Ivan Mabbett v Watson Wyatt Superannuation Pty Limited & Anor

Ivan Mabbett v Watson Wyatt Superannuation Pty Limited & Anor - [2008] NSWSC 365 - NSWSC 2008 case summary — Zoe

Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Briginshaw v Briginshaw (1938) 60 CLR 336 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Fitzgerald v Penn (1954) 91 CLR 268 Hannover Life Re of Australasia v Sayseng [2005] NSWCA 214 Hide and Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Hydarnes Steamship Company v Indemnity Mutual Marine Assurance Company [1895] 1 QB 500 International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyd's Rep 344 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; [1998] 1 All ER 98 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Lake v Simmons [1927] AC 487 Lasermax Engineering Pty Ltd v QBE Insurance (2005) 13 ANZ Ins Cas 61-643; [2005] NSWCA 66 Maggbury Pty Limited v Hafele Australia Pty Limited (2001) 210 CLR 181 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Masterton Homes Pty Ltd v Palm Assets [2008] NSWSC 274 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 CASES CITED : McLean v Bell (1932) 147 LT 262 National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Pedler v Richardson (Supreme Court of NSW, Young J, 16 October 1997, unreported) Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Prenn v Simmonds [1971] 1 WLR 1381; [1971] 3 All ER 237 Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65 Sayseng v Kellogg Superannuation [2003] NSWSC 945 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 Sherman v Nymboida Collieries Pty Ltd (1963) 109 CLR 580 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Watson v Foxman (2000) 49 NSWLR 315

[11]

The proceedings 1 These are proceedings concerning the claimed rights of the plaintiff, Mr Ivan Mabbett, to receive payment of an insured benefit commonly referred to as Total and Permanent Disablement benefits ["TPD"]. The plaintiff sustained a back injury on 9 July 2001, the very day upon which he had tendered his resignation to P & O Cold Logistics Services Pty Limited, the company by which he was employed. 2 The first defendant, Watson Wyatt Superannuation Pty Limited ('WWS') was initially sued in its capacity as trustee of the P & O Australia Superannuation fund [the fund], but is no longer a party to these proceedings. The second defendant, AMP Life Limited, is sued as Group Life Insurer of the fund. The convenient course is to refer to the first defendant either by its name or as 'the Trustee' and to the second defendant either by its name or as 'the Insurer'. 3 The plaintiff has standing to sue the Insurer even though it is a group policy and the Insurer owes the same obligation of good faith and fair dealing to the plaintiff as it does to WWS as trustee (Hannover Life Re of Australasia v Sayseng [2005] NSWCA 214 per Santow JA at [70] to [72]). This decision, with which Spigelman CJ and Tobias JA concurred, tracked the authorities concerning the nature and content of an insurer's obligations under a policy taken out by a trustee, the commercial purpose of which policy is to provide insurance against risks to third parties in what are sometimes referred to as "trust" and "benefit" cases. The decision upheld the proposition that the duty of good faith applies where the policy is at least for the indirect benefit of the insured. At [55] Santow JA affirmed the applicability of what his Honour referred to as a '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. At [56] Santow JA observed that the decision in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 afforded a principled basis for attributing such a duty of good faith and fair dealing to the insurer in its dealings with the employee. The duties of utmost good faith in respect of a claim are owed by the insurer and the employee to one another. The facts 4 The plaintiff was employed by P & O from 15 January 2001 until 9 July 2001. As an employee, he was also a member of the superannuation fund during this period. 5 On 9 July 2001 the plaintiff tendered his resignation to P & O. His stated intention was to commence work the next day as a demolition supervisor with Associate Building and Construction Service (ABC). The plaintiff's resignation was accepted by P & O, however he was asked to work until the end of the shift, it being a term of the plaintiff's employment contract that he give 8 hours notice of resignation. Hence the resignation became effective at the end of the plaintiff's shift on 9 July 2001 [PX194]. Between the time at which the plaintiff tendered his resignation, and the time at which the resignation took effect, the plaintiff alleges that he sustained a back injury in the course of his employment with P & O. 6 The plaintiff ceased working for P & O at the end of his shift on 9 July 2001. Due to his injury, the plaintiff alleges that he was unable to start work as anticipated with ABC immediately following the end of his employment with P & O. The plaintiff alleges that the Employer declined to rehire him after his resignation [PX194]. 7 Following a period of medical treatment for his back injury, the Plaintiff began working for ABC on or around 15 November 2001. The plaintiff submits that this work was only on a part-time basis, however this evidence is disputed by the Insurer. This work continued until May 2002. 8 In July 2003, the plaintiff obtained part time work as a bus driver for the Beech Boys Bus Company working two hours in the mornings and two hours in the afternoons five days per week. In September 2003, the plaintiff resigned after being made aware that ongoing work could only be provided if the plaintiff could work longer hours and obtain a Commercial Bus Licence. 9 More recently, the plaintiff has also been involved for some years in helping to run a shop selling organic products and remedies, and has been involved in political activities, but on his evidence he has only received the promise of future payment rather than regular remuneration. The plaintiff's approaches to the trustee/administrator about making a claim 10 In about June 2003, the plaintiff contacted the Trustee or its administrator about making a TPD claim. The Trustee or its administrator sent a letter to the plaintiff on 20 June 2003 regarding the claims process and sent claim forms on 25 November 2003. The plaintiff's completed forms were returned to the Trustee on or around 15 March 2004 [PX196]. The Trustee or its administrator sent the claim for TPD benefits to the Insurer on or about 15 April 2004, and it was apparently received on 20 April 2004 [PX236]. During May 2004, the Insurer requested further information from the Trustee, which the Trustee obtained from the plaintiff and his former employer, P & O. The claim was assessed by the Insurer. 11 The substantive documents before the Insurer in the claim were: · the Employee's Statement (completed by the plaintiff) dated 10 March 2004 [PX216]; · the Employer's Statement dated 31 March 2004 [PX230] · Initial Medical Report & Certificate for Superannuation Disablement Claim by Dr Ng dated 1 March 2004 [PX209]. 12 The Trustee was informed that the Insurer proposed to decline the claim by letter dated 3 June 2004 [PX249-250]. The Insurer invited the plaintiff to comment on the basis for the proposed declining of the claim set out in the letter within 21 days (ie by 24 June) and also invited the Trustee's response if it disagreed with the Insurer. 13 No response was received from the plaintiff or the Trustee by 29 June 2004 so the Insurer proceeded to deny the claim as proposed [PX254, 262]. 14 On 6 September 2006, the plaintiff's solicitor requested the Trustee to have the Trustee and Insurer reconsider the claim based on further evidence being: · Report of Dr Guirgis dated 23 August 2006 · Report of Dr Ng dated 29 June 2005 · Statement of the plaintiff dated 10 January 2006. 15 As the date on which the plaintiff alleged he had commenced his employment in the demolition industry after the injury differed from that previously given, the Trustee requested further information, which was received by the Insurer on or about 14 November 2006. 16 On 24 November 2006, subject to the Trustee's concurrence, the Insurer confirmed its decision to deny the claim. The Insurance Contract and Trust Deed 17 Clearly enough, the commercial context of the insurance contract with which these proceedings are concerned is that it provided benefits to a trustee of the superannuation fund to cover the trustee's own liability to pay TPD benefits to members. 18 During the hearing, the Court was taken to, and examined in detail, those clauses of the insurance contract and the trust deed which formed the basis of the relationship between the parties. Ultimately, only those clauses which are relevant to the issues in the dispute will be extracted in the judgment below.

[55]

"The commercial context explains why this is so: the insurance contract provides benefits to a trustee of a superannuation fund to cover the trustee's own liability to pay TPD benefits to members. The main purpose of a superannuation fund is to provide retirement benefits but it is permitted to provide ancillary death cover, TPD and temporary disablement benefits. The TPD benefit is calculated as a percentage of the member's salary by their remaining years of service to age 65 but for the illness or injury. The percentage applicable to the plaintiff is 9% (equivalent to the amount of statutory superannuation contribution an employer is required to make). It would be a bizarre result if the qualifying clause for TPD was read so as to allow a person to return (or continue unabated) to work with any employer on different duties (perhaps even on an increased salary) and also claim a benefit that was the equivalent of a retirement benefit." 41 The analysis is rejected. The 'bizarre result' suggested by the Insurer, in which a person could qualify for TPD benefits while working for another employer, is tempered by the fact that any potential claimant would still be required to satisfy the second limb of the test, i.e. to satisfy the Insurer that future employment was unlikely. 42 Moreover, what is here being sought by the Insurer amounts to no more and no less than a clear attempt to attribute a meaning to the words here in issue ["the Employer"] which is plainly contrary to the express language. This is said to be permissible as part and parcel of a purposive construction. In my view the proposition is simply unsustainable. 43 It is unnecessary to do more than to repeat the general statement of principles concerning proper construction in Masterton Homes Pty Ltd v Palm Assets & Ors [2008] NSWSC 274 [at 26] with most particular emphasis upon the quotation from the recent judgement of Tobias JA in Ryledar Pty Ltd v Euphoric Pty Ltd (2007) Aust Contract R 90-254; [2007] NSWCA 65, affirming the approach taken by Palmer J at first instance:

[58]

ii. Clearly primacy must be given to the actual words used in a written contract. McColl JA in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 at [69] enunciated the following principles: "[69] If the words used [in a written contract] are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate': A ustralian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109-110 per Gibbs J (as he then was). However, in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party's construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result, it is essential that that intention be made "abundantly clear": L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 at 251 per Lord Reid. [70] Dealing with the circumstances where there are internal inconsistencies in a contract, Gibbs J said "it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument.": Australian Broadcasting Commission at 109. [71] Gibbs J's statement in Australian Broadcasting Commission at 109 that "the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyd's Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which "must speak for itself, but … must do so in situ and not be transported to a laboratory for microscopic analysis".

[68]

The causation element 45 The Insurer maintains that that the error is immaterial, in that a finding should also be made that the plaintiff did not, on the material before the Insurer, demonstrate compliance with the first limb of the TPD definition. Specifically, it asserts that the plaintiff did not demonstrate, as required by the first limb, that the injury caused him to be absent from employment with the Employer for at least 6 months ('the causation element'). 46 Crucially, the Insurer contends that the fact that the plaintiff elected to resign on 9 July 2001 meant that it was his resignation, and not the injury, which was the proximate cause of his absence from the employer over the following period. 47 The plaintiff's contra contention is that such a definition of the causation element is illogical in the context in which the contract was made. Specifically, it would deny TPD benefits to those who were injured with less than 6 months remaining on a fixed term contract, or, indeed, to employees who were dismissed immediately after suffering injury, thus allowing any employer to avoid liability under the policy. The plaintiff contends that the true construction of the word 'causes' is that the injury or illness was sufficient to prevent the plaintiff from carrying out his pre-injury work with the employer. 48 At this stage, it is important to note that the plaintiff's submission is rejected insofar as it asserts that the plaintiff must continue in his pre-injury work in order to be disqualified under the first limb. There is no warrant for restricting the term "employment" in the first limb of the TPD definition to the insured person's usual duties. The word "employment" is not so defined in the definitions section of the policy, or elsewhere, and especially given the detailed definition of occupation, duties and work in the next limb, if the clause had intended to refer to the person's own normal duties, it would be expected that the clause would expressly say so or have used the apposite defined term "At Work" which means "performing their normal work duties during their normal work hours" [PX 38]. For this reason, the proper construction is that the plaintiff's injuries must cause them to be absent from any employment with the employer, and not merely from their usual duties. 49 To resolve the issue of whether the plaintiff satisfies the first limb of the TPD definition, it is necessary to ascertain, as a question of contractual construction, what is meant by the term 'cause' in the passage described above. On one interpretation of the first limb of the test, the term 'cause' may be interpreted as requiring two factors:

[70]

ii) but for the illness or injury, the Insured Person would not have been absent from employment with the Employer for at least 6 months in a row. 50 On a different interpretation, causation might require only that the illness or injury must be sufficient to cause the Insured Person to be absent from employment with the Employer for at least 6 months in a row. That is, the employer must have been absent from employment for 6 months in a row, and the injury must be sufficient to cause that absence, regardless of whether the employee would also have been absent if that injury had not occurred. 51 The difference between these two tests may be exemplified by the following example: A person is employed as a manual labourer. On a given date, this person is involved in an accident at work which means that he or she is no longer able to work as a manual labourer. One month later, the employer unexpectedly undergoes a major restructuring in which all employees performing manual labour are dismissed with two months notice. Using the first definition of causation, the injury will not have caused the employee to be absent for 6 months, since but for the injury occurring, the employee would only have worked an additional 3 months before being dismissed. On the other hand, the injury would have been, in and of itself, sufficient to prevent the employee from working for at least 6 months. It is therefore a 'cause' of the absence according to the second approach. As a theoretical matter, it does not seem to make any difference to either approach if the decision to restructure the company was made one month before the injury, rather than a month after i.e. if the employee was injured during the period of 2 months notice. 52 Neither of the tests described above are entirely satisfactory. In March v E & M H Stramare Pty Ltd (1991) 171 CLR 506, Mason CJ noted [at 516] that "the application of [the 'but for test'] proves to be either inadequate or troublesome in various situations in which there are multiple acts or events leading to the plaintiff's injury". Mason CJ also rejected the idea of a 'formulaic' approach to the question of causation, stating [at 515]:

[71]

"As Dixon CJ, Fullagar and Kitto JJ remarked in Fitzgerald v Penn [(1954) 91 CLR 268] (at 277): "it is all ultimately a matter of common sense" and "[i]n truth the conception in question [ie, causation] is not susceptible of reduction to a satisfactory formula": at 278." 53 The question to be answered in the present case is quite different to the causation question which commonly arises with respect to the causation of damage in contract or tort. In March v E & M H Stramare Pty Ltd, Mason CJ drew a distinction between 'scientific' and 'legal' causation, stating [at 509]: It has often been said that the legal concept of causation differs from philosophical and scientific notions of causation. That is because "questions of cause and consequence are not the same for law as for philosophy and science", as Windeyer J pointed out in National Insurance Co of New Zealand Ltd v Espagne (1961) 105 CLR 569 at 591. In philosophy and science, the concept of causation has been developed in the context of explaining phenomena by reference to the relationship between conditions and occurrences. In law, on the other hand, problems of causation arise in the context of ascertaining or apportioning legal responsibility for a given occurrence. The law does not accept John Stuart Mill's definition of cause as the sum of the conditions which are jointly sufficient to produce it. Thus, at law, a person may be responsible for damage when his or her wrongful conduct is one of a number of conditions sufficient to produce that damage: see McLean v Bell (1932) 147 LT 262, per Lord Wright at 264; Sherman v Nymboida Collieries Pty Ltd (1963) 109 CLR 580, per Windeyer J at 590-1. 54 In this case, the Court is merely asked to construe a contractual term, not to attempt to ascribe responsibility for damages. There is no question of finding the Insurer 'responsible' for the plaintiff's loss, merely establishing whether the loss falls into a particular category which the Insurer has agreed to indemnify. It may therefore be more akin to the notion of 'scientific' rather than 'legal' causation. 55 Ultimately, the issue which must be resolved in this case is whether the plaintiff's injury caused the plaintiff's absence in the sense of being a real and effective, and proximate, cause of that absence: cf Lasermax Engineering Pty Ltd v QBE Insurance (2005) 13 ANZ Ins Cas 61-643; [2005] NSWCA 66. 56 In construing the contractual clause, I note that there is no express requirement that the illness or injury be the sole cause of the plaintiff's absence from employment. There may be circumstances where there is more than one cause of the plaintiff's absence. Thus, in the example given above, both the employee's injury and the employer's decision to restructure are real and effective causes of the employee's absence. Similarly, in the present case, if the plaintiff can establish that his injury prevented him from being employed by the Employer for a minimum of 6 months, then the finding must be that the injury is, in fact, an effective cause of that absence. This is true regardless of whether, in the hypothetical case that the employee was not injured, the plaintiff would also have been absent from employment with the Employer due to his resignation. 57 A number of contextual considerations reinforce this as the intended meaning of the contractual term:

[92]

66 During the hearing the plaintiff was closely cross-examined in relation to the role which it was suggested he had played in his brother's compensation claim. I ensured that the relevant provisions of section 128 of the Evidence Act 1995 were made plain to the plaintiff. He elected to give the answers without taking objections. 67 In cross-examination he volunteered that he had assisted his brother with his compensation claim but he denied that he had assisted his brother to complete the claim form. It appears however that he had witnessed the claim form being signed. The area confronted by the Insurer in attempting to examine the matter was particularly difficult. Ultimately the Court refused leave to issue subpoenas towards the very end of the hearing. The most that can be said in relation to the whole of this area is that the allegations sought to be made good by the Insurer [linking the plaintiff with assisting his brother with his compensation claim, the proposition being that an issue in the other proceedings was why the brother gave one version of the accident in a claim form and had asserted another in the proceedings] was not substantiated. 68 There is of course a plethora of authority in support of the proposition that the Court is bound to see that a case of fraud is clearly proved. An allegation of fraudulent intent is one of the most serious allegations capable of being made. Actual dishonesty is said to be "the hallmark of fraud". 69 The gravity of the allegation has been said to be such that whereas section 140(1) of the Evidence Act 1995 (NSW) stipulates a single standard of proof for all civil cases, namely the balance of probabilities, Section 140(2) preserves the doctrine in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; Pedler v Richardson (Supreme Court of NSW, Young J, 16 October 1997, unreported) at 10-11. See also McLelland CJ in Eq in Watson v Foxman (2000) 49 NSWLR 315, 319. More recently in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 the High Court has put the matter in the following terms:

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