Kader v Tower Life Australia Limited

CATCHWORDS: Costs - Sickness and accident policy of insurance - Order for indemnity costs sought by defendant insurer and its agent following plaintiff's decision not to proceed

LEGISLATION CITED: Insurance Contracts Act 1984 (Cth), s 29

Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225; 118 ALR 248 Edwards Madigan Torzillo Briggs Pty Limited v Stack [2003] NSWCA 302 CASES CITED: Latoudis v Casey (1990) 170 CLR 534 Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622 Onetel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Tetijo Holdings Pty Limited v Keeprite Australia Pty Limited (FCA 3 May 1991 unreported)

Mahmoud Abdul Kader (Plaintiff) PARTIES: Tower Life Australia Limited (First Defendant) Rs Bhinder & Associates (Second Defendant) Raguhjit Singh Bhinder (Third Defendant)

Mr Porthouse (Plaintiff) COUNSEL: Mr Seton SC (First Defendant) Ms Collins; Ms Gerace (Second and Third Defendants)

Kheir & Associates (Plaintiff) SOLICITORS: Nicholas G Pappas & Co (First Defendant) Minter Ellison (Second and Third Defendants)

1 HIS HONOUR: The plaintiff, in December 1998, took out a sickness and accident policy with the first defendant Tower Life Pty Limited, which I shall refer to as Tower, and made a claim on the policy which Tower rejected. The Plaintiff joined the second and third defendants on the basis that if the policy did not respond for reasons asserted by Tower then either the second or third defendant was liable for that failure. The second defendant was Tower's agent, and the third defendant, a director, and, I infer, shareholder of the second defendant, although he had no involvement in the arranging of insurance for the plaintiff.

2 The policy, which is found at pp 19-43 of Exhibit "A" in the substantive hearing, entitles the plaintiff to a total disablement benefit as defined in para 3.1 of the policy of $1,154 per fortnight for a benefit period of two years: see p 48 of Exhibit "A". The plaintiff's claim on the policy was, first, that on 7 July 2000 whilst working as a tiler on a ladder at a job in Bronte he fell off the ladder and injured his back. He submitted that he has not worked since that accident, subject to one day, 15 March 2001, when he worked he said, helping a neighbour by doing his normal work for six hours for which he was not paid and which he said caused him a great deal of pain in the same area as where he had been injured on 7 July 2000, that is, above and below the belt area on the right hand side and down into the top of the buttocks on that side.

3 The plaintiff made a claim for total disablement on 12 January 2001: see Exhibit "A" p 51 and following. In April 2001 the plaintiff claims he had a further accident in which he injured his wrist falling down stairs and onto his wrist and fracturing it. He claims that the fracture has caused him long term problems with his wrist, that like his back problems, prevent him from working as a tiler.

4 The case commenced on Monday of this week. Mr Porthouse, of counsel, appeared for the plaintiff, Mr Seton SC for Tower and Ms Collins, with Ms Gerace for the second and third defendants. The plaintiff gave his evidence on Monday and cross-examination by Mr Seton commenced on that day. The cross-examination continued on Tuesday when part of a video was shown to the plaintiff. Mr Porthouse asked for time on Tuesday afternoon to consider his position in the light of the evidence which had been led to date and that which was yet to come and of which he had been given notice, and I granted him that time. When the matter resumed yesterday morning, that is, Wednesday, Mr Porthouse announced that the plaintiff did not wish to proceed with the case. There was discussion about what should occur, and by consent verdict and judgment for each of the defendants on the plaintiff's claims was ordered. There was no dispute that the plaintiff should pay the costs of the defendants, both of their defences and cross-claims, but the claims for indemnity costs sought by each of the defendants was resisted.

5 There was also an issue between Tower and the agent which has been resolved between them and is reflected in some draft orders which have been handed up.

6 Mr Seton submits that an order for indemnity costs against the plaintiff is appropriate in this case, it falling within the category of a case that had no realistic prospects of success. He relies on the following matters.

(1) The application for insurance contains a statement that the plaintiff earned a net income of $42,000 in the year ending June '98 and $40,000 in the year ending June '99. The plaintiff's evidence is that he earned less than $6,000 in both years and this is reflected in the tax returns which were tendered and became Exhibits "1D1" and "1D2".

(2) The plaintiff's own evidence is that he told the agent that he was earning "about $12000, $20000, $30000, I'm not sure how much I will be earning" (see C20 line 25) which also was not correct based on the tax returns and his evidence before this Court.

(3) The plaintiff claimed that he had not worked since 7 July 2000 except for one day, that is, 15 March 2001, for six hours and that on that day he was only testing himself and that he realised he could not work at all and that when he was working he was only "helping" a neighbour and was in pain as a result of the work. But there was evidence that he worked on 22 March 2000 at a primary school in Beverley Hills and on each of the 23rd to 26th of 2000: see Exhibit "A" on this application. I could not see any evidence of work on 27 March.

7 Mr Seton and Ms Collins both submitted that the evidence establishes that the plaintiff was well able to work in his occupation as a tiler and was doing so. Mr Porthouse submitted that although there was material giving significant cause to doubt the plaintiff's credibility not all the evidence was in. He submitted that the definition of total disablement was wide and that the Court might yet find that there was total disablement based on medical evidence. He also submitted that on the misrepresentation case it was the plaintiff's intention to rely on the Reply: see Exhibit "1" on the application for indemnity costs which has not yet been filed. He submitted that it was the plaintiff's case that the agent had written down what was in the application and that it was not clear whether the quote of about "$12000, $20000, $30000, I'm not sure how much I'll be earning" was intended to be gross earnings or nett. It was the plaintiff's evidence that he could only speak a few words of English and that the agent never asked him about anything to do with income.

8 I found the plaintiff's evidence very difficult to believe. This was not only because he contradicted himself on a number of points, (see T20 line 30, T50 lines 1-6, T57 lines 54-58, T17 lines 16-35, T77 lines 45-78, 15) but because his version of events was inherently implausible; ie. that the agent who had come to his house to assist him to take out a policy of sickness and accident insurance would not inquire about the matters which were in the form which the agent was filling out and which the agent did fill out. These were details which the agent, who on the plaintiff's case he had never met before, would not know and that the agent would want to know with some precision ie what amount the plaintiff had been earning.

9 In this case the plaintiff has abandoned his case. He has done so in the middle of cross-examination at a time when his credibility had come under sustained attack and where further material was about to be put to him that not only challenged his claim but contradicted his sworn testimony: see T32 lines 42-44, T95 lines 5-14, although see also lines 15-21. See also T86 pp 86-87.

10 The starting point in relation to costs is that the usual order for costs is costs on the ordinary basis (previously known as party/party costs): see Latoudis v Casey (1990) 170 CLR 534 at 566-7. No reliance was placed by Mr Porthouse on the argument that no costs should be ordered because the proceedings had not been heard to finality: see in this regard Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5, and see also Edwards Madigan Torzillo Briggs Pty Limited v Stack [2003] NSWCA 302. In my view this concession is appropriately made as this case falls within the description of surrender referred to by Burchett J in Onetel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 552-3 referred to in the Edwards Madigan case.

11 For costs on an indemnity basis something is needed that takes the case out of the ordinary and the Court should not, I infer, be too quick to see facts as giving rise to an exception particularly when the case has not been heard to finality. The most useful reference on the issue of indemnity costs is I think the case of Colgate-Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225, also reported at 118 ALR 248. The decision of Sheppard J in which he cited with approval the words of French J in Tetijo Holdings Pty Limited v Keeprite Australia Pty Limited (FCA 3 May 1991 unreported) in which it was said that the categories of case in which discretion may be exercised are not closed. Sheppard J then said: "it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud, both referred to by Woodward J in Fountain and also by Gummo J in Thors v Weekes (1989) 92 ALR 131 at 152 evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davis J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp ; the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson ; Maitland Hospital v Fisher (No 2) ; Crisp v Kent ) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records ). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis."

I have left out the citations for those cases that are referred to by his Honour Mr Justice Sheppard.

12 Thus for an order for indemnity costs to be made there must be material from what has already been put before the Court that enables the Court not only to form a view as to the probable result but also that demonstrates that the case falls within one of the categories, or if it does not, is one that nevertheless warrants the making of a special order.

13 In this case the plaintiff has made a claim for total disablement and supported it with evidence which was demonstrated to be false. He did work on at least 22, 23, 24, 25 and 26 March 2001: see Exhibit "A", when his sworn testimony was that he had worked on 15 March 2001 and only on that day. The video I think is also quite inconsistent with other parts of the plaintiff's testimony before the Court that he was in pain when he was doing the work to be seen on the video and that he did not bend over in a normal fashion, and that he was just helping. Indeed one of co-workers on 15 March is seen in the video on a later date, strongly pointing to the plaintiff having, or at least being part of, a crew on the 15th, and he had employed people, on his own evidence, in and before July 2000. When it is recognised that the plaintiff was informed on 28 May 2001 (see Exhibit "A" p 66) that he had been observed working on 15 March, the same day that he had a second conversation with the insurance investigator, it is clear that the plaintiff strove to come up with an explanation as to why he had been working on that day, and to present that day as the only day that he had worked because he knew he had been observed on that day.

14 On the misrepresentation point it is clear from the evidence which I did hear that the plaintiff well understood the significance of his statement of earnings and clear that a reasonable person in his position would have appreciated the importance of the information which was contained in the application form which was signed by him and which application form was, on the plaintiff's admission, demonstrated to be false. There was evidence to be called by Tower (see Exhibit "B" an affidavit of Helen Lilamand of 26 July 2005) that had Tower been made aware that the plaintiff earned less than $6,000 Tower would not have issued the policy (see Exhibit "B" and see s 29 of the Insurance Contracts Act), which was evidence that was not at all surprising.

15 I should note that in his evidence-in-chief the plaintiff's evidence was that he had commenced working as a tiler on his arrival in Australia in 1994. He said he worked eight hours a day five days a week: see T17. In cross-examination he volunteered that he had, before 1999, been working part time and that that is why he told the agent that he had only recently started work. This changed again subsequently when he said he had been unemployed from 1994 and been on Social Service benefits. The application form described him as having worked for six years as a tiler which was consistent with his evidence in chief. It is true that I have not heard the defendant's evidence nor the re-examination of the plaintiff but the plaintiff's evidence to rebut the effect of a document signed by him with the admittedly false statements contained in it (ie the income levels for two years, self employed for six years in a business known as Kader Tiles) was replete with assertions of loss of memory when uncomfortable evidence was put to him, and assertions of lack of ability to speak or understand English when difficult conversations were put to him (and I should emphasise that he had at all times in Court an interpreter interpreting the questions and his answers) and implausibility for the reasons in relation to the agent's role on that day to which I have already referred. To this I would add that on his case the agent told him he would be covered for up to $60,000 a year for life when the policy schedule provided to him provided for a maximum of $30,000 for two years.

16 There was a lot of damage done to the plaintiff's credibility by Mr Seton's cross-examination and the evidence of him working on 15 March and 22 to 26 March is sufficient in my view to establish that if the truth came out the claim was always doomed to failure, but the conclusion is reinforced by these other matters and by the abandonment of the claim after Tower had shown that it had evidence that would establish that the plaintiff had been untruthful both when taking out the policy and in making the claim and in his evidence before this Court. I should note for completeness that even were there anything in the waiver of disclosure point, and I think that was unlikely to be of any assistance to the plaintiff on non-disclosure, it was not relevant to the misrepresentation case.

17 In my view this is a case in which it is appropriate that an order be made for indemnity costs against the plaintiff in respect of each of the costs orders to be made in favour of the defendants.

18 What I propose to do is make orders in accordance with those previous orders that were signed by the defendants and to do so on an indemnity basis.

19 By consent as between the defendants amongst themselves and otherwise not by consent, I make orders in paragraphs 1 and 2 of the short minutes of order. And I note the agreement in paragraphs 3 and 4 as between the defendants/cross-claimants. I shall initial these orders on the top right hand corner and date them with today's date in the top right hand corner.

20 I direct that the exhibits be returned on the expiry of twenty-eight days from today's date in the absence of any appeal.

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