Free, T.A. v National Mutual Life Association of Australasia Ltd & G. Creese [1988] FCA 471

LIMITED DISTRIBUTION NOT SUITABLE FOR REPORTING

JUDGMENT No. 2.1.2. 38-

CATCHWORDS.

INSURANCE - sum assured payable in the event of total and permanent disablement of insured - total and permanent disablement defined to mean that the insured has, in the opinion of the insurer, "been wholly prevented from engaging in his profession business or occupation" or from engaging "in any other profession business or occupation for which he is fitted by his knowledge, training status and abilities"

construction of policy - obligation of insurer in formation

of requisite opinion - implied requirement to act reasonably.

DAMAGES - interest on damages until judgment - whether available in Federal Court where action commenced before

insertion of s.51A Federal Court of Australia Act 1976 -

Centrepoint Freeholds Pty. Ltd. v Lucas (TN) Pty. Ltd. (1985) 60 A.L.R. 187.

TONY ALFRED FREE v THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED and GEOFFREY CREESE

TG No 6 of 1983

Ryan J. 15 August 1988 Brisbane

R=CEIVED 16.AUG 1988

FEDERAL COURT OF AUSTRALIA

PRINCIPAL REGISTRY

IN THE FEDERAL COURT OF AUSTRALIA

) ) TASMANTA DISTRICT REGISTRY ) TG No 6 of 1983 ) GENERAL DIVISTON )

BETWEEN : TONY ALFRED FREE

(Applicant) AND: THE NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LIMITED (First Respondent) AND: GEOFFREY CREESE

(Second Respondent)

Coram: Ryan J.

Date: 15 August 1988

Place: Brisbane

REASONS FOR JUDGMENT

The applicant who is now aged thirty-six, from 1974 to 1984, carried on business in partnership with his wife as a timber carting contractor. When he first carried on that business he used a "MAN" truck and timber jinker leased by Tasmanian Forest Holdings Pty Ltd to which he was contracted

to cart logs, and sub-leased to Mr Free.

By 1976 the partnership entered into a lease on its own account of a "Mack FR612" which it operated in conjunction with the "MAN" vehicle, with one truck being driven by Mr

Free's brother as an employee of the partnership. Later the

"MAN truck was traded in ona "Wyatt" vehicle.

In 1979 it was decided to change the "Mack" truck for a new "Mack 612RST" to be leased from Webster Acceptance Ltd. The purchase price of that vehicle was $82,890. When arrangements for that lease were completed, Mr Free

approached B.R. Speers and Associates, insurance brokers, with whom he had traditionally done business, and requested

them to procure comprehensive insurance of the new vehicle.

On 6 August 1979 the lease documents were executed and Mr and Mrs Free signed an authority to their bank authorizing it ta pay 48 monthly instalments of rent under the lease of

$1849 each.

Shortly afterwards the second respondent, Mr Creese, who was associated in some way with B.R. Speers and Associates, made an unsolicited approach to Mr Free and suggested that he should procure a policy of life insurance 1ssued by the first respondent ("National Mutual") with a view to ensuring that the lease on the new "Mack" truck could be paid out in the event of his being prevented by death or

disability from continuing to drive that truck.

Mr Creese later called on Mr Free at his home and

described the policy of insurance which he considered appropriate to Mr Free's needs. The evidence 1s unclear as

to the precise words used by Mr Creese. Mr Free's version

was that the policy was described as one which "was to cover me if anything happened when I was driving the log truck and

could not perform my normal duties", Mr Free already had two

policies of life insurance or what he called "death cover" and was concerned, again in his own words, to have "this policy to cover me in case I could not work, and the truck would be paid off and there would be still a form of money

coming in to live on".

According to Mr Creese, he explained the disability cover to Mr Free by indicating that the amount insured would become payable if Mr Free were unable, as a result of accident or iliness, to doa similar type of job. He elaborated by instancing that National Mutual would not expect an insured to "go and retrain again as a carpenter or a butcher or something else that he has no prior knowledge to

or training for or abilities in".

It appears that Mr Creese did not explore the types of alternative employment which, if he remained able to engage in them, would preclude Mr Free from recovering the sum insured. That was probably because of a tacit assumption that, if Mr Free were permanently disabled from driving a truck, he would also be unable to engage in any other similarly remunerative occupation, That seems to have been

an assumption which Mr Free shared.

Immediately or shortly after his conversation with Mr Creese, Mr Free, on 21 August 1979, siqned a proposal to National Mutual for a policy having a sum assured of $85,000

and, as one of its supplementary benefits, a supplementary

ra

total and permanent disablement ("CMN") component.

That

proposal was accepted by National Mutual and in due course a

policy issued to Mr Free to which was attached a CMN annexure

containing the following provisions:-

"THE ASSOCIATION AGREES subject to the Policy referred to in the Schedule (hereinafter called

'the Policy') and to the Conditions hereinafter contained that if

(1) the CMN Benefit Annual Premiums are duly

paid

and (2) the Total and Permanent disablement of the Life Assured (as defined in the said Conditions) occurs before the CMN Benefit Expiry Date

and (3) such proofs as the Directors consider necessary to establish the aidentity of the claimant the validity of the claim and the age of the Life Assured are deposited with the Association together with the Policy duly discharged

IT WILL PAY to the Assured or the Executors Administrators or Assigns of the Assured in full

satisfaction and discharge of the aggregate of all sums payable under the policy and any Annexure thereto an amount equal to all such sums (save and except any sum payable by way of Supplementary Accidental Death Benefit) as would have become payable thereunder if the Life Assured had died at the time the disablement of the Life Assured as aforesaid occurred.

The basis of the contract for the grant of this Benefit is the Proposal for the Policy the Application for this Benefit and all Statements Declarations and Agreements made in writing by or ian respect of the Life Assured in relation to them.

CONDITIONS

1. The CMN Benefit Annual Premium becomes due and is payable in advance on the Commencing Date of this Benefit and on each anniversary thereof occurring before the death of the Life

Assured the Total and Permanent Disablement of the Life Assured or the CMN Benefit Premium

Term Expiry Date whichever is the earliest.

2. 'Total and Permanent Disablement of the Life Assured' shall mean that the Life Assured has after the Commencing Date of this Benefit and in the opinion of the Association (after consideration of such medical and other evidence as it shall require)

{a} become disabled by bodily injury or disease to such an extent that he/she is at the relevant time and has been throughout the immediately preceding continuous period of six months wholly prevented from engaging (whether or not for reward) in his/her profession

business or occupation or any similar profession business or occupation or

from engaging in any other profession business or occupation for which he/she 1s fitted by his/her knowledge training status and abilities and will be so

disabled for the remainder of his/her life." After he and his wife acquired the new "Mack" truck, Mr Free used it to carry timber on two trips a day from the Gordon River to Triabunna which required him to work between 16 and 17 hours a day five days a week. His weekends were

spent in carrying out maintenance of the truck.

By about August or September 1980, Mr Free began to experience severe pain in the left knee. He had earlier consulted a Dr Gibbs, a general practitioner of Moonah about "knee problems" between December 1979 and February 1980. Dr Gibbs suggested that Mr Free lose weight which he did, reducing from 13 stone 1 1b to 11 stone 9 ibs, and prescribed ultrasound therapy and. courses of anti-inflammatory medication. By 2 May 1980 Dr Gibbs was able to note "knees O.K.". However, by August 1980, although his weight had apparently remained at its reduced level, Mr Free was. still

seeking treatment for his knees, and, on 10 September 1981,

"a

he consulted another general practitioner, Dr Beltz of South

Hobart.

Dr Beltz ordered x-rays and blood tests to assist in diagnosing Mr Free's condition. When he saw Mr Free again on 14 September 1981, Dr Beltz referred him to Mr Howard Bye for arthroscopy which revealed crystal deposits within the knee joint and some cartilage degeneration. In the light of that information and the fact that a blood test indicated normal uric acid levels, Dr Beltz concluded that Mr Free was suffering from the fairly rare condition of "pseudo-gout"

caused by calcium pyrophosphate crystals. Mr Free was the first patient with this condition whom Dr Beltz had encountered. Courses of anti-inflammatory medication were prescribed, as well as Zyloprim and intra-articular steroid injections all without success. Dr Beltz then referred Mr Free to Dr Strang, a rheumatologist of Melbourne, who examined Mr Free on 12 November 1981. A report furnished to

National Mutual by Dr Strang on 22 March 1982 concluded with

the following paragraphs:-

"My comments to the doctor who sent him, Dr. Ian Beltz, was that it was unusual for gout to start in the knees; the usual crystal disease which affects them being calcium crystal disease, and it is difficult to identify which crystals are involved without using a polarizing microscope. My suggestion was that he be given atrial of Indocid and if he had not had this or it upset his driving, which was possible, then he should

have Clinoril. There 15 no cure for calcium crystal disease that I know of, and it is a matter of trying various non-steroidal

anti-inflammatory agents in turn and if Indocid

was not suitable, then Voltaren could be given a trial or even enteric-coated aspirin, two tablets

three times daily. ft said that it was apparent that he would not be able to carry on with his job, in his present condition of chronic pain.

I have not heard the results of any treatment since I wrote to the local doctor on the 26th November, 1981, so I cannot answer the question as to the response to treatment, and, of course, to the prognosis. Apparently meniscal degeneration was observed by arthroscopy and this would progress inevitably. If the origin of the pain was uric acid gout, then this could be easily controlled medically but the degeneration which has already occurred would continue with weight bearing and passage of time.

I would not agree that he is disabled to the extent that he is wholly prevented from performing any work. I doubt if he would be able to carry on his present occupation, as I. stated earlier. He would certainly be capable of carrying out a sedentary occupation, not involving prolonged standing or walking or weight

lifting. If you have any questions please address them to me."

Mr Free continued to consult Dr Beltz and, by early 1982, told him that he was no longer able to drive his truck. That disability was consistent, in Dr Beltz'''s opinion, with the persistent pain to be expected as a concomitant of calcium crystals in the knee joint. That pain has not responded to a range of analgesics which Dr Beltz considered safe to recommend for Mr Free. Dr Beltz also expressed the view that Mr Free's condition would make it difficult for him to perform "any sort of manual labour that involved squatting, bending of the knees, walking long distances - any type of repetitive movement of the joints" or "any job that anvolved sitting for long periods of time". Dr Beltz also expressed the opinion, in the light of his subsequent observations of Mr Free which have continued until this year,

that the degeneration of his knees 1s progressive.

In April 1984, Dr Beltz referred Mr Free to another rheumatologist, Dr Hilton Francis of Hobart. Dr Francis, who gave evidence in these proceedings, saw Mr Free on 19 April 1984, 1n April and June 1986, and, most recently, on 18 February this year. Dr Francis confirmed the earlier diagnosis of Mr Free's condition and the prognosis that the

degeneration would be slowly progressive.

At about the same time as he first consulted Dr Beltz, the pain in Mr Free's knees had become worse to the point where he was restricted to one trip a day from New Norfolk to Triabunna and return, and was compelled to engage a Mr Danny Browning as an employee or sub-contractor to do the other trip each day. By January 1982, Mr Free's knees had further deteriorated and he deputed Mr Browning to drive the truck for both of its two daily trips. By that time, Mr Free could do little more than drive a car for short distances. His wife notified National Mutual of his disability and received

a claim form which was filled up and returned to National

Mutual in February 1982.

It appears that Mr Free was advised that it would be at least six months before his claim would be processed by National Mutual, and he thereupon applied for social security

sickness benefits which he received in respect of the period

1 February 1982 to 22 October 1982. From 22 October 1982

until 24 February 1983 he was in receipt of a rehabilitation

allowance while he underwent training in bookkeeping and

clerical work.

Mr Sawyer, the chief underwriter for National Mutual, gave evidence that most claims under its policies were processed within the underwriting division, but that difficult and potentially contentious claims were referred to a claims committee, comprising the underwriting manager, the chief underwriter, the chief medical officer, the chief solicitor, the senior claims officer, a representative from the superannuation division and the disabilities claims officer. Mr Free's claim was treated in that way. When it was first considered, the claim file before the committee

consisted of:-

(i) Mr Free's original claim ona pro forma claim form

dated 8 February 1982;

(ii) a similar claim form on which only Section B had been filled up as follows by Dr Beltz (with Dr Beltz's

answers indicated in capitals):-

"lL. Is this person ever likely to [] Yes Le

be able to resume work in his normal occupation?

Please give full reasons for your above

answer, including

(1) exact nature of present condition

(2) past and present treatment for this condition

(3) prognosis.

CHRONIC PAIN IN BOTH KNEES WHICH IS DUE TO CRYSTAL DEPOSITS - EITHER URIC ACID OR CALCIUM CRYSTALS. SERUM URIC ACID HAS BEEN WITHIN

Ls

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NORMAL LIMITS. THE CRYSTAL DISEASE IS PRODUCING A DEGENERATION OF ARTICULAR CARTILAGE (AT ARTHROSCOPY).

IT IS NOT POSSIBLE TO TELL WHETHER THIS IS DUE TO CALCIUM CRYSTALS OR WITH ACID CRYSTALS ACCORDING TO DR STRANG WITHOUT A POLARIZING MICROSCOPE (NOT ENOUGH JOINT FLUID TO EXAMINE) STEROID INJECTIONS ORAL ANTI INFLAMMATORY DRUGS ZYLOPRIM AND ULTRASOUND TREATMENTS HAVE NOT PRODUCED ANY IMPROVEMENT. PROGNOSIS IS POOR IN MY OPINION.

. If you answered 'No' to [7 ves [| No Question 1,

is this person ever likely to be able to resume work in any other job?

If 'Yes', please give full reasons for your answer indicating the type of work that could be undertaken.

PERHAPS CLERICAL WORK ALTHOUGH PROLONGED SITTING MIGHT ALSO AGGRAVATE CONDITION.

If you were unable to answer the first two questions definitely, do you consider that

(1) National Mutual should seek further medical opinion and, if so, from whom or (2) another medical examination should be held after a further period to establish if the person is disabled or not in terms of the definition?

DR R. STRANG 24 COLLINS ST MELBOURNE 3000 MR H. BYE 69 DAVEY ST HOBART.

SIX MONTHS HAVE NOT ELAPSED SINCE HE HAS DONE SOME WORK. FURTHER OPINION SHOULD BE SOUGHT THEN EITHER FROM MYSELF OR DR STRANG.

In your opinion, when would this person have first become aware of the condition which led to the claim?

ON 10/9/81 MR FREE STATED THAT HIS KNEES HAD BEEN ACHING FOR 2 YEARS.

(iii)

(iv)

(v)

- lil -

5. In your opinion, could this person's condition have been caused by intentional self-injury or intentionally contracted infection?

NO."

the report from Dr Strang to which I have already

referred;

a confidential medical report from Dr Gibbs dated 19 April 1982 which gave details of Mr Free's

consultations and treatment accorded to him between

April 1978 and May 1980;

a similar confidential medical report from Dr Beltz detailing consultations and treatment between 10

September 1981 and 8 September 1981.

It appears that before the first meeting at which Mr

Free's claim was considered, the following summary of the

claim was prepared by the secretary to the committee and

distributed to each member:-

"CMN Claim: Tony Alfred Free Branch: Tasmania

Policy Number: 1542005 Commencing date: 28 August 1979 Table: ITICTLSCMN

Sum Assured: $85,000

Date of Birth: 4 March 1952 Occupation: Logging Contractor

Disability: Chronic Knee Pain

~ 12 -

The above case was accepted at ordinary rates

death and rate x 2.5 (occupation) for CMN at Tasmania Branch on the 28.8.79.

On the 8 February 1982 Mr Free submitted a claim to the Association under the above numbered policy. The claim was based on Mr Free's contention that he was T & PD due to 'Chronic Pain in the Knees' accompanying the claim was a report from Dr I Beltz who on examination of

claimant believed Mr Free would no longer be able to perform his normal occupation but perhaps he could do clerical work.

And a report from Dr Roderick Strang of Collins St. Melbourne which clearly defines Mr Free's particular problems and concludes that it would be unlikely that Mr Free could perform his present occupation but that he certainly would be able to carry out sedentary occupations not involving prolonged standing, walking or weight lifting.

Historical medical evidence indicates we were aware of all medical history at date of acceptance. A request as to what the claimant has been doing, elicited that Mr 'Free has attempted to drive his truck but he has been

unable to sustain his driving for much more than one or two days.

What is the view of the Committee here."

That first meeting was held in May 1982 and it

that the Committee considered that the medical evidence

open the possibility that Mr Free was still capable working, and that other information suggested that he was fact working. The basis for the latter conclusion seems have been a file note dated 22 April 1982 by Mr Marsh

National Mutual's Tasmanian assessing section to

effect:-

"RE I. GRANT'S COMMENTS RE EMPLOYMENT SINCE 9/81

From discussions both myself and the agent have had with Mr Free it would appear that he has made some attempt to drive his truck but has been unable to sustain work for much more than one or two days."

seems

left

of in to

of

this

- 13 -

(Mr I. Grant was the senior claims officer who acted as the secretary to the claims committee). Accordingly, the committee resolved that further enquiries be undertaken and that Mr Free be placed under surveillance, after which his

claim would be discussed again.

Subsequently, a report dated 14 June 1982 was obtained from a firm of private enquiry agents, Dennis J. O'Day & Sons of Hobart. That report, after setting out certain matters under the sub-heading "BACKGROUND" including the registration numbers of motor vehicles observed at Mr Free's residence and the fact that he "is not in any debt in any way and never has

been", concluded as follows:-

"INQUIRY: As a 'Logger' I offered hima part contract in an operation I 'have contracted to do'. Free said 'he

could da it, no problems!!!'

SURVEILLANCE: We have now completed 18 hours of surveillance on an irregular basis and have found Free to be 'out and about' but in general he appears to be running the operation strictly as a manager/owner.

Yesterday we managed to obtain some film of this man and of course he appears quite normal bearing in mind he is doing simple things like Closing his swing down garage door, walking, driving and so on.

We can tell you that the Truck & jinker is operating at present ata place called 'Black Bobs'. This is an area of country which is heavily timbered and what we call 'Hillbilly Country'.

The area on the map will show youa town called Ouse, in Mid Tasmania, it is quite close to there.

- 14 -

GENERAL : I suspect that this manis at a stage in life where he has enough money to either lease the Truck or Simply employ a driver however by the way he spoke to the writer it is my opinion that he employs a driver as he said 'Yes I could handle that!' referring to contract hauling when he is finished where he is at present.

In conversation Free did say 'I don't drive much anymore!' This was an answer asking where I could contact him. He went on to say 'I am home most of the time!' This is certainly correct as we have found him very hard to filmas he is doing just that! At home!

Anthony Alfred Free 1s not in receipt of any form of Social Security.

We can tell you little more with what time was available and I would doubt 1f indeed if we will unless we 'sit on' Free for a set period.

We await your instructions and

would hope the above is of some value to you in the interim."

That report found its way on to the file which was before the

claims committee together with the following file note by Mr

Grant dated 13 July 1982:-

"Late PM 13.7.82 Spoke to Dennis O'Day this afternoon the film of

Mr Free was 'fuzzy' he will obtain further film at no cost within a few days I agreed that the

film would need to be reshot. (Statement made by Assessor JI must say should be viewed with suspicion)."

It appears that at some time later Dennis O'Day and

Associates obtained a second film of Mr Free engaging in some

activity. That film was forwarded to Melbourne on 25 August

1982 by the Tasmanian Branch which had been unable to view it

- 15 -

because it lacked a projector, Reference was made to the film in the further claim summary placed before the committee when it finally reviewed Mr Free's claim. That summary was

in the following terms:-

"As the committee will remember this claimant is a Logging contractor, who is making a claim due to 'Chronic pain in knees'. We have previously presented all relevant medical reports. It was

decided that we should place Mr Free under

surveillance and see what his activities are at the moment. I will project the film we have

prior to discussion.

The report from Dennis O'Day is attached (not of good quality). A verbal report from Dan Marsh advises that O'Day mentioned he 1s running his

business very well 'He has drivers on his trucks. He doesn't have to drive them at all'."

The committee decided to reject Mr Free's claim and its decision was recorded by Mr Grant in the following memorandum dated 15 September 1982:-

"The H.O. Disability Claims Committee has viewed the film from O'Day today & reviewed the medical evidence we have gathered on this case. The decision taken by the committee was to refuse this claim. We believe the medical evidence from Beltz & Strang supports this view. It would appear that Mr Free is still running a_ Logging business from what the Assessor has to say."

Mr Sawyer said that he believed the film to be still in existence but he could not recall what it depicted. He also expressed the belief that 1t would have played a part in the committee's decision to reject Mr Free's claim. That decision, he said, was based ona view that the medical and other evidence indicated that Mr Free was not totally

disabled. Under cross-examination he conceded that the

committee did not address itself to the question of whether

~ 16 -

Mr Free was disabled from pursuing some occupations but still able to pursue others for which he was fitted by his knowledge, training, status and abilities. Moreover, Mr Sawyer had no recollection of whether he was aware that Mr Free, at the time of the committee's decision to reject his

claim, was in receipt of social security benefits or that he

had engaged a full-time driver to operate his truck.

As a result of the committee's decision National Mutual, on 22 September 1982, wrote to Mr Free that:- "We refer to your claim under the disablement

benefits of the above Policy. After fullest consideration of all the evidence

obtained we must advise we are not prepared to admit the clain.

The Policy will remain in force providing valuable benefits whilst you continue to pay the premiums.

After completing his rehabilitation training, Mr Free obtained employment as a travelling salesman selling automotive parts on commission. The driving involved in that work aggravated the pain in his knee and the employment proved unremunerative. Mr Free then undertook a business of selling fuel additives to customers' homes, while his wife sold cosmetics on a similar basis. He then became an "Blectrolux" salesman but was forced to resign that employment on 1 September 1984 for the same reasons as

compelled him to cease selling automotive parts.

Whilst engaged in those successive occupations, Mr Free

continued the operation of his truck using first Mr Browning,

- 17 -

and then Mr Browning's brother, as the driver, until the truck was sold towards the end of 1984. In about 1985, Mr

Free and his wife commenced business as landscape gardeners under the name "Allabout Landscape Supplies" in Derwent Park. Mr Free has assisted in that business by operating a small back hoe for about 20 hours a week, The business has also owned a "Traxcavator" which is operated at the Carlton tip by an employed driver for three shifts a week of four hours each

under contract to Taswaste.

For almost the whole of his working career, Mr Free has been concerned with the servicing, maintenance and driving of motor vehicles and he holds all requisite licences to operate

a very wide range of then.

By his statement of claim the applicant pleaded the making of the following three representations, apparently as the basis of a claim in damages for contravention of s.52 of

the Trade Practices Act 1974:-

"7. The First Named Respondent by its servant or agent the Second Named Respondent further represented to the Applicant that the aforesaid policy would indemnify the Applicant in the event that physical disability or illness prevented the Applicant from driving his truck to the full extent of the policy namely $85,000.00.

8. At the aforesaid time and place the First Named Respondent by its servant or agent the Second Named Respondent further represented to the Applicant that the aforesaid indemnity of $85,000.00 would be paid to the Applicant upon the production by the Applicant of a medical certificate stating he was permanently disabled from driving his truck.

- 18 -

9. At the aforesaid date and place the First Named Respondent by its servant or agent the Second Named Respondent further represented to the Applicant that the benefit payable under the aforesaid disability policy would be $85,000.00."

It is also pleaded that "the representations made by the second-named respondent to the applicant were made negligently, fraudulently, deceitfully and/or recklessly with indifference to the truth". Finally, it 15 pleaded that "the

second-named respondent wilfully and fraudulently misled the

applicant in his advice to the applicant as to the nature of and the benefits payable under the said policy of disability insurance for the purpose of obtaining business from the

applicant".

The evidence does not establish the making of any representation to the effect of that pleaded in paragraph 8 of the statement of claim. Nor is there anything to suggest that the representation pleaded 1n paragraph 9 was deceptive

or misleading.

However, the statement of claim also erects a cause of action for breach of the contract constituted by the National Mutual Policy No 1542005. Damages flowing from the alleged breach of that contract have been quantified in the sum of $85,000. It must therefore first be determined whether that

cause of action has been made out. It is only if National Mutual has properly refused Mr Free's claim on the basis of

some construction of the policy, inconsistent with that

alleged in paragraph 7 to have been represented as accorded

- 19 -

by National Mutual to its disability cover, that it becomes necessary to consider the cause of action under the Trade

Practices Act, or the allegations of fraud against Mr Creese,

The relevant annexure to the policy imposes an obligation on National Mutual to pay to Mr Free the = sum assured if total and permanent disablement (as defined in the conditions) occurs before 28 August 1994. That in turn requires reference to the definition in condition 2(a) which has already been set out. The definition imports the requirement that an opinion be formed by National Mutual (after consideration of such medical and other evidence as it shall require) that the insured has become disabled by bodily

injury or disease to the specified extent.

It is to be implied in a contract of insurance which makes recovery depend upon proof to the satisfaction of the insurer or its directors, or the formation of some opinion as to a matter of fact, that the insurer will act reasonably in requiring evidence and in forming the requisite opinion. (See

e.g. Braunstein v The Accidental Death Insurance Co (1861) 1

B& S 782; 121 E.R. 904; Harvey v Ocean Accident and

Guarantee Corporation [19053 2 I.R. 1 at 13, 19 and 24,) In this case National Mutual did not require any further medical or other evidence after the second meeting of its claims committee to which it presumably had delegated the function of forming the opinion whether Mr Free had become disabled to the extent required by cl.2(a) of the conditions to the CMN

annexure to the policy. It 1s therefore appropriate to ask

-~ 20 -

whether, on the evidence before the claims committee in September 1982, a reasonable insurer could bona fide form the opinion that Mr Free had not become disabled by the condition of his knees to such an extent that he was then, and had been throughout the six months from March 1982, wholly prevented from engaging in his occupation as an owner-driver of a logging truck. It was not open to the committee to form that negative opinion by concluding that Mr Free could, for short periods on a given day, perform some or all of the activities required by that occupation. For the construction of similar

provisions in insurance policies see Hooper v The Accidental

Death Insurance Company (1860) 5 H&N 546 : 157 E.R. 1297 and

Pocock v_ Century Insurance Company, Ltd. £19601 2 Lloyd's Rep. 150. In the latter case Mr Commissioner Molony Q.C.

observed, at 154:-

"The broad test that I think must be applied in order to understand the application of this clause is to ask oneself: Is a man fit to go to business? It does not mean that he has got to be fit to spend the whole day there; it does not mean that he has got to be fit to carry on all the activities which that business normally involves. The question is: Is he fit to attend there and play a worth-while part in the conduct of it? If the answer 1s 'No', then in the view that I have already expressed, Clause (f) applies, and in that sense J find that the plaintiff was disabled from attending to 'business of any and every kind' up to the date that has been mentioned."

On that construction of the policy, and in the light of

the medical evidence contained in the reports of Dr Beltz and

Dr Strang, I conclude that it was not reasonably open to National Mutual in September 1982 to form the opinion that Mr

Free was not wholly prevented by the condition of his' knees

- 21 -

from engaging in his occupation as the owner-driver of a

logging truck, or any similar occupation or business.

It does not appear that the claims committee ever addressed itself to the question of whether Mr Free was similarly prevented from engaging in any other profession, business or occupation for which he was fitted by his knowledge, training, status and abilities. That failure compounded the breach by National Mutual of its obligation bona fide and reasonably to consider whether or not it formed the opinion required by cl.2(a) of the CMN annexure to the

policy.

In my view, had the committee considered the second question raised by that clause, it would have found it necessary to identify each business or occupation other than that of owner-driver of a logging truck or something similar, for which Mr Free was fitted by his knowledge, training, status and abilities. It would have been obliged in that process of identification to exclude, amongst others, menial occupations inconsistent with Mr Free's status as an owner-driver of a logging truck, part-time occupations which attracted significantly less remuneration than he had derived as a full-time owner-driver, occupations which required substantial additional training, and any business or occupation which required a greater capital investment than had been necessary for him to carry on his business as

owner-driver of the "Mack" truck acquired in 1979,

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Had it undertaken that process, the claims committee, acting reasonably on the evidence before it in September 1982, would have formed the opinion that Mr Free was wholly prevented from engaging in any other business or occupation other than that of owner-driver of a logging truck, for which he was fitted by his knowledge, training, status and abilities. Tt 1s true that Dr Beltz tentatively, and Dr Strang positively, indicated that Mr Free was not prevented from undertaking a clerical or other sedentary occupation. However, there was nothing in the available evidence to suggest that Mr Free was fitted by knowledge, training,

status and abilities for any such occupation.

I also conclude that had the claims committee addressed itself to the correct questions, even if it had required and obtained further evidence, 1 would have been bound, acting reasonably, to have formed the opinion that Mr Free would be disabled in terms of the definition in cl.2(a) of the conditions of the CMN annexure, for the remainder of his life. I am reinforced in that conclusion by the evidence given in these proceedings of Mr Free's experiences since September 1982, the continuing medical assessments of his condition and my own observations of him. It could not reasonably be suggested on the proper construction of the definition that the operation of a back-hoe for up to twenty hours a week was an occupation for which Mr Free was "fitted by his knowledge, training, status and abilities". The fact

that he has been forced, or chooses, to engage in that

occupation rather than remain completely idle does not entail

- 23 -

that it was one of the occupations contemplated by the definition which would, if able to be engaged in, preclude

recovery of the sum insured.

The consequence of the breach or breaches by National

Mutual of the contract of insurance is that Mr Free should receive an award of damages represented by the amount of $85,000 which he would have received had the contract been performed according to its terms; (Robinson v Harman (1848) 1

Ex. 850 at 855; 154 E.R. 363 at 365).

In view of the conclusion which I have reached in respect of the cause of action for breach of contract, it is unnecessary to deal further with the other causes of action alternatively relied on by the applicant. However, I should say that the evidence did not support the allegation that Mr

Creese had been guilty of fraud.

The cause of action on which Mr Free has' succeeded arose before the commencement of s.51A inserted in the

Federal Court of Australia Act 1976 by Act No. 165 of 1984.

However, I consider, in the light of the judgment of the majority of a Full Court of this Court in Centrepoint Freeholds Pty. Ltd. v TN. Lucas (TN) Pty. Ltd. (1985) 60

A.L.R. 187, that I should give effect to s.34 or s.35 of the

Tasmanian Supreme Court Civil Procedure Act 1932 and add to

the judgment for $85,000 an amount of damages in the nature of interest from 30 September 1982 until the date of

judgment. If agreement cannot be reached on the amount of

- 24 -

that interest, or the rate at which 1t should be calculated, I shall receive written submissions on that question from

Counsel for the parties. I shall also order that National Mutual pay the applicant's costs of these proceedings, such

costs to be taxed.

I certify that this and the preceding twenty-three (23) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Ryan.

Associate

Dated: +> Pugery C2 PSP

NAME OF ACTION

NO. OF ACTION

SOLICITORS FOR THE APPLICANT

COUNSEL FOR THE APPLICANT

SOLICITORS FOR THE RESPONDENT

COUNSEL FOR THE RESPONDENT

DATES OF HEARING

: Tony Alfred Free v The National Mutual

Life Association of Australasia Limited and Geoffrey Creese

: TG No 6 of 1983

: Gunson, Pickard & Hann

: Mr P.W. Slicer

: Page Seager

: Mr D.A. Bessell

22-24 February 1988