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CITE

Unreported Judgment

Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd[2002] QDC 126Forde DCJ
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Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd[2002] QDC 126

DISTRICT COURT OF QUEENSLAND

CITATION:	Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd [2002] QDC 126
PARTIES:	WENDY LEE SCHAFFER Plaintiff -v- ROYAL & SUN ALLIANCE LIFE ASSURANCE AUSTRALIA LIMITED ACN 001 698 228
FILE NO/S:	D 4239 OF 2000
DIVISION:	Civil Jurisdiction
PROCEEDING:
ORIGINATING COURT:	Brisbane
DELIVERED ON:	10 May 2002
DELIVERED AT:	Brisbane
HEARING DATE:	15 April 2002
JUDGE:	Forde DCJ
ORDER:	JUDGMENT FOR THE PLAINTIFF WITH COSTS TO BE ASSESSED.
CATCHWORDS:	INSURANCE – life policy of insurance – totally and permanently disabled – “unlikely ever to be able to work again in their own occupation” – non-disclosure or misrepresentation Insurance Contracts Act 1984 (Cwth) ss 21, 26 and 29 – whether insured knew matter to be relevant to insurer determining whether to accept the risk and if so on what terms – meaning of “known” discussed – onus on insurer under s. 29(1)(c) Australian Casualty Life Ltd v Hall (1999) 151 FLR 360 followed Butcher v Port (1985) 2 ANZ Insurance Cases 60 followed Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Insurance Cases 61-113 followed McArthur v Mercantile Mutual Life Insurance Company Limited (2001) QCA 317 followed Vernon v Bosley (No. 1) (1999) 1 All ER 577 at 611 followed White v The Board of Trustees (1997) 2 Qd R 661 followed Dew v Suncorp Life & Superannuation unreported 21 March 2001; affirmed on appeal 26 October 2001 followed Twenty First Maryland Pty Ltd v Mercantile Insurance (Aust) Ltd (1990) 6 ANZ Insurance Cases 60-954 Herbohn v NZI Life Limited (1998) 10 ANZ Insurance Cases 61-410 considered Tyndall Life Insurance Co Ltd v Chisholm (1999) SASC 445 CIC Insurance Limited v Midaz Pty Ltd (1998) 10 ANZ Insurance Cases 61-394
COUNSEL:	P. Hay for the plaintiff J. Sweeney for the defendant
SOLICITORS:	Murphy Schmidt for the plaintiff Hillhouse Burrough McKeown for the defendant

Contents

Introduction3-4
The Policy 4
Clause 19.1 – Did The Defendant Make A Decision 4-7
The Issues 7-8
The Evidence 9

Dr Peter Kenneth Joseph 9-12
Plaintiff’s Evidence Of Symptoms And Medical Treatment 12-15
Dr David McEvoy 16-18
Dr Ivan Paul Holm 18-24
Dr Nigel Prior 24
Dr Doron Samuell 24-25
Dr Patrick Doughty 25-27
Paul Witzerman 27-28
Patricia Jane Barker 28
Dr David Alcorn28

“Absent From And Unable To Work Because
Of The Injury Or Illness For A Continuous
Period Of At Least Six (6) Months31-33
“Incapacitated To Such An Extent ...
Unlikely Ever To ... Work Again In ... Own
Occupation34-35
Credibility Of Plaintiff 36-38
Non-Disclosure 38-42

Circumstances Surrounding Execution Of Proposal 42-45
The Relevant Case Law 46-49
Alternative Basis For Non Disclosure 49-50

Section 26: Was There A Non-Disclosure
Amounting To A Misrepresentation 50-51
Section 29 – Remedies For Non-Disclosure
And Misrepresentation 51-52

Evidence And Findings In Relation To S. 29 52-59
Denial Of A Fair Trial 59-60

Summary Of Findings 60-61
Orders 61

Introduction

[1]
The plaintiff in this action is Wendy Lee Schaffer. The plaintiff seeks declaratory relief and benefits under a policy of insurance with the defendant, Royal & Sun Alliance Life Assurance Australia Limited. The said policy was a Recovery Insurance Policy which relevantly gave benefits to the plaintiff in the event that she should become “totally and permanently disabled” from performing her “own occupation” which in the present case was a credit officer. The defendant agreed to pay to the plaintiff the sum of $100,000.00 plus an indexation benefit and any increasing claim benefit. The defendant initially refused relief on the basis that the plaintiff was not so disabled and later for material non-disclosure.

[2]
A proposal^[1]was lodged by the plaintiff through her broker one Graham Lavin and was dated 26 August, 1998. The said policy was issued on 8 September 1998 but commenced on 3 September 1998. The plaintiff made a claim on 7 January 2000.^[2]

[3]
She had resigned from her employment with Queensco-Unity Dairy Foods Co-operative Association Limited (“Queensco”) on 1 July 1999 on the ground she alleges, that she could not perform her duties as a credit officer due to breathlessness caused by stress.

The Policy

[4]
The said policy^[3]provided as follows:

“1.
We pay in the event of … total and permanent disablement.

We will pay the sum insured for benefit 1 set out in the schedule if on or before the expiry date for benefit 1 set out in the schedule:

-the insured person becomes totally and permanently disabled as defined in section 19.

19.
Total and permanent disablement of the insured person

We will pay for “total and permanent disablement” if the insured person:

-is permanently unable to work (see section 19.1)….

19.1
Permanently unable to work

This section of the definition only applies if the insured person suffers an illness or injury both:

-before the anniversary of the commencing date when the insured person is 65 and before their permanent retirement; and

-while they are working in regular employment for income…

Own Occupation Definition

If the schedule states you have the “own occupation” definition, the insured person is totally and permanently disabled if:

-they have been absent from and unable to work because of the injury or illness for a continuous period of at least 6 months, and

-we believe, after consideration of medical and any other evidence, that they are incapacitated to such an extent that they are unlikely ever to be able to work again in their own occupation”.

Clause 19.1 - Did the defendant make a decision?

[5]
It is pleaded the Amended Statement of Claim that:

“8.
On or about 17 December 1999 the plaintiff:

(a)
had been absent from and unable to work because of injury or illness for a continuous period of at least six months:
(b)
was incapacitated to such an extent that she was unlikely ever to be able to work again in her own occupation.”

[6]
The plaintiff delivered to the defendant a claim form dated 7 January 2000. The medical reports of Dr. Joseph her general practitioner and Dr. McEvoy a thoracic specialist were enclosed. The defendant also obtained medical reports. The extent of the material placed before the defendant is not relevant for the purposes of the present discussion. It is sufficient to state that the defendant wrote to the plaintiff on 29^th March 2000 advising her that the plaintiff’s condition did not fufill the definition of “Total and Permanent Disablement” and that the defendant would review the claim upon receipt of specialist medical evidence^[4].

[7]
By letter dated 2 May 2000^[5], the plaintiff forwarded to the defendant a report from Dr. Holm, a psychiatrist. The report supported the plaintiff’s claim that she was permanently and totally disabled within the meaning of the policy. This report was dated 18 April 2000^[6]. On or about 25 July 2000, the plaintiff was examined by Dr. Alcorn, psychiatrist for the defendant. By letter dated 30 August 2000^[7], the defendant advised the plaintiff that it avoided the policy under section 29(3) of the Insurance Contracts Act 1984 (Cth) (the “Act”) on the ground of material non-disclosure. It related to answers in the insurance proposal which were said to be incorrect. In other words, the defendant did not make a decision about whether the plaintiff was unlikely to work in her own occupation or that she was “totally and permanently incapacitated.”

[8]
By letter of 12 September 2000, the plaintiff’s solicitors rejected the allegations of non-disclosure and made demand on the defendant for the sum of $106,090 pursuant to the policy^[8]. This included the sum insured of $100,000.00 and other benefits. By letter of 18 September 2000, the defendant broadened the allegations of non-disclosure and again sought to avoid the policy from its inception.^[9]

[9]
If the defendant’s election to avoid the policy was erroneous, then it is necessary to determine whether the defendant should have made a decision within the meaning of clause 19.1 of the policy. The defendant, after inviting the plaintiff to send further material did not, I find, make a decision within the meaning of the policy. What is the effect of that omission? A recent decision of the Court of Appeal in Queensland assists in the determination of this question. In the case of McArthur v Mercantile Mutual Life Insurance Company Limited^[10] (McArthur’s case), the Court held that where the decision of the insurer was found to be invalid, the question whether the plaintiff was “totally and permanently” disabled is to be determined by the Court. The Court of Appeal applied the decision of Butcher v. Port^[11] (Butcher’s case). In McArthur’s case a decision was in fact made but on an erroneous standard of proof. The decision of the insurer was held to be a condition precedent to the obligation to pay. What if there is wrongful conduct on the part of the insurer? Reference was made to the decision of Edwards v The Hunter Valley Co-op Dairy Co Ltd.^[12]. Relying on Butcher’s case^[13]it was held by McLelland J. in Edwards’ case^[14]that the insurer cannot rely on non-fulfilment of the condition precedent if fulfilment was prevented by its own default. The default in the present case was that the defendant did not make a decision once the plaintiff provided further material notwithstanding the invitation to do so on 29 March 2000. It then becomes, I find, a question for determination by this Court^[15]. A finding in favour of the plaintiff would only be relevant if the defendant fails on the defence of non-disclosure.

[10]
The proper approach in determining whether the plaintiff was totally and permanently disabled within the meaning of the policy is to look at all of the evidence not only as at the date that the decision ought to have been made but up to the present time provided that the evidence is pertinent to the determination of the plaintiff’s condition at the relevant time.^[16]For present purposes that date is to be September 2000. It seems an appropriate time as by then both the plaintiff and the defendant had obtained further specialist reports. This allowed a reasonable time for the defendant to consider the material and obtain legal advice. Also, the first and second notices to avoid the policy had been made by the defendant by 18 September 2000. Both parties have accepted that September 2000 is the appropriate date. It was not argued by counsel for the defendant that a decision was made by the defendant pursuant to clause 19. The defendant clearly relied upon the avoidance provisions of section 29 of the said Act in refusing to pay.

The Issues

[11]
The main issues in this case are:

Was the plaintiff working in regular employment for income? She had been working for Queensco since 1995.
Was the plaintiff unable to work for a continuous period of six (6) months up to 17 December, 1999 because of her illness? Neither
counsel has suggested any other period. The claim was made on 7 January 2000. Paragraph 8 of the Amended Statement of Claim refers to the six months period up to 17 December 1999.
Was the plaintiff incapacitated to such an extent that she was “unlikely ever to be able to work again in her own occupation” as a credit officer as at September, 2000? She was suffering from symptoms such as breathlessness and was subsequently diagnosed as having as an anxiety condition.
Was there non-disclosure by her when she filled questions 7 and 12 in her proposal within the meaning of section 21(1) of the said Act? The plaintiff failed to tell the insurer that she had seen Dr. Joseph in December 1997 and that she had complained to him then of breathlessness. In fact, she represented in her proposal that she had seen Dr. Joseph in July 1997 for “Routine check up (yearly) – No medical reason Fully fit”. In answer to the question “Have you had any symptoms, sickness, injury, taken any prescribed medication, or consulted a doctor...in the last 12 months?” the plaintiff answered in the negative. As mentioned the proposal was dated 26 August 1998.
Did the non-disclosure of the plaintiff entitle the insurer to avoid the policy under section 29(1)(c) or 29(3) of the Act?

The Evidence

[12]
It is important to keep in mind that those reports which came into existence after September, 2000 are still relevant provided that “they are pertinent to the determination of the appellant’s (plaintiff’s) condition at the relevant time”.^[17]

Dr. Peter Kenneth Joseph

[13]
The plaintiff began to attend his surgery in December, 1986. He was her general practitioner. His notes are Exhibit 1 document 2. His evidence at trial also touched upon those entries and is referred to as well for completeness. The first entry in relation to breathlessness was 8 February 1993. The plaintiff complained of “air hunger”. Dr. Joseph ordered a full blood count to check for anaemia. The blood count was normal as was blood pressure, heart and pulse. He asked her to return for a full assessment. The next consultation was on 1 July 1993. The breathlessness complained of was not “strictly” pre-menstrual. The plaintiff said that she felt that she could not breathe properly. It was not aggravated by exercise. A chest X-ray was normal. This was done at the Redlands Hospital in July 1992. Her respiratory test in July 1993 was good and better than predicted for someone of her age and height according to Dr. Joseph^[18]. Dr. Joseph was unable to diagnose a cause.

[14]
Other tests included a histamine challenge which is used as a diagnosis for asthma. An echocardiogram was also undertaken. This is an ultrasound to check the function of the heart. Dr. Joseph also put down a halter monitor which is a 24 hour test to assess the rhythm of the heart. The plaintiff was then referred to Dr. Shirley Coghlan, a physician, at the Princess Alexandra Hospital. Dr. Coghlan found no cause for the shortness of breath. Regular monitoring with a peak flow meter was suggested by Dr. Coghlan. Although it was intended for the plaintiff to return to Dr. Coghlan in six weeks time this did not occur.

[15]
The plaintiff did see Dr. Joseph on 25 June 1997 as mentioned in her proposal form. However, that consultation related to a general check up and did not relate to the question of breathlessness. The next relevant entry is 23 December, 1997. It is convenient to set out the evidence of Dr. Joseph on this consultation^[19]as it interprets his entries and removes any doubt about the legibility of his notes:

“I am having trouble breathing. Feels she is not inhaling enough air. See entry 1993 – was referred to medical out-patients Princess Alexandra Hospital – see letter Dr. Couglan.” Under my assessing her symptoms, “No chest pain, tightness, not related to exertion. Definitely better at night.” Goes on, “Progressively more annoying over the past one and a half to two weeks” On examination, lungs were clear. Respiratory function testing was again very satisfactory, in fact above predicted, although I did note the patient did feel subjectively significantly improved. I did what we call pre and post tests there which are we do (sic)respiratory function, we give the patient some nebulised Ventolin, which is an asthmatic medication, and we do post airway studies; in other words, we repeat them to see if there is any reversibility. The essence of it is even before Wendy Schaffer had any form of asthmatic treatment, her respiratory functioning tests are very, very good and not indicative of asthma. So that was a subjective response, not a quantifiable response. So my assessment of the cause of her symptoms or the cause of complaint, that is a question mark which means unknown. Respiratory function tests, RFT, are not supportive of asthma. There is no symptom of ischaemic heart disease and therefore I ordered a serum feraton (sic) which is in fact an indicator of iron storage. That was normal. I ordered a full blood count which was normal and I did thyroid function tests which were normal”.

[16]
Further, Dr. Joseph gave the following evidence:^[20]

“…I put her on a trial of Bricanyl, which is an asthmatic medication which opens the airways, and I said I would like her to try that and then I would review her…There was no diagnosis made.”

[17]
Dr. Joseph did refer to the histamine challenge test which was borderline. He described the test as probably not being significant. He confirmed that the plaintiff had never been diagnosed, at that point at least, with a stress anxiety or depressive illness. The next consultation was on 30 October 1998, after the claim had been made on the policy. Reference was made to the December 1997 consultation. The plaintiff was complaining of being short of breath. Dr. Joseph confirmed that her iron studies were normal. At that stage, Dr. Joseph referred the plaintiff in November 1998 to Dr. McEvoy, a thoracic specialist. It was later confirmed by Dr. McEvoy that the breathlessness was stress induced.

[18]
By the next consultation on 11 March 1999 Dr. Joseph was in possession of the report from Dr. McEvoy. Obviously, the plaintiff was aware of the diagnosis as she had taken steps to limit her stress levels. Her employment was seen as her main source of stress. By 7 June 1999, the plaintiff stated that she was not coping and was emotionally drained. She was given a sickness certificate from 17 June to 2 July^[21]. When she returned on 1 July, she told Dr. Joseph that she had resigned from work. The plaintiff indicated that she wished to take a break. Dr. Joseph wrote a letter of that date addressed to no one in particular and it stated inter alia “I feel that she should take an extended break from work to recover and consider her options. All options need to be considered including resignation”.^[22]

[19]
Dr. Joseph did not agree that he had suggested that she resign but that it was an option which he may have discussed. In cross examination, Dr. Joseph stated that he would have told the plaintiff that he was unable to give a diagnosis. He would not have said “there is nothing wrong with you”. I accept that evidence. The fact that he advised further treatment with Bricanyl showed that he was still investigating and attempting to treat the symptoms. One must remember that this was some eight (8) months prior to her filling in the proposal form. It would be of assistance in a chronological sense at least, to look at what the symptoms were as far as the plaintiff was concerned up to June, 1999, when she stopped work. She resigned in early July 1999.

Plaintiff’s evidence of symptoms and medical treatment

[20]
In her affidavit^[23], the plaintiff sets out in detail the nature of her duties with Queensco after the merger with Australian Co-operative Foods. The nature of that work, I find, would have caused the plaintiff to be stressed. Whether it would have adversely affected a person of ordinary physical and mental attributes is another question. Suffice to say that such stress is capable of causing breathlessness. Her medical treatment history is to be found in her affidavit^[24]. The plaintiff suffered from intermittent breathing problems from 1993. Medication such as Ventolin did not assist. When she first consulted Dr. Joseph in 1993, the symptoms had subsided. Between July 1993 and September 1993 when the plaintiff saw Dr. Coghlan, the symptoms had not returned. The plaintiff did not return to Dr. Coghlan as the letter said that she could not assist the plaintiff until she saw her when she was suffering the shortness of breath.

[21]
The plaintiff initially thought it may be asthma and then some type of allergy. Dr. Joseph had discounted asthma. Between 1993 and November 1997, the breathlessness was sporadic. It did not require medical attention. It would arise once every few months and last “for a couple of days at most and then go away”. ^[25]The plaintiff continued to believe it was an allergy. She had no symptoms for months at a time.^[26]By December 1997 the shortness of breath returned. It had become more annoying over a one and a half to two week period. The plaintiff then consulted Dr. Joseph again. She said that after further tests which were normal she was given “a clean bill of health”. The Bricanyl prescribed by Dr. Joseph gave no relief but produced headaches and nausea. After a couple of uses it was discarded by the plaintiff. Given the intermittent nature of the symptoms and the normality of all tests, I find, that for a lay person, given there were no sinister findings, she was justified in thinking that she had “a clean bill of health” albeit she suffered from breathlessness from time to time. I am satisfied that Dr. Joseph did not use those words. He said that he was unable to diagnose any condition.

[22]
In the period from June, 1996, the following appears in the affidavit of the plaintiff:^[27]

“32.
By June 1996 the staff numbers in the credit department had been reduced from eight (8) to four (4) with the removal of a Credit Controller and all three (3) of the Claims Processors.

We were told that because the bulk of the cashflow would be transferred to Sydney with the more lucrative Cheese (Industrial) accounts, the company could not justify the Brisbane staff numbers and that the workload would ease with the implementation of the new computer system in the following year.
This meant that the Corporate Credit Manager, myself and the remaining credit controller had to pick up the work of the lost credit controller and the credit processors.
The reduced staff numbers and the unchanged workload meant that our hours increased. The pressure to keep the credit department’s work up to date was constant.
By July 1998 our department’s requests for temporary staff to lend a hand were being ignored and the new computer system had not been rolled out.
We were told that the new computer system would be rolled out in the latter part of 1998 and that it would be the answer to all our problems and ease our workload. It was intended that all staff were to be trained on the new system prior to rollout.
By December 1998 the rollout of the new system had still not happened. The IT department were having problems with the implementation of the new system in Queensland and were not ready to go live. We had received one hour of staff training on the new system. The training was not hands-on because the new terminals had not arrived for our department yet.
The computer rollout date was set for 1 January 1999. Our IT department were told that they would have to rollout the new system on that date, whether they were ready or not.
On 11 January 1999 I arrived back to work from Christmas holidays to find a new PC on my desk and the new computer system implemented. Because of the limited training we had received, I still did not know how to use the new system.
I was also advised that the new system had crashed during the go live rollout, there was no back-up system in place and that a management decision had been made to load and send the delivery trucks out to deliver product without the necessary paper work. Therefore we had no signed documentation for the receipt of any goods from the customers. We had no record of the product we had delivered and we had no paperwork to give the customer to cross reference what they had ordered with what they had received. This made the collections for this product impossible to enforce.
The new system only got worse, the customers billing system did not work and we were unable to generate statements for three weeks on 7-day accounts. This severely affected our cashflow. When the billing system was able to generate statements, the integrity of the data was, to say the least, questionable. The running of the statements used to take me a maximum of four hours to complete each week. This process, with the new system, was now taking a minimum of two and a half to three days to complete. With this increased time frame to produce statements it was agreed that a temporary assistant might be necessary to help out.
By the end of January 1999, the new computer system had doubled our workload through errors, causing customer queries, complaints and the requests for PODs to verify deliveries.
Out of frustration, I made some inquiries and found out that this ‘new’ computer system (RAMS) was at least 25 years old and that the system was being ultimately supported by a firm in New York, USA. This meant that any problems or queries that our IT people could not solve had to be reported to the IT support team in the USA to be resolved.
In February 1999 the pressure increased with the new computer system consistently producing errors on the customer accounts. Payments were slow and anything queries usually was not paid. Errors were being produced by the new computer system faster than the staff, then numbering five (5), could sort them out. Overtime was still required to try and get the job done.
Customers were very upset and abusive. Not only were the accounts wrong, but the delivery system to verify what they had received did not exist. On top of all this, the credit department was trying to work on a new computer system that we still only had one hour of training on.
March to June 1999 were the worst three months. I was getting run down and I felt that I just could not keep going. Following the implementation of the new computer system in January 1999, I had increased difficulty coping with most things in my work and personal life. During my day at work, I knew that I had to keep my emotions under control to get the job done, but at night I would often go home and cry.
By June 1999, the stress of my work environment had become too much. I could not sleep and I was experiencing severe headaches. I was taking pain killers, namely Mersyndol, to relieve muscle spasms and headaches. I was often woken at night with severe headache and would take Mersyndol to go back to sleep. I was suffering from pains in my chest because I couldn’t control my breathing. I was breathless and had difficulty breathing. I felt emotionally strained and frustrated. The muscle spasms in my back and neck also caused me a lot of pain.
I stopped work on 17 June 1999.
On 18 June 1999, I told the corporate credit manager, Ray Sylvia, that I had a medical certificate that was valid for two weeks.
During my two weeks of sick leave I felt that I could no longer cope in the work environment and, out of concern for my medical condition and worsening ill health, I did not return to work.
Accordingly on medical advice, I resigned on 2 July 1999.”

I generally accept the plaintiff’s evidence of the history she gave to the various doctors and her evidence about her working conditions. The plaintiff said that she acted on medical advice when she resigned. This aspect is somewhat inaccurate. Dr. Joseph and Dr. McEvoy suggested she consider a change of employment.

Dr. David McEvoy

[23]
The first report of Dr. McEvoy is dated 24 September 1999.^[28]The plaintiff saw him firstly in November 1998. He found that the plaintiff’s pulmonary function tests were normal as were the resting electrocardiogram and thyroid function tests. He did note that:

“…She had first noticed intermittent dyspnoea in 1993 and over the subsequent 5 years her symptoms increased in frequency and severity. The principal complaint was of air hunger and sometimes the sensation was accompanied by retrosternal chest discomfort and hyperventilation”.

[24]
He was of the view that the plaintiff’s symptoms were “strongly suggestive of psychogenic dyspnoea”. Dr. McEvoy said that he discussed with the plaintiff the prospect of changing her employment. After that consultation in November 1998, the plaintiff returned for a review on 20 September 1999. During that period she had undergone relaxation treatment, regular exercise, massage therapy and used music for relaxation. Her symptoms occurred infrequently. The plaintiff told Dr. McEvoy that her symptoms would recur with greater severity if she returned to her former employment as a credit officer. Given what had occurred in the six (6) months prior to her resignation, I am satisfied that the plaintiff was genuine in her belief when she saw Dr. McEvoy in September 1999.

[25]
In his evidence, Dr. McEvoy said that he may have questioned the plaintiff as to the types of activities which trigger the symptoms in the home or workplace. In fact, given the sentence in his report just prior to the consultation on 20 September 1999, it follows, and I so find, that the question of a change of employment was probably discussed as a means of relieving her symptoms. This was confirmed in his evidence in chief.^[29]Dr. McEvoy was not saying that she could not perform her duties as a credit officer. In fact, he answered in the negative a question for the insurer HIH in or about November 1999:^[30]

“Is Ms. Schaffer totally disabled and unable to perform her occupational duties as a credit controller?”

[26]
The plaintiff did not mention to him any other stressors in her life. By the time that she resigned in July 1999, she had departed with something in the vicinity of $97,000.00 towards a scheme which later turned out to be a total loss.^[31]It is not clear when she learned that she had suffered a loss. What she did tell Dr. McEvoy was that her breathlessness prevented her from performing her job as a credit officer. He disagreed with her conclusion. He accepted in evidence that she told him that her symptoms were work related.^[32]She was unable to tell him anything different or new about her job which may have caused her to be stressed. When one looks at her medical history and the change of employment in the credit industry, one can find that when doing this type of work her symptoms manifested themselves.^[33]Dr. McEvoy did point out^[34]that the plaintiff did not seek any formal treatment from medical practitioners for her condition. It must be acknowledged that the plaintiff was trying to remove from her life some of the stressors which she believed had contributed to her condition. She had obtained her Certified Credit Executive certificate in October 1998, and I accept that she was endeavouring to return to work to improve her health. The plaintiff commenced a regular exercise programme, set aside time for relaxation and attended the Relaxation Centre and gave up the Amway business. By January 1999, the symptoms of muscle spasm, difficulty sleeping, mood swings and severe shortness of breath continued. By June, she had had enough. Her symptoms disappeared gradually but not completely after giving up work. She was controlling her anxiety by January 2000.^[35]In February, the severe symptoms began again. The trigger for this, I find, was the sudden sale of the home she shared with Mr. Hertzog. This required an urgent move. By March 2000, she had consulted Dr. Holm.

Evidence of Dr. Ivan Paul Holm

[27]
Dr. Holm, a psychiatrist, was first consulted by the plaintiff in March, 2000. Between then and March, 2002, the plaintiff consulted with him on three or four weekly intervals.^[36]He was of the view that the plaintiff was not capable of continuing as a credit officer. His evidence was that she:

“had been hypersensitised to that environment due to stresses she experienced with her previous employment and I believe that were she to attempt to work in the environment again, that she would experience considerable rise in her anxiety levels, quite irrespective of what treatment she may have had in the meantime and that she would be unable to cope with the stresses of that environment”.^[37]

[28]
In a report dated 18 April 2000^[38], Dr. Holm expressed the opinion that the plaintiff was suffering from an Anxiety Disorder not otherwise specified under Diagnostic and Statistical Manual for Mental Disorder (DSM IV). He was of the view that her symptoms were sufficient to prevent her from returning to her own occupation. He did not believe that treatment would allow her to return to her position as a credit officer rather that she would be able to return to some occupation. Dr. Holm had seen the plaintiff on two occasions at that point. His notes are to say the least quite sparse amounting to three typed lines in total. He did give evidence that he did not take detailed notes when treating patients. The plaintiff had made a claim on an income protection policy with HIH on 15 September 1999.^[39]At the time that she made that claim, she had seen Dr. Joseph and Dr. McEvoy, but had not sought any other medical assistance for her condition.

[29]
When Dr. Holm reported to Dr. Joseph about his findings, it related to her WorkCover claim. Dr. Holm was well aware of the circumstances of the plaintiff’s anxiety state being work related. He summarised the matters arising from her work environment which were likely to have exacerbated her condition.^[40]He advised her to attend the Relaxation Centre. Dr. Holm once again expressed the view that the plaintiff was very unlikely to return to her former employment as a credit officer. A more detailed report was provided to the defendant in June, 2000.^[41]By that time, Dr. Holm reported that the plaintiff was under his care for an Anxiety Disorder. He had seen her on four occasions by then. He stated that the plaintiff reported to him that when she contemplates a return to credit control work, she has an increase in anxiety symptoms.^[42]When one considers her employment history, I find that her reaction was consistent with her past experiences as a credit officer.^[43]

[30]
Dr. Holm confirms the diagnosis of Dr. Persley who had diagnosed the plaintiff with a Generalised Anxiety Disorder in April, 2000.^[44]Dr. Persley had advised specific treatment to manage her anxiety. He believed that it would take some four (4) months for her to develop the skills necessary to do this. Dr. Persley had relied upon the history given by the plaintiff that the exacerbation of the symptoms was related to the “increasing stress in the workplace due to staff reductions and introduction of new computer systems with inadequate training of staff”.^[45]

[31]
Of particular interest in Dr. Persley’s report is that he found that the plaintiff “was totally disabled for work. However, this should be temporary”.^[46]He nominated four (4) months recovery period. Dr. Persley had the benefit of Dr. Samuell’s report. This will be discussed later in these reasons.

[32]
In his report of 24 June 2000, Dr. Holm was able to give to the defendant a detailed report of the symptoms, the diagnosis and the likely outcome of treatment. He was still of the opinion that a return to work would cause a significant exacerbation of her anxiety symptoms sufficient to prevent her working. He summarised his view as follows:^[47]

“I think that despite the period of time she has been away from work and the anxiety management strategies she has learnt that she is now somewhat hypersensitised to the sort of work environment she left particularly the environment in which there is pressure to perform with deadlines”.

[33]
In a report to WorkCover Queensland dated 25 July 2000, Dr. Holm concurs with the findings of Dr. Persley about the symptoms and diagnosis. He reported that other stressors were causing her symptoms. These included moving house and her likely work future. Dr. Holm expressed the view, which I accept, that her condition was work related. Her personality was an obsessional one according to Dr. Holm. It is a personality which is more likely to result in stress and anxiety if the plaintiff is unable to achieve her goals in her work environment. Dr. Holm confirmed that the plaintiff was unable to return to her previous occupation due to her condition of an Anxiety Disorder.

[34]
The treatment which the plaintiff was receiving included counselling with Dr. Holm and attendance at the Relaxation Centre for anxiety management. The last paragraph contains the following statement:^[48]

“The progress of her treatment would be best judged over the next three to four months at which time a more accurate prognosis would be able to be given.”

[35]
By a letter to HIH Insurance dated 27 September 2000^[49], Dr. Holm advised the insurer that three hourly activity reporting was stressful for his patient. He recommended that this requirement be waived. Also, he suggested that any factual interview be postponed for four (4) months to avoid her being “overly stressed” In a letter to WorkCover dated 17 January 2001^[50], Dr. Holm stated that “(o)ver the past six months or so Ms. Schaffer has continued to describe fluctuating symptoms of anxiety”. He confirmed that the plaintiff was still hypersensitised to further stress.

[36]
The plaintiff was facing criminal charges in July, 2001. Dr. Holm wrote a report for her solicitors and stated that the plaintiff “would have been suffering from considerable anxiety symptoms for at least twelve months prior to this date” (July, 1999).^[51]In early 2002, Dr. Holm was asked to respond to suggestions by Dr. Alcorn concerning the treatment which may have been appropriate for the plaintiff at an earlier stage. Dr. Alcorn was retained by the defendant. Dr Alcorn suggested that medication or cognitive behavioural therapy would have been a desirable course to take to manage the disorder. In defence of his treatment regime, Dr. Holm opined that the plaintiff was apprehensive about taking medication. Further trials of medication would have “likely resulted in an increase in her anxiety and been somewhat counter productive to her overall treatment”.^[52]In relation to possible cognitive therapy, Dr. Holm said that the plaintiff was in the 10% to 30% of individuals who are unable to or unwilling to conform to such therapy. This was due to her obsessional nature. His approach was to provide supportive psychotherapy with the focus on identifying problems and attempting to solve them and to plan an approach to deal with problems as they arise.^[53]The plaintiff’s preoccupation with the present litigation was seen as a stressor by both Dr. Holm and Dr. Alcorn. Dr. Holm did concede that after the litigation is finalised, the cognitive therapy may be an option. The defence say that this is a recognition by him that alternative treatment might work. One has to focus on September 2000 and other evidence pertinent to that date. The prospects of success, I find, could only be regarded as speculative.

[37]
In cross-examination,^[54]Dr. Holm stated that the first period when the plaintiff was suffering from an Anxiety Disorder was in the six months prior to leaving work, that is, January to June, 1999. I accept his evidence in this regard, as it coincides with the unusual demands upon the plaintiff at work during that time. The evidence of her work conditions has not been challenged. I accept the details provided in her affidavit and the opinions of Dr Holm which are based upon that history. Her intermittent and more severe symptoms, I find, were consistent with the changing conditions of her employment.

[38]
Some criticism was directed to Dr. Holm for arriving at his final diagnosis after two visits from the plaintiff and also the paucity of his notes. He explained that the consultations were of about three quarters of an hour each and that he had taken a full history. He also had access to the reports of Dr. Joseph and Dr. McEvoy. Counsel for the defence suggested that a detailed questionnaire could have been utilised. Dr. Holm replied by stating that the usefulness of such a tool is debatable. He prefers to talk to the patient. Questionnaires he said are used for medico-legal opinions, whereas Dr. Holm says that he was treating the plaintiff^[55]. He did concede however that this type of anxiety disorder is potentially treatable^[56]. He had discussed with the plaintiff the possibility of her taking medication and arrived at the conclusion that it would have added to her anxiety. In other words, she would have had to take drugs to continue in the workplace^[57].

[39]
Dr. Holm was asked about cognitive behavioural therapy. He explained it as follows:

“The – full structured cognitive behavioural therapy is a fairly structured therapy where you attempt to assist the patient to identify maladaptive thought processes, in this case particularly anxious thoughts, and to essentially find alternative – less anxious alternative thoughts to that, and it can become very structured in the sense of recording thoughts, writing down alternatives, keeping diaries and so on…I was and still am of the opinion that the more- the fully structured form of cognitive behaviour therapy would be counterproductive because of her rather obsessional nature. She would get too worried about recording all the details in accuracy and becoming potentially quite anxious. It is not an uncommon problem. As Dr. Alcorn quotes one of our major psychiatric references, that between 10 and 30 per cent of people are not suitable for CPT and I am of the opinion that Wendy is one of them.”^[58]

[40]
Given the period over which Dr. Holm has treated the plaintiff it is difficult to say

that he is wrong in his approach to treatment or moreover his diagnosis. He did agree that her progress had been slow. The ongoing litigation and unresolved work options have contributed to this according to Dr. Holm.^[59]I accept his evidence in this respect. He confirmed that the plaintiff is looking at alternative options including financial planning. The plaintiff stated that her discussions with the Australian Institute of Credit Management resulted in a severe aggravation of her symptoms^[60].

Dr. Nigel Prior

[41]
Dr. Prior, a psychiatrist, gave a report to WorkCover dated 31 January 2000. He saw the plaintiff on 21 January 2000. His evidence was objected to by the plaintiff’s counsel in her written submissions. There was an agreement that the reports of Dr. Prior and Dr. Hardinge were only admissible if called. The defence did not contradict that submission. Dr. Prior was not called. Although mention is made of the reports of Dr. Prior by various medical witnesses, I have been able to rely on their opinions without regard to the opinions of Dr. Prior. In any event, to the extent that other experts have expressed similar views to Dr. Prior, I have dealt with those in these reasons.

Evidence of Dr. Doron Samuell

[42]
The plaintiff was seen by Dr. Samuell, a psychiatrist, on 10 February 2000. There seemed to be some friction between Dr. Samuell and the plaintiff who later complained about certain events at his surgery^[61]. In forming his opinion, Dr. Samuell was limited to the one interview. He was of the view that the plaintiff was not unfit for a period of six months due to any anxiety disorder to engage in her occupation. Dr. Samuell was referring to the nature of the work which the plaintiff said caused her stress in the workplace.^[62]Dr. Samuell noted that the plaintiff had never been told to consult a psychiatrist. In fact, she went to see Dr. Holm the next month. Up until that time she had tried to remove the stressors in her life including the Amway business. She believed that the only other stressor was her occupation. Dr. Samuell formed the view that the plaintiff was a hostile person with very little psychological insight into her difficulties. By that time she had accepted she had psychological problems.

[43]
Dr. Samuell opined that the plaintiff’s most recent employment with Queensco was no more stressful than other jobs which she had held. I disagree with that view. The pressures which mounted over a period of time were an obvious stressor which distinguished that job from the others. Dr. Samuell diagnosed the plaintiff with a panic disorder. He seemed to base that view on the belief of the plaintiff that she was going to have a heart attack. The diagnosis was speculation on his part.^[63]His diagnosis is contrary to other expert evidence including Dr. Persley and Dr. Alcorn. Therefore, I reject his factual findings and his opinion.

Dr. Patrick Doughty

[44]
Dr. Doughty reviewed material on behalf of WorkCover. He formed the view that on the material the plaintiff’s work caused her to suffer from anxiety and that work was the precipitating factor. The incapacity had resolved but that it would “return if she attempted to work in similar conditions.”^[64]He indicated that she was fit to return to work but not with her original employer. The report is dated 23 February 2000.

[45]
A telling answer was given by Dr. Doughty in cross-examination:^[65]

“If she had developed anxiety in the conditions she was subjected to at work, combined with her perception of those conditions, whether real or imaginary, is irrelevant. Combined with her personality traits, as described by Dr. Prior, then common sense says that if she had had anxiety probably for three years, if you put her back in exactly the same situation or very similar situations, then she would get further anxiety symptoms.”

Dr. Doughty did add;

“From what Dr. Prior has said in his report, then she should have been able to go back to work when work practices were more considerate than at her previous employers”.

[46]
To the extent that Dr. Doughty is relying on other expert opinion, and without the benefit of assessing the plaintiff, his evidence is of less weight. However, where he expresses a view based upon facts, then that is a different matter. For example, when assessing a certain personality type such as the plaintiff and the likely benefit of using medication, he said:^[66]

“And you have mentioned that Dr. Prior in his report describes the personality type of Ms. Schaffer. Is that personality type one of the types that you were referring to? – Yes, unfortunately. Because such people are very conscientious when working. They find it very difficult indeed to see anything except in shades of black and white. They find it very difficult to not do a job completely accurately and with every “i” dotted and every “t” crossed. If they are not allowed the time or facilities to check their work and do it to their degree of satisfaction, irrespective of what the employer wants, then they tend to develop an anxiety state, and it would be quite reasonable that such people, although they may improve with axiolytics or antidepressants, they may not, because of their personality trait, improve to the same degree as somebody else who can accommodate differing degrees of work load, for instance, you cannot be as efficient with individual parts of that work load as you would with a lighter load, and so such people tend to be worried not just at work, but overall as well.

Dr. Doughty, with that in mind, is it, in your opinion, surprising that Ms. Schaffer maintains that she is – feels unable to cope with working in the credit industry, given her past experience?—No, because having known quite a lot of credit controllers, and how credit control officers (sic) work, there is usually a great push to get the job finished and she would have probably been under pressure wherever she went, and she was probably aware of this.”

[47]
I generally accept the evidence of Dr. Doughty where he expresses his own opinions on the facts before him. He was retained by WorkCover and is probably more objective in the present litigation. In effect, Dr. Doughty’s evidence supported the plaintiff’s view that she could not return to work without suffering from similar stress. Also, I find that medication was not an appropriate course for her because of the high standards she set herself and her obsessive personality trait.

Paul Witzerman, psychologist

[48]
The plaintiff’s answers to the tests conducted caused Mr. Witzerman to comment that she “responded to the tests in a consistent and honest manner”.^[67] At the time that Mr. Witzerman saw her, he stated that the plaintiff was not suffering from an psychological or psychiatric disorder. He said that she was “obviously experiencing some notable symptoms of anxiety for at least four years prior to the changes occurring” in her job at Queensco. I accept that latter analysis as it is consistent with her history and the previous findings in this matter.^[68]The report is dated 6 January 2000. Mr. Witzerman accepts that the symptoms were such that they were consistent with a diagnosis of Anxiety Disorder Not Otherwise Specified immediately prior to her resignation from work. He was unable to determine that her employment was a major significant contributing factor to her condition, given her pre-existing condition. He believed that the “characteristics of her personality may also have contributed to her developing a clinically significant anxiety condition, even if she had been employed in another role by a different employer.”^[69]The real question is whether the plaintiff was so permanently disabled that she could not return to her occupation as a credit controller. There may be other aggravating factors.

Patricia Jane Barker, psychologist

[49]
Mrs. Barker is a counsellor/psychologist with WorkCover. She assessed the plaintiff as at 8 February, 2001.^[70]The plaintiff continued to express an unwillingness to return to work. She said the plaintiff’s current focus was to stabilise her symptoms. Mrs. Barker found it difficult to assess whether or not the plaintiff would be able to achieve a successful return to work. The plaintiff was still of the view that if she went back to work that she ran the risk of her symptoms re-occurring. The relevant date to determine the disability of the plaintiff is September, 2000. The evidence of Mrs. Barker is of historical interest only and confirms the problems of which she complained as at the relevant date have persisted.

Dr. David Alcorn

[50]
The plaintiff was seen by Dr. Alcorn, a psychiatrist, on one occasion being 25 July 2000. Apart from the interview, the plaintiff filled in a lengthy questionnaire. It does not seem to be in dispute that in January 2000, the plaintiff’s symptoms had settled down. This was when she saw Dr. Prior. In February, the plaintiff had to move house and this triggered her symptoms. She consulted Dr. Holm in March, 2000 not May as reported by Dr. Alcorn. Dr. Alcorn confirmed that she was being treated by Dr. Holm (as at July 2000). Also she was going to the Relaxation Centre once per week. Having discussed her symptoms in detail, Dr. Alcorn diagnosed the plaintiff with a near remitted Adjustment Disorder with a Depressed and Anxious Mood.^[71]Dr. Alcorn explained the difference between a Generalised Anxiety Disorder and an Adjustment Disorder. The former tends to have an earlier age of onset whilst the latter “is an adjustment to a particular stressor, so that can have a major onset whenever the stress recurs.”^[72]For present purposes the diagnosis of Dr. Holm and Dr. Alcorn do not differ significantly. It is a “question of semantics.”^[73]

[51]
Dr. Alcorn opined that the proximate cause of the plaintiff’s symptoms appears to be workplace related. He referred also to the Amway business presumably as another stressor. The plaintiff gave that away in 1998. Dr. Alcorn stated that it was likely that the plaintiff would not return to work as a credit controller. He did not consider that her condition would permanently disable her for other spheres of vocational activity. Dr. Alcorn probably did not know in July 2000 the exact wording of the policy. The question under the policy is “would she return to her own occupation”. He answered in the negative to that enquiry as at July 2000.^[74]He believed that a return to work would induce anxiety symptoms. He did indicate that that belief of the plaintiff that she could not return to work had not been tested with a return to work program. He did comment that the belief was “probably correct”. To put the matter beyond doubt he stated:^[75]

“There is no doubt that the subject herself has a belief that she will never work again in credit management, and is not motivated to do so through a probably justifiable fear of a recurrence of her Adjustment Disorder. In the absence of the definitive treatment and work trial, it would be difficult to be definitive in response to this question, but based on the balance of probabilities at this time, and allowing for the uncertainties noted above, the subjects’s beliefs would seem to render this unlikely.”

[52]
Up to that point in time, the plaintiff had been improving under the treatment of Dr. Holm. She had acted reasonably, I find, in following his advice. She was motivated to undergo treatment but held the belief that returning to work in credit management would provoke her symptoms. Dr. Alcorn agrees with that synopsis. By March 2002, Dr. Alcorn had written a further report.^[76]He set out the treatment regime which he says would have allowed the condition to be stabilised. This included medication and cognitive behavioural therapy. For the reasons discussed, I accept the evidence of Dr. Holm that such treatment was unlikely to be successful for the plaintiff. The later report from Dr. Alcorn does not detract from the findings thus far based upon his earlier report of July 2000 which is also pertinent to the relevant date for assessment viz. September 2000. Although Dr. Alcorn states that the plaintiff could perform some of the duties as a credit officer he is doubtful about other aspects such as confronting debtors.^[77]

[53]
Dr. Alcorn referred to the fact that Dr. Holm had in fact prescribed valium 5 milligrams. He was still critical of the treatment and said that it did not amount to an appropriate and comprehensive medication treatment program for a generalised anxiety disorder. Although there is some basis for the criticism given the time lapse, one must remember that the decision as to disability is to be looked at in hindsight but at the relevant date viz. September 2000. At that time, Dr. Holm had been treating the plaintiff for only six(6) months and progress was being made.

“Absent from and unable to work because of the injury or illness for a continuous period of at least six (6) months

[54]
The defence submit that the resignation by the plaintiff from her employment with Queensco and her continued absence from the workforce was a lifestyle choice. It was further submitted that she was able to get out of a stressful occupation and to take advantage of the taxation structure which had been set up by her husband as part of his business. Although she may have told Mrs. Perkins about her reasons for resigning being tax related, there is in fact no evidence that any ongoing taxation benefits accrued to the plaintiff. The defence attempts to establish that, I find, failed. The plaintiff declared the $4,000.00 paid to her by her husband’s trust company in the year ended 30 June 1999.^[78]Thereafter, there seemed to be no significant distribution. The reasons offered by the defence^[79]do not convince me that tax reasons were the actual reasons for the plaintiff resigning from Queensco.

[55]
In relation to the stress of the occupation, the evidence is one way. I find that she suffered an injury or illness within the meaning of the policy whilst working at Queensco for income. I find that the plaintiff left her employment with Queensco because of the increasing stress. The question for determination is: “was she then unable to work because of her illness for a continuous period of six months”? According to the pleadings the relevant period is say 17 June 1999 when she obtained a medical certificate from Dr. Joseph and was on sick leave until 17 December 1999. The entry made by Dr. Joseph on 7 June^[80]reads “(w)ork related stress. Not coping. Emotionally drained. Sickness certificate 17 June 2 July…”. The plaintiff resigned from her work by 2 July. She told Dr. Joseph on 1 July that “she wanted to take a break”.^[81]On 2 August 1999, she told Dr. Joseph that she had decided “to retrain herself computer marketing sector”.^[82]She also said that she wished to pursue her disability insurance claim. It was with HIH. She reiterated that the position as a credit controller was too stressful for her. On 19 August 1999 she presented to Dr. Joseph an insurance application for her disability claim against HIH. This was a separate policy from the one with the defendant. She was to see Dr. McEvoy in September 1999 and indicated to Dr. Joseph that she was going to make a claim against WorkCover. An action was then commenced against her former employer Queensco^[83].

[56]
By March 2000, the WorkCover claim was successful. The plaintiff had seen Dr. Prior, a psychiatrist. This probably led to her seeking treatment from Dr. Holm in March 2000 for formal anxiety management program. The plaintiff underwent treatment from Dr. Holm on at least nine occasions between March and September 2000. By August 2000, the defendant had first rejected her claim based on s. 29 of the Act for material non-disclosure.

[57]
In the written submissions on behalf of the defendant^[84], the following points were made:

Between September to November 1999 her symptoms improved and by September 1999 she did not need psychiatric help according to Dr. McEvoy. Dr. McEvoy is a thoracic specialist not a psychiatrist.
The plaintiff had not sought treatment from anyone other than Dr. Joseph and yet believed she could not perform her duties as a credit controller. Dr. Joseph and Dr. McEvoy (November 1998) had discussed with her the question of changing her employment.
By January 2000, her symptoms had decreased as she was away from the stressors of her employment. Dr. Witzerman found no evidence of any psychological or psychiatric disorder.

This was confirmed by Dr. Samuell in February 2000. Dr. Persley in April 2000 said that the evidence did not suggest that the plaintiff was unable to work as a credit officer for a continuous period of six months.

[58]
In relation to this first part of the definition of “unable to work”, I make the following findings:

The stress of her job as a credit officer was the cause of the plaintiff resigning in July 1999.
That although the symptoms may have subsided by early 2000, the plaintiff had not recovered sufficiently to go back to work at that stage.
The absence of treatment by a psychiatrist up until March 2000 was because no referral was given by Dr. Joseph until March 2000.
Other stressors caused her symptoms to get worse by April 2000 notwithstanding the treatment by Dr. Holm
As at 17 December 2000, the plaintiff’s symptoms had caused her to be absent from and unable to work because of her illness for a continuous period of six (6) months.

“…incapacitated to such an extent that they (the plaintiff) are unlikely ever to be able to work again in their own occupation”

[59]
Counsel for the defence relied upon the test in White v. The Board of Trustees^[85]where the court decided that “unlikely ever to be able to work again “in a job” meant “no real chance or even improbable”^[86]. Apart from this definition point, the psychiatrist in that case who had seen the plaintiff on one occasion, Dr. Rodney, deferred to the treating psychiatrist. He found it difficult to give a prognosis relating to the total and permanent disability aspect. The decision in the present case must take into account the “own occupation” aspect. In my view, the treating psychiatrist is often in a better position to form an opinion. It might be said that the treating psychiatrist is closer to the patient and that an objective assessment is more difficult.^[87]

[60]
In the present case, I am satisfied that Dr. Holm, as the treating psychiatrist over some eighteen (18) months up to September 2000 was more likely to predict more reliably the long term prognosis. This finding is also supported by the consistent manner in which he gave his evidence. Even though Dr. Holm had given his opinion after he had seen the plaintiff on two occasions, his evidence confirms his earlier prognosis. In his report^[88]Dr Alcorn was of the opinion that “(i)t is likely that the subject will not return to work as a credit controller”. He relied on her attitude. He did “not consider that her condition will be permanently disabling for other occupations”. In evidence^[89], he resiled from that position once the significance of it was taken into account under the present policy. Dr. Alcorn

seemed to change his evidence relating to “own occupation” so as to fit within the ambit of the definition. He did not focus on her occupation when he originally consulted her. Dr. Samuell also resiled from his initial observation that the symptoms would resurface.^[90]I find, therefore, that the evidence of Dr. Holm is to be preferred.

The following findings are open on the evidence as relevant to September 2000:

The plaintiff’s anxiety disorder was likely to be exacerbated if she went back to her occupation as a credit officer.
The plaintiff’s obsessive personality traits made it unlikely that treatment with medication or cognitive behavioural therapy would be successful.
Other stressors in the plaintiff’s life contributed to her inability to cope with stress.
The fact that symptoms of the anxiety disorder continued after the plaintiff minimised other stressors such as her involvement with Amway allowed an inference to be drawn that work stress was the precipitating factor.
The plaintiff’s treatment regime was supervised by Dr. Holm and although progress was made the plaintiff continued to be vulnerable to relapses.
The plaintiff’s belief that a return to work as a credit officer would lead to increasing the symptoms of her anxiety condition was well justified.
That the plaintiff was incapacitated to such an extent that she was “unlikely ever to be able to work again” as a credit officer.

Credibility of Plaintiff

[61]
In his written submissions, defence counsel has attacked the plaintiff’s truthfulness as a witness. It is alleged that her demeanour was inconsistent with someone who perhaps should have been troubled. Instead, it was submitted that she had excellent memory when it suited and had ready answers and did not appear adversely troubled with the pressure of giving evidence. The evidence showed that the plaintiff had obsessive traits. This was evident in her need to understand questions and the precise manner in which she gave evidence. It must also be recognised that the litigation was seen as a stressor by the psychiatrists and so such demeanour is perhaps explicable. She was, I find, very tense on occasions and it was obvious that the nature of the questions was adversely affecting her.

[62]
The other aspects of the plaintiff’s evidence which were attacked on credit grounds included:

Dealing with large amounts of cash in relation to lending $120,000.00 in what turned out to be a “scam”. In fact, someone who was not thinking clearly and the subject to stress, I find, would be prone to such conduct.
The extraordinary and aggressive treatment meted out to Dr. Samuell. Dr. Samuell saw the plaintiff on one occasion for an hour or so. The plaintiff was subject to a visit by “Zorro” whilst she was waiting in the waiting room of Dr. Samuell. Presumably, it was another patient. One could understand that the plaintiff was upset given the reasons why she was there. The plaintiff’s perception was that there was a lack of understanding by Dr. Samuell or his staff.
The communications with Dr. Holm regarding the nature of the report required for a claim. This is evidence of her obsessive personality in trying to “tie up loose ends”. It is not, I find, evidence of her not wanting to get better.
The criminal charges were laid in August 2000. It was submitted that it seemed to have less impact on her in comparison to moving house. The latter was sudden and the plaintiff could not cope. The plaintiff expressed the view that she was never going to be found guilty and was confident about her innocence. This may have reassured her, at least in her own mind.
The lack of stressors on her overseas trip. There was no evidence given about the extent of the trip, the deadlines and how the plaintiff coped on a day to day basis. The stress of relevance in the present case, is that related to her job as a credit officer.
The plaintiff’s willingness to become a self employed financial planner. This is consistent with someone wanting to get back into the workforce. She had become hypersensitised to the work as credit officer. There is nothing inconsistent with some optimism on her part and her ongoing disability related to her previous occupation.
In the plaintiff’s action against her former employer Queensco, she denied that she had been shown the final Statement of Claim. There was no evidence to prove the contrary. Therefore, any allegations about the nature of the symptoms in that document cannot be used against the plaintiff on credit. In any event, the document was filed on 16 June 2000. With hindsight, the plaintiff's solicitors had related all of her symptoms to her former employment. The subject proposal was dated August 1998. The Statement of Claim against Queensco is not particularly relevant.

The plaintiff was a tense person. The litigation was a stressor on her. Those matters were taken into account in assessing her demeanour. She was careful to understand the question and then attempted to answer concisely. The attempts by the defence to show some inaccuracy relating to tax returns failed. The suggestion that she was never told that she was in good health by Dr. Joseph or Dr. Coughlan was accepted by her. Because they found all tests to be normal the plaintiff assumed that she had “a clean bill of health”. That is not something which can be readily criticised. Generally, I found her to be a credible witness.

Non-Disclosure

[63]
The defence pleaded in paragraph 9 of the Amended Defence that the contract of insurance was entered into after the plaintiff submitted a proposal for Recovery insurance. The proposal was dated 26 August 1998.

[64]
The said proposal signed by the plaintiff contained a declaration which read as follows:

“I have read this application form and confirm that the answers given are my true and complete answers. I have read my duty of disclosure and have not withheld any information material to the insurance. I have read and understood the key features statement of the insurance…”

[65]
Section 21 of the said Act provides as follows:

“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….”

[66]
It is common ground in this case that the relevant policy is a “life policy” within the meaning of the said Act. It is not disputed that the defendant duly informed the plaintiff in writing of her duty of disclosure under Section 22 of the said Act. The following provisions are also relevant:

“26
Certain statements not misrepresentations

(1)
Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.
(2)
A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms…

29
Life Insurance

(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:

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)
…

(2)
…

(2)
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.”

[67]
The defendant purported to avoid the policy under the provisions of section 29 of the said Act. The matters pleaded which are relevant are as follows:

“14.
In answer to questions in the proposal, the plaintiff stated:

(a)
Q7

What is the name and address of your usual doctor or the lastdoctor you consulted, if no usual doctor?

Peter Joseph Queen Street Cleveland 4163

How long have you been their patient?

12 years

Date of last consultation?

6/97

Reason for last consultation and results

For a routine checkup (yearly) No medical reason Fully Fit

(b)
Q11

Have you ever had any of the following. Please tick either Yes or No for each condition listed below and fill out a Special Health Questionnaire (on page A7) for each condition with a Yes answer

Stress, anxiety or depression? No

(This aspect was not pursued at trial)

Other than those conditions stated in Q11 on page A4:

(a)
have you had any symptoms, sickness, injury, taken any prescribed medication, or consulted a doctor, chiropractor or other health professional in the last 12 months? No.

Misrepresentation re last visit to Dr. Joseph ( the Q7 matter)

The answer referred to in paragraph 14 (a) constituted a misrepresentation by the plaintiff made between 26 August 1998 and the date of the entry into the contract of insurance on 3 September 1998.

Particulars

The true facts were that the plaintiff had seen Dr Joseph in December of 1997 for a medical reason (because she was having difficulty breathing, symptoms for which Dr Joseph was unable to determine the cause).

Further, (or in the alternative to paragraph 16 herein) between 26 August 1998 and 3 September 1998 the plaintiff knew that the answer which she gave to question 7 was incorrect, alternatively did not care whether the answer which she gave was correct or incorrect.
...

Misrepresentation re other symptoms (the Q12 matter)

The answer referred to in paragraph 14(c) to question 12 constituted a misrepresentation by the plaintiff made between 26 August 1998 and the date of the entry into the contract of insurance on 3 September 1998.

Particulars

The true facts were that other than those conditions stated in Q 11 on page A4. The plaintiff had experienced symptoms and taken prescribed medications and consulted a doctor, chiropractor or other health professional in the last 12 months. She had experienced symptoms of difficulty breathing and breathlessness, chest discomfort, hyperventilation which symptoms had gradually become worse since they first appeared in 1993 and continued to the time of proposing She had sought and received treatment in respect of those symptoms in the period August 1997-August 1998 from both Dr Joseph and Mr Herringe (a health professional) and had taken Ventolin and Bricanyl.

Further, (or in the alternative to paragraph 19 herein) between 26 August 1998 and 3 September 1998 the plaintiff knew that the answer which she gave to question 12 was incorrect, alternatively did not care whether the answer which she gave was correct or incorrect.

Non disclosure re Dr Joseph

By failing to disclose to the defendant that she had seen Dr Joseph in December 1997 about experiences of air-hunger, chest discomfort and hyperventilation, the plaintiff failed to comply with the duty of disclosure imposed by section 21 of the Insurance Contracts Act 1984.

Further, by failing to disclose to the defendant that the experiences of air-hunger, chest discomfort, hyperventilation and associated symptoms continued to trouble her and were becoming increasingly severe, the plaintiff failed to comply with the duty of disclosure imposed by section 21 of the Insurance Contracts Act 1984.

The defendant would not have been prepared to enter into a contract of life insurance with the plaintiff on any terms (alternatively, would not have entered into the contract of insurance with the plaintiff) if:

(a) the plaintiff had not made the said misrepresentations; or

(b) the plaintiff had disclosed the matters referred to in paragraphs 20 or 21.

By letter dated 30 August 2000, the defendant (as it was entitled to do) avoided the policy.”

[68]
The only symptoms of which the plaintiff complained to Dr. Joseph in the last 12 months were “…having trouble breathing. Feels she is not inhaling enough air…”. The answers to Q7 and Q12 were untrue. She had seen Dr. Joseph in December 1997 for the symptoms just referred to. The fact that she believed it might have been hayfever does not detract from that finding that there were symptoms of which she was complaining. In any event, when Dr. McEvoy asked her whether “she suffered from any disorder affecting the nose or throat including hayfever” she answered in the negative^[91]. The fact that she asked Mr. Lavin for his opinion about declaring her breathlessness is evidence of a belief by her that the symptom was relevant. When that conversation occurred is doubtful. Mr. Lavin denied that it occurred. I cannot be satisfied that it is relevant, in time at least, to the present proposal.

Circumstances surrounding the execution of the proposal

[69]
Mr. Lavin is unable to recall what he said to the plaintiff on each occasion that he assisted her in obtaining insurance cover. He had arranged sickness and accident cover with FAI Life for the plaintiff.^[92]He had also arranged life cover with another insurer. Mr. Lavin stated in his affidavit that he saw the plaintiff and her husband, Mr. Hertzog on 15 July 1998. The plaintiff told him that her employer was providing income replacement cover and so Mr. Lavin recommended a “trauma” policy. He stated he returned to see both the plaintiff and her husband on 19 August 1998. He recommended the subject policy for $100,000.00 cover with an “own occupation” total and permanent disablement policy. Mr. Lavin stated that if there had been any medical changes or health related events since the proposal for cover he would always ask the client. She told Mr. Lavin that her last consultation with Dr. Joseph was in June 1997 for her yearly check up which revealed that she was fully fit. Mr. Lavin was away and one of his employees completed the form and it was sent to her in due course for signing. Mr. Lavin gave evidence that the handwriting in the proposal was that of an employee Mr. Ashman. It is signed by the plaintiff and witnessed by Mr. Lavin. Although Mr. Hertzog challenges the dates and whether Mr. Lavin attended at them, it is not contested that the plaintiff provided the answers in the proposal. Obviously, it was filled out based upon that information provided by the plaintiff. Mr. Lavin denied discussing any breathing problems with the plaintiff. I was generally unimpressed with Mr. Lavin’s ability to recall matters. He obviously got the dates wrong and yet swore an affidavit based upon his recollection of what occurred. He also agreed that he may have been mistaken as to who was present^[93]. I am satisfied that on an occasion prior to the proposal being signed that the plaintiff raised the question of her breathlessness. She also told Mr. Lavin, on her husband’s version, that she had a “clean bill of health” by her doctors.

[70]
In fact, I have found that no such statement had been made by Dr. Joseph. Any opinion offered by Mr. Lavin was based on a false premise. He had been misinformed by the plaintiff. Mr. Lavin denied that there was any discussion of breathlessness prior to the proposal being signed. I am satisfied that there was a discussion of breathlessness on another occasion. I accept the evidence of Mr. Hertzog in this respect^[94]. The answers to Q7 and Q12 were untrue.

[71]
It is necessary to set out the plaintiff’s evidence in this regard in order to determine the effect of the untrue statements in the context of Ss. 21, 26 and 29 of the said Act. The plaintiff contended that the answers she gave, which made no reference to breathlessness were true. The reason for this was that she had been advised by Mr. Lavin that if she had a “clean bill of health” with no diagnosis then she need not include reference to that symptom in the proposal. She believed that she had an allergy and that “I did not believe that that would be of any relevance to the policy”^[95]. The answers in the proposal had been filled out based on previous dealings between the plaintiff and Mr. Lavin. As at the date of the proposal in August 1998, the plaintiff had tried Bricanyl and it had not resolved the symptom of breathlessness. The plaintiff cannot rely on Mr. Lavin’s advice when the facts upon which he advised were fallacious. It is not suggested that Mr. Lavin was the agent of the defendant in this action.

[72]
The plaintiff was asked the following questions:

“Why were you concerned about your health?—Because I had a breathlessness that was sporadic that didn’t go away, but it wasn’t to the point where it was consistently troubling me. Like it was gone – it was here one day, gone for two months. It is like a toothache. If you have a toothache one day and it is gone for two months, you are probably not going to go to the dentist.

You were concerned, I suggest to you, Mrs. Schaffer, because there was no cause that the doctors could pinpoint; that is why you were concerned?-- Yes, that’s true.^[96]

Who said words to the effect, “Wendy, you are fully fit”? –Well, Dr. Coghlan said, “I can find nothing wrong with you”, I had a clean bill of health ^[97]

So am I right in saying,, “No-one actually told me I was fine, I just assumed that”?—No, everything was normal. All the breath tests, all the tests that were required to be done, the blood tests, the cardiogram tests, every tests (sic) came back normal. I could only assume that I was fully fit.^[98]

His Honour: Doing your best over four years, could you say it was once a month or once every six months for one year and the next year it was ----? -- It would be maybe once every six months and then it might be not again for nine months, 10 months, and then, you know, I might - then it might be once the next month. It was just very, very sporadic, and over the four years maybe half a dozen times would be an appropriate answer to that question.^[99]

Throughout the early part of 1998, the symptoms were still there, is that right – intermittently? – Yes, intermittently they would be.

Now, you went and saw Mr. Hardinge, who is a remedial therapist on certain occasions in 1998, that’s so? –Yes.

He is at Birkdale, I think? – Yes, he is.

Now, it would be incorrect, I suggest to you, to say as at 1 February 1998 that the breathlessness stopped for 10 months? -- Excuse me, could you ask that question again? I am confused.

It would be incorrect to say that the breathlessness stopped for the next 10 months, that is, it didn’t exist? -- From which date to which date?

From February 1998 through to December of ’98? -- It would have continued to be intermittent^[100].”

[73]
I find that:

The plaintiff had consulted Dr. Joseph with symptoms on 23 December 1997.
The plaintiff had taken medication prescribed by Dr. Joseph on 23 December 1997 viz. Bricanyl.
The plaintiff had experienced symptoms on an intermittent basis in the 10 months prior to signing the proposal application and had sought treatment from a therapist but not related to her breathlessness^[101].
That even though the plaintiff had not been told that she had a “clean bill of health”, it was reasonable for her to believe given the sporadic nature of her breathlessness, that she was generally in good health.

The Relevant Case Law

[74]
Section 21 of the said Act

“…duty to disclose…every matter known to the insured”

…relevant to the decision of the insurer whether to accept the risk…”

Shepherdson J.(with whom the other members of the Court agreed in Australian Casualty and Life Ltd v Hall stated^[102]:

“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 “known” in s. 21(1) I would with respect adopt and apply the following words of Hodgson CJ I 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 247):

“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’.”

[75]
Having regard to those principles and the findings above, I am satisfied that there has been no breach by the plaintiff of her duty under s. 21(1)(a) of the Act to disclose her symptom of breathlessness or her consultation in December 1997 with Dr. Joseph. Even if the plaintiff had told the defendant that she had visited Dr. Joseph in December as well and identified the symptoms of breathlessness, and the underwriter had made contact with Dr. Joseph, I find that it is unlikely that there would have been any difference in the identification of the illness. In the following 10 months the symptoms were intermittent. This was a similar situation to Dew v Suncorp Life & Superannuation Limited^[103]. The plaintiff continued to work until

June 1999. Her treatment as recommended by Dr. Joseph , viz. Bricanyl was tried a couple of times. Further, I am satisfied that no reasonable person in the circumstances could be expected to know the nature of the breathlessness to be a matter relevant to the defendant in accepting the risk and on what terms. The Queensland Court of Appeal in CIC Insurance Limited v Midaz Pty Ltd & Anor^[104](Pincus JA with whom the others agreed) stated the principle as follows:

“It will be noted that the duty is not expressed to extend to any matter unknown to the insured; the language does not suggest an intention to cover matters which should have been known but were not”

The insured in that case as landlord was unaware of the nature of the chemicals kept by the tenant who stored inflammable materials. The premises were partly destroyed by fire. In Herbohn v NZI Life Limited^[105], the insured, Dr. Bianchi, was found to be aware of the requirements of the insurance policy relating to total and permanent disability. He was well aware that his tinnitus was causing him to lose time off work and that his hearing was affected. They were regarded as significant factors by the court.

[76]
In arriving at the finding in respect of s. 21(1) of the said Act, I have had regard also to the observations of Jones J. in Dew v. Suncorp Life and Superannuation Limited^[106]unreported 21 March 2001:

“…there is a question of degree in all of this…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…”

With respect, I agree with those observations as relevant to the present plaintiff. The plaintiff continued with her employment from 1993 to June, 1999. She had a change of position to real estate but generally suffered intermittent symptoms which were cause by the nature of her employment as a credit officer. She was stoic throughout. It was only when she saw Dr. McEvoy in November, 1998, that she became aware that her symptoms were stress related. I am satisfied that the plaintiff truly believed that her breathlessness and related symptoms were not relevant to the decision of the defendant whether to accept the risk. The present plaintiff is, in my view, in as strong a position as the plaintiff in Australian Casualty & Life v Hall^[107].

The plaintiff there was told that she was “as fit as a fiddle” but did not disclose her attendance on medical practitioners. The present plaintiff disclosed her attendance but not the reason. Given what occurred I have found that she was justified in believing that she had “a clean bill of health”.

[77]
In determining whether a reasonable person could be expected to know that the symptoms were relevant to accepting the risk, an objective test must to be applied. The factors which are relevant in that respect are:

The plaintiff had not been back to Dr. Joseph with any further symptoms although she accepts they were intermittent ^[108]
The plaintiff had consulted a health therapist with symptoms including headaches and thoracic tension not breathlessness^[109]
The plaintiff had continued to work
The manner in which the proposal was filled in relying on past dealings with Mr. Lavin and signing after the answers had been filled in by an employee of Mr. Lavin. The latter gathered the information

The latter facts are relevant. The phrase “in the circumstances” in S. 21(1)(b) has some meaning. It means “in the circumstances in which the matter became known to the insured and the circumstances at the time the duty of disclosure fails to be discharged” where Jones J. stated:

“I was referred to Twenty-first Maylux Pty Ltd. v Mercantile Mutual Insurance (Aust) Ltd (1990) 6 ANZ Insurance Cases 60-954 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.”^[110]

In applying those objective factors in the present case, I am satisfied that a reasonable person in the circumstance could not have been expected to know that the consultation for breathlessness in December 1997 was a matter relevant as to whether the defendant would accept the risk.

Alternative basis of non-disclosure

[78]
The defence in its written submissions, submits that the various statements made by the plaintiff in the proposal were, when examined together, untrue. The submission continues that the statements taken together fail to properly and fully disclose to the defendant the true extent of the plaintiff’s troubles and its effect on her health: Herbohn v. NZI Life Ltd.^[111]In other words the statements amount to a misleading picture of the health of the plaintiff; by not telling the defendant that she had seen Dr. Joseph some 8 months previously, at a time when she had symptoms, and that she had been advised to take some drugs to treat the breathlessness. This combination of factors, according to the defence, hid the fact that the symptom of breathlessness had existed for at least 5 years on an intermittent basis and that the problem had got worse in the last twelve months prior to the proposal being submitted.

[79]
The defence has pleaded the untrue answers to Q7 and Q12 as the basis for non-disclosure. Paragraph 21 of the pleading is broad enough to cover the present submission about a “misleading picture of health”. I am satisfied that the plaintiff regarded herself as a healthy person apart from the usual problems of health in life and her intermittent breathlessness. She had no specific treatment since December 1997 save for a couple of puffs of Bricanyl which did not assist. The other symptoms referred to in paragraph 21, were neither complained of in December 1997 nor was there any specific evidence that those symptoms as distinct from breathlessness were in fact experienced by the plaintiff between December 1997 and August 1998 when she signed the proposal. I reject this alternative basis for relying on s. 21(1) of the Act.

Section 26: Was there a non-disclosure amounting to a misrepresentation?

[80]
It has been said that this section is “the lynch-pin of the Act’s rules as to misrepresentation, as it determines what untrue statements are misrepresentations and what misrepresentations are material”.^[112]As the learned author points out a falsity in fact can establish a misrepresentation. The state of mind or knowledge may determine whether it is fraudulent or innocent. However, if the insured makes a statement on the basis of a belief held by that person then if a reasonable person would have held a similar belief the statement is not a misrepresentation. Fraud is not alleged in the present case. The section does make it more difficult for an insurer even if there is an untrue statement made by an insured.^[113] Another way of putting the proposition according to the learned author is:

“…an untrue statement is a misrepresentation if the maker –

-did not believe it to be true, or

-he believed it to be true but the belief is unreasonable.”

[81]
It is submitted by the defence that its strongest case relates to the answer to Question 12. Paraphrasing for convenience, “have you had any symptoms…taken any prescribed medication, or consulted a doctor… in the last 12 months? No”. As has been discussed, this answer is untrue. Because the date of avoidance is less than three (3) years after the commencement of the policy, the defendant does not have to prove a fraudulent misrepresentation. An innocent misrepresentation is sufficient under s. 29(3)^[114].

[82]
Section 26(2) has similar provisions to s. 21(1) of the Act and states that a statement made is not a misrepresentation even if the other aspects of s. 26(1) are met unless the ‘statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. It has already been decided that any statements made in response to either in Q7 or Q12 would not have been relevant. In other words, the untrue statements by the plaintiff in her proposal were not material to the risk. One can contrast the situation in Herbohn’s case^[115]where Dr. Bianchi admitted that the severity of his tinnitus and its effect on his work was known to him to be relevant to the risk. For the reasons discussed, there has been no failure by the plaintiff to comply with her duty of disclosure (s. 21) nor has there been a misrepresentation within the meaning of s. 26 of the Act.

Section 29 – Remedies for non-disclosure and misrepresentation

[83]
Although it is not necessary to deal with this section in view of the findings relevant to ss. 21 and 26, it is desirable that there be findings of fact and to deal with the submissions made on this aspect. The entitlement to avoid the policy under s. 29(3) of the Act only arises where the defendant would have entered into the same policy even if the plaintiff had made proper disclosure and had not made any misrepresentation. In other words, if the plaintiff had disclosed her breathlessness and her more recent consultation with Dr. Joseph in December 1997.

[84]
Counsel for the defence in his written submissions^[116], suggested that the plaintiff’s counsel conceded that a similar test can be applied to s. 29(1) and s. 29(3) in the sense that the question is whether the defendant would have accepted the risk of “own occupation” “total and permanent” disability cover for the premium in question if proper disclosure been made.

[85]
In Tyndall Life Insurance Co. Ltd. v Chisholm^[117], Debelle J. held that “it is implicit in the wording of s. 29(1)(c) that the insurer is denied a remedy only where he would have entered into precisely the same contract as that which was made.^[118] No issue arises in this case because the defendant continued to deduct the premium after the purported avoidance of the policy.

Evidence in relation to Section 29

[86]
The defence called two witnesses on this point. Alexander John Angus was the underwriter who worked part time with the defendant. He had a long and varied experience in the insurance industry. He gave evidence of his practice in relation to the policy concerned. Given the answers in the proposal, he underwrote the risk without further question. He stated in his affidavit ^[119]that he would not have approved the issuing of the policy if the plaintiff had revealed intermittent symptoms of breathlessness since 1993 or if she had seen Dr. Joseph about the problem in December 1997. He said it was his practice not to underwrite an unknown risk. Breathlessness, he said, can be a symptom of a number of significant health risks. If he had been told of those matters (not revealed by the plaintiff), he would have called for a “Private Medical Attendant Report” (PMAR). This required Dr. Joseph to fill out a form asking more detailed questions. This was in August 1998 before Dr. McEvoy had suggested that the symptoms were stress related. Certainly, Mr. Angus would not have approved the issuing of the policy if the proposal had revealed stress or anxiety. Further investigations by way of a questionnaire about the stress would have been required before deciding the issue.

[87]
In cross examination^[120], the following question was asked:

“Mr. Angus, I suggest to you that if in fact you had have done so - you had received on that proposal a comment regarding breathlessness, you had obtained a PMAR from Dr. Joseph and Dr. Joseph had told you that Ms. Schaffer at that time had only – had been attending upon his practice for 12 years, had only on three occasions in those 12 years raised breathlessness, the first two occasions being in 1993, the second – or the third occasion I’m sorry being in December of 1997 and that in both those years investigations were undertaken and the results came back clear, that you would have approved the policy?”

[88]
This question was objected to on the basis that it was a “speculative inquiry”. I reserved the admissibility of that evidence. If the question is not allowed it makes it difficult to test the validity of the evidence. This is conceded by the defence in the written submissions.^[121]An underwriter could say that the policy would not have issued if there was any type of non-disclosure or misrepresentation and yet not have the basis of his opinion tested by putting certain hypotheses to the witness. In Chisholm’s case^[122]evidence was led from two underwriters as to whether they would have issued the policy if they had known of the tests for cancer which the insured had undertaken. The insurer did not seek to prove what might have been disclosed had it required the insured to undergo a further medical examination. Debelle J. said that to do so would “require an insurer to discharge an evidentiary burden which is extremely difficult, if not in some circumstances impossible to prove. That is not what is intended by s. 29(1)(c), a conclusion which is re-enforced when s. 29(1)(c) is compared with s. 29(3)^[123].

[89]
The question put certain facts which were the subject of evidence viz. the nature of the symptoms of which Dr. Joseph was aware. As it turned out a different question was finally answered:^[124]

“His Honour: Well, the question was: if you had been aware of breathlessness and that she had been to a doctor on three occasions over those 12 years and you inquired of the doctor, namely Dr. Joseph, who gave you the reply that there were – no physical problems and the report was – the reports obtained from the specialists were clear as far as the – any physical problems were concerned, what would your next step have been?—I - I think the question mentioned also that the most recent attack was in 1997. That (sic) right?

Ms. Hay: Yes, that’s correct? -- A lot depends on exactly how the doctor writes the words he uses and we usually hope that they make some comment about their opinion as to what causes breathlessness, but if we’d received a report saying there were some episodes of breathlessness, they’d been investigated, no cause found, and if the doctor had added some comment about, you know, it didn’t seem significant well I would’ve accepted it but – so alot depends on just what the doctor’s summing –up of the – his opinion of the whole results were.”

[90]
This evidence is not so speculative that it ought to be disallowed. All of Dr. Joseph’s notes are before the court. Any answers from Dr. Joseph would have been reflected in the notes. The history and symptoms in this particular case up until August 1998 are reflected in the notes. The last treatment recommended by Dr. Joseph was in December 1997. This evidence is no more speculative than that of Mr. Willison in Chisholm’s case^[125]where he said that “he would have accepted the proposal even if Dr. Hume had not made any comment in section L of the form, since the comments made by Dr. Hume beneath the defendant’s answer to B3-21 showed that no abnormality had been found after examination…”. Admittedly on the face of the form in that case there was reference to the rectal bleeding. What the insured had failed to do was advise the insurers of the positive test which indicated bleeding in the large bowel. If the insured has disclosed the test, then Mr. Willison stated that he would not have accepted the proposal but would have deferred his assessment until the condition of rectal bleeding had been investigated and a diagnosis made^[126].

[91]
In Chisholm’s case,^[127]Debelle J. found that the insurer would not have accepted the proposal if the facts about recent bleeding and the test had been disclosed. The insurer would have deferred assessment of the proposal until the cause of the rectal bleeding had been ascertained. The insurer would have required the insured to undergo a colonoscopy. Although the insurer did not seek to prove what might have been disclosed if there was a further medical examination, the insured called a specialist medical practitioner to determine what might have occurred. The effect of his evidence was “that, although a polyp would have been present in the (insured’s) colon in June 1991, it was likely that the polyp was not malignant.”^[128]. This evidence and other evidence was of a speculative nature. Debelle J. rejected the submission that the insurer had to prove more than it would have just deferred its consideration of the question as to whether it would have entered into the contract until the cause of the bleeding had been fully investigated. The reasons were twofold^[129]:

The obligation on the insurer under s. 29(1)(c) did not extend to proving reliance on the facts in the proposal regarding a further obligation to prove what condition would or would not have been diagnosed in consequence of the medical condition and to prove that the particular diagnosis would have caused it not to accept the risk.
Where fraud is established, an insured person should not be in a position to profit from same (this is not applicable to the present case).

[92]
The uncertainties raised by Debelle J. are not as obvious in the present case as they were in the examinations conducted by Dr. Joseph and Dr. Coghlan. All tests were normal. Therefore, had the plaintiff disclosed the consultation in December 1997 and the breathlessness complained of, then Mr. Angus would have sought Dr. Joseph’s opinion. The facts which would have given rise to his opinion are well documented. The following evidence from Mr Angus leads to a finding that the nature of the evidence objected to should be allowed in the present case^[130]:

“You see, I suggest to you that in fact some periodic episodes of breathlessness would not have cause you any great concern, not enough to not write the business? -- Provided we had a report from a doctor and he had in – his original question was he’d investigated and found no significant cause and was not concerned about it himself.

And what if the doctor didn’t state that he wasn’t concerned about it but simply said that he couldn’t find any significant cause? -- Probably in the scenario you painted I think that there were – you mentioned two spread over several years and the last one was something more than 12 months prior to the application. Probably would’ve accepted it, I - I think.”

Mr. Angus resiled from that position in re-examination^[131].

[93]
What the counsel for the defence seems to have conceded in argument^[132]is that once the insurer discharges its onus by proving that it would not have entered into the contract had there been full disclosure, the evidentiary onus shifts to the plaintiff to “go down the rabbit hole with all the doctors and prove the steps that would have occurred that would have led to the issuing of the policy at some time later…”. The evidence called by the insured in Chisholm’s case supports that view. Facts can be proved also by way of cross-examination. The evidentiary onus can be discharged by undermining in cross-examination the opinions expressed in chief. For those reasons, the evidence objected to is admissible.

[94]
Mr. Willison had been an underwriter since 1980. He had underwritten various types of policies for a range of insurers including the defendant. He also gave evidence in Chisholm’s case.^[133]Mr. Willison referred to the consultation by the plaintiff with Dr. Joseph in December 1997 for breathlessness. He said that an insurer cannot write an unknown risk and that he would not have written the policy but would have deferred same until a PMAR was obtained^[134]. In cross-examination^[135], he was asked about the proposal which stated that the plaintiff had not seen a doctor for 12 months. He said that this would not be significant. When directed to the underwriting guidelines^[136], it seemed that in fact a medical examination may be required where the client had not consulted a doctor in the preceding 12 months.

[95]
Also, Mr. Willison was referred to his evidence about not underwriting a client with unknown risks. In fact, the guidelines^[137], where there is neuralgia which has been fully investigated but no cause has been established allows the risk to be undertaken. On two issues, Mr. Willison seemed to be at odds with the defendant’s own guidelines. His original evidence favoured the defendant on both issues. One was left with some doubt about his evidence at that point. Finally, he was referred to the handwritten notes in the defendant’s file^[138]. The following matters appear in the file:

“25.01.00 …get PMAR from GP to determine all consultations…”

“23.2.00 …Pay Cleveland Family Practice $50.OO for copy of all clinical notes”

“4.5.2000 Received report from Ms. Schaffer from her psych. Dr. Holm. Seems to support client but does not give any reasoning for it”

“4.5.2000 After looking through report, next action would be 2 staged:

refer the information to hand to UWG (underwriting) to gain their views on the consultations prior to the acceptance of policy.
After this follow up for more info on the issues raised by Dr. Holm.

Referred first to Lionel. (Willison)^[139]

“1.5.2000 File returned by Lionel. At this stage he doesn’t feel there is sufficient information to enable them to determine how it would have been treated. Suggests write to other doctors for further info. Also reviewing Dr. Holm’s report, feel it would be best to arrange IME. Rang Dr A rooms, seemingly lengthy delays.”

“12.5.2000 Appointment arranged with Dr. Alcorn for 25.7.00…”

[96]
The plaintiff’s counsel in her written submissions, submits that this evidence shows what the defendant would have done in the event of full disclosure by the plaintiff. Ex. 13 is relied upon for this submission. When a PMAR was requested from Dr. Joseph he provided a copy of his notes. These were reviewed by the underwriter Mr. Willison who was unable to determine whether or not the defendant would have accepted the risk when considering the proposal. I accept those submissions.

[97]
Having considered the evidence of Mr. Willison and putting the evidence of Mr. Angus to one side, the defendant has failed to prove to my satisfaction that they would not have entered into the contract even if the plaintiff had made proper disclosure or had not made any misrepresentation as alleged before the said policy was entered into. The evidence of both Mr. Angus and Mr. Willison was internally inconsistent and leads one to a clear finding that the defendant failed to discharge the onus of proof required under s. 29.^[140]When one considers their evidence together, the defendant’s case becomes somewhat “dubious”.^[141]

[98]
Further, there is no evidence from the defendant that it would not have entered into a policy of insurance with the plaintiff under “any terms” as provided for in S 29(3). For example, where there is a symptom of neuralgia with an unknown cause, then the ordinary rate premium may be subject to a 50% increase. Mr. Willison accepted that there may be a loading^[142]where there are symptoms and the cause remains unknown.

Denial of a fair trial

[99]
For completeness, the written submissions of the defendant are marked Exhibits “A1” and “A2” and “C” and the submissions of the plaintiff are marked “B” and “D”. Earlier in the defendant’s written submissions^[143]defence counsel submits that the defendant has been denied a fair trial on the issue of evidence relating to s 21(1)(c) of the Act. The question of admissibility was reserved in relation to exploring what might have occurred if a PMAR had been sent to Dr. Joseph. A ruling has been given that the evidence is admissible. The defence had the opportunity of dealing with same in re-examination. There was no application for an adjournment in order to call further evidence. The evidence was called on day three (3). The matter was listed for five (5) days and finished on day four (4). In any event, the written submissions do not convince me that the defence did not have adequate time to consider the matter.

[100]
In his written submissions, counsel for the defence concedes that the Court can order the defendant to pay to the plaintiff the sum of $100,000.00 plus any indexation benefit and any increasing claim benefit if certain matters as set out in the summary of findings are established. This removes the problems as discussed in McArthur’s case^[144].

Summary of Findings

The plaintiff suffered an illness or injury whilst she was working in regular employment for income with Queensco-Unity Dairyfoods Co-operative Association Limited.

That as from 17 December 1999 the plaintiff had been absent from and unable to work because of the said injury or illness for a continuous period of at least six months.

That the defendant had not made a decision within the meaning of clause 19.1 of the policy of insurance as at September 2000.

That the plaintiff was incapacitated to such an extent as at September 2000 that she was unlikely ever to be able to work again in her “own occupation” as a result of the said injury or illness.

That the plaintiff in her proposal for insurance complied with her duty of disclosure within the meaning of s. 21(1) of the Insurance Contracts Act 1984 (Cth).

That the plaintiff in her proposal for insurance made statements which were not misrepresentations within the meaning of s. 26(1) and s. 26(2) of the said Act.

That the defendant has failed to discharge its onus of proof in relation to s. 29(3) of the said Act.

ORDERS

It is declared that the defendant’s purported decisions on 30 August and 18 September 2000 were void and of no effect.
It is declared that the plaintiff is entitled to a total and permanent disablement benefit pursuant to the policy of insurance dated 8^th September 1998 with the defendant.
Judgment for the plaintiff against the defendant in the sum of $106,090.00 as monies due and owing and interest at the rate of 9 per centum from 30 August 1998.
Liberty to apply to finalise the terms of the draft order to be initialled by me in the event that the parties are unable to agree as to the final order.

Footnotes

[1] Exhibit 1 document 19

[2] Exhibit 1 document 31

[3] Exhibit 1 document 21

[4] Exhibit 2 document 48

[5] Exhibit 2 document 53

[6] Exhibit 2 document 52

[7] Exhibit 2 document 72

[8] Exhibit 2 document 75

[9] Exhibit 2 document 76A

[10] (2001) QCA 317

[11] (1985) 3 ANZ Insurance Cases 60-638

[12] (1992) 7 ANZ Insurance Cases 61-113

[13] op. cit.

[14] op. cit.

[15] McArthur op. cit. 17-20

[16] ibid. 9-10, 21.

[17] McArthur ibid at 21.

[18] Transcript 158/55

[19] Transcript 161/1

[20] Transcript 161/50

[21] Transcript 164/27

[22] Exhibit 1 document 25A

[23] Exhibit 3 para 26 (f)

[24] Exhibit 3 paras 56-69

[25] Exhibit 3 para. 64

[26] Transcript 25/48

[27] Exhibit 3

[28] Exhibit 1 document 29

[29] Transcript 148/50

[30] Exhibit 1 document 29E

[31] Exhibit 12

[32] Transcript 149/50

[33] Exhibit 1 doc. 1 p 3-5

Exhibit 1 doc. 2 08.2.93

Exhibit 1 doc. 2 01.07.93

Exhibit 1 doc. 2 01.02.95

Exhibit 1 doc. 2 23.12.97

[34] Ex. 1 doc 29E

[35] Exhibit 3 para. 80-83

[36] Transcript 169/1

[37] Transcript 169/12

[38] Exhibit 2 doc. 52

[39] Exhibit 1 doc 28

[40] Exhibit 2 doc 58

[41] Exhibit 2 doc 64

[42] Exhibit 2 doc 64 p. 2

[43] Reasons for Judgment para. 26

[44] Ex 2 doc 49A

[45] Ex 2 doc 49A

[46] Ex 2 doc 49A p. 4

[47] Ex 2 doc 64 p. 4

[48] Ex. 2 doc. 67A p. 4

[49] Ex. 2 doc. 77

[50] Ex. 2 doc. 82

[51] Ex. 92A

[52] Ex. 2. doc 99 p. 1

[53] Ex. 2 doc 99 pp 1-2

[54] Transcript 170/30-50

[55] Transcript 174/10

[56] Transcript 178/48

[57] Transcript 179/46

[58] Transcript 180/40

[59] Transcript 181/30

[60] Exhibit 3 para 98

[61] Ex. 2 doc. 45

[62] Ex. 2 doc 37 p. 2

[63] Transcript 228/10

[64] Ex. 2 doc. 37A

[65] Transcript 138/20

[66] Transcript 138/40

[67] Ex. 1 doc. 30 p.6-7

[68] Judgment para. 25

[69] Ex. 1 doc 30 p.8

[70] Ex. 2 doc 85

[71] Ex. 2 doc. 68 p. 10

[72] Transcript 255/60

[73] Transcript 255/40

[74] Ex. 2 doc. 68 p. 13

[75] Ex. 2. doc. 68 p. 14

[76] Ex. 2 doc. 98

[77] Ex. 2 doc. 98 p. 19

[78] Ex. 1 doc 24B

[79] Exhibit A2 para 38

[80] Ex. 1 doc. 2

[81] Ex 1 doc 2

[82] Ex. 1 doc. 2

[83] Ex. 11

[84] Ex A 1 and Ex A 2

[85] (1997) 2 Qd. R. 661

[86] ibid at 673

[87] Vernon v Bosley (No. 1) (1997) 1 All ER 577 at 611

[88] Ex. 2 doc. 68 p. 11

[89] Transcript 266/10

[90] Transcript 228/55

[91] Transcript 147/30

[92] Ex. 1 doc. 7

[93] Transcript 192/40

[94] Ex. 5 para. 14-17

[95] Transcript 36/25

[96] Transcript 39/40-52

[97] Transcript 42/24-32

[98] Transcript 50/26-32

[99] Transcript 52/15-24

[100] Transcript 62/28-48

[101] Transcript 115/30

[102] (1999) 151 FLR 360 at 371

[103] unreported 21.3.01 at p. 20 para. 73 affirmed on appeal 26.10.01 p 8 para 34

[104] (1998) 10 ANZ Insurance Cases 61-394 at 74,184

[105] (1998) 10 ANZ Insurance Cases 61-410

[106] op cit at 17

[107] op.cit. pp. 24-5

[108] Transcript 64/10

[109] Transcript 64/20

[110] op. cit. p. 6; see also Australian Casualty & Life op. cit. 375

[111] op. cit. p. 74, 615

[112] Morgan J.K., 1986, “The Insurance Contracts Act 1984”, Longman Cheshire, Melbourne at 61.

[113] ibid at 61

[114] Herbohn op.cit. p. 74,616-7

[115] ibid. 74, 615

[116] Ex A1, A2

[117] (1998) SASC 445

[118] Sutton, K.C., 1991, “Insurance Law in Australia”, Law Book, Sydney at para 3.115

[119] Ex. 8 para. 24

[120] Transcript 198/5

[121] Ex A 2 para. 23

[122] op. cit. para 79(f)

[123] ibid at para 96

[124] Transcript 200/19

[125] op cit at para 83(f)

[126] ibid at para 83

[127] ibid at para 85

[128] ibid at para 87

[129] ibid at paras 96-97

[130] transcript 201/5

[131] Transcript 209/5(f)

[132] Transcript 207/20

[133] op cit

[134] Ex. 9 para. 24-26

[135] Transcript 237/5

[136] Ex. 1 doc 14A p. 2

[137] op. cit. p. 54

[138] Ex. 13

[139] Transcript 242/48

[140] CIC Insurance Limited v Midaz Pty Ltd (1998) 10 ANZ Insurance Cases 61-394 p 74-186.

[141] ibid

[142] Transcript 241/38

[143] Ex A1 para 43-48

[144] op.cit

Editorial Notes

Published Case Name:
Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd
Shortened Case Name:
Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd
MNC:
[2002] QDC 126
Court:
QDC
Judge(s):
Forde DCJ
Date:
10 May 2002

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
Australian Casualty Life Ltd v Hall	(1999) 151 FLR 360	2 citations Jump To Cite 1 - (1999) 151 FLR 360 Cite 2 - (1999) 151 FLR 360
Butcher v Port	(1985) 3 ANZ Insurance Cases 60-638	1 citation Jump To Cite 1 - (1985) 3 ANZ Insurance Cases 60-638
Butcher v Port	(1985) 2 ANZ Insurance Cases 60	1 citation Jump To Cite 1 - (1985) 2 ANZ Insurance Cases 60
CIC Insurance Limited v Midaz Pty Ltd	(1998) 10 ANZ Insurance Cases 61-394	3 citations Jump To Cite 1 - (1998) 10 ANZ Insurance Cases 61-394 Cite 2 - (1998) 10 ANZ Insurance Cases 61-394 Cite 3 - (1998) 10 ANZ Insurance Cases 61-394
Edwards v The Hunter Co-op Dairy Co Ltd	(1992) 7 ANZ Insurance Cases 61 — 113	2 citations Jump To Cite 1 - (1992) 7 ANZ Insurance Cases 61 — 113 Cite 2 - (1992) 7 ANZ Insurance Cases 61 — 113
Herbohn v NZI Life Limited	(1998) 10 ANZ Insurance Cases 61-410	2 citations Jump To Cite 1 - (1998) 10 ANZ Insurance Cases 61-410 Cite 2 - (1998) 10 ANZ Insurance Cases 61-410
McArthur v Mercantile Mutual Life Ins Co Ltd	[2002] 2 Qd R 197; [2001] QCA 317	2 citations Jump To Cite 1 - [2001] QCA 317 Cite 2 - [2001] QCA 317
Pearson v Rizos	View on:JADE(1998) SASC 445	1 citation Jump To Cite 1 - (1998) SASC 445
Permanent Trustee Australia Ltd. v FAI General Insurance Co Ltd.	(1998) 147 FLR 12	1 citation Jump To Cite 1 - (1998) 147 FLR 12
Permanent Trustee Australia v FAI General Insurance Co Ltd	View on:NSWLR(1998) 44 NSWLR 186	1 citation Jump To Cite 1 - (1998) 44 NSWLR 186
Twenty-first Maylux Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd	(1990) 6 ANZ Insurance Cases 60-954	2 citations Jump To Cite 1 - (1990) 6 ANZ Insurance Cases 60-954 Cite 2 - (1990) 6 ANZ Insurance Cases 60-954
Tyndall Life Insurance Co Ltd v Chisholm	View on:JADE(1999) SASC 445	1 citation Jump To Cite 1 - (1999) SASC 445
Vernon v Bosley (No 1)	(1997) 1 All ER 577	1 citation Jump To Cite 1 - (1997) 1 All ER 577
Vernon v Bosley (No. 1)	(1999) 1 All ER 577	1 citation Jump To Cite 1 - (1999) 1 All ER 577
White v The Board of Trustees	(1997) 2 Qd R 661	3 citations Jump To Cite 1 - (1997) 2 Qd R 661 Cite 2 - (1997) 2 Qd R 661 Cite 3 - (1997) 2 Qd R 661

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Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd[2002] QDC 126