Supreme Court New South Wales Medium Neutral Citation: Catriona Smith v OnePath Life Limited [2020] NSWSC 1185 Hearing dates: 3, 4 August 2020 Decision date: 02 September 2020 Jurisdiction: Equity - Commercial List Before: Hammerschlag J Decision: Summons dismissed. Catchwords: INSURANCE LAW – Insurance Contracts Act 1984 (Cth) – Life insurance policy where the insured gave false answers to questions about his use of drugs – Whether he failed to comply with his duty of disclosure or made misrepresentations – Whether such failure was or the misrepresentations were fraudulent – Whether the insurer would have entered into the policy in any event – Whether the insurer was entitled to avoid the policy – HELD – The insured fraudulently failed to comply with his duty of disclosure and fraudulently made misrepresentations – HELD – The insurer would not have entered into the policy and legitimately avoided it. Legislation Cited: Insurance Contracts Act 1984 (Cth), ss 21(1), 26(2), 29(1)-(2) Cases Cited: Briginshaw v Briginshaw (1938) 60 CLR 336 CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 Lamb v Johnson (1914) 15 SR (NSW) 65 Permanent Trustee Australia Limited v FAI General Insurance Company Limited (In Liq) (2003) 214 CLR 514 QBE Underwriting Ltd as managing agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd [2018] NSWCA 55 Stealth Enterprises Pty Ltd t/as The Gentlemen's Club v Calliden Insurance Limited [2017] NSWCA 71 Tyndall Life Insurance Co Ltd v Chisholm (2000) 11 ANZ Ins Cas 90-104 Category: Principal judgment Parties: Catriona Smith – Plaintiff OnePath Life Limited – Defendant Representation: Counsel: J E Sexton SC with H J A Neal – Plaintiff J Gleeson QC with S J Walsh – Defendant Solicitors: StevensVuaran Lawyers – Plaintiff Moray & Agnew – Defendant File Number(s): 2017/366808 JUDGMENT 1. HIS HONOUR: The late Peter Larcombe (to whom I shall refer as Peter, with no disrespect intended) committed suicide on 19 August 2016 by jumping from the roof of a parking structure at 9800 South La Cienega Boulevard, Los Angeles, California. 2. A dearth of evidence was adduced about the circumstances of Peter's death. The death certificate records him as never married and living in Dubai. He had a bodyguard and was embroiled in a significant controversy surrounding an alleged major fraud. There were allegations that he had stolen millions of dollars. 3. Peter was a cocaine user, a drinker and a smoker. Occasionally, he used drugs other than cocaine. 4. On 21 November 2014, that is, some 19 months before he died, Peter took out a life insurance policy (the Policy) with the defendant (or the insurer). The policy amount, after indexation, is $2,625,000. [1] 5. The plaintiff, to whom he was married, and to whom I shall refer as Catriona, is the nominated beneficiary under the Policy. 6. She has claimed under it. The insurer has declined cover, saying that it has avoided the Policy [2] because Peter fraudulently failed to comply with his duty of disclosure and made misrepresentations about his smoking and drug use. 7. For the reasons which follow, the insurer was entitled to avoid the Policy. THE FACTS The Application Form 1. On 30 October 2014, Peter signed an Application Form (the Application) for the Policy. It was lodged with the insurer on 6 November 2014. 2. The Application drew attention to the applicant's duty of disclosure under the Insurance Contracts Act 1984 (Cth) (the Act) to disclose to the insurer every matter he knew or could reasonably be expected to know which was relevant to the insurer's decision whether to accept the risk of insurance and, if so, on what terms. The Application included a questionnaire. Where a 'Yes' or 'No' answer was to be given, there was a box to be ticked. 3. Under the heading 'Personal Health Statement', it asked: 3. During the last 12 months, have you smoked tobacco or any other substance? [Question 3] 1. Peter answered 'No'. The answer was false. 2. Under the heading 'Medical History', it asked: 25. Have you within the last five years had any other illness, injury, operation, X-ray, electro-cardiogram, blood transfusion, any other special tests or been advised to have a blood test for any reason? [Question 25] … 30. Do you take, or have you ever taken drugs or any medications on a regular or ongoing basis? [Question 30] … 31. Have you ever used or injected any drugs not prescribed for you by a medical attendant, or have you ever received advice, counselling or treatment for drug dependence? [Question 31] 1. Peter answered 'Yes' to Question 25. 2. Peter answered 'No' to both Questions 30 and 31. The answers were false. 3. The questionnaire went on to state, 'If you answered "Yes" to any questions from 9-34 and 36, please complete the following table.' It made provision to specify the question number to which the applicant had responded 'Yes' and then asked questions about disability, illness, injury, or condition and type of treatment. Peter specified Question 25 and provided the following information: BLOOD TEST – HEALTH CHECK ALL CLEAR DATE DONE – 08/14 1. As to type of treatment, he answered: N/A – HEALTH CHECK DUE TO AGE. 1. The health check to which he referred was not due to age but, rather, due to him having binged on cocaine. 2. Further on, the questionnaire asked for details of his usual doctor or medical centre. He identified his usual doctor as Dr Daniel Hameiri. He stated that his last visit to this doctor was '1 month ago' for a 'health check', and that the outcome, including medication, treatment, etc., was 'N/A'. In a sense, the visit to Dr Hameiri was for a health check, but the need for a check arose from his cocaine binge. Drugs 1. Catriona was the only witness in her cause. She swore affidavits on 15 November 2018 and 7 February 2019, which were read. Her affidavits largely deal with her observations of Peter's drug use. She was cross-examined at some length. 2. Early in the proceedings, the Court gave leave to the insurer to administer interrogatories to Catriona about Peter's drug use. 3. Peter was born on 15 May 1978. Thus, he died at age 38. 4. He was university educated, with a Bachelor of Commerce and a Master of Applied Science. 5. The evidence deals with Peter's history essentially from the time he met Catriona. 6. They met (she refers to him as Pete) in 2008 at a mutual friend's 30th birthday party, after which they struck up a relationship. Peter was working for a capital raising company and was living in Bondi. Catriona was living in North Bondi. 7. In answer to an interrogatory, she disclosed that in 2008, Peter used ecstasy tablets on one occasion at a house party. She also saw him take ecstasy at parties two or three times in 2009. 8. On New Year's Eve 2008/09, about 3 months after they started dating, they went to two parties where, she says, for the first time she saw him and others 'snorting cocaine', that is, inhaling it through the nose. Her evidence was that he used 'maybe eight or nine lines' between approximately 9:30pm and 2:00am. She remembers being at the second party and in the bathroom 'doing it there, seeing it there.' I gather she was a participant in the activity. Her best recollection was that he did 'one or two bags.' A bag holds a gram. 9. Peter had a dealer who supplied him with drugs. 10. In January or February 2009, Peter was made redundant by his employer. 11. In about March 2009, they moved in to an apartment in Bondi Beach, which Peter owned. 12. On 12 June 2009, they attended a fundraising ball in the city. Afterwards, they went to a club (or bar) at Darling Harbour. There, Catriona went with Peter and others to the handicapped toilets where they snorted cocaine. Peter used nine or ten lines, equating roughly to one or two bags, over the course of the evening. He obtained the substance from his dealer. 13. Catriona says that, at times, Peter would go 'AWOL' [3] . He would go out (presumably with friends) and not come home for a night or two. He would be unreachable on his mobile phone. These episodes would happen mostly after they had fought. 14. On 19 February 2010, they celebrated Catriona's 30th birthday. They held a party in their apartment for 30 or 40 guests. Peter and others snorted cocaine. Peter organised the supply through a dealer. 15. On 12 March 2010, they went to a 30th birthday fancy dress party at a function centre in Kings Cross. Peter and others snorted cocaine. The night ended badly. They were walking home and had a fight in the street. Added to the cocaine he had taken, Peter was drunk on rum. Catriona was physically injured, I infer, by Peter. Someone called the police. When the police arrived at the scene, at 5:30am, Catriona was lying on the ground bleeding from a laceration to her head. She told Peter to 'get away' from her. She was concerned particularly about the fact that 'it had got physical.' 16. Catriona moved out but they got back together in about July 2010, although they did not go back to living with each other at that time. They broke up again in about April 2011. 17. On 19 November 2011, they met at a party in Bondi. This time, Catriona supplied cocaine. She had obtained it through a friend at work. She and Peter used it. 18. They slowly rekindled their relationship over the next couple of months. By this time, Peter had started his own company although she says they did not talk much about his work. 19. On New Year's Eve 2011/12, at a party at Peter's apartment, where he was then living with two friends, Peter used one to two bags of cocaine. 20. On 31 March 2012, they went to a wedding near Yass. Peter used cocaine. 21. Catriona became pregnant with their first child in June 2012. She and Peter were engaged shortly before Christmas that year. She says that until March 2013, she did not see Peter take any drugs. Their first child, a son, was born in March 2013. In about July 2013, they moved to a house in Willoughby. Peter took to drinking Chardonnay. 22. In January 2014, they went on holiday to London, Switzerland and Thailand. 23. During this period and until 6 June 2014, she says she did not see Peter taking drugs. 24. However, on 6 June 2014, they met friends to celebrate Peter's birthday and Peter and his friends took cocaine. At this time, their child was about 15 months old. 25. On the weekend of 22 August 2014, they went to Blueys Beach, north of Sydney, with some of Peter's friends. Catriona went to Melbourne on the Sunday night. Peter was supposed to stay with his mother but, unbeknown to Catriona, he stayed instead at the Park Hyatt hotel. She says she did not see Peter taking drugs at this time. 26. Over the weekend of 12 September 2014, Catriona visited her parents in the country. 27. On 15 September 2014, Peter consulted Dr Hameiri at his general practice in Double Bay. Dr Hameiri was called by the insurer and cross-examined, not without some force. 28. He recalled Peter coming to see him after bingeing on cocaine. Dr Hameiri says that Peter told him that he had been found wandering incoherently over the weekend of 13 September 2014 and had no recollection of what had happened. Peter told him that he had been bingeing on cocaine and ice (the colloquial term for the illicit drug crystal methamphetamine). Dr Hameiri's description of Peter was that he came in a 'fairly sort of distressed state'. 29. Peter told him that he was concerned that he had swallowed a plastic bag of cocaine. Peter thought he was possibly going to die because he wasn't sure what he did. Dr Hameiri arranged for a blood test and referred Peter for an ultrasound, which Peter did not undergo. 30. Dr Hameiri's brief clinical notes, as interpreted by him for the Court, record that Peter told him that he was a moderate smoker, regularly drank alcohol and regularly used cocaine. 31. At Peter's request, Dr Hameiri gave him injections of vitamin B and C. 32. After she had returned from the country, Peter said to Catriona, 'I had a massive weekend. My mother took me to see Dr Hameiri for a vitamin B injection.' The reference to the massive weekend was, no doubt, to his binge. 33. On 22 September 2014, Dr Hameiri saw Peter again for a vitamin B injection which, according to Dr Hameiri, is prescribed to ameliorate the effects of substance abuse. 34. Dr Hameiri says that the blood test results showed raised liver function tests which, given Peter's age, was probably caused by alcohol or drug use. He says he discussed a copy of the results with Peter. He again referred Peter for an ultrasound but his recollection is that Peter did not attend for one. 35. In October 2014, they went on holiday to Hamilton Island. 36. In December 2014, they moved to Double Bay. Peter was working long hours and would drink with colleagues after work. 37. Peter took cocaine on New Year's Eve 2014/15. 38. Their second child was conceived in about April 2015. At or about this time, Peter went AWOL for a weekend. 39. At this time, Peter was moving between living at the InterContinental hotel in the Sydney CBD and with his mother. Often, Catriona did not know his whereabouts. They were estranged. She says she did not see him take any drugs. 40. Dr Kiing Hsiang Law is a medical practitioner who practises at Haymarket, Sydney. Dr Law gave affidavit evidence. He was not cross-examined. His consultation notes record that he saw Peter on 25 June 2015. The notes record 'taking cocaine heavily refer to sydney clinic 22-24 murray st bronte needs assessment as support.' 41. Dr Law deposed to the fact that because his records do not record any problem with Peter's cognition, it was intact. The Sydney Clinic is a private clinic which treats patients with drug and alcohol dependence issues. 42. Peter called Catriona to say that he had checked himself 'into rehab.' 43. According to records produced by the Sydney Clinic and admitted into evidence without objection: * Peter was admitted to the Sydney Clinic soon after seeing Dr Law. Some of the clinical notes make reference to 25 June 2015 and some to 26 June 2015. (I think it is more probable than not that, on 25 June 2015, the arrangements were made for his admission but he was actually admitted on 26 June 2015.); * Peter saw medical registrar Dr Greg Been on 25 or 26 June 2015. The doctor's notes record: 25/6/15 Ψ Reg – Been – admission for Dr Sturrock 37 yo man presents with low mood and cocaine abuse Presenting complaint: "I have a binging issue… I have a problem with cocaine, base (amphetamine), ice and pills" 3 years ago took drugs every day for 18 months, was sober for ~ 3 months. "Its like a slippery slope" "Money not really an issue": financially successful/independent Past 5 days had 28g of cocaine "When I start I just can't stop", past month had ~35g Sometimes has hallucinations "I see things, apparitions". Knows they are not real, nil paranoia, nil delusions Has been D & A counsellor for past 1½ months fortnightly Past Ψ Hx Nil formal diagnoses D&A Hx Past issues with most substances, recently only cocaine Past month ~ 3 bottles scotch. Smokes cigarettes only when using cocaine … * Peter used cocaine, 'base' (amphetamine), ice and pills and in the last five days had 28g of cocaine; * Peter went missing from the clinic on 28 June 2020. The police were called. 1. According to Dr Hameiri's records, Peter saw him on 29 June 2015. Arrangements were made for Peter to go to a private rehabilitation facility in Byron Bay, but Peter did not go. 2. Peter and Catriona reconciled in about July/August 2015 but Peter did not move back into the house. They met up in Dubai in October 2015. 3. Their second child, a son, was born on 30 December 2015, when Peter was in Dubai. They went on holiday to America in August 2016. 4. On 19 August 2016, Peter committed suicide. Smoking 1. Catriona gave evidence that Peter smoked occasionally, although there were periods of time where he did not smoke. He smoked every year that she knew him. Typically when he was having a drink he would smoke more than one cigarette and would smoke multiple cigarettes from time to time. 2. From about March 2013, about once or twice a month when they had drinks on the back deck at home, Peter would join her, having a cigarette or two. When Peter drank, he would have five or six cigarettes which he would borrow from her or friends. 3. Dr Hameiri's notes, as interpreted by him, record that Peter was a moderate smoker. Insurer's Acceptance of the Application 1. On 12 November 2014, the Application was assessed by Mr Ian McDonnell, the insurer's Principal Underwriter, who underwrote the application. He gave unchallenged evidence, with reference to his Underwriting Sheet for the Policy, of having reviewed the Application, of his observations and the underwriting checks carried out within the insurer. He accepted the Application for the Policy. [4] 2. Mr McDonnell gave evidence that the insurer followed the underwriting guidelines of its reinsurer, Munich RE. 3. He gave uncontested evidence that: * if Peter had answered 'Yes' to Questions 30 to 31 (about drug use), he would have been required to complete one of the questionnaires that appear on page 16 and following of the Application. [5] * had he become aware prior to 21 November 2014 that Peter had ever taken drugs not prescribed for him by a medical attendant which had not already been disclosed in the Application, he would have requested that Peter complete a Drug questionnaire. [6] * in 2014, he understood from his training and experience as an underwriter, that cocaine and amphetamine use can cause physical and psychological illnesses, lead to dependency, cause incapacity for employment, lead to an increased risk of mortality and presents an unacceptable risk. * all of the reinsurance and insurance underwriting guidelines of which he was aware, including the Munich RE underwriting guidelines, provide that applications for cover were to be declined if there was use of illicit drugs in the 3 years before the application. * had he been aware that Peter had taken any cocaine or amphetamines in the 3 years before 21 November 2014, he would have declined to offer covers on any terms. * had he determined that no covers would be issued because of Peter's cocaine use, he would have not gone on to consider the effect of the use of amphetamines because he would have refused to offer all covers on the basis of cocaine use alone. * had he been asked to assume that, as at 30 October 2020, Peter had in the last 12 months smoked cigarettes, he would in theory had to apply a loading on the premium for all covers but Peter's smoking would not have changed his decision not to offer covers on the basis of cocaine or amphetamine use. The Relevant STATUTORY ENACTMENTS and applicable legal principles 1. The following sections of the Act are pertinent: 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, having regard to factors including, but not limited to: (i) the nature and extent of the insurance cover to be provided under the relevant contract of insurance; and (ii) the class of persons who would ordinarily be expected to apply for insurance cover of that kind. … 26 Certain statements not misrepresentations … (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. … 29 Life insurance Scope (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. Insurer may avoid contract (2) If the failure was fraudulent or the misrepresentation was made fraudulently, the insurer may avoid the contract. 1. References below to sections are to sections of the Act. 2. In Permanent Trustee Australia Limited v FAI General Insurance Company Limited (In Liq) (2003) 214 CLR 514 at [30], McHugh, Kirby and Callinan JJ said in relation to s 21(1)(a), 'The word "knows" is a strong word. It means considerably more than "believes" or "suspects" or even "strongly suspects".' 3. Knowledge imports a level of certainty which may be distinguished from suspicion of belief: QBE Underwriting Ltd as managing agent for Lloyds Syndicate 386 v Southern Colliery Maintenance Pty Ltd [2018] NSWCA 55 at [95]. 4. For the purposes of s 21(1)(b), the relevant state of mind is that of a reasonable person, not that of the insured: CGU Insurance Ltd v Porthouse (2008) 235 CLR 103 at [52]. The test is whether a reasonable person could be expected to know that the relevant matter was relevant. It is not sufficient if a reasonable person could be expected to have a suspicion that the information might be relevant to the insurer's decision: Stealth Enterprises Pty Ltd t/as The Gentlemen's Club v Calliden Insurance Limited [2017] NSWCA 71 at [50]. 5. A fraudulent misrepresentation is a representation which is false and which is made either knowingly, or without belief in its truth or recklessly, not caring whether it be true or false and with the intention that it should be acted upon by the insurer: Tyndall Life Insurance Co Ltd v Chisholm (2000) 11 ANZ Ins Cas 90-104 at 86,140. 6. It is not enough that the insured may have acted carelessly. He or she must be shown to have lacked an honest belief in the truth of his answers. If the insured was consciously indifferent to the truth of his answers, the insured was reckless: Lamb v Johnson (1914) 15 SR (NSW) 65 at 74-75. 7. The onus of establishing fraudulent misrepresentation or non-disclosure rests on the insurer in this case. The allegations are serious. Whilst the civil standard of balance of probabilities applies, the nature of the issue necessarily affects the process by which the requisite degree of satisfaction is obtained: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362-363. The ISsues 1. The following principal issues arise for determination. 1. First, did Peter, in not disclosing his drug use and smoking, fail to comply with his duty of disclosure under s 21(1)? The answer to this turns on whether these were matters which either Peter knew to be relevant to the decision of the insurer whether to accept the risk and, if so, on what terms or a reasonable person in the circumstances could be expected to know it to be a matter so relevant. 2. Second, did Peter, in giving the answers to Questions 3, 30 and 31, make a misrepresentation? The answer to this turns on whether the answers he gave were incorrect and whether either he knew or a reasonable person in the circumstances could be expected to have known that his answers would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. (See s 26(2)). 3. Third, if Peter failed to comply with his duty of disclosure, was his failure fraudulent? (See s 29(2)). 4. Fourth, if Peter made a misrepresentation, did he make it fraudulently? (See s 29(2)). 5. Fifth, if Peter fraudulently failed to comply with his duty of disclosure or made a fraudulent misrepresentation, would the insurer have entered into the Policy even if Peter had not done so? (See s 29(1)(c)). The arguments 1. The Court had the benefit of comprehensive written submissions and oral argument. The Insurer 1. The insurer argues that the answers to each of Questions 3, 30 and 31 were not true because Peter: * had smoked tobacco during the last 12 months; * was taking and had taken drugs (cocaine) on a regular or ongoing basis; * had used drugs not prescribed for him by a medical attendant; * had received advice and treatment connected with drug dependence. 1. It argues that these were matters which Peter knew were relevant to the decision of the insurer whether to insure and, if so, on what terms and that a reasonable person in his circumstances could be expected to have known this. It drew attention to the fact that these were matters which were the subject of specific questions and to Peter's declaration in the Application that he had read of and understood the duty of disclosure. It argues that, at the time of the Application, Peter's known drug use was recent, illegal, serious and had been the subject of medical help. It drew attention to the fact that Peter was highly educated and had years of experience in the finance industry. 2. It argues that the answers were also misrepresentations. 3. It contends for a finding that both the failure to disclose and the misrepresentations were fraudulent. It argues that Peter obviously knew that the answers were wrong and that the circumstances make it difficult to characterise the non-disclosure and representations as anything but intentional or made with a conscious indifference as to their truth. 4. As to the extent and seriousness of Peter's drug use, it argues that the evidence establishes that Peter had a significant and long-standing history of taking a range of illicit drugs, usually cocaine, but also base amphetamine, ecstasy and crystal methamphetamine. It drew attention, in particular, to: 1. Catriona's evidence disclosed no less than 8 occasions from September 2008 to 21 November 2014 on which she saw Peter use cocaine and his use of cocaine on 31 December 2014, two months after the Application; 2. Peter's use of other drugs; 3. Dr Hameiri's evidence that Peter 'binged on cocaine and ice' on the weekend of 13 September 2014 and that Peter had raised liver function, which is consistent with alcohol or drug use; 4. the recording by Dr Law that Peter had been taking cocaine heavily and his referral of Peter to the Sydney Clinic; 5. the history recorded by Dr Been at the Sydney Clinic that, 3 years previously, Peter took drugs every day for 18 months and was sober for approximately 3 months; 6. the recording in the Sydney Clinic records of a 'binging issue', that Peter had a problem with cocaine, base amphetamine, ice and pills, and had had 28g of cocaine in the previous 5 days and 35g over the previous month. 1. It argues that that Peter plainly used drugs more extensively than Catriona's evidence discloses. 2. It relies on the uncontested evidence of Mr McDonnell that the insurer would not have entered into the Policy had Peter's drug use been disclosed or Questions 30 and 31 been answered 'Yes' and his drug use revealed. Catriona 1. The central thrust of Catriona's argument is that Peter used cocaine in social settings, on special occasions or celebrations when a number of people used it in the same way as others may drink alcohol together, and that it was a normal social activity within his social circle, even though it involved illicit drugs. She characterises Peter's drug use as recreational, occasional, irregular and sporadic. She argues that the evidence did not establish any significant use of cocaine beyond that which she gives evidence of having observed. 2. She argues that Peter did not know and a reasonable person in his position would not have known that 'occasional social use of cocaine was relevant to the decision of the insurer to insure his life, in circumstances where he was relatively young, of good health, self-employed in the finance business, earning a good income, and in a de-facto relationship, with one young child.' 3. She argues that he did not breach his duty of disclosure and that his 'No' answers to Questions 30 and 31 should not be taken to be misrepresentations (s 26(2)). 4. She argues that Dr Hameiri's evidence should not be accepted and that Dr Law's evidence and the Sydney Clinic records should be treated with scepticism. 5. She argues that the structure of the Application conveys that the insurer was not materially interested in knowing about a proponent's recreational drug use, or the occasional cigarette, and it was open to a reasonable person in Peter's position to so think. 6. She argues that Question 3, read as a whole, is directed at finding out whether the proponent smokes on a daily basis and that the evidence did not establish this in the case of Peter. She argues that, if it was relevant for the insurer to know whether the proponent smoked occasionally, it would have been very easy to ask. 7. She argues that Questions 30 and 31 are couched in very general language and, read literally, the word 'drugs' could encapsulate non-prescription painkillers, cold and flu tablets or even caffeine and that 'medications' is even broader, and would include herbal remedies, all sorts of creams and ointments, cold presses, lip salves etc.. She argues that it is significant that there is no reference to 'recreational' drugs. She argues that Question 30 requires the drugs or medications to be taken on a regular or ongoing basis, thus requiring a relatively high degree of continuity, as distinct from occasional, irregular or sporadic usage. She argues that Question 31 does not require disclosure of advice, counselling or treatment for occasional, recreational drug use. Drug dependence is required and the evidence did not show that Peter ever received advice, counselling or treatment for drug dependence. 8. She argues that Questions 30 and 31 are in a section titled 'Medical History', and that if he had answered 'Yes' to them, the Application did not make provision for any further information because he did not have any disability, illness, injury, condition or symptoms. 9. She argues that if it was relevant to the insurer to know about a proponent's recreational drug use, it would have been a simple matter to ask that question. 10. A comparison was sought to be drawn by reference to another version of a proposal form also used by the insurer which, it was submitted, was much clearer than the Application. 11. She argues that the Court would not find fraud against Peter for the same reasons it would find no breach of the duty of disclosure or misrepresentation and for the additional 'fundamental reason' that Peter disclosed his half-sister's multiple sclerosis, the identity of Dr Hameiri as his doctor and that he held a pilot's license, as well as the fact that he gave his authorisation in the Application for Dr Hameiri to release details of his medical history to the insurer. This, it was put, is inconsistent with a person engaging in fraudulent non-disclosure or misrepresentation in a proposal for insurance. 12. She puts in issue that Mr McDonnell's evidence establishes that the insurer would not have issued the Policy had Peter complied with his duty of disclosure or not made a misrepresentation. She argues that Mr McDonnell does not say that he took actual notice of the answers to Questions 30 and 31 and does not say that, if Peter had answered 'Yes' to those questions, he would have requested him to complete a Drug questionnaire. As to smoking, she argues that his affidavit evidence does not provide 'counter-factual evidence (independently of drug use)'. He also does not provide information about what the loading would have been. the witnesses 1. It is appropriate, at this point, to make some observations about the viva voce witnesses. Catriona 1. Catriona comes from the country, went to private school in Sydney, graduated in Economics, and occupied a number of responsible positions as a human resources administrator for major law firms in Australia and major law firms and a major accounting firm in London. 2. She is intelligent and articulate. 3. Her affidavits were deftly crafted to place the best and most benign complexion on Peter's drug use. Her oral evidence reflected the same propensity, in seeking to characterise his drug taking as sporadic, recreational, modest, restricted to times of party making and other celebratory social occasions and merely an ordinary incident of their social interaction. She identified only eight occasions of cocaine use by Peter over nearly 8 years. 4. Whilst her evidence of the individual occasions when she observed Peter's drug use, drinking and smoking may be accurate in itself, it does not, because it is restricted to her own direct observations of his use, convey an accurate picture. 5. In my opinion, Peter's use of cocaine was far more regular and serious than her evidence sought to portray. 6. She made a number of references to observing or being present when Peter and her and Peter used cocaine in the company of friends. During cross-examination, she identified no less than 33 individuals with whom he, she or they had engaged in that activity. Dr Hameiri 1. A substantial attack on Dr Hameiri's credit was made. He was criticised for spelling errors and other drafting infelicities in his affidavit and for what was said to be poor note-keeping. Reference was made to some disciplinary proceedings in 2011 which was said to establish that he was not a careful historian or note-taker. 2. He was criticised for failing to respond to a subpoena to produce 'all documents including, without limitation, all publications, brochures, pamphlets or other documents relating to the reasons for prescribing vitamin B and C including, without limitation, injections of vitamin B and C'. 3. The attack on Dr Hameiri's credit was unsuccessful. The criticisms of his evidence were peripheral. Although he made no application to set the subpoena aside, it was plainly oppressive and correctly regarded by him as such. His failure to respond says nothing of his credit. 4. He was a convincing witness with no stake in these proceedings and I believe him. Moreover, his evidence fits well with a significant body of other contemporaneous or reasonably contemporaneous material. 5. Dr Hameiri's notes were on the cryptic side but his interpretation of them was convincing and, in my view, compelling. DISPOSITION 1. Peter's illicit drug use was serious, regular and much heavier that Catriona's evidence reveals. The contemporaneous medical records themselves disclose this. I see no reason to treat those records with scepticism. They sit comfortably with Peter's established binge on the weekend of 13 September 2014, Dr Law's uncontested evidence, Peter's AWOL episodes, his elevated liver function, his vitamin B and C injections, his admission to the Sydney Clinic and the recommendation that he go to the Byron Bay Clinic. 2. The medical records reveal, amongst others, that he had a bingeing issue, a problem with cocaine, base amphetamine and ice, that 3 years before 2015 he took drugs every day for 18 months and had been sober for 3 months, that when he started he just could not stop, and sometimes had hallucinations. 3. To describe his drug use as recreational, occasional, irregular, sporadic or socially acceptable is a mischaracterisation. But even to give it that description does not mean that he was not a regular or a non-trivial user of illicit drugs. 4. He plainly used illicit drugs on multiple occasions not restricted to those when Catriona was there. 5. I reject the submission that Questions 30 and 31 are unclear. They are clearly and obviously directed to the use of illicit drugs. 6. Parts of the Application to be filled out if a 'Yes' answer was given to Questions 30 or 31 do not render those questions any less clear. 7. That the insurer also used some other proposal form provides no assistance here. 8. Peter was an educated and sophisticated man. His cognition was apparently unimpaired by his drug use. 9. It is inconceivable that he did not know and understand that by Questions 30 and 31 he was being asked, in plain English, whether he was taking or had previously taken or used or injected illicit drugs. 10. It is inconceivable that he thought that those Questions were directed to caffeine, over-the-counter pain killers, herbal remedies, creams and ointments, cold presses or lip salves, or that he considered that the insurer would be interested in these things and not interested in ecstasy, ice and cocaine use, even if it could properly be described as recreational (whatever that description may connote). If he did think that, he should have answered 'Yes'. I find that he did know and understand that he was being asked about his illicit drug use. 11. It is inconceivable that he did not know that he was, and for a long time had been, a non-trivial drug user. I find that he did know and that his 'No' answers to Questions 30 and 31 were deliberately false, a misrepresentation and fraudulent. 12. It is inconceivable that he did not know and understand that his illicit drug use was relevant to the insurer's decision whether to accept the risk and, if so, on what terms. I find that he did know and understand this. In any event, a reasonable person in his circumstances could be expected to know this. 13. His disclosure in the Application of his half-sister's multiple sclerosis and his pilot's licence and his authorisation for the release of his medical history by Dr Hameiri are not inconsistent with a person engaging in fraudulent conduct. If anything, they are consistent with it, having regard to the fact that nothing in the Application would have alerted the insurer to any problem. It is to be remembered that he gave an inaccurate answer that his health check was due to age and he made no disclosure that he was a smoker. 14. The unchallenged evidence is that the insurer would not have issued the Policy had it known of his drug use. 15. Peter was a smoker and his answers to the questions about that were false but, ultimately, this has no material role to play in determining this dispute. CONCLUSION 1. The summons is dismissed. 2. I provisionally order that the plaintiff is to pay the defendant's costs of the proceedings. This order will solidify seven days after delivery of this judgment, unless either party notifies the other party and my Associate that some other order is sought, specifies the order, and provides a brief statement of the grounds upon which it is sought. In that event, the order will be vacated and I will give directions for determination for the question of costs ************ . Endnotes 1. At the same time, Peter applied for and the insurer issued a total and permanent disability policy, which the insurer issued with a multiple sclerosis exception. 2. It gave notice of avoidance by its Further Amended Commercial List Response. 3. Originally a military term for Absent With Out Leave. 4. and for the total and permanent disability policy. 5. See [15]. 6. This is a reference to a Supplementary Personal Statement Drug questionnaire, the form of which is in evidence and seeks information about use of particular drugs including ecstasy and cocaine. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 September 2020