Larwint Pty Ltd v Norwich Union Life Australia Ltd [2007] VSCA 21

2 I agree, for the reasons given by Ashley JA, that the appeal should be dismissed.

3 The appellant, Larwint Pty Ltd, took out a policy of insurance with the respondent, Norwich Union Life Australia Ltd. The policy provided for the payment of a "critical illness benefit" in the event that a person nominated as the "life insured" suffered an "insured event". The insured events included a "heart attack" as defined. Larwint made a claim on the policy, alleging that Mr Richard King, the person nominated as the life insured, had suffered a heart attack on 31 July 2004. The claim was rejected, and Larwint brought a proceeding to enforce the policy. The learned trial judge rejected its claim. Larwint challenges that rejection.

4 At the end of oral argument on the appeal, the Court reserved liberty to Larwint to apply to amend its notice of appeal and to make written submissions in support of any proposed amendment. It also reserved liberty to Norwich to file submissions in connection with any proposed amendment. This course was taken because it had become became evident that, apart from matters squarely raised by the Notice of Appeal, there were live issues as to -

• The basis or bases upon which Larwint had made the claim on the policy.

• The matters comprehended by the pleading in the statement of claim that Norwich had refused to indemnify Larwint "in breach of the terms of the policy".

• The basis or bases upon which Larwint had pursued its claim at trial.

• The matters comprehended by the notice of appeal.

5 In the event, Larwint did file a proposed amended notice of appeal, and submissions in support thereof; whilst Norwich filed submissions opposing grant of leave to amend. An understanding of the terms of the policy and the course of events is necessary before the application to amend can be determined, and thus before the matters comprehended by the appeal can be clearly exposed.

The policy

6 The policy provided relevantly that -

• "Norwich Union Flexible/Executive Flexible Recovery Money insurance provides for payment of the critical illness benefit in the event that the Life Insured suffers an Insured Event (defined in clause D.6) for the first time and this occurs whilst the policy is in force."[1]

• "A claim for this benefit shall be (admitted and) paid only if:

(i) an Insured Event occurs before the Renewal Date prior to the Life Insured attaining age 65 years;

(ii) the Insured Event is diagnosed by a medical practitioner and is supported by clinical, histological and laboratory evidence as appropriate. The benefit is not payable if You do not have the condition which has been diagnosed".[2]

• Insured Events included "heart attack".[3]

• "Heart attack means death of a portion of heart muscle as a result of inadequate blood supply to a relevant area. The basis for diagnosis shall include:

(i) electrocardiographic changes associated with the myocardial infarction; and

(ii) elevation of cardiac enzymes consistent with the myocardial infarction.

If in the policyowners (sic) opinion the above tests are inconclusive we will, at our discretion, consider other appropriate tests."[4]

Pertinent circumstances

7 The treating cardiologist, Dr Robert Lew, gave unchallenged evidence that on 31 July 2004 Mr King, the life insured, suffered a heart attack as that term is medically understood. That is, he suffered death of a portion of the heart muscle. A significant elevation in cardiac enzymes confirmed that a substantial amount of the heart muscle had been irreparably damaged. The infarction was attributable to a very substantial reduction in the lumen of a particular coronary artery, the obstruction being observable on coronary angiography.[5] There was not, however, ECG evidence of the infarction, a not uncommon circumstance particularly in the area of the heart affected in the present case.

8 I have used the expressions "heart attack", "death of a portion of the heart muscle" and "myocardial infarction". They are interchangeable in the present connection. Each of them refers to death of a part of the heart muscle attributable to deprivation of adequate blood supply. Each of the three expressions is used in the policy definition of "heart attack".

9 When a claim was made on the policy, Norwich did not admit it. Rather, it wrote to the appellant raising the possibility, in effect, that what had occurred on 31 July 2004 had been an attack of unstable angina rather than a heart attack. Angina describes pain which is due to interference with the blood supply to a part of the heart muscle, such interference not resulting, however, in death of heart muscle. Norwich asserted that, according to some medical publications, a rise in certain cardiac enzymes may be attributable either to heart attack or unstable angina. It stated that -

"Taking into consideration that our policy provides the option of considering other appropriate tests, we ... will obtain a copy of all medical examinations and tests which your [sic] had following the event."

It said that on receipt of this information it would review the claim "in relation to the heart attack definition".

10 The intimation by Norwich that it would obtain more information was conveyed by its letter to Larwint dated 25 October 2004. It had anticipated that letter by requesting further material from Dr Lew on 15 October.

11 Dr Lew responded by letter dated 19 November. Relevantly, he said this:

"Richard King has had a myocardial infarct and not unstable angina. This is confirmed by his abnormal cardiac enzymes, his elevated CK 2803, his echocardiogram findings with a regional wall motion abnormality and a focal stenosis on coronary angiography which I subsequently performed coronary angioplasty on.

He did not have any ECG changes but this is not unusual in the setting of a myocardial infarct. He has definitely not had unstable angina as evidenced by the abnormal cardiac enzymes which represented myocardial damage."

12 The doctor attached reports of the relevant investigations.

13 Before that report was received, however, Norwich had written to Larwint's solicitors concerning the claim. By its letter dated 5 November 2004, Norwich said this:

"In order for the definition [of "heart attack"] to be satisfied, there must be evidence of both ECG changes and elevation of cardiac enzymes. These requirements are consistent across the industry.

As you may appreciate, medical conditions are very complicated and to avoid any 'grey' areas, we attempt to define the conditions that are covered with as much detail as possible. This is particularly important when not all cases of a generic type of condition (such as cancer and heart attack) are covered by the policy.

When the definition of 'Heart Attack' in your client's policy was arrived at, we were forced to rule out some types of heart attack. We attempted to do this by restricting access to the benefit to more severe cases. Accordingly while your client may well have suffered a myocardial infarction, his condition does not appear to be one which will result in him being entitled to benefits under the terms and conditions of the policy as it does not satisfy our definition of Heart Attack.

A similar process occurs in relation to all definitions to ensure that the policy responds appropriately and that it is affordable. To cover all illnesses and injuries without thought to issues of degree would result in a policy which would be beyond the means of the majority of people and unsustainable by the insurer."

14 The insurer went on to say that the information then to hand did not suggest that Mr King had suffered any ECG changes associated with his myocardial infarction, that the claim had not been formally declined, that Mr King had been advised during discussions that the current evidence did not satisfy the "definitional" requirements, and that it was obtaining further information from the treating cardiologist. Upon receipt of requested information, Norwich said, it would advise its formal position.

15 Pausing for a moment, on the hearing of the appeal Norwich did not attempt to sustain the meaning of the definition "heart attack" which it had advanced in its letter of 5 November 2004. Of this, more later.

16 Returning to the sequence of events, the plaintiff's writ was filed on 14 December 2004. There is nothing to show that Norwich had formally denied liability on the claim in the period which commenced when it received Dr Lew's report of 19 November, and which ended when the proceeding was commenced. Certain material included in the appeal book suggested that Norwich had taken specialist medical opinion after receiving Dr Lew's report. But we were informed from the Bar Table that this material did not get into evidence at trial. Why it was included in the appeal book remains unexplained.

17 From the material adduced at trial, the furthest that Norwich went by way of accepting that Mr King had suffered myocardial infarction was in its letter of 5 November. There it drew a distinction between myocardial infarction generally and myocardial infarction as defined by the policy; and there it said that Mr King "may well have suffered a myocardial infarction", though not infarction as defined.

The pleadings

18 The statement of claim was broadly expressed. It drew attention to the definition of "insured event", to the inclusion of "heart attack" as an insured event, and to the definition of "heart attack". It asserted that Mr King had suffered a heart attack within the meaning of the policy on 31 July. That was susceptible of picking up all that was comprehended by the definition of "heart attack", perhaps as amplified by the description of "insured event" in clause D.3(ii) of the policy. The statement of claim then pleaded a refusal to indemnify "in breach of the terms of the policy".

19 Concerning Larwint's allegation that Mr King had suffered a heart attack, Norwich pleaded as follows:

"4 It denies paragraph 4 of the Statement of Claim and says further that the life insured did not suffer a heart attack within the meaning of the Policy.

PARTICULARS

The medical evidence does not support the fact that the life insured suffered any electrocardiographic changes associated with his myocardial infarction, and as such did not satisfy paragraph (i) of the definition."

20 Concerning Larwint's allegation that it had refused to give indemnity in breach of the terms of the policy, Norwich pleaded the following:

"6 It denies paragraph 6 of the Statement of Claim and says further that in accordance with the terms of the Policy as set out in paragraph 3 of the Statement of Claim the life insured did not suffer an insured event within the Policy definition of Heart Attack as set out in clause C.14 of the policy, and as such is not entitled to the amount sought under paragraph 6 of the Statement of Claim."

21 Larwint did not file a reply to that defence.

The case at trial

22 When opening Larwint's case at trial, senior counsel informed the learned trial judge that the sole issue in controversy was the proper construction of the definition of "heart attack, specifically the issue whether, where there had been a definite diagnosis of death of a portion of heart muscle, and the basis for the diagnosis had been elevation of cardiac enzymes, the definition was satisfied in the absence of ECG changes." Counsel said that "the case ... is therefore whether the definition of heart attack means that the definition is only satisfied if there are both electrocardiographic changes as well as elevation of cardiac enzymes consistent with myocardial infarction". Then, immediately after referring to paragraph 4 of the defence, he observed that "the pleadings do very helpfully precisely identify what the issue is."

23 Counsel also adverted in his opening to investigations other than the rise in cardiac enzymes which supported the diagnosis of myocardial infarction. He did so, as I understand it, in order to support his submission that the words "(t)he basis for diagnosis shall include..." contraindicated the necessity for there to be both positive ECG changes and elevation of cardiac enzymes before a diagnosis of myocardial infarction could be made; not to suggest that Norwich had exercised a discretion of the kind described in the third sentence of the definition.

24 I should next mention the opening remarks of senior counsel for Norwich at trial. Shortly put, he said it was his client's contention that there must be both ECG changes and enzyme elevations for the definition of "heart attack" to be satisfied.

25 I turn to consideration of counsel's closing addresses. Senior counsel for Larwint made no mention, specifically, of the third sentence of the definition. His argument, developed in different ways, was that the definition was satisfied if consideration of all relevant investigations made out a diagnosis of myocardial infarction - even if, in the particular case, there were no ECG changes or raised enzyme levels.

26 Counsel for Norwich submitted, consistently with his remarks at the outset, that the basis for diagnosis must include the presence of both positive ECG changes and enzyme elevation. But, asked by the learned trial judge what meaning was to be given to the third sentence of the definition, counsel said that if one of the two "boxes" had not been ticked, -

"and the policy owner says, 'look, this hasn't been ticked', but it hasn't been ticked because it's inconclusive, that leaves our client with a discretion to make a payment on the policy by reference to other tests notwithstanding that one or possibly both of these two items is absent in the present case."

According to counsel's submission, once a policyowner raised the point, the insurer was given a discretion to consider other appropriate tests.

27 Counsel accepted, as I understand it, that the third sentence of the definition could apply if a doctor was unable to tick the "ECG box" because ECG results do not correlate well with damage to a particular part of the heart. Bearing in mind the fact that the third sentence of the definition focuses in the first instance upon the policyowner's opinion, counsel submitted, in effect, that a policyowner might form the opinion, in the face of a normal ECG but the presence of elevated cardiac enzymes, that the tests referred to in (i) and (ii) were inconclusive.

28 I should refer also to this interchange between counsel and the learned trial judge -

"COUNSEL:

Your Honour, ... my point is if in a particular case they were negative or one of them was negative such as this case that would be a case in which one of the tests was inconclusive.

HER HONOUR:

On one view isn't that what happened here and then the insured has written to the insurer saying think about other tests and the insurer has written off to the doctors and got reports that say Mr King has had a heart attack? So wouldn't the insurer be contractually bound in any event to make the payment?

COUNSEL:

No, your Honour. (a) because that's not the case as it exists on the pleadings ...

HER HONOUR:

I know that.

COUNSEL:

... and (b), because we have not had the application or consideration of other appropriate tests put to us squarely under this clause of the policy and we have not exercised our discretion or being called upon to do so one way or the other."

29 Counsel also submitted that, had the plaintiff relied upon the third sentence of the definition -

"It's not simply a technical point. It would be a completely different - I was going to say cause of action. I suppose in one sense it would still be a cause of action based on the contract but it wouldn't be a cause of action under which the plaintiff could maintain a specific outcome upon the defined facts. It would be - the point which we would reach would be that our client would have a discretion and would have to make a decision in the exercise of that discretion."

He added that Larwint's counsel had disclaimed reliance upon an exercise of discretion.

30 In reply, counsel for Larwint said this about the third sentence of the definition:

"If Your Honour was of the view that [Norwich's] argument ought to be accepted, we don't accept that we're excluded from relying upon the additional material, its true we didn't conduct the case in that way because we did not understand our learned friends to be denying on the policy - denying indemnity on the basis that there wasn't a strict compliance with the basis for diagnosis as opposed to a definition. The pleadings certainly leave it open because our pleadings simply allege the terms of the policy that the heart attack occurred within the meaning of the policy, that we've sought indemnity under the policy and that the liability has been wrongly denied."

"It's certainly true that the policy owner didn't find those results inconclusive, the policy owner found them conclusive. And it would be an odd thing, wouldn't it, if the two tests referred to did enable the positive diagnosis you were excluded from considering other tests but if they didn't, you could."

31 Counsel was pressed by the learned judge to say whether he was proposing as an alternative to submit that his client ought succeed because of the application of the third sentence of the definition. Her Honour said was that it was the first time that the issue had arisen, and that it had done so out of what counsel for Norwich had submitted. Counsel's response was, I think, equivocal. I understand him to have submitted that it was hard to give the sentence any real meaning, to say what circumstances could call it into operation. That was surely the impression which he created with her Honour, for in paragraph 5 of her Reasons she said this:

"The defendant refused the plaintiff's claim for indemnification under the policy in relation to Mr King's heart attack. It asserted that the plaintiff did not qualify for the relevant benefit, because there was no evidence of the requisite electrocardiographic changes in Mr King's case and that, as a result, his heart attack did not fall within the definition in clause C.14. (I note that the plaintiff does not claim entitlement to a benefit under the last sentence of the definition.)"

I refer also to paragraph 6 of her Honour's Reasons in which she said -

"The sole issue is as to whether a heart attack must be diagnosed on the basis of both electrocardiographic changes and elevation of cardiac enzymes, in order to fall within the relevant provisions of the definition in clause C.14."

Certainly, her Honour did not consider a possible claim by Larwint founded upon the last sentence of the definition of "heart attack".

32 Her Honour rejected the various arguments advanced for Larwint in support of the proposition that the requirements of the second sentence of the definition could be made out although, as the case might be, the electrocardiograph revealed no evidence of infarction or cardiac enzymes were not raised.

The Notice of Appeal

33 By notice of appeal dated 2 June 2006 Larwint relied upon two grounds of appeal:

"1. The learned trial judge erred in finding that the appellant had not suffered a "Heart Attack" as defined in the insurance policy entitled Norwich Union Flexible Recovery Money ("the policy") notwithstanding that:

(a) he had suffered death of a portion of heart muscle as a result of inadequate blood supply on 30 April 2004 (sic) during the currency of the policy;

(b) a medical practitioner made a diagnosis of heart attack supported by the presence of elevated cardiac enzyme level and other clinical and histological evidence, and after taking into account an electrocardiogram carried out on 2 August 2004 which failed to show associated electrocardiographic changes.

2. The learned trial judge erred in finding that the definition of "Heart Attack" in the policy required that the "heart attack" be diagnosed by a medical practitioner and that the diagnosis must be supported by both:

(a) electrocardiographic changes associated with Myocardial Infarction; and

(b) elevation of cardiac enzymes consistent with the Myocardial Infarction,

unless in the policy owner's decision the above tests are inconclusive, the insurer in its discretion considers other appropriate tests, and determines that the Life Insured has suffered a 'Heart Attack'."

34 By application to amend dated 31 January 2007, Larwint sought leave to add the following additional ground of appeal:

"3. Alternatively to grounds 1 and 2, if the policyowner's opinion that the electrocardiogram and biochemical assessment had enabled a conclusive diagnosis of myocardial infarction to be made was an opinion that the electrocardiogram and biochemical assessment were 'inconclusive' within the meaning of the third sentence of clause C14 (contrary to the appellant's primary submission), the learned trial judge erred in failing to hold that the insured was entitled to payment of the critical illness benefit in circumstances where the respondent had exercised its discretion to consider other appropriate tests, and it was accepted that the Life Insured had suffered a myocardial infarction."

35 The application was premised, according to submissions filed for Larwint, on the proposition that the third sentence of the definition could operate in circumstances where there had been a definite diagnosis of myocardial infarction based on an ECG which showed no abnormality and a biochemical assessment which showed elevation of cardiac enzymes - despite the policyowner being of opinion, in those circumstances, that the tests enabled a conclusive diagnosis of myocardial infarction , and being of opinion that the tests were not "inconclusive".

Submissions concerning the proposed amendment

36 Having set the appropriate framework, the application to add the third ground of appeal can be considered.

37 Larwint submitted that the issue raised by the proposed ground had been argued before the trial judge, albeit only in reply. It had arisen out of submissions concerning the interpretation and operation of the third sentence of the definition , made in the final address of counsel for Norwich.

38 The issue, according to Larwint's submissions, was raised by paragraphs 12(b) and 23 of its outline of submissions on the appeal. The contention that the third sentence of the definition could apply was not one involving questions of fact in respect of which there could be controversy. It was premised on accepting Larwint's opinion that the tests conclusively showed that Mr King had suffered a myocardial infarction, which was the position accepted and contended on behalf of Larwint at trial. There could be no doubt that Norwich had decided to seek and take into account other tests, albeit in the absence of an express request for it to do so. Norwich had accepted that Mr King had suffered a myocardial infarction.

39 The application to amend was opposed on the bases that the proposed new ground of appeal -

• Did not disclose an appellable error by the learned trial judge.

• Did not identify a cause of action on which the appellant could have succeeded at trial.

• Related to a claim that was neither pleaded nor pursued at trial, as a result of which Norwich would suffer prejudice if the application for leave to amend was granted.

40 Concerning the first of those matters, Norwich contended that at the very least it would be necessary for Larwint to establish that Norwich had accepted that Mr King had suffered a myocardial infarction. But there was neither evidence nor a finding to that effect. The finding by the learned trial judge that Mr King had suffered death of a portion of heart muscle in late July 2004 was insufficient. It was not a finding that Mr King had suffered a heart attack as that term was defined by the policy.

41 The second and third bases of objection, amplified by submissions, raised related matters. The gist of the submissions was that no claim based on the third sentence of the definition had been plainly raised. The broad plea that Norwich had refused to pay the amount due on the policy, in breach of its terms, had been insufficient to do so. At the least, Norwich submitted, the appellant had been required to plead that it had expressed the opinion that the tests were inconclusive, or that in the circumstances no such expression of opinion was required; that Norwich had exercised its discretion to consider other appropriate tests; and that it had accepted that Mr King had suffered a myocardial infarction.

42 In developing these submissions, Norwich relied on the submissions made by counsel for the parties in their closing addresses, and particularly the failure of counsel for Larwint, in his reply, to articulate clearly a claim based upon the last sentence of the definition. It could not be said, Norwich also submitted, that Larwint's outline of submissions on the appeal truly raised the matter.

43 Then, as to alleged prejudice, Norwich submitted that Larwint's failure to raise the matter at trial had precluded it from having had the opportunity to consider whether it wished to -

• Lead evidence or conduct cross-examination in relation to the issue whether Larwint had expressed the opinion of inconclusivity.

• Lead evidence in relation to the issue whether it exercised its discretion to consider other appropriate tests.

• Lead evidence in relation to the question whether it accepted that Mr King had suffered a myocardial infarction.

Leave to amend should be refused

44 Assuming, for the moment, that by operation of the last sentence of the definition, and despite the absence of one or both of positive ECG or cardiac enzyme studies, a policyowner might be found to have suffered a heart attack falling within the definition, I think it is clear that no such case was raised by the statement of claim, was argued at trial, or arose on the appeal.

45 The writ was issued in the face of the insurer's assertion that a heart attack would only meet the policy definition if there were relevant ECG and cardiac enzyme abnormalities. Even if, nominally, the statement of claim was wide enough to embrace a claim founded in reliance on the third sentence of the definition, the defence focused attention on the requirements of the second sentence of that definition. There was no reply, as might have contended that, even so, Mr King had suffered a heart attack falling within the third sentence of the definition.

46 Next, the conduct of Larwint's case at trial was consistent with the issue being the confined one raised by the defence. Larwint did not adduce any evidence to suggest that it had formed the opinion that the results of the ECG and cardiac enzyme studies were inconclusive that Mr King had suffered a heart attack. Neither did it put into evidence material which seems likely to have shown that Norwich had sought expert medical opinion, and that in seeking such opinion Norwich had repeated its misunderstanding of the full operation of the definition. Again, Larwint's counsel, in his reply at trial, did not take up the challenge of giving a meaning to the third sentence of the definition, or seek to apply it in the circumstances of the case.

47 In the circumstances described, it is understandable that the learned judge did not embark upon an analysis of the third sentence of the definition, or consider its possible application in the circumstances of the case. I do not see what error could legitimately be complained of in those circumstances.

48 Again, the notice of appeal in its original form was not apt to raise any complaint that the judge had erred by not construing the third sentence of the definition, and by not applying it in Larwint's favour.

49 Further still, not only does the proposed amendment seek to agitate a matter that was neither raised by the statement of claim nor agitated at trial, I agree with the submission for Norwich that to now permit consideration of the matter would likely cause it prejudice. A number of factual questions would or might have been investigated at trial had a claim reliant on the third sentence of the definition been raised. Mr King might have been cross-examined as to whether he ( in substance, the policyowner) had formed the opinion that the ECG and enzyme tests were inconclusive; and, if so, whether Larwint had requested Norwich to exercise a discretion to consider other material. Norwich might have led evidence whether any such request had been made; and, if so, how it had dealt with it.

50 It may be said with some force that Larwint has been prejudiced by the turn of events - which I contrast with the likely prejudice which Norwich would suffer if leave to amend was granted. Larwint appears to have accepted the insurer's initial reading of the pertinent definition, and to have acted and to have pleaded and argued a case accordingly. The statement by counsel for Norwich at trial that his client had not been called upon to exercise the discretion referred to in the last sentence of the definition, and that it had not done so, was almost certainly true. But it is also the case that the statement implied the existence of a basis for acceptance of a claim which was incompatible with Norwich's earlier explanation, communicated to Larwint, of the working-out of the definition. On the reading of the definition which Norwich advanced in final address at trial and on the appeal, had Larwint formed an opinion that the results of the ECG and cardiac enzyme testes were inconclusive, then it could have requested Norwich to consider the results of other investigations. Had it made such a request, Norwich would or would not have agreed to consider further material. Perhaps - this was a matter debated on the appeal - refusal or failure by Norwich to exercise its discretion in favour of considering further material would have been examinable in a court proceeding. Further, had a claim in reliance on the last sentence of the definition been articulated, and had Norwich exercised its discretion to consider further material, it may be that rejection of the claim could have been challenged by a proceeding to enforce the policy - at least if it could be said that the entirety of the material only admitted of a conclusion favourable to Larwint.

51 But none of this happened. It is not just a question of a claim not having been pleaded and argued; but of the absence of a factual basis which could enliven such a claim. In the event, leave to amend, in my opinion, should be refused.

52 I add this postscript. I conclude hereafter that the appeal should fail upon the limited issue which it raises. The consequence of my analysis of clause C.14 is that Larwint deprived itself of an alternative way of making a claim on the policy and of pursuing the present proceeding. It may be that questions will arise whether it is now open to Larwint to reformulate its claim, and to bring a second proceeding in the event that a reformulated claim was rejected. If such questions do arise, the past conduct of both parties seems likely to be one of the matters which will require careful scrutiny.

The issue for determination. Its resolution

53 In the event, the issue for determination is whether Norwich was obliged to accept the claim, no question of the exercise of a residual discretion by it having arisen, in the event that the ECG was normal and that cardiac enzyme studies bespoke myocardial infarction - those circumstances leading the treating cardiologist to conclude that Mr King had certainly suffered a myocardial infarction, and Mr King to be of opinion (so it was said) that they "conclusively" did so.

54 Before going further, I should say something about the proper approach to construction of the policy. According to Larwint's submission, at which Norwich did not cavil, pertinent considerations were described by Kirby J in his judgment, dissenting in the result, in Johnson v American Home Assurance Company.[6] There is no need to recapitulate his Honour's detailed exposition. I should, however, note this: accepting that the primary duty of a court is to discern from the language, structure and apparent purpose of the document what it means, and accepting that (in the usual case) a court should give the words used their ordinary operation, Larwint sought comfort from the propositions that -

•

Words should be given an operation which takes into account the commercial and social purposes of an insurance policy.

•

Wherever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that such would not have been intended by the parties.

•

Notwithstanding the primary rule, a liberal approach should be adopted in giving meaning to words in the special field of insurance contracts and insurance documentation. In consequence, a fair and reasonable construction should be adopted which would take into account the variety of persons entering into an insurance contract and the entitlement of such persons to know the bargain which they have secured. Further, the contra proferentem principle may still be useful where each of the competing constructions is strongly supported by argumentation, and where dictionaries and logic alone cannot readily carry the day for either party - when, it may be said, the words are intractably ambiguous.

55 In my view, the propositions upon which Larwint particularly relied do not assist it. On analysis, clause C.14 has an unambiguous and rational meaning, the application of which produces no absurd or unjust result. In the event, for the reasons which follow, the learned trial judge correctly decided that Norwich was not bound to accept the claim as it had been made, and as it was pursued in the proceeding.

56 First, and contrary to Larwint's submissions, the second sentence of the definition seems to require, on first reading, that the basis for diagnosis must include findings which may be described as broadly indicative of myocardial infarction on two particular tests. The indications to that effect are -

•

The apparent imperative, "shall include", preceding (i) and (ii).

•

The "and" linking (i) and (ii).

•

The references to "electrocardiographic changes associated with the myocardial infarction", and to "elevation" of cardiac enzymes "consistent with the myocardial infarction." One may contrast that language with language which would be sufficient to require, in making a diagnosis of heart attack, that consideration must be given to the results - whether positive, doubtful or negative - of those tests.

A question arises whether that immediate impression is misplaced. This in turn directs attention to the played by the second and third sentences of the clause, and to their interrelationship. To those matters I now turn.

57 Second, as a matter of general principle, every part of clause C.14 must be given work to do. Although the description of what constitutes a heart attack is set out in the first sentence of the clause, the second and third sentences are not to be ignored. Speaking generally, they appear to me prescribe how the occurrence of heart attack may be established for the purposes of the clause. In different ways, many of the definitions of insured events in Part C of the policy set out some methodology whereby the occurrence of the particular insured event is required to be established. In some instances, there is a requirement that a particular type of treatment has been instituted. In other instances, there is a requirement that the event meet a defined level of severity, to be measured in a particular way.[7] In still other instances, there is a requirement that the occurrence of the event be established by positive results of particular diagnostic tests. In cases falling within the last class, the language used is not constant in form - a matter relied upon by Larwint in advancing its construction of the critical part of clause C.14. But whether or not Larwint's submission should be accepted, I think it is clear that the part played by the second and third sentences in the operation of the clause is as I have described it.

58 Third, another consequence of the proposition that all parts of clause C.14 must be given work to do is that attention must be paid, inter alia, to its last sentence. The apparent intent of that sentence is to expand the circumstances in which a heart attack may attract indemnity. It is true that the entry point for application of the sentence requires the policyowner to form a certain opinion, and then that the insurer exercise a discretion to consider "other appropriate tests" (conveniently, "other tests"). It may be accepted that the route to acceptance of a claim under the third sentence is likely to prove more difficult for a policyowner. But that is not to deny its existence.

59 Fourth, it is the corollary of what I have just said, there could be no purpose at all to the third sentence if consideration of the other tests could lead nowhere. In my opinion the sentence should not be read in such a way It could not sensibly be argued, for instance, that the third sentence says nothing about the possible consequences for a claim of further tests being considered, and that therefore clause C.14 contemplates no consequences in that connection. Neither could it sensibly be argued, if consideration of the other tests made it clear that a heart attack had been suffered, that the insurer could reject the claim because one or other of the ECG or cardiac enzymes tests had not bespoken myocardial infarction. Norwich, understandably, did not contend for either of those constructions. That contrasts with the construction of the clause that it advanced in pre-litigation correspondence - a construction which must have entailed adoption of one or both of them.

60 Larwint submitted, in effect, that the definition of heart attack meant, unless requirements (i) and (ii) in the second sentence were read disjunctively, that a claim must fail if an ECG or cardiac enzyme studies were not relevantly abnormal. But once the third sentence of the definition is recognized to expand the circumstances in which a claim may fall within the policy, and that the sentence may apply notwithstanding (i) or (ii) is not satisfied, that submission loses force.

61 Fifth, the second sentence of clause C.14 provides, relevantly, that "(t)he basis for diagnosis shall include" two matters. I agree with Larwint's submission that this contemplates that other matters will or may be taken into account in making the diagnosis. It is inevitable that a diagnosis of heart attack will in part rely upon the clinical history given by the patient; whilst modern medical technology makes it likely that many tests other the ECG and cardiac enzyme studies will have been undertaken in order to elucidate diagnosis. It is therefore true, as Larwint submitted, that the other tests referred to in the third sentence of the definition may be part of the "basis for diagnosis". But, contrary to Larwint's argument, that does not necessarily mean that the third sentence is deprived of application. If the correct construction of clause C.14 is that the second sentence does not apply unless there are positive results on both ECG and cardiac enzyme studies, then the third sentence can operate despite heart attack having been diagnosed - in a second sentence context - by reference to matters other than ECG and cardiac enzyme tests.

62 I turn, sixth, to the language of interrelationship between the second and third sentences, emphasizing that, in light of the issues raised by the appeal, there is no occasion to consider every aspect of the working-out of the third sentence.

63 I focus first of all on the words "the above tests" in the third sentence. I consider that it is a reference, not to all the tests which may have been relied upon to make the diagnosis, but only to the two tests particularly identified in the second sentence. Whilst I have agreed with Larwint's submission that the verb "include" in the second sentence implies that other tests may have been taken into account in making the diagnosis of heart attack, that sentence identifies two specific tests to which the words "the above tests" in the third sentence naturally attach. Moreover, it is implicit in the third sentence that - at least in the policyowner's opinion - the "other appropriate tests" will remove any doubt about diagnosis that there could be on consideration only of the ECG and cardiac enzyme studies. It would be inconsistent with this that the "above tests" should include the other tests.

64 Seventh, the threshold for the application of the third sentence is not that one or both of the ECG or cardiac enzyme tests, in the particular case, is or are in fact relevantly "inconclusive", but that the policyowner forms the opinion that those tests are inconclusive. In that connection, two matters fall for consideration. First, what is meant by "inconclusive"? Second, what is the necessary content of the opinion?

65 By "inconclusive", I consider, is plainly meant "inconclusive in making out the diagnosis of heart attack". I turn to the content of the opinion. Counsel for Larwint submitted, in substance, that his client had not formed an opinion that the tests were relevantly inconclusive because it had been informed that a negative ECG is not an unexpected circumstance where heart attack has occurred, and because the diagnosis of heart attack was firmly established by the elevated cardiac enzymes (perhaps taken together with other circumstances). The submission was directed to showing, I think, that the third sentence of the definition, at best for policyowners, could have little application. But I do not think that is so. The opinion must be founded on "the above tests", and only those tests. It is not to have regard to other tests and the clinical history. A pertinent opinion might be held in a number of situations - as, for example, where one test was indicative of heart attack, and one was not; where one test was indicative of heart attack but the other was equivocal; and where both tests were equivocal. It would be otherwise, I consider, if both tests were plainly within normal limits.

66 In the present case, having regard to the way that its claim was articulated and fought, I doubt that Larwint really addressed the third sentence of the definition, and specifically the opinion there referred to, at all. Had it done so, considering only the two tests, I think that it might well have formed a pertinent opinion. The fact that the results on the two tests were capable of being reconciled in favour of a diagnosis of heart attack did not mean that the policyowner might not fairly opine that the results of those tests were inconclusive.

67 Eighth, Larwint submitted that the true construction of clause C.14 was that a heart attack occurred if the Life Insured suffered death of a part of the heart muscle as a result of inadequate blood supply, and a medical practitioner made a conclusive diagnosis based on ECG and biochemical assessment. That construction could be arrived at in any one of three ways. First, by reading the words "shall include" as meaning that the specified basis for diagnosis was neither exhaustive or imperative. Second, by reading "and", where appearing between (i) and (ii), disjunctively. Third, by reading the second sentence as being subject to the third sentence in one or other of two ways.

68 I need not address the last-mentioned proposition. There, in part, Larwint sought to rely upon the case not pleaded or argued at trial. Other than that, its submission turned upon what it claimed would be an absurd consequence of the working-out of the interrelationship between the two sentences. My analysis of the interrelationship is inconsistent with that claim.

69 I go to the submission which focussed on the words "shall include". Larwint drew attention to variant language within part C of the policy by which it is required that the occurrence of a particular insured event be established by recourse to particular diagnostic tests. Counsel contrasted the requirement that a benign intracranial tumour "must be confirmed by imaging studies"- there are like requirements that a cancer is to be "confirmed by histological examination", that diagnosis of liver disease "must be based on" specified criteria, and that primary pulmonary hypertension is to be "established by cardiac catheterisation" - with the pertinent language of the second sentence of the definition of heart attack: "The basis for diagnosis shall include". This did not clearly and unambiguously require that the diagnosis be confirmed by ECG and cardiac enzyme tests indicative of infarction. The touchstone was the requirement in clause D.3(ii) of the policy that the insured event be diagnosed by a medical practitioner and be supported by clinical, histological and laboratory evidence as appropriate. Dr Lew had made the relevant diagnosis after considering, inter alia, ECG and cardiac enzyme tests. The second sentence of the definition was not imperative; and in any event was not exhaustive.

70 It is certainly true that the language used in the different clauses of part C of the policy is not uniform. It is also true that the language of inclusion may be contrasted with the language of prescription. But I do not accept that the requirements for satisfaction of the definition of heart attack are to be found in clause D.3(ii) and in the opening sentence of clause c.14. Clause D.3(ii) is a broad statement. What will be "clinical, histological and laboratory evidence as appropriate" will be affected by the particular definition of an insured event. Further, whilst the first sentence of the definition of heart attack describes the compensable condition, the second and third sentences specify the alternative circumstances necessary before the condition falls to be indemnified. It is not heart attack at large, but heart attack as defined and specified, which attracts indemnity - a point made by the insurer, citing MLC Ltd v O'Neill.[8] Again, I have already accepted that the words "shall include" mean that diagnostic considerations may, and very likely will, extend beyond ECG and cardiac enzyme tests. But that is not incompatible with it being mandatory, in any event, that the results of those two tests be "positive". Still further, and as I pointed out earlier, the language of (i) and (ii) does not sit comfortably with the submission that it requires no more than that consideration be given to those tests regardless of their import. In all, the effect of the second sentence appears to me to be this: whilst a diagnosis of heart attack might be based on a multiplicity of considerations, nonetheless, to satisfy the requirements of that sentence, positive results are required on one or both of - that is a matter which I next address - ECG and cardiac enzyme tests.

71 Should "and", where appearing between (i) and (ii) in the second sentence of the definition, be read disjunctively? Larwint submitted, citing Victims Compensation Fund v Brown,[9] that "and" may be given a dispersive effect from the general context in which it is used, and where the purpose of the instrument suggests such interpretation. Building upon that principle, Larwint submitted that clause D.3(ii) set the framework for considering clause C.14. The latter specified two diagnostic criteria, either of which could - of itself - enable a diagnosis of heart attack. A normal ECG is not uncommon in the case of a patient who suffers a heart attack. The purpose of the policy is to give indemnity where the life insured suffers a heart attack. The purpose of the policy, and context, required that "and" be given a dispersive meaning.

72 My initial impression was that "and" where relevantly appearing should be given its primary, conjunctive application. Consideration of Larwint's submissions has not led me to change my opinion. The purpose of the policy is to give indemnity not where a person suffers a heart attack in lay or medical parlance, but where a person suffers a heart attack as defined. The evidence in this case showed that it is not uncommon for a person who has suffered a heart attack to have a normal ECG. It follows that a medical man may diagnose a heart attack in reliance upon clinical presentation and having regard to other test results. But that is no occasion to manipulate the language of the definition of to make it accord with modern day medical practice.

Order

73 In my opinion, the appeal should be dismissed.

[1] Introduction to Part D.

[2] Clause D.3.

[3] Clause D.6.

[4] Clause C.14.

[5] This had led on to coronary angioplasty being performed.

[6] [1998] HCA 14; (1998) 192 CLR 266 at 272 - 274, [19]. Counsel also cited Ingham v ACN000333844 Ltd (In Liq) [2006] NSWCA 63 at [6] per Giles JA, Handley and Santow JJA agreeing, MLW Technology Pty Ltd and Anor v May [2005] VSCA 29 at [5] per Gillard AJA, Winneke P and Buchanan JA agreeing, and a passage from the judgment of Gibbs J, as his Honour then was, in Australian Broadcasting Commission v Australian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109.

[7] The tests of severity vary. Thus there is reference to conventional methods of assessing hearing and sight loss. But the event described as "coronary artery disease" requires that the nominated person has had to undergo a remedial procedure such as angioplasty.

[8] [2001] NSWCA 161 at [15] per Mason P; see also [19], and [29] per Hodgson JA. The language of the clause there considered was markedly different. But the principle, in my opinion, is not thereby affected.

[9] [2002] NSWCA 155; (2002) 54 NSWLR 668 at 683-684, [73] per Mason P, McLellan J agreeing. Spigelman CJ dissented, see particularly at 672, [12] and 674-675, [28], [29], [31] and [36], not in principle, but in the application of principle. The High Court effectively agreed with the Chief Justice; see (2003) 77ALJR 1797 per Heydon J at 1799 - 1800, [12]-[16] and 1804, [31]-[35].