Galaxy Homes Pty Ltd v National Mutual Life Association of Australasia Ltd (No 2) - [2012] SASC 235

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Civil)
GALAXY HOMES PTY LTD v NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD (No 2)
[2012] SASC 235
Reasons for Decision of The Honourable Justice Nicholson
21 December 2012
INSURANCE - LIFE INSURANCE - THE POLICY - CONSTRUCTION
INTERPRETATION - GENERAL RULES OF CONSTRUCTION OF INSTRUMENTS - GENERAL MATTERS
The plaintiff was the insured under a life insurance policy entered into with the defendant. The policy provided for a benefit payable on death of the life insured (the directing mind of the plaintiff) and also payable in advance of death where the life insured "has a Terminal illness" as defined. The life insured was diagnosed with advanced metastatic melanoma some 2 months or so after the insured cancelled the policy. The insured made a claim for the Terminal illness benefit. The claim was rejected by the insurer. At an earlier stage the court was asked to determine two preliminary issues relating to whether the policy was capable of responding to the claim. The preliminary issues were answered in favour of the plaintiff. In these proceedings the insured seeks payment of the Terminal illness benefit which it maintains has fallen due under the policy terms, or, in the alternative, damages for breach of contract. For the insured to succeed it needed to establish that the life insured had a “Terminal illness”, as defined in the policy, during the currency of the policy.
Whether, during the currency of the policy, the life insured had an “illness which will result in death within 12 months, regardless of any treatment that might be undertaken” – whether clause E.1 of the policy applies to exclude any cover that otherwise would attach – whether the insured has a claim for breach of contract.
Held – plaintiff insured’s claim dismissed – the life insured’s illness did not, during the currency of the policy, have the prognostic character that it “will result” in death within 12 months – the insurer would not be permitted to rely on clause E.1 of the policy to exclude cover that would otherwise attach – the insured’s alternative claim for damages for breach of contract also fails.
Insurance Contracts Act 1984 (Cth) s29, s33, s46, s47, s57; Australian Concise Oxford Dictionary 1987; Oxford English Dictionary 3rd ed, completely reset, 1980; Vol II at p1990; Journal of Clinical Oncology “Final version of 2009 AJCC Melanoma Staging and Classification” by Charles M Balch (and numerous other authors) 2009; Journal Lancet Oncology “Melanoma of the small intestine” Marka Lens, Veronique Bataille & Zoran Krivokaplc, vol 10, May 2009, referred to.
Galaxy Homes Pty Ltd v National Mutual Life Association of Australasia Ltd [2012] SASC 141; Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; McArthur v Mercantile Mutual Life Insurance Company Ltd [2002] 2 Qd R 197, [2001] QCA 317; Tower Australia Ltd v Farkas (2005) 64 NSWLR 253, [2005] NSWCA 363; Farkas v North City Financial Services Pty Ltd & Ors [2004] NSWSC 206; Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 14 SASR 303; R v Hallett [1969] SASR 141; R v O’Sullivan & Mackie (1975) 13 SASR 69; Czarnikow Ltd v Koufos [1969] 1 AC 350; Bolton v Stone [1951] 1 AC 850; Willis v The Commonwealth (1946) 73 CLR 105; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579; Greg Nelson v The Hollard Insurance Company Pty Ltd (2010) 77 NSWLR 313, [2010] NSWSC 199; Asteron Life Ltd v Zeiderman (2004) 59 NSWLR 585, [2004] NSWCA 47; Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 172 CLR 1, [1992] HCA 64; Brisbane City Council v Attorney-General for Queensland (1908) 5 CLR 695, [1908] HCA 8; Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd (2007) 240 ALR 519, [2007] FCAFC 60; Sherry v FAI General Insurance Company Ltd (in liq) (2002) 12 ANZ Insurance Cases 61-516, [2002] SASC 3; Wenham v Ella (1972) 127 CLR 454, considered.

GALAXY HOMES PTY LTD v NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALASIA LTD (No 2)
[2012] SASC 235
Civil
NICHOLSON J.
Introduction

The plaintiff, Galaxy Homes Pty Ltd as trustee of the Galaxy Homes Unit Trust (“the insured”) is the insured under a life insurance policy entered into with the defendant, National Mutual Life Association of Australasia Ltd (“the insurer”). The life insured is Mr Peter Eden. The policy was in place for only a short time. It commenced on or about 23 February 2011 and was cancelled by the insured with effect from 17 November 2011.
The policy contained a “Terminal illness benefit” cover pursuant to which, if the relevant insuring clause were to be satisfied, the insured would be entitled to early payment of the “life benefit” in the amount of $4 million, otherwise payable only on the death of Mr Eden.
On 28 December 2011, that is, after the policy had come to an end Mr Eden was diagnosed with, and Mr Eden became aware that he was suffering from, very advanced and incurable metastatic melanoma.
In these proceedings the insured seeks payment of the $4 million terminal illness benefit which it maintains has fallen due under the policy terms or, in the alternative, damages in that same amount for breach of contract. At an early stage and on the basis of a statement of agreed facts, I was asked to determine two preliminary issues relating to whether the policy was, in the agreed circumstances and on its proper construction, capable of responding to the claim notwithstanding that, inter alia, Mr Eden’s condition only became known after the policy had expired.
It is common ground that the policy is of the type often described as an occurrence based policy. Whether or not the insured is entitled to recover the Terminal illness benefit of $4 million will depend, in part, on whether an event, falling within the insuring clause, occurred during the currency of the policy. The insuring clause is in the following terms:
D.1 Life insurance
D.1.1.Life insurance benefit
If the person insured dies, we will pay you the nominated beneficiaries or your estate the life benefit. This amount is paid once only as a lump sum.
D.1.2.Terminal illness benefit
If the person insured has a terminal illness, you may ask us to pay the life benefit immediately. This amount is paid once only as a lump sum.
Under clause I.3 “Terminal illness” is defined as follows.
Terminal illness means any illness which, in our opinion, will result in the death of the person insured within 12 months, regardless of any treatment that might be undertaken. Our decision will be based on medical evidence provided to us by the person insured, and any other medical evidence we may require.
In an earlier judgment in this matter[1] I answered the two preliminary issues in favour of the insured. I found that in order to satisfy the relevant insuring clause (including the incorporated definition of “Terminal illness”) it would be sufficient for the insured to prove that, during the policy period, Mr Eden “had” an illness, that was to be characterised as a Terminal illness (as defined). However, I found that it was not necessary for any formal diagnosis to have been arrived at or any medical opinion to have been obtained or any claim to have been made or for the insurer’s opinion to have been reached during the policy period itself.[2]
[1] Galaxy Homes Pty Ltd v National Mutual Life Association of Australasia Ltd [2012] SASC 141.
[2] The second preliminary issue concerned whether or not it had become too late to make a claim by virtue of the provisions of “H.1 Ending the plan”. Again, this issue was decided in the insured’s favour.
In my earlier reasons I also found that the failure of the insurer to consider the insured’s claim and to enter upon the exercise of forming the opinion required by the definition of “Terminal illness” was a breach of the policy. As a consequence, the insurer was to be deprived of the opportunity thereafter to consider the merits of the insured’s claim. As such, I directed that the matter proceed to trial before me and that it was for the court to decide, as a question of fact, whether during the period of time the policy was in force the insured “had” an illness that satisfied the requirements of “Terminal illness” as defined.[3]
[3] Earlier reasons at [83].
The trial resumed on 13 September 2012. The expectation was that the parties would call their respective medical experts and the court would proceed to consider whether or not Mr Eden’s illness was properly to be characterised as a “Terminal illness” for policy purposes. However, on the resumption of the trial, and as a result of information coming to the insurer’s attention only a matter of days before the resumption date, the insurer applied for leave to amend its defence. The insurer alleged that it was entitled to avoid the policy, under s29 of the Insurance Contracts Act 1984 (Cth) (“IC Act”) because of fraudulent non-disclosure by the insured and Mr Eden at the time the policy was taken out. The insurer alleged that the insured and Mr Eden had failed to inform it of matters relating to the removal of a mole from Mr Eden’s right shoulder in 1994 and, in particular, that the mole had been found to be a malignant melanoma.
Leave to amend was granted and the trial proceeded. Rather than hearing from the experts, Mr Eden gave evidence and was cross-examined at some length on matters relevant to the new issues raised in the insurer’s amended defence. At the conclusion of Mr Eden’s evidence it became apparent that both parties needed time in order to further investigate the new issues raised by the insurer, including whether or not two persons mentioned in Mr Eden’s evidence might need to be joined to the proceedings either by the insured or by the insurer. With these considerations in mind, a timetable was put in place to enable the parties to further prepare their respective cases and the trial was adjourned to 1 November 2012.
On 29 October 2012 the insurer filed its third defence. In that document it abandoned its claim for relief under s29 of the IC Act for fraudulent non-disclosure. In the result, the trial proceeded on 1 November 2012 with the hearing of evidence from each party’s expert medical witnesses only.
Certain agreed facts, background circumstances, and relevant policy provisions were set out and considered at some length in my earlier reasons[4]; the present reasons have been written with that background in place and on the assumption that the reader is familiar with it.[5]
[4] [2012] SASC 141.
[5] During the earlier proceedings it was an agreed fact that Mr Eden was diagnosed with metastatic melanoma on 28 January 2012. However, the parties are in agreement that that was an error and that the diagnosis, in fact, occurred on 28 December 2011.
Issues
For the insured to succeed it must establish that Mr Eden had a “Terminal illness”, as defined in the policy, during the currency of the policy. The insured must establish that Mr Eden, during the currency of the policy, had an “illness which will result in the death of Mr Eden within 12 months, regardless of any treatment that might be undertaken.” When addressing this issue a number of sub-issues arise.
(i)What is the commencing date to which the phrase “within 12 months” refers (the “as at” or “as from” date)? It is common ground that Mr Eden was suffering from the illness with which he was diagnosed on 28 December 2011, that is, stage IV metastatic melanoma, as at the date the policy was cancelled (17 November 2011). It also is common ground that Mr Eden was suffering from the same illness as at the time he first suffered severe abdominal pain and discomfort (August 2011). All of the experts (with hindsight) agree that this was symptomatic of his stage IV metastatic melanoma. It is conceivable that Mr Eden was suffering from this diagnosed illness prior to August 2011. However, the available evidence renders it difficult to draw any inference as to the development of the illness over time sufficient to attach a prognosis at a time earlier than August 2011.[6] In any event, I take the view that the insured is entitled to rely on any event or occurrence that satisfies the insuring clause and which “occurs” at any time during the policy period. The insuring clause does not expressly seek to fix upon the first occurrence of a Terminal illness during the policy period; it only requires that the life insured “has” a Terminal illness and by implication, at any time during the policy period.[7] The insurer did not press for an “as at” date earlier than August 2011. Both parties maintained that their respective cases on the facts should succeed whichever date applied. However, and understandably, the insurer pressed the court to apply the August 2011 date and the insured pressed for the November 2011 date. On the view I take of the proper construction of the insuring clause, discussed later in these reasons, it does not matter which date is adopted for the “as at” or “as from” date. Nevertheless, for the reason just given, I do prefer and have sought to apply the relevant policy provisions to an “as at” date of 17 November 2011.
[6]    In this respect, I mean by “diagnosed illness”, metastatic melanoma to the extent of a stage IV diagnosis. I explain the “staging” process later in these reasons. All of the medical experts agree that Mr Eden’s condition in 2011 was a consequence of and development from the malignant melanoma removed in 1994. It follows that he must have had some form of malignancy prior to August 2011 and most likely one of the stages of metastatic melanoma.
[7]    To the extent it might be argued that Mr Eden’s illness existed prior to the commencement of the policy, clause E.1 of the policy may be of relevance. This is discussed later in these reasons.
(ii)In order for the insured to recover, Mr Eden’s diagnosed illness, stage IV metastatic melanoma, has to be characterised as an illness which, as at the date of its characterisation, will result in the death of Mr Eden within 12 months of that date of characterisation. This may or may not be, and in the present case, will not be the same as the date of diagnosis. This approach accords with an ordinary and businesslike reading of the insuring clause, “if the person insured has a Terminal illness…”. The policy is an occurrence based policy and the occurrence as provided for in the insuring clause is the having, not the diagnosis of a Terminal illness. I repeat the finding I arrived at in my earlier reasons.[8]
[8]    At [68]-[69].
The Terminal illness benefit insuring clause is satisfied where an insured establishes that the life insured “has” an illness during the policy period which illness satisfies the definition of Terminal illness…
The word “has” should be given its ordinary meaning which, in this context, is to experience, or to suffer, or to be subjected to a specified state.[9]
When assessing Mr Eden’s prognosis for the purpose of deciding whether or not the illness from which he suffered during the policy period was “one which will result in the death of Mr Eden within 12 months…” the starting point for that 12 month period is 17 November 2011. The prognostic character of the illness is to be determined both as at and as from that date, 17 November 2011.
(iii)A further subsidiary question that potentially arises in this context is as to the nature of the evidence that can be relied upon by the court when determining whether or not the prognosis for Mr Eden at the “as at” date satisfies the definition. The three alternatives would appear to be:
(a)matters of fact concerning Mr Eden’s condition actually known at the “as at” date;
(b)matters of fact concerning Mr Eden’s condition which subsequently came to be known but were available to be known, that is, knowable, at the “as at” date; and
(c)matters of fact concerning Mr Eden’s condition which subsequently came to be known but which were not available to be known, that is, not knowable, at the “as at” date.
Given my approach to the construction of the insuring clause and the relevant definition clause, dealt with later in these reasons, and given my ultimate approach to the contest between the insured’s and the insurer’s respective expert medical opinions, it, strictly, is not necessary that I form a concluded view on this issue.
(iv)A third, and ultimately determinative, sub-issue is the meaning to be given to the phrase “will result” as used in the definition of “Terminal illness” and the interaction of that component of the definition, agreed to by the parties as part of their bargain, with the insured’s onus to prove its case on a balance of probabilities as imposed on the insured by the general laws of civil procedure.
[9]    See, for example, the Australian Concise Oxford Dictionary 1987, 4^th meaning under “have”.
The insurer’s primary line of defence is that, on all of the relevant evidence before the court, the insured has not established that, at any time during the policy period, Mr Eden was suffering from a “Terminal illness” as defined. However, even if the insured were to succeed on this issue, the insurer asserts a second line of defence. The insurer maintains that clause E.1 of the policy applies to exclude any cover that otherwise would attach. Clause E.1 is in the following terms.
E When we will not pay
E.1 If the person insured had a medical condition, injury or sickness before the plan began
We will not pay a benefit for a medical condition, injury or sickness that occurred before the Commencement date unless you or the person insured told us in writing about the medical condition, injury or sickness, and we agreed to accept it, when you or he or she applied for the plan or applied to have the plan increased (except where the increase was due to exercising an option) or restored under clause H.4.
For the purposes of this clause, the person insured had a medical condition, injury or sickness if:
§ a ‘medical practitioner’ or ‘other health professional’ gave the person insured, or recommended that he or she receive advice, care or treatment, or
§ the person insured had symptoms of a medical condition or sickness for which a reasonable person would have tried to receive advice, care or treatment from a ‘medical practitioner’ or ‘other health professional’.
[Other presently not relevant provisions of clause E.1 follow.]
Given the terms of clause E.1, a number of sub-issues arise.
(i)Did Mr Eden have a “medical condition, injury or sickness that occurred” before the commencement date of the policy?
(ii)If so, is this the “medical condition, injury or sickness” for which the insurer is being asked to pay a benefit?
(iii)If so, did the insured or Mr Eden tell the insurer “about the medical condition, injury or sickness” in writing?
(iv)And, did the insurer “[agree] to accept it when the insured… applied for the plan…”?
(v)If the answers are yes to (i) and (ii) and no to (iii) and (iv), does section 33 or section 47 of the IC Act prevent the insurer from relying on clause E.1 to refuse the insured’s claim?
The evidence potentially relevant to and findings determinative of whether Mr Eden had a terminal illness, as defined
On this issue, the insured relies on the evidence of Mr Eden, Mr Eden’s treating surgeon, Mr David Walsh and a consultant physician in medical oncology, Professor Michael Brown. Two affidavits of Mr Eden were read (with the consent of the insurer)[10] and Mr Eden was cross-examined at large. As far as the expert evidence is concerned the insured tendered three reports prepared by Mr Walsh[11] and two reports by Professor Brown.[12] In addition, the insured relied upon a Terminal Illness Benefit Medical Certificate prepared by Mr Walsh and provided to the insurer dated 24 April 2012.[13] Both Mr Walsh and Professor Brown also gave oral evidence, essentially by way of cross-examination. The insurer relied on the evidence of Professor Richard Fox, also a consultant physician specialising in medical oncology. Professor Fox provided two reports[14] and also gave oral evidence, again, essentially by way of cross-examination.
[10] Sworn 31 July 2012 and 16 August 2012, exhibit P3 (tabs 2 and 3).
[11] First Walsh report dated 20 April 2012 (P3, tab F), the second Walsh report dated 11 August 2012 (P3, tab 9) and the third Walsh report dated 2 October 2012 (P10).
[12] First Brown report dated 10 September 2012 (P3, tab 15) and the second Brown report dated 24 September 2012 (P9).
[13] P3, tab E and P3, tab D, pp37-38.
[14] First Fox report dated 7 September 2012 and the second Fox report dated 9 September 2012 (P3, tabs 21 and 23).

Professor Brown is currently the Senior Medical Oncologist and Director of Cancer Clinical Trials at the Royal Adelaide Hospital Cancer Centre. He has been practicing as a qualified physician and pathologist for twenty years; specialising in medical oncology for the past fifteen years. In the last four years, while directing the Cancer Clinical Trials, Professor Brown has been involved in the care of patients with melanoma and lung cancer, and the development of clinical and academic expertise in those cancers. He has taught and published extensively in this area. In addition to research and conducting clinical trials, Professor Brown has continued to have an active role in day-to-day patient care and consultation.
Mr Walsh is a Fellow of the Australasian College of Surgeons. He has a sub-specialty in breast and endocrine surgery and oncology. He has had over twenty years of clinical experience in surgery and is currently the Consultant Surgeon and Head of the Breast Endocrine Surgical Unit at the Queen Elizabeth Hospital. Mr Walsh is also the Visiting Surgeon at a number of other hospitals, including St Andrews Hospital, where he was the General Surgeon on call when Mr Eden was admitted. In addition to his extensive clinical experience, Mr Walsh has been involved with a number of research grants and numerous publications, as either an individual author or co-author, addressing breast cancer issues. He is a Senior Lecturer in Surgery at the University of Adelaide.
Professor Fox has been a practicing medical oncologist, dealing with the management of patients suffering various forms of cancer, since 1974. He was the Director of the Department of Clinical Haematology and Medical Oncology at the Royal Melbourne Hospital from 1985 to 2006. At present he is the Director of Medical Research at St Vincent's Hospital in Melbourne, chair of a number of cancer committees and President of the Cancer Council of Victoria. Professor Fox indicated that he supervises at least a dozen patients suffering metastatic melanoma each year in his role as Director of Medical Research at St Vincent's Hospital. He has also been involved in extensive research into the treatment of cancer and cancer cell biology, including clinical trials in cancer therapy, for over thirty years.
I was very impressed with each of the three experts. I have no doubt that each is a highly competent and very experienced practitioner. Each was very comfortable in assessing and explaining the relevant scientific literature. As far as familiarity with and involvement in ongoing research into the academic studies of metastatic melanoma is concerned, I expect that Professor Fox would be regarded as pre-eminent in Australia with Professor Brown not far, if at all, behind. The medical issues in this trial were well within the expertise of all three men. Ultimately, there was only one major issue upon which Professor Brown and Mr Walsh disagreed with Professor Fox. It turned to a large extent on a question of the proper interpretation of particular passages in the leading review or study setting out statistical findings as to the period of survival for patients with metastatic melanoma, the so called Balch report.[15] I will deal with this disagreement in due course.
[15] Final version of 2009 AJCC Melanoma Staging and Classification by Charles M Balch (and numerous other authors) Journal of Clinical Oncology 2009; 27:6199-6206.
A helpful explanation and description of the four stages of melanoma is in Mr Walsh’s third report.[16] The four stages of melanoma can be identified, at least in part, by way of its progression throughout the body and relate closely to prognosis.
Stage I melanoma is characterised by tumour thickness and the presence and number of mitoses[17] and ulcerative status. There has to be no evidence of regional lymph node or distant metastasis.[18] There are two subclasses of stage I melanoma…
Stage II melanoma is characterised by tumour thickness and ulceration status. There must be no evidence of regional lymph nodes or metastasis.
Stage III melanoma is characterised by the level of lymph node metastasis. There must be no evidence of distant metastasis.
Stage IV melanoma is characterised by the location of distant metastasis and the level of the lactatedehydroginase level (LDH). Stage IV can be divided into classifications A, B or C. Type A is where the tumour has metastasised to distant skin, subcutaneous layers or lymph nodes with a normal serum LDH. Stage IV(B) is where the tumour has metastasised to the lungs and the serum LDH is normal. Stage IV(C) is where the tumour has metastasised to organs other than the lungs and the LDH is normal or where there are distant metastases with an elevated LDH.[19]
[16] P10.
[17] Mitosis is part of the process involved in cell division and, in particular, refers to the process of division of the chromosomes.
[18] Metastasis refers to the process of transmission of pathogenic microorganisms or cancerous cells from an original site to one or more sites elsewhere in the body, usually by way of the blood vessels or lymph system. It can also refer to a secondary cancerous growth formed by transmission of cancerous cells from a primary growth located elsewhere in the body.
[19] In the quote just extracted from Mr Walsh’s third report he has referred to type A, (B) and (C). In the various literature to which my attention has been drawn the descriptors used in this respect are sometimes recorded in the lower case, sometimes recorded in the upper case, sometimes in brackets and sometimes not in brackets. I do not understand these variations of terminology to indicate anything of significance; there are three sub-classifications for stage IV. We are predominantly interested in the third and I will refer to it as “(c)”.
Mr Eden’s LDH levels, when tested on three occasions after his initial diagnosis on 28 December 2011, were within the normal range. However, he presented with numerous metastasised tumours in multiple organs apart from the lungs. According to Professor Fox, the normal LDH meant that he had a better prognosis than that given by Professor Brown and Mr Walsh. This is the nub of their disagreement. Professor Brown and Mr Walsh maintained that Mr Eden had the worst prognosis (statistically) notwithstanding his normal LDH levels. It is not entirely clear to me whether Professor Fox’s view was that the normal LDH levels removed Mr Eden from the stage IV(c) classification for prognostic purposes and thus gave rise to an improved prognosis or whether he remained within stage IV(c) but had a better prognosis than other stage IV(c) patients with elevated LDH levels. To the extent that this issue is one of nomenclature or categorisation, per se, it is probably of little consequence. The different approaches taken and their impact on the respective prognoses is plain enough.
For Mr Walsh, his clinical observations following the abdominal laparotomy performed by him on 28 December 2011 demonstrated conclusively that Mr Eden’s condition fell within stage IV(c). Mr Walsh’s clinical findings included that, as at 28 December 2011, Mr Eden suffered from the following.[20]
Multiple pigmented lesions consistent with melanoma throughout the liver, peritoneal cavity and a series of innumerable small bowel tumours.
His acute obstruction was from the intussusceptions of these larger small bowel tumours in the distal small bowel.
The operative findings in view of his likely metastatic melanoma was not surgically curable and so he had a palliative small bowel resection and primary anastomosis to overcome his obstruction and to alleviate his current symptoms.
Mr Eden made a rapid recovery from this with complete resolution of his abdominal obstruction.
According to Mr Walsh, subsequent pathology reports on the small bowel removed at surgery indicated a large deposit of malignant metastatic melanoma within the small bowel.
[20] Report dated 11 August 2012, P3 at tab 9.
Mr Walsh in his third report, dated 2 October 2012, added the following with reference to his clinical observations.
Relevant observations that Mr Eden did not have a single small bowel metastasis. He had multiple tumours within the small bowel probably in excess of twenty. The resection of the primary obstructing tumour did effectively nothing to reduce his tumour burden load. He also had extensive peritoneal and liver disease. These are the key observations in that he has uncontrolled intra-peritoneal malignant melanoma.
Professor Brown and Mr Walsh maintained throughout their evidence that the fact that Mr Eden presented with non-pulmonary visceral[21] melanomas was sufficient to categorise him as stage IV(c) so as to attract the worst prognosis that attached to that category of patients. The fact that Mr Eden had normal LDH and albumin levels[22] was not sufficient to take him outside that category.
[21] The reference to non-pulmonary visceral sites is a reference to tumours present in organs other than distant skin, subcutaneous layers, lymph nodes and the lungs. All of these presentations fall within IV(a) and IV(b). The fact that Mr Eden was seen to have tumours throughout the liver, the peritoneal cavity and in the small bowel meant that he presented with tumours at non-pulmonary visceral sites.
[22] Whilst the albumin levels, tested and shown to be normal, were referred to in this context, the debate between the experts was focussed almost entirely on the normal LDH levels.
Professor Fox, on the other hand, maintained throughout his evidence that the fact of Mr Eden having normal LDH and albumin levels was an independent positive prognostic factor and justified a better prognosis for Mr Eden notwithstanding his non-pulmonary visceral site presentation. Professor Fox maintained that Mr Eden was in a different position from those patients suffering from metastatic melanoma at non-pulmonary visceral sites who have abnormally elevated LDH levels. As a consequence, Mr Eden’s prognosis was better than that for such other sufferers.
I will return to this issue of LDH levels and its relevance to the opinions as to prognosis proffered by each of the three experts. It is the most significant reason why Professor Fox has given a prognosis of longer survival for Mr Eden as compared with that of Mr Walsh and Professor Brown. However, before turning to the respective opinions of the three experts as to prognosis I need to say something about the relevance of their opinions to the exercise to be undertaken bearing in mind the terms of the insuring clause.
For the insured to succeed, it must establish that the illness (metastatic melanoma) from which Mr Eden was suffering during the currency of the policy was one which, as at 17 November 2011, “will result in the death of Mr Eden within 12 months, regardless of any treatment that might be undertaken”.
This calls for a prognosis as to Mr Eden’s life expectancy to be ascertained as at 17 November 2011. Whilst the ultimate issue is for the court, the evidence upon which that ultimate issue is to be determined comprises Mr Eden’s clinical symptoms and presentation at that time, such medical test results from which information about Mr Eden’s condition at that time might be inferred together with the opinions of the three medical experts.[23]
[23] That is, the first two categories of evidence identified in paragraph [12](iii) above but not the third. The insurer has submitted that the court is entitled also to rely on evidence of matters which only came into being after the date of diagnosis, for example, the fact that Mr Eden was still alive during the trial in November this year. I deal briefly with this issue later in these reasons and reject the insurer’s contention.
A potential difficulty in this last respect is that any expert prognosis offered with respect to a person suffering from metastatic melanoma is very largely, perhaps almost entirely, dependent on published statistical studies of the survival of patients with that disease. In this case, the three experts placed significant reliance on what is regarded as the leading study in this area, the Balch report.[24] Such studies, including the Balch report, present statistical findings as to the period of survival for patients with metastatic melanoma but with these periods commencing from the date of diagnosis. A prognosis based on a statistical analysis with reference to the date of diagnosis can present a difficulty when the application of the provisions of an insuring clause to a particular individual’s illness is attempted.
[24] Final version of 2009 AJCC Melanoma Staging and Classification by Charles M Balch (and numerous other authors) Journal of Clinical Oncology 2009; 27:6199-6206.
For example, Mr Eden was diagnosed on 28 December 2011. However, had he presented himself to the hospital in August 2011, the time when he was suffering severe abdominal pains, and had a full history been taken at that time, including as to the cutaneous melanoma excised from his shoulder in 1994 and had a laparotomy been performed, Mr Eden, more likely than not, would have been diagnosed in August 2011 with stage IV metastatic melanoma,[25] some four months earlier than the time of the actual diagnosis. Yet the Balch findings would suggest that the same (statistically based) prognosis would follow. In the context of an insuring clause that turns on a period of 12 months or less, this lack of specificity in the primary prognostic tool might be of significance.
[25] See the evidence of Professor Brown and Mr Walsh at T142-145, 214.
Whilst the various diagnoses for each member of the populations considered in statistical studies such as the Balch study do not reflect a uniform or readily comparable stage within the progression of their respective diseases, this will be accommodated to some extent by the size of the population in the study and the method of statistical analysis. Nevertheless, it highlights the fact that such studies provide a statistical conclusion not necessarily directly applicable to the circumstances of a particular patient at a given point in time. For example, it is likely that had Mr Eden been “diagnosed” with stage IV in August 2011 or at any time between August 2011 and 28 December 2011 a particular consulting medical practitioner would have offered him the same prognosis. Indeed, this is reflected in the opinions expressed by Mr Walsh and Professors Brown and Fox in this case who all said that their prognosis would not change whether it had been given as at August 2011, 17 November 2011 or 28 December 2011. Implicit in each expert’s evidence was the proposition that, if Mr Eden had been diagnosed in August 2011 or on 17 November 2011 with the same condition and stage with which he was diagnosed on 28 December 2011, the same prognosis would have been given because that is as far as the statistical studies (in particular, the Balch report) take the matter.
Mr Walsh
In his first report of 20 April 2012, Mr Walsh stated as follows.
The five year survival for all patients with metastatic melanoma is less than 6%, unfortunately the majority of patients in this situation would be dead within 6 to 12 months. (Emphasis supplied.)
During his examination-in-chief Mr Walsh said that his reference to the majority of patients “in this circumstance” being dead within six to 12 months was a reference to a patient presenting as Mr Eden had done as at 28 December 2011 (date of diagnosis).[26]
[26] T208.
In the “Terminal Illness Benefit Medical Certificate”, completed by Mr Walsh on 24 April 2012, in answer to the question “How long do you expect your patient to live?” Mr Walsh recorded “6 months”. Mr Walsh conceded during cross-examination that when he wrote this figure down he intended, and it was then his opinion, that the six months was to be calculated from the date of the certificate, that is, 24 April 2012.[27]
[27] T212.
In his second report dated 11 August 2012 Mr Walsh, with reference to a review paper in the Journal Lancet Oncology,[28] expressed the opinion that the median survival of patients presenting with intestinal metastatic melanoma is poor, being between six and nine months. Again, during his oral evidence Mr Walsh stated that the six to nine month median survival was to be assessed from the date of first diagnosis. He went on to state in that second report:
I believe that the ominous nature of a presentation of metastatic small bowel melanoma and the fact that it must be considered incurable by current treatments, that the prognosis for Mr Eden’s terminal illness would have been unaltered by a diagnosis of the problem either in August 2011 in November 2011 or the subsequent date of presentation in December 2011. Again, this is based upon the survival data in the 2009 Lancet Oncology review paper…
[28] “Melanoma of the small intestine” Marka Lens, Veronique Bataille & Zoran Krivokaplc, Journal Lancet Oncology vol 10, May 2009, p516.
As I understand the reference to the “median” survival, it is a reference to the notion that 50 per cent of patients will survive for less than between six and nine months and 50 per cent will survive for more than between six and nine months from date of first diagnosis. The paper to which Mr Walsh referred also asserts a five year survival rate [for patients with intestinal metastatic melanoma] of less than 10 per cent.
In Mr Walsh’s third report dated 2 October 2012, he observed “entirely from anecdotally and from my memory” that he had seen about a half a dozen patients presenting with small bowel melanoma. According to his recollection, none of these patients with non-resectable small bowel disease survived more than 12 months. He also observed that, of the patients he had seen, Mr Eden represented the most extensive small bowel intra-peritoneal disease that he had seen in his surgical practice.
Also in that third report, Mr Walsh said this.
Again in population based studies age appears to be important. The issue here is again it is a general observation and it is hard to believe when confronted with the extent of intra-abdominal disease that a patient’s age is going to significantly impact on survival. I think that one has to be very careful about studies reporting survival of small bowel melanoma. Within these studies there will be patients with a single small bowel metastasis that can full resected and there will also be patients with extensive disease in Mr Eden’s category. I think that one should look at the individual patient rather than historical groups in trying to determine prognosis.
The effect of Mr Walsh’s opinion as to prognosis, at its highest for the insured, is that Mr Eden had six to nine months to live as at and from the date of diagnosis (28 December 2012). However, the basis of this opinion would appear to be the reference in the literature relied upon by Mr Walsh to the effect that the median survival of patients presenting with intestinal metastatic melanoma is poor, being between six and nine months together with Mr Walsh’s clinical observations and assessment of Mr Eden which, in Mr Walsh’s experience, put Mr Eden as one of the more serious cases within that category of patients.
This prognosis presents some difficulty for its application in the context of the insuring clause because Mr Walsh would have formed the same opinion if asked and if Mr Eden had presented similarly, as at August 2011 and as at 17 November 2011. Indeed, as at 24 April 2012, Mr Walsh still gave Mr Eden six months to live. Whilst this is tolerably consistent with a prognosis of between six and nine months as at 28 December 2011 (date of actual diagnosis) it is not consistent with a prognosis of between six and nine months as at or from August 2011.
During his oral evidence Mr Walsh maintained that he would have given a prognosis for Mr Eden of less than 12 months to live at any of the dates August 2011, November 2011 and December 2011 or later.[29]
Professor Brown
[29] T210, 214-215.

In his first report of 10 September 2012, Professor Brown concluded that Mr Eden had non-pulmonary visceral metastatic melanoma as at both August 2011 and November 2011. He was prepared to infer this from the clinical findings of Mr Walsh following the laparotomy and the subsequent pathology results. Attached to this first report and upon which Professor Brown relied extensively, was a copy of the Balch report. This report analysed the survival rates of 7,972 patients with stage IV melanoma. Based on this study and its results Professor Brown expressed the opinion that:
Mr Eden’s chance of surviving 7 months would have been about 50% and his chance of surviving 12 months would have been 33%.
Again, these statistics relied upon and quoted by Professor Brown refer to time periods from the date of diagnosis. In his first report Professor Brown said this.
I believe that the extent and bulk of this disease indicates, more likely than not, metastatic melanoma would have been present both in mid-November 2011 and in August 2012 [sic: 2011]. The presence of non-pulmonary visceral metastases of melanoma in either August 2011 or mid-November 2011 would have made Mr Eden’s disease stage IVc which has the worst prognosis of any stage of melanoma.
He went on to observe that the prognosis he had proffered was one “regardless of any treatment that may have been undertaken”.
I say regardless of any treatment that may have been undertaken because at the time of his presentation and subsequent tissue diagnosis on 28 December 2011, standard first line treatment for metastatic melanoma in Australia was… . Neither drug has been shown to extend survival and, therefore, would not alter the natural history of his metastatic melanoma nor the chance that he would live beyond 12 months.
In his second report, Professor Brown restated his position that the likelihood of Mr Eden surviving 12 months, whether from August 2011, November 2011 or December 2011, was 33 per cent. Professor Brown was pressed on this and other issues during a sustained cross-examination but he maintained his opinion. Again, the nature of the opinion expressed by Professor Brown exposed the difficulty that confronts the court when applying the various expressions of medical opinion adduced in this case to the requirements of the insuring clause. The medical experts when giving their opinion relied substantially[30] on the studies undertaken in the peer reviewed literature. These studies all, would appear to work, from a “fixed” point namely the date of diagnosis for each of the subjects dealt with in the study. As I have already indicated it would seem to explain why all of the experts gave the same answer whichever “as at” date was selected. Intuitively, one might think there should be different answers. However, a prognosis is just that. In the present case it can only be a best very educated guess or estimate about something, inherently difficult to predict, to take place in the future. In this respect the experts are hostage to the recorded outcomes in their literature.
[30] Of course, the clinical findings, particularly those of Mr Walsh following the laparotomy, were important to all three experts as well. However, such clinical findings largely serve to position a particular patient within a prognostic group for the purpose of applying the conclusions to be drawn from the literature.
It might be tempting to construe the insuring clause as embracing an “as at” date to be the date of diagnosis.[31] In other words, the insuring clause would require the plaintiff to establish that Mr Eden had, during the policy period, an illness which will result in death within 12 months from date of diagnosis. However, in my view, such a construction of the insuring clause (and of the definition of Terminal illness) is not permitted by the words used in the policy. In any event, it would give rise to the possibilities of capricious applications of the insuring clause given that a date of diagnosis does not represent a consistent fixed point within the development of the disease for individual patients. As I have already stated, the “as at” date I prefer is 17 November 2011. As it happens, this is not that far removed from 28 December 2011, the date of Mr Eden’s diagnosis.
The prognosis contended for by the plaintiff – does it satisfy the insuring clause?
[31] This was the date adopted in Tower Australia on a construction of the terms of the policy before the court in that case.
I will come to Professor Fox’s evidence in due course. He takes a different view and at all times maintained that Mr Eden had a significantly better prognosis as at any of the nominated dates than Mr Walsh or Professor Brown would allow for. However, for the moment I will assume that a prognosis based on the opinions of the insured’s two experts is the appropriate one to adopt.
For the insured to recover, the court must be satisfied on a balance of probabilities that, as at 17 November 2011, Mr Eden’s illness had a certain prognostic character. It had to be an illness which, as at that date, “will result in his death within 12 months, regardless of any treatment…” (emphasis supplied). At no time did Professor Brown say that Mr Eden will not survive 12 months from any of the relevant dates, including 17 November 2011. He was confident to assert that Mr Eden would not survive 20 years, 8 years or 5 years.[32] However, he stopped at anything less than 5 years.[33] In other words, Professor Brown was prepared to give a prognosis of certainty with respect to relatively long time frames but would only proffer a prognosis qualified by probabilities with respect to time frames shorter than 5 years. Mr Walsh was not pressed with this line of questioning but it was implicit in the various prognostic formulations he gave that there could be no certainty that Mr Eden would not survive 12 months. Whilst Mr Walsh relied on his clinical observations of Mr Eden and clinical experience generally, the heartland of his opinion was the conclusion, in the literature he relied on, to the effect that the median survival of patients presenting with intestinal metastatic melanoma was poor, between six to nine months.
[32] T149.
[33] T149.
To the extent that the prognoses of Mr Walsh and Professor Brown differed in their formulations and in the event that any such differences were to be material to the question before the court (which is not my view) I would have a preference for that of Professor Brown. I accept that Mr Walsh, as the surgical clinician, was well placed to be able to assess the prospects for his patient. He also had first hand observational knowledge of the clinical findings at surgery. However, all of the clinical findings properly described and analysed were available to and relied on by Professor Brown and, for that matter, Professor Fox. Professor Brown is significantly more experienced or familiar with metastatic melanoma and the peer reviewed literature. Mr Walsh’s main area of expertise was breast and endocrine surgery. He had relatively limited clinical experience with other non-pulmonary visceral metastatic melanoma surgical patients.
The prognoses given by Mr Walsh and Professor Brown each fell well short of an opinion that, as at 17 November 2011, Mr Eden had an illness that will result in his death within 12 months.
The court is proceeding to decide, whether a particular state of affairs existed as at 17 November 2011. The material fact in question is the prognostic character of the illness as at 17 November 2011. This is a matter of historical fact and to be determined on the balance of probabilities.[34] In this respect, I can take account of later obtained medical opinion evidence probative, by way of inference or otherwise, of the prognostic character of the illness as at 17 November 2011.
[34] Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 639-640 (Brennan and Dawson JJ) and 642-643 (Deane, Gaudron and McHugh JJ).
Whilst I am required to make a finding as to an historical fact and am to do so on a balance of probabilities, I have the assistance of and ordinarily would rely on the expert medical opinions each of which purports to provide a prognosis by way of assessing future prospects. The task undertaken by the experts in this respect is similar to that described in Malec v J C Hutton Pty Ltd in the context of assessing future contingencies for assessment of damages purposes. Brennan and Dawson JJ said this.[35]
The fact that the plaintiff did not work is a matter of history, and facts of that kind are ascertained for the purposes of civil litigation on the balance of probabilities: if the court obtains the required degree of satisfaction as to the occurrence of an historical fact, that fact is accepted as having occurred. … Hypothetical situations of the past are analogous to future possibilities: in one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur. Both are to be distinguished from events which are alleged to have actually occurred in the past.
To similar effect were the observations of Deane, Gaudron and McHugh JJ.[36]
When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain: if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. And in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high – 99.9 per cent - or very low – 0.1 per cent. But unless the chance is so low as to be regarded as speculative – say less than 1 per cent – or so high as to be practically certain – say over 99 per cent – the court will take that chance into account in assessing the damages.
[35] At 639-640.
[36] At 642-643.
Whether I were to adopt the prognostic formulation of Professor Brown or Mr Walsh or, a fortiori, Professor Fox, I would not be satisfied that Mr Eden’s illness could be described as having the required prognostic character as at 17 November 2011. None of the expert evidence establishes that Mr Eden had an illness the prognosis for which was such that it “will result” in his death within 12 months. At best, for the insured’s case, Mr Eden had an illness, as at 17 November 2011, from which he was substantially more likely than not to die within 12 months (as Professor Brown put it, a 33 per cent chance of survival). It is not sufficient for the insured to ask the court to find that, as at 17 November 2011, on a balance of probabilities, Mr Eden would not survive 12 months. This would demonstrate no more than as at 17 November 2011 it was more likely than not that Mr Eden would die within 12 months and serve to give no effect to the contractually agreed language of “will result” in death. The insured must prove, on a balance of probabilities, the historical fact that as at 17 November 2011 Mr Eden’s illness had a particular prognostic character, namely, that it “will result” in death within 12 months.
I am fortified in the construction I have just outlined by a consideration of the common law approach when assessing damages, to the proof of historical facts as compared with the proof or establishment of future events or contingencies, as explained above with reference to Malec v Hutton.
Ultimately, the question before me is one of construing the words used, in the context of the insuring and definition clauses and in the context of the policy as a whole. The insured must prove, on balance of probabilities that Mr Eden’s circumstances fell within the insuring clause. The terminology used in the present case, “will result”, consists of unusually rigid language for a policy of this type. In McArthur v Mercantile Mutual Life Insurance Company Ltd,[37] more flexible language was used. The definition of permanent disability required a finding, inter alia, that the insured “was likely never to [work again]”; not an uncommon formulation in policies of this type. Again, the task before the court was to determine, on a balance of probabilities, whether an historical fact had been established. The fact concerned the prognostic character of the plaintiff’s condition, as at a time earlier or no later than the court’s consideration of the issue. The plaintiff needed to establish, on balance, that he had been, in fact, “disabled or incapacitated to such an extent as to render [him] likely never to [work again]”. Here, unlike in the present case, the prognostic character of the plaintiff’s condition, to be proved, itself contained an element of probability (“likely”). The prognostic character called for had an element of flexibility built in to it but it was that character, as a whole, which had to be proved as an historical fact, on balance.
[37] [2002] 2 Qd R 197; [2001] QCA 317.
Tower Australia Ltd v Farkas[38] also concerned a claim for a terminal illness benefit although in many respects the form of, and terminology used in, the policy was materially different from that in the present case. In Tower Australia the insuring clause under consideration required a finding that the insured had “an illness or condition which is highly likely to result in death within 12 months” (emphasis supplied). At face value, the language used fell somewhere between that used in McArthur, “likely never…” and that used in the present case, “will result”.
[38] (2005) 64 NSWLR 253; [2005] NSWCA 363.
At first instance[39] Bergin J considered the meaning of the expression “highly likely”. It was common ground before her that this involved “an impressionistic judgment” as distinct from something reflecting a particular percentage of mathematical probability. Her Honour observed that the word “likely” is protean and will take its meaning from its context.
I am satisfied that the term “likely” means a real and not remote chance and that in this context “highly likely” moves, as Tower submitted, into the realms of probability. It is not necessary to speak in percentages – the test is that the likelihood of death in 12 months is high, or, put another way, in all probability death will result in 12 months.
The “diagnosis” of the terminal illness is the event that entitles the payment of the death benefit.[40] For the cancer to qualify as a terminal illness under the Tower Term conditions, there had to be an “assessment” or an evaluation or judgment, that the cancer would be highly likely to result in the plaintiff’s death within 12 months.[41]
[39] Sub nom,Farkas v North City Financial Services Pty Ltd & Ors [2004] NSWSC 206.
[40] I have already found that given the particular terms of the policy before me in the present case, it is the “having” of the Terminal illness rather than the “diagnosis” that is the event that entitles the payment of the benefit.
[41] At [29]-[30].
Whilst it is not of direct significance to the present case it is to be observed that her Honour equated the term “likely” with the notion of “possibility” (a real and not remote chance) and the term “highly likely” with the notion of probability, impliedly, more likely than not. Arguably (as the insurer in that case maintained) such an approach would seem to give little effect or weight to the word “highly” when applied to the word “likely”. Whilst it can be accepted that the word “likely” does have a protean character and always will need to be construed in its particular context, the approach taken by her Honour would appear to have departed from the meaning of the word “likely” often identified in other authorities.[42] Nevertheless, there are cases where the word “likely” has been regarded as saying something stronger than “probable” and cases where the word “probable” has been regarded as saying something stronger than the word “likely”. Ultimately, it will be a matter of context.
[42] See a leading discussion of the notion in this State by Bray CJ in Australian Telecommunications Commission v Krieg Enterprises Pty Ltd (1976) 14 SASR 303 at 309ff and cases there referred to including R v Hallett [1969] SASR 141 at 153, R v O’Sullivan & Mackie (1975) 13 SASR 69, Czarnikow Ltd v Koufos [1969] 1 AC 350 at 410 and Bolton v Stone [1951] 1 AC 850 at 864.
In the Court of Appeal, Mason P (with whom Beazley JA and Tobias JA agreed) essentially approved of her Honour’s interpretation, and application to the facts, of the term “highly likely” and said this.[43]
A medical prognosis is defined as “an assessment of the future course and outcome of a patient’s disease, based on knowledge of the course of the disease in other patients together with the general health, age and sex of the patient” (Oxford Concise Colour Medical Dictionary). Dr Dodds explained that his prognosis had regard to the statistical guidance of the Shipp Report, improvements in medical science since 1993, and the specific insights drawn from close examination of the respondent’s background and presenting symptoms. As indicated, he concluded that: “Mr Farkas had generalized intermediate-grade non-Hodgkin’s lymphoma of poor prognostic type because of the involvement of multiple extra nodal sites of disease”.
This was undoubtedly a situation illustrative of the observation of Deane J, Gaudron J and McHugh J in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 that:
“… questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration of proof”.
When a judge or jury decides an issue “on the balance of probabilities” this may occasionally involve application of mathematics associated with the probability theory. But the vast majority of cases entail much more. Even when the issue is the existence or non-existence of a past event the reality is that the decision-maker arrives at a state of reasonable satisfaction having regard to the seriousness of the issues involved, the evidence gathered or not gathered, intangibles such as assessment of the credibility of witnesses, as well as the broad “possibilities” (see generally The Hon Mr Justice D H Hodgson, “The Scale of Justice: Probability and Proof in Legal Fact-finding” (1995) 69 Australian Law Journal 731).
The present case called for satisfaction to the level of high likelihood. I agree that this involved more than mere probability. It is however necessary to bear in mind that the matter at issue was predictive in the sense of involving proof of a future possibility as distinct from an historical fact. Furthermore, the matter to be predicted was considered by the experts and the court as offering a choice between two possibilities: death within 12 months from the disease or continued existence thereafter. (The possibility of death from other causes within 12 months was not expressly adverted to and it appears to have been subsumed in the “continued existence” category.) This binary focus meant that, to the extent that it is meaningful to speak of a 60 per cent degree of satisfaction that death would occur, a 60 per cent “likelihood” of death indicated that there was only a 40 per cent “likelihood” that death would not occur. Any attempt to transfer such crude mathematics to the evaluative exercise of determining “high likelihood” needs to bear in mind that the evaluative question would need to be applied to a 60:40 ratio with the 20 per cent gap that this entails. These considerations really point up the non-mathematical aspect of the central issue, but they assist in explaining why I would affirm Bergin J’s conclusion in the instant matter.
[43] At [52]-[55].

The issue before the court in cases like Tower Australia is not the direct question of whether or not the life insured is “highly likely” to die within 12 months of diagnosis. It is whether or not he had an illness or condition that carried with it a prognosis (or in the terms I have previously used, a prognostic character) as at the relevant date, to the effect that it was an illness or condition which is highly likely to result in death within 12 months. Once the court found, on a balance of probabilities, that the illness in question carried with it certain prognoses, according to the expert medical evidence, it then became a question of construction of the term “highly likely” in order for the court to determine whether the prognostic character, as settled upon in accordance with the evidence, fell within the requirements of the insuring clause. Bergin J said as much when she observed.[44]
For the cancer to qualify as a terminal illness under the Tower Term conditions, there had to be an “assessment”, or an evaluation or judgment, that the cancer would be highly likely to result in the plaintiff’s death within 12 months. (Emphasis supplied.)
[44] [2004] NSWSC 206 at [30].
It is the assessment or the evaluation or the judgment of which the court must be satisfied on a balance of probabilities. It must be an assessment or an evaluation or a judgment, reached on a balance of probabilities, about the required defined character. In the present case, was this an illness which, as at 17 November 2011, had the (prognostic) character that it “will result” in death within 12 months?
As I have indicated, it is incorrect in my view, to approach the matter by asking the question has the insured proved, on balance of probabilities, that as at 17 November 2011 Mr Eden “will die” within 12 months. This question serves to import an additional and unwarranted critical phrase into the policy language: has the insured proved that Mr Eden “more likely than not will die”?
In my view, perhaps harsh as it may appear, the insurer has taken steps to ensure (and the parties have agreed) that the prognostic character that must be established has an element approaching absolute certainty about it; something more and significantly more than likely or indeed, highly likely.
In this context it should be remembered that the insured has made a claim not for the “life benefit” but for an acceleration of the payment of the life benefit. Ordinarily, were the life insurance plan here to have been annually renewed, the insurer would expect to be called upon, in the short to medium term, to pay out the life benefit upon death of a life insured in Mr Eden’s position. In the unusual circumstances of this case, the insurer was never going to be liable to pay the life benefit as a result of the death of Mr Eden. Bearing in mind that life insurance plans such as the present, unless cancelled by the insured or by the insurer (but only on quite limited grounds), are renewed on an annual basis, it makes some sense for any entitlement to an “acceleration” of the life benefit ordinarily payable on death to be strictly confined. In my view, the insurer in this case has done that by the use of the word “will” as opposed to other alternatives which allow for significantly less certainty about the content of any relevant prognosis and which, in a practical sense, would have served to expand the operation of the Terminal illness insuring clause.
Perhaps, given the nature of expert evidence in this case and, in particular, that relating to the basis upon which prognoses are determined, the type of illness suffered by Mr Eden may rarely lend itself to a prognosis that falls within the insuring clause construed in the manner just explained. However, this will not necessarily be so. It is conceivable that a person with stage IV metastatic melanoma might present to the medical profession and be diagnosed at such a late stage in the development of the illness that, even though statistically the prognosis might be expressed that a person with this illness has a 33 per cent chance of surviving more than 12 months from date of diagnosis, the clinical findings at diagnosis might be such that the doctors would be willing to say, with expressed certainty, that this particular patient has only weeks or months to live. That was not the case with Mr Eden.
This conclusion that the insured’s expert evidence does not serve to bring Mr Eden (and therefore the insured) within the terms of the insuring clause means that the insured’s claim must be dismissed. Nevertheless, and in case I am found to be wrong and in deference to the extensive and detailed submissions put by the parties, I will briefly deal with a number of the other issues that have been raised.
Professor Fox
Professor Fox’s opinion was less supportive of the insured’s case. Professor Fox in his reports and evidence provided a number of prognoses according to various “as at” dates and on the basis of varying assumptions. For present purposes, his prognosis of most relevance was that given in his second report[45] to the effect that had he examined Mr Eden in August 2011 or on 17 November 2011 he would have “prognosticated a survival of 12 months or more”.
[45] Dated 9 September 2012, P3, tab 23.
The insured argues that Professor Fox’s opinions at the time of providing his reports and giving evidence were “tainted” by the fact that he took into account his knowledge of matters of fact that only came into existence and could only be known at a time after 17 November 2011. For example, Professor Fox placed significant weight on the facts that following testing on 30 December 2011, 17 March 2012 and 10 May 2012 Mr Eden was found to have LDH and albumin levels within the normal range. Professor Fox’s view was that whilst an abnormally elevated LDH level and an abnormal albumin level were both strong indicators of a poor prognosis, normal levels were independent prognostic factors for prolonged survival. Professor Brown and Mr Walsh agreed with the former but not the latter. In addition, Professor Fox acknowledged being influenced by his clinical findings when he examined Mr Eden in September 2012 including the fact that he was still alive (some nine months or so after the date of diagnosis (28 December 2011)).[46] The knowledge in September 2012 that Mr Eden was still alive would have extended the prognosis “by some months”.[47]
[46] T262-263.
[47] T263.
I am not satisfied on the evidence before me that any of the medical experts were in a position to infer from the LDH and albumin level results obtained on 30 December 2011 and later that it was more likely than not that Mr Eden would have recorded similar “normal” results on or about 17 November 2011 or earlier.[48] None purported to do so.
[48] In this respect the situation with respect to Mr Walsh’s clinical observations and findings at the time of the laparotomy on 28 December 2011 is different. All of the experts were prepared, on the basis of these observations and findings, to draw an inference as to Mr Eden’s condition as at 17 November 2011.
The insurer submits that I am entitled, when determining the nature of Mr Eden’s prognoses as at 17 December 2011, to have regard to evidence of factual matters acquired at a later time. In particular, the insurer maintains that the fact that Mr Eden was still alive as at September 2012 when Professor Fox saw him and, indeed, during the trial in early November 2012 was relevant and probative of the issue whether Mr Eden will survive more than 12 months from 17 November 2012. The insurer put a number of arguments in support of this proposition. There is, of course, also the well known statement by Dixon J (as he then was) in Willis v The Commonwealth.[49]
It was said that his Honour ought not to have treated the plaintiff’s remarriage, which took place five months after the death of her first husband, Wilson, as showing that, except possibly in that interval, no actual pecuniary loss to her had ensued from his death and the learned judge should have taken his stand as at the date of such death and considered only the probabilities then existing of the plaintiff remarrying.
In my opinion the objection is no longer tenable. The decided cases are almost uniformly against it. I refer particularly to… and to the authorities discussed by Uthwatt J., authorities from which his Lordship said the principle was to be drawn that where facts are available they are to be preferred to prophecies.
. . . .
It is apparent that the fact of the plaintiff’s early remarriage to a husband who is as well able to provide for her as was the deceased is the substantial reason why Dwyer C.J. made no award for damages in the plaintiff’s favour. (Citations omitted.)
[49] (1946) 73 CLR 105 at 116.
The notion that a court will not speculate where it knows is well accepted, but usually in the context of its taking into account future contingencies when assessing damages for future economic loss. The question before me in this case is not in that form. The court is not being asked what is the probability of a particular event occurring in the future. It is being asked whether, as at 17 November 2011, Mr Eden’s condition attracted a particular prognosis.
The insured submits that the admissible evidence available to be relied on by the medical experts, is as to facts (including inferences) probative of Mr Eden’s condition as at 17 November 2011, that were either known or knowable as at that time, once appropriate enquiries or investigations were to be undertaken. What is not admissible, submitted the insured, are matters of fact that were not knowable as at 17 November 2011 because these matters of fact had not come into existence. The most obvious example of the latter is the fact of Mr Eden’s continued survival as at September or November 2012.
It cannot have been intended by the parties that such evidence would be admissible as relevant to the nature of the prognostic character of Mr Eden’s illness as at 17 November 2011 (or earlier on the insurer’s case). To have it so would simply serve to reward an insurer for standing by and delaying its processing of a claim for the Terminal illness benefit. If the fact of survival for any period of time including up to or more than 12 months is a potentially relevant consideration, what is to stop an insurer from simply waiting until death or the expiration of 12 months whichever comes first? If the former, the insurer might then pay out the claim but be mulcted some interest for the delay in payment.[50] If the latter, there would be nothing to stop the insurer from refusing the claim. Any alternative claim for damages for unreasonable delay in assessing the claim would be problematic. The insured would be met with the argument that if the actual period of survival after the “as at” date is a relevant consideration it could not be said that any delay in assessing the claim for this reason was unreasonable and in breach of the policy. If the actual period of survival was a relevant consideration what would this mean for the question of “fresh evidence” on any review or appeal of a determination reached before the expiry of 12 months after the “as at” date?
[50] IC Act s57. Even this would be problematic. If the actual period of survival after the “as at” date is a relevant consideration and was the only reason for delay in payment, it would be difficult to fix on a date from which it “was unreasonable for the insurer to have withheld payment”; vide s57(2).
In the circumstances of this case and given the requirements of the insuring clause, I agree that the type of distinction articulated by the insured is appropriate. It is consistent with principle and with the reasoning on this issue in McArthur[51] and Tower Australia.[52]
[51] [2002] 2 Qd R 197; [2001 QCA 317 particularly at [74], [78].
[52] (2005) 64 NSWLR 253; [2005] NSWCA 363 particularly at [20]-[21].
For this reason, that is, Professor Fox’s reliance on clinical observations in September 2012, including the continued survival of Mr Eden as at that date, and on LDH levels obtained only after 17 November 2011, the reliability of his opinion(s) as to prognosis as at 17 November 2011, is significantly compromised. Mr Eden’s post-operative normal LDH levels were crucial to the more positive prognosis given by Professor Fox and his continued survival was also quite influential. Furthermore, given that this reliance by Professor Fox on the normal LDH levels when arriving at his opinion was misplaced, the major reason why he disagreed with Professor Brown also falls away.
For these reasons and should it have been necessary to decide, I would have preferred Professor Brown’s opinion as to prognosis over that of Professor Fox.
On the assumption that it was permissible for Professor Fox to take account of Mr Eden’s normal LDH levels when tested on 30 December 2011 and after when considering Mr Eden’s prognosis as at 17 November 2011, I would still, although with some hesitation, have preferred the opinion of Professor Brown. The contest at this point was between two eminently well qualified oncology physicians with extensive clinical, academic and research experience in the very area under consideration. Each has a deep and expansive knowledge and understanding of the relevant literature. In such circumstances, it is never an enviable task for a judicial officer without any training and experience in the relevant discipline, to express and make a finding as to which of the two experts is to be preferred. Ultimately, given that I am satisfied that even on the basis of the opinions of Professor Brown and Mr Walsh, the insured’s claim must fail, it is not necessary for me to express such an opinion. Nevertheless this issue did occupy a very significant proportion of both the expert evidence heard and counsel’s submissions. Without meaning any disrespect to either the expert witnesses themselves or to counsel, I will confine myself to providing the main reasons for not accepting Professor Fox on this topic.
The authors of the Balch report state the following.[53]
The updated AJCC Melanoma Staging Database clearly demonstrates that an elevated serum LDH is an independent and highly significant predictor of survival or outcome of stage IV patients, independent of other factors. Furthermore, this factor was among the most predictive independent factors of diminished survival in all published studies when it was analysed in a multivariate analysis, even after accounting for site and number of metastases.
Both Professor Brown and Mr Walsh accepted these propositions. It is common ground that elevated serum LDH is an independent and highly significant predictor of survival or outcome of stage IV patients. The authors of the Balch report continued as follows.[54]
Survival rates are significantly reduced in patients with an elevated serum LDH at the time of initial assignment to stage IV. Therefore, when serum LDH is elevated above the upper limits of normal at the time of staging, those patients who also have distant metastases are assigned to M1c, regardless of the site of their distant metastases.
The number of metastases at distant sites has previously been documented as an important prognostic factor. This was also confirmed by preliminary multivariate analyses using the AJCC Melanoma Staging Database. However, this feature was not incorporated into the staging system because of significant variability in the deployment of diagnostic tests to comprehensively search for distant metastases among institutions that contributed data… (Emphasis supplied.)
[53] Balch at p214. Citations omitted.
[54] At p214. Citations omitted.
Professor Fox maintained that, in addition to the proposition that elevated serum LDH was an independent and highly significant poor prognostic factor, the Balch report, together with a number of other much smaller reviews or studies, also supported the proposition that a normal serum LDH level was a good prognostic factor even for a person otherwise in stage IV(c) that is, even for a person (such as Mr Eden) suffering from metastatic melanoma at non-pulmonary visceral sites. Not only did Professor Fox maintain that this was supported by the findings of and discussion in the Balch report, he also seemed to say that it should follow, perhaps almost intuitively, as a matter of logic. If elevated levels signify a poorer prognostic outcome even for a patient with the significant tumour burden and location of tumours such as in the case of Mr Eden, a normal serum LDH level must logically indicate a better prognosis than someone with that tumour burden and location of tumours would otherwise enjoy.
Neither Professor Brown nor Mr Walsh accepted that this necessarily would follow as a matter of logic.
Professor Brown expressed the opinion that an elevated LDH level might convert a good prognosis into a poor prognosis because it suggests that something is abnormal with the patient despite the lack of other identifiable indicators. Both he and Dr Walsh were of the view that if one was able to see from direct observations that a patient, as in the case of Mr Eden, had a large number of widespread tumours, a normal LDH may simply mean that for whatever reason, perhaps unknown, the LDH was not reflecting the true pathology of the disease.
As a matter of logic, I can readily understand that an abnormal (elevated) serum LDH level may prove to be an independent and highly significant predictor of survival. However, the fact that it is described as an independent factor does not mean that it necessarily will replace other factors. Independent does not mean “in lieu of”. There is still room, as a matter of logic, for a heavy tumour burden in non-pulmonary visceral sites, as was the case with Mr Eden, also to be a highly predictive factor of survival or outcome for a stage IV patient.
It is with some hesitation, but I take the view that Professor Fox has engaged in a misreading of or perhaps in reading too much into the Balch article. Balch provides two graphical representations of its findings of present significance.[55] Figure 2A plots survival curves for 7,635 patients with metastatic melanomas at distant sites (stage IV). They are sub-grouped according to the site of the metastatic disease. It was from these graphs that Professor Brown developed his prognosis. The three survival curves relate to 1,474 patients with skin, subcutaneous or distant nodal metastases which show the best prognostic curve, 1,895 patients with lung metastases either with or without skin and subcutaneous metastases which show the next best prognostic curve and 4,603 patients with non-pulmonary visceral metastases which show the worst prognosic curve. It was this latter survival curve that Professor Brown used as the basis for his prognosis in finding that Mr Eden had a 33 per cent chance only of surviving for 12 months.
[55] At p212.
Figure 2B compares the survival curves for 387 normal LDH patients with 377 abnormal LDH patients. The former show a significantly better survival curve than the latter. It was the former survival curve for 387 patients that Professor Fox relied on when he “prognosticated a survival of 12 months or more”.
The Balch report under the heading “Staging for Distant Metastatic Melanoma (stage IV)”[56] commences its discussion of this topic with the following.
In patients with distant metastases, the site(s) of metastases and elevated serum levels of LDH are used to delineate the M1 stage into three M categories: M1a, M1b and M1c.[57] One-year survival rates among 7,972 stage IV patients were 62% for M1a, 53% for M1b and 33% for M1c melanomas (P < .0001; Fig 2A).
Patients with distant metastasis in the skin, subcutaneous tissue, or distant lymph nodes and a normal LDH level are categorized as M1a; they have a relatively better prognosis compared with those patients with metastases located in any other distant anatomic site (Fig 2A). Patients with metastasis to the lung (or with a combination of lung and skin or subcutaneous metastases) and a normal LDH level are categorized as M1b and have an intermediate prognosis. Those patients with metastases to any other visceral site or at any location with an elevated LDH level are designated as M1c and have the worst prognosis (Fig 2A and 2B).
Elevated serum LDH. The updated AJCC Melanoma Staging Database demonstrated that an elevated serum LDH level is an independent and highly significant predictor of survival outcome among patients with stage IV disease. Thus 1 – and 2-year overall survival rates for those stage IV patients in the 2008 AJCC Melanoma Staging Database with a normal serum LDH were 65% and 40%, respectively, compared with 32% and 18%, respectively, when the serum LDH was elevated at the time of staging (P < .0001; Fig 2B). Therefore serum LDH should be measured at the time stage IV disease is documented, and if the LDH level is elevated, those patients are assigned to M1c regardless of the site of their distant metastases.
[56] At p213.
[57] As I understand the position, these references line up effectively with the notion earlier described of stage IV(a), stage IV(b) and stage IV(c) although in saying this I recognise that I may be misrepresenting Professor Fox’s position on this.

In addition, Dr Bode completed a Medical History Report at the request of the insurer and on the basis of information received from Mr Eden. In the Medical History Report the following question was asked.
Has the patient EVER suffered from or required treatment for problems relevant to the following: (If yes, please give details of the dates, current state, past history, investigations, treatment, duration of illness, time off work and any referrals. …)
(c)Cancer or tumour of any kind?
The form provides for three boxes one of which is to be ticked as indicating “unknown”; “no”; or “yes – please specify”, respectively. Dr Bode ticked the “unknown” box and then added in handwriting the following:
Previous wide excision of a mole in 1993, the histology was unclear as mole poorly stored over Easter before testing. Therefore a wider excision was done as a precaution.
There then appears a handwritten arrow pointing to the words “not available”. An inference to be drawn from the form of the handwritten notation is that the results of the wider excision done as a precaution were not available to Dr Bode.
At one stage the insured also sought to rely on a second document completed by Dr Bode a “Standard Medical Exam Form”.[74] However, Dr Bode does not actually depose, in his affidavit, to having forwarded this document to the insurer, although a handwritten note on the top of the first page suggests it was faxed to Bernadette Byrnes on 23 February 2011, the day before the policy was issued.[75] The evidence is unclear as to whether or not this second form found its way to the insurer. Dr Bode was not called to give oral evidence and therefore was not cross-examined on this issue. In any event, the issue is of little moment because the information contained in the second form, the Standard Medical Exam Form, relevant to the issue presently under consideration did not or would not have been seen to have added to the insurer’s information on the topic. The handwritten notation in the Standard Medical Exam Form by Dr Bode was in the following terms.
Skin lesion removed in 1993 just before Easter by local doctor. Wasn’t tested till after Easter, and by that time, had degraded. – Precautionary wider excision done at Wakefield…
[74] Exhibit SB4 to the affidavit of Dr Bode, sworn 12 October 2012, exhibit P8.
[75] According to an agreed fact in P1 the policy was issued on 24 February 2011.
The insured submits that the information in the Medical History Report, as provided by Dr Bode, was sufficient, at least to put the insurer on enquiry. There had been a mole removed, a precautionary wider excision performed for histological purposes but with unknown (from Dr Bode’s perspective) results.
The insurer submits that Dr Bode’s Medical History Report[76] does not take the matter of disclosure any further. The insurer submits that to have asserted that it was “unknown” as to whether the mole was a cancer or tumour of any kind was incorrect particularly given that Mr Eden knew that it was a malignant melanoma.
[76] Exhibit SB2 to the affidavit of Dr Bode.
During his cross-examination Mr Eden maintained that he told Bernadette Byrnes the “full story of what actually happened with the removal of the mole”. He told her that he had been told in 1994 that he had a 40 per cent chance of dying within five years, that the mole was a malignant melanoma and, as a consequence, he had a very substantial premium loading imposed with respect to his then existing life insurance for each of the next five years. I am satisfied that Mr Eden, at the time that the application for insurance was completed and at the time he spoke to Dr Bode, was aware that he had been diagnosed with a malignant melanoma.
The insured submits that the information disclosed in the application form and in the report of Dr Bode was sufficient to inform the insurer “about” the medical condition in fact suffered by Mr Eden in 1994, that is, malignant melanoma. I disagree. In my view, whatever content is to be given to the protean word “about” in the circumstances of this case, the insurer was not told about a malignant melanoma. If anything, and whether advertently or inadvertently, the impression left by the written material was that the condition treated was benign.
The insured referred to the observation of Dr Bode in his affidavit that it was “inherent in the fact that there had been a wider excision performed (which I expressly wrote on the form) that it was likely the mole was a melanoma”.[77] Only limited aspects of Dr Bode’s affidavit were tendered by consent and the paragraph in which this observation occurs was not one of them.[78] Arguably, the question of what might be inferred from the fact that a precautionary wider excision was performed is a matter of expert evidence upon which the insurer has not had an opportunity to respond. As I understand the insurer’s position, had the insured wished to rely on other aspects of Dr Bode’s affidavit the insurer may have required, at the least, for Dr Bode to be presented for cross-examination.
[77] Exhibit P8 at [20].
[78] See T122ff, 335ff and 379 to 386.
In any event, even if I were to accept the expression of opinion of Dr Bode that, inherent in the fact that there had been a wider excision performed, was an inference that the mole was likely to have been a melanoma, I would only accept this in the sense of being the sort of inference that a medically trained person might draw. I have no evidence on the topic of the extent to which, if at all, as a matter of routine the insurer in this case had access to medically qualified opinion when reviewing application forms. I have no evidence as to whether or not all applications were reviewed by an in-house or external medically qualified person or whether only applications which put the insurer on notice of a potential issue were reviewed and only to that extent. In the circumstances, and in particular given the nature of the answers to the questions on the application form leading to an available inference that the episode in 1994 did not involve malignant melanoma, I remain unsatisfied that the insurer was told “about” it notwithstanding this observation of Dr Bode.
Did the insurer agree to accept cover for the medical condition?
The next question or issue that arises under clause E.1 is whether the insurer agreed to accept the pre-existing medical condition, injury or sickness when the insured applied for the life plan. This must be read in the context of the question of whether or not the insured or Mr Eden told the insurer about it. If, as I have found, neither the insured nor Mr Eden told the insurer about the 1994 episode of malignant melanoma, it cannot be said that the insurer, with this information to hand, went on to agree to cover the condition.
Conclusions to this point
I will summarise the position reached to this point with respect to clause E.1. Whilst I am satisfied that Mr Eden did have a medical condition or sickness that occurred before the commencement date of the policy I am not satisfied that the medical condition or sickness was of the relevant character sufficient to trigger the application of clause E.1. However, if I am wrong in that respect and the suffering of malignant melanoma in 1994 is sufficient to trigger the operation of clause E.1 in the circumstances of this case, I would be satisfied that the insurer was not told about it in writing and did not expressly agree to accept it for the purposes of the insuring clause. In this event, the insurer would be entitled to rely upon clause E.1 to exclude the cover that otherwise would have attached, but for the insured’s remaining arguments relying on ss33 and 47 of the IC Act.
Section 47 of the IC Act
I turn, first, to consider s47 which provides.
(1)This section applies where a claim under a contract of insurance is made in respect of a loss that occurred as a result, in whole or in part, of a sickness or disability to which a person was subject or had at anytime been subject.
(2)Where, at the time when the contract was entered into, the insured was not aware and a reasonable person in the circumstances could not be expected to have been aware of, the sickness or disability, the insurer may not rely on a provision included in a contract that has the effect of limiting or excluding the insurer’s liability under the contract by reference to a sickness or disability to which the insured was subject at a time before the contract was entered into.
The IC Act was passed in 1984. There is surprisingly little authority dealing with s47. The New South Wales Court of Appeal in Tower Australia[79] referred to the section in passing but in a manner and in a context that is of no assistance here. In Greg Nelson v The Hollard Insurance Company Pty Ltd[80] Einstein J referred to s47 and the New South Wales Court of Appeal’s decision in Asteron Life Ltd v Zeiderman[81] in order to assist him to construe s46 of the Act (which is in virtually identical terms but deals with pre-existing defects or imperfections) and its application to structural damage suffered by a boat the subject of a claim brought under a private pleasure boat insurance policy. I will return to the case of Asteron shortly. However, I start with identifying the requirements of s47.
[79] Tower Australia Ltd v Farkas (2005) 64 NSWLR 253; [2005] NSWCA 363.
[80] (2010) 77 NSWLR 313; [2010] NSWSC 199.
[81] (2004) 59 NSWLR 585; [2004] NSWCA 47.
The first requirement is that s47 will only apply where a claim under a contract of insurance is made “in respect of a loss that occurred as a result, in whole or in part, of a sickness or disability to which a person was subject or had at anytime been subject”. Can it be said that the insured’s claim here is in respect of a loss that occurred as a result… of a sickness or disability to which Mr Eden… had at any time been subject? Read literally, it might be suggested that the answer is, no. The claim in this case is made in respect of the sickness or disability itself (provided it is of the appropriate prognostic character) to which Mr Eden has been and is subject. There is no independent loss which has occurred as a result of that. However, in my view, such a strict or literal reading was not intended by the legislature.
The intention behind s47 (and other provisions such as s33) is that an insurer should not be able to side-step or get around the carefully crafted statutory regime in part IV of the IC Act which serves to identify material misrepresentations and material non-disclosures and the full extent of remedies available to the insurer, by taking advantage of matters of form so as to re-characterise such conduct as either warranties by an insured or as falling within exclusions from cover. The point was taken up by Spigelman CJ in Asteron Life.[82] Whilst Spigelman CJ dissented in the result, this aspect of his reasoning was neither approved nor disapproved of by the other members of the court, Meagher JA and Bergin J.
[82] (2004) 59 NSWLR 585; [2004] NSWCA 47.
The appellant relied, alternatively, on the proposition that there was no “loss” within s47(1) of the Act.
The appellant submits that the policy responds to a “diagnosis”[83] and no consequent “loss” is required for the policy to respond. It submits that the word “loss”, in its natural and ordinary meaning, does not apply to the mere existence of a sickness or disability, as distinct from some consequence of such a condition. It further submits that the broad reading of the word “loss” in s47(1) of the character given to it by Rein DCJ, effectively reading it as equivalent to “an insured event”, renders s47(1) otiose.
It is not the experience of the Court that parliamentary draftsmen are so averse to redundancy or repetition that the Court must strain to give independent and separate operation to all the words of the statute. The principle of interpretation that, if possible, all words must be given meaning and effect is a weak principle, if it is to be applied to reach a conclusion that every provision must have some kind of operative effect. The principle is, as Mason CJ put it, “of limited application”.[84]
There is an important qualification to the general rule which O’Connor J identified, with reference to authority:
Courts will, however, when necessary take cognisance of the fact that the legislature does sometimes repeat itself, and does not always convey its meaning in the style of literary perfection.[85]
In the context of the whole of the legislative scheme, particularly the purpose of ss46 and 47 to prevent avoidance of the Act’s regulation of misrepresentation and non-disclosure, the reference to “loss” in each of ss46(1) and 47(1) should not be construed to confine the preclusive operation of ss46(2) and 47(2).
Sub-section (1) of each of the two sections identifies the need for a claim to be made, as a precursor to the reliance by the insurer on an exclusion clause, which reliance is precluded by ss(2) of each section. The use of the word “loss” is, in my opinion, merely designed to indicate the circumstances, in accordance with the particular insurance contract under consideration, which can give rise to claims. It is not, in my opinion, employed in the sense suggested in the appellant’s submission, to require the identification of a monetary or other disadvantage, over and above the circumstances which cause the policy to respond, prior to the operation of an exclusionary clause precluded by ss46(2) and 47(2).[86]
[83] In the present case, as I have indicated earlier, the policy responds not to a “diagnosis” but to an occurrence but this does not detract from the reasoning on this point by Spigelman CJ.
[84] Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 172 CLR 1; [1992] HCA 64.
[85] Brisbane City Council v Attorney-General for Queensland (1908) 5 CLR 695 at 720; [1908] HCA 8.
[86] Asteron Life at paragraphs [25] to [30].
With respect, I agree with the analysis of Spigelman CJ on this point. By virtue of sub-section (1), s47 has potential application to the insurer’s exclusion, clause E.1. In any event, in the present case the claim under the contract of insurance is made on the basis that Mr Eden, during the currency of the policy suffered from metastatic melanoma stage IV with (on the insured’s case) the requisite prognostic character. This readily lends itself to being characterised as a loss that “occurred as a result… of a sickness or disability to which [Mr Eden] was subject or had at anytime been subject”, namely, malignant melanoma.
Sub-section (2) imposes two further requirements and I will deal with them in the reverse order from that as stated in the sub-section.
First, is the insurer purporting to rely on a provision in the policy that has the effect (in this case) of excluding its liability under the policy “by reference to a sickness or disability to which Mr Eden was subject at a time before [the policy] was entered into?” There is no evidence from which the court might infer that Mr Eden had metastatic melanoma prior to the commencement of the policy in February 2011.[87] The only sickness or disability by reference to which the insurer might seek to exclude liability under clause E.1 is that of malignant melanoma. At all material times the insured was suffering from malignant melanoma; it may or may not have metastasised to some degree between 1994 and the commencement date of the policy in February 2011 but at all times it was present in Mr Eden’s body and to be characterised as malignant melanoma. The unknown throughout that period was the rate of progression from stage I through to stage IV. I am satisfied that the insurer in purporting to exclude cover (on the assumption that it would otherwise attach) in reliance on clause E.1 is seeking to rely on a provision of the policy that falls within sub-section (2). It may do so unless the insured can demonstrate that the second aspect of ss(2) is satisfied.
[87] See the policy schedule exhibit P2.
Is it the case that at the time when the policy was entered into the insured (which for present purposes can be regarded as Mr Eden) “was not aware of, and a reasonable person in the circumstances could not be expected to have been aware of, the sickness or disability”? In other words, was Mr Eden aware or would a reasonable person in his circumstances have been aware at the time the policy was taken out that he was suffering from malignant melanoma? There is evidence that Mr Eden was aware that in 1994 he had a mole removed that on the basis of later histology was diagnosed as malignant melanoma. He was given a 40 per cent chance of surviving five years. Mr Eden survived that five years and considerably longer; there is no evidence to suggest that he experienced any indicator or suffered any symptom which might suggest a recurrence or a development of the 1994 episode prior to August 2011, some 17 years later.
It is easy enough for the medical profession to form a view and confidently so that Mr Eden’s diagnosis of metastatic melanoma in 2011 came about as a direct consequence of the malignant melanoma removed from his shoulder in 1994 and that, at least in medical terms, it is a later and more serious manifestation of the same illness. However, there is no reason to think that, in these circumstances, Mr Eden was aware and had present to his mind at the time he completed the application for the insurance policy that he was still suffering from malignant melanoma or some development of it. There is nothing in Mr Eden’s evidence to suggest that he was so aware at that time or even feared that he might be. In my opinion, for Mr Eden, as a lay person, to have been of this mental state was entirely reasonable and that “a reasonable person in the circumstances could not be expected to have been aware of the sickness” from which he was, at the time of the application in February 2011, suffering.
In Asteron Life Ltd v Zeiderman[88] the Court of Appeal was asked to apply s47 to overcome a “waiting period” clause. The relevant clause in the policy provided, in effect, that the insurer would not pay pursuant to the policy where certain medical conditions were diagnosed or occurred within 3 months after the date of issue of the policy and would not pay for cancer if first diagnosed within three months after the date of issue of the policy. As far as the latter is concerned, it left open the possibility that a first diagnosis within three months of the date of issue of the policy might relate back to a first suffering of the disease before the policy was taken out. A majority (Meagher JA and Bergin J with Spigelman CJ dissenting) held that s47 did not apply to such a clause in the circumstances of that case. However, they did indicate that s47 would apply to contractual provisions in policies that purported to exclude cover by reason of pre-existing pathology, such as in the present case. Because of the particular issue that arose in Asteron Life, the reasoning in the three judgments is not of direct assistance to my consideration of the potential application of s47 to clause E.1. Nevertheless, none of the members of the Court of Appeal reasoned in a way that is inconsistent with the approach I have adopted above; if anything each adopted an approach that is consistent.
[88] (2004) 59 NSWLR 585; [2004] NSWCA 47.
For these reasons, s47 of the IC Act provides another reason why, in my view, the insurer should not be entitled to take advantage of clause E.1 in the circumstances of this case.
Is the insurer precluded from relying on clause E.1 by virtue of s33 of the IC Act?
Section 33 provides:
The provisions of this division are exclusive of any right that the insurer has otherwise than under this Act in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement.
I will be very brief here. In my view, section 33 has a significant role to play in ensuring that the codification, in Division 3 of Part IV of the IC Act, of the remedies now available to an insurer with respect to a material misrepresentation or non-disclosure retains its integrity.

Section 33 is the last section in Part IV of the IC Act which deals with the topic of disclosures and representations. The section targets the insurer’s rights “in respect of a failure by the insured to disclose… and in respect of a misrepresentation or incorrect statement”. Like s47 only a very small number of authorities have considered the ambit of s33.[89] Nevertheless, the first thing that strikes one about clause E.1, in this context, is that it does not purport to provide for a right in respect of a failure to disclose or in respect of a misrepresentation or incorrect statement. Clause E.1 purports to provide for a right in the insurer, to exclude cover, with reference to a defined event, that is, a sickness or disability that occurred before the commencement date of the policy. This right to exclude cover for this reason will stand unless the insured can demonstrate that it told the insurer about the pre-existing sickness and, in effect, sought specific cover for it to which the insurer agreed.
[89] See, for example, Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd (2007) 240 ALR 519; [2007] FCAFC 60 at [27]-[28]; Sherry v FAI General Insurance Company Ltd (in liq) (2002) 12 ANZ Insurance Cases 61-516; [2002] SASC 3 at [33]. There are other cases which have referred to s33 but simply for the proposition that it prevents an insurer from contracting out of the codified remedies for misrepresentation and non-disclosure provided for in Division 3 Part IV of the IC Act but without any discussion of the ambit of s33.
Given my findings with respect to the application of s47 it is not necessary that I come to a concluded view about the potential application of s33 and I have not done so. However, I am inclined to the view that a provision in the form of clause E.1 will stand or fall in accordance with the requirements of s47 and that s33 has no role to play.[90]
Conclusion with respect to the insured’s claim to be paid the Terminal illness benefit of $4 million
[90] In this respect, I am conscious of the “finding” in Macquarie Underwriting Pty Ltd v Permanent Custodians Ltd to the effect that the contention that such an attempt to limit the definition or ambit of policy coverage cannot withstand s33 is “arguable”, (2007) 240 ALR 519; [2007] FCAFC 60 at [28].
For the reasons given, the insured’s claim under this head fails. However, if I am wrong in finding that the insured had not brought itself within the insuring clause, the insurer would not be permitted to rely on clause E.1 to exclude the cover that would otherwise attach.
The insured has sought a remedy, in the alternative, of damages for breach of contract. I found in my earlier reasons that the insurer in failing or refusing to undertake the opinion exercise, in accordance with the requirements of the insuring clause and the definition of Terminal illness, breached its contract (the policy) with the insured. I also found that, as a consequence, it fell to the court to decide, as a question of fact, whether during the policy period the insured had an illness that satisfied the requirements of the insuring clause.[91]
[91] [2012] SASC 141 at [74]ff.
In my earlier reasons for judgment I also raised, as a possibility, whether the insured might have a claim for breach of contract. After the delivery of my earlier reasons the insured sought leave, which was granted, to amend its claim by alleging a breach of policy[92] and seeking in its prayers for relief an alternative claim for damages for breach of the policy.
[92] Third statement of claim, paragraph 8.
I have given further thought to this issue. The basic entitlement of an innocent party following a breach of contract is to have damages assessed on the basis that the party is to be put in the position it would have been in but for the breach of contract.[93] The insured is entitled to be placed in the position it would have been in had the insurer, at or within a reasonable time after receiving the insured’s claim on 27 April 2012,[94] assessed the claim in accordance with the requirements of the insuring clause. In so doing the insurer would have been obliged to properly construe the insuring clause so as to identify its requirements, and to apply it to the evidence then available together with such other medical evidence as it “may require”.
[93] The so called compensation principle, for example, Wenham v Ella (1972) 127 CLR 454 at 466.
[94] Agreed Fact in exhibit P1.
I have undertaken this exercise, albeit on the basis of the evidence obtained by the parties and provided to the court.[95] As such, the insured has already been placed in the position it would have been in but for the breach. In any event, there is no evidence concerning what medical opinion evidence (additional to that provided with the April 2012 claim) the insurer would have had before it had it undertaken the opinion exercise within a reasonable time after receiving the claim. There is no evidence before the court concerning any opinion the insurer would have reached had it undertaken the task. The insured has not proved that an outcome different from the one arrived at by me would have been reached had the insurer not breached its contract. Furthermore, as I have intimated, the insured has had the opportunity in these court proceedings to prove its claim for the Terminal illness (accelerated Life benefit) in accordance with its policy entitlements. The insured’s alternative claim for damages for breach of contract also fails.
[95] I have proceeded to ascertain as an historical fact the prognosis or prognoses for Mr Eden, as at 17 November 2011, and to determine whether or not this prognostic character of the illness, as at 17 November 2011, satisfied the definition of Terminal illness. However, this would be the same task to be undertaken by the insurer in forming its “opinion” whether or not Mr Eden’s illness satisfied the definition. As I held in my earlier reasons, the forming of the insurer’s opinion is not, of itself, part of the definition of Terminal illness, it is the agreed means (subject to court intervention, as in the present case) by which the material fact, the prognostic character of the illness, is to be determined.
The insured also makes a claim for interest pursuant to s57 of the IC Act. It submits that, in the event that the insured were to be entitled to be paid the Terminal illness benefit of $4 million, it would be entitled to interest in accordance with the terms of s57. The period in respect of which any such interest is payable is the period commencing on the day as from which it was unreasonable for the insurer to have withheld payment and ending on whichever is the earlier of the day of payment or the day on which payment were to be sent by post to the insured.[96]
[96] Sub-section 57(2).
Interest would only be payable in the event that I am found to be wrong in dismissing the insured’s claim. My preference is to await any such finding and the basis for it before hearing further from the parties as to the question of interest generally and, in particular, the day as from which it would have been unreasonable for the insurer to have withheld payment.
The insured’s claim is dismissed. I will hear the parties on the question of costs.