Hitchens v Zurich Australia Ltd

Mr Hitchens' Medical History

1. Mr Hitchens was born in 1969. When he was 14 he underwent an operation to remove a melanoma from his left calf. In 1989 when he was aged 19 or 20 he underwent an operation for a groin dissection involving the removal of lymph nodes on the left side of the groin because the cancer had metastasised.
2. A consequence of the removal of those lymph nodes was that from 1989 Mr Hitchens suffered from lymphedema and cellulitis in the left leg. Lymphedema would cause the leg to swell. Cellulitis was the result of a bacterial infection that was treated with antibiotics. Sometimes Mr Hitchens was hospitalised so that the antibiotics could be administered intravenously.
3. On 10 April 1996 Mr Hitchens was involved in a motor vehicle accident. He was deliberately run over by a work colleague. He suffered injury to his right knee and to his neck and elbows, as well as impact to the back of the skull. He was diagnosed as also suffering from reactive depression as a result of the incident. On 24 April 1996 a consultant psychologist, Mr Alec Jones diagnosed Mr Hitchens as suffering an acute stress disorder as defined by the Diagnostic and Statistical Manual of Mental Disorders, 4th ed of the American Psychiatric Association ("DSM-IV"). Mr Jones reported that Mr Hitchens was suffering severe reactive depression due to continuing pain.
4. On 1 May 1996 Dr Karen Oswald of the Balmoral Street, Hornsby Medical Centre referred Mr Hitchens to an orthopaedic surgeon. She advised that: "Mr Hitchens has presented for continuing psychological assessment after the motor vehicle incident. He has completed tests and been under observation for a period exceeding a total of seven hours on two occasions. He is currently suffering Acute Stress Disorder as defined by the Diagnostic and Statistical Manual of Mental Disorders, 4th ed of the American Psychiatric Association … Mr Hitchens' physical pain, including neck and shoulder spasms, is being severely exacerbated by psychophysiological response creating reactive depression. …"
5. On 3 May 1996 Mr Hitchens underwent a right knee arthroscopy. He also suffered damage to his left leg. He was provided with a Zimmer splint for his left leg in early May 1996. Records of the Balmoral Street, Hornsby Medical Centre record an attendance on 7 May 1996 in which Mr Hitchens was complaining not only of lymphedema, but also of spasms in his left leg.
6. On 13 May 1996 Mr Hitchens' mother, a registered nurse, wrote to Mr Jones concerning her son's condition. She reported that Mr Hitchens remained very depressed, mainly due to on-going headache and muscle spasms affecting his neck and shoulders. She reported that he was currently taking Valium (for neck spasms), Endone (for pain), and Prozac (for depression). In his oral evidence Mr Hitchens asserted that he did not know that he was taking Prozac.
7. Mr Hitchens was referred to a chiropractor, a Mr Matthew Long, at the Wahroonga Centre for spine-related disorders. On 21 June 1996 Mr Long reported, amongst other things: "At the moment Mr Hitchens is seeing a psychologist, Mr Alec Jones, to help his [sic] cope with his current situation. He does relate anxiety attacks and he feels that the psychological aspect of his condition is inhabiting [sic] his recovery. Mr Hitchens related a history of malignant melanoma at the age of 14. He underwent a groin dissection and was later operated on for a secondary malignancy in his lymph nodes. Mr Hitchens is currently taking a variety of medications, including Valium and Endone. He is also taking Prozac and has apparently taken a variety of anti-inflammatories, although he cannot recall the specifics of these. … Mr Hitchens frequently described how his current complaints had affected him psychologically, and for this he is seeking counselling with Mr Alec Jones. It appears to me that Mr Hitchens' symptoms may well be augmented to a degree by this distress (something which Mr Hitchens agreed with), and at this stage the nature of his symptoms is such that manual treatment would be difficult. He would most probably benefit from an appropriate in-patient rehabilitation program at Mt. Wilga …"
8. Mr Hitchens was admitted to Mt Wilga Private Hospital on 26 June 1996 for two weeks' rehabilitation. It appears from his discharge summary that he was provided with physiotherapy and cognitive behavioural therapy which included breathing techniques and visualisation techniques for the management of his pain. It appears from the discharge summary that Mr Hitchens had had a series of falls at home preceding his admission which had resulted in injury, including laceration to the head requiring suturing and an increase in medications, including Valium. On discharge his medications included five milligrams of Endone to be taken three times a day and Prozac, 40 milligrams to be taken daily.
9. In November 1996 Dr Mervyn Cross performed a right knee reconstruction.
10. On 17 February 1997 a physiotherapist, Ms Joan Lawlor, reported to Dr Oswald that the right knee was stable since surgery and was not causing Mr Hitchens distress. She reported on treatment for Mr Hitchens' neck and headache problem and noted that neck pain and headaches had escalated since his return to work as had his intake of Endone to control the pain. She reported that in her opinion there was a 50 per cent physical component to Mr Hitchens' headaches as well as a significant central neural component and that Mr Hitchens was currently depressed, lethargic, sleeping a lot and too tired to go to the gym.
11. Mr Hitchens received continued treatment during 1997 for the results of the motor vehicle incident. On 1 October 1997 Mr Jones reported to Dr Oswald that Mr Hitchens was suffering, amongst other things, an adjustment disorder with mixed anxiety and depressed mood, and this was apparently aggravated by a medication dependency (on Endone and Codeine). In respect of medication dependency Mr Jones reported: "Medication Addiction - Causation As a direct result of his physical and psychological pain, Mr. Hitchens became addicted to Endone and other pain management drugs, including Codeine often self-prescribing. This was not dissimilar to his conduct just prior to entering Mount Wilga Rehabilitation Hospital in 1996. It is undoubted that the physical pain at that time was very real. However, due to the trauma Mr. Hitchens was unable to psychologically manage the pain in his badly injured leg as well as his neck. The latter was badly swollen for many months. Notwithstanding efforts by medical personnel at this Centre he continued to obtain various medications from February to April 1997. These included retail shelf products. He was required to undergo closer scrutiny when medical and psychological practitioners becoming aware that he was sourcing medication 'outside' the Centre. Much of his anxiety was also due to the appeal by the vehicle driver against her sentence. This matter was settled on August 18, 1997. Mr. Hitchens has since reduced his medication voluntarily. He stopped taking Endone for a period of two weeks, using only Codeine up until September 24, 1997. On that date he suffered a severe migraine and began taking the Endone again. He is now on two Endone tablets a day."
12. In February 1998 Mr Hitchens attended a three-week ADAPT pain-management program at the Royal North Shore Hospital. The program was described as providing cognitive behavioural therapy that included physical upgrading and medication withdrawal and training in the self-management of pain. At the commencement of the program Mr Hitchens' medications were recorded as including one 5mg tablet of Endone taken twice daily. At the end of the program his medications were stated to be nil. The director of the program reported that Mr Hitchens had had difficulties in returning to work which were thought to be related not simply to his pain, but more likely to anxiety. He was offered psychological follow-up therapy at the Pain Management Research Centre after the program, but this was not taken up.
13. The director of the ADAPT program recommended on 5 March 1998 that Mr Hitchens should avoid recommencing the medications that had ceased. However, the Balmoral Street Medical Centre provided Mr Hitchens with a prescription for antibiotics and for Endone on 16 March 1998 and again on 5 April 1998. The records of that centre show that a prescription for Endone was "reluctantly written" on 5 April 1998, that a request for Endone was refused on 24 April 1998, but a prescription was "reluctantly written" on 16 May 1998. The doctor's notes for 16 March 1998 record that cellulitis had started the previous day. The notes of 16 May 1998 record Mr Hitchens reporting a flare-up of neck pain and "three days of agony". Thereafter, scripts for Endone were regularly written, i.e. on 3 June, 17 July, 17 August, 6 October, 1 November and 4 December 1998. In 1999, the number of scripts for Endone reduced to nine, but in 2000, 30 scripts were written. In 2001 there were 38 scripts for an oxycodone analgesic.
14. On 1 March 1999 Dr Cross reported to Dr Oswald. He referred to a "three months post ACL reconstruction of his right knee". The same letter said that Mr Hitchens had had a lot of problems with his left leg over the last 18 months which included six months of hospitalisation, but he could be confident with regards to his right knee.
15. In 1997, 1998 and 1999 Mr Hitchens obtained prescriptions for Endone from the Balmoral Street Medical Centre. In those years he occasionally attended a medical centre at Chatswood, but he was not prescribed Endone at that time from the Chatswood Medical Centre. Mr Hitchens' psychiatrist, Dr Robert Hampshire, said that medications of Tramal and the analgesics Oxycontin and Endone should only be used for acute pain for days going into weeks at the most.
16. From about June 2000, Mr Hitchens began obtaining prescriptions for Endone not only from the Balmoral Street Medical Centre, but also from the Chatswood Medical Centre and a medical centre at Strathfield. Thus on 22 May 2000 he was prescribed Endone from the Balmoral Street Medical Centre for cellulitis. A standard prescription for Endone is for twenty 5 milligram tablets. The recommended dose is five milligrams every six hours.
17. On 6 June 2000 Mr Hitchens obtained a prescription of Endone from the Strathfield Medical Clinic. He was prescribed Endone at the Chatswood Medical Centre on 11 June 2000. On 16 June 2000 Dr Osen of the Strathfield Medical Clinic provided Mr Hitchens with a prescription for Endone (5mg). He noted that Mr Hitchens was to see the surgeon Mr Merv Cross on 26 June 2000 in relation to his left knee. On 20 and 25 June 2000 Mr Hitchens obtained prescriptions from the Chatswood Clinic for Endone. On 25 June 2000, the doctor at the Balmoral Street Medical Centre made a note of a telephone call received from a Dr Harrison from the Chatswood Medical Centre to clarify that Mr Hitchens had been requesting Endone from a different surgery.
18. In cross-examination Mr Hitchens agreed that at this time he was going to different clinics to get Endone prescriptions and continued to do so throughout the balance of 2000. The prescriptions obtained by Mr Hitchens for oxycodone (that is, Endone) declined from 30 and 38 in 2000 and 2001 respectively, to 15, 20 and 7 in 2002, 2003 and 2004. However, in 2002 he commenced taking Tramadol under the trade name Tramal. From January 2002 the prescriptions were for tablets containing either 100mg or more commonly 200mg of Tramadol. The usual instruction was for one tablet to be taken twice daily and 20 tablets were prescribed on each occasion. Thus, each prescription should have supplied sufficient tablets for 10 days. In 2002 Mr Hitchens was prescribed Tramadol on 20 occasions in addition to being prescribed oxycodone on 15 occasions. In 2003 he was prescribed Tramadol on 26 occasions in addition to being prescribed oxycodone on 20 occasions. In 2004 he was prescribed Tramadol on 18 occasions in addition to being prescribed oxycodone on seven occasions.
19. Mr Hitchens said that he took Endone when he suffered from severe or strong pain, or on occasions might take that drug where he suffered from a dull pain which was not severe, but for which he needed a breakthrough. Tramadol is classified as a narcotic analgesic and is used in the management of moderate to severe pain. Mr Hitchens said he used it to deal with pain that was less severe than pain for which he took Endone. He regarded pain that may have lasted a day or more as potentially long-term pain for the relief of which he would take Endone.
20. Mr Hitchens denied that he was or now is addicted. He said that his understanding of addiction as explained to him by his mother, a registered nurse, was that an addiction to pain medication would arise if the person took the medication when they did not need it, but in his case he took the pain medication when he did need it.
21. Mr Hitchens admitted that he did not tell the doctor at one medical centre that he had visited or was going to visit another medical centre to get another prescription of the same drug. For example, he agreed that in 19 days in November 2000 he visited five medical clinics, four of which gave him a prescription for Endone and two of which prescribed Endone with a repeat. He agreed that he did not tell any of the medical practitioners that at about the same time he was going to other doctors and getting Endone. He agreed that he believed that to do so would reveal the extent of his Endone consumption and he would not be prescribed more. Notwithstanding this admission, he denied deliberately having withheld information from the doctors. I do not accept that denial. The denial is damaging to Mr Hitchens' credit.
22. There were repeated instances of similar behaviour. Mr Hitchens agreed that in 2002, 2003 and 2004 there was barely a day that he was not taking either Endone or Tramal, or both. He agreed that each time he took that medication it was as a result of pain he was suffering from lymphedema or cellulitis.
23. Mr Hitchens' use of Endone declined in 2004. In January 2004 he was prescribed Endone once by the Strathfield Clinic and was prescribed Tramal on three occasions from the Strathfield Clinic. In February he was prescribed Tramal once from the Strathfield Clinic. In March he was prescribed Endone once by the Five Dock Medical Centre and Tramal once by the Strathfield Clinic. In April he was prescribed Tramal on two occasions from the Strathfield Clinic. In May he was prescribed Tramal on one occasion and Endone on one occasion from the Strathfield Clinic. In June he was prescribed Tramal on one occasion from the Strathfield Clinic. In July he was prescribed Endone once from the Five Dock Medical Centre. He was prescribed Tramal on two occasions from Strathfield and on one occasion from Chatswood. In August he was prescribed Tramal on one occasion from Strathfield and one occasion from Chatswood. In September he was prescribed Endone and Tramal on one occasion from Strathfield and one occasion from Chatswood. He was prescribed Tramal from Strathfield in October 2004 on two occasions and Endone from Strathfield on one occasion. In November he was prescribed Tramal on one occasion from Strathfield.
24. In 2004 Mr Hitchens visited a clinic at Leichhardt, for apparently the first time. He visited the Leichhardt Clinic on 8 and 9 September 2004 and 26 October 2004. He was not then prescribed Tramal or Endone.
25. In 2004, up to 8 August 2004, Mr Hitchens was prescribed Tramal on 11 occasions and Endone on four occasions. It cannot be assumed that Endone was taken four times a day. His prescriptions were for it to be taken PRN, that is, as required. The pattern of prescribing in 2004 prior to the completion of the proposal form on 8 August 2004 suggests that at that time Mr Hitchens was taking Tramal or Endone something less than every day, unless he had a stockpile of medication from the previous year. In 2003 Mr Hitchens had been prescribed Tramal on 26 occasions and Endone on 20 occasions which would be about a year's supply if taken every day.
26. Mr Hitchens was warned by the Chatswood Clinic in July and September 2003 about the long-term use of analgesics and about the drugs' addictive properties. He received repeated warnings or advice from the Strathfield Clinic about the potentially addictive properties of the drugs. However, the doctor whom he was seeing most regularly in 2004, Dr Alexakis of the Strathfield Clinic, did not consider that Mr Hitchens was addicted to the drugs. On the other hand, he was unaware that Mr Hitchens was obtaining supplies not only from the Strathfield Clinic, but also elsewhere.
27. Mr Hitchens suffered from chronic lymphedema and cellulitis in his left leg. Notes of the Strathfield Clinic dated 20 July 2000 refer to his having a week off for the condition. A note of Strathfield Clinic of 10 August 2000 states: "Due to go to lymphedema clinic - infective bad three years, 20 hospitalisations prescription given for Endone, Diclocil".
28. A note of 30 September 2000 records Mr Hitchens as having been to a lymphedema clinic two weeks earlier. This did not stop his travelling to Africa in November that year. He was provided with a pump and a garment for the leg.
29. A note of the Chatswood Medical Centre of 18 May 2001 referred to a flare-up of new cellulitis over the previous two days and the leg being too sore for him to wear a stocking on it. A note of 28 May 2001 refers to his suffering from cellulitis for the seventh time in four and a half months and an increase in lymphedema. There were repeated references in the medical notes to Mr Hitchens' suffering from cellulitis and lymphedema which involved regular attendances at medical clinics. A medical certificate from a Dr Simpson of 4 May 2002 stated that Mr Hitchens suffered lymphedema of his left leg and that he had recurrent cellulitis and carried antibiotics for urgent therapy and a limited supply of Tramal for recurrent severe pain. There are numerous references in the medical notes of 2001 and 2002 to his taking Endone or Tramal to deal with pain associated with his lymphedema and cellulitis. A note of the Chatswood Medical Centre on 29 August 2002 referred to a long-term discussion of pain management and that Mr Hitchens would need to reduce his dosage slowly over time and use other methods for chronic pain relief. On 25 September 2003 a doctor at the Chatswood Medical Centre recorded advice to Mr Hitchens to attend a pain clinic to deal with the pain from his lymphedema and the giving of a warning about addiction. A note of 28 September 2003 of the Chatswood Medical Centre recorded that he had attended a pain clinic without much benefit in respect of the chronic lymphedema in his left leg and suffered chronic pain from it.
30. The notes of the medical centres record 10 attendances in 2000 at the Balmoral Street Medical Centre in respect of cellulitis, three attendances in 2000 at the Chatswood Medical Centre for the same condition, seven attendances in 2000 at the Strathfield Medical Centre for the same condition, and two attendances at the Five Dock Medical Centre for the same condition: a total of 22 attendances. The notes record nine attendances at the Balmoral Medical Centre in 2001 for the same condition, six attendances at the Chatswood Medical Centre in that year for that condition, and eight at the Strathfield Medical Centre: a total of 23 attendances. In August 2001 Mr Hitchens was admitted to hospital for four days and treated with intravenous antibiotics for cellulitis. In 2002 there were six attendances at Chatswood Medical Centre, eight at Strathfield, three at Balmoral Street, and one at Five Dock, the records of which referred to his recurrent cellulitis in his left leg.
31. In 2003 Mr Hitchens attended the Strathfield Medical Centre on 13 occasions. Some clinical notes refer to his lymphedema or cellulitis. Prescriptions for Endone or Tramal or both were provided on all occasions and these were prescribed for the pain described by Mr Hitchens associated with cellulitis or lymphedema. In the same year he attended the Chatswood Medical Centre on eight occasions and obtained the same prescription medicines.
32. On 25 September 2003 Mr Hitchens was advised to attend a pain clinic and cautioned in relation to his becoming addicted to Tramal. The doctors at the Chatswood Clinic had stopped prescribing Endone, but, unbeknownst to them he got it from other clinics. In 2003 Mr Hitchens attended the Five Dock Medical Centre on three occasions on which he was prescribed Endone as well as other medications. In that year he attended the Balmoral Street Medical Centre on seven occasions and received prescriptions for Endone and Tramal.
33. On 5 January 2004 the Strathfield Medical Centre provided Mr Hitchens with a referral to the Royal North Shore Hospital pain clinic. He did not attend the pain clinic. In 2004, up to 8 August 2004, he attended the Strathfield Medical Centre on 11 occasions and was prescribed Tramal, or Tramal and Endone. In 2004, up to 8 August 2004, he attended the Five Dock Medical Centre twice and was prescribed Endone. In the same period he attended the Chatswood Medical Centre on one occasion and was prescribed Tramal.
34. Mr Hitchens had further surgery to his right knee on 28 May 2004 at the Mater Hospital. It was a short procedure involving admission and discharge on the same morning. The procedure was described in the records of the hospital as "arthroscopy, removal of loose body, condroplasty and notchplasty - right knee".

Completion of proposal form: 8 August 2004

1. Mr Hitchens and his then partner, later wife, Ms Nary Quoe, used the services of a financial planner, a Mr Desmond Roll, in arranging their insurance. On 15 June 2004 Mr Roll provided Mr Hitchens with a copy of a product booklet prepared by Zurich which included a copy of an application form to be completed by a proponent seeking life insurance. The parts of the form relevant to the present proceedings were left to Mr Hitchens to complete. Ms Quoe gave evidence to the effect that much of the form was completed in Mr Roll's presence, but I do not accept that evidence. I accept Mr Roll's evidence to the contrary which is confirmed by the statement made by Mr Roll on the form that "after appointment client wished to complete application form in their own time and then send it to me". On the basis of his usual practice Mr Roll said that he believed that he took Mr Hitchens through each page of the application and pointed to each section that he had to complete and said words to the effect: "You are applying for insurance. You understand that you need to answer these questions truthfully and accurately". Mr Hitchens completed the form and signed it on 8 August 2004. He sent it to Mr Roll who received it on 25 August 2004.
2. Mr Roll recalled that Mr Hitchens told him that he had been injured in a motor vehicle accident in 1996 and had explained that it was a deliberate attempt by another person to run him over at his previous employer's workplace. He had no recollection of Mr Hitchens' having told him at any time that he suffered stress as a result of a court case in connection with the motor vehicle accident. Nor did he have any recollection of Mr Hitchens' telling him about suffering pain, or from any medical condition, or that he was taking medication. Mr Roll gave evidence, on which he was not cross-examined and which I accept, that if he had been told that Mr Hitchens had ongoing pain, or had a medical condition, or was taking medication he would have told him to write it down in the application. Mr Hitchens said that he had numerous phone calls with Mr Roll about what information needed to go into the form, without explicitly saying what information he gave Mr Roll about his medical history. I doubt that anything explicit was disclosed to Mr Roll.
3. In cross-examination Ms Quoe said that at the meeting with Mr Roll on 15 June 2004 she and Mr Hitchens discussed the fact that Mr Hitchens was continuing to suffer from pain in his leg as a result of his lymphedema and was continuing to take Endone and Tramal for the pain he suffered. Ms Quoe gave oral evidence after Mr Roll gave evidence. She had sworn an affidavit in support of Mr Hitchens' case. She did not give evidence to that effect in her affidavit. Her affidavit did not deal with the topic of the meeting with Mr Roll. In cross-examination Mr Roll was asked whether Mr Hitchens spoke about cancer. He had no recollection of that. He was not asked about any discussion about Mr Hitchens' taking strong pain medication as a result of his lymphedema (or at all). I infer that Ms Quoe had not conveyed the substance of what she said in evidence about this to Mr Hitchens' solicitor or counsel. I am not satisfied that such a discussion as claimed by Ms Quoe took place. If it did, Mr Roll would have said that Mr Hitchens should write it down on the application.
4. The application was considered by an underwriter at Zurich, Ms Sarah Cosier. Zurich arranged for Mr Hitchens to be examined by a nurse employed by an independent company called Lifescreen Australia. That examination took place on 14 September 2014. The nurse in question, a Ms Chloe Runeckles, completed a report as to her examination of Mr Hitchens and completed details which can be inferred were provided to her by Mr Hitchens in respect of some aspects of his medical history. However, Ms Runeckles was not called to give evidence and counsel for Mr Hitchens submits that no inference adverse to Mr Hitchens can be drawn from the report prepared by her.
5. It is common ground that Zurich was not entitled to avoid the policy on the ground of non-disclosure or misrepresentation unless the non-disclosure or misrepresentation was fraudulent. If a failure to disclose or a misrepresentation were not made fraudulently Zurich would not be entitled to avoid the policy because more than three years had passed since the contract of insurance was entered into (Insurance Contracts Act 1984 (Cth), s 29(2) and (3)). Zurich did not press a claim that the contracts of insurance had been varied in 2007 and that it avoided the contracts within three years of the variation.
6. Counsel for Mr Hitchens submitted that if he failed to make a required disclosure or made any material misrepresentation, nonetheless he was not guilty of fraud. Mr Hitchens also contends that to the extent to which he failed to answer questions or gave obviously incomplete answers, there was no misrepresentation or non-disclosure by him and Zurich waived the duty of disclosure as to the matters in question (Insurance Contracts Act, ss 21(3) and 27). He contends that Zurich was on notice of: (a) the cancer he suffered; (b) the consequences of his motor vehicle accident in 1996; (c) the lymphedema and cellulitis which he suffered; (d) the pain medication he took; and (e) the treatment he had received at medical centres he had attended.
7. Mr Hitchens contends that because Zurich was on notice of those matters and failed to make inquiry of medical practitioners who had treated him, it thereby waived the duty of disclosure in relation to such matters. For this contention Mr Hitchens relies on s 21(2)(d) of the Insurance Contracts Act.
8. Sections 21, 23, 26, 27 and 29 relevantly provide: "21 The insured's duty of disclosure (1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: (a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or (b) a reasonable person in the circumstances could be expected to know to be a matter so relevant. (2) The duty of disclosure does not require the disclosure of a matter: (a) that diminishes the risk; (b) that is of common knowledge; (c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or (d) as to which compliance with the duty of disclosure is waived by the insurer. (3) Where a person: (a) failed to answer; or (b) gave an obviously incomplete or irrelevant answer to; a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter. … 23 Ambiguous questions Where: (a) a statement is made in answer to a question asked in relation to a proposed contract of insurance or the provision of insurance cover in respect of a person who is seeking to become a member of a superannuation, retirement or other group life scheme; and (b) a reasonable person in the circumstances would have understood the question to have the meaning that the person answering the question apparently understood it to have; that meaning shall, in relation to the person who made the statement, be deemed to be the meaning of the question. … 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. … 27 Failure to answer questions A person shall not be taken to have made a misrepresentation by reason only that the person failed to answer a question included in a proposal form or gave an obviously incomplete or irrelevant answer to such a question. … 29 Life insurance Scope (1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into: (a) failed to comply with the duty of disclosure; or (b) made a misrepresentation to the insurer before the contract was entered into; but does not apply where: (c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or (d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds. Note: If subsection 27A(1), (3) or (4) applies to the contract of life insurance, different remedies may be available to the insurer in respect of each separate contract of life insurance that is taken to exist by virtue of the relevant subsection. Insurer may avoid contract (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. (3) If the failure was not fraudulent or the misrepresentation was not made fraudulently, the insurer may, within 3 years after the contract was entered into, avoid the contract. …"

Proposal Form

1. The relevant part of the proposal form is called "Life Insured's Statement". It contained a statement in bold type that to avoid delays in processing the application the proponent should make sure that he or she fully answered all questions relevant to the application. The duty of disclosure under s 21 of the Insurance Contracts Act was set out, namely, that the proposed insured had a duty to disclose to the insurer every matter within his or her knowledge that he or she knew, or could reasonably be expected to know, was relevant to the insurer's decision whether to accept a risk of the insurance and, if so, on what terms, but that that duty did not require disclosure of a matter that diminished the risk to be undertaken by the insurer, was common knowledge, which the insurer knew, or, in the ordinary course of its business, ought to know, or as to which compliance with the duty of disclosure had been waived.

Question 1

1. Pages 12-19 of the form dealt with medical matters. Section 2 of that part of the form was headed "Doctor's details". Question 1 asks: "Do you have a 'usual doctor or medical centre'?"
2. Mr Hitchens answered that question, "No". Under question 1 the form asked for: "Details of doctor/centre you usually visit, or the last doctor/centre attended if you do not have a 'usual' medical attendant."
3. This was left blank. The form asked for the name of the doctor or centre, contact details including telephone number and address and asked "How long have they known you?", and "When was your last consultation?". It asked for details of the last consultation. This part of the form under the question numbered 1 was left blank. That is to say, Mr Hitchens provided no details in respect of the last doctor or medical centre he attended.
4. Zurich contends that the answer to question 1 was knowingly false. It contends that at the time he completed the form Mr Hitchens did have a usual doctor and a usual medical centre. In the 12 months up to 12 August 2004 he had attended the Strathfield Medical Centre on 18 occasions, whereas he had only been to the Chatswood Medical Centre three times, the Balmoral Street Medical Centre twice, and the Five Dock Medical Centre twice. Mr Hitchens denied that he knew when he was applying for insurance that his usual medical centre was Strathfield. He said in re-examination that the reason he answered question 1 "No" was that he was going to so many medical centres, he did not consider himself to have a usual doctor. That answer is explicable if a different timeframe is adopted to determine whether a particular doctor or medical centre was his usual doctor. If a longer timeframe than one year is taken, say three or four years, then there is an approximate equivalence in Mr Hitchens' attendance at Balmoral Street, Chatswood and Strathfield.
5. Mr Hitchens did not complete the balance of this part of the form that required the specification of the details of the last doctor or centre attended if he did not have a usual medical attendant. Although the requirement to provide those details was not expressed as a question, but as a request or direction, counsel for Zurich accepted that s 21(3) applies whether a requirement for the provision of information is posed as a question or as a request, instruction or direction. In my view, this concession is correct. The form could as easily have made the request for information by posing a series of questions, namely: (a) If no, who was the last doctor or medical centre on whom you have attended? (b) What is the telephone number and address of such doctor or centre? (c) How long have they known you? (d) When was your last consultation? (e) What was the reason for your last consultation? (f) What were the results of the consultation? (g) What degree of recovery have you had since your last consultation?
6. The form seeks the same information both by asking questions and by requesting the provision of information. Whether expressed interrogatively or not, the form is to be taken as raising a series of questions. As Mr Hitchens failed to provide an answer as to the last doctor or centre he attended and failed to provide the requested details as to that consultation, Zurich is taken by s 21(3) to have waived compliance with the duty of disclosure in relation to the matter about which the question was asked. That matter was Mr Hitchens' last medical consultation. His failure to answer that part of the form does not result in Zurich's having waived the duty of disclosure in any wider respect.

Question 2

1. Question 2 was: "Have you had reason to visit any other doctor in the last two years?"
2. Mr Hitchens answered that "Yes".
3. The form then asked for the date of the consultation or consultations. Two boxes were provided for that purpose. They were left blank. The failure to complete the boxes entailed a waiver only of any duty to disclose the dates of his consultations with other doctors in the last two years. It is not a waiver of any duty to disclose the frequency or number of such consultations.
4. The form then sought the name and address of the doctor, that is, "any other doctor [visited] in the last two years", the reason for such visit or visits, the results of such visit or visits, and the degree of recovery. Mr Hitchens answered this part of the form by writing against the request for the "name and address of doctor": "Name: Medical centres Address: Numerous"
5. He answered the balance of the request as follows: "Reason - stitches/antibiotics Results ________ Degree of recovery [left blank] "
6. Mr Hitchens pleads that by being on notice that he had attended numerous medical centres and by failing to make inquiry of the medical practitioners who had treated him, Zurich waived disclosure in relation to the treatment he had received at the medical centres he had attended.
7. The answer provided by Mr Hitchens to question 2 as to his reason for attending other doctors in the past two years was substantially false. Obtaining antibiotics, and on one occasion having stitches, was a reason for Mr Hitchens' having attended medical centres in the previous two years. But the more important reason, and the occasion for far more frequent attendance, was the obtaining of strong pain relief for lymphedema and cellulitis. Mr Hitchens admitted that when filling out the form he knew that over the preceding two years he had on many occasions attended a doctor as a result of significant pain for lymphedema and cellulitis, and to obtain prescription pain relief. He denied that he made a conscious decision not to state that as the reason for his attendances. I do not accept that denial.
8. In re-examination Mr Hitchens gave the following evidence in relation to his answer to question 2: "Q. I just want you now to look at question 2 and have you had reason to visit another doctor in the last two years to which you have said 'Yes' and then I want to take you down to the reason 'Stitches/antibiotics'? A. Yes. Q. Do you have any recollection of why you wrote 'stitches/antibiotics' under 'reason' in relation to that question? A. (No answer) Q. Can you tell us why you might have done that? A. Yeah, look, it was one other reason, it was a reason other than my lymphedema and cellulitis that I went to a medical centre so I was just trying to highlight that, yes, stitches and antibiotics."
9. Counsel for Mr Hitchens submitted that this was a rather perplexing answer. Mr Hitchens appears to say that in answering question 2 he intended to refer to what was out of the norm, and thus gave the answer about stitches and antibiotics as the reason for attending another doctor in the last two years. That is not a plausible construction of the question asked. Mr Hitchens said that he answered "No" to question 1 because he did not have a usual doctor or usual medical centre, but was going to so many medical centres. If he answered question 2 as if it were asking about treatment given by doctors or medical centres who were not his usual doctor or medical centre, that would indicate an attempt so to construe the form as to avoid giving answers that would fairly disclose his medical condition. But question 2 could not reasonably or honestly have been so construed. However the matter is approached, the answer given to the request in question 2 for the reason for Mr Hitchens' visits to a doctor in the last two years is substantially false.
10. Zurich did not conclude that Mr Hitchens' sole reason for visiting numerous medical centres over the previous two years was to obtain stitches and antibiotics. The underwriter at Zurich who considered the application, Ms Sarah Cosier, conceded in cross-examination that she would not have understood that the stated reason for visits to numerous medical centres in the previous two years, namely "stitches/antibiotics" was the sole reason. She surmised that that stated reason would have been the reason for Mr Hitchens' last consultation, but she had no recollection of her actual thought processes.
11. The vice of the answer is in what it concealed, namely that the principal reason for Mr Hitchens' visit to numerous medical centres for the previous two years was to obtain prescriptions for strong pain relief for lymphedema and cellulitis.

Question 5

1. Section 3 of this part of the form was headed "Personal Habits". It was divided into five questions. Question 5 asked: "Do you take medication, drugs, stimulants, sedatives or tranquilisers or have you done so in the last five years? If 'yes' give details."
2. Mr Hitchens answered that question "Yes" and in the box for the provision of details wrote, "Pain Medication - result of motor vehicle accident". He pleads that this put Zurich on notice that he took pain medication and by failing to make inquiry of medical practitioners who had treated him, Zurich waived the duty of disclosure in relation to the pain medication he took.
3. The answer did not identify whether the pain medication taken was the kind of medication that could be obtained over the counter, such as paracetamol or aspirin, or whether it was pain medication only obtainable on prescription which might include strong medication such as the opioid analgesics that Mr Hitchens was taking. Counsel for Mr Hitchens points out that the question was apt to cover both prescription and non-prescription medications and the reference to drugs, stimulants, sedatives and tranquilisers would suggest that an affirmative answer to question 5 could well cover prescription medications. On the other hand, Zurich says that when the answers to question 2 and question 5 are read together it can be seen that at least in respect of the previous two years the pain medication referred to in the answer to question 5 was apparently not prescription medication, as otherwise it should have been referred to in the answer to question 2 asking for the reason for attendances on the doctors referred to in the answer to that question.
4. Zurich also submits that the statement that the pain medication referred to in the answer was a result of the motor vehicle accident was false, or when read with other information provided, was deliberately designed to minimise the impact of the answer on a reader. The answer is to be read in conjunction with other answers given about the motor vehicle "accident". Thus in section 7 under the heading "Medical Background" Zurich asked 33 questions about the proponent's medical history. Question 11 asked whether the proponent then had or ever had had tendonitis, tenosinovitis, RSI or regional pain syndrome? Mr Hitchens answered that question, "Yes" and against the requirement to provide details including date, condition, name and address of doctor/hospitals, treatment, results, length of time off work, answered "motor vehicle impact 10/4/96 - deliberately hit by vehicle. Knee reconstruction and various soft tissue injuries. 6-12 months off work." In answer to question 18 in section 7 which asked whether he had had an ECG, x-ray, CT or MRI scan, Mr Hitchens said that he had had an MRI scan and x-ray as a result of motor vehicle accident. Mr Hitchens answered "Yes" to two questions for which he was directed to complete a medical questionnaire. Those were questions whether he then had, or had ever had: "27. Any disease of, or injury to, the neck or spine including back strain, disc disorder, lumbago, fibrositis, sciatica, neuritis or other non-specific back pain? 28. Any injury, deformity or disease involving any joint or limb?"
5. Section 11 was a medical questionnaire to be completed if the proponent answered yes to any part of section 7 where he was instructed to complete a medical questionnaire. In that section Mr Hitchens identified the injury or complaint as being an injury or complaint to or in respect of "neck/knee pain". The date of onset was identified as 10 April 1996 (the date of the motor vehicle accident). The part of the body affected was disclosed as "neck/right knee". The cause was identified as his having been hit by a motor vehicle deliberately. The date of "your last attack" was identified as 1997. He was asked, "what treatment have you received", and answered "knee reconstruction, neck physiotherapy". He was asked, "what treatment are you currently receiving and how often?", and answered "nil". He said that he had been off work from 10 April 1996 to June 1997 and had been admitted to hospital for the complaint for five days in April 1996, one month in June 1996 and two days in 1997. He identified the hospitals to which he had been admitted as the Hornsby Hospital, the Mt Wilga Private Hospital and the Mater Hospital, and identified Dr Cross as the doctor who had provided treatment. He said again that an MRI and an xray was performed. He identified the date of the test as in 1996. He was asked, "When did you last consult your doctor for this?", and answered "1998". He left blank questions as to the name and address of the doctor last consulted "for this". He said he was fully recovered in respect of the complaint. He said he did not need to complete another medical questionnaire. Hence, he did not fill in another part of the form which would have been available to provide information concerning any other condition or illness. He provided additional information on a separate sheet as follows: "Injuries sustained from being hit by a motor vehicle deliberately caused damage to right knee, right elbow and soft tissue neck issues. Resulted in approximately 12 months off work. Treatment included, right knee reconstruction, right elbow aspiration, extensive physiotherapy on neck. No other impact to current lifestyle apart from odd headache. No other impact to working commitments. Treatment - Mt Wilga Private Hospital - neck - Dr Merv Cross - knee Hornsby Hospital - elbow/knee"
6. Zurich submitted that the impression conveyed is that the pain medication referred to in the answer to question 5 said to be as a result of the motor vehicle accident was taken in connection with the "odd headache", but that odd headache did not impact his current lifestyle and he had fully recovered from the injury. Counsel for Mr Hitchens submitted that nonetheless Zurich was put on notice that Mr Hitchens did have continuing odd headaches eight years after the accident and was therefore put on notice to inquire what was the pain medication that was being taken. I deal with these matters further below.

Lymphedema and Cellulitis

1. Mr Hitchens also answered "Yes" to a question as to whether he then had or had ever had cancer, a tumour, cysts or growth of any kind. In respect of that question he said: "maligna [sic] melanoma within groin 1989 - complete groin disection [sic]. Sydney Melanoma Unit no impact to work - 3 months' treatment - no other conditions apart from mild lymphedema left leg."
2. He also answered "Yes" to a question "Have you had any blood test, urine test or bowel screening?", and gave as the details in respect of that matter "Cancer treatment/infections - cellulitics [sic]".
3. The form did not require Mr Hitchens to complete section 11, being the medical questionnaire, in relation to the affirmative answers to those questions. The medical questionnaire was filled out in relation to the complaint of neck or knee pain because Mr Hitchens had answered "Yes" to two questions where the form did direct the completion of the medical questionnaire.
4. Accordingly, Mr Hitchens did not fail to answer the questions in the medical questionnaire in relation to cancer, lymphedema and cellulitis. Mr Hitchens provided further information in relation to cancer and lymphedema as a further response to section 7. He said: "No other required treatment from cancer treatment 15 years ago. Suffer from the odd lymphedema. Treatment several years ago has declined significant lymphedema. Has not caused any impact to work commitment."
5. Zurich says that Mr Hitchens' description of his lymphedema as being mild and from his suffering only the "odd lymphedema" was deliberately false. Counsel for Mr Hitchens says the answer was substantially true; that the medical records showed that Mr Hitchens' lymphedema in 2004 was significantly better than it had been several years previously and that in contrast to the position several years previously, his lymphedema could be described as mild. In my view, Mr Hitchens' statements that he suffered mild lymphedema and the odd lymphedema misrepresented the extent of his condition. The sentence "Treatment several years ago has declined significant lymphedema" does not make grammatical sense but an experienced underwriter called by Zurich, Mr Michael Molesworth, acknowledged that it could indicate to a reasonable underwriter that he had had significant lymphedema in the past. That does not detract from the message conveyed that Mr Hitchens' then current condition of lymphedema was mild and he suffered only the odd lymphedema.

Questions 25 and 33

1. Mr Hitchens answered "No" to a question whether he then suffered or had ever suffered "25. Lethargy, chronic fatigue, chronic pain syndrome, glandular fever or fibromyalgia?" That answer is not shown to be false because it is not shown that chronic pain syndrome is the same thing as frequent pain.
2. Mr Hitchens also answered "No" to the question: "33. Do you intend or believe you may need to seek advice or treatment from a doctor or other health professional for any current health problem[s], or have you any symptoms of ill health or disability not already stated in this application?"
3. Prima facie, the answer to question 33 was false. Mr Hitchens had an ongoing need to seek advice and treatment, in the form of prescription pain medication and antibiotics for his lymphedema and cellulitis. However, he was not cross-examined on this answer.

Depression or other mental or nervous condition: Question 24

1. Mr Hitchens answered "No" to a question whether he then had or had ever had "24. Depression, stress, anxiety, panic attacks, behavioural disorder or other mental or nervous condition?"
2. As noted earlier in these reasons Mr Hitchens had been diagnosed with a stress disorder by a psychologist, Mr Jones. Mr Hitchens said that he was unaware of that diagnosis. I do not believe that evidence. Disbelief of Mr Hitchens' denial would not itself justify a finding that the diagnosis had been communicated to Mr Hitchens, but the inference is overwhelming that Mr Hitchens was aware of that diagnosis. He saw Mr Jones for about two years. He made a claim for compensation arising from his having been hit by the motor vehicle in 1996. It can be inferred from the advice given by Mr Jones to his solicitor that the claim included a claim for compensation for psychological injury. He reported such a psychological injury to his physiotherapist or chiropractor, Mr Long. I do not think it probable that Mr Hitchens would have forgotten, or would not have turned his mind to, these circumstances when he answered the question in the proposal form as to whether he suffered depression, stress, anxiety, panic attacks, behavioural disorder or other mental or nervous condition. It is clear that Mr Hitchens read this section of the form as asking not only about his current state of health, but about previous conditions. That is clear from the fact that he answered the questions by referring to his medical history. It would therefore be no answer to say that he understood the insurer only to be asking as to whether or not he then suffered from depression, stress, anxiety, panic attacks, behavioural disorder or other mental or nervous condition. Nor did Mr Hitchens give evidence that that was how he read and answered the question.
3. No question of waiver arises in relation to this answer.

Authorities for Zurich to obtain medical information

1. The booklet containing the application form which included the Life Insured's Statement, also contained four authorities to be signed by the life insured addressed to "Dear Doctor" (but without naming a doctor) authorising the doctor to release to Zurich details of the proponent's medical history. Mr Hitchens did not sign those authorities when he submitted the application to Mr Roll to be forwarded to Zurich. On 25 August 2004 Mr Roll's firm returned the authorisations to him for signature advising that the underwriters were unable to assess the application until the form had been signed. Mr Hitchens signed the authorities. Zurich received the application from Mr Roll on 27 August 2004.

Zurich's consideration of proposal

1. Ms Cosier had no recollection of the particular application. She gave evidence, which I accept, that she handled about 20 such applications per day and that each application would take about 15 minutes to be analysed. It appears from the evidence of an underwriter called by the plaintiff that the processing of about 20 applications for life, income protection and TPD insurance by an underwriter per day was typical of the industry at the time.
2. Ms Cosier gave evidence to the effect that in accordance with her usual practice she would have read the application and noted the disclosures made. She gave evidence to the effect that in accordance with her usual practice she would have considered the following factors to be relevant, namely, that: (a) there had been no recurrence of the malignant melanoma since 1989; (b) the treatment for lymphedema appeared to have been successful and that Mr Hitchens suffered from only the odd lymphedema; (c) that the effects of the motor vehicle accident in 1996 appeared to have been resolved, save for the odd headache and there had been no time off work as a result of the accident since 1997; and (d) that Mr Hitchens was not continuing to receive medical treatment in respect of these conditions.
3. I accept that evidence.
4. Although she had no recollection of the particular application Ms Cosier speculated that she would have taken the reference to pain medication to be a reference to Mr Hitchens' taking an occasional painkiller such as aspirin or paracetamol.
5. Ms Cosier deposed that she would have declined Mr Hitchens' application had she been aware of Mr Hitchens' medical history. The guidelines provided by Zurich's reinsurer included that income protection cover be declined if there were a history of present drug dependence, or drug dependence within the previous seven years, or evidence of an anxiety disorder associated with substance abuse or depression however long ago this occurred, or evidence of severe depression or depression in association with drug abuse. Ms Cosier deposed that had full disclosure of Mr Hitchens' medical history been made she would have noted that he obtained regular scripts for Endone and Tramal, sometimes within days of his last script, which would have indicated a high need for pain relief. The history of his attendances at different medical centres to obtain prescriptions for pain medication would have raised the prospect of "doctor shopping" and hence the prospect of his having developed a dependency on the medications, or alternatively that he had significant on-going pain and had not fully recovered from his injuries. She would have noted, amongst other things, that Mr Hitchens had been diagnosed and treated for a depressive order, variously described, including acute stress disorder, severe reactive depression and had been diagnosed as anxious for a number of years following the accident and had been prescribed Prozac.
6. This evidence was not challenged. Rather, Ms Cosier was cross-examined with a view to establishing that enough information was disclosed on the proposal form that should have led a reasonable prudent underwriter to require the provision of further information from Mr Hitchens' doctors. This was directed to the issue of waiver dealt with below.
7. Ms Cosier discussed the application with another member of the underwriting team and decided to request a medical evaluation and blood tests. Ms Cosier thought she would have taken that decision because the application revealed some continuing, albeit minor, symptoms.

Events before examination by Lifescreen Australia nurse

1. On 30 August 2004 Zurich advised that it would require Mr Hitchens to have certain blood tests for cholesterol, HIV, and hepatitis B and C, and also to undergo a medical examination by a paramedic from a company such as Lifescreen Australia. A request for the examination was made to Lifescreen Australia it seems on 31 August 2004. The health evaluation request stated that, "nurse to provide full details of the injuries sustained in the accident."
2. The medical examination of Mr Hitchens took place on 14 September 2004 by a registered nurse, Ms Runeckles. Between the date Mr Hitchens signed the proposal form (8 August 2004) and that examination, two things of note occurred. On 20 August 2004 Mr Hitchens attended the Chatswood Medical Centre and advised the doctor there that he had felt a nodule in his left abdomen one week previously. He was given a referral to a specialist, Professor Thompson of the Sydney Melanoma Unit. Given that Mr Hitchens had a melanoma excised in 1984 and there had been secondary cancers removed in 1989, the appearance of what felt like a nodule in his left abdomen was a matter of concern.
3. Mr Hitchens attended the Sydney Melanoma Unit on 30 August 2004. Professor Thompson reported that he could find no evidence of a recurrence of melanoma. He detected a "firm subcutaneous nodule" that "felt like a lipoma". In layman's terms, this is a fatty lump. Professor Thompson reported to the Chatswood Medical Centre that he had arranged a biopsy "to exclude the remote possibility that it was a melanoma metastasis." Mr Hitchens gave evidence (which I accept) that he was told at the time that the lump was nothing to be concerned about.
4. A subsequent biopsy confirmed that the lump was not a recurrence of his cancer. However, the results of the biopsy had not been obtained at the time of Mr Hitchens' examination by Ms Runeckles.
5. I do not accept that the failure to disclose the subcutaneous lump and the fact that a biopsy was still outstanding at the time of his examination by Ms Runeckles involved a relevant breach of the duty of disclosure. I accept Zurich's submission that the possibility, even if remote, of a recurrence of a cancer in the form of the subcutaneous lump was a matter that a reasonable person would consider to be relevant to the insurer's decision whether to accept the risk. Had the contract of insurance been entered into when the results of the biopsy were still unknown, then I accept that the duty of disclosure would have been breached. (I do not say that such a breach would have been fraudulent.) But the contract was not entered into until 1 December 2004. The results of the biopsy were known well before then. They showed no malignancy. The lump was benign. It did not affect Mr Hitchens' health. The position is the same as it would have been had the lump been detected, diagnosed and a biopsy taken and the results provided before the application form was submitted in August 2004. The presence of a fatty lump with no malignancy would not have been a matter that required disclosure.
6. The only relevance of the non-disclosure of the lump and the fact that the results of the biopsy were outstanding at the time Mr Hitchens was examined by Ms Runeckles is that his failure to make mention of it might indicate a less than frank approach to the insurer. However, because of the assurance Mr Hitchens had been given by Professor Thompson I do not draw that adverse inference from his failure to mention the lump, as distinct from the extent of the disclosure of his other medical conditions and medical history.
7. The second episode that assumed significance at the hearing was that on 8 September 2004 Mr Hitchens suffered an injury when riding his bike. He suffered a deep laceration to his right elbow that was sutured under local anaesthetic at the Leichhardt Medical Centre. A note there read, "needs antibiotics". Also on 8 September 2004 Mr Hitchens attended Strathfield Medical Centre at 6.31pm and received prescriptions of Endone and Tramal. On 9 September he again attended the Leichhardt Medical Centre and was given a prescription for Keflex (an antibiotic) and Panadeine Forte. It is unclear whether his attendance at Strathfield at 6.31pm was before or after his bike accident and attendance at Leichhardt.

Report of Lifescreen Australia nurse: Ms Runeckles

1. The suggested significance of these events relates to information given by Mr Hitchens to Ms Runeckles on 14 September 2004. The form she completed provided for the insertion of the "Name and address of Usual Medical Attendant". It appears from the form she completed that she initially wrote "N/A". This was crossed out. Then she wrote "Balmain". This was crossed out. Then she wrote "Leichhardt Medical Centre". Against a line "State how long he/she has been your Doctor" Ms Runeckles wrote "N/A - 1st visit". Against the line "Date, reason and outcome of last consultation" she wrote "stitches to L [sic] elbow".
2. Mr Gleeson QC for Zurich submitted that having received a script for Endone and Tramal from Strathfield Medical Centre on 8 September, it should be inferred that Mr Hitchens' reason for going back to the Leichhardt Medical Centre on 9 September to obtain a prescription of Panadeine Forte, and the reason for his refraining from asking for a prescription of Endone and Tramal from Leichhardt, was that when the forthcoming Lifescreen examination took place Mr Hitchens would have the name of a doctor to provide who was "clean", that is, would not inform the insurer that he was taking prescription narcotic analgesics.
3. While this is a possible scenario, there is an alternative explanation consistent with Mr Hitchens' attending the Leichhardt Medical Centre on both days for genuine purposes without any intention to deceive the insurer. It is not possible to say whether the bike accident occurred before or after the attendance at Strathfield at 6.31pm on 8 September. It may well have occurred later. Mr Hitchens lived in Leichhardt. It is quite possible, indeed I think it probable, that he attended the Leichhardt Medical Centre after his bike accident because it was closer to home. It appears he was told to come back the following day because he needed antibiotics. He did so. Presumably he complained about pain in his elbow and was prescribed Panadeine Forte. I would infer consistently with Mr Hitchens' other evidence that he did not tell the doctor at Leichhardt that he had been prescribed Endone and Tramal the day before, but that does not mean that he went to Leichhardt and obtained the prescription for Panadeine Forte with the intention of providing a false trail as to his medical condition in case the insurer made inquiries.
4. Zurich submitted that Mr Hitchens falsely told Ms Runeckles that his usual medical centre was Leichhardt. This was not a particular of Zurich's claim of misrepresentation. In any event, Ms Runeckles did not give evidence. It is clear from the following answer that she was told that the visit to Leichhardt was the first visit that Mr Hitchens had made to that medical centre. It is more likely that he proffered the name of Leichhardt in answer to a question asking who was the last doctor he had visited. There is no basis for saying that that statement was inaccurate.
5. Ms Runeckles recorded in response to a question which asked, "Strained back, sciatica, whiplash, spondylitis or any other form of back or spinal trouble?", the following answer: "Whiplash - 10/4/96 - 3-6 months, chiropractor and physio. Fully recovered, no other treatment."
6. This answer does not detract from the disclosure made on 8 August 2004 that Mr Hitchens suffered from the odd headache as a result of the injury suffered on 10 April 1996. On the other hand, when read with the proposal form of 8 August 2004, it confirms that there was no significant qualification to Mr Hitchens' statement that he had fully recovered from the effects of those injuries.
7. In response to the question "Cancer, cyst, naevi or tumour of any kind?", Ms Runeckles recorded: "Cancer. Malignant melanoma in 1989. Groin dissection - fully recovered. No other treatment required."
8. Again, this answer does not detract from the information given on 8 August 2004 that Mr Hitchens suffered from the odd lymphedema and suffered from mild lymphedema. Ms Runeckles was not called and Mr Hitchens said that he could not confirm what he said to Ms Runeckles. If Mr Hitchens told Ms Runeckles the information which appeared in the answer in response to her question as to whether he had suffered cancer, cysts, naevi or a tumour of any kind, then the statement that he had fully recovered from the groin dissection and no other treatment was required would not have been true, having regard to the fact that Mr Hitchens continued to suffer lymphedema and cellulitis which were the results of the groin dissection. He had previously disclosed that he was or had suffered from cellulitis, that he continued to suffer lymphedema which he described as odd and mild and as having declined significantly from what it had been in the past. If Mr Hitchens said that no other treatment was required that would not have been true because Mr Hitchens continued to receive prescriptive pain medication for ongoing moderate to severe pain as a result of the cellulitis and lymphedema that were the result of the groin dissection. But because Ms Runeckles was not called, Mr Hitchens' counsel could not question her on the accuracy of the answers she recorded. Where fraud is alleged it must be distinctly proved. I do not think that Zurich has established that Mr Hitchens misrepresented his condition to Ms Runeckles.
9. In answer to the question "Arthritis, rheumatism, gout, tendonitis, repetitive strain injury or any disorder of the joints or muscles?" Ms Runeckles recorded an answer "knee reconstruction - 1996 - no further problems." There was no evidence that it was not true to say, as at 14 September 2004, that Mr Hitchens had no further problems as a result of the knee reconstruction. It would not have been true to say that he had not had any problems arising from the knee reconstruction after 1996 because he had had further surgery on the knee in 2000 and in May 2004. However, as I do not know at what period of time the question was asked, I do not conclude that the answer given by Mr Hitchens to Ms Runeckles in relation to that question was not true.
10. In answer to a question "Motor car or any other accident, work, sport or recreational injury?", Ms Runeckles recorded an answer, "Pushbike accident - 1999 - nil injuries. Knee reconstruction - 1996 (football injury. 10 years ago) MVA - whiplash - 1996." She had previously recorded the stitches given at the Leichhardt Medical Centre. No material "other accident" was raised in the course of the evidence. The answer provided to this question was not a misrepresentation.
11. In answer to the question "Do you, or have you ever, taken drugs or any medication on a regular basis? If yes, what type and reason." Ms Runeckles recorded the answer, "No". Mr Hitchens said that he could not confirm that the question was asked and answered in the way recorded. He did not deny it. Ms Runeckles was not called. If the question were asked and the answer recorded were given by Mr Hitchens, then the answer would have been false. But as Mr Hitchens' counsel had no opportunity to cross-examine Ms Runeckles and there was no explanation for her not being called, I cannot conclude that the question was asked in the same terms as appears on the form or that the simple answer as recorded was given.
12. In answer to the question "Do you contemplate seeking medical advice, undergoing any investigation or treatment or having any operation in the near future?", Ms Runeckles recorded the answer, "No". Again, I cannot be satisfied that the question was asked and was answered by Mr Hitchens in the way set out on the form. In any event, it is not clear what the form meant by the expression "near future". It might be within the next week or two. If the question were asked as written on the form, it has not been established that Mr Hitchens interpreted the question in a way that meant that the answer given was false, even though I infer that Mr Hitchens did intend to make further visits to his doctors to obtain further prescriptive pain medication with about the same regularity as he had hitherto in 2004. That is, sometimes once a month and sometimes two or three times a month.
13. Question 18 asked "Have you required medical treatment, including surgery, for any illness or injury not mentioned above?". Ms Runeckles recorded the response, "Tonsillectomy - 1972". This answer is not one of the particulars provided by Zurich of its allegation that Mr Hitchens misrepresented his condition to Zurich by providing the information to Ms Runeckles that was recorded in the Lifescreen report.
14. Ms Cosier reviewed the report from Lifescreen Australia. She recorded the following in her underwriting notes: "Rec'd medical: Whiplash 1996, 3-6 months, 1 x chiro & physio, full recovery Malignant melanoma 1989, groind [sic] dissection, full recovery Knee reconstruction 1998, no further problems Build wnl Nurse notes full power in limbs, nil tremor or muscle wastage, fine motor intact - doesn't req additiona [sic] reports as all injuries over 5 years old Note melanoma > 15 yrs ago - discuss with cmo for opinion."
15. Ms Cosier had a discussion with Zurich's chief medical officer about the melanoma. On 24 September 2004 she recorded that he had advised that cover should be granted on ordinary rates.
16. On 24 September 1996 Mr Roll was advised by Zurich that Mr Hitchens' application had been accepted at standard rates for Term, TPD and Trauma cover, but the Income Replacement policy would be subject to the indemnity option, due to Mr Hitchens' being newly self-employed.
17. On or about 18 August 2004 Mr Hitchens and Ms Quoe advised Mr Roll that they wanted to increase the amount of life insurance cover from $1 million as originally proposed to $1.5 million. On 18 October 2004 Mr Roll sent Mr Hitchens a declaration to complete advising that the information contained in the application form and life insurance statement dated 8 August 2004 remained unchanged. The declaration was made by Mr Hitchens on 15 November 2004.
18. The application for the increase in cover was considered by another underwriter at Zurich, a Ms Brenda Garcia. She accepted the risk at standard rates. She also had no recollection of the particular application, but gave evidence to the same effect as Ms Cosier that if Mr Hitchens' true medical history had been known she would have declined the application. She was also cross-examined with a view to obtaining concessions that a prudent underwriter would have made further inquiries. But Mr Hitchens did not dispute that his application would have been declined had he made full disclosure of his medical condition and history.
19. Subject to the question of waiver, Mr Hitchens made misrepresentations to Zurich and failed to comply with his duty of disclosure in the following respects: his statement in answer to question 2 of the proposal form that the reason for his visits to numerous medical centres for the previous two years was for stitches and antibiotics was substantially false, in that although obtaining antibiotics and stitches was a reason, the principal reason for his attending medical centres in that period was to obtain strong pain relief for lymphedema and cellulitis; his statement that he suffered mild lymphedema of the leg and from the odd lymphedema misrepresented the extent of his condition and concealed the extent of pain relief he was receiving; his statement that he had not ever had depression, stress, anxiety, behavioural disorder or other mental or nervous condition was false; his statement in answer to question 33 on the proposal form that he did not believe that he might need to seek advice or treatment from a doctor for any current health problems, was false, but because he was not cross-examined on that answer I could not conclude it was knowingly false; Mr Hitchens' failure to disclose his ongoing consumption of Endone and Tramal and the fact that he had been, and was, in the habit of obtaining prescriptions for those drugs from different doctors without advising one that he was getting a prescription for the drugs from another, was a breach of his duty of disclosure under s 21(1).

Waiver

1. As noted above at [50] Mr Hitchens pleaded that Zurich waived compliance with the duty of disclosure in relation to the cancer from which he suffered, the consequences of the motor vehicle accident in 1996, lymphedema and cellulitis, the pain medication he took and the treatment he received at the medical centres he attended. The plea of waiver is not relevant to the misrepresentation that Mr Hitchens had not ever suffered from depression, stress, anxiety, panic attacks or other mental or nervous condition. The answer, "No" given to that question was a complete answer, but was untrue.
2. Mr Hitchens relies on both s 21(2)(d) and s 21(3) (and also s 27). Section 27 relates to misrepresentation. Mr Hitchens misrepresented that he suffered only the "odd lymphedema" and that the lymphedema from which he suffered was "mild". Section 27 does not affect the consequences of that misrepresentation. The section provides that a person is not to be taken to have made a misrepresentation by reason only that he or she failed to answer a question or gave an obviously incomplete or irrelevant answer. The section was introduced to counter the form of some proposals that provided that a question that was not answered was to be deemed to be answered, "No". Where an answer is given, but the answer is not true, there will be a misrepresentation, whether the answer was complete or not complete.
3. Section 21(2)(d) is not an answer to Zurich's complaint that Mr Hitchens misrepresented the facts in his application. Accordingly, irrespective of the arguments about waiver, Zurich was entitled to avoid the policy, if the answer given to the question about Mr Hitchens' reason for visits to numerous medical centres in the last two years were fraudulent, or if his misdescription of the severity of his lymphedema were fraudulent, or his false statement that he had not ever had depression or anxiety or other mental or nervous condition were fraudulent.
4. Counsel for Mr Hitchens argued for a wider application of the principle of waiver. The effect of the argument was that if the insurer waived compliance with the insured's duty of disclosure, a representation that was false by reason of what was not disclosed should not be treated as false. I do not accept that submission.
5. The question of what is meant by waiver of an insured's duty of disclosure and when such waiver is to be imputed to an insurer is unclear. In Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd [1973] 2 NSWLR 7, Macfarlan J (quoting Lord Chelmsford in Earl of Darnley v London, Chatham and Dover Railway (1867) LR 2 HL 43 at 57), said (at 27) that as a waiver must be "an intentional act with knowledge" there could be no waiver by the insurer of its right to avoid a policy of insurance on the grounds of material non-disclosure unless the insurer at any relevant time knew that there had been such material non-disclosure or that it had the right to avoid the policy.
6. Counsel for Mr Hitchens submitted that this was not the right test. In its Report on Insurance Contracts [1982] ALRC 20 at 99-100 the Australian Law Reform Commission was critical of this aspect of the decision in Claude R Ogden & Co Pty Ltd v Reliance Fire Sprinkler Co Pty Ltd. Having quoted Macfarlan J's statement that: "it is … clear that there can be no question of waiver of [the insurer's] right to avoid the policy on the grounds of non-disclosure for the reason that [the insurer] did not at any relevant time have knowledge that there had been such material non-disclosure or that it had the right to avoid the policy", the Law Reform Commission said: "165. Criticism. On such a basis, it is difficult to see how an insurer could ever be regarded as having waived non-disclosure by not making further inquiry in relation to an unanswered or incompletely answered question in a proposal form. Mr Justice Macfarlan specifically rejected Phoenix Life Insurance Co. v. Raddin [120 US 187 (1886)] on the basis of an alleged difference between American and Australian law. The rejection of the possibility of waiver appears to have been based on a misunderstanding of what it was that was alleged to have been waived. Mr Justice Macfarlan's judgment speaks of waiver of non-disclosure. But waiver of non-disclosure is a misdescription of the basis of the insured's argument. It is waiver of the right to information which alone is in issue. One cannot waive a non-disclosure (any more than a misrepresentation) unless one knows that it has taken place. But one can certainly waive one's right to information if one knows that that information has not been provided."
7. I do not understand this criticism. Whilst one can waive one's right to information if one knows that information has not been provided, the question is whether the insurer waives its right to insist on compliance with the duty of disclosure, that is, waives its right to material information. Unless the insurer knows that the information it knows has not been provided is information that should be provided if the duty of disclosure were to be complied with, it could not intentionally and with knowledge waive its right to material information by issuing a policy without ascertaining what the information is.
8. In Jaggar v QBE Insurance International Ltd [2007] 2 NZLR 336 the Court of Appeal of New Zealand propounded a different test. The Court said (at [35]): "[35] Waiver in this context is a very limited concept (see Wise (Underwriting Agency) Ltd v Grupo Nacional Provincial SA [2004] 2 Lloyd's Law Rep 483 (CA)). It usually applies in two situations: (a) Where an insurer asks questions about a particular topic, it will have waived disclosure of material facts and circumstances which fall strictly outside the ambit of the particular questions on that topic. By way of example, the insurer might ask whether a prospective insured has ever been convicted of an offence for which he/she was imprisoned. Such a question would waive disclosure in relation to convictions which did not result in imprisonment. (b) Where the insured discloses facts and circumstances which reasonably indicate the possible existence of further material facts, the insurer will have waived disclosure if it fails to make further inquiry. An example might be disclosure by an insured that he or she has been in hospital. A failure by the insurer to inquire into the circumstances would waive the need for disclosure of such circumstances."
9. Section 21(2)(d) of the Insurance Contracts Act is derived from s 24(3)(c) of the Marine Insurance Act 1909 (Cth) that excepted from an insured's duty of disclosure "(3) Any circumstance as to which information is waived by the insurer". This also reflected the common law as to non-marine insurance (ALRC 20 at [160]).
10. The general concept of waiver at common law is an elusive concept (Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [50]-[54]). As Gummow, Hayne and Kiefel JJ observed at [51]: "Sometimes, although expressed as waiver, the reasoning adopted in cases reveals the elements for applying a more specific principle, typically election or estoppel." (footnotes omitted)
11. Thus it would be arguable that the principle as formulated at [35(a)] in Jaggar v QBE Insurance International Ltd may be too wide and cases which fall within the principle as stated are more appropriately characterised as cases of estoppel. Thus if a prospective insured were asked if he or she had been convicted of an offence within the last five years, and did not disclose an older offence in the reasonable belief he or she was not required to do so, the insurer would be estopped from relying on the non-disclosure as a ground for avoiding the policy. But if the proponent for a fire insurance policy had been convicted of arson and insurance fraud four years and ten months previously, and knowing that the convictions were highly material, delayed submitting the application for insurance until five years had passed, the insurer would not be so estopped. It is not clear to me that the insurer would have "waived" compliance with the insured's duty of disclosure by its having sought and obtained a truthful answer to a limited question about any convictions.
12. It is unnecessary to decide such a question in this case. If "waiver" under s 21(2)(d) is properly to be understood as referring to cases of estoppel or election (as argued by Ewart, Waiver Distributed (1917) Chap IX) then s 21(2)(d) would be inapplicable to this case.
13. But the better view, and the view by which I am in any event bound, is that "waiver" in s 21(2)(d) takes its meaning from how the concept has been applied in insurance law.
14. If the principle of waiver in insurance law and s 21(2)(b) is as broad as formulated in Jaggar v QBE International Insurance Ltd at [35(b)] then Mr Hitchens' plea of waiver has substance, depending on what is meant by the expression "reasonably indicate".
15. The principle as formulated in para [35(b)] in Jaggar v QBE International Insurance Ltd substitutes for the requirement that a waiver be an intentional act with knowledge (Earl of Darnley v London Chatham and Dover Railway Co quoted by Macfarlan J in Claude R Ogden v Reliance Fire Sprinkler Co) a requirement that it be an intentional act (issue of the policy) with knowledge or reasonable notice of the possibility that the duty to disclose material facts has not been complied with. That is not consistent with my concept of waiver at general law. Nor is the width of the formulation of the second principle supported by the decision of the Court of Appeal of England in WISE Underwriting Agency Ltd v Grupo Nacional Provincial SA [2004] EWCA Civ 962; [2004] 2 All ER (Comm) 613; [2004] 2 Lloyd's Law Rep 483. That decision requires that in insurance law, before a question of waiver arises, there must be a fair presentation of the risk.
16. In WISE Underwriting Agency Ltd v Grupo Nacional Provincial SA Longmore LJ, with whom Peter Gibson LJ agreed on this issue, said that before an insurer will be taken to have waived disclosure of a material fact there must be a fair presentation of the risk. If there has been a fair presentation of the risk to the insurer and the insurer receives information which, either on its own or in conjunction with other facts known to the insurer or which the insurer is presumed to know, would prompt a reasonably careful insurer to make further inquiries, then, if the insurer does not make the inquiry, assuming it could be simply made, it will be taken to have waived disclosure of the material fact which that inquiry would necessarily have revealed (at [110]). His Lordship summarised the position (at [111]) as follows: "[111] So the question becomes: (a) was there a fair presentation of the risk? And (b) was the insurer in the course of that presentation in the words of Parker LJ (at 511-512) [in Container Transport International Inc v Overseas Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd's Rep 476] - 'put on enquiry by the disclosure of facts which would raise in the mind of a reasonable insurer at least a suspicion that there were other circumstances which would or might vitiate the presentation[?]'"
17. Peter Gibson LJ said (at [130]: "[130] The issue of waiver is based on s 18(3)(c) of the Marine Insurance Act 1906, Grupo Nacional Provincial SA (GNP)'s claim being that there was a waiver by implication. I take the law to be correctly summarised in MacGillivray on Insurance Law (10th edn, 2003) pp 446-447 (para 17-83) which the judge cited in his judgment ([2003] EWHC 3038 (Comm) at [34], [2004] 1 All ER (Comm) 495 at [34]). That required the court to consider (1) whether GNP had performed its fundamental duty of making a fair presentation to the reinsurers, WISE (Underwriting Agency) Ltd (WISE), of the risk and (2) whether reasonably careful reinsurers would have been put on inquiry in the circumstances. If there was a fair presentation of the risk and the reasonably careful reinsurers would have been put on inquiry but failed to make an inquiry which they could have made easily, they will be treated as having waived disclosure of what they would have discovered had they made that inquiry. However the court should not subvert the duty of the assured to make a fair presentation of the risk by finding that the reinsurers were put on inquiry and failed to discover for themselves the material information save in a clear case."
18. Rix LJ (who dissented on the question whether waiver had been established) emphasised that principles of waiver in insurance law stem from the decision in Carter v Boehm (1766) 3 Burr 1905; 97 ER 1162 and is part of an "overall scheme of fairness between assured and insurer" (at [47]). His Lordship concluded: "[64] Ultimately, it seems, the question is: has the insurer been put fairly on inquiry about the existence of other material facts, which such inquiry would necessarily have revealed? The test has to be applied by reference to a reasonably careful insurer rather than the actual insurer, and not merely by reference to what such an insurer is told in the assured's actual presentation but also by reference to what he knows or ought to know, ie his s 18(3)(b) knowledge. The reasonably careful underwriter is neither a detective on the one hand nor lacking in common sense on the other hand. Mere possibilities will not put him on inquiry, and very little if anything can make up for non-disclosure of the unusual or special. Overriding all, however, is the notion of fairness, and that applies mutually to both parties, even if the presentation starts with the would-be assured."
19. WISE Underwriting is not authority that where an insured has not made a fair presentation of the risk, but discloses facts and circumstances which would reasonably indicate to a prudent insurer the possible existence of further material facts, the insurer will be taken to have waived disclosure of those further material facts that would be revealed to a prudent underwriter by further inquiry. I do not accept the width of the principle stated in Jaggar v QBE International Insurance Ltd at [35(b)].
20. Counsel for Mr Hitchens cross-examined those who participated in the underwriting decision for Zurich to establish that acting with reasonable prudence, and in accordance with Zurich's underwriting guidelines, further inquiries should have been made of Mr Hitchens' treating doctors. Those inquiries, if sufficiently pursued, would have revealed the full extent of his medical condition and the extent of the prescriptions for opioid analgesics. In support of that case, Mr Hitchens called evidence from an experienced underwriter, a Mr Anthony O'Leary. Mr O'Leary acknowledged that Mr Hitchens had had very frequent visits to doctors or medical centres for the previous few years before making the application for insurance. He accepted that Mr Hitchens did not give to the insurer a fair presentation of the risk in relation to the question as to his attendances on doctors and medical centres. He was of the view that Mr Hitchens had been "inconsistent with his disclosures, particularly the depth of his disclosures" with the resulting effect that things appeared in 2004 from what he had disclosed to be much better than they really were. That is clearly so. Accordingly, if an insurer will only be taken to have waived compliance with the duty of disclosure pursuant to s 21(2)(d) of the Insurance Contracts Act if there has been a fair presentation of the risk, there would be no waiver under that provision.
21. In General Accident Insurance Asia Limited v Sakr [2001] NSWCA 402; (2001) 11 ANZ Ins Cas 61-508 Giles JA with whom Hodgson JA and Sperling J agreed, said (at [32]) that s 21(2)(d): "…reflects the common law position discussed in, for example, Liga Knitting Mills v Lombard Insurance Co Ltd (1984) 3 ANZ Ins Cas 60-551 at 78,258-9 and the cases there cited; see also MacGillivray on Insurance Law 9th ed, para 17-78; Sutton, Insurance Law in Australia, 3rd ed, para 3.31; Law Reform Commission, Insurance Contracts, LRC 20, para 161."
22. In Liga Knitting Mills v Lombard Insurance Co Limited (1984) 3 ANZ Ins Cas 60-551 at 78,258-9 Southwell J of the Supreme Court of Victoria cited with approval the following passage from MacGillivray on Insurance Law, 7th ed at [675]: "It is also said that the insurer cannot complain of non-disclosure if he realises that he has the means of discovering a fact … this means that it is not necessary to disclose minutely every material fact. Assuming that there is a material fact apt to be disclosed, the rule is satisfied if the assured discloses sufficient to call the attention of the insurers in such a manner that they can see if they require further information they ought to ask for it. So, if reasonably sufficient information has been placed before them they cannot take advantage of failure to follow it up. If they shut their eyes to the light, it is their own fault. But there must be limits on this principle or else it would be tantamount to replacing the assured's duty of disclosure with a duty on the part of the insurers to make enquiries in order to discover material facts. It is submitted that the principle concerning means of information available to the insurers applies only to situations where the assured has made reasonably sufficient disclosure and the insurers need only to clarify a detail by enquiry from an immediately available source or the assured himself in order to complete the picture."
23. The first part of the passage from MacGillivray is supported by a dictum of Lord Esher MR in Asfar & Co v Blundell [1896] 1 QB 123 at 129 upon which counsel for Mr Hitchens also relied. His Lordship there said: "I now come to the point that there was a concealment of a material fact by the plaintiffs when they effected the insurance. The rule as to this is well known, and as to it I feel no doubt. The assured is bound to disclose every material fact which is within his knowledge, and which is not to be taken as being within the knowledge of the underwriters. If he fails to do so, he is guilty of what is called in insurance law concealment, which may in fact be either innocent or fraudulent. But it is not necessary to disclose minutely every material fact; assuming that there is a material fact which he is bound to disclose, the rule is satisfied if he discloses sufficient to call the attention of the underwriters in such a manner that they can see that if they require further information they ought to ask for it."
24. This statement must be understood in context. In Asfar & Co v Blundell the insurance was of a charterer's profit. The profit was lost when the charterer lost freight which would otherwise have been payable owing to damage to some of the goods being carried. An integer in the charterer's profit was how much freight it had to pay the ship owner. The insurer argued that the charterer had failed to disclose that the freight payable under the charter party to the ship owner was a lump sum and not a tonnage freight payable only on so much of the cargo as actually arrived in merchantable condition. Lord Esher MR went on to say: "In this case the plaintiffs disclosed that there was a charter party in existence, for one of the parts of the subject-matter of insurance was chartered freight; and further, that the subject-matter which the underwriters were asked to insure was the difference between the chartered freight payable by the assured to the ship owner, and the bill of lading freights which they were to obtain from the consignees of the goods. But having given this information, they did not tell the underwriters whether the chartered freight was a lump sum, or whether it was a tonnage freight depending upon the delivery of the goods to the consignees. But that the freight must be a lump sum was almost certain; and if the underwriters wanted to be sure on the point, they could have immediately acquired the knowledge by asking the question; the question ought to have been present to their minds. I think, therefore, that sufficient was disclosed by the plaintiffs to satisfy the rule that the assured must make a disclosure of the material facts …" (at 129).
25. It does not follow that the position would have been the same had the clause not disclosed been an unusual term. As Kay LJ said (at 133): "It is agreed that, if a charterparty contains an unusual clause which it is very material to the underwriters to know, it is not enough for the assured merely to tell the underwriters that there is a charterparty in existence; the assured is bound to go further, and state that it contains an unusual clause; if he does not do so, there is concealment which vitiates the policy. But here the clause is not unusual …"
26. This is consistent with the principle that the question of waiver of the duty of disclosure does not arise unless the insurer has been informed of facts which fairly indicate to a prudent insurer that there are other facts that may materially affect its decision to underwrite the risk or the terms on which it might do so, that have not been disclosed. This is how Fitzgerald P characterised the issue in Orb Holdings Pty Ltd v Lombard Insurance Co (Australia) Limited [1995] 2 Qd R 51 in terms of s 21(3) of the Insurance Contracts Act when dealing with an argument that the insurer had waived the duty of disclosure because the information provided was "obviously incomplete". There a proposal for fire insurance misrepresented the building to be insured as being of "brick/iron" construction when it had wooden walls. The proposal added a note "See Survey Report". Fitzgerald P said: "That note may have suggested that additional information was or would be available in such a report. However, it would not necessarily follow that the information given was incomplete so that it cannot be said that it was 'obviously incomplete'. It is a quite sensible reading of the note directing attention to the 'Survey Report' that it meant that the report would provide confirmation and perhaps further details of the information contained in the proposal." (at 53)
27. Greenhill v Federal Insurance Co Limited [1927] 1 KB 65 is another example of the same principle. The insurance was in respect of a consignment of goods from Halifax, Nova Scotia to Nantes. The underwriters denied liability on the ground of material non-disclosure of the facts that the goods had been exposed to the risk of being damaged whilst being transported from New York to Halifax and stored at Halifax by unsatisfactory means which exposed them to damage by seawater, snow and storm. The argument that the underwriters had waived the duty of disclosure on the ground that they failed to ask questions as to the circumstances of the carriage of the cargo from New York to Halifax and as to its condition was rejected. The argument, if accepted, would have destroyed the duty of disclosure (at 85). Scrutton LJ said (at 85): "I could understand that the way in which cargo is tendered may put the underwriter on inquiry. For instance, this celluloid shipment appears to have a variety of odd names, of which I have never heard before, and of which I daresay a good many people have never heard - fiberloid, pyralin, and other obscure names. I can conceive that if an underwriter is told 'I propose to ship pyralin' and does not ask 'what on earth is that?' he waives the disclosure to him of the ordinary qualities of pyralin or fiberloid. But if any particular shipment of pyralin or fiberloid has some peculiar quality which would not ordinarily follow from, or be disclosed by, saying 'this is pyralin', it seems to me that that is clearly a matter which ought to be disclosed."
28. Sargant LJ said (at 89): "But it is said that here there was, within s. 18, sub-s. 3 (c), a waiver by the insurer of information as to the previous history of the goods so far as pre-carriage was concerned, and this because such goods were known not to have originated in Halifax; that there must have been some pre-carriage; and that it was therefore for the insurers to make inquiries as to the circumstances of such pre-carriage. Had the pre-carriage necessarily or ordinarily involved incidents - vicissitudes - of the same character as those which occurred in the actual pre-carriage here, there would have been much in favour of this argument. But it is clear from the evidence that this is not so, and that the circumstances of the pre-carriage were so exceptional that they would necessarily be material and ought to have been disclosed. Indeed, the argument of the plaintiffs, if pressed to its logical conclusion, would in almost every case negative mere non-disclosure as a defence, since in almost every case appropriate inquiries would have got behind the non-disclosure and have elicited the material circumstances, unless indeed they had resulted in a positive misstatement by the assured."
29. Counsel for Mr Hitchens cited Professor Clarke, The Law of Insurance Contracts, 6th ed at [23-13D]. The learned author said (at 754-755): "Whatever is disclosed to the insurer, the question arises of the knowledge and experience that the insurer should bring to its appreciation, so that the proposer might say, 'I told you enough; as to what I did not say, you should have realised, you were put on inquiry' or 'I am entitled to assume that I would be covered'. This argument is closely related to the argument that information does not have to be disclosed, because it was information that the insurer knew or should have known. … The insurer is only expected to assume or infer what can readily and confidently be assumed or inferred. The corollary is that the insurer is not expected to fear the worst and seek confirmation of his fears. In the absence of grounds for suspicion, the insurer is entitled to assume without investigation that the proposer has told the truth. … … In the case of life or PHI insurance, the insurer, once alerted that the proposer has undergone medical treatment, is on notice, 'for the hospital records or the attending physicians would disclose the true cause of the insured's stay' in hospital. However, to name the doctor with whom the proposer is registered, and to authorise the doctor to supply the insurer with necessary information, may not be sufficient unless the insurer has reason to contact the doctor." (footnotes omitted) (PHI or Permanent Health Insurance is the name formerly given to Income Protection Insurance).
30. The last quoted paragraph relied upon is in a section headed "Waiver of Further Information". With respect, the learned author does not identify why being on notice that a proposer has undergone medical treatment means that an insurer waives the insured's duty to disclose material information merely because it has the opportunity to obtain further information about the medical treatment undergone. The authority cited is a decision of the United States Court of Appeals for the District of Columbia, Prudential Insurance Co of America v Saxe 134 F 2d 16 (1943) at 29.
31. But that was a different case where the insurer was held to have "waived" its right to avoid a policy of life insurance by having accepted payment of premiums after notice was given to its agent that the life insured had not disclosed on the proposal form a prior hospitalisation. It was a case in which the insurer was taken to have elected to affirm the policy by accepting payments of premium with the knowledge of its right, or the facts giving rise to its right, to rescind (at 29). The policy was issued in December 1936. The wife of the life insured was the sole beneficiary. The life insured died on 30 January 1938 (at 19). He had been admitted to a hospital for 15 days in January 1934. He answered "No" to a question whether he had ever been in a hospital for observation, diagnosis, rest or treatment. (It was held that there was sufficient evidence to support a jury finding in favour of the plaintiff that this was not a genuine hospitalisation but a fictitious one to cover up an alleged social lapse caused by over-drinking at a wedding and that the life insured had stayed in the hospital for two weeks in order to conduct his architectural business from the hospital room during his stay and because he was interested in a nurse there (at 22)). Be that as it may, in December 1937 the life insured's wife told the insurer's agent all that her husband had told her about his prior hospitalisation and asked whether she should continue to pay premiums on the policy as she would have to borrow money to do so. The agent encouraged her to keep up the payments. It was in this context that the Court of Appeal said (at 29) that at the time the wife made her disclosure: "There was no time for delay though as it turned out there was ample time for investigation, if the insurer had acted promptly. It had authority, in the policy, to do this. It had enough to put it on notice the hospital's records or the attending physicians would disclose the true cause of the insured's stay or some other which it might wish to accept as conclusive or investigate further."
32. Prudential Insurance Co of America v Saxe says nothing about waiver in the context of the insured's duty of disclosure on entering into the contract of insurance.
33. I have found that, unless Zurich waived Mr Hitchens' duty of disclosure, he was in breach of that duty by failing to disclose his ongoing consumption of strong opioid analgesics and failing to disclose the fact that he had been and was in the habit of obtaining prescriptions for those drugs from different doctors without advising one doctor that he was getting a prescription for the same drug from another doctor. Zurich did not waive that duty of disclosure. The fact that had it pursued inquiries by insisting that Mr Hitchens inform it of the names of all of the doctors he had visited and then used the consent forms to obtain information as to what drugs had been prescribed by all of those doctors, it would have elicited the information not disclosed, does not mean that it waived the duty of disclosure. Mr Hitchens disclosed the fact that he was taking pain medication. But that information did not disclose the nature or frequency of the pain medication he had been taking or of his concealment from doctors that he was obtaining prescriptions for the same drugs from other doctors. Those were unusual matters that were not revealed by the proposal form.
34. It was Mr O'Leary's opinion that because Mr Hitchens had disclosed that he had taken pain medication in the last five years as a result of the motor vehicle accident that occurred in 1996, a prudent underwriter would have followed up the issue by asking for more details regarding the type of pain medication taken and how recently it had been taken. Depending on the answers provided, in Mr O'Leary's opinion, the prudent underwriter could then have decided whether or not to obtain a report from the doctor prescribing the medication. He noted that in 2007 when Mr Hitchens applied for an increase in cover, Zurich did ask for more details regarding the type of pain medication, the frequency and amount of use and the site of the pain, when it had been given exactly the same disclosure in 2004 as to the taking of pain medication.
35. But the question is not whether Zurich exercised reasonable care in making its decision to issue the policies. The matters not disclosed were unusual. There was not a fair presentation of a risk. Zurich was not put on notice that there were material matters relevant to its decision whether or not to accept the risk relating to Mr Hitchens' use of pain medication. It did not waive the duty of disclosure.
36. The other grounds on which Zurich was entitled to avoid the policy involved Mr Hitchens' making misrepresentations. In respect of those matters no question of waiver of the duty of disclosure arises. It is irrelevant whether, as Mr O'Leary opined, the answers provided by Mr Hitchens should have prompted a prudent underwriter to seek more information. The question is not whether Zurich was negligent in relying on his answers, but whether it did. It is clear that the underwriters did rely on his answers and this was not disputed.
37. Pursuant to s 26(2) statements made by Mr Hitchens are not taken to have been a misrepresentation by him unless he 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. That requirement is clearly satisfied. It was clear that the questions on the proposal form were asked because the insurer regarded the information sought as being relevant to its decision. Mr Hitchens did not suggest that he had a different view.
38. For these reasons I consider that much of the evidence of Mr O'Leary, and the cross-examination of Zurich's underwriters, Ms Cosier and Ms Garcia, was irrelevant. However, in case I am wrong, I will state my conclusions as to whether Zurich should be taken to have waived disclosure by not making further inquiry because Mr Hitchens had disclosed matters that indicated the possible existence of further material facts (Jaggar v QBE Assurance International Ltd at [35(b)]; see para [129] above).
39. Zurich called evidence from an experienced underwriter, Mr Michael Molesworth. He was asked to express his opinion as an underwriter whether Mr Hitchens conveyed in his application, considered as a whole, that there were additional matters that Mr Hitchens had not disclosed in relation to his medical history that could have been obtained if the underwriter chose to ask for them. In his opinion there were not. Mr Hitchens disclosed two matters which might have indicated possible additional risk in his application for life insurance. They were the melanoma in 1989 and injuries in 1996.
40. As to the former, the time since the melanoma was removed was stated and the level of invasion could be assessed from the statement there had been a complete groin dissection. Whether the melanoma had recurred or spread could be assessed in the negative from the answers, including that there were no other conditions apart from mild lymphedema in the left leg and it was "fully recovered. No other treatment was required." It did not appear to Mr Molesworth that an underwriter should identify any additional matters relevant to the risk that Mr Hitchens had not disclosed. The risk had been referred to Zurich's chief medical officer, Dr Richard Mulhearn, whom Mr Molesworth described as one of the most experienced life insurance medical officers in Australia, and he had not considered that a need for additional information was indicated.
41. As to the latter, the major indicators of additional risk to be considered were first the degree of recovery. This was stated expressly as being full recovery apart from odd headaches, and "no other impact to current lifestyle apart from odd headaches. No other impact to working commitments." Secondly, the time since last symptoms or full recovery. This would be assessed from the information provided as seven years. Thirdly, the time since being off work. This would also be assessed from the information provided as being seven years. Fourthly, whether there were any ongoing treatment or medication. This would be assessed from the information provided as nil, except for non-prescription pain medication. This assessment followed from the proponent's statement that he was not currently receiving any treatment; a statement in the Lifescreen Australia Report that he was not taking drugs, tablets, or any treatment on a regular basis; his statement that he was taking, or had taken in the last five years, pain medication as a result of the motor vehicle "accident" but had last seen a doctor for the neck/knee pain caused by being hit by the motor vehicle in 1998.
42. Mr Molesworth was asked and answered a limited question, namely whether Mr Hitchens conveyed in his application as a whole that there were additional matters that he had not disclosed in relation to his medical history that could be obtained if the underwriter chose to ask for them, or to have them.
43. Mr Molesworth's opinion was that he could not identify any additional matters significant to the assessment of the risk that Mr Hitchens did not disclose in relation to his medical history, that could have obtained if the underwriter chose to ask for them.
44. I accept that opinion. But the opinion Mr Molesworth gave is relevant only to the question whether Zurich was on notice that there was information material to the risk that had not been disclosed. He was not asked whether a prudent underwriter would have made further inquiry.
45. In cross-examination Mr Molesworth said that he would have understood from the life insured's statement that he suffered odd and mild lymphedema. He said that he probably would not have asked for more information but a reasonable underwriter might well do so. A reasonable underwriter might also not do so, but accept the disclosure.
46. Mr O'Leary said that in his opinion a prudent underwriter would require a full report from the treating doctor to assess the particular risk.
47. This was a question on which the views of reasonable underwriters could reasonably differ.
48. Zurich's underwriters were accustomed to referring to underwriting guidelines provided by reinsurers, known as the RGA and Gen Re Guidelines. The Gen Re Guidelines said that a treating doctor's report was required in the case of lymphedema.
49. However, the underwriting guidelines were just that. They were guidelines, not rules. Zurich's underwriters consulted its chief medical officer rather than seeking a treating doctor's report. Other underwriters, such as Mr O'Leary, would have been more conservative. But this was a matter on which attitudes could reasonably differ, and the decision would be affected by the nature of the disclosed risk. Given Mr Hitchens' description of the lymphedema as odd and mild I do not accept that a prudent underwriter, acting reasonably, was required to make further enquiries.
50. Mr O'Leary said that Mr Hitchens' answer to question 2 would have put a prudent underwriter on warning that there was the possibility of a more complex medical history. From his perspective as an underwriter it was unlikely that a proponent in a sedentary occupation would require attendances to numerous medical centres in a two-year period for "stitches/antibiotics" if there were not an ongoing problem. The question "Degree of Recovery" was not answered. In his view, a prudent underwriter would have asked more questions and depending on the answers, would decide whether or not to obtain reports from medical centres.
51. I accept that opinion. Counsel for Zurich submitted that Mr O'Leary's opinions were fatally weakened because he did not disclose in his reports opinions he had expressed elsewhere as to the fairness of the presentation of the risk. This was relevant to evidence Mr O'Leary was asked to give, which I rejected, as to whether in his opinion, there had been non-disclosure or misrepresentation of material facts. There is substance to the challenge to Mr O'Leary's credit, but that does not detract from the cogency of his reasoning.
52. When asked about this in cross-examination Ms Cosier said that she would read the response, "stitches/antibiotics" as referring to the reason for Mr Hitchens' last visit. But that would leave the question unanswered. I accept that a prudent underwriter would press for an answer to the question, if he or she were giving the application more thought than could be given in handling 20 such applications in a day.
53. I also consider that as the proponent failed to give a credible answer to the question as to the reasons for his attendance on medical practitioners in the previous two years, and disclosed the taking of pain medication, a prudent underwriter would have asked for details of the pain medication being taken. In 2007 Mr Hitchens applied to change the income protection cover from the indemnity basis to an agreed value basis. In considering that application Ms Garcia did require details of the pain medication to be provided. That application was still pending when Mr Hitchens suffered his accident with the power saw. But the same reasons for asking that question in 2007 existed in 2004.
54. I do not accept that information as to the doctors whom Mr Hitchens consulted and the pain medication he was being prescribed could have been obtained without delay, which is a qualification sometimes given to when a failure to inquire will amount to waiver of the duty of disclosure. It would have been necessary to probe Mr Hitchens further and then, depending on his responses, contact such doctors as he might identify.
55. But if, which I do not accept, not only the duty or disclosure, but the consequence of a false answer, can be waived by an insurer's not making an inquiry that a prudent insurer would make, and if that is so irrespective of the fairness of the presentation of the risk and the delay that would attend such an inquiry, then I would accept that by not making further inquiries in relation to the answer to question 2, Zurich waived the consequence of the false answer.
56. This same issue is relevant to whether there was a waiver of the duty of disclosure of Mr Hitchens' consumption of Endone and Tramal and his habit of doctor-shopping for prescriptions. If inquiries had been pursued to ascertain the reasons for Mr Hitchens' attendance at numerous medical centres in the past two years by asking for the names and addresses of the medical centres and details of ongoing problems, then, depending on the answers, a prudent underwriter would have to have decided whether or not to obtain reports from the medical centres. Such reports, if obtained from the Strathfield medical centre and the Chatswood medical centre would have disclosed the prescription of Endone and Tramal. If inquiries had been pursued as to the nature of the pain medication Mr Hitchens disclosed he was taking, and had been truthfully answered, the same information would have been provided. But unless the underwriter obtained full copies of medical records and analysed them as was done in this case, it is unlikely that Mr Hitchens' doctor-shopping for prescriptions would have been revealed.
57. On any view, an underwriter is not required to be a detective.
58. For these reasons, even if the doctrine of waiver could have the expansive operation for which counsel for Mr Hitchens contended, I would not conclude that the doctrine could affect the consequence of the description of Mr Hitchens' lymphedema, nor his failure to disclose that he was in the habit of getting prescriptions of drugs from different doctors without disclosing to one that he was getting prescriptions from another.

Fraud

1. The questions then are which, if any, of the misrepresentations were made fraudulently, and whether Mr Hitchens' failure to disclose his consumption of strong opioid analgesics and the fact that he had been in the habit of obtaining prescriptions for those drugs from different doctors without advising one doctor that he was getting a prescription from another, was a fraudulent concealment of those facts.
2. Counsel for Mr Hitchens submitted that Mr Hitchens had been told by Mr Roll that Zurich would make inquiries of his medical practitioners. Mr Roll accepted in cross-examination that when Mr Hitchens raised the motor vehicle accident he would have said to Mr Hitchens that Zurich would probably write to his doctor in regards to it. If a client disclosed a fairly extensive medical history then, in accordance with Mr Roll's practice, it would be more than likely that he would tell the client that the insurance company would write to the client's doctor for more information. Counsel submitted that every important matter known to Mr Hitchens concerning his health, namely his cancer, the motor vehicle accident, lymphedema and cellulitis was disclosed to Zurich and those disclosures were made in the knowledge that Zurich would be going to his doctors and would find out whatever they wished to find out about his medical condition in much greater detail than Mr Hitchens was capable of conveying. Hence, so it was submitted, it was improbable that Mr Hitchens would make knowingly false statements or knowingly conceal material matters when it was his expectation that such inquiries of his doctors would be made.
3. It was put to Mr Hitchens in cross-examination that he deliberately decided not to make any mention on the application form of the Chatswood clinic, the Strathfield Clinic, the Balmoral Street Clinic, or the Five Dock Clinic, because he knew that a reference to any of those would expose him to the possibility that the insurer would discover the frequency and regularity of the prescription pain relief he was taking. He denied that that was so. Mr Hitchens said that after speaking to the broker he was expecting to receive some more questions as the broker had told him that given his history he expected that the insurer would make more inquiries. I accept that Mr Hitchens expected the insurer to make further inquiries. I think he completed the form in a way that would minimise that risk.
4. Mr Hitchens said that he understood that anyone could obtain the information on his Medicare file and it would be impossible to hide the facts about the nature and extent of the prescriptions for pain medication. I do not accept that evidence.
5. Had Mr Hitchens provided contact details for his doctors, or for his usual doctor in 2004, or for his usual doctors from 2000 to 2004, or even for the last doctor he consulted in relation to his ongoing medical issues, that would be a factor tending to negative fraud. But Mr Hitchens did not do that. He left blank the parts of the form that asked for details of the doctor or centre he usually visited or the last doctor or centre he attended if he did not have a usual medical attendant, and he did not give the name or address of any other doctor he had visited in the last two years. Because this part of the form was not answered, or the answer was obviously incomplete, Zurich is deemed to have waived compliance with the duty of disclosure in relation to those matters (s 21(3)). But that does not mean that the absence of an answer as to the identity and contact details of his doctors is irrelevant to the question of fraud. I accept that Mr Hitchens was given information that led him to expect that Zurich would make inquiries of his doctors if it considered that that was necessary or desirable having regard to the medical history provided. But his failure to name any doctor or to provide any contact details for any doctor, coupled with the anodyne description of his medical history when compared with the reality, reduced the chances of such inquiries being made. I do not consider that Mr Roll's advice to Mr Hitchens that Zurich could be expected to make its own inquiries of Mr Hitchens' doctors is a factor making it objectively less likely that Mr Hitchens would deliberately provide false answers or conceal matters that he knew should be disclosed, or seek to deceive Zurich in order to obtain insurance.
6. Counsel for Mr Hitchens also submitted that a relevant consideration was that the plaintiff and Ms Quoe, being his then fiancée and intended future wife, contemplated marriage with children. They contemplated that they would both work during the marriage. Mr Hitchens had worked for a time in the claims processing department of an insurer. He was aware of his duty of disclosure. He and Ms Quoe both took out insurance in respect of each other's lives and both took out policies of disablement and income protection. Counsel for Mr Hitchens submitted that Mr Hitchens was aware that if he made a misrepresentation or failed to make required disclosures it could vitiate his insurance and the persons who would suffer would include his wife, in the event of his death or disablement.
7. I accept that these are relevant considerations. On the other hand, having regard to his medical history, Mr Hitchens must have been aware that it would be at least doubtful whether cover would be provided if full disclosure were made. The same considerations provide a motive for Mr Hitchens to do what he could to obtain insurance.
8. In cross-examination Mr Hitchens said that he tried to fill out the application form in an holistic way. He said that the answer to question 5 (see paras [71] and [72] above) was given with the intention of showing that as a result of the motor vehicle accident in 1996 he had had further complications, pain medications and "everything like that" and was intending to draw attention to the motor vehicle accident and the medical problems he had. He said that in completing the form he wanted to draw attention to the lymphedema. The lymphedema had got worse as a result of the motor vehicle accident. However, when providing further medical background in relation to the motor vehicle accident on 10 April 1996 Mr Hitchens did not, in that context, refer to any worsening of his lymphedema. Rather, he referred to having had "knee reconstruction and various soft tissue injuries" that resulted in his taking six to 12 months off work (see para [74] above). No-one reading the form could deduce that Mr Hitchens was taking strong prescriptive pain medication for lymphedema and cellulitis and that the lymphedema for which such medication was being taken had been exacerbated by the 1996 motor vehicle accident. I have concluded that Mr Hitchens was aware of that and deliberately did not seek to provide full information as to his medical condition.
9. I have concluded that Mr Hitchens misrepresented his reasons for his visits to numerous medical centres for the previous two years by stating that the reason was for stitches and antibiotics. By not giving the principal reason for his attendances Mr Hitchens misrepresented the position (Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679 at [105]-[109]). Mr Hitchens did not deny that he had on many occasions attended a doctor as a result of significant pain for his lymphedema and cellulitis and to obtain prescription pain relief. He did deny that he made a conscious decision not to state that as the reason for his attendance at numerous medical centres and he denied that he realised that to state the real reason would have caused the insurer to at least further investigate that matter with his doctors and in all likelihood to reject the application. I do not accept those denials. I have referred to the evidence given by Mr Hitchens about this matter in re-examination at paras [67]-[68] above. No satisfactory explanation could be given as to the reason he answered the question the way he did. I do not conclude that the reason Mr Hitchens could not provide a satisfactory answer was because of his disability. Rather, I think the reason he could not provide a satisfactory answer was because none was available.
10. I am satisfied that Mr Hitchens knew that the answer he provided to question 2 was substantially false because it omitted the principal reason for his attendance at numerous medical centres. In the context of s 27 of the Insurance Contracts Act there is a question as to whether fraud is established if the proponent makes a material representation knowing it to be false or being recklessly indifferent to its truth, or whether the proponent must also have made the knowingly false statement with the intention of inducing the insurer to accept the risk in the belief that it would otherwise not be accepted, or would only be accepted on different terms from those that would otherwise be imposed (Twenty-First Maylux Pty Ltd v Mercantile Mutual Insurance (Australia) Limited [1990] VR 919 at 925-926). In other contexts that distinction could be critical, for example if the proponent contended that a knowingly false representation or a deliberate concealment of a material fact were due to embarrassment concerning a medical condition. But no such issue arises here. In this case the only explanation for Mr Hitchens' making knowingly false representations or deliberately concealing material facts was to seek to induce Zurich to offer cover.
11. I have found that Mr Hitchens' description of his lymphedema as mild and of his having suffered only the odd lymphedema misrepresented the extent of his condition. However, the adjectives used are themselves vague. They represented Mr Hitchens' opinion about his condition. I accept counsel's submission that compared with the condition from which he suffered after the motor vehicle accident in 1996 and up to 2001 Mr Hitchens could honestly have considered that the lymphedema was mild. Although he was still taking prescriptive pain relief, his consumption of Endone, which he regarded as the stronger drug, had decreased significantly from 2001. His consumption of Tramal had increased indicating that he suffered significant pain, unless he were addicted to the drug which he denied and of which his doctor, Dr Alexakis, had not seen evidence.
12. Nonetheless, it was not a fair depiction of his condition to the insurer and having regard to his other answers I think Mr Hitchens did not consider that it fairly disclosed his condition to the insurer, but thought he could justify the description by comparison with his previous condition. Although the position is less clear than in the case of other misrepresentations, I am nonetheless satisfied that this misrepresentation was also fraudulent.
13. I have found that Mr Hitchens' statement in the proposal form that he had not ever had depression, stress, anxiety, behavioural disorder or other mental or nervous condition, was false. I have rejected his denial of knowing that he had been diagnosed as depressive following his motor vehicle accident. Whilst it is possible that his psychologist, Mr Jones, did not tell him that he had diagnosed Mr Hitchens as suffering from an Adjustment Disorder with mixed anxiety and depressed mood, it is clear from information that Mr Hitchens himself conveyed that he was aware of the diagnosis. Mr Long, a chiropodist, reported to Dr Oswald on 21 June 1996 that: "Mr Hitchens frequently described how his current complaints have affected him psychologically and for this he is seeking counselling with Mr Alec Jones. It appears to me that Mr Hitchens' symptoms may well be augmented to a degree by this distress (something which Mr Hitchens agreed with) … "
14. Mr Hitchens' mother, a registered nurse, reported to Dr Oswald that Mr Hitchens remained very depressed and was taking Prozac daily for depression, something Mr Hitchens professed not to recall.
15. Mr Hitchens said that he had never seen a diagnosis that he was suffering from acute stress disorder as defined in DSM-IV but did not believe that he was so diagnosed. He agreed he had frequent attendances on Mr Jones between 1996 and 1998. He said he could not exactly say what Mr Jones' job was. He would have thought he was a doctor, but could not tell exactly what he was qualified for. He said he was seeing Mr Jones for meditation and to assist his memory for the court case arising from the motor vehicle accident. It was put to Mr Hitchens in cross-examination that he issued legal proceedings as a result of injuries he suffered from the motor vehicle accident and amongst the injuries for which damages were claimed were psychological injuries. Mr Hitchens said he did not know. The statement of claim was not tendered and there is no direct evidence that a claim for psychological injuries was made, although it would have been surprising if such a claim were not made having regard to Mr Jones' diagnosis.
16. Mr Hitchens was admitted to the Royal North Shore Hospital on 26 August 1996. This was more than four months after the accident. The discharge report of 29 August 1996 records the principal diagnosis as being cellulitis to the left leg, abrasions and damage to the knee, against a background of lymphedema. It records against "Other Diagnoses" "depression". Mr Hitchens said he was unaware of the diagnosis.
17. On 26 May 1999 Dr Oswald reported to Mr Hitchens' solicitor that following the motor vehicle "accident" on 10 April 1996: "Probably the major problems he experienced however were psychological. He was agitated and suffering jerking spasms, knee giving way and frequent falls. He saw Alec Jones (psychologist) for his stress disorder and reactive depression. I prescribed Prozac as well as strong analgesics - Endone, Valium and Orudis. …"
18. In the context of Mr Hitchens' bringing a claim for damages I think it highly improbable that he would not have known that he was being treated by Mr Jones for depression. That he was so aware is confirmed by Mr Long's record of matters disclosed to him by Mr Hitchens. I do not accept Mr Hitchens' denial of knowledge about these matters. I am satisfied that his denial was due to his being aware that Zurich was relying on his negative answer in the proposal form to the question as to whether he had ever had depression, stress or anxiety etc. as a ground for avoiding the policies.
19. It is of course theoretically possible that the depression for which Mr Hitchens was receiving treatment was feigned for the purposes of his then claim for personal injuries, but Mr Hitchens gave no evidence to that effect. Nor was any submission made to that effect by his counsel and I do not draw that conclusion.
20. Mr Hitchens gave evidence that when he completed the proposal form he was not in any way depressed. He was working hard. He was playing sport. He was proposing to marry and have children. A number of friends gave evidence to the effect that they observed no signs of depression or anxiety or any other psychological issue. Thus, a Mr Paap said that he had known Mr Hitchens since 1998. They played cricket together and had lived together as flatmates in 1999 and 2000. Mr Paap deposed that Mr Hitchens seemed a jovial and up-beat type of person who had physical health issues, but he seemed to put up with those and lived a normal life. He was outgoing and exhibited no indications of depression, anxiety or any other psychological issue. This evidence was not challenged and I accept it. But it does not meet Zurich's case. Zurich does not contend that when the proposal form was completed in 2004 Mr Hitchens was suffering from depression or other mental or nervous condition. The question on the proposal form asked not only about his then current mental condition, but his past mental condition. Mr Hitchens did not say that he read the form as only asking about his then current medical condition.
21. I conclude that Mr Hitchens' answer to this question was knowingly false.
22. In para [84] I have concluded that, prima facie, Mr Hitchens' statement that he did not believe that he might need to seek advice or treatment from a doctor for any current health problems was false. However, if specifically asked about the answer to question 33 he might have proffered a reason for answering the question "No" which, if accepted, might negate fraud. The allegation of fraud in relation to each alleged misrepresentation needed to be put specifically to Mr Hitchens. I do not find that his answer to question 33 was a fraudulent misrepresentation.
23. I have found that Mr Hitchens failed to comply with his duty of disclosure by not disclosing his ongoing consumption of Endone and Tramal and the fact that he had been and was in the habit of obtaining prescriptions for those drugs from different doctors without advising one that he was getting a prescription for the drugs from another.
24. This is not a finding that Mr Hitchens breached his duty of disclosure by failing to disclose that he was addicted to those drugs. Mr Hitchens denied that he was addicted. Dr Alexakis did not consider that he was addicted to them. Mr Hitchens said that he took them because he needed pain relief, not because he was dependent on them. In 2004 he had reduced his use of Endone. Mr Hitchens' use of Tramal (Tramadol) went from 20 prescriptions in 2002 to 26 in 2003 and then reduced to 18 in 2004.
25. Counsel for Mr Hitchens submitted that this was a more benign drug that did not have the same issues to the patient's becoming dependent on the drug as arose in the case of Endone. That submission is supported by the opinion of Professor Starmer. Professor Starmer does refer to some Swedish studies commenting on the occurrence of Tramadol dependence in association with other analgesic treatment and to the possibility of a dependent syndrome developing in susceptible patients. However, this is not the point.
26. It is true that Mr Hitchens disclosed that he was taking pain medication. He wrote: "Pain Medication - result of motor vehicle accident." Mr Hitchens submits that this answer was accurate. His use of Endone started in 1996 and was a result of a motor vehicle accident.
27. Elsewhere in the form he described the motor vehicle accident as giving rise to a knee reconstruction and various soft tissue injuries. He said the treatment he received as a result was knee reconstruction and neck physiotherapy. He said he was not currently receiving any treatment for that. Nowhere on the form did he disclose that the motor vehicle accident had worsened his lymphedema and that he was continuing to take pain medication for the lymphedema. He did not disclose the type of pain medication that he was taking or the frequency of use. Although that use was lower in 2004 than it had been between 2000 and 2003 it was still substantial. Although he denied that he was addicted to Endone or Tramal, he had been warned about the risk of dependence on Endone and he had taken steps to obtain the drugs from more than one doctor knowing that each doctor was ignorant of the prescriptions written by another. Counsel for Mr Hitchens submitted that this only indicated that he was stockpiling the drugs in case of need when he could not readily obtain a prescription and did not indicate an excessive consumption of the drugs. It is impossible to draw a conclusion one way or the other. Mr Hitchens did not provide such an explanation. But the point is not significant. Mr Hitchens suffered chronic pain between 2000 and 2004 and he agreed that in that period there were not many months that he did not suffer pain to such a degree as to have to attend on a doctor and ask for prescription medication. He said that it never stopped his working, playing sport or living life.
28. In my opinion Mr Hitchens sought to minimise the impact of his disclosure that he was taking pain medication by saying only that it was the result of the motor vehicle accident and not saying that it was for the purpose of treating lymphedema or cellulitis, and then by minimising his description of the lymphedema he suffered and by confining his description of the effects of the motor vehicle accident to a knee reconstruction and soft tissue injury. I think his failure to refer to the nature and extent of the pain medication he was taking was deliberate and the form was carefully prepared to seek to reduce the likelihood of the insurer asking more questions. In my view the concealment of these material matters was deliberate and fraudulent.
29. I am satisfied that Mr Hitchens' failure to satisfy his duty of disclosure was deliberate and that he knew that the false or misleading answers were false or misleading. In reaching that conclusion I am fully conscious of the seriousness of the finding and the need for convincing evidence. I remind myself of the principles in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 and of s 140(2) of the Evidence Act 1995 (NSW). But the contrast is striking between the depiction of Mr Hitchens' medical condition in the proposal form and the medical records showing a dependence on strong analgesics to cope with pain, and his concealment of his consumption from his doctors.
30. It follows that Zurich was entitled to avoid the policies on the grounds of fraudulent misrepresentation and fraudulent non-disclosure.

Disablement

1. On 4 September 2007, a few days before the injury to his hand, Mr Hitchens consulted a neurologist, Dr Ronald Joffe, pursuant to a referral. Mr Hitchens had developed severe right-sided trigeminal neuralgia that triggered spasms of severe pain.
2. Mr Hitchens' psychiatrist, Dr Robert Hampshire, reported on 15 July 2010 that Mr Hitchens then suffered pervasive and severe depression following his injury, and suffered from panic attacks. He reported that pain was a pervasive and all-consuming symptom for Mr Hitchens and that he was currently taking very high amounts of a strong narcotic oral analgesic, Endone, which was of a concern to both Dr Hampshire and Mr Hitchens' general practitioner. Dr Hampshire opined that Mr Hitchens had a substance abuse disorder and a pain disorder of both psychological and organic causality. At that time Dr Hampshire said that in his opinion Mr Hitchens' prognosis was extremely poor and it was implausible that he would ever work again, unless there were a change in his current psychiatric state, which was unlikely.
3. On 25 March 2013 Dr Hampshire reported that Mr Hitchens continued to suffer from a post-traumatic stress disorder in the moderate to severe range, but it had reduced in intensity and severity since he had previously seen Mr Hampshire in 2010 and February 2011. He reported that Mr Hitchens was suffering from a major depressive disorder which was perhaps marginally less severe than when Dr Hampshire previously saw him. He still diagnosed Mr Hitchens as suffering from a pain disorder and that pain dominated his clinical presentation. The pain had its causality in an organic basis being the tops of the amputated fingers on the right hand with a contribution from his trigeminal neuralgia. There was also a psychological causality to the pain disorder with his depression. The more severe his pain, the more depressed Mr Hitchens became and conversely, the more depressed Mr Hitchens was, the less able he was to tolerate pain and more inclined to take increasing amounts of analgesia and anti-convulsants. Dr Hampshire continued to diagnose him as suffering from an iatrogenic substance abuse disorder, being to the narcotic, oxycontin. An iatrogenic disorder is one caused or produced by the diagnosis or treatment by a physician.
4. In his report of 25 March 2013 Dr Hampshire said that Mr Hitchens' chronic pain disorder, both of organic and psychological causality, continued to remain poorly controlled and he continued to suffer from an iatrogenic substance abuse disorder because of the medical efforts made in attempting to treat him. It was Dr Hampshire's view that Mr Hitchens was totally and permanently disabled because of his injury and was unlikely ever to work in his profession or any similar business or similar occupation to which he had been trained. He was unable, in the doctor's view, to generate at least 80 per cent of his pre-disability income through personal exertion in his usual occupation and he considered it probable that this would remain the case for the remainder of Mr Hitchens' working life.
5. On 14 July 2014 Dr Hampshire reported having had a prolonged psychiatric interview with Mr Hitchens on that day. Mr Hitchens continued to complain of severe pain in his hand and on the right side of his face from trigeminal neuralgia. He also reported having been admitted to the Royal Prince Alfred Hospital with a bowel condition which he reported his physicians had said was caused by the excessive use of opiates. Dr Hampshire reported that Mr Hitchens disputed that diagnosis. Dr Hampshire expressed concern about the quantity of Tegretol, an anti-convulsant, that Mr Hitchens was taking for his trigeminal neuralgia and his use of oxycontin and another analgesic, Lyrica. Dr Hampshire reported that it was not clear precisely what Mr Hitchens' current analgesic use was as it appeared that he had numerous analgesic preparations kept at home, including Lyrica and Tramal and also the narcotic analgesics, Oxycontin, Targin and Endone, each of which was highly addictive and should only be used for acute pain for days, going into weeks at the most. Dr Hampshire said that Mr Hitchens was not compliant with medications and in his opinion self-medicated excessively. Mr Hitchens had been advised to re-attend a pain disorders clinic, but was resistant to doing so. He considered that Mr Hitchens was abusing his narcotic based analgesics and his dose of Tegretol and was non-compliant with medication. The fact that he had had three in-patient hospital admissions for bowel obstruction implied that he had been very excessive in his use of narcotic analgesics. Dr Hampshire considered that Mr Hitchens remained totally and permanently disabled to work at any level for which he had been trained or has workplace experience. His depression had reduced from the previous consultation and was not then dominating the clinical picture. Dr Hampshire considered that Mr Hitchens' underlying psychiatric condition was a pain disorder of organic and psychological causality, along with an iatrogenic substance abuse disorder, being to narcotic analgesics and that his co-morbid panic attacks and depression varied in severity and intensity.
6. There is no contrary medical evidence. Mr Hitchens was examined by other doctors at the request of Zurich, but Zurich did not tender other medical reports.
7. Zurich contended that the doctors were dependent on Mr Hitchens' accurately describing his pain and medical condition and that he had exaggerated his condition. Reports were provided by Dr Hampshire and by Mr Hitchens' treating general practitioner, Dr Alexakis, in November and December 2010 to the effect that Mr Hitchens would not be capable of providing instructions to his solicitors if Zurich were given leave to amend its defence to raise an issue of fraud. In his report of 11 November 2010 Dr Hampshire sought to re-interview Mr Hitchens in the presence of his legal team. He proceeded gently to raise the matter with him at which point Mr Hitchens became overwhelmingly distressed, broke into tears, became extremely agitated and commenced to hyperventilate. He developed at least the onset of a panic attack with a marked tremor, an excess of sweating, chest pain and a feeling of light-headedness. Dr Hampshire found that Mr Hitchens was virtually unable to respond in a clear, concise and logical fashion to any questions put to him and may have moved to a dissociative state because the content of his speech revealed long, circuitous, rambling and over-inclusive statements that were delivered in an almost formally thought disordered manner. It was Dr Hampshire's then opinion that Mr Hitchens was not capable of providing instructions on the issue of whether he had made fraudulent misrepresentations or fraudulent non-disclosure because that issue generated so much anxiety, and exacerbated traumatic symptomatology, that it grossly impaired Mr Hitchens' cognitive functioning so that he could not provide meaningful instructions or make reliable statements where his integrity was in question.
8. Nonetheless, leave to amend was granted. Mr Hitchens was cross-examined for the better part of three days. Most of the cross-examination dealt with Mr Hitchens' medical condition before his completion of the proposal for insurance and the adequacy of his disclosure of that condition and what full statements in the proposal form. Until the very end of the questioning Mr Hitchens handled the cross-examination in a way which could not have been anticipated from the earlier medical reports. Apart from a short break in the afternoon of the first day of his giving evidence, Mr Hitchens handled the cross-examination reasonably well. His answers were for the most part responsive. He was articulate and appeared reasonably intelligent. It was not until the very end of his cross-examination that Mr Hitchens broke down. He did so after being asked questions directed to seeking to establish that he was able to work as an IT consultant, including by reference to his concentration, ability to read documents, ability to understand complex questions and stamina, that is, by reference to his performance in the witness box.
9. Zurich submitted that because the opinions of Dr Alexakis and Dr Hampshire were dependent upon their acceptance of Mr Hitchens' own descriptions of his suffering that his claim to have been permanently and totally disabled should be rejected unless he were accepted as an honest witness. There is some force to this submission. In concluding that Mr Hitchens was guilty of fraudulent representations and fraudulent non-disclosure it necessarily follows that I have not accepted him as a witness of truth. His demeanour as a witness did not inspire confidence. But I have discounted that in assessing his credibility. Mr Hitchens' counsel submitted that he was a damaged individual and that is undoubtedly true. The question whether he has been totally and permanently disabled only arises if my conclusion that Mr Hitchens was guilty of fraud is wrong. I cannot and do not reason from the premise that because I have found Mr Hitchens to have been fraudulent, I could not accept his evidence as to the extent of his disability, and I should find that he deceived his doctors as to the extent of his disability.
10. There was no cross-examination of Dr Hampshire, Dr Alexakis or Mr Hitchens to seek to establish that his subsequent performance as a witness showed that he had exaggerated his symptoms to Dr Hampshire and Dr Alexakis when they were asked to provide reports as to whether or not he would be capable of dealing with the issue of fraud if Zurich were given leave to amend its defence to raise that issue. Moreover, Mr Hitchens' initial consultations with Dr Hampshire were simply as a patient and not for the purpose of Dr Hampshire's providing an expert report to be used in court proceedings. Deception of his doctors for the purposes of this case would be fraud of a quite different order from the fraud of which I have concluded Mr Hitchens was guilty.
11. For these reasons, in the absence of contrary medical opinion, I consider that notwithstanding that Mr Hitchens was able to deal with the defence of fraud and perform as a witness much better than would be expected from the earlier medical opinions, I should accept Dr Hampshire's diagnosis that Mr Hitchens suffers from a pain disorder that is both organically and psychologically based as described in his reports, by reason of which it is probable that Mr Hitchens is totally and permanently disabled within the meaning of the definition. Mr Hitchens can use a computer but not for prolonged periods. He types with his little finger of his right hand. He avoids situations where he might be expected to shake someone else's hand. Most significantly he is consumed by his pain associated with his loss of fingers and trigeminal neuralgia. He is also addicted to narcotic analgesics albeit that he does not recognise that addiction.
12. Accordingly, had I concluded that Zurich was not entitled to avoid the policies on the ground of fraudulent misrepresentation and non-disclosure, I would have accepted that Mr Hitchens was entitled to recover, that is, that he had established his permanent disablement.
13. Zurich did not contend that the policies do not respond because Mr Hitchens' inability to work is not solely due to Injury and Sickness (as defined). The definition of Sickness in both policies is to a sickness or disease which first manifests itself after the policies began. Mr Hitchens' psychological condition is a strongly contributing factor to his inability to work. A significant element of that psychological condition is his substance abuse disorder. Mr Hitchens suffered from a substance abuse disorder before the policy was entered into. Zurich relies upon the non-disclosure of that condition, amongst other grounds, as justification for its avoidance of the policies. It did not submit that because Mr Hitchens' disability is contributed to by an illness which pre-dated the policy, the unlikelihood of his ever working was not solely the result of Sickness or Injury as defined, that is as a sickness which first manifested itself after the policy began.
14. It is unnecessary to deal with questions of quantum and interest.

Zurich not precluded from avoiding for fraudulent misrepresentation or non-disclosure

1. Counsel for Mr Hitchens submitted that it was not open to Zurich to avoid the policies on the ground of fraudulent representation and non-disclosure on 19 August 2010 because Zurich had already repudiated the income protection policy by reducing fortnightly payments to him after 19 November 2007 and by ceasing to make payments to him from 8 May 2008. Mr Hitchens purportedly terminated the policy by accepting Zurich's alleged repudiation of it on 12 November 2009. Counsel submitted that an insurer's right of avoidance is a right arising under or by virtue of the contract of insurance. They submitted that the right of avoidance is no longer available following a repudiation by the insurer which the insured has accepted so as to bring the contract to an end.
2. The premise of the argument is that Zurich repudiated the contract and Mr Hitchens accepted the repudiation and terminated the contract. Even if that premise were established, it does not mean that the contract ceased to exist for all purposes. If Mr Hitchens had been entitled to terminate the contract by accepting Zurich's alleged repudiation, the termination would have discharged the parties from future performance, but it would not have avoided the contract ab initio. Mr Hitchens relied on the fact of the contract having been made and allegedly repudiated to claim contractual damages. There is no reason that Zurich could not avoid the contract from its inception on discovering the grounds that entitled it to allege fraudulent misrepresentation and non-disclosure.
3. In any event, I do not accept the premise of the submission. Zurich's position communicated on 28 November 2008 was that it was investigating the accuracy of the disclosure of Mr Hitchens' medical condition and was also investigating Mr Hitchens' disclosure of his financial position. It sought the provision of financial information. It repeated the request on 23 December 2008, and again on 5 January 2009, 24 March 2009 and 5 May 2009. As at 9 November 2009 Zurich stated that the information requested by it on 28 November 2008 had still not been provided and that it needed that information in order properly to review Mr Hitchens' file and determine his eligibility to continue to claim for benefits. It advised that it had not provided further claim forms because it was not in a position to continue with its assessment of Mr Hitchens' claims. That remained the position on 12 November 2009.
4. This does not indicate that Zurich had repudiated the contract at the time of Mr Hitchens' purported acceptance of the repudiation.

Conclusion and orders

1. By avoiding the policies from their inception Zurich was entitled to recover the payments made to Mr Hitchens under the income protection policy to the extent they exceeded the premiums paid. However, Zurich did not file a cross-claim to seek recovery of that amount.
2. For these reasons I give judgment for the first defendant. I will hear the parties on costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 June 2015