Hannover Life Re of Australasia Limited v Sayseng

CATCHWORDS: INSURANCE - Liability to pay under group life contract held by trustee of retirement fund - Whether the incapacity of the "insured person" satisfied the definition of "total and permanent disablement" as required by the policy - Whether employee the "insured person" - Whether insurer was under a duty of good faith and fair dealing vis-à-vis employee as well as the trustee - Whether if there was such a duty of good faith it was breached so far as the employee was concerned - Basis for extending duty to person not a party to insurance contract who only indirectly benefited from it in that the insurance money funded the trustee's payout to employee and the payout depended on it - Content of duty of good faith where lack of procedural fairness to employee. - CONTRACT - Privity - Incremental extension of Trident principles.

Insurance Contracts Act 1984 s48 LEGISLATION CITED: Superannuation Industry (Supervision) Act 1993

Beverley v Tyndall Life Insurance Co Ltd (1999) WAR 327 C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25 Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175 Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415 Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 Maciejewski v Telstra Super Pty Ltd [1999] NSWSC 341 CASES CITED: Rapa v Patience (McClelland J, 4 April 1985, unreported) Tonkin v Western Mining Corporation Ltd [1998] 10 ANZ Ins Cas 61-397 Trident General Insurance Co Ltd v McNiece Bros Pty Limited (1988) 165 CLR 107 Verinder v Australian Institute of Steel Construction Ltd (2004) 13 ANZ Ins Cas 61-589 Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380 Wyllie v National Mutual Life Association Ltd (Hunter J, 18 April 1997, unreported)

HANNOVER LIFE RE OF AUSTRALASIA LIMITED (ACN 37 062 395 484) (Appellant) PARTIES: Diosdada SAYSENG (First Respondent) KELLOGG SUPERANNUATION PTY LIMITED (Second Respondent)

D DAVIES, SC (Appellant) COUNSEL: I HARRISON, SC/ G BEAUCHAMP (First Respondent) Submitting appearance (Second Respondent)

Deacons (Appellant) SOLICITORS: Firths, The Compensation Lawyers (First Respondent) Blake Dawson Waldron (Second Respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41138/03 SC 5048/02

SPIGELMAN CJ SANTOW JA TOBIAS JA

23 JUNE 2005 HANNOVER LIFE RE OF AUSTRALASIA LIMITED v Diosdado SAYSENG & 1 Ors Judgment 1 SPIGELMAN CJ: I agree with Santow JA. 2 SANTOW JA: OVERVIEW The appellant, Hannover Life Re of Australasia Limited ("Hannover" or "the insurer") is the insurer under Group Life Contract No. VGL 8034 ("the policy") held by the second respondent, Kellogg Superannuation Pty Limited ("the Trustee"), as trustee of the Kellogg Retirement Fund ("the Fund"). While the policy covers only the Trustee with respect to payments made by it under the Fund, those payments depend upon a Kellogg employee-member of the Fund suffering " total and permanent disablement ". That requirement depends on the Trustee forming an opinion to that effect. But where, as here, a group insurance policy has been taken out, liability to pay also depends on its definition of " total and permanent disablement " being satisfied. That definition is predicated upon the insurer forming an opinion that the " Insured Person " is incapacitated to the required extent. 3 In the present case, the member of the Fund claiming total and permanent disablement was Mr Diosdado Sayseng ("Mr Sayseng"), the first respondent. Mr Sayseng successfully challenged Hannover's determination that he was not so disabled in proceedings before Bryson J. This appeal is brought by Hannover only, as the Trustee has elected not to be involved in the appeal. 4 I set out below the relevant clause of the Trust Deed (cl 10(1)) governing Mr Sayseng's entitlement to payment from the Fund: " 10 TOTAL & PERMANENT DISABLEMENT

(1) Where, in the opinion of the Trustee, a Member becomes totally and permanently disabled while in service prior to the Normal Retirement Date and where the Trustee has effected a policy of insurance to secure part or all of the benefits payable in accordance with this Rule 10 and the Member becomes totally and permanently disabled within the meaning of the definition of such disablement in that policy, a benefit of the amount specified in sub-rule (3) of this Rule shall be payable in accordance with sub-rule (4) of this Rule." 5 The relevant clause in the policy dealing with the definition of "total and permanent disablement", to which clause 10(1) refers, is as follows: " TOTAL AND PERMANENT DISABLEMENT means: … (b) having been absent from work through injury or illness for an initial period of six (6) consecutive months and in our opinion being incapacitated to such an extent as to render the Insured Person unable ever to engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience." [emphasis added] 6 I refer later to the significance attaching to the reference to Mr Sayseng as "the Insured Person" in terms of his capacity to assert rights under or by reference to the policy, though not a party to it. 7 The appellant challenges the declaration and order made by the trial judge. The challenged declaration set aside Hannover's purported determination of whether Mr Sayseng was totally and permanently disabled within the meaning of the definition of that expression in the policy. That determination was contained in Hannover's letter to William M Mercer Pty Limited of 27 April 2000 stating that "We are unable to deem Mr Sayseng totally and permanently disabled" within the policy definition. That determination was declared by Bryson J to be void. His challenged order was that it be determined by the Court as a separate question whether Mr Sayseng was, at the relevant time, in the condition of "Total and Permanent Disablement" within the meaning of the definition of that expression in the policy. 8 The challenged declaration was made on the basis that the insurer was under a duty of good faith and fair dealing vis-à-vis Mr Sayseng as well as the Trustee. The existence of such a duty was disputed on appeal. So too whether, if there were such a duty, it was breached so far as Mr Sayseng was concerned. Denial of any duty to Mr Sayseng calls into question his capacity to challenge the determination of the Trustee, when not a party to the policy. I discuss later whether this depends on extending the exception to the privity rule articulated in Trident General Insurance Co Ltd v McNiece Bros Pty Limited (1988) 165 CLR 107 or is simply derived from the general duty of good faith in a context such as the present. 9 The trial judge concluded that Hannover in the course of good faith and fair dealing was required to act with due regard for the interests both of the claimant Mr Sayseng and the Trustee. He found that Hannover had failed so to act, by failing to seek Mr Sayseng's response to material (doctors' reports and a video) adverse to Mr Sayseng's case. 10 Hannover disputes that finding on various grounds. It also contends that, even if the finding in relation to its duty stood, Mr Sayseng's claim necessarily failed because the trial judge had earlier concluded that the decision of the Trustee (as distinct from Hannover) could not be impugned. That was said to suffice to preclude Mr Sayseng's claim under the terms of cl 10 of the Trust Deed, since cl 10(1) required, cumulatively, a favourable decision from both the Trustee on the one hand, and Hannover as insurer on the other. The trial judge instead deferred making a final decision so far as the Trustee was concerned. He concluded that "As the trustee may well reconsider Mr Sayseng's entitlement again if he obtains a favourable decision against Hannover, I will defer making orders disposing of the proceedings against the Trustee".

SALIENT FACTS 11 Mr Sayseng was employed as a factory worker by Kellogg (Aust) Pty Ltd ("Kellogg") between December 1988 and 21 September 1998 when he took voluntary redundancy. 12 As part of his employment, Mr Sayseng became a member of the Fund which was administered by the Trustee. 13 Pursuant to the terms of the Fund's Trust Deed (cl 10), the Trustee was permitted (but not obliged) to take out insurance to provide cover for the Fund's liabilities to its members. 14 Rule 10 of the Membership Rules (Sch 1 to the Trust Deed), provided: "(1) Where, in the opinion of the Trustee , a Member becomes totally and permanently disabled while in service prior to the Normal Retirement Date and where the Trustee has effected a policy of insurance to secure part or all of the benefits payable in accordance with this Rule 10 and the Member becomes totally and permanently disabled within the meaning of the definition of such disablement in that policy, a benefit of the amount specified in subrule (3) of this Rule shall be payable in accordance with subrule (4) of this rule. [emphasis added] 15 The Trustee effected the policy with Hannover, which provided inter alia for cover for "total and permanent disablement", which was defined relevantly as follows: " TOTAL AND PERMANENT DISABLEMENT means: … (b) having been absent from work through injury or illness for an initial period of six (6) consecutive months and in our opinion being incapacitated to such an extent as to render the Insured Person unable ever to engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience." [emphasis added] 16 On 18 October 1998, after ceasing work, Mr Sayseng lodged an application with the Trustee for disability benefit on the basis that he was totally and permanently disabled as a result of lower back problems that developed in about January 1996. The Trustee had retained William M. Mercer Pty Ltd ('Mercer') to conduct some aspects of the Fund's affairs, and it managed Mr Sayseng's claim. 17 Both the Trustee and Hannover rejected Mr Sayseng's claim. Hannover rejected the claim on 27 April 2000. In considering the claim, Hannover liaised with Mercer to obtain the relevant medical reports, retained private inquiry agents to make observations of Mr Sayseng and procured reports from healthcare experts including Dr Funnell (Consultant in Rehabilitation Medicine) and Ms Gosling (Occupational Therapist). 18 The Trustee rejected the claim on 9 April 2001 (the first consideration). Mercer had sent it a letter dated 10 January 2001, being a letter of advice obtained from lawyers Principal Legal Group. It recommended that Mr Sayseng not be considered totally and permanently disabled but noting that the Trustee must form its own decision having regard to all the evidence obtained. 19 The Trustee resolved accordingly at the meeting of its Directors on 9 April 2001. Mr Sayseng sought a reconsideration from the Trustee relying upon entitlements under the Superannuation Industry (Supervision) Act 1993 and regulations. In applying for a reconsideration, Mr Sayseng supplied a further medical report from Dr Giblin (orthopaedic surgeon) to establish that he was totally and permanently disabled. The Trustee forwarded a copy of Dr Giblin's report to Hannover and asked for a reassessment. 20 On 25 June 2001, Hannover wrote to the Trustee maintaining its decision to decline the claim, and on 20 September 2001 the Trustee resolved to affirm its earlier decision to deny the claim (the second consideration). 21 On 11 October 2002, Mr Sayseng commenced proceedings in the Equity Division of the Supreme Court seeking declarations against both the Trustee and Hannover to the effect that they ought to have decided that he was totally and permanently disabled. 22 In February 2003, Mr Sayseng forwarded further medical reports to Hannover and the Trustee to attempt to persuade them to reconsider their respective decisions. Hannover reaffirmed its earlier decision on 13 March and 4 April 2003, and the Trustee reaffirmed its earlier decision on 26 May 2003 (the third consideration). 23 In October 2003, the proceedings were heard by Bryson J, who made the declarations as sought, finding that: (a) There was nothing wrong with the way the Trustee went about its consideration and reconsiderations of the matter; (b) Hannover's decision of 27 April 2000 was vitiated because it did not obtain a response from Mr Sayseng to the two medical reports it had obtained from its experts (Dr Funnell and Ms Gosling) and the surveillance tapes it had obtained and forwarded to its experts; (c) Since Hannover's decision was void, it was for the Court to assess whether Mr Sayseng was totally and permanently disabled within the meaning of the policy, such to be determined as a separate question in the proceedings. 24 This Court granted Hannover leave to appeal from the decision of Bryson J on 15 June 2004.

The first instance judgment 25 I set out below under convenient headings the salient findings and conclusions of the trial judge.

Construction of Rule 10(1) of the Schedule to the Kellogg Retirement Fund Trust Deed 26 There are two conditions of entitlement to the benefit under the Fund with which Mr Sayseng must conform: (a) It is a condition for payability of the benefit that the member become totally and permanently disabled while in service prior to the normal retirement date ([13], Red, 25J-K). Whether a member is so disabled is established not by the objective facts but by the opinion of the Trustee ([13], Red, 25L-M); (b) Where the Trustee has effected a policy of insurance relating to benefits payable in accordance with Rule 10, it is a further condition of entitlement that "the member becomes totally and permanently disabled within the meaning of the definition of such disablement in that policy." ([14], Red 25O-R). For the purpose of this condition, whether a member becomes totally and permanently disabled depends on the definition of that expression in the policy ([15], Red, 25W-Y). 27 For Mr Sayseng to succeed, he must impugn both the opinion of the Trustee and the opinion of Hannover. The opinion of the Trustee is only relevant to the first condition. Where there is a policy the Trustee's opinion does not determine what the policy means or whether anything is payable under the policy (and vice versa) ([16], Red, 26H-N). 28 The Trustee must decide whether the member has become "totally and permanently disabled while in service prior to the Normal Retirement Date" on the ordinary meaning of those words ([17] Red, 26Q-S). Accordingly, the Trustee must independently consider what its opinion should be and actually form that opinion. The directors would not discharge their duties if they merely followed or endorsed the opinion of the insurer ([17], Red 26T-V). 29 The matter for the opinion of the Trustee in Subrule 10(1), when understood in its context but without the definition of the almost identical expression "Total & Permanent disablement" in the policy, involved a stringent test ([54] Red, 42U-X). Thus both in the narrow context of Rule 10 and the wider context of the whole Deed, the matter for opinion refers to being disabled for employment, including employment in the work the member was doing and other employment for which he is qualified by capacity, training or experience ([54] Red, 43C-D).

Construction of the Hannover Group Life Contract 30 The Group Life Contract was an agreement to pay benefits to the Trustee, and Insured Persons were not intended to be parties to it. Hannover did not insure or purport to insure Mr Sayseng, and nor is he entitled to recover pursuant to s48(1) of the Insurance Contracts Act 1984 ([20]-[22] Red, 27Y-29E). 31 The definition in para (b) of the definition of total and permanent disablement is fulfilled partly by facts as they objectively exist, and partly by facts determined in the opinion of Hannover ([19] Red, 27U-V). 32 The trial judge then reviewed the grounds upon which discretionary decisions of superannuation trustees may be challenged, drawing particularly on Rapa v Patience (McClelland J, 4 April 1985, unreported). He properly drew attention to the context of the modern employment relationship and its influence upon employer and employee contributions when it comes to applying the grounds of review of a trustee's discretion whether or not to pay benefits. He observed that whereas a superannuation trust may once have been perceived as having a function as an exercise of bounty on the part of the employer, this did not accord with modern day realities of the employment relationship in which employees contribute their own funds and bargain for employer contributions which serve the economic function of being part of the reward for employment services (judgment at [59] Red, 45N-S). Hence there is a strong shared expectation that benefits will actually be available as contemplated by the parties to that bilateral relationship. 33 The available bases for challenging an exercise of discretion by the trustee under a clause such as were listed in cl 10 of the Trust Deed in summary form by the trial judge as follows: (i) the discretion was not exercised by the trustee in good faith; (ii) the discretion was not exercised upon real and genuine consideration; (iii) the discretion was not exercised in accordance with the purposes for which it was conferred; (iv) the discretion was not exercised for sound reasons, where the trustee has disclosed reasons (other than disclosure in proceedings in which the discretion is challenged); (v) while there is the well-established immunity protecting a trustee from being compelled to give reasons for discretionary decisions, if the decision reached is such that no reasonable person deciding whether to form the opinion required of the trustee could have reached that decision, it may be said that there must have been a failure of good faith or failure in the application of real and genuine consideration or in the exercise of powers for their proper purpose; citing Maciejewski v Telstra Super Pty Ltd [1999] NSWSC 341 ([61]-[63]); (vi) however, the ambit of any challenge to the decision is necessarily restricted to consideration of the material which was available to the trustee (and insurer) at the time of its (their) consideration; citing Tonkin v Western Mining Corporation Ltd [1998] 10 ANZ Ins Cas 61-397; (vii) finally, if a trustee's discretionary exercise of power is successfully challenged, while the court may compel re-consideration (even to the extent of substituting a new trustee), it cannot itself exercise the power which the trust deed confers on the trustee and undertake the trustee's duties for it ([73] Red, 54G-N). 34 Applying those principles to the present circumstances, the trial judge found that there was no ground or reasoning demonstrated which would place the conclusion reached by the Trustee out of the minds of reasonable persons so as to enable the decision to be set aside ([65] Red, 49W-Y). Nor should it be found that the Trustee exercised the discretion by reference to the wrong question and for that reason had failed to give the matter real and genuine consideration ([72] Red, 53W-Y). Moreover, the fact that the directors of the Trustee in making their decision had applied tests attributed to the policy where the wording was slightly different, was not a ground on which the court would set aside its decision unless there were clear reasons for saying that the tests they applied were wrong, which was not the case ([72] Red, 53K-Y). 35 Turning to the challenge to Hannover's decision as insurer, the matter in issue on this appeal, the trial judge observed that when the decision of an insurer is challenged, while the grounds of challenge are generally similar to those applicable to trustees, the court proceeds to determine the facts should the insurer have actually failed to form the relevant opinion or have constructively failed to do so by proceeding on the wrong basis ([77] Red, 55M-S). 36 The nature and content of Hannover's obligations vis-à-vis Mr Sayseng were derived by the trial judge from the principles stated in Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 at 77,536. The relevant principles were said to be these ([81] Red, 57K-58Z): (a) There was an implied obligation on Hannover to consider and determine whether it should form an opinion on the matter which was a condition of its own liability; (b) That obligation involved consideration and determination of the correct question; (c) Hannover was under a duty of good faith and fair dealing which required it to have due regard for the interest of the claimants, meaning Mr Sayseng, as well as the Trustee; (d) Hannover was also obliged to act reasonably in considering and determining what its opinion was; (e) If the view taken by Hannover can be shown to have been unreasonable on the material before it, its decision can be successfully attacked; (f) If Hannover's decision is successfully attacked, the matter upon which its opinion was required becomes one for determination by the Court; (g) It has been held to be unfair for an insurer to act upon detailed and adverse medical reports obtained by the insurer itself without giving the claimant an opportunity to balance the report by obtaining a detailed report from a treating doctor, or giving the claimant a chance to answer the adverse elements in the report ([88], Red, 60L-O) citing Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175, Hodgson J at 78000 and 78001; Wyllie v National Mutual Life Association Ltd (Hunter J, 18 April 1997, unreported) and Beverley v Tyndall Life Insurance Co Ltd (1999) WAR 327 per Ipp J at [25], [33 to 37] and [84 to 95] and Malcolm CJ at [6], [12] and [13], [14] and [15]. Anderson J who agreed in the result of the appeal did not agree with this holding: see [97] to [98]. 37 The trial judge recognised that Mr Sayseng was not a party to the policy whereas the cases referred to involved a direct contractual relationship between the insurer and the claimant. Therefore, not being a party to the policy, Mr Sayseng could not rely upon the provisions of s13 of the Insurance Contract Act 1984 (Cth) which implies into the contract of insurance a provision requiring each party to act towards the other party in respect of any matter arising under or in relation to it with the utmost good faith. Nonetheless, the trial judge found support in the opinion of Mahoney JA in C E Heath Casualty & General Insurance Ltd v Grey (1993) 32 NSWLR 25 at 27 ("in my opinion, the principle is not limited to person who are, under the general rule, actual parties to the contract of insurance. It extends to others who are necessarily involved in the insurance") and further support in the structure of the insurance arrangements contained in the policy. This led his Honour to conclude that Mr Sayseng's interests were indirectly but very strongly involved in the decision of the insurer and that both directly and indirectly Mr Sayseng had an interest in compliance by the insurer with its duty to proceed fairly to form its opinion. Hence the validity of the opinion formed by the insurer fell to be tested on the basis that Mr Sayseng was entitled to fair dealing when Hannover considered his claim ([89] Red, 60-61). 38 I interpolate here that, as submitted by the appellant in this case, the opinion of Mahoney JA was obiter. This was because, as Clark JA pointed out at [43], the directors whose obligation to act in good faith was in question were in fact parties to the insurance contract. These and later observations of Mahoney JA were however made in the course of a detailed and carefully reasoned judgment which proceeded upon the initial assumption that the directors concerned were not parties to the relevant policy. 39 Thus I consider that those observations do bear upon the present case. This is so, though the present case is neither a "trust case" nor a "benefit case", the latter in the narrower sense described by Mahoney JA below at 37-8. Rather it is an analogous case where the policy, though contractually and directly for the benefit of the Trustee, indirectly benefits employees by ensuring that the Trustee has the funds to meet a proper claim by any employee. I set out below Mahoney JA's reasoning as it bears on this point (at 37-8): "In my opinion, the principle [of utmost good faith] is not limited to persons who are, under the general law, actual parties to the contract of insurance. It extends to others who are necessarily involved in the insurance.

The principle extends, in my opinion, at least to two such classes of cases. I shall, for brevity, refer to them as "trust cases" and "benefit cases".

By trust cases I mean where the insurer contracts for insurance of the insured and the insured holds the benefit of the contract of insurance on trust for a third party. …..

It would in my opinion be surprising if a third person, not technically a party to the contract of insurance, was not subject to the duty of good faith. He may, for example, know the policy is to be effected on trust for him and indeed prompt the making of it. If he knows facts which would affect the insurance by, for example, leading the insurer to decline the risk or to impose a higher premium, it would be strange if he could yet insist upon payment under the policy.

I do not mean by this that the beneficiary under a policy held on trust is obliged to seek out or reveal relevant information to a proposed insurer. The extent of his obligation will depend upon the circumstances. It is sufficient to hold that, in appropriate circumstances, the principle of good faith may extend to him albeit he is not a party to the contract.

The same principle extends, in my opinion, to "benefit cases". In England, and prior to the present legislation, in Australia, they were commonly entered into for estate planning purposes and with a view to conferring benefits upon third persons revocable at the wish of the proponent party to the policy: see Re Engelbach's Estate ; Tibbetts v Engelbach and Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 at 478 et seq per Barwick CJ and Windeyer J (at 499 et seq), in their dissenting judgments. "Utmost good faith" would require, I think, that a person proposing to take a benefit under such a policy might, in appropriate circumstances, be obliged to reveal facts known to him affecting the insurance." [emphasis added] 40 The trial judge distinguished the reasoning of the majority of the High Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (supra). This was on the basis that the policy did not purport to extend insurance to Mr Sayseng or to the other "Insured Persons" referred to in it. Rather the benefit of those policies was extended to the Trustee. The relevant passages are at [78] of his Honour's judgment and conclude with the observation that " Trident General Insurance Co Ltd v McNiece Bros Pty Ltd related to provisions which in explicit terms purported to extend insurance to sub-contractors whereas here there was no basis for Mr Sayseng or any other Insured Person to assume that insurance by Hannover was effectively available to them personally, or available in any other manner than the indirect path of their having an entitlement to a payment from the Kellogg Retirement Fund, with the Trustee having a corresponding entitlement under the Group Life Contract to have insurance money paid into the Fund." 41 I shall deal later with whether what Mason CJ and Wilson J in Trident General Insurance Co Ltd described as "the principled development of the law" of privity in an insurance contract applies to this case. The question here is whether it should apply by analogical or incremental extension to a person in Mr Sayseng's position. Mr Sayseng remains totally dependent for the success of his claim against the Trustee, on the latter being entitled to payment under the policy. 42 The trial judge's findings regarding Hannover's decision can be summarised as follows: (a) Hannover obtained the report of Dr Funnell based partly on surveillance tapes in a short video, and Ms Gosling, both severely adverse to Mr Sayseng's claim, but none of this material was ever passed on to Mr Sayseng for comment and he was not provided with an opportunity to respond thereto ([93] Red, 63K-W); (b) These reports were so important that it was not possible for Hannover to reach a conclusion (in the course of good faith and fair dealing and with due regard to the interests of the Trustee and Mr Sayseng) on the effect they had upon the other material submitted by Mr Sayseng without ascertaining what response, if any, would be made to them ([94] Red, 64F-N), more especially given that the prior reports obtained by Hannover generally supported Mr Sayseng's claim, though not conclusively; (c) Hannover's decision of 27 April 2000 rejecting the claim was thus vitiated by this failure and should not be treated by the Court as an effectually formed opinion for the purpose of determining its liability under the policy ([95] Red, 64U-X); (d) The Court should itself embark on deciding whether there was total and permanent disablement within the meaning of the policy ([95] Red, 64X-Y). 43 In consequence, Bryson J made a declaratory order establishing the lack of effect of the purported opinions of Hannover and directing the trial and determination of the separate question of whether Mr Sayseng was totally and permanently disabled within the meaning of the policy ([96] Red, 65E-H). 44 The trial judge concluded that because the Trustee may well re-consider Mr Sayseng's entitlement if it obtained a favourable decision against Hannover, no order should presently be made disposing of the proceedings against the Trustee ([96] Red, 65H-J).

Grounds of Appeal 45 The grounds of appeal essentially encompassed three issues. I have grouped the grounds of appeal accordingly:

ISSUE 1 - Hannover's duty to disclose . Ground 1 The judge was in error in holding that Hannover was under a duty to disclose to Mr Sayseng the material it had obtained to form its opinion before that opinion was formed. Ground 2 The judge was in error in holding that because of what was contained in them, the reports of Dr Funnell and Ms Gosling should have been passed onto Mr Sayseng for an opportunity for him to answer them. Ground 3 The judge was in error in finding that the reports of Dr Funnell and Ms Gosling put an entirely different view of Mr Sayseng and his disability. Ground 4 The judge was in error in holding that there was any duty of good faith or any analogous duty owed by Hannover to Mr Sayseng in consideration of his claim. Ground 5 The judge was in error in holding that Hannover's decision of 27 April 2000 was vitiated and of no effect.

ISSUE 2 - Reconsideration by Hannover Ground 6 The judge was in error in failing to consider the validity and effect of the reconsiderations of the claim by Hannover on or about 25 June 2001 and 4 April 2003.

ISSUE 2 - Relationship of Hannover's duty to the Trustee's consideration Ground 7 The judge was in error in not dismissing Mr Sayseng's claim and the proceedings when he held that the decision of Kellogg was not able to be impugned. Ground 8 The judge was in error in not dismissing Mr Sayseng's claim on the basis that Kellogg might well reconsider Mr Sayseng's entitlement if Mr Sayseng obtained a favourable decision against Hannover.

DISPOSITION 46 The first and central issue in this appeal can be stated in these terms. What is the nature and content of the insurer's obligation, if any, towards an employee under a group disability superannuation policy, where: (a) that policy is taken out by the trustee and not by the employee; (b) it is to provide cover to the trustee against any liability on the trustee's part to that employee claiming against the trust on the ground of his or her total and permanent disablement; (c) the policy is thus of indirect rather than direct benefit to the employee, who must nonetheless satisfy the definitional requirements of the policy for total and permanent disablement expressed to be based on the insurer's opinion; (d) the policy cover is predicated on the opinion of the insurer and earlier of the Trustee that the employee is so incapacitated within the policy definition; (e) the employee is not "specified or referred to in the [insurance] contract … as a person to whom the insurance cover … extends", and so cannot rely on s48 of the Insurance Contracts Act 1984 (Cth) to recover his loss directly from the insurer; (f) the employee not being a party to the insurance contract: (i) cannot rely on s13 of the Insurance Contracts Act 1984 (Cth) to imply a statutory duty of utmost good faith, and (ii) cannot claim under the policy, but depends for his or her claim against the trustee on satisfying the definitional requirements of the policy (so far as concerns total and permanent disablement expressed to be based on the insurer's opinion). 47 The trial judge (at [81]) found that there was an obligation of the insurer to Mr Sayseng of the nature described by McLelland J in Edwards v The Hunter Valley Co-op Dairy Co Ltd & Anor (1992) 7 ANZ Ins Cas 61-113 at 77,536-7: "It is next necessary to examine the nature and content of Zurich's relevant obligations under the policy. Those obligations were contractual and not fiduciary. Zurich was an insurer, not a trustee. Since the commercial purpose of the policy was, relevantly, to provide insurance against the risk of total and permanent disablement, and since the policy was expressed in terms requiring the formation by Zurich of a particular opinion as a condition of Zurich's own liability, there was clearly an implied obligation on Zurich to consider and determine whether it should form that opinion. That involved a consideration and determination of the correct question (see Butcher v Port (1985) 1 NZLR 491 at 496, 504, and cf Wilson v Metro Goldwyn Mayer 18 NSWLR 730 at 734). Furthermore, in the exercise of powers affecting the interests both of itself and the claimant, Zurich was under a duty of good faith and fair dealing which required it to have due regard for the interests of the claimant (see Distillers Co Biochemicals (Aust) v Ajax Insurance Co 130 CLR 1 at 29-31). This duty is in my opinion analogous to the duty to which a mortgagee is subject in exercising a power of sale of mortgaged property, and to the duty to which a controlling shareholder of a company is subject in exercising a right to procure the passage of a resolution affecting the interests of the shareholders at a general meeting of the company (cf Peters American Delicacy Co v Heath 61 CLR 457 at 502-4). (It is to be noted that the policy was issued prior to the commencement of the Insurance Contracts Act 1984).

Where under a contract, rights or liabilities depend upon the subjective state of mind of a party, eg the party's approval, opinion or satisfaction, of or about something, it can be a difficult question whether the party is subject to an implied obligation in reaching that state of mind, or failing to reach it, as the case may be, to be bound by objective standards of reasonableness (see the discussion by Mason J in Meehan v Jones 149 CLR 571 at 590-1, and see also VL Credits v Switzerland General Insurance (1991) 2 VR 311 at 315-6). However in the field of insurance, it is well established that where under a contract of insurance an element of the insurer's liability is expressed in terms of the satisfaction or opinion of the insurer, the insurer is obliged to act reasonably in considering and determining that matter (see Moore v Woolsey (1854) 4 E1 & B1 243, 119 ER 93, Braunstein v Accidental Death Insurance Co (1861) 1 B & S 782, 121 ER 904, London Guarantie Co v Fearnley (1880) 5 App Cas 911 at 916, 921, Doyle v City of Glasgow Life Insurance Co (1884) 53 LJ Ch 527, Harvey v Ocean Accident and Guarantee Co (1905) 2 IR 1, Butcher v Port (1985) 1 NZLR 491, cf Teur v London Life Insurance Co (1936) 1 DLR 161).

To say that an insurer must act reasonably in forming or declining to form an opinion is not to say that a Court can substitute its own view for that of the insurer. As North J pointed out in Doyle at 529, "reasonable persons may reasonably take different views". Unless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer, the decision of the insurer cannot be successfully attacked on this ground." 48 The appellant challenges the existence of any such obligation. In Edwards, as here, the policy was not taken out by the employee with the insurer but by the proponent of the scheme. Thus, in Edwards the policy was taken out by the actual employer with the insurer. Here, it was taken out by the affiliated trustee of the scheme. In each case, this was part of the superannuation plan. The only difference was that in Edwards the employer was the proponent of the plan whereas here there is a trust scheme with an employer-affiliated trustee. That cannot matter. In each case, benefits were to be funded out of the policy, payable upon the member becoming "totally and permanently disabled". This was, in Edwards, according to a definition agreed from time to time by the employer with the insurer. Here the terms were incorporated by reference to the policy. There is again no material difference. Finally, each set of terms is predicated on the opinion of the insurer. The only additional feature in Edwards is that this is "after consideration of such medical or other evidence as it [Zurich] may require". 49 I do not consider any of these features render Edwards distinguishable from the present case. I have earlier referred to the observations of Mahoney JA, relied on by the trial judge at [79] allowing extension of "the application of the duty of utmost good faith among persons who are not strictly contractual parties to an insurance policy". It is not clear whether Mahoney JA intended to limit himself to what he described as "trust" and "benefit" cases or, perhaps, cases analogous to these. The trial judge evidently took a broad view of the duty when he concluded that "in my opinion the standing [to sue] is related to the duty of good faith in exercise by an insurer of rights under the contract including the right of controlling the settlement of claims; see [C E Heath Casualty and General Insurance Ltd v Grey & Ors at 39] ... In my opinion the observations of Mahoney JA support the view that a person other than a contracting party may have standing to challenge the effectiveness of an opinion formed by an insurer". (His Honour appreciated that these observations of Mahoney JA were obiter.) 50 For reasons which I develop below, I agree with his Honour's conclusion that the nature of the insurer's obligation was as stated in Edwards but I do so on two bases. The first is that the duty of good faith applies where the policy is at least for the indirect benefit of the insured, as evidenced here not only by the reference in the policy to each of the employees as "the Insured Person" but also by its availability to fund payments to them via the Trustee. The second is based on the reasoning in Trident, though derived incrementally. I start however with the appellant's argument challenging the proposition that Edwards is dispositive of the present case. 51 The appellant submits that the essence of McClelland J's decision in Edwards appears from the last sentence in the passage cited by Bryson J at [81] and which I have quoted above. There McClelland J said, "unless the view taken by the insurer can be shown to have been unreasonable on the material then before the insurer, the decision of the insurer cannot be successfully attacked on this ground" [emphasis added]. 52 On this basis, the appellant contended that in opinion cases all the court could enquire into was whether the decision could, effectively, be supported by the material considered by the insurer. 53 This reading essentially negates that which is stated in the earlier two paragraphs and in particular the first paragraph quoted, at least so far as opinion cases are concerned. McClelland J there stated that "[F]urthermore in the exercise of powers affecting the interests both of itself and the claimant, [Zurich] was under a duty of good faith and fair dealing which required it to have due regard to the interests of the claimant". That duty informing the exercise of the Trustee's discretion is thus predicated very broadly to require the Trustee to have regard to the interests of the claimant employee, whether or not the direct beneficiary of the policy. It affected not only the insured but also the claimant employee. 54 Taking the three paragraphs of the quoted passage together, I consider that what his Honour intended was to delineate the duty of good faith and fair dealing common to cases where a favourable opinion was required to be formed by the insurer as a condition of the employee receiving a benefit as well as cases where that was not a condition. That duty, I emphasise, constituted a bilateral obligation between both insurer and claimant, for the benefit of both. Then, for those policies dependent on the insurer forming a favourable opinion as to whether the employee qualified, there was a related but distinct duty to act reasonably in forming or declining to form that opinion. There would be little point in a duty of good faith and fair dealing if it were essentially supplanted by the duty merely to act reasonably in those cases where rights or liabilities depended upon an opinion about something, here an opinion about total and permanent disablement. What McClelland J was directing his mind to in the third paragraph, as is clear from the earlier quoted part, was that a court must not substitute its own view for that of the insurer, by reference to additional material not before the insurer. There is no suggestion of that here. Rather the question here concerns the obverse. What was alleged was a failure on the part of the insurer, in denying itself the further material it could have received from the employee. This was an employee response to the video and the two medical reports, had the employee been invited to make such a response, or at least been placed in a position to provide such a response if he so chose. (Hannover argues that it did do the latter, a proposition disputed by the employee; see later.) 55 There is, however, a further consideration. That is the applicability of this bilateral obligation of utmost good faith in a situation where the insured is not the employee concerned or other third party but, as here, the trustee of the fund. It was the Trustee who effected insurance in order to fund liabilities that may arise in relation to that employee. As a matter of principle, should the obligation of utmost good faith apply in such circumstances? Here, the appellant places particular reliance on the trial judge's disavowal of any reliance on Trident General Insurance Co Ltd v McNiece Bros Pty Ltd as removing that basis for the conclusion reached by the trial judge that the duty of utmost good faith applied. 56 I consider that the decision in Trident does indeed afford a principled basis for attributing the duty of good faith and fair dealing to Hannover in its dealings with Mr Sayseng, notwithstanding that Mr Sayseng was neither a party to the insurance contract nor within the class of persons expressed to be insured by it. However, as I later explain, attribution of that duty need not depend upon the analogical extension of the reasons which led Mason CJ and Wilson J, and also Toohey J, to conclude as they did in Trident General Insurance Co Ltd. (The reasons of Gaudron J depended upon principles of restitution but led to the same result.) Such a result can be reached based on the reasoning of Mahoney JA in C E Heath Casualty & General Insurance Ltd v Grey, to which I have earlier made reference, that such policies are essentially for the benefit of the employee, albeit indirectly. 57 In their joint judgment Mason CJ and Wilson J noted the relative lack of antiquity of the doctrine of privity (at 113-4) and the criticisms made by Law Reform Commissions and otherwise of its harsh application (at 116-7). They concluded that insistence on privity of contract to deny a right to enforce a contract of insurance at the suit of a member of the class of persons expressed to be insured by it was unjust because it would result in (a) failure to give effect to the express intention of the party who effects the insurance, (b) failure to give effect to the common intention of the parties including the insurer, to benefit third parties, and (c) injustice to these third parties who, having been made aware of the existence of the policy, have ordered their affairs accordingly. Thus at 123-4 they conclude: "In the nature of things the likelihood of some degree of reliance on the part of the third party in the case of a benefit to be provided for him under an insurance policy is so tangible that the common law rules should be shaped with that likelihood in mind." In the present case, Mr Sayseng was likewise forced to rely on payment by Hannover to the Trustee under the policy to, in turn, enable payment by the Trustee to him from the Fund, as I further explain below. 58 Reliance, however, is not an ingredient of the third party's cause of action on Trident principles. Rather it simply explains the public policy underlying the exception to the privity doctrine in this setting, a point emphasised in Woodside Petroleum Development Pty Ltd v H & R - E & W Pty Ltd (1999) 20 WAR 380 at 399-402. 59 Toohey J agreed with the reasoning of Mason CJ and Wilson J. For the purpose of the decision he confined the exception to public liability insurance but then observed (at 163) "… it would be unreal to think that a decision upholding the Court of Appeal would not have implications for privity of contract in other situations. And the disposition of this appeal inevitably takes the Court into areas that lie outside the field of insurance". 60 Gaudron J (at 173) agreed generally with the reasons of Mason CJ and Wilson J but differed in a significant respect when she stated: "The right of the third party is not a right to sue on the contract: rather it is a right independent of, but ordinarily corresponding in content and duration with, the obligation owed under the contract by the promisor to the promisee." Her Honour based her decision in favour of the third party not on contract but on unjust enrichment, affirming that this was "not an abrogation of the doctrine of privity of contract" (at 177). 61 Brennan and Dawson JJ in dissent rejected any exception to the doctrine of privity, holding that there was no remedy in contract in the circumstances. Deane J considered that, although there was no contractual remedy, a trust in favour of McNiece had arisen, and so formed one of the five who upheld the appeal, though on different grounds. 62 When one turns to the circumstances of this case, the principal difference to the cases referred to is that instead of the policy being one in which the proceeds go directly to the employee in respect of the coverage of that employee, the coverage is of the Trustee's liability with respect to that employee and the proceeds go directly to the Trustee. That said, the employee is benefited by the existence of the policy and, indeed, is wholly dependent upon the policy in terms of the quantum of benefit paid. This arises in several ways: (i) Rule 10(1) leaves it entirely to the Trustee to effect a policy of reinsurance to secure part or all of the benefits payable in accordance with the Rule. Rule 10(5)(a) provides that if insurance in relation to a particular member is not required " the trustee may exercise its discretion to pay a benefit in the event of the total and permanent disablement of the Member ". This is, therefore, a matter of discretion not right, so that the employee would be particularly vulnerable if denied any rights vis-à-vis the insurer. (ii) Rule 10(2) provides that if the insurer refuses to insure at its standard premium rates or for any reason refuses to insure or to pay any part of the required sum, "the trustee in its discretion may reduce the benefit payable pursuant to sub-rule (1) of this Rule by part or all of the sum insured refused." This again emphasises both the benefit to the employee from the policy being effected by the Trustee and the dependence of the employee on the policy obligations being performed by the insurer. 63 The trial judge observed that "there was no basis for Mr Sayseng nor any other Insured Person to assume that insurance by Hannover was effectively available to them personally, or available in any other manner than the indirect path of their having an entitlement to payment from the Kellogg Retirement Fund, with the Trustee having a corresponding entitlement under the Group Life Contract to have insurance money paid into the Fund. Trident General Insurance Co Ltd v McNiece Bros Pty Ltd related to provisions which in explicit terms purported to extend insurance to sub-contractors." (at [78] Red, 56) 64 That said, Mr Sayseng depended upon this "indirect path" not being obstructed by the insurer's unfair dealing towards him. Equally, the insurer depended on Mr Sayseng performing his related obligation of utmost good faith, particularly in matters of disclosure. It therefore should be recognised that a failure by the insurer to give effect to the requirements of the policy, including an obligation of utmost good faith to both the Trustee and employees, would result in a failure to give effect to the expressed contractual intention of the Trustee, namely, to provide retirement benefits to employees. That would indeed result in a failure to give effect to the common intention of the parties, so causing injustice to the third party employee. While the latter may not be taken to be aware of all the details of the policy, he must be taken to be aware of the existence of the policy and to have ordered his affairs accordingly. He may well have made contributions and undertaken employment with the assurance that, if he suffered total and permanent disablement, there would be cover for that contingency. 65 All these are matters which led to Mason CJ and Wilson J to conclude that "in the nature of things the likelihood of some degree of reliance on the part of the third party in the case of a benefit to be provided for him under an insurance policy is so tangible that the common law rule should be shaped with that likelihood in mind." 66 Here, indeed, while "the benefit to be provided for him" does not involve a direct payment by the insurer to Mr Sayseng under the policy, any payment by the Trustee from the Fund to that employee is directly underpinned by, and dependent on it receiving payment under the policy; see Rule 10(2) earlier quoted. It is entirely in accord with the rationale for abandoning strict application of the privity doctrine in an insurance context to extend its application to a retirement or disability plan which is so underpinned. Comparing the position to the insured subcontractor in Trident, there is no relevant difference in principle. Indeed, insofar as the employee makes a contribution to the costs of insurance, the case is even stronger. 67 In recent times, there have been two cases which were in a sense precursors of the situation presently before this Court. 68 Verinder v Australian Institute of Steel Construction Ltd (2004) 13 ANZ Ins Cas 61-589, was decided fourteen days before the decision of the primary judge. It deals with a similar policy under which, on the occurrence of disability in the employee, the insurance company would make a payment to the employer. One of the issues for determination in that case was whether Verinder, the employee, could make a direct claim on the insurer. As it happened, Verinder was not an "Insured Person" (he did not meet a threshold condition). But by way of dicta McDougall J at [48] made the observation that: "… were it necessary to do so, I would have considered the issue on the basis that the evidence showed that: 1. The policy was taken out by AISC not for its own benefit, or to indemnify it for any liability that it had assumed to its employees, but for the benefit of its employees; and 2. With the exception of benefits under cl 3.12 of the policy (waiver of premium benefit), all benefits under the policy accrued to the employees of AISC so that, if AISC made a claim, the claim would be made for the benefit of the sick or injured employee." 69 Similarly, in Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415 the insured was the employee but the payment was to be made to the policyholder. That case was a limitations case but at [23] it was accepted that the employee could make a direct claim "on the same basis as the contractor, who was not a party to the insurance contract, but was within the definition of the "Insured", in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107." 70 Accordingly, I would go further than the trial judge who restricted himself to concluding that Mr Sayseng had standing to challenge the Trustee's determination, but fell outside the decision in Trident. Thus, I would conclude that Mr Sayseng, though not entitled to the proceeds of the policy, was entitled to the same obligation of good faith and fair dealing as was owed by the insurer to the Trustee, taking account of their respective positions. That obligation, being a bilateral one, enures also for the benefit of the insurer as Mahoney JA observed in C E Heath Casualty and General Insurance Ltd v Grey (supra) at [36]: "In my opinion, a third person involved in a transaction of insurance may be bound by the principle of uberrima fidae (utmost good faith) and, to the extent he is, may be under a duty to disclose facts affecting the insurance; however, the extent of the duty imposed on the third person will depend on the circumstances of his involvement." 71 Were the Trident outcome to be based on the principle of unjust enrichment in the manner articulated by Gaudron J, the obligation of good faith and fair dealing would operate independently of the insurance contract, so avoiding the unjust enrichment that would otherwise be enjoyed by the insurer where a legitimate claim under the insurance policy was not able to be pressed against the insurer to the detriment of the employee third party. 72 However, even if the Trident principles were inapplicable to the present case because of the differences between the facts of that case and this, I consider that the duty of good faith and fair dealing should nonetheless apply as between insurer and third party employee. I do so given the latter's total dependence on payment by the insurer to the Trustee in circumstances where that must have been appreciated by all parties to the tripartite arrangement and because, in particular, the policy is held by the Trustee for "the benefit" of the employees in the wider sense of benefit; cf Mahoney JA in the earlier quoted passage from C E Heath Casualty & General Insurance Ltd v Grey at 37-8. 73 I turn now to the second issue in the appeal, namely, that even were there a duty of good faith and fair dealing, that duty was not breached as there was no lack of fair dealing by Hannover in its consideration of the matter. To quote from the appellant's submissions: "The experts retained by Hannover, as well as the experts retained by Trustee and the Plaintiff were all concerned to determine whether the lower back problems of the First Respondent had at the relevant time caused him to be totally and permanently disabled within the meaning of the policy. Quite unlike the position in Beverley [Beverley v Tyndall Life Insurance Co Ltd [1999] WASCA 198], the reports of Dr Funnell and Ms Gosling did not propose a completely different cause of the First Respondent's problems that required him to have the opportunity to answer the new cause. There was simply a difference of medical opinion, although it is to be noted that the views of Ms Gosling did not significantly differ from the views of two doctors retained by the Trustee, Dr Mitchell (see at para [35]) and Dr Billett (see at para [36])." 74 It is true that Beverley was a clear case of non-disclosure of a critical matter by the insurer. What there occurred was that after a fall in her home in which the insured suffered a slipped disc, she made a claim on the policy. Unknown to her, the insurer obtained its own expert reports on the insured and as a consequence of those reports, never disclosed to the insured, rejected her claim. 75 Ipp J gave the lead judgment, not only upholding an appeal on the merits but also a second ground based upon the insurer's duty to "act fairly, in good faith and reasonably" at [91]. Ipp J held (at [94]) that to withhold the information meant that the insured, instead of being able to answer the information on its merits, was left in a position where she had to challenge the reasonableness of the decision. Malcolm CJ agreed at [12] to [16] while Sanderson J preferred not to discuss this ground. 76 The distinction sought to be drawn in the present case is that what was not disclosed were two additional medical reports obtained by the insurer from its experts, namely Dr Funnell and Ms Gosling, coupled with the surveillance tapes or videos that it had obtained and forwarded to its experts and which were specifically relied upon by Dr Funnell. 77 The trial judge's conclusion (at [93] to [94] Red, 63-4) concerning the two reports was as follows: "[93] In my opinion it is striking that there was no flow of information back from Hannover to Mr Sayseng about the investigations which Hannover caused to be made. The private investigator's report and film were not notified to Mr Sayseng. If they had the neutral significance suggested by the private investigator's report itself, not passing them on to Mr Sayseng was of no importance; however the film acquired some significance because Dr Funnell made an adverse interpretation based on it. The severely adverse report of Dr Funnell, and the equally severely adverse report of Ms Gosling were not passed on to Mr Sayseng for comment. Doctor Funnell's report is dated 12 January 2000. It was passed to Mercer by Hannover on 24 January 2000. Ms Gosling's report was given after an assessment on 14 March 2000 and was passed by Hannover to Mercer on 10 April 2000. The letter declining the claim of 27 April 2000 followed without there being any further representation or communication from the Trustee to Hannover and indeed without there being an opportunity for the Trustee to respond. There was also no offer to Mr Sayseng of an opportunity to comment, and there was not even communication of the reports to Mr Sayseng.

[94] I would not suppose that information collected by an insurer which confirmed, or in some moderate way qualified information furnished by the claimant should as a matter of fairness be passed on to the claimant for an opportunity to answer by comment or to answer by submission of some further material. However the reports of Dr Funnell and Ms Gosling put an entirely different view of Mr Sayseng, his disability and his claim before the insurer, a view which departed completely from that presented by the medical reports and information submitted by Mr Sayseng. The first indication about the view of Hannover on the relative importance of these adverse reports was that relatively severe passages from them were quoted in the letter of 27 April 2000 which declined the claim. In my view these reports were so important that it was not possible for the insurer to reach a conclusion on the effect they produced in relation to other material submitted, in the course of good faith and fair dealing and with due regard to the interests of Mr Sayseng and of the trustee, without finding out what response if any would be made to them. This was particularly so as the first two reports obtained by Hannover, those of Dr Giblin and Dr Salmon, supported Mr Sayseng's claim in general ways although not conclusively. The difference was not a slight matter; one body of reports had to be completely right and the other body completely wrong, and a fair minded person deciding between them would go further than to rely on his own impressions, particularly as they related to matters of medical expertise and factual complexity." 78 Indeed the significance of the video surveillance tapes and the report of the private investigator based thereon not being made available to Mr Sayseng, yet being relied upon by Dr Funnell, was further underlined by Mercer's report of 22 May 2000 to the Trustee, made by Marie Sullivan, who was described as "principal Legal Group". At Blue, 76 she states her view that, "this report is unsound and inconclusive and that it should not influence any decision that the Trustee makes about the particular claim." That statement was preceded by a reference to the private investigator's supposed finding that "when observed there was no obvious signs of restriction in relation to Mr Sayseng's alleged back injury" with further elaboration of what was observed. 79 When expert advice is given in terms to the effect that the Trustee should disregard the video report because it was neutral, it is invidious that Dr Funnell, likely lacking that same advice, should be permitted by Hannover to provide a report which relied, inter alia, upon that very video report to draw inferences adverse to Mr Sayseng from it, a fortiori where neither Dr Funnell's report nor the video report was made available to Mr Sayseng's solicitors so that they could answer what was said in it or sought to be derived from it. 80 In those circumstances, any attempt to draw a distinction between the situation in Beverley where the reports were apparently the only ones in question and the present case where the reports were additional to reports already disclosed, is untenable given the nature of those reports so withheld. This latter consideration went directly to whether Mr Sayseng had a legitimate answer to the adverse view of his claim proffered by Dr Funnell which was, according to that expert, purportedly supported by the video surveillance tape subsequently disavowed by Mercer as unreliable. 81 The appellant then attempts to escape the conclusion reached by the trial judge on the basis that when Hannover wrote to the Superannuation Complaints Tribunal on 14 August 2002 setting out the substance of all the reports on which it relied, including the reports from Dr Funnell and Ms Gosling which form the basis of his Honour's determination in the present proceedings, this gave ample opportunity to Mr Sayseng or his solicitors to ask for the reports to be furnished to them. 82 There are several matters which bear upon the tenability of that proposition. First, the letter to the Superannuation Complaints Tribunal post-dated any further consideration by the insurer. The latter had earlier rejected Mr Sayseng's claim on 27 April 2000 and confirmed that rejection on 25 June 2001. Hannover forwarded the claim to the Superannuation Complaints Tribunal on 14 August 2002. Thereafter, as the chronology reveals, this still left the Trustee to re-consider the claim for the third time on 26 May 2003. It maintained its previous decision that Mr Sayseng was not totally and permanently disabled (Blue, 138). Needless to say the Trustee had no response from Mr Sayseng or his advisers in relation to the report of Dr Funnell, the video on which he partly relied and Ms Gosling (who also, it appears, placed some at least indirect reliance on the video). 83 Moreover, the letter of 14 August 2002 to the Superannuation Complaints Tribunal makes no mention at all of the video and said only this about the Funnell and Gosling reports: " Dr Funnell - IME, 12/1/00

Dr Funnell took a history consistent with other doctors and viewed the radiological evidence. He found that the progressive worsening of his complaints from 1997 in the face of conservative treatment and duty restrictions to be unusual. He also found it unusual that his symptoms hadn't improved in 18 months since ceasing work. He could not see any reason why for the most part Mr Sayseng could not return to his previous employment.

Lyn Gosling - Functional Capacity evaluation - 4/4/00

The functional assessment demonstrated inconsistent exaggerated behaviour therefore true assessment of his functional ability could not be determined. The result was that given the discogenic pain at L4/5 it would be appropriate for him to perform semi-sedentary work or work where he could vary his posture between sitting and standing and where he was not required to life heavy weight repetitively." 84 There is a final difficulty with all of this. There is simply no evidence that the Tribunal passed on a copy of the letter of 14 August 2002 to Mr Sayseng or his advisers. We are simply asked to infer that the Tribunal made it available. There is no subpoena, interrogatory or other evidence elicited from Mr Sayseng that would establish that the letter was passed on. Nor does the chronology reveal when the Tribunal made its determination or, indeed, whether there was any time for representations to be made by Mr Sayseng, even were he informed of the reports. This is quite apart from whether the summation of the reports could fairly be said to be a substitute for the reports themselves. This is more particularly so where that summation makes no mention of the video and when a reading of Ms Gosling's report indicated that it embraced the opinion of Dr Funnell who undoubtedly did rely in part on seeing the video. I should add that it was only in December 2001 that Mr Sayseng's current solicitors commenced to act for him and there is no evidence as to their knowledge, if any, of the existence of the video or the private investigator's report based thereon. 85 In those circumstances I do not consider that the letter of 14 August 2002 provides any answer to the conclusions reached by the trial judge at [93] to [94] as to the breach by Hannover of its obligation of good faith and fair dealing in failing to seek a response from Mr Sayseng to the relevant reports and the video. The situation is comparable to that in Wyllie v National Mutual Life Association of Australasia Ltd (NSWSC, Hunter J, 18 April 1997, unreported). There the insured made a claim under a policy of insurance for total disability benefit which was rejected. Hunter J held that the duty of good faith applied to the insured whether or not he was a contracting party. He relied upon the earlier quoted dicta of Mahoney JA in C E Heath Casualty & General Insurance Ltd v Grey in observing that the insurer had chosen to act on information that was scant and elliptic, concluding (at 24): "I think the conduct of the Insurer was manifestly unfair to the plaintiff in failing to provide the plaintiff with an opportunity of addressing the matters upon which McKeand had formed the opinion that the plaintiff was " Clearly ... not T. & PD ". Having regard to the nature and seriousness of the plaintiffs injury and to the unsatisfactory aspects of the claim material referred to later in these reasons, I think the Insurer was obliged to inform the plaintiff of the particulars of the basis upon which that opinion had been reached and so to afford him the opportunity of presenting evidence of his actual capacity." 86 Here, one may compare the unsatisfactory nature of the video material relied on by Dr Funnell. 87 Finally, the appellant contends that the judgment contains the inherent contradiction that the Trustee was regarded as having fulfilled its obligations although it three times rejected Mr Sayseng's claim without doing what the trial judge held Hannover was required to do. 88 The appellant then contends that because the Trustee must form a favourable opinion and because that requirement is cumulative upon what the insurer Hannover must do, and because the trial judge concluded that the Trustee's decision could not be impugned, it therefore must follow that instead of deferring making orders disposing of the proceedings against the Trustee, the trial judge ought to have dismissed the Summons. 89 The answer given by the trial judge was in my view perfectly correct, as was the course he took. On previous occasions of re-consideration the Trustee had first sought to ascertain the result of the insurer's consideration of the claim, consistently with the requirements of Rule 10. Accordingly, it was correct for the trial judge to conclude that "the Trustee may well re-consider Mr Sayseng's entitlement again if it obtains a favourable decision against Hannover". Therefore the correct order was that made by the trial judge, namely, to defer making orders disposing of the proceedings against the Trustee. This would allow the Trustee to take into account, as the Trustee would undoubtedly do, the court's ultimate determination as to whether Mr Sayseng was "in the condition of Total and Permanent Disablement within the meaning of Group Life Contract No. VGL 8034".

OVERALL CONCLUSION and ORDERS 90 I conclude that the appellant fails in this appeal and would propose orders as follows: (1) Appeal dismissed. (2) Appellant to pay the costs of the respondent of this appeal. 91 TOBIAS JA: I agree with Santow JA. ********

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