Host-Plus (Qld) Pty Limited v Kelley

Federal Court of Australia|2009-12-15|Before: Buchanan J

REASONS FOR JUDGMENT BUCHANAN J: 1 These proceedings, in the original jurisdiction of the Court, concern an "appeal" under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Act"). The appeal is available against determinations of the Superannuation Complaints Tribunal ("the Tribunal") established under the Act. It is only available on a question of law. 2 Mr Kelley, whose interests are directly involved in the present matter, has not appeared in the proceedings. He cites financial incapacity to do so. 3 Mr Kelley worked as a chef. He was admitted as a member of the Intrust Super Fund ("the Fund") on 17 January 2001. The trustee of the Fund was Host-Plus (Qld) Pty Limited. The trust deed contemplated the payment to members of benefits for temporary total disablement but only in the event that the trustee had insured for such a benefit and the insurer accepted a claim that such a benefit should be paid. The capacity of the Fund to provide that benefit, among others, was secured by a policy of insurance made between the trustee and Australian Income Protection Pty Limited ("the insurer"). The policy commenced on 31 January 2005 but, for reasons which need no detailed explanation, it extended to cover events and circumstances prior to that time. In particular, it extended to protect Mr Kelley from the time he became a member of the Fund upon the same terms as provided by the policy. 4 The decision of the Tribunal against which the appeal was brought was made on 16 February 2007. In its decision the Tribunal found that the decision of the insurer (which was adopted by the trustee) to reject a claim by Mr Kelley for a weekly benefit was not fair and reasonable and that the benefit provided by the policy should be paid "for the period commencing 21 April 2005 in accordance with the Policy". The policy provided, if its conditions were met, that a weekly benefit equivalent to 90% of income would be paid, subject to a waiting period of 21 days, for a maximum of 104 weeks. The Tribunal calculated such an amount to be approximately $88,000. It did not, however, stipulate the period for which the benefit was payable although it may be inferred that it intended it would be paid for the whole of the maximum period of two years. One complaint made on the appeal is that there was no evidence upon which the Tribunal could assess a period of liability at the maximum for which the policy provided. Another is that it gave no reasons for such a conclusion, if that is what it intended. 5 In a personal summary compiled by Mr Kelley of his medical history he referred to back and hip problems, including pain, which manifested in 1996. In due course, it would seem, medical opinion was to the effect that the problems were related to degeneration of Mr Kelley's right hip. In 2000 he had a total hip replacement and it appears that his pain resolved for some years until 2003. According to his current general practitioner, Dr Yuen, he again developed pain in his lower back and right leg in mid 2003. In June 2004 Mr Kelley recorded that he had "an incident at work which caused the back pain to increase". At this time he was only working two to three days due to his ongoing pain before the incident occurred. He told Dr Donnelly, an orthopaedic specialist, that the incident involved twisting his back while lifting a tray out of the fridge following which he developed ongoing low back pain. Commencing in March 2005 Dr Yuen certified him unfit for work. 6 Dr Donnelly, who saw Mr Kelley on 29 August 2005, reported that the "significant aggravation of his low back while lifting a tray out of the fridge" resulted in a soft tissue exacerbation which would have completely settled by the date of his report (1 September 2005). Dr Donnelly's examination revealed that Mr Kelley's main limiting condition was his right hip. He found him to be completely incapacitated for work due to right hip pain and limitations. He thought the right hip would probably require further surgery and that the problem was due to "a loose right femoral component" apparent from x‑ray films. Mr Kelley's original surgeon, Dr Morgan, apparently agreed with Dr Donnelly's assessment. Dr Morgan performed a further hip operation on 3 November 2005. There appears to be no report about Mr Kelley's medical circumstances after that date. 7 Mr Kelley's claim was made on 1 April 2005, after he was certified unfit for work. It nominated "lower back pain" and "right hip pain and shin" as the injuries or sicknesses upon which the claim was based. On 24 August 2005 the claim was declined by the insurer because there had been no clear diagnosis allowing the identification of a relevant sickness or injury. On 7 November 2005 the claim was again declined on the basis that his back and leg pain was a pre-existing condition dating at least from May 1996. On 18 November 2005 the decision was repeated. 8 Mr Kelley wrote a number of letters. In one letter, dated 25 November 2005, Mr Kelley seemed at pains to emphasise that he was not pursuing a claim related to any disability concerning his back but only a claim arising from his right hip. He said: My submission is that any diagnoses or treatment of back condition is irrelevant to my claim, as it has been found to be the loosening of the right hip prosthesis which has been the reason I have not been able to work. The loosening of the prosthesis has occurred during the time I have been a member of Intrust (Host) and therefore covered by Insurance. I do not believe that this should be treated as a pre-existing condition, as the previous condition was treated by a total hip replacement in 2000.

9 However that did not remain his position and in submissions put to the Tribunal he said: I acknowledge that the hip replacement is not covered by this policy however I believe that the back condition is still covered …

He then advanced a number of arguments to the effect that his back condition was a recurring one which fell within the terms of the policy as he had no treatment for it for a substantial period of time until it re-emerged during the policy period. 10 The policy provided that a benefit would be paid if: …at any time during the Policy Period an Insured Person shall sustain Sickness or Injury as defined in the Policy.

11 As earlier indicated it was accepted that the policy period, in Mr Kelley's case, commenced on 17 January 2001. Injury was defined as a physical injury caused by a violent, external and visible means but not including any condition which was also a Sickness. "Sickness" was defined as follows: SICKNESS means sickness or disease which is first contracted or which the Insured Person first becomes aware of while this insurance is in force and which continues for a period of not less than the Waiting Period and excludes any Pre-Existing Sickness.

Pre-existing sickness was defined as follows: PRE-EXISTING SICKNESS means any pre-existing Sickness that an Insured Person is having or has had treatment for or advice for treatment for in the six (6) calendar months prior to the date of commencement of his or her cover under the Policy. However such condition will be covered provided an Insured Person has, with the agreement of a legally qualified medical practitioner, ceased all treatment or advice for at least six (6) months during the insured Policy Period.

12 The position advanced to the Tribunal by the insurer (to which the trustee subscribed) did not directly address the merits of Mr Kelley's claim, although it did so indirectly. The submission appeared to suggest that Mr Kelley was prevented by earlier concessions from seeking a benefit under the policy. It generated immediate procedural problems as it referred to matters discussed at a conciliation conference, contrary to s 30 of the Act. The submission concluded by suggesting that the Tribunal should "determine the complaint be withdrawn". Such an approach seems to me to have been unhelpful and misconceived. The Tribunal's obligation under the Act was to deal with a complaint that a decision was unfair or unreasonable (s 14(2)). By the time of the review by the Tribunal that was clearly the substance of Mr Kelley's complaint. The Tribunal was not bound by technicalities, legal forms or rules of evidence (s 36(a)). It was to inform itself of any matter relevant to the review in any way it thought appropriate (s 36(c)). It was required to make a determination in accordance with s 37(3), namely, to affirm the decision, vary it, set it aside and substitute another or to remit the matter to the trustee or insurer. In that respect it had all the powers, obligations and discretions of the trustee and insurer. In my view no complaint can be made by the insurer or the trustee about the fact that the Tribunal addressed itself to the substance of Mr Kelley's complaint and the question of whether his claim should have been accepted. It should have been anticipated that that would happen. 13 However the Tribunal was not permitted to do anything that would be contrary to the terms of the policy (s 37(5)). This might have been a more promising line of argument. As will be seen, I have concluded that the decision of the Tribunal should be set aside for that reason. It is, in my view, regrettable that the insurer did not concentrate more upon a substantive defence of its own decision, rather than debating matters at a procedural level. However, for the purpose of the present appeal such matters may be put aside. What is now relevant is to examine whether there has been an error of law on the part of the Tribunal. 14 The first question examined by the Tribunal was whether Mr Kelley had suffered from a sickness or an injury. It concluded that he had a sickness rather than an injury. It said: The medical evidence before the Tribunal indicates that the Complainant had significant osteoarthritis of the hip as well as a congenital spina bifida occulta and pars articularis problem resulting in early spondylisthesis L5-S1 in the lumbar spine. On the basis of the evidence about the Complainant's medical conditions the Tribunal considers that the Complainant had a sickness rather than an injury, namely osteoarthritis of the hip and structural changes in the lumbar spine (pars interarticularis defect at L5-S1 with early spondylolisthesis and spina bifida occulta).

15 The next issue was identified as follows: The next issue for consideration was whether the Complainant's condition that caused him to cease work in 2005 was a pre-existing sickness. The Complainant claimed that he suffered from two conditions, namely hip problems and a back condition. It appears to the Tribunal that the Complainant submitted that he first became aware of the back condition in 2003, after commencement of his insurance cover (which commenced on 17 January 2001). He argued that he was only informed in 2005 that he had disc bulges and in 2006 that he had osteoporosis and osteoarthritis in the back. The Complainant therefore argued that his back condition falls within the definition of "sickness" in the policy as being a sickness that he first became aware of whilst the insurance was in force, and was not a pre-existing sickness. The Complainant further argued that the medical evidence showed that the hip problems identified in 1996 were not related to the osteoarthritis, osteoporosis or disc bulge.

16 However the Tribunal concluded that: There is clear radiological evidence before the Tribunal that both the osteoarthritis of hip and the lumbar spine conditions were identified in 1996. Moreover, the Complainant had over 13 physiotherapy treatments addressing both areas in 1996.

17 The Tribunal went on: The medical evidence before the Tribunal shows that the Complainant's primary sickness, osteoarthritis, was present in 1996. It is clear from the Complainant's treatment in 1996 that he was aware that he had a problem even if he was not made aware of any specific diagnosis. The nature of the problem in 1996 and its relationship to the current claim in the view of the Tribunal does not enable it to be claimed that it was a sickness of which the Complainant first became aware in 2003 even though he may not have been aware of the relevant medical terminology.

18 This conclusion appears to reject Mr Kelley's argument that he first became aware of some additional problems with his back in 2003. The Tribunal then went on to refer to an alternative argument put by Mr Kelley. It said: In the alternative, the Complainant argued that if his back problem was a pre-existing condition, he did not have any treatment on his back between 1996 and 2003 because it was "arthritis of the hip that was the problem". Accordingly, he fell within the policy because the policy covers pre-existing sicknesses where the insured member has ceased all treatment or advice for at least six months during the policy period.

19 This alternative thesis advanced by Mr Kelley does not appear to have received further attention. The Tribunal came to the view that he was entitled to a benefit for other reasons and did not return to this issue. The legal problems arising from the terms of the policy which I shall shortly identify apply also to Mr Kelley's alternative argument. As will be seen, it was insufficient to argue only that he did not have some specific treatment for his back in a particular period. Such a contention is, in any event, contradicted decisively by the fact that his hip operation in November 2000, within six months of commencement of his cover under the policy, was intended to and did resolve his back pain, as well as other pain, until about 2003. At least, that was the effect of the medical reports and there was no evidence to the contrary. 20 The Tribunal then turned its attention to the operation of the pre-existing sickness exclusion in the policy and the exception to that exclusion in the event that all treatment or advice had ceased for six months during the policy period with the agreement of a legally qualified medical practitioner. It must be taken that the discussion concerned the treatment Mr Kelley had received for his hip problems and the related back pain they caused, although that is not made explicit by the Tribunal. The Tribunal said: It is clear that the Complainant had treatment for his pre-existing sickness in the six (6) calendar months prior to the date of commencement of his cover under the policy - he had a hip replacement in November 2000 and joined the Fund on 17 January 2001. The issue for review is whether it was fair and reasonable for the Trustee and the Insurer to decline payment of the IP benefit on the basis that the Complainant did not satisfy the requirement in the policy that he cease all treatment or advice in relation to his pre-existing sickness for at least six months during the insurance policy period. The Tribunal noted the evidence relating to the advice and treatment of the Complainant's medical condition during the policy period. The Complainant's treating doctor, Dr SY, who first saw him on 18 June 2003, was of the view that following the Complainant's hip operation in 2000, his pain settled for some years until 2003. However, the Tribunal also examined the Health Insurance Commission report of the Complainant's history of medical consultations, which indicates that, from the period 8 November 2001 to 26 August 2002, some 9½ months, the Complainant only sought medical treatment on one occasion, that being on 6 March 2002. The Complainant next consulted his previous treating doctor on 30 August 2002 and then not again until 25 March 2003. The report therefore shows that the Complainant did not seek any medical advice for a period of seven months during this period.

21 There are a number of difficulties with the analysis and conclusion contained in these passages, whether they are confined to a consideration of Mr Kelley's hip problem or, as seems the better view, address his overall medical circumstances. The conclusion that Mr Kelley had not sought medical advice for a period of seven months during the policy period was based upon a report of the Health Insurance Commission which recorded Medicare payments made on Mr Kelley's behalf. A covering letter addressed to the insurer made it clear that the information did not extend to services provided to public patients in hospitals or to outpatients in public hospitals or in emergency departments of hospitals. The period of seven months which was identified by the Tribunal was the period between visits to Mr Kelley's then general practitioner, Dr Stevens, on 30 August 2002 who Mr Kelley had seen on many occasions since 1988, and then to Dr Yuen who took over as Mr Kelley's general practitioner after Dr Stevens' retirement. The second visit occurred on 25 March 2003. 22 Mr Kelley's own summary of his medical history referred to a matter that was, in two respects, destructive of the analysis and conclusions of the Tribunal. As the Tribunal itself pointed out, the total hip replacement which Mr Kelley had in September 2000 fell within the period of six months prior to him joining the fund on 17 January 2001. The pre-existing sickness exclusion therefore applied unless the exception was activated. His hip operation was carried out by Dr Morgan, an orthopaedic consultant in Ipswich, who carried out the total hip replacement at Ipswich General Hospital in September 2000. Mr Kelley was referred to Dr Morgan by his general practitioner, Dr Stevens. He was cleared to return to work in January 2001 and was to commence annual checks by Dr Morgan in October 2001. He had an annual check at Dr Morgan's clinic in September or October 2002. This visit was not recorded by the Health Insurance Commission. It represents a medical review of Mr Kelley's circumstances. It probably occurred within six months of the visit to Dr Yuen on 25 March 2003, but it certainly occurred, in any event, as part of ongoing review of his circumstances. 23 There was no adequate foundation, therefore, for the conclusion that Mr Kelley had not had medical advice for more than six months. Moreover it could not be concluded that he had ceased all treatment or advice for at least six months and it could not be concluded that any interruption to such treatment or advice amounted to a cessation with the agreement of a legally qualified medical practitioner. Both aspects were requirements essential to the operation of the exception to the pre-existing sickness exclusion. These elements were not established simply by reference to a gap in visits to his general practitioner of more than six months. In short, the requirement to treat his circumstances as falling within an exception to the pre-existing sickness exclusion was not, and could not on the evidence have been, satisfied. The Tribunal failed to give proper attention to, or apply, the terms of the policy. 24 No better position for Mr Kelley could arise on his alternative argument. His medical treatment and advice cannot be dissected into different components in the way he suggested. His hip operation had been intended to, and did, resolve his back problems. Leaving aside the soft tissue injury in 2004 (which would have resolved by September 2005) the recurrence of pain which commenced in 2003 was assessed as due to the loosening of a femoral component which was ultimately addressed by a further operation in November 2005. There was no medical support for a complaint of ongoing lower back pain which was unrelated to his hip problems. The pre-existing sickness exclusion was activated unless Mr Kelley had, with the agreement of a medical practitioner, foregone all treatment and advice for the sickness or injury. There was no evidence that any medical practitioner had agreed that Mr Kelley could forego all advice and treatment for any of his conditions. 25 In my view the Tribunal committed errors of law. First, it reached a conclusion which was contrary to the terms of the policy and involved a misapplication of it. Furthermore, s 37(6) of the Act required the Tribunal to affirm the decision of the insurer and the trustee if it was satisfied that the decision was fair and reasonable in the circumstances. In Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 Allsop J, after a review of the authorities, said (at [32]): If the Tribunal finds that the decision of the trustee or the insurer is in conformity, with and required, by the governing rules or policy terms, in the sense which I have discussed above, it cannot other than find or be satisfied that the decision is fair and reasonable. 26 In my view, applying those observations, the Tribunal was, in effect, directed to affirm the decision because it was, in my view, bound to find as a matter of proper application of the policy that it did not provide for the payment of a benefit to Mr Kelley and expressly excluded any relevant benefit. 27 The determination of the Tribunal must be set aside. I have considered whether I should remit the matter for further attention by the Tribunal but have decided that there would be nothing to be gained by so doing. Using the Tribunal's own analysis, applying a correct view of the requirements of the policy and applying the Act there was no matter identified by the Tribunal which could yield an outcome favourable to Mr Kelley. Nor was there any evidence of such a matter. In those circumstances there would be no point in remitting the matter. I propose instead to substitute, pursuant to s 37(3) of the Act, a determination that the decisions of the insurer and the trustee, that Mr Kelley was not entitled to a benefit under the policy or the deed, be affirmed. 28 That conclusion makes it strictly unnecessary to deal with other arguments which were advanced but I will mention two briefly. 29 One argument I have already foreshadowed. It was that the Tribunal did not identify the period for which any benefit would be paid. In my view this criticism was well founded. The Tribunal may have intended that payment be made for the maximum period although, as I earlier observed, there was no evidence that Mr Kelley remained medically incapacitated by reason of sickness or injury after the date of his second hip operation in November 2005. It is not possible to be certain what period was intended. Had I not already determined to set the Tribunal decision aside I would have set it aside for the reason that the decision was not, in this respect, the subject of adequate reasons and remitted the matter to the Tribunal for further consideration. In light of my earlier conclusions that is unnecessary. 30 A further argument was that the insurer (and the trustee) were denied procedural fairness because steps were taken to redact elements of the insurer's submissions before those submissions were provided to the Tribunal for its consideration. In my view there is no substance in this criticism. 31 Section 30 of the Act provides: 30 At a review meeting in relation to the complaint, unless the parties otherwise agree, evidence must not be given and statements must not be made about any word spoken or act done at a conciliation conference if the word or act related to a question to be determined by the Tribunal. 32 In the present case there had been a conciliation conference. In submissions which were first sent to the Tribunal on 13 October 2006 explicit reference was made to the conciliation conference and to statements made during the conference by Mr Kelley. Those references should not have been made. Staff of the Tribunal asked in writing for the deletion of any references to matters discussed during conciliation and for a revised submission. The insurer strongly objected, although on what basis remains unclear to me having regard to the terms of s 30 of the Act. Amended submissions were sent which did not appear to satisfactorily address the problem. That was the view of officers of the Tribunal. It is my view also. On this occasion elements of the submissions were redacted after discussion with the insurer. Again the insurer disagreed. In an email dated 3 November 2006 an officer of the Tribunal said: If you wish to replace the submission/overview with the points that you wished to make but with the information clearly sourced from the documentary material provided to you during the proceedings at the Tribunal so that the points do not relate in any way to statements made at the conciliation conference please feel free to do so no later than by Wednesday 8 November 2006. If you have not provided a substitute submission by next Wednesday 8 November then the Tribunal will take it that you are satisfied that the document as it is presented in the attachment above is acceptable to you. 33 A further submission was not provided. To the knowledge of the insurer and the trustee the redacted version of the submission (which was provided to them) was provided to the Tribunal. There is no basis to suggest that the insurer was denied the opportunity to put a proper submission to the Tribunal. It seems to me that it chose not to respond to the indications which were given to it or, for that matter, to the terms of s 30 of the Act. 34 It was not suggested that the members of the Tribunal were in any way at fault in the process which was followed. Rather, it was suggested that the result of the steps taken was that the insurer's position was not adequately before the Tribunal. I do not regard that as a complaint which may be laid at the door of either the Tribunal or the administrative staff of the Tribunal. It was the result of choices made by the insurer. The argument on the present appeal about whether it was necessary to make each of the redactions, or whether certain parts of the submission could be supported (even though not attributed in this way in the submission itself) by reference to Mr Kelley's own submission to the Tribunal, rather than what was said at the conciliation conference, was not sufficient to raise any serious question of a denial of procedural fairness. 35 The order which I will make is that the determination of the Tribunal be set aside and in lieu thereof it be determined that the decision of the insurer and the trustee that Mr Kelley was not entitled to a benefit under the policy, or the deed, be affirmed. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.

Counsel for the Applicants and Second Respondents: V M Heath

Solicitor for the Applicants and Second Respondents: Ebsworth & Ebsworth

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