Australian & New Zealand Banking Group v RQA Accountants Pty Ltd & ors

Supreme Court of NSW|2013-03-12|Before: Adamson J

-[8] of the cross-claim: alleged failure to warn insured 81The first set of allegations made against AAMI, in [3]-[8] of the cross-claim are, in substance, that AAMI owed RQA a duty to warn it of any material exclusions from the Policy. The duty appears to be based in part on representations alleged to have been made by AAMI that: "the Insurance Premium payable on the purchase of their first Australian business insurance policy & related premium will be sufficient to safeguard against reasonable risks of doing business in Australia, including but not limited to widely known risks of theft and vandalism and consequential losses." [4] 82The allegation is made in [5] that AAMI was obliged to warn RQA of any material exclusions and in [6] that it was obliged to warn RQA of a difference between standard exclusion policies in Australia, India and Canada. It is also alleged that AAMI was in breach by failing to undertake a site inspection of the Premises and warning RQA of relevant risks. 83The duties which RQA allege are owed by AAMI could arguably be owed by a broker since there is implied in contracts between an insured and a broker that the broker will exercise reasonable care and skill in respect of a contract for the provision of brokering services: Claude R. Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1975] 1 Lloyd's Rep. 52. Brokers are obliged to use reasonable skill and care in advising the client as to completion of the proposal and in procuring the cover which the client has requested, either expressly or by necessary implication; and thirdly, if the broker is unable to obtain the cover required, to report to the client in what respect the broker has failed and seek the client's alternative instructions: Anthony John Sharp & Anor v Sphere Drake Insurance PLC & Ors [1992] 2 Lloyd's Rep. 501 at 523. 84Insurers owe no such duties to potential insureds. The relationship between the insured and insurer is governed by the Policy, the principles of general law and the Insurance Contracts Act 1982 (Cth). There is no basis for the allegation that the insurer has a duty to warn of the type and nature alleged in [3]-[8] of the cross-claim.

-[12] of the cross-claim: alleged refusal to pay the limit of the Policy 85The allegations made in these paragraphs are, effectively, that AAMI breached the Policy by paying out only 30% of the maximum amount of $50,000 payable. The following allegation is made: "The remaining balance of 70% of the maximum insurance policy sum of $50,000 or approximately $35,000 was denied by the First Cross defendant [AAMI] on an unreasonable and impossible to understand reason of "Lack of Sufficient Substantiation", rather than based on real world objective assessment of the Cross Claimant's local industry work culture in Australia of similarly highly experienced, qualified and time poor Accountants with Corporate Accounting background of public listed companies." 86As far as I can discern, the defendants allege that AAMI had an obligation to pay the whole of the limit of the Policy, $50,000, in the absence of sufficient substantiation because of the defendants' prior experience, expertise and qualifications and because it was the maximum that was payable. Mr Surana expressed his rationale for this argument in oral submissions in the following terms: "Reasonable cause of action; if I ask a lay person on the street, "look, you paid the full amount of premium to the insurer and the insurer has paid you 30% of the claim", any person will jump up and down, not only me, any person. You don't need to be a corporate accountant of my calibre. It's as simple as that, your Honour." 87The cause of action articulated by Mr Surana is not known to the law. 88Mr Surana developed this allegation in oral submissions by relying on a Product Disclosure Statement (PDS) produced by AAMI as the basis for an express representation by AAMI as to the insurance which it was providing as part of its standard cover. Mr Surana highlighted the following portion of the PDS: "The other benefits that you will have experienced through AAMI Business Insurance include: package discounts peace of mind pay by the month customised cover hassle-free claims plain language policy documentation." 89Mr Surana particularly emphasised the reference to "customised cover". He did not provide any basis for an argument that the provision of "customised cover" required AAMI to pay the maximum amount of the Policy whenever there was a claim. 90Mr Surana, in oral submissions, made reference to s 13 and s 54 of the Insurance Contracts Act 1984 (Cth) and submitted that AAMI was in breach of those provisions and that a cause of action arose in favour of the defendants by reason of the breach. 91Section 13 requires parties to an insurance contract to act with the utmost good faith and implies such a term into insurance contracts. I understood Mr Surana to be submitting that it was a breach of AAMI's duty of good faith to the defendants for it to require substantiation of RQA's claim. He also submitted that the doctrine of contra proferentem operated so as to prevent AAMI from refusing to pay the maximum amount under the Policy. 92Section 54 provides that an insurer may not refuse to pay claims in certain circumstances. I understood Mr Surana to be submitting that s 54 required AAMI to pay the maximum amount of the claim irrespective of whether it was sufficiently substantiated. 93It appeared from Mr Surana's submissions that he was under the misapprehension that an insurer was only entitled to refuse to pay the whole of an amount claimed if it could establish that such loss had not been suffered by the insured. The onus is the reverse of Mr Surana's apprehension. 94The doctrine of contra proferentem operates in the context of insurance contracts so as to preclude an insurer from construing an ambiguity in the policy so as to deny liability: Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd [2002] NSWSC 1006 at [25]-[28] per Palmer J; upheld on appeal: QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd [2003] NSWCA 356. It does not, however, have the effect that an insured is relieved of the obligation to substantiate its claim, or that the insurer is obliged to pay the maximum amount payable under the policy, irrespective of whether the loss claimed has been substantiated. 95I am persuaded that these paragraphs of the cross-claim do not disclose any arguable cause of action.

-[21] of the cross-claim: infliction of mental anxieties and trauma due to business cash crisis 96In these paragraphs RQA alleges, in substance, that because the claim was not settled to the maximum amount, it created cash flow difficulties for the defendants which resulted in their suffering mental anguish and financial loss. This claim is most forcefully articulated in [15] which alleges: "As a result of substantial financial under settlement of cash due to the general insurance claim dispute, materially driven by the First Cross Defendant's vague interpretation of the policy clauses and diversion of the Cross Claimants business time to non business activities, the Cross Claimants suffered severe mental anxieties & trauma due to significant cash crisis and constantly underlying threat of moving towards insolvency in the newly located business triggering a long list of adverse consequences and associated personal health and family health issues." 97The underlying question is whether AAMI was obliged to pay more than the amount it paid. The only basis on which it is said that AAMI should have paid $50,000 rather than the $19,000 it in fact paid is that it was the limit of the Policy. This is addressed above. If AAMI was not obliged to pay more than it did, then AAMI cannot be liable for the consequences of the defendants not receiving the maximum amount payable under the Policy. Paragraphs [13]-[21] do not disclose any arguable cause of action against AAMI.

-[26] of the cross-claim: forced participating in dispute processes 98The defendants allege that they have been forced to spend a substantial amount of time engaging in dispute resolution processes and in endeavouring unsuccessfully to obtain pro bono legal assistance. Mr Surana alleges that he: "was forced to spend substantial amount of personal time in duplicating provision of uncomfortable and sensitive personal information to new and unrelated irrelevant people." 99I am satisfied that no arguable cause of action is disclosed by these or any other paragraphs of the cross-claim. 100AAMI has persuaded me that the cross-claim discloses no reasonable cause of action and it amounts to an abuse of process. I do not consider there to be any discretionary matters which ought prevent its dismissal.

RQA's notice of motion filed 3 September 2013 101RQA seeks three forms of relief in this notice of motion: (1) Reversal of $7,512.19 of loan enforcement fees imposed on 23 August 2012; (2) Costs for time, stress and other inconvenience involved in the notice of motion; and (3) A restraining order preventing the ANZ from dealing with any of the defendants' accounts. 102Although the motion identifies RQA as the only party seeking orders, it is apparent from the context, the form of prayer 2 and from the oral submissions made that Mr and Mrs Surana are also applicants. 103Effectively RQA and Mr and Mrs Surana are seeking summary judgment in respect of these three claims for relief. There is no basis on which the Court would, even if it were otherwise inclined to make the orders sought, make them on a summary basis. 104Each of the claims for relief sought is misconceived. 105As to the first prayer for relief in the notice of motion Mr Surana submitted that the ANZ was not entitled to charge loan enforcement fees once the Local Court pleading had been filed in the Local Court because the effect of filing was to render all agreements between the defendants and the ANZ void or voidable. I have rejected this submission for the reasons given above. The ANZ is entitled, by reason of the terms of its agreements with the defendants, to charge loan enforcement fees to the defendants and to apply such deductions to any account at its discretion. 106Furthermore, I accept the ANZ's submission that the line item for $7,512.19 for loan enforcement fees on the overdraft facility of RQA is, effectively, a book entry. The rights as between the ANZ on the one hand and Mr and Mrs Surana on the other are determined by an accounting either when there is an offer to redeem the mortgage or when the either of the mortgages is discharged. The parties are entitled to a single accounting but not a piecemeal one. The first prayer for relief in the defendants' notice of motion is effectively a prayer for a piecemeal accounting relating to an aspect of the total loan enforcement fees. To entertain this application for relief would be to subject the ANZ to futile litigation since the result could have no effect on the legal rights of the parties: Adams v Bank of New South Wales [1984] 1 NSWLR 285, at 296B-D per Hutley JA with whom Moffit P and Samuels JA agreed. 107As to the second prayer for relief in the notice of motion, it is not maintainable for the principal reason that the ANZ does not, for reasons given above, owe a duty of care to its customers. 108As to the third prayer for relief in the notice of motion, the applicants have not identified any basis on which they invoke the Court's limited jurisdiction to vary the terms of a contract. Accordingly, the agreements between the parties govern their respective rights and responsibilities. Each of the relevant agreements confers a right on the ANZ to combine accounts and an obligation on the customer to pay the ANZ's enforcement expenses. There is no basis on which the Court would interfere with the parties' contractual rights and responsibilities, whether on an interlocutory or final basis.

Orders 109I make the following orders: (1)An order for possession of the Property against the first and second defendants. (2)An order that the plaintiff have leave to issue a writ of possession forthwith. (3)That the defence filed 20 August 2012 be struck out. (4)Dismiss the whole of the first cross-claim filed on 22 August 2010. (5)Dismiss the first defendant's notice of motion filed on 3 September 2012. (6)Order the defendants to pay the costs of: (a)the plaintiff's motion filed on 29 November 2012; (b)the first defendant/cross-claimant's motion filed on 3 September 2012; (c)the cross-defendant's amended motion filed on 12 October 2012.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 March 2013

Insurance Contracts Act 1982(Cth)

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