George Tzaidas bht Vickie Tzaidas v Child & Ors; Vickie Tzaidas v Child & Ors; Con Tzaidas v Child & Ors

Supreme Court of NSW|2003-07-22|Before: Michael Grove J, Grove J

CITATION : George Tzaidas bht Vickie Tzaidas v Child & Ors; Vickie Tzaidas v Child & Ors; Con Tzaidas v Child & Ors [2003] NSWSC 667 HEARING DATE(S) : Tuesday 22 July 2003 JUDGMENT DATE : 25 July 2003 JURISDICTION: Common Law JUDGMENT OF : Michael Grove J at 1 DECISION : In each case Motion dismissed.

CATCHWORDS : INSURANCE - APPLICATION TO SUE INSURER DIRECTLY - RIGHT OF INSURER TO DISCLAIM - FEDERAL AND STATE LEGISLATION LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1946 Insurance Contracts Act 1984 (Cth) C.A. and M.E.C. McInally Nominees v H.T.W. Valuers (Brisbane) 2001 188 ALR 439 Cassell & Co v Broome 1972 1 All ER 801 CASES CITED : FAI Insurance v Australian Hospital Care 2001 204 CLR 641 FAI General Insurance v Jarvis 1999 49 NSWLR 1 Hellyer v AMP General [2002] NSWSC 866 HIH Casualty & General v Dellavedova [1999] FCA 456 George Tzaidas by his tutor Vickie Tzaidas v Robert Peter Child, Hurstville Community Co-Operative Hospital Limited and Charles M. Scarf; PARTIES : Vickie Tzaidas v Child & Ors Con Tzaidas v Child & Ors FILE NUMBER(S) : SC 20445/01; 20448/01; 20444/01 COUNSEL : M.B. Williams SC with D. Ash (Plaintiff/Applicant) M. Ashhurst (Respondent: CGU Insurance) SOLICITORS : Charlton Shearman (Plaintiff)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20445/01 - GEORGE TZAIDAS by his tutor VICKIE TZAIDAS v ROBERT PETER CHILDS & ORS 20448/01 - VICKIE TZAIDAS v ROBERT PETER CHILD & ORS 20444/01 - CON TZAIDAS v ROBERT PETER CHILD & ORS

JUDGMENT 1 HIS HONOUR: These motions seek orders granting leave to individual plaintiffs to commence proceedings against CGU Insurance Limited (the insurer) pursuant to s6 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Law Reform Act). The plaintiffs are mother, father and child. It was not suggested that for present purposes any distinction need be drawn between them and it was convenient to have as evidence one set of affidavits in support, which were filed in the action brought by the infant plaintiff together with limited reference to parts of single affidavits in each of the actions brought by the parents respectively. From time to time where I am referring to identical matters language in the singular can be used. 2 The (amended) Statement of Claim alleges damage consequent upon professional negligence. The first defendant Dr Child is an obstetrician, the second defendant is Hurstville Community Co-operative Hospital Limited (the Hospital) and the third defendant Dr Scarf, is a paediatrician. Senior counsel for the plaintiffs was authorized to state on behalf of the first and third defendants that, on this motion, they submitted to such order of the Court as is made. 3 On 20 October 1999 Mr Martin Green was appointed Administrator (in the corporate sense) of the Hospital. Subsequently the Hospital entered a Deed of Company Arrangement and Mr Green was appointed Deed Administrator on 8 December 1999. Insofar as the plaintiff needs to show that the Hospital will be unable to satisfy any judgment against it and that action against it is probably ineffectual, counsel for the plaintiff noted that although it had now passed out of administration back into the hands of its directors "the weight of evidence suggests that it is impecunious in the relevant sense". Counsel for the insurer, who appeared to resist the motions, did not seek to dispute this statement. 4 The Hospital was covered in respect of specified risks under a policy of insurance in force from 30 June 1999 to 30 June 2000 with Pacific Indemnity, a business name under which the insurer traded. The indemnity available included liability for claims for compensation of the nature sought in the three actions. 5 The policy was of a type sometimes described as a "claims made and notified" or "discovery" policy in the parlance of the insurance industry. The policy excluded acts, omissions etc prior to the "specified retroactive date in the schedule" but the schedule in fact specified that "the retroactive date is without limitation". 6 Clause 4.1 of the policy is germane to the motions, namely: If during the Period of Insurance, the Insured becomes aware of any fact, situation or circumstance, including any written or verbal notice of demand for compensation, that may give rise to a Claims and elects during the Period of Insurance to give notice to Pacific Indemnity of such fact, situation or circumstance shall, for the purposes of this Policy , be deemed a Claims notified to Pacific Indemnity during the currency of this Policy . 7 Mrs Tzaidas was admitted to the Hospital for childbirth shortly before midnight on 15 November 1996. The infant plaintiff George was delivered at about 11 am on 16 November. Mr Tzaidas was a carrier of Haemophilia B also known as Christmas Disease or Factor IX deficiency. After the delivery both mother and child remained as in-patients at the Hospital. Observations were made of George's condition which progressed to apparent seizures in the early hours of 22 November. The child was taken by emergency transport to the Children's Hospital where he arrived on that day at about 11.40am. 8 The fact, situation or circumstance asserted by the plaintiff to make the Hospital (as insured, see clause 4.1 supra) aware that a claim may be made is to be derived from certain correspondence produced in answer to subpoena by Hurstville Community Private Hospital which had taken over the operation of the Hospital. 9 By letter dated 27 August 1999 solicitors (Martin Bell & Co) wrote to the Hospital in these terms: " RE: GEORGE TZAIDAS Address: 16 Jaffa Street FAIRFIELD WEST Born on: 16 November 1996 We wish to advise that we act for George Tzaidas. We are instructed that our client was treated by your hospital in respect of injuries sustained on 16 November 1996 and it would be appreciated if you could kindly let us have copies of all your clinical notes setting out the nature and conditions of our client's injuries, treatment given and prognosis. This request is made pursuant to the provisions of the Private Hospitals Regulations 1996 under the Private Hospital and Day Procedure Centres Act . We enclosed herewith our client's authority for such information together with our cheque for the sum of $30.00 being your fees herein. Further, we would be pleased if you could forward to us a statement of any fees incurred by our client in connection with those injuries, either paid or outstanding." 10 The papers included what appears to be a copy of a reply to that letter: "Regarding your letter, reference Tzaidis, I wish to inform you that request for access to the record of baby, Tzaidis, cannot be accommodated. The hospital genuinely endeavours to grant all patients access to their records. However the hospital protocol is as follows: · The patient (or their next of kin, as stated in the patient's record) writes personally to the hospital. · Appointment is made with hospital's resident doctor to go through the notes with the patient. · The patient's doctor may veto the above process. Yours faithfully, Philippa McCaffery General Manager." 11 Next is a letter dated 3 November 1999 addressed to Philippa McCaffery: " RE: GEORGE TZAIDAS Address: 16 Jaffa Street, FAIRFIELD WEST NSW 2165 Born on: 16.11.96 We refer to the above named and to your letter of 20 October 1999 which stated that you could not accommodate our clients request for access to clinical records. We note that under s42 of the Private Hospitals and Day Procedure Centres Act 1988, you are required to provide a patient's representative with access to their clinical records. Furthermore under s43, you are required to provide copies of these clinical notes to the patient's representative if so requested. Under the Act you are therefore required to provide our office, as the patient's representative, with copies the clinical records. In our letter of 27 August 1999, we enclosed our client's authority to this effect. If you refuse our request for access, you must inform us of the reasons for the refusal and of any rights of appeal that may exist in relation to the refusal. We do not understand your protocol that the patient must personally write to you requesting access. Please urgently advise us of your position in this regard." 12 Next is a letter dated 15 December 1999. It appears that this file copy which I have mentioned was produced on subpoena is on letterhead (as distinguished from the copy of the earlier letter to solicitors dated 20 October 1999) and it may be that this letter was not sent, having regard to the opening statements in the next letter of 29 February 2000 from the solicitors. The content of these letters was: "I refer to your correspondence of 3rd November. Pleased be advised that our policy for patients wishing to access their medical record is designed to ensure the patient is provided with appropriate clinical support whilst viewing their record. This support ensures they are able to interpret and understand the record's content. The Hospital considers it has a duty to provide this service to our patients. Please be advised that the baby's mother is named as next of kin in the baby's medical record and we would allow her to access the baby's record in accordance with our policy. I trust this clarifies our position for you."

And: " RE: GEORGE TZAIDAS We refer to the above named and to our letter of 3 November 1999, a copy of which is enclosed for your reference. We advise that we have not received a response from you in relation to same. We again reiterate that under s42 of the Private Hospitals and Day Procedure Centres Act 1988, you are required to provide our office, as Mr Tzaidas' representative, with copies of his clinical records. To date your office has refused and/or neglected to supply these records. We request that you urgently provide copies of these clinical records, or inform our office of your reasons for refusal. We await your early response." 13 On the issue to which this correspondence is asserted to be relevant, the plaintiffs also rely upon the content of the clinical notes themselves. There are also some file notes of "follow up" telephone calls none of which assert contemplated action. They do show a continuing interest by the solicitors in obtaining access to the notes. 14 Section 6 of the Law Reform Act creates a charge upon insurance moneys and sub-section (4) provides: "6 (4) Every such charge as aforesaid shall be enforceable by way of an action against the insurer in the same way and in the same court as if the action were an action to recover damages or compensation from the insured; and in respect of any such action and of the judgment given therein the parties shall, to the extent of the charge, have the same rights and liabilities, and the court shall have the same powers, as if the action were against the insured: Provided that, except where the provisions of subsection (2) apply, no such action shall be commenced in any court except with the leave of that court. Leave shall not be granted in any case where the court is satisfied that the insurer is entitled under the terms of the contract of insurance to disclaim liability, and that any proceedings, including arbitration proceedings, necessary to establish that the insurer is so entitled to disclaim, have been taken."

15 In addition to showing that any judgment against the Hospital will possibly be unsatisfied, the plaintiffs accept that it must be shown second, that there is an arguable case on the merits against the Hospital and third, that the Hospital is arguably indemnified against its liability by the insurer. In relation to this third matter a written outline of submissions by Mr Williams SC and Mr Ash, who appeared for the plaintiffs succinctly stated their position: "If the insurer is entitled to disclaim, leave must be refused: s6(4). In this matter, the insured did not give notice of a potential claim to the insurer during the relevant period. The effect of the contract of insurance would be that the insurer could refuse to (sic - the) claim. Without anything else, that would be the end of the story. However, there is s54 of the Insurance Contracts Act 1984, considered by the High Court in FAI Insurance v Australian Hospital Care 2001 204 CLR 641. " 16 I shall refer to the Insurance Contracts Act 1984 as "the Commonwealth Act". 17 Counsel referred to an observation by Powell JA in FAI General Insurance v Jarvis 1999 49 NSWLR 1 @ 18-19, that the coming into force of s54 of the Commonwealth Act depriving the proviso to s6(4) of the Law Reform Act of operation was "a position for which no one seems yet to have argued." This position is expressly argued on behalf of the plaintiffs. 18 In summary Jarvis decided that the provisions of the Commonwealth Act were irrelevant to any consideration of the question of whether leave to commence proceedings ought to be given pursuant to s6(4) of the Law Reform Act because the latter is directed, on application for leave to commence, to whether an insurer is entitled under its contract to disclaim liability, whereas the former is directed to the determination at trial of the extent of prejudice to the insurer and whether the act or omission of the insured which would otherwise have provided a disclaimer should be permitted to provide a defence in whole or in part to the claim already made by the insured. 19 I summarize my understanding of the thrust of contentions by Mr Ashhurst of counsel who appeared for the insurer:

That Jarvis is authority on the material issue which is binding on the court sitting at first instance. To borrow Mr Williams' expression, it is therefore "end of story".

Alternatively, the correspondence above recited together with any reference to the Hospital clinical records was insufficient to make the Hospital aware that a claim may arise, and

In the further alternative, that the evidence in support of the motion does not demonstrate an arguable case on the merits against the Hospital. 20 As I am of the view that Mr Ashhurst's first proposition is correct, it is strictly unnecessary to deal with the alternatives. However, whilst I consider that Jarvis is immune from challenge at first instance, it was made clear that if that view were taken consideration would be given to inviting appellate review where departure from that authority could be sought. In the light of that potential, I will briefly note my conclusions on the alternative propositions advanced on behalf of the insurer. 21 I turn to the first alternative. I have used the label "claims made and notified" as a convenient categorization of the policy but as was pointed out in Australian Hospital Care @ 652-653, labelling of contracts may obscure more than illuminate. Strict attention to the terms of any particular contract is required. The terms of the present contract in clause 4.1 above recited do not specify a necessity for demand for compensation (written or verbal) although such is expressly included, what is specified is awareness of fact, situation or circumstance that may give rise to a claim. 22 The solicitor's letter of 27 August 1999 did not give notice of intended claim against the hospital nor did the following exchanges. However, I am satisfied that the Hospital was aware of these circumstances. A solicitor was enquiring about injuries sustained on the day of George's birth. The request for clinical notes "setting out the nature and conditions of our client's injuries, treatment given and prognosis" could not reasonably be understood as relating to ongoing medical treatment given the emanation of the request from lawyers. Nor could it be thought that enquiry was being made in connection with some antecedent injury as it is clear there is allegation of injury on 16th November, the day of birth. The Hospital may be taken to be aware of circumstances recorded in its own notes. They reveal a manifestation of symptoms including persistent vomiting. Importantly the notes reveal the need for Factor IX was recognized (apparently by a Registrar) and the Hospital must have been aware that it had no supplies of this. The Hospital would also be aware of the circumstances in which the newborn baby was removed from its care by emergency transport and taken to the new children's hospital. 23 It is not to the point that viewed in isolation, the initial letter from solicitors might have been thought to imply contemplation of action against the medical attendants who were not employees of the Hospital. The question is whether the Hospital was aware of circumstances which may give rise to a claim against it even if jointly or severally with others, and I would answer that question in the affirmative. 24 In argument on these issues Mr Ashhurst invited comparison with what had been found sufficient or insufficient to fulfil like conditions in other cases. In Australian Hospital Care the relevant clause referred to awareness of any "occurrence" and there was a letter expressly referring to considering bringing action against the insured. In C.A and M.E.C. McInally Nominees v H.T.W Valuers (Brisbane) 2001 188 ALR 439 a letter from solicitors to valuers stating, inter alia, that enquiries with local agents indicated a likely sale price of property substantially below a valuation by them was held not to give the valuers an understanding that a claim was being adumbrated against them. In HIH Casualty and General v Dellavedova [1999] FCA 456 a series of letters from solicitors to accountants including assertions such as "claims made in the cash flow analysis may not be justified" were held not to assert a claim. Nor did a stated intention to seek pre-action discovery pursuant to Federal Court Rules suffice. In Hellyer v AMP General [2002] NSWSC 866, Smart AJ opined that a conversation in which a client telephoned the principal of a diving business at Cairns informing him that she was hospital for hyperbaric treatment for "the bends" at HMS Penguin in Sydney and suggesting that other participants in a diving course should be checked would have made the principal realise that a claim might be made against him. 25 All of these cases turn upon their own facts and the particular provisions of the insurance contracts and my conclusion in the present case is as above stated. I should add for completeness that the plaintiffs relied upon a report from Dr Boyd, a medical administrator of wide experience but I have not relied upon any of the content of his report to reach my conclusion. 26 The second alternative contention on behalf of the insurer was that the evidence fell short of demonstrating that the plaintiffs have an arguable case on the merits against the Hospital. There is evidence in the affidavit of Vickie Tzaidas of expressions of concern by her to Hospital staff about George's condition. There is also description by Con Tzaidas of observations of intense jerking movements of legs and arms and head twitching when the child had reached the third day of life. The hospital notes are replete with observations of the baby's distress and failure to settle into a rhythm of life. I am conscious that the Hospital's medical records locate the first expression of concern by the mother at the fifth day but the Hospital could be argued to have displayed some inertia in the sense of simply awaiting the visits from medical attendants before taking action. There is reference to Registrars and I infer that such were employed at the Hospital. There is reference to the identification, apparently by a Registrar, of the requirement for Factor IX as distinct from other steps and no supply was ever obtained by the Hospital, the evidence being that the first administration was within a couple of hours of the baby arriving at the new children's hospital. 27 It is recognized that prima facie breaches of duty discussed in the reports of Doctors Barrowclough and McWhirter focus upon the situations of the first and third defendants in the actions, but the present requirement is simply to show at least an arguable case against the Hospital (see Insurance Law in Australia, Sutton, 3rd Edn par 2.122) and there is in my opinion sufficient material to meet that undemanding test. It is arguable that the Hospital stood by awaiting advice or instruction from consultants who they ought to have known would only be intermittently available and that there were indications for early response and emergency action such as in the event that took place when the child was removed. 28 I return to the first contention advanced on behalf of the insurer. I have mentioned the explicit ruling in Jarvis that s54 of the Commonwealth Act is irrelevant to granting leave pursuant to s6(4) of the Law Reform Act. The plaintiffs point to these passages at the conclusion of the joint judgment (McHugh, Gummow and Hayne JJ) in Australian Hospital Care @ 660: "…. if a third party had made a demand on the insured during the period of cover but, for whatever reason, the insured had not notified the insurer of the making of that demand until after the period of cover ended, it is apparent that the effect of the contract, but for s54, would be that the insurer may refuse to pay the insured's claim only by reason of the failure to notify the fact of the demand. Similarly, in the present case, the claim which the insured made on FAI was for indemnity against liability for an occurrence of which the insured first became aware during the period of cover. The effect of the contract of insurance is that FAI could refuse to pay that claim by reason only of the fact that the insured did not give notice of the occurrence to it. Section 54, therefore, requires the conclusion that FAI may not refuse to pay the insured's claim. The effect of the contract of insurance, but for s54, would be that the insurer may refuse to pay the insured's claim by reason only of the omission of the insured to notify the occurrence which at the time, was one which might subsequently give rise to a claim by the third party against it. That being so, the section is engaged. No prejudice to the insurer's interests was suggested. " 29 Neither in this case was any prejudice to the insurer's interests specifically raised. 30 I derive an impression of some strength that those views, if applied to the present issue would suggest a contrary conclusion to that reached in Jarvis. Of course, Jarvis was not referred to in Australian Hospital Care as the appeal did not involve s6(4) of the Law Reform Act, of which there is apparently no counterpart in Queensland (see Sutton @ par 2.114) from whence that appeal came. Mr Ashhurst argued that Australian Hospital Care was entirely irrelevant in the present debate and that is true in the sense that neither the issue in Jarvis nor its authority was in focus. That is not to say, however, that the basis of engagement of the Commonwealth Act there determined cannot provide exposition of the law. But there is an important question of judicial discipline departure from which can have unfortunate results. As Lord Hailsham remarked in Cassell & Co v Broome 1972 1 All ER 801 @ 809 "….. in the hierarchical system of courts which exists in this country, it is necessary for each lower tier, including the Court of Appeal, to accept loyally the decisions of the higher tiers". The comment is applicable to courts in the Australian federation. 31 Mr Williams argued that I should hold Jarvis impliedly overruled by Australian Hospital Care but in the absence of stated disapproval or clear contradiction I would not regard such a finding as compatible with appropriate exercise of first instance jurisdiction. It might be noted in passing that, for reasons which he gave, Smart AJ in Hellyer expressed reservations about Jarvis but accepted that he was bound by it. As I have said, I am of like opinion. 32 In each case the motion is dismissed and the plaintiff is ordered to pay the costs of the respondent CGU Insurance Limited. I note that no order for costs affecting the submitting parties is sought. **********

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