Public Trustee v Lumley Life Ltd

[2012] QSC 61

SUPREME COURT OF QUEENSLAND

CITATION:	Public Trustee v Lumley Life Ltd and Ors [2012] QSC 61
PARTIES:	PUBLIC TRUSTEE            (applicant) v LUMLEY LIFE LIMITED ACN 000 017 194      (first respondent) DAVINDER DOTHER (second respondent) JULIE DOTHER (third respondent)
FILE NO:	BS 8138 of 2006
DIVISION:	Trial
PROCEEDING:	Application
DELIVERED ON:	23 February 2012
DELIVERED AT:	Brisbane
HEARING DATE:	23 February 2012
JUDGE:	Fryberg J
ORDERS:	Order as per draft; Applicant to pay the respondent’s costs of the application up to the date of amendment; and Respondent to pay the costs of the applicant’s costs of the amended application.
CATCHWORDS:	Insurance – Life insurance – Claims and payments – Timing Insurance – Life insurance – Other Matters – Interest
COUNSEL:	M R Bland for the applicant P W Telford for the respondent
SOLICITORS:	Office of the Official Solicitor to the Public Trustee of Queensland for the plaintiff Cooper Grace Ward for the defendant

HIS HONOUR:  In December 1999 Davinder and Julie Dhother purchased a policy of life insurance from the first respondent whom I shall describe as Lumley.

Davinder Dhother is the second respondent.  In January 2001 he killed Julie Dhother, his wife.  He was convicted of her manslaughter in May 2002. 

In 2003 the Public Trustee, the present applicant, obtained an order to administer her estate.  In that capacity, it adopted a claim which had been made under the policy on behalf of the beneficiaries of that estate, the couple's children.  It is common ground that any interest which Davinder Dhother had under either the policy or the Will of Julie was forfeited by reason of public policy, although it was expressed on behalf of the Public Trustee in terms that he held his interest under the policy as a trustee for the beneficiaries of the estate of the deceased. 

It is unnecessary to go into that matter, save to say that it was not until he made an affidavit in April 2007 that he consented to the Public Trustee obtaining the proceeds of the policy.  If the Public Trustee's submission regarding his being a trustee be correct, it must follow that it could not have been until that date that the title of the Public Trustee was perfected.  That point is, however, not presently in issue.

Lumleys dealt with the claim by asking for the production, amongst other things, of the original policy of insurance.  That policy had come into the possession of the Public Trustee, although it is not clear when.  Notwithstanding the valuable nature of a life insurance policy and the use which can be made of it, the Public Trustee's records do not disclose when it obtained that document.  Indeed, the whole matter seems to have been mishandled or at least handled with extreme delay by the Public Trustee.

Lumleys made several requests for delivery of the original policy and four other documents but for no apparent reason the Public Trustee did not comply. Eventually, in 2006 it commenced proceedings against Lumleys and Davinder seeking, as the application was originally framed, a declaration that Davinder Dhother had forfeited any right under the policy and an order that Lumley Life pay the sum insured with accretions to it. That application did not include any claim for interest, either pursuant to section 57 of the Insurance Contracts Act or otherwise.

The Public Trustee proceeded with the application in the same dilatory style it had adopted in handling the claim.  It served the original application in September 2006, at least I assume it did, and apparently, served the affidavit of Mr Feely on Lumleys on the 11th of October in that year.  At that time it had still not provided the original policy of insurance, but exhibited to the affidavit of Mr Feely was a photocopy of that policy.  The Public Trustee did not inform Lumleys that it had the original policy at that time. 

Not until August 2008 was a copy of the order to administer the estate and the original policy document sent to Lumleys.  Following that, Lumleys paid the amount of the claim.  That occurred in May 2009.  However, the application remained on foot.

In November 2011, it was amended and for the first time the Public Trustee sought an order for interest under section 57 of the Insurance Contracts Act down to the date of payment.  It did not nominate a date from which interest should begin to run.

In the light of the affidavit of Davinder Dhother to which I have already referred, the declaration in the originating application became unnecessary and in the light of the payment by Lumleys, the order for payment sought in the originating application would have been redundant.  Consequently, the amended relief sought was the only substantive relief sought in the amended application.  That is the matter that is before me today.

The Public Trustee submits that the time at which it became reasonable for Lumleys to have made the payment was at the latest, the date when it received the affidavit of Mr Feely.  It then had, it is submitted, everything which a reasonable insurer would require in order to make the payment.

The Act provides that the period in respect of which interest is payable commences on the day as from which it was unreasonable for the insurer to have withheld payment of the amount.  The Public Trustee's submission is that it was unreasonable to have withheld payment from the time when Lumleys received the copy of the policy exhibited to Mr Feely's affidavit.

Lumleys submits in response that strictly it could have withheld payment until the policy was received in 2008 but it concedes that a letter which it sent in 2008 (accepting a proposition in an earlier letter in 2007 from the Public Trustee) amounted to a waiver of that requirement (from the date of receipt of the 2007 letter).  That concession extends the period to run from the date of receipt of the  letter which was 9th of October 2007.  It is unnecessary for me to decide whether that course of letters, in fact, amounts to a waiver in the light of that concession.

The submission that the affidavit with its exhibit was sufficient to make it unreasonable for the insurer to withhold payment should, in my judgment, be rejected.  It proceeds on the premise that the purpose of the requirement made pursuant to the policy for the production of the original policy is simply to inform the insurer of the terms of the policy.  If that be not the purpose, goes the submission, then there is no purpose at all and on either view it is unreasonable for the insurer to have failed to pay up from the time it received the copy.

The reason I reject that submission is that I do not think that that purpose is indeed the one which the requirement has.  Policies of life insurance of this type are valuable documents.  They can be assigned by endorsement on them and they can be used like certificates of title as deposits with finance institutions to provide security for loans.  An insurance company is entitled to require production of the original in order to ensure that the policy has not been assigned and that it is in the possession of the claimant and not of an equitable chargee.

It was, therefore, quite in order for Lumleys to refuse to make the payment.  This is not, in my judgment, a matter of insisting on strict legal rights solely.  It is also a matter of ordinary commercial reason.  It follows that I accept the submissions made on behalf of Lumleys that the commencement date for the payment of interest should be the date in October 2007 which I mentioned earlier.  The first respondent has, therefore, succeeded in the application.  I will hear the parties on costs.

...

HIS HONOUR:  Each party has applied for costs, although I think it is fair to say that each concedes that its argument for costs of the whole proceeding has some difficulties.  It seems to me that since the proceedings were amended, the first respondent has been in a position where it knew what was claimed against it, that is interest, and it did not pay the interest nor make any offer of payment in a sum equivalent to that which I have determined is payable. 

...

HIS HONOUR:  It was necessary, as I said, for the application to be brought and although the applicant has not got as much as it claimed, it has got more than the respondent offered.  I do not think the fact that more was claimed significantly impacted on the amount of costs.

The amended proceedings were necessary and the Trustee should have its costs of them.

As for the period prior to the amendment, in my judgment, the applicant Trustee should pay the respondents' costs.  At the time the application was made, the claim for payment was premature and no cause of action existed.  That cause of action at the earliest, arose when the waiver took place which happened in 2008, albeit that it was back-dated and arguably, did not happen until the original policy was delivered in the same year. 

Thereafter, there was some delay in the making of the payment but it was made within a year of those events.  It took over two years for the amendment to be made and the amount of costs that would have been incurred in that period of dilatoriness would be minimal.  It seems to me that looking at the matter as a whole, the applicant should pay the respondent's costs of the application up to the date of the amendment.

I should add that on the face of the material that has been provided to me, there is an appearance that this file has been mishandled by the Public Trustee.  One would hope that if the Trustee does not itself bear the costs and seeks to have them paid from the estate, that it also would advise the beneficiaries to obtain independent legal advice and that perhaps would need it to relinquish the further handling of the estate.  That is a matter which the Trustee should consider.  It should also consider whether because of the delay in payment of interest from the time which would have been reasonable had the Trustee done what it ought to have done (that is delivered the original policy), it should pay the foregone interest into the estate by way of damages for the Trustee's poor performance.  Those are matters for the Trustee to consider.

...

HIS HONOUR:  There will be an Order in accordance with the  draft, initialled by me and placed with the papers.