Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Commonwealth Financial Planning Ltd v Couper [2013] NSWCA 444 Hearing dates: 21/06/2013 Decision date: 16 December 2013 Before: Beazley P; McColl JA; Leeming JA Decision: Appeal dismissed, with costs. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: APPEAL - challenge to credit-based findings of fact - no adequate reconciliation of all evidence on point - internally inconsistent findings - appellate interference warranted - no retrial required as judgment able to be independently supported MISLEADING AND DECEPTIVE CONDUCT - life insurance policy - written advice to take out new policy and cancel existing policy - failure to advise of effect of Insurance Contracts Review Act 1984 (Cth), s 29(3) - insufficient information at time of advice for proper comparison - inability to recommend competitors' products - breach of Corporations Act 2001 (Cth), s 1041H and Australian Securities and Investments Commission Act 2001 (Cth), s 12DA Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) Civil Liability Act 2002 Corporations Act 2001 (Cth) Insurance Contracts Act 1984 (Cth) Uniform Civil Procedure Rules 2005 Cases Cited: Biogen Inc v Medeva plc [1997] RPC 1 Fox v Percy [2003] HCA 22; 214 CLR 118 Mason v Demasi [2009] NSWCA 227 Perre v Apand [1999] HCA 36; 198 CLR 180 Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 Texts Cited: ASIC Regulatory Guide 175: Licensing: Financial product advisers - Conduct and disclosure (October 2013) Report of the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Financial Products and Services in Australia (November 2009) Category: Principal judgment Parties: Commonwealth Financial Planning Ltd (appellant) Teghan Elizabeth Couper as executor of the estate of Noel Stevens (respondent) Representation: Counsel: M A Jones SC (appellant) D Campbell SC; Mr S Longhurst (respondent) Solicitors: Henry Davis York (appellant) RMB Lawyers (respondent) File Number(s): 2012/237522 Decision under appeal Jurisdiction: 9101 Citation: [2012] NSWDC 94 Date of Decision: 2012-07-03 00:00:00 Before: Levy SC DCJ File Number(s): 2012/132876 HEADNOTE [This headnote is not to be read as part of the judgment] Mr Stevens had a life insurance policy with Westpac Life. An authorised representative of the appellant CFP (a subsidiary of the Commonwealth Bank of Australia) persuaded him to take out cover with another insurer, CommInsure, and cancel his existing policy. Mr Stevens' true medical history was not disclosed to CommInsure. When Mr Stevens was diagnosed with pancreatic cancer, CommInsure avoided the policy for non-disclosure pursuant to s 29(3) of the Insurance Contracts Review Act 1984 (Cth), which entitled an insurer to avoid a life insurance policy for non-fraudulent non-disclosure within three years from entry into the contract. That three year period had long since expired in relation to Mr Stevens' Westpac Life policy. The trial judge found CommInsure validly avoided the policy, and no appeal was brought from that decision. The trial judge relied on the evidence of Mr Stevens and his daughter to conclude that CFP's authorised representative was negligent and engaged in misleading or deceptive conduct, in that he was too hasty and failed to sufficiently impress upon Mr Stevens the risk he took replacing one policy for another. Held by the Court, dismissing the appeal: 1. The credibility-based findings of fact failed to address divergences between the evidence of the father and daughter as to the father's alcohol consumption, to reconcile their testimonial evidence with other evidence as to Mr Stevens' alcohol purchasing patterns and medical history or to deal with other difficulties in relation to Mr Stevens' evidence; those findings were also inconsistent with the finding as to Mr Stevens' alcohol consumption that supported the conclusion that CommInsure was entitled to avoid the policy. A review of the evidence demonstrates that, to the extent the primary judge's findings are based on the credibility of Mr Stevens and his daughter, they cannot by themselves sustain the judgment: [51]-[73]. Fox v Percy [2003] HCA 22; 214 CLR 118 applied; Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 and Biogen Inc v Medeva plc [1997] RPC 1 referred to; Mason v Demasi [2009] NSWCA 227 discussed 2. The judgment can be upheld and a retrial avoided because a review of the evidence shows, independently of the primary judge's credibility-based findings, that the written advice given by CFP's authorised representative was misleading and deceptive even if fully explained orally, and it caused Mr Stevens to cancel his existing policy. The advice (a) wrongly supposed a comparison could be made between the CommInsure and Westpac Life policies, because at the time the advice was given, it was not known whether CommInsure would insure Mr Stevens and on what terms (such comparison as there was was also incomplete); (b) the CFP authorised representative was not permitted by his employer to recommend Mr Stevens maintain his Westpac Life policy, and (c) the advice failed to disclose the effect of s 29(3) of the Insurance Contracts Review Act: [93-[104]. Whether advice was "appropriate" pursuant to former ss 945A and 953B of the Corporations Act 2001 (Cth) also discussed: [105]-[110]. Judgment 1THE COURT: The plaintiff, Mr Noel Stevens, was diagnosed with pancreatic cancer and died shortly after succeeding at trial against the second defendant, Commonwealth Financial Planning Ltd (CFP), now the appellant. The essential nature of the dispute is simply stated. Mr Stevens had life insurance with Westpac Life Insurance Services Ltd (Westpac Life) for many years. On the advice of CFP by its employee and authorised representative Mr Andrew Galloway, he took out cover in 2010 with The Colonial Mutual Life Assurance Society Ltd (CommInsure) and cancelled his Westpac Life policy an hour later. CommInsure and CFP are both subsidiaries of the Commonwealth Bank of Australia (CBA). 2Mr Stevens' medical history was not disclosed accurately to CommInsure, and when he made a claim in the following year, CommInsure avoided the policy from inception. CommInsure was the first defendant in the proceedings brought by Mr Stevens, but the primary judge held that it was entitled to avoid the policy, and no cross-appeal has been brought from that decision. 3The primary judge found that CFP was liable for the negligence and misleading and deceptive conduct of Mr Galloway. The essence of that finding was that Mr Galloway was too hasty and failed sufficiently to impress upon Mr Stevens the risk he took by replacing one policy for another. CFP appeals from the judgment against it, and the respondent (who is Mr Stevens' daughter and executrix, who also gave evidence at the trial) seeks to sustain it by a notice of contention based on a right to damages under (former) s 953B of the Corporations Act 2001 (Cth). 4Proceedings were commenced by statement of claim filed 26 April 2012. Evidence was taken on commission before a judge of the District Court (who was not the primary judge) on 11 May 2012 at Mr Stevens' home, followed by a trial lasting five days before the primary judge between 29 May and 8 June 2012. Judgment was delivered on 3 July 2012. The trial judge did not see the plaintiff give evidence. The appellant challenged some of the facts found, including on a Fox v Percy basis, and to a considerable extent there is substance in that challenge. In that event, the parties accepted that, save to the extent that findings turned upon the credit of Mr Galloway, this Court ought as best it can determine the issues arising on the appeal. Hence these reasons address the evidence in more detail than would ordinarily be the case. Factual background 5Mr Stevens was referred to Mr Galloway by an employee of CBA, Mr Michael Rowley, following an unsolicited telephone call in September 2010. Mr Stevens denied telling the CBA caller (he could not remember Mr Rowley by name) that he was interested in discussing his existing insurance arrangements with Westpac, and said that he understood he was being referred to Mr Galloway to discuss his concerns about a managed investment he had with CBA. Mr Rowley did not give evidence. One document in evidence suggested that Mr Rowley stood to receive 30% of the first year's premium ($444.60) if Mr Stevens were persuaded to take up insurance with CommInsure. 6Following Mr Rowley's referral, Mr Galloway made an appointment to meet Mr Stevens at 11.30am on 27 September 2010. Mr Galloway had never previously met Mr Stevens. He also had before him Mr Stevens' profile, which included address, telephone number, bank accounts and bank balances. It was possible for Mr Galloway to extract deposit and withdrawal information from Mr Stevens' CBA account if he wished, and he said that he believed that he had done so. 7Mr Galloway accepted that he had no independent recollection of this meeting or the subsequent meeting of 13 October 2013. (A new employee, Mr Cameron Patterson, who was "shadowing" Mr Galloway, also attended the meeting of 27 September. He claimed to have an actual recollection of the meeting, as did Mr Stevens. Their recollections diverged, but on the view taken in this appeal, nothing turns on this.) 8At the meeting on 27 September 2010, it must rapidly have become obvious that Mr Stevens had few assets. Mr Galloway would have seen that he had less than $1,000 in the bank account into which his wages were paid. There was uncontroversial evidence that Mr Galloway readily established that Mr Stevens was renting and had no significant assets save for his superannuation and his Westpac Life policy. He was unwilling and unable to invest in managed funds, and Mr Galloway made a note that he had "a limited budget to spend". Mr Stevens contributed to a compulsory industry superannuation fund, and therefore had no choice and no occasion for advice or review. Mr Galloway also made a note in these terms: "Noel Stevens - renting 27/09/2010 47 y/o S&J Form Work. Dogman, rigger. → 4 years $31 p/hr x T/H p/w - $1300 p/w MF - no plans for funds ..." 9Since Mr Stevens had no choice in relation to his superannuation and no interest in other investments that could be made, there was little Mr Galloway could do by way of advice. From another note made by Mr Galloway, it may be inferred that there was discussion of Mr Stevens' "First Choice" investment with CBA. It was common ground that Mr Stevens had been concerned that the investment had been performing poorly, but was ultimately content to do nothing. Although it may seem strange, Mr Galloway was clear in his evidence that he was not permitted to advise Mr Stevens to leave his Westpac Life policy in place and not take out a CommInsure policy. 10In that way it became clear to Mr Galloway that the only way in which Mr Stevens could be assisted by financial advice (and therefore the only way by which Mr Galloway could earn a fee) would be by advice in relation to Mr Stevens' insurance. Mr Galloway learned how much Mr Stevens paid each month for his Westpac Life policy, either because he was told or because he checked the withdrawals from his CBA savings account or both, and he formed the view, at least tentatively, that CommInsure could provide a competitive rate. 11Mr Galloway completed an "Insurance Financial Needs Analysis", which was signed by Mr Stevens. The scope of the advice was described as "a defined scope of insurance". It was made clear that Mr Stevens would receive advice on the subject of insurance, for which he would not be charged a fee. Parts of the document (a form which is 24 pages long) record answers given by Mr Stevens on that day. He said that he was renting and that his assets were the contents of his home (valued at $5,000), his car (valued at $7,000) and a CBA deposit ($5,000). 12The document includes a page written in Mr Galloway's hand: "Client has an existing policy of life insurance with Westpac for $298,511. He has come in to review this as all other accounts are with CBA & he wanted to compare prices of insurance. Also wanted to talk about trauma insurance as he has heard that trauma insurance is available to him. I recommended a full review of insurances but the client declined this as he has a limited budget to spend. Client is looking for a like-for-like life insurance policy & $50k trauma providing such a policy is approx the same price as he is currently paying for life ins with w/pac." 13The document included Mr Stevens' date of birth, age, marital status and a question about his health. There were four boxes: "Excellent", "Good", "Average" and "Poor". The box marked "Excellent" was ticked. Mr Galloway said that he would have given Mr Stevens those four options, from which Mr Stevens had selected "Excellent". Mr Stevens denied being asked anything about his health. 14Other parts of the document also recorded that Mr Stevens had "Life Cover" from Westpac Life in the amount of $298,511, with a monthly premium of $117.46. There was in evidence a certificate of currency from Westpac dated 27 September 2010 showing a death benefit of $298,511 with monthly premium of $117.46. There was a dispute about when those figures, which were accurate, were included in the Insurance Financial Needs Analysis document. Mr Galloway said that Mr Stevens came to the meeting with a small piece of paper with handwritten information upon it. Mr Stevens denied knowing those amounts. He said: "I know that he could not have written in the premium amount on page 10 as I did not know it myself. On the same page he could not have written in the amount of my term life cover since at the time of this meeting that was also unknown by me. ... I did not know the value of my Westpac Policy; I did not come into the bank to review that Policy; I did not want to compare the bank's prices with those offered by Westpac; I did not say that I wanted to talk about trauma insurance as I had [never] heard about it". 15As noted above, the monthly premium was readily ascertainable from information available to Mr Galloway (since it was an automatic debit from Mr Stevens' CBA account) but the amount insured would not have been known to Mr Galloway. Mr Galloway said that he believed that he was told the premium by Mr Stevens, but "I believe that I confirmed the accuracy of what Mr Stevens told me by looking up Mr Stevens' banking records (in his presence and with his consent)". 16It was common ground that Mr Galloway gave Mr Stevens a copy of CFP's Financial Services Guide at the meeting. The preparation of the Statement of Advice 17On 28 September, at 11:07am, Mr Galloway made an electronic note: "unable to assist client with super as he doesn't have choice of fund through work. Client needs insurance advice though so closing this OTR, to be replaced with insurance OTR". 18"OTR" is a reference to "One Team Referral", reflecting the fact that Mr Rowley had originally referred Mr Stevens to him. Less than an hour later, Mr Rowley added a note "Type(s) of insurance in which customer is interested: needs income protection to replace current policy with westpac". That note was, of course, wrong; his Westpac Life policy was for life, not income protection, and at his meeting with Mr Galloway Mr Stevens had made it clear that he was not interested in a full insurance review. The note is revealing, however, in that it confirms that Mr Rowley was monitoring the progress of the advice to be given to the man whom he had referred. 19On 30 September 2010, Mr Galloway added this note "Have met with Noel and he has agreed to a plan. Preparing now." Mr Galloway explained that he used the word "plan" and "Statement of Advice" interchangeably. Mr Galloway was cross-examined to the effect that this reflected a decision to take out insurance, which he denied. The evident purpose of the note was as a message by way of update to Mr Rowley. (The same purpose may be seen in the next note, dated 13 October 2010 at 2pm added by Mr Galloway: "Client is happy with the advice and has proceeded with insurance.") 20Although Mr Galloway took responsibility for the Statement of Advice which issued on 13 October 2010 recommending cancelling the Westpac Life policy, he did not draft it. He did not even insert information into a template. His evidence, which was supported by the contemporaneous documents, was that he sent information to "paraplanning"; a draft document was then returned to him, which it was his habit to check and make stylistic changes to, and then present to the client. He accepted, properly, that the statement on its face that it was "prepared by Andrew Galloway" was not wholly true. 21He gave evidence about the process: "Q. What happens in short is that the paraplanning people synthesise and distil the material you've sent through to them and put it into a form that ends up like this? A. With a bunch of different autotexts and things that they have a process to do so, yes. ... Q. Are you seriously telling us that the system of work that you were required to work on as a representative and an employee of [CFP] was such that you didn't give individualised advice but operated under a template? A. There is a template that is used by paraplanning and we endeavour to make stylistic changes to that template. ... Q. What I'm saying to you is, as difficult as it might be for you because certain things are imposed upon you, that what you were effectively called upon to do was to comply with a template rather than to comply with your obligation to give individualised personal advice to the client that you're dealing with. A. Correct, I follow the process that I am provided. Q. Even if in so doing there may be some compromise in the position of the prospective client. A. When it comes to relevant disclosures and explanations, I leave that to CFP and their team to develop these - these documents. Q. I understand your difficulty in this sense. That is, it's drummed into you that your primary duty is to your employer and your secondary duty is to your client. That's the position isn't it? A. I don't agree with that. Q. Where the two conflicted, you gave effect to the duty to your employer and not to the client, didn't you? A. That seems to be the case in this document. But my job is to help clients with goals and objectives. That's my primary objective. Q. I understand that. I understand you may have had the best motivation in the world but you are saying that you were constrained by the structure that was imposed upon you by your employer, weren't you? A. When it comes to the - the advice document, I guess you can say that you're correct in that but I have certain limitations and abilities on what I can and can't change or omit or add to with the regards to the statement of advice. Q. First of all, you didn't compose it and they then check it - rather, they composed it for you, didn't they? A. They compose it and I check it. So I'm the last - the last link in the chain of this document being prepared. Q. That's why I say I'm not being critical of you as to the formatting of this document. They get some information from you about your meeting, they put it together, send it back to you and what you're saying is that you're hamstrung about amendments that you can make to it, is that right? A. Yes." 22"Paraplanning" produced a draft on 8 October 2010. The first page of the document submitted by Mr Galloway stated that the annual premium Mr Stevens would be paying was $1,482. The document stated that he recommended a combination of term life with a rider for trauma "due to lower overall costs". The document also stated that premiums be "stepped". There was evidence that CommInsure offered two types of premium structures. That which was cheaper overall in most cases was its "Level Premium" option, but the "Stepped Premium" option started lower but more rapidly increased. Mr Galloway inserted into the form a recommendation to replace the existing insurance because "Westpac life insurance more expensive dollar for dollar and no trauma insurance within the existing policy". Mr Galloway stated in the section "Disadvantages of replacement" that "12 month suicide will restart". 23The form required Mr Galloway to provide an "Alternative Strategy". It said that: "An Alternative Strategy must be provided for every insurance strategy recommendation. If an alternative strategy is not provided in each case the plan will be placed on hold." 24Mr Galloway provided not one but two "alternatives" in the form he sent to paraplanning: "self insure - insufficient capital/equity to self insure" "Full Insurance Review - client declined" 25Those are not alternatives in any meaningful sense. Mr Galloway recorded in the document that (putting to one side superannuation, as to which he had no information) Mr Stevens' total assets were $17,000. The reference to self insurance was therefore an "alternative" that was entirely theoretical. It is absurd to regard as a serious alternative that Mr Galloway might suggest that Mr Stevens cancel his Westpac Life policy and "self-insure". Although Mr Galloway was not cross-examined on this point, it may be inferred that the only reason this was included was in order that the request could be processed by "paraplanning". Secondly, the fact that Mr Stevens had declined a full insurance review is once again not a true alternative; it was stating the client's instructions as to the scope of the advice sought. A true alternative was necessarily an alternative within the scope of the advice Mr Galloway had been retained to provide. 26It is not as though there were no other alternatives which could be included in the form. The authors of the form which Mr Galloway had to complete and send to paraplanning correctly recognised that any financial advice inevitably involves a choice, depending on available funds and clients' preferences. Mr Galloway did not provide the two most obvious alternatives, namely, merely to take out a CommInsure Life policy (whose quoted annual premium was only $1,097) or simply maintain his Westpac Life policy. Had he provided the first alternative, and had Mr Stevens accepted that advice, then he and Mr Rowley would have been $385 worse off for the purposes of calculating any commission. Nor did Mr Galloway advise Mr Stevens that he could do nothing. He was not permitted to provide that advice, but had he done so and had Mr Stevens accepted it, Mr Galloway and Mr Rowley would have lost all opportunity to earn a commission. The presentation of the Statement of Advice on 13 October 2010 27At their second meeting, on 13 October 2010, Mr Galloway provided the Statement of Advice. Mr Galloway said that he took Mr Stevens through the document, Mr Stevens accepted the advice, and then together they completed an application for the CommInsure policy. Mr Stevens denied all this. He said he was not taken through the document, that he was merely asked to sign it, and that during the meeting Mr Galloway told him to go to Westpac to cancel his existing policy so that he could be insured with CommInsure. On his return, according to Mr Stevens, Mr Galloway "proceeded to do something on a computer that he had there and from time to time he asked me things about what he was doing". 28Four times are established by electronic records on 13 October. First, Mr Galloway diarised 90 minutes for "Noel Stevens - Plan presentation" between 12.30pm and 2.00pm. Secondly, Mr Galloway sent the completed application to CommInsure at about 1.40pm, where it was immediately approved, subject to physical receipt of signed documentation. Thirdly, Mr Galloway made an electronic note on the One Team Referral screen at 2.00pm saying "Client is happy with the advice and has proceeded with insurance". Fourthly, Mr Stevens cancelled his Westpac Life policy at 2:43pm. 29By reason of those electronic records, it is plain beyond argument that Mr Stevens' recollection and pleading that Mr Galloway asked him to cancel his Westpac Life policy during the 13 October meeting, and before the CommInsure policy was in place, was in error. This was for practical purposes conceded at the trial. 30The document which emerged from paraplanning, and was, within limits, settled by Mr Galloway, was "personalised" in the sense that it addresses Mr Stevens in the second person, and refers to him throughout as "Noel". It contains some errors. For example, in the summary, it recommended, "Noel, apply for term life cover of $295,511 [sic] with trauma cover of $50,000 through a CommInsure Total Care Plan Policy", and "Cancel your existing CommInsure Total Care Plan [sic] only once the recommended insurance policy is confirmed as in place". It also advised that "[t]he upfront cost of implementing this advice is $1,482". That was the first year's premium, assuming no loadings. That statement did not allow for the fact that if the advice were followed, Mr Stevens would no longer be paying monthly premiums to Westpac Life. 31The Statement of Advice stated that: "If the information you have provided is incomplete or inaccurate, you will need to consider if my advice is appropriate for your circumstances and objectives before you act upon it." 32At this stage, the only information which had been provided that was relevant to CommInsure's decision to insure his life, and the premium it would charge, was his age, that he was employed as a dogman, that he had not smoked for 12 months, that he was in excellent health and that he was not engaged in any high risk activities. More detailed questions relevant to that decision were only to be asked after the Statement of Advice was presented (and accepted) when completing the "Write Away" application form. 33The uncontested evidence was that if an applicant for life cover advised, when completing the electronic "Write Away" application form (something Mr Galloway did with Mr Stevens during their meeting, immediately after presenting the Statement of Advice), that he or she consumed more than four standard drinks a day, the application would be referred for manual underwriting. If the applicant was applying for trauma cover, the application would be referred for manual underwriting if he or she consumed more than three standard drinks a day. He was not asked about this, but it is inconceivable that Mr Galloway was not aware that some answers on the application form would result in a manual underwriting process as opposed to an automatic acceptance. He gave this evidence: "Q. ... [Y]ou would have known that a disclosure of eight standard drinks of alcohol per week wouldn't have excited any interest at the underwriter's end, wouldn't you? A. Absolutely. I agree with that - that eight standard drinks per week does not excite underwriter scrutiny." 34It is obvious that Mr Galloway would prefer to sign up Mr Stevens immediately, but he had no way of knowing prior to 13 October 2010 that Mr Steven's application would be processed automatically. All that he had recorded was that his health was "Excellent". 35The evidence was not clear whether positive answers to questions about hepatitis C, counselling for alcohol addiction, gastric disorder, and raised liver function would result in manual underwriting, but it may confidently be inferred that if manual underwriting was involved where an applicant for life insurance with trauma cover drank more than three standard drinks a day, manual underwriting would also have been involved if all those circumstances had additionally been indicated. The effect of that underwriting might have been to increase the premium or to insert an exclusion in the policy. 36To anticipate what follows, at the time the Statement of Advice was written by paraplanning and finalised by Mr Galloway, Mr Galloway was not in a position to know (a) whether CommInsure would insure Mr Stevens at all, (b) what the premium would be, and (c) whether there would be exclusions in any insurance it wrote for him. At best, Mr Galloway may have had an expectation that a 47 year old non-smoker who described his health as "excellent" was likely to be accepted by CommInsure automatically at the premium he had calculated. Even that is unlikely to have been a confident expectation, in light of Mr Galloway's evidence that "on average the amount of Write Away applications that I do that are automatically accepted is below 15% which is a very low average." 37The Statement of Advice stated that: "It is very important that you take full ownership of your financial decisions. I can help you make the appropriate decisions, but those decisions remain yours. If you do not feel completely comfortable with the recommendations in this Statement of Advice, you should seek more information and advice from me. The recommendations in this advice remain current for 30 days. If more than 30 days have passed or there has been a change to your personal situation you should not act on this recommendation without discussing your situation with me. However, if you are completely satisfied with all the information, have carefully read the current Product Disclosure Statement for each of the products recommended and have no further questions, simply sign the 'Agreement to proceed' form and return it to me." 38The recommendation on page 6 included: "I have recommended that you cancel your existing Westpac Life Cover as the recommended CommInsure policy is cheaper on a like for like, dollar for dollar basis and the recommended policy offers you a trauma benefit." 39Mr Stevens was paying $1,410 annual premium to Westpac Life, which would rise to $1,482 to CommInsure, for the same level of life cover, but which would additionally include $50,000 trauma cover. There were some advantages in the wording of the CommInsure policy compared with Westpac Life's, but they were substantially the same. A motivating factor from the point of view of CommInsure was to obtain more business at the expense of its competitor. A motivating factor from the point of view of the CFP employee Mr Galloway was the fee. For if Mr Stevens were persuaded to take out a new CommInsure policy, Mr Galloway could receive his share of the whole of the first annual premium ($815) as well as small trailing commissions ($21) for every annual premium Mr Stevens subsequently paid (the Statement of Advice disclosed that Mr Galloway would receive those payments). The evidence also suggested that Mr Rowley would earn a commission if a new product was sold to Mr Stevens. 40Seen from the perspective of CBA, CFP, Mr Galloway and Mr Rowley, there was every reason to provide those recommendations. The ultimate questions in this appeal are whether it was misleading or deceptive for him to be advised in those terms, and whether the advice was "appropriate" given what Mr Galloway knew or ought to have known. There was, at the time the Statement of Advice was presented to Mr Stevens, no statutory obligation upon Mr Galloway or CFP to act in the best interests of Mr Stevens. 41No financial decision is riskless, and very few are clearcut. The Statement of Advice went some way to alerting Mr Stevens to the risks to which following Mr Galloway's advice would expose him. Page 11 of the Advice included this statement, which appears to be in standard form: "As I have recommended replacement insurance cover to you, it is critical you do not cancel your existing policy until the new cover is in place. This is intended to be [an] interim measure only and is a prudent step to make sure your new cover is implemented as expected without losing your existing cover. Once the new cover is in place, your existing policy can be cancelled. If for whatever reason the new cover cannot be implemented, your existing policy may need to be maintained in order to preserve your insurance coverage. You should note that you may have to pay two sets of insurance premiums during this transition period but I do not expect this to be significant in terms of time or cost." 42That disclaimer went some distance, but did not warn against the possibility of avoidance for misrepresentation or non-disclosure. That was addressed in a separate section, which described the "Risks and disadvantages", including that "▪ The insurance company may not pay the benefit if you do not comply with your duty of disclosure." The document listed "Other considerations", including: "▪ When you apply for your insurance you will be required to submit your health and financial details. The level of detail required will depend on your individual circumstances and the type and level of cover you are applying for. ... ▪ The law requires you to disclose all the information you know, or should know, that is relevant to the insurer's decision whether to provide cover or determine the terms of cover. Failure to disclose relevant information may void your cover or prejudice any claim so it is important that you are as open and honest as possible. ... ▪ I also considered retaining your existing policy and/or increasing the level of cover inside your existing policy - these were discounted as dollar for dollar your existing policy is more expensive". And immediately prior to Mr Galloway's signature was the exhortation: "Please take the time to read this Statement of Advice carefully to ensure you are comfortable with the recommendations." 43In very small print on pages 11 and 12, the Statement of Advice said: "▪ If your health or personal circumstances have changed since you first took out your insurance, you may be subject to additional underwriting requirements when you apply for new cover. This may result in a higher premium including a loading and possibly exclusion for some conditions. ... ▪ Waiting periods will recommence. ▪ You will pay a higher level of insurance premiums compared to what you are paying at the moment for an increased level of cover. ▪ If you were to take out the same amount of term life cover only in the recommended product, the ongoing premiums would be $1097 per annum which is cheaper than your existing Westpac cover." 44The Statement of Advice did not mention the rights given by s 29(3) of the Insurance Contracts Act 1984 (Cth), which is in these terms: "If the insurer would not have been prepared to enter into a contract of life insurance with the insured on any terms if the duty of disclosure had been complied with or the misrepresentation had not been made, the insurer may, within 3 years after the contract was entered into, avoid the contract." 45It was common ground that neither Mr Stevens nor Mr Galloway knew of that section in 2010. The statutory right to avoid the contract for non-fraudulent non-disclosure was not available to Westpac Life, because the three year period had long since expired. However, the statutory right on the part of CommInsure to avoid the policy recommended by Mr Galloway would continue until October 2013. The application for the CommInsure policy 46During the course of the meeting, Mr Galloway applied for insurance on behalf of Mr Stevens. He did so electronically - by completing the "Write Away" application form on a laptop computer. The form completed by Mr Galloway correctly stated Mr Stevens' occupation as "Dogman" but wrongly stated that he did not work at heights above 15 metres for more than 10% of the time. It stated that he drank eight standard drinks a week, which was hotly in contest at the trial. It wrongly stated that he had never had or sought advice or treatment for lung complaints, gastric, duodenal ulcer or other bowel disorder, "any disorder of the gall bladder or liver (including hepatitis B, C or raised liver function)", said that he had not consulted a doctor during the last two years for any other reason not listed, and said that he had not received counselling or treatment for alcohol abuse. 47The form included a declaration: "I confirm that the declarations and answers to all questions in this Application are true and correct including those entered or inputted into this Application on my behalf (for a life insured, this declaration relates to answers and declarations in respect of the life insured). ... I have read and understood my duty of disclosure as set out in the PDS and I am aware of the consequences of non-disclosure." 48Because of the favourable answers, cover was able to be granted immediately, and at the premium already included in the Statement of Advice. Contrary to his pleaded case and sworn evidence, Mr Stevens cancelled his Westpac life policy later that afternoon, and commenced paying premiums to CommInsure. Diagnosis with pancreatic cancer and CommInsure's avoidance of the policy 49Mr Stevens was admitted to Wollongong hospital on 30 August 2011 and diagnosed with jaundice. He was diagnosed with pancreatic cancer in early September 2011. By November 2011, his diagnosis was that the cancer was terminal, and Mr Stevens made a claim on his CommInsure policy dated 11 November 2011. CommInsure confirmed receipt by letter dated 17 November, but by letter dated 23 December 2011, avoided the policy. The letter pointed to the following non-disclosures in his application form: "Question Answer Have you ever sought advice or treatment for, experienced symptoms of or suffered from any of the following: To this you answered: 'No' Gastric, duodenal ulcer or other bowel disorder? Actual position: You consulted the Frankston Medical centre and the notes read as follows: ● 15 November 2009 For some time has been troubled with bloating, belching, acid reflux. No alarm symptoms. ● 15 February 2010 Bloating, burning, burping in upper abdomen, reflux, since 12 months ago No pain with swallowing. Risk factors alcohol and ex-smoker Gastritis ● 2 July 2010 Gastroenteritis Question Answer Have you ever sought advice or treatment for, experienced symptoms of or suffered from any of the following: To this you answered: 'No' Any disorder of the gall bladder or liver (including hepatitis B, C or raised liver function)? Actual position: You consulted the Frankston Medical centre and the notes read as follows: ● 27 June 2010 Blood test results show raised LFT's, folate deficient, slightly raised C-reactive protein, low iron saturation Question Answer In the last 5 years have you been advised or received counselling or treatment for alcohol or substance abuse? To this you answered: 'No' Actual position: You consulted the Frankston Medical centre and the notes read as follows: ● 15 November 2009 Drinks 8 stubbies (heavy) every night. Counselled about alcohol. ● 15 February 2010 Drinking 8 stubbies a night, for years, after work, drunk once a week Advice about safe drinking Alcoholism ● 27 June 2010 Drinking 8-10 heavy stubbies every night, more on weekends ● 2 July 2010 Counselling about drinking. Review in 3 months. ... Question Answer In the last 2 years have you consulted a doctor or health professional for any other reason not already mentioned in this application? (if yes, specify the reason) To this you answered: 'No' Actual position: You consulted the Frankston Medical centre and the notes read as follows: ● 27 June 2010 Several days of discomfort in throat. Has been coughing up some blood. Voice husky and has been intermittently husky over past month. Coughs up some black material in mornings. Ceased smoking 8-9 months ago - used to be a heavy smoker for at least 10 years. Generally feeling tired, not depressed but has history Follow up with ENT, already has referral Question Answer Are you considering seeking medical advice, treatment, tests or surgery in the future (other than for routine check-ups)? To this you answered: 'No' Actual position: You consulted the Frankston Medical centre and the notes read as follows: ● 2 July 2010 LFT - review in 3 months" 50In fact, in light of the medical evidence available at the trial, the non-disclosures were more extensive. Because the most important issue going to credit was Mr Stevens' alcohol consumption in the second half of 2010, when Mr Galloway had recorded him as drinking eight standard drinks a week, it is convenient to note the following matters from the evidence: Frankston Medical Centre, 15 November 2009: "Drinks 8 stubbies (heavy) every night. ... Counselled about alcohol." Frankston Medical Centre, 15 February 2010: "drinking 8 stubbies at night, for years, after work, drunk once a week. ... advice about safe drinking" 15 February 2010, Referral for gastroscopy: "Reflux, indigestion, burping last 12 months, Drinking 12 cans a night" Frankston Medical Centre, 27 June 2010: "Drinking 8-10 heavy stubbies every night, more on weekends." Frankston Medical Centre, 2 July 2010: "LFT - counselling about drinking - review in 3 months" Wollongong Hospital, 2 September 2011: "ETOH: 15-20 drinks/night" Wollongong Hospital, 5 September 2011: "ETOH history ~15-6 standard drinks / day for >10 years" Wollongong Hospital, 19 October 2011: "ETOH 15-20 SD/night for 10+ years" The credibility of Mr Stevens and his daughter 51The first six grounds of appeal advance a challenge to the trial judge's assessment of the credibility of the principal witnesses at the trial. 52By the time Mr Stevens' affidavit was sworn, he had had stents inserted to treat the jaundice, he had been subjected to a range of invasive procedures and a lengthy course of chemotherapy, was being given morphine and was shortly to die. It is likely that his affidavit was prepared in some haste, and prior to discovery. His morphine intake had increased shortly before being cross-examined. 53Mr Stevens asserted that he had reduced his alcohol to eight to ten standard drinks per week in June or July 2010, fairly shortly before seeing Mr Galloway. He said that he was in good health. He said (and pleaded a case) that Mr Galloway had asked him to go to Westpac during the 13 October 2010 interview to cancel his policy. He said that he signed documents on 13 October 2010 without anything having been read to him. He said nothing was said to him about fees. He said of the Statement of Advice: "Mr Galloway did not before I signed this document ever say anything about the insurance company not paying benefits to me, excluding or reducing my level of cover, or possibly having to submit to any health check or have any health details provided. As I have already said the impression given to me from what was said was that it was all a done deal and was in my best interests without anything further having to occur." 54Mr Stevens gave evidence on commission, when he was evidently exhausted as well as dying, and counsel fairly agreed to limit cross-examination and take no point by reason of it. It was squarely put that it was not true that he had been drinking eight drinks per week. 55Mr Stevens said that he only drank beer. When he purchased beer, "most of the time I used cash", and he accepted that "if he were buying anything from Dan Murphy's it would be liquor", and accepted that he made these purchases by eftpos: 18 August 2010 Dan Murphy's $79.99 19 August 2010 Dan Murphy's $79.99 23 August 2010 Dan Murphy's $39.99 24 August 2010 FC Liquor $39.99 27 August 2010 Dan Murphy's $43.18 13 September 2010 BWS $32.00 27 September 2010 Dan Murphy's $51.90 29 September 2010 Dan Murphy's $59.99 4 October 2010 Dan Murphy's $52.90 56He was asked these questions in cross-examination: "Q. Do you agree that if in this timeframe you were drinking in the order of eight to 10 stubbies a week, your personal consumption of beer would be in the order of $15 to $20 per week? A. ... Yeah. Q. And can I just suggest to you that the frequency of purchases that I've taken you through in these documents is inconsistent with you having a level of alcohol consumption as low as eight to 10 stubbies per week in this timeframe? A. Yeah, I can explain that to you. I didn't have to drink them all at one go, most of the time I'd have a slab in the cupboard, one for when my friends come around, or I'd take a slab with me to somebody else's place and we'd share the slab. So we used to get around and have like barbecues on weekends and stuff like that, and you can't just turn up empty handed, so that's where them sort of slabs, or slabs and things like that went to. It wasn't just for me." 57Ms Couper's affidavit was sworn after her father had given that evidence on commission. It was an affidavit of one and a half pages principally directed to the purchasing and consumption of alcohol. It was plainly directed to answering the case which had been put in cross-examination against her father. She gave evidence that he would drink no more than eight to ten beers a week in 2010, that a neighbour would often come to their house and drink a lot of beer, that she would use her father's eftpos card to buy alcohol for herself and her friends. It was squarely put to her that she was lying. Findings of the primary judge - credit 58The primary judge said that he gave reasons in much shorter form than he would otherwise have done, having been told that Mr Stevens had entered palliative care. Nevertheless, they are lengthy, and engage with the competing testimonial evidence in light of the contemporaneous documents; this is not a case where there was no analysis of the competing evidence such that it may be inferred that the process of fact finding miscarried: cf Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [66]. 59His Honour rejected an attack on the credit of the plaintiff's daughter, Ms Couper. She said that her father drank no more than eight to ten beers per week, and that the extra consumption was by her, her friends and a neighbour. His Honour said that "I considered that Ms Couper gave her evidence sincerely, truthfully and in a dignified and impressive manner", and found at [33]-[37]: "I considered that as she was living in her father's home during the relevant time frame, she would have been in a reasonable position to observe and relate such of his patterns of drinking that she would have been able to see. I did not consider her explanations as to the pre-diagnosis alcohol purchasing patterns evident from her father's financial records and the manner in which alcohol was consumed in the house, by her father, a named neighbour, herself and her grandmother, to be implausible, or to have been given in order to deflect from a description suggestive of a much greater level of consumption by her father. I have allowed for the possibility that as her father, Mr Stevens may not have wanted to place Ms Couper in a position to see any at times greater level of alcohol consumption on his part than that which she had described. As this was not the subject of specific evidence, it is not a matter which was determinative of my conclusions on the issues raised. Significantly, both from Mr Stevens' evidence and from the evidence of Ms Couper, I considered it objectively compelling that Mr Stevens had managed to maintain responsible employment as a dogman over a considerable period of time with significant accrued sick leave, and that he had been subject to random blood alcohol testing because of the dangerous nature of his work as a dogman, Ms Couper's evidence was consistent with that fact. If Mr Stevens was in fact regularly consuming alcohol to the level suggested by the defendants, it would have been unlikely that he could have maintained his employment as a dogman without significant absences from his work over such a long period. In arriving at these views, I have not overlooked the content of Mr Stevens' medical records that suggested an, at times, greater level of consumption [than 8-10 beers per week], a matter to which I shall return ... In particular, those records have to be considered with the cautions identified by Basten JA in Mason v Demasi [2009] NSWCA 227, at [2] because they state conclusions rather than verbatim accounts. Accordingly, on the subject of the credit and reliability of the evidence of Ms Couper, on the subject of her father's pre-diagnosis health and level of alcohol consumption, for the reasons I have outlined above, I reject the suggestion that she gave false evidence." 60That rejection was striking. There was a very significant divergence between the evidence of father and daughter. The father accepted that he had been a heavy drinker, but said he had cut down his weekly intake to eight to ten beers in June or July 2010. The daughter maintained that throughout 2010 he would drink no more than eight to ten beers a week. The reasons of the primary judge do not address this divergence. 61All of the evidence was that the only liquor purchased by Mr Stevens was beer. His daughter said that beer would normally be bought as a "slab", although he also said that that "it doesn't have to be slabs all the time". Yet the man who said that he mostly paid in cash made electronic purchases consistent with two slabs on Monday 16 August, two slabs on Thursday 19 August, another slab on Monday 23 August, another slab on Tuesday 24 August and another slab on Friday 27 August. (The absence in the bank statements of eftpos purchases on weekends suggests that they were recorded as taking place on the immediately following Monday.) 62It is not merely the sheer quantity of alcohol demonstrably purchased, but the manner and timing of the purchases. The purchasing pattern is consistent only with steady, substantial drinking, throughout the week, in the order of ten beers a day. What is the alternative? The steady pattern of purchasing throughout each week is inconsistent with occasional social gatherings where most of the beer was drunk by others, and, aside from the statement given by Mr Stevens in cross-examination reproduced above, there was no evidence of that in any event. Everything that Mr Stevens' daughter said about her and her friends and her neighbour drinking some of the beer could be true, and yet it would still be glaringly improbable that her father drank only eight to ten beers a week. Is it suggested that of the seven "slabs" bought by eftpos in the last fortnight of August, that her neighbour visited for four nights a week and drank five or more beers while her father nursed one? Her evidence did not come close to supporting such a scenario. Mr Stevens' daughter also said that she had used her father's card to buy beer for herself and her friends. But once again, although his Honour considered that Ms Couper's explanation of the alcohol purchased was not implausible, his reasons did not grapple with the fact that her explanation could not plausibly account for the consumption of the overwhelming majority of the "slabs" of beer bought almost every other day. 63Moreover, there is the wealth of medical records. The primary judge discounted them, because "they state conclusions rather than verbatim accounts". There is, as Basten JA observed in Mason v Demasi, very often difficulty where a patient's history is summarised in the notes prepared by a medical practitioner. But that is the opposite of this case in relation to most of the evidence. The statement of "alcoholism", it may be accepted, states a conclusion, but statements such as "8-10 heavy stubbies every night" (27 June 2010) are not a conclusion; they are on their face verbatim (or near verbatim) records of what Mr Stevens said, in his own words. When Mr Stevens made those statements to his doctors, he had no reason to tell anything other than the truth. The reasons of the primary judge do not adequately explain why they are to be wholly discounted. 64The primary judge placed reliance on the consideration that Mr Stevens was able to continue to work, notwithstanding the random breath testing that took place on the job. His Honour found this "objectively compelling". But Mr Stevens told his doctor that he drank after work in the evening ("Drinks eight stubbies (heavy) every night"). There was no evidence that a man who drank each evening at the levels described by Mr Stevens to his doctors would not by the next morning be able to pass a breath test. The consideration is not "objectively compelling" in the slightest; to the contrary, it may reasonably be inferred from all of the evidence that Mr Stevens was able to fulfil his work duties despite his alcohol consumption. In truth, what is "objectively compelling" is the consistent contemporaneous evidence of Mr Stevens' statements to his doctors and purchases of alcohol by eftpos on his CBA account. 65Finally, there is an internal inconsistency in the reasoning process at first instance. The primary judge found at [94] that CommInsure was entitled to avoid the policy (emphasis added): "because Mr Stevens was consuming more than 3 standard drinks per day as an average over the disclosure period; his medical records showed that he had a relevant history of raised liver function test results; he had a past history of Hepatitis C, and his medical records disclosed an episode of having coughed up blood." 66More than three standard drinks per day is very considerably more than eight to ten drinks per week. It is more than double. The dispositive portion of the reasons whereby the primary judge concluded that CommInsure was entitled to avoid its policy involved a rejection of the "eight to ten drinks per week" evidence of Mr Stevens and his daughter. The primary judge does not reconcile his acceptance of their evidence as to eight to ten drinks per week with his finding that Mr Stevens consumed more than three standard drinks per day. 67The task and duty of this Court is to conduct a "real review" of the evidence, to give respect and weight to the advantages of the primary judge, but not to shrink from giving effect to its own conclusion. This is one of that rare class of case, where even if the facts fall short of being "incontrovertible" it must be concluded that the decision at trial is at least "glaringly improbable" or "contrary to compelling inferences", such that this Court must not shrink from giving effect to its own conclusion, after making all due allowances for the advantages available to the trial judge: Fox v Percy [2003] HCA 22; 214 CLR 118 at [29]. Those terms are convenient descriptive labels or guidelines, but in truth no definitive test is possible to specify those (rare) occasions when appellate review of a credit-based finding of fact is warranted: Xu v Jinhong Design & Constructions Pty Ltd [2011] NSWCA 277 at [15]. All that can be done is to look at all of the evidence, testimonial and documentary, while at the same time being conscious of the advantages of the primary judge, including the necessarily incomplete character of his or her reasons: Biogen Inc v Medeva plc [1997] RPC 1 at 45. 68Something in the order of one hundred and sixty eight cans or bottles of beer were bought by eftpos on Mr Stevens' CBA account in the last fortnight in August 2010. Mr Stevens did not drink light beer. It follows that there were well in excess of 220 standard drinks. The purchasing pattern suggests that all that alcohol was drunk in that period. Mr Stevens probably did not drink every single one of those drinks himself in that two week period, but despite his own evidence and that of his daughter, it is exceedingly improbable (to say the least) that he drank only eight to ten standard drinks in each of those two weeks. Much more persuasive evidence would be required to explain those purchases and to falsify the numerous statements by Mr Stevens to the doctors treating him before the evidence of Mr Stevens and his daughter to the contrary could be accepted. Other periods in the second half of 2010 disclosed similar patterns of purchases. The fact that the primary judge saw, and was impressed by, Mr Stevens' daughter does not immunise his finding from appellate review, in circumstances where, as here, there is no adequate reconciliation of all of the evidence bearing on the point, and where the primary judge himself has made inconsistent findings on the point. 69Lest there be scope for confusion, it should be made clear that that rejection does not amount to a conclusion that either or both were knowingly giving false evidence. When Mr Stevens gave instructions and swore his affidavit and was cross-examined, he was in the terminal stages of pancreatic cancer, and had indeed given up alcohol, and was being cared for by his daughter, in circumstances undoubtedly distressing to both of them. Other difficulties with the evidence of Mr Stevens 70There was also a failure in the reasons of the primary judge to grapple with two other inconsistencies in Mr Stevens' evidence. 71First, Mr Stevens maintained that he had been told by Mr Galloway "to go down to Westpac now and to cancel your policy with them and I'll sign you up with us straight away", and that he did that, then returning to Mr Galloway to obtain cover with CommInsure. That allegation was squarely made in paragraphs 13-14 of the verified statement of claim and maintained in his affidavit. As noted above, it was demonstrably wrong. Diary records demonstrated that the meeting with Mr Galloway on 13 October was scheduled for 12.30pm until 2.00pm (following which Mr Galloway was scheduled to meet three different clients). Mr Galloway's note to Mr Rowley confirms that the meeting took place when scheduled. Mr Stevens went to Westpac and while in the branch cancelled his existing policy by telephone. That conversation was taped and the transcription was in evidence; it took place at 2.43pm on that day, after his CommInsure application had been accepted. 72Secondly, Mr Stevens claimed that "I did not come into the bank to review [the Westpac] Policy." He said that he did not know the value of the Westpac Life policy, and did not want to compare the prices. He said he had never heard of trauma insurance and did not even know what the word meant. And he denied "that anything was asked at this meeting at all about my health and whether it was something that had to be considered before the Commonwealth Bank could do anything". But it is very difficult to reconcile that evidence with the existence of a certificate of currency dated 27 September 2010 addressed to him stating the monthly premium and sum insured, both of which amounts were recorded in Mr Galloway's handwriting in the Insurance Financial Needs Analysis signed by Mr Stevens on that day. The evidence suggests that Mr Stevens automatically received a renewal notice in relation to his Westpac Life policy on 1 October each year. The certificate of currency was different. It was brought into existence on 27 September apparently at Mr Stevens' request, for it stated: "Dear Mr Stevens ... Thank you for your request for a certificate of currency for this policy". 73Those matters reinforce the conclusion that, to the extent that the primary judge's findings are based on the credibility of Mr Stevens, they cannot by themselves sustain the judgment. Mr Galloway's evidence 74Mr Galloway was cross-examined thoroughly and some very serious allegations were made against him, including that he did not present the Statement of Advice at all, and that he did not ask Mr Stevens the questions in the application for the CommInsure policy. However, the primary judge found that the Statement of Advice was "presented" (at [61]) without further saying what that involved. Mr Galloway said that he believed that he "still spent a fair bit of time on the statements of advice to help a client understand the document". The primary judge did not make a finding that the Mr Galloway had not asked all of the questions on the application form. Mr Galloway conceded that he had no independent recollection of it but maintained that: "I asked every single question on the Write Away application and I always do". 75The impression gained from reading the cross-examination of Mr Galloway is of a witness doing his best to answer questions, in a careful and thorough cross-examination, making concessions where appropriate. This Court cannot, in fairness to Mr Galloway and in deference to the primary judge, make any adverse finding contrary to the evidence of Mr Galloway beyond those made by the primary judge. Moreover, to the extent that his Honour's rejection of Mr Galloway's evidence is based upon a preference for Mr Stevens' evidence, it would be wrong to rely upon the rejection. 76It follows that only if the appeal can be determined (a) without reliance on any finding turning upon his Honour's favourable assessment of Mr Stevens or his daughter, and (b) without reliance on findings adverse to Mr Galloway as stated in the previous paragraph, can a retrial be avoided. The reasons of the primary judge 77The primary judge said (at [61]) that: "The clear aim of this process was to sell Mr Stevens a CML insurance product in lieu of his existing Westpac life insurance policy. That Statement of Advice, which comprised some 19 pages, some of it being in very small print, was presented to Mr Stevens at a further meeting that was later arranged by Mr Galloway to take place on 13 October 2010." That finding is probably independent of the assessment of credibility, but in any event, nothing turns on it. 78Mr Galloway claimed no independent recollection of either meeting. Mr Patterson (who was present only on the first meeting, which was his first day at work), did claim a recollection. The primary judge preferred the evidence of the plaintiff, for whom it was a "single and isolated transaction", rather than the "necessarily ... reconstructed" account of Mr Patterson (at [65]). In light of the flawed assessment of Mr Stevens' credibility, that preference cannot safely be sustained on appeal. 79The primary judge found that CFP owed Mr Stevens a duty of care (at [81]) which included: "the duty to ensure the plaintiff was adequately informed of the consequences of potential material non-disclosure of health and related matters, which an underwriter of trauma and life insurance of the kind under contemplation would regard as being material to the risk, in circumstances where he was being encouraged to transact a new policy of life insurance that was intended to be followed by cancellation of the pre-existing policy, once CML had accepted the new proposal." There is no challenge to the formulation of duty in those terms, so it is not necessary to consider it further. 80The primary judge found that there was no doubt that Mr Galloway made the recommendations recorded in the Statement of Advice, upon which Mr Stevens relied. His Honour then said (at [112]-[113]) that: "At the heart of the matter concerning the representations made to Mr Stevens is the assertion which I find to have been made by Mr Galloway to Mr Stevens to the effect that it would be better for Mr Stevens to have all his business, including his life insurance policy, with the one bank, which in effect meant the Commonwealth Group, rather than having his life insurance remain with Westpac. This was asserted to have represented a better deal for Mr Stevens when it was not, and when Mr Stevens was given to understand he was getting a 'like for like' policy, which, in reality, he was not. In my view, that representation was misleading and deceptive because it meant that Mr Stevens would be giving up a valuable asset, namely a life insurance policy that had remained in force and under which the right to make a claim in the event of innocent non-disclosure being shown was safeguarded by statute, as that policy had been in force for more than 3 years since 2003, unlike the CML policy: s 29(3) of the Insurance Contracts Act (Cth) 1984." 81CFP gave much attention to [114], because it contains factual findings that directly fed into the finding of breach: "These events have arisen because the CML proposal was prepared under the computerised 'Write-Away' system, where the important foundation form was not printed off for Mr Stevens to check before it was submitted to the insurer for automated acceptance. It was an important document, which, if filled out incorrectly, or with insufficient detail or disclosure, as I have found occurred in this case, the ramifications for the proponent would be potentially and foreseeably financially disastrous. This was the effect in this case because the transaction proceeded in haste, on-line, without Mr Stevens being orally advised of the need to ensure factual accuracy and where ordinary prudence suggested that the form be given careful consideration including by checking details of disclosure against factual and medical records. In this regard, I accept the specific recollection based evidence of Mr Stevens to the usual practice assumptions made by Mr Galloway as to what was said and done on the 13 October 2010 meeting. This is especially so where it was apparent, that at least in some respects, Mr Galloway had not followed his usual practice on this occasion." 82That reasoning cannot be sustained for two reasons. Not only does it in part turn upon the primary judge's favourable assessment of Mr Stevens, but also it presupposes that it was possible for the application to be printed out prior to its being submitted. The unchallenged evidence was to the contrary: "There's no capacity to print it off before it gets sent through to CommInsure", which evidence was accepted by the cross-examiner. 83The primary judge said there should have been a full explanation of the risk, rather than "just in a perfunctory manner in fine print in a disclosure document that was swamped with information": at [116]. His Honour applied s 5B of the Civil Liability Act 2002 and found that the risk of material non-disclosure was not insignificant, such that Mr Galloway ought to have printed off the form or produced an equivalent hard copy for Mr Stevens to consider and complete carefully, including by taking it away if necessary in order to check medical matters: at [120], something which, on the unchallenged evidence, could not be done. His Honour said that "it was insufficient ... to simply place the disclosure documents before Mr Stevens for signature"; that too reflects a finding based on the testimonial evidence of Mr Stevens which cannot be sustained on appeal. 84Part of the reasoning as to causation was also flawed. In relation to his Honour's finding of breach by failing to print the CommInsure application form and ensure that Mr Stevens could consider it fully, not only did the only evidence point to that being impossible, but also it is difficult to see how that would have altered his decision-making. Mr Stevens said that he was not good at reading or writing. As it was put by Mr Jones SC, counsel for CFP, in writing: "Mr Stevens accepted in cross examination that at the relevant time he was aware of his duty of disclosure, and was aware that one of the matters that CommInsure would be interested in was his health. There is no suggestion that Mr Stevens made disclosure of his disastrous recent medical history, and the primary judge also made findings only consistent with his disclosure as to alcohol intake being inaccurate by a degree of at least 100%. Considered in that light, the burden on the respondent was to show how the provision of a 40 page written application ... would have made a difference. That causal enquiry was not aided by the primary judge's obvious inability to accept that the application was not dealt with orally." 85However, part of his Honour's reasoning is in a different category. On the issue of causation within the meaning of s 5D, his Honour said at [122]: "it is plain that were it not for the negligence, as I found to have been the case here, it would have been unlikely that Mr Stevens would have accepted the risk of the possibility of an avoided policy by surrendering one that was perfectly good and acceptable to him and where it was within the scope of the duties of a financial planner giving an unsophisticated person advice to ensure that the person in question was being given recommendations that were in his best interests, without conflict arising with the interests of the seller of the products being recommended: 5D(2) of the CL Act." 86That finding is not based on testimonial evidence (and any evidence from Mr Stevens on what he would have done would have been inadmissible by reason of s 5D(3)(b) of the Civil Liability Act). And it is inherently plausible. 87His Honour found that there was misleading or deceptive conduct in two respects. The first was that Mr Stevens was misled and deceived into thinking that the new policy protected his estate, when in fact it was avoidable. The second was that the representation that the CommInsure policy was better than the Westpac policy was misleading, because the latter was not avoidable, as more than three years had passed since it was incepted: at [128]. Resolution of the appeal 88Only if it appears to the Court that some substantial wrong or miscarriage has been occasioned may a retrial be ordered: Uniform Civil Procedure Rules 2005, r 51.53. If a retrial is to be avoided, the resolution of the appeal must be premised on the assumptions, favourable to CFP, that (a) on 27 September 2010 Mr Stevens told Mr Galloway that his health was "excellent", (b) on 13 October 2010 Mr Galloway spent at least 30 minutes explaining the Statement of Advice to Mr Stevens, whose essence was to apply for life insurance with trauma cover from CommInsure and cancel his existing Westpac Life policy, and (c) when that advice was accepted, Mr Galloway asked a series of questions about his health and consumption of alcohol which Mr Stevens answered in the manner advised to CommInsure. 89At first blush, it may be thought that there are some considerable unlikelihoods in those factual premises. How did Mr Stevens come to answer specific questions about alcohol consumption and his medical history incorrectly? There was every reason for him to be honest, and no reason for him to be inaccurate. Mr Stevens left school at 16 without obtaining the school certificate, and had been drinking heavily for many years. Further, it is not implausible that a genuine mistake was made in relation to alcohol consumption, in that Mr Stevens heard a question he had been asked by many doctors as to his alcohol intake as a question of how many drinks he consumed each day, rather than each week. The answer recorded by Mr Galloway of eight resembles the answers he is recorded as having given to his doctors on 15 November 2009, 15 February 2010 and 27 June 2010 reproduced above ("8 stubbies (heavy) every night" etc). All those considerations may have contributed to the inaccurate answers he gave to Mr Galloway. 90Making those assumptions favourably to CFP, it is easy to see how the primary judge was concerned by the apparent haste with which Mr Stevens accepted the advice from Mr Galloway. We share his Honour's concern. There is a real tension between the exhortations in the Statement of Advice acknowledging the need for the client to "take full ownership" of his financial decisions, to take his time to read and understand and "feel completely comfortable" with the advice, and what actually happened - a change of insurer then and there. Mr Galloway's evidence was: "I mention to all my clients at the conclusion of all meetings that they need to take everything home and read it and if they're comfortable with everything they can proceed with anything otherwise they can call me with any queries." If that advice was given, Mr Stevens did not follow it. But Mr Stevens did accept the advice in the Statement of Advice at the meeting, left the meeting with a CommInsure policy in place, and immediately cancelled his Westpac Life policy. 91Yet if this appeal turned upon the matter which the primary judge regarded as very important and of concern - the haste with which the decision was made - then a retrial could not be avoided. For haste per se cannot lead to liability. A client is entitled to be advised to take his or her time, and to reject that advice and make an investment decision then and there. That is an aspect of autonomy, something highly regarded in the Australian legal system. "One of the central tenets of the common law is that a person is legally responsible for his or her choices": Perre v Apand [1999] HCA 36; 198 CLR 180 at [114] McHugh J. 92But this appeal can be decided, and the judgment upheld, on reasoning unconnected with the clarity and effectiveness of Mr Galloway's oral explanation of the Statement of Advice. It therefore should be so decided, so as to avoid a retrial. The judgment should stand and the appeal should be dismissed because the written advice given by Mr Galloway was misleading and deceptive even if fully explained orally, and it caused Mr Stevens to cancel his Westpac Life policy. It is also likely that the advice was not "appropriate" advice within the meaning of (former) s 945A of the Corporations Act, but, in the absence of full argument on the point, it is not appropriate to express a concluded view. Given the incomplete factual findings having regard to the substantial success of CFP's challenge to them, we would prefer not to express a view on breach of a common law duty, and it is not necessary to do so. Misleading and deceptive conduct 93The following features of the Statement of Advice, taken together, made Mr Galloway's conduct misleading and deceptive or likely to mislead or deceive. 94First, the advice that was given wrongly supposed that a comparison could be made between CommInsure and Westpac Life. That could not be done, because whether CommInsure would insure Mr Stevens, and if so with what exclusions and at what premium, was not known. The unequivocal advice that the CommInsure policy was cheaper on a like for like, dollar for dollar basis was incomplete. That was merely the best case, and could not be assessed definitively at that stage. What is more, at the time of the advice Mr Galloway accepted that he was in no position to compare the two policies insofar as they applied to Mr Stevens: "Q. You hadn't looked at the old policy had you, the Westpac policy? A. No I hadn't received a policy schedule. Q. Apart from a general familiarity with the Commonwealth Bank product you hadn't looked at it in the context of this plaintiff had you? A. No. Q. How could you then make a representation of fact that the terms and conditions of the recommended insurance policy are different to your current policy? A. I don't know." 95Secondly, the advice was necessarily incomplete. Mr Galloway was forbidden by his employer from recommending competitors' products. He gave this evidence: "Q. [It] would be not permissible for you within the terms of your employment to recommend, for example, a Westpac life insurance product to any client you were talking to. A. Correct. ... Q. What you're telling us is even in the event that you were aware of facts, matters, and circumstances that made a competitive bank's insurance company an entity that provided a product that better satisfied a person's needs, objective, financial circumstances, and personal situation, you would not be able to recommend it to the client, that's correct, isn't it? A. From a recommendation perspective, that is correct. His Honour: Well, does that mean the answer is yes? A. Your Honour, if - if the client comes to us with the - one type of product and we're looking at a comparison to our own and we find that their product is more superior, we would simply offer no advice. We're not authorised to provide advice on another - on a - we have an approved products list and there are certain products that aren't on that product list that we therefore can't provide advice on." 96It follows that it was not possible for Mr Galloway to recommend, as a viable alternative, maintaining the Westpac Life insurance policy. It was misleading for Mr Galloway to advise to the effect that all considerations pointed towards cancelling the Westpac Life policy and applying for CommInsure. 97Thirdly, such comparison as there was between Westpac Life and CommInsure was also incomplete. Mr Galloway recommended that Mr Stevens take the "Stepped Premium Rate option", which meant that the premium was recalculated every year by reference to his age. The alternative was the "Level Premium Rate option", which for most insureds would lead to lower premiums overall, but higher premiums in the first years of the policy. CommInsure's product disclosure statement indicated that the Level Premium Rate option was much higher (the only example given of life, total permanent disablement and trauma cover was for a 35 year old non-smoking male accountant, whose Stepped Premium Rate was $51.55 per month, and whose Level Premium Rate was $128.83 per month). It may readily be inferred that although the Level Premium Rate was generally cheaper in the long run, Mr Galloway did not mention it because it would have been uncompetitive with the existing Westpac Life policy. The Statement of Advice did state the following: "▪ I have recommended stepped premiums for you because of the initial cost savings available and your reliance on insurance will reduce with age. ▪ Premiums can be calculated as stepped or level. Stepped premiums increase with the life insured's age. Level premiums don't increase with your age up to age 65, after which time they revert to a stepped-style premium. Stepped premiums are generally cheaper at the beginning but over time become more expensive." 98Mr Galloway's comparison of premiums was confined to the first year. But he was attempting to sell a product designed to last a lifetime. It was misleading to confine his comparison to the first year's premiums. Further, it would be necessary to take into account the facts that (a) the benefit payable under the Westpac Life policy increased (subject to a direction to the contrary) by 3% per year and (b) the structure of the premiums under the Westpac policy. There is nothing to suggest that Mr Galloway even made an inquiry as to that structure. 99It should be noted that Mr Galloway was not challenged on this particular point, and were it necessary to the conclusion that his advice was misleading and deceptive, it would be inappropriate to rely upon it. The other matters independently suffice to render the advice misleading and deceptive. 100Fourthly, although the Statement of Advice did disclose the risk of avoidance for non-disclosure, it failed to disclose the important effect of s 29(3) of the Insurance Contracts Act. Section 29(3) was, in Mr Galloway's words, "news to me". His evidence was: "Q. If you'd have known about that in 2010 especially when dealing with something called like for like, ... you would have spoken with the client carefully about the potential consequences of forgetting or omitting or not disclosing in an unintentional sort of way things the insurance company might want to know about? A. I anticipate I would yes. Q. Because you can immediately see that ... if what I'm saying is correct on the one hand, a policy that's been in for more than three years is unassailable on the grounds of innocent non-disclosure, whereas a new policy has got a three year period before that benefit attracts to it, this is all completely news to you is it? A. Yes it is. Q. That's something that your employers just never ever brought to your attention? A. No. ... Q. [I]f what I have said to you is correct about - look, after three years, absent fraud, it doesn't matter if you haven't told the insurance company everything you should have told them - but that when you're coming to get a replacement policy, you've got to go through that three year window before you get that protection, you would have regarded that as an important matter to specifically bring to your client's attention? A. Yes. Q. The only reason you didn't in this case is because you didn't know about it. Is that right? A. Correct." 101That failure is perhaps a consequence of the circumscribed way in which the Statement of Advice was drafted by others, in accordance with a template, which did not fully deal with the impact of federal law upon a decision of an insured to switch insurer, and perhaps a consequence of the fact that Mr Galloway was unable to recommend Westpac Life (so that he had little occasion to be aware of s 29(3)). But whatever the reason for it, in circumstances where in truth there was little material difference in the policies, that statutory difference was very material to the decision Mr Stevens was being asked to make. It was misleading and deceptive to advise him to do so without drawing it to his attention. 102The primary judge found that the statement that the CommInsure policy was better than the Westpac Life policy was misleading and deceptive. That finding should be accepted. It was misleading and deceptive, when made and relied on 13 October 2010, because the Westpac policy was not subject to avoidance under s 29(3), and for the other reasons given above. 103As to whether the misleading and deceptive conduct caused Mr Stevens to cancel his Westpac policy, the primary judge found (at [122]) that: "it would have been unlikely that Mr Stevens would have accepted the risk of the possibility of an avoided policy by surrendering one that was perfectly good and acceptable to him". 104As noted above, that finding is unaffected by the difficulties accompanying his Honour's acceptance of Mr Stevens' evidence, and is inherently plausible. It follows that CFP by its agent Mr Galloway engaged in conduct in relation to a financial product (the CommInsure policy) or a financial service (the Statement of Advice) which was misleading or deceptive or likely to mislead or deceive contrary to s 1041H of the Corporations Act which caused loss recoverable pursuant to s 1041I of the Corporations Act. It also follows that there was a contravention of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth), which caused loss recoverable pursuant to s 12GF of that Act. Those conclusions are sufficient to sustain the judgment in Mr Stevens' favour. Corporations Act s 945A and s 953B 105In 2010, s 945A of the Corporations Act provided that an authorised representative such as Mr Galloway must only provide advice to a retail client if he "determines the relevant personal circumstances in relation to giving the advice" and "makes reasonable inquiries in relation to those personal circumstances", gives reasonable consideration to and makes reasonable investigations of the subject-matter of the advice, and then may only give advice which is "appropriate to the client, having regard to that consideration and investigation". (The section was repealed on 1 July 2012, and replaced by provisions which ASIC regards as imposing a higher standard of advice: see current s 961G and ASIC Regulatory Guide 175: Licensing: Financial product advisers - Conduct and disclosure (October 2013), RG 175.343.) "Relevant personal circumstances" for the purposes of s 945A were defined in s 761A to be "in relation to advice provided or to be provided to a person in relation to a matter, are such of the person's objectives, financial situation and needs as would reasonably be considered to be relevant to the advice." 106Former s 953B entitled a person who suffered loss because of the contravention of s 945A or s 945B to recover that loss from the financial services licensee (cf now s 961M). 107The Court received one paragraph of written submissions from the respondent in support of her notice of contention. CFP understandably devoted little attention to the notice of contention in its submissions in reply. It was not developed significantly orally (although the Court sat late, and offered additional time, neither party asked for additional hearing time). It follows that this is not the occasion to attempt to delineate the metes and bounds of "appropriate" financial advice required by (former) s 945A(1)(c). It suffices to say that the same reasons which made Mr Galloway's Statement of Advice misleading and deceptive suggest that it was also advice which was not "appropriate" to Mr Stevens, given the unqualified and incomplete way in which it was provided. The same reasons sustain a finding that the contravention caused Mr Stevens to cancel his Westpac Life policy, thereby causing the loss in respect of which the primary judge found he was entitled to recover damages. 108Mr Galloway was aware that Mr Stevens had no dependants save for his aged mother and few assets. He was essentially recommending that an unsophisticated client cancel one life insurance policy for another, which would cost him in premiums from the outset, and increasingly more thereafter. For the advice to be appropriate, we incline to the view that it was necessary to do much more than say that the new policy was, like for like, dollar for dollar, better value. The comparison that needed to be made was, for the reasons given above, nowhere near so straightforward. However, in the absence of written submissions or oral argument on the issue, we do not express a concluded view. 109The unfortunate facts of this appeal tend to bear out the first recommendation of the conclusions of the Report of the Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Financial Products and Services in Australia (November 2009): that the Act be amended to: "explicitly include a fiduciary duty for financial advisers operating under an AFSL, requiring them to place their clients' interests ahead of their own." 110In the circumstances in which Mr Galloway found himself, it is difficult to see how he placed Mr Stevens' interest ahead of his own and of his employer. Mr Galloway conceded that there were circumstances when he could not do so: "Q. Where [duty to employer and duty to client] conflicted, you gave effect to the duty to your employer and not to the client, didn't you? A. That seems to be the case in [the Statement of Advice]..." Orders 111Despite the fact finding process miscarrying, a retrial is not necessary. The appeal should be dismissed, although for reasons different from those accepted by the primary judge. Even so, there is no reason to displace the usual rule that costs follow the event. ********** 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: 16 December 2013