FEDERAL COURT OF AUSTRALIA

Hannover Life Assurance Re of Australasia Ltd v Membrey [2004] FCA 1095

SUPERANNUATION INSURANCE – Complaints Tribunal – Member of an employee insurance fund murdered - Insurer refused to pay interest on claim under insurance policy after taking five years to exercise a discretion in respect of proof of death – Whether Superannuation Tribunal erred in finding that Insurer had unreasonably and unfairly refused to pay interest – Whether compound interest was appropriate.

Administrative Appeals Tribunal Act 1975 (Cth)

Insurance Contracts Act 1984 (Cth)

Superannuation (Resolution of Complaints) Act 1993 (Cth)

Attorney‑General (Cth) v Breckler (1999) 197 CLR 83 referred to

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 referred to

Briffa v Hay  (1997) 75 FCR 428 at 443E referred to

Colonial Mutual Life Assurance Society Limited v Brayley [2000] FCA 133 referred to

Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 referred to

Federal Commissioner of Taxation v Raptis (1989) 2 ATC 4994 referred to

Hungerfords and Ors v Walker and Ors (1990) 171 CLR 125 referred to

National Mutual Life Association of Australasia v Campbell (2000) 99 FCR 562 at 565 followed

Ngaere Belinda Hornsby v Military Superannuation & Benefits Board of Trustees No. 1 (2003) 123 FCR 484 referred to

NRMA Insurance Ltd v Tatt and Anor (1989) 92 ALR 299 referred to

Moss v Sun Alliance Australia Ltd (1990) 93 ALR 592 referred to

Retail Employees Superannuation v Crocker (2001) FCA 1330; 48 ATR 359 referred to

Walker v FAI Insurance Ltd (1991) 6 ANZ Insurance Cases 60-O81 referred to

James Edelman “Claims to Compound Interest in Restitution: Awakening the Sleeping Giant” – (1999) 27 ABLR 211

James Edelman “Claims to Compound Interest Part II: Extending Compound Interest Claims for Wrongdoing” – (2000) 28 ABLR 115

HANNOVER LIFE ASSURANCE RE OF AUSTRALASIA LTD V ROGER JAMES MEMBREY & ANOR

N741 of 2003

CRENNAN J

25 AUGUST 2004

MELBOURNE

THE COURT ORDERS THAT:

1.         The determination of the Superannuation Complaints Tribunal dated 19 May 2003 be affirmed.

2.         The application be dismissed.

3.         The applicant is to pay the first respondent’s costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant is an insurance company appealing against a decision of the Superannuation Complaints Tribunal (“the Tribunal”) of 19 May 2003.  Such an appeal lies to the Federal Court on a question of law, from a determination of the Tribunal: s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (‘the Act’).  The Tribunal determined that the decision of the Trustee and Insurer in relation to the non‑payment of interest on the benefit payable to the first respondent (father of the deceased member of the fund) is unfair and unreasonable in its operation in relation to the complainant in the circumstances and ordered the Insurer “to pay interest on the benefit at the rate set under the regulations of the Insurance Contracts Act 1984 (Cth) from 1 December 1995 compounded annually to the date of payment to the Trustee” which was 12 October 2000.  The second respondent is the Trustee who has not appealed the Tribunal decision that it pay a fixed sum of interest to the first respondent.  It has given notice it will abide by any orders which the Court makes.  The first respondent raised a competency issue in respect of the appeal which was brought three days out of the time limits as provided in s 46(2)(a) of the Act.  I granted leave, as required, on the filing of an affidavit on behalf of the applicant setting out the circumstances of this short delay. 

2                     The background facts are not in dispute.  The deceased member of an employee insurance fund, Elisabeth Membrey, was murdered on either 6 or 7 December 1994.  She was a graduate of La Trobe University in Victoria and at the time of her murder she was working casually in the evenings as a bar assistant at the Manhattan Hotel in Ringwood.

3                     After her family became alarmed at her disappearance on or about 7 December 1994, the Victoria Police instituted a formal homicide enquiry on 13 December 1994.  In a subsequent coroner’s report of 29 August 2000 it was recorded that examination by the police of the deceased’s unit where she had lived, shortly after her disappearance revealed a significant amount of blood had been sought to be removed from the hallway carpet and wall.  Blood was also located in the deceased’s vehicle and subsequent analysis revealed a strong likelihood that this was the deceased’s blood. 

4                     The first respondent made a claim in respect of the deceased member’s death on 28 March 1995 which the Trustee advised to the Insurer by letter dated 7 April 1995.  The Trustee’s letter informed the Insurer that notification had been received that the member disappeared on 6 December 1994.  The Trustee advised the Insurer “Homicide Police believe she may have been murdered” and sought advice as to the Insurer’s requirements to enable payment of the benefit.  On 24 April 1995 the Insurer requested inter alia a “full Death Certificate”.  On 27 April 1995 the State Government offered a reward of $100,000 for information concerning the homicide of Ms Membrey.  Her body has never been found; no person has been charged in respect of her murder.  On 5 September 1996 a Crimes Compensation hearing was held which proceeded on the basis that Ms Membrey was murdered. 

5                     Legal relations between the Insurer and the Trustee (and through the Trustee, the first respondent Mr Membrey) were governed by an insurance contract.  The relevant insurance policy dated 1 January 1992, provided that a benefit is payable upon the death of a member (Clause 8).  Clause 10 provided:

“The Trustee shall as soon as possible after becoming aware of the event give notice to [the Insurer] of the death and permanent disablement of any Member or of any other circumstance which entitled the Trustee to receive a Benefit in respect of that Member under this Agreement and supply all necessary information within their knowledge and assistance within their power to enable [the Insurer] to make any payment in respect of that Member and shall produce the certificate of death and/or any other document or such evidence of qualification as [the Insurer] may require.” (emphasis added)

6                     Correspondence ensued between the first respondent, the second respondent and the Insurer.  On 2 April 1998 the Insurer advised that it would consider the claim upon the production of a coronial inquest report.  Then on 29 March 2000 the Insurer advised that the claim could be considered upon receipt of a letter from the Victoria Police confirming that the deceased member had been murdered on or about 6 December 1994, and although a body had not been located the Victoria Police believed she was murdered. 

7                     On 28 August 2000 the Coroner issued a report to the effect that the deceased member had been murdered by an unidentified person on or about 7 December 1994.  A death certificate dated 8 November 2000 was registered.  The Insurer paid a benefit of $47,600 to the Trustee under cover of a letter dated 9 October 2000, such payment being effected on 12 October 2000.  Payment of the benefit to the first respondent (and his wife) was made under cover of a letter dated 10 July 2001, some six years and four months after the claim had been first notified to the Trustee.  In subsequent correspondence between the Trustee and the Insurer the Trustee sought to have the Insurer pay interest on the sum from 1 July 1996 and pointed out to the Insurer that the Insurer’s advice about what evidence was required in order to substantiate the claim had changed as between 24 April 1995, 2 April 1998 and 29 March 2000.  The Insurer declined to pay interest on the benefit.

8                     A complaint was initiated before the Tribunal pursuant to s 14(2) of the Act.  The first respondent sought a review by the Tribunal of the decision of the Insurer not to pay interest on the benefit payable as a result of the death of the deceased member of the superannuation fund.

The Tribunal’s Decision

9                     The Tribunal found, as a fact, that the Trustee and the Insurer both knew of the deceased member’s disappearance, and presumed homicide, in or about November and December 1995.  (In fact, the evidence was they were respectively notified of those matters on or about 28 March 1995 and 7 April 1995). The Tribunal also found that the Insurer had suggested at different times different documents which would satisfy it as proof of death.  The Tribunal then went on to find:

“The Tribunal is satisfied that the facts point to it being unfair and unreasonable to the Complainant for the Insurer, knowing of the circumstances of the disappearance of the Deceased Member, not to have determined at an earlier time what alternative methods of establishing proof of death may have been available to the Complainant.  As a result, it is unfair and unreasonable that the Insurer declines to pay interest.”

10                  The Tribunal then found that the evidence the Insurer eventually stated that it would accept as qualification for the payment of a benefit was available by the middle of 1995.  Against that background the Tribunal ordered: 

“. . . it would be fair and reasonable for the Insurer to pay interest from 1 December 1995 until the date of payment to the Trustee.  In the Tribunal’s view, the rate of interest should be that payable under the Insurance Contracts Act 1984 compounded from year to year.”

The appeal on a question of law

11                  On the appeal, limited to a question of law, the Insurer as applicant sought to identify errors in the legal approach of the Tribunal and some eleven questions of law are set out in the grounds of appeal.  In essence, the grounds were the Tribunal’s findings were not open on the evidence (ground 1) and the Tribunal erred in law in its conclusions (ground 2).  There is no doubt a “no-evidence” ground can raise a question of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-358. The grounds of appeal also raised an issue as to whether the Tribunal asked itself the correct questions (grounds 3 and 4) and whether it took into account irrelevant considerations and failed to take account of relevant considerations (grounds 9 and 10).  Further grounds of appeal alleged failure to construe the contract of insurance correctly (grounds 5 and 6) and challenged the extent of the Tribunal’s powers under subs 37(5) of the Act (ground 8).  Grounds 11 and 12 set out findings it was alleged should have been made.  The questions of law raised constituted questions of law for the purposes of s 46 of the Act and accordingly attracted the jurisdiction of the Court.  As with appeals under the Administrative Appeals Tribunal Act 1975 (Cth) the appeal is not an appeal in the strict sense but lies within the original jurisdiction of the Court: Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 581.  See also Ngaere Belinda Hornsby v Military Superannuation & Benefits Board of Trustees No. 1 (2003) 123 FCR 484 at [16] and [37] (‘Hornsby’).

12                  Whilst the background facts were unusual, this matter falls to be decided by reference to established principles.

13                  The Act is part of an integrated legislative scheme governing superannuation which is described by a Full Court in National Mutual Life Association of Australasia v Campbell (2000) 99 FCR 562 at 565 (‘National Mutual’) as follows:

“Section 14 is one of a number of sections which allows a complaint to be made to the Tribunal that a particular decision or a particular conduct of a trustee, insurer or other designated person is or was unfair or unreasonable: ss 14, 14A, 15A, 15B, 15CA, 15E, 15F, 15H and 15J.  The functions of the Tribunal are to enquire into the complaint, and to try to resolve it by conciliation and, if that fails, to review the decision or conduct to which the complaint relates (s 12).  The Tribunal must pursue the objective of providing a mechanism for review that is fair, economical, informal and quick (s 11) . . . 

In reviewing a decision or conduct, the Tribunal is not bound by technicalities, legal forms or rules of evidence, and may inform itself of any matter relevant to the review in any way it thinks appropriate (s 36).  A decision of the trustee or insurer as varied by the Tribunal, or a decision made by the Tribunal in substitution for a decision of the trustee or insurer is, for all purposes (other than the making of a complaint about the decision), taken to be a decision of the trustee or insurer as the case may be (s 14(3)).  The Tribunal’s powers in dealing with a complaint under s 14 are contained in s 37.”

14                  Section 14AA (added in 1998) provides that a complaint may be made out about discretionary or non‑discretionary decisions.  The decision in question was discretionary.  Section 37 is in the following terms:

            “Tribunal powers – complaints under section 14:

              (1)      For the purpose of reviewing a decision of the trustee of a fund that is the subject of a complaint under section 14:

(a)               the tribunal has all the powers, obligations and discretions that are conferred on the trustee; and

(b)               subject to subsection (6) must make a determination in accordance with subsection (3).

              (2)      If an insurer or other decision‑maker has been joined as a party to a complaint under section 14:

(a)               the tribunal must, when reviewing the trustee’s decision, also review any decision of the insurer or other decision‑maker that is relevant to the complaint; and

(b)               for that purpose, has all the powers, obligations and discretions that are conferred on the insurer or other decision‑maker; and

(c)                subject to subsection (6), must make a determination in accordance with subsection (3)

              (3)      On reviewing the decision of a trustee, insurer or other decision‑maker that is the subject of, or relevant to, a complaint under section 14, the tribunal must make a determination in writing:

(a)               affirming the decisions; or

(b)               remitting the matter to which the decision relates to the trustee, insurer or other decision‑maker for reconsideration in accordance with the directions of the tribunal; or

(c)                varying the decision; or

(d)               setting aside the decision and substituting a decision so set aside.

              (4)      The tribunal may only exercise its determination‑making power under section (3) for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness, unreasonableness, or both, that the tribunal has determined to exist in relation to the trustee’s decision that is the subject of the complaint no longer exists.

                          (5)      The tribunal must not do anything under subsection (3) that would be contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract.

              (6)      The tribunal must affirm a decision referred to under subsection (3) if it is satisfied that the decision, in its operation in relation to:

(a)               the complainant; and

(b)               so far as concerns a complaint regarding the payment of a death benefit‑any person (other than the complainant, a trustee, insurer or decision‑maker) who:

(i)                 has become a party to the complaint; and

(ii)               has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death

was fair and reasonable in the circumstances.”

15                  The section requires the Tribunal to make a determination under subs 37(3) as to whether the relevant decision was unfair or unreasonable, subject to subs 37(5) and subs 37(6).  The Tribunal can only exercise its “determination‑making power” as referred to in subs 37(4) for the purpose of placing the complainant as nearly as practicable in such a position that the “unfairness, unreasonableness or both” found to exist in relation to the relevant decision no longer exists. 

16                  The terms “unfairness” and “unreasonableness” are incapable of precise definition as recognised by the Full Court in National Mutual at [36].  Nevertheless, as with any words of broad content appearing in a statute they must be dealt with within their statutory context. 

17                  I adopt, with gratitude the exposition of the Tribunal’s task under s 37 of Allsop J. in Retail Employees Superannuation v Crocker (2001) FCA 1330; 48 ATR 359 at [31] (‘Retail Employees’) as follows:

“The Tribunal’s task is not to engage in ascertaining generally the rights of the parties, nor is it to engage in some form of judicial review of the trustee or insurer.  Rather it is to form a view, from the perspective of the trustee or insurer, as to whether the decision of either was (recognising the overriding framework given by the governing rules and policy terms, respectively) unfair or unreasonable.”

I would only add that the Tribunal can form a view that a decision is both unfair and unreasonable.

18                  It is necessary to revisit the decisions made by the Insurer in more detail to fully appreciate the evidence upon which the Tribunal made its determination.

19                  The claim first came to the attention of the Trustee on 28 March 1995.  The first respondent, the deceased’s father, wrote to the Trustee that “ . . . on Dec 06, 1995, Elisabeth tragically disappeared and is believed by Homicide Police to have been murdered.” 

20                  The Trustee advised the Insurer of this notification on 7 April 1995 and asked the Insurer to advise “your requirements to enable the payment of the insured benefit of $47,600.00.”  The Insurer replied with a pro‑forma letter requiring a birth certificate, proof of change of name, death certificate stating cause of death and the date of the last contribution.  The Membrey parents were advised of the Insurer’s requirements by the Trustee by letter dated 5 May 1995. 

21                  On 22 May 1995, the Victoria police offered a reward of $100,00.00 under the title “Homicide of Elisabeth Frances Membrey”.  This was followed by a new release from the office of the Deputy Premier and Minister for Police dated 6 December 1995 in which the Minister appealed for public assistance for police who he said: “strongly believe Ms Membrey was murdered and her body dumped at a yet to be identified location.” 

22                  On 10 March 1996 the Membreys wrote to the Trustee as follows:

“As previously explained, Elisabeth is currently missing and believed by Homicide police to have been murdered.   . . . what is payable, to whom, when, under what circumstances, and what needs to be done for payment to be made.”

23                  It appears that on the Insurer’s advice, the Trustee regretfully advised the Membreys on 24 April 1996 that “. . . the Insurer of the fund will not be able to consider a death claim just now in the absence of a death certificate.  . . .to enable the Trustees to consider a death claim, they will require a death certificate, and until you are able to provide this document, we regret our inability to give further consideration to the . . . claim.”  It can be noted that the advice that the Insurer will not be able to consider the claim in the absence of a death certificate was not correct having regard to the express terms of Clause 10 of the policy, set out above.  The Membrey’s responded on 8 August 1996 indicating that they had “. . . no idea what we are supposed to do to satisfy your requirement of a death certificate . . .”.

24                  As mentioned above, a Crimes Compensation Tribunal hearing was conducted in September 1996 on the basis that the authorities conducting the hearing were satisfied death occurred in circumstances capable of attracting the consideration of that Tribunal.

25                  On 8 January 1998 the Membreys wrote again to the Trustee as follows:

“On June 16, 1995 you advised that you “have closed the file on Elisabeth pending further information”.  We are unsure what this means in the longer term.  Elisabeth, who is our daughter, is assumed by Victorian homicide police as having been murdered (because of the forensic evidence at the crime scene and as a conclusion of the investigation).  To date, however, despite an intensive investigation and considerable public assistance generated from media reports, her body has still not been located.  The Victorian police homicide detective in charge of the investigation is Detective Senior Sergeant Rowland Legg and his contact telephone number is (03) 9865 2321.  We will advise him of the contents of this letter.

Our understanding is that in (sic) there is a sum of life assurance also payable but you have previously stated that this cannot be effected until a “full death certificate” is presented to you.  This we do not think is possible because Elisabeth’s body has not been located.  In our letter of March 10, 1996 (to which we do not appear to have received your reply) we asked,

·        what amount is payable,

·        to whom,

·        when, and under what circumstances it will be paid.

Whilst before her disappearance it seemed like a trivial thing and of not much immediate consequence (because no‑one even remotely thought that she would die at an early age) we do recall that Elisabeth told us that she had nominated her mum, Joy Frances Membrey, as the superannuation scheme beneficiary.  She had no other “dependants” – which has been verified by the intense police investigations.

The superannuation/insurance question has not been a pressing matter to us as we continue to have our minds on other things, but now that three years have slipped by we would like to try to get from you some status update please on both the superannuation account balance and the additional life assurance.  If you maintain your view that the sum of life assurance cannot be paid out for the time being, we at least assume that it will be generating income (from the presumed date of death, being December 06/07, 1994) and that eventually the combined sum of principle and accumulated income will be paid to the beneficiary.

We would appreciate your response on all the above matters please.”

            (Original emphasis)

26                  The Trustee responded to this by letter on 18 February 1998 which included the following:

“We believe that Ms Membrey was covered for an insured death benefit of $47,600.00  as on 6 December 1994.  However, this will not become payable until the Insurer receives documentary evidence that Ms E. Membrey died on or about 6 December 1994.

 . . . We advise that the Fund’s Insurer requires two basic proofs for admission of a death claim:

·        Proof of Death;

·        Proof of Age.

. . . no claim exists until acceptable proof of death is supplied.  Therefore, the question of interest on the insured portion of the benefit does not arise.”

27                  The Membreys wrote a reply on 4 March 1998 enquiring again as to the degree of evidence which was required to “recognise a claim” in circumstances where “the Victorian homicide police have no doubt that Elisabeth was murdered.”  They also enquired in that letter “whether, the claim, when paid will reflect revenue generation on the principal sum from the assumed date of death – Dec 06 or 07 1994” and asked for “the specific requirements of the fund’s insurer.” 

28                  The Trustee then wrote to the Insurer on 25 March 1998 and asked the Insurer what “degree of evidence” was required by the Insurer to recognise a claim and whether interest would accrue from when the death occurred until the date of admission of the claim.

29                  On 2 April 1998 the Insurer wrote to the Trustee as follows:

“In view of the circumstances involved on the above member we are prepared to consider a potential death claim on receipt of the Coroner’s Inquest Report which appears to be available some time this year.

 In regards to interest payments, we see no cause or reason why Hannover should pay interest on this potential death claim, therefore we will not pay any form of interest.”

This was the first occasion, since being notified of the claim by the Trustee’s letter dated 7 April 1995, upon which the Insurer utilised the discretion available to it under Clause 10 of the policy to accept something other than a death certificate as proof of death.  The Trustee advised the Membreys of this shift in the Insurer’s position on 5 May 1998.

30                  On 9 February 1999 the Trustee wrote to the Membreys saying:

“We would appreciate your advice on the likely date of a coroner’s inquest into the circumstances surrounding the disappearance of your daughter.  As you will be aware, this is required by the Fund Insurer.”

31                  The Membreys wrote back to the Trustee on 12 February 1999.  This letter included the following:

“1.       The Coroner’s Inquest happens when the Victoria Police submit the papers to the Coroner’s Court.  This happens when the police are satisfied that all leads have been investigated.  The “when” is not . . . a matter for us to decide, but the police.

2.         The police previously thought that the Inquest might have been held in 1998 but as we advised later last year, they then thought that it could be early in 1999, BUT it may be later in 1999 – or even in future years depending on the outstanding leads and the resources of the police involved.

3.         The Victoria Police homicide detective in charge of the case is Detective Senior Sergeant Rowland Legg (9865 2321) and you may wish to confirm the above with him?

The above supports our earlier claim that whilst we understand that the insurer may not pay out until the Coroner’s Inquest (in the meantime the Victoria Police will confirm that Elisabeth has been murdered – there is forensic evidence to support that, but that her body has not been located as yet, and may or may not ever be) . . .,

… we believe that it is totally and morally unreasonable for the insurer to have the use of the money from 6 December, 1994 but for them to refuse to accumulate any sort of deemed return to be eventually passed on with the sum assured …

. . . if her body had been found at the crime scene, then the insurer would have presumably paid forthwith.”

32                  On 25 February 2000 the Membreys forwarded another copy of their letter of 12 February 1999 with an addition to the bottom of the letter which does not need to be set out.

33                  The Trustee wrote again to the Insurer on 23 March 2000 requesting the Insurer to answer the Membrey’s queries about evidence of death.

34                  On 29 March 2000 the Insurer responded to the Membrey’s queries as follows:

“To enable us to consider this claim without the death certificate or the coroner’s report we will require a letter from Detective Senior Sergeant Rowland Legg from the Victorian Police (as we are of the understanding that he is in charge of the case). 

This letter should state that the claimant was murdered on or about 6 December 1994 and that although a body has not been located they believe she was murdered. 

            It should also state that the Coroner’s Inquest has not been completed and the time frame in which they expect it to be finalised.”

            This was the second time the Insurer utilised the discretion available to it under Clause 10 of the policy to require something other than a death certificate as proof of death, just short of five years after the Insurer first received notification that Elisabeth Membrey had disappeared but Homicide police believed she was murdered on 6 December 1994.

35                  Three observations can be made.  First, it was always within the Insurer’s discretion under the express terms of Clause 10 of the insurance contract (set out in full at paragraph 5 above) to decide what document or evidence (other than a certificate of death) would qualify for proof of death to enable payment of the relevant benefit.  Secondly, it is clear that the first respondent (and his wife) sought to satisfy whatever was required by the Insurer as proof of death in circumstances where their daughter had been murdered.  They commenced the process of trying to satisfy requirements as early as 10 March 1996 after being advised that the Insurer required a “full Death Certificate” as proof of death.  Thirdly, five years after the murder, the Insurer exercised its discretion under Clause 10 to consider the claim (without a death certificate or a coroner’s report) on the basis of a letter from a nominated Detective as to police beliefs about the deceased’s murder. 

The applicant’s submissions

36                  On the appeal the applicant argued, correctly, that it was at the Insurer’s discretion under Clause 10 of the relevant policy to require the production of the certificate of death or such other document as the Insurer may require.  Then it was argued that the fact that the Insurer required different and less stringent proof of death over a period of time (in fact 5 years) did not release the Trustee from its primary obligations to meet the requirement of production of a death certificate at the time when the Insurer was insisting upon such as proof of death.  It was further argued that relaxing its requirements over time did not amount to a waiver by the Insurer of its right to determine the sufficiency of proof of death.  Thus it was argued that the Trustee did not satisfy the Insurer’s requirement for proof of death until 6 November 2000.  It was argued that the question for determination by the Tribunal was whether, upon a proper construction of the insurance contract, it was unreasonable for the Insurer not to pay the claim until 9 November 2000.  It was argued that the satisfaction, for example, about the deceased’s death by a Crimes Compensation Tribunal in September 1996 was irrelevant and further it was submitted that the Tribunal’s determination was contrary to the terms of the insurance contract and that it was fair and reasonable for the Insurer not to pay the claim until 6 November 2000.

The first respondent’s submissions

37                  It was submitted on behalf of the first respondent that the Tribunal’s decision was not contrary to the policy.  It was argued that the Insurer had a discretion under Clause 10 (a point with which the applicant agreed) and the Tribunal’s task was to assess the fairness and reasonableness of the decision of the Insurer not to pay the benefit at an earlier date which underpinned the Insurer’s decision not to pay interest on the benefit.  It was submitted that the determination of the Tribunal that the refusal to pay interest was unfair or unreasonable was not affected by any error.  Relying on subs 37(4) of the Act, it was submitted that the Tribunal had the power to award compound interest in seeking to place the first respondent as closely as practicable in a position in which he would have been, absent unfairness, unreasonableness, or both, in the relevant decision.

Consideration

38                  The findings by the Tribunal namely that it was an unfair and unreasonable decision of the Insurer not to pay the benefit earlier as it was able to do under the Contract of Insurance, by accepting police evidence as proof of death in lieu of a death certificate, and consequentially that it was an unfair and unreasonable decision of the Insurer not to pay interest on the payment, made many years after the death, were findings which were open on the evidence, summarised in paragraphs [18] to [35] above.  It cannot be contended successfully that there was no evidence to support these conclusions or that such findings were not open on the evidence.  As Gummow J. stated in relation to an appeal on a question of law under the Administrative Appeals Tribunal Act 1975 (Cth) in Federal Commissioner of Taxation v Raptis (1989) 2 ATC 4994 at 4996:

“. . . the Tribunal will have made an error of law if there was no evidence to support a conclusion of fact, if the only true conclusion which the Tribunal, properly instructed as to law, could have reached is contrary to that it did reach, or if its decision otherwise was perverse . . .”

39                  The findings of fact the Tribunal made were available on the evidence which was not seriously in dispute; they were not perverse findings and the Tribunal’s conclusions and  determination were not contrary to the terms of the policy of insurance.  In fact, the unfairness and unreasonableness found by the Tribunal to characterise the Insurer’s decision turned in part on the fact that it was within the express terms of the policy for the Insurer to have made a different decision from the one it actually made as to proof of death up until 29 March 2000 and this discretion existed from the outset that is from April 1995.  Furthermore, it was not argued on behalf of the applicant that (as a matter of law) the applicant could not be liable to pay interest on the benefit.  Rather, it was argued that interest under the Insurance Contracts Act 1984 (Cth) (the ‘Insurance Contracts Act’), only ran against the applicant from the date when the applicant became liableto pay the claim, which it said was 6 November 2000.

40                  I do not accept the applicant’s submission that “it was fair and reasonable for [the Insurer] not to pay the claim until after 6 November 2000” the date upon which the Trustree provided the coroner’s report to the Insurer.  This ground 11 is not made out.  Evidence that the Victoria Police could at an earlier date, have given the Insurer the type of letter the Insurer was content to accept as proof of death on 29 March 2000, in lieu of a death certificate, is relevant evidence.  Evidence as to the Crimes Compensation Tribunal hearing in September 1996 is also relevant and both pieces of evidence were able to be received in accordance with s 36 of the Act and the Tribunal was entitled to rely on such evidence.

41                  I do not accept that the Tribunal failed to ask itself the correct questions (grounds 3 and 4); it asked the question required by s 37(6) namely, whether the applicant’s decision not to pay interest on the benefit was fair and reasonable in relation to the first respondent.  The question is not confined to the question suggested by the applicant as the correct question, namely whether upon the proper construction of the contract the decision was fair and reasonable.  The statute emphasises the question of the fairness and reasonableness to the complainant, in the context of what may lawfully be done under the insurance contract, properly construed.  I do not accept that the Tribunal misconstrued the contract of insurance (grounds 5 and 6).  The Tribunal never denied that the liability of the Insurer did not crystallize until the procedure for proof of death was followed, nor did it deny that the Insurer could refuse to make the payment under the terms of the contract; rather, it found a discretion was available to the Insurer under the contract of insurance (both parties agreed that was correct) and that it was unfair and unreasonable for the Insurer to delay in utilising the discretion in all the circumstances.  The discretion was clearly apposite to the unusual circumstances of the case.  I do not accept that the Tribunal took into account irrelevant factors or failed to take into account relevant factors (grounds 9 and 10).  The Tribunal is able to inform itself of any relevant matters as provided in s 36 of the Act.

42                  It is recognised that the Insurer’s delay of five years in ameliorating its request for a death certificate (something which is not immediately available in circumstances of disappearance and presumed murder) did not contravene the express terms of the insurance policy.  The decision made by the Insurer was in conformity with the policy but was not required by the policy, which contained in its terms a discretion to ameliorate the requirement for production of a death certificate.  Further, it was clear from the correspondence that the Insurer could exercise a discretion to pay interest.  The Insurer’s refusal to pay interest was not based on a lack of power to do so or by a lawful constraint upon it or upon any argument that there could never be a legal right to interest; it was based on the argument that no liability for interest arose until 6 November 2000.  In circumstances where the Tribunal was satisfied of the unfairness and unreasonableness of the Insurer’s decision, the Tribunal was empowered and acting according to law in supplanting the decision of the Tribunal with its view of the merits as governed by subs 37(4) and subs 37 (5) National Mutual Life Association of Australasia v Campbell (2000) 99 FCR 562 at 565; Briffa v Hay (1997) 75 FCR 428 at 443E; Colonial Mutual Life Assurance Society Limited v Brayley [2000] FCA 1333 at [32]; Retail Employees at [32]; Hornsby at [37].  Subsection 41(3) gives the Tribunal’s decision the same legal effect as one made by the Insurer (Attorney‑General (Cth) v Breckler (1999) 197 CLR 83 at [88]).  Accordingly grounds 7 and 8 are not made out.

Simple or compound interest

43                  The question of whether or not any interest payable should be simple interest or compound interest is one to be determined on the evidence by reference to the powers which the Tribunal has under subs 37(4) of the Act.  The applicant debated the date upon which interest would commence to run but accepted that simple interest was appropriate. (Ground 12).  There is no provision in the Insurance Contracts Act or the Regulations thereunder dealing with compound interest.  Section 57 provides as follows:

“(1)     Where an insurer is liable to pay to a person an amount under a contract of insurance or under this Act in relation to a contract of insurance, the insurer is also liable to pay interest on the amount to that person in accordance with this section

(2)       The period in respect of which interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment of the amount and ending on whichever is the earlier of the following days:

(a)               the day on which the payment is made;

(b)               the day on which the payment is sent by post to the person to whom it is payable.

(3)       The rate at which interest is payable in respect of a day included in the period referred to in subsection (2) is the rate applicable in respect of that day that is prescribed by, or worked out in a manner prescribed by, the regulations.

(4)       This section applies to the exclusion of any other law that would otherwise apply.

(5)       In subsection (4):

            law means:

(a)               a statutory law of the Commonwealth, a State or Territory; or

(b)               a rule of common law or equity.”

Whilst there is a view that s 57 ousts the operation of other legislation concerning matters such as an applicable interest rate (a question I do not have to decide): NRMA Insurance Ltd v Tatt and Anor (1989) 92 ALR 299 at 315 (per McHugh J), there is nothing in s 57 which would preclude the awarding of compound interest on appropriate facts, in an appropriate case, following the approach in Hungerfords and Ors v Walker and Ors (1990) 171 CLR 125.  See Moss v Sun Alliance Australia Ltd (1990) 93 ALR 592 at 604.  See also Walker v FAI Insurance Ltd (1991) 6 ANZ Insurance Cases 61 – O81. 

44                  It is clear from the evidence set out above that the Insurer and Trustee were both on notice of the first respondent’s concerns that any unfairness arising out of a late payment of a benefit be compensated for by the payment of interest.  This is a compensatory issue hence different and distinct from an Insurer’s liability to pay interest once liability to pay is established.   The Tribunal is a specialist Tribunal.  It stated:

“Upon being notified of the complaint by the Trustee it is inconceivable that the Insurer set aside the amount claimed in a non‑interest earning account”

There was no evidence or submissions from the Insurer to the contrary.

45                  Under subs 37(4), the Tribunal can exercise its determination‑making power to restore a complainant so far as practicable to the position in which a complainant should be, absent a decision which was unfair, unreasonable or both.  In making awards where damages are calculated by reference to compound interest rates, in cases involving compensatory damages for breach of contract or a wrong, a court is attempting to put a plaintiff in the same position he would have been had he not suffered the breach of contract or wrong.  In a not dissimilar fashion, the power granted under subs 37(4) appears to me to permit full compensatory or restitutionary determinations and enables the Tribunal, in appropriate circumstances and on appropriate evidence, to determine there should be payment of interest compounding annually, notwithstanding the provisions of s 57 of the Insurance Contracts Act as to the applicable rate of interest to be applied.  There are numerous examples of cases where compound interest has either been taken into account in assessing damages, or awarded, either on a compensatory or restitutionary analysis, in order to give the plaintiff a complete and just remedy.  See James Edelman “Claims to Compound Interest in Restitution: Awakening the Sleeping Giant” (1999) 27 ABLR 211 and “Claims to Compound Interest Part II: Extending Compound Interest Claims for Wrongdoing” (2000) 28 ABLR 115.  In determining compound interest should be paid, the Tribunal is doing no more than recognising that the Insurer has had the use of the money which the Tribunal found was not paid to the first respondent by reason of an unfair and unreasonable decision of the Insurer. 

46                  Determining interest that is to be compounded is merely obliging the Insurer to give back the value of the use of the money which it had during the relevant period, when, but for the unfair and unreasonable decision, the first respondent would have had the value of the use of the money as pointed out in his correspondence from time to time.  Given Clause 10 of the insurance contract and the evidence set out at [18]–[35] above, it was open to the Tribunal to take the view that the Victoria police could have provided what the Insurer required as proof of death (as of 29 March 2000) earlier (at least about 1 December 1995) and further find that simple interest from that date until payment to the Trustee would not place the first respondent in the position described in subs 37(4), namely that the unfairness, unreasonableness, or both in the Insurer’s decision not to pay interest “no longer exists.”

47                  The appellant has not made out any of the grounds set out in the notice of appeal.

48                  The application must be refused with costs.

Associate:

Dated:              25 August 2004