Taylor v MDA National Insurance Pty Ltd

EX TEMPORE REASONS FOR JUDGMENT 1 This is an application for an interim injunction which has come before the Court in urgent circumstances this afternoon. 2 In the application, the applicant Dr Robert Taylor, seeks an order that upon his giving, by his advocate, the usual undertakings as to damages the Court order that pending further order the respondent in the proceedings, MDA National Insurance Pty Ltd, which is the applicant's professional indemnity insurer, be restrained from cancelling the contract of insurance, and that the contract of insurance is to remain in full force and effect according to its terms. 3 The nub of the matter is this. 4 On 20 January 2015, the insurer wrote a letter to the solicitors acting for Dr Taylor in relation to the contract of insurance. The letter of 20 January 2015 emerges out of a sequence of exchanges between Dr Taylor and his solicitors on the one hand, and the insurer on the other, over time, especially from about October 2014, in relation to a series of matters which had come to the attention of the insurer by reason of a particular article published in the media. That article raised a number of factual contentions which caused the insurer to seek a response from Dr Taylor about the various contentions in the article. 5 There are quite a range of contentions raised by the article and on 19 December 2014, the solicitors for Dr Taylor sent a comprehensive letter to the insurer dealing sequentially with each of them and asserting a position in relation to the proper law to be applied in determining the duty of utmost good faith and obligations of disclosure and, in particular, circumstances going to the legal obligations arising under s 21 of the Insurance Contracts Act 1984 (Cth), and also the proper approach to the construction, in particular, of s 21(1)(a) and (b) of that Act. 6 In the result, the insurer was unpersuaded that Dr Taylor had properly discharged duties cast upon him by law and in the letter of 20 January 2015, the insurer gave notice to Dr Taylor that under cl 41 of the professional indemnity policy, the policy of insurance was to be cancelled effective from midnight tonight. 7 That gives an indication of why the matter is before the Court late this afternoon. 8 Three things were said in the letter of 20 January 2015 grounding the contention of a contravention of cl 41 of the policy. The first goes to circumstances relating to events which occurred in May 2004 in Dallas in the State of Texas in the United States. In the letter, the author of the letter says that Dr Taylor admits, arising out of the earlier exchanges, that he was arrested in Dallas, Texas in May 2004, in relation to soliciting a minor for sex although he maintains that he does not recall being charged and that it was only recently brought to his attention that he may have been charged following the arrest. 9 Dr Taylor, in the exchanges, denies that he has been charged with any offence in the United States although he provides an explanation about those events in terms which suggest that he engaged in conversations in an internet chat room believing a certain state of affairs to exist but as things transpired he was in fact engaging with a police officer who presumably was trying to detect predation upon young children. It seems to be accepted by Dr Taylor that he was arrested about that matter in the sense that he was brought into custody by police officers and an investigation took place about aspects of that matter. 10 He says that he was not charged with any offence arising out of that investigation and he says that he has not been convicted of any offence, and really that is where that matter lies so far as he is concerned. I will return to an aspect of that in a moment. 11 The second matter raised by the insurer's letter of 20 January 2015 is that in the course of the exchanges Dr Taylor admits that after departing from the United States in 2005 and while residing in New Zealand and before immigrating to Australia in 2011, according to Dr Taylor's affidavit, he changed his name from Max Munish Mehta to his current "Anglo-Saxon" name, Dr Robert Taylor. 12 He says in his affidavit that he adopted that persona because in New Zealand he was of the view that adopting an Anglo-Saxon name was conducive to social engagement and social harmony from his perspective, and thus he adopted that name. He says in his affidavit that in 2011 he came to Australia and that he has not made any secret of the fact that his birth name is Mehta. He says that for the purposes of obtaining certification from the medical regulatory authorities, he submitted all of the foundation qualification documents going to his skills and qualifications, which disclose certificates and degrees and other matters in his birth name. 13 Dr Taylor contends that this matter of the change of his name is not a matter of great controversy, in fact. 14 The third matter that the insurer relies upon in the letter supporting cl 41 termination of the contract this evening is that Dr Taylor admits that prior to January 2013, albeit with the permission of a doctor called Dr Yousaf, he deliberately forged Dr Yousaf's signature to certify documents submitted to the regulatory authority known as AHPRA to support Dr Taylor's application for medical accreditation. He admits that was investigated by that body which made a finding in January 2013 that he had forged Dr Yousaf's signature with the result that Dr Taylor was required to undertake an ethics course of training. He undertook that course. 15 Arising from these contentions then, there seem to be three matters which are admitted by Dr Taylor. The first is that Dr Taylor was the subject of an arrest and an investigation in Texas in the United States in relation to particular matters in 2004, although those matters, it seems, subject to a matter that will be mentioned shortly, did not result in a charge nor a conviction for any offence. 16 The second thing is that Dr Taylor admits that he changed his name, and my recollection of the affidavit of Dr Taylor is that he says he changed his name in 2007. It is common ground that he did not disclose to the insurer upon applying for professional indemnity insurance or renewals of that insurance that he had changed his name. He says that he was under no obligation to do so. 17 The third matter which is conceded is that Dr Taylor, in engagement with a regulatory body, did forge Dr Yousaf's signature to certify documents submitted to that body in support of Dr Taylor's application for medical accreditation. It also seems to be accepted, or, at least on the evidence it is open to conclude, that Dr Yousaf had on a prior occasion certified to particular matters in support of Dr Taylor and that the matters in question were, again, those same matters. That, of course, is not to understate the significance of Dr Taylor's concession that for the purposes of his engagement with the regulatory body he elected to forge the signature of Dr Yousaf on certification documents albeit that they were documents that Dr Yousaf had on other occasions been willing to certify. 18 The insurer contends that having regard to these matters, it is entitled to cancel the policy of insurance on giving Dr Taylor three business days written notice, and by the letter of 20 January 2015, it does precisely that. The application for the interlocutory injunction is supported by an affidavit by Dr Robert Taylor and also by an affidavit by Mr Peter Whitehead. Dr Taylor's affidavit is affirmed on 22 January 2015. In that affidavit, Dr Taylor seeks to address a number of things, and one of them is a concern in relation to the way in which a particular question was answered in the application for insurance. 19 One of the questions to be answered by Dr Taylor was: Have you ever been the subject of an investigation, complaint, disciplinary or other proceeding or inquiry by any court, tribunal, board, statutory or other body? 20 Dr Taylor answered that question "no", and at para 21 of his affidavit, he says that he understood that question to be asking for information about his work as a radiologist only, and he still believes that to be the proper focus of that question. He says that he did not then, nor does he now, understand that question to be asking him to disclose anything about the circumstances of his arrest in Texas. 21 The insurer, on the other hand, says that the question of the arrest in Texas is a matter which goes to circumstances where a statutory or other body was conducting an investigation in relation to particular conduct and that was a matter which ought to have been disclosed and Dr Taylor did not properly answer the question by answering "no". The applicant for the relief today contends that there is ambiguity about the scope of that question and it was at least open to Dr Taylor to take the view he took about it at the time and that the question ultimately becomes one of examining what is required of him by s 21 of the Insurance Contracts Act 1984 (Cth). 22 That Act provides that an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or, a reasonable person in the circumstances (of Dr Taylor) could be expected to know to be a matter so relevant. The applicant says that he did not know that the matters in 2004 in Dallas, Texas, were matters relevant to the decision of the insurer whether to accept the risk, and he says that, properly understood, no reasonable person in his circumstances could be expected to know such a matter to be relevant. So, there is at least a question of contention between the insurer and Dr Taylor about that matter. 23 One might well conclude that the question of whether a person has complied with the law in relation to a particular matter in Dallas, Texas in the United States, would be a matter of relevance to the insurer in understanding whether the particular applicant for insurance has a disposition to comply with the law generally and in particular, whether that disposition might express itself in a failure to comply with professional obligations and professional legal obligations which might subsist during the period of insurance. However, for present purposes, I accept that there is a contentious question about what a reasonable person in the circumstances of Dr Taylor might be expected to know was the relevant matter. 24 The next question, then, is Dr Taylor's concession that he caused his name to be changed, and the relevance of that matter in terms of disclosure, to the insurer. 25 One could well imagine that in a relationship of utmost good faith, one to the other, that a party assuming risk in relation to conduct of a person who has shown a disposition to change their name, might well want to understand why that is so and what circumstances caused that individual to change their name, and whether there are things about that conduct which would rationally and reasonably call for inquiry. 26 On the face of it, I find it relatively difficult to accept that the question of the change of name of Dr Taylor from Mehta to Taylor is not a matter which the insurer could legitimately conclude is a matter it would wish to know about and ought to be disclosed to it. 27 Dr Taylor's answer to that proposition is that Dr Taylor did not seek to withhold the disclosure of his name change and that all of the circumstances relating to his qualifications under his birth name were fully disclosed to the regulatory bodies. I accept for present purposes that at least a question arises about the obligation to disclose Dr Taylor's name change to the insurer although I would regard a challenge by Dr Taylor to the proposition that there is no obligation to disclose that matter as being quite weak in terms of the strength of the triable issue. However, I accept for the moment that, although weak, it is, at least, a matter in issue and there may be facts and circumstances relevant to it which would need to be ventilated and tested with a view to making findings of fact at trial. 28 The third matter concerns the question of the deliberate forging of Dr Yousaf's signature on the certification documents. 29 That particular matter is one of very great concern. 30 Here is a professional person who is willing, in his dealings with the regulatory bodies, to forge the name of Dr Yousaf for the purpose of supporting medical accreditation. The explanation for that matter is that Dr Taylor understood that the matters which were the subject of a certification had previously been certified by Dr Yousaf. Dr Taylor accepts that forging Dr Yousaf's name was conduct which breached an appropriate ethical obligation. He says that it rises no higher than that and he undertook a course in ethics about it. 31 I do find very great difficulty in that proposition. 32 I find it difficult to accept any basis upon which any person dealing with a regulatory medical body could possibly regard forging Dr Yousaf's signature as legitimate or proper. Moreover, I would regard that matter as something which, having come to light (and even not having come to light), is a matter that ought to have been disclosed to the insurer. 33 The difficulty I have with the last aspect of the matter is that on the face of those contentions concerning the forging of Dr Yousaf's signature, it would seem to me to follow that there is an obligation on Dr Taylor to disclose that matter. Dr Taylor has sworn in his affidavit to the circumstances of that matter with a view to seeking to demonstrate that there is no failure of his obligations to the insurer. For the purposes of today's application, it seems to me that there are matters about that which would require some further examination. However, I am also of the view that the triable issue on that question is weak and even when weighed in the balance overall, is at great risk of failing to reach a sufficient threshold which would warrant the grant of interlocutory remedies. 34 Nevertheless, I accept for present purposes that there is at least an issue about those matters and I therefore look to the question of where the balance of convenience might lie and where prejudice might fall should the Court fail to act and it later emerge that the applicant has demonstrated the merits of its position on non-disclosure at trial, and whether the rights and interests of the applicant are so irreparably damaged in the interim that notwithstanding the great reservations I have about the triable issue questions on the matters I have mentioned, relief should go for the next few days. 35 On the question of the balance of convenience, there are a number of factors. 36 In Dr Taylor's affidavit, he deposes to facts in relation to his medical circumstances and in that affidavit he says that he has worked as a radiologist in the United States and New Zealand and Australia. He says that as a radiologist he has very limited contact with patients. He says that the majority of the time is spent reviewing various scans on computer screens and reporting on those scans mostly in writing. He says that he moved from New Zealand to Australia in 2011 and he also says that there are essentially three ways that he can work as a radiologist. The first is as an employee in a radiology practice under a contract of employment. The second is as a locum working temporarily in a radiology practice for a period of time, generally when someone is away. The third opportunity is a self-employed person establishing his own radiology practice. 37 I rather gained the impression from reading Dr Taylor's affidavit that he was in work as a radiologist and that should his contract of insurance be cancelled he would find it virtually impossible to find work in either of the three ways described, that is, as an employee, or working in a locum or as a self-employed person. It seems, however, that Dr Taylor is not presently employed although he has been employed until as recently as last Friday as I understand it, and that he is presently in the process of trying to obtain work. I understand that he is engaging in interviews about that matter at the moment. However, I accept that if Dr Taylor is unable to obtain or sustain professional indemnity insurance, he is at very great risk of not being able to work in any of the ways he has described which, for the purpose of this application, I accept as the relevant ways. That would make it difficult for him to earn any professional income pending the determination of these questions which are alive before us today. 38 The second thing is that he would then be dealing with professional matters in circumstances where there would be no subsisting professional indemnity policy and those with whom he deals might be at risk in relation to any claims-based matter that might arise. The proposition was also put that Dr Taylor is at risk of prejudice because if the contract of insurance is cancelled, he would then be required to honestly answer any application for insurance to the effect that his present policy has been cancelled and, of course, cancelled in circumstances where he says there is at least a triable question about that matter. 39 It is also said, as I have already mentioned, that should these events come to pass, then Dr Taylor will not be able to earn any money as a professional person. 40 The last matter which is agitated on this application is that it is not suggested, at least pending any interim order, that there is any immediate prejudice to the respondent by the Court intervening to grant urgent interim relief. That is not to say, of course, that in the dynamics of the relationship between the insurer and the insured, an insurer is not potentially in a prejudicial position if it is compelled to engage in a professional indemnity relationship with a person who has failed to discharge duties of utmost good faith. A breach of those duties carries with it the necessary inference and conclusion that the insurer would be at risk. However, for the purpose of this application, there is no demonstrated immediate risk that is likely to mature in the next four or five days. That is the foundation upon which I approach the matter for today's purposes only. 41 In examining these questions, I have had regard to and have applied the observations of their Honours Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 and particularly at [65] to [72] and I also have regard, of course, to the observations of Gleeson CJ and Crennan J at [19] where their Honours embrace the observations of Gummow and Hayne JJ. 42 I also have regard to the observations of the Full Court of this Court in a joint judgment of the Court in Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 where their Honours deal with questions arising out of ABC v O'Neill and other cases in relation to the proper approach to interlocutory injunctions and the balance of convenience and the relationship between triable questions and the balance of convenience. I thus adopt and apply the approach of their Honours in those matters. 43 Having regard to all of those observations, notwithstanding the reservations I have expressed, and they are serious ones for present purposes, about the strength of the triable question on some aspects in challenging the insurer's grounds of reliance on the cl 41 contended breaches giving rise to the termination of the contract of insurance, I propose to make an order which will have the effect, for a very limited period of time, of restraining the insurer from giving effect to a decision to terminate the contract of insurance from midnight on 23 January 2015. 44 I propose to make an order, not in the broad terms framed by the applicant in terms of a restraint operating until further order, but rather, I propose to re-frame that relief by restraining the respondent from cancelling the contract of insurance until 4.00pm on Friday, 30 January 2015 (having regard to the Public Holiday on 26 January 2015). The application will be listed for further hearing on 30 January 2015, for further determination as to whether or not the present order ought to be extended. 45 The costs will be reserved. 46 The orders are made on the usual undertaking as to damages given by Dr Taylor. 47 In relation to the matters which have been raised about my observation that Dr Taylor has denied being charged with any offence in the United States, I take the force of the observations by Mr Hazan that the highest at which that matter can be put is in the way he has described it, in that Dr Taylor says that he does not recall being charged after an arrest, or ever being notified or informed that he was required to attend a court on a future date on a charge of the kind referred to in the article. In the letter I referred to earlier dated 19 December 2014 from Hazan Hollander to the insurer, that matter is further addressed and Dr Taylor, through his lawyers, says that his attention has been brought to the possibility that he may have been charged following his arrest in 2004. To the extent that I made the observation that Dr Taylor actively denies that he has been charged with any offence, I do not regard the correct state of the evidence, as I have just described it, as causing me to alter the exercise of the discretion to grant an order which would be limited in the way described until next week. I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.