Folan v United Super

Judgment (EX TEMPORE - REVISED 19 May 2014) 1HIS HONOUR: In reasons for judgment given on 27 March 2014 ([2014] NSWSC 343), Nicholas AJ held that the plaintiff, Mr Folan, was entitled to be paid benefits for total and permanent disablement (TPD). Those benefits were payable under a policy issued by the second defendant (the Insurer) in favour of the first defendant (the Trustee). The Trustee was the trustee of a superannuation fund of which, Nicholas AJ concluded, Mr Folan was a member at the relevant time. 2On 28 March 2014, Nicholas AJ made orders which, the parties agreed, were appropriate to reflect the reasons for judgment given the day before. Those declarations and orders dealt with all matters in issue save the question of interest. 3The parties have been unable to agree on the question of interest. Accordingly, the matter has been listed before me for that question to be argued and resolved. 4The background is not, for present purposes, contentious. Mr Folan had worked for some years, principally as a labourer, in the construction industry until, on 6 March 2009, he was injured in a motor vehicle accident. He has not worked since. Nicholas AJ concluded, in substance, that Mr Folan's injuries and disabilities consequent thereon were such that he met the TPD definition in the policy of insurance issued by the Insurer in favour of the Trustee. 5The claim for interest is made under s 57 of the Insurance Contracts Act 1984 (Cth). It is common ground that the Court's approach to s 57 is as stated by Nicholas J in Sayseng v Kellogg Superannuation Pty Ltd (2007) 213 FLR 174 at [4]-[8]. 6In those paragraphs, Nicholas J reviewed relevant authorities, starting with the decision of Cole J in Bankstown Football Club v CIC Insurance Ltd (unreported, NSWSC, 17 December 1993). The conclusion that his Honour drew from those authorities was set out at [7] of his reasons. His Honour said that the relevant question was the determination of a reasonable period for the insurer to investigate and determine its position on a claim made upon it. 7However, importantly, an insurer's adoption of an incorrect view, even if held in good faith, does not bear on the question of reasonableness. As Bongiorno J said in HIH Casualty and General Insurance Ltd (in liq) v Insurance Australia Ltd (No 2) (2006) 14 ANZ Ins Cas 61-685 at [9], to hold otherwise would in effect give the insurer an unjustified benefit by obtaining and relying upon incorrect or even bad legal or loss adjusting advice. 8Nicholas J said in Sayseng at [7] that the evaluation of a reasonable period of time for investigation of a claim is "a discretionary determination" which requires consideration of the facts of the case, "including the probable issues which require investigation". Those latter words are significant, for reasons that will appear shortly. 9As I have said, Mr Folan was injured on 6 March 2009. There was a six month waiting period under the policy. He made a claim for benefits on about 4 December 2009. That claim was made to the Trustee. The Trustee notified the claim to the Insurer a month later, on 5 January 2010. 10Mr Folan had arthroscopic surgery to his left elbow (the elbow which had been injured in the accident) by an orthopaedic surgeon, Dr Burrow. That surgery was performed on 15 February 2010. Apparently, Dr Burrow advised about a month later that Mr Folan would be permanently unfit for heavy lifting and that he would require assistance to identify occupations that he could follow that would accommodate his permanent disability. 11Mr Folan underwent a course of physiotherapy. In June 2010, Dr Burrow formed the opinion, and advised Mr Folan, that further physiotherapy would not be beneficial. 12On 7 June 2010, Dr Burrow prepared a report addressed to the Trustee. I note at this stage that it is clear that the Trustee had been requested or retained by the Insurer to investigate the claim on behalf of the Insurer. To the extent that it matters, it is probably the better view of the trust deed in question that, absent any such request, the role of the Trustee is to hold the benefit of the policy on the terms of the trust deed, to make claims and do what is reasonably appropriate to advance them, and to hold any benefit paid on trust for the claimant member. Thus, to the extent that the Insurer took a more active role, I think it is correct to say, as was submitted for Mr Folan, that it did so in the capacity of agent for the Insurer. I should note that on at least two occasions, when the Trustee did request information in relation to the claim, it stated that it was acting as the Insurer's agent and was duly authorised by the Insurer to obtain information on the Insurer's behalf. 13That is a very roundabout way of saying that when the report of Dr Burrow of 7 June 2010 was addressed to the Trustee, I infer that it was addressed to the Trustee in its capacity as agent undertaking inquiries for the Insurer. 14In the report, Dr Burrow dealt with the diagnosis and other matters. He then said that Mr Folan had seen some improvement in pain profile and range of motion, but continued to experience significant stiffness and discomfort. Dr Burrow thought that the left elbow would deteriorate further and that at some indefinable stage, Mr Folan would require a total replacement of the joint. 15When asked to deal with Mr Folan's capacity to return to work, Dr Burrow said that Mr Folan was fit for office or light duties but, given his occupational and educational skills, might find it difficult to obtain meaningful employment. He then said: "An opinion from an occupational physician may be more helpful in clarifying his ongoing workability [sic], but I believe the prognosis in this regard is poor." 16By way of conclusion, Dr Burrow said: "I think it would be very unlikely given the above comments that Mr Folan will find work that meets his particular skills set, and permanent physical restrictions." 17Thus, by 7 June 2010, it must have been plain to the defendants that the likelihood of Mr Folan's obtaining suitable work was limited, that Dr Burrow did not regard himself as an expert in the field of occupational health and training, and that a report from an expert in that field might be more helpful. 18To my mind, the report from Dr Burrow of 7 June 2010 spelled out with conspicuous clarity two things. The first was that in Dr Burrow's view it would be very difficult for Mr Folan to find work that he could do given his education, training and disabilities. The second was that if the question was to be pursued, the defendants should take the matter up with an expert such as "an occupational physician". 19That second matter is something which the defendants conspicuously failed to do. 20The defendants did undertake a number of investigations. They made inquiries of CIC Allianz, the CTP insurer of the vehicle involved in the motor vehicle accident. Allianz (as I will call it) produced a body of material. Presumably, the defendants, or at least the Insurer, gave consideration to that material. 21In 2011, the Trustee requested Dr Burrow to provide a further report. That report was given on 7 May 2011. It is common ground, and rightly so, that the report says nothing that in substance was not said in the report of 7 June 2010. Dr Burrow said that in his view Mr Folan met the TPD definition, and gave reasons for that. He said that he did not know what duties were involved in certain other positions (including a dogman and crane hoist driver) that had been suggested but doubted that they would meet the restrictions. He said that Mr Folan could take up employment for example in an office or on other light duties with no heavy lifting. Again, he said, it would be appropriate to seek an opinion from an expert: "an occupational therapist or physician". 22In other words, Dr Burrow told the defendants exactly what he had told them 11 months earlier. 23The question that required investigation was that flagged by Dr Burrow in his report of 7 June 2010: could Mr Folan find work that met his particular skills set and permanent physical restrictions? The obvious course of investigation was that suggested by Dr Burrow: speak to an occupational physician (or, perhaps, an occupational therapist). Why did the defendants not do this? To my mind, the submissions that were put were really a smokescreen to attempt to cover up the inactivity, and the failure to follow up the clear and obvious suggestion made by Dr Burrow. 24The submissions referred to documents provided by Commonwealth Rehabilitation Services Australia, who had been retained by Allianz to assist in Mr Folan's rehabilitation following the accident. Some of those documents did not even come to the attention of the Insurer before it made its decision. And of the ones that did, there was in my view nothing in them that was inconsistent with the view that Dr Burrow had expressed. Indeed, one of those that on any view did come to the Insurer's attention expressly referred to Dr Burrow's report of 7 June 2010. 25I can accept that the Insurer required time, either on its own account or in conjunction with the Trustee, to investigate the matters flagged by Dr Burrow in his report of 7 June 2010. I accept that a thorough investigation might have taken some considerable time: certainly, more than the one month put in submissions for Mr Folan. I do not accept that it was reasonable to allow more than a year for the process to work out. It is important to bear in mind that the defendants were fully aware of the circumstances of the accident, the injuries that Mr Folan sustained, and his consequent disabilities. All that had been investigated. The sole remaining question for investigation was whether Mr Folan could find work that met the particular restrictions identified by Dr Burrow. 26Accepting that the matter is not one capable of precise evaluation, and accepting further that it may not have been a simple matter of referring Mr Folan to an occupational physician or therapist and getting an appointment a week later and a report two weeks later, nonetheless, I think, a reasonable time for the completion of the investigations should have occupied the defendants for no longer than from 7 June 2010 through to, at the latest, the end of September 2010. To my mind, such a period would have provided ample time for the proper assessment of Mr Folan by appropriately qualified experts, and the investigation of whatever recommendations those experts might have made as to employment which Mr Folan could undertake. 27The fact that the defendants took a slower and more roundabout way to attempt to perform the same task should not be taken in my view to detract attention from the real issue, which is their failure to do what Dr Burrow had suggested. 28Accordingly, and recognising (as Nicholas J said in Sayseng at [7]) that the probable issue which requires investigation is the limited one to which I have referred, I conclude that the investigations should have been completed, at the latest, by the end of September 2010. 29In those circumstances, interest should run from the beginning of October 2010. 30There has been no judgment for a money sum in favour of Mr Folan. The relevant order that the parties propounded and that Nicholas AJ made was for the Insurer to pay the insured sum either direct to Mr Folan or through the Trustee for Mr Folan's benefit. Apparently the sum has not been paid. Accordingly, the appropriate way to deal with the problem is to declare that interest should run from the date that I have indicated. 31If I am wrong, and the sum has been paid, that will be accommodated by the form of declaration that I am about to make. 32I declare that the second defendant is liable to pay interest on the benefit payable by it to the plaintiff, in accordance with s 57 of the Insurance Contracts Act 1984 (Cth), from 1 October 2010 until the date of payment of the said benefit. 33The parties have not put submissions on costs. It seems to me that the costs of the hearing today should follow the costs orders made by Nicholas AJ. [Counsel addressed.] 34I order the defendants to pay the plaintiff's costs of the application in respect of interest. 35I direct that the exhibits on the application be handed out.