New South Wales Supreme Court CITATION : Bar-Mordecai v UMP of NSW [2004] NSWSC 878 HEARING DATE(S) : 11 & 12 August 2004 JUDGMENT DATE : 24 September 2004 JURISDICTION: Common Law JUDGMENT OF : Master Harrison DECISION : (1) The further amended statement of claim is dismissed ; (2) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Dismiss statement of claim Fair Trading Act 1987 - 42 LEGISLATION CITED : Insurance Contracts Act 1984 (Cth) - ss 13 & 14 Trades Practices Act 1974 (Cth) - s 52 Supreme Court Rules 1970 (NSW) - Part 13 r 5; Part 15 r 26 Bar-Mordecai v AMIL [2003] NSWSC 774 Bar-Mordecai v Hillston [2004] NSWCA 65 CASES CITED : Gibson v Parkes District Hospital (1991-92) 26 NSWLR 35 Henderson v Henderson [1843-60] All ER 378 Port Melbourne Aiuthority v Anshun Pty Limited (1981) 147 CLR 589 Michael Bar-Mordecai (Plaintiff) PARTIES : United Medical Protection of New South Wales (formerly NSW Medical Defence Union Limited) (Defendant) FILE NUMBER(S) : SC 20325/2003 COUNSEL : Mr S D Kalfas (Defendant) Mr M Bar-Mordecai (Plaintiff in person) SOLICITORS : Mr B Cuff & Mr D Brown, United Medical Protection (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON FRIDAY, 24 SEPTEMBER 2004 20325/2003 - MICHAEL BAR-MORDECAI v UNITED MEDICAL PROTECTION OF NEW SOUTH WALES LIMITED (FORMERLY NSW MEDICAL DEFENCE UNION LIMITED) JUDGMENT (Dismiss statement of claim) 1 MASTER: On 26 August 2003 I delivered a judgment in Bar-Mordecai v AMIL [2003] NSWSC 774. The plaintiff had sought leave to proceed against the defendant, which at the time was in provisional liquidation. Leave to proceed was refused on the basis that the plaintiff's claims had no solid foundation. This decision is currently under appeal. Since that judgment was delivered the defendant has been taken out of liquidation. The plaintiff has filed a recast statement of claim and has filed it as of right. It is not subject to the leave requirement. The defendant now seeks to have the amended statement of claim (ASC) dismissed pursuant to Part 13 r 5 of the Supreme Court Rules 1970 (NSW) (SCR) or struck our pursuant to Part 15 r 26 of the SCR. The plaintiff relied on his affidavits affirmed 3 March 2004 and 21 May 2004. The defendant relied upon the affidavit of David Brown sworn 17 March 2004 and Stephen James sworn 30 April 2004. All deponents were cross-examined. 2 The plaintiff has cast a wider net and now pleads causes of action of breach of contract, breach of a constructive trust, statutory breaches of the Insurance Contracts Act 1984 (Cth) (ICA), the Trades Practices Act 1974 (Cth) (TPA), and the Fair Trading Act 1987 (NSW) (FTA), breaches of the duty of good faith (both statutory and in general law), loss of opportunity, negligence, misrepresentation, misleading and deceptive conduct and estoppel. 3 I do not intend to repeat here what I said in my earlier judgment in detail. However, to understand the plaintiff's case, it is necessary to refer to some of the prior litigation (previously described by the plaintiff as a "plethora of litigation") involving the plaintiff. The plaintiff appeared in proceedings before the Medical Disciplinary Tribunal as a result of which he was disbarred from medical practice. In addition there were proceedings in both probate and equity in this Court. The plaintiff's arguments stem from the premise that Mrs Eveline Hillston was his de facto wife for 11 years and he as her husband was permitted to provide medical treatment to her. Very recently the NSWCA in Bar-Mordecai v Hillston [2004] NSWCA 65 [at para 114] recognised that this de facto relationship had existed. But whether the relationship between the plaintiff and Mrs Eveline Hillston was one of de facto husband and wife was not an issue before the Medical Tribunal (Ex A, J 2). 4 The plaintiff defined the probate litigation as involving three issues. They were defined by him as firstly, "the unlawful killing issue" - whether the plaintiff had unlawfully killed his patient, the late Mrs Eveline Hillston, by the administration of morphine 30mg IMI; secondly, "the de facto issue" - whether the plaintiff had a bona fide de facto relationship with his patient, the late Mrs Eveline Hillston for the duration of their 11 year cohabitation; and thirdly, "the revocation issue" - whether the late Mrs Eveline Hillston revoked her 1989 will in the plaintiff's presence in 1992. 5 The plaintiff defined the equity litigation as involving the same unlawful killing and de facto issues but there is an additional issue, namely undue influence. The issue being whether the plaintiff had unduly influenced his patient, the late Mrs Eveline Hillston to make gifts to him during her lifetime in his role as her treating medical practitioner. According to the plaintiff, three of those issues, namely the unlawful killing, de facto and undue influence were directly related to his practice of medicine and these events occurred during a six week period when the plaintiff was a member of the defendant (see Ex 6). 6 Since my last judgment, the plaintiff's pleadings have changed in two significant aspects. The first aspect is that the plaintiff, in addition to making written requests for assistance from the defendant, which was pleaded in his earlier statement of claim, also made other oral requests for assistance. I shall return to this aspect shortly. The second aspect is that the plaintiff being a medical practitioner and not being legally trained, was never provided with the Articles and Memorandum of Association nor was he told of their existence. In 1994 and 1995, after paying valuable consideration to the defendant, he received documents from the defendant which he thought constituted an insurance policy but has since discovered constituted merely an indemnity which was subject to the exercise of absolute discretion by the defendant. The plaintiff claims that the defendant was obliged to have explained the true nature of the contractual relationship to him in plain English. The ASC also pleads that he did not receive any notification from the defendant about a resolution in 1997 in relation to the granting of discretionary cover to members nor any notification about adopting a guideline for the granting of discretionary assistance in 2000, although he was not a member of the defendant in 2000. 7 Also since my last judgment was delivered some further documents have come to light. The most important documents are contained in Exs 3, 4 and 7. They are a copy of the NSW Medical Defence Guidebook to Membership (Ex 3), copies of four internal memorandums dated from 3 November 1998 to 14 December 1998 (Ex 4), and three booklets in different colours, entitled "Medical Insurance Policy, Membership Guidebook and Policy" and one undated booklet entitled "Memorandum and Articles of Association" (Ex 7 and the document Ex MBM 6). The plaintiff deposed (aff 31 March 2004) that he did not receive copies of policy documents or membership booklets which set out the terms and conditions of his insurance or the circumstances in which he could make claims and receive insurance benefits but later acknowledged that he did receive copies of policy schedules for the years commencing 31 February 1995 and 31 December 1996 and 1997. So this only leaves the pleading of the defendant's failure to supply and notify the plaintiff about the existence of the Articles and Memorandum of Association. 8 In my earlier judgment I referred to the test and law in relation to whether a pleading should be dismissed or struck out. Briefly, Part 13 r 5 of the SCR provides that the Court may dismiss the proceedings in three situations. These include: firstly, where no reasonable cause of action is disclosed; secondly, where the proceedings are frivolous or vexatious and thirdly, where the proceedings are an abuse of the process of the Court. In addition, Part 15 r 26 of the SCR provides that the Court may strike out the whole or any part of the pleading in three situations. These include: firstly, where no reasonable cause of action is disclosed; secondly, where the proceedings have a tendency to cause prejudice, embarrassment or delay; and thirdly, where the proceedings are an abuse of the process of the Court. 9 Taking the plaintiff's case at its highest, in May 1994 when the plaintiff joined the NSW Medical Defence he received a membership card together with a letter (Ex MBM 6), which referred to his membership "with the NSW Medical Defence, the largest and oldest Australian owned medical defence organisation". The letter highlighted that: "NSW Medical Defence is unique because it is the only MDO in NSW to offer you: · In-house legal department · Largest membership in NSW · Financial security through our subsidiary insurance company · World-wide protection including Canada and (excluding USA)" 10 It is critical to observe that this letter does not specifically say that the defendant offered a policy of insurance but rather "offered financial security" through its "subsidiary insurance company". In 1994 and 1995 no medical defence organisation in Australia was offering contracts of insurance to its members (Aff S Jones para 9) so it was not possible for the plaintiff to obtain a contract of insurance with some other organisation during that time. 11 In 1996 the nature of doctor's membership with the defendant changed so that in addition to the discretionary trust, the plaintiff was covered by an insurance policy. On 4 April 1996, the plaintiff received a letter together with his medical insurance policy and membership booklet for 1996. The covering letter went on to state: "As you know, this year United Medical Defence launched its Medical Insurance Policy – a significant development in the way Australian doctors are indemnified. You received automatic and instantaneous cover under this insurance policy when you renewed your membership for 1996. Your policy schedule and notes on the limit of cover and period of insurance are included in this mailing. The move to insurance represents a very positive step for medical indemnity and greater security for all practitioners. It is important to remember that the $1 million cover is in addition to the unlimited discretionary cover you have always had . Insurance increased your security in two ways. First by knowing in advance the terms and conditions of your cover, and secondly in the knowledge that United, like any insurance company, must comply with the strict scrutiny of the Insurance and Superannuation Commission. Therefore you can rest assured that United is financially stable – giving you greater security and peace of mind. No other medical defence organisation in Australia gives you this benefit." 12 This letter informed the plaintiff that he was covered under an insurance policy and additionally had unlimited discretionary cover. 13 The factual matrix relied upon by the plaintiff is much the same as in the earlier proceedings. As I previously stated on 15 February 2001, the plaintiff wrote to the defendant and requested legal assistance with the application to appeal the decision of the Medical Tribunal in the New South Wales Court of Appeal. On 21 February 2001, the defendant advised the plaintiff that his request was declined. The plaintiff did not hold a policy with the defendant in 2001, but taking the plaintiff's case at its highest it may be arguable that the incident arose in 1998 when the complaints were being heard by the Tribunal. The plaintiff held insurance in 1998. 14 It is at least arguable that the plaintiff was a member of United at the time the incident occurred – see cl 6.2.4. The guidelines delegated to the Underwriting Committee the responsibility for considering and granting discretionary assistance (cl 1.1). But where it determines that assistance is not to be granted it can only make a recommendation to the Board – cl 1.3. The guidelines should be used on a rebuttable presumption basis. Guideline 2.1(v) indicates that it is likely that assistance will be granted for a disciplinary matter, which arose in the course of the member's professional practice. The guidelines do not specifically refer to a grant of assistance for an appeal from the decision of the Disciplinary Tribunal. However, under both the Articles of Association (article 61) and the resolution of the Board dated 17 November 2000 (cl 6.2.5), the Board has the power to exercise its discretion absolutely to refuse or withdraw assistance to any individual member in any circumstances. The articles and the resolution override the guidelines. Thus, the Board was not obliged to assist the plaintiff with his appeal from the Disciplinary Tribunal. 15 Although at paragraph 20 of my earlier judgment I recorded that it was common ground between the parties that the plaintiff never requested legal assistance in either the equity or the probate proceedings, this is no longer the case. The plaintiff has either in submissions and/or in his pleading referred to three oral requests for legal assistance. The first oral request was allegedly made in 1995, the second was a telephone request to Dr Kearney in 1997 in relation to the unlawful de facto issue and the third request was an oral one in relation to the undue influence in July 1998. 16 By 25 November 1998 the defendant had made a decision to provide some assistance but by 15 February 2001 it had decided not to provide any further assistance. There are now documents in evidence that provide an explanation as to why the discretion was exercised the way it was by the defendant (see Ex 4). The 1998 memos detail the complaints made in the medical tribunal. Dr Kearney on behalf of the defendant viewed the long-standing sexual relationship as not being a matter relevant to the defence union. She considered that the plaintiff was entitled to some assistance for the breach of confidentiality complaint and that it was appropriate to offer the plaintiff a contribution towards legal costs of $10,000.00. 17 Another written request for assistance in his appeal was made on 15 February 2001. The Underwriting Committee declined his request. The reasons for the Committee declining to provide assistance in the Mrs Eveline Hillston matter was that it was unrelated to Dr Bar-Mordecai's clinical practice. In relation to the appeal to the Medical Board the defendant viewed it as still being unrelated to clinical practice and that Dr Bar-Mordecai had been found guilty. It was agreed that no further assistance should be provided. The Committee further agreed that as the matter was unrelated to Dr Bar-Mordecai's clinical practice and as the company had already declined assistance earlier, the matter did not require confirmation by the Board. However, while it is unlikely that the defendant would have responded favourably to the plaintiff's oral requests for assistance in 1995, 1997 and 1998, if they were in fact made, these allegations could have and should have been pleaded in the earlier statement of claim – see Port Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 and Henderson v Henderson [1843-60] All ER 378 at 382 per Wigram VC. 18 In the earlier proceedings the plaintiff alleged that the defendant's conduct in its failure to provide assistance to the written requests amounted to negligence and breach of contract. The additional documents do not alter my view. For the reasons given in my earlier judgment these claims are futile. Breach of good faith 19 As to the alleged breaches of the duty of good faith, the plaintiff relies upon the statutory scheme as enunciated in Part II of the ICA - 'The duty of the utmost good faith' and the common law of good faith – see Gibson v Parkes District Hospital (1991-92) 26 NSWLR at 35 (paras 51-53 FASC). Section 13 of the ICA relates to contracts of insurance, not discretionary trusts and states: "13 A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith." 20 Section 14 of that part of the ICA provides: "(1) If reliance by a party to a contract of insurance on a provision of the contract would be to fail to act with the utmost good faith, the party may not rely on the provision. (2) Subsection (1) does not limit the operation of section 13. (3) In deciding whether reliance by an insurer on a provision of the contract of insurance would be to fail to act with the utmost good faith, the court shall have regard to any notification of the provision that was given to the insured, whether a notification of a kind mentioned in section 37 or otherwise." It was submitted by the plaintiff that the insurer carries an onus to comply with the duty of utmost good faith, an onus that in the circumstances has not been discharged and has led to the plaintiff suffering extensive loss and damage. Further the plaintiff pleads that it did not make a full and proper disclosure. The plaintiff also relied upon s 37 of the ICA which obliges the insurer to notify the plaintiff of an unusual term in the contract. These claims based on the ICA are hopeless. The TPA and FTA claims 21 The plaintiff alleges that the conduct of the defendant contravened a variety of provisions of the TPA and FTA. Section 52 of the TPA provides for a general prohibition against misleading or deceptive conduct. Section 52(1) of the TPA states: "A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive". Section 42(1) of the FTA is similar except where s 52(1) of the TPA refers to 'a corporation', s 42(1) of the FTA does not limit its operation to conduct engaged in by corporations. For there to be breaches of s 52 TPA and s 42 of the FTA, the plaintiff needs to establish: firstly, conduct on the part of a corporation or person; secondly, conduct that is misleading or deceptive; thirdly, conduct effected in trade or commerce; fourthly, that there was reliance on the conduct and fifthly, loss or damage caused by the conduct (para 69 and 70 FASC). 22 It is put by the plaintiff that the defendant, being involved in trade or commerce engaged in conduct which did or was likely to mislead the plaintiff in misleading and confusing the plaintiff about the benefits and services it provided and the circumstances in which they would be provided. Furthermore, the plaintiff alleges that in breach of s 58 of the TPA and s 53 of the FTA he was misled into believing that provided he paid the annual membership fee he would be entitled to and would receive the benefits and services the defendant represented. 23 A fair reading of the document the plaintiff received on joining membership with the defendant in May 1994 did not state that it offered the plaintiff a contract of insurance. Rather it "offered financial security" through its subsidiary insurance company. If the plaintiff wanted to know more, he could have made further inquiries. In my view the alleged failure to provide the plaintiff with or alert him to the existence of the Articles of Memorandum of Association does not give rise to any claim. The plaintiff's claim on the contract of insurance (that is, the situation from 1996) is hopeless. In so far as claims are raised in negligence and breach of contract for the failure to notify the plaintiff of the nature of his membership with the defendant and the content of his insurance policy, these claims are also hopeless. Constructive trust 24 The plaintiff's claim is that the nature of the relationship between the UMP (and its predecessor) and members including the plaintiff is such that the defendants are trustees for their members pursuant to a constructive trust (SC para 16). According to the plaintiff, the learned authors of Jacobs' Law of Trusts, Butterworths 6th ed 1997 at [1301] state that to determine whether there is a constructive trust, the inquiry is not as to the actual or presumed intention of the parties, but as to whether according to the principles of equity, it would be a fraud for the party in question to deny the trust. It is my view that the pleading that there was a constructive trust between the plaintiff and defendant is doomed to failure. 25 The issue of whether in 1994 and 1995 the plaintiff obtained a policy of insurance or an entitlement to make a claim for indemnity subject to discretion was false and misleading, is hopeless and should not be permitted to go to trial. It is my view that the causes of action for breach of contract, TPA, FTA, ICA, breach of good faith, negligence, and misleading and deceptive conduct breach of constructive trust and estoppel should not be permitted to go to trial. The further amended statement of claim is dismissed. 26 Costs are discretionary and usually follow the event. The plaintiff is to pay the defendant's costs as agreed of assessed. Orders (1) The further amended statement of claim is dismissed. (2) The plaintiff is to pay the defendant's costs as agreed of assessed. ********** Last Modified: 09/28/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.