Haddad v Allianz Australia Insurance Ltd

Judgment

1. On 13 May 2014 I delivered judgment in a case brought by Sally Haddad against Allianz Australia Insurance Limited (Haddad v Allianz Australia Insurance Ltd [2014] NSWDC 132). I found that Allianz had breached the contract which existed between it and Sally Haddad and, in addition, I found that it had engaged in misleading conduct contrary to what I will call the "statutory consumer law".
2. Having delivered that judgment, I asked counsel - Ms S Haddad, who appeared for the plaintiff, and Mr DP O'Connor who appeared for the defendant - to address some supplementary questions which I formulated. I will put on the record the three questions. There were as follows: 1. Is the plaintiff's claimed loss too remote to sound in damages for breach of contract? 2. Is the plaintiff's claimed loss too remote to sound in damages under the Australian Consumer Law for misleading conduct? 3. What damage has the plaintiff suffered, if any, from the defendant's purported unilateral cancellation of the policy?
3. Written submissions were addressed to those issues, plus another issue which emerged of the question of any statutory apportionment. I heard oral submissions from both counsel on 14 July 2014. It seems to me that my judgment should address the following issues. First is the contract point, which is the first question; second, the applicability of what I will call the "statutory consumer law", which includes the question of apportionment; thirdly, the question of remoteness under the applicable statutory consumer law, which is the second question I formulated; fourthly, the question of reliance; and, fifthly, the question whether the provisions of the Insurance Contracts Act 1984 (NSW) exclude the statutory consumer law.
4. I will address the first question to do with the contract point. Mr O'Connor addressed this issue by arguing that the question of damages or remoteness of damages does not arise because there was no acceptance of the repudiation of the contract which I found had occurred. I think Mr O'Connor is right about that. This contract was repudiated but the repudiation was not communicated to the plaintiff. Mr O'Connor referred me to Howard v Pickford Tool Co Ltd [1951] 1 KB 417. He relied upon the oft quoted passage from the judgment of Asquith LJ in the Court of Appeal. The passage appears at 421 and is as follows - "An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind. Therefore, a declaration that the defendants had repudiated their contract with the plaintiff would be entirely valueless to the plaintiff if it appeared at the same time, as it must appear in this case, that it was not accepted." In addition, Mr O'Connor relied upon the judgment of the High Court in Visscher v Giudice [2009] HCA 34; 239 CLR 361; 83 ALJR 1068. Heydon, Crennan, Kiefel and Bell JJ at 381 at [58] cited a passage from Rigby v Ferodo Ltd [1988] ICR 29 from the speech of Lord Oliver of Aylmerton where his Lordship said as follows about an employment contract - "Whatever may be the position under a contract of service where the repudiation takes the form either of a walk-out by the employee or of a refusal by the employer any longer to regard the employee as his servant, I know of no principle of law that any breach which the innocent party is entitled to treat as repudiatory of the other party's obligations brings the contract to an end automatically. No authority has been cited for so broad a proposition and indeed [counsel for the appellant] has not contended for it." His Lordship went on to say that he did "entirely fail to see how the continuance of the primary contractual obligation can be made to depend upon the subjective desire of the contract breaker." The passage extracted by the Justices of the High Court from Rigby v Ferodo Ltd concluded with his Lordship saying as follows - "For my part, I can see no reason in law or logic why, leaving aside for the moment the extreme case of outright dismissal or walk-out, a contract of employment should be on any different footing from any other contract as regards the principle that 'an unaccepted repudiation is a thing writ in water and of no value to anybody'." His Lordship was quoting from Asquith LJ's judgment in Howard v Pickford Tool.
5. In this case the contract came to an end in accordance with its terms. There was no relevant loss within that period, nor was there any relevant loss within the statutorily extended period. The contract came up for renewal on 22 July 2009 and had to be renegotiated between the parties to the former contract. All that Allianz had promised was to pay for an event within the period, not beyond the period.
6. The uncommunicated repudiation which occurred in this case of course leaves an insured person, such as Sally Haddad, exposed at the end of the contract. The insured may be unprotected because the insurer's obligation is to only "normally" offer renewal; hence, the legislature has stepped in to provide protection for an insured. They must receive notice of cancellation and, if not, they are automatically covered for a period equivalent to the original cover period.
7. The contract did not come "to an end automatically", adopting the passage relied upon in the High Court. The "continuance of the primary contractual obligation [cannot] be made to depend upon the subjective desire of the contract breaker." An "unaccepted repudiation is a thing writ in water and of no value to anybody." In my opinion, there was no damage to Sally Haddad arising from the repudiation of the contract by Allianz. This opinion does not disregard Ms Haddad's argument that Allianz's conduct involved more than a failure to give notice but a repudiation. I accepted that and so found; but, nevertheless, it remains the case that the repudiation of the contract was uncommunicated to the insured, Sally Haddad, and there was no contractual obligation on Allianz to offer a renewal.
8. I do not see the relevance of Ms Haddad's argument about a later insurer not being aware of an unacceptable risk. That may be unfair; it depends on the circumstances. For example, in this case, Allianz changed its mind about some of the factors which it took into account about the acceptability of the risk. I acknowledge that it could be unfair to both an insured and a later insurer, but that is why the legislature has stepped in. The argument is not relevant to the breach of contract in this case.
9. I turn now to the second issue of the applicability of what I call the "statutory consumer law", which picks up the question of apportionment as well. In her amended statement of claim filed on 25 October 2012, Sally Haddad pleaded and relied upon ss 20 to 22 and s 18 of the Australian Consumer Law. No issue was taken in the defence about the plaintiff's reliance upon those provisions. My judgment relied upon those provisions being the applicable law.
10. However, in addressing the question of apportionment which was raised, I had occasion to check when ss 18 and following of the Australian Consumer Law, which is sch 2 to the Competition and Consumer Act 2010 (Cth) came into effect. It seems that it had effect from 1 January 2011. I have not had the assistance of either counsel in addressing any transition provisions and whether the applicable law is that relied upon by the plaintiff or the Trade Practices Act 1974 (Cth), which was renamed the Competition and Consumer Act 2010.
11. The changes took effect on 1 January 2011. The events in this case occurred over 2009 and 2010. The loss, which Sally Haddad argues is the basis of her claim against Allianz, occurred on 2 September 2010, some months before the commencement of the Australian Consumer Law. I have not had the benefit of counsel addressing the question of, if the applicable law was the Trade Practices Act and not the Australian Consumer Law, the consequence of the fact that I relied upon the Australian Consumer Law in my judgment.
12. I might say in that regard that it seems to me, from my reading, that the provisions which are applicable to this case have not relevantly changed. In other words, if the applicable law was the Trade Practices Act, specifically s 52 so far as misleading conduct is concerned, I would have reached the same conclusion. However, it does seem to have a specific impact on the question which I raised about apportionment.
13. Apportionment of damages, according to the respective fault of a plaintiff or a defendant, is provided for by s 137B of the Competition and Consumer Act 2010. That provision, as I understand it, came into effect on 1 January 2011. Again I have not had the benefit of counsel addressing any transition provisions, but it seems to me that the provision about apportionment is unlikely to be applicable in this case. I may be wrong, of course, in these observations about the applicability of the statutory consumer law because I have not had the benefit of counsel addressing that question. Nevertheless, I am of the opinion that s 137B of the Competition and Consumer Act is not applicable.
14. I turn now to the question of remoteness under the statutory consumer law, which is the second question I raised for counsel to address. That issue also raises the question of the applicable law. Sally Haddad, under the new law, would rely upon s 236 of the Australian Consumer Law. If that provision was not applicable at the time, then she would have to rely upon s 82 of the Trade Practices Act. Again, it seems to me that there is little difference in the substance of the respective provisions.
15. Under s 82 of the Trade Practices Act there is a causal requirement that a plaintiff's injury must be sustained "by" a contravention of the Act, whereas under s 236 of the Australian Consumer Law, a person may recover any loss or damage which the person has suffered "because of" the conduct of another person which is in contravention of the Act. It seems to me, from the commentary provided by Russell Miller's Miller's Australian Competition and Consumer Law Annotated (31st ed 2011, Thomson Reuters), that it is not a relevant difference. I accept that there has probably been a more recent edition but, again, the issue was not addressed by counsel. I propose to deal with the question of remoteness under statutory consumer law as if that question can be dealt with in the same way under either provision.
16. Mr O'Connor, in his written submissions addressing this point, argued that the "conduct found to have been misleading happened outside the period of the contract of insurance" [45]. To my mind, that does not matter in this case. As it happens, there was an ongoing commercial relationship between Sally Haddad and Allianz, although not an ongoing contract. The commercial dealings concerned a claim under the former contract of insurance. They involved communications regarding settlement of that claim.
17. I have found, at [42] of my judgment, that, in those dealings, Allianz misled, probably by oversight, Sally Haddad. It matters not whether there was a current contract. The dealings were "conduct" in "commerce" which was likely to mislead Sally Haddad. Mr O'Connor develops his argument over [45 to 52] of his written submissions against Sally Haddad's claim that she has suffered loss "because of" his client's misleading conduct and that she should "recover the amount of the loss". Mr O'Connor concludes by simply asserting that a plaintiff being able to sue up to six years "operate far too harshly on the insurer".
18. The argument is that the misleading conduct provisions of the statutory Australian Consumer Law is "not intended to benefit those who fail to take reasonable care of their own interests", [52]. As I said, I propose to proceed as if there is no substantive difference between s 236 of the Australian Consumer Law and s 82 of the Trade Practices Act. Section 236(1) of the Australian Consumer Law relevantly provides as follows - "If (a) a person…suffers loss or damage because of the conduct of another person; and (b) the conduct contravened a provision of ch 2 or 3; the claimant may recover the amount of the loss of damage by action against that other person."
19. Subsection (2) goes on to provide that an "action under subs (1) may be commenced at any time within six years after the day on which the cause of action that relates to the conduct accrued." All of the authorities, of course, discussed the former s 82 of the Trade Practices Act. As I said, I do not think that there is any substantive difference. That is because s 82 provided for recovery where a person suffered loss or damage "by conduct of another person". There is, in my opinion, little relevant change from the causal link "by" to the causal link "because of". In Henville v Walker [2001] HCA 52; 206 CLR 509; 75 ALJR 1410 [163], Hayne J said of s 82 as follows - "What the Act directs attention to is whether the contravening conduct was a cause. It does not require, or permit, the attribution of some qualification such as 'solely' or 'principally' to the word 'by'."
20. In my opinion, the same can be said of the words "because of" contained in s 236(1). It seems to me that the first question is the relevance of common law principles in applying the statutory provision. That question was answered by a majority of the Justices of the High Court in Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494; 73 ALJR 12. At p 510 ([38]), McHugh, Hayne and Callinan JJ examined ss 82 and 87 of the Trade Practices Act, pointing out that that the "inquiry is one that seeks to identify a causal connection between the loss or damage that is alleged has been or likely to suffered and the contravening conduct." Their Honours go on to say that, once the causal connection is established "there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies." Their Honours said that "it is wrong to limit the apparently clear words of the Act by reference to one or other" of various common law analogies. Their Honours qualified their conclusions at 512 ([41]) by acknowledging that their opinion "is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit."
21. How should I approach the construction of this legislation? In Marks v GIO, Gummow J considered the legislation over p 526 ([95]) and following. His Honour said at 528 ([99]) that the Trade Practices Act "is a fundamental piece of remedial and protective legislation which gives effect to 'matters of high policy'. It is to be construed so as 'to give the fullest relief which the fair meaning of its language will allow'." I have omitted references by his Honour to authorities.
22. In Henville v Walker, McHugh J said at p 489 ([96]) that the "width of the potential application of s 82 and the objects of the Act tell against a narrow, inflexible construction of the section." Again I have omitted reference to authority. With those observations in mind, I note what was said by McHugh, Hayne and Callinan JJ in Marks v GIO at p 509 ([34]). Their Honours, having noted that s 82 provides, in effect, that the loss or damage that may be recovered by action "is the amount of the loss or damage suffered 'by conduct of' another person that was done in contravention" of the relevant provisions, their Honours went on to say that s 82 "contains no stated limitation of the kinds of loss or damage that may be recovered and contains no express indication that some kinds of loss or damage are to be regarded as too remote to be recovered."
23. In Henville v Walker, the High Court had to determine the applicability of s 82 of the Trade Practices Act to a case where the loss suffered by the claimant was the combined effect of a s 52 misrepresentation and the claimant's own error. Gummow J agreed with the reasons of McHugh J and with the reasons of Hayne J. It is, therefore, important to make reference to some of the passages from the judgments of those two judges. At p 493 ([106]), McHugh J said that if "the defendant's breach has 'materially contributed' to the loss or damage suffered, it will be regarded as a cause of the loss or damage, despite other factors or conditions having played an even more significant role in producing the loss or damage. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist even though the breach without more would not have brought about the damage. In exceptional cases, where an abnormal event intervenes between the breach and damage, it may be right as a matter of common sense to hold that the breach was not a cause of damage. But such cases are exceptional."
24. At 494 ([109]), McHugh J pointed out that the "courts have accepted that loss or damage is causally connected to a contravention of the Act if a misrepresentation was one of the causes of the loss or damage sustained by the claimant." His Honour quoted from a judgment of the Full Federal Court in Como Investments Pty Ltd (In Liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 41-550 at 43,619. The court there said as follows - "Acknowledging that people are often swayed by several considerations, influencing them to various extents, the law attributes causality to a single one of those considerations, provided it had some substantial rather than negligible effect." McHugh J said at 504 (136]) as follows - "Given the long history of the common law's recognition of the concept of remoteness in assessing damages in contract and tort and its relationship with the issue of causation, it seems proper to read the term "by" in s 82 as including the concept of remoteness. By remoteness, I mean that the loss or damage was not reasonably foreseeable even in a general way by the contravener." His Honour observed at p 505 ([140]) as follows - "Nothing in the common law, in s 52 or s 82 or in the policy of Act supports the conclusion that a claimant's damages under s 82 should be reduced because the loss or damage could have been avoided by the exercise of reasonable care on the claimant's part." Turning now to the judgment of Hayne J in Henville v Walker, I repeat the passage I had formerly quoted at [163] of his Honour's judgment. His Honour went on to say over pp 509 to 510, ([165]) that "nothing in the text of s 82(1) (or any of the other provisions of the Act) suggests that the carelessness of the person who suffers loss or damage as the result of contravention of the Act should be taken into account in deciding what was the amount of loss or damage actually suffered. Nor is some such limitation to be derived from considering the intended purposes of the Act. The very simplicity of the language used in s 82(1) appears to confine attention to the limited question of the historical relevance of the contravening conduct to the loss or damage sustained. It does not provide a basis for concluding that notions of contributory fault are to be given a place in its operation."
25. I take these remarks by Hugh and Hayne JJ, agreed with by Gummow J, as authoritative guidance in approaching Mrs Haddad's claim for loss. In my opinion, Allianz's conduct "materially contributed" to Sally Haddad's loss in the sense that Sally Haddad's ongoing dealings with Allianz up to November 2009, without Allianz mentioning that Sally Haddad was no longer insured by Allianz, no doubt left Sally Haddad with the impression that there was otherwise no issue with her insurance cover with Allianz.
26. I acknowledge that there was another contributing cause to her loss, namely, the fact that she overlooked the need to renew her insurance, not once but twice. I bear in mind that, for a substantial period, Sally Haddad was dealing with Allianz about another claim. It was resolved less than a year before the loss which this case is about. But those very dealings I have found were misleading Sally Haddad by inducing a belief on Sally Haddad's part that the business relationship between her, as insured, and Allianz, as insurer, was not fundamentally altered. In fact, it was fundamentally altered because Allianz had cancelled the contract of insurance between them and had failed to notify her of that cancellation.
27. In my opinion, Allianz's misleading conduct in the statutory sense has "'materially contributed' to the loss…suffered" by Sally Haddad and should, therefore, "be regarded as a cause of the loss or damage, despite other factors or conditions having played…a significant role in producing the loss or damage." I have been quoting from McHugh J's judgment in Henville v Walker at 493 ([106]). I have omitted his Honour's reference in that case to the other factors playing "an even more significant role in producing the loss" because, in my opinion, in this case, the roles were about the same.
28. I do not regard this case as falling into one of McHugh J's "exceptional cases". It is not an extraordinary or abnormal event for someone to overlook paying their insurance premiums. There was evidence in the case in the form of some correspondence which was exhibited to an affidavit that Sally Haddad carried a number of insurances with Allianz which included personal and business insurances.
29. People have various forms of insurance often falling due at different times and are used to responding to a renewal notice. It bothers me that so much time passed, but here it is relevant that there were negotiations up to within a year of the loss in question. By reference to what McHugh J said at p 504 ([136]), I do not regard the loss as "not reasonably foreseeable even in a general way" by Allianz. It is reasonably foreseeable that someone could overlook their premiums or forget to check that they are still insured. People's lives can be busy and, in my opinion, it is reasonably foreseeable that a person could overlook checking that one of their insurances is up to date, especially if the insurer has negotiated and paid a claim in the meantime. In my opinion, Sally Haddad's loss in this case was "because of" or "by" the conduct of Allianz in its misleading of her.
30. I turn now to the fourth issue, which was a matter raised by Mr O'Connor of Sally Haddad's reliance upon his client's conduct. Although a lack of reliance was not specifically pleaded in Allianz's defence, I will treat its general denial of the assertions of liability under the statutory consumer law as putting the question of reliance in issue.
31. In the affidavit of Jim Haddad, Sally Haddad's husband, which was exhibit B, he made it clear at [1] that he was the conduit to his wife, Sally Haddad, the insured. In addition, in his evidence at p 26 he said as follows - "Well, I am Sally Haddad's husband and I was conducting this matter in its entirety on her behalf. All the communications with the assessor were with me. Any mail that came would have come in her name because she was the insured, but it was mail that was referred to me and I dealt with it. All the responses to Allianz and to other places were written by myself and explained to my wife what was happening and what the letter was about, and she read it and signed it. So I'm the one that fully knows everything about this claim. If Sally Haddad was to come here, which she could, but she wouldn't know as much as me. She couldn't be able to be of much assistance to anybody."
32. There is also some evidence of reliance which appears in Jim Haddad's affidavit, exhibit B, which appears as part of annexure L at p 108 which is in the correspondence. In addition, there is a passage in the judgment of the Full Court of the Federal Court of Australia in Jones v Acfold Investments Pty Ltd (1985) 6 FCR 512; 59 ALR 613 which appears at 523. Sheppard, Morling and Spender JJ having referred to authority said over 523 to 524 the following - "As those cases make clear, if a representation is provided which is of such a nature as to be likely to induce a representee to act upon it, the inference may be drawn, if the representee does act, that he has acted in reliance on the representation. But since the inference is one of fact it may be rebutted by other evidence which is inconsistent with the inference."
33. Wilson J made a similar observation in Gould v Vaggelas (1985) 157 CLR 215 at 238. To my mind, it is probably that Sally Haddad would rely upon the misleading conduct, which I have found Allianz engaged in, on the question of the existence of insurance cover. I would so infer that reliance. That is for these reasons. It is contrary to common sense that Sally Haddad would insure an asset for some years, make claims and then leave it uninsured.
34. The context is that Sally Haddad has other business and personal insurances with Allianz. Had she just let it lapse or if the contract was cancelled, then the remedy is provided by statute, but here Allianz actively dealt with Sally Haddad regarding a claim under the policy, which policy insured a significant asset. Allianz knew that it no longer covered the asset but said nothing to Sally Haddad. Sally Haddad no doubt assumed that the asset was still insured, but here there was a significant contribution to that assumption provided by the conduct of Allianz. I would infer that Sally Haddad relied upon the conduct of Allianz.
35. Mr O'Connor argued that a finding of reliance by Sally Haddad raises a question of procedural fairness because she was not called as a witness in the case. There is, in my opinion, no procedural unfairness, as I have found Jim Haddad was essentially a conduit to his wife and he was available for cross‑examination. Any reliance by Jim Haddad I can, based upon his evidence, clearly attribute to Sally Haddad, the plaintiff.
36. Finally, I turn to the fifth issue of whether the Insurance Contracts Act excludes the operation of what I will call the "statutory consumer law". Mr O'Connor argued that relief is not available under the statutory consumer law, partly because of the existence of the Insurance Contracts Act, but s 7 of that Act provides as follows - "It is the intention of the Parliament that this Act is not, except insofar as this Act, either expressly or by necessary intendment, otherwise provides, to affect the operation of any other law of the Commonwealth, the operation of law of a State or Territory or the operation of any principle or rule of common law (including the law merchant) or of equity."
37. There is no express provision in the Insurance Contracts Act dealing with the point made by Mr O'Connor nor, in my opinion, do I read that Act as having such an effect as contended for by way of necessary intendment. Section 58 in the Insurance Contracts Act has to do with an extension of cover under an existing contract of insurance, not with conduct in trade or commerce. This case is a very good example. The Insurance Contracts Act applied to the circumstance where there was an end to the contract without notice to the insured, but conduct engaged in by the insurer between itself and the insured to do with a claim under the former contract is another topic and one that is dealt with separately by the statutory consumer law.
38. In other words, an insurer is still obliged not to engage in misleading conduct in trade or commerce by reason of the provisions of the Insurance Contract Act. That Act does not exempt an insurer from its obligations under the statutory consumer law. The fact that the statutory consumer law provides for a limitation period of six years is not unusual; it is a common statutory limitation period and clearly a matter of legislative policy. In my opinion, the Insurance Contracts Act does not evince an intention to replace remedies provided for by statutory consumer law.
39. One final observation is that Mr O'Connor relied upon a passage in the judgment of Brennan CJ in Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; 192 CLR 603 at 608 regarding an insured's obligation to act reasonably to mitigate any loss suffered but that case, however, was not a case, as this one relevantly is, to do with the statutory consumer law.
40. I appreciate that I have not dealt specifically with the last question which I asked counsel to address. That is because that issue is the question of what damage Sally Haddad suffered, if any, from Allianz's purported unilateral cancellation of the policy. That is partly because, if that question relates to the contract question, it does not arise. If it relates to the statutory consumer law issue, as a result of direction, I am dealing at this stage with liability rather than damages and I apprehend that that issue might be more appropriately dealt with when the issue of damages is agitated. They are my reasons.

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