Montclare v MetLife Insurance Ltd
[2009] VSC 402
•8 SEPTEMBER 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 10156 of 2005
| JOHN MONTCLARE | Plaintiff |
| v | |
| METLIFE INSURANCE LIMITED (ACN 004 274 882) | First Defendant |
| RIVKIN DIRECT INSURANCE AGENCIES PTY LTD (ACN 073 632 292) | Second Defendant |
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JUDGE: | HARPER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 2 SEPTEMEBER 2009 | |
DATE OF JUDGMENT: | 8 SEPTEMBER 2009 | |
CASE MAY BE CITED AS: | MONTCLARE v METLIFE INSURANCE LTD | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 402 | |
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Insurance – Appeal from an Associate Judge – Pleading – Application to strike out portions of first defendant’s defence - Rules of the Supreme Court 2005, r.23.02 - Whether information provided in the insurance application form accurate – Whether particulars support the principal allegation – Whether necessary to plead particulars of state of mind, including knowledge - Freehouse Pty Ltd v Middletons, Moore & Bevins (Unreported) 30 April 2001 not followed – Ristevski & Anor v Kyriacou & Ors (Unreported) 15 October 1996 applied – Whether plea of agency adequate - Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Murdoch QC with Mr P. Bingham | Maurice Blackburn |
| For the First Defendant | Mr J. Gleeson SC | Deacons |
| For the Second Defendant | No appearance |
HIS HONOUR:
This is an appeal from certain of the orders made by Mahony AsJ on 21 May 2009. His Honour ordered that particulars added by way of previous amendments of paragraphs 22A and 32B of the first defendant’s amended defence to amended statement of claim (“the defence”) be deleted, and that – save in the respects otherwise mentioned in his orders - the application made by the plaintiff by his summons of 24 April this year be dismissed. He also ordered that the first defendant’s costs of the hearing before him be paid by the plaintiff. It is against these orders that the appeal is brought.
The plaintiff sues under a policy of term life insurance. It was taken out on 21 January 1999. There is no dispute about that, because the first defendant alleges in paragraph 19 of its defence that on that day it “entered into a contract of insurance with the plaintiff”. The difference between the parties at this point is that the plaintiff contends that the relevant policy was a “master policy in respect of the deceased [a man named Graeme John Shilton] as life insured … commenced by the issue of a certificate under the master policy to the plaintiff as certificate holder in respect of the deceased as life insured”. According to the plaintiff, the result is that he is not the insured; rather, that honour falls to either the second defendant or to an associated company of that defendant.
The plaintiff contends that this difference is material. As I understand his case on this issue, it is that - by reason of the particular arrangements by which the insurance was in this case effected - he is not placed under the same obligations of disclosure that would apply were he “the insured” as that expression is used in the Insurance Contracts Act 1984. By pleading the opposite case, and categorising the plaintiff as the insured, the first defendant’s defence is (or so the plaintiff contends) significantly flawed.
Be that as it may, the plaintiff by his summons of 24 April sought to strike out a number of paragraphs of the defence, paragraph 19 being among them. The objection to that paragraph is to the allegation that the relevant contract was entered into between the first defendant and the plaintiff; and this happened when, on 21 January 1999, the defendant accepted the plaintiff’s written application for insurance. The ground of objection is that the particulars under that paragraph do not support the allegation of a contract to which the plaintiff is a party. They (that is, the particulars) would have it that the contract of insurance is constituted by certain documents the factual and legal effect of which is incompatible with the contract described in paragraph 19 of the defence. The plaintiff contends that an examination of those documents will disclose that they do not constitute the contract there (purportedly) identified.
The strike out application is made pursuant to r.23.02 of the Rules of the Supreme Court 2005. So far as presently relevant, it provides that, where a pleading may embarrass the fair trial of the proceeding, the Court may order that that pleading be struck out. In determining whether such embarrassment has been caused, however, the Court may not have regard to any evidence.
The plaintiff contends that an examination of the documents to which the first defendant refers in its particulars under paragraph 19 would not amount to an examination of evidence. Even were that contention correct, however, it does not circumvent the difficulty for the plaintiff that paragraph 19 is in its own terms a perfectly adequate statement of a material fact. As a pleading it is in my opinion unimpeachable, and nothing in the particulars can alter its nature in that respect. If the defendant cannot make good the particulars, or if it makes good the particulars but they do not support the allegation, the latter will fall. But that will be a conclusion which is drawn from an examination of the evidence followed by the application to that evidence of the applicable law; and the process will say nothing about whether or not paragraph 19 conforms to the rules of pleading. And it is the issue of the paragraph’s conformity with those rules, not the first defendant’s capacity to prove the allegation, which is raised in the plaintiff’s summons.
In coming to this conclusion, I do not wish to suggest that inadequate particulars can never result in a pleading that is embarrassing or which may prejudice or delay the fair trial of a proceeding. If the absence of particulars, or their manifest inadequacy to support the material allegation in support of which they are put forward, is not corrected after proper opportunity for correction has been provided, then it may be entirely appropriate for the opposite party to bring that circumstance to the notice of the court; and the court may be of the opinion that such particulars as have been pleaded cannot sustain the material allegation they are intended to support, and for which particulars are necessary. In that state of affairs, it might be entirely appropriate for the court to intervene pursuant to r.23.02 so that further time and expense is avoided, and a hopeless pleading put to its final rest. That point has not been reached in this case, nor was it submitted that it had. I expect, however, that the first defendant will examine its position and, if necessary, either take steps to remedy any deficiency, or reconsider its position more generally. I expect, too, that the plaintiff will re-examine its contention that the particulars cannot sustain the principal allegation. After such examination or re-examination, the parties may, uninhibited by anything in these reasons, take such action as they may be advised. As I presently understand the position, however, the issue raised by the plaintiff at this point is in truth not one of the sufficiency or otherwise of the particulars as particulars, but whether, if they are made out, the result as a conclusion of fact and law will or (as the plaintiff would contend) will not support the material allegation made by paragraph 19 of the defence.
Under the heading “Other Matters”, Mahony AsJ queried the correctness of the judgment of Beach J in Freehouse Pty Ltd v Middletons, Moore & Bevins.[1] His Honour was there concerned with the proper scope of two rules of the Rules of the Supreme Court 1996. Rule 13.02(a) required that every pleading shall contain in summary form a statement of all the material facts on which the party pleading relies, but not the evidence by which those facts are to be proved. Rule 13.10(3)(b), however, required that every pleading contain particulars of any condition of the mind, including knowledge. But to give the latter particulars might involve an insertion of evidence into the pleading. If it did, then (in his Honour’s opinion) those particulars should not be provided.
[1](Unreported) 30 April 2001, No. 5895 of 1998.
I respectfully disagree. In my opinion, the rules of pleading, which have not changed materially as between their 1996 and their present (2005) form, should be construed so as to ensure that pleadings reveal the real issues in dispute and avoid surprise. This is unlikely to be achieved in the absence of relevant particulars, especially where an allegation of knowledge is made by one party and denied by the other. Every particular by which the party pleading knowledge intends to support that allegation should be included in the pleading if there is any prospect that its absence will take the other party by surprise when evidence is given at trial. If particulars cannot be given, then it may be that the allegation of knowledge will be susceptible of objection as being embarrassing, or as prejudicial to the fair trial of the proceeding. This may be the occasion for an order for the removal of untenable claims.
If one of the issues in this case is the identity of the insured (and, if the plaintiff is the insured, the extent of his obligation to provide the first defendant with accurate and relevant information) another is the accuracy of information in fact given to the first defendant by the plaintiff and the life insured, Graeme Shilton. The defendant alleges that it was false in several material respects. In a form of application for insurance, which form was dated 23 November 1998 and signed by both the plaintiff and Mr Shilton, the two (so the first defendant contends) falsely stated that Mr Shilton had never suffered from a mental disorder, and that the signatories were unaware of any circumstance which might shorten Mr Shilton’s life. The form also stated that the information contained in it was true, and that “an application for life, trauma or disability insurance was not being made to any other company”. In fact, so the first defendant alleges, Mr Shilton had suffered from dysthymia for a number of years (between 30 October 1987 and 19 April 1991) during which he had received psychiatric treatment on at least 60 occasions. He attempted suicide in 1989, and took his own life on 22 January 2001.
The primary source of the information with which we are here concerned was Mr Shilton. Indeed, the first defendant pleads (in paragraph 26 of the defence) that it required him, as the life insured, to provide the answers now alleged to be false. It also alleges that “[t]he representations made by Shilton in the first application were made by him ... as agent for the plaintiff”.[2] Particulars are given. The agency, it is pleaded,
... was actual and/or implied. Insofar as it was actual, the first defendant is unable to provide particulars at this time save to say that the agency is to be inferred from the matters set out hereunder in respect of an implication. Insofar as it was implied, the implication arises from the fact that Shilton signed the first application at or about the same time as the plaintiff signed the first application with the knowledge of the plaintiff, for the purpose of ensuring that a benefit was paid to the plaintiff on Shilton's death.
[2]First defendant’s amended defence to the amended statement of claim (“the defence”) para.22A.
Mahony AsJ ordered that the words “save to say that the agency is to be inferred from the matters set out hereunder in respect of an implication” be deleted. It seems to me, however, that they do not add anything that in a pleading sense is undesirable or to be impugned. My concern with the allegation of agency is more fundamental.
I do not understand why agency is pleaded. An agent is, in the present context, one whose acts bind the principal because they are deemed to be those of the principal. The term is defined in the Australian Legal Dictionary as, amongst other things, “A relationship involving authority or capacity in one person (the agent) to create or affect legal relations between another person (the principal) and third parties”.
But here the relevant knowledge concerned Mr Shilton’s health, and the first defendant required him, and no-one else, to furnish the first defendant with the information it sought. By signing the form of application, the plaintiff did not clothe Mr Shilton with authority to create or affect legal relations between him and the first defendant. The plaintiff by signing the form of application did this for himself. Nor did he invest Mr Shilton with authority to answer the first defendant’s questions on the plaintiff’s behalf. He had no power to countermand a requirement which had been imposed by the first defendant. So the answers were those of Mr Shilton, not of the plaintiff. The first defendant itself made it so, even if the mode of authenticating the answers was not of itself enough to take the relationship outside that of agency.
But it seems to me that the plaintiff did, as a matter of law, make important representations about the answers given by Mr Shilton. By assigning the form of application, he represented that the answers were, to the best of his knowledge and belief, true. He also, by signing the form of application, represented that he had made such enquiries as were appropriate to constitute a proper foundation for that knowledge and belief. If that be the defendant’s case, it should fashion its defence accordingly.
The plaintiff submits that the particulars of agency are insufficient. I think that, for the reason just mentioned, they are unnecessary. If I am wrong about that, and therefore wrong about the question of agency, I nevertheless am of the opinion that the particulars are adequate so long as the first defendant has not failed to disclose anything which, if it were to be aired at trial, would impermissibly take the plaintiff by surprise. If the form of application was signed by Mr Shilton at or about the time it was signed by the plaintiff and otherwise in the circumstances described in the particulars of the relevant portion of the defence, then it is arguable that, as a matter of law, he thereby made Mr Shilton his agent. And it is not surprising that the first defendant cannot give any further particulars. Each case of this kind must be judged against its own circumstances because what are or are not sufficient particulars will depend on those circumstances. In my opinion, they circumstances obtaining here are such as to render the particulars sufficient.
The plaintiff next complains about the particulars of Mr Shilton’s alleged mental disorder. He submits that it is not clear whether the first defendant is alleging that Mr Shilton suffered from dysthymia at the time of the signing of the application on 23 November 1998. In my opinion, however, it is clear that the allegation is that this affliction ceased in 1991. If I am wrong about that, then the particulars of the relevant portion of the defence will have to be amended.
The next complaint concerns the particulars of the plaintiff’s knowledge of that disorder. The plaintiff submits that it is not good enough to plead that he knew of Mr Shilton’s mental health issues because he knew the deceased “sufficiently well to make an application for a life insurance policy in respect of Shilton’s life”.[3] Nor is that deficiency cured by the addition of an allegation that the relevant knowledge came to the plaintiff “by reason of the fact that he had satisfied himself as to Shilton’s medical history so as to enable him to reasonably and honestly make the declarations contained in ... the first application”.[4]
[3] Defence, para.24(b).
[4] Ibid.
The plaintiff submits that these particulars do not comply with the rule that every pleading shall contain particulars of any condition of the mind, including knowledge: r.13.10(3)(a). Nor do they meet the requirement, contained in r.13.10(2)(c) and reinforced by my ruling on the point made by Beach J in the Freehouse case, that particulars shall be given if they are necessary to avoid surprise at trial. The first defendant counters by contending that they are sufficient, and since they are the best it can do, there will be no surprise. If additional matter comes into the hands of the first defendant, the plaintiff will be informed of it; and so surprise will be avoided.
In Ristevski & Anor v Kyriacou & Ors,[5] I said, when dealing with the adequacy of particulars in a pleading alleging fraud (but the principle applies more generally):
The Rules of the Supreme Court require that every pleading shall contain the necessary particulars of any fact or matter pleaded: r.13.10(1). Particulars shall be given if they are necessary to enable the opposite party to plead or to define the questions for trial or to avoid surprise at trial: r.13.10(2). Every pleading shall contain particulars of any fraud: r.13.10(3). It follows that, whether or not particulars are properly described as forming part of the pleading itself, they may very well perform an essential function; and their absence may very well deprive the pleading of all efficacy.
It may also very well be that a person who suspects fraud, and who wishes to allege it, is unable to point to any more than mere speculation as a means of supporting the allegation. Hard as it may be for such a person to appreciate the fact, it is nevertheless inappropriate to allow such an allegation to go forward to trial. If the person making the allegation does not have sufficient evidence to support it, then the sooner the allegation is removed from the list of issues between the parties, the better. The Court should not be concerned with hunches, no matter how reluctant litigants may be to put their hunches aside. In such cases, the Court should act to save the subject of an allegation of fraud which cannot be substantiated 'from the vexation of the continuance of useless and futile proceedings'.
[5] (Unreported) 15 October 1996, No 12137 of 1991
It seems to me that the impugned particulars signify that the first defendant is here relying on not much more than a hunch. All it can say to substantiate the allegation of knowledge is to point to the (alleged) fact that the two had a relationship which, in each of the two applications made for term life insurance cover, was described as that of “friend/mentor”. Nothing of value is contributed by adding that the plaintiff knew Mr Shilton well enough to make application for a life insurance policy in respect of his life. Such policies are taken out, given sufficient reason, on lives about which very little may be known except that their ending would cause the insured financial stress. An example is a policy taken out on the life of a judge by a litigant who, because of the nature of the litigation, would be very adversely affected should the judge die before judgment.
It is in my opinion similarly unhelpful to allege that the plaintiff knew of Mr Shilton’s medical condition because he (the plaintiff) satisfied himself that he was in a position “to reasonably and honestly make the declarations contained in ... the first application”.[6] He may have satisfied himself that he was in the position described. He may, on that foundation, have made the declarations in question reasonably and honestly. And yet the declarations may nevertheless have been factually incorrect. If at the end of the trial the first defendant is in no better position than that pleaded on its behalf, then the allegations in question will not be made out.
[6] Defence, para. 24(a).
In these circumstances, it is incumbent on the Court to ask whether, as an issue of good case management, these allegations should be allowed to remain in the defence in their present or in some modified form. On balance, I think that they should remain, but only if they are amended. The amendment should make it plain that the basis for them is the first defendant’s allegation of the friend/mentor relationship. According to the first defendant, that description has as its joint source the plaintiff and Mr Shilton themselves. If that is so, it is a source upon which the first defendant can rely as an admission. It suggests that the plaintiff – if not as a friend, then more possibly as a mentor - may well have known about Mr Shilton’s psychiatric problems (and, as becomes relevant later in the pleadings) his financial position. On the hypothesis (the pleading of which is not attacked as being inherently improper as a pleading) that Mr Shilton did suffer from a psychiatric illness, and was not sufficiently financially well placed so as to disadvantage the plaintiff financially should he die, the first defendant should, it seems to me, be allowed to explore these matters at trial even if it is not itself, and independently of the plaintiff, in a position to support the relevant allegations by evidence. There does on balance seem to be enough in the allegation of a friend/mentor relationship between the plaintiff and Mr Shilton to enable the first defendant properly to submit that it is based on more than a mere hunch. Indeed, it has the plaintiff himself as its source (or so the first defendant contends). And so the allegations of knowledge are likewise, albeit at a step more distant, also based on more than a mere hunch. The first defendant should therefore be allowed to explore that relationship, and the extent of that knowledge, at trial.
On 17 April 1999, the plaintiff applied for an increase in the benefit to which he would become entitled on the death of the life insured. According to the first defendant, the second form of application was signed by the plaintiff and Mr Shilton on that day. It made the same representations about Mr Shilton’s health as did the first. It was also supported by a letter. That letter was dated 28 May 1999. The author of the letter was Mr Shilton. In it, he stated in effect that the purpose of the application, and the cover that would (it was hoped) follow, was “to provide adequate cover to meet obligations of additional financing of investments/properties (debts) in the event of my death”.
The first defendant pleads that, in writing this letter, Mr Shilton was the agent of the plaintiff. The particulars of agency are the same as those given to support the allegation of agency in relation to the first application. They are attacked by the plaintiff on the same basis. My response is likewise the same, save that in this instance it seems to me that, as a matter of law, the allegation of agency is more soundly based. By writing the letter in support of the plaintiff’s application for an increase in his insurance benefit, Mr Shilton was advancing the plaintiff’s position in a way and by means which, as one would expect, an agent would adopt. He was (to refer again to the words of the Australian Legal Dictionary) exercising the authority of the plaintiff in order to affect legal relations between the plaintiff and the first defendant – or, at least, that is as the first defendant contends in its defence in the case. I am therefore of the opinion that the agency alleged here is not open to the criticism to which I earlier referred. Provided that they contain enough to ensure that the plaintiff is not taken by surprise at trial, I am of the opinion that the particulars of agency are sufficient.
By paragraph 34A of the defence, the first defendant alleges that at the time the relevant letter was written the plaintiff and Shilton knew that Shilton had no, or only very minimal, debts and/or financing commitments. In those circumstances, the purpose of the two (that is, the plaintiff and Shilton) entering into the contract of insurance was not so that, in the event of Shilton's death, the debt benefit payable under the policy would enable the plaintiff to satisfy the debt and/or financing commitments in a sum which approximated the insured benefit under the second policy. It was some other purpose.
The plaintiff attacks this pleading on the basis that it refers to the purpose of the plaintiff without giving particulars of that purpose. In my opinion, however, particulars are not required. In this instance the first defendant is not putting forward any particular purpose as that which lay behind the second application, save that which the Shilton letter itself sets out.
In those circumstances there is, it seems to me, no requirement according to the laws of pleading to the effect that the first defendant should provide particulars of a purpose which - on the hypothesis which seems to me to be appropriate - the first defendant is not putting forward. Rather the position of a first defendant simply is that, to the extent that any purpose motivated the plaintiff (apart from that set out in the Shilton letter) that purpose was not disclosed in the relevant form of application. The first defendant does not suggest that any particular purpose lay behind that application.
That, I think, covers the matters raised by the plaintiff in support of its appeal. Apart from some criticisms of the defence, which seemed to me to be readily susceptible of correction, the submissions of the plaintiff have not succeeded. In those circumstances unless I can be persuaded otherwise, it seems to me that the appeal should be dismissed and the costs of the appeal should be borne by the plaintiff.
(Discussion ensued in relation to costs)
I do accept the point made on behalf of the plaintiff by Mr Bingham that immediately after the conclusion of the hearing before Mahony AsJ, the plaintiff was legitimately in a position of some concern. The authority of Freehouse remained and, while it remained, the plaintiff would – unsurprisingly - be concerned that the first defendant might shelter behind that authority in taking the position that no further particulars of the knowledge alleged in the plaintiff would be provided.
In answer to that submission, however, Mr Gleeson has directed my attention to a letter dated 27 May 2009 from his instructing solicitors to the solicitors for the plaintiff in which the solicitors for the first defendant say, in effect, that they are not in a position to provide any further particulars; and, although they do not say this, it would follow that they do not seek to gain any protection that the Freehouse decision might otherwise have provided for them.
In those circumstances it seems to me that the costs of the appeal should go as I originally indicated. I will order that the plaintiff pay the first defendant's costs of the appeal.
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