Plaintiff v Defendants

SET-OFF - Whether insurer could rely on set-off if _Insurance Contracts Act 1984 (_Cth) did not apply to insurance cover - Whether insured liable in negligent misstatement to insured - Whether insured liable for misleading and deceptive conduct - Australian Securities and Investments Commission Act 2001(Cth) ss 12DA(1), 12GM(5) - Fair Trading Act 1985 (Vic) ss 11, 41(3B).

1 The plaintiff, John Montclare, sues Metlife Insurance Limited ('Metlife'), the first named defendant, claiming $1.1 million as a life insurance benefit. The life insured was Mr Graeme Shilton who died by suicide on 22 January 2001. He was 43 years old.

2 Mr Montclare's case is that he obtained life insurance on the life of Mr Shilton with Metlife (then called Citicorp Life Insurance Limited ('Citicorp')) initially for $300,000, and later for $1.1 million. In 2005, Metlife purchased Citicorp.[1]

3 Metlife admitted that it entered into a contract of insurance with Mr Montclare on the life of Mr Shilton and that, from 10 June 1999, the benefit payable under that insurance was $1.1 million. However, Metlife contended that Mr Montclare was not entitled to payment of that sum.

4 I find that the life insurance cover obtained by Mr Montclare was pursuant to contracts of insurance under which he was an insured for the purposes of the Insurance Contracts Act 1984 (Cth) ('the ICA'). Citicorp, now Metlife, issued that insurance and was a party to the contracts of insurance. Mr Shilton made a fraudulent misrepresentation to Citicorp before the contracts were entered into in answer to a question about his medical history. That misrepresentation had effect as though it had been made by Mr Montclare. Metlife validly avoided the contracts of insurance under s 29(2) of the ICA. The proceeding will therefore be dismissed.

5 The insurance issued by Metlife excluded claims involving death by suicide where this occurred within 13 months of the insurance commencement date. Metlife did not rely on that exclusion.

6 The proceeding was commenced in 2005 and came to trial before another judge of the Court over four days in May and June 2011. Because of late discovery by Metlife and Mr Montclare's desire to consider calling further evidence, the trial was adjourned out of the list. When the trial recommenced before me in May 2014, the trial proceeded for 16 days. The parties agreed that the evidence of witnesses, being Mr McCowan, Mr Ridgeway and Dr Kahans, given at the hearing in May 2011, was to be regarded as evidence before me. I made orders to that effect. Mr Montclare's case is that the life insurance cover, upon which his claim relied, was issued under a Citicorp Life Insurance Master Group Life and Disability Insurance Policy (Group and Non Group Members) ('master policy') between Metlife and Rivkin Direct Management Pty Ltd ('Rivkin Direct Management'). Rivkin Direct Management was a related company to the second defendant, Rivkin Direct Insurance Agencies Pty Ltd ('Rivkin Direct Insurance Agencies'). Rivkin Direct Management was a company associated with Mr Rene Rivkin. It acted as trustee of the master policy. It was not registered as an insurer.

7 The bulk of Rivkin Direct Management's business was dealing with trustees of superannuation plans, employers and individuals who wanted to become life insureds.[2]

8 On a number of occasions in this judgment, I use the name 'Rivkin' where it is unclear from the evidence which Rivkin company should be referred to.

9 Rivkin Direct Management was deregistered in 2002. There was no master policy issued by Citicorp to Rivkin Direct Insurance Agencies. Counsel for Mr Montclare said that Metlife took no point about the absence of Rivkin Direct Management.[3] Mr Montclare pleaded that the second defendant, Rivkin Direct Insurance Agencies, was 'joined as a party to this proceeding solely in order to bind it to the outcome of this proceeding and no relief is sought against it other than an order for the payment to the plaintiff of sums received by the second defendant from the first defendant in respect of the plaintiff under the master policy'. Mr Montclare contended that nothing of significance to the outcome of this proceeding turns on the fact that Rivkin Direct Management is not a defendant.

10 Rivkin Croll Smith Insurance Agencies Pty Ltd ('Rivkin Croll Smith Insurance Agencies'), and later Rivkin Direct Insurance Agencies, marketed the policies. They were agents of Citicorp, to sell and promote the renewable term life insurance product 'Term Life and Term Life Executive Plan'.

11 On 26 July 2006, Rivkin Direct Insurance Agencies gave an undertaking to Master Kings 'to pay to the Plaintiff within 7 days of receipt any sums received by the Second Defendant from the First Defendant in respect of the Plaintiff under the insurance policy which is the subject of this proceeding'. By the combination of the effect of that order and the order Beach J made during the first hearing of this proceeding, the second defendant was excused from further attendance until submissions were made about costs.

12 Mr Montclare argued that his insurance cover was not as an insured for the purposes of the the ICA and, therefore, he did not have the statutory obligations relating to disclosure and misrepresentations that are imposed on an insured by the ICA.

13 Metlife denied that it has any liability to Mr Montclare. By letter dated 6 December 2001, Metlife gave notice to Mr Montclare's legal representatives of its intention to avoid any policy, pursuant to s 29 of the ICA. Metlife relied on allegations of misrepresentation and non-disclosure by Mr Montclare and Mr Shilton, either fraudulent or negligent, and upon the rights given to it under the ICA. In its further amended defence, Metlife pleaded that it was entitled to, and did, by its letter of 6 December 2001, or 'hereby', namely by the delivery of the pleading, avoid the contracts of insurance, 'alternatively the contracts alleged by the plaintiff'.

14 Metlife's case was that Mr Shilton and Mr Montclare had misrepresented or failed to disclose: who had signed Mr Shilton's signature in the two insurance applications and in two letters concerning those applications; the purpose of the insurance; Mr Montclare's previous attempts to obtain insurance; and statements and details of Mr Shilton's medical history.

15 Metlife alleged that Mr Montclare signed Mr Shilton's name on both insurance applications and on two letters: one of 7 April 1999, to increase the amount of the cover, and a second of 29 May 1999, to state the purpose of the increased cover.

16 Metlife alleged that, in both applications, Mr Montclare represented that the answers given by Mr Shilton were, to the best of Mr Montclare's knowledge and belief, true and that Mr Montclare had made such enquiries as were appropriate to constitute a proper foundation for his knowledge and belief that the answers given by Mr Shilton were true.

17 Metlife also alleged that Mr Shilton and Mr Montclare falsely answered questions concerning Mr Shilton's medical history, including a question whether he had ever had a 'mental or nervous disorder or breakdown'. They thereby failed to disclose or made misrepresentations as to whether Mr Shilton had ever suffered from a mental or nervous disorder or breakdown.

18 It also alleged that Mr Shilton and Mr Montclare falsely answered questions concerning their applications for insurance to other insurers and that Mr Montclare and Mr Shilton failed to disclose that they had unsuccessfully sought life insurance from NRMA Life Ltd ('NRMA'). Metlife alleged that Mr Shilton and Mr Montclare made false statements about the purpose of the applications for life insurance.

19 Metlife separately contended that Mr Montclare had made false representations to Metlife that the answers given by Mr Shilton were, to the best of his knowledge, true and correct and that he had made such enquiries as were appropriate to constitute a proper foundation for his knowledge and belief that the answers given in the insurance applications were true and correct.

20 Metlife contended that it was entitled to and did avoid the contracts of insurance under s 29 of the ICA. Metlife submitted that, had it known of these fraudulent non-disclosures and misrepresentations at the time of application, it would not have entered the contracts of life insurance with Mr Shilton or Mr Montclare on the same terms and, therefore, it was entitled to avoid the contracts under s 29(2) of the ICA.

21 Alternatively, if the non-disclosures and misrepresentations were innocent, Metlife's case is that if the required disclosure had occurred and if the misrepresentation had not occurred, it would have decided not to enter contracts of life insurance with Mr Montclare, on any terms. Metlife contended that, on this alternative basis of innocent misrepresentation and non-disclosure, it was entitled to avoid the contracts of insurance under s 29(3) of the ICA.

22 Metlife alleged, in the alternative, that in the event that the ICA did not apply to the insurance granted to Mr Montclare, he and Mr Shilton had engaged in negligent misrepresentation, in breach of their duty of care at common law, and/or misleading and deceptive conduct, under the Australian Securities and Investments Commission Act 2001 (Cth) and s 11 of the Fair Trading Act 1985 (Vic). Metlife said that if it does have any liability to Mr Montclare, those causes of action give it rights of set-off that exceed the amount of any such liability.

23 Mr Montclare denied that he or Mr Shilton were guilty of any non-disclosure or made any misrepresentation. As previously stated, his case was that he was not an insured under a contract of insurance for the purposes of the ICA and therefore not subject to the obligations that it imposes and remedies that it gives. He also alleged that Metlife did not provide him with the notice of his disclosure obligations required by s 22 of the ICA.

24 Mr Montclare disputed that Metlife has any right of set-off against his claim.

25 Both parties provided the Court with their statement of the issues in the case. They identified many issues. In broad and general terms, the issues are:

(a) What was the legal relationship between the parties relating to life insurance on Mr Shilton's life?

(b) What obligations did the parties owe each other under the ICA?

(c) Were there non-disclosures or misrepresentations by Mr Shilton or Mr Montclare?

(d) Were any non-disclosures or misrepresentations by Mr Shilton or Mr Montclare fraudulent?

(e) Would Citicorp have declined to issue insurance cover either under the contracts that it entered into or, on any terms and conditions, if it had been aware of the matters not disclosed or misrepresented?

(f) If the insurance cover was not subject to the provisions of the ICA, did the alleged non-disclosures and misrepresentations entitle Metlife to remedies, including under causes of action in negligent misstatement and misleading or deceptive conduct that permitted Metlife to set-off any claim Mr Montclare may have under the insurance contracts?

26 In relation to the above issues, I have reached the following conclusions:

(a) Mr Montclare was subject to the obligations imposed by the ICA, in respect of the insurance cover granted by Citicorp. The two certificates of insurance issued by Citicorp were contracts of insurance that were subject to the provisions of the ICA.

(b) Citicorp did not give Mr Montclare notice of their disclosure obligations under the ICA and therefore can only rely on fraudulent non-disclosure and fraudulent or innocent misrepresentations.

Mr Shilton and Mr Montclare fraudulently represented to Citicorp that they had not been refused insurance. Mr Shilton made a fraudulent misrepresentation in response to question 9H about his medical history. That misrepresentation had the same effect as though it had been made by Mr Montclare

(e) Metlife has proved that it would not have entered into the contracts of insurance if Mr Shilton had not made a misrepresentation about his medical history in answer to question 9H contained in the insurance application forms. That misrepresentation had the same effect as though it had been made by Mr Montclare.

(f) Because the contracts of insurance were subject to the provisions of the ICA, Metlife's causes of action in negligent misstatement and misleading and deceptive conduct cannot be relied on. In any event, those causes of action would not succeed.

27 It is important to note that Metlife did not rely on, or plead, a breach of the duty of utmost good faith or common law fraud. It relied on the statutory remedies provided by the ICA. Those remedies do not provide a right to avoid a contract of insurance on the ground of fraud alone. The insurer must prove that it would not have entered into the contract of insurance if, in general terms, the fraud had not occurred. This requirement is discussed below.

The relationship between Mr Montclare and Mr Shilton

28 Mr Montclare was born in 1970 and after leaving school completed a hairdressing apprenticeship, undertook some acting and studied for a diploma of financial markets. In 1993 or 1994, when he was working as a male escort, Mr Shilton phoned him and they met.[4] Mr Montclare 'provided a service' to Mr Shilton who continued to contact him regularly. They became friends and developed a sexual relationship which continued until Mr Shilton's death.[5] They met on most days and spent a couple of nights most weeks at each other's homes. Mr Shilton did not own a car and on occasions Mr Montclare drove him to where he needed to go.

29 Mr Shilton was born in 1957 and was a renowned classical saxophonist. He taught the saxophone at the Victorian College of the Arts ('VCA') and elsewhere and, in 2001, shortly before his death, was appointed head of the woodwind department at the VCA.[6]

30 Mr Shilton left half his residuary estate to his father and half to Mr Montclare. He nominated Mr Montclare as his preferred beneficiary for his superannuation fund benefits.

31 Mr Montclare and Mr Shilton discussed buying property and living together. [7] According to Mr Montclare's evidence, in 1998, when Mr Shilton was planning to travel overseas, he suggested taking out life insurance. He wanted Mr Montclare to be the beneficiary of the policy so that he would be financially secure.[8] That led to the making of the first insurance application.[9]

32 In 1998, Mr Montclare was 28 years of age.[10] His evidence was as follows. He said that he was partially dependent on Mr Shilton, who assisted him in paying rent, and that he had become used to his help.[11] Mr Shilton gave Mr Montclare gifts and paid about $400-500 of his living expenses each month.[12] Mr Montclare said he needed this support because he was studying and did not have regular employment.[13] He said that he was not very good with money and spent what he had on clothes, phone bills, car services, and occasionally at the casino.[14] He said that they obtained life insurance on Mr Shilton's life because they were in love and Mr Shilton wanted to provide for him.[15]

33 Mr Montclare denied that he had persuaded Mr Shilton to take out life insurance or that Mr Shilton was ambivalent about it or did not want it to occur.[16]

34 In 1999, they inspected properties.[17] In March 1999, they obtained pre-approval for a loan of around $300,000 and Mr Montclare's father agreed to lend him $100,000. Mr Montclare and Mr Shilton decided to buy two small investment properties and subsequently increased their pre-approved finance to around $600,000.[18]

35 Mr Montclare gave evidence that in early 1999, they decided to purchase property in Port Melbourne. They deferred doing so, however, because they were advised that property prices would fall after the millennium.[19] In fact, they never did purchase property.[20]

36 In 1998, before applying for life insurance, Mr Montclare read the Rivkin Direct Term Life Insurance Customer Information Brochure ('Customer Information Brochure').[21] A table in the brochure indicated that Metlife required the life insured to undergo a medical examination when he was aged 41 or older and the cover sought exceeded $300,000.[22]

37 In November 1998, Mr Montclare applied for life insurance cover on Mr Shilton's life for the amount of $300,000. Mr Montclare denied that they applied for that cover because no medical examination was required.[23] He said that Mr Shilton 'didn't have anything wrong with him'.[24]

38 On 21 January 1999, Rivkin sent Mr Montclare a certificate of insurance providing life insurance cover on the life of Mr Shilton for $300,000.

39 By an application dated 17 April 1999, Mr Shilton (or Mr Shilton and Mr Montclare) applied to Rivkin Croll Smith Insurance Agencies to increase the cover to $1.1 million. Citicorp approved that increase from 10 June 1999 and sent a second certificate of insurance providing for cover on Mr Shilton's life of $1.1 million.

Section B. Was Mr Montclare a party to a contract of insurance under the ICA?

40 The first issue is whether Mr Montclare was an insured under the ICA so that its provisions relating to disclosure and misrepresentations applied to his entry into the insurance contracts.

41 If he was not an insured, but had a contractual right to claim life insurance payments from Metlife, perhaps as a third party beneficiary, then the provisions of the ICA on which Metlife relied did not apply to him.

42 Part IV of the ICA is a statutory code which replaces the common law on non-disclosure and misrepresentation applying to an insured and an insurer before they enter an insurance contract. Mason CJ, Dawson, Toohey and Gaudron JJ discussed this effect of the ICA in Advance (NSW) Insurance Agencies Pty Ltd v Matthews in the following terms:[25]

Section 33 provides:

The provisions of this Division are exclusive of any right that the insurer has otherwise than under this Act in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement.

The evident intention of the legislature is to replace the antecedent common law regulating non-disclosure, misrepresentations and incorrect statements by insured persons before entry into a contract with the provisions of Pt IV. To that extent Pt IV is a statutory code which replaces the common law. Accordingly, the circumstances in which it is legitimate to resort to the antecedent common law for the purpose of interpreting the statute are extremely limited: see Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd. However, in the light of our view as to the meaning of the relevant provisions of the statute, we do not find it necessary to resort to the common law or to explore the bases on which it may be permissible to engage in that exercise.[26]

43 The expression 'contract of insurance' is not defined in the ICA. However, s 10 provides:

10 Contracts of insurance

(1) A reference in this Act to a contract of insurance includes a reference to a contract that would ordinarily be regarded as a contract of insurance although some of its provisions are not by way of insurance.

(2) A reference in this Act to a contract of insurance includes a reference to a contract that includes provisions of insurance in so far as those provisions are concerned, although the contract would not ordinarily be regarded as a contract of insurance.

(3) Where a provision included in a contract that would not ordinarily be regarded as a contract of insurance affects the operation of a contract of insurance to which this Act applies, that provision shall, for the purposes of this Act, be regarded as a provision included in the contract of insurance.

44 Section 11(1) defines 'contract of life insurance' to mean 'a contract that constitutes a life policy within the meaning of the Life Insurance Act 1995'.

45 Section 9(1) of the Life Insurance Act 1995 (Cth) specifies particular contracts as constituting a life policy for the purposes of that Act. The first contract specified is the most relevant for present purposes. It is:

(a) a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life;

46 Section 11(9) provides:

Subject to subsection (10), a reference in this Act to the entering into of a contract of insurance includes a reference to:

(a) in the case of a contract of life insurance - the making of an agreement by the parties to the contract to extend or vary the contract;

...

47 Sutton on Insurance Law[27] contains the following description of life insurance:

What has been described as 'the classic definition of life insurance' is found in Bunyon [Bunyon on Life Assurance (5th ed, 1914) 1]:

The contract of insurance has been defined by Tindal CJ to be that in which a sum of money "as a premium is paid in consideration of the insurer's incurring the risk of paying a larger sum upon a given contingency" ... The contract of life insurance may be further defined to be that in which one party agrees to pay a given sum upon the happening of a particular event contingent upon the duration of human life, in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments by another. This consideration in money is termed the premium or premiums, and is paid either in one sum, when it is termed a single premium, or by a succession of periodical instalments.

48 Mr Montclare pleaded three alternative bases for his claim, none of which relied on him being an insured for the purposes of the ICA.

49 First, he contended that Metlife provided him insurance cover under the master policy in respect of Mr Shilton as life insured.

50 Secondly, and alternatively, Mr Montclare contended that on or about 21 January 1999 Metlife provided him with cover under the 'alternative master policy' by the issue of a certificate under the alternative master policy to him as certificate holder in respect of Mr Shilton as life insured.

51 Thirdly, Mr Montclare contended that on or about 7 January 1999, he, as a certificate holder, entered into a policy of term life insurance with Metlife. This alternative policy was constituted by the certificate of insurance and a schedule and a master policy. The terms of this alternative policy included that cover would commence by the issue of a certificate by Rivkin Direct Management, alternatively Rivkin Direct Insurance Agencies, to him as certificate holder.

52 Mr Montclare pleaded that Rivkin Direct Insurance Agencies, alternatively Rivkin Direct Management, held the benefit of the cover under the master policy, or the alternative master policies, in trust for him. He pleaded that the defendants refused or failed to pay him the sum insured and, in the case of Metlife, did so in breach of the policies and that as a result he suffered loss and damage.

53 Metlife contended that Mr Montclare was an insured pursuant to contracts contained in two certificates of insurance and that the obligations imposed by the ICA applied to him. The certificates were self-contained and contained all the terms of the insurance.

54 Metlife did not dispute that life insurance cover could be provided without the person entitled to the benefit of the insurance being an insured for the purposes of the ICA, as Mr Montclare contended, but disputed that that had happened in this case.

The business arrangement between Rivkin Direct Management and Citicorp

55 I will next consider the arrangement between Rivkin Direct Management and Citicorp for the provision of insurance to members of the public and the documents that were issued as part of that arrangement.

56 Mr Terence McCowan, a solicitor, helped establish the Rivkin Direct insurance business and was appointed a director. He approached Citicorp seeking to have it structure a policy that Rivkin Direct Insurance Agencies could supply to persons seeking insurance. He described Citicorp as essentially an insurance wholesaler without a retail arm. Citicorp had group policies for 'industry groups or social groups' and Mr McCowan said that Rivkin was 'just another group which did insurance through Citicorp Life'.[28] He described the structure of the arrangement reached as involving Citicorp as the insurer and Rivkin Direct Management as the group-holder, who would sell sub-policies 'for want of a better word' based on the master policy.[29] Citicorp's master policy contained the terms of insurance under which it granted cover to individuals.[30] However, he did not wish to express an opinion on whether Citicorp issued a policy of insurance to individuals such as Mr Montclare under a group policy as distinct from granting insurance cover to the individual. He did say that there was a contract entered into between the insured and Citicorp on similar conditions to the master policy.[31]

57 Mr McCowan drafted the terms of the insurance application forms which Mr Montclare submitted to Rivkin Direct Management.

58 Rivkin Croll Smith Insurance Agencies, which was another company in the Rivkin group, was the marketing arm for the sale of the insurance cover. Rivkin Croll Smith Insurance Agencies, and later Rivkin Direct Insurance Agencies, sold the insurance cover by direct mail and advertising and Mr Rivkin promoted it on television programs.

59 On 5 June 1996, Citicorp wrote to Rivkin Croll Smith Insurance Agencies. The letter was headed 'Broker Pool Opportunities'. The letter commenced:

As previously discussed with Max Rosas of this office, Citicorp Life has a complete range of Risk Insurance Products which can be badged and used exclusively by the Advisers representing your organisation.

You will be aware our Broker Pool alternative consists of Term, Trauma and Income Protection, and is an excellent advantage for Risk Insurance Advisers for not only the reasons of exclusivity.

....

The insurance contracts must be issued to an independent party as trustee of the plans who will be responsible for most aspects of administration, which includes production of all new business and renewal bordereaux in an acceptable format.[32]

60 Mr McCowan gave evidence that Rivkin Direct Management was the independent trustee which held the policy.[33]

61 The operation of group policies is described in Sutton on Insurance Law in the following terms:

An important feature of the modern life insurance market is that all products can be sold both on an individual basis as well as a group basis. The group market involves a policyowner which is either an employer or a superannuation fund. The employer group schemes are structured on the basis that the life insured is an employee or a dependant of an employee; the employer is the policyowner and can be the agent of the life insured for the purposes of the insurance. The superannuation fund schemes are structured on the basis that the life insured is a member and beneficiary of a trust fund and these dual capacities shape important features of the law on group schemes. The policyowner is the trustee of the fund. The person whose life is insured is the life insured. It is the policyowner, not the life insured, who enters into the contract, is obliged to pay the premium, has standing to claim and is entitled to receive the benefit amounts paid by the life insurer.[34]

62 Neither Mr Montclare nor Mr Shilton was an employee. There is an issue whether they or one of them was member or beneficiary of a trust fund.

63 I will next describe the documents that implemented the arrangement between Citicorp and Rivkin.

64 There was a draft trust deed naming Rivkin Direct Management, which was yet to be incorporated (it was incorporated on 3 September 1996), as trustee for the purpose of acting as the legal owner of a disability, trauma and life insurance policy or policies to be effected with such life insurance companies as the trustee may direct.

65 The trust deed in evidence was unexecuted. It was faxed on 30 August 1996, by Rivkin Croll Smith Insurance Agencies to Citicorp, with a cover sheet on which the question was asked:

Mark, herewith is our draft Trust Deed.

Can you clarify if & when a purchaser has to complete the 'Appendix A' à only group business.[35]

66 Metlife did not admit that the draft trust deed was executed. Mr McCowan could not recall whether it had been, but said that he assumed that it had been because otherwise the policies would not have been marketed.[36]

A. The Trustee has resolved to act as trustee for the purpose of acting as the legal owner of a disability, trauma and life insurance policy or policies to be effected with such life insurance companies as the Trustee may select.

B. The Trustee has agreed to effect the said policy with the Life Office for the benefit of Superannuation Plan Trustees, Individuals and Employers who wish to jointly participate in a single disability, trauma and life insurance policy for the purpose of obtaining the terms and conditions which are normally available to trustees of large superannuation funds and large employers.

C. The Life Office has agreed to issue a group disability, trauma and life insurance policy to the Trustee on the lives of the members of superannuation funds, the trustees of which participate in the group pool established hereunder, on the lives of employees of employers that participate in the group pool established hereunder and on the lives of individuals.[37]

the disability, trauma and life insurance policy or policies effected for the purpose of this Deed shall be held in trust by the Trustee for the trustees of superannuation funds, individuals and employers that become parties to this Deed and the said policy or policies shall be administered in accordance with the provisions set out herein. This Trust shall be known as the Rivkin Direct Disablement and Life Pooled Trust.[38]

69 'Policy' was defined in the draft trust deed to mean 'the group policy or policies effected by the Trustee pursuant to the provisions of this Deed'.

70 The draft trust deed provided for a written application to be made to the trustee by three categories of persons. First were Superannuation Plan Trustees who wished the members of their funds to become lives insured under the 'Policy'. Second were employers who wished their employees to become lives insured under the 'Policy'. Third, and of relevance to this case, were individuals who wished to become insured under the 'Policy'. Mr Montclare was said to fall into the third category. Persons in each of the categories could apply to the trustee to participate in the deed by completing the application form, which was Appendix A. The trustee could accept such applications and the successful applicant then became a 'Participating Individual' in the deed.

71 Appendix A was headed Application for Participation by a Participating Trustee, Employer or Individual and stated:

[NAME] ........................................................................................... (hereinafter called 'the Participating Trustee' or 'the Participating Employer' or 'the Participating Individual' as the case may be) hereby applies to participate as an equitable owner in the insurance policy (herein called 'the Policy') administered by Rivkin Direct Management Pty Ltd (hereinafter called 'the Trustee') pursuant to the Deed dated this date made by the Trustee and to include members of the superannuation fund administered by the Participating Trustee or employees of the Participating Employer or Participating Individuals as Lives Insured under the Policy and in consideration of the acceptance by the Trustee of the Participating Trustee or Employer or individual as a participant in the equitable ownership of the Policy, the Participating Trustee or Employer or Individual undertakes to make contributions to premiums under the Policy and agrees to become a party to the Deed dated this date made by the Trustee and be bound by that Deed as if it were originally named therein.

Dated this ............................... day of ................................. 199 ..........

The Common Seal of )

................................... ) ...................................

was affixed by the authority )

of the Board of Directors ) ...................................

in the presence of )

...................................

...................................[39]

72 The deed defined the terms 'Life Insured' and 'Participating Individual' as follows:

'Life Insured' means the member of a superannuation fund (the trustee of which becomes a party to this Deed) or an employee of an Employer that becomes a party to this Deed or an individual who becomes a party to this Deed or an individual who becomes a party to this Deed and who becomes a life insured under the policy.

'Participating Individual' means a person who becomes a party to this Deed pursuant to the provisions hereof.[40]

7. INSURANCE PROCEEDS

Upon being advised of the occurrence of an event that is insured under the Policy, the Trustee shall make a claim under the Policy for the insurance proceeds payable in respect of that event and shall immediately, upon receipt of the proceeds of the Policy in respect of the insured event, pay the amount of those proceeds to the Participating Employer of the Life Insured or the Participating Trustee of the superannuation fund of which the Life Insured was a member or the Participating Individual or his legal personal representative.[41]

74 Of importance in this proceeding was that Mr McCowan gave evidence that, in practice, the applicant for insurance or customer did not sign the Application for Participation by a Participating Trustee, Employer or Individual contained in Appendix A, but only signed the application for insurance form.[42]

75 Mr Montclare submitted that Rivkin Direct Management had waived the formality of an application by persons who wished to become Participating Individuals. It was not suggested that Mr Shilton or Mr Montclare ever applied in writing to become Participating Individuals under the trust deed.

76 But, as no executed trust deed is in evidence and there is no evidence of Mr Shilton or Mr Montclare applying to become Participating Individuals, it is unclear how the trust deed can apply to, or assist in the identification of the legal character of Mr Montclare's insurance cover.

77 I proceed on the basis that the trust deed, whether in the form of the draft trust deed that was in evidence, or in any other form, did not apply to the insurance cover that Mr Montclare obtained.

78 The Citicorp Life Insurance Master Group Life and Disability Insurance Policy (Group and Non Group Members) states that:

[i]n consideration of receiving from the Policyowner premiums as and when they fall due, we shall subject to these terms and conditions pay to the Policyowner the individual amounts of insurance set out in this Policy.[43]

79 Rivkin Direct Management was named in the first schedule as the 'Policyowner'.

80 Mr McCowan was shown a copy of the master policy and said that he presumed that it was a copy of the master policy which Citicorp issued to Rivkin. Mr Montclare did not receive a copy of the master policy.

81 The operation of the master policy, for the purposes of the present case, turns on its definition of 'Participating Person', which is:

Participating Person means any person (not being a Participating Employer, Participating Trustee or Participating Entity) acting in the capacity of trustee, nominee or otherwise who applies to the Policyowner to participate in this Policy by including any persons in respect of whom the Participating Person has an insurable interest as Members under this Policy.[44]

82 Mr Montclare contended that he was a 'Participating Person' because he applied to Rivkin Direct Management to participate in the master policy in relation to Mr Shilton, who was the member.[45]

83 The master policy provided for members: 'Group Persons' and 'Non Group Persons'. Clause 2.1 states:

We may accept for membership any Non Group Person nominated by the Policyowner for insurance cover (the type of cover to be nominated by the Policyowner) equal to:

(i) the Sum Insured; and/or

(ii) the Monthly Benefit (subject to the Monthly Benefit not exceeding the Maximum Monthly Benefit).[46]

84 'Group Person' means a 'person nominated by the Policyowner for membership under this Policy at the request of a Participating Trustee, Participating Employer or Participating Entity'. This definition is of persons who are usually granted insurance cover under group policies.

85 'Non Group Person' means a 'person nominated by the Policyowner for membership under this Policy at the request of a Participating Person'. The inclusion of non-group persons extends the class of persons who can obtain cover under the policy beyond the members of a group.

86 When a member dies, then subject to the provisions of the policy, Citicorp pays to the 'Policyowner' the sum insured for that member (clause 5). The 'Policyowner' holds the money in trust for the benefit of the member and, where applicable, in accordance with the terms of any trust deed (clause 25). Clause 25.2 provides that all benefits will be payable in the manner set out in the first schedule. That schedule provides that death benefits are payable in a lump sum.

87 Clause 28, which deals with the 'Free Look' period for 'Non Group Members', refers to Participating Person receiving a certificate of insurance in stating:

If the Participating Person within 14 days of receipt of their Certificate of Insurance requests for the insurance to be cancelled, we will cancel the insurance from inception and refund any premium that has been paid.

88 Rivkin Direct Management and Citicorp issued a Customer Information Brochure for term life insurance.[47] Rivkin Direct Management's name was at the top of the coversheet. The following information appeared at the foot of the cover:

CITICORP

Rivkin Direct Insurance is issued by:

is marketed by: Citicorp Life Insurance Ltd

Rivkin Croll Smith ACN 004 274 882

Insurance Agencies Pty Ltd

ACN 073 632 292

89 Under the heading 'Information on Your Insurance', the brochure stated:

When your application for Rivkin Direct Term Life Insurance is accepted, a Certificate of Insurance and Policy Information Statement will be sent to you detailing the cover selected. Please ensure that these documents are read carefully in conjunction with this Customer Information Brochure.

90 In a 'Q & A' section of the brochure, the following information appeared:

Q How do I apply for Rivkin Direct Term Life Insurance?

1. Applications can only be effected after completion of a current application form contained in this Customer Information Brochure.

This Customer Information Brochure is for the general public and provides information of a general nature outlining the benefits and other conditions of the Certificate of Insurance which is issued under the Master Policy.

91 The Rivkin Direct Management application form, that was of the type that Mr Montclare and Mr Shilton completed, was on tear out pages in the middle of the Customer Information Brochure. An applicant for insurance would send the completed form and payment to Rivkin Croll Smith Agencies Direct Insurance Agencies, which would forward the payment to the administrator of the insurance, Jacques Martin Administration & Consulting Pty Ltd, which, in turn, would distribute part of the premium to Citicorp and part to Rivkin Direct Insurance Agencies.[48] All cheques were to be made payable to 'Rivkin Direct Trust Account'.

92 Next, the application form would be sent to Citicorp, where underwriters would assess the application and might require the applicant to undergo a medical examination. Citicorp would advise Rivkin Direct Management of the life cover that it was willing to grant and confirm the premium rate.[49]

93 Mr Montclare and Mr Shilton forwarded two insurance application forms, the first was for $300,000 cover and the second for $1.1 million, and they are described below.

94 The insurance applicant to whom cover was granted received a Customer Purchase Record and had a 14 day cooling off period. The Customer Purchase Record in this instance recorded the following customer details: the applicant as John Montclare Enterprises and the life insured as Graham Shilton. This misspelt Mr Shilton's first name of Graeme. It nominated Rivkin Croll Smith Insurance Agencies as agent of the life office, which in turn was described as Citicorp. The insurance was described as Rivkin Direct Term Life Insurance with cover of $300,000.

95 On 3 February 1999, the administrator of Rivkin Direct wrote a letter to Mr Montclare headed 'Rivkin Direct Term Life Insurance Policy Information Statement' ('Policy Information Statement'), which stated:

Thank you for selecting Rivkin Direct as your choice of Term Life Insurance.

Please find attached your Certificate of Insurance which is evidence of the contract between yourself, Rivkin Direct Management Pty Ltd and the insurer, Citicorp Life. A schedule is attached to your Certificate and together these documents provide full details of your cover.[50]

96 The letter summarised Mr Montclare's insurance cover and included the following details:

Rivkin Direct Term Life Insurance Cover

Should the Life Insured die while the insurance remains in force, subject to the exclusions outlined in the certificate, the Sum Insured will be paid to you. If Life Insured is diagnosed as being terminally ill with a remaining life expectancy of less than 6 months, then the sum insured or $750,000, whichever is the lesser will be paid.

...

Exclusions

There will be no entitlement to a Death Benefit in the event of suicide occurring within 13 months of the date of commencement or reinstatement of the Insurance. A Terminal Illness Benefit will not be payable if the illness or injury arises from self inflicted injury (or complications arising thereafter).[51]

97 The Policy Information Statement stated that Rivkin Direct Term Life Insurance is issued from the No 1 Statutory Fund of Citicorp Life Insurance Ltd ACN 004 274 882.

98 The Policy Information Statement sent to Mr Montclare was accompanied by a certificate of insurance of seven pages. The schedule to the certificate was signed 'for and on behalf of Rivkin Direct' but was not signed by Metlife. Metlife's case is that the certificates of insurance contained the terms of the insurance contract under which Mr Montclare was an insured.

This Certificate of Insurance sets out the cover provided under a Master Group Life and Disability Insurance Policy (dated 1 October 1996) between Citicorp Life Insurance Ltd and Rivkin Direct Management. In the event of the Death, Terminal Illness or Total and Permanent Disablement (if applicable) of the Life Insured, any Benefits payable under that Policy will be paid directly by the Insurer to us as trustee. We will then pay the Benefit to you in accordance with this Certificate of Insurance.[52]

100 The 'us' referred to was Rivkin Direct Management and the 'you' was Mr John Montclare.

101 Mr Graeme John Shilton was listed in the schedule as the life insured.

102 Under the heading 'Policy Cover', the certificate stated:

(a) Insurance cover will be provided under this Certificate for an initial period which commences on the Commencement Date and ends on the first Annual Renewal Date provided you have paid the 'Total Initial Premium' (or the first instalment) specified in the Schedule.

(b) Subject to the age limitations contained in this Certificate, we shall renew cover for further periods of one year upon receiving your request to do so accompanied by the total annual premium (or the first instalment for that year) prior to the expiry of each period of annual cover.

(c) Your entitlement to any Benefit is subject to the terms and conditions of this Certificate and any special conditions contained in the Schedule.

(d) This Certificate is issued on the basis of the information disclosed to the Insurer in the application form, as well as in the personal statements and declarations made by you and the Life Insured.

(e) All Benefits payable under this Certificate shall be paid in Australian Dollars.[53]

103 There were no special conditions contained in the schedule.

104 The certificate described the 'Death Benefit' as payable:

(a) If during any period of cover the Life Insured should die, then we will pay you the Sum Insured that has been paid to us by the Insurer.

(b) Where a Death Benefit is paid it will discharge all of the Insurer's obligations under the Master Policy and no further benefits of any kind shall be payable under this Certificate.[54]

105 The certificate described the circumstances in which insurance liability ceased, which included 'upon cancellation of this insurance or the Master Policy for any reason'.

106 The issuing of the certificate was recorded in Jacques Martin Administration & Consulting Pty Ltd's bordereau report for February 1999, which was sent to Citicorp.

107 A second certificate of insurance was issued to Mr Montclare for term life cover of $1.1 million with a commencement date of 10 June 1999.

108 The second certificate was dated 7 January 1999, but that appears to have been in error as it was accepted by the underwriters on 8 June 1999.[55] Mr Montclare gave evidence that he received it.[56]

109 The second certificate was also signed by Rivkin Direct.[57] It did not have an accompanying Policy Information Statement, although Mr Gary Ridgeway, who was called as a witness in the plaintiff's case, stated that such a letter would have been sent. Mr Ridgeway commenced employment with the second defendant, Rivkin Direct Insurance Agencies, in late 1998 and was its manager and sole employee.

110 The opening paragraph of the second certificate stated:

This Certificate of Insurance sets out the cover provided under a Master Group Life and Disability Insurance Policy (dated 1-10-1996) between Citicorp Life Insurance Ltd ACN 004 274 882 and Rivkin Direct Insurance Agencies Pty Ltd ACN 073 632 292. In the event of the Life Insured's Death or Terminal Illness or Total and Permanent Disablement (where chosen as an option) any Benefits payable under that Policy will be paid directly by the Insurer to us as trustee. We will then pay the Benefit to you in accordance with this Certificate of Insurance.

111 The pronoun 'you' was defined as Mr J Montclare.

112 Mr McCowan said that the second certificate of insurance was incorrect because it referred to a master group life and disability insurance policy between Citicorp and Rivkin Direct Insurance Agencies, whereas the Rivkin company named should have been Rivkin Direct Management.[58] Rivkin Direct Insurance Agencies never entered into a master policy.

113 The insurance certificates were signed on behalf of 'Rivkin Direct' without further identification of the company that was intended to be referred to.

114 Mr Ridgeway said that amounts payable under claims were paid directly to the claimant, who was entitled to the benefit of the life insurance and not to any trustee or intermediary.[59] In this case, Mr Montclare wrote to Mr Ridgeway on 4 October 2001 requesting that a settlement cheque be sent to him as the certificate holder.

115 The second certificate contained a few provisions that were not in the first certificate. One was an 'Important Notice' which stated:

This is not a savings plan. The primary purpose of this policy is to provide a benefit in the event of your death or total and permanent disablement (if selected). If you terminate your plan at anytime, you will not get anything back.[60]

116 Before summarising the parties' submissions on whether Mr Montclare was an insured, it is important to consider further the legal relations created by group policies. Mr Montclare's case is that his insurance cover arose under a group scheme and not as a party to a contract of insurance. It is important to keep in mind that Mr Montclare was not seeking insurance as an employee, who was a member of an employer group or insurance which was an additional benefit attached to a superannuation scheme. He was seeking insurance as an individual on the life of another person, Mr Shilton, although under an arrangement that provided insurance cover to members of a group.

117 I have previously quoted the passage from Sutton on Insurance Law concerning group policies.

118 In Hannover Life Re of Australasia Ltd v Sayseng[61], Santow JA, with whom Spigelman CJ and Tobias JA agreed, described the group life policy under consideration as follows:

The Group Life Contract was an agreement to pay benefits to the Trustee, and Insured Persons were not intended to be parties to it. Hannover did not insure or purport to insure Mr Sayseng, and nor is he entitled to recover pursuant to s 48(1) of the Insurance Contracts Act 1984.

119 In Erzurumlu v Kellogg Superannuation Pty Ltd,[62] Ball J stated:

Although a member is not a party to the contract with the insurer who provides insurance cover to the trustee of a superannuation fund, the member has standing to enforce the contract as a beneficiary of the trust which holds the insurance policy as one of its assets. The member does not have a personal claim but is entitled to seek an order that the insurer pay to the trustee the amount due to the trustee under the contract: Sayseng v Kellogg Superannuation Pty Ltd [2003] NSWSC 945 at [78] ff.

120 The High Court decision in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd[63] recognised the right of a person who is entitled to claim under an insurance policy to sue to enforce that rights.

121 However, the position of an individual who applies for life insurance cover on the life of another person under a group policy appears not to have been considered in detail by any authority.

Provisions of the ICA dealing with the rights of third parties to enforce contracts of insurance

122 Prior to June 2014, there was no provision in the ICA imposing obligations of disclosure or liabilities for making misrepresentations on third party beneficiaries under life insurance policies.

123 Section 48 of the ICA imposed those obligations on third party beneficiaries only in respect of contracts of general insurance and not in respect of contracts of life insurance.[64]

124 Section 48A applied to life policies for the benefit of another person, but did not impose any obligations of disclosure or penalties for making misrepresentations. In any event, it has been interpreted as relating to policies effected by persons on their own lives and not to policies effected by another, for example a superannuation fund trustee for the benefit of members.[65]

125 Clarke JA in C E Heath Casualty & General Insurance Ltd v Grey, considering the provisions of Part IV of the ICA, stated:[66]

What is clear from these provisions is that the obligation to disclose, and not to make misrepresentations, is cast upon a person intending to enter into a contract of insurance and the consequences of non-compliance are visited only upon persons who actually enter into such a contract. What is of greater importance is the fact that there is no obligation to disclose, or not misrepresent, before a contract is entered into, imposed upon a person entitled to recover the amount of a loss pursuant to s 48(1). Nothing in s 28 provides that anything he or she does, or fails to do, before the contract is concluded in any way disentitles him or her from successfully maintaining a claim.

126 Recently, in ABN AMRO Bank NV v Bathurst Regional Council,[67] a Full Court of the Federal Court consisting of Jacobson, Gilmour and Gordon JJ applied the reasoning of Clarke JA and stated:

We do not think it was intended that where a non-party who is, under the contract, defined as one of the insured failed, fraudulently, to comply with the duty of disclosure under s 21, this could result in the avoidance of the contract between the insurer and the innocent insured, the other party to the contract.

127 The question of the rights and obligations of third party beneficiaries under contracts was considered in the Review of the Insurance Contracts Act 1984 (Cth) ('the Review') which was commissioned by the Commonwealth Government and published in June 2004. The Review recommended that:

Section 48A of the [Insurance Contracts] Act should be amended so that: ... it is clear that a third party can bring an action against an insurer without the intervention of the policy owner ...[68]

128 The Review also recommended that third party beneficiaries under contracts of insurance should have:

• the same rights and obligations as an insured for the purposes of subrogation;
• the duty of utmost good faith (but not pre-contractually) ...[69]

129 The Review led nine years later to the passage of the Insurance Contracts Amendment Act 2013 (Cth), which substituted new subsections (1), (2) and (3) of s 48 and (1) and (2) of s 48A of the ICA, which new subsections commenced on 28 June 2014. The new subsections had the following intention:

The intent of sections 48 and 48AA (as amended) is that third party beneficiaries should be in no better position, in terms of their ability to claim, than the insured. An insurer should be entitled to raise defences relating to the conduct of an insured, including conduct occurring prior to the time the contract was entered into.

To make it clear that, in defending an action by a third party beneficiary:

• an insurer may raise defences relating to the conduct of the insured; and
• the conduct that may be raised may have occurred either after the contract was entered into or before (for example, non-disclosure).[70]

130 The new s 48 deals with contracts of general insurance and the new s 48A with life policies. Section 48A provides:

48A Life policy for the benefit of third party beneficiary

(1) The following paragraphs have effect in relation to a contract of life insurance to the extent that the contract is expressed to be for the benefit of a third party beneficiary (who may be the life insured):

(a) the third party beneficiary has a right to recover from the insurer any money that becomes payable under the contract even though the third party beneficiary is not a party to the contract;

(b) if the third party beneficiary is not the life insured, any money paid to the third party beneficiary under the contract does not form part of the estate of the life insured.

(1A) Paragraph (1)(a) has effect in relation to a contract of life insurance that is maintained for the purposes of a superannuation or retirement scheme, subject to:

(a) the terms of the contract and the scheme; and

(b) any other law;

relating to the payment of money under the contract or the scheme.

(2) Subject to the contract, the third party beneficiary:

(a) has, in relation to the third party beneficiary's claim, the same obligations to the insurer as the third party beneficiary would have if the third party beneficiary were the insured; and

(b) may discharge the insured's obligations in relation to the payment of any money to the third party beneficiary under the contract.

(3) Nothing in this section restricts the capacity of a person to exercise any right or power under a contract of life insurance to which the person is a party. In particular, nothing in this section restricts the capacity of a person:

(a) to surrender a contract of life insurance to which the person is a party; or

(b) to borrow money on the security of a contract of life insurance; or

(c) to obtain a variation of a contract of life insurance, including a variation having the result that the contract ceases to be a contract to which this section applies.

131 This legislative history is significant because it establishes that the ICA, at the time relevant to these proceedings, did not impose the obligations of an insured on a third party beneficiary to a life insurance contract. The ICA has imposed those obligations on third party beneficiaries only since June 2014.

132 If Mr Montclare's submissions are correct, he was not a party to a contract of insurance to which the ICA applied, but was a third party beneficiary under the master policy or a third party with rights to enforce it. On that argument, the ICA imposed no obligation on him to make disclosure, nor did it provide Citicorp with any remedy against him if he failed to disclose material facts or made a misrepresentation, even a fraudulent misrepresentation. If Mr Montclare is correct in this submission, then subject to some technical arguments about the identification of the correct Rivkin company that he needed to sue and the determination of Metlife's set-off, he would succeed regardless of any fraudulent conduct on his part or by Mr Shilton.

133 I state again that it is important to keep in mind that Metlife did not rely on a defence that Mr Montclare had breached his duty of utmost good faith that is prescribed by s 13 of the ICA or is recognised at common law.

Submissions about whether Mr Montclare was an insured under the ICA

134 Mr Montclare submitted that insurance cover was provided under the master policy issued by Metlife to Rivkin Direct Management on or about 1 October 1996 and under a trust arrangement made between Rivkin Direct Management and Mr Montclare in 1999. No contract of insurance was entered into in 1999. For the purposes of the ICA, the trustee, Rivkin Direct Management, was the 'insured', as it was the contracting party to the master policy that Citicorp issued. Mr Shilton was the 'life insured'. Mr Montclare was a beneficiary under the trust, and a 'third party beneficiary' for the purposes of the ICA. Because Mr Montclare was not an insured, he was not subject to the provisions of the ICA concerning non-disclosure or misrepresentation.

135 Premiums were paid to the Rivkin trust account and the bordereau account referring to the premiums paid by Mr Montclare were recorded as part of the master policy accounts. Approximately 300 policies were issued under the master policy.[71]

136 Mr Montclare was a 'Participating Person', who applied to the 'Policyowner', Rivkin Direct Management, to participate in the master policy by including Mr Shilton as a member under the policy.

137 Metlife treated Mr Montclare's claim as made under the master policy and processed his application under the trust deed and group policy arrangement without attending too closely to the details required by that arrangement.

138 The master policy and the trust deed were drawn in contemplation of, and by reference to, each other. The certificates of insurance described the life cover provided under the master policy.

139 Mr Montclare's case, that he had insurance cover, relied on a number of the documents to which I have referred, including the Customer Information Brochure, Citicorp's letter of 5 June 1996 to Rivkin Croll Smith Insurance Agencies and the certificates of insurance. He submitted that he was treated as a 'Participating Person' without having to have made a written application to be so treated.

140 The Policy Information Statement that accompanied the first certificate of insurance stated: '[p]lease find attached your Certificate of Insurance which is evidence of the contract between yourself, Rivkin Direct Management Pty Ltd and the insurer, Citicorp Life'.[72] That did not evidence a contract of insurance between Citicorp and Mr Montclare. Rather it was 'a shorthand way of saying there is a contractual arrangement, i.e. for the due administration of the trust between Mr Montclare and Rivkin Direct Management and a contract, being the master policy, between Rivkin Direct Management and Citicorp Life'.[73] Rivkin Direct Management was obliged to make claims on behalf of Mr Montclare under the master policy and was bound, as trustee, to pay any amount that it received to him.

141 The certificates of insurance certified to the beneficiary that the trustee would act in accordance with the trust deed, and established that the insurance had been effected pursuant to the master policy.

142 Alternatively, Mr Montclare submitted that he and Mr Shilton were joint members under the master policy.

143 Metlife submitted that the certificates of insurance were 'self-contained' contracts of insurance between it and Mr Montclare. The certificates substantially recorded the terms and conditions of the contract or contracts of insurance.

144 The policy of life insurance was not issued under the master policy. If it had been, only Mr Shilton could have been a member entitled to benefits and only his estate could claim the amount insured. Mr Montclare and Mr Shilton never applied to become members of the master policy under the procedures set out in it and the trust deed. The trust deed was not mentioned in the Customer Information Brochure and it did not form part of the insurance arrangement.

145 The Policy Information Statement referred to the attached certificate of insurance and described it as 'evidence of the contract between yourself, Rivkin Direct Management Pty Ltd and the insurer, Citicorp Life'.[74] This was an assertion of a tripartite contract, with Mr Montclare as the insured and Citicorp the insurer. Rivkin Direct Management was not an insurer or the insured but the recipient and trustee of any benefit paid by Citicorp for the certificate holder.

146 There were two contracts of life insurance for the purposes of the ICA, which arose from the two applications for life insurance made by Mr Montclare with Mr Montclare being the insured and Citicorp the insurer. The written terms of the two contracts were contained in the Customer Information Brochure, the first and second applications for life insurance by Mr Montclare and the related certificates of insurance, schedules and Policy Information Statement dated 3 February 1999.

147 Each application gave rise to a contract of insurance based on a conventional contractual analysis of offer, acceptance and consideration. By completing the application forms, Mr Montclare made offers to Metlife to enter into a contract of life insurance. Mr Montclare's offers were accepted by Citicorp by its issue of the Policy Information Statement and the first and the second certificates.

148 Mr Montclare's interpretation of the arrangement would produce an unbusiness-like and absurd result. It would render pointless the disclosures that Mr Shilton made in the two insurance applications.

149 Metlife relied on the House of Lord's decision in Swain v The Law Society,[75] which considered an arrangement whereby premiums were paid by solicitors when effecting insurance under Law Society's professional indemnity scheme, which was a compulsory scheme established under statute. The brokers employed by the Law Society received a commission from the insurers on the premium paid and shared it with the Law Society, which used the money for the benefit of the profession as a whole. The question determined was whether the Law Society was accountable to solicitors for the money that it received under a commission-sharing agreement. The House of Lords held that it was not, because it was not a trustee of the master policy contract. Lord Brightman described the insurance arrangement in place as:

(1) The master policy [which] is a contract between the insurers and The Law Society under which the insurers bind themselves to provide solicitors with insurance on the terms of the certificate of insurance on payment of the appropriate premium, and to provide insurance for former solicitors without payment of premium [and] (2) The certificate of insurance [which] evidences a contract between the insurers and the named solicitor under which the insurers bind themselves to indemnify the solicitor and all others who come within the definition of the assured.

150 Mr Montclare submitted that Swain's Case was not analogous to the present circumstances as it concerned attempts to characterise a statutory scheme as imposing a trust relationship on the Law Society, in circumstances in which there was an agreement between the trustee and the insurer that the insurer would enter into contracts with the solicitors. I agree that the circumstances considered in Swain's Case are quite different from those in the present case, and it is therefore not of direct assistance in resolving this case.

151 The issue for decision is whether Mr Montclare obtained life insurance cover from Citicorp under a contract of insurance regulated by the ICA and, therefore, was an insured under the ICA with the duties of disclosure and subject to the liabilities for misrepresentation imposed on an insured by that Act.

152 I consider that the certificates of insurance were contracts of insurance for the purposes of the ICA. They were contracts of insurance that provided for the payment of money on the death of a person. They stated both that the cover was provided under the certificates of insurance and that it was provided under the master policy. They stated that Citicorp provided life insurance cover to Mr Montclare 'under this Certificate'. They repeated many of the provisions of the master policy. The fact that the insurance cover given under the certificates of insurance was, in turn, provided under the master policy does not prevent the certificates from being contracts of insurance.

153 Certificates of insurance can constitute insurance contracts. Professor M Clarke in his work, The Law of Insurance Contracts,[76] states that if a certificate appears to be a complete statement of the insurance contract, subject to contrary terms in the certificate, that should preclude reference to the policy at all, especially if the certificate contains a statement that it shall take the place of the policy. If the certificate is evidently not a complete statement of the terms of the contract of insurance, the courts have compared the contents of the certificate and the policy and held, in case of conflict, usually in favour of the insured, that the certificate prevailed.

154 In Kelly and Ball Principles of Insurance Law, the authors state:

There is much less difficulty in identifying the terms of the final contract than there is in identifying the terms of interim cover. The terms of the final contract are normally found in the policy or, less frequently, in the master policy referred to in the certificate of insurance that is given to the insured.[77]

155 A certificate of insurance can in appropriate circumstances be the legal instrument conferring rights and imposing obligations on an insured.

156 The two certificates of insurance were contracts whereby Citicorp agreed to provide insurance cover. The certificates gave Mr Montclare, as certificate holder, the right to claim insurance benefits from Citicorp. Those were benefits that were to be provided under the master policy. The certificates contained Mr Montclare's entitlement to receive benefits provided by the master policy, subject to any modifications contained in the certificates. Those features of the certificates are sufficient to constitute the certificates as contracts of insurance. Viewed objectively, the certificates gave Mr Montclare enforceable legal rights. The fact that insurance entitlements had their source in the master policy did not prevent Mr Montclare's contractual entitlements being contained in, and arising from, the certificates of insurance. The master policy envisaged that certificates of insurance would be issued. It is true that the certificates were signed by Rivkin Direct, but they were sent to Mr Montclare as a result of Citicorp's approval of his application for life insurance cover.

157 The master policy was a group policy and Rivkin Direct Management was not an employer or a superannuation fund trustee, but was the 'Policyowner'. However, the master policy allowed individuals, namely 'Non Group Persons', to become members and it allowed persons to participate by becoming 'Participating Persons'. Although the master policy was part of a group insurance scheme, the certificates of insurance could still be contracts of insurance for the purposes of the ICA.

158 The insurance cover was issued by Citicorp. Rivkin Direct Management was the 'Policyowner' under the master policy but received any payments under the policy on trust. That obligation explains why the Policy Information Statement described the certificate of insurance as evidence of a contract of insurance between Mr Montclare, Rivkin Direct Management Pty Ltd and Citicorp Life.

159 Under the certificates of insurance, amounts paid under the policy are made in respect of a member (clauses 4.2 and 25.1 of the master policy), but are made to the 'Policyowner', who pays them to the certificate holder.

160 I do not consider that Mr Shilton or Mr Montclare ever became 'Non Group Persons' or Participating Individuals under the master policy. Instead, the benefits payable under the certificates of insurance were agreed to be paid to Mr Montclare under the master policy without him participating in the group scheme in relation to which the master policy played a central role. The scheme of insurance cover upon which Mr Montclare relied was never implemented in his case. Rather, Citicorp issued certificates of insurance to him. I consider that those certificates were contracts of insurance.

161 The master policy and the certificates of insurance both stated that the payment of entitlements following a claim discharged all the insurer's obligations under the master policy, and that no further benefit would be payable under the certificates. That statement reflected the fact that the entitlements were payable pursuant to the master policy. However, Mr Montclare's right to obtain those entitlements was conferred by the certificates of insurance.

162 It is significant, but not decisive, that any amount payable on a life insured's life was payable to Rivkin Direct Management to be held for Mr Montclare. Mr Montclare had the right to notify Rivkin Direct Management of an entitling event and it would then notify Citicorp. Citicorp agreed to pay any sum due to Rivkin Direct Management, which, in turn, agreed to hold the sum on trust for Mr Montclare and pay it to him. The evidence of Mr Ridgeway suggests that Citicorp did not apply this practice and that Citicorp dealt directly with the person who held the insurance cover. The interposition of Rivkin Direct Management between Citicorp and Mr Montclare does not prevent the certificates of insurance being contracts of insurance. Mr Montclare's right under the certificates to make a claim and receive entitlements from Citicorp through Rivkin Direct Management was evidence of the contract or contracts of insurance between Mr Montclare and Citicorp.

163 The object and purpose of these certificates of insurance were to provide life insurance payments to Mr Montclare upon Mr Shilton's death. Insurance policies are to be interpreted as commercial documents and with a view to achieving their purpose. As Gleeson CJ stated in McCann v Switzerland Insurance Australia Ltd:[78]

A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure.

164 His Honour also stated in International Air Transport Association v Ansett Australia Holdings Ltd[79] that:

In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contact calls for an understanding of the genesis of the transaction, the background, and the market.

165 The legal effect that I give to the certificates of insurance recognises Mr Montclare's enforceable rights against Citicorp to life insurance benefits. In my opinion, Mr Montclare neither directly, nor through Mr Shilton, ever joined the group scheme contemplated by the master policy. There is no reference to that scheme in the certificates of insurance or in the Customer Information Brochure. No executed copy of the trust deed was in evidence. The insurance cover that Citicorp agreed to give to Mr Montclare is recognised by treating the certificates of insurance as contracts of insurance.

166 I, therefore, accept Metlife's submissions that Mr Montclare was a party to a contract of insurance regulated by the ICA and that he was an insured for the purposes of that Act. I consider that the certificates of insurance were contracts of insurance for the purposes of the ICA and that Mr Montclare was an insured under that Act.

167 Mr Montclare's third basis of pleading his case relied on his rights under the certificates of insurance in the following terms:

In the alternative...on or about 7 January 1999, the Plaintiff, as policyowner, entered into a policy of term life insurance with the First Defendant ('the alternative policy").

168 Metlife contended that there were two contracts of insurance created by each of the certificates of insurance. Mr Montclare contended that there was no contract of insurance.

169 I consider that the issue of the two certificates of insurance evidenced two contracts of insurance.[80]

170 Nothing was said to turn on this point in this case.

171 I will proceed to consider Mr Montclare's case on the basis that he was a party to contracts of insurance to which the provisions of the ICA applied.

Section C. Metlife's defence based on non-disclosure and misrepresentation

172 The next sections of the judgement consider Metlife's defence that Mr Montclare and Mr Shilton breached their duties of disclosure and made misrepresentations in order to obtain life insurance. Those breaches and misrepresentations related to the identity of the person who signed Mr Shilton's name on relevant documents, the purpose of the increased insurance cover, the question whether Mr Montclare had previously been refused insurance and matters relating to Mr Shilton's medical history. Mr Montclare was also alleged to have made separate misrepresentations.

173 The fraud defence relied on alleged actions by both Mr Montclare and Mr Shilton in failing to disclose and making misrepresentations about the fact that Mr Shilton suffered from a mental or nervous disorder or breakdown in that he suffered from dysthymia, alternatively depression, for a number of years. They also relied on allegations that Mr Montclare signed Mr Shilton's name and the failure to disclose that NRMA had refused Mr Montclare life insurance.

174 Metlife alleged that Mr Montclare made a fraudulent misrepresentation by representing to it that the answers given by Mr Shilton in the insurance applications were to the best of his knowledge and belief true and that he had made such enquiries as were appropriate to constitute a proper foundation for his knowledge and belief that the answers given by the deceased to the first application were true.

The provisions of the ICA dealing with disclosure and misrepresentation

175 Section 21 describes Mr Montclare's duty of disclosure:

21 The insured's duty of disclosure

(1) Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that:

(a) the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or

(b) a reasonable person in the circumstances could be expected to know to be a matter so relevant.

(2) The duty of disclosure does not require the disclosure of a matter:

(a) that diminishes the risk;

(b) that is of common knowledge;

(c) that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or

(d) as to which compliance with the duty of disclosure is waived by the insurer.

(3) Where a person:

(a) failed to answer; or

(b) gave an obviously incomplete or irrelevant answer to;

a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter.

...

176 Sections 25 and 26, which deal with misrepresentations, provide:

25 Misrepresentation by life insured

Where, during the negotiations for a contract of life insurance but before it was entered into, a misrepresentation was made to the insurer by a person who, under the contract, became the life insured or one of the life insureds, this Act has effect as though the misrepresentation had been so made by the insured.

26 Certain statements not misrepresentations

(1) Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation.

(2) A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.

(3) This section extends to the provision of insurance cover in respect of:

(a) a person who is seeking to become a member of a superannuation, retirement or other group life scheme; or

(b) a person who is a holder, or is applying to become a holder, of an RSA.

177 An 'RSA' is a retirement savings account within the meaning of the Retirement Savings Accounts Act 1997 (Cth).

Did Citicorp inform Mr Montclare of the duty of disclosure?

178 Section 22 of the ICA, which requires the insurer to inform the insured of their duty of disclosure, states:

22 Insurer to inform of duty of disclosure

(1) The insurer shall, before a contract of insurance is entered into, clearly inform the insured in writing of the general nature and effect of the duty of disclosure and, if section 21A applies to the contract, also clearly inform the insured in writing of the general nature and effect of section 21A.

(2) If the regulations prescribe a form of writing to be used for informing an insured of the matters referred to in subsection (1), the writing to be used may be in accordance with the form so prescribed.

(3) An insurer who has not complied with subsection (1) may not exercise a right in respect of a failure to comply with the duty of disclosure unless that failure was fraudulent.

179 Schedule 1 of Pt 2 of the Insurance Contracts Regulations 1985 (Cth) ('the Regulations') contains a form of words to inform insureds of the general nature and effect of their duty of disclosure in respect of contracts of life insurance. The use of the exact form of words is not compulsory. The schedule provides:

Your duty of disclosure

Before you enter into a contract of life insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984, to disclose to the insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer's decision whether to accept the risk of the insurance and, if so, on what terms.

You have the same duty to disclose those matters to the insurer before you renew, extend, vary or reinstate a contract of life insurance.

Your duty however does not require disclosure of a matter:

• that diminishes the risk to be undertaken by the insurer;

• that is of common knowledge;

• that your insurer knows or, in the ordinary course of his business, ought to know;

• as to which compliance with your duty is waived by the insurer.

Non-disclosure

If you fail to comply with your duty of disclosure and the insurer would not have entered into the contract on any terms if the failure had not occurred, the insurer may avoid the contract within 3 years of entering into it. If your non-disclosure is fraudulent, the insurer may avoid the contract at any time.

An insurer who is entitled to avoid a contract of life insurance may, within 3 years of entering into it, elect not to avoid it but to reduce the sum that you have been insured for in accordance with a formula that takes into account the premium that would have been payable if you had disclosed all relevant matters to the insurer.

180 The onus is on the insurer to show compliance with the requirements of s 22. The insurer must 'clearly inform' the insured of their duty of disclosure. The informing must occur with 'some precision'.[81] In Suncorp General Insurance Ltd v Cheihk, Giles JA stated:

Clarity was required not only in the contents of the note by which information was conveyed but also by the manner in which the note conveying the information was made known. A note in a document without attention appropriately drawn to it would not suffice, even if the contents of the note were adequate to state the general nature and effect of the duty of disclosure.[82]

181 The insurer must inform the insured of the possible consequences of a failure to make proper disclosure.[83]

182 Metlife argued that it complied with s 22 by including the words contained in section 14 in the application form, which Mr Shilton completed. Mr Shilton and Mr Montclare signed that section of the application. A warning laden with the technical language of s 29 of the ICA, which provides the insurer with remedies for non-disclosure, would confuse applicants for insurance. Section 14 of the application stated:

You are required to disclose to us all information which is relevant in assisting us as to whether we should extend cover to you. This includes true and full disclosure as to all information required in the application, as well as reference to any other matter which might indicate that you are more likely to suffer a serious health problem, or to have shortened longevity, than the average member of the community.

If you fail to disclose any such information to us, your rights, or the rights of any other person, to claim in relation to this insurance may be prejudiced.

183 Mr Montclare argued that the notice did not comply with s 22. The notice required by s 22 had to be addressed to the insured, but the section 14 statement was addressed to the life insured. There were significant differences between the statement on the insurance application form and that prescribed by the Regulations. The notice provided in section 14 did not explain in clear terms that a policy or claim could be avoided or denied by reason of non-disclosure.

184 I consider that the notice given by Citicorp did not comply with s 22 because it did not clearly state the consequences of a failure to comply with the duty of disclosure.

185 That finding prevents Metlife from relying on the remedies available under the ICA, if it establishes that there has been a failure to comply with the duty of disclosure, unless any such non-disclosure was fraudulent. However, a failure to comply with s 22 does not affect the remedies available if Metlife establishes that the insured made misrepresentations. Section 22 only applies to innocent non-disclosures.

186 The information that Metlife said Mr Shilton and Mr Montclare should have disclosed was closely linked to, or overlapped with, the matters that Metlife alleged were misrepresentations.

187 This section of the judgment deals with Metlife's contention that Mr Montclare and Mr Shilton falsely represented that Mr Shilton had signed four documents, being the two insurance applications, the April 1999 increase in cover letter and the May 1999 purpose of increased cover letter, and failed to disclose that Mr Shilton had not done so. Metlife contended that the misrepresentations and non-disclosures were fraudulent because Mr Shilton did not sign the two insurance applications or the April and May 1999 letters. Rather, Mr Montclare signed Mr Shilton's signatures on those documents.

188 Metlife contended that s 25 of the ICA operated so that misrepresentations by Mr Shilton had effect as if made by Mr Montclare. Section 25 is set out above.

189 Metlife argued that it would not have entered into the insurance contracts, on any terms, if the misrepresentations had not been made or if Mr Montclare and Mr Shilton had disclosed that Mr Montclare had signed Mr Shilton's name.

190 Mr Montclare agreed that he had signed Mr Shilton's name on the medical authority contained in the first insurance application and on the two letters of April and May 1999. He said that he had Mr Shilton's authority to sign his name on those three occasions and he had not forged Mr Shilton's signature. But he denied that he had signed Mr Shilton's other signature on the first application or Mr Shilton's two signatures on the second application.

191 I next consider the evidence concerning the signatures bearing Mr Shilton's name that appear on the four documents.

192 On 26 November 1998, Mr Montclare and Mr Shilton completed an application for Rivkin Direct Term Life Insurance: Mr Montclare was the applicant and Mr Shilton the life insured. They sought cover of $300,000 on Mr Shilton's life.

193 The application contained sections numbered 4 to 13 that were to be completed by the life insured. They were completed in the same terms in the first and second applications.

194 Section 5 asked three questions about whether the life insured had any other life, trauma or disability insurance in force, or had applied for any, or whether any application for life, trauma or disability insurance on his life had been declined, deferred or withdrawn from any company or accepted with a loading or otherwise than as submitted. The 'no' box was ticked in respect of these questions. The answers given to these questions are dealt with in the section of these reasons dealing with the application for life insurance made to NRMA.

195 Section 9 of the application form asked '[h]ave you ever had any of the following' and then listed 19 medical conditions or groups of medical conditions. The fifth category was '[i]ndigestion, gastric or duodenal ulcer?' The answer given was 'yes' and 'indigestion 1 week'. The eighth category, which was the subject of question 9H was critical for Metlife's case. It asked '[h]ave you ever had ... mental or nervous disorder or breakdown'. The answer given was 'no'.

196 Where an affirmative answer was given to a medical question, the life insured was required to complete a box that was headed:

If yes, give dates, name and address of doctor (if any), full particulars, including duration.

197 Question 9P was: Have you ever had any other illness, injury or operation? The answer given was 'no'.

198 Section 14 of the application form was headed 'TO BE COMPLETED BY THE LIFE INSURED AND THE APPLICANT'. I will set it out in full:

You are required to disclose to us all information which is relevant in assisting us as to whether we should extend cover to you. This includes true and full disclosure as to all information required in the application, as well as reference to any other matter which might indicate that you are more likely to suffer a serious health problem, or to have shortened longevity, than the average member of the community.

If you fail to disclose any such information to us, your rights, or the rights of any other person to claim in relation to this insurance may be prejudiced.

1. I/we hereby declare that the information contained in this application is true and correct.
2. I/we are not aware of any other circumstances which might render the life to be insured to have shortened longevity or suffer a serious health problem.
3. I/we acknowledge that I/we was/were not given any advice and no Fact Find was undertaken and that I/we understand that we are not receiving advice, I/we risk making a financial commitment to a life policy that may not be appropriate to my/our needs and objectives.[84]

199 Two signatures appeared under this declaration in the application forms that Mr Montclare and Mr Shilton submitted: one in the name of Mr Montclare and the other in the name of Mr Shilton.

200 Immediately under this declaration was a second declaration with a signature in the name of Mr Montclare, in the following terms:

The undersigned declares that prior to completing and signing this Application, I/We have read and retained for later perusal a current edition of the Rivkin Direct Term Life Insurance Customer Information Brochure dated 1 October 1998.

201 The evidence of the signing of the first application was as follows. Mr Montclare said that while he was at Mr Shilton's home and while seated at the kitchen or dining table, he read the questions in the application form out to Mr Shilton, who was sitting in the lounge room. Mr Shilton answered the questions and Mr Montclare wrote his answers on the application form.[85] Mr Shilton then came to the table and signed the application form.[86]

202 Metlife contended that Mr Montclare signed Mr Shilton's name.

203 Mr Montclare said that he took care when filling in the application form, that he read the document 'carefully in terms of answering the questions', but 'didn't read all the fine print'.

204 The application form contained a medical authority for Mr Shilton to authorise Citicorp to seek medical information about him from doctors. Mr Montclare's account was that about half an hour after completing the other parts of the application form, he told Mr Shilton, who was in the kitchen cooking, that it was missing a signature - he had not signed the medical authority.[87]

205 Although at one point, Mr Montclare said that he could not recall whether he or Mr Shilton signed Mr Shilton's name on the medical authority, in the end, he gave evidence that he, Mr Montclare, probably did so.[88] He said that he did not attempt to make the signature look like Mr Shilton's, he simply signed 'Graeme Shilton', in a style that looked 'totally different' to his own signature.[89]

206 Mr Montclare was cross-examined about the differences between this oral evidence and his answers to interrogatories, but I do not consider that the differences were material. Mr Montclare consistently stated that Mr Shilton, being busy cooking, asked him to sign Mr Shilton's name on the medical authority.

207 Mr Montclare denied that he forged Mr Shilton's signature on the first application. He said that he did not think it mattered that he signed Mr Shilton's name because Mr Shilton gave him permission to sign.[90]

208 Mr Montclare sent the application form to Rivkin Direct Management.

209 Mr Shilton did not have to undergo a medical examination for the insurance cover of $300,000. In December 1998, Citicorp wrote to Dr Burgin, Mr Shilton's general practitioner, enclosing a Personal Medical Attendant's Report ('PMAR') in respect of Mr Shilton. The doctor completed the report. He did not report any serious medical issues or any mental or nervous disorders or breakdowns.

210 Between submitting the application for insurance to Rivkin Direct Management and receiving the approval of cover for $300,000, on 6 January 1999, Mr Montclare and Mr Shilton applied to NRMA for life insurance cover in the sum of $550,000. Mr Montclare said that this was Mr Shilton's idea, as they had not received a reply from Rivkin Direct Management and Mr Shilton believed NRMA was a 'better company'.[91]

211 He disclosed the application to Rivkin Direct Management to NRMA, but stated incorrectly that it had been for 'approx $200,000', rather than $300,000. Mr Montclare described this as an 'error'.[92]

212 On 25 January 1999, Mr Robert Bereny, an underwriter with Citicorp, wrote to Mr Ridgeway of Rivkin Direct Management approving life cover for Mr Shilton in the amount of $300,000 at standard rates.

213 Rivkin Direct Management then sent Mr Montclare the first certificate of insurance for life cover in the sum of $300,000 commencing on 21 January 1999. I have set out the details of that certificate previously.

214 On 27 January 1999, Mr Shilton and Mr Montclare wrote to Rivkin Direct Management stating:[93]

Dear Rivkin Direct,

Re: Application for Term Life Insurance for Graeme John Shilton

We would like you to make the following adjustments to the certificate of insurance and policy, which commenced on 21 January 1999.

Firstly it has been noticed the life insured's first name is spelt incorrectly. Please change from Graham to Graeme.

Secondly could you please change the applicant's details from J. Montclare (Enterprises) to John Montclare.

Yours sincerely,

Graeme Shilton (Life Insured) John Montclare (Applicant)

215 The letter suggests that Mr Shilton was aware of the details of Mr Montclare's first insurance application.[94]

216 In February 1999, NRMA asked Mr Shilton and Mr Montclare to complete a financial questionnaire for the purposes of considering their life insurance application. They completed it on 15 February 1999 and on this occasion gave the correct amount of $300,000 for the life insurance cover that Citicorp had granted through Rivkin Direct Management.[95]

217 RMA's life insurance cover limit was $500,000. When Mr Montclare and Mr Shilton obtained $300,000 cover from Metlife, NRMA would only offer an additional $200,000.[96] According to NRMA's file note, Mr Montclare informed them that 'it was a mistake on the [financial questionnaire] and he doesn't have $300,000 elsewhere'.[97] He was asked to send a letter to that effect. Mr Montclare said that he understood that the $300,000 referred to in the telephone call with NRMA was a reference to mortgages that he and Mr Shilton had or would have.[98]

218 On 2 March 1999, a representative of NRMA told Mr Montclare that NRMA would offer only $200,000 cover. According to Mr Montclare, NRMA suggested that if they wanted to obtain additional cover they should recontact Rivkin Direct Management 'as they were more aggressive'.[99]

219 NRMA declined the application for increased life insurance cover because Mr Shilton and Mr Montclare had not established the purpose of the cover.

220 Mr Montclare denied that he received NRMA's letter declining cover. He said that he believed that NRMA had offered some insurance cover, which remained open for acceptance. He agreed that he knew that NRMA had not offered $550,000 cover and that his application as submitted had not been accepted.[100] He said that it did not occur to him to tell Citicorp of the NRMA application[101] and that his failure to do so was an 'inadvertent mistake'.[102]

221 Metlife argued that the failure of Mr Shilton and Mr Montclare to disclose that they had applied or were applying for life, trauma or disability insurance with NRMA (question 5) was a non-disclosure or misrepresentation that was fraudulent or not innocent. The misrepresentation was not withdrawn. This argument is considered later in this judgment.

The April 1999 letter requesting increased cover

222 On 7 April 1999, Mr Montclare and Mr Shilton wrote to Rivkin Direct Management seeking to increase their life insurance cover to $1.1 million.[103] Mr Montclare said that he required that cover because they proposed to borrow $600,000 to purchase property, and he required $500,000, which was ten times Mr Shilton's annual salary, to provide for him in the event of Mr Shilton's death, as he was partially financially dependent on him.[104]

223 Before applying for increased cover, Mr Montclare said that he considered the information contained in the Customer Information Brochure.[105] He noted that there were no financial requirements for obtaining insurance cover up to the amount of $1.25 million.[106] He said that this was an 'important factor' in deciding to apply for $1.1 million cover, as it would 'make it easier'.[107] However, he also said that he weighed up his and Mr Shilton's requirements and would still have applied for cover of $1.1 million even if $2 million could have been obtained without satisfying financial pre-conditions.[108]

The signing of the April 1999 letter requesting increased cover

224 Metlife's case was that Mr Montclare signed Mr Shilton's signature on the April 1999 letter seeking increased cover.

225 Mr Montclare's evidence about the signing of the April 1999 letter was confusing. At one point he said that he could not recall whether Mr Shilton had signed the letter. But he also said that Mr Shilton prepared the April letter and left it at Mr Montclare's house and that Mr Shilton asked him whether he, Mr Shilton, had signed it.[109] He said that Mr Shilton initially asked him to 'bring it around' the next day but then said, '[d]on't worry, just sign it on my behalf and send it off'.[110] Mr Montclare's evidence was that he signed both his and Mr Shilton's name on the letter.[111] He denied that he signed Mr Shilton's name in a style to give it the appearance of Mr Shilton's signature.[112]

226 A Rivkin staff member telephoned Mr Shilton after receiving the April 1999 letter. Mr Montclare was present and participated in the telephone call. According to Mr Montclare, the Rivkin staff member asked the questions contained in the insurance application form and copied information from the first application form into the second application. At least one detail was changed, as Mr Shilton's salary was recorded at an increased amount.[113] The same answers of relevance to the determination of this proceeding were given.

227 The Rivkin representative advised Mr Shilton that he would have to undergo a medical examination to obtain the increased cover.[114] Rivkin sent the second application form to Mr Montclare with the answers inserted during the telephone call and a medical examination form to sign.[115]

228 Mr Montclare said that he 'just glanced through' the form without reading it. It looked to be the same as the first application and he assumed that the Rivkin employee had filled it out correctly.[116]

229 He said that he phoned Mr Shilton and told him that the second application form had arrived and that Mr Shilton had to make time to sign it.[117] Mr Shilton initially said 'I'll make the time' and then said '[c]an you just sign my signatures for me and send it off'.[118] Despite this, Mr Montclare said that he took the forms to Mr Shilton's house and that Mr Shilton signed the forms in two places.[119] There was some dispute in final submissions about whether Mr Montclare had actually given that evidence, but it is clear from the following evidence that Mr Montclare did say that Mr Shilton signed the document:

Counsel --- Was Graeme Shilton with you when you signed it?

Mr Montclare --- I went - I called him and said, 'The form's arrived', and he said - he asked me - he said to sign it but then I remember him coming over or I coming over and then he signed his.

...

Counsel --- You say that he signed the second application in front of you, did he?

Mr Montclare --- Yes, to the best of my recollection he did.

Counsel --- Both at pages 17 and 19 of the application?

Mr Montclare --- I need to see it.

Counsel --- No, Mr Montclare, I'm asking you about your memory now?

Mr Montclare --- Yes, I think he did.

Counsel --- You think he did?

Mr Montclare --- Yes.

Counsel --- You're not sure?

Mr Montclare --- I'm not 100 per cent sure but I'm pretty certain he signed it.

Counsel --- It might have been you signing his signature on the second application?

Mr Montclare --- It's possible but he signed it. I remember me ringing him and he said to bring it over to sign it.

...

Counsel --- You have a memory of him coming over to sign it?

Mr Montclare --- I can't recall whether he came over or I went over to his place.

Counsel --- Whether it was him coming to you or you going to him, you have a clear memory, do you, of one of those two things occurring because you were together when the document was signed?

Mr Montclare --- M'mm.

Counsel --- Correct?

Mr Montclare --- M'mm.

Counsel --- You need to say yes or no?

Mr Montclare --- Yes.

Counsel --- Why then do you have any uncertainty about whether you signed for him? If he came over and you were there together when it was signed, why would you have any uncertainty about him signing his own name?

Mr Montclare --- Because as I was saying earlier, it's possible I signed it at the beginning, because he asked me but then I went - when I saw him, he said he would sign it.

Counsel --- So you have no recollection of seeing him sign his name in either place on the second application?

Mr Montclare --- I think he did sign it. I remember him signing it.

Counsel --- You now do have a recollection of seeing him sign?

Mr Montclare --- That's what I remember.

Counsel --- So you do have a recollection of seeing him sign the second application?

Mr Montclare --- Yes.[120]

230 Dr Bill Wilson performed a medical examination of Mr Shilton for Citicorp. Mr Shilton wanted Mr Montclare to be present during the examination, but Dr Wilson asked him to remain in the waiting room.

231 Dr Wilson had previously conducted a medical examination of Mr Shilton for NRMA and mentioned that fact to Mr Montclare.[121]

232 Rivkin Direct Management requested a statement of the purpose of the increased cover that Mr Montclare sought.

233 On 28 May 1999, Mr Shilton wrote to Rivkin Direct Management as follows:

Although one cannot put a value on one's own life, the purpose of this cover (needs analysis) is to provide adequate cover to meet obligations of additional financing of investments/properties (debts) in the event of my death.

My general health is good as you will see from the doctor's report results.[122]

234 Mr Montclare said that the May 1999 letter was meant to convey to Rivkin Direct Management and Citicorp that he and Mr Shilton required the increased cover to pay debts that they proposed to incur.[123] He denied that he wanted to represent to Rivkin Direct Management that he and Mr Shilton had substantial debts.[124]

235 Mr Montclare's evidence was that Mr Shilton prepared the May 1999 letter and left it at Mr Montclare's house to send.[125] He also said that he could not remember whether Mr Shilton emailed him the letter from work or gave it to him on a floppy disk.[126] He said that he stayed that night at Mr Shilton's house and that Mr Shilton told him to bring the letter to him the next day to sign, but also said '[d]on't worry about it, just sign it and send it off in the morning'. Mr Montclare followed those instructions.[127]

236 Mr Montclare denied that he tried to make his version of Mr Shilton's signature look like Mr Shilton's signature.[128]

237 Mr Montclare was cross-examined about his answer to an interrogatory that he believed that he did not know on or about 28 May 1999 that Mr Shilton proposed to send the May 1999 letter, or a letter in substantially those terms, to Rivkin Direct Management/Citicorp.[129] His answer in cross-examination was that he did not lie in the interrogatory because he, Mr Montclare, sent the letter.[130]

238 On about 10 June 1999, Citicorp accepted Mr Montclare's application to increase the insurance cover to $1.1 million.[131]

239 Metlife challenged the truth of Mr Montclare's explanation of the purpose of the increased cover.

240 Mr Montclare said that in May 1999, he and Mr Shilton were 'actively looking' for property with the goal of making purchases by Mr Montclare's birthday, in June.[132] But they decided to postpone buying as they were advised that prices might fall after the millennium.[133] Mr Montclare said that when Mr Shilton's May 1999 letter was sent, he and Mr Shilton proposed to purchase two properties with a total mortgage of about $600,000,[134] or one property for $600,000.[135] They thought that they could service a loan of that amount as the properties would produce rental income.[136] But they did not purchase any property as prices did not fall as they anticipated in 2000 and they were disorganised in their approach to purchasing property.[137]

241 In answering an interrogatory, Mr Montclare said that as at 28 May 1999, he did not know if Mr Shilton owned real estate or had debts.[138] Senior counsel for Metlife suggested to Mr Montclare that that answer was a lie as in March 1999, Mr Montclare provided NRMA with a financial questionnaire and letter, which listed Mr Shilton's assets and liabilities. Mr Montclare denied that he had lied and said that he thought he knew Mr Shilton's debts, but he was not certain.[139]

242 Metlife made an extensive attack on Mr Montclare's credit and therefore the weight to be given to his evidence.

243 Metlife's attack on Mr Montclare's credit extended to a general assertion that he was an evasive witness. Metlife attacked Mr Montclare's evidence of when he became friends with Mr Shilton, of various issues relating to his work as a male escort, including his accounting for payments that he received, about whether he or Mr Shilton suggested that they obtain life insurance and that they purchase property, and as to various matters concerning the insurance applications, including the application to NRMA and the April and May letters and his explanation for wanting access to Mr Shilton's medical records.

244 Mr Montclare's counsel submitted that these criticisms were not of substance and attacked Metlife's credit because of the manner in which it handled his claim. He submitted that Metlife had gone to 'ridiculous lengths' to blacken his character and must have known before the trial commenced that it could not prove some of the allegations that it made against him. Those criticisms, at least in part, depended on whether Metlife had a factual or legal basis for resisting Mr Montclare's claim.

245 I consider that a number of aspects of Mr Montclare's evidence raise real doubts about his credit and require me to exercise caution in accepting his account of events where it is not supported by other credible evidence. These aspects include his evidence that he did not know that NRMA had declined cover or had sent a refund, his statements in answers to interrogatories that he did not know that Mr Shilton proposed to send the May 1999 letter and his statement about his knowledge of Mr Shilton's debts. There was also his confusing evidence about the signing of the April 1999 letter and the second insurance application. Added to these matters, later in these reasons, I conclude that I cannot accept Mr Montclare's evidence that he did not sign all the six signatures of Mr Shilton's name on the four documents: the two insurance applications and the April and May letters.

246 Metlife called expert handwriting evidence as part of its case that Mr Shilton did not sign the insurance applications or the April or May letters.

247 This evidence was given by Mr Neil Holland who is a forensic document examiner. He was employed for thirteen and a half years with the Victoria Police State Forensic Science Laboratory and during the last ten of those years he was head of the document examination branch. In 1989, he commenced his own consultancy which is now named Scientific Document Services Pty Ltd. He has given evidence in Court on hundreds of occasions.

248 Metlife's solicitors instructed Mr Holland to examine Mr Shilton's and Mr Montclare's signatures on certain documents and prepare a report setting out his expert opinion on the signatures of various documents.

249 Mr Holland microscopically examined Mr Shilton's signatures and sorted the documents into three groups based on the letter and signature structure.[140] He said that:

The forensic examination of signatures and handwriting involves a comparison process. This involves a microscopic examination of the standard (control) signatures and handwriting of a particular individual/individuals and then of the questioned signatures and handwriting.[141]

250 The groups into which the documents were placed were as follows. Group 1 contained:[142]

(a) Two suicide notes from Mr Shilton dated 19 January 2000 and 7 January 2001;

(b) Letter dated 27 January 1999 to Rivkin Direct Management from Mr Shilton and Mr Montclare;

(c) Medical examination report of Mr Shilton by Dr Wilson dated 13 May 1999;

(d) NRMA application for life insurance dated 6 January 1999;

(e) Medical examiner's report of Mr Shilton dated 27 February 1999;

(f) Letter dated 3 March 1999 from Mr Shilton and Mr Montclare to NRMA;

251 Group 2 contained original documents:[143]

(a) Application to Rivkin Direct Management for life insurance dated 23 November 1998;

(b) Application to Rivkin Direct Management for life insurance dated 17 April 1999.

(a) Letter dated 7 April 1999 from Mr Shilton and Mr Montclare to Rivkin Direct Management;

(b) Letter dated 28 May 1999 from Mr Shilton to Rivkin Direct Management/Citicorp Life.

253 Mr Holland's opinion was that the signatures in Group 2 were by the one writer,[145] those in Group 3 were by the one writer,[146] and it was 'highly probable' that the Group 1 signatures were by the one writer.[147]

254 The importance of Mr Holland's conclusions for the issues in this case is that he considered that the writer of the signatures on the Group 2 and 3 documents was a different writer from the writer of the signatures on the Group 1 documents.[148] Metlife submitted that it was probable that the Group 1 documents, such as the will, bore Mr Shilton's signature.

255 Mr Holland gave evidence that, using microscopic examination, he first compared the signatures within each Group and then compared the signatures between each Group.[149]

256 He prepared an initial report following an examination of photocopies of the signatures, and placed the documents into the three groups on the basis of 'highly probable' conclusions.[150] The initial report was tendered in the course of re-examination.[151]

257 Five of the 13 documents that Mr Holland examined were originals, including three documents in Group 1, but he was hindered because some documents were photocopies or facsimiles, which meant that the fine details of the signatures could not be determined. He examined the originals under a microscope before forming a conclusion.[152] He did not identify any standard control signatures because all the signatures were questioned signatures.[153]

258 He was also unable to establish who wrote the signatures on the original will and suicide notes.[154] Mr Holland concluded that it was 'highly probable' that the two suicide notes were written by the one writer, based on the 'significant letter and word constructions' in the handwriting.[155] He compared this handwriting with that contained on page eight of the certificate of insurance. His opinion was that there were significant differences in letter and word construction and it was 'highly probable' that the two pieces of handwriting were not written by the one writer.[156]

259 Mr Holland provided diagrams and descriptions of the 'letter formations' within the Group 1 signatures.[157] He was unable to say from which signatures he drew the diagrams,[158] but said that they were an 'average' signature. He agreed there were some variations between the signatures.[159]

260 Mr Holland addressed the differences between the signatures in 9 out of the 13 letters in Mr Shilton's signature. He did not consider the letters 'i', 'l', 'o' or 'n'. He said that he simply selected certain letter forms, although he could have gone through every letter. He considered that the letters and differences that he did address were sufficient to support his conclusion.[160]

261 Initially, all the Group 1 documents that he considered were copies, save for the medical examination report of Mr Shilton by Dr Wilson dated 13 May 1999, which was the original document.[161]

262 Upon reviewing the original of Mr Shilton's will and his two suicide notes, Mr Holland prepared a supplementary report dated 4 August 2011, in which he expressed the opinion that these original signatures were by the one writer.[162]

263 He did not identify similarities between the Group 2 signatures and Group 1 signatures.[163] He could not say whether Mr Montclare signed any of the signatures.[164]

264 He was unable to establish who wrote the Group 2 signatures and Group 3 signatures[165] and he could not determine whether the Group 2 and Group 3 signatures were by the one or a different writer.[166]

265 He described in detail the differences in the letter formations and styles in the Group 1 and Group 2 signatures, illustrating these with diagrams of the 'main letter forms'[167] which were 'not of any one specific signature'[168] and which were additional to the ones he had drawn for his earlier Group 1 analysis.[169]

266 Mr Holland explained why he placed the documents into particular Groups. The Group 1 signatures of the name 'Graeme' contained letter formation similarities in the letters 'G', 'r', the connection between 'r' and 'a', in 'e' and the connecting stroke between the letters 'm' and 'e'.

267 The Group 1 signatures of the surname 'Shilton' contained significant similarities between the letters 'S', 'h', 'i' and 'l'. The cross bar of the letter 't' in the surname 'Shilton' was absent in the Group 1 signatures, whereas a number of the Group 2 signatures contained the letter 't' with the cross bar crossed.[170]

268 He considered that there were no similarities between the Group 1 and Group 2 signatures.[171]

269 He identified differences between the Group 2 and the Group 1 signatures. In the name 'Graeme' there were differences in the formation of the letters 'G', the connecting stroke between the 'G' and the 'r', in the 'a' and in the 'e'. In the surname 'Shilton', there were significant differences in the formation of the letters 'S', 'h', and 't'.

270 He said that he observed significant similarities in the Group 2 signatures on the two insurance application forms which indicated to him that the signatures were by the one writer.[172]

271 The Group 3 signatures were on the April and May 1999 letters. The signature of the name 'Graeme' had significant differences from the Group 1 signatures of that name: in the letter formations of the letters 'G' and 'a', in the baseline of the lowercase letters, and in the distance between the end of the first name 'Graeme' and the commencement of the surname 'Shilton'.

272 The Group 3 signatures of the surname 'Shilton' also had differences with the Group 1 signatures of 'Shilton': they had no connection between the 'S' and the 'h' and the highest point of the 'h' formation was higher than the height of the 'S' formation.

273 Mr Holland expressed the opinion that the differences between the Group 1 and Group 3 signatures, taken together, were significant.[173]

274 Mr Holland's opinion was that the writer of the Group 3 signatures did not sign the Group 1 signatures.[174]

275 Mr Holland stated that the Group 2 signatures 'appear pictorial similar' to the Group 1 signatures and it was possible that the writer of the Group 2 signatures 'had at his/her disposal a copy of a Group 1 signature to use as a guide'.[175] In contrast, the Group 3 signatures were 'distinctly different' to the Group 1 signatures and it was possible that the writer of the Group 3 signatures 'did not have any copy of a Group 1 signature to use as a guide'.[176]

276 Mr Holland gave evidence that the signatures on documents that he had placed in the particular Groups were 'consistently written', apart from natural variation in the signature construction, and showed a 'particular stroke sequence' and had significant similarities.[177] The signatures in Group 3 also had 'significant unusual letter forms'.[178] The Group 1 signatures were written 'fluently and with speed',[179] whereas the Group 2 and Group 3 signatures were written less fluently.[180]

277 Mr Holland was challenged in cross-examination about his allocations of signatures to particular Groups, for example his reliance on an elongated 'G' in 'Graeme' to distinguish between Group 1 and Group 2 signatures,[181] and the height of the 'S' formation.[182] He said that his allocations were based not just on the 'G' formation, but on all the letters and styles utilised within the signature.[183]

278 He considered that there were differences between the letters in the Groups, even if there was some variation within the Groups. He accepted that he did not identify certain differences in some letters in his report.[184] For instance he said that the 'S' was below the 'G' far more in the Group 2 signatures than in the Group 1 signatures.[185] The highest point of the 'h' formation was higher than the high point of the 'S' in Group 2 signatures. He said that the 'a' was similar in all of the Group 2 signatures.[186]

279 It was suggested to him that there were other signatures of Mr Shilton which could have been examined, but Mr Holland said he was 'definitive'; that is, he considered that he could reach a definitive opinion with the signatures that he had.[187]

280 He was asked to compare the two versions of the 'G' in his diagrams with the 'G' in the Group 2 signatures and it was suggested that some of the Group 2 signatures should be in Group 1 because of the formation of the 'G'. He disagreed.[188] He said that he only reached a final opinion after examining all the signatures and he had all the information at hand in regard to other letter forms.[189]

281 Mr Montclare attacked Mr Holland's evidence and submitted that it should be regarded as of no probative value because the two suicide notes on which his opinion was based were not in evidence.

282 Mr Montclare contended that Mr Holland's evidence about the difference in letters between Group 1 and Group 2 signatures was unconvincing. He submitted that the differences between Mr Shilton's true signature and the signatures on the insurance applications were not as Mr Holland had suggested. He relied on the fact that Mr Holland formed his conclusion in his initial report after examining an email version of a copy of the signatures. He submitted that Mr Holland gave equivocal evidence about whether he reached his conclusion after looking at the original documents under microscope. His reliance on the formation of the letter 'a' was misplaced. The 'a' appearing on the documents appeared as a splodge from which no conclusions could be drawn. The Court was not bound by the expert's opinion unless satisfied by the expert's reasoning.

283 Mr Holland is a hand writing expert of considerable experience. The Court is not bound by his evidence, but I did find it persuasive. I did not find his evidence to be merely that of an advocate for Metlife, as at one point was suggested by Mr Montclare. For example, he was at pains to refer to, and thereby indicate, the existence of his earlier reports, even though they were not in evidence.

284 No evidence contradicting Mr Holland's evidence was called. Mr Montclare's counsel stated that Mr Montclare did not have the financial resources to commission his own handwriting expert.

285 I saw nothing in Mr Holland's reasoning, or the answers he gave in evidence, that threw real doubt on his conclusions. The identification of differences between the letter formations in the signatures was a matter of expert evidence. He explained the distinctions that he identified between the three groups of signatures. I accept that they existed. I am persuaded, by Mr Holland's description of the differences in the letter formations, that his categorisation of Mr Shilton's signatures into the three groups was justified.

286 While there is room for argument on whether some of the Group 2 signatures were significantly different from the Group 1 signatures, I consider that Mr Holland's evidence established that the Group 2 and Group 3 signatures, consisting of the insurance applications and the April and May 1999 letters, were not signed by the person who signed the Group 1 signatures.

287 It is highly likely that Mr Shilton signed at least some of the Group 1 documents including his will and the suicide notes. It follows that Mr Holland's evidence supports the conclusion that Mr Shilton did not sign the Group 2 and Group 3 documents: the two insurance application forms and the April and May 1999 letters.

Additional reasons for not accepting Mr Montclare's evidence about Mr Shilton signing the documents

288 Independently of Mr Holland's evidence, I am unable to accept Mr Montclare's account of who signed Mr Shilton's name on the insurance applications. Mr Shilton's first name, 'Graeme', is misspelt as 'Greame' in the medical authority section of the second application form. It is improbable that Mr Shilton would misspell his own name. Mr Montclare submitted that he was hardly likely to forge a signature and be so careless as to misspell Mr Shilton's first name. But on Mr Montclare's evidence, Mr Shilton signed the second application, including the medical authority. Mr Montclare gave evidence that he saw Mr Shilton sign the second application. I do not accept that evidence. As Metlife submitted, if Mr Shilton did not sign his name in the second place where it appears on the second insurance application, it is probable that he did not sign it in the first place. Mr Montclare's evidence was that Mr Shilton signed both the signatures of his name on the second application.

289 Mr Montclare did not suggest that, if Mr Shilton did not sign his signature on the documents, that anyone other than Mr Montclare could have signed Mr Shilton's name.

290 There is a further point. On Mr Montclare's own evidence, he signed Mr Shilton's signature on three occasions on relevant documents, which Mr Holland placed into his Group 2 and Group 3 documents. This evidence supports Mr Holland's conclusion, because independently of Mr Montclare's evidence, he concluded that the three signatures that Mr Montclare admitted signing were not Group 1 signatures, namely those that were likely to have been signed by Mr Shilton.

Conclusions about Mr Shilton's signatures on the four documents

291 The defences of misrepresentation and non-disclosure relating to the signing of the four documents were introduced by amendment after the proceedings were adjourned in 2011.

292 Mr Montclare admitted signing Mr Shilton's name on the medical authority in the first insurance application, and on the April 1999 and May 1999 letters. He said that he had Mr Shilton's authority to do so.

293 However, he denied that he had signed the other signature of Mr Shilton's name on the first insurance application form or the two signatures of Mr Shilton's name on the second insurance application form.

294 Mr Montclare contended that he had no motive for forgery because Mr Shilton wished to obtain life insurance. Mr Shilton had undergone a medical examination and signed documents for the insurance application made to NRMA and the second insurance application. Mr Shilton had signed the letter of 27 January 1999 sent to Rivkin Direct Management that sought to correct the information recorded on the first certificate of insurance.

295 In view of my acceptance of Mr Holland's evidence, I find that Metlife has proved that Mr Shilton did not sign the two insurance applications or the April and May 1999 letters. As Mr Shilton and Mr Montclare were the only two persons who it was suggested might have signed those documents or been involved in their preparation, I find that Mr Montclare signed Mr Shilton's signature in the six places where it appears on the documents. I make that finding having taken into account the gravity of the matters alleged and of the gravity of the finding that I have made.[190]

296 It is unclear why Mr Montclare would admit to signing three signatures of Mr Shilton's name on the four documents in issue, but not the other three signatures of Mr Shilton's name. It would be speculation to suggest a reason.

297 The consequence of my finding that Mr Montclare signed the six signatures is that Mr Shilton and Mr Montclare made false representations to Metlife that Mr Shilton had signed them. They allowed the signature of Mr Shilton's name to appear on the two applications and the two letters, without disclosing that Mr Montclare had signed Mr Shilton's name or that he had done so with Mr Shilton's authority. Mr Shilton allowed Mr Montclare to sign Mr Shilton's name to the declaration:

1. I/We hereby declare that the information contained in this application is true and correct.
2. I/We are not aware of any other circumstances which might render the life to be insured to have shortened longevity or suffer a serious health problem.[191]

298 The insurance applications and the April and May 1999 letters therefore contained misrepresentations, being false statements of fact as to who had signed Mr Shilton's name, including on the section 14 declarations, in the two insurance applications.

299 Mr Shilton and Mr Montclare were obliged to disclose the fact that Mr Montclare had signed Mr Shilton's name on the application forms and on the April and May 1999 letters, because a reasonable person in the circumstances could have been expected to know that that fact was relevant to Metlife's decision whether to accept the insurance risk and, if so, on what terms: s 21(1)(b) of the ICA. They did not do so.

300 These findings are another factor that has a significant effect on the credibility of Mr Montclare and lessens the weight that I give to his evidence where it is not supported by other credible evidence.

301 However, it does not automatically follow from my findings that Mr Montclare forged Mr Shilton's signature or that the misrepresentations or non-disclosures were fraudulent.

Insurer's remedies for the insured's allegedly fraudulent misrepresentations or non-disclosures concerning Mr Shilton's signatures

302 Section 29 of the ICA, which is set out below, entitles an insurer to avoid a contract of insurance in certain circumstances on the basis of non-disclosure or misrepresentation.

303 A non-disclosure or misrepresentation is fraudulent for the purposes of s 29 of the ICA if the conduct was dishonest in the sense that the non-disclosure or misrepresentation was made or occurred knowingly or without belief in its truth or recklessly, careless as to whether it was true or false.[192] In order for a fraudulent misrepresentation to be established, it must be proved that the representor had no honest belief in the truth of the representation in the sense in which the representor intended it to be understood.[193]

304 Metlife contended that Mr Montclare forged Mr Shilton's signatures. Metlife bore the onus of proving the allegation of forgery and fraud. Under s 140(2)(c) of the Evidence Act 2008 (Vic), the Court is to take into account the gravity of the allegation in deciding whether it is satisfied that the allegation has been proved.[194] It would not usually be so satisfied if there was another possible view of the conduct consistent with an innocent or non-fraudulent explanation.

305 A signature is not forged if the person whose name was signed authorised the other person to sign, which authority can be express or implied, or later ratifies the signature made by the other person.[195]

306 In Brott v The Queen,[196] Brennan J stated that at common law 'forgery is a species of fraud and fraudulent intent is an essential element of the offence. ... [T]here must be both a possibility of prejudice to some person and an intent to cause it. ... Nor is there a forgery when a signature is placed on a document by a person having the purported signatory's authority to do so'.

307 Forgery is the making or alteration of a document, so that it tells a lie about itself, whereby another may be induced to act or refrain from acting on the truth of the document, to the possible prejudice of some person.[197]

308 Section 83A(1) and (6) of the Crimes Act 1958 (Vic) (the statutory offence created to replace the common law offence of forgery which was abolished),[198] state:

(1) A person must not make a false document with the intention that he or she, or another person, shall use it to induce another person to accept it as genuine, and by reason of so accepting it to do or not to do some act to that other person's, or to another person's prejudice.

(6) For the purpose of this section, a document is false if it purports -

(a) to have been made in the form in which it is made by a person who did not in fact make it in that form; or

(b) to have been made in the form in which it is made on the authority of a person who did not in fact authorise its making in that form; or

(c) to have been made in the terms in which it is made by a person who did not in fact make it in those terms; or ...

309 Dishonest intention is not an element of the offence contained in s 83A(1) of the Crimes Act 1958 (Vic).[199] If a person makes a false document with the necessary intention, the requirements of s 83A(1) for the offence of forgery are ordinarily made out, notwithstanding that the person may have intended to use the document to obtain property which he/she believed belonged to him/her.[200]

Mr Montclare's case that he had Mr Shilton's authority to sign the documents

310 Metlife contended that Mr Montclare had not pleaded, and therefore could not argue, that he had Mr Shilton's authority to sign his signature on the insurance applications and the April and May 1999 letters or that Mr Shilton had ratified those signatures.

311 As a result of this submission, at the close of the proceeding, Mr Montclare applied for leave to file an amended reply. The amended reply pleaded that Mr Shilton authorised him to sign the applications, including, as an alternative plea, all of the four signatures on the insurance applications, if the Court did not accept his evidence that he had only signed one of those signatures. The amended reply also alleged that Mr Shilton authorised him to sign the April and May letters in his name.

312 Metlife, in a written submission, stated that it did not oppose the application for leave to amend. However, it submitted that Mr Montclare's new alternative allegations were directly inconsistent with the evidence, including Mr Montclare's evidence that he did not sign for Mr Shilton in respect of any of the three disputed signatures. It further submitted that the alternative allegation of authority must fail as a question of fact, because it was not supported by any credible evidence proffered by Mr Montclare or any other evidence.

313 I granted Mr Montclare leave to file the amended reply.

Were Mr Shilton's and Mr Montclare's misrepresentations and non-disclosures about Mr Shilton's signatures fraudulent?

314 The onus lies on Metlife to prove that the signatures on the four documents were not Mr Shilton's. For the reasons that I have given and having taken into account the gravity of the allegations, I am satisfied that it has done so.

315 It is then for Mr Montclare to prove that Mr Shilton authorised him to sign his signature on the six occasions that the signature appears. An immediate problem is that Mr Montclare said that he only signed Mr Shilton's signature on three occasions and did so with his authority. On one view, the Court might not go beyond the conclusion that it did not accept Mr Montclare's evidence on this question. Metlife submitted that the Court should adopt that approach.

316 Metlife submitted that the Court should not attempt to reach explanations for Mr Montclare's conduct when he had not told the truth to the Court. It submitted that the most likely explanation was that Mr Montclare 'didn't want to push his luck' by keeping on asking Mr Shilton to sign documents and that Mr Shilton was ambivalent and, sometimes reluctant about and resistant to, the life insurance applications.[201]

317 The question remains why Mr Montclare did not disclose to Citicorp that he was signing Mr Shilton's signature. The issue only arose following Mr Holland's report, when on 12 August 2011, Metlife amended its defence to allege that Mr Montclare had forged Mr Shilton's signature on the four documents. Mr Montclare then delivered a reply in which he pleaded that he had signed Mr Shilton's name on the two letters. In answers to interrogatories on 8 November 2011, Mr Montclare also stated that he signed Mr Shilton's signature on the medical authority section of the first insurance application.

318 However, the original reply does raise the authorisation plea in respect of some of Mr Shilton's signatures and the amended reply in respect of all six signatures that are in dispute, so it is necessary to determine the issue, despite Mr Montclare's evidence. In view of the plea of authorisation raised by the amended reply, it would, in my opinion, be wrong to make a finding about fraud without considering that plea.

319 Mr Montclare submitted that it was clear that Mr Shilton was engaged in, and supported him in, obtaining the life insurance: he underwent an HIV test for the first insurance application; he signed the correcting letter of 27 January 1999 addressed to Rivkin Direct to which I have referred; he signed the NRMA application and supporting documents; he underwent pathology tests and two medical examinations, one of which was in respect of the application for increased cover; and he signed the written application dated 6 January 1999 and letters dated 3 and 23 March 1999 connected with the life insurance applications to NRMA. Rivkin sent documents in connection with the insurance to his address. He had no motive for forgery.

320 Metlife submitted that Mr Montclare had engaged in a significant deception by signing Mr Shilton's signatures on documents that were used to obtain $1.1 million in life insurance cover. He gave false evidence about the signing of the documents. His evidence that Mr Shilton was an enthusiastic participant in the two insurance applications was not corroborated and should not be accepted. Mr Montclare's refusal to admit forgery should lead to the Court rejecting of any benign explanation for his actions.

321 I consider that the proposition that Mr Shilton authorised Mr Montclare to sign his signature on the four documents gains support from the circumstances that demonstrate that Mr Shilton wanted Mr Montclare to obtain life insurance. He underwent two medical examinations and other medical tests that were required to obtain it. He participated in Mr Montclare's application to NRMA. Mr Shilton impliedly approved and adopted Mr Montclare's actions in submitting the first application and signing his name on it, because, in his letter of 27 January 1999 to Citicorp, he requested minor changes to information recorded on the first certificate of insurance.

322 Mr Shilton obviously knew of the second insurance application for increased cover because, at Citicorp's request, he underwent a second medical examination by Dr Wilson. The second application mostly repeated information, including the answers to questions about Mr Shilton's medical history, that had been recorded in the first application. However, it recorded his salary at an increased level.

323 I find, therefore, that Mr Montclare had authority to give the Rivkin representative the answers to the health questions on the second application form. As previously stated, I have considerable reservations about the accuracy of Mr Montclare's evidence. However, the circumstances surrounding the making of the two insurance applications to Citicorp and the application made to NRMA suggest that Mr Montclare and Mr Shilton were engaged in a joint endeavour to obtain insurance on Mr Shilton's life for the benefit of Mr Montclare. I am satisfied that Mr Shilton authorised Mr Montclare to sign the two insurance application forms on his behalf and to make the two section 14 declarations, including the declarations that the information contained in the application was true and correct.

324 As Mr Montclare had Mr Shilton's authority to sign his name on the second insurance application, I accept that Mr Montclare had Mr Shilton's express or implied authority to sign his name on the 'increased cover letter' of April 1999, which was the document that led to the creation of the second application. I make a similar finding in respect of the May 1999 'purpose of cover' letter.

325 I find that Mr Montclare has established that he had Mr Shilton's authority to sign his name on the four documents. I therefore find that Metlife has not established that Mr Shilton's and Mr Montclare's failure to disclose that Mr Montclare had signed Mr Shilton's name on the four documents and the misrepresentations that Mr Shilton had signed them, were fraudulent. Having found that Mr Shilton had expressly or impliedly authorised Mr Montclare to sign his name, I do not consider there was any dishonest purpose or fraud in misrepresenting that Mr Shilton had signed the documents or in failing to disclose that he had not. The misrepresentation and non-disclosure were innocent misrepresentations and non-disclosures.

Insurer's remedies for the insured's allegedly innocent misrepresentations concerning Mr Shilton's signatures

326 Section 29(1), (2) and (3) of the ICA stated at the relevant time:

29 Life insurance

(1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where:

(c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or

(d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.

Note: If subsection 27A(1), (3) or (4) applies to the contract of life insurance, different remedies may be available to the insurer in respect of each separate contract of life insurance that is taken to exist by virtue of the relevant subsection.

(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.

(3) If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract.

327 Metlife's case was that if the misrepresentations and non-disclosures concerning Mr Shilton signature were innocent then it still had a defence to Mr Montclare's claim, because it would not have been prepared to enter into the contracts of insurance on any terms if the misrepresentation had not been made or proper disclosure had occurred. It contended that it entered into the contracts of insurance in reliance on the truth of the representations. Metlife bore the onus of proving these contentions.

328 Metlife called evidence from Mr James Haber, who was an underwriter with Citicorp in 1998, about the significance of misrepresentations and non-disclosure and what Citicorp would have done if the real position as to who signed Mr Shilton's signatures had been disclosed.

329 Mr Haber had only become aware of this proceeding three weeks before he gave evidence.

330 Mr Haber works as an underwriting solutions manager with OnePath Insurance, which issues life insurance and policies concerning income protection, trauma and business expenses insurance.[202] He commenced work with National Mutual in 1988 and first worked in underwriting in income protection with Australian Casualty and Life in 1994/1995, by which time National Mutual had been taken over by AXA. He has never worked in insurance claims. He said that he had been trained to understand the risk profile of all medical conditions.[203]

331 He worked for Citicorp from approximately 1996 to May 1999 as an underwriter in the life insurance, total and permanent disablement, income protection and trauma policy areas and then as a senior underwriter assessing applications for insurance from both medical and financial perspectives. Mr Robert Bereny, another underwriter who later became a senior underwriter, dealt with Mr Montclare's two insurance applications.

332 Since 1999, Mr Haber has had no association with Citicorp. He moved to Perth with his family in that year, because his wife had obtained an underwriting position in that city. In April 2000, he recommenced work as an underwriter in Perth.

333 Mr Haber was questioned by counsel for Mr Montclare about the other persons who worked in Citicorp's underwriting department. His evidence was that there were about five people employed there when Mr Montclare's applications were assessed.[204] He was a senior underwriter and performed underwriting assessments. Mr Bereny joined the department after he did. Mr Haber had performed a minor role in connection with Mr Montclare's first application by questioning the medical tests required of Mr Shilton.[205] The documents also suggested that Ms Janelle de Visscher, who was a senior underwriter, had read Mr Bereny's assessment of the applications.[206] She had joined Citicorp after Mr Haber left in May 1999.

334 Mr Bereny was unable to give evidence because of his health.

335 I found that Mr Haber was generally a credible and impressive witness. He has not had any association with Citicorp or Metlife since 1999. He did not always give evidence that assisted Metlife's case. I did not consider that he was attempting to apply hindsight and knowledge of how Mr Shilton's life had ended to the evidence that he gave.

336 Mr Haber's evidence did not assist Metlife's case concerning the significance of Mr Montclare signing Mr Shilton's signatures on the four documents. He gave evidence of his likely response if he had learned that an insurance application and declaration was signed by a person in another person's name, but with the authority of the first person. He said that the application would have been referred back to the Citicorp State Manager, who would have referred it back to the intermediary and required that it have it 'recompleted correctly...by the life insured'.[207] Citicorp would still have granted insurance cover if the person whose name had been signed subsequently adopted the statements made in the insurance application.[208]

337 Mr Haber stated that all Citicorp would have required was an assurance that Mr Shilton was affirming that the information in the insurance application was true. That assurance could have been provided by Mr Shilton signing the application.

338 Metlife submitted that all Mr Haber's evidence established was that if Metlife had been informed that Mr Montclare signed the applications, they would have been returned to Mr Montclare and Mr Shilton with a letter asking what such information meant. It could not be inferred that Mr Shilton would have read the document, probably for the first time, and then signed it and sent it back.

339 On one reading, s 29(2) and (3) are satisfied if an insurer would not have accepted an application in the form that it was submitted, but would have returned the document to the applicants. However, in this case, Mr Haber's evidence does not establish that Citicorp would not have been prepared to enter into a contract of life insurance on any terms because Mr Montclare signed Mr Shilton's name on the documents. The question is whether Mr Shilton would have signed the documents if they had been returned. Because of the circumstances that indicate Mr Shilton's involvement in the obtaining of the life insurance, I consider that it is probable that he would have done so.

340 As I have previously stated, the evidence suggests that Mr Shilton wanted to assist Mr Montclare obtain insurance on his life. His involvement with the NRMA application supports that conclusion. I conclude that it is probable that Mr Shilton would have signed the insurance applications himself, if Citicorp required him to do so.

341 Metlife has not established that it was entitled to avoid the contracts of insurance because of misrepresentations or non-disclosures about Mr Shilton's signatures. I am not satisfied that it would not have entered into the contract of life insurance, or any contracts of insurance, on any terms if the misrepresentation had not been made or proper disclosure had occurred.

342 After Rivkin Direct Management accepted their initial life insurance application, Mr Montclare and Mr Shilton continued with their application for life insurance to NRMA.[209] On 6 January 1999, Dr Wilson conducted a medical examination of Mr Shilton for NRMA.[210]

343 By a letter of 29 March 1999, NRMA declined Mr Montclare's application for life insurance stating:

'on the basis of the information received we must decline your proposal'.[211]

344 The letter enclosed cheques to refund the deposit payment for insurance premiums.[212] Mr Montclare gave evidence that he did not believe he received the letter or the cheques.[213] He said that NRMA refunded the premium by a direct deposit.[214]

345 An NRMA file note dated 1 April 1999 of a conversation between Mr Montclare and an NRMA employee about the refund of the deposit suggested that Mr Montclare followed up the premium refund. It stated:

Mr Montclare called furious that he hasn't received his money + that he was told by Sandra that he would get it on Monday (29-3-99). I told him the cheque was done then and it comes out overnight so it was sent on Tuesday. I told him it is out of our control now. Aust. Post have it. He said he didn't care & that he wanted it this afternoon to be picked up at the branch (he rang at 2.00). I spoke to accounts, they assured me that if we get two stop payments in, get his bank details, we can direct deposit his account today... Also, client upset about why 2 cheques were going to be sent - I told him (after investigation) that he sent two money orders in.[215]

346 Mr Montclare agreed that the file note accurately recorded his conversation with NRMA.[216]

347 In completing their second life insurance application made to Citicorp, on 17 April 1999, Mr Shilton and Mr Montclare were required to answer the question contained in section 5:

Has any application for life, trauma or disability insurance on your life ever been declined, deferred or withdrawn from any company or accepted with a loading, or otherwise than as submitted.

348 They answered it 'no'. That was a false answer and the true answer was 'yes'. Mr Montclare knew that NRMA had offered insurance cover, but for an amount that was not acceptable to him.[217] Both Mr Montclare and Mr Shilton knew of the application to NRMA. Mr Shilton had undergone a medical examination in connection with it.

349 I find that, before Mr Montclare and Mr Shilton applied to increase their life insurance cover with Citicorp, they knew that NRMA had declined to grant the life insurance cover that they sought. I do not accept Mr Montclare's evidence about this issue. I am not satisfied that the NRMA refusal slipped his mind when he answered the question about other insurance. Mr Montclare's pursuit of the premiums paid to NRMA was telling evidence that he had that knowledge. It cannot be accepted that a reasonable person would have held the belief that the answer given to the question was true.

350 Metlife contended that the misrepresentation about other life insurance was fraudulent and rendered false the representation in the insurance application that the answers in it were true and that no other application for life insurance had been declined. Mr Shilton and Mr Montclare had not made appropriate enquiries to enable them to give the answers that they gave. Mr Montclare and Mr Shilton were obliged to disclose to Citicorp their application to NRMA, and it was fraudulent not to do so. These matters were clearly relevant to Citicorp's decision whether to accept the application.

351 Mr Montclare argued that Mr Shilton revealed the NRMA application to Dr Wilson at the medical examination undertaken in respect of the application for increased cover. Dr Wilson conducted separate medical examinations of Mr Shilton for NRMA and Citicorp. In his medical report to Citicorp, Dr Wilson mentioned the NRMA medical examination and the tests that he had conducted. Citicorp was on notice that Mr Shilton had sought life insurance from NRMA. Citicorp was presumed to have known that fact by the operation of s 21(2)(c) of the ICA.

353 I do not consider that Dr Wilson's reference to the NRMA medical examination proves that Citicorp had notice of Mr Montclare's and Mr Shilton's application to NRMA. There is no evidence that Citicorp was aware of their application to NRMA. The reference to a medical examination for NRMA in a medical examination report contained in its file does not prove that it knew, or, in the ordinary course of business ought to have known, that NRMA had declined cover. It is not a sufficient reference to the medical examination to justify the conclusion that the insurer had that knowledge that Mr Montclare had been refused life insurance by NRMA.[218]

354 I consider that the answer to the question about other insurance applications was a fraudulent misrepresentation and non-disclosure by Mr Shilton and Mr Montclare. The question was material to Citicorp's risk and had been the subject of a question on the application form.

Consequence of Mr Shilton's and Mr Montclare's misrepresentation and non-disclosure about the NRMA insurance

355 Metlife's case is that it would not have been prepared to enter into the contracts of insurance if Mr Shilton and Mr Montclare had disclosed the NRMA application and had not misrepresented the absence of other life insurance applications.

356 Mr Haber's evidence, which was the only underwriting evidence called, was that Citicorp would still have granted the life insurance Mr Montclare sought even if it had known that NRMA had refused Mr Montclare's application, provided Mr Shilton's income was sufficient to justify that level of cover. It would have granted life insurance cover of an amount equal to 20 times the life insured's income.[219] Mr Shilton met that requirement and Citicorp therefore would have granted the insurance cover.[220]

357 Mr Montclare contended that Mr Haber's evidence did not establish that Citicorp would have taken any different course if it had been aware that NRMA had declined the cover sought.

358 Metlife has not established that if the 'other insurance' misrepresentation had not been made, or NRMA's refusal of cover had been disclosed, it would not have entered into the contracts of insurance, or that it would not have entered into a contract of insurance on any terms. Therefore, it cannot rely on the misrepresentation or the non-disclosure of the refusal of cover by NRMA to avoid the insurance cover.

Metlife's arguments in respect of the financial purposes letter of May 1999

359 Metlife asked Mr Montclare and Mr Shilton to explain the purpose of the increased cover that they sought and provide an analysis of their need for the insurance.

360 I will set out again the terms of their letter of 28 May 1999 in response ('the financial purposes letter'), Mr Shilton stated:

Although one cannot put a value on one's own life, the purpose of this cover (needs analysis) is to provide adequate cover to meet obligations of additional financing of investments/properties (debts) in the event of my death.

My general health is good as you will see from the doctor's report results.

361 Metlife argued that the letter represented that Mr Shilton had debts and/or financing commitments of approximately the sum insured under the second contract of insurance. It argued that the letter suggested that the purpose of the life cover was to satisfy Mr Shilton's debts and/or financing commitments in the event of Mr Shilton's death, which were approximately of the amount of the increased cover sought.

362 Both Mr Shilton and Mr Montclare knew that Mr Shilton did not have financing commitments or investments/properties (debts) that required servicing by Mr Montclare in the event of Mr Shilton's death.

363 Mr Montclare disputed that the letter had the meaning that Metlife suggested.

364 I am not persuaded that the statements in the financial purposes letter of May 1999 contained any misrepresentation or failed to disclose any relevant fact. A fair reading of the letter suggests that it was directed to a state of affairs that might exist following Mr Shilton's death. Mr Montclare might require 'adequate cover to meet obligations of additional financing of investments/properties (debts) in the event of my death'. That might well have been the financial situation that Mr Montclare faced if they had purchased property before Mr Shilton's death. The use of the word 'additional' suggests that the letter was written in contemplation of a state of affairs that might exist in the future.

365 I do not consider that the letter contained any misrepresentation or failed to disclose any fact that should have been disclosed about the purpose of the insurance cover.

366 Metlife pleaded in its defence that it was entitled to, and did, by its letter of 6 December 2001, avoid the contract of insurance. Alternatively it said that by its defence it had avoided the contracts of insurance.

367 Metlife's letter of avoidance only relied on s29(3) of the ICA. It stated;

Had Mr Shilton correctly disclosed a medical history which included episodes of depression and mood swings, and the previous suicide attempt, we would not have accepted, on any terms, his applications for Term Insurance.

Citicorp Life Insurance is of the view Mr Shilton failed in his duty of disclosure. Accordingly the Term Life Insurance is hereby avoided and cancelled from inception in accordance with our rights under Section 29(3) of the Insurance Contracts Act.

A refund of all premiums paid in respect of this cover will be forwarded under separate cover.

As a result of this decision, this claim is denied and no benefits are payable.

368 Mr Montclare argued that the master policy was never avoided. Metlife did not argue to the contrary. Rather, it argued that it has avoided the contracts of insurance contained in the certificates of insurance.

Section D. Did Mr Shilton and Mr Montclare fail to disclose aspects of Mr Shilton's medical history or make misrepresentations concerning them?

369 I will next deal with Metlife's defence that Mr Montclare and Mr Shilton failed to disclose relevant matters and made misrepresentations because of answers given in the insurance application forms to questions about Mr Shilton's medical history. I will set the questions out again.

370 The critical question on the Rivkin Direct Management insurance application form was:

372 A second question and answer relied on by Metlife in its defence, although not the subject of any submission, was 9P:

Have you ever had any of the following:

Any other illness, injury or operation?

374 Where an affirmative answer was given to a medical question, the life insured was required to complete a box that was headed:

If yes, give dates, name and address of doctor (if any), full particulars, including duration.

375 The other important section of the application form was section 14 which I have previously set out, but for ease of reference I will set out again. It stated:

You are required to disclose to us all information which is relevant in assisting us as to whether we should extend cover to you. This includes true and full disclosure as to all information required in the application, as well as reference to any other matter which might indicate that you are more likely to suffer a serious health problem, or to have shortened longevity, than the average member of the community.

If you fail to disclose any such information to us, your rights, or the rights of any other person, to claim in relation to this insurance may be prejudiced.

376 Section 23 of the ICA deals with ambiguous questions and states:

23 Ambiguous questions

Where:

(a) a statement is made in answer to a question asked in relation to a proposed contract of insurance or the provision of insurance cover in respect of a person who is seeking to become a member of a superannuation, retirement or other group life scheme; and

(b) a reasonable person in the circumstances would have understood the question to have the meaning that the person answering the question apparently understood it to have;

that meaning shall, in relation to the person who made the statement, be deemed to be the meaning of the question.

377 When a person contends that a question is ambiguous then, in applying s 23, the question is whether a reasonable person in the same circumstances would have understood the question to have the same meaning as the person answering apparently understood it to have.

378 Mr Haber, the underwriter, said that answering the question about 'mental or nervous disorder or breakdown', 'comes down to a person's interpretation' of the question.[221]

379 There was no evidence of Mr Shilton's understanding of the question, although his answer to other questions, for example his answer disclosing indigestion, suggests that he understood that the medical history questions could require disclosure of short term indispositions.

380 Mr Shilton and Mr Montclare disclosed information about Mr Shilton's medical history on the NRMA insurance application form that was not disclosed to Metlife on its life insurance application form.

381 On the NRMA application form, Mr Montclare ticked the answer 'yes' to the question whether Mr Shilton had had 'asthma, bronchitis or any lung complaint'.[222] When asked why he ticked 'no' to a similar question on the Citicorp application form and why he did not correct that error at a later time, Mr Montclare said 'it shows that people can make mistakes' and he thought 'the doctor would have told him', presumably meaning Citicorp.[223]

382 Mr Montclare answered NRMA's question about 'back, neck or spinal trouble', with a 'yes' and recorded that the 'trouble' was 'back a little'.[224] Mr Montclare answered a similar question with a 'no' on the Citicorp application form, but said that he did not realise he had been asked about back issues by Citicorp or that he had given the answer 'no'.[225]

383 Mr Montclare submitted that a reasonable person in the context of the application for life insurance would only consider that he had to disclose a recognisable and diagnosed psychiatric illness relevant to the risk of suicide after 13 months from obtaining the insurance. This was because of the limitation in the cover provided by the insurance. Metlife submitted that it was self-evident that in the context of this life insurance application, when regard was had to the particular enquiries made in the application form, that the insured would have been aware of the duty to disclose a mental or nervous disorder, such as depression, suicide attempts and his frequent statements to friends that he proposed to commit suicide, which revealed ongoing suicidal ideation or thoughts.

384 Mr Montclare submitted that question 9H contained vague terms and should be construed contra proferentum.

385 I do not consider that the question was ambiguous. The words used are ordinary words capable of being understood by a reasonable person.

386 Applying the relevant meanings given in the Macquarie Dictionary,[226] a 'disorder' is 'a derangement of physical or mental health or functions'. A 'breakdown' is: 'a collapse of physical or mental health'. 'Mental' means pertaining to the mind. A 'nervous breakdown' is defined as 'any of various psychiatric illnesses, esp. those attended by nervous debility and exhaustion and undefined physical complaints'.

387 Metlife relied on representations that they alleged were made by Mr Montclare and Mr Shilton that:

(a) Mr Shilton had never suffered from a mental or nervous disorder or breakdown (question 9H);

(b) Mr Shilton had never suffered from any other illness or injury or had an operation (question 9P);

(c) they were unaware of any other circumstances which might render the deceased's life to have shortened longevity or suffer from a serious health problem (section 14 declaration); and

(d) the information contained in the applications was true and correct (section 14 declaration).

388 Metlife pleaded that Mr Montclare represented that Mr Shilton's answers were to the best of Mr Montclare's knowledge true and correct and that Mr Montclare had made such enquires as were appropriate to constitute a proper foundation for his knowledge and belief that the answers given by Mr Shilton were true and correct.

389 Metlife pleaded that contrary to the section 14 declarations in the two insurance applications, Mr Montclare and Mr Shilton knew that:

(a) Mr Shilton had suffered from a mental or nervous disorder or breakdown in that he had suffered from dysthymia, alternatively depression, for a number of years;

(b) Mr Shilton had attempted suicide in 1981 and 1989;

(c) from approximately 1989 until his death in 2001, Mr Shilton frequently stated to friends that he proposed to commit suicide.

390 Mr Montclare submitted that statements said to have been made by Mr Shilton to his friends in 2001 could not be relevant as the insurance had already been issued.

391 Metlife particularised this part of its pleading by alleging that Mr Shilton suffered from dysthymia, or alternatively depression, for a number of years and received psychiatric treatment on at least 60 occasions between 30 October 1987 and 19 April 1991. He continued to suffer from dysthymia, alternatively depression, up until at least 17 April 1999, being the date of the second application. The particulars then referred to suicide attempts by Mr Shilton in 1981 and 1989. The particulars also referred to four friends of Mr Shilton, without naming them, who were to give evidence about Mr Shilton's frequent statements to them that he would commit suicide. The particulars alleged that Mr Montclare knew of these matters.

392 Dysthymia was generally described by the psychiatric evidence as a depressed or melancholic mood.

393 Depression, in its clinical sense, was identified by reference to a combination of some or all of persistent symptoms such as feelings of depression, an inability to cope with everyday situations, difficulty in sleeping, loss of appetite and suicidal rumination.[227]

394 Metlife alleged that the answers given to the health questions were fraudulent non-disclosures or misrepresentations because they were deliberate, alternatively made recklessly without caring whether they were true or false. It said that it would not have entered into the contracts of insurance or contracts on any terms if Mr Montclare and Mr Shilton had complied with their duty of disclosure and not made the misrepresentations. It entered into the contracts on the truth of the representations.

395 Alternatively, Metlife alleged that if the details of Mr Shilton's mental health history had been disclosed, it would have sought a report from the treating psychiatrist or treating psychologist. If no report was provided, it would not have entered into the first contract of insurance. If a report was provided by Dr Daniel Kahans, who Mr Shilton had consulted and who gave evidence, containing the matters set out in his outline of evidence, Metlife would not have been prepared to enter into the contracts of insurance.

396 Alternatively, if such a report was provided to it and if, but only if, the report stated that Mr Shilton had suffered from mild depression, the diagnosis of which was consistent with treatment and a medication regime, and consistent with written evidence from Mr Shilton that he had fully recovered and had been stable since the time of the attempted suicides, and he had no history of having engaged in any alcohol or substance abuse, then Metlife would have entered into the first contract of insurance.

397 Mr Montclare relied on the fact that Metlife's pleading of fraudulent misrepresentation or non-disclosure of Mr Shilton's medical history was limited to the allegation that Mr Shilton had suffered from a mental or nervous disorder or breakdown in that he had suffered from dysthymia, alternatively depression, for a number of years. The particulars of that pleading referred to 60 occasions of psychiatric treatment and alleged that he suffered from dysthymia, alternatively depression, up until at least 17 April 1999.[228] The allegations of a failure to disclose attempted suicide and statements to friends of an intention to commit were not pleaded to be fraudulent and must be taken to be innocent misrepresentations or non-disclosures.

398 Evidence concerning Mr Shilton's medical history came from a treating psychiatrist, three psychiatrists who gave expert evidence, Mr Montclare, and friends of Mr Shilton. This evidence was principally relevant to deciding whether Mr Shilton and Mr Montclare correctly answered the questions contained in the application form about Mr Shilton's health. I will next describe that evidence.

399 Mr Shilton consulted Dr Eng-Seong Tan, who was an associate professor of psychiatry and a senior psychiatrist at St Vincent's Hospital, on 28 occasions between 30 October 1987 and 26 April 1989. Dr Tan was described by another expert psychiatrist witness as having a high reputation and with whom it was difficult to obtain an appointment, because of his standing.

400 Dr Tan did not give evidence and Metlife's failure to call him as a witness was not explained. I therefore assume that his evidence would not have assisted Metlife's case.[229]

401 The expert witnesses referred to parts of Dr Tan's notes, although they said that they were difficult to read.

402 In a letter dated 30 October 1987 to Dr Johns, the referring general practitioner, Dr Tan stated that he was 'happy to spend a number of sessions talking to [Mr Shilton] about his life situation to see if he can be helped to view his life in a different light'.[230]

403 Dr Dush Shan, a psychiatrist who gave expert evidence as part of Mr Montclare's case, referred to Dr Tan's consultations with Mr Shilton in the following terms:

Dr Eng-Seong Tan 30th October 1987 (132.1) in writing to Dr Johns, the referring GP describes some of the reasons why the patient asked to be seen. There is no mention of dysthymic disorder or depression or anxiety or problems with recurrent suicidal ideation.

The handwritten records of Dr Tan were examined. I could not find mention of a diagnosis of treatment for symptoms of depression or anxiety as such. Instead, the notes consist of a record of a range of issues that the patient discussed and received counselling about. The sessions with Dr Eng-Seong Tan seemed quite similar to the sessions the patient subsequently had with Dr Kahans. The patient generally appears to be a person who worried over all manner of issues, in particular financial and occupational.[231]

404 Dr Diane Neill, a psychiatrist called by Metlife to give expert evidence, said that it appeared from Dr Tan's notes that Mr Shilton continued to present with problems concerning relationships, being worried, having stressful periods and being dissatisfied.[232]

405 Mr Montclare submitted that Mr Shilton's contact with Dr Tan was in the nature of counselling and did not indicate a sufficiently serious condition to require disclosure to Citicorp.

406 I consider that there is insufficient evidence to enable any conclusion to be drawn about Mr Shilton's medical condition between 1987 and 1989 when he consulted Dr Tan.

407 Dr Daniel Kahans was called as a witness in Metlife's case. He is a retired psychiatrist. Mr Shilton consulted him on 30 occasions between 16 November 1989 and 19 April 1991.

408 By the time he gave evidence in 2014, he was aged 80 years and in poor health. He suffered from a number of serious medical conditions which I will not set out, but which I have taken into account in assessing his evidence. Because of his poor health, Dr Kahans' own doctor expressed the preference that he be interviewed at home, however he did not suggest that Dr Kahans' medical condition prevented him from giving evidence.

409 The Court, both in 2011 and in 2014, heard his evidence at his home in suburban Melbourne. Counsel for Mr Montclare submitted that having regard to Dr Kahans' age and medical condition his evidence was unreliable. But Metlife's counsel submitted that his memory in relation to the main issues was 'pretty good'.

410 My impression of Dr Kahans was that he had a reasonable memory of his consultations with Mr Shilton and had formed a clear that Mr Shilton suffered from depression. However, because of the long time which had elapsed since his consultations with Mr Shilton occurred, I would not accept that he could recall any particular conversation with Mr Shilton, save where it is recorded in his notes. There is also an issue about the effect on the weight to be given to Dr Kahans' evidence of instructions that Metlife's solicitors asked him to assume. I discuss that issue later in this judgment.

411 Dr Kahans graduated in psychiatry in 1966 and retired in 2000. He is a fellow of the Royal Australian and New Zealand College of Psychiatry.[233] He worked exclusively in private practice, with a predominant interest in psychodynamic psychotherapy.[234] On 25 October 1989, Dr Kaye Weiner, a general practitioner, referred Mr Shilton to Dr Kahans 'to discuss his anxieties & his problems with his work & social life'.[235] Mr Shilton consulted Dr Kahans on approximately 30 occasions, between 16 November 1989 and 19 April 1991.[236]

412 Dr Kahans remembered Mr Shilton 'as a colleague and musician and the difficulty he had as a saxophonist ... and also that he related very well to me ... he has trusted me and finds me an easy person to talk to'.[237] Dr Kahans is also a musician.[238]

413 Dr Kahans did not record a diagnosis of Mr Shilton in his records.[239] Dr Kahans said that Mr Shilton's problems, at a superficial level, were those of everyday life, but they were interpreted more deeply by Mr Shilton.[240]

414 Dr Kahans administered three tests to Mr Shilton: Cattell's 16PF (Personality Factors); the Edwards Personal Preference Schedule, which deals with 15 personality variables; and the Eysenck Personality Questionnaire ('EPQ'), which assesses personality traits.[241] Dr Kahans said that 'personality problems' were not 'foremost' in his mind, but he recognised that Mr Shilton was flamboyant and inward-looking.[242] Dr Kahans said that although these three tests could not be used to diagnose mental illness, they may be a 'reflection' of anxiety and depression.[243]

415 Dr Kahans said that he did not use the standard diagnostic conventions of the International Classification of Diseases ('ICD') or the Diagnostic and Statistical Manual of Mental Disorders ('DSM') III or IV in relation to Mr Shilton and there was insufficient information to conclude that Mr Shilton fell within the ICD or DSM.[244] Rather, he used the term 'depression' as commonly understood in clinical practice.[245] Dr Kahans acknowledged that it is difficult to define the criteria for depression,[246] but he used criteria that included feelings of depression, inability to cope with everyday situations, suicidal rumination, difficulties in sleeping, and sometimes loss of appetite which occurs in neurotic depression.[247] Mr Shilton displayed the appearance of 'smiling, probably defensive in nature' which Dr Kahans said could be a leading symptom in depression.[248] In cross-examination, Dr Kahans agreed that his notes of the first consultation, on 16 November 1989, did not refer to that appearance.[249]

416 Dr Kahans was asked by Metlife's solicitors to prepare a report on the following assumptions:

1. A friend reported that from about 1993 until his death on 22 January 2001 he saw two sides to Mr Shilton's personality. One of the sides was a sad and depressed side which was more common when he was not fully occupied with work. There were days when he did not get out of bed. He reported that Mr Shilton regularly referred to thoughts of committing suicide (including in 1998), especially when he was under stress. The friend reported that in or about 1993 or 1994, at a dinner party Mr Shilton grabbed the table and tipped it over. He then grabbed and smashed a wine bottle and attempted to attack a guest with the smashed bottle. Mr Shilton later told his friend that he did not know why he had behaved in that way. Events of this kind occurred on other occasions, such as him throwing a dining room chair out of his apartment onto the roof of a neighbour's house with whom he was disagreeing. He also told his friend at some time between 1996 and 1998 he told his friends [sic] that he was raped as a child.
2. A second friend reported that in the 12 months prior to Mr Shilton's death Mr Shilton was almost constantly in a depressed mood and frequently referred to suicide. He made reference to suicide on at least 100 occasions over that 12 month period.
3. A third friend whom he met through work reported that he had known Mr Shilton since about 1985 and that he was the type of person who was happy one minute and sad the next. He was up and down and often manic in his behaviour. He was a nervous and paranoid person who often spoke as if the world was against him. He talked about suicide many times over the years but had not mentioned it in the last 2 or 3 years before his death.
4. A fourth friend reported that he discussed his suicidal thoughts in general conversation. He displayed occasional erratic behaviour. By way of example, when hosting din[n]er parties he would [un]expectedly ask everyone to leave.

417 Mr Montclare submitted that these assumptions were inconsistent with the pleaded particulars.

418 A number of these assumptions were not established by the evidence and two of the friends were not called as witnesses. The first friend, who was probably Mr Peter Egan, was not called to give evidence. There was evidence that Metlife was unable to locate him to give evidence and it applied under ss 63 and 67 of the Evidence Act 2008 (Vic) to tender as previous representations parts of a witness statement that he had previously signed. I ruled that Metlife had not satisfied the requirements of the Evidence Act and that the representations were not admissible.

419 Metlife also did not call the fourth friend, who may have been Mr Bruce Wallace.

420 The second friend was Mr Peter Beattie whose evidence is summarised later in these reasons. He did not give evidence in accordance with the assumption stated in the instructions given to Dr Kahans, that in the 12 months prior to Mr Shilton's death, Mr Shilton was almost constantly in a depressed mood and frequently referred to suicide. The third friend was Mr Kerrin Hancock, whose evidence is summarised later in these reasons.

421 During Dr Kahans' evidence in 2011, counsel for Mr Montclare questioned him as to his knowledge of Mr Shilton's condition in 1998 and 1999. The following exchanges occurred:

Counsel for Mr Montclare --- Doctor, in that case why did you express the opinion that you did without seeking that information?

Dr Kahans --- Because I assumed - I clinically assumed that the variety of factors operating would be similar to the four factors I already discussed.

Counsel for Mr Montclare --- So if that wasn't the case, then your opinion about this situation in 1989/1999 would be unreliable?

Counsel for Metlife --- Well, Your Honour, my learned friend has just slipped in two dates ten years apart. That is quite wrong. The evidence is given in three parts and it shouldn't be done that way. Very specific evidence was called from Dr Kahans on specific assumptions in '99.

Judge --- If the assumptions aren't made out. I don't know why you need to go on with this. If the assumptions aren't made out I'm going to disregard the opinion. It is as simple as that. Formulate another question if you want to.[250]

422 Dr Kahans was asked by Metlife's solicitors to prepare a full psychiatric report on Mr Shilton in the form that he would have provided to Metlife if he had been requested to provide a report between 23 November 1998 and 10 June 1999. The outline of evidence of Dr Kahans indicates that he would have reported:

1. That he treated Mr Shilton on approximately 30 occasions.

1. That he formed the diagnosis that Mr Shilton suffered from Chronic Reactive Depression caused by his own response to his homosexuality and problems in his personal relationships.
2. That Mr Shilton had attempted suicide on two previous occasions, one in 1981 and one in 1989.[251]

423 Applying the assumptions given to him by Metlife's solicitors, Dr Kahans expressed the opinion that in November 1998 or April 1999, the generic factors affecting Mr Shilton, which were 'longstanding effects', would have been more intense, as he probably was not in therapy and he was acting out a cry for help in the context of homosexual and anxiety conflicts.[252]

424 Dr Kahans, however, conceded that he did not know of Mr Shilton's work position, homosexual relationships, or relationship with his father in 1998 or 1999.[253] Dr Kahans considered that because Mr Shilton had been referred to him, he necessarily suffered from a psychiatric illness.[254]

425 However, Dr Kahans said that his diagnosis of chronic reactive depression was formed during his consultations with Mr Shilton and that that condition was likely to persist.[255]

426 Dr Kahans at one point in giving evidence in 2011, in answer to a question from the Court, said that he told Mr Shilton that he suffered from neurotic depression.[256] He said that there was no reference in his notes to that diagnosis because:

If that be so then it was taken for granted because he issued forth a great deal of neurotic symptoms and that of course was self-explanatory that - I don't have to trot out a diagnosis to him.[257]

427 He said that to have informed Mr Shilton of his specific diagnosis would have 'prejudice[d] my therapy with him. Patients do not always like a formal diagnosis like this'.[258] In cross-examination, when asked whether he told Mr Shilton that he had a diagnosis of depression, Dr Kahans said 'I may have, I don't know ... probably did tell him that the matter is a diagnosis of depression'.[259]

428 In a letter to Dr Weiner dated 21 November 1989, Dr Kahans wrote that, '[a]t interview [Mr Shilton] requested that any information he may ... give me I treat as confidential, thus I am unable to write to you with my usual detailed response letter'.[260] Dr Kahans acknowledged that Mr Shilton was seeking support, 'and probably analysis of his state', from him.[261] Part of his therapy was friendly support and assistance in working out social and occupational problems.[262]

429 On 27 February 1992, Dr Kahans wrote to Dr Weiner stating that he had discharged Mr Shilton as from that day. His letter stated:

If in the future Graeme may need further therapy at Wingrove Community Clinic we would be pleased to provide this.

430 Dr Kahans notes were brief. In respect of the initial consultation on 16 November 1989, Dr Kahans recorded that Mr Shilton was in mid-career crisis, that he was engaged as the leading classical saxophonist of Australia and had a basic problem of not being able to make enough money to survive properly. He recorded that Mr Shilton said that he had sexual and family problems and that there was no evidence of 'functional psychosis or cerebral organicity'. He also recorded that he 'probably needed 2-3 years of continual therapy'

431 The notes of a consultation of 30 November 1989 recorded that 'supportive and insight orientated psychotherapy in progress', and 'discussed family background' and 'smiling, probably defensive in nature. Needs extended further indepth psychotherapy'.

432 Dr Kahans' notes of 9 December 1989 which related to the monkshood incident recorded:

Graeme rang me at 10am stating that he took some monkhood which is highly poisonous material. He felt that he could not cope any more....

Casualty Dr stated to me that monkswood is used as decorative wood and that Graeme told him that he'd bought this for decoration, but knew that it was poisonous, hence Dr was a bit worried about motivation of Graeme. Graeme said that he did not but it to commit suicide.

Also actually took the poison because he could not cope with financial pressures with music.

433 In notes of a consultation on 12 December 1989 shortly after the monkshood incident, Dr Kahans recorded:

'recipient to taking monkshood poison at a party, getting drunk in relationship with Michael.

Confused. Sexual frustration.

Background of difficulty with brother.

Pressure from parents and intolerance of tenant ... and next door neighbour.

...

History of previous attempt at suicide in 1981 because of a 'love affair' broken.(homosexual love affair).'

434 He noted the monkshood incident as 'attempted suicide'.

435 Dr Shan, an expert witness called as part of Mr Montclare's case and whose evidence is considered below, thought that this note suggested that Mr Shilton appreciated that he had attempted suicide twice.

436 Dr Kahans' notes of a consultation on 10 January 1990 stated that Mr Montclare was 'improving' and 'more positive' and 'highly motivated for therapy'

437 Dr Kahans' notes of a consultation on 12 January 1990 recorded that Mr Shilton took monkshood because of the person with whom he was in a relationship was involved with someone else and he 'cannot cope with this fully.'

438 Dr Kahans' notes of a consultation on 23 February 1990 recorded:

Supportive and uncovering therapy in progress.

Central theme -reaction to rejection of parents to Graeme's style of life.

439 Dr Kahans' notes of a consultation on 9 March 1990 recorded that Mr Shilton needed 'constant review at this stage so as to prevent previous explosive pattern with monkshood'

440 A note in June 1990 recorded that Mr Shilton was 'responding well to therapy'..

441 Dr Kahans' notes of a consultation on 7 July 1990 recorded:

Rang and asked for emergency appointment...

At interview stated that he left his residence...found it difficult to cope with too many stresses from landlord and neighbour...and also from one girl who is making demands on him

Friend, Bill has significantly helped him...Now is living with Bill...Planning to go overseas next year...America and Europe in January, February and March

To return Thursday...

Says I have really helped him in rehabilitation

442 Dr Kahans' notes of a further consultation in July 1990 recorded 'supportive therapy in progress'.

443 Dr Kahans' notes of a consultation on 28 September 1990 recorded:

Supportive and uncovering therapy in progress ...

To return ...

Gave details of his music schedule and his difficulty in coping with teaching.

444 In October 1990, Dr Kahans' notes recorded 'self-destructive tendency discussed'. There was a second consultation that month and Dr Kahans' notes record that Mr Shilton made an urgent appointment and the notes record 'supportive therapy.'

445 Dr Kahans' notes of a consultation on 3 January 1991 recorded 'feelings of depression...discussion in depth of genesis'.

446 Dr Kahans' last note of a consultation with Mr Shilton was on 19 April 1991 and included the entry of 'plenty of work ... says at night he feels depressed'.

447 In his evidence in 2011, Dr Kahans gave his diagnosis of Mr Shilton as 'reactive depression and [that] there was no evidence of psychosis or organicity. Neurotic depression was my diagnosis'.[263] Dr Kahans said that he made this diagnosis at his first consultation with Mr Shilton on 16 November 1989.[264] He said that his diagnosis would not have been different in 1998 or 1999.[265]

448 Dr Kahans gave evidence that reactive depression and neurotic depression are equivalent and can describe a minor or major state of unhappiness.[266] Dr Kahans explained that reactive depression is where a patient 'responds to generic aspects of his life situation and conflicts'.[267] The ongoing generic factors that caused Mr Shilton's reactive depression were:

his innate need for homosexual relationships which was very much against the ethos of his parents, one. Two, the fact he was a brilliant classical saxophonist and there's not much work in Melbourne for a saxophonist like that and that also he had conflicts within the homosexual relationships he did make, but perhaps out of all these factors the most important one was that he and his father did not get on at all because the father could not accept his son's homosexuality.[268]

449 Neurotic depression refers to a 'constellation' of factors, usually chronic and longstanding, facing the patient and his personality, his reaction to which made him unable to cope.[269]

450 He also said that Mr Shilton responded well to his psychotherapy and did not need drug therapy.[270]

451 Dr Kahans did not use the term 'dysthymia', because he considered that it was a 'very loose term' meaning 'alteration of mood'.[271] But he also agreed that terms used to describe depression, including 'neurotic depression', are loose terms due to the complex nature of the condition.[272]

452 Dr Kahans agreed that Mr Shilton was well, or 'relatively well', when he was discharged from his treatment in 1991.[273] Dr Kahans said that he gave Mr Shilton 'plenty of chances' to continue therapy. His notes do refer to Mr Shilton cancelling or not keeping appointments.[274]

453 Dr Kahans considered that Mr Shilton would have been at risk of further episodes of depression after their consultations ended.[275]

454 Dr Kahans said that he made his diagnosis 20 years before knowing that Mr Shilton had committed suicide. However, he took the suicide into account in his evidence.[276]

455 It is relevant in considering Dr Kahans' evidence to deal with the evidence of Mr Shilton's two alleged suicide attempts.

456 Mr Shilton in 1981, when aged 24, took an overdose of antibiotics, apparently following the breakdown of a relationship. There was little detail of this incident in the evidence. Dr Kahans regarded it as a serious suicide attempt. Other psychiatrists who gave evidence regarded it as less serious, for instance Dr McLaren, a witness called as part of Mr Montclare's case, described it as 'about as serious as stamping his foot'.[277] However, those other psychiatrists had not treated Mr Shilton.

457 In December 1989, about two months after first consulting Dr Kahans, Mr Shilton took an overdose of a toxic plant called monkshood, which is a cardiac glycoside.[278] Excessive doses of monkshood can cause cardiac arrest. Mr Shilton telephoned Dr Kahans, Dr Weiner and some friends, and told them that he was going to the Alfred Hospital.[279]

458 I have previously set out Dr Kahans' note of 9 December 1989 concerning this incident.

459 Mr Shilton was not admitted to a psychiatric ward, but was monitored in a medical ward in case he developed cardiac arrhythmia.[280] Dr Lynette Chazan was one of the medical staff, who treated him.

460 Mr Shilton's discharge summary from the Alfred Hospital recorded a diagnosis of 'parasuicide attempt'. This is a description of self-harm behaviour without a firm intent of death. The hospital notes include the following:

Mr Shilton took an impulsive O/D of a plant he knew to be toxic, while drunk after a x-mas party. He describes dysthymia for years in the setting of chronic financial & employment problems in his work as a saxophonist ...

He decided to see a [indistinct] 2/12 ago on the encouragement of friends who felt he was unable to fulfil ambitions to go O/S because of low self-esteem. So far he has been doing psychological tests apparently, although he denies any disappointment/anger with therapist re not having treatment proper. Therapist is also a musician who sees others of his friends.

There is no indication of recent worsening of dysthymia, major depressive illness, psychiatric disorder. Apart from moderate social drinking he denies drug/[indistinct] intake. He denies past suicide attempts or ideation. There is no evidence of manic episodes, but he describes feeling happy only when playing. O/E he is remorseful & euthymic, with a very superficial grasp of his situation. He is not suicidal.

His plans to attend Dr Kahans on Thursday sound acceptable - can leave hospital whenever physically fit.

461 The Alfred Hospital record which was sent to Dr Kahans states under the heading of 'Presenting Complaint' that:

Mr Shilton had been under a great deal of financial pressure lately and had been seeing a Psychiatrist for the two months prior to his admission. On the morning of admission he ate the leaves, stem and bulb of a plant called Monkswood in a suicide attempt and then phoned up his friends.

PROGRESS IN HOSPITAL

Monkswood is a cardiac glycoside. Mr Shilton was admitted and monitored for two days watching for degrees of heart block. This did not ensue and he was reviewed by his Psychiatrists who felt that he was well enough to be discharged and he would be reviewed by his own private Psychiatrist after discharge.

462 Neither Dr Chazan, nor any other doctor who attended Mr Shilton at the Alfred Hospital, gave evidence. The plaintiff objected to the tender of the hospital notes. But I ruled that they were admissible, save for one minor exception, as they satisfied the business records provision in s 69 of the Evidence Act.

463 Dr Kahans regarded the monkshood episode as a very serious attempt at suicide.[281] I have previously set out part of his notes of 12 December 1989. They also recorded:

Recipient to taking monkshood poison at a party, getting drunk in relationship with Michael ... History of previous attempt at suicide in 1981 because of a 'love affair' broken. (Homosexual love affair) ... Took anti-biotics overdose ... nothing happened then ...[282]

464 Dr Kahans said that he foresaw the monkshood incident occurring and said that it would have been a miracle if Mr Shilton was never depressed again.

465 Dr Kahans gave evidence that, taking into account Mr Shilton's suicide in 2001, he believed that the two suicidal episodes, in 1981 and 1989, were 'active suicidal attempts', with suicidal intention, and a 'cry for help'.[283] He described the antibiotics incident in 1981 as 'histrionic in part' and designed to scare people.[284]

466 Dr David Burgin is a general practitioner who attended Mr Shilton between October 1997 and February 1999. In addition other doctors at his medical centre attended Mr Shilton. Dr Burgin did not give evidence. In a report to the Coroner in 2001, he stated that he had treated Mr Shilton for hay fever, asthma, indigestion and minor skin infections and that:

He suffered no life threatening illness to the best of my knowledge ... I have not treated him for any nervous nor depressive illness. There is no record of him being prescribed any tranquillizers or antidepressants.[285]

467 Three psychiatrists were called to give expert evidence: Dr Shan, Dr McLaren and Dr Neill. Their evidence was principally relevant in identifying Mr Shilton's condition when in 1998 and 1999, he or Mr Montclare answered the question in the insurance application forms. Mr Shilton had not consulted them and they based their opinions on available medical records and related documents. These included: the medical records of Dr Kahans, Dr Tan and the Alfred Hospital; the letter of referral from Dr Weiner to Dr Kahans; Dr Kahans' letters to Dr Weiner, and; the transcript of evidence given by Dr Kahans in 2011.

468 Each of the doctors said that Mr Shilton's clinical records were not detailed.[286] Drs Neill and McLaren experienced difficulty in reading Dr Tan's notes.[287]

469 Dr Dush Shan, a psychiatrist, prepared two reports in 2014 in response to a request by Mr Montclare's solicitors. He gave evidence as part of Mr Montclare's case.

470 Dr Shan is a consultant psychiatrist of 30 years' experience. He has held appointments at the Royal Park Psychiatric Hospital and as Principal Specialist, Consultation Liaison Psychiatry, at the Alfred Hospital for 8 years.

471 Although Dr Shan acknowledged that speaking with a patient is a 'core part' of forming a psychiatric diagnosis, he said that doctors frequently manage patients without access to clinical notes.[288] Dr Shan attributed the lack of detail in Dr Kahans' medical records about Mr Shilton to the fact that he had not made a diagnosis, because Mr Shilton was receiving counselling and psychotherapy.[289]

472 Mr Shilton appeared to be undergoing a course of psychotherapy.[290] In his first report, Dr Shan expressed the opinion that in the period 1998 or 1999:

[Mr Shilton] sought counselling from Dr Daniel Kahans and a previous psychiatrist, Dr Eng-Seong Tan for issues mainly in relation to personality traits that caused him to have difficulty coping with setbacks and disappointments but may for a short time have suffered a mental or nervous disorder or breakdown.[291]

473 Dr Shan said that Mr Shilton sought counselling because he 'worried over all manner of issues, in particular financial and occupational' and found it useful to 'talk about even simple issues'.[292] In 1998, patients who needed counselling for everyday issues would visit psychiatrists, as their treatment was Medicare rebatable, but today such patients would visit psychologists.

474 Dr Shan observed that there was no record of a diagnosis or indication of ill health. He said that there was no indication that Mr Shilton had been prescribed medication,[293] needed time off work, or suffered clinically significant symptoms of anxiety and depression, panic attacks or suicidal thoughts or delusions.[294]

475 Dr Chazan at the Alfred Hospital had recorded that Mr Shilton 'describes dysthymia for years in the setting of chronic financial & employment problems'.[295] However, Dr Shan doubted 'very much' that Mr Shilton used the word 'dysthymia', which could have been used to refer to 'depressive feelings or melancholia'.[296]

476 The only diagnosis Dr Shan found in the records provided to him was Dr Kahans' 'retrospective diagnosis'[297] of reactive or neurotic depression given in his evidence in chief in the 2011 hearings.[298] Dr Shan acknowledged that Dr Kahans had very respectable qualifications in psychiatry and his retrospective diagnosis was 'potentially sound'.[299]

477 Dr Shan considered that, in 1998 or 1999, Mr Shilton suffered from mild depression and personality problems.[300] However, he also expressed the opinion that Mr Shilton was well when discharged from consulting Dr Kahans and received no subsequent psychiatric treatment.[301] He stated:

In 1998, or 1999 if an independent psychiatrist had prepared a report, using a recognised diagnostic convention such as the ICD 10 it would have been that the patient in addition to having problems of personality, had have suffered only from mild depression, leading a diagnosis of Mild Depressive Episode F32.0. This would be consistent with the fact that there was no period whatsoever of being prescribed psychotropics including anti-depressants and anxiety medications, no occasion when there was a significant period of sick leave or absence from work due to psychological ill health, and no occasion when an admission to a Psychiatric Facility was needed. The only one occasion when there was an admission of relevance was when he was kept under observation in a Medical Ward because he had impulsively ingested a toxic material after consuming alcohol. Similar impulsive behaviour that was very unlikely to cause death had been shown by the patient such as when he took some antibiotics some 10 years before. In addition, he was able to continue with most of his ordinary activities if not all.[302]

478 Dr Shan noted that Dr Kahans, in his evidence in 2011, did not specify whether he was using the term 'depression' as a feeling of depression or clinical depression indicative of a psychiatric illness.[303] He questioned Dr Kahans' opinion that a patient who is referred to a psychiatrist necessarily has a psychiatric illness.[304]

479 Dr Shan considered that it was not appropriate to describe Mr Shilton as 'suicidal', as Dr Kahans had in his notes. Mr Shilton's behaviour involved impulsive self-harm, which he would have known was very unlikely to lead to death.[305] Similarly, the Alfred Hospital notes of 1989, which referred to the monkshood incident as a 'parasuicide attempt', indicated that Mr Shilton's actions were a cry for help with no intention of causing death.[306] If a psychiatric diagnosis of Mr Shilton had been made, he would have been admitted to a psychiatric hospital, but he was not so admitted.[307] Dr Shan also noted that if there were 'genuine concerns about severe depression leading to constant pre-occupation with suicide', then more 'energetic treatment' by Dr Kahans would have been expected.[308]

480 Nevertheless, Dr Shan recognised that Mr Shilton probably held the view that he had twice attempted suicide when he was discussing his actions with Dr Kahans shortly after the monkshood incident.[309] It was unlikely that Mr Shilton would have forgotten that he had twice attempted self-harm.[310] However, Dr Shan said that suicide, by itself, cannot lead to an inference of a mental illness.[311]

481 Dr Shan did not believe that Dr Kahans informed Mr Shilton of a diagnosis or that Mr Shilton would have been aware of having been diagnosed with a mental illness. Instead, Mr Shilton would have believed that he was seeing Dr Kahans, and before him Dr Tan, for counselling and therapy.[312] The Alfred Hospital notes of Mr Shilton's admission did not record him mentioning any mental illness or disorder. Rather, he told the registrar that he was attending a psychiatrist because of low self-esteem.[313]

482 Dr Shan said that no diagnosis is needed for a person to undergo psychotherapy.[314] Psychotherapy involves 'talking therapies' for life issues rather than illness and can be used by psychiatrists, psychologists, counsellors, and social workers.[315] He agreed that psychotherapy is a recognised method of treating depression and that Dr Kahans was at the 'higher end of the spectrum [of sophistication] in respect of psychotherapy'.[316]

483 Dr Niall McLaren, a psychiatrist of more than 35 years' experience who practises in Queensland, was called as an expert witness in Mr Montclare's case. He practised in adult general psychiatric areas with an emphasis on post-traumatic conditions, and in military and forensic psychiatry. He has given expert evidence hundreds of times.

484 Dr McLaren did not believe that Mr Shilton was suffering from a mental disorder in 1998 or 1999, or that he was mentally ill at the time of his death, or had ever been genuinely depressed at any stage of his life.[317] Rather, he had an abnormal personality or personality disorder. He relied on the fact that Mr Shilton worked regularly, did not drink to excess and was not using illegal drugs, at least between 1987 and 1989.[318] He was not prescribed medication, was not admitted to hospital, and was not given a medical certificate for time off work or social security benefits.[319]

485 Dr McLaren considered that Mr Shilton had sought therapy for an 'abnormal personality', which could be caused by upbringing and life experience in a particular social setting.[320] He described Mr Shilton as having a 'neurotic personality'.[321] Dr McLaren said that the results of the EPQ confirmed his view that Mr Shilton had a 'personality disorder', which was not a mental illness.[322] The EPQ does not purport to establish the existence of a mental illness.[323]

486 Dr McLaren described Dr Tan's and Dr Kahans' treatment as being 'little more than friendly support and some assistance' with 'social and occupational problems'.[324] Dr McLaren described the psychiatrists who had treated Mr Shilton as 'ageing psychiatrists in private practice in a wealthy suburb who specialise in seeing talented but histrionic, sexually-ambivalent musicians' who provided 'supportive chats'.[325] Mr Shilton consulted Dr Kahans 'in the role of a caring older man who understood him and was relatively non-judgemental'.[326] The fact that Mr Shilton saw a psychiatrist a number of times did not prove that he had a mental illness.[327]

487 Dr McLaren did not consider that Dr Kahans provided psychoanalytic treatment.[328] His notes did not indicate the form of treatment and management that Dr Kahans implemented.[329] Dr Kahans' reference in his notes of 16 November 1989 to the need for two to three years of continual psychotherapy did not imply that Mr Shilton had anything other than 'personality problems'.[330] Mr Shilton's appointments with Dr Kahans were on an irregular basis, and his problems were often social in nature.[331] The therapy finished without a clear statement as to whether the goals had been achieved.[332] There was no evidence that Mr Shilton saw himself as mentally ill.[333]

488 Dr McLaren misread a reference in Dr Kahans' notes to 'genesis' as being to a reference to the Book of Genesis in the Bible, rather than to the origin of Mr Shilton's illness. However, he readily conceded that error.

489 Dr McLaren suggested that Mr Shilton attended Dr Tan and Dr Kahans sporadically, cancelled appointments at short notice for domestic reasons, and was seen by the two psychiatrists as 'little more than mildly anxious and sporadically mildly depressed'.[334]

490 Dr McLaren considered that 'mental disorder was being over-diagnosed' and that personality disorder is being mistaken for formal mental illness.[335] He agreed that he was 'something of a crusader on the issue'[336] and his evidence suggested that he diagnosed mental disorders less frequently than some other psychiatrists.

491 Dr McLaren described Mr Shilton's 'suicidal gesture' in 1981, in which he overdosed on antibiotics, as being 'about as serious as stamping his foot' and lacking suicidal intent.[337] No man of his intelligence and sophistication would have taken antibiotics with suicidal intent. Mr Shilton's second suicidal gesture, the ingestion of monkshood, was 'histrionic' and not the action of a seriously mentally ill person or a person intent on ending their life.[338] It was evidence of Mr Shilton's personality disorder, not of a mental disorder.[339] The Alfred Hospital did not admit Mr Shilton to the psychiatric department following the monkshood incident nor did it provide a formal psychiatric diagnosis in its discharge summary. The psychiatric department of a major teaching hospital would not have missed identifying a significant mental disorder in such a presentation. The incidents were not evidence of mental disorder and he was never substantially ill. The Hospital's reference to parasuicide meant 'yet another pointless gesture by somebody who should know better'.[340]

492 Dr McLaren noted that neither Dr Tan nor Dr Kahans had made a formal diagnosis of Mr Shilton and their case notes were 'far below ... minimal professional standards'. They had no overt concern about Mr Shilton's mental state.[341] Dr McLaren did not accept Dr Kahans' statement, in his notes of 9 March 1990, that Mr Shilton needed constant review. Mr Shilton did not again attend Dr Kahans until 19 April 1990.[342]

493 Dr McLaren said that Dr Kahans' oral evidence in 2011 that he diagnosed Mr Shilton with reactive or neurotic depression was a diagnosis made 'after the event'. At the time of Dr Kahans giving that evidence, reactive depression and neurotic depression were not accepted diagnostic terms and he used them interchangeably. He said that Dr Kahans 'was uncomfortable, maybe even a bit befuddled by the process and was using the terms which he hadn't used 20 years before'.[343] No such diagnosis appeared in his case notes and Dr McLaren suggested that Dr Kahans was 'intimidated by the judicial process' and 'tried to formalise ... a very informal process'.[344]

494 Dr Diane Neill, who is a consultant psychiatrist in private specialist clinical practice, gave expert evidence as part of Metlife's case and provided two reports. Dr Neill was for 10 years a visiting psychiatrist at the Alfred Hospital and for part of that period she was Head Consultation - Liaison Psychiatry. She was an admitting psychiatrist at the Albert Road Clinic and the Melbourne Clinic for 14 years. Since 2010, her clinical practice has comprised supervising junior consultants, providing compulsory counselling with respect to boundary transgressions to medical practitioners at the determination of medical regulators, undertaken Medical Panel Tribunal Work and limited medico-legal assessments.

495 In her first report, Dr Neill wrote that Mr Shilton had:

a long history of ambivalence about sexuality, and impoverished intimacy, loneliness, emptiness, neediness, sensitivity to rejection, worry and recurrent depressed mood. There is a possible past history of childhood sexual assault, a personal history of excessive alcohol use, and a family history of psychiatric illness (mother had postnatal nervous breakdown).[345]

Mr Shilton had by mid-1991 attended two psychiatrists for psychotherapy over a period of about 4 years, and in that time had undergone a medical admission due to significant self harm. There had been a previous occasion in which he had taken an overdose in response to a relationship breakdown. In my experience this average person would take this to mean they had suffered from a mental or nervous disorder or breakdown.[346]

497 Dr Neill concluded that, as at 1998 or 1999, Mr Shilton had suffered from a mental or nervous disorder or breakdown, or mental illness.[347] She based her opinion on Mr Shilton having had, over several years, symptoms of anxiety and depression and difficulties with relationships, his sense of self and work, for which he had sought mental health help.[348]

498 Because of Mr Shilton's prolonged treatment and degree of depression and dysfunction, Dr Neill disputed that in 1998 or 1999 he suffered from only mild depression.[349] She considered that he had longstanding dysfunction in a range of areas.[350] In cross-examination, Dr Neill said that she could not find any severe 'symptomatology' or disruptions in function, apart from the suicide attempts, which would indicate, in 1998 or 1999, more than moderate depression.[351] She considered that the attempted suicide conveyed that Mr Shilton's depression was more severe than mild, but the overall illness might still be mild.[352]

499 However, as at 1988 to 1989 Dr Neill said it was appropriate to diagnose Mr Shilton with 'dysthymia/dysthymic disorder/neurotic depression', and in December 1989 to January 1990 to diagnose him with 'adjustment disorder/reaction'.[353] Neurotic and reactive depression may co-exist and may overlap with dysthymic disorder/dysthymia.[354] By the term 'adjustment disorder/reaction' she meant 'adjustment disorder reaction/reactive depression'.[355] She was unable to specify the diagnostic criteria for adjustment disorders, neurotic depression or reactive depression.[356] Despite that, she did say that if Mr Shilton's personality traits caused him to have difficulty coping with setbacks or disappointments, that would justify a diagnosis of adjustment disorder/reaction.[357]

500 She gave evidence that depression can include personality disorders, but it appeared that she had drawn that conclusion from works concerned with child psychiatry.

501 Dr Neill gave evidence that the EPQ, Edwards Personal Preference Schedule, and Cattell's 16PF, which assess personality and gather other symptoms,[358] returned 'multiple' depressive and anxious items in respect of Mr Shilton.[359] The Edwards Personal Preference Schedule also indicated 'overwhelming' positive responses to depression and anxiety symptoms and the EPQ listed 'extensive' anxiety and depression symptoms.[360]

502 Dr Neill agreed that there was insufficient information concerning Mr Shilton to reach a diagnosis under a recognised diagnostic convention for the period 1991 to 1999.[361]

503 In her report, Dr Neill cited a definition of dysthymic disorder from the textbook by Kaplan and Sadock, which she said was an 'expanded DSM definition'.[362] In 1988-89, the commonly used definition included:[363]

• [l]ow grade depressed mood (dysthymia) of at least 2 years duration with infrequent euthymia and
• [d]epressive personality traits eg brooding and given to worry; pre-occupied with inadequacy, failure, negative events; passive, indecisive; conscientious or self-disciplining.[364]

504 She was questioned about the fact that her report did not mention that the first criterion for this definition of dysthymic disorder was 'indeterminate early onset less than 21 years'.[365] Dr Neill said that the DSM criteria and diagnosis of dysthymic disorder were 'in a state of flux at that time'.[366]

505 Counsel for Mr Montclare cross-examined Dr Neill about another passage from Kaplan and Sadock's work which referred to the 'DSM-III-R' criteria for dysthymia. Dr Neill disputed counsel's construction of the criteria as requiring the presence of features, such as insomnia and low self-esteem, for at least two years with intermissions never lasting more than two months, in addition to depressed mood.[367] Dr Neill said that there was evidence of Mr Shilton suffering significant insomnia, including the reference in Dr Kahans' notes to difficulty sleeping.[368]

506 Dr Neill considered that Mr Shilton had not recovered since his attempted suicides in 1981 and 1989. Although his mental state had improved since 1989, his work functioning had improved and he was only intermittently attending appointments, he still suffered from depressed mood. Dr Kahans' last entry on 19 April 1991 was that 'at night he feels depressed'.[369] His friends' perspective was that he suffered from intermittent moodiness, worry, talk about suicide, unpredictable behaviours, thwarted relationships and rash judgement, for example undue spending on others to his own detriment.[370]

507 Dr Neill noted that both Dr Kahans and Dr Tan had offered Mr Shilton psychotherapy.[371] She said that psychological therapies were the first line of treatment for mild to moderate anxiety and depressive disorders.[372] Her source for this statement, Kaplan and Sadock, also mentioned other treatments, for example cognitive therapy and medication, as being equally good.[373]

The evidence of Mr Shilton's friends regarding his mental health

508 Mr Kerrin Hancock, who was a friend of Mr Shilton and the executor of his will, gave evidence in Metlife's case.

509 Mr Hancock became a close friend of Mr Shilton in 1985, when they were teaching music at the same school.[374] They remained friends and were in regular contact.[375] From the mid-to-late 1990s, Mr Hancock would meet with him about 'once a month, [or] once a fortnight' and speak with him on the telephone at least once or twice a week.[376]

510 While Mr Hancock found Mr Shilton to be cheerful, humorous, quirky, friendly and intelligent, he also said that he had mood swings, 'worrying levels of self-doubt', vulnerability and paranoia.[377] Mr Hancock described Mr Shilton as having 'insecurities regarding life generally', suffering from 'ups and downs in mood' and needing reassurance.[378] One moment, he would be buoyant and happy, but the next he would 'plunge' into despair and doubts.[379]

511 Mr Hancock gave as an instance of Mr Shilton's self-doubt an occasion when he was preparing for a concert at which he was to perform a difficult piece of music that had been written for him. Mr Shilton would display 'huge angst', be utterly meticulous and say that he 'can't do it'.[380] Before another concert in the mid-1980s, Mr Hancock found Mr Shilton surrounded by expensive saxophone reeds and trying to find the perfect reed. He was shaking, panicking and a 'complete emotional mess'.[381] Mr Hancock acknowledged that he was not a saxophonist and it was understandable that a saxophonist would want the best reed for his performance in a concert.[382] He said, however, that Mr Shilton's actions were outside the bounds of normal human behaviour.[383]

512 Mr Hancock recounted an incident to illustrate Mr Shilton's mood swings, in which he observed Mr Shilton lose his temper and become aggressive towards one of his students at the VCA.[384] He said that Mr Shilton demanded perfection, even in his students.[385] In cross-examination, Mr Hancock agreed that it was possible that he did not understand what was going on in the incident.[386] Mr Hancock also recalled that in 1985, during the week leading up to a performance of a 100 piece concert band of which Mr Shilton was in charge, Mr Shilton was worried, fretting and anxious. However, at the end of the performance he received a standing ovation.[387]

513 Mr Hancock said that Mr Shilton's characteristics of 'self-doubt' and meticulous preparation for technical performances could be 'precursors' of, or factors related to, his suicide, depending on his work pressures, but did not necessarily suggest that he had a mental illness.[388] Mr Hancock agreed that for performers, angst and meticulous preparation prior to the performance of difficult works were normal. However, he explained that different performers respond to pressure in different ways and that Mr Shilton's 'performance life' was not the average life of other classical saxophonists.[389] Mr Shilton had reached a very high level in his field and he even had the uncommon experience in Australia of having works written for him.[390] He was often under extreme pressure, beyond that facing other performing artists. A classical saxophonist holds an extremely rare position.

514 Mr Hancock gave evidence that from 1985, Mr Shilton spoke about suicide on approximately five or six occasions, especially when things were bad for him or he was under pressure.[391] He did not recall Mr Shilton speaking of suicide in the two to three years before his death.[392] Mr Shilton would say, for example, 'if it all gets too bad then I'll just kill myself'.[393] Mr Hancock said that he felt disappointed, concerned and upset at these remarks, and would tell Mr Shilton not to be stupid. He thought it very possible that Mr Shilton meant what he said.[394] No one else was present when Mr Shilton spoke to him about suicide.[395] In cross-examination, Mr Hancock said that Mr Shilton did not make this statement (that 'if it all gets too bad then I'll just kill myself') in an offhand or flippant manner, but Mr Hancock agreed that it could be interpreted in that way.[396]

515 During the late 1990s, Mr Shilton once told Mr Hancock that he would jump off a bridge over the Eastern Freeway into the traffic below.[397] Mr Hancock was 'horrified' and said to Mr Shilton, 'why would you do that ... you'll endanger other people.'[398] Mr Hancock acknowledged that Mr Shilton may have been seeking his attention, but said that that did not mean that he would not take the comments seriously.[399] Mr Hancock thought that Mr Shilton had a genuine suicidal intention and had described what he wished to do, but at the time he did not believe that Mr Shilton was going to kill himself within the next month.[400] It is unclear from the evidence whether Mr Hancock recalled Mr Shilton making that statement before the insurance cover was granted.

516 Mr Hancock said that Mr Shilton first mentioned suicide in 1985.[401] But he was unable specifically to identify other occasions, apart from those previously mentioned and a few other occasions in the late 1980s or early 1990s when Mr Shilton told Mr Hancock that he had access to an apparatus or drugs to kill himself.[402] Mr Hancock believed he had a genuine intention to do so.[403]

517 In the late 1980s and early 1990s, Mr Hancock asked Mr Shilton whether he had plans for his older years and retirement, and Mr Shilton would reply that he was not concerned and that he would 'just kill myself'.[404]

518 Mr Hancock did not do anything in response to Mr Shilton's references to suicide. He found the topic confronting and did not want to discuss it with him.[405] While he was not certain that Mr Shilton would commit suicide, he considered that Mr Shilton had plans for suicide 'for a long time'.[406]

519 Mr Hancock said that if he genuinely believed someone might commit suicide, he would try to stop them, in the sense of stopping them from doing the physical act there and then, but he also said there was probably not much he could do if he was not present at the time the person committed suicide.[407]

520 Mr Hancock met with Mr Shilton the night before he died and had no idea that he was going to commit suicide.[408] He did not think Mr Shilton had a genuine intention to do so within the next week or the month - otherwise, he would have done something.[409] He described Mr Shilton as initially cheerful, but he suddenly despaired and became self-doubting when speaking about his promotion to the position of senior lecturer in the woodwind section of the VCA and the long hours that he would need to work.[410]

521 Mr Hancock said that he was not surprised that Mr Shilton took his own life.[411] He believed that Mr Shilton was serious when he referred to suicide.[412]

522 Mr Shilton told Mr Hancock in 1985 that he had seen a psychiatrist before they had met,[413] and that he was seeing a psychiatrist in the 1980s and possibly early 1990s.[414] Mr Hancock said that, to his knowledge, Mr Shilton had never suffered a breakdown.[415]

523 Mr Hancock said that he was suspicious of Mr Montclare and became more suspicious when he learnt the worth of the insurance policy. He refused, as executor, to hand over Mr Shilton's medical records to Mr Montclare 'purely by [his] desire to hinder Mr Montclare in his claim'.[416] Mr Hancock alleged that in a conversation in a restaurant in 2004, Mr Montclare suggested that he would give him a financial reward if he co-operated with his insurance claim. Mr Montclare denied that such a conversation occurred. While, I have expressed my considerable reservations about Mr Montclare's evidence, in view of the conflict of evidence, the length of time since the conversation occurred and the fact that the comment is said to have been made in a soft voice, I am not persuaded that Mr Montclare made the comment in the terms alleged by Mr Hancock.

524 Mr Graham Beattie, a friend of Mr Shilton, gave evidence as part of Metlife's case.

525 Mr Beattie first met Mr Shilton in the late 1980s through a mutual acquaintance, Mr Peter Egan.[417]

526 Mr Beattie said that he did not have a close relationship with Mr Shilton, but nonetheless said that they were very good friends.[418] They met about three times a week during the 1990s.[419]

527 Mr Beattie described Mr Shilton during the 1990s as a:

very caring person, got along with people extremely well, was quite social. Had his moments, mood swings but in a sense was there to help everybody or anybody.[420]

528 He described Mr Shilton as 'up and down ... crazy one minute and depressed the next'; he was either very high or very low and 'when he was low, he was low'.[421] For example, at a party Mr Beattie saw Mr Shilton throw himself into a swimming pool, fully clothed, in order to get attention.[422] Mr Beattie said that '[o]ne minute the world was fantastic, and then the next minute the world was ... evil and he didn't want to be a part of it'.[423] He said that Mr Shilton was a gambler and would have a lot of money one week but would be struggling the next week.[424]

529 Mr Beattie said that consistently throughout the 1990s, every month, Mr Shilton often 'talked about ending it' and said that 'he would never be famous until he was dead'.[425] In cross-examination, Mr Beattie agreed that Mr Shilton had not made a serious reference to suicide every month.[426]

530 Mr Beattie said that he was disappointed that Mr Montclare rather than he was receiving the insurance money, but said that those were Mr Shilton's wishes.[427]

531 At times, Mr Beattie considered that Mr Shilton's comments about suicide were serious and at other times he thought they were light-hearted, joking and attention-seeking.[428] He was never sure whether Mr Shilton was serious.[429] Mr Beattie said that he, Mr Beattie, would 'laugh it off', that 75 per cent of him treated Mr Shilton's statements light-heartedly, but 25 per cent of him was concerned.[430] Mr Beattie said that were he sufficiently concerned that a person was going to commit suicide, he would have tried to help that person. He agreed that he was not sufficiently concerned by Mr Shilton's statements to take any such action.[431]

532 Mr Shilton spoke privately to Mr Beattie about being unhappy with the way his life was going.[432] Mr Beattie also recalled Mr Shilton telling him, in 2000, that he had had enough and did not think his life would change. Mr Beattie reminded Mr Shilton that they were thinking of buying property together.[433] He also recalled another occasion when Mr Shilton made a serious reference to suicide after cheques that he had written bounced.[434]

533 After Mr Shilton attempted suicide and was admitted to hospital in December 1989, he told Mr Beattie that he was seeing a psychiatrist and receiving good help.[435]

534 In cross-examination, Mr Beattie said that he thought that Mr Shilton had a mental illness, but later in cross-examination he clarified that he did not know whether that was the case or even whether Mr Shilton was on medication.[436] He thought that Mr Shilton was a 'little bit strange', based on his behaviour.[437]

535 Mr Beattie was not surprised when Mr Shilton killed himself.[438] He had thought since the 1990s, that Mr Shilton would commit suicide, as he had always said, either jokingly or seriously, that he would do so.[439]

536 Mr Beattie gave evidence of an incident shortly before his death, when Mr Shilton was called to a police station in Melbourne because a cheque that he provided to Mr Montclare had been cashed and had not been honoured.[440]

537 I have taken into account that Mr Hancock appeared to have an unfavourable view of Mr Montclare and did not want him to benefit from the insurance policy. Similarly, Mr Beattie thought that Mr Montclare was not entitled to the money. Both Mr Hancock and Mr Beattie readily conceded that they held this view and I do not consider that it affects the weight to be given to their evidence.

538 Mr Montclare submitted that Mr Hancock's evidence was or might be exaggerated and unreliable and that Mr Beattie tended to increase estimates when pressed. I accept that Metlife did not explain the differences between their evidence and the assumptions about their evidence that were pleaded and provided to Dr Kahans. However, I did not consider that Mr Hancock or Mr Beattie were exaggerating their evidence. They were being asked about conversations and statements that were made and occurred many years ago.

539 Metlife foreshadowed that it would call as witnesses other friends of Mr Shilton, but did not do so, and therefore I can infer that their evidence would not have assisted Metlife's case. An exception to this is Mr Egan where there was evidence of Metlife's attempts to locate him.

540 However, the failure to call some witnesses does not detract from the evidence that was called.

The evidence of Mr Montclare and witnesses called as part of his case regarding Mr Shilton's mental health history

541 Mr Montclare said that Mr Shilton was 'eccentric', 'quirky' and 'reacted to ... things that went wrong with work', but was not manic.[441]

542 Mr Montclare agreed that Mr Shilton was 'caring' and 'eccentric', but said that 'we all have mood swings'.[442] He did not see Mr Shilton having violent outbursts or throwing anything in a fit of temper, although he did get angry with Mr Montclare for being late.[443]

543 He did not consider that Mr Shilton suffered depression, although Mr Shilton did have 'good days and bad days, just like we all do'.[444] Mr Shilton's 'good days and bad days' were not more pronounced than the average person's.[445]

544 Mr Montclare said that Mr Shilton was not depressed and did not have a depressive illness.[446] He was 'always wanting to work', 'never took a day off', 'never took antidepressants' and was 'never on [a] disability support pension'.[447] In 1998, Mr Shilton did not suffer depression and Mr Montclare did not know that he had attended psychiatrists.[448]

545 In relation to the question on the insurance application form concerning 'mental or nervous disorder or breakdown', Mr Montclare said that Mr Shilton 'never believed he had anything'.[449] Mr Montclare said that at the end of 2000/2001, he had not seen any mental disorder or mental trouble in Mr Shilton and did not even know what the term 'mental disorder' meant.[450]

546 I do not accept that Mr Montclare had no understanding of what the term meant, at least in its ordinary sense. However, I accept that as at 1998, he had not heard the term 'dysthymia'.[451]

547 Mr Montclare denied that Mr Shilton talked 'as if the world was against him'.[452] He did talk about things being hard, about politics, work and being upset about overseas trips that were cancelled, but he was not a negative person.[453]

548 Mr Montclare agreed that a fair characterisation of Mr Shilton was that he was entertaining, generous and supportive, but often needing reassurance.[454] He said that he was not 'very insecure', but was 'sometimes self-effacing'.[455]

549 Mr Montclare described Mr Shilton as 'fairly open' and said that Mr Shilton did not keep secrets from him.[456] He was with Mr Shilton regularly, and Mr Shilton confided in him both things that excited and worried him.[457] He said that Mr Shilton was not worried about money as he had a good income.[458]

550 Mr Montclare said that Mr Shilton never proposed to commit suicide and he had never heard him talk about suicide.[459] He was unaware of any suicide attempt by Mr Shilton.[460] The monkshood incident occurred 'well before' he met Mr Shilton and he never mentioned it.[461]

551 Mr Montclare clarified, in cross-examination, that Mr Shilton 'never proposed to commit suicide' in the sense of being suicidal or wanting to commit suicide.[462] Mr Montclare agreed that he chose the words, 'never proposed to commit suicide', carefully: Mr Shilton may have talked about it, but he never proposed to commit suicide. As an example of what he understood by the words 'proposing to commit suicide', Mr Montclare described a depressed and suicidal friend who had attempted to commit suicide and who had been 'upset' and 'beyond herself' in the days leading up to the attempt.[463] Mr Montclare called an ambulance and the attendants stopped his friend from taking pills and committing suicide.

552 Mr Montclare did recall Mr Shilton saying, on one occasion in 2000, that he 'would be famous like other artists if he was dead'. Mr Montclare said that was not a reference to suicide.[464]

553 Mr Montclare said that he had seen Mr Shilton three or four days before he committed suicide, and he was not expecting his death.[465]

554 Mr Mark Pollard, a composer and associate dean, met Mr Shilton in approximately 1996, while working at the VCA.[466] Mr Pollard knew Mr Shilton well, both professionally and personally.[467]

555 Mr Shilton worked for a year on Mr Pollard's first major CD, which was released in 2000, as well as in connection with a number of new music performances. Mr Shilton also commissioned Mr Pollard to compose a new work.[468]

556 When Mr Shilton was working at the VCA as a teacher, Mr Pollard would see him at least two or three times a week. While they were working on the CD, he saw Mr Shilton much more frequently, sometimes for four or five hours per day.[469] He also saw Mr Shilton 'on and off' outside work, but Mr Pollard was not an 'extremely close friend'.[470] He maintained fairly regular contact with Mr Shilton until his death.[471]

557 Mr Pollard described Mr Shilton as a hard worker who was professional and reliable, had good organisational abilities, and handled the demanding ensemble program 'exceptionally well'.[472] He agreed that a fair description of Mr Shilton was that he was 'intense caring and eccentric'.[473] Mr Pollard never observed depression, mood swings or violent or aggressive behaviour in Mr Shilton.[474] He was not manic, but rather a bit moody, but that was not unusual in their workplace.[475]

558 Mr Shilton never told him that he had seen a psychiatrist or that he had attempted suicide.[476] Mr Pollard never heard Mr Shilton speak about suicide and was shocked when he learned of it.[477] In response to the proposition that Mr Shilton often talked as if the world was against him, Mr Pollard said he saw that 'a little bit, to the extent that I see it with pretty much everybody that I work with at lunchtime'.[478]

559 Mr Michael Duke, a university music lecturer, met Mr Shilton in 1986 when, at age 11, he began weekly saxophone lessons at Mr Shilton's home.[479] The lessons continued through primary school, high school and university until 1996, when he finished his undergraduate degree at the VCA.[480] He also performed in the Melbourne Symphony Orchestra and the Australian Pops Orchestra with Mr Shilton.[481]

560 Mr Duke was not have relationship of social friendship with Mr Shilton, but he said that their relationship became more collegial when he went to the VCA.[482]

561 Mr Duke moved to the United States to complete his postgraduate degree,[483] and during that period had some limited email communication with Mr Shilton.[484]

562 Mr Duke described Mr Shilton as a mentor, a 'fantastic' and 'engaged' teacher, and a 'huge influence' on him.[485] Towards the end of his time at the VCA, he noticed that Mr Shilton was:

a little bit manic sometimes. When he was happy, he was happy; when he was depressed or sad, he was - it was noticeable, but there was never any talk about mental health issues. He never mentioned any of that to me. I never really brought it up with him, so I suppose it's only my own observations, that I thought maybe he was a little bit manic.[486]

563 Mr Duke had never heard Mr Shilton talk about suicide. However, in the mid-1990s, he was told by a close friend of Mr Shilton that he had made a suicide attempt by taking monkshood.[487]

564 Ms Fiona Burnett, musician and teacher, met Mr Shilton, as her teacher at the VCA, in 1996, when she was a 25 year old masters student.[488] She had a teacher/mentor-student relationship with him throughout 1996 and 1997, but did not see him thereafter.[489] She met Mr Shilton for an hour every week during the two 12-week semesters that occurred each year. Ms Burnett attended lessons at Mr Shilton's house, but did not have any other contact with him.[490] She did not regard him as a social friend.[491]

565 Ms Burnett described Mr Shilton as an exemplary and very professional teacher, with high standards for himself and his students.[492] There was 'closeness' in their teacher-student relationship: Ms Burnett learnt a lot from Mr Shilton and he attended her performances and appreciated her background in improvised music and jazz.[493]

566 Ms Burnett did not see any signs of 'unwellness or mental illness' in Mr Shilton.[494] They mostly spoke about the saxophone and about some aspects of his personal life, but not in any detail. She agreed that their discussions would not have typically extended to his mental health.[495]

567 Ms Burnett did not know that Mr Shilton had attempted self-harm twice or that he had attended a psychiatrist on about 60 occasions before she met him.[496] However, she said that 'musicians are sensitive people' and seeing a psychiatrist was not abnormal 'for people who are creative and sensitive'.[497]

568 Ms Alma Hadziavdic was a close friend of Mr Montclare. They went to high school together and shared a flat from 1995 until 1998 or 1999.[498]

569 She met Mr Shilton in approximately 1995 through Mr Montclare.[499] She was not a close friend or confidante of Mr Shilton.[500] She saw him a few times each week, when he visited the flat that she shared with Mr Montclare.[501] On those occasions, she would usually be on her way out to work.[502] She never saw him without Mr Montclare. After Ms Hadziavdic moved out of the flat in 1998 or 1999, she kept in touch with Mr Montclare and Mr Shilton.[503]

570 Ms Hadziavdic described Mr Shilton as friendly, caring, witty and passionate about his work. She did not observe any sign of mental illness, depression or mood swings.[504] She was surprised to hear that Mr Shilton had attended a psychiatrist and had self-harmed on two occasions.[505]

571 Ms Gordana Vujanovic met Mr Montclare in 1993 when he helped her carry her wheelchair-bound sister out of her car. They developed a firm friendship. They lived in the same area and she saw Mr Montclare frequently, either weekly or fortnightly, for coffee or dinner.[506]

572 Mr Montclare introduced Ms Vujanovic to Mr Shilton in 1996.[507] Thereafter, almost until the time of Mr Shilton's death, she met him for coffee or dinner once or twice a week, or gave him a lift. Sometimes two or three weeks would pass between their meetings.[508] She knew that Mr Shilton was supporting Mr Montclare until he was able to find a full time job.

573 Ms Vujanovic described Mr Shilton as well-liked, sociable and affable. She did not know, and was surprised, that he had spoken about suicide and had attended a psychiatrist, and she did not know that he had twice attempted suicide. She did not consider that Mr Shilton was suicidal or suffering from a mental illness or that he had any signs of depression.[509] She saw nothing abnormal about his behaviour and he never struck her as having a mental illness.[510] She said she was shocked at his suicide.[511]

Did Mr Montclare or Mr Shilton make a misrepresentation about, or fail to disclose, Mr Shilton's mental health history?

574 Metlife submitted that Mr Shilton's answer to question 9H in the insurance application form about 'mental or nervous disorder or breakdown' was false. It contended that Mr Shilton and Mr Montclare should have disclosed that Mr Shilton suffered from dysthymia, alternatively depression for a number of years. Their failure to do so was fraudulent. The declaration that the answers was true was also false because Mr Shilton had attempted suicide in 1981 and 1989 and from approximately 1989 until his death in 2001 had frequently stated to friends that he proposed to commit suicide.

575 Mr Shilton knew, or ought to have known, that these matters were material to Metlife's risk in deciding whether to grant insurance on his life. The questions were simple and in plain English. Mr Shilton's mental health problems were significant and unforgettable.

576 The insurance application form posed questions about 20 medical conditions and Mr Montclare ticked the 'yes' box to indicate that Mr Shilton suffered from gastric conditions, but did not disclose his suicide attempts or treatments by psychiatrists.

577 Mr Montclare must have known that Mr Shilton suffered from a depressive mood and mood swings, had attended psychiatrists on a number of occasions, had previously attempted suicide and had spoken often about suicide. Even friends and students of Mr Shilton with far less contact than Mr Montclare had observed mood swings.

578 Dr Shan agreed that Mr Shilton had a history of recurrent depressed mood. He also agreed that for a short time Mr Shilton may have suffered from a mental or nervous disorder. Dr Neill's evidence supported Metlife's case. Dr McLaren's evidence should be discounted as he was a 'crusader' against what he considered were the high levels of diagnoses of mental illness.

579 Of the lay witnesses, Mr Beattie and Mr Hancock were best placed to give reliable evidence about Mr Shilton's mental health during the relevant period. Their evidence showed that Mr Shilton had mood swings more pronounced than ordinary people, behaved erratically and spoke of suicide on a number of occasions.

580 Mr Shilton was affected by a mental or nervous disorder prior to 1998-9, certainly when he attempted suicide and during his consultations with Dr Kahans.

581 Mr Shilton consulted Dr Kahans because he asked his general practitioner to be referred to specialist psychiatric treatment. Dr Kahans diagnosed Mr Shilton with reactive or neurotic depression. Dr Kahans' notes referred to depression. His last note recorded that Mr Shilton: 'says at night he feels depressed'.

582 Mr Shilton attempted suicide about two months after his first consultation with Dr Kahans and Dr Kahans' notes referred to the need for his 'constant review'. Mr Shilton told Dr Kahans that he had attempted suicide previously.

583 Mr Shilton wished to keep his medical condition private.

584 Mr Montclare said that he was close to Mr Shilton and therefore must have known, as Mr Shilton's friends recalled, that he was somewhat unstable and prone to mood swings, significant and debilitating sadness and negative laments about life's difficulties.

585 Metlife relied on its submissions in respect of the answer given to question 9H also in respect of the 'serious health problem' or 'shortened longevity' issues which were contained in section 14 of the insurance application forms.

586 Mr Montclare submitted that question 9H ought to be construed as referring to a mental illness sufficiently serious as to raise a real risk of suicide after 13 months from the issue of insurance, because an earlier death by suicide was excluded from the insurance cover. Alternatively, the question could be legitimately read as referring only to an illness diagnosed in accordance with a recognised diagnostic convention. Where a question is ambiguous, s 23 of the ICA requires consideration of how a reasonable person would have understood it.

587 Metlife had not pleaded, and could not rely on, the allegation that Mr Shilton suffered from reactive or neurotic depression.

588 Mr Shilton could reasonably have believed that he not suffered no mental or nervous disorder or breakdown, that his contacts with Drs Tan and Kahans were for counselling and not for a condition sufficiently serious to require disclosure. Visits to psychiatrists were normal for creative and sensitive people. His attendances on Dr Tan and Dr Kahans occurred so long before the insurance applications were completed that he could have reasonably believed them to be irrelevant.

589 There was no evidence that Mr Shilton knew, or that a reasonable person would have known, that he had been diagnosed with depression. The knowledge that Mr Shilton had to have, namely, that a matter was relevant to Citicorp's decision to accept the risk and, if so, on what terms, was more than a belief, suspicion or even strong suspicion.[512]

590 Mr Haber gave evidence that Citicorp was seeking disclosure of recognisable and diagnosed psychiatric illnesses and not personality traits. Citicorp had issued policies to people who were being treated and medicated for serious long-term depression and psychosis and depression.

591 Mr Montclare was not asked to declare, and he did not declare, that the information given by Mr Shilton was true and correct. He was asked to state his present state of knowledge. He made reasonable enquiries before making that declaration.

592 Dr Kahans' evidence was unreliable. He did not diagnose that Mr Shilton had any mental condition in accordance with any diagnostic convention. He did not diagnose Mr Shilton with depression. He did not prescribe medication for Mr Shilton. He had insufficient information to conclude that Mr Shilton fitted the ICD or DSM diagnosis of dysthymia. He saw Mr Shilton on 30 occasions for support and insight. He made statements based on assumptions which were impermissible, for example that generic factors were still operative and affecting Mr Shilton a decade after their last consultation. He had been unwilling to talk to Mr Montclare's solicitors before giving evidence. He gave evidence of Mr Shilton's condition from a distance of more than 20 years.

593 Metlife asked Dr Kahans to assume that Mr Shilton had frequently told friends that he proposed to commit suicide. Those assumptions must have influenced Dr Kahans' evidence, but they were not proved and two of the friends were not even called as witnesses.

594 Mr Shilton was at least relatively well when discharged and Dr Kahans thought that he may suffer further mild depression if he had further conflicts with his father about homosexuality.

595 Dr Neill's evidence should be disregarded because she had not identified the material that she considered in reaching her conclusions. She relied on Dr Tan's notes, but they were not in evidence. She was incorrect in concluding that Dr Tan had provided a diagnostic formulation. She relied on Dr Chazan's notes, but Dr Chazan had not made a diagnosis. She erred in concluding that there was 'good consensus between the three treating mental health experts'.[513] She relied on inapposite definitions of dysthymia. There was no basis for her assertion of 'a personal history of excessive alcohol use' relevant to a diagnosis of mental illness.[514] She relied on the existence of a personality disorder to conclude that Mr Shilton had dysthymia or depression. Her basis for that conclusion lay in learning relating to child psychiatry that had no relevance to adults. It would be unreasonable for an insurer to expect an applicant for insurance, in order to answer medical questions, to conduct a character analysis of themselves and disclose personality traits. Dr Neill's diagnosis that Mr Shilton had an adjustment disorder was not justified by her evidence, nor was it pleaded by Metlife.

596 Dr Shan's and Dr McLaren's evidence was considered, professional, cogent and reasonable and should be preferred. They assumed the truth of the material contained in Dr Tan's notes, the Alfred Hospital notes and the coroner's notes. Their evidence was given on the basis of worst case scenarios, including the assumptions about the friends' evidence that Dr Kahans had been asked to make.

597 The two alleged suicide attempts involved no more than Mr Shilton engaging in impulsive self-harm partly as a cry for help or similar.

598 Mr Montclare submitted that there had not been a failure to disclose facts relevant to 'a serious health problem' or 'shortened longevity'.

599 It is necessary to consider Metlife's defences based on non-disclosure and misrepresentation separately.

600 As previously stated, Metlife contended that Mr Shilton and Mr Montclare were obliged to disclose that Mr Shilton had suffered from a mental or nervous disorder or breakdown in that he had suffered from dysthymia or alternatively depression for a number of years. They also contended that they should have disclosed that Mr Shilton had attempted suicide in 1981 and 1989 and had frequently stated to friends that he proposed to commit suicide.

601 Section 21 requires two matters to be considered in determining whether Mr Montclare, as the insured, breached his duty of disclosure.

602 The first question under s 21(1) of the ICA is whether Mr Montclare knew that Mr Shilton had suffered from a mental or nervous disorder or breakdown, in that he had suffered from dysthymia or depression for a number of years, to apply the words of the further amended defence. The failure to disclose this condition was the only matter that Metlife alleged to be a fraudulent non-disclosure. In any event, because Metlife did not give notice of the duty of disclosure to Mr Montclare, it could only exercise remedies provided by the ICA in respect of fraudulent non-disclosures.

603 If this opening question raised by s21(1) is satisfied, then s 21 will apply if either of two circumstances are proved to exist. The first, stipulated in s 21(1)(a), is if Mr Montclare knew that the condition was a matter relevant to the decision of the insurer whether to accept the risk, and, if so, on what terms.

604 The second matter stipulated by s 21(1)(b), is whether a reasonable person in the circumstances could be expected to know the condition to be a matter 'so relevant', i.e. relevant to the decision of the insurer whether to accept the risk and, if so, on what terms.

605 Mr Shilton was not the insured. The ICA imposed the obligations of disclosure on the insured, Mr Montclare. Unlike the provisions of s 25, which attribute misrepresentations by the life insured to the insured, the ICA does not attribute responsibility for the life insured's non-disclosure of matters to the insured.

606 I do not consider that it has been proved that Mr Montclare knew that Mr Shilton had a mental or nervous disorder or breakdown and therefore the defence based on the allegation that Mr Montclare fraudulently failed to disclose relevant matters has not been proved. I have reached that conclusion for the following reasons.

607 The word 'know', appearing in s 21(1) in the expression 'being a matter that the insured knows to be relevant', is a strong word and means considerably more than 'believes' or 'suspects' or 'strongly suspects'.[515]

608 Mr Montclare denied that he had any knowledge of Mr Shilton's mental health issues. Metlife argued that Mr Montclare's credit was low and that he had answered questions in a guarded manner. It relied on the fact, that he had a close association with Mr Shilton.

609 Mr Montclare met Mr Shilton in 1993 or 1994. There is no evidence on which to find that he did know that Mr Shilton had experienced any mental or nervous disorder or breakdown. He denied that he knew that Mr Shilton suffered from any such disorder or breakdown. The evidence of Mr Shilton's friends does not establish Mr Montclare's knowledge of these matters, although they appeared not to understand the importance of the role that Mr Montclare played in Mr Shilton's life. Mr Hancock and Mr Beattie gave evidence that Mr Shilton did not tell them in the last few years of his life that he intended to kill himself. During those years, his relationship with Mr Montclare appears to have been at its closest.

610 There is no evidence that Mr Montclare knew that Mr Shilton suffered from a condition of dysthymia or that he had heard of that condition. There is no evidence that Mr Shilton knew that he suffered from dysthymia.

611 I also find that Metlife has not proved that Mr Montclare knew of Mr Shilton's suicide attempt or attempts. They had occurred some years before they met.

612 I make a similar finding in respect of Mr Shilton's statements to friends about committing suicide. There is no evidence that Mr Montclare was present when any such statement was made. Mr Montclare's friends did not know whether to take those statements seriously.

613 In addition, because Metlife did not give Mr Montclare notice of his duty of disclosure, Metlife has no remedy against him in respect of innocent, or non-fraudulent, non-disclosure. Metlife does not allege that the non-disclosures of the suicide attempts and statements to friends were fraudulent.

614 Metlife's defence based on non-disclosure has not been established.

615 Metlife's misrepresentation defence raises separate issues from the non-disclosure defence. The misrepresentation defence is that Mr Shilton should have answered, or instructed Mr Montclare to answer, question 9H in the affirmative and then disclosed that he had suffered from dysthymia or alternatively depression for a number of years. He should also have disclosed two suicide attempts and statements to friends that he proposed to commit suicide.

616 By reason of s 25 of the ICA, any misrepresentation by Mr Shilton had effect as though it had been made by Mr Montclare.

617 Therefore, it is necessary to determine whether Mr Shilton made a misrepresentation by answering question 9H in the negative or, adopting that answer, if it was inserted in the insurance application form by Mr Montclare.

618 On Mr Montclare's case, he filled in the answers to the medical questions, but did so on Mr Shilton's instructions. I have previously found, in dealing with the issue of Mr Shilton's signatures, that Mr Montclare was engaged in a joint endeavour with Mr Shilton to obtain life insurance. For the reasons that I gave in reaching that conclusion, I consider that the answers made to the medical questions are to be regarded as representations made by Mr Shilton as well as by Mr Montclare.

619 I have previously considered the meaning of question 9H and concluded that it was a clear question and not ambiguous.

620 As previously stated, there is no evidence that Mr Shilton knew that he suffered from dysthymia or that Dr Kahans made a diagnosis of that condition.

621 However, I consider that if a person experienced a condition of depression, in the sense that I have discussed, for a number of years and knew that they were experiencing that condition, he or she would recognise it as a mental or nervous disorder and answer question 9H 'yes'. I consider that persistent occasions of being unable to cope with everyday situations and feelings of depression would be regarded by a reasonable person as a mental or nervous disorder or condition.

622 I accept that Dr Kahans considered that Mr Shilton suffered from depression in the period 1989 to 1991. Dr Kahans consistently stated that to be his opinion in his evidence in 2011 and 2014. He had been Mr Shilton's treating psychiatrist.

623 I have taken into account the incorrect assumptions Metlife's solicitors asked Dr Kahans to make in preparing a report for use in this proceeding. Dr Kahans took those incorrect assumptions into account. Whilst this affects his evidence, it does not render it inadmissible. The weight to be given to expert evidence can be lessened partially, or entirely, if the factual basis or assumptions on which it based are not established. The basis rule is that an expert opinion is not admissible unless evidence has been, or will be, admitted, whether from the expert or from some other source, which is capable of supporting findings of primary fact which are sufficiently like the factual assumptions on which the opinion is based to render the opinion of value. Expert opinion based on a combination of inadmissible and admissible material is inadmissible if it is impossible to determine what conclusions are based on the expert's own observations and what conclusions are based on hearsay. But expert opinion based only partly on inadmissible material which can be readily ascertained and discarded is admissible subject to weight.[516]

624 Dr Kahans was Mr Shilton's psychiatrist and therefore not to be regarded as only an expert witness.

625 He appeared to give his opinion of Mr Shilton's mental health in the period 1989 to 1991 based on his consultations with him. On the same basis, he expressed the opinion that the depression was chronic. I accept that he considered that Mr Shilton suffered from depression that might re-occur depending the circumstances affecting his life. His notes support that conclusion. I consider that that opinion was made before he was provided with any assumptions for the purpose of preparing a report.

626 The opinions of the expert psychiatrists about Mr Shilton's condition differed. Dr Kahans, Dr Neill and Dr Shan each considered that Mr Shilton suffered from some form of depression.

627 Two of the expert psychiatrists, Dr Shan and Dr McLaren, suggested that the consultations with Dr Kahans were more for counselling and psychotherapy than for psychiatric treatment. Dr Shan considered that Mr Shilton had suffered from mild depression and personality problems in 1998 and 1999 but that he was not suicidal. Dr Neill considered that Mr Shilton's depression was more serious, while Dr McLaren did not believe that Mr Shilton was suffering from a mental disorder.

628 Some of the expert psychiatric evidence appeared to construct a dichotomy between treatment for depression on the one hand and supportive conversations on the other. It is not apparent why the two are mutually exclusive or why the supportive therapy that Dr Kahans' notes frequently record was not treatment for depression.

629 I preferred the evidence of Dr Neill and Dr Shan to that of Dr McLaren. Their evidence was less dogmatic and more balanced in assessing Mr Shilton's medical history.

630 Based on a combination of Dr Neill and Dr Shan's evidence and the evidence of Dr Kahans, particularly when supported by his notes, I find that Metlife has proved that Mr Shilton did suffer from a condition of depression at least in the years that he consulted Dr Kahans. That condition was a mental or nervous disorder within the meaning of question 9H.

631 In order for Mr Shilton's answer to question 9H to be a fraudulent misrepresentation, it must have been false to Mr Shilton's knowledge or he must have been recklessly indifferent as to its truth or falsity. I have previously, when dealing with Metlife's forgery allegations, considered the proof that is required before a finding of fraud can be made.

632 The next question is whether Metlife has proved that Mr Shilton knew that he had suffered from mental or nervous disorder or breakdown because he suffered from a condition of depression for a number of years or was recklessly indifferent to whether that was the case when he answered or provided instructions for the answering of question 9H.

633 I mention one preliminary matter first. I am satisfied that a reasonable person in Mr Shilton's position could be expected to have known that the answer to question 9H would be relevant to Metlife's decision as to whether to accept the risk and, if so, on what terms. The requirements of s 26(2) of the ICA are therefore satisfied.

634 I am not satisfied that Dr Kahans did inform Mr Shilton that he had diagnosis of neurotic or reactive depression. Dr Kahans' evidence was equivocal on this issue and he was giving evidence of possible conversations of some years previously. There is no reference in Dr Kahans' notes that supports a finding that he informed Mr Shilton of that specific diagnosis.

635 However, I am satisfied that Dr Kahans did discuss with Mr Shilton that he did have depression. His notes suggest that they discussed Mr Shilton's depression and that Mr Shilton was having difficulty coping with life. That is clear from Dr Kahans' notes, in the extracts to which I have previously referred. They reveal that they were discussing more than symptoms. The position is therefore not the same as that in Australian Casualty & Life Ltd v Hall , a case relied on by the plaintiff.[517]

636 Mr Shilton requested his general practitioner to refer him to a psychiatrist.

637 I am satisfied that as a result of his discussions with Dr Kahans, Mr Shilton knew that he suffered from depression. I have taken into account the statements to which I have previously referred about the strength of the word 'know'.

638 The monkshood incident and Mr Shilton's resulting hospitalisation support the conclusion that Mr Shilton knew that he suffered from depression. Mr Shilton's ingestion of monkshood could have killed him. He must have known the seriousness of his situation as he obtained admission to the Alfred Hospital and remained there for a few days. The incident was a striking example of his inability, on occasions, to cope with life.

639 It is telling of Mr Shilton's understanding of his obligations in answering the medical history question and declarations that he provided details of some relatively minor medical ailments.

640 Section 26(1) of the ICA provides that certain statements are not misrepresentations where they were made on a belief that the person making the misrepresentation held, being a belief that a reasonable person in the circumstances would have held. There was no evidence as to the basis of any belief that Mr Shilton held.

641 I do not accept Mr Montclare's submission that question 9H should be read as limited to matters relevant to the risk of Mr Shilton committing suicide more than 13 months after the contract of insurance had been entered into. Mr Shilton's mental health was relevant to whether life insurance cover should be granted at all. Matters that may have affected Mr Shilton's mental health cannot be divided into those that may have had an effect within 13 months from the issue of life insurance and those that may only have affected him after 13 months.

642 I have taken into account that there is no evidence that Mr Shilton received medical treatment for, or took medication for, depression or any related condition after 1991. He was able to hold down a demanding job, maintain his home, teach students, develop his relationship with Mr Montclare and maintain a circle of friends. But question 9H related to Mr Shilton's past medical history generally, not just in respect of a particular period.

643 I have placed less weight on the evidence of friends about statements that Mr Shilton made about committing suicide. In the absence of expert evidence on the statements' significance, I consider that they did not provide decisive assistance in determining whether Mr Shilton knew that he suffered from depression.

644 The failure to disclose incidents of attempted suicide and statements to friends that he intended to commit suicide are not alleged to have been a fraudulent misrepresentations. I do not consider that if, as required, Mr Shilton had answered question 9H in the affirmative, that those matters had to be disclosed. They are more examples of the effect of the mental or nervous disorder.

645 Little separate attention was given in final submissions to question 9P, which was also pleaded to contain a false representation. It asked:

Have you ever had any other illness, injury or operation?

646 Mr Shilton answered it in the negative. I do not consider that the evidence establishes that Mr Shilton knew that he suffered from an illness, injury or operation. No substantial evidence was led about this question. The question lacks clarity because it joins 'illness' with 'injury' or 'operation.'

647 I do not consider that it has been proved that Mr Montclare or Mr Shilton made a false answer in respect of the 'longevity' and 'serious health' issues which were raised in the section 14 declaration in the insurance application forms. They were directed to the future and there was no evidence that might make those declarations false or fraudulent. There was no medical evidence from a treating doctor as to Mr Shilton's mental condition in 1998 or 1999. The evidence of statements made to friends about committing suicide does not provide a basis for finding that the declaration was false or fraudulent.

648 I, therefore, find that Mr Shilton did make a fraudulent representation in answering, or arranging for the answering of, question 9H. That representation has effect as if it was made by Mr Montclare: s25 of the ICA.

649 Metlife pleaded that Mr Montclare represented that Mr Shilton's answers were, to the best of his knowledge true and correct and that he had made such enquiries as were appropriate to constitute a proper foundation for his knowledge and belief that the answers given by Mr Shilton were true and correct.

650 I consider that Mr Montclare did not make that representation. The section 14 declaration contained declarations both by Mr Montclare and by Mr Shilton that:

1. I/We hereby declare that the information contained in this application is true and correct.

2. I/We are not aware of any other circumstances which might render the life to be insured to have shortened longevity or suffer a serious health problem.

651 Metlife submitted that there was no evidence that Mr Shilton read or considered the contents of the first application at all. In respect of the second application, Mr Montclare said that he just glanced through it. He had previously spoken on the phone to a Rivkin representative, when the second application form was filled out. Metlife also submitted, in the alternative, that Mr Montclare's conduct was sufficiently reckless so as to constitute fraud.

652 Metlife also relied on the manner in which Mr Montclare had made the insurance applications and suggested that he was attempting to avoid the need for Mr Shilton to undergo a medical examination or a financial needs analysis. He had made false statements to Metlife and NRMA. It said that he must have known of Mr Shilton's mood swings, attendances on psychiatrists and attempts at suicide.

653 Mr Montclare pointed out that the medical health questions on the application forms were directed to Mr Shilton, the life insured and Mr Montclare was not required to, and did not, disclose any information concerning Mr Shilton's health or make any enquiries concerning it. Mr Montclare had asked Mr Shilton the questions and recorded the answers. His obligations of disclosure under the ICA were limited to matters that he knew.

654 I have previously stated, in dealing with Metlife's non-disclosure defence, that I consider that it has not been proved that Mr Montclare knew of Mr Shilton's mental health history. I consider that Mr Montclare's declaration that the information in the application was true and correct, cannot impose an obligation on him extending beyond what he knew to be the case. Conjecture is not a substitute for proof. Even Mr Hancock and Mr Beattie had limited knowledge of Mr Shilton's mental health history.

655 Metlife has not proved that Mr Montclare made a fraudulent misrepresentation in signing the declaration that the information contained in the declaration was true and correct.

Section E. What would Metlife have done if the misrepresentations had not been made or if disclosures had been made?

656 It is next necessary to consider the remedies that Metlife had in respect of the misrepresentations made about Mr Shilton's mental health history. I will repeat the terms of s 29 of the ICA for ease of reference:

29 Life insurance

(1) This section applies where the person who became the insured under a contract of life insurance upon the contract being entered into:

(a) failed to comply with the duty of disclosure; or

(b) made a misrepresentation to the insurer before the contract was entered into;

but does not apply where:

(c) the insurer would have entered into the contract even if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentation before the contract was entered into; or

(d) the failure or misrepresentation was in respect of the date of birth of one or more of the life insureds.

(2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract.

(3) If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract.

(4) [Sets out a formula to reduce the insurer's liability when the insurer does not avoid the contract of insurance...]

657 Section 29(1)(c) operates so that s 29 does not apply in the circumstances that it describes. It contains a number of negatives, but the authorities have decided that the insurer bears the onus of establishing that it would not have entered into the contract if the insured had not failed to comply with the duty of disclosure or had not made the misrepresentations before the contracts were entered into.[518]

658 If the misrepresentation is not fraudulent and therefore is to be treated as innocent, the insurer may avoid the contract within three years after the contract was entered into. In order to exercise that remedy, the insurer must prove that it would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made. Alternatively, the insurer may, by notice in writing given to the insured before the expiration of three years after the contract was entered into, vary the contract by substituting for the sum insured a sum that is not less than the sum ascertained in accordance with a statutory formula.[519]

659 Metlife called evidence from Mr Haber to seek to establish what Citicorp would have done if disclosure had occurred and the misrepresentation had not been made.

660 Prior to the commencement of the trial, Metlife stated that it would call Mr Robert Bereny, the underwriter who assessed Mr Montclare's applications. He had only recently joined Citicorp at the time he assessed Mr Montclare's application. Mr Bereny was not called and Metlife relied on a confidential medical report to explain his non-attendance. Mr Montclare sought to draw significance from the fact that Mr Bereny did not give evidence. I accept that the confidential medical report explains why he did not give evidence, but his absence did create a gap in Metlife's evidence on the issue of what decision Citicorp would have made if Mr Shilton's mental health had been disclosed and had not been the subject of misrepresentation.

661 Mr Haber gave evidence that there was a collective in-tray in the Citicorp underwriting department and as each underwriter who had finished their previous application, they would take a new matter.[520] He said that it was a strong underwriting team, which achieved the aim of being consistent.[521] It only had about 5 staff. He had worked in the underwriting department for 3 years and was a senior underwriter.

662 He had no training as to actuarial data and statistics to enable him to predict the risk of suicide from past events.[522] He said that he was underwrote cases based on information gathered from the application form, medical evidence from the doctors and specialists and from the client himself. By the time that he gave evidence he had assessed thousands of underwriting applications.

663 Mr Haber said that Citicorp had written underwriting guidelines from reinsurers.[523] Underwriting manual guidelines draw from actuarial or statistical studies.[524]

664 If Mr Shilton's mental health history had been disclosed, Mr Haber said that he would had access to the Gerling Reinsurance manual. Gerling was a reinsurer of Citicorp's life insurance. The manual was not produced despite Mr Montclare's applications to have it discovered.[525] However. Mr Haber said that he would not have referred to it for something as simple as mental illness.[526] In any event, he said that the Gerling reinsurance manual would have suggested getting reports and questionnaires from clients and their doctors to form a risk profile that they normally would have done.[527] The manual was a guide and not set in stone.[528]

665 Mr Haber was asked about the Hannover Reinsurance manual, which contained underwriting guidelines and which he said may have been available to him in underwriting while he was employed at Citicorp. It provided that where an applicant for life insurance has attempted suicide, including on two occasions, then after the elapse of four years ordinary insurance rates would apply. But an application by a person with a five year history of mental illness and continuous treatment would have to be referred to Hannover, the reinsurer, for assessment.[529]

666 Metlife submitted that the guidelines contained in the Hannover manual did not apply in the present case, because Mr Shilton attended psychiatrists on dozens of occasions and had experienced suicidal ideation.

667 Mr Haber accepted that there was no way of being able to predict the risk of a person committing suicide based on their past conduct.[530]

668 However, he stated that given what he had been told about the case, a response of not providing cover was a 'no brainer'.[531] He explained this statement in re-examination as follows:

Basically, given the risk profile of the history of the depression, two suicide attempts, the number of consultations, the suicidal ideation as - there's no other answer that could come back as other than declined.[532]

669 He identified the risk factors by reference to the two attempted suicides and long standing chronic condition.[533]

670 Mr Montclare relied on Metlife's failure to call a number of other Citicorp staff members who were engaged in underwriting at times relevant to Mr Montclare's application for life insurance.

671 Mr Haber's opinion was that a history of chronic depressive illness increased the likelihood of suicide. He based that opinion on underwriting tens of thousands of cases 'where we see this sort of history commonly' and from the reinsurance manuals and the red flags that they showed.[534] The mental health questionnaire sought details of the mental illness and how it had been, and was being, treated. But Metlife did not prove that it or any other questionnaire was used at the time.

672 Mr Haber assumed that Mr Shilton had suicidal tendencies or ideation from the beginning of the 1990s until 1998.[535]

673 Mr Haber gave evidence of previous Metlife decisions on insurance applications from persons who disclosed mental health issues. There were only a small number of such applications.

674 Other underwriting files may be relevant in establishing underwriting practices or policies.[536]

675 In some cases, applicants were granted cover although they had significant mental health issues, including depression and psychosis, and had been hospitalised and prescribed medication. Mental health questionnaires had not been sent to those applicants, nor had further reports been sought from doctors or psychiatrists. Mr Haber distinguished those cases because the applicants had not attempted suicide or had suicidal ideation.[537] Mr Haber said that sufficient information had been received from the medical reports provided and, in some cases, from further medical examinations by treating doctors.[538]

676 The parties questioned Mr Haber about a number of these applications. I will consider them in the order in which they were discussed in the evidence. The first was an application in 2006 to lift a premium loading of 100 per cent imposed in 1998 when life insurance was issued to a particular applicant.[539] The insured's personal medical attendant's report in 1998 revealed a history of reactive depression for four years, anxiety, mood disorder and psychosis, for which the insured had received counselling and seen a psychiatrist. The insured was prescribed an antipsychotic medication and also took cannabis occasionally. His doctor assessed him as not at risk of suicide. No psychiatric report was required. Mr Haber said that the insured's general practitioner who gave the report had treated him for years. He was granted insurance with a loading of 100 per cent of the premium. When, in 2006, he applied to lift the loading, he disclosed on a nervous disorder questionnaire that he had been symptom free for six years and had had 'vague suicidal ideation in the past with no conviction'. The application to lift the loading was refused.[540]

677 In another case,[541] where life insurance of $250,000 was granted on standard rates, the insured disclosed that he had suffered depression for three months after the death of his father. Mr Haber said that the insurer wrote to the doctor to make sure that it had all the information. He explained that the decision to grant insurance was due to the depression being of short term duration and being a reaction to a death in the family.[542]

678 In the next case,[543] a medical report stated that the applicant had both anxiety and depression and had been prescribed with anti-depressants. No report was requested from his psychologist or occupational therapist. Mr Haber said that the condition had been monitored and maintained by the medication and there was no hint of suicidal ideation or attempt. Mr Haber said that the reporting doctor knew the applicant and had been diligent in her review and that a psychologist's report would not have further benefited the assessment. However, when his attention was drawn to the fact that the doctor's report was not sought about mental health issues, Mr Haber said that the insurer exercised 'blind faith' and took 'the risk on what the doctor is telling us in the report'.[544] He said that not everyone who has a mental illness has suicidal ideation.[545] Death cover of $350,000 was granted, but not Temporary or Permanent Disablement insurance in view of the 'health history'.

679 In the next case discussed in detail,[546] the applicant had experienced three episodes of major depression, the third of which lasted six months. Six months prior to his application, he had required psychiatric treatment and medication. Citicorp provided life insurance at standard rates. Mr Haber explained that, while the doctor's report indicated that the applicant's mood was depressed, it also said the applicant's mood had started to improve, there was no evidence of psychosis and she was not suicidal. She had been referred to psychiatrists, but no psychiatric report was requested because the doctor's report was sufficient.[547]

680 The next case concerned a person who had experienced panic and anxiety attacks for months, had been referred to psychiatrists for cognitive behavioural techniques and had been prescribed medication. But the attacks had not occurred for three years.[548] She was granted cover at standard rates of $350,000.

681 The next case concerned an applicant who had a history of depression, including an acute depressive episode, and who was taking medication.[549] She was at risk of post-traumatic stress disorder. She had not been treated by a psychologist.[550] She received insurance cover with a 75 per cent loading.

682 The final case concerned an applicant who had been hospitalised twice for psychosis and had suffered a schizophrenia attack slightly more than a year prior to the application.[551] She was taking antipsychotic medication. She was offered life insurance with a 250 per cent loading, but she did not accept it.[552]

683 Those cases did not establish a uniform pattern in the decisions of Citicorp or Metlife on applications where the life insured had mental health issues. The applications appeared to have been assessed on their merits and individual facts, particularly the medical reports received. There was no requirement for further information from the applicants or treating psychiatrists as the insurer considered that the application contained sufficient information for an assessment to be made. In no case discussed in oral evidence was the applicant required to complete a mental health questionnaire or provide a psychiatrist's report. In no case did Citicorp or Metlife refuse to offer cover, at least with a loading. Mr Haber stated that based on the information that Citicorp or Metlife received in those cases, there was no need to decline cover. The applicants provided sufficient information to enable Metlife to assess their applications, without the need for a psychiatrist's report.[553] None of the applicants had attempted suicide.

684 The parties addressed a number of hypothetical scenarios that might have existed if Mr Shilton had answered 'yes' to question 9H about 'mental or nervous disorder or breakdown'.

685 First, there were the scenarios that Metlife pleaded in its defence. Metlife pleaded that if the insurance application disclosed that:

(a) Mr Shilton had suffered from a mental or nervous disorder or breakdown in that he suffered from dysthymia, alternatively depression, for a number of years,

(b) the deceased had attempted suicide in 1981 and 1989, or

(c) in the period from approximately 1989 until his death in 2001, the deceased frequently stated to friends that he proposed to commit suicide,

it would have sought a report from a treating psychiatrist or treating psychologist and if no such report was provided it would not have been prepared to enter into the contract. If such a report had been provided by Dr Kahans and had contained the matters set out in his outline of evidence, Metlife would not have been prepared to enter into the contract of insurance.

686 Dr Kahans' outline of evidence, which I have previously set out, but will repeat for ease of reference, included the following:

If he had been asked to prepare a full psychiatric report on Mr Shilton by Metlife between 23 November 1998 and 10 June 1999, he would have said as follows:

1. He treated Mr Shilton on approximately 30 occasions from the period 16 November 1989 to 19 April 1991.
2. He formed a diagnosis that Mr Shilton suffered from chronic reactive depression. His depression was caused by his own response to his homosexuality and problems in his personal relationships.
3. Mr Shilton had attempted suicide on two previous occasions, once in 1981 and once in 1989.

At the time he discharged Mr Shilton from his care, he had progressed and responded well to treatment. It was his view that he didn't need any further therapy at that time. However, the nature of Mr Shilton's condition was such that he was at risk of suffering from further episodes of depression.[554]

(i) a report from a treating psychiatrist or psychologist or from an independent psychiatrist stated that:

(A) Mr Shilton had suffered only from mild depression;

(B) the diagnosis of mild depression was consistent with treatment and medication regime and consistent with written evidence from Mr Shilton;

(C) Mr Shilton had fully recovered and had been stable since the time of the attempted suicides; and

(ii) Mr Shilton had no history since the time of the attempted suicides of having engaged in any alcohol or substance abuse;

Metlife would have entered into the contracts of insurance.

688 If the circumstances set out in [687(i)] applied, but the circumstances set out in [687(ii)] did not apply, Metlife would not have been prepared to enter into the contracts of insurance.

689 If the circumstances set out in [687(ii)] applied, but the circumstances set out in [687(i)] did not apply and instead the report stated:

(i) that Mr Shilton had suffered only from moderate to severe depression;

(ii) that the diagnosis of moderate to severe depression was consistent with treatment and medication regime and consistent with written evidence from Mr Shilton;

(iii) that Mr Shilton had fully recovered and had been stable since the time of the attempted suicides;

Metlife (i.e. Citicorp) would have been prepared to enter into a contract of life insurance with Mr Montclare, but would, as a minimum, have imposed a 100 per cent to 200 per cent loading on the standard premium.

690 Mr Haber also gave evidence concerning other scenarios, both in chief and in cross-examination. I will refer to these scenarios by the number given to them by Metlife's counsel.

691 The first scenario was if Mr Montclare or Mr Shilton had answered 'yes' to question 9H and disclosed by way of information 'Dr Tan, 1987 to 1989' and some contact particulars and 'Dr Kahans 1989 to 1991' and some contact particulars and the two attempts at suicide and suicidal tendencies in the 1990s. In those circumstances, Mr Haber would have written to Dr Kahans for a report.[555]

(a) that Mr Shilton attended on him on about 30 occasions between 1989 and 1991, that Mr Shilton suffered from reactive depression with no evidence of psychosis or organicity,

(b) that at the time that Dr Kahans saw Mr Shilton there were a constellation of factors facing Mr Shilton and his personality which were chronic, long-standing factors and his reaction to that was to have difficulty coping,

(c) that Mr Shilton had twice attempted suicide, once in 1981 because of a broken homosexual love affair, and once in 1989 where he took a poisonous substance which is grossly toxic and he had to be treated at the Alfred Hospital,

then Mr Haber would not have offered life cover and would have declined the application.[556]

693 The second scenario was that there had been no hint of suicidal ideation by Mr Shilton from 1991 to the time of the application and Mr Shilton was stable and adjusted to his lifestyle. In the second scenario, Mr Haber said that there was a possibility that Citicorp would have considered offering life cover with a premium loading from 75 per cent to 100 per cent.[557]

694 If there was no information at all about Mr Shilton's situation post-1991, life cover would not have been given.[558] In final submissions, Metlife particularly emphasised this answer.

695 Metlife's third scenario was where it had learned that Mr Shilton had not signed the insurance application and associated documents. That scenario is not relevant to the mental health history issue.

696 The fourth scenario was where Mr Shilton did not have mental health issues, but had personality problems. In those circumstances, Mr Haber would have asked more questions. Mr Haber said that he did not know what conclusion would have been reached.[559]

697 The fifth scenario was if Mr Shilton had only mild depression between 1989 and 1991. Cover would still have been declined because of the two attempted suicides and suicidal ideation and tendencies in the 1990s.[560]

698 The sixth, eighth and ninth scenarios (there was no seventh scenario) were similar to the fifth. Mr Haber said that cover would have been declined. This would have been the conclusion even if Mr Shilton's suicide attempts were not serious, and the reference to suicidal tendencies in the 1990s meant light-hearted comments not taken seriously by those who heard them, or if there were no suicidal tendencies in the 1990s but only irregular references taken light-heartedly.[561]

699 The tenth scenario was that Mr Shilton did not have suicidal tendencies throughout the 1990s, and his irregular references to suicide were taken light-heartedly. This scenario was also that Mr Shilton was stable, adjusted to his lifestyle, a busy and respected performer and teacher of classical music at the highest levels, in a committed loving relationship with a wide circle of friends, and was receiving no treatment or medication. In those circumstances, cover with a loading would have been considered.[562]

700 The eleventh scenario was based on the same assumptions as scenario ten, but added that an independent psychiatrist had reported that, in addition to having personality problems, Mr Shilton had suffered only mild depression. He had not been prescribed medication and had no significant period of sick leave or absence from work due to psychological ill health; and had not been admitted to hospital apart from the monkshood incident, which was 'impulsive behaviour which was very unlikely to cause death'. Mr Shilton was able to continue with most of his ordinary activities.[563] In those circumstances, cover with a loading would have been granted.

701 The twelfth scenario was that Mr Shilton had never been genuinely depressed, his contacts with Dr Tan and Dr Kahans were no more than supportive chats, the suicidal gestures were not serious in intent, and he was never mentally ill in any meaningful sense, but he had a rather flamboyant and self-involved personality. In those circumstances, cover would have been granted without a loading.[564]

702 The thirteenth scenario was that Mr Shilton had consulted Dr Kahans on 30 occasions for support and insight and Dr Kahans noted no diagnosis of depression or dysthymia and that there was insufficient information to conclude that he fitted the diagnostic criteria for those conditions. He was given no medication. He engaged in impulsive self-harm on two occasions, the last in 1989, partly as a cry for help or similar. He was well, or relatively well, when discharged and he might suffer further mild depression if he had further conflicts with his father about his homosexuality. In those circumstances, Citicorp would have granted cover without a loading.

703 Metlife submitted that the twelfth and thirteenth scenarios were remote from the facts of this case.

704 On the tenth day of the trial, Metlife sought to amend particulars of its defence to allege that if Mr Shilton or Mr Montclare had disclosed the matters that it said should have been disclosed, that it would have sent Mr Shilton a mental health questionnaire. Its decision on whether to grant life insurance would have depended on answers provided in that questionnaire. It wanted to ask Mr Haber about hypothetical scenarios that might have arisen from answers provided in the questionnaire. The application was opposed and I refused it. My reasons for refusing that application were firstly the late stage of the trial at which it was made, taking into account the time that this proceeding has been in existence and the history of previous pleading amendments. Secondly, I could not see that the answers given to further hypothetical scenarios based on questions in a questionnaire that was never sent and, may not have even existed, would produce relevant evidence.[565]

705 Mr Montclare submitted that Metlife had not established what decision Citicorp would have made in 1998 and 1999, if Mr Shilton or Mr Montclare had disclosed Mr Shilton's mental health history.

706 Metlife had nominated witnesses who it proposed to call on important issues, including Mr Bereny and friends of Mr Shilton, whose evidence was said to have been the basis of the assumptions on which Dr Kahans was asked to express an opinion. But it did not do so. A Jones v Dunkel[566] inference should be drawn against it.

707 Citicorp had no relevant written instructions to underwriters about the issues raised by Mr Montclare's applications.[567] Written underwriting guidelines and reinsurance manuals were not produced.[568] Mr Haber only purported to give evidence about his own practice.[569] His evidence was not of the standard required to establish what decision Citicorp would have made. His evidence was self-serving and given in hindsight fifteen years after the event.

708 Mr Haber's claims experience did not support his contentions and his evidence differed from the hypothetical scenarios pleaded in the defence. His evidence was unreliable, for instance at relevant times, Citicorp did not send mental health questionnaires to life insurance applicants to obtain further information. He had no real involvement in Citicorp's consideration of Mr Montclare's application.

709 Mr Haber had only considered three cases concerning mental health issues and only one with suicidal ideation.[570] There was no evidence that Metlife ever declined an application on the basis of an applicant having those conditions.

710 Mr Haber acknowledged that in a number of hypothetical scenarios that Mr Shilton's application may have presented, he would have granted cover with a loading if there had been disclosure and no misrepresentation. Mr Haber's evidence in this regard was to the same effect as the outcomes stated in the Hannover Reinsurance manual, that if Mr Shilton had had two suicide attempts and that was the only medical evidence, then after four years he would be insured on ordinary rates and if there was a five year history of mental illness there would be insurance on adjusted rates.

711 Mr Montclare submitted that depressive symptoms do not equal depression. Symptoms do not have to be disclosed. There were no questions on the application form about suicidal ideation.

712 The Queensland Court of Appeal decision in Schaffer v Royal & Sun Alliance Assurance Australia Ltd[571] established that evidence that the insurer would not have immediately granted cover, but may have required further reports or medical examinations, did not suffice to demonstrate that cover would have been refused.

713 Metlife produced no evidence about the decision it would have made if Mr Shilton and Mr Montclare had disclosed Mr Shilton's mental health history in the second application as distinct from the first application.

714 Metlife submitted that Mr Haber was a reliable witness and had worked for Citicorp when Mr Montclare's application was being considered. He had 'signed off' part of the first insurance application.

715 Metlife, by reference to Mr Haber's evidence, identified a number of hypothetical decisions that it would have made depending on the information that it received about Mr Shilton's medical history. In most of the hypothetical circumstances, it would not have insured Mr Shilton's life, or would only have insured it with a premium loading. Metlife would not have granted insurance if Dr Kahans had reported to it in the terms contained in his outline of evidence.

716 Citicorp would not have granted Mr Shilton cover if he had experienced suicidal ideation in the 1990s.

717 Citicorp would have provided insurance without a loading if Mr Montclare had disclosed that Mr Shilton suffered from mild depression, had made a full recovery and was stable and had not engaged in any alcohol or substance abuse.

718 Citicorp would have granted insurance with a 100 or 200 per cent loading if it had been informed that Mr Shilton suffered from moderate to severe depression, had fully recovered and had no alcohol or drug abuse.

719 Mr Haber gave evidence that '[i]f there's no hint of suicidal ideation in the meantime from 1991 [since his consultations with Dr Kahans had ended] to the time the application was submitted, and the client is stable, adjusted to lifestyle ..., there's a possibility we would have considered life cover with a loading'.[572]

720 Dr Kahans would have reported to Metlife in 1999 in the same terms as the evidence he gave at trial. Dr Kahans, in evidence-in-chief, said that Mr Shilton had chronic reactive depression, which was caused by a constellation of factors. He had twice attempted suicide.

721 Section 29 of the ICA requires consideration of the decision that the insurer would have made if misrepresentation or non-disclosure had not occurred, not what decision a particular underwriter would have made. In the case of fraudulent misrepresentation or non-disclosure, the insurer is denied a remedy only if it would have entered into precisely the same contract as that which was made.

722 Metlife had explained why Mr Bereny's health prevented him giving evidence.

723 Metlife had no other files where the applicants had a similar mental health history to Mr Shilton. It is clear that had Mr Shilton's mental health history been disclosed, Citicorp would have sought further information from him and probably would have asked Dr Kahans for a report, including details of Mr Shilton's history, treatment and follow-up.

724 Metlife argued that it was not required to provide separate underwriting evidence to establish whether it would have accepted the second insurance application if there had been disclosure and no misrepresentation because the outcome of both applications would have been similar.

725 As I have previously stated, in order to avoid the contracts of insurance, the insurer has to establish that s 29 applies. To be able to avoid contracts of insurance for a fraudulent non-disclosure or misrepresentation, it has to prove that it would not have entered into the same contract if disclosure had occurred or the misrepresentation had not been made.

726 The authors of Sutton on Insurance Law summarise the law on this issue as follows:

If the insurer is to establish the right to a remedy, the onus is on the insurer to produce evidence. It has been recognized by the courts in the context of inducement at common law that this something of a 'loaded' question, as the insurer will have every incentive to state that, with disclosure, he or his assessment of the risk would have been different, and it is essentially a matter for the court to determine whether, in light of the experience and qualifications of the insurer answering the questions, the evidence is to be given weight ... It is most unlikely that a court would rely simply on an assertion by an insurer of its position, as that is in effect retroactive underwriting. The absence of evidence on the part of the insurer is perilous.

The most crucial evidence will often be of its underwriting practice, and in particular of underwriting guidelines in its underwriting manual.[573]

727 Evidence that is no more than unsubstantiated hindsight will carry little weight.[574]

728 Metlife submitted that the relevant question was whether the insurer would have entered into precisely the same contract. Mr Montclare, as previously stated, submitted that evidence that the insurer would not have immediately granted cover did not suffice to demonstrate that cover in the terms granted would have been refused.

729 In Schaffer v Royal & Sun Alliance Life Assurance Australia Ltd,[575] a decision of the Queensland Court of Appeal, the evidence of two underwriters was that if the insured had disclosed the true facts of her medical condition, the insurer would have sought a private medical attendant's report from the life insured's doctor. But neither underwriter was prepared to speculate as to what the insurer would have done if the doctor had provided his full medical notes and another doctor's report. Nor would they express an opinion about whether the insurer would have eventually declined the proposal. Davies JA, with whose judgment Cullinane J agreed, in dealing with the right of avoidance for innocent misrepresentation under s 29(3) of the ICA, under which in order to avoid the contract of insurance the insurer must establish that it would not have entered into a contract of insurance on any terms, stated:

What that means is this: for a right of avoidance under s 29(3) to arise it must be shown that, on the insured's offer on the assumption that it had stated the true facts, the insurer would not have been prepared to enter into a contract on any terms; in other words, the insurer would have declined the risk.

Once that is accepted, it can be seen that if, absent the misrepresentation, on 3 September 1998 the appellant would still have been undecided on the question whether it would be prepared to enter into a contract on some terms or other with the respondent, perhaps because it needed to conduct future investigation, the appellant did not establish its right to avoid the contract under subs (3). That it would probably have deferred its decision on 3 September would not be sufficient. It must be shown that, at some point, the offer would probably have been declined.

What subs (3) does not require, expressly or implicitly, is that any such hypothetical contract, the preparedness to have entered into which must be excluded, be one entered into on the date on which the actual contract was entered into. The only reference in the subsection to that date is in the requirement that, the condition of subs (3) having been established, the avoidance take place within three years after that date.

...

There was simply no evidence on this question. One possibility plainly was that the appellant would still have insured the respondent either at the same or a higher premium ...

I would therefore agree with the trial judge's conclusion that, in effect, the appellant failed to discharge the burden of proof upon it of showing that it would not have been prepared to enter into a contract with the respondent on any terms if the misrepresentations had not been made.[576]

730 McPherson JA, while expressing agreement with Davies JA, stated:

In that regard, it is not, I consider, sufficient for the defendant to establish only that, had the requisite disclosure been made, it would have made further inquiries to determine whether or not to accept the risk either at all or at a different premium or on different terms. Proving that its decision whether or not to accept the risk would have been deferred is not to demonstrate that in the end it would not have entered into any contract of life insurance with the insured. That is, I conceive, the significance of the phrase 'in the end' in the passage quoted earlier from the judgment of Kirby P in Barclay Holdings v British National Insurances to the effect that the additional information, although of interest to the insurer, is not material unless it determines for the insurer the acceptance or rejection of the insurance.[577]

731 Another case concerning s 29(3) was the New South Wales Court of Appeal decision in Davis v Westpac Life Insurance Services Ltd.[578] McColl JA agreed with the statement of Davies JA in Schaffer v Royal & Sun Alliance Assurance Australia Ltd,[579] and disagreed with some of the observations of McPherson JA. McColl JA said:

In my opinion s 29(4) makes it plain that for the purposes of s 29(3) an insurer is entitled to demonstrate that it would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with by taking into account information it would have obtained as a result of enquiries made consequent upon compliance with the duty of disclosure. As Davies JA said in Schaffer, the only relevant time period is three years after entry into the policy. If, during that time, the insurer becomes aware of facts which reveal that the insured had not complied with the s 21 duty of disclosure (and/or made a misrepresentation), but needs to obtain further information before determining what its attitude to acceptance of the risk would have been, it is entitled to bring the results of those consequent inquiries to bear in that exercise. If after making those enquiries it determines it would not have been prepared to enter into any policy, it can avoid the policy.[580]

732 The judgment of Debelle J in Tyndall Life Insurance Co Ltd v Chisholm[581] appears to take a different approach, suggesting that where an insurer would not have entered into 'this' contract immediately, but would have required further medical investigation and deferred any assessment of the proposal until a medical examination was conducted, s 29(1)(c) and (2) would be satisfied and the insurer could avoid the policy. That case dealt with a fraudulent misrepresentation. The insurer did not seek to prove what might have been disclosed had it required the applicant for insurance to undergo a further medical examination. Debelle J was satisfied that the insurer would have required the applicant to undergo a medical investigation. He rejected the argument that the insurer had to prove on the balance of probabilities what the outcome of the future medical examination would have been. He stated:

[t]hat is to require an insurer to discharge an evidentiary burden which is extremely difficult, if not in some circumstances impossible, to prove. That is not what is intended by s 29(1)(c), a conclusion which is re-enforced when s 29(1)(c) is compared with s 29(3).

This case vividly demonstrates the almost impossible task an insurer would face if it had to prove the likely outcome of a further medical examination. It would involve proof of a number of steps, most, if not all, of which would involve a fairly high degree of speculation ... In short, by his fraudulent conduct, the defendant prevented Tyndall from making further investigations. He should not be in a position to profit from his fraud.

Secondly, an insured person should not be in a position to profit from his fraud ... By his conduct, the defendant has prevented Tyndall from obtaining further medical evidence for the purpose of deciding whether it will accept the risk and enter into the policy. Tyndall was denied the opportunity of establishing the true facts and denied the opportunity of deciding not to accept the risk. If insurers must discharge this difficult evidentiary task, that will in turn severely diminish any incentive for fraud.[582]

733 Debelle J also considered the position of a 'take up option', which entitled the insured, after a medical event had occurred, to obtain additional life insurance, and stated:

Tyndall has not led evidence to prove that it would not have been prepared to enter into the contract on any terms if the defendant had complied with the duty of disclosure and had made no misrepresentation. The facts to be proved under s 29(3) of the Act differ from those to be proved under s 29(1)(c). In the absence of such evidence, Tyndall cannot rely on s 29(3).[583]

734 As Debelle J observed, there is a difference in the structure of s 29(1)(c) and s 29(3). The difficulties confronting an insurer in establishing its actions in hypothetical situations are inherent in the provisions of the ICA which give insurers remedies if they can establish misrepresentations or non-disclosures. Section 29(3) places an onus on the insurer to prove that it would not have been prepared to enter into a contract of insurance with the insured on any terms.

735 I consider that the application of the words of s 29(1)(c) and (2) leads to the same conclusion as Davies JA reached in Schaffer's Case in respect of innocent misrepresentation under s 29(3), where the insurer seeks further information before making a decision on whether to grant insurance cover. Where the insurer says that, if there had been no non-disclosure or misrepresentation and therefore disclosure had occurred, it would have required further information and made further investigation, it must prove that, at some point, the applicant's offer would probably have been declined.

736 This conclusion appears to be the view of the authors of Sutton on Insurance Law in the following passage concerning s 29(3):

It is not necessary for the insurer to prove that it would have made a final decision declining the insurance at the time it actually entered into the contract. It is not sufficient to ground the avoidance right that the insurer would have deferred the decision. It must be shown that the particular insurer would not have entered into the contract presumably on the same terms, conditions or premium, had he or she known the true position.[584]

737 I consider that Metlife has proved that, applying the negatives contained in s 29(1)(c), Citicorp would not have entered into the same life insurance contract with Mr Montclare if Mr Shilton had not made the fraudulent misrepresentations about his medical history that I have found that he did.

738 I consider that the evidence establishes that upon an affirmative answer being given to the question and the condition of depression being disclosed, Metlife would have sought further information from Dr Kahans and Mr Shilton. Although medical questionnaires were not being used in 1998 and 1999, the other mental health files to which I have referred, indicate that information was often sought from treating doctors, usually general practitioners. Mr Shilton's general practitioner, Dr Burgin, had only seen him on a few occasions for minor ailments. So, it is likely that Metlife would have sought information from the last treating psychiatrist, Dr Kahans.

739 I consider that Dr Kahans, in 1998, would have reported that Mr Shilton had suffered from reactive depression and had attempted suicide in 1989. Mr Shilton's suicide attempt in 1989 was a significant factor, not present in any of the Metlife mental case files examined at the trial. In those circumstances, I consider that the effect of Mr Haber's evidence was that Metlife would, at best, only have granted insurance with a loading.

740 Citicorp would not have had access to the friends' evidence of Mr Shilton's statements about suicide. Nor, obviously, would it have had access to the evidence of the three expert psychiatric witnesses

741 I accept the explanation for Mr Bereny not giving evidence. I am not persuaded that the fact that other Citicorp underwriters were not called is decisive in this case. This is because of my assessment of Mr Haber's evidence. It has to be borne in mind that Citicorp had a small number of staff in its underwriting department.

742 I found Mr Haber's evidence persuasive. He gave clear evidence that Citicorp would not have entered into the same contract of insurance if Mr Shilton had not made the misrepresentation. He had no association with Metlife and appeared independent. He readily agreed to propositions that did not assist Metlife's case. Examples of this were his evidence in respect of Metlife's decisions about whether to issue insurance if it had learned that Mr Shilton had not signed the four documents, or if it had learned of NRMA's refusal to provide insurance cover.

743 I do not consider that Mr Haber's evidence was the exercise of hindsight. He did assume that Mr Shilton had suffered suicidal ideation in the 1990s and there was no evidence of that. However, he gave evidence of a number of scenarios in which no suicidal ideation was present, but in which he considered that Citicorp would have imposed a loading.

744 Mr Haber's evidence gained some support from the other mental health applications that were referred to in evidence. The other cases were evidence of actual office practice, which can be of more assistance than guidelines.[585] Mr Haber's evidence suggests that each case was looked at individually.

745 Mr Haber placed considerable importance on the fact that Mr Shilton had attempted suicide. That made the case a greater risk than other cases which he had underwritten.

746 I accept Metlife's submission that Mr Haber's evidence about whether it would have entered into the first contract of insurance is also applicable to the issue of whether it would have entered into the second contract of insurance. There is no material difference between the issues relevant to Citicorp's entry into the first contract of insurance and its entry into the second contract.

747 There is force in the opinion of Debelle J in Tyndall's Case[586] that an insured should not be able to benefit from fraud which has resulted in the insurer deciding not to seek further information before deciding to insure. In all areas of the law, including insurance law, fraud usually unravels everything. But s 29(2) does not adopt that approach. The insurer carries the onus of proving that it would not have entered into the contract. Nor has its case been assisted by the absence of Mr Bereny's evidence. I also take into account the danger of hindsight being exercised, particularly when all the witnesses knew how Mr Shilton's life ended.

748 However, I consider that Metlife has established that it is probable that if Mr Shilton had not made the misrepresentation, had answered the question in the affirmative and had disclosed his condition of depression and treatment by Dr Kahans, then after receiving a report from Dr Kahans, Citicorp would not have insured Mr Shilton's life on the terms ultimately entered into.

749 I will now consider an alternative consideration. I will express my conclusions on the assumption that Mr Shilton's misrepresentations arising from the answer to question 9H had been innocent. In those circumstances, I would not have been satisfied that Metlife had established that it was entitled to avoid the insurance contracts under s 29(3).

750 It is unclear, in view of Mr Haber's differing responses to the hypotheses put to him, whether the insurer would have refused to provide cover on any terms or granted it, and, if so, on what terms and subject to what loading.

751 Metlife has established that it would not have entered into the same contract of insurance with Mr Montclare if the misrepresentation in answering question 9H had not been made.

752 The next issue is Mr Montclare's submission that the Court ought exercise its overriding power under s 31 to disregard Metlife's avoidance of the contracts of insurance, as it would be harsh and unfair, in the circumstances, not to do so and the insurer had not been significantly prejudiced by the failure of disclosure or misrepresentation. Section 31 deals with circumstances where the issue is whether, despite the insured having been guilty of fraud, relief should nevertheless be granted to him or her.[587]

31 Court may disregard avoidance in certain circumstances

(1) In any proceedings by the insured in respect of a contract of insurance that has been avoided on the ground of fraudulent failure to comply with the duty of disclosure or fraudulent misrepresentation, the court may, if it would be harsh and unfair not to do so, but subject to this section, disregard the avoidance and, if it does so, shall allow the insured to recover the whole, or such part as the court thinks just and equitable in the circumstances, of the amount that would have been payable if the contract had not been avoided.

(2) The power conferred by subsection (1) may be exercised only where the court is of the opinion that, in respect of the loss that is the subject of the proceedings before the court, the insurer has not been prejudiced by the failure or misrepresentation or, if the insurer has been so prejudiced, the prejudice is minimal or insignificant.

(3) In exercising the power conferred by subsection (1), the court:

(a) shall have regard to the need to deter fraudulent conduct in relation to insurance; and

(b) shall weigh the extent of the culpability of the insured in the fraudulent conduct against the magnitude of the loss that would be suffered by the insured if the avoidance were not disregarded;

but may also have regard to any other relevant matter.

(4) The power conferred by subsection (1) applies only in relation to the loss that is the subject of the proceedings before the court, and any disregard by the court of the avoidance does not otherwise operate to reinstate the contract.

754 Metlife submitted that it had been significantly prejudiced by the failure to disclose or misrepresentations and, therefore, s 31(2) did not apply.

755 I do not consider that the Court should disregard the avoidance of the insurance contract under s 31 of the ICA on the facts of this case. It would not be harsh and unfair not to do so. Mr Montclare has to establish that the avoidance should be disregarded. I am not persuaded that in respect of the misrepresentation in the answer to question 9H that it would be harsh and unfair to allow Metlife to avoid the contract. The evidence suggests that that question was important and that an affirmative answer would have probably have affected the terms upon which any insurance would have been issued.

756 The following statement of Debelle J in Tyndall Life Insurance Co Ltd v Chisholm[588] is applicable:

In other words, this is a case where the insurer has been prejudiced by the non-disclosure and misrepresentation. It was induced to enter into the contract because of the non-disclosure and misrepresentation. It would not have done so had full disclosure been made, thus providing it with an opportunity to investigate the cause of the bleeding. Tyndall has made a substantial payment. The prejudice to it is not minimal or insignificant. The onus is on the defendant to establish an absence of prejudice for the purposes of s 31(2) ...[589]

757 Metlife has established that it was entitled to avoid the contracts of insurance that it entered into with Mr Montclare. It did avoid those contracts either by Citicorp's solicitors' letter sent on 6 December 2001 or by its defence filed in this proceeding.

758 Metlife contended that if it had not entered into a contract of insurance with Mr Montclare that was governed by the ICA, then it could set-off any amount for which it was liable to Mr Montclare by the damages it could recover from him and Mr Shilton under separate causes of action.

759 I have decided that the contracts of insurance were subject to the ICA and therefore the determination of these alternative claims is not strictly required. But in case I am wrong in my conclusions, I will consider these alternative claims.

760 Metlife alleged that Mr Montclare and Mr Shilton engaged in negligent misrepresentation. In its defence, it pleaded the following:

[A]t all material times, in circumstance where:

(a) the plaintiff and the deceased knew that the first defendant would rely on the information contained in the first application, the second application and the purpose of cover representation in deciding whether to enter into a policy of insurance with the plaintiff in respect of the deceased's life;

(b) it was reasonably foreseeable that the first defendant would suffer loss if the plaintiff and the deceased did not ensure that all information contained in the first application, the second application and the purpose of cover representation was accurate;

(c) the first defendant was vulnerable to damage if the plaintiff and the deceased failed to exercise reasonable care in completing the first application, the second application and in making the purpose of cover representation

the plaintiff and the deceased owed a duty of care to the first defendant to ensure that the information contained in the first application, the second application and the purpose of cover representation was accurate and/or that they disclosed all relevant information to the first defendant.[590]

761 Metlife submitted that Mr Montclare and Mr Shilton breached this duty of care by failing to ensure that the information provided to Metlife was accurate, and failing to disclose all relevant information to Metlife.[591] This breach resulted in the non-disclosure and/or misrepresentation of matters relevant to Mr Shilton's mental health, which caused Metlife to enter into the contracts of insurance and thereby to attract a liability. This liability constitutes Metlife's loss, if the Court finds that Mr Montclare would otherwise have a valid claim under the contracts of insurance.[592]

762 In asserting the existence and scope of such a duty, Metlife noted that the elements of a claim for negligent misstatement often overlap with those that apply to other categories of duty related to pure economic loss. Metlife referred the Court to Johnson Tiles Pty Ltd v Esso Australia Pty Ltd,[593] a case involving allegedly negligent advice in which Gillard J, in reference to the House of Lords decision in Hedley Byrne & Co Ltd v Heller & Partners Ltd,[594] summarised the elements required for establishing that a duty of care for negligent misstatement exists: