The Salient Facts and Documents
5 On 15 March 2016, the Insured met with the Financial Adviser, an employee of ANZ, at the ANZ branch in Grafton. At that meeting, the Financial Adviser provided the Insured with a Financial Services Guide (FSG) for ANZ Financial Planning dated 23 February 2015. The FSG included statements that ANZ offered services through ANZ Financial Planning, and that "ANZ Financial Planning acts on behalf of other product issuers (including other ANZ Group Members) when it sells" products including life insurance products (CB tab 114, p 1546). It appears that ANZ Financial Planning is a business unit of ANZ, rather than a separate legal entity.
6 On 18 May 2016, the Insured met with the Financial Adviser again at the ANZ branch in Grafton. At that meeting, the Financial Adviser presented the Insured with a Statement of Advice dated 28 April 2016, which included a recommendation to purchase income protection insurance and life insurance offered by OnePath, and to cancel her existing insurance. The Financial Adviser also provided the Insured with the OnePath OneCare insurance product disclosure statement (PDS) dated 1 July 2014, the Supplementary PDS dated 5 December 2015, and the OnePath OneAnswer Frontier Personal Super & Pension PDS dated 2 May 2016. The Financial Adviser discussed the recommendations with the Insured, and took her through the Statement of Advice. The Statement of Advice instructed the Insured to read the OneCare PDS and Supplementary PDS. The Financial Adviser and the Insured finalised an application form for OnePath OneCare Income Protection and Life Insurance cover on a computer within the branch (Application Form) (CB tab 22, p 409). The Financial Adviser reminded the Insured that further details may be required through the underwriting process and to be patient and to understand it is "to ensure everything is disclosed" and that the Insured will know the impact of her medical history on cover (CB tab 22, p 410).
7 The Application Form signed by the Insured on 18 May 2016 begins with a detailed description of the policy owner's duty of disclosure and of the possible consequences of not complying with that duty. That description is substantially repeated on the first page of the Personal Statement which forms part of the Application Form (CB tab 21, p 394). A surprising submission was made by ASIC that the document called the Personal Statement was not in evidence (T18.5), but it obviously was, as it forms a fundamentally important part of the Application Form. The first page of the Personal Statement concludes with an acknowledgement by the Insured that she understood her duty of disclosure and her duty to ensure that all of the information provided in the Personal Statement was true and complete.
8 Some of the questions in the Personal Statement were framed by reference to specified periods of time. For example, the question concerning smoking history (CB tab 21, p 396) asked whether the Insured had smoked tobacco, cigars or a pipe "During the past five years", and if so whether the Insured had smoked tobacco, cigars or a pipe "Within the last 12 months, or used a nicotine replacement treatment within the last 3 months". By contrast, the section of the form under the heading "Medical history" (CB tab 21, p 397) was not framed by reference to a specific time period, but instead used the word "ever" in posing the question "Have you ever been diagnosed with, had any symptoms of, or had or been advised to have any consultation or treatment for any of the following (if you are unsure, select 'Yes' to see a list of conditions)". There then appeared a lengthy list of conditions.
9 The Insured ticked the box for "Yes" in answer to the sub-question "Any other accident, injury, pain or disorder affecting a joint, muscle, ligament, tendon, cartilage or limb (including any of the shoulder, hip, hand, wrist, knee, ankle, foot, head, jaw, ribs, arm or leg)?" (CB tab 21, p 397). That answer then called for further information (CB tab 21, p 399), in which the Insured ticked the box for "Hip" but not the box for "Shoulder or collarbone", and indicated that the condition was a cartilage injury on the right side, and in answer to the question "Select when you last had symptoms, pain or restriction due to this condition in your right hip", the Insured answered "More than 5 years ago".
10 The Insured also ticked the box marked "Yes" in answer to the sub-question "Any form of mental health condition, or fatigue related illness?" (CB tab 21, p 398), and then ticked the "Yes" box for the further sub-question "Depression (including major depression, dysthymia)" (CB tab 21, p 398). That answer then called for further information about the Insured's mental health condition (CB tab 21, p 401). In answer to the question, "Have you ever received any treatment (including medication, counselling, etc.) within the past two years, or had any symptoms within the past two years, for any nervous or mental disorder?", the Insured ticked the box marked "Yes". The next question was not limited to a specific timeframe but used the word "ever" as follows: "Have you ever had any time off work for any nervous or mental disorder?", to which the Insured ticked the box marked "No". Similarly, the next question used the word "ever" as follows: "Have you ever been referred for specialist psychological or psychiatric counselling, or been admitted as an in-patient to any hospital or clinic, for any nervous or mental disorder?", to which the Insured ticked the box marked "No". In answer to the request to provide the diagnosis of the Insured's condition or conditions as described by the treating medical attendant, the Insured said: "Approx 1999/2000 depression relating to overall unhappiness and sadness in work situation and personal life. Proactively sought medication recognising depression symptoms." In answer to the request to specify for each condition the date diagnosed and date the condition ceased (if applicable), the Insured stated: "1999/2000 lasted a few weeks. Had 5 weeks off work on sick leave until well to return to work - post medication and break from work." In answer to the request to specify the symptoms for each condition, the Insured stated: "Verge of tears, general unhappiness in workplace. Medicated and full recovery (no symptoms) and remained with employer for another 3 years." In answer to the question whether the Insured had ever had any recurrence of the symptoms, the Insured ticked the box marked "Yes", and in answer to the request to provide the dates of the last symptoms stated: "Stayed on medication for over 6 years to start with as happy with impact. Stopped medication approx for 6 years, however resumed approx 2 years. Happy to be on medication when recognise feeling flat or stress". In answer to the question: "Have you ever attempted suicide or self harm?", the Insured ticked the box marked "No". In answer to the question whether the Insured was aware of the cause or reasons for her mental health condition, the Insured ticked the box marked "Yes", and then in answer to the request to provide details stated: "General stress from stress, duties and busy at work. Dealing with other staffing issues (eg less staff at work and unhapiness [sic] of employees). Medication to take edge off and function to best of ability. Have been with this employer for 12 years and never had anytime off for depression. Proactively happy to take medications". In answer to the request to provide details of the treatment including any medication taken for the condition, the Insured stated: "Efexor 2 a day". In answer to the question: "Have you ever been admitted to hospital or any other care facility?", the Insured ticked the box marked "No". In answer to the request for details of the doctor who holds the records relating to this condition, the Insured gave the details for Dr John Bradshaw, a general practitioner, at the Queen Street Clinic in Grafton.
11 In answer to the question whether the Insured had "ever" made a claim for, among other things, workers' compensation, the Insured ticked the box marked "No" (CB tab 21, p 403). However, that answer was corrected in a Personal Statement Adjustment Form signed by the Insured on 7 July 2016 (CB tab 35, p 533-535), in which the Insured said that that answer was incorrect and referred to having made a claim for workers' compensation for depression in 2001 and an injury on her right side in 2001 and 2003, noting that there is an indecipherable word used by the Insured in describing the right side injury (CB tab 24, p 421).
12 The Personal Statement then set out the authority provided by the Insured for her medical practitioner to release details of her personal medical history to OnePath for the purpose of further assessing the application (CB tab 21, p 404). On the same page, the Insured acknowledged and agreed to having read and understood the duty of disclosure and declared that the statement and answers provided in the Personal Statement were true and complete. The "Declarations" section of the Application Form again set out the details of the duty of disclosure (CB tab 21, p 406). The Declarations given by the Insured (CB tab 21, pp 406-7) included the following:
• I have read and understood my duty of disclosure, and declare that the statements made in this application including any Personal Statement are true and complete.
• I have received and read the relevant OneCare Product Disclosure Statement (PDS) prior to completing and submitting this application.
• …
• I authorise my adviser, named in this application, to receive and access my personal information including financial, medical, and other matters, whether disclosed in this application or obtained from third parties (e.g. doctors, accountants), for the purposes of management and administration of my application, policy and any claims. Where there is any change to this authority, or to my adviser, I will notify OnePath Life of the change.
• I understand my financial adviser is acting as my agent in completing and submitting this application whether electronically or by any other method acceptable to OnePath Life.
• I understand the insurance applied for in this application is subject to further assessment by OnePath Life and will not become effective until my application is accepted and a Policy Schedule is issued by OnePath Life.
13 Those declarations made it clear that the Financial Adviser was acting as the agent of the Insured in making the application. It was also clear from the last declaration in the extract above that it was a matter for OnePath whether to accept the application for insurance, rather than that being a decision made by the Financial Adviser in a way which would bind the insurer. I note at this point that a submission was made that the Financial Adviser was acting as the agent of OnePath in selling life insurance to the Insured, based on the statement in the FSG that ANZ Financial Planning acts "on behalf of" other product issuers (including other ANZ Group Members) when selling life insurance products (CB tab 114, p 1,546). I reject that submission. The expression "on behalf of" as used in that statement in the FSG is ambiguous, in that it may refer either to acting in the interests of an entity, or as representative of the entity. It is only the latter sense which may give rise to a relationship of agency, and even then there are many kinds of commercial representatives (such as distributors) who do not satisfy the legal meaning of the word "agency", namely an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties: International Harvester Company of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Company (1958) 100 CLR 644 at 652 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ).
14 On 18 May 2016, OnePath sent a letter to the Insured enclosing the Insured's Personal Statement Adjustment Form and an Interim Cover Certificate. The covering letter included a reminder as to the Insured's duty of disclosure (CB tab 23, p 411). On 23 May 2016, OnePath submitted a request for a report from Dr Bradshaw, the Insured's general practitioner, in relation to the Insured's mental health, blood pressure and general health. The request was directed to United Healthcare Group (UHG). On 25 May 2016, OnePath received an email from UHG stating that Dr Bradshaw would not release anything whatsoever to UHG (CB tab 30, pp 519-20). That led to UHG cancelling the request for information from Dr Bradshaw. On 14 June 2016, an underwriting note was prepared in relation to the Insured's application for insurance, noting that the only real concern with the Insured was in respect of mental health, and given that the insurer had "quite good disclosure" from the Insured in relation to mental health, that was always going to be an exclusion, and due to the doctor's refusal to complete the requested report, mental health would be excluded (CB tab 24, p 414). On 15 June 2016, OnePath sent a letter to the Insured which included an offer for income protection and life insurance cover, with the income protection cover being offered expressly subject to an exclusion in relation to mental illness, and the life insurance cover being offered at standard rates (CB tab 31, p 521-523). The letter again included a reminder as to the Insured's duty of disclosure. Also on 15 June 2016, the Financial Adviser telephoned the insured, and discussed the impact of the mental health exclusion, and how the Financial Adviser had indicated that that was to be expected (CB tab 32, p 524).
15 On 28 June 2016, the Insured met with the Financial Adviser, again at the ANZ branch in Grafton. They discussed the mental health exclusion and the Insured accepted the offer which OnePath had made on 15 June 2016 (SOAF at [23]). The Insured signed the declaration, which included the declaration that the Insured understood and acknowledged that her duty of disclosure outlined in the PDS continued up until the date that OnePath accepted her application and issued a policy. The Financial Adviser emailed the signed letter to OnePath. On 28 June 2016, OnePath sent a letter to the Insured which enclosed the Insured's Policy Schedule, the OneCare Policy Terms and a Welcome to OnePath brochure.
16 On 7 July 2016, the Insured completed and signed the Personal Statement Adjustment Form to which I have referred above (CB tab 35), informing OnePath that she had made workers' compensation claims in 2001 for depression and an injury on her right side in 2001 and 2003. On 14 July 2016, OnePath made a telephone call to the Insured in relation to the information provided in that form. As is agreed in the SOAF at [26], during the telephone conversation OnePath reminded the Insured of her duty of disclosure and, in relation to the right side injury disclosed in the Personal Statement Adjustment Form, the Insured:
(a) confirmed that the disclosure related to an injury to her back, which probably occurred in approximately 2001;
(b) confirmed that the injury caused strong pain in the sacroiliac area;
(c) confirmed that symptoms continued on and off until about 2004;
(d) confirmed that she had approximately two weeks off work in relation to the injury; and
(e) confirmed that she had made a claim for workers' compensation in relation to the injury and time off work, which was finalised in December 2003.
The discussion did not address the Insured's mental health history. On 22 July 2016, the Insured was advised by OnePath that, following OnePath's review of the Personal Statement Adjustment Form, there would be no changes to the Policy.
17 On 14 February 2017, the Insured injured her right shoulder in a workplace incident. Despite undergoing surgery in relation to the injury, the Insured's right shoulder tendon later ruptured during physiotherapy. The Insured underwent further surgery on 6 December 2018 in relation to the injury.
18 On 25 October 2018, the Insured completed and signed an Initial Claim Form for income protection, which she submitted on 14 November 2018, together with an Initial Treating Doctors Statement by Dr Bradshaw and supporting documentation. The Initial Treating Doctors Statement included disclosure of a previous right shoulder injury (CB tab 46, p 705). On or about 27 November 2018, after some further enquiries, OnePath accepted the Insured's claim for specified benefit periods, subject to ongoing assessment of the claim, and started to pay the Insured benefits, accruing from 27 June 2018.
19 In November and December 2018, and again in early 2019, OnePath sought further information from the Insured regarding her prior shoulder injury and medical records from Dr Bradshaw. By email of 18 January 2019, Dr Bradshaw declined to provide OnePath with the medical records requested by OnePath. On 25 November 2019, OnePath sought a Statement of Claims from the Insured's previous health fund, HCF, and a report from the Insured's orthopaedic surgeon. On the same day, OnePath sent a letter to the Insured which enclosed a supplementary personal statement for completion. On 2 December 2019, the Insured sent an email to OnePath in response to its letter of 25 November 2019, in which she (wrongly) stated that the previous right shoulder injury was "mentioned when policy was first filled out" (CB tab 61, p 810).
20 On or about 2 December 2019, HCF provided a Statement of Claims, which contained details of claims made by the Insured under her HCF policy for the period 19 January 1996 to 27 November 2019, including various dates of admission to the Grafton Base Hospital, but did not include information as to the reasons for those hospital admissions.
21 On 3 December 2019, OnePath requested the Insured's medical records from the Grafton Base Hospital. On the same day, OnePath notified the Insured of the records obtained from HCF, its knowledge of her admissions to the Grafton Base Hospital, and that it had made a request for a copy of her records from that hospital. On the same day, the Insured responded to OnePath saying, among other things, that the admissions to Grafton Base Hospital were for mental health issues during the early 2000s, and more recently for two shoulder surgeries (CB tab 63, p 814). On 7 January 2020, OnePath sent a letter to the Insured requesting that she complete a supplementary personal statement in relation to her pre-existing right shoulder injury. On 17 January 2020, the Insured provided a supplementary personal statement which included confirmation by Dr Bradshaw that he had no record of shoulder injuries between 2005 and 2017 (CB tab 66, p 928).
22 On or about 27 April 2020, OnePath received the requested hospital records from the Grafton Base Hospital, which disclosed that in the period from 2001 to 2005, the Insured was admitted to the Grafton Base Hospital on six occasions in relation to her mental health, including suicidal ideation and suicide attempts. The Grafton Base Hospital records (CB tab 68) revealed that:
(a) on 7 May 2001, the Insured had been admitted to the emergency department (p 1,268), having taken 7 Serapax and 13 Aropax tablets the previous evening (p 1,271). The records indicate that the Insured "stated she hoped she could kill herself" (p 1,271). The Insured was discharged on 8 May 2001 (p 1,285);
(b) on 24 May 2001, the Insured was admitted to Grafton Base Hospital (p 1,239). The records indicate the reason for admission being "Depression, suicidal ideations, change of medication" (p 1,258). During that admission, on 26 May 2001, the Insured presented to the nurses' station having cut her arm with a Stanley knife hidden in her bag (pp 1,243-1,244). The records of the admission contain several references to the Insured making statements that she wanted to die (pp 1,245-1,246). The Insured was discharged on 4 June 2001 (p 1,260);
(c) on 12 May 2002, the Insured was again admitted to hospital (p 1,226). The records indicate that she had engaged in superficial slashing of both of her arms (pp 1,227-1,228). The records stated that the Insured had plans and means of self-harm (p 1,229). The Insured was discharged on 15 May 2002 (p 1,226);
(d) on 24 November 2002, the Insured was again admitted to hospital (p 1,214). The records again contain references to the Insured's suicidal ideation and planning (p 1,217). The Insured was discharged on 26 November 2002 (p 1,214);
(e) on 3 March 2003, the Insured was again admitted to hospital (p 1,199). During that admission, the Insured consumed 60 mg of Diazepam which she had secreted in her bag (p 1,204). This was referred to as an "acute overdose" (p 1,199). The Insured was discharged on 5 March 2003 (pp 1,214-1,216); and
(f) on 24 November 2005, the Insured was again admitted to hospital as part of a safe "time out" in circumstances where she had suicidal thoughts with some non-fixed plans (p 947). The Insured was discharged on 26 November 2005 (p 950).
23 The Claim Assessment Notes from OnePath's initial assessment of the Grafton Base Hospital records on 6 May 2020 record that the Insured did not advise OnePath of her six admissions to hospital for suicidal ideations, overdose and self-harm in the period 2001 to 2005 (CB tab 50, p 758). OnePath made a further request for medical records from Dr Bradshaw, and on 27 May 2020, OnePath received confirmation from Dr Bradshaw's clinic that the Insured had revoked OnePath's authority to request the medical records (CB tab 73).
24 On 11 June 2020, a OnePath Retail Claims Consultant (referred to in the SOAF as Person A) requested permission to refer the claim for technical review (CB tab 75, p 1,335). It was recognised in that email that, given the Insured had been on policy for over three years, OnePath would only have a remedy if there had been fraud. On 17 June 2020, a OnePath Principal Claims Consultant (referred to in the SOAF as Person B) instructed Person A to proceed with a retrospective underwriting review to determine whether cover would have been offered to the Insured had the information then held by OnePath in relation to the Insured's mental health history been known prior to accepting the Policy (CB tab 75, p 1,334). On 19 June 2020, Person A prepared a Retrospective Underwriting Request, which was signed on 22 June 2020 by a OnePath Retail Senior Claims Consultant (referred to in the SOAF as Person C) (CB tab 76, pp 1,338-1,344). In an Underwriting File Note dated 29 June 2020, a OnePath underwriter (referred to in the SOAF as Person D) concluded that, based on the knowledge of the Grafton Base Hospital admissions, OnePath would have declined the Insured's request for income protection cover, while life insurance cover would have been accepted at standard rates (the same rates as were initially offered to and accepted by the Insured) (CB tab 77), referring to "mental health issues between 2001 and 2005 with multiple episodes of suicidal ideation and a least one attempted suicide". Person D had not been involved in the initial underwriting of the Insured's income protection or life insurance cover.
25 On 29 June 2020, Person A sent the Retrospective Underwriting to Persons B and C (CB tab 75, p 1,333), and received a reply that day from Person B instructing Person A to proceed with a procedural fairness letter and adding "if our fraud argument is reasonable (once we receive her pro-fair response), then I would support declining this claim" (CB tab 75, p 1,333). Further emails were sent internally within OnePath on 30 June and 1 July 2020, which also involved a OnePath Manager (referred to in the SOAF as Person E). On or about 7 July 2020, the draft letter discussed in those emails was finalised, and was sent to the Insured on 9 July 2020 (the Procedural Fairness Letter) (CB tab 85).
26 The Procedural Fairness Letter referred to the Insured's income protection claim, and stated that the purpose of the letter was to make the Insured aware of the information that OnePath would take into consideration when making a decision about whether the Insured meets the criteria for payment of income protection benefits under the Policy and to draw specific issues to her attention which may be adverse to her claim, and to give her an opportunity to respond to the matters raised in the letter. The letter stated: "In particular, it appears that the responses provided in your Application Form were incorrect or incomplete."
27 Under the heading "Background", the letter referred to the questions which the Insured was asked in the Application Form regarding her medical circumstances, and expressed concerns that some of her responses in the Application Form were not supported by information that OnePath had subsequently obtained. The letter stated that it provided the Insured with the information obtained during OnePath's investigations, so that the Insured had the opportunity to respond or provide additional information before OnePath made its decision on her claim.
28 The letter then set out the duty of disclosure contained in the Application Form, which the Insured had declared she had read and understood (CB tab 85, p 1,434). The quoted extract contained express reference to the remedies available to the insurer for breach of the duty of disclosure within three years of entering into the contract (which I note had obviously elapsed by 7 July 2020), and then referred to the circumstance where the failure to tell OnePath something was fraudulent, in which case OnePath may refuse to pay a claim and treat the contract as if it never existed.
29 Under the heading "Information relevant to our review", the letter referred to the Application Form and the Grafton Base Hospital records. Copies of those documents were enclosed with the letter, together with a request to let OnePath know if there are any documents not listed above in the letter which the Insured considered should be considered in OnePath's assessment of the claim (CB tab 85, p 1,434-1,435). The letter then set out the specific responses in the Application Form concerning the Insured's mental health condition, including the Insured's negative answers to questions as to whether she had ever been admitted as an in-patient to any hospital or clinic for any nervous or mental disorder, whether she had ever had longstanding (ie longer than 12 months) recurrent or multiple episodes of any type of nervous or mental disorder, whether she had ever attempted suicide or self-harm and whether she had ever been admitted to hospital or any other care facility. The letter then set out the substance of the Grafton Base Hospital records (CB tab 85, p 1,436).
30 Under the heading "Potential barriers to the claim continuing", the Procedural Fairness Letter stated as follows:
Insurance Contracts Act (Section 29) provides that in certain circumstances an insurer may avoid a contract of insurance where there has been non-compliance with the duty or [sic] disclosure, or where an insured has made a material misrepresentation, prior to the parties entering into the contract.
Avoiding a contract of insurance means the cover is treated as though it had never existed. We are considering our rights under Section 29 in light of the evidence we have outlined above.
31 Under the heading "What to do next", the Procedural Fairness Letter stated as follows (CB tab 85, p 1,437):
Before we proceed to make a decision on your claim, you have the opportunity to provide an explanation as to why you failed to disclose and/or misrepresented your mental health medical history in your Application Form and before we accepted your Application.
If you wish to provide a response or submit further information for us to consider, you will need to do this in writing within 21 days from the date of this letter.
32 On the same day, 9 July 2020, Person A and the Insured spoke over the telephone. During the telephone call (SOAF at [61]):
(a) the Insured confirmed that she had revoked OnePath's authority to request clinical notes;
(b) Person A told the Insured that OnePath had received the Grafton Base Hospital records;
(c) Person A told the Insured that OnePath had noted concerns in relation to what was disclosed in the Application Form as compared to the Grafton Base Hospital records;
(d) Person A told the Insured that he needed to send the Insured a copy of the Grafton Base Hospital records and a letter stating OnePath's concerns by post;
(e) Person A requested that the Insured read what OnePath's concerns were and that the Insured respond in writing;
(f) Person A told the Insured that she would be given 30 days to respond to OnePath's letter, being a longer time than the 21 days normally allowed for a response. Person A told the Insured that if she required longer than 30 days to respond, she should let Person A know; and
(g) Person A told the Insured to call him back if she was not sure about something in the material to be posted.
33 The Procedural Fairness Letter reached the Insured on 17 July 2020 (CB tab 89). On 22 July 2020, the Insured sought a three week extension for provision of a response to the Procedural Fairness Letter, and on 27 July 2020, Person A confirmed by email to the Insured that a principal claims consultant had approved an extension of time to respond to 30 August 2020 (CB tab 90, p 1,452). By 5 August 2020, the Insured had engaged the Financial Rights Legal Centre (FRLC), an independent community legal centre, to act on her behalf in relation to her claim (CB tab 94). On 7 August 2020, the FRLC sent a letter to OnePath on behalf of the Insured, requesting certain documents including a copy of the agency or broker or other agreement between OnePath and ANZ relating to the distribution of insurance products and/or provision of insurance advice (CB tab 94, p 1,462). Following further discussions between OnePath and the FRLC, on 20 August 2020, a further extension was provided giving the Insured until 30 September 2020 to provide a response, that extension having been approved by Person E. In response to the FRLC's letter of 7 August 2020, on 28 August 2020, OnePath sent a copy of telephone recordings between OnePath and the Insured to the FRLC (CB tab 93), and on 31 August 2020, OnePath sent a copy of the Insured's income protection claim file to the FRLC (CB tab 94, p 1,460). One Path did not provide any agency, broker or other agreement between OnePath and ANZ relating to the distribution of insurance products and/or provision of insurance advice.
34 On 29 September 2020, the FRLC on behalf of the Insured sent a letter to OnePath responding to the Procedural Fairness Letter (Response Letter) (CB tab 97). The opening paragraph of the Response Letter stated that the FRLC acted for the Insured and understood that OnePath had asked the Insured to explain the reason she did not fully disclose her history of mental illness on her insurance application, and stated that they were instructed to respond in the manner which followed. Under the heading "Disclosure on the insurance application", the Response Letter stated as follows:
In 2016, [the Insured] attended an ANZ branch and was referred to an adviser, [the Financial Adviser]. Details of the adviser are listed on the insurance application.
[The Financial Adviser] helped [the Insured] answer the mental health questions on the application form. [The Financial Adviser] asked [the Insured] whether she ever had any mental health issues and [the Insured] answered yes. The questions that followed were more specific and [the Insured] asked for clarification about how far back in time she needed to go when responding to the questions. [The Financial Adviser] stated that she would need to go back 5 years.
During a conversation with [the Financial Adviser], [the Insured] discussed her mental health issues and [the Financial Adviser] asked whether [the Insured] was taking medication and if so, whether it was working well. [The Insured] confirmed she was taking medication and was stable. [The Financial Adviser] then confirmed that she did not have to go back beyond 5 years.
The medical records mentioned in your letter dated 7 July 2020 related to events outside the 5 year period and so [the Insured] understood that she was not required to disclose them on her application. As you can see, [the Insured] relied on the information provided by the adviser in branch and disclosed information accordingly.
The Response Letter then referred to the request for documents previously made and noted that there remained outstanding a copy of the applicable underwriting guidelines, and a copy of the agency or broker or other agreement between OnePath and ANZ relating to the distribution of insurance products and/or provision of insurance advice. The Response Letter asked OnePath to confirm when those documents would be provided (CB tab 97, p 1,468).
35 On 30 September 2020, Person A sent an email to the FRLC attaching the applicable underwriting guidelines, but did not respond to the other request for production of the agency, broker or other agreements.
36 On 30 September 2020, there was a series of emails between Persons A, B and E concerning the Response Letter. In the course of those emails, Person A said that he assumed that they would need a copy of the Financial Adviser's notes and Statement of Advice, but acknowledged that he was not familiar with the process. Person E, being a more senior employee, responded that there was no need to request the Statement of Advice or Financial Adviser's file. There is also a reference to forwarding the Response Letter to those responsible for complaints at ANZ Financial Planning, although that appears to be directed to the FRLC's request for the agency or broker or other agreement. At the end of that series of emails, Person A asked Person E whether the income protection claim should continue to be managed as usual awaiting a further response from the solicitor, or whether OnePath would proceed to deny the claim due to non-disclosure, to which Person E answered ambiguously "Proceed as normal" (CB tab 99, p 1,471). Shortly afterwards on 30 September 2020, Person A sent to the FRLC the retrospective underwriting referral for the Insured (CB tab 103).
37 On 1 October 2020, Person A made a note which summarised aspects of the Response Letter and other interactions with the FRLC and stated under the heading "Action" the following: "Based off what we received to date and what we are aware of determination made to decline the IP [income protection] claim." (CB tab 50, p 742).
38 On 7 October 2020, OnePath sent a letter to the Insured stating that, after reviewing all the material provided by the Insured and obtained by OnePath in connection with the claim, OnePath had decided to avoid the Insured's income protection cover from inception, and would not be continuing payment of income protection benefits (the Avoidance Letter). In the second paragraph, the Avoidance Letter stated that it set out:
• the reason for our decision;
• how your policy is affected;
• how you can find out more information about our decision; and
• what you can do if you are not satisfied with our decision.
That fourth aspect of the letter was in fact not addressed by the contents of the Avoidance Letter.
39 The Avoidance Letter referred to the Insured's duty of disclosure, the underwriting review, the Response Letter, and the information known from the Grafton Base Hospital records. The Avoidance Letter then said as follows under the heading "Breach of the duty of disclosure" (CB tab 107, p 1,493):
It is evident that you did not inform Onepath of your correct medical history and other important matters when you applied for income protection insurance.
In failing to inform Onepath of the matters now known, we are of the view that you have breached your duty of disclosure, and that this breach is fraudulent.
In making this determination we have considered the following:
• While you advise that you completed the application under the guidance of [the Financial Planner], this information was not available for the underwriter of OnePath Life Limited to consider at the time of application.
• It is the obligation of the Life Insured and Policy Owner to ensure they comply with the Duty of Disclosure by ensuring that all information provided to The Insurer is accurate including reviewing the accuracy of the responses in the Application Form.
• The application included wide-ranging questions which made it clear that Onepath was concerned to know the entirety of your medical history and not just conditions that occurred within the prior 5-year period. The medical questions on the application specifically asks [sic] "Have you ever attempted suicide …. Have you ever been admitted to hospital …" and do not limit this to 5 years.
• We consider that you knew, or a reasonable person in the circumstances would have been aware of the requirement to disclose the full history of your mental health issues.
• It seems you were selective in your disclosure to Onepath Life. For example, when asked about your medical history, you disclosed part of your mental health issues, however you did not provide the full details that is [sic] now known:
To the question have you ever attempted suicide or self-harm? You answered NO
To the question have you ever been admitted to hospital or any other care facility? You answered NO
In our opinion, you completed the application and other documents recklessly and with a total disregard to your obligation to provide true and complete information to Onepath.
40 The Avoidance Letter then referred to s 29(2) of the ICA, as stating that if the failure to comply with the duty of disclosure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. It was then stated that in terms of the requirement to establish fraud for the purposes of that provision, the courts have identified that that can be satisfied by either a deliberate decision to conceal the true facts or to mislead the insurer, or by reckless indifference as to whether the duty of disclosure is complied with or the facts disclosed are true and correct. The letter then conveyed OnePath's decision to exercise its rights under s 29(2) of the ICA to avoid the Insured's income secure standard cover from inception, thereby treating that cover as though it never existed and stated that no claims would be met under it. The Avoidance Letter confirmed that the Insured's life cover would remain and continue to be honoured as long as the Insured continued to pay the premiums required to keep that cover in force. The letter then stated that the amount which OnePath had paid the Insured in total disability benefit payments exceeded the amount that the Insured had paid in premiums for income protection standard cover, and thus no refund of premiums was due.
41 Although the Avoidance Letter did not include the foreshadowed information as to what the Insured could do if she was not satisfied with OnePath's decision, the FRLC on behalf of the Insured lodged a complaint on 13 April 2021 to OnePath seeking a reinstatement of the income protection cover on the basis that the insured's non-disclosure was innocent (CB tab 109). On 22 June 2021, OnePath rejected that complaint, and indicated that the Insured could have her complaint reviewed free of charge by the Australian Financial Complaints Authority (AFCA), an external dispute resolution scheme (CB tab 111, p 1,510). On 28 September 2021, the FRLC took up that opportunity with AFCA on behalf of the Insured (CB tab 112).