Oberlechner v Tower Australia Limited

[2002] NSWSC 814

Reported Decision: (2002) 12 ANZ Insurance Cases 61-533

New South Wales

Supreme Court

CITATION:	Oberlechner v Tower Australia Limited [2002] NSWSC 814
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 3837/01
HEARING DATE(S):	2 to 5 September, 2002
JUDGMENT DATE:	6 September 2002
PARTIES :	Alfredo Oberlechner - Plaintiff Tower Australia Limited - Defendant
JUDGMENT OF:	Palmer J

COUNSEL :	M.L. Williams SC, D.T. Kell - Plaintiff M.L. Brabazon - Defendant
SOLICITORS:	Herbert Weller - Plaintiff P.W. Turk & Associates - Defendant
CATCHWORDS:	INSURANCE - CONTRACTS REVIEW ACT - Deed of Release of insurance claim processed when insured with good claim suffering from depression, acute grief and in severe financial difficulty. HELD: Deed declared void - INSURANCE. Whether plaintiff incapable of earning due to continuing depression. HELD: Plaintiff entitled to continuing benefits under policy.
LEGISLATION CITED:	Contracts Review Act 1980 (NSW) - s.7(1), s.9(2) Supreme Court Act 1970 (NSW) - s.94
CASES CITED:	- Amcor Limited v Watson (2002) Aust Contract Reporter 90-110 - Baltic Shipping Company v Dillon: Mikhail Lermontov (1991) 22 NSWLR 1 - Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296
DECISION:	Plaintiff entitled to declarations and orders sought.

Introduction

1    In these proceedings the Plaintiff claims unpaid benefits said to be owing under an Income Protection Policy administered by the Defendant and declarations to the effect that he is presently entitled to continuing benefits under that Policy. The Defendant says that these claims were released by the Plaintiff in a Deed of Release dated 2 January 2002; alternatively, it says that the Plaintiff ceased to be entitled to benefits under the Policy as from 3 September 2000, when he became capable of working. 2    There are two principal issues:


– whether the Deed of Release should be declared void under the Contracts Review Act 1980 (NSW) or set aside under the general law on the ground of unconscionable conduct or undue influence;

– if the Deed is declared void or is set aside, whether from 3 September 2000 to date the Plaintiff has been incapable of earning 80% or more of his pre-sickness monthly income so as to qualify for continuing benefits under the Policy.

3    Apart from a difference of opinions between the Plaintiff’s medical experts on the one hand and the Defendant’s medical expert on the other, there is very little dispute, if any, between the parties as to the fundamentally important facts.

Background

4    The Plaintiff, Mr Oberlechner, was born in Italy and came to Australia some years ago. He was a highly skilled and talented systems designer working in the Information Technology industry. In July 1999 his employer required him to undertake a complex and difficult design project. For many months, he worked up to eighteen hours a day, often seven days a week. He felt that the resources given to him were inadequate and the support from his employer almost non-existent. His health and his family life suffered greatly. His wife and two young children hardly saw him. Yet pride in his work drove him on until the project was completed. 5    Mr Oberlechner expected gratitude from his employer and a substantial bonus. Instead, as he saw it, he received nitpicking criticism and the bonus which he was offered was derisory. 6    In December 1999, Mr Oberlechner suffered a major depressive illness with an acute stress reaction. According to his psychiatrist, his condition followed “a classical picture seen in the condition known as ‘burn-out’ which … is an occupationally acquired syndrome usually caused by a combination of long hours and high pressure situations” . 7    Mr Oberlechner, who is now 38 years of age, has not worked since December 1999, apart from very short-lived attempts to resume part-time work with his employer, both of which proved disastrous and aggravated his depression. 8    No one doubts that Mr Oberlechner wants very much to return to full-time employment. No one has ever accused him of malingering. He has made a number of attempts to obtain work with other employers but as soon as he discloses his condition and that he is on medication prospective employers lose interest. 9    From the beginning of 2000, Mr Oberlechner’s financial situation and that of his family became increasingly difficult. By the end of 2001, it had become truly disastrous. Mr Oberlechner’s desire to return to work has been spurred as much by financial necessity as by self esteem. 10    Mr Oberlechner had taken out an Income Protection Policy in 1995 and had paid his premiums since that date. The Policy provided a monthly income benefit if Mr Oberlechner suffered a loss of income solely as a result of sickness or injury. The benefit was payable only if Mr Oberlechner was incapable of earning 80% or more of his highest average monthly income through personal exertion from his normal occupation solely as a result of his sickness. 11    In February 2001, Mr Oberlechner made a claim under that Policy against the Defendant (“Tower”). Tower made three payments of $5,000 each to Mr Oberlechner during April and May 2001 which it described as “goodwill payments” made while it was considering whether or not to admit his claim. 12    On 12 June 2001, Tower wrote to Mr Oberlechner saying that it had decided to pay income benefits under the Policy but only for a period of incapacity from 14 December 1993 to 3 September 2000. It was Tower’s view that as from 3 September 2000 Mr Oberlechner was not incapable of earning 80% or more of his highest average monthly income, within the meaning of the Policy. Tower, therefore, proposed to pay a total of $24,643.38 in income benefits to Mr Oberlechner of which he had already received $15,000 in goodwill payments. 13    Mr Oberlechner rejected that proposition and on 2 August 2001 he commenced these proceedings to enforce the payment of income benefits under the Policy.

Deed of Release

14    In November 2001, Mr Oberlechner and his solicitor made a number of attempts to settle the proceedings with Tower. In late November, Mr Oberlechner himself, in desperation, began to negotiate directly with Tower’s Claims Manager, Mr A. Wagner. In a meeting on 26 November 2001, he told Mr Wagner of his financial position:
“I have a pile of bills and I have no way of paying them, all my commitments and mortgages are in default, I have creditors taking legal action resulting in the Bailiff knocking on my door, my phone is disconnected on account of non payment of the account, my daughter’s school is sending threatening letters to remove her from school, my wife’s health has also deteriorated to the point where she required psychological treatment, I don’t have private medical cover any more because I can’t afford it, my creditors are starting to file remarks on my credit rating which means I cannot get loans to continue and if I can get a loan I have to pay much higher interest. I don’t know where I am going to go from here and Christmas is coming up. I am also receiving a lot of harassing, threatening phone calls because people have been chasing payments.”

Mr Wagner admitted that he appreciated that Mr Oberlechner was in severe financial difficulty. He said:
“I don’t mean to sound rude, but I did listen to the man. To say that I gave it enormous consideration would not be accurate.”
15    The last offer which Mr Oberlechner put forward to Tower on 14 December 2001 was that Tower pay him a total of $387,500, comprising arrears of benefit payments from 3 September 2000 onwards, projected benefits for a further period of incapacity as consideration for surrendering the Policy, and a sum for costs and disbursements. Mr Wagner responded with an offer on about 17 December. The terms of that offer are disputed to some extent, but what is clear is that Mr Wagner’s offer required surrender of the Policy in return for a total sum which was vastly less than Mr Oberlechner’s previous offer of $387,500. Mr Oberlechner was incensed. He rejected Mr Wagner’s offer and instructed his solicitor to pursue his claim against Tower in full. 16    On Christmas Eve, Mr Oberlechner received a telephone call from his sister in Italy informing him that his mother had died unexpectedly. His mother had begun declining into dementia a little time before and Mr Oberlechner, with his doctor’s encouragement, had taken a trip to Italy in September 2000 to see her. Mr Oberlechner’s sister asked him to come to Italy at once for the funeral, which was to be held on 27 December, but might be postponed for a day or two. 17    The news of his mother’s death had a severe effect on Mr Oberlechner. He rang his treating psychologist, Dr Hughes, on Christmas Day, distraught and sobbing. According to Dr Hughes, Mr Oberlechner was suffering acute grief, the effect of which was likely to last for some days at least. 18    Mr Oberlechner was desperate to find a way to get to Italy as soon as possible to attend his mother’s funeral. But he had no money, he was hugely in debt, his wife was under a great deal of stress, and her emotional health was deteriorating. He had not even enough money to buy his children Christmas presents. None of this evidence of Mr Oberlechner has been challenged. 19    The only way Mr Oberlechner could think of to get some money in order to go to his mother’s funeral was to go to Mr Wagner to see if he could settle his claim against Tower. At that stage, he says, nothing mattered to him except to go to the funeral and to provide his wife and children with some money to live while he was away. 20    He rang Tower’s offices and was told that they would be open on 27 December. On the morning of that day he arrived at Tower’s offices without prior appointment and asked to see Mr Wagner. There is no contest in the evidence as to what occurred next. 21    Mr Wagner saw Mr Oberlechner together with a junior officer, Mr Motu. Mr Oberlechner told them that his circumstances had changed: he said that his mother had died and that he wanted to go to Italy for the funeral. He said that he had no money. He asked whether Tower was prepared to settle his claim. Mr Wagner told him that Tower would settle for $72,000 and a $10,000 contribution towards his legal costs. Mr Wagner emphasised “we are not negotiable on this figure” . 22    Mr Oberlechner asked about a further four months of partial benefits under the Policy. Mr Wagner responded: “The total offer is $82,000 and that includes a cancellation of the Policy” . Mr Oberlechner asked if he would ever be able to get insurance cover again. Mr Wagner told him that he could not give him advice because he was not an underwriter. 23    Mr Oberlechner then asked: “What do I have to do to settle?” Mr Wagner said: “I will have a Deed prepared which you will need to sign” . 24    Mr Oberlechner says that in the condition in which he then was he believed that he would have settled his claim against Tower for any amount which would have enabled him to attend his mother’s funeral and to provide some money for his wife and children to live while he was away. I accept that evidence as truthful. Indeed, it was not seriously challenged by Tower. 25    Mr Oberlechner left Tower’s office while the Deed was being prepared by Tower’s in-house solicitor, Ms Tay. About an hour later he returned and saw Mr Wagner and Mr Motu. Mr Wagner gave him an envelope which contained the Deed of Release and a covering letter which he himself had signed, but which had been prepared by Ms Tay. Mr Wagner said to Mr Oberlechner, when handing him the envelope: “You should get legal advice about signing the Deed” . 26    Mr Oberlechner then went home and discussed the Deed with his wife. The covering letter which Mr Wagner had given him said:

“Dear Mr Oberlechner

Re: Disability Income Policy 1067583

I refer to your attendance at Tower’s office on this date. Please find attached a Deed of Release. I recommend that you seek independent legal advice prior to signing this Deed. I note that you have solicitors already acting on your behalf with respect to proceedings 3837 of 2001.

The offer contained in this Deed will be open to you to accept until close of business on 3 January 2002. If you are satisfied with the terms of this offer, please sign and return the Deed to Tower’s office.”
27    Mr Oberlechner then tried to contact his solicitor, Mr Weller, to obtain his advice. Not surprisingly at that time of the holiday period, Mr Weller could not be contacted. If Mr Oberlechner were to be in time for his mother’s funeral, he had to fly out of Sydney that evening and he would probably be away until after Tower’s offer expired on 3 January. He signed the Deed, left it with his wife, paid for his airline ticket on a credit card because the money from Tower would now cover the cost, and flew out of Sydney that night. 28    On 31 December, Mrs Oberlechner attended Tower’s offices and delivered the Deed which had been signed by her husband. No legal advice concerning the Deed had been received by Mr or Mrs Oberlechner between 27 and 31 December. On 2 January 2002, Tower handed over a cheque for $82,000. All of that money has been spent on paying some of Mr Oberlechner’s most pressing debts, Mr Oberlechner’s travel expenses and the family’s living expenses.

Contracts Review Act

29 I now deal with the question whether the Deed of Release should be declared void under s.7(1)(b) of the Contracts Review Act . 30    The relevant principles of law are now well settled. The Act enables the Court to give relief even in circumstances where the contract would not be regarded as sufficiently harsh, oppressive or unconscionable to warrant it being set aside by a Court of Equity. The Act is intended to set a lower threshold for the Court’s intervention than that required by the general law: see e.g. Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296, at 301 per Mahoney JA. 31 In particular, it is not necessary for a plaintiff claiming relief under the Act to establish that the contract was the result of unfair conduct or unjust conduct on the part of another party to it. The list of matters to which the Court must have regard under s.9(2) is not exclusive nor is it exhaustive. As Kirby P said in Baltic Shipping Company v Dillon: Mikhail Lermontov (1991) 22 NSWLR 1, at 20:
“The duty of a court remains to have regard to ‘all the circumstances of the case’. It must consider the ‘public interest’, including in the observance of agreements duly entered. But in the end, the focus of attention must be upon the contract. The court must decide whether ‘in the circumstances’ the contract is ‘unjust’. A contract may be ‘unjust’ because of peculiarities inherent in the circumstances of one of the parties of which the other party was quite ignorant. It may be ‘unjust’ although the other party has acted quite honourably and lawfully.”

See also Amcor Limited v Watson (2002) Aust Contract Reporter 90-110, at 91,200 per Sheller JA.

32    In the present case, I have come to the conclusion that the Deed of Release was unjust in the circumstances relating to it at the time that it was made, and that it is just to declare the Deed void in whole. My reasons are as follows. 33    First, there was a material, if not gross, inequality in bargaining power between Tower and Mr Oberlechner. Mr Oberlechner was in a desperate financial plight, as Tower knew. He had rejected Tower’s last offer made on 17 December but now, because of his mother’s death and his financial inability to attend her funeral and to provide for his family, he was coming to Tower, on bended knees as it were, to take whatever it would give him. I have no doubt that Mr Wagner was fully aware of Mr Oberlechner’s desperation and of his willingness to take whatever was offered. 34    Second, the precise terms of the offer which Mr Wagner put to Mr Oberlechner on 27 December were not the subject of prior negotiation; they were put to Mr Oberlechner for the first time on that day. Whatever the terms of the offer which Mr Wagner had put to Mr Oberlechner on 17 December, they did not seem to have contained a sum certain. Mr Oberlechner had had no prior opportunity to consider the terms of the offer put to him on 27 December, or to get legal advice about those terms. 35    Third, it was not reasonably practical for Mr Oberlechner to negotiate for better terms. He was told by Mr Wagner that the offer was “not negotiable” . He could not obtain any legal advice on the offer or any assistance in negotiating it before he had to fly out of Sydney to attend his mother’s funeral. 36    Fourth, by reason of his emotional distress at the death of his mother, his distress at the financial difficulties in which his wife and children were placed and at his own position, combined with his continuing depression, I am satisfied that Mr Oberlechner did not have the mental capacity to protect reasonably his interests in dealing with Tower. 37    Fifth, Mr Oberlechner did not have any legal advice available to him by the time that he was compelled to decide whether or not to sign the Deed and so be able to leave Sydney in time for his mother’s funeral. 38    Sixth, Mr Oberlechner was denied a reasonable opportunity to obtain legal advice by the imposition by Tower of a time limit for acceptance of the offer. That time limit was most unreasonable, having regard to the notorious fact that most legal offices would be closed between Christmas and New Year and that Mr Oberlechner would have to make up his mind almost immediately whether to accept the offer in time to go to his mother’s funeral. There was no reason given by Mr Wagner for the imposition of the time limit. He said that it was stipulated by Ms Tay. Ms Tay was not called in evidence to explain why she thought it necessary or desirable that such a time limit should be imposed, particularly at that time of the year. The inference is open – and I draw the inference – that the time limit was deliberately imposed upon Mr Oberlechner by Tower in order to put pressure on him to accept the offer. I regard such pressure as the use of “unfair tactics” within the meaning of s.9(2)(j) of the Act. 39 Seventh, the commercial purpose of the Deed, from Tower’s point of view, was to release it from any obligation to pay continuing benefits under the Policy in return for a sum which would have been relatively small if Mr Oberlechner were able to establish his claim in these proceedings and his entitlement to benefits were to continue for a substantial time thereafter. On the other hand, the effect of the Deed on Mr Oberlechner was that, if he had a good claim against Tower and was unable to work for a substantial time in the future, he would, by the Deed, surrender the only substantial source of income for himself and his family in return for an amount which would not even discharge fully his present indebtedness. Such a bargain would be improvident on its face, and would not prudently be entered into without the benefit of legal advice and careful consideration. Mr Oberlechner was given time for neither. 40 Eighth, I take into account that to declare the Deed of Release void has the effect of restoring the parties to the rights and obligations which they had immediately before the Deed was entered into. For the reasons which I explain later, I have come to the conclusion that as at 27 December and as at the present time Mr Oberlechner was, and is, entitled to continuing benefits under the Policy. If the Deed of Release is not avoided, the consequence is that Mr Oberlechner will have surrendered his rights under the Policy for a very small sum, to Tower’s great advantage and to his own great disadvantage. 41 Finally, I take into account the public interest, on the one hand, in holding parties to their contracts and, on the other hand, in not permitting the stronger party to a contract to take advantage of the weaker. In my opinion, in the circumstances of this case, the latter consideration prevails over the former. 42 It is for these reasons that I have concluded that it is just to avoid the Deed and that, in the exercise of my discretion, it should be declared void ab initio under s.7(1) of the Contracts Review Act . The amount of $82,000 paid to Mr Oberlechner under the Deed must, of course, be offset against unpaid benefits still owing and to become owing to him under the Policy. 43    Having reached that result, I do not need to consider the other grounds for setting aside the Deed of Release which have been invoked by Mr Oberlechner.

Whether continuing incapacity

44    I now turn to the issue whether Mr Oberlechner has been incapable of earning at least 80% of his pre-sickness monthly income since 3 September 2000, so as to be entitled to further income benefits under the Policy from that date forward. 45    In view of the urgency with which this judgment is required, I will not examine in detail the medical evidence which has been given by each side. Rather, I will endeavour to summarise its effect. 46    Dr Timney, a psychiatrist who has seen Mr Oberlechner on a number of occasions, diagnosed Mr Oberlechner’s condition as “a co-morbid psychiatric illness of a major depressive episode of initially moderate to severe severity with a panic disorder without agoraphobia” . The intensity and severity of the symptoms varied over time. Dr Timney’s opinion is that Mr Oberlechner has never been able to go back to full-time work since December 1999. 47    In his report dated 6 May 2002, Dr Timney said:
“In my opinion he will require continued treatment for a period of at least a further twelve months and possibly longer depending on his subsequent progress.”
48    Mr Oberlechner has been under continuous treatment by his general practitioner, Dr Hadfield, since December 1999. Dr Hadfield impressed me as a careful witness who gave direct and frank answers in cross examination without advocating his patient’s cause. 49    Dr Hadfield’s report of 15 March 2001 shows that Mr Oberlechner presented on 14 December 1999 with significant somatic symptoms of depression and anxiety. Dr Hadfield prescribed anti-depressant medication on 21 February 2000 and Mr Oberlechner has been on mediation ever since then. Two short visits by Mr Oberlechner to his place of employment in February produced an aggravation of his symptoms. Mr Oberlechner’s condition, according to Dr Hadfield, did not improve much and in September 2000 Dr Hadfield prevailed upon Mr Oberlechner to take a planned trip to Italy to see his mother. 50    The trip was beneficial to Mr Oberlechner and Dr Hadfield was of the view that he should try a graduated return to his workplace. Mr Oberlechner sought to return to work initially for two hours per day from 20 November. That experience was totally counterproductive. According to Mr Oberlechner, for two weeks he was given no useful work to do but was left to languish at a spare desk. His condition worsened considerably so that Dr Hadfield certified him totally unfit for work. However, Dr Hadfield hoped that Mr Oberlechner might be able to return to work with his current employer by mid-2001. That hope did not materialise. 51    Dr Hadfield’s evidence in cross examination was that Mr Oberlechner has been suffering from depression continuously since December 1999, but the degree of severity of that depression has varied from time to time. It was put to him that if Mr Oberlechner had returned to work in November 2000 in circumstances in which his employer had been more helpful, his condition would have improved considerably, the suggestion being that the continuation of Mr Oberlechner’s illness was not the product of the illness itself but, rather, of the attitude taken by the employer. Dr Hadfield’s response was:
“… a return to work is very much a trial and effort sort of process. It is really very much an attempt to give someone duties and see how they manage with that. The thing with Fred is you have an underlying clinical depression and it is not just a reaction to his workplace situation.”
52    Dr Hadfield’s view was that Mr Oberlechner continued to be unfit for work to the present time but that his depression did not totally preclude him from doing basic work in the information technology industry. His opinion was, however, that during all the time that he had seen Mr Oberlechner, he was not able to work forty hours per week. In my view, the ability to work not less than 40 hours per week at the same level as he was working prior to his illness is a safe guide to Mr Oberlechner’s capacity to earn 80% or more of his pre-sickness monthly income for the purposes of this Policy. 53    Mr Oberlechner has been under the treatment of Dr Hughes, a clinical psychologist, who has seen him on very many occasions since February 2000. Dr Hughes was, like Dr Hadfield, a most impressive witness: careful, moderate and considered in his answers and, to my perception, balanced in his attitude towards his patient. 54    Dr Hughes was of the opinion that Mr Oberlechner has suffered a major depression. He gave this evidence:

“ Q: Do you think he has been capable of performing any meaningful work in the time that you have been treating him?
A: He has had periods where has done some meaningful work in the sense of repairs around the house, odd jobs.

Q: I had in mind more meaningful work in a job similar to his previous occupation at EDS?
A: No, I don’t think that and, I think, even when I was writing reports saying that he needed that. When I wrote letters to Mr Weller I indicated he would only have been capable of that even when his mood was lifting, given an appropriately supportive return to work.”
55    Dr Robertson, a consultant forensic psychiatrist, has also provided a report and given evidence. He concluded that Mr Oberlechner had developed a severe depressive illness. By 28 August 2001, when Dr Robertson saw Mr Oberlechner, Dr Robertson was of the view that Mr Oberlechner had made quite a reasonable recovery, although he had not recovered fully. In his oral evidence he explained that he regarded Mr Oberlechner’s depression August 2001 as “in remission” . He said that a person in remission is much more prone to relapse into depression than one who has recovered. He gave this evidence:

“ Q: Even though you had been asked general questions about his ability to work, did you think that he could work at a job involving up to 80 hours a week, in a high pressure task such as he described to you at EDS?
A: I don’t think he would have been fit for that when I saw him, not by any means.

Q: Half that much?
A: Well, I think he probably would have needed to make some sort of – ideally he would have made some sort of graduated return to work, but that may not have been possible in the real world, if he was starting with a new employer. But he needed to be doing something that was not highly pressured if at all possible.

Q: On limited hours you mean?
A: Well ideally, yes. As I said, in the real world, with a new employer, that may not have been possible, but he needed – it would have been desirable, let’s say, for him to ease himself back into the workforce gradually and gently.”
56    Tower’s expert, Dr Walden, a consultant psychiatrist, saw Mr Oberlechner on two occasions: on 7 May 2001 for one hour and 25 minutes and on 6 November 2001 for 45 minutes. Dr Walden’s view was that it was possible that Mr Oberlechner had suffered a major depressive disorder around November 1999, but that it was difficult to be certain of this in retrospect. 57    In Dr Walden’s report of 9 May 2001, she said:

“I consider any possible symptoms of this have largely resolved. He is not currently working because of an industrial dispute which is yet to be resolved. I do not consider that he has sufficient symptoms of anxiety or depression to actually interfere with his capacity to work were it not for the unresolved industrial issues.

Considering the history obtained from Mr Oberlechner and the reports of his treating practitioners, it seems likely that he could have been unfit for working in his own occupation between approximately December 1999 and June 2000. He was then well enough to travel overseas and to return to work. His ceasing work in November 2000 after an attempted return to work appears to be more related to the nature of the unresolved industrial dispute with an increase in feelings of anger and agitation.

…

I do not consider that Mr Oberlechner’s residual minor symptoms of anxiety and depression are of sufficient severity to prevent him from returning to his usual occupation. There are unresolved grievances with his employer.”
58    In her report of 7 November 2001, Dr Walden said:

“Mr Oberlechner continues to have an unresolved work dispute with his employer. He is currently attempting to negotiate a mutually agreeable return to work four hours per day.

I do not consider that Mr Oberlechner currently has any psychiatric disorder. He describes some worries about his future and occasional feelings of anxiety or depression which I do not consider constitute any psychiatric illness but are part of a normal emotional reaction to circumstances he finds unpleasant.

Mr Oberlechner’s mental state examination is normal.

Currently, I consider that Mr Oberlechner is fit to perform duties as an information specialist in the IT industry. I do not consider that he currently has an illness or injury which prevents him from performing his pre-injury duties. He has an unresolved industrial dispute with his employer and is attempting to negotiate return to work conditions.

Given his time out of the workforce, it would probably be appropriate for Mr Oberlechner to return to work on a part time basis 20 hours per week with an upgrade to full hours over a one month period. I do not think that this is necessary on the basis of any current illness. Rather it is part of him becoming familiar with again working day to day.”

Significantly, Dr Walden said that she does not think, and never thought, that Mr Oberlechner was malingering. That suggests that Dr Walden believes that there has always been some genuine reason for Mr Oberlechner’s inability to return to work.

59    I accept the evidence of Drs Timney, Hadfield, Robertson and Hughes in preference to that of Dr Walden in coming to the conclusion that at no time from 14 December 1999 to the present has Mr Oberlechner been capable of earning 80% or more of his pre-sickness monthly income and that that incapacity has been solely as a result of his suffering a depressive illness. My reasons are as follows. 60    First, I accept as more reliable the observations and the evidence of Dr Hadfield and Dr Hughes as to the severity and duration of Mr Oberlechner’s depression. Both of those doctors saw Mr Oberlechner on very many occasions throughout 2000 and 2001. On the other hand, Dr Walden saw Mr Oberlechner only twice in 2001, for a total of two hours and ten minutes. 61    All of Mr Oberlechner’s treating doctors say that his condition fluctuates in severity and that at some times he is better than at others, although he has never been fully cured. On the two occasions upon which Dr Walden saw him, it may well have been the case that Mr Oberlechner was experiencing one of his better days. Dr Walden’s consultations, in my opinion, were too short and too few to outweigh the views expressed by those who had seen him far more regularly. 62    Second, both Dr Timney and Dr Robertson confirmed the diagnosis of Drs Hadfield and Hughes, and confirmed their conclusion that Mr Oberlechner has never been able to resume work in the information technology industry at the level he was working prior to his illness, for a forty hour week. 63    Third, I do not think that Dr Walden is justified in her conclusion that it is an “unresolved work dispute” with Mr Oberlechner’s employer which has been the cause of Mr Oberlechner’s inability to return to work since June 2001. The “dispute” was the cause of the illness in the first place. Mr Oberlechner’s inability to recover from the illness, it is legitimate to infer, may well be the cause of his inability to “resolve the dispute” . In any event, as Dr Hadfield said: “The thing with Fred is you have an underlying clinical depression and it is not just a reaction to his workplace situation” . 64    Finally, I should note Tower’s submission that Mr Oberlechner’s incapacity to earn the relevant level of income is not “solely as a result of his suffering from a sickness” within the meaning of Clause 17.3 of the Policy because the incapacity was partly the result of his employer’s conduct in failing to resolve the dispute. 65    I do not accept that submission. In my view, it is inherently probable that so long as Mr Oberlechner’s illness persisted, it would be impossible for him to reach any resolution with his employer, simply because his depression disabled him from dealing properly with any such attempted resolution. Further, all of the evidence in this case concerning the conduct of Mr Oberlechner’s employer emanates from Mr Oberlechner, repeated though it is by various doctors. Bearing in mind that his depression was caused by work stress, it would be unsafe to act upon the basis that Mr Oberlechner’s account of his employer’s conduct after December 1999 is objective and accurate.

Commencement date for benefits

66    The parties disagree upon the construction of Clause 17.11 of the Policy, which is in the following terms:
“ WAITING PERIOD is the number of weeks that you must suffer a Loss of Income before the Income Replacement Benefit becomes payable. The Waiting Period is shown in the Appendix. The Income Replacement Benefit is not payable during the Waiting Period.”

“Loss of Income” is defined in Clause 17.3 as follows:

“ LOSS OF INCOME in respect of a particular clam means:

(a) you are not capable of earning 80% or more of your Pre-Injury/ Sickness Monthly Income by way of personal exertion from your normal occupation solely as a result of you suffering from an Injury or Sickness; and either

(b) you are not working, or

(c) you are working in an occupation trade or business to a limited extent and earning less than 80% of your Pre-Injury/Sickness Monthly Income solely as a result of you suffering from an Injury or Sickness.

If at the time you suffer a Loss of Income you have been unemployed or on maternity leave for 12 months or more (a) above will be replaced by the following:

‘you are not capable of earning 80% or more of your Pre-Injury/ Sickness Monthly Income by way of personal exertion from any occupation for which you are reasonably suited by reason of education, training and experience solely as a result of you suffering from an Injury or Sickness; and either’.”

Clause 15.0 provides:
“ EXTENT OF COVER
Subject to the payment of premium as shown in the Schedule, if you suffer a Loss of Income after the Risk Commencement Date and while this Benefit is current, we will pay the Monthly Income Benefit described in the Appendix, but subject to the terms and conditions set out in this Policy.”
67    Mr Oberlechner continued to receive payments from his employer in respect of sick leave up to 20 March 2000. Tower contends that the Waiting Period required by Clause 17.11 commences on that date because sick leave payments are nevertheless income derived from personal exertion and Mr Oberlechner was still receiving such payments until that date. 68    Mr Oberlechner submits that reference to “Loss of Income” in Clause 17.11 incorporates the definition of that term in Clause 17.3, so that one suffers a Loss of Income for the purpose of Clause 17.11 as soon as one becomes entitled to a benefit under Clause 15.0 because one has fulfilled the requirements of Clause 17.3. 69    When announcing my conclusions to the parties yesterday, to be following by publication of my reasons today, I said that I regarded Tower’s construction as correct. After reflection overnight, I have come to the opposite view, for the following reasons. 70    Clauses 17.3 and 17.11 are clumsily drafted. Although Clause 17.3 purports to be a definition of the phrase “Loss of Income” , what follows is not a synonym but a description of the events which must occur before “Loss of Income” arises entitling one to payment of a benefit under Clause 15.0. Clause 17.3 really means: “Loss of Income in respect of a particular claim occurs if …” , etc. 71    Clause 17.11 therefore means that the Waiting Period is the specified number of weeks which must have elapsed from the date that one first qualified for payment of a benefit under Clause 15.0, that is, the date upon which the requirements of Clause 17.3 were first met. In the present case, that date is clearly 14 December 1999. 72    I appreciate that this construction means that Mr Oberlechner will have received sick leave payments for a short period during which he is also entitled to receive benefits under the Policy. That, I think, is the fortuitous result of the fact that as at 14 December 1999 Mr Oberlechner had accrued sick leave entitlements which his employer was prepared to pay to him. That consideration does not militate against the construction at which I have arrived. 73    Accordingly, the calculation of benefits to which Mr Oberlechner is entitled should be along the lines contained in the schedule provided by Mr Oberlechner’s solicitors.

Interest

74 The calculations provided by the parties’ solicitors suggest that, as a result of the conclusions to which I have come, after allowing a credit for amounts paid by Tower as “goodwill payments” and for the sum of $82,000 paid under the Deed of Release, it will be found that a balance of benefits payable under the Policy is now outstanding. The “credits” allowable to Tower will have been “used up” some time ago and the benefits payable to Mr Oberlechner will have begun accruing from that date. In my view, it is proper that interest on those unpaid and accruing benefits be paid by Tower up to the date of judgment under s.94 of the Supreme Court Act 1970 (NSW). The appropriate calculations should be agreed between the parties’ solicitors prior to the bringing in of Short Minutes of Order.

Damages for distress

75    The relief sought in the Amended Statement of Claim included declarations that the Plaintiff was entitled to continuing benefits under the Policy and an order for payment accordingly. There was a prayer for relief, expressed in the alternative, that “the Defendant pay the Plaintiff damages for breach of the insurance policy”.

76    In his final submissions, Mr Williams SC who appears with Mr Kell for Mr Oberlechner, submitted that in addition to the declarations and orders as to payments of benefits under the Policy, the Court should award damages for the stress and suffering caused to Mr Oberlechner by Tower’s failure to pay the benefits as required by the Policy. Mr Williams was not able to refer me to any authority directly in point in support of the proposition that damages for stress and suffering may be awarded as a consequence of a breach by an insurer of an insurance policy. 77    Mr Brabazon, who appeared for Tower, correctly pointed out that the Amended Statement of Claim does not plead any damage arising from stress and suffering and that whether such damage could be, or should be, awarded was never an issue in the case until Mr Williams’ final submissions. For that reason alone, I would decline even to consider the question whether such damages can, in law, be awarded and whether, if they can, they should be awarded in this case.

Conclusions

78    I will stand the proceedings over for a short time to enable the parties to consider these reasons and for the Plaintiff to bring in Short Minutes of Order accordingly. I will then hear argument as to costs.
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Last Modified: 09/09/2002