Herbohn v NZI Life Ltd

[1998] QSC 122

IN THE SUPREME COURT  

OF QUEENSLAND
  No. 327 of 1993

[Herbohn v NZI Life Ltd]

BETWEEN:

BARBARA JEAN HERBOHN
  Plaintiff

AND:

NZI LIFE LTD ACN 000 101 962
  Defendant

REASONS FOR JUDGMENT - W C LEE J.

Judgment delivered 12 June 1998

CATCHWORDS:     INSURANCE - insurable interest - total and permanent disablement - tinnitus - whether “bodily injury or disease” - whether total disablement multifactorial - “mental unsoundness” - whether “unsound mind” - whether states of mind other than “diagnosable psychiatric condition” amount to “mental unsoundness” - alcoholism - whether exclusions or conditions of cover - onus of proof - whether full disclosure - whether non-disclosure innocent or fraudulent - whether insurer entitled to avoid policy.

Insurance Contracts Act (1984) Cth: ss.11, 18, 19, 21, 22, 25, 26, 28, 29, 33 and 57(2).

WORDS AND PHRASES - “mental unsoundness” - “unsound mind” - whether interchangeable - whether depressive condition “mental unsoundness” - insurance - “total and permanent disability” - tinnitus.

Counsel:Mr J Griffin QC, with him Mr R  Myers for the plaintiff

Mr P Keane QC, with him Mr D Andrews for the defendant

Solicitors:Thynne & McCartney Solicitors, as town agents, for Pilgrim Geddes Solicitors and Attorneys, for the plaintiff

Clarke and Kann Solicitors for the defendant

Hearing Dates:           2, 3, 4, 5, 8, 11 December 1997.        

IN THE SUPREME COURT

OF QUEENSLAND

No.327 of 1993

BETWEEN:

BARBARA JEAN HERBOHN
  Plaintiff

AND:

NZI LIFE LTD ACN 000 101 962

Defendant

REASONS FOR JUDGMENT  - W C LEE J.

Judgment delivered 12 June 1998

A.  Overview

This is an unusual case and raises matters not commonly experienced in actions involving alleged disability of persons because of personal injury, disease or otherwise.  It was closely contested on numerous complex issues over several days, involving 82 documentary exhibits, a great deal of conflicting expert and lay evidence, and disputes as to the meaning of parts of the Insurance Contracts Act 1984 (“the Act”) as well as provisions of a policy of insurance. Subsequent submissions in writing have been received on behalf of the plaintiff, with a copy to the defendant. This is marked B3. This is in addition to lengthy written submissions for each party at the hearing. Those of the plaintiff are marked B1, B2. Those for the defendant are marked A. These are all placed with the papers. There were also lengthy oral submissions which have been recorded.

The plaintiff seeks by the action to recover an alleged entitlement under a total and permanent disablement clause of a contract of insurance between her and the defendant proposed by her on 1 March 1988 (ex.2) and accepted by the defendant on 21 April 1988 (ex.5).  The policy is ex.1 and is dated 22 April 1988.  A useful consolidated chronology was tendered at my request as a general guide to relevant events, but subject to the evidence.  See e.g. R413-4.  It was prepared by the defendant.  The italicised portions were added by the plaintiff.  Some of the matters therein, to which reference will be made, do not accord precisely with the evidence.  It will be convenient to attach a copy of that chronology (ex.82) to these reasons.

A claim was formally made on the defendant on 10 May 1989 (ex.7),  alleging total and permanent disablement of Dr Geoffrey Neale Bianchi, the plaintiff’s de facto partner, by reason of tinnitus which he alleged forced him to permanently stop work as a psychiatrist and indeed in any capacity on and from 9 February 1989 (ex.7).  The plaintiff is the insured and the life insured is Dr Bianchi.  The claim was ultimately rejected by the defendant after various medical assessments of Dr Bianchi.  The plaintiff, by notation inserted in the chronology (ex.82) states that “December 1989 NZI Life rejected claim”.  This date is not clear from the evidence.  Medical assessments were still being undertaken throughout 1990 and subsequently.  The writ was not issued until 3 March 1993.

By her statement of claim, in respect of which leave was given to amend on 2 December 1997, the plaintiff claims moneys due and owing by way of compensation in terms of the above policy entered into between the plaintiff and the defendant with an alternative claim for damages for breach of contract of insurance plus interest, and an alternative claim seeking declarations. In substance the claim is for the sum of $500,000 plus interest pursuant to s.57(2) of the Act and Regulation 32 of the Insurance Contract Regulations.

Leave was also given on 2 December 1997 and again on 8 December 1997 to the defendant to amend its defence. The defendant denies that there was ever a valid policy entered into between the plaintiff and the defendant because of the alleged lack of an insurable interest by the plaintiff within the meaning of s.18 of the Act. Further, it claims that even if there was such a policy, and even if Dr Bianchi was totally and permanently disabled by tinnitus, he did not make full and frank disclosure of the extent of his pre-existing tinnitus so that it is entitled to avoid the contract, further alleging that that non-disclosure was fraudulent. The defendant alleges that the plaintiff was responsible for non-disclosure by Dr Bianchi as her agent, and also by the virtue of s.25 of the Act. The defendant further alleges that Dr Bianchi was not totally and permanently disabled as a result of tinnitus and further contends that if a valid policy is found to exist in favour of the plaintiff, the plaintiff has not brought herself within the scope of the promise to pay, and in the alternative, that the policy contains exclusion clauses, such that Dr Bianchi’s depression and alcoholism, which the defendant says are two reasons which at least contribute towards or cause any inability to work, would preclude the plaintiff from claiming under the policy. The question of who bears the onus on the last matter was also a source of contention. The defendant submitted that the onus was on the plaintiff to prove not only total and permanent disability as a result of tinnitus but also that such a disability was not caused directly or indirectly by mental unsoundness or being under the influence of alcohol. The plaintiff on the other hand contended that the latter are true exclusion clauses, the onus being on the defendant to prove the existence of one or both of them. The defendant by leave on 8 December 1997, has now pleaded the exclusion cl.1(e).

The plaintiff contends that the defendant’s approaches are inconsistent i.e. the defendant on the one hand contends that Dr Bianchi’s tinnitus was far more severe than he disclosed at the time that the policy was enter into, thus amounting to a misrepresentation giving the defendant the right to avoid the contract, yet on the other hand, the defendant contends that the tinnitus is not so severe as to cause Dr Bianchi to be totally incapacitated by it.  The interaction of the numerous issues and alternative defences renders the case more complicated and detailed than usual. 

B.  The Policy

As indicated, the policy (ex.1), dated 22 April 1988, is owned by the plaintiff as the insured but the life insured and the person with respect to whom the total and permanent disablement benefit applied (for the plaintiff’s benefit) was Dr Geoffrey Bianchi.  He was the original plaintiff in the action but by order of Thomas J on 16 September 1993, leave was given to substitute Barbara Jean Hebrohn as plaintiff.  The plaintiff’s ownership of the policy came about in this way. 

Dr Bianchi met his wife during first year at the University of Queensland and was married to her for 27 years.  In October 1987, he met the plaintiff when she was working as a nurse in a private hospital.  By January 1988, the plaintiff had become pregnant with Dr Bianchi’s child.  She subsequently gave up work.  Dr Bianchi informed his wife of this fact.  The plaintiff became concerned about who would support her and the child if Dr Bianchi died, and particularly as Dr Bianchi was maintaining his relationship with his wife throughout 1988 after the pregnancy was confirmed (R28).  Dr Bianchi accordingly enquired about a life policy of insurance for the plaintiff, some time prior to 1 March 1988.  He was referred by a broker to Mr Murphy, a canvassing agent for the defendant, and he requested a quotation for a policy of life assurance on his life which was to be for the benefit of the plaintiff.  Dr Bianchi stated that on Mr Murphy’s advice and recommendation, the quotation included a separate cover for total and permanent disablement benefits. 

After completion of a proposal (ex.2) signed by the plaintiff and Dr Bianchi on 1 March 1988, a personal statement by Dr Bianchi and a confidential medical report by Dr David Lindsay (the latter two being contained in the one document by attached sheets - ex.3, R129), the policy was formally accepted by the defendant.  By acceptance notes (ex.4, 5) signed by M J Morro, superintendent of the Mercantile and General Group, (the defendant’s reinsurer who accepted 90 per cent of the risk), and which were addressed to the defendant, she suggested that the policy be accepted at “borderline ordinary rates”, which, she said in oral evidence, was because of mild tinnitus, hypertension and asthma (R361), in reliance upon the proposal, personal statement and confidential report by Dr Lindsay.   Apparently the defendant accepted this on 21 April 1988 (see the notation on ex.5).  The terms and conditions of the contract are those contained in ex.1, and also “The statements contained in the application form and any supporting documentation” (i.e. ex.2, 3) “form the basis of and be part of this contact”. It will be necessary to refer to other matters leading up to the implementation of this policy subsequently.

The policy document in evidence (ex.1) as well as the personal statement and confidential medical report (ex.3) are appalling copies.  Apparently the original document could not be located.  Presumably from the “Important Warning” on ex.1, the policy and a copy were sent to the plaintiff with a copy of the application.  A somewhat better copy of the personal statement and the confidential medical report was made available to the Court by the parties and will be placed with and form part of ex.3.  The “white out” markings are simply to obliterate notes I wrote on it during the hearing and do not affect the validity of the document.

The schedule to the policy (ex.1) shows the policy as first commencing on the 22 April 1988, and describes it as a “yearly renewable term insurance to age 75 subject to renewal at yearly intervals”.  It refers to the next renewal date on 22 April 1989 and states that the policy expires on 22 April 2004 (subject to another benefit element continuing in force).  It provides for a cover of $500,000 payable on the death of Dr Bianchi or $500,000 to be paid on his total and permanent disablement, i.e. only one benefit is payable.  The initial premium for both covers was $2,926.00. Apart from numerous clauses common to policies of this type, the relevant conditions bearing upon “maturity on total and permanent disablement” are set out as follows:

“1.The Maturity on Total and Permanent Disablement Benefit will not be payable if any event on which provision of such Benefit depends is directly or indirectly caused or consequential upon:

(a) intentional self-injury or attempted suicide; or

(b) war (whether declared or not) riot or civil commotion; or

(c)participating in any felonious act; or

(d) making or attempting to make a flight in or descent from an aircraft or projectile except as a fare-paying passenger travelling on a scheduled flight in a duly licensed aircraft engaged in public transport; or

(e)mental unsoundness, or being under the influence of alcohol, intoxication, drugs or narcotics; or

(f) engaging in any form of professional boxing , wrestling or football, in racing or time trials of any kind other than on foot, or engaging for reward or competitively in any snow, ice or water sports.” (emphasis added).

That clause was the focus of submissions by the defendant bearing upon considerable evidence relating to Dr Bianchi’s depressive condition and alcohol abuse, although it should be observed that there is no definition of “mental unsoundness”.  Nor is there medical or other evidence of what that term encompasses or reference to any authorities bearing upon it, whether in an insurance policy or otherwise or what symptoms it might be expected to produce.   Nor was there evidence which, from an expert psychiatric point of view, related or equated Dr Bianchi’s “depressive condition” or symptoms with “mental unsoundness”, as has occurred in some cases for the purposes of particular statutory requirements: eg R v.  Ford [1972] Q.W.N. 5. No expert said that Dr Bianchi’s condition was equivalent to “mental unsoundness”. The plaintiff, without attempting to analyse each, or reference to any authorities, simply contends that Dr Bianchi’s “depressive condition” could not at any time amount to mental unsoundness or unsound mind and should be ignored for any purpose, and alternatively that it, along with alcohol abuse, were caused by and reactive to the tinnitus as the cause of the plaintiff’s total and permanent disability. The defendant likewise simply asserts to the contrary, contending that however these conditions were caused, they prevent recovery by the plaintiff, relying upon Jaensch v.  Coffey (1983) 155 C.L.R. 549 at 559 per Brennan J, a case which was concerned with the necessity for a “shock induced recognisable psychiatric illness”, in order to found a claim for damages for “nervous shock”, a term of very wide import. This difference has caused considerable difficulty and research in resolution of the dispute.

Clause 5 of those conditions then provides:

“The Life Insured will be considered to be Totally and Permanently Disabled when after the date of commencement of this Policy and while the Maturity on Total and Permanent Disablement Benefit is in force he has become disabled by bodily injury or disease to such an extent that he is wholly prevented from engaging (for reward or otherwise) in his profession, business or occupation or any similar occupation or from engaging in any other occupation for which he is fitted by his knowledge, training, status and abilities and has been so disabled for at least the immediately preceding six calendar months and will be so disabled for the rest of his life or ... (not relevant)”.  (emphasis added).

Clause 6 is as follows:

“In the event of the Total and Permanent Disablement of the Life Insured while the premiums for this Benefit as shown in the Schedule are being paid, we will, subject to Maturity on Total and Permanent Disablement Benefit Conditions (1), (7) and (9), and any other relevant Conditions or provisions of this Policy and any restriction shown in the Schedule, pay to you the amount that would have been paid under the Benefit Element to which the Maturity on Total and Permanent Disablement Benefit attaches if the Life Insured had died on the day in which the Total Permanent Disablement claim was admitted by us and that Benefit Element will be cancelled as from such date.”  (emphasis added).

Clause 7 is as follows:

“In the event of Maturity on Total and Permanent Disablement Benefit becoming payable in accordance with Maturity on Total and Permanent Disablement Benefit Condition (6) we may at our discretion pay the Benefit in five yearly instalments.”

Clause 8 provides:

“We guarantee we will, subject to Maturity on Total and Permanent Disablement Benefit Condition (4), renew all or, at your election, part of the Maturity on Total and Permanent Disablement Benefit each year on the same Terms and Conditions as apply to the renewal of the Benefit Element to which the Maturity on Total and Permanent Disablement Benefit attaches.”

There is a similar guarantee renewal, condition 4, under the Life Insurance conditions.  Other clauses do not need to be mentioned in detail.  Clause 11 of the Maturity on Total and Permanent Disablement Benefit Conditions allows the insured, but not the defendant, at any time to cancel this benefit.  The defendant contends that cl.6 is subject to cl.1, thus, assuming the plaintiff is wholly prevented from engaging in his profession or any other relevant occupation, throwing the onus on the plaintiff to prove that the disability was not caused, directly or indirectly, by mental unsoundness or being under the influence of alcohol.  As indicated, the plaintiff contends that these are true exclusion clauses which the defendant has the onus of proving, in order to escape liability.

The plaintiff duly paid the initial premium of $2,926.00 in 1988, the first renewal premium in 1989, and the second renewal premium in 1990.  No further premiums were paid thereafter.  The policy lapsed on 22 April 1991 after the plaintiff declined to pay the renewal premium of $4,840.76 sought in the renewal notice (ex.35).  Dr Bianchi said by letter 22 April 1991 to the defendant (ex.36) that he could not afford the premium.  For the plaintiff to succeed the policy cl.5 provides that subject to other clauses, including cl.1, Dr Bianchi must have been totally and permanently disabled by bodily injury or disease during the currency of the policy (cl.6).  This means between 21 April 1988 and 21 April 1991 when it lapsed.  The relevant event can occur at any time whilst the premiums are being duly paid.  He must also be still so disabled.  It was not suggested by the defendant that tinnitus was not “bodily injury or disease” within the meaning of cl.5 referred to above (R387).

In accordance with the defendant’s allegation as to its entitlement to avoid the contract by reason of alleged fraudulent non-disclosure or misrepresentations, the defendant, allegedly acting in pursuance of s.29(2) of the Act, did not do so until the last day of the trial by means of a letter ex.81 dated 11 December 1997. It was not suggested that the rejection of the claim was an avoidance of the policy, but rather, only a rejection of that particular claim. The letter dated 10 December 1997 from the defendant’s solicitors to the plaintiff’s solicitors enclosed a letter of the same date advising that the defendant has avoided the policy of insurance with the plaintiff and enclosed a cheque for the amount of $10,764.11 representing the entire premiums paid by the plaintiff with respect to both types of cover provided by it. The defendant’s contention was that by reason of the fraudulent misrepresentations, it was entitled to avoid the policy at any time, and not only within three years after the contract was entered into, as provided in s.29(3), it being contended that the latter provision applied only with respect to an innocent misrepresentation.

C.  Dr Bianchi’s Background and Circumstances

This is no more than a thumb nail sketch of what can only be described as an extensive and meritorious academic, research, teaching and professional career as his 7 page curriculum vitae (ex.34) demonstrates.  There have been numerous publications, awards and distinctions of the highest order and considerable experience in teaching as well as in research in many areas of disability, and involving various groups in the community.

Dr Bianchi was born on 14 November 1939 in Bogantungun, in Queensland.  He attended Brisbane Grammar School, and in 1957 began studying medicine at the University of Queensland, having obtained a scholarship.  In 1962, he graduated from the University of Queensland as dux of his class with a bachelor of medicine and a bachelor of surgery.  He commenced internship at the Royal Brisbane Hospital in 1963.  In 1965 he took up a position of psychiatric registrar at the RBH.  At the end of that year he obtained his diploma of psychological medicine.

He became involved in psychiatry between 1966 and 1971.  He worked as a senior tutor, and later as a research fellow at the University of New South Wales School of Psychiatry.  During that period he also held a position as honorary clinical assistant psychiatrist at the Prince Henry Hospital in Sydney.  He also conducted a limited private practice, of about half a day per week from rooms at the Prince of Wales Hospital in Randwick.

In 1968 he became a member of the Royal Australian and New Zealand College of Psychiatry, and was later made a fellow.  In 1971, he was awarded his doctorate of medicine for his thesis titled “Hypochondriasis and Psychogenic Pain - A Psychiatric Study of Disease Phobia, Disease Conviction and Somatic Prooccupation”.  Between 1971 and 1973 Dr Bianchi conducted research and worked in Europe.  Between 1974 and 1976 he held a position as senior lecturer and first assistant in the department of psychological medicine at the University of Otago, in Christchurch New Zealand.  Between 1977 and 9 February 1989, when he ceased practice, Dr Bianchi conducted a private specialist psychiatric practice on the Gold Coast. 

Dr Bianchi’s former wife, now Dr Yvonne Kirkegard, also practised as a general practitioner on the Gold Coast in the same rooms as those occupied by him, and apparently then practised under the name of Dr Y Bianchi (ex.2). They did not have children.  As indicated, by January 1988, the plaintiff was pregnant with Dr Bianchi’s child, and a daughter, Elise, was born on 1 September 1988.  Dr Bianchi, as at December 1988, was supporting two households, which he did for some months.  He said in evidence that he did this with his wife’s consent, and that she had located a house in which the plaintiff and child could live with his financial support, but providing that Dr Bianchi continued to live with her (his wife).  He said he did so but it is clear that he also spent some time with the plaintiff, and particularly at weekends at his farming property at Canungra (R34).  The emotional tension this arrangement must have caused is obvious, as Dr Bianchi later admitted, although, when questioned about whether his personal circumstances caused him to become depressed, he asserted that he was a robust person, well able to cope with such stresses in life with no adverse consequences.  All of the evidence shows that  he was, prior to the onset of tinnitus (but also for a considerable period thereafter), a strong person of dominant personality.  Dr Kirkegard said that by December 1988 his interests were with the plaintiff and child and that she was irrelevant to him (R197), which gives some support to his evidence of his mental state, at least at that time.

In December 1988, Dr Bianchi separated from his wife who left and he then commenced to live full time with the plaintiff and their daughter.  He said that his wife had apparently changed her mind at this stage and had tried to have him give up his daughter which he would not do.  He said that his wife suspected that he was having sexual intercourse with herself as well as with the plaintiff.  His wife left the home and moved to Brisbane on 17 December 1988.  Dr Bianchi told various medical practitioners, including Dr Bryant (ex.70) that he had suffered a prolonged period of domestic disturbance leading up to separation from his wife in December 1988.  Dr Bryant said, “During 1988 Dr Bianchi was experiencing constant stress, and this was intensified by his wife’s persistence that he relinquish his young daughter.”  Dr Bianchi confirmed this (R95), but said that this insistence did not occur until December 1988, just prior to his wife leaving.  He also said that he found it very difficult to cope with the loss of his wife, for some period after July 1989 until he overcame the loss.

Thereafter, Dr Bianchi has, apart from a few relatively minor periods of separation, (but one consisting of some 16 months in about 1993), lived with the plaintiff and their daughter ever since.  He has had extensive problems with alcohol, resulting in numerous admissions to about four different hospitals commencing in July 1991 (R26, 29), and on various occasions up to the present time, and underwent detoxification programmes and other treatments.  He still undergoes treatment. He is also a regular patient for two years of Dr Freed, psychiatrist, who did not give evidence.  They now reside in a home at Bardon in Brisbane, owned by Dr Bianchi’s mother who, apparently, does not charge them rent.  He takes the child to school regularly and is very attached to her and the plaintiff. 

Notwithstanding the separation from his wife in December 1988, he said (as Dr Kirkegard confirmed) that he resumed a loving (and intimate) relationship with her after she moved to Brisbane, in mid-January 1989 until July 1989, visiting her every alternate weekend with the plaintiff’s consent and encouragement.  This indicated that Dr Kirkegard had an underlying affection for him notwithstanding the difficulties in their marriage, particularly during the latter part of 1988 and gave him some cause for optimism that their marriage would continue.  This relationship continued until he discovered from her diary and phone calls that she had formed another relationship whereupon he terminated his relationship with her.  He said he took this badly and it caused him to become depressed, which, he said, was not overcome until the “stupid emotions like jealousy, inappropriate emotions” subsided (R76).  Nevertheless, he said that they have, at least in recent years, resumed a relationship as good friends.  He said he admired her enormously.  He said this occurred no later than by 1993 although from his evidence, it was much earlier than this (R76).  Indeed, he told Dr Andrewes on 13 May 1992 (ex.30) and Dr Mulholland on 17 August 1992 (ex.76) that he had regular and friendly contact with her.  He said (R95) “But I don’t regard her as departed from my heart” and (R96) “I didn’t really believe that Yvonne would jettison me forever”.  Notwithstanding that Dr Kirkegard said that her marriage to Dr Bianchi had not been a happy one, she gave evidence in support of the plaintiff’s case and during earlier stages of preparation for trial, assisted Dr Bianchi by consulting experts, for example, Dr Mulholland.  She has apparently acted at times as Dr Bianchi’s general practitioner with respect to some referrals and has given him general support in recent years.  Dr Bianchi’s relationship with the plaintiff and their child has therefore separately developed, and he has accepted his new relationship of friendship and mutual respect with his former wife which, he said, the plaintiff always encouraged.

Dr Bianchi and his wife were divorced in about February 1990, which involved a substantial financial settlement which he foresaw in August 1989 (R192) after the final break.  He said he paid his wife a sum close to $1M cash.  She has since remarried but still works in Brisbane as a general practitioner (ex.  57).  Dr Bianchi at the time owned a home on the Gold Coast and the farm at Canungra.  He kept these properties as his part of the settlement.  He said he later sold the Gold Coast house as well as part of the farm property to alleviate financial difficulties.  He told Dr Stevenson, consultant psychiatrist who examined him on 2 November 1989 for the defendant, that he had increased his financial worth by buying and selling real estate; that his estimated worth was several millions; that he had a farm on which he grazed cattle and grew coffee beans; that he planned to live off real estate investment earnings and profits from farming and that prior to his illness, he had planned to retire early.  It may be noted that real estate was booming in the late 1980's but slumped in the 1990's, when interest rates approached 20 per cent (R27, 214).  He made similar optimistic statements to Dr Fulop on 2 November 1989.

In evidence, Dr Bianchi denied in part these statements to Dr Stevenson (R214) and offered some explanations as to what he said he meant.  He said he was a “dreamer”.  This will be referred to again later.  He also criticised Dr Stevenson as being “seven years off the pace” (ex.48).  It is also of some significance that the plaintiff swore that Dr Bianchi did very little farming (R23, 27), as Dr Bianchi himself said, indicating that it was no more than a hobby or diversion for a professional man.  Also the plaintiff swore that Dr Bianchi never spoke to her about retiring early at any time before February 1989 (R26, 29), notwithstanding his intimate relationship with her which had commenced in October 1987, and which resulted in full time cohabitation from December 1988. 

Dr Bianchi said that he first noticed symptoms of tinnitus, initially only in his left ear, in the middle of 1987.  He said that he was concerned that it may have been caused by an acoustic neuroma, a benign tumour usually located in the auditory canal.  In August 1987, he consulted Dr William Barry Coman, an ear, nose and throat specialist at Wickham Terrace, Brisbane, whom he had known since university days, and a neuroma was excluded by various tests including a magnetic resonance imaging test (M.R.I.).  Dr Bianchi said that the tinnitus progressively became worse and much more severe by late 1988, and particularly by early 1989 (R52), so that by February 1989 he was forced to give up his psychiatric practice because of it following a report by Dr Coman of 6 February 1989 (ex.9) (R146) certifying his unfitness due to tinnitus.  He said that at some stage he mistakenly increased alcohol consumption in an attempt to alleviate the symptoms of tinnitus, without success.  Dr Bianchi denied that he suffered from alcoholism before late 1990 (R101, 219) or early 1991 (R268).  This is consistent with what he told Dr Mulholland in August 1992 (ex.76).  This is supported by the plaintiff who said that it came on gradually from the end of 1990 (R29) and that when she started to cohabit with him from December 1988 he was just a social drinker.  She seemed to have fixed his overall decline from about May 1991 when they left the then premises (R25 L40-60).   As indicated, he first went into hospital for treatment for alcoholism in July 1991.  The date of admission to Currumbin Hospital (ex.82) wasn’t proved.

There is evidence by the plaintiff (R24) and Dr Kirkegard that Dr Bianchi complained of the severity of  his tinnitus particularly in late 1988 and early 1989, which interfered with his sleep.  Dr Kirkegard had noted that he was not attending to his patients in the same competent way that he had done previously.  Dr Bianchi said that the noise from the tinnitus was so overwhelming and distracting that he was unable to concentrate on what his patients were saying to him.  He said that the tinnitus was severely debilitating, and that as a result, he subsequently became depressed, and also became a heavy drinker.  He said that he did not suffer any depression before the onset of tinnitus.  Nor did he have any treatment for any such condition.  Nor was he other than a social drinker until well after the commencement of the tinnitus.  He asserted that the two conditions were caused by tinnitus and did not emerge in any serious way until about two years after he ceased work on 9 February 1989 (R268).  On his evidence, this occurred in 1991,  and has some support from the evidence of the plaintiff.  Dr Coman said there was no evidence of depression or alcoholism before tinnitus emerged (R144), and that it was likely that tinnitus came first, followed by depression (R144).

Dr Kirkegard also said that she observed no depressive symptoms prior to 1988, nor any particular difficulty with alcohol.  She said that he started to consume more alcohol late in 1988 (R196), and that it probably started to affect his practice.  As Dr Bianchi points out, she is a teetotaller.  I prefer the plaintiff’s evidence in this respect viz.  that from December 1988 when she commenced to live with him, he was just a social drinker until from about late 1990 and at least by 1991 culminating in his first report for treatment for alcoholism in July 1991.  He committed one drink driving offence in December 1990 (ex.76).

Dr Kirkegard, and well as Dr Coman, said that Dr Bianchi was highly regarded by his patients and by the medical professional generally and that he was obsessive and perfectionist with his work.  She said he was a strong and dominant person.  However, in a report of Dr Peter Mulholland, psychiatrist, Dr Kirkegard said that she had observed “professional burnout” as being a factor in Dr Bianchi’s emotional decompensation.  She told Dr Mulholland (and said in evidence - R204) that her understanding was that his problems “developed in 1987 and 1988" which was in fact after tinnitus had developed.  Dr Mulholland reports that “she understood that his interviews with patients had become unreasonably and unexpectedly short, that his relationships with patients were breaking down and the patients were expressing dissatisfaction with him.  She also understood that he had stopped keeping up with the necessary letters and paper work associated with the psychiatric practice and that also he had stopped keeping up to date with the necessary ongoing studies.”  She also told Dr Mulholland that she was aware of the tinnitus from about 1987 and recalled that it became severe in 1988 and that it was distressing for Dr Bianchi.

That report of Dr Mulholland (ex.57) was tendered not as to proof of its contents, but as proof of the fact that Dr Bianchi had perused it and had gone through and made various comments on parts of that letter, but he made no comments whatsoever against those parts above referred to regarding “professional burnout”.  When questioned on this, his answer was that he would never pretend to alter in any way the professional opinion of Dr Kirkegard whom he respected greatly, but stressed that his tinnitus had commenced in July 1987, the inference being that anything Dr Kirkegard may have noted thereafter was due to tinnitus.  On all of the evidence, this is a not unreasonable inference.  Various letters referred to below indicate that Dr Bianchi had  reduced his working hours since July 1987 because of tinnitus which, he said, affected his concentration. 

With some insignificant qualifications, I was generally impressed with the evidence of both the plaintiff and Dr Kirkegard.  Both appeared to be open and frank in giving their evidence and made no attempt to guild the lilly in Dr Bianchi’s favour.  Each had expressed difficulty in their relationships with him and both appeared to give their evidence in a relatively impartial way.  Nor did the plaintiff give any indication of advancing her own cause.

The plaintiff’s claim is therefore based upon Dr Bianchi’s alleged total and permanent disability caused by tinnitus.  It was not seriously disputed by the defendant at the trial that Dr Bianchi has suffered some degree of tinnitus since about mid-1987.  Mr Keane QC, Senior Counsel for the defendant, conceded as much in addresses.  However, it was the defendant’s contention that Dr Bianchi was not totally and permanently disabled by it, that he was either not totally and permanently disabled at all, or if he was, it was by a combination of factors such that the plaintiff failed to bring herself within the terms of the policy (Clauses 1(e), 5, 6 of ex.1), or that exclusions barred her claim.  Other grounds relied upon have already been mentioned.

From the foregoing brief outline of Dr Bianchi’s academic and professional achievements, it is clear that he possesses an intellect in the superior range.  This has been confirmed by numerous expert assessments of him in evidence both before and subsequent to the commencement of this litigation, and indeed accords with my observations and assessment of him during the very lengthy periods he gave evidence and was cross-examined.  In a sense, this is a two edged sword as Dr Mulholland has postulated (ex.75, p.5) and may have acted against his own interests. He had ready and spontaneous answers to intensive questioning of him of the most searching and detailed kind over several lengthy periods in the witness box during which he displayed discrimination and mastery of almost all issues put to him, including many not related to tinnitus, with apparent facility to concentrate on what was asked of him and any implications therefrom, yet on the other hand he claims that the reason why he was forced to give up his practice as a psychiatrist was because the tinnitus prevented him from concentrating whilst he was interviewing psychiatric patients.  This has also been the experience of certain medical experts, referred to below, and has made the assessment of his evidence more difficult than usual.  Indeed, Dr Westmore (R210) said, “there is a great discrepancy between the way he presents and the history he presents with.” 

On the other hand, there is medical evidence which shows that by reason of his superior intellect and his obsessional and perfectionist nature, tinnitus would be more likely to incapacitate him than a person not of his intellectual standard, because of his belief that he could not do a proper and indeed perfect job.  The medical and other evidence also shows that Dr Bianchi’s personality is such that he always attempts to present well at interviews.  Some specialists say that he attempts to marshall his resources and “rise to the occasion” to present well.

It should be here observed in accordance with the “common sense” approach of Lawton LJ in W v. L [1974] 1 QB 711 at 719, that at no time during his evidence did I observe any signs to indicate that Dr Bianchi was suffering from “mental unsoundness” or “unsound mind” or any impairment in his mental capacity such as would render him unable to manage his affairs. Lawton LJ, after dealing with the words “mental disorder”, held that the words “mental illness” are ordinary words of the English language which have no particular medical significance and no particular legal significance and should be interpreted in accordance with the advice of Lord Reid in Cozens v.  Brutus [1973] A.C.854, 861, that “ordinary words of the English language should be construed in the way that ordinary sensible people would construe them”. That general approach has been applied in Queensland in numerous authorities on analogous questions: Re Magavalis [1983] Qd.R. 59 at 63 where McPherson J (as His Honour then was) also found that because a person was not suffering from any “psychiatric illness”, “this may not necessarily be identical with mental illness”: R v.  Enright [1990] 1 Qd.R. 563 at 572 per Lee J., with whom Macrossan J. and Thomas J. agreed.

The foregoing observation has apparently also been the view of at least some professionals who examined Dr Bianchi.  However, this tentative view must receive further consideration below, depending upon the evidence, the submissions of each party, and the meaning of “mental unsoundness” and its application if any in this particular policy.  It also involves a consideration of whether Dr Bianchi’s superior intelligence and ability to “rise to the occasion” may have masked what is otherwise a mental disorder falling within that description which indicates the importance of objective testing of Dr Bianchi’s condition which does not depend upon his veracity.  Both Mr Keane QC and Mr Griffin QC, senior counsel for the plaintiff agreed that the outcome of this case depended substantially, if not entirely on Dr Bianchi’s credibility.

D.  The Issues

These will for convenience be considered in the following order:- 

1. INSURABLE INTEREST - Is there a valid contract of insurance in favour of the plaintiff?

2. TOTAL AND PERMANENT DISABILITY - Did Dr Bianchi become totally and permanently disabled and if so, when?

3. EXCLUSIONS - If Dr Bianchi became totally and permanently disabled during the currency of the policy, does the claim fall within the terms of the policy or were any clauses of exclusion applicable so that the plaintiff is unable to recover under the policy?

   (a) “Mental unsoundness” and “being under the influence of alcohol”

1. NON-DISCLOSURE - If the plaintiff otherwise has a valid claim, did Dr Bianchi as the life insured make any material non-disclosures amounting to misrepresentations to the defendant which allows the defendant to avoid the contract with the plaintiff either by virtue of s.25 of the Act or because Dr Bianchi was the plaintiff’s agent for the purposes of procuring the policy (ex.1)? 

   (a)       Non-disclosure amounting to a misrepresentation?

   (b)Innocent or fraudulent?

2. INSURABLE INTEREST - Is there a valid contract of insurance between the plaintiff and the defendant?

It was initially said that by virtue of s.18 of the Act, the contract was void because the plaintiff did not have an insurable interest in the life of Dr Bianchi. Argument hinged around the effect of s.19(3) of the Act which provides that:

“A person who is likely to suffer pecuniary or economic loss as a result of the death of some other person has an insurable interest in the life of that other person.”

By s.19(4)(c), it is provided that -

“A person has an insurable interest in the life of a person on whom he depends, either wholly or partly, for maintenance and support.”

The plaintiff was recalled to give further evidence on the very question of her dependence for maintenance and support upon Dr Bianchi.  In the end, the defendant did not press this particular ground (R427).  In any event, I consider that at the relevant time, that is at the time the policy was taken out in April 1988, the plaintiff who was pregnant to Dr Bianchi, was dependent on him.  Also because their child would become dependent on Dr Bianchi when born, his death would have been likely to cause pecuniary or economic loss to the plaintiff.  She was living in a house provided by him, and in return for domestic duties of the type expected of any spouse, at least at the times he spent with her, she received financial support from him.  She clearly had a relevant insurable interest.  However, there is no need, because the matter was not pursued, to consider it in any further detail. 

1. TOTAL AND PERMANENT DISABILITY - Did Dr Bianchi become totally and permanently disabled, and if so when?

There is no real dispute that Dr Bianchi suffers from tinnitus, and has done so since at least the middle of 1987.  Audiology tests in 1987 revealed that his tinnitus presented at the frequency of about 8000Hz predominantly in the left ear, although with some disturbance also in the right ear.  Dr Bianchi said it became significantly worse in late 1988, and particularly in early 1989.  He likens the noise produced to that of a jet aircraft or a “screaming jet warming up”, a jet of the “older noisier type”.  He said that he has it 24 hours per day, including the periods when he gave evidence in Court.  He said (R284) that “it is perpetual when I’m awake.  It is a hissing, a ringing, screeching sound that is very very intense, more intense than people would be able to contemplate”.  See also his comments at R72.  Various experts, including Dr Goodey, said that the plaintiff has the problem 24 hours per day and that it was a “screaming squealing” sound.  He also has some hearing loss.  Dr Coman was clear about this (R152), as the report from St Andrews Hospital, referred to below, also indicates. 

To a layman, without the benefit of expert evidence, this concept presented some difficulty in ready understanding throughout the trial when Dr Bianchi had no apparent problem in hearing precisely, every question put to him.  On only one occasion in his lengthy evidence, did I observe him say, “I beg your pardon” to a question.  Generally speaking, he answered all questions spontaneously and responsively (subject to matters of credit referred to elsewhere).  However, as will later appear, this is not the end of the matter.  He said he could hear satisfactorily within the speech range and that it was only in the rare range required for the appreciation of high pitches of music or bird song that he was limited (R278, 284).  There is medical evidence on this question from experts from both sides.  Nevertheless, the failure of Dr Bianchi and Dr Lindsay to disclose any defect in hearing in the documents ex.2, 3, which preceded acceptance by the defendant of the application for insurance, is one of the alleged misrepresentations on which the defendant relies.

The medical evidence was uncontradicted to the extent  that the way in which people react to tinnitus has more bearing on the debilitating nature of the condition than does the objective severity of the condition itself.  Indeed, it appears uncontradicted that the condition, although (according to some experts)  its causes and existence may be objectively determined, is, like pain, essentially a subjective phenomenon.  There is also the question of whether that reaction may consist of factors personal to the personality and make up of Dr Bianchi as some experts state is the case or whether there is a “psychiatric reaction”, or “psychological reaction” amounting to “mental unsoundness” or “being under the influence of alcohol” so as to invoke the exclusions clauses in the way above mentioned.  There is also the question that even if such were the reactions, what was the cause thereof.  It must always be borne in mind that it is the effect on the particular person which must be considered.

These aspects demonstrate the importance of the credibility of Dr Bianchi which both senior counsel recognize.  Thus, the central question is whether Dr Bianchi’s tinnitus caused such a severe reaction in him that he became totally and permanently disabled by it (and, subject to the construction of the policy conditions referred to below,  not directly or indirectly by “mental unsoundness” or “being under the influence of alcohol”) during the currency of the policy and so prevented him from engaging in his professional occupation as a psychiatrist or in any other occupation in respect of which he was suitably trained or qualified, viz.  lecturing, medical research, administration or in perhaps in some other ways, including work associated with aboriginal health, an area in which he was very highly qualified and had expressed interest as his detailed curriculum vitae (ex.34) and his oral evidence, demonstrate. 

Because the alleged severity and effect of the tinnitus was so central to the dispute, it is necessary to set out the history relating to it and other aspects of his health from Dr Bianchi’s point of view, in as near to chronological order as is possible, together with the relevant evidence of medical witnesses and assessments of him in the order in which each first saw him.  This shows the logical progression of his tinnitus and its treatment.  Because of the considerable conflict in that evidence, it is unfortunately necessary to refer to it in some detail.  In this context, (even though it will be necessary to refer to them in a different context later), it will be necessary to intersperse certain letters written by Dr Bianchi to various insurance companies and others in which he himself made reference to his condition.

On 13 July 1987, Dr Bianchi wrote to another insurer, the Australian Casualty Co Ltd (ex.43) with whom he had another policy of insurance, as follows:

“Early notification of health problems is required by my sickness and accident policy with you.
I have just begun to experience tinnitus, which is interfering with my concentration at work.
I hope to attend an ENT Surgeon soon.”  (emphasis added).

On the same date he wrote an identical letter to the A.M.A. Agency of Queensland with whom he also had a sickness and accident policy.  On 18 August 1987, he consulted Dr Coman. Dr Coman stated in ex.19, a report to the defendant on 23 June 1989, and in his oral evidence, that at that time ( i.e. 18 August 1987), Dr Bianchi complained of a ringing noise in his left ear which had been present for one month.  He said the noise kept him awake at night, that he occasionally had a noise in the right ear and he was keen to find out what could be done about it.   He told Dr Coman of his past history including firing weapons and service in the National Service.  His clinical examination was unremarkable but Dr Coman said that the hearing tests showed a hearing loss in the high frequencies of his left ear and a lesser loss in the right ear.  Dr Coman was concerned to exclude a neuroma which is a tumour of the acoustic nerve.  Dr Bianchi subsequently had hearing tests and an MRI scan to exclude a neuroma.  The various tests were conducted at St Andrews Hospital.

On 21 August 1987, Dr Bianchi wrote to the Claims Department of Australian Casualty Co Limited (ex.45) as follows:

“My letter of 13.7.1987 was merely to notify you that I was experiencing some difficulty because of tinnitus. 
Though I have had to decrease my amount of work, I am not so stricken that I need to make a claim.

Dr W Coman of 201 Wickham Terrace, Brisbane is my ENT Surgeon.  Investigation is continuing mainly to exclude an acoustic neuroma.”(emphasis added).      

Exhibit 24 consists of a report from St Andrews Neurosensory Unit dated 18 September 1987, showing “pure tone audiometry” tests.  The notation on the report is difficult to decipher but appears to be as follows:

“Tinnitus matched at 8k   7odb
 After 10 mins of matching decreased to 60 db
 ?  Central 500 ½

L1K,   R2K”

That test was done on the referral of Dr Coman.  More tests were conducted by that hospital later.  Exhibit 21 dated 14 January 1992 showed an increase in the tinnitus level over the tests on 18 September 1987.  Exhibit 25 shows that a test was conducted on 7 August 1995 with the following results:

“P.T.A. showed grossly normal hearing sensitivity ® and a high frequency sensor neural hearing loss .  Impedance:  both ears had normal M.E.P. and T.M. mobility.  Acoustic reflexes were active with no decay noted.  Speech discrimination: supports the P.T.A. ABR: Please refer to attached report.”(emphasis added).

The attached report showed auditory brain stem responses with a summary as follows:

“Initial waveforms showed poorer morphology than expected given the grossly normal thresholds between 2  and 4 k with improvement noted at higher levels.  A significant difference was noted between ears and the absolute and interpeak latencies were within normal limits bilaterally.  You may wish to review to  monitor.”

Exhibit 23 is a report by the Neurosensory Unit of St Andrews’ Hospital to Dr Coman dated 5 September 1996, referring to Dr Bianchi’s several visits up to 21 August 1996.  The report states:-

“Throughout that period Dr Bianchi has experienced tinnitus associated with his high frequency sensorineural loss.  This tinnitus has always been consistent with the hearing loss and appears to match a 8KH_z pure tone at about threshold intensity.  Tinnitus is constant and audible at all times and causes Dr Bianchi very significant distress. 

Tests over this period have investigated his cochlear function, middle ear function and auditory brain stem function.  On initial tests, the hearing was essentially normal except on the left in the high frequencies.  At that time middle ear function was normal with acoustic reflexes present and no reflex decay.

Speech discrimination in quiet was essentially normal. 

Tinnitus matching at that time was consistent with the hearing loss on the left and did respond to tinnitus inhibition marginally but not completely.

Currently the hearing has deteriorated in the high frequencies bilaterally and still shows the asyminetry on the left.  Tinnitus is now apparent on the right and left ears.”  (emphasis added).

The assessment was as follows:

“In discussions with Dr Bianchi, it is clear that his tinnitus is constant and quite debilitating.  It is better at times when he is relaxed and when he is able to distract himself with other occupations.  At night it is most difficult for him to sleep, especially once awoken.”

And finally, ex.26 shows that audiometry tests occurred on 11 October 1996.  To that audiology  report was attached an appendix headed “Tinnitus Handicap Questionnaire” in which some 27 questions were asked about what he perceived to be the effect of tinnitus on him in respect of which Dr Bianchi was asked to indicate to what degree he agreed or disagreed with the various statements by writing in a number from zero to 100.  This was Dr Bianchi’s own assessment in response to those 27 questions and was subject to trenchant criticism by Dr Roberts.  See below. 

As indicated, the M.R.I. conducted in 1987 excluded any neuroma.  Dr Coman said in evidence that since Dr Bianchi was first seen in 1987, he had been offered advice about how to cope with tinnitus.  This included reassurance that there was no serious hearing loss or serious ear disorder and that 90 per cent of patients were able to accept that advice and able to cope but that a smaller per cent of patients in whom the tinnitus is more severe had much greater difficulty so that they then move on to other methods of treatment which may include sedation.  They also include trial of tinnitus maskers and other devices, which Dr Coman said Dr Bianchi had tried without success. 

Dr Bianchi said (R47) that “towards late ‘87 there was a build up in the severity of tinnitus”, a statement on which the defendant relies in the context of an alleged misrepresentation.  On 14 January 1988, Dr Bianchi wrote on behalf of his wife (as referring GP) to Dr David Lindsay, a consultant thoracic physician who was not an expert on tinnitus (ex.59, R247).  A copy of that letter was only recently made available by Dr Lindsay to the parties (R215).  At that time there was no question that a policy of the current kind was in contemplation.  In that letter (ex.6), Dr Bianchi set out information regarding his general health complaints of every kind, including his ‘flu, asthma treatment he was on, his high blood pressure, his overweight and  continued:-

“I drink too much wine and were I to give up wine altogether, I think my blood pressure would be rather lower.  However both my parents have had a tendency to raised blood pressure.  I also have a severe high-pitched tinnitus in my left ear (frequency 8,000 cycles per second).  I have consulted Bill Coman in Brisbane.  I find the tinnitus rather difficult to put up with and I have cut back on my psychiatric work.”  (emphasis added).

On 19 January 1988, Dr Bianchi consulted Dr Lindsay for the first time (R244, ex.59) and last saw him on 29 January 1993.  Dr Bianchi said that the major purpose of the first visit was “to get totally rid of the asthma” (R47).  On 20 January 1988, Dr Lindsay wrote to Dr Bianchi referring only to Dr Bianchi’s asthma, hypertension and blood pressure, with no mention whatsoever of the tinnitus (ex.60, R248).  Dr Bianchi said that he did not expect Dr Lindsay to treat him for his tinnitus.  This was outside the area of his expertise.  Dr Lindsay made no reference to depressive symptoms or alcoholism.

The relevant insurance was then put in train by contacting Mr Murphy, the proposal dated 1 March 1988 (ex.2), followed by a visit to Dr Lindsay on 8 March 1988.  Dr Lindsay said (R245) that the purpose of that visit was “to follow up his asthma management and to check his blood pressure which was elevated at the first consultation,” although he “presumed” he must then have been asked to fill out a medical report.   At R250, Dr Lindsay said that on that occasion “I was concentrating on the initial consultation; on the management of his asthma and hypertension and Bill Coman was the ear, nose and throat surgeon, presumably, advising concerning tinnitus and his ear, nose and throat problem.”

Dr Bianchi at some stage (referred to below) completed the personal statement portion of ex.3.  As will appear, it was not completed by Dr Lindsay and probably not completed by Dr Bianchi on 9 March 1988, both of which appeared to be wrongly assumed by the plaintiff’s addition to the chronology.  This was disputed by Mr Keane during addresses (R413-5).  Dr Lindsay completed the confidential medical report which, as indicated, is combined in one document (ex.3) with the personal statement.  The confidential medical report is apparently dated 9 March 1988.

Of significance, on the day after, i.e. 10 March 1988, Dr Bianchi wrote to the A.M.A. Insurance (ex.46) as follows:-

“Dear Pat,

I am considerably troubled by tinnitus and have also developed hypertension and asthma which are responding to treatment.  I consulted Dr David Lindsay about the latter two about a month ago and would like to notify AMA Insurance about this new development.  (My policy requires such notification).

Yours sincerely,

Geoff Bianchi

PS Tinnitus is not settling, but I’m coping by virtue of the decreased work load.” (emphasis added).

The foregoing statements by Dr Bianchi indicate that his tinnitus was far more serious than mild.  There is no evidence that any of the letters to other insurance companies and to Dr Lindsay, or any of the tests at St Andrews had come into the possession of the defendant before the policy of insurance was accepted by the defendant, or indeed at any time before normal preparation for the trial.  There is no evidence when various documents came into the possession of the defendant.  As indicated, Dr Lindsay said that the letter to him of 14 January 1988 (ex.6) was only recently made available to the parties.  Thereafter, Dr Bianchi said in evidence that his symptoms of tinnitus became more severe late in 1988 and early 1989.  The plaintiff and Dr Kirkegard said that he began to complain of the severity of tinnitus about that time, although Dr Kirkegard said she was aware of it existence before then.

On 6 February 1989 Dr Coman issued the following certificate (ex.9):-

“This is to certify that Dr Jeffrey Bianchi attended my surgery for consultation today.  He is suffering from incapacitating tinnitus and is unfit to carry out his normal duties.”

Dr Coman made no mention of depressive symptoms or alcoholism in that certificate.  On 9 February 1989 Dr Bianchi lodged a “long term disability or salary continuance claim form” with another company, American Home Assurance Company (ex.47), in which he stated that he could not carry on because of his progressively restricted ability to function adequately due to tinnitus.  The general import of the claim was that he was permanently incapacitated from that time.  In answer to the question, “If still totally disabled, when do you expect your disability to terminate”, he answered, “Date.  Never.  I believe the severity of my tinnitus is unresponsive to (treatment).”  He reported, “Severe unrelenting tinnitus ear 8,000C/S ruining my ability to concentrate and leading to marriage break-up, asthma, hypertension, increased weight”.

On 16 February 1989, Dr Bianchi wrote to the defendant, (ex.37), as follows:

“I have an insurance policy with you. 

I was forced to retire because of ill health on 9.2.89.

I’m not sure if my policy with you covers me for this.  Please send me the appropriate claim form plus a copy of the policy.”

In response to questions as to why he had not tried to perform any duties, even part time, since then, or why he did not consult with colleagues (apart from Dr Coman whom he saw on 6 February 1989 and Dr Lindsay whom he saw on 17 February 1989), to seek advice before he ceased work, Dr Bianchi denied that his reference to being “forced to retire” in this letter meant that he had then decided to retire “permanently” at that stage (R80), because he said he hoped that with therapy, he would recover sufficiently to enable him to carry on with his practice.  He then pointed to other factors which he said negated the notion of a decision of “permanent” retirement as at 16 February 1989 with no intention to try to work if he could.

Dr Lindsay was called by the plaintiff to give evidence by telephone.  He saw the plaintiff again on 17 February 1989 and on several occasions subsequently, the last visit being 29 June  1993 (R244).  In his report of 19 June 1989 to the defendant (ex.59) Dr Lindsay stated that on 17 February 1989, Dr Bianchi presented because of an exacerbation of a cough, wheeze and sputum production for two weeks.  This related to his asthma.  His blood pressure was also checked.  About that time he told Dr Lindsay that his tinnitus had prevented him from satisfactorily continuing his psychiatric practice.  He said it had become severe and quite disabling, disturbing his concentration and sleep.  Dr Lindsay continued:

“Neither his asthma nor his hypertension were of sufficient severity to disable him significantly although both required regular therapy for their reasonable control.  Based on his description of the persistent severity of his tinnitus I would consider that sufficient to prevent him practising as a psychiatrist.  As mentioned previously, I am not expert in ear, nose and throat diseases, and therefore do not feel qualified to comment further on the severity and prognosis of his tinnitus.

I would suggest that you request a report from his ear, nose and throat consultant, Dr W Coman of 201 Wickham Terrace, Brisbane.  Presumably this has already been sought?”

Dr Lindsay, who had been informed of Dr Bianchi’s general health problems as far back as 6 January 1988 (ex.6) and had consulted him twice in that year, made no mention of any depressive symptoms or any problems relating to alcohol on 17 February 1989 or 19 June 1989.  Thereafter Dr Bianchi saw Dr O.  Rejda on about seven occasions from 4 April, 1989 up to 7 September 1990 (exs.10-18) in which Dr Rejda certified that Dr Bianchi was unfit for work for various periods due to tinnitus.  He made no reference to depressive symptoms or problems with alcohol.  Dr Rejda, who is apparently a general practitioner, gave evidence for the plaintiff by telephone.  He issued a certificate on 19 June 1989 (ex.49) in which he referred to Dr Bianchi’s complaint of tinnitus which he said was keeping him awake and he could not carry on with his normal duties.  He told Dr Rejda that he had a tinnitus masker and sedation but it did not work.  Of some interest, Dr Rejda said (R113),

“And I asked him if he saw anybody else and basically he knows well that tinnitus is very difficult to treat, you have to change the lifestyle, not to drink coffee, stimulants, alcohol, reduce smoking, reduce tendency to fight a little bit, use masking devices, sleeping in the room with the radio a little bit on and it is - suffice for people suffering from tinnitus.  I asked him if he knows - basically he knows all those things because he used to be a psychiatrist, you know, and about sedation, trying to avoid stress and things like that he knows.”

Nevertheless, Dr Rejda concluded that Dr Bianchi was suffering from tinnitus, and that it was “serious tinnitus”.  Dr Bianchi told Dr Rejda that he could not concentrate and could not sleep.

On 9 March 1989, Dr Bianchi wrote to Dr Coman (ex.51) asking Dr Coman to send a summary of his tinnitus to a Dr Elliot at Canungra.  He said in the letter that AHA was still “examining” the situation.  He concluded the letter as follows:- “Please give your strong support - they are writing to you again.”

On 10 May 1989, Dr Bianchi wrote to the defendant as indicated (ex.7), in which he stated that he regarded himself as totally and permanently disabled by tinnitus which forced him to stop work on 9 February 1989.  At this time he was still in the fortnightly relationship with his wife by visits to her in Brisbane, with the plaintiff’s consent.  He said in evidence that it was about this time that he finally resolved that, because of his tinnitus, he would not recover, whereupon he then gave up medical insurance and other matters necessary for him to remain in practice, as well as membership of a Board of Advice and offers of free rooms in a private hospital on the Gold Coast where he was well regarded.  He asked what further information was required from the defendant.  On 30 May 1989, Dr Bianchi completed a fact finding sheet (ex.8) which the defendant requested.  Dr Bianchi referred to the history of medical treatment starting with Dr Coman in August 1987, 6 February 1989, and with Dr Lindsay on 19 January 1988 and 8 March 1988.

On 14 June 1989 (ex.52), Dr Bianchi wrote to Dr Coman referring to his “death/permanent and total disability policy” with the defendant since April 1988.   He said:-

“I told them then of my tinnitus and stated that it was mild at that time.  Then the intensification of the tinnitus occurred in early 1989, so I am hopeful they will pay out on the policy.”  (emphasis added).

Even though this letter was written well after the policy commenced on 22 April 1988, the defendant is entitled to rely on this statement as indicating that Dr Bianchi knew that from the information provided by him to the defendant before the policy was accepted, the defendant would regard his reported tinnitus as no more than “mild” as Ms Morro stated in evidence, and not “severe” or that he was “considerably troubled” by it at that time, or that it affected his concentration and that he had reduced his working hours.  At the same time, the reference to it being “mild” is not inconsistent with Dr Bianchi’s evidence, supported by both the plaintiff, Dr Kirkegard and Dr Coman, that his tinnitus severely worsened in late 1988 and early 1989.  In this sense, his reference to “mild” may be seen as a relative term.

In that letter to Dr Coman, Dr Bianchi said that the masking devices had not helped.  He also said that the tinnitus in the right ear was then developing, “but I’m OK”.  If Dr Bianchi’s evidence is accepted, this indicates a general worsening of his tinnitus by mid-1989.  This has some support from Dr Goodey who when speaking about the  MRI to exclude the brain tumour, said that this “was done at an early stage when the tinnitus was confined to the left ear and the tests showed the hearing a little worse on the left ear ...” (R173).  It also is supported by the test at St Andrews Hospital on 14 January 1992 (ex.21).

On 14 June 1989, Dr Bianchi wrote to Dr Lindsay as follows (ex.61):-

“Dear David,
NZI Life will have written to you and have asked me to arrange payment for the report they requested.  I hope a good bottle of red might suit.
The death/permanent total disability policy was taken out in April 1988.  I admitted to mild tinnitus at that time which greatly intensified in Jan-Feb 1989.  The policy’s beneficiary is the mother of my daughter Elise.
My asthma’s not too bad, but I still produce a lot of clear sputum.  Does Intale ever help adult asthma?
I’ll see you for review in a month or so.
With very best wishes.

Geoff.”(emphasis added)

Dr Bianchi again referred to his admission that his tinnitus was “mild” in April 1988.  On 19 June 1989, Dr Lindsay furnished the report referred to above (ex.59).  That was a report to the Claims Administrator of the defendant and referred to his three consultations with Dr Bianchi on 19 January, 1988, 8 March 1988 and 17 February 1989.  Dr Lindsay admitted in evidence that his statement that Dr Bianchi’s description of tinnitus preventing him from practising as a psychiatrist, was based only on Dr Bianchi’s statement and the fact that Dr Bianchi had ceased practice (R251).

On 23 June 1989, Dr Coman furnished a report (ex.19) to the defendant in which he referred to the history of Dr Bianchi’s complaint and attached an audiogram.  He said that on 6 February 1989, Dr Bianchi’s complaint of tinnitus was worse and interfered with his work.  He was unable to concentrate.  Dr Bianchi told him that he was totally disabled and unable to carry out his work which required concentration.  Dr Coman again made no reference to depressive symptoms or alcoholism in that respect.

On 11 September 1989, Dr Bianchi was examined by Mr Ira Smith, a psychologist from Brisbane, who was engaged by the defendant following receipt of the claim “to provide an objectively based opinion as to his capacity to continue in his professional practice in terms of the definition provided” (emphasis added).  This indicates that the defendant provided Mr Smith with guidelines dealing with the scope of his assessment and was doubtless directed towards the policy requirement.  Mr Smith prepared a report on 12 September 1989 (ex. 20).  He was called by the plaintiff to give evidence.  Dr Bianchi gave Mr Smith a history consistent with that in his own evidence and said that the noise impaired his ability to sustain concentration, which is supported by Mr Smith’s opinions stated in oral evidence.  He also told Mr Smith that he did not have a depressive disorder but that the tinnitus “does get him down”.

In the above report, Mr Smith said that Dr Bianchi was functioning within the “very superior range of intellectual efficiency”, above 98th percentile level, but he did not exclude any cognitive deficiency, however small.  He further stated that an objective personality study showed that Dr Bianchi was experiencing  “moderate levels of depressiveness” but that his “mood and effect were appropriate”, meaning that there was no indication of depressiveness in his interaction (R105).  By this time, Dr Bianchi’s relationship with his wife had finally broken down (i.e. in July 1989), which he said caused him to become depressed, which is not an abnormal reaction to a final breakdown of a longstanding relationship but which, according to ordinary language, cannot on its own be said to indicate “mental unsoundness”.

Mr Smith acknowledged that he had no means of determining the severity of Dr Bianchi’s tinnitus, but referred to a “tinnitus inhibitor” which Dr Bianchi brought with him to the interview.  Mr Smith said that this was apparently a device which could mimic the sound of the tinnitus.  Dr Bianchi demonstrated what he said was the sound of his tinnitus using the machine.  Based upon that demonstration Mr Smith said he considered that tinnitus of that level would “cause severe distraction” and would prevent Dr Bianchi from “fulfilling the requirements of focussed attention, ongoing analytical evaluation, and the exercise of total professional proficiency” (p.3).  He said in evidence (R105) that he would not have expected Dr Bianchi to resume his previous work at all, or indeed any like work (R106).

Mr Smith gave evidence that he administered objective tests to come to the conclusion he reached about Dr Bianchi’s cognitive functioning and emotional state.  He referred to the use of the “Wechsler Memory Scale” to test Dr Bianchi’s capacity, and the “Minnesota multi-faceted Inventory” as an indicator of personality status (R105-6).  He stated that he did not consider Dr Bianchi able to function effectively in his chosen profession. He admitted during cross-examination however, that he was dependent on Dr Bianchi’s demonstration in order to form an opinion of the severity of the tinnitus.  He also acknowledged that he had not discussed with Dr Bianchi any matters relating to his personal life, or alcohol use (R108).

On 11 October 1989 (ex.54), Dr Bianchi wrote to Dr Coman as follows:

“Dear Bill,

I have a big favour to ask of you - one vital for the future of my new lady and our child ( a lump sum). 
NZI Life’s Manager of Claims and Service (R H Bracht) suggested on the telephone you didn’t think I was TOTALLY & PERMANENTLY INCAPACITATED by my rotten tinnitus. 

(I definitely will never be able to return to medicine).  I told him I’d see you again and I asked if a new letter from you would be admissible.  He said yes.

His R H Bracht’s address is NZI Life, GPO 4166, Sydney, 2001.

The favour is - Can the letter be so strong that the sneaky insurance co.  can’t escape their liability? 

They are sending me to a Sydney psychiatrist, presumably to prove my symptoms are imaginary or the result of depression.

Excuse the scribble (Ventolin, poor vision)
Please help Bill,

Regards, Geoff”.

Dr Bianchi’s attitude from his oral evidence showed that he was upset about the need for further tests in Sydney following Mr Smith’s assessment.

On 13 October 1989, ex.53, Dr Coman issued the following certificate to the defendant:-

“I have been asked by Dr Bianchi to indicate that he is totally and permanently incapacitated to such a degree that he will definitely never be able to return to medicine because of his persistent tinnitus.”

Again, Dr Coman made no reference to depressive symptoms or alcoholism. 

On 2 November 1989 Dr Bianchi was next assessed by Dr Anne Marie Fulop, chief medical officer employed by the defendant.  She gave evidence by telephone for the defendant.  Her report is ex.67.  He was examined at the Parramatta Hospital and was referred by the defendant following the claim lodged by him for “total and permanent disablement for severe, irreversible tinnitus”.  On presentation he claimed to have had the tinnitus for over two years which had begun on the left ear and was initially mild.  He said that in approximately January 1989, the intensity increased over a period of a few weeks and also involved the right ear.  He told her that the high pitched noise with a “measured” intensity of 8,000 cycles per second, sounded like “jet engines warming up”.  He told her of the tests to exclude neuroma and that he had seen an ear nose and throat specialist and had undergone various tests.  He told her the audiometry revealed a mild hearing loss in the left ear.  He said at that time tinnitus tended to be worse in the left ear by day but tended to trouble him more in the right ear at night.  He said that he had no subjective hearing difficulty in either ear and had no complaints of nausea, vertigo, headache or diplopia.  He had a secondary problem over the past three months, that of a serious retinopathy in the left eye causing micropsia and retamoryol opsia.  That had been treated with good results.  When questioned regarding the adverse effects of the tinnitus on lifestyle and well being he stated the following:-

“(1)The continuous distraction of having a loud noise in the head has prevented him from reading, one of his favourite leisure activities.  He can no longer sit and read a book for more than ten minutes before losing concentration.  He manages to read newspapers and magazines.

(2)The noise interferes with his ability to carry out his profession as a practising psychiatrist in private practice.  He feels less able to concentrate on his patients problems due to the tinnitus.

(3)He regards himself as less conversant than previously and finds conversation quite an effort.

(4)The stress of the condition has interfered with his general health.  He has required anti hypertensive medication to control high blood pressure for over a year.  Asthma attacks have been more frequent although not requiring hospitalisation and now under control with additional medication (Intal, Bicaudate and ventolin).  The sensation of fullness following a small quantity of food intake has been recently investigated with gastro copy and colonoscopy with a negative result.

(5)The tinnitus has interfered with Dr Bianchi’s’ ability to perform clerical tasks e.g. filling out income tax documents, writing cheques and answering letters.

(6)The disorder has generally reduced his ability to enjoy life and feels he has become ‘less interesting’ to others, however he says he can ‘still sparkle’ occasionally.  His disorder does not interfere with driving, sleeping (6 to 8 hours sleep per night) and he does not regard himself as being depressed.  At no stage has he been suicidal or required sedative hypnotics or antidepressants.”  (emphasis added).

It should be noted that Dr Bianchi said in evidence and has told the plaintiff and other specialists that his sleep was severely affected by the tinnitus.  After telling Dr Fulop about his hours of work, the fact that he was a higher achiever with respect to his professional accomplishments and his success as a psychiatrist, he told her that over the past few years he attempted to further improve the quality of his life by reducing the number of working hours, increasing his physical activity by playing more golf and going for walks.  He told her he purchased 40 acres of farmland and had been actively involved in its upkeep both administratively as well as physically, planting trees and doing repairs himself. 

He also informed her of his marriage breakup and his new relationship.  At that time he said his wife was not demanding a divorce but felt that a divorce would be financially advantageous to him and his wife.  He apparently said that he felt quite content with his personal life at that time and thought that on the whole he was lucky that things had worked out so well.

With respect to his professional career, he said that tinnitus had incapacitated him to such an extent that even part-time involvement in his practice was unthinkable.  He did not wish to consider other possible options within his specialty such as research, teaching, stress management, etc.  Nor did he feel that any rehabilitation programme in the form of psycho-therapy or counselling or self-help organisation such as the Tinnitus Association to help him cope better with the problem would be beneficial.

Dr Fulop concluded as follows:

“Dr Bianchi presented himself as a pleasant and co-operative, highly intelligent person who portrayed no clinical evidence of overt anxiety or depression.  He has sustained no major lifestyle changes as a direct result of his tinnitus apart from what appears to be a voluntary cessation of all work-related activity which may possibly be an extension of his ambition to improve the quality of his life.

Dr Bianchi did not appear too concerned regarding his inability to return to his profession and felt that other aspects of his life e.g. family and friends would compensate for his career.  He felt that financially he could get by with buying and selling properties in the future.

In my opinion Dr Bianchi appears to have come to terms with his chronic condition and does not meet the criteria for Total and Permanent Disablement.

I feel that at present he could probably cope in his profession, even on a part-time basis initially.  With further counselling and support he would probably manage full-time work in the future. 

In view of the complexity of issues involved in patients suffering from tinnitus, Dr Bianchi needs to be assessed by a psychiatrist and also a clinical psychologist to determine whether his perceived disability which prompted him to lodge a claim for Total and Permanent Disablement is due to masked depression a personality disorder manifesting itself as a hypochondriacal state, or whether psychosocial stresses such as marital problems or professional burnout are interfering with the doctor’s ability to continue in his profession.

Literature review of tinnitus research indicates that it is a relatively common disorder.  Although the condition is disabling initially to varying degrees, most patients learn to cope with it in time with or without intervention from the medical profession and following an adjustment period usually return to their pre morbid existence in the community.”  (emphasis added).         

Dr Bianchi accepted that he told Dr Fulop the matters attributed to him in the report, his only criticism being that she was employed by the defendant and was biased against him. 

Dr Bianchi was next seen by Dr Richard Bryant, a psychologist from Sydney, who interviewed Dr Bianchi on three occasions, 2 November 1989, 5 July 1990 and 11 June 1997 and prepared three reports, exhibits 70, 71 and 72, dated 7 November 1989, 20 July 1989 and 15 June 1997 respectively.  Dr Bryant gave evidence for the defendant by telephone. In his first report, exhibit 70, Dr Bryant concluded that in his opinion Dr Bianchi had not suffered a total and permanent disablement.  He based that opinion on the fact that certain cognitive tests administered to Dr Bianchi showed that he was able to “manage demanding tasks, including those involved in psychiatric practice” (p.6).  Dr Bryant in this regard also referred to Dr Bianchi’s ability to concentrate during his interview with him.  It should be noted that Dr Bryant performed tests on Dr Bianchi during his initial assessment on 2 November 1989 but was not in a position to produce those test results.  No reference was made to those tests in the report of 20 July 1990 (ex.71) but in evidence (R306), he said that Dr Bianchi was performing “relatively poorer, but nonetheless at an average level on a task requiring rapid shifts between attentional and visual and motor skills”.  This was a reference to the digital symbol test and has some significance.  Dr Bryant’s evidence was that on the block design sub-test the results were “well above average”, and he said (R304) that “every sub-test was well above average”.  This is contrary to Dr Andrewes’ evidence and to some extent is inconsistent with his own evidence (R306) that Dr Bianchi was performing in a relatively poorer way in certain respects.  It must always be remembered that Dr Bianchi was of superior intellect and as Dr Andrewes said in his report (ex.30), it is difficult to assess a man such as Dr Bianchi because he was previously exceptionally gifted, the inference being that a relatively poorer performance of the type ascertained by Dr Bryant, could be regarded of significance in Dr Bianchi.

In coming to this conclusion I have not overlooked another possible explanation i.e. that the exhortation at the top of the confidential report required mention of matters affecting the longevity of  Dr Bianchi and there is no evidence that tinnitus is likely to affect longevity, but to the contrary, although Dr Lindsay knew that it should be drawn to the attention of the defendant in some way, at least in the personal statement.  Dr Bianchi was also of this view as he, in fact, disclosed it in his personal statement.

Another matter foreshadowed above which gives some support to the view that Dr Lindsay  did not see the completed personal statement is the fact that he said he would never disclose details concerning the health of one of his patients and would refuse to do so unless the patient gave permission to divulge that information (R252).  He was then read the following declaration by Dr Bianchi which appears at the end of the personal statement portion of ex.3 just above Dr Bianchi’s signature as follows:-

“I hereby declare that the proposed Contract of Assurance with the NZI LIFE LIMITED is sought by me on faith of the above Personal Statement, that all the answers to questions in such Personal Statement are correct and that I have withheld no material information, and I agree (1) that the Proposal Declaration and the Personal Statement shall be the basis of such Contract; (2) that any medical practitioner whether named in the said Personal Statement or not who has been or may hereafter be consulted by me shall be and is hereby authorised and directed by me to divulge at any time to the Company or any legal tribunal any information he may have acquired, with regard to myself and I expressly waive all professional confidence and provisions of law as to privilege or otherwise forbidding disclosure of such information.”  (emphasis added).

Dr Lindsay was then asked (R254) whether that was the kind of authority that he would need before he would ever disclose to NZI and he answered “Correct”.  At R252 he was asked this question and gave this answer:

Q:“And there is no way you would have written to NZI about Dr Bianchi’s health unless Dr Bianchi authorised you to do so?  -- He did so in a letter dated 14 June 1989;”

That letter was, of course, ex.61 and was written long after the claim was lodged on the defendant and which resulted in Dr Lindsay’s report to the defendant on 19 June 1989 (ex.59).  He was then questioned about the Personal Statement of which he did not have a copy and could not ever remember having seen it.  Having regard to the above emphatic answers, I find that this further indicates that Dr Lindsay was not aware at any time of Dr Bianchi’s declaration on the Personal Statement which would have satisfied Dr Lindsay to make disclosure of any such information concerning the health of Dr Bianchi to the insurance company if asked.  His view was that no such authority was given until 14 June 1989 (ex.61).  Had he been aware of those declarations it is unlikely that his evidence would have taken this form.

Accordingly, on Dr Lindsay’s evidence, and from the documents themselves, I find that he  was not aware of the contents of the completed personal statement when he (Dr Lindsay) completed the confidential medical report.  Dr Lindsay was more concerned with Dr Bianchi’s asthma and hypertension which was his specialty and appears only to have completed the confidential medical report at Dr Bianchi’s instigation.  Had the “attached letter from my GP” contained a reference to the fact that Dr Bianchi’s tinnitus was severely troubling him at that time to the extent that it was affecting his concentration and work involving reduced hours, it is probable that Dr Lindsay would simply have copied it on to that part of the confidential medical report to which that annotation was directed by a line.  Unfortunately Dr Lindsay’s memory after this time could not elucidate the matter any further.  I find it difficult to see how the plaintiff (and Dr Bianchi) can rely upon the letter of 14 January 1988 (ex.6) to Dr Lindsay, when it was written with no question of an insurance policy in mind, and when Dr Lindsay had no interest in tinnitus, as knowledge imputed to the defendant, even if Dr Lindsay was the defendant’s agent.

The defendant submits that Dr Lindsay was the agent of Dr Bianchi and cites a number of reasons for this.  These are that Dr Bianchi was Dr Lindsay’s patient and was chosen by Dr Bianchi to complete the confidential medical report, and that Dr Lindsay said in evidence that he would not have divulged any information to the defendant without Dr Bianchi’s approval.  The plaintiff on the other hand submitted that Dr Lindsay was the defendant’s agent because the defendant was entitled to nominate a practitioner of his choice, and the examination was carried out for the defendant’s purposes and was paid for by the defendant.  As indicated above, Mr Murphy’s evidence that the usual practice was for the insurance company to pay the medical examiner for the medical examination and confidential medical report, and Ms Morro’s evidence to similar effect was of a general kind relating to the general practice. 

Dr Lindsay was not asked whether he was in fact paid.  The rubber stamp on the bottom of the confidential medical report (ex.3), headed “Office Use Only”, had a notation under that, “Paid and Folio No.”.  Something appears to have been written but then struck out and is otherwise totally indecipherable.  It does not appear whether that means that a payment was in fact made or whether that stamp was put on in the usual way with no payment actually recorded, or if it was recorded, it was then struck out.  This, of course is, speculation.  It is most unfortunate it was not clarified in the evidence.  The onus is on the plaintiff to prove that Dr Lindsay was the defendant’s agent.  There is no evidence as to whether Dr Bianchi paid for his follow-up consultation with Dr Lindsay on 8 March 1988 with respect to his asthma and hypertension.  Presumably he would have paid for this in the ordinary course.  Dr Lindsay was not asked whether he charged separately for the “confidential medical report” which followed the consultation on 8 March 1988.

Dr Bianchi’s letter to Dr Lindsay of 14 June 1989 (ex.61) referred to above, does not help.  He said that the defendant had asked him to arrange payment for the report they requested and he hoped that “a good bottle of red might suit”.  Dr Lindsay’s report of 19 June 1989 (ex.59) already referred to above, was directed to the defendant.  The reference to payment for that report is perfectly consistent with it falling within the terms of cl.3 of the Total and Permanent Disablement Benefit Conditions which required that “any expenses incurred in proving a claim, including any medical examination by doctors of our choice, will be borne by you.”

According to ordinary principles of agency, the knowledge of the agent would ordinarily be imputed to the defendant as principal.  Even if Dr Lindsay, at the time he completed the confidential medical report, was aware not only of Dr Bianchi’s tinnitus, but more importantly, whether it was of such a nature that it was affecting Dr Bianchi’s ability to work, a crucial factor is Dr Lindsay’s evidence that he would not have divulged any information concerning Dr Bianchi’s health without Dr Bianchi’s permission (R252), and notwithstanding Dr Bianchi’s signed declaration on the bottom of the Personal Statement (ex.2) which Dr Lindsay probably never saw.   Thus, although the knowledge of an agent must ordinarily be imputed to a principal, that is not necessarily so. 

Nor does s.21(2) of the Act provide any assistance to the plaintiff. That section states that the duty of disclosure does not apply to facts which the insurer knows or ought to have known in the ordinary course of its business. Hence, even if Dr Lindsay was the defendant’s agent, it cannot be said that the defendant would in the ordinary course of business necessarily obtain confidential medical information about Dr Bianchi, known to Dr Lindsay, even with Dr Bianchi’s authority in ex.2 and ex.3. Dr Lindsay said in evidence that he would refuse to divulge such information. In this context, unless the defendant chose to make enquiries of the medical practitioners referred to, the defendant is limited to the information provided on the confidential medical report. To speak of “imputed” knowledge is meaningless in this context.

For all of the above reasons, I find on the balance of probabilities that Dr Lindsay was in fact acting as agent for Dr Bianchi (and the plaintiff) in the particular circumstances of this case, and that no knowledge possessed by Dr Lindsay (even assuming he recalled the statement regarding tinnitus and the letter of 14 January 1988), can be imputed to the defendant.  I have  already concluded on the balance of probabilities that Dr Lindsay handed back the completed confidential medical report to Dr Bianchi, whether or not the personal statement had been filled out at that time and that Dr Bianchi sent it back to Mr Murphy for transmission to the defendant.

The distinct impression I have after carefully considering all of the evidence both documentary and oral, and the way the evidence was given by various witnesses, is that Mr Murphy simply deferred to Dr Bianchi, a professional expert of high standing and status to whom he (Mr Murphy) had been referred by a broker.  Doubtless he would have been regarded by Mr Murphy as an important client, to the treated with some deference.  Mr Murphy left the entire arrangements to Dr Bianchi to complete so far as the personal statement and medical report were concerned.  It is probable also that Dr Lindsay completed the confidential medical report in a somewhat informal way on behalf of a professional colleague and handed it back to Dr Bianchi for transmission back to Mr Murphy.  This, in my view, better accords with the whole of the evidence in the case.

Accordingly, I find that Dr Bianchi failed to disclose to the defendant, in either ex.2 or in both parts of ex.3, the severity of his tinnitus and the effect of it upon his concentration, his ability to work and the hours of work.  I accept that disclosure of the severity of the tinnitus and its effect upon his ability to work were significant factors which ought to have been drawn to the attention of the defendant in the proposal, or in the personal statement or in the confidential medical report, or otherwise, before the policy was accepted by the defendant.  Dr Bianchi also wrongly stated in ex.2 that he was in good health, and was also responsible for the incorrect statement in the confidential medical report that he had no defect in hearing.

In relation to tinnitus in the personal statement (ex.3), and when considered in combination with the other matters relied upon by the defendant, it could not be said to be “an obviously incomplete or irrelevant answer” within in the meaning of s.21(3)(b) on which the plaintiff relies. In a sense, this is an assertion by the plaintiff that the answers were not complete. Furthermore, I accept the evidence of Ms Morro and Mr Hodgson that had this information been conveyed to the defendant before the policy was accepted, the defendant would not have entered into the policy or alternatively on the terms and conditions in which it did: s.29(1)(c). Also, his statement that he was in good health and the statement that he had no defect in hearing were also literally untrue.

Two questions arise:-

(i)was there a non-disclosure amounting to a misrepresentation?  and

(ii)if so, was it innocent or fraudulent?

(a)  Was there a non-disclosure amounting to a misrepresentation?

Dr Bianchi admitted in the clearest of terms that information concerning the severity of his tinnitus and the fact that it was affecting his work were matters of considerable importance to an insurance company before a policy of this kind was accepted. He therefore knew that information as to these matters would have been relevant to the decision of the insurer whether to accept the risk, and if so, on what terms: s.26(2). It is also clear that a reasonable person in the circumstances could be expected to have known that this information would have been relevant to the decision of the insurer. Indeed, Dr Bianchi himself asserted that he did in fact make full disclosure to the defendant in the three ways mentioned above, viz. the letter of 14 January 1988 (ex.6(2)) to Dr Lindsay, his statement to Mr Murphy, and his reference to “tinnitus” in the personal statement (part of ex.3), or at least put the defendant on its guard if it wished to make further enquiries. These have been already dealt with. Also within the meaning of s.21(1), these are matters known to the insured (via Dr Bianchi). Therefore, the plaintiff cannot rely upon the restriction contained in s.26(2). Nor can Dr Bianchi rely upon s.26(2) with respect to the other two statements referred to that “he was in good health and had no defect in hearing”. If answered differently, the latter would probably have put the defendant on enquiry.

As to s.26(1), this is more difficult.  Dr Bianchi has asserted that he made full disclosure in the three ways contended for.  As already indicated, there is no basis for any belief by Dr Bianchi that anything he told Dr Murphy related to his true condition and its effect on his work.  Mr Murphy knew no more than what Dr Bianchi himself subsequently wrote in the Personal Statement, viz.  “tinnitus”.  Mr Murphy dismissed Dr Bianchi’s reference to tinnitus as irrelevant and in effect, no more than “mild” or insignificant, as Dr Bianchi must be taken to have known.  Whether Dr Bianchi reasonably believed or would be entitled to believe that Mr Murphy may have passed any information onto the insurance company is however another question to be subsequently considered under (ii) below. 

Nor could Dr Bianchi rely upon any belief that his reference to tinnitus in the personal statement (ex.3) was in fact true, having regard to his real condition at the time, nor for the matter,  as to the other two factors mentioned.  See e.g. the letters of 14 June 1989 to Dr Coman (ex.52) and to Dr Lindsay (ex.61) and his reference to the fact that tinnitus was “mild” at that time.  The fact that Dr Bianchi believed that his reference to tinnitus and disclosure of the names of Dr Coman and Dr Lindsay were sufficient to invite the defendant to enquire of them if they saw fit, presents more difficulty under s.26(1), but I have concluded that for the purposes of s.26(1), it  does not convert the nature of his disclosure into a belief that what he in fact disclosed was true, even though this belief is relevant to the further consideration as to whether his non-disclosures in the several respects referred to were innocent or fraudulent. 

Dr Bianchi’s reliance upon the letter of 14 January 1988 (ex.6) to Dr Lindsay is in a slightly different category as it refers to the severity of his tinnitus and the fact that it was affecting his work.  Quite apart from the fact that I have held that Dr Lindsay was not the agent of the defendant or, even if he was, he had probably overlooked that letter, the contents of that letter were in fact true.  In these circumstances, s.26(1)(a) does not apply to assist the plaintiff.  The result is that the relevant non-disclosure by Dr Bianchi (and the plaintiff) amounts to a misrepresentation.

(b)      Was the non-disclosure or misrepresentation innocent or fraudulent?
The remedies, if any, available to the defendant are set out in s.29. If the misrepresentation was innocent, the defendant could only avoid the contract within three years after it was entered into (s.29(3)). Accordingly, the defendant has lost any right if the misrepresentation was innocent. If it was fraudulent, the defendant is entitled to avoid the contract at any time: s.29(2), and it has now purported to do.

By virtue of s.33, the provisions of Division 3 of part IV (including the right to avoid the contract) provide the only remedies available to an insurer. Section 24 of the Act appears to have altered the common law position under which the breach of an essential term of the contract gave a right to rescind the contract. This was said to be a “basis” clause, namely that the representations were deemed to be essential terms going to the root of the contract. See also the “special warning” in the contract itself (ex.1). See e.g. Khan v. The Bankers and Traders Insurance Co Ltd (1926) 37 C.L.R. 451 at 454 per Higgins J. (Knox CJ, Isaacs, Rich, Starke JJ agreeing); Maye v. The Colonial Mutual Life Assurance Society Ltd (1924) 345 C.L.R. 14 at 16 per Starke J. (dissenting) at 45-47; Newsholme Bros v. Road Transport & General Insurance Co. [1929] 2 K.B. 356 at 376 per Scrutton LJ at 378-380 per Greer LJ; Jenner v. The National Mutual Life Association of Australasia Limited (1986) 4 ANZ Insurance Cases 60-685; Strover v. Harrington [1988] 1 Ch.390 per Sir Nicolas Browne-Wilkinson V.C. at 408. Section 24 provides that a statement made by or attributable to the insured with respect to the state of affairs does not have effect as a warranty but has effect as though it were a statement made to the insurer by the insured during negotiations for the contract but before it was entered into. No such basis was pleaded in the defence or raised during the hearing, so it will not be considered.

As the defendant’s outline of submissions (ex.A) states in para.3, it must be shown that Dr Bianchi intended to mislead the defendant as to the nature of the risk of total and permanent disability from tinnitus, before it can be said that his inadequate disclosures were made fraudulently.  This is supported by Commercial Banking Co of Sydney Ltd v. R.H. Brown & Co (1972) 126 C.L.R. 337 per Menzies J. at 343, that a person who makes a false and fraudulent misrepresentation is only liable to the persons to whom it is made, i.e. to the persons whom it is intended should act upon it: Peek v. Gurney (1873) L.R. 6 H.L. 377. Reference is also made in the cases to the fact that the representation must not have been honestly made. I accept the statement of principle in Steinberg v.  FCT (1972-75) 134 C.L.R. 640 at 694 and the passage cited from the judgment of Lord Denning LJ in Curtis v.  Chemical Cleaning and Dyeing Co Ltd [1951] 1 K.B. 805 at 808:-

“In my opinion, any behaviour, by words or conduct, is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption.  If it conveys a false impression, that is enough, if the false impression is created knowingly, it is a fraudulent misrepresentation; if it is created unwittingly, it is an innocent misrepresentation; but either is sufficient to disentitle the creator of it to the benefit of the exemption.  In Rex v.  Kylsant (Lord) [1932] 154....2.  It was held that a representation might be literally true but practically false, not because of what it said, but because of what it left unsaid;  in short, because of what it implied.”

Reference has already been made to the various statements made by or on behalf of the plaintiff in the proposal (ex.2), and the personal statement (ex.3) and the confidential medical report (ex.3).  As indicated, those statements were, when taken together, untrue in the sense that they were incorrect and did not fully explain the extent of the tinnitus.  They failed to properly and fully disclose to the defendant the true extent of Dr Bianchi’s tinnitus and its effect on his work.  As indicated above, I accept that the defendant would not have entered into this particular insurance had they been fully aware of the true situation and I have accepted the evidence of Ms Morro and Mr Hodgson generally in this regard.

The defendant has submitted that Dr Bianchi intended to mislead the defendant as to the nature of the risk of total and permanent disability from tinnitus by virtue of the following: 

(a)he knew that any adverse effect of his tinnitus on his ability to work would be important to the insurer in deciding whether or not to provide disability cover.  (R84, 86).

(b)he knew that the true position was that tinnitus was “interfering with my concentration at work” (in July 1987) (ex. 43 and 44).  He was considerably troubled by tinnitus, which was not settling, “but I’m coping by virtue of the decreased workload” (ex. 46).  See also ex. 6, 38, 39, 40, 45 and 47.

(c)Dr Bianchi took great care in relation to his insurance arrangements and that his assertions were “lame and patently untrue” that he had truthfully represented the nature and effects of his problems with tinnitus to the insurer by the letter ex.6 of 14 January 1988 to Dr Lindsay, the statement to Mr Murphy, and his disclosure of tinnitus in the personal statement (ex.3).  It was submitted that this was significant because it was not a frank acknowledgement of error.

(d)Dr Bianchi wrote in the confidential medical report (ex.3), thereby adopting its terms and knowing that it made no reference at all to tinnitus or any problems concerning concentration at work or that he had reduced his workload, or any hearing loss.

Basically, it was contended that Dr Bianchi’s evidence was false in so many respects that an inference that the representations were fraudulent was more readily able to be drawn.

In Dr Bianchi’s favour is the fact that he did not initially enquire about a total Permanent and Disablement Policy.  This was suggested by Mr Murphy, which I accept.  It is for the plaintiff’s benefit, not Dr Bianchi’s, even though, if the plaintiff succeeds, it would ease her financial worries and would no doubt tend to contribute to their relationship.  Also Dr Bianchi’s letter of 16 February 1989 (ex.37) to the defendant, shows that he was not even sure if the policy covered retirement due to ill-health (i.e. tinnitus), which is not consistent with an earlier well thought out plan to deceive.  Dr Bianchi openly wrote to Dr Lindsay on 14 January, 1988 (ex.6) in which he referred to his tinnitus and its interference with his work.  At that time the policy was not even in contemplation.  Dr Bianchi had also openly written to various other insurance companies during the previous six months and indeed on 10 March 1988, the day after Dr Lindsay signed the confidential medical report.  He was perfectly open with all of those insurers in order to comply with specific indications of those policies.  The submission that the defendant was aware of the correspondence to other insurers, such that the defendant would have been aware of his true condition, whilst not satisfactorily proved, nevertheless appears to be a basis for suggesting that this was Dr Bianchi’s belief which was not consistent with dishonesty.

Also in his favour is the fact that in the first page of the personal statement (ex.3), he disclosed that he had previous medical examinations by Dr W.Coman, the ear nose and throat surgeon at Wickham Terrace, Brisbane in connection with tinnitus in his left ear.  He disclosed it as of  “recent onset - still present - no underlying disease”.  Against those disclosures was the reference to the ENT surgeon whose name appears to the left of those entries (that is, Dr Coman) as Dr Bianchi’s relevant specialist who was well aware of Dr Bianchi’s condition and its severity since August 1987.  Dr Lindsay’s name was also disclosed and he was in fact the medical examiner who completed the confidential medical report.  Dr Bianchi authorised the defendants to contact them if necessary. 

Notwithstanding Dr Lindsay’s evidence that he, from his point of view, would not have disclosed any information revealed at a medical examination to the defendant without the express permission of Dr Bianchi as his patient, Dr Bianchi had signed specific declarations in two documents (ex.2 and 3) whereby he agreed that any medical practitioner whom he had consulted was authorised to give any such information to the defendant as it may require.  Regardless of the fact that it has been held above that Dr Bianchi could not rely upon the letter of 14 January 1988 to Dr Lindsay as knowledge imputed to the defendant, and regardless of Dr Lindsay’s ignorance of the two signed declarations by Dr Bianchi in exs.2 and 3, those declarations allowed Dr Bianchi to hold the not unreasonable belief that the defendant could have obtained whatever information it wished from Dr Coman and/or Dr Lindsay regarding any aspects of his health, including what had been written in the letter to Dr Lindsay on the 14 January 1988.  In a sense, the way in which Dr Bianchi made the disclosure in the personal statement was an invitation to make inquiries if it wished.  This does not appear to be consistent with an intention to deliberately deceive.  Also Dr Bianchi was entitled to believe that Dr Lindsay was well aware that the severity of his tinnitus was  affecting his work by reason of the contents of ex.6 and that Dr Lindsay would have disclosed them to the defendant, as he duly authorised, if the defendant required that information.    So also with Dr Coman who had access to the tests at St Andrews Hospital and who had consulted Dr Bianchi on several occasions.

Even though I have held that the various statements made by Dr Bianchi in exs.2 and 3 were untrue in the sense that they were literally inadequate or incomplete, I have taken into account his several explanations as to what he meant by the answers he gave.  His answer “Yes” to the question, “Are you in good health?” in ex.2, has at least been qualified by his later disclosure.  He had been advised by Dr Coman in effect that the condition was not life threatening.  As to his hearing, he was able to hear in normal speech zones and was entitled to not unreasonably believe that he had no relevant hearing disability which he should disclose to the defendant.  Dr Coman told him that he had no serious hearing problem and certainly no such problem as would effect his longevity.  This is capable of explaining the answer “no” to para.  P(ii) of ex.3.  His statement that he had no underlying disease was justified by exclusion of any neuroma by the M.R.I. in 1987 and by Dr Coman’s reassurance to him.  The answer “No” to the question in ex.2: “Do you know of any other circumstance which may affect the risk on your life?”, cannot be said to be untrue because all of the evidence shows that tinnitus is not “life threatening” apart from possible suicide which Dr Bianchi never contemplated due to his responsibilities.  The defendant is bound by the terms of its own questions.  The answer, “no” under para.G on p.2 of ex.3 to “Any other illness, injury or operation?”, does not suggest fraud, given that it follows his disclosure of tinnitus and all of his other relevant conditions under para.F on p.1 of ex.3.  It may also be noted that on p.2 under para.H, he disclosed his mother’s previous history of depression.

The fact that he mentioned his tinnitus and that he was troubled by it, to Mr Murphy, a canvassing agent for the defendant, who “did not want to know about it”, is not consistent with a fraudulent intent.  Dr Bianchi was not to know that Mr Murphy would not tell the defendant at least what he, Dr Bianchi, had stated to him that he was troubled by tinnitus.  Also Mr Murphy’s attitude in conversation with Dr Bianchi did not have the consequence of Dr Bianchi excluding a reference to tinnitus in the personal statement (ex.3) which, had such an omission  occurred, may have been damning.  Dr Bianchi independently considered it important enough to mention it in the personal statement, notwithstanding Mr Murphy’s attitude to it.  Given that the personal statement and confidential medical report were in the one document, and even if the “attached letter from my GP” did not mention tinnitus as I have found was probably the case, it was in fact mentioned in some detail in the attached Personal Statement, both of which went to Mr Murphy and then to the defendant together as one document.  This is not consistent with deliberate dishonesty or a fraudulent intent to mislead or deceive the defendant into relying on an inadequate disclosure in the confidential medical report. 

This is further supported by the fact that Dr Bianchi had possession of ex.3 from Mr Murphy before he passed it on to Dr Lindsay and there is every probability that he had perused it.  The confidential medical report was headed “Confidential Medical Report on the health, constitution and prospects of longevity of Dr Geoffrey Neal Bianchi”.  In my opinion this goes some way to explaining Dr Bianchi’s answer (and that of Mr Murphy) that tinnitus was not “life threatening” and also why Dr Lindsay would not have considered it necessary to go into the confidential medical report, even if he had remembered it.  The attached personal statement required information in para.F of “any medical examination, advice, treatment” during the last five years and this was fully disclosed by Dr Bianchi.  Again the authorities make it clear that the defendant is bound by the form of document and questions it used.  Dr Bianchi (and Dr Lindsay if he had remembered it), were entitled to assume that the requirements in para.P of the confidential medical report seeking full comment on any favourable features, related to matters bearing upon the longevity of Dr Bianchi and not on matters such as tinnitus which all the evidence shows does not affect longevity, unless as indicated, a sufferer commits suicide as a result of it.

The fact that Dr Bianchi’s tinnitus was troubling him since July 1987 and that it was affecting his work, was well known to other insurance companies but also to Dr Coman who specifically ordered him to undergo the tests at St Andrews.  It is true that none of this information had been shown to have been known to the defendant at the time or, indeed, on the evidence, until some time during the preparation for trial.  Nevertheless, this medical information was from Dr Bianchi’s point of view, recorded (at least by Dr Coman, Dr Lindsay, and St Andrews Hospital) in places readily available to be ascertained by the defendant, if it wished, and particularly as he has specifically authorised disclosure in exs.2 and 3.  Having regard to Dr Bianchi’s intelligence, his knowledge of insurance policies and knowledge of his obligations always to make adequate disclosure, and what must be taken to be his certain knowledge that deliberate non-disclosure would surely defeat any claim in the future, it is impossible to conclude that what were in fact inadequate disclosures were made dishonestly or with fraudulent intent to deceive the defendant into issuing the policy.

The various factors against Dr Bianchi have been canvassed in detail above.  Of general concern was the fact that his credit was questionable in many respects.  The defendant asserts that his good performance in court and at various interviews and his demeanour generally is sufficient to indicate fraud and suggests clever manipulation.  Reliance was placed on various aspects by the defendant, e.g. the fact that when he went into Damascus Hospital for treatment for his alcoholism he made not mention of tinnitus.  However, he had numerous assessments and numerous visits to hospital over a period and there is no reason not to accept Dr Bianchi’s statement that all relevant places were well aware of the basic cause of his problem as he understood it to be.  It is well known that any patient who undergoes multiple assessments and treatments does not always repeat time and again all details of health problems whether it be due to memory or a not unreasonable belief by the patient that he or she would be regarded as neurotic if matters are constantly repeated from time to time.  This is common knowledge.  Some of the experts put this down to his obsessional and perfectionist nature and his desire always to present well.  There is some merit in this.  This explains parts of Dr Bianchi’s evidence. Fraud cannot be inferred from his demeanour and performance in court or from his performances at various assessments.

I was initially concerned at what might be thought to be the irregular way in which the procedure authorised by Mr Murphy was carried into effect by Dr Bianchi and the fact that the confidential medical report came back into Dr Bianchi’s hands for transmission back to Mr Murphy when, in fact, he should never have seen it.  Also of some concern was the “attached letter from my GP” referred to in the confidential medical report, which suggests that in effect, Dr Bianchi (via his GP) was the person completing essential parts of that report.  However, as indicated above, Mr Murphy probably deferred to Dr Bianchi who then simply organised the confidential medical report in an informal way with a colleague who, as his own specialist, knew of Dr Bianchi’s general health conditions.

Having considered all of the evidence, documentary and oral, and the manner in which it was given before me, particularly that by Dr Bianchi, I am unable to conclude according to the relevant standard that Dr Bianchi was dishonest and fraudulent in the disclosures which he made.  Whilst the disclosures were inadequate and therefore untrue, I am unable to conclude that Dr Bianchi, from the way he disclosed he had tinnitus and his evidence generally, made these inadequate disclosures with the intention to deceive the defendant into accepting the policy even though he recognized that knowledge of the severity of his tinnitus and its effect on his work, when matters were put him in evidence, were important factors which the defendant would have taken into account in deciding whether or not to accept the policy.  I accept Dr Bianchi’s statement that the defendant, had it wished to do so, could have found out all it required from Dr Coman and Dr Lindsay, and that this is the reason why he filled out his reference to tinnitus in the personal statement (ex.3) in the way in which he did, almost, as it were, extending an invitation to the defendant to investigate the matter further if it wished.  He duly authorised the defendant to obtain any medical information it wished, in the declarations in both ex.2 and ex.3.  There was no reason for him to assume that this would not be done if the defendant wished.

Overall, whilst I had concerns with some aspects of his evidence and demeanour, I have in the end concluded that he did not deliberately mislead or lie to any expert or to the Court.  I accept the general thrust of his evidence.  I conclude that the defendant has not shown, according to the requisite standard, that the inadequate disclosures attributable to Dr Bianchi, even though they amount to misrepresentations, were made fraudulently.

I have not overlooked the submission on behalf of the plaintiff that because the defendant had sought and accepted renewal premiums in 1989, and 1990, (in both cases after the defendant was aware of ex.37 of 16 February 1989 and ex.7 of 10 May 1989 and had possession of numerous medical reports in late 1989), and had also after further medical reports in 1990, sought premiums for the year commencing April 1991 which Dr Bianchi declined to pay, the defendant has affirmed the contract or has waived the right to rely upon any breach of his duty of disclosure and upon any misrepresentation.  It is not necessary to consider this aspect in any detail.  There can of course only be a waiver if a party is shown to have knowledge of the relevant facts and with that knowledge, did some act or pursued some course of conduct which clearly indicated to the other party that those misrepresentations were not relied upon.  It does not appear on the evidence as to when the defendant first became aware of the various letters to other insurers or to Dr Lindsay which the defendant relied as demonstrating a misrepresentation.  For example, Dr Lindsay said in evidence in court that his letter (ex.6) of 14 January 1988 was only recently made available to both parties.  It is not necessary to consider this aspect any further.

Nevertheless, because I have held that the misrepresentations were not made fraudulently, the defendant, not having elected to avoid the contract within the three-year period referred to in s.29(3) of the Act, is no longer entitled to do so.

E.  Conclusion

In the result I find that there was a valid contract entered into between the plaintiff and the defendant, and that the defendant is now no longer in a position to avoid the contract because of the misrepresentations by Dr Bianchi.  I find that Dr Bianchi does suffer and has since February 1989 suffered a total and permanent disability as a result of bodily injury or disease consisting of tinnitus and nothing else, but made worse by subsequent depressive symptoms and alcoholism;   and that in consequence has not been able since February 1989 to perform work to which he is suited by reason of training or experience.

In accordance with the supplementary submissions from counsel for the plaintiff, B3, (which has not been the subject of any contrary submission on behalf of the defendant), it is clear that the benefit in terms of the policy became payable to the plaintiff on 9 August 1989, i.e. six months after the total and permanent disablement commenced on 9 February 1989. See cl.7 of the relevant conditions. The plaintiff concedes that the defendant had a discretion to pay the benefit in five yearly instalments in accordance with cl.7 of the conditions. In accordance with s.57 of the Act, the defendant is accordingly liable to pay interest on the amount it was liable to pay the plaintiff in accordance with the contract of insurance (ex.1). It has been agreed between the parties that in the event that judgment is given in favour of the plaintiff, it became unreasonable for the insurer to have withheld payment of the first instalment beyond 1 November 1989: s.57(2).

In 1989, Regulation 32 of the Insurance Contracts Regulations provided for interest to be paid at the rate of 11 per cent per annum.  Regulation 32 was amended in 1990 to substitute an interest rate of 13 per cent per annum.  That regulation was further amended in 1997.  It prescribed an interest rate to be determined by adding 3 per cent to the 10 year treasury bond yield at the end of the half financial year ending in the period during which interest was payable.  The ten year treasury bond yield at 30 June 1997 was 7.05 per cent.  Accordingly the effective insurance interest rate from 1 November 1997 to the date of judgment will be 10.05 per cent.

Judgment will accordingly be given in favour of the plaintiff against the defendant in accordance with para.7 of the further submissions for the plaintiff (B3).  These must be updated to the date of judgment.  I accordingly ask the parties to agree on the amount involved to today’s date so that judgment can now formally be given for that amount.  If there is no argument concerning costs, that of course can also be included in the draft order.