Plaintiff v Defendants

It detailed AXA's case as to fraud by noting that AXA alleged that the complainant had not been totally disabled as defined in the policy, had provided incorrect information on various claim forms and had not revealed that he had done some work as an insurance agent and in associated capacities during the period for which he claimed benefits.

21 The Panel acknowledged Mr Day's denial of any intention to deceive AXA and his claim that as he was AXA's agent, who sold only its products, any work he did or income he earned at any time relevant were well known to it.[1]

22 The Panel commenced a discussion of the legal considerations relevant to the case[2] by again referring to the question of fraud, reviewing a number of legal authorities in relation to it and reminding itself of the applicable standard of proof and of the principle discussed by Dixon J, in Briginshaw v Briginshaw[3] as it might apply to an allegation of fraud. It stated that "these principles have guided the Panel in this matter."[4]

23 Although under the sub-heading "Discussion" the Panel defined "the issue" as being whether ". . . from time to time (Mr Day) was in fact 'working' within the terms of the policy", it did so in the context of this being the essence of AXA's allegation of fraud. That this is so is obvious from the Panel's then reference to AXA's submission of 1 June 2004 and the information included with it. It acknowledged that it was upon this material, which included not only Mr Day's claim forms but also AXA's business records of its dealings with him as its insurance agent, that AXA asserted that Mr Day had been fraudulent.

24 The Panel analysed in detail AXA's allegations and the evidence it relied upon and Mr Day's response to that evidence. It referred to the parties' submissions and "voluminous documentation" including AXA's internal records which, AXA asserted, showed ". . . that (Mr Day) continued to sell new insurance business and provide financial and superannuation advice to new and existing clients of his business during the alleged total disability period". This period was said to be from 11 September 2000 to 14 February 2001. The Panel also noted that an allegation by AXA that Mr Day was receiving income from other insurers as well as AXA during periods of alleged total or partial disability, which allegations Mr Day denied, was unsubstantiated by any evidence.

25 In reaching conclusions as to the facts it had to determine, the Panel again addressed the question of fraud in the context of the requirements of the relevant policies. It acknowledged the importance of answers to questions on claim forms because they are the material upon which an insurer determines whether it is liable in any particular instance. It acknowledged that Mr Day conceded that he had given incorrect answers on claim forms. It accepted that he had made incorrect or inappropriate value judgments but concluded that ". . . that is a far cry from having a fraudulent intent, an essential feature of the allegation made against him by (AXA)".

26 Finally, the Panel reviewed the evidence before it concerning the work AXA alleged Mr Day performed and the income he received during periods for which he claimed total or partial disability. It referred to the informality of a country insurance agent's working environment and the expectations of clients derived from a personal relationship. It accepted Mr Day's explanations and concluded by specifically exonerating him of any intent to deceive or to obtain any unjust benefit from AXA. In other words, the Panel acquitted Mr Day of fraud.

This proceeding

27 Dissatisfied with the Panel's determination, AXA commenced this proceeding against FICS and Mr Day. Just prior to trial Mr Croyle, Mr Slater and Mr Wilson, as the Panel appointed pursuant to Rules 45 and 46 of the FICS rules, were added as defendants and an amended statement of claim was filed. That amended statement of claim asserted four errors by the Panel which determined Mr Day's complaint. Those errors were, that the Panel had characterised the issue to be determined as being whether Mr Day was "working" at relevant times within the terms of the relevant policy and thereby had asked itself the wrong question; that it had failed to ask itself the correct question, namely whether Mr Day had been fraudulent in giving false answers to certain questions on claim forms; that it had failed to consider whether he had been reckless in answering those questions and was thereby fraudulent and that it had misconstrued the word "working" in the relevant policies.[5]

28 AXA's amended statement of claim contended that the errors it alleged in the Panel's determination could result in a number of different legal conclusions, entitling it to the relief it claimed. It said that those errors constituted a breach by FICS and/or the Panel of the contract by which AXA was a member of FICS. FICS's rules constituted the terms of that contract and it sought declaratory relief and/or specific performance with respect to that contract. In the alternative it contended that FICS or the Panel had fallen into jurisdictional error and was therefore liable to judicial review in the nature of certiorari in respect of its determination. Finally, if the contract by which AXA was a member of FICS was an arbitration agreement within the meaning of the Commercial Arbitration Act 1984, (as was claimed by FICS and Mr Day in their defences to AXA's claim) it sought leave to appeal questions of law arising from the Panel's alleged errors pursuant to s 38(4)(b) of that Act.

29 In its defence FICS denied any error by the Panel in reaching its determination and contended that the rules relied upon by AXA applied to the Panel, not to FICS itself and that, in any event, there were other rules which constituted terms of AXA's contract with it as a member which changed the complexion of that contract to FICS's advantage in this case. It denied any jurisdictional error by it or the Panel and, finally, claimed that the agreement between it and AXA constituted an arbitration agreement and that the Panel's determination constituted an award. It pleaded that that award was final and binding on the parties to the arbitration, including AXA. In any event it contended that by virtue of s 38 of the Commercial Arbitration Act the Court had no jurisdiction to set aside or remit an award on the ground of error of law unless leave had been granted pursuant to s 38(4). As no such leave had been granted the only jurisdiction which could be exercised by the Court was to grant or withhold leave under s 38(4). Finally, it pleaded that there was no manifest error of law on the face of the determination which could lead to leave to appeal being granted.

30 In his defence to AXA's amended statement of claim Mr Day largely joined issue with AXA, pleaded the arbitration point relied upon by FICS and made appropriate admissions. The Panel did not file a written defence but stated that it would abide the Court's decision.

AXA's case

31 The central plank of AXA's case is that the Panel made errors in its determination. Indeed, unless it establishes one or more of those errors it cannot succeed on any of the bases upon which it might be entitled to relief in this proceeding. The establishment of such an error is a necessary, if not a sufficient pre-requisite to AXA's success on each of the cases which it seeks to set up. Unless error is established there can be no breach of contract, no jurisdictional error and no ground upon which leave to challenge the Panel's determination could be granted by the Court if the process is, as the defendant's claim, an arbitration. Mr Gleeson of Counsel for AXA did not argue that there was any distinction between the error required to be demonstrated to establish a right to judicial review and error required to found a claim for leave to challenge an arbitrator's award, although in the latter case, of course, the error must be an error of law "manifest" on the face of the award. Although there was no particular emphasis placed upon the question in the course of his argument it appeared that Mr Gleeson accepted that the error which would be required to establish a breach of contract was of the same order.

32 It is convenient to examine each of the errors in the determination alleged by AXA's case as they were pleaded in its amended statement of claim. In doing so the principles expressed in cases such as Minister for Immigration v Wu Shan Liang[6] and Collector of Customs v Pozzolanic[7] must be borne in mind. The reasons of a body such as the Panel in this case are meant to inform and not to be scrutinised over- zealously to seek the identification of some inadequacy from infelicity of language or looseness of expression. In this instance these principles are apposite whether the Panel's reasons are being examined to determine the existence or non-existence of error constituting a breach of the contract between AXA and FICS, an error going to the Panel's jurisdiction for the purpose of judicial review or the identification of error sufficient to justify a grant of leave to appeal against an arbitrator's award.

Paragraph 14 (a)

33 The error pleaded in para 14(a) was in the following terms:

it misstated the issue it had to determine. AXA submitted that the Panel asked itself the wrong question because what was at issue was not whether Mr Day had been working within the terms of the relevant policy but rather whether he had made a fraudulent claim within the meaning of s 56 of the Insurance Contracts Act 1984 (Cth) so as to entitle AXA to refuse payment. It referred to To v Australian Associated Motor Insurers Limited[8] and in particular to a passage from the judgment of Buchanan JA[9].

35 Whilst taken alone, out of context, the passage relied upon by AXA in the Panel's determination might appear to ask the wrong question or at least to omit some of the necessary characteristics of the right question. But a reading of the determination as a whole demonstrates that the passage referred to should not be interpreted as meaning that this was the only issue for the Panel's determination. An analysis of the structure of the determination demonstrates that this is so. It was necessary for the Panel to consider the question of whether Mr Day had been working or not working at particular times in order to examine the factual basis for AXA's allegation that his claim was fraudulent in that he had deliberately or recklessly given false answers to questions on claim forms.

36 Before the allegedly erroneous passage the Panel had dealt with issues of injury. After it there was a discussion of the question of disablement. In that part of the determination in which the impugned passage appears the Panel was merely distinguishing issues before it upon which there was no dispute from those upon which there was. No error as alleged by AXA is demonstrated in that part of the Panel's determination.

Paragraph 14(b)

37 Paragraph 14(b) of the amended statement of claim alleges an error by the Panel in failing to ask itself whether Mr Day had been fraudulent on the basis that he gave false answers, whether deliberately or recklessly, to questions on claim forms concerning whether he had been able to do any work in his business or occupation and had been able to attend in any way to his business or occupation at times relevant to his claims.

38 Commencing at page 6 of the determination the Panel set out AXA's contentions on the issue of fraud from correspondence between it and Mr Day and from its submissions to the Panel. It expressed no doubt as to AXA's case. It noted that AXA urged the conclusion that Mr Day had been deliberate and deceitful in answering questions on the various claim forms which he had submitted to it.

39 In particular, the Panel referred to AXA's submission to it of 1 June 2004 in which it set out its allegations of fraud against Mr Day and responded to his case. That submission, which was before this Court, was of some 15 pages. After reading it the Panel could have had no doubt as to AXA's allegations - that Mr Day had made fraudulent claims in that he had knowingly given false information to AXA in support of those claims or had been reckless in answering questions on AXA's claim forms - such recklessness amounting to intent.

40 In determining the question of fraud the Panel made a number of findings; that AXA had been aware at all times of all Mr Day's earnings from his business both whilst he claimed whole or partial disablement and otherwise and that it did not dispute the medical evidence which supported Mr Day's claims. With respect to the neck injury the Panel found that Mr Day conceded that he had undertaken various tasks in relation to his business which were not disclosed to AXA but that such activity was "sporadic and minimal". It found that Mr Day was entitled to be paid benefits by AXA as a result of his neck injury for periods which it specified.

41 With respect to Mr Day's back injury the Panel noted AXA's reliance on its own records as to Mr Day's earnings and his activities as its agent. The Panel found that insofar as Mr Day engaged in any activity during the period of his claimed disability such activity was not "work" within the terms of the policy. The Panel's finding amounts to a finding that such activity was de minimis. Again, it found Mr Day to have been totally disabled for a period which it specified.

42 In respect of both Mr Day's neck and back claims the Panel accepted his contention that income which he received during periods of disability was related to activity undertaken outside those periods. It noted that AXA did no more than assert the contrary whereas Mr Day had responded to AXA's allegations "identifying the source of the receipts". It found his explanation as to such activity as he did undertake "plausible".

43 The Panel set out four matters which led it to reject the allegation of fraud against Mr Day, namely, the fact that he was genuinely injured, his full and frank admission with considerable detail of his dealings with AXA, AXA's knowledge of his work activities and that none of AXA's allegations about Mr Day's income established an intent to deceive. When these matters are added to the findings to which reference has already been made no error can be identified in the question which the Panel asked itself as to whether Mr Day had been fraudulent.

Paragraph 14(c)

44 This paragraph alleges that the Panel was in error in that it considered only whether Mr Day set out to deceive AXA deliberately or intentionally and did not consider whether he had been reckless.

45 In its determination the Panel set out its views of the law as to fraud.[10] In that passage it quoted from the judgment of Bergin J in Timothy Muggleston v National Mutual Life Association of Australasia Ltd[11] which itself referred to cases from Derry v Peek[12] in 1889 to Tyndall Life Insurance Company Ltd v Chisholm[13] in 1999. The passage from Muggleston was unremarkable and, with respect to Bergin J, correct. The Panel embarked upon its task having acknowledged a correct definition of fraud. It said that it followed the principles set out in Muggleston in deciding the complaint. There is no warrant for concluding that on the occasions on which it referred to fraud in the course of its determination it did not include fraud constituted by recklessness.

46 In its determination the Panel dealt specifically with Mr Day's state of mind when he gave incorrect answers to questions which he answered on AXA's claim forms. It characterised those answers as having been the result of an incorrect value judgment on Mr Day's part. Such a characterisation is inconsistent with reckless indifference to the truth but the fact that it was made lends weight to a conclusion that the Panel considered the question.

47 AXA has not established error in the Panel's consideration in the manner it alleged in paragraph 14 (c) of the amended statement of claim.

Paragraph 14(d)

48 The complaint pleaded in paragraph 14(d) of the amended statement of claim asserts that the Panel misdirected itself or misconstrued the meaning of the word "working" in the policy by concluding that to be "working" a person must be performing a function that actually generated income and must be performing that function in more than an incidental sense.

49 In its argument AXA submitted that working meant performing any activity or function of a person's occupation whether income producing or not. It referred to cl 2 of the relevant policy which contains the definition of total disability in these terms:

At a glance

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Judgment (13 paragraphs)

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Legislation Cited (2)

Cases Cited (4)