Triffitt v Australiansuper

PARTIES : Michael Triffitt v Australiansuper Pty Ltd & Colonial Mutual Life Assurance Society Limited

COUNSEL : Mr M Gollan for plaintiff Mr J Duncan for defendants

SOLICITORS : Firths - The Compensation Lawyers for plaintiff Home Wilkinson Lawry for defendant

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50063 of 2007 Michael Triffitt v Australaiansuper Pty Ltd & Colonial Mutual Life Assurance Society Limited. JUDGMENT 1 His Honour: This is the hearing of proceedings in which the plaintiff makes a claim against the first defendant, the trustee of Australiansuper, and the second defendant, the insurer of the fund, for payment of disability benefits being benefits for total and permanent disablement. The second defendant insured the benefits payable by the first defendant. 2 In August 2007 the defendants agreed to pay the total and permanent disablement benefit (the TPD benefit) of $95,400 which was paid on 11 October 2007. The hearing is only concerned with questions of interest and costs. Chronology 3 The plaintiff was employed by Incat Tasmania Pty Ltd in Hobart, Tasmania as a trainee welder and commenced employment on 27 March 1995. He became a member of the fund shortly thereafter. 4 On 16 June 1997 the plaintiff suffered a severe injury to his back at work. He suffered a second injury on 30 September 1997 and a third on 4 December 1997. He was off work for a period of time and then returned on light restricted duties up until 25 August 1998 when he was certified totally unfit for work thereafter, ceasing employment on medical grounds on 17 September 1998. He has not worked since. 5 On 2 November 1999, the plaintiff underwent a lumbar fusion which was performed by Dr Liddel. 6 On 13 December 1999 the plaintiff's solicitors submitted the plaintiff's application for payment of a TPD benefit. The application was considered by the insurer and the trustee and over a period up until April 2001 the defendants made various requests for information. The defendants had the plaintiff medically examined. 7 On 12 May 2001 the first defendant advised the plaintiff of the rejection of his claim. The reasons for declining the claim were provided in the letter refusing the claim. Between this time and November 2006 there was no further communication between the plaintiff and the defendants. 8 The plaintiff then consulted the solicitors and asked for copies of documents from the trustee regarding his claim which was supplied by the trustee under cover of a letter dated December 2006. 9 On 16 April 2007 the plaintiff's solicitors wrote to the trustee with a copy to the insurer enclosing further medical reports and a detailed statement from the plaintiff and asked for urgent reconsideration of the application. It was pointed out by the solicitors that they would have to commence proceedings before 12 May 2007 in order to prevent a limitation point arising. 10 In May 2007 the plaintiff's solicitors wrote to the trustee a letter enclosing further documents relevant to the reconsideration of the application. The documents included further medical reports made during 2004 and 2005. This letter was received by the trustee on 7 May 2007. 11 These proceedings were commenced on 8 May 2007 and in due course the defendants had the plaintiff medically examined on 29 June 2007 and they proceeded with the reconsideration of the application and preparation of the matter for hearing. 12 On 28 August 2007 the solicitors for both defendants wrote to the solicitor for the plaintiff and said inter alia: "We confirm that on 24 August 2007 we informed you that we had been instructed that CommInsure had resolved to pay the benefit amount under the Policy." 13 The letter then went on to deal with the disposition of the proceedings regarding interest and costs. The letter was expressed to be without prejudice save as to costs but such privilege was waived. The plaintiff's claim 14 The plaintiff claimed interest from the date of rejection of his claim on 12 May 2001. He had earlier maintained an earlier date but this was not pressed in the hearing before me. The claim against the trustee was pursuant to section 100 of the Civil Procedure Act 2005 and pursuant to s 57 of the Insurance Contracts Act 1984 (Cth) against the second defendant insurer. The plaintiff was content to accept the rate of interest applicable to the claim under section 57 of the Insurance Contracts Act 1984 (Cth). The plaintiff also sought his costs of the proceedings. 15 Section 57 of the Insurance Contracts Act 1984 (Cth) is in these terms: ""57 Interest on claims (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. (3) The rate at which interest is payable in respect of a day included in the period referred to in subsection (2) is the rate applicable in respect of that day that is prescribed by, or worked out in a manner prescribed by, the regulations. (4) This section applies to the exclusion of any other law that would otherwise apply. (5) In subsection (4): law means: (a) a statutory law of the Commonwealth, a State or a Territory; or (b) a rule of common law or equity. 16 The defendants raised the question of whether at the date of the hearing there was any present liability to pay an amount under the contract of insurance. They submitted a that in respect of the refusal to meet the claim on 12 May 2001 the plaintiff had not shown that the actions of either the trustee or the insurance company should be set aside. Similarly in respect of the failure to reconsider the matter prior to proceedings commencing the defendants also submitted that there was no basis on which the Court could determine the matter. 17 It is apparent that there was a further decision shortly prior to 24 August 2007 that the claim should be paid. In an addendum to the submissions of the defendants it is conceded that: "1. In August 2007, the defendants' solicitors, under cover of 'without prejudice' communication, advised the plaintiff's solicitors that the defendants would pay to the plaintiff the TPD benefit. The benefit of $95,400 was subsequently paid on 11 October 2007. …….. 12. At most, the fact that the payment of the benefit referred to in paragraph 1 above, at its highest, means nothing more than that the Trustee and Insurer formed respective opinions pursuant to the trust deed and the insurance contract that, on the material now before the Trustee and the Insurer , the plaintiff is totally and permanently disabled within the relevant definitions in the trust deed and the insurance contract." (emphasis added) 18 The relevant clauses in the trust deed and in the insurance policy are a standard form for this type of benefit. The definition in the trust deed was as follows: ""total and permanent disablement" means disablement of a Member resulting from an illness accident or injury to the Member which commenced or occurred whilst the Member was employed by an Employer and whilst a Member as a result of which - (a) the Member has been precluded for a period of six consecutive months after the date of occurrence of such event from following any occupation for which the Member is reasonable suited by education training or experience, and (b) the member will, in the opinion of the Trustee after consideration of medical evidence satisfactory to it, continue to be so disabled to such an extent as to render the Member unlikely ever again to resume work in or attend to any such occupation; and "totally and permanently disabled" shall have a corresponding meaning PROVIDED THAT where at any time all or part of the benefit payable in the event of total and permanent disablement is insured with an insurance company, the term "total and permanent disablement" shall bear the meaning ascribed to it in the relevant policy in lieu of the above definition unless the trustee in its absolute discretion otherwise determines; " 19 The definition in the insurance policy was in these terms: "" Total and permanent disablement (TPD): Disablement where we are satisfied on medical or other evidence that an insured member : (a) has been absent from employment for 6 consecutive months because of sickness or injury; and (b) (i) is so incapacitated because of the sickness or injury that the insured member is prevented from ever engaging in his or her own occupation or any occupation for which he or she is reasonably suited by education, training or experience; or (ii) has suffered the total or permanent loss of the use of: · 2 hands; or · 2 feet; or · 1 hand and 1 foot; or · the sight in both eyes; or · 1 hand or 1 foot and the sight in 1 eye, where "hand" means whole hand below the wrist and "foot" means the whole foot below the ankle." 20 The evidence before me satisfies me as to the occurrence of the relevant injury and the fact that the plaintiff was not able to work for a period of six months. The concession referred to above shows that the appropriate opinions were formed. Accordingly in my view there is a liability, which is attached to the second defendant to make the payment and thus enlivens section 57 of the Insurance Contracts Act 1984 (Cth). In these circumstances it is not necessary to determine whether the earlier decisions of the trustees can be attacked. 21 As was made plain in the submissions of the defendant the material before the trustee and the insurer earlier this year was substantially different from the material before them in 2001. Whether this is relevant depends upon a consideration of the authorities that deal with the payment of interest under section 57. It was the plaintiff's submission that the settled law was that interest would be payable from the date, determined objectively, from which it became unreasonable for the insurer to withhold payment. They referred to an earlier case where this matter was decided that being a decision of Cole J in Bankstown Football Club v CIC Insurance Ltd (unreported 17 December 1993) where he remarked as follows: "In my view, s57 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. If there was liability found and the insurer to pay, then the presumption must be that the insurer would be deemed to know of that obligation as ultimately determined, even though it may bona fide have held a different view at all time prior to determination, at least at the first instance level, in relation to the question of liability. A reasonable period is to be given to the insurer to investigate and determine its position but if it adopts an incorrect position in relation to its obligation to pay under the policy, that, in my view, does not mean that simply because that incorrect position is adopted on a bona fide basis, it becomes reasonable for the insurer to decline to pay the sums otherwise due. That seems to me to be the correct interpretation of s57(2), particularly in circumstances of s57(1) of the Act, where an insurer is liable to pay to a person an amount under a contract of insurance." 22 Those proceedings reached the High Court and the High Court remarked (187 CLR 384 at 410) as follows, "There has been no challenge to the construction placed upon section 57 by Cole J that a reasonable period is to be given to the insurer to investigate and determine its position, but the existence of a bone fide dispute as to the entitlement of the insured is not necessary in answer to the complaint that the insurer has been acting unreasonably in withholding payment." 23 This view was followed by Einstein J in Hams v CGU Insurance Limited [2002] NSWSC 843. His Honour had earlier decided the question of liability and at paragraph 27 and following he said: "27 In my view the approach taken by Cole J in Bankstown Football Club Limited v CIC Insurance Limited is apposite in relation to treating with the s 57 issue in this present case. Certainly a reasonable period must be given to the insurer to investigate and determine its position. It seems to me that for the insurer in this case, and in these circumstances, to claim that its position ultimately found to have been incorrect, must be measured by the approach taken by this insured in making this claim, does not properly reflect the correct approach where the s 57 criterion has to be determined. If, as here, the insurer adopts an incorrect position in relation to its obligation to pay under the policy, that does not mean that simply because that position was adopted on a bona fide basis, it became reasonable for the insurer to decline to pay the sums otherwise due. I do not accept that there is substance in the proposition that on the facts here, the insurer can be said to have justifiably and reasonably withheld payment until judicial determination of the issue. 28 It seems to me that the cases cited by Mr Taylor SC each deal with particular types of circumstances where, as with completion of a coronial enquiry and as with questions of an insured's conduct, one-off type circumstances arose justifying that approach. 29 This was a claim which the defendant must be taken to have investigated prior to rejecting the claim." 24 The plaintiff's submissions particularly relied upon the comments in paragraph 29 as a basis for his claim that interest should be payable from 12 May 2001 when the claim was denied. 25 In Sayseng v Kellogg Superannuation Pty Ltd & Anor [2007] NSW SC 857 Nicholas J a was concerned with the determination of interest in certain circumstances following an appeal to the Court of Appeal in earlier proceedings that were heard by Bryson J. His comments on the question of interest were as follows: "7 In my opinion it should now be accepted that the correct approach to be taken by the court on this question is that taken by Cole, J in Bankstown Football Club . In my assessment, the cases to which I have referred establish that 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. Under the Act the court is not required to evaluate and pronounce upon the opinion or decision-making process of the insurer. It is not relevant that the insurer acted bona fide in denying the claim, or when the judgment of the court established the insurer's liability to pay it. In short, the award will be calculated on the basis of what the court finds is a reasonable time for completion of the insurer's investigation of the claim. Put another way, in my opinion, the insurer is not automatically liable to pay interest from the day on which it became liable to pay to a person an amount under a contract of insurance. Under s 57(2) liability to pay interest is to be calculated with regard to the day on which it was unreasonable for the insurer to withhold payment of the amount after it had become liable to pay it in response to a claim." 26 He also later commented that: "21 Furthermore, it was always open to the insurer to have initiated its own enquiries after notification of the claim and pending receipt of responses from the plaintiff and the trustee. For example, upon receipt of the member's statement and accompanying information it was well-placed to retain medical practitioners to examine the plaintiff and otherwise obtain further information to enable it to assess the claim. Certainly, in my opinion, by the time the employer's statement had been received, the insurer had had ample time within which to thoroughly investigate and assess the claim." 27 A perusal of the reasons given for the rejection of the claim would indicate that over the several years since the injuries the insurer and trustee had been able to make a number of investigations and had the plaintiff medically examined by their own doctors including a psychiatrist. The actual assessment of the plaintiff's claim was in the following terms: "DESCRIPTION OF ALLEGED DISABILITY LUMBAR DISC LESION, DEPRESSION MEDICAL PRACTITIONERS CONSULTED

Dr Daryl Nye, Consultant Neurosurgeon Dr John Liddell, Consultant Neurosurgeon Dr David Brownbill, Consultant Neurosurgeon Dr N Ludbey, General Practitioner Dr Mark Cunningham, Consultant Psychiatrist Dr David Barton, Consultant Occupational Physician

Dr Daryl Nye, a Consultant Neurosurgeon examined the member on 02/06/99. On examination Dr Nye noted the presence of a gross functional state, with excessive sensitivity to gentle palpation in the lumbar region, a gross restriction of lumbar movement, a claimed subjective sensory impairment affecting the whole of the left leg. Dr Nye considered the member was not fit to return to his pre injury duties nor to undertake alternative employment at the present time.

Dr John Liddell, a Consultant Neurosurgeon performed a spinal fusion on the member on 02/11/99. In a report dated 01/11/99, Dr Liddell was of the opinion that the likelihood of the member resuming his former duties or similar duties in the foreseeable future was negligible.

Dr David Brownbill, a Consultant Neurosurgeon examined the member on 26/11/99. Dr Brownbill examined the patient three weeks post the spinal fusion performed by Dr Liddell. Hence spinal movements were not tested. Dr Brownbill considered that at that stage he would not be able to return to work activities. However, it was likely that in six months time he would be able to return to work avoiding heavy lifting, forced spinal mobility, repeated bending or prolonged standing or sitting. These restrictions would continue permanently.

The Medical Attendant's Statement was completed by Dr N Ludbey, the member's GP. Dr Ludbey completed the Statement on 02/06/00 at which time he stated that the member was undergoing a rehabilitation program and that he may expect to return to light/ alternative or modified duties in the future.

Dr Mark Cunningham, a Consultant Psychiatrist, examined the member on 22/01/01. Dr Cunningham diagnosed his condition as Adjustment Disorder with Anxiety and Depression associated with his back injury. The member reported being motivated to return to work. Dr Cunningham considered the prognosis to be good and his condition may be assisted by a psychiatrist or a psychologist treating him for a period of three to six months. The member himself reported that he was 90% improved post surgery. Dr Cunningham noted that in. terms of the member's fitness for work, he would be unable to return to his previous work and should avoid weight bearing. Dr Cunningham was of the opinion the member would be best suited to a sedentary job,

Dr David Barton, a Consultant Occupational Physician examined the member on 22/01/01. Dr Barton was of the opinion that the member's symptoms were not as disabling as he portrayed and that the member had the capacity to return to suitable employment, such as running a takeaway food store or process work in a factory of bench repair activities. Mr Barton reported that he had managed a pizza shop for four years and would like to open a small business possibly in the smallgoods area where he could do management activities. Overall, Dr Barton considered that from a physical point of view the prognosis was excellent.

WORK EXPERIENCE/REHABILITATION: Rehabilitation was attempted but met with no success. CONCLUSION:

Mr Michael Triffitt is a 30 year old former trainee welder, (2nd year) with Incat Australia who ceased work on 25/08/98 as a result of a back injury sustained during the course of his work with Incat in June 1997. A workers compensation claim was lodged. The claim was accepted on 09/12/97 and finally settled and closed on 14/12/99. Mr Triffitt's work history includes periods as a factory hand, driver, salesman/storeman and managing a pizza shop. He has indicated a desire to open a small business and undertake the management activities of this venture.

The medical evidence overall to date suggests that Mr Triffitt does have a capacity to undertake some work within his sphere of experience, education and training.

Both Drs Cunningham and Barton were of the opinion that the member had the capacity to undertake sedentary work or management activities respectively. Dr Cunningham considered the prognosis from a psychological point of view to be good. Dr Barton considered the prognosis from a physical viewpoint to be excellent. Dr Barton also notes that the member's symptoms were not as disabling as he portrayed.

Dr Nye noted a gross functional state, but considered the member was not fit for his pre injury or alternative duties. Dr Liddell performed a spinal fusion on the member on 02111/99. Prior to this procedure, he provided a report dated 01/11/99 in which he stated that the likelihood of the member resuming his former duties or similar ones was negligible.

Drs Ludbey and Brownbill were both of the opinion that the member could undertake selected duties with restrictions.

In order to qualify for Colonial benefits for Total and Permanent Disablement, Mr Triffitt must satisfy the policy definition.

Total and Permanent Disablement means having been absent through injury or illness from employment for six consecutive months and after consideration of medical evidence, having become incapacitated to such an extent as to prevent the member from ever engaging in the members own occupation, OR ANY OCCUPATION, for which the member is reasonably suited by education, training or experience,

It has been made clear from the above medical evidence, that Mr Triffitt could undertake selected duties. The member himself has also indicated a desire to undertake certain employment options. Therefore Mr Triffitt does not meet the requirements for eligibility for Total & Permanent Disablement, and as such, Colonial is denying the claim.

Having stated this, on the balance of probabilities it would be fair and reasonable that on the weight of the medical/rehabilitation evidence, Mr Triffitt has not satisfied the definition of Total and Permanent disablement as contained in the contract between Colonial and Superannuation Trust of Australia.

Should Mr Triffit have any further medical/rehabilitation information which are previously unsighted and falls within our period of liability (25/08/98 to 25/02/99) and wishes to submit that information to us, we will reassess the claim.

Assessor: Harin Randhawa 02/03/01 Signature:" 28 The plaintiff underwent a laminectomy in November 1999 and the defendants had information regarding that procedure. Obviously sufficient time had passed for the impact of that procedure to be assessed in the context of the application made by the plaintiff. Apparently the defendants agreed because they were confident enough to make a decision to reject the claim. It is apparent from the reasons above that there was information to support the plaintiff's position. Both Dr Cunningham and Dr Barton were doctors engaged by the defendants to examine the plaintiff. Give that fact and the time from when the injuries occurred and the decision to reject the claim, it seems clear there was adequate time to assess the claim 29 The fact that the later medical evidence and information submitted in 2007 may have provided a different perspective or further confirmation of the plaintiff's claim is not relevant to the question of determining what was a reasonable time within which to assess the claim. 30 In my view a reasonable time to assess the claim expired on 12 May 2001 and accordingly interest should be payable from that date. The parties may wish to make further submissions on costs once my decision on this aspect is known. Accordingly I will fix the time for any further submissions.

19/10/2007 - no amendment - Paragraph(s) 29/10/2007 - - Paragraph(s)

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