Shuetrim v FSS Trustee Corporation

Interest pursuant to s 57 of the Insurance Contracts Act

1. Section 57 of the Insurance Contracts Act provides, relevantly: "(1) Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section. (2) The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days: (a) the day on which the payment is made; (b) the day on which the payment is sent by post to the person to whom it is payable."
2. In Bankstown Football Club Ltd v CIC Insurance Ltd (Supreme Court (NSW), 17 December 1993, unrep), Cole J stated that: "…section 57 is directed to a determination of the point of time at which empirically, it can be stated that it was unreasonable to decline to make payment. That decision is not to be determined simply by a determination of whether or not there was a bona fide dispute regarding the entitlement to payment. It is rather to be determined by a finding as to whether or not there was liability. … A reasonable period is to be given to the insurer to investigate and determine its position…".
3. Cole J's observations have been followed in many cases, including by Nicholas J in Sayseng v Kellogg Superannuation Pty Ltd [2007] NSWSC 857 where his Honour said at [7]: "…the question of reasonableness is to be judged by reference to the true position in respect of the claim with allowance to be made for the insurer to have a reasonable period of time within which to investigate the claim and to consider its position. The discretionary determination is to be made having regard to the particular circumstances of the case, including the probable issues which require investigation."
4. As I explained in my reasons of 24 April 2015, when Mr Shuetrim commenced these proceedings, neither MetLife nor TAL had made any decision in respect of his claim.
5. Thus, at the time proceedings were commenced, Mr Shuetrim alleged that MetLife (and also TAL when it was joined as a defendant) had "constructively denied" his claim; that is, had, by not making a decision, acted in breach of their duties of good faith and fair dealing to Mr Shuetrim.
6. For the reasons set out at [150] to [197] of my judgment of 24 April 2015, I did not accept that aspect of Mr Shuetrim's claim.
7. However, I did find that both MetLife and TAL, when actually making their decisions to decline Mr Shuetrim's claim (on 17 December 2014 in the case of TAL, and on 23 January 2015, for reasons given on 10 February 2015, in the case of MetLife), acted in breach of their duties of good faith and fair dealing to Mr Shuetrim.
8. It appears to me that it must follow from those findings that the "point of time at which empirically, it can be stated that it was unreasonable [of TAL and MetLife] to decline to make a payment" to Mr Shuetrim was not, as was submitted on Mr Shuetrim's behalf, three months from when he first made his claim on the Trustee on 15 February 2013; nor later than the dates on which the insurers actually made their decisions.
9. TAL made its decision within weeks of Lindsay J's order of 5 December 2014 granting TAL and MetLife leave to use documents produced on subpoena (see [193] to [195] of my reasons of 24 April 2015). I do not see the delay between 5 and 17 December 2014 (the date on which TAL made its decision) as being unreasonable.
10. MetLife made its decision a little over a month after TAL made its decision. In the circumstances I summarised at [231] to [236] of my reasons of 24 April 2015, MetLife's delay from 17 December 2014 (the date of its "show cause" letter) was caused by its purported provision of procedural fairness to Mr Shuetrim. However, I see no reason why MetLife could not have made its decision earlier; at least by the time TAL did so. By then, MetLife had available all the material necessary to make a decision.
11. In those circumstances, my conclusion is that the date from which it was unreasonable for TAL and MetLife to withhold payment to Mr Shuetrim was 17 December 2014.
12. Accordingly, interest should run under s 57 against both TAL and MetLife from 17 December 2014.

Costs as between Mr Shuetrim and MetLife and TAL

1. Mr Shuetrim has succeeded against both MetLife and TAL and, on the face of it, should have his costs of the proceedings.
2. However, both MetLife and TAL submit that, because Mr Shuetrim was not successful in relation to his "constructive denial" case, he should not have all of his costs of the proceedings.
3. MetLife submits that the time expended dealing with the "constructive denial" issue was no less than 25 per cent of the hearing time and that, accordingly, MetLife and TAL should pay 75 per cent of Mr Shuetrim's costs and Mr Shuetrim should pay 25 per cent of their costs.
4. TAL contends that it should pay only one quarter of Mr Shuetrim's costs of the trial and that, otherwise, there should be no order for costs in favour of Mr Shuetrim.
5. The general approach is to order costs in accordance with the outcome of the proceedings as a whole, without attempting to differentiate between particular issues in which a party may or may not have succeeded (for example, Cretazzo v Lombardi (1975) 13 SASR 4 at 12). However, a court may make a different order if the losing party succeeds on significant issues (for example, James v Surf Road Nominees Pty Ltd (No. 2) [2005] NSWCA 296 at [31] - [36]). A court will generally only deprive the successful party of the costs relating to an issue in which it was unsuccessful when that issue was clearly dominant or separable (for example, Monie v Commonwealth of Australia (No. 2) [2008] NSWCA 15 at [63] - [66]).
6. As Mr Shuetrim points out, at the time the proceedings were commenced, the "constructive denial" argument was the only one available to him as neither MetLife nor TAL had then made any decision concerning his claim.
7. Nonetheless, Mr Shuetrim did not establish "constructive denial" and, contrary to the submission made on his behalf, that issue was decided against him.
8. It is true, as is put on behalf of the insurers, that the "constructive denial" issue occupied a significant amount of time, both so far as concerns documentary evidence and argument. A considerable part of the Court Book was directed to the history of the litigation, much of which was relevant only to the "constructive denial" issue. In those circumstances, my opinion is that, so far as costs are concerned, some account must be taken of Mr Shuetrim's failure on this issue.
9. Accepting that mathematical precision is not possible in this area, my assessment is that the "constructive denial" issue took some 20 per cent of the time involved in these proceedings.
10. Accordingly, I propose to order that MetLife and TAL pay 80 per cent of Mr Shuetrim's costs of the proceedings. It does not follow that Mr Shuetrim should pay 20 per cent of the insurers' costs and I decline to so order.

The Trustee's costs

1. Mr Shuetrim commenced these proceedings against the Trustee and MetLife on 25 September 2013. Mr Shuetrim joined TAL as a defendant on 9 December 2013.
2. Shortly before the commencement of the hearing, Mr Shuetrim and the Trustee settled. On 4 March 2015, the Trustee filed a submitting appearance, save as to costs.
3. The terms on which Mr Shuetrim and the Trustee settled are not before me. Thus I do not know, for instance, what provision was made in that settlement as to the Trustee's costs.
4. The Trustee now seeks an order that MetLife and TAL pay its costs of the proceedings.
5. In that regard the Trustee submitted: "…it is a party to these proceedings only because of the actions and inactions of TAL and MetLife including their provision of insurance, their denial of [the Trustee's] claim for a Total and Permanent Disablement (TPD) benefit on behalf of [Mr Shuetrim] and their failure to provide procedural fairness to each of [the Trustee] and [Mr Shuetrim]".
6. The Trustee's reference to the insurers' "failure to provide procedural fairness" was evidently a reference to MetLife's "show cause" letter of 17 December 2014, which I dealt with at [231] to [236] of my reasons of 24 April 2015. If that is so, I cannot see its relevance to the question of costs; proceedings had by then been on foot for over a year.
7. It is true, in one sense, that the Trustee was only a party to these proceedings because TAL and MetLife had not made a decision concerning Mr Shuetrim's claim until 17 December 2014 (in the case of TAL) and 23 January 2015, for reasons given on 10 February 2015 (in the case of MetLife).
8. However, as I have said, I have not accepted Mr Shuetrim's claim that there was a "constructive denial" of his claims before these dates.
9. Once the insurers made their decisions, the Trustee supported those decisions.
10. Thus, on 24 February 2015, the Trustee's solicitors wrote to Mr Shuetrim's solicitors: "We confirm that we are now in receipt of reasons for declinature of [the Trustee's] claim for a permanent disablement (TPD) benefit on behalf of [Mr Shuetrim] provided by each of [MetLife] and [TAL]. As you know, the trust deed for the Fund does not oblige [the Trustee] to determine whether an insured Fund member is totally and permanently disabled nor does it afford a Fund member a TPD benefit payment in the absence of [the Trustee] having received an insured benefit from an insurer. In the event of [the Trustee's] receipt of such an insured TPD benefit it will pay the sum received to an insured Fund Member in accordance with the trust deed and superannuation law. [The Trustee] considers that each of the decisions of MetLife and TAL were open to them on the evidence before them and not unfair or unreasonable in their operation in relation to [Mr Shuetrim]".
11. What occurred between the date of that letter and the filing by the Trustee of the submitting appearance on 4 March 2015 has not been explained.
12. In those circumstances, and for the further reason that the claims made by Mr Shuetrim against the Trustee were separate and discrete from those made against MetLife and TAL, I can see no reason why the matters set out by the Trustee at [31] above provide a basis for the costs order it seeks.
13. In its submissions as to costs, the Trustee also relied upon a provision in each of the policies. The provision in the TAL Basic Policy is in the following terms: "Where a claim or an application for insurance is denied by us, on medical or other grounds and the denial results in litigation against you…we will consult with you in the conduct and management of any such litigation or dispute resolution and, with your agreement, will arrange for representation, be it legal or otherwise, to defend the litigation…on behalf of you at our cost." (Clause 8.5.5)
14. There is a provision to the same effect in the MetLife Police - Blue Ribbon Policy (cl 9.4).
15. In my opinion, these clauses were not enlivened in the circumstances of this case because Mr Shuetrim's commencement of the proceedings was not caused by either insurer's denial of his claim.
16. I accept TAL's submission that the reference in cl 8.5.5 of the TAL Basic Policy to the denial of a claim means an actual, and not a constructive, denial. The same must also be true for cl 9.4 of the MetLife Police - Blue Ribbon Policy. When the proceedings were commenced, neither insurer had made any decision concerning Mr Shuetrim's claim. It was the absence of a decision that resulted in litigation. And I have found that neither insurer breached its duty to Mr Shuetrim by reason of not having made a decision at the time proceedings were commenced.
17. In any event, no material has been adduced before me to explain the circumstances in which the Trustee incurred legal costs. I do not know whether TAL and MetLife consulted with the Trustee in relation to the "conduct and management" of this litigation, nor whether TAL or MetLife "arranged" for the legal representation of the Trustee. It was for the Trustee to demonstrate these matters if it wished to show that the provisions of the policies upon which it relied were enlivened.
18. For those reasons I am not satisfied that those provisions provide a basis for the costs order sought by the Trustee.
19. Alternatively, the Trustee seeks its costs thrown away in respect of subpoenas to produce served by TAL and MetLife on third parties.
20. The Trustee submitted that TAL and MetLife had a duty of utmost good faith to the Trustee requiring that such documents be made available by them to the Trustee.
21. I am not prepared to entertain this submission. The submission refers to correspondence between the parties that is not in evidence before me. In any event, I can see no reason why the Trustee did not simply itself exercise its rights, as a party to this litigation, to access the subpoenaed documents in the Registry.
22. In those circumstances, I am not prepared to make any order in respect of the costs of the Trustee.

Final declarations and orders

1. I make the following declarations and orders: 1. Declare that the purported determination of the second defendant as to whether the plaintiff was entitled to a benefit under policy number 3261 (Police - Blue Ribbon Policy) was void and of no effect. 2. Declare that the plaintiff satisfies the definition of Total and Permanent Disablement within the meaning of the second defendant's policy number 3261 (Police - Blue Ribbon Policy). 3. Declare that the second defendant is liable to pay interest on the sum of $597,287.00, in accordance with s 57 of the Insurance Contracts Act 1984 (Cth), from 17 December 2014 until the date of payment of the said benefit. 4. Order that the second defendant pay to the first defendant in trust for the plaintiff the sum of $597,287.00, together with the said interest. 5. Declare that the purported determination of the third defendant as to whether the plaintiff was entitled to a benefit under policy number GR821-GL (Basic Policy) was void and of no effect. 6. Declare that the plaintiff satisfies the definition of Total and Permanent Disablement within the meaning of the third defendant's policy number GR821-GL (Basic Policy). 7. Declare that the third defendant is liable to pay interest on the sum of $207,216.00, in accordance with s 57 of the Insurance Contracts Act 1984 (Cth), from 17 December 2014 until the date of payment of the said benefit. 8. Order that the third defendant pay to the first defendant in trust for the plaintiff the sum of $207,216.00, together with the said interest. 9. Order that the second and third defendants pay 80 per cent of the plaintiff's costs. 10. No order for the costs of the first defendant. 11. Grant liberty to the parties to apply on short notice as to the form of these declarations and orders, such liberty to be exercised by 5.00pm on 23 June 2015.

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: 19 June 2015