Green v AMP Life Limited

Green v AMP Life Limited - [2005] NSWCA 354 - NSWCA 2005 case summary — Zoe

[13]

14 October 2005 GARY SYDNEY GREEN v AMP LIFE LIMITED & ORS Judgment 1 SPIGELMAN CJ: I agree with Basten JA. 2 GILES JA: I agree with Basten JA. 3 BASTEN JA: For some 26 years prior to April 2002, Mr Green (the Appellant) was a financial planner and an agent selling insurance policies underwritten by AMP Life Limited. He was a member of the Australasian Association of AMP Society Agents ("the Association"). 4 On 11 April 1997, an arrangement was created by trust deed known as the Income and Agency Protection Plan. The purpose of the plan was to provide income protection for agents in the event of disability. The mechanism by which that protection was provided was that trustees of the plan entered into (or obtained the benefit of) a policy issued by AMP Life Limited. Pursuant to the plan, members of the Association could, by making application to AMP Life Limited, become entitled to receipt of benefits under the policy upon disablement. 5 Information concerning the plan was made available to agents by way of a consumer information brochure. At some point in the year 2000, the Appellant received a copy of issue no. 5 of the brochure. The brochure included an application form. On 18 December 2000 the Appellant completed a copy of the application form, which was sent to the Trustees in January 2001. On 10 May 2001 AMP Life Limited wrote to the Appellant advising that his application had been accepted and enclosing a single paged document headed "2001 IAPD Individual Member Cover Details". 6 In October 2001 the Appellant was diagnosed as suffering from a mental illness. AMP Life Limited accepted his claim under the policy for payment of a total disablement benefit, accepting that his mental condition was one which made him unfit to carry out his occupation as an agent. However, it ceased to pay benefits to him after two years from the commencement of such payments. The primary issue which arose below, and on appeal, was whether the Appellant's entitlement to payment of the benefit ended after two years, or was on-going. 7 The background to the dispute arose out of a purported amendment to the policy agreed upon late in 1999 and purportedly effective from 1 January 2000. The effect of the amendment was to limit the payment of benefits for mental disorders to a period of two years. At the heart of the Appellant's case was the proposition that the amendment had not been effective, because the parties to the policy had not produced a form of wording for the amended policy until 2004. 8 On 4 June 2004 the Appellant commenced proceedings in the Equity Division by way of summons seeking declarations which appear to have been intended to establish, in substance, a continuing entitlement to benefits, not limited to the period of two years. Pre-litigation correspondence suggested that the claim was based on construction of the amended policy. 9 This straightforward claim was supplemented by a statement of claim which was amended in November 2004. By the time the trial commenced on 21 February 2005, the Appellant was: (a) asserting that there had been no effective amendment of the terms of the policy, (b) making a claim under s 52 of the Trade Practices Act 1974 (Cth) for misleading and deceptive conduct on the part of AMP Life Limited, and (c) making a claim for breach of fiduciary duty against the Trustees of the plan. Further, in the alternative to the argument that the policy had not been the subject of an effective variation from 1 January 2000, the Appellant argued that AMP Life Limited was estopped from asserting, as against him, that such a variation had been made and, separately, the Appellant claimed a contractual entitlement based on a direct contract between himself and AMP Life Limited. 10 The proceedings were heard before Campbell J (the primary judge) over a period of some four days in February and March 2005. On 6 May 2005 his Honour dismissed the plaintiff's claim and made a declaration as to the relevant terms of the insurance policy in conformity with the terminology adopted by a "memorandum of alteration" executed on behalf of AMP Life Limited on 5 August 2004: see Green v AMP Life Limited [2005] NSWSC 370. His Honour also ordered the plaintiff to pay the defendant's costs.

[16]

Mr Campbell added that "there was no dissent from that statement". 13 Mr Campbell was cross-examined as to the effect of this passage in his affidavit, the thrust of the cross-examination being that it was a reconstruction of a matter of which he had no specific memory. His Honour, who heard Mr Campbell, accepted the evidence in his affidavit. 14 On the appeal, the Appellant challenged both the finding and its legal consequence. In relation to the challenge to the finding, the thrust of the complaint was that any inference of a contractual agreement to vary the policy document in that way was manifestly inconsistent with the process within AMP Life Limited, as outlined by the witnesses, which involved consideration of the proposed variation both by senior officers and, in usual circumstances, by AMP's lawyers. What happened in late 1999, as the Appellant argued, was agreement on terms which were to go in the brochure, but no agreement as to the wording which was to be included in the policy document. 15 Although there was no express statement by anyone that the agreement with respect to the policy variation was "subject to contract", the argument in this Court accepted as a helpful structure within which to proceed, the three classes of agreements identified in Masters v Cameron (1954) 91 CLR 353 at 360. In that well-known passage, the joint judgment stated: "[The agreement] may be one in which the parties have reached finality in agreeing all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."

[17]

The present case, in relation to the variation, was not capable of falling within the second category and accordingly must either have fallen within the first class (parties intending to be immediately bound) or within the third class (no concluded bargain until formal wording prepared). 16 The Appellant argued that the variation fell within the third class, because there was a well-established "sign-off process" within AMP Life Limited. Various witnesses, it was submitted, had attested to or accepted that fact. Although it was clear that the process had been followed in relation to the brochure, the brochure itself stated that it was subject to the terms of the policy. Accordingly, AMP Life Limited itself gave separate and predominant effect to the policy. Because it was not in dispute that the formal variation of the policy had not been effected until April 2004, it must have been the case, so it was argued, that the variation had no effect, despite the terms of the brochure, until the memorandum of alteration to the plan was executed on 5 August 2004. 17 The primary judge found that a binding and effective agreement was reached between the AMP Life Limited and the Trustees at least by the time that Mr Campbell, on behalf of AMP Life Limited, executed the "sign off certificate" for the brochure, on 23 November 1999. Whilst his Honour was conscious of the fact that no similar certificate was then executed in relation to the policy, as might have been expected, his Honour noted that there were significant and weighty factors which favoured an objective assessment of intention to be bound by the policy document subject to the variation. For example, his Honour noted that AMP Life Limited could not lawfully issue a policy unless an actuary had given written advice about the terms and conditions under which the policy was issued, pursuant to s 116 of the Life Insurance Act 1995 (Cth): at [56]. That advice was provided on 30 December 1999. Secondly, his Honour noted that the premium rates were those which Swiss Re had approved on the basis that the amendments it wanted had been made: at [58]. Thirdly, his Honour noted that, although there was on-going discussion between the Trustees and AMP Life Limited during the year 2000, without agreement being reached, those discussions did not support the Appellant's argument, but rather the contrary. His Honour stated at [99]: "Those discussions do not detract from there having been an agreement, which was put into effect from 1 January 2000, concerning introduction of the mental illness limitation. Rather, what they show is that the trustees continued to be dissatisfied with the agreement that they had reached, and were seeking, unsuccessfully, to change it." 18 In short, both AMP Life Limited and the Trustees of the plan continued to issue policies and administer the trust, respectively, on the basis that the relevant variation had been made. The evidence of each of Mr Campbell (for AMP Life Limited) and Messrs McLean, Kelly and Patterson (being the Second-Fourth Respondents and the Trustees of the plan) affirmed that the document executed in August 2004 conformed to the changes agreed in November 1999. Each of them stated in their affidavits that "the memorandum reflected the amendments to the Plan that I had agreed upon during November 1999" or words to that effect: none of them was shaken in cross-examination. The memorandum executed in August 2004 itself stated that "the policy is amended with effect from 1 January 2000" by the amendments thereafter set out. The language set out in that memorandum was not identical with that found in the brochure, but its effect is the same. 19 In these circumstances, his Honour concluded that the objectively determined intent of the parties was that the relevant variation take effect from 1 January 2000 and that the policy was so varied. No error has been shown in his Honour's reasoning or conclusion. 20 By way of cross-claim, the Respondents sought an order of rectification to give effect to their common subjective intention, being the intention of the respective parties to the policy, that the document be so varied. His Honour stated at [180]: "I conclude that the trustees, and AMP, each had a subjective intention that the amendment to the Plan concerning the limitation on mental illness benefits would take effect from 1 January 2000. They also had a subjective intention that that amendment would be given effect to by an appropriate written amendment to the policy document being made. It was not the subjective intention of any of them, however, that no such amendment to the terms on which insurance was offered under the Plan would be effective until such a document had been executed. These conclusions do not lead, however, to a conclusion that the policy document should be rectified. This is because, following the making of the agreement to vary the Policy, it was not the intention of the parties that their contract was one which was one expressed in writing, so far as that variation is concerned. They intended that their contract would become one expressed in writing, but that is not the same thing."

[19]

Variation not in writing 21 In order to avoid the conclusion that, if his Honour's factual finding were upheld, the appeal would fail, the Appellant sought to raise a legal submission based on the requirement identified in the Life Insurance Act that a life insurance policy must be in writing. This contention was resisted by the Respondents, who asserted that it had not been raised in any substantial manner below and, had it been raised, might have been answered by evidence supporting an estoppel. For present purposes, it is not necessary to address the merit of that objection. Nor is it necessary to address in detail the specific provisions of the Life Insurance Act relied upon by the Appellant for the proposition that a life policy must be in writing. That conclusion may, in broad terms, be accepted, although it should be noted that there is no provision expressly requiring that the policy be in writing, or prescribing any consequence for failure to reduce a contract or policy to written form. 22 The submission fails for other reasons. First, it was not demonstrated that the variation had not been reduced to writing. Indeed, it was common ground that it had been, in late 1999, although it did not in terms identify the clauses of the policy which were being varied, but only the effect of the variation. Nevertheless, as his Honour noted, a form of variation was given to the appointed actuary under s 116(1), who, so far as is known, had no difficulty in providing the written advice as to the likely consequences of the proposed variation. 23 In seeking to draw the Court's attention to the provisions which assumed the existence of a written policy, the Appellant referred to s 198 of the Life Insurance Act, which empowers ASIC to seek copies of forms of proposals or policies and, where appropriate, to give a written direction to change the form in a way specified: see s 198(3). One could envisage that, in the present circumstances, if ASIC had inquired as to the form of policy adopted with respect to the plan, and sought the relevant policy document in 2003, it might have discovered that the variation said to have taken effect on 1 January 2000 was not recorded in a memorandum of variation executed by an appropriate officer of AMP Life Limited and was inadequately identified by the brochure or other documentation. If ASIC had required that the variation be put in its current formal state, no doubt AMP Life Limited would have complied with the direction. However, it would seem at least plausible that the effect of such a direction would merely be to vary the form of the policy, not its terms or conditions. 24 This last matter focuses attention on the imprecision of the submission made on behalf of the Appellant. It was common ground that the variation now exists in a formal and appropriate document. The submission for the Appellant must go so far as to suggest that a life policy cannot have a particular effect unless each of its terms or conditions has been reduced to writing prior to the policy being issued to a particular beneficiary. It was not explained how that inference could be derived from the terms of the Life Insurance Act. 25 In relation to a separate argument that there was a contract between the Appellant and AMP Life Limited directly, the primary judge noted at [150] that he was not satisfied that the relevant analysis had been "squarely argued", in part because no consideration had been given to the provisions of the Life Insurance Act. Where there is an attempt to impose a financial obligation on a life insurance company, it will usually be necessary to give consideration to the possible consequences of such liability in relation to the scheme of prudential regulation, in order to be sure that the relevant State law is one which is capable of operating concurrently with the Commonwealth Act: see Life Insurance Act, s 233(1), and see generally, in relation to the Life Insurance Act 1945 (Cth), Australian Mutual Provident Society v Goulden (1986) 160 CLR 330 at 335-337. In relation to the present argument concerning a statutory obligation for a policy to be in writing, one might add, in similar vein, that no attention was paid in argument to the operation of s 230 of the Act which provides: 230 A life company's failure to comply with this Act does not invalidate any life policy issued by the company.

[21]

Estoppel 27 By way of an alternative argument, the Appellant asserted, both below and in this Court, that AMP Life Limited was estopped from asserting the variation of the policy, as against him. The factual basis for this argument was unpromising. It relied upon a single page document headed "2001 IAPP Individual Member Cover Details" which did not refer to the payment of benefits flowing from mental disorder (or other identified conditions) being limited, relevantly, to a period of two years. This material was unpromising for four reasons. First, it was provided to the Appellant after he had applied to enter the plan and his application had been accepted; secondly, the brochure from which he had extracted the application form expressly identified the limitation; thirdly, there was no reason to suppose that a one page document would summarise all the limitations, qualifications and conditions attached to the policy and, fourthly, he gave no evidence of anything specific done in reliance upon it. Nor was there evidence that AMP Life Limited intended, by providing the member cover details, that the Appellant treat the document as a complete statement of relevant limitations and restrictions on benefits. Furthermore, the circumstances of the case involved a policy restricted to agents who had experience in dealing in documentation relating to insurance policies because they were directly involved in marketing insurance policies. 28 The primary judge relied upon a passage in the reasons of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9 as a succinct statement of the elements of equitable estoppel. The first two elements in that statement identify an assumption or expectation of a particular legal relationship between a plaintiff and a defendant, the adoption of which has been induced by the defendant. However, the result in the present case may be clearer if the focus is placed on the nature of any representation made by AMP Life Limited as to the terms of the policy. In Foran v Wight (1989) 168 CLR 385 at 410-411, Mason CJ referred to "the traditional insistence on a clear and unambiguous representation as a necessary foundation for an estoppel", referring to Legione v Hateley (1983) 152 CLR 406 at 435-437 (Mason and Deane JJ) and the cases there cited. In the present case, it is unrealistic to suggest that the one page statement constituted an implied representation that there were no significant limitations or restrictions on payments under the policy, nor is any other conduct relied upon to constitute such an implied representation. 29 The estoppel argument must fail for these reasons and those outlined by his Honour at [104]-[117]. It is not necessary, for present purposes, to address in detail the challenges to each of the adverse findings made by his Honour in relation to the third-sixth factors identified by Brennan J in Waltons Stores.

[22]

Trade Practices Act claim 30 His Honour identified the basis of the claim for damages for contravention of s 52 of the Trade Practices Act in the following terms at [119]: "The claim relies upon two pieces of conduct. The first is the same representation, in the 10 May 2001 Member Cover Details document, as was the foundation for the estoppel claim. The second is a failure to advise the plaintiff at any time between 15 January 2001 and 4 May 2001 that AMP intended to amend the policy terms and conditions to provide that disability payments for mental disorders would cease after two years." 31 The second element of conduct relied on, the failure to advise, was premised on the assumption that the policy terms and conditions had not been amended prior to January 2001. That assumption was contradicted by his Honour's finding that such an amendment had been effective from 1 January 2000. As his Honour noted, the assumption was only otherwise correct in the trivial sense that the policy document itself had not been amended. A representation based on that assumption, as his Honour correctly concluded, could give rise to no loss: see [125]. 32 In relation to the first element of conduct relied on, namely the representation in the 10 May 2001 member cover details document, as his Honour noted, the claim failed for substantially the same reasons as those underlying the failure of the estoppel claim: at [121]. However, his Honour went on to make the following statement of principle, which was challenged on appeal: "In deciding whether conduct is misleading and deceptive, for the purposes of a claim for damages under s 82 Trade Practices Act 1974 (Cth), one considers the particular person who complains about the conduct, quite apart from any class into which such a person might fall: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 79 ALJR 308 at [36]-[37]. In deciding whether supply of a particular document is misleading or deceptive, one can take into account '… the nature of the parties, the character of the transaction contemplated, and the contents of the [document] itself' : Butcher, at [40]."

[23]

The complaint made about this passage was that Butcher was said to be concerned with the state of mind of the representor, a matter not in issue in the present case, which turned, on his Honour's analysis, on the conduct of the Appellant, including his failure to read the brochure from which he extracted the application form. 33 In fact, Butcher did not focus on the state of mind of the representor: the relevant passages in the joint judgment had quite a different emphasis. Butcher was concerned with a sale of real estate and a complaint by the purchasers that they had relied upon a diagram provided by the real estate agent, indicating that a swimming pool was on the landward side of the high water mark, and thus within the boundaries of the property which they sought to purchase. As the joint judgment noted at [39] "it is important that the agent's conduct be viewed as a whole". Their Honours continued: "It is also important to remember that the relevant question must not be reduced to a crude inquiry: 'Did the agent realise the purchasers were relying on the diagram?' to do that would be impermissibly to dilute the strict liability which s 52 imposes." 34 In one sense, the Appellant was correct in seeking to distinguish Butcher, that case being concerned with whether the real estate agent was the source of the representation, or was merely the conduit for a statement of which it was not the author, and which it did not seek to endorse. In the present case, it was not in issue that AMP Life Limited was the author of the relevant representation; however, its conduct needed to be identified. 35 The relevant conduct of AMP Life Limited, viewed as a whole, involved the promotion and issue of a life policy for the benefit of the Appellant: c.f. Butcher, at [128] (McHugh J). That conduct included the distribution of the brochure, as well as the member cover details document. Whether that conduct was misleading or deceptive did not depend, as a matter of fact, on whether the Appellant read each document, part of each document or no part of either document. Rather, an objective assessment was required to be made based on the particular circumstances of the case. In this respect, Butcher provides useful guidance. Thus, in relation to the brochure and diagram provided by the real estate agent in Butcher, the joint judgment discussed the appropriate level of analysis in the following terms (at [76]): "Finally, it is necessary to deal with a submission made by the purchasers that it was wrong to analyse the structure and language of the brochure too minutely. It is true that the level of analysis which is appropriate might vary from case to case. A more impressionistic analysis, concentrating on the immediate impact of the conduct, might be sounder where the document was only briefly looked at before a decision was made. In other cases a more detailed examination may be appropriate. Here the purchasers had the brochure for 12 days before the auction. They relied on it in instructing professional advisers, and they were embarking on a very serious venture. It is not inappropriate to look closely at the contents of the brochure before deciding whether the agent had made a representation." 36 As was put to counsel for the Appellant in argument, the complaint that the Appellant had not in fact read the brochure seemed to be directed to the question whether he may, by his own conduct, have contributed to the loss or damage suffered. As McHugh J noted in Henville v Walker (2001) 206 CLR 459 at [140]: "There is no ground for reading into s 82 doctrines of contributory negligence and apportionment of damages. No doubt, if part of the loss or damage would not have occurred but for the unreasonable conduct of the claimant, it will be appropriate in assessing damages under s 82 to apply notions of reasonableness in assessing how much of the loss was caused by the contravention of the Act."

[26]

Costs 40 A final ground of appeal concerned the order for costs made against the Appellant by the primary judge. The need to address that ground arises because the appeal has otherwise been unsuccessful and, subject to the separate challenge, his Honour's order as to costs would stand. 41 The substance of the challenge in this respect was somewhat obscure. The relevant ground merely asserted that an appropriate exercise of the discretion in relation to costs would have been to order that each party bear his or its own costs. In the written submissions, the Appellant added: "This was because the respondents in effect succeed on the basis of an oral amendment that was not disclosed to Appellant until these proceedings were commenced." 42 At the hearing of the appeal, it was further suggested that his Honour ought to have permitted further submissions to be made with respect to costs in the light of his reasons for judgment. 43 The challenge to the costs order made below should be rejected for three reasons. First, there was no procedural flaw in ordering, in effect, that costs should follow the event. It is common for civil litigation to involve a number of issues, some of which may or may not arise for determination, depending on the outcome of others. It is usual, and sometimes inevitable, that a competently presented case will recognise the need to deal with contingent issues, because the party may fail on its primary argument. Costs nearly always fall within that category. Where a party at a hearing fails to raise any point in relation to an order for costs, the court is entitled to assume that there is no basis upon which some order different from the usual order would be sought. Unless the court itself identifies some reason for taking a contrary view, it will generally be appropriate for the court to make orders as to costs without providing an opportunity for further submissions. This was such a case. 44 Secondly, if there is a particular circumstance which might justify an order other than that which the Court has made, it is generally open to a party to seek a variation of a proposed order before it is entered. A special order may be appropriate in circumstances where there has been an offer of compromise. In cases where an offer is likely to have been made, the court will often provide an opportunity for submissions as to costs; in other cases the parties may themselves indicate the possibility that such an opportunity may be necessary, without revealing which party has made an offer and on what terms. It was not suggested that this was such a case, but if it had been, a timely application to the trial judge would no doubt have been entertained. None was made. 45 Thirdly, the suggestion put in favour of a different order is not persuasive. The reference to the commencement of proceedings must be a reference to the filing of the summons on 4 June 2004. However, in February of that year, there was correspondence between the solicitor for the Appellant and solicitors for AMP Life Limited debating the construction of a provision which then appeared in the plan limiting the benefit period to a maximum of two years for injury or illness arising out of or in connection with a mental disorder. The Appellant confirmed, in an email to one of the Trustee respondents, on 19 February 2004, that the issue he sought to agitate was that the two-year period did not apply to him because he had not been hospitalised. The "oral amendment" referred to in the submissions was apparently the agreement at the meeting in October 1999 that the wording of the policy should be varied to accord with the proposed wording of the brochure. Whatever the date on which this factual assertion first become known to the Appellant, and whatever the basis on which the proceedings commenced, the proceedings were not abandoned when the Appellant became aware of this assertion, but proceeded with the correctness of the assertion, and its legal effect, being at the heart of the litigation. In these circumstances, the obvious result is that, the Appellant having been unsuccessful at trial, he should pay the Respondents' costs. Nothing was put in argument to undermine this result.

At a glance

Court

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Judgment (28 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (9)

Cited By (3)