Michael Robert Till v National Mutual Life
[2004] ACTCA 26
MICHAEL ROBERT TILL v NATIONAL MUTUAL LIFE
ASSOCIATION OF AUSTRALASIA LTD [2004] ACTCA 26 (10 December 2004)
INSURANCE – income protection policy – entitlement to benefits of policy by total or partial disability – cessation of payments – whether insurer required to continue disability payments when employment contract ends.
CONTRACTS – repudiation – whether erroneous view of obligations amounts to repudiation.
Taylor v J Thomas & Son (1983) 2 ANZ Insurance Cases ¶60-524
Shevill v Builders Licensing Board (1981) 149 CLR 620
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Roadshow Entertainment v (ACN 053 006 269)Pty Ltd (1997) 42 NSWLR 462
Ross T Smith & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
No. ACTCA 19-2004
No. SC 106 of 2002
Judges: Crispin P, Connolly and Selway JJ
Court of Appeal of the Australian Capital Territory
Date: 10 December 2004
IN THE SUPREME COURT OF THE ) No. ACTCA 19-2004
) No. SC 106 of 2002
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:MICHAEL ROBERT TILL
Appellant
AND:NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD
Respondent
ORDER
Judges: Crispin P, Connolly and Selway JJ
Date: 10 December 2004
Place: Canberra
THE COURT ORDERS THAT:
The appeal be upheld.
There be judgment for the appellant in the sum of $50,529 plus costs.
The matter be remitted to the trial judge for further assessment of damages from 26 March 2003.
The respondent pay the appellant’s costs of the appeal and below.
IN THE SUPREME COURT OF THE ) No. ACTCA 19-2004
) No. SC 106 of 2002
AUSTRALIAN CAPITAL TERRITORY )
)
COURT OF APPEAL )
ON APPEAL FROM A SINGLE JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
BETWEEN:MICHAEL ROBERT TILL
Appellant
AND:NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD
Respondent
Judges: Crispin P, Connolly and Selway JJ
Date: 10 December 2004
Place: Canberra
REASONS FOR JUDGMENT
THE COURT:
This is an appeal from a decision of a judge that the plaintiff appellant’s entitlement under the terms of an income protection insurance policy had ceased due to the end of his contract of employment.
The appellant issued proceedings in this Court alleging that the respondent had breached its contract of insurance with him. The appellant sought damages for that breach. The trial judge held that there had been no breach of the insurance policy. The appellant says that the trial judge misinterpreted the insurance policy. The appellant says that the trial judge should have found that the respondent had breached its obligations under the policy. For the reasons given below we are of the view that the appeal must be allowed and we make the consequent orders discussed below.
The appellant was a self-employed electrician carrying on electrical work in connection with air-conditioning. He provided his services on a long-term contract to a Canberra air-conditioning firm, Southern Air Conditioning. On 15 October 1996 he took out an insurance policy described as a “Vital Income Protection Policy” with the National Mutual Life Association of Australasia Limited, which is now part of the AXA Australia Group.
His Honour made the observation, which we would endorse, that although the insurance policy –
seems to give effect to the intention that it be in “plain English” so as to enable the parties to have a better understanding of it. This case is an example where that intention is clearly not met.
It is clear from its terms that the policy is intended to apply both to employees and to self-employed persons. The policy provides for a weekly benefit if the person insured is totally disabled through either injury or sickness. The policy provides that a person is totally disabled if -
He or she:
·Cannot do at least one of the income producing duties of his or her occupation;
·Is not working; and
·Is following the advice and under the regular care of a medical practitioner.
In the event that the person is “totally disabled” the policy provides for the payment of a fixed amount specified at $765.67 per week.
The policy then makes provision for a person who, despite meeting the definition of total disability, is able to undertake some work. Such a person is, by definition, not “totally disabled” no matter how extensive the disability might be. The policy provides that such a person is to be taken as being partially disabled. It provides -
If the person insured has been totally disabled for 14 days and then he or she does some work - but is partially disabled - we will pay you a reduced weekly benefit ...
The person insured is partially disabled if, immediately after being totally disabled for at least 14 days, he or she returns to work and – because of the disability – earns less than the amount of his or her pre-disability income.
The payments to be made in relation to “partial disability” is that proportion of $765.67 per week that the actual income earned by the insured bears to his or her pre-disability income. The amount of such payments can vary from time to time. For some periods they may be the full amount of $765.67 per week.
The policy expressly provides that payments continue for so long as the person is totally or partially disabled, even if the term of the policy otherwise expired. The policy provided -
We will stop paying if the person insured stops being entitled to benefits for being totally disabled or partially disabled.
In 1998 the appellant made a claim under the policy. The trial judge found that in 1997 he had been complaining of tiredness, shortness of breath and asthma. He underwent certain tests in late 1997, and on 1 July 1998 Dr Mullins reported that “exposure to large amounts of dust mite at work was most likely to [be] responsible for the severe deterioration in symptoms over the past two years”. On 15 July 1998 the appellant, on the advice of Dr Mullins and Dr Hurwitz, a respiratory physician, ceased work for six weeks, and his asthmatic condition improved greatly. The trial judge found that payments were commenced by the defendant under the policy from 12 August 1998, originally on the basis of total disability. He also found that, as the appellant undertook various forms of light duties or clerical work with Southern Air Conditioning, he was paid a benefit under the policy on the basis of partial incapacity.
The trial judge found at [8], and it was not challenged on the appeal, that:
From September 1998 the plaintiff worked part-time at Southern Air Conditioning performing clerical work with that company and its successor, AE Smith, until 15 August 2000. Since that time he has worked variously with the ACT public service, Addecco and Abasol. The payments to him by these bodies have never reached the level of his pre-disability income. At the time of this hearing the plaintiff was working at Abasol. These periods of work were presumably the cause of the defendant paying the plaintiff on the basis of partial disability.
The respondent continued to make payments to the appellant until 1 May 2001, when it ceased payment altogether. There had been a reduction in benefits payable indicated to the appellant on 15 November 2000, whereby the respondent advised that it would only pay at 88% on the basis that the appellant was no longer totally disabled.
On 1 May 2001, the respondent advised that it would cease payments entirely because it formed the view, on medical advice, that the appellant was no longer disabled. The letter asserted that it was the combined view of two doctors that:
... the condition you have claimed for is currently under excellent control and that you are able to return to work provided you have respiratory protection where dust is excessive ...
We consider it is not unreasonable for you to wear respiratory protection in your circumstances.
As you are now no longer totally disabled in accordance with the terms and conditions of your policy, we regret to advise that no further benefits are payable.
His Honour found that the appellant had a “sickness” for the purposes of the policy, that sickness being atopic asthma with sensitivity to dust mite allergens. He continued at [24] -
The consequence of the sickness is that the plaintiff is unable, by reason of this, to work in a dusty environment for to do so would bring on his pre-existing asthma. I also accept that it is not practicable for him to work in such environments with respiratory protection. In terms of the policy, an “income producing duty” is referable to the plaintiff’s activity as an air conditioning technician required by his contract to work in a dusty environment. The “duty” to which the policy refers I regard as, “that which one is bound to do by moral or legal obligation” or perhaps the “action required by one’s position or occupation; office; function” (The Macquarie Dictionary, 3rd ed). In the plaintiff’s case, that duty encompasses the places necessary for him to be in carrying out the contract engaged in for the purposes of his business. In this regard, I consider that the “occupation” described in the policy as encompassing “one’s habitual employment, business, trade or calling” (The Macquarie Dictionary, 3rd ed). In the plaintiff’s case, that includes the business constituted by his engagement as an air conditioning technician to carry out the duties as directed under the contract.
His Honour then concluded that the consequence of his condition was that he met the criteria under the policy for total disability. He said at [25]
It follows that I regard the plaintiff as totally disabled in terms of the policy by reason of not being able to do one of the income producing duties of his occupation and the cause of this is his sickness being the underlying asthma condition coupled with his increased sensitivity to allergens.
Mr Crowe, for the appellant, submits that his Honour, thus far, had found in the appellant’s favour. Having reached the view that the appellant’s condition was such that it met the criteria for total disability, it would follow that he was entitled to a benefit that would be paid on the basis of total incapacity, or partial incapacity if he had been able to engage in some alternative employment. These payments had been made by the respondent from mid 1998 to 1 May 2001.
The trial judge did not reach this conclusion, because he made a finding that the obligations of the insurer under the contract had come to an end when the appellant’s employment arrangements came to an end. This is the primary issue on this appeal. The crucial finding is at [29] of the judgment where his Honour held -
In my view, the defendant was entitled under the terms of the policy to cease the plaintiff’s weekly benefit at least when the plaintiff’s contract with AE Smith ceased in August 2000 if not at some earlier stage when AE Smith was not pursuing its air conditioning business or if the plaintiff was no longer required by that company to work as an air conditioning technician. If the contract to work as an air conditioning technician is no longer on foot, but there is a return to work, it cannot be said that it is because of the disability that the plaintiff earns less than the amount of the pre-disability income. The plaintiff no longer qualifies as partially disabled under the policy.
It seems to us that his Honour here fell into appellable error. He had earlier found that the appellant met the criteria under the policy for incapacity payments, in that his condition of sensitivity to dust meant that he was unable to do one of the income producing duties of his occupation as he was unable to work in confined spaces where dust would be a problem. This was clearly correct on the evidence before us. The appellant had been self-employed as an air-conditioning electrician, under a contract to the firm Southern Air Conditioning, that later merged with AE Smith. His Honour found that that firm’s contract came to an end, and that AE Smith left the industry. This fact, however, does not, it seems to us, affect the obligation on the respondent insurer to provide payments under the policy if the appellant meets the criteria for incapacity payments. The status of his contract does not alter the fact that, as his Honour found, his occupation was that of air-conditioning electrician, and he was unable, by reason of his sickness, to do at least one of the income producing duties of his occupation.
The error of this approach may readily be grasped when considering the common position of a tradesperson in the building industry who works as a subcontractor. Such a person will frequently be working on a series of short-term contracts. It could not be said that if such a person held the policy of insurance subject to this appeal that the obligation of the insurer to pay disability payments would come to an end at the point in time when the contract that was in place at the date of the injury or sickness came to an end.
The obligation under the insurance contract makes no reference to the nature of the employment relationship. Indeed, as his Honour noted, the policy of insurance seems to be drafted on the basis that it will apply equally to employees and self-employed persons. The obligation to make a payment occurs when the insured person:
·Cannot do at least one of the income producing duties of his or her occupation;
·Is not working; and
·Is following the advice and under the regular care of a medical practitioner.
The respondent argued that the approach of his Honour could be supported on the basis that the appellant’s “duty” to work in a dusty environment only arose in the context of the actual contract he had with Southern Air Conditioning, subsequently AE Smith. It was argued that when that contract ceased, so too did the relevant disability, it not having been proved (it was argued) that the appellant could not perform the relevant duties of his occupation in other contexts. It would not appear that this is the approach that was taken by his Honour. There was considerable evidence before his Honour that the applicant was under a continuing disability to work as an “electrician” and, particularly an electrician involved in air-conditioning. There was also considerable evidence that his income was reduced by reason of his disability. Most importantly, his Honour’s findings in [24] of his reasons (quoted above) are contrary to this argument.
His Honour found that the appellant was “disabled”, and having so found, it seems to us that he was in error in reading into the contract of insurance, in effect, a provision that the obligation to make payments only existed so long as the insured remained under a contractual obligation to provide the income producing duties of his or her occupation to a particular employer or head contractor.
The appellant’s claim below was framed as, alternatively, a claim for damages based on a repudiation of the insurance contract by the respondent, and a claim for damages for breach of contract, being the ongoing payments under the insurance contract that the appellant says are due under the terms of the policy if it was found that the conduct of the respondent in ceasing payments did not amount to a repudiation of the contract. As his Honour noted in his reasons, there is nothing inappropriate in pleading a claim in such a way, citing Taylor v J Thomas & Son (1983) 2 ANZ Insurance Cases ¶60-524 at 77,991, where the Full Court of the Supreme Court of Queensland, (McPherson J, Kelly and GN Williams JJ agreeing) said:
Under modern conditions no obstacle exists to pleading in the alternative what are really two inconsistent claims, one being for damages for breach involved in a repudiation of the policy of insurance, and the other under the policy for moneys due by its terms. ...
The appellant’s case, on appeal and below, was that the decision of the respondent insurer to cease payments in May 2001, together with the letter of November 2000 reducing payments, amounted to a repudiation of the contract of insurance.
The learned trial judge was in agreement with the submission of Mr Crowe that the reasons given by the insurer in the letter of 1 May 2001 were in fact not sustainable on the basis of the medical evidence then before the insurer. His Honour expressed the view that, despite being in error, the letters form the respondent to the appellant did not establish repudiation. He said at [32] –
For that to be so, I would have to view the letters as inevitably leading to the conclusion that the defendant only intended to fulfil the contract in a manner substantially inconsistent with its obligations and not in any other way (see Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623). The letters demonstrate an erroneous view of the effect of the medical opinion and of the obligations under the policy but that does not necessarily establish an intent to repudiate.
It seems to us that this is the correct approach to the question of repudiation. Because the insurer took a view of medical reports that a court may regard as erroneous, and so terminated payments, does not of itself demonstrate a repudiation. As Wilson J observed in Shevill v Builders Licensing Board (1981) 149 CLR 620 at 633, “Repudiation of a contract is a serious matter and is not to be lightly found or inferred.” The material before the trial judge, and before us on appeal, demonstrates that the insurer came to an erroneous conclusion, but it would be a substantial step to go from this to infer an intention to repudiate the contract.
A repudiation occurs when, as Gibbs CJ expressed it in Shevill (op cit) at 625:
... one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.
The evidence before us establishes only that the insurer took an erroneous view of its obligations under the contract. As Stephen, Mason and Jacobs JJ observed in DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432:
... on the evidence this Court would not be justified in finding that the appellant acted otherwise than in accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the contract. Consequently it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear (see Asperey JA in Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126 at 149). In these circumstances the Court is not justified in drawing an inference that the appellant intended not to perform the contract according to its terms or that it repudiated the contract.
This approach is clearly settled law, and has been applied in intermediate appellate courts - Roadshow Entertainment v (ACN 053 006 269)Pty Ltd (1997) 42 NSWLR 462 at 479.
We are of the view that the respondent insurer was in error in ceasing to make payments, but that this error falls well short of what is needed to establish repudiation. As Lord Wright said in Ross T Smith & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 at 71 –
repudiation of a contract is a serious matter, not to be lightly found or inferred ... mere honest misapprehension, especially if open to correction, will not justify a charge of repudiation.
His Honour’s view that the conduct of the respondent insurer did not amount to repudiation, which we are of the view is entirely correct, would not of course be fatal to the appellant’s case, because the matter was pleaded in the alternative, and Mr Crowe says that, upon a finding that the respondent’s conduct did not amount to repudiation, the trial judge, having been satisfied that the appellant met the criteria under the policy for incapacity payments, should have proceeded to assess damages on the basis of a calculation of the amounts payable under the contract of insurance from the date of cessation of payments to the date of trial.
It seems to us that on this basis the appeal must be upheld. It would follow that there should be judgment for the appellant and the matter should be remitted for further hearing on damages, to be calculated on the basis that there was no repudiation.
Mr Crowe noted that the only evidence before his Honour as to the damages that should be payable if repudiation was not established was a calculation of the income benefit payable under the policy from 1 May 2001 to the date of hearing of 26 March 2003. This was in the form of a report by Mr Sykes, a forensic accountant, and appears in the Appeal Book at 180. This was prepared on the basis, as found by the trial judge, that the appellant met the criteria for payment in that he was unable to perform the duty of an air-conditioning electrician, and it took into account all other earnings that he had achieved to 26 March 2003. It calculated a total loss to that date of $50,529.
It seems to us that in the circumstances of this case it would be entirely appropriate for us as an Appeals Court to uphold the appeal and enter partial judgment for the appellant in the sum of $50,529, and to remit the matter to the trial judge for further calculation of damages from 26 March 2003. We are clearly not in a position to do this, as it will require the consideration both of additional medical evidence, to enable a determination to be made as to whether the eligibility criteria is still met for incapacity payment under the insurance policy, and evidence of what earnings he has in fact been able to achieve by way of part-time or alternative employment.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.
Associate:
Date: 10 December 2004
Counsel for the appellant: Mr RL Crowe SC with Mr DJC Mossop
Solicitor for the appellant: Pamela Coward & Associates
Counsel for the respondent: Mr J Gleeson
Solicitor for the respondent: Meyer Clapham
Date of hearing: 12 November 2004
Date of judgment: 10 December 2004
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