Mercantile Mutual v Selikas

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40360/99 DC 2215/97

TUESDAY, 21 NOVEMBER 2000 MERCANTILE MUTUAL INSURANCE (AUSTRALIA) PTY LIMITED v SELIKAS

JUDGMENT 1 MASON P: I agree with Rolfe AJA. 2 MEAGHER JA: I agree with Rolfe AJA. 3 ROLFE AJA: Introduction

The respondent/plaintiff, for whom Mr M.S. Jacobs of Queen's Counsel and Mr B. O'Sullivan of Counsel appeared, sued the appellant/defendant, for which Mr R.J.H. Darke of Counsel appeared and on behalf of which he said everything possible in support of the appeal, seeking to recover benefits to which he claimed to be entitled under an accident/illness insurance policy issued to him by the appellant. 4 The respondent, at all material times, was an electrical contractor and carried on business as such, his "occupation" being stated in the Certificate of Currency for the period 4 June 1994 to 4 June 1995, which is the presently relevant period, as "electrical contractor". Subject to the terms and conditions of the policy he was entitled to capital benefits for various injuries in an amount being a stated percentage of the capital sum insured of $25,000. In addition he was entitled to weekly accident and illness benefits in the sum of $500 for a maximum period of 104 weeks with an excluded period of claim of two weeks if he came within the definition of "Total Disablement", and thirty per cent thereof if he came within the definition of "Partial Disablement". 5 The respondent's claim arose because he injured a finger on his left hand whilst working as an electrician on 1 February 1994. He asserted this constituted "Total Disablement" or, alternatively, "Partial Disablement" within the meaning of the policy. As the appellant declined to make any payments under the policy, the respondent brought proceedings in the District Court, which were heard by his Honour Judge Dent QC, who delivered judgment on 24 March 1999. There were many issues before him, which do not concern this Court, in respect of all of which his Honour found in favour of the respondent. 6 Relevantly for present purposes, his Honour found that the respondent was suffering from "Total Disablement" and not "Partial Disablement", and awarded him the full amount in consequence thereof, including the specified percentage for the finger injury. The award for the finger injury is not now in issue, the only challenge on appeal being that his Honour should have found that the respondent was suffering from "Partial Disablement" rather than "Total Disablement". 7 His Honour held that the respondent was entitled to judgment for $71,997.12, which included interest pursuant to s.57 of the Insurance Contracts Act 1984. As the amount involved in the appeal is less than $100,000, leave to appeal was required. This Court granted leave on 9 August 1999 conditionally upon the appellant's paying the costs of the application for leave to appeal and of the appeal in any event. 8 The substantive relief sought in the Notice of Appeal was that the judgment be set aside and in place thereof there be a declaration that the respondent suffered "Partial Disablement", and an order that there be judgment for him in the sum of $23,750.33 consequential upon that "Partial Disablement". On the hearing of the appeal, Mr Darke said that the appellant acknowledged that the respondent was entitled to $25,329.66, in lieu of $23,570.33, if the appellant was successful.

The Policy 9 The presently relevant definitions in the policy are:- (a) "Occupation":- "Your usual occupation, business or profession as shown in the certificate", i.e. "electrical contractor" ; (b) "Partial Disablement":- "occurs where, directly and solely as a result of injury and occurring within twelve months thereof, You become unable to carry out a substantial part of all the normal duties of Your usual Occupation"; and (c) "Total Disablement":- "occurs where, directly and solely as a result of injury or illness, and occurring within twelve months thereof, You become unable to engage in Your usual Occupation whether on a full-time or part-time basis". 10 The appellant's concession that the respondent suffered "Partial Disablement" necessarily carried with it the concession that by reason of the injury he became unable "to carry out a substantial part of all the normal duties of" an electrical contractor. Mr Darke acknowledged that the substantial part of all the normal duties, which the respondent was unable to carry out, was the physical and manual work of an electrician. The only issue on appeal is whether the injury was such that in addition to his not being able to carry out that substantial part of those duties, the respondent was unable "to engage in Your usual occupation whether on a full-time or part-time basis".

The Appellant's Submissions 11 The appellant pointed to the evidence that prior to about May 1990 the respondent was an employed electrician, and that thereafter he conducted his own electrical contracting business. He did this, initially, in his own name and then in partnership with his wife and, for a time, engaged as many as twelve electricians in the business. The submission was that he gave unchallenged evidence that in addition to the performance of some manual work as an electrician, he carried out the vast bulk of the managerial duties of the business including doing all paper work; giving quotations; seeking to win business; purchasing materials; invoicing; banking; and engaging sub-contractors. 12 It was submitted that when the respondent suffered the injury on 1 February 1994, the business was carried on by him and his son and, notwithstanding the injury, continued to trade and, by about November 1994, a further two electricians had been engaged. His Honour found that there did not seem to be any doubt, on the evidence, that from 1 February 1994 to the date of the respondent's retirement, his duties in the business were restricted to driving his son to work sites, writing out bills, inspecting the work performed, certifying it, ordering in materials and paying for them. 13 It was submitted that the proper approach to the issue of the extent of disablement would have been to consider the evidence and make findings as to all the respondent's normal duties in carrying out his business as an electrical contractor prior to the injury, and then to consider the extent to which he had, solely as a result of his injury, become unable to engage in that occupation. It was submitted that his Honour failed to do this, but merely made findings concerning some aspects of the business, and that he ought to have found that prior to his injury the respondent's normal duties in carrying out his business included the administrative tasks to which the submissions earlier made reference. 14 His Honour did find that before the injury the respondent carried out physical work as an electrician, but that after it he was restricted to the duties to which I have referred and "supporting his son so that his son could make a living as a working electrician". He was of the view that "the core function" of the respondent was the performance of work which generated income. 15 The submissions continued that his Honour made findings concerning the duties that the respondent in fact carried out in the business following his injury, but that no findings were made as to the extent to which he, solely as a result of his injury, had become unable to carry out all his normal duties; and that there was no evidence upon which he could have concluded that the respondent had become unable to carry out any of the administrative duties to which the submission referred. This approach, in my opinion, would have led to his Honour posing the incorrect question. The correct question, allowing for the concession of "Partial Disablement", was whether he had become unable to engage in his usual occupation on either a full-time or a part-time basis. It was the respondent and not the business, which was insured, and his Honour was correct in focussing attention on the respondent's capacity, rather than the continuance of the business. 16 It was submitted that the trial Judge's approach to the construction of the definition of "Total Disablement" was erroneous in that he failed to have due regard to the language of the policy and, in particular, to accommodate the words of the two definitions. Rather, it was submitted, his Honour followed an approach "substantially based upon the notion that the respondent as the owner of an electrical contractor's business, ought not to be disadvantaged in comparison with a notionally insured employed electrician", and that there was no justification for that approach in the language of the policy. The consequence of the submission, linked with the further submission based on the disparity in the amount paid for "Total Disablement" and "Partial Disablement", led to the submission that the policy should be construed so that "Total Disablement" only occurs if there is a level of disability greater than that necessary to satisfy "Partial Disablement". 17 I think the last submission is correct, because the definition of "Total Disablement" involves an inability to engage in one's usual occupation whether on a full or part-time basis. However, I do not agree that the analogy to an employed electrician led his Honour into error. All he was pointing out was that the respondent could only engage in part of his usual occupation, and that that was not the part which generated income. 18 The submissions then turned to the question of "Partial Disablement" and stated that "substantial" meant "considerable" as opposed to "real or of substance". 19 Mr Darke submitted:- "The requisite inability for the purposes of the Total Disablement definition is an inability to engage in the usual occupation at any sensible or realistic level, even if there is an ability to perform some of the normal duties of that occupation.

The definition of Total Disablement ought not to be taken to be satisfied if there is merely an inability to engage in the usual occupation as normal or an inability to carry out a substantial part of all the normal duties previously carried out. If it was construed in that way there would be an almost entire overlapping between the concepts of total and partial disablement under this policy."

He accepted, therefore, that "Total Disablement" did not involve a total inability to perform any of the functions which the respondent formerly carried out as an electrical contractor. This, if I may say so with respect, was a sensible and proper concession. It would be a very serious injury, which precluded the insured from doing any of those activities. A less serious injury may, however, prevent him from engaging in his usual occupation whether on a full-time or a part-time basis.

His Honour's Findings 20 His Honour found that in addition to carrying out administrative and managerial work, the respondent had carried out physical work, which required the use of both hands for its proper and safe performance, being concerned, inter alia, with live wires; and that it also involved heavy work occasionally. He concluded that the direct sole cause of the respondent's disablement was the finger injury and that that precluded him from carrying out the physical and manual work of an electrician.

The Proper Construction 21 Whilst assistance may be derived from authorities on other clauses in similar types of policies, it becomes necessary to construe the particular words used in this policy in the light of the facts as found. The respondent's "usual occupation business or profession as shown in the certificate" was that of "electrical contractor". There are electrical contractors and electrical contractors and what is to be determined in the present case is whether the respondent's injury "directly and solely" render him "unable to engage in his usual occupation whether on a full-time or part-time basis". This is a causation issue related to his particular circumstances. 22 There is no issue that by reason of the injury the respondent became unable to carry out a substantial part of all the normal duties of his occupation as an electrical contractor. The issue is whether he became unable to engage in that usual occupation on either a full-time or a part-time basis. In my opinion that question should be answered in the affirmative. It is not to the point that the respondent was able to carry out some of the duties of his usual occupation. The question is whether he was able "to engage in" his usual occupation. 23 The engagement in his usual occupation involved not only carrying out the administrative and managerial tasks, which he was able to do, but also the physical and manual tasks, which he was not able to do. In those circumstances, the carrying out of only the administrative and managerial tasks was not an engaging in his usual occupation. His inability to carry out the physical and manual work meant, on the facts of this case, that he was not able to engage in his usual occupation as an electrical contractor. Therefore, he was unable to engage in the usual occupation specified in the policy, and, accordingly, fell within the definition of "Total Disablement". 24 This conclusion is, in my opinion, consistent with the appellant's submission that the requisite inability for the purposes of "Total Disablement" is an inability to engage in the usual occupation at any sensible or realistic level, even if there is an ability to perform some of the normal duties of that occupation.

Conclusion 25 In my opinion the appeal should be dismissed with costs. _____________

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