Insurance Australia Limited t/as NRMA Insurance v John Checchia

Court of Appeal (NSW)|2010-10-14|Before: Beazley JA, McColl JA, Rothman J

and Sir Alexander Kingcome Turner, Actionable Misrepresentation, 4th ed (2000) Butterworths Category: Principal judgment Parties: Insurance Australia Limited t/as NRMA Insurance (Appellant) John Checchia (Respondent) Representation: J Poulos QC; V Heath (Appellant) B Gross QC; Mr S Dixon (Respondent) Moray & Agnew (Appellant) Young & Muggleton (Respondent) File Number(s): 2009/298480 Decision under appeal Citation: Checchia v Insurance Australia Ltd trading as NRMA Insurance [2009] NSWSC 1005 Date of Decision: 2009-09-29 00:00:00 Before: Rothman J File Number(s): 2009/298480

HEADNOTE [This headnote is not to be read as part of the judgment] The respondent sustained a back injury when his bicycle was struck by a motor vehicle. He brought a claim for compensation under the Motor Accidents Compensation Act 1999 (the MAC Act), which was settled at a settlement conference conducted pursuant to that Act for $1.2 million (the settlement amount). Before the settlement monies were paid, the appellant ascertained that the respondent had sustained a back injury in an earlier accident. The appellant refused to pay the settlement monies, alleging that the respondent's claim was fraudulent. The appellant argued that had it known of the earlier injury, its management of the claim would have been different and it would have only settled the matter for a much lower sum than the settlement amount. In proceedings before Rothman J in the Supreme Court, the respondent claimed damages for the appellant's breach of the settlement agreement. The appellant contended that it was entitled to refuse to pay the settlement monies, given the respondent's failure to disclose his earlier back injury and his exaggeration of the extent of his ongoing symptoms and earnings prior to the accident. Rothman J found that although the respondent had failed to disclose his earlier injury and exaggerated the extent of his injuries sustained in the motor vehicle accident, he had not done so for the purpose of obtaining a financial benefit within the meaning of the MAC Act, s 118. His Honour ordered judgment for the respondent in the settlement amount, with interest and costs. The appellant appealed from Rothman J's orders, contending that the trial judge:

Judgment 1BEAZLEY JA : On 21 January 2003, the respondent was involved in an accident on his way to work when the bicycle he was riding was struck by a motor vehicle (the 2003 accident). He sustained an injury to his back and brought a claim for compensation under the Motor Accidents Compensation Act 1999 (the MAC Act). In making his claim, the respondent denied that he had had any previous back injury or had previously made a claim for personal injury compensation.

Facts surrounding the respondent's claim 2The respondent's bicycle was flipped in the 2003 accident and he landed heavily on his back. He had " niggly " low back pain for a few weeks afterwards, for which he received chiropractic treatment and massage. He then developed back and leg pain and on 27 March 2003, consulted his general practitioner, Dr Nakhle. 3On 9 April 2003, the respondent was admitted to the emergency department of Concord Hospital with severe low back pain and came under the care of Dr Steel. An MRI undertaken at that time revealed a large right-sided disc protrusion at the L4/5 level. 4In late April 2003, the respondent made a claim for compensation under the MAC Act. In his claim form, the respondent denied having suffered any previous back injury. In particular, the " No " box was ticked in response to the question, " Have you had any other injuries or illness - before or since the accident - to the same part(s) of your body? ". The question, " Have you ever made a claim for personal injury compensation, workers compensation or other damages? " was also answered in the negative. The respondent signed the statutory declaration attached to the claim form in which he declared that the contents of the form were, to the best of his knowledge, true and correct in every respect. 5On 12 May 2003, the respondent underwent a surgical decompression performed by Dr Parkinson which confirmed the existence of the disc protrusion. 6The respondent's condition improved somewhat following this procedure. However, in late May 2003, the respondent had a recurrence of severe pain and was in considerable distress. He had signs and symptoms indicative of a piriformis syndrome resulting in a sciatic neuritis with neuropathic pain and allodynia. On 6 June, the respondent underwent a right sciatic nerve block performed by Dr Aggarwal, consultant physician in rehabilitation and pain medicine. A second sciatic nerve block with a steroid preparation was performed on 13 June 2003. 7The respondent thereafter remained under Dr Aggarwal's care and during 2003, 2004 and 2005, presented with variations in the level of his pain and symptomology. Due to an exacerbation of pain in February 2004, the respondent had a repeat MRI, which revealed a recurrent disc protrusion at L4/5 with possible compression of the L4/5 roots. Strong pain relief medication, including Endone, provided only temporary relief. 8On 26 July 2004, the respondent underwent a second lumbar decompression at Concord Hospital, performed by Dr Steel. A month after the operation, he reported to Dr Steel that he still had severe pain in his back and down his right leg. He was referred back to Dr Aggarwal. 9The respondent saw Dr Parkinson again in November 2005. Investigations undertaken at that time revealed disc herniation compressing the right L5 nerve root. There was also significant thecal sac compression. On 21 November 2005, Dr Parkinson performed a further L4/5 discectomy, L5/L4 and S1 rhizolysis, fat and bone grafting, L4/5 laminectomies and L4/L5 pedicle screw fusion. 10In addition to the three serious back operations, nerve blocks and facet joint injection that he underwent, the respondent also completed the ADAPT pain management program at Royal North Shore Hospital. The respondent also participated in other pain management programs, was assessed by a variety of rehabilitation experts and undertook a gym program designed for him by one of the rehabilitation experts. He was also taking a range of prescribed pain relief medication. 11On 20 October 2006, at a settlement conference directed pursuant to the MAC Act, s 80, the respondent's claim was settled in an amount of $1,225,000 (inclusive of costs and disbursements). The net settlement amount payable to the respondent was approximately $1,185,000. However, before the settlement monies were paid, the appellant ascertained that the respondent had sustained an injury to his back in a work related accident in 1993 (the 1993 accident). The appellant thereupon refused to pay the settlement monies, alleging that the claim was fraudulent within the meaning of the MAC Act, s 118. 12The respondent brought proceedings in the Supreme Court Common Law Division alleging that the appellant had breached the settlement agreement. He claimed damages for breach of the agreement in the amount of the settlement monies, together with interest and costs. The central issue for determination at trial was whether the appellant insurer was entitled to refuse to pay the settlement monies pursuant to the MAC Act, s 118. 13The appellant contended it was entitled to refuse to pay the settlement monies as the respondent had failed to disclose the earlier back injury sustained in the 1993 accident and had failed to disclose that he had ongoing symptoms relating to those injuries, including back pain, sciatic pain and restrictions on his capacity to work (the medical claim). In addition, the appellant contended that the respondent had exaggerated the extent of his injuries arising from the 2003 accident; had exaggerated his earnings prior to that accident; and had produced false documents to verify his alleged earnings (the income claim). 14The appellant's case was that had it known of the respondent's previous back injury, the appellant's management of the claim would have been entirely different and would have had a significant effect on the settlement amount that the appellant would have been prepared to offer. 15The trial judge, Rothman J, found that the respondent had failed to disclose the 1993 back injury and had at times exaggerated the extent of his ongoing symptoms. His Honour also found that, although the appellant had some indication of the existence of a pre-existing condition at L4/5 from Dr Matheson's report dated 20 April 2006, the appellant relied on the representation that there had been no previous injury to that area of the respondent's back. 16However, his Honour concluded that the respondent had not made the representation that he had had no previous back injury for the purpose of obtaining a financial benefit within the meaning of s 118. His Honour also rejected the appellant's allegations that the respondent had falsified his pre-injury earnings. It followed on his Honour's findings that the appellant was not entitled to be relieved of liability for any part of the settlement. His Honour thus ordered judgment for the respondent in the settlement amount, together with interest and costs: Checchia v Insurance Australia Ltd t/as NRMA Insurance [2009] NSWSC 1005. 17The appellant appeals from those orders. It also appeals from an interlocutory ruling in which his Honour rejected a line of cross-examination directed to the credit of a witness, Ms Mowad.

The MAC Act 18An object of the MAC Act is to provide compensation for compensable injuries sustained in motor accidents and to encourage the early resolution of claims: s 5(1)(b). This object is given legislative effect in s 80, which requires the insurer to resolve claims by settlement or otherwise as justly and expeditiously as possible. An insurer is also obliged, as expeditiously as possible and at least within three months of a claim being made, to give written notice to the claimant advising whether liability is admitted or denied: s 81. Section 82 imposes a duty on an insurer to make a reasonable offer of settlement to a claim either within one month of an injury stabilising, or within two months after a claimant has provided all relevant particulars about the claim. Once liability is admitted, the insurer has an obligation to make payments of hospital and medical, rehabilitation, respite and care expenses on behalf of the claimant as those expenses are incurred: s 83. 19The MAC Act provides for an assessment process through the Motor Accidents Claims Assessment and Resolution Service (CARS): s 98. The parties are required to participate in a settlement conference as soon as possible after the insurer has made an offer of settlement under s 82. A claim cannot be referred to the Authority until a settlement conference has taken place: s 98A. Section 98B imposes an obligation on the claimant and the insurer, prior to the settlement conference, to each provide the other with copies of documents upon which each relies for the purposes of the assessment of the claim. If the matter does not settle, the MAC Act makes provision for the assessment of the claim by an assessor: see Pt 4.4, Div 2; and for the commencement of court proceedings: see Pt 4.4, Div 3. 20Sections 116-118 deal with fraudulent claims. Section 116 provides that a licensed insurer must take all such steps as may be reasonable to deter and prevent the making of fraudulent claims. Section 117 provides that a person who makes a statement that is false in a material particular is guilty of an offence. Section 118, which is central to the determination of issues in this case, provides: " 118 Remedy available where claim fraudulent (1) This section applies to a claimant or insurer if it is established that, for the purpose of obtaining a financial benefit, the claimant or insurer did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with knowledge that the doing of the thing or the omission to do the thing was false or misleading. (2) If this section applies to a claimant: (a) a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and (b) a person who has paid an amount to the claimant in connection with the claim (whether under a settlement, compromise or judgment, or otherwise) is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claim. (3) If this section applies to an insurer, the claimant is entitled to recover from the insurer as a debt the amount of the financial benefit so obtained by the insurer and any costs incurred by the claimant in connection with the claim." 21The appellant contended that it was entitled to refuse to pay the claim pursuant to s 118.

Issues on the appeal 22The appellant raised 10 grounds of appeal. In summary, the appellant's principal contentions were that the trial judge:

erred in his construction of the MAC Act, s 118 (1) (ground 1);
erred in his application of the MAC Act, in adopting the respondent's 'true value theory' in the application of s 118(2), thereby reversing the onus of proof (ground 2);
erred in his factual findings in that his Honour: (a) made findings unsupported by evidence and contrary to compelling inferences, (b) made findings contrary to the evidence: in this regard, the appellant challenged 31 factual findings of his Honour; and (c) failed to make findings of fact that ought to have been made on the evidence (grounds 3 and 4);
failed to analyse the evidence as a whole, in that he quarantined aspects of the respondent's credit, in particular in relation to Exhibits G and 19 relating to the respondent's income claim (ground 5);
erred in disallowing certain cross-examination of a witness, Ms Mowad (ground 6);
erred in failing to give proper reasons for rejecting critical aspects of the appellant's submissions (ground 7);
erred in the manner in which he awarded interest (ground 8); and 8 erred in the exercise of his discretion in respect of costs (grounds 9 and 10).

The trial judge's construction of s 118 23Th e trial judge commenced his consideration of the construction of s 118 by reference to the Court's decision in Toubia v Schwenke [2002] NSWCA 34; 54 NSWLR 46 in respect of the Motor Accidents Act , s 66, the predecessor provision to s 118: see judgment at [16]. The effect of that decision, as his Honour understood it, was that for the appellant to succeed in its reliance on s 118, it had to prove: (a) that [the respondent's] conduct was false or misleading; (b) that [the respondent's] false and misleading conduct was engaged in: (i) for the purpose of obtaining financial benefits; and (ii) with knowledge that the conduct was false or misleading; (c) that [the respondent's] false and misleading conduct deceived NRMA (and continued to deceive it until the time of the execution of the settlement); (d) that [the respondent's] false and misleading conduct caused [the respondent] to obtain a financial benefit; and (e) to the extent that all of the foregoing are satisfied, it is for the Court to quantify the financial benefit obtained by the false or misleading conduct." 24The appellant accepted that it bore the onus of proof in respect of the matters specified in (a)-(d). The trial judge stated, at [22], that although s 118(1) referred to " the purpose " of obtaining a financial benefit and not " a purpose ", it was not necessary to establish that this was the only purpose in engaging in the proscribed conduct. It was sufficient that a claimant's dominant purpose was to obtain a financial benefit. A minor purpose would not suffice. His Honour considered, therefore, that the obtaining of a financial benefit must be the operative reason underpinning the respondent's engaging in misleading or false conduct. In other words, s 118 required an intention by the respondent to achieve a result desired by him, namely, the obtaining of a financial benefit. His Honour concluded that " purpose " was the claimant's subjective purpose and the effect the person sought to achieve by that conduct: see News Ltd v South Sydney District Rugby League Football Club [2003] HCA 45; 215 CLR 563. 25As " purpose " within s 118(1) was subjective, his Honour, at [23], said that evidence of the person's state of mind was required. His Honour observed that the subjective intention of a claimant was, in most cases, to be inferred from the conduct in which the claimant engaged and its likely effect, noting that a claimant's own evidence as to intention would ordinarily be treated with caution. His Honour referred to the question of purpose later in his judgment. In particular, at [133], his Honour dealt with the question of the subjective purpose necessary to relieve an insurer from liability under s 118. His Honour reiterated that the " purpose of the misleading conduct [must] be for the obtaining of a financial benefit, as objectively determined ". His Honour held that claimants who knowingly engage in misleading or false conduct do not escape the effect of s 118 by having " a subjective view as to their entitlements that is greater than, in reality, is the case ". 26His Honour, at [24], noted that for the purposes of s 118, the false and misleading conduct had to be done with knowledge. His Honour then turned to purpose. Relevantly, his Honour said that " it is not sufficient ... that the conduct be engaged in for the purpose of obtaining a financial benefit , it is necessary that the conduct was misleading for that purpose " (emphasis added). Importantly, having regard to the appellant's argument, his Honour then stated: "25 In the circumstances of these proceedings, the claim for compensation was arguably for the purpose of obtaining a financial benefit. That claim for compensation contained a false or misleading statement. Of itself, that combination of facts is insufficient. Leaving aside, for the instant purpose, the requirement for the conduct to be knowingly false or misleading, it is necessary to satisfy the Court that the false or misleading character of the statement was for the purpose of obtaining the financial benefit ." (emphasis added) 27His Honour then dealt with the meaning of " financial benefit " as follows: "26 I turn then to the meaning of the term 'financial benefit'. The term 'financial' needs no explanation. The Oxford English Dictionary defines 'benefit' as meaning, 'advantage or profit; gain'. This definition is consistent with definitions in other dictionaries and its ordinary usage. An 'advantage' is likewise defined as 'the result of a superior or better position, an enhancement, increased well-being or convenience; so as to increase or augment the effect of anything; pecuniary profit.' 27 It seems then, in its ordinary meaning in the context of s 118(1) of the Act, 'financial benefit' means a gain, financially, to which the person would not otherwise have been entitled . Thus, if the purpose of the false or misleading conduct was to obtain money to which the person, against whom the allegation is made, would otherwise be entitled, the purpose of the false or misleading conduct is not the obtaining of a financial benefit within the meaning of s 118(1) of the Act." (emphasis added)

The appellant's argument on the construction issue 28The appellant contended that his Honour made three material errors in the construction of s 118. 29First, the appellant submitted that his Honour erred in limiting the meaning of " benefit " in subs (1) to the receipt of an amount of monetary compensation to which the claimant was " not otherwise entitled ": see at [27], where the determination of the entitlement was fixed by a comparison of the settlement sum with that which his Honour assessed to be " the true value " of the respondent's claim. The appellant submitted that where a matter had been subject of a settlement, the assessment of the benefit obtained for the purposes of s 118(2) was the difference between the amount of the settlement and the amount the matter would have settled for if the true facts were known (the settlement theory). 30Secondly, the appellant submitted that his Honour erred in that he considered that the phrase " financial benefit " meant the same thing in subs (1) and (2). Although the appellant did not direct this submission to any particular passage in his Honour's judgment, it is apparent that the alleged error is to be found in the judgment at [24]-[25] and was more fully developed in the appellant's next submission. 31Thirdly, the appellant submitted that his Honour erred in holding that it was not sufficient, for the purposes of s 118(1), for the insurer to prove that a statement was made or conduct engaged in for the purpose of obtaining a financial benefit and that the statement or conduct was knowingly false or misleading: see judgment at [24]. His Honour, wrongly on the appellant's submission, required the insurer additionally to prove that the false or misleading character of the statement was " for the purpose of obtaining the financial benefit " that the claimant in fact obtained as a result of the false or misleading conduct: see judgment at [25]. 32The appellant submitted that the effect of his Honour's approach to the construction of the section was to wrongly impose an additional layer of proof for the insurer to discharge. The appellant submitted alternatively that if his Honour's construction was correct, his Honour should have found that the appellant had proved that the respondent had made a false and misleading statement for the purpose of obtaining the financial benefit he in fact obtained. 33The appellant also submitted that the term " financial benefit " was wider than the construction given to it by the trial judge and included the obtaining of an advantage, such as a superior bargaining position or the removal of some difficulty that might otherwise have acted as an impediment to the satisfaction of the claim. The appellant contended that on his Honour's findings, the respondent had engaged in the deliberately false conduct for the purpose of removing difficulty or doubt in the payment of his claim: see judgment at [132] referred to below.

Determination of the construction issue 34There was no dispute before his Honour or on appeal as to the meaning of false and misleading. Nor was there any dispute that " p urpose ", within s 118(1), means the subjective intention of the claimant. As his Honour acknowledged, absent an admission by the person concerned, there is rarely direct evidence of a person's subjective purpose or intention. Rather, purpose or intention is to be inferred from the whole of the evidence: Woolmington v DPP [1935] UKHL 1; [1935] AC 462 at 481; Peters v R [1998] HCA 7; 192 CLR 493 at [134]. The evidence of the person whose purpose is in question may be taken into account: see Federal Commissioner of Taxation v Spotless Services Ltd [1996] HCA 34; 186 CLR 404 although, as his Honour recognised, at [23], such evidence would ordinarily be treated with great caution. As his Honour also recognised in this case, the evidence relevant to purpose included the fact of the misleading conduct itself and the respondent's dissembling. 35The next consideration is the meaning of " financial benefit " in each of subs (1) and (2). This was the area of contention on the construction issue. It is convenient to deal first with the second and third of the material errors of construction alleged by the appellant as to the meaning of " financial benefit " in ss 118(1) and (2) and then to deal with the submission that his Honour erred in applying the 'true value' approach to s 118(2). 36The appellant contended that his Honour erred in finding that the phrase " financial benefit " had the same meaning in subs (1) and (2). This submission was based upon the juxtaposition of the statement at [24], that it was not sufficient that the conduct was engaged in for the purpose of obtaining " a financial benefit " and the statement at [25], that it was necessary for the misleading conduct to be for the purpose of obtaining " the financial benefit " . The appellant submitted that it was apparent from the use of the indefinite article in subs (1) and the use of the definite article in subs (2) that there was a difference in the meaning of " financial benefit " in the two subsections. The appellant contended that the " benefit " that may be recovered by the insurer under s 118(2), or, more correctly in this case, the amount that the insurer may in fact not be required to pay is not limited to, and may not be identical with, the benefit the claimant intended to obtain under s 118(2). Accordingly, it was argued it was not correct, as his Honour found at [24]-[25], that, in order to establish that s 118(1) was satisfied so that s 118 was engaged, an insurer had to prove that a claimant who engaged in false and misleading conduct, did so for the purpose of obtaining the financial benefit in fact obtained as a result of that conduct. 37In my opinion, when his Honour's reasons at [24]-[25] are read together, his construction of " financial benefit " was not correct. Subsection (1) requires that the false and misleading conduct be engaged in for the purpose of obtaining " a financial benefit ". A person may knowingly engage in false or misleading conduct in circumstances where no claim is available, for example, where a claimant was not entitled to claim compensation because the injury was sustained in non-compensable circumstances. In that case, the inference would readily be drawn that the conduct was engaged in for the purpose of obtaining a financial benefit. Alternatively, a person may be entitled to compensation under the MAC Act but may engage in false or misleading conduct, such as, for example, by exaggerating the extent of disability, or not disclosing a pre-existing injury, for the purpose of obtaining greater compensation than that to which he or she is entitled. Whatever be the content of the false and misleading conduct, it must be for the purpose of obtaining a financial benefit under the MAC Act. 38Although an insurer may have established the factual matters necessary to satisfy s 118(1), it will not be known whether an insurer will be relieved of liability under s 118(2)(a) in respect of a payment, settlement, compromise or judgment until it is known whether the financial benefit in fact obtained by the claimant was one to which he or she was not entitled. That requires a determination of the financial benefit to which the claimant was entitled on the premise that no misleading statement was made. The quantitative difference between the two, if any, is the extent to which the insurer is relieved from liability pursuant to s 118(2)(a). 39It follows that there need not be a correspondence between any financial benefit the claimant was fraudulently seeking and the financial benefit, from the payment of which the appellant is relieved under s 118(2). In other words, s 118(1) specifies the circumstances in which the section is engaged. Section 118(2) specifies the consequences which may flow where the section is engaged. 40I should add that the conclusion I have reached in respect of " the financial benefit " in s 118(2) is supported by the decision of Court of Appeal of the Supreme Court of the Australian Capital Territory in Ivancic v Zardo [2004] ACTCA 11 (Higgins CJ, Gray and Gyles JJ). That case involved a falsely exaggerated claim made under Motor Accidents Act 1988 for compensation in circumstances where the claimant had sustained a genuine compensable injury. The insurer argued that the financial benefit obtained as a result of a false or misleading statement that related to part of a claim was the whole of the settlement monies. This argument was rejected. The Court held that s 66 required apportionment of the amount paid so that relief was only granted in relation to the financial benefit obtained by the claimant as a result of the false and misleading statement. 41This leads back to a consideration of the first of the appellant's submissions on the construction issue, namely, that his Honour erred in determining the financial benefit under s 118(2) by reference to the amount to which the respondent would have been entitled had the matter proceeded to trial, that is, by reference to the 'true value' of the respondent's claim. Strictly, it was not necessary for his Honour to determine the s 118(2) question, as he held that the appellant failed to establish that the respondent had the necessary purpose under s 118(1). Nonetheless, his Honour embarked, at [136], upon the process of assessing damages. Although it is not entirely apparent that his Honour was assessing these damages for the purposes of s 118(2)(a), as much appears from his statement, at [136], that: "Damages are being assessed for the purpose of ascertaining whether the amount agreed in the settlement included a 'financial benefit', i.e. resulted in an outcome greater than that to which [the respondent] was entitled. As a consequence, more than the settlement sum cannot be awarded."

The 'true value theory' v the 'settlement value theory' 42In his Honour's view, at [136], the correct approach to determining whether and the amount by which the insurer was to be relieved of liability in accordance with s 118(2)(a), was to determine the amount of damages that the respondent would be awarded for the breach of the settlement agreement that the respondent was seeking to enforce. This was because, he said, that damages were to be awarded for breach of contract. His Honour observed, at [136], that this was different from the assessment of a damages claim brought in a court under the MAC Act. In particular, the appellant could not be awarded a sum greater than the settlement amount, even if the court, treating the matter as an assessment of damages under the MAC Act, arrived at an amount higher than the settlement amount. 43Having made those observations, his Honour assessed the respondent's damages as if assessing a personal injuries claim under the MAC Act. The appellant described this approach as the 'true value theory', which was the approach the respondent had submitted at trial ought to be taken under s 118(2). His Honour specifically rejected the 'settlement theory' advanced by the appellant. According to this theory, the trial judge was required to determine the amount for which the appellant would have settled the claim had the respondent not engaged in false and misleading conduct. The appellant submitted that in adopting the 'true value theory', his Honour reversed the onus of proof of the respondent's claim generally. 44In my opinion, the trial judge erred in his approach to determining the amount of the liability of which the appellant was relieved under s 118(2). Section 118(2) is directed to the quantification of the amount of the liability which an insurer is relieved from paying where s 118(1) has been engaged. This case concerns s 118(2)(a) which applies to one or more of four distinct types of liability: payment; settlement; compromise or judgment, although the difference between a compromise and a settlement is not immediately apparent: see Wigan v Edwards (1973) 1 ALR 497; Callisher v Bischoffsheim (1870) LR 5 QB 449; 39 LJQB 181; McDermott v Black [1940] HCA 4; (1940) 63 CLR 161, but this is not presently of any moment. This case involved a liability in respect of a settlement. The case did not involve a liability in respect of a payment or a judgment. 45A settlement typically involves compromise by both parties. There are a myriad of factors that may affect that compromise. One factor often of significance is the costs involved in a matter proceeding to a full hearing. Another factor may be the avoidance of delay. There may be factors personal to a particular party that are not quantifiable but which may influence the person to offer or to accept a particular amount. In particular, litigation is stressful and a party simply may not have the stomach for a protracted legal battle. There could be other less worthy motivations in settling, including a desire that previously undisclosed income does not come to notice. Lawyers for both claimants and insurers are familiar with this process and routinely make assessments of claims for the purpose of settlement. Relevantly for present purposes, it cannot be assumed that an amount agreed by way of settlement or compromise and the amount obtained or likely to be obtained in a court judgment would be the same. 46Where a settlement is involved, s 118(2) expressly provides that the insurer is relieved from the legal liability to pay under the settlement " to the extent of the financial benefit so obtained by the claimant " . In my opinion, the court is required to determine, not what the person guilty of the false and misleading conduct would have obtained in a judgment, but the financial benefit that person obtained in the settlement, as a result of the false and misleading conduct. 47It follows that in my opinion, his Honour erred in his approach to s 118(2). 48The appellant also argued that in adopting the respondent's 'true value theory' in the quantification required under s 118(2), his Honour reversed the onus of proof. Having regard to my conclusion as to the proper approach to s 118(2), it is not necessary to deal with that argument. However, I make the following remarks as to the 'onus' question and to the evidence adduced by the appellant to discharge that onus. 49As the appellant raised s 118 by way of defence, it bore the onus of establishing both that the respondent's conduct fell within s 118(1)and the amount in respect of which it was relieved of liability. 50Mr Najdzion, CTP Insurance Claims Team Manager, said that had he known of the 1993 back injury, he would have looked to settle the matter for about $350,000 to $400,000 inclusive of workers compensation payback and costs and would not have recommended settlement in excess of $600,000 inclusive of workers compensation payback and costs. He said that if the matter had not settled for the maximum of $600,000, he would have recommended an exemption from a CARS assessment and strongly sought to have the matter fully investigated and litigated. 51Mr Najdzion also said had he known at the time settlement was being discussed that there was evidence that, more likely than not, the respondent had recovered from his 2003 accident, he would not have agreed to settle the claim. The evidence to which Mr Najdzion referred was the video surveillance evidence, which showed the respondent moving freely in respect of a range of activities and in a variety of different circumstances. Mr Najdzion also said that had he known the respondent's earnings in the tax year immediately before the 2003 accident and his earnings from the Jet Cafe were significantly lower than claimed, he would not have agreed to a settlement for the amount finally agreed upon. 52His Honour rejected Mr Najdzion's evidence, which, his Honour considered, at [39], displayed a " subjective annoyance " at being misled. His Honour considered, at [40], that this subjectivity seemed to colour Mr Najdzion's assessment of the nature of the claim submitted and the respondent's level of incapacity. 53Whether his Honour's assessment of Mr Najdzion's evidence was well based was dependent upon his Honour's factual findings in respect of the respondent's level of disability and his pre-accident earnings. Those findings are under challenge and are dealt with below. It is sufficient at this point to note that his Honour was not bound to accept Mr Najdzion's evidence. However, it was evidence available to his Honour to assist in the assessment task that he was required to undertake under s 118(2), having regard to the factual findings that were otherwise made on the medical and income claim. Whether or not that evidence would have been sufficient to discharge the appellant's onus under s 118 is not necessary to decide. 54Having regard to my conclusion that his Honour erred in his construction of both ss 118(1) and (2), it is not necessary to consider the appellant's other arguments relating to the application of the section: see ground 2.

Third issue: error in factual findings (grounds 3 and 4) 55The appellant raised challenges to 31 of his Honour's factual findings. In essence, however, the challenges fell into two categories: first, the extent of the respondent's disabilities arising from the 2003 accident (the medical issue); and secondly the respondent's earnings (the income claim). If those challenges succeed, the appellant contended that his Honour's conclusion that the respondent had not engaged in false and misleading conduct for the purpose of obtaining a financial benefit was erroneous.

The medical issue 56The appellant contended that the respondent had exaggerated any disability from which he was suffering and that any disability he in fact suffered was partly attributable to the 1993 accident. This challenge first requires an understanding of the nature and extent of the claim made by the appellant in his claim form and in his CARS statement.

Statements made in the claim form and in the CARS statement 57In pursuing his claim for compensation the respondent denied having suffered any previous back injury or having made any claims for compensation. The claim form had been filled out by the respondent's wife, however, the respondent signed the statutory declaration attached to the claim form in which he declared that the contents of the form were, to the best of his knowledge, true and correct in every respect. 58The respondent also stated in the claim form that he sustained: massive bruising; pain in leg due to disc problem pushing on nerve; and shock. He complained of having the following ongoing problems as a result of his injuries: inability to walk due to severe pain to his leg; insomnia; restricted movement, especially when sitting; inability to walk or drive; necessity to take medication. The supporting medical certificate signed by Dr Nakhle stated that the respondent was suffering from sciatica. 59In late September 2006, the respondent submitted a signed statement to CARS in support of his claim (the CARS statement). In the CARS statement, the respondent made no mention of any previous back injury and stated that at the time of his accident he was fit, healthy and active and that he had no prior problems with his back or legs. The respondent said that his level of disability was accurately recorded in the report of Judith Davidson, consultant occupational therapist, dated 22 September 2005. The respondent also stated that his sexual activity was affected by pain and his wife had to carry out all the childcare and domestic activities. 60In her report, Ms Davidson stated that the respondent complained of the following level of disability: "

Low back pain rated as 8.5/10 on the day of the assessment. He stated that his major pain was in the buttocks. Prior to commencement of the gym programme, he rated his low back pain as 9.5/10.
The back pain varies during the day but is highest in the morning and then late in the evening. Each morning when he starts moving around, his pain gradually reduces.
His workers compensation certificate has a weight restriction of 5 kg.
His sitting tolerance is only 20 minutes.
His standing tolerance is only 20 minutes.
His walking tolerance is 15 minutes.
Inability to perform his pre-injury work tasks as a Cafe Bar Manager.
Inability to assist in the care of his 2 children.
Inability to share a bed with his wife in a normal marital relationship." 61On 13 April 2006, the respondent underwent a medical assessment pursuant to the MAC Act. Professor Ryan, the assessing medical officer, determined that the respondent had sustained the following injuries in the 2003 accident: back: disc/nerve root problems, muscle reduction, sensory change; right leg: numbness, weakness; neck: strain; sexual/urinary: dysfunction/impairment. 62Professor Ryan considered that the respondent's back (disc/nerve root problems, muscle reduction, sensory change) and right leg (numbness, weakness) gave rise to a permanent impairment and that the sexual/urinary dysfunction/impairment arose indirectly from the back and right leg injury. He assessed the respondent as having a 25 per cent whole person impairment. 63The statements in the claim form and the CARS statement that the respondent had had no previous injury to his back and had not made a previous claim for compensation were false. The respondent had sustained an injury to his back on 23 May 1993, whilst employed as a shop assistant, when he fell between a truck and a loading ramp. He suffered a disc protrusion at L4/5 and a fracture to the endplate of the L4 vertebrae and was hospitalised for about four days. He came under the care of Dr Bruce, orthopaedic specialist, who reviewed him on several occasions during June, July and August 1993. The respondent made a claim for workers compensation in respect of this injury. 64In a medical report dated 19 July 1993, some two months after the accident, Dr Bruce noted that the respondent continued to have discogenic back pain, which he said was not unusual. Dr Bruce reported that about 80 per cent of patients were better at three months and the remaining 20 per cent may take six months to get better. On 28 August 1993, Dr Bruce observed that the respondent still had a decreased range of movement of the lumbar spine, but no neurological signs. He certified the respondent fit to resume work on light duties on and from 29 August 1993. On the basis of this advice, the respondent resigned from his then employment as a shop assistant and commenced working as a waiter. Dr Bruce noted in a further review on 7 December 1993 that the respondent's " back is now good with no real discomfort and no right leg pain " (at [64]). The respondent was also assessed at this time by Dr Cameron, consultant surgeon, on behalf of the workers compensation insurer. Dr Cameron was of the opinion that the respondent was expected to make a full recovery from the 1993 injury.

Medical reports available at time of settlement 65The respondent's MAC Act claim was settled on 20 October 2006. The medical reports of Dr Bruce and Dr Cameron were not in the appellant's possession at that time. The respondent had served the medical reports from the following doctors for the purposes of the CARS assessment: Dr Lawson (consultant physician), Dr Rust, Dr Aggarwal, Ms Stynes, Dr Dwyer, Dr Rowe, Dr McMahon, Dr Fitzsimons, Dr Nakhle and Ms Davidson (to whom reference has already been made). In addition, the appellant served the report of Professor Ryan, and hospital notes from Concord Hospital and St Vincents Hospital. The respondent also served an Oswestry Disability Questionnaire, which he had completed at the Metropolitan Rehabilitation Hospital. 66The appellant had obtained medico legal reports from the following medical practitioners: Dr Bowers (specialist rehabilitation physician), Dr Matheson (consultant neurosurgeon), Dr Maguire (consultant psychiatrist), Dr Perla (general practitioner specialising in occupational health), Ms Croker (occupational therapist) and Ms Stynes (psychologist). The appellant also had copies of medical reports that were part of the respondent's workers compensation claim arising out of the 2003 injury. 67The overall picture that emerged from these medical and health reports was that the respondent was suffering persistent back and leg pain of a high order, which he assessed at various times as being between 6 and 10 out of 10; that his pain persisted despite medication and his participation in the ADAPT program; that he was limited in his daily activities; that he could not walk for more than 15 minutes; and that he sometimes needed to lean on the wall for support.

Appellant's communication with the respondent about the prior injury 68On 14 November 2006, the appellant wrote to the respondent's solicitors advising them that they had been informed that a person by the name of 'Giovanni Checchia' had received benefits from QBE Insurance for a fractured back sustained in 1993. The appellant provided the respondent's solicitors with documentation relating to the 1993 claim and sought their urgent advice as to whether the respondent had made a prior claim in the name of Giovanni Checchia for a back injury in 1993. By letter dated 22 November 2006, the respondent's solicitors confirmed that the respondent had made such a claim and provided an authority to enable the appellant to obtain copies of medical reports of treating medial practitioners in respect of the 1993 injury. 69On 5 February 2007, the appellant advised the respondent's solicitors that pursuant to the MAC Act, s 118 the appellant was " relieved of its liability in respect of the Settlement Agreement ... to the extent of the financial benefit flowing from the [respondent's] omission ". The appellant supported its position by forwarding medical reports of Dr Matheson and Dr Bowers to the respondent's solicitors. These particular reports had been obtained after the appellant became aware of the 1993 injury. Both Dr Matheson and Dr Bowers stated that the fact of the earlier injury affected the assessment they had previously made as to the attribution of the respondent's ongoing problems. These reports are discussed further below. 70On 22 February 2007, the respondent's solicitors advised the appellant that the respondent consented to the settlement being set aside and that the respondent would " make an application to CARS to have the matter referred to an assessor for determination or hearing ". The appellant rejected this proposal. Thereafter, it neither paid the settlement monies nor re-engaged in any of the processes mandated by the MAC Act.

The medical opinions as to the cause of the respondent's post-2003 symptomology 71Dr Bowers saw the respondent for medico-legal assessment prior to the settlement conference. In his report dated 11 July 2006, Dr Bowers attributed most of the respondent's complaints to the accident. Those complaints were of ongoing pain at the lumbosacral spine radiating to both buttocks, aggravated by walking, flexing the spine and negotiating steps. Coughing and sneezing aggravated the pain, suggesting nerve irritation. He noted that the respondent's pain level was decreased by medication and hydrotherapy. 72Dr Bowers considered that, long term, the respondent would be " prone to ongoing aches and pains associated with osteoarthritis of the spine ". Dr Bowers considered that the respondent was only suitable for sedentary work and over his lifetime would be suitable to return only to three-quarters of the normal hours of work. 73Subsequently, Dr Bowers was asked to comment upon the effect of the 1993 injury on the respondent's current condition. He expressed the opinion that: "... half of [the respondent's] complaints were due to the accident of January 2003 and half due to the work accident of 1993." 74In 2008, Dr Bowers viewed the video material. In his report dated 28 August 2008, he expressed the opinion that: "... if it was not accepted that [the respondent] was symptomless between the accident of 1993 and the subject accident of January 2003 then the symptoms present when I saw him in July 2006 would be 50% attributable to the accident of 1993 and 50% attributable to the accident of January 2003." 75Dr Bowers also stated in the 28 August 2008 report that a video recorded in September 2005 was consistent with the respondent having symptoms affecting the lumbar spine at that time. He also said that his opinion as to the respondent's work capacity was not changed by what he saw in a video recorded in October 2005. In this regard, his view was substantially in accordance with that expressed by Dr Parkinson, the respondent's treating surgeon, whose report is referred to below. 76Dr Matheson undertook a medico-legal assessment of the respondent at the request of the appellant. In his initial reports, Dr Matheson accepted that, except for a 10 per cent attribution to a pre-existing calcific lesion at L4/5, the respondent's reported condition was otherwise caused by the 2003 accident. He considered the respondent to be " quite restricted in work ". In his report dated 6 October 2005, Dr Matheson noted that the appellant was: "... not claiming inability to carry out self care at home but obviously he is going to have trouble with certain activities such as spring cleaning and car washing and lawn mowing." 77Upon being advised of the 1993 accident, Dr Matheson " radically " altered his opinion. Dr Matheson considered that the " main genesis " of the respondent's problems was the 1993 accident. He said that the respondent's fall off the bike in 2003 was merely a recurrence of the earlier injury and " did not cause the L4/5 prolapse which was present many years earlier ". He said the 2003 accident was " unlikely to have played any part in the progression " of the respondent's illness. Dr Matheson rejected the opinions of Dr Bruce and Dr Cameron that the prognosis for the 1993 injury was for a full recovery. 78Dr Matheson also viewed the video material. He considered that the videos indicated that the respondent had a minor back disorder, but that they excluded a major back disorder and showed that the respondent was quite functional. 79His Honour generally dismissed the evidence of Dr Matheson who, on his Honour's view, was inexplicably antipathetic to the respondent. 80Dr Mills, consultant physician in occupational medicine, assessed the respondent on 23 September 2005 in his capacity as an Independent Medical Examiner. In his report of that date, he expressed the view that the respondent's presentation was: "... not consistent with his reported level of disability. He was noted to be exaggerating disability ... indicating that his true level of activity is likely to be significantly greater than reported." 81In his later report dated 1 September 2008, Dr Mills expressed the opinion that the video material was not consistent with the respondent: "... suffering from a chronic disabling back condition of sufficient severity to prevent him from maintaining employment." 82Dr Mills was of the opinion that when he had first assessed the respondent in August 2005, the respondent had understated his " true activity tolerance ". Nonetheless, Dr Mills expressed the view that: "The natural history of lower back pain can be very variable, with me being unable to predict with any accuracy whether a previous significant episode of lower back pain had resulted in [the respondent] experiencing constant on-going functionally limited lower back pain, or he being asymptomatic if he avoids exposure to aggravating factors. From a preventative perspective however, I would state that given this history of he having to change jobs because of lower back pain, [the respondent] should permanently avoid working in situations likely to aggravate his pre-existing lower back condition. The appropriate medical restrictions for the injury of 1993 are the same as I have recommended for his injury of 21 January 2003. These are; he should be considered (allowing him the benefit of the doubt) to be fit to perform full-time employment within (at least) the restrictions of a maximum lift of 10-kg from bench height or 5-kg from the ground. He should avoid prolonged or repetitive bending or stooping, and heavy pushing and pulling. He should avoid exposure to significant whole-body impact or vibration forces." 83The trial judge accepted Dr Mills' opinion as to the respondent's employability, namely, that he was fit to perform duties with restrictions appropriate to a person with a back injury. His Honour noted that that opinion did not change after Dr Mills viewed the video material. 84His Honour discounted the evidence of the respondent's general practitioner who was supportive of the respondent. 85Subject to Dr Parkinson's reports, the medical evidence to which I have referred was that reviewed by the trial judge. As indicated above, there was other medical evidence considered by the appellant for the purposes of the CARS assessment, which was also in evidence before his Honour. I propose to refer only to the evidence of Dr Aggarwal and then only briefly, as it provided the most continuous evidence of the respondent's presentation to a medical practitioner prior to the settlement. 86In a report to the respondent's solicitors dated 6 October 2006, Dr Aggarwal, after providing a detailed summary of the respondent's condition and treatment over the preceding three or so years, described the respondent's current condition as follows: "On his most recent review, 23 rd June 2006, [the respondent] did not feel there has been much improvement in his pain since he has been commenced on the Norspan analgesic patches. He has slowly increased the dose of this up to the 20 mg patch. He remains in constant pain that he describes as sharp stabbing and knife like sensation. He remains depressed. Despite his pain, he is independent with all his activities of daily living and is able to walk without the use of a gait." 87Dr Aggarwal assessed the respondent as being fit for seated work duties in a cafe, taking bookings and so forth, notwithstanding that he understood the respondent to be in constant pain. Dr Aggarwal placed restrictions on any employment activity involving lifting. He specified that lifting was to be limited to 5 kg and there was to be no repetitive lifting over 2.5 kg. Repetitive back movements were also to be avoided. Dr Aggarwal also recommended that the respondent take half-hourly breaks to " perform stretching and range of motion exercises ". Dr Aggarwal concluded that it was unlikely the respondent would ever be pain free. He said: "After acute pain fails to respond to conventional therapeutic measures, secondary mechanisms come into play including psychological factors and sensitisation of nerve cells in the pain pathways in the spinal cord and the brain. As a result of these secondary factors, reversal of the pain becomes much more difficult, as pain continues to be maintained despite resolution of the cause of the initial pain. It is now over 3 years since [the respondent's] original injury. He is still in constant pain and it is unlikely that he will ever be pain free. It is likely that he will have some degree of pain indefinitely, but it is possible that he may be able to be taught to manage and control his pain better, so that it does not interfere with his function as much." 88Following the appellant's refusal to pay the settlement monies, the respondent's solicitors obtained a report dated 4 July 2007 from the respondent's treating surgeon, Dr Parkinson. Dr Parkinson had been provided with reports of Dr Bruce, Dr Stern and Dr Cameron relating to the 1993 accident. Having regard to the opinions in those reports, Dr Parkinson considered that there was no pre-existing component to the respondent's current condition attributable to the 1993 accident. In his opinion, the respondent's problems with his back and leg that were causing his current symptoms were entirely attributable to the 2003 motor vehicle accident and to the spinal surgery that followed. 89Dr Parkinson did not alter his opinion after having viewed video surveillance evidence of the respondent. He considered such evidence generally to be unreliable, an opinion shared by most of the other medical experts who commented on the video material. 90The trial judge, at [83], accepted Dr Parkinson's evidence without qualification.

Lay evidence supporting no ongoing disability from the 1993 accident 91The respondent's brother-in-law, Mr Grasso, gave evidence that he had not observed the respondent display any symptoms of his previous back injury from the time the respondent's marriage in about 1994 until the accident in 2003. During part of this time, the respondent had lived with his parents-in-law and Mr Grasso still lived with his parents, so Mr Grasso was able to observe the respondent on a daily basis. Mr Grasso and the respondent also engaged in a range of vigorous physical activities, including builders' labourers' work and playing indoor soccer. His Honour accepted Mr Grasso's evidence completely. His Honour also accepted the evidence of the respondent's wife that at least from the time of their marriage in 1994 until the 2003 accident, the respondent had displayed no symptoms of a back injury. 92The appellant did not directly challenge his Honour's acceptance of this evidence and it did provide valuable support for the respondent's case that he had no ongoing disability from the 1993 accident from about early 1994 onwards. However, the appellant challenged his Honour's finding that the respondent had no such ongoing disability. Given there was no challenge to this evidence, the challenge to his Honour's findings as to the 1993 injury needs to based on other aspects of the evidence.

Video surveillance and associated evidence 93There was lengthy video surveillance evidence tendered by the appellant which both pre and post-dated the discovery of the false information in the claim form. His Honour rejected the appellant's case that the video evidence demonstrated the respondent was capable of a much greater level of activity than claimed. His Honour observed that in some of the video evidence, the respondent appeared to move in a manner which indicated that he was protecting his back. On other occasions, he was shown to be limping. His Honour acknowledged that in some of the later videos, the respondent was moving freely, but that in another his presentation was such as to indicate that he had difficulties with his back. In circumstances where the respondent's case was not one of constant pain nor of consistent limitations on free movement, his Honour rejected the appellant's submission that the videos demonstrated that the respondent's level of disability was less than that claimed. 94The video evidence also showed the respondent visiting hotels. The evidence indicated this was on a reasonably regular basis for the purpose, it would seem, of playing poker machines. He was seen driving his car to the hotels and withdrawing money from a number of ATMs. His Honour rejected the appellant's submission that these activities were inconsistent with his alleged disabilities. His Honour saw no inconsistency between the respondent's level of claimed disability and engaging in the activities depicted in this video evidence. His Honour commented that it was difficult to imagine a less physically taxing task than driving to a local hotel or even one slightly further away, withdrawing some money from an ATM and pushing a button on a poker machine. His Honour observed, at [105], that such an activity would allow the respondent to sit for short periods and stand or walk around when in pain. His Honour's observation is correct so far as it goes. However, insofar as that observation applied to the respondent, there was no evidence as to whether that is how he conducted himself whilst playing on the poker machines. 95A number of the medical experts viewed the video material. Significantly, as his Honour noted, at [115]-[123], none of the medical experts said that the respondent's presentation on video was inconsistent with his having a back injury. However, the fact of back injury was not in dispute. The issue was whether the respondent had exaggerated his symptoms, and thereby engaged in misleading conduct, for the purpose of obtaining a financial advantage. 96The Court viewed the video material. It showed the respondent engaging in a variety of activities, including walking, standing, lifting and bending. The surveillance was undertaken at different times, including on occasions when the respondent was attending medical appointments. The videos presented a varied picture. At times, the respondent appeared to walk and move freely. At other times, he appeared to have some restrictions on his movement. This was particularly, but not only, apparent on occasions when he was arriving or leaving medical appointments. 97There was no doubt that when the respondent was arriving or leaving medical appointments, his movements were more restricted, especially in the vicinity of a doctor's rooms. By the time he was a short distance away from the doctor's rooms, his movements would become noticeably freer and often apparently unrestricted. In my opinion, this aspect of the video material did reveal the respondent engaging in conduct that exaggerated his level of pain or disability. 98His Honour also considered that the fact the respondent was to be observed moving freely on the video material was not inconsistent with the extent of the disability claimed. His Honour's reasoning is highly favourable to the respondent. However, whether that indicates that his Honour misused his advantage as a trial judge cannot be determined in isolation from the other evidence and his Honour's other findings.

Trial judge's findings as to effects of 1993 and 2003 injuries 99His Honour concluded, at [98], that from December 1993 at the latest, the respondent had no symptoms from the 1993 accident and for all practical purposes, in terms of symptoms, that injury had wholly resolved. His Honour found that the injuries currently being suffered by the respondent were wholly or overwhelmingly the result of the 2003 injury and/or its treatment. The appellant challenges each of these findings. 100His Honour found that there were times when the respondent deliberately exaggerated the symptoms from which he was suffering: see [124]. Nonetheless, his Honour concluded that the symptoms the respondent reported at various medical examinations were symptoms that he in fact suffered, even if he was not suffering from them at the time of the examination. His Honour explained: "In other words, the conduct did not give a false impression or misleading impression of the symptoms that Mr Checchia suffered or of the pain that he endured. A fortiori is that the case, when it is taken together with the information that his symptoms varied and that he was able to participate in an exercise regime." 101His Honour concluded, at [125], that neither the respondent's conduct, nor any statement concerning his disabilities, was misleading or false. In this regard, his Honour did not consider that this aspect of his conduct, that is, relating to his disabilities, was intended to be misleading or false. His Honour concluded on the balance of probabilities that the respondent " intended to represent only that which he was suffering ". This finding is also challenged. 102Before dealing with the question whether his Honour correctly applied s 118 to the facts, it is necessary to determine the challenges to his Honour's factual findings. There is some crossover in the challenges that are made. However, they may be divided into three broad categories. The first category is the challenge to the findings that relate to the respondent's disabilities and whether there was any continuing disability following the 1993 accident. The second is the challenge to the findings relating to the appellant's economic claim. This challenge embraces the independent challenge to his Honour's judgment constraining certain cross-examination of the respondent's employer, Ms Mowad. The third category incorporates the challenge to the respondent's credit (see fourth issue on the appeal: ground 5). It is convenient first to refer briefly to the credit finding.

Trial judge's credit findings in respect of respondent 103His Honour's findings at [124] and [125] were made notwithstanding his Honour's adverse credit findings, at [126], that overall, he did not find the respondent " a witness of truth and reliability ". His Honour considered that some of the respondent's answers were disingenuous or dissembling, but that not all of them were. His Honour instanced the respondent's answers to the Oswestry Disability Questionnaire as an example where the respondent could not be believed. The Oswestry Questionnaire was administered to the respondent as part of a rehabilitation programme in which he specified the restrictions on his everyday life. 104Nonetheless, his Honour found that the respondent had withstood a vigorous cross-examination and that his evidence in respect of his disability and earnings was, " in most respects, extremely believable, unsophisticated, and unrehearsed ". 105His Honour considered that such nervousness as the respondent displayed in cross-examination was a reaction to his embarrassment at failing to declare his full income and the issues associated with that, rather than a consciousness of guilt as to the claim he made to the appellant in respect of his prior earnings. The respondent had not given evidence of any such embarrassment. Rather, he sought to explain away the circumstances in which he had received the PAYG statement for 2002 which showed much higher earnings than he had disclosed in his income tax return. 106His Honour concluded, at [128], that the respondent engaged in misleading and/or false conduct insofar as he misinformed the appellant as to the existence of a prior injury in 1993. His Honour further found that the respondent's conduct in maintaining that assertion, by which I understand his Honour to be referring to the respondent's denials to doctors of any previous injury, or failing to correct those assertions, was also knowingly false and/or misleading. 107His Honour's findings in respect of the respondent's credit had three consequences. First, it led to his Honour's conclusion, at [129], that there was no false or misleading statement as to the respondent's income claim. Secondly, it led to his Honour's finding, at [132], that notwithstanding the false statement in relation to the absence of previous injury, the respondent did not seek to obtain a financial benefit to which he was not entitled. Thirdly, it led to his Honour's quantification of damages in a way which was favourable to the respondent. However, his Honour's conclusions on these matters is dependent upon whether his underlying findings are sustainable. If they are not sustainable, then his credit finding in respect of the respondent must be consequentially undermined.

The medical claim 108The trial judge found, at [100]-[101], that the respondent exaggerated his discomfort in the witness box and in the courtroom and that there were aspects of his evidence that seemed highly improbable. His Honour was prepared to accept that although during the time he was in pain from his 2003 injury, the respondent may have forgotten his 1993 injury, that did not explain his assertion in his CARS statement that he had no prior problems with his back or legs. In addition, his Honour observed, at [103], that the respondent had denied any such previous injuries to Dr Mills, Dr Perla and Dr Matheson. 109Nonetheless, his Honour accepted, at [104], that the respondent genuinely attempted to return to work and genuinely undertook the rehabilitation exercises which he had been prescribed. His Honour also accepted, at [104], that the state of his 2003 injury prevented him from returning to permanent full-time unrestricted work. His Honour found that the medical evidence corroborated the respondent on this aspect of his claim. 110His Honour found, at [125], that neither the respondent's conduct seen in the videos nor any statement concerning his disabilities was misleading or false, nor was this aspect of his conduct intended to be misleading or false. His Honour held that on the balance of probabilities, the respondent intended to represent only that which he was suffering. His Honour's conclusion must be seen to have been based essentially upon the evidence of Dr Parkinson, the respondent's treating surgeon. His Honour was not satisfied that the video surveillance evidence demonstrated that the respondent was exaggerating his symptoms. His Honour said, at [122], that the medical evidence and the respondent's statements disclosed the respondent was not, prior to the settlement, in constant pain and that often the pain was worse than at other times. His Honour then noted that " the mere fact that a recording would show [the respondent] moving freely is not inconsistent with his representations and conduct ". These findings were made notwithstanding his Honour's adverse credit finding. 111Nonetheless, it must be said that Dr Parkinson's evidence was compelling. There was support for Dr Parkinson's evidence in the reports of Dr Bruce, the treating specialist, in relation to the 1993 injury and from Dr Cameron, retained by the workers compensation insurer in respect of that injury, both of whom said that the respondent was likely to have a full recovery. 112The evidence of Dr Bowers in relation to the respondent's presentation on video was substantially to the same effect as the evidence of Dr Parkinson, namely, that the video evidence did not affect their assessment of the respondent's work capacity. There was other medical evidence that supported the respondent's case. There was no suggestion, including by way of cross-examination, that the respondent had had any other treatment relating to his back from December 1993 until the 2003 injury. In addition, the trial judge accepted the evidence of the respondent's wife and brother-in-law and no basis has been shown to interfere with those findings. These matters lend further support to Dr Parkinson's opinion and his Honour's acceptance of it. 113As a general proposition, provided that a trial judge is satisfied that a claimant had the disabilities upon which a medical practitioner based her or his expert opinion, it is difficult for an appellate court to interfere with the trial judge's acceptance of that material. The position may be different, however, if the trial judge's acceptance of a claimant's level of disability does not withstand appellate scrutiny. I will return to this issue later in these reasons.

The income claim 114Although the appellant's reason for refusing to pay the settlement monies was the non-disclosure of the 1993 accident, the respondent's income claim became the subject of considerable controversy during the course of the proceedings and led to the appellant amending its defence to include a pleading that when making his claim, the respondent misled it as to his earnings. The appellant contended that the respondent's false statements (as the appellant contended) regarding his earnings further undermined the respondent's already diminished credit in respect of his claimed level of disability. In this regard, medical experts accepted that a person's own assessment of pain and suffering was subjective and a medical practitioner was dependent upon the veracity and accuracy of the person's complaints. The appellant also submitted that the respondent's alleged misstatements as to his earnings affected the case theory upon which the claims officers were entitled to base their assessment of a reasonable offer of settlement. 115In the CARS statement, Exhibit 9, said by the appellant to be dated 29 September 2006, the respondent claimed that at the time of the accident he was earning $1,000 per week as a cafe manager/supervisor working about 45 hours per week. There was no indication in the statement as to whether this was a net or gross amount. In written submissions prepared for the purposes of the CARS assessment, the respondent's solicitors stated that at the time of the accident the respondent was earning $750 per week net as a cafe manager with Jet Cafe. The respondent claimed future economic loss at the rate of $650 per week, on the basis that he had a small residual earning capacity. 116Earlier, in August 2006, in answer to a request made by the appellant for particulars of income, the respondent's solicitor stated that at the time of the accident the respondent was contracted to be paid $1,000 net per week, that he worked for one week after the accident and then took two weeks off because of pain. The letter stated that there was a letter from Ms Mowad lodged with the claim form, which supported this amount. It seems that that letter was not filed with the claim form. 117About three weeks before the settlement conference the respondent provided to the appellant copies of his income tax assessments for the financial years 1999, 2003 and 2005. He also provided PAYG statements for the financial years 2000, 2001 and 2003, but not for 2002, the financial year preceding the accident. Other evidence disclosed that the respondent's taxation agent had a copy of the 2002 income return as filed with the ATO at this time. The information provided in this material disclosed that the most the respondent had earned in the period 1999-2001 was $25,200 gross. His 2003 and 2005 earnings were, of course, post-accident and in much lower sums. 118On 6 October 2006, the respondent's solicitors forwarded to the appellant's solicitors what were said to be the respondent's 2002 PAYG statements. These documents became Exhibits 18 and 19 in the proceedings. Exhibits 18 and 19 disclosed an aggregate gross income in 2002 of $42,599, made up of payments of $6,899 from Bar Cupola (Exhibit 18) and $35,700 from Blues Point Cafe (Exhibit 19). If correct, these documents disclosed income for the 2002 financial year of about $820 gross per week (assuming earnings for the full 52 weeks). Neither the respondent's income tax return for the financial year, nor notice of assessment, was provided to the appellant at this time. 119On 16 October 2006, four days before the settlement conference, the respondent's solicitors faxed the appellant a copy of a letter dated 15 December 2002 on the letterhead of " Jet Caffe Espresso Sydney " under the signature " Antoinette Mowad, Director, QVB Jet Cafe ". According to Ms Mowad, the signature was not hers, but that of a Mr Charles Armstrong, the manager of the cafe, who, she said, was authorised to sign the letter. 120The letter was addressed " Dear John " and set out terms of employment as a Floor Supervisor, classified as " Grade 6 Maitre D for the purposes of the award ". The letter specified a remuneration of $25 per hour and ordinary hours of work of 50 hours per week. The letter stated that the salary was for all ordinary hours, penalty rates, overtime and allowances due under the award. The date of commencement was stated to be 02/01/2003, with the first three months of employment on a probationary basis. The letter was to be signed and returned by " 23/12/ 05 " (emphasis added) if the offer of employment was accepted. On the basis of this letter, the respondent's weekly income was $1,250 gross per week. This letter became Exhibit G in the proceedings before Rothman J. 121The respondent claimed that Exhibit G was his letter of employment for work at Jet Cafe. The appellant contended, however, that Exhibit G was a concoction and that the evidence pointed to it having been created in about March 2006 for the purpose of the respondent's CARS assessment. This contention is considered later in these reasons. 122Three days before the settlement conference and after at least two follow up requests, the appellant received from Jet Cafe answers to particulars requested, in a letter dated 9 May 2006. In those responses, Ms Mowad said that the respondent was employed as a " manager-supervisor " at the rate of $3,240 per month net, which is equivalent to approximately $750 net per week. In her evidence in chief, Ms Mowad said that she would have seen Exhibit G at the time. In cross-examination, Ms Mowad said that the respondent was employed as a " waitperson " and that she was unaware of the contents of Exhibit G but, by way of apparent explanation, stated that Mr Armstrong was the manager as well as the author and signatory of the letter. 123During the course of preparation for the hearing before Rothman J, the appellant subpoenaed the respondent's tax agent, who produced a copy of the respondent's 2002 tax return and the supporting PAYG statements from Bar Cupola and Blues Point Cafe. These documents became Exhibit 23. According to the tax return, the respondent's gross earnings for the 2002 financial year was $14,699, or $283 per week. This comprised earnings from Bar Cupola of $6,899, which was unchanged from that disclosed in Exhibit 18 and $7,800 from Blues Point Cafe, as compared to $35,700 in Exhibit 19. The total earnings indicated in Exhibits 18 and 19 on the one hand and Exhibit 23 on the other were $42,599 as compared with $14,699. The writing on each of Exhibits 18 and 19 was different from the writing on the PAYG statements in Exhibit 23, other than for the signature on Exhibit 19, which appeared to be identical to the signature on the Bar Cupola PAYG statement in Exhibit 23. 124The appellant also sought to obtain documents from the Australian Taxation Office (ATO). On 24 July 2008, the Deputy Commissioner of Taxation wrote to the appellant's solicitors, advising that the ATO had not received a request for an amendment of the respondent's 2002 income tax assessment. Nor had an amended assessment been processed. This information did not entirely accord with other evidence indicating that in April 2008, that is, after the present proceedings had been commenced, the respondent had made an application for an amendment of his income tax assessment for the 2002 year. It is a reasonable assumption that the application to amend the return was so that the respondent's formal income tax position disclosed to the Commissioner of Taxation corresponded with the information contained in Exhibit 19. The application was rejected by the ATO, as the respondent was out of time for filing an amended income tax return. 125At trial, the respondent gave evidence that he was earning about $750 per week after tax and that he was paid in cash. On the other hand, Ms Mowad said that the respondent was not paid in cash. Ms Mowad's evidence in this regard was supported by evidence of a payment of $409 per week into the bank account of the respondent's wife from 29 January 2003 until 10 April 2003. Jet Cafe's bank deposit slips record these deposits as payments to either " John Checchia " or " J Checchia ". There was no dispute that these payments were made to the respondent in respect of his employment at Jet Cafe. 126The respondent's PAYG statement for the year ending 30 June 2003 signed by Ms Mowad specified gross payments for the period commencing 20 January 2003 in a total amount of $5,500 gross. His income assessment for that year disclosed that an amount of $1001 was withheld for tax. Accordingly, the PAYG statement and income tax return is fully reconcilable with payments of $409 per week for 11 weeks from 20 January to 10 April 2003. 127There was other evidence which contradicted the respondent's claim that he was earning $750 net per week immediately before the accident and that he was working 50 hours per week. In addition to his claim under the MAC Act, the respondent made a claim for workers compensation in respect of his fall, as it occurred on the way to work. In the employer's report of injury (being part of Exhibit 15) signed by Ms Mowad, Ms Mowad stated that the respondent commenced employment on 9 January 2003 as a " waitering supervisor ". His hours of work were stated to be five hours per day, five days per week, that is 25 hours per week. The " NO " box was ticked in response to the question whether the employee was employed under an award. However, the box which sought identification of the award was completed and stated that the respondent was employed under the State Restaurant and Employees Award at classification grade 2. Ms Mowad's evidence was that the award rate for a grade 2 employee under this Award was $455.30 gross, or approximately $409 net per week, which was the amount that was being paid into the wife's bank account.

Exhibit G 128The trial judge, at [49] ff, held that Exhibit G was genuine and contained the terms and conditions of employment to which Jet Cafe and the respondent had agreed. His Honour's reason for accepting Exhibit G as the genuine letter of employment was essentially based upon his acceptance of the evidence of Ms Mowad. As nearly the whole of his Honour's reasoning on this issue is subject to challenge by the appellant, it is necessary to deal both with his Honour's reasons, and the challenges made to those reasons in some detail. 129First, at [48], his Honour noted that Ms Mowad was not related to the respondent. However, it should be observed that she and the respondent were long time friends. His Honour then referred to her evidence that she had not signed Exhibit G but that the signature appearing on the document was that of Jet Cafe's manager, Mr Armstrong, whom she said was authorised to sign such a document on her behalf. There was no apparent reason for him signing this letter in her name if he had authority to sign in his own name. Mr Armstrong was not called as a witness. 130At [49], his Honour stated that there were significant aspects of Exhibit G that indicated it was genuine, although his Honour did not identify what those aspects were. 131At [50]-[51], his Honour rejected the criticisms made of Ms Mowad's credit. For the most part, his Honour's comments are general. However, his Honour dealt with a particular challenge to Ms Mowad's credit based upon the difference in the award classification of the respondent's position as grade 6 in Exhibit G, as compared to the grade 2 classification in Exhibit 15, being the employer's report of injury signed by Ms Mowad. His Honour stated, at [51], that he did not consider that there was any discrepancy. His Honour said: "It is usual for persons, particularly in employment with an employer of a small number of employees, (i.e. say 15 employees or less), to be classified differently for different purposes. [The respondent's] classification for award and/or formal purposes would be very different from his classification for internal purposes." 132There was no evidence adduced of any such usual practice or that such a practice operated in the business of which Ms Mowad was a principal. In my opinion, his Honour's reasoning was based upon supposition and was not supported by primary facts. As such, the reasoning was impermissible in the determination of this particular issue. I return to the consequence of this later in these reasons. In any event, there are other difficulties with this reasoning. First, Ms Mowad stated in her examination in chief that she was prepared to pay the respondent $25 per hour, as stated in Exhibit G, because that was: "... pretty much equivalent to - I think it was like the restaurant employee grade 6, which is like on top of the scale. So we wanted to be able to match that because we were asking for him to be quite responsible in our employ so we wanted to give him sort of top of the scale at the time." 133Ms Mowad agreed in cross-examination that as an employer she would have to have accurate records showing an employee's earnings. She said that the PAYG statement issued to the respondent for the year ending 30 June 2003 showing gross earnings of $5,500 was accurate: see Exhibit 35. As I have already indicated, this was only consistent with earnings of $409 per week. Ms Mowad was also cross-examined to the effect that she had incorrectly ticked the " NO " box in the employer's report of injury form and that she intended to imply in the document that the respondent was employed under the State Restaurant Employees Award at a classification of grade 2. Ms Mowad said that she had correctly ticked the " NO " box and that she did not know " why she had written the rest of it ". She explained her position by saying " but you know, this is a form ". 134The trial judge did not deal with any of this evidence, which was critical not only to an assessment of Ms Mowad's credit, but more particularly to the question whether Exhibit G should be accepted as genuine. 135His Honour, at [52], next dealt with the appellant's submission that Exhibit G was inconsistent with the evidence of the first payment of $409 made to the respondent on 20 January 2003. Exhibit G stated that the respondent's employment was to commence on 2 January 2003. The respondent's PAYG statement, Exhibit 35, signed by Ms Mowad specified 20 January 2003 as being the date of the first payment. In the employer's report of injury form, signed by Ms Mowad on 7 May 2003, the " date employed " was stated to be " 09/01/03 ". If 9 January was in fact the commencement date, this would make the respondent's PAYG statement correspond with a weekly salary of $455.30 gross per week from 9 January 2003 to 10 April 2003, the date the respondent ceased work. 136His Honour reasoned against any inconsistency between Exhibit G and the first payment of wages made " in the period 20 January" as stated in the PAYG statement . His Honour said that a first payment of wages on that date was consistent with a commencement of employment before that date and possibly as early as the week of 2 January 2003. His Honour observed that given the time of the year, by which I understand his Honour to mean the traditional Christmas/New Year period and the possibility of payments on a fortnightly basis, then had the respondent commenced work on about 7 January 2003 he would not have been paid until the period commencing 20 January 2003. 137There is nothing exceptional in that part of his Honour's reasoning in which he concludes that the PAYG statement was consistent with the commencement of employment prior to 20 January 2003. However, there is a difficulty with his Honour's reasoning that the respondent was paid on a fortnightly basis. Whilst it is a common enough practice for some employees to be paid fortnightly, his Honour's surmise of possible fortnightly payments, which, it must be kept in mind, was to support the veracity and genuineness of Exhibit G, was contrary to all the other evidence relating to the payment of the respondent's salary at this time. The unchallenged documentary evidence disclosed that he was paid weekly. There was no evidence that the respondent was in fact paid fortnightly, even if only in the period prior to the accident. 138The respondent sought to explain the evidence of the weekly payments of $409 by saying that prior to the accident, he was paid in cash in the sum of about $750 per week, as he was undergoing a probationary period. He said that after the accident, he could not work as many hours due to his injury and that the salary of $409 per week reflected the salary for those reduced hours. 139The respondent relied upon the absence of any cross-examination on this evidence as a reason why it should be accepted. It is permissible, and often a strong basis, for a court to accept a witness' evidence on a particular matter where there is no cross-examination challenging the veracity or accuracy of the evidence given: Poricanin v Australian Consolidated Industries Ltd [1979] 2 NSWLR 419 at 426. However, a court is not bound to accept such evidence: Precision Plastics Pty Ltd v Demir [1975] HCA 27; 132 CLR 362. In this case, the appellant's evidence is inconsistent with the documentary evidence and the evidence of Ms Mowad. The documentary evidence demonstrated that the payments of $409 commenced prior to the accident. Ms Mowad said that employees were not paid in cash. Nor did she give evidence that there was any probationary period. Given the adverse finding at [126] as to the respondent's credit, his Honour's acceptance of the respondent's evidence about his wages is inconsistent with contemporary documentation and cannot stand. 140His Honour, at [55], dealt with the weekly payments of $409 in the context of the appellant's submission that the amount of these payments was inconsistent with the amount of earnings indicated in Exhibit G and with the amount claimed by the respondent in his claim form and CARS statement. His Honour reasoned against any necessary inconsistency between the documentary evidence and Ms Mowad's evidence that the respondent was not paid in cash. His Honour said: "It is notorious that cafe staff receive tips (or gratuities). The contract of employment seems to indicate that the $25 per hour is an all-inclusive rate. Gratuities received by staff, if pooled, may be taken and deducted from (or included in) the hourly rate. On that basis, the award rate of $409 (nett) per week would be paid into the account and the tips separately received; yet the employer would make no cash payment. And the rate received may still equate with the contracted amount." 141With respect to his Honour, this supposition is not supported by and is inconsistent with the evidence. The respondent was not asked whether he received tips, although it would be a reasonable assumption that he may have. However, he did not give evidence that the $750 net per week he claimed he earned was based in part on a base salary and in part on tips. Nor did the respondent give evidence that he received more than the monies paid into his wife's bank account. 142Further, Exhibit G specified an hourly rate of $25 for an average working week of 50 hours. Exhibit G expressly specified what this amount encompassed. It did not include tips, pooled or otherwise. The interpretation given to the document by his Honour was not available on its express terms. In addition, Ms Mowad's evidence was that at the time of reaching the agreement said to be contained in Exhibit G, she was prepared to pay the appellant $25 per hour, not that the amount that he was to receive, including tips, was $25 per hour. Finally, it might be remarked that his Honour's reasoning contains the unlikely proposition that the respondent would receive a set amount in tips per week, so that, in combination with the amount of $409 per week paid by Ms Mowad, he received the contracted amount. 143As part of its challenge to the authenticity of Exhibit G, the appellant also relied upon the date " 23/12/ 05 " specified in the second last paragraph of the letter, being the date by which the respondent was to return a signed copy of the letter if he wished to accept the employment on the terms offered. His Honour, at [53], found that this was far more likely to be a typographical error than an indication that the letter was a forgery, by which I would understand his Honour to mean a document concocted after the event. However, where there is a substantial body of other evidence relating to the respondent's earnings, which throws doubt upon the authenticity of Exhibit G, the reference to a 2005 date supports an inference that the letter was brought into existence at a later point in time than the date of its alleged execution. 144There is another aspect of his Honour's reasoning, at [53], which calls for comment. His Honour stated that for Exhibit G to be a forgery, he " must find that Ms Mowad was lying and/or be part of a conspiracy to support a false claim " by the respondent. His Honour said the evidence that he accepted did not allow the drawing of such an inference. Some of this reasoning does not necessarily follow. His Honour found that Ms Mowad did not sign Exhibit G. That finding is not challenged and it is apparent from other documents in evidence that the signature on Exhibit G is not her signature. Accordingly, if Exhibit G was brought into existence at some later point in time so as to support the respondent's claim for compensation, then, given that it was apparently signed by Mr Armstrong, Ms Mowad would not necessarily have been part of a conspiracy to support the respondent in the making of a false claim. 145There is another possible explanation for Ms Mowad's evidence in relation to Exhibit G, namely, that she found herself in a dilemma in giving her evidence. She was confronted in cross-examination with Exhibit G. Although Ms Mowad was not related to the respondent, she was a long-standing friend. She had been subpoenaed on several occasions to provide documents relating to the respondent's employment. However, Exhibit G (or a copy of it) was not produced from her records. It was produced by the respondent. It is curious, to say the least, that a copy of Exhibit G signed by the respondent was not produced by Ms Mowad. 146The respondent's PAYG statement issued by Ms Mowad, the employer's report of injury form signed by her and the bank deposits of $409 per week that she did produce are not consistent with Exhibit G. In fact, the documents she produced and Exhibit G are not reconcilable. Thus, when confronted with Exhibit G in cross-examination, Ms Mowad was faced with two possible courses. She either had to state that the documents she produced were false or Exhibit G was false. Alternatively, she had to explain away the inconsistencies. She chose the latter course. 147With respect to his Honour's acceptance of Ms Mowad's evidence, her explanation of the inconsistencies between the documents were not compelling: see, for example, Ms Mowad's comment " but you know, this is a form ", when asked about the information in the employer's report of injury form. This comment was made notwithstanding the terms of the Employer Declaration that the details in the form were " true and correct in every particular ". If his Honour's finding is correct, most of the essential information in this form was inexplicably wrong. If it was wrong, the consequence for the respondent was that he would not have been paid the weekly compensation based on his pre-injury earnings to which he was entitled, as he must have known from his earlier compensable injury in 1993. 148If his Honour was correct in accepting that Exhibit G was genuine and recorded the respondent's terms of employment, then Ms Mowad's evidence could only mean one of two things. The PAYG statement, the banking records and the employer's report of injury were false and Exhibit G was correct. Alternatively, the PAYG statement, the banking records and the report of injury were correct and what Ms Mowad had not paid the respondent the contract wages to which he was entitled before or after the accident. His Honour did not deal with these possibilities. Rather, he resolved the conflict in the documentation by accepting Ms Mowad as a credible witness, as he was not prepared to find she was part of a conspiracy to support the respondent in making a false claim. 149My conclusion on this cuts across his Honour's finding as to Ms Mowad's credit. I consider that in accordance with authority, it is open to me to come to a different view of Ms Mowad's credit than that reached by his Honour: see Abalos v Australian Postal Commission [1990] HCA 47; 171 CLR 167; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1997] HCA 3; 160 ALR 588; Fox v Percy [2003] HCA 22; 214 CLR 118. Where all of the contemporaneous documentation other than Exhibit G, including the bank records of monies paid to the respondent by way of his weekly wages, support earnings of $409 per week, I am of the opinion that the evidence is overwhelmingly against the respondent's case that he earned $1,000 per week, or $750 net, and therefore Ms Mowad's evidence that she paid him $25 per hour should not have been accepted. 150Before departing from Exhibit G, I should note that the appellant complains that his Honour dealt with its case on this issue on the basis that the appellant asserted Exhibit G was a forgery, whereas its case was that the document was a deliberate concoction to support the respondent's income claim. Whilst his Honour did use the word " forgery " it is apparent that his Honour considered at least some of the appellant's arguments on the basis that the appellant was asserting that the document was not genuine. 151The appellant also complains that his Honour failed to deal with the respondent's evidence that Ms Mowad signed Exhibit G in his presence. The appellant submitted that this evidence threw up another essential conflict in the evidence between the respondent and Ms Mowad. 152The respondent said in his statement that he started work at QVB Jet Cafe " in December 2002 " and when he started he was given Exhibit G. He gave the following evidence about Exhibit G in cross-examination: "Q. And did you sign that at the same time as the signature Antoinette Mowad was put on it? A. As stated on the letter. Q. And where were you when this letter was prepared? Where were you physically speaking when this particular document, the annexure was prepared? A. I don't know sir. Q. Well, was it at the restaurant or somewhere else? A. She would have had to prepare it and then Q. And then what? A. We had to sign it. Q. Where were you when you signed it? A. Probably it was at the cafe ... Q. Did you see her write her name there? A. I can't remember. Q. You said you were both there at the same time, wherever it was? A. Yes ... Q. I want to suggest to you that that is not Mrs Mowad's signature, that is someone else's signature. What do you say about that? A. I don't know sir." 153Then this evidence was given: "Q. ... Have you thought about the situation that brought about this offer of employment from Mrs Mowad; have you thought about the time that she made the offer to you? A. Not really. No sir. ... Q. And could it be the case that somebody else other than Mrs Mowad was the signatory of the document of 16 December 2002? A. I am not sure, sir. ... Q. ... When did you actually start working after the conversation which you had concerning this letter, Ex G? A. Approximately probably towards the end of December, beginning of January." 154The respondent did not mention Mr Armstrong in his evidence, say that he saw Mr Armstrong sign Exhibit G, or that Mr Armstrong gave him the document. 155There was no re-examination, and Mr Armstrong was not called. 156Letters signed by Ms Mowad sent to her landlord on 26 February 2001 and 27 December 2002 were not on the same letterhead as Exhibit G, which had the typewritten date 15 December 2002 and the handwritten date on the annexure of 16 December. 157His Honour did not refer to this evidence or attempt to resolve the inconsistencies. 158In dealing with his Honour's reasons, I have indicated those areas where his reasoning was open to him and other areas where his reasoning was based upon supposition and was either not supported by the evidence or was inconsistent with the evidence in the case. In my opinion, his Honour's reasoning in respect of Exhibit G was affected by the errors described and his finding that it was genuine cannot be supported.

Exhibits 18 and 19 (the PAYG statement) 159The trial judge noted that there was no evidence that the respondent forged Exhibit 19 (the PAYG statement from Blues Point Cafe which stated earnings of $35,700). His Honour accepted, however, that both Exhibits 18 and 19 could not have been issued in 2002 and must have been completed in 2005, as the PAYG statements bore a form number and edition date for the year 2005. He concluded that Exhibit 19 was not genuine. 160The only evidence as to the genesis of Exhibit 19 was in the respondent's application to the ATO when he sought to amend his income tax return. In that application, he said he was sent the wrong payment summary and the correct one had been sent to him when he was in hospital. This explanation, which was clearly false, was rejected by his Honour (at [108] and [110]). The appellant's original income tax return for the 2002 year is undated, but must have been lodged without delay, because his assessment for that year, with his refund cheque, was issued on 25 November 2002. 161The appellant would have discovered the error, if there was one, when he received his PAYG statement shortly after 1 July 2002. The alleged discrepancy was too large (gross $7,800 or $35,700) to have escaped notice. His Honour recognised the importance of Exhibit 19. As his Honour observed at [113], without documentary evidence that his 2002 earnings were consistent with his claimed earnings at Jet Cafe, there were uncertainties as to the assessment of the respondent's income. In this regard the appellant drew attention to the fact that if Exhibit 19 was not accepted as an accurate statement of income, the respondent's 2002 earnings were, on average, $352 per week. 162His Honour found, as noted in [159] above, that Exhibit 19 was not genuine. His Honour concluded that the most probable inference was that the initial tax return understated the respondent's income, either because significant amounts were paid in cash. The inference that the PAYG statements had been issued, lost and re-issued, was less likely (at [110]). 163His Honour found that the most probable explanation for the amended tax return lodged for 2002 was that the respondent had become aware that a court would not award him compensation in an amount greater than that disclosed in his tax return. He observed it was not unusual in such circumstances for applicants to amend their tax returns (at [111]). He concluded, at [112], that the respondent obtained a PAYG statement that disclosed his true income because of his claim under the MAC Act and this reflected adversely on his credit. 164Nonetheless, his Honour was not satisfied that the respondent's income of $750 per week on his claim form was overstated. That finding, coupled with his Honour's acceptance of Exhibit G as genuine, led his Honour to find, at [113], that the respondent's pre-accident earnings had to be assessed at $750 per week " at least " and his future earning capacity at $650 per week (at [143]). Accordingly, his Honour was not satisfied that the respondent's claim of pre-injury earnings of $750 per week was false or misleading. 165His Honour's conclusion, that although Exhibit 19 was not genuine, the information in it was correct, has to be considered along with the other evidence relating to the respondent's pre-injury income. Exhibit 19 is consistent with Exhibit G, but, for the reasons I have given, his Honour's finding that Exhibit G was genuine cannot be supported. In those circumstances, the correctness of Exhibit 19 calls for reassessment along with the other evidence in the case. 166His Honour's conclusion that the respondent obtained Exhibit 19 to support his income claim under the MAC Act may well be correct, but it does not follow that it was a statement of his " true income " from Blues Point Cafe. Nor would an acceptance of Exhibit 19 as a correct statement of the respondent's 2002 earnings determine his earnings at Jet Cafe. Mr Colosi, the owner of Blues Point Cafe, did not give evidence, notwithstanding several attempts by the appellant to interview him and serve him with a subpoena. Mr Colosi was uncooperative and would not attend conferences or provide his address for service of a subpoena. The appellant sought to obtain Mr Colosi's address from his solicitor but were informed that Mr Colosi did not want to give evidence. 167The appellant served Blues Point Cafe with a subpoena to produce documents, but its solicitors advised the appellant's solicitors by letter that the documents had been destroyed. The appellant obtained a summary of Blues Point Cafe's payroll for the financial year ending June 2004 from Blues Point Cafe's accountant. In that year, the highest wage paid to an employee was $18,000, the next highest $14,000, the third highest $12,780 and most employees were paid less than $10,000. 168His Honour did not consider this evidence. If the 2004 summary was correct, it would support the original PAYG statement (part of Exhibit 23) as a correct record of the respondent's 2002 earnings. If the summary was not correct, the information in Exhibit 19 may have been correct. This evidence was important and had to be taken into account before deciding that the income disclosed in Exhibit 19 was correct. 169His Honour failed to consider Exhibit 18. Exhibit 18 disclosed the same income from Bar Cupola as Exhibit 23, which had been issued in 2002. The respondent never explained why or how he came to receive a further PAYG statement from Bar Cupola. That was another matter that required consideration. 170The only evidence, therefore, of the respondent's earnings at the time of the accident which was not challenged, was the payments of $409 net, into his wife's bank account. 171If Exhibit 19 was the only evidence relating to the respondent's level of earnings in a period proximate to the accident, it would have been open to the trial judge to accept it as evidence of his actual earnings at that time. However, where the finding that Exhibit G was genuine cannot be supported and Exhibit 19 was brought into existence three years after the period to which it related, there must be a real question as to whether it can be accepted as an accurate statement of the respondent's income during the relevant part of the 2002 financial year. 172In my opinion, the deficiencies and omissions in his Honour's consideration of the evidence in support of the income claim amount to appealable error and this Court must intervene.

Fifth issue: challenge to the interlocutory ruling in respect of cross-examination of Ms Mowad: ground 6 173The appellant sought to discredit Ms Mowad's evidence that Exhibit G evidenced a genuine contract of employment. As part of that challenge, the appellant sought to cross-examine Ms Mowad about statements she made to the lessors of the premises where Jet Cafe conducted its business and the rental cheques sent to them which were dishonoured. The details are summarised in Exhibit VD1. The appellant argued that the tender of a cheque the debtor knows will be dishonoured is a form of dishonesty. The appellant acknowledged that the proposed cross-examination related to Ms Mowad's credit. This brought the provisions of the Evidence Act 1995, ss 102 and 103 into play. 174Section 102 provides that evidence relevant only to credit is not admissible. Section 103 (in its form as at the date of hearing) provided an exception to that rule where evidence adduced in cross-examination had substantial probative value. In determining whether the evidence had substantial probative value, the court has to have regard to whether the evidence tended to prove that the witness knowingly or recklessly made a false representation when the witness was under an obligation to tell the truth, and the period that had elapsed since the acts or events to which the evidence relates were done or occurred: s 103(2). 175The respondent objected to the cross-examination and made an application to the trial judge to exclude the evidence under the Evidence Act , s 135(c) on the basis that if this line of cross-examination was allowed to be pursued its probative value would be substantially outweighed by the danger that the evidence might cause or result in undue waste of time. 176His Honour noted that the purpose of the cross-examination was to establish that Ms Mowad's evidence that Exhibit G was genuine should not be accepted. His Honour held that even if the credit issue had substantial probative value, the enquiry would be an undue waste of time. 177The appellant challenges his Honour's ruling upon the basis that his Honour failed to carry out the inquiry directed by s 103 and to carry out the necessary balancing exercise required under s 135. 178Ms Mowad's credit was of critical importance. If her credit was successfully attacked, her evidence supporting the genuineness of Exhibit G would have been undermined. The appellant had documents that supported the proposed line of cross-examination. It does not appear that those documents were so numerous that cross-examination would have been an undue waste of the Court's time. 179His Honour's ruling was discretionary and appellate interference is dependent upon the principles in House v R [1936] HCA 40; 55 CLR 499 at 505 being satisfied. It was also a ruling on practice and procedure and an appellate court always shows restraint in exercising its appellate powers in respect of such rulings: Re In the Will of Gilbert (1946) 46 SR (NSW) 318. 180However, given the importance of the credit issue in this case, the cross-examination should have been allowed. A different result might have ensued had the cross-examination become protracted. In my opinion, that point had not been reached at the time his Honour refused this line of questioning and error has been demonstrated. The consequences of this will be dealt with below in determining what course this Court should take.

Conclusion on the issues thus far 181Before dealing with the other issues on the appeal, it is convenient to summarise my conclusions thus far which deal with grounds 1, 2 3 and 4 (in part) 5, and the challenges to his Honour's findings of material facts in paragraphs 8, 9, 10, 16, 17 and 18. 182First, I have concluded that his Honour erred in his construction of both s 118(1) and s 118(2). I have also concluded that his Honour's reasoning in respect of Exhibit G and the credit of Ms Mowad was flawed. Further, the finding that Exhibit 19, which his Honour found was not genuine but was nevertheless a correct statement of the respondent's actual income during the relevant period in the 2002 financial year, cannot be supported. 183In my opinion, these conclusions require this Court to intervene and order a new trial. The credit issues are such that this Court is not in a position to determine the economic loss issues under s 118(2). 184The medical issues raise different considerations. If the respondent was exaggerating his condition it is difficult to avoid the conclusion that he was doing so to obtain a financial benefit. His Honour found that the respondent overall was not a witness of truth or reliability. It was, of course, open to his Honour to differentiate between those parts of the respondent's evidence that were not credible and those parts which should be accepted. Nonetheless, my conclusions on the income claim necessarily undermine his Honour's finding that the respondent's evidence about the extent of his disabilities should be accepted despite his Honour's general credit finding and his finding of exaggeration. Accordingly, there must be a new trial on all issues. 185It is not necessary to consider the other challenges made by the appellant. However, it is appropriate that I make brief comments in respect of the interest and costs issues.

Seventh issue: the interest issue 186This issue only arises if I am wrong in finding that his Honour's approach to s 118(2) was erroneous. For that reason, I will deal with it in relatively brief terms. 187An award of interest under the Civil Procedure Act 2005, s 100 is discretionary and to challenge it on appeal, the appellant must show error of the kind referred to in House v R at 449-500. The respondent's statement of claim pleaded breach of the settlement agreement and sought an order for damages in the sum of $1,225,000, being the settlement sum, together with interest on that sum from 17 November 2006 to the date of judgment. 17 November 2006 was 28 days after the date of the settlement agreement. 188The trial judge awarded the respondent the settlement sum plus interest pursuant to the Civil Procedure Act , s 100 on and from 10 November 2006 to the date of judgment at the rate specified in the Uniform Civil Procedure Rules 2005 (UCPR), Sch 5 and thereafter, pursuant to the Civil Procedure Act , s 101. 189The appellant submitted that his Honour erred in three respects in his award of interest. His Honour ought not to have awarded interest on that part of the settlement sum that reflected the workers compensation payments received by the respondent. The appellant submitted that interest should have been awarded at half the rate ordered by his Honour on the balance of the workers compensation payments the respondent received after the settlement (using a " rule of thumb " method to account for the gradual receipt of monies). The appellant also contended his Honour erred in awarding interest on the $40,000 costs component. These matters had all been conceded by the respondent at trial and that concession was maintained. An appropriate adjustment would therefore be required to take account of these matters even if his Honour's judgment was not otherwise disturbed. 190In the circumstances, it is not necessary for me to deal with the appellant's submissions based on the MAC Act, ss 116 and 117.

Eighth issue on the appeal: the costs issue 191The respondent claimed costs on an indemnity basis, relying on an offer of compromise pursuant to UCPR, r 20.26. It had not been argued that UCPR, r 20.26 had not been complied with, but if so, his Honour considered that it was appropriate for him to treat it as a Calderbank offer. 192The offer of compromise was $1,040,000 plus costs plus interest, which his Honour considered was a true compromise of the respondent's claim for $1,225,000. As his Honour awarded this amount, the result of the proceedings was more beneficial to the respondent than the terms of the offer. 193His Honour considered that where a plaintiff makes an offer under the rules and obtains a better result at the trial, exceptional circumstances needed to be established before the court would do other than order indemnity costs: see, for example, Regency Media Pty Limited v AAV Australia Pty Limited [2009] NSWCA 341 at [19]. His Honour found no reason to depart from the ordinary rule. He held that if the offer had to be treated as a Calderbank offer, the appellant's rejection was unreasonable, that exceptional circumstances had not been established and the same order should be made. 194The appellant submitted that his Honour ought not to have ordered it to pay the respondent any costs and in particular ought not to have ordered costs on an indemnity basis. 195The appellant submitted the respondent's persistent deceit was the effective cause of the litigation. In addition, the respondent's prolonged failure to produce documents relating to his earnings and then producing documents which were not genuine, prolonged the proceedings and increased the costs. 196The appellant relied upon its statutory obligation under s 116 not to settle claims for merely commercial considerations and its statutory obligation to prevent and deter fraud. The appellant submitted that for those reasons, it was not in the same position as other defendants who were at liberty to compromise claims as they saw fit. 197If I am wrong in my ultimate conclusion in this matter, then I consider that his Honour's discretion in respect of costs miscarried for the following reasons. First, the respondent's initially false and misleading conduct in failing to disclose the 1993 accident was the effective cause of the appellant refusing to pay the settlement sum. Secondly, the appellant's income claim was highly contestable, given that many of the documents he and others produced were inconsistent, incorrect, or false. Thirdly, his Honour overlooked the statutory duties of the appellant and respondent. These together constitute extraordinary reasons for refusing to make an indemnity costs order. 198I am also of the opinion that even if the respondent was entitled to judgment of the settlement sum, there should have been a reduction in the costs awarded to the respondent, given the conduct to which have referred. In my opinion, had the respondent maintained his judgment, the appropriate costs order would have been that the appellant pay the respondent 50 per cent of his costs at first instance on the ordinary basis.

Conclusion 199It follows from my reasons that the appeal should be allowed. Accordingly, I propose the following orders:

Appeal allowed;
Set aside the orders of the trial judge made 29 September 2009;
Order that there be a new trial on all issues;
Order that the respondent pay the appellant's costs of the appeal;
Order that the costs of the first trial abide the outcome of the new trial. 200McCOLL JA : I agree with Beazley JA and Handley AJA. 201HANDLEY AJA : In this complex and difficult appeal I have had the benefit of reading the reasons for judgment of Beazley JA in draft. I agree with her Honour's reasons and with the orders she has proposed but will add reasons of my own on the construction of s 118 of the Motor Accidents Compensation Act 1999 (the 1999 Act) and its application to the facts. The background facts and history are found in Her Honour's judgment. 202This section relevantly provides: "118 Remedy available where claim fraudulent (1) This section applies to a claimant ... if it is established that, for the purpose of obtaining a financial benefit, the claimant ... did or omitted to do anything (including the making of a statement) concerning a motor accident or any claim relating to a motor accident with the knowledge that the doing of the thing or the omission to do the thing was false or misleading. (2) If this section applies to a claimant: (a) a person who has a liability in respect of a payment, settlement, compromise or judgment relating to the claim is relieved from that liability to the extent of the financial benefit so obtained by the claimant, and (b) a person who has paid an amount to the claimant in connection with the claim ... is entitled to recover from the claimant the amount of the financial benefit so obtained by the claimant and any costs incurred in connection with the claim." 203This section, as it applies to a claimant, reproduces the text of s 66 of the Motor Accidents Compensation Act 1988 (the 1988 Act), repealed by the 1999 Act. The earlier section was considered in Toubia v Schwenke (2002) 54 NSWLR 46. I will refer to conduct within s 118(1) as a misrepresentation. 204Section 118(1), despite its heading, does not reproduce the general law. 205The trial Judge focussed on whether the claimant's subjective purpose was to obtain a financial benefit. His analysis must be set out at some length. At [22]-[23] he said: "22 ... The purpose must be the dominant purpose for the conduct in question, and, in that sense, the obtaining of a financial benefit must be the operative reason underpinning Mr Checchia engaging in the misleading or false conduct. The Act requires an intention by ... Mr Checchia to achieve a result desired by him, namely, the obtaining of a financial benefit ... Purpose, therefore, is the subjective purpose of the person who engaged in the false or misleading conduct and the effect the person sought to achieve by that conduct ... 23 The purpose, envisaged by the Act, is a subjective purpose and requires evidence of the state of mind of the perpetrator of the false or misleading conduct. Direct evidence of the reason for conduct may not be forthcoming. In those circumstances, it may, and usually will, be inferred from the conduct itself and its likely effect." 206The analysis was further refined: "24 ... The purpose (of obtaining a financial benefit) must be the reason for the intention to mislead ... It is not sufficient simply that the conduct is engaged in for the purpose of obtaining a financial benefit, it is necessary that the conduct was misleading for that purpose." 207The analysis was then further refined [25]: "25 ... the claim for compensation was arguably for the purpose of obtaining a financial benefit. That claim ... contained a false or misleading statement. Of itself, that combination of facts is insufficient. ... it is necessary to satisfy the Court that the false or misleading character of the statement was for the purpose of obtaining the financial benefit." 208The Judge made the following findings concerning the claimant's representations about his symptoms and disabilities at [124]-[125]: "124 ... there were ... times when Mr Checchia exaggerated, deliberately, the symptoms from which he was suffering, at that particular time . However, it seems to me that the symptoms that he disclosed on medical examinations were symptoms that he, in fact, suffered, even if there were not being suffered at the time of the examination. In other words, the conduct did not give a false impression or misleading impression of the symptoms that Mr Checchia suffered or of the pain that he endured ... 125 I do not consider that Mr Checchia's conduct, or any statement, concerning his disabilities was misleading or false. Nor do I consider that this aspect of his conduct was intended to be misleading or false. On the balance of probabilities, Mr Checchia intended to represent only that which he was suffering" (emphasis supplied). 209After further consideration the Judge said at [132]-[133]: "132 ... Those are factors that, together with the acceptable evidence of Mr Checchia, compel me, on the balance of probabilities, to find that his conduct was not done for the purpose of obtaining a financial benefit. While he may have sought to forestall an enquiry that would delay or complicate a settlement that appropriately compensated him for the injury, he did not do so for the purpose of preventing a rejection of his claim or for obtaining a claim to which he was not entitled. 133 That raises an interesting question as to the subjective purpose necessary to relieve an insurer of liability under the Act. On one view, if claimants engaged in false or misleading conduct for the purpose of obtaining what they considered to be their just entitlements, such claimants would not be engaging in the conduct for the requisite purpose. I do not accept that view. It seems that a construction consistent with the purpose of the Act requires that the purpose of the misleading conduct be for the obtaining of a financial benefit, as objectively determined. Claimants did not escape the effect of s 118 ... by having a subjective view as to their entitlements that is greater than, in reality, is the case." 210Accordingly his Honour rejected the insurer's case that the claimant had made false or misleading representations about his symptoms and disabilities for the purpose of obtaining a financial benefit. 211He summarised his findings concerning the claimant's representations about his pre-injury earnings at [129]: "129 I am not satisfied ... that Mr Checchia's conduct (some of it possibly fraudulent, at least in his dealings with the ATO) in asserting a prior rate of earnings (and supporting the assertion with questionable documents) was false or misleading." 212With all due respect to the learned trial Judge, his reasoning in the passages quoted, which was not based on direct evidence from the claimant of his state of mind, contained serious errors. 213Since the section covers some cases of common law fraud, the position in the tort of deceit is relevant. Its constituent elements are a misrepresentation of fact made without an honest belief in its truth, with the intention of inducing the victim to act on it, which induces him to do so and suffer loss. The victim must believe that the fraudster intends him to act on the representation as true. 214The subjective motives and expectations of the fraudster are irrelevant. Fraud can be established although the fraudster was not seeking to obtain any benefit for himself. The principles are stated in Spencer Bower, Turner and Handley, "Actionable Misrepresentation" 4 th ed 2000 at p 61: "Although fraud involves an intention on the part of the representor that the representee should act in the way he did, there is no need to prove any further intention and the representor's motive is irrelevant. It is immaterial that the representation was made without any intention of damaging the representee, or of benefiting the representor or some third person". 215Section 118(1) only applies where the claimant's purpose is to obtain a financial benefit. As Lord Diplock said in Sweet v Parsley [1970] AC 132, 165, in a passage referred to by the trial Judge: "'Purpose' connotes an intention by some person to achieve a result desired by him." 216The focus is on the purpose of the claimant but he can only obtain a financial benefit by inducing the insurer to act on his representation, and it only will if it relies on it. 217Under the section the insurer must prove that the claimant made his misrepresentation "with the knowledge" that it "was false or misleading". The tort of deceit is also committed if a misrepresentation is made without an honest belief in its truth. The wider liability in deceit is not relevant. 218Where a claimant knowingly makes a misrepresentation to the insurer which is likely, viewed objectively, to induce it to act to its financial detriment, the tribunal of fact will ordinarily infer that his purpose was to obtain a financial benefit. 219The insurer does not have to establish that the claimant had a clear understanding of the nature or extent of the financial benefit that he might or would obtain if the insurer acted on his misrepresentation. The claimant could normally only make a misrepresentation in order to benefit in some way. The insurer does not have to prove a more focussed purpose. 220The Judge's finding, above [8], that, when the claimant deliberately exaggerated the symptoms he was experiencing, his misrepresentations were not false or misleading is just wrong. I have particular difficulty with his finding that the claimant "intended to represent only that which he was suffering." On the Judge's finding this was something he was not suffering. The fact that the claimant experienced those symptoms at other times cannot sanitise his false statements. 221There is a real distinction between a claimant who suffers symptoms all the time and one who only suffers them some of the time. There is no scope for a finding that the difference was not material. 222The finding of deliberate exaggeration compels the inference that the claimant did this for the purpose of obtaining a financial benefit. No other purpose for knowingly making the misrepresentations is plausible. Otherwise why not tell the truth? 223Again, with respect, the Judge's finding in para [132], quoted above [9], that the claimant did not engage in the relevant conduct for the purpose of obtaining a financial benefit because he only sought to forestall an enquiry that would delay or complicate a proper settlement is again just wrong. An early and straightforward settlement is a financial benefit, and in any event the truth would probably have exposed issues that were likely to reduce any settlement figure. 224There is no need, at the s 118(1) stage, to quantify the claimant's true entitlements. It is sufficient if the natural and probable result of his misrepresentations, viewed objectively, was to induce the insurer to act in some way to its financial detriment, for the benefit of the claimant. 225Section 118(1) is not concerned with results. It applies even if the misrepresentations failed to achieve their desired purpose. 226The claimant's purpose must normally be established objectively, by inference from the circumstances. The relevant principles, developed for the tort of deceit, are summarised in Spencer Bower Turner and Handley op cit p 72: "In most cases proof of intent to induce is not disputed and this ingredient, essential though it is, goes by default ... For all practical purposes the intention must be objectively established. Where intention is an issue it may be inferred. Where the circumstances will not support the inference independent proof of an intention to induce is essential." 227The authorities cited by the authors include Smith v Chadwick (1884) 9 App Cas 187; Arnison v Smith (1889) 41 Ch D 348; and Possfund Ltd v Diamond [1996] 1 WLR 1351. In Smith v Chadwick the Earl of Selborne LC said at p 190: "In an action of deceit ... it is the duty of the plaintiff to establish ... actual fraud which is to be judged of by the nature and character of the representations made, considered with reference to the object for which they were made, the knowledge or means of knowledge of the person making them, and the intention which the law justly imputes to every man to produce those consequences which are the natural result of his acts." 228In Arnison v Smith Lord Halsbury LC referred to this statement and said at p 368: "If men make a statement which is intended to be believed, and which when they make it they know to be untrue, I cannot agree that they may have no intention to deceive ... If men tell for business purposes what in plain English is called a lie, they are guilty of fraud, and to talk about their having had no intention to deceive is no more a defence than it would be a defence to a prosecution for forging a bill of exchange to say that the forger meant to pay it when it became due." 229In Possfund Ltd v Diamond at 1364 Lightman J said: "For the purpose of the tort of deceit ... it is necessary to establish a material misrepresentation intended to influence, and which did in fact influence, the mind of the representee and on which the representee reasonably relied. There has been much argument before me whether the required intention of the representor should be objectively ascertained, as the intention reasonably to be inferred from his words or action (or inaction) ... [F]or all practical purposes ... the intention must ... be objectively established. Such intent is objectively established if the representor expressly communicates intent to the representee ... [W]here it is not expressly communicated, the representee must establish that he reasonably relied on the representation and that he reasonably believed that the representor intended him to act upon it." 230These principles were applied in Krakowski v Eurolynx Properties Ltd [1995] HCA 68, 183 CLR 563 at 580, 583, 584 where the plurality based their finding of fraud on an inferred intention. At p 580 they said: "A representation that the instrument of lease covered the whole of the agreement ... bears only one meaning. If that representation was made consciously ... it must have been made fraudulently. There is no sense in which a representation in those terms could have been honestly made." 231The Judge considered, above [6], [7], that it was not sufficient that the misrepresentations were made for the purpose of obtaining a financial benefit, they must be false "for that purpose". But this necessarily follows. A tribunal of fact which applied the approach of the Earl of Selborne and Lord Halsbury would have no hesitation in drawing that inference. Why else tell a lie? 232A similar difficulty arises in supporting the Judge's reasoning in [125] quoted above [8]. The Judge found that the claimant made misrepresentations about his symptoms and disabilities that were not "intended to be misleading or false". Given the claimant's sanity and sobriety at the time, this was an impossible finding in the face of the principles applied by the Earl of Selborne, Lord Halsbury, and the High Court. 233There is another difficulty with the finding [132], quoted above [9], that the claimant did not make his representations to obtain "a claim to which he was not entitled". 234How could the claimant, as a layman, know the value of the claim "to which he was entitled"? How could the Judge find that he knew what his claim was worth when he made his misrepresentations? How could he find that the claimant knew that his lies would not tend to enlarge his settlement? 235The claim to which the claimant was entitled was one based on the truth. A tribunal of fact directing itself in accordance with Lord Halsbury's principle would not accept direct evidence from a claimant who told deliberate lies that he had no intention to deceive, nor would it draw that inference from the objective facts. 236There is a further difficulty. The Judge said at [126] that, "overall", the claimant was not a witness of truth or reliability. It is surprising that he nevertheless found that his misrepresentations and the false documents he put forward were intended to obtain no more than his just entitlements. 237Beazley JA has demonstrated that the Judge's findings about the claimant's true symptoms, disabilities and pre-injury earnings cannot be supported. His further findings about the claimant's intentions also cannot stand in the face of the objective facts and the Judge's credit finding. 238The inference that the claimant, who in general was found not to be a witness of truth or reliability, made his misrepresentations and proffered false documents for an honest purpose cannot withstand scrutiny. The findings are glaringly improbable, inconsistent with proved facts, and contrary to the apparent logic of events: Fox v Percy [2003] HCA 22, 214 CLR 118, 129 [31]. 239In my judgment therefore the insurer established that s 118(1) applied. Its remedies, conferred by subs (2), are limited to "the extent of the financial benefit so obtained". The onus of establishing this is on the insurer. 240It may not be easy for an insurer to establish "the extent of the financial benefit". If the claim had gone to trial and the claimant's credit was damaged the tribunal of fact would apply the onus of proof and discount his claims. It would disallow what he had not satisfactorily proved. 241The insurer, with the reverse onus under s 118(2), will face the onus discount and fail to recover amounts that it cannot prove were "so obtained". A dishonest claimant who exaggerated a genuine injury may end up retaining more from his settlement than he would have received at a trial. 242If the claim had gone to trial and the claimant received judgment before the fraud was discovered the awards under each head of damages will be known. 243A lump sum settlement will make the insurer's task more difficult. The break up may not be known and the insurer may have to prove what the settlement figure would have been if the truth had been told. In some cases the whole settlement may even be the relevant financial benefit. The claimant would then be free to establish his true entitlement at a later trial of the original action. This would not be possible if judgment had been entered by consent for the settlement sum. 244The difficulties are not insurmountable and in Toubia v Schwenke (2002) 54 NSWLR 46, 56 [46], the insurer recovered the amounts awarded by an Arbitrator for non-economic loss and future economic loss. 245The effect of a contravention of s 66 of the 1988 Act on a lump sum settlement was considered by the Court of Appeal of the Australian Capital Territory in Ivancic v Zardo [2004] ACTCA 11. 246The Court dismissed, with an irrelevant exception, an appeal and cross appeal from a judgment of Connolly J [2003] ACTSC 32, 177 FLR 255. The Trial Judge had held that the original claimant had made misrepresentations to the insurer within s 66(1) of the 1988 Act and had obtained a financial benefit when judgment in his favour was given by consent for $425,000. 247The Trial Judge assessed that financial benefit at $350,000 and gave judgment for the insurer for that amount. 248Although the false statements related to only part of the claim [2004] ACTCA [29], the insurer cross-appellant argued [21] that if the claim was tainted to any extent by fraud the claimant lost the entire amount. 249On the other hand the claimant appellant argued [28] that the only financial benefit was his entitlement to a lump sum and since this could not be apportioned by the Court the insurer was not entitled to recover anything. 250The Court, Higgins CJ, Gray and Gyles JJ, held [31] that s 66 required apportionment "so that relief is only granted in relation to the financial benefit obtained" and [38] "the all or nothing contention of each party must be rejected.". 251The rejection of the all or nothing approach in that case was appropriate because the misrepresentations related to only part of the claim and the claimant had a judgment which could not be set aside to enable his claim to be properly litigated. The decision may not foreclose a finding that a settlement, not embodied in a judgment, was the financial benefit "so obtained". 252The Court could only take that course if a judgment under s 118(2) relieving the insurer from the whole of its liability under a settlement, not embodied in a consent judgment, remitted the claimant to his original rights and enabled him to pursue his claim to judgment. 253The Court is not able to determine the quantum issues, and must order a general new trial. 254Section 118 reproduces only part of the general law, but in relation to judgments it goes beyond the general law. It is not necessary to decide whether the section displaces the general law within its field or merely provides additional remedies, but I will offer some tentative views. 255Under the general law a party induced by fraud to enter into a contract can, on discovering the fraud, elect to rescind ab initio. 256The insurer discovered the claimant's fraud before it paid the settlement sum. Under the general law, assuming it remains available, it could have rescinded and brought proceedings in equity to enforce its rescission which would have remitted the parties to their original rights and liabilities. 257The Court would have enforced the insurer's rescission without requiring proof that it had suffered any loss. The principles are summarised in Spencer Bower, Turner, and Handley op cit at pp 72-3: "[O]nce make out that there has been anything like deception, and no contract resting in any degree on that foundation can stand. It is enough if revelation of the material facts might have given [the victim] pause". 258The insurer invoked s 118 on 5 February 2007 in a letter from its solicitors to the claimant's solicitors. On 22 February the latter offered to have the settlement set aside, but on 5 April the offer was rejected. 259My tentative view is that s 118 provides additional remedies, and the general law is not affected. 260There is a presumption that Parliament does not intend to take away a person's common law and equitable rights. This presumption is of considerable strength where the rights are those of the victims of fraud. There is nothing in s 118 to indicate that Parliament intended to take away any of those rights or to exclude the ordinary jurisdiction of the courts in cases of fraud. 261Subject to the above I agree with the reasons for judgment of Beazley JA and with the orders she has proposed.

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: 04 August 2011

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