Mr Erzurumlu's claim
31It appears that Mr Erzurumlu was unaware of his rights to claim a permanent disablement benefit. However, at some time in late 2008 he consulted Factual & General Insurance Assessors and, on 4 December 2008, they submitted a permanent disablement claim to the Trustee on his behalf. The claim was supported by a number of medical reports including a number of the early medical reports relating to Mr Erzurumlu's injuries together with a report completed by Dr Rezk in a form supplied by the Insurer. That report was completed on 11 November 2008. The report consisted of answers to a number of questions. Question nine asked whether the claimant could do his/her normal job. In response to that question, Dr Rezk ticked the "No" box. The question then asked if no "which work duties is the claimant unable to do". In response to that question, Dr Rezk responded "clerical duties", although it is difficult to understand that response since clerical duties did not form part of Mr Erzurumlu's normal job and it did appear that he was able to undertake that work as part of his modified duties when he was still working at Kellogg. In response to other questions, Dr Rezk indicated that "IT jobs" would be appropriate for Mr Erzurumlu. Question 11 asked "If you think that the claimant will NEVER return to any type of work, please give detailed reasons for this". In response, Dr Rezk wrote "not normal duties that has bending & standing etc.".
32On 19 December 2008, the Trustee forwarded Mr Erzurumlu's claim to the Insurer.
33On 24 December 2008, the Insurer responded by asking for an employer statement in respect of Mr Erzurumlu and full tax returns and assessments from 2005 onwards. On 2 April 2009, the Insurer also requested copies of all medical and investigation reports and details of any rehabilitation programs that Mr Erzurumlu was involved in. That material was supplied to it.
34On 23 June 2009, the Insurer wrote to Mercer (Australia) Pty Ltd, the Trustee's agent. The letter set out the material that the Insurer had considered and included copies of the additional material it had obtained, including CGU's workers compensation file. In addition, the letter drew Mercer's attention to the definition of permanent disablement in the Policy. The letter concluded:
We would appreciate that this letter and the attached documentation is immediately provided to the member for their review, so as to ensure that the member is afforded procedural fairness.
If they have any additional comments or information to submit we request that this be furnished to our office by 23 July 2009. We will of course consider any further relevant evidence or submission the member would like to provide.
35The letter and attachments were forwarded to Mr Erzurumlu on 8 July 2009.
36Mr Erzurumlu's adviser asked for an extension in which to reply. That extension was granted until 3 August 2009. However, no additional information was submitted on Mr Erzurumlu's behalf.
37On 26 August 2009, the Insurer wrote to Mercer setting out its decision to decline the claim. The letter set out the material the Insurer had considered. The Insurer gave the following explanation for its decision:
Cessation of the member's employment is shown to have been for reasons other than total disablement, namely the withdrawal of suitable duties by the said employer, Kellogg (Aust) Pty Ltd, pending further recommendations of vocational options given that the member would be unable to upgrade to 100% of his usual full pre-injury duties. This is shown to have occurred in spite of the member having been certified fit for suitable or modified duties on a full time basis, and of which the member had been satisfactorily performing over a prolong period following his injury of April 2003 and up until cessation date of employment in 20 April 2005.
Rehabilitation provider, Peak Conditioning in their final report which is shown to have been compiled of close proximity to the member's cessation date of employment (April 2005), strongly infer that the member's fitness level was gauged to be of an acceptable level and should not be a limiting factor in the member's return to pre-disability work. According to the member, the duties he was currently performing (April 2005) were "pretty much" his pre-injury duties as they constituted approximately 95% of the pre-injury duties as to that when he was originally injured in 2003.
Of relevance in this matter is also the opinion of specialist, Dr Con Kafataris whereby in his report dated 14 February 2005 he was of the view that the member was deemed fit for a full shift of his current suitable duties in the tank room. It was opined that the member is likely to retain a work capacity of permanently modified duties with lifting restriction of 15kg. It is likely that the member will maintain full time gainful employment within these restrictions.
Whilst the member is illustrated to have a diagnosable back condition, it is reasonably evident that at the time of the member ceasing work on 20 April 2005 he had a residual capacity to undertake his usual suitable duties on a full time basis. If not for the employer withdrawing their offer of suitable duties, which the member opined consisted of 95% of his usual pre-disability duties and appears to have satisfactorily performed up to and including 20 April 2005, the member most likely could have continued to work in this capacity beyond 20 April 2005, or up until Normal Retirement Age if he had been so permitted to do so by his employer.
As such, it is our view that the evidence does not portray the member to have been incapacitated to such an extent as to render the member unable ever to engage in or work for reward in any occupation, or work as at the purported date on which total and permanent disablement is alleged to have begun of 20 April 2005, or within the immediate following six consecutive months. Consequently, the first limb of the Total and Permanent Disablement definition is shown not to have been satisfied.
The member is illustrated to be still relatively quite young with potentially a further twenty five (25) life years remaining before Normal Retirement Age of 65 years. Information to hand would depict the member to have elected to retrain into the alternate career path of Information Technology, as opposed to seeking employment of a similar or lighter category to that which he had undertaken with Kellogg, although with a different employer. On this point we draw to your attention Dr Con Kafataris findings as discussed above.
The evidence does not persuade Hannover Life Re to reach an opinion that the member is totally and permanently disabled in line with the policy definition. The onus of establishing an entitlement to the total and permanent disablement benefit rests with the member.
38On 20 November 2009, Mercer provided the Trustee with a detailed summary of the material that had been considered by the Insurer. It recommended that the claim should be denied although it stressed that "the Trustee must carefully consider all of the attached material in reaching its own independent decision". The Trustee was also supplied with an advice from Mercer Legal dated 14 December 2009. The advice analysed a number of legal issues concerning the claim. It concluded:
On review of the evidence we are of the view that it could be argued that the insurer has not reached a decision that is fair and reasonable on the evidence for the following reasons: The insurer has not obtained any independent medical assessment itself and has only relied on the medical reports supplied for the purposes of the member's Worker's Compensation claim. We note these reports consider different issues to that which is required to be assessed by the insurer under the terms of the Policy. In addition in our view, there are a number of important considerations which were noted in the Sayseng case and equally apply to this matter that have not been fully addressed by the insurer. For example such at the time of the Member's termination by Kellogg, he had a lifting restriction in relation to his employment, and it appears there has been no assessment of this issue on the Member's capacity for work and the permanency of his impairment.
39The directors of the Trustee met on 15 December 2009. The minutes of that meeting record:
Ms Hunt [the author of the Mercer Legal advice] advised that the current claim should be returned to the insurer to address the issues raised in the Sayseng matter. In particular an independent medical assessment and a vocational assessment (not for workers compensation) is recommended to be suggested to the insurer to be obtained.
Ms Hunt and Ms Durant offered to discuss this issue with Hannover. Mr Spehr offered to be part of these discussions. The Directors RESOLVED to agree to this.
40The request for review was passed on to the Insurer who agreed to it. As part of that review, the Insurer asked for a complete copy of Mr Erzurumlu's personnel file together with a job description of his duties prior to his disablement and a job description of his duties prior to his cessation of work in 2005.
41The requested material was supplied to the Insurer. In addition, the Insurer obtained a report from Dr Peter Slezak, its chief medical officer, on 12 April 2010. That report concluded:
On the evidence available to me, I consider that Mr Erzurumlu would be able to perform a range of sedentary duties eg Surveyor Technician or work within the IT Industry particularly were he able to sit and/or stand at will. I therefore consider that Mr Erzurumlu does not satisfy the policy definition as to be totally and permanently disabled.
42On 12 May 2010, the Insurer wrote to Mercer setting out the additional material that it had considered and requesting any additional comments from Mr Erzurumlu by 12 June 2010. No further comments were provided and on 22 June 2010 the Insurer sent Mercer a letter confirming that it denied the claim. The letter set out a number of reasons for doing so. First, it purported to set out an analysis of the work that Mr Erzurumlu was required to perform and it concluded on the basis of that analysis that Mr Erzurumlu had not accurately described his duties to Dr Kafataris and that, in particular, he had overstated the amount of lifting he was required to do. It also concluded that "[i]t is reasonably documented that the member was able to perform suitable duties on a regular basis which consisted of approximately 95% of the member's usual pre-injury duties." The letter continued:
As indicated within Dr Con Kafataris' reports dated 14 February 2005 and 10 March 2005, when he ceased work the member was fit for a full shift of his duties in the Tank Room. The member is unlikely to return to all aspects of his pre-injury duties however could return to permanently modified duties with a lifting restriction of 15 kg. Dr Kafataris went on to state that the member was coping with the duties of the Tank Room previously, and he could therefore see no reason why the member would not be able to upgrade in the near future taking into account the member's recent exacerbation when seen in March 2005. Dr Kafataris further indicated that it was likely that the member would maintain full time gainful employment within these restrictions. The evidence therefore indicated that the member was able to continue to perform the duties in the Tank Room, which were duties within his education, training or experience, when he ceased work at the time of his redundancy.
The letter then concludes:
Hannover Life Re is of the view that the alternative duties the member was performing at the time he ceased work were generally comparable to the member's employment before his injury. The work in the Tank Room was reasonably open to the member having regard to his education, training or experience.
As the information stands, the member would appear to have not experienced any significant difficulty in continuing to work despite his 'mild pain' and could have continued to perform his work with the employer of Kellogg (Aust) Pty Ltd, indefinitely but for those duties no longer being available. (footnote omitted)
43Secondly, the letter relies on the report of Dr Slezak. It also refers to Mr Erzurumlu's formal qualification in customer service and surveying and his self taught computer skills. It then concludes:
Overall, the consensus of the evidence is that the member is able to perform work as a production operator (or light assembly factory work), or similar suitable work with a 15 kg lifting restriction. This is work within his education, training or experience.
44Lastly, the letter refers to an internet search which revealed Mr Erzurumlu's public webpage. The letter comments:
Of interest we noted the member's continued capacity and functional agility to ride and manoeuvre the weight of his motor cycle(s), despite his diagnosed medical condition/s, prior to and following the member's documented surgeries to his right elbow (approx. 1991), right knee (1993 and 2001) and back (2003 and 2008).
On the webpage, Mr Erzurumlu had said of a Katana 1100:
The bike had to be sold due to the fact that it was too heavy to handle due to a back operation.
He also said of a Ducati:
This is a magic bike but after the second back operation riding bikes was out of the question. It will be ridden again once I am able.
45On 21 July 2010, Mercer wrote to the Insurer raising a number of concerns with the Insurer's letter dated 22 June 2010. The concerns included the fact that the decision was based largely on WorkCover evidence, that the evidence did not address the question of the permanency of Mr Erzurumlu's condition and that Dr Slezak did not examine Mr Erzurumlu. The letter also comments:
Evidence identifying the availability of work for people with the Member's condition and restrictions does not appear to have been obtained by the Insurer. It appears that no analysis in relation to the Member's residual capacity Vs earning capacity in the open labour market has been performed and that the Vocational Assessment Report has been based on Workers Compensation Legislation. It further appears that no labour and market analysis with real employer contacts has been performed to establish the likelihood of the Member being able to secure a position as a Production Operator or similar suitable work, in the open labour market.
46Lastly, the letter refers to the fact that Mr Erzurumlu had no success in obtaining jobs in the IT field, which indicated that his chances of doing so "would appear to be minimal".
47The Insurer replied to that letter on 3 August 2010. It observed that the claim had been made a number of years after Mr Erzurumlu was said to have suffered from permanent disablement and as a consequence the Insurer had been prejudiced in considering the claim and that had made it necessary to rely on historical material. The letter concludes:
As the information stands, the member is reported to have not experienced any significant difficulty in continuing to perform his assigned work duties despite his 'mild pain' and would have continued to perform those duties with the said employer indefinitely, but for those duties being withdrawn by Kellog [sic] (Aust) Pty Ltd.
In giving the matter our consideration, the availability of any potential job prospect/s with an alternate employer would therefore need to be retrospective. As such, Hannover Life Re is of the view that the earlier vocational assessments conducted on behalf of the workers compensation insurer reasonably illustrate availability and the capacity of the member to undertake such duties. The member by his own volition had chosen to pursue a different career path in Information Technology, as opposed to seeking out the availability of suitable lines of employment within his then demonstrated work capacity and transferable skills matrix eg Tank Room.
As the information stands, in all probability the member could have potentially resumed suitable employment within his demonstrated work capacity and transferable skills matrix. To this end, the policy definition requires an assessment of whether a member is unable ever to engage in or work for reward in any occupation.
48Mercer prepared a supplementary report for the Trustee on 9 September 2010 summarising the additional material that it had obtained. It made the following recommendation:
In this regard, after considering all available evidence and without pre-empting the Trustee's decision, we believe it is open to the Trustee to resolve that the Member does not satisfy the Fund's definition of Total and Permanent Disablement. (emphasis in original)
49That supplementary report was considered by the directors of the Trustee at a meeting on 14 September 2010. Consideration of Mr Erzurumlu's claim was postponed to give the directors an opportunity to read the additional material that had been supplied to them. The issue was then considered at a meeting of directors on 29 September 2010. The minutes of that meeting record a lengthy list of material considered by the directors. They then record the following decision:
The Trustee Directors all agreed that the decision made by Hannover Life Re to deny Mr Erzurumlu's TPD claim was based on a fair review of the evidence, that the insurer had operated with good faith and that the insurer's decision on review of the evidence was fair and reasonable. The Directors further resolved to deny the Total and Permanent Disablement claim by Mr Huseyin Erzurumlu.
50The Trustee notified its decision to Mr Erzurumlu on 5 October 2010.
51On 24 August 2011, Mr Erzurumlu commenced this proceeding. His solicitors then sought a review of his claim. In support of that request, they supplied a medical report of Dr Machart dated 24 December 2012 and medical reports of Dr Patrick dated 14 January 2013 and 18 January 2013. Those reports, however, shed little light on the matter since they were directed to Mr Erzurumlu's medical conditions at the time they were prepared, not his capacity in 2005. It is clear that Mr Erzurumlu's condition has deteriorated substantially over that time. Both the Insurer and Trustee denied the claim. In its letter dated 2 May 2013 to Mercer, the Insurer said:
It is submitted that as the member had the capacity to perform suitable duties, which was essentially 95% of his normal duties, up to 12 hour a day as at 21 April 2005, he would have had a higher chance of success in obtaining alternate employment in the field of factory work (or other work within his education, training and experience) had he made an attempt to do so.
Instead, the member opted to pursue his interest in computers in spite of being certified fit for work within his education, training and experience by his treating doctor.