Murphy, McCarthy & Associates Pty Limited t/as MMA Civil Contractors (Subject to Deed of Company Arrangement) v Zurich Australia Limited

1. [1]

   WARD P: I agree with Ball JA.

2. [2]

   MITCHELMORE JA: I agree with Ball JA.

3. [3]

   BALL JA: This is an appeal against orders made by the primary judge, Kunc J, on 25 September 2024 dismissing a claim by the appellant, Murphy, McCarthy & Associates Pty Ltd t/as MMA Civil Contractors (Subject to Deed of Company Arrangement) (MMA), under an insurance policy issued to MMA by OnePath Life Ltd on 16 July 2013 and renewed annually by MMA. Among other things, the policy provided life and total and permanent disability (TPD) cover. The life insured under the policy was Mr Francis Heron, who through a company he incorporated, FREMS Contractors Pty Limited, provided his services to MMA as a construction manager and project supervisor on an exclusive basis from about 2002 to November 2021. MMA claimed that Mr Heron suffered a “total and permanent disability” within the meaning of the policy following a left hip replacement he had on 19 November 2021. On 1 August 2022, the life policy was novated to the respondent, Zurich Australia Limited, following its acquisition of the insurance business carried on by OnePath.

The policy

1. [4]

   Clause 3.2.1 of the policy relevantly provides:

2. [5]

   Clause 3.2.1.2 relevantly provides:

3. [6]

   Clause 3.2.1.2 contains the following definition of “Own Occupation TPD”:

4. [7]

   The word “occupation” is not defined in the policy. “Injury” is defined in the glossary of special terms to mean:

5. [8]

   Clause 1.8 of the policy provides:

Factual background

1. [9]

   In mid-2021, Mr Heron, who was then aged 64, saw his general practitioner, Dr Peter Hay, complaining of hip pain. He was referred to Dr Michael O’Sullivan, an orthopaedic surgeon, who diagnosed Mr Heron as suffering from “arthritic change affecting the left hip”.

2. [10]

   Mr Heron ceased work on or about 12 November 2021. He underwent a total left hip replacement on 19 November 2021. The primary judge found that “the surgery was very successful”, that Mr Heron “has made an excellent recovery” and that he “cuts a vigorous figure as he moves about [his current work site] performing his duties” (a conclusion the primary judge was able to draw from several videos shown to him): J[2]. However, Mr Heron did not return to work at MMA.

3. [11]

   On 26 May 2022, Firths, solicitors, lodged on behalf of MMA an Initial Claim Form dated 20 May 2022 for a TPD claim in respect of Mr Heron together with several supporting documents. Those documents included Mr Heron’s Resume and a “Position Description of Mr Heron, during his employ with MMA Civil Pty Ltd”. They also included a OnePath Treating Doctors Statement dated 8 June 2022 completed by Dr O’Sullivan and an “Education, Training and Experience Questionnaire” signed by Mr Heron on 20 May 2022.

4. [12]

   The resume relevantly described Mr Heron’s “Site Specific Responsibilities” as:

5. [13]

   The position description, which Mr Heron believed was created by Mr Shane McCarthy, the controlling mind of MMA, relevantly contained the following (quoted at J[75]):

6. [14]

   In the Treating Doctor’s Statement, Dr O’Sullivan expressed the opinion that Mr Heron was “unable to perform [normal] duties” and in response to questions concerning whether he expected Mr Heron’s limitations to improve and, if not, his reasons, Dr O’Sullivan answered the first question “No” and gave as his reason “Ongoing limitations due to THR [total hip replacement]”.

7. [15]

   In a report dated 8 February 2024 (after the hearing had commenced) that was relied on by MMA at the hearing, Dr O’Sullivan gave the following explanation for his conclusions:

8. [16]

   On 8 July 2022, Dr Hay completed a Permanent Incapacity Medical Certificate in which he said:

9. [17]

   Following correspondence between Firths and OnePath on 13 July 2022 and again on 11 August 2022, OnePath asked that Mr Heron complete an “Occupational Questionnaire” setting out details of Mr Heron’s “duties, roles and responsibilities” and if they changed over time, separate questionnaires for each relevant period. The information was said to be required “to properly consider Mr Heron’s ‘own occupation’”. Firths refused to supply that information saying in a response dated 17 August 2022 to the second request:

10. [18]

    MMA commenced proceedings in October 2022. The case was fixed for a 3‑day hearing commencing on 30 January 2024. Before the hearing, on or about 16 October 2023, FREMS entered into an agreement with Jonishan Pty Ltd for Mr Heron to work as a project supervisor at the Badgerys Creek airport construction site. During late December 2023 and early January 2024, Zurich obtained video footage of Mr Heron working at that site. It was Zurich’s case at the hearing that the activities that Mr Heron engaged in at the Badgerys Creek site demonstrated that he was still able to engage in the activities of the occupation he carried on while working for MMA. The tender of the video footage resulted in the parties relying on additional medical evidence that was prepared after the hearing commenced and extensive cross-examination of Mr Heron, including cross‑examination of him by reference to the video footage: J[14].

The primary judgment

1. [19]

   The critical question before the primary judge was whether Mr Heron was, as a consequence of his hip replacement, unlikely ever again to be able to engage in the occupation in which he was engaged immediately before his operation.

2. [20]

   His Honour began the answer to that question by referring to uncontroversial principles relevant to the interpretation of commercial contracts as set out in decisions including Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] and Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]-[17]: J[31]-[32]. His Honour then referred to the dictionary definition of “occupation” and several cases concerning the meaning of that word, including Minister for Immigration & Multicultural Affairs v Hu (1997) 79 FCR 309 (Hu): J[35], [55]. His Honour concluded (J[59]):

3. [21]

   Applying that definition, his Honour then sought to identify what Mr Heron’s occupation was by reference to several documents, including the application form for the insurance which included a section requiring Mr Heron to provide information about his “present duties” (which Mr Heron said in cross‑examination did not change over time), Mr Heron’s resume, which his Honour found was created by MMA “some time no earlier than 2019” (J[66]), the position description and an Education, Training and Experience Questionnaire, which was also included with the Initial Claim Form, as well as Mr Heron’s own evidence. His Honour concluded at J[101] that Mr Heron’s own occupation was “Construction Manager/Project Supervisor” for MMA, which involved the duties and responsibilities stated in his resume. In reaching that conclusion, his Honour rejected the position description as “a document upon which the Court can rely with any confidence” for several reasons. It was not Mr Heron’s document. Although Mr Heron referred to it in an affidavit he swore in support of the claim, he could not recall whether it was before him at that time and he said he had no idea about it. The document was incomplete because it referred to Mr Heron’s responsibilities but then only listed under the heading “Responsibility 1” the “Manual elements of the position”. The emphasis on the manual elements appeared to be inconsistent with his job description of “Construction Manager/Supervisor”. Finally, the document was prepared by Mr McCarthy and there was a real risk that it was “a self-interested MMA document”: J[109].

4. [22]

   His Honour also thought that Mr Heron’s evidence did not provide reliable evidence of the nature of his occupation while working for MMA. His Honour gave two main reasons. First, his Honour accepted that although “Mr Heron may have performed some manual work while in the trenches” that was not an essential part of his job or occupation, but rather was a case of Mr Heron “helping out” on occasions when he saw a task to be done, which was typical of his attitude to work: J[104], [112]. Second, his Honour thought that the evidence given by Mr Heron of the degree to which he engaged in physical activities was exaggerated, although not deliberately so: J[16]. On that point, his Honour said:

5. [23]

   His Honour then turned to the question of what activities Mr Heron was currently able to engage in and whether in the light of those activities he was unlikely ever again to be able to engage in the occupation in which he was engaged immediately before his operation.

6. [24]

   In relation to the first issue, the primary judge referred to a long list of activities that Dr O’Sullivan and Dr Robin Mitchell, an occupational physician called by Zurich, agreed Mr Heron could engage in: J[134]. Those activities were:

7. [25]

   Based on that evidence, the primary judge reached the following conclusions:

8. [26]

   In relation to the second question (whether Mr Heron would be able to engage in the activities of his own occupation in the future), the primary judge concluded that Mr Heron was not disabled to such an extent that he was unlikely ever again to be able to engage in those activities: J[160]. He gave three reasons:

The grounds of appeal

1. [27]

   MMA identifies multiple grounds of appeal in its Amended Notice of Appeal. Many of them are overlapping, and not all of them are easy to follow. Some have embedded in them more than one ground. Rather than deal with each ground separately, it is convenient to focus on what appear to be the essential errors that are said to exist with the primary judgment.

2. [28]

   First, it is said that the primary judge took the wrong approach to the definition of the word “occupation” as used in the policy and in doing so placed too much emphasis on Mr Heron’s resume and inadequate weight on evidence of what Mr Heron did for MMA. Second, and related to the first point, it is said that the primary judge gave inadequate weight to the position description and to the description of Mr Heron’s duties contained in the application form in determining his occupation immediately before his hip operation. Third, it is said that the primary judge wrongly concluded that Mr Heron’s evidence of the nature and extent of the physical work he did for MMA was exaggerated. Fourth, it is said that the primary judge gave inadequate weight to the evidence from the medical experts.

3. [29]

   MMA contends that the primary judge’s conclusion that Mr Heron’s occupation while he was doing work for MMA was as set out in his resume rests on a false distinction between Mr Heron’s own occupation and a job, and on an over reliance on the Federal Court’s decision in Hu (ground 8). It also claims that the conclusion fails to take account of the purpose of the insurance and in doing so places insufficient weight on what Mr Heron did while he worked for MMA (grounds 9 and 11).

4. [30]

   There is some force in these criticisms of the primary judge’s reasons. The purpose of the insurance was not to protect Mr Heron against the possibility that, as a result of an injury, he would not be able to work. Rather, its purpose was to protect MMA against the possibility that, as a result of an injury, Mr Heron would not be able to continue to work for it. The terms of the policy recognise the distinction between life and TPD insurance designed to protect the life insured and life and TPD insurance designed to protect an “employer” by giving the insured an option of selecting which definition of “TPD” would apply. The “own occupation” definition was clearly intended to be the appropriate definition for insurance of the latter type. The word “occupation” as used in the definition of “own occupation” should be interpreted consistently with the purpose of providing protection to the employer. That conclusion is not altered by the fact that Mr Heron was engaged by MMA through his private company.

5. [31]

   The purpose of the policy and the definition of “TPD” selected by MMA was to protect MMA if Mr Heron’s services were, because of an injury, no longer available to it. In that context, the word “occupation” requires consideration of the actual activities carried out by the life insured in his or her most recent job, not whether he or she could carry out the same occupation according to some abstract taxonomy for the classification of different types of occupation.

6. [32]

   However, it does not follow from that that the only source of information concerning the tasks Mr Heron performed for MMA was Mr Heron’s evidence. The primary judge was entitled to consider the documentary evidence relevant to that question, including Mr Heron’s resume, and to place weight on that evidence, particularly if he considered Mr Heron’s evidence to be exaggerated on the subject. Nor does it follow that everything that Mr Heron did for MMA was part of his occupation. Rather, it was necessary to determine what things Mr Heron did for MMA that were essential or sufficiently important that they could be said to be part of his occupation rather than something that was merely incidental to it. The answer to that question depended on questions of judgment and degree and required consideration of matters such as the importance of the relevant activities to MMA’s business, the frequency with which Mr Heron engaged in them and whether they were part of what MMA might reasonably have expected Mr Heron to do.

7. [33]

   The decision in Hu is of limited relevance. That case concerned the question whether a delegate of the Minister for Immigration and Multicultural Affairs had made an error of law in rejecting an application by Mr Hu for a Class 126 (independent entrance) visa. The answer to that question depended on whether the delegate had made an error of law in concluding that Mr Hu’s “usual occupation” was that of an “electrical engineer”. “Usual occupation” was defined in the Migration (1993) Regulations 1992 (Cth) reg 2.4(4) to mean “an occupation that the applicant has engaged in for gain or reward for a continuous period of at least 6 months during the period of 2 years immediately preceding the relevant application for a visa or entry permit”. The trial judge concluded that the delegate had made an error and that Mr Hu’s usual occupation was that of a scientist (physicist), not an engineer. In upholding that conclusion, the Full Court said (at 324):

8. [34]

   Two things may be said about the decision in this context. First, it is apparent that the Federal Court was concerned with the meaning of a different phrase (“usual occupation”) and in a very different context than the phrase and context in issue in the present case. Second, it appears that the primary judge relied on Hu principally as authority for the proposition that in identifying a person’s occupation it is necessary to consider not just the tasks the person was performing at a particular time (in the present case, what Mr Heron did on a particular job) but what the person did more generally and to consider that question by reference to documentary evidence including the person’s resume as well as evidence of what the person actually did. Both those propositions are uncontroversial.

9. [35]

   Moreover, although the primary judge was inclined to adopt a taxonomic approach to the identification of Mr Heron’s occupation consistently with the approach taken in Hu, it is apparent that when addressing the critical question whether Mr Heron was unlikely ever again to be able to engage in his own occupation, his Honour did focus on the activities Mr Heron could do following his hip replacement and compared that to what Mr Heron did when he worked for MMA.

10. [36]

    In relation to what Mr Heron could do following his hip replacement, the primary judge set out a long list of physical activities that Mr Heron can still perform. No challenge is made to those findings.

11. [37]

    The primary judge also sought to identify what physical activities Mr Heron engaged in while working for MMA. In rejecting Mr Heron’s evidence that the work he did for MMA was “completely different” from the work that he was now doing for Jonishan, his Honour made two points. One was that Mr Heron tended to exaggerate the difference and the degree to which his work at MMA required him to engage in physical activity: see [22] above. The second was that some of the physical activities Mr Heron engaged in were examples of him “helping out” on occasions and were not essential parts of his job. As the primary judge explained:

12. [38]

    Similarly, the activities that Mr Heron could no longer undertake were not an essential part of his own occupation: see [26] above.

13. [39]

    Consequently, although the approach taken by the primary judge to the definition of “own occupation” may have been erroneous, his Honour made no error in applying the definition to the facts of this case – that is, his Honour correctly sought to determine whether Mr Heron, following his hip replacement, was unlikely to be able to continue to carry out one or more of the essential or important tasks that he had previously performed for MMA.

14. [40]

    MMA claims that the primary judge erred in rejecting the position description (ground 6). It gives three reasons. First, the document was confirmed “at least for the most part” by Mr Heron’s evidence. Second, the reasons given by the primary judge for rejecting the position description were “insufficient in any event”. Third, the contents of the position description were confirmed with Mr Heron by Dr Mitchell.

15. [41]

    MMA also raises an issue concerning his job description, although it is not easy to follow the point made by MMA in this context. The relevant ground of appeal (ground 13) is in the following terms:

16. [42]

    As to the position description, MMA’s principal complaint is that the document reflects the effect of Mr Heron’s evidence, which the primary judge ought to have accepted. That issue is dealt with below. MMA also suggests that the absence of a “Responsibility 2” was of no consequence and the fact that the document used the future tense (for example, “The primary responsibility of this position will be to assist with the installation and commissioning of pipelines …” (emphasis added)) was inconsistent with the document being prepared for the purposes of the claim. These criticisms are misplaced. The primary judge was correct to point out that the document was not Mr Heron’s document, that Mr Heron appeared to have no idea about the document when he was cross‑examined about it, that it was obviously incomplete and that it was difficult to reconcile with other evidence concerning Mr Heron’s role at MMA, which was primarily a supervisory one. His Honour was entitled in those circumstances to conclude that little weight could be given to the document in determining what Mr Heron’s role at MMA was.

17. [43]

    So far as the evidence given by Dr Mitchell is concerned, although Dr Mitchell was asked to “take a history from Mr Heron concerning his duties and responsibilities as a ‘Construction Manager/Supervisor’”, it is apparent that in response to that request, Dr Mitchell has merely quoted the position description. It is unclear from what Mr Mitchell says whether Mr Heron adopted that description. But even if he did, this evidence takes the matter no further than the other evidence given by Mr Heron about the position description.

18. [44]

    In response to a further question concerning Mr Heron’s responsibilities, Dr Mitchell did say this:

19. [45]

    As to the application form, the relevant section of the form listed various types of work and asked Mr Heron to indicate what percentage of his time was spent on tasks of that type. In relation to “Sedentary/Administration (e.g. filing, computer work, answering telephone, reception duties)”, Mr Heron said 20%. In relation to “Manual work – light (e.g. driving, warehousing, surveying, lifting under 5kg)”, Mr Heron said 5% “(if any at all)”. In relation to “Site visits/inspections (e.g. real estate sales, building industry inspector, contractor, underground)”, Mr Heron said 75%. Mr Heron left the item described as “Manual work – heavy” blank, suggesting that he did no work of that type. In cross‑examination, Mr Heron explained that included in the 75% was the inspection of trenches. The primary judge considered this evidence: J[64], [108]. His Honour correctly thought that the evidence supported the conclusion that Mr Heron’s responsibilities while working for MMA involved a minimal amount of manual labour.

20. [46]

    Many of the grounds of appeal relate to the primary judge’s conclusion that Mr Heron exaggerated the extent and nature of the physical activities he engaged in when working for MMA. MMA submits that that finding was not available to the primary judge for two principal reasons. First, it is said that the finding is inconsistent with concessions made by Mr Lloyd SC, senior counsel for Zurich, when MMA sought to lead additional evidence in re‑examination concerning Mr Heron’s credibility. The effect of those concessions is said to be that the primary judge was required to accept evidence given by Mr Heron, with the result that his Honour ought to have concluded that Mr Heron’s own occupation required him on occasions to undertake tasks that he could no longer undertake because of his hip replacement. Second, it is said that it was not open to the primary judge to conclude that Mr Heron had a tendency to exaggerate when that was not put to him and was not a submission made by Zurich.

21. [47]

    The first point is most clearly stated in grounds 1 and 2, which are in the following terms:

22. [48]

    In re-examination, Mr Gollan, who appeared for MMA, sought to tender photographs showing Mr Heron undertaking work for MMA and to ask questions of Mr Heron about those photographs with a view to establishing the types of activity Mr Heron engaged in while working for MMA. The first photograph put to Mr Heron showed him using a concrete saw. During argument on the question whether Mr Gollan should be permitted to tender the photographs and to put questions to Mr Heron of that type in re-examination, the primary judge indicated that the questions and photographs would be inadmissible in re‑examination to the extent that they were directed at giving details of what in fact Mr Heron did while he was working for MMA. That evidence ought to have been given in chief. However, his Honour indicated that the evidence might be admissible in re-examination to the extent that it had been put to Mr Heron in cross-examination that he was not telling the truth when he gave evidence about the work that he had done and the photographic evidence corroborated the evidence Mr Heron had given in cross-examination – in particular, in the case of the first photograph that prompted the objection that Mr Heron had used concrete saws while working for MMA. In response to that point, Mr Lloyd said that he would not be submitting that Mr Heron had not used concrete saws while working for MMA. More generally, after his Honour was taken to photographs showing Mr Heron engaged in other activities while working for MMA, Mr Lloyd said:

23. [49]

    A short time later, after the morning tea adjournment, the following exchange occurred between the primary judge and Mr Lloyd:

24. [50]

    Following further discussion in which Mr Lloyd made it clear that “My submission will be that the resume description is the accurate description of the core or key or essential responsibilities”, the primary judge said:

25. [51]

    Contrary to the submissions of MMA, there is no inconsistency between the concessions made by Mr Lloyd and the conclusions of the primary judge. The concessions concerned the truthfulness of the answers given by Mr Heron to questions concerning the activities he engaged in while working for MMA. On the other hand, the conclusions of the primary judge concerned the frequency of those activities and whether those activities formed an essential part of Mr Heron’s occupation while working for MMA. That called for an evaluative exercise that did not depend solely on conclusions regarding what Mr Heron did.

26. [52]

    In addition, the primary judge’s conclusions regarding Mr Heron’s credibility need to be understood in context. The evidence given in chief by Mr Heron concerning his activities while working for MMA was very brief. Relevantly, it consisted of the following two paragraphs in his first affidavit affirmed on 7 February 2023:

27. [53]

    In a second affidavit affirmed on 16 January 2024 (after Mr Heron had started working for Jonishan), Mr Heron said:

28. [54]

    Mr Heron was cross-examined extensively on both affidavits and on the position description. As I have explained, Mr Heron was also cross-examined extensively on the work that he did for Jonishan by reference to the video footage with a view to demonstrating that Mr Heron was still able to undertake many of the activities that he undertook while working for MMA and that the bald statements contained in his affidavits were not correct. One example of evidence of this type, although it comes from evidence given by Mr Heron in re‑examination in response to questions from the primary judge, is the following taken from a passage of the transcript quoted at J[84]:

29. [55]

    It is apparent that Mr Heron both in his affidavit evidence and in some of his oral evidence was quite dogmatic about the types of work that he did while working for MMA and the types of work that he can do now which was difficult to reconcile with other evidence he gave and with the video recordings obtained by Zurich. The primary judge had the advantage of seeing Mr Heron in the witness box and considering all the material. It was on that basis that he formed the opinion he did concerning Mr Heron’s credibility. There was ample evidence to justify that finding and that finding itself was consistent with the concessions made by Mr Lloyd. It was not a finding that Mr Heron had not performed some of the tasks he said he did while working for MMA. Rather, it was a conclusion that Mr Heron had exaggerated the extent of the physical activities he had engaged in while working for MMA and the degree to which those activities were different from the activities that he continues to engage in while working for Jonishan.

30. [56]

    Moreover, the only specific activities that the medical evidence established that Mr Heron could not do that it was suggested he had done while working for MMA were “walking along a concrete pipe in a trench and undertaking work in a confined space in a trench that might put his hip into an ‘awkward’ position”: J[159]. His Honour concluded that MMA had not established that they were essential aspects of the work that Mr Heron did for MMA and consequently had not established that Mr Heron would not be able to engage in his own occupation as a result of being unable to undertake those activities. The finding that those activities were not an essential aspect of the work that Mr Heron did for MMA is not challenged.

31. [57]

    MMA’s second point in this context is most clearly expressed in ground 10, which is in the following terms:

32. [58]

    The point highlighted is evidently a reference to the rule in Browne v Dunn (1893) 6 R 67 (HL). That rule was explained in the following terms by Gummow, Kirby and Callinan JJ in MWJ v The Queen [2005] HCA 74; (2005) 80 ALJR 329 at [38]:

33. [59]

    In the present case, Mr Heron was cross-examined extensively with a view to establishing that he could and in fact did undertake many of the physical activities that he had previously undertaken while working for MMA and that a number of the activities he said he undertook while working for MMA were not an essential part of his job. He and MMA were plainly on notice of the case that they were required to meet and were given an opportunity to answer it. The view that Mr Heron had a tendency to exaggerate was an evaluative conclusion based on that cross-examination. It was not a conclusion that needed to be put to Mr Heron separately. As Bray CJ explained in Thomas v Van Den Yssel (1976) 14 SASR 205 at 207:

34. [60]

    In relation to Mr Heron’s credit, it is not correct to say that MMA was not put on notice that the primary judge might find that Mr Heron’s evidence was exaggerated and was not given an opportunity to deal with that possibility. During final submissions, the following exchange occurred between the primary judge and Mr Gollan:

35. [61]

    In the light of that exchange, it cannot be suggested that MMA was not on notice of the findings that his Honour might make or that it was not given an opportunity to make submissions on the issue.

36. [62]

    MMA contends that the primary judge had insufficient regard to the medical evidence. This contention is most clearly stated in ground 14 (see also ground 4), which is in the following terms:

37. [63]

    The difficulty with this ground (and ground 4) is that on the findings of the primary judge, the medical evidence MMA refers to was based on a misunderstanding of the activities that Mr Heron was required to perform while working for MMA. The medical experts were cross-examined extensively on what Mr Heron could and could not safely do by reference to the video recordings. The primary judge took account of that evidence in setting out the list of activities that Mr Heron could still safely do at J[134].

38. [64]

    During cross-examination, Dr O’Sullivan gave this evidence:

39. [65]

    Dr Mitchell agreed that Mr Heron could not safely undertake those activities following his hip replacement. The primary judge was conscious of that evidence and accepted it when he described at J[158] (quoted at [25] above) the things that Mr Heron could not do. However, on the findings of the primary judge those activities were not an essential part of the work Mr Heron did for MMA.

Conclusion

1. [66]

   It follows that, in my opinion, the appeal must be dismissed with costs.