Hannover Life Re of Australasia Ltd v Colella
[2014] VSCA 205
•9 September 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2013 0133
| HANNOVER LIFE RE OF AUSTRALASIA LTD (ABN 37 062 395 484) | Appellant |
| v | |
| CESARIO COLELLA | Respondent |
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| JUDGES: | ASHLEY and BEACH JJA and GARDE AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 30 July 2014 |
| DATE OF JUDGMENT: | 9 September 2014 |
| MEDIUM NEUTRAL CITATION: | [2014] VSCA 205 |
| JUDGMENT APPEALED FROM: | Colella v Hannover Life Re of Australasia Ltd [2013] VCC 620 (Judge O’Neill) and Colella v Hannover Life Re of Australasia Ltd [2013] VCC 990 (Judge O’Neill) |
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INSURANCE – Total and permanent disability policy – Construction of definition of ‘total and permanent disablement’ and other provisions of policy – Construction of policy by trial judge correct except in one respect – Same result on facts if correct test applied – Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 considered – Repatriation Commission v Hill (2005) 142 FCR 88 followed – Challenges to trial judge’s findings rejected – Appeal dismissed – Application for leave to appeal as to costs dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Mr A G Uren QC with | Moray & Agnew |
| Mr D J Christie | ||
| For the Respondent | Mr P Bingham | Maurice Blackburn |
ASHLEY JA:
I concur with Beach JA and Garde AJA.
BEACH JA:
In this matter I have had the advantage of reading in draft the reasons for judgment of Garde AJA and I agree with his Honour that both the appeal and the application for leave to appeal should be dismissed, substantially for the reasons given by his Honour. Specifically, as the reasons of Garde AJA disclose, the trial judge did not err in any of the ways asserted by the appellant. Further, there was no relevant error in any of the trial judge’s conclusions. That said, I wish to add the following observations.
First, as has been said before, a policy of insurance is a commercial contract and should be given a businesslike interpretation. Interpreting a policy of insurance (like any other commercial document) requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.[1]
[1]McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, 589 [22] (Gleeson CJ); Intergraph Best (Vic) Pty Ltd v QBE Insurance Ltd (2005) 11 VR 548, 555 [27] (Charles JA and Osborn AJA, with whom Buchanan JA agreed); and Electricity Generation Corporation v Woodside Energy Ltd (2014) 88 ALJR 447, 454 [35] (French CJ, Hayne, Crennan and Kiefel JJ).
The words ‘any work’ in what has been described as the first limb of the total and permanent disablement clause of the policy have to be given a reasonable interpretation in the light of the commercial purpose of the policy. From time to time during the appellant’s submissions, it appeared to me that the appellant had overlooked this requirement. While the appellant preferred to submit that the first limb was satisfied if the respondent could do any ‘portion’ of work for which he was otherwise qualified or suited, in truth, the appellant’s submission appeared to be that if there was any fragment of work (although perhaps more than one that might be described as de minimis) that the appellant could perform then the first limb of the
test was not satisfied.
Whether one construes the words ‘any work’ as the trial judge did, or without reference to the concept of any particular ‘job’, but rather, so as to encompass the concept of an ability to undertake remunerative work as described by the Full Court of the Federal Court in Repatriation Commission v Hill,[2] the result in respect of the first limb is the same. For the reasons given by the trial judge and the reasons given by Garde AJA, on any reasonable construction of the first limb that pays proper respect to the words used in the policy and the commercial purpose of the policy, and on the whole of the evidence called and tendered before the judge, the respondent satisfied the first limb of the total and permanent disablement test. I say on the whole of the evidence because, as is trite, the respondent’s claim fell to be determined upon the whole of the evidence and not merely upon the opinion of one doctor expressed at one point in time without regard to the balance of the evidence.[3]
[2](2005) 142 FCR 88, 101 [57] (Wilcox, French and Weinberg JJ).
[3]Cf ground 8 of the appellant’s amended notice of appeal.
Secondly, like Garde AJA, I see no error in the approach of the trial judge to what has been called the second limb of the total and permanent disablement clause. The judge did not substitute, or purport to substitute, his opinion for the opinion of the appellant. The judge conducted a detailed analysis that led him to the conclusion that the appellant had ‘cherry-picked’ that part of the material that supported a denial of the respondent’s claim. In my view, the judge was correct, for the reasons he gave, to so characterise the formation of the appellant’s opinion. Further, the judge was correct to conclude from his analysis that the appellant had not acted reasonably and fairly in considering the respondent’s claim. As the judge concluded, and as Garde AJA has shown, the opinion formed by the appellant was not open to an insurer acting reasonably and fairly in the consideration of the respondent’s claim. That said, whether it might one day be decided that the duty of an insurer in forming an opinion of the present type is a duty to form a fair and reasonable
opinion, or even a duty to form a correct opinion, will have to wait for another day.[4]
[4]Cf Finch v Telstra Super Pty Ltd (2010) 242 CLR 254, 281 [66] (French CJ, Gummow, Hayden, Crennan and Bell JJ).
GARDE AJA:
Introduction
In April 2007, the respondent (‘the claimant’) left his employment as a despatch manager with Carter Holt Harvey (‘Carter’), a paper and cardboard production and distribution company. He was a member of a superannuation fund with a total and permanent disablement (‘TPD’) benefit provided by the appellant (‘the insurer’), a life assurance company. ING Custodians Pty Ltd was the trustee of the superannuation fund (‘the trustee’).
The claimant left his employment as a result of a significant and continuing knee condition. He claimed on the Carter Group Life Policy (‘the policy’) for the TPD benefit. He provided considerable medical and other evidence, and on five occasions made a claim for the TPD benefit. The insurer rejected all claims.
The claimant then commenced a proceeding in the County Court of Victoria to recover the TPD benefit. After a seven day trial before Judge O’Neill, the insurer was ordered to pay the trustee for the claimant the TPD benefit of $160,000 and interest of $53,455.25 (‘the order’). The insurer was ordered to pay the claimant’s costs of the proceeding including costs on an indemnity basis from 14 March 2012.
By an amended notice of appeal dated 23 October 2013, the insurer appeals from the order on thirteen grounds largely relating to the construction of the policy, the trial judge’s assessment of the evidence and the award of interest. The insurer also seeks leave to appeal against the costs order made by the trial judge.[5]
[5]County Court Act 1958 (Vic) s 74(2E).
Grounds of Appeal
The grounds of appeal set out in the amended notice of appeal are in substance that the trial judge:
(1) erred in law in the construction of the first limb of the definition of TPD in Clause 1.3 of the policy in holding that:
(a) the phrase ‘any work’ in the first limb should be interpreted to mean ‘any job’; and
(b) the phrase ‘unable to do any work as a result of injury’ in the first limb should be interpreted to mean a job reasonably available in the marketplace and in an area in which it could be expected an insured in the position of the claimant could reasonably apply;
(2) should have found that on a proper construction of the first limb that:
(a) the word ‘work’ means the performance of tasks within an occupation;
(b) the phrase ‘unable to do any work as a result of injury’ means incapable, by reason of injury, of performing any work, even light duties;
(c)the questions of:
(i)the availability of work in the marketplace; and
(ii)the availability of work in an area in which it could be expected an insured in the position of the claimant could reasonably apply
do not arise.
(3) erred in finding that, during the first 6 month period of claimed disability, the claimant was unable to do any work as a result of injury.
(4) should have found that, during the first 6 month period of claimed disability:
(a) the claimant was able to do work albeit that he was unable to perform all tasks of his usual occupation; alternatively
(b) a job for the claimant was available.
(5) erred in making an adverse credit finding against Mr Beadles on the basis that Mr Beadles was said to have given a different answer to questions from the trial judge regarding a conversation about the claimant’s work hours than he had given in his evidence-in-chief.
(6) should have found that Mr Beadles had given the same evidence as to the claimant’s work hours during evidence in chief as he gave when answering questions from the trial judge and should therefore have accepted the evidence of Mr Beadles as to the conversation regarding the claimant’s work hours.
(7) erred in not accepting the evidence of Mr Simm on the basis that Mr Simm saw the claimant for the purpose of establishing whether there was a link between injury and employment, not in relation to his work capacity.
(8) ought to have found that Mr Simm gave evidence in relation to the claimant’s work capacity and ought to have accepted the evidence of Mr Simm as to the claimant’s work capacity.
(9) erred in finding that the insurer’s opinion that, at the end of the initial 6 month period of claimed disability, the claimant continued to be so disabled that he was unable to resume his previous occupation at any time in the future and would be unable at any time in the future to perform any Other Occupations:
(a) was comprehensively flawed;
(b) was unfair and unreasonable.
(10) ought to have found that the insurer’s opinion that, at the end of the initial 6 month period of claimed disability, the claimant did not continue to be so disabled that he was unable to resume his previous occupation at any time in the future and will be unable at any time in the future to perform any Other Occupations, was reasonably open.
(11) erred in refusing to consider the insurer’s reply submissions filed 6 March 2013.
(12) erred in finding the insurer liable to pay interest on the judgment amount from 8 January 2009 to the date of the order.
(13) ought to have found that, if the insurer was liable to pay interest on the judgment an amount at all, such interest ought to have been calculated from 18 May 2012.
The grounds of appeal set out in the amended draft notice of appeal relating to costs were in substance that the trial judge:
(1) erred in law in the exercise of his discretion in ordering that:
(a) the insurer pay the claimant’s costs pursuant to County Court Scale ‘D’ up to and including 31 August 2011 and pursuant to the County Court Scale of Costs, plus GST, from 1 September 2011 up to and including 13 March 2012 to be taxed by the Costs Court in default of agreement.
(b) the insurer pay the claimant’s costs on an indemnity basis from 14 March 2012, including costs reserved by His Honour Judge Wischusen in respect of the trial on 22 and 23 March 2012, to be taxed by the Costs Court in default of agreement.
(2) should have exercised his discretion to order that:
(a) the insurer pay the claimant’s costs pursuant to the County Court Scale of Costs, plus GST, from 22 May 2012 to be taxed by the Costs Court in default of agreement;
(b) the claimant pay the insurer’s costs pursuant to the County Court Scale of Costs, plus GST, prior to 22 May 2012 to be taxed by the Costs Court in default of agreement;
(c) in the alternative to (b), there should be no order as to costs for the period prior to 22 May 2012.
(3) erred in finding that it was unreasonable for the insurer not to have accepted the claimant’s ‘Calderbank’ offer of 27 February 2012.
(4) erred in failing to take into account that, after the claimant’s ‘Calderbank’ offer of 27 February 2012, the claimant:
(a) supplemented the evidence in support of his claim with 42 additional pieces of written evidence including an additional 12 medical reports;
(b) the claimant amended his statement of claim by a document dated 22 May 2012 which resulted in the claimant effectively running a new case.
(5) ought to have found that, in the circumstances, it was not unreasonable for the insurer not to have accepted the claimant’s ‘Calderbank’ offer of 27 February 2012.
Most of the grounds of appeal relate to the construction of the policy and to the trial judge’s findings on the evidence. Two grounds relate to the award of interest. This being an appeal by way of re-hearing, this Court must give the judgment which in its opinion ought to have been given at first instance. If the Court concludes that the decision appealed against was wrong, it would not be saved because it could be said that the conclusion of the judge below was reasonably open. This Court’s conclusion that the conclusion was wrong would demonstrate error. The trial judge, however, had the advantage of seeing and hearing the witnesses, and that imposes a natural limitation on this Court’s ability to review factual findings. But it may reach a conclusion contrary to that of the trial judge, even in the case of a finding apparently dependent upon the credibility of witnesses, for example, where it concludes that the decision at trial was ‘glaringly improbable’, or ‘contrary to compelling inferences’.[6]
[6]Fox v Percy (2003) 214 CLR 118, 128 [28]-[29] (Gleeson CJ, Gummow and Kirby JJ).
The policy
Clause 1.3 of the policy defines TPD (‘the TPD definition’) relevantly as:
A Person suffers Total and Permanent Disablement if they,
· are unable to do any work as a result of injury or illness for 6 consecutive months and at the end of the 6 months they continue to be so disabled that he or she is in our opinion unable to resume their previous occupation at any time in the future and will be unable at any time in the future to perform any Other Occupation, or
…
‘Other Occupation’ is defined in the Glossary of the policy, and:
means any occupation the person is qualified to perform by their education, training or experience at the time we assess the claim and includes,
· part-time occupations, and
· an occupation which may be perceived by the person to be of lower status than the person’s previous occupation or an occupation in which the person does not earn as much income as they did in their previous occupation.
To succeed in his claim on the policy, the claimant had to show that he satisfied both limbs of the TPD definition namely:
(a)he was unable to do any work as a result of injury or illness for six consecutive months; and
(b)at the end of the six months he continued to be so disabled that in the opinion of the insurer he was unable to resume his previous occupation at any time in the future and will be unable at any time in the future to perform any other occupation.
Construction of the first limb of the TPD definition
In McCann v Switzerland Insurance Australia Ltd,[7] Gleeson CJ said:
A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.[8]
[7](2000) 203 CLR 579.
[8]Ibid 589 [22] (citations omitted).
The first limb of the TPD definition may be compared with that considered by McLelland J in Rapa v Patience[9] where TPD was defined to mean ‘absence from the service of the Employer through illness or injury for six consecutive months’. In Finch v Telstra Super Pty Ltd,[10] the High Court held that McLelland J was correct when he considered that this definition ‘suggests a continuation of the relationship of employer and employee for the period of such absence’. The High Court in Finch considered a definition of ‘Total and Permanent Invalidity’ there defined as disablement as a result of which the claimant ‘has been continuously absent from all active Work for a period of at least six months …’. ‘Work’ was defined to mean ‘engagement in any business, trade, profession, vocation, calling, occupation or employment’. The first limb of the TPD definition in the present case is closer to, although not the same as, that considered by the High Court in Finch.
[9](Unreported, Supreme Court of New South Wales, McLelland J, 4 April 1985) 10-11.
[10](2010) 242 CLR 254, 267-8 [23] (‘Finch’).
The trial judge correctly observed that the TPD definition involves a two-step process, each of which must be satisfied by the claimant. The first step was that the claimant had to prove he was unable to do any work as a result of injury for six consecutive months. The second was for the claimant to satisfy the insurer that he continued to be so disabled as to be unable to resume his previous occupation or any other occupation (as defined) at any time in the future.
Referring to a number of authorities,[11] the trial judge held that the word ‘any’ found in the first limb of the TPD definition should be given its usual meaning. The expression ‘any work’ should be interpreted to mean ‘any job’.[12]
[11]Nile v Club Plus Superannuation Pty Ltd [2005] NSWSC 55; Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175; Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd (2011) 282 ALR 167; Sayseng v Kellogg Superannuation Pty Ltd [2007] NSWSC 583; Ivkovic v Australian Casualty & Life Ltd [1994] 10 SR(WA) 325; QBE Insurance Ltd v Jande [1994] NSWCA 366.
[12]Colella v Hannover Life Re of Australasia Ltd [2013] VCC 620 [109] and [116] (‘Reasons’).
The trial judge then interpreted the phrase ‘unable to do any work as a result of injury’ to mean ‘a job reasonably available, either on a full time or part time basis, for which the insured has a realistic capacity by reason of physical ability, intellectual capacity or education and training.’[13] He said:
A person may have a job which requires a range of duties, for example some clerical and some manual. To isolate out some aspect of the work, say filing documents, and say the plaintiff is therefore able to ‘work’ in the face of a significant injury, is unrealistic.[14]
[13]Ibid [123].
[14]Ibid [116].
Mr Uren QC who appeared with Mr Christie of Counsel for the insurer challenged the trial judge’s interpretation of the first limb of the TPD definition.
He advanced three main submissions. First, he submitted that the expression ‘work’ extended to the performance of a task within an occupation. It was not confined to the job in which he was previously employed. To satisfy the first limb, a claimant on the policy must be incapable of performing any portion of the work within an occupation even light duties during the first six month period. Whilst a realistic view had to be taken, a capacity to perform an employment activity or an activity for which employment could be obtained was sufficient to disentitle a claimant from satisfying the first limb of the definition.
Secondly, Mr Uren QC submitted that the trial judge was concerned with an irrelevancy when he considered that the scope of the work that the claimant was said to be unable to perform was confined to that which the claimant was suited by physical ability, intellectual capacity, or education and training. According to Mr Uren QC there was no need for that consideration to be taken into account at all at the first limb stage. Rather, ‘unable to do any work’ meant an incapacity to perform any work at all excluding ‘de minimis’ or minimal work.
Thirdly, Mr Uren QC said that the trial judge was wrong when he held that the concept of work must include that which is reasonably available in the market place, and that any other concept was impractical. The policy protected against a lack of capacity to work — it was not dependent on whether work was reasonably available. The expression ‘unable to do any work’ related to capacity — not employment availability.
Mr Bingham of Counsel who appeared for the claimant highlighted five different meanings that the word ‘work’ as used in the TPD definition could assume.
‘Work’ could mean:
(c) all the duties of the job in which the insured was employed;
(d) all the duties of a job reasonably available to the insured and for which the insured has a reasonable capacity;
(e) all of the duties of any job, even if not reasonably available to the insured or for which the insured had no reasonable capacity;
(f) any of the duties of any job, even if not reasonably available to the insured or for which the insured had no reasonable capacity; or
(g) labour of any kind, including, for example, housework, or pushing a wheelbarrow.
He drew attention to the provisions of the policy, particularly the range of meanings assumed by the word ‘work’ or derivatives of the word ‘work’ in the policy such as ‘work hours’, ‘working’, ‘At Work’, ‘absent from work’, ‘working’, or ‘absence from work’.[15] He submitted that the policy should be construed ‘contra proferentem’ against the insurer in the event of ambiguity.[16]
[15]See cl 1.5, 2.4, 2.11, 2.13, 2.14, 2.15, 6.5, Glossary, and Schedule Items 8 and 15 of the policy.
[16]In additional to Legal and General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390, 393-4 (Kirby P) cited by the claimant, see Rich v CGU Insurance Limited (2005) 141 ALR 370, 375-6 [24]-[25] (Kirby J), 385-6 [59] (Callinan J); Provincial Insurance Co Ltd v Morgan [1933] AC 240, 251-253; McCann v Switzerland Insurance (2000) 203 CLR 579, 602 [74(4)] (Kirby J); Johnson v American Home Assurance Co (1998) 192 CLR 266, 274-5 [19(4)]; The Federation Insurance Ltd v R Banks [1984] VR 525, 528 (Starke J), 543 (Brooking J).
Mr Bingham submitted that the fundamental purpose of the policy was to protect a worker against inability to earn an income. That purpose was fulfilled if a worker could not work in his own job for six months, and then could not work for the rest of his working life in a position for which he was qualified by education, training or experience.
In addition to the decisions referred to by the trial judge, significant assistance in the interpretation of the TPD definition is obtained from the decision of the Full Court of the Federal Court of Australia in Repatriation Commission v Hill.[17]The Court said concerning the definition of the word ‘work’ and the meaning of the expression ‘do work’:
There are problems with the submission that any ability to perform a remunerative task amounts to capacity for ‘work’. On that definition, a quadriplegic who could make a voice activated response to a telephone request would be capable of doing work. The fact that someone might be willing to pay for such a service would mean that such a person was able to ‘do work’, and probably for more than eight hours per week. Any definition of ‘work’ that treated so severely disabled a person as able to ‘do work’ might all but eviscerate entitlement to an invalidity service pension. It is hardly likely that this is what the legislature intended.
…
Whether a person has the ability to ‘do work’ is likely to depend, in part, upon that person’s background, training and skills. A person may have done hard physical labour all his or her life. That person may have had only minimal education. A serious back injury may render that person incapable of doing work, whereas another person, with a different educational background, might be able to switch from physical labour to clerical duties.
…
In our view, the expression to ‘do work’ in cl 5(2)(b), when read in context, requires the decision-maker to focus upon the applicant, and not some hypothetical person. Consideration must be given to whether a person of the applicant’s background, suffering from his or her condition, is, solely by reason of the impairment, permanently unable to do remunerative work of the type that he or she would otherwise be fitted to undertake. In answering that question, it must be determined whether the applicant can undertake such work for more than eight hours per week. In other words, the test looks at the individual applicant, treats ‘work’ as remunerative activity, and assesses the applicant’s ability to carry out that activity by reference to that person’s qualifications, background and skills.
The test that we consider appropriate does not go as far as that seemingly applied by the primary judge. His Honour’s analysis would treat an applicant as relevantly incapacitated in circumstances where that person could not readily find alternative employment. That goes too far. It imposes an unwarranted gloss upon the language used by the legislature. The correct test, in our view, does not focus upon employability, but rather the capacity to perform remunerative work of a kind for which the person is otherwise suited.[18]
[17](2005) 142 FCR 88 (Wilcox, French and Weinberg JJ) (‘Hill’).
[18]Ibid 100 [52], 101 [54], [57]-[58].
While the Court in Hill was concerned with the interpretation of a determination under legislation relating to veterans’ entitlements, a number of salient principles emerge which assist in the interpretation of the TPD definition, and which I adopt in the present case:
(1) The word ‘any’ should be given its usual meaning.
(2)The expression ‘unable to do any work’ is concerned with the capacity of the person to perform remunerative work of a kind for which the person is otherwise suited.
(3)The capacity to perform remunerative work is different from the capacity of a person to perform a work task. It does not follow that because a person is capable of performing one or more work tasks that person has a capacity to perform remunerative work. A quadriplegic who is able to make a voice activated response to a telephone request is not disqualified from demonstrating that he or she satisfies the TPD definition.
(4)The capacity to do work is dependent, in part, on a person’s background, training and skills. A person is not able to perform work unless that person has the necessary qualifications, skills and experience to perform the work.
(5)To be practical and meaningful, the concept of capacity to perform work must be in the context of an occupation or employment recognised in the community. There is no useful concept of work outside of remunerative activity within the framework of existing occupations or employment.
(6)A person may have the capacity to perform work even though the occupation or employment is not available in the town or region in which the person lives. The test is not concerned with the availability of employment or work to the person — rather it is concerned with the person’s capacity to perform remunerative work for which the person is otherwise suited.
Save in one respect, I reject Mr Uren QC’s submission that the trial judge erred in the construction of the TPD definition. The trial judge was correct to interpret the expression ‘any work’ to mean ‘any job’ — an expression which I take to be synonymous with ‘any remunerative employment’ or ‘any occupation’. He was also clearly correct when he described as unrealistic the isolation of ‘some aspect of the work, say filing documents’ followed by the conclusion that the person was able to ‘work’ in the face of significant injury that deprived the person of the capacity to perform the work in other respects.[19]
[19]Reasons [116].
It has been accepted that inability to perform work does not (apart from a short qualifying or refresher course) require a claimant to undergo a course of retraining in order to make him or her employable. Rather the assessment of TPD takes into account any job or occupation for which the claimant is reasonably fitted having regard to his then current education, training or experience.[20]
[20]Fernance v Wreckair Pty Ltd(No 2) (1992) 43 IR 300, 329 (Hungerford J); Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913 [36] (Brereton J); Hannover Life Re of Australasia v Dargan [2013] NSWCA 57 [37] (Bathurst CJ); (Macfarlan, Meagher, Hoeben JJA and Tobias AJA); Chapman v United Super Pty Ltd [2013] NSWSC 592 [32]-[34] (Young AJ).
Consistently with authority, the trial judge was right to take into account the claimant’s physical ability, intellectual capacity, education and qualifications in concluding that he was unable to perform any work for six consecutive months as a result of injury. Plainly, a person has no ability to do work for which the person does not have the physical or the intellectual capacity, or is unqualified or unsuited. Mr Christie who appeared for the insurer at the trial properly accepted in submissions at the trial that the phrase ‘unable to do any work’ must mean work that the insured could undertake. This excluded occupations which were beyond the insured from a physical, educational or intellectual perspective.[21]
[21]Reasons [123].
To the extent, however, that the trial judge’s construction of the expression ‘unable to work’ is dependent on the existence of work ‘which is reasonably available in the market place and in an area in which it could be expected an insured in the position of the claimant could reasonably apply’, the trial judge went too far.[22] The TPD definition is concerned with the capacity of an insured to perform work in an occupation or remunerative employment. The policy does not insure the actual availability of work for the insured in the occupation or remunerative employment in the town or region in which the insured resides.
[22]Ibid [123]-[124].
This point was also made by the Court in Hill in the following passage:[23]
The test that we consider appropriate does not go as far as that seemingly applied by the primary judge. His Honour’s analysis would treat an applicant as relevantly incapacitated in circumstances where that person could not readily find alternative employment. That goes too far. It imposes an unwarranted gloss upon the language used by the legislature. The correct test, in our view, does not focus upon employability, but rather the capacity to perform remunerative work of a kind for which the person is otherwise suited.
[23]Hill 101 [58].
To like effect, in Wells v Australian Aviation Underwriting Pool,[24] de Jersey CJ said:
The second ground of appeal is that His Honour erred, ‘having found in error that Mr. Wells was capable of performing supervisory duties ... when there was no evidence that such work was available ... in Toowoomba or elsewhere’. Accepting the evidence of Mr Mittendorff, who was a witness called by the appellant, the learned Judge found that ‘some licensed aircraft maintenance engineers perform only supervisory work, and that the impediment to Mr Wells['] finding fulltime work of that kind came from the limited size of the relevant employment market in Toowoomba, rather than from what the occupation involves’. As indicated above, the definition of "permanent total disablement" relevantly fastens on the capacity of the insured person to engage in the occupation or employment, not the place where such work would or could be carried out.[25]
[24][2004] QCA 43 (de Jersey CJ, Williams JA and Mackenzie J) (‘Wells’).
[25]Ibid [17].
The trial judge’s definition of TPD did include a gloss on the definition contained in clause 1.3 of the policy insofar as it included the requirement that the work be reasonably available in the market place and in an area in which it could be expected that an insured in the position of the claimant could reasonably apply. As in Hill and in Wells, this went too far. The trial judge did not refer to either Hill or Wells in the reasons.
However, as will emerge, later in this judgment, the result is the same if the trial judge had applied the correct test relating to the first limb of the TPD definition. Having regard to the claimant’s accepted injury and resulting disability, he satisfied the first limb of the TPD definition. He was unable to do any work as a result of the injury to his knee for six consecutive months after taking into account his background, training and skills particularly his lack of qualifications, skills and experience for any work in a clerical or sedentary capacity.
Did the claimant satisfy the first limb of the TPD definition?
The trial judge accepted that the claimant was unable to do any work as a result of injury over the six month period from April 2007 when he stopped work until October 2007. This was for good reason. The claimant walked with a limp. He had restrictions as to the distance he could walk. His physical ability was very significantly reduced. It was difficult for him to drive long distances, particularly getting from work to home in the afternoon.[26]
[26]Reasons [136].
The claimant left school at sixteen. He had no formal qualifications or certificates. Essentially, he had always worked in the paper industry. He worked in the paper industry with Visy from 1981, and with Carter from 2006. At Visy, he started as a stacker and machine operator, working also in the dispatch office, was later promoted to supervisor, subsequently becoming the despatch manager. In this capacity, his work was largely supervisory in nature including some accounting work and general bookkeeping. But he was required at Visy to walk up to 16 kilometres per day, averaging about 14 kilometres per day.[27]
[27]Ibid [15].
While working for Visy, he hurt his right knee tripping on debris. He had about six falls, and his knee deteriorated with pain, inflammation and swelling. He first sought medical attention in 2003 because he was suffering significant pain. In the last year of his employment at Visy, he did not drive the forklift at all.[28]
[28]Ibid [16]-[17].
Following his employment with Carter, the claimant found that he had to walk 70 metres to attend meetings at 8:00am in the morning, and 130-140 metres to reach the administration building to photocopy, send a fax or undertake other administrative duties. He found forklift driving hard because he had to get up and down in a cramped space, causing his knee to swell. It was hard to turn around in the forklift. He had to use his injured right knee on the brake and accelerator. He suffered pain which was at times so bad that he could not drive home overnight staying at a friend’s place or with his mother-in-law. At work it was hard to balance on his left leg when his right leg was ‘out’. He suffered from locking of the knee, aching and cramps, and had to stop and stretch the leg.[29]
[29]Ibid [20]-[27].
The claimant had arthroscopic surgery on his knee in 2004. In 2005, Mr Jim Kiellerup, orthopaedic surgeon (‘Mr Kiellerup’) undertook further arthroscopic surgery. On both occasions, the knee returned to its previous state. Mr Kiellerup undertook a third round of arthroscopic surgery on 1 August 2007.[30]
[30]Ibid [31]-[32].
The claimant’s partner, Ms Julie Anne Rowe, described the difficulties experienced by the claimant by 2007 including limping, sometimes staggering, difficulties with driving, and getting in and out of the car. There was too much physical work at Carter for the claimant. She helped him out at their 100 acre farm at Kilmore, including driving the tractor, the ride-on mower and the car. She did most of the maintenance around the house including using the mower, whipper-snipper and painting. He could not climb ladders.[31]
[31]Ibid [74]-[76].
The trial judge had the benefit of the evidence of two other witnesses who had observed the claimant over extended periods, and of surveillance film taken of the claimant in July and August 2008.[32]
[32]Ibid [46], [77]-[83].
Mr Kiellerup gave evidence of the two arthroscopies performed by him in October 2005 and July 2007. He first saw the claimant on 1 September 2005, and described the subsequent degenerative progression of his right knee up to 23 November 2010. Even at the first consultation on 1 September 2005, the claimant described ongoing symptoms in his right knee, including pain, which was worse after work, and walking any significant distance. The claimant felt his knee may give way on occasions. On examination, Mr Kiellerup found significant crepitus. An MRI scan showed an extensive tear to the lateral meniscus with an associated cyst.[33]
[33]Ibid [49].
Mr Kiellerup said that when he saw the claimant again on 30 January 2007 he complained of ongoing right knee pain. His knee ached at night, and was swollen. He had intermittent trouble with walking. Following examination, Mr Kiellerup recorded a 5 degree fixed flexion contracture, and significant knee joint effusion. During the arthroscopy in July 2007, Mr Kiellerup found Grade 3-4 arthritis with some synovitis. There was full thickness loss of cartilage, all the way to the bone. He diagnosed advanced right knee osteoarthritis, and concluded that eventually the claimant would need a total right knee replacement. He was too young for that to be undertaken in 2007. On 27 March 2012, Mr Kiellerup provided a certificate which in substance stated that the claimant satisfied the TPD definition.[34]
[34]Ibid [50]-[55].
Dr Richard McClelland, the claimant’s treating general practitioner, gave evidence that he had treated the claimant since 1985. On 17 January 2007, he referred the claimant to Mr Kiellerup, because of the increased pain and disability to his right knee. He provided medical certificates in relation to the claimant’s employment. In a letter of 6 March 2008, he said that the claimant’s right knee injury was unlikely to improve and that he was permanently incapacitated from his previous employment. He had consultations on a number of occasions from 2003 to 2008. After a consultation on 4 January 2007, he recorded that the knee was swollen and painful. He recalled that as at April 2007, the right knee problem was the claimant’s major health problem. Around April 2007, Dr McClelland thought that the claimant had trouble driving and climbing in and out of the forklift, walking on concrete floors, going up and down ladders and the like. The claimant was not able to perform his employment as at April 2007. Walking would be a very significant impediment for the claimant. Walking 50 metres would be excessive.[35]
[35]Ibid [67]-[73].
At the trial, two witnesses were called on behalf of the insurer. Mr Rodney Simm, orthopaedic surgeon (‘Mr Simm’) examined the claimant to report to the WorkCover insurer in June 2007. He did not see the claimant concerning the TPD policy. He was not asked to form an opinion as to whether the claimant satisfied the TPD definition. He accepted that the claimant would have difficulty using a forklift, and would suffer pain from kneeling or squatting.[36]
[36]Ibid [57]-[66], [134].
Mr Simm had limited information about the medical history of the claimant. In his report to the WorkCover insurer in June 2007, Mr Simm described the current condition of the claimant:
His knee remains very swollen and it is quite painful at times. Pain occurs over the front of the joint but most of the pain is on the lateral side of the joint. His knee clicks on movement. His knee is more painful after prolonged sitting. He has no locking or giving way of the joint. It is very difficult for him to squat or kneel and he has increased pain negotiating stairs. He is able to negotiate stairs and inclines in a normal way.
He gave his opinion in the following terms:
This man suffers from osteoarthritis of the right knee, mostly in the lateral compartment of the joint. He has evidence of chronic reactive synovitis of the right knee with a large right knee effusion.
The cause of his condition is multifactorial. The contributing factors are as follows:
1.there is probably a contribution form a constitutional predisposition to osteoarthritis,
2.multiple falls in the workplace which were probably associated with aggravation or causation of a tear of the right lateral meniscus, and
3.the sequelae of two arthroscopic procedures which were performed for symptoms arising from the work injuries. It appears that both of these arthroscopic procedures involved removal of some of the tissue of the lateral meniscus.
He concluded:
This man has osteoarthritis of the right knee. The condition relates to falls at work and the sequelae of 2 arthroscopic procedures undertaken for these work injuries. The condition has deteriorated. This may relate in part to constitutional factors but I also believe there is contribution from the work injuries and surgical treatment of those injuries.
He is capable of undertaking his normal work which is not physically demanding.
In a later report of 17 March 2009, Mr Simm stated:
This man had significant pathology which is progressive and his work capacity may be currently quite different from his work capacity when I examined him almost two years ago.
There were compelling reasons why the trial judge should prefer the evidence of Mr Kiellerup and Dr McClelland over that of Mr Simm. As I have said, in June 2007, Mr Simm examined the claimant for WorkCover purposes only. He did not examine him for the purposes of the claim under the TPD definition. He was not then given the TPD definition or asked for his opinion concerning it. Secondly, Mr Simm examined the claimant once only and with very limited history. By contrast, Mr Kiellerup and Dr McClelland were the treating medical practitioners responsible for the medical care of the claimant. They were much better placed to give evidence as to his medical and physical condition, and the procedures they had undertaken in their endeavours to ameliorate the deteriorating condition of his right knee.[37] They were in the best position to assess his ability to work.
[37]Ibid [134].
In my view, there was no error on the part of the trial judge when he preferred the evidence of Mr Kiellerup and Dr McClelland to the opinion of Mr Simm to the extent that there were differences between them in assessing the claimant’s medical condition and work capacity. It was plainly open to him to do so. It is the conclusion which I reach on consideration of the evidence
The other witness called by the appellant at the trial was Mr Beadles (‘Mr Beadles’), the applicant’s manager at Carter. He said that he had never received any complaints from the claimant about his knee or that he was impaired in carrying out his activities. He did acknowledge that the claimant ‘walked with a funny gait’. He was not sure whether the claimant’s ‘funny gait’ was a limp. It was possible it was, but Mr Beadles said he made no inquires of the claimant in this respect. The claimant said that he had discussed with Mr Beadles the level of success of the respective arthroscopies which they both had had. Mr Beadles denied that there was such a conversation.[38] Even at this stage, Mr Beadles’ evidence might be thought unlikely. Why would a manager not ask an employee for whom he was the responsible supervisor about an obviously painful disability that was daily affecting the employee’s movement and work? Why would he note a ‘funny gait’ but not observe and never ask whether his employee limped? Why would he not inquire about an obviously serious physical restriction affecting one of his staff?
[38]Ibid [92]-[93].
Mr Beadles gave evidence about an approach he made to the claimant seeking that he change his work hours of 5:30am to 11:30am. According to Mr Beadles in evidence in chief, he requested that the claimant start ‘no earlier than 6am and finish no earlier than leaving at 2pm in the afternoon’. Later in his evidence in chief, Mr Beadles said ‘No, there was no expectation of working longer hours, the key focus was on making sure the deliveries occurred’. A few questions later, still in evidence in chief, Mr Beadles altered his position on this topic and in answer to a question about the claimant being required to work later than 2:00pm said ‘It wasn’t mandated, if required and there were still deliveries to go out, yes’. Mr Beadles then said that he told the claimant this and that the claimant ‘wasn’t prepared to do that and he would resign’. The issue was revisited in a conversation between Mr Beadles and the claimant on the following day.
The trial judge had reservations about the credibility of Mr Beadles’ evidence generally, and particularly as to the first conversation. In one respect, the transcript suggests that the trial judge was incorrect. The trial judge stated in the reasons that the change in position by Mr Beadles occurred in answer to questions by the Court. According to the transcript, the responses were given in answer to the insurer’s counsel in evidence in chief, and not the Court. The difference is inconsequential. It does not matter whether it was the trial judge or the insurer’s counsel who asked the questions. It was the answers of Mr Beadles that were material. The transcript shows Mr Beadles shifting his position as to the work hours required of the claimant as the questioning continued. It is not surprising that the trial judge was concerned by the succession of answers given by Mr Beadles. The trial judge had the opportunity to observe Mr Beadles as he gave evidence in the witness box. It was open to him to prefer the claimant’s evidence to that of Mr Beadles, and to consider the claimant to be a much more credible witness than Mr Beadles. There can be no criticism made of the trial judge that he did so.
Taking the evidence as it was before the trial judge, together with the trial judge’s assessment of the medical and lay witnesses, the evidence clearly points to the conclusion that the claimant satisfied the first limb of the TPD definition. This is the result even allowing for the fact that the trial judge in my view erred in assessing whether the claimant was ‘unable to do any work as a result of injury’ when he took into account whether the work was ‘reasonably available in the marketplace and in an area in which it could be expected an insured in the position of the [claimant] could reasonably apply’.[39] For the reasons that I have given, this consideration is not necessary or material to determine whether the claimant was unable to do any work as a result of injury. Nonetheless, the answer is the same on the correct test namely that on the evidence the claimant was unable to do any work as a result of injury.
[39]Ibid [124].
As a result, the trial judge was correct to hold that, the claimant satisfies the first limb of the TPD definition.
Did the claimant satisfy the second limb of the TPD definition?
Both the claimant and the insurer were content for the trial judge to decide whether the second limb of the TPD definition was satisfied. It was not submitted at the trial or on appeal that the claim should be remitted to the insurer to form a further opinion. The trial judge did decide whether the claimant had satisfied the second limb. Likewise, it was not part of the insurer’s case on appeal that the trial judge had erred in any way in so doing. Unlike the position in Finch, the parties were content before us that the trial judge should have decided whether the second limb of the TPD definition was satisfied. Remitter to the insurer was not sought or argued before this Court or below. It does not arise in this proceeding.
For the claimant to satisfy the second limb of the TPD definition the trial judge accepted the following principles:
·The determination of the claimant’s disability is to be made as at the time of the assessment by the insurer.
·The disability must prevent the claimant resuming his occupation at any time into the future.
·The disability must prevent the claimant from performing any other occupation at any time into the future.
·The disability must prevent the claimant from performing any other occupation at any time in the future.
·‘Other occupation’ means occupation for which the person is qualified by education, training or experience.
·Such an occupation includes part-time work or that of a lower status than the previous occupation, or an occupation returning a lower income.[40]
[40]Ibid [139].
Mr Uren QC for the insurer contended that the claimant had the capacity to work in a sedentary position, and perform the duties of a despatch manager provided that there was no forklift driving. Mr Bingham contended that the claimant had been a despatch manager in the paper industry. The suggestion that he could work and earn a living without the physical components of extensive walking and using a forklift was unsupportable. He said that the physical part was 95 per cent of the job according to the claimant. To excise the physical component was to excise the reality of the occupation in the real world.
The trial judge was satisfied on the evidence that the claimant was unable to resume his previous employment as at October 2007. At that time, he had recently had arthroscopic surgery. His work required significant physical exertion including walking, use of the forklift and various tasks involving pallets at the work premises. From October 2007, if anything, the claimant’s condition had deteriorated. The trial judge had little difficulty in determining that as at that date the claimant had no capacity to return to his previous employment. That position remained over the period in which the insurer made its various assessments, up to 2012.[41]
[41]Ibid [140]-[141].
As to the claimant’s capacity to undertake any other occupation, on either a full-time or part-time basis, the trial judge concluded:
(a) the claimant had no trade, qualification or certificates;
(b)his training and experience were solely in the paper industry, initially manual and machine operation work and then in the despatch area;
(c)the claimant had little if any capacity to operate computers which were ‘so much a part of the modern work environment’;
(d)the claimant was not particularly competent in clerical work; and
(e)the claimant had not in fact been able to obtain work.[42]
[42]Ibid [143]-[144].
The trial judge referred to the decision in Sayseng v Kellogg Superannuation Pty Ltd[43] where Nicholas J said:
The definition of ‘total and permanent disablement’ has been considered in many cases. To meet the test in the definition the insured is required to prove that he is incapable of performing any occupation or work which he is reasonably capable of performing by reason of education, training, or experience. It is said to be a stringent test. It is one to be considered by reference to his existing education, training, and experience. The court is required to ascertain what the insured is actually capable of doing with regard to the qualification that the capacity for work under consideration is that for which the insured is reasonably capable of performing by reason of education, training, or experience. If he requires retraining in order to be employable, he is totally and permanently disabled within the definition.
The definition relates to disability to obtain future employment. It requires consideration of whether or not, on the evidence, it is probable that the insured would actually obtain work for reward (i.e. paid employment) for which he is qualified by education, training or experience, and whether his condition has disabled him from doing what he is qualified to do. The court is expected to take a realistic and common sense approach in its assessment. The application of the definition is directed to the realities affecting the capacity of the insured under consideration. It is not about theory.
The trial judge also referred to Cavill Power Products Pty Ltd v Royle[44] which quoted Embury J of the Saskatchewan King’s Bench:[45]
To exclude the plaintiff from the benefit of the policy because he could earn a living if he could obtain an improbable position which involved the doing of practically no work would in my opinion, be most unjust.[46]
[43][2007] NSWSC 583 [63]-[64] (citations omitted).
[44](1991) 42 IR 229.
[45]Ibid 240.
[46]Lang v Metropolitan Life Insurance Company (1937) Vol 2 WWR 452 (Embury J).
On the evidence, the trial judge concluded that, as at October 2007, there was no occupation the claimant was capable of performing with his disability, either on a full or part-time basis, given his education, training and experience. That position had persisted through to the present time.[47]
[47]Ibid [147].
In its written submission, the insurer contended that the trial judge erred in that he considered that the determination whether the claimant satisfied the second limb of the TPD definition was to be made when the insurer made its assessment rather than on 20 October 2007, being the conclusion of the initial six month period.
This submission is misconceived. It is clear that the trial judge undertook the assessment of the claimant’s work capacity as at October 2007, and not on 8 January 2009 or any later date when the insurer made its assessment. The question above the trial judge’s discussion of this issue is entitled ‘Was the Plaintiff, from October 2007, so disabled as to be unable to resume his previous occupation in the future or to perform any other occupation?’ The trial judge makes a number of references to October 2007, which he plainly regards as the date on which the assessment of work capacity is to occur.[48] I reject the submission that the trial judge applied the wrong date to the assessment of work capacity.
[48]Ibid [140], [141], [147].
As with the first limb of the TPD definition, Mr Uren QC submitted that the trial judge erred when he held that the insurer should have made enquiry ‘as to what jobs exist in the real world to which [the claimant] would be suited by education, training and experience’. Again, the answer to this submission is that the concept of occupation or remunerative employment must be related to the framework existing in the community. There is no realistic or practical concept of work outside this context. If the trial judge intended actual inquiry to be made as to the availability of the occupation or employment in the town or region in which the claimant resided, he went too far. However this made no difference to the result. Application of the correct test gives rise to exactly the same result as was arrived at by the trial judge.
Did the insurer act reasonably and fairly in its decisions to disallow the claim on the policy?
The trial judge considered whether the insurer in making its assessment of the claimant’s work capacity had acted reasonably and fairly and had due regard to the interests of the claimant. As Brereton J said in Halloran v Harwood Nominees Pty Ltd:[49]
It is now well established, and uncontroversial in the present case, that an insurer’s obligation to a person in the position of [the claimant] in the present context is one to act fairly and reasonably.
[49][2007] NSWSC 913 [31].
In PaulWeber v Tiss Pty Ltd,[50] Nicholas J said:
It was accepted on both sides that the court should approach the matter in accordance with the principles stated in Edwards v The Hunter Valley Co-op Dairy Co Limited. There it was held that in forming an opinion relevant to its liability under a contract of insurance the insurer is obliged to act reasonably in considering and determining the matter. It also held that unless the view taken by the insurer can be shown to have been unreasonable on the material then before it, the decision of the insurer cannot be successfully attacked on this ground.[51]
[50][2005] NSWSC 67.
[51]Ibid [7] (citations omitted).
The trial judge extensively reviewed the fifth and last opinion and decision of the insurer made on 18 May 2012 (‘the final refusal’).[52] The final refusal was signed by a claims assessor on behalf of the insurer. The trial judge undertook a review of the surveillance film of the claimant taken in July and August 2008 at his property in Willowmavin, numerous medical reports provided to the insurer and a number of witness statements. He then concluded that the final refusal was comprehensively flawed, unfair and unreasonable.[53]
[52]The five refusals of the insurer were made on 8 January 2009, 20 April 2009, 15 June 2010, 6 June 2011 and 18 May 2012.
[53]Reasons [183].
The trial judge gave numerous reasons for his conclusion that the final refusal was unfair and unreasonable:
(a) the statement that the cessation of the claimant’s work and subsequent absence from work at Carter was not to do with his knee;
(b) although accepting Mr Beadles’ statement that the claimant had not made complaints to him about his right knee problem, the final refusal made no attempt to reconcile what Mr Beadles said with the statement of other employees, including Messrs Wallis, MacDonald and Sverma;
(c) there is no clear explanation as to why the statement of Mr Beadles was preferred;
(d) apart from Mr Beadles being the manager, there was no basis on which his opinion was to be preferred. There was no analysis as to the extent, in an average working day, Mr Beadles had the capacity to observe the claimant;
(e) there is no attempt to reconcile the opinion of Mr Simms that the claimant had a current work capacity and did not leave his employment as a result of his knee injury with the opinions of the treating orthopaedic surgeon, Mr Kiellerup, and the general practitioner, Dr McClelland that the cessation of work was as a result of injury;
(f) there is no attempt to carefully consider the reports of the two treating practitioners, as against Mr Simm who had seen the claimant on one occasion only and for a reason other than work capacity in the context of TPD;
(g) the insurer acted on the opinion of Mr Simm only, ignoring the opinions of the other doctors;
(h) there ought to be good reasons stated to reject the views of the treating practitioners;
(i) there was a failure of the insurer’s opinion to refer to and analyse the reports of Drs Rowe and Horsley, specialist rehabilitation and occupational physicians. Each physician noted that the claimant was suffering from a serious and debilitating degenerative condition in his knee. Each physician said that it will come to knee replacement, with retraining to follow in the opinion of Dr Horsley after knee replacement;
(j) the insurer misunderstood the claimant’s report to the effect that he drove a forklift 70 per cent of the time and with the time spent on his feet, it totalled 95 per cent of his work activities – the insurer simply considered that the claimant said that he was on his feet 95 per cent of the time, and undertook 70 per cent forklift driving. The insurer simply recorded that the percentages of these activities did not add up and raised doubt as to the validity of the claimant’s statements;
(k) as to the conflict as to the various distances that the claimant walked in the course of his employment, there were no details as to how this disparity was resolved, and no attempt by the insurer to communicate with the claimant to have the discrepancy explained;
(l) the surveillance film was incorrectly assessed — when the claimant did walk, he did so with a pronounced limp and slowly, undertaking modest manual activities;
(m) far from having a capacity to work and training by short courses in health and safety, leadership and supervising ‘transferable to many types of occupations’, review of the medical evidence did not suggest that the claimant had a capacity for work;
(n) the reference to the claimant’s clerical role in VicRail was for a period of two weeks when he was in his late teens, and was no basis to suggest that the claimant had any experience or capacity in that role;
(o) the short courses were minor and of little relevance in the job market;
(p) retraining of the claimant was not referred to or considered in the insurer’s opinion;
(q) the insurer’s opinion fails to identify and consider any alternative occupations for which the claimant may be suited, given his injury, nor make any assessment as to whether; in any such occupation, the claimant would require retraining; and
(r) the insurer had ‘cherry picked’ aspects of the medical reports and statements most suited to its purpose making no reference to the complaints the claimant said he made or to the clear view of a number of co-workers who provided statements that they knew of his knee problem.[54]
[54]Reasons [171]-[183].
I reject the submission made on behalf of the insurer that the trial judge failed to address the correct question, namely whether the decision of the insurer was so unreasonable that a reasonable person in that situation could have made it. In Hannover Life Re of Australia Ltd v Sayseng[55] the New South Wales Court of Appeal following Edwards v The Hunter Valley Co-op Dairy Co Ltd[56] held the relevant principles to be:
[55][2005] NSWCA 214 [36] (Spigelman CJ, Santow and Tobias JJA).
[56](1992) 7 ANZ Ins Cas 61-113 at 77,536.
(a) There was an implied obligation on Hannover to consider and determine whether it should form an opinion on the matter which was a condition of its own liability;
(b) That obligation involved consideration and determination of the correct question;
(c) Hannover was under a duty of good faith and fair dealing which required it to have due regard for the interest of the claimants, meaning Mr Sayseng, as well as the Trustee;
(d) Hannover was also obliged to act reasonably in considering and determining what its opinion was;
(e) If the view taken by Hannover can be shown to have been unreasonable on the material before it, its decision can be successfully attacked;
(f) If Hannover’s decision is successfully attacked, the matter upon which its opinion was required becomes one for determination by the Court;
…
This test has been followed and applied in subsequent cases.[57]
[57]See for example Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2014] NSWSC 632 [105] (Hallen J); Erzurumlu v Kellogg Superannuation Pty Ltd [2013] NSWSC 1115 [54] (Ball J); Re Hannover Life Re of Australasia Ltd v Dargan [2013] NSWCA 57 (Bathurst CJ) [34]; Paul Weber v Tiss Pty Ltd [2005] NSWSC 67 [7] (Nicholas J).
Mr Uren QC also submitted that the trial judge impermissibly engaged in an over-zealous scrutiny of the reasons given by the insurer by trawling through the final refusal picking out flaws in the reasoning process. He further submitted that the material before his Honour demonstrated that there was another view of the facts available on the evidence before the insurer rather than testing whether or not the view of the evidence taken or the conclusions reached by the insurer were outside the bounds of reasonable disagreement.[58]
[58]PaulWeber v Tiss Pty Ltd [2005] NSWSC 67 [8]; IvanMabbett v Watson Wyatt Superannuation Pty Ltd [2008] NSWSC 365 [26] (Einstein J).
I reject these criticisms by the insurer. There were strong reasons for the trial judge to take the view that he did which he set out in his judgment. The trial judge’s view was certainly open on the evidence that he had and his view is the view which I independently adopt on consideration of all the evidence.
Trial Judge’s refusal to consider the insurer’s reply submissions
This ground of appeal can be quickly resolved. As Mr Uren QC acknowledged in argument, the reasons are either right or wrong. It makes no difference whether the trial judge was right when he refused to receive reply submissions from the insurer revisiting a number of topics previously argued apparently for failure to comply with the requirements of his previous directions.
The submissions advanced by the appellant that the trial judge was wrong when he concluded that the final refusal was unfair and unreasonable should be rejected. The trial judge comprehensively reviewed the statements made on behalf of the insurer in the final refusal. There were numerous reasons why the final refusal was seriously flawed. There was no attempt to address or engage the numerous medical opinions or the statements of other employees adverse to the position of the insurer. Statements considered adverse to the insurer’s position were simply ignored or omitted from the reasoning process.
Interest
The trial judge allowed the claimant interest from 8 January 2009 to 23 August 2013 calculated at $53,455.25. Section 57(2) of the Insurance Contracts Act1984 (Cth) provides for an insurer to pay interest for the period commencing on the day on which it was unreasonable for the insurer to have withheld payment of the amount and ending on the day on which payment was made.
Following the delivery of judgment on 17 June 2013, the trial judge gave consideration to the award of interest and to costs. In a second judgment dated 16 August 2013, his Honour reviewed the medical reports and documents received by the insurer to determine the extent and purport of the reports and information available to it at the time when decisions were made by it refusing to accept the claim.
The trial judge reviewed the insurer’s letter of 8 January 2009 (‘the first refusal’) concluding that there were a range of incorrect and inaccurate assessments and statements. He concluded that the first refusal of the claim was unreasonable. The main reasons for this conclusion were:
(a) the assessment of the video surveillance was comprehensively flawed;
(b) there was nothing in the claimant’s taxation returns to suggest that he continued to be involved in activities on his farm;
(c) the sum of $139,610 referred to in those returns reflected a written down asset value and not expenditure;
(d) the insurer ‘cherry picked’ those aspects of Dr Rowe’s report which suited its purpose;
(e) there was no reference to the fact that the claimant may have to be retrained;
(f) there was no reference to the opinion of Dr Rowe that the claimant could not work where he was required to stand or walk for long periods;
(g) no information was sought from the employer as to the exact nature and extent of the claimant’s previous duties; and
(h) there was no assessment made as to what realistic employment the claimant was capable of.
On behalf of the insurer, it is submitted that as at 8 January 2009 it had only limited information, and much less than it had later. While this is true, the information that it had was sufficient to inform it of the true facts and circumstances. The opinion of Dr Rowe described the claimant as having ‘severe degenerative osteoarthritis of the right knee with more than likely multiple derangements in the right knee’ with ‘severe cartilaginous derangement of the right knee’. Dr Rowe advised that ‘there is no other form of treatment that could be offered to this man apart from symptomatic treatment and eventually he will need at least a partial, and probably a total knee replacement on the right’. During examination by Dr Rowe, the claimant stated that he could walk and do some work on his farm, but could not walk long distances and could not drive a car a long distance. He had difficulty driving a forklift.
In terms of his work capacity, Mr Rowe noted:
Mr Colella is at the moment fit for some work. He is not totally incapacitated for work. He does have capacity. He could, in my view, drive a forklift and he could work in a supervisory role. He is not fit to drive a truck or other heavy equipment.
Mr Rowe also noted of the claimant:
He could not return to work as a carpenter’s assistant or in any job that requires him to walk up and down ladders or stairs. He could work in a sedentary position and possible [sic] he could work as a Despatch Manager if there was no driving involved in the job.
As to the prospect of other jobs, Mr Rowe said:
I am not of the view that he is totally incapacitated for all work. He, at the least, has a part-time capacity, provided heavy lifting was not required and provided prolonged standing or walking was not required. He might need some retraining or re-education but he does have capacity for employment.
Mr Rowe recorded that the claimant ‘does not have the capacity to stand for long periods, walk long distances or lift heavy weights’. Mr Rowe concluded that ‘there are obviously restrictions placed upon [the claimant] and he is a candidate for rehabilitation and re-education’.
On 3 April 2009, the trustee disagreed with the insurer’s position stating in substance that:
(h)Dr Rowe’s report when looked at as a whole supports the proposition that there was no real world likelihood of the member obtaining and maintaining suitable full time employment, for which he is presently suited by his education, training and experience;
(i)it adopted Dr Rowe’s view that the surveillance material and the activities of the claimant on his farm did not necessarily mean that he will be suited for employment in the paid workforce;
(j)as to the ability to drive a forklift, which is also relied on, we are of the view that the claimant would likely suffer significant difficulties in repeated climbing in and out of the forklift due to his knee injury. We do not consider it likely that he could engage in this kind of employment on a permanent basis; and
(k)on a fair and balanced assessment of the whole of the evidence, the only reasonable conclusion is that the claimant is TPD, and the benefit ought to be paid accordingly.
The insurer responded on 24 April 2009 with another refusal contrary to the trustee’s opinion and letter.
It was clearly open to the trial judge to arrive at the view that he did on the evidence before him that the insurer was unreasonable when it withheld payment at the time of the first refusal. The first refusal contains errors and over simplifications, and is selective of the medical evidence. The trial judge’s conclusions were well merited on the evidence before him.
Costs
There is a high threshold for the grant of leave to appeal as to costs. In order to succeed in an appeal as to costs, the insurer must show that there are strong reasons to interfere with the exercise of the trial judge’s discretion, for example, where error in principle is identified or where the judge acted on a manifestly erroneous view of the facts, or where the award is manifestly unreasonable.[59]
[59]Spotless Group Ltd v Premier Building and Consulting Pty Ltd(Rec appt) [2008] VSCA 115 [10]-[11] (Redlich and Dodds Streeton JJA).
The insurer was ordered to pay indemnity costs on the basis that it was unreasonable for the insurer to have failed to accept a Calderbank offer dated 27 February 2012. The Calderbank offer was in the amount of $130,000 in full and final settlement of the claim. The trial judge awarded indemnity costs from 14 March 2012. In arriving at his decision, the trial judge referred to the principles established by Habersberger J in BHP Billiton (Olympic Dam Corp) Pty Ltd v Steuler Industriewerke GmbH (No 3)[60] where many cases concerning the award of costs are analysed and comprehensively discussed including the judgment of this Court in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2).[61]
[60][2012] VSC 414 [59]-[67].
[61](2005) 13 VR 435 (Warren CJ, Maxwell P and Harper AJA).
The trial judge rejected the insurer’s submissions which were very largely repeated before this Court on the application for leave to appeal as to costs. The main arguments advanced in submissions in support of the application for leave to appeal were:
(1)after 13 March 2012, the insurer was requested to take into account in a further review of the claim numerous additional pieces of written evidence including medical reports, and statements or statutory declarations of co-workers;
(2)the claimant subsequently amended his statement of claim to impugn the insurer’s later decisions enlarging the statement of claim considerably; and
(3)given the large amounts of additional material, the proceeding was prematurely commenced by the claimant.
The trial judge observed:
(1)there were flaws in the insurer’s decision-making process going back to the time of the first claim;
(2)the insurer ‘cherry picked’ evidence which suited its contention that the claims for TPD should be rejected;
(3)the insurer did not act reasonably or fairly and give due consideration to the interests of the claimant. Its attitude to the claim became evident at the time the first claim was made and continued through until the final and fifth claim in 2012;
(4)the amendments to the statement of claim were largely to answer the insurer’s claims that it had not received twenty three documents, and to plead the fifth claim and refusal;
(5)the insurer ought to have pleaded in its Defence that it had not received documents which the pleadings referred to as having been provided to the trustee;
(6)as at the date of the offer, February 2012, the insurer had in its possession sufficient material to determine the claim, and it ought to have determined it in favour of the claimant; and
(7)all throughout the period the various claims were made the insurer relied on inappropriate information, misinterpreted materials and failed to obtain at least one important medical opinion.
There is no error in principle, or erroneous view of the facts, or manifest unreasonableness in the trial judge’s award of costs. There is no error disclosed in the reasoning of the trial judge. There is no reason, let alone strong reason to interfere with the trial judge’s award of costs. The trial judge has a wide discretion as to the award of costs of the proceeding. The application for leave to appeal as to costs must fail.
Conclusion
All of the grounds of appeal set out in the notice of appeal fail. In addition, the application for leave to appeal must be dismissed.
I would order that the appeal and the appellant’s summons filed 6 September 2013 seeking leave to appeal as to costs both be dismissed with costs.
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