Philips v Tower Australia Limited

Philips v Tower Australia Limited - [2007] NSWSC 946 - NSWSC 2007 case summary — Zoe

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(1) Tower was estopped from asserting that the policy had lapsed; and (2) The FICS determination was enforceable between her and Tower as a matter of contract. 5 The parties agreed that the following issues arose: 1. Estoppel i. What representations did the defendant make to the plaintiff? ii. Were the representations sufficiently clear to found an estoppel? iii. Was the plaintiff reasonably induced by the representations to act in a particular way? iv. Was there reliance on the representations? v. If there is an estoppel, is the plaintiff entitled to relief in equity? vi. If so, what is the appropriate relief that would compromise a reversal of detriment? 2. The FICS Contract Claim i. Did the parties enter into a contract in relation to their participation in the FICs dispute resolution process? (was there intention to create legal relations, consideration etc?) ii. If so, what were the terms of the contract? iii. Has there been any breach of the contract by the defendant? iv. If there has been breach, has the plaintiff made out a case for any and what, relief? 6 I should note that as the case was ultimately put, Tower accepted that if I were to conclude that the representations said by Ms Philips to have been made were in fact made, they were sufficiently clear to found an estoppel. It also accepted that Ms Philips had suffered detriment as a result of reasonable reliance on those representations, again assuming that I were to find that they had been made. 7 I should note also that the contract case was not based on the proposition that any agreement in relation to determination by FICS was incorporated into the policy. It was based on an independent contract said to have been made between Ms Philips and FAI Life, or Tower, based on the making of a complaint to FICS and the obligation under FICS' constitution and rules binding FAI Life, or Tower, to participate in the process and to abide by the outcome. The latter obligation was not one binding upon Ms Philips (or indeed upon any complainant who referred a complaint to FICS). 8 The summons claimed equitable compensation, and damages and other relief. I came to the view that if Ms Philips were to succeed on either basis, that would not of itself lead immediately to either of those remedies. 9 If she were to succeed on the estoppel case, the appropriate relief would be to reverse the detriment. If she were to succeed on the contract case, the relief sought was based on giving effect to the FICS determination. That determination was: "The decision of the panel is that the company should allow the complainant to restart the policy from 1 February 1998 upon payment of the premium, without providing proof to the satisfaction of the company as to her good health."

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16 In cross-examination, Ms Philips adhered in substance to what I might call the combined version of this conversation (T30.31-31.5): "I rang up to ask if it was possible to suspend my payments. I was going on maternity leave. I didn't want to stuff up my policy of insurance because I'd already had problems with my elbows. They were severe problems but because it was pregnancy - I was told it was pregnancy related that I was covered by sick leave. I had three weeks sick leave, therefore, I didn't need to make a claim because I was covered at work for sick leave. I was going on unpaid maternity leave and was wondering if I could - some way of retaining my policy without cancelling it to save me some money while I was on unpaid maternity leave. He replied that there shouldn't be a problem with that. It would be a simple matter to start, but to stop the payments and just have to start them again when I needed the cover. But he did say that - he suggested that if I was to become injured while I was on unpaid maternity leave that I would be covered at that time. And he said I'll just check with my supervisor. It should not be a problem. I'll check with my supervisor to make sure it was okay. He checked with his supervisor to make sure it was all right. Apparently it was all right as far as what he knew. And they asked me to send - if I was going to go ahead with it, to send in a letter confirming our conversation, which I then did. Q. And there's nothing else you can recall? A. The fact that he had an Asian accent was all, I suppose, I recall of that." 17 Shortly after that conversation took place, and on 1 February 1998, Ms Philips wrote to FAI Life as follows (I omit formal parts): As discussed by telephone recently, I wish to suspend my policy No. 1078437 for approximately 12 months. I will not be in paid employment for this time as I will be on maternity leave. I wish to reinstate the policy on my return to paid employment. Please send forms to do this in January 1999.

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19 As the text of the letter indicates, there was a reinstatement application form sent with it. That form would not have been required for immediate reinstatement but, on FAI Life's business requirements at the time, it would have been required if a reinstatement application were to be made in January 1999. 20 Ms Philips said in her evidence-in-chief that the reference to discontinuance in the letter alarmed her, because that was not what she wanted, nor what she had discussed. Thus, she said, she rang FAI Life once more. She spoke to someone (not the person to whom she had spoken earlier). She thinks that she gave him the policy number, and referred to the letter. She says that they had a conversation to the following effect: · She told him that she was concerned because the letter suggested that the policy was to be cancelled, whereas she had wished to suspend it · She told him further that all she wanted was to be able to suspend payments · He said, she thought after a pause, that she should not worry; that it was just a generic letter; that "They do it all the time"; and that "Everything would be fine". · He said further that the policy would be "Auto reinstated" if she resumed making payments by direct debits; if she did this, the policy would restart. 21 I interpose to note that "Auto reinstate" was a piece of jargon used by FAI Life to denote the reinstatement of a policy after non-payment of premium without underwriting assessment within certain time limits and on certain conditions. 22 Ms Philips wrote a number of letters to FAI Life, setting out her account of the conversations. She also received correspondence from FAI Life. After receiving one such letter, dated 12 May 1999, she said that she had a further conversation with a third representative of the company (paragraph 35 of her affidavit): "[35] I then telephoned FAI and spoke to a gentleman and said words to the effect, "If I sent FAI a cheque to cover the period I was on maternity leave, would you not apply any further restrictions?" He said words to the effect, "FAI will not apply any further restrictions except those placed on your original policy."

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· Reinstate Policy up to 1 ½ months after - Written request from policy owner(s) - Cheque for premium · Reinstate Policy more than 1 ½ months after lapse - Written request from policy owner(s) - Cheque for premium - Reinstatement Application Form 25 At page 130 of the appendices to that document there is a further reference to income protection insurance. The material that I have just set out is repeated at page 131. 26 Ms Wana Obaidi was the Senior Risk Alterations Manager of FAI Life from 1997 to 1999. She and her team of about eight worked in the customer service department. The call centre operators also worked in that department. Ms Obaidi thought that there were no more than ten of these at any one time. 27 Ms Obaidi said that if all call centre operators were busy, she and others in the customer service department would take customers' calls. However, her training (and, I infer, that of her team) was different to the training of call centre operators. 28 Ms Obaidi said that when she took calls from customers, she had available to her the manual to which I have referred together with another document. She did not say that call centre operators (or for that matter her team) had those documents available to them. However, there was other evidence, to which I shall turn, that at least the manual was available to call centre operators. 29 It was Ms Obaidi's clear understanding that auto reinstatement could only occur up to one and a half months from lapse for non-payment of premium. Any application outside that time would require the applicant to complete a reinstatement application form, which included a medical questionnaire. 30 Mr George Lesiow was the manager of the call centre at the time. He gave evidence of the training program for call centre operators. He too referred, although to some extent inaccurately, to the different kinds of reinstatement after lapse. 31 Mr Lesiow agreed with Ms Obaidi that a customer who wanted to cease payments for twelve months would have to complete a reinstatement application form. 32 Mr Lesiow said that call centre operators were trained and tested to ensure that they had a thorough understanding of FAI Life's products and procedures, and that when they started to take calls from customers they were monitored to ensure that they were responding in an appropriate way to queries. 33 Mr Lesiow said further that call centre operators were provided with a wealth of material, including the manual identified by Ms Obaidi, to assist them to perform their duties. He did not say that such operators were required to, or did, refer to any of the materials provided to them when they answered questions. The parties' submissions 34 Mr Rayment QC, who appeared with Mr Gollan of counsel for Ms Philips, submitted that Ms Philips was an impressive and intelligent witness. Her inquiry, he said, was directed to a specific problem that she foresaw. It was thus unlikely, he submitted, that she would have misunderstood what she had been told. That she did not do so was confirmed, he submitted, by the terms of the letter she wrote immediately afterwards. 35 Further, Mr Rayment submitted that if Ms Philips had not been satisfied, she would not have acted as she had done. Thus, he submitted, her subsequent actions (including suspending payment of premiums) supported her evidence. 36 Mr Rayment submitted further that when Ms Philips had been challenged on a specific point of the first conversation - relating to the onset of symptoms in her left elbow - she maintained her ground even when it appeared to be inconsistent with histories contained in medical and paramedical reports that were put to her. She was justified, and the challenge evaporated, when other histories, consistent with her evidence, were considered. Mr Rayment relied upon this to buttress his submissions as to her credibility. 37 Mr Perram SC, who appeared with Mr Griscti of counsel for Tower, did not submit that Ms Philips was untruthful in her evidence. His submission was that she was mistaken, and had conflated two separate concepts in her account of the first conversation. He submitted that the following matters supported this proposition:

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(1) Her reference in evidence-in-chief to "Auto reinstatement", a word she said was likely to have been used in the first telephone conversation, was consistent with the proposition that the person to whom she spoke considered the relevant terms of the advisers' manual to which I have referred. (2) The representation as to maternity leave (stated in the letter of 26 June 1999) appears to be correct: See in particular clauses D15, D17.1, D17.7, D18.0, D18.3, and D29.0 of the policy. (I should mention that Mr Rayment, perhaps somewhat inconsistently for the representative of a claimant on an insurance policy, contested this submission as to the extent of the cover available) (3) The reference to "13 months" appears to have come from clause 8.0 of the policy. Mr Perram submitted that this, in conjunction with what he said was the correct representation said to have been made as to the availability of benefits during maternity leave, suggested that the operator may have been looking at the policy. (I interpose to note that if this is so then it would not explain the reference to "Auto reinstatement", which is not an expression contained in the policy.) Thus, Mr Perram submitted, it was unlikely that the operator would have made the mistake attributed to him. (4) By reference to the evidence of Ms Obaidi and Mr Lesiow, Mr Perram submitted that the inquiry made by Ms Philips was of a kind often made. Thus, he submitted, it was unlikely to have been one where a mistake was made in response. In this context, I note that Tower displays some degree of indecision. In a letter that it wrote to FICS in connection with the complaint it put the contrary proposition. That letter however was not put to Ms Obaidi or Mr Lesiow. (5) If, as the first conversation suggested, there had been a reference to a supervisor then it would suggest that two independent mistakes were made: one by the operator and one by the supervisor. This, Mr Perram submitted, was unlikely to have happened. (6) As to the second conversation, Mr Perram submitted that that operator too must have got things wrong. For that matter, he submitted, so too the operator with whom the third call occurred must have got things wrong. Again, he submitted, this was unlikely. (7) Thus, Mr Perram submitted, it was cumulatively unlikely that all those mistakes could have been made, whereas everything could be explained by Ms Philips' having made the one mistake.

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Analysis 38 I start with the proposition that I thought that Ms Philips was a most impressive witness. She seemed to me to be an intelligent and alert person, who was doing her best to give truthful, complete and accurate evidence. 39 It is clear that Ms Philips had a real concern to ensure that cover under the policy would continue to be available to her if she suspended and then resumed payments of premium. That concern was based on the worsening condition of her right arm and the onset of symptoms in her left arm. Those were matters that had arisen after inception of the policy, and that may well have led to a claim under the policy. Ms Philips was concerned to ensure that, either by action or by inaction, she did not prejudice her rights to make a claim. 40 My assessment of Ms Philips is that she is unlikely to have made the mistake to which Mr Perram referred. That follows from my view of her intelligence and from the real concern that she had. 41 I do not regard it as unlikely that Ms Philips would have a clear recall today of events that occurred over nine years ago. First, she has reiterated her account consistently (save as to the "maternity leave" issue) in subsequent correspondence: not only with FAI Life but also with FICS. Secondly, the matter is one that was of great importance to her; it is not something minor or incidental. Nor is it one of innumerable similar events that occurred to her, or for her, over the years. 42 I am conscious of the ability of self-interest to affect the accuracy of testimony without any deliberate intent or dishonesty. As McLelland CJ in Eq said in Watson v Foxman (1995) 49 NSWLR 315 at 319: "...human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or [sic] self-interest, as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."

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43 That is a most important consideration to bear in mind, and one for which I have sought to make every allowance. Nonetheless, having done that, I regard Ms Philips' evidence as credible and convincing. It engendered in me a comfortable feeling of actual persuasion that the events of which she gave evidence occurred substantially as she said. 44 That view is reinforced, although in a collateral way, by the failure of the challenge to her evidence as to the onset of symptoms in her left arm. I regard her responses to that challenge in cross-examination, and her subsequent vindication, as corroborating my assessment of her credibility. 45 If matters went no further, I would find in her favour. However, I acknowledge that the matters to which Mr Perram pointed in submissions raise a real impediment to my doing so. 46 It is undoubtedly correct to say that acceptance of Ms Philips' evidence as to the conversations must lead to the conclusion that representatives of FAI Life made mistakes on at least three, and perhaps four, occasions. But I do not think that the question of assessment of what actually happened, or assessment of the evidence, is to be undertaken by some mechanical (or for that matter arithmetical) assessment of probability (see Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; and see the majority, Dixon, Evatt and McTiernan JJ, in Helton v Allen (1940) 63 CLR 691, 712). 47 In this case I am confronted with a choice. Did Ms Philips make a mistake on three separate occasions? Or did FAI Life's representatives (at least three of them) make a mistake on three separate occasions? 48 I have no way of making any assessment of the probability of the latter alternative, apart from what may be inferred from the policies and procedures to which I have referred. However, I have been able to make an assessment of the former. In my assessment, the matters put against Mrs Philips do not destroy, or negate, the feeling of actual persuasion that her evidence gave me. 49 The question of objective probability may be looked at in two different ways. On the one hand, it is less rather than more probable that Ms Philips would have been mistaken on a matter of such great importance to her - let alone mistaken on three occasions. In this context, it is necessary to reiterate that no submission of deliberate untruthfulness was put. 50 On the other hand, it may be said to be less, rather than more, probable that three or four separate representatives of FAI Life would have made the errors attributed to them, having regard to the wealth of material available to them which, if consulted and understood, would have averted the errors. 51 In effect (and making the most favourable assumption to Tower: that the representatives, had they given evidence and been cross-examined, might have stuck to what might be thought to have been their story), the probabilities, in my view, cancel out. 52 In this context, I refer again to what I have said before as to one inconsistent aspect of Tower's case. It put to me that inquiries such as those made by Mrs Philips were common. As I have said, it relied upon that to suggest that they would not have been answered wrongly. However, it put to FICS (many years closer to the relevant events) that such inquiries were not common. That inconsistency as to a matter on which Mr Perram placed some weight, although unresolved through cross-examination, does not leave me with a feeling of real satisfaction in relation to this particular aspect of Tower's evidence. 53 I am thus left with my assessment of Ms Philips. On that basis, I find that the representations alleged by her in her evidence were made. Her estoppel case is thus, in principle, made good, and she is entitled, in principle, to succeed on that basis.

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The FICS Contract Case 58 On the view to which I have come, it is unnecessary to deal with this. Since it involves no disputed issue of fact, there is no advantage in my doing so. Conclusion 59 Ms Philips is entitled to succeed on the questions that have been argued on the basis of estoppel. 60 I direct the parties to bring in short minutes of order to give effect to these reasons within seven days. The orders should include liberty to apply on fourteen days notice; and, subject to any submissions that may be put to me, for Tower to pay Ms Philips' costs to date. Costs 61 The parties are unable to agree on an appropriate order for costs. These proceedings were commenced in the District Court of New South Wales. The ordinary statement of claim whereby they were commenced is not a particularly easy document to follow. The first cause of action alleged appears to be that in paragraph 20: breach of (unspecified) obligations under the Insurance Contracts Act 1984. The second cause of action alleged (paragraph 24) appears to be breach of the statutory and common law duties of utmost good faith. 62 It will be recalled that the case that the plaintiff put before me was based on two quite different causes of action. One was estoppel - on which she has succeeded. One was in contract - which it was unnecessary for me to consider. Neither of those finds any mention in the District Court statement of claim, although it is correct to say that the complaint to FICS and determination by FICS are mentioned (paragraphs 16 and 17). The representation on which the plaintiff succeeded is also mentioned (paragraph 7). 63 Perhaps some understanding of why the estoppel claim, on which Ms Philips succeeded, was not mentioned in the District Court proceedings is to be found in some further and better particulars given, by letter dated 23 August 2005. Tower's solicitors had pointed to one aspect of the District Court pleadings as perhaps raising an estoppel, and had suggested that the allegation should be withdrawn or properly pleaded and particularised. The response was to assert, among other things, that estoppel is a "Shield" and not a "Sword", so that it could not be pleaded as a breach of contract. The writer appears to have held the view that estoppel could only be raised in reply. If that view were held, it was inadequate. Obviously enough, estoppel can be relied upon in defence or in reply. But, as this case shows, it can also be relied upon to ground a cause of action. 64 Thus, Tower submitted it should have its costs in the District Court proceedings. It referred to the circumstance that the current formulation of the commercial list statement had not emerged until after a hearing before Hammerschlag J on 22 March 2007, in which his Honour rejected a draft commercial list statement then propounded by Ms Philips but gave leave, in effect, to try again. 65 For the plaintiff, Mr Gollan asserted that estoppel had indeed been appreciated and put forward to Tower as a reason why Ms Philips should succeed. He referred to a letter of 21 December 2004 from his instructing solicitors to Tower in which was said, among other things: "As you can appreciate, if the Financial Industries Complaints Service found that Tower was estopped from relying on a particular portion of its policy, the court will also most likely follow the same conclusion, subject to the evidence being presented".

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68 I fail to see how the "Calderbank principle" can be engaged in circumstances where the offer made involved no element of compromise. Mr Gollan pointed to the offer to pay arrears of premium. Given that success on an equitable claim would involve doing equity, and given that the doing of equity in this case would involve the plaintiff to give credit for arrears of premium, that was hardly an offer of compromise. It was no more than a recognition of the inevitable. 69 The parties interrupted the District Court proceedings whilst Ms Philips sought to persuade FICS in some way, which I am at a loss to understand, to enforce its determination. She made a submission to FICS dated 6 April 2006, in the course of which she undertook, so as to avoid detriment to Tower, "to pay Tower's costs incurred in the District Court proceedings on a party/party basis up to the stay, being 20 December 2005". 70 Ms Philips has succeeded on one of the causes of action introduced by the recent amendment (to the extent that it can be said to be flagged in the commercial list statement) and argued before me. There is no suggestion that any special costs order should be made in relation to the cause of action that I have found it unnecessary to consider. However, as I have said, it is significant that neither cause of action is to be discerned on any fair reading of the statement of claim in the District Court proceedings. 71 In my view, the inevitable consequence of the abandonment of the case sought to be made out in the District Court is that Tower should have its costs of the proceedings in the District Court. 72 It does not follow from that that Ms Philips should not have her costs in this Court. Although it may be that some of the work done was referable to the District Court statement of claim, which for a while stood as the articulation of her case in this Court, the reality is that the error of that course was recognised, and the current commercial list statement was filed. 73 In the circumstances, I make the following orders as to costs:

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