Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3;

Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; - HCA 1986 case summary — Zoe

[6]

GIBBS C.J.: The appellant, Mr Gates, brought proceedings in the Federal Court claiming against the respondent, an insurance company, damages for breaches of ss.52 and 53(g) of the Trade Practices Act 1974 (Cth), as amended ("the Trade Practices Act") or alternatively damages for breach of contract. The matter came before Ellicott J., who held that the appellant, on the faith of false statements made to him by an agent of the respondent, arranged for a superannuation policy which he had already taken out with the respondent to be extended to include total disability cover, and also arranged for that cover to be included in a new life policy which he took out at about the same time with the respondent. In the case of each policy an extra sum of $2.09 was paid by way of premium. The statements which the learned trial judge found were made by the agent of the respondent and were false were to the effect "that the total disability benefit under the provisions he was recommending for inclusion in his existing and new policy would be payable to (the appellant) if he suffered an injury or illness which left him physically incapable of carrying on his occupation as a self employed builder". In fact, in the case of each policy, the total disability clause entitled the appellant to the extra benefits under that clause only if the respondent "having regard to medical evidence considers him incapacitated to such an extent as a result of such illness or injury as to render him unlikely ever to be able to attend to any gainful profession, occupation or employment". The learned trial judge held that the respondent had committed breaches of ss.52 and 53(g) of the Trade Practices Act. However, he held that the appropriate measure of damages was that applicable in tort and that since there was no evidence to show that the cover under the total disability clauses was not worth the premiums payable for it, and since no consequential losses were proved, the appellant was not entitled to any pecuniary damages for the breach of those sections. He added that an alternative method of compensating the appellant for the loss or damage he had suffered would be to vary or rescind the policies and direct a refund of the premiums paid to date but that the appellant had not claimed to be compensated on that basis. He went on to hold that the statements made by the agent were intended to have contractual effect and that there was a collateral contract under which the appellant agreed to enter into the contracts of insurance and to pay the premiums thereunder in consideration of the respondent agreeing to pay disability benefits to the appellant in the circumstances represented by the respondent's agent. He assessed damages for breach of this contract at $66,003.

[17]

7. Actions based on ss.52 and 53 are analogous to actions in tort and the remedy in damages provided by s.82(1) appears to adopt the measure of damages applicable in an action in tort. That sub-section refers to loss or damage by the conduct of another that contravened a provision of Pt.IV or Pt.V; it therefore looks to the loss or damage flowing from the offending act of the other person. The acts referred to in ss.52 and 53 do not include the breach of a contract, and in awarding damages under s.82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractual measure of damages is therefore inappropriate in such a case. It has been held in the Federal Court in a number of cases that the measure of damages in tort, and not that for breach of contract, will apply in the assessment of damages under s.82 where there has been a contravention of s.52 or s.53: see Brown v. Jam Factory [1981] FCA 35; (1981) 35 ALR 79, at p 88; Mister Figgins v. Centrepoint [1981] FCA 15; (1981) 36 ALR 23, at p 59 and Brown v. Southport Motors (1982) 43 ALR 183, at p 186. This view is plainly correct. I have recently discussed the measure of damages in an action for deceit in Gould v. Vaggelas [1985] HCA 85; (1984) 58 ALJR 560, at pp 561-563; 56 ALR 31, at pp 34-37. The appellant in the present case was entitled to recover the difference between the price paid to have the total disability clauses included in the policies (that is, the amount of $2.09 per month in each case) and the value of those clauses at the time the policies were issued. He was also entitled to recover consequential loss, at least if it was foreseeable. It was not proved that the benefits conferred by the clauses were not worth the amount of the additional premium paid. It was not proved that the appellant suffered any consequential loss. It has not been shown either that if the representations had not been made the appellant would have taken out a different policy conferring benefits of the kind which it was represented to him that the total disability clauses conferred, or that it would have been possible to obtain such a policy. As was said in the Full Court, "The inference seems inescapable that, but for the statements, Mr. Gates would have proceeded exactly as he did save that he would not have paid extra for total disability cover." The claim for damages under the Trade Practices Act was not made out. No application was made for the making of any ancillary orders under s.87. No doubt, under that section, the court could have awarded rescission of the policies and return of the premiums paid, but that course was not sought and would in any event have afforded little benefit to the appellant.

At a glance

Court

Decision date

Before

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Judgment (50 paragraphs)

Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 (20 February 1986)

Parties

Legislation Cited (2)

Cases Cited (10)