Bogovic v Aon Hewitt Financial Advice Limited

Solicitors: Berill & Watson Lawyers (Plaintiff) Colin Biggers & Paisley (First, Second and Third Defendants) File Number(s): 2023/210284

JUDGMENT

1. This judgment deals with two notices of motion each filed on 20 March 2024. The plaintiff's notice of motion seeks leave to file a proposed amended statement of claim ("PASOC") in the form annexed to the affidavit of Patrick Williamson-Hill, the solicitor with carriage of the matter for the plaintiff, affirmed on 20 March 2024. The defendants' notice of motion seeks summary dismissal pursuant to r 13.4(1) Uniform Civil Procedure Rules 2005 (NSW) on the ground that the plaintiff's cause of action is statute barred by dint of the expiration of the time limited by s 14(1)(b) Limitation Act 1969 (NSW). The defendants' opposition to the plaintiff's PASOC rests solely on the ground of "futility", in that it would be futile to permit the amendment as the proceedings are statute barred. It follows that the substantive matter in dispute is whether the defendants have discharged the high burden necessary for summary dismissal.

The nature of the cause of action and background facts

1. The second and third defendants are insurance brokers who acted for the plaintiff in arranging insurance including life, trauma, total and permanent disablement ("TPD"), and income protection cover. The original statement of claim was filed on 30 June 2023. The PASOC somewhat seeks to vary the grounds of the claim. Given the question is whether a maintainable claim is pleadable rather than pleaded, it is appropriate for present purposes to focus on the PASOC: O'Brien v Bank of Western Australia [2013] NSWCA 71 at [3]. By it the plaintiff sues the second and third defendants for professional negligence occurring on 21 May 2008, on 28 October 2010 and on 29 February 2016. The plaintiff's case is that the second and third defendants failed to exercise reasonable care in the supply of financial planning and insurance advice, specifically by arranging TPD cover in an inadequate amount. The claim is pleaded in negligence. A previously pleaded cause of action in contract is abandoned by the PASOC. The first defendant is said to be liable by reason of the statutory cause of action created by s 917B Corporations Act 2001 (Cth). Alternatively, the plaintiff alleges that the first defendant is vicariously liable as principal for the negligence of its agents, the second and third defendants.
2. From the averments in the PASOC, the amount of TPD cover of $25,000 originally obtained in May 2008 was maintained throughout the period of insurance despite subsequent reviews of the cover in 2010 and 2016. In contrast, the life insurance cover was increased in 2016 to $1 million.
3. From the averments appearing under the heading Loss and Damage in the PASOC ([32] - [35]), the plaintiff alleges that had he "been appropriately advised" by the second and third defendants, he would have maintained an appropriate sum of TPD insurance. The amount is not specified. Rather, further particulars will "be provided after the exchange of expert evidence". The claim made for loss and damage is particularised as (at [35]): "Loss of the difference between the TPD benefit amount payable under the AIG Priority Protection Policy and TPD insurance proceeds of an appropriate sum. Further particulars will be provided after the exchange of expert evidence."
4. The following facts appear as particulars (perhaps irregularly; no point was taken) to the averment that the plaintiff has suffered TPD (at [33]): "(a) The Plaintiff ceased work on 1 April 2017 due to myalgic encephalomyelitis/chronic fatigue syndrome and soft tissue rheumatism/fibromyalgia; (b) The Plaintiff was absent from employment for an uninterrupted period of three consecutive months; (c) The Plaintiff is incapacitated to such an extent as to render him unlikely ever to engage in any business, profession or occupation for which the [plaintiff] is reasonably suited by education, training or experience; (d) On or about 20 September 2023, [the life insurer] formed the opinion that the Plaintiff was totally and permanently disabled and accepted that it was liable to pay him a TPD benefit in the sum of $44,896.40 with a date of loss of 20 May 2020." These particulars are drawn having regard to the definition of "total and permanent disablement (own occupation)" in the insurance policy wording annexed to the third affidavit of Mr Williamson-Hill affirmed on 1 May 2024 (Court Book ("CB") at p 172) which I admitted over the objection of the defendants.
5. No defences have yet been filed as the defendants' request for further and better particulars have resulted in the plaintiff propounding the PASOC. Accordingly, the issues are yet to be fully identified.

Applicable principles

1. Rule 13.4(1)(b) provides as follows: "If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings - … (b) no reasonable cause of action is disclosed, or … the court may order that the proceedings be dismissed generally or in relation to that claim.
2. The sole ground invoked by the defendants is that no reasonable cause of action is disclosed because the claim is statute barred. Alternative relief seeking to have the statement of claim struck out under r 14.28(1) UCPR was not separately addressed and seems to have been invoked out of an abundance of caution.
3. The power conferred upon the Court by r 13.4 is to be exercised by application of clearly established and well-known principles which need not be elaborated here. It is sufficient, of all the expressions of the relevant test in decided cases of high authority, to bring to mind the formulation preferred by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 (at [57]): "It is, of course, well accepted that a court whose jurisdiction is regularly invoked … should not decide the issues raised in those proceedings in a summary way except in the clearest of cases. Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways, but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way (footnote omitted). For a comprehensive recent exposition of the applicable principles, see Angus & Julia Stone Pty Ltd v HNOE Limited [2024] NSWSC 627 at [18] ff (Nixon J).
4. For the purpose of the application of this principle, it needs to be borne in mind that the identification of the date upon which a cause of action accrued is a question of fact, not law. In Wickstead v Browne (1992) 30 NSWLR 1; [1992] NSWCA 272 (at 5-7), Kirby P, albeit in dissent, in the course of a characteristically clear and comprehensive summary of the applicable principles said (at 5): "Common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence..."
5. This case, like Wickstead, involves a claim in negligence for pure economic loss. As the cases referred to by Ms Harris-Roxas of counsel appearing for the defendants make clear, identifying the point in time when measurable loss has been suffered and the time within which proceedings must be brought accordingly commences to run may be elusive and will vary from case to case. Learned counsel frankly acknowledged the hurdle that the defendants need to clear as expressed in Wardley Australia Limited v Western Australia (1992) 175 CLR 514; [1992] HCA 55 (at 533, per Mason CJ, Dawson, Gaudron and McHugh JJ): "We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident to the question." Ms Harris-Roxas argued that the case at hand fell into the category of "the clearest of cases".
6. It should also be borne in mind that not only have the defendants assumed the high burden of demonstrating the relative certainty of outcome of this litigation, it is also relevant to bear in mind that at trial the defendants would carry the legal onus of making good their limitation defence: Pullen v Gutteridge, Haskins & Davey Pty Ltd [1993] 1 VR 27 at 71-6.
7. In the application of these principles, it is well to remember that I am not seised of the power to decide a separate question requiring me, according to the civil standard of proof, to finally identify the date when measurable economic loss first occurred, and the plaintiff's cause of action accrued: cf Todd Hadley Pty Ltd v Lake Maintenance (NSW) Pty Ltd (No 2) [2020] NSWCA 81. Here, the defendants are required to demonstrate to the required high degree of certainty that if the proceedings were allowed to go to trial in the ordinary way, the plaintiff's cause of action will be found to have been statute barred. In this context it would be insufficient for me to conclude that the action was probably commenced out of time, if arguably it was not.

Each party's position

1. I do not propose to fully summarise the arguments of counsel. I have had the benefit of pertinent written and oral submissions, the substance of which is reflected in these reasons. Fundamentally, the position of the defendants is that any economic loss was first suffered when the plaintiff lost the opportunity to obtain more advantageous TPD cover. It was submitted that the latest possible date by which that could have occurred was when the plaintiff's medical condition progressed to the point where he became incapacitated for work by reason of it on 1 April 2017. Afterwards, it goes without saying, it was not realistically possible to obtain TPD cover for that condition at an affordable premium.
2. Mr Batley of counsel, who appeared for the plaintiff, argued that given the nature of the professional services supplied by the defendants to the plaintiff, measurable economic loss was not suffered by the plaintiff until the satisfaction of all of the conditions specified in the policy entitling the plaintiff to the payment of the TPD benefit as set out in the particulars to paragraph [33] of the PASOC (paras [4]-[5] above) because the absence of more advantageous cover materialised then in actual economic loss. This was on either 20 September 2023 when the life insurer formed the necessary opinion that the plaintiff was totally and permanently disabled, or on 20 May 2020, being the date of loss as ascribed to the claim under the policy by the insurer. Either way, the loss was suffered within 6 years of the commencement of the proceedings.
3. In reply, Ms Harris-Roxas argued that the cause of action the plaintiff sued upon was essentially for professional negligence by a professional adviser. While the defendants were insurance brokers advising the plaintiff on his insurance needs and obtaining cover on his instructions, they were not an insurer and had no responsibility for, or control over, the terms of the policy upon which the insurer was prepared to write the cover. Counsel argued that the terms of the policy obtained by the defendants on the plaintiff's behalf were simply irrelevant to the question of when measurable economic loss first accrued, on the assumption, for the purpose of the argument only, that the defendants were negligent.
4. Ms Harris-Roxas sought to draw an analogy with the position of the liability of a negligent registered valuer for losses suffered by a lender or mortgage insurer in reliance on the valuer's opinion as discussed by the High Court in Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; [1999] HCA 25 at 447-448 (per Gummow J). His Honour was of the opinion that the mortgage insurer's loss ""crystalised" at the moment of realisation, when the relationship between the market value of the property and the moneys secured became fixed in the relevant sense." His Honour stated, "[t]he "loss" which is recoverable was sustained at the time of default and not at the time of entering into the transaction". As I understood the argument, it was that when the borrower defaults, the lender's loss crystalises even though the extent of it may not be known until the exercise of the power of sale results in an actual loss. The analogy is when the plaintiff's illness disabled him his loss crystallised even if the extent of it may not be known until the insurer makes a decision on his subsequent claim.

Consideration

1. I commence by reminding myself that it is not my role to decide this question finally. The question for me is whether it is so clear that any economic loss flowing from the defendants' putative negligence accrued more than six years prior to the commencement of the proceedings by the filing of the statement of claim on 30 June 2023 that there is a high degree of certainty the plaintiff's claim will fail because it runs foul of the statutory bar.
2. As Bell P (as the Chief Justice then was) pointed out in Todd Hadley, the starting point is the plurality judgment in Wardley (at 527) where Mason CJ, Dawson, Gaudron and McHugh JJ said: "Economic loss may take a variety of forms and, as Gaudron J noted in Hawkins v Clayton, [(1998) 164 CLR 539 pp 600-601], the answer to the question when a cause of action for negligence causing economic loss accrues may require consideration of the precise interest infringed by the negligent act or omission. The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough (footnotes omitted). Their Honours went on to say in the context of misrepresentations: "When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of "loss or damage". And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired."
3. In the case of loss or damage dependent upon the materialisation of a contingency their Honour's said (at 532): "…the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred. A deferred liability may stand in a different position but there is no occasion here to discuss that matter."
4. Given the way the argument before me developed, it is also apposite to record that the plurality in Wardley expressed agreement with the decision of Von Doussa AJ in SWF Hoists and Industrial Equipment Pty Ltd v State Government Insurance Commission (1990) 6 ANZ Insurance Cases 76,688 (61-002); [1990] ATPR 41-045 that the cause of action of an insured to sue an insurer on a policy of liability insurance purchased on a misrepresentation by the insurer as to the extent of the indemnity accrued "only when the insured was called on by a third party to make payments against which it would have been entitled to be indemnified by the insurer under the contract as represented." Before then, "there was no more than a potential for loss".
5. Finally, in Wardley, their Honours expressly approved of the statement of Gaudron J in Hawkins v Clayton (at 601) concerning when a plaintiff first suffers loss in respect of a contingent loss or liability in the following terms: "… if the interest infringed is an interest in recouping moneys advanced it may be appropriate to fix the time of accrual of the cause of action when recoupment becomes impossible rather than at the time when the antecedent right to recoup should have come into existence, for the actual loss is sustained only when recoupment becomes impossible." (Emphasis in Wardley).
6. With reference to the defendants' argument that the plaintiff's loss accrued from 1 April 2017 when he ceased work because he lost the opportunity to obtain adequate cover, it is worth bearing in mind what is meant by loss of opportunity. In Cassis v Kalfus [2001] NSWCA 460, Hodgson JA, referring to Sellars v Adelaide Petroleum (1994) 179 CLR 332; [1994] HCA 4, said (at [76]): "… if one can characterise an economic disadvantage suffered by a plaintiff as involving the loss of a commercial opportunity which has some value, then that will be enough to constitute actual damage and to complete a cause of action (Sellars). However, if the economic disadvantage is no more than a contingency for future loss, then, unless and until the contingency occurs, there is no damage and no cause of action (Wardley)." Hodgson JA's statement above was endorsed in Todd Hadley at [78].
7. In Segal t/as Segal Litton & Chilton v Fleming [2002] NSWCA 262 Hodgson JA, in the same vein, referred to the "significant difference between the loss of a chance, on the one hand, and the chance of a loss, on the other" (at [24]). His Honour expanded upon this difference in the succeeding paragraphs (at [25]-[26]): "In the former case, where a chance is lost, it will never be known how things would have turned out if the chance had not been lost, so that the only possible compensation a plaintiff can obtain is compensation for the value of the chance itself. Accordingly it is reasonable to require a plaintiff to commence proceedings within the limitation period once the chance has been lost, and reasonable to award damages on that basis against a defendant. On the other hand, where a person incurs a chance, even a substantial chance, of suffering a loss, in due course it may become clear that no loss is ultimately suffered; and so long as there is some appreciable chance that no loss will be suffered, it is unreasonable to require a plaintiff to commence proceedings and unreasonable to award damages against a defendant. However, once there is actual loss, even if there is also the chance of further loss, a plaintiff must commence proceedings within the appropriate limitation period, and can obtain damages reflecting actual loss suffered plus damages reflecting the chance of any further loss."
8. In Todd Hadley, Bell P referring to the facts of Wardley, said (at [80]) "[n]otions of contingent loss are far more intelligible in the context of… a commercial arrangement; they are not readily transposed to liability for breach of a duty of care" (my emphasis). Bell P also referred (at [79]) to the observations of Young AJA in Khoury v Coffee Projects (Australia) Pty Ltd [2015] NSWSC 591 (at [26]-[27]). I would emphasise that Young AJA referring to Deane J's judgment in Wardley said it was "quite clear that there [is] no general rule that [applies] and that one must look at each of the situations to see when the cause of action accrued". I interpolate the need to look closely at each situation which arises in the case at hand tells heavily against the availability of summary dismissal for contravention of a statute of limitations because that necessity bespeaks a triable issue.
9. Mr Batley placed much emphasis upon Commonwealth of Australia v Cornwell (2007) 229 CLR 519; [2007] HCA 16 as providing an analogy. The case was concerned with when a cause of action for negligent advice accrued for the purpose of s 11 Limitation Act 1985 (ACT). In 1965 the plaintiff's superior had advised him that he was ineligible to join an advantageous superannuation scheme then open to the Commonwealth public servants because he was not a permanent officer of the public service. The scheme was superseded in 1976 and when the plaintiff became a permanent employee in 1987, he joined the 1976 scheme which was less advantageous to him. He retired on 31 December 1994 and alleged that his existing superannuation entitlements were less advantageous than those that would have been available to him had he been correctly advised of his entitlement to join the extant scheme in 1965. He alleged that his cause of action for economic loss for negligent advice or the negligent provision of information upon which he relied accrued upon his retirement. By applying the principles to be derived from Wardley, a plurality of six justices (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ; Callinan J in dissent), said (at [18]-[19]): "Here, the economic loss which the respondent sustained was alleged to be the lesser benefit which he obtained on his retirement, this being worth less than it would have been had he not relied upon the negligent advice given to him in 1965. But to speak simply of a "retirement benefit" and its value is to obscure the nature of the economic loss involved. This does not turn upon proprietary or other rights or obligations created and governed by the general law, such as the indemnity granted by the respondent in Wardley, or the continuing financial obligations undertaken by the lessees in Murphy v Overton Investments Pty Ltd . What the respondent stood to enjoy upon "retirement" was an "entitlement" conferred by federal statute law. This "entitlement" was his "interest" in the sense used in the above passage from Wardley. The significance attached to retirement on grounds of health, by retrenchment, for cause, upon death and for other reasons depended upon the terms of the particular legislation. What was only in prospect until the falling in of one or more of various contingencies, matured into actual loss only at the end of the respondent's service and upon the falling in of one or more of the statutory contingencies which had to be met for the respondent to be entitled to a statutory benefit. Hence the submission by the respondent that it was only upon his retirement that the relevant statutory contingency fell in upon which the respondent became entitled to a benefit which was limited or diminished and his cause of action first accrued" (footnotes omitted).

Decision

1. When one considers the arguments of the parties in the light of these authorities, it is not obvious to the necessary high degree of certainty for the purpose of summary dismissal that the loss of an opportunity to obtain more advantageous insurance cover constitutes the loss of a chance having commercial value of the type discussed in Segal. To my mind it seems more than fairly arguable that this situation constituted no more than the chance of a loss, even a substantial chance of loss which is merely contingent or prospective. Upon a full examination of the facts, it may well be found to fall into that category described by Hodgson JA in Segal at [26] where "there is some appreciable chance that no loss will be suffered". If this is so, there is no measurable or actual loss sufficient to complete a plaintiff's cause of action.
2. I also think it more than fairly arguable, in terms of Wardley and Cornwell, that the plaintiff's interest infringed by the putative negligence of the defendants was his entitlement to TPD cover under the life insurance policy he was advised by the defendants to take out and which they arranged for him as his agent in accordance with his instructions as informed by their advice. The prospective loss constituted by the TPD cover arranged for the plaintiff by the defendants, in the words of the plurality in Cornwell, at least arguably, "was only in prospect" and "matured into actual loss only" when he satisfied the necessary conditions of the policy arranged on his behalf by the defendants to qualify for the payment of the TPD benefit.
3. In this regard, it does not appear obvious to me to the requisite high degree of certainty, the considerations that: the defendants did not issue the TPD policy; were not a party to it; and had no part in determining the plaintiff's entitlements under it, renders the terms of the policy and the process of establishing an entitlement to a TPD benefit under it irrelevant to the question of when the plaintiff's cause of action first accrued. I regard it as potentially significant for present purposes that in Onepath Life Limited v Standley [2020] NSWCA 321, Meagher JA (Macfarlan and McCallum JJA agreeing) described "TPD Cover" (at [22]) as "a form of contingency insurance which provides no indemnity but instead a payment upon the happening of a contingent event" (my emphasis). His Honour continued: "The event is the suffering of "total and permanent disability" as a result of illness or injury and must occur while the cover is in force."
4. Each of the elements of the definition relevant in the policy wording had to be satisfied before the entitlement to receive TPD cover arose. The insurance policy wording in Standley is different from the wording in the present case. However, it is clear that the entitlement to cover did not arise in Standley until the conditions of cover set out in the policy had been satisfied. On the findings of the trial judge and of the Court of Appeal, this did not occur when the insured had to resign from work in February 2016 as a result of physical injuries, but rather in September 2017 as a result of the psychological condition that had developed in consequence of the physical injuries. His right to sue on the policy did not arise until then notwithstanding earlier disablement by reason of the physical injuries.
5. It should also be said that in many of cases to which reference has been made, the defendant raising the limitation defence has not been a party to the contract which governed the accrual of the plaintiff's loss. It is sufficient to refer to Wardley, where the defendant was not a party to the deed of indemnity the terms of which governed the accrual of the plaintiff's loss; and Todd Hadley, where the valuer was not a party to the mortgage which governed the accrual of the lender's loss. Other examples could doubtless be multiplied.
6. I am not satisfied that the defendants have discharged the onus of establishing a clear case for summary dismissal. It follows that, in the way the matter was put before me, I should grant the plaintiff leave to file and serve the PASOC. In written submissions the plaintiff accepted he should be responsible for such of the defendants' costs as have been wasted by the amendment. The defendants should otherwise be responsible for the costs of each motion.
7. My orders are: 1. The defendants notice of motion filed on 20 March 2024 is dismissed. 2. The plaintiff is granted leave to file and serve an amended statement of claim in the form annexed to the affidavit of Patrick Williamson-Hill affirmed on 20 March 2024 in accordance with his notice of motion filed on 20 March 2024 by 4 pm on 14 June 2024. 3. List the matter for directions before the Common Law Case Management Registrar on 17 June 2024. 4. The plaintiff is to pay the defendants costs thrown away by reason of the amendment to the statement of claim. 5. The defendants otherwise are to pay the plaintiff's costs of and incidental to each Notice of Motion filed on 20 March 2024.

Amendments 04 June 2024 - Cover Sheet - corrections to the spelling of the Defendants names; Representation - Amendments to representation of Defendants. 05 June 2024 - Cover Sheet - corrections to defendants names. 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: 05 June 2024