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2024-02-22 00:00:00

Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140

https://www.caselaw.nsw.gov.au/decision/18dcdadf1e3b6911ffdedb20

2024-05-25T23:27:36.554313+10:00

Supreme Court New South Wales Medium Neutral Citation: Hunt Leather Pty Ltd v Transport for NSW (No 4) [2024] NSWSC 140 Hearing dates: 13 and 14 December 2023 Date of orders: 22 February 2024 Decision date: 22 February 2024 Jurisdiction: Common Law Before: Cavanagh J Decision: (1) The answer to question 10 is no – the plaintiffs are not entitled to recover the funder’s commission as damages. (2) Question 11 does not arise. (3) I list this matter for further directions on 13 March 2024. Catchwords: CIVIL PROCEDURE — Representative proceedings – where plaintiffs entered into a litigation funding agreement – whether plaintiffs may claim as a head of damages the litigation funder’s commission. Legislation Cited: Civil Procedure Act 2005 (NSW), ss 3, 19 Federal Court of Australia Act 1976 (Cth), pt IVA Civil Liability Act 2002 (NSW), ss 5D, 5E, pt 1A Cases Cited: Hunt Leather Pty Ltd v Transport for NSW (No 3) [2023] NSWSC 1598 Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound (No 2)) [1967] 1 AC 617 Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 Talacko v Talacko (2021) 272 CLR 478 Landoro (Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318 Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 Arsalan v Rixon (2021) 274 CLR 606 Griffiths v Kerkemeyer (1977) 139 CLR 161 Van Gervan v Fenton (1992) 175 CLR 327 Hungerfords v Walker (1989) 171 CLR 125 Nominal Defendant v Gardikiotis (1996) 186 CLR 49 Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 Henville v Walker (2001) 206 CLR 459 Wallace v Kam (2013) 250 CLR 375 Category: Procedural rulings Parties: Hunt Leather Pty Ltd (First Plaintiff) Sophie Hunt (Second Plaintiff) Ancio Investments Pty Ltd (Third Plaintiff) Nicholas Zisti (Fourth Plaintiff) Transport for NSW (Defendant) Representation: Counsel: A Bannon SC with A Hochroth (Plaintiffs) D McLure SC with N Simpson (Defendant) Solicitors: Banton Group (Plaintiffs) Lander & Rogers (Defendant) File Number(s): 2018/263841 Publication restriction: None JUDGMENT 1. This is the judgment in respect of the remaining common questions agreed to by the parties arising out of the plaintiffs’ claims for damages due to interference with their businesses during the construction of the Sydney Light Rail. The remaining questions, common questions 10 and 11, were deferred until after determination of the liability issues. 2. These questions relate to the plaintiffs’ contention that the litigation funder’s commission of 40% (“the funder’s commission”) is recoverable as damages payable to the plaintiffs. 3. On 19 July 2023, I entered judgment for the first and third plaintiffs (“the corporate plaintiffs”) in nuisance with damages to be finalised in accordance with the findings set out in that judgment. I rejected the second and fourth plaintiffs’ claim in public nuisance. 4. On 13 and 14 December 2023, there was a further hearing in relation to three issues being: 1. common questions 10 and 11; 2. an application under the slip rule to correct certain mathematical calculations or findings in the principal judgment; and 3. further argument on some specific damages issues. 5. On 14 December 2023, I delivered a further judgment (see Hunt Leather Pty Ltd v Transport for NSW (No 3) [2023] NSWSC 1598) dealing with the application under the slip rule and the further damages issues. 6. Subsequent to that judgment, I made orders by consent, thereby finalising the amounts payable to the first and third plaintiffs, subject only to common questions 10 and 11. That is, although judgment was entered for specific amounts, that was subject to there being any further entitlement on the part of the first and third plaintiffs to recover an additional sum in respect of the funder’s commission. 7. The rest of this judgment deals with common questions 10 (as amended) and 11, which are in the following terms: Common question 10 Are such Group Members as have suffered loss or damage as a result of private or public nuisance for which the defendant is responsible and who have entered into a litigation funding agreement in connection with these proceedings entitled to claim as a head of damages their reasonable litigation funding costs incurred under any such agreement without needing to show: (a) that it was the nuisance of the defendant which rendered them impecunious so as to be unable to pursue their claims without the benefit of litigation funding; (b) that they would have pursued their claims against the defendant without litigation funding had they the means to do so; or (c) that they negotiated over the terms of the litigation funding agreement? Common question 11 If yes to 10, what is a reasonable rate of litigation funding costs recoverable by such Group Members? 8. The plaintiffs claim that in respect of each sum awarded or recovered by each Group Member who entered into a funding agreement, including the lead plaintiffs, (I will describe those persons as the plaintiffs in this judgment) there should be an additional amount of 40% added on account of the commission which the plaintiffs have agreed to pay the litigation funder on resolution of the proceedings (either by settlement or a judgment). 9. In support of their submission that the plaintiffs should recover the funder’s commission, the plaintiffs rely on: 1. Statement of Sophie Hunt dated 25 October 2022 and Statement of Nicholas Zisti dated 25 October 2022; 2. Affidavit of Paul Lindholm, an authorised representative of the litigation funder, dated 2 November 2023; and 3. A report of John Walker dated 2 November 2023, a person said to be an expert in litigation funding. 10. No witness was required for cross-examination. The defendant did not call any evidence in response. The defendant thus did not seek to challenge the factual evidence contained in the affidavit of Mr Lindholm as to the circumstances leading up to the agreement to fund the litigation. 11. Further, there was no challenge to the expertise of Mr Walker. The defendant’s approach to the evidence of Mr Walker was to submit that I would not accept his central opinion, being that the 40% figure agreed to was reasonable, because the plaintiffs had not established the principal assumptions on which Mr Walker relied for the purposes of offering his opinion. That is, as he says in his report, he assumes that no other litigation funder was willing to offer funding in respect of these proceedings. Having made that assumption, he then identifies the factors relevant to these proceedings and to the process which would lead to an assessment of the percentage that a litigation funder might charge. The plaintiffs’ contentions 12. It is accepted by the plaintiffs that this is a novel claim, in the sense that they acknowledge that there is no prior decision in which a court has awarded such a sum as damages. It seems that it has never been claimed previously, although it might be more accurate to say that it has not been claimed in any case which has proceeded to a court determination. 13. The plaintiffs say that they have suffered loss as a result of the tortious conduct of the defendant and that they are entitled to be put back into the position they would have been but for that tortious conduct. Their loss includes the funder’s commission. The plaintiffs submit that they are entitled to recover such losses as are the reasonably foreseeable consequence of the tortious conduct (Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd (The Wagon Mound (No 2)) [1967] 1 AC 617). Recoverability of such losses is subject to the losses being not too remote. 14. It is accepted by the plaintiffs that damages must be assessed by reference to the circumstances of each case and must be assessed according to what is reasonable in all the circumstances (Roberts v Goodwin Street Developments Pty Ltd [2023] NSWCA 5 at [92]-[93] per Kirk JA and Griffiths AJA). 15. Further, the plaintiffs submit that it is not necessary for them to establish that the particular harm or loss was foreseeable but losses of the kind they seek must have been reasonably foreseeable. They submit that there is no reason in principle why “reasonable litigation funding costs” expended for the purpose of an action to recover damages such as this should not be recoverable, suggesting that costs of litigation that are reasonably incurred in an attempt to reduce losses caused by a wrongdoing are a head of loss (Talacko v Talacko (2021) 272 CLR 478 at [60]). 16. It is a feature of the plaintiffs’ submissions that they describe the funder’s commission as “reasonable litigation funding costs”, albeit it is really a straight commission. They also suggest that costs incurred to reduce their losses should be recoverable, but they disavow any suggestion that they were attempting to mitigate their losses by agreeing to pay the funder’s commission. 17. Whilst they accept that there has been no case decided in support of the proposition they advance, they point to the decision of the Queensland Court of Appeal of Landoro (Qld) Pty Ltd v Jensen International Pty Ltd [1999] QCA 318 (“Landoro”), in which the Queensland Court of Appeal allowed an amendment to a statement of claim to recover the costs of litigation finance. 18. Specifically, they submit that the Court (per Davies JA) did not find that it was necessary for the plaintiffs to prove that they had been rendered impecunious by reason of the defendant’s wrongful conduct. Having said that, the plaintiffs accept that the Court in Landoro was considering a strikeout application rather than determining the matter on a final basis. 19. The plaintiffs submit that “the litigation funding costs” incurred by the plaintiffs were caused by the nuisance and that they form part of the reasonably foreseeable consequences of a nuisance for the following reasons: 1. it was reasonably foreseeable that any nuisance for which the defendant was responsible would impact a range of persons and entities along the light rail route; 2. it was reasonably foreseeable that it would be uneconomic for individuals and businesses impacted by the nuisance to bring claims against the defendant individually; 3. it was reasonably foreseeable that individuals and businesses likely to be impacted by the nuisance would be unwilling to take on the substantial adverse costs and risks involved in bringing proceedings against the defendant; 4. it was thus reasonably foreseeable that any proceedings would likely be brought by way of a class action and that the proceedings would be likely to be funded proceedings; 5. the defendant actually foresaw and anticipated the risk of a class-action pointing to the statements in the defendant’s risk register; 6. the funding agreement would not have been entered into without the nuisance for which the defendant has been found to be responsible; and 7. in the circumstances of the present case, in the absence of litigation funding, the case would not have been brought. 20. The plaintiffs submit that the litigation funding costs should not be considered too remote as they were a kind of loss which was reasonably foreseeable at the time of commission of the tort. 21. Further, the plaintiffs submit that acceptance of their claim in this matter does not mean that a funder’s commission will be recoverable in every funded class-action or that funding costs will always be recoverable. They point to the specific, unique and individual circumstances of this matter as supporting their claim, accepting that such circumstances would not always exist, even in class actions. 22. They submit that the Court should not stifle recovery in a case such as this and the plaintiffs should not be penalised because their only means of pursuing litigation was through a litigation funder. Further, they reject any suggestion that a finding that the funder’s commission is recoverable as a head of damage would ‘open the floodgates'. 23. Finally, the plaintiffs submit that it is not necessary to establish: “(a) that it was the nuisance of the defendant which rendered them impecunious so as to be unable to pursue the claims without the benefit of litigation funding; (b) that they would have pursued their claims against the defendant without litigation funding had they had the means to do so; or (c) that they negotiated over the terms of the litigation funding agreement.” 24. The plaintiffs say that their failure to establish these matters does not preclude them from recovering the funder’s commission. The defendant’s position 25. The defendant disputes that the plaintiffs are entitled to recover the funder’s commission as damages. It does so for two principal reasons, submitting that: 1. the plaintiffs have not established that the funder’s commission is a loss caused by the defendant’s tortious conduct, particularly having regard to remoteness, foreseeability and normative considerations. 2. the funder’s commission should be viewed as costs, rather than damages, particularly having regard to the statutory regulations which govern the awarding of costs. 26. Further, the defendant submits that the plaintiffs have not established that the commission is reasonable as the assumptions on which Mr Walker relied to form his opinion have not been established. Evidence 27. Ms Hunt says in her affidavit of 25 October 2022 that she registered as a group member on 15 June 2018 and signed a funding agreement with International Litigation Partners No. 16 Pte Ltd (“ILP”) in her own capacity and on behalf of Hunt Leather. 28. On 9 September 2019 she was approached by her lawyers and asked whether she and Hunt Leather would be willing to be appointed as lead plaintiffs. She agreed to this request. She says that, at the time, she was aware that the legal costs of running the proceedings would likely be several million dollars. 29. In his evidentiary statement dated 25 October 2022, Mr Zisti comments to a similar effect. He understood that because of the ILP agreement, Ancio and he would not have to pay the costs associated with the proceedings because those costs would be paid by ILP. 30. Had it not been for the ILP agreement, he would not have been willing for Ancio or himself to be appointed as lead plaintiffs because he did not have the financial resources to pay any costs. At the time, that is October 2022, Mr Ancio worked as an uber diver and was struggling with debt. He did not have any ability to borrow funds through traditional finance options. Mr Lindholm (the funder) 31. Paul Lindholm describes himself as a financial consultant. He is the authorised representative of ILP. ILP is the litigation funder in these proceedings. ILP has paid the plaintiffs’ costs. He is also the agent for several other funding entities which fund litigation in Australia under what is loosely described as the International Litigation Partners or ILP group. ILP is part of the group of companies which acquire capital from several funding participants around the world. That capital is then invested in the funding of litigation for reward. 32. Part of Mr Lindholm's role is to assess potential claims for their suitability as funded litigation projects and to monitor the conduct of those claims. There are particular stages in class action litigation when a funder is required to consider the financial impact of the different courses of action available. 33. The first stage is the commencement of the proceedings. He says that it is a significant decision to commence proceedings because, in his experience, the cost of class-action proceedings typically range from $10 to 20 million. In the absence of a common fund order, unless a significant number of group members sign a funding agreement, the reward that the funder might expect to obtain upon a successful resolution of the proceedings may be minimal. 34. Indeed, the funder’s return could be negative in the event that the aggregate commission earned was less than the cost of capital over the duration of litigation. 35. Mr Lindholm says that there are a number of factors that must be considered prior to agreeing to provide funding for a claim, including the merits of the claim; the nature and extent of the evidence required, including expert evidence; the volume of documentation; the make-up of the class of people; the estimated damages; the likelihood that another law firm might file a competing claim; and potential adverse costs orders. 36. After proceedings have commenced, the litigation funder must consider the ongoing financial impacts and viability of the claim. Mr Lindholm says that ILP was able to assess the financial impacts of these proceedings whilst they were on foot because, pursuant to clause 13.1 of the funding agreement, ILP could terminate the funding agreement at any time at its own discretion. 37. He says it was the general practice of ILP to offer funding for cases that other funders do not wish to fund and, in doing so, this allows ILP to seek a greater funder’s commission and avoid having to compete with multiple funders. 38. In around May 2018, Mr Lindholm was introduced to Rick Mitry (the solicitor for the plaintiffs) regarding these proceedings (at that stage potential). After considering the material available, he identified that these proceedings had a high degree of risk relative to other class actions generally, particularly because: 1. only 50 to 70 potential group members had been signed up; 2. Mr Mitry had not conducted any damages modelling for the class or engaged a quantum expert; 3. the proceedings had been commenced against a New South Wales State government entity and he considered that the government may not wish to set a precedent by settling such an action; 4. there would be limited common issues; 5. the prospect of early settlement was low; 6. the defendant would offer financial assistance to some group members; 7. a portion of the class may not want their accounts to be scrutinised; 8. the claim was novel and precedent setting; and 9. it may be difficult for the plaintiffs to engage experts to give evidence against the government on a large infrastructure project. 39. At the time, Mr Lindholm thought there was a possibility that a common fund order could be obtained but he was aware of the risk that it would not occur. 40. Following his viability assessment, he caused ILP to fund the proceedings based on the funder’s commission rates included in the funding agreement. He does not know whether Mr Mitry sought funding from anyone else. Mr Walker (the expert on funding) 41. Mr Walker was retained by the plaintiff to offer an expert opinion on the arrangements. Mr Walker has extensive experience in litigation funding and management. He has been involved in over 500 litigated disputes since 1996. 42. Mr Walker explains the creation and development of the market, and comments on the number of litigation funders in the market and their funding rates. He then deposes to the relevant characteristics of the risks associated with these proceedings, referring to generic liability risks, mass tort liability risks and damages risks. 43. He says that there would have only been a limited number of funders who would have been prepared to fund these proceedings. He refers to the range of contractual funder’s commission rates in the market as of 1 January 2014, and the changes in the market between 1 January 2014 and 15 January 2018. He concludes that the contractual funding rates included in the Funding Agreement in June 2018 were reasonable. He also considers that the rates would have been reasonable if the Funding Agreement was entered into in October 2023. 44. It is not necessary that I say anything further about his report at this time as the report is relied on for the purposes of establishing that the funder’s commission rate was reasonable. The defendant did not call any evidence in response to Mr Walker. Mr McLure did not cross-examine Mr Walker. He merely challenged the validity of the assumptions that he made. The litigation funding agreement (“the Funding Agreement”) 45. Ms Hunt entered into the Funding Agreement of 15 June 2018. For the purposes of the agreement, she is described as the claimant, as is any other person who entered into the agreement. The recitals to the agreement are in the following terms: A. The Claimant has or may have claims against the Respondent(s) arising out of the Matter described in Schedule 2. B. The Claimant wishes to make its claims against the Respondent(s), and to the extent practicable wishes to make its claims concurrently with the similar or related claims of other persons. The Claimant is or will be a Group Member in the Proceedings which may be brought in respect of the Claims. C. The Claimant wishes to manage its risks of litigating or otherwise pressing its claims against the Respondent(s) by obtaining financial assistance from the Funder as a commercial claim funder. D. The Claimant and the Funder intend in good faith to make an arrangement under which the Funder provides financial assistance to the Claimant in connection with the Investigation of contemplated proceedings and if proceedings are instituted, for the prosecution of claims by the Claimant and the other persons described in paragraph B above against the Respondent(s) and such other persons as may be determined in accordance with the terms set out below, in return for the remuneration to the Funder identified in this Agreement. E. To give effect to the mutual objective described in paragraph D, the Claimant and the Funder have agreed upon the terms set out below and agree that the said terms supersede and replace any prior agreement between them in respect of any matter described in this Agreement. 46. As set out in clause 5.1, the funder agreed to pay: 1. all legal costs and disbursements of the claimant reasonably incurred; and 2. any adverse costs order or other costs order which the court makes against any funded person. 47. As set out in clause 5.8, in addition to the funding assistance offered, the funder agreed to provide management services during the term of the agreement. 48. Clause 7.1 is in the following terms: Upon Resolution, the Claimant will pay to the Funder or its nominee, from the Resolution Sum: (a) Claimant’s Common Costs Share – being the Claimant’s Pro Rata share of the Legal Costs incurred in respect of Common Benefit Work; (b) Claimant’s Individual Costs – being the Legal Costs incurred in respect of Individual Benefit Work in respect of the Claimant’s Claims; (c) Claimant’s Appeal Costs Share – being the Claimant’s Pro Rata share of Appeal Costs; (d) Funder’s Commission – being the Claimant’s Pro Rata share of the Funder’s Commission; (such amounts being the Deductions), plus any GST in accordance with Section 17 below. 49. Resolution costs and resolution sum are defined as follows: Resolution Costs means the total amount of any costs payable to or to the benefit of the Claimant or any Representative representing Claims including the Claimant’s Claims, whether by an order of a court, tribunal or arbitrator pursuant to any agreement with any Respondent. Resolution Sum means the amount or amounts, or the value of any goods or services, to which the Claimant, or any part of the Group including the Claimant, becomes entitled in connection with or satisfaction or part satisfaction of the Claims, including (without limitation) as a result of a settlement, judgment or arbitration and whether the said amount or value is provided by the Respondent (or if more than one, any of them) or any other person, and for the avoidance of doubt includes any amount or value to be provided by or in respect of a person against whom any Respondent claims any indemnity, apportionment or contribution. 50. Schedule 4 sets out the funder’s remuneration. The funder’s commission scale is as follows: Resolution on or before 31 March 2019 Resolution after 31 March 2019 and on or before 31 December 2019 Resolution after 31 December 2019 In the event that there is a Common Fund Order 30% 35% 40% 25% 51. There was no common fund order. The matter proceeded to a full hearing after 31 December 2019 and the funder’s commission is thus 40%. 52. It can be seen that the benefit that a claimant, such as the plaintiffs, obtain from the funding agreement is: 1. payment of their ongoing costs and disbursements, thereby enabling them to pursue the claims against the defendant; 2. indemnity in respect of costs orders made against them, thereby ensuring that they bore no costs risks in pursuing the claims; and 3. litigation management services, thereby adding another layer of benefit to them, in terms of expert management of the litigation. 53. The benefit that the litigation funder obtains from the funding agreement is the funder’s commission if the claims are successful. Categorisation of the loss 54. It is important to consider the loss in the context in which it arises and in the context of the whole of the funding agreement. 55. This is so for a number of reasons, including that: 1. the amount of the funder’s commission bears no relationship to any legal work undertaken; 2. the amount is not payable to or on behalf of legal professionals; 3. the agreement to pay is between the plaintiffs and the litigation funder; 4. the Court has no supervisory power in respect of the funder’s commission, other than should it be necessary to approve a settlement; and 5. the funder’s commission is calculated as a percentage of the sum recovered. 56. The plaintiffs do not assert that every amount payable by them or the funder pursuant to the funding agreement is recoverable as part of their damages claim. They submit only that the agreed percentage (that is, 40%) which each plaintiff must pay on resolution is recoverable as part of their damages claim. 57. As such, they do not seek to recover as damages the other sums referred to in the funding agreement, which might more readily be identified as costs. 58. There was some uncertainty about this point during the hearing (perhaps caused by the plaintiffs’ description of their loss as being litigation funding costs rather than the funder’s commission) but, in response to the defendant’s submissions on the issue, Mr Bannon clarified that the plaintiffs were only seeking to include the funder’s commission as damages. 59. The plaintiffs submit that this sum is not “costs” irrespective of how costs are broadly defined in the Civil Procedure Act 2005 (NSW) (“CPA”). 60. I do not consider that the funder’s commission could be described as costs for the following reasons: 1. there is a clear distinction between the costs and the funder’s commission in the funding agreement; 2. the amount of the commission is not calculated with reference to the amount of work undertaken by the legal representatives, albeit the commission varies depending upon at what stage of the proceedings there is resolution; 3. the amount of the funder’s commission has been determined by way of a commercial agreement entered into between the plaintiffs and the litigation funder; 4. the commission is the funder’s consideration for providing the benefits to the plaintiffs which I have already outlined; 5. the funders commission is not a contingency fee as that term might be commonly understood, in the sense that the commission is not a percentage fee charged by the lawyers in lieu of costs; 6. solicitors and barristers still charge fees and issued invoices in the usual way. It is just that those fees are paid by the litigation funder; 7. similarly, any adverse costs order obtained against the plaintiffs would be made against the plaintiffs personally. It is just that the funder has agreed to pay those costs; 8. the Court has no supervisory jurisdiction over the funder’s commission in the sense that, at least in these proceedings, the Court does not have the power to set aside or vary it or even assess its reasonableness (subject to the plaintiffs seeking to claim it as damages). The amount of commission may be wholly unreasonable (assessed objectively for the purposes of the damages claim) but the plaintiffs entered into the agreement on those terms; 9. I do not consider that the funder’s commission falls within the meaning of costs in s 19 of the CPA. Costs is defined in s 3(1) of the CPA as follows: costs, in relation to proceedings, means costs payable in or in relation to the proceedings, and includes fees, disbursements, expenses, and remuneration. 10. The court's power in respect of costs is limited to those sums which fall within the meaning of costs set out in s 3(1). The definition is intended to refer to fees, disbursements, expenses, and remuneration paid or payable to legally qualified persons or other persons retained in the proceedings, such as experts. 61. As such, in my view, the funder’s commission is not “costs”. 62. Nor could the funder’s commission be aptly described as finance to fund the litigation. There was no loan agreement between the funder and the plaintiffs. The amount claimed is not interest (compound or otherwise) on money borrowed to pay legal costs. Describing the arrangement as litigation finance would not be accurate. Similarly, the plaintiffs’ description of the funder’s commission as being litigation funding costs is not an apt description. 63. Further, the commission is not being claimed as a business expense, in the sense that it represents amounts paid as part of the operation of the plaintiffs’ businesses for the purposes of deriving income. 64. The lead plaintiffs did not include the funder’s commission in their calculation of loss of profits, which has already been agreed and determined. 65. Nor do the plaintiffs submit that the commission is a sum which they paid in mitigation of their losses. I raised that with Mr Bannon and he specifically denied the proposition that the funder’s commission should be viewed as a sum paid in mitigation of other losses. 66. To the extent that the funder’s commission might be assessed as a loss of a sum capable of being the subject of an award of damages, it could only be viewed as a loss arising from a contingent liability. 67. At the time of the assessment of damages and entry of judgment, the plaintiffs had not paid any amount to the litigation funder. Indeed, they did not become liable to pay any amount to the litigation funder at the time that the nuisance occurred. Whilst liability to pay might be viewed as a loss capable of being subject to an award of damages, it is a feature of this aspect of the claim that the liability to pay (which is said to be the loss) did not crystalise until after a judgment was otherwise entered in favour of the plaintiffs (whether by Court determination or agreement) for a sum of money. The plaintiffs only become liable to pay the funder’s commission after they become entitled to receive a sum from the defendant by way of a judgment (either determined or by consent). 68. The plaintiffs are thus seeking to recover “a loss” which does not crystalise until after the defendant has been ordered, or has agreed, to compensate the plaintiffs in respect of their economic loss. It is a loss which the plaintiffs are not even obliged to tell the defendant about until a time of their choosing. 69. It is an amount payable which arises because of, and is determined by reference to, a contractual arrangement between the plaintiffs and a third party, that is, an entity which is not a party to the litigation, which played no role in the circumstances leading to the other losses sustained by the plaintiffs and had nothing to do with any attempt by the plaintiffs to mitigate their other losses. 70. It is difficult to accept that the funder’s commission is a “loss” in the compensatory sense. Of course, the liability to pay only arises after the plaintiffs have won but that is not the point. Yet, it is significant that the obligation to pay the funder’s commission arises out of the funding agreement. All of the terms of the funding agreement must be considered. When doing so, the contention that the funder’s commission is a loss for the purposes of a damages claim becomes even less clear. I will return to this. 71. However, on the plaintiffs’ case, it is a sum which they are required to pay and which, on their case, will have the consequence that they will not be put back in the position they would have been but for the tortfeasor’s (i.e. defendant’s) conduct. This is despite damages being compensatory and despite the tortious measure of damages being the amount that is necessary to put the party back in the position that it would have been but for the tortious conduct. 72. In the end it is only necessary to say that the amount claimed is an amount which the plaintiffs become liable to pay pursuant to their agreement with the litigation funder after the entry of judgment in their favour for a specified sum. Determination of question 10 73. As identified by the plaintiffs, common question 10 raises two questions being: 1. as a matter of principle, are the plaintiffs entitled to claim reasonable litigation funding costs as a head of damages in nuisance? and 2. in order to do so, must the plaintiffs demonstrate the matters set out in subparagraphs (a), (b) and (c). 74. I will deal with subparagraphs (a), (b) and (c) at the outset. 75. I agree with the plaintiffs’ submissions that, if the funder’s commission is otherwise recoverable as a head of damages, it would not be necessary for each individual plaintiff who seeks to recover the funder’s commission as a separate head of damages to establish each of the matters set out in subparagraphs (a), (b) and (c). 76. The ultimate question in assessing any amount claimed by way of damages is whether the amount claimed is reasonable in all the circumstances. Whether the amount claimed is reasonable must be assessed objectively, such that whether the parties to the funding agreement negotiated and achieved the result that they wished to achieve could not be determinative of whether the amount claimed is recoverable. The amount would be recoverable if it was objectively reasonable, whether or not the plaintiffs negotiated for the best deal or shopped around for the best funder. 77. In a claim such as this, it would be a matter of assessing a range of factors to determine whether the amount claimed is reasonable, including whether the percentage falls within the range generally available in the particular market; whether there are factors about the particular matter which meant that, although the percentage claimed was higher than in other matters, it remained within an appropriate range, and whether on a consideration of the likely available funding the agreed figure represented a reasonable rate in all circumstances. 78. In respect of subparagraphs (a) and (b), it must be remembered that the real benefit to litigation funding is that the persons who enter into such agreements do not have to pay their own legal fees and are also not exposed to payment of the defendant's legal fees should they be unsuccessful. 79. The idea that the entitlement to recover the funder’s commission as damages would be limited with reference to whether the person so claiming was impecunious seems rather contrary to the whole point of litigation funding. 80. In Money Max Int Pty Ltd v QBE Insurance Group Ltd (2016) 245 FCR 191 (“Money Max”), the Full Federal Court (per Murphy, Gleeson and Beach JJ) considered whether it had power to make a common fund order. In doing so, the court made a number of observations about class actions and litigation funding under the heading ‘policy considerations', specifically in relation to the scope and intent of representative proceedings as contained in part IVA of the Federal Court of Australia Act 1976 (Cth). 81. The Court observed at [180] that: “Despite the intent of the legislature, the costs and risks associated with class action proceedings have placed such litigation beyond the resources of ordinary and even most wealthy Australians.” 82. The Court went on to note at [182] that, “these costs and risks posed (and continue to pose) a serious obstacle to the enhancement of access to justice envisaged by the legislature.” 83. Further, at [183], the court observed: “Litigation funders stepped in to fill this gap and the High Court endorsed their role in doing so. In [Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386], Gummow, Hayne and Crennan JJ at [65] (with Gleeson CJ at [1] and Kirby J at [147]-[148] agreeing) endorsed the views of Mason P in Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at [105] where his Honour said: ‘The law now looks favourably on funding arrangements that offer access to justice so long as any tendency to abuse of process is controlled. (citations omitted). As I explain below, the present litigation attracts the following principle recently stated by Lord Phillips MR giving the judgment of the English Court of Appeal in Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292 at [52]: ‘… Public policy now recognises that it is desirable, in order to facilitate access to justice, that third parties should provide assistance designed to ensure that those who are involved in litigation have the benefit of legal representation’.” 84. Those observations were made in the context of considering whether to make a common fund order. The question arising in these proceedings was not addressed but the court’s observations rather detract from any suggestion that it would always be necessary for a member of a class to establish that he or she was impecunious and would not have embarked upon the litigation without litigation funding, in order to recover the funder’s commission as damages. 85. It does not seem to me that it must be necessary for the court to engage in an enquiry into the financial status of each plaintiff who enters into a litigation funding agreement prior to allowing the claims. This is evident in this matter as the persons who have suffered the losses, whether they be corporate entities or individuals, operate businesses. The idea that only those businesses that went broke could obtain the benefit of the funder’s commission (in the sense of a damages claim) cannot be accepted. 86. This view is perhaps consistent with or analogous to the approach of the High Court in Arsalan v Rixon (2021) 274 CLR 606 (“Arsalan”). Arsalan involved the question of whether the cost of hiring a replacement vehicle following a motor vehicle accident was recoverable. Specifically, the question arose as to whether it was necessary for the plaintiff to establish that he had a need for the replacement vehicle and whether the hiring of a prestige vehicle was unreasonable. 87. The Court distinguished between the needs-based test which may be applicable in claims for personal injury relating to care gratuitously rendered (see Griffiths v Kerkemeyer (1977) 139 CLR 161 then Van Gervan v Fenton (1992) 175 CLR 327) and the consideration of the real loss suffered as a result of damage to a chattel, including the actual cost of hiring a replacement vehicle. 88. The Court did not accept that it was necessary that the claimant demonstrate a need for the replacement vehicle as a pre-condition to recovery of the cost of the replacement vehicle. 89. The question of whether the plaintiffs can recover the funder’s commission must be assessed having regard to conventional principles and having regard to whether the amount claimed is objectively reasonable, rather than a subjective assessment of the financial position of each plaintiff and a consideration of what each plaintiff might have done should a litigation funding arrangement not have been available or if they had the financial capacity to pursue the claim without such funding. Is the funder’s commission recoverable as damages in these proceedings? 90. The outcome of this case must depend on the application of conventional principles. 91. As described in Hungerfords v Walker (1989) 171 CLR 125 at 143 per Mason CJ and Wilson J: “… a plaintiff is entitled to restitutio in integrum. According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant’s wrong, subject to the rules as to remoteness of damage and to the plaintiff’s duty to mitigate his loss.” 92. The Court allowed a claim for loss of use of money observing at 144: “Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages.” 93. In Nominal Defendant v Gardikiotis (1996) 186 CLR 49 at 54 McHugh J observed: [W]hen a plaintiff asserts that, but for the defendant's negligence, he or she would not have incurred a particular expense, questions of causation and reasonable foreseeability arise. Is the particular expense causally connected to the defendant's negligence? If so, ought the defendant to have reasonably foreseen that an expense of that kind might be incurred? 94. As was said in Arsalan at [25], the basic goal of the compensatory principle is to "undo, by monetary equivalent, the consequences of the wrong experienced by the plaintiff so far as is reasonable”. 95. There is no case in which the funder’s commission has been allowed as a component of the damages awarded. 96. The only similar case the plaintiffs could point to was the decision of the Queensland Court of Appeal in Landoro. 97. In Landoro, the Court allowed the plaintiff to file a proposed amendment to the statement of claim including a claim based on a litigation finance agreement. The claim in Landoro included a claim for the additional costs of litigation finance which came at a higher price than ordinary business loans. Davies JA (with whom McMurdo P agreed on this point), allowed the claim to proceed, that is allowed the amendment. As his Honour said at [12]: “To allow these claims to proceed is not, by any means, to assert their correctness. It is no more than, as mentioned earlier, to deny that they are so obviously untenable that they cannot possibly succeed.” 98. Demack J would not have allowed the amendment to include the litigation finance cost. His Honour found at [22] that: “Just as a litigant cannot recover compensation for the loss of time spent in the preparation and conduct of the case (Cachia v Hanes (1994) 179 CLR 403), so a party cannot recover loss which consists of “expenditure on litigation”: Berry v British Transport Commission [1962] 1 QB 306, per Devlin LJ at 328. The reason for that latter rule was examined in detail by Devlin LJ, and although it could not be said that taxed costs provided a full indemnity, His Lordship found a justification for the stringent standards which prevail in a taxation of party and party costs: “it helps to keep down extravagance in litigation and that is a benefit to all those who resort to the law” (p 322). As long as this rule remains, the necessity to borrow money and to insure against an adverse result is properly categorised as expenditure on litigation and is not recoverable. The amendment to claim this amount should not be allowed.” 99. The plaintiffs also referred to Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361. That case involved an application under s 68 of the Arbitration Act 1996 (UK) to set aside the award of an arbitrator that included an allowance of the costs of litigation funding. The arbitrator's decision was based on an interpretation of s 59(1)(c) of the Arbitration Act 1996 (UK) and the meaning of “other costs”. As the outcome of the case depended upon the construction of the words in an English statute, it is of no relevance to these proceedings. Foreseeability and remoteness 100. Whilst it may have been foreseeable on the part of the defendant that the business owners along the route may take action against it (the defendant’s own risk register identifies that risk) and that they might join together to do so, mere foreseeability is insufficient. 101. The loss must not be too remote. Remoteness is a question of fact. This requires an evaluative judgment having regard to all of the circumstances of the case. 102. The plaintiffs are entitled to be put back in the position they would have been but for the tortious conduct but they are only entitled to recover their actual loss. The funder’s commission arises because, once they found themselves in the position of having suffered a loss of profit, they entered into an agreement with a third party to enable them to recover their loss of profit. In that sense, the loss is removed or remote from the tortious conduct. It arises from measures which the plaintiffs chose to take after they had suffered a loss of profit, not in mitigation of their losses (the plaintiffs disavow this) but to reduce their risks associated with recovery of their loss of profits. It may be more properly viewed as expenditure on litigation, a step removed from the actual losses sustained by the plaintiffs caused by the defendant’s tortious conduct. In that sense remoteness is intertwined with causation. Causation 103. I have already determined that part 1A of the Civil Liability Act 2002 (NSW) (“CLA”) does not apply, contrary to the contention of the plaintiffs. As such, I am not bound to apply ss 5D and 5E. Having said that, at common law, the plaintiff bears the onus of proving each fact that he or she relies on to succeed in a cause of action. Causation is a question of fact. 104. Section 5E of the CLA merely adopts the common law position. Similarly, whilst s 5D introduces the concepts of factual causation and scope of liability causation, as two separate matters which the plaintiffs must establish, the common law recognises that causation involves a normative question, not just a factual question: see, for example, Henville v Walker (2001) 206 CLR 459 at [98] per McHugh J. The result will be the same whether or not the CLA applies. 105. Unlike the question of breach, which is considered prospectively or in a forward-looking manner, causation is considered looking backwards at what has actually happened. It is not applying hindsight but merely considering the facts as they are known and determining the relationship between those facts. On this issue, the Court is considering the relationship between the tortious interference with the plaintiffs’ businesses and the agreement to pay a commission to a litigation funder as part of a mutually beneficial commercial agreement supporting the plaintiffs’ maintenance of the litigation against the defendant. 106. It is known that the defendant was guilty of tortious conduct in the nature of a nuisance. It is known that, having regard to my judgment, the defendant’s tortious conduct caused the plaintiffs to suffer economic loss in the nature of loss of profits. It is known that the lead plaintiffs have been awarded a sum by way of damages representing their loss of profits. It is known that the defendant is liable to pay those sums to the plaintiffs. It is also known that the plaintiffs will be liable to pay 40% of those sums to the litigation funder on receipt of the damages sums, having regard to the agreement they entered into with the litigation funder. 107. The chronological course of events I have just identified does not include the two further steps which must be considered a necessary condition of the loss, being the taking of proceedings by the plaintiffs and their entry into the litigation funding agreement pursuant to which they agreed to pay the funder’s commission. Both of those steps were taken by the plaintiffs independently of anything done by the defendant. They were taken by the plaintiffs well after the defendant’s tortious conduct ended and at a time either when the individual plaintiffs had resumed their businesses or ceased to trade at all (in the case of Ancio). The litigation was commenced to recover the losses sustained by the plaintiffs. The funding agreement was entered into by the plaintiffs, both as a means of enabling them to pursue the litigation and to eliminate the burden of any legal costs and expenditure or other financial risks which would otherwise fall on them consequent on pursuit of the litigation. 108. That is, if the funder’s commission should be considered a properly compensable head of damages, in the sense that it is a “loss”, then it is a loss deliberately incurred by the plaintiffs which has the effect of breaking any chain of causation between the defendant’s conduct and that loss. 109. What the plaintiffs have really done is enter into a bargain with a third party, by which they agreed to give the third party an amount of money in return for the third party taking the risk on the litigation. The loss arises from the plaintiffs’ own conduct or decision to pursue the litigation on a risk free basis. Without reference to the defendant, the plaintiffs have increased “their loss” by 40% so as to ensure that they did not bear any costs associated with the litigation. They have not otherwise reduced their loss of profits flowing from the defendant’s conduct. They have agreed to “take a loss” on the amount they actually recover from the defendant by way of actual losses caused by the defendant, so as to enable them to not only pursue the litigation but to do so on a risk free basis. 110. The funder’s commission is different from litigation finance provide by a third party to a plaintiff to enable the plaintiff to pay its legal costs. The funder’s commission represents the funder’s return on its investment. The funder did not lend money to the plaintiffs. It agreed to pay the plaintiffs’ expenses in return for a slice of the damages. 111. In those circumstances, the causal chain between the defendant ‘s conduct and the loss has been broken. The plaintiffs’ conduct in entering into such an agreement was an intervening act which broke the causal chain between the tortious conduct and the so called loss. I do not accept that the defendant caused the claimed loss, being the funder’s commission. 112. Further, even if I be wrong on that assessment, I do not accept that it is appropriate, in all of the circumstances, for the defendant to be responsible for such a loss for similar reasons (the normative or s 5D(1)(b) CLA question). The matters to which I have already referred are also relevant to this question. 113. In assessing whether a defendant’s tortious conduct caused the loss, it is necessary to have regard not only to whether, but for the defendant’s conduct, the loss would have been sustained, but also whether it is appropriate in all the circumstances for the defendant to be responsible for such a loss. That approach is enshrined in s 5D of the CLA – that is, factual causation and scope of liability causation. 114. There is no prescription of the circumstances which a court might consider in undertaking that normative assessment. Each case must depend on its own facts and circumstances. I must consider whether or not and why responsibility should be imposed on the defendant for the funder’s commission. The normative or scope of liability evaluation provides a basis for limiting the liability of a defendant even when the “but for” test is satisfied. 115. In Wallace v Kam (2013) 250 CLR 375, when referring to s 5D(4) of the CLA, the Court said at [23]-[24]: “In a novel case, however, s 5D(4) makes it incumbent on a court answering the normative question posed by s 5D(1)(b) explicitly to consider and to explain in terms of legal policy whether or not, and if so why, responsibility for the harm should be imposed on the negligent party. What is required in such a case is the identification and articulation of an evaluative judgment by reference to “the purposes and policy of the relevant part of the law”. Language of “directness”, “reality”, “effectiveness” or “proximity” will rarely be adequate to that task. Resort to “common sense” will ordinarily be of limited utility unless the perceptions or experience informing the sense that is common can be unpacked and explained. A limiting principle of the common law is that the scope of liability in negligence normally does not extend beyond liability for the occurrence of such harm the risk of which it was the duty of the negligent party to exercise reasonable care and skill to avoid…” 116. At the heart of the law of tort and the principle of damages is the idea of compensation. The common law recognises that persons should be compensated in respect of conduct towards them which is tortious. Yet there must be limits. 117. As I said in the principal judgment (at [579]) the law of torts is concerned with the allocation of losses which arise incidental to the activities of people in modern society. The plaintiffs sustained substantial business losses as a result of the conduct of the defendant. In my judgment, it is appropriate that they be compensated for such losses by the defendant. 118. However, I do not consider it appropriate for the scope of such a liability to extend to amounts which the plaintiffs have to pay a third party, not in mitigation of such losses, but as a means of enabling them to pursue litigation against the defendant on a cost and risk free basis. 119. That would be to visit upon the defendant not just the consequences of its own conduct but the consequences of a decision taken by the plaintiffs, freely and willingly, to share the proceeds of the litigation in return for a benefit to them, being the payment and indemnification of costs (as well as the oversight and management of the litigation). 120. Further, it does not seem to me that this case is so different or unique that the principle which would arise could only ever be applied to this case. As was observed in Money Max, litigation funders now fill a gap in that they allow access to justice in circumstances in which the costs of such access are beyond the means of ordinary people. The old rules preventing third party support of litigation thus no longer apply. 121. However, that does not mean that the commercial arrangements entered into between plaintiffs and litigation funders should all be visited upon the tortfeasor. To do so in this case would be to extend the compensatory principle to expenditure on litigation. It would be to not merely compensate the plaintiffs but advantage them and others who might adopt the same course by making the defendant responsible to reimburse the plaintiffs for the consequences of their own bargain which at the time of entry into the bargain provided a substantial benefit to them. 122. I do not consider it appropriate that the defendant’s liability extend that far. 123. For the reasons set out above, the answer to question 10 is thus: No – the plaintiffs are not entitled to recover the funder’s commission as damages. 124. Question 11 does not arise and I do not consider it appropriate to offer a hypothetical opinion on whether a 40% commission is reasonable. 125. I list this matter for further directions on 13 March 2024. 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. Decision last updated: 22 February 2024

nsw_caselaw:17542e73cf5c0081ec1931bb

decision

new_south_wales

nsw_caselaw

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2020-10-20 00:00:00

R v Botrus (No 3) [2020] NSWSC 1448

https://www.caselaw.nsw.gov.au/decision/17542e73cf5c0081ec1931bb

2024-05-25T23:27:36.720497+10:00

Supreme Court New South Wales Medium Neutral Citation: R v Botrus (No 3) [2020] NSWSC 1448 Hearing dates: 9 September 2020 Date of orders: 9 September 2020 Decision date: 20 October 2020 Jurisdiction: Common Law Before: Walton J Decision: I confirm the application to discharge the whole jury is dismissed. Catchwords: CRIMINAL LAW – discharge of jury – actions of accused’s siblings during playing of ERISP – prejudice – seriousness – stage of proceedings – fairness – no miscarriage of justice – directions Legislation Cited: Crimes Act 1900 (NSW) Evidence Act 1995 (NSW) Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 4) 2020 Public Health Act 2010 (NSW) Cases Cited: Crofts v The Queen (1996) 186 CLR 427; [1996] HCA 22 Dupas v The Queen (2010) 241 CLR 237; [2010] HCA 20 Gilbert v The Queen (2000) 201 CLR 414; [2000] HCA 15 Hamide v R (2019) 101 NSWLR 455; [2019] NSWCCA 219 Miller v R (2015) 252 A Crim R 486; [2015] NSWCCA 206 R v Munday (1984) 14 A Crim R 456 R v Ahola (No 6) [2013] NSWSC 703 The Queen v Glennon (1992) 173 CLR 592; [1992] HCA 16 Wilson v R [2019] NSWCCA 38 Category: Principal judgment Parties: Regina (Crown) Fredon Botrus (Defendant) Representation: Counsel: M Clark (Crown) S Pararajasingham (Defendant) Solicitors: Office of the Director of Public Prosecutions (Crown) Sayad Sahinovic Legal (Defendant) File Number(s): 2019/11627 REASONS FOR DECISION 1. By indictment dated 31 August 2020, Fredon Botrus (“the accused”) was charged that, on 11 January 2019, at Sydney in the State of New South Wales, he did murder Alfredo Isho (“the deceased”), contrary to s 18(1)(a) of the Crimes Act 1900 (NSW). The accused pleaded not guilty to the offence. 2. The trial commenced on Thursday, 31 August 2020. 3. On 8 September 2020, the seventh day of trial, the accused’s electronic record of interview (“the ERISP”) which was adduced in evidence by the Crown through the evidence of the Officer in Charge, Detective Sergeant George Brticevic. At that juncture there remained in the trial, on the joint estimate of the parties, two days evidence (a joint position as to the remaining witnesses and proposed order was communicated via email to the Court on the evening of 8 September 2020). 4. On 9 September 2020, at the outset of proceedings on the eighth day of trial, counsel for the accused made an application to discharge the jury (“the application”). That application was predicated upon the conduct of the accused’s sisters, Valnten and Valy Botrus (collectively, “the sisters”), during the course of the playing of the ERISP. 5. No application was made by counsel for the accused during the playing of the ERISP, nor was an application made prior to the retirement of the jury, along with the usual directions, at the end of seventh day of the trial. The Crown opposed the application to discharge the jury. 6. The application to discharge the whole of the jury was refused. These are my reasons for decision. THE EVIDENCE 7. The uncontested evidence on the application was given through the affidavit of Alen Sahinovic, solicitor for the accused, and the affidavit of the accused, sworn 8 and 9 September 2020, respectively. 8. Prior to turning to a summary of that evidence, in light of the issues raised on the application, it is useful to briefly set out the layout of the courtroom and my own observations of the jury during the playing of the ERISP. 9. The trial was being conducted in King Street Court 3. The layout had been adjusted to ensure compliance with social distancing requirements pursuant to the Public Health (COVID-19 Restrictions on Gathering and Movement) Order (No 4) 2020 under the Public Health Act 2010 (NSW). As such, the jury panel was situated in two discrete sections of the courtroom: 1. five jurors were seated in the traditional jury box, situated on the western side of the courtroom; and 2. seven jurors were seated in the public gallery, in a cordoned off section, directly behind the bar table on the northern side of the courtroom. 10. For completeness, the dock was situated on the eastern side of the courtroom. As such, the legal representatives for the accused were seated on the eastern side of the bar table, closest to the dock. Limited seating for the general public remained available in the balance of the public gallery that was not cordoned off for the jury. The sisters were seated in the public gallery space adjacent to the accused. 11. The ERISP was played on two large screens situated on either side of the courtroom: one above the traditional jury box and the other above the dock. 12. I now turn to a summary of the evidence, which commences with the playing of the ERISP on the seventh day of the trial: 1. On Tuesday, 8 September 2020 at 1.38pm, the Crown tendered the ERISP. During the playing of the ERISP, the sisters of the accused were present in the courtroom. They were seated in the public gallery on the eastern side of the courtroom, in the public seating next to the dock. The accused gave evidence that they were “seated to my right”. 2. Prior to playing of the ERISP, the sisters were, at various times throughout the day, accompanied by two further persons. It is not in dispute that the two persons were the parents of the sisters and the accused. 3. During the playing of the ERISP, Mr Sahinovic heard “10-15 short outbursts” of “giggling and laughter” coming from the direction of the public gallery to the rear of the courtroom on the eastern side (hereinafter referred to as “the laughter”). Mr Sahinovic was seated on the eastern side of the bar table, directly in front of the dock. 4. Mr Sahinovic initially dismissed the sound without further inquiry. Upon the continuation of the laughter, Mr Sahinovic turned to observe that the laughter was coming from the sisters of the accused. Upon this discovery, Mr Sahinovic attempted to make eye contact with the sisters in an effort “to signal that their behaviour was inappropriate”. The laughter, whilst not sustained in its frequency, did not cease to occur. 5. At 2.13pm, whilst the Court remained in session and the ERISP continued to play, Mr Sahinovic sent a series of short texts messages in quick succession to the mobile telephone number of Valnten Botrus. Those messages are extracted below: Please stop laughing It’s a very bad look We are in a murder trial 6. Each message was time stamped at being set at 2.13pm. No reply was received during the playing of the ERISP. 7. The laughter continued. Mr Sahinovic deposed at para 8 of his affidavit that he recalled hearing laughter from the sisters when the accused mentioned and/or referred to the following: 1. the words “piss” and “shit”; 2. provided an account of the colour of the bike; 3. his knowledge about the bike; and 4. the circumstances in which the towel located in the garage was said to be wet. 8. Mr Sahinovic deposed that he observed the following: 1. A number of jurors seated within his line of sight, namely, those seated in the traditional jury box, “turn[ed] their gaze towards the sisters laughing”. He further observed that the look on the face of “two or three” jurors, in particular, was one of “clear disgust”. 2. Four jurors, seated in the traditional jury box, looked towards the sisters “on a number of occasions”. 9. The accused gave evidence that he heard the sisters laughing “at regular intervals during the playing of the ERISP”. He deposed that he observed: 1. Three jurors situated in the traditional jury box looked in the direction of the sisters during the playing of the ERISP when the sisters laughed. 2. Two jurors situated in the jury box situated within the public gallery, behind counsel for the accused, looked in the direction of the sisters during the playing of the ERISP when the sisters laughed. 10. During Mr Sahinovic’s observations of the laughter of the sisters, he passed handwritten notes, with respect to the same, to counsel for the accused. Counsel for the accused acknowledged receipt of the notes by nodding his head. 11. Whilst Mr Sahinovic considered the behaviour “highly prejudicial”, he deposed that he did not want to further highlight the conduct of the sisters. As such, he decided against “approaching the sisters, looking at them, or signalling them”. During the course of oral submissions, counsel for the accused confirmed that he “joined in” with the observations of his instructing solicitor. Mr Sahinovic deposed that his position “was further complicat[ed] given the proximity of the jurors to where counsel and I were seated”. 12. At 2.59pm, the ERISP reached conclusion. Prior to retiring for the day, the jury were provided with copies of the transcript of the ERISP and given directions. The Court adjourned at 3.05pm. 13. Following the adjournment of proceedings, Mr Sahinovic attempted to locate the sisters to discuss the incident with them. He could not locate either sister outside the King Street Court Complex. However, he received a reply to his earlier text messages (extracted above) and engaged in brief exchange of messaged at 3:08pm. That exchange is extracted below: Valntin: I’m so sorry I didn’t mean to Mr Sahinovic: That was a disaster The jury saw you guys repeatedly laughing throughout the interview 14. Counsel for the accused, together with Mr Sahinovic, went to the cells to discuss the matter with the accused. During that discussion, the accused confirmed he heard the laugher and made observations of the jury. Mr Sahinovic recorded that the accused said: “That’s why I told them not to come” and was observed to be crying. 13. During the course of submissions on the application, the Crown submitted that he heard no laughter and made no observations of the jurors situated in the jury box within the public gallery behind him. The observations of the Crown were limited to those jurors directly within his line of sight, namely, those within the traditional jury box. He did not observe expressions of “disgust”. 14. Whilst the Crown did not share in the observations made by either Mr Sahinovic or the accused, he noted two observations made by the instructing solicitor, Mr Peter Clayton, during the playing of the ERISP. 15. It was conceded by the Crown that Mr Clayton noticed the sisters within the courtroom and had heard the laughter. In total, Mr Clayton had heard laughter twice during the playing of the ERISP. The first time was when mention was made during the ERISP of “an Assyrian father, to do with a motorcycle”. The second time was in relation to the matters to which Mr Sahinovic set out in para 8 of his affidavit. Further, the Crown submitted: “Mr Clayton's observation was that the look on her face [being a reference to a juror] was certainly one of disapproval, if not disgust”. 16. It was also conceded by the Crown that, as with the legal representatives of the accused, no steps were taken by the Crown with respect to the circumstances at the time of its occurrence or immediately afterwards before the jury retired on the seventh day of the trial. 17. I observed two persons sitting in the public gallery in the position identified in the evidence during the course of proceedings on the seventh day of the trial, although their relationship to the accused was then unknown. I did not observe the behaviour referred to in the evidence of Mr Sahinovic and the accused. The Court did, however, observe the jury during the playing of the ERISP. They were, as they had been throughout the trial, attentive to the evidence. 18. Nonetheless, I accept the evidence given by Mr Sahinovic and the accused, which was uncontested and, in some respects, corroborated. The Court’s attention was directed to a screen on the opposite side of the courtroom to the accused and the sisters (which permitted observations of the jury as well as the screen) and the ERISP was played somewhat loudly (most likely due to poor quality of some aspects of the ERISP). And, of course, no issues were raised by counsel (in the absence of the jury) that would have alerted the Court to the difficulties. 19. That consideration does not, however, detract from my observations of the jury as generally attentive and compliant to directions throughout the trial, but permits of the acceptance of the evidence that some members of the jury observed, during the playing of the ERISP, the sisters engaged intermittently in the conduct in question and then responded in the manner identified in the evidence. 20. Three factual conclusions may be reached out of that evidence: 1. That the sisters engaged in the conduct complained of, earlier defined as “the laughter”, at various stages throughout the playing of the ERISP. The laugher, whilst not a sustained occurrence, occurred at regular intervals throughout the playing of the ERISP and became particularly noticeable from or around 2.13pm. 2. It may be inferred that the jury had affirmative knowledge that the two women observed to be laughing throughout the playing of the ERISP were the sisters of the accused. That conclusion is supported by the combined effect of the following: 1. The elder sister of the accused, Valntin, had previously attended upon the courtroom on multiple occasions prior to the seventh day of the trial. That fact was conceded by the Crown. On each occasion, she sat in the same place in the public gallery, closest to the dock. That regularity suggests a familial connection. 2. On 8 September 2020, as earlier mentioned, Valntin was accompanied at various stages throughout the day by her younger sister, mother and father. All four persons sat in close proximity across two rows (that separation, it may be noted, appears to be a result of the obvious limited nature of the seating). Their positioning suggests a familial connection to each other and, once again, to the accused. 3. On 8 September 2020, a video featuring the accused’s father, Laith Mushi, providing consent to search the premises at 83 Tallowood Crescent was tended through Detective Senior Constable Stirton and marked Ex 11. It was conceded by the Crown that the father was sitting during the seventh day of the trial with the sisters in the public gallery where they were situated during the playing of the ERISP. Whilst I note his appearance, owing to the subsequent removal of facial hair, had changed since the filming of the video, in my view, that superficial change would not create a barrier to his identification as to the father of the accused, particularly when considered in light of the combined effect of each of the preceding factors herein listed. 4. During the ERISP, the accused referred to the members of his family. In addition to his parents, he identified his siblings as consisting of an elder sister, Valntin; younger sister, Valy; and younger brother, Carlos. 5. On 1 September 2020, during the opening address of counsel for the accused, it was submitted: It is not in dispute that as at 11 January 2019 Fredon Botrus lived with his father, Laith, mother Jennifer, and two younger siblings, brother Carlos, and sister Valentin, and the family lived at 83 Tallowood Crescent, Bossley Park. 6. My observations were that at least one of the sisters had some familial resemblance to the accused. 21. At least six members of the jury were observed to have noticed the laughter of the sisters. The reactions consisted of briefly turning their gaze to the direction of the sisters. At least two jurors seated within the traditional jury box and one juror within the jury box situated in the public gallery were observed to have had a simultaneous reaction in the form of a brief change in facial expression. I accept the facial expression may be described as conveying “disapproval” and/or “disgust” in response to laughter by two persons within the courtroom during the course of a murder trial. Nonetheless, my observations of the jury were that they were attentive and engaged in the viewing of the ERISP and did not appear distracted by the circumstances described in the evidence of the parties. DECISION AND DIRECTION TO THE JURY 22. As mentioned, on 9 September 2020, following a consideration of the relevant principles and arguments of the parities, the Court formed the view that, in all of the circumstances of this particular case, the jury should not be discharged and that appropriate directions be given to the jury immediately. Counsel for the accused maintained his application for a discharge but did not dispute the force of the direction foreshadowed by the Court. 23. The Court gave the following direction: Members of the jury, I remind you that you are obliged by the oaths and affirmations that you took at the commencement of this trial to return a true verdict according to the evidence. You were advised that a fundamental obligation of the jury was to act in accordance with that oath or affirmation and to reach your verdict only upon the evidence. You must perform your role as a juror based only upon the evidence that you hear in this courtroom such as through witnesses or recordings, such as the ERISP, and directions of law given by me, such as the present one, and not anything that may occur or has occurred in the courtroom, other than submissions by counsel, or outside of it. You may have heard or seen the reactions of some persons in the courtroom during the playing of the ERISP. Any observations of that kind must be put out of your mind as it forms no part of the evidence in the trial of the accused. It would be unfair to the accused if, in reaching your verdict, you were to take it into account any observations of such reactions in your deliberations as they are not evidence. SUBMISSIONS OF THE PARTIES 24. Counsel for the accused advanced the following submissions in support of the application: 1. As to the absence of immediate response taken by counsel for the accused at the time of the conduct, reliance was placed upon the novelty of the occurrence and the desire to not highlight the conduct of the sisters. The conduct was described as “entirely unexpected” and occurring within a “dynamic situation”. In such circumstances, the view was formed that do have done anything about it at the time would have drawn attention to it. Notwithstanding that submission, it was conceded by counsel for the accused that, in retrospect, he should have raised the issue at an earlier time. 2. As to the available inferences for the jury, counsel for the accused contended that the jury would draw the following inferences: 1. that to his family and to him these proceedings are a joke; 2. that neither his family nor he are taking this trial for murder seriously; 3. that the accused comes from a family that does not value life, be it the deceased's or his own; 4. that the accused comes from a place of high dysfunction, which, in the jury's eyes, might provide an explanation for an unprovoked and brazen daylight murder. It could only be a place of dysfunction where a 21-year-old sister and a 16-year-old sister, seated metres away from the accused, are laughing while a record of interview is being played at his trial for murder; 5. that the accused is a delinquent; and 6. that lies were told by the accused and the laughter of his siblings reflects incredulity by those who are meant to know him the best. 3. In light of the available inferences, it was contended that the conduct of the sisters had “irredeemably” prejudiced the accused. 1. Inferences (a)-(e), it was submitted, would support a conclusion that the accused “comes from a place of dysfunction, and if you come from a place of dysfunction maybe you're the type of person who will commit an unprovoked and brazen daylight murder”. 2. Inference (f), it was contended, significantly undermines the defence case. 4. As to the alternative approach sought by the Crown, namely, the provision of direction, it was contended that such an approach would be inappropriate on two bases: 1. First, counsel for the accused relied upon his characterisation of the prejudice to the accused as irredeemable. That submission is supported by the particular circumstances in which the prejudice arose, namely, the laughter by his sisters during the playing of the ERISP. Further, as it was an occurrence beyond the control of the accused, it was contended it was “prejudicial in a deeply unfair way”. In the result, it was contended it could not be cured by direction. 2. Second, relying upon his arguments vis-à-vis prejudice to the accused and the novelty of the occurrence, counsel for the accused contended that any direction would merely highlight the problem. 25. In the course of submissions counsel for the accused also characterised the conduct of the sisters as “contemptuous” of this Court. Notwithstanding my lack of observation of the conduct, in light of the evidence before me, I am prepared to accept that characterisation as appropriate. The age of the sisters does not excuse their decision to cause disruption, whether mild, infrequent or otherwise, or even absentminded as to the context at which they found themselves. 26. The Crown advanced the following submissions in opposition to the application: 1. Whilst the Crown accepted that the situation as outlined in the uncontested evidence before the Court was “unusual” and capable of producing some prejudice, it was contended that such prejudice may be cured with a direction. 2. The Crown identified the pivotal inference upon which the accused’s case vis-à-vis prejudice rests as that the two persons laughing were, in fact, the sisters of the accused. The Crown contended that the presence of the elder sister throughout the trial does not lend itself to “the inescapable inference” that she was, in fact, related to the accused. I have earlier dealt with this matter, finding the inference was available to the jury. 3. The Crown proposed the following direction: Members of the jury, you may have observed some members of the public gallery laughing at certain points during the playing of the accused's record of interview with the police. You're to put that conduct out of your minds. It plays no part in your deliberations. You should confine yourselves to the evidence and only the evidence in the trial. LEGAL PRINCIPLES 27. A summary of the relevant principles that guide the exercise of a trial judge’s discretion whether to discharge a jury were set out in Crofts v The Queen (1996) 186 CLR 427; [1996] HCA 22 (“Crofts”). In the joint judgment of Toohey, Gaudron, Gummow and Kirby JJ, their Honours observed (at 440-441): … No rigid rule can be adopted to govern decisions on an application to discharge a jury for an inadvertent and potentially prejudicial event that occurs during a trial. The possibilities of slips occurring are inescapable. Much depends upon the seriousness of the occurrence in the context of the contested issues; the stage at which the mishap occurs; the deliberateness of the conduct; and the likely effectiveness of a judicial direction designed to overcome its apprehended impact. As the court below acknowledged, much leeway must be allowed to the trial judge to evaluate these and other considerations relevant to the fairness of the trial, bearing in mind that the judge will usually have a better appreciation of the significance of the event complained of, seen in context, than can be discerned from reading transcript. 28. The New South Wales Court of Criminal Appeal has repeatedly applied the authority of Crofts: Wilson v R [2019] NSWCCA 38 (“Wilson”) at [171]-[172]; Hamide v R (2019) 101 NSWLR 455; [2019] NSWCCA 219 (“Hamide”) at [112]-[115]; Miller v R (2015) 252 A Crim R 486; [2015] NSWCCA 206 (“Miller”) at [126] (see also, R v Ahola (No 6) [2013] NSWSC 703 (“Ahola”) at [11]-[12]). 29. In Hamide, Bell P provided further guidance as to the discretion afforded a trial judge. His Honour observed: [114] This passage [of Crofts at 440-441] concisely states the principles that guide the exercise of a trial judge’s discretion whether to discharge a jury. Those principles are settled, though it should be emphasised that they are only guiding principles; there is “no rigid rule” prescribing how the discretion should be exercised. In Miller, Beazley P, Fullerton and Hamill JJ summarised the principles as follows (at 510-11 [126]): “(1) In determining whether the jury must be discharged following the wrongful admission of evidence, there is no rigid rule to be applied: Crofts at 440. (2) In deciding an application to discharge the jury, key considerations include: (a) the fairness of the trial: Crofts at 440; (b) the nature of the statements said to have given rise to the prejudice, including whether they were such as to “have been left vividly etched on the mind of the jury”: Crofts at 441; (c) the seriousness of the occurrence in the context of the contested issues: Crofts at 440; (d) the stage at which the mishap occurs: Crofts at 440; Maric at 635 [ALJR]; (e) the deliberateness of the wrongful conduct: Crofts at 440; Maric at 635; (f) the likely effectiveness of a judicial direction designed to overcome the apprehended impact of the evidence, and particularly the difficulty of formulating a direction that does not refer specifically to the evidence and by doing so reinforce the prejudice: Crofts at 440-441; Maric at 635. (3) Such damage as was caused by the wrongly admitted evidence may not be capable of remedy by trial directions: Maric at 635. … (5) Significant leeway must be allowed to the trial judge to evaluate these and other considerations, bearing in mind: ‘… that the judge will usually have a better appreciation of the significance of the event complained of, seen in context, than can be discerned from reading transcript’: Crofts at 440-441.” [115] Additionally, in Ahola, Button J said at [17] that, on his review of the relevant decisions of the High Court and the New South Wales Court of Criminal Appeal, trial judges are neither required nor encouraged “to take an overly sensitive approach to the accidental receipt of prejudicial material”, as in “many circumstances a direction is an appropriate remedy, not the discharge of the whole jury”. This statement was cited with apparent approval by Beazley P (with whom R A Hulme J and R S Hulme AJ agreed on this point) in Younan at 129 [39]. 30. His Honour also provided a summary of the various terms used by the courts to describe “the kinds of events in trials that give rise to a miscarriage” (at [97]-[100]). Bell P further observed (at [101]): [101] Not every irregularity will be prejudicial, and not every prejudicial piece of evidence will be irregular. There is prejudice, and there is unfair prejudice: Papakosmas v The Queen (1999) 196 CLR 297; [1999] HCA 37 at 325 [91]. Prejudicial evidence will have the quality of unfairness where there is a real risk that the evidence will be misused by the jury in some unfair way: R v BD (1997) 94 A Crim R 131 at 139 per Hunt CJ at CL. 31. In Ahola, Button J rejected an application to discharge the jury. His Honour was not satisfied that in all the circumstances there was “a high degree of necessity” (at [29]). As to the discretion of the trial judge, Button J observed (at [18]): [18] … A trial judge should take into account a number of factors including but not limited to the extent of the prejudice to the accused; the ability to ameliorate that prejudice to any degree by direction, comment or other step; and the stage that the proceedings have reached. As I have said, the ultimate question is whether a high degree of necessity for the discharge of the jury has been established in all of the circumstances. 32. Both parties advanced submissions with respect to the Court of Criminal Appeal of New South Wales judgment in Wilson. In Wilson, the applicant contended, inter alia, the trial miscarried because the trial judge failed to discharge the jury after a prejudicial event thereby causing a miscarriage of justice. The prejudicial event consisted of two separate outbursts by a co-accused, Mr David Wilson, the brother of the applicant, during the course of the trial. 33. The first incident occurred on 16 June 2011 (“the first outburst”). On that occasion, in the presence of the jury, the Mr David Wilson made a series of statements suggesting he had not been provided with the opportunity to “see my evidence”. The applicant made an application to discharge the jury. It was contended that the remarks by Mr David Wilson may have “aggravated… a justifiable discontent in the jury room” and there was a danger of prejudice to the applicant. A similar application was advanced by Mr Xavier. The trial judge refused the application. It was held that whilst the incident sought to invoke sympathy for the co-accused, it did not prejudice the case of the applicant (or the second-co-accused, Mr Xavier). The trial judge directed the jury to ignore the outburst and, with respect to the applicant and Mr Xavier, “[that] no responsibility in any way for the outburst and nothing that was said can be in any way used in respect of them”. 34. The second incident occurred on 19 July 2011 (“the second outburst”). During the course of taking evidence, the co-accused said: Your Honour, I wish to plead guilty to the charge of pseudoephedrine and my brother and Jose Xavier… are guilty as charged. They fabricated evidence against me, okay. … Evidence gone missing, which proves I am innocent of this charge. 35. Counsel for the applicant made an application to discharge the jury. It was contended that the prejudice that arose from the second outburst could not be overcome by direction. A similar application was advanced by Mr Xavier. The trial judge refused to discharge the jury, finding it could be overcome by direction to jury. A direction was given consistent with the principles in Bartle, which included the following: “Now [what] you heard obviously, just before you left, [was] an emotional outburst from [the co-accused]… it is imperative that you pay absolutely no regard to any statement made by him in respect of either his co-accused”. 36. The Court of Criminal Appeal affirmed the decision of the trial judge. In reaching that conclusion, reference was to the authority of R v Bartle [2003] NSWCCA 329 at [82] and The Queen v Gleenon (1992) 173 CLR 592 at 614-615. The Court observed “reliance may be placed on the integrity and sense of duty of jurors who may be expected to accept and obey directions given to them by the trial judge” (Wilson at [176]). The Court also observed that “the trial judge was well placed to assess the significance of the outburst in the context of the trial” and “an appropriately strong direction was given to the jury” (Wilson at [178]). 37. Counsel for the accused contended that the factual scenario dealt with in Wilson “can easily be distinguished” from the present application. It was submitted: [W]hat occurred in Wilson … was the kind of mischief that the accused brought on himself, and the accused brought on the co-offenders, the co-accused at the time. This is a very different situation. As I've said earlier, if your Honour wants to criticise me for it I will wear that, but the nub of my submission is, this has happened through no fault of this young man, and he shouldn't be prejudiced in his trial for what is the most serious offence in the criminal calendar. 38. If by that submission, counsel for the accused sought to suggest that the circumstances in Wilson may be generally distinguished from the current proceedings as to the circumstances of the prejudicial events, that submission is erroneous as the factual substratum has many similar elements and the relevant principles discussed in this judgment are applicable in the present case. 39. The submission advanced by counsel for the accused appears to hinge upon the fact the applicant’s brother in Wilson was a co-accused and the jury in that case may have inferred the accused “brought the mischief on himself” but that contention ignores three significant relevant similarities: 1. First, the source of the prejudicial event in both matters was a direct family member: the two siblings of the accused and one sibling of the applicant, respectively. 2. Secondly, the jury in both matters were either aware or it may be inferred were aware of the familial connection to the accused and the applicant. 3. I do not consider it may be concluded that the circumstances in Wilson were such that a jury may consider that the second outburst was the kind of mischief the applicant brought on himself. Both in Wilson and in this matter the accused were the subject of prejudicial acts by family members which were out of their immediate control, although the accused in this case had, by his legal representatives, the opportunity to significantly reduce any prejudice (an opportunity that did not exist for the second outburst in Wilson). Neither accused played any role in the occurrences. Nor can fault be attributed to them. 40. Thus, there were similar factual circumstances applying in both cases: an outburst by a close family member, the relevant outburst occurred during a late stage of the trial in Court, and the outburst was not caused or instigated by the accused. There is, however, distinction in the two matters, but not one favouring the accused’s submissions as to a relevant distinction (or the discharge application), namely, the circumstances giving rise to prejudice suffered by the applicant in Wilson was arguably more acute and the circumstances more serious than the present matter. 41. By pointing to the existence of factual distinctions, counsel for the accused did not cavil with the statement of principle in Wilson on this application. In any event, the Crown, correctly in my view, relied upon Wilson as an authority regarding the review of a discretionary decision of the trial judge to not discharge the jury. I have previously outlined the statements of principle arising out of the judgment of Wilson relevant in the present context 42. The factual background to the conviction appeal in R v Attallah [2005] NSWCCA 277 (“Attallah”) is analogous to the present application. During the course of the trial of Mr Attalah, the Crown prosecutor expressed concern that the applicant’s family were creating a disturbance in the courtroom. It was confirmed that some noises had been coming from the back of the courtroom and had attracted the jury’s attention. The trial judge said that she had not noticed anything. On the following day the jury sent the trial judge a note, which was in the following terms (Attallah at [70]): Your Honour, we of the jury would like to draw to your attention an issue that has been occurring for some time now. Family members of the defendant are consistently interacting with the assisting solicitors for Mr Stewart by making comments and passing notes from the public gallery. Question, is this the normal courtroom practice? This was very apparent and disturbing yesterday 16 April 2003. A young lady, who we gather is the daughter of the defendant Mr Attallah, was making derogatory comments which were heard by a number of jurors as the witness Vanessa was walking in and out of the courtroom. May we ask from you that members from the public gallery are refrained from this behaviour as it is quite difficult to concentrate and remain focused on the proceedings with this going on. Thank you for your assistance in this matter. Kind regards the jury. 43. The decision of the trial judge to not discharge the jury was upheld on appeal. James J observed, with the agreement of Buddin and Rothman JJ, that none of the incidents gave rise to a miscarriage of justice. In reaching that decision he observed (at [86]-[90]): [86] A trial judge has a wide discretion in deciding whether a jury should be discharged and a jury should be discharged, only if there is a real need for such a step to be taken. [87] In the present trial all of the three outbursts by the appellant, on which counsel for the appellant relied, occurred during a long cross-examination of the appellant, which, with interruptions, extended over five hearing days. This Court was not directed to any other occasion during the cross-examination in which the appellant lost his composure. [88] It is relevant to take into account the length of the trial and the stage in the trial at which the outbursts occurred. The cross-examination of the appellant commenced on the forty-third day of the trial and the trial continued thereafter for almost another month. [89] The conduct sought to be relied on as requiring a discharge of the jury was conduct by the appellant himself and, for obvious reasons, a trial judge should be cautious about discharging a jury and thereby terminating a criminal trial, because of conduct engaged in by the accused in the courtroom. [90] It was open to the trial judge to consider that any directions given by her specifically referring to the appellant’s conduct would only draw further attention to the appellant’s conduct. 44. His Honour also joined with the observations of the trial judge, inferred from the above note and her Honour’s direction to the jury, that the jury were “conscientiously endeavouring to perform their function and objected to what was happening because it tended to distract them from concentrating on the evidence” (at [76]). CONSIDERATION 45. There can be little doubt, and the Crown does not dispute it, that the accused would suffer prejudice as a result of the conduct of the sisters described in the evidence. It does not follow, however, that the characterisation of the prejudice advanced by the accused may be wholly accepted and, in particular, the jury would draw the inferences relied upon by counsel for the accused. 46. A significant part of the prejudice, relied upon by the accused, was that the jury will necessarily and irremediably form various impressions, based upon the conduct of the sisters during the ERISP, about the accused’s family. The foundation for that proposition was never made entirely clear in the submissions advanced on the application, but it appeared to be suggested that the jury would necessarily infer from the conduct of the sisters that the whole of the family, to employ the characterisation used by counsel for the accused, treated these proceedings as a joke, did not take this trial for murder seriously, do not value life, and were highly dysfunctional (as a family unit) and, would, therefore conclude that the accused came from a place of dysfunction and was “the type of person who w[ould] commit an unprovoked and brazen daylight murder”. By extension, it was submitted that by the conduct of the sisters the jury may draw an inference that the accused is a delinquent. 47. The difficulty with those contentions is that they seek to extrapolate from a series of occurrences, that occurred intermittently on the seventh day of the trial during the course of the ERISP, by the sisters, broad propositions largely devoid of any context other than the fact of the laugher during the ERISP under the observation of some members of the jury. The consideration of the present application needs to be approached on the basis of what the jury had observed, not only during the playing of the ERISP, but during the course of the proceedings including on the seventh day of the trial, either by dint of the fact of what had been shown to them in evidence or what it may be reasonably inferred had been observed by them (particularly given concessions by the parties). When approached in that way, the global propositions as to prejudice by the accused require a closer attention. 48. The inferences which counsel for the accused contended the jury would have drawn from the sisters’ conduct with respect to the accused’s family and in consequence himself, are questionable in a number of respects for the following reasons: 1. The sisters were aged 16 and 21, respectively. Beyond the knowledge of their existence, as a result of the defence opening address as well as the ERISP itself, no further information was provided to the jury about the sisters. The sisters had been observed, earlier that day, seated with their parents, as family. Neither the sisters nor the parents caused any similar disruption in the proceedings prior to the playing of the ERISP. It might also be noted that the laughter only occurred in the absence of the parents. 2. The parents’ conduct during the course of the proceedings, in my view, may be described as atypical of members of the public seated in the public gallery in court proceedings. They observed the proceedings silently and the manner in which they entered and exited the courtroom, throughout the proceedings, reflected a conscious understanding of basic courtroom etiquette. Further, the facial expression of Mr Mushi when in the courtroom was sombre and his countenance reflected an appreciation for seriousness of the trial. Equally, the accused was not observed to be laughing during the playing of the ERISP or the course of the trial. 3. Unlike the sisters, as mentioned above, the jury had observed Mr Mushi by another means in the trial; on the day the ERISP was played, Mr Mushi was featured at the start of video footage marked Ex 11. In that brief appearance, I observed the father of the accused to be entirely cooperative with the police, providing assistance by freely answering questions as well as providing consent for the police to search the premises as part of their investigation. Neither his conduct on the video footage nor his conduct in the courtroom displayed any behaviour that may be considered reflective of an unreasonable or dysfunctional family. 4. It might be added, the conduct of the accused throughout the trial, up to that point, may be described as appropriate and conscious of the seriousness of the charge he faces and the fact that he was in the charge of the jury. The accused was not a source of distraction nor did he exhibit any behaviour consistent with that of the sisters. 5. The observations of the conduct of the sisters during the ERISP, does not detract from any observations of reasonable conduct on the part of the parents or the accused throughout the trial. The presence of the parents, particularly when seated as a family earlier on the morning of the seventh day, projected a clear visual of support for the accused. 49. Turning to the prejudice facing the accused, in my view, it may be properly found to arise in two ways. 50. First, the jury might infer that by the conduct of the sisters the accused is making light of the proceedings or not appreciating the gravity of the charge being faced by the accused. Second, the jury might infer that by the conduct of the sisters the accused is demonstratively telling lies, with their laughter and its timing affirming the existence of such lies. 51. As to the first aspect of prejudice, any prejudice must be measured against the countervailing factors discussed above and the inconsistency with the behaviour of the accused in the presence of the jury throughout the trial. Over the course of the trial, the accused displayed a neutral countenance as he silently observed the case put by the Crown against him and allowed Mr Pararajasingham to advocate on his behalf. My observations are that at various stages of the evidence he was taking notes. During the course of the evidence on the seventh day, which included a significant amount of video footage featuring the accused, he appeared, in my view, equally composed as he viewed the evidence put to the jury. 52. Based on my observations of the accused in the presence of the jury, the accused appeared to be attentive and his demeanour was consistent with someone treating the proceedings seriously. The jury were positioned within the courtroom to observe the accused in the dock on each day of the trial and, in my view, in light of the observations of the accused available to them over the course of seven days at the time of the ERISP, they would not be quick to come to a contrary conclusion, particularly in the light of appropriate directions to confining their attention (and deliberations) to the evidence. 53. As to the second aspect of prejudice, counsel for the accused contended that the timing of laughter reflected incredulity by the sisters as to lies told by the accused. It was submitted that such an inference significantly undermined the defence case. 54. Prior to the playing of the ERISP, the jury were aware that the accused told lies to the police on 11 January 2019. The existence of such lies was highlighted by counsel for the accused in his opening address. He stated: It is not in dispute that when spoken to by police on 11 January 2019, this then 18 year old male told some lies to police and he sought to distance himself from that motorbike and the circumstances in which it was found. In due course you will need to consider for yourselves, drawing on your knowledge of the world and ordinary human experience as to why he may have said such things, what factors may driven him to tell lies. 55. Whilst counsel for the accused contended that reasonable explanations existed for such lies, which at that stage were yet to be put to the jury, it is unclear how an inference that the sisters disbelieved the statements of the accused, with respect to conceded lies, may irredeemably or unfairly prejudice the accused in that respect. It was accepted the accused lied. Even if the laughter of the sisters was interpreted as a sign of disbelief in the truth of their brother’s account to the police, the jury were already alerted to the fact they would hear lies by the accused, in particular lies relating to his knowledge of “[the] motorbike and the circumstances in which it was found”. Each of the particular instances of laughter identified at para 8 of Mr Sahinovic’s affidavit corresponded to an admitted lie with respect to the motorbike. In the result, I do not accept that the timing of the laughter resulted in irredeemable prejudice to the accused that was beyond the remedy of a direction. 56. There remains one further issue of prejudice, relied upon by counsel of accused to which particular attention should be given, namely, that on the basis of the conduct of the sisters during the ERISP, the jury would infer that the accused comes from a family that does not value life, be it the deceased's or his own. The difficulty with that contention is as follows: 1. Starting with the sisters, the source of the laughter, there was no suggestion made by the parties that the laughter appeared to concern glee at the fact the deceased was murdered or that their brother was on trial for the same. The uncontested evidence is that the sisters laughed during the ERISP, in particular, at specific lies told by the accused. There is no reasonable basis, in the light of intermittent laughter from two young girls, for the jury to reach such a serious conclusion as to the overall moral stance of either the sisters, the family as a whole or, in particular, the accused. 2. Turning to the parents, they were not in courtroom at the time of the laugher, as such, it appears unlikely that the jury would join the parents to any inferences drawn vis-à-vis the sisters. 3. Finally, the suggestion that the jury would draw an inference that the accused does not value life, due to the conduct of the sisters, needs to be considered in the light of the circumstances of the trial. As at the time of the playing of the ERISP, the following was known to the jury: the accused was on trial for murder, a charge they witnessed him enter a plea of not guilty; the jury was directed “the accused is presumed to be innocent of any wrongdoing until a jury is satisfied beyond reasonable doubt that his guilt has been established according to law”, by my opening remarks on the first day of the trial. The trial had progressed without any other incident of that kind. The occurrence of laughter by the sisters is not relevant to the state of mind of the accused. 57. Thus, the inference relied upon by the accused lacks a proper foundation. 58. Having identified the extent of the prejudice to the accused, I now turn to consider the seriousness of the occurrence, which must be understood within the context of the contested issues. 59. Prior to turning to that assessment, I return to a consideration of Wilson. In Wilson, the prejudicial event in the Court below concerned two outbursts by Mr David Wilson, a self-represented co-accused and brother to the applicant, a fellow co-accused, in the presence of the jury. The second outburst, which occurred a week before the jury retired to consider its verdict, was found to be prejudicial. The content of the outburst made it irrefutably serious in nature: Mr David Wilson specifically named the applicant, identified him as “my brother”, announced that he wished to plead guilty and stated that the applicant and Mr Xavier were also guilty. Prior to rejecting the application to discharge the jury, as noted above, the trial judge reached his ruling with the assumption that all members of the jury had heard the second outburst. 60. Returning to the present application, the evidence does not support a conclusion that all members of the jury heard the laughter. As earlier mentioned, neither the Court nor the Crown observed the conduct during the playing of the ERISP. The laughter that occurred was intermittent. Whilst it resulted in momentary glances from the jury, based upon the uncontested evidence, the laughter was not characterised as a sustained outburst as it did not feature throughout the entire playing of the ERISP. In my view, the conduct of the sisters did not ultimately detract from the jury’s capacity to listen and follow the evidence. Indeed, given the layout of the courtroom, not all jurors appear to have been made aware of the occurrence during the course of evidence. Further, given the limited, aberrant and intermittent nature of the occurrence, in my view, the circumstances of the incident would not be vividly etched in the mind of the jury. Also, any discussions had between the jury as to the same, in my view, any prejudice arising, in that respect, is amenable to direction. 61. For completeness, I note the incident occurred at a late stage of the proceedings. CONCLUSION 62. There is an important principle which bears upon my determination of the current application. Such principle is that criminal trials necessarily proceed on the basis that a jury will follow and apply any direction given by a trial judge: see Wilson as above; The Queen v Glennon (1992) 173 CLR 592 at 603 and 614-615; Dupas v The Queen (2010) 241 CLR 237; [2010] HCA 20 at [27]-[29]; R v Munday (1984) 14 A Crim R 456 at 457-8; and Gilbert v The Queen (2000) 201 CLR 414; [2000] HCA 15 at [31]. 63. I consider that the directions made by the Court were sufficient to remedy any unfairness to the accused occasioned by the conduct of his sisters and, more generally, were sufficient to prevent any miscarriage of justice. My view in this respect does not vary if the jury inferences sought by counsel for the accused are accepted, or as I have analysed, should properly be viewed in a different light. 64. My observations of the jury throughout the trial, up to and including the playing of the ERISP, were that they were attentive, engaged, compliant and overall conscientiously endeavoured to perform their functions. Any reaction by the jury to the conduct of the sisters more widely reflects, in my view, an objection in being distracted in any way from their function. During the playing of the ERISP, they did not appear distracted although there must have been on the evidence momentary interruptions or distractions. 65. Finally, I note that, having heard the decision of the Court as to the discharge application, the parties had no objection to the form of the direction proposed by the Court. 66. I confirm the application to discharge the whole jury is dismissed. Amendments 09 March 2021 - Publication restriction removed. 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. Decision last updated: 09 March 2021

nsw_caselaw:5c0f1df8e4b0851fd68d040c

decision

new_south_wales

nsw_caselaw

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2018-12-12 00:00:00

MetLife Insurance Ltd v Hellessey [2018] NSWCA 307

https://www.caselaw.nsw.gov.au/decision/5c0f1df8e4b0851fd68d040c

2024-05-25T23:27:36.995359+10:00

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: MetLife Insurance Ltd v Hellessey [2018] NSWCA 307 Hearing dates: 24 and 25 May 2018 Date of orders: 12 December 2018 Decision date: 12 December 2018 Before: McColl JA at [1]; Meagher JA at [2]; White JA at [65] Decision: Appeal dismissed with costs. Catchwords: INSURANCE – life insurance – benefit conditional on insurer’s satisfaction as to insured member’s total and permanent disablement – overlapping obligations requiring insurer to act reasonably and fairly in considering question under policy and determining whether it was so satisfied – insurer’s outright rejection of lay witness material significant to its reasons for discounting medical expert evidence that supported insured member’s claim – unchallenged inference from absence of rational or persuasive reasons for such rejection that insurer failed to engage with material – whether breach of obligations to act reasonably and fairly Cases Cited: Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 Edwards v Hunter Valley Coop Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233 Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123 MetLife Insurance Ltd v FSS Trustee Corporation [2014] NSWCA 281 Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 Minister for Immigration and Water Protection v Stretton (2016) 237 FCR 1; [2016] FCAFC 11 TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9 Category: Principal judgment Parties: MetLife Insurance Ltd (Appellant) Bernadette Hellessey (Respondent) Representation: Counsel: G Watson SC, C Purdy (Appellant) BD Dooley SC, JC Lee (Respondent) Solicitors: HWL Ebsworth Lawyers (Appellant) Slater & Gordon Lawyers (Respondent) File Number(s): 2017/313493 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2017] NSWSC 1284 Date of Decision: 25 September 2017 Before: Robb J File Number(s): 2015/241436 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. MCCOLL JA: I agree with Meagher JA’s reasons and the orders his Honour proposes. MEAGHER JA: Overview 2. The respondent, Bernadette Hellessey, was an officer in the NSW Police Force. She claimed benefits under the First State Superannuation scheme on the basis that she was totally and permanently disabled. The appellant (MetLife) was the group life insurer under that scheme. The parties accept that the relevant terms of that superannuation scheme and the group life insurance policy are faithfully recorded by Ward JA in MetLife Insurance Ltd v FSS Trustee Corporation [2014] NSWCA 281 at [18] and [43]–[50]. Under that policy, Ms Hellessey was entitled to benefits for total and permanent disablement (TPD) if, having “been absent from” her occupation as a police officer “through injury or illness for six consecutive months”, she as the “Insured Member”: …provided proof to [its] satisfaction that [she had] become incapacitated to such an extent as to render [her] unlikely ever to engage in any gainful profession, trade or occupation for which [she was] reasonably qualified by reason of education, training or experience. 3. Ms Hellessey commenced working as a police officer on 4 May 2001. In the course of her duties between that time and February 2008, she was exposed to numerous traumatic incidents. By February 2008, she was receiving regular medical treatment for anxiety and depression and engaged in non-operational duties only. Her last day of service as a police officer was 31 August 2010. She has not worked since that time. Accordingly, the six consecutive months during which she was absent from her employment ended on 1 March 2011. On 10 February 2012, Ms Hellessey’s application for payment of a TPD benefit was made, supported by a statement from her treating psychiatrist, Dr Durrell, that she suffered from post-traumatic stress disorder (PTSD) and major depressive disorder. 4. Some four-and-a-half years later, on 30 November 2016, MetLife advised by letter that it had not formed the opinion that the respondent satisfied the TPD definition. That rejection of her claim for the TPD benefit followed two earlier rejections by letters of 22 December 2014 and 19 October 2015. Before each rejection, MetLife had sent “procedural fairness letters” to solicitors acting for Ms Hellessey, which invited her response to its assessment of material and information provided to or obtained by it. Those letters also advised of MetLife’s preliminary view as to whether the medical and other material supported a conclusion that Ms Hellesey satisfied the TPD description. The responses, if any, to those letters were followed by a letter advising of Metlife’s decision, which in each case was that MetLife was not satisfied in the terms of the TPD definition. 5. Ms Hellessey challenged MetLife’s first rejection by the underlying proceedings commenced on 18 August 2015, and before MetLife’s second letter rejecting her claim. The third rejection was delivered only days before the trial commenced, on 5 December 2016. Ms Hellessey proceeded to challenge this rejection on the basis that in considering and determining her claim MetLife failed to act reasonably and fairly. And it was not controversial that, if that challenge was upheld, the Court could itself determine whether the TPD definition had been satisfied as at the assessment date, accepted to be 1 March 2011, on the material available at trial. 6. The primary judge (Robb J) held, after also considering MetLife’s reasons for the first and second rejections, that its third rejection of Ms Hellessey’s claim was invalid: Hellessey v MetLife Insurance Ltd [2017] NSWSC 1284 at [989]. His Honour then addressed whether Ms Hellessey’s PTSD and major depressive disorder had rendered her unlikely ever to engage in any relevant employment, notwithstanding that she was 34 years old at the date for assessment. He concluded that Ms Hellessey had been so incapacitated as to engage the TPD definition – a conclusion which is not challenged on appeal: Judgment [1040]. The applicable principles 7. The relevant principles are those stated by McLelland J (as his Honour then was) in Edwards v Hunter Valley Coop Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113, and approved by this Court in Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123; TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68; and Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233. MetLife’s liability under the policy turned on its being satisfied as to the extent of the Insured Member’s incapacity. Both in considering that question and in determining whether it was so satisfied, MetLife was required to act reasonably and fairly. And breach of one or more of these overlapping implied obligations would deprive the decision of contractual effect. 8. Thus, an insurer’s decision may be set aside if it is shown to be unreasonable on the material before the insurer. It will not answer that description merely because the Court would or could have reached a different opinion on that material, because “reasonable persons may reasonably take different views”: Edwards at 77,536. In addition, however, a decision may be set aside if the process of consideration underlying it was not undertaken reasonably and fairly, even if the outcome itself is not also shown to have been unreasonable on the material before the insurer. Again, more than one reasonable process of consideration may be open in the circumstances, but the process adopted by an insurer would not cease to be unreasonable simply because another, and reasonable, process to the same conclusion happened to exist. 9. For example, in Shuetrim, the insurer’s breach of that duty was in not considering a “body” of relevant medical and psychiatric opinions: at [154]. And, in Hannover Life v Jones, the failure to take into account the Insured Member’s psychological makeup was a “failure to act reasonably and fairly in undertaking the task of forming the opinion as to [his] disablement”: at [134]. As will become apparent, it is not necessary in this appeal to attempt a comprehensive description of the evidentiary material required to be considered by an insurer because the lay witness material considered below would meet any such description: see, in another context, Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9 at [65] (Basten JA, McColl and Simpson JJA agreeing), identifying the evidence required to be considered by an administrative decision-maker by reference to its apparent credibility, relevance and materiality to a claim. The third rejection 10. The material before MetLife at the time of its third rejection letter consisted of medical opinions, a vocational assessment, and evidence from various sources as to Ms Hellessey’s recreational activities – particularly her attendance at and participation in horse-related shows and events in the period from early 2011. Those medical reports included Dr Durrell’s opinions that she suffered from PTSD and major depressive disorder, and was unlikely to be able to engage in any gainful employment. 11. In its letter of 30 November 2016, MetLife advised: MetLife has considered all of the information received in relation to the member’s TPD claims. That consideration has included the evidence around the date of assessment (1 March 2011), evidence coming into existence after the date of assessment and evidence served in the Proceedings. MetLife has also had regard to the evidence and submissions of the member and the Fund during the assessment of the claim and the various requests for reconsideration. In consideration of all the evidence, MetLife has not formed the view that the member is ‘unlikely ever’ to return to suitable employment prior to 25 June 2043. MetLife has identified suitable vocational options reasonably within the member’s education, training and experience and which are ‘far removed from policing’. … MetLife acknowledges that Dr Durrell, Dr Westmore and Mr Rawling have reached a different view and those opinions have not been disregarded by MetLife. MetLife has however identified its concerns about the weight to be given to those opinion. This is because MetLife considers the practitioners have not been provided with full or accurate accounts of the extent of the member’s activities. 12. The reference to the “extent of the member’s activities” is to the following matters which are dealt with by the primary judge between Judgment [942] and [988] under the headings: - Horse-related shows and events - Facebook posts - Fairymead - Palomino Association and the Goulburn Pony Club - Shopping activities The structure of the primary judge’s reasons 13. Although the primary judge considered the first two rejections between Judgment [250]–[376], the parties agreed, and his Honour accepted, that the only “operative question” was whether the third rejection was valid: Judgment [802], [803], [823]. Neither party sought to depart from that proposition on appeal. 14. In determining that question, the primary judge at Judgment [825] described the Court’s task as being: … whether or not MetLife addressed the correct questions raised by the policies, and whether the process of reasoning engaged in by MetLife was reasonable in the sense that it did not contain defects of logic or judgment that had the result that MetLife had not adhered to its duty to act with utmost good faith. The court must allow MetLife freedom of judgment where it has acted reasonably in the sense just described, and must not find that MetLife’s reasoning was defective only because the court would have reached a different conclusion on the evidence. 15. His Honour’s reasons then proceeded, mostly in reverse chronological order, as described in Judgment [827]. First, he outlined the “history of the process of determination” and the contents of each of the third and fourth procedural fairness letters and the third rejection letter. Secondly, he addressed the reasonableness of MetLife’s treatment of the material, including the sworn lay witness statements provided to MetLife on 9 November 2016, as well as the medical reports of Dr Durrell, Dr Westmore and Mr Rawling, and Mr Everett’s vocational assessment report. Thirdly, he “drew upon” his explanation of MetLife’s treatment of that material in addressing the reasonableness of “MetLife’s decision regarding Ms Hellessey’s activities”. 16. That particular “decision” was described as follows: [944] The most significant feature of the reasoning process adopted by MetLife … is that MetLife decided that it … should decide for itself what relevant activities Ms Hellessey had engaged in both at and around the assessment date, and subsequently up to the time of the third rejection. [945] Having identified the nature of Ms Hellessey’s activities from the available information, it then made its own lay judgment as to the physical and psychological significance of those activities in relation to whether they were consistent with the physical and psychological symptoms and incapacities that Ms Hellessey and the medical experts who prepared reports in favour of her case had claimed that she suffered from. [946] MetLife did not describe in any elaborate or positive way what the extent of Ms Hellessey’s activities was, or why they were inconsistent with her having the claimed disabilities. It asserted that Ms Hellessey’s activities were inconsistent with her claimed symptoms. [947] It then recorded in various ways that the reports prepared by the medical experts who supported Ms Hellessey’s case either did not refer to her activities at all, or did not refer to them to the extent that MetLife thought was necessary. On that basis, MetLife either rejected the medical reports or decided to give them insignificant weight. The consequence of MetLife’s having put aside Ms Hellessey’s supporting medical evidence in this way was that there was nothing to weigh against MetLife’s own conclusions of fact, or the medical opinions upon which MetLife chose to rely, that rejected the claim that Ms Hellessey satisfied that TPD definition at the assessment date. 17. The primary judge earlier observed at Judgment [853] that MetLife ultimately rejected or gave little weight to the medical opinions of Dr Durrell, Mr Westmore and Mr Rawling because they had “not been provided with full or accurate accounts of the extent of [these] activities”. As his Honour then observed at Judgment [854], that conclusion “underscores the significance of MetLife’s having dismissed the evidence of Ms Hellessey’s lay witnesses”. 18. Significantly, the primary judge found at Judgment [867] that MetLife’s consideration of the lay written evidentiary material was not “reasonable or proper” because it involved ignoring or not engaging with “a substantial body of consistent evidence” which, taken as a whole, “provided substantial corroboration for the opinions reached by Ms Hellessey’s treating medical professionals, and in particular Dr Durrell, concerning the symptoms of her psychological injury”: Judgment [860], [865], [866]. The appeal 19. MetLife appeals from his Honour’s order that its third rejection “was not valid and effective”. The two grounds of appeal challenge the primary judge’s conclusion to that effect. Ground 1 alleges error in applying the incorrect legal test as to the “first-stage” question and having regard to considerations and evidence not properly relevant to that stage. Ground 2 alleges error in his Honour’s finding that MetLife’s determination was unreasonable arising from failures to consider and apply Ms Hellessey’s onus of providing evidence in support of her claim; to determine whether on the evidence available it was unreasonable for MetLife not to be satisfied of the matters required; and in the standard for determining the validity or invalidity of MetLife’s decision. As already noted, there is no challenge to his Honour’s determination of the “second-stage” question in favour of Ms Hellessey. 20. The appeal should be dismissed. The primary judge’s holding that MetLife breached its obligation to act reasonably and fairly in its treatment of the lay witness material was itself sufficient to sustain his Honour’s conclusion that the third rejection was invalid. That conclusion also called into question MetLife’s treatment of the medical reports and opinions. The significance of the lay witness material is obvious when its subject matter is considered in the context of the evidentiary and other material before MetLife at the time of the third rejection. That material is summarised below. Material provided to or obtained by MetLife Ms Hellessey’s background 21. Before Ms Hellessey joined the NSW Police Force, she had worked for a short time for Woolworths as a checkout operator, obtained a certificate in childcare and worked in a childcare centre, as well as obtaining a driving instructor training certificate and working as a driving instructor. She married in January 2003 and had two daughters. The family lived in the outskirts of Goulburn until June 2012, when it moved to a small property near Quialigo. 22. Ms Hellessey has always been a keen horsewoman, having started riding at the age of five and showing horses at about age 11. Before she ceased working as a police officer, she attended, agricultural and horse shows, sometimes on a weekly basis, with a long-time friend, Ms Cleary. She maintained, however, that by early 2011 the nature and extent of her participation in those events had changed. She would not ride or “show” her horses, leaving that to either Ms Cleary or Mr Harvey, also someone with a great love of horses whom she had known for many years. In January 2012, Ms Hellessey and Ms Cleary registered a newly born foal which they had bred in the Australian Pony Stud Book, referring to their “stud” as Fairymead. Material before the first rejection (22 December 2014) 23. The medical information provided to or obtained by MetLife included reports from Dr Durrell; from Ms Hellessey’s treating psychologist, Mr Ward, and treating general practitioner, Dr Falk; from a consulting psychiatrist retained by the NSW Police Force, Dr Bertucen; and from a consultant psychiatrist retained by MetLife, Dr Hodgson. MetLife also had a surveillance report showing Ms Hellessey leaving her residence to visit a local shopping centre and green grocer; Mr Everett’s vocational assessment of job options available to Ms Hellessey in the light of her training and experience; and a report summarising Ms Hellessey’s Facebook statuses and posts between April and November 2012. Those Facebook entries suggested that, notwithstanding her medical condition, Ms Hellessey continued to attend and participate in various horse-related and other events, including in Goulburn and Sydney. Dr Durrell (treating psychiatrist) 24. The reports of Dr Durrell diagnosed Ms Hellessey with PTSD and a major depressive disorder. In his report of 16 February 2013, he observed – referring to the job options identified by Mr Everett (viz. learning and development officer, childcare worker, driving instructor, cashier, sales representative) – that Ms Hellessey’s “chronic and permanent work-caused mental injury to be of such chronicity and severity to render her totally and permanently incapacitated from any return to the workplace”. 25. By his letter dated 29 September 2013, Dr Durrell responded to MetLife’s request that he comment on “Ms Hellessey’s Facebook summary details”. The entries summarised referred to a bus trip of the Goulburn Pony Club to the mounted police unit in Redfern, a visit to a Sydney Opera House concert in which Ms Hellessey’s nine-year old daughter played the recorder, and attendance at regional shows and horse or pony club events. In responding, Dr Durrell made the following comments: 1. that “the Facebook entries that you have provided do not exclude or confound the diagnosis of PTSD”; 2. that “without her husband, support person and medication, she would be unable to attend the Palomino Awards night, the Opera House recital of her daughter playing the recorder or be able to attend the Sydney International Equestrian Centre”; 3. that she “requires psychotropic medication including anxiolytics and low doses of Valium in addition to her Zoloft medication” without which “it is most unlikely that Ms Hellessey would have been able to continue with her ‘behind the scenes’ activities at the Royal Easter Shows and other shows”; and 4. that he and Mr Ward “have encouraged Ms Hellessey to continue with her horse-related activities”. 26. His letter concluded that “from a longitudinal treating psychiatric perspective … Ms Hellessey’s PTSD is a permanent mental injury that is likely to render her permanently incapacitated from gainful employment in trades and occupations for which she is reasonably qualified”. Mr Ward (treating psychologist) 27. In the context of Ms Hellessey’s claim for workers’ compensation, Mr Ward wrote in May 2011 that he believed she “may be” currently fit for employment provided that it is “far removed from policing”. However, in November 2012, in response to MetLife’s request that he comment on her capacity to undertake any of the jobs described in Mr Everett’s report, he advised that based “on what has been reported to me and my observations over time of Ms Hellessey’s affective state I do not believe she would be suitable at this stage for the mentioned positions as they all involve interpersonal interaction”. 28. Later, in responding in May 2013 to questions from MetLife directed to the Facebook entries, Mr Ward did not consider her attendance at shows and horse award nights as behaviour “inconsistent with [the diagnosis of] social phobia”. He explained, she “does not feel pressured when speaking with [horse people and] has attended the Royal Easter Show all through our therapy”. In response to MetLife’s question whether she was unlikely ever to engage in any gainful employment, he said “due to the lack of progress with her affective state and intrusiveness regarding traumatic memories I do not believe Ms Hellessey is fit to work”. Dr Hodgson (consultant psychiatrist) 29. Dr Hodgson prepared two reports. In the first, dated September 2012, she confirmed his diagnosis of Ms Hellessey as suffering from chronic PTSD, chronic major depressive disorder and social phobia, also recording that she appeared “a genuine and sincere historian” not motivated by “secondary gain”. In relation to her future work prospects, and noting that “she is well engaged with support from her psychiatrist, psychologist and general practitioner, she has excellent family support, and she has her interest in horses and animals”, Dr Hodgson considered that “she may, with time, be able to work in some fulfilling capacity related to her education, experience and training”. 30. In her second report dated 3 May 2013, and responding to MetLife’s questions directed to the Facebook material, she observed: “Ms Hellessey may appear happy in her Facebook postings, but I am unable to give a professional independent opinion as I am doubtful whether or not credence can be given to Facebook comments and photos. These may not have been independently verified and they may not be reflective or indicative of her usual status”. With respect to MetLife’s question directed to her incapacity for work, Dr Hodgson referred to her earlier opinion that she did not consider Ms Hellessey’s incapacity was such as to render her “unlikely ever to engage in any gainful profession, trade or occupation”. At the same time, she emphasised that Ms Hellessey should be reassessed with the Facebook material and any “other more recent professional documentation”. Dr Bertucen (consulting psychiatrist) 31. Dr Bertucen wrote two reports. In the first, addressed to NSW Police Force and dated 30 August 2011, he expressed conflicting opinions as to whether Ms Hellessey could return to some form of work. Having said that she “may be capable of returning to some form of work within six to 12 months after her medical discharge”, he stated unequivocally that she was “totally and permanently disabled in respect of any future employment for which she is qualified by virtue of experience, education and training”. That report was prepared following a consultation with Ms Hellessey. The doctor’s summary of her personal history includes that her “hobbies and pasttimes largely centre around horses and equestrian activities. (She has been demotivated to be involved in this for the last eighteen months, however, she is gradually getting back into this source of enjoyment.)” 32. In his second report dated 17 August 2015, and addressed to MetLife, Dr Bertucen expressed the view that as at March 2011 it was likely that Ms Hellessey “could engage in work either on a part-time or full-time basis as a Learning-Development/Training-Development professional until retirement age”. That opinion is not supported by any reasoning and Dr Bertucen’s earlier, and apparently conflicting, opinions are not explained or resolved. Additional material before the third rejection (30 November 2016) 33. Before its fourth procedural fairness letter was sent (on 31 October 2016), MetLife obtained access (in most cases by subpoena) to records relating to the Australian Palomino Horse and Pony Association; the Goulburn Pony Club; Ms Hellessey’s bank accounts, credit cards, and Facebook account;and Mr Harvey’s Facebook account. In addition, MetLife secured printouts of the websites of organising entities of horse shows and events which apparently received some form of sponsorship from “Fairymead show horses/stud”. That material is summarised by the primary judge at Judgment [455], [457]–[459], [462], [464]–[468]. 34. In this same period, further medical opinions were provided or obtained: two from a consultant psychiatrist, Dr Westmore; two from a neuropsychologist, Dr Rawling; and one from a psychologist, Professor Mattick. Drs Westmore and Rawling were retained on behalf of Ms Hellessey, and Professor Mattick was retained by MetLife. Dr Westmore (consultant psychiatrist) 35. In his report dated 9 December 2015, Dr Westmore described Ms Hellessey as being unlikely ever to engage in gainful employment because: She is socially isolated and withdrawn, depressed in mood, irritable and intolerant. Her capacity to deal with clients, co-workers and supervisors would all be significantly impaired because of her psychiatric illnesses and the associated symptoms. 36. In his further report of 20 June 2016, he was asked to assume Ms Hellessey engaged in activities which included “limited participation in horse shows”, occasional visits to shops, and the undertaking of some activities as the secretary of a horse and pony association. He considered those activities were not inconsistent with his diagnosis that she suffered from chronic PTSD and a major depressive disorder. He added “a number of the activities described are activities which could be done in isolation, away from others and without the need to interact with others”. Dr Rawling and Professor Mattick (consultant neuropsychologists) 37. Dr Rawling undertook emotional state and other psychological assessments of Ms Hellessey in August 2016, concluding in his first report dated 8 August 2016 that Ms Hellessey “has a severe and chronic psychological disability” and, for that reason, that the “validity and usefulness” of the job options identified in Mr Everett’s vocational assessment which had not taken account of that psychological disorder were “highly questionable”. Having tested the validity of her claimed disability, he concluded that there was “no evidence of factitious failure on cognitive testing” and that on personality testing she showed a tendency to see her symptoms as extreme. However, he concluded that there was “no compelling evidence of exaggerated claims of disability”. 38. Professor Mattick was retained to undertake clinical assessments with a view to measuring “any exaggeration or fabrication of complaints and deficits, using validated measures and approaches”. Relevantly, he concluded using a particular method of assessing symptom validity that Ms Hellessey was “exaggerating whatever symptoms she may be experiencing in terms of anxiety, depression and other problems”. Dr Rawling was then asked to comment on that conclusion. In his report dated 21 November 2016, he did so, taking issue with Professor Mattick’s conclusion because the tests he had conducted did not provide “objective scientific justification for his conclusion that Ms Hellessey does not suffer the symptoms of which she currently complains”. Having undertaken a further assessment of Ms Hellesey following that of Professor Mattick, Dr Rawling’s opinion was that whilst she “may have the aptitude to cope with the cognitive demands of a number of jobs … her psychological frailty made it unlikely that she would survive in such jobs long term”. Lay witness material served by Ms Hellessey 39. Affidavits, including of Ms Hellessey, Ms Cleary, Mr Harvey and Ms Eves (her mother), were provided to MetLife on 9 November 2016, in the context of the proceedings but also in response to the third and fourth procedural fairness letters. On 25 November 2016, Ms Hellessey’s solicitors noted that those affidavits had been served and asserted that they “must be considered by MetLife”. 40. The fourth procedural fairness letter contained separate descriptions of Ms Hellessey’s involvement in Fairymead show horses/stud, her activities as secretary of the Goulburn Pony Club, secretary of the Australian Palomino Horse and Pony Association (a subject also dealt with in the third procedural fairness letter), as well as her attendance at and travel to various horse shows and related events in the period between August 2011 and March 2016. Ms Hellessey’s affidavit did not address her involvement with Fairymead stud. However, it did deal at some length with her involvement in the Palomino Association, the Goulburn Pony Club and “various other activities arising out of her ownership of a small number of horses and her children’s engagement in horse riding”: Judgment [866]. The affidavits of Ms Cleary and Mr Harvey described the “changed” and limited nature of Ms Hellessey’s involvement in horse shows and events after 2010. 41. Ms Cleary also addressed the Fairymead stud. In the fourth procedural fairness letter, it was said that between January 2011 and June 2015 Ms Hellessey was “involved” with Fairymead, including “acting as the Owner/Manager”. Reference was made to correspondence with the Welsh Pony & Cobb Society of Australia Inc, and to that stud’s sponsorship or support of shows and other causes. In relation to that subject, Ms Cleary said: In January 2012, we had a foal born who we jointly owned and called Fairymead Princess Mary. I had her registered with the Australian Pony Study Book in joint names. We used my Australian Pony Stallion (Cranellie Da Vinci) and my Australian Pony mare at the time, (Vichand Chantilly Lady) to breed the horse. We had decided to call our ‘stud’ prefix Fairmead, because my Husband, Keith, is from Fairymead in Queensland. Fairymead … never was a business venture of any sort, it was merely a stud name that we could use to register any foals we had. If we went to shows or sponsored classes at local shows, we would often put it under the name “Fairymead Show Team”. 42. Ms Hellessey’s descriptions of her ongoing symptoms, and the changes in the activities which she was able to undertake, were supported by the evidence of her husband, her mother and friend, Ms Manning, a local nurse. The evidence of Ms Cleary and Mr Harvey was capable of corroborating Ms Hellessey’s description of the limited nature of her involvement in horse-related shows and events, and her difficulties with social interaction. The breach in MetLife’s rejection of the lay witness material 43. The grounds of appeal and MetLife’s submissions do not always recognise or focus on the distinction between a breach of the obligations to act reasonably and fairly in the consideration process and a breach apparent from the outcome of that process. Here, the primary judge’s first and significant reason for concluding that the third rejection was invalid was that “it was not a reasonable or proper approach for MetLife to reject all of Ms Hellessey’s lay evidence in the manner described in the third rejection letter”: Judgment [867]. MetLife’s treatment of that evidence was significant for its “judgment in relation to the facts concerning Ms Hellessey’s psychological injury and its symptoms”, as well as being a “major factor in the reasons given by MetLife for discounting the evidence of the medical experts who supported Ms Hellessey’s claim”: Judgment [854]; as is acknowledged by the terms of MetLife’s conclusion in the third rejection letter extracted at [11] above. The primary judge’s analysis 44. MetLife responded to the lay witness material in its third rejection letter: MetLife has carefully considered the affidavits and makes the following comments. While we do not intend providing an exhaustive analysis of every affidavit we note that the member’s affidavit falls short of adequately addressing or does not address at all, issues raised in MetLife’s letters of 11 May 2016 and 31 October 2016. For example the member has not addressed in any way her involvement with “Fairymead”. 45. As the primary judge noted at Judgment [857], MetLife’s observation that Ms Hellessey’s affidavit did not address her involvement with Fairymead was correct, but ignored the affidavit evidence of Ms Cleary which his Honour described as being a “cogent response to MetLife’s reliance upon Ms Hellessey’s involvement in Fairymead”. His Honour concluded from the absence of any reference to it that MetLife had ignored it completely or not engaged with it, necessarily rejecting the letter’s assertion that MetLife had “carefully considered it”: Judgment [859]. 46. His Honour then considered MetLife’s statement that Ms Hellessey’s affidavit “falls short of adequately addressing or does not address at all, issues raised” in the third and fourth procedural fairness letters. At Judgment [862], he observed that, apart from Fairymead, the issues referred to in that fourth letter “appear primarily to be Ms Hellessey’s involvement in the Palomino Association, her being secretary of the Goulburn Pony Club, her involvement in other horse competitions, events and shows, her Facebook posts, and what was described as her registration activities”. He continued: [865] … [the lay witness] affidavits contained a substantial body of consistent evidence concerning Ms Hellessey’s activities and the consequences of her psychological injury, that in significant respects dealt with and explained major aspects of the preliminary considerations stated in MetLife’s third and fourth procedural fairness letters. [866] The evidence of Ms Hellessey, Ms Cleary and Mr Harvey was clearly capable of establishing the genuinely limited involvement of Ms Hellessey in relation to horse shows and events. Ms Hellessey addressed and explained the limited nature of her involvement in the Palomino Association and the Goulburn Pony Club, and her various other activities arising out of her ownership of a small number of horses and her children’s engagement in horse riding. All of the lay affidavits, taken as a whole, provided substantial corroboration for the opinions reached by Ms Hellessey’s treating medical professionals, and in particular Dr Durrell, concerning the symptoms of her psychological injury. 47. At Judgment [868]–[869], his Honour concluded, in the face of MetLife’s outright rejection of the “evidence of apparently credible, and in some degrees independent, witnesses without having or expressing any rational or persuasive reasons”, that it had proceeded without giving this body of material more than “perfunctory consideration”. That conclusion, reiterated at Judgment [960], was available and is not challenged by any ground of appeal or argument developed in the appeal. He also noted the absence of any argument on the part of MetLife that it did not have sufficient time “to give full and proper consideration to the affidavits and to explain its treatment of those affidavits properly” (Judgment [869]), in circumstances where it had freely proceeded to make its third decision. Ground 1(a): application of incorrect legal test 48. This ground contends that the primary judge applied an “incorrect legal test” to determine whether MetLife’s third decision was valid. Citing Hannover Life v Jones at [121], MetLife submits that the “criterion of reasonableness of the insurer’s decision is whether the opinion formed … was not open to an insurer acting reasonably and fairly in the consideration of the claim”. The primary judge is said to have formulated and applied two tests, each of which departed from that stated in Hannover Life v Jones. 49. The first is that formulated at Judgment [116]. Having referred to the statements of principle in Shuetrim at [60]–[65], his Honour continued: … The insurer is required to “act reasonably in considering and determining” when forming its satisfaction or opinion as to whether the TPD definition is satisfied, and it must be shown that the view taken by the insurer was unreasonable on the material before it. In my view, if it can be shown on the evidence before the insurer that the actual decision-making process that was adopted by the insurer was sufficiently unreasonable to vitiate the determination, it should not be required of the claimant that he or she be able to exclude all other routes to the insurer reaching the same determination that could have been reasonable. 50. MetLife submits that his Honour’s last observation contradicts the principles in Hannover Life v Jones. In my opinion, that is not so. As his Honour recognised at Judgment [116], the obligation to act reasonably and fairly applies to the process of consideration (addressed in this observation), as well as the decision. And his Honour’s use of the adverb “sufficiently” before “unreasonable” acknowledges the point made at Judgment [825] (quoted at [13**] above), that the process (or decision) is only to be impugned if it exceeds what French CJ described in another context as the “area of decisional freedom” within which “reasonable minds may reach different conclusions”: Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 at [28]; cf at [105] (Gageler J), referring to “the bounds of reason”. 51. The second wrong formulation of the relevant test is said to appear at Judgment [852], where his Honour said: In deciding whether the determination by MetLife to reject Ms Hellessey’s claim for the third time was sufficiently reasonable in relation to the logic and judgments applied to the consideration of the available information, it is appropriate to look at the process of reasoning on an overall basis, on a basis that tracks the significant arguments addressed by MetLife, and also the individual decisions that MetLife made along the way that underpin the more general process of reasoning that led to MetLife’s ultimate determination. 52. Here, MetLife takes issue with the implicit requirement that a determination be “sufficiently reasonable in relation to the logic and judgments applied to the consideration”. In my view, such a requirement is not erroneous in substance. It also acknowledges the insurer’s decisional freedom, except by reference to a minimum standard of reasonableness. That this formulation did not contemplate any reversal of onus is made plain by a fair reading of the Judgment as a whole, especially [114]–[116]. 53. The written submissions in support of this ground, which asserts a misapplication of relevant principles, do not address his Honour’s findings as to the reasonableness of MetLife’s treatment of any of the evidentiary material, including the lay witness material. 54. In oral argument, the Court was taken to parts of the reasons in which it was said the primary judge had erred, either in applying the wrong test, reversing the onus or substituting the Court’s opinion for an opinion reasonably available. The only submission made in oral argument in relation to the reasoning at Judgment [855]–[869] was that the use to be made of the lay witness material was “part of the weighing process” to be undertaken by the decision-maker. Whilst that is correct, it is beside the point in circumstances where the primary judge found that MetLife had not engaged in that process. This ground is not made out in relation to his Honour’s conclusion concerning MetLife’s failure to consider the lay witness material. Ground 1(b): reliance on irrelevant considerations and evidence 55. MetLife submits that in deciding whether its third rejection was valid the primary judge had regard to oral evidence given during the course of the trial, as well as his findings as to the credibility of particular witnesses. It is said this approach was explicitly acknowledged at Judgment [534]. 56. In my view, a fair reading of the relevant parts of his Honour’s reasoning demonstrates otherwise. At Judgment [533], the primary judge recorded that in deciding whether to reject Ms Hellessey’s claim for the third time MetLife had to give “proper consideration to a number of relatively detailed substantive affidavits”. In the review of the evidence which followed, the summaries of the affidavit evidence and evidence in cross-examination, and findings as to credibility of each witness are separately recorded: Judgment [535]–[656]. More significantly, his Honour’s analysis directed to the validity of the third rejection, including the treatment of the lay witness material, does not refer to or rely upon any oral evidence given during the trial: Judgment [853]–[988]. That analysis was repeatedly described as directed to MetLife’s assessment of “Ms Hellessey’s lay witnesses’ sworn evidence”, as distinct from their evidence more generally or any assessment of their credibility: see Judgment [868], [869], [983], [986]. 57. This ground is not made out, either in relation to the finding of breach with respect to MetLife’s consideration of the lay witness material or the “first stage” enquiry more generally. In that enquiry, contrary to MetLife’s submissions, the primary judge’s reasons do not indicate that he had regard to Dr Westmore’s report of 30 November 2016: cf Judgment [875], [914], [934]. Finally, as is apparent from Judgment [236], whilst his Honour did not rely upon Dr Hodgson’s reports as providing “expert evidence” in the “second stage” inquiry, they remained relevant as providing “advice, information and suggestions to MetLife as part of its process of determining Ms Hellessey’s claim”. Ground 2(a): reversal of onus 58. Ground 2(a) is that the primary judge erred in failing properly to consider and apply Ms Hellessey’s onus to provide proof to MetLife’s satisfaction of the matters required by the TPD definition. MetLife submits the primary judge “considered that MetLife had to accept the claim unless it could justify a state of dissatisfaction, thereby disregarding the obligation of the Insured Member to provide evidence to the insurer in support of his or her claim”. Judgment [960], which concerns MetLife’s rejection of the lay witness material, is said to be a “pointed” example of the approach adopted by the primary judge that “MetLife must be wrong if it was arguable that Ms Hellessey was right”. In that paragraph, his Honour concluded in relation to MetLife’s consideration of the significance of Ms Hellessey’s horse-related activities: [960] In my view it was not reasonable for MetLife to reject Ms Hellessey’s sworn lay evidence out of hand just because it painted a different picture of the psychological significance of Ms Hellessey’s activities than that MetLife had chosen to adopt. The available evidence may have been consistent with MetLife’s conclusions, but it was equivocal and capable of explanation. Ms Hellessey’s witnesses’ evidence provided an explanation. It may have been within MetLife’s contractual province if it had given due weight to both the evidence that it had accumulated and the sworn evidence of Ms Hellessey’s witnesses. It did not do so. Without any real explanation, it simply rejected evidence that was inconsistent with its own conclusions that were inherently contestable. 59. This paragraph is said to describe an instance where the primary judge found MetLife to have “unreasonably refused to accept the due weight” of Ms Hellessey’s evidence, even though the evidence available “may have been consistent with MetLife’s conclusions”. That submission, in my view, grossly misunderstands the paragraph, which is referring to his Honour’s earlier reasoning at Judgment [855]–[869]. The point made is that MetLife could have given bona fide consideration to the lay witness material and that, acting reasonably and fairly in doing so, it might have concluded that the evidence should be given little weight. In the course of oral argument, senior counsel for MetLife did not contest that it was “right” to understand his Honour’s reasoning in that way. This ground is not made out in relation to MetLife’s consideration of the lay witness material. Ground 2(b): failure to consider unreasonableness of MetLife’s decision 60. This ground is that the primary judge erred in failing properly to consider and determine the critical question of whether “on the evidence available to [MetLife], it was unreasonable for [it] not to have been satisfied of the matters required by the TPD definition”. In support of this ground, MetLife submits that “according to Hannover v Jones [its] decision would only be invalidated if that conclusion was not reasonably or fairly open” to it. Not only did the primary judge not apply that test, it says, but his Honour “appears to have tested MetLife’s conclusion by reference to his own evaluation and, where the two differed”, by preferring his own opinion. As an example of this substitution of his own “evaluation” of material, MetLife refers to the description at Judgment [858] of MetLife’s response in the third rejection to Ms Hellessey’s affidavit concerning Fairymead as “not strictly wrong”. 61. The former submission is wrong in law, for the reasons at [8] and [50] above. The latter ignores the context in which the primary judge’s observation was made. His Honour was in no sense substituting his own view for one that was reasonably open: he was emphasising that, whilst the earlier observation may have been correct, it ignored the substance of the matter as recorded in Ms Cleary’s affidavit and its doing so constituted “a serious error in MetLife’s reasoning process”: Judgment [859]. Accordingly, this ground is not made out in relation to MetLife’s consideration of the lay witness material. Ground 2(c): excessive scrutiny of MetLife’s decision 62. As Ms Hellessey’s written submissions suggest, this ground asserts that the primary judge erred by imposing too high a standard of analysis on the decision made by MetLife and this resulted in unfairness to it. In support of it, MetLife refers to seven so-called “criticisms” made of it by the primary judge, which are claimed to have been “unwarranted”. For example, in relation to the third rejection letter, at Judgment [529], his Honour said: [529] MetLife seems to have been proceeding on the basis that Ms Hellessey was engaged with Ms Cleary in a substantial horse-related business that traded under the name “Fairymead”, so that when it did not receive a comprehensive explanation as to why that was not so, it thought it reasonable to disregard all of the other evidence served to support Ms Hellessey’s claim. 63. MetLife submits that it was “unfair” to speculate as to its reasons for attaching significance to Ms Hellessey’s involvement in Fairymead. However, any such speculation is not shown to have involved or led to any material legal or factual error in relation to MetLife’s consideration of the lay witness evidence. The other criticisms do not address that evidence in any respect. Conclusion 64. The primary judge’s conclusion at Judgment [989] that the third rejection was invalid should be upheld. His Honour did not err in finding that MetLife breached its obligation to act reasonably and fairly in its treatment of the lay witness material, and that was sufficient to sustain his conclusion. This is not a case where it is appropriate for this Court to deal with the challenges to other findings of breaches of duty by MetLife in its consideration and determination of whether the TPD definition was satisfied. Many of those findings take account of his Honour’s conclusion in relation to MetLife’s rejection of the lay witness material, and it would be difficult and artificial to deal with those finding on the hypothesis that this rejection involved no breach of duty: see Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [7] (Leeming JA, Basten and Gleeson JJA agreeing). The appeal should be dismissed with costs. 65. WHITE JA: I have had the advantage of reading in draft the reasons for judgment of Meagher JA. I agree with those reasons and with his Honour’s proposed orders. I would add the following observations concerning one of MetLife’s submissions. These remarks do not qualify my agreement with the reasons for judgment of Meagher JA. 66. Meagher JA has referred (at [19]) to MetLife’s second ground of appeal. Ground 2(b) was that: “The trial judge failed properly to consider and determine the critical question of whether, on the evidence available to the appellant, it was unreasonable for the appellant not to have been satisfied of the matters required by the TPD definition.” 67. This ground of appeal framed the critical question not as being whether MetLife acted reasonably in declining to form an opinion that the matters required by the TPD definition were satisfied, but whether it was unreasonable for it not to be so satisfied. 68. In its written submissions MetLife explained this ground as being that the primary judge had not followed the “legal test” authoritatively stated in Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233; (2017) ANZ Ins Cas 62-149 that the criterion of reasonableness of the insurer’s decision is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim (per Gleeson JA at [121] with which Macfarlan and Meagher JJA agreed at [1] and [9] respectively). The passage relied on was as follows: “[121] As I have said, the task for the court in the present case is not to assess what it thinks is reasonable and thereby conclude that any other view displays error. It may also be accepted that there can be a range of opinions available to an insurer acting reasonably and fairly on the material before it. However, the suggested analogy with judicial review is not so close as to require the adoption of the stringent test of unreasonableness in the Wednesbury sense. Rather, the criterion of reasonableness of an insurer’s decision is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim.” 69. MetLife submitted that the decision it made was “plainly open” to it and hence was not an invalid determination, that the test proposed by the primary judge was different from the “test stated in Hannover v Jones” and that the primary judge “focused on the process” rather than the body of evidence before MetLife. The test stated by the primary judge that MetLife criticised was: “In my view, if it can be shown on the evidence before the insurer that the actual decision-making process that was adopted by the insurer was sufficiently unreasonable to vitiate the determination, it should not be required of the claimant that he or she be able to exclude all other routes to the insurer reaching the same determination that could have been reasonable.” (Judgment [116]) 70. MetLife submitted that “at no stage did the trial judge here consider whether a decision might be ‘open’ if the insurer was acting reasonably or fairly.” In oral submissions Mr Watson SC who appeared with Mr Purdy for MetLife submitted that the question was whether “an insurer in the position of this insurer, acting reasonably – whether that decision was open”. 71. That is, MetLife submitted that the primary judge was in error by inquiring whether MetLife itself acted reasonably and fairly in declining to form the opinion that it was satisfied that the respondent met the TPD definition. This was because, so it was submitted, the relevant inquiry was whether an insurer in MetLife’s position could reasonably have reached the opinion that it formed. 72. This submission takes what was said by Gleeson JA in Hannover Life Re of Australasia v Jones at [121] out of context and ignores other parts of his Honour’s reasons, and the reasons of the other judges of the Court. 73. As Meagher JA observed in Hannover Life Re of Australasia v Jones (at [8]) the focus of the parties’ arguments in that case was “on the unreasonableness ground for attacking the insurer’s opinion, as distinct from whether the insurer acted unreasonably in the opinion-forming process.” It was to this that Gleeson JA was referring in [121] of his Honour’s reasons quoted above. His Honour was not saying that the claimant will be bound by the insurer’s opinion that he or she was not totally and permanently disabled if the insurer did not act reasonably in forming that opinion but an insurer could reasonably have formed that opinion. 74. In Hannover Life Re of Australasia Ltd v Jones Gleeson JA restated (at [86]) the principle that: “...the insurer is not entitled to refuse a claim for a reason which depends on the efficacy of an opinion in relation to the formation of which it has not acted reasonably and fairly or which does not address the correct question. And if the insurer does form and rely on such an opinion, that constitutes a breach of its contractual obligations and the court itself may determine whether on the material available to it, the claim falls within the policy.” 75. His Honour cited various authorities in support of that well-established proposition, including Edwards v Hunter Valley Coop Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 and Hannover Life Re of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123; [2005] NSWCA 214, and rejected a challenged by the insurer to the decision of the primary judge in Hannover Life Re of Australasia Ltd v Jones (Brereton J) to the same effect (at [50] and [82]). 76. Gleeson JA noted (at [87]): “[87] The debate in this Court focused on whether the assessment of the reasonableness of the Insurer’s ‘opinion’ should be undertaken in the Wednesbury sense, as the Insurer contended; or by reference to entirely objective criteria, that is, a review of the merits of the insurer’s decision, as Mr Jones contended; or by reference to some other criterion or standard of review.” 77. Gleeson JA rejected both the submission of the insurer that the assessment of the reasonableness of its opinion should be undertaken in the “Wednesbury sense”, meaning either a decision that was so unreasonable that no reasonable insurer could have reached it or, perhaps, was irrational, and Mr Jones’ contention that the insurer’s opinion could be reviewed on its merits and had to be either correct or fair and reasonable as assessed on entirely objective criteria (at [89]-[98]). The test formulated by his Honour at [121] addressed the standard for assessing the reasonableness of the insurer’s opinion, not the reasonableness of the way the insurer went about forming its opinion. 78. In Hannover Life Re of Australasia Ltd v Jones Macfarlan JA repeated the observation of Allsop CJ in Minister for Immigration and Water Protection v Stretton (2016) 237 FCR 1; [2016] FCAFC 11 at [10] that “the concept of legal unreasonableness is not amenable to minute and rigidly-defined categorisation or precise textual formulary”. Meagher JA said that for a claimant to establish that an insurer’s decision is not contractually binding a party would need to show that the view taken by the insurer was unreasonable on the material then before the insurer or that the insurer had not considered the correct question or that in considering that question and informing itself as to matters relevant to its determination, the insurer had not acted fairly and reasonably (at [7]). 79. His Honour added (at [9]) that the insurer breaches its implied obligation to act reasonably and fairly in forming or declining to form an opinion if the opinion was not open to an insurer acting reasonably and fairly in considering the claim, but that is not the only ground on which the insurer’s opinion may have no contractual effect. 80. An opinion that would not be open to an insurer acting reasonably and fairly will not be binding on the claimant. It is not a corollary of that principle that the insurer’s opinion will be binding on the claimant if it is one that would be open to an insurer acting reasonably and fairly, if the insurer in question did not act reasonably and fairly in reaching its opinion. It is only if the insurer has acted fairly and reasonably in assessing and determining the claim that the insurer’s decision that it is not satisfied that the claimant has met the requirements of the TPD definition may be determinative. It would be to distort the contractual language (“to our satisfaction”) to postulate the satisfaction of an hypothetical reasonable insurer faced with the same materials which the actual insurer had. 81. There is a distinction between the formation of a reasonable opinion and acting reasonably in the formation of an opinion. Para [121] of the reasons in Hannover Life Re of Australasia v Jones addresses the former. The reasons of the primary judge addressed the latter. The primary judge was not in error in doing so, nor in his evaluation that MetLife did not act reasonably in forming its opinion. ********** 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. Decision last updated: 12 December 2018

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Adam Eftimoski v Metricon Homes Pty Ltd [2014] NSWCATCD 254

https://www.caselaw.nsw.gov.au/decision/55026b4de4b0b29802dc2b1d

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"Civil and Administrative Tribunal\nNew South Wales\nMedium Neutral Citation: Adam Eftimoski v Metr(...TRUNCATED)

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Rigby v State of New South Wales [2022] NSWCA 14

https://www.caselaw.nsw.gov.au/decision/17eff9382c114f57b6069409

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"Court of Appeal\nSupreme Court\nNew South Wales\nMedium Neutral Citation: Rigby v State of New Sou(...TRUNCATED)

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"Zonnevylle v Secretary, Department of Education; Zonnevylle v Secretary, Department of Education [2(...TRUNCATED)

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"Civil and Administrative Tribunal\nNew South Wales\nMedium Neutral Citation: Zonnevylle v Secretar(...TRUNCATED)

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New South Wales Nurses Association v Calvary Retirement Community Cessnock [2006] NSWIRComm 333

https://www.caselaw.nsw.gov.au/decision/549f7b073004262463a981dd

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"Industrial Relations Commission\nof New South Wales\n\n\n\n CITATION: New South Wale(...TRUNCATED)

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DPP v CAMPILLO [1999] NSWSC 1294

https://www.caselaw.nsw.gov.au/decision/549f9ee53004262463b2769a

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"New South Wales\nSupreme Court\n CITATION : DPP v CAMPILLO [1999] NSWSC 1294\n CURRE(...TRUNCATED)

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R v Evans; R v Rawlinson; R v Proud [2014] NSWSC 979

https://www.caselaw.nsw.gov.au/decision/54a63ed43004de94513dc1ec

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"Supreme Court\nNew South Wales\n\n\nMedium Neutral Citation: R v Evans; R v Rawlinson; R v Proud [(...TRUNCATED)

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Council of the Law Society of New South Wales v Liepins (No 3) [2016] NSWCATOD 51

https://www.caselaw.nsw.gov.au/decision/5726a25ce4b05f2c4f04d93d

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"Civil and Administrative Tribunal\nNew South Wales\nMedium Neutral Citation: Council of the Law So(...TRUNCATED)