CATCHWORDS

TRADE PRACTICES - Consumer protection - misleading or deceptive conduct - whether advertisement for  health insurance was misleading or deceptive - use of the words "no excess to pay"

Trade Practices Act 1974  s52

ST LUKES HEALTH INSURANCE V MEDICAL BENEFITS FUND OF

AUSTRALIA LTD

No TG 15 of 1995

NORTHROP J

HOBART

21 JUNE 1995

IN THE FEDERAL COURT OF AUSTRALIA

TASMANIA DISTRICT REGISTRY        No TG 15 of 1995

GENERAL DIVISION

B E T W E E N :

                  ST LUKES HEALTH INSURANCE

                                                   Applicant

A N D :

           MEDICAL BENEFITS FUND OF AUSTRALIA LTD

                                                  Respondent

COURT:    NORTHROP J

PLACE:    HOBART

DATE:     21 JUNE 1995

                    REASONS FOR JUDGMENT

     This action involves a dispute between two companies involved in the health insurance business in Tasmania.  It may seem strange that subsection 52(1) of the Trade Practices Act 1974 enables one company to bring proceeding against a competing company alleging conduct which is misleading or deceptive or likely to mislead or deceive within the meaning of the subsection when the persons who are said to be the victims of such conduct are the public generally and not the company who brings the action.  It is now far too late in the day to query this type of action.  Subsection 80(1) of the Act provides, for relevant purposes, that the Minister, the Commission or any other person may bring a proceeding seeking an injunction to restrain a person from engaging in conduct that constitutes a contravention of subsection 52(1) of the Act.  There are many legal authorities where one competing company sues a competitor company where the conduct complained
about is said to mislead or deceive or likely to mislead or deceive the public generally.

     The facts in this case, to a large extent, are not in dispute, but it is necessary to refer briefly to some of them.  The real issue on the question of liability is the construction of advertisements which have appeared on television in Tasmania and also in newspapers circulating in Tasmania, in the southern part of Tasmania, the northern part of Tasmania, and the north-west of Tasmania.  The pleadings, if I may say so, are very helpful in this case in that they do identify the issues between the parties and, to a large extent, the pleadings should have limited the need to lead evidence in many of the areas in which affidavits were filed for the hearing of this action, directions having been given that the evidence be presented by way of affidavit.

     To some extent, the evidence called by the respondent is directed to a separate defence which I will deal with later, but on the pleadings the issues are so clearly defined that the matter could have been argued almost on the pleadings themselves.  The affidavits filed on behalf of the applicant, although read to the Court, do not take the matter much further, and the cross-examination of one of the applicant's witnesses, again, does not take the matter much further.

     Looking at the pleadings, it is admitted that the applicant is a corporation under the Trade Practices Act, and carried on the business as a provider of among other things health insurance within the State of Tasmania.  The respondent, also, is a corporation under the Trade Practices Act and carries on business as a provider of, among other things, health insurance under the name Medical Benefits Fund within the State of Tasmania.  There is an allegation that on various days the respondent published or caused to be published a television advertisement within the State of Tasmania.  That is admitted, and the words spoken or written in that television advertisement are as follows, and this is the crucial part of the case for the applicant, and I quote:

     "MBF (which stands for Medical Benefits Fund) Extra Essentials covers you for dental, optical, pharmaceutical and physiotherapy for just $2.10 per week.  With no excess to pay and no two month waiting period.  MBF Extra Essentials.  Essential cover for $2.10 per week.

     It is then alleged, and admitted, that the object and purpose of that advertisement was to promote the respondent's form of health insurance known as "The Essentials Package".  The advertisements were admitted to be in the course of trade.  The statement of claim then alleges that that conduct constituted misleading or deceptive conduct which was likely to mislead and deceive persons seeing it in Tasmania, essentially on the basis that it would suggest that the insurance cover offered would be on the basis that there was no excess to pay, that there would be a total indemnity of costs incurred by a person joining the particular package in relation to liability incurred for dental, optical, pharmaceutical or physiotherapy treatment.  That fact is
disputed and denied by the respondent.  That is the first issue to be determined, the meanings to be given to the words appearing in the television advertisements as understood by the people to whom they were directed, namely the general public in Tasmania covering the whole range of persons in that State irrespective of their degrees of knowledge of the industry, their degrees of understanding of what was involved, and having regard generally to the whole range of the community itself.  It is then alleged that the meanings were in fact false in that there were limitations imposed on persons entering into the essentials package.  I will come to these limitations later.

     There is then similar allegations in the statement of claim in relation to the advertisements in the newspapers but the example given is slightly different to that in the television advertisement in that the newspaper advertisements depict a photograph and then it appears there may have been variations, depending upon which comes first.  The copy advertisement annexed to the statement of claim is in relation to optical, and it depicts a photo of a woman, then a series of words not in a sentence, "Optical" in large type, then "Dental, Physio & Pharmaceutical", then the word "Cover" in large type, then the words "No Excess, No Two Month Waiting Period", then "$2.10 per week" in large type, then "for Singles - Families $4.20 - less with discounts.  Call us about MBF Extra Essentials on 1800 804 915".

     The publication of those advertisements is admitted, and the evidence shows that there were variations in relation to whether the first word was to be optical, dental or something else.  All those facts are admitted, but the allegation that the conduct in publishing these advertisements was misleading or deceptive is denied.  The nature of the misleading conduct or the effect of it is denied also.

     There is then an allegation that unless restrained the respondent will continue to publish the television advertisement and the newspaper advertisement.  That is not admitted.

     In addition to those pleadings, there is an additional pleading in the defence as follows:

     "4.  In further answer to the statement of claim the respondent says that:

     (a)  The television and newspaper advertisements referred to in the Statement of Claim (the `advertisements') invited persons in the target audience to contact the Respondent to obtain information about `MBF Extra Essentials';

     (b)  Persons who made enquiries of the Respondent in response to either or both of the advertisements were given information about the level of benefits payable under `MBF Extra Essentials';

     (c)  If any person were caused by either or both of the advertisements to think and believe the matters alleged in paragraphs 8 and 12 of the Statement of Claim (which is denied), they were corrected by the information given to them upon enquiry."

     I will refer to this defence immediately and say that in my opinion even if I accept - as I do accept - the fact that MBF would explain to persons applying for the cover what were the effect of the terms of the package that was entered into, that does not overcome any misleading or deceptive conduct which had occurred at an earlier stage when the member of the public seeing the advertisement, or hearing it, goes along to MBF to consider entering into it.  The misleading or deceptive conduct occurs at the time of the publication of the television advertisement or of the publication of the newspaper advertisements.  I expressed a similar view in an earlier decision I gave in Australian Unity Friendly Society v Health Insurance Commission and Mutual Unity Limited v Health Insurance Commission, No VG 392 of 1994 and No VG 403 of 1994 respectively, in an oral judgment given on 17 November 1994 and, in particular, at pages 5 to 6 of these reasons.  This has nothing to do with the question of confusion or otherwise as referred to in the submissions made on behalf of the respondent in this case, but the Court must look at the advertisements, determine what the proper construction is to be given to them, and then determine whether the advertisements so constructed are misleading or deceptive or likely to mislead or deceive.

     I turn, first, to the television advertisement.  There are two aspects of this, the first is the use of the word "covers", and the second is the use of the words "no excess to pay".  In normal use the word "covers", in the context of insurance, has a fairly well understood meaning.  To put it in the vernacular, it means a person covers himself or herself against a liability that may incur in the future relating to health matters, and I use the word "health" to cover the aspects of dental, optical, pharmaceutical and physiotherapy as well as general.  This is made clear by a reference to most dictionaries and I refer first to the New Shorter Oxford English Dictionary, in this case published in 1993, a fairly recent version.  Under the word "cover" a very wide range of meanings are given, probably the most relevant being:  "Shield, protect; shelter, be a means of defence or protection.  Adequate insurance against loss or damage etc; the state of being protected of this."

     The Macquarie Dictionary is even more explicit although not so many meanings are given.  The relevant one appears to be:  "To suffice to defray or meet a charge, expense, etc, offset an outlay, loss, liability, etc".  And then:  "To insure against risk; covered by a comprehensive policy".

     The word "cover" itself is fairly neutral in this sense in that it merely refers to a case where a person undertakes some health policy to protect himself or herself from a liability that may be incurred in relation to the risks covered by the insurance.

     Of more importance is the meaning to be given to the word "excess" in the phrase "with no excess to pay" or "no excess".  This, again, is referred to in the New Shorter Oxford Dictionary where a large number of meanings are given to the word "excess", the relevant one for present purposes being "The amount by which one number or quantity exceeds another;  spec. a sum payable by an insured party in the event of a
claim, the insurer paying the amount by which the claim exceeds the sum".  I repeat that definition.  "Excess:  A sum payable by an insured party in the event of a claim, the insurer paying the amount by which the claim exceeds the sum".  It is a very general definition.

     The Macquarie definition is not quite so explicit on this but gives similar meanings to the word "excess":  "1.  The fact of exceeding something else in amount or degree.  2.  The amount or degree by which one thing exceeds another."  There is no specific reference there to insurance.

     In the context, in my opinion, having regard to the use of the phrase "no excess to pay" in the television advertisement, the reference there is to no excess in the sense of no sum to be paid by the person insured.  In other words, the advertisement says the insurance cover is for a complete indemnity of liability incurred for dental, optical pharmaceutical and physiotherapy expenses.

     As far as the newspaper advertisements are concerned, where there is no sentence at all, the words "no excess" in my opinion, prima facie, mean the same thing, that the person who takes out the policy is to be indemnified with respect to the total amount of liability incurred for dental, optical pharmaceutical and physiotherapy treatment undertaken by that person.

     Counsel for the respondent has challenged this view and attempts to rely upon evidence to show that in the insurance industry the word "excess" has a more limited meaning and is to be limited to any amount which is to be paid by the insured by way of an "up-front payment" for a reduction in the amount of the premium to be paid for that insurance.  In the outline of submissions it is said the word "excess" "has a well known meaning in the health insurance industry.  The respondent's advertisements were projected into an environment which was well familiar with health insurance policies which provided "cover" in the sense outlined above, subject to the payment of a "deductible" or "excess".  The object of such policies was to assist in reducing the cost of the "cover".  MBF is simply saying, "you can acquire our cover without having to agree to the payment or deduction of an excess.""

     In my opinion the evidence does not go that far.  In any event, this advertisement is directed to the public at large, not to persons engaged in the health insurance industry.  The evidence of the accountant for the applicant suggests that in his experience in the industry the word "excess" covers any amount which is to be paid by the insured whether a stated amount in a policy or amounts paid in excess of the amounts recovered under the policy, "excess covers any amount paid by the insured."  This same view, in my opinion, is supported by material which is in the affidavit of Mr Ewen, the sales manager in Tasmania for the respondent, Mr Ewen says:

     "Excess means an amount that is deducted from the benefit claimed before the benefit is paid for the payment that must be made by the insured before the benefit will be
paid."

     He produced a number of brochures and documents which make reference to the word "excess" and continued "It is always used in the sense of deductible".

     In my opinion, that is too narrow a meaning to be given to the word "excess" in its normal meaning.  Also it is too narrow in relation to the health insurance industry, although the more important concept is in relation to the general public.  Before doing that, it is necessary to turn to what, in fact, is the MBF Extra Essentials cover.  I do this by reference to a brochure produced by the respondent entitled "MBF.  All About Hospital Essentials and Extra Essentials Cover".  It was printed in Tasmania in March 1995, that is, before the present application was issued but after most of the advertisements which are complained about had been published.  The evidence suggests that there was a similar brochure before this one, the exact terms of which are not before the Court, but the Court accepts that essentially they were of a similar kind.  The relevant part dealing with the Extra Essentials Cover is set out on page 4 of the brochure, and I read the relevant part:

     "What does MBF Extra Essentials cover?

     MBF Extra Essentials pays for -

     General Dental Costs - 80% of the costs of consultations, X‑rays, routine fillings, extractions, scaling and cleaning, fluoride applications and sport mouthguards ...

     Up to $300 per person per calendar year.

     Chemist prescriptions - This covers pharmacy items (excluding contraceptives and steroids) available only with a doctor's prescription.  You pay the current pharmaceutical benefits scheme amount and MBF pays the rest up to $25 per prescription ...

     Up to $300 per person per year.

     Physiotherapy Treatment - You will receive up to $18 for every visit to the physiotherapist ...

     Up to $300 per person per calendar year.

     Optical Cover - You will receive between $130 and $160 for a pair of glasses, or up to $150 for contact lenses ...

     One complete appliance per person, per calendar year."

     Looking at the details of this policy it is obvious that there are quite marked limitations imposed on the cover to be given to a person entering into this particular type of cover, the MBF Extra Essentials.  First of the general dental costs,  only 80 per cent of costs of a limited type of treatment is covered.  The remaining 20 per cent must be paid by the insured.  Many dental treatments are excluded and a witness illustrated those by giving a long list of treatments of a dental kind which are not covered by this policy.  Further there is a limitation of $300 per person per calendar year.  On any view, there is money which is to be paid by the insured and which cannot be recovered under the insurance policy.  In my opinion any amount so paid is an excess.

     Chemists prescriptions, likewise, have a limitation imposed on the amount covered.  From the evidence given in Court, it appears that the first $16.20 of any prescription must be paid by the insured person.  There is a provision that certain types of persons - pensioners, for example - may have that amount reimbursed or paid for under the current Pharmaceutical Benefits Scheme, but unless a person comes within that limited class the person insured must pay the first $16.20 of any amount for a prescription obtained under a doctor's prescription.  Then the MBF pays the next $25, if it goes that high, and after that $25 has been paid, if the prescription costs more, the balance must be paid by the insured.  In any event, there is an upper limit of $300 per person per year.  On any view, this cover does have a deductible or excess amount to be paid by the insured even on the definitions advocated by counsel for the respondent.

     Likewise, there are limitations on the physiotherapy treatment where the amount is limited to $18 for every visit with an upper total limited of $300.00 per person per calendar year.  Likewise, with optical cover, it is limited to one pair of glasses per calendar year per person, and the amount is limited to $130.00 or $160.00 or amounts between those amounts for a pair of glasses and up to $150.00 for contact lenses.

     It is in this context that on the meaning to be given to the word "excess"  as accepted by the Court the advertisements are misleading and deceptive or likely to mislead or deceive in that a person seeing or hearing or reading the advertisements would form the view that the insurance cover granted would be such that there was no excess, nothing to be paid, by the insured in relation to costs incurred for those types of treatment.

     The whole question of health insurance cover is a very complex and difficult one and there are a very wide range of covers available from various health insurance providers.  In many of those, for a reduction of premium the insured undertakes to pay what is described as an excess.  In other words, the insured runs a risk of not getting full cover but to pay the excess him or herself rather than pay a higher premium.  This is illustrated by an examination of the pamphlet prepared by the applicant and tendered by the respondent headed "St Lukes Health Insurance, Hospital & Extra Cover Health Care, Tasmania's Best Choice in Health Insurance, Effective 15 August 1994".  Set out in this pamphlet are a range of hospital covers and what is covered by those various ranges, how the premiums can be reduced by entering into an agreement for the insured to pay certain excess amounts giving rise to the concept referred to earlier of deductibles or pre-excess amounts paid before the insurance is paid.  Reference is also made to a number of other documents - I refer to one only, an article in the Consumer magazine, being exhibit 6, which refers to an examination conducted of various types of health insurance cover available.  This was a publication in 1992 where, under the subheading of "Is there anything I can do to cut the costs of fund membership", there appears the following:  "The other way to save money is to agree to pay part of any bills yourself (an excess)".  To some extent, this may be ambiguous as to whether it is a specified amount or merely the balance between what the liability is and what can be recovered under the insurance policy.  However, in my opinion, it does support the view that the word "excess" normally means any amount which the insured must pay and which is not covered by the amount the insurer pays.

     Reference was also made to the form of the advertisement on the television where the words "with no excess to pay" are coupled with "and no two month waiting period" - it being argued that the two month waiting period is a well-known concept where normally in the health insurance field a person who applies for cover has to wait a period of two months before being entitled to the cover.  It was argued that in this context the words "no excess to pay" must be understood in the same technical sense of health insurance.  I do not accept that argument because that does not help, in my view, one way or the other.  The concept of no excess is so clear in my opinion as to cover, and only cover in this context, the fact that a person who has entered into this agreement, will not have to pay any of the expenses incurred to the dentist, optician, chemist or physiotherapist.

     For these reasons, in my opinion, the applicant has made out a case that the respondent has engaged in conduct which is misleading or deceptive, or likely to mislead or deceive, under section 52 of the Trade Practices Act.  The question remains as to what should be done about it.

     The advertisements, it appears, were published in Tasmania commencing in July 1994.  They were stopped in November 1994 and resumed in February 1995 and have ceased since April 1995.  The respondent has led evidence relating to these advertisements but, if anything, that material tends to support the case for the applicant, but I do not rely upon that.  It is argued that there has been this long delay by the applicant in bringing these proceedings and this indicates that there may well be no substance in the claims made.  I have put to one side and reject the concept that the absence of any evidence of actual misleading of the public generally does not affect this case at all but that, in any event, this long delay is to be taken into account.

     The respondent also tendered in evidence a letter from the firm Zeeman Kable and Page, the same firm which is now acting for the applicant.  The letter dated 14 February 1995 is directed to the respondent complaining about certain advertisements of a different kind to those the subject of the present action.  That letter was in fact written on behalf of a company not being the applicant.  It was written on behalf of Health Benefits Council of Tasmania Limited which is not the applicant St Lukes Health Insurance.  In my opinion, the only effect of this letter is to highlight the fact that there is nothing before the Court to show that any letter of demand was written on behalf of the applicant before action was commenced in this case.

     It might be argued, as was suggested, that the letter from the solicitors in relation to the Health Benefits Council of Tasmania Limited and the fact, assuming for the moment it is correct, that no further action was taken by that company, suggests that there is no substance in the complaint made by the applicant now, particularly since the advertisements have ceased since April.  In my opinion, what the Court has to determine is whether the advertisements were in fact misleading or deceptive or likely to mislead or deceive.  Once that factor has been determined against the respondent, the matters I have just recently been discussing are relevant to the question of remedy and nothing more.

     It may have been possible that if a letter of demand had been written on the part of the applicant the respondent may well have determined to notify the applicant that it would no longer publish the advertisements complained of.  But the history of this action suggests to the Court that the respondent was fighting strongly the suggestion that the advertisements were in contravention of section 52 of the Trade Practices Act and that it had denied that it had any intention of stopping the publication.  The application in this case was not issued until March 1995.  There is no evidence as to when it was served although there was an appearance entered on 3 April 1995, and the advertisements ceased sometime in April 1995.

     The evidence given by Mr Ewen is not conclusive on the issue.  There has been no undertaking given that the respondent will refrain from publishing these advertisements or any similar advertisements in the future.  The respondent has fought the case, both on the substance of whether the advertisements were in fact in contravention of section 52 as well as the separate defence of there being no misleading or deceptive conduct in relation to contracts entered into by persons who have availed themselves of the opportunity to enter into the particular package.  In those circumstances, in my opinion, although there has been some delay from July when the first advertisements appeared until action commenced in March, it is not such as to warrant the refusal to grant injunctions restraining the respondent from using these advertisements or similar types of advertisements.

     The application also seeks corrective advertising but, in my opinion, the time factor is such that no useful purpose would be served by correcting advertisements at this stage.  There was no application for any interlocutory injunction at all.  There was an application for a speedy trial, which has been obtained.  But, in my opinion, this is not a case where corrective advertisements should be ordered.  In this matter, the question of time is of importance, as illustrated by the Hospitals Contribution Fund of Australia Limited v Switzerland Australia Health Fund Pty Limited (1988) 78 ALR 483.  The claim for corrective advertisements is rejected.

     The applicant also sought leave to include a claim for a declaration but, in the circumstances, there is no need to pursue that application for amendment any further.

     Orders made accordingly.

I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment of The Honourable Justice R.M. Northrop.

Associate:

Date:

                         ATTACHMENT

Counsel for the Applicant:   Mr A. Blow

Solicitor for the Applicant:Zeeman, Kable and Page

Counsel for the Respondent:  Mr A. Bannon

Solicitor for the Respondent:     Dunhill Madden Butler

Date of Hearing:             21 June 1995