Court of Appeal Supreme Court New South Wales Medium Neutral Citation: MetLife Insurance Limited v MX [2019] NSWCA 228 Hearing dates: 8 March 2019 Date of orders: 16 September 2019 Decision date: 16 September 2019 Before: Meagher JA at [1]; Gleeson JA at [2]; Payne JA at [165]. Decision: (1) Grant leave to appeal. (2) Direct the appellant to file a notice of appeal in the form of the draft in the White Book within 7 days. (3) Appeal dismissed. (4) Appellant to pay the first respondent's costs in this Court. (5) Order that in relation to these proceedings, the first respondent be referred to only by the pseudonym "MX". (6) Pursuant to Court Suppression and Non-publication Orders Act 2010 (NSW), s 7, and on the ground specified in s 8(1)(c), prohibit for a period of 50 years the disclosure of the identity of the first respondent, or any information tending to reveal his identity, by publication or otherwise in Australia. Catchwords: SUPERANNUATION – accident and sickness insurance – benefits for disablement – where benefits insured under group life policy – benefit for "total and permanent disability" – where insurer declined claim twice – where the insurer's second decision took into account its first decision – whether insurer took into account irrelevant consideration – whether insurer in breach of its contractual duty – whether insurer acted reasonably and fairly in its consideration of the claim Legislation Cited: Court Suppression and Non-publication Orders Act 2010 (NSW), ss 7, 8(1)(c), 11 Supreme Court Act 1970 (NSW), s 103 Cases Cited: Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175 Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113 Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913 Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233 Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123 Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 MetLife Insurance Ltd v Hellessey [2018] NSWCA 307 Metlife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2016] NSWSC 980 Metlife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2017] NSWCA 56 Newling v Metlife Insurance Limited [2019] NSWCA 149 Nile v Club Plus Superannuation Pty Ltd [2005] NSWSC 55 Rapa v Patience (Supreme Court (NSW), McLelland J, 4 April 1985, BC850088, unrep) TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 Ziogos v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2015] NSWSC 1385 Category: Principal judgment Parties: MetLife Insurance Limited (Appellant) MX (First Respondent) FSS Trustee Corporation as Trustee of the First State Superannuation Scheme (Second Respondent) Representation: Counsel: Mr J E Sexton SC / Mr S J Walsh (Appellant) Mr R A Cavanagh SC / Mr M Best (First Respondent) Mr S Drummond (Solicitor) (Second Respondent) Solicitors: HWL Ebsworth Lawyers (Appellant) Slater & Gordon Lawyers (First Respondent) Thomson Geer Lawyers (Second Respondent) File Number(s): 2018/236372 Publication restriction: Pursuant to Court Suppression and Non-Publication Orders Act 2010 (NSW), s 7, and on the ground specified in s 8(1)(c), prohibit for a period of 50 years the disclosure of the identity of the first respondent in these proceedings, or any information tending to reveal his identity, by publication or otherwise in Australia. Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Date of Decision: 24 July 2018 Before: Slattery J File Number(s): 2015/378414 [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.] HEADNOTE [This headnote is not to be read as part of the judgment] The first respondent who is referred to by the pseudonym MX is an injured former police officer who claimed an insured benefit for total and permanent disability under an insurance policy issued by the applicant, MetLife Insurance Limited (MetLife), to the second respondent, FSS Trustee Corporation, the trustee of a superannuation scheme of which MX was a member. MetLife's liability under the policy turned partially on it being satisfied that MX's incapacity rendered him unlikely ever to engage in any gainful profession, trade or occupation for which he was reasonably qualified by reason of education, training or experience (the ETE clause). It declined MX's claim on two occasions, having formed the opinion in 2014 (the first decision), and again on reconsideration of the claim in 2017 (the second decision), that it was not satisfied that MX's incapacity answered the description in the ETE clause. On the determination of separate questions in the Supreme Court, Slattery J found that MetLife breached its obligations of utmost good faith and of acting reasonably in forming its opinion in 2014, and again in 2017: MX v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2018] NSWSC 923. His Honour held that MetLife's first and second decisions were void and of no effect. MetLife sought leave to appeal against that decision. On a concurrent hearing of the application for leave and the appeal, the principal issues raised were: Whether the primary judge erred in finding that MX had breached its obligations of utmost good faith and of acting reasonably in forming its first opinion in 2014. Whether the primary judge erred in finding that MetLife's process of consideration underlying its second decision in 2017 was unreasonable because it was made with reference to its first decision and that was an irrelevant consideration. Whether the primary judge erred in finding that the second decision was vitiated because MetLife failed to act reasonably and fairly in considering MX's claim. Gleeson JA (Meagher and Payne JJA agreeing), granting leave to appeal but dismissing the appeal with costs, held: As to issue (1): There was no error in the primary judge's finding that MetLife was in breach of its contractual duty to MX by failing to act fairly and reasonably in considering his claim in 2014. This was evident from its reasons, which did not explain the actual path of reasoning for arriving at its decision, and cited competing medical evidence without explaining why it preferred one medical opinion over the evidence of MX's treating psychiatrist: [154]-[162]. Newling v FSS Trustee Corporation (No 2) [2018] NSWSC 1405; Ziogos v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2015] NSWSC 1385, referred to. As to issue (2): The first decision formed part of the relevant context to which MetLife was entitled to have regard in the process of reconsideration of its decision. Whether or not MetLife's second decision was a separate decision or merely confirmation of its opinion already formed, the second decision necessarily involved consideration of the first decision, which was not an irrelevant consideration: [91]-[93]. As to issue (3): There was no error in the primary judge's finding that the second decision was vitiated because Metlife, in breach of its contractual duty, had failed to act reasonably and fairly in its process of consideration of the material, including medical opinions, as to whether MX was totally and permanently disabled: [106]-[111], [115]-[142]. Judgment 1. MEAGHER JA: I agree with Gleeson JA. 2. GLEESON JA: This appeal concerns the entitlement of an injured worker to a benefit available under an insurance policy issued by an insurer to the trustee of a superannuation scheme, of which the worker is a member. The insurer's liability under the policy turned partially on it being satisfied that the member had become incapacitated to such an extent as to render him unlikely ever to engage in any gainful profession, trade or occupation for which he was reasonably qualified by reason of education, training or experience. The insurer formed the opinion that it was not so satisfied in 2014, and again on reconsideration of the claim in 2017. On each occasion the insurer declined the member's claim for a benefit. 3. On the determination of a separate question, the primary judge, Slattery J, found that the insurer breached its obligations of utmost good faith and of acting reasonably in forming its opinion in 2014, and again in 2017: MX v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2018] NSWSC 923. 4. The insurer has sought leave to appeal against that decision. Leave to appeal is required as the decision in the proceedings below concerned a separate question: Supreme Court Act 1970 (NSW), s 103. The hearing proceeded as a concurrent hearing of the application for leave and the hearing of the appeal, if leave be granted. Given the nature of the arguments raised by the insurer, there should be a grant of leave to appeal. 5. For the reasons that follow, the appeal should be dismissed with costs. Background 1. The first respondent, who it is convenient to refer to as the respondent, is a former police officer. He is a member of the First State Superannuation Scheme (the Scheme) of which the second respondent, FSS Trustee Corporation, is the Trustee. The Scheme provided certain benefits to members in respect of the disablement of a member, including "insured benefits", being the amount payable to the Trustee from a Group Life Insurance Policy in respect of the death or disablement of a member, referred to as the "Blue Ribbon Policy". The policy was issued by the appellant, Metlife Insurance Ltd (the Insurer), to the Trustee in its capacity as trustee of the Scheme. The Trustee did not take any active part in the appeal. 2. The respondent commenced work as a police officer in July 1998. During his 22 years of service he generally worked as an undercover officer and was often involved in dangerous and difficult situations and dealt with serious and organised crime. He was exposed to many violent and traumatic events and incidents. His last day of work was 23 August 2010. On 2 September 2010, he consulted his general practitioner who certified him unfit to return to work. He has not worked since that time. The six months during which he was absent from his employment ended on 2 March 2011. On 20 January 2011, he was diagnosed by Dr Greg Wilkins, his treating psychiatrist, as suffering from a psychiatric illness – delayed-onset post-traumatic stress disorder (PTSD). He was medically discharged from the Police Force on 13 October 2011. 3. In March 2012, the respondent made a claim for a benefit available under the policy. Under that policy (cl 2.1), the respondent was entitled to benefits for total and permanent disablement (TPD) as defined in the First Schedule to the policy (relevantly par 6(b)) if, having been "absent from" his occupation as a police officer "through injury or illness for six consecutive months", he, as the "Insured Member": provided proof to [its] satisfaction that [he had] become incapacitated to such an extent as to render [him] unlikely ever to engage in any gainful profession, trade or occupation for which [he was] reasonably qualified by reason of education, training or experience. 1. It is common ground that the date for assessment of the respondent under the policy is 2 March 2011. At that date, he was aged 41 years, with a 26-year working life expectancy. It is also common ground that the amount of the benefit under the policy is $634,371. 2. It is not in dispute that the first limb of the definition of TPD was satisfied – the respondent was hurt on duty, and developed and suffered from a psychiatric illness, PTSD, which continued to incapacitate him from his occupation as a police officer for six consecutive months, and indeed up to the time of the hearing. 3. As to the second limb, commonly referred to as the ETE (education, training and experience) clause, the Insurer disputed the effects that the respondent's PTSD has on his capacity for remunerative employment. On 1 December 2014, the Insurer made a decision to decline the claim (the first decision). The respondent commenced proceedings in 2015 challenging the first decision. On 9 June 2017, following a request by the respondent's solicitors to reconsider the claim, the Insurer maintained that denial (the second decision). 4. The parties accepted that the respondent's claim under the policy was to be analysed in accordance with the "two-stage" approach explained in TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 (TAL Life v Shuetrim) at [157]-[158]. With respect to the first stage of the analysis, an order was made in March 2017 for the separate determination of the following questions: 1. Whether, in refusing to accept the respondent's claim, the [Insurer] acted in breach of its statutory and/or general law duties? 2. Whether the [Insurer] breached its duty to act reasonably in considering the claim made by the respondent? 1. The primary judge answered the separate questions affirmatively and declared that the Insurer's first and second decisions were void and of no effect. Non-publication order 1. A non-publication order was made in the proceedings below and continued by the Registrar of this Court until the hearing. In this Court, the respondent has been referred to by the pseudonym, MX, and not by his name in the pleadings. For the reasons given by the primary judge at Judgment [15]-[20], a non-publication order should be made by this Court for a period of 50 years on the ground stated in s 8(1)(c) of the Court Suppression and Non-publication Orders Act 2010 (NSW), namely, the order is necessary to protect the safety of the respondent, having regard to the well-founded concerns for the respondent's safety, given his activities as an undercover officer. The order should apply throughout the Commonwealth as this is necessary for achieving the purpose of protecting the safety of the respondent, whose undercover activities included interstate operations: Court Suppression and Non-publication Orders Act, s 11. The material taken into account by the Insurer The first decision – 1 December 2014 1. The Insurer declined the claim in a letter to the Trustee dated 1 December 2014 stating: For the reasons set out below, MetLife does not consider that the Insured Member has become incapacitated to such an extent as to render the Insured Member unlikely to ever engage in any gainful profession, trade or occupation for which the Insured Member is reasonably qualified by reason of education, training or experience. 1. The Insurer's letter went on to identify in chronological order the evidence which formed the basis of the denial of the claim. Reference was made to the following reports: Dr Wilkins, the respondent's treating psychiatrist – 20 January 2011, 21 February 2013 and 13 November 2013; Dr Peter Anderson, consultant psychiatrist – 9 March 2012; surveillance investigation report – 5 July 2012; A/Prof Robert Kaplan, forensic psychiatrist – 9 July 2012 and 22 December 2013; vocational assessment report of Ms Nicola Monger – 2 August 2012; surveillance investigation reports – 10 March 2013 and 5 July 2013; investigation report, including interview of the respondent – 23 August 2013; and Dr Jonathan Adams, forensic psychiatrist – 5 March 2014 and 2 June 2014. 2. The Insurer concluded: Conclusion MetLife considers that the Member has not suffered a total and permanent disablement as defined in the Group Life Insurance Policy Contract – Blue Ribbon – issued by MetLife to FSS Trustee Corporation. Accordingly, MetLife has declined the Member's claim. 1. It is not in dispute that the medical evidence expressed the common view that the respondent had suffered psychological injury in the form of PTSD. Dr Wilkins' view was that the respondent would not ever be capable of returning to employment and that he had suffered a permanent incapacity. A/Prof Kaplan's initial view was that while it was certain that the respondent could never return to policing or security work, his moderate improvement as at July 2012 raised the possibility that he would be able to do "alternate duties". 2. In his supplementary report, A/Prof Kaplan referred to the surveillance video of the respondent at a community club (the Club) which he considered showed the respondent "appears to be working behind the bar at the Club and interacting with patrons without difficulty". After acknowledging that "[i]t would be helpful to learn Dr Wilkins' response to the surveillance videos", A/Prof Kaplan concluded: As it appears [the respondent] can work at the …. Club as a bar assistant without evident difficulty, I can see no reason why he cannot return to full-time work provided this excluded police duties. 1. Dr Wilkins responded to A/Prof Kaplan's views and commented on the surveillance footage of the respondent, which was limited to 67 minutes from the surveillance time logged. In his 13 November 2013 report, Dr Wilkins observed: [27] The 67 minutes of surveillance footage shows: (a) [The respondent] volunteering at [the] Club. [The respondent] can be observed assisting in simple tasks including: assisting in moving a large drink machine, assisting others in arranging furniture, and serving drinks over the bar on one occasion. (b) [The respondent] driving his vehicle – or at times presumably driving the family vehicle as it is not possible to ascertain whether the driver is in fact [the respondent]. (c) [The respondent] is observed obtaining a large bag of coins from a teller at the Commonwealth Bank in the …. CBD. (d) [The respondent] dropping his children to school. (e) [The respondent's] car is observed parked at [the] Club on a number of occasions. and expressed the opinion that these behaviours were consistent with what the respondent had reported to him while under his care, and were also consistent with his observed behaviours during clinical consultations. 1. Dr Wilkins referred to the interview notes of an investigator retained by the Insurer, who had spoken with a director from the Club. The director had confirmed that the Club did not have any employees and is run solely on the volunteering of Club members. Dr Wilkins noted that the respondent did not engage in any form of employment or part-time work and that the interview notes of the investigator showed: 44. … that all [the] Club members are volunteers. They come and go as they please and it is that freedom of movement and application which allows [the respondent] to participate at all. He is under no obligation and this dramatically reduces the pressure and sense of responsibility. If the responsibility and obligation were present [the respondent] would withdraw and be unable to attend at all. 45. The 67 minutes of surveillance footage provides evidence of [the respondent] volunteering behind the bar on a single occasion (of less than 40 minutes duration) hardly proof of capacity to work, nor does it depict him socialising. [Emphasis omitted from the original.] 1. Dr Wilkins said that the respondent is easily distressed and unable to engage with others for a prolonged period of time without becoming increasingly anxious and retreating from the situation. With respect to the three occupations identified in the vocational assessment report of Ms Monger – clerical and administrative worker, insurance consultant and law clerk – Dr Wilkins' opinion was that the respondent would struggle with a position of responsibility that required him to take instruction and follow protocols and that the respondent was unfit for any form of paid employment. The Insurer's reasons for its first decision 1. Insofar as the Insurer's letter analysed or commented upon the evidence which it identified as forming the basis of its first denial of the claim, reference should be made to the following matters: * with respect to the vocational assessment report, the Insurer noted that Ms Monger said: The [respondent] has few restrictions physically and the occupations identified are such that the [respondent] is able to undertake such duties without constant reminder of his previous police life and duties. (The Insurer did not refer to or acknowledge the limitations of Ms Monger's report insofar as it did not consider the respondent's psychological condition or restrictions.) * with respect to the investigation material, the Insurer noted that the respondent can be seen to be reasonably involved in a community Club and was identified as the contact at the Club for enquiries relating to functions. The Insurer commented: Objectively, one would think that the Member in this case would have to be reasonably reliable to perform this role. * with respect to Dr Wilkins' report of 13 November 2013 responding to the surveillance and investigation material, the Insurer commented: Dr Wilkins went further and said that as a result of the [respondent's] chronic PTSD, he had cognitive decline and persistent symptoms that had made him unreliable. On this basis, Dr Wilkins said that it would be unlikely that the [respondent] would be capable of retraining as he could not reliably perform in a retraining program. He said that it seemed increasingly apparent that the [respondent] would not ever return to a pre-injury level of functioning that would enable him to return to any form of employment or work related activity. The [respondent's] day to day functioning and, the reliance placed upon him by the club with respect to organising functions and events in MetLife's opinion suggests otherwise. * with respect to A/Prof Kaplan's report of 22 December 2013 (incorrectly described in the Insurer's letter as dated 9 July 2012) responding to the surveillance videos, the Insurer noted (emphasis in original): … that on the basis of the new evidence provided to him, there appeared 'to be an inconsistency between [the respondent's] behaviour and [sic] the clinical environment and outside the clinical environment. There could be a number of explanations for this, including a response to treatment'. * with respect to the second report of Dr Adams of 2 June 2014, which was dismissive of the conclusions in the vocational assessment report and commented that the remarks of A/Prof Kaplan in his 22 December 2013 report were not consistent with his clinical assessment of the respondent, and disagreed with A/Prof Kaplan that the respondent could return to full-time work provided this excluded Police duties, Dr Adams expressed the view that from a psychiatric perspective the surveillance footage only portrayed the respondent's behaviour in a certain time and in limited circumstances, when out of his home and did not depict important areas of his mental state, for example, his mood, anxious ruminations, hyper-vigilance, thought processes and additional symptoms of mental illness. The Insurer commented: Nevertheless, the surveillance clearly indicates that the [respondent] was leading a fairly normal life and was actively involved in fundraising activities of [the] club, without apparent difficulty. The second decision – 9 June 2017 1. The Insurer received the following additional material after its first decision (which included affidavits and medical reports served by the respondent in the proceedings as referred to in (1), (2), (3), (4) and (11) below): 1. affidavits of the respondent sworn on 15 January 2015 and 8 June 2017, and an affidavit of a member of the Club sworn 10 May 2017, who will be referred to by the pseudonym, AX; 2. report of Dr Selwyn Smith, consultant psychiatrist, dated 2 December 2015; 3. report of Dr John McMahon, clinical psychologist, dated 23 March 2016; 4. Patient Health Summary printed 10 May 2016 from Dr Coverdale, the respondent's general practitioner; 5. report of Dr Inglis Synnott, consultant psychiatrist, dated 1 June 2016; 6. documents dated 4 July 2016 obtained on subpoena from the Department of Immigration and Border Control concerning the respondent's international travel movements; 7. report of Dr Fernando Roldan, clinical psychologist, dated 18 July 2016; 8. a report from an investigator dated 12 September 2016; 9. an Employability Capacity Assessment of Ms Alicia Tyler dated 23 September 2016; 10. reports of Dr Mark Kneebone, consultant psychiatrist, dated 27 September 2016 and 11 October 2016; and 11. reports of Dr Wilkins, the respondent's treating psychiatrist, dated 23 August 2016 and 12 December 2016. 1. On 26 May 2017, the respondent's solicitors requested the Insurer reconsider the claim, pointing to reports served in the proceedings by the respondent, including the report of Dr Wilkins dated 12 December 2016. 2. The further material relied upon by the respondent addressed two issues: first, whether the respondent's incapacity was such that he could not undertake any of the work options identified in the vocational assessment report of Ms Monger; and second, whether the respondent's reported level of functioning was inconsistent with the surveillance video and other investigative material obtained by the Insurer. 3. As to the first issue, the respondent said in his 15 January 2015 affidavit that he could not undertake any of the duties in the occupations identified in the vocational assessment report of Ms Monger due to his current symptoms of PTSD. He gave detailed reasons as to the difficulties he anticipated he would encounter in undertaking those occupations, including: his impatience with people, and that he could become agitated and/or irritable and also argumentative; his low moods and wanting to isolate himself made communication extremely difficult; his difficulty in concentrating with motivation which would make preparing reports difficult; his poor memory and difficulty in remembering tasks and managing a diary; his difficulty meeting new people or engaging with them; the fact that he struggles to get out of bed or leave the house on some days due to lack of sleep associated with violent recurring nightmares; his inability to sit in front of a computer all day; and his difficulty comprehending information and in analysing and interpreting information. 4. As to the second issue, the respondent explained in his 8 June 2017 affidavit his reasons for attending the Club, and the nature of his activities. Responding specifically to the six sightings of the respondent at the Club shown in the surveillance video, the respondent said: on 7 February 2013 he helped move a drinks machine by prior arrangement with other members of the Club; on 21 February 2013 he was in attendance at the Club for about seven minutes depositing coins for the Club; on 7 June 2013 he was shown leaving the Club; on 9 June 2013 he attended the Club on a Sunday afternoon with his wife and family; on 19 June 2013, after shown leaving the Club, he attended a local liquor shop to purchase some alcohol which he said was probably for his daughter's birthday party; and on 24 June 2013, he was seen at the Club and then followed back to his home address. 5. The respondent observed that for the period 2 November 2012 to 24 March 2013, the surveillance totalled 39 hours, whilst the total video obtained was four minutes. Of the nine days of observations in that period, there were seven days where his car was parked where he lived and there was no sighting of him at all. During the period 7 June 2013 to 25 June 2013, there was a further nine-day surveillance; and on one of those days, 22 June 2013, he was not present at a function held at the Club. 6. The respondent said that his family had strong connections with the Club, that volunteers, not employees, run the Club, and that he was not an employee of the Club. He described the Club as "my safe haven", and said that he did not feel safe in many places due to his career as an undercover police officer. Given the focus of the Insurer's reasons on the respondent's attendances and activities at the Club, two paragraphs of his affidavit should be reproduced in full: 9. However, since developing PTSD, it has been incredibly difficult to attend public functions and the …. Club has been a safe place for me. I continue to go there and help out occasionally because of the advice of my treating doctor, Dr Wilkins. I have been advised that surfing/swimming is a form of rehabilitation and therapy that I need to continue with. Since developing PTSD and depression, I have preferred to isolate myself. Helping at [the] Club and surfing/swimming is now my form of socialisation. This activity gets me out of the house and is part of the structure of my day. The people who are members at the Club I know through my family or they are in fact my family. I continue to train, as it is a form of treatment for my psychiatric injury. … 11. I believe that the surveillance supports me. There are over sixty hours of surveillance and it shows that I don't go to cafes or hotels. I go to the …. club because it is safe. The surveillance shows that I stay close to my home and restrict my travel to places where I feel safe and comfortable. Over the sixty hours of surveillance the furthest I go is to my father's address which is about six km from my home. I believe the surveillance supports what I have consistently told people. … 1. Club member AX gave evidence supporting the respondent's explanation of his activities at the Club. AX said that he had known the respondent for approximately 14 years. He confirmed that the Club relies on volunteers and said that he had observed the respondent undertake certain activities as a volunteer, relevantly, sweeping out the shed, putting away equipment, picking up rubbish and loading and unloading equipment. AX said that he was not aware of any particular function that the Club specifically relied upon the respondent to perform, either on a paid or voluntary basis. Having spoken with the respondent on a confidential basis about his activities as a police officer, AX expressed the view that the respondent attended the Club not only for his enjoyment, but as a means by which he is able to leave his home to go to a place where he is able to feel safe and secure. 2. It is of assistance at this point to refer briefly to the further medical opinions and vocational assessment report which feature significantly in the Insurer's reasons for its second decision. Dr Roldan – July 2016 1. In July 2016, Dr Roldan, clinical psychologist, diagnosed the respondent as having developed chronic PTSD. He performed psychometric tests and did not find any evidence of fabrication or exaggeration of the respondent's symptoms. Dr Roldan expressed the opinion that "within the context of the psychometric test results" the respondent has "intellectual, memory and literacy skills of a level that would qualify him to undertake various forms of gainful employment in keeping with his education, training and experience". Dr Roldan noted however that the respondent reported a number of psychological difficulties associated with PTSD, depression and anxiety that he said prevent him from undertaking any form of employment. 2. After observing that Ms Monger's vocational assessment report had not considered the respondent's psychological functioning capacity or psychological restrictions, Dr Roldan raised a "query" as to whether the respondent's role, activities and attendances at the Club contradicted some of his PTSD symptoms and difficulties in these terms: [18.49] In his affidavit dated 15.01.15, [the respondent] also referred to the vocational assessment report from ECA (02.08.12) and concluded that he was also psychologically incapable of undertaking the occupational roles suggested in that vocational assessment report. Within this context [the respondent] not only referred to diagnoses of PTSD, but also Anxiety Disorder and Major Depressive Disorder. He also specifically itemised his various self-reported psychological symptoms. For reasons of clarity, however, I would like to indicate here that in my opinion, it would seem reasonable to query whether, at least in part, some of the symptoms and difficulties [the respondent] mentioned in the abovementioned affidavit appear contradicted by his described role, activities and attendance at … [the] Club in 2013 (see above). (Emphasis added.) 1. Dr Roldan concluded: [20.10] In my opinion, the level of psychological functioning suggested by the information provided in the 2013 reports from Brooksight Investigations implies a greater level of psychological functioning and social interaction coping ability than is admitted to by [the respondent]. Furthermore, I note that despite describing a range of impairments associated with post-traumatic stress, anxiety and depressed mood, on specific question [the respondent] describes a consistent daily routine that not only involves carrying out chores around the house, but also daily or almost daily independent sporting/fitness and other activities that involve him leaving the house. I also note that other aspects of [the respondent's] history, discussed in the Document Review section as well as under the heading of "Functional Assessment" (and in particular the subheading of 'Social, Recreational and Interpersonal Activities'), seem to me to suggest a greater level of social interaction and public exposure than implied by him. Furthermore, I note the instances of overseas travel that [the respondent] vaguely described on specific questioning and which, in my view, again suggest greater psychological resilience to new and potentially stressful environments and social interaction than is implied by [the respondent's] disability report. [20.11] On the basis of the abovementioned considerations, I am of the opinion that while [the respondent] is likely to be unfit to ever return to police work or any other work with similar characteristics, he is likely to have the psychological and intellectual ability to return to the workforce in other roles that might be said to be consistent with the education, training and experience at a rate of 15 hours or more per week. The exact role, however, might be assessed with reference to vocational assessment that gives consideration to clinical issues that might be said to call for the minimisation of certain occupations with high levels of public exposure and potential for conflictive interactions. (Emphasis added.) [20.12] In summary, on the basis of the information and data available to me, I cannot conclude that [the respondent] would be "unlikely ever" (i.e. until age 67), due to psychological incapacity, to engage in some form of employment, at the rate of at least 15 hours per week, for which he is reasonably qualified by reason of his education, training and/or experience. (Emphasis added.) Further vocational assessment report – September 2016 1. Ms Tyler considered that the respondent was suitable for employment in six categories: compliance officer, insurance investigator, liaison officer, insurance consultant; general clerk, and delivery driver. Her report was prepared on the assumption that the respondent's psychological restrictions and capacity for hours at work were those stated by Dr Roldan, namely, minimisation of roles with high levels of public exposure and potential for conflictive situations, and 15 hours per week or more of work. 2. Ms Tyler provided a summary of the functional requirements of jobs within the six work options identified and made the same comment for each, as to whether there was a "Match with assessment of capacity": Match with assessment of capacity: Based on Dr Roldan's Report (18 July 2016) [the respondent] is able to return to work at 15 hours or more per week in roles that … minimise the potential for conflicting interpersonal situations and minimise public exposure. Based on labour market feedback, this role does not involve conflictive situations and has no public exposure, and is therefore assessed as appropriate to [the respondent's] assessed capacity for work. (Emphasis added.) Dr Kneebone – September and October 2016 1. In his 27 September 2016 report, Dr Kneebone agreed with the other medical opinions that the respondent has PTSD. He accepted that the respondent's PTSD was genuine and his symptoms were unlikely to be feigned, whilst also raising the "very real possibility" that the respondent was exaggerating his levels of impairment. Reference was made to inconsistencies between the respondent's reported levels of functioning and that observed through objective psychometric testing performed by Dr Roldan, and investigative web-based collection performed by an investigator, ConsilAD. 2. Dr Kneebone expressed the opinion that the respondent had not received optimal psychological treatment, and in this regard referred to cognitive behaviour therapy or eye movement desensitisation and reprocessing therapy (EMDR). 3. Dr Kneebone agreed with Dr Roldan's assessment that whilst the respondent had no capacity to work in the NSW Police Force as a consequence of his psychiatric condition, he is: … likely to have the capacity to return to the workforce in other roles that might be said to be consistent with his education, training or experience at a rate of 15 hours or more a week on the provisions (sic) that high levels of public exposure or the management of interpersonal conflict are not required. (Emphasis added.) 1. In his further report of 11 October 2016, Dr Kneebone expressed the opinion, by reference to the vocational assessment report of Ms Tyler, that in light of Dr Roldan's assessment, some of the employment options outlined in that vocational assessment would be suitable for the respondent to pursue, specifically: delivery driver, general clerk or insurance consultant. In Dr Kneebone's opinion, the roles of liaison officer, compliance officer and insurance investigator are highly likely to be suited to the respondent. Dr Wilkins – August and December 2016 1. In his report of 29 August 2016, Dr Wilkins maintained his view that the respondent would not ever return to a role within the NSW Police Force and "it is not apparent that he would be fit for alternate duties". He referred to the respondent's fluctuating mental state from day-to-day and noted that most days he remains volatile and anxious, and his capacity for reasoning and sound judgments fluctuates; that he is easily distressed; and is unable to engage with others for a prolonged period of time without becoming extremely anxious and retreating from the situation. 2. In his further report of 12 December 2016, Dr Wilkins commented on the reports of A/Prof Kaplan and noted that whilst his supplementary report of 22 December 2013 relied on surveillance video and logs of the respondent's activities, A/Prof Kaplan had not spoken with the respondent after his first consultation in July 2012. 3. As to the 18 days surveillance conducted on the respondent from November 2012 to June 2013, Dr Wilkins noted that the respondent never went outside a 6.3 kilometre distance from his home address. (It is to be observed that between 20 and 28 March 2013, the respondent travelled overseas.) Dr Wilkins also noted that there were no reports of the respondent attending cafes, hotels, shopping malls or restaurants and the respondent's range of so-called activities included a particular sporting activity, walking his dog with his wife and children, going to the gym, going to a golf club with his father, father-in-law and son for one hour once a week and helping out at the Club in a voluntary capacity without any expectation. 4. After summarising the respondent's activities shown in the surveillance material, Dr Wilkins expressed the opinion: [68] Any conclusions drawn with respect to a subject's mental state or capacity for function of that individual must be interpreted with caution when such conclusions are based on surveillance videos or film or reports of videos or social media. [69] Observing the surveillance of [the respondent] and his various activities confirms his limitations and is consistent with the information he has supplied at his various reviews and assessments. [70] I see no reason to change my opinion of [the respondent], other than to hope that these observations are considered when assessing the restricted nature of his daily activities as a result of his mental infirmity. 1. With respect to Ms Tyler's vocational assessment, Dr Wilkins referred to the limitations of her recommendations which were based on Dr Roldan's psychometric testing, which Dr Wilkins said was conducted "in isolation" and "fails to take into account the impact of the real world on the respondent's capacity to function in the real world". Dr Wilkins said that the surveillance supported the paucity of interaction which the respondent had in the real world, noting there were long periods of time when no sightings were recorded. 2. Dr Wilkins said that the detail of the jobs and requirements to perform such jobs in Ms Tyler's report overlooked the "essence" of the respondent's condition and expressed the following view: [82] Ms Tyler and Dr Roldan have assumed that capacity to perform in the jobs/roles nominated can be deduced from the presence and addition of single traits and individual cognitive skills as demonstrated in isolation – controlled testing conditions. [83] This overlooks the composite effect of the "noise" created in the real world when a person is confronted by the actual setting, the actual responsibility, the actual interference of competing stimuli requiring a response in real time from the individual. None of the testing conditions have addressed the emotional overlay which such a composite real world setting demands on the flawed and injured system which is [the respondent's] inner world. 1. With respect to Dr Kneebone's recommendation of EMDR and trauma-focused therapy, Dr Wilkins said that these treatments are contraindicated in patients who disassociate or have a tendency to do so. Dr Wilkins noted that the respondent had expressed this feeling of disassociating when he had been reporting specific details of his trauma exposure.. 2. Dr Wilkins said that he saw no reason to doubt the respondent's reporting of his symptoms. He said that nothing in the material from the web search conducted by the investigator, ConsilAD, which included references to the respondent's holidays overseas, a holiday villa operated by the respondent, and his participation in a charity sporting event from Sydney to Melbourne, suggested that the respondent had been dishonest or is malingering. The Insurer's reasons for its second decision 1. The Insurer declined the claim for a second time by its letter to the Trustee dated 9 June 2017, which stated: THE RECONSIDERATION MetLife does not propose to repeat here the consideration of the evidence related to the initial decision and set out in MetLife's letter of 1 December 2014. MetLife's additional consideration is set out below and in the enclosed Information Summary. This further consideration should be read in conjunction with that letter of 1 December 2014. Please note with regard to our letter of 1 December 2014, the further consideration set out in this letter and the Information Summary now provided, that we have not referred to every document available to us. It is not practicable to do so however that some particular document is not specifically addressed does not mean that MetLife has not had regard to it. MetLife has carefully considered all of the evidence to hand. 1. Under the heading "Further Information", the Insurer's letter referred to receipt of the respondent's affidavit but made no further comment. The letter also referred to the affidavit of AX, about which the Insurer commented: The affidavit does not however go to the issue required to be considered by MetLife under the [PBRI] policy, including whether the [respondent] is unlikely ever to engage in any gainful profession, trade or occupation for which [he] is reasonably qualified by reason of education, training or experience. 1. The Insurer acknowledged that the medical opinions of Dr Wilkins, Dr George, Dr Anderson, Dr Adams and Dr Coverdale all agreed on the diagnosis of PTSD and that it was unlikely that the respondent would return to employment outside the NSW Police Force. The Insurer commented that these opinions differ as to the extent of the respondent's psychiatric impairment and the impact on his future work capacity. 2. The Insurer then referred to medical reports received after its 1 December 2014 letter, specifically from Dr Smith, in connection with the respondent's work injury damages claim, Dr McMahon, Dr Wilkins, Dr Roldan, Dr Kneebone, as well as the vocational assessment report of Ms Tyler and the social media report of the investigator, ConsilAD. The Insurer commented: It is apparent that Dr Wilkins' original opinion was based on the [respondent's] self-reported history of significant symptoms of anxiety and social isolation (Dr Wilkin's [sic] report 20 January 2011) and distressing decline in cognitive function rendering the [respondent] mentally feeble and unwell, (Dr Wilkin's [sic] report of 12 February 2013) assumptions which are at odds with the objective evidence of the extent of the [respondent's] regular social activities at the Club and the psychometric tests conducted by Dr Roldan. When his further evidence was put to Dr Wilkins he simply adhered to his original prognosis. Dr Wilkins [sic] prognosis was if anything more pessimistic when responding to the reports of Dr Roldan, Dr Kneebone, the vocational assessment by ECA and the social media report by ConsilAD. Dr Wilkins reiterated his view that the [respondent] will continue to suffer from debilitating and intrusive symptoms of Posttraumatic Stress Disorder that are evident in both his presentation during consultation sessions, and in his self reported experiences of daily living. In terms of the [respondent's] capacity, Dr Wilkins reported: He drives his own car locally to his beach activities where he supports the surfing community by attending to housekeeping and tidying the clubhouse. Interacting in a limited fashion with a small group of well-known regular attendees leading similar lives. When outside of his routines with respect to location or company MX described himself as very anxious, persistently tense and nervous. As a result he will work hard to avoid intrusions and disruptions and change. Dr Wilkins advised that the social media and surveillance reports corroborate the [respondent's] own report of his activities which, he said, are remarkable only for the paucity of adventure and their repetitive nature. Dr Wilkins reported that there was virtually no chance that [the respondent] will return to the workforce and he reached this conclusion based on his recent observations of the [respondent]. Dr Wilkins' view does not align with other practitioners who have assessed the [respondent] in the past 12 months or so. [Emphasis in original.] 1. After referring to observations in surveillance reports dated March and July 2013 of the respondent at the Club assisting behind the bar, taking telephone calls and other activities, the Insurer commented that Dr Roldan considered that the respondent did not disclose to him the extent of his involvement with the Club. 2. The Insurer next referred to records obtained from the Department of Immigration and Border Protection which indicated that the respondent had travelled to one overseas destination on 12 occasions between July 2010 and May 2016 and once to another overseas destination in July 2011. 3. Under the heading "Independent Medical Assessments", the Insurer referred to the report of Dr Roldan and the conclusion of Ms Tyler, based on Dr Roldan's clinical assessment, that the respondent was suited to the roles of compliance officer, factual investigator, liaison officer, insurance consultant, general clerk and delivery driver. The Insurer also referred to the report of Dr Kneebone before stating its conclusions as follows: SUMMARY MetLife acknowledges that there is a divergence of medical opinion, the basis for which appears due, at least in part, to an acceptance of the [respondent's] reported symptoms on face value without any objective validity testing or regard to objective material. MetLife considers that [the] weight of the evidence demonstrates that, at the date of assessment and subsequently, the [respondent's] general functioning was at a higher level than reported to Dr Wilkins and other medical practitioners. The divergence also arises from the different purpose for which some of the assessments were instructed. For example reports prepared for the purposes of the [respondent's] worker's compensation claim do not address the long-term future prognosis required by the TPD definition. The accuracy of the history given by the [respondent] and relied on by treating medical attendants raises a question as to the weight to be given to, and the reliability of, the diagnosis and prognosis postulated on the back of that history. For example, despite the [respondent's] insistence and Dr Wilkin's [sic] certification that the severity of his symptoms prevented him from travelling by public transport to attend the assessments instructed by MetLife, the [respondent] is able to (and has been able to) regularly travel overseas and two of the [respondent's] trips to [a particular country] were for periods of over a month. While Dr Wilkins has the benefit of being the [respondent's] treating psychiatrist, Dr Wilkins has maintained a pessimistic prognosis reached at the time of his initial consultation with the [respondent] despite being provided with objective evidence calling into question the severity and extent of the [respondent's] reported incapacity (for example his activities and regular attendance at the …. Club and regular overseas travel). MetLife is therefore inclined to ascribe less weight to Dr Wilkins' reports where it is in conflict with other medical evidence, notably that of Dr Kaplan, Dr Roldan, Dr Kneebone and Dr Prior. The recent assessments of Dr Roldan and Dr Kneebone evidence that the [respondent's] capacity for some work persists. Both express the view that the [respondent] would be capable of work in suitable relevant employment for at least 15 hours a week. Doing its best to evaluate the competing views of the consultant and treating medical practitioners, MetLife considers the views of Dr Kaplan, Dr Roldan, Dr Kneebone and Dr Prior are qualitatively preferred. MetLife notes Dr Prior's cautiously optimistic view that the [respondent] had capacity to work outside the NSW Police Force. MetLife does not dispute that the [respondent] suffers from symptoms consistent with PTSD, however MetLife is not satisfied on the proof provided that the [respondent's] symptoms have caused the [respondent] to be totally and permanently disabled. MetLife has also had regard to the [respondent's] relatively young age, namely 41 years at the date for assessment and currently 48 years old and MetLife has identified suitable vocational options reasonably within the [respondent's] education, training and experience and which are 'far removed from policing'. OUR DECISION PBRI Policy MetLife has not changed its opinion that the [respondent] has not provided proof that, at the relevant date for assessment (while an Insured Member) he was incapacitated to such an extent as to render him unlikely ever to engage in any gainful profession, trade or occupation for which his is reasonably qualified by reason of education, training or experience. The primary judge's reasons 1. The primary judge gave detailed and lengthy reasons covering 97 pages addressing in sequence the respondent's challenges to the Insurer's first and second decisions. A substantial part of the reasons address what were referred to as the "reinsurance" issues. The context of the reinsurance issues requires a brief explanation. The reinsurance issues 1. The Insurer had entered into a Treaty with RGA Reinsurance Company of Australia Limited (RGA Australia) dated 23 June 2003 (with an effective date of 5 February 2003), which reinsured the Insurer's liabilities under the Blue Ribbon Policy. Article 18 of the Treaty dealt with claims procedures and Art 18.8 provided: For any Sum Insured above the Claim Handling Limit defined in Schedule F, the Cedant must before accepting liability for a claim under that Reinsured Policy, obtain RGA Australia's prior approval. This Article is subject to the other terms of this Treaty. 1. RGA Australia had denied liability to the Insurer on the basis that under the Treaty the respondent's claim, and similar claims of that class, related to initial medical events and illnesses that had occurred before the Insurer and RGA entered the Treaty, and accordingly were excluded from the scope of cover under the Treaty. 2. This dispute was the subject of proceedings between the Insurer and RGA Australia in the Commercial List of the Equity Division. The Insurer was unsuccessful in its proceedings against RGA Australia concerning the construction of the Treaty: Metlife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2016] NSWSC 980 (McDougall J). An appeal by the Insurer was dismissed by this Court: Metlife Insurance Ltd v RGA Reinsurance Company of Australia Ltd [2017] NSWCA 56. As his Honour noted, the decisions of McDougall J on 15 July 2016 and this Court on 28 March 2017 were made between the dates of the Insurer's first and second decisions: Judgment at [110]. First decision 1. After a detailed review of the terms of the Treaty and the communications between the Insurer and RGA Australia, the primary judge turned to the six pleaded contentions concerning "reinsurance" issues, which alleged that RGA Australia was, in substance, exercising a veto of the Insurer's decision-making capabilities under the policy, and that RGA Australia was the true decision maker about whether the respondent was totally and permanently disabled within the terms of the Policy: Judgment at [202]. The respondent contended that, by reason of these matters, the Insurer had breached its duty to act in good faith and fair dealing towards him: Judgment at [208]. 2. It is not necessary to refer to the first four of those contentions. These were rejected by his Honour and there is no challenge to these findings on appeal. His Honour accepted that the fifth and sixth contentions vitiated the first decision. 3. The fifth contention was that the Insurer took into account an irrelevant consideration in forming its opinion, namely, RGA Australia's refusal to grant prior approval of an outcome favourable to the respondent: Judgment at [269], [271]. The sixth contention was that the Insurer had denied the respondent procedural fairness, because it failed to disclose to him that it was in a position of conflict between its own interest under the Treaty with RGA Australia and its contractual duty to the respondent: Judgment at [272]. 4. The primary judge then addressed the respondent's other challenges to the first decision. These concerned the way in which the Insurer had approached the evaluation of medical and vocational evidence and other materials in reaching its first decision. His Honour found that the first decision was vitiated on two grounds. 5. First, the Insurer did not disclose the reasons for its decision. Reference was made to the requirement and standard of reasons to be given by an insurer, stated by Ball J in Ziogos v FSS Trustee Corporation as Trustee of the First State Superannuation Scheme [2015] NSWSC 1385 (Ziogos) at [75]. His Honour found that rather than explain its decision, the Insurer's 1 December 2014 letter did no more than just recite material and then give a conclusion which did not show how the material had been evaluated, accepted, rejected, reconciled or otherwise dealt with to the extent that it was inconsistent with the conclusion reached: Judgment at [284], [285]. After analysing the Insurer's reasons in some detail, his Honour concluded at Judgment [298]-[300]: [298] In my view, MetLife's survey of surveillance, investigation and medical evidence, followed by the conclusion that MetLife reached does not constitute an explanation by MetLife as to how it reached its decision so that the respondent can be satisfied that the decision was reached in the utmost good faith. Even if one accepts the three comments of MetLife that go beyond the recording of the materials available to MetLife as reasoning, they do not in themselves explain why MetLife reached the conclusion that it did. [299] This can be demonstrated by posing a number of simple questions which represent issues that are absent from the reasoning. Did MetLife reject the whole of Dr Wilkins' opinions? How did MetLife see itself as able to choose, on a proper medical basis, the opinions of Dr Wilkins, Dr Adams and Dr Anderson on the one side and Associate Professor Kaplan on the other? How did MetLife evaluate the importance of the surveillance material in its reasoning process given that Dr Wilkins and Dr Adams had dismissed it as not inconsistent with a diagnosis of chronic PTSD but Associate Professor Kaplan did apparently regard it as decisive? [300] Regrettably, MetLife's 1 December 2014 letter leaves all of these pertinent questions unanswered. Mr Sexton SC correctly emphasised to the Court that a judicial standard of reasoning is not required from an insurer on the authorities. This can be accepted. But in my view, the gaps in this reasoning are such that they do not satisfy the test stated by Ball J in Ziogos at [75], and one cannot discern why MetLife reached the conclusion that it did. 1. Second, his Honour found that three comments in the Insurer's 1 December 2014 letter, which went beyond merely reciting the evidence before the Insurer, were unreasonable, specifically: 1. it was unreasonable of the Insurer and not consistent with its duty merely to rely directly upon video surveillance to reject Dr Wilkins' view, without understanding why Dr Wilkins thought that the contents of video surveillance material was not inconsistent with his view that the respondent was incapable of undertaking gainful employment: Judgment at [305]; 2. the Insurer's comments about the respondent's day-to-day functioning and the reliance placed upon him by the Club failed "to get to grips with" whether the respondent was relied upon by the Club to organise functions and events in a way consistent with paid employment in circumstances where the evidence only indicated that the respondent was involved in volunteering: Judgment at [306]; 3. the vocational assessment by Ms Monger was not based on the respondent's actual attributes and provided no basis to infer that the respondent himself could actually do any of the jobs identified by Ms Monger: Judgment at [307]. Second decision 1. After observing that the respondent did not advance any argument challenging the second decision based on the reinsurance issues, the primary judge found that the Insurer's opinion on the second decision was vitiated on two bases. 2. First, the Insurer's decision, following reconsideration, did not approach the matter afresh, but simply approached the task as one of whether or not it should change its mind: Judgment at [345]. His Honour gave three reasons for this conclusion: 1. the Insurer's second decision was not a "genuine consideration" because in the concluding paragraph to its decision the Insurer said that it "has not changed its opinion": Judgment at [345]. 2. other features of the Insurer's letter of 9 June 2017 pointed to the same conclusion. His Honour said at Judgment [346]: The letter principally considers the additional medical and other evidence since the last decision, and the letter does not expressly put the first decision to one side, as it could have done. MetLife did make this second decision and issued this letter under some considerable time pressure in order to accommodate the respondent. The omission of these matters is all the more understandable in those circumstances. Notwithstanding that the omission is explicable this way, the total picture the letter presents is of answering the question whether or not, recent evidence and other material changes the position MetLife had reached in the first decision. 1. the Insurer took into account an irrelevant consideration, the fact that it had made the first decision, and as a consequence the Insurer had asked itself the wrong question, namely, whether or not it should shift its position: Judgment at [347]. 1. Second, the Insurer failed to act reasonably, specifically: 1. the Insurer did not take into account affidavit evidence of the respondent and AX, a member of the Club. His Honour found that this evidence was important in highlighting that the Club did not rely upon the respondent to perform any role, that he was always a volunteer and that the Insurer's continued reliance upon the surveillance material did not take this into account: Judgment at [355]. 2. the Insurer's analysis of why Dr Wilkins' view of the respondent should be rejected was inadequate, especially when Dr Roldan did not make a finding of fabrication of symptoms by the respondent: Judgment at [356]. 3. the Insurer unreasonably relied upon the opinion of Dr Kneebone that the respondent was not TPD, when that opinion was dependent on the respondent undertaking additional psychological treatment which Dr Wilkins had advised should be avoided and without enquiring whether the respondent might actually obtain the treatment: Judgment at [357]. Issues on appeal 1. The grounds of appeal and the issues raised by them may be summarised as follows. First decision 1. Grounds 1-4 challenge his Honour's findings in relation to the reinsurance issues. 2. Grounds 5 and 6 challenge the primary judge's conclusion that the first decision was a breach of the Insurer's obligations to act reasonably and fairly, and its duty of utmost good faith. The issues raised by these grounds are whether the Insurer's reasons for its decision were inadequate, and whether the Insurer failed to act fairly and reasonably in evaluating the evidence, including medical reports. Second decision 1. Grounds 7 and 8 challenge the primary judge's finding that the Insurer's process of consideration was unreasonable because the Insurer took into account an irrelevant consideration, namely its first decision, when reconsidering that decision. 2. Grounds 9-13 challenge the primary judge's findings that the Insurer did not act reasonably in its consideration of the respondent's claim. Ground 14 challenges the primary judge's conclusion that the second decision was vitiated. Relevant principles 1. It is only necessary to refer to some matters of principle, given that the Insurer did not challenge his Honour's statement of the applicable legal principles, except for ground 3, which as will be seen is not dispositive of the appeal: Judgment at [63]-[73]: 2. The relevant principles are those stated by McLelland J (as his Honour then was) in Edwards v The Hunter Valley Co-op Dairy Co Ltd (1992) 7 ANZ Ins Cas 61-113, and approved by this Court in Hannover Life Re of Australasia Ltd v Sayseng [2005] NSWCA 214; (2005) 13 ANZ Ins Cas 90-123; TAL Life v Shuetrim; Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233 (Jones); and MetLife Insurance Ltd v Hellessey [2018] NSWCA 307. The following propositions are uncontroversial. 3. First, where an insurer's liability under a policy turns on it being satisfied as to the extent of the insured member's incapacity, the implied obligation on the insurer to consider and determine whether it should form the relevant opinion includes that it determine the correct question. 4. Second, both in considering that question and in determining whether it is satisfied that the extent of the insured member's incapacity answers the terms of the education, training and experience clause (the ETE clause), the insurer is required to act reasonably and fairly. A breach of one or more of these overlapping implied obligations will deprive the decision of contractual effect. 5. Third, there is a distinction between acting reasonably in the formation of an opinion and the formation of a reasonable opinion. The distinction is between the process of consideration and the outcome itself. As explained in MetLife Insurance Ltd v Hellessey at [8] (Meagher JA, McColl and White JJA agreeing): [8] Thus, an insurer's decision may be set aside if it is shown to be unreasonable on the material before the insurer. It will not answer that description merely because the Court would or could have reached a different opinion on that material, because "reasonable persons may reasonably take different views": Edwards at 77,536. In addition, however, a decision may be set aside if the process of consideration underlying it was not undertaken reasonably and fairly, even if the outcome itself is not also shown to have been unreasonable on the material before the insurer. Again, more than one reasonable process of consideration may be open in the circumstances, but the process adopted by an insurer would not cease to be unreasonable simply because another, and reasonable, process to the same conclusion happened to exist. See also the additional comments of White JA at [78]-[81]. 1. Fourth, as to the process of consideration, an insurer misdirects itself in law if it takes into account an irrelevant consideration: Jones at [82]-[85] approving the remarks of Brereton J in Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913 at [42]-[43], where his Honour applied Rapa v Patience (NSWSC, McLelland J, 4 April 1985, BC850088, unrep), a case involving a challenge to the decision of a trustee of a superannuation fund. 2. It is convenient to first address the grounds relating to the Insurer's second decision. (a) The Insurer's second decision Grounds 7 and 8: relevance of the Insurer's first decision 1. Ground 7 contends that the primary judge erred in finding that the Insurer was required to reconsider its earlier decision to decline the claim without reference to that decision. Ground 8 contends that the primary judge erred in finding that the first decision was an irrelevant consideration in making the second decision. Submissions 1. The Insurer submitted that on a fair reading of the second decision, the Insurer considered the further medical and other evidence served by the respondent in support of his claim and weighed it against the other evidence that had been obtained since the Insurer's first decision that pointed against a conclusion that the respondent was totally and permanently disabled. The Insurer submitted that the primary judge erred in finding that the second decision was not a "genuine consideration" because the Insurer said in its conclusion that it "has not changed its opinion". According to the submission, this description of the Insurer's decision inappropriately preferred form over the substance of the Insurer's reasons. 2. The Insurer also submitted that it would have been quite artificial for it to ignore its first decision and that reconsideration connotes looking at the previous decision. 3. The respondent repeated his submission at trial that the second decision was not a new decision, but effectively a consideration of whether the first decision was correct. Reasoning 1. At trial, the parties approached the matter on the basis that the Insurer's 1 December 2014 and 9 June 2017 letters were separate decisions, albeit the respondent submitted that the 9 June 2017 letter was not a "new" decision. 2. In this Court the parties' submissions did not specifically address whether the second decision is to be treated as a separate decision from the first decision, or as merely confirming the opinion already formed on the basis of the reasons previously furnished, as well as any additional reasons to be found in the decision on review: cf Newling v Metlife Insurance Limited [2019] NSWCA 149 (Newling). 3. In my view, his Honour's finding that the Insurer's second decision was not a genuine reconsideration of the respondent's claim cannot stand. 4. First, to characterise the second decision as simply whether the Insurer should "change its mind", ignored the substance of the Insurer's reasons. On a fair reading of the Insurer's reasons in its 9 June 2017 letter, the statement under the heading "Conclusion" that the Insurer "has not changed its opinion" described the outcome of its decision, not the nature of the review undertaken by the Insurer leading to its decision. 5. Second, the reasons furnished for the second decision made plain that the Insurer based its reconsideration of the claim on the additional reasoning and materials to which it referred in its 9 June 2017 letter, as supplementing the earlier reasoning and materials referred to in its 1 December 2014 letter. 6. Third, a review or reconsideration of the first decision necessarily involved looking at the Insurer's previous decision, in this case, in the light of additional materials. Contrary to his Honour's view, it was not an irrelevant consideration for the Insurer to have regard to its first decision and the reasons previously furnished for declining the claim. It would have been quite artificial, on reconsideration, for the Insurer to ignore its first decision, in particular the materials and reasons relied upon for the conclusion reached in its first decision. 7. To adopt such a restrictive approach, as the primary judge found was required, is to ignore the relevant context in which the Insurer was asked by the respondent's solicitors to reconsider its first decision. That context included the Insurer's reasons for declining the claim and the material on which that decision was based, together with the new material provided by the respondent in support of his claim and the further material obtained by the Insurer. 8. Even if, contrary to my view, the Insurer's 9 June 2017 letter was not a separate decision but merely confirmation of the Insurer's opinion already formed, the position in this case is the same. The Insurer's second decision necessarily involved a reconsideration of the first decision, which was not an irrelevant consideration to the formation of the Insurer's opinion, following a review. 9. The Insurer has established grounds 7 and 8. Whether errors found in relation to the first decision had continuing significance? 1. There was a dispute at trial as to whether, if the first decision is vitiated by errors in the Insurer's process of consideration, it must follow that the second decision is also vitiated because, as the respondent had contended below, it was infected by the same errors in the process of consideration. 2. The Insurer's response at trial was that if the first decision was vitiated, it did not necessarily follow that the second decision fell with the first. The primary judge referred to this issue at Judgment [315] but did not need to resolve it. He found that the Insurer's second decision was vitiated on the particular grounds referred to at [68] and [69] above. 3. In this Court, without conceding any errors with respect to the first decision, the Insurer submitted that the second decision was not infected by the errors in the process of consideration, as found by his Honour with respect to the first decision. The relevant "process" errors, the Insurer submitted, concerned the non-disclosure of RGA Australia's opinion and the Insurer's position of conflict to the respondent, and these were merely historical facts by the time of the second decision. That submission should be accepted. 4. As mentioned, the decisions of McDougall J and this Court concerning the construction of the Treaty were delivered before the date of the Insurer's second decision. Those decisions determined that RGA Australia had no obligation to indemnify the Insured under the Treaty in relation to the respondent's claim. Any opinion RGA Australia may have previously expressed with respect to the respondent's claim was entirely irrelevant at the time the Insurer made its second decision, and there was no conflict between the Insurer's position under the Treaty and its contractual duties to the respondent. Grounds 9–14: whether the process of consideration underlying the second decision was not undertaken reasonably and fairly 1. Ground 9 challenges the finding that the Insurer failed to take into account evidence of the respondent and AX. Ground 10 challenges the finding that the Insurer acted unreasonably in having regard to surveillance and information about the respondent's day-to-day functioning when evaluating the weight to be given to Dr Wilkins' evidence. Grounds 11 and 12 challenge the findings concerning the Insurer's assessment of Dr Wilkins' and Dr Roldan's opinions. Ground 13 challenges the finding concerning the Insurer's assessment of Dr Kneebone's opinion. Ground 14 challenges the primary judge's ultimate conclusion that the Insurer's second decision was vitiated Grounds 9, 10, 11, 12 and 13 are directed to questions of process and whether the insurer acted fairly and reasonably in its consideration of the evidentiary material. Ground 14 does not describe a basis on which the second decision might be treated as having no contractual effect, because it neither identifies a failure to act reasonably and fairly in the course of consideration or the reaching of a conclusion which was not reasonably open on the material before the insurer. Submissions 1. The Insurer submitted that it is clear from a reading of its second decision that it did refer to the affidavits of the respondent and AX. Next, the Insurer submitted that the primary judge inappropriately seized on a statement in one part of the reasons for its second decision that Dr Wilkins' view "does not align with the other practitioners", and disregarded the Insurer's reasons elsewhere in its decision for preferring the evidence of other medical experts. The Insurer also submitted that, on a fair reading of Dr Kneebone's report, his opinion was not predicated on the respondent undertaking further treatment. 2. In oral argument, the Insurer pointed to inconsistencies in the material supporting the respondent's claim which it said fell into three categories. The first involved activities of the respondent at the Club. The second was material concerning overseas trips taken by the respondent. The third was evidence that the respondent engaged in a sporting event over eight days from Sydney to Melbourne for the purpose of raising money for charity. According to the submission, this material was inconsistent with the extreme characterisation by Dr Wilkins of the respondent's emotional condition and social withdrawal. 3. The Insurer submitted that it was open to the Insurer to prefer from one set of medical opinions – that of Dr Roldan, A/Prof Kaplan and Dr Kneebone – over another, as there was a rational basis for doing so. Reasoning 1. The starting point is to observe that the onus was on the respondent to provide proof, to the satisfaction of the Insurer, of his incapacity within the terms of the ETE clause. In this regard, following the first decision, the respondent provided two affidavits and a supporting affidavit from AX, a member of the Club, together with the further medical reports, including from Dr Wilkins. The additional material obtained by the Insurer included the vocational assessment report of Ms Tyler and medical reports from Dr Roldan, clinical psychologist, and Dr Kneebone, psychiatrist. Dr Roldan addressed the vocational assessment by Ms Monger; Dr Kneebone addressed the vocational assessment of Ms Tyler. 2. The reasons furnished for the Insurer's second decision included the "Summary" which is reproduced at [56] above. Of present significance, the Insurer stated: The recent assessments of Dr Roldan and Dr Kneebone evidence that the [respondent's] capacity for some work persists. Both express the view that the [respondent] would be capable of work in suitable relevant employment for at least 15 hours a week. and then indicated its acceptance of the views of A/Prof Kaplan, Dr Roldan, Dr Kneebone and Dr Prior as "qualitatively preferred". Grounds 9 and 10 1. It is convenient to deal with these grounds together as they are related. 2. It may be accepted, as the Insurer submitted, that the Insurer's reasons furnished in its 9 June 2017 letter mentioned the respondent's affidavits and the affidavit of AX. However, that it not an answer to the finding which is challenged. The finding challenged by the Insurer is that it acted unreasonably in putting aside this evidence when continuing to rely on the surveillance material as casting doubt on the respondent's reported level of functioning and as a basis for concluding that he was capable of performing paid employment in certain roles. In my view, no error on the part of the primary judge has been established. The finding which is challenged supports a conclusion that there was a failure to act reasonably and fairly in the process of consideration as to whether the respondent was totally and permanently incapacitated. 3. First, the Insurer did not directly challenge the finding as to the significance of the affidavits of the respondent and AX in highlighting that the Club did not rely upon the respondent to perform any role and that he was always a volunteer. Having developed PTSD and depression, the respondent preferred to isolate himself. On the advice of Dr Wilkins, his treating psychiatrist, he engaged in certain physical activities as a form of rehabilitation and therapy, attending the Club in that context and helping out as a volunteer. As the respondent said, "This activity gets me out of the house …" and he continues to train as a form of treatment for his psychiatric injury. 4. Second, it appears from the Insurer's reasons that it did not purport to weigh the significance of the difference between undertaking paid employment in the roles identified in the vocational assessments of Ms Monger and Ms Tyler and the nature and context of the respondent's activities at the Club including volunteer work. 5. Third, whilst the respondent had no qualifications to express medical opinions, that does not mean that his statements as to what he could not do, expressed by reference to his psychological symptoms, should be put out of consideration: Nile v Club Plus Superannuation Pty Ltd [2005] NSWSC 55 at [61] (Brownie AJ). 6. That is not to say that the Insurer should have accepted all that the respondent said, or all that the doctors who supported him said, in particular Dr Wilkins, but the reasons given by the Insurer did not purport to weigh the significance of what the respondent had said about his vocational prospects, or the nature and reasons for his activities at the Club, and the support for the respondent's account in the affidavit of AX: Nile v Club Plus Superannuation Pty Ltd at [66]. Nor did the Insurer's reasons address whether that material undermined or in any way affected the views of A/Prof Kaplan, Dr Roldan, Dr Kneebone and Dr Prior. 7. In circumstances where the Insurer did not call evidence from any of its officers who dealt with the claim, there being no suggestion that they were not available to give evidence, it was open to the primary judge to find that the Insurer failed to act reasonably and fairly in considering the respondent's claim. 8. For completeness, I will consider the other grounds relied upon by the Insurer. Grounds 11 and 12 1. The essential complaint by the Insurer is that in finding that there was inadequate analysis of why Dr Wilkins' view should be disregarded, his Honour did not take into account the Insurer's reasons elsewhere in its decision for preferring the evidence of other medical experts. 2. In addressing these grounds, it is necessary to consider whether the Insurer's process of consideration of the medical opinions as to whether the respondent was totally and permanently incapacitated was undertaken reasonably and fairly. Dr Prior 1. The Insurer's 9 June 2017 letter extracted the following statement from Dr Prior's July 2011 report: I believe that ultimately [the respondent] will have the capacity to work external to the NSW Police Force. He is not currently fit for this. 1. This statement by Dr Prior was made in answer to the question: "does the officer have a capacity to work external to the NSW Police Force?". Whether the respondent "ultimately" will have the capacity to work external to the NSW Police Force is the wrong question for the ETE clause. 2. Unsurprisingly, the Insurer's oral submissions did not place any reliance on Dr Prior's opinion: see [102] above. Given the different context of Dr Prior's opinion, the Insurer did not act reasonably and fairly in its consideration of this medical opinion as not supporting the respondent's claim. A/Prof Kaplan 1. The Insurer's reasons for its second decision did not specifically address A/Prof Kaplan's opinion, except to say that it gave less weight to Dr Wilkins' opinion where it conflicted with A/Prof Kaplan's view which, among others, was qualitatively preferred. Contrary to the premise of the Insurer's submissions, the Insurer did not give reasons elsewhere in its decision for preferring the opinion of A/Prof Kaplan. 2. Two further matters should be mentioned. First, whilst A/Prof Kaplan's opinion was that he could see no reason why the respondent could not return to full-time work, provided this excluded police duties, this opinion did not directly answer the question raised by the ETE clause; and there was not a match between this opinion and the work options identified by Ms Monger, which did not take into account the respondent's psychological condition and restrictions. 3. Second, in addition to the difficulties referred to at [110] above, the Insurer's stated reasons indicate that it did not purport to weigh the significance of what Dr Wilkins said in response to the surveillance material in circumstances where A/Prof Kaplan was not provided with Dr Wilkins' response in his 13 November 2013 report for comment, even though A/Prof Kaplan had said that it would be helpful to learn Dr Wilkins' response. Dr Roldan 1. Although Dr Roldan raised a "query" as to whether the respondent's role, activities and attendances at the Club contradicted his PTSD symptoms and difficulties, he found, on psychometric testing, no evidence of symptom fabrication or exaggeration by the respondent. 2. Dr Roldan's opinion as to the respondent's capacity for work was expressed in generalities; he said that there might be "other roles" or "some form of employment" which the respondent could perform based on his education, training or experience, taking into account his "clinical issues", which required that any such role needed to minimise "high levels of public exposure and potential for conflictive interactions". 3. Whilst Dr Roldan was provided with Ms Monger's vocational assessment, there was no match between Dr Roldan's opinion as to the respondent's capacity taking into account his psychological condition and restrictions, and the work options identified by Ms Monger. Taken together, the Insurer failed to act reasonably and fairly in its consideration of this vocational assessment as not supporting the respondent's claim. 4. Dr Roldan's opinion that there might be "other roles" or "some form of employment" which the respondent could perform based on his education, training or experience taking into account his "clinical issues", directs attention to the Insurer's consideration of Dr Kneebone's opinion which assumed that Ms Tyler's vocational assessment matched the respondent's capacity for work other than the police force, taking into account the restriction stated by Dr Roldan that any "other role" needed to minimise "high levels of public exposure and potential for conflictive interactions". Ms Tyler's vocational assessment 1. Ms Tyler's opinion that there was a match between the respondent's capacity and the functional requirements of jobs within the six occupations she had identified was based on "labour market feedback" that these roles satisfied the restriction identified by Dr Roldan of minimising "high levels of public exposure and potential for conflictive interactions". 2. The so-called "labour market feedback" was not identified by Ms Tyler in her report. Whilst her report referred to reports on labour market investigations for each of the six work options, and this appears to be a reference to investigations by a labour market researcher who, according to the report, had assisted Ms Tyler, no such reports, let alone the "labour market feedback" were included in the materials before this Court. 3. On the face of her report, there was no evidence for Ms Tyler's statement that each of the six identified roles "does not involve conflictive situations and has no public exposure". Nor is that statement self-evidently correct. When one examines the functions described by Ms Tyler for the roles of "clerical work", "investigative work" (compliance officer/internal auditor/insurance investigator), "liaison officer" (to undertake fundraising initiatives) or "delivery driver", the idea that the respondent could do those jobs without being generally in contact with the public or exposed to potential conflictive situations seems highly artificial. 4. Further, the idea that some employer might employ the respondent to undertake any of the suggested roles had to be considered not just as a matter of theory that one is physically and psychologically fit to do particular work. As Hodgson J emphasised in Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175, one must consider also the actual likelihood of that person obtaining employment, meaning, in the present case, employment of 15 hours or more per week that was really open to the respondent given his psychological condition and restrictions. 5. As indicated at [46]-[47] above, Dr Wilkins said that it is one thing to assess the respondent's capacity by reference to the presence and addition of individual traits and cognitive skills as demonstrated in controlled testing conditions; it is quite another to assess the respondent's capacity to perform in the real world when confronted by "the actual setting, the actual possibility, the actual interference of competing stimuli requiring a response in real time from the individual". The Insurer's reasons put aside without comment Dr Wilkins' response to Ms Tyler's vocational assessment. Dr Kneebone 1. The Insurer's stated reasons for giving preference to Dr Kneebone's opinion were that the respondent's capacity to travel overseas regularly, his engagement in regular exercise, his participation in charity events and his voluntary duties at the Club were inconsistent with his reported level of functioning. The following matters arise in relation to the Insurer's process of consideration of Dr Kneebone's opinion. 2. First, the Insurer's consideration of the respondent's overseas travel, in particular, the respondent's report to Dr Kneebone that he was able to travel with a support person and his travel was confined to local areas due to anxiety, did not purport to weigh the significance of the following: the respondent's other statements to Dr Kneebone that he travelled overseas with his wife, father-in-law and friends, and to Dr Roldan that he always travelled overseas with his family to locations described as "quiet areas"; that he generally did not feel the same level of "threat" that he does at home; and that his wife and step-daughter had travelled both to another overseas destination and domestically for holidays but he had refused to go as he did not think he would have enjoyed himself because he would have been out of his comfort zone. 3. Second, the Insurer's consideration of the respondent's regular exercise, did not purport to weigh the significance of the respondent's statements, confirmed by Dr Wilkins, that he engaged in such activity on the advice of Dr Wilkins to get himself out of the house as a way to address his psychological condition. 4. Third, the Insurer's consideration of the respondent's participation in charity events, did not purport to weigh the significance of the respondent's statement that the event was to raise funds for cancer research and a close relative had cancer, or Dr Wilkins' opinion that the participation in this charity event was not inconsistent with the respondent's reporting of his symptoms. 5. Fourth, the Insurer's consideration of the respondent's voluntary duties at the Club, did not purport to weigh the significance of the respondent's statements as to what he could not do, supported by Dr Wilkins' opinion. 6. Nor did the Insurer's reasons address whether the respondent's statements and Dr Wilkins' views concerning the activities referred to at [131]-[134] above, affected or in any way undermined Dr Kneebone's views that there were inconsistencies between such activities and the respondent's reported level of functioning. 7. In oral argument, the Insurer emphasised that Dr Kneebone gave two reasons for his view that there was a "very real possibility" that the respondent was exaggerating his levels of impairment. The first reason was the results of the psychometric testing by Dr Roldan. The second reason concerned the video surveillance and the investigative web-based data collected by ConsilAD. 8. As to the psychometric testing, as mentioned, Dr Roldan found no evidence of fabrication or exaggeration of the respondent's symptoms. Nor was the possibility of exaggeration by the respondent supported by Dr Wilkins. 9. As to the video surveillance, Dr Kneebone's view was given without the benefit of the respondent's June 2017 affidavit and Dr Wilkins' report of December 2016 responding to the video surveillance. 10. As to the ConsilAD report, the evidentiary basis for the statement by ConsilAD that the respondent had the title of functions manager at the Club in 2012 is unsound. The description of the respondent as functions manager is a gloss on what the director of the Club told the investigator. The material before the Insurer indicated that the Club director said that the respondent: … helps out a lot. If there was a title that you would give him, it would be the Functions Manager, but again, it's just like my position: it's totally voluntary. 1. The director also confirmed that the respondent was not an employee of the Club and did not receive a salary or income, but on occasions "I will fling a [volunteer] a 50". The idea that the respondent was performing the role of "functions manager" at the Club was incorrect. 2. The Insurer's reasons did not address whether the material referred to in [137]-[140] above undermined or in any way affected the opinions of Dr Kneebone. 3. Given the matters referred to above, the Insurer's consideration of the medical opinions as to whether the respondent was totally and permanently disabled was not undertaken reasonably and fairly. Ground 13 1. Ground 13 challenges his Honour's finding that it was also unreasonable for the Insurer to rely upon Dr Kneebone's opinion that the respondent might improve with certain treatment. 2. In assessing this complaint, two matters are significant. First, it is not in dispute that the Insurer did not take any steps to determine whether the respondent would receive the treatment suggested by Dr Kneebone. Second, Dr Wilkins said that the suggested treatment had been deliberately avoided because such treatment is contraindicated in patients such as the respondent, who disassociate or have a tendency to do so. 3. In the absence of those enquiries by the Insurer, the possibility that the respondent would return to work if he received treatment of the type recommended by Dr Kneebone was speculative: Ziogos at [103]. There was no error in his Honour's finding which again supports a conclusion that there was a failure to act reasonably and fairly in the process of consideration of the respondent's claim. Conclusion 1. For the reasons given above, there was no error in his Honour's finding that the Insurer's second decision was vitiated because the process of consideration underlying it was not undertaken reasonably and fairly. (b) The Insurer's first decision Grounds 1-4 1. These grounds relate to the reinsurance issues. Senior counsel for the respondent indicated that the respondent sought to uphold his Honour's decision that the Insurer's first decision was vitiated on reasons other than the reinsurance issues. Counsel candidly acknowledged that the "reinsurance" issues were unnecessarily the focus of argument on the hearing of the separate question. I have considered, in accordance with Kuru v State of New South Wales (2008) 236 CLR 1; [2008] HCA 26 at [12], whether these grounds should be resolved, although they cannot affect the outcome of the appeal. I do not consider it appropriate to address these grounds, given that the reinsurance issues were ultimately not the subject of detailed attention in this Court, and the issues had no relevance to the Insurer's second decision. Grounds 5 and 6 1. Grounds 5 and 6 are both expressed in general terms. Reference to the Insurer's written submissions identifies that these grounds challenged his Honour's finding that the reasons for the Insurer's first decision were inadequate, and a breach of its "obligation of utmost good faith". The Insurer also challenged his Honour's findings that the three comments in the Insurer's 1 December 2014 letter, which went beyond merely reciting the evidence before the Insurer, were unreasonable. Submissions 1. Without conceding that an insurer is obliged to give reasons or, if reasons are given the standard to be met is that referred to in Ziogos at [75], the Insurer submitted that the reasons furnished in its 1 December 2014 letter met that standard. The submission continued that the Insurer's reasons explained "the actual path of reasoning" by which the conclusion was arrived at, referring to the remarks of Parker J in Newling (No 2) at [163]. 2. The Insurer accepted that the first decision may have been better reasoned, but submitted that the decision was supported by medical evidence and that there were reasons identified in the decision for the conclusion. The Insurer submitted that it was not bound to prefer the evidence proffered by the respondent or his treating doctors if there was evidence to the contrary, nor was it otherwise bound to accept evidence proffered by the respondent. The Insurer submitted "it's very plain from this letter that MetLife has taken the view that the self-reporting of impairment is inconsistent with actual factual observations". 3. The respondent sought to uphold the conclusion of the primary judge that the reasons furnished by the Insurer for its first decision were inadequate and that the Insurer acted unreasonably in evaluating the medical and vocational evidence and other materials. Reasoning The standard of reasons 1. In Ziogos, Ball J said at [75]: In my opinion, it follows from the previous paragraph that MetLife was also required by its duty of utmost good faith to give reasons for its decision. It is only by examining those reasons that it is possible to determine whether it acted with the utmost good faith in forming the opinion it was required to form. To put the point another way, where an insured person's rights depend not on the objective fact (whether or not the insured suffered from TPD) but on the insurer's opinion concerning that question, the requirement of utmost good faith requires the insurer to explain how it reached the decision it did so that the insured person can be satisfied that the decision itself was reached in the utmost good faith. (Emphasis added.) 1. In Newling (No 2), after referring to this statement in Ziogos, Parker J doubted at [152] that the duty of good faith necessarily carries with it an obligation to give reasons, whilst noting at [162] that an insurer's failure to give reasons has been treated as having evidentiary significance because in the absence of reasons as to what material the insurer has taken into account and how the insurer reached its adverse conclusion, the Court may be more readily persuaded that the insurer failed to give proper consideration to the issues which arose. Parker J continued at [163]: Even if I considered that MetLife was under an obligation to give reasons, the obligation to give reasons could not be more extensive than the obligation of the medical panel considered by the High Court in Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 (it might arguably be less). In that case the obligation required no more than an explanation of "the actual path of reasoning" by which the conclusion was arrived at (see [48], [55]). (Emphasis added.) 1. As the primary judge correctly acknowledged, a judicial standard of reasoning is not required. And, contrary to the Insurer's submission, I do not detect any real difference between the statements in Ziogos and Newling (No 2) as to the standard of reasons if reasons are provided by the Insurer. In Ziogos, Ball J said that the reasons must explain how the insurer reached its decision. In Newling (No 2), Parker J said that the reasons required no more than an explanation of "the actual path of reasoning" by which the conclusion was arrived at. 2. It is not necessary on this appeal to address any difference between Ziogos and Newling (No. 2) as to whether an insurer is subject to an obligation to give reasons for its decision. In this case, the Insurer furnished reasons for its first decision, which his Honour found were inadequate. Plainly, the Insurer's reasons had evidentiary significance as to whether the Insurer's process of consideration of the respondent's claim was undertaken fairly and reasonably. The Insurer's 1 December 2014 letter 1. Accepting that a judicial standard of reasoning is not required, in my view, there was no error in his Honour's finding that the Insurer's reasons did not explain how it reached its decision. The reasons did not explain the actual path of reasoning by which the conclusion to decline the respondent's claim was arrived at. To merely refer, as the Insurer did, to competing medical opinion with respect to the respondent's capacity did not explain why the Insurer preferred the view of A/Prof Kaplan to the competing medical evidence of Dr Wilkins, the respondent's treating doctor, and Dr Adams, a forensic psychiatrist. 2. Insofar as the Insurer made three comments, which his Honour took as going beyond merely reciting the evidence before it, again there was no error in his Honour's findings that these comments did not explain why the Insurer reached the conclusion that it did. 3. The first finding concerned the Insurer's reliance upon video surveillance to reject Dr Wilkins' view as to the respondent's capacity. In putting aside Dr Wilkins' views on the video surveillance, the Insurer's reasons did not give any thought or comment to Dr Wilkins' opinion that the contents of the video surveillance was not inconsistent with his view that the respondent was incapable of undertaking gainful employment. The activities that the respondent was filmed undertaking at the Club were in a voluntary capacity, without any expectation of payment. The Insurer did not explain why those activities in that context bore any relationship to the activities the respondent would be required to undertake in paid employment, in particular, in the roles identified in the vocational assessment. 4. Nor did the Insurer give any thought or comment to the fact that the divergent view of A/Prof Kaplan was qualified. As indicated, A/Prof Kaplan had indicated that it would be helpful to learn Dr Wilkins' response to the surveillance videos, but the Insurer did not provide him with Dr Wilkins' report of 13 November 2013 responding to the surveillance videos. It was unreasonable for the Insurer to reject Dr Wilkins' view of the surveillance videos in circumstances where it had not sought comment of A/Prof Kaplan on those views, which A/Prof Kaplan had indicated would be of assistance to him in forming his opinion. 5. The second finding concerned the Insurer's reliance on the respondent's day-to-day functioning. Plainly, it was highly significant that the respondent's activities at the Club involved volunteering, not paid employment. There was no error in his Honour's finding that the Insurer failed "to come to grips with" the nature of the respondent's activities at the Club. Again, the Insurer's reasons did not explain how those activities bore any relationship to the activities the respondent would be required to undertake in paid employment, in particular, in the roles identified in the vocational assessment. 6. The third finding concerned the Insurer's reliance upon the vocational assessment which did not take into account the respondent's psychological condition and restrictions. It is no answer for the Insurer to say, as was submitted, that the scope of Ms Monger's report was deliberately limited to the respondent's physical condition. Ms Monger's opinion as to the respondent's physical suitability for the identified roles was beside the point, given that there was no evidence before the Insurer matching the three identified work options with the medical evidence of the respondent's psychological condition and restrictions. 7. It was well open to the primary judge to conclude that the Insurer's reasons for its first decision were inadequate and that the Insurer in breach of its contractual duty had failed to act fairly and reasonably in considering the respondent's claim. Grounds 5 and 6 have not been made out. Conclusion 1. The appeal should be dismissed and the Insurer ordered to pay the first respondent's costs of the appeal, the Insurer having consented to the making of the latter order as a condition of the concurrent hearing of the leave application and appeal. No order should be made in relation to the costs of the Trustee which did not take any active part in the appeal. 2. Accordingly, I propose the following orders: 1. Grant leave to appeal. 2. Direct the appellant to file a notice of appeal in the form of the draft in the White Book within 7 days. 3. Appeal dismissed. 4. Appellant to pay the first respondent's costs in this Court. 5. Order that in relation to these proceedings, the first respondent be referred to only by the pseudonym "MX". 6. Pursuant to Court Suppression and Non-publication Orders Act 2010 (NSW), s 7, and on the ground specified in s 8(1)(c), prohibit for a period of 50 years the disclosure of the identity of the first respondent, or any information tending to reveal his identity, by publication or othe-+rwise in Australia. 1. PAYNE JA: I agree with Gleeson JA. ********** 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 September 2019