MLC Ltd v J&W Management Services Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

No. 5266 of 1996

MLC LTD	Plaintiff
v
J & W MANAGEMENT SERVICES PTY LTD	First Defendant
and
KEVIN STANLEY ROBERT SEDAWIE (in his capacity as administrator ad litem of the estate of CHARLES WARRICK MAHONY)	Second Defendant

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATES OF HEARING:	8, 9, 10, 13 and 14 November 2000
DATE OF JUDGMENT:	24 July 2001
CASE MAY BE CITED AS:	MLC Ltd v J&W Management Services Pty Ltd
MEDIUM NEUTRAL CITATION:	[2001] VSC 241

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Insurance - agent of insurer - duty of agent to insurer - agents agreement - duty of agent to insurer implied as a matter of law - notice of cancellation of policy – time when notice of cancellation may be given by insurer - whether insurer able to give notice of cancellation before date on which premium due – policy considered by insurer to be no longer in force when claim made on policy – decision to meet claim, whether reasonable – whether director/employee of company being agent of insured liable for acts and omissions of agent company – whether failure of agent to inform insured of matters constituted breach of s. 52 of Trade Practices Act – contributory negligence – whether damages to be awarded under s. 82 of the Trade Practices Act may be reduced for fault of plaintiff – whether contributory negligence able to be relied on in circumstances where damage caused by breach of express term of contract.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G.A.P. Nettle QC with Mr M.K. Moshinsky	Wisewoulds
For the Defendant	Mr G.A. Uren QC with Mr C. Macauley	Ebsworth & Ebsworth

HIS HONOUR:

In these proceedings the plaintiff claims damages against the defendants in the sum of $531,615.74. The causes of action relied on by the plaintiff are that the first defendant and Charles Warwick Mahony deceased (“the deceased”) acted in breach of agency retainer agreements, that respectively they engaged in misleading and deceptive conduct contrary to the provisions of s. 52 of the Trade Practices Act 1974 (Cth) and s. 11 of the Fair Trading Act 1985 (Vic) and that as business agents of the plaintiff they were negligent.

The plaintiff is a life insurance company. It is the successor in law of Capital Financial Group Ltd (“Capita”) which was formerly known by the name of City Mutual Life Assurance Society Ltd (“City Mutual”). The second defendant is sued as the administrator ad litem of the estate of the deceased. The deceased was at all material times a director of the first defendant.

By an agreement made on 17 September 1982 City Mutual appointed the deceased as its agent and sales representative. By a further agreement dated 31 January 1986 City Mutual appointed the deceased as its agent with authority from 1 January 1986 to “arrange contracts of insurance for all of City Mutual’s products”. It was provided by cl. 3(b) thereof:

“The agent shall ensure that at all times the agent does not commit any breach of the Insurance (Agents and Brokers) Act 1984 of the Commonwealth of Australia.”

By cl. 5 thereof it was provided:
“It is intended by this agreement that the relationship between City Mutual and the Agent shall be strictly that of principal and agent and not in anyway that of employer and employee. This agreement contains the whole of the terms relating to the Agent’s appointment.”

By cl. 12(a) of the agreement it was provided:
“The agent shall not under any circumstances:
(a)make, alter or discharge contracts for City Mutual, nor waive forfeitures, name any extra rate for special risks, offer a contract at other than the approved premium rates or make any endorsement whatsoever on the policies of City Mutual.”

That agreement continued until 26 May 1989.

On 26 May 1989 the deceased wrote a letter to Capita informing it that he wished to transfer his agency to his company, the first defendant, of which he was a director. By an agreement made 11 July 1989 between Capita and the first defendant, Capita appointed the first defendant as its agent from 26 May 1989 and that from that date “any existing agency agreement between Capita and the Agent is cancelled”. Although by the agreement the first defendant was identified as the “Agent”, it is to be concluded that by that term the agency agreement existing between the deceased and Capita up to 26 May 1989 was cancelled. By the agreement made 11 July 1989 Capita authorised the first defendant to “arrange contracts of Life Insurance or Superannuation for Capita”.

It was provided by cl. 11 of that agreement that:

“The agent shall on the day of receipt or as soon as is reasonably practicable pay to Capita all moneys received by him in connection with a contract of life insurance or proposed contract of life insurance.”

Again by cl. 12.1 of that agreement it was provided:
“The agent shall not under any circumstances:
make, alter or discharge contracts for Capita, nor waive forfeitures, name any extra rate for special risks, offer a contract at other than the approved premium rates or make any endorsement whatsoever on the policies of Capita.”

On 25 June 1990 the plaintiff entered into an agreement with the first defendant whereby the plaintiff appointed the first defendant as its agent. By cl. 3 of that agreement it was provided:

“New Business
The agent is authorised to canvass within Australia for proposals as specified in the schedule of commission forming part of this agreement or as otherwise advised to the Agent by MLC.”

It was agreed between the plaintiff and the first defendant pursuant to that agreement, as is relevant, that which was provided in the following clauses:
“6. Limitations of Authority
The Agent is not authorised nor allowed nor shall hold itself out as being so authorised to perform the following:
(a)Undertake any duties or exercise any authority on behalf of the MLC other than those stated in this agreement.
(b)Refund any part of a premium on a policy or settle any amounts due or purportedly due under any policy.
(c)Arrange a medical examination or other medical tests other than as outlined in MLC’s standard procedures or as otherwise given by the written permission of MLC.
(d)Incur costs or charges on behalf MLC unless authorised by MLC.
(e)Make available insurance cover, waive or modify in any way the terms of insurance or admit liability for a claim or interfere with the rights of any insurer for whom MLC is acting.

8. Collection of Premiums
The agent is authorised to collect the initial premium or instalment of the premium in respect of proposals for policies. Where the initial premium is in a form other than a cheque made payable to MLC the agent is required to issue a receipt showing MLC as the insurer. The agent shall provide MLC with details of the receipts when forwarding all moneys to MLC. All such moneys are the property of MLC and are to be paid to MLC promptly without any deduction.

16. Notices
Subject to paragraph 10 headed “Variation” any notice, demand, request or consent to be given by MLC shall be given in writing and delivered or handed to the agent directly or sent by pre-paid post addressed to the last registered address known to MLC.
Any such notice, demand, request or consent so posted by MLC shall be deemed to have been duly served upon the agent on the third day after the date of posting.”

Clause 17 provided for commission to be paid by the plaintiff to the first defendant.

Pursuant to a “Merger of Business Agreement” entered into on 18 April 1990 between the plaintiff and Capita it was agreed that on and after 19 April 1990 Capita must cease to issue any product as specified by the plaintiff. By the agreement the plaintiff assumed the exclusive management of the business carried on by Capita in accordance with the agreement and as more particularly provided by Schedule 3 to the agreement. Pursuant to that schedule the plaintiff agreed to manage and control the business as agent for Capita and agreed that it must as agent “perform and fulfil all obligations, and discharge all liabilities of Capita under the Policies in accordance with their terms” (cl. 2(h) Schedule 3). “The Policies” were defined within the agreement to include “Life Insurance Policies” and superannuation product on issue by Capita. “Life Insurance Policies” in turn were defined to mean “any policy of life insurance (including any ‘continuous disability policy’)”.

On 4 October 1990 the Federal Court of Australia ordered that the scheme giving effect to the amalgamation of the life insurance business of Capita and the plaintiff under the Life Insurance Act 1945 (Cth) be confirmed without qualification. Pursuant to that scheme it was provided, inter alia, by the following clauses:

“2. On the effective date [4 October 1990]:
(a)MLC shall assume and take over and thereafter indemnify Capita in respect of all liabilities both actual and contingent of Capita under the policies and all other liabilities of Capita in respect of the life insurance business of Capita, being liabilities properly chargeable to the statutory funds;
(b)Capita shall be released and discharged from all future liability under the policies and other liabilities of Capita in respect of the life insurance business of Capita;
(c)subject to this scheme the holders of the policies and all persons claiming through or under them on the one hand and MLC and its statutory funds and other assets on the other hand shall acquire and become subject to rights and liabilities identical, subject to the joint actuarial report, with the rights and liabilities which immediately before the effective date existed between those holders and persons on the one hand and Capita, the statutory funds and other Capita assets on the other hand;
(g)any reference in any of the policies of Capita shall have effect as a reference to MLC;
(h)a reference to Capita in any other agreement, deed or other instrument relating to any superannuation fund shall have effect as a reference to MLC;
(j)any legal proceedings pending by or against Capita in respect of the policies or the life insurance business shall be deemed continued by or against MLC (as the case may be).

by virtue of the scheme and without any further act, deed, instrument or resolution.

3. Nature of the Scheme
This scheme is binding on all persons and has effect notwithstanding anything in the instruments constituting Capita or MLC or their respective articles of association or rules.”

On or about 1 April 1987 Capita, by a policy of insurance issued by it to Cash Resources Australia Pty Ltd (“Cash Resources”), agreed to pay to Cash Resources the sum of $500,000 on the terms thereof and on the occurrence, inter alia, of the total and permanent disablement of William Lloyd Roberts. Pursuant to cl. 4(c) of the policy it was agreed:

“This policy shall be null and void and all moneys paid in respect thereof absolutely forfeited to Capita in the following circumstances.
(c)Where any premium is not paid on the due date or within one month thereof.

It was further agreed pursuant to cl. 9(b) and proviso (a) thereto that:
“The insured shall be deemed to be totally and permanently disabled if while this policy is in force and prior to the last anniversary of the commencement date of the policy immediately preceding his/her sixtieth birthday he/she suffers bodily injury or disease such that in the opinion of Capita (after consideration of such medical and other evidence as it shall require) he/she:
(b)is at the relevant time and shall remain for the remainder of his/her life wholly prevented by reason of such bodily injury or disease from following any business occupation or regular duties for which he/she is reasonably fitted by education, training and experience.
For the purpose of this clause any business occupation or regular duties for which he/she is reasonably fitted shall include such pre-existing occupation.
The words “total and permanent disability” shall have a corresponding meaning.
Provided that a total and permanent disability benefit shall not be payable pursuant to this clause in the following circumstances:
(a)where in the opinion of Capita as a result of medical and other treatment or rehabilitation the insured would be capable of following a business occupation or other duties for which he/she may reasonably become fitted; in forming its opinion Capita shall take into account the insured’s pre-existing occupation, his/her education, training, status and experience.”

The type of policy issued is commonly referred to as a “Key Man policy”. By the terms of the schedule forming part of the contract of insurance the life insured was that of Roberts; the sum insured was $500,000; the commencing date was 26 March 1987; the amount of each premium was $3,230; the “due dates on which premium (sic) payable are the commencing date and - annually”; the maturity/expiry date was 26 March 2012. It was further provided by the schedule as follows:

“Special Conditions:
1. Important Note
The premium for this policy will change each year. There are two reasons for this. Firstly the sum insured is adjusted annually. Secondly the premium depends on the life insured’s age in the year concerned. The premium will be calculated each year from Capita’s then current premium scales.

2. Total and permanent disability benefits are also provided.”

It is against that background of agency agreements, the merger agreement, the order of the Federal Court confirming the scheme referred to and the contract of insurance referred to that the plaintiff’s claim is made in these proceedings.

The plaintiff alleges that at all material times until 26 May 1989 the deceased was an agent of Capita in relation to its insurance business, that at all material times from or about 26 May 1989 until 4 October 1990 or alternatively 25 June 1990 the first defendant was an agent of Capita in relation to its insurance business, that pursuant to the merger agreement Capita and the plaintiff agreed that the plaintiff would assume the liabilities of Capita under the contract of insurance and other policies and that the business of Capita would be merged with the business of the plaintiff; that on 25 June 1990 the plaintiff appointed the first defendant as its agent in connection with its insurance business and that pursuant to the order of the Federal Court made on 4 October 1990 the plaintiff succeeded to all the rights and obligations of Capita against the defendants.

The plaintiff’s claim for damages against the defendants is made as follows. The plaintiff alleges that between 1987 and 1990 the first defendant and the deceased without authority from Capita represented to Cash Resources, the insured under the contract of insurance, that the premium for the policy was $2,880 per annum when in fact the premium was higher. The plaintiff alleges that as a result of such representation the premium of $4,561, due to be paid under the contract of insurance, to Capita by the insured on 26 March 1990 was not paid on or before that date or within the following month, and that in consequence thereof Capita was entitled to terminate the policy by a notice in writing to Cash Resources. The plaintiff alleges that on or about 17 May 1990 Capita remitted to the first defendant and to the deceased a letter for transmission to the insured by which Capita notified the insured that the policy had lapsed for non-payment of premium. It is alleged that the first defendant and the deceased did not transmit the said letter to Cash Resources and did not inform Capita or the plaintiff that they had not done so. It is alleged that in ignorance of the representations made as referred to and the fact that neither the first defendant nor the deceased had transmitted the letter of 17 May 1990 to Cash Resources at all material times from 17 May 1990 Capita and subsequently the plaintiff treated the policy as having lapsed. It is alleged that the first defendant and the deceased were aware that Capita and subsequently the plaintiff so treated the policy as having lapsed and further it is alleged that from 26 May 1990 Capita (alternatively the plaintiff) cancelled and did not subsequently reinstate reinsurance it had taken out in respect of the policy in the sum of $250,000.

It is further alleged by the plaintiff that the first defendant and the deceased between 1990 and 1995 received and accepted two payments from Cash Resources as and for payment of premiums under the policy one being in the sum of $2,880 received on or about 8 June 1990 and the other being for the sum of $1,696.50 received on or about 30 June 1994. The plaintiff alleges that the first defendant and the deceased represented to Cash Resources and dealt with it on the footing that the policy remained on foot. It is alleged that the first defendant and the deceased remitted the first payment to the plaintiff without informing it of its purported character, along with payments made by Cash Resources from time-to-time as superannuation plan contributions to a superannuation plan of which MLC Nominees Pty Ltd was the trustee. It is alleged that the first defendant and the deceased remitted the second of the said payments received from Cash Resources, to the plaintiff indicating that it was a contribution to Robert’s account with the said superannuation plan. The plaintiff alleges that on or about June 1994 Roberts became totally and permanently disabled within the meaning of the policy and subsequently Cash Resources made a claim under the policy which the plaintiff met by making a payment of $531,615.74 to Cash Resources in January 1997. The plaintiff alleges that in breach of the terms of the agency agreements the deceased or the first defendant (as the case may be) and negligently both the first defendant and the deceased:

¨    misrepresented to Cash Resources the amount of the premium for the policy as being $2,880 per annum;
¨    misrepresented to Cash Resources the basis upon which premiums were received and applied as alleged;
¨    did not inform Cash Resources of the lapse of the policy or alternatively that Capita and the plaintiff considered the policy to have lapsed;
¨    did not tell Capita or the plaintiff that Cash Resources had not been informed of the lapse of the policy or alternatively that Capita and the plaintiff considered the policy to have lapsed;
¨    did not take reasonable care to rectify the status of the policy in particular by ensuring that all premiums due on the policy were paid and ensuring that Capita and the plaintiff treated the policy as being on foot;
¨    informed Cash Resources that the policy remained current and dealt with the insured on that footing in circumstances where they knew that Capita and the plaintiff considered the policy to have lapsed;
¨    did not tell Capita or the plaintiff that the first defendant and the deceased had informed Cash Resources that the policy remained current and were dealing with Cash Resources on that footing in circumstances where they knew that Capita and the plaintiff considered the policy to have lapsed;
¨    received from Cash Resources and accepted payments of money from time-to-time as and for the payment of the premium under the policy;
¨    remitted moneys received from Cash Resources in the character of premium payments under the policy without informing the plaintiff that the moneys had been received and accepted in the character and indicating to the plaintiff that the money was a contribution to an account in a superannuation plan.

Further or alternatively the plaintiff alleged that the first defendant and the deceased respectively engaged in conduct in trade or commerce which was misleading and deceptive of the plaintiff or likely to mislead and deceive the plaintiff in contravention of s. 52 of the Trade Practices Act 1974 and s. 11 of the Fair Trading Act 1985.

The plaintiff alleged that in the circumstances it was obliged to pay Cash Resources the total and permanent benefit payable under the contract of insurance and it thereby suffered loss and damage. The plaintiff claims damages against the defendants in the sum of $531,615.74 being the principal sum due under the policy - $500,000 less premiums due on 26 March 1991 to 1995 inclusive ($31,269.25) together with interest $60,934.99 and $1,950 legal costs of Cash Resources. Alternatively the plaintiff claims damages on the basis that had proper premiums been paid on the policy, Capita would not have treated the policy as having lapsed, Capita would not have cancelled its reinsurance policy in the sum $250,000, or Capita or the plaintiff would have reinstated the reinsurance cover in respect of the policy and the plaintiff would not have incurred interest and legal costs in respect of the claim or cost of investigation and that in consequence the plaintiff suffered damages being the difference between the sum of $531,615.74 and the total of the loss of the insurance cover together with such costs incurred by it, when all calculated, amount to $297,062.17 as particularised in the document headed “Calculation of Loss and Damage”.

The defendants have denied liability to the plaintiff. The defendants as part of their defence initially pleaded that if they were liable to the plaintiff in negligence the plaintiff was guilty of contributory negligence. After submissions had been concluded leave was granted to the defendants to amend their defence to take advantage of the amendments to s. 26 of the Wrongs Act 1958. It was then alleged by the defendants that if the defendants were liable to the plaintiff whether for breach of contract or in negligence the plaintiff was guilty of contributory negligence and any damages recoverable by the plaintiff in respect of the wrong committed by the first defendant or the deceased should be reduced having regard to the plaintiff’s share and responsibility for damages pursuant to s. 26 of the Wrongs Act 1958 (as amended).

In reply the plaintiff denied that it was guilty of contributory negligence and further claimed that a defence of contributory negligence was not available in respect of any breach for expressed terms of the agency agreements as those contractual duties were not concurrent and co-extensive with a duty of care in tort.

It was during the first agency agreement entered into between the deceased and City Mutual, dated 17 September 1982, that on 18 October 1985 the deceased by letter dated 15 October 1985 suggested to Cash Resources that it should obtain a “keyman” policy of insurance covering Roberts, the managing director of Cash Resources, in an amount of $500,000 which would cover the cost of his replacement in the event of his death or total and permanent disablement. The premium quoted by the deceased was $2,880 each year in the case of a policy including total and permanent disablement and in the case of a death only policy a yearly premium of $2,180. The keyman policy suggested by the deceased was “a non-capital, death and or disability cover renewable each year and convertible to permanent cover or superannuation”. It is not alleged that the deceased breached or acted in contravention of any term of this first agency agreement.

However, it is after the deceased had entered into his second agency agreement with City Mutual and dated 31 January 1986 and during the currency of that agreement, which continued until 26 May 1989 and subsequent to that time that it is alleged that the first defendant and deceased as agents for City Mutual, Capita and the plaintiff acted in breach of that and subsequent agreements.

On 9 February 1986 the deceased submitted to Capita the proposal for a keyman policy cover for a basic cover on the life of Roberts for the sum of $500,000 with yearly premiums of $2,880. However on or about 16 March 1987 and before the policy was issued by Capita, the deceased without the knowledge of Roberts or Cash Resources submitted to Capita a written alteration to the original proposal amending the premium to an amount of $3,230 payable annually. The document was purportedly signed by a director of Cash Resources whose signature had been witnessed purportedly by the deceased and who had signed the document as a witness and dated it 16 March 1987.

The signature purportedly witnessed by the deceased was not the signature of Roberts and it was not recognised by any relevant witness in evidence as that of a director of Cash Resources. The document itself demonstrates that the deceased was aware that the correct premium on the policy was $3,230. The date which the document bore, 16 March 1987 was subsequent in time to the document sent by Capita to the deceased being headed “new business advice” and dated 5 March 1987. By that document it stated that the proposal was medically acceptable subject to a number of matters one of which was, “balance of 1^st premium-$350”. That amount, when had regard to with the initial premium as quoted by the deceased, $2,280, totals $3,230 being the amount referred to in the document purportedly signed on behalf of Cash Resources which signature was said to have been witnessed by the deceased on 16 March 1987. The receipt of this “new business advice” sent by Capita to the deceased gives explanation as to why Roberts executed the “alteration of original proposal” as a witness to the purported acceptance of Cash Resources of the premium being $3,230. It was submitted on behalf of the plaintiff that by executing this document as a purported witness to Cash Resources accepting the premium of $3,230 the deceased acted contrary to and in breach of his agency agreement with Capita.

As previously referred to, it was on 1 April 1987 that the keyman policy was issued by Capita providing cover of $500,000 on the life of Roberts with a quoted premium of $3,230 and with special conditions previously referred to including that the premium for the policy would change each year and giving explanation for this.

It was in May 1987 that the deceased sent to Capita under the heading “new business” a note enclosing a cheque for $2,880 as part payment of the premium. At that time it was the understanding of Cash Resources that the full annual premium amount was $2,880. Again it is alleged by the plaintiff that this note establishes that the deceased acted in breach of his agency agreement in that he was informing the insured that the premium was different to that which he knew in fact was the case.

On 18 June 1987 the deceased sent to Roberts, at Cash Resources, a letter enclosing the “keyman policy document”. By his letter the deceased suggested that Cash Resources had had the benefit of a period of cover for nothing and stating – “If you wish, you can repay the premium to get the tax prior to June 1987, but as far as we are concerned you are paid up to April 1988. This was, in fact, not so as the premium due under the policy which had commenced on 26 March 1987 was only part paid as was known to the deceased but misrepresented to Cash Resources. It is alleged that in so informing Cash Resources and purporting to effect the premium due under the policy that the deceased breached his agency agreement with Capita.

The next relevant event that occurred was that on 22 April 1988 Capita issued a notice directed to Cash Resources at its business address which notice was headed “Important Notice”. The notice stated, “As the premium debt due on the date shown was not received within the grace period this policy is no longer in force. Prompt action now will restore the valuable benefits provided by the policy. Please read notes on the back”. The “premium debt” stated by the notice was $3,934.09. It was stated to be due on 26 March 1988 and the reinstatement date was stated to be 4 May 1988. This notice was in its form an overdue premium notice for policies less than two years in force. The recollection of the administrator of Cash Resources, Robyn Best, was not clear as to whether she had seen the document, however, when regard is had to other facts and matters I am satisfied that probably the document was received and seen by Roberts of Cash Resources. On 26 April 1988 a letter was written by the deceased to Roberts and received by Cash Resources. In that letter the deceased referred to, “Following our discussions” and also stating, “I regret the misunderstandings that have occurred and I thank you for bringing the matter to our notice as the cover on our records was higher”. By that letter the deceased confirmed that the extent of the cover on policy was for “death or total and permanent disability” and the premium was “$2,880 per annum”. This latter statement was incorrect as known to the deceased, by reference to the policy itself which had been sent by him to Roberts. On 27 April 1988 Ms Best completed a “payment voucher” drawing a cheque for $2,880 with respect to the policy and noting, “Cover to 26 May 1989”. That date accorded with that set out in the letter from the deceased to Roberts dated 26 April 1988. In making that payment it is clear that Cash Resources was of the view that by paying $2,880 it was paying the full premium due under the policy giving it cover until 26 May 1989. However the deceased in a note sent to Capita with respect to the policy stated: “Enclosed is a cheque for $2,880 being part premium payment… let me know the balance”. The deceased by that note also stated that, “the company wish only to maintain the policy at $500,000 and no CPI increase. Would you please make the adjustment”. It is to be seen from these events that the deceased was representing to Cash Resources that the full premium payable was $2,880, that he represented that the policy was in force and would expire on 26 May of each year and on such basis received from Cash Resources its cheque for $2,880, but in forwarding a cheque for such amount to Capita he represented that the cheque was for “part premium payment” and that the insured wished the policy to be amended to exclude CPI increases. Although the deceased forwarded a cheque to Capita for $2,880 as part premium payment he represented to Cash Resources, the insured, that the total premium for the year was $2,880. It is alleged by the plaintiff that by the deceased so informing the insured he acted in breach of his agency agreement.

On 16 May 1988 the deceased sent a note to the Policy Alterations Department of Capita with respect to the subject policy informing it that the insured did not wish to have CPI increases and requesting confirmation in writing that that had been done and that the sum insured was to remain at $500,000. Notwithstanding that the deceased had sent the premium cheque for $2,880 to Capita as part premium payment on the policy, on 7 December 1988 the deceased wrote to Roberts at Cash Resources informing him that “the policy is now fixed at $500,000 and a premium of $2,880”. The representation that the premium was fixed at $2,880 was incorrect as the premium increased each year for factors set out in the policy itself. The fixing of the sum covered at $500,000 did not cause the premium on that policy to be fixed at $2,880. By deleting CPI increases with respect to the sum insured the premium became $3,230 for the year ended March 1988. In consequence notwithstanding that the deceased represented that the premium was fixed at $2,880 that was not the case.

By a note written to Capita by an assistant to the deceased, Noel Thompson, dated 24 February 1989 and received by Capita on 27 February 1989 Thompson informed Robyn Robie an employee of Capita, in its policy alterations section that with respect to the subject policy the client had received a renewal notice for $4,000 odd. He advised that the client only wished a cover of $500,000 and requested that she forward, “an amended notice for the appropriate premium” to the deceased. On 27 February 1989 Robyn Robie sent a note to the deceased to which she attached an account for the policy keeping the sum assured at $500,000 and stating, “the annual premium for this year is $4,061”. Again on 8 March 1989 Robyn Robie sent a memorandum to the deceased with respect to the subject policy stating that the premium for the policy was $4,061 for the sum assured of $500,000. By that memorandum she advised that the account notice was correct and further stating that “the premium goes up due to age”. Notwithstanding being advised of these matters and that the premium due under the policy was $4,061, the deceased wrote a letter dated 16 March 1989 to Alan Kaye, who at the time of the trial of the proceedings was the managing director of Cash Resources, but at the time of the letter was the businesses development manager of the company. The letter informed Cash Resources that with respect to the subject policy the premium was due on 26 March 1989 and that the premium was $2,800. By this letter the deceased enclosed a pre-paid envelope stating that the policy, “is now administered manually and my staff and I can keep track of it for you”. It was submitted that by so informing Cash Resources on 16 March 1989 that the premium under the policy was $2,800, at a time when the deceased knew that such was not the fact, that the deceased acted in breach of the terms of his agency agreement in that he, in effect, without any authority, purported to alter the terms of the contract of insurance between Capita and Cash Resources. Further, it was submitted that by so informing Cash Resources that the premium was $2,800 the deceased acted in breach of an implied obligation pursuant to his agency agreement to exercise reasonable skill and care while acting as an agent for Capita pursuant to his agency agreement. Further, it was submitted that by so informing Cash Resources on 16 March 1989 that the premium was $2,800 the deceased engaged in misleading and deceptive conduct within the meaning of s. 11 of the Fair Trading Act. It was submitted that the statement in the letter of 16 March 1989 that the premium was $2,800 was a misrepresentation of the fact as known to the deceased and insofar as he engaged in that conduct it caused the plaintiff to suffer loss and damage.

On 26 April 1989 Robyn Best drew a payment voucher for $2,800 for payment of the premium with respect to the policy from March 1989 to March 1990. Payment of the sum of $2,800 was received by Capita on 27 April 1989.

As referred to, it was on 26 May 1989 that the deceased wrote to the personnel manager of Capita requesting that his agency be transferred to the first defendant. On 11 July 1989 the first defendant and Capita entered into the agency agreement referred to. It was by that agreement that on and from 26 May 1989 the first defendant became an agent of Capita and the agency agreement between Capita and the deceased terminated.

By a Request for Payment issued by Capita on 13 February 1990 and directed to Cash Resources at its business address Capita informed Cash Resources that the premium due on the subject policy from 26 March 1990 and due on that date was $4,561. This Request for Payment was found on the file of Cash Resources. It had been amended in writing by Robyn Best. The figure $4,561 had a line ruled through it and there was written, “as per W. Mahony $2,880”. It was in 1996 at a time when Cash Resources was making a claim under the subject policy that an insurance investigator engaged by the plaintiff visited the offices of Cash Resources and was shown and permitted to make photocopies of documents then held by Cash Resources relevant to the subject policy. It was at or about that time that this document was observed on the file of Cash Resources. In her evidence Robyn Best identified the written alterations to the document as being made by her. Although giving evidence that the alteration meant that the bill had been altered on Mahony’s advice she had no recollection of speaking either to Mahony or anybody else concerning the amount of the bill at the time. On 7 June 1990 Ms Best prepared a “Payment Voucher” for the drawing of a cheque, the payee being “Capita Financial Group”. The voucher was with respect to the subject policy for the period “April 1990 – March 1991” and the amount was $2,880. On 8 June 1990 Ms Best, on behalf of Cash Resources, wrote a letter to Capita Financial Group addressed to the deceased’s business premises and marked for the attention of “W. Mahony”. The letter stated – “Further to our telephone conversation of the said date. Find enclosed our cheque for $2,880 as agreed”. From the alteration made by Ms Best to the Request for Payment it is apparent that someone directed her to make the alteration. Whether that was the deceased, or an officer of Cash Resources, when regard is had to the letter written by Ms Best marked for the attention of the deceased, on 8 June 1990, it is to be inferred that as a probability the deceased on or about 8 June 1990 spoke to some person at Cash Resources and advised Cash Resources or agreed with it that the premium to be paid with respect to the policy was $2,880.

On 17 May 1990 Ms Merveen McPherson, then employed as a policy maintenance officer by Capita, wrote a letter to Cash Resources - “C/- C.W. Mahony, 52 Commercial Road, Prahran, Vic 3181”. That address was the business address of the deceased. The letter by number identified the subject policy and identified the life assured as Roberts. Further by that letter it stated in part –

“Unfortunately your policy lapsed because you have not paid the premium of $4,561 due on 26 March. This means that you no longer enjoy the benefits provided. If you want to restore these benefits, the first thing you must do is complete the enclosed Application for Reinstatement form and return it together with a payment for overdue premiums of $5,822.
Once you do this we can consider your application for reinstatement. We cannot reinstate you policy automatically as this is like taking out a new contract. This means we need to reassess your health, occupation and pasttimes.”

The witness, Melanie Hamilton, the “claims manager insurance” for the plaintiff, gave evidence that a copy of the letter of 17 May 1990 was located on the proposal papers file of the plaintiff which contained records of the client and the policy held by a client. Ms McPherson in her employment as a policy maintenance officer with Capita looked after non-payment of premiums on policies and processes that were undertaken either cancelling policies or having premiums paid. On looking at the letter of 17 May 1990 addressed to “Cash Resources Aust” care of the deceased at his office premises she identified the same as the “lapsed letter that went to the client which I signed”. She said that after she had signed the letter:

“It would have been placed in an envelope with a reinstatement application and sent to the client and a copy would have gone to the agent and a copy to the sales manager.”

She identified the sales manager as a sales manager employed by Capita. When asked why the letter was addressed, “Cash Resources Australia, C/- C.W. Mahony, 52 Commercial Road, Prahran”, she said that that was the address on the “policy report”. That document was a document identified by her (Exhibit P.11) which had been last altered on 9 April 1990 when the address of Cash Resources was changed to – “C/- C.W. Mahony, 52 Commercial Road, Prahran”. She identified on that document an entry made that the premiums were paid to 25 March 1990, that she said was the day before the unpaid premium fell due. She was asked as to where the original letter of 11 May 1990 was sent. She replied, “Well, the original letter is addressed to C/- C.W. Mahony, 52 Commercial Road, Prahran. That’s where it would have gone”. The witness, Kaye, was asked whether he had any recollection of receiving that letter. He said that he did not. He was asked whether he could recall that part of the content of the letter – “Unfortunately, your policy lapsed because you have not paid the premium of $4,561 due on 26 March, this means that you no longer enjoy the benefit provided”. He said that he did not recall that. The witness, Ms Best, was also taken to the letter, she said she had no recollection of seeing that document in 1990.

For some reason Cash Resources did not attend to the Request for Payment dated 26 March 1990 until June of that year. One would expect that had Cash Resources received the letter of 17 May 1990 it would probably have attended to the matter of the policy it being stated that the policy had lapsed at that time. Having regard to the evidence of Ms McPherson I am satisfied that the original of the letter of 17 May 1990 was sent to the deceased’s business address at 52 Commercial Road, Prahran and as a probability received by the deceased. I am satisfied that when regard is had to the contents of the letter written by Ms Best on 8 June 1990 to Capita at the business address of the deceased at 52 Commercial Road, Prahran, that the letter of 17 May 1990 was not forwarded to Cash Resources by the deceased nor did the deceased bring to the attention of Cash Resources the fact that the policy had lapsed because it had failed to pay the premium of $4,561 due on 26 March 1990. On the records of Capita and by its processes the policy had been lapsed by it and treated as technically surrendered as it was a term insurance policy over two years old and not having a cash value. I am also satisfied that the deceased failed to advise Capita that he had not transmitted to Cash Resources the letter of 17 May 1990 nor communicated to it the contents of that letter.

From the computer records and reports of the plaintiff showing transactions recorded for the superannuation plan operated by the plaintiff for Cash Resources (Plan UO33) and for the period during the financial year 1 July 1990 to 30 June 1991 there was credited as a contribution to that superannuation plan the sum of $2,880. It was not able to be ascertained from such records the date during that year that the contribution was credited to that plan. It is likely in my view, and I am satisfied to the degree necessary, that on the deceased receiving the sum of $2,880 during June 1990 he caused it to be transmitted to Capita in such a way as to be credited by it to the superannuation plan of Cash Resources. The deceased failed to take any steps to have the policy rectified or reinstated, the policy remained on the plaintiff’s records as a policy that had lapsed and acting on that basis Capita gave notice to its reinsurer, Australian Reinsurance Co Limited, that effective from 26 May 1990 the subject policy had been technically surrendered thereby terminating its reinsurance cover with respect to the policy.

During the period from 1986 through to 1990 Capita had in place a reinsurance arrangement covering its risk with respect to life insurance and under life policies. Pursuant to that arrangement with Australian Reinsurance, Capita retained $250,000 of the risk on insurance on any one life policy, the balance being reinsured and held covered with Australian Reinsurance. The policy on the life of Roberts was the subject of a reinsurance contract with Australian Reinsurance Co Limited. The insurance was effected for the 12 month period ending 25 March 1991. On such reinsurance cover being terminated, with respect to the policy, on 15 June 1990 a premium refund from 26 May 1990 was claimed. However, from 26 May 1990 Capita and the plaintiff had no reinsurance cover with respect to the policy which was considered to be lapsed or technically surrendered. Evidence was given by Eleanor Desouza, which I accept, that in circumstances where a policy of the nature of the subject policy had lapsed for non-payment of premium and later subsequently reinstated, Capita would have had to reinstate the reinsurance cover in respect of such policy or else Capita would face the full amount of a claim under the same. She said that Capita would send a notice to the reinsurer informing it that the policy had been reinstated and Capita would then pay back the premium to the reinsurer if there had been a premium refund. She said that it was invariably the practice of Capita to obtain reinsurance cover in events where there had been a technical surrender but there had been, at a later time, a reinstatement of the policy.

As previously referred to, it was on 25 June 1990 that the plaintiff entered into the agency agreement with the first defendant.

It was submitted on behalf of the plaintiff that as from 19 April 1990 the “first effective date” under the merger agreement entered into between Capita and the plaintiff, as Capita was obliged to cease to issue any product of a kind or similar nature to that issued by plaintiff and further as it was agreed that the plaintiff must on and after 19 April 1990 pursuant to cl. 2(f) of Schedule 3, “perform and fulfil all obligations and discharge all liabilities of Capita under the policies in accordance with their terms”, that from that date each of the deceased and first defendant owed to the plaintiff a duty of care with respect to their acts and omissions relevant to the subject policy. It was submitted that the acts and omissions of the deceased and the first defendant relevant to the letter of 17 May 1990 constituted not only acts and omissions relevant to the duty of care that they each owed to Capita, but also were breaches of a duty of care which was owed by them to the plaintiff.

Further it was submitted that as from 4 October 1990, the date on which the Federal Court of Australia, by order, gave effect to the scheme which gave effect to the amalgamation of the life insurance business of Capita and the plaintiff, that any act or omission by the deceased or the first defendant, constituting a breach of an agency agreement with either or both and Capita, it would constitute a breach of agreement with the plaintiff. It was submitted that such was the case as in the scheme by cl. 2(h) the reference to “any other agreement” was a reference to an agreement distinct and separate from “other instrument relating to any superannuation fund”. It was submitted that therefore in the agency agreements between Capita and the deceased and the first defendant reference in such agreement to Capita was to have the effect of being a reference to the plaintiff, so that the plaintiff had a direct right of action against the agents for any breach of such agreements. It was submitted that in the result the plaintiff had a right of action against the deceased in respect of any breach by him of the agency contract of 31 January 1986 and a direct right of action against the first defendant under the agency agreement dated 11 July 1989. I accept this submission in that I am satisfied that in the circumstances in this case the plaintiff has a right of action against each of the first defendant and the second defendant consequent upon any breach by the first plaintiff or the deceased of their respective agency agreements with Capita including any term implied as a matter of law and further the plaintiff has a right of action against each defendant in the event of it being established that the deceased or the first defendant breached a common law duty owed to Capita causing it and thereby the plaintiff to suffer loss and damage.

Pursuant to the agency agreement entered into between the plaintiff and first defendant on 25 June 1990 the first defendant was, inter alia, obliged pursuant to cl. 8 thereof to pay moneys to the plaintiff which moneys were the property of the plaintiff without any deduction.

On 16 April 1991 the deceased wrote a letter to Roberts at Cash Resources which stated, in part, as follows:

“Dear Bill,
When we originally wrote your Keyman policy you were a smoker. However as you have not smoked now for in excess of 18 months we are prepared to offer you non smoking rates which will reduce your contribution to $1,696.50 per annum. This being a substantial reduction.
However we will require you to have a medical at our expense, as well as an HIV test, the latter being at the request of the Life Insurance Commissioner.”

This letter was written notwithstanding that the deceased was aware, from his receipt of the letter of 17 May 1990 from Capita, that the subject policy had lapsed because of the failure of Cash Resources to pay the premium of $4,561 due on 26 March 1990. A copy of the letter dated 16 April 1991 was found on the agent’s client’s file, that is, the client’s file of the first defendant. On 23 May 1991 the deceased again wrote to Roberts at Cash Resources in which he apologised “for the error in my last letter”. A copy of that letter was also found on the agent’s client’s file, that is, the file of the first defendant. It is to be inferred, in my view, from the reference in that letter to “my last letter” and from the contents of the letter of 23 May 1991 that the letter of 16 April 1991 was sent by the deceased to Roberts.

In the letter of 23 May 1991 the deceased, after apologising for the error in the last letter as I have referred to, he wrote:

“The position is that your current policy was accepted with select rates in June 1986 but as you were a smoker there was not any discount. The premium was fixed for 10 years at $2,800 under an arrangement negotiated with City Mutual.
If you wish, this arrangement will continue to June 1995 (the date of the last premium which covers you to June 1996).
We are prepared to review a policy and offer a discount provided the policy holder has ceased smoking for 18 months and the premium will then reduce to $1,696.50. However we need the following:
¨ new proposal
¨ medical examination by policyholder’s own doctor
The result of this examination is only to assure the reinsurers that the policyholder has ceased smoking and has NO other bearing on the policy.
Life companies operate under the Life Assurance Act and, as we act as trustee for policyholder’s funds we have to adhere strictly to the rules. The form that the doctor signs is designed to this end.
Once the discount is issued it cannot be altered (even if you took up smoking again).
We cannot deny your previous contract nor can we avoid it. You may be uninsurable but you cannot alter the policy.
In summary, you have two choices:
¨undergo the examination and pay the new premium
¨forego the examination and maintain you current premium.”

The deceased had no authority from the plaintiff to write the letter of 16 April 1991 or the letter of 23 May 1991. He was aware that the subject policy had been treated by the insurer to have lapsed as I have referred to. In each letter it is clearly represented that the policy still remained on foot which was not considered to be the case by the insurer as known to the deceased.

From the plaintiff’s superannuation file, with respect to Cash Resources, which held a superannuation contract with the plaintiff, which insured a number of members of Cash Resources, including Roberts, there was produced a report of a standard medical examination concerning Roberts and dated 12 August 1991. This report which included, as part of the history taken, that Roberts smoked 60 cigarettes but had ceased smoking in August 1988. Having regard to the contents of the letters of 16 April 1991 and 23 May 1991 and the fact that subsequently Roberts underwent the medical examination conducted on behalf of the plaintiff, that it is to be inferred that both letters were sent by the deceased and received by Roberts. In each of such letter the deceased represented that the subject policy was still on foot whereas he knew the contrary was the case as considered by the plaintiff.

On 14 June 1993 the deceased wrote a letter to Alan Kaye of Cash Resources, referring to the “Keyman Policy No. … W.L. Roberts” stating:

“The above policy is now under ‘non smoking’ rates, however, due to credit that came from the reduction of contribution the policy is in credit until September 30^th 1993.
We shall be writing to you before that date with the contribution details to bring it back to balance for June 1994.”

A copy of this letter was found on the first defendant’s file.

A year later and on 14 June 1994, the deceased wrote a letter to Robyn Best of Cash Resources referring to the “Keyman Policy” relating to Roberts and identifying the same correctly by number. The deceased advised “that payment for the policy are (sic) now due”. The letter stated “Premium is now $1,696.50” and further stated, “Since this policy is handled manually could you send premium to: W Mahony, C/- MLC Life Ltd, PO Box 285, Caulfield East, Vic”. By the letter the deceased further said – “I confirm that the sum insured remains at $500,000”. A copy of that letter was found on the agent’s file, that is, the file of the first defendant. The letter was found on the file of Cash Resources. In my view having regard to the fact that the letter of 14 June 1994 was sent by the deceased and received by Cash Resources it is probable that the letter addressed to Kaye and dated 14 June 1993 was also sent by the deceased and received by Cash Resources. The premium quoted in the letter of 14 June 1994 and received by Cash Resources is that quoted in each of the letters of 16 April 1991 and 23 May 1991. I am satisfied that as a probability both those earlier letters were sent by the deceased and received by Roberts at Cash Resources. The letter of 14 June 1994 again misrepresented to Cash Resources that the subject policy was on foot, that the sum insured remained at $500,000 and that the premium of $1,696.50 was the relevant premium as due under the policy. The facts were known to the deceased to be wrong as he knew from receipt of the letter of 17 May 1990, addressed to him by Capita that the policy had lapsed as the premium of $4,561 due on 26 March 1990 had not been paid.

Having received the letter of 14 June 1994 Ms Robyn Best completed a payment voucher recording the drawing of a cheque dated 15 June 1994 payable to the plaintiff. In the particulars of the voucher the Keyman Policy with respect to Roberts was identified by number and the sum assured as $500,000. Robyn Best sent the cheque for $1,696.50 to the deceased “C/- M.L.C. Life Ltd”. The letter identified the sum in payment of the premium under the policy “as requested”. When that was received it was passed by the deceased to the plaintiff. The cheque was accompanied by a “With Compliments” slip. On the slip as tendered there was stamped “MLC Superannuation 30 June 1994”, noting its receipt at that time. Although the document tendered in evidence was a photocopy of the “With Compliments” slip received by the plaintiff the evidence of Ms Hamilton, which I accept, was that she had previously seen the original and that the copy “With Compliments” slip received in evidence was a photocopy of the original. She also gave evidence which I accept that that which was written on the slip was all in the same handwriting. That written on the slip was: “Please credit account W Roberts CASH RESOURCES AUST P/L Warwick UO33”.

It is to be noted that the post office box number and address on the “With Compliments” slip was the same as that to which the deceased had directed Ms Robyn Best to send the cheque by his letter of 14 June 1994. The letter and number “UO33” was identified in the certificate of the witness Whereat (Ex. p.45) as the number of the superannuation plan operated by the plaintiff for Cash Resources. By attachment “B” to the certificate of Whereat and headed “Cash Resources Australia Pty Ltd superannuation plan” there is set out for the period 1 July 1989 to 30 June 1995 the transactions for the account of Roberts within the Cash Resources superannuation plan. Within that account and dated 30 June 1994 there is entered – “contributions $1,696.50”. I am satisfied on the evidence that when the deceased forwarded the cheque for $1,696.50 received by him from Ms Best he forwarded the same to the plaintiff as a payment not for a premium under the subject policy but rather as a contribution to Robert’s superannuation plan held as part of the Cash Resources superannuation plan with the plaintiff. On the “With Compliments” slip there was no written reference to the policy or the payment being in the nature of a payment for a premium.

On 31 July 1994 Roberts retired from his employment as managing director of Cash Resources.

A partly completed “Disablement Claim Application” had been lodged with the deceased. It had not been conveyed to the claim’s department of the plaintiff. When it was brought to the attention of Ms Hamilton, the claims manager of the plaintiff, she thereafter took charge of the claim made under the policy.

Ms Hamilton first joined the plaintiff in 1986 as an underwriter and after a period of time transferred to the claims department of the plaintiff and became responsible as the claims officer for the investigation of the claim made by Cash Resources under the subject policy. At the time of the trial of the proceedings Ms Hamilton was the Claims Manager, Insurance, for the plaintiff in Sydney which position she had held for some five years. In that position she has been responsible for all claims made with respect to the plaintiff’s insurance products including claims made against life policies and claims made on total and permanent disablement policies. She reported directly to the General Manager, Insurance in Sydney.

On or about 21 September 1995 Ms Hamilton was informed that the deceased had recently died. The witness Danagher was, during the time relevant to these proceedings, employed by the plaintiff as an agent adviser. In that position he was the deceased’s adviser. At the time that Ms Hamilton was advised of the death of the deceased Danagher informed her that the deceased had originally written the subject policy on the life of Roberts and informed her that Roberts had suffered from throat cancer and had retired from his position. Danagher became aware of a potential claim under the policy. From investigations made, Ms Hamilton ascertained that the policy was not in force. On the disablement claim application being conveyed to Ms Hamilton she ascertained that it had only been part completed on the front of the form and whereas the back provided for a treating doctor’s report that had not been completed. In the course of her investigation of the claim Ms Hamilton obtained the deceased’s client file, relevant to the policy. She also engaged the services of Australian Adjusters to attend the office of Cash Resources and collect any material that they had in their possession relating to the claim and the actual policy. On or about 28 March 1996 Ms Hamilton received a preliminary report from the investigator including photocopies of documents that the investigator had found at the office of Cash Resources relevant to the claim. One such document was the letter of 18 June 1987 from the deceased to Roberts enclosing the keyman policy document. She also received a photocopy of the letter of 26 April 1988 from the deceased to Roberts wherein he confirmed that which he said were the terms of the subject policy including that the premium was $2,880. Further, Ms Hamilton received a photocopy of the letter from the deceased to Roberts dated 7 December 1988 in which he was advised, inter alia, that the policy was fixed at $500,000 with a premium of $2,880. Ms Hamilton also received a photocopy of the letter of the deceased to Alan Kaye dated 16 March 1989 advising that under the subject policy the premium was due on 26 March 1989 and the premium was $2,800. Ms Hamilton further received a photocopy of the Request for Payment directed to Cash Resources at its office premises dated 26 March 1990 on which were the alterations as were made by Robyn Best. The Request for Payment was on the file of Cash Resources. Further, from the plaintiff’s file Ms Hamilton obtained a copy of the letter dated 17 May 1990 to Cash Resources, care of the deceased at his business premises. Ms Hamilton also obtained from the deceased’s file the copy letter of the deceased to Roberts dated 16 April 1991 wherein it was stated, as previously referred to, that, “we are prepared to offer you non-smoking rates which will reduce your contribution to $1,696.50 per annum….”. She also received from the file of the deceased the copy letter from the deceased to Roberts dated 23 May 1991, previously referred to. Further, Ms Hamilton obtained from the plaintiff’s superannuation file the standard medical examination form dated 12 August 1991. Ms Hamilton also received from the deceased’s file a copy of the letter of the deceased to Alan Kaye dated 14 June 1993. As previously referred to she gave evidence as to and identified the photocopy hand-written note marked as received by the plaintiff’s superannuation department on 30 June 1994. Further, she received from the Cash Resources’ file a copy of the letter of Robyn Best to the deceased dated 15 June 1994. In addition she obtained a copy of the bank statement of Cash Resources showing a debit entry on 1 July 1994 of the sum of $1,696.50. On 13 December 1992 the plaintiff transferred their computer records from one computer system to another. Ms Hamilton gave evidence that at the date of that transfer of the computer records the subject policy was out of force.

Ms Hamilton obtained a status report with respect to the subject policy as generated from a computer of the plaintiff, the run date of which was 7 January 1996. It showed that the then current status of the policy was “out of force”.

On 22 February 1996 the plaintiff received from Cash Resources under the signature of Marcel Kaye, director, a letter stating in part – “We are still waiting for an answer to your investigation relating to our payment of $1,696.50 forwarded to MLC Life Ltd on 15 June 1994”. She further identified the letter written by the plaintiff to Kaye dated 1 March 1996, wherein in part, it was stated –

“The policy on the life of William Lloyd Roberts lapsed effective 26 April 1990 due to non payment of renewal premium.
The cheque for $1,696.50 was credited to Cash Resources Australia Pty Ltd superannuation plan (UO33) on advice from Warrick Mahony. A copy of his note is attached. The money which was credited to W.L. Roberts member account was paid as part of the resignation proceeds to him.
We have no record of receiving premium on the above policy after 29 April 1989.”

This letter was part of matters taken into account by Ms Hamilton on reaching her decision as to the matters the subject of the claim against the plaintiff by Cash Resources under the subject policy. Ms Hamilton gave evidence, which I accept, that she reviewed all the documents which had been obtained from the files of Cash Resources the files of the deceased and/or the first defendant and those of the plaintiff including its superannuation files. She said that at a fairly early time she came to the conclusion that by the actions of the agent, who the plaintiff was responsible for, the plaintiff was at risk for $500,000 as the policy was said to be in place by the agent to the client and the client believed that the policy was in place and providing cover. She said that on reaching that conclusion she took into account a medical report obtained from Robert’s surgeon. That report dated 2 October 1996 was a report of Mr Peter Thomson, an ear, nose, throat, head and neck surgeon. He reported that Roberts who was then 54 years of age had a history of carcinoma of the larynx diagnosed after a biopsy had been carried out on 26 October 1994. He reported that this condition was treated with radiotherapy, however, the cancer failed to clear and Roberts proceeded to surgery in the form of a total laryngectomy and a partial thyroidectomy on 26 April 1995. The surgeon further reported that in order to allow Roberts to speak he had been fitted with a blomsinger valve and as a consequence Roberts breathed through a hole in his neck and that he was no longer able to talk in the usual way, although with the use of the blomsinger valve Roberts had obtained excellent vocal rehabilitation. The surgeon further reported that since the original surgery Roberts had had a number of problems requiring further surgery, the most important of which was the removal and then reinsertion of the blomsinger valve to the tracheoesophagel puncture and that such surgery had been carried out because Roberts was having difficulty with changing his valve. Further, the surgeon reported that Roberts had had a number of social and psychological problems for which he had been treated in Adelaide and that since surgery he had been receiving thyroid hormone replacement therapy which he would need for the remainder of his life. The surgeon reported that when he last saw Roberts in August 1996 there was no sign of the recurrence of his cancer. He reported that Robert’s then current situation was that he breathed through a permanent tracheostomy hole in his neck, that he swallowed in the normal way, that he spoke by breathing in and then occluding the hole in his neck in order to push the air back through the speaking valve in order to vibrate tissues in his pharynx to produce a voice. The surgeon reported that Roberts produced excellent speech, using this method, which was easily understood on the telephone as well as in person.

The surgeon had been asked to express an opinion as to the ability of Roberts to earn income. As to that matter the surgeon reported that there was no question that a total laryngectomy imposed a considerable psychological strain and physical impairment on a patient. He said that the loss of the larynx reduced the amount of weight Roberts could lift and hence it affected his ability to perform physical work. He further reported that the need to occlude the hole in his neck made it more difficult for Roberts to work requiring the use of both hands. He expressed the opinion that in his experience the majority of men who undergo the procedure undergone by Roberts do not work again because of the combination of the psychological and physical trauma. The surgeon added, however, “Having said all this Bill Roberts is no ordinary person”. Ms Hamilton gave evidence that at the time she was considering the claim by Cash Resources, the plaintiff also had made against it a claim by a professional person who was a “family court” solicitor and who had the same condition as that of Roberts. Ms Hamilton had before her a medical opinion relevant to the “family court” solicitor by an occupational physician, Dr Ulman. That other person was a man aged 47 years of age who had been self employed and who had a total disability claim on the basis of the fact that he had undergone a total laryngectomy for carcinoma of the larynx. Ms Hamilton said that she concluded that Roberts met the terms and conditions of the contract being that he was totally and permanently disabled and unable to work again.

Accounts of Australasian Adjusters Pty Ltd were tendered for work performed in conducting enquiries relevant to the claim against the plaintiff under the subject policy. Those accounts totalled $3,269.20.

There was also tendered an agreement dated 10 January 1997 between Cash Resources and the plaintiff which agreement witnessed that in consideration of the payment by the plaintiff to Cash Resources of the sum of $531,615.74 including costs of Cash Resources, that Cash Resources agreed to accept that sum in full satisfaction of all claims by it pursuant to and payable under the subject policy of insurance and that Cash Resources agreed that the policy was thereby cancelled and discharged and it released the plaintiff from any claims arising out of the said policy which it thereby surrendered.

In cross-examination Ms Hamilton said that there was exerted by Cash Resources commercial pressure to have the plaintiff settle the claim. She said that it was a matter taken into consideration. However, she said that she believed that the plaintiff had a liability for $500,000, that the policy was seen to be in place and so under normal circumstances that liability would be the plaintiff’s and that it would simply go forward as the plaintiff was responsible for the actions of the agent. She said that the plaintiff had proceeded collecting what information it could, knowing that it had under the policy a pay-out of $500,000, which she said was a lot of money. She said that the plaintiff had no premium for the policy, that it had no reinsurance in place, so from a corporate perspective it was a lot to pay out. She said that she was not instructed by anybody at MLC to admit the claim and said that the decision was hers. She said that she had regard to Thomson’s report in making her decision and that she was aware that Roberts had resigned in July 1994 before his cancer was diagnosed. She said that she concluded that it would be difficult for Roberts to work and that his position at Cash Resources was that of a financial controller who was involved in daily contact with people and that she concluded that it would be difficult for him to do that job in his condition. She said that she took into account the comment of the treating surgeon, Mr Thomson, that Roberts was “no ordinary person” and said, further, that the evidence that she had before her was that it was unlikely that Roberts would go back to work. She said that the evidence that she had obtained was that Roberts had suffered stress attacks in the past and that he was having treatment for it. She said that the evidence was that Roberts was quite a forceful character, a very astute businessman and very tough. She said that the plaintiff had made a decision to admit liability if Roberts met the terms and conditions of the insurance so they needed the report of Thomson before they arranged payment. She agreed that in October 1996 she had received the report from Dr Ulman concerning the “family law” solicitor. She said that she thought that there were similarities between that person and Roberts as the conditions suffered by them were similar, they were both professional people, they both had client contact and that they both operated and worked on the phone. She said that as to the solicitor, she had concluded that it would be extremely difficult to practise law based on the nature of his disability. She said that as to Roberts she considered that it was unlikely that he would resume employment based on the nature of his disability.

As I understood the evidence of Ms Hamilton relevant to the report of Dr Ulman concerning the solicitor it provided her assistance in understanding the nature of the medical condition suffered by Roberts, the physical restrictions placed on him after surgery and the psychological stresses that would also be involved in the condition. As is to be expected of a person, such as a senior claims manager, experienced in dealing with many claims including a claim of a similar nature to that in respect of which a decision is to be made, information relevant to another claim leads to a general background of knowledge and a better understanding of the condition which may be suffered by a claimant thereby enabling a better educated and more sound decision to be made when having regard to the particular decision to be made which, in this case, was whether Roberts met the terms and conditions of the policy. She accepted that she was aware that Roberts had left his employment before he had been diagnosed and that there were other factors that led to his resignation as a director. She said that she concluded, that, notwithstanding that Mr Thomson reported that Roberts was “no ordinary person”, he would not have been able to continue his occupation as a managing director. She said that she was aware that Roberts had “sold out” of the business and had sold his shares and that he had retired to a farm. She said that she had been aware from the assessor’s report that Roberts had a permanent farm manager in place and that he did drive around the property doing some supervision. She gave evidence that from her investigation there was no indication that any premium had been received after 1989.

Having seen Ms Hamilton in the witness box and having heard her give evidence I formed the view that she was a very experienced senior claims manager with a large insurance company. She had considerable past experience and in having regard to the report of Dr Ulman concerning the solicitor she took matters from that into account to broaden her knowledge and understanding of the condition and disabilities that had been suffered by and were continuing to be suffered by Roberts at the time when it was necessary for her to determine whether it was reasonable to conclude that he had met the conditions entitling Cash Resources to be paid under the terms of the policy. She impressed me as not only being a very experienced claims manager but one who was able to exercise a sound and reasonable judgment in determining the matter that she had to determine. She was well aware of the fact that under the terms of the policy, if Roberts met the terms and conditions relevant to the same, there was a very large pay out to be made and that the plaintiff had not had the benefit of the receipt of premiums nor did it have the benefit, in the circumstances that have occurred, of a reinsurance cover. I am satisfied that she made her decision as to whether Roberts satisfied the terms and conditions of the policy not influenced by commercial pressure that may have been sought to be imposed on the plaintiff by Cash Resources. I am satisfied that the decision made by Ms Hamilton that Roberts met the terms and conditions of the policy was a reasonable decision made by her in the circumstances of this case and taking into account matters only relevant to that decision.

The fact that the deceased, on or about 30 June 1994 forwarded to the plaintiff, Cash Resource’s cheque for $1,696.50, together with the “With Compliments” slip directing that the plaintiff credit Roberts superannuation account reinforces the conclusion that I have reached that the deceased received the letter of 17 May 1990 from Capita addressed to Cash Resources care of him and that he did not forward that letter to Cash Resources or advise it of its content. As at 30 June 1994 the deceased was aware that the policy was considered by the plaintiff to have lapsed and to be no longer on foot. That is why the deceased directed the plaintiff to credit the sum of $1,696.50 to the superannuation account of Roberts. However, at the same time and subsequent to 17 May 1990 in consequence of the actions of the deceased Cash Resources believed that the policy still remained on foot. That that is the case is to be seen from the letters between Cash Resources and the deceased. On 8 June 1990 Robyn Best wrote to Capita at the deceased’s business address sending a cheque for $2,800 “as agreed” and with respect to the policy. On 16 April 1991 the deceased wrote to Roberts offering non-smoking rates stating that it would reduce the contribution of Cash Resources to $1,696.50 per annum. Again by the deceased’s letter to Roberts dated 23 May 1991 the deceased represented to Roberts that the policy was still on foot. Again on 14 June 1994 by his letter to Robyn Best of Cash Resources the deceased represented that the policy was on foot. The letter of 15 June 1994 from Robyn Best to the deceased enclosing a cheque for $1,696.50 “in payment of the premium” with respect to the subject policy is clear evidence that Cash Resources believed that the policy still remained on foot. These matters establish to my satisfaction that the deceased did not forward to Cash Resources the letter of 17 May 1990 or advise it of its contents.

I am satisfied that as between the plaintiff and Cash Resources, the decision of Ms Hamilton that the plaintiff was liable to Cash Resources under the terms of the policy by reasons of the acts of the plaintiff’s agent was a reasonable decision for her to make. The amount paid to Cash Resources by the plaintiff took into account its liability to Cash Resources under the terms of the subject policy, it took into account costs incurred by Cash Resources pursuing its claim and it took into account interest on the claim and the amount of the premiums not paid. The costs and interest element of the amount paid were not challenged in these proceedings on behalf of the defendants. I am satisfied that the plaintiff’s settlement of the claim of Cash Resources against it was reasonable.

The primary submission made on behalf of the defendants was that although Capita and the plaintiff may have considered the subject policy to have lapsed in consequence of the non payment of premiums, the subject policy was never avoided by Capita and in consequence the plaintiff always was liable under it. It was submitted that no matter what may be considered were acts and omissions of the deceased relevant to the policy such acts or omissions were not causative of any loss said to be suffered by the plaintiff. It was submitted that although Capita terminated its reinsurance cover with respect to the policy it did that notwithstanding that the policy remained on foot and therefore it was the master of its own loss in consequence of not having such reinsurance cover.

Section 59 of the Insurance Contracts Act 1984, as at the relevant time provided:
“(1)An insurer who wishes to exercise a right to cancel a contract of insurance shall give notice in writing of the proposed cancellation to the insured.
(2)The notice has effect to cancel the contract at whichever is the earlier on the following times:
(a)the time when another contract of insurance between the insured and the insurer or some other insurer, being a contract that is intended by the insured to replace the first mentioned contract, is entered into;
(b)whichever is the latest of the following times:
(i)4 o’clock on the afternoon of the third business day, or in the case of a contract of life insurance, the twentieth business day, after the day on which the notice was given to the insured;
(ii)if a time is specified for the purpose in the contract – that time;
(iii)if a time specified in the notice – that time.

(3)This section does not apply to a contract of life insurance to which section 100 of the Life Insurance Act 1945 applies.”

On behalf of the plaintiff it was submitted that section 100 of the Life Insurance Act 1945 did not apply to the subject policy. On behalf of the defendants senior counsel accepted that as the subject policy was a term insurance policy and being a type of policy which did not have a surrender value, Cash Resources did not have the benefit of section 100 of the Life Insurance Act 1945. However, on behalf of the defendants it was submitted that no notice, as required by s. 59 of the Insurance Contracts Act was given and that therefore the policy remained on foot notwithstanding the fact that Capita purported to lapse or avoid the policy.

By cl. 4(c) of the subject policy it was provided –

“This policy shall be null and void and all moneys paid in respect thereof absolutely forfeited to Capita in the following circumstances.
(c)Where any premium is not paid on the due date or within one month thereafter.”

The provision in cl. 4 that the policy, “shall be null and void” should be read as giving the insurer the right to avoid the policy if the premium was not paid within a month of the, “due date” – Newbom v City Mutual Life Assurance Society Ltd[1].
[1](1935) 52 CLR 137 at 733.

By the schedule to the subject policy it provided that the “commencing date” was 26 March 1987 and that the “due dates on which the premium payable are the commencing date and – annually”. The first due date was 26 March 1987 and thereafter while the policy remained on foot it was 26 March of each year after the year 1987.

On behalf of the plaintiff it was submitted that by reference to s. 59(2)(b)(iii) of the Insurance Contracts Act a notice of proposed cancellation to be given to an insured in writing may of itself specify the time in the future at which the insured wishes to exercise a right to cancel the contract of insurance and on such being given the notice has the effect to cancel the contract at the future time specified in the notice. It was submitted that there was no requirement pursuant to s. 59 of the Insurance Contracts Act that the right in Capita to cancel or avoid the policy had to be crystallised at the time when the notice was given. It was submitted further that the “Request for Payment” issued by Capita on 13 February 1990 and directed to Cash Resources constituted a notice which satisfied the provisions of s. 59 of the Insurance Contracts Act. By the terms of the, “Request for Payment” the due date was identified as “26/03/90”. Particular reference was made to that typed on the left hand side of the “Request for Payment” and adjacent to that part of it identifying the “Payment Now Due” and the “Due Date”. That typed on the left side of the “Request for Payment” stated:

“Payment must be received within one month of the due date or no further protection will be provided and the contract will cease.”

It was further submitted on behalf of the plaintiff that by each of the deceased and the first defendant not informing Capita that the letter of 17 May 1990 had not been forwarded to Cash Resources and their respective failures to not inform Capita that Cash Resources had not been told that the contract of insurance and been avoided by Capita or that Capita treated it as such that the deceased had engaged in misleading and deceptive conduct contrary to s. 11 of the Fair Trading Act and that the first defendant had likewise engaged in such misleading or deceptive conduct contrary to s. 52 of the Trade Practices Act.

In Demagogue Pty Ltd v Ramensky[13] it was held by the Full Court of the Federal Court that facts and circumstances may exist where silence constitutes a breach of s. 52 of the Trade Practices Act 1974 (Cth). In that case there had been a failure on behalf of a vendor to disclose to the purchasers the need for a road licence under the Land Act 1962 (Qld) for vehicular access to the development in which there was to be constructed the unit purchased by the respondents. The primary judge (Spender J.) had held that the need for such a licence for vehicular access to the development was an unusual and unexpected circumstance and to the respondents unexpected.
[13](1992) 39 FCR 31.

In his judgment Black C.J. at p. 32 said:

“Silence is to be assessed as a circumstances like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether having regard to all the relevant circumstances there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or a duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation in the circumstances of the case that if particular matters exist they will be disclosed.”

In his judgment Gummow J. agreed with the finding of the trial judge as referred to. At p. 40 he said:

“’Conduct’ within the meaning of s. 52 includes refusing to do an act and refusal to do an act includes a reference to ‘refraining (otherwise than inadvertently) from doing that act’: s. 4(2). But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct. The expanded meaning given by s. 4(2) to ‘conduct’ should not distract attention from the fundamental issue in the case at hand.

Again, at p. 41 his Honour said:
“Consistently with regard to the natural meaning of the terms of s. 52 the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence there has been conduct which is or is likely to be misleading or deceptive.”

His Honour in his judgment referred to Kimberley NZI Finance Ltd v Derero Pty Ltd[14] stating that he agreed with the remarks of French J. in the passage cited. In that passage French J. said:
“If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s. 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure.
The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist.”

The principles enunciated in the authorities referred to had equal application to the provisions of s. 11 of the Fair Trading Act 1985.

[14][1989] ATPR (digest) 53, 193 at 53, 195.

Capita addressed the letter of 17 May 1990 to Cash Resources care of the deceased at his business address, at which time the first defendant was the agent of Capita. It would reasonably have been expected by Capita that the letter would be given to Cash Resources. It would reasonably be expected by Capita to be informed of the fact that the letter had not been given to Cash Resources. However, the fact that the deceased did not inform Capita and the plaintiff that the letter of 17 May 1990 had not been delivered and did not inform Capita and the plaintiff that Cash Resources believed that the contract was on foot did not constitute a breach by him of s. 11 of the Fair Trading Act. As at 17 May 1990 the deceased was not engaged in trade or commerce with Capita and thereafter the plaintiff. It was the first defendant which was so engaged in trade and commerce with Capita and thereafter the plaintiff. It would reasonably be believed by Capita and the plaintiff thereafter that the subject policy had been cancelled and for Cash Resources to believe that to be the case. The failure of the first defendant to not inform Capita and thereafter the plaintiff that the letter of 17 May 1990 had not been delivered to Cash Resources and its failure to inform Capita and the plaintiff that Cash Resources believed the subject policy to be still on foot, in the circumstances of this case constituted the first defendant engaging in conduct which was misleading and deceptive in breach of s. 52 of the Trade Practices Act.

It was further submitted on behalf of the plaintiff that the deceased and the first defendant engaged in misleading and deceptive conduct towards Cash Resources in that, first, on or about 7 June 1990 the deceased represented to Cash Resources that the premium due under the policy was $2,880 and, secondly, on or about 16 April 1991 the plaintiff was prepared to offer a non-smoking rate premium of $1,696.50. On each of these occasions the deceased was acting as an employee, an agent of the first defendant. He was not engaged in trade or commerce with respect to his relationship with Cash Resources and consequently the deceased himself was not in breach of the provisions of s. 11 of the Fair Trading Act 1985. As to the conduct of the first defendant with respect to each of these matters it was submitted that although the first defendant engaged in misleading and deceptive conduct towards Cash Resources that caused Capita and the plaintiff to suffer loss because had Cash Resources not been mislead it would have either itself cancelled the policy as it would not have been prepared to pay the higher premiums or had it reinstated the policy at least Capita and the plaintiff would have maintained its reinsurance cover on the policy thereby limiting its exposure under the same. In Janssen Gillag Pty Ltd v Pfizer Pty Ltd[15] Lockhart J. considered whether damages able to be recovered under s. 82 of the Trade Practices Act could only be recovered when reliance was had on a breach of s. 52 of the Act if the person seeking to recover damages had himself relied on conduct which constituted a breach of s. 52 of the Act. At p. 529 he said:
[15](1992) 37 FCR 526.

“What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damages can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.”

Again, at p. 530-531 his Honour said:
“Whilst the applicant’s loss or damage must be caused by the respondent’s misleading or deceptive conduct I see nothing in the language of the Act or its purpose to warrant the suggestion that the right of an applicant for damages under s. 82 is confined to the case where he has relied upon or personally been influenced by the conduct of the respondent which contravenes the relevant provision of Pt IV or Pt V of the Act.”

Again, his Honour said at p. 531:
“Section 82(1) should not be given a restricted meaning to be available only to the person who suffers loss or damage by reason of his own reliance upon the representations which constituted the relevant contravention of Pt IV or Pt V; nor for that matter should it be given an extended meaning which strains the language used by the legislature. But a person who suffers damage by reason of or as a result of the conduct of the contravener (albeit that that person does not himself rely upon the representations) is not to strain the language of the sub-section but to interpret it according to its ordinary and natural meaning. For a person to recover under the section he must suffer loss or damage by reason of or as a result of the contravention. There is nothing unduly wide about that.”

Insofar as the first defendant in its continued dealings with Cash Resources with respect to the policy after 17 May 1990 and by making these representations to Cash Resources it represented to it that the policy was still on foot. By such conduct the first defendant engaged in misleading and deceptive conduct in trade and commerce in its dealings with Cash Resources and thereby acted in breach of s. 52 of the Trade Practices Act. By that the first defendant gave reason for Cash Resources to reasonably believe that the policy still remained on foot.

The conclusion that I have reached is that by the first defendant not delivering the letter of 17 May 1990 to Cash Resources, it breached its express contractual obligation owed to Capita and breached the duty of care that it owed to Capita. By continuing to deal with Cash Resources as if the policy was on foot while it ought to have reasonably expected Capita and thereafter the plaintiff to believe that the policy had been cancelled, the first defendant breached the duty of care owed by it to Capita and the plaintiff. By not informing Capita and thereafter the plaintiff that it had not delivered to Cash Resources the letter of 17 May 1990, the first defendant breached the duty of care that it owed to Capita and thereafter the plaintiff. By not informing Capita and that plaintiff that it had not delivered to Cash Resources the letter of 17 May 1990 and that Cash Resources thereafter continued to believe that the policy was still on foot the first defendant acted in breach of s. 52 of the Trade Practices Act in its dealings with Capita and the plaintiff. Whereas Capita believed the policy to be cancelled and terminated the reinsurance cover in respect of the same, the policy remained on foot. Through the acts and omissions of the first defendant the policy remained on foot, Cash Resources believed it to be on foot and when Cash Resources made a claim against the plaintiff under the same, on it being reasonably satisfied that Roberts met the terms and conditions under the policy it was reasonably required to meet the claim by paying to Cash Resources the sum of $531,615.74 without having the advantage of any reinsurance cover.

In United Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd[16], an insurance broker arranged an industrial special risks policy but negligently failed to fully disclose to the insurer the insurer's claims history. After the insurer's premises were damaged by fire, the insurer refused to pay the full amount, which would have been payable under the policy but for the non-disclosure. The insured brought proceedings against the insurer and the broker, in which the insurer paid a lesser sum by way of compromise. The insured claimed the balance from the broker. At p609 McHugh J. identified and questioned the subject of the appeal as
[16](1998) 192 CLR603.

“whether a plaintiff claiming damages for breach of contract is entitled to damages for loss arising from the plaintiff compromising legal proceedings with a third party where the proceedings arose out of the breach of contract.”

At p. 613 his Honour further said –
“…to succeed in its action against the broker, the insured must show more than its loss was causally connected with the brokers breach of duty. Damages in contract are recoverable only for a loss which is the kind of loss which was in the contemplation of the contract breaker or would have been within the contemplation of a reasonable person in his or her position.
Was it or ought it to have been within the reasonable contemplation of the broker that, if it failed to carry out its obligation to exercise reasonable care and skill in obtaining the policy, the insured might be placed in a position where it was forced to compromise a claim for indemnity under the policy?”

His Honour answered that question in the affirmative.

In my view, the deceased and by him the first defendant, having received the letter of 17 May 1990 which I am satisfied was so received and knowing that by that letter Capita gave notice to Cash Resources that it had avoided the contract of insurance and knowing that such letter was not provided to Cash Resources the first defendant ought to have reasonably had in its contemplation that in consequence of its omission and in consequence of it continuing to deal with Cash Resources as if the policy remained on foot, that if Roberts, the “key man”, in the future, satisfied the terms and conditions of the contract of insurance, a claim would be made by Cash Resources under the contract of insurance. A reasonable person in the position of the agent, the first defendant, would have contemplated such matters and contemplated that Capita and thereafter the plaintiff would be required to make payment under the terms of the contract of insurance. I am satisfied that the plaintiff has established that it suffered damage in the sum of $531,615.74.

I am satisfied that the breach by the first defendant of the express term of its contract had with Capita and the breach by it of the term implied by law in the agency contracts that it had with Capita and the plaintiff as I have referred and the breach by the first defendant of s. 52 of the Trade Practices Act as I have referred it caused the plaintiff to suffer damage in the sum of $531,615.74. I am also satisfied that the breach of the first defendant of its common law duty owed by it to Capita and the plaintiff thereby constituting negligence on its part caused the plaintiff to suffer loss and damage in the same amount.

For the reasons previously expressed from the time that the first defendant first became the agent of Capita on 26 May 1989 and the deceased ceased to be the agent of Capita, in the circumstances of this case no duty of care was owed by the deceased to Capita or the plaintiff and by his acts or omissions he did not act in breach of s. 11 of the Fair Trading Act. Therefore it follows that with respect to the events that occurred on and after 17 May 1990 no act or omission of the deceased gave rise to a cause of action whereby the deceased and thereby the second defendant was liable in damages to the plaintiff.

As I have referred to in the course of this judgment that the plaintiff has alleged that with respect to events which occurred before 17 May 1990 and during the course of the deceased acting as an agent for Capita he had acted in breach of his agency agreement, he had acted in breach of the duty of care owed by him to Capita, as implied as a matter of law in his agreement with Capita and that he had acted in a manner which contravened s. 11 of the Fair Trading Act. Assuming for the purpose of argument that these matters are established by the plaintiff, it is my view that such breaches and contravention considered separately and together were not a cause of the plaintiff suffering loss and damage in the circumstances of this case. The acts and omissions which caused the plaintiff to suffer loss and damage in the circumstances of this case were those of the first defendant which occurred on and after 17 May 1990.

I next turn to the allegations of the defendants that if they or either of them are liable to the plaintiff whether in breach of contract or in negligence any damages to be recovered by the plaintiff should be reduced having regard to the plaintiff's share in the responsibility for the damage. In its amended defence the defendants relied on the provision of s. 26 of the Wrongs Act 1958 (Vic) as amended by the Wrongs (Amendment) Act 2000. For the reasons previously expressed it is not necessary to consider this plea against the second defendant as I have concluded that the deceased and thereby the second defendant is not liable in damages to the plaintiff. In making these allegations no specific allegation was made on behalf of the first defendant that if the plaintiff was able to recover damages against it pursuant to s. 82 of the Trade Practices Act, the amount that should be awarded to the plaintiff should take into account the fact that loss suffered by Capita and thereafter the plaintiff had been partly due to the fault of Capita and the plaintiff.

In I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd[17], it was held by the Full Court of the Supreme Court of Queensland, comprising five members of the Court, that when regard was had to the inter-relationship between s. 82 and s. 87 (1) of the Trade Practices Act that s. 87 (1) of the Act, should be given the effect which its terms appear to require, namely that an order may be made requiring that the defendant to compensate the plaintiff for part only of the loss which is causally connected with the contravention with respect to complaint made. It was further held, that once a proceeding of a kind mentioned in s. 87(1) is before the Court, it has vested in it all the powers which s. 87 encompasses, whether or not the plaintiff presses for a s. 87 order and that the Court may properly mould the relief granted in such a way to achieve a fair result for both parties' and in doing so and consequently the Court may award only part of the loss causally connected with the contravention found. Accordingly it was held that in assessing damages under s. 82 of the Act, a Court is not confined to an “all or nothing” assessment but rather in order to achieve a fair result to both parties, it may take into account fault on behalf of a plaintiff, relevant to the loss suffered by a party acting in contravention of s. 52 thereby reducing the damages to be recovered by such plaintiff.
[17][2000] QCA 383.

In Australian Securities Commission v Marlborough Gold Mines Ltd[18], the High Court held that in the case of Commonwealth Legislation uniformity of decision in interpretation is of sufficient importance to require a judge of a single court not to depart from an interpretation on such legislation by an Australian intermediate appellant court unless convinced that the interpretation was plainly wrong. On behalf of the plaintiff senior counsel submitted that the decision in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd was wrong and should not be followed and that any damage able to be recovered by the plaintiff against the first defendant under s. 82 of the Trade Practices Act should not be reduced in the event of it being determined that there was fault on the part of Capita and or the plaintiff. Not withstanding argument addressed to the Court relevant to this matter, I would not be prepared to depart from the decision in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd. However, as I referred it has not been alleged that any damages awarded to the plaintiff by reason of the first defendant’s breach of the provision of s. 52 of the Trade Practices Act, should be reduced having regard to the fault of Capita or the plaintiff. Not withstanding that the reasons that I hereafter express, in my view damages to be recovered by the plaintiff in these proceedings should not be reduced.
[18](1993) 177 CLR 485 at 492.

In Astley v Austrust Ltd[19], it was held by a majority of the Court that where damages are to be awarded for breach of contract such damages may not be reduced under apportionment of liability legislation such as that provided by s. 26 of the Wrongs Act 1958 (Vic) where the plaintiff had sued in contract whether or not the plaintiff has or could have also sued in tort.
[19](1999) 197 CLR 1.

By the Wrongs (Amendment Act) 2000, s. 25 of the Wrongs Act 1958 was amended to introduce a definition of the word 'wrong' which was defined as follows –

“'wrong' means an act or omission that –
(a)gives rise to a liability in tort in respect of which a defence of contributory negligence is available at Common Law: or
(b)amounts to a breach of a contractual duty of care that is concurrent and coexistent with a duty of care in tort.”

Section 26 (1) of the Act was also amended by substituting for s. 26 (1) the following -
“(1)if a person (the claimant) suffers damage as a result partly of the claimant's failure to take reasonable care (contributory negligence) and partly of the wrong of any other person or persons –
(a)a claim in respect of the damage is not defeated by reason of the contributory negligence of the claimant: and
(b)the damage recoverable in respect of the wrong must be reduced to such extent as the court thinks just and equitable having regard to the claimant's share in the responsibility for the damage.”

118 By the plaintiff’s reply to the amended defence of the defendants not only did the plaintiff deny that it was guilty of contributory negligence but further or alternatively it made the plea:

“the defence of contributory negligence is not available in respect of the claims for breach of the terms alleged by paragraphs 6B(b) 7A(b) and 14(b) of the amended statement of claim as those contractual duties are not concurrent and extensive with a duty of care in tort.”

The plea by the reply specifically related to alleged breaches of express terms of the agency agreements between Capita and the deceased and between the first defendant and Capita and between the first defendant and the plaintiff. In substance the plea of the plaintiff, by its reply, is that a breach of an express term of the agency agreements do not amount to breaches of a contractual duty of care that is concurrent and coexistent with a duty of care in tort and therefore if in consequence of such a breach or breaches the plaintiff suffers damages, such damages are not able to be reduced by application of s. 26(1) of the Wrongs Act having regard to the responsibility of the plaintiff for such damages. For the reasons previously expressed it is not necessary to consider the plea of the defendants insofar as it relates to any alleged breach by the deceased of an express term of the agency agreement entered into between him and Capita.

Insofar as I have determined that the first defendant acted in breach of an express term of its agreement with Capita dated 11 July 1989 in that by not forwarding the letter of 11 May 1990 to Cash Resources it had effectively waived the forfeiture of the contract of insurance by Capita thereby causing the plaintiff to suffer damage, I accept the plea of the plaintiff by its reply, that the plea of contributory negligence would not be available to the first defendant with respect to the damage thereby suffered by the plaintiff.

However, to the extent that I have concluded that by operation of law there was to be implied in the agency agreements had between Capita and the first defendant, and the plaintiff and the first defendant, that the first defendant was under a duty to exercise reasonable skill and care in its actions relevant to the subject policy of insurance and by breach of that duty the plaintiff suffered damage, such duty is concurrent and co-existent with a duty of care in tort and in such circumstances the plea of contributory negligence made by the first defendant must be had regard to.

By its amended defence the first defendants alleged that there was contributory negligence on the part of Capita and the plaintiff in that the plaintiff failed to correctly exercise its purported rights to cancel the policy in accordance with law; that it failed to instruct the defendants or either of them; that it failed to give notice to cancel the policy which complied with s. 59 of the Insurance Contracts Act; that it failed to require them or either of them to forward the letter of 17 May to the insured; that it failed to make proper inquiries of the defendants or of the insured as to whether the letter of the 17 May 1990 had been forwarded and received by the insured; that it failed to make proper inquiries as to the basis upon which the sums of money received after the 17 May 1990 were received; that it failed to inform the defendants or the insured that the plaintiff regarded the policy as being no longer on foot; and that it failed to send the letter of the 17 May 1990 or a copy thereof to be insured.

The letter of Capita dated 17 May 1990 was addressed to Cash Resources care of the deceased at the business address of the deceased being the business address of the first defendant. As I have previously referred to, that letter had it been received by Cash Resources would have constituted notice pursuant to s. 59 of the Insurance Contracts Act and it would have had the effect of cancelling the policy of insurance. The letter itself was addressed to Cash Resources care of the deceased. I am satisfied that as a probability it was received by the deceased as agent for the first defendant at his business premises, that being the business premises of the first defendant. It was the failure of the first defendant, the agent of Capita at the time to forward that letter to Cash Resources which resulted in the contract not being cancelled by Capita. Clearly by its contents and address the letter was directed to Cash Resources. It was reasonable for Capita to expect such an important letter, when regard is had to its contents, to be furnished, by its agent, the first defendant, to the insured. Capita did not need to instruct the deceased or the first defendant that it required the letter to be forwarded to Cash Resources. It was entitled, in my view, to rely on its agent, the first defendant, to send the letter on to Cash Resources and it was not at fault in not enquiring of the first defendant as to whether the letter had been forwarded to Cash Resources. The letter on its face informed the deceased, the first defendant, and Cash Resources, had it been delivered, that Capita regarded the policy to have lapsed and be no longer on foot. Having received the sum of $2,880 in June 1990, it was appropriate for it to be deposited, in the superannuation fund in which it was so deposited. Further, having regard to the payment of the sum of $1,696.50 in April 1994 accompanied by the “With Compliments” slip, it was appropriate for the plaintiff to credit that sum to the superannuation fund held in the name of Roberts. In my view, on the receipt of each of those sums there was no fault on behalf of either Capita or the plaintiff. In my view, in the circumstances of this case there was no contributory negligence on the part of Capita or the plaintiff which should cause damages which the plaintiff is otherwise able to recover in these proceedings to be reduced nor does there exist any matter which should reduce the damages that the plaintiff is entitled to recover under s. 82 of the Trade Practices Act by operation of s. 87(1) of that Act.

For the reasons expressed it is my view, the plaintiff is entitled to recover against the first defendant damages in the sum of $531,615.74. However, for the reasons I have also expressed the plaintiff is not entitled to damages against the second defendant, the administrator ad litem of the deceased.

It is ordered that there be judgment for the plaintiff against the first defendant in the sum of $531,615.74 and it is ordered that the first defendant pay the sum of $531,615.74 to the plaintiff. Further, on the plaintiff's claim against the second defendant, as administrator ad litem of the estate of the deceased Charles Warwick Mahony, it is ordered that there be judgment for the second defendant against the plaintiff and it is ordered that the plaintiff's proceedings against the second defendant be dismissed.

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[2001] VSC 241

24 July 2001