Future Value of Insurance Policies
95 The cash values of the Insurance Policies three, seven and ten years after they had been sold, which were referred to by the IMB representatives, were derived from estimates in a model prepared by National Mutual for the Ivers in connexion with the scheme. The key assumption in the model, his Honour observed, was the rate of investment return. The evidence showed that the assumed rate was one approved by the Insurance Commission as an indicative rate of return for the use of insurance offices in marketing their products. Both National Mutual and Legal & General were prepared to lend to the policy holder up to 90 per cent of the cash value of the policy at the time of the loan, subject to the policy having been in force for at least two years. The amounts of the loan-backs in 1994 and 1997, referred to in an IMB document of 22 July 1991, were within 90 per cent of the cash value. The policies would have had to be in place for two years for them to have any prospect of having a loan value of $2,000.
96 His Honour found that in written material distributed to members of the public, and statements made by IMB representatives at sales seminars, representations were made, in the period March to December 1991, to the effect that in ten years a policy would be worth $25,000 and also that a policy would accumulate sufficient value to enable policy holders to borrow through the loan-back facility $2,000 in 1994, $5,000 in 1997 and $18,000 in 2001. Similar representations were made during the period from about January 1992 to September 1993. IMB distributed widely a document entitled "National Mutual cash value print out" which showed the cash value of the policy at the end of each year of the twenty year life of the policy, his Honour found. It contained the note "These figures represent illustrations only, future values cannot be guaranteed". Notwithstanding that qualification, his Honour considered that the document would likely have had the effect of reinforcing the representations made. If there were no other evidence his Honour acknowledged that there would have been substance in the Commission's argument.
97 Before his Honour the Commission argued that there could be no reasonable grounds for making the representations. There were so many variables that it was impossible to predict what the cash values would be. However, there was a "mass of testimony", his Honour found, that established that IMB's presentations left people with the clear understanding that the suggested policy values were indicative only, and could not be guaranteed because actual values depended upon a range of market influences. One of the Commission's own witnesses had been given a document that advised that the figures were estimates only and based upon rates that may not be material. She had received similar oral advice from an IMB representative.
98 In mid to late July 1991, IMB had used two documents as marketing aids. They contained unqualified statements about the National Mutual policy accumulating sufficient value to support the three loans. His Honour considered the Commission's contention, that mere distribution of the document was sufficient to amount to conduct in contravention of s 52, but was of the view that it was necessary to have regard to the evidence of the information subsequently provided to people in face-to-face interviews or policy seminars, namely that policy performance was not guaranteed.
99 In relation to the performance of the Legal & General policies the Commission relied upon statements in a document headed "2001 Rugby League Syndicate - Members Information Portfolio", which was distributed by IMB in the first half of 1992. The document, his Honour found, however, was likely to convey that there was no assurance. A video presentation prepared by Mr Cowley in March 1993 did not advance the Commission's case. The statements there made about the performance of the policy were immediately qualified.
100 His Honour did not accept the evidence of three of the four witnesses relied upon by the Commission. As to the fourth, his Honour considered that it was necessary to consider what was alleged to have been said by Mr Cowley about the Legal & General policy with other evidence. There were two other occasions in which unqualified statements were made and which might constitute conduct contravening s 52. Mr Glenn Ivers had made statements to the effect that the policy would produce $25,000 in ten years' time. A script prepared for seminar presentations contained a statement that the payment of $25 a week into a capital guaranteed investment fund held by Legal & General would guarantee investor options on 25,000 $1 shares in 2001. His Honour did not, however, consider that they could be viewed in isolation from the "mass of evidence" called by the Respondents and which his Honour considered presented "a pretty comprehensive picture of how the Respondents marketed both the National Mutual and the Legal & General policies".
101 This evidence was provided by thirty-three witnesses, from a group of 439 witnesses who had provided statements, whom his Honour described as "Category J". They had attended the seminars and ultimately purchased policies. Their evidence generally disclosed a range of views and they did not appear to his Honour to be blind supporters of IMB. Of those witnesses whose evidence was useful, the majority gave evidence that they understood that there was no assurance that the policies would yield the $25,000 figure mentioned at the seminar they attended. Some clearly understood that the figure was governed by interest rates, and others understood there to be uncertainty as to whether the figure could be achieved.
102 His Honour regarded the evidence of these witnesses as reflecting the evidence that the larger body of Category J witnesses would have given. The parties had agreed that this approach could be taken when the sample witnesses were chosen. It was supported by the evidence of other Category J witnesses, not from the sample but called by the Respondents. The evidence suggested to his Honour that most people attending seminars left with an understanding that what was said about future policy values was qualified. His Honour did not accept, therefore, that the unqualified statements about policy performance should be regarded as amounting to misleading conduct. What was said by Glenn Ivers on 8 September 1993 was to be viewed in the same way. The evidence of a few witnesses who believed the figure to be an unqualified, firm, figure should be discounted as not representative, his Honour held.
103 The Commission also submitted, before his Honour, that the National Mutual document showed the ten year value of its policies at $24,369 not the figure of $25,000 as had been represented. His Honour dealt with the argument, although it would not appear to have been raised on the Commission's pleading. His Honour did not consider the representation to be misleading. To state the precise value was more likely to mislead, his Honour observed.
104 The Commission submitted that with respect to those persons who were misled by an initial representation, but did not subsequently attend seminars, the misrepresentation would not have been corrected. The witnesses who were called were not representative of such people. All the Category J witnesses were persons who later attended seminars and purchased policies. A representation does not cease to be misleading because it is subsequently corrected, it was submitted. It was further submitted that the evidence of the Category J witnesses was inherently unreliable and should not have been afforded weight. The evidence of one of the witnesses, who did believe the policies would be worth $25,000, should not have been discounted. In relation to the second basis it was contended that rounding up of the figure is inherently misleading.
105 His Honour did not find that the initial representations were misleading and then proceed to determine whether they were later corrected, as the Commission contended. Rather, his Honour considered that the conduct of the Respondents needed to be viewed overall to ascertain what was conveyed before determining whether it was misleading or likely to mislead. Purchasers were, after all, exposed to a course of conduct. In so doing his Honour did not hold that it was necessary to have regard to the point of contact. His Honour referred to SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14, and the observation there made, that conduct that is misleading or deceptive is not limited to conduct that involves or is likely to induce entry into a transaction. His Honour considered the earlier representations to have been a "temporary error", which had no relevant effect upon any person. We take his Honour to say that no one in fact was misled.
106 The conclusion reached by his Honour was clearly open on the evidence, in our view. This was a case where the evidence was able to show whether persons who had heard an initial, unqualified, statement about the value of the policies were affected by it. If the statements had been influential, one would have expected to find those persons amongst those who attended the later seminars. The Category J witnesses were representative of those attendees. And it was appropriate, in the circumstances of this case, for his Honour to view the conduct of IMB and its representatives as a whole. It was not suggested that IMB was attempting to sell policies at the outset. What it engaged in, with potential purchasers, was a course of conduct. It is the effect of all of that conduct that was appropriate to be considered. To refer only to what was said at one point of the communications would be similar to selecting parts of a conversation and assessing whether those words were capable of misleading. It would fail to put them in context (see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199).
107 The principal submission of the Commission on the appeal related to his Honour's acceptance of the Category J witnesses. It was submitted that their evidence was coloured by the fact that they were committed to the proposal. We do not understand why their evidence was to be regarded as unreliable. They were apparently quite sensible people who were able to give an account of what they had been told. Their evidence did not suggest them to be IMB supporters and there was no reason that they should be. Although they had been repaid their premiums, they had purchased policies in a scheme that did not proceed. They were cross-examined and found to be credible.
108 The Commission pointed to the finding in connexion with the witness Ms Colbran. His Honour did accept that she had been told by the IMB representative Mr Livesey, and she believed, that in ten years her policy would be worth $12,500. His Honour did not, however, make a finding of misleading conduct. The Commission submits that the fact that the statement made did not reflect IMB's usual practice of qualifying the statements, or that it was made on only one occasion, does not render the conduct any less a contravention. The submission overlooks the orders sought by the Commission and the case it had pleaded, which were much wider. This is the context in which his Honour spoke. A finding of one misleading statement to one person would not justify the orders sought. We add that it would not appear that the Commission sought the specific order.
109 His Honour's finding, that the conduct of the IMB representative did not convey certainty about future values, also disposes of the Commission's argument concerning the misrepresentation of the National Mutual document. Inherent in the finding is an acceptance that rounded-off figures are less likely to convey certainty, as his Honour pointed out. If the exact figure had been used there would have been a greater potential for people to be misled because it would convey that the figure is reliable.