Swansson v Harrison

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

MAJOR TORTS LIST

No. 6310 of 2013

RICHARD NEIL SWANSSON	Plaintiff
v
RUSSELL ALAN HARRISON & ORS	Defendants

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JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	5, 6 and 7 March 2014
DATE OF JUDGMENT:	26 March 2014
CASE MAY BE CITED AS:	Swansson v Harrison & Ors
MEDIUM NEUTRAL CITATION:	[2014] VSC 118

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TORT - negligence - misleading and deceptive conduct - Corporations Act2001 (Cth) s 1041H and Australian Securities and Investments Commission Act 2001 (Cth) s 12DA - application for life insurance policy to replace an existing policy - insurance adviser's oral advice - whether failure to advise as to ongoing duty of disclosure - whether failure to advise of risk of avoidance of life insurance policy for innocent non-disclosure within 3 years – Insurance Contracts Act 1984 (Cth) s 29(3) - failure to make further inquiries about client's medical condition prior to cancellation of an existing life insurance policy - standard of care of reasonable and prudent insurance adviser – Wrongs Act 1958 (Vic) ss 48, 57.

TORT - contributory negligence – insurance applicant's failure to disclose changes to status of medical condition before policy issued - just and equitable apportionment - causation - reduction in damages – Wrongs Act 1958 (Vic) ss 26, 48, 62 - Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529.

EVIDENCE - credit of witnesses - reliability and fallibility of memory - Watson v Foxman (1995) 49 NSWLR 315

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Gillies QC with Mr B Jellis	Adviceline Injury Lawyers
For the Defendants	Mr D Masel SC with Mr R Heath	Colin Biggers & Paisley

TABLE OF CONTENTS

Introduction and Summary.............................................................................................................. 1

Background......................................................................................................................................... 2

7 March meeting............................................................................................................................ 3
Events after 7 March..................................................................................................................... 5

How the case was put........................................................................................................................ 8

Factual and legal issues for decision............................................................................................ 11

What advice was given on 7 March 2012?................................................................................... 13

General considerations............................................................................................................... 13
Phone conversation/s before 7 March..................................................................................... 15
7 March meeting.......................................................................................................................... 17
Events after 7 March................................................................................................................... 25
Credit of the two witnesses....................................................................................................... 25

Reliability of recollection.......................................................................................................... 26
Mr Swansson’s motivation...................................................................................................... 26
Mr Swansson’s previous insurance applications.................................................................... 28
Mr Swansson’s understanding of the disclosure duty............................................................ 30
Mr Swansson’s understanding that he had done all he needed to do...................................... 31
Mr Harrison’s version: alleged inconsistencies....................................................................... 34
Mr Harrison: having it both ways?......................................................................................... 38
Mr Harrison’s sloppy business practice?................................................................................ 39
Mr Harrison’s motivation to earn commission?..................................................................... 39

Findings........................................................................................................................................ 40

Was it negligent not to make further enquiry about Mr Swansson’s condition before cancelling the AXA policy?................................................................................................................................ 43

Was Mr Swansson guilty of contributory negligence?............................................................. 46

Just and equitable apportionment................................................................................................ 49

Conclusion and orders.................................................................................................................... 51

HIS HONOUR:

Introduction and Summary

In March 2012 the plaintiff cancelled a policy of life insurance he had held since 2004 and entered a new policy of life insurance with a different insurer. Each policy was designed to respond if the insured died or was diagnosed with a terminal illness. In May of that year he was diagnosed with pancreatic cancer. By July of 2013 he was advised his prognosis was terminal.

After his terminal illness diagnosis in 2013, the plaintiff made a claim under the new policy. The claim was declined by the insurer when it avoided the policy for non-disclosure of facts that were material to its acceptance of the risk. There is no dispute about that insurer’s entitlement to do so. Due to the cancellation of the first policy and the avoidance of the second, the plaintiff was left uninsured. Had the first policy not been cancelled in March 2012, upon diagnosis of terminal illness the plaintiff would have been entitled to $1,477,454.79 under that policy.

In cancelling the first policy and entering the second, the plaintiff was advised and assisted by the defendants, his insurance advisers. Broadly speaking, the first question in this case is whether his advisers are legally liable for him having no insurance cover when he was diagnosed with a terminal illness. If so, a second question is whether the damages to which the plaintiff would then be entitled should be reduced because of contributory fault on his own part.

I have concluded that:

(a)Mr Swansson’s loss of the sum that he would have received under the first policy upon his terminal illness diagnosis resulted partly from the negligence of the defendants and partly from his own failure to take reasonable care; and
(b)in all the circumstances, it is just and equitable to award him damages in the sum of $738,727.35 (before the addition of interest).

My reasons follow. But first, to identify more precisely the issues that arise, it is necessary to explain in more detail the background facts and how the case was put.

Background

Richard Swansson, the plaintiff, is an architect now aged 49 years. He is married with two school aged children. In 2004 he took out a policy of life insurance with AXA insuring him against death or diagnosis of a terminal illness.

As was the case in 2012, his insurance adviser in 2004 was the first defendant, Russell Harrison, the sole director of the third defendant Harrisons Financial Services (Aus) Pty Ltd (‘Harrisons’). Mr Harrison and Harrisons were, in 2004 as in 2012, authorised representatives of the second defendant Synchronised Business Services, the holder of an Australian financial services licence.

All three defendants were represented by the same legal practitioners in this case. It is common ground that for the purposes of the proceeding they are to be treated, collectively, as Mr Swansson’s insurance adviser and that any act or omission of Mr Harrison is an act or omission of all defendants.

Mr Swansson’s life insurance policy with AXA was renewed from year to year and was current and in force at the beginning of 2012. On about 26 February 2012, AXA sent Mr Swansson a renewal notice requiring payment of the annual premium. The renewal premium was $3,916.56. It had increased by about $800 from the previous year. Shortly after receiving the notice Mr Swansson telephoned Mr Harrison. There is a dispute about whether there was one phone call or two and precisely what was said in their conversation or conversations. But it is not disputed that in one of them, around the end of February 2012, they arranged to meet at Mr Harrison’s office on 7 March 2012.

On Monday 5 March 2012, two days before he met with Mr Harrison, Mr Swansson attended his general medical practitioner, Dr Feren, complaining of a sore stomach. He attributed it to something he had eaten at a restaurant the previous weekend. He had already taken some Panadol and Buscopan overnight. Dr Feren thought he was likely to be suffering from giardia and prescribed medication, Fasigyn, which Mr Swansson believed to be an antibiotic.

7 March meeting

On Wednesday 7 March 2012, Mr Swansson attended at Mr Harrison’s office in Toorak. There is much about this meeting that is in contest. It is common ground however that:

·the meeting lasted something in the order of an hour and a half;
·Mr Harrison obtained from Mr Swansson some updated financial details;
·Mr Harrison presented to Mr Swansson a pre-prepared, written statement of advice which recommended a substitute insurance product with AIA;
·discussion took place about Mr Swansson’s preferred premium payment model, and a stepped annual premium option was selected (meaning that lower premiums were paid in earlier years of the policy than in later years);
·by a process of question and response, Mr Harrison took Mr Swansson’s instructions for the completion of a written application for insurance with AIA which Mr Harrison completed in Mr Swansson’s presence;
·after the application form was completed in that fashion, Mr Swansson signed it as being true and correct; and
·Mr Swansson signed an undated letter authorising the cancellation of the AXA policy and provided this to Mr Harrison.

For the purposes of this case, the most critical section of the application form was the one requiring details of the applicant’s last medical consultation, the reason for it and the result. Mr Harrison wrote that Mr Swansson’s last consultation was with Dr Feren on 5 March 2012, the reason being “sore stomach” and the result being “giardia – antibiotics ‑ resolved”. Much attention in evidence was focused upon the conversation between the two men concerning the insertion of the word “resolved” on the application.

A further contest between the parties about this meeting concerned the question of what Mr Harrison said (or did not say) to Mr Swansson on the topic of an insured’s disclosure obligation. More particularly, the dispute centred on what was said about an insurance applicant’s obligation to make continuing disclosure until the application is accepted, and the consequences of not making adequate disclosure (or making a misrepresentation).

Another area of dispute surrounded what was said (or not said) about Mr Swansson’s application to AIA for life insurance in the context of the proposed cancellation of the AXA policy, a policy that had existed for more than three years. Section 29(3) of the Insurance Contracts Act 1984 (Cth) permits an insurer to avoid a contract of life insurance for breach of the duty of disclosure or for misrepresentation before entry into the contract, providing no more than 3 years have elapsed since that date. One of the effects of entering a new contract of life insurance was to re-expose Mr Swansson to the risk of his policy being avoided for innocent non-disclosure. By contrast, that risk had long since passed in relation to the AXA policy. Mr Harrison said that he gave advice on this topic at the 7 March meeting; Mr Swansson denied that he did.

Additionally, the parties were in dispute about whether Mr Harrison recommended that Mr Swansson maintain the AXA policy for the time being after he learned about Mr Swansson’s recent medical complaint. Mr Harrison claimed he recommended keeping the AXA policy until Mr Swansson was sure his stomach complaint had cleared up. Mr Swansson denied any such recommendation was made.

Towards the end of the process of filling out the application Mr Swansson was asked how he would like to pay the annual premium for the new AIA policy. He said he would pay it by credit card and he gave Mr Harrison the relevant details. They were recorded on the application form. Yet another factual dispute exists as to whether Mr Harrison explained to Mr Swansson that the credit card payment would not be taken until AIA had accepted his application.

After the meeting on 7 March 2012, Harrisons submitted the application to AIA. Ultimately, AIA accepted the application and a new policy was issued on about 23 March 2012. Five days later, on 28 March 2012, Harrisons dated the previously undated letter signed by Mr Swansson requesting that AXA cancel its policy, and then sent it to AXA. AXA cancelled the policy on or about that date. Renewal premium for the AXA policy, due on 19 March, had not been paid.

As Mr Harrison disclosed in the written statement of advice, if Mr Swansson took out the new policy of insurance Mr Harrison became entitled to an upfront commission of 110% of the first annual premium; thereafter he would receive an annual 11% trailing commission (both paid by the insurer). Had the AXA policy been maintained, Mr Harrison would have continued to receive trailing commission on that policy.

Events after 7 March

A number of relevant things occurred between the meeting of 7 March 2012 and the commencement of the AIA policy on 23 March 2012.

On 8 March 2012, Mr Swansson returned to Dr Feren complaining of a “stabby” sore stomach. Dr Feren referred him for an ultrasound investigation. The ultrasound was performed the following day, 9 March 2012. Dr Feren rang Mr Swansson with the result, saying it demonstrated he had pancreatitis. Dr Feren wanted him to see a gastroenterologist at the first available opportunity.[1]
[1]P12, Ex A142. [Note: Exhibits A & B were paginated court books tendered by the parties. Each, in turn, contained documents that were individually marked as exhibits. So, for example, P 12 is an exhibit found in Exhibit A, and page 142 of Exhibit A is the particular page of Exhibit P 12 to which I make reference].

On 13 March, Mr Swansson attended a gastroenterologist, Dr Tang. Dr Tang diagnosed mild pancreatitis, advised him to abstain from any alcohol for a period of a month[2] and referred him for a MRCP scan (a form of magnetic resonance imaging) to rule out any ‘ductal abnormality’. That scan took place on 22 March 2012 and it revealed pancreatic divisum (a ductal abnormality) with mild residual inflammation. The evidence suggests that the result of that scan was not communicated to Mr Swansson until ‘late March’.[3]
[2]Some evidence suggests it may have been three months.
[3]D6, ExA405

It was the day following the MRCP scan, 23 March 2012, that AIA accepted the risk and the new policy commenced.

At no stage did Mr Swansson provide Mr Harrison’s office with any additional details about the progress of his medical condition or further diagnosis after 7 March. The reason why he did not do so lies at the heart of this case.

Mr Swansson said he was led to believe from what Mr Harrison said at their 7 March meeting that his stomach soreness was of no real interest to the insurer. Further, he said he did not understand he had any further obligation to tell the insurer (by reporting to Mr Harrison) what transpired with his medical condition after 7 March because he believed he had done all he needed to do at that meeting.

Mr Harrison disputed that Mr Swansson could have had either state of mind. He relied on the conversation he said he had with Mr Swansson about his health on 7 March, and the advice he claimed he gave him about his ongoing duty of disclosure. The evidence on both subjects is discussed in detail below.

Although he did not attend Mr Harrison’s office again, between 7 March and 23 March Mr Swansson had at least one telephone conversation with Mr Harrison’s staff. When filling out the application form, Mr Harrison had inadvertently omitted to complete the part of the document that asked for details of Mr Swansson’s usual consumption of alcohol. Upon receiving Mr Swansson’s application AIA noticed the omission and asked for the information to be supplied. On about 20 March an employee of Harrisons telephoned Mr Swansson and obtained his instructions. In that telephone conversation Mr Swansson advised the employee that he had 4 standard drinks per week. He did not volunteer any further information about his medical condition but neither did the employee ask about it.

There may have been one further communication between Mr Swansson and Mr Harrison’s office before the AXA policy was cancelled on 28 March. Mr Swansson believes that as a result of receiving a renewal premium reminder from AXA sometime after 19 March he telephoned Mr Harrison’s office and asked whether or not he should pay the premium. That phone call is not conceded by Mr Harrison. But if it did occur, it is common ground that, again, Mr Swansson did not say anything about the progress of his medical condition nor was he asked about it by Mr Harrison’s staff.

Mr Swansson underwent an endoscopic ultrasound examination on 2 May 2012. It had been recommended by Dr Tang when he told Mr Swansson the result of the MRCP scan that had taken place on 22 March. It was that further ultrasound examination that led to the diagnosis of pancreatic cancer, told to Mr Swansson on 3 May 2012. He informed Mr Harrison of the diagnosis the following day, 4 May. On 8 May 2012, a 17mm lesion was surgically removed from Mr Swansson’s pancreas.

There followed a period of aggressive chemotherapy treatment under the supervision of an oncologist, Associate Professor Jeremy Shapiro. This led to a period of remission. However in mid-2013, as a result of a routine CT scan, it was discovered that the cancer had metastasised into the liver and the lungs. On 17 July 2013, Associate Professor Shapiro certified that Mr Swansson was suffering metastatic pancreatic cancer, a terminal illness diagnosis.

Harrisons lodged a claim on the AIA policy on Mr Swansson’s behalf on 30 July 2013. On 28 October 2013, AIA communicated to Mr Swansson its decision to decline his claim. It did so, so its letter states, on the basis he had ‘misrepresented the true nature of his visit to his GP on 5 March 2012’ and had failed to comply with his ongoing duty of disclosure by not advising AIA of his ongoing symptoms, consultations and investigations before the policy commenced. After considering a response from Mr Swansson’s lawyers, AIA confirmed its decision to decline the claim.

In the meantime, Mr Swansson had lodged a claim on his initial insurers, AXA, but that claim was declined on the basis that the policy had been cancelled on 28 March 2012.

There is no suggestion by the parties to this proceeding that either insurer was bound to meet Mr Swansson’s claim. They conducted the case on the footing that Mr Swansson was left uninsured.

How the case was put

Mr Swansson alleges that the defendants negligently failed to exercise the skill and care reasonably to be expected of an insurance adviser (or broker) professing skill in that field. Alternatively, he alleges that the defendants engaged in misleading and deceptive conduct in contravention of s 1041H of the Corporations Act 2001 (Cth) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’).

In each case, he alleges that the negligence and statutory contraventions caused him the loss of cover under the AXA policy. That is, he claims that but for the negligence and statutory contraventions he would have maintained the AXA policy until the terminal illness diagnosis and would have been paid $1,477,454.79 under that policy. The defendants did not dispute that, had Mr Swansson maintained the AXA policy, he would have been paid that sum upon the terminal illness diagnosis.

Numerous grounds of negligence were particularised in Mr Swansson’s pleadings. Those grounds embraced failures to take reasonable steps to:

·ensure continuity of insurance cover;
·adequately explain the continuing nature of the obligation of disclosure;
·warn Mr Swansson of the risks in changing life insurance policies including the risks associated with any potential non-disclosure;
·tell Mr Swansson to inform Mr Harrison or AIA of any material event including medical consultations before AIA’s agreement to underwrite the new policy;
·ascertain whether any material events, including further medical consultations had occurred before commencement of the new policy; or
·make any other enquiry about Mr Swansson’s medical condition before sending the cancellation notice to AXA.

The misleading and deceptive conduct was put in several ways. First it was alleged that Mr Harrison represented there was no significant difference in cover between the old and new policies whereas, in fact, a critical difference between the two policies was that the AXA policy was no longer avoidable by AXA (except for fraud) but the AIA policy could be avoided in the first 3 years if there was an innocent non-disclosure or misrepresentation.

Secondly, it was alleged that Mr Harrison ‘trivialised’ the significance of Mr Swansson’s stomach complaint. That is, he misled Mr Swansson to believe it was appropriate to describe his condition on the application form as having ‘resolved’, and that there was no need for any further or ongoing disclosure about it.

At trial, Mr Swansson distilled his various pleaded grounds of negligence and misleading and deceptive conduct into four specific complaints. They were that Mr Harrison (and thus, the defendants):

·failed to explain the continuing nature of the duty to disclose material facts;
·trivialised the significance of Mr Swansson’s stomach complaint to justify inserting the word ‘resolved’ in the application;
·failed to explain the value of s 29(3) of the Insurance Contracts Act and the immunity from the loss of the policy through innocent misrepresentation that provision guarantees; and
·failed to check with Mr Swansson about his medical condition before finally cancelling the AXA policy.

As well as contesting each of Mr Swansson’s allegations of bad advice, Mr Harrison advanced a positive assertion that Mr Swansson was determined to get out of the AXA policy because he was angry with the increase in premium. Further, Mr Harrison maintained that Mr Swansson had insisted, when pressed, that he felt fine (or used other words to that effect) on 7 March and that he agreed that ‘resolved’ was an appropriate description for the status of his giardia complaint.

While maintaining their denial that they were liable on any of the grounds alleged by Mr Swansson, the defendants alleged, in the alternative, that if they were liable Mr Swansson was substantially responsible for his loss. That responsibility was said to arise because of Mr Swansson’s failure to disclose to Mr Harrison or his office any of the further medical consultations, tests or diagnoses after 7 March 2012. Such conduct, they alleged, amounted to contributory negligence or conduct that justified a reduction in any award of damages in favour of the plaintiff, at general law or under s 1041I(1B) of the Corporations Act or s 12GF(1B) of the ASIC Act.

Factual and legal issues for decision

The defendants conceded – rightly in my view – that if Mr Swansson’s version of the disputed facts were made out on any of the key events, then it is clear that a case of negligence had been made out against them.

It follows that on three of the four complaints made by Mr Swansson, the issues to be resolved are substantially, if not entirely, factual. Those three complaints each relate to questions about what occurred on 7 March. Those questions concerned the advice given about the continuing duty of disclosure; the choice of the word ‘resolved’ on the application form; and the advice given about the value of the immunity against policy avoidance based on innocent non-disclosure.

But the case put by the plaintiff concerning Mr Harrison’s failure to check with him about his medical condition before finally cancelling the AXA policy on 28 March (ie. the fourth complaint) is in a different category. There is no factual dispute about that issue: no enquiry was made. In contest is whether, in all the circumstances, the lack of enquiry on Mr Harrison’s part before taking the step of cancellation amounted to a failure to exercise reasonable care.

If the defendants are liable to the plaintiff on any of the grounds alleged, the next question is whether the plaintiff was legally at fault for not informing Harrison’s office of his ongoing medical status. Again, there is no factual dispute about this issue: he offered no such information after 7 March.

But Mr Swansson contends that there could be no finding of contributory negligence against him if he succeeds on any of his grounds of complaint against the defendants. As I understood his argument, if he established any of the alleged acts or omissions on the part of the defendants - the necessary prerequisite before considering contributory negligence - such failure or failures would provide a complete and sufficient explanation why he did not volunteer developments in his medical condition after 7 March. So, it was said, any finding of negligence on the part of the defendants would deny the possibility of contributory negligence on the plaintiff’s part.

If, however, I do conclude there was a failure to take reasonable care on Mr Swansson’s part that was a cause of his loss, then the issue of apportionment of responsibility arises.

In summary, the broad issues I need to decide are as follows:

·at their meeting on 7 March, did Mr Harrison give any or any adequate advice to Mr Swansson on the topics of his ongoing duty of disclosure, the relevance of his stomach condition in the context of his disclosure duty and the value of the immunity against policy avoidance for innocent non-disclosure subsisting in the AXA policy?
·did Mr Harrison’s lack of enquiry about Mr Swansson’s medical status before cancelling the AXA policy constitute negligence?
·if the defendants are liable to Mr Swansson in negligence or statutory contravention, did his failure to advise them of his medical status after 7 March amount to a failure to take reasonable care that was a cause of his loss?
·if so, by what extent is it just and equitable to reduce the recoverable damages having regard to his share in responsibility for his loss?

Before turning to the first issue, I should note the fact that Mr Swansson gave his evidence in two ‘stages’. Because of concerns about his state of health, evidence was taken at his home on 19 December 2013 by way of an examination de bene esse[4] before an associate to a judge of this court. Mr Swansson was represented by counsel, as were the defendants. His evidence was transcribed and the transcript (and DVD recording) of that examination was admitted into evidence at trial.[5] Somewhat unusually, but with the consent of all parties to the proceeding, at trial further evidence was led from Mr Swansson, and he was cross examined, to supplement the evidence taken on 19 December 2013.
[4]A procedure governed by Order 41 of the Supreme Court (General Civil Procedure) Rules2005 (Vic).
[5]P 12, Ex A 82-157.

What advice was given on 7 March 2012?
General considerations

In approaching the evidence, there are a number of general considerations that I bear in mind.

First, I take into account lessons derived from ‘ordinary human experience’.[6] Such lessons include the recognition that human memory is fallible, and ordinarily the degree of fallibility increases with the passage of time. Self-interest may intervene, even sub-consciously, causing a person to reconstruct a memory in a manner that best accords with his or her cause. As is well known, the perception by two people of the same event, including a conversation, can diverge – so the starting point of recollection is not necessarily common even before memory is overlaid with other influences. In both the initial perception and the re-telling of an event, subtle (or not so subtle) differences may be explained because of varied attention given to matters such as emphasis, sequence, the inclusion or exclusion of a particular detail, and surrounding, contextual facts or circumstances. Each of these influences can reasonably explain why one person’s recollection of an event differs markedly from another’s well before we are driven to consider the likelihood of deliberate distortion or concoction.
[6]See for example, Watson v Foxman (1995) 49 NSWLR 315, 318-319 (McLelland CJ)

It follows that where two differing accounts are given of the same event or conversation neither may truly reflect what actually occurred in every particular. Of course, in litigation, the object of determination is not so much to discern what truly occurred, but to ascertain whether the party who carries the burden of persuasion has discharged their onus in respect of the relevant fact in issue.

In relation to the 7 March meeting, it is not practical or realistic to discuss, and arrive at conclusions about, each disputed subject matter in isolation from the others. Each supplies context for the other and they need to be considered together.

Each side made a substantial attack on the credibility of the other side’s principal participant: Mr Swansson and Mr Harrison respectively. I will discuss the arguments about credit in some detail later. But it is as well to say at the outset that, contrary to submissions made by their respective opponent, I found that each witness gave his evidence in an apparently straightforward and responsive manner. Neither, it appeared to me, betrayed any obvious signs of concoction or evasion. Each seemed to make a genuine attempt to answer questions truthfully and to the best of his recollection. And yet, as will appear, each gave an account of the same conversation that was diametrically opposed to the other’s in several critical respects.

In my view it is most likely that the explanation for the significantly divergent accounts given by the two men is to be found, primarily, in the foibles and idiosyncrasies of human perception and memory rather than in concoction or deliberate distortion. For that reason, the making of findings on the disputed facts is to be largely aided by deciding which version best accords with the contextual facts and with inherent plausibility.

Phone conversation/s before 7 March

The backdrop for the 7 March meeting was a telephone call (or calls) in the last few days of February. It is not so critical to decide how many calls occurred. Of more significance is what was revealed in the conversation or conversations about Mr Swansson’s attitude towards continuing with the AXA policy, and what impression Mr Harrison formed about it.

Mr Swansson said he rang Mr Harrison after getting his AXA premium renewal advice and asked him why his premium had gone up so much. He said that in a second call, Mr Harrison explained it was because of a loading imposed by the insurer due to a previous illness (fungal meningitis) he had suffered some years earlier. According to Mr Swansson, Mr Harrison recommended that Mr Swansson take up a less expensive policy which would provide the same benefits. The meeting of 7 March was arranged to discuss that recommendation.

According to Mr Harrison, Mr Swansson rang only once, on 26 February 2012. Mr Harrison is able to be so definite because of a note he entered, via a computer, into a data system called ‘SmartPad’ maintained in his office.

The SmartPad software enabled any staff member to make an entry in relation to a particular client referenced to a particular insurance product. Amongst other things, those entries might consist of a record of a conversation or meeting with the client, a communication between staff members (akin to an email message, but stored in the SmartPad log), a record of a document being scanned and uploaded into the client file, or a record of an outgoing or incoming communication between Harrisons and an insurer. Against each entry was listed the time and date of the entry, the staff member making it and the staff member or members to whose attention the entry was drawn. The accumulation of the entries for the client formed a continuous string or log.

An important feature of the SmartPad log is that once a record is entered, it cannot be deleted or modified.

The SmartPad log contained this record dated 29 February 2012:

I spoke with Richard and he was upset that his Term policy had increased by $800 this year. This figure was with indexation of 5% but the premium has risen by 20%. He has asked me to shop the market as he is definitely not prepared to pay for this increase and has made an appointment to come in on Wednesday next at 10:30am at which time I will both review and give him an SOA [statement of advice] with a view to rewriting him on the day.

That entry was made by Mr Harrison. He said he made it on his computer either as he was speaking to Mr Swansson or immediately after the call. The entry was directed to three staff members, one of whom was Alexandra who assisted in the underwriting aspects of the business. Another was Hedy, his wife, who primarily looked after the administrative functions.

Later entries on 1 March show a series of intra-office communications between Mr Harrison, his wife and Alexandra discussing why the premium on the AXA policy was as high as it was, with mention of a previous ‘abnormal’ blood test result thought to be attributed to Mr Swansson’s earlier meningitis. Also mentioned was a 2005 medical report that stated that the condition was ‘all clear’. Mr Harrison concluded that ‘we should now be able to get him through at standard rates’.

One entry that was fixed upon by Mr Swansson’s counsel, and raised in connection with later evidence, was one in which Mr Harrison mentioned self-protection. When asked by his wife whether a particular section of the statement of advice (which, presumably, she was preparing) should be included, Mr Harrison responded on 5 March, writing:

Probably wouldn’t hurt to do it [ie. include it] anyway to protect us.

In his evidence, Mr Swansson insisted that he did not say to Mr Harrison that he was determined not to pay the increased premium, nor did he ask Mr Harrison to find him another policy. On his version he was merely interested to know whether the increase in 2012 was likely to be repeated in the next year. He denied being ‘upset’ about the AXA premium increase.

Mr Harrison adhered to the version as set out in his SmartPad note of 29 February. He was not challenged about the contemporaneity of the note.

So, before coming to the meeting on 7 March, there are already two divergent accounts of what led to it. On one view, Mr Swansson was upset with AXA and determined to get out of the policy. On the other, Mr Swansson was merely interested in ascertaining whether there were likely to be similar future premium increases, although he was open to hearing about a cheaper, alternative policy that provided equivalent benefits.

Along with other factors, a preference for one or other of those accounts might render more probable a particular version of what took place at the meeting. In my opinion, however, there is little to commend the view (as contended for by Mr Swansson) that Mr Harrison’s note was a misinterpretation of the tenor of the conversation. There is no apparent reason why Mr Harrison would write ‘upset’, at the time, if that was not the feeling conveyed; or that he would write that his client was ‘definitely not prepared to pay for this increase’ unless that was the essential message that he was given.

7 March meeting

Mr Swansson’s account of what occurred the first moment he was greeted by Mr Harrison at the office on 7 March contrasted with what Mr Harrison recalled. Each party argued that the difference was of some consequence.

According to Mr Swansson, when Mr Harrison first greeted him and said, ‘How are you?’, he responded by saying, in effect, ‘Well as it happens I’ve got a sore stomach’.[7] There followed, according to Mr Swansson, a discussion as to whether he would prefer to postpone the meeting with him saying that he had been working that day and he was content to continue with the meeting.
[7]P12, ExA130

According to Mr Harrison, no such discussion took place at that point. The first time Mr Swansson’s stomach complaint was mentioned, Mr Harrison said, was when they got to filling out the part of the application form concerning the applicant’s last medical consultation. If Mr Swansson had said such a thing he believed he would have remembered it, and he did not. He also said that, had it occurred, he would have taken Mr Swansson into the board room (where he conducts client interviews) and immediately discussed his health. He said he would have discussed whether the meeting should be postponed altogether, or whether they should merely undertake the review of Mr Swansson’s financial position and insurance needs. In any event, he said he would have recommended against continuing with the insurance application at that stage. As none of that occurred, he was sure that the conversation did not occur as Mr Swansson claimed.

As will become evident, some features of the greeting conversation, as recalled by Mr Swansson, are remembered by Mr Harrison as having occurred at a later time in their meeting, when completing the application form. In particular, Mr Harrison recalled recommending to postpone the insurance application at that time, whereas Mr Swansson denied that he did.

For the present, I will merely note that both men have different recollections as to when first mention was made of Mr Swansson’s sore stomach.

Moving past the greeting phase, both parties agree that they then proceeded to undertake the review of Mr Swansson’s financial position and insurance needs. They did so seated at the board table, adjacent to one another, in the board room of Mr Harrison’s office. Mr Harrison made handwritten notes on a notepad which, in part, recorded that total life cover of $1.5 million was still appropriate and that:

Richard prefers to go with Optimum cover as it provides lower premiums whilst the children are still at school. Payable annually.

Next they moved on to discuss the statement of advice which Mr Harrison’s office had prepared in advance. It was dated 5 March 2012. Mr Harrison was cross-examined about the apparent difference between his SmartPad note of what was said on 29 February and his further oral evidence about that conversation, on the one hand, and what was recorded in the statement of advice as the purport of that discussion, on the other.

The statement of advice recounted that ‘Richard is not happy’ about the increase in premium, and that ‘Richard has requested that options for a cheaper premium be explored’. It was pointed out that the document said nothing about Mr Swansson being determined to get out of his AXA policy as Mr Harrison had suggested. Generally, it was put that Mr Harrison had exaggerated the strength of Mr Swansson’s feeling against AXA and had concocted a story that Mr Swansson had a fixed determination to cancel the AXA policy come what may.

I will need to return to this subject below because more evidence was given by Mr Harrison about what Mr Swansson allegedly said when the subject of his medical consultation was discussed. But, on this point, I do not detect a significant difference in what appears in the SmartPad note and what appears in the statement of advice. Mr Harrison’s explanation for any difference in ‘tone’ was that his staff had prepared the statement of advice from what he recorded in the SmartPad note. Given the nature and evident purpose of the statement of advice, it is not particularly surprising that it does not record, for instance, that Mr Swansson was ‘definitely not prepared to pay for this increase’.

The statement of advice contained a recommendation that Mr Swansson take out a life insurance policy with AIA for no less than $1,477,454.79 (ie. the amount of the existing AXA cover). Harrisons gave as the reasons for the AIA recommendation, ‘excellent underwriting experience’ and AIA’s policy being ‘very competitively priced for the levels of cover and benefits required’.

Included in the statement of advice was a table comparing AXA’s premiums with AIA’s premiums, as well as a table of options for method of premium payment offered by AIA. Handwritten notations on the options table showed that Mr Swansson selected the particular ‘stepped’ premium option in part because the annual premium levels over the first 5 years were lower than the premiums if the ‘level’ option was selected. The end of those 5 years marked the time when the youngest of his two children reached year 12 at school. The first year of the AIA stepped premium began at $2216 compared to the $3916 sought by AXA for the then current year, although it is not clear what the first year’s premium might have been with AIA if a ‘level’ option was selected.[8]
[8]From my reading of the table attached to the statement of advice, the level premium option for the first year with AIA was almost identical with the amount sought by AXA.

Mr Harrison did not suggest that he gave to Mr Swansson any advice on the topic of the continuing duty of disclosure or the value of the immunity from policy avoidance for the first 3 years, while discussing the statement of advice. As a result of the experience of this case, he now includes in statements of advice a reference to both of those subjects.

I turn now specifically to the subject of advice in relation to an insurer’s continuing duty of disclosure and the consequence of not making proper disclosure.

Mr Swansson maintained that at no point in the meeting of 7 March did Mr Harrison give him any advice about an ongoing duty to disclose material facts concerning his health.[9] Mr Harrison insisted that he gave such advice on 3 occasions. Those three occasions arose at various points while taking Mr Swansson through the AIA application form.
[9]T54.7

The first was when he came to the very first page of the application. On that page there is the following text:

Your Duty of Disclosure
Before you enter into a contract of insurance with an insurer, you have a duty under the Insurance Contracts Act 1984, to disclose to the insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer’s decision whether to accept the risk of the insurance and, if so, on what terms.
Non-Disclosure
If you fail to comply with your duty of disclosure and the insurer would not have entered into the contract on any terms if the failure had not occurred, the insurer may avoid the contract within three years of entering it. If your non-disclosure is fraudulent, the insurer may avoid the contract at any time…

Mr Harrison did not say that he read those actual words to Mr Swansson. Instead, he claimed, his practice is to give an explanation in his own words while pointing to that section of the document. He said he has given the explanation ‘hundreds’ of times, and that it does not vary. In evidence, he explained what he tells an applicant for insurance, and has told applicants since 2004, in these terms:

Well, before we fill out this – this application document, I need to inform you of your duty of disclosure. Under the law you have a duty to disclose anything that might be relevant or material to the underwriter making a decision to issue the policy. If you fail to – to disclose everything and under the circumstances an underwriter, had they have known the issues, would have either declined or deferred the issue of your policy, then they will have for the first three years an opportunity to void the policy, to cancel it, or to vary it. And after a period of three years, that they would – they would then only be able to do, cancel the policy on the basis of fraudulent non-disclosure. And the thing that you need to remember is that the duty of disclosure is an ongoing duty so it’s – it’s there until such time as the new policy is issued.[10]

[10]T173.

Missing from the written explanation appearing on the AIA application form, set out above, is any explicit reference to the ongoing obligation of disclosure until the policy is issued. But Mr Harrison insisted that he gave his advice orally in the terms he recounted in which, in the last sentence, he does emphasise the continuing nature of the duty. He explained that other insurers do include such a reference on their documentation and he gives the same explanation in his own words regardless of which policy application he has before him.

The second point at which Mr Harrison claims to have given the advice was when he and Mr Swansson were completing the declaration regarding the last medical consultation. I deal with that subject in more detail below, but essentially Mr Harrison claimed that after he queried whether Mr Swansson was prepared to proceed with the application notwithstanding his stomach complaint, he said:

Fine, then we’ll – we’ll proceed. But you need to know that you’re – you have an ongoing duty to disclose any change in your health issues between now and the time that the policy is issued.[11]

[11]T193

Lastly, the application form contains a section headed ‘Declaration’. The words typed in fine print above the place where the applicant signs contains words that say:

I/We have read the Priority Protection Product Disclosure Statement [which had been given to Mr Swansson], current at the time of this application, including Your Duty of Disclosure notice set out in the Significant Risks section and understand its contents and what is meant by my/our duty to disclose. I also understand that my/our duty to disclose continues after I/we have completed this application until AIA Australia has accepted the risk.

Again, Mr Harrison did not claim to have read it out but said he paraphrased it in these terms:

… I tell him that in essence … the declaration confirms his understanding of the duty of disclosure … and that he has an ongoing duty to disclose anything to the insurer up until the time that the policy is issued … and … before he signs that I will give him the application … to read … and to make sure that he is comfortable that all the answers are correct. … I then handed him the application.[12]

[12]T198-2 (The transcript recorded a number of fillers – eg “ah” – which have been omitted).

Relevant to the issue of the ongoing nature of the disclosure was the question whether Mr Harrison made it clear to Mr Swansson that the application had to be accepted by AIA before the contract of insurance was finalised, thus marking the end of the disclosure period.

Mr Swansson said that when he left Mr Harrison’s office on 7 March, having signed the application and the authority for his credit card to be debited with the premium, he believed he had done all that was necessary for him to do for a changeover policy.[13] Furthermore, he said that having signed up and authorised a credit card payment he left Harrison’s office thinking the policy was ‘binding’.[14]
[13]T56
[14]P12, Ex A:97-98.

According to Mr Harrison, however, when he came to the part of the application form headed ‘Section F. Policy Details’ and took Mr Swansson’s instructions about paying the premium yearly by credit card, he explained that the credit card would not be charged ‘until such time as the policy is finalised and underwritten’.[15]
[15]T189.

The next, and perhaps most controversial issue, was what was said surrounding the insertion of the word ‘resolved’ on the application form dealing with Mr Swansson’s medical condition.

Mr Swansson’s evidence about this was captured in the following statement,

… my specific words were … Russell should I worry about that, in terms of the word resolved. … to which Russell gave me an - an explanation of three parts; first of which my stomach wasn't relevant to a policy that would go ten or 15 years, … secondly that to not write resolved would mean that the application wouldn't be immediately processed … And thirdly that it was advice he had given before to other people who were in a similar situation. So I ‑ I took it as something that he had learnt to do over many years of filling in these forms and I accepted his advice.[16]

[16]T54-55 (The transcript recorded a number of fillers – eg “um” – which have been omitted).

Mr Harrison’s evidence about this aspect of the conversation significantly differed from Mr Swansson’s account. I will set it out as he gave it:

What did you ask next? ‑ ‑ ‑ I then asked him what was the reason for the consultation. He said he had a sore stomach. I then asked him what was the result of that consultation, and he said he had giardia, that he had been prescribed antibiotics and he was fine now. And I clarified that and he said no, he was fine.
When you say you clarified it, firstly do you or don’t you remember word for word what you said? ‑ ‑ ‑ I remember reasonably what I said, following on from that but ‑ ‑ ‑
No, at the time you say you clarified it? ‑ ‑ ‑ I clarified that it was. I asked, “Are you sure it was resolved?”
Yes? ‑ ‑ ‑ Or it had – or he was feeling better and ‑ ‑ ‑
And what did he say to that? ‑ ‑ ‑ He said yes, he was. And I said, “Well, the reason I am asking is because my wife has suffered from stomach bugs over a long period of time. In many instances it has taken years to resolve properly. So I’m just putting it out that maybe it would be an appropriate time now to not proceed with the policy, but rather we can pay you ‑ get you to pay for the AXA policy, keep it in-force, and at a time when we know that everything has cleared up, we can then cancel the AXA policy, seek a refund of the unused portion of premium, and proceed with ‑ with a newer and cheaper policy”.
Did he say anything to you? ‑ ‑ ‑ Yes, he said ‑ ‑ ‑
In response to that? ‑ ‑ ‑ His response was, “I am fine. I am not paying those bastards another dollar and I want to proceed”.
All right. And in light of the answer that he had given you that he was fine now and that he wanted to proceed, and that he wasn’t going to pay AXA who he called those bastards another dollar, what did you do? ‑ ‑ ‑ I said, “Fine, then we’ll – we’ll proceed. But you need to know that you’re ‑ you have an ongoing duty to disclose any change in your health issues between now and the time that the policy is issued.”
And did he say anything to that? ‑ ‑ ‑ “Fine”.[17]

[17]T192-193.

As might be expected, both men were cross-examined extensively about their version of events, and each denied the other’s account. Neither was significantly shaken about what they recalled.

In summary, Mr Swansson contended that the selection of the word ‘resolved’ was entirely Mr Harrison’s idea, and that he queried it. That is, he expressed concern that it might not have been appropriate for his condition. Mr Harrison contended that, if the word ‘resolved’ was not actually used by Mr Swansson, then an equivalent term (‘fine now’, ‘better’ etc.) was used and Mr Swansson agreed that ‘resolved’ was an appropriate description of the status of his condition.

Moreover, Mr Harrison claimed, and Mr Swansson denied, that he (Mr Harrison) recommended not proceeding with the application at that time because of a concern the condition may not have fully cleared, based in part on his own wife’s experience. Finally, Mr Harrison claims to recall Mr Swansson expressing himself in quite strong terms about not wanting to pay AXA any more money and reiterating that he was ‘fine’ and wanted to proceed.

Events after 7 March

There is little or no dispute about what occurred after 7 March; rather, the question is more about why things did not occur. That is: why did Mr Swansson not tell Mr Harrison or his staff about the further developments regarding his stomach complaint, and why did Mr Harrison or his staff make no further enquiry about it?

But it is necessary to note that Mr Swansson gave two reasons why he did not give further information about his condition after 7 March. The first was that he did not understand that there was any more he had to disclose after 7 March because he was not informed about any ongoing duty of disclosure and, so far as he knew, the policy was binding when he left Harrisons’ office. The second was that he thought that the pancreatitis with which he was diagnosed after 7 March was, as he put it, ‘the same illness that I had on the day that I disclosed it [ie. on 7 March]’.[18]

Credit of the two witnesses

[18]P12, Exh A.99. Each of the two reasons were relied upon by Mr Swansson’s counsel in final address: T351-353.

Each party spent considerable time in submissions enumerating reasons why the other side’s principal witness should be disbelieved on the critical matters in dispute. As I stated earlier, I did not detect from my observations of them that either witness was not being truthful. But there were aspects of each witness’s evidence that invited scrutiny. I will deal with the main arguments that were or might be put in relation to each man’s credit, generally and on particular issues.

Reliability of recollection

For Mr Swansson, it may fairly be said that making an application for insurance was a less common, and likely to be a more memorable event, than it would be for Mr Harrison. As Mr Harrison said, he had interviewed clients and explained disclosure obligations ‘hundreds’ of times. He had been doing so in his own business since around 2003, and before that in someone else’s business.

Occasionally Mr Harrison slipped into saying, understandably, that he “would have” done or said something in connection with Mr Swansson’s application. That is, in relation to some things, he was relying on his habitual practice rather than an actual memory of what occurred. Having said that, like Mr Swansson, Mr Harrison did claim to have an actual memory of specific aspects of their meeting and conversation.

Importantly, Mr Harrison begins with the advantage of having a contemporaneous note (in the SmartPad log) of the 29 February conversation. That note lends support to there being at least a degree of irritation on the part of Mr Swansson about having to pay the increased premium sought by AXA. The note recorded him as being ‘upset’ and definite about not wanting to pay it.

Mr Swansson’s motivation

Whether that degree of irritation progressed to Mr Swansson being ‘angry’ toward AXA at the meeting on 7 March is a further step. Mr Harrison believed that Mr Swansson ‘came across as very angry with AXA’.[19] He recalls Mr Swansson referring to AXA as ‘bastards’ and being quite dogmatic about not wanting to pay them anything further.
[19]T234.

I accept the proposition, put for Mr Swansson, that it borders on the irrational to think that a person would angrily decide to cancel one life insurance policy and take up another, with a cavalier attitude toward the risk of not disclosing a current medical condition, out of sheer vengeance toward the current insurer. Senior counsel for Mr Swansson characterised the defendant’s portrayal of Mr Swansson as a ‘stubborn resolute person who had decided hell or high water to get a new cover to make a saving on the premium’. But putting it that way depicts the extreme end of the range of possibilities of what occurred.

In my view, it is probable that Mr Swansson was quite unhappy about the premium increase. That unhappiness was likely to be the motivation for his initial call to Mr Harrison. The evidence suggests he was cost sensitive. He probably did ask Mr Harrison to find out if there was a cheaper policy that delivered equivalent benefits. His recollection of his state of mind, that he was merely interested in finding out whether the same rate of premium increase was likely to be repeated in the following year, does not strike me as being so plausible. Nor is it consistent with the contemporaneous SmartPad note.

But, even if Mr Swansson did say to Mr Harrison, at some point, that he did not intend to pay ‘those bastards another cent’, I do not think that signified that he was irrationally motivated to change policies. Mr Swansson did not strike me as an irrational, vengeful or hot-headed person. But nor do I think that Mr Harrison would concoct a recollection that Mr Swansson said words along the lines he described.

More likely, Mr Swansson indicated a strong desire not to pay the AXA premium. He may even have used colourful language and displayed some irritation. Mr Harrison’s recollection of ‘anger’ may involve an element of false impression or faulty recollection, but perhaps only as to degree. Mr Swansson’s denial of having said what is alleged is probably because, whatever it was, from his point of view it was said more as an aside; not something to be embedded in memory.

Although I accept that Mr Swansson wanted to save money on his insurance premium, in my view it is unlikely that desire was the reason (or even a reason) why important information about his medical condition was not disclosed to AIA.

Mr Swansson’s previous insurance applications

A serious assault was launched upon Mr Swansson in connection with previous insurance applications he had completed. Answers given to questions in four earlier life insurance applications were put to Mr Swansson in an attempt to demonstrate that he had previously given untruthful answers. The purpose of putting those previous answers into evidence was to impugn Mr Swansson’s credit such that I should not trust the account he gave me in the present case.[20]
[20]At one stage it was suggested the evidence showed a propensity, or a tendency, to give false answers in insurance proposals, but that basis for admission into evidence was disavowed after objection.

The four previous applications relied upon were made on 16 February 1998, 12 May 2000, 16 December 2003 and 2 February 2004. The last of them was relied upon solely for containing a truthful answer about a particular medical condition so as to expose earlier answers as being untruthful. The others were relied upon in part for containing untruthful answers, and in part for containing truthful answers that were contrasted with those given on the same subject in other applications.

The relevant subject matter concerned past treatment for cancer, tumour or a cyst, past treatment for asthma, and previous use of recreational or non-prescribed drugs.

Mr Swansson agreed in evidence in this proceeding that he had once had a fatty lump or cyst removed from his arm on one occasion in 1999. I understood that the lump may have first appeared much earlier, while he was at university in the early 1980’s. I accept that there were inconsistencies in his various answers in different applications on similar subject matter. On some occasions he disclosed a growth and on others he did not.

But the answer to a particular question seemed to depend, first, upon whether it enquired about something as generic as a growth, or was more specifically directed, for example, to a ‘cancer, tumour or cyst’. Secondly, the particular answer was likely to have depended on whether, at the particular time, Mr Swansson regarded the removal of his fatty lump as a cyst or not. On one occasion he did refer to it as a cyst. Another occasion he denied having had a cyst. On another he referred to having had a ‘fatty lump’ removed. Having regard to these factors, I was not persuaded that any of his past answers on that topic reflected dishonesty.

Even less did I feel persuaded that he was dishonest about his answers on the topic of asthma. In 2003 and 2004 he answered that he had suffered ‘extremely mild…exercise induced’ asthma 3 or 4 times a year, the first symptom having appeared in 1996. He said he had used an inhaler. In 1998 and 2000 he had answered ‘no’ to a question about whether he had suffered from or sought advice or treatment for asthma. First, from that history it is apparent there was no consistent attempt to conceal his asthma symptoms. Secondly, it is very likely that Mr Swansson’s perception that he had something that could be called an ‘asthma’ condition sharpened as his exercised induced symptoms recurred and persisted over a period of years.

Last, there was the issue of his answers to questions about drug use. In 2003, in response to a question about use of ‘recreational drugs’, he answered that he had previously used marijuana socially but not since 1996. This answer was relied upon to discredit him because he gave instructions to Mr Harrison in 2012 to answer no to the question: ‘Have you ever used illicit drugs or received advice, treatment or counselling for the use of alcoholic or illicit drugs?’ Without suggesting that it was necessarily the correct answer to give if in fact he had used marijuana recreationally in the mid 1990’s, in my view it falls a long way short of establishing that his answer was a dishonest answer or that he is a dishonest person.

In summary, I was not persuaded that any of the answers the defendants relied upon established a dishonest (or, if it was contended, a reckless) disposition on Mr Swansson’s part. They did not reveal any consistent pattern of concealment. It appeared that they were influenced by particular forms of questions or particular perceptions of Mr Swansson at different times as to his medical condition. And, they were insufficiently connected in time to 2012 to be cogent.

Mr Swansson’s understanding of the disclosure duty

As revealed by the past history of his applications for insurance, Mr Swansson was very likely to have encountered the notion of the duty of disclosure – including that it continues to the point of policy acceptance – on several previous occasions. He is an intelligent man. He struck me that way from the evidence he gave and the way he gave it. He has tertiary qualifications, has practised as an architect since 1988 and conducted his own business. I infer, as a matter of probability, that the duty of disclosure has been explained to him in the past. He has signed numerous declarations, including those in connection with the AIA application, saying that he had read and understood the continuing duty of disclosure.

Additionally, it seems highly unlikely that an experienced insurance adviser, as Mr Harrison is, taking an applicant through an insurance application which contained several prompts for giving advice on the duty of disclosure, would fail to give that advice at all. I accept Mr Harrison’s evidence that he habitually gave advice on the duty of disclosure in his own standard terms, as demonstrated in evidence.

I am fortified in that conclusion by the explanation given by Mr Harrison about the particular importance he attached to doing so because of an experience he had had taking over the insurance business of another insurance adviser. In fact that previous adviser, a Mr Shields, had been Mr Swansson’s adviser before Mr Harrison took over the business. Both Mr Swansson and Mr Harrison confirmed that Mr Shields had been errant in a number of respects.

One respect, apparently, in which Mr Shields had been errant was not having his clients make proper disclosure of matters they were obliged to disclose. His various misdemeanours had led to him being banned from acting as an adviser for a period of years. Having taken over Mr Shields’ business, Mr Harrison had had to deal with some of the aftermath of his errors. From that experience, Mr Harrison said, he became particularly alert to the need to give clear advice about the duty of disclosure. I had no reason to doubt Mr Harrison’s evidence about that experience and the impression it made on him.

In the result, it seems most likely that Mr Swansson, being generally familiar with an explanation of the duty of disclosure, and in fact probably expecting it, would have no particular reason to remember the explanation being given to him in familiar terms.

It is to be recalled that Mr Harrison’s customary explanation, as he rehearsed it in evidence, included a statement that the duty continued until the issue of the new policy. It also included an explanation about the insurer’s ability to avoid the policy in the first three years if the insured failed to make proper disclosure.

Mr Swansson’s understanding that he had done all he needed to do

Related to the issue of Mr Swansson’s understanding of his duty to make continuing disclosure was the question whether he had a belief that the policy was binding once he left Mr Harrison’s office. Further, consequentially or otherwise, did he believe he had done all that he needed to do including to provide any further information about the status of his medical condition?

Those questions in turn involved several elements: the moment he thought a new policy took effect, whether a time gap existed between the application and the policy issue, and whether he thought the developments in relation to his stomach complaint after 7 March were of no interest to the insurer.

Several contextual facts, and matters of inherent plausibility, are relevant when considering these questions.

First, it should be evident to an intelligent person that an application for insurance is only that: an application. Applications generally have be assessed and accepted by the person to whom it is submitted. Mr Swansson did not say he thought that Mr Harrison had authority to accept his application on behalf of AIA, and I do not think that he would have held that belief. Additionally, nearly two weeks later he gave further instructions to Harrisons about his alcohol habits, aware that it was AIA who wanted to know. He did not say he had been surprised by that inquiry. That inquiry was consistent with the process of the insurer continuing to assess his application.

These matters make it unlikely that, when he left Harrisons, Mr Swansson thought that the policy was then binding. And if Mr Harrison told him, as I think it probable, that his credit card payment would not be processed until the policy issued, that statement would make it even less likely he could have believed that the policy was already in place. In turn, he would have appreciated that there remained a period after the completion of the application within which the ongoing obligation of disclosure continued to apply.

Secondly, I find it implausible that Mr Swansson believed that it would be of no interest to the insurer that his stomach complaint, thought to have been giardia, had been diagnosed as pancreatitis and was subject to ongoing investigation on the recommendation of a gastroenterologist.

One of Mr Swansson’s explanations for not thinking it necessary to inform the insurer - that is, by informing Mr Harrison - was that Mr Harrison had made him think the giardia was of no real consequence. Further, he thought that the later diagnosed condition of pancreatitis was in substance the same essential complaint. Even if I was to accept his evidence on the first of those two propositions, I find it hard to accept that the second accurately represented what he believed in 2012.

The analysis is not made better for Mr Swansson when it is recalled that he was advised not to drink alcohol for at least a month because of his pancreatitis, then was asked only days later about his alcohol habits, that matter being relevant to the assessment of his application for insurance. One would expect, as a matter of common sense, that a person might be prompted by that enquiry to reconsider the importance to the insurer of the present state of his medical condition if that medical condition had a bearing on his present capacity to consume alcohol. We know, however, that he made no mention of his latest medical advice or the investigations he had just undergone.

Finally, I have some misgivings about Mr Swansson’s evidence that he did not think he needed to disclose anything further for both of the reasons he gave. That is, because he thought he had done all he needed to do, and that he thought that his medical condition, as it was on 7 March, was unimportant to the insurer and, after 7 March, remained essentially the same.

I will come in a moment to the plaintiff’s submission that Mr Harrison tried to have it both ways; but I consider there is an element of having it both ways in what Mr Swansson said on this topic. If he was ignorant about any ongoing duty of disclosure, and believed he had disclosed all he had to disclose by what was written on the application form, it would not matter how his medical condition progressed after 7 March. Yet he also explained his failure to report his medical status after 7 March by saying that he thought that pancreatitis was not essentially different from giardia. To the extent he relied upon the second belief for not volunteering any further information to Mr Harrison, it cuts across the likelihood that he relied upon the first.

Mr Harrison’s version: alleged inconsistencies

Mr Swansson argued that Mr Harrison’s account was inconsistent in several respects.

One alleged inconsistency focused on the absence of notes in either Mr Harrison’s SmartPad system, or in any written form, recording some of the critical disputed events that Mr Harrison claimed had occurred.

Mr Swansson pointed to Mr Harrison’s SmartPad entry on 5 March 2012 about including a section in the statement of advice ‘to protect us’. Mr Harrison agreed with the proposition that, generally, there was a defensive component in giving a written statement advice: that is, for the protection of the adviser.

Mr Harrison agreed that nowhere had he recorded that Mr Swansson had declined his recommendation to defer applying for the AIA policy, as he claimed Mr Swansson had done after discussing the attendance on his doctor for giardia two days earlier. Mr Swansson argued that had the conversation occurred as Mr Harrison recalled it, given his propensity for self-protection Mr Harrison would have made a self-serving note about it. Mr Harrison said he did not record it in the SmartPad because it was not used for that purpose; and he did not record it in the notebook used to record the financial review information because he generally did not ‘go back to [it]’ after completing the application form.

Although neither of those explanations seemed particularly compelling, the significance of Mr Harrison’s omission to record Mr Swansson’s instruction to proceed with the application is to be measured against the relative significance attached by either party to the conversation that they had at the time they had it. I doubt that either of them attached anywhere near the same significance to their conversation then as it appears they do now. In that circumstance, the omission by Mr Harrison to ‘protect’ himself by making a self-serving note – assuming his version of events – is not so adverse to his account as was suggested.

Perhaps a little more surprising is the absence of any mention of that aspect of the conversation in a later SmartPad entry made on 14 August 2013, after Mr Swansson’s terminal illness diagnosis. That entry recorded a communication by Mr Harrison to AIA, via the SmartPad platform, setting forth the result of his review of the file. Mr Harrison was overseas at the time but was able to get access to the file electronically. He wrote that he had spent 6 hours checking ‘every message and piece of paperwork in the file’.

No mention is made in his review of what had taken place about the conversation concerning the use of the word ‘resolved’ on the form, nor the conversation Mr Harrison now recalls about his wife’s illness and deferring the policy application. But Mr Harrison did insist that he had ‘carefully pointed out … that it was imperative…that he [Mr Swansson] disclose any changes in health up to the date of issue of his policy’.

In the message, Mr Harrison concentrates on Mr Swansson’s apparent failure to tell him, at the time of the application, about his visit to Dr Tang (the gastroenterologist). Mr Harrison was deceived by a date appearing on the version of the application he viewed; namely 13 March 2012. It later became apparent that the original date of the application had been ‘whited out’ and 13 March substituted for it. That occurred when AIA noticed the application had not been witnessed. Two staff of Harrisons then signed their names as purporting to have witnessed Mr Swansson’s signature and re-dated the application to make it appear he had revisited the office on 13 March to resign the application in their presence.

It was not disputed that Mr Harrison was in Queensland when the ‘resigning’ occurred, and that he was unaware it had taken place. He said he did not condone it and that he had taken steps to ensure that practice did not occur again.

But two consequences flowed from that occurrence. First, upon reviewing the file on about 14 August 2013, Mr Harrison was misled into believing that the interview with Mr Swansson had been on 13 March not 7 March. When matched with what by then had become known about his further medical appointments and diagnoses as at 13 March, it left unexplained why, at the interview, Mr Swansson had told Mr Harrison no more than that he had been diagnosed with giardia. Accordingly, Mr Harrison’s message to the AIA representative recorded in the SmartPad log concentrated on the likely consequences of what looked like ‘a significant non disclosure here’.

As it turned out, his reasoning was incorrect, fundamentally because of malpractice within his own office. But it gave Mr Swansson’s counsel the opportunity to suggest that, in an endeavour to cover his own failure to properly explain the duty of disclosure or his trivialisation of the giardia condition, Mr Harrison had too readily turned on his own client.

Secondly, Mr Harrison persisted in giving instructions to his lawyers that Mr Swansson had concealed the information about his diagnosis of pancreatitis at the interview right up to the de bene esse examination last December. In evidence before me, Mr Harrison accepted that counsel acting on his behalf at that examination had, initially, put propositions to that effect to Mr Swansson in cross-examination. It was only during the course of that de bene esse procedure that Mr Harrison learned about the wrongful ‘witnessing’ and redating of the application. He then immediately and unreservedly withdrew the accusation of concealment of the pancreatitis diagnosis as formerly advanced.

Mr Harrison’s persistence in giving instructions to his lawyers about Mr Swansson’s concealment was said to reflect a level of desperation on his part to deflect responsibility that rightfully belonged with him.

There is no doubt that the omission from the SmartPad message on 14 August 2013 of some critical aspects of the account now given by Mr Harrison, and his version until the de bene esse examination that the interview occurred on 13 March 2012, give cause to examine his account more critically.

Nevertheless, even while labouring under the misconception resulting from his staff having redated the application, Mr Harrison (through his counsel) still put to Mr Swansson at the de bene esse examination the central elements of the account he gave in court. That is, he put to him (1) that he placed the word ‘resolved’ on the form because Mr Swansson had said that his complaint was resolved; (2) that he had told Mr Swansson about his wife’s past experience and suggested that he might maintain his existing policy until recovery was certain; and (3) that he had told him he had an duty of disclosure that was ongoing until the policy was in place.

A further aspect of Mr Harrison’s account that was heavily challenged was the actual words that he said were used at the time of writing the word ‘resolved’ on the application form. At the de bene esse examination the account that was put to Mr Swansson in cross examination was that he had told Mr Harrison at the interview that ‘the diagnosis of giardia ... had been made within the last couple of days, and that it had resolved’.[21] As his evidence to me reveals, he has also described Mr Swansson has having said that he was ‘fine now’ or ‘fine’ or ‘feeling better’.[22] Some other variations were given as well.
[21]P12, ExA.131
[22]Above, [93].

In his account in court, Mr Harrison said he was not entirely sure exactly what words Mr Swansson used. He thought Mr Swansson himself probably used the word ‘resolved’. In any event, he believed that whatever precise words Mr Swansson used he (Mr Harrison),

‘… would have clarified with him before I wrote the word resolved down’ [by asking] ‘then that’s resolved is it Richard’?[23]

[23]T245 lines 2, 22

There is an air of unreality in expecting witnesses to recall precisely the words used in a conversation that took place several years earlier. Especially is that so when, at the time of the conversation, the witness was unlikely to have contemplated a need to later recall the precise language used by each person.

Mr Harrison did his best, it seemed to me, to respond to counsel’s questions by trying to remember and state the words that were said. But, the clear effect of his evidence was that words were used that gave him to understand that Mr Swansson’s stomach complaint had resolved itself by the time of the interview. On that basis, he believed he would have clarified with Mr Swansson that ‘resolved’ was an appropriate word to use to describe its current status. Ultimately, he put it no higher than that.

Mr Harrison: having it both ways?

Mr Harrison claimed that he had misgivings about Mr Swansson’s claimed recovery from giardia, enough to suggest maintaining his AXA policy. Yet he also claimed he was entitled to accept his client’s word so he had no further obligation to check with Mr Swansson before ultimately cancelling that policy.

Mr Swansson argued that, if a finding was made in Mr Harrison’s favour on the way the conversation occurred, then he was attempting to have it ‘both ways’. I think there is force in this criticism and will return to it after I have made my findings on the facts.

Mr Harrison’s sloppy business practice?

In addition to the highly irregular office practice of falsely witnessing the signing of a document (a criticism not personally levelled at Mr Harrison), there were other aspects of the application process that were criticised as evidencing sloppy and inattentive business practices. They included not having a reference to disclosure or the effect of s 29 of the Insurance Contracts Act in the statement of advice; forgetting to have the application witnessed; and forgetting to fill in the alcohol consumption details and the tax file number.

Each omission was accepted by Mr Harrison as clumsy. He denied that it was because he was hurrying to get off to a holiday in Queensland for which he was scheduled to leave the afternoon of the interview.

Mr Swansson argued that the inference to be drawn was that, just as Mr Harrison was clumsy in these ways, so too was he inattentive to the requirements of giving proper advice about disclosure, and the consequences of inadequate disclosure. It was also suggested that Mr Harrison was anxious to avoid the likely delay to the application process that would have resulted from full and proper disclosure of the stomach complaint.

Despite these criticisms, Mr Harrison’s overall business practice did not impress me as being sloppy or slack. Mr Harrison’s methods and paperwork seemed to be systematised and purposefully designed. He presented in the witness box as a person who was keen to ensure that his business was well run and quite proud that (he thought) it was. None of the omissions in completing or processing the application were of a character that they should logically undermine the veracity of a claim to have given particular oral advice of a substantive kind.

Mr Harrison’s motivation to earn commission?

Mr Harrison did not shirk admitting that he was entitled to an upfront commission of 110% of the first year’s premium if the AIA policy was instigated, but only lesser trailing commission for the current year if the AXA policy was retained. When it was inferentially suggested to him that he placed his own interests above the interests of his clients, Mr Harrison responded by saying, in substance, that he had had operated a successful business for 25 years that generated sufficient commission income as it was, without any need to jeopardise the interests of a client for more. To my observation that response was given candidly and without hubris.

Further, his counsel also argued with some potency that a professional who puts his own interests above those of clients is generally not long in business. The mere observation that a professional will derive a fee from a transaction is a rather glib way of impugning the quality of the service that earns it. In any event, it was evident that there was a not insubstantial amount of time spent by several Harrisons’ personnel in the course of securing the new policy: namely, the office time spent in preparing the advice; interviewing the client; submitting the application; and following up further queries, and so forth. So it could hardly be said that the commission fee was some sort of windfall.

In making findings on this case, the fact that Mr Harrison was entitled to a commission on the AIA policy offers little, if any, assistance.

Findings

Having regard to my analysis of the evidence thus far, I reach the conclusions that follow.

First, I am not persuaded that the first conversation about Mr Swansson’s stomach ailment occurred at the very outset of the meeting on 7 March as Mr Swansson thinks happened. More likely, Mr Swansson’s recollection of a discussion about deferring the AXA application relates to what occurred at a later point in time, as recalled by Mr Harrison. In my view such a conclusion best fits the whole of the evidence.

Secondly, I find, on the balance of probabilities, that Mr Harrison gave Mr Swansson advice, on one if not more occasions while completing the application, about his ongoing duty to disclose material facts to the insurer. He also explained the consequences of not doing so, including that within the first three years the insurer could avoid the policy for non-disclosure or misrepresentation that was not fraudulent. I accept that he gave advice, in substance, in conformity with his habitual practice as he explained in evidence.

Mr Swansson’s failure to recall that advice, is in my view, explicable because he was generally aware of the substance of the advice and had no particular reason to recall it. Not having remembered it, he convinced himself it was not given.

Thirdly, I am not satisfied that Mr Harrison wrote the word ‘resolved’ in quite the circumstances that are described by Mr Swansson. That is, I am not persuaded that Mr Harrison wrote it in the face of Mr Swansson querying it, or gave the three reasons that Mr Swansson recalls he gave.[24] I suspect that the explanations he attributes to Mr Harrison may be a combination of some of his own thoughts at the time with snippets of recalled conversation. But, whatever might be the reason for Mr Swansson’s evidence on that subject, it does not seem likely to be correct in view of the whole of the evidence and my assessment of what constitutes the more plausible account.
[24]Above [92].

I prefer the account of the conversation as generally given by Mr Harrison. I think it is probable that he mentioned his wife’s experience in the context of suggesting that Mr Swansson might maintain the AXA policy for the time being. It is more likely than not that on 7 March Mr Swansson felt much better than he had on 5 March, believed his stomach ache was of a transitory nature and felt there was no good reason to defer making the AIA application.

I have already discussed the question of Mr Harrison’s perception of Mr Swansson being ‘angry’. Although there may have been some basis for Mr Harrison to recall Mr Swansson having a degree of emotional resistance to paying more money to AXA, I doubt that any such feeling was as strong as Mr Harrison remembers it. Nor was it likely to have been a decisive factor in Mr Swansson’s desire to proceed with his application.

Fourthly, it seems to me that Mr Swansson must have appreciated that his application to AIA was not finalised, in the sense of being accepted and binding, when he left the meeting on 7 March. For that reason he expressed no surprise when a follow up question (about his alcohol habits) was asked 13 days later. If he left the meeting believing he had ‘nothing more to do’, it was only because he had already provided his credit card details so payment could be drawn when necessary, he had provided a signed but undated letter to enable the cancellation of the AXA policy to be effected without further recourse to him, and he assumed that his medical condition had effectively resolved so that there would be nothing more for him to disclose. But things changed.

So, in summary, I am not satisfied that Mr Harrison:

·failed to advise Mr Swansson about his ongoing duty of disclosure; or
·failed to advise Mr Swansson of the risk that the new policy could be avoided in the first three years for non-compliance with his duty; or
·trivialised the significance of Mr Swansson’s stomach complaint to justify inserting the word ‘resolved’ on the application form.

These three findings deal with three of the four ways[25] that Mr Swansson put his case against the defendants in negligence and for breach of the statutory standard. I then turn to the fourth way the case was put against the defendants.

Was it negligent not to make further enquiry about Mr Swansson’s condition before cancelling the AXA policy?

[25]Above [38].

As I previously mentioned this particular head of negligence was not subject to any real factual dispute. The single question is whether on the admitted facts Mr Harrison failed to exercise the standard of care that a reasonable and prudent adviser would have exercised in the circumstances.

Whether Mr Harrison’s failure to make further enquiry amounts to negligence is informed by the foreseeability of the risk of harm, whether it was an insignificant risk, and what precautions a reasonable person in Mr Harrison’s position would have taken to guard against it. In turn, the question of what precautions a reasonable person would have taken involves, amongst other things, considering the probability of harm eventuating, its seriousness, and the burden of taking precautions to avoid the risk. [26]
[26]Wrongs Act 1958 (Vic) s 48 (‘Wrongs Act’).

Further, where, as here, allegations of negligence are made against a skilled insurance adviser, the standard of care against which the defendants’ conduct is to be judged is determined by reference to what could reasonably be expected of a person possessing such skill. It is judged from the standpoint of time when the alleged negligence occurred, not later.[27]
[27]Ibid s 57.

In my view, for the reasons that follow, Mr Harrison did fail to exercise the standard of care required of him and he (and thus the other defendants) was thereby negligent.

It was not argued on Mr Harrison’s behalf that the risk of loss of insurance cover was not foreseeable, or that it was an insignificant risk. Rather, it was argued that it was simply not reasonable to require him to make inquiries of his client three weeks after their meeting and having heard nothing further since. In other words, it could not be reasonably expected in the circumstances that a skilled insurance adviser would have made further enquiry of Mr Swansson before cancelling the AXA policy.

I was reminded by Mr Harrison of his evidence that, on 7 March, he had advised Mr Swansson to defer making his application to AIA and that Mr Swansson had responded that he felt fine and wished to proceed. Notwithstanding that, generally, I accept Mr Harrison’s evidence in that respect, even so in my view his conduct fell short of the required standard in the particular circumstances of this case.

The particular circumstances to which I refer include the following:

(a)Mr Harrison knew of the special value of the AXA policy, compared to the AIA policy, in that it could no longer be avoided for innocent non-disclosure;
(b)Mr Harrison was aware that Mr Swansson had been to a doctor only two days before the interview on 7 March, a very short space of time in which to be sure of his recovery;
(c)Mr Harrison himself expressed concern that the kind of condition from which Mr Swansson suffered was one that could take some time to clear, mentioning his own wife’s experience;
(d)By the time he was poised to implement the cancellation of the policy, Mr Harrison was aware that three weeks had elapsed since he last heard from Mr Swansson meaning that the last information he had about his client’s stomach complaint was by then out of date; and
(e)It was a relatively easy thing to make an inquiry of Mr Swansson about his current medical status ‑ he merely had to make a telephone call.

Having regard to the third matter listed in the preceding paragraph, I agree with the submission that Mr Harrison’s claim that there was no reason to check on his client’s condition involved an attempt to ‘have it both ways’. In the combination of circumstances I have described, a reasonably prudent adviser would have checked again with his client before finally cancelling the existing policy. That is particularly so given the magnitude of the risk to the client if he unwittingly failed to disclose a relevant medical matter, thereby imperilling his new cover.

Mr Swansson derived support for his case on this head of negligence from the opinion of an independent insurance broker, Peter John Howard. Mr Howard’s expertise was not challenged.[28]
[28]Although he also gave evidence in support of Mr Swansson’s claim based upon the advice given (or not given) at the 7 March meeting, I have not needed to discuss those opinions because they were based upon a set of facts which I have not accepted.

Assuming the events after 7 March 2012 to be as I have described them - which, as I have said, are not substantially in dispute - it was Mr Howard’s opinion that, in such circumstances:

… A reasonably prudent broker would have rung Mr Swansson to check on his stomach condition before cancelling the First Policy [ie AXA policy]. This is because of the precious asset (being continuity of cover) that stood to be lost if there has been some development in respect of that stomach condition.[29]

[29]P 13, Ex A 75.

Mr Howard was not challenged at all on this opinion. I accept his view as accurately describing the precautions that a reasonably prudent broker would have taken in those circumstances. However, I would have reached the same conclusion concerning the standard of care to be exercised by a reasonably prudent broker even without Mr Howard’s opinion.

As there is no dispute that Mr Harrison failed to check with Mr Swansson about his stomach condition before cancelling the AXA policy I find that he was negligent in that regard.

Had Mr Harrison made that inquiry, it seems not only probable but highly likely that he would have learned of Mr Swansson’s diagnosis of pancreatitis and that further investigations were pending. He would not have cancelled the AXA policy, realising that the AIA policy was then susceptible to avoidance for non-disclosure. Further, because it very quickly became evident that Mr Swansson had pancreatic cancer, the AXA policy would have been maintained and would have remained in force at the time of the diagnosis of terminal illness. There is no reason to doubt that Mr Swansson would then have made a claim on the AXA policy and been paid the insured sum.

In those circumstances I find that the negligence of Mr Harrison caused Mr Swansson to lose the $1,477,454.79 payable under the AXA policy.

Was Mr Swansson guilty of contributory negligence?

Having found that Mr Harrison was negligent, and that his negligence caused Mr Swansson’s loss, the question is whether Mr Swansson contributed to that loss by his own failure to exercise reasonable care for his own interests.

In determining whether Mr Swansson failed to take reasonable care to avoid the risk of loss of insurance cover, the general principles that applied in judging Mr Harrison’s conduct[30] apply equally to him.[31] The standard to be applied is that of a reasonable person in the position of Mr Swansson. I must bear in mind what Mr Swansson knew or ought to have known at the time. Whether there was contributory negligence is a question of fact that, in turn, depends on all the facts of the case.[32]
[30]See [172] above.
[31]Wrongs Act s 62.
[32]Sungravure Pty Ltd v Meani (1964) 110 CLR 24, 36 (Windeyer J); TAL Structural Engineers Pty Ltd v Vaughan Constructions Pty Ltd (1989) VR 545, 552 (FC).

One way in which the case was put against Mr Swansson was that he failed to take reasonable care when giving instructions to Mr Harrison about the state of his medical condition on 7 March 2012. I do not think that the defendants have made out their argument on that basis. On the basis of my earlier findings, I consider that Mr Swansson believed himself to be much better on 7 March and that the answers he gave to Mr Harrison about his medical condition on that date were reasonably based.

But the second way that the defendants put the case against Mr Swansson is that he was careless in failing to inform Mr Harrison’s office, after 7 March, of the further developments in his medical condition. Not only did he not take active steps to contact Mr Harrison’s office but he had one if not two opportunities in telephone calls he had with Mr Harrison’s office to inform them about his present condition.

For the moment, I put to one side the particular advice which I find Mr Harrison gave to Mr Swansson about his ongoing duty of disclosure. Even still, I would have thought that a reasonable person, in Mr Swansson’s position, who knew that his insurance application represented that his ‘giardia’ condition had ‘resolved’ would have thought it prudent to tell his adviser, subsequently, that his condition was not in fact ‘giardia’ and was not in fact ‘resolved’. A prudent person would do that if only to check that it did not matter that things had changed.

But accepting, as I do, that Mr Swansson was advised about his ongoing duty of disclosure, and understood it, makes his failure to inform Mr Harrison of the developments in his stomach complaint after 7 March all the more careless.

I am not satisfied that Mr Swansson thought that his pancreatitis was, in effect, the same thing as giardia. At one point Mr Swansson appeared to admit he knew they were different.[33] But if he did not think they were much different, it was only because he gave insufficient attention to the issue contrary to his own interests.
[33]T 87.

His carelessness becomes even more stark when a simple opportunity presented itself to inform Mr Harrison of his changed medical condition. He was telephoned by Harrison’s office about his alcohol consumption. Moreover, the inquiry from Harrisons was about his alcohol consumption and he had only been told a few days earlier that he needed to reduce his alcohol consumption because of the developments in his medical condition. And, on his own account, he rang Harrisons on another occasion to ask about payment of his AXA premium and, again, failed to tell the office of his continuing stomach illness.

Given his knowledge of the ongoing duty of disclosure, what was represented on his insurance application, and subsequent developments in relation to his medical condition, Mr Swansson knew or ought to have known that his failure to tell Mr Harrison of his continuing stomach illness carried the risk of his new policy with AIA being avoided for non-disclosure. Further, he knew he had given Mr Harrison a signed authority to cancel the AXA insurance. In those circumstances, he knew, or ought to have known, that the AXA policy would be cancelled if he failed to inform Mr Harrison of his changed medical condition.

I have little hesitation, therefore, in concluding that Mr Swansson failed to exercise the care a reasonable person in his position would have taken by not telling Harrison’s office that his stomach complaint had not resolved, that it had been diagnosed as pancreatitis and that further investigations were pending.

It was put by Mr Swansson that if I found any negligence on the part of Mr Harrison, that negligence would effectively expunge the possibility of negligence on the part of Mr Swansson. Such an argument might have carried more persuasion had I found that Mr Harrison was negligent in any of the three ways it was put for having failed to give proper advice on 7 March.

But I am not persuaded that the argument has the same force in relation to Mr Harrison’s failure to make inquiries of Mr Swansson before cancelling the AXA policy, particularly given that I have found in Mr Harrison’s favour on the first three complaints. Each failure was independent of the other but each was causative of the loss.

Further, I reject the argument put for Mr Swansson that it would be perverse to find any contributory negligence because, as it was argued, the ‘real cause’ or the ‘effective cause’ of the loss of the AXA policy was the ‘unilateral act of the broker in cancelling it without speaking to the client’. True it was that the final event that led to the cancellation of the AXA policy was Mr Harrison sending the previously signed letter from Mr Swansson to AXA. Nevertheless, the letter was sent because Mr Harrison was ignorant of the developments in Mr Swansson’s medical condition after 7 March. Had Mr Harrison known of the pancreatitis and further pending investigation, there is no doubt he would not have sent the letter. So, the real focus is on what caused Mr Harrison to be ignorant of the further diagnosis and pending investigations. In my view, Mr Swansson’s silence on the point was a cause of that ignorance.

Had Mr Swansson told Mr Harrison’s office of those facts I am satisfied, for the same reasons I have already given in respect of Mr Harrison’s failure to make the inquiry of Mr Swansson, that the outcome would have been that the AXA policy was not cancelled and would have been in force at the time of the terminal illness diagnosis.

Accordingly, I find that Mr Swansson’s own negligence was a cause of his loss of entitlement under the AXA policy.

The issue that remains to be determined is the apportionment of responsibility for the loss that was suffered.

Just and equitable apportionment

The extent to which damages must be reduced when the damage has been caused by the negligence of both plaintiff and defendant is determined by reference to what the court thinks just and equitable having regard to the plaintiff’s share in the responsibility for the damage.[34] The apportionment of responsibility must be just and equitable from the point of view of both sides.[35]
[34]Wrongs Act s 26
[35]Watt v Bretag (1981) 27 SASR 301 at 313.

Such apportionment involves a comparison both of culpability, that is, of the degree of departure from the standard of care of the reasonable person, and of the relative importance of the acts of the parties in causing the damage.[36]
[36]Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529, 532-3.

A finding of apportionment is a finding upon ‘a question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis and of weighing different conclusions’.[37]
[37]Ibid 532.

For the defendants it was urged that the twofold comparison should result in a very substantial finding of contributory negligence on the part of Mr Swansson. Other than urging me to make no finding of contributory negligence, no submission was put to me by Mr Swansson about apportionment of responsibility.

On the second of the two factors for comparison, it is difficult to separate the respective causal contributions of the negligent omissions of each party. In each case, their failure was the mirror image of the one thing. Mr Swansson failed to tell Mr Harrison what he knew about his then current medical condition; Mr Harrison failed to ask Mr Swansson about it. Each occurred, in substance, within the same general time frame. Had either of them done what they should have done, the outcome – the retention of the AXA policy - would have been the same, by the same causal route. I find little to separate their causal contribution.

Turning to a comparison of their respective culpabilities, again I find little to separate them. Against Mr Harrison there is the fact that he is the professional adviser. He is the one who has particular, specialist knowledge about the value of the existing AXA policy. He is the one who has, or should have, experience in insurance matters that should lead him to be particularly alert to the danger of inadvertent non-disclosure by intending insureds.

On the other hand, Mr Swansson was the one uniquely aware of the developments in his own medical situation. He ought to have, but evidently did not, reflect on the facts that he had recently informed his insurance adviser that he was feeling better, his medical condition had been described in his insurance application as being “resolved”, and yet he was undergoing a sequence of further tests with a degree of urgency which were revealing a more troubling diagnosis.

As he ought to have done, had he turned his mind to his ongoing duty of disclosure about which he had recently been informed, he should have appreciated that there was great peril to his insurance cover if he did not tell Mr Harrison of those medical developments. And, as highlighted earlier, he had one or two simple opportunities to pass on news of the further diagnosis and tests.

On these bases, having regard to Mr Swansson’s share in the responsibility for the loss of the AXA policy, I conclude that it is just and equitable that the damages recoverable in respect of Mr Harrison’s negligence be reduced by fifty percent.

Conclusion and orders

The parties agreed that the full measure of the damage suffered by Mr Swansson from the loss of the AXA policy was $1,477,454.79 (excluding interest).

It follows from my findings on negligence and contributory negligence that defendants are liable for his loss but that the damages recoverable by Mr Swansson should be reduced to $738,727.35, before the addition of any interest.

[2014] VSC 118

26 March 2014