Sharma v LGSS Pty Ltd

Case [2018] FCA 167

FEDERAL COURT OF AUSTRALIA

Sharma v LGSS Pty Ltd [2018] FCA 167

Appeal from:

D16-17\017 [2016] SCTA 113

D16-17\018 [2016] SCTA 114

File number: NSD 1590 of 2016
Judge: GLEESON J
Date of judgment: 1 March 2018

Catchwords:

 INSURANCE – appeal under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) against decisions of Superannuation Complaints Tribunal – whether Tribunal erred in affirming insurer’s decisions to avoid applicant’s insurance under s 29(2) of the Insurance Contracts Act 1984 (Cth) for fraudulent misrepresentation and non-disclosure – whether s 21 of the Insurance Contracts Act 1984 (Cth) imposed duty of disclosure on applicant as a third party beneficiary – appeal allowed
Legislation:

Administrative Appeals Act 1975 (Cth) s 44(1)

Insurance Contracts Act 1984 (Cth) ss 21, 25, 29, 31, 32, 54

Superannuation (Resolution of Complaints) Act 1993 (Cth) ss 46(1), 46(3)

Federal Court Rules 2011 rr 33.21, 33.34

Cases cited:

Carden v CE Health Casualty & General Insurance Ltd (1992) 7 ANZ Ins Cas 61-147

CE Health Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25

Commissioner of Taxation v Donoghue [2015] FCAFC 183

Haritos v Commissioner of Taxation [2015] FCAFC 92; (2015) FCR 315

Hussain v Minister for Foreign Affairs [2008] FCAFC 128; (2008) 169 FCR 241

P v Child Support Registrar [2013] FCA 1312

Plasteel Windows Australia Pty Ltd v CE Heath Underwriting Agencies Pty Ltd (1989) 5 ANZ Ins Cas 60-926

Rawson Finances Pty Ltd v Commissioner of Taxation [2013] FCAFC 26

Repatriation Commission v Owens (1996) 70 ALJR 904

Repatriation Commission v Warren [2008] FCAFC 64; (2008) 167 FCR 511

Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd [2003] QCA 182

Tyndall Life Insurance Co Ltd v Chisholm (2000) ANZ Ins Cas 90-104

Von Braun v Australian Associated Motor Insurers Ltd [1998] ACTSC 122; (1998) 135 ACTR 1
Date of hearing: 13 December 2017
Registry: New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: Catchwords
Number of paragraphs: 64
Solicitor for the Applicant: Mr P Bingham of Slater & Gordon
Counsel for the Respondents: Mr J Morris SC with Mr L Teoh
Solicitor for the Respondents: TurksLegal

ORDERS

NSD 1590 of 2016
BETWEEN:

SUDESH PRASAD SHARMA

Applicant
AND:

LGSS PTY LTD (ACN 078 003 497)

First Respondent

TAL LIFE LIMITED (ACN 050 109 450)

Second Respondent

JUDGE:

GLEESON J

DATE OF ORDER:

1 MARCH 2018

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.The matter be remitted to the Superannuation Complaints Tribunal for determination according to law.

3.The second respondent pay the applicant’s costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

GLEESON J:

  1. The applicant (“Mr Sharma”) appeals from two decisions of the Superannuation Complaints Tribunal (“Tribunal”) made on 18 August 2016, pursuant to s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (“Superannuation Complaints Act”). By…

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AGLC
Sharma v LGSS Pty Ltd [2018] FCA 167
Case
[2018] FCA 167
Decision Date

CaseChat Overview and Summary

In this appeal, Sharma, the applicant, sought to challenge the decisions of the Superannuation Complaints Tribunal, which affirmed the insurer's decisions to avoid Sharma's insurance under section 29(2) of the Insurance Contracts Act 1984 (Cth) on the grounds of fraudulent misrepresentation and non-disclosure. The first respondent, LGSS Pty Ltd, is the trustee of Local Government Super, the superannuation fund in question. The second respondent, TAL, is the insurer. The central issue before the court was whether the Superannuation Complaints Tribunal erred in affirming the insurer's decisions to avoid Sharma's insurance, and if so, whether section 21 of the Insurance Contracts Act imposed a duty of disclosure on Sharma as a third-party beneficiary.

The court found that the Tribunal erred in concluding that the insurer's decisions were fair and reasonable, given the facts found. It was determined that TAL was not entitled to rely on section 29(2) to refuse Sharma's claims. The court held that the Tribunal's reasons arguably involved a conclusion of law that section 21 applied to Sharma; however, the Tribunal did not record any analysis of that provision and did not refer to it in its deliberations and findings. Furthermore, the court found that the Tribunal's reasons did not contain an express finding that Sharma "made or was required to make any application to the insurer for cover" under either the TPD policy or the SC policy.

The appeal was allowed, and the matter was remitted to the Superannuation Complaints Tribunal for determination according to law. The second respondent, TAL, was ordered to pay the applicant's costs of the appeal.

Orders

Orders of the court

1. The appeal be allowed.

2. The matter be remitted to the Superannuation Complaints Tribunal for determination according to law.

3. The second respondent pay the applicant’s costs of the appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the following reasons, the appeal must be allowed and the matter remitted to the Tribunal for decision according to law. In short, the Tribunal erred in concluding that the decisions of TAL and the trustee were fair and reasonable because, on the facts found, TAL was not entitled to rely on s 29(2) to refuse Mr Sharma’s claims.BACKGROUND FACTS Mr Sharma is a former employee of Liverpool City Council. Local Government Super or the Local Government Superannuation Scheme (NSW) (“fund”) is a superannuation fund established by the Local Government Super Trust Deed. The trustee of Local Government Super is LGSS Pty Ltd, the first respondent. Mr Sharma became a member of Local Government Super in about April 2005, by signing a membership application. On 22 March 2007, he completed and signed a form entitled “Local Government Superannuation Scheme Voluntary Insurance Cover”. By this form, Mr Sharma applied for TPD cover in the amount of $1,080,000 and SC cover in the amount of $3,640 per month. The 22 March 2007 form refers to Prefsure Life Limited (“Prefsure”) in the declaration at page 4 and, under the heading “Payment of invoice”, the form states “Please have any invoices made out to Prefsure Life Limited. In January 2009, the trustee wrote to Mr Sharma under the subject heading “Important changes effective 1 March 2009” referring to the recent appointment of TAL as insurer of Local Government Super. In 2012, Mr Sharma lodged a claim for payment of a TPD benefit based on the medical conditions of a major depressive disorder with a date of onset of May 2007 and schizophrenia with a date of onset being 14 March 2008. He also supplied details of surgical treatment undertaken for wrist injuries sustained after a fall from a ladder in 2010. In May 2013, Mr Sharma was informed by the trustee that his application for a TPD benefit had been approved and he was paid the sum of $68,841.73. Mr Sharma was also told that TAL was still assessing the voluntary insurance component of his application. By letter dated 16 January 2015, TAL informed the trustee that it had “declined the member’s underwritten cover”. The letter stated relevantly:Policy number: GR 0385Life insured: Sudesh SharmaDate of birth: 01/09/1968Member No.: 3069587Re - Underwritten cover for Income Protection and Total and Permanent DisablementImportant news about this insurance claimWe have carefully assessed the member’s claim and based on the additional medical information, we regret to say we have declined the member’s underwritten cover, which means that TAL will avoid Mr Sharma’s underwritten Life, TPD and IP cover pursuant to s 29(2) of the Insurance Contracts Act 1984 for fraudulent misrepresentation/non-disclosure in relation to a history of tachycardia and depression.How we made our decision Underwritten CoverThe member completed the application for Voluntary Insurance Cover on 23 March 2007, to obtain Income Protection cover and to increase his Total & Permanent Disability and Death cover.As per the Personal Statement, the member ticked NO to the entire health & medical History Questionnaire 3 and NO to the entire Questionnaire 5.Following the same, the member was accepted for cover, as underŸIP – $3,640.00; Waiting Period 90 days and benefit expiry period till Age 65ŸTPD / Death – $1,080,000.00ŸStandard acceptanceŸRisk commencement date being 17 July 2007…Based on the information contained in the clinical notes of Ryde Mental Health, it appears that the member was diagnosed with major depression in 2003 and treated with a variety of antidepressants following the sudden death of his wife in 2001. The member continued to receive treatment in the form of supportive counselling and medication throughout 2003 and 2004 until he ceased in January 2005. At that point in time he was advised to continue to take his medication despite no longer feeling depressed.The above confirms that had TAL been aware of Mr Sharma’s history of depression and tachycardia, TAL would not have offered cover on the same terms.Accordingly, it is TAL’s opinion to avoid the member’s underwritten Life, TPD and IP cover pursuant to s 29(2) of the Insurance Contracts Act 1984 for fraudulent misrepresentation/non-disclosure in relation to a history of tachycardia and depression.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Although it was not referred to by the Tribunal, or in the notice of contention, TAL made submissions that s 32 of the ICA has a relevant operation. As none of Mr Sharma’s questions of law concern the application of that provision, I am not persuaded that it falls within the subject matter of the appeal. Accordingly, I have not addressed the submissions concerning the operation of s 32: cf. Commissioner of Taxation v Donoghue [2015] FCAFC 183 at [63] per Kenny and Perram JJ.CONCLUSION The appeal must be allowed. The matter will be remitted to the Tribunal for determination according to law. TAL should pay Mr Sharma’s costs of the appeal.

Ratio Decidendi

Legal Principle Established

TAL also sought leave to rely on a notice of contention dated 21 November 2017. Leave was required because the notice of contention was filed out of time: rr 33.21 and 33.34 of the Federal Court Rules 2011. CONSIDERATIONQuestions of law raised in notice of appeal The questions identified in Mr Sharma’s amended notice of appeal are:1.Whether the Tribunal misconstrued s 21 of the Insurance Contracts Act as imposing, on or before 1 March 2009, a duty of disclosure on Mr Sharma as a third party beneficiary and life insured under:the TPD policy;the SC policy?2.Whether there was any evidence that Mr Sharma made or was required to make any application to the insurer for cover under:the TPD policy;the SC policyand whether by providing cover in the absence thereof the insurer thereby waived compliance with any duty of disclosure of Mr Sharma?3.Did the insurer waive compliance with any duty of disclosure of Mr Sharma or elect not to exercise any remedy it may have had under s 29(2) of the Insurance Contracts Act in respect of the TPD policy?4.Whether there was any evidence that the insurer would not have entered:the TPD policy; the SC policy,even if Mr Sharma had not failed to comply with any duty of disclosure before the relevant contract was entered into?5. Whether there was any evidence that the insurer avoided:the TPD policy;the SC policy? TAL did not dispute that the questions set out in the amended notice of appeal were questions of law, except for question 3. I agree that question 3 is a question of fact. The second issue raised in question 2, also concerning whether there was a waiver, is also a question of fact. Nor did TAL take issue with whether the identified questions were questions arising from the reasons of the Tribunal. In fact, TAL’s oral submissions were substantially directed to the issues sought to be raised by the notice of contention. The questions posed in the notice of appeal do not engage with the Tribunal’s reasons in a straightforward way. For example, as to question 1, although the Tribunal identified s 21 of the ICA as a relevant provision, it did not record any analysis of that provision and it did not refer to s 21 in its “deliberations and findings”. However, I accept that it is reasonable to infer that the Tribunal understood Mr Sharma to owe a duty of disclosure to TAL under s 21.by reason of its inclusion of s 21 as a relevant statutory provision and because the Tribunal concluded that TAL was entitled to invoke s 29(2) which applies in the circumstances set out in s 29(1). The relevant circumstances include where the person who became the insured “failed to comply with the duty of disclosure” in accordance with s 29(1)(a). The parties agreed that, by s 11 of the ICA, the “duty of disclosure” in s 29(1)(a) means the duty referred to in s 21. Thus, I accept that the Tribunal’s reasons arguably involved a conclusion of law that s 21 applied to Mr Sharma. As to question 2, the Tribunal’s reasons do not contain an express finding that Mr Sharma “made or was required to make any application to the insurer for cover” under either the TPD policy or the SC policy. The Tribunal’s reasons do not address the significance of the fact that the TPD policy and the SC policy were executed on 1 March 2009, well after Mr Sharma’s application for voluntary cover was accepted in July 2007. I do not accept that question 2 is a question of law arising out of the Tribunal’s determination and accordingly, I am not satisfied that the question is properly the subject matter of this appeal.