TOWER AUSTRALIA LTD v FARKAS

In the Court of Appeal, the appellant submitted that the trial judge erred in adopting a construction of the Policy that disregarded available medical treatment and in concluding on the evidence that a "terminal illness" had been diagnosed and had occurred. In particular, it was argued that the judge erred in her analysis of the meaning of "highly likely". HELD: Per Mason P (Beazley and Tobias JJA agreeing):

1. Reference to "an illness or condition which is highly likely to result in death within 12 months" requires inquiry into the anticipated outcome for the particular patient, which includes the patient's likely response to the diagnosis. The trial judge's interpretation of the terms of Policy as not requiring consideration of available treatment was thus in error.

2. The trial judge's analysis of the meaning of "highly likely" as a protean term that must be considered in context, and her finding that the Policy responded in the circumstances, were correct. Satisfaction to a level of high likelihood does, in this context, require more than mere probability. The finding that death was 2. The trial judge's analysis of the meaning of "highly likely" as a protean term that must be considered in context, and her finding that the Policy responded in the circumstances, were correct. Satisfaction to a level of high likelihood does, in this context, require more than mere probability. The finding that death was "highly likely" was an essentially evaluative exercise, rather than solely an appraisal of mathematical probabilities.

3. The fact that the respondent did survive beyond twelve months was not relevant to the prognostic matter to be determined for the purpose of entitlement to benefits under the Policy. It is not legitimate for the Court to have regard to facts that could not be known at the contractually agreed date for assessment of whether death was highly likely to occur. The decision in McArthur v Mercantile Mutual Life Insurance Co Ltd (2001) 163 FLR 236 is distinguishable. ORDERS: Appeal dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40607/04 SC 50154/03

Friday 28 October 2005 TOWER AUSTRALIA LTD v George FARKAS JUDGMENT 1 MASON P : A Policy of Insurance issued by the appellant to the respondent offered two benefits, referred to as the Tower Term Death Benefit ($100,000) and the Critical Illness Benefit ($650,000). The benefit start date was 8 March 2002. 2 The Tower Term Death Benefit was payable in the event of death or diagnosis of "terminal illness" while covered for the death benefit. The Critical Illness Benefit was payable in the event of death, or on the occurrence of "terminal illness" or one of a number of specified "insured events" (including cancer). 3 On about 8 April 2002 the respondent experienced symptoms that included stomach pain and bloating. He subsequently underwent tests including an abdominal ultrasound, a colonoscopy and a gastroscopy, during which biopsies were taken of eight ulcerated lesions. On 1 May 2002 the biopsy report revealed what was diagnosed as a malignant non-Hodgkin's Lymphoma in the stomach. On 2 May 2002 CT scans revealed malignancies in the lungs and chest. 4 The respondent came under the care of Dr Anthony J Dodds, a specialist haematologist. Later that month he consulted Dr A R Young, a clinical associate professor specialising in haematology, for a second opinion. 5 The respondent underwent extensive chemotherapy and, ultimately, an autologous stem-cell transplant. His disease went into remission and remains in remission to the present time. 6 Initially, there was a claim for Critical Illness Benefit based on the "insured event" of cancer. Since, however, the illness was diagnosed within 90 days of the start date, the benefit was not payable due to an exclusion to that effect. 7 The respondent then claimed the two benefits on the basis that the cancer that was diagnosed and taken to have occurred on 1 May 2002 represented a "terminal illness". This was defined in the Policy to mean "an illness or condition which is highly likely to result in death within 12 months, where this assessment is confirmed by appropriate specialist medical practitioners approved by us". 8 No reliance was placed by the insurer upon the concluding words of this definition. 9 Initially the respondent relied upon a report of Dr Dodds of 2 May 2003 which stated: Mr Farkas was referred to me in May 2002 following the diagnosis of malignant non-Hodgkin's lymphoma involving the stomach. Subsequent investigations showed that the lymphoma was more widely spread with multiple pulmonary nodules seen on radiological examination of the thorax. Histopathology of biopsies taken from the gastric mucosa showed infiltration of the stomach by diffuse large cell malignant lymphoma of B-cell origin.

Mr Farkas' condition at that time was very serious with a survival highly likely to be less than 12 months.

He has since undergone intensive chemotherapy including an autologous bone marrow transplant to treat his condition.

He is in the process of recovering from his treatment and his disease currently appears to be in remission. 10 The claims were denied by the insurer: 1. … on the basis that your condition does not meet the definition of Terminal Illness as provided by either policy. In this regard we note that Dr Dodds stated in his report dated 2 May 2003 that your 'disease currently appears to be in remission'.

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.

79.79. Even the evidence of Tower's medical witness, Dr Szer, does not detract from the conclusion that even with treatment the plaintiff's death was highly likely within 12 months of diagnosis. His prognosis without treatment was "dismal". The highest Dr Szer could put it with treatment was that the plaintiff would have had "an approximately 50% chance of being alive and free of lymphoma at 12 months". Of course the test was not whether he was alive and free of lymphoma. Putting that to one side, Dr Szer's "approximately 50% chance" is just an approximation. The cross-examination of Dr Szer utilizing the example of having two identical patients, one with treatment and one without treatment, was rather illuminating. He frankly conceded that early favourable response to treatment may not justify improving prognosis but persistence of disease progression would make prognosis worse. It must be remembered also that Dr Szer did not see the patient at the relevant time - at diagnosis - whereas Dr Dodds and Professor Young did.

80. The evidence of Dr Dodds that he had not had one patient in the plaintiff's condition that survived 12 months is also very important. Both Dr Dodds and Professor Young relied heavily upon their clinical experience and why not, it may be asked. This Policy is predicated on the basis that it is the practitioner's views or assessment of whether death within 12 months is highly likely. Notwithstanding the problem that arose in relation to the wording of Professor Young's report, I am not satisfied that his concession that it was "quite possible" that he did not include the extra words at the behest of the plaintiff requires that I reject his evidence given in this trial. I have however reviewed his evidence with that concession in mind. Had he been the only medical witness for the plaintiff the acceptance of his evidence might have been more problematical, however it has to be remembered that this was left as a "possibility" even though the qualifying word "quite" was included. In any event the words that were not included in the final report are not pivotal in the light of the competing claims in this case. Indeed it appears that Professor Young's additional words, "particularly if not treated successfully" touch upon the uncertainty of the response to treatment to which reference is made earlier.

81. Although I am satisfied that numerical percentages introduce gradation of more precise measurement than intended by the parties to this Policy, the cross-examination of the plaintiff's medical witnesses and the evidence in chief of Tower's medical witness focused upon such percentages. With treatment, Dr Dodds' prognosis for the plaintiff was "a little below the middle" and a "worse prognosis" than 50/50; Professor Young's prognosis was less than 50% at 20% or 30% - thus a 70% or 80% chance of death within 12 months; and Dr Szer put it at 81. Although I am satisfied that numerical percentages introduce gradation of more precise measurement than intended by the parties to this Policy, the cross-examination of the plaintiff's medical witnesses and the evidence in chief of Tower's medical witness focused upon such percentages. With treatment, Dr Dodds' prognosis for the plaintiff was "a little below the middle" and a "worse prognosis" than 50/50; Professor Young's prognosis was less than 50% at 20% or 30% - thus a 70% or 80% chance of death within 12 months; and Dr Szer put it at "approximately 50%". I am satisfied that the combination of this evidence elevates the chances of the plaintiff's death within 12 months of diagnosis, as Tower put it in the written submissions, into the realm of probability as opposed to there being a real chance. I am satisfied that on the evidence, even with treatment, the plaintiff's prognosis with the gastroplymphoma and multiple extranodal sites particularly in the lungs, was a high likelihood of death within 12 months. Tower is therefore liable to the plaintiff for the terminal illness benefits in both Tower Term and Critical Illness Benefit Condition. The issues on appeal 25 The appellant tendered two issues for determination in the appeal. 26 It was first submitted that Bergin J erred in adopting a construction of the Policy that disregarded the availability of medical treatment. Secondly, the judge erred in concluding on the evidence that a "terminal illness" had been diagnosed and had occurred. The construction of the policy 27 As indicated below, I would reject the second arm of the appellant's case. This strictly makes it unnecessary to deal with the construction issue. Since, however, the primary judge's interpretation could impact on claims involving other policy holders, there is utility in indicating any firm conclusions relevant to the construction issue. I consider it appropriate to do so, even though it will be unnecessary to address every contingency. The Court has heard full argument from leading counsel, although the factual submissions were at the forefront of the case advanced by senior counsel for the respondent, Mr Jackson QC. 28 Bergin J said this on the construction issue: 74 The plaintiff and the second and third defendants submitted that the Policy requires a prognosis that the result would be death within 12 months based on the presentation of the disease at the time of diagnosis, not taking into account the treatment that was available. It was submitted that the construction for which Tower contends requires the insertion of the words "with treatment" and that such a construction is not reasonable when one reads the whole of the Policy. 74 The plaintiff and the second and third defendants submitted that the Policy requires a prognosis that the result would be death within 12 months based on the presentation of the disease at the time of diagnosis, not taking into account the treatment that was available. It was submitted that the construction for which Tower contends requires the insertion of the words "with treatment" and that such a construction is not reasonable when one reads the whole of the Policy.

75 It was submitted that the construction for which Tower contends leads to uncertainty. Those uncertainties include whether all insureds will accept treatment with emphasis placed upon patient autonomy. There is the uncertainty of the response to treatment particularly, for instance, in the "rarer" types of cancer, a type with which the plaintiff was diagnosed. There is also the uncertainty of the timing of treatment that may be administered. There is the further uncertainty of the different types of treatment that may be prescribed by different practitioners. What if, for a variety of reasons, the patient is unable to have access to the obviously world class treatment to which the plaintiff had access? All of these uncertainties favour the construction that it is the presentation of the disease per se at the time of diagnosis rather than its presentation with treatment that is relevant for prognosis. If there is an ambiguity in the definition as to whether it is an illness or condition that is treated or an illness or condition that is not treated, the construction given to the Policy should favour the plaintiff: Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 520-521 per Gibbs CJ; Johnson v American Home Assurance Company (1998) 192 CLR 266 at 274-275 per Kirby J; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 602 per Kirby J. That means that on the basis that there is an ambiguity, the prognosis is to be made at the time of diagnosis on the presentation of the disease per se rather than the presentation of the disease with treatment.

76 The words of the definition, that it is "an illness or condition which is likely to result in death within 12 months", also support this construction. It may seem odd, particularly to medical practitioners, that the assessment of the high likelihood of death within 12 months does not take into account the available treatment. However that is what the words say, without the introduction or implication of the words "with treatment". I am satisfied that the appropriately beneficial construction of the Policy is that the prognosis, or assessment, is to be made of the presentation of the disease per se without treatment.

29 I respectfully disagree. 30 In my opinion, the insurer's interpretation does not require the introduction or implication of the words In my opinion, the insurer's interpretation does not require the introduction or implication of the words "with treatment" to achieve the result it contends for. On the contrary, the reference to "an illness or condition which is highly likely to result in death within 12 months" entails an investigation of the anticipated outcome for the particular patient as at the date of diagnosis and/or "occurrence" ; and this in turn points the inquiry towards the patient's likely response to the diagnosis. Most patients will seek reasonably available medical care that offers genuine hope for success. 31 Undoubtedly, there will be uncertainties involved with the application of so open-ended a concept as that of "terminal illness" as defined in this Policy. That, however, is no reason for choosing a liberal interpretation in favour of the insured if the ordinary and fair meaning indicates otherwise, a fortiori if that "liberal interpretation" produces consequences that border on absurdity. This is not to deny the applicability of the contra proferentem principle as a rule of construction of last resort. But the caselaw cited by her Honour at J75 does not go further than that. 32 Indeed, the caselaw emphasises the need to construe an insurance policy by giving its language an ordinary and fair meaning, taking account of the commercial and social purposes for which it was written. For example, in McCann, Gleeson CJ said (at 589 [22]): 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. 33 In the present case, terminal illness benefit is a species of accelerated death benefit, payable to a person with an illness or condition highly likely to result in death within 12 months. 34 The history of medicine is replete with instances of life-threatening diseases that have ceased to be such due to the progress of medical science. Illnesses or conditions like tetanus and snake bite are no longer generally regarded as fatal, because of the ready availability of relief save in exceptional cases. To refuse to take account of available treatment in any and every case (as her Honour's approach to construction indicates) would be to convert the Policy into a lottery ticket without textual justification and contrary to a fair, commercial and reasonable reading of it. A person with an accidentally cut finger who (without reason) declined all offers of assistance, choosing to bleed to death for want of staunching the wound, would be regarded as the cause of The history of medicine is replete with instances of life-threatening diseases that have ceased to be such due to the progress of medical science. Illnesses or conditions like tetanus and snake bite are no longer generally regarded as fatal, because of the ready availability of relief save in exceptional cases. To refuse to take account of available treatment in any and every case (as her Honour's approach to construction indicates) would be to convert the Policy into a lottery ticket without textual justification and contrary to a fair, commercial and reasonable reading of it. A person with an accidentally cut finger who (without reason) declined all offers of assistance, choosing to bleed to death for want of staunching the wound, would be regarded as the cause of his or her own demise. It would in the circumstances be absurd to regard that person as having suffered an illness or condition highly likely to result in death within 12 months, or any time. This and other examples indicate that matters took a wrong turning in her Honour's approach to interpretation. 35 The Policy will inevitably throw up difficult issues. The present case is one that is factually contestable on medical grounds. 36 Other cases may be problematical for different reasons. For example, an illness might befall a person whose financial circumstances made it uncertain whether he or she could and/or would choose to have access to treatment without which there would be a high likelihood of death within 12 months. Another hypothetical might involve an illness treatable through blood transfusion that befell a person whose religious beliefs made it unlikely that a transfusion would be accepted. I imply no conclusion in relation to these hypotheticals. The factual issue 37 Her Honour's conclusions (at J78-81) are set out above. 38 The appellant submitted that the evidence of the experts rose no higher than supporting a conclusion that death within 12 months was the outcome that, as at the date of diagnosis, would follow more probably than not from the progression of the disease if treated in accordance with what was available to the respondent, both practically and financially. An aspect of this submission was the argument that her Honour had erred in her analysis of the meaning of the words "highly likely" in the particular context. 39 Mr Hutley SC submitted that Bergin J erred in that she dissected the phrase "highly likely" into component parts. Alternatively, she equated high likelihood with mere probability. Alternatively, it was submitted that "highly likely" was synonymous with "highly probable" , a standard of persuasion not reached in the present case. I do not accept that these submissions do justice to her Honour's reasoning. 40 Senior counsel for the respondent defended the decision on the basis that it was the product of acceptance of oral evidence tested in cross-examination, the decision not being shown to be erroneous in any respect. Particular reliance was placed upon the conclusions stated at J81 (set out above). 41 In my view, the judge's conclusion that the Policy responded has not been shown to be wrong either in its approach to construction of the Policy or its application to the facts at hand. 42 Dr Dodds' latest medico-legal report was dated 3 March 2004 (Blue 348) and, so far as relevant, stated: A diagnosis of lymphoma was made on 1st May 2002 by Dr Ben Goodman of Laverty Pathology. He reported the biopsies as showing gastric mucosa with infiltration by diffuse large cell malignant lymphoma of B cell origin. The small bowel mucosa showed no definite abnormality. CT scanning performed on the 2 nd May and reported by Dr Andrew Csillag revealed enlargement of mediastinal lymph glands in the chest and multiple pulmonary lesions. This suggested wide-spread involvement by the lymphoma. A subsequent radionuclide gallium study on the 22 nd May 2002 was reported by Dr Szeto and revealed increased gallium accumulation in the stomach and the left lung. Blood tests arranged on the 3 rd May and performed by St Vincent's Pathology showed no evidence of circulating lymphoma cells in his blood and no paraprotein. His blood count was normal except for a mild lymphopenia of 1.2 x 10 9/L. His LDH level was normal at 385 units per litre and the routine biochemistry tests were also normal. A second opinion was obtained from Dr J Turner of St Vincent's Hospital on the 3 rd June 2002, which confirmed the original results. In summary, Mr Farkas had generalized intermediate-grade non-Hodgkin's lymphoma of poor prognostic type because of the involvement of multiple extra nodal sites of disease.

At this stage his illness was highly likely to result in death within 12 months and because of that I sought opinions from other members of my department at St Vincent's Hospital and from Professor Graham Young, Clinical Associate Professor of the Department of Medicine and Deputy Director of the Kanematsu Laboratories, Royal Prince Alfred Hospital, with Professor D Raghaven, the Associate Director, Comprehensive Cancer Centre University of Southern California School of Medicine, and by email with Professor James Armitage of the University of Nebraska Medical Centre, USA. Professor Armitage is a world authority in the treatment of non-Hodgkin's lymphoma.

It was decided, because of the serious nature of Mr Farkas' condition, to treat him with 6 chemotherapy session of CHOP together with MabThera, an antibody used to improve the response rate of the CHOP treatment. On the 22 nd June 2002, Mr Farkas underwent a further gastroscopy carried out by Dr Mistilis. The histopathology report showed no evidence of lymphoma in the stomach but it was felt that the depth of the biopsies was not sufficient to be sure of this and thus Mr Farkas completed his chemotherapy course.

Because of the high likelihood of relapse of his disease it was decided to treat him further with an autologous stem cell transplant. He underwent this procedure in November 2002, which required his stay as an inpatient in St Vincent's Hospital for approximately 1 month. During that period he did suffer some complications but recovered from the procedure and currently remains in remission. There remains however a significant risk of relapse of the lymphoma and ultimately death from it.

43 Each of the witnesses acknowledged the respected status of a document referred to as the Shipp Report. It was a paper written in 1993 entitled A Predictive Model for Aggressive Non-Hodgkin's Lymphoma . Dr Dodds agreed that this report constituted the recognised prognostic index, referred to as the International Prognostic Index (IPI). The IPI and the age-adjusted index operated to predict the risk of death of a person diagnosed with progressive non-Hodgkin's lymphoma. Dr Dodds agreed that, according to the IPI and its age adjusted index, the respondent's risk of death within one year was "about 50%" (J58). He also recognised that medical developments since 1993, particularly combination chemotherapy, had "transformed aggressive non-Hodgkinson lymphoma from a fatal disease into one which is often curable" (J59). 44 His evidence as set out at J59 nevertheless explained that the IPI was a statistically-based predictive model that could not be regarded as directly applicable in its clinical application to a particular patient. He demonstrated (in the evidence summarised at J59-60) that the symptoms presented by the respondent disclosed a particularly aggressive form of cancer that led him to the opinion, an opinion to which he adhered, that as at the point of diagnosis, the prognosis for Mr Farkas was gloomier than the statistical prediction. Dr Dodds referred in particular to the gastrolymphoma and the multiple extranodal sites that were involved (Black 52, 54. See also Blue 386-7). 45 Associate Professor Young gave evidence to the effect that, even with treatment, death within 12 months appeared highly likely as at 1 May 2002. The lengthy passage of evidence set out that J68 shows that this opinion was predicated upon the assumption that the patient would undertake the usual therapy available at the time. Dr Young also addressed the IPI statistics and, like Dr Dodds, adhered to the view that survival for this particular patient was not a probability (speaking in lawyers' terms) at point of diagnosis in May 2002. The key portion of his evidence was as follows (Black 35-7): Q. Would you agree that at the time of diagnosis, on the assumption that he would undertake the usual therapy? A. Yes.

Q. Appropriate to persons suffering this condition? A. Yes.

Q. That his chance of surviving twelve months from the date of diagnosis, that is May 2002, was something better than 50/50? A. No, I would not, and I don't think Professor Szer says that either.

Q. What do you say his chances were of surviving better than twelve months as at the date of diagnosis on the basis of his receiving the usually treatment, or can't you say? A. I think it is very difficult to say because there are features to Mr Farkas' case, not only did he have stage four disease involving with a gastrointestinal mass, and I have read out the statistics on that, he also had involvement, based on his CT scan, of his lungs, which would have made things even worse. 1. Now, it is very difficult in medical statistics to get patients who are exactly the same and therefore we do end up using statistics which do exactly that and that is average out patients according to their disease and their stage but there are so many other caveats that can change that diagnosis. 1. I find it often very difficult to give precise diagnostic information. I would have said though that in my opinion it would have been less than a 50 percent chance of him surviving twelve months. 1. … 2. Q. You yourself, is it the case, can not put a percentage upon the prognosis for Mr Farkas as at May 2002, is that what you tell her Honour? A. Well, I am saying that I would not agree with this final statement in this report on page 7 (Dr Szer's report) particularly that 50 percent chance. In my opinion it would have been less than 50 per cent.

Q. Well, would it have been significantly less than 50 per cent? A. I would certainly have put it more in the 20 to 30 per cent.

Q. Would you agree with me that this is a matter about which in fact experts with your qualifications can disagree? A. Absolutely. 46 There had been an issue based upon a remark by Dr Young at the time of his consultation to the effect that the respondent had a 50/50 chance of survival. Professor Young gave a more than adequate explanation for this expression based on adoption of an appropriate bedside manner when dealing with a patient with this disease at an early consultation (see J 69-70). His attempt to prevent a patient in shock assuming the worst did not undermine the weight of his prognostic evidence given at trial. 47 Dr Szer had provided a detailed report based on his examination of the respondent's medical records from January 2002 onwards, the report of Dr Dodds dated 3 March 2004 and the report of Dr Young dated 3 March 2004. 48 One of the matters Dr Szer addressed was whether he agreed with the opinion of Dr Dodds that "on diagnosis [the plaintiff's] illness was highly likely to result in death within 12 months" . So far as presently relevant, Dr Szer stated: If the assessment made by Dr Dodds was describing the natural (untreated) history of this condition, I do agree with his contention, but as indicated previously, no reasonable physician would fail to offer combination chemotherapy to a 52 year old patient with this diagnosis in 2002. As such, I am not of the opinion that the plaintiff was highly likely to be dead within 12 months as at May 2, 2002 nor at 13 June 2002 nor at 8 May 2003. One needs to examine old literature to identify the natural history of Stage IV large B cell non Hodgkin lymphoma. 1. … 2. Thus, without therapy, the prognosis would have been dismal for this patient, but with the standard therapy available in May 2002, he would have had an approximately 50% chance of being alive and free of lymphoma at 12 months.

49 The following components of the trial judge's reasoning, with which I agree, may be identified: 1. Dr Szer's conclusion was strongly based upon the statistical probabilities as revealed in the Shipp Report, adjusted to the respondent's age, according to the criteria in that Report. The Policy, however, required more than this in its focus upon the circumstances of the particular insured. Drs Dodds and Young, Dodds in particular, were better placed in this regard and the relevant parts of their analyses did not depend on the no-treatment assumption. 2. The application of the Shipp Report produced a statistical probability just above 50% that the respondent would die less than 12 months from date of diagnosis even with access to reasonably available treatment. 3. Nevertheless, Drs Dodds and Young, Dodds in particular, were well placed as the treating doctors to form the view, which they did in fact form, that for this particular patient death would in all probability ensue within that period notwithstanding treatment. These prognoses were in each case at a stronger level of persuasion than that represented conventionally by lawyers who speak of scales just being depressed in one direction and/or probability to the level of 51%. 4. Bergin J was critical of some aspects of Dr Young's evidence, but her Honour did not reject his testimony (see J80). 5. Bergin J accepted the insurer's submission that the concept of "high likelihood" moved the enquiry into the "realms of probability". But her Honour did not regard mere probability as sufficient. She recognised that "high likelihood" was a concept that could not and should not be reduced to mathematical terms, a fortiori when dealing with a hypothetical event. Her conclusion that the respondent's case was established on the basis that "the likelihood of death in 12 months is high, or, put another way, in all probability death with result within 12 months" should not be read as treating the two statements as necessarily synonymous; but should definitely be read as requiring more than satisfaction on the (mere) balance of probabilities. 50 I agree with her Honour's approach to the issue and am unpersuaded that she erred in the essentially evaluative conclusion that death within 12 months was highly likely even with treatment. 51 As a general proposition, assistance to be gained from statistical material depends upon the data upon which it is based and the scientific credibility of its analysis. Adjustments may call to be made within broad parameters, such as occurred in the present case when the age of the patient is factored in. But common sense as well as the evidence given by the experts in the present case show that no two patients are identical. The presenting diagnosis of a particular patient may reveal a genetic or other background factor that may not be part of the data leading to the statistically-based predictions. Alternatively, the level of intensity of symptoms may enable the clinician to express an opinion as to how closely the patient resembles the statistical "norm", again assuming that one has been able to determine whether or not such symptomology and/or a level of intensity of such symptomology was factored into the statistical data. The clinician's prognosis must be explicable and contestable in accordance with the principles stated in cases such as Makita (Aust) Pty Ltd v Sprowles (2001) 52 NSWLR 705. To be of assistance to the court, it must also express itself in concepts that enable the court to make forensic use of the medical science in the context of the legal issue that is engaged. 52 A medical prognosis is defined as "an assessment of the future course and outcome of a patient's disease, based on knowledge of the course of the disease in other patients together with the general health, age, and sex of the patient" (Oxford Concise Colour Medical Dictionary ). Dr Dodds explained that his prognosis had regard to the statistical guidance of the Shipp Report, improvements in medical science since 1993, and the specific insights drawn from close examination of the respondent's background and presenting symptoms. As indicated, he concluded that: .. Mr Farkas had generalized intermediate-grade non-Hodgkin's lymphoma of poor prognostic type because of the involvement of multiple extra nodal sites of disease.

53 This was undoubtedly a situation illustrative of the observation of Deane, Gaudron & McHugh JJ in Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643 that: 1. … questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration of proof.

54 When a judge or jury decides an issue "on the balance of probabilities" this may occasionally involve application of mathematics associated with the probability theory. But the vast majority of cases entail much more. Even when the issue is the existence or non-existence of a past event the reality is that the decision-maker arrives at a state of reasonable satisfaction having regard to the seriousness of the issues involved, the evidence gathered or not gathered, intangibles such as assessment of the credibility of witnesses, as well as the broad "probabilities" (see generally The Hon Mr Justice D H Hodgson, "The Scales of Justice: Probability and Proof in Legal Fact-finding" (1995) 69 ALJ 731). 55 The present case called for satisfaction to the level of high likelihood. I agree that this involved more than mere probability. It is however necessary to bear in mind that the matter at issue was predictive in the sense of involving proof of a future possibility as distinct from an historical fact. Furthermore, the matter to be predicted was considered by the experts and the court as offering a choice between two possibilities: death within 12 months from the disease or continued existence thereafter. (The possibility of death from other causes within 12 months was not expressly adverted to and it appears to have been subsumed in the "continued existence" category.) This binary focus meant that, to the extent that it is meaningful to speak of a 60% degree of satisfaction that death would occur, a 60 % "likelihood" of death indicates that there was only a 40% "likelihood" that death would not occur. Any attempt to transfer such crude mathematics to the evaluative exercise of determining "high likelihood" needs to bear in mind that the evaluative question would need to be applied to a 60:40 ratio with the 20% gap that this entails. These considerations really point up the non-mathematical aspect of the central issue, but they assist in explaining why I would affirm Bergin J's conclusion in the instant matter. 56 A particular aspect of the factual challenge was the appellant's reliance upon Dr Dodd's statement that the patient's condition placed him "slightly below the centre" or "a little below the middle" of a spectrum extrapolated in some way from the Shipp data (Black 54). According to the appellant, this could not satisfy the contractual requirement of high likelihood given that the IPI statistics suggested a 50/50 chance of survival beyond 12 months, with treatment. 57 The relevant passage of evidence constituted almost the entirety of the re-examination of Dr Dodds and was in the following terms (Black 54): Q. The IPI about which my learned friend asked you about was also described by you as having been achieved in the way my friend asked you about and you agreed with that. Could you tell her Honour please is there any specific statistical treatment of a subcategory of the condition that you have described as rare, causing concern to you and your colleagues and justifying additional treatment for Mr Farkas, in the IPI index about which my learned friend asked you? Is there specific statistical treatment of that subcategory of disease? A. Well, he showed me a section which looked at gastrointestinal tumours. That's the only one I could point to.

Q. Now, gastrointestinal tumours will include only one kind of tumour, only one extent of tumour, or does it include a range? A. No, there's a range of different histological types of gastrointestinal tumours. Some have a very good prognosis and may respond to antibiotic therapy. Some have a very grave prognosis and are universally fatal.

Q. On that spectrum where in your clinical judgment did you place Mr Farkas?

OBJECTION (HUTLEY). NOT ARISING OUT OF CROSS-EXAMINATION. QUESTION ALLOWED.

Q. Where on that spectrum that you have described did Mr Farkas' case place itself in your clinical judgment when you commenced your treatment of him? A. Well, I placed it slightly below the centre. He did have a large cell lymphoma but I was ---

HER HONOUR: Q. He did have a large? A. A large cell - the type of lymphoma the Shipp report is dealing with. But I was concerned about the extent of involvement elsewhere in the body. So I put it a little below the middle, I would say.

WALKER: Q. When you say below you mean, from the patient's point of view, worse or better? A. A worse prognosis, yes. 58 I do not think that this evidence compelled her Honour to reject the respondent's case. I do not read the passage as indicating that Dr Dodds was resiling from his stance of merely qualified acceptance of the IPI statistics, graphically indicated near the end of his cross-examination when he said (Black 53): I don't have a single patient who survived in this situation. That's I guess an experience that sticks in my mind. The situation he was speaking of was survival beyond 12 months notwithstanding "CHOP therapy" . I read Dr Dodds' evidence in re-examination as adhering to a firm assessment that this particular patient was expected by him to die within 12 months, despite treatment. This was material which (taken with the evidence as a whole) justified her Honour in reaching her ultimately evaluative conclusion favourable to the respondent. 59 Dr Dodds had earlier described the IPI as a "broad overall prognostic index" . He saw it as having a problem relating to particular rarer sorts of lymphomas in that "if you looked at those solely, you would have a different figure from if you looked at the group as a whole" (Black 48). He considered the IPI was problematical "because it is a statistical analysis and of course it doesn't deal with the individual case" and "there are individual cases to produce that range of 50% which were better and which were worse" (Black 49). Disposition 60 The declarations and orders made by Bergin J addressed several matters beyond those of present concern. As regards the issues debated in this Court there is no declaration addressing what I have termed the general construction issue. Rather, the declarations and orders go directly to the question of the respondent's entitlement to be paid the benefits in question. In those circumstances, dismissal of the appeal will not entail acceptance of her Honour's views on the construction issue. 61 The parties are agreed that there is a slip in the fourth declaration in that its reference to The parties are agreed that there is a slip in the fourth declaration in that its reference to "Order 5" should read "Order 7" . It is appropriate for that correction to be made. Subject to it, the appeal should be dismissed with costs. 62 BEAZLEY JA: I agree with Mason P. 63 TOBIAS JA: I agree with Mason P.

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