Plaintiff v Defendant

5 The plaintiff has not worked since he left the business in May 1997. On 23 May 1997 a receiver and manager was appointed to Aprique (Vic) Pty Ltd. On 3 July 1997 a liquidator was appointed. On 5 August 2003 the company was wound up.

6 The relevant term of the income protection policy is the following (C.B. 309):

"The person injured is totally disabled if, because of an injury or sickness, he or she is:

• unable to perform at least one income producing duty of his or her occupation;

• not working; and

• under the regular care and attendance of a medical practitioner."

7 By its amended defence the defendant says that the plaintiff is not totally disabled within the meaning of the policy; further, that the plaintiff is able to perform each income producing duty of his occupation; further, that the reason the plaintiff is not working in his previous or any other occupation is not because of sickness or injury (as required by the policy) but because his business collapsed. The defendant also says that the plaintiff's claim for bridging finance (of $60,000 obtained on 31 March 2005 with interest at 16% per annum and default interest of 19% per annum plus costs of obtaining the finance) is not only factually unsupported but is incompetent in law in that the plaintiff is not entitled both to an indemnity under the policy and to consequential damages.[1] The defendant also says that it would be inappropriate to make the declaration sought as to continuing entitlement to disability benefit, because the notion of continuation is vague and indeterminate and the evidence unpersuasive. The real dispute, however, is whether the plaintiff has proved that since November 2004 he answers the description of total disablement as defined in the policy.

8 A plain reading of the definition of total disability ("the term") contained in the policy and quoted in paragraph 6 above clearly establishes the following as qualifying cumulative requirements - that the plaintiff

(a) because of an injury or sickness;

(b) is unable to perform;

(c) at least one income producing duty of his occupation;

(d) is not working; and

(e) is under the regular care and attendance of a medical practitioner.

"Occupation" means that which was being pursued at the time of incurring of disability.[2]

9 Here, the plaintiff's occupation was managing director of a manufacturing company, with net sales of some $4 million per annum (C.B. 813). It is inability to perform an income producing duty of the occupation which is the test. Further, the test is inability to perform; not lessened performance. Further, the test is that the inability is because of a sickness. The sickness relied upon by the plaintiff is a major depressive disorder. That condition clearly is a sickness within the terms of the policy. By clause 1.13 of the policy "sickness" is defined as:

"'Sickness' means sickness or disease suffered by you which manifests

itself which this Policy is in force."

"'Injury' means bodily injury to you caused by an accident occurring

while this Policy is in force..."

By its own terms, and by its contrast with the bodily character of injury, sickness as defined by the policy comprehends the psychiatric entity of major depressive disorder, classified as a mood disorder (DSM-IV-TR345). (In the plaintiff's further and better particulars of the statement of claim, paragraph 3(a), the sickness - not having been specified in the statement of claim - was stated to be chronic depression. In the Opening it was stated to be major depressive disorder. Nothing turns on the difference in nomenclature).

10 I turn to the evidence.

(b) The Plaintiff

11 The plaintiff, Mr McIver gave extensive evidence before me. His evidence in chief was in summary as follows.

12 Mr McIver resides in North Ringwood and described himself as retired. He was born on 18 May 1954 and was raised in Ballarat. He had an older brother and a younger sister. He attended Ballarat North State School and Ballarat East High, obtaining the Form Six Certificate. He then moved to Melbourne. He joined the State Public Service as a clerk, work he found very boring. He then had a series of positions in private enterprise on the sales side. He liked the work and did well. He progressively moved up the scale of responsibility in various companies, from sales representation to sales manager to national marketing manager. Ultimately in 1989 he obtained the position of marketing manager with Dyoll, a salaried position. After a short period he and two other persons, Mr Sheares and Mr McPherson, effected a buyout of the business. Initially they had equal one-third shares. Sheares dropped out. Mr McIver virtually ran the company on both the production and the administration sides. He worked hard and long hours in doing so. By 1994 the business was doing very well. Then financial troubles started occurring, to which I shall return.

13 On the personal side, Mr McIver for 17 years had a relationship with a woman from Ballarat. After that relationship concluded he met and in 1991 married Sarah Davidson, who gave evidence before me. A boy was born to them on Christmas Day 1992. Mr McIver was ecstatic at the birth of their son, and continues to have a very close relationship with him. However, later in the marriage the question of further children became an issue between him and his wife. Mrs McIver wanted more children and Mr McIver did not. Mr McIver for many years had had severe lower back pain, as well as reflux. He did not like taking pills. The business grew. Mr McIver started having trouble sleeping because he was mentally occupied with the business. He came under the care of Dr Fennessy for sleep problems. Mr McIver commenced taking Mersyndol, then Temazepam, then Rohypnol (prescribed by Dr Fennessy). He commenced taking large doses of Rohypnol. Mr McIver was a light drinker of alcohol. In 1994 he and his wife and son moved to a larger home, in Warrenwood, which was closer to the business in Thomastown. He purchased trappings of success: initially a houseboat on the River Murray at Echuca, then a ski boat, then a holiday house at Eildon. Expensive cars were leased through the business. The Rohypnol increased. He had an anxiety reaction at Eildon, was referred by Dr Fennessy to the psychiatrist Dr Leitmanis, and was taken off Rohypnol. Mr McIver did not take Rohypnol again but in 1996 commenced taking Mersyndol in massive doses, 20 per night. He became physically ill, ceased the Mersyndol and recommenced the Temazepam. Then the National Bank moved in on the business on 16 May 1997.

14 In the course of the Dyoll business from 1992 to 1996 there were problems accounting for funds. Mr McIver gave evidence that "My business partner, Easden, on three separate occasions announced that he had made accounting errors to the tune of roughly $500,000" (T. 44). Mr McIver described the third such occasion as follows (T. 45-46):

"He came to me on a Friday and wanted to know if I was interested in buying him out and I said that I was but asked him to try and look in his heart and over the weekend to remember what we used to have as a friendship because I had already asked him were the figures correct and he said they were, as that we were showing to be highly profitable again so I asked him if he could front me on Monday, look in my eyes and confirm that the figures were correct, as in trading figures, and that we were trading successfully. Then I would buy his share. So on Monday morning he came in and he initially said the figures were correct and then he broke down and started crying and said that no, he had made errors again and again, there were accounting errors up around the $500,000 mark and at that point I said, 'That's enough. You have to go'. But I decided that for his family's sake, not for his because I had no feelings for him, he was either going to be locked up or certainly - I can't think of the word - disgraced and I didn't care about him but I cared for his family so we decided not to take action, just to get him physically out of the business, although he remained a shareholder."

There was another major financial problem in 1996. A significant customer of Dyoll, Billy Guyatt's, which had orders of some $4,000,000 with Dyoll, cancelled its orders. Litigation and mediation ensued, which was resolved in early 1997 on terms unfavourable to Dyoll. At the same time Mr McIver was injured in a motorcycle accident. Financial difficulties were mounting. Mr McIver had provided the National Australia Bank with personal guarantees but the Bank wanted more. They were not forthcoming. Then on 16 May 1997 Bank representatives came to the premises of Dyoll at Thomastown. Mr McIver in evidence described that fateful day as follows (T. 56-57):

"I really don't have much of a memory about it. I had actually fought with the Bank to have this particular person because I still saw the business as viable and had done things like left considerable money in the business of my own and the - he came in. All I can remember about it is - it's more a visualisation of him being in my office. I think he asked me to address the staff at some point. He went out of my office and I just picked up my briefcase and didn't say goodbye to anyone or do anything, just got in the car and drove home and my now ex-wife said 'What are you doing home?' and I just said, 'I just can't do this any more', and went to bed."

"... so I never went back, never had anything to do with it again in any shape or form."

15 Mr McIver lost some $100,000 invested in the business, plus his ongoing income and benefits.

16 Mr McIver described his consequent personal state as "a breakdown". He withdrew from people and from life. On 5 August 1997 he was admitted to Delmont Private Hospital for one night upon the referral of Dr Leitmanis. On Father's Day weekend after an argument with his wife he attempted suicide by taking between 100 and 200 Temazepam tablets which he had stockpiled. He was admitted to Maroondah Hospital, transferred to St Vincent's, and then to Belmont Private Hospital where he remained as an in-patient for a month. On occasions prior to the suicide attempt he pulled his toenails off. After the suicide attempt his wife took out an intervention order against him. His marriage was over.

17 Mr McIver remained under the care of Dr Leitmanis, who provided monthly reports to the defendant supporting provision of income protection to the plaintiff.

18 Mr McIver, now separated, bought a house in North Ringwood. He commenced a relationship with another woman. Later he briefly moved to Brisbane, but returned in August 2002. He purchased another house in North Ringwood and recommenced under the care of Dr Leitmanis, who provided monthly reports to the defendant for the provision of monthly income support, which provision had commenced in November 1997. Then Dr Leitmanis ceased practising and ultimately Mr McIver came under the care of Dr Hucker. Then on 5 November 2004 Mr McIver received notice from the defendant of termination of benefits. Mr McIver upon receipt of the notice reacted with "absolute panic attack" and "was extremely suicidal" (T. 85). He had been on monthly income support from November 1997. No more.

19 In December 2004 Mr McIver asked Dr Sheehan to refer him to Belmont Hospital, but Mr McIver ended up at Epworth Hospital overnight and was then transferred to St Vincent's, where he was held as an involuntary in-patient and treated "disgustingly" (T. 87) for five days. He was transferred to Maroondah Hospital and discharged the next day. After these episodes, in 2005 Mr McIver continued to have severe lower back pain and sleeping problems and for those reasons regularly consumed up to 100 Panadeine tablets each 24 hours.

20 Mr McIver was taken by his counsel through his work duties as Managing Director at Dyoll, and the duties stated by him in the application by him to the defendant in November 1992 for income protection. Mr McIver stated that he was no longer capable of performing those duties including negotiating for major purchases of raw materials including freight, conducting negotiations with senior buyers and retailers of the company's products, overseeing the production and managing of furniture and conducting performance review and engaging and terminating employees. Mr McIver gave evidence that he now does not know what is real and not real, does not think logically, breaks down under stress, and does not have the requisite business toughness. Almost at the end of his evidence in chief, when asked by his counsel "What would you say as to your ability to cope?" Mr McIver replied (T. 110):

21 I consider the evidence of Mr McIver in cross-examination below, commencing at paragraph 71.

(c) The Medical Evidence

22 On behalf of the plaintiff a number of medical practitioners were called and numerous medical reports were provided in the Court Book. The written reports were received as evidence in chief. Each psychiatrist took an extensive history from the plaintiff, a matter of critical significance and to which I shall return. A summary of the evidence in chief of the psychiatrists is as follows.

23 Dr M W N Epstein, psychiatrist, of Sandringham was the first psychiatrist called and three reports of his were received. They were dated 21 March 2005, 7 June 2006 and 22 June 2006. Dr Epstein has been a psychiatrist since 1975 and has extensive psychiatric experience. He was honorary secretary of the Royal Australian and New Zealand College of Psychiatrists between 1991 and 1997.

24 Dr Epstein's report of 21 March 2005 reviewed his examination of the plaintiff on 17 March 2005 and numerous psychiatric reports. The report sets out the history taken by Dr Epstein including (C.B. 150):

"In mid 1996 he found out that his business partner had embezzled one [and a] half million dollars from the company. He was horrified, distressed and very angry."

"At the moment he continues to suffer from a major depressive disorder with features of anxiety and has intermittent panic attacks. He is also suffering from substance abuse disorder ... His current work capacity is nil."

By report dated 7 June 2006 Dr Epstein reviewed his examination of the plaintiff on 31 May 2006 and some psychiatric reports. He concluded (C.B. 165):

"He suffers from a major depressive disorder with features of anxiety and has intermittent panic attacks. He is also suffering from a substance abuse disorder..."

By report dated 22 June 2006 Dr Epstein comments upon a report of Dr D Samuell of 14 June 2006, essentially on the matter and consequences of the plaintiff's credibility.

25 Dr N E Hucker, psychiatrist of Box Hill is the plaintiff's treating psychiatrist. Dr Hucker has been practising as a psychiatrist since 1978 and a Fellow since 1983. He was called and two reports of his were received. They were dated 21 April 2006 and 10 July 2006.

26 Dr Hucker examined the plaintiff initially on 13 December 2005 and thereafter on 26 December 2005, 3 and 11 January 2006, 16 February 2006, 24 March 2006, 27 April 2006, 12 May 2006 and 19 June 2006.

27 In his report of 21 April 2006 Dr Hucker stated (C.B. 158):

"My current working formulation using the DSMIV-TR is that on Axis 1 Mr McIver has a depressive disorder and a substance abuse disorder that requires treatment. On Axis II he provisionally has a personality disorder.

In terms of permanent disability, his depressive disorder, substance abuse disorder and personality disorder have not responded fully to the treatments offered and therefore his ability to handle the face to face confrontation and managerial authority duties of his Managing Director role is still significantly impaired."

In his report of 10 July 2006 Dr Hucker stated under the heading "Provisional Diagnoses" (C.B. 178-179):

"AXIS I

Chronic Adjustment Disorder - exacerbated by the termination of payments. Symptoms of anxiety, panic, suicidality, depressed mood and intense irritability are an exacerbation of his symptomatology dating from 1997.

Substance Abuse Disorder

Mr McIver has a history of abuse of alcohol, prescribed hypnotics and his current mood stabilisers but according to him his over usage of Panadeine is his major drug abuse. Currently Pathology tests do not indicate any significant damage to his liver or kidneys from the Panadeine.

Depressive Disorder, Chronic with Suicidality

There is a differential diagnosis of Bipolar 2 Disorder. Mc McIver's longitudinal presentation of Depression is confused by his reactions to major life stresses, chronic substance abuse, medication abuse and insomnia and possibly his medical conditions.

AXIS II

In my opinion Mr McIver's personality functioning does not present as a clear-cut Narcissistic Personality Disorder nor Obsessive Compulsive Personality Disorder but displays a range of traits, over control, perfectionism, grandiosity, intolerance, impulsivity, and a ability to deceive. These traits are to be found in the Narcissistic Borderline and Obsessional Personalities and would be consistent with a provisional diagnosis of Personality Disorder not otherwise specified."

Dr Hucker stated under the heading "Effect of Mr McIver's symptoms on his ability to perform as a Managing Director in his Company" (C.B. 179):

"I would like to specifically address Mr McIver's ability to regain employment and perform all of his original work roles as a managing director in a multi million dollar furniture company.

In my opinion, the symptoms he describes: lack of emotional control in social situations where there is confrontation or conflict, irritability and intolerance towards people, panic experiences with an intense urge to withdraw, suicidal thoughts as a solution in conflicted situations, would make it impossible for him to conduct himself in his role as a Managing Director. His duties to engage in very competitive confronting social interactions, control his feelings and present a confident competent front are compromised. He does not have his position or company to go back to and at the present time he is only coping because of the medications he is taking. His original skills in people management, sales and marketing demand highly organised social functioning."

At the conclusion of his report Dr Hucker stated (C.B. 180):

"It is of concern to me that Mr McIver's apparent deceit with his taxation, the history of taking goods from a previous employer, the apparent inconsistencies in the history given and the significant financial benefits involved does mean that a diagnosis of malingering has to be considered.

In his situation it is understandable that Mr McIver wishes to get the best financial support from his insurance policy. At this point in time I am not able to confirm the presence of this diagnosis.

Mr McIver has stated to me as his treating Psychiatrist, that he knew what he was doing but that he though that it was acceptable in the circumstances. He has been quite open when asked about this by myself and others. Given the history from Dr Leitmanis, the histories taken by others and my observations of Mr McIver, my opinion is that the Psychiatric Diagnoses stated are present and can account for his significant dysfunction and disability, which in my opinion make it impossible for him to function adequately in the role of Managing Director of a National Furniture Company."

28 Dr A Sheehan, psychiatrist, of Lilydale was called and a report of his of 8 December 2004 was received. Dr Sheehan has practised as a psychiatrist since 1991.

29 In his report of 8 December 2004 Dr Sheehan reviewed his examination of the plaintiff that day and some medical reports. Dr Sheehan diagnosed the plaintiff "as suffering from a chronic major depressive disorder, recurrent" and also "substance abuse and dependence" (C.B. 129). Dr Sheehan stated (C.B. 129):

"... I would regard him as medically unfit for any current employment and unable to perform any duties of his previous position as Managing Director.

I would regard his prognosis as poor. Considering the length of time he has been in treatment and his lack of progress during that time, I would regard him as being totally and permanently incapacitated."

30 Also relied upon by the plaintiff are numerous reports of Dr A H Leitmanis, psychiatrist of Vermont South who had been the treating psychiatrist of the plaintiff from 1994. Dr Leitmanis has been deregistered and was not called as a witness by either party.

31 The reports of Dr Leitmanis so relied upon were dated 14 October 1997, 20 July 1999, 23 August 1999, 9 August 2001, 14 March 2002, 3 February 2003 and 1 November 2003. Dr Leitmanis examined the plaintiff on numerous occasions from 4 November 1994 to 29 September 2003. In the report of 14 October 1997 Dr Leitmanis stated that the plaintiff "has been suffering from a major depressive episode" (C.B. 181), has "improved significantly" (C.B. 182) and "is still prevented from performing his usual occupational duties by nature of his anxiety and his reactions to even minor stress" (C.B. 182). In his report of 20 July 1999 Dr Leitmanis stated that the plaintiff "has a major affective disorder, of unipolar depressive type. It is a chronic disorder" (C.B. 183). In his report of 9 August 2001 Dr Leitmanis stated that the plaintiff had "a bipolar disorder" (C.B. 187). In his report of 14 March 2002 Dr Leitmanis stated that the plaintiff "gives a good history of bipolar disorder with certainly distinct hypomanic episodes and more clear severe episodes of depression" (C.B. 188). In his report of 1 November 2003 Dr Leitmanis stated that the plaintiff "suffers from a bipolar affective disorder. He also has secondary anxiety symptoms and secondary substance abuse" (C.B. 191). He also stated that he was "unable to give a proposed date either on a part time basis or a full time basis" of an estimated return to work date for the plaintiff (C.B. 192).

32 The plaintiff also relied upon a report dated 6 December 2004 by a psychologist, Mr C E Southwick, of Mitcham. Mr Southwick examined the plaintiff for treatment on 22 and 29 November 2004 and 6 December 2004. Mr Southwick was not called before me. In his report Mr Southwick stated that he had also viewed numerous medical reports concerning the plaintiff.

33 In his report Mr Southwick stated (C.B. 134):

"In my opinion Mr Keith McIver is suffering with a severe, debilitating and chronic major depressive disorder."

"In my opinion Mr McIver will never work again."

"In my opinion Mr Keith McIver's condition has been severely exacerbated by the series of events manufactured by his insurance company over the past months. The reports presented by these two psychiatrists, Doctors Kornan and Greenberg are, in my opinion, clearly inaccurate and unreasonable and seem to lack professional objectivity."

34 A general practitioner, Dr J Summons, of Park Orchards, was called on behalf of the plaintiff and a brief report of his dated 8 March 2005 was received as to "excessive use of paracetamol" (C.B. 137).

35 On behalf of the defendant, four psychiatrists were called.

36 The principal such psychiatrist was Dr P Kornan of Collins Street, Melbourne who examined the plaintiff three times. Dr Kornan gave evidence before me and three reports of his were received, dated 20 June 2000, 30 August 2004 and 11 July 2006. Dr Kornan has practised as a psychiatrist for 42 years.

37 In his report of 20 June 2000 Dr Kornan reviewed an examination of the plaintiff on 19 June 2000 and some medical reports including of Dr Leitmanis of 20 July 1999. Dr Kornan stated the plaintiff's "mental status examination is consistent with someone who has a depressive illness at the upper level of mild severity with some associated anxiety symptoms" (C.B. 200). He went on: "In overall terms his current psychiatric state, in my opinion, is basically at the upper level of chronic mild severity, although at times it is of chronic moderate intensity" (C.B. 201) and that in terms of DSM IV criteria "he has an adjustment disorder with mixed anxiety and depressed mood" (C.B. 201). Dr Kornan stated (C.B. 201):

"I consider that this man is in fact fit to return to sales work which is basically the work he did over the years."

"The future management of his condition is bound up with motivation factors. I consider that his disability payments play a significant part in him being in his current situation."

"Clearly my views differ from that of his treating psychiatrist Dr Leitmanis."

In his report of 30 August 2004 Dr Kornan reviewed an examination of the plaintiff on 11 August 2004 and some medical reports. He stated of the plaintiff (C.B. 209-210):

"I consider that he is capable of working full-time in business if motivated to do so."

"I consider that this man has no motivation to return to work subject to a legal settlement for a lump sum totally on his terms."

"I believe he is in fact currently fit for work."

In his report of 11 July 2006 Dr Kornan reviewed an examination of the plaintiff on 5 July 2006 and numerous medical reports. Dr Kornan stated that according to DSM IV the plaintiff (C.B. 278):

"presents with:

Axis 1 - An adjustment disorder with associated disturbances of emotion, and conduct, DSM IV 309.40. This is of mild degree.

Axis 2 - Personality weaknesses, and possibly even a personality disorder, not otherwise specified, DSM IV 301.99."

"The question arises as to whether or not this man has a personality disorder. I think that he does have, in overall terms, a personality disorder ..."

"My overall view is that this man can function effectively enough to return to the type of business activities/sales person seen previously, if motivated to do so ...

In summary, this man presents with ongoing neurotic features, and has the psychiatric diagnosis outlined above ...

... whilst there are neurotic features in his presentation, the key issue is one of motivation. If this man had capital, he would be working again, in my opinion."

38 Dr Y Greenberg, psychiatrist, of North Melbourne was called and three reports of hers were received, dated 15 October 2004, 7 September 2005 and 29 May 2006. Dr Greenberg has practised as a psychiatrist for 32 years.

39 In her report of 15 October 2004, Dr Greenberg reviewed an examination of the plaintiff on 11 October 2004. She had been provided with Dr Kornan's report of 30 August 2004. Dr Greenberg concluded (C.B. 247):

"I could not find any evidence, either in the history, in the information provided by Dr Kornan, or from my observations of Mr McIver, to suggest that he had either bipolar disorder or manic depressive disease."

"I agree with Dr Kornan and I do not believe that Mr McIver is suffering from bipolar disorder. Whether or not he had any symptoms suggestive of bipolar disorder in 1996/1997 when he saw Dr Leitmanis I do not know. I agree with Dr Kornan that Mr McIver should be able to, and should be expected to, transfer some of the energies that he uses on motorbike riding and socialising into a working role. I assume it would be difficult to persuade him to exchange an income of $13,000 a month for the amount that he mentioned that he could earn in industry, namely $75,000 per year."

In her report of 7 September 2005 Dr Greenberg reviewed various medical reports. In her report of 29 May 2006 Dr Greenberg reviewed her examination of the plaintiff on 23 May 2006 and some other material and stated "My view of this case is that Mr McIver's main problem is a personality disorder" (C.B. 262). She proceeded "In my opinion, it is not the 'clinical diagnosis' or diagnostic label that is important in this case, but rather the question as to whether or not Mr McIver is firstly an honest witness and secondly capable of work or not" (C.B. 263). She concluded (C.B. 263):

"... over the longer term, I believe that he has been, still is, and will continue to be capable of meaningful work or activity. I do not believe that he is totally incapacitated for work as a result of his nervous condition."

40 Dr D Samuell, psychiatrist, of Sydney was called before me and reports of his of 12 January 2005, 13 December 2005 and 14 June 2006 were received. Dr Samuell has practised as a psychiatrist since 1997.

41 Dr Samuell's report of 12 January 2005 reviewed other medical reports. His report of 13 December 2005 reviewed his examination of the plaintiff on 6 December 2005 and other medical reports. He concluded (C.B. 239):

"... the most likely diagnosis was that of a narcissistic personality disorder ...

I was not satisfied that the symptoms presented to me at interview were the cause of significant impairment. Other than Substance Abuse and Personality Disorder Not Otherwise Specified, I made no psychiatric diagnosis. In my opinion Mr McIver is fully fit to work in any capacity for which he is suitably qualified. His personality structure has much greater explanatory potential for his stated difficulties than any psychiatric diagnosis."

In his report of 14 June 2006 Dr Samuell reviewed the report of 21 March 2005 of Dr M Epstein and stated that "there was significant developmental history that was consistent with a personality disorder" and that "in making a diagnosis of major depression, it is unclear what criteria Dr Epstein has relied upon" (C.B. 271).

42 Dr R Ratnayake, psychiatrist, of East Melbourne was called and a report of hers of 3 April 2006 was received. That report reviewed other reports and a videotape of the examination of the plaintiff by Dr Samuell on 6 December 2005. Dr Ratnayake concluded "At the time of examination by Dr Samuell, Mr McIver did not fulfil the criteria for a diagnosis of major depressive disorder, based on the videotaped interview" (C.B. 267). Dr Ratnayake did not herself examine the plaintiff.

43 From the above review it is evident that often the examining psychiatrists did not ask the question for my determination, stated in paragraph 9 above, namely inability to perform an income producing duty of the occupation of managing director of a company of the order of that which retained the plaintiff. Further, insofar as a number of the defence psychiatrists, Dr Greenberg in particular, rested in part upon an adverse assessment of the plaintiff's truthfulness as an historian, I am unaffected by those opinions as to truthfulness in myself determining truthfulness. Of course, the truthfulness and accuracy of the history given by the plaintiff has significant bearing on the provenance of the psychiatric diagnosis predicated thereon. I shall return to this significant matter in detail, when I consider cross-examination of the plaintiff's psychiatrists, commencing at paragraph 69 below.

44 The standout psychiatrist and medical witness was Dr Kornan. He is a psychiatrist of vast experience and was a witness of balance, care and depth.

(d) Lay Witnesses

45 A number of lay witnesses were called. I summarise first the lay witnesses called by the plaintiff.

46 Sarah McIver, of Croydon, a part-time caterer, the former wife of the plaintiff, gave evidence. In evidence in chief she stated that she and the plaintiff were married in 1991. They have one child, a son, born on Christmas Day 1992. Mrs McIver described the plaintiff as initially a committed, hardworking businessman who was a great salesman and enjoyed socialising. He started to have trouble sleeping and obtained medical treatment for that condition well before the business collapse in 1997. He commenced withdrawing from her. She moved out of the bedroom in 1996 principally because of his sleeping troubles. Around Christmas 1996 he was very stressed because there were issues with the business. In May 1997 he came home from work and he said he (T. 515):

"... wasn't going back and it was all over, the Bank had moved in. He basically went to bed and he spent days and days in bed and of course, obviously things started happening and it all collapsed. He went in and out of hospital."

In the period following the business collapse the plaintiff's personal appearance and demeanour deteriorated. One day she found him (T.517).

"sort of huddled into the corner of the shower ... he was very slouched over and he was just shaking and crying ... he was standing there and he had no toenails. They were gone. That was sort of it for me. It was quite awful."

She managed to get the plaintiff out of the shower and put him back in bed. He would not speak with her. In late 1997 they sold their home in Warrenwood and moved to rented accommodation in Croydon. The plaintiff got worse. He would sit and stare and do nothing. After an argument she said to the plaintiff (T.519):

"I just wanted out of it and if he wasn't going to help himself I would eventually leave and he would have to look after himself ..."

Soon after that the plaintiff took an overdose and attended emergency at Maroondah Hospital. They separated in late 1998 and the marriage was dissolved in 2000. She has custody of their son and the plaintiff has regular access to him.

47 Mrs McIver took out an intervention order against the plaintiff in September 1998 because of his unstable behaviour and as a precautionary measure. The plaintiff had not been violent towards her.

48 Mrs McIver has very limited contact now with the plaintiff, the only contact being through child access. She does not think his capacity to manage has improved. He "really leaves everything to me" (T.524).

49 In cross-examination Mrs McIver stated that "I think he genuinely had a breakdown after the business broke up and was unable to cope after that" (T.529). She had little sympathy for the depressed state of the plaintiff but does not believe he "pretends to be depressed" (T. 530). She agreed that the plaintiff was not doing as much as he could to get back to work. The plaintiff has improved since 1998.

50 I found Mrs McIver to be an impressive witness. She was straightforward and direct, fair, and gave no appearance of bias for or against the plaintiff. She was accurate and truthful.

51 Six business acquaintances or personal friends of the plaintiff were called on his behalf. I shall refer to them in approximately chronological order.

52 Mr M B Smith, office manager, of Boronia first met the plaintiff in 1977 when they were employed together. They remained friends over the years. The plaintiff was an outgoing type who was very good at sales work. At Dyoll the plaintiff worked very hard. The plaintiff approached Mr Smith to become administration manager of Dyoll following Mr Easden in 1996. Mr Smith soon realised the company was in severe financial difficulty. Mr Smith was at the business on 16 May 1997 when the plaintiff left. Mr Smith remained at Dyoll for another month. He and the plaintiff have had limited contact since then, probably three or four times a year. Mr Smith stated (T.553):

"I think [he] appears to have changed. He doesn't really look after himself all that well ... he just seems to keep very much to himself."

53 Mr G S Beaumont, company director, of Sandringham gave evidence that he first met the plaintiff in the late 1980's in business. The plaintiff was marketing manager and was very forthright, and very strong in what he wanted. At Dyoll Mr Beaumont had limited contact with the plaintiff and he did not seem any different from before. When next Mr Beaumont saw the plaintiff, the plaintiff was in hospital before his 50th birthday, was very sedated and "appeared to me to be a broken man" (T.379). Later, at the plaintiff's 50th birthday, the plaintiff was "okay but restrained and he was emotional" (T.379). Later, when the plaintiff's relationship with a woman (after his divorce) broke up he "went to pieces" (T.380). The final question and answer in evidence in chief was the following (T.381):

"As a businessman yourself used to dealing with other businessmen and the cut and thrust of commerce, are you in your layman's way able to give us some sort of assessment of how you think he would cope in business? ... Well, as far as going into business, I feel that, particularly in running a business, if you went in - he was a marketing manager and I think with the stress involved I don't think Mr McIver would handle that stress very well at all. I don't think he would be able to, because of the stress - I would have thought he would have started to probably break down under a certain amount of stress and would not probably do his job very well."

54 Mr G G McIntosh, group managing director, of Avalon Beach, New South Wales gave evidence that he first met the plaintiff in business in 1989. At that time Mr McIntosh was a furniture buyer for the Myer organisation and dealt with the plaintiff at Dyoll in soft furniture. The plaintiff was confident and professional in his business dealings and a tough negotiator. Mr McIntosh moved to Sydney in early 1997 and has not seen the plaintiff since then. He has had some telephone contact with the plaintiff who seemed "very subdued" and "sounded depressed" (T.398).

55 Mr C J Porter, general manager, product and marketing, of Darlinghurst, New South Wales, gave evidence that he first met the plaintiff in business in 1991. Mr Porter was in buying and merchandising planning for the Myer organisation and the plaintiff was managing director of Dyoll. Their business contact continued until 1993, when Mr Porter moved to Sydney. Until 1993 there was regular contact between the two. The plaintiff always presented as in control. Mr Porter attended the plaintiff's home and his wedding. The plaintiff presented as a person of success and flaunted a little of his wealth.

56 Mr P J Myers, a self-employed builder, of North Ringwood first met the plaintiff in 1994 at Echuca where they both had boat and skiing interests. They became friends and in fact lived nearby in Melbourne. The plaintiff was (T.986):

"... larger than life, a bit, and had a very outgoing type personality and as we used to call it in the building industry, he was six foot four and bullet proof".

After the company collapse the plaintiff was "very kind of meek and mild" and "was, well, depressed is what you would call it, I guess" and "was full of self pity" (T.586).

57 Mr G P Thiessen, general manager operations, of Ringwood North gave evidence that he has known the plaintiff personally for some 10 years, they having first met at their children's kindergarten. At first the plaintiff was very outgoing and very confident. After the 1997 business collapse the plaintiff became very withdrawn and "seemed to have lost confidence in his own capability to continue in the way he had in the past" (T.581). Mr Thiessen has not had much to do with the plaintiff since 1998 when the plaintiff separated from his wife.

58 The lay witnesses called on behalf of the plaintiff each was an impressive witness. Each was accurate and truthful.

59 For the defendant, two lay witness were called, Mr Sellers and Mr McPherson.

60 Mr K S Sellers, a chartered accountant, of Kilmore East gave evidence that he is a partner in Sims Lockwood and Partners, insolvency specialists, and was so when in early 1997 the firm was appointed by the National Australia Bank to conduct an investigation into the financial viability of Aprique Pty Ltd trading as Dyoll Furniture. Mr Sellers was the partner responsible for the investigation. He did so. He had discussions with the plaintiff as director. The plaintiff did not allege or refer to embezzlement or misappropriation by a former director. He did not refer to Mr Easden making significant errors in the range of $1 million plus. The plaintiff did allege to Mr Sellers that a stock loss totalling $150,000 had occurred over a period of time to November 1996 and that two former supervisors were suspected of stock theft. In his 1997 financial report Mr Sellers stated that it "seems extraordinary that in a company of this size such a stock loss could accrue over an extended period of time and not be detected" (T.619). Mr Sellers stated the same view in evidence before me. As to the asserted $1,500,000 embezzlement, Mr Sellers did not report on that because the plaintiff had not said it. In evidence before me, Mr Sellers stated "I have never seen a company of this size have that size of embezzlement" (T.621).

61 Mr G P McPherson, general manager, of Mt Eliza gave evidence that he first met the plaintiff in the late 1970's when Mr McPherson was general manager of a company and the plaintiff became employed as a sales representative. The plaintiff did a very good job and in 1985 left the employment to pursue his career. In the late 1980's the plaintiff contacted Mr McPherson to invite investment in Dyoll. Mr McPherson did so to the extent of $70,000 and became a director and minority 10% shareholder of the company. He provided a bank guarantee for the company. The plaintiff was managing director. Mr Easden was a shareholder and was the accountant. Mr McPherson had close association with the operations of the business. Financial difficulties arose in the mid 1990's. In February 1996 Mr McPherson received accounts which showed huge increases in expenses. He enquired about that and ultimately a meeting was held. There Mr McPherson put to the plaintiff that the plaintiff's remuneration package be reduced to $100,000 and the plaintiff refused. A vote was taken and as a minority shareholder Mr McPherson lost the vote. Mr McPherson kept enquiring of the plaintiff as to the operations and costs of the business and received no positive response. A couple of months later Mr McPherson resigned, but the bank guarantee remained in place.

62 Mr McPherson gave the following evidence in chief (T. 657-659):

"[Q] Mr McIver has given evidence that in 1996 he discovered that David Easden had embezzled an amount of approximately $1.5 million from Dyoll in three stages, $500,000, approximately, each time. Did Mr McIver ever inform you that David Easden had embezzled $1.5 million or anything like it? ... No, he didn't.

Did he ever inform you that Mr Easden had made accounting errors in the range of $1.5 million or anything like it? ... Absolutely not.

Did he ever say that David Easden had acted dishonestly in relation to any amount of money? ... No. Not dishonestly at all.

Were there some references to accounting errors in 1995 or 1996? ... Yes. David [Easden] had made some errors with the accounting. I believe in '95 there were some minor issues and we had our outside accountant come in and go through everything with David and it was all signed off as okay.

So they were the '94/'95 accounts signed off by an external accountant? ... Correct, and in '96 David himself at the meeting we had, when he resigned he advised he had made some errors in the accounting and that, basically, they were being fixed and that he had made the errors and they were being fixed.

To the best of your recollection what was the amount involved in the errors? ... $100,000, $105,000. Somewhere around that area.

I just want to read to you some evidence that Mr McIver gave to his Honour. This is at 325 of the transcript. I was cross-examining Mr McIver and I said: 'You never told your fellow director, Mr McPherson, that Easden had misappropriated/embezzled $1.5 million, did you? ... I certainly did. McPherson was present in every meeting.' Does that cause you to change the evidence you gave a moment ago? ... Absolutely not. He didn't tell me that at all. I would have said, 'Ring the police.'

He then went on to say: 'The only one that he may not have been physically present in was the one when Easden physically came to me but he was certainly aware of and present because he had to be involved in the fact that Easden was sacked.' To your knowledge was ...? ... Well, I was advised at a meeting with the other directors that were there that he had resigned and was moving on. He also then announced that he had made these errors with the accounting for about $100,000 and that's all I know about Easden.

At 326 he went on to give evidence to his Honour that: 'In fact he, from memory, was one of the ones at one stage that - I think it was him that was actually accusing Easden of theft and you've got to remember too that with the other occasions there, I didn't have the sole vote of whether Easden stayed or not.' Did you ever accuse Easden of theft? ... No.

In April 1998 did you receive a telephone call in relation to Mr McIver? ... Yes, I did, from Andrew Pettersen of Beaver Plastics.

What did Mr Pettersen say? ... That Keith McIver had applied for a position as general manager at the company and he wanted a reference on him and I told him that he was a good salesperson but not a general manager.

No further questions."

63 In cross-examination, Mr McPherson stated that the first he had ever heard of a loss of $500,000 on three occasions was the day before he gave evidence in August 2006. He stated that he lost money over Dyoll but stated that he did not hold a grudge against the plaintiff. In cross-examination it was put to Mr McPherson that he was biased against the plaintiff and had animus towards him. Despite counsel's loyal efforts, the puttage failed entirely. Mr McPherson impressed me as a straightforward, fair and moderate witness and person. He was a truthful and accurate witness.

(e) Consideration and Analysis

64 There is no doubt that the plaintiff was severely traumatised by the loss of his business in May 1997. The defendant paid income protection for six years from November 1997 to November 2004. The question is whether the plaintiff has fulfilled the criteria for provision of income protection as stated in paragraph 8 above from November 2004 to the present.

65 I have stated above that the lay witnesses including especially Sarah McIver called by the plaintiff were truthful and accurate. This they were. However their evidence is of but attenuated relevance on the question stated in the previous paragraph. Their evidence taken at its highest falls far short of constituting evidence of inability as required. Mr Beaumont's evidence cited in paragraph 53 above goes to relativity not inability.

66 As distinct from the plaintiff's lay witnesses, the psychiatric and medical evidence is of central relevance to the issue to be determined.

67 Psychiatrists are not mere amanuenses. They bring their medical knowledge, skills and critical capacities to bear upon assessment of the patient or subject. They assess the person before them. But critical to their analytical task, and their diagnoses, is the history taken from the patient. Other data, including medical and chemical records is relevantly considered, but the history taken is a central and critical underpinning of diagnosis.[3]

68 So much was acknowledged by all the psychiatrists called for the plaintiff. Dr Epstein agreed that perhaps the most important thing a psychiatrist does in assessment is take a history (T. 403); Dr Hucker said the same (T. 444); Dr Sheehan said the same (T. 564).

69 Further, those psychiatrists each acknowledged that untruthful or exaggerated history negates or at least undermines psychiatric diagnosis. Dr Epstein agreed that if the plaintiff was not an honest historian, it is reasonable that the psychiatrist could not come to a conclusion, especially if the dishonesty "relates to matters of significance in their psychiatric pathway" (T. 407); Dr Hucker agreed that if there was significant dishonesty in the history given he could have no reasonable certainty in the soundness of the diagnosis (T. 445); and Dr Sheehan agreed that if the plaintiff was not honest in is communications with the psychiatrist then he could come to no conclusions about his mental state (T. 564).

70 Accordingly, the truthfulness and accuracy of the evidence given before me and the histories given by the plaintiff to the psychiatrists has a double significance: for the acceptance of the plaintiff's evidence by the Court and for the acceptance by the Court of the psychiatric evidence dependent upon that truthfulness and accuracy. Plainly, human error and fragility, forgetfulness, imperfection, and matters not of real significance and substance should not weigh against the plaintiff; but matters of real substance do.

71 There are four specific matters of real substance which all tend in the one direction.

72 The matters of real substance are the following.

73 First, the plaintiff's assertion that Mr Easden embezzled $1,500,000 from Dyoll. In my view this was a deliberate and developed untruth. The allegation only surfaced after income support was terminated by the defendant on 5 November 2004. It surfaced one month later, on 8 December 2004 in a history given by the plaintiff to Dr Sheehan (C.B. 123). Until 5 November 2004 the assertion by the plaintiff was that there were "errors" (and of a smaller amount). It was "accounting errors" to Dr Golumbeck on 1 April 1998 (exhibit D); "errors" in the plaintiff's statement of 27 September 1999 (exhibit G); and "errors" in his solicitor's file note of 24 February 1998 (exhibit K). The plaintiff had not alleged embezzlement to his wife, to any fellow directors, to any company accountant, to the investigating accountant Mr Sellers, to any of his business contacts or personal friends, or to any medical practitioner - until his income support benefits were terminated. Then, by 17 March 2005 it had escalated into this history given by the plaintiff to Dr Epstein (C.B. 150):

"In mid 1996 he found out that his business partner had embezzled one [and a half] million dollars from the company. He was horrified, distressed and angry."

Graphic; persuasive; but untrue. The plaintiff's explanation for not contemporaneously alleging embezzlement - his concern for the Easden family - is entirely unpersuasive. There is no other evidence of the plaintiff having solicitude for others than his son, especially not those whom he considered had wronged him; and his wife gave evidence that when Mr Easden later got into trouble her husband was "really pleased" (T. 526). The embezzlement story unravelled during the course of the hearing. The plaintiff gave evidence that he told his co-director Mr McPherson of embezzlement. Mr McPherson flatly rejected that evidence, as I have rehearsed in paragraph 62 above. Mr McPherson's direct and spontaneous response - that he would have rung the police - is plainly truthful evidence. The significance of the embezzlement falsity is that not only does it demonstrate untruthfulness to the Court on a critical matter but also to the psychiatrists on a critical matter on the psychiatric pathway. Mere business failure might not do; major embezzlement was called in aid of regaining terminated benefits.

74 The second matter of real substance is the evidence of the plaintiff to the Court and history to the doctors of excessive paracetamol intake. I consider the plaintiff's evidence and history given on this matter to be untrue. His evidence and history is that he consistently took some 100 tablets in 24 hours. No witness has been called to support that evidence. Apart from the logistics of obtaining such supply, such intake would have been all but lethal. Yet there is no evidence of liver damage and the plaintiff's serum paracetamol levels were not significantly elevated. Of such asserted intake Dr Greenberg stated that it "is probably incompatible with survival" (C.B. 263), Dr Samuell stated that "doses much lower than this would be considered a medical emergency" (C.B. 224), and Dr Kornan stated that "this is probably a lethal dose" (C.B. 279). Dr Epstein in evidence said "Yes, I think it's a lie" (T. 418). Dr Hucker said "I actually believed what Mr McIver was telling me" (T. 490). I consider the plaintiff's evidence and history as to paracetamol intake is untrue, and designed to bolster his claim that he is unfit for any duties of his former occupation.

75 The third matter of real substance is the conduct of the plaintiff in non-payment of taxation and his evidence to the Court and history to the psychiatrists in relation thereto. The plaintiff has failed to pay any tax on the over $1,000,000 of income protection benefits he received from 1997 to 2004. The plaintiff gave untruthful and evasive evidence on the matter of his liability to pay tax on those benefits. In cross-examination he stated (T. 178):

"... I spoke to one of your ex-employees, my case manager, and I called Edmond Nicholls who actually told me that there was no tax payable and it wasn't until some years later - in fact, even the - there was a, like, a disclaimer on the bottom of the form I used to get every month that wasn't that specific which in fact AC & L [Australian Casualty and Life] changed themselves some years later to make it more specific and he actually said there was no tax attributable. I did speak to a couple of accountants. They said it was open to interpretation but if someone had said that there was no tax, then there was no tax."

Mr Nicholls was not called for the plaintiff; nor was any other accountant. A handwritten statement by the plaintiff in August 2003 states that the original claims assessor "advised my accountant that payments were not necessarily subject to tax" (C.B. 789). That person was not called - perhaps understandably as the advice recorded was "not necessarily". The plaintiff gave evidence that the claims assessor made the above statement to him and his accountant, Mr Littlejohn. Mr Littlejohn was not called either. Dr Hucker stated that he had "a clear recollection that [the plaintiff] said he hoped he could get away with it" (T. 448). The plaintiff's dissembling evidence as to his belief as to non-liability to pay tax is undone by his own words, written in a document to the defendant in August 2003 (C.B. 787):

"You are not to go anywhere near the ATO as the ramifications at this point could be obviously serious to me."

76 The fourth matter of real substance is the demonstrated exaggeration by the plaintiff to the Court of his symptoms and condition and omissions by him of relevant data to the psychiatrists. In cross-examination this occurred (T. 221):

"How were you in, say, January/February of this year? ... An absolute basket case.

An absolute basket case? ... Yes."

"But the last two years I have been incapable of doing anything because I sleep most of the days. I don't socialise ..."

"... the last 18 to 20 months is me being in, as described by my friends, a zombie-like state ..."

A review of the plaintiff's credit card and other records showed that the plaintiff regularly socialised. He admitted he had had some 30 internet dates in the last two years which he attended under stress. He shopped at two dealers for his BMW leased in November 2003. The vehicle is valued at $165,000 and the plaintiff personally arranged its financing. He had done likewise some five years earlier with another BMW. Since the trauma of 16 May 1997 the plaintiff has bought and sold four houses and rented another. The plaintiff in December 2004 told Dr Sheehan that he spent most of his time at home, rarely goes out, occasionally goes on an internet dating line, and apart from that has little social contact (C.B. 125). He told Dr Epstein in March 2005 that he spent much of his time at home, and made no mention of dating or socialising (C.B. 154). He did not tell Dr Hucker about dating or socialising although Dr Hucker would have asked him because it was a relevant matter for proper assessment (T. 466).

77 There was a constellation of other matters relied upon by the defendant as to credit but I consider they are not matters of substance or are peripheral or remote. The surveillance video tapes (exhibit E) in my view do not amount to much, and I disregard them as adverse to the plaintiff beyond their being yet more demonstration that (at the time of their filming) the plaintiff was neither an absolute basket case nor in a zombie-like state. The videos do show a most commendable characteristic of the plaintiff - his devotion to his son.

78 The untruthfulness and exaggeration of the plaintiff to the psychiatrists called by the plaintiff in my view significantly diminishes the provenance of their diagnoses. Further, I consider Dr Kornan was by far the most impressive medical witness, for the reasons I have stated above in paragraph 44. I do not consider the psychologist Mr Southwick's opinion as stated in his report as balanced, in view of his gratuitous observations as to the reports of Dr Kornan and Dr Greenberg quoted above paragraph 33. I consider the proper conclusion on all the evidence is that the opinions of the psychiatrists called for the defendant, particularly of Dr Kornan, are to be preferred over those called for the plaintiff. The attempt late in the trial on behalf of the plaintiff to transform the claim based upon major depressive disorder and related disorder into a personality disorder does not avail the plaintiff. Narcissistic personality traits do not constitute disabling sickness as contemplated by the policy.

79 Conscious as I am of the seriousness of the finding, and of the seriousness of the consequences of the finding, I find that on significant and critical matters of his history, condition and capacity the plaintiff has not been truthful to the psychiatrists and to the Court. On the basis of the evidence and analysis I was of that provisional view at the conclusion of the hearing. Of course one would not so find without careful consideration. Since the hearing I have reviewed all the evidence and again considered all the analyses. Reflection has only confirmed my view.

80 The plaintiff is and has been since November 2004 an intelligent, able and articulate man. As Dr Kornan correctly saw in the financial situation of receipt from the defendant of $13,000 per month he lacks and lacked the motivation to perform his work duties or any of them.

81 I find that the plaintiff has failed to prove on the balance of probabilities that he is, or has been at any time since 5 November 2004, because of sickness unable to perform at least one income producing duty of his former occupation as managing director.

82 Accordingly, and for the reasons I have stated in this judgment, I dismiss the claim of the plaintiff against the defendant.

83 I order that the plaintiff pay the defendant's costs of the proceedings.

84 I shall hear counsel as to consequential orders including detail as to costs.

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[1] Russell Young Abalone Pty Ltd v Traders Prudent Insurance Co Ltd (1993) 7 ANZ Ins. Cas. 61-182 (Tasmanian Full Court, 25 May 1993) and Judd v Suncorp Insurance and Finance (1983) 2 ANZ Ins. Cas. 77-991 (Queensland Full Court, 17 September 1987).

[2] Duncan v Prudential Insurance Co Ltd (1999) 10 ANZ Ins. Cas. 61-483 (W.A.S.C., 19 October 1998) and Pleass v Cigna Insurance (1995) 8 ANZ Ins. Cas. 61-252 (W.A.D.C., 5 April 1995).

[3] See Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 200 ALR 447; (2000) 7 ALJR 1598; Barneveld v Hume City Council [2004] VSC 350 at [18] - [21] and the authorities cited in f.n. 6 and 7 therein; and Gjorgovska v AFM Cleaning Services & Anor [2006] VSCA 104 at [27] - [28].