FEDERAL COURT OF AUSTRALIA Westpac Life Insurance Services Limited v Mahony [2016] FCA 1071 File number: QUD 271 of 2016 Judge: ALLSOP CJ Date of judgment: 2 September 2016 Catchwords: INSURANCE – life insurance – the legitimate engagement of s 215 of the Life Insurance Act 1995 (Cth) – where a person set to benefit under a life insurance policy may be denied benefits by operation of the forfeiture rule – whether costs should be allowed for making of application and in what amount Legislation: Federal Court of Australia Act 1976 (Cth), s 43 Federal Court Rules 1979 (Cth) Federal Court Rules 2011 (Cth) Life Insurance Act 1995 (Cth), s 215 Cases cited: Challenger Life Company Limited v Estate of the late Robert John Real [2014] FCA 1325 Edwards v State Trustees Limited [2016] VSCA 28 Helton v Allan [1940] HCA 20; 63 CLR 691 MLC Ltd v Brooker [2001] FCA 845 Date of hearing: 25 May 2016 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance – Insurance List Category: Catchwords Number of paragraphs: 39 Counsel for the Applicant: Mr M J May Solicitor for the Applicant: Cooper Grace Ward Lawyers Solicitor for the First Respondent: Mr G F Jongkind of Jongkind Frank & Co Solicitor for the Second Respondent: Ms J A Gahagan of Gahagan & Associates Counsel for the Third Respondent: Mr P Goodwin Solicitor for the Third Respondent: Careswell and Company Solicitors ORDERS QUD 271 of 2016 BETWEEN: WESTPAC LIFE INSURANCE SERVICES LIMITED (ABN 31 003 149 157) Applicant AND: LOUIS JAMES MAHONY First Respondent PATRICIA MARLENE COLDWELL AS THE EXECUTOR OF THE ESTATE OF THE LATE LAINIE COLDWELL Second Respondent DAKOTA MARDELL MAHONY Third Respondent JUDGE: ALLSOP CJ DATE OF ORDER: 2 September 2016 THE COURT ORDERS THAT: 1. Any party wishing to oppose the orders proposed at paragraph 37 of the reasons published today, file and serve submissions by 30 September 2016. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT ALLSOP CJ: 1 The applicant (Westpac Life) seeks declarations pursuant to s 215 of the Life Insurance Act 1995 (Cth) (the Act) in respect of the sum of $150,000 paid into Court upon the filing of the application commencing these proceedings. 2 Section 215 of the Act is in the following terms: 215 Power to pay money into Court (1) A life company may pay into the Court any money payable by the company in respect of a policy for which, in the company's opinion, no sufficient discharge can otherwise be obtained. (2) Payment of the money into the Court discharges the company from any liability under the policy in relation to the money. (3) Any money paid into the Court under this section is to be dealt with according to the order of the Court. (4) This section has effect subject to the Rules of the Court. 3 The brief circumstances that give rise to the application are that the first respondent, who is the former partner of the deceased (Lainie Coldwell), and the estate of Ms Coldwell (the second respondent being the executor of the estate) both claim the proceeds of the life insurance policy on the late Ms Coldwell's life. 4 The gist of the dispute is that the first respondent, Mr Louis Mahony, has been charged with the murder of Ms Coldwell, as well as being charged with offences involving the defrauding and attempted defrauding of insurance companies (including Westpac Life in respect of the subject policy). 5 Mr Mahony has sued Westpac Life in the Charleville Magistrates Court for payment under the policy. 6 The facts go back to July 2009 when Westpac Life issued a life insurance policy to Louis Mahony and Lainie Coldwell as joint owners and lives insured. The policy provided for the payment of $150,000 to the other in the event of the death of one. The policy also provided for payment to a loan account owed by them to Westpac Banking Corporation (WBC) being a joint home loan account. As at 31 July 2009, a sum of $123,709.49 was jointly owed by Mr Mahony and Ms Coldwell to WBC in that account. 7 Ms Coldwell died on 25 August 2009 in Charleville, Queensland, from head injuries after she apparently fell from a tree. On 1 September 2009, solicitors acting for Mr Mahony notified Westpac Life of his claim to the policy moneys. 8 Shortly thereafter, a claims administrator of Westpac Life responded to the solicitor's letter requesting various information including a copy of the coroner's report when it was available. The coroner's report, at this point, seemed to be important because, since Ms Coldwell apparently fell from a tree, a claims officer was concerned in October 2009 as to whether the death was accidental or suicide. 9 In November 2009, Westpac Life became aware that Swiss Re had issued policies on the life of Ms Coldwell of over $1.7 million that had been taken out, like the Westpac Life policy, only a matter of weeks before the death of Ms Coldwell. An autopsy was undertaken in August 2009, making clear that the cause of death was a head injury from a fall from a height. This document was given to Westpac Life by the coroner in September 2011. 10 By early 2010, a degree of suspicion in Westpac Life had arisen about Ms Coldwell's death, based on the shortness of time the policy had been taken out prior to her death, and by the knowledge that other policies of significant value had been taken out in the same time frame. 11 Westpac Life made a number of investigations, including of the handwriting on the application for the insurance. An expert handwriting examiner informed Westpac Life in July 2010 that the signature on the insurance application was probably that of the deceased, Ms Coldwell. 12 During 2010, Westpac Life sought certain information as to other policies and superannuation funds from Mr Mahony's solicitors. But it was apparently resolved during 2010 that Westpac Life would await the coroner's report before paying any moneys. 13 In January 2011, Charleville detectives became involved in the investigation of Ms Coldwell's death. A detective sergeant contacted Westpac Life requesting certain assistance as to the details of the policies. 14 By June 2011 (almost two years after the death of Ms Coldwell) the coroner apparently was resolved not to issue a report until the finalisation of police inquiries. By the end of December 2011, Mr Mahony's solicitors informed Westpac Life that Mr Mahony proposed to sell real property that had been mortgaged to secure the joint loan and the letter further stated that he would therefore make a claim personally for the moneys due under the policy. The letter recognised that Westpac Life was awaiting the coroner's report before finalisation of its position. The letter did not contain an unequivocal claim for payment at that time. 15 Thereafter, a significant body of time passed while the coroner awaited the finalisation of the police investigation. By April 2013, the homicide squad in Brisbane had apparently taken over the investigation. In January 2014, Westpac Life was told that the matter was under investigation by three "cold case" detectives from Brisbane. Further requests for assistance were made of Westpac Life by the police in Brisbane for information and documentation. 16 Westpac Life thereafter made regular inquiry of the coroner and police as to progress in the investigation – in April, June, July and November 2014, and January 2015. 17 In May 2015, Mr Mahony's solicitors asked for all documentation and correspondence held by Westpac Life in relation to the policy. This was refused by Westpac Life. 18 Finally, in August 2015, Mr Mahony filed a claim and statement of claim in the Charleville Magistrates Court alleging breach of contract. The body of the statement of claim asserts "loss and damage" from the non-payment. However, the relief claimed is the sum of $150,000 plus interest at the rate of 6 per cent from 14 August 2015 and $1215.10 in costs. No claim for general damages or interest prior to August 2015 is made. Meanwhile, probate of Ms Coldwell's will issued in favour of Patricia and Trevor Coldwell in August 2012. Mr Trevor Coldwell has since died. In December 2015, the remaining executor, Patricia Coldwell, through her solicitors, informed Westpac Life that the estate would make a claim under the policy. 19 On 10 December 2015, Mr Mahony was arrested in connection with the death of Ms Coldwell. He is in custody and has had bail refused. A committal hearing was to take place in July 2016. The charges against Mr Mahony are for the murder of Ms Coldwell and dishonestly inducing or attempting to induce insurance proceeds from Swiss Re Life, Health Australia Limited, Westpac Life and Sunsuper Pty Ltd. The committal hearing was set down in July 2016. 20 The affidavit evidence that was filed that recounted the above circumstances satisfies me that Westpac Life formed the opinion that no sufficient discharge could be obtained otherwise than paying money into the Court. The basis for Westpac Life's opinion for this is Mr Mahony's possible involvement in Ms Coldwell's death. If Mr Mahony was criminally involved in Ms Coldwell's death, he will be disqualified from benefitting under the policy, under what is sometimes referred to as the "forfeiture rule". It is unnecessary to discuss the doctrinal basis of the rule: see Edwards v State Trustees Limited [2016] VSCA 28. It is sufficient to note that there is potential for the rule to apply. As Dixon, Evatt and McTiernan JJ said in Helton v Allan [1940] HCA 20; 63 CLR 691 at 709 about the rule: It is placed upon a principle of public policy, and it was said that no system of jurisprudence could with reason include amongst the rights which it enforces rights directly resulting to a person asserting them from the crime of that person. 21 The doctrine includes not only murder, but also manslaughter. The principle can only be expressed in a wide form: see, generally, Helton v Allan at 709-710. 22 If Mr Mahony is innocent of the charges, he will be entitled to the policy moneys. If he is guilty of the murder or manslaughter of Ms Coldwell, he will not be entitled to the proceeds of the insurance policy. If there is a legitimate claim for the proceeds of the insurance policy, it will be at the instance of the estate. 23 When the matter came before me on 25 May 2016, I raised the question with the applicant as to whether it was necessary to go to the extent of seeking a declaration in the originating application as to the operation of s 215, given the terms of that section, and, in particular, the operation of subsection (2). 24 I also required more particularisation of the costs of the application which were sought to be taken from the policy proceeds. 25 I also ordered Mr Mahony to file a one-page document setting out the basis of his claim in the Magistrate's Court. Mr Mahony's claim is one now set out in that document for interest from 21 January 2010 based on discretionary pre-judgment interest. 26 The applicant has submitted that it was appropriate to bring the present application because the previous Federal Court Rules 1979 expressly required a company that paid money into Court under s 215 of the Act to apply for a declaration as to the persons entitled to the money. The current Federal Court Rules 2011 do not have an equivalent provision; and, indeed, the current Rules do not provide specifically for any application under s 215. I accept, however, the submission that it is implicit that money being paid into Court is to be accompanied by a form of proceeding which gives judicial context to the payment into Court. Thus, I accept that the practical reality of paying into Court requires a proceeding to enable the exercise of judicial power in due course to direct where the money is to be paid. 27 The above, however, does not persuade me that I should make any declaration that may forestall the conclusion by any Court that Mr Mahony is entitled to interest for the delay in payment. Subsection 215(2) may conceivably be read widely enough to have that effect. In fairness, the declarations sought by Westpac Life do not, in terms, seek an expression by this Court that Westpac Life is discharged from any liability that may have been incurred by delay in payment. The declarations sought are only that the sum of $150,000 has been paid into Court in respect of the relevant policy, and pursuant to the provisions of s 215. 28 Nevertheless, given that it may be some time before it is clear whether or not Mr Mahony had any hand in the death of Ms Coldwell, it is legitimate to clarify the applicant's position by recognising the legitimacy of its payment into Court and the legitimate engagement of s 215. For those reasons, I am prepared to make the declarations sought by Westpac Life. 29 The question of costs then arises. The documents submitted by the solicitors for Westpac Life identify professional costs and disbursements on an indemnity basis of $37,632.50. This sum includes filing fees of $3,650.00 and counsel's fees for appearing on the application of $3,025.00 and preparation of the helpful submissions of some six pages. 30 I accept that the applicant has properly invoked the jurisdiction of the Court. I accept that the circumstances which have given rise to the need to come before the Court arise through no wrongdoing of the applicant, and I accept that the applicant has acted properly in its conduct of the proceeding. 31 The question of legal costs in a case such as this is not without difficulty. Some evident care and attention has been given to the affidavit material. On one view, the affidavit material could have been less voluminous, but it is difficult to criticise the solicitors or Westpac Life for careful attention to detail in a matter as serious as this. That said, it may have been wiser to come to Court with a short summary affidavit and seek the view of the other parties and the docket judge as to the necessary level of detail (and consequent expense) that was required. I do not, however, wish to be critical. 32 On the other hand, if Mr Mahony is innocent of what he has been accused of, it may seem unjust to deduct from his modest insurance moneys a sum in the tens of thousands of dollars to protect the position of the insurer. Nevertheless, a balance has to be struck. The order that the applicant seeks is that its costs on an indemnity basis fixed in the sum of $25,000 be paid out of the moneys paid into Court. 33 I am persuaded that some form of costs order should be made to Westpac Life. As to the question of costs, the terms of s 43 of the Federal Court of Australia Act 1976 (Cth) are sufficiently wide to enable the Court to make an order for costs out of money paid into Court. This was the view of Branson J in HCF Life Insurance Co Pty Limited v Lamb [2000] FCA 573 at [18]-[22]. Her Honour's view received the agreement of Hely J in MLC Ltd v Brooker [2001] FCA 845 at [6]. See also Challenger Life Company Limited v Estate of the late Robert John Real [2014] FCA 1325 at [41]. 34 Part of the cost of doing business as a life insurer, however, is that occasions such as this arise. It may well be that Mr Mahony is innocent of any wrongdoing, and, if that be the case, he has been held out of his policy moneys for a number of years. That said, there were reasonable grounds for suspicion and investigation of this matter, given the closeness of time between the taking out of the policy (and other policies of significant value) and the death of Ms Coldwell, together with the on-going police investigation. 35 The question of costs is troubling in the sense that the funds are small and a careful and precise application was necessary thereby requiring the expenditure of time by the lawyers in the preparation of the matter. Looking at the matter and recognising that Westpac Life was put in this position through no fault of its own, but recognising that someone will be entitled to these funds which will be necessarily depleted by the costs order, I think it is ultimately fair and appropriate that Westpac Life have some indemnification for its reasonable costs. Looking at the matter as a whole and accepting the need to traverse the detail which was traversed in the affidavits setting out the history of the investigation of the matter, I assess that the sum of $20,000 (which includes, of course, $3,650.00 as the filing fee on the originating application) is both appropriate and reasonable. 36 On the last occasion, I indicated that I would provide reasons without making orders to permit the parties to consider the question of the removal of Mr Mahony's claim in the Charleville Magistrates Court to this Court, and the framing of any dispute between Mr Mahony and the executor of Ms Coldwell's estate. 37 Subject to receiving any submissions from the parties as to why I should not make the following orders, such submissions to be filed within 28 days, I propose to make declarations as sought in paragraph 1 of the originating application; make an order for the costs of the applicant to be paid from the moneys paid into Court in the sum of $20,000; make an order that subject to the deduction of such $20,000 that the money paid into Court is to be held in accordance with further order of this Court pending determination of the person or persons entitled thereto; and make an order that the applicant be excused from further attendance until further order. 38 In due course, the second respondent, Ms Patricia Marlene Coldwell, the executor of the estate of the late Lainie Coldwell, and the first and third respondents, Mr Mahony and Ms Dakota Mardell Mahony, the daughter of the late Ms Coldwell and Mr Mahony, can use these proceedings as the vehicle for dispute as to the entitlement to the moneys paid into Court. Should Mr Mahony wish to agitate and progress his claim for interest from 2010, he has the opportunity in these proceedings to proceed against Westpac Life, or to proceed in the Charleville Magistrates Court. 39 Unless the parties provide submissions contrary to the course that I have proposed by 30 September 2016, I will make the orders that I have indicated. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop. Associate: Dated: 2 September 2016