|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices - misleading or deceptive conduct - misrepresentation by credit union as to terms of disability insurance policy concerning loan repayments - whether applicant could and would have obtained alternative insurance but for respondent's inducement - whether respondent acting unconscionably in demanding loan repayments - whether respondent in breach of either collateral warranty or warranty implied under s.74 Trade Practices Act 1974 - availability of damages for distress, inconvenience and anxiety.Practice and Procedure - commencement of limitation periods under Trade Practices Act for claim for lost opportunity and for claim of unconscionable conduct - discretion to allow amendment to pleadings discussed.
Trade Practices Act 1974: ss.52(1), 52A, 74, 82 and 87.
Federal Court Rules: Ord 13 r (2).
HEARING
SYDNEY Counsel and Solicitors N F Francey and J R S Bowers
for Applicant: instructed by Emery Sheriff & WatsonDunhill MorganCounsel and Solicitors R S McColl instructed by> for Respondent:
ORDER
In respect of matter G861 of 1988 -short minutes of order giving effect to these reasons for judgment, on which date argument as to costs will be heard.
1. The application be dismissed.
2. The matter be adjourned to a date to be fixed to
hear argument as to costs.In respect of matter G863 of 1988 - Counsel bring in, on a date to be fixed,
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.6
DECISION
Before the Court were two separate applications, the one by Mr Zoneff and the other by Mr Hollands that were by consent heard together, since both of the applicants were members of the Elcom Credit Union Limited ("the respondent"), a credit union formed under the provisions of the Credit Union Act 1969 (NSW). At the relevant time the respondent existed to deal solely with persons ("members") who were employed by Elcom Industries, the State Electricity Commission or its predecessor. The respondent was an industry based credit union, which is to say that its membership was restricted to persons employed in the mines which serviced the Electricity Commission. Each of the applicants was, prior to the disabling accidents they each suffered, an underground miner.2. At the relevant time the respondent obtained deposits from members who authorised direct deductions from their pay, which deposits attracted interest and utilised the funds so invested for the purpose of making loans to members, again at interest, that rate of interest varying depending upon the purpose of the loan and the security offered. Thus interest on home loans secured over the member's home attracted a lower rate of interest than interest on loans for other purposes.
3. At some point of time the respondent itself insured borrowers who suffered an injury or disability from accident for the amount of the borrowing and paid the premiums itself, the premium no doubt being reflected in the interest rate charged to borrowers.
4. The terms of the insurance seem to have been that a benefit was payable under it in the event of the member being unable to engage in his usual occupation.
5. However in March 1983 the respondent negotiated with an independent broker for a form of policy that would be available to borrowers upon payment by the borrower, not the respondent, of a premium. The insurer under the policy was QBE Insurance Limited. The policy was not one which the respondent sought in the market place but rather one which it settled upon after approaches were made to it by a Mr Phil Davies of CUIBS, the independent broker.
6. The new form of policy contained what, for the applicants, was a severe drawback; it provided that the benefits payable under it, which were in essence the instalments of loan repayments, which the borrowers were required to repay to the respondent under loan agreements entered into with the respondent, up to a limit of $20,000 would be indemnified only if the borrowers' injuries were such as to incapacitate him from any work.
7. Under the policy benefits were payable only in the case of "total
disability" defined as meaning:
"the Insured Debtor being totally and continuously8. As it turned out each of the applicants suffered an accident, with the result that he was seriously disabled and unable to resume his employment at the mine. This disability was not ultimately, however, such that he was prevented thereby from engaging in or attending to any possible occupation that might be conceived. In the result in each case, after an appropriate period of time the insurers refused to continue paying benefits under each policy.
disabled by reason of Injury or Sickness and
thereby prevented from engaging in or attending to
any profession, business or occupation". (emphasis
added)
9. The applicants each commenced proceedings under s.52(1) and s.82 of the Trade Practices Act ("the Act") 1974 claiming that they had suffered loss by the misleading and deceptive conduct of the respondent in respect of the policies. Each sought also relief under s.87 of the Act on the basis that the respondent had engaged in conduct that was in the circumstances unconscionable in breach of s.52A of the Act. After the evidence was substantially completed the applicants sought to amend their statement of claim to add claims for damages for breach of an implied warranty under s.74 of the Act and for breach of a collateral warranty as to the terms of the policy. In the case of Mr Hollands I allowed the amendment on the basis that as the applicant relied on no different evidentiary matter than the matters already raised there was no prejudice to him. Indeed ultimately there was no real objection to the amendment of Mr Hollands' statement of claim by counsel for the respondent.
10. The amendment to the statement of claim in the case for Mr Zoneff was in a different category because it was argued that to permit the amendment would be conducive of great prejudice to the respondent because as at the date of the amendment, if allowed, more than six years had elapsed from the time the relevant contract (if there were one) had been breached so that the claim of the applicant would be statute barred. I heard argument on the matter and reserved my decision upon it .
11. The facts surrounding the effecting of the insurance by each of the
applicants are in very short compass and ultimately admit
of little dispute.
For convenience I will deal separately with each applicant.
The facts surrounding the effecting of insurance by Mr Zoneff
12. Mr Zoneff was born in 1945 in Austria and came to Australia when about four years of age. He left school at age 15 after three years of secondary schooling with what was then called the Intermediate Certificate, having then completed a total of nine years schooling. His results were a little lower than average. After a number of jobs including a milk run, work with the State Railways as a porter, a labourer and as a guard or signalman, work as a machine operator and work as a labourer he secured work with Elcom as a miner.
13. As a result of a number of transactions, which it is unnecessary to describe, Mr Zoneff had borrowed the sum of approximately $21,000 from the respondent secured by a mortgage over his home.
14. Some time in March 1983 an advertisement of the respondent appeared at
the colliery in the form of a circular. That advertisement
on the letterhead
of the respondent read as follows:
"BENEFITS OF SICKNESS & ACCIDENT COVERAGE15. Mr Zoneff received a copy of this circular but did not retain it. Rather he discarded it, not however, as I find, because he was uninterested in its contents. Some six to eight weeks later, Mr Zoneff attended at the office of the respondent by appointment and saw a Mrs Gardiner. His purpose in so doing was to see about taking out an insurance policy for his existing loan and to borrow from the respondent the amount of the premium, adding that amount to his existing loan. The amount of the premium was $1,853.67.
(DISABILITY INSTALMENT PROTECTION PLAN)
1. While you are away from work because of injury
or illness, the Plan pays your loan repayments
for you, and you don't have to pay them back.
2. If payroll deductions continue while you are
off work, money received under the Plan goes
to your savings account. You then have
immediate access to it to help pay the extra
costs of being disabled - medical treatment,
prescriptions, nursing, travel to hospital, etc...
3. You are covered 7 days a week, 24 hours a day
in addition to Sick Pay and any other benefits.
4. The money becomes payable after only 14 days,
and is equal to a full monthly loan repayment
- paid in advance. If the disability
continues, further payments are made at
monthly intervals for as long as the
disability lasts (up to $20,000 maximum).
5. No matter how many months your loan has to
run, only one initial charge is made - to
cover the full term. If you repay your loan
early a refund is given.
6. The Credit Union will pay the premium and add
it to your loan. You don't have to 'put your
hand in your pocket'.
7. On an average sized loan of say $3,000 over 36
months, sickness and accident cover costs no
more than 80c per week."
16. Because Mrs Gardiner had been apprised by Mr Zoneff of the purpose of his visit she had papers ready for him to sign, those papers being an application for loan and an application for insurance on a form signed in triplicate and bearing the names QBE Insurance Limited and CUIBS Pty Limited. That form stated the amount of Mr Zoneff's then indebtedness as $21,064.47 being for a term of 84 months and requiring monthly payments of $440. It stated the premium for the policy as being $1,853.67 which together with an amount of 50 cents for stamp duty totalled $1,854.17 which was the amount of the additional loan which was the subject of the loan agreement signed that day. When the additional loan amount is added to Mr Zoneff's then outstanding balance of $21,063.97 the figure of $22,918.14 should have been the sum of the loan insured. For whatever reason the total principal insured was $21,064.47. Nothing turns upon this discrepancy.
17. At the meeting with Mrs Gardiner a conversation ensued. Mrs Gardiner told Mr Zoneff that the policy was one of the best policies that have ever been put out in the market. She said that if Mr Zoneff was off work for 14 or 15 days all he needed to do was get in touch with the respondent and they would send her a form for certification by a general practitioner and upon return of that form his premiums would be paid. No mention at all was made of the fact that it was only if Mr Zoneff was unable to obtain work at any occupation at all that the benefit was payable.
18. In cross-examination Mr Zoneff said that when he took the insurance cover out, presumably in 1983, he was led to believe that he was covered if he could not work in the mining industry. When pressed he said that the discussions with Mrs Gardiner took place in the context of the mining industry and that although there was probably nothing said by her when taking out the contract to this effect he had assumed that the policy covered him if he was unable to make repayments of the loan because as a result of injury he was unable to work in his usual occupation as a miner. Any erroneous assumption on Mr Zoneff's part could however not be taken into account unless induced or perhaps influenced by the misleading or deceptive conduct of the respondent: Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd [1982] HCA 44; (1981-2) 149 CLR 191 at 199, 203-4, 225 and 255; McWilliam's Wines Pty Ltd v. McDonalds System of Australia Pty Ltd [1980] FCA 159; (1980) 49 FLR 455 at 466 and [1980] FCA 159; 33 ALR 394 at 404; Lego Australia Pty Ltd v. Paul's (Merchants) Pty Ltd [1982] FCA 135; (1982) 42 ALR 344.
19. Mr Zoneff was seriously injured in October 1984 while working at the Cooranbong Colliery. As a result he was, it was agreed between the parties, not fit for his former employment as a miner. The case proceeded on the basis that he was not totally and permanently disabled within the definition of the policy. He was paid benefits under the policy for some time.
20. Subsequently in February 1985 Mr Zoneff again approached the respondent for further financial accommodation, the detail of which is irrelevant. As a result that accommodation was granted but because it was beneficial to Mr Zoneff that it be treated as a home loan it was to be added to his existing mortgage. The evidence suggests that as a matter of accounting the existing loan was treated as repaid and a new advance made of the total of the old advance then outstanding plus the new advance. A policy of insurance was effected in respect of the new advance.
21. Notwithstanding the potential for an argument that the original insurance effected in 1983 was no longer relevant if the original advance were repaid as a result of the 1985 transaction the parties, correctly in my view having regard to the circumstances of the 1985 transaction, agreed that that transaction was to be treated only as an additional advance and as therefore not affecting the 1983 insurance.
22. Since the 1983 insurance clearly only concerned repayment of the $21,064.47 and no claim was made by the applicant in respect of the 1985 insurance, it follows that the events of 1985 have no relevance at all to the case. An earlier realisation of this might have saved some time at least at the hearing.
23. On 21 February 1986 the insurer advised Mr Zoneff that having regard to medical reports received, he was, while medically unfit for work as a miner, not totally disabled. As a result the insurer advised that no further benefit was payable under the policy. On 10 September 1986 the respondent demanded payment of the then outstanding loan balance of $35,829.02 the total indebtedness at that time of Mr Zoneff including the 1985 advance, his account then being in default.
24. On 14 January 1987 the insurer wrote again to Mr Zoneff advising him that
the initial loan (the balance of which was either $21,063.97
or $21,064.47 as
the case may be) having been repaid by virtue of the transaction of 25
February 1985 that operated to cancel the
insurance with respect to the
initial loan with the result that his account had been credited with a rebate
of $1,346.12. Further,
it was said that in applying for a new policy in 1985
he had made a false declaration as a result of which the cover under the
policy
issued at that time, for which the insurer had then debited his account
with $2,263.82, was invalid. It was said that under the
first policy $6,600
had been paid of which only four months benefit ($1,760) should have been
paid. It was said as a result that
there had been an overpayment to him of
$4,840 which, when the $2,263.82 was reimbursed left him having been overpaid
$2,576.18 for
which demand was made. So far as appears from the evidence, no
steps have been taken by the insurer to recover the amount said to
have been
overpaid and, as I have already indicated, since no claim is made against the
respondent in respect of the insurance effected
in 1985 and since the
respondent does not allege that the transaction in 1985 operated to discharge
the initial loan, the question
whether the insurer was correct in the
allegations made in this letter does not arise in the present case and it
would be improper
to embark upon a consideration of these matters,
particularly as the insurer was not a party to the present proceedings.
The facts surrounding the effecting of insurance by Mr Hollands
25. Mr Hollands was born in Australia and educated in Lithgow to "Opportunity Sixth" level which Mr Hollands described as being not good enough to be in first year high school but too old to be in sixth class primary school. He left school at age 14. He worked as a labourer for a number of years, obtained a rigger's ticket and did a welding course at technical college. He worked in various mines in the Lithgow area for approximately seven years and transferred to construction work when the mines closed. He was re-employed in the mining industry in 1977 as a machine man until his injury during the course of employment in December 1985 when he received a severe tear of the rotator cuff. It is conceded for the purpose of these proceedings that as a result of this injury he was not fit to go underground to work as a miner although he was, it was alleged, and there was no evidence to the contrary, fit for other occupations outside his ordinary occupation as a miner. Attempts to obtain a job with two rental hire car firms and garages were apparently unsuccessful.
26. Mr Hollands prior to 1985 had taken out loans with the respondent and in late 1985 approached the respondent to take out a further loan of $3,000 to enable him to make renovations to his house. He had been aware of the availability of insurance cover for the loan because he had such insurance before. Prior to approaching the respondent on this occasion he had been aware of the advertisement about insurance displayed at the mine, that being presumably the same advertisement seen by Mr Zoneff. He had also seen a copy of this circular on the counter at the office of the respondent.
27. According to Mr Hollands he had merely glanced at the advertisement but had not really read it through. The part he said he recalled was that part which was said to have recorded that if the member was off work for two weeks with a doctor's certificate the benefit would be paid. That of course is not what the circular says, as a glance at it indicates. However, it may be taken as Mr Hollands' recollection of the effect of a part of paragraph 4 and perhaps paragraph 1.
28. Mr Hollands, like Mr Zoneff, saw an employee of the respondent and completed a loan application and application for insurance in identical terms to that of Mr Zoneff, save as to details of loan, instalments and premium etc. The insurance applied for was to cover a loan for $3,166.12 for a term of 24 months with monthly repayments of $166. The premium was $96.56.
29. At the first interview which took place on 22 November with Mrs Gardiner or a Mrs Reid (there is no significance as to who it was), Mr Hollands completed only an application for loan. There was a discussion at this first interview relating to insurance. Mrs Gardiner or Mrs Reid said that Mr Hollands needed insurance. She said words to the effect that Mr Hollands had had the insurance before. She said "why not take it again". To this Mr Hollands replied that he had never needed it before. He explained that he had been off work previously "on small occasions" and had never worried about it.
30. At the second meeting on 28 November 1985 Mr Hollands signed the loan agreement and application for insurance. He subsequently received a certificate of insurance setting out the terms and conditions of the insurance. This document was, save as to names and other details peculiar to Mr Hollands' transaction, in the same form as the certificate of insurance issued to Mr Zoneff.
31. In cross-examination Mr Hollands admitted that what he really wanted from the respondent was the loan of approximately $3,000 and that at that stage he did not really care about the insurance policy. His attitude was that he did not see why he should have it. I find that he completed the application for insurance only because Mrs Gardiner recommended that he do so.
32. Mr Hollands' employment at the mine was terminated on 5 June 1987. Some
time after his accident in December 1984 he claimed
on the policy and the
insurer paid instalments on his loan with the respondent of an unspecified
amount. At some stage the insurer
stopped making those payments being of the
view that Mr Hollands was not entitled to benefits because he was not
permanently disabled
within the meaning of that expression in the policy.
About three months after payments stopped Mr Hollands was contacted by an
employee
of the credit union advising him that he was three months behind in
repayment of the instalments on his loan. He was advised that
the respondent
was going to repossess articles from his house to the value of the money he
owed. Subsequently the respondent commenced
proceedings against Mr Hollands
in the Local Court in Burwood to recover the balance of the loan outstanding
of $1,329.11. Those
proceedings have been contested but not yet heard.
The claims under s.52
33. Each of Mr Zoneff and Mr Hollands claim against the respondent under s.82 of the Trade Practices Act in conjunction with s.52 of that Act for damages said to have been suffered by the misleading and deceptive conduct of the respondent.
34. Section 52(1) of the Act provides:
"A corporation shall not, in trade or commerce,35. Although evidence was adduced by the respondent to the effect that it was a non profit organisation, it was not suggested either that the respondent was not a corporation or that its conduct was not in trade or commerce, cf. R v. Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533 and Re Ku-ring-gai Co-operative Building Society (No 12 ) Ltd [1978] FCA 50; (1978) 36 FLR 134.
engage in conduct that is misleading or deceptive
or is likely to mislead or deceive."
36. For the respondent it was submitted:
* The respondent had not in either case been guilty of37. It is convenient to consider each of these submissions by reference to the facts pertaining to each applicant.
misleading or deceptive conduct in breach of s.52.
* Even if it had been guilty of a breach of s.52 in either
case the loss of the applicants had not been induced by
the misleading or deceptive conduct nor, if there be a
difference, had they relied upon it.
* In any event the decision of the High Court in Gates v.
City Mutual Life Assurance Society Ltd [1986] HCA 3; (1985-6) 160 CLR
1 brought about the result that unless the evidence
established that the applicants could and would have
entered into a contract of insurance containing a clause
which required benefits to be paid under that policy in
the event of the insured being unable to return to his
usual employment the applicants had failed to show
damage.
* The evidence did not establish in either case that the
applicant could and would but for the misleading conduct
of the respondent have effected a policy containing a
usual employment clause.
* In the case of Mr Zoneff he was in any event precluded
by the provisions of s.82(2) from bringing proceedings
under s.82 because more than three years had elapsed
from the date on which any cause of action he had had
accrued.
* To the extent that the applicants claimed damages for
distress, inconvenience or anxiety the evidence did not
support such a claim.
38. The conduct of the respondent said to be misleading and deceptive was the advertisement and the conversation between Mrs Gardiner and Mr Zoneff.
39. For the respondent it was submitted that the advertisement could not be misleading or deceptive or likely to mislead or deceive for the purposes of s.52 unless it conveyed a misrepresentation: Taco Company of Australia Inc v. Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177 at 202; see also Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd [1984] FCA 180; (1984) 2 FCR 82 at 88; Equity Access Pty Ltd v. Westpac Banking Corporation & Ors 12 December 1989 Hill J (unreported) at 18; cf. Rhone-Poulanc Agrochimie SA v. UIM Chemical Services (1986) 12 FCR 471 at 501 and see also Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd [1988] FCA 40; (1987-88) 79 ALR 83 at 93. So much may be accepted at least in a case such as the present.
40. It was then said that the advertisement on its proper reading was not misleading and contained no representation that the policy would provide benefits for as long as the insured was unable to work in his usual employment (with or without a limit of $20,000). It is clear that the advertisement does not say so expressly. Rather it makes reference to the employee being away from work. However the context in which the word "work" is used, particularly when in the context of a credit union involving members employed by a particular employer and when read together with the reference to payroll deductions continuing in paragraph 2 suggests in my view clearly enough that the reference to being away from work in paragraph 1 would be understood by a reader as a reference to being away from the actual employment undertaken at the time of the injury or illness. In my view the circulation of that advertisement constituted misleading or deceptive conduct or at the very least conduct that was likely to mislead, to lead into error, those persons to whom it was directed who included Mr Zoneff.
41. The other conduct complained of as breaching s.52 was the statement of
Mrs Gardiner that if Mr Zoneff was off work the insurance
policy would cover
him and make the payment for him but that he had to be covered by a doctor's
certificate to say that he could
not go to work. These words on their own and
taken out of context do not necessarily contain a misrepresentation that the
policy
would cover Mr Zoneff in the event that he was incapacitated from
working in his usual employment. However they were not made in
a vacuum.
They were made in the context of the advertisement or circular which I have
already found to constitute misleading conduct
or conduct likely to mislead
and also in the context that Mrs Gardiner told Mr Zoneff that the policy was
one of the best policies
that had ever been put out in the market. In these
circumstances I find that Mrs Gardiner's words to Mr Zoneff also constituted
conduct vicariously of the respondent which was likely to mislead and thus in
breach of s.52. I should say that it was not suggested
at all that Mrs
Gardiner knowingly misled or deceived Mr Zoneff and I would readily infer from
the evidence that Mrs Gardiner and
other employees of the respondent,
including its secretary, failed to appreciate that the policy did not provide
cover to those insured
in circumstances where they were unable to work at
their usual occupation but not so disabled as to be unable to work in any
occupation
or position at all.
Mr Hollands - Was there misleading or deceptive conduct?
42. It follows from the conclusions I have reached with respect to Mr Zoneff
that in respect of Mr Hollands the advertisement also
constituted misleading
and deceptive conduct or conduct likely to mislead or deceive. Having regard
to the evidence of the conversation
between Mrs Gardiner (or perhaps it was
Mrs Reid) and Mr Hollands it is difficult to see that in merely recommending
to Mr Hollands
that he take out the policy there was any additional misleading
or deceptive conduct.
Mr Zoneff - Was he induced to enter into the contract of insurance by the
misleading or deceptive conduct?
43. For the respondent it was submitted that the onus of establishing that he was induced by or relied upon any conduct in breach of s.52 so as thereby to suffer loss or damages lay upon the applicant. This is no doubt so: Gould v. Vaggelas (1985) 157 CLR 215 at 236; Lam v. Ausintel Investments Australia Pty Ltd NSW Court of Appeal, 11 October 1989 (unreported). Nevertheless, as the passage referred to above in Gould v. Vaggelas points out, if there is a material representation made which is calculated to induce the entry into of a contract and there is in fact the entry into of a contract there arises a "fair inference of fact" that the person entering into the contract was induced so to do by the representation. See too, Redgrave v. Hurd (1881) 20 Ch D 1 at 21, Gipps v. Gipps (1978) 1 NSWLR 454 at 460; Jones v. Acfold Investments Pty Ltd (1985) 59 ALR 613 at 623-4. That inference may, of course, be rebutted by other evidence which is inconsistent with the inference: Holmes v. Jones [1907] HCA 35; (1907) 4 CLR 1692 at 1707 per O'Connor J and Jones v. Acfold Investments Pty Ltd (supra).
44. Accepting these submissions, however, there seems little doubt that Mr Zoneff was induced to purchase the insurance cover by virtue of the misrepresentations contained in the advertisement. Indeed his only purpose in attending at the office of the respondent was to effect that insurance and to add the amount of the premium to his loan account with the respondent. Hence it is strictly unnecessary to determine whether anything said by Mrs Gardiner, accepting that, in its context, it constituted misleading conduct, also induced the purchase of insurance cover.
45. Counsel for the respondent submitted that because Mr Zoneff had attended at the office of the respondent having decided to take out the policy before he went to see Mrs Gardiner nothing said by her could have induced him to make out the contract. He simply did not rely on any misrepresentation made by her. With respect, such a view is an oversimplification. Where at a time prior to the contract of insurance being effected (and that was when the application for insurance was accepted by the insurer, i.e. at a time later than the second representation) the misrepresentation is substantially repeated or, as in the present case words are said which when understood in conjunction with the first misrepresentation amount to a reinforcement of it and particularly as here where Mrs Gardiner had praised the policy as one of the best ever put out in the market, that conduct was an inducing effect in that the person relies upon and is influenced by it. If loss or damage is suffered in the result it matters not that the second misrepresentation was not the only conduct upon which the applicant relies: cf. Gould v. Vaggelas (1985) 157 CLR 215 at 236 per Wilson J.
46. Accordingly I find that in effecting the insurance Mr Zoneff relied upon
the misleading and deceptive conduct of the respondent
so that any loss
suffered by him arose by virtue of the contravention by the respondent of
s.52.
Mr Hollands - Was he induced to enter into the contract of insurance by the
misleading or deceptive conduct?
47. Mr Hollands' case presents a greater factual difficulty. Although he saw the advertisement it does not seem that he read it. He merely glanced at it and I do not find on the balance of probability that it had any inducing effect upon him at all.
48. He had previously had insurance of the same kind but there was no evidence of any misrepresentation being made in respect of that insurance. He was advised to take out the insurance again which he did. But nothing said by or on behalf of the respondent that was in any way likely to mislead or deceive him through Mrs Gardiner or Mrs Reid operated to induce him so to do.
49. In these circumstances it seems to me that Mr Hollands' case under s.82
must fail for this reason alone.
Has either applicant proved damages having regard to Gates' case?
50. In Gates the appellant had, inter alia, claimed damages for breaches by the respondent insurer of s.52 of the Act. It was found that he had been induced by false representation made by an agent of the respondent to extend the terms of an existing superannuation policy to include disability cover. That cover extended only the event that as a result of injury or illness he became unable to attend to any gainful profession, occupation or employment whereas the representation was such as to lead him to believe that it covered him if he was incapable of carrying on his occupation as a self-employed builder. The damages claimed were such as to compensate him for the amount he would have received had the policy contained, as represented, the "usual employment clause" rather than the "any employment clause".
51. It was held both in the Full Court of this Court and in the High Court that in the circumstances of that case, where the appellant had not shown any consequential loss, he was limited to recovering damages in accordance with the principles applicable in tort being the difference between the value of what he paid and had to pay by way of premiums and the value of the total disability clause in the relevant policies. There being no evidence that the cover was not worth the premium payable and paid the appellant failed to recover damages under s.82.
52. The case is binding authority both for the proposition that under s.82,
at least in a case such as the present, the appropriate
measure of damages is
that sounding in tort rather than in contract and for the proposition that the
true measure of damages in deceit
is that reflected in the statement of the
law contained in the judgment of Dixon J. in Toteff v. Antonas [1952] HCA 16; (1952) 87 CLR
647 at 650:
"In an action of deceit a plaintiff is entitled to53. In the joint judgment of Mason, Wilson and Dawson JJ. in Gates their Honours refer to the possibility of recovering what the American authorities refer to as "expectation loss" and continue at 13:
recover as damages a sum representing the prejudice
and disadvantage he has suffered in consequence of
his altering his position under the inducement of
the fraudulent misrepresentations made by the defendant."
"Because the object of damages in tort is to place54. In Gates the appellant had not established that but for his reliance on the misrepresentation he could and would have entered into policies of insurance containing the disability clause which was represented. This was so because, first, it was the agent who persuaded the appellant to take out the disability insurance and second there was no evidence that either any other company offered at that time disability insurance on those or similar terms or that the appellant would have sought out some opportunity of taking out such insurance with another company.
the plaintiff in the position in which he would
have been but for the commission of the tort, it is
necessary to determine what the plaintiff would
have done had he not relied on the representation.
If that reliance has deprived him of the
opportunity of entering into a different contract
for the purchase of goods on which he would have
made a profit then he may recover that profit on
the footing that it is part of the loss which he
has suffered in consequence of altering his
position under the inducement of the
representation. This may well be so if the
plaintiff can establish that he could and would
have entered into the different contract and that
it would have yielded the benefit claimed ...
The lost benefit is referable to opportunities
foregone by reason of reliance on the
misrepresentation. In this respect the measure of
damages in tort begins to resemble the expectation
element in the measure of damages in contract save
that it is for the plaintiff to establish that he
could and would have entered into the different contract."
55. By contrast, however, the applicant in Warnock v. Australia & New Zealand Banking Group Ltd (1989) ATPR 40,928 did succeed in recovering damages for a lost opportunity to insure himself against disabilities contributed to by a pre-existing condition. In Warnock the respondent bank had actively promoted a financial product of "insured personal loans". The applicant in applying for the insurance, which was part of the "product" albeit underwritten by an insurer, signed a declaration that he was in good health. In fact he suffered rheumatoid arthritis for which he was undergoing regular treatment. He disclosed this fact to the bank manager at the time of seeking the insured loan and was told that the declaration only pertained to life cover, that he should not worry about it and that the manager would fix it and he should sign the declaration. The policy contained an extension for death, disablement or unemployment as a result of illness existing at the time of the policy or commencing within 28 days thereafter. Arising out of the pre-existing illness the applicant became disabled and claimed on the policy only to find that the insurer resisted payment.
56. Burchett J. found in the circumstances of the case that the applicant was entitled to recover damages amounting to the benefit he would have received under a policy not containing the exclusion clause less the extra premium he would have had to pay to secure such cover. His Honour distinguished Gates' case on a number of bases. The first was that the misrepresentations were made by the bank not the insurance company, notwithstanding that the bank was an agent for the insurance company. More importantly however for the present aspect of the case, his Honour accepted the applicant's express evidence that if he had been told the truth and insurance had been available he would have paid the higher premium. No such evidence was adduced in Gates. Further his Honour found that an alternative policy would have been available but at a higher premium. His Honour so found on the basis of an admission by the bank obtained in the course of cross-examination together with a failure by the bank to call evidence to the contrary. In the result his Honour held that the applicant was entitled to relief measured by the cover he would have obtained had the manager told him the truth instead of misrepresenting the situation.
57. It is necessary therefore to consider whether the evidence adduced before
me establishes whether a policy could have been obtained
with a usual
employment clause and if so whether in each case the applicants would have
obtained it but for the misrepresentation
of the respondents.
Could the applicants have obtained a policy with a usual employment clause?
58. The applicants led evidence from a Mr Hoffman who had been involved in insurance broking since 1952. Since 1972, Mr Hoffman had managed various companies including Jardine Underwriting Agency Pty Ltd which underwrites various risks for Australia and overseas insurers including the underwriting of sickness and accident insurance. Since March 1988 Mr Hoffman had been a principal of Hoffman Counselling Pty Ltd, consulting on insurance matters related to claims, underwriting and broking practice. He was a past president of the Insurance Institute of N.S.W. and a past council member of the Australian Insurance Institute and clearly qualified to give the evidence he gave.
59. Mr Hoffman gave evidence that disability insurance was underwritten both by life companies, where it was limited to life insurance and by general insurers. Generally life insurers were more inflexible than general insurers as to variations in policy wording and disability benefits under policies written by life insurers generally defined disability by reference to "any employment" rather than by reference to "usual employment". Consumer credit policies insuring periodical payments in 1983 were, according to Mr Hoffman, whose evidence I accept, usually written with a "usual employment clause" and had been so written since 1968 when the Fire and Accident Underwriters Association, a tariff cartel, issued a standard wording for consumer credit insurance. That cartel was disbanded (one may assume the Trade Practices Act may have had some part to play in that) and the form of wording used broadened thereafter. Policies providing lump sum benefits or disability written by general insurers were sometimes provided under policies containing a "usual employment" clause and sometimes under policies containing an "any employment"clause.
60. Through Mr Hoffman there were tendered a number of sample policies said to have been written in or about the period with which the cases are concerned. None were on precisely the same terms as those effected by the applicants.
61. According to Mr Hoffman, at least since 1976, the wording of policies was not set in stone. It was possible to get whatever wording one wanted; it was merely a matter of negotiating a premium. Where group policies were negotiated there was, if anything, even greater flexibility. A group policy was one where a generic group of people, such as a credit union or other association, would obtain insurance for members and generally the premium would be smaller. Evidence was given of a procedures manual obtained from the Co-operative Insurance Company of Australia Limited dealing with credit union insurance. That insurance was issued under a "usual employment" policy. The manual bore no date but worked examples contained in it would suggest that it was written some time in 1984. It refers to a new version of the Loan Repayment Insurance Policy, so that it does not establish that a group policy containing a "usual employment" clause was available in 1983 although it does tend to establish that fact in 1985. The document contained worked calculations to determine premiums. As Mr Hoffman said in evidence a group policy operating for a miners' credit union might be expected to add a loading for that occupation as compared to a teachers' credit union. He was unable to say what such a loading would have been in 1983. One company had imposed a loading of an additional 10 percent and the figure was probably prudently more. Also affecting the quantum of premium was the question of commission or administration fees payable to the banker and the credit union.
62. According to Mr Hoffman's evidence in chief a general insurer would have written a "usual employment" clause at the same price as an "any employment" clause policy to keep the business.
63. In cross-examination Mr Hoffman said, contrary to his expert report, that general insurers were not particularly interested in the employment classification of a prospective policy holder, that being a matter of more interest when group policies were involved. He agreed however that some insurers would not write policies for underground miners at all, even individual policies.
64. I find from Mr Hoffman's evidence that a general insurer, although not a life insurer, would have written a policy at the relevant time insuring each of the applicant's instalments on his respective loan and containing a usual employment clause. The question of the premium that would have been charged for such a policy is more difficult.
65. The resolution of this question clearly depends on whether the policy available is to be looked at as a group policy or as an individual policy of credit insurance.
66. Mr Hoffman's evidence, which I accept, was not totally clear. In his expert report which was tendered in evidence he said that individual personal accident and sickness policies had been rated for premium purposes taking occupational hazard into account. The most usual kind of policy sold in the period which might have been available for purchase by each of the applicants was a consumer credit insurance policy insuring the weekly instalments under hire purchase agreements and other forms of credit contracts issued by a general insurer. In cross-examination he commented that the differential rating used by one insurer having regard to the hazardous nature of the occupation of the insured did not really apply to one-off hire purchase credit risk type policies and inferentially not to a similar one-off policy insuring loan repayments. Nowhere in his evidence, however, can I find any firm foundation for a finding that the premium for an individual policy containing the same or substantially the same provisions as were contained in the certificate of insurance but substituting the usual employment clause would have been no more than that actually charged to the applicants by QBE. I am therefore compelled to find on the evidence that such a policy would have been available at an increased premium although I am not able to quantify the extent of that increased premium. To do so on the state of the present evidence would be mere speculation.
67. No doubt for this reason the applicants sought to rely on Mr Hoffman's evidence concerning group policies. This evidence was to the effect that in such cases an occupational loading was less significant and that one underwriter imposed a 10 percent surcharge on premiums of policies involving people in hazardous occupations. He said that it would be a matter for negotiation such that the underwriter would have written it at the same price to keep the business, such was the competition prevailing in the market place. Accordingly such a policy would have been able to have been obtained by the respondent and I find that on the balance of probabilities could have been obtained either at the same premium or at the worst at a 10 percent surcharge.
68. The question that then arises is whether it is appropriate to concentrate on a group policy as the kind of policy which would have been available for purchase by the applicants had the misrepresentations not been made. For the applicants it was submitted that Warnock's case led to the conclusion that I could take into consideration the fact that the respondent could have obtained the requisite group policy and that the premium payable under that policy would have been the same for all members, or at least at a premium 10 percent more than that charged.
69. Warnock's case, however, when carefully analysed does not lead to that conclusion. In Warnock, Burchett J inferred from evidence that was given in cross-examination that Mr Warnock's pre-existing illness could have been covered upon payment of a hefty premium loading. The evidence did not relate to whether a group policy (with its consequential averaging of premium) could have been obtained at a particular premium but rather it was found that an individual arrangement could have been made for Mr Warnock involving a hefty premium loading.
70. Where the question to be formulated is whether the applicants have as a result of the misrepresentation been deprived of the opportunity of entering into a particular contract, the answer is not to be determined by reference to what form of group policy the applicant might have arranged had it sought to arrange such a policy. The answer must rather depend upon what policy would and could have been arranged for the applicants but for the misrepresentation. That answer must, of necessity, concentrate on an arrangement to meet the particular circumstances of the applicants rather than an arrangement that could have been made by the respondent to meet the contingencies applicable to the applicants and others employed by the same employer. In other words, I am required to consider the availability of an individual policy, rather than a hypothetical group policy. Nothing in Warnock suggests otherwise.
71. While I am prepared to infer, as Burchett J inferred in Warnock, that,
having regard to the respondent's bargaining power and
the quantum of business
it wrote, the respondent could have obtained a particular policy for each of
the applicants the evidence
does not permit me to infer that the premium for
such policy would have been identical to that pertaining to the group policy
without
any additional loading. Accordingly I must conclude that any
particular policy to be issued by the insurer for the applicants at
the
instance of the respondent would have been issued at an additional loading.
Although the evidence is slim I am prepared to hold
that such a policy would
have been issued at an additional loading of 10 percent, having regard to the
competition existing in the
market place and the market power of the
respondent.
Would the applicants, but for the misrepresentation have sought to obtain a
policy with a usual employment clause?
72. Neither of the applicants gave any direct evidence that, but for the misrepresentation, they would have sought to obtain alternative insurance, if such were available.
73. Counsel for the applicants in argument stated that he had deliberately eschewed such evidence, rather than "school" his clients to give it. Not to "school" the clients was undoubtedly proper, but where such evidence is not given directly on oath the circumstances must be such that an inference can be drawn that the applicants would have purchased the alternative policy.
74. The state of a man's mind, is, as Bowen L.J. observed in Edgington v.
Fitzmaurice (1885) 29 Ch D 459 at 483, as much a matter of fact as is his
state of indigestion. Thus the purposes and intentions of a person may be
established
by direct statements as to what that state of mind was: Allied
Pastoral Holdings Pty Ltd v. Federal Commissioner of Taxation (1983)
83 ATC
4015 as well as by evidence of what they did and said at a relevant time. Of
course statements as to purpose or intention
given in the witness box will be
scrutinized carefully, having regard to the self serving nature of those
statements. In Pascoe
v. Commissioner of Taxation (1956) 30 ALJR 402 Fullagar
J referring to direct evidence given by a syndicate member of the intention at
the time of acquisition of property said
at 403:
"Where a person's purpose or object or other state75. This is not to say that in an appropriate case an applicant must fail if he not give such direct evidence, for other evidence in the case may permit an inference to be drawn as to the actual state of mind of the applicant.
of mind in relation to a given transaction is in
issue, the statements of that person in the witness
box provide, in a sense, the 'best' evidence, but,
for obvious reasons, they must, as Cussen, J.,
observed in Cox v. Smail ((1912) VLR 274 at p 283),
'be tested most closely, and received with the
greatest caution.' In that case Cussen, J., after
pointing out that states of mind in relation to
acts done were generally complex, elaborately
analysed the factors to be considered in
determining whether an assignment of property by a
bankrupt to a creditor had been made 'with a view
to' giving that creditor a preference."
76. In Mr Hollands' case, as I have already found, Mr Hollands was encouraged by the "sales talk" of either Mrs Gardiner or Miss Reid to take out the policy, albeit that he was reluctant so to do having regard to his previous experiences with such policies in earlier dealings with the respondent. The premium was a relatively small amount: $96.56. But Mr Hollands' evidence was that he did not care about the insurance policy. Even if such a policy had been available elsewhere at the same premium I could not conclude that Mr Hollands would have gone out looking for it. It is possible that if it had been available easily through the respondent he might have purchased it at the same premium or even at a 10 percent surcharge but in the absence of direct evidence from Mr Hollands I am unable to draw such an inference.
77. The case of Mr Zoneff is different. He went specifically to the respondent to effect a policy and to add the amount of the premium to his pre-existing loan, so that there is no trouble in inferring that, had he been aware of the misrepresentation he would have purchased an alternative policy at least for the same premium. There is a difficulty that Mr Zoneff, like Mr Gates, was only interested in the policy by virtue of the advertisement which contained the misrepresentation, so that it is likely that if the misrepresentation had not been made Mr Zoneff would have done nothing at all. I cannot, on the evidence, even putting this difficulty to one side, conclude that Mr Zoneff would have sought to effect an alternative policy at a higher premium. Absent any direct evidence from Mr Zoneff that if he had been told the truth he would have been prepared to pay a higher premium (say even 10 percent), it would be mere speculation on my part to conclude on the balance of probabilities that he would.
78. The additional premium would have been $185, a not inconsiderable amount (although one which, no doubt with hindsight Mr Zoneff would now have been happy to pay). By contrast, Mr Warnock gave direct evidence which was accepted that if he had been told the truth and insurance had been available at a higher premium he would have paid the higher premium. Accordingly, there is in Mr Zoneff's case the same gap in proof as operated to preclude Mr Gates from recovering damages.
79. This result is one that may be thought to be unfair and contrary to the policy underlying the Act. Here the respondent has engaged in conduct likely to mislead or deceive and the applicant has not obtained the insurance which was represented to him. He has been seriously injured in circumstances in which, had he obtained the policy represented, he would have obtained benefits. Yet the result of applying the measure of damages in tort rather than in contract to a statutory cause of action is to leave him without a satisfactory remedy. That is the consequence on the present facts of Gates' case and it is not for a judge at first instance to question the correctness of that decision. Any remedial action must be a matter for the legislature or for the High Court.
80. I find accordingly that neither applicant has made out a case for damages
for lost opportunity.
The limitation period in Mr Zoneff's case
81. Having regard to the above findings the question of the operation of s.82(2) does not arise in regard to Mr Zoneff's claim for lost opportunity. However, as the matter was argued and may proceed further it is appropriate to comment shortly on the question.
82. In Jobbins v. Capel Court Corporation Ltd 21 December 1989, (unreported) the Full Court of this Court, Davies, Burchett and Hill JJ., held that in a claim for damages under s.82(1) involving a breach of s.52 of the Act arising out of a misrepresentation inducing the applicant to enter into a contract the cause of action accrued at the time the contract was entered into, that being the time when damage was suffered, notwithstanding that the applicant was unaware at that time that damage had been suffered or that the representation was false and notwithstanding that the quantum of loss may thereafter increase. Does it follow from this that Mr Zoneff was out of time to bring a claim for lost opportunity resulting from a misrepresentation?
83. In my view in a circumstance such as the present it does not. For the cause of action under s.82(1) to accrue actual loss or damage must be suffered. The contract of insurance in fact entered into by Mr Zoneff has not been shown to be worth less than was paid for it and can be assumed to be in fact worth what was paid for it. That therefore is not the loss or damage suffered by Mr Zoneff. His loss for present purposes was the loss of opportunity to enter into an alternative contract of insurance from which he would benefit only if an accident occurred as a result of which he was unable to work in his usual occupation. It may be said that there was some, albeit negligible loss suffered at the time he entered into the contract of insurance because the lost opportunity had some value having regard to the statistical possibility that an accident might happen. However, in my view a negligible loss of that kind is not to be taken into account.
84. In Cartledge v. E Jopling & Sons Ltd (1963) AC 758 at 771, Lord Reid
said:
"A cause of action accrues as soon as a wrongful85. That statement which was cited with approval by the Full Court in Jobbins is applicable in a case such as the present. If the lost opportunity had any value at the time the contract of insurance induced by the misrepresentation was entered into having regard to the contingency of accidents happening in the future, such a loss can be regarded as negligible. It is only when the contingency happened that the real loss was suffered by Mr Zoneff and it is then that the cause of action would have accrued.
act has caused personal injury beyond what can be
regarded as negligible, even when that injury is
unknown to and cannot be discovered by the
sufferer." (emphasis added)
86. Alternative claims were brought on behalf of each of the applicants under s.52(1) of the Act. It was not alleged that the unconscionable conduct was to be found in the misrepresentations, if any, made by or on behalf of the respondent. Had that been alleged the applicants' claim would have foundered upon s.87(1CA)(a) because more than two years would have elapsed from the time the cause of action would have accrued.
87. The unconscionable conduct alleged was said to be the actions of the respondent in seeking to enforce the respective loan contracts in a manner inconsistent with the representations said to have been made as to the benefits available.
88. For a claim for damages to be advanced under s.87(1A) in respect of conduct which is unconscionable the loss or damage must arise "by" the conduct, that is to say there must be the same kind of causal relationship between the unconscionable conduct and the loss as there is required to be between the misleading conduct and the loss for a claim to be advanced under s.82(1). Even if it be assumed in favour of the applicants that the enforcing of the loan agreements could constitute unconscionable conduct, the loss or damage that the applicants suffered was suffered at the latest at the time the accidents which incapacitated them occurred. At that time the loan agreements were repayable in accordance with their terms (the moneys owing under them had not become owing as a result of any relevant unconscionable conduct) and the policy which might have been expected to reimburse the applicants for the premiums clearly did not cover them on the applicants' case. The action of calling up the loans when they were in default brought about no further loss at all. Hence in my view for this reason alone the claim under s.52A must fail.
89. There is however a further difficulty. The calling up of moneys properly due and owing is not, in my opinion, unconscionable conduct, even if the entry into the loans was induced by a misrepresentation. It should be noted that on the facts none of the money borrowed by Mr Hollands was a borrowing induced to be made by virtue of any false representation and in Mr Zoneff's case the most that could be said to have been induced by the misrepresentations of the respondent was the additional borrowing representing the amount of the premium.
90. Section 52A(1) requires that the unconscionable conduct be in connection with the supply or possible supply of goods or services. If it be assumed that the relevant services here are the financial services which form the general business of the respondent there must be considerable difficulty in a case such as the present in holding that the calling up of Mr Zoneff's loan was in connection with the supply to him of an advance. Conduct involving the provision of moneys under contract of loans is expressly excluded from the definition of services under s.4 of the Act. There must, for s.52A(1) to be satisfied, be some connection between the provision of the services and the unconscionable conduct. No doubt any connection, except perhaps one that is very remote, will suffice but it is hard to see here any relevant connection at all save the obvious fact that a loan has to be first made before, it being in default, it is called up (even if the provision of loans can be the relevant service).
91. Further the conduct referred to in s.52A(1) must be in all the circumstances, unconscionable. The cases have not sought to define unconscionability nor is it appropriate so to do because the criteria to be applied will depend upon all the circumstances. Nevertheless, in general terms, it may be said that conduct will be unconscionable where the conduct can be seen in accordance with the ordinary concepts of mankind to be so against conscience that a court should intervene. At the least the conduct must be unfair. It invites comparison with doctrines of equity: cf. Blomley v. Ryan [1956] HCA 81; (1954-6) 99 CLR 362 and Commercial Bank of Australia Ltd v. Amadio [1983] HCA 14; (1983) 151 CLR 447 where inequality of bargaining power or absence of the ability to bargain freely will be relevant to the finding that there has been an unfair advantage taken by one person of the other.
92. By force of s.52A(3) it is provided expressly that a corporation shall not be taken to engage in behaviour in breach of s.52A(1) by reason only that that person institutes legal proceedings in relation to that supply of services. It can hardly be supposed that the legislature would exclude the commencing of legal proceedings from the ambit of unconscionable conduct from s.52(1) but intend that the making of a demand in anticipation of those proceedings would constitute such conduct, otherwise legal proceedings might be instituted without demand being made. In any event no damage has been suffered here by the demand for payment for no payment has been made.
93. In Mr Hollands' case proceedings have been instituted against him in the Local Court at Burwood and the institution of those proceedings is outside the conduct proscribed by s.52A(1). No steps have yet been taken to recover Mr Zoneff's debt nor to enforce the security against him, but in the circumstances of this case it would be inequitable to enjoin the respondent from seeking to enforce its security against him on the basis that so to do would be unconscionable in the circumstances where the moneys owing under that security became owing as a result of ordinary loans made to and accepted by him in circumstances other than as a result of unconscionable conduct on the part of the respondent.
94. While the loan made to enable Mr Zoneff to pay the premium under the
policy may be in a different position, most if not all of
that amount has been
refunded to him by the insurer in the form of a credit. Accordingly, I would
decline to grant injunctive relief
to prevent the respondent requiring
repayment, particularly when so to do would be tantamount to ignoring the
limitation period applicable
to remedies under s.87(1A).
Mr Zoneff's application to amend his statement of claim to plead breach of
implied warranty under s.74 or breach of collateral contract
95. The respondent opposed Mr Zoneff's application made just prior to the close of evidence, to amend his statement of claim to plead that there was implied by s.74 a warranty that the insurance contract was as represented by the respondent or that there was a breach of a collateral warranty to the effect that the insurance contract had the characteristics represented, namely that it covered Mr Zoneff in the event that he became by reason inter alia of injury, unable to resume his normal occupation.
96. Both amendments proceed upon the basis that Mr Zoneff's remedy is one for breach of contract, that contract having been made in April 1983, and breached in the same month. In other words a period of more than six years had elapsed from the date of the breach and the date of the application for amendment. It was not suggested that the limitation period applicable in New South Wales for actions for breach of contract was inapplicable but cf. John Robertson & Co Ltd v. Ferguson Transformers Pty Ltd [1973] HCA 21; (1972-3) 129 CLR 65 and Scotland v. Bargen [1982] HCA 22; (1982) 41 ALR 65.
97. Power in the court to give leave to amend pleadings is expressed in Order
13 r.(2) in broad terms:
"The Court may, at any stage of any proceeding, on98. The rule does not, as that, for example, in force in New South Wales (Part 20 r.4 of the Supreme Court Rules of N.S.W) does, deal specifically with the situation where at the time of amendment the plaintiff's claim for relief is statute barred.
application by any party or of its own motion,
order that any document in the proceeding be
amended or that any party have leave to amend any
document in the proceeding, in either case in such
manner as the Court thinks fit."
99. In Weldon v. Neal (1887) 19 QBD 394 it was held under the then rules of
Court applicable to the High Court of Justice that there was a settled rule of
practice that
amendments to pleadings were not admissible when they prejudice
the rights of the opposite party as existing at the date of the amendment.
As
Lord Esher MR stated at 395:
"If an amendment were allowed setting up a cause of100. The rule in Weldon v. Neal has, as Toohey J in Bradshaw v. Hair Transplant (1986) 70 ALR 503 illustrates, been followed, e.g. by Lush J. in Christodoulopoulos v. Rowntree & Co (Australia) Pty Ltd (1971) VR 378 and there is, to quote Toohey J., in the absence of a specific provision as contained in the N.S.W. Rules of Court, "formidable authority that the rule in Weldon v. Neal still exists".
action, which, if the writ were issued in respect
thereof at the date of the amendment, would be
barred by the Statute of Limitations, it would be
allowing the plaintiff to take advantage of her
former writ to defeat the statute and taking away
an existing right from the defendant, a proceeding
which, as a general rule, would be, in my opinion
improper and unjust."
101. While in Metropolitan Oils (Pty) Ltd v. Beringer (1986) 71 ALR 327, the decision which preceded Bradshaw, although reported later, Toohey J had expressed the view that the broad language of the present rule might have displaced the rule in Weldon v. Neal, in Bradshaw his Honour was compelled to decide the issue and held that at least when sitting as a judge at first instance, he was bound to apply the rule in Weldon v. Neal and in the result to reject an amendment to a statement of claim accordingly. That decision is not clearly wrong and as a matter of comity I would in any event follow it. I must say that regrettable though the result may be the decision is, with respect, correct as the authorities presently stand.
102. Accordingly, I would refuse leave to amend the statement of claim in Mr
Zoneff's case. That relieves me of a consideration
of s.74 and collateral
contract in his case.
The claim by Mr Hollands under s.74(2)
103. Section 74(2) provides relevantly:
"Where a corporation supplies services ...to a104. The words "supply" and "service" are defined in s.4 of the Act but the definition excludes rights, benefits etc. provided, granted or conferred under, inter alia, a contract of insurance or any contract for or in relation to the lending of moneys.
consumer in the course of a business and the
consumer, expressly or by implication, makes known
to the corporation any particular purpose for which
the services are required or the result that he
desires the services to achieve, there is an
implied warranty that the services supplied under
the contract for the supply of the services ...will
be reasonably fit for that purpose or are of such a
nature and quality that they might reasonably be
expected to achieve that result, except where the
circumstances show that the consumer does not rely,
or that it is unreasonable for him to rely, on the
corporation's skill or judgment."
105. The applicant's case was that the relevant services to which s.74 referred, on the facts of the present case, were the providing of financial services including the provision of insurance of a particular kind, that is to say insurance providing benefits in the event of the injury of the insured in circumstances where he is unable to resume his ordinary work.
106. The respondent submitted that as so defined the services fell outside the definition in s.74 of "services" for the services were "under a contract of insurance". That submission is untenable. The provision of services to procure the issue from another of a contract of insurance is antecedent to the issue of a contract of insurance and cannot be said to be service under the policy so effected: cf. Warnock's case supra. It was not argued, as it might have been, that the alleged services fell outside the statutory definition as being in relation to the lending by the respondent of moneys, although such an argument would have been inconsistent with the decision in Warnock where s.74(1) was found on the facts of that case to be applicable.
107. I am however relieved of having to decide whether the relevant activity was a "service" as so defined or whether the policy was supplied under a contract for the supply of such services for, accepting these matters in favour of the applicant, the facts do not permit me to hold that Mr Hollands by implication (there is no suggestion that he expressly so did) made known to the respondent that he desired the insurance to cover him for a disability which prevented him from resuming his ordinary employment. As I have already held, the advertisement played no part in Mr Hollands' thinking; all that happened was that an employee of the respondent suggested he take out a policy and with some reluctance he did. The employee made no representations as to the terms of the policy and the evidence simply does not support a finding of fact that in anything said or done at the time Mr Hollands, by implication, made known to the respondent that he desired the insurance to cover him with a particular kind of cover.
108. In these circumstances Mr Hollands' claim for breach of a warranty to be
implied under s.74(2) fails. No claim was made as
in Warnock for a breach of
an implied warranty that the financial services would be rendered with due
care and skill.
The claim by Mr Hollands for breach of collateral warranty
109. For similar reasons, Mr Hollands' claim for breach of a collateral warranty said to have been made by or on behalf of the respondent must fail.
110. In Gates the appellant also claimed additionally for damages, on the basis that the respondent was in breach of a collateral warranty to the effect that the policy would cover him in circumstances where he was unable to return to work in his usual occupation. The claim, which had been accepted by the trial judge failed for two reasons: the first that what was said to him by the agent was not promissory and the second that in any event what was said was inconsistent with the terms of the application for insurance and therefore with the main contract: Hoyt's Pty Ltd v. Spencer [1919] HCA 64; (1919) 27 CLR 133 at 139, 147-8. The second of these reasons may be put to one side in the present case as not relevant to the present facts as the application for insurance contained no reference to the terms of the policy and because the representations were made not on behalf of the insurer but on behalf of the person who was to procure the insurance.
111. There were two formulations advanced for Mr Hollands of the collateral
contract under which he was said to be suing. First,
it was said that the
contract could be expressed as follows:
"The respondent, in consideration of the member112. The second, and only slightly different formulation, was that the collateral contract could be formulated as follows:
entering into a loan with it undertook to procure a
policy of the kind that would provide benefits to
him if he were injured and unable to resume work at
his usual occupation."
"In consideration of the members of the respondent113. For present purposes there is no particular difference between these formulations.
borrowing and upon payment of an additional amount
to the respondent to be applied in payment of the
premium and overheads the respondent would procure
that there would be available to the member the
benefits of an insurance policy covering him for
his loan repayments if he were unable to work in
his usual occupation by virtue of injury."
114. As Gibbs C.J. said in Gates at 5:
"The question whether the statements constituted aSee too J J Savage & Sons Pty Ltd v. Blakney [1970] HCA 6; (1970) 119 CLR 435 at 442.
collateral contract depends on the intention of the
parties: Heilbut, Symons & Co v. Buckleton [1912] UKHL 2; (1913)
AC 30 at 49-51. In the present case the statements
were not promissory in form - they purported to be
descriptive or explanatory of one of the terms of
the formal written contract into which the parties
proposed to enter. I find it impossible to say
that either of the parties actually intended that
the statements should constitute a term of the
contracts between them or (if it matters) that an
objective inference can be drawn that they did so
intend. The statements were representations and
nothing more."
115. In Mr Hollands' case there were no oral statements made by the employee
of the respondents that could be seen as representations,
let alone as
promissory terms. The only representations were in the advertisement and I
find it impossible to say on the evidence
that the statements in the
advertisement, read only as to a small part by Mr Hollands were actually
intended by him to constitute
a term of the contract between the respondent
and him. Just as in Gates those statements were descriptive rather than
promissory
and do not permit in the circumstances of the present case a
finding that there was a collateral contract as claimed. Accordingly,
Mr
Hollands' claim for breach of collateral warranty must fail.
Damages for distress, inconvenience and anxiety
116. In connection with his claim under s.52 of the Act each of the applicants sought in addition to damages for lost opportunity damages for distress, inconvenience and anxiety caused, it was said, to them by virtue of the failure of the insurance company to pay benefits under the policy and the subsequent enforcement or fear of enforcement by the respondent of the loan agreements. It was not in dispute that in a proper case damages of this nature could have been awarded in deceit and that the measure of damage under s.52 and s.82, being akin to that in tort, permitted the recovery of such damages. See McGregor on Damages 15th ed at para 1737 and cases there cited and cf Steiner v. Magic Carpet Tours Pty Ltd (1984) ATPR 40,490 at 45,642. This is so at least if such damages are reasonably foreseeable.
117. The respondent however submitted that the evidence adduced by either applicant did not suffice to show damages of that kind in the present case. Since I have already found that Mr Hollands was not induced or influenced to purchase the insurance by reason of any misleading or deceptive conduct it is not necessary to discuss the evidence in his case.
118. The evidence relied upon in Mr Zoneff's case was, to say the least, scant. It consisted of replies to three questions asked in chief. First he was asked whether he recalled receiving a letter of 10 September 1986 from the respondent demanding payment of his outstanding loan balance of $35,829.02 in default of which the account would be placed in the hands of the Credit Union Collection Centre. To this, unresponsively he replied "it was one of the letters I got that really upset me". Second, he was asked again how he felt when he received the letter to which he replied that he was very upset. Third, he was asked, still in reference to the same letter, what concern he had upon reading it, to which he replied, "I thought we would lose the house after reading that letter."
119. On this basis Mr Zoneff seeks substantial damages for his distress. It is not suggested that he has suffered nervous shock or any aggravation of his illness as could perhaps in some cases be envisaged, cf Campbelltown City Council & Ors v. Mackay (1988) 15 NSWLR 501.
120. I have great sympathy with Mr Zoneff. As a result of an accident he is left with a physical condition which obviously causes him great distress. He was obviously in pain throughout the proceedings and his physical situation appears to be such that he cannot sit or remain in the one position for any length of time. It is a consequence of his accident that his earnings have been impaired and that he finds himself unable to meet the repayments of the amounts which he owes to the respondent. He was, as I have found induced in part at least by an employee of the respondent and by the advertisement to obtain insurance which he believes might have alleviated his present financial situation. I find that it is reasonably foreseeable, particularly given his occupation as an underground miner, that he could be injured in such a way that would give rise to this financial predicament. I do not doubt that he was upset by that predicament as well as by the injury that he has suffered.
121. Looking at the matter objectively, it was reasonably foreseeable that he would be induced by the representations to effect the present insurance and that distress could flow out of that inducement. This is so, contrary to the respondent's submissions that the representation was innocent so far as the respondent was concerned. The test of reasonable foreseeability is objective not subjective.
122. There is a difficult question of judgment involved where the distress for which damages are sought flows not only from the breach of s.52, but also from supervening events, in the present case the accident. The respondent has no obligation to compensate Mr Zoneff for the distress which his accident has occasioned. It seems to me that in the present circumstances damages for distress must be fairly nominal: such damages are not intended to be exemplary.
123. It thus becomes necessary to determine when Mr Zoneff's cause of action in respect of this damage, being the only damage which he has been shown to have suffered (other than negligible damage) accrued. His case is that that distress arose out of the realisation that his house was in jeopardy and that he was required to repay the loan without the benefit of the desired insurance. As the evidence discloses Mr Zoneff was notified of the insurance company's refusal to pay in February 1986. Thus the earliest that this damage could have been suffered was 21 February 1986. That is less than three years from the commencement of the proceedings. In these circumstances his claim is not statute barred.
124. Doing the best I can, I am of the view that, as Mr Zoneff did suffer
distress as a result of the respondent's breach of s.52
the appropriate award
for damage under this head is in the order of $1,000. Such other damages
under this head as he might have
suffered are more appropriately recoverable,
if at all, against his employer or such person, if any, as may have been
responsible
for his injury.
Costs
125. As Mr Hollands has failed totally in his claim the proper order of costs
is that he pay the respondent's costs of his application.
As the two cases
have been heard together it is necessary to apportion the time taken in the
hearing between the two cases. I will
hear counsel on this matter. Mr Zoneff
has been only partially successful and accordingly I will hear counsel not
only as to the
question of apportionment of the time spent in hearing as
between the two cases but also as to whether the respondent should pay
all, or
if not all, what proportion of Mr Zoneff's costs and generally as to the
proper order to be made in the circumstances.
Final Comment
126. I can not leave this judgment without commenting upon one matter of evidence in this case. Evidence was adduced under objection from the respondent on behalf of each applicant from a Dr Goyen in her capacity as a consultant with Mental Psychological Consultants Pty Limited. Dr Goyen is a senior lecturer in education at Macquarie University and an expert in matters relating to reading and readability. It is unnecessary to go into the detail of her evidence. Suffice it to say that, by reference to a number of tests which have been developed and which were the subject of cross-examination, she expressed the view that the certificate of insurance received by each applicant required a graduate or even post-graduate level of literacy.
127. She also said that she had tested each of the applicants and that their reading ability fell short of that required to understand the certificate of insurance.
128. Counsel for the applicants indicated that he sought three findings from this evidence, which might be available under s.83 of the Act to be used in cases similar to the present involving the same respondent and by implication the same misrepresentations. What all three findings were, was never elaborated, presumably because the idea met with a lack of enthusiasm from the bench. One of them was, however, as to the level of literacy attainment required to comprehend the certificate of insurance.
129. I do not propose to make any such finding, for the certificate of insurance ultimately played no part in the proceedings at all, nor, having regard to the evidence, could it have. The representations claimed to have induced each of the applicants to effect insurance were made prior to the certificate of insurance being received by each applicant. That step no doubt operated as the acceptance by the insurance company of the applicants' application for insurance but the contract had by then been formed and the terms of the certificate played no part in the misrepresentations. Hence it was irrelevant whether the applicants, if they had read the certificate, understood it.
130. It is true that Mr Zoneff gave evidence that when the policy came out he was not impressed by it. He said, and perhaps he was referring to the circular, that he was not going to join it (whatever that may mean) but the fact is that, if that was in 1983, he effected another identical insurance in 1985. In any event neither party ultimately sought to argue that anything in the 1983 certificate was relevant.
131. The respondent's submissions referred to the certificate of insurance only in relation to the claim for unconscionable conduct in asserting that it gave each applicant a copy of the policy which "he could and should have read". As I have found that the certificate was irrelevant in determining the claim of the applicants under s.52A it is inappropriate to make findings relating to the evidence of Dr Goyen.
132. There is much to be said for the view that the evidence of Dr Goyen was
wholly irrelevant. However it may well be that, absent
such evidence, the
respondent may have sought in some way to assert that the applicants should
have read and could have understood
the certificate. For this reason I would
not reject the evidence as wholly irrelevant and accordingly am of the view
that it was
admissible. In any event having seen and heard each applicant in
the witness box I would have concluded without the evidence that
neither would
have been capable of comprehending the niceties of the certificate and in
particular neither would have appreciated
from reading it that it covered them
only in the event that they were unable to be employed or occupied in any
employment at all.
Dr Goyen's evidence is merely corroborative of this.
Conclusion
133. I would for these reasons, dismiss Mr Hollands' application and in respect of Mr Zoneff's application find that the only damage he suffered was in respect of distress in the sum of $1,000. I would direct that counsel bring in short minutes to give effect to the within reasons and adjourn the matter to a date to be fixed to deal with the question of costs and the settling of the short minutes.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCA/1990/29.html