Larwint Pty Ltd v Norwich Union Life Australia Ltd
[2006] VSC 187
•19 May 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 9588 of 2004
| LARWINT PTY LTD (ACN 006 586 492) | Plaintiff |
| v | |
| NORWICH UNION LIFE AUSTRALIA LTD (ACN 006 783 295) | Defendant |
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JUDGE: | WILLIAMS J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 9 March 2006 | |
DATE OF JUDGMENT: | 19 May 2006 | |
CASE MAY BE CITED AS: | Larwint Pty Ltd v Norwich Union Life Australia Ltd | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 187 | |
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CONTRACT – Insurance Policy – Definition of “Heart Attack” – Whether heart attack must be diagnosed on the basis of specified diagnostic criteria to fall within definition of “Heart Attack” in the policy
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Collins SC and Mr M. Osborne | Fitzpatrick Teale |
| For the Defendant | Dr C. Jessup QC and Mr J. Gleeson | Tresscox |
HER HONOUR:
The plaintiff seeks indemnification by the defendant, under the terms of an insurance policy document dated 11 December 2000 and entitled “Norwich Union Flexible Recovery Money” (“the policy”).
The Facts
The following matters are uncontroversial. The plaintiff is the policy owner, entitled under its terms to a “Critical Illness Benefit” of $300,000, if Mr Richard Allan King, the “Life Insured”, has suffered the “Insured Event” of a “Heart Attack”, as defined in cl C.14 of Part C.
Clause C.14 is in the following terms:
“C.14 Heart Attack
Means death of a portion of heart muscle as a result of inadequate blood supply to relevant area. The basis for diagnosis shall include:
(i)Electrocardiographic changes associated with the Myocardial Infarction, and
(ii)Elevation of cardiac enzymes consistent with the Myocardial Infarction.
If in the policyowners (sic) opinion the above tests are inconclusive we will, at our discretion, consider other appropriate tests.”
Mr King suffered a heart attack, or death of a portion of heart muscle as a result of inadequate blood supply, on 30 July 2004, during the currency of the policy. His heart attack was diagnosed, in part, by the presence of elevated cardiac enzyme levels consistent with it. However, an electrocardiogram carried out on 2 August 2004 failed to show associated electrocardiographic changes.
The defendant refused the plaintiff’s claim for indemnification under the policy in relation to Mr King’s heart attack. It asserted that the plaintiff did not qualify for the relevant benefit, because there was no evidence of the requisite electrocardiographic changes in Mr King’s case and that, as a result, his heart attack did not fall within the definition in cl C.14. (I note that the plaintiff does not claim entitlement to a benefit under the last sentence of the definition.)
The issue
The sole issue is as to whether a heart attack must be diagnosed on the basis of both electrocardiographic changes and elevation of cardiac enzymes, in order to fall within the relevant provisions of the definition in cl C.14.
Submissions
The plaintiff
The plaintiff relies upon the first sentence in cl C.14. It submits that the balance of the clause is not imperative and that the two specified diagnostic criteria are neither exclusive nor essential. It argues that the last sentence of cl C.14 confirms that the policy contemplates that a diagnosis of heart attack might be based upon other tests.
Counsel for the plaintiff argue that, even if the balance of the words following the first sentence in cl C.14 are to be read as part of the definition of “Heart Attack”, the clause should be construed so as to include a heart attack, diagnosed otherwise than on the basis of both the listed criteria, which is not included within the definition by the operation of the last sentence.
The plaintiff contends that the interpretation of cl C.14 adopted by the defendant would result in the extraordinary situation of the exclusion from the ambit of the definition a heart attack, otherwise properly diagnosed, including one diagnosed on the basis of one of the specified criteria. The provision would, in its submission be deprived of practical sense in those circumstances.
The plaintiff also argues that the governing words, “the basis for diagnosis shall include”, do not prescribe a particular basis for diagnosis. On the contrary, they result in the word “and”, between the two specified criteria, being accorded a dispersive or alternative effect. Those governing words indicate which test results are included amongst those forming the basis of a diagnosis, but they do not exclude others. The list of two bases for diagnosis is not exhaustive.
Counsel for the plaintiff refer to instructive principles of statutory interpretation. They cite Blackburn J’s description, in Re the Licensing Ordinance[1], of the two types of case in which the word “and” can mean “or”:
“The first category is that of cases where, if ‘and’ was given its natural meaning, the result was so extraordinary (to quote Lord Parker CJ in R v Oakes ([1959] 2 QB 350), ‘an absurdity or unintelligibility’) that in order to make sense of the provision the court was obliged to say that it must read the word ‘and’ as if it had been ‘or’. The cases in the second category were those in which there was a list of items, the items being joined by ‘and’ and the list being governed or affected by words which showed that the list was a list of alternatives. In such a case, the word ‘and’, which is used to join the items in the list, is truly cumulative; it links the members of a class and its function is to indicate that the whole class is to be considered together. Governing the words which enumerate the members of the class are other words which categorize the class, as a whole, as a class of alternatives. … [T]he word ‘and’ inside the class does not have dispersive or alternative force; its force is wholly cumulative; it is the words outside the class which give the dispersive effect. A common example is the wording of a statutory definition – for example, ‘’motor vehicle’ includes motor cycles, tractors, and trailers’ – where the ‘and’ has a truly cumulative meaning, but dispersive effect is given by the word ‘includes’. That is the explanation of Associated Newspapers Limited v Wavish ((1956) 96 CLR 526) … .”[2]
[1][1968] 13 FLR 143.
[2][1968] 13 FLR 143 at 146-7.
In Associated Newspapers the High Court considered the definition of the word “obscene” in s 169 of the Police Offences Act 1928 (Vic). Section 169 contained the following:
“’Obscene’ … includes –
(a)tending to deprave and corrupt persons whose minds are open to immoral influences; and
(b)unduly emphasising matters of sex, crimes of violence, gross cruelty or horror.”
A magistrate had dismissed an information laid against the applicant essentially on the basis that it was not obscene under s 169(a), without considering whether it unduly emphasised matters of sex, crimes of violence, gross cruelty or horror. The applicant sought to appeal from orders of the Supreme Court of Victoria making absolute an order nisi for the review of the magistrate’s decision and remitting the matter for further consideration by the magistrate. Dixon CJ refused the application, relevantly holding that the word “and” had a dispersive rather than a cumulative effect in the definition.[3]
[3](1956) 96 CLR 526 at 528.
Counsel for the plaintiff also seek support for their argument as to the effect of the governing words by reference to a general proposition that a definition of a term as one “including” certain things will not be exhaustive[4].
[4]See: Adelphi (Estates) Limited v Christie (1984) 269 EG 221; Lewison, K, The Interpretation of Contracts (2nd Ed) at p 109 [4.10].
In addition, they refer to the general principles relating to the construction of insurance contracts, described by Kirby J in McCann v Switzerland Insurance[5] and repeated by his Honour in Johnson v American Home Insurance[6]. Accordingly, they urge the Court to apply those principles, by giving cl C.14 what they contend is its ordinary and fair meaning and the result of a liberal interpretation taking account of the commercial and social purposes for which it was written, contra proferentem. They argue that the purpose of the policy is to offer cover in relation to any heart attack suffered by Mr King and clearly diagnosed. The definition should be given an operation consistent with that purpose, in the absence of language clearly to the contrary. They submit that, wherever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that it would not have been intended by the parties. They contend that the defendant should not be considered to have intended to avoid insuring the plaintiff in relation to his heart attack.
[5](2000) 176 ALR 711 at 725-6 [74].
[6](1998) 192 CLR 266 at 272-6 [19].
Counsel for the plaintiff rely upon the context of the definition in the policy. They refer to other definitions of Insured Events in the policy which, in contrast to that of “Heart Attack” in cl C.14, use the word “must”.
They cite the definition of “Benign Intracranial Tumour” in cl C.3 and that of “Liver Disease” in cl C.18 which appear in the following terms :
“C.3 Benign Intracranial Tumour
Means a life threatening …, non cancerous tumour on the brain giving rise to symptoms of increased intracranial pressure such as papilloedema, mental symptoms and seizures as confirmed by a consulting Neurologist. The presence of the underlying tumour must be confirmed by imaging studies such as CT Scan or MRI.
. . .
C.18 Liver Disease
Means end stage liver failure. The diagnosis must be based on the following criteria: …” (emphasis added).
They submit that the word “must” would have been employed in place of “shall” in cl C.14, had the intent been that it should have imperative force.
The plaintiff also refers to cl D.3 of the policy. Clause D.3 provides that a claim for a benefit shall be admitted, relevantly, only if the Insured Event of a “Heart Attack” occurs whilst the policy is current and if :
“(ii)The Insured Event is diagnosed by a medical practitioner and is supported by clinical, histological and laboratory evidence as appropriate. The benefit is not payable if you do not have the condition which has been diagnosed.”
Counsel for the plaintiff submit that the provisions of cl D.3(ii) contemplate a diagnosis based on the outcome of tests other than those referred to in clause C.14 (i) and (ii).
Counsel for the plaintiff do not argue that the definition of “Heart Attack” in the policy is ambiguous. However, they submit, that if the Court were to take a contrary view, it should adopt a contra proferentem approach to its construction, by including within the ambit of the definition a heart attack diagnosed without evidence of associated electrocardiographic change.
The defendant
Counsel for the defendant, on the other hand, argue that the question raised by the definition is not whether Mr King had a heart attack diagnosed by any proper process; rather, the issue is as to whether he had a heart attack within the definition in the policy.
Counsel for the defendant maintain that the definition in cl C.14, sensibly construed, relates to a diagnosis which is the outcome of a diagnostic process based upon the two specified criteria. They refer to the definitions of the words “bases” and “diagnosis” in the Oxford English Dictionary to contend that the definition in cl C.14 speaks of a diagnosis of heart attack, being the opinion of a medical practitioner that there has been “death of a portion of heart muscle as a result of inadequate blood supply to relevant area”, which opinion must be supported by the presence of associated electrocardiographic change and consistent elevated cardiac enzyme levels.
The Oxford English Dictionary definitions upon which this argument is founded are in the following terms:
“basis . . .
(ii) Transferred and configurative senses. . . .
8.That by or on which anything immaterial is supported or sustained; a foundation, support”[7]
[7]At p 985.
and
“diagnosis . . .
1.a. Med. Determination of the nature of a diseased condition; identification of a disease by careful investigation of its symptoms and history; also the opinion (formally stated) resulting from such investigations.”[8]
[8]At p 596.
The defendant submits that the expression “shall include” has imperative force in the grammatical context of the definition of “Heart Attack”. Counsel for the defendant argue that the list of test results contained in the definition is not exhaustive, but that it indicates that the diagnosis must be supported by evidence of both electrocardiographic changes and elevated cardiac enzymes. They also contend that the logical extension of the plaintiff’s argument is that the definition would be satisfied in the absence of either one or both of the diagnostic criteria. Such a result would be extraordinary and could not have been intended by the draftsperson of the policy.
Counsel for the defendant rely upon the decision of the Court of Appeal of the Supreme Court of New South Wales in MLC Limited v O’Neill.[9] The subject policy defined “Heart Attack” in the following terms:
“This means the death of a portion of heart muscle (myocardium) as a result of inadequate blood supply. The diagnosis is based on clinical Electro Cardiogram (ECG) and biochemical assessment with the three following criteria normally being present:
● a history of typical chest pain
● confirmatory new ECG changes
●elevation of cardiac enzymes above standard laboratory levels of normal.”
[9][2001] NSW CA 161.
In O’Neill the primary judge had recognised the respondent’s entitlement under the policy when a myocardial infaction had been properly diagnosed, on a basis acceptable to modern medical science, notwithstanding that the diagnosis was not based on the ECG or biochemical assessment to which the definition referred. However, the Court of Appeal upheld an appeal on the basis that the liability was triggered by a diagnosis which the policy stipulated was to be based on clinical ECG and biochemical assessment.[10]
[10][2001] NSW CA 161 at [16] per Mason P.
Mason P, with whom Handley and Hodgson JJA relevantly agreed, referred to a submission to the effect that the prescription of the types of diagnosis was indicative, rather than imperative, as well as an argument relying upon the use of imperative language elsewhere in the policy[11]. His Honour went on to state:
“I do not accept this submission nor do I accept the related submission that the words commencing ‘The diagnosis is based on’ are not an essential part of the definition of heart attack. I accept that this is a matter of impression, but my clear impression is that the definition of heart attack is a composite one and, whatever the scope of the concluding words, there must be a diagnosis based on ECG and biochemical assessment.”[12]
[11][2001] NSWCA 161 at [19].
[12]Ibid.
Mason P found no ambiguity which would trigger the contra proferentem rule invoked by the respondent.[13]
[13][2001] NSW CA 161 at [20].
Hodgson JA expressed his concern that the subject policy might result in there being no entitlement to a benefit in relation to a heart attack diagnosed by some different criteria which might, in the future, have replaced the specified criteria which had, by then, become discredited scientifically. However, his Honour considered that the provisions of the Trade Practices Act 1974 (Cth) might be invoked to deal with the conduct of an insurer promoting the policy in such circumstances. Ultimately, Hodgson JA was persuaded that the absence of the words “must be” from the clause, “the diagnosis is based on” certain procedures, did not result in a different conclusion, because the provision would otherwise “effectively be surplusage”. [14]
[14][2001] NSW CA 161 at [29].
Counsel for the defendant argue that the decision in O’Neill supports the proposition that the policy contains a composite requirement as to the bases upon which a heart attack is diagnosed.
The plaintiff in reply
Counsel for the plaintiff respond that, although similar, the wording of the policy relevantly differs from that of the policy under consideration in O’Neill. They also argue that the facts in that case are distinguishable, as the heart attack in question was not diagnosed on the basis of either ECG change or biochemical assessment, pointing out that the definition would not have covered the heart attack, even if the word “and” were to have been given dispersive effect.
Counsel for the plaintiff further submit that the Insured Event is the heart attack, rather than the diagnosis.
Conclusion
In my view, the definition of the Insured Event of a “Heart Attack”, like the similarly worded definition in O’Neill, is a composite one. It includes the requirements as to the basis for diagnosis listed in cl C.14 (i) and (ii), as well as the outcome of any exercise of the defendant’s discretion contemplated by the last sentence.
The words “shall include” are used imperatively in the definition. I reach this conclusion notwithstanding that the word “must”, found elsewhere in the policy, has not been utilised.
Further, cl C.14 supplies the definition of the “Heart Attack” which is the “Insured Event” referred to in cl D.3(ii). The reference (in effect) to the “appropriate” evidence of the Insured Event in that sub-clause should be construed as a reference to the evidence of the requisite basis for diagnosis under cl C.14.
I do not find cl C.14 to be ambiguous, triggering application of the contra proferentem principle. In my opinion, its meaning is clear and the words used should be given their ordinary meaning.
I do not consider the construction of cl C.14 for which the defendant contends to be productive of an extraordinary, absurd or unjust result. The wording of the policy simply limits the type of heart attack in relation to which a benefit is payable to one demonstrated by the presence of the two diagnostic criteria listed in the definition or one falling within the definition by the operation of the last sentence when the insurer has exercised its discretion in favour of considering the results of other tests.
On the other hand, to give the word “and” the dispersive, or alternative, force for which the plaintiff contends would be the render all but the first sentence of cl C.14 surplusage. Hodgson JA in O’Neill considered such a outcome to be a reason for concluding that the definition in that case (which did not contain the word “shall” which appears in cl C.14) should be given imperative force. In my view, there is even more reason to accord the word “shall” in cl C.14 the imperative force which will avoid the result that all but the first sentence of the definition is redundant.
In the absence of a diagnosis based upon both electrocardiographic changes associated with Mr King’s heart attack and elevated cardiac enzymes consistent with it, the plaintiff is not entitled to the claimed indemnification under the relevant terms of the policy upon which it relies.
The proceeding should be dismissed.
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