Resolution Life Australasia Ltd v Teagle

Federal Court of Australia|2023-12-18|Before: Stewart J

Counsel for the Applicant: J G Duncan and L N Hamilton

Counsel for the First Respondent: First respondent did not appear

Counsel for the Second Respondent: The second respondent filed a submitting notice save as to costs

BETWEEN: RESOLUTION LIFE AUSTRALASIA LTD Applicant

AND: GREGORY TEAGLE First Respondent

N.M. SUPERANNUATION PTY LTD Second Respondent

AUSTRALIAN FINANCIAL COMPLAINTS AUTHORITY LTD Third Respondent

order made by: STEWART J DATE OF ORDER: 18 December 2023

The proceeding be dismissed.
The applicant pay the costs of the third respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction and material facts 1 Gregory Teagle is a qualified motorcycle and motor mechanic. He owned and ran his own automotive business in Burleigh Heads, Queensland, from 1990. He was the lead mechanic in the business. [C65, C275] 2 In August 2004 when he was 34 years of age, Mr Teagle applied to become a member of Flexible Lifetime - Super, a superannuation fund of which AMP Superannuation Ltd (ASL) was the trustee. He did so with the assistance of a "Financial Planner", Peter Bartlett, who was employed by a different AMP company, namely AMP Financial Planning Pty Ltd. [C95] 3 One of the available benefits of membership of the fund was total and permanent disablement (TPD) cover. In his application, Mr Teagle quite properly disclosed that he had suffered a "lower back strain" in January 2003 which was caused when moving an office desk. He disclosed that symptoms had lasted for one month and that he had received treatment in the form of "a massage and electronic current therapy". [C59, C72, C85] 4 On 29 November 2004, ASL offered insurance benefits to Mr Teagle attached to his Flexible Lifetime - Super plan. The offer provided a TPD benefit of $500,000, being the amount for which Mr Teagle had applied, but subject to an exclusion described as "Lumbar/Sacral Spine" in the following terms: [C93] Total and Permanent Disability Benefit under this plan shall not be payable for injury or illness that is caused wholly or partly, directly or indirectly by any injury to or disorder of the lumbar and sacral spine or any part of the lumbar and sacral spine including its muscles, ligaments, discs or nerve roots. 5 The letter from ASL enclosing the offer of cover included the following statements which were clearly designed to be reassuring: [C92] We consider all claims on their merits and do not intend to deny any claim involving the exclusion without considering all the circumstances causing the illness or injury. We are prepared to consider the payment of a disability claim if it would be unfair, or contrary to the intent of the plan for the exclusion to apply. For example, we would pay if illness or injury is caused by a motor vehicle accident or, by cancer, and is not related to, aggravated by, or complicated by your lower back problems. Please be assured that we are not trying to avoid paying genuine claims. The exclusion is simply to exclude the increased risk of illness or injury due to your previous medical history. 6 Mr Teagle accepted the offer of cover, including the exclusion, on 9 December 2004. [C96] There is a record that in January 2005, Mr Teagle raised a query with ASL as to why there was an exclusion of cover in relation to his back, but the record does not show what response he received, if any. [C97] 7 The insurer that provided the TPD cover to the trustee, the policy owner, for the benefit of Mr Teagle was AMP Life Ltd. [C94] 8 By a deed dated 30 June 2020, it was recorded that on 15 May 2020 there was a successor fund transfer of members and assets supporting their benefits by ASL to NM Superannuation Pty Ltd (NM Super), which was also part of the AMP group. Thus, NM Super became the trustee and AMP Life remained the insurer. [C105, C247] Sometime thereafter, although it is not recorded when that occurred, Resolution Life Australasia Ltd succeeded AMP Life as the insurer under the relevant policy. 9 On 15 December 2021, Mr Teagle submitted a TPD claim. [C248] The claim form recorded that in 2010 he first began to suffer symptoms of what was apparently subsequently diagnosed as neurogenic claudication and spinal stenosis. It recorded that Mr Teagle had ceased all work in February 2021 on medical advice and had sold his business because he could no longer do the work. [C236-247] 10 Following the receipt of medical advice, on 13 May 2022, NM Super (or possibly AMP Life, it is not quite clear but it does not matter) wrote to Mr Teagle stating that it had reviewed his claim and wished to give him the opportunity to review and comment on what it had received and provide any new information before it made a decision. It stated that the medical information received for the claim indicates that it relates to a condition of Mr Teagle's lumbar spine which is an excluded condition. That is to say, the trustee and/or insurer's preliminary view was that the claim would be declined on the basis that it fell within the lumbar/sacral spine exclusion but Mr Teagle had the opportunity to submit more information before a final decision would be made. [C267-273] 11 Thereafter, Mr Teagle entered into correspondence with NM Super about the exclusion, and he simultaneously made a complaint to the Australian Financial Complaints Authority (AFCA) under the AFCA external dispute resolution scheme that has its statutory basis in Pt 7.10A of the Corporations Act 2001 (Cth). 12 The initial complaint, which was submitted on 1 June 2022, was directed at AMP Financial Planning Pty Ltd. It was stated to be a complaint relating to life insurance for which Mr Teagle sought "compensation". [C277] 13 AFCA gave the complaint number 884902 and initially took it to be a complaint against Resolution Life, but was advised by Resolution Life that the correct entity was NM Super. It would appear that by that time Resolution Life had acquired the relevant insurance business of AMP Life and had thereby become the insurer under the policy. [C280] AFCA then treated complaint 884902 as being a complaint against the trustee, NM Super, on the basis that "the insurance is held inside super [so] the complaint needs to go through the super trustee". [CB283] 14 In its initial response to the complaint, NM Super acknowledged that Mr Teagle was "seeking compensation in regards to the TPD cover". [C286] 15 Mr Teagle received letters from both Resolution Life and NM Super saying that they had reviewed his complaints to them and about them to AFCA and had concluded that the position taken in the preliminary advice letter of 13 May 2022 was "appropriate" and "a fair and reasonable outcome". [C290, 298] Resolution Life nevertheless continued to assess the claim on the basis that no final decision had yet been made. [C321, 349] In that context, Mr Teagle asked why the initial lumbar/sacral spine exclusion had not been "reviewed every four years" and, on another occasion, why he had not been advised that he could request a review of the exclusion. [C324, 365] 16 Mr Teagle also asserted that the condition giving rise to his TPD claim was not related to his previous history of a minor lower back strain that gave rise to the lumbar/sacral spine exclusion. [C346] He also submitted a brief letter from Dr Geoff Askin, an orthopaedic surgeon, stating that his symptoms had nothing to do with any previous back strain in his younger days, "as that would have been a disc injury whereas this problem is related to hypertrophic facet joints". [C326] 17 Resolution Life provided a further preliminary indication of its position to Mr Teagle dated 24 November 2022, and gave him an opportunity to respond. Resolution Life stated that in accordance with the initial assessment of Mr Teagle's TPD claim, no TPD claim was payable on account of the lumbar/sacral spine exclusion. [C363] 18 Mr Teagle's immediate response to Resolution Life and to AFCA included the complaint that he had at no time been offered an "upgrade in TPD insurance or change in 19 years" and that he did not know that he could ask for a review as no one had told him. [C365] 19 Thereafter, by letter dated 9 December 2022, AFCA advised Resolution Life that it had decided to join Resolution Life to the complaint and assigned an additional case number namely 936830. The issues that AFCA said that it would investigate were the trustee's disclosure of the lumbar/sacral spine exclusion, the insurer's interim decision to decline the TPD claim and the trustee's acceptance of the insurer's decisions. [C368, 370] 20 Resolution Life responded to AFCA by letter dated 18 January 2023, stating that it was in the process of finalising its decision on Mr Teagle's TPD claim and providing further information. [C376] 21 By letter dated 31 January 2023, Resolution Life notified NM Super that it had declined Mr Teagle's TPD claim. That was on the basis of the lumbar/sacral spine exclusion. [C388] Inexplicably, on 2 March 2023, Resolution Life's senior legal counsel advised AFCA that no decision had yet been made on the TPD claim, and that while a recommendation had been made to the trustee the trustee had not yet made a decision. [C396] 22 On 30 March 2023, AFCA issued its "recommendation" in relation to Mr Teagle's complaints 884902 and 936830 against NM Super and Resolution Life and he was given 30 days to advise whether he accepted the recommendation. The recommendation recorded that the complaint was about the insurer's decision to apply a lumbar/sacral spine exclusion to Mr Teagle's TPD cover. The key findings were that the insurer correctly applied the exclusion to the cover in 2004, that the trustee and insurer's disclosure to Mr Teagle about the exclusion was adequate and that the decisions of the trustee and the insurer were fair and reasonable in all the circumstances. [C412] 23 Needless to say, Mr Teagle did not accept AFCA's recommended outcome. Amongst other issues that he raised in correspondence with AFCA which was in turn provided to Resolution Life was that a review of his policy was never undertaken in the 19 years that he had had the policy benefit and paid premiums. He stated that in an earlier letter "AMP" had stated that an exclusion is able to be reviewed after a certain time from the injury which had resulted in the exclusion, but that was not done in relation to his policy. [C423] 24 The complaint with regard to there having been no review of the exclusion in relation to Mr Teagle was specifically taken up by AFCA with Resolution Life on 31 March 2023. With reference to an AMP Life underwriting assessment document that indicated that "reviews are taken after two or three years", Resolution Life was asked to explain why a review was not undertaken for Mr Teagle. [C420] 25 Resolution Life's answer to AFCA was that a review must be requested by a complainant or their adviser, and that such a review is not undertaken without a request. The following was also stated: [C427] The underwriter at the time the assessment was made would have called the adviser to discuss the assessment outcome. They would have also discussed the possibility of any reviews. Due to the passage of time, we cannot locate notes on such a conversation, however, as per the attached document titled 'Underwriting Philosophy', it was part of standard process in 2004 to call the adviser to personally communicate the underwriting decision on all non-standard assessments. 26 The "Underwriting Philosophy" document referred to relevantly stated that "We will ring the adviser to personally communicate our decision on all non-standard assessments". It was silent on the matter of telling an adviser about the availability of a review of an exclusion. [C429] The relevant underwriting document records that for the particular type of exclusion in question, "Review after 3 years symptom free". It says nothing about whether such a review is only undertaken, or available, on request. [C494] 27 By letter dated 18 April 2023, AFCA wrote to both NM Super and Resolution Life in relation to the two complaints. AFCA identified that the relevant underwriting guidelines show that Mr Teagle could have had the exclusion placed on his insurance cover reviewed after a period of three years. It then asked a number of questions, including: [C439] (1) How was the opportunity for a review of the exclusion disclosed to Mr Teagle? (2) How was the exclusion review opportunity "signposted" to Mr Teagle? (3) What would the process have been for Mr Teagle to have had his exclusion reviewed? (4) If Mr Teagle had made a request for a review of the exclusion after three years, what would the likely outcome have been based on the medical information before the insurer and AFCA? A statutory declaration was requested if answering the question required a retrospective underwriting opinion. (5) Is the placatory wording in the covering letter to the revised terms dated 29 November 2004 (quoted at [5] above) capable of being misleading or misrepresenting that the insurer would pay a claim if it is not related to the previously disclosed back issues? 28 Resolution Life responded to AFCA by letter dated 11 May 2023. The response included the following: [C445] (1) When the adviser was informed of the exclusion, "the adviser would have been told of the option to request a review of the underwriting decision to apply a lumbar/sacral back exclusion to the Complainant's TPD cover." Also, with reference to the record of the complaint made by Mr Teagle in January 2005 (referred to at [6] above), it would have been common practice to communicate to the complainant at the time of providing a complaint outcome that he could contact the insurer for a review if he desired. (2) There was no obligation on Resolution Life to advise the complainant directly or in writing of the option of requesting a review. Where a nominated representative had been engaged by a customer, the invariable practice was to notify that nominated representative, who could be expected to be skilled in understanding the process and timeframes for reviews. That practice was an appropriate and sufficient means of "signposting" to the complainant's representative that there was an opportunity for a review. (3) Had a review been requested in 2009 (it not being explained why that year was chosen), the insurer would have required completion of a standard personal statement by the complainant including a back questionnaire, and the insurer may have requested further medical information. (4) It was said that the wording in the 29 November 2004 letter "is a formal way of saying that in certain non-standard circumstances, Resolution Life may accept a claim outside policy terms if the illness or injury the subject of the claim is not related to, aggravated or complicated by the condition which was the subject of the exclusion". It was said that that would be the exception, not the norm, and that "it provides Resolution Life with an option to pay certain claims ex gratia where it would be unreasonable not to do so". 29 Resolution Life also provided a statutory declaration by an unidentified person, their name having been redacted without explanation, who described themselves as a Senior Underwriter employed by Resolution Life. The person provided a "retrospective underwriting opinion" that had Mr Teagle requested a review in 2009, the request to remove the exclusion from the TPD cover would have been declined. [C449] 30 AFCA's final determination of Mr Teagle's complaint is dated 20 June 2023. It relevantly records that Mr Teagle raised several arguments which, in essence, pointed to his dissatisfaction with the existence of the lumbar/sacral spine exclusion and his claim for a TPD benefit not being accepted. He indicated that he wants his TPD claim to be accepted or for Resolution Life (described as "insurer 2") to compensate him for the amount of the TPD benefit due to his concerns relating to the exclusion of his cover. [C522] 31 The determination made the following findings: [C522] (1) Because Mr Teagle's back-related condition is within the scope of the exclusion, the exclusion effectively defeats his claim. (2) AMP Life (described as "insurer 1") failed to meaningfully signpost to Mr Teagle, or his agent, that he had an opportunity to have his exclusion reviewed after three years. (3) Had Mr Teagle known about the review opportunity and availed himself of it, his exclusion would have been removed. Also, the exclusion had a material impact on his TPD claim. 32 The determination explains that the AFCA panel was satisfied that Resolution Life's decision to decline to pay the TPD benefit is fair and reasonable in all the circumstances because the exclusion defeats the claim. Also, NM Super's decision to agree with Resolution Life's decision to decline the claim is fair and reasonable because the claim does not have a reasonable prospect of success due to the exclusion. [A9] 33 However, the panel was not satisfied that Resolution Life's decision to not compensate Mr Teagle is, in its operation in relation to him, fair and reasonable in all the circumstances. That is because AMP Life failed to "signpost" to Mr Teagle that he had an opportunity to have the exclusion reviewed after three years. That failure led to him being deprived of a meaningful opportunity that has had a material effect on his claim. Because Resolution Life has taken over responsibility for complaints relating to AMP Life as part of the transfer of life insurance business, Resolution Life is responsible for compensating Mr Teagle. [A9] 34 The "determination" was then recorded as follows: [A9] This determination sets aside the decision of insurer 2 to not compensate the complainant. AFCA substitutes a decision that insurer 2 must compensate the complainant for an amount equivalent to the TPD cover. This determination otherwise affirms the decision of insurer 2 to not pay the TPD claim. It also affirms the decision of the trustee to agree with insurer 2's decision to not pay the TPD claim. However, if it is beyond insurer 2's power to compensate the complainant for an amount equivalent to the TPD cover, then AFCA does not affirm insurer 2's decision not to pay the TPD claim. Instead, it sets aside that decision in the alternative and substitutes a decision that insurer 2 must pay the TPD claim on the basis that it would be unfair and unreasonable to rely on the exclusion to defeat the TPD claim in these circumstances.

Resolution Life's "appeal" 35 Under s 1057(1) of the Corporations Act, a party to a superannuation complaint may apply to the Federal Court, "on a question of law", from AFCA's determination of the complaint. Proceeding under that provision, on 18 July 2023 Resolution Life commenced an "appeal" against AFCA's determination by filing a notice of appeal. 36 As subsequently amended, and rearranged in accordance with how the appeal was put on behalf of Resolution Life in its submissions, the notice of appeal makes the following contentions: (1) AFCA acted beyond power and in error of law in positing the existence of a relevant reviewable decision of Resolution Life to not compensate Mr Teagle, where Resolution Life made no such decision, and then purporting to review that posited decision (ground 2). (2) AFCA erred in law in determining that Resolution Life must make a gratuitous payment to Mr Teagle (ground 3). (3) AFCA erred in law in failing to exclude the complaint as was required by rule C.1.4 of the AFCA Complaint Resolution Scheme Rules because it was a complaint about "underwriting or actuarial factors leading to an offer of a Life Insurance Policy on non-standard terms" (ground 1), and AFCA acted beyond power and in error of law in purporting to make an underwriting decision of Resolution Life (ground 9). (4) AFCA's determination that Mr Teagle satisfied the TPD definition in the policy was attended by jurisdictional error or legal unreasonableness (ground 4B). (5) Having determined that the TPD claim-rejection decision (ie the decision to not pay a TPD benefit) was fair and reasonable, it was legally unreasonable of AFCA to determine that the TPD claim-rejection decision was, in fact, not fair and reasonable in the event that it is beyond Resolution Life's power to compensate Mr Teagle for an amount equivalent to the TPD cover, as determined and ordered by AFCA (ground 4A). (6) Having made its recommendation dated 30 March 2023 in favour of Resolution Life and NM Super and determining that no further action was required, AFCA erred in failing to provide procedural fairness to Resolution Life by proceeding to make the determination, reversing its position in the recommendation, on the following findings without giving notice to Resolution Life of, and giving to Resolution Life a fair and reasonable opportunity to respond to, them (ground 5): (a) Resolution Life made a posited decision to not compensate Mr Teagle (ground 6); (b) Resolution Life had to compensate Mr Teagle outside the terms of the policy (ground 7); (c) Rejecting or discounting the evidence of Resolution Life of a retrospective underwriting opinion as at January 2009 on the basis that Resolution Life's retrospective underwriting evidence was at an irrelevant date (ground 8); and (d) Resolution Life acted in breach of a duty of utmost good faith owed to Mr Teagle (ground 10). (7) AFCA erred in finding that Resolution Life acted in breach of the duty of utmost good faith (ground 11). 37 Mr Teagle is the named first respondent to the appeal. Due to financial constraints, he played no active role in opposing the appeal. 38 NM Super is the second respondent. It filed a submitting appearance. 39 AFCA is the third respondent. AFCA opposed the appeal by briefing counsel to make submissions to the Court on why the appeal should fail. It did so expressly conscious of the principle expressed in R v Australian Broadcasting Tribunal; Ex Parte Hardiman [1980] HCA 13; 144 CLR 13 at 35-36 (ie that save in an exceptional case where submissions going to the powers and procedures of the tribunal are made, a tribunal whose decision is under review should not become a protagonist), as qualified in relation to the desirability that a tribunal appear by counsel to make such submissions as it thinks calculated to assist the court and, in an appropriate case, to argue against the applicant's case in Fagan v Crimes Compensation Tribunal [1982] HCA 49; 150 CLR 666 at 681-682. See also MetLife Insurance Limited v Australian Financial Complaints Authority (No 3) [2022] FCA 849 at [12] and Freedom Pharmaceutical Pty Ltd v Minister for Health (No 2) [2021] FCA 1250 at [6]-[9]. 40 AFCA appropriately sought to balance the prospect of a remittal to it in the event that the appeal is successful with the absence of a contradictor and the Court's indication during case management of the proceeding that it would be assisted by AFCA's active participation in the appeal. I acknowledge the assistance given to the Court by AFCA and AFCA's counsel.

The AFCA scheme 41 The AFCA external dispute resolution scheme as enacted in Pt 7.10A of the Corporations Act has been thoroughly examined and explained in other cases. See, for example, QSuper Board v Australian Financial Complaints Authority Ltd [2020] FCAFC 55; 276 FCR 97 at [63]-[65], [67] (Moshinsky, Bromwich and Derrington JJ), MetLife Insurance Ltd v Australian Financial Complaints Authority Ltd [2022] FCAFC 173; 295 FCR 1 at [27]-[40] (Middleton, Jackson and Halley JJ); AIA Australia Ltd v Sharma [2023] FCAFC 42; 408 ALR 490 at [21]-[23] (Stewart, Halley and Button JJ) and Notesco Pty Ltd v Australian Financial Complaints Authority Ltd [2022] NSWSC 285; 160 ACSR 44 at [6]-[8] (Rees J). 42 The determination of superannuation complaints submitted to AFCA is governed by the Corporations Act and by AFCA's complaints resolution scheme rules (the AFCA Rules): QSuper at [17]. AFCA does not have authority to determine a "complaint relating to superannuation" that falls outside the ambit of s 1053(1): Metlife at [5] and [102]. 43 Section 1053 of the Corporations Act specifies when complaints relating to superannuation can be made under the AFCA scheme. Relevantly, a complaint can be made under s 1053(1)(a) if it is a complaint that the trustee has "made a decision" relating to a particular member of a regulated superannuation fund that is or was unfair or unreasonable. However, it is to be noted that a trustee or insurer "makes a decision" if they make or fail to make a decision or if they engage in conduct, or fail to engage in conduct, in relation to making a decision whether or not the decision or conduct involved the exercise of a discretion: s 1053(5). 44 Section 1055 of the Corporations Act sets out the decision-making process which AFCA must follow in determining superannuation complaints (not involving a decision relating to payment of a death benefit): (1) In making a determination with respect to a superannuation complaint, AFCA has, subject to s 1055, all the powers, obligations and discretions that are "conferred on" the trustee who made the original decision or engaged in the conduct to which the complaint relates: s 1055(1); (2) If AFCA is satisfied that the decision or conduct is fair and reasonable in relation to the complainant, AFCA must affirm that decision/conduct: s 1055(2); (3) If AFCA is satisfied that the decision or conduct is unfair or unreasonable, AFCA may take any one or more of the remedial actions mentioned in s 1055(6) for the purpose of placing the complainant, as nearly as practicable, in such a position that the unfairness or unreasonableness no longer exists: s 1055(4); (4) The remedial actions permitted under s 1055(6) include varying the decision or setting aside the decision and either substituting an alternative decision or remitting the decision for reconsideration in accordance with any directions or recommendations of AFCA; (5) Under ss 1055(7)(a) to (c), AFCA may not make a determination contrary to: (a) law; (b) the governing rules of a regulated superannuation fund or an approved deposit fund to which the complaint relates; or (c) the terms and conditions of an annuity policy, contract of insurance or RSA to which the complaint relates. (6) A determination made by AFCA under s 1055 of the Corporations Act is binding on scheme members but not complainants. If a complainant is not satisfied with AFCA's determination, they may ignore it and proceed as if it were not made and may pursue the trustee in the courts or in any other manner they see fit: QSuper at [67(c)] and [134], citing the Corporations Act, s 1051(4)(e).

Contention 1: Jurisdictional error - no "no-compensation" decision 45 Resolution Life identifies that in its determination AFCA stated that Resolution Life "has decided to not pay the complainant a TPD benefit". Resolution Life refers to that as the "no-compensation" decision. Resolution Life submits that there was never a request by Mr Teagle for payment of compensation separate from payment that would arise from his claim under the policy. Also, in its recommendation the only decisions identified as being under consideration were the decisions of the trustee and the insurer to not meet the TPD claim; there was no posited separate decision of the trustee or the insurer to not compensate Mr Teagle. 46 Resolution Life submits that, as a result, it never made any decision not to pay compensation to Mr Teagle outside of the policy. On that basis, it is said that AFCA had no jurisdiction to entertain any such posited decision with the result that its decision is beyond power. 47 Mr Duncan, who appeared with Mr Hamilton for Resolution Life, broadened the attack somewhat in oral submissions. He submits that the posited no-compensation decision of the insurer is not a decision that meets the jurisdictional gateway in s 1053(1)(a) of the Corporations Act because it is not a decision of the trustee of a regulated superannuation fund, but rather the decision of the insurer. [T39] He also submits that the complaint in relation to the posited no-compensation decision is not a complaint "relating to superannuation" as referred to in the chapeau to s 1053(1). [T40] 48 The first and most obvious difficulty with Mr Duncan's submission in relation to there having been no no-compensation decision by the insurer is that "decision" as referred to in s 1053(1) includes, as explained above, the failure to make a decision and conduct and the failure to engage in conduct: s 1053(5). Undoubtedly, Resolution Life has not compensated Mr Teagle. Also, it does not wish to do so, as evidenced by this proceeding. There was therefore a "decision" within the meaning of that term in s 1053(1) by Resolution Life to not compensate Mr Teagle outside of the policy terms. 49 As to the second aspect of the asserted error, there was a complaint to AFCA about NM Super's decision relating to a particular member, namely Mr Teagle, within s 1053(1)(a) of the Corporations Act. The insurer was then joined to that complaint (see [13] and [19] above). Such a complaint is within s 1053(1)(a): Metlife at [107]. 50 It is also quite wrong, even if it were relevant, that Mr Teagle never claimed "compensation". See [12] and [14] above. 51 In the circumstances, the first contention must be rejected.

Contention 2: Jurisdictional error - determination to have the applicant exercise a discretion 52 The contention is that AFCA erred in law in determining that Resolution Life must make a gratuitous payment to Mr Teagle. Mr Duncan submits that its "discretion" to make an ex gratia payment in lieu of a payment under the policy is not a discretion that has been "conferred on" Resolution Life within the meaning of s 1055(1) of the Corporations Act. Mr Duncan submits that "conferred" means something that has been "given formally or officially; for example, under statute or contract". 53 Section 1055(1) of the Corporations Act provides: In making a determination of a superannuation complaint, AFCA has, subject to this section, all the powers, obligations and discretions that are conferred on the trustee, insurer, RSA provider or other person who: (a) made a decision to which the complaint relates; or (b) engaged in conduct (including any act, omission or representation) to which the complaint relates. 54 There is no textual or contextual support for Resolution Life's construction of "conferred" as used in that provision. To the contrary, the language of "all the powers, obligations and discretions" is particularly broad. The word "all" cannot be ignored. Moreover, AFCA's powers to make determinations include in relation to conduct that is engaged in, including acts and omissions, to which the complaint relates, as expressed in para (b). The inclusion of conduct does not sit easily with Resolution Life's narrow construction of "conferred". 55 As AFCA recorded in its determination, Resolution Life stated, in explanation of the placatory wording in the 29 November 2004 letter, that it may accept a claim outside policy terms, including paying claims ex gratia where it would be unreasonable not to do so (see [28(4)] above). Thus, Resolution Life does not dispute that it has the power to pay compensation as ordered by AFCA in its determination, including for the very reason that AFCA made the determination, ie that it would be unreasonable not to do so. Resolution Life can only have that power if it was "conferred" on it - "conferred" in this context meaning only that it is possessed of the relevant power, obligation or discretion. There is no suggestion, and in the light of Resolution Life's explanation there cannot be any suggestion, that it was beyond its powers under its constitution or other applicable rule or norm for it to make such a payment. 56 The second contention must be rejected.

Contention 3: Jurisdictional error - AFCA Rule C.1.4(b) 57 The contention is that AFCA erred in law in failing to exclude the complaint as was required by r C.1.4(b) of the AFCA Complaint Resolution Scheme Rules because it was a complaint about "underwriting or actuarial factors leading to an offer of a Life Insurance Policy on non-standard terms", and AFCA acted beyond power and in error of law in purporting to make an underwriting decision of Resolution Life. 58 Mr Duncan submits that the opportunity for a review of an exclusion is "embedded within, and forms part of, the underwriting provisions", and that an integral component of AFCA's determination is its own underwriting exercise performed as though it were the applicant. He submits that this is outside of AFCA's competence as being excluded by r C.1.4(b). 59 However, that rule provides that AFCA must exclude a complaint about underwriting or actuarial factors "leading to an offer of a Life Insurance Policy on non-standard terms". The complaint that was upheld by AFCA in its determination was not such a complaint. The complaint was that Mr Teagle was not afforded the opportunity of a review of the exclusion three years after his symptoms which led to the exclusion ceased. That is what was said to be unfair or unreasonable. The reason for that is because the failure to afford Mr Teagle that opportunity was material because, had there been a review, the exclusion would have been removed and his TPD claim would have been paid. The only "underwriting" consideration was with regard to the counterfactual of what would likely have occurred if Mr Teagle had been afforded a review, as he should have been, in order to arrive at a conclusion whether the failure to afford him that review had a result that was unfair or unreasonable. That consideration does not cause the complaint to be caught by the rule. 60 The complaint considered and determined by AFCA was therefore not a complaint excluded by r C.1.4(b) of AFCA's rules. The third contention must be rejected.

Contention 4: Jurisdictional error - determination of TPD 61 The contention is that AFCA's determination that Mr Teagle satisfied the TPD definition in the policy was attended by jurisdictional error or legal unreasonableness. 62 Mr Duncan submits that the TPD claim was rejected by Resolution Life on the basis of the lumbar/sacral spine exclusion, and that no occasion for Resolution Life to consider and determine whether Mr Teagle satisfied the TPD definition in the policy arose. As a result, Resolution Life had neither formed the opinion, nor failed to form the opinion, under the TPD definition. He submits that in those circumstances AFCA was not empowered to proceed to undertake that exercise itself, and erred in law in doing so. 63 No submission in support of AFCA having acted legally unreasonably in this context was put. Rather, the submission was confined to AFCA having acted beyond jurisdiction. 64 Similarly as regards contention 3, AFCA did not make a determination that Mr Teagle satisfied the TPD definition. Rather, in order to determine whether Resolution Life's failure to afford Mr Teagle the opportunity for a review of the exclusion to his policy was unfair or unreasonable, AFCA considered the counterfactual. That is to say, it considered what would have happened had he been afforded a review and that review had resulted in the exclusion being removed from the policy. It was in that context that AFCA considered whether or not Mr Teagle's condition satisfied the TPD definition. Because that definition was likely satisfied, AFCA determined that the failure to afford Mr Teagle a review of the exclusion when it should have done so operated unfairly or unreasonably against Mr Teagle. 65 That approach is not beyond AFCA's wide jurisdiction and powers in s 1055(1). The fourth contention must accordingly be rejected.

Contention 5: Legal unreasonableness - "no-compensation" decision 66 The contention is that, having determined that the TPD claim-rejection decision (ie the decision to not pay a TPD benefit) was fair and reasonable, it was legally unreasonable of AFCA to determine that the TPD claim-rejection decision was, in fact, not fair and reasonable in the event that it is beyond Resolution Life's power to compensate Mr Teagle for an amount equivalent to the TPD cover, as determined and ordered by AFCA. 67 Mr Duncan identifies four steps in AFCA's reasoning process, and criticises each one as either being legally unreasonable or amounting to a factual finding without evidence. It is necessary to deal with each in turn. 68 The first step in AFCA's reasoning process is said to be AFCA's factual finding that Mr Teagle was not advised of an opportunity to have the lumbar/sacral spine exclusion reviewed after three years. Mr Duncan submits that that finding was made without evidence and/or was attended by legal unreasonableness. 69 There is no foundation to that submission. It may be that a different finder of fact could or would come to a different conclusion on that question, but there is no doubt that there was evidence on which AFCA based its finding. For a start, Mr Teagle said that he was never advised of any opportunity for a review. That disposes of the complaint that there was no evidence to support the finding. As far as unreasonableness is concerned, Resolution Life's evidence amounted to no more than the assertion that Mr Teagle or his adviser would have been told of the review opportunity as part of standard procedure, but the procedural documents did not support that assertion. It was entirely within AFCA's jurisdiction to make the finding that it did, and there is no error on a question of law in relation to what it did. 70 The second step in AFCA's reasoning process is said to be that had the lumbar/sacral spine exclusion been reviewed at any one of three possible dates, namely 13 February 2006, 5 August 2007 or 9 December 2007, it would have been removed by the insurer. Mr Duncan submits that AFCA's conclusion failed to consider relevant evidence and is legally unreasonable. 71 There was ample material on which AFCA could base its decision, most notably the letter from Dr Askin referred to at [16] above. Mr Duncan criticises AFCA's reliance on that letter on the basis that it is addressed "To whom it may concern", is very brief and does not reveal the basis for Dr Askin's opinion. There are at least two answers to that criticism. First, the external dispute resolution process administered by AFCA is not subject to the rigours of a court process and does not require opinion evidence to be in a form that would be admissible in a court. Indeed, the AFCA rules require that AFCA consider complaints submitted to it in a way that is "efficient, effective, timely" and "cooperative, with the minimum of formality" (r A.2.1(c)). Also, the AFCA panel "is not bound by rules of evidence" (r A.14.2). Secondly, Dr Askin had a long involvement in reporting on Mr Teagle's medical condition as part of the TPD claim handling process. That was well known to Resolution Life and to AFCA. There is no relevant error in AFCA relying on Dr Askin's opinion in the circumstances. 72 Mr Duncan has failed to identify any relevant error in this step in AFCA's reasoning. 73 The third step in AFCA's reasoning process is said to be AFCA's finding that Mr Teagle satisfied the TPD definition in the policy. However, as explained, that finding was only in the context of deciding whether the failure to offer Mr Teagle a review of the exclusion from his policy was material and, in that sense, whether it was unfair or unreasonable. There is no relevant error in the approach of AFCA on this question. 74 The final step in AFCA's reasoning process is said to be the finding that Resolution Life could and should have exercised a discretion "outside of the terms of the policy" to compensate Mr Teagle for an amount equivalent to the TPD cover. This is also said to be legally unreasonable. It is not explained why that is so. As explained above, Resolution Life accepts that it has a discretion to make a payment "outside of the terms of the policy". There is no relevant error in AFCA having found that Resolution Life's failure to do so was unfair or unreasonable. 75 I should add that in his written submissions, Mr Duncan also submits that AFCA's decision that if Resolution Life does not have the power to pay compensation to Mr Teagle outside the policy, then its decision to decline the claim within the policy is legally unreasonable. Mr Duncan refers to this as the "AFCA reversal decision". It is not necessary to deal with this aspect of the case because Resolution Life by its own admission does have the power to pay compensation to Mr Teagle outside the policy, with the result that the condition on which the reversal decision arises is not met. Simply put, the point is not reached.

Contention 6: Procedural fairness - AFCA determination 76 The contention is that having made its recommendation dated 30 March 2023 in favour of Resolution Life and NM Super and determining that no further action was required, AFCA erred in failing to provide procedural fairness to Resolution Life by proceeding to make the determination, reversing its position in the recommendation, on a number of findings without giving notice to Resolution Life of, and giving to Resolution Life a fair and reasonable opportunity to respond to, them. 77 In support of that contention, citing SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; 228 CLR 152, Mr Duncan submits that in order to meet its obligations of procedural fairness to Resolution Life, it was necessary for AFCA to advise Resolution Life of the factual findings and reasoning that were not part of AFCA's recommendation and to provide to Resolution Life the opportunity to respond to these prior to AFCA finalising and delivering the AFCA determination . In SZBEL, at [26], it was said that the statutory framework within which a decision-maker exercises statutory power is of critical importance when considering what procedural fairness requires; also, the particular content to be given to the requirement to accord procedural fairness will depend upon the facts and circumstances of the particular case. Neither the statutory framework nor the facts and circumstance of this case mean that AFCA was required to advise Resolution Life of its proposed factual findings and reasoning and give it the opportunity to respond to those prior to finalising its determination. 78 The AFCA Rules have provisions governing the process to be followed by AFCA. That process is relevant to determining the requirements of procedural fairness. Rule A.10.1 provides that AFCA will generally share information provided by a party to a complaint with the other parties to the complaint, including after the complaint has been closed when appropriate. Rule A.10.2 provides that before a complaint is determined, AFCA must provide the parties to the complaint with "access to relevant information" and "an opportunity to make submissions". 79 None of Resolution Life's specific complaints with regard to procedural fairness has any substance. The issue at the centre of AFCA's determination that was a development on its recommendation, and which in turn resulted in a different outcome, was Mr Teagle's opportunity to request a review of the exclusion condition that was imposed on his TPD cover. Resolution Life was given clear and adequate notice that that formed part of Mr Teagle's complaint and was a matter being considered by AFCA: (1) Prior to AFCA's recommendation, Mr Teagle raised a complaint about the failure of the insurer to review the exclusion, and its failure to advise him that he could request a review. See [15] and [18] above. (2) Mr Teagle's response to AFCA's recommendation which was provided to Resolution Life for comment was that the exclusion was never reviewed when it should have been. See [23] above. (3) AFCA then expressly requested Resolution Life to explain why a review had not been undertaken. See [24] above. 80 Following Resolution Life's response (dealt with at [25] above), AFCA asked Resolution Life a number of questions in relation to any request by Mr Teagle for a review of the exclusion (see [27] above), to which Resolution Life responded at some length (see [28]-[29] above). Those questions and responses covered whether Mr Teagle was advised of the opportunity of a review, what the likely outcome of a review would have been and whether Resolution Life could make a payment to Mr Teagle outside the policy terms in the event that a strict application of the exclusion would operate unfairly. 81 There is no unfairness in that process in relation to AFCA's ultimate determination that Resolution Life failed to afford Mr Teagle an opportunity for a review of the exclusion because it failed to inform him of that opportunity, and that had a review taken place the likely outcome would have been that the exclusion would have been removed. Resolution Life had notice of those matters, and ample opportunity to make whatever submissions on them that it chose to. 82 The first specific complaint by Resolution Life with regard to procedural fairness is that AFCA did not advise Resolution Life that AFCA would posit a decision by Resolution Life not to compensate Mr Teagle. The complaint overlooks that it was the common understanding of Mr Teagle, Resolution Life and AFCA that Resolution Life had not compensated Mr Teagle, and that AFCA's inquiries with regard to the review of the exclusion were premised on Resolution Life not having compensated Mr Teagle outside of the policy. In those circumstances, there was no need for AFCA to expressly state that it was proceeding on the basis that Resolution Life had not compensated Mr Teagle. 83 Mr Duncan developed a submission orally that Resolution Life had not been put on notice that Mr Teagle was seeking compensation as opposed to payment of his TPD benefit under the policy. That submission overlooks that Mr Teagle used the word "compensation" on more than one occasion. Also, it was inherent in his complaint that he had not been advised of the opportunity to review the exclusion to his cover, and his contention that he should be paid because his disability did not relate to the back strain on which the exclusion was based, that he was seeking compensation outside the terms of the policy. In any event, AFCA made it clear by its inquiries about compensation outside the terms of the policy that that is what it was considering, and it was obvious that what Mr Teagle really wanted was to be paid the TPD sum whether that was within or outside the terms of the policy - in other words, he wanted the money. Resolution Life was accordingly on more than adequate notice. 84 Another of the specific complaints made by Resolution Life is that AFCA chose February 2006 as an appropriate date for the review of the exclusion without giving Resolution Life notice of that in advance, or without giving notice that it considered 2009 to be an inappropriate review date. However, the insurer's own document stipulated "Review after 3 years symptom free". Mr Teagle's relevant symptoms had begun on 12 January 2003 and ended on 12 February 2003, and the insurer had been advised of that. It should therefore have been quite obvious to Resolution Life that the appropriate review date would have been February 2006. It had every opportunity to identify whatever date it thought was appropriate, and to address its evidence and submissions in relation to that date. It chose 2009 without explaining why that was an appropriate date, although the inference is that it chose that date opportunistically because by early 2009 Mr Teagle had had health problems which the person who provided the statutory declaration relied on to conclude that had a review been undertaken the exclusion would not have been removed. 85 In oral address, Mr Duncan developed a submission that Resolution Life had been instructed by AFCA in its letter of 18 April 2023 (discussed at [27] above) to confine its consideration of the likely outcome of a review to "the medical information before the insurer and AFCA". He submits that that was an unfair fetter on Resolution Life's ability to adequately respond to the question at hand. 86 That submission fails for at least two reasons. First, it is an unduly narrow reading of what was put to Resolution Life by AFCA. In effect, AFCA was saying, "given what we now know, what would the likely outcome of a review have been?" There was no stipulation that Resolution Life was to confine itself to any specific information then available, and there was no prohibition on making further inquiries. Resolution Life could have undertaken further investigations, obtained further information or instructed further experts. Secondly, and decisively, Resolution Life did not make any complaint at the time that it was being unfairly fettered in its ability to respond. If it had that view, it could have said so, or it could have in any event responded with other or additional information. It chose not to, and cannot now be heard to complain. 87 Resolution Life also complains that it was not given prior notice of AFCA's intended reliance on the duty of utmost good faith. That reliance is dealt with in more detail below, from which it is apparent that that was only an alternative basis relied on by AFCA. Thus, even if there was some procedural unfairness in relation to it, that was immaterial to the result. 88 In the circumstances, Resolution Life's complaints of procedural unfairness fail.

Contention 7: Utmost good faith 89 The contention is that AFCA erred in finding that Resolution Life acted in breach of the duty of utmost good faith. No submissions are addressed to this ground of appeal. AFCA's principal basis on which it found that the insurer should have advised Mr Teagle of the opportunity for a review of his exclusion of the three years was that "fairness and reasonableness" demanded that. It was only in the alternative that it reasoned that the insurer's duty of utmost good faith as imposed by s 13 of the Insurance Contracts Act 1984 (Cth) leads to the same result. [A15] 90 With reference to the statement in CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; 235 CLR 1 at [257], that "utmost good faith will usually require something more than passivity: it will usually require affirmative or positive action on the part of a person owing a duty of it", and the statement at [15] that utmost good faith may require an insurer to act with due regard to the legitimate interests of an insured and not only its own interest, AFCA reasoned that the insurer should have advised Mr Teagle of the opportunity to request a review of the exclusion from his TPD cover. There is no apparent error in that reasoning.

Conclusion 91 As each of Resolution Life's grounds of appeal must fail, the proceeding must be dismissed. AFCA has sought, and is entitled to, its costs. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.

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