Slattery J “The law defining the scope of the duties of decision makers dealing with claims by members of superannuation funds for whom the trustee has obtained insurance cover is well developed. That law and the corresponding rights of members may be shortly stated,” [86].

“The Member’s Standing to Sue. A member of a superannuation fund for whom the trustee has obtained insurance cover has standing to seek an order that the insurer pay the trustee the amount due to the trustee under the insurance contract: Erzurumlu v Kellogg Superannuation Pty Ltd [2013] NSWSC 1115 (“Erzurumlu”) at [54]. The member has standing to bring a claim both under the Deed against the trustee and under the Policy against the insurer: Wyllie v National Mutual Life Association of Australasia Ltd (1997) 217 ALR 324 (“Wyllie”), at 337-338,” his Honour said [87].

“The Trustee’s Decision-Making Duties. In making its determination, a trustee has a duty to apply a trust fund, such as the Fund, in accordance with the trust deed, in this case the Deed: Finch v Telstra Super Pty Ltd [2010] HCA 36; (2008) 242 CLR 254 (“Finch”) at [30] ff. It is also required to act in good faith, on a real and genuine consideration of the material before it, for the purpose for which it was conferred, for sound reasons where the trustee has disclosed reasons, although the Trustee is not obliged to give reasons for its decision: Hannover Life Re of Australia Ltd v Sayseng [2005] NSWCA 214 (“Sayseng”) at [32] ff (per Santow JA). Where no reasonable person deciding whether to form the opinion required of the trustee could have reached that decision, a failure of good faith, a failure of genuine consideration, or a lack of proper purposes may be inferred: Sayseng at [33]. The ambit of any challenge to a trustee’s decision is restricted to consideration of the material available to the trustee: Sayseng at [33],” [88].

“Finch adds important definition to the duties that apply to trustees of superannuation funds, such as the Trustee, and explains that the decisions of such a Trustee may be reviewable for want of “properly informed consideration”. The High Court explained this in Finch at [66],” then quoted such [89].

“The general rule where a trustee has failed to discharge its duties in considering a member’s claim is to refer the matter back to the trustee for reconsideration: Sayseng at [33]. But if the Court vitiates an insurer’s decision upon breach of an insurer’s duty of utmost good faith and embarks on a second stage inquiry, and on that inquiry finds that the plaintiff is totally and permanently disabled within the Policy definition, there may be no further work for the Trustee to perform and no need to remit the matter to the Trustee for further consideration and it can be dealt with by the Court: Jones v United Super Pty Limited [2016] NSWSC 1551 at [112],” Slattery J said [90].

“This statement of applicable principle now deals with the duties on insurers in the position of Hannover,” [91].

“The Insurer’s Duty of Utmost Good Faith. An insurer dealing with a claim against it owes an insured a duty of utmost good faith, sometimes also described as a duty of good faith and fair dealing: Sayseng at [36]. The duty of utmost good faith does not impose obligations in the abstract; it depends on the contractual rights and obligations of the parties in relation to the claim; and it imposes an obligation on the insurer to exercise its rights and discharge its obligations as conferred by the contract of insurance with the utmost good faith: Ziogos v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2015] NSWSC 1385 (“Ziogos”) at [66],” his Honour said [92].

“The insurer’s obligation of utmost good faith is contractual not fiduciary. Conduct which would not be permissible in a fiduciary relationship will not necessarily infringe the duties of good faith and fair dealing, as the fiduciary relationship is one in which the parties are not free to pursue their separate interests: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) (“Meagher, Gummow & Lehane”),” [93].

“Some common practical examples of the discharge of the obligation of good faith and fair dealing assist in understanding its scope. The obligation may, in appropriate circumstances, require an obvious enquiry to be made: Halloran v Hardwood Nominees Pty Ltd [2007] NSWSC 913 (“Halloran”) at [38]. It is important to correlate the activities that an insured is capable of undertaking, as for example activities that are demonstrated in video surveillance material, to the activities the insured is required to undertake in employment: Ziogos at [103],” [94].

“The Duty to Form an Opinion. Under a contract for insurance, if an element of insurance liability is expressed in terms of the satisfaction, or opinion, of the insurer, the insurer is obliged to act reasonably in considering and determining that matter: Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 (“Edwards”) and Sayseng at [47]. In Edwards (at 77,536) McLelland J stated with respect to clauses such as that in issue in this case, that there was an implied obligation on the insurer to consider and determine whether it should form the relevant opinion, which involved a consideration and determination of the correct question; and in the exercise of powers affecting the interest of both itself and the claimant the insurer was under a duty of good faith and fair dealing requiring it to have due regard to the interest of the claimant. McLelland J’s statement of the law was once more adopted with approval by the Court of Appeal last year in Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233 (“Jones”),” [95].

“Jones also approved (at [82] – [85]) Brereton J’s statement in Jones v United Super Pty Limited [2016] NSWSC 1551 at [55] that the insurer’s decision will also be liable to be reviewed and avoided by the Court if in forming an opinion (about a claimant’s disability) the insurer: (1) misdirects itself in law, that is to say asks itself the wrong question; or (2) takes into account an irrelevant consideration or fails to take into account a relevant consideration,” [96].

At [100] “The insurer’s duty of utmost good faith in dealing with a claim and the duty to act reasonably in forming an opinion may be compared and contrasted. The duty of utmost good faith: (a) is broader than the implied term obliging the insurer to act reasonably and applies to all aspects of the claims handling process: Ziogos at [68] and Jones at [71]; (b) does not imply a higher or stricter standard than the implied term requiring the insurer to act reasonably in considering and determining the matter: Ziogos at [69]; (c) is not to be equated with the implied obligation to act reasonably in forming an opinion concerning or being satisfied about a particular matter; nor are the two standards the same: Ziogos at [73], commenting on CGU Insurance Ltd v AMP Financial Planning Pty Ltd [2007] HCA 36; (2007) 235 CLR 1; and (d) requires the insurer to form the opinion itself and to act with the utmost good faith in doing so and it is not sufficient that some other insurer acting reasonably could have reached the conclusion that it did: Ziogos at [74],” Slattery J said.

“Some authorities have used other words to describe the obligation to act reasonably in forming an opinion. Nicholas J’s description of the obligation is particularly useful: as one which requires the decision-maker to give an objective even-handed and realistic consideration to the whole of the evidence, uninfluenced by personal beliefs, prejudice, suspicion, or speculation: Savelberg v United Super Pty Ltd [2011] NSWSC 1482 at [13]. In accordance with authority, “objective” in Nicholas J’s formulation should be taken to mean “unbiased from the perspective of the decision-maker” and not to invite an assessment of a hypothetical claimant or a decision divorced from the actual material before the decision-maker,” [101].

“The Duty to Give Reasons. It follows from the requirement that the insurer itself form an opinion acting in accordance with its duty of utmost good faith, that the insurer should give reasons for its decision,” in [102] then quoting Ball J in Ziogos at [75].

“But an insurer is not required to undertake the detailed consideration of a claim required at a court hearing: Chammas v Harwood Nominees (1993) 7 ANZ Ins Cas 61-175 (“Chammas”) and Weber v Tiss Pty Ltd [2005] NSWSC 67 at [8], (“Weber”). An insurer’s statement of reasons for declining a claim should be understood as a practical document intended to inform the claimant of the basis of the decision rather than providing detailed reasons with reference to the evidence being relied upon, comparable to a judgment of a court or tribunal: Weber at [8],” [103].

“The Use of Expert Evidence. Expert evidence was deployed on both sides in this case and some of it was before the Trustee and Hannover at the time of their respective decisions. This circumstance adds additional content to the applicable duties in the consideration and determination of this claim. The following additional statements of principle have relevance where experts are involved. If the insurer seeks an opinion from an expert it must provide the expert with all the information relevant to the expert’s opinion; the expert must be asked the right questions; but asking the right questions of the expert does not require the insurer to ask the expert to address specific provisions in the policy as the insurer is making the ultimate decision and not delegating it: Lazarevic v United Super Pty Ltd [2014] NSWSC 96 (“Lazarevic”) at [101]. Experts and the insurers who rely upon them should attend to evidence relating to the individual insured and the insured’s characteristics rather than to general statements of hope or expectation about the circumstances or conduct of anyone suffering from the condition in question: Ziogos at [102]. Where an expert’s opinion about an insured’s circumstances or capacity for employment depends upon an assumption it may be impermissible for the insurer to rely upon the expert’s opinion as to that matter unless the assumption is verified: see for example Ziogos at [103],” Slattery J said [104].

“The Consequences of Non-Compliance. If the insurer does not comply with its duty of utmost good faith the Court may itself determine the question whether the insurer suffered from total and permanent disablement: Sayseng at [36](e), Birdsall v Motor Trades Association of Australia Superannuation Fund Pty Ltd [2015] NSWCA 104 at [25] and Jones at [67],” [105].

To legal principles governing interpretation of the education, training and experience (ETE) clause, in [188] Slattery J “From those cases statements of applicable principle can be refined. In the Court of Appeal’s decision in Jones (at [147] – [150]) Gleeson JA considered Brereton J’s elucidation of the meaning of an ETE clause identical to the one under consideration in this case. The effect of the Court of Appeal’s decision in Jones was to approve Brereton J’s comprehensive statement at first instance in that case (Jones v United Super Pty Limited [2016] NSWSC 1551, [71] – [72]) of the proper interpretation of the ETE clause,” and quoted same fully.

“In the ETE clause the word “by” in the phrase “reasonably fitted by education, training or experience” clearly expresses the notion of a link or connection between the suggested future work and the insured’s past, education, training and experience”: Jones at [146] citing Wardley Australia Limited v the State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525,” his Honour said [189].

“Unlikely Ever” to be Able. The words “unlikely” and “ever” in this group of words have both been closely considered. The word “unlikely” in the formulation has been said to mean improbable in the sense of a less than 50 per cent chance: Halloran at [76] and Beverly v Tyndall Life Insurance Co Ltd [1999] WASCA 98; (1999) 21 WAR 327 at 32,” [190].

“Expressing the word “unlikely” as requiring a less than 50 per cent chance does not invite a statistical test, as the formula is not concerned with what is likely in the population as a whole but rather whether having regard to what is known about the insured, he or she was unlikely ever to be able to engage in any gainful profession, trade or occupation for which he or she was reasonably qualified by reason of education, training or experience: Ziogos at [83],” [191].

Then, “The issue is whether it is unlikely that the insured would actually obtain paid employment for which the insured was qualified by education, training or experience, not whether in theory the insured may obtain employment of that type: Halloran at [76]; Banovic v United Super Pty Ltd [2014] NSWSC 1470 and Lazarevic at [108]-[109],” Slattery J said [193].

“Regular Remuneration Work”. Capacity to perform “regular remunerative work” is different from the capacity to perform a particular work task; and it does not follow that because a person is physically capable of performing one or more work tasks, that that the person has an ability to engage in remunerative work: Hannover Life Re of Australasia Ltd v Colella [2014] VSCA 205; (2014) 47 VR 1; VSCA 205 (“Colella”) and Jones v United Super Pty Limited [2016] NSWSC 1551 at [77],” [194].

“A person can be reasonably fitted for “Regular Remuneration Work” by reason of education, or training or experience or a combination of those factors: Hannover Life Re of Australasia Ltd v Dargan (2013) 83 NSWLR 246; [2013] NSWCA 57 (“Dargan”). A claimant may require further training to pursue another occupation after the termination of his employment, leading to the assessment of whether the claimant was totally and permanently disabled. The fact that some further training may be required does not preclude a conclusion that the claimant was reasonably fitted to carry out the further occupation: Dargan at [44]. In Dargan, for example, a heavy vehicle driver had already obtained a certificate to become a taxi driver and only needed to pass a subsequent week long course to ensure that he was able to retain that certificate: Dargan at [40]. He was found not to be TPD. But in Halloran the claimant had ceased to be employed in a role of greasing machinery and in the three years after leaving that employment he completed a TAFE course qualifying him for white collar work. Brereton J held in Halloran that at the time of suffering his injury the claimant was not qualified for that work “by reason of his education, training and experience”: Halloran at [35] and Dargan at [40] – [41],” his Honour said [195].

At [197] “Geographical Limitation on Employment. In Jones (at [173] – [176]) the Court of Appeal considered, but did not decide, whether the policy definition of total and permanent disablement would be satisfied, if the claimant was incapable of finding available employment in or near the location where he lived. A ground of appeal in Jones was directed to challenging particular remarks of the learned trial judge, Brereton J, which remarks were not essential to his Honour’s reasoning and therefore the issue did not need to be determined on appeal in Jones. Brereton J’s remarks at first instance in Jones v United Super Pty Limited (at [67]) were relevantly as follows:

[Brereton J] “I find it difficult to accept that someone who has always resided and worked in a regional town may be regarded as not TPD because there are jobs which he or she could physically perform, but only on the other side of the country. They would have lost the ability, which they formerly had, to work in any employment for which they were fitted by education, training or experience, where they live”.

Slattery J considered aspects of Australian common law in this context.

Then, in [209] “The Time to Determine TPD Status. The time at which a claimant suffers TPD is capable of a general answer, which was discussed by Ball J in Ziogos at [86],” and quoted same.

Later, after traverse of facts and findings, at [278] Slattery J “In Summary. In my view, no matter how Mr Carroll’s prior vocational experience is approached, Mr Carroll is unlikely ever to be able to engage in Regular Remuneration Work as defined under the Policy, based on his education, training or experience. The two forms of work which he could undertake based on his education, training or experience are precluded for different reasons. Estimating and project management work is not wholly sedentary and requires visits to work sites. I accept the medical evidence that says Mr Carroll is unfit for such physical work. And in relation to running small family businesses, the highest characterisation that could be given of Mr Carroll’s work for Too Easy Distributing or Nicholas Wines was that it was “casual work or other work of an intermittent nature”, which Bathurst CJ said in Dargan does not qualify as Regular Remuneration Work.

“For these reasons the Court has concluded that the plaintiff is successful in challenging both the Trustee’s and Hannover’s decisions in 2013 and 2014 that Mr Carroll was not Totally and Permanently Disabled under the Policy and the Deed. The Court proceeded to a second stage inquiry and assessed for itself whether Mr Carroll is Totally and Permanently Disabled within the Policy as at the time for assessment, 9 March 2012 and finds that he is. The plaintiff is therefore entitled to a declaration to that effect and orders that Hannover pay the sum of $104,000 to the Trustee for distribution to Mr Carroll,” Slattery J said [279], and costs.

Orders for short minutes.

P: A Coombes ins Firths Compensation Lawyers, Mr Stephen Firth. D: B Nolan ins TurksLegal, Mr Michael Iacuzzi.