Solicitors: C and M Lawyers (plaintiff / respondent)
HWL Ebsworth (defendant / applicant)
File Number(s): 2018 / 39324
[2]
Judgment
On 16 September 2019, the defendant, TAL Life Ltd (TAL), filed a notice of motion by which it sought leave to amend its defence.
The Court delivered a judgment on that application on 28 April 2020: Makari v TAL Life Ltd [2020] NSWSC 455.
The principal judgment considered the amendments that TAL sought leave to make in two groups. The first was set out at [15] and [16] and the second at [50]. For the reasons set out in that judgment, I gave TAL an opportunity to provide to the Court a response to the problems that I described in the judgment concerning the amendments that TAL sought leave to make.
Makari v TAL Life Ltd [2020] NSWSC 775 | Case summary | Zoe
TAL's solicitors provided its further submissions under cover of an email dated 12 May 2020. They attached a revised draft of TAL's proposed amended defence.
TAL deleted from the revised draft the amendment contained in the earlier draft that is set out at [15] and [16] of the principal judgment. As TAL no longer seeks leave to make that amendment, it need not be considered further.
TAL has replaced the amendment set out at [50] of the principal judgment with the following more elaborate draft pleading:
CRITICAL ILLNESS CLAIM
15. Further and in the alternative, if the Court finds that the Policy was not avoided, the Critical Illness Claim is excluded by cl 9.2 of the Policy.
16. At all material times, cl 9.2 of the Policy relevantly provided that no payments would be made under the Critical Illness insurance "in the case of … Cancer … if … the signs or symptoms leading to diagnosis became apparent to the Life Insured or would have become apparent to a reasonable person in the position of the Life Insured within three months after the … Plan start date".
17. "Cancer" was relevantly defined to mean "the presence of one or more malignant tumours. The malignant tumour is to be characterised by the uncontrollable growth and spread of malignant cells and the invasion and destruction of normal tissue."
Particulars
Policy, cl 11.2, definition of "Cancer"
18. The Plan start date under the Policy was 30 July 2010.
Particulars
Policy Schedule, Section titled "Critical Illness Insurance Plan Premier", "Plan Start Date"
19. Professor Woodgate diagnosed chondrosarcoma (a Cancer, as defined by the Policy) on 23 December 2010.
Particulars
Affidavit of the plaintiff sworn 9 August 2018, [130]
20. Within three months after the Plan Start Date on 30 July 2010, the following signs and symptoms became apparent to the plaintiff:
(a) the persistence of the lesion in the mid-shaft of the left femur;
Particulars
Report of Dr Ho to Professor Woodgate dated 29 July 2010
(b) the persistence of symptoms of pain and aching in his left leg despite treatment;
(c) an increase in the symptoms of pain and aching in his left leg;
Particulars
Affidavit of the plaintiff sworn 9 August 2018, [121 - 122]
This is also to be inferred from the fact that the plaintiff was referred for a further diagnostic and remedial procedure, being an excision of the bone cyst / bone graft.
(a) Inability to stand for long;
Particulars
Affidavit of the plaintiff sworn 9 August 2018, [121 - 122]
This is also to be inferred from the fact that the plaintiff was referred for a further diagnostic and remedial procedure, being an excision of the bone cyst / bone graft.
(a) Inability to sleep for long;
Particulars
Affidavit of the plaintiff sworn 9 August 2018, [121 - 122]
This is also to be inferred from the fact that the plaintiff was referred for a further diagnostic and remedial procedure, being an excision of the bone cyst / bone graft.
21. The signs and symptoms which became apparent within three months after the Plan start date led to the diagnosis of the plaintiff's cancer / chondrosarcoma (whether or not the cancer / chondrosarcoma had existed before the Plan start date).
Particulars
Those signs and symptoms directly and proximately caused the plaintiff to undergo the excision procedure, which resulted in the diagnosis.
The effect of this amendment, if permitted, would be to claim that Mr Makari's entitlement to the benefit under the Policy was excluded by cl 9.2, because each of the matters listed in par 20 (with sub-par (a) being used three times) was a sign or symptom that became apparent to Mr Makari within three months after the Plan start date and lead to the diagnosis.
The alleged signs or symptoms in sub-pars (a) and (b) are expressly described as being the "persistence" of a medical condition and a symptom respectively. Sub-paragraph (c) is described as the "increase" of certain symptoms. The second two sub-pars (a) referred to the inability of Mr Makari to stand or sleep for long.
The allegations in sub-pars (a) and (b) on their face amount to a claim that signs or symptoms that were experienced by Mr Makari before 30 July 2010, and which continued after that date, are capable of satisfying the criterion "became apparent" within three months of 30 July 2010, and lead to the diagnosis. Put another way, TAL wishes to argue that signs or symptoms that were in fact apparent before 30 July 2010, and persisted after that date, also became apparent after that date for the purposes of cl 9.2 of the Policy.
TAL wishes to claim, by means of sub-par (c), that a sign or symptom, being pain and aching, which was apparent before 30 July 2010, is capable of becoming apparent after that date because it increases in intensity.
The effect of each of the repeated sub-par (a)'s is less clear, but the draft amended statement of claim appears to allege that it became apparent to Mr Makari after 30 July 2010 that he could not stand or sleep for long.
Mr Makari tendered his 9 August 2018 affidavit in response to TAL's additional submissions. The paragraphs of the affidavit referred to in the revised draft amended defence state the following:
121. Subsequently I saw Professor Woodgate on 19 October 2010. I was still on 7mg of Prednisone. Professor Woodgate saw the x-ray. I told Professor Woodgate that I was seeing the urologist on 3 November regarding the elevated PSA. I recall Professor Woodgate didn't say much.
122. I complained to Professor Woodgate about the increasing pain in my femur and that I could not stand for long, sleep for long and I was just generally very tired of putting up with the pain and lack of sleep as a result. I advised Professor Woodgate that I felt that I wasn't getting anywhere and that I needed some solution to the problem. Professor Woodgate suggested that I should have an excision of the bone cyst and a bone graft with a rod.
In par 81 of his affidavit, Mr Makari deposes that, when he first saw Professor Woodgate on 5 June 2008, he told the professor that he "was now getting aches and discomfort in the left thigh, with severe pain, worse at night, resulting in difficulty sleeping and even standing and walking". It is a proper inference from the following paragraphs of Mr Makari's affidavit dealing with the period before 30 July 2010 that he continued to have difficulty in standing and sleeping for long periods because of the pain and aching in his left leg.
Thus, on the basis of the way in which TAL has framed its revised draft amended defence, TAL seeks leave to be able to argue that cl 9.2 of the Policy excludes Mr Makari's claim, if signs and symptoms that appeared before 30 July 2010 persisted or increased after that date, with the result that, within the three month period, Mr Makari was subjected to some investigation that led to the diagnosis that he was suffering from cancer.
This aspect of TAL's proposed new defence raises two questions. The first is whether it is available as a matter of the proper construction of cl 9.2 of the Policy. The second, as foreshadowed by Mr Makari, is whether, if cl 9.2 on its proper construction excludes TAL's liability under the Policy, reliance upon the provision is prohibited by s 47 of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act).
As I understand Mr Makari's submissions in response, he argues that the construction of cl 9.2 for which TAL contends is untenable, and for that reason the Court should decline TAL's application to amend its defence to include par 20, as the amendment would be futile.
If cl 9.2 is given a relatively literal construction, it may be unlikely that signs and symptoms that existed before 30 July 2010 could properly be regarded as having become apparent to Mr Makari within three months after that date. Something that is already apparent does not subsequently become apparent. Further, it is difficult to see how pre-existing signs and symptoms can become apparent after 30 July 2010 if it happens that they increase in intensity or frequency.
However, the truth of those suggestions is a matter for argument, and there is arguably scope for the result to be dependent partially on the findings of fact concerning the nature, the commencement and the development over time of the signs and symptoms. Provided that those findings depend upon a consideration of the lay evidence, it will in my view be preferable and appropriate for the application of cl 9.2 to be dealt with on its merits on a final hearing. It is not in the interests of the parties or the proper administration of justice that a risk be taken of error in the context of an application by TAL for leave to amend its defence to rely upon cl 9.2 of the Policy.
I turn now to the application of the Insurance Contracts Act, the terms of which are set out in the principal judgment at [59]. In essence, the section has the effect that if, at the time when the Policy was entered into, Mr Makari was not aware of, and a reasonable person in the circumstances could not have been expected to have been aware of, Mr Makari's cancer, TAL may not rely upon "a provision included in the contract that has the effect of limiting or excluding the insurer's liability under the contract by reference to a sickness or disability to which the insured was subject at a time before the contract was entered into".
In his original submissions, Mr Makari contended that the amendment for which TAL sought leave should not be allowed as it was futile, because the relevant effect of cl 9.2 of the Policy on which TAL relied was prohibited by s 47.
As I said in the principal judgment at [63], it was my understanding that TAL wishes to argue that, if cl 9.2 of the Policy excluded liability because of a diagnosis after the date of the Policy, by reason of signs or symptoms occurring in the three months after the date of the Policy, that exclusion of liability will not involve the exclusion of liability for a sickness or disability by reference to a sickness or disability to which the insured was subject at a time before the contract was entered into.
The critical words are "by reference to". As I understand it, TAL wishes to argue that s 47 of the Insurance Contracts Act does not prevent it from relying upon cl 9.2, because the exclusion of liability is by reference to the appearance of signs or symptoms within the three month period after the Plan start date, and not by reference to the cancer that Mr Makari had at the time the Policy was entered into.
TAL referred to the decision of the Court of Appeal in Asteron Life Ltd (formerly Royal & Sun Alliance Financial Services Ltd) v Zeiderman (2004) 59 NSWLR 585; [2004] NSWCA 47 (Asteron Life), in which the Court, by majority, decided that s 47 of the Insurance Contracts Act did not prohibit the insurer from relying upon the exclusion in the relevant policy. In that case, the exclusion relevantly provided: "We will not pay for cancer if first diagnosed…within three months after the issue date…of this policy". Unlike the present case, it was clear, and accepted by both parties, that this exclusion applied on its proper construction. The insured suffered from cancer on the date the policy was issued, but it was first diagnosed within the three month period. The majority effectively held that the exclusion was a "waiting period" exclusion, and only excluded claims arising out of a diagnosis within the period "and the date of the onset of the underlying pathology is completely irrelevant". As Bergin J (as her Honour then was) said at 595:
… The contract of insurance in this case has the effect of limiting the relevant liability not by reference to (or because of or on the basis of) pre-contractual pathology but by reference to post-contractual diagnosis irrespective of pre-contractual pathology, that is, irrespective of whether the insured was subject to the particular sickness or disability at a time before the parties entered into the contract.
In the present case, TAL's reliance upon cl 9.2 of the Policy may fail because there is a real construction issue. That has been considered in outline above. Section 54 will only become relevant if TAL succeeds on the construction issue. In that event, cl 9.2 will exclude liability because, in some way that is presently unclear, relevant signs and symptoms that became apparent after the Plan start date led to the diagnosis of Mr Makari's cancer. At this stage of dealing with TAL's application for leave to amend its defence, the Court should accept that it is an open possibility that, by parity of reasoning with Asteron Life, TAL will succeed in establishing that s 47 does not apply because the exclusion was by reference to the appearance of signs and symptoms that led to the diagnosis, rather than the existence of the cancer at the date of the Policy.
I stated the provisional conclusion in the principal judgment at [66] that I did not think that it would be appropriate for the Court, on the amendment application, to refuse leave to amend on the basis that the proposed defence, as particularised, could not succeed because of the application of s 47 of the Insurance Contracts Act. The reason was that I considered that the arguments as to whether or not the section applied were likely to depend upon precise findings of fact concerning the nature and timing of the signs and symptoms experienced by Mr Makari after the date of the Policy, in relation to those that he experienced before that date.
Notwithstanding the submissions made on behalf of Mr Makari, I remain of that view. In so far as TAL seeks leave to amend its defence by including the revised par 20, TAL should in principle be given that leave.
There remain, however, other matters that require consideration before TAL should be given the leave that it seeks.
In the principal judgment, I set out at [67]-[78] the nature of the concerns I had about the possible consequences of the Court simply granting leave to TAL to amend its defence to add the defence based upon cl 9.2 of the Policy, in the terms in which it was then proposed to be pleaded. I was concerned to know whether allowing the amendment would introduce the possibility of the need for significant further expert medical evidence.
A particular concern that I expressed at [71] was that the amendment proposed by TAL did not make clear whether TAL accepted that the condition that was later diagnosed as cancer was in fact in medical terms the same condition from which Mr Makari suffered at the date the Policy was issued. I indicated at [72] that I did not think that TAL should be given leave to amend its defence at this late stage of the proceedings, unless the relevant amendments made clear TAL's position on that issue.
Two primary observations can be made about the effect of TAL's revision of its draft amended defence.
The first is that, as I have explained above, par 20 introduces an acceptable level of precision into TAL's allegation as to the signs and symptoms that it seeks leave to argue became apparent after 30 July 2010 for the purposes of cl 9.2 of the Policy. The analysis that I have set out above satisfies me that it is tolerably clear that this proposed aspect of TAL's defence is a narrow one.
The second observation is that, by means of par 21, TAL appears to wish to reserve its position as to "whether or not the cancer/chondrosarcoma had existed before the Plan start date".
TAL explained its reason for formulating par 21 in this way in par 8 of its written submissions. TAL said:
…
(a) the defendant does not know whether it was the same cyst which was later shown to be cancerous; and
(b) the defendant says this is not relevant to the consideration of the exclusion, which applies as long as the signs and symptoms which led to the diagnosis became apparent after the Plan start date.
I am not prepared to accept TAL's submission (a) at face value. While the Court does not have all of the evidence, it strongly seems to be the case that all available medical opinion is to the effect that, on 23 December 2010, Professor Woodgate diagnosed the same cyst from which Mr Makari had suffered since 2006 as being cancerous, but which had always previously been diagnosed as being benign. It is my understanding that there has never been an issue about this. It would be surprising if TAL's investigations have not put it in the position where it could, and should, admit that at all material times Mr Makari has suffered from the same cyst.
My surprise is enhanced by the fact that, at par 15 of its written submissions, TAL, when dealing with the potential application of s 47 of the Insurance Contracts Act, said: "The claim that was made under the Policy was in respect of the sickness or disability which the plaintiff was aware of prior to entering into the contract of insurance". Unless I am entirely confused, this appears to be a positive submission by TAL that the cyst that was diagnosed as being cancerous on 23 December 2010, and which was the reason for the claim under the Policy, was the same "sickness or disability" that existed before the date of the Policy.
If I have not misunderstood Mr Makari's submissions, much of his opposition to TAL being given the leave that it seeks arises out of the fact that TAL has been unwilling to clearly accept that at all relevant times Mr Makari suffered from a single and continuing cyst that was first diagnosed as being malignant on 23 December 2010. Mr Makari has expressed doubt and suspicion about TAL's motive and the possible forensic consequences of TAL being given leave to amend its defence in the way set out in the revised draft amended defence.
It is plainly critical to Mr Makari's case theory that it is established that, at all material times, he suffered from the one cyst. That will be essential to his argument that the signs and symptoms that led to the cancer diagnosis did not become apparent in the three months after 30 July 2010, because they were apparent before that date. If there were a possibility that the cyst that gave rise to signs and symptoms before 30 July 2010 was a different cyst to the one that gave rise to signs and symptoms leading to the cancer diagnosis, within the three months after 30 July 2010, then Mr Makari's argument as to the proper construction of cl 9.2 might fail, or at least be put in jeopardy.
Consequently, if TAL is given leave to include par 21 in an amended defence, that may suit TAL, but it will logically oblige Mr Makari to obtain further medical evidence to establish that, at all material times, there has only been one continuing cyst. Put another way, while it may be sufficient for TAL's purposes, in relation to how it submits cl 9.2 should be construed, to say (as is said in par 8(b) of the submissions set out above) that it is not relevant whether the cyst existed at the Plan start date, because the issue is when the signs and symptoms became apparent, the effect of the defence being amended will make the issue relevant to Mr Makari's case.
After I had considered the parties' written submissions, I was not sure whether the effect of the Court giving TAL the leave that it sought would lead to the necessity for one or both of the parties to obtain further medical expert evidence. At that time, I did not appreciate the logic of the observations made in the preceding paragraph. As the matter was being dealt with in chambers, because of the consequences of the present pandemic, I caused my associate to send the parties an email, which relevantly sought information as follows:
His Honour requests that he be given by TAL Life a written response to par 6 of Mr Makari's written submissions, particularly in relation to the possibility that par 21 of the proposed revised amended defence may raise an issue dependent for its determination on expert medical opinion evidence.
His Honour's provisional reading of the revised draft pleading led him to understand that TAL Life's case concerning reliance on clause 9.2 of the Policy would depend upon inferences to be drawn from the lay evidence. Specifically, his Honour wishes to be told whether, if leave is given to make the amendments, TAL Life will seek to rely upon further expert medical opinion evidence.
By further written submissions dated 2 June 2020, TAL stated that it did not accept that par 21 of the proposed revised amended defence raises a question requiring further medical expert opinion. TAL said that the signs and symptoms referred to in par 21 are those particularised in par 20. TAL further stated that whether those signs and symptoms became apparent to the plaintiff within the relevant period is a question of fact, not a matter for expert medical opinion. That is a matter to be determined in the usual way on the basis of lay evidence and documents. TAL's submissions ended with the following statements:
6. If the plaintiff were to serve expert medical opinion evidence against TAL Life on this issue, TAL Life would not wish to be precluded from adducing medical expert opinion evidence in response.
7. However, TAL Life confirms that it does not intend to adduce expert medical opinion evidence in chief to establish the matters pleaded in paragraph 21 of the Amended Defence.
Mr Makari responded by further written submissions dated 5 June 2020. Relevantly, on the question of whether the grant of leave might lead to the parties serving further medical expert evidence, Mr Makari made the following submissions:
2…
(v) Despite the comfort that can be taken by the plaintiff from the existing opinion of Dr Stalley that the Plaintiff's problem all along was cancer that was belatedly discovered, and despite a healthy expectation that what really led to the diagnosis was the report of the pathologist to the effect that the specimen analysed showed malignancy, no-one in the position of this plaintiff would go to trial if the amendment is allowed without getting expert medical evidence as to what really caused the medical diagnosis to come about.
(vi) Thus the proposed reservation of the right to advance expert evidence, if the plaintiff does so, is a naked attempt to reverse the onus of proof of the exception. It is for the Defendant to make it good and to do so on the basis of a reading of it about which the Plaintiff has already made submissions on two occasions. Before the Plaintiff is put to the expense and delay of meeting the amendment to raise the exception, the defendant should demonstrate that there is evidence that will, if accepted, enliven it. In the absence of that, the amendment sought should be seen as unjustifiable and unmeritorious for this further reason.
3. If these two grounds for [opposing] the application to amend do not persuade the Court to reject it, it is submitted:
(i) the amendment should only be allowed on the basis that the defendant is not to adduce expert medical evidence in support of the exception in reply or otherwise, and is to be confined to its particulars as enlivening it, whatever evidence the plaintiff advances to combat it; and
(ii) if the amendment is allowed, the costs consequences should be as put in the plaintiff's submissions of 25 May last, para [20].
The relevant submissions in par 20 were as follows:
(ii) Alternatively, if the second and only amendment now sought is allowed in any form:
(a) the Plaintiff should still have the costs of the motion since the defendant, without explanation, has belatedly alter the shape of the proceedings and taken two bites at the cherry.
(b) If the Court is against the plaintiff on that, the plaintiff should have the cost of the motion of and incidental to the agitation of the first proposed amendment which was abandoned (para 5 DFS), and if the second proposed amendment goes forward, it should be on the terms as to costs above mentioned in para (6) hereof.
Paragraph 6, as referred to in this submission, relevantly submitted:
… If the amendment now proposed is to be allowed, that result in prejudice to the plaintiff should be provided against by an order that the defendant pay the costs of the determination of the issue or issues raised by this amendment in any event.
I have come to the following position with regards to TAL's application for leave to amend in terms of the revised amended defence. I would grant TAL that leave, provided that I were satisfied that the new issues raised can be decided on the basis of the lay evidence, as contained in Mr Makari's 9 August 2018 affidavit, as may be augmented in cross-examination, as well as the proper construction of cl 9.2 of the Policy and s 47 of the Insurance Contracts Act.
I now understand that par 21 of the revised draft amended defence is pleaded in a manner that is legitimate from TAL's perspective, but has the consequence that it opens up the forensic issue of whether the signs and symptoms that were apparent to Mr Makari before 30 July 2010 were a consequence of the same underlying medical condition that led to the persistence and increase of those signs and symptoms in the three months after that date.
I will not grant the leave to amend sought by TAL, if the consequence is that, at this late stage of the proceedings, Mr Makari has to obtain further medical expert evidence. At the very least, the Court should not permit the amendment without understanding, with some certainty, what the forensic consequences will be. If there is in reality no issue about the cyst from which Mr Makari has suffered being the same at all material times, then that fact must be made certain, and the continuation of the proceedings should occur on that basis. If there is any real issue as to the truth of that fact, that issue should be exposed now, and in any event before the leave to amend sought is granted. The Court should not give the leave to amend, if Mr Makari is left in any doubt as to whether there is a real issue about the identity and continuity of the cyst. He should not have to obtain additional medical expert evidence to expunge a possibility that there is an issue. He should not have to go to trial in a condition of uncertainty as to whether there is any issue of fact as to whether signs and symptoms that were apparent before 30 July 2010 related to a different cyst to those that were apparent within the three months after that date.
Because of the manner and the time at which this issue has arisen, it will not be convenient to attempt to resolve the issue by a series of amendments to the pleadings, as it would probably be necessary for Mr Makari to amend his statement of claim.
In all of the circumstances I would be prepared to make the following orders to resolve TAL's application to amend its defence:
1. Grant leave to the defendant to amend its defence by filing an amended defence in the terms of the revised draft amended defence attached to the defendant's solicitor's email to the associate to Robb J dated 12 May 2020.
2. The grant of leave in order 1 is made on the basis that the defendant has advised the Court that it accepts that the cyst suffered by the plaintiff and diagnosed as being cancerous on 23 December 2010 was the same, or substantially the same, medical condition from which the plaintiff suffered at all material times up to and including 30 July 2010, and the defendant will not contend to the contrary in these proceedings.
3. The grant of leave in order 1 is made on the basis that after the defence is amended the defendant will not serve any further medical expert evidence except such evidence as is responsive to any further medical expert evidence served by the plaintiff on the defendant.
4. The defendant is to file and serve the amended defence the subject of the leave in order 1 by [ ] 2020.
5. The plaintiff is to file and serve any reply to the amended defence by [ ] 2020.
6. Grant leave to the parties to apply for any orders necessary to give effect to these orders on three days' notice by arrangement with the associate to Robb J.
7. Direct the defendant to serve and deliver to the associate to Robb J by [ ] 2020 submissions (limited to 3 pages) in response to the plaintiff's submissions as to the costs order that should be made in respect of the defendant's notice of motion filed on 16 September 2019 and the consequences of the leave being granted to the defendant to amend its defence.
8. Stand the proceedings into the Registrar's list on [ ] 2020 for directions.
I am satisfied that, if TAL will agree to the restriction in order 2, but Mr Makari decides that he will nonetheless serve further medical expert evidence, then it would be unjust for the Court to permit that to happen but to prevent TAL from responding.
If TAL is not prepared to agree to order 2, then it should say so and give clear and specific reasons why the issue should be left open to dispute between the parties. I would then make a final decision as to whether the leave to amend sought by TAL should be given.
The parties should confer for the purpose of agreeing dates to be inserted in the draft orders, and provide draft short minutes of order, together with any other response that may be appropriate, to my associate within 10 days of the publication of these reasons for judgment.
[3]
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Decision last updated: 19 June 2020