PILKINGTON V FIDELITY LIFE ASSURANCE COMPANY LIMITED HC WN CIV-2007-485-2270

PILKINGTON V FIDELITY LIFE ASSURANCE COMPANY LIMITED HC WN CIV-2007-485-2270 14 April 2010IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2007-485-2270BETWEEN GREGORY ALLEN PILKINGTON Plaintiff AND FIDELITY LIFE ASSURANCE COMPANY LIMITED Defendant Hearing: 1 April 2010 Counsel: H Cull QC and J Shoebridge for the Plaintiff P Rzepecky and G Simms for the Defendant (appearing on a pickwick basis) Judgment: 14 April 2010RESERVED JUDGMENT OF JOSEPH WILLIAMS JIn accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 3.30pm on the 14 th April 2010. [1] This is an ex-parte application by the plaintiff for a mandatory injunction to force the defendant to continue paying him. The plaintiff has an income protection insurance policy with the defendant. It commenced on 20 August 2003. In broad terms the policy provided that (subject to a waiting period of 13 weeks) the plaintiff would be paid monthly inflation adjusted benefits totalling $11,250 if he became disabled prior to the age of 65. He would qualify for such payments if he was unable to work and was under the regular and personal care of an approved medical practitioner because of continuing sickness or injury.[2] In the plaintiff's particular case a further requirement under clause 7(a) of the contract was that he was prohibited from pursuing in his own occupation for 10 hours per week and could not in any other occupation. [3] On 28 November 2003, following problems in the business he owned and operated, the plaintiff made a claim against the policy. He was assessed by Dr Treadwell, a Wellington psychiatrist in May 2004 at the request of the defendant. He was diagnosed with generalised anxiety disorder, panic attacks, and developing phobia about health institutions and management. [4] On 21 July 2004, the defendant accepted the plaintiff's claim. In what appears to be standard procedure, the defendant formulated a disability claim management plan in respect of the plaintiff's rehabilitation and treatment. [5] Before long the defendant became concerned at the level of progress the plaintiff was making in effective treatment and rehabilitation. In September 2005, the defendant advised the plaintiff that payments would cease until the plaintiff received regular treatment from a psychologist as recommended by Dr Treadwell who first assessed him. The plaintiff, for his part, resented the extent to which the defendant wished to intrude into and scrutinise his life. [6] After protracted negotiations the parties could not resolve this dispute and the plaintiff eventually issued proceedings against the defendant on 11 October 2007 to force the recommencement of payments. The proceedings were filed in the Wellington High Court. [7] These proceedings were adjourned sine die on 8 April 2008 when an agreement in principle was reached between the parties as to how the plaintiff's condition should be managed. This agreement involved medical experts for both parties agreeing a diagnosis for the plaintiff's condition and a proposed treatment plan. Retrospective payments were made and ongoing monthly payments were recommenced. Because at that point important details were still to be worked out, the proceedings remained on foot. Although all issues relevant to those proceedings appear to have been resolved, no notice of discontinuance was ever filed.[8] On 5 February 2010, the defendant again ceased making payments. On 17 February 2010, the defendant's solicitors wrote to the plaintiff's then solicitors advising that over the last 18 months the defendant has carried out an extensive investigation into the plaintiff including the circumstances of claim and his current lifestyle. The defendant now says that the plaintiff failed to disclose material facts when the insurance policy was first entered into; fraudulently represented that he was suffering from a mental illness when he was not; has throughout the relevant period, owned businesses, earned income and been engaged in occupations in breach of the policy. [9] The defendant issued fresh proceedings in the Auckland High Court and these were served on the plaintiff on 23 February 2010. These proceedings seek repayment of all benefits. The plaintiff retaliated by reawakening the Wellington proceedings and applying for an ex parte interim injunction. [10] The plaintiff argued that the defendant abused the court's processes by issuing fresh proceedings in Auckland while the Wellington proceedings were still extant. [11] The plaintiff pointed to a letter of 16 October 2007 in which the defendant's solicitors gave an "undertaking" to pay monthly benefit payments "pending the substantive hearing of the application for a permanent injunction." Although the defendant expressly stated in the letter that the "undertaking" was "without prejudice to fidelity's position and it reserves all rights", the defendant could only be released from its undertaking by leave of the court. No application for leave had been made. [12] The defendant argued that the apparent undertaking given in the letter needed to be seen in its context. The letter was sent six months before the agreement to adjourn the Wellington proceedings and any "undertaking" given had been overtaken by the subsequent substantive agreement between the parties in the Wellington proceedings.[13] Mr Rzepecky argued that the proceedings commenced in Auckland were on an entirely different factual basis and were clearly distinct from the Wellington proceedings which he described as "moot and stale". [14] It is unnecessary for me to resolve either the status of the "undertaking" in the letter of 16 October 2007 or the relationship between the Auckland and Wellington proceedings because Mr Rzepecky on behalf of the defendant rightly accepted that whether the defendant was obliged to continue paying the plaintiff was a serious question that must now be tried either in the Auckland proceedings or consolidated proceedings involving both sets of proceedings. [15] Putting that matter to one side, the next question is the balance of convenience. This raises issues such as the adequacy of damages, the relative strength of each side's case if a preliminary view on that matter is possible and so forth. As Fisher J put it with customary clarity:The question is whether it has been affirmatively shown that the risk of injustice of an ultimately successful, but temporarily unassisted, plaintiff is greater than the risk of injustice to a temporarily restrained, but ultimately successful, defendant. [Telecom New Zealand Limited v Clear Communications Limited (1997) 6 NZBLC 102,325 at 102,335.][16] In that case, His Honour acknowledged that the test in respect of interim mandatory injunctions is the same as that for prohibitory injunctions. He cited Soft- Tech International Pty Limited v Ball1 where Eichelbaum CJ reflected on the difficulty in securing mandatory injunctions. The then Chief Justice said:Mandatory injunctions are relatively uncommon, interim mandatory injunctions are rare indeed, and interim mandatory injunctions having the effect of a final order and involving the payment of a sum of money which normally would be described as a debt, in my experience are completely novel. [at p684].[17] As Fisher J commented:I respectfully agree. I do not doubt the jurisdiction for such an order but it must be rare that it could be justified on the facts, given: (i) other avenues for preserving the security of the plaintiff's ultimate judgment (principally charging orders and Mareva injunctions),1 (1990) 3 PRNZ 683(ii) the essentially fungible nature of money, (iii) the opportunity for most plaintiffs to borrow elsewhere pending judgment, and (iv) the jurisdiction to avoid interest under the relevant instrument or under s 87 of the Judicature Act 1908 (at p102,335).[18] The essential principle therefore is that interim mandatory injunctions will be subjected to the same test as interim prohibitory injunctions but in the case of interim mandatory injunctions, it will be a rare set of facts indeed that will withstand the scrutiny of that test. [19] The plaintiff says that he will suffer irreparable harm if his monthly payments are halted. He says without these payments his fishing charter operation in Vanuatu will collapse, he will be unable to meet his monthly outgoings and he will inevitably be bankrupted. He argues that without such an order, the defendant will be able to outlast the plaintiff and the serious question to be tried will never get to trial. [20] The plaintiff argues further that the defendant behaved badly by ignoring the Wellington proceedings, breaching its undertaking, and unilaterally issuing fresh proceedings in Auckland. [21] The defendant argues that damages is a perfectly adequate remedy for the plaintiff if his breach of contract argument is successful. The defendant says that the plaintiff, on his own evidence, is impecunious. His undertaking as to damages is worthless. If the defendant is successful in defending its cessation of payments, and if the plaintiff is found to have acted wrongly or fraudulently, there will be no prospect of recovering any additional monthly payments made pursuant to an interim mandatory order of the court. [22] In a second line of argument, the defendant argued that the evidence as to the plaintiff's impecuniosity was thin. The defendant argued that the plaintiff needed to go much further than the assertions he made in order to establish that the cessation of monthly payments would inevitably bring about his financial ruin. It was argued that the court would be entitled to infer on the basis of the superficial nature of the evidence on this question, that the plaintiff was not impecunious at all.[23] In response to these arguments, the plaintiff filed more details as to his accounts and supplemented his own earlier undertaking as to damages (which the defendant argued was worthless) with a limited undertaking by Beverley Lynn Nickel. Ms Nickel is the plaintiff's mother-in-law. The undertaking is worded as follows:BEVERLEY LYNN NICKEL undertakes that if, by reason of the granting of the interlocutory application without notice for interim injunction sought by the plaintiff, the defendant sustains any damages that in the opinion of the Court the plaintiff ought to pay, Beverley Lynn Nickel will abide by any order that the Court may make in respect of such damages up to a maximum of $70,000.[24] Mr Pilkington's affidavit containing budget and bank account details suggests that the plaintiff's outgoings exceed his income by a factor of nearly 15 to 1, and that his total liabilities exceed assets when the figure identified as "past and present legal fees" of $85,000 is taken into account. [25] Further affidavits provided evidence that the plaintiff's wife, Kristin Pilkington, has been unemployed as from the end of January this year and cannot support him, and that from October to January the plaintiff's fishing charter business had consistently received tax refunds. This was because for the most part purchases for the business exceeded its revenues. [26] As the authorities show, interim injunctions are rarely granted. In a case such as the present where cash payments are at issue, they are even rarer. Nonetheless, if I was quite satisfied that failure to make interim mandatory orders to protect the plaintiff's position until trial would have led him to immediate and complete financial ruin, I would not have hesitated to grant the orders sought. Among other unacceptable outcomes of failure by the court to act would have been defeat of the applicant's access to justice. [27] Having reviewed all of the evidence and in particular the disclosures made by the plaintiff and his wife, I am not satisfied that this will be the outcome in this case. Although the relevant standard of proof is still the balance of probabilities, an applicant for interim relief must give complete disclosure of all relevant material in his or her possession. The applicant must also be scrupulously honest. Thedefendant has been right in pointing out that the plaintiff has not met the standard. I point in particular to the following: a) Mr Pilkington claimed he paid $800 a month to support his children when the affidavit of his former wife, Isabel Winslow, made it clear that he had never made such regular payments and that this was a matter of controversy between them; b) Mr Pilkington claimed that he had missed making monthly loan payments when the material he disclosed from Westpac Bank demonstrated that there were no loan arrears at the time of his affidavit; c) when confronted with this inconsistency, Mr Pilkington changed his story; d) there is an unexplained deposit of NZ$8,000 into his account which covered the last month of loan repayments, and Mr Pilkington failed to explain the source of that deposit; e) Mr Pilkington has not disclosed any bank accounts, business accounts, or tax returns for his charter business dated earlier than October 2009. Such accounts would have demonstrated (or not) that the business has never made a profit. If there are no such accounts and all accounting for the business is in Mr Pilkington's own name, then that material has not been provided either; f) it is still not clear whether Mr Pilkington has disclosed all of his banking accounts; g) to the extent that the foregoing relates to insufficient disclosure, this is despite the plaintiff having taken three opportunities to meet objections and criticisms raised by the defendant.[28] Thus, although the defendant has conceded a serious question to be tried, and although in theory at least, interim relief could have been available, the plaintiff has been less than truthful in his disclosures, and such disclosures as he has made have been less than complete. I cannot therefore be satisfied to the required standard, that failure to make the order sought would lead to the plaintiff's financial ruin. [29] The application is dismissed accordingly. The defendant will be entitled to costs on the application on a category 2B basis. "Joseph Williams J"Solicitors: Helen Cull QC, Barrister, PO Box 10-433, Wellington McElroys Litigation Lawyers, PO Box 835, Auckland 1140