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[2006] NSWDC 77
District Court of NSW
2006-08-18
Cole J, Rolfe J
Original judgment source is linked above.
CITATION: Camilleri v Australian Casualty & Life [2006] NSWDC 77
CATCHWORDS: INSURANCE - Income Protection Policy - total disability - whether requirements met - whether insurer entitled to deduct a portion of workers compensation settlement received by insured - whether insurer repudiated contract - whether insured elected not to terminate for repudiation or breach
LEGISLATION CITED: Workers Compensation Act 1987, s 66
Alessi v National Mutual Life Association of Australasia Ltd (1982) 2 ANZ Ins Cas 60-481 Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1 Allsop v Federal Commissioner of Taxation (1965) 113 CLR 341 ASIC v Rich (2005) 218 ALR 764; [2005] NSWCA 152 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 Broadlands Properties Limited v Guardian Assurance Company Limited (1984) 3 ANZ Ins Cas 60-552 Browne v Dunn (1893) 6 R 67 Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175 CIC Insurance Ltd v Bankstown Football Club Ltd (unreported, NSWSC, Cole J, 16/09/93) Commercial Union Insurance Co Ltd v Willetts Radio & TV Ltd (1985) 3 ANZ Ins Cas 60-677 Constantinides v Du Pont Superannuation Fund Pty Ltd (2002) 68 ALD 664; [2002] FCA 534 Cullinane v Mercer Benefit Nominees Ltd [2006] FCAFC 82 Dean v J Thomas & Son [1981] Qd R 62; (1980) 1 ANZ Ins Cas 60-402 Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88 Green v AMP Life Ltd (2005) 13 ANZ Ins Cas 90-124; [2005] NSWSC 370 H v First State [2003] NSWIR Comm 293 Harrison v Zurich Australian Insurance Ltd (BC9603264, NSWSC, Rolfe J, 30/7/1996) Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; [1993] HCA 27 Ivkovic v Australian Casualty & Life Ltd (1994) 10 SR (WA) 325 Johnson v Australian Casualty Co Ltd (1992) 7 ANZ Ins Cas 61-109 Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832 CASES CITED: Kennedy v Queensland Insurance Co (1924) 24 SR (NSW) 542 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 McLaurin v Federal Commissioner of Taxation (1961) 104 CLR 381 Porter v OAMPS Ltd (2004) 207 ALR 635; [2004] FMCA 272 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 Riley v National Mutual Life Association of Australasia Ltd (1986) 4 ANZ Ins Cas 60-684 Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Limited (receiver & manager appointed) (1997) 42 NSWLR 462 Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 Shevill v Builders Licensing Board (1982) 149 CLR 620 Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR (NSW) 174 Szuster v Hest Australia Ltd (2000) 207 LSJS 35; [2000] SADC 2 Taylor v J Thomas & Son (1983) 2 ANZ Ins Cas 60-524 The Glendarroch [1894] P 226 Till v National Mutual Life Association of Australasia Ltd (2005) 13 ANZ Ins Cas 61-640; [2004] ACTCA 26 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 Tropicus Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office (1998) 148 FLR 441; 10 ANZ Ins Cas 61-412 Walton v Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Ins Cas 61-620; [2004] NSWSC 616 Wiley v Board of Trustees, State Public Sector Superannuation Scheme (unreported, SC(Qld), White J, 3/4/1997, BC9701020) Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17
PARTIES: John Camilleri (Plaintiff) Australian Casualty & Life (Defendant)
COUNSEL: Mr T Hale SC, Mr M Murphy (Plaintiff) Mr R Cavanagh (Defendant)
SOLICITORS: Church & Grace (Plaintiff) Turks Legal (Defendant)
1 HIS HONOUR: These proceedings arise out of a claim made by the plaintiff upon a policy of insurance originally issued by Australian Casualty & Life ("AC&L") following an accident on 30 December 1997 in which the plaintiff was injured whilst riding a quad bike. Mr T Hale SC, with Mr M Murphy of counsel, appears for the plaintiff, and Mr R Cavanagh of counsel appears for the defendant.
2 There is no dispute that National Mutual Limited has taken over the obligations of AC&L and stands in its shoes. I shall refer to AC&L/National Mutual Ltd as "the insurer".
3 The insurer made payments in accordance with the policy for two years after the accident, until 16 May 2000, but on 7 June the insurer wrote to the plaintiff stating: "Based on the medical evidence on file we believe you to be fit to perform the occupation of farm owner/manager … you are no longer entitled to benefits under this policy".
4 Lawyers acting for the plaintiff sought a review of the insurer's position and provided further information but the insurer maintained its position that the plaintiff did not meet the criteria of the insuring clause for total disability. Between 2001 and 2002 there was further correspondence and on 25 February 2003 the plaintiff issued a Statement of Claim in this Court.
5 There is no dispute that the Statement of Claim filed asserted the continuation of the policy and sought payment of the past benefits, to be updated as at the date of the hearing.
6 On 13 February 2004 the plaintiff filed an Amended Statement of Claim - it pleaded that the failure of the insurer to pay the monthly benefits was a "repudiation of the policy of insurance by the insurer and was continuing and the plaintiff hereby accepts the repudiation and the policy is rescinded" (para 12 Amended Statement of Claim). Damages for loss of future benefits were included in the prayer for relief.
7 By a Further Amended Statement of Claim the plaintiff expanded his pleading by asserting that the requirement that the insurer pay a monthly benefit was a condition of the policy, or alternatively an essential or fundamental term of the policy, or alternatively an intermediate term of the policy, and that the plaintiff was entitled to terminate the policy due to the failure of the insurer to make payments from 7 June 2000 onwards.
8 As the claim by reason of the amendments exceeded the jurisdictional limit of this Court, the insurer's consent was required to extended jurisdiction and that consent was given: Exhibit "B".
9 The issues which arise are: (1) Whether the plaintiff is unable to perform "any occupation for which he is reasonably suited by education, training or experience" within the meaning of clause 2 of the insuring clause, and relevant to this:
(a) are there limits on what occupation the insured can be required to perform; and (b) must there be evidence of actual employment available? (2) If the answer to (1) is yes, was the insurer's failure to pay, a breach of the policy that entitled the plaintiff to terminate the contract of insurance?
(3) If the answer to (2) is yes - did the plaintiff elect not to terminate the contract of insurance for breach or repudiation and is he precluded by virtue of the election from seeking to recover damages for loss of the contract?
(4) In computing the amount due, if an amount is due, is the insurer entitled to deduct amounts received by the plaintiff for workers compensation and if so, what amounts?
(5) In computing the amount due for future payments, should that be relevant, how are those amounts to be calculated?
(6) In relation to issue (1), upon whom is the burden of proof placed, and did the cross examination of the plaintiff and other witnesses called in the plaintiff's case go far enough to permit the challenge mounted by the insurer?
(7) On the question of repudiation - was the insurer's refusal to make payments after May 2000 a decision lacking bona fides and if so is that relevant? If it is, has the plaintiff established a lack of bona fides on the part of the insurer?
10 The plaintiff was hospitalised as a result of the accident, which involved him being thrown from his bike when it collided with a peach tree forming part of an orchard. He remained in hospital for 16 days and for the first two days he was unconscious: see T24-T25. He suffered the following injuries: (1) fractures to C5 and C6 (ie of the cervical spine);
(5) fractures to two teeth and one tooth knocked out.
(See Rehab One report, 22 February 1999, p 79 Exhibit "F".)
11 The plaintiff has, it is agreed, lost vision in his left eye as a result of the accident.
12 At the time of the accident the plaintiff was 44 years of age and is now 54 years of age. He had commenced working in the family business at the age of 15. The family business had initially been an orchard business which the plaintiff and two brothers had taken over from their parents, but one of the brothers had seen an opportunity for the business to branch out into stock feed manufacture and distribution, and that had been successfully achieved. The plaintiff, who was one of the directors of the company operating the business, attended to the orchard side of the business in ways in which I shall describe, but he also had a significant involvement in the maintenance and repair of all of the vehicles used in connection with both sides of the business - forklifts, tractors and trucks - he would organise the priorities for repair and give instructions to the full time qualified mechanic on what needed to be done and in what order. Although not formally qualified as a mechanic, he assisted in work on these vehicles. He also would order spare parts and fertiliser. He would sometimes assist in the stock feed side of the business by helping bag feed and he would also drive a forklift. The stock feed plant and storage was located on the same property as the orchard and the workshop was located within the buildings on the property.
13 The plaintiff's brother Charles was in charge of the orchard and was responsible for pruning and spraying, and the plaintiff's brother Bill was in charge of the stock feed side, but when Bill died a manager was appointed for that side of the business.
14 The plaintiff's role in the orchard was to lay irrigation pipes, pick fruit and supervise other pickers, plant fruit trees, inspect trees for blight, and check irrigation piping at the beginning of the season. He would also help in the bagging of fruit.
15 The plaintiff would also drive trucks in connection with the stock feed side of the business from time to time.
16 At the time of the accident, the plaintiff was suffering from insulin dependent diabetes, raised cholesterol and hypertension, which were controlled by medication: Rehab One p 79 Exhibit "E".
17 The insurer does not dispute that the plaintiff suffered significant injuries in the accident, and indeed it paid the plaintiff two years of benefits pursuant to clause 1 of the policy. The insurer does not dispute that the plaintiff cannot perform all of the manual tasks which he could perform before the accident, but places emphasis on the fact that not all of the plaintiff's pre-accident activities involved heavy physical labour.
18 The plaintiff gave evidence that: (1) After the accident he tried to do some of the work that he had done before as a mechanic, but he could not do the heavy lifting required and could not look up at the truck or vehicle from underneath because this would cause him pain in his neck: T41-42.
(2) He had tried bending down to attend to the irrigation but this caused him dizziness: T42.25.
(3) He could not drive a forklift other than forwards because it involved a lot of turning around to look back and up - and his neck was too painful: T28 and T41.
(4) He had lost his truck licence, effectively because of his loss of vision in his left eye: T27.5-T28.
(5) He could not lift 50 kg bags (or anything like that weight) as he had done: T40.10.
(6) He did order parts for the mechanic after the accident: T43.10.
(7) He has been doing some charity work since the accident, which consists of: (a) selling items in a religious charity shop from 10am to 3pm once a week: T43;
(b) collecting and delivering pies for charity - three hours at a time "every two weeks or so". The boxes of pies weigh 8-10 kg and he collects them from the pie manufacturer and takes them to various charity centres using his utility: T44. His evidence was that after that he usually gets "pretty tired" and lies down: T44.51.
(8) Before the accident he was strong and robust - able to lift very heavy items (50 kg bags, brake linings, truck tyres) and a person who enjoyed his work (T29, T57) and was unrestricted by any ill health. He was able to actively play with his children and was very social (T29, T57).
(9) Following the accident he had left the family business and purchased Arundel Park, an industrial property from which he earns rental income.
(10) He had left school at 15 years of age to join the family business and he had no other formal education.
19 I have mentioned the loss of vision in the left eye (assessed at 90%: see pp 28 and 60 Exhibit "C"). There appeared to be initially some concern about brain damage or impairment but this was excluded subsequently: see Dr Ross Mellick pp 84-85 and 89 Exhibit "C". The plaintiff was assessed as having 45% loss of sense of smell but no impairment of taste, and also some hearing loss which was not due to the accident and which does not affect his ability to converse and was not productive of any difficulty in the courtroom: Dr Carroll pp 46-47 Exhibit "C".
20 Dr Darveniza in November 1999 described the plaintiff as having "quite marked limitation of all neck movements especially extension and flexion" (p 37 Exhibit "C") causing "daily post traumatic headaches and fractures to the cervical spine, leaving him with chronic neck pain proportional to activity" and said (p 34 Exhibit "C"): "It is now almost two years since the accident and his current disabilities must be considered permanent. In my opinion, he is fit for light sedentary duties in which he is relatively free to move about. There is no doubt that the injury and its sequelae have led to significant physical and economic loss".
21 In February 2001 and September 2003 Dr Darveniza's views remained unchanged and on 10 November 2005 he added "He is permanently unfit for duties requiring intact hearing, sight and sense of smell and duties requiring repetitive lifting, bending and stooping etc": p 42 Exhibit "C". In a report of 15 January 1999, Associate Professor Michael Fearnside, a neurological surgeon, said (p 52 Exhibit "C"): "As a result of the motor bike accident on 30/12/97, Mr Camilleri sustained multiple injuries as detailed above.
Specifically, he sustained a severe injury to his neck with a rupture of the C5/6 disc resulting in some prolapse but not requiring surgery at the present time, fractures of the C6 and C7 spinous processes and a ligamentous injury at the C6/7 level.
The MRI scan in November did not reveal any evidence of myelomalacia.
Clinically, he did have physical signs in the arms referable to the C5/6 level and this is consistent with the radiology and the mechanism of the accident.
When seen, I thought that he would be unsuitable for return to his work at the present time but it is as yet too early to offer a final comment as to being permanently unable to return to any form of work for the foreseeable future. I suggested that a program of physiotherapy and perhaps anti-inflammatory medications under the supervision of his family doctor would be appropriate. He will be reviewed as necessary."
22 In a report of 30 November 2000, Associate Professor Fearnside said: "When Mr Camilleri was seen on 10.8.2000, it was almost three years (short three months) from the time of the accident on 30.12.97. Mr Camilleri's symptoms have persisted with particular reference to his dizziness, headaches and neck pain. I think that his prognosis for improvement is poor. It is more likely than not that he will continue to experience symptoms related to his neck and head for the foreseeable future. By his report, he has not been able to return to work. Noting that he did have a heavy physical job, when I last saw him, he was unfit for his pre injury occupation."
23 In a report of 28 June 2006, Dr Mellick said (p 85 Exhibit "C"): "Certainly on the basis of the assessment made at the time of my examination of him I did not identify injuries of sufficient magnitude to render him unable to perform a wide variety of work in the familiar surroundings of his farm. For example, I would expect him to be able to perform supervising tasks without difficulty and I would not expect major limitations of his ability to do clerical work."
24 In his report of 25 October 2005, Dr Drew Dixon said (pp 30-31 Exhibit "C"): "In summary he was involved in an accident when riding his quad bike on a property at Maroota when he collided with a tree sustaining a head injury with loss of consciousness and a frontal laceration with fracture to the left inferior orbital margins and of the left zygomatic arch as well as fractures of the spinous process of C6/7. He had small occipital contusions and had traumatic optic neuropathy of the left eye with loss of vision. He has not been able to return to his work duties due to ongoing pain and stiffness in his lower back where he has aggravated lower lumbar spondylosis as well as persisting headaches which become severe from time to time.
He is totally disabled as he is unable to perform any occupation for which he is suited by education, skill and experience. It is noted that he has had a functional assessment with Work Solutions with reasonable tolerance for sitting and walking but it was noted that he had difficulty performing tasks requiring sustained cervical posture tasks such as stooping. …
He does not appear fit to do sustained manual work and remains permanently incapacitated."
25 The plaintiff has been extensively reviewed by work rehabilitation specialists including specialists retained by the workers compensation insurer, Commonwealth Rehabilitation Service. Mr Vincent De Giovanni, a Forensic Vocational Psychologist, of MECA Consultants, provided several reports. In his report of 8 September 2000, he noted that there was no cognitive impairment preventing the plaintiff's return to the duties which he had undertaken prior to the accident. However he said (pp 11-12 Exhibit "C"): "In general terms, the physical restrictions associated with Mr Camilleri's injuries have already been determined as being significant enough to prevent him from carrying out the duties of a motor mechanic's assistant and an orchard worker (see CRS Functional Capacity Evaluation report dated 15/1/99). In my opinion Mr Camilleri is fitted for work as either a truck driver or forklift operator on the basis of training and experience. However his loss of vision and neck restrictions indicate he is not unconditionally physically fit for such work in all situations.
While I believe other jobs can be identified for which Mr Camilleri is fitted by education given that there are still many jobs available that do not require any minimum level of formal education, he is not fit for those jobs by reason of lack of training and experience. …
Objective psychological testing indicates that Mr Camilleri has the capacity to enter into physically appropriate employment at his level of education, with only on-the-job training. Professional intervention by way of rehabilitation would be necessary, and in my opinion Mr Camilleri is not totally unemployable if new fields of employment are considered. These may not necessarily be within his family business as it may not have the necessary diversity to accommodate his needs, unless it were a job that had been specifically modified for him. Under [these] circumstances the job would fail to meet the criteria of being commonly available or occurring. …
Rehabilitation, if it covers the gamut of both physical and vocational rehabilitation, may provide a more positive outcome, although one could not guarantee that it would equip Mr Camilleri for work within his family company. The inference here of course is that he could be rehabilitated to be employable in positions outside of his family company. In such a case he would face the difficulties of prejudice by employers, to age and disability status. While one cannot be categorical in saying no-one would ever employ Mr Camilleri, it becomes less likely with increasing age and when compounded by physical injuries and lack of specialised skills in fields of high demand."
26 In his supplementary report of 8 September 2000, Mr De Giovanni said (pp 15-16 Exhibit "C"): "Based on education alone, Mr Camilleri can perform only those jobs that require no minimum level of education. The bulk of these comprise lesser skilled labouring or heavy manual occupations. At this time (and indefinitely) they are contra-indicated by his physical capacities as medically and paramedically determined.
Based on training alone, Mr Camilleri has had no formal training and has no qualifications and is therefore not suited or eligible for any occupation requiring a qualification to substantiate completion of a formal training course. He has had informal training (although this is not specified as a criteria), however this has been in aspects of agricultural labouring and semi-skilled mechanical work which have, again, been medically and paramedically assessed as unsuitable in light of his physical injuries.
Mr Camilleri's work experience is within the same areas he has acquired informal training, and the conclusions in respect of that training apply here also. The only exceptions are truck driving and forklift operating in which he has experience and the necessary licensing. However here again his physical ability to perform either of these occupations remains questionable at best. While he is cognitively capable based on my objective assessment, medical and paramedical opinion does not support either option.
Mr Camilleri's position appears clear and unequivocal when considered against the separate criteria. However if [by] "suited by education" one also means the capacity to acquire appropriate work skills through training; or experience; or to acquire experience following training not currently held, then I believe Mr Camilleri has retained some capacity to acquire a limited range of skills through informal retraining and experience. However these skills would not be related to, or available from within, his family businesses; and his eventual success in actually finding his work while not impossible, would be marginal at best in view of his age and his disability status."
27 The CRS examined the plaintiff and provided a Functional Capacity Evaluation Report (pp 7-10 Exhibit "4") as at 15 January 1999, concluding that he was unable to return to his previous duties "at this stage", recommending various steps be taken including the taking of anti-inflammatory medication, which it noted he was not taking: p 10.
28 The insurer's medical evidence consisted of three reports of Professor Robert Oakeshott, three reports of Work Solutions (rehabilitation specialists), and a report of Dr Frank Machart of 8 December 2005: see Exhibit "4".
29 Dr Machart was of the view that cervical spine injury of the type suffered "is not likely to cause disabling symptoms such as headaches, dizziness or significant or constant neck pain 8 years after injury": p 44 Exhibit "4". In his view, in respect of bony injury to the cervical spine the plaintiff "would have recovered sufficiently to return to normal work unrestricted": p 45 Exhibit "4".
30 Professor Oakeshott notes that the plaintiff did on examination "demonstrate reduced movements of his neck" and does "complain of dizziness when bending downward or getting up from a sitting or lying position". Professor Oakeshott considered the dizziness to be related to blood pressure and not to any injury arising out of the accident. He noted that the restricted neck movements were "not associated with any significant discomfort": p 53 Exhibit "4". He further noted that: "There are degenerative changes in his neck and lumbar spine which I consider are age related and not injury related which could cause intermittent discomfort in either his neck or lower back."
Following my clinical examination at today's consultation, I consider that if he was strongly motivated to return to work then he would be able to return to the work that he was performing prior to the above accident.
I believe that he could ride his quad bike and could attend to the irrigation system in the orchard. I believe that he could maintain such an irrigation system.
It is to be noted that he has returned to driving. In view of the degenerative changes in his neck and back, he should maintain a reasonable level of physical fitness and back strength and flexibility with appropriate exercises and diet if he is to avoid putting on too much weight.
Providing he adheres to the usual Occupation Health & Safety Guidelines for the type of work that he has been doing, I believe that [he] would be able to do most of his pre-accident duties without any significant difficulties.
There is no medical reason why he should not be able to perform at this level. However, his performance, I consider, will be largely related to his motivation to perform this level of work."
31 Professor Oakeshott noted that the plaintiff was not taking any medications in relation to injuries suffered in the accident, did not require further investigations, did not require surgical consideration nor did he anticipate any significant deterioration or improvement of the injuries (p 55 Exhibit "4"). He then said: "If motivated, I believe that he could work full time. There is no medical reason why he should not return to full-time work, as discussed above.
Apart from the above, I could not identify any medical reason why he should not return to appropriate work, as discussed above.
In other words, I consider that he is not totally disabled from work."
32 Work Solutions' Ms Nicole Tallon reported (pp 39-40 Exhibit "4"): " VOCATIONAL OPTIONS
The assessment results have been analysed and Mr Camilleri was counselled with regard to the following employment options. - · Supervisor - machinery/vehicle maintenance and repair
· Employment opportunities - Mr Camilleri is the director with his 2 brothers of his family farm operating in Stock feed supplies (factory) and orchard
POTENTIAL BARRIERS TO A RETURN TO WORK · Mr Camilleri has a number of significant injuries and physical restrictions, which would impede him from fulfilling all of his pre injury duties. However Mr Camilleri has the capacity as director of his company to accommodate his restrictions in a return to work program.
· Mr Camilleri does not have the physical capacity to operate machinery safely when considering his reported symptoms of vertigo and loss of eye sight to his left eye as well as his reported headaches which have the potential to reduce the required concentration necessary to fulfil this position safely.
CONCLUSION/RECOMMENDATIONS · Mr Camilleri did not present as motivated towards returning to work. When directly asked if he wanted to return to work in his company he stated that he does not have the "confidence" to return to work. It is anticipated that Mr Camilleri has the capacity to fulfil certain duties of his pre-injury position as well as other potential duties within the operation and management of a farm comparable to that of his family farm. It is recommended that an updated workplace assessment be conducted. Commonwealth Rehabilitation Services (CRS) conducted a workplace assessment on the 21st May 1999 restricting this assessment to his pre-injury employment duties only. An updated assessment could be conducted to assess any potential duties compatible with his restrictions within the entire organisation given his director status within the company.
· With regards to consistency regarding Mr Camilleri's pre-injury employment, he reported filling a number of positions however his predominant responsibility was to manage the maintenance of transport vehicles and machinery which included transporting stock as required.
· Mr Camilleri may be restricted to part time work, which will be assessed at the time of the functional assessment.
When considering Mr Camilleri's age, aptitude, transferable skills and physical restrictions it may be concluded that Mr Camilleri would have difficulty finding work in the open Labour market. However, given his position and part ownership of his farming business it can be concluded that Mr Camilleri could return to work in some capacity if motivated. It is recommended that a full workplace assessment, other than just his pre-injury position be carried out. Mr Camilleri may require support and functional education relating to potential duties, which would be identified through this workplace assessment."
33 It would appear therefore on the basis of the various medical reports that there are significant questions concerning the veracity of the plaintiff's reporting: (1) Is he really suffering from significant restriction in neck movement?
(2) Is restriction in neck movement accompanied by pain?
(4) Does he really wish to return to work even if able to do so?
(5) What was the real nature of the main work that he was performing prior to the accident and to what extent was it physical and to what extent managerial?
(6) Was he exaggerating his physical symptoms when seeing Professor Oakeshott? (See p 52 Exhibit "4".)
(7) Is the absence of a report from Dr Percy, his treating general practitioner, indicative of a lack of foundation for the plaintiff's claims?
34 None of the authors of the medical and vocational reports were required to attend for cross-examination. Neither of the defendant's doctors were called to comment on the evidence led from the plaintiff about his condition.
35 Mr Hale made the point that there was no challenge made to the credibility of the plaintiff during cross-examination and he submitted that it was not open to the defendant to now make challenges to the veracity of the plaintiff. There was a challenge to the plaintiff's evidence on the question of how much work he could do per week (T5 18/7/06 and see also T7-8 18/7/06), and how much he could move his neck (T7 18/7/06 and T14), but there was no clear challenge to the witness that something he had said previously or in court was false or exaggerated. Mr Hale relied on the rule in Browne v Dunn (1893) 6 R 67, which was explained by Hunt J (as he then was) in Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1.
36 The defendant insurer (see paras 5-8 of its submissions in reply) contends that the absence of any direct assertion that the plaintiff or Mrs Camilleri were not telling the truth does not permit the Court to disregard the medical evidence: "6 … It is the Defendant's case that the Plaintiff and Mrs Camilleri, to a certain extent, exaggerated the level of disability.
7 The Defendant traversed this by suggesting that the Plaintiff's restriction of movement as early as 1998 was significantly less than he complained in the witness box, relying on medical reports which suggest a lesser restriction of movement and putting propositions to the Plaintiff in respect of activities which would seem to be inconsistent with the Plaintiff's evidence, i.e. loading and unloading the back of a car with boxes of meat pies on a fortnightly basis, driving the ride on mower every week for 3 hours, doing the gardening, sweeping, etc. The Defendant is not in a position to know when, if at all, or how often the Plaintiff might leave concerts early or lie down inside his own home. These are matters which a Defendant can never directly attack as the Defendant was not there. The Defendant can only put the general proposition which it seeks to assert, i.e. that there is a degree of exaggeration in the level of disability, and back it up with examples. The Court would then assess all of the evidence, including the medical evidence.
8 The Plaintiff's oral submission that this is not a case about medical evidence is surprising. The Plaintiff bears the onus of establish that, because of injury or illness, he is disabled within the definition. He can only establish the causal nexus between the injury and the level of disability through medical evidence."
37 At 22-23 of Allied Pastoral, Hunt J said: "A challenge made to the evidence of a witness in the course of a final address may take place in various ways. The opposing party may ask the tribunal of fact simply to disbelieve that evidence; if he has led evidence in direct contradiction of the evidence of that witness, he may then ask the tribunal of fact to accept the evidence of his own witnesses in preference to that of the witness in question; or he may point to other evidence in the case, led by either party, which tends either to contradict the evidence of that witness or to destroy his credit. There are many reasons why it should be made clear, prior to final addresses and by way of cross examination or otherwise, not only that the evidence of the witness is to be challenged but also how it is to be challenged. Firstly, it gives the witness the opportunity to deny the challenge on oath, to show his mettle under attack (so to speak), although this may often be of little value. Secondly, and far more significantly, it gives the party calling the witness the opportunity to call corroborative evidence which in the absence of such a challenge is unlikely to have been called. Thirdly, it gives the witness the opportunity both to explain or to qualify his own evidence in the light of the contradiction of which warning has been given and also, if he can, to explain or to qualify the other evidence upon which the challenge is to be based. It is this third reason for the application of the first rule in or aspect of Browne v Dunn which is applicable in the present case."
38 Mr Cavanagh never put to the plaintiff that what he had told the doctors examining him about his physical problems was exaggerated or false in any respect. Nor did he put to the plaintiff that what he now said was, in the light of what he had previously told doctors and the hospital staff, false or exaggerated. To the extent that the plaintiff made admissions, for example that he did collect and deliver pies three hours a week, that is evidence on which the insurer is entitled to rely, but the question is whether the defendant's submissions can go further than that.
39 Professor Oakeshott's report notes a different presentation at the commencement of the interview and that at the "formal part" of the examination. He finds degenerative changes in the plaintiff's neck and lumbar spine which he considers are age- and not injury-related, and which "could cause intermittent discomfort in either his neck or lower back", but he regards lack of motivation as the reason for the plaintiff's failure to return to work: p 54 Exhibit "4". He expresses the view that the plaintiff "could ride his quad bike and could attend to the irrigation system in the orchard. I believe he could maintain such an irrigation system".
40 The introduction to the report does not describe any detail of maintaining the irrigation system, so it is not clear precisely what physical activities Professor Oakeshott thinks are involved, nor is it clear which of the pre-accident duties he thinks the plaintiff would not be able to perform when he says "I believe that [he] would be able to do most of his pre-accident duties without any significant difficulties".
41 It is clear that Professor Oakeshott regarded the problems as motivational, and the very limited attempt by the plaintiff to return to work gives some support to that conclusion. An expert report can be couched in such terms as to make clear to a plaintiff that his assertions of injury, illness and incapacity are challenged, and the basis for that challenge is made clear so that the plaintiff is on notice of the attack made of his or her position, there may be no requirement for cross examination to ensure compliance with the rule in Browne v Dunn (see "Cross on Evidence" at [17445], Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 224-5; Porter v OAMPS Ltd (2004) 207 ALR 635; [2004] FMCA 272 at [12]), which after all is a rule of fairness to enable the witness to know what the attack is, and on what it is based: see Allied Pastoral at 16D-E.
42 The lack of specificity that I have identified in Professor Oakeshott's report leaves uncertainty: is Professor Oakeshott saying that the plaintiff can bend and squat in the course of attending to irrigation duties; is he saying the plaintiff can drive a forklift without difficulties; is he saying the plaintiff can drive a semi trailer and can lift heavy bags, tyres and truck parts? When the plaintiff gives evidence that he cannot do these things and also evidence that undermines the proposition that he is not unmotivated, is the defendant saying that that evidence should not be accepted and if so, on what basis? These uncertainties I think highlight the need for cross examination to ensure compliance with the rule in Browne v Dunn. In any event, the plaintiff appeared to me to be straightforward and honest in giving his evidence. I do not think he was shown to have said anything that was false either to this Court or on some earlier occasion. I therefore proceed on the basis that the plaintiff's evidence, unless it is demonstrably erroneous by reference to some other item of evidence, ought be accepted. I accept the plaintiff's sworn unchallenged testimony as to his limitations, which coupled with the reports of Dr Darveniza, Associate Professor Fearnside and to some extent Dr Dixon, establishes on the balance of probabilities that the plaintiff has considerable restriction in the movement of his neck brought about by the accident on 30 December 1997, which impacts on his ability to perform the menial tasks in which he was engaged prior to the accident. Mr Hale also argued that I should pay no regard to Professor Oakeshott's report on the basis that it infringed the requirements of an expert report (see Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 and ASIC v Rich (2005) 218 ALR 764; [2005] NSWCA 152 at 793-4) because it did not make clear the basis of its conclusions. I think that the matters to which I have just referred, even if they do not lead to rejection of Professor Oakeshott's report, do restrict the weight of it. Dr Machart's report which offers a view of what is to be expected following injuries of the kind undoubtedly suffered, is contradicted by the plaintiff's experts and whilst it may provide a basis for doubting long term limitations it does not overcome the plaintiff's evidence if his evidence his accepted.
43 I do not agree with Mr Cavanagh's submission (DS36) that the findings of Dr Machart and Professor Oakeshott are consistent with those of Associate Professor Fearnside. Nor are they consistent with those of Dr Darveniza. I agree that Dr Dixon's assertion that the plaintiff was asserting inability to return to work due to pain in the lower back is somewhat at odds with other reports, but Dr Dixon did not limit himself to that: see passage set out at [24] above.
44 The plaintiff was reported by Ms Tallon as having told her that his pre-injury activities were (p 36 Exhibit "4"): "Mr Camilleri reported working on his family farm/orchard since the age of 15 years. Mr Camilleri held labouring positions in market gardening, orchard and stock feed. He held the position responsible for truck and machinery operation, maintenance and repair for the majority of his working life. This included ordering parts and working on machinery and vehicles within the business. Mr Camilleri was also responsible for ensuring the safety standards and registration requirements were met for all machinery and vehicles within the company."
45 Ms Tallon noted (p 37 Exhibit "4"): " TRANSFERABLE SKILLS · Mr Camilleri has restricted transferable skills having worked predominantly in a labouring capacity on his family's farm/orchard. · Mr Camilleri has mechanical skills. He has no formal qualifications in this area. Mr Camilleri has extensive experience in maintaining and repairing the company's trucks and machinery. · Mr Camilleri has extensive orchard, stock feed and market gardening experience and knowledge. · Mr Camilleri has ordering experience having been responsible for ordering parts for the machinery and trucks. · Mr Camilleri has supervisory skills and practical "paper work" experience ensuring safety standards and registration of machinery and vehicles are maintained."
46 The application for cover contained the following questions and answers: " A. Principal occupation
F. Please describe the specific duties of your occupation ( what you do day-to-day )
Picking and packing tomatoes or peaches, delivery of produce to market also delivery of meal to various clients.
47 The insurance schedule indicated that benefit period for injury was "Life-time". The policy contained relevantly the following provisions: "2. If the person insured is totally disabled, we will pay you the monthly benefit. The person insured is totally disabled if:
during the first 2 years of total disability, because of an injury or sickness, he or she is unable to perform at least one income producing duty of his or her occupation;
after the first 2 years of total disability, because of the same injury or sickness, he or she is unable to perform any occupation for which he or she is reasonably suited by education, training or experience ;
he or she is under the regular care and attendance of a medical practitioner . …
A formula is then set out - it is not relevant. " Meaning of partially disabled
The person insured is partially disabled if, immediately after being totally disabled for at least 14 days, he or she is able to perform one or more duties of his or her occupation, but not all of them, or is working in another occupation, and - because of the disability - the amount the person insured earns for the work he or she does is less than the amount of his or her pre-disability income .
The person insured must be under the regular care and attendance of a medical practitioner ."
"9. We may reduce your benefit by any amount which is paid under legislation for the injury or sickness you are claiming for under this policy.
We will only reduce your benefit in this way if the amount paid under legislation, plus the benefit payable to you under this policy, total more than 75% of the person insured's pre-disability income . If this applies, we will reduce the benefit to an amount which, when added to the amount paid under legislation, equals 75% of the person insured's pre-disability income . However, we won't pay more than the benefit.
Please note, we won't reduce what we pay you by any amount received from other sources, such as other income protection policies, superannuation benefits or from social security.
If the amount under legislation is paid as a lump sum, we will only reduce what we pay you by the portion of the lump sum which relates to income."
"21. You can end this policy at any time. If you cancel it in the first 14 days, you get your money back. If you cancel it after the first 14 days, you don't get your money back."
48 There were some exclusions to cover under the policy (low back and right hip) but significantly no point was taken by the insurer about these exclusions. Nor was any point taken concerning the need for the insured not to be working and to be under the regular care and attendance of a medical practitioner.
49 The words "occupation for which [he] is reasonably suited by education, training or experience" give rise to some difficulties: (1) What is an occupation for which the plaintiff is reasonably suited by education, training or experience?
(3) Does the insurer have to prove that work is available in that occupation nominated?
50 Some of the controversy in this case stems from the fact that the plaintiff was, for many years, a director of (and effectively a partner in) a successful family farming operation that had approximately 30 employees and a large turnover, but his evidence was that he performed largely menial tasks in that operation - tasks which involved bending and quite heavy lifting and which now, if his evidence is accepted, he cannot do. His brother Bill, and then an employed manager, managed the stock feed side of the business. He described himself, in the proposal, as spending 90 percent of his work on menial work (see p 2 Exhibit "A"), although in his claim form he said under "Occupation and duties", "company director/peach farming/stock feeding business. Involves administration and physical work": Exhibit "2". He has, I accept, lost his license to drive heavy vehicles due to loss of vision in one eye and he has problems driving a forklift because of his neck. He has sold his interest in the business and purchased an income producing property. The administration of which he gave evidence was ordering parts for vehicles, and he had some supervisory role in the motor workshop, which had only one other employee, a licensed mechanic.
51 Mr Cavanagh argues that the insurer does not have to prove that work is actually available for the plaintiff. The sole question, he submits, is whether the plaintiff is unable to perform any occupation for which he is suited and the onus of establishing that he is not able, lies upon him.
52 I make some preliminary observations. The clause does not say "unable to perform any occupation" but rather unable to perform "any occupation for which he or she is reasonably suited by education training or experience". A man with no formal education and employed as a station porter who is physically injured is not suited to undertake work as a computer programmer even though physically he could perform that work. A barrister who is unable to work as a barrister due to significant mental impairment is not suited by his education training or experience to work as a station porter even though physically he could work at that job. These are rather obvious examples and there must be grey areas. In this case, one question which has arisen is whether the plaintiff could as a result of his experience in the workshop, work as a manager of a fleet of vehicles. I shall return to that point.
53 Secondly, the fact that he might have been able to work in the family business in a limited role that could not be sustained elsewhere would not establish that he is able to work full-time.
54 Mr Cavanagh emphasised in his submissions that the obligation on the insurer to pay until the plaintiff's death was a very onerous one - this he said was relevant to the very strict requirements for total disability. He argued at one point that the plaintiff might fall within the definition of partial disability (for which there was no claim) but did not meet the requirements for total disability. The plaintiff did not return to paid work so clause 3 under the portion dealing with total disability does not apply.
55 Whilst the definition of total disability may assist in concluding that the definition of partial disability was intended to include part time work, the corollary of that conclusion is that total disability focuses on ability to work full time.
56 A number of cases were relied on by the parties in connection with the interpretation of the "total disability" clause: Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175; Walton v Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Ins Cas 61-620; [2004] NSWSC 616; Constantinides v Du Pont Superannuation Fund Pty Ltd (2002) 68 ALD 664; [2002] FCA 534; Wiley v Board of Trustees, State Public Sector Superannuation Scheme (unreported, SC(Qld), White J, 3/4/1997, BC9701020); Riley v National Mutual Life Association of Australasia Ltd (1986) 4 ANZ Ins Cas 60-684; Szuster v Hest Australia Ltd (2000) 207 LSJS 35; [2000] SADC 2.
57 In Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175, which concerned an employee in a retirement fund, the question of disablement, to be decided by a trustee in its absolute discretion, was whether the employee was "incapacitated for further employment". Hodgson J was of the view that the employment in question was not limited to employment with the particular employer but was limited to full time employment, "and to employment which is reasonably open to the member", ie employment "which the member is capable of undertaking, having regard to his education, experience and training, or at least employment which he could become capable of undertaking with further training which it would be reasonable for him to undertake": at 77,999. The claim form used that form of words and Hodgson J said at 78,000: "I think those words sufficiently indicate that the relevant employment is full-time employment , and that the question is not merely incapacity to engage in some theoretical employment, but actual likelihood of obtaining employment . And the reference to reasonable qualification, I think, appropriately encompasses the requirement that the employment should be something that the member is capable of undertaking." [emphasis added]
58 There are some cases in which the particular wording used to define the condition upon which benefits are to be paid has been treated as not requiring full time occupation: Szuster v Hest Australia Ltd (2000) 207 LSJS 35; [2000] SADC 2; H v First State [2003] NSWIR Comm 293, with Chammas being distinguished.
59 Here the express wording in the policy is the same as the wording Hodgson J read into the disability definition. The clause makes no reference to "part-time" and further occupation is qualified as one "for which he or she is reasonably suited by education or training or experience" and a full time occupation is what the insured is suited for as demonstrated by the proposal. Although the context is different, I think that the approach taken in Chammas to interpretation is relevant to the present problem and I respectfully adopt that approach here.
60 Constantinides v Du Pont Superannuation Fund Pty Ltd (2002) 68 ALD 664; [2002] FCA 534 and Ivkovic v Australian Casualty & Life Ltd (1994) 10 SR (WA) 325 demonstrate that "unable to perform any occupation" is more stringent than "unlikely", and "permanently unable" is more stringent than "unable now and for the foreseeable future": see Cullinane v Mercer Benefit Nominees Ltd [2006] FCAFC 82. I think "unable to perform any occupation" is similar to "incapacitated for further employment" and I accept that the phrase "unable to perform any occupation for which he or she is reasonably suited by education training or experience" imposes a stringent test. I also accept that it is not sufficient for an insured to establish that he is not now capable of performing the tasks that he was performing prior to the accident, but inability to perform those tasks will be of relevance to determining whether he is unable to perform any occupation for which he is suited if those tasks are a normal part of the occupation or one of the occupations for which he is suited.
61 In Alessi v National Mutual Life Association of Australasia Ltd (1982) 2 ANZ Ins Cas 60-481 Wickham J, in considering the claim of a carpenter who had become a roofing carpenter and whether he was wholly prevented "from engaging in his occupation or any similar occupation or any other occupation for which he [was] fitted by his knowledge, training, status and abilities", said: "I do interpret the clause in the policy as applying not merely to any ability to do any kind of work at anything but, in the case of this insured, to relate to him being prevented from carrying on any occupation which his abilities allow him to carry on, having regard to his knowledge, training and status as a carpenter and, specifically, as a roofing carpenter. I would, however, conclude that it would not be sufficient for the plaintiff to show merely that he was not able to carry on as a roofing contractor unless he also showed that he was not able to carry on some kind of occupation generally related to that of a carpenter".
I think this passage points to the need for the alternative occupation to have some relationship with the occupation previously undertaken, or for which the insured had been trained.
62 In Walton v Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Ins Cas 61-620; [2004] NSWSC 616, Einstein J had to consider an income protection life insurance policy, which he noted was in many ways akin to a sickness and accident policy. His Honour set out the relevant principles of construction which I paraphrase and from which I omit the cited authorities and respectfully adopt: (1) The contract of insurance is to be construed as a whole.
(2) There is a presumption capable of rebuttal that the words in the contract of insurance have to be given the ordinary and natural meaning as understood by the ordinary reasonable man.
(3) Ambiguity in the language is usually resolved in accordance with the "contra proferentem" principle but this rule only operates where the words are truly ambiguous.
(4) In the case of all disability policies of insurance the definition of disability must be carefully examined, as they vary greatly in their effect.
63 To these principles can be added the need to give a business-like interpretation to a policy of insurance which "requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure": per Gleeson CJ in McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; [2000] HCA 65 at [22], approved in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [15].
64 In Walton, the relevant definition of total disability required the insured to "be unable to perform the Important Duties of your Occupation". His Honour noted at [19] that the onus of proof rested on the insured, who had to prove that he was unable to perform one or more of the important duties of his occupation and that that led to diminution in income.
65 The written submissions lodged by the insurer highlight limits in the plaintiff's medical evidence and note that "the medical evidence does not support the level of disability complained of by the plaintiff in the witness box" (para 40). The submissions draw attention to the fact that the plaintiff's medical reports focus on the plaintiff's inability to work as a truck mechanic's trade assistant with some unrelated farm hand duties (para 42), and establish that the plaintiff "could not perform sustained heavy physical work". I set out para 46 of the defendant's submissions: "The Plaintiff agreed in cross-examination that he could undertake courier work. He agreed in cross-examination that he could undertake light delivery work, although he sought to limit that to a number of hours per week. The Plaintiff has experience managing a business. The Plaintiff has not sought employment of any type. The restrictions set out in the Plaintiff's medical reports do not suggest that the Plaintiff is unfit for all forms of work. The Plaintiff's medical evidence does not establish that the Plaintiff is unable to perform any occupation for which he is suited. Whilst the Defendant does not submit that he need establish that he is unfit for all forms of work, he bears the onus of establishing that he is unable to undertake any occupation for which he is reasonably suited by education, training or experience. He has not called any medical evidence to establish that he is, has been since 2000 or will be in the future unable to undertake work such as that of a courier driver, delivery work, other driving work (driving light vehicles), managing a workshop, working in a supervisory or administration role in a factory, working in a car park or the wide range of occupations that do not involve heavy lifting or sustained manual effort. As such, the Plaintiff has not established that he is unable to undertake any occupation for which he is reasonably suited by training, education or experience."
66 The oral evidence called on behalf of the plaintiff (other than in respect of courier work to which I shall return) is unhelpful to the defendant's case. The fact that the evidence goes beyond what was reported to doctors, if it be the fact, may be relevant on the issue of credibility and could well have founded extensive cross examination but it did not. The extent to which the plaintiff's role as manager of the workshop was consistent with his working as a mechanic's assistant and performing menial tasks was not the subject of any challenge. Mr Neale, a licensed mechanic employed in the Camilleri Stockfeeds workshop, did agree that the plaintiff was his "boss" but did not give evidence that contradicted the extensive physical aspect of the plaintiff's work. The written submissions do seek to argue the matter as one of onus - and to argue that the plaintiff has not established on the balance of probabilities that he has been unable since 2000 to undertake any occupation or that he will be unable to do so in the future. I accept that the question is not whether he can work in the business in which he used to work but whether he has the capacity to perform in any occupation for which he is reasonably suited.
67 The plaintiff in his evidence in chief stated that much of his work in the workshop was physical work (see T21-T23) and none of that evidence was challenged.
68 The plaintiff's evidence that he is carrying out courier work on a part time unpaid basis certainly points to his ability to do some part time work on a paid basis, but again accepting his evidence, the hours per week are quite limited.
69 There were certainly some aspects of his evidence which seemed potentially to found what appeared to be the defendant's concerns as to the genuineness of the plaintiff's condition, for example the absence of any medication for the headaches and neck pain, the absence of any consultations since 2000 for any treatment, the absence of physiotherapy, the limited attempts to return to work, and the evidence of what is recorded as having been said at Westmead Hospital. I thought that the plaintiff's wife tended to exaggerate the extent of her husband's limitations beyond what the plaintiff himself described, but her evidence was challenged in only a limited fashion. If the plaintiff's evidence is accepted as truthful however then he cannot return to most of the physical work that he was doing before the accident and the non-physical work was quite limited and would not on the balance of probabilities be sufficient to support a full time job. The vocational experts seemed to agree on the difficulty of the plaintiff obtaining full time work on the open labour market in a non-physical role.
70 Taking into account both the medical and vocational reports and the evidence of the plaintiff and other witnesses called on behalf of the plaintiff, which corroborated his evidence, I am not satisfied that the plaintiff could not obtain employment on a part time (albeit limited) basis in some capacity for which he is suited, either assisting in farm management or in relation to management of a fleet workshop or as a courier, but I am satisfied on the balance of probabilities, having regard to his age, his restrictions of movement, inability to bend and lift, his experience of pain, and difficulties consequent on that pain, his inability to drive large trucks, difficulties in driving a forklift and extensive driving of light vehicles and even in inspecting vehicles, that he is unable to work on a full time basis in any occupation for which he is suited as a result of the accident, and I am satisfied that a full time role in a farm management role suitable to his experience, but without the need for extensive physical exertion, is unlikely to be available to him.
71 It follows that in my view the plaintiff has made out his entitlement to be paid under the total disability provisions of the policy.
72 The plaintiff received $200,000 as a lump sum in settlement of workers compensation entitlements. The insurer submits that $105,000 of that should be treated as falling within clause 9 (which I have set out earlier). The insurer accepts that not all of the $200,000 is deductible and has suggested an approach (involving principally a deduction of the amount for pain and suffering: s 66 of the Workers Compensation Act 1987), which approach seemed to me to be reasonable. The plaintiff's position is that since the plaintiff received a lump sum with no apportionment it is not appropriate for this Court to determine what amount should be allowed. Reliance was placed on McLaurin v Federal Commissioner of Taxation (1961) 104 CLR 381 and Allsop v Federal Commissioner of Taxation (1965) 113 CLR 341. I do not accept that these cases assist the plaintiff. In McLaurin at 391, Dixon CJ, Fullager and Kitto JJ expressly stated that it may be appropriate to dissect where some of the claims are not for unliquidated damages. In any event, we are not here concerned with income tax assessment but a clause in a policy which on its face required all payments for injury or sickness to be deducted. In my view, dissection, and in the manner proposed by the insurer, is appropriate.
73 The various meanings of repudiation are discussed in Professor Carter's "Breach of Contract" (2nd ed) [701]-[705], and he adopts the meaning: "A repudiation of obligations occurs when a party to a contract clearly indicates an absence of readiness or willingness to perform contractual obligations if the absence of readiness or willingness satisfies the requirement of seriousness."
74 Anticipatory breach is a species of repudiation, that is, where although time for performance has not yet arrived, the promisor indicates that he will not perform: see Carter, above, [706].
75 Greig and Davis in "The Law of Contract", The Law Book Company Ltd, (1987) at p 1198 describe repudiation thus: "Where one party indicates, by his words or conduct, that he is unable, or is no longer willing, to provide the other with the benefits expected under the contract, it is often said that he has 'repudiated' or 'renounced' his obligations thereunder. But there is no magic in such words. They are merely a convenient means of expressing the notion that a refusal to perform, or a breach committed during the course of performance, is sufficiently serious to give rise to the right to terminate. However, because of the use of such expressions in the latter context, any idea that the words necessarily connote the requirement of an intention on the part of the defaulting party not to continue with performance must be rejected."
76 In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, the purchaser of a property was required to pay the balance of monies within 14 days of notice of registration of a plan of subdivision. The vendor registered a plan and notice was given but the purchaser asserted correctly that the plan registered was not the relevant plan, and treated the failure to lodge the current plan as repudiation, which it purported to accept. The vendor asserted that the purchaser's purported rescission was itself a repudiation, which it purported to accept. The majority held that the parties had abandoned or abrogated the contract before the commencement of proceedings but in the course of judgment the Court rejected the proposition that the vendor's assertion of right to payment was repudiatory conduct, saying (at 431-3): "No doubt there are cases in which a party, by insisting on an incorrect interpretation of a contract, evinces an intention that he will not perform the contract according to its terms. But there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognize his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.
… on the evidence this court would not be justified in finding that the appellant acted otherwise than in accordance with a bona fide belief as to the correctness of the interpretation which it sought to place upon the contract. Consequently, it is a case of a bona fide dispute as to the true construction of a contract expressed in terms which are by no means clear (see Asprey JA in Satellite Estate Pty Ltd v Jaquet (1968) 71 SR (NSW) 126 at 149). In these circumstances the court is not justified in drawing an inference that the appellant intended not to perform the contract according to its terms or that it repudiated the contract."
77 In Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, Latham CJ held that Luna Park was entitled to terminate the contract by reason of Tramways' breaches but also because of the fact that Tramways was prepared to continue the performance of the contract only upon the basis of its construction of the contract (a construction favoured by the majority of the Court of Appeal but not by the majority of the High Court). Tramways indicated that the contract would not in the future be performed according to its true construction and that justified "the inference that breaches such as those which had already been committed would be committed in the future", so that it "must be regarded as renouncing the contract which it in fact made, even though it was contended by the plaintiff that the contract would be properly performed": at 304-5. McTiernan J agreed with this approach. Rich J agreed that Tramways was in breach of its obligations and was not entitled to recover. Dixon J (as he then was) took the same view on construction as Jordan CJ and Davidson J in the Court of Appeal. In Associated Newspapers Ltd v Bancks (1951) 83 CLR 322, the High Court (Dixon, Williams, Webb, Fullagar and Kitto JJ) adopted a similar approach: see at 339-40.
78 In Shevill v Builders Licensing Board (1982) 149 CLR 620, it was said per Gibb CJ at 634: "a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract or he shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way", cited with approval in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623.
79 There are a number of cases dealing with the question of repudiation in an insurance context and two of those in the context of sickness and accident policies. In the latter category are Till v National Mutual Life Association of Australasia Ltd (2005) 13 ANZ Ins Cas 61-640; [2004] ACTCA 26 and Green v AMP Life Ltd (2005) 13 ANZ Ins Cas 90-124; [2005] NSWSC 370. Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182 (a fire policy) was referred to in Green, but is also a case on which the insurer relies. The plaintiff relies on Taylor v J Thomas & Son (1983) 2 ANZ Ins Cas 60-524. There are other cases dealing with repudiation in the insurance context to which no specific reference was made by either party in submissions: Commercial Union Insurance Co Ltd v Willetts Radio & TV Ltd (1985) 3 ANZ Ins Cas 60-677; Broadlands Properties Limited v Guardian Assurance Company Limited (1984) 3 ANZ Ins Cas 60-552; Johnson v Australian Casualty Co Ltd (1992) 7 ANZ Ins Cas 61-109; Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88; Tropicus Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office (1998) 148 FLR 441; 10 ANZ Ins Cas 61-412; Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832 at 75,191; Harrison v Zurich Australian Insurance Ltd (BC9603264, NSWSC, Rolfe J, 30/7/1996); CIC Insurance Ltd v Bankstown Football Club Ltd (unreported, NSWSC, Cole J, 16/09/93); Kennedy v Queensland Insurance Co (1924) 24 SR (NSW) 542.
80 In Till v National Mutual Life Association of Australasia Ltd (2005) 13 ANZ Ins Cas 61-640; [2004] ACTCA 26, the Court of Appeal of the Supreme Court of the ACT considered an income protection policy. The insured, a self-employed electrician, was found by the trial judge to be disabled, but he held that the obligation of the insurer ceased when the insured's long term contract with an air conditioning contractor came to an end. He also held that the insurer had not repudiated the contract. The Court of Appeal upheld the appeal but agreed with the trial judge that there had been no repudiation. The Court referred to Shevill v Builders Licensing Board (1982) 149 CLR 620, DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 and Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Limited (receiver & manager appointed) (1997) 42 NSWLR 462, and said that although the insurer was in error in ceasing to make payments, the error fell far short of what is needed to establish repudiation, citing the words of Lord Wright in Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60: "[29] … 'repudiation of a contract is a serious matter, not to be lightly found or inferred … mere honest misapprehension, especially if open to correction, will not justify a charge of repudiation.'"
The Court in Till also said: [25] … Because the insurer took a view of medical reports that a court may regard as erroneous, and so terminated payments, does not of itself demonstrate a repudiation. …
[29] We are of the view that the respondent insurer was in error in ceasing to make payments, but that this error falls well short of what is needed to establish repudiation. …
81 In Green v AMP Life Ltd (2005) 13 ANZ Ins Cas 90-124; [2005] NSWSC 370, Campbell J held that the insurer was entitled to refuse to make payments to an insured suffering from a mental condition because of an amendment to the policy. Campbell J also held that even if the policy did require payment, the plaintiff could not claim damages for loss of future payments because even if there had been a repudiation of the contract by the insurer it had not been accepted by the insured. Campbell J said: "[138] At common law, if a party to a contract repudiates it, the other party can accept the repudiation and terminate future performance of the contract. That party is then entitled to damages. Those damages are assessed on the basis that they are the sum of money which will, so far as money can, put the innocent party in the same position as he would have been in if the contract had been performed (subject to any questions of remoteness of damage). This is assessed as the present value of the net benefits which would have accrued under the contract to that party, if the contract had been performed, and which are not too remote.
[139] Damages assessed in this way can sometimes be recovered by an insured from an insurer, if the insurer repudiates the contract of insurance, and the insured accepts that repudiation."
82 His Honour made reference to exposition of principle by Underwood J in Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182 at 78,039-40 and said: "[140] Any contractual obligation which AMP has in the present case either to, or concerning, the plaintiff is to make periodical payments while he remains Totally Disabled. For so long as the contract remains on foot, that will continue to be AMP's obligation. The only way in which the plaintiff would be entitled to a lump sum for the present value of net future benefits under the contract is if the plaintiff has, and has exercised, a right to terminate the contract for repudiation ." [emphasis added]
83 Campbell J noted the need for acceptance of a repudiation in clear and unequivocal terms making reference inter alia to Taylor v J Thomas & Son (1983) 2 ANZ Ins Cas 60-524 (see below). His Honour also said: "[151] … The mere fact that an insurer denies a claim for indemnity under a policy is not in itself enough to amount to a repudiation of a contract of insurance: Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832 at 75,191; DTR Nominees Pty Ltd v Mona Homes Pty Ltd & Anor (1978) 138 CLR 423 at 432; Broadlands Properties Ltd v Guardian Assurance Co Ltd (1984) 3 ANZ Ins Cas 60-552 at 78,319-78,322. …"
84 Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins Cas 61-182 involved a fire policy and the insurer refused to pay on the basis of material non-disclosure and breach of conditions. Underwood J, having referred to the need for acceptance of the repudiation in clear unequivocal terms, said: "If an insured elects to accept the insurer's wrongful repudiation, the damages are measured in accordance with the principles laid down in Hadley v Baxendale [(1854) 9 Exch 341]. If an insured does not accept the repudiation the contract remains on foot entitling him or her to recover only in accordance with its terms. See Taylor v J Thomas and Son; VACC Insurance Co Ltd (3rd Party) (supra); Shelbourne and Co v Law Investment and Insurance Corp Ltd [1898] 2 QB 626; Maurice v Goldsbrough Mort and Co Ltd [1939] AC 452. The nature of a claim against an insurer who fails to pay but does not repudiate the policy is discussed in F and K Jabbour v Custodian of Israeli Absentee Property [1954] 1 WLR 139 at 143 et seq. Pearson J examined a large number of authorities and concluded that such a claim is one for damages but that the expression has a different meaning in claims for a failure to indemnify under a policy of insurance, for the only wrong has been a failure to pay a sum due under a contract. The method of calculating this sum is usually provided for in the contract itself. This decision is referred to by the editor of McGregor on Damages (15th edn) at 1, where it is said that actions (inter alia) to recover money under insurance policies are to be distinguished from claims for damages for breach of contract and are outside the scope of the book."
85 In Tropicus Orchids Flowers and Foliage Pty Ltd v Territory Insurance Office (1998) 148 FLR 441; 10 ANZ Ins Cas 61-412, Mildren J cited with approval the following passage from Sutton, "Insurance Law In Australia", 2nd ed (1991), The Law Book Company Ltd, pp 866-7: "15.107. Where an insurer is willing to perform the contract of insurance according to its terms but nevertheless asserts a view of the contract which turns out to be wrong, although he believed that view to be correct, there is no intention not to perform the contract and no repudiation of the insurer's obligations. The claim by the assured is a claim for indemnity under the policy and the insurer in denying liability relies on the terms of the policy to support that denial. In no sense does he repudiate the contract of insurance. He may repudiate liability under the contract but he does not repudiate the contract itself. But if the insurer goes further than this and manifests "a definite resolve or decision against doing in the future what the contract required" so as to amount to a direct negation of the undertaking contained in the policy, there is a repudiation of the contract and the assured has the option of accepting that repudiation and suing for damages for breach of contract, or of ignoring the repudiation, affirming the policy and suing upon it.
If he adopts the former course he is not bound by the terms of the policy and his measure of damages including consequential loss, will be governed by the rule in Hadley v Baxendale as to remoteness of damage. If he adopts the latter course, the terms of the policy continue to apply, the insurer's indemnity is in respect of loss of or damage to the property insured, together with any additional benefits provided for in the policy, and any consequential loss outside those benefits will not be recoverable."
86 In Tropicus, there was no assertion of repudiation and acceptance of repudiation (p 37), so that case is not otherwise in point.
87 In Taylor v J Thomas & Son (1983) 2 ANZ Ins Cas 60-524, the trial judge held that the insured was entitled to treat the insurer's refusal to pay on a public liability claim as a repudiation of the policy. The Court of Appeal (McPherson J, with whom Kelly and Williams JJ concurred) rejected the appeal. The circumstances were that Taylor had had a car accident. His insurer, AAMI, arranged for repairs by Thomas. After repairs were complete but before delivery, a fire broke out at Thomas' premises and Taylor's car was destroyed. The cost of repairs was $1550 and the vehicle prior to the fire was worth $2545. At the hearing, Taylor consented to judgment in the amount of $2545 plus $1164.42 interest and costs. VACC, Thomas' insurer, had been joined to the action following its refusal to agree to indemnify Thomas. VACC had continuously, even before the trial, taken a position that it was not liable for more than $995 - the difference between the value of the repaired vehicle and the unrepaired vehicle. That approach was erroneous, it was held by the trial judge. Thomas was required by the terms of the policy to notify VACC promptly of the commencement of proceedings by a third party against Thomas and it had not done so. Thomas asserted in answer waiver of the notice requirement and repudiation of the policy.
88 In relation to the repudiation, VACC argued that this was not open to Thomas because Thomas' third party notice joining VACC was in a form that was, McPherson J thought, "consistent only with an affirmation of the policy notwithstanding [VACC's] earlier repudiation thereof".
89 McPherson J pointed out that it was open to a party to rely on pleadings to demonstrate an election to accept the repudiation, but that in such circumstances the innocent parties must make it clear by appropriate pleading that the election has been made, and that if there is an alternative claim for monies due under the policy, as is permitted by modern pleadings, that it is "pursued only as an alternative to the allegation of repudiation in the event that the latter is unsuccessful". He held that the pleading fell far short of that unambiguous indication of election to accept repudiation.
90 McPherson J however held that since VACC, even after judgment was given against Thomas in the amount of $2545 plus $1164.42 interest plus costs, continued with its assertion that it was only liable for $995, and entry of judgment was the very event which gave rise to VACC's liability to indemnify, its refusal to pay after that date constituted a continued repudiation which gave Thomas a new opportunity to elect to accept the repudiation and determine the policy. Thomas, by seeking leave to amend the third party notice, did act to accept the repudiation and treat the contract as at an end. McPherson J held that the termination of the policy precluded VACC relying on breach of the requirement to give prompt notice of the joinder of Thomas.
91 McPherson J pointed out that until the Court imposed liability on Thomas (by judgment or by conduct), VACC had no obligation under the policy to pay. The earlier indications that it would not pay the full amount demanded by Taylor (no doubt AAMI exercising a right of subrogation but also claiming for any uninsured loss on behalf of Taylor too) were, in effect, anticipatory breaches. VACC's refusal to pay following entry of judgment was capable of being treated as the act of repudiation. Secondly, VACC's refusal to pay, although based on a particular case, was antithetical to the policy because the policy required it to indemnify Thomas in respect of all sums that Thomas became legally liable to pay "for compensation in respect of damage to property". As McPherson J pointed out, the conclusion of VACC's lawyers that Dean v J Thomas & Son [1981] Qd R 62; (1980) 1 ANZ Ins Cas 60-402 was irrelevant to the liability of VACC to insure Thomas under the policy issued by it, noting (at 77,994): "To say that the defendant was entitled to less was to deny the indemnity which the third party had undertaken to provide."
92 In Judd v Suncorp Insurance & Finance (1987) 5 ANZ Ins Cas 60-832 (which involved a claim on a house and contents policy), Carter J rejected a claim for damages saying at 75,191: "It was submitted that since the defendant had refused to meet the claim of the plaintiffs, it was in breach of the contract of insurance and the plaintiffs were entitled to damages. Rather, the claim by the plaintiffs was, in my view, one to be indemnified under the policy and the defendant denied its liability to indemnify the plaintiff by relying on the very terms of the policy and it asserted facts which formed the basis for that denial. In no sense could it be suggested that the defendant repudiated the contract of insurance. On the contrary, the defendant expressly relied upon the terms of the policy in support of its denial that it was liable to indemnify the plaintiff. In short the claim was a claim for indemnity under the policy."
93 I think that three uncontroversial propositions can be derived from these cases: (1) If the insurer's conduct does constitute repudiation the insured must accept that conduct as repudiatory conduct if he wishes to rely on the conduct and bring the contract to an end.
(2) The insured may accept repudiatory conduct by its pleadings but must do so in unambiguous and clear terms.
(3) The insured can plead as an alternative to repudiation a claim for monies due under the policy (against the possibility that the court will not find that the insurer's conduct amounted to repudiation).
94 What is more difficult is to determine what conduct of an insurer will amount to repudiation.
95 Taylor v J Thomas & Son (1983) 2 ANZ Ins Cas 60-524 is authority for the proposition that refusal to pay a claim based on an erroneous view of the law can constitute repudiation. I have referred to the fact that McPherson J regarded the case upon which reliance had been placed by VACC as irrelevant to the indemnity provided under the policy, and the insurer's position as antithetical to the policy.
96 The plaintiff's submissions sought to distinguish Till on the basis that in that case the insurer had on the basis of uncontested medical opinion applied an erroneous construction of its obligations under the policy and to argue that it was based on its own facts. I do not see the absence of conflict on the medical evidence as making Till less applicable here, and I think that the case indicates an approach which is of wider application than the precise facts of that case. I note too that Taylor was cited in Till with approval on another issue and could not have been seen as inconsistent with the court's approach on this aspect.
97 In my view, the approach taken in Till is applicable here. Whilst I am not bound as a matter of strict precedent by that decision, it was not suggested by Mr Hale that it was wrongly decided, and not only am I not inclined to think that it is clearly wrong, but, with respect I think it is correct.
98 In saying that, I recognise that the question of repudiation in the context of insurance policies is not without difficulty and different results may be produced depending on the nature of the insurer's assertions (eg an assertion that the policy was induced by fraud, misrepresentation or non-disclosure (see for example Johnson v Australian Casualty Co Ltd (1992) 7 ANZ Ins Cas 61-109), an assertion that the policy was never effected because for example it is claimed that the agent had no authority, an assertion that conditions of the policy were not complied with, reliance on an exclusion clause), but: (1) There is authority at a high level for a distinction between repudiation of liability under the policy and repudiation of the policy itself: Kennedy v Queensland Insurance Co (1924) 24 SR (NSW) 542, in which Street ACJ (as he then was), with whom Gordon J concurred, said: "I think that the present case is also distinguishable from Juriedini's Case . By denying the existence of any liability for the loss sustained the company precludes itself from relying on a reference to arbitration as a condition precedent to the plaintiff's right of action, but it is not repudiating its obligation in the sense that it is disputing the existence of any binding contract at all. It is not avoiding the policy. In resisting the claim it affirms it, and relies upon the non-compliance with its conditions by the plaintiff as a ground for relieving itself from liability. That is merely a repudiation of liability under the contract, and not a repudiation of the contract itself. In denying liability on the ground of non-compliance with the conditions it is merely rejecting the claim, and in those circumstances I can see nothing to prevent it from relying on the stipulation that an action must be brought within three months after the rejection." This seems to involve a notion of "repudiation" that is different to the general approach to repudiation of contract having as its consequence, not the termination of the contract of insurance, but the inability of the insurer to rely on a condition or requirement in relation to that claim. See also the passage in the statement of Stephen J in Distillers Co (Bio-Chemicals) (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 25, in which his Honour cited authority for the proposition that "the insurer's repudiation of liability to indemnify prevents it from relying, by way of defence to the insured's action against it, upon the insured's prudent settlement of the third party's claim against him". The judgment of Halse-Rogers J in Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88 seems to indicate a different approach, but see the judgment of Davidson J which refers to Kennedy with approval. (2) In CIC Insurance Ltd v Bankstown Football Club Ltd (unreported, NSWSC, Cole J, 16/09/93), a fire policy case, Cole J said: "The purported exercise of a contractual power does not normally constitute repudiatory conduct. That is so even if it be found that the factual basis for the purported exercise was not present. The reason why that is so is because the bona fide but wrongful exercise of the power conferred by the contract does not 'evince an intention that the party will not perform the contract according to its terms' ( DTR Nominees Pty Ltd v Mona Homes Pty Ltd and Anor (1978) 138 CLR 442 at 432; Braidottie v Queensland City Properties Ltd (1991) 65 ALJR 387 at 397)." Although the case went on appeal to the Court of Appeal and then to the High Court, Cole J's decision on the question of repudiation was not the subject of appeal, and although Powell JA did not agree with Cole J's conclusion (notwithstanding the absence of appeal) the basis for disagreement was explained by Rolfe J in Harrison v Zurich Australian Insurance Ltd (BC9603264, NSWSC, Rolfe J, 30/7/1996). (3) In Harrison v Zurich at 21-22, having made reference to Progressive Mailing House and Shevill , Rolfe J said: "In order for there to be a repudiation it must be established that the insurer is disputing the existence of any binding contract at all, rather than liability under the contract and on a basis for which the contract provides. The resistance of a claim and the bases for a claim, in circumstances where there is reliance on non-compliance with policy conditions as a ground for relieving the insurer from liability, is not a denial of the contract, but an affirmation of it. Accordingly, the repudiation, in those circumstances, is of the liability under the contract and not of the contract itself: Kennedy v Queensland Insurance Co (1924) 24 SR (NSW) 542; Edwards v Insurance Office of Australia Ltd (1933) 33 SR (NSW) 88 and Broadlands Properties Ltd and Broadlands Estates Ltd v Guardian Assurance Co Ltd [1984] 3 ANZ Ins Cas 60-552." (4) Not only is the approach of Rolfe J in Harrison (a fire policy) and Cole J in CIC v Bankstown (a fire policy) consistent with Till , but so is the approach of Campbell J in Green v AMP Life Ltd (2005) 13 ANZ Ins Cas 90-124; [2005] NSWSC 370 (another sickness and accident policy). (5) There is a further complication which is the recognition in some cases that damages for breach of the insurance contract will not mean damages at large, but effectively the amount that would have been paid had the insurer met the claim: see Green at [140] and see the passage from Russell Young Abalone Pty Ltd set out at [83] above.
(6) Whilst the formulations of what will fit into the category of repudiation of the policy and what into repudiation of liability are not uniform (see Kennedy and Zurich on the one hand and Commercial Union Insurance Co Ltd v Willetts Radio & TV Ltd (1985) 3 ANZ Ins Cas 60-677 at 79,253 on the other), refusal to accept that the insured meets defined criteria on a factual basis would seem to be at the opposite end of the spectrum to, for example, asserting that no contract was ever entered into or was entered into on the basis of non-disclosure, misrepresentation or fraud.
(7) The fact that if too wide a view of repudiation is taken in the insurance field, every failure to pay a claim would amount to a repudiation should the refusal be found to have been incorrect, rather suggests that there needs to be something more than failure to meet a claim when lodged. The fact that the nature of the insurance contract is unique and one in which by its nature has imposed on the insurer as its main obligation (and here it was said in the plaintiff's submissions the only obligation) to pay the insured's claim provided the relevant criteria are met. Sickness and accident policies have potentially their own problem because unlike most policies the payments are continuing payments for so long as the insured meets defined criteria.
99 In my view, the failure of an insurer under an income protection policy or sickness and accident policy to pay a claim because it does not believe on the evidence available to it that the insured meets the requirements of total disablement does not constitute a repudiation unless the insurer's belief was not a genuine or bona fide belief.
100 In this case, the plaintiff asserted that the insurer had not reached a bona fide belief as to the plaintiff's level of disablement. A bundle of documents said to be a portion of the insurer's file, and accepted as not being complete, was tendered by the plaintiff. A dispute erupted between Mr Hale and Mr Cavanagh as to whether Mr Hale should be required to complete the tender or Mr Cavanagh should do so. In my view, if the plaintiff asserts a lack of good faith or lack of bona fides on the part of the insurer, it needs to establish that case on the basis of "he who avers must prove" (expressed in the maxim ei incumbit probatio qui dicit, non quo negat: Digest xxii 3, 2) and see The Glendarroch [1894] P 226 at 234 per Lopes CJ and 231 per Lord Esher MR, and I am inclined to think the plaintiff, if it wished to argue that the file demonstrated lack of bona fides, was required to put the entire file of the insurer before the Court before asking the Court to infer that the insurer did not act in good faith on that basis. If specific documents were said to evidence absence of good faith those documents had to be identified. No particular documents in the bundle tendered were identified. In any event, pp 8-28 of Exhibit "F", which is the insurer's record of claims handling, in my view, establishes no absence of good faith on the part of the insurer, and I have already referred to some of the matters which might legitimately have given rise to concern on the part of the insurer as to the genuineness of the plaintiff's assertions of disability and inability to work, and some, if not all of which are reflected in the claims handling record.
101 The principles of election are discussed in Sargent v ASL Developments Ltd (1974) 131 CLR 634, and reaffirmed in Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26; [1993] HCA 27, where it was said that the true nature of election is "that the party electing shall be 'confronted' with two mutually exclusive courses of action between which he must, in fairness to the other party, make his choice": see also at 640-2 and 648-9 per Stephen J, and "Carter on Contract", LexisNexis at [37-080].
102 There is no dispute by the plaintiff that his original pleadings were quite inconsistent with any election to accept the insurer's refusal as a repudiation. The plaintiff says, however, that the insurer's obligation to pay monthly amounts and its failure each month constitutes a continuing repudiation which the plaintiff was entitled to accept at any time.
103 I think it is clear that the fact that a promisee has affirmed the contract following conduct which amounted to repudiation does not preclude reliance on a continuing repudiation or subsequent repudiation whether in the form of breach or anticipatory breach (see "Carter on Contract" and cases there cited).
104 In Walton v Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Ins Cas 61-620; [2004] NSWSC 616, Einstein J said: "[54] The proposition of the insurer which I accept as of substance, was that the policy should be construed as follows:
• an insured becomes entitled to a right to benefits if he or she suffers a specific injury or trauma or becomes disabled or dies [cl 1.1];
• where the event is the suffering of a disability, the policy permits one claim for each period of continuous disability for a period longer than the 30 day waiting period [cf cl 1.9];
• that claim comes to an end when the insured is no longer disabled;
• the circumstance that the disability insurance is administered on a monthly basis does not determine any rights as between the parties."
105 The plaintiff did not lodge fresh claims after the commencement of proceedings and the refusal to pay was based on the material submitted well before the launching of proceedings in 2003.
106 The claim for total disability was rejected in June 2000 and again after the receipt of further medical information, well before the commencement of proceedings in 2003. If contrary to my view the rejection of the claim constituted repudiation, I do not think that the failure to pay each month gave rise on each occasion to a fresh opportunity to the insured to treat that month's failure as a repudiation. If the failure to pay in 2000, or alternatively after further information was put before the insurer, was a repudiation, the insured did not accept the conduct as a repudiation when he commenced proceedings in 2003. The plaintiff also retained the benefit of cover under the policy and even from 2003 to 2005 he obtained cover for any ailment which he might suffer (ie quite apart from the sequelae of the injuries suffered in 1999). If the plaintiff was entitled to monthly payment then he was not required to make payments of premium - see clause 19 (p 39 Exhibit "A").
107 I do not think that Taylor is inconsistent with this conclusion even assuming repudiation. In Taylor, VACC's conduct amounted to anticipatory repudiation until such time as liability was imposed by a Court on the insured. At that point the insurer's failure to meet the insured's liability gives rise to right of repudiation based on actual breach and this was a fresh basis of repudiation.
108 There was, in the plaintiff's submission, a further strand in relation to the breach. The submissions assert that breach of a fundamental term and breach of intermediate term both entitle termination and that the plaintiff does not need to rely on repudiation. The insurer argued that the contract of insurance had no express right of cancellation and hence any right to cancel would have to be implied and such an implied right was inconsistent with the presumed intentions of the parties.
109 In "Australian and New Zealand Insurance Reporter", CCH Australia Ltd, the learned authors state at [14.335]: "At common law, in the absence of relevant legislation such as the Insurance Contracts Act 1984 (Cth) (¶14-340), neither the insurer nor the insured can cancel a contract of insurance unless the contract specifically confers such a right (eg Deaves v CML Fire & General Insurance Co Ltd (1979) 1 ANZ Insurance Cases ¶60-011; (1978-1979) 143 CLR 24, per Gibbs ACJ (as he then was) at ANZ Insurance Cases p 75,138; CLR p 40), or the parties otherwise agree. In addition, where there is a breach of contract amounting to a repudiation thereof, the other party may elect to treat the repudiation as a termination of the contract (¶14-370). Unlike avoidance, cancellation operates from the time of cancellation and has no retrospective effect. Consequently, accrued rights are not affected and the insurer cannot avoid its liability after the event that renders it liable has occurred, or has become inevitable, by cancellation: Walton v Colonial Mutual Life Assurance Society Ltd (2004) 13 ANZ Insurance Cases ¶61-620."
and at [14.370]: "A policy of insurance may also be terminated for breach. Some policies provide that certain actions on the part of an insured automatically terminate the contract. Where this is so, the policy terminates at the date of the wrongful act or omission (although the insurer may still be liable in respect of any claim by virtue of sec 54 of the Insurance Contracts Act 1984 (Cth) - see ¶14-050). Usually, however, a policy will not automatically terminate upon a breach of its provisions. Firstly, the breach must be one which goes to the root of the contract. If this has occurred, the innocent party will be given the opportunity to either: (a) accept the breach as terminating the policy and maintain an action for damages; or (b) continue with the contract and sue for damages representing the loss sustained as a result of the breach. However, if the wrongful act is not one which goes to the root of the contract, the innocent party can only maintain an action for damages."
110 I read this as expressing the view that a party can treat breach of a term going to the root of the contract as a repudiation of the contract, which can be accepted. It does not appear to support the notion that an insured can terminate a contract of insurance for breach where the breach is not capable of constituting a repudiation. All of the cases which have been brought or come to my attention in which the insurer's breaches of an insurance policy have led to termination or claimed to lead to termination have been cases in which the breaches were asserted to amount to repudiation of the policy eg Till; Willetts; Johnson v Australian Casualty Co Ltd (1992) 7 ANZ Ins Cas 61-109; Green.
111 I think that [140] in Green is also consistent with the view that the breach of an insurance contract must amount to repudiation for the breach to entitle termination, whatever the position in relation to other forms of contract (see Tramways in the High Court).
112 In Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 the High Court approved of a test of essentiality enunciated by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 (see also Shevill v Builders Licensing Board (1982) 149 CLR 620) and I would accept that absent any special consideration in respect of insurance contracts, the requirement to pay benefits on total disability would meet the requirements of essentiality accepted by the High Court.
113 Whilst the statement of principle in relation to termination for breach by the High Court is broadly stated, and a statement by the NSW Court of Appeal in Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR (NSW) 174 at 187 (per Jordan CJ and Nicholas J) refers to the applicability of general contractual principles to breach by an insured, the issue of breach by an insurer, other than in the context of repudiation, has not been ventilated previously, it seems, and the specialised nature of approach on repudiation in relation to insurance policies, if justified, would seem to be equally applicable in this sphere as well, but whether that, if it be correct, can be framed in terms of intention of the parties, as the insurer contends, is a matter of some difficulty. In any event, I have already expressed the view that in the present context the failure to pay benefits did not constitute a repudiation, but that even if it did, the plaintiff elected to press on with his rights under the contract of insurance rather than bring it to an end, which conclusion, if correct, would also apply to the right to terminate for breach, if it were otherwise available.
114 It follows in my view that the plaintiff is entitled to all of the unpaid monthly instalments to date, less any amounts received, but not to any amount for future instalments.
115 It follows that the plaintiff is entitled to all of the monthly payments from June 2000 to date less the amount of $105,000, being a portion of Workers Compensation payments received on 12 April 2001. That amount should be calculated as an up-to-date figure and with interest and short minutes brought in at a time to be fixed.
116 I shall hear the parties on the issue of costs.
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Camilleri
Australian Casualty & Life
[2004] FMCA 272
[2000] SADC 2
[2004] ACTCA 26
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(1951) 83 CLR 322
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