O'Shanassy v AIA Australia Limited

Supreme Court of NSW|2021-10-15|Before: Henry J, Lindsay J

Judgment

In these proceedings, which were commenced on 22 September 2017, the plaintiff, Mr Paul O'Shanassy, claims that the first defendant, AIA Australia Limited (AIA), who was substituted in place of Colonial Mutual Life Assurance Society Limited (CMLA) trading as CommInsure (CommInsure), is obliged to pay partial disability benefits to the second defendant, Equius Legal Admin Pty Limited, under an Income Care Plus policy of insurance numbered 01347323 (TPD Policy) that CommInsure purported to cancel on 3 December 2014. In these reasons, references to CommInsure include AIA in its capacity as the first defendant.
CommInsure, who has filed a cross-claim in the proceedings, claims that the TPD Policy was terminated due to false representations about Mr O'Shanassy's work activities and fraudulent payment claims and seeks to recover the Monthly Benefits paid under the TPD Policy between May 2010 and August 2014. In his defence and reply, Mr O'Shanassy denies making false representations and fraudulent claims for payment and says that CommInsure was not entitled to terminate the TPD Policy and cannot recover past payments having regard to disclosures made by him to CommInsure and representations made to him about what work he was entitled to undertake.
These reasons deal with a notice of motion filed by Mr O'Shanassy seeking leave to file and serve a second further amended statement of claim, a further amended reply and amended defence to cross-claim and to rely on further expert evidence.
In summary, Mr O'Shanassy's amendments seek to plead, amongst other things, that CommInsure elected to affirm the TPD Policy in August 2012 and breached its duties of utmost good faith implied under s 13 of the Insurance Contracts Act 1984 (Cth) (ICA) and of good faith and dealing under the general law by denying liability and purporting to cancel the TPD Policy.
CommInsure opposes most of the amendments for reasons relating to delay, the prejudice from needing to respond to the new factual matters raised by the amendments and the lack of merit of the new claims and defences. It also opposes the grant of leave to rely on expert evidence from a forensic accountant (relying on guillotine orders that have been made) but neither opposes nor consents to leave to rely on two further medical reports.

Background

The following is taken from the pleadings and evidence on the application. I make no findings on any contentious issue of fact that may arise in any substantive proceedings.
Mr O'Shanassy is a solicitor and an undischarged bankrupt.
On 8 February 2009, CommInsure issued the TPD Policy to Mr O'Shanassy. Ownership of the TPD Policy was transferred on 6 October 2009 by Mr O'Shanassy to Fukura Pty Limited (Fukura) (a company that was deregistered on 25 September 2017) and then on 24 June 2014 by Fukura to Equius.
The TPD Policy is an income protection policy that identifies Mr O'Shanassy as the "life insured" and includes terms which provide for payment of Monthly Benefits (as defined) to the owner of the policy in the event that Mr O'Shanassy is Partially or Totally Disabled (as defined).
On or about 29 June 2009, Mr O'Shanassy suffered a cerebral aneurysm and underwent emergency surgery. At the time, Mr O'Shanassy was the principal of the legal practice, Sagacious Legal Pty Ltd. He was diagnosed with a further aneurysm in August 2011.
CommInsure made payments of Monthly Benefits under the TPD Policy in respect of the period from 29 June 2009 to 31 August 2014, although payments in respect of the claim for 29 November 2010 to 21 August 2011 were withheld for a period of time (CB47).
The evidence and submissions suggest that the payments for this period were withheld following information received from Mr O'Shanassy that he may have returned to work in some capacity (T22.45-T23.44) and were paid in August 2012 after Mr O'Shanassy accepted an offer made by CommInsure on 17 July 2012 to pay Partial Disability Benefits equal to 54% of the Monthly Benefits that had been paid previously (as one of two options for consideration) in resolution of the claim (Outstanding Claim).
On 6 August 2014, CommInsure wrote and requested that Mr O'Shanassy take part in a recorded interview as part of the ongoing management of his claim. The letter noted that CommInsure had received certain information alleging that he may have performed work during the course of the claim that he had not disclosed, as Mr O'Shanassy was aware through previous discussions.
Pausing here, the evidence indicates that in May 2012, CommInsure had been contacted by Mr O'Shanassy's ex-wife, Ms Lake, regarding Mr O'Shanassy's claims, that Ms Lake was willing to assist CommInsure with its investigations (having initially asked for payment for doing so, which was refused by CommInsure) and that, in May or July 2012, she had provided information relating to Mr O'Shanassy's alleged activities during the period of his claims. It also indicates that Mr O'Shanassy was aware of and concerned about the interactions between CommInsure and Ms Lake; was told by CommInsure in September 2012 that Ms Lake had provided information to CommInsure relating to Mr O'Shanassy's alleged activities during the course of the claim (that was not further explained); Ms Lake had been requested to provide any information in the form of a statutory declaration; CommInsure had not entered into any agreement to pay monies to her in exchange for her information; and, any information provided by witnesses would be corroborated where possible (CB149). The evidence also indicates that CommInsure had again been in contact with Ms Lake around August 2014 (and that CommInsure was going to seek to obtain a statement from her in relation to documents provided) and that Mr O'Shanassy was aware of that contact and had warned CommInsure that anything she provides would be "false and exaggerated" (CB150, CB153).
On 11 August 2014, Mr O'Shanassy advised CommInsure that he was available to attend an interview and asked for documents and information relating to any allegations made by Ms Lake in advance of the interview.
Based on a letter sent by CommInsure to Mr O'Shanassy and Equius dated 8 September 2014, it seems that the interview did not take place.
In the 8 September letter, CommInsure set out a summary of the matters about which it required Mr O'Shanassy's assistance and referred to documents and other evidence from various sources that gave rise to concerns about the truth and accuracy of his claim that he was disabled and the extent of his work activities from at least February 2010. The letter also annexed six statutory declarations from five people (including two from Ms Lake) and a forensic accountant's report from McGrathNichol dated 19 August 2014 which were said to evidence that substantial professional work had been undertaken by Mr O'Shanassy as a solicitor, including but not limited to, work involved in long running commercial litigation proceedings on behalf of Mr Ballard (Ballard litigation) that went beyond the claimed one to two hours per week of administrative work that Mr O'Shanassy had disclosed to CommInsure he had been undertaking. The letter gave Equius and Mr O'Shanassy an opportunity to respond by 7 October 2014, which was later extended to 7 November 2014. There is no response to the allegations in the 8 September letter in evidence.
On 3 December 2014, CommInsure advised Equius and Mr O'Shanassy that it had cancelled the TPD Policy on the basis that, at least from May 2010 onwards, Mr O'Shanassy had falsely represented to CommInsure the true extent of his work activities and that he had not returned to work as a solicitor, which amounted to making a fraudulent claim. The letter asserted and purported to exercise a right to refuse payment of any claim for ongoing benefits pursuant to s 56 of the ICA and a right at common law to cancel the TPD Policy on the basis that the conduct amounted to a fundamental breach of the contract, and also demanded repayment of the benefits paid under the TPD Policy to date, being the sum of $809,132.90.
By a scheme approved by the Federal Court of Australia on 15 March 2021, the life insurance business of CMLA was transferred to AIA pursuant to Part 9 of the Life Insurance Act 1995 (Cth) (Life Insurance Act). The scheme contemplated that any person having a claim against CMLA has the same claim against AIA and that any proceedings connected with a CMLA Life Policy must be continued by or against AIA.

Pleadings

Mr O'Shanassy commenced these proceedings by statement of claim filed on 22 September 2017.
On 2 February 2018, Mr O'Shanassy filed an amended statement of claim (ASOC).
On 19 February 2018, CommInsure filed a defence to the ASOC and a cross-claim (Cross-Claim).
On 23 July 2018, CommInsure provided further particulars of the allegations that Mr O'Shanassy was performing work as a solicitor which included a table that, by reference to entries in tax invoices, identified 148 occasions on which it was alleged that Mr O'Shanassy had performed work as a solicitor between 24 February 2010 and 24 November 2011.
On 27 July 2018, Mr O'Shanassy filed a further amended statement of claim (FASOC).
On 3 August 2018, CommInsure filed a defence to the FASOC (Defence to FASOC).
On 17 August 2018, Mr O'Shanassy filed a motion seeking to strike out paragraphs of CommInsure's defence and Cross-Claim which, on 10 January 2019, was dismissed by consent (without a hearing).
On 26 March 2019, Mr O'Shanassy filed a reply and a defence to the Cross-Claim.
On 29 April 2019, CommInsure filed a reply to Mr O'Shanassy's defence to the Cross-Claim.
On 22 January 2020, Mr O'Shanassy filed an amended defence to the Cross-Claim and an amended reply.

Evidence

On 30 April 2019, the Court made orders for the service of evidence in relation to the FASOC and the cross-claim, which required Mr O'Shanassy's evidence to be served by 25 June 2019 and 3 September 2019, respectively. In accordance with that order, Mr O'Shanassy served his affidavit sworn 2 July 2019.
In August 2019, in accordance with orders made on 24 July 2019, CommInsure served its lay evidence, which comprises two affidavits from CommInsure staff (Ms Byrne and Mr Mellor) who were involved in managing Mr O'Shanassy's claim under the TPD Policy. Mr O'Shanassy did not serve any lay evidence as required by the 24 July orders.
Mr O'Shanassy did not serve any evidence in relation to the Cross-Claim and evidence in reply in relation to the FASOC by 10 September 2019, as required by orders made on 24 July 2019. However, prior to the next directions hearing, the plaintiff served an affidavit of Mr Miles dated 15 October 2019 annexing a report from Dr Sam Rewais dated 9 October 2019.
At a directions hearing held on 17 December 2019, Mr O'Shanassy relied on an affidavit from Mr Miles sworn 16 December 2019 annexing an updated report from Dr Sam Rewais. The Court made orders that no further evidence was to be served and relied on by Mr O'Shanassy after 17 January 2020 without further leave of the Court, with the exception of further medical evidence regarding Mr O'Shanassy's medical condition.
On 17 January 2020, Mr O'Shanassy served two lay affidavits (of Kosta Patsan sworn 17 January 2020 and of Reginald John Sherlock sworn 17 January 2020) and later, on 31 January 2020, the plaintiff served an affidavit from Mr Miles annexing a medical report prepared by Professor Noel Dan dated 30 January 2020.
On 4 February 2020, Ward CJ in Eq (as Her Honour then was) made an order granting leave to Mr O'Shanassy to serve further affidavit evidence from identified persons if served by specified dates and ordered that Mr O'Shanassy would not be permitted to rely on further lay or expert evidence not served in accordance with that timetable without further leave of the Court. Two further affidavits were served by Mr O'Shanassy pursuant to that order.
In April 2020, CommInsure served its evidence in reply.

Discovery

On 18 May 2020, Mr O'Shanassy filed a motion seeking disclosure from CommInsure which was resolved by consent orders. According to Mr Miles' evidence, the disclosure application was made as he considered that Mr O'Shanassy might have a claim against CommInsure under s 13 and/or s 14 of the ICA but there was insufficient evidence upon which to certify such a claim.
In July 2020, CommInsure and Mr O'Shanassy served their list of documents which were inspected by both parties.
According to Mr Matkovich's evidence, by the end of July 2020, the proceedings were ready to be set down for hearing.
Mr Miles deposes that, after inspecting CommInsure's discovery, he determined there was sufficient evidence upon which a claim under s 13 and/or s 14 of the ICA could be certified.

November 2020: Mr O'Shanassy's motion to amend

On 3 November 2020, Mr O'Shanassy filed a notice of motion seeking leave to amend his claim by filing a second further amended statement of claim and to rely on further expert evidence. The application, which was opposed by CommInsure, was heard by Lindsay J on 30 November 2020.
Mr O'Shanassy sought to plead that CommInsure breached its utmost good faith obligations under s 13 of the ICA in the way it conducted its investigations and/or by cancelling the TPD Policy (the particulars of which included that CommInsure had failed to act towards Mr O'Shanassy in a manner consistent with commercial standards of decency and fairness, failed to act with due regard to legitimate interests of and the disclosures made by Mr O'Shanassy, relied on information provided by Ms Lake, Mr Ballard and others in circumstances where it knew or ought to have known that the information was unreliable and failed to properly investigate the circumstances surrounding the provision of information, encouraged Ms Lake to provide information in exchange for the prospect of a financial reward, and failed to provide Mr O'Shanassy with a reasonable opportunity to respond to the allegations raised in the 8 September letter). Mr O'Shanassy also sought to plead that, pursuant to s 14(1) of the ICA, CommInsure was prohibited from relying on any provision of the TPD policy if its reliance constituted a failure to act with utmost good faith.
The transcript of the hearing before Lindsay J records that Counsel for Mr O'Shanassy identified his principal claim as that brought under s 13 of the ICA, that the claim under s 14 of the ICA was no longer pressed because "the statutory estoppel issue essentially muddies the waters" as the breach of the implied provision to act in good faith under s 13 would entitle him to an award of damages, and that Mr O'Shanassy did not press his application to seek leave to rely on further expert evidence. The Court was informed that the expert evidence aspect of the notice of motion had not "gone away completely" but Mr O'Shanassy's position was that the evidence that was already on foot was sufficient to answer the question of his entitlement or otherwise to benefit from a medical perspective under the TPD Policy (T2.10-17, T4.39-42 and T7.7-13).
Justice Lindsay dismissed Mr O'Shanassy's notice of motion seeking leave to file the proposed second further amended statement of claim: Paul Gerard O'Shanassy v The Colonial Mutual Life Assurance Society Limited trading as CommInsure (Supreme Court (NSW), Lindsay J, 30 November 2020, unrep).
Lindsay J considered that the proposed amendments sought to be relied on by reference to s 13 of the ICA added nothing to and were not necessary for the case Mr O'Shanassy wanted to advance at the final hearing: at [8]-[9]. His Honour's reasons refer to an issue raised by Mr O'Shanassy about the quality of the documents relied on by CommInsure to establish the fraud (which I understand to relate to CommInsure's reliance on the statutory declarations referred to at [19] above rather than evidence from those witnesses), the prospect of a forensic battle that may play out at the hearing and that CommInsure's allegation of fraud may fail if Mr O'Shanassy's criticism of the quality of the sources relied on was correct. However, His Honour stated that those matters involved a broader issue of forensic tactics rather than being a pleading issue. His Honour concluded that he was not satisfied that the proposed amendments established any cause of action separate from or supporting a claim for relief made in the pleading as it stands: at [6] - [11].

Events since the hearing before Lindsay J

On 7 December 2020, the proceedings were adjourned by consent to 10 February 2021 so that Mr O'Shanassy could clarify what, if any, expert evidence he would seek to rely on at any final hearing in the matter.
On 8 February 2021, the Court made orders requiring Mr O'Shanassy, on or by 3 March 2021, to meaningfully respond to letters sent by CommInsure about his expert evidence on 3 December 2020 and 20 January 2021.
On 3 March 2021, Mr O'Shanassy's solicitor sent a letter advising that Mr O'Shanassy would be relying on the evidence served in the proceedings as at 3 March 2021 and that leave would be sought at the next directions hearing to serve additional expert evidence from an accountant and reports from Dr Balzer and Dr Rewais, acknowledging that leave would be required to rely on that evidence.
By letter dated 11 March 2021, CommInsure's solicitors advised that CommInsure reserved the right to object to Mr O'Shanassy's evidence served to date, could not consider its position regarding any future application by him seeking leave to serve further expert evidence and invited him to provide information as to why he should be granted leave at this late stage in the proceedings and what evidence he proposed to rely on.
On 29 March 2021, in accordance with timetabling orders made by Registrar Walton, Mr O'Shanassy served on CommInsure the pleadings the subject of this application.
On 15 April 2021, CommInsure's lawyers advised that CommInsure did not consent to the filing of the Proposed Pleadings (as defined in that letter), contending that they did not disclose any reasonable cause of action, would cause undue prejudice and raised the same allegations under s 13 and 14 of the ICA that had been the subject of the motion before Lindsay J.
On 23 April 2021, Mr O'Shanassy filed a notice of motion seeking to file and serve the new pleadings and for leave to rely on a medical report of Professor Dan dated 30 January 2020, medical reports from Dr Balzer and Dr Rewais and an expert report from a forensic account.
By consent orders made on 21 October 2021, AIA was joined as a party and substituted in place of CMLA in the principal proceedings and CommInsure's cross-claim.

The existing pleadings

In the FASOC, Mr O'Shanassy alleges that: 1. pursuant to an agreement made on 24 June 2014, Equius agreed to pay to Mr O'Shanassy 50% of the proceeds of any claim paid under the TPD Policy, net of all direct expenses referable to the claim: at [6A]; 2. Mr O'Shanassy was Totally Disabled in the period from July 2009 to 28 May 2010, Partially Disabled in the period 29 May 2010 to 22 August 2011, Totally Disabled from 22 August 2011 to 31 October 2014 and, since 1 November 2014, has been (and continues to be) Partially Disabled: at [8], [9] and [9(b)]; 3. in breach of the TPD Policy, CommInsure has failed to pay to Equius a Total Disability Benefit from 1 September to 31 October 2014 and a Partial Disability Benefit from 1 November 2014: at [9C], [10] and [11]; 4. by reason of CommInsure's failure to indemnify Equius under the TPD Policy from September 2014, Mr O'Shanassy was prevented from paying outstanding premiums payable under a Total Care Plan of Life Insurance Policy No 01289533 (Life Policy) and CommInsure's purported termination was a repudiation which is not accepted by Mr O'Shanassy (Life Policy Claim): [15] - [16C]; and 5. Mr O'Shanassy has suffered loss and damage by reason of his loss of benefits under the TPD Policy from September 2014 (which loss continues) and the loss of the benefit of the Life Policy: [16].
By way of relief, Mr O'Shanassy seeks declarations to the effect that Equius is entitled to indemnity for Monthly Benefits under the TPD Policy for Mr O'Shanassy's Partial Disability and orders for the payment of Monthly Benefits under the TPD Policy for the period from September 2014 to the date of judgment together with interest, reinstatement of the Life Policy and, in the alternative, damages.
In response (as pleaded in its Defence to the FASOC and Cross-Claim), CommInsure alleges that: 1. representations were made by Mr O'Shanassy (on his own behalf and/or on behalf of Fukura) that: between June 2010 and July 2011, his involvement with the law firm, Sagacious Legal, was limited to dealing with administrative issues and discussing activities of the firm for up to one to two hours per week; Mr O'Shanassy had not engaged in any work as at 24 October 2011; and from 22 August 2011, he ceased doing any work at all: Defence to FASOC at [23]-[25]; 2. the representations were false as, by February 2010 at the latest, Mr O'Shanassy was performing work as a solicitor or at least able to perform some of the income producing duties of his occupation: Defence to FASOC at [26]-[28]; 3. by reason of the false representations, the benefit payments sought under the TPD Policy were fraudulent claims and made in breach of the implied term under the TPD Policy that claims would be made with the utmost good faith and in breach of a duty of care: Defence to FASOC at [30]; Cross-Claim at [23], [26]-[27]; and 4. as a consequence, CommInsure was entitled to terminate the TPD Policy, refuse to make future payments pursuant to s 56 of the ICA and recover the monthly benefits paid under the TPD Policy: Defence to FASOC at [30] and Cross-Claim at [27].
In his Reply and the Amended Defence to the Cross-Claim, Mr O'Shanassy pleads the following: 1. he made disclosures to CommInsure regarding the administrative activities that he was undertaking; he was not undertaking work in his profession as a solicitor; Ms Byrne on behalf of CommInsure represented that he was entitled to work at his law firm for up to 10 hours per week (Work Representation); and the progress claims were true and correct and did not omit any relevant information: Amended Defence to the Cross-Claim at [14(b), (c), (g) and (q)] and Reply at [4(b), (c), (g) and (q)]; 2. CommInsure is estopped from denying his claims because of his reliance on the Work Representation, he denies that he made false representations and fraudulent claims, denies breaching any duty of care and the implied term and says that CommInsure was not entitled to terminate the TPD Policy: Reply at [11] and [13]; and Amended Defence to the Cross-Claim at [20]-[21]; and 3. if any findings are made against him regarding his disclosures or work undertaken, such findings may relate only to a minimal or significant part of a claim such that non-payment for the remainder would be harsh and unfair, relying on s 56(2) of the ICA: Amended Defence to the Cross-Claim at [32].

Proposed amendments

The amendments that Mr O'Shanassy seeks leave to plead fall into a number of discrete categories and overlap as between the proposed second further amended statement of claim (SFASOC), the proposed Further Amended Defence to Cross-Claim (FAD) and proposed Further Amended Reply (FAR).
First, there are amendments to the SFASOC that seek to plead that, by effecting a compromise of the Outstanding Claim in August 2012 with knowledge that witnesses (namely, Ms Lake and Mr Joe Lorincz) contended that Mr O'Shanassy had been working while submitting progress claims, CommInsure elected to affirm the TPD Policy, confirmed its liability to pay monthly benefits and gave up its right to contend that it was not liable, on the basis that the policy owner's entitlements would not be prejudiced by Mr O'Shanassy carrying out work within the scope of the Work Representation (Affirmation Claim): SFASOC at [11A], [12], [12B], [12H] and [12L].
Second, Mr O'Shanassy pleads a "Good Faith Claim" (SFASOC at [12M] - [12W]), alleging that: 1. CommInsure owed duties of utmost good faith and/or good faith and fair dealing (which, in oral submissions, was said to plead duties arising under s 13 of the ICA and the general law) to Mr O'Shanassy (as a direct, indirect or third party beneficiary of the TPD Policy from 8 October 2009), to Fukura (between 8 October 2009 and 23 June 2014) and to Equius (from 24 June 2014): SFASOC at [7B]; 2. CommInsure breached those duties by: 1. failing to disclose to Mr O'Shanassy and Equius information provided to it by Ms Lake in May and July 2012 and demonstrate that the matters relied upon to purportedly cancel the TPD Policy and deny liability to pay monthly benefits were not in substance known to CommInsure when it affirmed the TPD Policy and/or settled the Outstanding claim in August 2012: SFASOC at [12R]; 2. denying liability to pay monthly benefits and/or purporting to cancel the TPD Policy based upon Mr O'Shanassy's activities that CommInsure had represented would not affect his entitlements (relying on the Work Representation and a new representation alleged to have been made by CommInsure (by Mr Maronese) at a meeting on or about 15 September 2012 to the effect that Mr O'Shanassy's activities in overseeing Sagacious Legal's business would not impact his entitlements under the TPD Policy (New Work Representation)) and/or had been disclosed by Mr O'Shanassy prior to CommInsure affirming the TPD Policy and/or settling the Outstanding Claim in August 2012: SFASOC at [12U(a)]; 3. obtaining the benefit of the compromised settlement of the Outstanding Claim and then later using the same considerations to deny liability and purportedly cancel the TPD Policy: SFASOC at [12U(b)] 4. delaying the carrying out certain investigations into whether Mr O'Shanassy was working as a solicitor: SFASOC at [12U(c)]; 5. relying upon statements and statutory declarations of various witnesses to deny liability and purportedly cancel the TPD Policy, being material which simply supports matters previously known to CommInsure in August 2012, and where CommInsure does not intend to call direct evidence from those witnesses at the hearing so that their evidence can be tested by cross-examination: SFASOC at [12U(d)-(e)]; and 1. those duties prevent CommInsure from cancelling the TPD Policy, refusing to pay Monthly Benefits, resiling from the settlement of the Outstanding Claim and the Work Representation and New Work Representation, and in the alternative, that Mr O'Shanassy has suffered loss and damage as a result: SFASOC at [12V] and [12W].
The Affirmation and Good Faith Claims are also pleaded in the FAD (at [12(c1)], [25(a1)], [27(b)], [28(b1)] and 32) and in the FAR (at [13(e)]).
In addition, the FAD and FAR plead reliance upon s 14 of the ICA to deny that CommInsure is entitled to rely upon the alleged breach of an implied term in the TPD Policy: FAR at [13(d)] and FAD at [27(a)]. The FAR also pleads reliance on s 59A of the ICA to assert that the cancellation of the TPD Policy should be disregarded, the TPD Policy reinstated and CommInsure ordered to pay Monthly Benefits from September 2014 to the date of judgment: FAR at [13(d1)], [14(d)]. The factual matters underpinning those claims are those pleaded in the SFASOC relating to the existence and content of the duty of good faith.
CommInsure opposes leave being granted to plead the Affirmation Claim, the Good Faith Claim and reliance on ss 14 and 59A of the ICA.
Third, there are amendments to the FAD and FAR (described as miscellaneous) that plead that the Work Representation included "supervisory" work (FAD at [14(b)] and FAR at [4(b)]), the New Work Representation (FAD at [14(l)] and FAR at [4(l)]) and non-admissions that various representations made by Mr O'Shanassy were made on behalf of Fukura (FAD at [14(q1)] and FAR at [4(q1)]) (Representation amendments).
CommInsure opposes leave to amend to plead the Representation amendments. [1]
Finally, there are various amendments to the SFASOC which are characterised as updating and miscellaneous which include, for example, references to the "policy owner", Mr O'Shanassy's Pre-Disability Income, the purpose of the TPD Policy, the particulars in relation to the assertion of Partial Disability and the claims in relation to the Life Policy and are located at SFASOC at [4], [7(a)], [7(f)], [7(k)], [7(p)], [7(s)], [7A], [8], [9, particulars (b)] [9B, particulars (b), (b1) and (c)], [10], [14], [14A], [16AA], [16AB] and [16B] (Miscellaneous amendments). CommInsure does not oppose the Miscellaneous amendments, other than an amendment to the particulars to SFASOC [9(b)] which removes "to date" from the phrase "in the period 1 September 2014 until 31 October 2014 to date". [2] As that amendment seems to simply rectify a typographical error to clarify that the dates referred to in the particulars reflect the dates pleaded at [9], I see no basis for that opposition and will grant leave in respect of all the Miscellaneous amendments.
I should also record that the schedule provided by CommInsure records that it opposes a "Miscellaneous" amendment to the FAD at [3(c)]. As that amendment simply includes a defined term for Fukura Pty Ltd as (Fukura), I have proceeded on the basis that it was an error in CommInsure's schedule and that this amendment is not opposed.

Legal principles

Mr O'Shanassy requires leave of the Court to amend pursuant to s 64(1)(b) of the Civil Procedure Act 2005 (NSW) (CPA), which provides the Court with a discretion to grant leave to a party to amend any document in the proceedings. Section 64(2) of the CPA provides that all necessary amendments are to be made for the purposes of determining the real questions raised by, or otherwise depending on, the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
In considering whether to make an order granting leave to amend, the Court must seek to act in accordance with the dictates of justice: CPA, s 58(1).
For the purposes of determining the dictates of justice in a particular case, s58(2) of the CPA provides that the Court must have regard to the overriding purpose of the CPA and the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) to facilitate the just, quick and cheap resolution of the real issues in the proceedings (CPA, s 56(1); UCPR, r 2.1) and the objects stated in s 57 of the CPA. Those objects are the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable to the respective parties. The Court may also have regard to (CPA, s 58(2)): 1. the degree of difficulty or complexity to which the issues give rise; 2. the degree of expedition with which the parties have approached the proceedings, including the timeliness of interlocutory activities; 3. the degree to which any lack of expedition in approaching the proceedings arose in circumstances beyond the parties control; 4. the degree to which the parties have assisted the court to facilitate the just, quick and cheap resolution of the real issues in the proceedings; 5. the use of the parties of any opportunities available during the course of the proceedings; 6. the degree of injustice that would be suffered as a result of any order or direction; and 7. such other matters as the court considers relevant.
The weighing of the factors in the exercise of the discretion to grant leave to amend includes, in particular, a consideration of: 1. the nature and importance of the amendments to the party seeking them; 2. the extent of the delay in applying for leave to amend and the explanation for that delay; 3. the prejudice that is assumed to follow from the amendment, and that which is shown; 4. the parties' choices to date in the litigation; and 5. the detriment to other litigants, the need to avoid waste and inefficient use of public resources, and the potential loss of public confidence in the legal system which arises where a court is seen to accede to applications made without adequate explanation or justification. See Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [5], [24], [30] (French CJ), [93], [95], [100], [102], [105], [108], [112], [114] (Gummow, Hayne, Crennan, Kiefel and Bell JJ) (Aon).

Consideration and determination

The parties' written and oral submissions focused on the amendments seeking to plead the Affirmation and Good Faith Claims.
In broad terms, Mr O'Shanassy submits that leave to plead those claims should be granted as they are arguable, potentially important to his case and should not cause significant prejudice to CommInsure. He says that most of the factual matters on which they are based are already pleaded, that the Good Faith Claim and s 14 of the ICA pleading largely raise legal issues, and that the scope of further evidence required to respond to the new factual matters would, therefore, be confined. He also contends that the Good Faith Claim is different to that which was pressed before Lindsay J and that an adequate explanation has been given by Mr Miles for the delay in pleading the claims.
On this last point, Mr Miles's explanation for the delay in pleading the Affirmation Claim is that Mr O'Shanassy did not know what information had been disclosed to CommInsure by third parties until it provided discovery in July 2020. He says that it was not until after the unsuccessful application before Lindsay J and new senior and junior counsel were briefed that he and Mr O'Shanassy were aware of the legal significance of the factual matters underpinning the Affirmation Claim and that Mr O'Shanassy had an arguable case that CommInsure had affirmed his entitlement to monthly benefits under the Policy when it compromised and settled the Outstanding Claim.
Mr Miles also gives evidence that he and Mr O'Shanassy were previously unaware that the content of an insurer's duty of utmost good faith extended to the matters now pleaded (as referred to at [60(b)] above) and provided for the remedies available at [60(c)] above. In support of that position, Mr O'Shanassy relies on the recent Federal Court decision of Delor Vue Apartments CTS 39788 v Allianz Australia Insurance Ltd (No 2) [2020] FCA 588 (Delor) that was affirmed on appeal in Allianz Australia Insurance Limited v Delor Vue Apartments CTS 39788 [2021] FCAFC 121 (Delor (FCAFC)) (the Delor decisions), which he contends provides support for an insurer's duty of good faith to operate broadly and the availability of a legal remedy to an insured even where indemnity under a policy would not otherwise be available for reasons relating to non-disclosure.
The Delor decisions involved a claim relating to cyclone damage to an apartment complex in Queensland. The body corporate (Delor Vue) had innocently failed to disclose defects to the eaves and soffits, which non-disclosure meant that Allianz had an arguable case that it was entitled to reduce its liability to nil under s 28(3) of the ICA. Aware of the non-disclosure issue and its rights, Allianz nevertheless confirmed cover on 9 May 2017 and agreed to pay the claim subject to the terms of the policy. The parties proceeded on that basis. A year later, Allianz wrote to Delor Vue to resolve the claim. That offer stated that it was in accordance with the terms of the earlier communication and would only be open for 21 days, after which time it would deny monetary responsibility for an insurance claim based on an alleged non-disclosure and misrepresentation in connection with the taking out of the policy, claiming a legal entitlement to reduce its liability to nil under s 28(3) of the ICA. Delor Vue commenced proceedings in which it contended that the insurer had made an election not to exercise its rights under the ICA or that it was estopped from doing so or it had waived its rights under the section and, alternatively, alleged a breach of the duty of utmost good faith.
At first instance, Allsop CJ found that Allianz was, after 9 May 2017, estopped from resiling from its position as at 9 May 2017 and reducing its liability to nil under s 28(3) of the ICA (having made a clear representation or promise that cover was confirmed and that it would adjust the claim in accordance with the policy terms), had waived its rights and breached its duty of utmost good faith by resiling from its position and seeking to rely on the non-disclosure of Delor. Allsop CJ did not accept the case based on election.
On appeal, a majority of the Full Court (Derrington J in dissent) found no error in Allsop CJ's reasons in relation to estoppel, waiver and good faith but found that Delor Vue was entitled to succeed based on an election. Their Honours confirmed that the common law doctrine of election was concerned with circumstances where a party is required by law to make a binding choice and held that in an insurance contract, the law requires an insurer to elect between disclaiming liability and seeking to rely upon the rights conferred by the policy, but there was no obligation to elect unless and until the relevant party is aware of the relevant facts. In this case, the majority concluded that the insurer had knowledge of the relevant facts to reduce its liability to nil, and so it would be directly inconsistent with the position of reducing its liability under the policy to enforce rights under the policy, to enter the property and adjust the loss for which it had accepted liability: [114]-[119], [131] and [133]. The insurer had exercised those rights for a year and it could not now resile from that choice.
As to the duty of utmost good faith, the majority affirmed the decision of Allsop J because the breach had to be assessed at the time it occurred, not with the benefit of hindsight and also endorsed Allsop J's reliance on the principle that the duty "encompasses notions of fairness, reasonableness and community standard of decency and fair dealing" (at [253]) and that there was a lack of decency and fairness in the position taken by Allianz which effectively went back on its representation or promise of a year earlier: at [246]. Derrington J also dissented on this ground.
CommInsure takes issue with Mr O'Shanassy's contention that the amendments are in the nature of reformulating his claim within the scope of the existing factual issues. It submits that, if allowed, the amendments would cause prejudice to it as the new claims require exploration of a range of new factual issues and further evidence relating to events which occurred between 2009 and 2014. It submits that the proposed amendments are sought very late, contending that after a long delay occasioned by Mr O'Shanassy, the evidence had been completed (subject to the present application), discovery has occurred on the basis of the factual matrix raised by the current pleadings, and the case was effectively ready for trial. It also submits that the explanation provided by Mr O'Shanassy for the delay does not demonstrate that the delay is justified.
CommInsure submits that the Good Faith Claim is essentially of the same nature as that proposed and dismissed by Lindsay J. It accepted that the Delor decisions reflect a development in the understanding of the law relating to utmost good faith under s 13 of the ICA but contended that the circumstances in this case are very different (T16.49 and T26.20-T26.35). It also submitted that the factual and legal bases for the Affirmation and Good Faith Claims are, at best, weak and raised a number of legal issues with Mr O'Shanassy's Good Faith Claim and reliance on ss 14 and 59A of the ICA, including that the duty under s 13 of the ICA was not owed to Mr O'Shanassy as he has not been a party to the TPD Policy since October 2009 (T26.38).
Pausing here, it was in response to CommInsure's written submissions that Mr O'Shanassy included the "amendments in red" contained in the SFASOC and FAR that plead a duty of good faith and fair dealing and reliance on s 59A of the ICA. These were described by his senior counsel as "late thoughts" (T4.50) and were not the subject of evidence or written submissions served in advance of the hearing. As was put at the hearing, the point that Mr O'Shanassy seeks to agitate by the "red amendments" is that certain amendments were made to the ICA in June 2013 that extended the duty of utmost good faith implied into contracts of insurance under s 13 of the ICA to third party beneficiaries (such as Mr O'Shanassy) and to introduce s 59A (T5.4-T5.34).
CommInsure opposes the "red amendments" for the reasons already referred to and on the basis that the 2013 ICA amendments only apply to contracts of insurance entered into after 28 June 2013: Insurance Contracts Amendment Act 2013 (Cth) (ICA Act), s 2 and Schedule 1, cl 6. That is, CommInsure contends that the 2013 ICA amendments do not apply to the TPD Policy.
As the principles referred to at [73] make clear, the exercise of the Court's discretion to allow an amendment necessarily involves a weighing process in which the factors for and against the grant of leave must be identified and considered. Those factors include a consideration of the stage at which the application for the amendment is made and if, as in this case, there has been delay in applying for the amendment, an explanation by Mr O'Shanassy of the circumstances giving rise to the amendments and reasons for the delay.
Mr O'Shanassy's proffered explanation for his delay in raising the Affirmation and Good Faith Claims is, in essence, the lack of advice from previous Counsel about the existence of the claims and the impact and timing of the Delor decisions.
Even accepting that the Delor decisions warranted a fresh consideration of a good faith claim based on a breach of the duty of utmost good faith under s 13 of the ICA in mid-2020, the prospect and scope of such a claim were clearly within the contemplation of and considered by Mr O'Shanassy and his legal team from July 2020 onwards, after the first Delor decision was handed down, as evidenced by the fact that such a claim was pursued as part of the application to amend before Lindsay J (and a claim under s 14 of the ICA was originally pursued but ultimately not pressed: CB610).
As Mr O'Shanassy's Senior Counsel accepted at the hearing, the Delor decisions did not apply to the Affirmation Claim as an explanation for delay (T15.18). The Delor decisions and the evidence adduced on the application also did not satisfactorily explain the reasons for the delay in seeking to plead that part of the Good Faith Claim based on breaches of the duty of good faith and fair dealing under the general law. Nor do they explain the delay in seeking to amend to plead ss 14 and 59A of the ICA and the pleading of the Representation amendments.
While I am satisfied that the evidence demonstrates that the current application did not arise because of some deliberate tactical decision not to seek the amendments earlier, to my mind, the explanation provided and the matters referred to above highlight that the delay in bringing this application was the consequence of a failure on the part of Mr O'Shanassy and his legal advisors to act diligently and expeditiously in the prosecution of his claims: Karl Suleman Enterprizes Pty Ltd (in liq) v Pham [2013] NSWCA 93 at [22]. In that context, the explanation that has been given by Mr O'Shanassy does not, in my view, justify the delay in seeking leave to the plead the amendments proposed on this application.
Mr O'Shanassy is correct to submit that many of the factual matters pleaded repeat allegations already pleaded on the Amended Reply and Amended Defence to Cross-Claim. However, as CommInsure submits, there are also new allegations of fact pleaded: see, for example, the allegations regarding contact with Ms Lake and Mr Lorincz in May and June 2012, the New Work Representation, the compromise of the Outstanding Claim, CommInsure's alleged failure to disclose information to Mr O'Shanassy and deferral of the carrying out of investigations for a number of years after November 2010. Those pleadings have the effect of opening up the scope and propriety of CommInsure's investigations as to Mr O'Shanassy's alleged work activities while receiving payments under the TPD Policy prior to the purported termination of the TPD Policy.
Granting leave to plead the new claims, particularly the Good Faith Claim, will inevitably lead to a broadening of the factual issues that will need to be addressed by the evidence. The question of whether CommInsure's conduct breached its duty of utmost good faith will involve not just a consideration of the particular allegations of fact raised by Mr O'Shanassy, as suggested by Mr O'Shanassy, but will require an assessment of CommInsure's conduct as a whole and an evaluative decision by reference to all of the circumstances of the case: Delor (FCAFC) at [252].
CommInsure's evidence does not identify any particular witness who cannot be located or is no longer unavailable due to the passing of time since the events in question although the need to conduct further witness interviews and prepare evidence with existing witnesses and others (including persons who may no longer be in the employ of CommInsure) will involve further costs and delay and cause some prejudice to CommInsure.
As no hearing date has been set, the timing of Mr O'Shanassy's amendment motion and the grant of leave to amend will not result in the adjournment or vacation of the trial. That said, granting leave to amend would cause delay in proceedings that have been ongoing for over four years and (subject to the present application) were seemingly ready to be allocated a hearing date. The delay in the final disposition of the proceedings and attendant costs has deleterious effects, not only upon CommInsure but to other litigants and is a relevant factor on this application: Aon at [114]. It is also relevant that there has been not insignificant default by Mr O'Shanassy in complying with orders for the provision of evidence in the past.
In relation to the nature and importance of the Affirmation Claim, CommInsure submits that Mr O'Shanassy's argument that CommInsure made an election (also referred to as the affirmation) not to refuse to pay all the future monthly benefits has no basis because, at the time when it is alleged that CommInsure made its election, CommInsure did not yet know all the relevant facts. It contends that although it was aware of some allegations made by third parties as to Mr O'Shanassy's return to work as a solicitor, it was yet to undertake appropriate investigations as to the veracity of the allegations which, where then, and still are, denied by Mr O'Shanassy.
It also submits that it is unclear on what basis Mr O'Shanassy suggests that, even if he is bound by the agreement to make monthly payments for the Outstanding Claim period and cannot recover them, this would preclude CommInsure from ever refusing payments in the future (even if later claims were made fraudulently).
While accepting there is force and logic to these submissions, the issue I have is that an assessment of whether CommInsure made an election (or affirmation) of the nature asserted in the amendments will require a consideration of the factual matrix at the time, such as the extent of CommInsure's knowledge of the relevant facts, the nature and content of Mr O'Shanassy's disclosures and the circumstances surrounding the offer made on 17 July 2012 and its acceptance, including what (if any) representations or promises were made. While the pleadings might tend to suggest that CommInsure did not know all the relevant facts (as was submitted in oral submissions), that matter and the other factual issues raised by the Affirmation Claim are not to be resolved on this application and can only be determined by the trial judge having regard to all the evidence before Court.
Further, and in contrast to the Good Faith Claim, the new factual matters raised by the Affirmation Claim are more confined and limited in time and the claim was not the subject of the previous application to amend before Lindsay J. Given the nature and timing of the factual matters raised by the Affirmation Claim, it might also be expected that they could be dealt with by CommInsure's current witnesses (noting that Ms Byrne was apparently informed about the information received from Mr Lorincz and the case manager for Mr O'Shanassy's claim at the time, and the evidence on this application indicates that Mr Mellor was aware of the discussions with Ms Lake), although I accept that further inquiries may need to be made of others, such as Mr Maronese. As pleaded, the new relevant facts would not include, for example, CommInsure's communications with Mr Ballard and other persons directly involved in the Ballard Litigation (other than Ms Lake and Mr Lorincz, to the extent they were involved). Nor does the claim raise an issue as to CommInsure's reliance on contemporaneous business as part of its investigation.
I accept Mr O'Shanassy's submission that the nature of the Affirmation Claim is potentially important to his claim. As he submits, if the Affirmation Claim succeeds, CommInsure may not be entitled to rely on the fact that Mr O'Shanassy was working or able to perform the income producing duties of his occupation within the meaning of the TPD Policy at any time up to August 2012 to deny liability and/or cancel the TPD Policy.
Relevantly, CommInsure did not assert that the Affirmation Claim pleading was liable to be struck out or that the claim was hopeless and unarguable. While there would be some advantage in rejecting what may be described as a claim that has little merit, weighing all of the factors and while finely balanced, in my view, it would not be in the interests of justice to refuse Mr O'Shanassy leave to plead the Affirmation Claim, particularly as the case is yet to be set down for hearing and the Claim is relatively confined and arguable.
The position in relation to the Good Faith Claim is, in my view different. For the reasons that follow, I am not satisfied that it would be in the interests of justice or consistent with case management principles to grant leave to Mr O'Shanassy to amend and plead that claim and decline to do so.
First, I accept CommInsure's submission that the Good Faith Claim seeks to plead amendments of the same nature as those proposed and rejected by Lindsay J, although worded differently in some respects. At their essence, both applications seek leave to amend to plead a cause of action based on an allegation that CommInsure owed a duty of utmost good faith to Mr O'Shanassy and breached that duty by the manner in which it conducted its investigations into Mr O'Shanassy's claim and by purporting to cancel the TPD Policy.
The Good Faith Claim in the present application advances more particular and some different claims, such as those that rely on the compromise of the Outstanding Claim (SFASOC [12U(a)(ii)] and [12U(b)]). However, the overlap with the application advanced before Lindsay J is apparent when regard is had to particulars of the claim before Lindsay J (which referred, for example, to a failure to have due regard to disclosures made by Mr O'Shanassy and reliance on information provided by others) and the claims now advanced at [12R], [12S], [12U(a)(ii)], [12U(d)] and [12U(e)], all of which also rely on, refer to and/or seek to impugn the disclosures made by Mr O'Shanassy, reliance on material given by others.
In particular, the amendment proposed at [12U(e)] seeks to raise a breach of good faith claim based on reliance on the very same materials that were the subject of debate before Lindsay J. His Honour's observations and reasons remain apt. In my view, CommInsure's continued reliance on the materials annexed to the letter sent to Mr O'Shanassy to maintain its position that it was entitled to deny liability and not call direct evidence from them or make them available for cross-examination gives rise to a forensic battle about admissibility of the evidence on which CommInsure relies, rather than conduct in breach of a duty of utmost good faith that could prevent CommInsure from purporting to cancel the TPD Policy on 3 December 2014 or refusing to pay Monthly Benefits from that time.
I do not consider that it would be consistent with case management principles to grant leave to amend to plead a claim that has been considered by this court, albeit in a somewhat different guise, and rejected, or a pleading that relies on s 14 of the ICA that Mr O'Shanassy's counsel had previously indicated was no longer be pressed.
Second, and as outlined above, in contrast to the Affirmation Claim, granting leave to plead the Good Faith Claim would have the effect of broadening the case in a significant way, by requiring exploration of factual matters relating to events which occurred between 2009 and 2014 and possibly beyond, based on Mr O'Shanassy's inclusion of the allegation relating to reliance on the material at [12P(b)] of the SFASOC in circumstances where it does not intend to call direct evidence and make those witnesses available for cross-examination.
The question of whether CommInsure's conduct breached its duties of good faith will not involve merely a consideration of the particular allegations of fact raised by Mr O'Shanassy, as his submissions suggest. Nor does it largely raise legal issues. Rather, the Good Faith Claim will require an assessment of CommInsure's conduct as a whole and an evaluative decision by reference to all of the factual circumstances of the case: Delor (FCAFC) at [252].
Accordingly, granting leave to plead the Good Faith Claim can be expected to require extensive further evidence and associated costs and delay. The consequence of granting leave to amend to introduce new issues of that kind and extent and the timing of the relevant events also mean that the availability of witnesses to give evidence to meet the new claim could be affected.
Third, in my view, there is a significant difference between the position of CommInsure in this case to that of the insurer in Delor which goes to the merits of Mr O'Shanassy's Good Faith Claim. A central issue in this case is whether Mr O'Shanassy falsely represented to CommInsure that he did not return to work as a solicitor and made fraudulent claims. However, in Delor, the assertion of fraudulent non-disclosure was never pressed by the insurer: Delor at [20] and [242]. As CommInsure submits, if Mr O'Shanassy's claims are shown to be based on continuing false representations and are fraudulent, it is difficult to see how the act of terminating the TPD Policy and refusing to pay future claims could be in breach of CommInsure's duties of utmost good faith or fair dealing.
Fourth, while I do not consider that it is appropriate or necessary to make a determination on this application about the various legal issues raised without the benefit of detailed submissions (on issues such as the proper construction of the ICA, having regard to matters such as the language used in the 2013 amendments, the proper construction of the Life Insurance Act (particularly s 200(3)(e)), the circumstances in which a party becomes a third party beneficiary or indirect beneficiary under the common law and the circumstances in which and reasons why the principles in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44 should be extended to apply to Mr O'Shanassy), I accept CommInsure's submission that the legal basis for Mr O'Shanassy's Good Faith Claim is weak. The following matters, in particular, persuaded me that it is a difficult cause of action to sustain, as is his pleading that seeks to invoke s 59A of the ICA.
As a non-party to the TPD Policy from October 2009, Mr O'Shanassy was not owed a statutory duty of utmost good faith under s 13 of the ICA, prior to the amendments in 2013: Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214 at [46] (Hannover), a contention with which Mr O'Shanassy did not take issue.
The 2013 ICA amendments upon which Mr O'Shanassy said in oral submissions that he seeks to rely (namely, the amendments to s 13 that provide for the extension of the duty of utmost good faith to a third party beneficiary and the introduction of s 59A which enables a court to disregard a cancellation of a life insurance contract if an insured has made a fraudulent claim) only apply to a contract of insurance that is "originally" entered into after 28 June 2013: ICA Act, Schedule 1, Part 1, cl 6; Schedule 5, Part 4, cl 17(1).
At the hearing, Mr O'Shanassy contended that assignment of the TPD Policy from Fukura to Equius in 2014 created a new contract, such that the 2013 amendments applied (T5.38-T6.1). While accepting that an assignment of the rights and obligations under an insurance contract may amount to a novation and entry into a new contract between the insurer and assignee (Allianz Australia Insurance Ltd v General Cologne Re Australia Ltd [2003] NSWSC 144 at [43]), the use of the word "originally" suggests a distinction between a new contract (where liabilities have been assigned) and the contact of insurance that was "originally" entered into, which in this case was the TPD Policy issued to Mr O'Shanassy in 2009.
In addition, the duty of utmost good faith under s 13 of the ICA (as amended in 2013) only applies in relation to a third party beneficiary "after the contract is entered into" (ICA, s 13(4)), which presumably means in relation to something that happens after that time: D Kelly and M Ball, Principles of Insurance Law (LexisNexis Australia, loose-leaf) at [5.0260]. Based on the wording of the provision, it is difficult to see how a duty owed to Mr O'Shanassy (assuming he was a third party beneficiary under the TPD Policy after 28 June 2013) could apply retrospectively to events occurring before 28 June 2013, such as the alleged affirmation, settlement of the Outstanding Claim and breach of duty that is alleged to have taken place in 2012, and to other alleged breaches of duty which are said to have arisen based on conduct occurring prior to June 2013, such as the deferment of carrying out investigations after November 2012 and the non-disclosures of information received from Ms Lake and Mr Lorincz in 2012.
It is also difficult to see how s 59A of the ICA could have any application in circumstances where CommInsure purported to cancel the TPD Policy in reliance on its common law rights (as referred to at [20] above), rather than relying on any statutory right, in particular, a claim under s 59A(1) of the ICA.
As to whether Mr O'Shanassy is an "indirect beneficiary" for the purposes of a common law duty of good faith, for the purposes of the application, I accept that proposition may be arguable based on the approach in Hannover at [50] - [72]. However, I do not assess that argument to be strong given Mr O'Shanassy's pleading (FASOC at [6A]) suggests that he may only have gained the status of an indirect beneficiary following his oral agreement in June 2014 that he was entitled to receive payment of 50% of the benefits under the TPD Policy.
Fifth, I am not persuaded that refusing leave to amend so as to plead the Good Faith Claim would cause a substantial injustice to Mr O'Shanassy in circumstances where his existing defence denies making any false representations and fraudulent claims, raises an estoppel and invokes the operation of s 56(2) of the ICA, where he will have leave to pursue his Affirmation claim, and where the formulation of the Good Faith Claim has significant difficulties, both legally and factually.
For similar reasons to those of Lindsay J, I am not satisfied that the Good Faith Claim amendments are necessary to determine the real questions raised by the issues in these proceedings, within the meaning of s 64(2) of the CPA. The issues in the proceedings are not about what CommInsure did or did not do during its investigations, but whether CommInsure is obliged to reinstate the Monthly Benefits payments under the TPD Policy from November 2014 on the basis that Mr O'Shanassy has been and continues to be Disabled (Totally or Partially) and has worked as a solicitor since 2014, albeit in a "reduced capacity", or whether CommInsure was entitled to terminate the TPD Policy in circumstances where it appears that Mr O'Shanassy undertook work in at least 2010 and 2011 contrary to disclosures made to CommInsure that he was not performing work as a solicitor and not able to perform the income producing duties of his occupation.
Finally, a "just resolution" of Mr O'Shanassy's application to amend to plead the Good Faith Claim requires consideration of the case management factors to which I have referred and not merely whether he has an arguable claim to put forward: Aon at [114]. As was observed by the plurality in Aon at [112]: A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
For completeness, I should record that it was common ground that the outcome of the court's decision whether to grant Mr O'Shanassy leave to plead the Good Faith Claims would follow through to amendments in the FAD and AR, including the pleading of s 14 of the ICA.
The parties' submissions did not address the Representation amendments in any detail. It was only in the schedule received after the hearing that CommInsure identified its opposition to them. Accordingly, I have dealt with them in a more summary way that the other claims.
I am satisfied that leave should be granted to Mr O'Shanassy to amend so as to plead the Representation amendments. While raising new factual matters that may need to be the subject of further evidence, those new facts are confined to a disclosure allegedly made to Ms Byrne about "supervisory tasks" during a telephone conversation that is already the subject of claims in these proceedings and, presumably addressed by the evidence from Ms Byrne, and an alleged representation made in September 2012 by Mr Maronese at a meeting at which he and Mr Mellor attended, which is also already referred to in the pleadings, and could be expected to be dealt with in the evidence of an existing witness. The pleading of the non-admissions do not appear to raise any new factual issues and it is difficult to see what real prejudice would be caused by those amendments. I also consider that the Representation amendments are relevant to the real issues in these proceedings, which raise the nature and extent of disclosures made by Mr O'Shanassy in relation to his work activities and whether they were false in the context of what was allegedly represented to him by CommInsure.
In conclusion, I will grant leave to Mr O'Shanassy to amend the SFASOC, the FAD and FAR other than in relation to the Good Faith Claim and the amendments raising ss 14 and 59A of the ICA.

Application for leave to adduce further evidence

Mr O'Shanassy's motion seeks leave to rely on medical reports from Professor Dan, Dr Balzer and Dr Rewais and an expert report from a forensic accountant. Mr O'Shanassy no longer presses for the relief in relation to Professor Dan's report (prayer 2.1) as CommInsure does not contend that leave is required and the report has already been served.
Mr O'Shanassy requires leave in circumstances where, as set out at [37] above, a guillotine order was made on 4 February 2020 that Mr O'Shanassy was not, without leave, permitted to rely on any further lay or expert evidence.
Granting leave to Mr O'Shanassy to rely on further evidence would involve an exercise of the Court's powers to make directions and orders relating to evidence and the conduct of proceedings. In considering whether to exercise power to grant leave, regard must be had to the overriding purpose of the CPA and the UCPR to facilitate the just, quick and cheap resolution of the real issues in the proceedings (CPA, ss 56(1), 56(2); UCPR, r 2.1), the objects specified in s 57 of the CPA, which include the just determination and the timely disposal of the proceedings, and the need to seek to act in accordance with the dictates of justice: CPA, ss 57(1), 58(1)-(2). Also relevant is the explanation (if any) for why Mr O'Shanassy is seeking leave to adduce the evidence at this stage.
According to the evidence, Dr Balzer was Mr O'Shanassy's general practitioner for his brain injuries between 2009 and 2014 or 2015 and provided a number of forms to CommInsure certifying Mr O'Shanassy's medical condition in that period, when the policy was purportedly cancelled.
Mr O'Shanassy gives evidence that he had been unable to locate Dr Balzer to ask him to provide a report in these proceedings (Dr Balzer having left his previous practice), he had a telehealth consultation with him on 9 October 2021 and had been informed that Dr Balzer could provide a report within 28 days.
Dr Rewais has been his general practitioner since approximately 2013 and 2014. Mr O'Shanassy deposes that he had been unable to contact Dr Rewais in the months prior to the hearing due to his and his daughter's health issues, and COVID-19 pandemic restrictions which had prevented Mr O'Shanassy from travelling to the Southern Highlands in NSW to attend a consultation. Mr O'Shanassy deposes that as soon as he is able to travel, he will consult with Dr Rewais to obtain a report.
Mr Miles gives evidence that Mr O'Shanassy's previous counsel had not advised that reports should be obtained from his general practitioners about the medical advice they had provided to Mr O'Shanassy. He says that he determined reports should be obtained in light of the length of time since Mr O'Shanassy first became disabled and because medical certificates ceased being provided to CommInsure following its denial of liability and purported cancellation of the TPD Policy.
Mr O'Shanassy submits that leave should be granted to rely on medical reports from the doctors as the reports are intended to establish a factual matter, namely that Mr O'Shanassy has been following the advice of a medical practitioner, an explanation has been given for why they had not yet been obtained and CommInsure has not identified any prejudice that may arise, noting Mr O'Shanassy consented to CommInsure adducing expert evidence in reply.
CommInsure neither opposes nor consents to the grant of leave to rely on medical reports from Dr Rewais and Dr Balzer, although its submissions referred to the history of Mr O'Shanassy delays in the preparation of his lay and expert evidence, which delays are apparent from the procedural background set out at [22] to [36] above. CommInsure also noted that, in the absence of the reports, the Court and CommInsure are unable to assess whether they would be of assistance and what would be required for it to respond.
I am satisfied that leave should be granted to Mr O'Shanassy to file and serve medical reports from Dr Rewais and Dr Balzer. As treating doctors, their evidence can be expected to be relevant to issues in dispute, namely whether Mr O'Shanassy was following advice of a Medical Practitioner and continues to be Partially Disabled: SFASOC at [7(q)] and [9B]. While not entirely satisfactory, the matters referred to at [128]-[130] provided some explanation for the delay and why the reports were not available at the hearing and also indicated that they could be served within a relatively short period of time. CommInsure's position can also be protected by making orders granting CommInsure leave to serve evidence in reply and providing for Mr O'Shanassy to attend a medical examination by a doctor appointed by CommInsure (if requested to do so by CommInsure) and to specify all other evidence (if any) served to date that he intends to rely on in relation to his medical evidence. This last order is, in my view, warranted having regard to CommInsure's previous attempts that sought to clarify the nature and extent of Mr O'Shanassy's expert evidence (see, for example, at [51]).
Mr O'Shanassy also seeks leave to adduce expert evidence from a forensic accountant. In written submissions and his affidavit sworn 11 October 2021, Mr O'Shanassy refers to VBD Accountants having been retained to provide a report. I pause to observe that Mr Miles' affidavit (which was served in support of the notice of motion) refers to the engagement of the Quinn Accounting Group to quantify Mr O'Shanassy's entitlement to benefits under the TPD Policy and that its report should be available by 15 June 2021. No explanation was provided by Mr O'Shanassy or Mr Miles about the absence of that report or why VBD Accountants were now engaged. Mr O'Shanassy gives evidence that VBD Accountants' report was not available at the hearing as medical issues affecting his business manager and her daughter and state lockdowns (which had prevented retrieval of some records located in New South Wales) had delayed provision of various financial records of the legal practices that he has operated since returning to work in November 2014.
Mr O'Shanassy submits that expert accounting evidence is needed as the assessment of his Monthly Benefits under the TPD Policy includes specific definitions involved in the calculation of the "Total Disability Benefit" and the "Partial Disability Benefit". Mr Miles and Mr O'Shanassy depose that to avoid the need for refresher reports they (together with previous Counsel) had the view that expert accounting evidence should be obtained closer to the hearing date and that their approach had changed after newly appointed Counsel had reviewed the matter.
CommInsure opposes leave being granted to Mr O'Shanassy to rely on expert accounting evidence. It submits that Mr Miles' evidence makes clear that it was a forensic choice on the part of Mr O'Shanassy and his legal team not to serve such evidence earlier notwithstanding that the facts pleaded in the FASOC in respect of Mr O'Shanassy pre-disability and gross income since 1 September 2014 were, at all times, denied by CommInsure.
There is force to CommInsure's submissions. In my view, it should have been apparent to Mr O'Shanassy's legal team, as well as Mr O'Shanassy (a solicitor apparently experienced in litigation), that his income calculations were an issue and that any accounting evidence should have been served earlier, having regard to the guillotine orders made in February 2020. The explanation provided also does not satisfactorily explain why Mr O'Shanassy did not notify CommInsure earlier of his intent to serve evidence of that nature closer to the final hearing date.
That said, having considered the submissions and the evidence on the application, I am persuaded that leave should be granted to Mr O'Shanassy to adduce expert accounting evidence. As Mr O'Shanassy submits, he would potentially face significant prejudice if he was not granted leave to adduce such evidence now as he would be at risk of having his claim dismissed even if the Court otherwise found he was entitled to payment of Monthly Benefits under the TPD Policy.
The position would likely to have been different if a hearing date had already been allocated and was impacted by the grant of such leave. However, no date has yet been fixed and the evidence suggests that Mr O'Shanassy should be able to serve his expert accounting evidence within a relatively short period of time given the COVID-19 restrictions have been lifted and the time he had available since then. I accept that this step will involve some further delay but CommInsure will be afforded an opportunity to obtain financial documents from Mr O'Shanassy and serve expert evidence in reply. In those circumstances, I am satisfied that it is the interests of justice and not inconsistent with case management principles to provide Mr O'Shanassy a final opportunity to adduce expert accounting evidence in support of his claim.
Mr O'Shanassy also submits that the issue of his "Pre-Disability Income" between 2009 and 2012 has been extensively investigated by CommInsure and is an issue that should not be re-agitated by it. To the extent that this submission is relied on to contend that Mr O'Shanassy should not be ordered to produce documents or information on affidavit relating to his Pre-Disability Income for that period, I reject it.
In the context where Mr O'Shanassy's affidavit refers to evidence that was not read on this application (see, for example, the Exhibit to the Affidavit of Michelle Byrne sworn 15 August 2019, referred to at [37(a)]) and relies on other documents which were not the subject of any submissions from either party, I am unable to make a finding that his Pre-Disability Income was extensively investigated by CommInsure between 2009 and 2012, as he contends. In any event, in my view, it is not appropriate for this Court on this application to determine whether or not CommInsure is able to take issue with Mr O'Shanassy's claimed entitlement to the payment of benefits the basis of his assertions regarding the scope of inquiries made about his Pre-Disability Income.
Further, in my view, if Mr O'Shanassy adduces expert accounting evidence that deals with his Pre-Disability Income then, as part of these proceedings, CommInsure should be entitled to test that evidence and seek the production of documents in addition to any documents it may have received as part of its prior investigations.
Mr O'Shanassy has been on notice for some time about CommInsure's request for documents and an affidavit as to the location of documents and his affidavit (see at [38]) indicates that he has already given some consideration as to what documents are (and are not) available to him. Thus, it is to be expected that Mr O'Shanassy should be in a position to produce the documents in his possession, custody or power within a short period of time and provide the information sought by way of an affidavit.
I am, therefore, persuaded that it is appropriate to make the orders sought by CommInsure if leave is granted for Mr O'Shanassy to produce documents and an affidavit specifying what were "the primary source" documents referred to in Mr O'Shanassy's affidavit (at [38(b)]) and what happened to them, and explain whether he retains any records of Sagacious Legal or the other entities referred to in Annexure A to CommInsure's submissions on the motion filed 23 April 2021 and, if not, where such records are located or what happened to them.
For these reasons, I will grant leave to Mr O'Shanassy to serve and rely on reports from Doctors' Rewais and Balzer and an expert report from a forensic accountant and will also make orders, as sought by CommInsure, including that it be granted leave to serve evidence in reply.
For completeness, I should also record that, in the absence of the reports themselves, the grant of leave will be subject to any objections of the usual nature and it will be a matter for the Trial Judge to determine whether they are admissible at trial.

Costs and orders

CommInsure submits that, if the Court allows the amendments, it should order Mr O'Shanassy to pay CommInsure's costs thrown away by reasons of the amendments. It also submits that the Court should order Mr O'Shanassy to pay its costs of the notice of motion irrespective of the outcome as he comes to Court seeking an indulgence and CommInsure's opposition to the amendments was not unreasonable. I agree.
The Court has a broad discretion as to costs under s 98 of the CPA and the UCPR to determine, by whom, to whom, to what extent and on what basis costs should be awarded. Ordinarily, costs will follow the event (UCPR, r 42.1). Under r 42.7 of the UCPR, which relates specifically to interlocutory applications, the general position is that costs of such applications are to be paid and dealt with in the same way as the general costs of the proceedings.
However, there is a line of authority to the effect that a party who seeks and obtains an indulgence from the Court, such as in an application for leave to amend, should pay the costs of the application and the costs thrown away by the amendments, even if the party applying for leave is successful: Wang v ABC Homes (NSW) Pty Ltd (No 2) [2018] NSWSC 1736 at [5]; Stanley v Layne Christensen Company [2006] WASCA 56 at [52]; The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (No 2) [2007] NSWSC 797 at [6]; Gain Capital UK Limited v Citigroup Inc (No 3) [2016] FCA 582 at [8].
In this case, Mr O'Shanassy sought and obtained a significant indulgence from the Court at a late stage of the proceedings that will enable him to amend his case and adduce further expert evidence despite guillotine orders having been made.
Leave to amend was granted because the amendments were considered to be arguable and should be dealt with at trial. However, CommInsure's arguments opposing leave to amend were not without substance and the decision was finely balanced. Appropriately, CommInsure did not oppose nor consent to leave being granted to adduce the further medical evidence but made submissions to the Court to assist in its consideration of whether leave should be granted. In my view, CommInsure could not be said to have acted unreasonably or caused costs to be unnecessarily incurred in failing to consent to the orders sought by Mr O'Shanassy.
Accordingly, I consider that the appropriate costs order to be made in relation to the application is for Mr O'Shanassy to pay CommInsure's costs thrown away by reason of the amendments, as well as the costs in relation to the application itself.
As to the other orders that I propose to make, I have based them on the draft orders provided by Mr O'Shanassy that were the subject of discussion at the hearing and largely agreed by CommInsure (on the assumption that leave would be granted) with consequential amendments made to the dates for the proposed steps in light of the timing and content of these reasons. In the event there are concerns about the timetable, the parties can raise the issue at the directions hearing before the Equity Registrar and also have liberty to apply.
For these reasons, I make the following orders: 1. Grant leave to the Plaintiff to file and serve by 4pm on 9 June 2022: 1. the Second Further Amended Statement of Claim in the form provided to the Court on 15 October 2021 but not including the amendments at [7B]-[7D] and [12M]-[12W]; 2. the Further Amended Reply in the form provided to the Court on 15 October 2021 but not including the amendments at: 1. [13(d)], [13(d1)] and [14(d)]; and 2. [13(e)], [14(c)] and [15(c)] to the extent that those paragraphs refer to [7B]-[7D] and [12M]-[12W]; and 1. the Amended Defence to the First Cross Claim in the form annexed to the affidavit of Robert John George Miles sworn 2 November 2020 but not including the amendments at: 1. [27(a)]; and 2. [25(a1)], [27(b)], [28(b1)] and [32(c)] to the extent that those paragraphs refer to [7B]-[7D] and [12M]-[12W]. 1. The Plaintiff to notify the First Defendant of what (if any) further lay evidence he intends to serve (and by when) by 9 June 2022 2. Grant leave to the Plaintiff to serve by 23 June 2022: 1. a medical report from Dr Balzer; and 2. a medical report from Dr Rewais. 1. Grant leave to the First Defendant to serve evidence in reply to the medical reports listed in order 3 by 4 August 2022. 2. Direct the Plaintiff to comply with a reasonable request by the First Defendant to attend a medical examination by a doctor appointed by the First Defendant. 3. The Plaintiff to notify the First Defendant by 23 June 2022 of all medical evidence served in the proceedings to date upon which he intends to rely in relation to his medical condition. 4. Grant leave to the Plaintiff to serve expert accounting evidence by 23 June 2022. 5. The First Defendant is granted leave to serve expert accounting evidence in reply by 23 August 2022. 6. The Plaintiff to produce to the First Defendant the documents listed in Annexure A to the First Defendant's submissions dated 13 October 2021 that are within his possession, custody or power by 30 June 2022. 7. The Plaintiff to serve an affidavit by 30 June 2022: 1. specifying the primary source documents referred to in paragraph 38(b) of his affidavit sworn 11 October 2021; 2. identifying what financial records (if any) of the entities listed in Annexure A to the First Defendant's submissions dated 13 October 2021 he retains in his possession; and 3. in respect of financial records of the entities listed in Annexure A to the First Defendant's submissions dated 13 October 2021 that are not in his possession, custody or power; explaining to the best of his knowledge and belief where those records are located or, if they are no longer available, what happened to them. 1. The Plaintiff to notify the First Defendant by 30 June 2022 of all evidence served in the proceedings to date upon which he intends to rely in relation to his Pre-Disability and Gross Income. 2. The Plaintiff to pay the First Defendant's costs of the Plaintiff's notice of motion filed on 23 April 2021 and the costs thrown away by reason of the amendments the subject of order 1 above. 3. List the proceedings before the Equity Registrar for further directions in relation to a Defence and any further lay evidence to be relied on by the First Defendant at 9:30am on 30 June 2022. 4. Liberty to apply on 3 days' notice.

Endnotes

CommInsure schedule of proposed amendments consented to or opposed emailed to chambers on 20 October 2021.
CommInsure schedule of proposed amendments consented to or opposed emailed to chambers on 20 October 2021. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 May 2022

Insurance Contracts Amendment Act 2013(Cth)

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