WERE THE ANSWERS FRAUDULENT MISREPRESENTATIONS?
124 I consider that the Comminsure case significantly overstates health problems being experienced by Mr Elwaly at the time of completing the Application and the Declaration of Continued Good Health. He was overweight and had addressed this issue apparently with considerable success. He disclosed the surgery and the weight loss as a result of it. He was suffering from time to time from feelings of stress, anxiety and depression as a result of challenging events in his life including the fact that he had difficulty gaining employment, had serious problems with his first marriage and access to his children, had language difficulties and various other forms of stress. He did not, however, in my appreciation of the evidence, suffer from any mental health condition which required disclosure. To suggest that he had a drinking problem, more specifically that he required counselling or treatment for alcohol, is not open on the evidence. It is true that on 19 August 2002, he consulted Dr Chang concerning his alcohol intake, but Dr Chang was emphatic and I accept (and the liver function tests confirm), that this was directed only to the issue of weight loss and a belief by Mr Elwaly that he could lose weight if he cut down his alcohol consumption. Further, it is most important to distinguish between events which occurred after completion of the Application and the Declaration of Continued Good Health from those which occurred beforehand.
125 Comminsure relies upon consultations with a clinical psychologist in 2005 in which, on two occasions, the topic of drinking was raised. Again, these were not consultations for drinking problems in the sense of alcohol addiction but consultations concerning marital issues when drinking was raised as an incidental issue. The consultations with the psychologist were driven by concern about the marriage problems. The clinical psychologist was not called to give evidence. If Comminsure sought to demonstrate that there was fraudulent non-disclosure about counselling or treatment for alcohol, the evidence on which it sought to rely was inadequate.
126 In relation to counselling or treatment for depression, stress or anxiety, it is true that Mr Elwaly discussed symptoms of depression with Dr Chang and Dr Quarles. I have considered this evidence closely in the analysis of the evidence above. Neither of the general practitioners called to give evidence were prepared to support any notion that Mr Elwaly was a depressant as such. The medical evidence adduced established that there is a significant difference between someone who suffers from the condition of depression and a person who is depressed from time to time as a result of external factors. The Queensland Court of Appeal (McMurdo P, Shepherdson J and Thomas JA) in Australian Casualty & Life Ltd v Hall (1999) 151 FLR 360 (at [57]-[59]) said:
57 The statutory duty to disclose is first directed to any matter known to the insured and once a matter is known to the insured, the next aspect of the duty to which the statute directs attention is whether the insured knows the matter to be relevant to the insurer whether to accept the risk and if so, on what terms.
58 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).
59 As to the meaning of "known" in s 21(1) I would with respect adopt and apply the following words of Hodgson CJ in the Equity Division of the Supreme Court of New South Wales in Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (1998) 44 NSWLR 186; 147 FLR 12 where his Honour said (at [8.3]):
"In my opinion, 'known' in s 21(1) means more than suspected or believed. What is required is that the matter should be the subject of a true belief, held with sufficient assurance to justify the term 'known'."
127 At [74]-[77]) their Honours continued:
74 Question D was in these terms: "During the past five years have you consulted any provider of medical services for any reason?"
75 The actual question that it asks is whether the applicant has consulted a provider. It does not ask for a statement of the reasons for any such consultation, let alone for a statement of symptoms. I do not think that there is any ambiguity in this, although if there was it should be resolved against the insurer which was responsible for drawing the document. The question did however require a "yes" answer and this activated the obligation to give answers in table E: see pars 24-26. That table however commences with the "name of injury or sickness", and the remaining questions in table E are subsidiary to the designated injury or sickness.
76 An obligation would arise on the part of the respondent to disclose her consultations with Dr Campbell and Dr Marnane only if there was a material injury or sickness of which she knew and which she was obliged by s 21(1) of the Insurance Contracts Act to disclose.
77 It is quite clear that the respondent did not know (truly believe) that the symptoms about which she saw Dr Campbell were relevant to the decision of the appellant whether to accept the risk and if so on what terms. Indeed she thought them irrelevant because Dr Campbell told her she was "as fit as a fiddle" and in my view the learned trial judge justifiably found that the advice she received from Drs Marnane and Campbell were that her problems were minor.
(emphasis added)
128 In relation to fits and fainting episodes, the question is whether Mr Elwaly fraudulently incorrectly answered the question by denying that he had counselling or treatment for fits and fainting episodes. This issue is more difficult and in my view is the key issue regarding the first question of whether the answer 'No' was fraudulently incorrect.
129 The evidence appears to show that between 1994 and 1997 there were episodes of fainting and on one occasion Mr Elwaly did receive advice or treatment in relation to this.
130 As for the incident at Sir Charles Gairdner Hospital on 16 May 2007 (which was after completion of the Application), while visiting his father, it appears Mr Elwaly felt lightheaded, lost awareness and collapsed unconscious for about 30 seconds. The hospital then took commendable, but very conservative, measures to make sure there was no underlying problem. It is clear that the results show there was no underlying problem whatsoever. It is entirely conceivable that in relation to that incident the answer Mr Elwaly gave was correct. That is, he considered that he had not had either counselling or treatment in relation to fainting episodes, but had simply been checked for any problems. There is no evidence that he had had treatment on the previous occasions he had visited the hospital in relation to fainting episodes in 1994 and 1997. There is no evidence that he had a positive basis for a belief that he had either counselling or treatment for such episodes. However, this is not to conclude there is no difficulty with his answer.
131 As for the implicit suggestion that he had backdated the Declaration of Continued Good Health to 12 May 2007 to avoid disclosing the 16 May 2007 experience, in my view this was without foundation and pure speculation. It is true that Mr Elwaly provided a more comprehensive detail of earlier experiences when he was seen by a consultant neurologist after completing the Application and the Declaration of Continued Good Health.
132 Although I consider that, at the least, Mr Elwaly was careless in completion of answers and not as fulsome as he might have been with the benefit of hindsight, it is not a simple thing for the declining insurer to discharge its onus of proving fraud to the Bringinshaw standard (Briginshaw v Briginshaw (1938) 60 CLR 336).
133 The basis for Comminsure's assertion that it was entitled to avoid the Policy on the grounds of fraudulent misrepresentation is that Mr Elwaly gave negative answers to seven questions asked of him in the Application. It is said that those answers were fraudulent having regard to the relevant matters set out in the defence. Properly understood, the questions in the Application seek to inquire as to whether the applicant has or proposes to consult a medical provider about the medical conditions mentioned in the questions.
134 Ms Graham's case was that Mr Elwaly was not suffering from alcohol related illness, condition or dependence. Ms Graham emphasises that the medical evidence of both Dr Chang and Dr Quarles and the results of his blood tests made clear that there was no concern of that description. The concern which Mr Elwaly did have, had a connection with alcohol and was related to his weight gain. There was evidence from Dr Quarles that in April 2007, Mr Elwaly was very pleased with himself that he had achieved significant weight loss and overcome his struggle with his weight. In December 2006, correspondence from Dr Cohen, the doctor who carried out lap banding surgery for Mr Elwaly, reported that Mr Elwaly was making 'stunning progress' having lost 46 kilograms or 78% of his excess weight and with his BMI falling from 43 to 27.5. This, Ms Graham argues with some force, is entirely inconsistent with any submission by Comminsure that Mr Elwaly's health was on some sort of 'downward spiral' since 2004.
135 In relation to depression, the situation is a little more complex. In 2002, Dr Chang trialled Mr Elwaly on Prozac for a month or so, but within a month Mr Elwaly was asking Dr Chang if he could come off the medication. It was Dr Chang who encouraged him to stay on it for a while to avoid any negative side effects from withdrawal. By October 2003, the evidence showed that Mr Elwaly was entirely medication free and by May 2004, he was trouble free. During the period August 2006 until June 2007, there were visits to Dr Quarles and there were three occasions on which prescriptions were given for what Dr Quarles described in evidence as being 'normal human stress or anxiety'. The types of normal human stress referred to by Dr Quarles were things like living with a new baby, work stress and Mr Elwaly's father being admitted to hospital. The evidence from Dr Quarles was that, in each case, Mr Elwaly was able to recover once the stresses subsided or were no longer applicable.
136 Dr Quarles was pressed in cross-examination on whether Mr Elwaly was suffering from depression or a depressive illness which required antidepressants on three occasions between August 2006 and June 2007. The response from Dr Quarles in each instance was that Mr Elwaly was not suffering from depression as such, and that the drugs were properly prescribed in a very low non-depressive dosage for purposes such as a mild sedative for sleep deprivation (Epilene), this being caused by the birth of a new baby. Similarly, Dr Quarles explained that Lexapro and the Ativan were prescribed in low dosages for human stress issues such as Mr Elwaly's father's illness and hospitalisation.
137 Mr Elwaly's health at that time is not to be confused with and can be contrasted with the situation in 2008 and 2009 when Mr Elwaly's mental health deteriorated to a point where he became mildly depressed and he was referred to Dr Proud. It was around this time that Mr Elwaly did actually commence seeking medical assistance for more serious problems. In contrast, in the period 2004 to 2007, Mr Elwaly was in relatively good health. Ms Graham's case is that Comminsure might have had an argument if Mr Elwaly had taken out the Policy at this time rather than at the earlier point in time. Dr Quarles also expressed the view that there had been a qualitative change in the condition of Mr Elwaly after June 2007.
138 There was also support from Ms Graham that in the period 2004 to 2007, Mr Elwaly's condition was not such as to cause a concern. She did not observe him or understand him to be suffering from depression, alcohol problems or otherwise. For Ms Graham it is argued that her observations of her husband in this period correlate with the true medical position.
139 The fainting episode in May 2007 should also be seen in its context. The evidence shows that Mr Elwaly suffered from syncopal fainting, which was a benign condition. Syncope is defined as being a transient loss of consciousness due to inadequate cerebral blood flow (MacNalty, AS and Critchley, Butterworths Medical Dictionary, 2nd ed, Butterworths, 1978). Mr Elwaly was relatively young when this incident occurred. However, according to the neurological report of Dr Conrad Ng of 25 February 1998, he did have four or five episodes of collapse since 1994 and had presented on a number of occasions to the emergency department at Royal Perth Hospital. The report also explained that Mr Elwaly described a gradual onset of feeling lightheaded for 30 seconds to a minute before he lost consciousness. This was unaccompanied by chest pains or palpitations, tongue biting, incontinence, subsequent weakness or abnormal sensation in his limbs. Mr Elwaly had it investigated in 1994 by a general practitioner. Two EEGs were performed which gave normal results, as did a Holter monitor and an MRI of the pituitary fossa. The report concluded with the following paragraphs:
…
On examination Mr. Elwaly is young gentleman, alert and orientated, in no distress. There was no jaundice, anaemia, clubbing or cyanosis. Pulse was 72/minute and regular, blood pressure lying 130/170 mmHg, standing 134/84 mmHg. Cardiovascular respiratory and abdominal examinations were unremarkable. Examination of his cranial nerves and peripheral nervous system was normal.
He was reviewed by Dr. Lamont and based on the history his symptoms are highly suggestive of convulsive syncope. Exacerbating factors include poor food intake and poor sleep. There may be also an element of stress in that he works long hours at his job.
I have informed him that he can resume driving and perform his usual work and activities. He has also been advised to avoid precipitating factors. No further medications are necessary. I have not made an appointment for further review at our Clinic.
…
140 In an annexure to Dr Quarles' report there was reference to some sort of a spell in January 2007, but this would not be sufficient to warrant rushing to a conclusion that Mr Elwaly had experienced some kind of a seizure.
141 In relation to the state of mind of Mr Elwaly, there is no proper basis for drawing a conclusion that Mr Elwaly was aware at any time up to signing the Declaration of Continued Good Health that he suffered from an 'alcohol related illness'. He had not sought any treatment from Dr Chang or Dr Quarles or Dr Ziembinski in relation to alcohol related illness. Importantly, he did seek treatment for weight loss in consequence of which he was told to cut down everything he ingested and was successful in doing so. I do not consider that it has been established that Mr Elwaly was seeking counselling or treatment for the use of alcohol or drugs, nor was he prescribed medication for such a problem. His medical consultation was purely connected to his weight.
142 Nor do I consider that it has been established that at the time of completion of the Application, Mr Elwaly was suffering or had suffered from depression or depressive illness or that he knew this to be the case. When he answered 'no' to the question '[h]ave you ever had or sought advice or treatment, experienced symptoms or suffered from … [d]epression or mental disorder …', that answer was true. It was true that he had suffered from stress, but given that the words appearing in the Application are such that depression or mental disorder are in bold font and the rest of the question, including stress and anxiety, are not, one might reasonably read the question as referring to stress and anxiety connected with depression or mental disorder, as distinct from the normal stress and anxiety that many people feel not uncommonly. If there is ambiguity in the question, it is to be resolved against Comminsure: s 23 ICA; see Australian Casualty & Life Ltd (at [75]).
143 Comminsure point to the fact that Mr Elwaly filled in a depression checklist which had a question '[h]ow often do you feel depressed?' for Dr Quarles on 30 November 2006, and that Dr Chang said he suffered from reactive depression. Comminsure argues that Ms Graham's submission that Mr Elwaly never suffered from depression has no support.
144 I would need to be satisfied that Mr Elwaly knew that he was suffering from a medical condition for which medical treatment was required. He did have problems with stress, as indicated, but I find that the main health issue with which he was concerned was being overweight, as a result of which he had tried various measures culminating in recent lap band surgery and weight loss prior to completing the Application. Not only was this condition and circumstance fully disclosed, but it was also the factor which caused Comminsure to impose a 75% loading on the premium. It is certainly significant, in my view, that Mr Elwaly's own medical tests at the time of the Application revealed normal results. Indeed, Comminsure itself had also obtained medical evaluations and blood tests both in 2004 when it provided the original cover and in 2007. All of these evaluations and tests were positive in the sense that they did not disclose any serious medical condition which might go to the insurer's risk.
145 I accept the submission for Ms Graham that a reasonable inference from all of these matters is that Mr Elwaly, when completing the Application, understood that Comminsure was already familiar with his relatively good health, having regard to the fact that he already held a life insurance policy with Comminsure, he had provided blood tests in 2004 and he had undergone, at the insurer's request, an independent medical evaluation which involved a comprehensive physical examination dealing with, amongst other things, liver and renal functions, general biochemistry, lipid levels and the presence of Hepatitis A, B and HIV. It was also significant that when Comminsure offered Mr Elwaly the cover in 2004, which he accepted, a 50% premium loading was imposed because of his weight. Factors concerning his weight were the factors that he disclosed when completing the Application. They would be the factors which would reasonably be regarded as being of significance to the insurer. Ms Waugh-Lill confirmed that this was so.
146 As at 20 December 2006, when the Application was completed and 24 May 2007 when the Declaration of Continued Good Health was received by Comminsure, Mr Elwaly was not suffering from or seeking medical attention with respect to any medical condition, diagnosable sickness or other serious medical ailment. He was doing well in weight loss as a result of the lap band surgery conducted in March 2006. It is certainly true that Mr Elwaly had a number of medical visits in 2006 prior to completion of the Application but none of those realistically went to the insurer's risk. Dr Quarles' medical notes show that he saw Mr Elwaly in March 2006 for conjunctivitis and issues concerning the forthcoming surgery. He saw him in April 2006 for back pain and in June 2006 for tiredness and cold symptoms and in August for tiredness and work stress. In November 2006 he consulted Dr Quarles regarding stress and anxiety and completed an anxiety and depression checklist. In December 2006 Dr Quarles prescribed Lexapro in a low dose for stress issues, as previously explained. I accept the evidence of Dr Quarles that there is nothing in 2006 or 2007 to demonstrate that Mr Elwaly was in bad health. The blood tests which the insurer obtained in 2004 and again in 2007 were all unexceptional and confirmed the view expressed by Dr Quarles. It would be reasonable to infer, if that was Dr Quarles' view at the time when he saw Mr Elwaly, that he would have conveyed that view to him. It is consistent with this that Mr Elwaly did not disclose concerns about his health to his wife, Ms Graham.
147 When Dr Quarles completed the medical examination and assessment in April 2007 at the request of Comminsure, again, he expressed no concerns at all about Mr Elwaly's state of health. There is no reason Mr Elwaly would have considered otherwise. The questions raised by Comminsure were extensive.
148 Disclosing the surgery and his weight loss led the insurer to seek additional extensive information. The insurer made the judgement on whether or not to place the cover on the basis of the information in those tests, not simply on the information contained in the Application.
149 In my view, the only clearly incorrect answer of 'no' was to the question concerning whether Mr Elwaly had ever had or sought advice or experienced symptoms or suffered from fainting episodes. At the time of the Application and the Declaration of Continued Good Health he must or should have known the correct answer to this questions was 'yes' not 'no'. The answer was at the very least careless, but given the specific nature of the question and his history, I must conclude that his answer was reckless and therefore fraudulent within the meaning of s 29(2) ICA. Otherwise I reject the contentions:
(a) that he had suffered from depression as the question in the Application was directed to 'disorders';
(b) that he had received counselling or treatment for excessive alcohol consumption. I accept the medical evidence that to the extent he himself had concerns about alcohol, it was related to diet and weight loss. The weight issue was fully disclosed by Mr Elwaly and was explored by Comminsure; and
(c) that gastric reflux was relevant or would have been considered to have been relevant. There was no evidence to support that contention.
150 But, as indicated, I accept that Comminsure has established fraudulent non-disclosure as to the fainting fits about which Mr Elwaly must have known, and was reckless not to consider and disclose.