In a National Mutual insurance proposal form for an income
protection policy, Dr Moore claimed to be a self-employed
psychiatrist earning $90,000 per year. He answered "no"
to questions asking whether he had ever suffered from a mental or
nervous disorder or drug dependency, and whether he had ever
injected himself with any non-prescription drugs. Relying on these
answers, National Mutual issued the policy.
Dr Moore later developed a major depressive illness which forced
him to resign from his job. He lodged a claim with National Mutual
under the policy, which was accepted, and National Mutual commenced
making monthly payments. Several years later, payments were ceased
on the basis that Dr Moore no longer suffered from a total
disability as defined in the policy. Dr Moore sued National
During the course of the proceeding, it was revealed that Dr
Moore had a long history of pethidine abuse (he had been injecting
himself with the drug since 1975). Further, Dr Moore was in fact an
employed psychiatry registrar (not a self-employed psychiatrist)
earning only $52,000 per year and had been having treatment for a
nervous disorder for several years before the policy was
National Mutual therefore sought to recover the amounts already
paid to Dr Moore (nearly $500,000) on the basis that he was guilty
of fraudulent misrepresentation under the Insurance Contracts Act
1984. The Court found that Dr Moore's misrepresentations
(except those regarding his profession) were made fraudulently, and
that National Mutual was entitled to avoid the policy.
Generally, money paid under a contract that has been avoided for
misrepresentation is recoverable. However, there is High Court
authority recognising a defence called 'change of
position'. In order for the defence to be available, the
insured must have acted differently (normally in a financial sense)
as a result of receiving the payment. The defence is not available
where the recipient has changed his or her position in bad faith or
is a wrongdoer.
The Court found that Dr Moore had changed his position by using
the money to pay living expenses which he would not otherwise have
incurred, but for the payments. Normally, the defence is not
available where the money has been spent on day-to-day living
expenses. However, in this instance, that was really the purpose of
the payments. If not for the payments, Dr Moore would have made
adjustments to his life and living expenses such as applying for
social security benefits and attempting to obtain some other form
In the Court's opinion, the fact that Dr Moore was guilty of
fraudulent misrepresentation did not make him a wrongdoer in
relation to the receipt of the payments because he did not mislead
National Mutual in relation to the payment of his claim. The Court
concluded that it would be unjust to make Dr Moore pay the money
Moore v National Mutual Life Association of
Australasia  NSWSC 416
The rationale for the above finding was that it would have been
more unjust to make Dr Moore repay the money he had obtained
pursuant to a fraud, than to prevent National Mutual from
recovering any of the money which it had paid as a result of Dr
Moore's fraud. Does that sound right to you?
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).