Tower Australia Ltd v Karim Shakir

CATCHWORDS: Insurance company seeking return of monies paid to insured under a sickness and accident policy on the basis of non disclosure and misrepresentation - standard of proof and whether met

Derry v Peak (1889) 14 App Cas 337 Pendlelowy v Colonial Mutual Life Association Society (1912) 13 CLR 676 Timothy Muggleston v National Mutual Life Association (2004) NSWSC 913 Briginshaw v Briginshaw (1938) 60 CLR 336 CASES CITED: Neat Holdings Pty Ltd v Karajan Holding Pty Ltd (1992) 67 ALJR 170; 110 ALR 449 Rejfek v McElroy (1965) 112 CLR 517 Davis v Council of City of Wagga [2004] NSWCA 34 Ferguson v McDonalds Australia Pty Ltd [2005] NSWCA 401 Kappadoukas v Fransepp Pty Ltd [2006] NSWCA 366 Waterways Authority v Fitzgibbon (2005) 221 ALR 402; [2005] HCA 57

PARTIES: Tower Australia Ltd Karim Shakir

COUNSEL: Mr R Cavanagh (Plaintiff) Mr J Young (Defendant)

1 The plaintiff ("Tower") seeks to recover payments in excess of $92, 000 made to the defendant ("Mr Shakir") pursuant to a policy of life insurance that had been taken out by Mr Shakir with an insurer whose obligations Tower has, it is agreed, taken over. I shall refer to Tower in these reasons without distinguishing between it and its predecessor.

2 The policy as originally effected (in February 1994) had an exclusion of any condition relating to the back. The "back exclusion" was removed on the application of Mr Shakir (through a broker) on 6 April 1995, following submission of a "back questionnaire" that Tower required answered, and which was answered by Mr Shakir (see Exhibit A, p.24).

3 In the questionnaire dated 20 March 1995 Mr Shakir made reference to an incident with his back in September 1992 (which I shall refer to as "the tennis incident") which he had referred to in the original proposal as an incident in October 1992 (see page 11, Exhibit A) and as a result of which the insurer had included the back exclusion but by his answers indicated that he had no back pain since September 1992. He said it had been a single episode and not recurrent - that in September 1992 he had been off work for two days and that the last symptoms were experienced in September 1992. Question 8 asked "when did you last receive treatment and from whom?" to which he answered "no treatment needed". It said he had no residual impairment of any kind and was "not bothered in any way". He was asked for the name and address of any doctor seen or physiotherapist or chiropractor consulted and gave the name and address of Dr. Brian G Marshall (question 12). He declared that he had given true answers and not withheld any information (see Exhibit A, p. 27). A letter from Mr Shakir's broker on 27 January 1995 made the statement that he had "not the slightest problem with the back area at all" (see Exhibit A, p.16).

4 Tower's case is that the answers provided to it by Mr Shakir in the questionnaire and the statement in the broker's letter of 27 January 1995 that he had "not had the slightest problem with the back area at all" since 1992 were false because he had experienced back problems in January 1995 and was undergoing treatment for it for a number of weeks preceding the completion of the questionnaire, even on the day that he signed the questionnaire.

5 Tower called Dr Cheng, a general practitioner specialising in acupuncture, whom Mr Shakir had consulted in January to May 1995, tendered Dr Cheng's notes and a report from Dr Cheng. Dr Cheng was cross examined.

6 The only issue it was agreed by counsel (Mr J Young appeared for Mr Shakir and Mr R Cavanagh for Tower) is whether Tower had established that Mr Shakir did attend on Dr Cheng in relation to his lower back. It was agreed that if he did not there was no non-disclosure and misstatement. If Tower succeeds there is no dispute that it is entitled to recover the amount claimed, i.e. $111,248.89 to 5 October 2007 inclusive of interest and $25.35 per day thereafter up to 26 October 2007, being a total of $112,781.24.

7 Dr Cheng's notes, if accurate, establish that (a) Mr Shakir first saw Dr Cheng on 28 January 1995 complaining of lower back pain. (b) Mr Shakir described himself as suffering from recurrent back pain over a 10 year period (c) he had had, as at 28 January 1995, significant increase in pain over the two days prior, i.e. from 26th January 1995 (d) Mr Shakir told Dr Cheng he had previously had chiropractic treatment for his lower back problem (e) Dr Cheng treated Mr Shakir's lower back with acupuncture and on occasion electrical impulses and on other occasions infra red treatment over approximately 15 visits in a period from 28 January to 27 March 1995 (f) on the first visit Mr Shakir told Dr Cheng he had had a CT scan of his lower spine (g) Mr Shakir, at Dr Cheng's request, brought a copy of the CT scan on the second visit (h) the CT scan confirmed that Mr Shakir had a disc bulge in his lower spine with no nerve compression.

8 Mr Shakir's position in his affidavit was that he had not had a problem with his lower back in January to March 1995 and had not seen Dr Cheng for any problem with his lower back. He asserted that he had seen Dr Cheng due to a problem he had with his shoulder "as it had been stiff for the last couple of months" (para. 41 of his affidavit) and that he had never told Dr Cheng that he had a recurrence of lower back pain nor did he tell Dr Cheng that he had had a ten year history of lower back pain. He said he had had no noticeable back pain since the episodes in 1992 (see paras. 42 and 43). In paragraph 44 of his affidavit Mr Shakir said that he had had "absolutely no episodes of lower back pain since the incident in September 1992" (emphasis added.)

9 Mr Shakir asserted in his affidavit that the pain in his shoulders had been as a result of playing tennis (para. 43).

10 There was agreement that to succeed Tower had to establish that Mr Shakir, in providing information through his broker on 27 January 1995 that he had "not the slightest problem with the back area at all" since 1992 (see page 16, Exhibit A) and/or by reason of the answers to the questionnaire (page 24, Exhibit A), had made statements that were false and that were made (a) with knowledge of their falsity or (b) without belief in their truth or (c) recklessly not caring whether they were true or false (See Derry v Peak (1889) 14 App Cas 337, 334; Pendlelowy v Colonial Mutual Life Association Society (1912) 13 CLR 676 at 680; Timothy Muggleston v National Mutual Life Association (2004) NSWSC 913 [46]) Although the contention by Tower was that there was also non-disclosure, the matters said to be not disclosed mirrored the statements said to have been false.

11 Mr Young in his submissions asserted that since Tower was asserting fraudulent non-disclosure and misstatement on the part of Mr Shakir it had to discharge a heavy onus. He made reference to the test in Briginshaw v Briginshaw (1938) 60 CLR 336 per Barwick CJ at pp. 361-362: "The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency". Reference was also made to the case of Neat Holdings Pty Ltd v Karajan Holding Pty Ltd (1992) 67 ALJR 170; 110 ALR 449, in which it was said at p.450 that a Court should not lightly make a finding on balance of probabilities that a party to civil litigation has been guilty of fraudulent or criminal conduct per Mason CJ, Brennan, Deane and Gaudron JJ. To these citations can be added Rejfek v McElroy (1965) 112 CLR 517, 521 in which it was said that what is required is proof that is clear and cogent, so as to induce, on a balance of probabilities an actual persuasion of the mind as to the existence of fraud and that the degree of satisfaction required may vary according to the gravity of the fact to be proved.

12 Mr Cavanagh accepted that what has come to be known as "the Briginshaw standard" was applicable but he resisted the elevation of the test to almost 'beyond a reasonable doubt level'.

13 I proceed on the basis that the assertion that an insured has made a statement with knowledge of its falsity or without belief in its truth, or recklessly not caring whether it was true or false is a serious allegation and I take that into account in determining whether I am satisfied on balance of probabilities that the statements Mr Shakir made to Tower on 27 January 1995 and on 20 March 1995 were false and were made fraudulently.

14 Mr Young indicated that he did not seek to impugn Dr Cheng's honesty but rather attacked the reliability of his notes. The attack included an attack on the professionalism of Dr Cheng because it was argued that no competent doctor would have noted what Dr Cheng said he noted about Mr Shakir's condition having continued for 10 years and yet not referred him to a specialist, choosing rather to commence and continue treatment for 2 months. Dr Cheng explained that he would take a history for the patient both as to symptoms and treatment (as he had done here) and would consider the material in determining the appropriate treatment. He also said that he would only continue treatment if the patient indicated that he was getting some benefit (T14.50, T22.30-36).

15 As Mr Young conceded the only part of what is recorded in Dr Cheng's notes which Mr Shakir, in his oral evidence, denied having said was that he had had lower back pain for 10 years.

16 Dr Cheng appeared to me to be a careful and absolutely honest and reliable witness.

17 I do not accept Mr Young's argument that Dr Cheng was shown to be unreliable in any way or that there is any basis for the asserted lack of professionalism. Dr Cheng conceded that he did not write down everything Mr Shakir told him about his problems and he accepted the possibility that there had been some treatment to an area other than the lower back but nothing he said undermined confidence that what he had written was what he regarded as the relevant essence of what was said to him, and that the lower back was the focus or main focus of the complaints by, and treatment provided to, Mr Shakir. I should note that it was not put to Dr Cheng that he only treated Mr Shakir's shoulders but rather what was put to him was that he had treated Mr Shakir's "upper back around the shoulders area" (T21.50-T22.8).

18 Mr Young referred to the need for caution in relation to doctors' notes. He did not refer to any authorities but cases such as Davis v Council of City of Wagga [2004] NSWCA 34, Ferguson v McDonalds Australia Pty Ltd [2005] NSWCA 401, Kappadoukas v Fransepp Pty Ltd [2006] NSWCA 366 and Waterways Authority v Fitzgibbon (2005) 221 ALR 402; [2005] HCA 57 indicate that the Court should be careful in accepting as reliable doctors' notes particularly where the notes deal in passing with the matter said to be erroneous. In this case the critical question is for what condition did Mr Shakir attend on Dr Cheng and what did he tell Dr Cheng. It could only be by reason of the grossest error that Dr Cheng could have written what he did write if Mr Shakir had seen him about a problem with his shoulder, and had given no history of problems with his back. Dr Cheng's notes detailed a reason for the attendance. There is nothing internally inconsistent with the notes that would point to an error in recording. Dr Cheng and Mr Shakir both speak English well and there was no suggestion of a communication problem.

19 Mr Shakir, in his oral evidence, said that the stiffness in his shoulders, which had led him to seek treatment from Dr Cheng, had been brought about by golf (T30.40-55, T55). There was extensive cross examination as to Mr Shakir's knowledge of golf which might well lead to a view that Mr Shakir knew little of the game, but more importantly a golfing injury was a different reason to that which he had advanced in his affidavit. The difficulties Mr Shakir had with golf questions seemed to lead him to later be unable to say whether tennis or golf was the reason for the claimed shoulder problems: T94.45.

20 Mr Shakir initially continued with the assertion that he had gone to see Dr Cheng about muscular tension in his shoulders (T51) but later he asserted that Dr Cheng had treated his shoulders and lower back as "one unit" (see T79.55). When cross-examined about where precisely the shoulder problem was he demonstrated initially an area which did not involve the back (T51-52) but later he pointed to an area that did involve the back (T55-56), although he said he called this "the shoulders". He seemed to accept at T94.15 that he did have a problem with his upper back and did have treatment for that (T94.10). That, if true, was itself not consistent with what he had told Tower.

21 Mr Shakir did not deny that he had told Dr Cheng that he had seen a chiropractor. His explanation for saying that he had seen a chiropractor related to a claim that he was referring to a massage he had had from a woman who was looking after his wife and was quite implausible (T80-T82).

22 At one point Mr Shakir asserted that he did not regard acupuncture as treatment: T93.10. That had not been advanced by him in his affidavit as a reason for not referring to acupuncture in the questionnaire (see para. 47 of his affidavit). That he regarded acupuncture as a relevant treatment for his back by 2000 is demonstrated by the report of his general practitioner Dr Richard Shorrock-Brown (Exhibit A, p.148) in which Dr Shorrock-Brown mentions that Mr Shakir had told him he had tried acupuncture for his back (see also Exhibit A, p.141, the report of Dr Michael Crouch). That he had told others that he had had chiropractic treatment is confirmed by Dr Bodel's report (Exhibit A, p.126).

23 Mr Shakir saw Dr Cheng on the same day that he completed the back questionnaire and he made no reference to Dr Cheng as someone he was seeing in connection with any part of his back.

24 Mr Shakir explained that he did not understand question 4 to be asking about muscular back pain but the question makes it clear that that was part of the information the insurer wanted (see T90.15, T91, T94.15).

25 In paragraphs 37-40 of his affidavit Mr Shakir asserted that he believed that he was only being asked about the 1992 tennis injury when completing the supplementary back questionnaire on 25 March 1995, but as Mr Cavanagh pointed out, in cross examination Mr Shakir acknowledged that he knew that the questions required answers in respect of anything at all about his back condition between the 1992 tennis injury and 20 March 1995 (T87-88).

26 Mr Shakir originally denied that he had received chiropractic treatment for his back or said to Dr Cheng that he had (see his affidavit, p. 46) but at T79.26 he said he may have and later in cross examination accepted that he told Dr Cheng that he did: T96.1-16. At T94.15 Mr Shakir said that he had had muscular tension that he had gone to see Dr Cheng about it "and he treated my back".

27 At some points Mr Shakir seemed to endeavour to present his position as being that whilst he had back problems they were not sufficient to lead him to being disabled and taking time off work (see for example: T90, T91.4, T100.45-100.57). Tower had sought information about any back problems not only those for which Mr Shakir, who was self employed, had taken time off work. This merging of the answer to the question as to how long he had been troubled by his back and how long he had been off work was apparent at T38-T39 where Mr Shakir was cross examined about the earlier questionnaire at page 11, Exhibit A. Mr Shakir said that the back problem he had in October 1992 had lasted only two days but then spoke of muscular tension (T39.35) "but not a back problem or something to stop me from working or playing tennis or golf", but at T40 he asserted that he had no noticeable back pain.

28 Mr Shakir in his affidavit (paragraph 36) denied having given instructions to his broker to send the letter of 29 January 1995 (Exhibit A, p.16) and initially in cross examination he seemed to resist any suggestion that he had: T43, but later he did accept that he had (T49, T50.25).

29 It is somewhat surprising that Mr Shakir initially denied having given instructions for the letter to be sent since what was contained in the letter was consistent with the position that he had adopted in his affidavit and initially in his oral evidence, namely that he had had no problems with his back since 1992.

30 I have referred in a number of specific respects to Mr Shakir's evidence. Overall, and contrary to the submissions of Mr Young, I thought he was demonstrated to be inconsistent, evasive and unconvincing.

31 Mr Shakir called two further witnesses - Mr Balagtas, a friend, and Mr Ghannoum, a relative. The evidence of both was that they had never heard Mr Shakir complain of having a back problem nor observed him having such a problem. That they were not aware of any problems was itself of limited import but their evidence was reduced in significance further by the fact that Mr. Balagtas' main contact with Mr Shakir had been in the 1980s and his recollection of his contact with Mr Shakir in the 1990s was quite vague and he was not aware of the tennis incident in 1992. Mr Ghannoum knew nothing of any of Mr Shakir's health problems even those of which Mr Shakir was complaining other than that he had had a car accident at some point. He saw Mr Shakir at family functions irregularly and would not discuss with Mr Shakir his own or Mr Shakir's health: T149.

32 Having regard to all of the evidence I am comfortably satisfied that Dr Cheng's notes are accurate and that Mr Shakir told Dr Cheng he had a recurrence of low back pain from 26 January 1995, that as at January 1995 he had had 10 years of recurrent back pain and that between January and March 1995 Mr Shakir received treatment from Dr Cheng for the back pain from which he was suffering.

33 There was no dispute that if Mr Shakir did see Dr Cheng for back pain and received the treatment that Dr Cheng records him as having, Mr Shakir's statements to Tower were false. It was conceded that if the answers were false then Mr Shakir had fraudulently misstated the position to Tower. In my view that concession was correctly made because the timing is that one or two days after his back problem had recurred Mr Shakir instructed his broker to tell Tower that he had not had the slightest problem with his back and then in March whilst still undergoing treatment from Dr Cheng he gave answers to Tower that were false and which must have been known by him to be false.

34 Tower has established that Mr Shakir gave false answers to Tower which he knew to be false and hence Tower is entitled to recover monies paid out to Mr Shakir on a policy that would not have had the back exclusion removed but for Mr Shakir's fraudulent misstatement and non disclosure. There will be judgment for the Plaintiff in the amount of $112, 781.24 and an order that Mr Shakir pay Tower's costs.

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