Dew v Suncorp Life and Superannuation Ltd [2001] QSC 252

SUPREME COURT OF QUEENSLAND CITATION: Dew v Suncorp Life and Superannuation Limited [2001] QSC 252 PARTIES: JUDY ANNE DEW (Plaintiff) SUNCORP LIFE AND SUPERANNUATION LIMITED (Defendant) FILE NO/S: 13 of 1999 DIVISION: Trial PROCEEDING: Trial ORIGINATING COURT: Supreme Court, Cairns DELIVERED ON: 21 March, 2001 DELIVERED AT: Cairns HEARING DATE: 12 October 2000 JUDGE: Jones J ORDER: 1. I give judgment for the plaintiff on claim in the sum of $520,000 together with interest on that amount at nine per cent per annum from 1 July, 1998 to the date hereof. 2. The defendant’s counterclaim is dismissed. 3. The defendant pay to the plaintiff the costs of and incidental to the claim and counterclaim to be assessed. CATCHWORDS: COUNSEL: Mr. C. Jensen for the Plaintiff Mr. S. Keim for the Defendant SOLICITORS: Thompson and Royds Lawyers for the Plaintiff MacDonnells as Town Agents for Clayton Utz Lawyers for the Defendant [1] On 13 June, 1996 the plaintiff made an application to the defendant for an insurance policy. She completed a Financial Protection Plan Application form (the “proposal”). By it she sought insurance cover in two categories – Life cover $500,000 -- 1 of 22 -- 2 Total and Permanent Disability (TPD) cover $500,000 [2] She was at the time 33 years of age, having been born on 19 June, 1963. She was married and living at Mount Isa with her husband. He too made application for insurance cover in the same amounts. Both of them were working and they had a combined annual income of $120,000. [3] On 25 June, 1996 the plaintiff submitted to medical examination arranged by the defendant with Dr. Kemp, general practitioner, of Mount Isa. For the purpose of this examination the plaintiff completed a questionnaire prepared by the defendant which in these proceedings has been called the “personal statement”. [4] The defendant accepted the risk arising from the policy of insurance in respect of both categories as from 17 July, 1996. One significant condition in the TPD cover was the continuance for six consecutive months of the total incapacity from engaging in an occupation before the insured was eligible to receive the benefits. [5] On or about 29 July, 1996 the plaintiff suffered a psychotic episode which caused her to see Dr. Kemp on 30 July, 1996. She presented in an agitated state, explaining that she had been hearing voices. She was suffering paranoid delusions and identified six or seven different personalities within herself. Dr. Kemp prescribed medications for her and saw her again on 2, 3, 6, 10, 14 August, 1996. The plaintiff had in the meantime been referred to Dr. Likely, consultant psychiatrist, whom she first saw on 19 August, 1996. [6] Despite the onset of this condition the plaintiff was able to continue her employment as a pay clerk for the Regional Health Authority, though she was experiencing some difficulties in carrying out her duties. She worked only for another seven months but remained officially in that employment until 29 December, 1997 when, after psychiatric assessment, she was declared to be totally and permanently disabled and was discharged. [7] On 9 April, 1998 she submitted a claim for payment under this policy. The claim was thus made in the latter part of the six month qualifying period. There is no challenge to the fact that the plaintiff continues to be wholly incapacitated and that her condition is permanent. [8] On 31 July, 1998 the defendant rejected the claim and cancelled the policy on the basis of the plaintiff’s alleged failure to disclose medical information at the time of making her proposal. [9] The defendant relied particularly on a report of Dr. Likely who, as I have indicated, first examined the plaintiff approximately two weeks after the onset of frank psychotic symptoms and less than two months after she had completed her proposal for insurance. The issue [10] Of the essential elements of the claim for which the plaintiff bears the onus of proof there is virtually no contest. The evidence establishes the acceptance of the risk by -- 2 of 22 -- 3 the defendant on 17 July, 1996 1. The evidence establishes the total and permanent disability precluding the plaintiff’s engaging in her normal occupation by 28 December, 1997. The medical condition giving rise to that incapacity continues to the present and will do so into the future 2. The six month qualifying period would, on that evidence, have expired on about 30 June 1998. [11] The contest in this case arises on the defendant’s counterclaim – namely, whether the defendant was entitled to avoid the policy on the grounds of the plaintiff’s breach of her duty of disclosure and/or her fraudulent misrepresentation. It is the defendant who bears the onus of proof on these issues. Legal Principles [12] The terms of the plaintiff’s duty of disclosure are set out in s.21 of the Insurance Contracts Act 1984 (Cth) (hereinafter “the Act”). It provides – 21. The insured’s duty of disclosure (1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant. (2) the duty of disclosure does not require the disclosure of a matter: (a) that diminishes the risk; (b) that is of common knowledge; (c) that the insurer knows or in the ordinary course of the insurer’s business as an insurer ought to know; or (d) as to which compliance with the duty of disclosure is waived by the insurer. [13] Section 27 of the Act is also relevant. It provides – 27 Failure to answer questions A person shall not be taken to have made a misrepresentation by reason only that the person failed to answer a question included in a proposal form or gave an obviously incomplete or irrelevant answer to such a question. [14] Section 29 of the Act provides:- 29 Life Insurance 1 Transcript 9/35 2 Transcript 162/10 -- 3 of 22 -- 4 (1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where: (c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or (d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds. (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. (3) If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract. (4) If the insurer has not avoided the contract, whether under subsection (2) or (3) or otherwise, the insurer may, by notice in writing given to the insured before the expiration of 3 years after the contract was entered into, vary the contract by substituting for the sum insured (including any bonuses) a sum that is not less than the sum ascertained in accordance with the formula SP/Q, where: S is the number of dollars that is equal to the sum insured (including any bonuses). P is the number of dollars that is equal to the premium that has, or to the sum of the premiums that have, become payable under the contract; and Q is the number of dollars that is equal to the premium, or to the sum of the premiums, that the insurer would have been likely to have charged if the duty of disclosure had been complied with or the misrepresentation had not been made.” [15] In Advance (NSW) Insurance Agencies Pty Ltd v Matthews 3 the High Court considered the nature of the Act and from the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ the following appears:- “The evident intention of the legislature is to replace the antecedent common law regulating non-disclosure, misrepresentations and incorrect statements by insured persons before entering into a contract with the provisions of Pt IV. To that extent Pt IV is a statutory code which replaces the common law.” 4 3 (1989) 166 CLR 606 4 Ibid at p.615 -- 4 of 22 -- 5 [16] In Bahr v Nicolay (No.2) 5 the High Court considered the characteristics that by which an act is deemed to be fraudulent for the purpose of registration of land under the current system. In the joint judgment of Mason CJ and Dawson J the following appears:- “According to the decisions of this Court actual fraud, personal dishonesty for moral turpitude lie at the heart of the two sections and their counterparts”.6 Consequently, a deliberate non-disclosure of a fact does not necessarily result in the finding of fraud. A proposer may make a decision not to disclose a matter but without the characteristics of dishonesty, moral turpitude or reckless indifference as to whether an answer was true or false, the conduct is not necessarily fraudulent. [17] The sections relevant to the determination of this case were considered by the Court of Appeal in Australian Casualty and Life Ltd v Hall 7. That case concerned a claim for a ‘monthly benefit’ entitlement under a policy which provided for a 14 day waiting period in respect of the employment preventing disability. In her proposal, the claimant answered in the negative the usual query about having received medical advice and treatment in respect of “any condition or injury”. She had in fact sought medical treatment for a variety of symptoms including headaches, migraine and chest pains. She had undergone testing for diabetes but was not told of any pre-disposition to that condition. Also not disclosed was the fact that she had been referred by her general practitioner to a consultant physician. The doctors’ advice to her was that she was “in good health”. Four years later the claimant suffered an onset of severe form of schizophrenia which rendered her totally and permanently disabled. She was challenged about her failure to disclose the fact of the visit to her physician. The claimant obviously knew she had seen the physician but the question was whether she knew the facts not disclosed to be relevant in terms of s.21(1)(a). [18] Whilst she had complained to the physician of certain symptoms the outcome of the consultation was to confirm that she was not suffering from any medical condition. The insurer argued that she ought to have disclosed the existence of the symptoms. In his reasons for judgment Shepherdson J (with whom the other members of the Court agreed) said:- “Whether a particular insured has discharged the duty imposed by s 21(1) is to be first viewed in light of the knowledge of the insured described in s 21(1)(a) and secondly by considering the provisions of s 21(1)(b). As to the meaning of “known” in s 21(1) I would with respect adopt and apply the following words of Hodgson CJ in the Equity Division of the Supreme Court of New South Wales in Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 44 NSWLR 186; 147 FLR 12 where his Honour said (at [8.3]): “In my opinion, ‘known’ in s 21(1) means more than suspected or believed. What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term ‘known’.”8 5 (1988) 164 CLR 604 6 Ibid at p.614 7 (1999) 151 FLR 360 8 Ibid at p.371 -- 5 of 22 -- 6 [19] Shepherdson J also made the point that “a symptom is not a condition” and that none of the claimant’s symptoms added up to a condition. He went on to say:- “The actual question that it asks is whether the applicant has consulted a provider. It does not ask for a statement of the reasons for any such consultation, let alone for a statement of symptoms. I do not think that there is any ambiguity in this, although if there was it should be resolved against the insurer which was responsible for drawing the document. The question did however require a “yes” answer and this activated the obligation to give answers in table E: see pars 24-26. That table however commences with the “name of injury or sickness”, and the remaining questions in table E are subsidiary to the designated injury or sickness. An obligation would arise on he part of the respondent to disclose her consultations with Dr. Campbell and Dr. Marnane only if there was a material injury or sickness of which she knew and which she was obliged by s 21(1) of the Insurance Contracts Act to disclose. It is quite clear that the respondent did not know (truly believe) that the symptoms about which she saw Dr. Campbell were relevant to the decision of the appellant whether to accept the risk and if so on what terms. Indeed she thought them irrelevant because Dr. Campbell told her she was “as fit as a fiddle” and in my view the learned trial judge justifiably found that the advice she received from Drs. Marnane and Campbell were that her problems were minor.” 9 [20] As to the requirement in s. 21(1)(b) Shepherdson J considered what fell within the embrace of the words “in the circumstances” for determining the objective test. He said:- “The phrase ‘in the circumstances’ must mean in the circumstances in which the matter became known to the insured and the circumstances at the time the duty of disclosure falls to be discharged.” 10 [21] I was referred to Twenty-first Maylux Pty Ltd v Mercantile Mutual Insurance (Aust) Ltd 11 in which Brooking J considered that “the circumstances” to be taken into account were not individual idiosyncrasies of the claimant but rather the extrinsic factors such as the level of informality attendant upon negotiations, whether cover was arranged over the telephone, or the type of policy in issue, or exposure to advertising and promotional referring. This case essentially confirms the test as being an objective one having regard to the particular circumstances in which an insured person finds himself or herself. Or, as put by the authors of Australian Insurance Law, “an objective test modified by subjective criteria”. 12 Disclosure [22] The proposal was signed by the plaintiff in the presence of Mr. Allan Barber, an insurance consultant, who sold and marketed insurance products on behalf of the defendant. Mr. Barber visited the residence of the plaintiff and her husband during the evening of 13 June, 1996. The plaintiff asserted that Mr. Barber was late for this appointment and quickly went through the process of completing the proposal. 9 Ibid at p.374 10 Ibid at p.375 11 (1990) 6 ANZ Insurance Cases 60-954 12 See also “Australian Insurance Law” Second Ed. Tarr, Liew and Holligan at p.92-2 -- 6 of 22 -- 7 During the course of this he also sought information from a laptop computer which he had with him. [23] Mr. Barber, understandably, has no detailed recollection of what was said and done at this interview but spoke of his invariable practice on such occasions. An evidentiary issue arises as to whether Mr. Barber drew the plaintiff’s attention expressly to the section of the application booklet entitled “What You Must Tell Us”. The plaintiff’s recollection was that there was no booklet provided at that time although one was sent later with the policy details. Nothing turns on this evidentiary issue since I am satisfied that the scope of the duty of disclosure was brought to the plaintiff’s attention or alternatively she was well aware of it at the time she completed both the proposal and her personal statement. The application form itself contains two declarations appearing immediately above the place where the plaintiff’s signature was inserted on the form. The personal statement carries a declaration that the answers in the statement are true and correct. No issue was raised in the pleadings or otherwise that the insurer had not complied with its obligation under s.22 of the Act. More importantly, in her evidence the plaintiff stated that she was aware she had to disclose anything relevant to the insurer’s decision.13 [24] I am satisfied that the duty of disclosure contemplated by s.21 of the Act was brought to the attention of the plaintiff, either through discussions with the consultant or by reason of the documents which were brought to her attention. What was disclosed to the insurer? [25] At the request of the consultant, Mr. Barber, the health questionnaire in the proposal14 was not completed. This was because the level of the cover sought dictated that the plaintiff would have to submit to an independent medical examination. In fact Mr. Barber noted the form with the words “full medical arranged”. He also gave evidence that he was bound by written instructions from the defendant to follow the procedure of not completing the medical questionnaire when a medical examination was required. This is unfortunate because the questionnaire in the proposal (Q 55-85) was more searching, and therefore useful, than the questionnaire in the personal statement15. For example, in the proposal Q.77 in part, reads:- “77. Have you ever had any medical advice, treatment investigation or counselling for any of the following: No Yes Nervous system condition, anxiety, depression, nervous breakdown, mental disorder, epilepsy.” This questionnaire also provides a full page to record details of advice and treatment, the condition, the identity of treating persons/institution and degree of recovery. 13 Transcript 28/40 14 Ex.6 15 Ex.7 -- 7 of 22 -- 8 [26] This question is to be compared with the equivalent question in the personal statement which was posed and answered by the defendant in the following terms:- “1. Have you ever had a disorder of any of the following? Yes No If “Yes”, give full details (a) Nervous system and brain: such as nervous tension, ˛ ® nervous breakdown, mental disorder, epilepsy? Family deaths One notes the absence in the latter document of any specific reference to “anxiety” or “depression”. Opinions may well differ whether those symptoms come under the umbrella of such conditions as “nervous tension” or “mental disorder”. [27] A second relevant passage in the personal statement reads as follows:- 2. During the last 5 years have you had any medical examination, advice or treatment, any X-Ray, blood test or any other tests? Yes ˛ No ® If “Yes”, full details required below – including results of tests Nature of illness Or Injury Date Period Disabled Completely Recovered? Treatment Given Full Name and Address of Doctor or Hospital Stress Yes Advised to Rest Dr. Kemp [28] Apart from what the plaintiff told to the medical practitioner, the only opportunity she had to detail the relevant part of her medical history was in her completion of the above questions in the personal statement. The design of the form and space available for the response to the question suggested that only a brief response was required. The form also bears the following instruction – “These questions should be answered in the presence of the medical examiner who is requested to stress any point which may appear to him to call for further inquiry.” [29] The insurance examination on behalf of the defendant was performed by Dr. Kemp. He knew the plaintiff and had examined her on 11 occasions prior to that examination. One expects that at the time of the examination he would have had available his notes of these earlier examinations. In particular, his attention was certainly drawn to the claim of stress symptoms for which he had treated the plaintiff in December, 1994. [30] Amongst the information contained in Dr. Kemp’s records16 is the fact that the plaintiff had suffered previously from pre-menstrual tension and gynaecological problems for which she was prescribed the drug Provera. She had previously had palpitations. In December 1994 she was treated by Dr. Kemp for an episode of depression and irritability and was given the drug Prozac which she took for a short period between 15 – 28 December. [31] In 1995 the plaintiff was seen by Dr. Kemp on six occasions for a variety of minor ailments, one of which included anxiety and hyperventilation. In 1996 prior to the insurance examination she consulted Dr. Kemp on one occasion for a minor ailment. 16 Ex.13 -- 8 of 22 -- 9 [32] Dr. Kemp’s report to the insurer on 25 June, 1996 was not tendered but some of its terms were revealed in the following passage of evidence17 :- “And it’s got your stamp “Dr. Kemp” and the form reads, Question 8A, “Additional facts which may influence the assessment of this risk” you wrote, “Nil”. (B) “Do you consider any medical attendance report or any special test is required?” You answered, “No”. (C) “Do you consider the abovenamed to be predisposed to any particular ailment or likely to require surgical operation?” You said, “No”. (D) “Do you consider that there is any likelihood of disablement?” and you said, “No”. (E) “Do you consider that the abovenamed is acceptable for life/disability insurance at ordinary rates?” and you said, “Yes”? – Yep. They were true answers, they truly reflected your professional opinion at the time? – Yeah, I think so, at the time. And in answering those questions, you would’ve taken into account your physical examination of her that day as well as your general interaction with her in a general sense. Do you understand what I’m saying? -- Yeah. I mean, you didn’t ----?— Yeah, I agree with that. ----you didn’t read those questions down as relating only to her physical state, did you?— No. No, all right. So this must’ve come as a surprise when she said that she’d had the voices in her head for a year?— It did.” [33] Dr. Kemp was the only medical practitioner to have seen the plaintiff between her move to Mount Isa on 5 October, 1994 and this examination – a period of 20 months. Given the nature of the plaintiff’s complaint to him in December 1994 and 31 August 1995, one would expect some details of her past history would have been conveyed which were not recorded in his rather skimpy clinical notes. I conclude from this that he was in the best position to advise the insurer as to her insurability at that time and as the above passage of evidence establishes his examination took into account the psychological factors. What was the plaintiff’s medical history? [34] Evidence of the plaintiff’s medical history in the five years prior to her making the proposal shows that she consulted with Drs. Khan, Teo, Vij and Moorthy and had sought advice from the Bankstown Hospital where she was employed in the hospital kitchen for a number of years. [35] Dr. Vij was the plaintiff’s general practitioner. He saw her on six occasions in 1991, nine occasions in 1992 and once in 1993. These consultations related to minor ailments including respiratory tract infections, menstrual problems, plantar warts and some emotional problems. For ailments other than the emotional problems which will be considered separately, the examinations and tests basically revealed no abnormality. Dr. Vij referred the plaintiff to Dr. Teo for her menstrual 17 Transcript 227/50 – 228/20 -- 9 of 22 -- 10 problems and to Dr. Moorthy, consultant psychiatrist, in December, 1992 for her emotional problems. She saw Dr. Moorthy on two occasions – 19 December 1992 and 2 January 1993. The medical advice sought from the Bankstown hospital resulted in her being given Mylanta for a stomach upset during working hours. I shall make no further reference to her consultations at the Bankstown hospital. [36] The defendant contends that, if the psychological problems experienced by the plaintiff had been disclosed, the TPD cover would have been rejected or, at the very least, more closely scrutinised. These problems have been closely considered particularly in cross-examination of the plaintiff. [37] The psychological problems for which there is medical record in the five years preceding the application are on any view, quite minor. In February 1992 the plaintiff complained of anxiety attacks to Dr. Vij. In the six week period between November 1992 and January 1993 the plaintiff again complained to Dr. Vij of anxiety and was referred to Dr. Moorthy whom she saw on two occasions. She was diagnosed as suffering from an adjustment disorder with depression at that time. In November/December 1994 the plaintiff complained to Dr. Kemp of being depressed and irritable and again on 31 August 1995 complained of anxiety. Effectively, this adds up to four episodes of anxiety, irritability or emotional problems in a period of four years. When the details of the plaintiff’s circumstances during these periods are known, the anxiety states are well explained. In 1992 and 1993 her husband was a serving member of the Royal Australian Navy and was frequently absent from home on voyages. During 1990 he had done a tour of duty in the Middle East associated with the Gulf War. There were changes in his navy postings which meant that the plaintiff had to make new friends and adapt to new circumstances on a number of occasions. The problems which this lifestyle gave rise to, have to be seen in the context of the plaintiff’s past. She had an impoverished upbringing. Her mother left the family home when the plaintiff was five years of age and she was raised by her alcoholic father, who quite often left her at home alone. When she was 19 years of age the plaintiff was subjected to high level emotional trauma when her then partner was the victim of a shooting incident and at his funeral, further people were killed in a reprisal attack. During this period in the early 90’s there were a number of deaths in the plaintiff’s family. These included the deaths of a cousin in 1990, her stepfather in 1992, her father and her mother in March and July 1994 respectively and another close friend in July 1995. Also during that period, her brother was diagnosed as positive to HIV. [38] What flows from this is that the plaintiff as a young person was subjected to a greater number of stressful incidents than would befall the average person of an equivalent age. Bearing in mind this combination of stressors, it is not unusual that the plaintiff would have complained of anxiety, on a few occasions, to a medical practitioner. What is significant is that her complaints of anxiety were not ongoing, nor was any treatment deemed necessary. [39] The referral of the plaintiff to Dr. Moorthy by her then general practitioner does not, in my view, necessarily indicate a serious concern for her mental state. This was done by Dr. Vij when the plaintiff presented with a variety of complaints which caused him to make referral to two specialists. Dr. Vij does not appear himself to have undertaken any close consideration of the plaintiff’s psychological problems and his medical note at the time of this referral simply reads:- -- 10 of 22 -- 11 “9 December 1992 – Pap smear nothing abnormal detected. Tired not sleeping. Upper respiratory tract infection. Moxocin Euhypmos. Medical certificate on 11 December 1992. Refer psychiatrist to talk to husband and wife together.”18 Dr. Vij was not called to give evidence and one would not expect that he would have any independent recollection of a consultation which had the features which would give rise to that notation in his records. [40] The plaintiff denied any recollection of her consultations with Dr. Moorthy which I found somewhat surprising given that this was the only psychiatrist that she had seen in her life prior to 1996. One possible explanation for this is that she did not wish the fact of her referral to a psychiatrist or the details of the consultation to be known. Another explanation is that the visit to Dr. Moorthy was so unproductive of any outcome that it was of minor significance in the scheme of the plaintiff’s treatment at that time bearing in mind that the visit to the specialist gynaecologist seems to have had more significance. [41] However, the plaintiff’s former husband does remember the plaintiff’s visits to Dr. Moorthy. The complaints which the plaintiff made to Dr. Vij in November 1992 were put to him and he described the family situation in the following terms:- “Does that correctly describe her conduct over a lengthy period of time?— I wouldn’t have thought it was that long. I mean, we had a few – we were having a bit of a rough patch in our marriage. I’d been away a fair bit on and off and we’d been arguing quite a bit and yeah, they are some of the symptoms she displayed but they were more to do with probably the environment in the family home at the time than anything else.”19 Mr. Dew’s recollection is that the referral to Dr. Moorthy was with a view to alleviating the problem that had arisen in their relationship. This is supported by some of the notes made by Dr. Moorthy but it seems Mr. Dew did not attend any of the consultations even though this was suggested. In cross examination it was put to Mr. Dew that Dr. Moorthy had diagnosed the plaintiff as suffering from “an adjustment disorder with variable psychosis”. This was in fact a mis-statement of the diagnosis which correctly stated was “an adjustment disorder with depressive features”. The witness’s response read as follows:- “I do recall her coming home and we had a bit of a chuckle that the doctor managed to come up with such a – a huge label for a five minute consultation.” 20 [42] The diagnosis reached by Dr. Moorthy indicates really a low level problem. The treatment suggestions included improving the security in the home, moving into a navy house and undertaking some psychotherapy (counselling) and arranging a joint interview with her husband. Dr. Moorthy confirmed that there was no evidence of the plaintiff having suffered any psychotic experiences at the time he 18 Ex. 16 19 Transcript 100/40 20 Transcript 102/35 -- 11 of 22 -- 12 saw her.21 The following passage then appears in Dr. Moorthy’s cross examination:- “Well, would you agree with me that this episode that she had, this feeling of anxiety and insecurity, was one of those little setbacks that say 20 – 25 per cent of the population experience in their lifetime? – Yes, in general they do and particularly with people in the navy and all when they go away for a long time it is not unusual and I in my own practice have seen people becoming insecure and all that. If an underwriter had come to you after your discussions with her and said, “My gosh we wouldn’t want to insure her”, you would have said, “You’re being a bit silly aren’t you?”? – Well, I think it would be a too harsh decision but that would be my idea.”22 [43] I found the evidence of Mr. Dew to be most reliable. He has lived apart from the plaintiff since November 1998 and they have had little contact.23 He has nothing to gain from these proceedings. He has a stable employment background and whilst he and the plaintiff lived together he provided support for her in times of stress. He impressed me with his forthright response to questions. I accept his evidence as being honest and reliable. His summation of the plaintiff’s psychiatric state in the years leading up to the proposal and after the family bereavements is as follows:- “Now, through those bereavements, did your wife continue working?— Yes. Did she work full-time? – Yes. What was she like when those – when her parents died and those other people died? – Well, naturally extremely upset, very much in control. She was eager to get back to work to keep herself busy. Did she have any significant periods off work? – No. How would you describe her mental state generally up to June 1996? – Well, she was articulate, she was bright, she was career orientated, she was interested in working and continuing to work. She was eager to start a family at some stage in the future. What about her mood, was she depressed, upset ---? – No, she was quite consistently happy and outgoing.” 24 On the topic of her working capacity and her interest in working after she arrived at Mount Isa, Mr. Dew described the plaintiff as being eager “to re-establish her working career”. His evidence then went on:- “There’s some evidence that she was a bit upset about everything. She didn’t have a job, lost her parents and went to see Dr. Kemp in December 1994. Do 21 Transcript 243/1 22 Transcript 243/1-18 23 Transcript 109/50 24 Transcript 87/30-50 -- 12 of 22 -- 13 you recall that?— I recall her going to see Dr. Kemp, but there was nothing that struck me as anything out of the usual, you know. Like, I wasn’t aware of anything other than a physical, a visit regarding a physical problem. I was always asking her to chase up a procedure to allow us to have children. You don’t recall her seeing him being a bit upset about anything?— I put a bit of pressure on her when we first arrived to get back into work and she may have seen him as a result of that.” 25 This latter comment is consistent with the plaintiff’s statement that the anxiety she experienced in late 1994 related to her inability to find work in her new environment even though Mr. Dew was not aware that the pressure he was imposing had that result. [44] The combined effect of the evidence of Mr. Dew and Dr. Moorthy leads me to the view that the episode of anxiety/depression in December 1992 and the plaintiff’s referral to the psychiatrist, does not suggest that the plaintiff was suffering any significant psychological problem. I see the referral as being more in the nature of providing an environment for discussion and counselling for the Dew’s marital problems. The onset of the disabling condition [45] In relation to the psychotic episode in July 1996 Mr. Dew commented that he had “never seen her (the plaintiff) like that before. She wasn’t in control of herself at all, she was very, very agitated and wanted me to reassure her, I meant her no harm and I wasn’t going to hurt her or stab her”.26 In cross examination Mr. Dew confirmed that she had never complained of symptoms such as hearing voices, having persecutory delusions or being attacked at home. He commented as follows:- “I don’t believe that she was like that. She, she’d talk to me about how she was feeling, and we had an open relationship like that. But I tried to probe into that particular one issue, to do with that business with the chap who was shot and that, she was reluctant to talk about that. She’d talk about how she feels about it, but she wouldn’t talk about the details pertaining to the actual incident” 27 [46] In cross examination it was put to Mr. Dew that the plaintiff did suffer from the symptoms I have just referred to. He replied:- “No. She didn’t as far as I’m – I’m convinced she had no – she was too much of a – she was an inspiration, she was really good. She was a really active woman, you know, in sport. The sports we did together, she’d held some good jobs, she had a good social life with friends. I mean she – I would have noticed if she’d had all those symptoms. There was a profound change in her from when she got ill, she was just a different person.”28 25 Transcript 89/25-35 26 Transcript 90/55-91/2 27 Transcript 111/35-45 28 Transcript 112/5-15 -- 13 of 22 -- 14 [47] I find that in the seven years of their association the plaintiff never displayed to her husband any of the psychiatric symptoms which she manifested in July, 1996. [48] This evidence of Mr. Dew is to be contrasted with the statements made by the plaintiff to Drs. Kemp and Likely and later to Ms. Wainwright after the onset of her psychotic symptoms. [49] The defendant relies heavily on these statements as being freely made and as demonstrating the existence of symptoms which were suggestive of the psychotic condition prior to its being diagnosed in July, 1996. If it were true that such symptoms were present, the failure on the part of the plaintiff to disclose them would constitute an obvious breach of her duty. I accept that the plaintiff made the statements reported by the respective doctors but the question is whether the statements were true. [50] Dr. Kemp recorded that on 30 July 1996, 29 the plaintiff said to him that:- • She had been hearing voices for more than a year and this was getting worse. • She had not used cannabis for the past six weeks. • She had some panic attacks and paranoid episodes. [51] Dr. Likely recorded on 19 August 1996 that the plaintiff gave him a “long history of symptoms suggestive of schizophrenia beginning in her early to middle teens”.30 This long history of symptoms included – • The sensation that she was composed of six different people, each with a different personality. • Internal debates between the different personalities taking on features of real voices. • Persecutory delusions. • Episodes of depression. The plaintiff also said that she habitually tried to self-medicate by smoking large quantities of cannabis. [52] The plaintiff has no recollection of saying these things and denies that the substance of any such comment, if made, was true. She points to the fact that she had no prior treatment for such symptoms, that she was able to maintain regular employment and that she did not smoke cannabis, save for sharing a joint on earlier social occasions. In each of these claims she is supported by the evidence of her former husband. It would be unlikely that he would be unaware of these symptoms and particularly be unaware of her cannabis use, given his aversion to that drug .31 29 Ex. 13 30 Ex. 10 31 Transcript 112/35 -- 14 of 22 -- 15 [53] An explanation for this conflict is posed by Dr. Likely in his evidence when he described the disorder from which she was suffering in July/August 1996 was to a severe degree. His evidence then reads:- “Given that she is a severely mentally disordered person, are you able to provide any guidance on how reliable the history of when the voices came would be?— Yeah, sure. Obviously when one is dealing with psychotic phenomena they, by definition, involve a blurring of the perception of what’s real and what’s false. That, of course, can affect the history that patients give you; and the more severe the symptoms get, there can be a phenomenon known as retrospective falsification, in other words the veracity of the history the patient gives you about events which they’ve experienced in the past can be questionable.” 32 [54] Counsel for the defendant argued that as the plaintiff had insight into her problems and was able to give a clear account of the onset of the symptoms it was unlikely she was wrong about their duration. However, this overlooks the very nature of the phenomenon which is to belie the rational and the normal recollection. [55] Dr. Kemp does not have a precise recollection of the words the plaintiff used to him to describe her deprived experience of psychotic symptoms but he was well aware her new complaints represented a significant change in her health status.33 He was not aware of the concept of retrospective falsification as a feature in the presentation of symptoms with severe mental disturbance. He was, however, prepared to defer to Dr. Likely’s greater expertise in such matters. He did say that having regard to his recent examination of the plaintiff and his interaction with her generally, the presentation of psychotic symptoms came as a surprise to him.34 [56] One assumes Dr. Kemp was aware of his obligation to the insurer to stress any point which called “for further inquiry”.35 Apart from the plaintiff herself, only Mr. Dew and Dr. Kemp were in the position to note behaviour which was suggestive of psychotic problems. Both had ample opportunity to observe such behaviour and neither of them saw any sign of it. I do not assess the plaintiff as a person having the subtlety to be aware of psychotic symptoms in herself and then to conceal them from her husband and Dr. Kemp who, it must be remembered, examined her on 11 occasions. [57] On balance I find the more likely explanation is that the plaintiff in her then mental condition unconsciously falsified the timing of the onset of psychotic symptoms. The plaintiff in giving her evidence was a reliable witness. The experience was difficult for her given her present condition and the intensity of her agoraphobia. Despite being cross-examined over a period of two days on matters that were emotionally upsetting, her answers, in the main, were satisfactory. On important issues her evidence was consistent with that of her former husband to which I have already made reference. I accept as correct her evidence that prior to July 1996 she did not experience psychotic symptoms. Accordingly, the evidence of her complaints to Drs. Kemp and Likely and Ms. Wainwright does not suggest to me 32 Transcript 163/4-18 33 Transcript 219/1 34 Transcript 238-20 35 Ex. 7 -- 15 of 22 -- 16 that at the time of her proposal, the plaintiff was aware of any significant mental condition of which she ought to have made disclosure. Would more detailed disclosure have made a difference? [58] There was a suggestion that disclosure of symptoms of anxiety, panic attacks, hyperventilation and depression might have put the defendant on inquiry which may have forewarned it of the impending psychotic illness, or caused it, in any event, to decline the cover. [59] As to the first of these propositions, Dr. Likely made a distinction between anxiety/depression in psychotic illness. When asked whether anxiety attacks were consistent with some degree of underlying psychotic symptoms he replied:- “No it wouldn’t be consistent with having underlying psychotic symptoms. Anxiety attacks are a different diagnostic entity, however some patients in the early stages of psychosis, when they become aware of typical symptoms or phenomena, whatever you want to call them, but not knowing what these symptoms mean, do become anxious but the occurrence of a hyperventilation or a full blown panic attack would not necessarily be correlated with an underlying psychotic illness.” 36 [60] The plaintiff’s own knowledge, and the alleged lack of detail in the proposal, was the subject of direct questioning. “Now it is true enough though, isn’t it, that you didn’t mention any of those things to Suncorp or anyone on its behalf at the time of taking out the insurance cover? – Well, no, because I didn’t – I didn’t see the necessity. Those illnesses that you were reading out to me had no significance to the illnesses that I have now. Everybody has stress in their life. Okay. It’s true, isn’t it, that in terms of considering what was relevant at the time that you took out the insurance, you’re very much influenced by the fact of the condition that you subsequently suffered. Isn’t that right? You seem to be saying to me,” None of those things are relevant because it’s not the same as the condition that I suffered in July/August 1996. “ Is that the way you’ve looked at the matter? – No, I’m telling you it’s life, it’s stress. People go through these things. What, am I the only person who ever goes to a doctor? But as what I’m trying to tell you that those insignificant things that I went to the doctor for with my bad PMT and the deaths of my family and things like that and nothing to do with my sickness that I have now. They don’t even have the same symptoms.37 [61] Nor did the plaintiff believe that symptoms of anxiety/depression, to the extent they existed prior to 1996, were within the sweep of the inquiry in the personal statement as to nervous tension/mental disorder. The following exchange occurred:- 36 Transcript 174/10 37 Transcript 49/30-60 -- 16 of 22 -- 17 “MR. KIEM: So, when you dealt – when you dealt with that question about a disorder of your nervous system and brain which is nervous tension, nervous exhaustion, mental disorder or epilepsy ----? – Uh-huh. ---you thought, well problems with grieving come within that general set of questions and ---? – I took --- --- it’s appropriate for ---? ---I took the nervous tension --- Okay? --- as that, yeah. Okay. Did you specifically relate it to that or did you say, well this question relates to general psychological problems ---? – No, no. Just that. Okay? – Yeah. Well, I suggest that issues of hyperventilation and anxiety attacks also come within the sweep of that question. Do you agree with that? – No, not really.”38 [62] I accept as genuine the plaintiff’s claim in this regard. Apart from the need to maintain the distinction between “symptoms” and what might add up to a “medical condition”, there is a question of degree in all of this. If, for example, the anxiety/depression were such as to make a change in her pattern of life, interfering with her employment and suchlike, then there would be a basis for suggesting such symptoms ought to be disclosed but if the symptoms are intermittent and what one might regard as a normal response to life’s stressors without interference of normal routine, then it seems to me that a reasonable person would not be expected to regard such a matter as relevant. Even the single condition identified – adjustment disorder – falls into this category in my view. [63] As to the second proposition – the insurer being put on notice – the starting point is the fact that proposals for TPD cover are scrutinised more closely than those for whole of life cover. Mr. Williams gave evidence for the defendant on this topic. He was employed by the defendant in various capacities for 32 years before he took early retirement. He, during that time, underwent various examinations which led to him becoming an associate member of the Australian Insurance Institute. He was a qualified insurance underwriter. He was the person responsible for acceptance of the plaintiff’s proposal. He described the process of dealing with an application for insurance cover and the use of the underwriting manual in this process. The manual was tendered39 and its contents are generally referred to in the evidence as “guidelines”. [64] Mr. Williams, unsurprisingly, said if he had been made aware of the psychotic symptoms which the plaintiff had said pre-existed the July 1996 episode, he would have declined the plaintiff’s application for TPD. Mr. Williams was also asked to consider the details of each of the complaints of anxiety/depression made by the plaintiff in the preceding five years. With regard to the December 1994 visit to Dr. Kemp and the taking of Prozac, Mr. Williams said that would have been considered against the guidelines of neurotic illness present in the preceding four years. 38 Transcript 120/38 39 Ex. 26 -- 17 of 22 -- 18 Similar consideration would have applied to the August 1995 visit to Dr. Kemp. But of course the defendant, both through the plaintiff’s personal statement and the report of Dr. Kemp, was aware of these two incidents and it does not appear to have caused any concern for further inquiry or indeed any hesitation in granting the insurance cover. [65] Mr. Williams was also asked to consider the detail of the plaintiff’s earlier visit to Drs. Khan, Vij, Teo and Moorthy in Sydney. The level of detail which was put to Mr. Williams about these visits was a great deal more extensive than the information ordinarily expected to have been presented to an underwriter. At best for the defendant, all that could be said is that if the plaintiff's proposal contained more detail about the earlier treatment this disclosure would have triggered further inquiry. [66] The relevant guideline does not provide much assistance to the defendant in this case. Under the section Neurosis, the guidelines suggest that for mild or moderate neuroses there should be a loading on the premium if there has been “an acute episode of depression within the last year”. In respect of TPD cover, consideration for the loading would arise if there had been an acute episode in the past two years. It is only in circumstances of severe neurosis, or of slow response to treatment with psychiatric support, or attempted suicide that the cover would be declined. Mr. Williams did not in fact refer to the guidelines in respect of the plaintiff’s proposal.40 It was unnecessary for him to do so because the proposal referred to a one-off mention of stress. Mr. Williams, as an experienced underwriter at that time, did not make frequent referrals to the guidelines in any event. [67] However, Mr. Williams said, had he been aware of the earlier visits to the doctors in Sydney he would have written to them for reports. The contents of the reports I imagine would be no more detailed than the evidence which those doctors have now given to this court. Such reports would not have disclosed any severe neurosis nor, indeed, any significant medical condition. Therefore, in my view, those reports would have been unlikely to have caused an experienced underwriter to decline the proposal. In support of this viewpoint, Mr. Williams in cross-examination said that the instances of declining proposals because of mental illnesses would be less than one percent.41 [68] Mr. Williams explained his failure to seek more specific answers to the questions in the personal statement by the fact that he assumed that the “family deaths” referred to in response to question 1(a) was the cause of the “stress” referred to in response to question 2. There was no basis for him making that assumption and he readily agreed that neither answer was responsive to the specific question. He agreed also that he could, if he so wished, have sought clarification. [69] The shortcomings in the plaintiff’s personal statement would be obvious to anyone reading it. “Family deaths” is obviously not a medical condition but it was an attempt by the plaintiff to alert the insurer that she did have psychological problems associated with family deaths. That would include the death of her partner when she was 19 years of age, the death of her cousin in 1990 and the deaths of other 40 Transcript 276/55 41 Transcript 288/30 -- 18 of 22 -- 19 family members which occurred between 1992 and 1994. The responsive answer which the plaintiff could have given would have been simply “nervous tension”. None of the other suggested disorders in the question would have been appropriate in the plaintiff’s medical history. The plaintiff, however, has chosen to identify one cause for symptoms of nervous tension. There were no doubt others e.g. marital disharmony, or difficulty with separation. If the defendant was concerned by the lack of specific identification of the nervous disorder then it could have sought a precise answer. It failed to do so. Similarly the term “stress” is not an illness but rather a symptom for which further explanation could have been sought. Waiver This gives rise to a consideration of the pleaded issue whether the defendant, in terms of s.21(3) of the Act has waived compliance with the duty of disclosure.42 It must be determined whether the expression “family deaths” or “stress” is an obviously incomplete or irrelevant answer to the question seeking an identification of a medical condition. As I have found, the plaintiff was genuine in her attempt to make a complete answer. Mr. Williams interpreted her answer to Question 1(a) as providing an explanation for the stress condition which she referred to in Question 2. [70] In this connection I was referred to a decision of the Court of Appeal in Orb Holdings Pty Ltd v Lombard Insurance Co. (Australia) Limited 43 in which Fitzgerald P said:- “It remains to refer again to ss 21(3) and 27 of the Insurance Contracts Act. By virtue of those provisions, the appellant cannot take advantage of either a failure to disclose or a misrepresentation by the respondent if the information given by the respondent was “obviously incomplete”. The rationale behind those provisions is that obviously incomplete information puts the insurer on inquiry and, if it omits to inquire, it has waived its right to rely upon the insured’s failure to disclose or misrepresentation. In the context of the plaintiff’s answers generally, in the personal statement and the medical report which was subsequently sent by Dr. Kemp, the circumstances would not necessarily put an underwriter “on inquiry”. [71] Whether an answer is “obviously incomplete” for the purpose of s. 21(3) of the Act has to be looked at, in my view, in light of other information coming to the knowledge of the insurer. The concept of waiver essentially involves an election – an election which allows the exercise of alternative and inconsistent rights. 44 Here the alternatives are to inquire or not to inquire. The consequence of not inquiring is quite significant, namely the absolving of the proposer from his/her duty to disclose. [72] In my view the plaintiff’s answers in her personal statement are unresponsive rather than “obviously incomplete”. Mr. Williams’ satisfaction with the information that 42 (1995) 2 QdR 51 See also Suncorp General Insurance Ltd v IM Engineering Pty Limited [1999] NSWSC 1008 (6 October 1999) 43 Ibid at p.53 44 Sargent v ASL Developments Ltd (1994) 131 CLR 634 at p. 655. -- 19 of 22 -- 20 came before him when he made the decision to accept the proposal was not an act of an election on his part but rather his preparedness to accept the plaintiff’s answer in the context of the other information which he had. Therefore, I would find that there was no waiver of the kind contemplated by s.21(3) of the Act. Conclusions [73] The plaintiff did not respond fully to Question 2 in the personal statement by her failure to identify the names of the medical practitioners whom she consulted, other than Dr. Kemp. Her failure to do so stemmed from her genuine belief that symptoms which caused her to consult those practitioners did not identify a material injury or illness. In those circumstances the visits were not relevant to the insurer’s acceptance of the risk. Even if she had identified the doctors by name and identified the symptoms she experienced on each occasion, it is unlikely that there would be any difference in the identification of illness or injury. On each occasion the plaintiff appears to have recovered completely from the intermittent episodes of stress and her treatment, at the hands of the Sydney doctors, was non-specific. In response to direct questioning Mr. Williams agreed that he could not say positively that the proposal would be declined even if the plaintiff’s medical history was disclosed to be as alleged in the defence. [74] From the insurer’s point of view, of all the medical practitioners who treated her, Dr. Kemp obviously had the best appreciation of the plaintiff’s insurability. It was on the defendant’s behalf that Dr. Kemp carried out the medical examination. The plaintiff completed the personal statement in his presence, presumably with an expectation that he would apply whatever knowledge he had of her past medical conditions. It was likely that he would have knowledge and understanding of the plaintiff’s medical history to a greater extent than was expressed in his medical notes. It was the defendant, through its agent Mr. Barber, who prevented the plaintiff from answering questions about anxiety/depression which might well have elicited the history of her medical consultations in Sydney. [75] These are the extrinsic factors which, for the purpose of s. 21(1)(b) of the Act, constitute to the circumstances in which the objective assessment is to be made. In those circumstances I have taken the view that the plaintiff has conveyed to the insurer the matters that she knew to be relevant for a decision which the defendant had to make. In my view also, a reasonable person in the circumstances would not have regarded the symptoms complained of to the medical practitioners as being relevant to the insurer’s risk. [76] It follows therefore that the defendant has failed to convince me that there is any fraudulent misrepresentation on the part of the plaintiff or that there was any breach in her duty of disclosure as contemplated by the Act. [77] Accordingly, I allow the plaintiff’s claim and I dismiss the defendant’s counterclaim. Damages [78] The policy of insurance provided that the TPD entitlement would arise after a six month qualifying period. The plaintiff ceased employment because of this -- 20 of 22 -- 21 disability on 28 December, 1997. On the view that I have taken of her claim she was entitled to be paid the policy benefit at least by 30 June, 1998. [79] The policy terms provided for an automatic indexation of the benefit unless this facility was declined. 45 The plaintiff had for the period ending 17 July, 1998 availed herself of the indexation. The letter from the defendant to the plaintiff dated 12 June, 1998 46 indicates that her benefit entitlement during that period was $520,000. On renewal of the policy the indexed level of benefit would be $540,800.00. This claim was lodged prior to the end of that period and before the renewing premium had not been paid. I have no doubt that the plaintiff would have renewed her policy taking advantage of the indexation facility given that the cost of doing so was $2.14 per month. But the time for renewal had not then arrived. [80] The relevant policy term and condition on this issue is found in Section 12 of the policy document 47 and is in the following terms:- “How the benefit is paid When a claim has been accepted by SUNCORP we will pay the benefit. Under Pt. (B) of the definition for total confirming disablement, you must be wholly and permanently disabled for six consecutive months. If your claim is admitted for total and permanent disablement, no further premiums are payable while you benefit is being paid. We will pay you the benefit: • In no more than 10 equal payments, one every six months; • At our discretion, as a lump sum payment. The amount of term life insurance cover and total and permanent disablement benefit for the insured person concerned, will be reduced by the total amount of total and permanent disablement claim payments made by you. This may result in the term life insurance cover ceasing altogether when the total and permanent disablement benefit has been paid in full.” [81] The defendant ought to have accepted the plaintiff’s claim on or before 30 June, 1998. At that time the benefit was $520,000. That, therefore is the amount that should have been paid and payment would have resulted in a termination of the policy. [82] I assess the damages suffered by the plaintiff at $520,000 together with interest on that amount at 9% per annum to the present day. Orders 45 Ex. 3 46 Ex. 4 47 Ex. 3 -- 21 of 22 -- 22 1. I give judgment for the plaintiff on claim in the sum of $520,000 together with interest on that amount at nine per cent per annum from 1 July, 1998 to the date hereof. 2. The defendant’s counterclaim is dismissed. 3. The defendant pay to the plaintiff the costs of and incidental to the claim and counterclaim to be assessed. -- 22 of 22 --