Challenger Life Company Ltd v Estate of the late Robert John Real

BETWEEN: CHALLENGER LIFE COMPANY LIMITED ABN 44 072 486 938

JESSICA GROVER, HAYLEY GROVER, JACKSON GROVER, ROBERT GROVER, HAMISH GROVER AND REYNA PHILLIPS BY THEIR TUTOR PAMELA GROVER

JUDGE: JACOBSON J DATE: 5 DECEMBER 2014 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The Plaintiff (Challenger) seeks a direction under s 215 of the Life Insurance Act 1995 (Cth) (the Act) that it pay the proceeds of a Guaranteed Annuity Policy (the Policy) into Court to be dealt with in accordance with the orders of the Court. In particular, Challenger seeks a declaration that, by doing so, it has discharged its liability under the policy. 2 The jurisdiction of the Court to make an order under s 215 is enlivened where, inter alia, there are competing arguable claims to the proceeds of an insurance policy: see HCF Life Insurance Co Pty Ltd v Lamb [2000] FCA 573 at [12]-[14], citing Carter Bros v Renouf (1962) 111 CLR 140. 3 In the present case there are competing arguable claims between the beneficiary nominated by the policyholder (Mr Real) and some of his beneficiaries under his will. 4 Mr Real took out the Policy in September 2011 and died in July 2012, having previously nominated his carer (Ms Costigan) as a beneficiary for 50% of the proceeds of the Policy. The nomination form left blank the identification of any other beneficiary. 5 Ms Costigan contends that the effect of the nomination form was to nominate her as a beneficiary in respect of 50% of the proceeds, with the balance payable to Mr Real's Estate. 6 However, Mr Real's great grandchildren, who are residuary beneficiaries under his will, contend that the nomination form was invalid. They contend that the effect of the contract under which the Policy was issued was that it is not possible for Mr Real to nominate a beneficiary for less than 100% of the value of the Policy. 7 The dispute between Ms Costigan and the great grandchildren puts Challenger in the position that it cannot obtain a sufficient discharge of its liability under the Policy otherwise than by invoking the jurisdiction of the Court under s 215 of the Act.

The Legislation 8 Section 215 of the Act provides: Power to pay money into Court (1) A life company may pay into the Court any money payable by the company in respect of a policy for which, in the company's opinion, no sufficient discharge can otherwise be obtained. (2) Payment of the money into the Court discharges the company from any liability under the policy in relation to the money. (3) Any money paid into the Court under this section is to be dealt with according to the order of the Court. (4) This section has effect subject to the Rules of the Court.

The Facts 9 Mr Real applied to Challenger on 21 September 2011 to issue the Policy. He completed an application form on that date for a product known as a Guaranteed Annuity. Mr Real was 83 years old when he signed the form and stated that the amount to be invested in the Policy was $870,000. 10 The application form stated that information about investing money in the Policy was contained in a product disclosure statement dated 15 June 2010 (the PDS). The application form went on to say that a person completing the application form was required to be given the PDS which he or she should read before completing the application. 11 It is evident from the terms of the PDS, to which I will refer in more detail later, that the contract between Mr Real and Challenger is comprised in the Policy Document set out in the PDS. 12 The PDS contained information about the nomination of beneficiaries under the Policy but Mr Real left blank the details in the application form providing for the nomination of beneficiaries. 13 On 23 September 2011 Challenger issued an Investor Certificate to Mr Real for his Guaranteed Annuity which was described as Policy Number 500737931. The Investor Certificate stated that the amount that was invested was $870,000 and that the monies comprised in that investment were not superannuation funds. 14 The Investor Certificate contained the following statements under the heading, Beneficiary Details: "As you have not nominated a beneficiary to receive benefits should you die, we will pay any benefits as a lump sum to your estate. If you would like to make a nomination contact our Investor Services team on 13 35 66." 15 On 2 November 2011 Mr Real signed and forwarded to Challenger a form of nomination of beneficiary under his Policy. The nomination form nominated Ms Donna Costigan as a beneficiary. It recorded that Ms Costigan had a relationship to Mr Real of carer. The percentage benefit stated in the form for Ms Costigan was 50%. There were no other beneficiaries nominated. 16 The nomination form was a standard form of document. It included the following information: "For superannuation monies any person you nominate must be a dependant. "Dependant" means your spouse (including de facto spouse), your children (of any age) or someone who is financially dependent on you. If you would like your nominated beneficiary to be your estate, please write 'Pay to Estate' in the relevant 'Name' section. If you do nominate your Estate, you cannot select another beneficiary ie, 100% of your benefit must be payable to your Estate. If you have selected a reversionary beneficiary, you are unable to change this nomination. Please refer to the additional information below regarding beneficiary nominations. Please note that Guaranteed Income Plan and Income Choice Annuities purchased with non-ETP monies can nominate any person (including dependants) as a beneficiary. If a dependant nominated to a benefit predeceases you, or if a person is not a dependant of your Estate at the time of your death, that person's benefit will be distributed equally amongst the surviving nominated dependants or your Estate. If there are no surviving nominated dependants or legal representative, it will be paid to a beneficiary selected at our discretion. Nominated beneficiary You can advise us of which dependants you would like to receive your benefits should you die. Alternatively, you can nominate that your Estate receive the benefits. Please note that this nomination is not binding on us. We must consider making payment to any of your dependants, including those that you have not nominated. When making this determination, we take into consideration any beneficiary you have nominated. You can update, cancel or change your nominated beneficiaries at any time by completing a new 'Nomination of beneficiary' form." 17 On 7 November 2011 Challenger wrote to Mr Real acknowledging receipt of his request to update the details of his policy. The letter enclosed a schedule recording the amended policy details. The following was recorded in the Beneficiary details of the amended schedule: "In the event of your death, the remaining proceeds will be as follows: Type of beneficiary Nominated beneficiary Name of beneficiary DONNA COSTIGAN % of benefit 100.00%" 18 At some time between 7 November 2011 and 14 November 2011 Challenger received a further form of nomination of beneficiary which purported to nominate Ms Costigan as a beneficiary for 75% of the value of the Policy with the remaining 25% payable to Mr Real's estate. However, that form was not signed and is therefore of no relevance to the present application.

The PDS 19 The PDS is contained in a brochure consisting of 29 pages of information together with various application forms and declarations running to a further 27 pages. The brochure is described as the "Challenger Guaranteed Annuity". 20 The brochure includes information about the nature of an investment in an annuity, the risks and benefits of such an investment, and how it works in practice. The brochure also includes information about the investment of superannuation monies in a guaranteed annuity. It is evident from what is said in this section of the document that an investor may invest either private monies or superannuation funds and that different rules apply to these separate sources of investment. 21 The section of the brochure dealing with guaranteed annuities purchased with private monies commences at page 13 of the brochure. That section contains information as to what happens in the event of the policy owner's death. 22 The following part of the information under the subheading "What happens in the event of your death?" is relevant: "For single owner investments you can choose to have your benefits payable to: • your estate; or • nominated beneficiaries You should keep your nomination of beneficiary(ies) up to date to take into account any changes in your circumstances. If no selection is made, the default selection is your estate." 23 The brochure goes on to provide additional information applicable to all plans, information about fees and costs, as well as information about social security legislation before setting out the "Policy Document". "Your Policy consists of two parts, this Policy Document and the Investor Certificate you receive when you invest in the Plan. You should read the contents of these documents carefully and keep them in a safe place. Your Policy is a legal contract between you and Challenger Life Company Limited (ABN 44 072 486 938) (Challenger Life). This Policy Document is deemed to be issued to you only after your signed Application Form is accepted by Challenger Life." 24 The Policy Document contains 14 sections occupying four pages of the brochure. Section 11 is headed "Nominated Beneficiary". That section is one page long. It includes a statement that: "We will pay remaining benefits under your Plan including any RCV (if applicable) paid upon your death (or if you are a joint owner, upon the death of the last surviving owner) to any one of the following: • your estate…; • your Revisionary Partner…; or • your Nominated Beneficiary…" 25 Section 11 also includes the following statements: "Where your sole Nominated Beneficiary is entitled to receive benefits upon your death, we will pay those benefits as a continuing stream of Income Payments to the sole Nominated Beneficiary. The sole Nominated Beneficiary, if entitled to receive some or all of the Income Payments under the Plan on your death, may commute those payments to a lump sum in the event of your death. Where your estate is entitled to receive benefits upon your death, and the Policy was purchased with Private monies, we will pay those benefits as a continuing stream of Income Payments to your estate. Your estate, if entitled to receive some or all of the Income Payments under the Plan on your death, may commute those payments to a lump sum in the event of your death. …"

Consideration 26 The contract comprised in the Policy Document and the Investor Contract is to be construed objectively. The meaning of the words is to be determined by what a reasonable person in the position of the parties would have understood the words to mean: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]. 27 The nomination form is not part of the contract but is a document that was issued pursuant to the Policy Document. It is therefore to be construed in the light of the Policy Document as a document which was intended to give effect to the terms of the contract. 28 The words used in section 11 of the Policy Document under the heading "Nominated Beneficiary" are not free of ambiguity. The policy owner is told, relevantly, that Challenger will pay the remaining benefit under the Policy to "any one" of his or her estate or his or her "Nominated Beneficiary". 29 A strict semantic and syntactical analysis, focussing in particular on the words "any one", and the word "or" together with the singular in the phrase "Nominated Beneficiary" might suggest that the alternatives offered to the policy owner are exclusive. That is to say, on this approach, the policy owner may select only his or her estate or a single nominated beneficiary to receive the whole of the benefits payable under the policy. 30 However, it seems to me that a commonsense reading of the language, particularly when read with other parts of section 11 and the information provided on page 15, indicates that there is another possible meaning. 31 The information provided on page 15 indicates, at very least, that more than one nominated beneficiary can be selected and that if no selection is made, the default selection is the estate. 32 Moreover, the wording of section 11 following after the description of the alternatives available to a policy owner suggests that the estate may be nominated to receive only part of the benefit. This appears from the statement that if the estate is entitled to receive "some or all of the Income Payments", it may commute them on the death of the policy owner. 33 In any event, the fact that two alternatives are offered does not of itself mean that the alternatives are exclusive. It seems to me that very clear words would be needed to demonstrate that a policy owner can choose only one of the alternatives rather than a combination of them. 34 This is particularly so when the business setting in which the contract was made is taken into account. The policy is a standard form of contract entered into with ordinary members of the public who wish to invest monies in an annuity payable during the currency of the policy and to selected beneficiaries on the death of the policy owner. 35 A contract of this kind is not to be given an overly legalistic, narrow or pedantic construction. It is not to be read as a statute. It may be that in some cases the ejusdem generis principle is of assistance in the process of construction of contracts: see Herzfeld P, Prince T and Tully S, Interpretation and the Use of Legal Sources (Thomson Reuters, 2013) at [25.3.340]. However, in the present case, there is no room for the application of that maxim or the principles applicable to the interpretation of legal texts. Yet this was the approach that was taken by counsel for the great grandchildren. 36 The effect of the construction proposed on behalf of the great grandchildren would be to deprive the nomination of Ms Costigan for a 50% share of any legal efficacy. It is true that the nomination form states that if the policy owner nominates the estate as the sole nominated beneficiary, he or she cannot also select another beneficiary. But it does not go on to say that where the policy owner nominates a beneficiary, that person must be nominated for 100% of the benefits payable. 37 This suggests that what was intended by the policy was that it was open to the policy owner to nominate one or more beneficiaries for less than 100% of the benefits, with the balance then payable to the estate if the estate was not specifically nominated to receive the balance payable. 38 In my opinion that reflects the proper construction of the Policy Document. To construe it in the manner proposed on behalf of the great grandchildren would be capricious: see Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99 at 109.

Conclusion and Orders 39 I have power to decide between competing claims as an incident of the exercise of the jurisdiction of the Court under s 215 of the Act: see HCF Life Insurance at [12]; Carter Bros v Renouf at 159-160. 40 It follows from what I have said above that I will order pursuant to s 215 of the Act that: (1) Upon the payment into Court by Challenger of the whole of the monies payable by it under Guaranteed Annuity Policy Number 500737931, Challenger is discharged from any further liability in relation to those monies. (2) The monies paid into Court in accordance with Order 1 are to be dealt with as follows: (a) 50% of the monies are to be payable to, or to the order of, Ms Donna Costigan; (b) the remaining 50% of the monies are to be payable to the Estate of the late Robert John Real. 41 Challenger should have its costs of this application on a trustee basis payable out of the proceeds of the Policy. 42 The contradictors in the present case were Ms Costigan and the great grandchildren who were represented by their tutor. 43 The great grandchildren were unsuccessful in their contentions and in my opinion should bear Ms Costigan's costs of the application. 44 The Estate of Mr Real filed a submitting appearance. The Estate's costs should be payable out of the funds comprising the Estate. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.