MetLife Insurance Ltd v Hellessey

Judgment

1. MCCOLL JA: I agree with Meagher JA's reasons and the orders his Honour proposes.

Overview

1. The respondent, Bernadette Hellessey, was an officer in the NSW Police Force. She claimed benefits under the First State Superannuation scheme on the basis that she was totally and permanently disabled. The appellant (MetLife) was the group life insurer under that scheme. The parties accept that the relevant terms of that superannuation scheme and the group life insurance policy are faithfully recorded by Ward JA in MetLife Insurance Ltd v FSS Trustee Corporation [2014] NSWCA 281 at [18] and [43]-[50]. Under that policy, Ms Hellessey was entitled to benefits for total and permanent disablement (TPD) if, having "been absent from" her occupation as a police officer "through injury or illness for six consecutive months", she as the "Insured Member": …provided proof to [its] satisfaction that [she had] become incapacitated to such an extent as to render [her] unlikely ever to engage in any gainful profession, trade or occupation for which [she was] reasonably qualified by reason of education, training or experience.
2. Ms Hellessey commenced working as a police officer on 4 May 2001. In the course of her duties between that time and February 2008, she was exposed to numerous traumatic incidents. By February 2008, she was receiving regular medical treatment for anxiety and depression and engaged in non-operational duties only. Her last day of service as a police officer was 31 August 2010. She has not worked since that time. Accordingly, the six consecutive months during which she was absent from her employment ended on 1 March 2011. On 10 February 2012, Ms Hellessey's application for payment of a TPD benefit was made, supported by a statement from her treating psychiatrist, Dr Durrell, that she suffered from post-traumatic stress disorder (PTSD) and major depressive disorder.
3. Some four-and-a-half years later, on 30 November 2016, MetLife advised by letter that it had not formed the opinion that the respondent satisfied the TPD definition. That rejection of her claim for the TPD benefit followed two earlier rejections by letters of 22 December 2014 and 19 October 2015. Before each rejection, MetLife had sent "procedural fairness letters" to solicitors acting for Ms Hellessey, which invited her response to its assessment of material and information provided to or obtained by it. Those letters also advised of MetLife's preliminary view as to whether the medical and other material supported a conclusion that Ms Hellesey satisfied the TPD description. The responses, if any, to those letters were followed by a letter advising of Metlife's decision, which in each case was that MetLife was not satisfied in the terms of the TPD definition.
4. Ms Hellessey challenged MetLife's first rejection by the underlying proceedings commenced on 18 August 2015, and before MetLife's second letter rejecting her claim. The third rejection was delivered only days before the trial commenced, on 5 December 2016. Ms Hellessey proceeded to challenge this rejection on the basis that in considering and determining her claim MetLife failed to act reasonably and fairly. And it was not controversial that, if that challenge was upheld, the Court could itself determine whether the TPD definition had been satisfied as at the assessment date, accepted to be 1 March 2011, on the material available at trial.
5. The primary judge (Robb J) held, after also considering MetLife's reasons for the first and second rejections, that its third rejection of Ms Hellessey's claim was invalid: Hellessey v MetLife Insurance Ltd [2017] NSWSC 1284 at [989]. His Honour then addressed whether Ms Hellessey's PTSD and major depressive disorder had rendered her unlikely ever to engage in any relevant employment, notwithstanding that she was 34 years old at the date for assessment. He concluded that Ms Hellessey had been so incapacitated as to engage the TPD definition - a conclusion which is not challenged on appeal: Judgment [1040].

The applicable principles

1. The relevant principles are those stated by McLelland J (as his Honour then was) in Edwards v Hunter Valley Coop Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113, and approved by this Court in Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123; TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68; and Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233. MetLife's liability under the policy turned on its being satisfied as to the extent of the Insured Member's incapacity. Both in considering that question and in determining whether it was so satisfied, MetLife was required to act reasonably and fairly. And breach of one or more of these overlapping implied obligations would deprive the decision of contractual effect.
2. Thus, an insurer's decision may be set aside if it is shown to be unreasonable on the material before the insurer. It will not answer that description merely because the Court would or could have reached a different opinion on that material, because "reasonable persons may reasonably take different views": Edwards at 77,536. In addition, however, a decision may be set aside if the process of consideration underlying it was not undertaken reasonably and fairly, even if the outcome itself is not also shown to have been unreasonable on the material before the insurer. Again, more than one reasonable process of consideration may be open in the circumstances, but the process adopted by an insurer would not cease to be unreasonable simply because another, and reasonable, process to the same conclusion happened to exist.
3. For example, in Shuetrim, the insurer's breach of that duty was in not considering a "body" of relevant medical and psychiatric opinions: at [154]. And, in Hannover Life v Jones, the failure to take into account the Insured Member's psychological makeup was a "failure to act reasonably and fairly in undertaking the task of forming the opinion as to [his] disablement": at [134]. As will become apparent, it is not necessary in this appeal to attempt a comprehensive description of the evidentiary material required to be considered by an insurer because the lay witness material considered below would meet any such description: see, in another context, Torbey Investments Corporated Pty Ltd v Ferrara [2017] NSWCA 9 at [65] (Basten JA, McColl and Simpson JJA agreeing), identifying the evidence required to be considered by an administrative decision-maker by reference to its apparent credibility, relevance and materiality to a claim.

The third rejection

1. The material before MetLife at the time of its third rejection letter consisted of medical opinions, a vocational assessment, and evidence from various sources as to Ms Hellessey's recreational activities - particularly her attendance at and participation in horse-related shows and events in the period from early 2011. Those medical reports included Dr Durrell's opinions that she suffered from PTSD and major depressive disorder, and was unlikely to be able to engage in any gainful employment.
2. In its letter of 30 November 2016, MetLife advised: MetLife has considered all of the information received in relation to the member's TPD claims. That consideration has included the evidence around the date of assessment (1 March 2011), evidence coming into existence after the date of assessment and evidence served in the Proceedings. MetLife has also had regard to the evidence and submissions of the member and the Fund during the assessment of the claim and the various requests for reconsideration. In consideration of all the evidence, MetLife has not formed the view that the member is 'unlikely ever' to return to suitable employment prior to 25 June 2043. MetLife has identified suitable vocational options reasonably within the member's education, training and experience and which are 'far removed from policing'. … MetLife acknowledges that Dr Durrell, Dr Westmore and Mr Rawling have reached a different view and those opinions have not been disregarded by MetLife. MetLife has however identified its concerns about the weight to be given to those opinion. This is because MetLife considers the practitioners have not been provided with full or accurate accounts of the extent of the member's activities.
3. The reference to the "extent of the member's activities" is to the following matters which are dealt with by the primary judge between Judgment [942] and [988] under the headings: - Horse-related shows and events - Facebook posts - Fairymead - Palomino Association and the Goulburn Pony Club - Shopping activities

The structure of the primary judge's reasons

1. Although the primary judge considered the first two rejections between Judgment [250]-[376], the parties agreed, and his Honour accepted, that the only "operative question" was whether the third rejection was valid: Judgment [802], [803], [823]. Neither party sought to depart from that proposition on appeal.
2. In determining that question, the primary judge at Judgment [825] described the Court's task as being: … whether or not MetLife addressed the correct questions raised by the policies, and whether the process of reasoning engaged in by MetLife was reasonable in the sense that it did not contain defects of logic or judgment that had the result that MetLife had not adhered to its duty to act with utmost good faith. The court must allow MetLife freedom of judgment where it has acted reasonably in the sense just described, and must not find that MetLife's reasoning was defective only because the court would have reached a different conclusion on the evidence.
3. His Honour's reasons then proceeded, mostly in reverse chronological order, as described in Judgment [827]. First, he outlined the "history of the process of determination" and the contents of each of the third and fourth procedural fairness letters and the third rejection letter. Secondly, he addressed the reasonableness of MetLife's treatment of the material, including the sworn lay witness statements provided to MetLife on 9 November 2016, as well as the medical reports of Dr Durrell, Dr Westmore and Mr Rawling, and Mr Everett's vocational assessment report. Thirdly, he "drew upon" his explanation of MetLife's treatment of that material in addressing the reasonableness of "MetLife's decision regarding Ms Hellessey's activities".
4. That particular "decision" was described as follows: [944] The most significant feature of the reasoning process adopted by MetLife … is that MetLife decided that it … should decide for itself what relevant activities Ms Hellessey had engaged in both at and around the assessment date, and subsequently up to the time of the third rejection. [945] Having identified the nature of Ms Hellessey's activities from the available information, it then made its own lay judgment as to the physical and psychological significance of those activities in relation to whether they were consistent with the physical and psychological symptoms and incapacities that Ms Hellessey and the medical experts who prepared reports in favour of her case had claimed that she suffered from. [946] MetLife did not describe in any elaborate or positive way what the extent of Ms Hellessey's activities was, or why they were inconsistent with her having the claimed disabilities. It asserted that Ms Hellessey's activities were inconsistent with her claimed symptoms. [947] It then recorded in various ways that the reports prepared by the medical experts who supported Ms Hellessey's case either did not refer to her activities at all, or did not refer to them to the extent that MetLife thought was necessary. On that basis, MetLife either rejected the medical reports or decided to give them insignificant weight. The consequence of MetLife's having put aside Ms Hellessey's supporting medical evidence in this way was that there was nothing to weigh against MetLife's own conclusions of fact, or the medical opinions upon which MetLife chose to rely, that rejected the claim that Ms Hellessey satisfied that TPD definition at the assessment date.
5. The primary judge earlier observed at Judgment [853] that MetLife ultimately rejected or gave little weight to the medical opinions of Dr Durrell, Mr Westmore and Mr Rawling because they had "not been provided with full or accurate accounts of the extent of [these] activities". As his Honour then observed at Judgment [854], that conclusion "underscores the significance of MetLife's having dismissed the evidence of Ms Hellessey's lay witnesses".
6. Significantly, the primary judge found at Judgment [867] that MetLife's consideration of the lay written evidentiary material was not "reasonable or proper" because it involved ignoring or not engaging with "a substantial body of consistent evidence" which, taken as a whole, "provided substantial corroboration for the opinions reached by Ms Hellessey's treating medical professionals, and in particular Dr Durrell, concerning the symptoms of her psychological injury": Judgment [860], [865], [866].

The appeal

1. MetLife appeals from his Honour's order that its third rejection "was not valid and effective". The two grounds of appeal challenge the primary judge's conclusion to that effect. Ground 1 alleges error in applying the incorrect legal test as to the "first-stage" question and having regard to considerations and evidence not properly relevant to that stage. Ground 2 alleges error in his Honour's finding that MetLife's determination was unreasonable arising from failures to consider and apply Ms Hellessey's onus of providing evidence in support of her claim; to determine whether on the evidence available it was unreasonable for MetLife not to be satisfied of the matters required; and in the standard for determining the validity or invalidity of MetLife's decision. As already noted, there is no challenge to his Honour's determination of the "second-stage" question in favour of Ms Hellessey.
2. The appeal should be dismissed. The primary judge's holding that MetLife breached its obligation to act reasonably and fairly in its treatment of the lay witness material was itself sufficient to sustain his Honour's conclusion that the third rejection was invalid. That conclusion also called into question MetLife's treatment of the medical reports and opinions. The significance of the lay witness material is obvious when its subject matter is considered in the context of the evidentiary and other material before MetLife at the time of the third rejection. That material is summarised below.

Ms Hellessey's background

1. Before Ms Hellessey joined the NSW Police Force, she had worked for a short time for Woolworths as a checkout operator, obtained a certificate in childcare and worked in a childcare centre, as well as obtaining a driving instructor training certificate and working as a driving instructor. She married in January 2003 and had two daughters. The family lived in the outskirts of Goulburn until June 2012, when it moved to a small property near Quialigo.
2. Ms Hellessey has always been a keen horsewoman, having started riding at the age of five and showing horses at about age 11. Before she ceased working as a police officer, she attended, agricultural and horse shows, sometimes on a weekly basis, with a long-time friend, Ms Cleary. She maintained, however, that by early 2011 the nature and extent of her participation in those events had changed. She would not ride or "show" her horses, leaving that to either Ms Cleary or Mr Harvey, also someone with a great love of horses whom she had known for many years. In January 2012, Ms Hellessey and Ms Cleary registered a newly born foal which they had bred in the Australian Pony Stud Book, referring to their "stud" as Fairymead.

Material before the first rejection (22 December 2014)

1. The medical information provided to or obtained by MetLife included reports from Dr Durrell; from Ms Hellessey's treating psychologist, Mr Ward, and treating general practitioner, Dr Falk; from a consulting psychiatrist retained by the NSW Police Force, Dr Bertucen; and from a consultant psychiatrist retained by MetLife, Dr Hodgson. MetLife also had a surveillance report showing Ms Hellessey leaving her residence to visit a local shopping centre and green grocer; Mr Everett's vocational assessment of job options available to Ms Hellessey in the light of her training and experience; and a report summarising Ms Hellessey's Facebook statuses and posts between April and November 2012. Those Facebook entries suggested that, notwithstanding her medical condition, Ms Hellessey continued to attend and participate in various horse-related and other events, including in Goulburn and Sydney.

Dr Durrell (treating psychiatrist)

1. The reports of Dr Durrell diagnosed Ms Hellessey with PTSD and a major depressive disorder. In his report of 16 February 2013, he observed - referring to the job options identified by Mr Everett (viz. learning and development officer, childcare worker, driving instructor, cashier, sales representative) - that Ms Hellessey's "chronic and permanent work-caused mental injury to be of such chronicity and severity to render her totally and permanently incapacitated from any return to the workplace".
2. By his letter dated 29 September 2013, Dr Durrell responded to MetLife's request that he comment on "Ms Hellessey's Facebook summary details". The entries summarised referred to a bus trip of the Goulburn Pony Club to the mounted police unit in Redfern, a visit to a Sydney Opera House concert in which Ms Hellessey's nine-year old daughter played the recorder, and attendance at regional shows and horse or pony club events. In responding, Dr Durrell made the following comments: 1. that "the Facebook entries that you have provided do not exclude or confound the diagnosis of PTSD"; 2. that "without her husband, support person and medication, she would be unable to attend the Palomino Awards night, the Opera House recital of her daughter playing the recorder or be able to attend the Sydney International Equestrian Centre"; 3. that she "requires psychotropic medication including anxiolytics and low doses of Valium in addition to her Zoloft medication" without which "it is most unlikely that Ms Hellessey would have been able to continue with her 'behind the scenes' activities at the Royal Easter Shows and other shows"; and 4. that he and Mr Ward "have encouraged Ms Hellessey to continue with her horse-related activities".
3. His letter concluded that "from a longitudinal treating psychiatric perspective … Ms Hellessey's PTSD is a permanent mental injury that is likely to render her permanently incapacitated from gainful employment in trades and occupations for which she is reasonably qualified".

Mr Ward (treating psychologist)

1. In the context of Ms Hellessey's claim for workers' compensation, Mr Ward wrote in May 2011 that he believed she "may be" currently fit for employment provided that it is "far removed from policing". However, in November 2012, in response to MetLife's request that he comment on her capacity to undertake any of the jobs described in Mr Everett's report, he advised that based "on what has been reported to me and my observations over time of Ms Hellessey's affective state I do not believe she would be suitable at this stage for the mentioned positions as they all involve interpersonal interaction".
2. Later, in responding in May 2013 to questions from MetLife directed to the Facebook entries, Mr Ward did not consider her attendance at shows and horse award nights as behaviour "inconsistent with [the diagnosis of] social phobia". He explained, she "does not feel pressured when speaking with [horse people and] has attended the Royal Easter Show all through our therapy". In response to MetLife's question whether she was unlikely ever to engage in any gainful employment, he said "due to the lack of progress with her affective state and intrusiveness regarding traumatic memories I do not believe Ms Hellessey is fit to work".

Dr Hodgson (consultant psychiatrist)

1. Dr Hodgson prepared two reports. In the first, dated September 2012, she confirmed his diagnosis of Ms Hellessey as suffering from chronic PTSD, chronic major depressive disorder and social phobia, also recording that she appeared "a genuine and sincere historian" not motivated by "secondary gain". In relation to her future work prospects, and noting that "she is well engaged with support from her psychiatrist, psychologist and general practitioner, she has excellent family support, and she has her interest in horses and animals", Dr Hodgson considered that "she may, with time, be able to work in some fulfilling capacity related to her education, experience and training".
2. In her second report dated 3 May 2013, and responding to MetLife's questions directed to the Facebook material, she observed: "Ms Hellessey may appear happy in her Facebook postings, but I am unable to give a professional independent opinion as I am doubtful whether or not credence can be given to Facebook comments and photos. These may not have been independently verified and they may not be reflective or indicative of her usual status". With respect to MetLife's question directed to her incapacity for work, Dr Hodgson referred to her earlier opinion that she did not consider Ms Hellessey's incapacity was such as to render her "unlikely ever to engage in any gainful profession, trade or occupation". At the same time, she emphasised that Ms Hellessey should be reassessed with the Facebook material and any "other more recent professional documentation".

Dr Bertucen (consulting psychiatrist)

1. Dr Bertucen wrote two reports. In the first, addressed to NSW Police Force and dated 30 August 2011, he expressed conflicting opinions as to whether Ms Hellessey could return to some form of work. Having said that she "may be capable of returning to some form of work within six to 12 months after her medical discharge", he stated unequivocally that she was "totally and permanently disabled in respect of any future employment for which she is qualified by virtue of experience, education and training". That report was prepared following a consultation with Ms Hellessey. The doctor's summary of her personal history includes that her "hobbies and pasttimes largely centre around horses and equestrian activities. (She has been demotivated to be involved in this for the last eighteen months, however, she is gradually getting back into this source of enjoyment.)"
2. In his second report dated 17 August 2015, and addressed to MetLife, Dr Bertucen expressed the view that as at March 2011 it was likely that Ms Hellessey "could engage in work either on a part-time or full-time basis as a Learning-Development/Training-Development professional until retirement age". That opinion is not supported by any reasoning and Dr Bertucen's earlier, and apparently conflicting, opinions are not explained or resolved.

Additional material before the third rejection (30 November 2016)

1. Before its fourth procedural fairness letter was sent (on 31 October 2016), MetLife obtained access (in most cases by subpoena) to records relating to the Australian Palomino Horse and Pony Association; the Goulburn Pony Club; Ms Hellessey's bank accounts, credit cards, and Facebook account;and Mr Harvey's Facebook account. In addition, MetLife secured printouts of the websites of organising entities of horse shows and events which apparently received some form of sponsorship from "Fairymead show horses/stud". That material is summarised by the primary judge at Judgment [455], [457]-[459], [462], [464]-[468].
2. In this same period, further medical opinions were provided or obtained: two from a consultant psychiatrist, Dr Westmore; two from a neuropsychologist, Dr Rawling; and one from a psychologist, Professor Mattick. Drs Westmore and Rawling were retained on behalf of Ms Hellessey, and Professor Mattick was retained by MetLife.

Dr Westmore (consultant psychiatrist)

1. In his report dated 9 December 2015, Dr Westmore described Ms Hellessey as being unlikely ever to engage in gainful employment because: She is socially isolated and withdrawn, depressed in mood, irritable and intolerant. Her capacity to deal with clients, co-workers and supervisors would all be significantly impaired because of her psychiatric illnesses and the associated symptoms.
2. In his further report of 20 June 2016, he was asked to assume Ms Hellessey engaged in activities which included "limited participation in horse shows", occasional visits to shops, and the undertaking of some activities as the secretary of a horse and pony association. He considered those activities were not inconsistent with his diagnosis that she suffered from chronic PTSD and a major depressive disorder. He added "a number of the activities described are activities which could be done in isolation, away from others and without the need to interact with others".

Dr Rawling and Professor Mattick (consultant neuropsychologists)

1. Dr Rawling undertook emotional state and other psychological assessments of Ms Hellessey in August 2016, concluding in his first report dated 8 August 2016 that Ms Hellessey "has a severe and chronic psychological disability" and, for that reason, that the "validity and usefulness" of the job options identified in Mr Everett's vocational assessment which had not taken account of that psychological disorder were "highly questionable". Having tested the validity of her claimed disability, he concluded that there was "no evidence of factitious failure on cognitive testing" and that on personality testing she showed a tendency to see her symptoms as extreme. However, he concluded that there was "no compelling evidence of exaggerated claims of disability".
2. Professor Mattick was retained to undertake clinical assessments with a view to measuring "any exaggeration or fabrication of complaints and deficits, using validated measures and approaches". Relevantly, he concluded using a particular method of assessing symptom validity that Ms Hellessey was "exaggerating whatever symptoms she may be experiencing in terms of anxiety, depression and other problems". Dr Rawling was then asked to comment on that conclusion. In his report dated 21 November 2016, he did so, taking issue with Professor Mattick's conclusion because the tests he had conducted did not provide "objective scientific justification for his conclusion that Ms Hellessey does not suffer the symptoms of which she currently complains". Having undertaken a further assessment of Ms Hellesey following that of Professor Mattick, Dr Rawling's opinion was that whilst she "may have the aptitude to cope with the cognitive demands of a number of jobs … her psychological frailty made it unlikely that she would survive in such jobs long term".

Lay witness material served by Ms Hellessey

1. Affidavits, including of Ms Hellessey, Ms Cleary, Mr Harvey and Ms Eves (her mother), were provided to MetLife on 9 November 2016, in the context of the proceedings but also in response to the third and fourth procedural fairness letters. On 25 November 2016, Ms Hellessey's solicitors noted that those affidavits had been served and asserted that they "must be considered by MetLife".
2. The fourth procedural fairness letter contained separate descriptions of Ms Hellessey's involvement in Fairymead show horses/stud, her activities as secretary of the Goulburn Pony Club, secretary of the Australian Palomino Horse and Pony Association (a subject also dealt with in the third procedural fairness letter), as well as her attendance at and travel to various horse shows and related events in the period between August 2011 and March 2016. Ms Hellessey's affidavit did not address her involvement with Fairymead stud. However, it did deal at some length with her involvement in the Palomino Association, the Goulburn Pony Club and "various other activities arising out of her ownership of a small number of horses and her children's engagement in horse riding": Judgment [866]. The affidavits of Ms Cleary and Mr Harvey described the "changed" and limited nature of Ms Hellessey's involvement in horse shows and events after 2010.
3. Ms Cleary also addressed the Fairymead stud. In the fourth procedural fairness letter, it was said that between January 2011 and June 2015 Ms Hellessey was "involved" with Fairymead, including "acting as the Owner/Manager". Reference was made to correspondence with the Welsh Pony & Cobb Society of Australia Inc, and to that stud's sponsorship or support of shows and other causes. In relation to that subject, Ms Cleary said: In January 2012, we had a foal born who we jointly owned and called Fairymead Princess Mary. I had her registered with the Australian Pony Study Book in joint names. We used my Australian Pony Stallion (Cranellie Da Vinci) and my Australian Pony mare at the time, (Vichand Chantilly Lady) to breed the horse. We had decided to call our 'stud' prefix Fairmead, because my Husband, Keith, is from Fairymead in Queensland. Fairymead … never was a business venture of any sort, it was merely a stud name that we could use to register any foals we had. If we went to shows or sponsored classes at local shows, we would often put it under the name "Fairymead Show Team".
4. Ms Hellessey's descriptions of her ongoing symptoms, and the changes in the activities which she was able to undertake, were supported by the evidence of her husband, her mother and friend, Ms Manning, a local nurse. The evidence of Ms Cleary and Mr Harvey was capable of corroborating Ms Hellessey's description of the limited nature of her involvement in horse-related shows and events, and her difficulties with social interaction.

The breach in MetLife's rejection of the lay witness material

1. The grounds of appeal and MetLife's submissions do not always recognise or focus on the distinction between a breach of the obligations to act reasonably and fairly in the consideration process and a breach apparent from the outcome of that process. Here, the primary judge's first and significant reason for concluding that the third rejection was invalid was that "it was not a reasonable or proper approach for MetLife to reject all of Ms Hellessey's lay evidence in the manner described in the third rejection letter": Judgment [867]. MetLife's treatment of that evidence was significant for its "judgment in relation to the facts concerning Ms Hellessey's psychological injury and its symptoms", as well as being a "major factor in the reasons given by MetLife for discounting the evidence of the medical experts who supported Ms Hellessey's claim": Judgment [854]; as is acknowledged by the terms of MetLife's conclusion in the third rejection letter extracted at [11] above.

The primary judge's analysis

1. MetLife responded to the lay witness material in its third rejection letter: MetLife has carefully considered the affidavits and makes the following comments. While we do not intend providing an exhaustive analysis of every affidavit we note that the member's affidavit falls short of adequately addressing or does not address at all, issues raised in MetLife's letters of 11 May 2016 and 31 October 2016. For example the member has not addressed in any way her involvement with "Fairymead".
2. As the primary judge noted at Judgment [857], MetLife's observation that Ms Hellessey's affidavit did not address her involvement with Fairymead was correct, but ignored the affidavit evidence of Ms Cleary which his Honour described as being a "cogent response to MetLife's reliance upon Ms Hellessey's involvement in Fairymead". His Honour concluded from the absence of any reference to it that MetLife had ignored it completely or not engaged with it, necessarily rejecting the letter's assertion that MetLife had "carefully considered it": Judgment [859].
3. His Honour then considered MetLife's statement that Ms Hellessey's affidavit "falls short of adequately addressing or does not address at all, issues raised" in the third and fourth procedural fairness letters. At Judgment [862], he observed that, apart from Fairymead, the issues referred to in that fourth letter "appear primarily to be Ms Hellessey's involvement in the Palomino Association, her being secretary of the Goulburn Pony Club, her involvement in other horse competitions, events and shows, her Facebook posts, and what was described as her registration activities". He continued: [865] … [the lay witness] affidavits contained a substantial body of consistent evidence concerning Ms Hellessey's activities and the consequences of her psychological injury, that in significant respects dealt with and explained major aspects of the preliminary considerations stated in MetLife's third and fourth procedural fairness letters. [866] The evidence of Ms Hellessey, Ms Cleary and Mr Harvey was clearly capable of establishing the genuinely limited involvement of Ms Hellessey in relation to horse shows and events. Ms Hellessey addressed and explained the limited nature of her involvement in the Palomino Association and the Goulburn Pony Club, and her various other activities arising out of her ownership of a small number of horses and her children's engagement in horse riding. All of the lay affidavits, taken as a whole, provided substantial corroboration for the opinions reached by Ms Hellessey's treating medical professionals, and in particular Dr Durrell, concerning the symptoms of her psychological injury.
4. At Judgment [868]-[869], his Honour concluded, in the face of MetLife's outright rejection of the "evidence of apparently credible, and in some degrees independent, witnesses without having or expressing any rational or persuasive reasons", that it had proceeded without giving this body of material more than "perfunctory consideration". That conclusion, reiterated at Judgment [960], was available and is not challenged by any ground of appeal or argument developed in the appeal. He also noted the absence of any argument on the part of MetLife that it did not have sufficient time "to give full and proper consideration to the affidavits and to explain its treatment of those affidavits properly" (Judgment [869]), in circumstances where it had freely proceeded to make its third decision.

Ground 1(a): application of incorrect legal test

1. This ground contends that the primary judge applied an "incorrect legal test" to determine whether MetLife's third decision was valid. Citing Hannover Life v Jones at [121], MetLife submits that the "criterion of reasonableness of the insurer's decision is whether the opinion formed … was not open to an insurer acting reasonably and fairly in the consideration of the claim". The primary judge is said to have formulated and applied two tests, each of which departed from that stated in Hannover Life v Jones.
2. The first is that formulated at Judgment [116]. Having referred to the statements of principle in Shuetrim at [60]-[65], his Honour continued: … The insurer is required to "act reasonably in considering and determining" when forming its satisfaction or opinion as to whether the TPD definition is satisfied, and it must be shown that the view taken by the insurer was unreasonable on the material before it. In my view, if it can be shown on the evidence before the insurer that the actual decision-making process that was adopted by the insurer was sufficiently unreasonable to vitiate the determination, it should not be required of the claimant that he or she be able to exclude all other routes to the insurer reaching the same determination that could have been reasonable.
3. MetLife submits that his Honour's last observation contradicts the principles in Hannover Life v Jones. In my opinion, that is not so. As his Honour recognised at Judgment [116], the obligation to act reasonably and fairly applies to the process of consideration (addressed in this observation), as well as the decision. And his Honour's use of the adverb "sufficiently" before "unreasonable" acknowledges the point made at Judgment [825] (quoted at [13**] above), that the process (or decision) is only to be impugned if it exceeds what French CJ described in another context as the "area of decisional freedom" within which "reasonable minds may reach different conclusions": Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18 at [28]; cf at [105] (Gageler J), referring to "the bounds of reason".
4. The second wrong formulation of the relevant test is said to appear at Judgment [852], where his Honour said: In deciding whether the determination by MetLife to reject Ms Hellessey's claim for the third time was sufficiently reasonable in relation to the logic and judgments applied to the consideration of the available information, it is appropriate to look at the process of reasoning on an overall basis, on a basis that tracks the significant arguments addressed by MetLife, and also the individual decisions that MetLife made along the way that underpin the more general process of reasoning that led to MetLife's ultimate determination.
5. Here, MetLife takes issue with the implicit requirement that a determination be "sufficiently reasonable in relation to the logic and judgments applied to the consideration". In my view, such a requirement is not erroneous in substance. It also acknowledges the insurer's decisional freedom, except by reference to a minimum standard of reasonableness. That this formulation did not contemplate any reversal of onus is made plain by a fair reading of the Judgment as a whole, especially [114]-[116].
6. The written submissions in support of this ground, which asserts a misapplication of relevant principles, do not address his Honour's findings as to the reasonableness of MetLife's treatment of any of the evidentiary material, including the lay witness material.
7. In oral argument, the Court was taken to parts of the reasons in which it was said the primary judge had erred, either in applying the wrong test, reversing the onus or substituting the Court's opinion for an opinion reasonably available. The only submission made in oral argument in relation to the reasoning at Judgment [855]-[869] was that the use to be made of the lay witness material was "part of the weighing process" to be undertaken by the decision-maker. Whilst that is correct, it is beside the point in circumstances where the primary judge found that MetLife had not engaged in that process. This ground is not made out in relation to his Honour's conclusion concerning MetLife's failure to consider the lay witness material.

Ground 1(b): reliance on irrelevant considerations and evidence

1. MetLife submits that in deciding whether its third rejection was valid the primary judge had regard to oral evidence given during the course of the trial, as well as his findings as to the credibility of particular witnesses. It is said this approach was explicitly acknowledged at Judgment [534].
2. In my view, a fair reading of the relevant parts of his Honour's reasoning demonstrates otherwise. At Judgment [533], the primary judge recorded that in deciding whether to reject Ms Hellessey's claim for the third time MetLife had to give "proper consideration to a number of relatively detailed substantive affidavits". In the review of the evidence which followed, the summaries of the affidavit evidence and evidence in cross-examination, and findings as to credibility of each witness are separately recorded: Judgment [535]-[656]. More significantly, his Honour's analysis directed to the validity of the third rejection, including the treatment of the lay witness material, does not refer to or rely upon any oral evidence given during the trial: Judgment [853]-[988]. That analysis was repeatedly described as directed to MetLife's assessment of "Ms Hellessey's lay witnesses' sworn evidence", as distinct from their evidence more generally or any assessment of their credibility: see Judgment [868], [869], [983], [986].
3. This ground is not made out, either in relation to the finding of breach with respect to MetLife's consideration of the lay witness material or the "first stage" enquiry more generally. In that enquiry, contrary to MetLife's submissions, the primary judge's reasons do not indicate that he had regard to Dr Westmore's report of 30 November 2016: cf Judgment [875], [914], [934]. Finally, as is apparent from Judgment [236], whilst his Honour did not rely upon Dr Hodgson's reports as providing "expert evidence" in the "second stage" inquiry, they remained relevant as providing "advice, information and suggestions to MetLife as part of its process of determining Ms Hellessey's claim".

Ground 2(a): reversal of onus

1. Ground 2(a) is that the primary judge erred in failing properly to consider and apply Ms Hellessey's onus to provide proof to MetLife's satisfaction of the matters required by the TPD definition. MetLife submits the primary judge "considered that MetLife had to accept the claim unless it could justify a state of dissatisfaction, thereby disregarding the obligation of the Insured Member to provide evidence to the insurer in support of his or her claim". Judgment [960], which concerns MetLife's rejection of the lay witness material, is said to be a "pointed" example of the approach adopted by the primary judge that "MetLife must be wrong if it was arguable that Ms Hellessey was right". In that paragraph, his Honour concluded in relation to MetLife's consideration of the significance of Ms Hellessey's horse-related activities: [960] In my view it was not reasonable for MetLife to reject Ms Hellessey's sworn lay evidence out of hand just because it painted a different picture of the psychological significance of Ms Hellessey's activities than that MetLife had chosen to adopt. The available evidence may have been consistent with MetLife's conclusions, but it was equivocal and capable of explanation. Ms Hellessey's witnesses' evidence provided an explanation. It may have been within MetLife's contractual province if it had given due weight to both the evidence that it had accumulated and the sworn evidence of Ms Hellessey's witnesses. It did not do so. Without any real explanation, it simply rejected evidence that was inconsistent with its own conclusions that were inherently contestable.
2. This paragraph is said to describe an instance where the primary judge found MetLife to have "unreasonably refused to accept the due weight" of Ms Hellessey's evidence, even though the evidence available "may have been consistent with MetLife's conclusions". That submission, in my view, grossly misunderstands the paragraph, which is referring to his Honour's earlier reasoning at Judgment [855]-[869]. The point made is that MetLife could have given bona fide consideration to the lay witness material and that, acting reasonably and fairly in doing so, it might have concluded that the evidence should be given little weight. In the course of oral argument, senior counsel for MetLife did not contest that it was "right" to understand his Honour's reasoning in that way. This ground is not made out in relation to MetLife's consideration of the lay witness material.

Ground 2(b): failure to consider unreasonableness of MetLife's decision

1. This ground is that the primary judge erred in failing properly to consider and determine the critical question of whether "on the evidence available to [MetLife], it was unreasonable for [it] not to have been satisfied of the matters required by the TPD definition". In support of this ground, MetLife submits that "according to Hannover v Jones [its] decision would only be invalidated if that conclusion was not reasonably or fairly open" to it. Not only did the primary judge not apply that test, it says, but his Honour "appears to have tested MetLife's conclusion by reference to his own evaluation and, where the two differed", by preferring his own opinion. As an example of this substitution of his own "evaluation" of material, MetLife refers to the description at Judgment [858] of MetLife's response in the third rejection to Ms Hellessey's affidavit concerning Fairymead as "not strictly wrong".
2. The former submission is wrong in law, for the reasons at [8] and [50] above. The latter ignores the context in which the primary judge's observation was made. His Honour was in no sense substituting his own view for one that was reasonably open: he was emphasising that, whilst the earlier observation may have been correct, it ignored the substance of the matter as recorded in Ms Cleary's affidavit and its doing so constituted "a serious error in MetLife's reasoning process": Judgment [859]. Accordingly, this ground is not made out in relation to MetLife's consideration of the lay witness material.

Ground 2(c): excessive scrutiny of MetLife's decision

1. As Ms Hellessey's written submissions suggest, this ground asserts that the primary judge erred by imposing too high a standard of analysis on the decision made by MetLife and this resulted in unfairness to it. In support of it, MetLife refers to seven so-called "criticisms" made of it by the primary judge, which are claimed to have been "unwarranted". For example, in relation to the third rejection letter, at Judgment [529], his Honour said: [529] MetLife seems to have been proceeding on the basis that Ms Hellessey was engaged with Ms Cleary in a substantial horse-related business that traded under the name "Fairymead", so that when it did not receive a comprehensive explanation as to why that was not so, it thought it reasonable to disregard all of the other evidence served to support Ms Hellessey's claim.
2. MetLife submits that it was "unfair" to speculate as to its reasons for attaching significance to Ms Hellessey's involvement in Fairymead. However, any such speculation is not shown to have involved or led to any material legal or factual error in relation to MetLife's consideration of the lay witness evidence. The other criticisms do not address that evidence in any respect.

Conclusion

1. The primary judge's conclusion at Judgment [989] that the third rejection was invalid should be upheld. His Honour did not err in finding that MetLife breached its obligation to act reasonably and fairly in its treatment of the lay witness material, and that was sufficient to sustain his conclusion. This is not a case where it is appropriate for this Court to deal with the challenges to other findings of breaches of duty by MetLife in its consideration and determination of whether the TPD definition was satisfied. Many of those findings take account of his Honour's conclusion in relation to MetLife's rejection of the lay witness material, and it would be difficult and artificial to deal with those finding on the hypothesis that this rejection involved no breach of duty: see Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [7] (Leeming JA, Basten and Gleeson JJA agreeing). The appeal should be dismissed with costs.
2. WHITE JA: I have had the advantage of reading in draft the reasons for judgment of Meagher JA. I agree with those reasons and with his Honour's proposed orders. I would add the following observations concerning one of MetLife's submissions. These remarks do not qualify my agreement with the reasons for judgment of Meagher JA.
3. Meagher JA has referred (at [19]) to MetLife's second ground of appeal. Ground 2(b) was that: "The trial judge failed properly to consider and determine the critical question of whether, on the evidence available to the appellant, it was unreasonable for the appellant not to have been satisfied of the matters required by the TPD definition."
4. This ground of appeal framed the critical question not as being whether MetLife acted reasonably in declining to form an opinion that the matters required by the TPD definition were satisfied, but whether it was unreasonable for it not to be so satisfied.
5. In its written submissions MetLife explained this ground as being that the primary judge had not followed the "legal test" authoritatively stated in Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233; (2017) ANZ Ins Cas 62-149 that the criterion of reasonableness of the insurer's decision is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim (per Gleeson JA at [121] with which Macfarlan and Meagher JJA agreed at [1] and [9] respectively). The passage relied on was as follows: "[121] As I have said, the task for the court in the present case is not to assess what it thinks is reasonable and thereby conclude that any other view displays error. It may also be accepted that there can be a range of opinions available to an insurer acting reasonably and fairly on the material before it. However, the suggested analogy with judicial review is not so close as to require the adoption of the stringent test of unreasonableness in the Wednesbury sense. Rather, the criterion of reasonableness of an insurer's decision is whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim."
6. MetLife submitted that the decision it made was "plainly open" to it and hence was not an invalid determination, that the test proposed by the primary judge was different from the "test stated in Hannover v Jones" and that the primary judge "focused on the process" rather than the body of evidence before MetLife. The test stated by the primary judge that MetLife criticised was: "In my view, if it can be shown on the evidence before the insurer that the actual decision-making process that was adopted by the insurer was sufficiently unreasonable to vitiate the determination, it should not be required of the claimant that he or she be able to exclude all other routes to the insurer reaching the same determination that could have been reasonable." (Judgment [116])
7. MetLife submitted that "at no stage did the trial judge here consider whether a decision might be 'open' if the insurer was acting reasonably or fairly." In oral submissions Mr Watson SC who appeared with Mr Purdy for MetLife submitted that the question was whether "an insurer in the position of this insurer, acting reasonably - whether that decision was open".
8. That is, MetLife submitted that the primary judge was in error by inquiring whether MetLife itself acted reasonably and fairly in declining to form the opinion that it was satisfied that the respondent met the TPD definition. This was because, so it was submitted, the relevant inquiry was whether an insurer in MetLife's position could reasonably have reached the opinion that it formed.
9. This submission takes what was said by Gleeson JA in Hannover Life Re of Australasia v Jones at [121] out of context and ignores other parts of his Honour's reasons, and the reasons of the other judges of the Court.
10. As Meagher JA observed in Hannover Life Re of Australasia v Jones (at [8]) the focus of the parties' arguments in that case was "on the unreasonableness ground for attacking the insurer's opinion, as distinct from whether the insurer acted unreasonably in the opinion-forming process." It was to this that Gleeson JA was referring in [121] of his Honour's reasons quoted above. His Honour was not saying that the claimant will be bound by the insurer's opinion that he or she was not totally and permanently disabled if the insurer did not act reasonably in forming that opinion but an insurer could reasonably have formed that opinion.
11. In Hannover Life Re of Australasia Ltd v Jones Gleeson JA restated (at [86]) the principle that: "...the insurer is not entitled to refuse a claim for a reason which depends on the efficacy of an opinion in relation to the formation of which it has not acted reasonably and fairly or which does not address the correct question. And if the insurer does form and rely on such an opinion, that constitutes a breach of its contractual obligations and the court itself may determine whether on the material available to it, the claim falls within the policy."
12. His Honour cited various authorities in support of that well-established proposition, including Edwards v Hunter Valley Coop Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 and Hannover Life Re of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas 90-123; [2005] NSWCA 214, and rejected a challenged by the insurer to the decision of the primary judge in Hannover Life Re of Australasia Ltd v Jones (Brereton J) to the same effect (at [50] and [82]).
13. Gleeson JA noted (at [87]): "[87] The debate in this Court focused on whether the assessment of the reasonableness of the Insurer's 'opinion' should be undertaken in the Wednesbury sense, as the Insurer contended; or by reference to entirely objective criteria, that is, a review of the merits of the insurer's decision, as Mr Jones contended; or by reference to some other criterion or standard of review."
14. Gleeson JA rejected both the submission of the insurer that the assessment of the reasonableness of its opinion should be undertaken in the "Wednesbury sense", meaning either a decision that was so unreasonable that no reasonable insurer could have reached it or, perhaps, was irrational, and Mr Jones' contention that the insurer's opinion could be reviewed on its merits and had to be either correct or fair and reasonable as assessed on entirely objective criteria (at [89]-[98]). The test formulated by his Honour at [121] addressed the standard for assessing the reasonableness of the insurer's opinion, not the reasonableness of the way the insurer went about forming its opinion.
15. In Hannover Life Re of Australasia Ltd v Jones Macfarlan JA repeated the observation of Allsop CJ in Minister for Immigration and Water Protection v Stretton (2016) 237 FCR 1; [2016] FCAFC 11 at [10] that "the concept of legal unreasonableness is not amenable to minute and rigidly-defined categorisation or precise textual formulary". Meagher JA said that for a claimant to establish that an insurer's decision is not contractually binding a party would need to show that the view taken by the insurer was unreasonable on the material then before the insurer or that the insurer had not considered the correct question or that in considering that question and informing itself as to matters relevant to its determination, the insurer had not acted fairly and reasonably (at [7]).
16. His Honour added (at [9]) that the insurer breaches its implied obligation to act reasonably and fairly in forming or declining to form an opinion if the opinion was not open to an insurer acting reasonably and fairly in considering the claim, but that is not the only ground on which the insurer's opinion may have no contractual effect.
17. An opinion that would not be open to an insurer acting reasonably and fairly will not be binding on the claimant. It is not a corollary of that principle that the insurer's opinion will be binding on the claimant if it is one that would be open to an insurer acting reasonably and fairly, if the insurer in question did not act reasonably and fairly in reaching its opinion. It is only if the insurer has acted fairly and reasonably in assessing and determining the claim that the insurer's decision that it is not satisfied that the claimant has met the requirements of the TPD definition may be determinative. It would be to distort the contractual language ("to our satisfaction") to postulate the satisfaction of an hypothetical reasonable insurer faced with the same materials which the actual insurer had.
18. There is a distinction between the formation of a reasonable opinion and acting reasonably in the formation of an opinion. Para [121] of the reasons in Hannover Life Re of Australasia v Jones addresses the former. The reasons of the primary judge addressed the latter. The primary judge was not in error in doing so, nor in his evaluation that MetLife did not act reasonably in forming its opinion.

---

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: 12 December 2018