unusual for ordinary mail to take 2 or 3 weeks or longer to arrive at my GPO unless it is sent by express post. This letter was sent by ordinary post. I also found in my GPO box today some 15 articles of post that were not my mail but had been addressed to other persons. This is also not an unusual occurrence.
I confirm that I have never received a notice of the missed payment, or any written warning that my policy was to be cancelled.
33. The appellants spoke with a Dispute Resolution Officer at AAMI. That officer wrote to them on 5 July 2016 in relation to their concerns, in particular that they were overseas at the time the policy was cancelled, did not receive the letters, and were unaware that the policy had lapsed due to non-payment. Having considered all information on the file, including the policy terms and conditions and the applicable law, the officer was satisfied that AAMI’s decision to decline a claim and cancel the appellants’ policy was correct and in line with the terms and conditions of the policy.
Applicable law
34. The issues in this case have to be resolved by reference to the applicable statutory provisions, principally sections 11, 13, 14, 39, 59, 60, 62, 63, 69, and 72A of the ICA. The parties also referred to section 29 of the Acts Interpretation Act 1901 (Cth) and section 160 of the Evidence Act 2011 (ACT) in relation to the first issue in this appeal.
35. The relevant extracts from some of these sections are set out below in the order in which the issues are considered. Broadly speaking, the sections describe the circumstances in which a contract of insurance can be cancelled (ICA sections 59, 62 and 63), the manner and time when certain types of information is to be given to a person to be insured (ICA sections 69 and 72A), how documents are served by post (Acts Interpretation Act 1901, Evidence Act 1995 (Cth) section 160 and Evidence Act 2011 section 160) and what constitutes the ‘duty of the utmost good faith’ (ICA sections 11 and 13). By operation of section 13 of the Acts Interpretation Act 1901, the headings to sections of Acts are part of an Act.
36. Section 63(1) of the ICA states:
63 Cancellations of contracts of insurance void
(1) Except as provided by this Act, an insurer must not cancel a contract of general insurance.
37. Section 59 includes:
59 Cancellation procedure
(1) An insurer who wishes to exercise a right to cancel a contract of insurance shall give notice in writing of the proposed cancellation to the insured.
(2) The notice has effect to cancel the contract at whichever is the earlier of the following times:
…
(b) whichever is the latest of the following times:
(i) 4 pm on the applicable business day;
(ii) if a time is specified for the purpose in the contract—that time;
(iii) if a time is specified in the notice—that time.
(2A) In subparagraph (2)(b)(i):
applicable business day means:
(a) in respect of a contract that is not a contract of life insurance:
(i) if the contract is in force because of section 58—the fourteenth business day; or
(ii) otherwise—the third business day; or
(b) in respect of a contract of life insurance—the twentieth business day;
after the day on which the notice was given to the insured.
38. Section 62 allows for section 59 to be obviated in specified circumstances. Section 62 states:
62 Cancellation of instalment contracts of general insurance
(1) An instalment contract of general insurance may include provisions inconsistent with section 59 with respect to the cancellation of the contract for non-payment of an instalment of the premium.
(2) An insurer may not rely on such a provision unless:
(a) at least one instalment of the premium has remained unpaid, at the time when the contract is sought to be cancelled, for a period of at least one month; and
(b) before the contract was entered into, the insurer clearly informed the insured in writing of the effect of the provision.
39. Section 69 deals with the manner and the time when certain types of information is to be given to a person to be insured. It states:
69 Giving of information to insureds
(1) Where:
(a) by reason of a provision of this Act, information in relation to a contract of insurance is to be or may be given in writing to a person before the contract is entered into; and
(b) it is not reasonably practical for the information to be so given in writing but it is reasonably practicable for it to be so given orally;
the provision shall be deemed to have been complied with if:
(c) the information is so given orally; and
(d) the information is also given in writing within 14 days after the day on which the contract was entered into.
(1A) If:
(a) an insured may, because of subsection (1), be informed orally of the matters referred to in subsection 22(1); and
(b) the regulations prescribe a form of words to be used in giving the information orally;
the information may be given using the prescribed form of words.
(2) Where, by reason of a provision of this Act:
(a) information in relation to a contract of insurance is to be or may be given in writing to a person before the contract is entered into; and
(b) it was not reasonably practicable for the information to be so given orally or in writing;
the provision shall be deemed to have been complied with, and the information shall be deemed to have been given, if the information is given in writing within 14 days after the day on which the contract was entered into.
40. Section 72A of the ICA provides:
72A Method for giving written notices or documents
A notice or other document that is required or permitted by this Act to be given to a person in writing may be given:
…
(b) to a natural person:
(i) personally; or
(ii) by post to that person at the person’s last‑known address.
Note: A notice or other document may also be given to a person by electronic communication in accordance with the Electronic Transactions Act 1999 and any regulations made under that Act.
41. In summary, the following propositions relevant to the appeal can be drawn from those sections:
(a) An insurer must not cancel a contract of general insurance except as provided by the ICA (section 63(1)).
(b) As a general rule, an insurer who wishes to exercise a right to cancel a contract of insurance shall give notice in writing of the proposed cancellation to the insured person, and the notice has effect to cancel a contract at a specified time (section 59(1), (2)).
(c) Although an instalment contract of general insurance may include provisions that are inconsistent with the general statutory rule for cancellation of a contract of insurance for non-payment of fees, an insurer may not rely on such a provision unless:
(i) before the contract was entered into, the insurer clearly informed the insured in writing of the effect of the provision; and
(ii) at the time when the contract is sought to be cancelled, at least one instalment of the premium has remained unpaid for at least one month (section 62).
(d) Where by reason of a provision of the ICA:
(i) information in relation to a contract of insurance is to be or may be given in writing to a person before the contract is entered into; and
(ii) it was not reasonably practicable for the information to be given orally or in writing,
the provision of the ICA shall be deemed to have been complied with, and the information shall be deemed to have been given, if the information is given in writing within 14 days after the day on which the contract was entered into (section 69(2)).
(e) Where the ICA permits or requires notice to be given to a person in writing, that notice may be given to a person by post to that person at the person’s last known address (section 72A).
42. Section 29 of the Acts Interpretation Act 1901 provides:
29 Meaning of service by post
(1) Where an Act authorises or requires any document to be served by post, whether the expression “serve” or the expression “give” or “send” or any other expression is used, then the service shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.
(2) This section does not affect the operation of section 160 of the Evidence Act 1995.
43. Section 160 of the Evidence Act 1995 (Cth) provides:
Postal articles
(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted.
44. Section 160(1) of the Evidence Act 2011 is in substantially the same terms as the Commonwealth legislation. It provides:
160 Postal articles
(1) It is presumed (unless evidence sufficient to raise doubt about the presumption is presented) that a postal article sent by prepaid post addressed to a person at a stated address in Australia or in an external territory was received at that address on the fourth working day after the day it was posted.
45. I repeat the observation made by Penfold J in Chen v The College of Building Ltd that it was not clear whether the applicable version of section 160 is that found in the Evidence Act 1995 (Cth) or the Evidence Act 2011 (ACT). The two provisions are not identical, but the difference in wording is not significant for the purpose of this appeal. Accordingly, the legislation is referred to as the Evidence Act later in these reasons for decision.
46. Section 11(1) of the ICA provides that “duty of the utmost good faith” means the duty referred to in subsection 13(1).
47. The subsections of section 13 of the ICA relevant to the appeal state:
13 The duty of the utmost good faith
(1) A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith.
(2) A failure by a party to a contract of insurance to comply with the provision implied in the contract by subsection (1) is a breach of the requirements of this Act.
Summary of issues
48. As noted earlier, section 63 of the ICA states that, “except as provided” by the ICA, an insurer “must not cancel a contract of general insurance.”
49. The appeal raises three issues:
(a) Whether AAMI gave the appellants notice of the cancellation of the insurance policy in accordance with section 59 of the ICA.
(b) Whether, if notice was not given, AAMI validly cancelled the insurance policy without notice in accordance with section 62 of the ICA.
(c) Whether AAMI or the appellants, or both parties, were in breach of the requirement that they act towards each other with ‘the utmost good faith’ (as prescribed by section 13 of the ICA). If AAMI did not act with the utmost good faith towards the appellants, were the circumstances such that it should pay compensation to the appellants even if it validly cancelled the insurance policy?
50. The question whether each party acted with the utmost good faith only arises for consideration by the Appeal Tribunal if the appellants are unsuccessful in relation to the first or second issues.
Issue 1 - notice of cancellation of the insurance policy
What the Original Tribunal decided
51. Section 59(2) of the ICA (quoted at [37] above) provides that an insurer who wishes to exercise a right to cancel a contract of insurance “shall give notice in writing of the proposed cancellation to the insured.”
52. The Original Tribunal:
(a) held that on or about 21 April 2016, AAMI sent a ‘Direct Debit Decline Notice’ to the appellants at their GPO Box;
(b) held that on or about 23 May 2016 AAMI sent a ‘Cancellation of your Policy’ notice to the appellants at their GPO Box; but
(c) made no finding that the appellant received notice in writing of the proposed cancellation of the insurance policy by way of the Direct Debit Decline Notice, or that they were not afforded the opportunity to provide correct and current credit card account details.
Submissions
53. The appellants submitted that because the Original Tribunal did not find that they had received written notice of AAMI’s intention to cancel the policy as required by section 59 of the ICA, AAMI:
(a) had to rely on the PDS term allowing cancellation without notice; and
(b) had to demonstrate that it had complied with section 62 of the ICA.
54. AAMI noted that, rather than not find that the appellants had received written notice of the intention to cancel the policy, the Original Tribunal concluded (at [26]) that it was not necessary to consider whether AAMI gave written notice in light of the Original Tribunal’s finding that the more specific requirements in section 62 of the ICA had been satisfied.
55. However, AAMI submitted, if the Original Tribunal had thought it necessary to consider the requirements of section 59 of the ICA, the Original Tribunal would have found that AAMI had complied with that requirement.
56. AAMI submitted that it had wholly complied with the requirements for the termination of a contract of insurance under section 59 of the ICA and in fact went beyond these requirements by posting two separate letters to the appellants.
57. Irrespective of whether the letter dated 21 April 2016 constituted notice of the proposed cancellation of the policy, AAMI relied on the letter dated 23 May 2016. It submitted that notice was effective from three days after that letter, being 26 May 2016. It noted that a similar letter was accepted in MLC Ltd v J&W Management Services Pty Ltd (MLC) to constitute notice under section 59(1) of the ICA and have the effect of cancelling the policy in accordance with section 59(2)(b)(i) of the ICA.
58. AAMI submitted that, in circumstances such as operated on 19 January 2016, the insurer could provide information to the insured within 14 days after the insurance policy was taken out. It relied on section 69(2) of the ICA on the basis that the written information was provided within 14 days after 19 January 2016.
59. AAMI relied on evidence before the Original Tribunal of letters being prepared and sent to the appellants at their nominated postal address. It referred to a detailed statement by Di Harris, Privacy Officer with the Suncorp Group of companies, dated 28 August 2018 setting out the process for the production, reconciliation and dispatch of specific customer policy documentation via Fuji Xerox Document Management Pty Ltd (Fuji) and Australia Post. It is not necessary for the purpose of these proceedings to recount in detail the contents of that statement and other documents attached to it. It is sufficient to note that the material establishes a detailed and checked process for documents to be prepared and sent.
60. As noted earlier, there was documentary evidence of a car insurance document and related papers including the PDS dated 19 January 2016 and addressed to the appellants at their GPO Box. The letter from AAMI to the appellants on 5 July 2016 stated “When you took out your policy, AAMI sent you a policy booklet and certificate of insurance. The documentation explains that AAMI may refuse a claim if the instalment remains unpaid for 14 days or more. AAMI is also entitled to cancel your policy without notice if an instalment payment remains unpaid for one month or more.”
61. In the case of the dishonour of the transaction on 19 April 2016 there is evidence that a letter was prepared on 21 April 2016 with the appellants’ GPO Box address, was received by Fuji on 22 April 2016 and was processed by Fuji on 26 April 2016. No errors were reported during the processing of this customers’ transaction and the policy document was lodged by Fuji with Australia Post on 26 April 2016. According to the statement by Ms Harris, AAMI ensures that insurance notices are lodged with Australia Post “such that they can be delivered within five clear working days of the relevant transaction.”
62. The documentation also indicates that:
(a) as at the date of the customer transaction, the appellants had previously advised that they did not wish to receive insurance policy documentation by email; and
(b) a review of the customers’ records identified no evidence of either a ‘return to sender’ or a ‘no longer at this address’ return of that letter.
63. AAMI acknowledged that the appellants subsequently stated that they did not receive the contract and the PDS, and that they did not receive the letter of 21 April 2016. However, AAMI relied on the presumption provided by the operation of sections 29 of the Acts Interpretation Act 1901 and section 160 of the Evidence Act that the letters sent in January, April and May 2016 had been received. AAMI also referred to the judgment of a Full Federal Court in Leveraged Equities Limited v Goodridge in support of its submission that the evidence of the appellants alone is not sufficient to rebut the presumption. There needs to be some corroboration of that evidence.
64. In the alternative, AAMI submitted to the Original Tribunal that even if the Original Tribunal were to accept that the appellants did not receive the PDS enclosed with the letter dated 19 January 2016:
(a) the information was, at the very least, provided to them in the Direct Debit Decline letter in April 2016, prior to AAMI relying on it to cancel the contract; and
(b) the policy was on the same terms as the previous contract of insurance held by the appellants with AAMI prior to the first cancellation.
65. Accordingly, the required information under section 62 was given to the appellants before the contract was entered into, in accordance with section 69 of the ICA.
66. In essence, AAMI submitted that the appellants had been provided with the documents and were aware of the consequences of not paying the premium by instalments as required under the contract of insurance. Accordingly, AAMI can and should succeed in these proceedings.
67. In reply to AAMI’s submissions, the appellants submitted, in effect, that the Original Tribunal could not have made a factual finding that AAMI had ‘given’ prior written notice to the appellants before cancelling the policy so as to comply with section 59 of the ICA. In the appellants’ submission:
(a) the notice letter dated 21 April 2016 was never received;
(b) the ICA requires notice to be ‘given,’ which is a form of service;
(c) the posting of a letter does not constitute service, and the statutory presumptions in section 29 of the Acts Interpretation Act 1901 and section 160(1) of the Evidence Act were not engaged in this case, or were rebutted;
(d) nothing in the legislation suggests that the mere act of posting is sufficient;
(e) where the actual date of delivery, or in this case the non-delivery, of the postal article is proven as a question of fact, there is no room for the operation of the presumptions;
(f) accordingly, the notice required by section 59 of the ICA was not served.
68. As to the letter from AAMI dated 23 May 2016, the appellants submitted that:
(a) the cancellation letter did not purport to be, nor could it constitute, a notice of intention to cancel as required by section 59 of the ICA (and the decision in MLC is relevantly distinguishable); and
(b) more importantly, the letter was received on 17 June 2016 which was after the claim was made on the policy on 3 June 2016.
69. As evidence that they did not receive the documents, the appellants relied on the following statement from their particulars of claim in relation to the letter dated 23 May 2016:
14. The applicants did not receive this alleged letter. Further, AAMI made no attempt to contact the applicants by telephone or email, despite knowing that the applicants had been overseas since 11 May 2016.
15. On 17 June 2016 the applicants received a letter dated 23 May 2016 cancelling the policy. This was received 25 days after the issue date.
70. In addition, the appellants relied on Dr Greinke’s email message to AAMI at 11:28am on 19 June 2016:
Dear AAMI
Further to my complaint regarding this claim, on Friday, 17 June 2016 I received a notice of cancellation of my policy, which was dated 23 May 2016.
It is not unusual for ordinary mail to take 2 or 3 weeks or longer to arrive at my GPO unless it is sent by express post. This letter was sent by ordinary post. …
I confirm that I have never received a notice of the missed payment, or any written warning that my policy was to be cancelled.
Regards
Andrew Greinke
71. In any case, the appellants submitted, the letter dated 23 May 2016 was sent two weeks after the appellants left the country and AAMI would, or should, have known that they would not receive it, and it would not come to their attention. That part of the appellants’ submission is best dealt with in relation to Issue 3 below.
Consideration and conclusion
72. For the appellants to succeed in relation to Issue 1, the Appeal Tribunal needs to be satisfied that:
(a) the Original Tribunal was in error in not making a finding about whether AAMI gave notice in writing to the appellants of the proposed cancellation of the insurance policy;
(b) the posting of a notice or other document to a person does not mean it is ‘given’ to that person for the purpose of section 72A of the ICA; and
(c) the appellants did not receive the relevant documents.
73. With respect to the first point, it is clear that the Original Tribunal decided it was not necessary to consider the issues raised by the appellants about not receiving notice and hence the opportunity to provide correct and current credit card details. The Original Tribunal made that decision because of the interpretation of the clause in the contract allowing AAMI to refuse to pay a claim or to cancel an insurance contract in specified circumstances.
74. On the basis (without deciding) that the Original Tribunal was in error in not deciding whether AAMI gave notice in writing to the appellants about the proposed cancellation of the insurance policy, it is appropriate to consider the other two points listed above.
75. Section 72A(b)(ii) of the ICA provides that where that Act requires or permits a notice or other document to be ‘given’ to a person in writing, the document may be ‘given’ to a natural person by post to that person at the person’s last-known address. In the present case, the appellants’ last-known address was their GPO Box. It was their responsibility, not anyone else’s (including Australia Post), to check and clear their mail box, or have someone do so on their behalf in their absence.
76. The question whether the posting of a notice or other document to a person means that the notice or document is ‘given’ to the person for the purpose of section 72A of the ICA involves a close reading of the words of that section and relevant judicial authority.
77. The ordinary English meaning of ‘give’ in the circumstance where someone is giving another person an object is set out in the dictionary definitions. For example, the Macquarie Dictionary includes:
1. to deliver freely; bestow; hand over: to give someone a present.
2. to deliver to another in exchange for something; pay.
3. to pass over to: give me that book, please.
78. Those meanings suggest that the act of giving includes the act of receiving. But is that the meaning contained in statutory provisions where ‘give’ and ‘given’ are used?
79. Section 29(1) of the Acts Interpretation Act 1901 (quoted at [42] above) provides, in effect for present purposes, that where an Act authorises or requires any document to be ‘given’ by post, then the service of that document “shall be deemed to be effected by properly addressing, prepaying and posting the document as a letter” and, “unless the contrary is proved, to have been effected at the time at which the letter would have been delivered in the ordinary course of post.”
80. Section 29(2) of the Acts Interpretation Act 1901 expressly provides that section 29 does not affect the operation of section 160 of the Evidence Act 1995. Section 160(1) of that Act and the Evidence Act 2011 (quoted at [43] and [44] above) provides for a presumption that a postal article sent by prepaid post addressed to a person at a stated address in Australia was “received at that address” on the fourth working day after the day it was posted. That presumption can be rebutted if “evidence sufficient to raise doubt about the presumption” is presented or adduced.
81. Three observations can be made about the operation of those sections. First, in Chen, Penfold J considered those sections and drew a distinction between a “finding to the effect that the statutory demand was served (as distinct from received).” As I understand that distinction, it is not necessary for a notice or other document to have been received in order that the statutory presumption in favour of service operates. I note, however, that there is no suggestion or any evidence that the appellants declined to accept their mail on a business day in order to postpone the date on which it was delivered.
82. Second, in the absence of evidence about the “ordinary course of post” if the requirements of section 160 were met (and there was no evidence sufficient to raise doubt about the presumption available under section 160(1)), the letter from AAMI would be presumed to have been delivered on the fourth business day after posting. Hence, if the letter had been placed in their GPO Box while they were overseas and they had not become aware of it for reason only that they (or someone on their behalf) had not checked the GPO Box during that period, that fact alone would not have improved their position.
83. Third, there are different provisions for displacing the presumptions in section 29 of the Acts Interpretation Act 1901 and section 160 of the Evidence Act. As Penfold J observed in Chen, evidence ‘sufficient to raise a doubt’ about the presumption in section 160(1) is not the same as evidence proving the contrary of a proposition in section 29.
84. Whichever test applies, the remaining issue is whether there is sufficient evidence about whether or when the appellants received the relevant document or documents from AAMI.
85. The appellants submitted that the statutory presumption does not apply if there is evidence of delivery or non-delivery. As noted earlier, they contend that they never received the letter of 21 April 2016. In respect of the letter of 23 May 2016, there appear to be two aspects of the appellants’ argument:
(a) The letter was not received until 17 June 2016, after the insurance claim had been made.
(b) In any case, even if that letter had arrived at their GPO Box promptly it would have been received at that address during the period of their travel which, as noted in the AAMI Travel Insurance Schedule, was between 11 May 2016 and midnight on 1 June 2016.
86. Finally, as noted earlier, the appellants also submitted that the letter dated 23 May 2016 did not purport to be, nor could it constitute, a notice of intention to cancel as required by section 59 of the ICA. It was headed “Cancellation of your Policy”, and the Cancellation Date was stated to be 20 April 2016. It stated, “This confirms your recent policy cancellation, effective 20 April 2016.”
87. Dealing with the last submission first, the terms of that letter are clear. It purported to confirm something that had already happened rather than expressing an intention to do something in the future. On its face, it would not seem to be, in the terms of section 59(1) of the ICA, ‘notice in writing of the proposed cancellation.’ Its terms can be contrasted with the Direct Debit Decline document dated 21 April 2016 which, reflecting the terms set out at pages 28 and 42 of the PDS, notified the appellants that, because the debit request had not been successful and the transaction had been declined, AAMI “can do” one or both of the following:
• refuse to pay a claim if an instalment is 14 days (or more) overdue
• cancel your policy without notifying you in advance if an instalment is 1 month (or more) overdue.
88. However, there is some judicial authority for the opposite conclusion. AAMI relied on the judgment in MLC. In that case, the Court considered a letter dated 17 May 1990 from an insurer advising the addressee that “your policy lapsed because you have not paid the premium … due on 26 March.” The plaintiff insurer submitted that the letter, had it been received, would have provided notice in compliance with section 59(1) of the ICA and would have had the effect of cancelling the contract of insurance at a time determined by the application of section 59(2) of the ICA. The defendants submitted that such a letter could not constitute a notice pursuant to section 59(1) as it spoke in terms as to what had occurred rather than that which would occur, and therefore it could not constitute a notice of “the proposed cancellation” of the subject contract of insurance.
89. McDonald J expressed the view that the letter of 17 May 1990 “would … have constituted giving to the insured notice under s 59(1) of the Insurance Contracts Act which would have had the effect of cancelling the policy at the time specified in s 59(2)(b)(i) of the Act.” However, on the evidence in that case, his Honour was satisfied that the letter was not received and that, as a result, the insurer had not given notice pursuant to section 59 of the ACA of the cancellation of the policy.
90. For that reason, the judicial characterisation of the letter as comprising notice of the type referred to in section 59(1) of the ICA must be taken as obiter. Although I have tended to a different conclusion in relation to the letter dated 23 May 2016, it is not necessary in this case to express a final view. The reasons are set out below. The real issue is whether it can be concluded that the advice in letters in January, April and May was ‘given’ to the appellants irrespective of whether (or when) they received each piece of written advice.
91. In my view, the judgment in Leveraged Equities does not go as far as AAMI submitted. In that case there was an issue whether a debtor had been given actual notice of an assignment, as required by the Conveyancing Act 1919 (NSW). The primary judge was “comfortably satisfied” that the debtor was telling the truth when he said that he did not receive the relevant letter. That finding was based on the primary judge’s assessment of the debtor’s credibility.
92. On appeal, Jacobson J (with whom Finkelstein and Stone JJ agreed) came to the view that the finding must be set aside in accordance with the principle stated in Fox v Percy. The Court held that there were “incontrovertible facts and uncontested testimony” which demonstrated that the primary judge’s conclusion was erroneous or at least was “contrary to compelling inferences,” all of which followed from the findings made by the primary judge in deciding to accept the debtor’s evidence. In particular:
(a) there was evidence of a generally reliable system for the dispatch of important documents which the primary judge accepted, and no evidence that any correspondence directed to the debtor had been returned to the sender;
(b) the primary judge had found that the debtor’s files were not always in proper order, and the debtor had conceded that it was not possible to say with certainty what documents were in the correspondence files on the relevant date;
(c) the primary judge had failed to pay regard to the caveat that there is an obvious difficulty in any judge making demeanour based findings when (as in that case) there is other reliable evidence that supports a contrary view; and
(d) the primary judge noted the debtor’s testimony that his recollections of events were unreliable and that he had jumbled and inaccurately repeated conversations and events.
93. According to Jacobson J, this was a case where “contemporary materials, objectively established facts and the apparent logic of events pointed only in one direction.”
94. Relevantly to the present case, Jacobson J wrote:
The presumption that an article sent by prepaid post was received is established in s 160 of the Evidence Act 1995 (Cth). The presumption is to be made unless evidence sufficient to raise doubt about the presumption is adduced. No such evidence was adduced by [the debtor]. Instead, his Honour said … that ordinary human experience is that systems sometimes fail and people “tell the truth that the system did not operate as expected.” That was not evidence that fell within the proviso to s 160.
95. Accordingly, that part of the judgment in Leveraged Equities stands for the propositions that:
(a) a credible witness’s statement that they did not receive a letter should not be accepted when there is clear evidence to the contrary; and
(b) the presumption in section 160 of the Evidence Act operates unless there is evidence sufficient to raise doubt about the presumption.
96. In other cases, superior courts have considered similar factual circumstances in the context of similar or the same legislation as in the present case.
97. In Fancourt v Mercantile Credits Ltd (Fancourt), the High Court considered whether a Fourth Schedule notice under the Hire-Purchase Act1959 (Qld) (Hire‑Purchase Act) had been given to or served on persons who had defaulted under a hire-purchase agreement. It was a term of the hire-purchase agreement that, if default were made in the payment of instalments payable during the hiring, the owner could without notice (save as required by the Hire-Purchase Act) retake possession of the goods and that, upon such repossession, the hiring would terminate, subject to any rights of the hirers by the Hire-Purchase Act to resume the hiring.
98. Section 13(3) of the Hire-Purchase Act stated:
(3) Within thirty days of the owner having taken possession of goods which were comprised in a hire-purchase agreement he shall serve on the hirer and every guarantor of the hirer and notice, in writing, in the form of the Fourth Schedule. (emphasis added)
99. Section 42(1)(c) of that Act provided:
(1) Any notice or document required or authorised to be served on or given to an owner or hirer under this Act may be so served or given –
…
(c) by posting it addressed to him at his last known place of abode or business (emphasis added)
100. The owners gave evidence that they had caused Fourth Schedule notices to be sent to the nominated post office address, and that neither notice had been returned to their office. One of the persons who had defaulted swore that he did not receive a Fourth Schedule notice and had made enquiries which revealed that no such notice was left for him. The appellants submitted that the service attempted by the owner was ineffective.
101. The High Court referred to section 39 of the Acts Interpretation Acts 1954 to 1962 (Qld) which provided:
(1) Where any Act authorises or requires any document to be given, sent, served, or delivered by post, then, unless the contrary intention appears, such giving, sending, serving, or delivery shall be deemed –
(a) To be effected by properly addressing, prepaying, and posting a letter or packet containing such document; and
(b) Unless the contrary is proved, to have been effected at the time when the letter or packet would be delivered in the ordinary course of post. (emphasis added)
102. The High Court concluded that there was no contrary intention in the Hire-Purchase Act and hence the Acts Interpretation Acts 1954 to 1962 applied. The Court stated that section 42(1)(b) and (c) of the Hire-Purchase Act “contemplate the possibility of something less than actual receipt by the person to be served.” Proof of the use of any one of the methods of service provided by section 42(1) “constitutes proof of service for the purpose of the Hire-Purchase Act”. The Court referred to a line of cases to the effect that proof of non-delivery means that service cannot be deemed to have taken place at the time of delivery in the ordinary course of the post and cannot be established as having taken place at any other time. The Court found it unnecessary to pursue these decisions other than to remark that they were all cases in which delivery was disproved. Despite remarks on those judgments about non-receipt, it was non-delivery which was significant because of the second limb of the relevant Interpretation Act which refers to proof of the contrary of delivery. The Court continued:
As the present case shows, delivery may be different from receipt by the intended recipient and provided that delivery is not disproved, the fact of non-receipt does not displace the result that delivery is deemed to have been effected at the time at which it would have taken place in the ordinary course of the post. There is here no evidence of non-delivery. It follows that the application of s 39(1) of the Acts Interpretation Act in no way affects the proof of service of the notices in this case in accordance with s 42(1)(c) of the Hire-Purchase Act and that such service is deemed to have taken place in the due course of the post.
103. Subsequent judgments have maintained the distinction between delivery and receipt, and have held that delivery occurred (or was deemed to have occurred) even when there is evidence that a document was not received by the addressee.
104. For example, in Deputy Commissioner of Taxation v Meredith, the New South Wales Court of Appeal considered whether the Commissioner of Taxation had given notice to the director of a company about the director’s liability to pay a sum of money. The Income Tax Assessment Act 1936 (Cth) provided in section 222AOE that the Commissioner “is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice” that sets out specified information and states that the person is liable to pay the Commissioner the identified amount. Section 222AOF of that Act provided for the method of giving notice as follows:
(1) If it appears from ASIC documents that a person is, or has been within the last 7 days, a director of the company, the Commissioner may give the person a notice under section 222AOE by leaving it at, or sending it by post to, an address that appears from such documents to be, or to have been within the last 7 days, the person’s place of residence or business (emphasis added)
105. The Commissioner presented unchallenged evidence that a notice had been sent in accordance with section 222AOE by posting to the address of the director and, hence, submitted that section 222AOF(1) had been engaged.
106. The director relied on section 29 of the Acts Interpretation Act 1901 (quoted at [42] above).
107. Basten JA (with whom Ipp JA concurred) referred also to sections 160 and 163 of the Evidence Act 1995 (Cth). His Honour noted previous authority that treated section 29 of the Acts Interpretation Act 1901 as having two limbs, the first a deeming of the conduct sufficient to constitute service, and the separate deeming the time at which service is effected. So understood, the presumption in section 160 of the Evidence Act affects only the time, referred to in section 29(1) as the “time at which the letter would be delivered” and in section 160 as the day on which it would be ‘received’ at the address to which it was posted.
108. Basten JA referred in some detail to the High Court’s judgment in Fancourt, including the distinction drawn between receipt and delivery. His Honour noted that section 29 was not concerned with receipt but only delivery to the nominated address. Section 29, in effect, imposes on the intended recipient responsibility for ensuring that the document does not go astray after delivery to the postal address.
109. Basten JA described as “irrelevant” evidence that the director collected all mail delivered to her home address and that she did not receive the notice sent by the Commissioner. Such evidence, whether directed to non-receipt or non-delivery, was irrelevant if the statutory precondition is satisfied by the act of sending the notice in accordance with the statutory prescriptions.
110. Basten JA observed, as had the High Court in Fancourt, that the risk of notice going astray in the post has been treated as tolerable in order to effect the policy underlying the scheme.
That risk may be extremely low, but it is not non-existent; the potential for unfairness arises because the intended recipient has no control over the postal service. Nevertheless, the intended result is clearly expressed and must be given effect.
111. Although the facts in the present case are not identical to those in the cases referred to above, they are sufficiently similar to support a finding that the letter dated 21 April 2016 was ‘given’ (in the sense of delivered) to the appellants, irrespective of whether they received it. There was evidence that the letter existed, the rigorous process for posting it by Fuji had been followed, the letter had been addressed to the GPO Box nominated by the appellants, and the letter had not been returned to AAMI. Consequently, had the Original Tribunal found it necessary to decide this matter, it could have decided that the appellants had been given the relevant notice by AAMI.
112. On that basis, this Appeal Tribunal is satisfied that AAMI gave the appellants written notice of the relevant clause of the contract and of AAMI’s intention to refuse to pay a claim or cancel the policy in applicable circumstances.
113. Consequently, whether or not the letter dated 23 May 2017 constituted notice for the purpose of section 59(1) of the ICA and was not received until 17 June 2016, the appellants had already been given written notice of the special clause and the real prospect that AAMI would seek to act in accordance with it before the date on which they were due to travel overseas.
114. The letter dated 23 May 2017, if it constituted notice, was deemed to have been received at the appellants’ GPO Box on the fourth working day after it was posted, well before the damage to the appellants’ motor vehicle and their claim on their insurance contract.
Issue 2 - notice about cancellation clause in insurance contract
What the Original Tribunal decided
115. The Original Tribunal referred to the appellants’ submission that:
(a) they never received the PDS relating to the contract of insurance that commenced on 19 January 2016; and
(b) no warning was given to them over the telephone on 19 January 2016 about the term of the policy that AAMI may cancel their policy without giving them advance notice of the cancellation.
116. According to the Original Tribunal, it was reasonable to conclude that:
(a) as a result of the first direct debit dishonour, the appellants were aware of their obligations to ensure that direct debits were honoured, including by ensuring that AAMI had their proper and current credit card information;
(b) the appellants understood that where a direct debit was dishonoured, and the instalment payments were overdue by more than a month, this would result in cancellation of the policy of insurance by AAMI.
117. The Original Tribunal stated that the evidence before it “does not establish one way or the other whether the applicants received the PDS with the other documents dated 19 January 2016.” The Original Tribunal continued:
If the Tribunal accepts the applicants’ evidence that the PDS was not received, I am nevertheless satisfied that the applicants – being legal practitioners, and in light of their insurance experience – had received policy documents which made it clear that if they should fail to pay an instalment, the insurer could cancel the policy without notice where an instalment was more than one month overdue. I note that the direct debit request service agreement specifically requires the insured to advise the insurer if the nominated account is transferred or closed, or the account details change. I further note that the direct debit request service agreement directs the insured to the PDS for an explanation of what would happen when an instalment is unpaid and when the insured “may not accept your claim”.
118. The Original Tribunal was satisfied, on the evidence, that AAMI “clearly informed the applicant in writing before, or at least within 14 days of, the formation of the contract” of the conditions that:
(a) should an instalment payment remain unpaid for 14 days, no claim would be paid; and
(b) should an instalment payment remain unpaid for one month or more, the policy could be cancelled without notice.
119. Accordingly, the Original Tribunal was satisfied that AAMI was entitled to deny the appellants’ claim, and was entitled to cancel the insurance contract without notice, in accordance with the terms of the contract.
Submissions
120. The appellants submitted that, as AAMI had not given them notice of the cancellation of the insurance policy, AAMI could only validly have cancelled the policy without notice if it complied with section 62 of the ICA. In their submission, AAMI had not complied with the legislative requirements. In summary, they submitted that:
(a) by section 62(2)(b) of the ICA, an insurer may not rely on a term permitting termination contrary to section 59 unless “before the contract was entered into, the insurer clearly informed the insured in writing of the effect of the provision;”
(b) the relevant policy was entered into on 19 January 2016 and no warning was given orally over the phone about the term of the contract permitting termination without prior notice (a fact that was accepted by the Original Tribunal at [18]);
(c) a finding that the appellants understood from the conversation that their policy might be cancelled without notice would be contrary to the evidence of the conversation on 19 January 2016;
(d) because the insurance policy was incepted by telephone, section 69(1) of the ICA (quoted at [39] above) is brought into play;
(e) section 69(1) provides that where, by reason of a provision of the ICA, information in relation to a contract of insurance is to be given in writing to a person before the contract is entered into and it is not reasonably practicable for the information to be so given in writing but is reasonably practicable for it to be given orally, the provision of the ICA shall be deemed to have been complied with if the information is given orally and it is also given in writing within 14 days after the day on which the contract was entered into;
(f) AAMI did not provide an oral explanation of the effect of the cancellation term as part of its “script” for the taking out of insurance policy;
(g) AAMI positively misinformed the appellants as to the effect of the policy by justifying its earlier cancellation by having sent a notice to the appellants;
(h) even if section 69(2) applied, AAMI did not provide a copy of the PDS with the 2016 policy documents (because it did not post a PDS containing the cancellation terms to the appellants on 19 January 2016) and hence AAMI failed to comply with section 69(2); and
(i) there was no evidence that AAMI had provided the 2012 PDS to the appellants and, in any event, the 2012 PDS stated that the insurer would make attempts to contact the insured.
121. In the appellants’ submission, the finding of the Original Tribunal that they were aware that a policy might be cancelled for failing to pay instalments (at [19]) was not a finding that the policy might be cancelled without notice. The Original Tribunal’s finding did not, in their submission, support the Original Tribunal’s conclusion at [25].
122. The appellants submitted that, for the reasons outlined above, AAMI failed to comply with section 62 of the ICA and, as a result, it was not entitled to cancel the insurance policy without notice.
123. AAMI submitted in reply that, not only had it complied with the requirements of section 59 of the ICA, it had complied with the requirements of section 62. In particular, AAMI submitted that:
(a) the Original Tribunal neither accepted nor rejected Dr Greinke’s evidence that AAMI gave him no oral warning that the appellants’ insurance policy might be cancelled without prior notice, but the Original Tribunal proceeded to conclude that this was of little consequence given AAMI’s compliance with section 69 of the ICA;
(b) the Original Tribunal was correct to find that it was not reasonably practicable for AAMI to provide the appellants with the relevant information in writing before the contract was entered into (particularly as the appellants were uninsured and applying over the phone for a policy of insurance to commence immediately);
(c) the appellants had access to the information online immediately;
(d) the PDS was posted to the appellants under cover of the letter dated 19 January 2016, in accordance with the list of documents that the letter purported to enclose, and the only evidence to the contrary was that of Dr Greinke (and AAMI notes that the appellants admitted that they did not read the terms of a PDS sent to them previously);
(e) although the appellants commenced insurance with AAMI in 2012, each renewal of the policy by them formed a new contract, the terms of which were contained in the PDS effective at the time of the renewal;
(f) even if it is accepted that the appellants did not receive the PDS enclosed with the letter dated 19 January 2016, the information was, at the very least, provided to them in the Direct Debit Decline letter dated 19 April 2016, before AAMI relied on the special clause to cancel the contract;
(g) the policy was on the same terms as the previous contract of insurance held by the appellants with AAMI before the first cancellation; and
(h) the conclusion at [25] of the Original Tribunal’s reasons for decision was correct and was open to the Original Tribunal to make on the evidence.
124. AAMI also submitted that the law was correctly applied by the Original Tribunal, and that section 69(2) was the applicable section, not section 69(1). AAMI further submitted that the warnings required by legislation to be given orally when a policy is taken out are already substantial such that further warnings may not have been absorbed even if they were given. It is not practicable for every term of the PDS to be scripted into a short phone call, and that is the purpose of section 69(2).
125. AAMI submitted that the PDS was a long document. While the length of the document should be drawn to a person’s attention it was not reasonable to give that information over the telephone. The document was designed for people in, and contained provisions for, different circumstances.
126. AAMI also referred to the Regulations under the ICA, particularly Schedule 4 which provided the ‘script’ of what the insurer is required to tell an applicant for insurance.
127. In the alternative, AAMI submitted that even if it had not exercised, or was not entitled to exercise, its right to cancel the policy under sections 59 and 62 of the ICA, it was permitted to deny the claim under section 39 of the ICA. That section provides:
39 Instalment contracts of general insurance
Where a provision included in an instalment contract of general insurance has the effect of limiting the liability of the insurer by reference to non‑payment of an instalment of the premium, the insurer may not refuse to pay a claim, in whole or in part, by reason only of the operation of that provision unless:
(a) at least one instalment of the premium has remained unpaid for a period of at least 14 days; and
(b) before the contract was entered into, the insurer clearly informed the insured, in writing, of the effect of the provision.
128. AAMI submitted that the existence of an unpaid instalment for at least 14 days was not an issue in these proceedings, and that, for reasons set out elsewhere in its submissions, it had clearly informed the appellants in writing of the effect of that part of the special clause before the contract was entered into by operation of section 69(2) of the ICA.
129. In response to that part of AAMI’s submissions summarised at [123](a) and (b), the appellants submitted that:
(a) whether or not the Original Tribunal made a finding (at [18]) that no oral warning was given, that was the unchallenged evidence of Dr Greinke and AAMI adduced no evidence that its phone operator had informed him of the effect of the PDS term;
(b) the appellants accept that it was not reasonably practicable for AAMI to inform them in writing of the PDS term before the policy commenced.
130. The appellants’ submission in relation to the operation of section 69 is that, if it is not reasonably practicable to give the required information in writing before the inception of a policy:
(a) the information may be given orally and be followed up by writing within 14 days of the commencement of the policy (section 69(1));
(b) only if it is not reasonably practicable to give that information orally, it may be given in writing within 14 days (section 69(2)).
131. In their submission, the issue is not whether it was reasonably practical for AAMI to give them orally the terms of the long PDS before the parties entered into the contract of insurance. The requirement to provide information orally applied only in relation to the particular type of term.
132. In their submission, AAMI could only rely on section 69(2) if it demonstrated that it was not reasonably practicable to inform the appellants orally of the effect of the PDS term. AAMI adduced no evidence to support that contention. To the contrary, the evidence was that AAMI deployed a multiplicity of “scripts” to orally inform customers of various matters required by the ICA, including the Duty of Disclosure. But there was no “script” for disclosing a variation of the requirement to comply with section 59.
133. In relation to AAMI’s reliance on the Schedule 4 ‘script’ to relieve it of any obligation to inform the appellants orally about the term allowing AAMI to cancel the policy without notice, the appellants submitted that the words in Schedule 4 related to the insured’s duty of disclosure. There was nothing to suggest that other provisions need not be disclosed.
134. In the appellants’ submission, because AAMI failed to comply with section 69(1) it could not rely on section 69(2). Even if section 69(2) was available, the unchallenged evidence of Dr Greinke was that AAMI’s letter with the renewed policy did not contain a PDS. In any event, merely including a PDS pamphlet in a letter would not “clearly inform” the applicants of the effect of the PDS term, which was not highlighted in the index and only found by a close reading at page 42 of the document. Such a term was contrary to the effect of the conversation on 19 January 2016, where AAMI stated that it cancelled the earlier policy after giving written notice. It did not suggest that it could cancel policy without notice. The appellants submitted that AAMI failed to comply with section 69 so cannot rely on the PDS term.
135. The appellants submitted that the Original Tribunal was in error (at [22]) by failing to consider whether it was reasonably practicable for AAMI to give that information orally during the telephone call on 19 January 2016. Yet the only question was whether an oral warning was given when the policy was taken out on 19 January 2016. It followed that the Original Tribunal’s analysis (at [23]) was wrong, and the conclusion (at [25]) was wrong. There was no valid cancellation. Consequently, there was no need to look at what AAMI sent subsequently to the appellants, and no need to look at section 13 of the ICA.
Consideration and conclusion
136. As AAMI submitted and the Original Tribunal noted, the insurance policy entered into on 19 January 2016 was a new policy made necessary by the cancellation of the policy by AAMI.
137. It is clear that, as at 19 January 2016:
(a) the provision in the PDS that formed part of the contract of insurance and which allowed AAMI to cancel the policy without notifying the appellants in advance in circumstances where an instalment was one month or more overdue (the special clause) was inconsistent with section 59 of the ICA (section 62(1));
(b) AAMI did not clearly inform the appellants in writing of the effect of the special clause before the contract was entered into (section 62); and
(c) it was not reasonably practical for that information to be given in writing to the appellants before the contract was entered into (section 69(1)).
138. In those circumstances, AAMI could not rely on the special clause (section 62(2)) to cancel the contract unless an exception specified in 69 applied.
139. That conclusion about the operation of section 69 follows from a consideration of the structure of the legislative scheme governing the cancellation of contracts of insurance. The language of the scheme indicates the legislative recognition of the significance of cancelling such a contract, and provides clear prescriptions for the circumstances in which a contract might be cancelled. It proscribes an insurer’s reliance on a contractual provision with respect to the cancellation of a contract for non-payment of a premium unless the statutory requirements are met.
140. More specifically, the scheme:
(a) commences with the prohibition in section 63(1) that “Except as provided by this Act, and insurer must not cancel a contract of general insurance” (emphasis added);
(b) contains a general rule that an insurer who wishes to exercise a right to cancel a contract of insurance shall give notice in writing of the proposed cancellation to the insured, which notice has effect as specified in section 59; and
(c) provides that a contract of insurance may include provisions that are inconsistent with section 59 “with respect to the cancellation of the contract for non-payment of an instalment of the premium” but the insurer may not rely on such a provision unless the specific statutory requirements set out in sections 62 and 69 are met.
141. That description of the scheme is consistent with the policy underpinning the ICA as set out in its long title:
An Act to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public and so that the provisions included in such contracts, and the practices of insurers in relation to such contracts, operate fairly, and for related purposes. (emphasis added).
142. The appellants submitted that AAMI can only rely on the special clause if, before entering into the insurance contract, AAMI gave the appellants (or at least Dr Greinke) notice orally that AAMI might rely on that clause. According to the appellants, that did not occur. Because of the operation of section 69(1) in this case, section 69(2) was not satisfied. Therefore, AAMI could not rely on section 69(2) to refuse the appellants’ claim.
143. The issue is to be resolved by reference to the operation of section 69 and to the evidence of the telephone conversation between Dr Greinke and the AAMI representative on 19 January 2016.
144. If it was ‘reasonably practicable’ for AAMI to give information about the special clause orally to the appellants before the contract was entered into, the steps to be taken before AAMI could rely on the special clause were for AAMI to give information in relation to the special clause to the appellants:
(a) orally before the contract was entered into; and
(b) in writing within 14 days after the date on which the contract was entered into (section 69(1)).
145. If the requirement to give information to a person in writing before a contract of insurance is entered into could not be met because it was not ‘reasonably practicable’ for the information to be given orally or in writing, the information shall be deemed to have been given if the information is given within 14 days after the day on which the contract was entered into (section 69(2)).
146. I am satisfied that it was ‘reasonably practicable’ for the AAMI representative to give Dr Greinke information orally about the special clause on 19 January 2016. Indeed, it would have been reasonably practical to read the terms of that clause as set out at pages 28 and 42 of the PDS.
147. The contents of the conversation on 19 January 2016 have to be assessed in that legislative context.
148. Each party provided evidence to the Original Tribunal. AAMI provided a print out of its written notes of the conversation (quoted at [12] above). Dr Greinke described that written evidence as a script with a long list of acronyms. The content of the summary of that conversation (as reconstituted by the Appeal Tribunal by reference to the acronyms) was as follows:
Andrew (Dr Greinke) called (AAMI). He started a new policy, and reinstated benefits due to the policy direct debit rejection on the previous (numbered) policy. Duty of disclosure – script was read and understood (by Dr Greinke) and questions were asked of and answered (by Dr Greinke). Options were offered but denied. Instalments were advised.
149. The appellants pointed out that there was no ‘script’ for disclosing the variation of the section 59 requirement, and therefore that was not raised with him. They also relied on Dr Greinke’s oral evidence about what was, and was not, said by the AAMI representative in that conversation. In particular, they relied on Dr Greinke’s assertion before the Original Tribunal that no warning was given over the telephone on 19 January 2016 about the clause allowing termination of the policy without notice.
150. On appeal, AAMI took issue with unsworn oral evidence given from the bar table by Dr Greinke. AAMI submitted that, as it did not have an opportunity to test the evidence through cross-examination, the evidence must be given little weight.
151. In reply, the appellants submitted that AAMI had not asked for Dr Greinke to be sworn in and cross-examined at the hearing before the Original Tribunal. Nor did AAMI seek a direction under section 82 of the ACT Civil and Administrative Tribunal Act 2008 (ACAT Act) that this appeal be conducted as a new application rather than as a review.
152. That issue can be resolved, in part at least, by reference to sections of the ACAT Act. In particular, those sections provide that:
(a) the tribunal need not comply with the rules of evidence applying in the ACT (section 8);
(b) the tribunal may inform itself in any way it considers appropriate in the circumstances (section 26); and
(c) in exercising its functions under the ACAT Act, the tribunal must ensure that its procedures are as simple, quick, inexpensive and informal as is consistent with achieving justice, and must observe natural justice and procedural fairness (section 7).
153. AAMI was legally represented. It received the appellants’ written statements before the hearing in the Original Tribunal and was on notice of the appellants’ account of the conversation of 19 January 2016. AAMI had the opportunity to test or take issue with evidence given from the bar table by Dr Greinke. The Original Tribunal was entitled to take that evidence into account.
154. As noted earlier, AAMI appeared to rely on Schedule 4 to the Insurance Contracts Regulations 2017 (Regulations) as setting out the oral advice which the insurer needed to give to an insured person before issuing a policy. That schedule does not assist AAMI in this case. In summary:
(a) the Regulations commenced on 1 April 2018 and hence could not have applied at 19 January 2016;
(b) section 9 of the Regulations provides that the section is made for the purposes of section 69(1A) of the ICA (quoted at [39] above) and that Schedule 4 sets out the words that may be used to inform an insured orally of the matters mentioned in section 22(1) of the ICA for the original entering into of an eligible contract of insurance;
(c) section 22(1) of the ICA obliges the insurer, before a contract of insurance is entered into, to clearly inform the insured in writing of the general nature and effect of the duty of disclosure;
(d) Schedule 4 of the Regulations (which refers to section 9 of the Regulations) sets out words to inform of duty of disclosure for eligible contract of insurance.
155. Even if Schedule 4 applied to the circumstances of this case, it only relates to the duty under the ICA of an insured to disclose certain matters to the insurer. Schedule 4 does not refer to, or relieve the insurer of, the obligation on the insurer to describe to the insured the special provision in the contract of insurance allowing for the policy to be cancelled without notice to the insured.
156. For completeness I note that comparable provisions in the Insurance Contracts Regulations 1985 were to a similar effect.
157. It follows that, in the absence of any evidence that AAMI told Dr Greinke of the special clause before the car insurance policy was entered into on 19 January 2016, one half of the requirement under section 69(1) was not met. Even assuming that written information about the special clause was given (or was deemed to have been given) to the appellants within 14 days after 19 January 2016 by the documents referred to earlier (see [14] to [18]), that cannot satisfy the conjunctive ‘and’ in section 69(1) between (c) and (d).
158. Nor does such written notice satisfy the requirement in section 69(2). That requirement is contingent on it not being ‘reasonably practicable’ to give the information orally or in writing before the contract was entered into. Because I have concluded that it was reasonably practicable to give notice orally before the car insurance contract was entered, section 69(2) does not apply in this case.
159. It is not clear how fully this argument was developed in submissions to the Original Tribunal. It is, however, apparent from the reasons for decision that the appellants said to the Original Tribunal that no warning was given orally over the phone on 19 January 2016 about the special clause.
160. Having referred to the special clause, the Original Tribunal stated “There is no obligation to specifically or drastically draw to the attention of the insured those sorts of terms which one would expect to find in a contract of this type.”
161. The Original Tribunal was satisfied on the evidence that AAMI had “clearly informed” the appellants in writing before, or at least within 14 days of, the formation of the contract of the conditions that:
(a) should an instalment payment remain unpaid for 14 days no claim will be paid; and
(b) should an instalment payment remain unpaid for one month or more, the policy could be cancelled without notice.
162. Therefore, the Original Tribunal was satisfied that AAMI was entitled to deny the appellants’ claim and that AAMI was entitled to cancel the contract without notice, in accordance with the terms of the contract.
163. It will be apparent from the conclusions set out earlier that AAMI had not informed the appellants orally or in writing about the special clause before the formation of the contract entered into on 19 January 2016, but had informed them in writing within 14 days of the formation of the contract. Given the provisions of the ICA governing the cancellation of insurance policies, the Original Tribunal fell into error in reaching the conclusion that AAMI was entitled to cancel the contract without giving notice to the insured.
164. Accordingly, the appellants succeed on this aspect of their appeal.
165. Although AAMI was prevented from relying on the special clause to cancel the contract without notice, it was not prevented from refusing to pay the claim when the claim was made some 45 days after the 19 April 2016 instalment was due but was unpaid, and after the 19 May 2016 instalment was due but was unpaid.
166. It is neither unusual nor unjust for an insurer to be able to decline to pay for repairs if the insured has not paid a premium, or an instalment of the premium, for a specified period. The appellants did not submit otherwise. Unfairness would arise if the insurer were prevented from exercising its contractual right in circumstances when the insured failed on two successive occasions (albeit apparently inadvertently) to pay the instalments.
167. For the same reasons as outlined in relation to Issue 1, the Original Tribunal could have been satisfied that the appellants received the documents which constitute the contract of insurance dated 19 January 2016. Accordingly, on two occasions before the appellants’ trip in May 2016 AAMI gave the appellants express written notice of its contractual right not to pay for the repairs if instalments were not paid.
168. However, there is an issue whether section 39 assists AAMI or the appellants.
169. The insurer’s rights under section 39 (quoted at [127]) are expressed in terms similar to those in section 62. But, in the present circumstances, it would not be appropriate to apply to section 39 the strict interpretation applied earlier in these reasons to section 62.
170. In summary:
(a) the scheme enabling an insurer to decline to pay for repairs where an insured failed to pay a premium for 14 days or more is not as proscriptive as the scheme summarised at [139] to [141] above;
(b) the consequences for the insured are rather different. In one set of circumstances, the entire insurance contract is cancelled. In the other, the contract remains on foot but one payment under that contract is not made because the insured failed to meet their end of the bargain by keeping instalments up-to-date;
(c) the limited evidence about the conversation between Dr Greinke and the AAMI representative on 19 January 2016 indicates that there was some discussion about instalment payments; and
(d) although there is no clear evidence that the consequence of not paying those instalments was explained directly in that conversation (although it might have been), the appellants had previously experienced problems in relation to AAMI insurance contracts arising from their failure to pay premiums, and it was open to the Original Tribunal to conclude that they had actual knowledge of the contractual consequences of not paying one or more instalments.
171. Furthermore, this it would arguably be inconsistent with the obligation on the appellants by section 13 of the ICA (considered below) to insist on AAMI paying for car repairs when they had failed to pay to monthly instalments under the contract.
172. Having regard to the evidence overall, the statutory provisions governing the insurance contract entered into between AAMI and the appellants on 19 January 2016, and the terms of that contract, I am not satisfied that the Original Tribunal was in error when it concluded that AAMI acted in accordance with the terms of the contract in refusing to pay the claim dated 3 June 2016 because an instalment payment remained unpaid for 14 days or more. Consequently, although the appellants have succeeded in one significant respect in relation to the applicable law, that is insufficient to reverse the decision that their claim for the costs of repairs to their motor vehicle (and associated tribunal costs) should be dismissed.
Issue 3 - the duty of utmost good faith
What the Original Tribunal decided
173. The Original Tribunal considered in some detail the implications of the statutory implied provision in each contract of insurance requiring each party to act towards the other party (in respect of any matter arising under or in relation to the contract) with ‘the utmost good faith.’ The Original Tribunal quoted from sections 12, 13 and 14 of the ICA, referred to the judgments in CGU Insurance Limited v AMP Financial Planning Pty Ltd (CGU) and Re Zürich Australian Insurance Ltd, summarised the evidence of the circumstances leading to the cancellation of the contract of insurance, and set out the submissions of each party about the duty of utmost good faith as it was said to apply in the present case.
174. The Original Tribunal concluded:
The primary cause of the cancellation of the policy was the failure by the applicants to pay their premium in instalments, as required by the contract. The duty of utmost good faith does not require the respondent to decline to rely on such a breach of contract. The applicants were aware that their credit card details had changed, and they were aware from a previous incident that a failure to update their details with the respondent would result in a cancellation of the contract. The applicants had not taken any steps to update those details with the respondent and continued to provide an address which to their own knowledge is unreliable. The duty of utmost good faith is a reciprocal one, and the applicants have not acted in good faith by failing to comply with the terms of their contract and then expecting that the respondents would, in total disregard of the respondent’s interests, provide retrospective insurance in relation to an accident that occurred more than 14 days after the unpaid instalment was due and in circumstances where, in accordance with the terms of the contract, the respondent had cancelled the policy. The applicants ask the respondent to sacrifice their own interests and to ‘coddle’ the applicants to a degree that is neither reasonable nor proper in the circumstances of a commercial contract of insurance.
Submissions
175. The appellants took issue with the Original Tribunal’s conclusion and some of the findings of fact in support of that conclusion. Specifically, they submitted that:
(a) the Original Tribunal was wrong to find, in effect, that AAMI need not give any real consideration to their interests before deciding to cancel the insurance policy, but could instead follow its automated computer processes;
(b) the Original Tribunal was wrong to find that attempting to contact the appellants by means other than post before cancelling their insurance policy would constitute an excessive burden or “sacrifice;” and
(c) the Original Tribunal was wrong to make a finding that the appellants’ unintentional oversight in not updating their credit card details could be equated with an act of bad faith and released AAMI from any obligation of good faith.
176. Rather, the appellants submitted:
(a) AAMI acted contrary to, and had breached, its duty of utmost good faith; and
(b) the appellants had not acted in bad faith.
177. The duty of utmost good faith is set out in section 13 of the ICA. Subsections (1) and (2), quoted earlier at [47] of these reasons for decision, are directly relevant to the present case.
178. The appellants submitted that the scope of that duty in a particular case is ascertained by reference to the circumstances of that case, including the circumstances of the insured and their interests.
179. In the present case, the appellants submitted, AAMI exercised a discretion when cancelling their insurance policy. The obligation of utmost good faith includes considering the interests of the insured when exercising the discretion. However, AAMI used an automated process when the instalment could not be deducted in April 2016. By that process, if AAMI did not receive a reply from the appellants a cancellation letter was issued. There was no evidence of a human being making a decision or an enquiry about why the appellants did not respond to AAMI’s letter, or even whether they had received that letter. Indeed, they submitted, AAMI also knew from its prior cancellation of their insurance policy that a similar letter posted to the appellants had not arrived.
180. Dr Greinke illustrated that submission by reference to his phone call to AAMI on 19 January 2016 when he told an operator he did not receive the prior notice and complained about AAMI’s previous failure to make contact when cancelling the previous policy.
181. Further, the appellants submitted that, at the time of the decision to cancel the policy on 23 May 2016, AAMI knew that the appellants had purchased travel insurance on 7 May 2016 (which had been paid by credit card) and had been overseas since 11 May 2016. Consequently, AAMI knew that any letter posted to them would not come to their attention if it arrived after 10 May 2016 (if it arrived at all). AAMI knew the appellants’ mobile telephone and email address details and could have contacted them by those means. The appellants submitted that AAMI was in breach of its duty of utmost good faith in cancelling the insurance policy while they were overseas, without attempting to contact them by telephone or email.
182. In the appellants’ submission, the Original Tribunal erred in finding that to require an insurer to make an enquiry of the appellants by telephone, email or text message would be to impose an excessive burden on the insurer, and a ‘sacrifice’ of its interests. In their submission, there was no evidence to support that conclusion. No relevant interest was sacrificed. Indeed, at that time, the insurer had a financial interest in keeping the policy on foot.
183. By contrast, the risk to an insured person if their insurance policy is cancelled is substantial. In the present case, the appellants were uninsured for some weeks and the result could have been catastrophic for them. In any case, Dr Greinke now has to disclose that he has had an insurance claim refused.
184. The appellants also submitted that the finding of the Original Tribunal (at [36]) that they had acted in bad faith towards the insurer was wrong for several reasons.
(a) Any failure by the appellants to update their credit card details was an unintentional oversight and fell far short of any conduct that might engage a duty of utmost good faith (let alone constitute bad faith).
(b) A failure by an insured to update credit card details, or otherwise ensure that all payments are made on time, does not relieve the insurer of its obligations of utmost good faith when deciding to cancel a policy. As a matter of public policy and principle, it would be a poor interpretation of the ICA if the breach of a duty on the insured to pay on time was construed as constituting bad faith on behalf of the insured person.
(c) The Original Tribunal was wrong to blame the appellants for failing to update their address details because there was nothing to update. The issue was not whether the GPO Box address was unreliable but that the postal system was not reliable or timely. Further, the appellants had never directed AAMI to contact them only by post, and AAMI had telephone numbers and email addresses for both appellants. As noted earlier, Dr Greinke said that he had complained on 19 January 2016 that AAMI had failed to telephone or email the appellants before cancelling the policy previously.
185. In support of the appellants’ submission that their unintentional oversight should not be characterised as a breach of the insured’s utmost duty of good faith to the insurer they referred to the following passage from the joint judgment of Callinan and Heydon JJ in CGU particularly the highlighted sentence:
At the outset we should say that we agree with the Chief Justice and Crennan J that a lack of utmost good faith is not to be equated with dishonesty only. The analogy may not be taken too far, but the sort of conduct that might constitute an absence of utmost good faith may have elements in common with an absence of clean hands according to equitable doctrine which requires that a plaintiff seeking relief not himself be guilty of tainted relevant conduct. We have referred to the doctrine of clean hands because, as with another equitable doctrine, that he who seeks equity must do equity, it invokes notions of reciprocity which are of relevance here. That is not to say that conduct falling short of actual impropriety might not constitute an absence of utmost good faith of the kind which the Insurance Act demands. Something less than that might well do so. Utmost good faith will usually require something more than passivity: it will usually require affirmative or positive action on the part of a person owing a duty of it. It is not necessary, however for the purposes of this case, to attempt any comprehensive definition of the duty, or to canvass the ranges of conduct which might fall within, or outside s 13 of the Insurance Act.
186. In the appellants’ submission, what is required is an ‘affirmative or positive action’ which conduct is ordinarily capricious, unfair, or failing to have regard to the interests of the other party. The appellants ‘unintentional oversight’ did not meet those criteria.
187. Accordingly, the appellants submitted that even if AAMI validly cancelled the policy, that decision was in breach of its obligation under section 13 of the ICA, for which it should pay compensation.
188. AAMI submitted that the Original Tribunal decided correctly that AAMI had acted in accordance with its duty of utmost good faith. At all times, AAMI acted fairly, reasonably and in accordance with community standards. Indeed, it submitted, AAMI had gone “above and beyond” the cancellation procedures required of it under the ICA, and AAMI “cannot be required to go even further and attempt numerous methods of contact with every customer that fails to pay their instalment premiums, including repeat offenders such as the Appellants, on every occasion they fail to do so.”
189. In its submissions to the Original Tribunal, AAMI also referred, among other things, to the following factors which it said are relevant to the ‘utmost good faith’ point:
(a) Dr Greinke gave evidence that the direct debit decline on both occasions was due to card cancellation and the appellants’ subsequent failure to update their direct debit details, and gave evidence that his card had been cancelled on three to five occasions;
(b) where the appellants’ card had been cancelled on several occasions, and the previous contract of insurance had been cancelled due to their failure to update direct debit details, they were clearly on notice of their obligation to ensure that their payment details remained up-to-date;
(c) despite the first cancellation and the alleged unreliability of the GPO Box on that occasion, the appellants chose to leave the GPO Box as the nominated postal address;
(d) the appellants could not nominate their GPO Box as their postal address and then assert that the address was unreliable and impose a burden on AAMI to make attempts to contact them by other means; and
(e) it would impose too high a burden on AAMI to require it to attempt numerous methods of contact with every customer that failed to pay their insurance premium instalments, or even every repeat offender, on each occasion that they failed to do so.
190. In AAMI’s submission on appeal, to decide in this case that AAMI had not acted in accordance with its duty of utmost good faith would have significant implications for all insurers and the procedures that have been developed in accordance with the ICA. To decide in favour of the appellants would, it submitted, “create a precedent with significant implications.”
191. By contrast, AAMI submitted, the appellants’ behaviour in:
(a) continuing to provide the GPO Box as their postal address (and address for service in these proceedings) while also asserting that AAMI is not entitled to rely on it;
(b) failing to update their credit card details on not one but two occasions; and
(c) demanding that AAMI then provide retrospective insurance,
is not in the utmost good faith.
192. Further, AAMI submitted that the appellants misunderstood CGU. The quoted paragraph does not allow the appellants to rely on passivity as evidence of their having acted in good faith, but requires them to demonstrate positive action towards acting in good faith.
193. In AAMI’s submission, the appellants cannot be entitled to relief on the present facts in accordance with CGU. The sins of the appellants should not be visited on AAMI when it gave notice and waited 25 days to cancel their insurance policy.
194. In response to the appellants’ submission that AAMI should have known the appellants were overseas between 11 May and 1 June 2016, and should have adjusted how it communicated with them during that period, AAMI’s submissions were, in essence, that:
(a) AAMI is a large insurer;
(b) the two types of insurance (motor vehicle and travel) were dealt with by different branches of the insurer;
(c) the knowledge of the appellants’ overseas travel cannot be imputed to the car insurance branch;
(d) a requirement that these branches share information about their customers would be an unreasonable burden on the databases and processes of such entirely different branches of insurance, and there might be privacy implications from this level of information sharing;
(e) even if the appellants’ travel intentions had been shared, AAMI had no way of knowing whether and when the appellants had actually departed and/or returned to Australia (or, more specifically, to Canberra);
(f) the Direct Debit Decline letter issued on 21 April 2016 was sent before the travel insurance was taken out on 7 May 2016, and before the scheduled departure date of 11 May 2016;
(g) the appellants’ preferred method of communication was that AAMI send documents to their GPO Box; and
(h) additional types of communications from AAMI to the appellants would have gone beyond what the law requires.
195. In relation to its use of automated processes, AAMI referred to a print out of a record dated 16 May 2016 that instalments were on hold due to the direct debit rejection on 19 April 2016, a rejection letter had been sent, there would be follow-up until 21 May 2016 and if no response was received from the appellants the hold would be removed and policy would be cancelled (see [21]).
Consideration and conclusion
196. Because of the conclusions reached in relation to Issues 1 and 2, it is appropriate to consider whether the obligation contained in section 13 of the ICA is relevant to the outcome of this appeal. For that purpose, it is appropriate to refer to those parts of the reasons for judgement in CGU where justices of the High Court considered the scope and operation of section 13.
197. Gleeson CJ and Crennan J accepted the “wider view” of the requirement of utmost good faith in preference to the view that absence of good faith is limited to dishonesty. In particular, they accepted that utmost good faith may require an insurer to act with due regard to the legitimate interests of an insured, as well as to its own interests. That obligation may require an insurer to act, consistently with commercial standards of decency and fairness, with due regard to the interests of the insured. However, the ICA does not empower a court to make a finding of liability against an insurer as a punitive sanction for not acting in good faith.
198. Callinan and Heydon JJ agreed that lack of utmost good faith is not to be equated with dishonesty only. They referred to notions of reciprocity which are of relevance here. Although apparently accepting that conduct falling short of actual impropriety might constitute an absence of utmost good faith of the kind that the ICA demands, they stated that utmost good faith “will usually require something more than passivity: it will usually require affirmative or positive action on the part of a person owing a duty of it.”
199. Kirby J (dissenting in the result) also agreed that the section 13 criterion was not restricted to dishonesty. In his view, “the criteria of dishonesty, caprice and unreasonableness more accurately express the ambit of what constitutes a breach” of section 13 of the ICA. His Honour also discussed the reciprocity of the duty of utmost good faith. He expanded on the meaning of ‘utmost’ in that statutory phrase, writing:
The exhibition of good faith alone is not sufficient. It must be good faith in its utmost quality.
The resulting duty is one that pervades the dealings of the parties to an insurance contract with each other. In consequence of the Act, and of the reform that it introduced in s 13, the duty of good faith as between insurer and insured now takes on a true quality of mutuality. …
… The duty imposes obligations of the most stringent kind in respect of the conduct of insurer and insured with each other, wherever that conduct has legal consequences.
200. As Kirby J noted later:
There may indeed sometimes be difficulties in deciding exactly what s 13 of the Act affirmatively obliges the insurer to do. But it is not nothing.
201. In the present case, those passages describe and illustrate the obligation imposed on AAMI and on the appellants by section 13 of the ICA. The mutuality of that obligation is clear from the section and from the quoted passages from CGU.
202. Independently of section 13, the appellants were contractually obliged to advise AAMI of any changes to their nominated account for payment of their monthly instalments. Under the Direct Debit Request Service Agreement, the appellants were responsible (among other things) for ensuring that the nominated account could accept direct debits or advising AAMI if their nominated account was closed or the account details had changed. They could also have checked the periodic statements in relation to their nominated credit card account to see whether the monthly deductions were being made. As noted earlier, the appellants gave evidence to the Original Tribunal that the direct debit failure was as a result of the hacking of their credit card details, that this was the second time that this had occurred, and that while Dr Greinke had updated his credit card details with other persons with whom he had dealings he had failed to provide updated details to AAMI.
203. The Original Tribunal concluded that the appellants were aware that their credit card details had changed, and they were aware from a previous incident that a failure to update their details with AAMI would result in a cancellation of the contract. They had not taken any steps to update those details with AAMI. The appellants cannot now rely on their passivity (in the form of absence of advice to AAMI about their direct debit account, whether that absence was inadvertent or otherwise) as a basis for denying AAMI the contractual right not to pay for the repairs to the vehicle.
204. Although nothing turns on it, I note that, contrary to the appellants’ submissions, the Original Tribunal did not find (at [36]) that they had acted in bad faith towards AAMI. Rather, the Original Tribunal noted that the duty of utmost good faith is a “reciprocal one” and recounted what the appellants were aware of and what they had failed to do. Then the Original Tribunal concluded that the appellants had not acted in good faith by failing to comply with the terms of the contract and then expecting that AAMI would provide insurance cover in the circumstances at the time of the claim.
205. Further, the appellants describe and perhaps hope for an ideal world in which an insurer would take a close personal interest in the day-to-day affairs of each customer and would proceed to contact each customer by various means if there appeared to be a lack of timely response from the customer. That world is not one in which the parties to this dispute operated. That does not mean that the insurer failed to act in the utmost good faith.
206. Having considered the evidence and the arguments on appeal, I am satisfied that the Original Tribunal was not in error in reaching its conclusions.
207. The appellants could also have made alternative arrangements with AAMI for insurance notices to be sent to them. If, as the appellants contended, the issue was not with the address of their GPO Box but the delivery service provided by Australia Post, then AAMI cannot be held accountable for, or bear the consequences of, the ineffectiveness (if any) of Australia Post’s delivery services. There was evidence that AAMI had done what is necessary to inform and enquire of the appellants at each stage, and had done so in writing addressed and sent to the appellants’ nominated address.
208. Sometimes documents sent by post will not be received. That does not mean that they cannot be deemed to have been given, served or delivered. In this case, AAMI was not obliged by contractual terms or the implied terms of section 13 to check whether the appellants had received the correspondence or why they had not responded to it.
209. In one other respect the obligation in section 13 is relevant to the outcome of the appeal. It reinforces the interpretation of the scheme in sections 59, 62, 63 and 69 of the ICA set out earlier in these reasons for decision (see [139] to [141] above). Section 13 provides support for a ruling in favour of the appellants flowing from AAMI not meeting the legal requirement to advise the appellants orally of AAMI’s contractual right to terminate their insurance policy without notice to them in specified circumstances.
210. However, section 13 does not compel the conclusion that the appeal should succeed. The appellants had written notice (and experience) of the consequences of not paying the monthly instalments.
211. As noted earlier, the Original Tribunal could have been satisfied that the appellants received the documents which constitute the contract of insurance dated 19 January 2016. On two occasions before the appellants’ trip in May 2016 AAMI gave the appellants express written notice of its contractual right not to pay for the repairs if instalments were not paid.
212. For completeness I note the fact that AAMI chose to utilise automated processes to conduct some aspects of its business does not, of itself, provide a basis for finding that it did not act with the utmost good faith towards the appellants. In any case, AAMI’s procedures were not entirely automated. Even if some written correspondence was automatically generated when certain events occurred, that correspondence invited the addressee to call a specified telephone number “where you will always speak to a real person not a machine – 24 hours a day, 7 days a week.” The appellants had spoken to AAMI employees on occasions and had their specific circumstances at such times taken into account and acted upon.
213. In summary, for the reasons given above, I have concluded that:
(a) the procedural omission by AAMI on 19 January 2016 was such that AAMI was not only in breach of the specific statutory requirement but also acted inconsistently with its utmost duty of good faith towards the appellants at that stage of the negotiations for the new policy and so could not revoke the policy without notice to the appellants; but
(b) on the overall assessment of the merits of the case made by the Original Tribunal (most aspects of which were confirmed in the analysis of the evidence on appeal) the appellants cannot succeed.
Orders
214. For the reasons given above, the appeal is dismissed.
………………………………..
President G Neate AM
HEARING DETAILS
FILE NUMBER:
AA 7/2019 (XD 1088/2018)
PARTIES, APPLICANT:
Andrew John Greinke
Gillian Catherine Dempsey
PARTIES, RESPONDENT:
AAI Limited trading as AAMI
COUNSEL APPEARING, APPLICANT
N/A
COUNSEL APPEARING, RESPONDENT
N/A
SOLICITORS FOR APPLICANT
N/A
SOLICITORS FOR RESPONDENT
Moray & Agnew
TRIBUNAL MEMBERS:
President G Neate AM
DATES OF HEARING:
25 July 2019
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