Proceedings below
11 Mr Farkas commenced proceedings against the insurer and his insurance intermediaries. The claims against the intermediaries were based on negligence and were dismissed. The claim against the insurer that succeeded was for a declaration that Mr Farkas had suffered a "terminal illness" within the Policy, with consequential relief. The proceedings were heard and determined by Bergin J ( Farkas v Northcity Financial Services Pty Ltd & 3 Ors [2004] NSWSC 206).
12 The diagnosis of cancer is not in dispute. But Dr Dodds' assessment of its prognosis as at 1 May 2003 is not conclusive. The issue that presented itself at trial was whether a terminal illness (as defined) had in truth been diagnosed (in the context of the claim for Tower Term Benefit) or had occurred (in the context of the claim for Critical Illness Benefit). As indicated, the insurer did not contend that the contractual requirement that the assessment of "terminal illness" had to be confirmed by "appropriate specialist medical practitioners approved by us" meant that the issue was withdrawn from judicial determination based on the facts at trial.
13 Bergin J addressed the meaning of the expression "highly likely" at J25 - 29 (see also J81, set out below). It had been common ground that this involved an impressionistic judgment as distinct from something reflecting a particular percentage of mathematical probability. Her Honour correctly observed that the word "likely" is protean and must be considered in context. She cited Spigelman CJ in Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (No 2) (2002) 50 NSWLR 655 at 674[52]. (See also Tillmans Butcheries Pty Ltd v Australasian Meat Employees Union (1980) 42 FLR 331, Cream Holdings Ltd v Banerjee [2003] Ch 650). The learned judge held (at J29) that the context in which the words "highly likely" were found in the Policy meant that an assessment or judgment had to be made as to whether the likelihood of death within 12 months was high.
14 Her Honour was satisfied that the term "likely" meant a real and not remote chance and that in this context, as Tower had submitted, "highly likely move[d] … into the realms of probability" . She concluded that:
It is not necessary to speak in percentages - the test is that the likelihood of death in 12 months is high, or, put another way, in all probability death will result within 12 months.
15 The critical question called to be determined on the evidence given at trial in early 2004. It was common ground that it was to be addressed with reference to the particular insured and as at 1 May 2002, this being the date on which the cancer was diagnosed and on which the happening of the relevant event (ie the occurrence of a terminal illness) had to be judged. Merely because there had been a fortunate response to later intensive medical treatment did not preclude a finding that the illness or condition diagnosed on 1 May 2002 was a "terminal illness".
16 The parties took up the opportunity to file additional written submissions addressing a matter raised during the hearing, namely whether it was legitimate for the Court to have any regard to the fact that death did not actually ensue within 12 months in the context of determining whether this was highly likely as at 1 May 2002. The insurer had not invoked any such principle at trial.
17 There are many circumstances in the law that call for application of the principle that "where facts are available they are to be preferred to prophecies" (Willis v The Commonwealth (1946) 73 CLR 105 at 116 per Dixon J. See generally H T W Valuers (Central Queensland) Pty Ltd v Astonland Pty Ltd [2004] HCA 54, 79 ALJR 190 at [39]).
18 The appellant submitted that this was one such case, placing particular reliance upon the decision of the Queensland Court of Appeal in McArthur v Mercantile Mutual Life Insurance Co Ltd (2001) 163 FLR 236, [2001] QCA 317. An insurance benefit was payable in the event of total and permanent disablement. This was defined in terms that included the insurer forming the opinion that the relevant injury had rendered the insured likely never to be engaged in gainful employment for which the insured was reasonably suited by training, experience or qualification. The insurer applied the wrong test in forming a negative opinion. The trial judge proceeded to determine the matter, taking into account all the evidence available at the time of trial, deciding that the appellant was not so disabled. The appellant appealed, arguing that the court should have taken into account only the medical evidence which was before the insurer at the time it rejected the claim. The appeal was dismissed. The Court of Appeal cited decisions, including Willis , to the effect that the court does not speculate when it may know.
19 The decision is, however, distinguishable. In McArthur, the insurer's error in forming the requisite opinion meant that the court had to proceed to decide, as a question of fact, whether the contractual state of affairs existed. Muir J (with whom McMurdo P agreed) said at 255[74] (emphasis added):
Medical reports coming into existence after the relevant time will be admissible provided that they are pertinent to the determination of the appellant's condition at the relevant time: cf Willis v Commonwealth (1946) 73 CLR 105 at 116.
McPherson JA spoke to similar effect (at 244[23]), while disagreeing slightly with Muir J as to what was the relevant time for the particular contract.
20 As the respondent points out in his written submissions, the evidence in question in the present case must relate to the insured's prognosis as at the date of diagnosis/occurrence of the relevant disease, 1 May 2002. But it is only the prognosis as at that date that governs entitlements under the Policy. Facts relevant to that matter may be tendered, whether or not they were in the minds of any doctor or the insurer at that time. But evidence that the insurer did or did not survive for 12 months casts no relevant light on that prognostic matter. For the Court to have regard to facts which could not be known at the contractually agreed date for assessment would effectively deny the bargain struck between the parties.
21 The insurer does not suggest that the mere fact that the insured survived for more than 12 months negated his entitlement. Yet to pay regard to later events, except those reflecting on the prognosis that was or ought to have been formed on 1 May 2002, would be to depart from the relevant bargain which was necessarily forward-looking in a prognostic sense.
22 Three specialists gave evidence. The two witnesses called for the respondent were Dr Dodds and Dr Young. Their evidence included information and opinions based upon what they had observed in May 2002 as well as opinions given with the benefit of hindsight focussing more closely on the question of whether the Policy responded. The appellant called Dr Jeffry Szer, a clinical haematologist and medical oncologist. He had not seen the respondent at the relevant time, but had access to all reports of the other doctors. Each witness was cross-examined.
23 None of the witnesses was in any doubt that the respondent would almost certainly have died within 12 months of diagnosis had no treatment been provided. At trial the plaintiff submitted that this meant that the Policy responded. In other words, it was contended that the Policy on its true construction required a prognosis that death within 12 months was highly likely based on the presentation of the disease at the time of diagnosis, without taking into account the treatment that was then available or the likelihood of it being sought by the insured. Bergin J upheld this construction of the Policy (see her reasons at J75-76).
24 The judge also considered the evidence on the basis of the alternative construction of the Policy propounded by the insurer. This involved a detailed analysis of the testimony of the three specialists (at J54-73). Based upon that analysis, Bergin J reached the following conclusions (at J78-81):
78. Even on the construction of the Policy that there was to be a prognosis considering the available treatment, the evidence of the plaintiff's medical witnesses establishes that at the time of diagnosis, with the special combination of the factors present with this plaintiff's disease, especially the involvement of the lungs, it was highly likely that the plaintiff's illness would result in death within 12 months. The luxury of retrospectivity must be resisted in this case because the relevant time for prognosis is May 2002. Tower fell into the retrospectivity trap when it declined the plaintiff's claim on the basis that the plaintiff was in remission in 2003. That was not the relevant test. The correspondence in 2003 was part of the claim made in 2002 and the relevant test was whether the assessment that the plaintiff was diagnosed with a terminal illness was confirmed, not whether the plaintiff just happened to be in remission at the time of the further correspondence.