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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - Consumer Protection - Misleading or deceptive conduct - False or misleading statements concerning effect of a condition or right - Total disability benefits payable under contract of insurance - Statements by agent of respondent as to effect thereof - Whether misleading or deceptive - Whether false.Trade Practices - Consumer Protection - Loss or damage for misleading or deceptive conduct and for false or misleading statements - Whether tortious or contractual measure of damages appropriate - Life insurance policies - Whether rescission or variation and return of premiums appropriate relief.
Contract - Collateral contract - Whether statements mere respresentations or collateral contract - Whether contract breached - Measure of damages - Capacity to carry on occupation - Medical evidence.
Evidence - Similar fact - False statements made by insurance agent - similar statements made to other policy holders - Whether evidence of those statements admissible.
Trade Practices Act - ss. 52, 53, 82, 84, 87
HEARING
SYDNEYORDER
1. Declares that in trade or commerce the respondent, a corporation, engaged in conduct that was misleading and deceptive in relation to the effect of total disability benefits added to policies numbered 909837 and 438249 taken out by the applicant with the respondent contrary to the provisions of s.52 of the Trade Practices Act 1974.2. Declares that in trade or commerce the respondent, a corporation, in connexion with the supply and promotion of the supply of services made false and misleading statements to the applicant concerning the effect of conditions and rights, namely, the effect of the total disability claims and rights thereunder added to policies numbered 909837 and 438249 taken out by the applicant with the respondent contrary to the provisions of s.53(g) of the Trade Practices Act 1974.
3. Makes no order at this stage as to the loss or damage suffered by the applicant by reason of the respondent's conduct done in contravention of ss.52 and 53(g) of the Trade Practices Act 1974.
4. Declares that a collateral contract was entered into in 1977 between the respondent and the applicant under which the respondent, in consideration of the applicant agreeing to add total disability benefit provisions to policies numbered 909837 and 438249 taken out with the respondent and to pay to the respondent the additional premiums payable in respect thereof, agreed to pay total disability benefits to the applicant thereunder if the applicant suffered an injury or illness which rendered him physically incapable of carrying on his occupation as a self employed builder for a continuous period of 90 days and if the respondent on the expiration of that period, having regard to medical evidence, considered him unlikely ever to be able physically to carry on the said occupation.
5. Declares that the respondent breached the said collateral contract.
6. Orders that the respondent pay to the applicant the sum of $66,003 by way of damages for breach of the said collateral contract.
7. Orders that the respondent pay the applicant's costs of this application.
8. Directs that each party shall have liberty to apply.
DECISION
In these proceedings Jeffrey Kenneth Gates ("the applicant") has alleged that, in 1977, The City Mutual Life Assurance Society Limited ("the respondent"), through its authorised agent, represented to him that a total disability clause added to a superannuation policy which he had already taken out with the respondent would entitle the applicant to payment in full of the benefits under the policy if as a result of illness or injury he was considered on medical advice to be incapable of carrying on ever again his occupation as a self employed builder. He has also alleged that a similar representation was made in relation to an identical clause contained in a new life policy which he took out, at the time, with the respondent.He claims that these representations were false, were made in trade or commerce and that the making of them therefore constituted breaches of ss. 52 and 53(g) of the Trade Practices Act 1974 ("the Act").
Subsequently, in 1979, he suffered an injury which, he asserts, rendered him permanently incapable of carrying on his business as a self employed builder insofar as it required constant physical activity on his part. The respondent has denied making these representations and when confronted by the applicant after the injury denied liability to make any payment to him pursuant to the total disability clause.
The applicant has brought these proceedings to recover the amount of the loss or damage suffered by him as a result of this conduct pursuant to s.82 of the Act. He also claims, alternatively, under this Court's associated jurisdiction, that the respondent has breached its agreement to pay the benefits under the policy to him in the events which occurred and that he is therefore entitled to damages for breach of contract. The defendant denies liability.
Section 52 of the Act forbids a corporation in trade or commerce to engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Section 53(g) provides:-
"53. A corporation shall not, in trade or commerce, in connexion with the
supply or possible supply of goods or services or
in connexion with the
promotion by any means of the supply or use of goods or services -
. . . . . . . . . .FACTS
(g) make a false or misleading statement concerning the existence, exclusion or effect of any condition, warranty, guarantee, right or remedy."
The applicant was born on 20 January 1948. He served an apprenticeship as a plumber but didn't finish his course. However, in the course of his early employment, he gained experience in carpentry, bricklaying, drainage and concreting, as well as plumbing. He was married in 1967 and set up business in plumbing and building repairs under the name "J.K. & K.J. Gates & Sons". He continued to operate this business until 1974. During this period he did a variety of building work. The work he did personally included setting out the site, digging and building the foundations, labouring, carpentry, plumbing, finishing and the like. He acquired a block of land during this period and built a house on it himself. Subsequently he bought an old house and renovated it.
In 1977 the applicant moved with his family to live in Launceston, Tasmania. At first he carried on in Launceston a building business in partnership with another tradesman, Mr Watchorn. This involved his doing much the same type of organizational and physical work as he had done in Sydney. However, it was shortlived. He then set up business as a builder in partnership with his wife under the name "J.K. and K.F. Gates".
The first project of the family partnership was to construct villas on a vacant block, the option to which he had acquired with Mr Watchorn in August 1977. Mr Watchorn, however, did not wish to participate in this venture. It involved the borrowing of money from Esanda and in connection with the borrowing of those funds questions arose as to the sufficiency of the applicant's insurance cover.
As at April 1977, the applicant had taken out a number of policies with the respondent in Sydney and because he was living in Tasmania, it was decided to have them transferred to the Tasmanian register of the respondent. One of them, No. 909837 dated 12 November 1975, was for $20,000 and was payable on death or maturity (24 October 2012). The applicant requested the respondent to transfer these policies on 22 April 1977 and the transfer was completed by 17 June, 1977. This transfer brought the applicant into contact with one of the respondent's agents in its Launceston office, Gary Alwyn Rainbird. The conversations which ensued between them lie at the heart of this case. There is no dispute that a discussion took place regarding the addition of a total disability clause to the policy numbered 909837. The applicant says it took place in July 1977. Mr Rainbird's evidence is that it occurred on 6 September 1977 when, he says, the applicant signed an application for the inclusion of that clause in the policy. I shall first set out the various versions of the conversations.
The applicant says that he spoke to Mr Rainbird in July 1977 by telephone and told him that he was going to build the villa units and that the bank, because he was borrowing from it, required additional life policy cover. As a result, he says, Mr Rainbird visited him at his home where he told Mr Rainbird that he wanted an additional $20,000 policy which would, when combined with his existing policy (909837) be sufficient to satisfy the bank. The applicant says that Mr Rainbird drew to his attention a new scheme with disability cover which the respondent had come out with. When asked how it worked, Mr Rainbird said - "It is very simple if you have an accident or injury and after 90 days if your doctor says that it is unlikely that you will be able to go back and fully carry out your normal occupation then the insurance company will pay out as if you had died."
The applicant said that it sounded a great idea to him. He asked Mr Rainbird whether he was sure that was how it operated and he said it was. He referred to the case of an abalone diver in Victoria who contracted asthma and was not supposed to dive any more. The company accepted his claim and he bought another business. There was, he said, a removalist in Launceston who injured his back and was not supposed to lift heavy things any more but could still manage his business. The company accepted his claim and paid out.
There was further conversation according to the applicant, about the clause, in which Mr Rainbird repeated, in substance, what was the effect of the new scheme.
Mr Rainbird also said, according to the applicant, that the cost was only a few dollars a year and that if he gave him a cheque for the policy he would take it away and get it all fixed up. A new policy for $20,000 was also discussed but it was indicated he would have to have a medical examination before it could be taken out. The applicant says he gave him a cheque and that Mr Rainbird said he would make an appointment for the applicant with a doctor.
The applicant also asked him if he would mind checking to make sure about what he was saying regarding the disability cover. The applicant says Mr Rainbird rang him back the next evening, referred to the medical examination and also confirmed that what he had been saying about the disability cover was correct.
Subsequently, he says, Mr Rainbird again saw him at his home and pointed out that he had forgotten to have the applicant fill out a proposal form for the disability cover. Mr Rainbird produced the proposal and filled it out for him and against "occupation" put down "carpenter/builder". He asked him to sign and said "You will see up here it says if after 90 days your doctor thinks you cannot go back into your profession, which is what I explained to you before then you claim and you are quite happy with that?" The applicant said "Yes that is fine, okay by me" and signed it. In cross-examination he gave the following evidence:-
"Are you able to recall whether he told you it was a total disability
clause?----Not precisely.representations were originally made. The application is before me. The operative portion is in the following terms:-
Are you able to recall whether he told you it covered permanent incapacity of any type?----No, it was explained to me as I have been explaining it to you.
Are you able to recall whether he used the words permanent incapacity?----No, that was not mentioned.
Certain of that?----Yes.
But he did read through the clause with you, did he?----He just generally went through it and 'you see how it applies to your occupation'.
Did you have a piece of paper in front of you?--- This is when he came back and I had to sign it.
And he went through what was on the form with you?--- Roughly, quickly.
And did he tell you that medical evidence had to indicate that you were unable to resume work?---He said if your doctor thinks you should not be doing things and after 90 days you present that to the company and the company accepts your claim.
But did he tell you that medical evidence had to support your incapacity?---By that it is a doctor saying you cannot do part of your job.
Did he put to you medical evidence had to support your incapacity?----No, not any more than what I have just said.
Can you remember the precise words he used?----Just what I said - if you have an accident or anything and your doctor thinks you cannot carry out your normal job or you are restricted in any way from doing things you can normally do, and your doctor thinks that, then he just says that and that's it."
The applicant said that he signed the application two months after the
"Application is hereby made for the inclusion in the above-mentioned policy of a provision that in the event of the Assured's becoming Totally Disabled as defined hereunder while the policy is in force the Society will pay (subject to the policy conditions) the sum assured and vested bonuses (if any) and any other benefits, except for Death by Accident Benefits (which are hereby expressly excluded) which would otherwise have become payable had the Assured died on the date on which the claim for Total Disability payments is admitted by the Society, in full discharge of
its liabilities under the policy.applicant. Question C. was as follows:-
It is understood and agreed that:-
(1) an additional monthly premium of $2.14 (plus Stamp Duty, if any) will be payable for the Total Disability Benefit.
(2) if this application is accepted by the Society, such application, the declaration hereunder by the Assured and any Personal Statement made by the Assured in connection herewith shall be read with and deemed to be part of the policy.
DEFINITION
The Assured shall be deemed to be Totally Disabled if while this Policy is in force and prior to the last anniversary of the Commencing Date of the Policy immediately preceding his sixty-fifth birthday he suffers an illness or injury resulting in his continuous inability to perform active work for a period of ninety (90) days and the Society upon expiration of such period having regard to medical evidence considers him incapacitated to such an extent as a result of such illness or injury as to render him unlikely ever to be able to attend to any gainful profession, occupation or employment.
Signature(s) of J.K. Gates
Date 6.9.77 Policy Owner(s) THE CITY MUTUAL LIFE
NOMINEES (CANBERRA) PTY LIMITED
J.J. Robertson"
There then follows a series of questions and answers signed by the
"C. State the industry in which you work and the nature of your duties.
(Give full details).It is in Mr Rainbird's handwriting.
Building - Carpenter."
On 7 September the applicant signed a proposal for a new policy for $20,000 and at the same time signed an application for a total disability benefit. The operative part of that document was as follows:-
"Application is hereby made for the inclusion in any policy issued on the life of Mr Jeffrey Kenneth Gates (hereinafter referred to as the Assured) pursuant to my/our proposal to the Society dated 7 September 1977 of a provision that in the event of the Assured's becoming Totally Disabled as defined hereunder while the policy is in force the Society will pay (subject to the policy conditions) the sum assured and vested bonuses (if any) and any other benefits, except for Death by Accident Benefits (which are hereby expressly excluded) which would otherwise have become payable had the Assured died on the date on which the claim for Total Disability payments is admitted by the Society, in full discharge of its liabilities
under the policy.the applicant worked. Mr Rainbird wrote under that "Building self employed".
This application and the declaration hereunder by the Person proposed for Assurance shall be read with and deemed to be part of the aforesaid proposal.
DEFINITION
The Assured shall be deemed to be Totally Disabled if while this Policy is in force and prior to the last anniversary of the Commencing Date of the Policy immediately preceding his sixty-fifth birthday he suffers an illness or injury resulting in his continuous inability to perform active work for a period of ninety (90) days and the Society upon expiration of such period having regard to medical evidence considers him incapacitated to such an extent as a result of such illness or injury as to render him unlikely ever to be able to attend to any gainful profession, occupation or employment.
Signature(s) of Person(s) . . J K Gates. . .
Date 7.9.77 to be Policy Owner(s). . . . . . . . . . . . . "
This document also contained questions. One related to the industry in which
The applicant says he signed both documents seeking disability benefits on the faith of Mr Rainbird's statement as to the effect of the cover.
The applicant says his wife was present in the same room when the first of these conversations took place. By the time of the hearing the applicant and his wife were divorced and she was remarried. Her name now is Karen Jane Stringer. Mrs Stringer gave her version of the conversation. She says that it took quite some hours, that the applicant explained about the building of the villa units and the superannuation policy and the other policies already taken out and that there was a sickness and accident clause in that policy. Mr Rainbird, she says, brought up the subject of additional sickness and accident benefits and that his company had a new policy they were promoting that was a sickness and accident policy that would be suitable for them as clients, that if something happened to disable the applicant while he was building they would be covered by the Insurance Company so they would not lose everything they had. He said that this policy would pay out after a period, that if you were disabled physically and you had a period of 90 days off work and your doctor said you could not return to fully doing your occupation this policy would be payable. He gave them several examples. One was about an abalone diver who developed asthma and who subsequently could not dive and follow his occupation. The respondent paid out. Another was a removalist in Launceston who had injured his back and although he could not physically do the removalist work himself, he could still run the company employing other people and the policy had been found to be liable. She says her husband queried it that it seemed too good to be true. She said in evidence:-
"I cannot remember whether Jeff said or I said, but we understood that type of policy was more applicable if you became more totally and permanently incapacitated or if you became quadraplegic or something to that effect. Mr Rainbird assured us that you did not have to be incapacitated to that degree, that the policy was payable if you were incapacitated to an extent where you could no longer carry out the physical side of your work."
They asked him to check the facts of that policy.
Mr Rainbird, she says, subsequently contacted them and assured them that the policy was all right and payable if you were off work for the 90 days. On the second occasion he had a proposal form for the applicant to sign. She also recalls that the applicant had a medical examination which Mr Rainbird organised for him.
The first conversation she thinks took place in July or August 1977 and she is not sure how much later the second conversation took place. In cross-examination, although she had referred to "sickness and accident benefits" in chief she made it clear that what she was referring to was a provision under which the value of the policy was payable after a period of 90 days on medical advice. She also said that Mr Rainbird used the expression "physically incapacitated" not "totally incapacitated".
Michael Farrelly, a panel beater by trade, worked for the applicant in connection with the renovation of premises for a restaurant which became known as the "Gaslight Music Hall". He recalls seeing Mr Rainbird speaking to the applicant at the site. After speaking to the applicant himself Mr Farrelly says he spoke to Mr Rainbird. The applicant introduced him to Mr Rainbird and then left. He says he asked Mr Rainbird if he had a policy that would cover him if he could no longer perform his normal occupation. Mr Rainbird said "Yes". He asked him whether the policy was the same one he had told Mr Gates about and he said yes. He also asked him if it would apply to him as well because he was thinking of doing building and Mr Rainbird said it would. He stated that he had a policy that would cover him in full if he could no longer perform his normal occupation and that if he had an accident or an injury the policy would be paid out after a three month waiting period. Mr Farrelly says he told Mr Rainbird he would give him a call when he wanted it fixed up. There was tendered in evidence during cross-examination a statutory declaration by Mr Farrelly early in 1981 sent to the respondent in which he declared that he was in the presence of the applicant and Mr Rainbird when the latter stated that the insurance policy the applicant had taken out would pay out the total cover if he was unable to perform his normal occupation. In cross-examination Mr Farrelly gave confusing evidence regarding the conversation. He said it took place and that there were two conversations. However, it is strange that he did not depose to it in his evidence in chief.
Mr Rainbird also gave evidence. He remembered the applicant signing a request form in April asking that his policies be transferred to the Tasmanian registry. He also recalled, subsequently in 1977, filling out a proposal for a sickness and accident policy relating to the applicant that was designed to cover loss of wages in the event of illness or accident. Later still in 1977 he had discussions with Mr Gates in relation to applying total and permanent disability benefits to his existing superannuation policy. He, Mr Rainbird, thought this benefit was needed. As a service to his client he advised him it was available and that he should add it to his policy. He was adamant that Mrs Gates was not present when discussing disability benefits. He recalls the application for those benefits being signed. He says:-
"I went through the questions that you have to fill in on the application for 'D' in relation to his occupation and the industry he works in and I also showed him the definition on the document which he had in front of him then he signed in both places and it was sent away to our office to be assessed."
Mr Rainbird also recalled having a discussion with Mr Gates about further life insurance in September 1977 when Mr Gates indicated he needed extra cover. He said he automatically applied the disability benefits to the new policy. He also had him sign an application adding legacy benefits to his existing policy. On a later occasion, he says, he told the applicant he had to have a medical examination.
Mr Rainbird is quite definite that any discussion about total disability benefits took place when the application to add those benefits was signed. He says that there was no example given of a removalist or of an abalone diver. He was unable to explain why the documents were signed on different dates. In cross-examination he stated that Mr Gates read the definition and then signed it. He went on (at p.652):-
"Did you have any discussion with him about that definition?----No, he
would have understood the definition.total disability benefits.
How, was there any discussion that leads you to say he understood it?---It is in black and white, it says in that definition of total and permanent disability benefits if you suffer serious illness, injury, and cannot work at any gainful occupation.
But you cannot remember any discussion about the clause, is that right?----That was all that was said about it.
What was said about it?----As I just stated.
. . You told him that?----That the total in "(? and)" permanent disability benefits covers you against serious illness, serious accident, cannot work on any gainful occupation; I said 'there is the definition', he read through it and signed it,. . . "
Mr Rainbird denied any discussion whatsoever with Mr Farrelly regarding
I have endeavoured to summarise the evidence given at the hearing directed to what was said between the applicant and Mr Rainbird when the total disability benefits were taken out by the applicant.
At the hearing, affidavits were tendered of conversations of a similar nature which had taken place between Mr Rainbird and other persons in Tasmania. The tender was based on the principle relating to evidence of similar facts. After argument I delivered judgment indicating that I would admit such evidence. In the end evidence was given by five witnesses.
Herbert George Pitt, a Telecom technician, said that in mid 1977 he discussed with Mr Rainbird an existing policy he had with the respondent. After discussing Mr Pitt's finances and family situation, Mr Rainbird suggested that he take out a total disability benefit on the existing policy plus a further policy with a disability benefit. Mr Pitt was a member of an insurance superannuation scheme and he asked Mr Rainbird - "If I were to be superannuated from my present employment on medical grounds would City Mutual pay out to me the sum for which I was assured under the terms of the total disability benefit if I were to take out such a policy." Mr Rainbird said "If you are superannuated and would continue to be unfit for work for a period of three months, you would then have to undergo another medical examination and if it were found you were still unfit to resume your occupation then you will have to be considered as being totally disabled and the sum assured would have to be paid to you." He says that as a result of the representations he applied to add total disability benefits to his existing policy. He also took out an additional policy with such benefits added. He signed an application in similar terms to that signed by the applicant. He agrees he read it through at the time he signed it. In cross-examination he said he asked for an explanation of total disability, that he was assured by Mr Rainbird what it actually meant and he took his word. He was then asked:-
"And you knew you only became entitled to that capital sum if you were permanently incapacitated?---Permanently incapacitated from my employment at that time."
He went on to say that it was all totally related to his present occupation. The example of a paraplegic was given but as he questioned further it became the medical condition or an injury that resulted in "your inability to perform your occupation".
Robert Graham, a manager by occupation, just prior to Christmas 1978 took out a life insurance policy with the respondent. This was also taken out following a conversation with Mr Rainbird at his home. In his affidavit, he said he discussed the use and meaning of the clause with Mr Rainbird who said:-
"If you suffered an illness or an accident which resulted in you being unable to continue the work which you had been doing up to the time of the illness or accident, or for which you had been qualified, you would be paid in full under the policy."
He says that Mr Rainbird told him that payment under the policy would be made if it was considered that he was unable, three months after the illness or accident, to carry out the work which he had been doing up to the time of the illness or accident as such illness or accident would be considered totally disabling and payment in full would be made to him. He said that Mr Rainbird's explanation of the meaning of the clause caused him to have that clause included in his policy.
In oral evidence in chief, he said that the principal objective of himself and his wife was to make sure they had cover in the event of the major risk they faced, namely, an inability on his part to earn a reasonable income. At the time his net earnings were $26,000 a year. He discussed the clause with Mr Rainbird and most of the discussion was on the wording - "unlikely ever to be able". He went on:-
"It was pointed out to him that to get gainful employment I considered that I needed to be able to demonstrate that I had skill and experience and therefore, as I understand that, I remember making the point, as I understood that, that means that it would be in areas for which I was trained or in which I had experience.
What did he say?---He said, he would have said yes."
In cross-examination he agreed he was looking at a practical situation, namely, one in which he would be permanently and totally disabled from carrying out gainful employment in practice of the type he would be able to get. He was excluding from occupations that he could carry out those occupations that were theoretically possible but practically unreal.
Christopher Allan Hibbs, an apprentice diesel fitter gave evidence to the effect that in May 1979 at his home in Ravenswood, Tasmania, he had a discussion with Mr Rainbird about a type of insurance which if he couldn't work any more, would provide the money to pay off his bills for his car and the like. Mr Rainbird explained the insurance he could offer. Mr Hibbs couldn't remember exactly what he said. He was asked:-
"What did he say it offered?----That if I could not continue in my present job as a diesel fitter, that it would pay up sort of thing."
Mr Hibbs said Mr Rainbird gave a couple of examples. One he remembered was of an abalone diver who got air in his blood and couldn't dive any more. Mr Rainbird said that they would pay up in that event. In cross-examination he said that he understood the benefits would be payable if he couldn't continue in his original job, that is, if he couldn't work again as a diesel fitter. He also signed a form which contained a reference to total disability similar to that contained in the application signed by the applicant.
Gerard Arthur Grant, an assistant manager at K-Mart in an affidavit sworn for the purposes of the proceedings said that he and his wife in 1979 each took out with the respondent a life insurance policy. He said further that in approximately November 1981, Mr Rainbird visited his home in Newnham, Tasmania, and he took out a further insurance policy and, on Mr Rainbird's recommendation, he agreed to extend this insurance to include a total disability clause. He said that Mr Rainbird said to him "for a few cents more a week you would be foolish not to include the disability clause, because if anything happened to you at work and you could not do your present job, the total disability provision would apply to you." Mr Grant asked him if this meant that if he suffered an injury which made him incapable of performing his present job at K-Mart, such as a back injury, the respondent would classify such injury as a total disability and pay him the amount due. Mr Rainbird said "Yes, you would qualify under the total disability clause."
In oral evidence Mr Grant said that he and Mr Rainbird had been friends for some years. He agreed that the conversation about the matter took several hours and that it took place in November 1978, not November 1981 as he had said in his affidavit. He was asked in relation to the clause:-
"Did he ever use those words or any of the words in the clause to you during the discussions?---- No, just saying if I could not do that job,
the job at K-Mart, I would get total disability."Cressy, Tasmania. In an affidavit he said he had discussions at his home with Mr Rainbird in September 1978 when he took out a life insurance policy for $10,000 with the respondent. Mr Rainbird said it would be a good idea for him to take out a total disability cover with this policy and Mr Dennis asked him to explain it. Mr Rainbird then said "The total disability clause would cover you in the event of any accident which would prevent you from carrying out your normal work as a farmer." Mr Dennis asked him if it would cover him if he had a back injury which prevented him from carrying out manual farm work and Mr Rainbird said "Yes".
Did he say anything about what would happen if you could not do the job at K-Mart but you could do other jobs?----No did not mention it."
The final witness in this group was Nicholas Cashmore Dennis, a farmer at
As a result of Mr Rainbird's statement he agreed to extend the insurance to cover the disability clause.
In oral evidence he recalled it being said that it was like having worker's compensation in a way. He reiterated that what was said was that if he could not do his normal duties as a farmer, he would be compensated and that he couldn't remember anything being said about being totally incapacitated.
Mr Rainbird remembered discussions with these people, some with regard to total disability but the effect of his evidence was that the most that was mentioned in any case was that the clause containing the definition would cover him if he couldn't work at any gainful occupation. He denied saying to any of them words to the effect that the policy moneys would be payable if he became incapable of undertaking his present occupation. He also said that no examples were given, e.g. of a paraplegic or an abalone diver.
At the time of the relevant discussions with each of these five witnesses an application was signed either for total disability benefit or for inclusion of total disability benefit in an existing policy. In each case the document contained a definition relating to total disability identical to that contained in the applicant's application of 6 September 1977. The relevant discussions took place between November 1977 and May 1979.
Documents tendered in evidence, copies of which were circulated to agents of the respondent including Mr Rainbird, show that in March 1977 the respondent decided to make total disability benefits available to a wider range of policies including existing policies in that range. In May 1977 a special memorandum was issued dealing with their addition to existing policies. Questions did arise as to the effect of these clauses. For instance, on 30 August 1977 the Tasmanian State Manager wrote to a firm of furniture removalists in Launceston explaining the effect of the clause. This letter followed discussions with Mr Rainbird. The letter explained:-
"Where a business proprietor incurs an injury or illness as a result of which he is no longer deemed to be able to perform active work in that business, and the medical evidence supports the fact that the proprietor will be so incapacitated that he would be rendered unlikely ever to be able to attend to any gainful profession, occupation or employment, Total Disability Benefits would become payable under the terms of the contract even though the business proprietor (after permanent disablement) continues to enjoy an income from his business."
In early 1979 questions arose as to the relative merit of the respondent's disability benefits and those offered by National Mutual. A letter of instruction to Mr Rainbird from the Tasmanian State Manager of the respondent dated 19 March 1979 contained the following statement:-
"1. The main matter of principle is whether or not total and permanent disablement exists. The Society's present attitude is that if it does exist we pay the disability claim. We do not look for a job of any type that the claimant might be able to do."
At that time questions were being raised by a firm of public accountants in Launceston as to the precise operation of those benefits.
Having considered all the evidence, I am satisfied that Mr Rainbird did make statements to the applicant and his then wife to the effect that the total disability benefit under the provisions he was recommending for inclusion in his existing and new policy would be payable to him if he suffered an injury or illness which left him physically incapable of carrying on his occupation as a self-employed builder.
This is a case where I have to choose between two quite diverse versions of events. It is true that Mr Gates, in the course of his evidence, tended to reconstruct conversations. In many respects his evidence was unsatisfactory. Indeed were I left to determine this matter on the basis of his and Mr Farrelly's evidence, I may have had difficulty in forming a positive conclusion in his favour. However, I was greatly impressed with the evidence of the applicant's wife. I regard her as a witness of truth. Although it was submitted that she was, in effect, coached by the applicant, I am quite sure she was giving her own independent recollection. She was not shaken in cross-examination. Her evidence, in my view, was not only truthful but reliable and she strongly corroborated the thrust of the applicant's evidence that he was told that disability benefits would be payable under the policy in the event of his being unable as a result of injury or illness to carry on his normal occupation.
There was some debate as to whether the relevant conversation took place in July 1977 or early September 1977. At one stage Mr Gates conceded that it could have taken place in September but the thrust of his evidence was that it took place in July and that subsequently, early in September Mr Rainbird came back to him and asked him to sign the application. Mrs Stringer put the main conversation in July or August.
Tendered in evidence was a request by Mr Rainbird to head office dated 4 August 1977 in the following terms:-
"Mr Gates is a self employed builder. Please advise me M.P.D. premium re total disability".
This document is consistent with Mr Rainbird having previously discussed total disability in July and having gone away to ascertain the premium. He was, in fact, informed that the premium was $2.09. This was the amount paid by the applicant to Mr Rainbird on 7 September 1977 on account of the addition of total disability benefits to the old policy. When confronted with this document Mr Rainbird conceded that by 4 August 1977 he could have had discussions with the applicant regarding the addition of total disability benefits to his existing policy.
I do not think anything turns on when these conversations took place. I am inclined to think they took place in July when the applicant took out a personal accident policy relating to his business. However, even if I were satisfied, contrary to the thrust of the applicant's evidence that they took place on 6 September, I would still hold that Mr Rainbird made representations to the applicant about the total disability benefits to the effect claimed by him and supported by the evidence of Mrs Stringer.
Counsel for the respondent relied on a number of factors which he submitted should lead me, on the balance of probabilities, to hold that Mr Rainbird had not made the representations alleged. He pointed (inter alia) to the applicant's admission that the clause was read, that it was headed "total disability" and that it contained its own definition. He also submitted that when the applicant read through the policies after the event, with full knowledge of the relevant facts, what he read appeared to accord with what he had been earlier told. Further, the applicant did not raise the question of disability cover until towards the end of 1979 and this was a factor to be taken into account in weighing the evidence.
He also pointed to the fact that the applicant had admittedly told Comalco untruths in relation to his employment by them and he had failed to tell his doctors that he had gone to work for them. He also relied on a number of matters which illustrated that the applicant must have been reconstructing when giving his evidence of the conversations.
In coming to the conclusion that I should accept the applicant's version, I have taken into account all these factors. As I have already indicated, had I been left with the applicant's evidence alone, these and other matters may have led me not to be satisfied that the statements were made. However, impressed as I was with the evidence of Mrs Stringer, and having in mind that none of the factors relied on is conclusive against the applicant, I am left with the firm conviction that representations of the nature alleged were made. The applicant does appear to have been consistent throughout in his claim that the moneys were to be payable if he couldn't work to full capacity in his occupation. When he first saw Dr. Patchett on 6 March 1979, shortly after his accident, Dr. Patchett noted:-
"Has complicated insurance policy which calls for compensation if he can't work to full capacity. So ref. D. Morgan".
I am strengthened in this conclusion by the impression which I had of Mr Rainbird's evidence. It seemed to me, as I listened to him in the witness box that he reconstructed his evidence based on what he regarded as his normal conduct. That impression is confirmed by my study of the transcript of his evidence. The evidence established that he discussed the question of total disability benefits with many clients and in cross-examination he conceded that he had no independent recollection of what took place. There are several passages which could be quoted but the following is sufficient:-
"The fact is Mr Rainbird, is it not, that you have no recollection at all of where or when or in what circumstances any of these documents were
signed. Do you agree with that?----Correct.that he could have had dicsussions by that date with Mr Gates about total disability additions to his policy. It is also clear that by mid June 1977 he was aware of Mr Gates' existing policy and that it did not carry disability benefits.
And I suggest to you you have got no recollection at all, no independent recollection at all, of any of the conversations that you had with Mr Gates or of where they were, or of who was present at those conversations relating to any of these matters in these documents?----All my business transactions were with Mr Gates.
You have no recollection as to where or when or in what circumstances. Do you agree with that?---- Correct."
Faced with the memorandum of 4 August 1977 requesting information, he agreed
This does not mean that I think Mr Rainbird deliberately told an untruth. It may well be that he gave his evidence to the best of his ability but his recollection was, in my view, faulty and not based on an independent recollection of the events but on what he regarded he would have said based on what he believed was his normal practice at the time. For instance, in saying that he didn't discuss it at the time the personal accident policy was taken out, he said "that is not something you talk about" (namely, taking out total disability) "and do it three or four months later". Admittedly he was keen to provide a service to his clients by getting them to take out what apparently was a new cover, that is the addition of total disability clauses to existing policies. Mr Gates, having become his client by 17 June and discussions on insurance matters having taken place shortly thereafter in July, it does seem likely that he would, at that stage, have pursued the question of total disability. I therefore do not regard Mr Rainbird as a reliable witness particularly as to the content of the conversations which took place leading up to Mr Gates adding total disability cover to his policy No. 909837.
As stated earlier, the applicant also relied on the similar fact evidence of some five witnesses. Such evidence is admissible if its relation to the fact in issue (in this case, whether the representations alleged were made) consists in the probability or increased probability that it would not be found unless the fact to be proved also existed (see Martin v. Osborne (1936) 42 Arg. L.R.261).
It appears that between 1 January 1977 and the commencement of this application, the respondent issued to 205 persons life assurance policies to which were attached total disability benefits and which were negotiated or serviced by Mr Rainbird. It was admitted that the applicant had written to 200 of these people. 33 responded in writing and 3 orally. Obviously it is not possible to conclude from the evidence that Mr Rainbird made similar representations to all of these people. Indeed, as it seemed to be in their interests to respond to the applicant's letter, it would not be proper to conclude that he made those representations to more than those who gave evidence of their making. However, their evidence does establish that representations of a similar nature were made during this period by Mr Rainbird and the making of them, in my view does, within the principles stated, make it more probable that they were also made to the applicant.
I am of the opinion therefore that the evidence of the five witnesses which I have endeavoured to summarise is admissible and that it does tend to support the probability of similar representations being made to the applicant.
However, I should make it clear that I have not relied on this evidence, as such, in coming to the firm conclusion I have that representations of the nature alleged by the applicant were, in fact, made. In other words, had I come to the view that the evidence of these five witnesses was not admissible, I would still have formed this conclusion based on my consideration of the evidence of Mr Gates, Mrs Stringer, Mr Farrelly and Mr Rainbird. In coming to that conclusion, I have had in mind that, although the civil standard of proof applies, a breach of s.53 of the Act can be the subject of criminal proceedings and therefore have had regard to the gravity of the matters in issue (see Peter Williamson Pty. Limited v. Capitol Motors Limited judgment of Franki J. as yet unreported and cases there cited).
As stated earlier I am satisfied that Mr Rainbird made statements to the applicant and his wife to the effect that the total disability benefits under the provisions he was recommending for inclusion in his existing and new policy would be payable to him if he suffered an illness or injury which left him physically incapable of carrying on his occupation as a self employed builder.
These statements were about the effect of the total disability cover and were clearly false. Under the definition in the cover the illness or injury suffered must be such as to render the insured "unlikely ever to be able to attend any gainful profession, occupation or employment" - a much more severe test.
On the evidence, which I accept, the statements were made in circumstances where the applicant queried the effect of the cover saying that what Mr Rainbird was offering was "too good to be true". Mrs Stringer said they thought that type of policy was more applicable "if you became a quadraplegic". They asked him to check. He did and he confirmed what he had said. On the faith of what he said the applicant added total disability cover to his existing policy and included it in the new policy.
At the time he made these false statements Mr Rainbird was clearly acting as the agent of the respondent. As a result of s.84(2) of the Act, the conduct he engaged in is deemed, for the purposes of the Act, to be engaged in by the respondent.
It follows from these findings, in my opinion, that the respondent has committed a breach of s.52 of the Act, that is to say, through Garry Rainbird, its agent, it has, in trade or commerce, engaged in conduct that is misleading or deceptive. It was misleading or deceptive conduct because Mr Rainbird falsely stated the effect of the total disability benefit provision which was being recommended by him for addition to the applicant's existing policy (No. 909837) and for inclusion in his new policy (No. 438249) with the respondent.
It also follows from these findings that the making of these false statements constituted a breach by the respondent of s.53(g) of the Act. Through Mr Rainbird, the respondent, in trade or commerce, in connexion with the supply of services (which by definition includes the rights benefits etc. provided granted or conferred under a contract of insurance) or the promotion of the supply of such services made false and misleading statements to the applicant concerning the effect of a condition or right. The condition is the condition in the total disability benefit cover which stipulates the events upon which the disability benefits are payable. The right is the right to total disability benefits under that cover. This was a breach of s.53(g) of the Act.
As indicated earlier, the applicant claims, in the alternative, for breach of contract which he says arises out of the same circumstances and therefore falls within the associated jurisdiction of the Court.
At the outset, this claim depends on finding that the respondent had promised to pay the total disability benefits if the applicant suffered an injury which rendered him physically incapable of carrying on his business as a builder.
The difference between a mere representation and a condition or promise is well known to the law. It is not always an easy matter to determine whether a representation has become part of a contract. It has been suggested that the Courts in England have been much more inclined to treat the making of a representation as leading to a collateral warranty or collateral contract than have Australian Courts. (See Cheshire & Fifoot - Law of Contracts - 4th Australian Ed. para 1037; Esso Petroleum Co. Ltd. v. Mardon (1976) Q.B. 801 per Lord Denning at 817). There is also a difference of approach between the two sets of Courts on the question whether a collateral contract will be recognised where the alleged collateral term is inconsistent with a term of the main contract. (cf. Hoyt's Pty. Ltd. v. Spencer [1919] HCA 64; (1919) 27 C.L.R. 133; City and Westminster Properties (1934) Ltd. v. Mudd 1959 Ch. 129; Seddon: a plea for the Reform of the Rule in Hoyt's Pty. Ltd. v. Spencer 1978 52 A.L.J. 372).
I do not think it is necessary, for the purpose of deciding this case, to enter into these fields of controversy. In determining whether statements made during negotiations leading up to the making of a contract are contractual or mere representations depends basically on the intention of the parties to be gathered from their words and conduct at the time. (See generally Halsbury's Laws of England Vol. 9 para. 347).
In the circumstances of this case I do not think there can be any real doubt, on the evidence I have accepted, that the parties intended the statements made by Mr Rainbird to have contractual effect. The nature and effect of the disability cover being offered by the respondent was discussed, the applicant asked that what Mr Rainbird was saying about it be checked, it was in fact confirmed to the applicant and the applications for disability benefit were clearly signed on the faith of those statements. The only proper inference to draw, in my view, from those facts is that it was intended that the statements made about the cover should have contractual effect. This is not a case where the respondent was agreeing not to enforce its acknowledged rights under the new disability cover as to the events upon which payment would be made, so as to bring into operation the principles laid down in Hoyts' Case. Here the parties contracted on the basis that the benefits would be payable if the applicant suffered an injury which forever rendered him physically incapable of carrying on his business as a builder.
The applicant did in fact sign applications for total disability benefits, in relation to each policy, which were subsequently accepted by the respondent and which contained a provision for payment which was different, indeed, much narrower. The proper legal interpretation of these events is in my view that there was a collateral contract under which the applicant agreed to enter into the contracts of insurance so constituted and to pay the premium thereunder in consideration of the respondent agreeing to pay disability benefits to the applicants in the circumstances represented by Mr Rainbird on its behalf.
The applicant is entitled to enforce that contract in this court by way of an action for damages for breach under the court's associated jurisdiction. In this respect I think the case falls squarely within the principles variously stated in the respective judgments of the Justices of the High Court in Philip Morris Inc.& Anor v. Adam P. Brown Male Fashions Pty. Ltd. and United States Surgical Corporation v. Hospital Products International Pty. Ltd. & Ors. (1981) 33 A.L.R. 46
I shall turn now to the question of damages. It is convenient to deal
separately with the claim under s.82 and the claim for breach of contract.
THE MEASURE OF DAMAGES UNDER S.82 OF THE ACT.
The applicant claims to have suffered loss or damage by reason of the respondent's conduct contravening ss.52 and 53(g) of the Act. This action is brought to recover the amount of that loss or damage pursuant to s.82 of the Act. The applicant asserts that under this provision he is entitled to be compensated on the basis that, having suffered an injury which prevented him from carrying out his normal occupation as a builder, he should be entitled to receive the total disability benefits payable pursuant to the policy. The exact amount so payable would depend on fixing the date when the respondent should, in effect, have recognised the applicant's right to receive those benefits.
He also contends that he is entitled to damages covering loss of profits from his business as a builder on the basis that, had he received these amounts from the respondent, he would not have suffered certain consequential losses. He also claims that had he had the moneys he would not have had to dispose of his interest in the restaurant, the Gaslight Music Hall but would have been able to remain in the business and make a large profit either from the business or its resale. Another claim he makes is that had he received the amounts under the policies, he could have operated as a builder and earned a minimum of $15,000 per annum. These are only some of the items claimed by him. In all he claims $201,141.
The respondent on the other hand submits that the applicant is not entitled to be compensated under s.82 on the basis that the policy included a right to receive benefits as represented by Mr Rainbird but is only entitled to be put in the same position as he was had he not acted on the faith of Mr Rainbird's statement. On this approach, it is argued, he is entitled either to nothing or, at the most, to the return of premiums paid by him for disability benefits under each policy.
The respondent submits that the proper principles to apply to the assessment of damages under s.82 are those applicable in an action for deceit. These principles are discussed in the following passage from the judgment of Dixon J. in Toteff v. Antonas [1952] HCA 16; (1952) 87 C.L.R. 647 at 650-1:-
"In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant. When what he has been induced to do is to make a purchase from the defendant and part with his money to him in payment of the price, then, if the transaction stands and is not disaffirmed or rescinded, what is recoverable is 'the difference between the real value of the property, and the sum which the plaintiff was induced to give for it' per Abbott L.C.J. Pearson v. Wheeler (1825) Ry. & Mood. 303, at p. 304 (171 E.R. 1028, at p.1029). As Sir James Hannen P. in Peek v. Derry (1887) 37 Ch. D.541 at p.594; cf [1889] UKHL 1; (1889) 14 App. Cas. 337 pointed out, the question is how much worse off is the plaintiff than if he had not entered into the transaction. If he had not done so he would have had the purchase money in his pocket. To ascertain his loss you must deduct from the amount he paid the real value of the thing he got."
The question has been considered in a number of cases in this court.
In Brown & Anor v. Jam Factory Pty. Ltd. & Anor 35 A.L.R. 79, Fox J. held that the correct way to approach the assessment of damages in the case before him was to apply the general principles respecting the measure of damages in tort. His Honour said (at p.88):-
"The correct way to approach the assessment of damages in this case, in my view, is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in reliance on that conduct (see Esso Petroleum Co Ltd. v. Mardon (1976) 1 QB 801; (1976) 2 A11 ER 5). This is the same, or analogous to, the general principle respecting the measure of damages in tort. There was not anything promissory in the statements relied upon, and no basis exists for adopting the measure of damages applicable in contract. As an action based on s.52 is more appropriately classified as one of tort, it is possible that the measure of damages will always, fundamentally, be based on principles affecting torts."
In Mister Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Limited (1981) 36 A.L.R. 23, Northrop J. agreed with these views and applied the principle to the facts of that case but conceded that there may be cases where the measure of damages to be recovered exceeds the difference in value between the amount by which the price paid exceeds the true value of what was obtained. His Honour referred to Esso Petroleum Company Limited v. Mardon (1976) 1 Q.B. 801. (See too Hubbards Pty. Limited v. Simpson Limited (decision of Lockhart J. 23 April 1982 unreported) and Margaret Brown v. Southport Motors Pty. Limited (decision of Fitzgerald J. 21 July 1982 unreported).
It is undesirable to lay down a general rule that the loss or damage suffered by a person as a result of conduct in breach of ss. 52 or 53 of the Act, is to be assessed on the basis of principles applicable to an action for deceit and not those applicable to breach of contract and I do not think their Honours intended to do so. Sections 82 and 87 are general provisions and Parliament clearly intended to confer a wide general power to compensate an applicant who has suffered loss by contravening conduct. Section 87 makes it clear that the means adopted for compensating an applicant can involve rescission, the variation of a contract and the refund of moneys as well as payment of damages.
Nevertheless it may well be that in most, if not all claims for damages for conduct breaching ss. 52 and 53, the appropriate test is the measure applicable in tort. I say this because these provisions are basically concerned with misleading and deceptive conduct in the course of trade or commerce. It is conduct which is much more akin to tortious conduct. The conduct struck at may or may not involve a breach or the formation of a contract. I therefore think that I should follow the approach adopted by other judges of this court.
In the present case, if the applicant is to be compensated on this basis, the appropriate measure of the damages he has suffered by reason of the contravening conduct is, I think, the difference between the value of what he has paid and has to pay by way of premiums and the value of the total disability condition in the policies in question. As a result of the contravening conduct he took out the disability cover. There is no evidence to show that this cover was not worth the premiums payable for it ($2.09 per month on a $20,000 policy) and therefore, on this approach to compensation, the applicant would not be entitled to any pecuniary damages.
An alternative method of compensating him for the loss or damage he has suffered would be to vary or rescind the policies and direct a refund of the premiums paid to date. This would restore him to the position he was in before the representations were made. In this case there do not appear to be any other consequential losses which the applicant has suffered by reason of the false statements. There are claims based on non payment of the benefits but these, in my view, for reasons I shall explain, fall into a different category.
The applicant, of course, has not claimed to be compensated on this latter basis. He asserts that the respondent said it would pay benefits, on the basis stated by Mr. Rainbird, and that, in the events that have happened, he is entitled to receive those benefits and compensation flowing from the non payment of them.
The applicant has claimed these amounts as damages to which he is entitled by virtue of s.82. I am quite satisfied, for the reasons I have given, that, on the basis of the false statements being mere representations, the applicant is not entitled to recover these amounts under s.82. They represent damages which might be payable on the basis of a measure of damages appropriate to contract and for the reasons I have given I do not think this is the proper basis. Does it make any difference, for the purposes of s.82, that the false statements became, as I have held, the subject of a collateral contract between the parties. In my opinion, it does not. The contractual aspect which the false statements bear may have resulted from the making of those false statements but the damages which the applicant suffers by reason of the breach of that contractual arrangement do not. They flow from a breach by the respondent of its promise to pay the benefits in the events agreed. If the applicant is to recover them he can only do so on the basis of a breach of the collateral contract.
It follows, therefore, that, in my view, the applicant is not entitled by
virtue of s.82 to recover any more than a refund of the premiums which he has
paid for the total disability cover. This relief, however, would have
to be
accompanied by an order varying policy No. 909837 and varying or rescinding
policy No. 438249. I do not propose to make orders
to this effect, first
because the applicant has not asked for them and secondly because I am
satisfied, for reasons I shall now explain,
that the applicant is entitled to
recover the amounts payable under the policies.
DAMAGES FOR BREACH OF COLLATERAL CONTRACT.
I have already held that a collateral contract existed between the parties for the payment of disability benefits in the events represented by Mr Rainbird.
In the context of what took place between the parties, I think the respondent agreed to pay the benefits if the applicant suffered an injury which rendered him physically incapable of carrying on his occupation as a builder for a continuous period of 90 days and if the respondent on the expiration of that period having regard to medical evidence considered him incapacitated to such an extent as a result of such injury to render him unlikely ever to be able physically to carry on his occupation as a builder. At the time the statements were made by Mr Rainbird, the 90 day period of physical incapacity and the need for medical evidence to establish physical incapacity were also mentioned by him to the applicant. I think it was clearly intended that they be part of the collateral agreement.
I think it is also clear on the evidence that, at least since April 1980, the respondent has denied the existence of the collateral contract and refused to perform it.
On 10 April 1980 the applicant wrote to the respondent alleging what had been told to him at the time he took out the cover and urging the company to recognise his claim on this basis. During that month the company wrote and rejected his claims under the policies. In a conversation with Mr Gates on 16 April 1980 an officer of the respondent told the applicant that his claims had been disallowed and that Mr Rainbird had denied the allegations made about him.
The respondent having refused to be bound by the collateral contract the applicant has, in my opinion, since April 1980, been entitled to recover the damages flowing from this breach or repudiation of the contract. That is what he seeks to recover in these proceedings.
Because the respondent did not recognise the collateral agreement it does not appear to have considered, prior to these proceedings, whether the applicant became incapable of physically carrying on his business as a builder, as it would have had it recognised it. However, I do not think this matters. Even if it had recognised the collateral agreement, payment to the applicant under it would not be dependent on the respondent forming such a view. Under a provision such as this, the respondent could not act capriciously. It should pay out the policy if there is medical evidence before it on which it ought reasonably be satisfied or on which a court would be satisfied that the insured, as a result of the injury, became physically incapable of carrying on his occupation continuously for 90 days and unlikely thereafter ever to be physically capable of carrying it on. (See Thew v. Railway Passengers Assurance Co. (1860) 6 Jur. N.S. 759; Harvey v. Ocean Accident & Guarantee Corporation (1905) 2 I.R.1; Braunstein v. Accidental Death Insurance Co. (1862) 5 L.T. 550).
Here this question does not arise directly because the respondent refused to recognise the arrangement and did not turn its mind to the matter. Upon its refusal, however, the applicant became entitled to the damages flowing from it.
Those damages, in my opinion, should at least equal the amount, if any, which the respondent would have been liable to pay to the applicant had it recognised the collateral contract. This in turn depends on whether the applicant was physically incapable for a continuous period of 90 days from carrying on his occupation as a builder and on whether, on medical evidence, had the respondent considered the matter, the respondent ought to have formed the view that the applicant was unlikely ever to be able physically to carry on his occupation as a builder.
I shall now deal with the evidence directed to these matters.
Early in February 1979 the applicant was renovating premises in Wellington Street, Launceston, for a restaurant. A concrete slab was being poured for the kitchen and bar areas. The task which the applicant was undertaking was the bringing of ready mixed concrete in a wheelbarrow from a truck and depositing it in a foundation. While receiving concrete from the truck more came down the shute than he expected. The wheelbarrow turned over, the applicant went with it and he landed on his back on a pile of brick rubble. This was very painful and the pain continued. He also found that he couldn't work except for short periods. After a couple of weeks he sought medical treatment. He went to see his local doctor, Dr. Barnes. In fact he was seen by a locum, Dr. Patchett, who, on 6 March 1979, noted "acute back strain since pouring concrete 3 weeks ago". He referred him to Dr. Morgan, an orthopaedic surgeon.
After examining him, Dr. Morgan formed the view that he had a lumbar disc disruption. He wrote to Dr. Patchett on 8 March 1979:-
"I am sure he has a lumbar disc disruption. I have advised relative rest and concurred with his working on as long as he does not do anything more than supervisory activities. I have suggested the temporary use of a low back support and analgesia as appropriate. With care his symptons should slowly settle."
On 27 March 1979 Dr. Patchett issued a certificate stating he was suffering from a lumbar disc lesion but stating he was fit for work from that date onwards.
The applicant continued to work but he still suffered pain and found he was unable to do the tasks he previously did in the renovation of the restaurant building. Instead of others helping him he had to get others to do the physical work and he assisted when he could. This work was completed towards the end of 1979.
Dr. Morgan saw him next in January 1980. He again formed the view that the applicant had a lumbar disc injury. He advised he avoid heavy work whilst his symptoms persisted. He was unable to predict whether his condition would improve or get worse. He wrote on 24 January 1980:-
"It would certainly be of interest to see the result of the HLAB 27 test but assuming that it is negative I still believe he has a low lumbar disc injury. He would be wise to avoid heavy work while his symptoms persist and would certainly be wise to go onto some occupation where he could
avoid heavy stress and change of position frequently if possible.13 March 1980 Dr. Morgan wrote to Dr. Barnes stating his opinion that the applicant had a genuine lumbar disc injury. At this stage he wondered if there was a touch of the psychotic about him but went on to say:-
. . . . . . . . . .
There is still a reasonable chance that his symptoms will settle at least to a degree and perhaps entirely. This is unpredictable of course and it is also just possible that they may worsen and even further investigation in the form of discography and perhaps consideration for fusion may become necessary."
He saw him again in March 1980 and did not notice any significant change. On
"He is unfit for heavy work in my view, and this may persist indefinitely. Nonetheless, I believe he is capable of light work and I certainly can't state that he is 100% disabled."
On 18 March 1980 Dr. Morgan answered a questionnaire from the respondent in which he stated:-
"I believe this man's symptoms are caused by a lumbar disc injury which is causing him variable back pain, worse on sitting and activity. The prognosis is unpredictable in that his symptoms could well gradually settle with the passage of time, but it is quite possible they may persist
at this level indefinitely.remunerative work the applicant would be capable of performing at sometime in the future. The condition might continue or he might be fit for any kind of work.
I believe he is fit for light work not involving lifting or frequent bending, preferably in a position where he is able to alternately sit, stand, walk about etc. from time to time. Clerical or sales work for instance, would be suitable."
He went on to state that he couldn't predict with certainty what type of
Dr. Morgan gave a report to a firm of solicitors on 29 April 1980. He repeated his diagnosis of a persisting lumbar disc injury. He went on in that report:-
"Despite considerable pressure from Mr. Gates, I resisted his suggestions that I certify him as unfit for work of any kind permanently, or indeed even temporarily. I regard him as fit for light work, not involving lifting or frequent bending, preferably in a position where he was able to change his position from time to time."
In cross-examination Dr. Morgan said that at the time he last saw Mr Gates he would have felt it was more likely than not that he would have been left with some persisting symptoms and that in view of that he ought to avoid heavy work. He still believes he had a genuine injury but there might have been some overlay factors. The applicant did in fact engage in some heavy work at Comalco in late 1979 and early 1980. Dr. Morgan said in his evidence-in-chief that he had no recollection of being told this and that had he known it might have affected his opinion. He said in cross-examination that he couldn't remember what the applicant said to him in 1980 about work. He also said that the fact that the applicant couldn't do his pre-existing job as a builder and had retired as a restauranteur seemed to be worrying him a lot.
In relation to his persisting symptoms he said he just was unable to form a definitive opinion as to how severe they might be or how long they might persist.
Dr. Barnes gave evidence. His locum in March 1979 was Dr. Patchett who saw him first. Dr. Barnes saw him on a number of occasions after that. The applicant continued to complain about his back. X-rays were taken and advice was received from Dr. Morgan. On 28 April 1980 Dr. Barnes gave the applicant a letter for the City Mutual in which he stated:-
"I consider he is unlikely to ever be able to return to previous occupation of builder."
Dr. Barnes was cross-examined on this expression of opinion but asserted that it was correct. His attention was drawn to a report of 16 April 1980 of Dr. Einoder, an orthopaedic surgeon, who had given the applicant a certificate to stay off work from 18 December 1979 until 1 June 1980 "to comply with his insurance claim". In that report Dr. Einoder said:-
"I am however unable to give him a certificate for any time beyond 1.6.80
since I feel it is not possible to predict the course that he will take.variance with Dr. Einoder as the latter had only seen the applicant once.
I suggest however that he is fit to perform most of his duties excepting the strenuously excessive activities and he should be encouraged to find such work."
Dr. Barnes in cross-examination, didn't think that his view was at complete
Three specialists were called on behalf of the applicant. They first saw him after the proceedings had commenced.
Dr. Guirgis, an orthopaedic surgeon, saw him three times. He interviewed and examined him and he had the benefit of computerised axian tomography (a CAT scan). Dr. Guirgis expressed the view that it was his firm belief that the applicant would not be fit again to be involved in any activities which would require applying stresses to his lumbar spine such as heavy lifting or repeated bending. He did not think that he would be fit again to work as a builder although he might be all right in a supervising job.
The CAT scan in question was taken by Dr. Williams, a radiologist, who also gave evidence and confirmed the results of the scan. Dr. Williams said that the scan was over 80% accurate by which I took him to mean that there was more than an 80% chance of it being correct. In this case the scan reflected an injury of the disc of a traumatic nature consistent with the applicant falling while wheeling a wheelbarrow.
Dr. Evans, also an orthopaedic surgeon, saw the applicant in January 1982 and after interviewing him and observing the CAT scan and X-rays reported:-
"I think that symptoms are consistent with swollen L4-5 and L5-S1 discs as shown on the CAT scan. This would cause the relatively mild symptoms that he has. These symptoms would prevent him from doing heavy work such as his pre-injury work and I think it is quite reasonable to assume that the disc lesions at L4-5 and L5-S1 have been caused by the work injury. I think the prognosis is for continuing symptoms at about the same level indefinitely."
Two specialists, Dr. Conrad and Dr. Weisz, were called on behalf of the respondent.
Dr. Conrad, a general surgeon who did considerable orthopaedic work, saw him on 4 November 1981 and after consideration of his symptoms physical examination and X-rays said that there was no objective evidence of disc damage present. He felt the applicant probably had a ligamentous strain and he was sure that this had settled down. He said in a report:-
. . . "I believe he could carry on his occupation as a self-employed builder providing that he did not do the heaviest of labouring work
himself. He certainly could work as a plumber.with the applicant's length of history, a milogram or discogram or something should be done to clarify his diagnosis and to find the real situation. He had by this seen the report by Dr. Guirgis and was aware of the CAT scan. He said that he at least gave the CAT scan report some credibility. He also conceded that he was not able to adhere to a definite opinion that the applicant had a ligamentous strain without a discogram or myelogram. He said that the applicant should not do repetitive lifting or lift more than 50 kilograms. He included among the tasks he shouldn't do, bricklaying, concreting without an assistant to help him, lifting heavy roof frames, digging ditches for any length of time, wheeling a wheelbarrow full of concrete or working on a roof.
I feel that his prognosis is good and he has a fairly minimal disability at the moment."
In cross-examination however, Dr. Conrad stated that he felt strongly that,
Dr. Weisz is an orthopaedic surgeon. He saw Mr Gates on 25 September 1981. After examination he stated that he didn't consider the applicant to be totally disabled according to the respondent's definition but in view of the negative examination he had conducted he would suggest only that he avoid very heavy lifting which would place strain on his presently settled lumbar spine. In his evidence in chief, he agreed that the CAT scan was some indication of a possible disc pathology and seemed to agree that this didn't co-relate with his expressed negative findings during his clinical examination. He thought there could be disc pathology present but he didn't think the test gave enough proof of that. Dr. Weisz was familiar with the use of the CAT scan and he had, as a result of his own research, arrived at the conclusion that they were more than 80% accurate. He agreed that if the applicant was his own patient he would suggest he avoid activity that might reactivate his earlier condition involving heavy physical work such as lifting, rapidly bending to pick up special objects, digging, climbing up ladders on to roofs and the like. He should avoid a full time job involving heavy manual labour.
The evidence does not show of course that the applicant is unlikely ever to be able to attend to any gainful profession, occupation or employment. Indeed, the applicant did not seek to make out such a case. He also appears to concede that he could work as a builder in a supervisory capacity or in clerical occupations. What he claims however is that he has not been physically able to work since the injury and he cannot again work as a self-employed builder as he had previously. From time to time, since the injury, he has undertaken work, e.g. at Comalco and as a cellarman. Both involved strenuous physical activity. I do not, however, regard his ability to do this as inconsistent with his claim that he is physically incapable of carrying out his occupation as a builder. During 1979, following the injury, he was engaged in building work at the restaurant but it is clear that he was not then physically able consistently to do the work he previously could.
Two builders were called to give evidence of the type of work a self employed builder might do. I think this evidence only confirms what is common knowledge, namely, that a self employed builder does much of the physical work on a building site as well as supervising. This, on the evidence, was certainly so in relation to the work which the applicant had performed prior to the injury.
The medical evidence confirms Dr. Morgan's original diagnosis of a lumbar disc disruption. He did not have the benefit of a CAT scan. Dr. Guirgis did not see him at the early stage but with the benefit of the scan his evidence clearly supports the existence throughout of an injury which rendered him permanently incapable of physically carrying on his occupation as a builder. Dr. Evans' evidence supports this. Although Dr. Conrad and Dr. Weisz, in their reports indicated that they thought he could carry on work as a builder, these views were qualified in the light of the scan. Such a scan was admittedly at least 80% accurate and each of them, in the light of it, was prepared to advise against heavy lifting and similar activities.
I am satisfied, having regard to the medical evidence before me, that, on the balance of probabilities, the applicant suffered an injury in February 1979 that rendered him physically incapable of carrying on his occupation as a builder continuously for a period of 90 days thereafter and that, since the expiration of that period, he has been unlikely ever to be physically capable of carrying it on. His occupation as a builder, he being self employed, involved him in considerable physical activity and after the injury he was no longer able to undertake it consistently as he had in the past. To do so would have been against medical advice.
The amount which the applicant would receive under the policy, upon the disability condition being fulfilled, would, of course, vary depending on bonuses and other amounts accrued up to the date when he became entitled to payment. The clause in the actual policy contained the following proviso:-
"PROVIDED THAT the Total Disability shall be taken as having occurred on the day on which the Society notifies in writing to the person then holding title to the Policy its admission of the claim for Total Disability payments."
Under that provision the bonuses etc. would be calculated, as I understand it, as at the date of notification. The respondent could not, as I have already indicated, escape liability simply by refusing to admit the claim. If it did it could be liable for damages for breach of the total disability provision in the policy if it could be shown on medical evidence that it ought to have admitted it.
Under the collateral contract which I have found to exist in this case, the respondent does not appear ever to have considered, on medical evidence, the applicant's capacity to carry on as a builder because it rejected his claim that such a contract existed. However, had it admitted the contract the respondent would, provided it proceeded to consider the matter expeditiously, have been entitled to refuse to admit the claim until it had medical evidence before it which justified a conclusion that he was unlikely ever to be capable physically of carrying on as a builder.
The applicant does not appear to have made coherent claims based on Mr Rainbird's representations until late 1979 or early in 1980. It was in April 1980 that these claims were rejected. Had the respondent, at that time, considered the applicant's ability to carry on as a builder in the light of the medical evidence before it, it would probably have sought further evidence. Late in April 1980 Dr. Barnes apparently gave a certificate to this effect but Dr. Morgan and Dr. Einoder, who were specialists, were not sure as to the applicant's future disability. On the evidence before me, what has enabled me to form a firm view on this matter is the CAT scan prepared for these proceedings and the evidence of Dr. Guirgis and Dr. Evans based on it.
What I have to fix is the time by which the respondent, had it turned its mind to the question, ought to have been satisfied of the applicant's future physical incapacity to carry on as a builder in terms of the collateral contract and admitted the claims.
This is obviously a matter of conjecture. Had the respondent invited the applicant to provide medical evidence to substantiate a claim under the collateral contract and obtained its own, it may well have taken another 6 to 12 months before it had in front of it evidence on which it ought to have admitted the claim. It would probably have involved a decision to take a CAT scan. I am satisfied that that moment would have been reached by the date these proceedings were commenced, i.e. 22 April 1981. It might have had the evidence before that date, but I am not satisfied it would. This being so, I propose to adopt it as the date on which the applicant would have become entitled to payment of the disability benefits.
I therefore consider that the applicant is, at least, entitled to damages equal to the amounts which he would have received under the two policies had they been duly paid out as at 22 April 1981. Figures were supplied to me of what these amounts would have been. They are $43,593.60 (Policy No. 909837) and $22,409.50 (Policy No. 438249).
As indicated earlier, the applicant relied on other heads of damages. These are based on the claim that the respondent should have paid out the policy moneys at a date much earlier than I have found to be so. Even if I had found that the policy moneys should have been paid as early as mid 1979 I would not have awarded damages on these bases. In my view they are too remote. The evidence as to them is unsatisfactory but had I regarded them as appropriate heads of damage I would have given the applicant an opportunity to prove them fully. This however is unnecessary.
In the circumstances, therefore, I think the applicant is entitled to damages for breach of the collateral contract in the sum of $66,003.00. As I understand it, the respondent would be entitled to deduct from this amount a small sum representing premiums unpaid. The respondent should pay the applicant's costs of these proceedings.
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1982/179.html