Finadri v Westpac Life Insurance Services Ltd
[2018] VCC 1636
•10 October 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-15-04395
| DENISE FINADRI | Plaintiff |
| v | |
| WESTPAC LIFE INSURANCE SERVICES LIMITED | Defendant |
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JUDGE: | HIS HONOUR JUDGE MURPHY | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14-18, 21, 23-24 May 2018 | |
DATE OF JUDGMENT: | 10 October 2018 | |
CASE MAY BE CITED AS: | Finadri v Westpac Life Insurance Services Ltd | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 1636 | |
REASONS FOR JUDGMENT
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Insurance – Insurance contracts – Fraudulent misrepresentations – Whether
insurer entitled to avoid the policy.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr C Hanson with Mr M A McLay | Melia Lawyers |
| For the Defendant | Mr A N Murdoch QC with Mr S E Gladman | Minter Ellison |
HIS HONOUR:
Introduction
1 In this proceeding, the defendant seeks to justify its avoidance of contracts of insurance issued to the plaintiff. The defendant also seeks to recover monies already paid under one of the contracts of insurance. The plaintiff seeks to have the contracts upheld. The defendant asserts that it was entitled to repudiate the contracts under the Insurance Contracts Act 1984 (Cth) (‘the Act’) on the basis of fraudulent misrepresentations in a proposal prior to the issuing of the policies. The plaintiff denied any fraudulent misrepresentations. She also denied any non-disclosure and said that, by reason of the issuing of the policies on the basis of an incomplete proposal form, the defendant had waived any right to disclosure.
2 For the following reasons I find that the defendant was entitled to rely on the proposal forms signed by the plaintiff in June and August 2009. Further, I find that in the proposal submitted by the plaintiff prior to the issuing of the policies, she failed in her duty of disclosure and fraudulently misrepresented her health status such that when the true picture came to light the defendant was entitled to avoid the policies and recover monies already paid under one of them.
Background to issuing of the polices
3 The plaintiff is employed as an office manager/bookkeeper for a family-owned business originally established by her parents, Finadri Windows Pty Ltd (‘the Company’). On a day-to-day basis, the Company, which manufactures and installs aluminium windows, was run by her older brothers, Walter, who gave evidence, and Adrian, who at the time managed the individual jobs on site, but is now deceased.
4 The Company had a longstanding banking relationship with the defendant, and the defendant also arranged relevant insurance policies. In evidence was a 2006 policy proposal signed by the plaintiff for Life and Total and Permanent Disability (‘TPD’) cover. In addition, the Company held ‘Key Person Insurance’ (‘KPI’) policies in the names of Walter, Adrian and the plaintiff.
5 Sometime in mid-2009, the Company’s bank manager, who was based at the defendant’s business office in Preston, introduced to Walter, at the Company’s office in Brunswick, a new insurance agent employed by the defendant, Mr Tim Campbell. Mr Campbell offered to review the policies held by the Company and discuss whether any changes were needed. On 10 June 2009, after what must have been a meeting between Mr Campbell, Walter, Adrian and the plaintiff, Mr Campbell sent to the plaintiff an email setting out the policies currently held by the defendant in favour of the Company.
6 One of the matters that Walter had asked Mr Campbell to arrange was to consider increasing the key person policy cover for his brother. Walter also gave evidence that he asked Mr Campbell to assess and discuss the personal insurance needs of the plaintiff.
7 The email to the plaintiff, dated 10 June 2009, foreshadowed a meeting the following week. Mr Campbell gave evidence that, in preparation for the meeting the following week, he had prepared and partially completed relevant documentation to obtain from the parties at the meeting documentation to allow him, if necessary or required, to prepare appropriate policy documents.
The meeting of 17 June 2009
8 Walter gave evidence that he had arranged for his wife to attend at the Company’s office on that day for the purpose of a meeting with Mr Campbell. He also arranged for Adrian and his wife to attend at the same time. The evidence from Walter is that he met for a short time with his wife and Mr Campbell. He then left and went to do other things. He did not see Mr Campbell with the plaintiff.
9 Mr Campbell gave evidence that he estimated that it would take approximately 40 minutes to complete the Client Profile document that he completed for Adrian and a similar document that he completed and had signed by the plaintiff. At all events, after the meeting on 17 June 2009, Mr Campbell had signed Client Profile documents in the names of Adrian and the plaintiff. The policies that these documents were to support were to be held in the name of the Company. On 18 June 2009, Mr Campbell faxed the documents to the Sydney insurance office of the defendant.
10 On the same date, Mr Campbell made a file note which recorded that the plaintiff was a client.
11 Again, on the same date, Mr Campbell forwarded to the plaintiff a letter setting out what had been done and awaiting further instructions from her.
12 On 25 June 2009, Mr Campbell sent a further letter to the plaintiff. The letter appears premised on instructions from the plaintiff that he is to proceed to arrange appropriate cover for her. As events unfolded, no further action was taken until 8 August 2009.
Conflicting accounts of the meeting of 17 June 2009
13 To return to the meeting of 17 June 2009, at that meeting, as I have indicated, Mr Campbell completed, on behalf of the plaintiff, a Client Profile document. This contains a range of personal information including income and material relevant to insurance needs, including in the case of disability. The plaintiff gave evidence that she recalled discussing matters involving her son with Mr Campbell, but was unable to provide further details of the circumstances of her meeting with him that allowed him to complete that document. The plaintiff also signed on that date a Personal Information Statement (“the June proposal’)[1] that is at the centre of the defendant’s decision to first issue the policies, and then later, avoid the policies.
[1] PCB tab 9.
14 Mr Campbell, who had commenced employment with the defendant in September 2008, having previously worked in various capacities in the finance industry, had no independent recollection, specific or general, of his dealings with the plaintiff and the Company. He was reliant on the documents that were produced. He is no longer employed by the defendant. His evidence as to what emerged from the documents was premised on many occasions with statements as to his usual practice and, “I would have”. He stated that he would date documents on the date that he signed them. He stated that his practice was not to rush clients to complete documents and that had the plaintiff sought further time to complete the June proposal, he would have given additional time. He stated that he would often see clients at their work address, and that on the basis that he lived nearby to the Company’s office, it would not have been inconvenient for him to return at a later stage to collect a completed document if requested to do so by the plaintiff.
15 The plaintiff’s account of the meeting of 17 June 2009 was that she recalled discussing the June proposal with Mr Campbell and providing him with some information about her son. She was unable to recall anything further of that part of the meeting. She was adamant that he did not sit down for any significant period of time with Mr Campbell. She maintained that after he had provided her with the June proposal and left it with her, he was then at the door of her office asking her whether she had finished it and asking her to give it to him so he could take it away.
16 The plaintiff’s evidence was that Wednesdays, which was the day of the meeting, were always very busy. The Company has a significant payroll and the plaintiff was responsible for preparing some 30 individual pays. This involved multiple calculations as to wages and entitlements for a number of the employees based on their union status and their location. She had to get the pays completed and dispatched to the bank by a certain time each Wednesday to allow the employees of the Company to be paid the next day. It was in those circumstances where she was rushed that she completed the June proposal.
17 The June proposal will be set out below, but it is the defendant’s case that the June proposal contains a number of misrepresentations, which the defendant maintains were fraudulently made, in relation to the plaintiff’s smoking status, her use of medication, and her medical history and status.
The August proposal and policy
18 The plaintiff has no independent memory of her dealings with Mr Campbell in August 2009. In evidence was a partially completed Personal Information Statement (‘the August proposal’),[2] which she agreed had her signature on it, although most parts of it that had been completed were not in her hand. In the June proposal, ‘Section N’, which sets out her income, had been completed without the particular financial year being included. In the August proposal, ‘Section N’ was not complete.
[2] PCB tab 10.
19 Also in evidence was a signed file note dated 11th August 2009 prepared by Mr Campbell indicating that the plaintiff had signed the proposal for insurance in her name.[3] He was to lodge the applications. The note indicated that there was no further action required by the plaintiff. Mr Campbell then faxed the relevant document to the defendant’s Sydney insurance office. The cover sheet[4] read as follows:
[3] PCB tab 21.
[4] PCB tab 23.
SUBJECT: Denise Finadri
Please find attached application for Denise Finadri.
Please refer to recent Key Person cover for full Personal Statement.
…
…
20 In evidence was communication between the underwriter in Sydney following receipt of the August proposal, which remained incomplete, and Mr Campbell seeking completion of the August proposal. Mr Campbell replied that the information contained in the June proposal was to be used as the basis of the policy.
21 It was on the basis of the August proposal, effectively incorporating the June proposal, that the policies were issued, and after a claim was later made, avoided on the basis of fraudulent nondisclosure and misrepresentations.
The competing cases
22 The plaintiff’s case is that the defendant cannot rely on any relevant non-disclosure or misrepresentations because the June proposal was made in the context of KPI cover being sought in the name of the Company, rather than for the plaintiff. Further, if there was any nondisclosure, the defendant had waived its right to full disclosure on the basis of proceeding with an incomplete August proposal document.
23 Alternatively, it is the plaintiff’s case that there was no nondisclosure, fraudulent or otherwise, and no fraudulent misrepresentations in relation to the June or August proposals.
24 In summary, the defendant’s case is that the provisions of s. 21 of the Act are a code. The plaintiff was seeking insurance cover, and therefore, she had a duty of disclosure as required by s. 21. The August proposal is to be read with the June proposal and it purported to discharge her obligation of full disclosure. The true position was that it contained a number of misrepresentations, as will be discussed below. The defendant goes further and says those misrepresentations are fraudulent, entitling it to avoid the polices pursuant to s. 29(2) of the Act.
Credit issues regarding the plaintiff
25 In closing, Mr Murdoch QC made a full blown attack on the plaintiff’s credit. In assessing the plaintiff’s credit, I have sought to leave aside the fact that the plaintiff has an obvious interest in the outcome of the proceedings, given her serious medical condition. I have also considered her demeanour under extended cross-examination. In assessing her demeanour, I have taken into account that she is suffering from a significant medical condition and made allowance for that.
26 Giving full due allowance for the plaintiff’s physical condition, the plaintiff’s responses under sustained cross-examination lacked conviction. Many of her answers appear self-serving and reconstructed. On critical issues she asserted a full memory – namely, the events surrounding the June proposal, yet she had no memory of the August meeting with Mr Campbell when she signed the August proposal. In an awkward, but compelling moment during the trial , she was unable to provide any explanation as to why the former was in her memory while the latter was not.
27 Further, in assessing the plaintiff’s credit, the weight of undisputed material associated with her engagement with medical professionals, to be discussed below, made her blanket negative answers to all questions in the June proposal as set out below lacking in veracity.
28 A central part of the plaintiff’s explanation for her responses in the June proposal was that she was rushed at the time. Her case was opened on the basis that the plaintiff was very busy on payday and that effectively she was waving away Mr Campbell to say “I haven’t got time for this, I haven’t got time for this.” Her evidence on this point, however, was wider than was opened, including that Mr Campbell was standing at the door putting pressure on her. She also made assertions that Mr Campbell should have helped her and he was effectively just trying to make money.
Is the plaintiff bound by the June proposal?
29 The plaintiff’s case was that the June proposal was for KPI and TPD cover for the Company. The policies were to be for the benefit of the Company. The August proposal came later, and was for individual polices for the benefit of the plaintiff. It is the August polices that the defendant seeks to avoid.
30 The plaintiff does not cavil with the fact that the defendant relied on the June proposal to issue the policies for the benefit of the plaintiff. The plaintiff submits, however, that the defendant was not entitled to do so, as the plaintiff had not agreed that this was to occur.
31 In reaching a conclusion on what happened at the August meeting, the plaintiff submits that the Court should adopt a Briginshaw[5] standard on the basis that the outcome of that conclusion will be very seriously adverse to the plaintiff, namely loss of cover for TPD, if she is found to have engaged in a fraudulent misrepresentation.
[5]Briginshaw v Briginshaw (1938) 60 CLR 336.
32 The defendant, on the other hand, submitted that the issue of whether there was reference to the June proposal at the August meeting, such that the two proposals were, for the purposes of the policy that was ultimately issued, to be read together, does not require a Briginshaw analysis. It is a matter to be decided on the usual civil standard.
33 I accept the defendant’s submission on this issue. Section 21 of the Act is a code in relation to the formation of policies and the duties of an insured. As the defendant submitted, there is no prohibition on an insured making more than one proposal. Similarly, there is no prohibition on an insurer relying on a proposal that may have been made for a different policy to be issued to a different entity and using that proposal to issue a policy on the life of an insured or in the name of the person making the proposal. The defendant’s case is that the ‘insured’ is defined in the Act to include ‘proposed insured’, and thus, the June proposal can be construed as part of the basis upon which it relied to issue the policy.
34 When the plaintiff completed the June proposal, she was a ‘proposed insured’ for both the policies to be issued on her life in the name of the Company, and also any policies which might subsequently be issued in her own name following advice received from Mr Campbell. It was not disputed that he had been requested by Walter to give the plaintiff such advice and that request is recorded in his file note following the meeting of 17 June 2009.
35 The second argument by the plaintiff is that the Court could not accept to the Briginshaw standard that the plaintiff was told that the June proposal was to be so used by the defendant. It was submitted that the evidence was just as consistent with Mr Campbell deciding in his own right to use the June proposal when submitting the August proposal to the defendant’s Sydney insurance office. The inferences were equally available, namely that Mr Campbell decided himself or that the plaintiff requested him to do so.
Assessment: Mr Campbell version preferred
36 In assessing the likelihood of what happened at the 11th August meeting, I note that the evidence of Mr Campbell was not challenged. He admitted that he did not have any specific or general recollection of the events. On the other hand, he said that his practice was to keep file notes, and in relation to the meeting of 11th August 2009, he said that “I would have explained what was required and what was not required”. He went on, “I would have said that we have previously completed a personal statement recently, so we can refer back to that and I would have said it wouldn’t have been required [of the plaintiff] to fill in the health information. That would be the explanation as to why the health questions are not completed.”[6]
[6] T247.
37 It is reasonable to reason back in relation to what was discussed at the meeting from the fact that on 12 August 2009, Mr Campbell sent to Sydney the application for insurance containing the cover sheet as discussed above.
38 This is evidence, I am satisfied, as to his state of mind at the time.
39 I am satisfied that it is inherently likely that Mr Campbell told the plaintiff that there was no need to complete the health information sections of the August proposal, as she had recently completed the June proposal and the relevant parts of that proposal could be used. That is reflected in the file note and in the cover sheet that I have referred to. As was submitted by the defendant in closing address, all the documents in evidence support Mr Campbell’s account as to his usual practice.
40 The plaintiff is really not in a position to contradict the defendant’s account, as she had no memory of the events in August 2009. She even conceded that Mr Campbell “possibly” did say something to the effect that the June proposal would be used. She did say, however, that her mind was effectively blank as to that period.
41 It is significant that the plaintiff did, on her admission, provide some of the figures as to salary on the August proposal. It is inherently unlikely that only that part of the document would have been completed unless there was some explanation given to her. It really requires a conclusion that Mr Campbell, who appeared to be a careful and conscientious employee, would not follow his usual practice, and purport to forward an insurance proposal to the Sydney office that was incomplete. This is unlikely.
42 The defendant’s case relies on the Court finding that the policy was issued relying upon both the June and August proposals, and that the former contains fraudulent misrepresentations that can provide a basis to avoid the policy. This requires the misrepresentations to remain operative when the policy was issued.
43 In considering the plaintiff’s explanation for her completion of the June proposal and the role of Mr Campbell, I find that the plaintiff was prone to mischaracterisation. She gave the impression that Mr Campbell was effectively a stereotypical insurance salesman trying to extract a commission from her and the Company who had just turned up unannounced on a busy Wednesday. In fact, as her brother Walter indicated, Mr Campbell had been introduced to him by the bank manager about a week prior to the 17 June 2009 meeting, and Mr Campbell had organised the meeting to ensure that key policies of the Company were up to date.
44 This evidence tends to support a conclusion adverse to the plaintiff in relation to her account of the events of 17 June 2009. It hardly seems in the interests of Mr Campbell to rush or seek to exploit the plaintiff when he was also responsible for all the Company’s insurance policies and had been asked by the key contact, Walter, to provide some advice to the plaintiff as to her personal insurance needs.
45 This background, in my view, contributes to a conclusion that it is inherently unlikely that Mr Campbell had any interest in rushing the plaintiff through the June proposal or effectively hassling her to complete it. While he may have had a salary package that included a bonus arrangement, the primary client in his attendance at the factory was the Company, and it would not be in his personal interest to seek to alienate the Company by rushing a key employee in relation to her personal insurance arrangements.
Authorities
46 The defendant’s case for avoiding the policies is based on its reliance on the continuing representations as to the relevant state of affairs by the proposed insured in the June proposal.
47 As submitted by the defendant, what is required is that the misrepresentation be made before the contract of insurance was entered in to (s. 29(1)(c) of the Act). In support of this, the defendant relied on a decision of Hargrave J, as his Honour then was, in Bergman v CGU Insurance Limited [2016] VSC 81 (‘Bergman’) where it was held that an earlier representation in a proposal was a continuing representation, and was therefore able to be characterised as a ‘misrepresentation’ because it remained false and relevant to the risk before the later policy was issued.
48 The plaintiff relied on the case of ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 (‘AMRO Bank’).[7] That case was about a claim for recovery under s. 48 of the Act by a party who was not insured by the insurer. Here, my conclusion that the June proposal is to be read together with the August proposal, so that there were in effect two proposals, is on the basis that for the purposes of s. 21 of the Act, the insured can mean actual or proposed insured. Thus, it is the plaintiff who owed the duty of disclosure, and, as submitted by the defendant, the fact that the earlier context was a disclosure in relation to a policy to be issued in the name of a Company does not, in my view, bring the matter within the dicta discussed in the AMBO Bank decision.
[7] The plaintiff specifically relied on [1631] – [1652].
49 The central matter is that the proposal had to be made before the policy was issued, and, consistently with FAI General Insurance Co Limited v McSweeney & Ors (1999) 10 ANZ Insurance Cases 61-443 (‘McSweeney’) and Bergman, provided it has not been withdrawn and remained a continuing proposal or representation, it could be acted on by the defendant.
Conclusion as to the June proposal and basis for the policies
50 I therefore accept the defendant’s submission that the June and August proposal documents can be read together as the documents upon which the policies were subsequently issued.
51 For the above reasons, being those submitted on behalf of the defendant, I am satisfied that the defendant issued the August policies on the basis of the June and August proposals, which were provided by the plaintiff under her duty of disclosure. The June proposal remained an unwithdrawn continuing representation by the plaintiff as to the matters contained therein. It was made temporally before the issuing of the policies. On the basis of the authorities relied upon by the defendant above, I am satisfied that defendant was entitled to treat the June proposal and the August proposal as a proposal form for the purpose of entering into the policies, and in considering whether the plaintiff has complied with her duty of disclosure.
52 I am further satisfied that the plaintiff was aware that the defendant would be relying on the June proposal. I do not accept the plaintiff’s submission that it is equally likely that Mr Campbell determined to use the June proposal as a basis for the August proposal without reference to the plaintiff, and the alternative inference that in fact he advised the plaintiff that he would do so.
53 Although he had no independent recollection of the 11th August discussion, he was not directly challenged that he would have followed his usual practice. The documents support his account. This is not a case of equal competing inferences as to what occurred at the meeting on 11th August. Looking at all the evidence, including the lack of challenge to the evidence of Mr Campbell, and in circumstances where the plaintiff has no recollection at all of the events on that date, I am comfortably satisfied to accept the defendant’s account.
54 It follows from this that I find that the plaintiff cannot rely on the incomplete August proposal to argue that the defendant has waived the right to disclosure as required by s. 21(3) of the Act.
55 The plaintiff sought to argue that in effect there were additional requirements imposed on the defendant in relation to the use of the June proposal, namely that Ms Finadri be told that the June proposal would be used for the purpose of her personal insurance requirements, and Ms Finadri be aware that the defendant intended to use the earlier proposal.
56 I accept the defendants submission that these additional requirements cannot be read into the Act. Rather, as was submitted, what was required was that the nondisclosures and misrepresentations remained on foot when the policy was issued. I accept the submission by the defendant that the matter is analogous to the renewal cases such as Bergman v CGU that was referred to.
57 In reaching my conclusion on this threshold issue, I do not accept that it is necessary to apply a Briginshaw analysis. It is only necessary to apply that analysis to the issue as to whether the defendant has defended its decision to avoid the policies under s. 29(3) of the Act.
58 If it was necessary to do so, I would reach the same conclusion, applying a Briginshaw analysis. The documents support the defendants case, the evidence of Mr Campbell as to his usual practice, as a matter of probability, supports the defendant’s case. Nothing was suggested that makes the evidence supporting the defendant’s contention inherently improbable. The alternative inference that the use of the June proposal was effectively a frolic of his own by Mr Campbell is inherently improbable, notwithstanding that he has no independent recollection of the events. Given the lack of memory on the part of the plaintiff as to the events on 11th August, the competing inference sought to be raised is significantly weaker than the case mounted by the defendant.
Conclusion on basis for issuing policies
59 For the above reasons, which are essentially those submitted on behalf of the defendant, I am satisfied that for the purpose of alleging a breach of duty of disclosure or fraudulent misrepresentation, I reject the primary submission of the plaintiff, and find that the defendant is entitled to rely on the June proposal regardless as to whether the plaintiff intended to, or had formed the view that, the defendant intended to act on the basis of the June proposal in issuing the policies applied for on 11 August 2009.
Events after 11 August 2009
60 After the plaintiff signed the August proposal, it was transmitted to the defendant’s Sydney insurance office. Thereafter, the underwriter, Ms Adora Rivera, was liaising with Mr Campbell in order to have the August proposal completed. The details of any communication between Mr Campbell and the plaintiff in relation to completion of the relevant income figures did not fully emerge, but it was not disputed that the August 2009 proposal was completed in enough detail to have the policies issued.
61 Thereafter, the existing policies held by the plaintiff were cancelled and she was given a premium refund. The policies that were issued provided a greater level of cover than those they replaced. The plaintiff then proceeded to an IVF program and continued working for the Company. She delivered twins in July 2010. Later in 2010, the plaintiff had a major health breakdown, and has not worked since. She made a claim on the TPD policy. The defendant paid the claim for a period, and then obtained further information and decided to cancel the polices on the grounds of non-disclosure. In this proceeding it defends its actions asserting fraudulent nondisclosure and or misrepresentation. It also seeks recovery of monies paid by way of a counterclaim.
The June proposal and the blind underwriting
62 The evidence was that when an insurer, such as the defendant, receives a claim under a policy and in the course of investigating the claim forms the view that there have been misrepresentations in the proposal(s), the underwriting department is requested to undertake a blind underwriting. This involves the original underwriter considering whether, on the basis of the information that should have been disclosed at the time the policy was issued, the defendant would have issued a policy, and if so, on what terms, including premium rates.
63 Before noting the basis upon which the defendant, in its blind underwriting assessment, determined to avoid the policies, on the basis of what the defendant submits amounted to nondisclosure and fraudulent misrepresentations, it is necessary to consider what the plaintiff represented to the defendant in the June proposal. This leads to a consideration as to how the defendant maintains that there were a number of misrepresentations of material matters such that the polices would never have been issued and thus it was able under the Act to avoid the polices that were actually issued.
The June proposal (mis)representations
64 Relevant parts of the June proposal form, as marked by the plaintiff, are produced below:
SECTION H: SMOKING AND ALCOHOL
1. Have you smoked tobacco, marijuana or any other substances in the past 12 months?
Yes ☐ No ☒
If ‘Yes”, please provide details
Type
Quantity(per day)
Cigarettes
Pipes/Cigars
Other (specify)
2. Have you used a nicotine replacement therapy in the last three months?
Yes ☐ No ☒
…
SECTION K: HEALTH DETAILS
1. To the best of your knowledge, have you ever had, or been told you have had, any of the following conditions listed below?
A ASTHMA
Yes ☐ No ☒
…
B SPINE, BACK OR NECK INJURY, PAIN, STRAIN OR DISORDER
Yes ☐ No ☒
If ‘Yes’, please indicate if any of the following apply:
Yes
No
Was your back/neck condition diagnosed as anything other than muscular aches, strains, pains or spasms?
☐Ø
☐
Have you had more than one occurrence of a back/neck condition?
☐Ø
☐
Have you had more than five days off work, or been on limited duties, within the last four years due to a back/neck condition?
☐Ø
☐
Has a doctor/general practitioner ever advised you to undergo any tests, investigations, or to take prescription medication for a back/neck condition?
☐Ø
☐
Please complete a Back and Neck Questionnaire.
C SKIN LESION (eg cyst, mole, melanoma, basal cell carcinoma, squamous cell carcinoma)
Yes ☐ No ☒
If ‘Yes’, please indicate if any of the following apply:
Yes No Have you noticed or become aware of any recent change in size or colour of any skin lesion for which you have not consulted a doctor? ☐Ø ☐ Have you had more than one lesion/cyst? ☐Ø ☐ Has any lesion/cyst been confirmed by a specialist/consultant to be malignant (cancerous)? ☐Ø ☐ Has any lesion been removed by a procedure other than being burnt/frozen off? ☐Ø ☐ Were you advised to have any further tests, treatments, checks or follow-ups for any lesion? ☐Ø ☐ Please complete a Skin Lesion Questionnaire.
D GOUT
Yes ☐ No ☒
If ‘Yes’, have you had any symptoms, treatment, or time off work in the last two years due to your gout?
Yes ☐Ø No ☐
Please complete a Gout Questionnaire.
…
F JOINT PROBLEMS
Yes ☐ No ☒
If ‘Yes’, please indicate if any of the following apply:
Yes No Have you had any problem with a joint other than the shoulder, wrist, elbow, knee or ankle? ☐Ø ☐ Was your joint problem anything other than just a strain or sprain? ☐Ø ☐ Have you had any symptoms or complications from a joint problem in the last two years? ☐Ø ☐ Have you ever had more than five days off work or been on limited duties due to any joint problem? ☐Ø ☐ Please complete a Joint Questionnaire.
…
FOR QUESTIONS 2 – 10, IF YOU ANSWER ‘YES’ TO ANY ANSWER, PLEASE PROVIDE FULL DETAILS ON THE NEXT PAGE
If you answer ‘Yes’ to any of the questions in bold, please complete the appropriate medical questionnaire.
To the best of your knowledge, have you ever had, or been told you had, any of the following:
Yes No A Blood disorder (eg anaemia, haemophilia, blood transfusion, leukaemia, lymphoma) ☐ ☒ B High Blood Pressure or High Cholesterol (if yes please provide date and reading level) ☐ ☒ C Heart or cardiovascular condition (eg chest pain, angina, rheumatic fever, heart complaint, blood vessel conditions) ☐ ☒ D Kidney, bladder or prostate disorder (eg kidney stones, urinary tract infections) ☐ ☒ E Bowel, colon, gastro-intestinal disorder or reflux condition (eg. Hernia, ulcers (non mouth), irritable bowel syndrome, colitis, haemorrhoids) ☐ ☒ F Repetitive Strain Injury (RSI), Chronic Fatigue Syndrome (CFS), Occupational Overuse Syndrome (OOS), Tenosynovitis, Chronic Pain Syndrome or Fibromyalgia ☐ ☒ G Stroke, Paralysis or Nerve Disorder (eg Bell’s Palsy) ☐ ☒ H Epilepsy or Fainting Attacks ☐ ☒ ... O O Any other illness or injury ☐ ☒ 3. Other than already disclosed, have you in the last five years:
Yes
No
A Taken any prescription medication on a regular or ongoing basis? (other than for colds and flu)
☐
☒
…
4. Do you currently have any other disability, illness, injury or symptoms not already disclosed?
Yes ☐ No ☒
65 It can be seen from the June proposal that the plaintiff answered all health questions in the negative. It was the defendant’s case that these answers involve fraudulent misrepresentations and nondisclosures.
66 As indicated the plaintiff in late 2010 suffered a major health breakdown and sought to make a claim under the TPD policy. The claim went to the claims section of the defendant which, having considered the contents of the June proposal containing what was essentially a series of negative answers to the medical questions, and having obtained some further material, forwarded the matter for a blind underwriting assessment.
The blind underwriting assessment
67 Ms Adora Rivera, Senior Underwriter, and Mr John Motu, Executive Underwriter, who both gave evidence, completed a blind underwriting assessment on 20 January 2011. The relevant blind underwriting document reveals that the following conditions were found to be not disclosed by the plaintiff in the proposal documents:
Thoracic and lumbo-sacral pains;
Bilateral knees problems;
Both hips and groin problems; and
Lower limb weakness.
68 The signed document goes on:
SUMMARY: This policy was accepted as a ‘Clean’ application. [The client had been undergoing tests since January 2009 and has been attending investigations by a neurosurgeon at the time the Personal Statement was signed. No disclosure was made on the Personal Statement regarding the above problems. Based on the medical reports received, no final diagnosis was made on the hips and groin pains either.
Assessment:
This client’s non-disclosure deprived us of our right to reasonably assess her application for IP, TPD, Life and Living benefit. Had the client disclosed the above conditions and had we received this medical report from the usual GP we would have not made any offer due to combined medical problems: thoracic and lumbo-sacral spine, bilateral knees and groin pains, both hips and lower limb weakness. As we do not have the full diagnosis as to the underlying cause of the hip and groin pains, we are unable to supply copies of the relevant reinsurance underwriting manual we use as a reference.
Did the plaintiff make misrepresentations in the June proposal?
69 Although the defendant had, following its blind underwriting, sought to avoid the policy on the grounds set out in the blind underwriting document, in its defence to the proceeding, the defendant relied on a wider range of alleged misrepresentations made by the plaintiff in the June proposal that:
a. she was a non-smoker;
b. she had not used a nicotine replacement therapy;
c. she had never had, or been told that she had, any spine, back or neck injury, pain, strain or disorder;
d. she had never had, or been told that she had, any skin lesion;
e. she had never had, or been told that she had, any joint problems;
f. she had never had, or been told that she had, any other illness or injury not already disclosed;
g. she had not taken any prescribed medication on a regular or ongoing basis (other than for colds and flu);
h. she had not had any other operation, investigation or consultation with any health services provider; and
i. she did not currently have any other disability, illness, injury or symptoms not already disclosed.
70 The plaintiff disputed that she had made any misrepresentations in the June proposal, and also denied any material nondisclosure.
The plaintiff’s state of health as at June 2009
71 Before considering the individual alleged misrepresentations, in order to assess whether the June proposal contained the alleged misrepresentations, it is necessary to note the state of the health of the plaintiff at the time of the June proposal as a key issue in this proceeding was whether the plaintiff had fraudulently misrepresented her medical conditions in the June proposal.
72 Before turning to consider the plaintiff’s evidence as to her state of mind and health when completing the June proposal, in order to assess this, these are my findings from the documents relevant to the plaintiff’s state of health in the period leading up to the June proposal.
73 In considering the medical records in evidence, I give them significant probative weight as they constitute contemporaneous records made at the time of histories provided by the plaintiff and opinions recorded and actions taken by the relevant medical practitioners. The lapse of time from the matters recorded in the documents in evidence to the date of trial, as a matter of common human experience, makes the matters contained in those documents inherently more plausible than inconsistent oral evidence from the plaintiff. It is also important to consider the records as a whole because they record a wide range of interactions with a range of health specialists over a significant period prior to June 2009 and thus become important objective background evidence in order to evaluate the asserted state of mind of the plaintiff when completing the June proposal.
74 The records are relevant to a wide range of issues raised by the alleged misrepresentations including the plaintiff’s smoking habits, musculoskeletal issues, referrals to other medical practitioners, prescriptions for medication, and general health issues.
75 The records of the Manningham Clinic (Exhibit 3) indicate that the plaintiff saw Dr Eva Youssef on 28 December 2007 and discussed, inter alia, wanting to stop smoking. The plaintiff was “also keen to have routine blood [tests]” as she was on a restricted diet, and was being examined in relation to a lump on her right side of her neck. On 5 April 2008, the plaintiff again saw Dr Youssef and was still worried about the lump on her neck. There was also a discussion about joint pain and arthritis. Dr Youssef’s records indicate that the plaintiff told her that her father has gout. There was also reference to blood tests.
76 On 18 April 2008, the plaintiff was referred by Dr Youssef to Dr Yvonne Pun in Box Hill, with a referral note stating:
“… [she] has been getting episodes of swelling, redness and pain over both ankles for several months now. This is often followed by redness and swelling over her shins. She is generally well, and recent bloods have all been normal – including N rh factor, ANA and uric acid. She does have a FHx [family history] of gout.”
77 On 6 January 2009, the plaintiff saw Dr Sumathy Krishnaswamy, who noted:
“both feet on dorsal aspect & ankle with pain extending to the legs, taking Voltaren. Seen podiatrist – going in fior (sic) orthotics.”
78 On the same day, Dr Krishnaswamy noted that she had advised and explained the results of the X-rays to the plaintiff and she was given Paroven for varicosity, Voltaren and there was a reference to orthotics and good shoes.
79 On 19 January 2009, the plaintiff saw Dr Danica Wong who, amongst other things, discussed “bilat (sic) all over leg pains – waiting for orthotics – suggest considering physio (sic) as well”.
80 On 28 January 2009, the plaintiff had a CT scan of her lumbar spine conducted at Balaclava Radiology.
81 The records of Dr Tasiopoulos indicate that, on 12 February 2009, the plaintiff was prescribed Panadeine Forte, Champix [nicotine replacement] (an initiation pack) and Valium. There was a further prescription of Panadeine Forte on 12 March 2009. On 18 March 2009, the plaintiff had an MRI of her lumbar spine in Prahran. The clinical notes noted “low back pain”. The referral doctor was Dr Tasiopoulos. He had also referred the plaintiff for the CT of the lumbar spine.
82 On 19 March 2009, the plaintiff was referred to Mr Damien Tange, neurosurgeon, by Dr Tasiopoulos regarding four months of severe low back pain radiating to both legs.
83 On 28 March 2009, in a new patient registration form for Mr D Tange, the plaintiff indicated that she was taking Celebrex, Voltaren and Valium. Her previous history included lap band surgery in 2001 and a “tummy tuck” in 2006. She listed Bodycare Physiotherapy as her physiotherapist.
84 On 30 March 2009, Matt Fishman, physiotherapist at Bodycare Physiotherapy (working at the same practice address as Dr Tasiopoulos) noted that he had been seeing the plaintiff for one month and noted that:
“[The plaintiff] presented with global lower limb, lumbar and thoracic pain as well as weakness at times. These findings [the CT scan findings discussed] do not explain her global and diffuse pain.”
85 Mr Fishman continued to refer to the plaintiff’s knee pain and leg difference that had been corrected with heel wedges:
“- [The plaintiff’s symptoms] have improved slightly during sessions and [the plaintiff] has increased tolerance for exercise and walking;
-She does however have random days of severe pain that are debilitating with no pattern;
-She is finding simple ADL’s difficult on these days;
-I have started her on some very gentle Pilates as she has poor core and pelvic control. This is evident in her gait. Her core is slowly improving.”
86 On 31 March 2009, Dr D Tange reported to Dr Tasiopoulos that the plaintiff “presents with significant discomfort, both in her hip and groin region, gluteal musculature, hamstring, and pain around her knees.” On history, this has been “present now for a few months and really does not seem to improve”.
87 On 16 April 2009, the plaintiff had X-rays of her knees and both hips at an Ascot Vale clinic.
88 On 27 April 2009, Mr D Tange asked Mr Andrew Tang, orthopaedic surgeon, to see the plaintiff.
89 On 7 May 2009, Mr A Tang reported back to Dr Tasiopoulos:
a. “Thank you very much for asking me to see Denise, a delightful young lady who presents with an interesting story of relatively sudden onset of pain involving her hips and knees, around Christmas last year. With physiotherapy and core stability exercises the majority of the pains have settled and what she has left now is a residual problem of pain in both her knees, she describes them quite clearly coming from the superior aspect of the patellae and has difficulty with kneeling or even squatting. Examination confirms patella-femoral irritability but s (sic) well as has this the suggestion of bilateral medial joint line tenderness as well.
b. There is no history of injury to explain why she should have signs of meniscal tear and as such I will organise an MRI scan of both knees. I will keep you informed.”
90 Mr A Tang again reported back to Dr Tasiopoulos on 21 May 2009. He noted damage to the patella apex of the tendon:
a. “I will offer Denise an arthroscopy of the more painful knee which is the left one, clean up the area under the tendon, see if we can deal with some of the damage to the posterior cruciate ligament by performing some form of capsular shrinkage to see if this buys her some symptomatic relief. This is the only option I have for her.”
91 In a further report of the same day, Mr A Tang indicated that:
a. “… I cannot actually explain why she would have these subacute strains, as well as this there is a question as to whether or not there is a tear in the medial meniscus of the left hand side, to my eyes there is, but I will have to clarify this with the radiologist.”
92 On 21 May 2009, the plaintiff had an MRI of her left and right knee.
93 On 29 May 2009, the plaintiff had a left knee arthroscopy performed at the Epworth Hospital by Mr A Tang.
94 In an Epworth Hospital admission form for the plaintiff’s left knee surgery, the document indicates that the plaintiff had taken steroids or cortisone in the last six months and they were last taken on 31 March 2009, but she was unsure of the name of the medication. The document also indicates that Champix would be a medication brought in by the plaintiff on the date of surgery.
95 Also in the admission form, the plaintiff answered “yes” to whether she had had ‘neck and back problems’, “yes” to ‘arthritis’ and “yes” to ‘skin issues: sores/rash/ulcers/wounds’, and in the comments section, wrote “lower (back) right leg)”.
96 Further, the plaintiff marked “yes” to whether she was a smoker, and particularised this as “3 weekly”, and marked “yes” to alcohol with the frequency being “once a week”.
97 On 12 June 2009, the plaintiff saw Dr Krishnaswamy. The entry reads:
“- has had Champix – full course – finished two mths (sic) ago
-has tried 2 cigarettes since
-request for Champix on private script
-lumpy erythematous patches in lower legs – bilateral, itchy
-for elocon cream trial – may need blood tests”.
On 17 June 2009 the plaintiff signed the June proposal.
98 While the defendant in its decision to avoid the policies was required to consider the position as at the date of the proposals, some of the medical material gathered later provided evidence as to the plaintiff’s medical condition before the issuing of the policies.
99 In an entry dated 7 October 2009, Dr Krishnaswamy noted:
“- Slightly lumpy and reddish (sic) lesions on both legs ongoing since March 09 (emphasis supplied)
-for doxy & cetaphil wash”
100 A referral dated 22 October 2009 from Dr Daisy Samuel-John to Dr Phillip Lane, reads:
“Thank you for seeing [the plaintiff] … who developed discoloured nodules on her lower limbs since March this year. They have been painful and itchy. A course of Doxycycline and Chlorhexidine wash have not helped. They are persisting and with summer coming on she is not happy with them. Also she is planning to go on IVF shortly.
O/E [On examination] The lower limbs are marked by erythematous nodules which are palpable and sore in spots.
Possible erythema nodosum?” (Emphasis supplied)
101 In a letter from Dr Rohan Crouch, rheumatologist, dated 27 October 2009, he noted that:
“ACTIVE PROBLEM: ? Erythema nodosum or another variant of panniculitis occurring on the lower legs bilaterally.
FINDINGS
This lady has had this eruption on the lower legs since March 2009. She has dusky blue dermal plaques occurring bilaterally. They are tender to touch. I agree with you that our diagnosis may be erythema nodosum but I think it is difficult due to the longevity of the condition. She has not responded to Voltaren or doxycycline previously. I discussed with her that although she is overly well I think a biopsy is warranted as I cannot be sure of the diagnosis.” (Emphasis supplied)
Was the defendant entitled to avoid the policies on the basis of fraudulent misrepresentation or non-disclosure?
102 The defendant did not dispute that it carried the burden to prove both misrepresentation and fraud. In final address, the plaintiff submitted that the defendant, in order to succeed in its case to avoid the policies, was required to satisfy the Court that, under s. 21(1) of the Act, the plaintiff knew of the matter within the meaning of s. 21(1); knew whether she believed the statement made was a matter relevant to the decision of the insurer to accept the risk, or whether the plaintiff, in the position of a reasonable person in the circumstances, would be expected to “know” the matter to be relevant.
103 This covers the obligation of the plaintiff under s. 21(1) of the Act. In the alternative, if there is a misrepresentation, the defendant was also relying on s. 26 of the Act which requires, in the case of an untrue statement in connection with a policy, that it was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held. In those circumstances the statement shall be taken not to be a misrepresentation.
Were there misrepresentations in the June proposal? Completing the proposal
104 The plaintiff submitted that in characterising her responses to the questions in the June proposal, the rushed circumstances of its completion must be considered. Thus, her evidence was that, as it was ‘payday’, she had “a huge day”. Walter supported this by indicating that things were busy that day. In relation to the role of Mr Campbell, the plaintiff testified that he was at her door “rushing me”. She stated that she had explained to him that she did not have a chance to go through the policy due to the busy morning, and that she was still in the middle of doing it, because she got carried away with completing the pays, to which Mr Campbell responded “I need to go, I need to go. Just give it to me.”
105 In closing address, the defendant took issue with the plaintiff’s evidence on this point where the plaintiff shifted her position under cross-examination. I have earlier noted that the plaintiff did not seek to challenge the evidence of Mr Campbell as to his usual practice. Further, some of the matters in the plaintiff’s evidence as to his motivation are not maintained on the evidence; in particular, whether he had arrived unannounced and whether he would be likely to achieve a commission. This weakens that part of her evidence that she was rushed. Further, there is an element of recent invention, in that, although the plaintiff’s case was opened on the basis that it was a busy day, the particular statements attributed to Mr Campbell by the plaintiff in her evidence were not opened, nor indeed put to him. These matters are damaging to her credit.
106 Having considered the plaintiff’s account of the meeting on 17 June, and the evidence of Mr Campbell as to his usual practice, and the concessions made by the plaintiff in cross-examination that she skimmed the document, I do not accept her account that there was anything rushed about her completion of the June proposal. The plaintiff’s case was that she completed the document in a rushed manner. At the time she was in good health and did not have back, hip and joint problems or any such condition. Her evidence was that she had minimal time off work and that after the arthroscopy, the issues in her back and hip resolved and she was able to continue working. This state of affairs was confirmed by a lack of relevant medical consultations after August 2009, and she subsequently fell pregnant. Having regard to the skin problem, this was just a rash.
107 The plaintiff’s state of mind as to her medical condition was set out in the first response to advice from the defendant that it sought to avoid the policy. In the undated March 2011 letter she indicated (exhibit ZI) that the failure to mention the arthroscope was human error. Such a procedure is very common. The scans were only a fact-finding mission as to why she had pain. After the procedure she no longer had discomfort or pain: “it was nothing serious and no residual effects after the arthroscope.” In final address, as a matter going to the credit of the plaintiff, the defendant noted that in that letter the plaintiff had not asserted, as she did in evidence, that she had been rushed by Mr Campbell.
108 Before I turn to consider the individual misrepresentations sought to be relied on by the defendant, I note that the plaintiff submitted that for the purposes of section 21 of the Act, the word “knows” is a strong word and means considerably more than “believes”, or “suspects”, or “strongly suspects”. The defendant did not dispute this but invited the Court to not accept the plaintiff’s evidence as to her subjective opinion of her health when answering the questions in the June proposal. In this respect the defendant submitted that there were two issues to be considered: first whether the answers in the June proposal were correct, and second the state of mind of the plaintiff in relation to the giving of those answers.
109 In final address it was put that events after 17 June don’t have a bearing on either of those elements. In contrast, the plaintiff submitted that, having regard to a record of Medicare claims after that date, it supported the plaintiff’s assertion that she was in good health at the time of the June proposal.
The plaintiff’s matters relevant to the misrepresentation allegations
110 The plaintiff’s response to the defendant’s submission that in the June proposal she had fraudulently misrepresented her health contained a number of elements. First it was submitted that the circumstances of the completion of the document were relevant, including the conduct of Mr Campbell and the work pressures that the plaintiff was under at the time. It was also submitted that at the time of the June proposal the plaintiff did not consider herself a smoker, and had previously described herself as one in application for a previous cover in 2006.
111 Further, the plaintiff’s subjective opinion was that her health was excellent, she was on top of the world, had had minimal time off work, and was seeking to become pregnant. After the arthroscope her back pain is disappeared and she had no further problems with her back or knees. In relation to her leg condition, it was just a couple of red dots on her leg like a rash. Finally, the June proposal enquires after “conditions” whereas the plaintiff did not consider herself as having any condition. I will return to these matters as I consider each of the asserted misrepresentations, but note that I accept the defendant’s argument that the plaintiff’s state of mind, as a reasonable person under section 21, must be considered as at the June proposal, rather than looking backwards as to how the various conditions unfolded thereafter.
112 Before considering each of the alleged misrepresentations, I referred above to my consideration of the circumstances of the completion of the June proposal. Contrary to the plaintiff’s evidence, I do not accept that she was rushed by Mr Campbell to complete the document. As I have indicated this is inherently unlikely given his role with the defendant and the continuing relationship between the defendant and the Company. Thus the circumstances of the form being completed are not factors that the plaintiff can put into the mix as to whether or not a conclusion as to fraud can be reached.
Alleged non-disclosure/misrepresentation: (a) non-– smoking
113 The defendant submitted that the plaintiff misrepresented her smoking status as at the time she completed the June proposal, where it asked her whether she had smoked tobacco, marijuana or any other substance in the last 12 months prior to 17 June 2009. The plaintiff indicated in the proposal that she had not.
114 In cross examination, the plaintiff admitted that her answer in this regard was not true, but later claimed that at the time she completed the June proposal, she was a non-smoker. She further maintained that she was rushed and didn’t get to read the question properly.
115 In evidence was an Epworth HealthCare form that the plaintiff completed on 28 May 2009. In this form, the plaintiff indicated that she was smoking three cigarettes per week. She gave evidence to this effect also, claiming “it would have been three [cigarettes] a week because I was trying to get on the pregnancy path and eliminating that totally”.
116 In her evidence, the plaintiff said that in 2006, and as late as February 2009, she was still smoking approximately six cigarettes per day, and as a result, on 12 February 2009, Dr Tasiopoulos prescribed the plaintiff with Champix.
117 The plaintiff stated that Champix is a prescription only medication that helps smokers cease smoking. She admitted that she was prescribed Champix for this purpose, and stated that it was possible she misrepresented her smoking habit to her doctor in order to obtain this prescription.
118 The plaintiff also admitted that she had told Dr Krishnaswamy on 12 June 2009 that she had tried two cigarettes since completing a full course of Champix some two months prior.
119 Upon her admission to Epworth Hospital on 13 November 2009, the plaintiff completed an Epworth HealthCare form in which she stated that she was smoking two cigarettes per day. The defendant also relied on a record from a Mr Ling in April 2013 which recorded that the plaintiff had a history of smoking, with a 15 pack year history.
120 The defendant relied upon all of these matters to submit that the plaintiff fraudulently misrepresented her smoking status at the time she completed the June proposal.
Alleged non-disclosure/misrepresentation: (b) nicotine replacement
121 In addition to the matters relating to the plaintiff’s status as a smoker, the defendant submitted that the plaintiff fraudulently misrepresented her answer in the June proposal where she was asked, at H2 of the June proposal, whether, in the last three months, the plaintiff had used a nicotine replacement therapy.
122 As I have just discussed, the plaintiff admitted that she was prescribed Champix, and admitted knowing that Champix is a nicotine replacement therapy. The plaintiff conceded under cross examination that, at the time of her arthroscope on 28 May 2009, she was taking Champix. Further, she admitted that she had told Dr Krishnaswamy on 12 June 2009 that she had finished a full course of Champix two months prior.
123 The plaintiff also conceded under cross examination that her answer in H2 of the June proposal was not true, and that she knew it not to be true.
124 On the basis of these concessions by the plaintiff the defendant submitted that the plaintiff had fraudulently misrepresented the use of nicotine replacement therapy.
Alleged non-disclosure/misrepresentation: (c) spine etc disorder
125 At section K(B) of the June proposal, the plaintiff indicated that she had not, nor had been told of, any spine, neck or back injury, pain, strain or disorder. The defendant argued that that this was a misrepresentation by the plaintiff.
126 On 12 February 2009, Dr Tasiopoulos prescribed the plaintiff with both Valium and Panadeine Forte to help her sleep and relieve her from severe back pain. The prescription for Panadeine Forte was renewed by Dr Tasiopoulos on 12 March 2009.
127 Upon her admission to the Epworth Hospital on 28 May 2009, the plaintiff disclosed ‘neck and back problems’, and conceded in cross examination that she referred to the neck and back problems that she had experienced in the preceding five to six months, and admitted to knowing that her answer was not true at the time she completed the personal statement.
128 The defendant submitted that on the basis of this evidence the plaintiff had misrepresented her back and spine problems.
Alleged non-disclosure/misrepresentation: (d) skin lesion
129 The defendant maintained that the plaintiff also fraudulently misrepresented her answer at K(C) of the personal statement in regards to her purported lack of skin lesions.
130 On 6 January 2009, Dr Krishnaswamy prescribed the plaintiff with Paroven to assist with blood circulation, upon the plaintiff complaining about a skin problem affecting her lower legs.
131 Further, in the Epworth HealthCare form completed by the plaintiff on 28 May 2009, the plaintiff disclosed ‘skin issues’ affecting her ‘lower [back] right leg’. In cross examination, the plaintiff admitted that at that time, the skin problem had been present for ‘at least a couple of months’. She had also taken cortisone for this issue in March 2009.
132 Additionally, the plaintiff admitted that she told Dr Krishnaswamy on 12 June 2009 that she had itchy, lumpy, swollen patches bilaterally on her lower legs, for which she was given corticosteroid, and told that she may need to undergo blood tests.
133 In October 2009 when the plaintiff’s condition worsened, she saw Drs Samuel-John and Crouch and informed both that the problem had been present since March 2009.
134 On 13 November 2009 in the Epworth HealthCare form, the plaintiff disclosed ‘Erythema nodosum’, being nodules under the skin, as being a condition she suffered.
135 The defendant submitted that given the problems that the plaintiff had had with her skin she had failed to disclose and misrepresented whether she had had any skin lesion in the June proposal.
Alleged non-disclosure/misrepresentation: (e) joint problems
136 In his closing written submission the defendant’s Counsel extracted a number of references to joint problems from the medical records that were noted above. These indicated that the plaintiff had complained to a number of doctors about pain in various joints leading to referral for x-rays, physiotherapy, an MRI, and ultimately an arthroscopy performed on 28 May 2009.
137 The plaintiff admitted under cross-examination that she had had joint problems in her feet, ankles and knees, hips and hands in the 12 months before she completed the personal statement. She further admitted that she knew the answer to question KF was not true at the time she completed it.
Alleged non-disclosure/misrepresentation: (f) other illness or injury not disclosed
138 The defendant relied on the same material that is relied on for the alleged misrepresentations in relation to spinal disorder, skin lesions and joint problems in relation to this answer. In addition it relied on concessions made by the plaintiff in cross examination as to her consultations with Dr Tasiopoulos for various complaints, as well as the report from Mr Fishman, physiotherapist, dated 30 March 2009 (PCB 542).
139 On this basis the defendant submitted that this answer was a further misrepresentation.
Alleged non-disclosure/misrepresentation: (g) prescribed medications
140 The defendant obtained concessions from the plaintiff in cross-examination that during 2009 and prior to completing the June proposal she had been prescribed by her general practitioners with a wide variety of restriction medications including Paroven, Valium, Panadeine Forte, Champix, and Celebrex, for use on a regular basis.
141 On this basis the defendant submitted that this answer was a misrepresentation.
Alleged non-disclosure/misrepresentation: (h) operations, investigations or consultations
142 The defendant relied on material indicating that the plaintiff had had a CT scan, an MRI scan, x-rays of her pelvis and hips, right knee and left knee, and MRI of her knees, and an arthroscopy. The plaintiff did not disclose that she had had a “tummy tuck” operation in 2006, and had seen Mr Tang as well as a neurosurgeon Mr Tange. She had also seen her GP just prior to the proposal.
143 It was submitted also that these matters constituted a misrepresentation.
Alleged non-disclosure/misrepresentation: (i) any other disability etc not disclosed
144 The defendant relied on the same matters as for the skin lesion issue, as well as the arthroscopy performed on 28 May 2009 and the subsequent review report by Mr Tang that the plaintiff was still getting tightness on the knee and had the “very wasted quadriceps” in the knee had been irritable for a long period.
145 The negative answer to this question was also submitted to be a misrepresentation.
Characterisation of the misrepresentations
146 The defendant’s case was that its pleaded misrepresentations were fraudulent. The plaintiff submitted that the Court could not reach such a characterisation when a number of matters were considered, going both to the plaintiff’s knowledge of the matters enquired of, and the position of a reasonable person in the position of the plaintiff completing the June proposal.
147 In submissions, the plaintiff emphasised that for the purposes of ss. 21 and 26 of the Act, the term “known” or “knows” is a strong word and means more than “believes”, “suspects” or “strongly suspects”. Reference was made to Dew v Suncorp Life and Superannuation Ltd [2001] QSC 252 (‘Dew’).
148 In Dew, the plaintiff did not fully respond to a question proposed by the insurer on the basis that she held a genuine belief that the symptoms that caused her to see various consulting practitioners did not identify a material injury or illness, and thus in her view, they were not relevant to the insurer’s acceptance of the risk. The plaintiff had recovered completely from intermittent episodes. It was held that a reasonable person in the circumstances would not have regarded the symptoms complained of to the medical practitioners as being relevant to the insurer’s risk (Dew [73]). In that case the insurer failed to sheet home a fraudulent misrepresentation in circumstances where the insured had been advised by her doctor that she was in good health.
149 The plaintiff also, in final address, relied on the case of Australian Casualty and Life Ltd v Hall (1999) 151 FLR 360 at [75] where the insured had been told by her doctors she was in good health, and thus was held not to have engaged in nondisclosure..
150 The plaintiff also submitted that the question in relation to skin lesions was at best ambiguous and that any answer in the circumstances could not amount to a misrepresentation.
Assessment
151 I accept the plaintiff’s submission that for the purposes of disclosure under section 21, the term “knows” is a stronger term than suspects and I approach a consideration of the defendant’s contentions on that basis.
152 Next, I do not accept the plaintiff’s submission in relation to any ambiguity in relation to the question in relation to skin lesion. When the question is read as a whole it would have alerted the plaintiff to the need to disclose the problems that she was having with the rash or nodules on the back of her legs. This applied particularly in circumstances where it is clear from the medical records after June 2009, that the condition had been a problem since around March or April 2009, and the plaintiff had had treatment for it.
153 The plaintiff also relied in closing address on a number of surrounding circumstances that pointed against the conclusion that there were any fraudulent misrepresentations in the June proposal. These included the circumstances that the document was completed, that Mr Campbell was the initiator of the original meeting, and she did not initiate or seek out the defendant to increase her level of cover, that the statements were made for a policy that was to be in the name of the company, and the plaintiff’s subjective views about her own health and medical conditions including the leg rash referred to earlier.
154 I have factored in those matters in reaching my conclusion on the issues of fraud on a Briginshaw standard.
The test for finding fraud
155 Numerous authorities have set out the matters that must be proved to establish fraud, starting with Derry v Peek (1889) 14 App Cas 337 at 374, where Lord Herschell described fraud as being “proved when it is shown that a false representation is being made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.”
156 In Prepaid Services Pty Ltd & Ors v Atradius Credit Insurance NV (2013) 302 ALR 732; [2013] NSWCA 252 at [51], the New South Wales Court of Appeal allowed an appeal against a decision of the New South Wales Supreme Court stating that the learned trial judge failed to address a number of matters, including what is set out as follows:
“In the end, three matters lead me to conclude that his honour has erred in failing to address whether Mr McQuaide was consciously indifferent to the truth of the relevant answers. The first is that the formulation of the relevant question, and the five reasons given in support of the conclusion, are concerned with an objective assessment of Mr McQuaide’s conduct as careless, excessively lax and, indeed, reckless. In accordance with the statement in Forrest referred to above, those objective considerations are evidence of Mr McQuaide not caring that the answers may not be true, but are not determinative of that question. The primary judge gave no consideration in his reasons to the ultimate question, which was whether Mr McQuaide was consciously indifferent to the truth of the answers given. The second is that in addressing that question it would have been necessary for the primary judge to consider his earlier findings as to Mr McQuaide’s intention and state of mind in participating in the completion of the proposal form. Two of those findings are consistent with Mr McQuaide caring that the answers were correct. There was one further matter. His honour is different treatment of the misrepresentation arising from the second answer, because of its ambiguity, acknowledges that Mr McQuaide could have had an honest belief as to its truth. That being the position is not consistent with his honour having addressed and made a general finding of reckless indifference in relation to the completion of the proposal.”
157 The defendant relied particularly on these matters.
158 The plaintiff submitted that a finding of fraud must be a finding of “moral turpitude”. I prefer the submission of the defendant that on the authorities, a finding of fraud could be made in the face of conscious indifference to the truth. In Prepaid Services the Court said that “conscious indifference means more than carelessness. It must be shown that, before and at the time that the insured signed the proposal form, he or she did not care whether the answers were true or false. It is not necessary, however, to show that the insured knew that there was a substantial prospect that the answers were not true.”
159 The defendant submitted, and I accept, that the term “moral turpitude” is really a description of fraud as described in paras (b) and (c) of the definition in Derry v Peek. It thus does not add to what the defendant is required to prove on a civil standard.
Assessment
160 It is now necessary to reconsider each of the nine alleged fraudulent misrepresentations. Before doing so, given the requirement to reach a conclusion on the Briginshaw standard, each of the representations may be considered both separately and as part of an overall picture. This is important given the concession by the plaintiff under cross-examination that she knew that the answer to question H 2 (b) “nicotine replacement therapy” was not true, similarly in relation to spine pain KB (c), and joint problems KF(e). The plaintiff was not directly asked about a number of the other negative answers to the questions. It follows, however, that if she understood that the answers to question H2(b) was not true then her answer to other questions must also be not true.
161 Similarly given her concessions, in relation to the answers to spinal pain, and joint problems that they were not true, then the balance of answers to the questions could also not have been true, given: (a) the various conditions she had up until the June proposal; (b), the investigations that had been undertaken; (c) the medications that she had been prescribed and ingested; (d) the medical professionals that she had consulted; (e) and her general physical health given that she had just had an arthroscopy on one knee and the specialist had indicated that she had muscle wasting.
162 Before considering whether or not the defendant has made out its case of fraudulent misrepresentations, I refer again to the outline of the plaintiff’s medical condition as revealed in the records and evidence digested above. This is relevant to considering the plaintiff’s answers under cross-examination that in effect she was in good health. Given the scope and depth of the various investigations and treatment, and use of medications, any description to that effect stretches credulity. This leaves aside her very recent knee surgery.
163 The plaintiff’s admissions under cross-examination that the answers to three of the questions were not truthful (questions H 2, KB, and the KC), makes it very difficult to resist a conclusion that the plaintiff was engaging in fraudulent misrepresentation in completing the June proposal.
164 Applying a “conscious indifference” or recklessness standard, to the smoking representation, the matters raised by the defendant in its final address on this particular point are cogent. In circumstances where the plaintiff was actively seeking to cease smoking, yet admitting to practitioners that she had, notwithstanding the Champix prescriptions, continued to smoke, a statement that she had not smoked in the last 12 months must I am satisfied, be made with reckless indifference to the truth. The plaintiff cannot have had any basis to give a negative answer to that question.
165 Similarly, as she conceded, the answer to the question regarding nicotine replacement therapy was false. While the plaintiff might have sought to give up smoking, on any view when she completed the June proposal, she had not succeeded and had been actively obtaining medication to assist her. Her explanation under cross-examination that she had been obtaining a Chamix prescription to provide it to her partner lacked credibility.
166 Although the plaintiff was not directly challenged on this point, her negative answer to questions in relation to prescribed medications (g), other consultations with service providers (h), and other illness or injury (i) cannot be characterised as other than being made with conscious indifference to the truth.
167 Weighed against this, in final submissions by the plaintiff, was her evidence as to her subjective assessment of her own health, the circumstances of the completion of the form, and her denial that she had told a deliberate lie or she was being fraudulent.
168 While it is a serious conclusion to reach on a Briginshaw basis that an individual has engaged in fraudulent misrepresentation, here there is a strong evidentiary basis to reach that conclusion. The conclusion can be fully reached on firm evidence, both documentary, and by way of inference from undisputed material emerging from that documentary evidence. The plaintiff’s oral evidence to the contrary, while it stands as a barrier to that conclusion can be set aside because, for the reasons set out by the defendant in final address, and in particular on the basis set out in paras [44]-[67] of the written submission, her credit has been substantially abased under cross-examination.
169 First, as I have indicated, I do not accept the plaintiff’s characterisation of the circumstances of the completion of the June proposal. I am satisfied she had an adequate opportunity to complete the form and answer the questions as she saw fit. She conceded at one stage that she had skimmed the statement enough to know whether to answer the questions “yes” or “no”. She later sought to retreat from that. This was characteristic of her evidence under cross-examination where when the examiner obtained concessions from her that were patently damaging to her case, she sought to retreat and dissemble from the earlier concession. One example raised in final address was the plaintiff blaming a lack of assistance from Mr Campbell in completing the proposal form.
170 Indeed, under cross-examination the plaintiff provided different explanations as to why she answered all questions in the negative: human error, that she was rushed, that Mr Campbell was calling for her to complete the form, that he had a motive for his actions in that he was going to receive a commission, that he did not assist her to complete the form, and that he did not follow through with an explanation as to how important the question as to smoking was.
171 The sheer weight of the medical material relating to the plaintiff in the period prior to the June proposal, when combined with the credit matters raised by the defendant in its final address, and the Court’s own observations of the demeanour of the plaintiff under the sustained cross-examination is such that I accept the defendant’s submission that in relation to each of the alleged misrepresentations they were made fraudulently, in the sense that they were made recklessly, and with conscious indifference to the truth.
172 While the plaintiff argued that the defendant was required to prove that each of the representations alleged were made fraudulently, in approaching this issue, each particular representation does not necessarily have to be considered on its own. Rather, a conclusion in relation to the plaintiff’s veracity on one particular representation, may assist to reach a conclusion in relation to another alleged misrepresentation. The Court could more easily reach a comfortable conclusion that the plaintiff had fraudulently misrepresented the position in one question given the conclusion in relation to another question.
173 While this is not a criminal trial, the matter can be approached in a way akin to a circumstantial case in a criminal trial. Thus in Attorney General for Jersey v Edmond- O’Brien [2006] 1 WLR 1485 the headnote reads, into alia, “that it was in the nature of circumstantial evidence that single items of evidence might each be capable of an innocent explanation but, taken together, established guilt beyond reasonable doubt...”
174 Here, in approaching the question as to whether the plaintiff has engaged in fraudulent misrepresentation, I regard it as appropriate, applying that authority, to consider each of the asserted misrepresentations individually, and in relation to each other.
175 In approaching this issue, the plaintiff’s concessions under cross-examination as to her truthfulness with medical practitioners are relevant to whether to accept her denials in relation to each of the representations that she was acting with reckless indifference.
176 Thus the defendant’s comprehensive attack on the plaintiff’s credit that I have already referred to in its closing address is relevant in reaching a conclusion on a Briginshaw standard.
Smoking and nicotine replacement therapy
177 In evaluating whether to accept the plaintiff’s account that she was in good health, and thus was in a position to answer the questions in the negative as she did, it is relevant that under cross-examination she admitted that she was prepared to overstate the extent of her smoking in order to get a prescription for Champix, and was prepared to tell doctors what they wanted to hear to get what she wanted even though what she told them might not be true. Thus she asserted she lied to her general practitioner in order to obtain a prescription for Champix for her partner.
178 The veracity of the plaintiff’s answers to the questions relating to smoking and nicotine replacement therapy can be seen as providing an important insight as to the plaintiff’s approach to the June proposal, and her state of mind at the time. On any view, she remained a “smoker” at that time. On any view she had been taking nicotine replacement medication in the recent past. A negative answer to both questions one and two could, in those circumstances, only be described as being an answer given with “reckless indifference to the truth.” They were both thus fraudulent.
Skin lesion question
179 Similarly, in considering her response to the skin lesion question, and her description that she had only had effectively a minor rash on the back of her legs, this is inconsistent with the medical records indicating that the nodules were present on both legs from March, she had been seeking treatment for the condition, had made reference to it in the Epworth Hospital intake form, and had raised it with the GP a week before she completed the proposal.
180 In closing address the plaintiff submitted that given she had regarded the condition as a rash, for which she was using a cream, then the form of the question, with the examples provided, were not such as to put her on notice that the condition was within the term “skin lesion” and thus require a positive answer. It was put that the sub examples were of such “strength” that it was open to the plaintiff to have concluded that her self-described “rash” was not caught by the question.
181 The plaintiff also argued that in relation to the skin lesion question (C)(d), the plaintiff’s “condition” did not fall within the question. I do not accept that when the question is looked at in the context of the sub-questions, the ordinary meaning of the term, and the array of treatment that she had been having in the period up until the June proposal.
182 Even if it could be argued that the question relating to skin lesion (d) is ambiguous, which I do not accept, the extent of the treatment of that condition, the continuing symptoms shortly prior to 17 June, and their duration, without the benefit of hindsight, was such that it would have required in any event, an affirmative answer to other questions under representations (g), (h) and (i).
183 Had the skin lesion question been the only alleged misrepresentation, then there might be merit in the plaintiff’s closing argument. However, looking at the skin lesion issue on its own, the duration of the symptoms, the various treatments provided, the period over which the matter was the subject of treatment, the cosmetic effect, and the answer to the Epworth intake form, all tend towards a conclusion that the plaintiff did not have a reasonable basis for her negative answer to question KC. When this is combined with the plaintiff’s answers to the other questions, including those where she admitted that that they were incorrect, and her admissions as to providing false information to medical practitioners to obtain prescriptions, then consistently with the position urged by the defendant, I can comfortably reach a conclusion that the plaintiff “knew” she had a skin lesion, that this was a “condition”, and thus the negative answer to this question was given with “conscious indifference to the truth.”
184 Also relevant in making an overall assessment of the plaintiff is the letter that she wrote after the defendant first denied liability. In that letter as noted earlier the plaintiff asserted that the knee screens were merely exploratory. Given the muscle wasting in existence at the time, and the earlier detailed investigations into the plaintiff’s back, knees, and joints the letter is, to say the least, very selective.
185 I don’t accept that there is any ambiguity in each of the questions such that the plaintiff had any basis to believe that whatever medical conditions, as distinct from symptoms, she was suffering they were not such as to prompt the appropriate answer in the questions.
Spine, and joint problems
186 In closing address counsel for the plaintiff submitted, relying on the decision in Australian Casualty and Life v Hall, that the plaintiff did not believe she had back and knee problems and thus the answers to the questions regarding spine pain and joint problems could not be said to be a misrepresentation.
187 In the face of the evidentiary matters raised by the defendant as to the plaintiff’s complaints of severe pain, prescriptions for serious painkilling medicines, serious investigations such as x-rays, MRIs and CT scans, referral to two different surgeons and a physiotherapist, an arthroscopy of one knee, and bilateral thigh wasting, I do not see how the plaintiff can have a sustainable subjective opinion that would allow her to form the view that would justify a negative answer to questions regarding her back and knees that would be raised by questions as to conditions under the headings of “spine, back or neck injury, pain, strain or disorder” and “joint problems”.
188 I therefore do not accept that the authority of Hall supports the plaintiff on this issue. There was just no evidentiary basis provided by the plaintiff to assert that her spine and joint problems were resolved, or that she had been told she did not have a “condition” for the purpose of section K of the proposal.
189 The proposal questions were asking more than about the plaintiff’s general health, they were directed to specific aspects of the plaintiff’s health and given her continuing engagement with medical professionals the negative answers to questions KB (spine), KF (joint), and 3 (prescription medication) and 4 (other disability etc) cannot be explained away by a retrospective self-serving opinion that the plaintiff’s health was “excellent”.
Conclusion: defendant’s characterisation accepted
190 It follows from the above conclusions that the defendant has made out its case of fraudulent misrepresentation under section 29 (2) of the Act. The defendant has made out its case that it was as entitled to avoid the policy on the basis of fraudulent nondisclosure. I reach that conclusion in considering the nine identified misrepresentations separately, and then by considering each in the context of the other. This is where in the face of the mountain of contemporaneous medical material that I have referred to, the blanket negative answers to the questions can only be characterised as answers proffered with a state of mind that meets the requirements set out in Prepaid Services.
191 The defendant was entitled to avoid the policy under s29(2) of the Act. This conclusion makes it unnecessary to consider whether the defendant could have succeeded in its alternative defence that it would not have been prepared to enter into any policy under s29(3) of the Act.
Counterclaim – recovery of benefits paid
192 By way of a counterclaim the defendant, in the event that it succeeded in having the policies avoided, sought a declaration that it was entitled to recover the amount paid to the plaintiff under the income protection policy (exhibit P), and/or damages. In final address the plaintiff’s counsel disputed that the defendant was entitled on the pleadings to recover monies in the event that it succeeded in avoiding the policies. He submitted that, notwithstanding the pleading, they had failed to plead a cause of action entitling them to have the money back.
193 The matter was not specifically addressed by senior counsel for the defendant in reply. Considering the pleading however, given my conclusion that the defendant was entitled to avoid the policy ab initio, subject to any further submissions, I am of the view that the defendant is entitled to recover monies paid under the policy.
194 I will hear the parties on appropriate orders.
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