Resolution Life Australasia Ltd v N.M. Superannuation Pty Ltd

JUDGMENT

1. MEAGHER JA: The appellant, Resolution Life Australasia Ltd (RLA), is a life insurance company and was formerly known as AMP Life Ltd (AMP Life). In 2018, the AMP Group agreed to sell AMP Life to the Resolution Life Group. That sale was completed, as to an 80% interest in AMP Life, on 30 June 2020 and, as to the remaining 20% interest, on about 28 June 2022. The respondent, N.M. Superannuation Pty Ltd (NM Super), was and remains a member of the AMP Group and is trustee of the AMP Super Fund, a "regulated superannuation fund" within the meaning of that term in s 19 of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act).
2. The AMP Super Fund is a pooled superannuation fund into which members deposit their money that in turn is applied to purchase interests in underlying investments. The trustee also arranges life risk insurance of the fund members. Approximately 274,000 members of the fund (referred to as the Master Trust portfolio) have the benefit of life risk insurance cover 'purchased' under one or other of nine life insurance contracts issued by RLA (then known as AMP Life) to NM Super (or its predecessor AMP Superannuation Ltd). Four of those life insurance contracts, made between March 1991 and May 2004, were the subject of the underlying proceedings. Those four contracts currently generate an estimated annual premium to RLA of about $265 million.

The underlying proceedings

1. In August 2022, NM Super (referred to in these reasons only in its capacity as trustee of the AMP Super Fund) invited proposals from other life insurers to be the 'Primary Insurer' of the Master Trust portfolio. That written invitation described itself as a "Request for Proposal" (the RFP). The stated object of the RFP was to rationalise the superannuation fund's "legacy" and current insurance arrangements and, in doing so, to appoint a 'Primary' insurance provider who would deliver both a "standard default insurance offer" as well as continue to support non-standard insurance arrangements to members of select employer plans. The meaning of some of this terminology will become clearer when dealt with later in these reasons.
2. After briefly engaging with the RFP, RLA commenced proceedings seeking to restrain NM Super from continuing with and implementing the RFP, including by offering the Master Trust portfolio the opportunity to transfer to a new insurer and new life insurance arrangements. The ultimate question in this appeal is whether the primary judge (Stevenson J) erred in dismissing RLA's amended summons (Resolution Life Australasia Ltd v N. M. Superannuation Pty Ltd [2023] NSWSC 98).
3. By that amended summons, RLA sought to restrain NM Super on the basis that the trustee threatened to breach an implied term of the four contracts providing cover in respect of members of the Master Trust portfolio. That implied term, as found by the primary judge, was that (J[30]): [NM Super] must do what is necessary on its part to enable [RLA] to have the benefit of the contract and must not hinder or prevent the fulfilment of the purposes of the express promises made in the contract.
4. RLA did not contend that there was any breach of the first limb of this term, relying only on a breach of the negative covenant in the second limb.
5. The four contracts are Contracts 20555, 20555A, 20666 and 70002C (each a Contract, and collectively the Contracts). The arguments in the underlying proceedings and in this Court focused on Contract 20555, the most valuable of the four Contracts in terms of annual premium generated. It was accepted that if RLA's claim did not succeed in respect of this Contract, it would not succeed with respect to the other three (J[20]).
6. RLA's case was and remains that under each of the Contracts it has an unconditional contractual right to be paid monthly premiums by NM Super in respect of members with current cover (or, to adopt the language of cl 3.7 of Contract 20555, cover which has started but not ceased) (Members). In those circumstances, the implied term is said to preclude NM Super from rendering the benefit of that promise of no value by 'unilaterally' deciding to 'lapse' a Member's cover by not continuing payment of those premiums.
7. As to the sense in which 'unilaterally' is used in RLA's case, a distinction is drawn between a decision not to continue to pay which is initiated and made by the Member and one which is initiated or made by NM Super. It is assumed in each scenario that the decision is to cause the cover to lapse by not paying the premium. On RLA's case, the non-payment of any premium in respect of a current Member is a breach of NM Super's express contractual obligation to pay monthly premiums, irrespective of whether that decision was initiated and made by the Member. In relation to the implied term, however, it is contended that there would be no breach where that decision is initiated and made by the Member. Conversely, if NM Super initiated or made the decision, it would be in breach of the implied term. NM Super might do so either by itself making the decision that cover be allowed to lapse or by giving advice to that effect which the Member acts on, in either case NM Super having formed the view that doing so was in the best interests of the Member.
8. The primary judge rejected the underlying premise of RLA's argument, finding that NM Super had not promised to pay monthly premiums due for each Member. The corollary of that finding is that RLA has no right to receive those premiums which could be diminished or defeated by NM Super's conduct in pursuing and implementing the RFP.
9. RLA appeals from the dismissal of its claim for declaratory and injunctive relief, contending that the Contracts require NM Super to pay monthly premiums, irrespective of whether a Member wishes to allow the cover to lapse or NM Super believes it is in the best interests of that Member that it lapse. Before identifying and considering the grounds of appeal, more must be said about the nature of the Contracts, the circumstances in which the proceedings were commenced, and the terms of the relief sought.

Contract 20555

1. Contract 20555 was entered into between AMP Life and the predecessor trustee of NM Super in September 1996. At that time, the legislative context in which that Contract was made included the then current form of s 52 of the SIS Act. That section provided that the governing rules of a superannuation entity, such as the AMP Super Fund, include covenants by the trustee in favour of the members of the fund to the following effect: (1) to act with the "same degree of care, skill and diligence" as an ordinary prudent person would exercise when dealing with property of another; (2) to ensure that the trustee's duties and powers were performed and exercised in the "best interests" of the beneficiaries; and (3) not to enter into any contract that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee's functions and powers. As to the relevance of legislative context when construing a contract, see Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70 at [11]; Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241; [2005] HCA 10 at [64]. As is explained below, the current provisions for the payment of monthly premiums were first included in the Contracts by amendments made on 30 June 2020.
2. Of the nine contracts, only Contract 20555 provides life risk insurance on an individual (or 'retail') basis. From the perspective of the life insurer, that insurance may be 'sold' directly to an individual life insured or indirectly through his or her financial adviser or it may be arranged through a superannuation fund. Where the business is arranged by the superannuation fund, the counterparty to the life insurance contract is the trustee of the fund, and insurance cover is provided to members of the fund who wish to have that cover. As Ms Beer, the CEO of RLA, stated in her affidavit dated 21 October 2022, whether this 'retail' insurance is sold directly to an individual or to a trustee of a superannuation fund for its members, the cover is "typically provided following consideration of the consumer's individual circumstances and then risk assessment and individual underwriting by the insurer". The premiums charged for such individual cover generally make provision for the recovery of some acquisition costs - such as commissions, retail marketing and other distribution costs - over the duration of the cover. Approximately 51,000 members of the AMP Super Fund had individual risk insurance under Contract 20555 as at 30 June 2022.
3. The remaining Master Trust portfolio members have what is described as "group risk" insurance, and are so insured under Contract 20555 or one of the other eight contracts. That "group risk" insurance provides life risk cover on a 'broad bulk basis' through a sponsor such as the trustee of a superannuation fund or an employer. As Ms Beer states in her affidavit, it is "typically used by superannuation funds to provide standardised, default cover to members of the fund, primarily those who may be members of the fund under particular corporate or employee plans". In this context, the reference to 'default level' cover is to benefits provided on a "non-underwritten basis" and without the life insurer incurring material upfront acquisition costs as would be incurred with respect to cover written on an individual basis. The evidence did not address the contractual terms of the relationship between NM Super and the corporate or employer sponsors of members of the superannuation fund concerning the giving of instructions for the continuation of their life insurance cover within the fund.
4. Following the Resolution Life Group's acquisition of RLA (then AMP Life), the provisions of Contract 20555 concerning the payment of premiums were amended. Prior to that acquisition, this contract adopted a different mechanism for the payment of monthly premiums which involved RLA 'paying' premiums by releasing units from or debiting a Member's "Investments Options". If the value of a Member's Investment Options was less than the premium due, it was not paid and the Member's Insurance Benefits lapsed. Because the Resolution Life Group's acquisition did not include certain investment operations of AMP Life, it was necessary to restructure the Contracts so that those elements were separated and retained within the AMP Group. It was also necessary to make changes to reflect the fact that the trustee of the AMP Super Fund and RLA would no longer be related entities.
5. The "agreed principles" governing the making of these amendments were set out in the Separation Deed dated 15 May 2020 between AMP Life, NM Super, AMP Superannuation Ltd (the former trustee of the fund) and AMP Ltd. Clauses 4.3 and 4.4 of that deed provided that certain amending provisions were to be included in the insurance policies providing life risk cover, including the Contracts. Paragraph 5 of Schedule 5 to that deed describes the required effect of some of those amending provisions, and was relied on by the parties as part of the context in which the amendments eventually made to Contract 20555 are to be construed: Risk cover (Amendments) 5… a. premiums for risk cover will be payable by NM Super (with the remedy for non-payment being limited to the lapsing of cover under paragraph b below); b. risk cover relating to a member will lapse if the premium for the cover remains unpaid for the applicable period (as reflected in the processes applying at the date of this Deed) after becoming due and payable;
6. The first version of Contract 20555 containing the amended provisions dealing with the payment of premiums is set out in the Schedule to an Amendment Deed between NM Super and AMP Life Ltd dated 30 June 2020. The version of that Contract which is the subject of the underlying proceedings is set out in the Schedule to a further Amendment Deed between the same parties dated 1 December 2021.

Correspondence before underlying proceedings

1. In early September 2022, following the issuing of the RFP, solicitors acting for RLA sought undertakings from NM Super: (1) that it would "cease and desist" that process in relation to the four Contracts; (2) that it would not terminate or take any unilateral step which might result in the termination of any of those Contracts; and (3) that it would not take any step that hindered or prevented the fulfilment of the express promises made by NM Super in those Contracts.
2. By their response dated 14 September 2022, the solicitors acting for NM Super declined to give the undertakings sought, and confirmed that NM Super did not intend to cease the RFP process. That letter referred to briefings of insurers invited to respond to the RFP and a subsequent addendum issued to participants who attended briefings conducted between 29 and 31 August 2022. That addendum emphasised, as stated in the RFP, that "for existing members who hold insurance under particular policies, [NM Super] will offer existing members and employers a transfer to the new insurance arrangements". The letter also confirmed that NM Super had not made any decision to terminate any of the Contracts, and stated that it did not intend to do so without the agreement of RLA.
3. In justifying the undertaking of the RFP process, NM Super's solicitors emphasised its duties as trustee under s 52 of the SIS Act, which remained in similar terms to those in force in 1996. The purpose of the RFP was said to be to secure a "market review of the Master Trust insurance offer" and the undertaking of that review was said to be required by NM Super's duties as trustee.

Declaratory and injunctive relief sought

1. On 19 September 2022, RLA commenced the underlying proceedings. The final form of the declaratory relief sought was that NM Super "may not" do what was also sought to be restrained, namely: (a) from terminating any of the Contracts unilaterally in order that an insurer who is chosen as the successful candidate in the RFP may replace RLA as the provider of insurance benefits to some or all Members currently insured under that contract; (b) while each Contract subsists and without RLA's consent, from deliberately procuring that an insurer who is chosen as the successful candidate in the RFP replaces RLA as the provider of insurance benefits to some or all Members currently insured under that contract; (c) while each Contract subsists and without RLA's consent, from deliberately procuring that premiums cease being paid to RLA in respect of some or all Members currently insured under that contract and that future premiums are paid instead to an insurer who is chosen as the successful candidate in the RFP… 3. … from proceeding or continuing with the RFP… insofar as it concerns the Contracts."

Grounds of appeal and notice of contention

1. The primary judge's holding that each of the Contracts contained an implied term as formulated in J[30] is not challenged, although there remain questions as to its scope.
2. The primary judge's failing to find that under each of the Contracts NM Super had promised to pay monthly premiums during the currency of each Member's cover is the subject of grounds of appeal 1, 2 and 3, which principally address questions of construction.
3. Ground 4 is that the primary judge should have found that cl 3.7(g) of Contract 20555 does not confer on NM Super a unilateral right to cancel each Member's cover. His Honour did not decide that question, having concluded that the insurance cover lapses if a Member decides to stop paying premiums, and gives instructions to that effect which NM Super acts upon.
4. Ground 5 contends that the primary judge erred in treating cl 26.1 of the Share Sale and Purchase Agreement (the Sale Agreement) as part of the context in which Contract 20555 was to be construed. Neither RLA nor NM Super was a party to that agreement, which was originally made between the AMP and Resolution Life corporate groups on 25 October 2018.
5. Ground 6 is directed to the interpretation of the Contracts other than Contract 20555. The appellant accepts that this ground only arises if the primary judge's reasoning in relation to the questions which grounds 1, 2 and 3 address involved error.
6. Ground 7 presses RLA's entitlement to declaratory and injunctive relief. Again, it does not arise if the primary judge's holding on the principal question of construction is upheld.
7. By grounds 1 and 2 of its Notice of Contention, NM Super supports the primary judge's conclusion that there was no obligation to pay monthly premiums, in particular by reference to NM Super's general duties as trustee as well as those imposed by s 52(2) of the SIS Act. By ground of contention 3, it is argued that the primary judge should in any event have rejected the claims for declaratory and interlocutory relief, including because the declarations are hypothetical and lack utility, and because the injunctions lack utility and would compel the respondent to act in breach of its obligations to members of the fund.

NM Super's 'obligation' to pay monthly premiums (grounds 1, 2 and 3)

1. These grounds address the construction of Contract 20555 and the question whether RLA has a contractual 'right' to receive payment from NM Super of monthly premiums in respect of each Member's cover until that cover ceases in accordance with cl 3.7, other than by lapsing. The relevant clauses are cll 3.7, 3.8, 3.9 and 3.10.

The language of the 'policy'

1. As at 1 December 2021, Contract 20555 comprised two 'policies', the relevant policy being the Protection Policy (cll 1.1, 3ff). Under that policy, RLA agrees to pay benefits to NM Super in respect of Members, being members of the AMP Super Fund who "wish" to be insured under that policy and whose application to be so insured has been accepted by RLA (cll 3.1, 11). The benefits to which each Member is entitled are recorded in his or her Member Plan (cll 3.2, 11). NM Super agrees that it holds or owns the Protection Policy as an asset of the AMP Super Fund (cl 1.2).
2. The cover in respect of each Member at any point in time is constituted by the Insurance Benefits which are "current" in relation to that Member. They include benefits payable on death, terminal illness, and total and permanent disablement. The period of a Member's cover starts on the Plan Starting Date for each relevant Insurance Benefit. That is a time after the first premium in respect of that cover has been received. The date on which subsequent monthly premiums are due is the Premium Due Date, defined in cl 3.6 as "a regular recurring day in each consecutive month as agreed between Resolution Life and the Trustee".
3. In relation to each Member with current cover, cl 3.7 addresses when that cover ceases with respect to each Insurance Benefit. It provides: 3.7 When cover starts and ceases In respect of each Member, each Insurance Benefit starts at the Plan Starting Date and ceases on the earlier of: (a) (for Insurance Benefits under Essential Protection and Employee Essential Protection) the Member's 65th birthday for all Insurance Benefits; (b) (for Insurance Benefits under Super Protection, Flexible Protection and Signature Super - Lifetime Protection (Personal)) the Member's 99th birthday for the Extra Death Benefit (and the Terminal Illness Benefit) and the Total and Permanent Disablement Benefit, and the Member's 65th birthday for the Temporary Salary Continuance Benefit; (c) (for Insurance Benefits under Employee Flexible Protection and subject to clause 7.10 which provides for continuation of cover after a Member is detached from an Employer Plan) the Member's 70th birthday for Death cover (and the Terminal Illness Benefit) and the Member's 65th birthday for the Total and Permanent Disablement cover and the Temporary Salary Continuance cover; (d) the Member's 65th birthday for the Waiver Benefit; (e) the Member's death; (f) the payment of the Insurance Benefit; (g) the cancellation of the Insurance Benefit; (h) the lapse of the Insurance Benefit (see clause 3.8); (i) the Insurance Benefit reducing to zero; (j) the end of that Member's Plan; (k) the date the Member's account is inactive as defined by section 68AAA(1) of the SIS Act unless: …; or (l) as agreed between Resolution Life and the Trustee.
4. Clauses 3.8, 3.9 and 3.10 provide: 3.8 Lapse If a premium due in respect of a Member is not paid within one month of its due date the Insurance Benefits in respect of that Member will lapse. 3.9 Insurance Premium The premiums and applicable government stamp duty and other charges in respect of this Policy, are calculated and payable as advised to the Trustee by Resolution Life from time to time and at the frequency advised to the Trustee by Resolution Life. The premiums [sic] in respect of a Member's Cover is to be paid monthly in advance. In respect of each Member, the premium is the sum of the premiums for each current Insurance Benefit (see clause 3.5), determined according to the relevant tables of premium rates or the premiums otherwise notified by Resolution Life to the Trustee (or as otherwise agreed by Resolution Life and the Trustee or as required by law). The premium for each current Insurance Benefit forms part of the Insurance Premium. The component of the Insurance Premium referable to the Signature Super -Lifetime Protection (Personal) Total and Permanent Disablement Benefit and the Signature Super - Flexible Protection Total and Permanent Disablement Benefit ("TPD premium") that relates to cover for Total and Permanent Disablement where a Member is unlikely ever to work in or attend to: (a) their Professional Occupation with any employer or as a self-employed person; or (b) Senior Managerial Duties, is 0.5% of the TPD premium or such other amount as Resolution Life determines from time to time. Resolution Life may, at its discretion, discount the premiums in respect of any Member or group of Members as it deems fit. Resolution Life may, at any time and without notice, change or withdraw any discounts on premiums for current Insurance Benefits. The change or withdrawal will take effect from such date as Resolution Life determines. 3.10 Variation of Premiums Resolution Life may, after giving the Trustee (or otherwise as agreed by Resolution Life and the trustee or required by law) not less than 30 days' prior written notice, or such longer period of notice as the Trustee reasonably requires to ensure members are notified in accordance with any regulatory requirements, vary the table of premium rates. The table of premium rates may only be varied by Resolution life once in any period from 1 July until 30 June next, except with the Trustee's consent.
5. The effect of cl 3.7 is that the cover continues from the Plan Starting Date until the earliest to occur of one of the events in pars (a) to (l) of that clause. With the exception of pars (g) and (i), each of those events has the consequence that the cover in relation to all Insurance Benefits in respect of that Member ceases upon the happening of the event. On any view, the duration of the cover is not from year to year or from month to month depending upon its being renewed at the commencement of each subsequent period. Rather, after payment of the first premium, the cover for a Member continues until one of those events occur, and it is a condition precedent to its continuing in force on that basis that premiums due monthly are paid one month in advance.
6. For each Member the monthly premium due on the Premium Due Date is the "sum of the premiums for each current Insurance Benefit" of that Member (cl 3.9). That premium is "due" to be "paid monthly in advance" (cl 3.9). If it is not paid within one month of that date, i.e. before the start of the one month period for which it is to be paid in advance, all of the Insurance Benefits in respect of that Member "lapse" (cl 3.8). This provision operates in the event that the condition precedent has not been satisfied, and does so by bringing the relevant Member's cover to an end without any requirement for RLA to make an election to that effect.
7. The premiums for each current Insurance Benefit are as determined "from time to time" in accordance with "tables of premium rates or the premiums" notified by RLA to NM Super (cl 3.9). Under cl 3.10, RLA is entitled without NM Super's consent to vary the table of premium rates once in a financial year. There is no express restraint on the exercise of that entitlement. However, the clause provides that at least thirty days' prior written notice must be given of any such changes to allow the trustee to "ensure members are notified".
8. In support of its contention that it has an unconditional right to receive premiums, RLA principally relies on the language of cl 3.9 and the statements that the "premiums and… other charges in respect of this Policy" are "payable" from time to time and that the premium "in respect of a Member's Cover is to be paid monthly in advance" (emphasis added). RLA also points to the description of the premiums as "calculated and payable as advised to the Trustee", "payable" used in the sense of liable to be paid. In relation to cl 3.8, it emphasises the use of the expressions "premium due" and "due date" as again describing or referring to an amount owing or the date on which it is liable to be paid.
9. Although there is not in terms a promise by the trustee to pay the monthly premiums due to be paid if the cover of each Member is to continue, RLA contends that the language of these clauses imposes that obligation, and without qualification. Specifically, the words "is to be paid" emphasised above are said to constitute "an express obligation requiring [NM Super] to pay premiums when they fall due".
10. In further support of that contention, RLA maintains that this construction of the language in cl 3.9 is supported by similar language in cll 7A.2, 7B.1(c) and 7C.5 of the policy. That construction is also said to be "congruent" with cll 4.3 and 4.4 of the Separation Deed and par 5 of Schedule 5 to that deed (see [16] above).
11. However, the use of this language is equally consistent with the condition precedent in cl 3.8 being the only means by which the policy compels the payment of premiums, because there is no express promise to that effect by NM Super. For the reasons which follow, this construction is to be preferred. From NM Super's perspective, whether it must satisfy the condition precedent in respect of a Member's cover then depends on what is required in the performance of its duties owed to each Member. If the Member instructs that the cover is not to continue, NM Super's duty is to allow the policy to lapse. In doing so, it does not breach any obligation under the policy, because the non-satisfaction of the condition precedent does not constitute a breach of contract on its part.
12. The context in which this language is to be construed includes NM Super's capacity as trustee and the nature and subject matter of the insurance, each of which is addressed below.

NM Super's capacity as trustee

1. NM Super's statutory and equitable obligations require that it act in accordance with a member's reasonable instructions and in his or her best interests. The construction of the policy is to be approached objectively and accordingly by reference to what the language would be understood to convey to reasonable parties in the position of RLA and NM Super. It is not likely that someone in that position would have understood the language as requiring NM Super to pay the monthly premiums, notwithstanding a Member's instructions that the cover should be lapsed; and in circumstances where the statutory covenants imposed by s 52(2)(h) of the SIS Act (as in force at the time the amendments to the Contracts were introduced) required that NM Super not enter into any contract that would prevent or hinder it in properly performing or exercising its functions and powers. Those functions and powers included arranging and managing life risk insurance of its members, and were required to be exercised in the best interests of those members (s 52(2)(c)).
2. The context in which the Contract is to be construed includes matters which were known to the parties at the time the amendments to the Contract were made in June 2020. At that time, commercially sophisticated and well-advised parties in the position of RLA and NM Super would have been well aware of the nature and scope of NM Super's duties to its beneficiaries. That this was so is put beyond doubt by the terms of cll 26.1(b) and (c) of the Sale Agreement, which was made in October 2018 and amended and restated in June 2020. Clause 26.1(b) contains a covenant by the AMP Group parties to "refrain from soliciting or actively encouraging any person to solicit, the owners, beneficiaries or policy holders under any policies through any 'program of internal replacement' without the prior written consent" of the RLA Group parties. That covenant was subject to the exceptions in cl 26.1(c), which included (i) where the AMP Group party who is a "trustee is acting in accordance with its duties to its beneficiaries" and (iii) where that party "is acting in accordance with instructions it receives from a member or an adviser".
3. Under the terms of the AMP Super Fund Trust Deed (cll 1.1, 10.1, 10.3), NM Super maintains Benefits Accounts, including Members' Employer Contribution Accounts for individual or group members, in which are recorded amounts of premium paid from the fund with respect to each member. It is not controversial that in relation to the continued payment of monthly premiums if NM Super receives instructions to allow a particular Member's cover to lapse by non-payment of his or her premium, it would act, and would be justified in acting, in accordance with those instructions. An obvious circumstance in which this might occur was given in argument. If under cl 3.10 of Contract 20555 RLA increases its premiums "too much", the Members would be likely to "instruct the trustee that they no longer wish to pay, and [RLA] would have many fewer insureds". In this respect, the Contract was described as dealing with that possibility by "allowing the insurance cover to lapse".
4. Nevertheless, on RLA's case, doing so would constitute a breach of NM Super's express contractual obligation to pay the Members' monthly premium, but would not breach the implied term because the decision not to continue paying premiums would have been made and initiated by the Member, who was not a party to the Contract.

Nature and subject matter of the insurance

1. As to the nature of life insurance, the authors of MacGillivray on Insurance Law (15th ed, 2022, Thompson Reuters) observe at [7-040]: The contract of life insurance is essentially different from other classes of risk. In the normal contract of life insurance (as distinct from contracts intended to be for a term certain) the insured must have at least a right of renewal subject to reasonable conditions. There has, however, been a significant difference of judicial opinion as to whether the contract of life insurance made in consideration of an annual premium is an insurance for a year with an irrevocable offer to renew upon payment of the agreed renewal premium, or an insurance for the entire life subject to defeasance or forfeiture upon non-payment of the renewal premium at the times stated.
2. Substantially the same observation was made by EJ MacGillivray in the first edition of his work (1912, Sweet and Maxwell) at 245; and is made by the current authors of Sutton on Insurance Law (4th ed, vol 2, 2015, Lawbook Co) at [21.1370]. In The Law of Insurance Contracts (6th ed, 2009, Informa), Professor Clarke contrasts the renewal of an existing contract with the continuation of existing insurance, observing at 11-4B: Distinguish renewal of insurance, which is commonly from year to year, from the continuation of insurance for a longer period but subject to forfeiture for non-payment of periodic premiums. The common case of continuation is life insurance, which continues until the life drops or a term of years passes, but the same principles apply to any insurance which continues conditionally on the payment by the insured of instalments of premium during the period of cover…
3. There is of course no a priori classification of contracts of life insurance into one of these or other categories. In each case, effect must be given to the language of the particular contract. If a contract of life insurance is from year to year with an irrevocable offer to renew, ordinarily the life insured is not bound to renew and only incurs a liability to pay a further premium having chosen to renew the cover. However, if, following payment of the initial premium, the cover continues in force conditionally upon the timely payment of each subsequent instalment of premium, there remains the question whether the insured (meaning the party to the contract with the life insurer) is bound to satisfy that condition or may choose to allow the contract to lapse.
4. In Couch on Insurance (3rd ed, vol 5, 2023, Thomson Reuters), the authors say at par 72.9: In contracts of life insurance providing for the payment of premiums, after the first, in periodical instalments, it is, as a rule, provided that nonpayment of the premium when due shall result in a forfeiture. Life insurance policies stating that they may be continued in force provided the premiums are thereafter paid on or before a specified day have been held by a number of authorities to make payment a condition precedent to the continuance of the contract and to any subsequent liability of the insurer.
5. In the second edition of that work (2nd (rev) ed, vol 6, 1985, The Lawyers Cooperative Publishing Co), at par 31.12 the authors also said of a contract of life insurance that it "is absolute on the part of the insurer, conditioned on the payment of the premium. It is optional with the insured whether he will continue to pay and keep his contract in force or not." In support of those observations, the authors cited the dissenting opinion of Strong J in New York Life Insurance Co v Statham 93 US 24 at 36-37 (1876). That dissent treated the policy there in question as "an insurance for one year, together with a right to have the insurance continued from year to year during his life, upon payment of the same annual premium, if paid in advance". As appears below, that characterisation of the policy in that case was inconsistent with the opinion of the Court delivered by Bradley J, which described the contract as one that continued in force subject to the payment of premium instalments in advance. The additional statements in the second edition were not directed to life insurance that makes payment of each premium instalment a condition precedent to the continuance of the contract or cover. That is not to say that the effect of such a policy might not also be to give the life insured the option of continuing the cover by payment of the next premium in advance.
6. Turning to the early cases referred to by MacGillivray (15th ed), in Pritchard v The Merchant's and Tradesmen's Mutual Life-Assurance Society (1858) 3 CB(NS) 622 at 643 [140 ER 885], Willes J expressed the obiter view that the policy over Mr Jodrell's life was an annual one in which the assured had a privilege of renewal, the insurer being "bound to go on insuring future years provided the future premiums" were paid within thirty days after the expiration of each period of insurance. On that analysis, the parties having the benefit of the insurance had no contractual obligation to renew from year to year by payment of the annual premium. If they did not do so, the policy would "become void, and all moneys paid on account thereof… become forfeited" (626). In Stuart v Freeman (1903) 1 KB 47, it was not necessary for the Court to express a concluded view on the characterisation of the life policy there in question. However, whilst Collins MR appears (at 51-52) to have accepted the classification preferred by Willes J in Pritchard, the remaining members of the Court did not, Mathew LJ describing himself (at 55) as "unable to agree" with the dicta in Pritchard.
7. As was also observed by MacGillivray in the first edition of his work (at 245-246), "in America, where the subject has been more carefully considered, it has been held that a life policy is not an insurance for a single year with a privilege of renewal from year to year by paying the annual premium, but is an entire contract of insurance for life, subject to discontinuance or forfeiture for non-payment of any of the stipulated premiums". The leading decision remained New York Life v Statham. In concluding his analysis, Bradley J rejected as untenable the contention that the payment of each annual premium in advance was the consideration for the insurance provided during the following twelve months (at 30): It often happens that the assured pays the entire premium in advance, or in five, ten, or twenty annual instalments. Such instalments are clearly not intended as the consideration for the respective years in which they are paid; for, after they are all paid, the policy stands good for the balance of the life insured, without any further payment. Each instalment is, in fact, part consideration of the entire insurance for life. It is the same thing, where the annual premiums are spread over the whole life… There is no proper relation between the annual premium and the risk of assurance for the year in which it is paid.
8. In Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723; [1935] HCA 33, the policy provided for the payment of premium by instalments. The conditions included that should any premium not be paid within one calendar month of its falling due, the "policy shall be void and the benefits assured shall be forfeited" (at 725). The joint reasons of Rich, Dixon and Evatt JJ described (at 732) the insurance "expressed by the policy [as] not an annual insurance from year to year in which the cover for each year depends upon the payment of premium. It is a promise to pay upon death without any limitation as to the time in which death must occur", the consideration for that promise being the periodical payment of premiums.
9. In that case, the contract provided that if the policy was kept in force for two years from its commencement, the non-payment of a subsequent quarterly premium should not void it if the policy's surrender value were sufficient for the payment of the premium, and the policy authorised the insurer to appropriate that value towards payment of the premium due (at 726, 730-732). The policy separately provided that in the event of non-payment of premiums within one month of their due date, the policy should be void, benefits assured forfeited and that any premiums paid be retained (at 730). The Court construed "void" as meaning voidable at the election of the insurer in circumstances where construing it as meaning "void" would enable one party to avail himself of his own wrong to bring a favourable outcome from his perspective which might not always be for the insurer's benefit (at 733). The relevant principle was that applied in New Zealand Shipping Company Ltd v Société des Ateliers et Chantiers de France [1919] AC 1.
10. In Foskett v McKeown [2001] 1 AC 102, there was an issue as to whether trust moneys used to pay premiums on a policy of life insurance were traceable into the proceeds of the policy and if so whether the beneficiary was entitled at his option to claim a share of the policy proceeds proportionate to the premiums paid out of the trust moneys. In his leading judgment, Lord Millett described at 133 an ordinary whole life policy as follows: … the insurance company undertakes to pay a stated sum on the death of the assured in return for fixed annual premiums payable throughout his life. Such a policy is an entire contract, not a contract for a year with a right of renewal. It is not a series of single premium policies for one year term assurance. It is not like an indemnity policy where each premium buys cover for a year after which the policyholder must renew or the cover expires. The fact that the policy will lapse if the premiums are not paid makes no difference. The amounts of the annual premiums and of the sum assured are fixed in advance at the outset and assume the payment of annual premiums throughout the term of the policy.
11. His Lordship held that the claimant beneficiaries were entitled to a proportionate share of the chose in action or, when the policy matured, the insurance moneys payable, each representing the traceable proceeds of the premiums at one time or another. That calculation was to be done by reference to the amount of the premium payments made out of the trust moneys during the life of the policy expressed as a proportion of the total of those payments.
12. A similar question arose in Goomboorian Transport Pty Ltd v Hanson [2018] QSC 135. However, Bond J (at [83]-[84]) held that the policy was very different from that dealt with in Foskett v McKeown. Those differences included that it had no surrender value, the premium instalments were not for the same amount for the whole of the policy and there was no statement that the benefits payable were in consideration of the first premium and all other premiums payable. His Honour concluded at [84] that "on the specific terms of this policy, the cover was provided on a month by month basis by paying the monthly premiums in advance as required". On that characterisation of the policy, it followed that the plaintiff, from whom the life insured had stolen the funds used to pay the last monthly premium in advance of the month in which the life insured died, was entitled to a declaration that the whole of the proceeds of the policy were held for it by the defendants as constructive trustee.
13. That decision was reversed on appeal (Hanson v Goomboorian Transport Pty Ltd [2019] 3 Qd R 375; [2019] QCA 41). In his judgment (with whom McMurdo JA and Douglas J agreed), Gotterson JA said at [57]-[60]: These provisions, in my view, characterise the cover provided by the policy as singular in nature. It was a cover that, subject to payment of the first premium, began on the commencement date and, subject to payment of premiums, continued until the earliest of the dates specified in s 4 occurred. Specifically, it was not a series of sequential covers in which each cover was for a month, or a year. I am unable to accept the respondents' contention that the requirement in cl 8.1 that the premiums must be paid in advance on or before the due date contradicted the characterisation I favour. This requirement did no more than fix the date by which each premium had to be paid. It did not imply, much less state, that cover expired on each due date, to be renewed for the next month upon payment of a further premium. Indeed, such an implication would have been inconsistent with cl 8.6 pursuant to which cover would continue beyond the due date for payment of a premium that was not paid. The sum insured was defined as the amount stated in the schedule or adjusted in accordance with the terms and conditions of the policy. A significant provision for adjustment was the Automatic Increase Benefit contained in cl 5.4. Under that provision, the sum insured would increase annually on the anniversary of the commencement date, unless declined by the insured. Thus, where the policy had been on foot for more than one year, the sum insured payable under cl 5.1 would be an amount that depended upon, and reflected, the fact that cover had been retained by payment of premiums during each year that elapsed until cover ended. Both the singular nature of the cover and the dependency of the amount of the sum insured upon continuity in payment of the premiums are factors which strongly favour attribution of the right to have Asteron pay the insured sum to all of the monthly premiums that were paid. To adopt the language of cl 2.2, it was the payment of these premiums which together caused cover to start and to be retained from that point until the date of Norma's death.
14. As is apparent, cl 8 was not in the form of a condition precedent and is to be contrasted with cl 3.8 of Contract 20555. Clause 8.1 imposed a payment obligation on the Policy Owner, providing that the owner "must pay premiums" on a monthly or other recurring basis and must do so "in advance on or before the due date". Clause 8.6 provided a right to cancel the policy "if the premium is not paid". In the event of non-payment, the insurer was entitled to send the Policy Owner a written notice that the policy would be cancelled if payment was not made by a specified future date.

Construction of the Protection Policy

1. The language of Contract 20555 treats the Member as the beneficial owner of the cover as well as life insured and, at least in relation to individual risk insurance, the person bearing the burden of paying the premium. In relation to non-disclosure and misrepresentation and the application of Part IV of the Insurance Contracts Act 1984 (Cth), cl 3.13 provides that if the Member fails to comply with the duty to disclose information, or there is any misrepresentation in respect of the Member, RLA is entitled to vary the amount of the Insurance Benefits or premiums or refuse payment of a claim as if the Member was the contracting party in relation to his or her cover. The purpose of that provision is to put RLA in the same position in which it would have been had s 25 of that Act applied to misrepresentations made after the Contract had been entered into, but before the Member's cover commenced. And, in the event of a claim, cl 3.14 contains requirements that the Member attend medical assessments and provide information that may reasonably be required.
2. The Protection Policy does not in terms contain a promise by the trustee to pay the monthly premiums in respect of each Member or provide the insurer with a right to elect to cancel the cover in the event such a promise is breached (cf cl 8 in Hanson v Goomboorian Transport). In relation to those monthly premiums, the agreement is not that a particular premium for the cover is agreed to be paid in "five, ten or twenty annual instalments" or that an entire premium calculated at the outset is to be paid in annual or monthly instalments spread over the whole of the period of cover (cf New York Life v Statham at 30). Rather, under Contract 20555, RLA is entitled to vary the premiums at least once annually without NM Super's consent, and unconstrained by any express provisions of the policy governing that exercise.
3. It is not controversial that absent a lapsing of cover under cl 3.7(h), each Member's cover continues until one of the other events in cl 3.7 occurs. Nor is it controversial that cl 3.8 makes the monthly payment of premiums in advance a condition precedent to the continuance of the cover. The critical question remains whether as a matter of construction there is a separate promise by the trustee that those premiums will be paid in relation to each Member until such time as his or her cover otherwise ceases. It is not necessary for the effective operation of cll 3.8 and 3.7(h) that there be such a promise. Where the Member wishes cover to continue, the operation of those clauses provides a sufficient incentive for the payment of the monthly premium. Indeed, the lapsing of cover is the only incentive for payment, or sanction for non-payment, of the monthly premium.
4. In this context, it is significant that cl 3.8 follows cl 3.7 and precedes cl 3.9. Clause 3.7 provides that one of the events upon which the cover will cease is if the Insurance Benefits "lapse" for non-payment of the monthly premium within one month of its due date. In its form, cl 3.8 is an "if clause". It describes a condition which must be satisfied to avoid the lapsing of the cover. Clause 3.9 explains how the amount of that premium is calculated, and cll 3.8 and 3.9 together state in relation to the satisfaction of the condition precedent the time by which the premium must be paid to avoid that consequence.
5. The date by which the condition precedent must be satisfied is not the "due date" referred to in cl 3.8, but within one month of that date, failing which the Insurance Benefits lapse and cover ceases. Three things follow, none of which is controversial.
6. First, there is nothing in cll 3.8 or 3.9 which could justify an order for specific performance of any obligation of NM Super to pay the Member's premium monthly in advance. The parties have agreed that NM Super should have within one month of that due date in which to pay that premium. They have also agreed what should happen if it is not paid by the end of that period.
7. Second, there is no obligation of NM Super to pay the unpaid premium after the cover has lapsed. The premium was payable in respect of a monthly continuation of cover which has not occurred because of the lapse of the policy. The premium was not the consideration for the cover to be provided during that one month period. However, its payment was only required if made within one month of the due date (cf the position under cl 8 in Hanson v Goomboorian Transport).
8. Third, there is no 'secondary' or 'ancillary' obligation of NM Super to pay any damages if the premium is not paid by its due date or within one month of that date. As to non-payment by the due date, the parties have agreed that NM Super should have a month from that date in which to make payment. Accordingly, there could be no actionable breach if not paid by the due date. As to non-payment by the end of that month, the parties have agreed that the cover should lapse in that event.
9. Thus, any 'requirement' that the premium be paid monthly in advance is not enforceable in debt or damages or by specific performance. As RLA emphasises, it does not necessarily follow that there was no contractual promise imposing such a requirement on NM Super. However, in circumstances where the satisfaction of that requirement is a condition precedent to the continuation of each Member's cover, the absence of such a promise is explicable. Where the Member's 'wishes' are to continue the cover, NM Super in performance of its duties to the Member must comply with the requirements of cll 3.8 and 3.9 so as to satisfy the condition precedent and thereby continue the Member's cover. Where the Member's wishes are not to continue the cover, such a promise if performed would prevent NM Super from satisfying duties as trustee.
10. Accordingly, the language used in these clauses and relied on by RLA as bespeaking a 'promise' of payment continues to apply and remains apposite, notwithstanding the absence of an express promise by NM Super to satisfy the condition precedent.
11. In summary, the construction urged by RLA would impose upon NM Super an obligation which is not the subject of an express promise or capable of being enforced. It would do so in circumstances where it is acknowledged that the performance of its duty to act in the best interests of a Member would require that it breach that obligation if instructed by the Member to allow the cover to lapse. That would also be the position if NM Super considered it to be in the best interests of a Member, or group of Members, that cover lapse.
12. The nature of the contract as a contract of life insurance issued to a trustee of a superannuation does not suggest any good reason for interpreting its language as containing the promise contended for. Clauses 3.7(h) and 3.8 provide by the sanction of lapsing the only incentive for payment of the monthly premium in advance. That incentive is sufficient unless the Member does not wish the cover to continue. The existence of a promise which is not enforceable and which the trustee must ignore in order to perform its statutory and equitable duties does not have the virtue of imparting business efficacy. Indeed, on the face of it, such a promise may require that the trustee act other than in the best interests of its member.
13. That cll 3.7(h) and 3.8 provide for the cover to lapse if the condition precedent is not satisfied does not depend on there having been any breach of contract on the part of NM Super. Nor does the event which constitutes the condition the non-satisfaction of which causes the Member's cover to lapse have to be a breach of contract. The parties have agreed that on the happening of that event, the benefits lapse and the cover ceases. No question of relief against forfeiture arises or could arise.
14. It remains to deal with the specific matters raised by grounds 1(b) and (c).
15. RLA contends that its construction of cl 3.9 is supported by cl 7A.2, 7B.1(c) and 7C.5, which apply to the specific cover provided under the product name "Signature Super - Employer Flexible Protection". Those provisions address whether premiums continue to be payable in certain circumstances, specifically during a period of unpaid leave (cll 7A.2, 7C.5) or where RLA has waived payment of premiums in the event of a Terminal Illness Benefit Claim (cl 7B.1(c)). These clauses qualify the third paragraph of cl 3.9, which in turn describes the amount of the premium due to be paid monthly in advance if the condition precedent to the continuation of cover is to be satisfied. RLA relies on the statements in these clauses that premiums "continue to be payable by the trustee". This language is to be understood in the same way as the similar language in cll 3.8 and 3.9, which describe what must be paid and when in order to satisfy the condition precedent in cl 3.8. It is equally consistent with there being no express or implied promise by NM Super to pay the monthly premiums.
16. RLA also contends that the construction of cll 3.8 and 3.9 adopted by the primary judge is not consistent with the operation and effect of those clauses being as proposed in par 5(a) of Schedule 5 to the Separation Deed (see [16] above). That paragraph called for the insertion of provisions having the effect that the premiums would "be payable by NM Super (with the remedy for non-payment being limited to the lapsing of cover…)". The construction adopted by the primary judge has that effect. If the cover for each Member is to continue, the monthly premiums "will be payable" by NM Super, and if those premiums are not paid, the benefits will lapse and cover cease. The description of that outcome as being a "remedy for non-payment" does not necessarily imply that the lapsing is a remedy for a breach of contract. The contract does not include any express promise. Instead, the parties have provided that payment is a condition precedent to the continuation of cover. The lapsing of cover provides the means of ensuring that if the cover is to continue, the monthly premiums are to be paid in advance.
17. The primary judge was correct in concluding that as a matter of construction Contract 20555 contains no such express or implied promise by NM Super. Having considered the language of that contract, the primary judge also made observations by reference to the "nature of life insurance". As the analysis above shows, whether an insured party has made such a promise ultimately turns on the language of the policy. In this case, the parties have chosen language which adopts the condition precedent as the means by which the timely payment of premiums will be compelled. The rejection of RLA's construction does not have the consequence that no one is liable to pay the insurance premiums (cf ground of appeal 1(d)). NM Super as trustee must pay the premium if a Member's cover is not to lapse.
18. It follows that grounds 1 and 2 should be rejected. Ground 3 challenges aspects of the primary judge's observations concerning the nature of life insurance at J[60]-[65]. For the reasons which appear above, an understanding of the language of the policy is assisted by a consideration of the nature of life insurance and the different ways in which it may be characterised. That consideration confirms the correctness of the primary judge's conclusion, whilst not necessarily confirming the correctness of some of his Honour's general observations.
19. It follows that RLA does not have an unconditional contractual right to receive monthly premiums, the enjoyment of the benefit of which it alleges would be hindered or prevented by NM Super's pursuit and implementation of the RFP process. It is accepted that in the absence of that benefit, the second limb of the implied term as found by the primary judge has nothing upon which to operate.
20. This conclusion also makes it unnecessary to address an alternative argument made by NM Super that for the operation of the implied term, it makes no difference whether there is a promise to pay future premiums or no promise at all, because such a promise would not be enforceable in circumstances where a Member does not want to continue the cover. The essence of that argument is that the purpose of the implied term is to secure the benefit of the premium payments contracted for. The only premium payments threatened by the RFP process are in respect of Members who consider their best interests lie in allowing the RLA cover to lapse and arranging life insurance elsewhere. As the benefit of the premium payments contracted for does not extend to the receipt of premiums from Members who for that reason no longer want to be insured by RLA, a breach of the implied term could not give rise to an equity entitling it to restrain NM Super's pursuit and implementation of the RFP process.

Remaining grounds of appeal (grounds 4, 5, 6 and 7) and grounds of contention

1. Ground 4 does not arise (see [24] above) and could not be dispositive.
2. The analysis leading to the rejection of grounds 1, 2 and 3 does not rely on the subject matter of ground 5 (being cl 26.1 of the Sale Agreement) other than as confirming a matter of background knowledge to be taken into account as part of the context in which the relevant version of Contract 20555 was made. That use of that material is limited to its being evidence supporting an inference that the parties had that knowledge of NM Super's statutory and equitable obligations as trustee. That inference can be drawn independently of any consideration of cl 26.1. It is not otherwise necessary to address ground 5 as my analysis and reasoning does not have regard to the content of cl 26.1 as relevant to the construction of cll 3.7 to 3.10 of the policy.
3. Ground 6 does not arise. The rejection of grounds 1, 2 and 3 means that the primary judge's conclusion in relation to the principal issue of construction concerning Contract 20555 was correct. That conclusion applies equally to the other three Contracts.
4. Ground 7 does not arise as there could be no breach of the implied term providing any foundation for the declaratory and interlocutory relief sought.
5. The reasoning above addresses grounds 1 and 2 of NM Super's Notice of Contention. It does not address ground 3, which is concerned with relief.

Conclusion

1. In the result, the appeal should be dismissed with costs.
2. ADAMSON JA: I have had the benefit of reading the reasons in draft of Meagher JA. Subject to what follows, I agree with his Honour's reasons and that the appeal ought be dismissed with costs.
3. Although the matter can be addressed and determined by the application of principles of construction to contracts of life insurance (as the primary judge did), the statutory framework is of particular significance in the present case. The primary judge found, in accordance with Mackay v Dick (1881) 6 App Cas 251 at 263 (Lord Blackburn), that a term was implied into the contract that the parties co-operate with each other. As Meagher JA said at [22], there remain questions as to the scope of the implied term formulated by the primary judge.
4. The scope and application of this implied term must be influenced by the statutory framework and, in particular, by s 52. In other words, no term can be implied which would be inconsistent with the statutory framework.
5. Section 52 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act), to which Meagher JA refers in [12], currently provides in s 52(1) that "[i]f the governing rules of a registrable superannuation entity [which was accepted to include the AMP Super Fund] do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect." The following covenants in s 52(2) imposed on the trustee are of particular relevance in the present case: ● the trustee is to act honestly in all matters concerning the entity (s 52(2)(a)); ● the trustee is to exercise relevant care, skill and diligence (s 52(2)(b)); ● the trustee is to perform the trustee's duties and exercise the trustee's powers in the best financial interests of the beneficiaries (s 52(2)(c)); ● where there is a relevant conflict between the duties of the trustee to the beneficiaries and its duties to any other person, the trustee is obliged to give priority to the duties of the beneficiaries and to ensure that the interests of the beneficiaries are not adversely affected by the conflict (s 52(2)(d)); and ● the trustee is not to enter into any contract or do anything else that would prevent or hinder the trustee from properly performing its functions and powers (s 52(2)(h)).
6. Section 54B of the SIS Act imposes civil and criminal consequences for a breach of s 52.
7. In addition to the alternative argument referred to by Meagher JA at [79], the appellant argued that what the respondent was proposing to do (by investigating whether the terms on which its members obtain life insurance can be bettered, both in terms of the provisions which apply to cover and the amount of the premium for such insurance) constituted a breach of an implied term in Contract 20555. I accept the respondent's submission that the effect of compliance with the term which the appellant contended ought be implied would put the respondent in breach of its statutory obligations imposed on it by s 52 of the SIS Act and, in particular, s 52(2)(c) and (h). A term which had the consequence of preventing the trustee from investigating whether other insurers might be able to provide life insurance cover for its members on better terms than the appellant offered and from engaging such insurer, if better terms were forthcoming, ought, accordingly, not be implied.
8. These matters provide an independent reason why the appeal ought be dismissed.
9. BASTEN AJA: I agree with Meagher JA.

Amendments 22 June 2023 - [40] - "is" changed to "being" 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: 22 June 2023