Nguyen v Westscheme Pty Ltd

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: NGUYEN -v- WESTSCHEME PTY LTD & ANOR [2006] WADC 1

CORAM: DEPUTY REGISTRAR HEWITT

HEARD: 7 DECEMBER

DELIVERED : 11 JANUARY 2006

FILE NO/S: CIV 801 of 2005

BETWEEN: THINH THI TUONG NGUYEN
Plaintiff
AND
WESTSCHEME PTY LTD
First Defendant
PREFSURE LIFE LIMITED
Second Defendant

Catchwords:

Practice - Western Australia - Application to strike out portion at statement of claim - Duty owed by insurer to beneficiary

Legislation:

Nil

Result:

Portions of the statement of claim struck out

Representation:

Counsel:

Plaintiff:     Mr D R Clyne
First Defendant             :     Mr B C Smith
Second Defendant         :     Mr B C Smith

Solicitors:

Plaintiff:     Friedman Lurie Singh & D'Angelo
First Defendant             :     Ilberys
Second Defendant         :     Ilberys

Case(s) referred to in judgment(s):

Hannover Life Re of Australasia v Sayseng [2005] NSWCA 214
Ilievska-Dieva v SGIO Insurance Limited [2000] WASCA 161
Lomsargis v National Mutual Life Association of Australasia Ltd [2005] QSC 199

Case(s) also cited:

Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317
Astley v Austrust (1999) 197 CLR 1
CE Heath Casualty & General Insurance v Grey (1993) 32 NSWLR 25
Edwards v Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Heitman v Guardian Assurance Co Ltd (1992) 7 ANZ Ins Cas 61-107
Karger v Paul [1984] VR 161
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107

DEPUTY REGISTRAR HEWITT: Before me is the application by the first and second defendants for orders striking out identified paragraphs in the statement of claim. Before I embark upon an analysis of the manner in which the relevant paragraphs are said to be offensive I shall first give a brief outline of the case.
The plaintiff is a member of the West Scheme Superannuation Fund of which the first defendant is the trustee. As part of the benefits conferred upon its members by the fund the first defendant took out a policy of insurance with the second defendant which would entitle the plaintiff to a benefit in the event of her total and permanent disability to be determined according to criteria contained within the policy.
It is pleaded that the plaintiff suffered an accident the consequence of which was that she was so incapacitated and accordingly the plaintiff made a claim to the first defendant to be passed on to the second defendant which was rejected.
With that background I now analyse the various paragraphs of the statement of claim which are under attack. The first such paragraph is par 13 which relevantly pleads that the first defendant ie the trustee owed the plaintiff a common law duty of care which arose by reason of the proximity between them.
It is contended that par 13 does not raise a reasonable cause of action against the first defendant, it being alleged that there is no basis in law for a concurrent tortious duty of care to prevent purely economic loss to the plaintiff where the rights and obligations between them are governed by a trust deed.
The first point to consider is whether an action for pure economic loss can lie. Whilst there is no doubt that claims for pure economic loss are not normally entertained, and indeed a wholesale recognition of such claims would effectively destroy a free enterprise system where the competition offered by one party in a market place will inevitably will cause some detriment to others in the same market place, nonetheless in particular circumstances such claims can lie.
It is true as the defendant alleges that the relation between the plaintiff and the first defendant is largely governed by the provisions of the trust deed, relevant legislation and the law relating to trustees. To my mind that is not necessarily exclusive of the operation of the principles of negligence.
The plaintiff relies on the decision in Ilievska-Dieva v SGIO Insurance Limited [2000] WASCA 161 as authority for the proposition that such a claim may be entertained. In that case an action was commenced in the Local Court claiming damages for delay in making workers compensation payments to which the plaintiff was entitled. The matter was struck out on application to a Magistrate, which was appealed to the District Court, and removed from that court to the Full Court of the Supreme Court for its consideration.
The court held that the claims were arguable and overruled the decision of the Magistrate striking them out.
The defendant distinguishes this case on the basis that the entitlement of the plaintiff had accrued and the matter related to administration rather than to determination of a claim. In my view it is arguable that the case has a broader application than contended for by the defendant such that if a claim was wrongly refused a claim for damages could lie. There is however a difficulty with the pleading in that there is no prayer for relief by way of damages but that is a technical matter which in my view could be easily remedied. I therefore conclude as a general proposition that the claim based in tort is at least arguable however I am not satisfied that the paragraph is free from difficulty. In par (f) it is said that the duty of care embraced a requirement to "act in utmost good faith in assessing the plaintiff's application for the total and permanent disability" and "act all times in the best interest of the plaintiff". If the plaintiff wishes to cast its action by postulating an existence of a duty of care and a breach of that duty then the material contained in pars (f) and (g) have no place. The standard to be applied by a party under the common law duty of care is a standard to take reasonable care. To act in utmost good faith is not in my view the same as to take reasonable care nor in my view is taking reasonable care necessarily the same as to act at all times in the best interest of the plaintiff. For those reasons although I am not prepared to strike out the whole of par 13 I am of the opinion that pars (f) and (g) should be struck out.
The next paragraph challenged is par 14 which postulates the existence of a fiduciary duty owed by the first defendant to the plaintiff pursuant to the terms and conditions of the trust deed. Following that general proposition in pars (a) to (j) are a set of contentions which I summarise as saying that the application of the duty to the circumstances of the plaintiff's claim required the satisfaction of the fiduciary duty by the steps described in pars (a) to (j).
The challenge to the pleading is in effect that those sub paragraphs do not properly set out the legal obligations owing by the first defendant to the plaintiff pursuant to the trust deed. The proposition advanced by the defendant is that the correct statement of the ambit of the fiduciary duties is contained in cases such as Hannover Life Re of Australasia v Sayseng [2005] NSWCA 214. The facts in that case were broadly similar to this and the Court of Appeal in New South Wales broadly accepted the propositions which had been enunciated by the trial judge and which are repeated in par 33 of the decision. The issue with which I must deal is whether it can be fairly said that sub pars (a) to (j) in par 14 are in fact an application of the general principles applicable to the case to the facts and circumstances of the case itself. Undoubtedly there is a great deal of repetition in redundancy within pars (a) to (j) but my conclusion on examining the material contained within those sub paragraphs is that for the most part they are not offensive but simply an attempt to translate the general principles into the facts of the case. There are however a number of sub paragraphs that in my view are deserving of criticism first of which is sub par (h) in which it is alleged there was a fiduciary obligation to act in accordance with the purposes for which the discretion was conferred pursuant to the trust. There is nowhere within this pleading any indication as to precisely what purposes the discretion was conferred nor the manner in which that purpose was thwarted by the actions of the first defendant. Similarly in par (i) it is said that there was a duty to act in accordance with the terms and conditions of the trust and elsewhere an allegation that that requirement was breached but there is no indication as to which terms and conditions of the trust are said to have been breached. In the next paragraph is that it is said that the first defendant owed a duty at all times to act in the best interests of the plaintiff. In my view that proposition is unsustainable. To the extent that a duty existed it was to act in the utmost good faith in processing the application. Such a broad and unconfined allegation in my view is unhelpful and takes the pleading party nowhere. Therefore whilst I am prepared to allow par 14 to stand in its basic form in my view pars (h), (i) and (j) should be struck out.
The next paragraph under attack is par 15 and that deals with the second defendant, that is the insurer, with whom the first defendant affected the policy of insurance against which the plaintiff made a claim. The first allegation is that there was a common law duty which arose between the second defendant and the plaintiff by virtue of the relationship which I have described. It is contended by the defendant that no such common law duty exists on that score the defendants rely upon the analysis contained in the case of Lomsargis v National Mutual Life Association of Australasia Ltd [2005] QSC 199. That is a decision of a single Judge of the Supreme Court of Queensland in which a plaintiff sought to introduce a tortious claim in an action based upon the refusal of the defendant to meet a claim, intending that tort to be the vehicle by which an award of exemplary damages might be granted.
After an exhaustive analysis of the decisions his Honour concluded that the tortious claim so pleaded should be struck out as disclosing no reasonable cause of action. His Honour elsewhere within his judgment stated that the standard to apply in a strike out application is that the claim is so clearly untenable that it can not possibly succeed. His Honour therefore found that the cause of action set out within the pleading was clearly untenable and could not possibly succeed.
Whilst the decision is not binding on the Courts in Western Australia nonetheless I find its logic persuasive and I accept the decision as setting out a proper analysis of the law in this area. I therefore conclude that insofar as the plaintiff seeks to rely on a common law duty pleaded in par 15 that claim is untenable and should be struck out.
The next paragraph under attack is par 16 in which it is alleged that the second defendant owed the plaintiff a contractual duty which arose because the policy of insurance was in effect a tripartite agreement between the plaintiff and each of the defendants. It is argued by the defendant that in truth the contract of insurance existed between the second defendant and the first defendant, that the plaintiff was not a party to that contract, and therefore the second defendant owed the plaintiff no contractual obligations whatever.
It is difficult to fault that logic. Undoubtedly there is a duty owed by an insurer in circumstances such as exist in this case but they are not contractual obligations they are effectively, summarizing in very broad terms the propositions in the Hannover Life case, duties of good faith and fair dealing. They arise by virtue of the relationship of insurer and beneficiary not by virtue of any contractual terms within the contract of insurance. It therefore follows that insofar as the plaintiff seeks to propound the proposition that the second defendant owed the plaintiff a contractual duty in my view that proposition is untenable. The paragraph will be struck out.
Unfortunately there is not within the pleading any paragraph that I can see that sets out the proper basis of the plaintiff's claim against the second defendant. In my view the proper basis of the claim against the second defendant is that there is a duty owed by an insurer to a beneficiary of a policy of insurance to deal with that beneficiary fairly and in good faith. If the plaintiff wishes to pursue the second defendant it is on the basis of the breach of that duty rather than some tortious or contractual duty that the action should proceed.
I now proceed to consider par 17 of the statement of claim which is again under attack. The attack in this particular instance alleges that the allegations of breach are devoid of factual content such that the defendant is able to understand the case which is being brought against it.
Undoubtedly in many instances the allegations contained in par 17 are somewhat imprecise but in my view pars (a) to (k) are satisfactory and need not be struck out. Paragraph (l) however alleges the first defendant failed to act in accordance with the purpose for which the discretion was conferred by the trust. There is nowhere within this pleading any indication as to what purpose that might be and therefore insofar as that allegation of breach is made it ought to be struck out in my view. The next paragraph of par 17 is sub par (m) in which it is said that the first defendant failed to act in accordance with the terms and conditions of the trust. Nowhere is there any identification of what terms and conditions are relied upon. That paragraph will also be struck out. The next paragraph alleges the defendant failed to act with the utmost good faith. It is somewhat unhelpful that the common law breaches and the fiduciary breaches are lumped together but clearly that paragraph relates to the allegations of fiduciary duty, or at least it will when effect is given to my decision to strike out what I regard as offending portions of par 13. The conclusion is therefore that sub pars (l) and (m) of par 17 will be struck out but the paragraph will otherwise survive the attack upon it.
A similar allegation is made regarding concerning par 18 of the statement of claim this being a paragraph in which the allegations of breach are levelled against the second defendant. In the light of the earlier decisions I have made concerning others paragraphs of the statement of claim there is no basis upon which this paragraph can remain within the pleading since there is nothing left for it to attach to.
There is also criticism of sub par (k) of par 18 which refers to a failure to act in accordance of express terms and conditions of the policy in certain identified sections. In my view the criticism of that paragraph is a sound one it is necessary to say what the provisions are, why they apply to the plaintiff and the manner in which it is alleged that those provisions were breached. For these reasons there will be orders that the paragraphs identified within this decision as being unsatisfactory will be struck out.

[2006] WADC 1

11 January 2006