Farrell & National Mutual Life Association of Australasia,Re [1990] QSC 2

\d-~o IN THE SUPREME COURT OF QUEENSLAND O.S. No. 1229 of 1989 Before Mr. Justice Shepherdson CATCHWORDS: IN THE MATTER of the Rules of the Supreme Court - and - IN THE MATTER of a Contract for Disabilitj Insurance between EAMON THOMAS FARRELL and THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED REASONS FOR JUDGMENT - SHEPHERDSON J. Delivered the 12th day of January, 1990. Construction of document - Disablement insurance policy - Whether "compensation" includes invalid pension payment or socialservices payment. Counsel: C. Brabazon Q.C. and M. Varitimos for Applicant R. Hanson Q.C. and A. Philippides for Respondent Solicitors: Cranston McEachern & Co. for Applicant Henderson Trout for Respondent Hearing date: 18th December, 1989. -- 1 of 13 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 1229 of 1989 IN THE MATTER of the Rules of the Supreme Court - and - IN THE MATTER of a Contract for Disability Insurance between EAMON THOMAS FARRELL and THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED REASONS FOR JUDGMENT - SHEPHERDSON J. Delivered the 12th day of January, 1990. These reasons should be read in conjunction with reasons in an extempore judgment which I delivered on 18th December, 1989 when I decided that I should continue to hear this application. I gave those extempore reasons on resumption of sittings at 2.30 p.m. on 18th December after the luncheon recess. Thereafter I heard argument from both sides and reserved my decision for further consideration. Before I proceed further I must say that at the time I gave my extempore reasons I had not read during the luncheon recess the decision of the High Court of Australia in Port of Melbourne Authority v. Anshun Pty. Ltd. (1981) 147 C.L.R. 589 to which case Mr. Brabazon Q.C. referred me as I was about to adjourn for the recess. Due to my oversight I did not read that case. During further argument after 2.30 p.m. Mr. Brabazon referred to Anshun's Case at pp. 602-604. I have since read the case and nothing I have read has led me to conclude that my -- 2 of 13 -- 2 ex tempore reasons and decision. should be altered. I refer especially to the following passage in the joint judgment of Gibbs C.J., Mason J. and Aickin J. at pp. 602-603:- "In this situation we would prefer to say that there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v. County of Sac. (1876) 94 U.S. [24 Law. Ed., at p. 199]. It has generally been accepted that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment." I cannot see that in the present case there will be any conflict between the judgment in the earlier action insofar as that part of the judgment is expressed in the sum of $36,887.03 and any declaration I may make which reduces the benefit payable under the policy because of invalid pension payments received or receivable by the applicant. I note that in Anshun' s Case Gibbs C.J., Mason J. and Aickin J. at p. 596 said:- " ... by making a claim for contribution the Authority asserted a right which was inconsistent with the right which it asserts in the present action. In the Soterales action it might have asserted a right to indemnity and in the alternative a right to contribution. Instead, for reasons which have not been explained, the Authority confined itself to the claim for contribution." -- 3 of 13 -- 3 At pp. 603-604 their Honours said:- "By 'conflicting' judgments we include judgments which are contradictory, though they may not be pronouncedon the same cause of action. It is enough that they appear to declare rights which are inconsistent inrespect of the same transaction." I come now to the first declaration sought by the applicant, namely:- " ( 1 ) Clause 4 of the subject policy of insurance between the Applicant and Respondent herein does not apply to reduce the benefit otherwise payable under the subject policy, by the Respondent tothe Applicant upon the basis of payments received by the Applicant or his wife by way of invalid pension or otherwise;" What is called cl. 4 in the originating summons is really condition 4 and it reads:- " 4. In the event of the Benefit becoming payable under this Policy, the maximum amount payable is the lesser of (a) the Amount of Benefit or (b) 75 per centum of the Average Weekly Income less any amounts paid or payable to the LifeInsured by reason of and (i) periodic disability income benefits under any other insurance policy (ii) periodic compensation (whether commuted or not and whether received by way of court order settlement or agreement) pursuant to any statute or ordinance(whether by way of workers'compensation, accident compensation, social services payment or otherwise) which relate to the period in respect of which the Benefit is or would otherwise be payable." The debate before me centred on condition 4(b)(ii). The Average Weekly Income of the applicant within the meaning of tne policy, as at 1st July, 1985 had been found by the jury at the -- 4 of 13 -- 4 trial before Thomas J. to be $314.00. figure is $235.50. 75 per cent of that In accordance with the Increase Claim Benefit Annexure to the policy, the respondent agreed to increase the level of benefit paid during a specified preceding 12 months from the beginning of the next and each succeeding 12 month period by 5 per centum compound. Thus, by applying that 5 per cent compound rate, the benefit was said by the applicant to be $286.25 per week as at 24th November, 1989. In the affidavit of Mr. Deed it is said to be $286. 50. The respondent did not dispute this figure but argued that there must be deducted from it, in accordance with condition 4(b)(ii) "any amounts paid or payable" to the applicant "by reason of periodic compensation ... pursuant to" the Social Security Act 1947 being invalid pension received and receivable by the applicant. There is before me a photocopy of a letter (undated) from the Department of Social Security, Woodridge, addressed to the applicant and said to have been received by him on about 11th November, 1989. This letter, which I will called ex. "H", includes the following statements:- 1. Invalid pension payments were then being made to the applicant at $247.70 per fortnight and his wife was receiving a wife's pension which included payments for four children at $445.90 per fortnight. 2. The applicant had requested the rate which he and his wife would receive if .he were in receipt of a continuing payment of $286.50 per week. -- 5 of 13 -- 5 3. That any income up to $130.00 per week would have no effect on the applicant's pension rate and that income over $130.00 per week would reduce his pension by 50 cents in the dollar. 4. Pension rates payable to the applicant if he received $286.50 per week would be $169.40 to the applicant. $267.60 would be paid to his wife. 5. In addition to affecting the rate of the applicant's pension, income of $286. 50 per week would result in his loss of fringe benefits which are there set out. Invalid pension was obviously then paid to the applicant on a fortnightly basis as at about 11 th November, 1989. This equalled $123.85 per week. If the applicant received $286.50 per week his pension rate would be reduced to $169. 40 ~nd I. interpret that to be $169. 40 per fortnight. This is the equivalent of $84.70 per week. I shall return to these figures later. I must first deal with Mr. Brabazon's submission that in construing condition 4 ( b) (ii) "compensation" does not include an invalid pension payment or a social services payment. Mr. Hanson Q.C. for the respondent submitted to the contrary. The policy is described as a "Disablement Insurance Policy". The definition section of the policy includes the following:- "'Total Disablement' means the continuous inability of the Life Insured by reason solely of injury orsickness (i) (a) during the first two years of any one period of disablement to perform eachand every normal duty of his usual occupation and -- 6 of 13 -- 6 (b) during the remainder of such period of disablement to perform each and every gainful occupation for which he is or may become reasonably fitted by education, training or experience and (ii) not engaging in any gainful occupation or employment except as provided for in Condition 6 of this policy. 'Totally Disabled' means suffering Total Disablement. 'Benefit' means the amount determined in accordance with Conditions 2, 3 and 4 of this Policy and payable by the National Mutual from time to time in the event of the Life Insured being Totally Disabled." I mention also without quoting it that the definition section also defines "Average Weekly Income". Condition 6 of the policy is not relevant to this case. The policy is clearly intended to provide for benefits to be paid to the applicant if he can bring himself within "total disablement" as defined in the policy: At the trial before Thomas J. th~ jury found:- 1. that as at 19th November, 1986 the applicant was suffering "total'disablement" as that term was defined in the policy; and 2. that the applicant had continued to be totally disabled for the whole of the period since that date. As I understand the position there is presently no doubt that the applicant continues to be totally disabled. Benefit payable under the policy commenced on the first day of total disablement and will continue until the occurrence of a certain event, e.g. the expiry date referred to in the schedule to the policy or the applicant dies, whichever should first happen. The expiry date in the schedule is 27th February, 2013. The -- 7 of 13 -- 7 maximum accident benefit period and the maximum sickness benefit period is stated in the schedule to be to age 65. The age of the applicant is not stated and it thus appears that the benefit payments under the policy could continue to 27th February, 2013. Because "total disablement" as defined seems to me to relate to the applicant's ability to work and thereby earn income or be gainfully employed and because condition 4 ( b) provides for a calculation based on average weekly income as defined, I ask myself in construing the word "compensation" in condition 4(b) (ii) - what is meant by "workers' compensation, accident compensation, social services payment" and, on a wider basis, what is meant by "compensation" pursuant to any statute or ordinance. As one might expect, the phrases "workers' compensation, accident compensation, social services payment" are not defined in the policy. Nor need they be. We live in an age where the welfare state operates in Australia and has done so for many years. These phrases are notoriously well-known in the community generally. I think it is also notoriously well-known that workers' compensation payments and social services payments are made pursuant to a statute or Act of Parliament. Of course I am here concerned with an invalid pension. Invalid pensions are dealt with in Division 3 of Part IV of the Social Security Act 1947 (Commonwealth of Australia). Sections 27 and 28 read:- "Incapacity for work 27. A person is permanently incapacitated for work for the purposes of this Division if: (a) the degree of the person's permanent incapacity for work is not less than 85%; and -- 8 of 13 -- 8 (b) that permanent incapacity, or at least 50% of that permanent incapacity, is directly caused by a permanent physical or mental impairment of the person. Qualifications for invalid pension 28. Subject to this Act, a person above the age of 16 years who.is not receiving an age pension and - (a) is permanently incapacitated for work or is permanently blind; and (b) is an Australian resident and is in Australia on the day on which he lodges his claim for an invalid pension, shall be qualified to receive an invalid pension." It can be seen that the incapacity referred to ins. 27 is "for work". I ·shou'ld mention that the Social Security Act 1947 provides for payment of different types of pensions and Part IV expressly relates to "age, pensions". invalid, wives' and carers' In the view which I take of the construction of condition 4(b)(ii) the word "compensation" where it appears in the phrase "periodic compensation" includes a social services payment pursuant to a statute such as the Social Security Act 1947 which social services payment is made in consequence of incapacity to work and thereby earn income. An invalid pension is such a payment. The invalid pension is a periodic payment and it was not argued that an invalid pension payable under the Social Security Act 1947 could not fall within the phrase "periodic compensation" in condition 4(b)(ii). Mr. Hanson raised the question - must the respondent pay the full amount, namely, $286.50 per week before the Department -- 9 of 13 -- 9 of Social Security will reduce the invalid pension otherwise payable to the applicant? It is apparent from the letter, ex. "H", that the rate of invalid pension is to some extent governed by income received by the pensioner from other sources. I have been referred to s. 33(12) of the Social Security Act 1947 which deals with rates of (inter alia) invalid pensions (other than invalid pensions payable. to a person who is permanently blind). Section 33(12) relevantly provides:- "(12) The annual rate at which a pension under this Part payable to a person ... is determined shall be reduced by - (a) 50% of the aggregate of: (i) the amount (if any) per annum by which the annual rate of income of the person exceeds: (A) if the person is an unmarried person - $2,080; or ( B) if the person is a married person - $1,820; and (ii) the amount (if any) per annum by which the annual rate of maintenance income of the person exceeds the annual maintenance free area of the person; or (b) an amount per annum equal to 26 times the pension reduction amount (if any) applicable to theperson divided by 250, whichever is the greater or,of the reductions calculated ( b) are the same, by theparagraph (a)." if the amounts per annum under paragraphs (a) andamount calculated under "Income" is defined ins. 3 of the Social Security Act and that definition relevantly provides:- " 'income' , in relation to a person, means personal earnings, moneys, valuable consideration or profits,whether of a capital nature or not, earned, derived or received by that person for the person's own use or -- 10 of 13 -- 10. benefit by any means from any source whatsoever, within or outside Australia ... " That definition uses the past tense "earned, derived or received" and the use of the past tense "received" suggests that the income must actually be received by the applicant before the reductions mentioned ins. 33(12) are made. However although "earned" is used in the past tense, a person may have earned income before actually receiving it. I must remember that I am construing a commercial document and not the Social Security Act 1947. In the subject policy the parties have taken into account that during the period of payment by the respondent of a benefit under the policy the applicant may receive periodic compensation which falls within condition 4(b)(ii) and the parties have provided in condition 4(b)(ii) for the amount of such periodic compensation paid or payable to be deducted from the 75 per cent of the average weekly income. The compensation does not necessarily have to be paid before any deduction under condition 4(b)(ii) can be made. The use of the words "or payable" (which I have underlined) imports an element of the future and in my view the only sensible interpretation which can be given to condition 4(b)(ii) is that the periodic compensation must be deducted from the figure representing 75 per cent of average weekly income and it matters not that the invalid pension has not then been actually received by the applicant. As long as it is payable, that is sufficient. This means of course that I must refuse the first declaration sought by the applicant. -- 11 of 13 -- 1 1 As to the second declaration sought, namely, that the benefit presently payable by the respondent to the applicant is in the amount of $286.50, that request is posed in the present tense. The originating summons was issued on 12th December, 1989. I have no evidence of the invalid pension rate of pay as at that date, nor any subsequent date; I have only the copy letter, ex. "H". I therefore cannot state what is the benefit presently payable to the applicant under the policy. I shall however set out the arithmetic based on ex. "H" to show what I consider is the amount, based on the $286.50 per week and the figures appearing in ex. 11th November, 1989. 75 per cent ofaverage weekly income "H", Less - invalid pension payable on basis thatapplicant receives $286.50 per week income - $169.40 per fortnight should have been as at $286.50 per week $ 84.70 per week $201.80 per week The amount payable under condition 4(b)(ii) should therefore have been $201 .80 per week as at 11th November, 1989. As to the third declaration sought, namely, that the amount of the benefit payable is to increase by 5 per cent per annum compound on and from the first day of July each year commencing 1st July, 1990, no specific argument was addressed on this and I am uncertain exactly what is sought. I can well understand there having been no argument because of the provision in the INCREASE CLAIM BENEFIT ANNEXURE to the policy which reads:- "IT WILL INCREASE the level of Benefit paid during that preceding twelve months from the beginning of the -- 12 of 13 -- 12 next and each succeeding twelve month period by five per centum compound." I have already mentioned this provision. I should add however that the word "benefit" as referred to in the third declaration sought is, as presently advised, based on the amount of $314.00 found by the jury to have been the average weekly income as at 19th November, 1986. Furthermore, I do not read the Increase Claim Benefit Annexure as meaning that the 12 months there referred to must commence on 1 st July of any calendar year. Rather, does it seem to me that the increase in level occurs only after benefit has been paid under the policy for a continuous period of 12 months and continues to be paid thereafter. It seems that the increase by 5 per cent compound is intended to occur on the 12 month anniversay of the commencement of the first 1 2 months period of payment of benefit. In saying this I realise the parties have accepted the calculations which show the present average weekly income to be $286.50. I decline to make the third declaration sought. It should not be thought that I am assentipg to a view that "benefit" in the third declaration sought means the balance remaining after deducting the amount payable for invalid pension. In the result then I decline to make the orders sought in paras. ( 1 ) , ( 2) and ( 3) of the originating summons. hear the parties on costs. I shall -- 13 of 13 --