MetLife Insurance Limited v Sandstrom

1. [1]

   BASTEN JA: In July 2011 the respondent, Rebecca Sandstrom, was medically discharged from the NSW Police Force as a result of suffering psychiatric injury in the course of her work as a police officer. As a member of the Police Force, she was covered by a superannuation scheme operated by FSS Trustee Corporation (“First State Super”) under the First State Superannuation Act 1992 (NSW). The benefits available under the scheme included an entitlement for payment in circumstances where the member was “totally and permanently disabled”.

2. [2]

   Ms Sandstrom’s entitlement to such a payment was conditional upon satisfaction of the conditions of two group life insurance policies taken out by the Trustee with the appellant, MetLife Insurance Ltd. In circumstances where the conditions of the contract were satisfied, MetLife agreed to pay the Trustee the amount provided for under the policy. The conditions of each policy were relevantly the same; at least MetLife did not submit that anything turned on minor differences in wording.

3. [3]

   The definition of total and permanent disablement involved the insured member “having provided proof to our [MetLife’s] satisfaction” of the elements of the definition. [1] It follows that satisfaction of the specific elements of the definition, in the case of a dispute, did not turn on the determination of a court, but upon the “satisfaction” of the insurer. However, in the case of a dispute, the matter must be referred to a “Claims Review Committee” consisting of one representative of the trustee, a representative of the insurer and an independent “representative” as agreed between the trustee and the insurer or, failing such agreement, as nominated by the Financial Ombudsman. [2] The insurer agreed to abide by the decision of the claims review committee. The insurer was to bear the cost of litigation where a claim was made against the Trustee. [3]

4. [4]

   On 24 July 2015 MetLife wrote to First State Super and to Ms Sandstrom stating that it was not satisfied that the criteria for total and permanent disablement had been established. Her claim was therefore declined. The Trustee wrote to the respondent on 25 August 2015 noting MetLife’s decision and stating that, “having undertaken its own separate analysis”, the Trustee had determined that MetLife’s decision was “fair and reasonable in the circumstances.” This statement presumably reflected the Trustee’s obligation under s 52(7)(d) of the Superannuation Industry (Supervision) Act 1993 (Cth) “to do everything that is reasonable to pursue an insurance claim for the benefit of a beneficiary, if the claim has a reasonable prospect of success.”

5. [5]

   Ms Sandstrom sought to challenge the decisions of both the Trustee and MetLife in proceedings commenced in the Equity Division of the Court in October 2015. The basis on which she was entitled to do so relied upon well-established authority that MetLife was under a contractual obligation to assess the claim in good faith and to act fairly and reasonably in making that assessment. [4] In the event that she established that MetLife had failed in some aspect of those contractual obligations, the Court is permitted to make its own decision on the merits of the claim.

6. [6]

   Before the trial judge, Slattery J, Ms Sandstrom was successful in having the decision of the Trustee set aside and in obtaining a favourable decision on the merits of her claim. [5] Proceedings were commenced naming both the Trustee and MetLife as defendants, however, Ms Sandstrom later discontinued her proceedings against the Trustee. On 10 March 2020 the trial judge made an order declaring that MetLife’s determination on 24 July 2015 was void and of no effect (order 1), that the plaintiff was, as at 9 March 2011, totally and permanently disabled (order 2) and that MetLife pay the Trustee the assessed benefit under each of two policies (order 3). MetLife appealed from the judgment and orders below, but only challenged the finding incorporated in the first declaration, that its own determination was ineffective. That is, in the event that it lost on that ground, it did not separately challenge the judge’s assessment of total and permanent disablement or the amount of the required payment under the policies.

Issues on appeal

1. [7]

   The trial judge upheld Ms Sandstrom’s submission that MetLife’s determination involved a breach of its contractual obligations on three of the nine grounds relied on by Ms Sandstrom. Those three grounds alleged that MetLife:

2. [8]

   The evidence of the medical practitioners relevant to grounds 2 and 3 has been set out by Macfarlan JA and need not be repeated in full. However, it is necessary to explain elements of the definition of total and permanent disablement under the policies, in order to identify the relevant legal requirements said not to have been complied with.

Legal requirements

1. [9]

   The definition of total and permanent disablement was relevantly in identical terms in both policies and was to the following effect:

2. [10]

   There was no dispute that, at the time the determination was made, Ms Sandstrom had been absent from her employment for six consecutive months. Rather, the date on which that temporal requirement was satisfied (9 March 2011) was treated as the date at which total and permanent disablement was to be assessed. The second limb involved both a procedural and a substantive element. The procedural element was the requirement that the claimant provide, proof “to the satisfaction of us”, an element referred to above. The substantive element had the following limbs, namely:

3. [11]

   So far as the first limb was concerned, there was no dispute as to the basis of her incapacity, namely the PTSD and co-morbidities resulting from her experiences as a police officer, including in particular the fatal shooting of a colleague.

4. [12]

   As to the second limb, it was not in dispute that engaging in work included part-time employment (or self-employment). However, it fed into the third limb, the limitation by reference to her “education, training or experience”, which excluded an assessment of her capability for retraining to achieve different skills to those she possessed at the time of the claim. The scope of that constraint is nevertheless vague.

5. [13]

   The limitation of the area of work imposed by the requirement to consider the member’s qualification “by reason of education, training or experience”, is sometimes referred to as the “ETE clause”. As noted in TAL Life Ltd v Shuetrim; MetLife Insurance Ltd v Shuetrim, [6] one effect of the clause is to limit the scope of the coverage: evidence that the claimant was unlikely ever to be able to work as a police officer was relevant (and accepted by the insurer), but insufficient to satisfy the clause. [7] On the other hand, the clause does limit the range of possible remunerative activity. In Hannover Life Re of Australasia Ltd v Jones [8] this Court upheld the reasoning of the primary judge in that case, Brereton J: [9]

6. [14]

   This court stated in relation to the passage emphasised at [71]:

7. [15]

   It would thus be erroneous to assess the chance of Ms Sandstrom obtaining future employment solely in terms of her previous employment as a police officer; it would also be incorrect to assess her future prospects by reference to work for which she might become qualified by undertaking further training or education.

8. [16]

   Of central importance was the assessment of the temporal element, namely that she was “unlikely ever” to engage in such employment. As will be noted, it was not the language which caused difficulty, but rather its application (or absence of application) by the medical practitioners expressing opinions.

9. [17]

   Construing a similar phrase in Shuetrim, Leeming JA stated:

10. [18]

    Accordingly, Ms Sandstrom bore the onus of satisfying the claims review committee that there was no real chance that she would return to employment. At the time of the claim she was 28 years of age and therefore had an expectation of a further 37 years working life until age 65. What was foreseeable over that time was not easy to assess.

11. [19]

    The issues raised as to the operation of such policies have broad social implications. As observed by Commissioner Hayne in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, [10] noting that in Australia 40% of premiums for life insurance were represented by group sales:

Challenge to acceptance of ground 2

1. [20]

   In its reasons for its decision (set out by Macfarlan JA at [97] below) MetLife commenced:

2. [21]

   It is clear that MetLife’s determination turned on the material set out following the first paragraph. The reference in that paragraph to the earlier letter was simply to assure the reader that these matters had been put to Ms Sandstrom for her comment prior to the determination being made. The reasoning then turned to specific passages in the medical reports.

3. [22]

   This statement in relation to Dr Grace was the subject of ground 1, which was ultimately not pressed. Ground 2 addressed a passage concerning Dr George. Nevertheless there are themes running through the reasons which render it convenient to deal first with Dr Grace, which is relevant to a later issue.

4. [23]

   There are two matters arising from reliance on Dr Grace’s statement set out above. First, the second sentence of his answer, which is no doubt that relied upon by MetLife, was by way of explanation of his firm belief that Ms Sandstrom would not return to pre-injury duties; neither would she, in Dr Grace’s opinion return to any job which reminded her of police work. This was not a response to a question which encapsulated the test under the policy. Further, it was addressed to Allianz, which was not a party to the superannuation insurance scheme. It will be seen below that, in relation to material favourable to Ms Sandstrom, preparation for a different purpose was identified as a reason for not placing reliance on it.

5. [24]

   Secondly, on 14 August 2012 Dr Grace provided a report in response to a request from a person he understood to be a claims assessor for MetLife. The first part of that report contained full details of all the consultations Dr Grace had had with Ms Sandstrom up until that time. As part of his response, Dr Grace answered a number of questions which were formulated partly in terms reflecting the terms of the policy, including the following:

6. [25]

   It is likely that MetLife placed significant weight on Dr Grace’s opinions because he was Ms Sandstrom’s treating psychiatrist at the time of her medical discharge. For MetLife to rely upon an opinion given to another insurer for a different purpose, without express reference to Dr Grace’s opinion provided to MetLife in response to a question formulated (at least in part) by reference to the terms of the policy, involved unfairness. While the reasons given were not intended or expected to be comprehensive, the omission in this specific respect is clearly significant. In particular, it must have been apparent to MetLife that generalised statements about future possibilities, without reference to the requirements of the policy, were apt to be unhelpful and possibly misleading.

7. [26]

   Turning to ground 2, the passage in question related to a report of Dr George dated 8 March 2011. After referring to Dr Grace, MetLife’s determination continued:

8. [27]

   Dr George’s opinion of 8 March 2011, addressed to the NSW Police Force, concluded as follows:

9. [28]

   It is clear that this was the focus of Dr George’s purpose in assessing Ms Sandstrom. However, in the course of answering questions posed for his consideration, the following question and answer were provided:

10. [29]

    As the trial judge found, the word “may” was not immediately responsive to the second part of the question. Indeed there is some inconsistency in the question which commences by seeking an opinion as to whether the officer has “total and permanent disablement”. Reading the two sentences of the answer together, Dr George is clear as to her “permanent disablement” from returning to preinjury duties, but is uncertain as to whether she will be able in the future to return to “some form of work with a different employer.” The use of “may” is consistent with (i) the conclusion that such work is unlikely, in the sense that there is only a remote and speculative possibility, (ii) the possibility of a real chance of such employment, or (iii) an unwillingness to express any position on that question. The trial judge identified the ambivalence and concluded that it was unfair for MetLife to rely upon the answer as adverse to Ms Sandstrom.

11. [30]

    It may be added that the question omitted any reference to her education, training and experience, as a qualification on the kind of gainful employment which was to be considered. It is clear from the introductory passage in the reasoning of MetLife that it gave significant weight to what it understood to be this opinion because of its proximity to the relevant date for assessment. The primary judge did not err in upholding ground 2.

Challenge to acceptance of ground 3

1. [31]

   Notwithstanding the terms in which it was formulated, ground 3 as relied on before and addressed by the primary judge related to questionnaires answered by Dr Wong on 11 March 2011 and by Dr Grace on 22 March 2011, and a consultation note of Dr Wong dated 9 May 2011. [11] The relevant passage in MetLife’s reasons in this respect read as follows:

2. [32]

   Dr Wong’s opinion of 11 March 2011 was provided in response to a request from the NSW Police Force which attached a copy of Dr George’s report of 23 February 2011, which it summarised in 10 propositions. Question 1 asked Dr Wong to tick a yes or no box indicating whether she agreed with the stated comments (referring to those ten propositions). She ticked the “Yes” box indicating that she did agree. The eighth comment read as follows:

3. [33]

   To the extent that ground 2 highlighted problems with this statement in Dr George’s report, the same analysis must apply in relation to Dr Wong’s opinion. (Dr Wong and Dr Grace received copies of Dr George’s earlier report which set out the questions and his specific answers.) It is also doubtful whether any real weight should have been given to this document in circumstances where the penultimate comment simply read “still suffers a”, with no object stated. Further, the subject of the agreement sought from Dr Wong was identified in the final comment, as “Medical discharge only option”.

4. [34]

   Of the remaining 3 questions addressed to Dr Wong, questions 2 and 4 concerned the subject of discharge. Thus question 4 asked whether Dr Wong supported a medical discharge, providing a yes/no option, for which she ticked “yes”. Importantly, however, question 3 was as follows:

5. [35]

   To rely on the opinion of Dr Wong of 11 March 2011 as supporting a possibility that Ms Sandstrom might have a reasonable chance of finding work in the future was unfair. Agreement with Dr George, in the circumstances set out above, was close to worthless; by contrast, when asked a specific question in terms reflecting aspects of the policy, she explicitly answered no. In truth, on no reasonable construction did that document provide support for a negative answer to the criteria for total and permanent disablement.

6. [36]

   It is clear that the importance attached to contemporaneous opinions, and the fact that Dr Wong was a treating general practitioner at the relevant time, provided a basis for MetLife to give significant weight to her opinions, as its reasons for determination demonstrated.

7. [37]

   On 22 March 2011, Dr Grace responded to the same questionnaire as that provided to Dr Wong. Like Dr Wong, he ticked the box “Yes” in answer to question 1. There is no doubt from what followed that Dr Grace also saw the form as directed to the question of medical discharge which he, like Dr Wong, concluded was the only available option. The only significant difference between their responses was that Dr Grace answered “Yes” to question 3, which was whether he believed “that there is any capacity for Ms Sandstrom to return to work in any organisation (in the foreseeable future).” That required him to answer a further question by specifying “timeframes and restrictions” to which he responded:

8. [38]

   The trial judge described Dr Grace’s answer to question 3 “as an elegant piece of diplomacy.” He continued: [12]

9. [39]

   Dr Grace was clearly focused on the issue of medical discharge. He concluded his answer to the questionnaire with a further comment:

10. [40]

    It may be accepted that Dr Grace’s answer to the questionnaire from the NSW Police Force provided no assistance to the claimant. However, when apparently asked to provide an opinion in terms of the policy, he stated on 24 June 2011:

11. [41]

    MetLife did not have to accept this view, which was not supported by reasoning, beyond the statements that she “has been unable to return to police work” and that he did not see her need to avoid contact “changing over time.” Nevertheless, it was unfair to rely upon a neutral statement in support of a contrary view to that expressed on 24 June 2011 without adverting to the further opinion, expressed within three months of responding to the questionnaire from the Police Force, and adopting terms apt to apply under the policy.

12. [42]

    The third document was the consultation note prepared by Dr Wong and dated 9 May 2011. That note recorded something said by Dr Wong in a telephone conversation with Mr Cratchley, a financial adviser to the claimant.

13. [43]

    The first document signed by Dr Wong (dated 1 August 2011) which was directly relevant to the total and permanent disablement claim of the same date, was in a form provided by the Trustee. Question 4 was in the following terms:

14. [44]

    Dr Wong chose to answer (b) and stated:

15. [45]

    It was true, as MetLife noted, that Dr Wong created a note in her patient file for Ms Sandstrom stating that she had spoken to Ms Sandstrom’s “financial adviser” and, having received authorisation from Ms Sandstrom, added “pt will not be able to return to policing but I cannot say she will not be able to work in any role in the future”.

16. [46]

    Read in the context of the information provided by Dr Wong to the Trustee, a reasonable understanding of Dr Wong’s opinions was that she was unable to express the negative opinion in conclusive terms, namely “will not be able to work”.

17. [47]

    The importance given to the most nearly contemporaneous opinions was permissible, but should have been accompanied by an acknowledgment that many medical conditions take time to stabilise. For example, an assessment of permanent impairment requires a determination that the degree of permanent impairment is, at the time of the assessment, fully ascertainable. [13] An approved medical specialist may decline to make an assessment until satisfied that the impairment is permanent and the degree of impairment is fully ascertainable. [14]

18. [48]

    In 2012 Dr Wong communicated opinions on a number of occasions to Ms Sandstrom’s workers’ compensation insurer (or claim manager). On 29 May 2012 Dr Wong responded to a request from MetLife in the following terms:

19. [49]

    In these circumstances, and without further explanation, it was not fair of MetLife to rely upon the specific opinion of Dr Wong identified in their reasons for determination without any explanation as to the use made of the other material supplied by her. For these reasons, the trial judge was correct in upholding ground 3.

Challenge to acceptance of ground 7

1. [50]

   It was unfortunate that, as Macfarlan JA explains, both the case presented by Ms Sandstrom’s solicitors, and the findings of the trial judge, made factual errors in relation to the numerous medical reports provided for the purposes of the claim. It was also unfortunate that Ms Sandstrom’s solicitors did not reply to the second procedural fairness letter of 23 June 2015, with the attached “Information Summary”. However, ground 7 alleged that MetLife had failed to address Ms Sandstrom’s solicitor’s submissions of 22 April 2015, responding to the first procedural fairness letter from MetLife, dated 26 February 2015. Ground 7 accepted that MetLife claimed to have taken the submissions into account but alleged that it had not done so in a way which gave real and genuine consideration to the matters raised.

2. [51]

   To an extent, the complaint in ground 7 covers similar territory to the substantive issues raised in grounds 2 and 3. That is, the submission is not that all material was not considered, but rather that it was considered on a selective basis which failed to have proper regard to Ms Sandstrom’s case as presented in the letter of 22 April 2015. The trial judge dealt with the matter, relevantly for present purposes, by reference to the medical opinions of Dr Grace, Dr Wilkins and Dr Smith. While it is true that this material was not addressed in the reasons for determination, it may be inferred that MetLife’s approach to this material was that set out in the information summary to which no response had been provided. That material was set out chronologically, with comments in the final column reflecting MetLife’s preliminary views. It is convenient to follow the same approach and deal with the relevant material chronologically.

3. [52]

   The fourth item of medical evidence referred to by the solicitors in their letter of 22 April 2015 was a report prepared by Dr Grace on 24 June 2011, to which reference is made above. As the trial judge noted, it was an important document: it was, in MetLife’s terms, contemporaneous with the time at which the assessment was to be made, and it expressed an opinion in terms reflecting the language of the definition of total and permanent disablement in the policy. The trial judge stated, wrongly, that it was not referred to in the information summary. [15] It was identified (in its correct chronological place) with the comment:

4. [53]

   With respect to the opinion of Dr George of 8 March 2011, MetLife commented in the information summary that it was “the most contemporaneous to the date for assessment.” However, as noted above, it was not expressed in terms of the policy definition, and was not given for that purpose. By contrast, in relation to WorkCover medical certificates given by Dr Wong certifying that Ms Sandstrom was “totally unfit for work” during specified periods, MetLife noted that such certificates “do not address the specific TPD criteria.” That was true; however, if acting fairly, the same observation should have been made with respect to Dr George and a similar qualification with respect to Dr Grace’s agreement with Dr George, which has also been considered above, and was noted by MetLife in its information summary.

5. [54]

   Further, reliance on Dr George’s opinion as benefitting from contemporaneity failed to address the submission made by Ms Sandstrom’s solicitors in the following terms:

6. [55]

   The solicitors also relied upon the report of 5 June 2012 by Dr Wong, responding to suggestions of vocational rehabilitation providers and stating that Ms Sandstrom was not fit to pursue employment as a claims officer/compliance officer, paralegal or as a clerical/administrative assistant. Because Dr Wong described Ms Sandstrom as “currently unfit to return to job for which she is reasonably qualified from her education, training and experience ie as a police officer”, MetLife commented that Dr Wong “may have misunderstood the definition of TPD” because she used the term “currently” and not “unlikely ever” and, secondly, considered the type of employment as limited to work as a police officer. That interpretation may have been true, but it disregarded the question in the form provided by the workers’ compensation insurer, which Dr Wong was answering, namely:

7. [56]

   As no issue appears to have been raised before the trial judge in relation to this opinion of Dr Wong, it is not appropriate to rely upon it in dealing with ground 7, although it relates to the assessment of Dr Wong’s evidence as a whole, and therefore has significance for grounds 2 and 3.

8. [57]

   The solicitor’s letter relied upon two reports by Dr Selwyn Smith, consultant psychiatrist, dated 12 July and 9 August 2013.

9. [58]

   Dr Smith’s first opinion contained the following findings:

10. [59]

    The information summary set out extracts from paragraphs 3 and 6 of Dr Smith’s opinion. It noted that the document had been provided with the solicitor’s letter of 22 April 2015. It suggested adverse opinions might be formed on the basis of three concerns, namely (i) the main purpose of the report appeared to have been to support a claim for work injury damages, (ii) Dr Smith first examined Ms Sandstrom two years after the date for assessment, and (iii) Dr Smith was not provided with the vocational assessment reports of Ms Zaki and the Insight Injury Management Group (Zoe Buck).

11. [60]

    The trial judge appears to have approached these comments, in the absence of contradiction and in the absence of any further reasons dealing with the issues, as providing the reasons for the decision. [16] Despite some misgivings, the judge considered this was a common approach of the parties. It is convenient to deal with the matter on that basis.

12. [61]

    As to the first matter, it was correct that the report was prepared for a purpose other than addressing the MetLife policy definition, but, as noted above, that was true of other opinions which MetLife relied upon without adverse comment, including those of Dr Grace, Dr George and Dr Wong. As to the second matter, the emphasis given to contemporaneity, and the failure to address the claimant’s submission that subsequent events may be helpful in demonstrating that a condition has stabilised, have already been noted.

13. [62]

    As to the third matter, namely the fact that Dr Smith had not been provided with the vocational counsellor reports, the trial judge concluded that provision of such reports was “unlikely to assist.” [17] That depends upon a consideration of the reports.

14. [63]

    The first vocational assessment (undertaken for workers’ compensation purposes) was carried out by Ms Zoe Buck on 18 May 2012. The summary noted that three categories of work had been identified, but added:

15. [64]

    The second vocational assessment was undertaken by Ms Mira Zaki on 20 June 2012, at the request of MetLife. She identified three different categories of employment. In commenting on her views, MetLife noted that, although the assessment was undertaken well after the relevant date, the claimant’s education, training and experience had not changed. Accordingly it treated her vocational options as suitable. The options were (i) inquiries clerk, (ii) general clerk and (iii) sales assistant (general).

16. [65]

    Two observations should be made about the vocational assessments. First, Ms Buck noted that, on medical grounds, Ms Sandstrom had been certified as “Totally Unfit for Work”. Her recommendations were therefore contingent on a variation of that medical opinion. Secondly, although not noted by MetLife, the opinion was stated to be provided for the purposes of identifying “suitable employment and capacity to earn in the open labour market” for the purposes of the Workers Compensation Act 1987 (NSW). With respect to Ms Zaki, her report stated that “[t]he identified Work Options do not involve a consideration of the Insured’s current psychological functional capacity or any psychological restrictions that the Insured’s [sic] has been recommended to observe when working.”

17. [66]

    While it is true that Dr Smith did not consider the vocational assessment reports because he did not have them, they were of such a general nature in their suggestions that MetLife could not fairly discount Dr Smith’s opinions to any material extent based on that omission.

18. [67]

    Dr Smith provided a supplementary report dated 9 August 2013. That report did not seek to review the reasoning and background set out in his earlier report, although an additional document identified as “pre-vocational assessment questionnaire”, which was undated, was referred to. That was a document prepared by Ms Sandstrom, probably for one of the vocational counsellors, as it refers to her time in the Police Force from May 2006-July 2011. Dr Smith expressed his opinion in the following terms:

19. [68]

    The information summary set out the second and third sentences from Dr Smith’s report, noted that it had been provided by the solicitor on 22 April 2015, noted that Dr Smith had not been given the two vocational assessments and had not been provided with Dr George’s report of 8 March 2011. For reasons already discussed, these comments provided little or no basis for rejecting Dr Smith’s views. While it is true that in this respect MetLife took note of the existence of the report provided by Ms Sandstrom’s solicitors, it apparently gave the report no weight, but for reasons which did not engage with the substance of the report.

20. [69]

    Finally, complaint was made as to the treatment of two reports prepared by Dr Greg Wilkins, dated 19 June 2014 and 3 October 2014. With respect to the first report, the information summary set out two passages, which read as follows:

21. [70]

    Whilst acknowledging that Dr Wilkins’ prognosis was “generally pessimistic” it was said also to be “somewhat ambiguous.” The reviewer considered that the prognosis was “guarded”, but also that Dr Wilkins was “unable to say whether or not the member would return to paid employment in the future.”

22. [71]

    That review was either quite unfair, or demonstrated a failure to read the whole report. Dr Wilkins expressed the view that “[i]t is highly probable that she will not return [to] any form of paid employment in the foreseeable future.” [18] He also stated that her symptoms increased dramatically when she was placed in a position of responsibility or simply presented with the possibility of being responsible for something or to someone, with the result that “it is not possible to outline what employment activities she would be able to perform.” [19] Under prognosis, Dr Wilkins concluded that: [20]

23. [72]

    In circumstances where a medical practitioner is not available to be questioned on the meaning of his report, to suggest that ambiguity results from a reference to the “foreseeable future” is unfair. The report was detailed and careful in its assessments.

24. [73]

    Secondly, MetLife suggested that Dr Wilkins “placed undue significance on what the member herself regarded as her own capacity … rather than focusing specifically on the TPD criteria.” That appears to have involved a misunderstanding of Dr Wilkins’ reasoning. For example, he treated low esteem as an element of incapacity. Given that the opinion of a consultant psychiatrist who did not have a consultation with the patient in order to identify how she viewed possible employment and her likely responses to particular situations would be dismissed out of hand, the criticism seems inapt.

25. [74]

    Finally, MetLife noted that Dr Wilkins was consulted three years after the date for assessment, a matter which has been addressed above.

26. [75]

    On 3 October 2014 Dr Wilkins provided a second report. However, it did not take the matter any further and may, as MetLife suggested, have been prepared for a worker’s compensation claim.

27. [76]

    It follows that the trial judge was correct to uphold the complaint that MetLife had not dealt satisfactorily with issues raised by the solicitors for Ms Sandstrom in their letter of 22 April 2015. It is not necessary to consider in detail particular aspects of the trial judge’s reasoning which involved errors. However, it may be noted that aspects of the reasoning set out above with respect to this ground both draw upon and supplement the reasoning with respect to earlier grounds of challenge.

Conclusions

1. [77]

   The only remaining question is whether the judge was correct to conclude that the elements of unfairness and unreasonableness arising from the way in which MetLife dealt with aspects of the claim were sufficient to constitute a breach of its contractual duties to deal with Ms Sandstrom’s claim fairly, reasonably and in good faith. In my view the cumulative effect of the matters addressed above is sufficient to demonstrate a lack of overall fairness and in part is suggestive of a conclusion reached on other grounds.

2. [78]

   That is not to say that MetLife was not entitled to be sceptical in considering whether it was satisfied that the claimant was unlikely ever to obtain remunerative work. Her youth, together with the long period over which that assessment needed to be made, warranted a level of scrutiny of the available evidence which might not otherwise have been justified. However, that scrutiny was applied inconsistently, objections being raised to those reports which were supportive of Ms Sandstrom’s claim but not in relation to reports which were neutral or suggested a reasonable possibility of future employment, even where the same concern applied. In those circumstances, I would dismiss the appeal from that part of the judge’s reasoning which found a breach of contractual duty with respect to the assessment of the claim. As there was no other challenge to the judge’s assessment of Ms Sandstrom’s claim, the judgment and orders must stand.

Cross-appeal – costs

1. [79]

   On 19 May 2020 the trial judge handed down a further judgment dealing with an application for indemnity costs made by Ms Sandstrom. [22] The application was rejected. On 14 July 2020 Ms Sandstrom filed a cross-appeal challenging the rejection of her claim. Although no summons seeking leave was filed, it was acknowledged that leave to appeal was required as the proposed appeal related to an order as to costs only: Supreme Court Act 1970 (NSW), s 101(2)(c). The respondent took no issue with the absence of a summons and, while resisting the other orders sought by the applicant, consented to a grant of leave. In the circumstances, that leave should be granted.

2. [80]

   The application for indemnity costs was based on a Calderbank letter dated 28 March 2018, served some two weeks before the beginning of the trial. In circumstances where the amount of the claim under the two polices was not in doubt, the offer turned entirely on the appropriate and reasonable assessment of the prospects of each party in the proceedings. It was not suggested that the offer did not involve a real element of compromise.

3. [81]

   The trial judge rejected the application on the basis that, in the circumstances as they stood at the time of the offer, rejection was not unreasonable. For the reasons given by Meagher JA, I agree that the cross-appeal should be dismissed. Costs should follow the event.

Orders

1. [82]

   Accordingly, I would propose the following orders:

   1. (1)

      Dismiss the appeal from the judgment in the Equity Division of 9 March 2020 and the orders entered on 10 March 2020.

   2. (2)

      Order that the appellant pay the respondent’s costs of the appeal.

   3. (3)

      Grant leave to Ms Sandstrom to cross-appeal from the refusal of her application for an indemnity costs order by the judgment in the Equity Division of 19 May 2020.

   4. (4)

      Note the consent of MetLife to the filing of the notice of cross-appeal on 14 July 2020.

   5. (5)

      Dismiss the cross-appeal.

   6. (6)

      Order Ms Sandstrom to pay MetLife’s costs of the cross-appeal.

2. [83]

   MACFARLAN JA: On 7 July 2011 the respondent, Ms Rebecca Sandstrom, was medically discharged from the NSW Police Force due to psychological symptoms from which she was suffering as a result of traumatic experiences she had during her service, which had commenced in 2005. On 1 August 2011 she claimed benefits from the First State Super fund, of which she was a member and FSS Trustee Corporation was the trustee, on the basis that she was totally and permanently disabled (“TPD”) by reason of post-traumatic stress disorder (“PTSD”). The trustee in turn sought indemnity from the appellant, MetLife Insurance Ltd, under two policies of insurance providing cover to the trustee in respect of fund members such as the respondent. Relevantly, the trustee was entitled to indemnity in respect of the respondent’s claim if the trustee provided proof to the appellant’s satisfaction:

3. [84]

   Following extensive communications between the appellant and the respondent, the appellant refused the claim by letter to the trustee of 24 July 2015.

4. [85]

   On 7 October 2015 the respondent commenced proceedings in the Equity Division of the Supreme Court against the trustee and the appellant challenging that decision. After a nine day hearing, Slattery J, by judgment of 9 March 2020, found that the appellant failed to fulfil its contractual duties in dealing with the respondent’s claim, set the appellant’s decision aside, found that the respondent satisfied the TPD definition and made orders against the appellant for payment ([2020] NSWSC 200). The respondent had discontinued her proceedings against the trustee prior to the hearing.

5. [86]

   The appellant appeals against his Honour’s decision in respect of “Stage 1” of the proceedings which was concerned with whether the appellant’s decision should be set aside (see MetLife Insurance Limited v MX [2019] NSWCA 228 at [12]). That stage related principally to the manner in which the appellant dealt, or failed to deal, with the opinions of five doctors, being Drs George, Grace, Wong, Wilkins and Smith. The appellant did not pursue an appeal in respect of “Stage 2” of his Honour’s findings, concerned with whether, assuming the appellant’s decision was set aside, the respondent satisfied the TPD definition and the trustee was entitled to indemnity in respect of the respondent’s claim. His Honour decided the Stage 2 issue favourably to the respondent.

6. [87]

   For the reasons that appear below, I have concluded that the appeal should be allowed. That conclusion renders it unnecessary to deal with the merits of Ms Sandstrom’s cross-appeal challenging his Honour’s decision not to order that the costs to which she became entitled as a result of her success at first instance be paid on an indemnity basis. The appellant’s success on appeal entitles the appellant, instead of Ms Sandstrom, to be paid first instance costs.

THE CLAIMS ASSESSMENT PROCESS

1. [88]

   As already noted, entitlement to indemnity under the insurance policies was conditional on proof to the appellant’s satisfaction of the respondent’s incapacity. The policies also provided the following concerning evidence to substantiate the claim:

2. [89]

   By letter of 26 February 2015 to the respondent (“the first procedural fairness letter”), the appellant stated that it had been assessing the respondent’s TPD claim which had effectively been made on it via the trustee’s claim on the appellant. The claim listed some 29 documents that had come into the appellant’s possession in the course of the assessment process and invited the respondent to review the list. It identified 16 of those documents as containing “possible adverse information”. It invited the respondent “to review [the documents] and make any submissions with respect to [them] that you would like us to take into consideration when making a recommendation on your claim”. It enclosed copies of the 16 documents.

3. [90]

   By the letter, the appellant also invited the respondent “to submit any additional medical information, including medical reports, or other evidence that you believe will assist in the assessment of your claim for total and permanent disability benefit”.

4. [91]

   The respondent’s solicitors responded by a 12-page letter dated 22 April 2015 to the trustee. They addressed the material identified in the appellant’s letter as possibly adverse and enclosed six further medical reports.

5. [92]

   The appellant responded to this letter with a 26-page (including schedules) letter of 23 June 2015 (“the second procedural fairness letter”). Under the heading “INFORMATION CONSIDERED” it referred to the attachment of an “Index of the information previously provided to you” and an “Information Summary” of information considered by the appellant in assessing the claim. It continued:

6. [93]

   In the letter the appellant then stated that it had carefully considered the respondent’s solicitors’ letter of 22 April 2015 and the documents provided with it. It stated that the purpose of its letter was as follows:

7. [94]

   Under the heading “OUR ASSESSMENT”, the appellant commented on some of the medical and vocational assessment material. It concluded by stating under the heading “CURRENT POSITION” in respect of each policy:

8. [95]

   The letter concluded as follows:

9. [96]

   The enclosed Information Summary described over 16 pages the principal medical opinions that had been considered and, in respect of many, recorded the appellant’s comments on them.

10. [97]

    The appellant declined the respondent’s claim by letter to the trustee of 24 July 2015 (“the decision letter”). After noting that it had not received a response to the letter of 23 June 2015, it continued:

11. [98]

    In conclusion, the letter noted the existence of an Internal Dispute Resolution Process.

12. [99]

    A letter in substantially the same terms was sent by the trustee to the respondent on 25 August 2015.

THE GROUNDS OF CHALLENGE AT FIRST INSTANCE TO THE APPELLANT’S DECISION

1. [100]

   The hearing at first instance proceeded upon the basis that the respondent’s challenges to the appellant’s decision on her claim were identified in a document entitled “SPECIFIC GROUNDS OF CHALLENGE AT THE STAGE ONE LEVEL”. It is sufficient for present purposes to quote the opening words to this document and the three grounds that were upheld by the primary judge and that are in issue on appeal:

THE RELEVANT MEDICAL EVIDENCE

1. [101]

   As noted earlier, the issues on appeal were confined to the primary judge’s decision regarding the way in which the appellant dealt with, or did not deal with, the opinions of five doctors. It is sufficient in these circumstances to refer to the documentary evidence of those opinions that was before the appellant in making its decision.

Dr Graham George

1. [102]

   Dr George is a consultant psychiatrist who was engaged by the NSW Police Force to undertake a psychiatric assessment of the respondent. He saw her on 23 February 2011 and provided a report of 8 March 2011.

2. [103]

   The relevant questions posed to Dr George and his answers were as follows:

Dr David Grace

1. [104]

   Dr Grace is a consultant psychiatrist who commenced treating the respondent on 27 September 2010. On 30 January 2011 he filled in and signed a form directed to a workers’ compensation insurer upon whom the respondent had made a claim. In it, he stated that his diagnosis of the respondent’s current psychological injury was “Post-Traumatic Stress Disorder”. In response to the question “Do you believe a return to pre-injury duties is a realistic goal and what timeframe is it anticipated to achieve this goal?”, he answered:

2. [105]

   On 22 March 2011, Dr Grace completed a questionnaire directed to him by the NSW Police Force. The questionnaire referred to an attached copy of the report of Dr George of 8 March 2011 (see [102]-[103] above) and provided a summary of the report which included as one of ten dot points:

3. [106]

   The questionnaire then asked Dr Grace to advise whether he agreed with Dr George’s comments. Dr Grace ticked the “Yes” box.

4. [107]

   In answer to the question “Can you advise whether you believe that there is any capacity for Ms Sandstrom to return to work in any organisation (in the foreseeable future)?”, Dr Grace ticked the “Yes” box and added the following:

5. [108]

   By letter of 24 June 2011 “To Whom It May Concern” Dr Grace said that the respondent had been a patient of his since 27 September 2010 and that:

6. [109]

   In a report dated 10 December 2011 to First State Super, Dr Grace indicated his agreement with both the following propositions:

7. [110]

   In his report of 14 August 2012, Dr Grace gave the following answer to a question numbered 7 posed to him:

Dr Anita Wong

1. [111]

   Dr Wong is a general practitioner whom the respondent commenced to consult in August 2001.

2. [112]

   On 11 March 2011 Dr Wong completed for the NSW Police Force a questionnaire in the same form as that completed by Dr Grace (see [105] above). Dr Wong also ticked the “Yes” box in response to the question whether she agreed with the comments of Dr George. Dr Wong however ticked the “No” box in answer to the question (Question 3) “Can you advise whether you believe that there is any capacity for Ms Sandstrom to return to work in any organisation (in the foreseeable future)?”.

3. [113]

   On 8 April 2011 Dr Wong completed a “Confidential medical report on permanent incapacity” directed to the trustee. Dr Wong indicated that in her opinion the respondent would never be able to return to her pre-injury occupation but, concerning the possibility of “any paid employment”, Dr Wong stated “can’t be determined at present”. She did this instead of choosing one of the two alternatives she was given, being “will never be able to be employed in any form of paid occupation due to this incapacity” or “is still able to be employed in some form of paid occupation”.

4. [114]

   In a note dated 9 May 2011 in her practice’s records, Dr Wong recorded that, with the respondent’s authority, she had spoken to a financial advisor, Mr Josh Cratchley, “regarding superannuation” and told him: “pt will not be able to return to policing but I cannot say she will not be able to work in any role in the future”.

5. [115]

   On 27 June 2011 Dr Wong wrote a letter “To whom it may concern” referring to the respondent’s PTSD and its consequences and, as a final paragraph, stating:

6. [116]

   It is important to note that above this certification Dr Wong had referred to the respondent’s traumatic experiences having occurred whilst in the Police Force and to police-related circumstances subsequently triggering her “catastrophic” PTSD responses. Before the certification, Dr Wong also said:

7. [117]

   On 21 December 2011 Dr Wong completed a questionnaire from Employers Mutual Limited. In response to the question “[d]o you anticipate Ms Sandstrom will return to suitable duties or pre-injury duties in a different job with a different employer?”, Dr Wong answered “not in [the] near future”.

8. [118]

   On 29 May 2012 Dr Wong provided information that had been requested of her by the appellant. Relevant questions and Dr Wong’s answers were as follows:

9. [119]

   On 5 June 2012 Dr Wong completed a questionnaire provided by Employers Mutual Limited, a workers’ compensation insurer upon whom the respondent had made a claim. In answer to a request to outline the respondent’s “current capacity for work including any specific limitations that need to be considered”, Dr Wong replied:

10. [120]

    In response to a request to identify when the respondent’s “treatment plan” was expected to be completed, Dr Wong stated “indefinite support required”.

11. [121]

    The form then requested Dr Wong to indicate whether “you approve the following suitable employment options based upon the position described outlined”.

12. [122]

    The first option was “Case Manager”, “for various companies who supervise and support ‘carers’ in the community i.e. Benevolent society”. The “Cognitive Demands” indicated in respect of this option were “Strong communication / Excellent interpersonal and organisation skills” and “Ability to work autonomously and in a team (essential)”. Dr Wong indicated her approval to this option by circling the word “Yes”. She added:

13. [123]

    In contrast, Dr Wong indicated a lack of approval in respect of the remaining three options, being “Claim Officer / Compliance Officer”, “Paralegal / Law Clerk” and “Clerical and/or Administrative Assistant”.

14. [124]

    In respect of the first of these additional options (option two), Dr Wong added:

15. [125]

    In respect of the second (option three), Dr Wong added:

16. [126]

    In respect of the third (option four), Dr Wong added:

17. [127]

    On 23 July 2012 Dr Wong provided to the worker’s compensation insurer her responses to a questionnaire. In relation a question as to the respondent’s “current capacity for work”, Dr Wong responded “Totally unfit for work”.

18. [128]

    In relation to the respondent’s “Long Term Prognosis” Dr Wong responded “never to be fit to [return] to previous employer” but “may be able to redeploy to alternate employer but not at this stage”. In relation to the “anticipated timeframe” in which the respondent “will be upgraded to suitable duties and fit to commence job seeking for alternate employment with a new employer”, Dr Wong stated “Uncertain”.

19. [129]

    On 12 August 2013 Dr Wong responded as follows to enquiries made of her by Ms Jeorgia Stanton, a case manager at Employers Mutual Limited:

Dr Greg Wilkins

1. [130]

   In his report of 19 June 2014, Dr Wilkins, a treating psychiatrist of the respondent from 2014, said the following:

2. [131]

   In his report of 3 October 2014 Dr Wilkins described the nature of the respondent’s PTSD but did not refer to her ability, or inability, to obtain employment.

Dr Selwyn Smith

1. [132]

   Dr Smith, a consultant psychiatrist, provided a report dated 12 July 2013 for the purposes of the respondent’s workers’ compensation claim. Dr Smith expressed the following views:

2. [133]

   Later in his report Dr Smith referred as follows to an earlier report of Dr Matthew Jones:

3. [134]

   On the appeal, this Court was informed that Dr Jones’ report was not in evidence before the primary judge in relation to Stage 1 of the proceedings, whereas it was in relation to Stage 2. What Dr Smith was referring to appears to be the following opinion of Dr Jones in a report dated 6 April 2013 which is quoted in the respondent’s letter dated 22 April 2015 to the trustee:

4. [135]

   Having been supplied inter alia with reports of Drs Grace and Wong, Dr Smith expressed the following opinions in a report dated 9 August 2013:

THE PRIMARY JUDGMENT

1. [136]

   The primary judge first undertook a thorough examination of case authorities relevant to the respondent’s claim. In this Court, the appellant accepted the correctness of what his Honour said, subject to “the qualification that it should be kept in mind that the source of the insurer’s duties must be found in the terms of the contract of insurance” and that it should be added to his Honour’s discussion that this Court in TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [63] stated that the onus of satisfying the insurer rests on the insured where, as here, the policy requires the insured to provide proof to the insurer’s satisfaction.

2. [137]

   Following Hannover Life Re of Australasia Ltd v Jones [2017] NSWCA 233 at [121], his Honour accepted that in a challenge to an insurer’s failure to be relevantly satisfied, the test to be applied is “whether the opinion formed by the insurer was not open to an insurer acting reasonably and fairly in the consideration of the claim” (at [38]).

3. [138]

   By reference to MetLife Insurance v MX [2019] NSWCA 228 at [79] and MetLife Insurance Ltd v Hellessey [2018] NSWCA 307 at [8], his Honour noted a distinction between “acting reasonably in the formation of an opinion and the formation of a reasonable opinion” (at [42]-[43]). As stated in Hellessey, “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” (at [8]). The respondent’s challenge to the appellant’s decision is, at least to the extent that it is pursued on appeal, directed at the process by which it was arrived at, rather than the outcome as such.

4. [139]

   His Honour also referred to authorities considering whether an insurer has a duty to give reasons. In this Court, the respondent did not contend that the appellant had a duty to give reasons for its lack of satisfaction. She contented herself in this respect with the proposition, as stated in MX at [155], that such reasons as are given by an insurer have “evidentiary significance as to whether the Insurer’s process of consideration of the respondent’s claim was undertaken fairly and reasonably”.

5. [140]

   As to the meaning of the expression “unlikely ever” used in the TPD Definition with reference to the prospect of the respondent obtaining employment in the future, his Honour referred to the authoritative statement of Leeming JA in Shuetrim at [111] distinguishing between “a mere expression of hope” of a return to work and the existence of a “real chance” of doing so.

6. [141]

   Finally, in the portion of his Honour’s judgment concerned with legal principles and not contested on appeal, his Honour stated that medical and other expert opinions expressed subsequent to the date on which the insurer is required to assess the claim may be taken into account provided they “are pertinent to [the] claimant’s condition as at the relevant assessment date” (at [66]).

7. [142]

   At first instance, the respondent challenged the appellant’s decision on nine specific grounds, of which his Honour rejected six. In this Court, the respondent did not seek by notice of contention to challenge his Honour’s decision on those rejected grounds. The three grounds that his Honour upheld, and therefore found to constitute material breaches of the appellant’s obligation to act in good faith and reasonably in forming its opinion, are set out in [100] above. His Honour’s reasons for upholding these grounds were as follows.

Ground 2 – isolation of one sentence from Dr George’s 8 March 2011 report

1. [143]

   The primary judge rejected the respondent’s submission that in Dr George’s report of 8 March 2011, his answer to Question 7, that “at some time in the future, [the respondent] may be able to return to some form of work with a different employer” (see [103] above), meant that it was “unlikely ever” that the respondent will return to work (at [132]). His Honour held that the word “may” in this sentence was “consistent with both an ‘expression of hope’ and ‘a real chance’ [of later employment] and is simply an unhelpful basis for reasoning to either conclusion” (at [134]).

2. [144]

   Consistently with this view, his Honour also rejected the appellant’s submission that the sentence indicated that the respondent had a “real chance” of returning to work (at [133]) and explained:

3. [145]

   The primary judge therefore held that this ground of challenge succeeded in part: he found that the appellant should not have relied on the relevant sentence, without further enquiry, but did not accept the proposition forming part of the ground that the opinion contained in the sentence “satisfied the criteria of ‘unlikely ever’ within the meaning of the TPD definition”.

Ground 3 – misinterpretation of Dr Wong’s “questionnaires”

1. [146]

   The primary judge treated this ground as referring to the questionnaires completed by both Dr Grace and Dr Wong (see [105]-[107] and [112] above) as well as to the consultation notes of Dr Wong of 9 May 2011 (see [114] above). The latter were erroneously referred to in the statement of the ground (see [100] above) as a “questionnaire”.

2. [147]

   His Honour did not place significance on Dr Grace’s acceptance in his questionnaire of Dr George’s opinion because, as he explained in relation to Ground 2, Dr George’s opinion was “[equivocal] at best” (at [147]). His Honour did not consider that what Dr Grace went on to say “resolves the equivocation” (at [148], and see [105]-[107] above). Therefore his Honour held that the respondent did not make out Ground 3 with respect to Dr Grace (see [151] quoted in [148] below).

3. [148]

   In relation to Dr Wong’s questionnaire response of 11 March 2011 (see [112] above), his Honour stated:

4. [149]

   His Honour then turned to Dr Wong’s consultation notes of 9 May 2011 in which Dr Wong recorded that the respondent “will not be able to return to policing, but I cannot say she will not be able to work in any role in the future” (see [114] above). His Honour considered that this did not support either the view that the respondent was “unlikely ever” to engage in relevant work or the view that she had “a real chance” of engaging in such work in the future. His Honour continued:

Ground 7 – failure to take into account the respondent’s solicitors’ letter of 22 April 2015 and provide reasons for rejecting its contentions

1. [150]

   In relation to the second limb of this ground, the primary judge said at [170] that MetLife had accepted that it was “under an obligation to provide adequate reasons” in explaining why the submissions contained in the respondent’s solicitors’ letter of 22 April 2015 had been rejected. On appeal, the appellant denied that it had made such a concession and the respondent did not contend that the appellant was subject to such a duty – see [139] above. As I consider that the primary judge’s reasoning otherwise discloses error in the manner referred to below in upholding this ground, it is unnecessary to address what his Honour said concerning a duty to give reasons.

2. [151]

   In addressing this ground, the primary judge recorded that the parties agreed that the appellant’s second procedural fairness letter (with its attached Information Summary) should be read with the decision letter of 24 July 2015 as the appellant’s reasons for its decision, although his Honour doubted the appropriateness of that agreement (at [172]-[173]).

3. [152]

   Proceeding on the agreed basis, his Honour found that the appellant had breached its contractual obligation to provide “some adequate reasoning” by not satisfactorily identifying why it rejected the respondent’s submissions in her solicitors’ letter of 22 April 2015 ([169], [178]). His Honour’s findings concerning a lack of proper response to that letter were confined to what it said, or did not say, about the medical opinions of Dr Wilkins, Dr Smith, Dr Oldtree Clark and Dr Grace. Of these, Dr Oldtree Clark’s opinion can be disregarded in this context because the primary judge found that the appellant’s communicated reasoning concerning it was adequate (at [199]). His Honour addressed the opinions of the other three doctors as follows.

4. [153]

   The primary judge said that the appellant’s comments in its Information Summary about Dr Wilkins’ report of 19 June 2014 (see [96], [130] above) constituted a “not unreasonable assessment that Dr Wilkins’ prognosis in this report is ‘somewhat ambiguous’” (at [181]). The comments in the Information Summary were as follows:

5. [154]

   His Honour then referred to “Dr Wilkins’ intermediate and significant report of 4 August 2014” (at [184]). The respondent however conceded on appeal that this was an error because there was no such report. The error no doubt resulted from the respondent’s solicitors’ letter of 22 April 2015 erroneously referring to such report. The quotations in the letter from that non-existent report in fact came from Dr Wilkins’ report of 19 June 2014 (as to which, see [130] above).

6. [155]

   His Honour considered that a sentence he quoted (in fact from the 19 June 2014 and not a 4 August 2014 report) stating that “[i]t is not possible to outline what employment activities [the respondent] would be able to perform” was “well capable of founding an inference that [the respondent’s] future employment is only a ‘remote or speculative’ possibility” (at [184]). His Honour continued:

7. [156]

   On appeal, the respondent conceded that his Honour made a mistake in stating that the report in which this sentence was contained had not been addressed. It had been addressed (see [154] above). Although the appellant did not quote in the Information Summary the particular sentence to which his Honour referred, the parts it did quote were not contended on appeal to be any less favourable to the respondent (see for instance [84] quoted in [130] above).

8. [157]

   His Honour did not find any breach arising out of Dr Wilkins’ report of 3 October 2014.

9. [158]

   The primary judge noted that neither the text of the second procedural fairness letter nor the appellant’s decision letter of 24 July 2015 referred to Dr Smith’s opinions (as to which, see [132]-[134] above). The only reference to them was in the Information Summary attached to the former.

10. [159]

    Having quoted Dr Smith’s opinions expressed in his report of 12 July 2013, the Information Summary noted that the report had been provided for the purposes of a "Work Injury Damages” claim, had been prepared over two years after the date for assessment of the respondent’s claim on the appellant and did not consider either of the vocational assessments that had been obtained. His Honour continued:

11. [160]

    His Honour noted that the Information Summary commented in relation to Dr Smith’s report of 9 August 2013 that Dr Smith appeared not to have been given the two vocational assessments, nor the report of Dr George of 8 March 2011. His Honour said however that none of these was likely to assist Dr Smith, for reasons already given (see [144], [159] above).

12. [161]

    His Honour continued:

13. [162]

    The appellant’s Information Summary quoted the second and third paragraphs quoted in [135] above but, as his Honour indicated, did not quote the first paragraph. All three paragraphs were quoted in the respondent’s solicitors’ letter of 22 April 2015.

14. [163]

    The primary judge noted that the respondent’s solicitors’ letter of 22 April 2015 quoted the following from Dr Grace’s report of 24 June 2011:

15. [164]

    His Honour then stated that Dr Grace’s report of 24 June 2011 was not referred to anywhere in the appellant’s Information Summary and continued:

16. [165]

    That report, and the part of it that his Honour quoted, was however in fact referred to in the appellant’s Information Summary, with the comment:

17. [166]

    His Honour summarised the appellant’s response, or lack of response, in relation to the medical opinions referred to above, stating (at [205]):

18. [167]

    His Honour said also that in the appellant’s letters and its Information Summary it appeared to treat medical opinions expressed nearer to the date for assessment as of more weight than those expressed later. His Honour continued (at [207]):

19. [168]

    His Honour then referred to the vocational assessments of Ms Zaki and Ms Buck and to the appellant’s comment in its decision letter of 24 July 2015 that the assessments show that “several vocational options have been identified as potentially suitable for the member to pursue given her education, training and experience”. His Honour continued:

Conclusion

1. [169]

   For these reasons, the primary judge found that the appellant’s decision of 24 July 2015 was not made in accordance with its contractual duties and should therefore be declared void and be set aside.

CONSIDERATION OF THE APPEAL

1. [170]

   As noted in [100] above, the primary judge found on three bases (being Grounds 2, 3 and 7 of the respondent’s challenge to the appellant’s decision) that the appellant breached its obligation to act in good faith and reasonably in forming its opinion. On appeal, the appellant challenged his Honour’s upholding of each of those grounds and the respondent did not rely on any Notice of Contention to seek to uphold his Honour’s decision on any additional basis. In these circumstances, it is convenient to address the appeal by considering whether his Honour was correct to uphold any or all of those three grounds.

Ground 2 – isolation of one sentence from Dr George’s 8 March 2011 report

1. [171]

   The primary judge regarded Dr George’s opinion that “at some time in the future, [the respondent] may be able to return to some form of work with a different employer” (see [103] above) as equivocal in that it was “consistent with both an ‘expression of hope’ and ‘a real chance’ [of later employment] and [was] simply an unhelpful basis for reasoning to either conclusion” (see [143] above). He concluded therefore that the appellant “should not have relied on this sentence, as it did, but should have gone back to Dr George and asked him what he really meant, before relying on the sentence” (see Judgment [136] quoted in [144] above).

2. [172]

   This opinion of Dr George was referred to in the appellant’s decision letter of 24 July 2015, along with other medical opinions, following the statement in the letter that “[a]s outlined in our procedural fairness letter dated 23 June 2015, there is medical opinion prior to and around the date for assessment of the member’s claim (9 March 2011) that she was likely to be able to return to work at some point in the future, external to the New South Wales Police Force” (see [97] above). That statement did not state, at least expressly, that all, or indeed any, of the medical opinions referred to thereunder were properly so characterised. Instead, the statement referred back to the procedural fairness letter.

3. [173]

   The medical opinions then referred to, including that of Dr George, were followed by the conclusion expressed in respect of each policy that the appellant had “not formed” the required opinion as to permanent incapacity. None of the opinions referred to needed on its own to establish the basis for the appellant’s non-formation of that opinion. Rather, reading the letter logically and reasonably, the descriptions of the opinions were given to provide some, but not necessarily conclusive, support for that conclusion.

4. [174]

   As the issue to be addressed by the appellant was whether it was, acting reasonably and fairly, positively satisfied of the respondent’s permanent disability, the opinion of Dr George, who had assessed the respondent at about the date for assessment, that the respondent “at some time in the future… may be able to return to some form of work with a different employer” was supportive of the appellant’s non-satisfaction. Particularly is that so when Dr George expressed his opinion in response to a question that specifically asked him about the policy issue of permanent incapacity. Because Dr George was apparently not satisfied of the relevant matter, the appellant, if attention is at this stage confined only to Dr George’s opinion, was similarly entitled not to be so satisfied.

5. [175]

   In these circumstances, I respectfully disagree with the primary judge’s view that the appellant “should not have relied on this sentence, as it did, but should have gone back to Dr George and asked him what he really meant”. Dr George’s opinion was relevant to the question that the appellant was considering. I therefore conclude that his Honour erred in upholding Ground 2.

Ground 3 – misinterpretation of Dr Wong’s “questionnaires”

1. [176]

   As noted above, the primary judge treated this ground as referring to the opinions of both Drs Wong and Grace. However as his Honour did not find fault with respect to the appellant’s reasoning concerning Dr Grace (see [147] above), it is sufficient for present purposes to only consider Dr Wong’s opinions.

2. [177]

   The appellant’s decision letter of 24 July 2015 (see [97] above) relevantly relied on Dr Wong’s following opinions:

   1. (1)

      In her questionnaire of 11 March 2011 Dr Wong agreed with Dr George’s opinion, as the decision letter described it, “that at some point in the future the member may be able to return to some form of work with a different employer”.

   2. (2)

      In the same questionnaire (though not quoted in the decision letter), Dr Wong gave a negative answer to the question “whether you believe that there is any capacity for Ms Sandstrom to return to work in any organisation (in the foreseeable future)?” (see [112] above).

   3. (3)

      In her consultation notes of 9 May 2011, Dr Wong recorded that she told the respondent’s financial adviser that “I cannot say she will not be able to return to work in any role in the future”. The appellant underlined the words “cannot say” in the decision letter.

   4. (4)

      Dr Wong indicated in response to a questionnaire of 5 June 2012 that the respondent would be fit to work as a case manager, a position to which reference was made in a vocational assessment.

3. [178]

   As indicated in [111]-[129] above, Dr Wong expressed the following further opinions recorded in reports which were, with the exception of that of 23 July 2012, before the appellant when it made its decision:

4. [179]

   The primary judge took the view that Opinion (2) above was “evidence directly supporting a conclusion” that the respondent was “unlikely ever” to obtain relevant employment (see Judgment [149] quoted in [148] above). This conclusion did not in my view however have regard to the fact that Dr Wong’s opinion was expressed to relate to the “foreseeable future”. In those circumstances it was not “evidence directly supporting” the view that the respondent satisfied the TPD definition.

5. [180]

   In the Judgment at [150] quoted in [148] above, the primary judge sought to reconcile Opinion (2) with Dr Wong’s agreement in Opinion (1) with the comments of Dr George. His Honour did so by stating that Dr Wong must have put Dr George’s comments aside on the basis that they were neutral, leaving Dr Wong’s Opinion (2) able to be read according to its terms. With respect, I see the two opinions as qualified in a similar fashion. Opinion (2) was limited to the “foreseeable future” whilst Opinion (1) said only that “at some time in the future” (that is, perhaps beyond the “foreseeable future”) the respondent may be able to “return to some form of work with a different employer”.

6. [181]

   His Honour then concluded that because in the appellant’s decision letter it treated opinion (1) “as evidence supporting its conclusion”, it misinterpreted Dr Wong’s responses as “inconsistent with the ‘unlikely ever’ component of the TPD definition” (Judgment at [151] quoted at [148] above). As I have however explained, both of these two opinions provide some support for the appellant’s lack of satisfaction and were therefore not inappropriately referred to in its decision letter. Moreover, the decision letter referred to Dr Wong’s consultation notes of 9 May 2011 (Opinion (3) above). The statement in them that she could not say whether the respondent would be able to return to work in any role in the future was supportive of the appellant’s lack of satisfaction, particularly when the view was expressed to the respondent’s financial advisor in circumstances where a more favourable view would clearly have assisted Dr Wong’s patient’s “superannuation claim”. This circumstance indicates that Dr Wong would be unlikely not to express a more favourable view if Dr Wong thought that one was available. The statement in the consultation notes was not, as his Honour said, “essentially equivocal”. In circumstances where the appellant had to decide whether it was positively satisfied of the relevant disability, it provided some clear guidance.

7. [182]

   In addition, what I consider to be the clarity of the view expressed in the consultation notes is supportive of the interpretation I have adopted in respect of Opinions (1) and (2).

8. [183]

   The absence of error on the part of the appellant in the respect found by the primary judge is supported by reference to Opinions (5) to (11) referred to in [178] above (although I leave Opinion (10) out of account because it was not put before the appellant). The Opinions were each referred to in the appellant’s Information Summary (with the exception of the 8 April 2011 and 27 June 2011 reports, which were listed in the “Index to Documents” attached to the second procedural fairness letter and in the first procedural fairness letter respectively) and therefore, on the basis upon which the case was approached below (as to which see [151] above), the references to them there are to be regarded as having being incorporated by the appellant in its reasons for lacking the relevant satisfaction. Read as a whole those further Opinions confirm that Dr Wong was, throughout, of the view that the respondent would not be able to return to any police or similar type of employment but was unable to say that she would not be able to take up some other kind of employment in the future. Dr Wong’s certification in Opinion (6), which is in similar terms to the policy provision, is to be read, in its reference to employment for which the respondent is “reasonably qualified because of her education, training or experience”, as a reference to “education, training or experience” in police work. This is clear from the context in which the view is expressed in the letter of 27 June 2011 and is confirmed by what Dr Wong said in Opinions (9) and (11) (see [116] and [178] above).

9. [184]

   For these reasons, the primary judge erred in upholding Ground 3 of the respondent’s challenge to the appellant’s decision.

Ground 7 – failure to take into account the respondent’s solicitors’ letter of 22 April 2015 and provide reasons for rejecting its contentions

1. [185]

   As indicated in [152] above, the primary judge’s findings concerning the alleged absence of a proper response to the respondent’s solicitors’ letter of 22 April 2015 related only to the medical opinions of Drs Wilkins, Smith, Oldtree Clark and Grace, of which Dr Oldtree Clark’s opinion was found to have been adequately dealt with and can therefore be disregarded. His Honour’s upholding of the ground related therefore only to the opinions of Drs Wilkins, Smith and Grace, to which I now turn.

2. [186]

   The primary judge found that the appellant failed to deal with a report of Dr Wilkins of 4 August 2014 which contained a view that “[i]t is not possible to outline what employment activities [the respondent] would be able to perform” (see [155] above). This sentence was however not in fact in a report of 4 August 2014. Instead, it appeared in Dr Wilkins’ report of 19 June 2014 with which the appellant did deal with in its Information Summary attached to the second procedural fairness letter. The primary judge found that what the appellant said in the Information Summary about that report constituted a “not unreasonable assessment that Dr Wilkins’ prognosis in this report is ‘somewhat ambiguous’” (see [153] above). The sentence upon which his Honour focused was not quoted in the Information Summary. It did not however need to be addressed in the Information Summary separately from Dr Wilkin’s other opinions in his report of 19 June 2014 as it did not favour the respondent’s position. If anything, it was supportive of the appellant’s lack of relevant satisfaction. I do not with respect agree with the primary judge’s observation that the sentence was “well capable of founding an inference that [the respondent’s] future employment is only a ‘remote or speculative’ possibility” (see [155] above).

3. [187]

   Contrary to his Honour’s finding, there was therefore no breach by the appellant relating to Dr Wilkins’ opinions. The respondent accepted that this was so because prior to the hearing in this Court, she notified the Court by email that she would not argue against the relevant grounds of appeal (numbered 12 and 13).

4. [188]

   The primary judge was critical of three aspects of the way in which the appellant dealt with the opinions of Dr Smith.

5. [189]

   First, his Honour was critical of the appellant’s comment that Dr Smith’s report of 12 July 2013 did not deal with either of the vocational assessments that had been obtained (see [159] above). His Honour said that those assessments were in fact irrelevant to Dr Smith’s opinion because they “[did] not deal with Ms Sandstrom’s precise medically established restrictions” and also said, or at least inferred, that the assessments only dealt with the respondent’s pre-injury working capacity (Judgment [191] quoted in [159] above).

6. [190]

   I do not with respect agree with these observations. One of the vocational assessments, by Ms Zoe Buck of Insite Injury Management Group, recorded that the opinions of Dr Grace in a report of 24 January 2012 and Dr George in his report of 8 March 2011 had been used in the making of the assessment. As well, Ms Buck interviewed the respondent (post-injury, on 18 May 2012) and made an assessment of her from an employment point of view. Ms Buck’s report was thus clearly premised on assumptions as to the respondent’s then medical condition derived from expert opinions and on her own presumably expert vocational assessment of the respondent’s post-injury capabilities based on her interview. It was not, as the primary judge suggested, related to the respondent’s pre-injury capabilities.

7. [191]

   It was appropriate for Ms Buck to proceed on assumptions as to the respondent’s medical condition as plainly she did not have the medical expertise to assess them herself. Her vocational assessment, as with any other expert opinion, would of course only be as good as the assumptions on which it was based.

8. [192]

   The second vocational assessment, that of Ms Mira Zaki of ECA dated 4 July 2012, was, on the other hand, expressly stated not to have involved “a consideration of the [respondent’s] current psychological functional capacity or any psychological restrictions that the [respondent] has been recommended to observe when working”.

9. [193]

   The primary judge said that the fact that Dr Smith did not have the vocational assessments was “not a proper basis for dismissing Dr Smith’s opinion” (Judgment at [191] referred to in [159] above). However both assessments would have been relevant matters for Dr Smith to consider and the appellant’s reference to them in its Information Summary was not therefore irrational. Ms Buck’s report identified types of jobs which the respondent might be able to perform notwithstanding her psychological injuries and Ms Zaki’s report was relevant to the “reasonably qualified by reason of education, training or experience” part of the policy condition: it identified pre-psychological injury jobs (other than policing) for which the respondent was qualified.

10. [194]

    Moreover, it was not accurate to say that the appellant “dismissed” Dr Smith’s report. Its Information Summary showed that it considered it and expressed some, not irrational, views about it. Despite being invited to do so, the respondent did not respond to this or any other part of the Information Summary.

11. [195]

    Dr Smith’s views in his report of 12 July 2013 were in any event far from decisive on the policy issue. The highest they rose was the view that the respondent “would have very limited capacity to obtain work in the open labour market” (see [133] above). The appellant did not list this report in its decision letter as supporting its lack of satisfaction but showed by its Information Summary that it had taken it into account.

12. [196]

    Secondly, the primary judge was critical of the Information Summary’s treatment of Dr Smith’s report of 9 August 2013 because the Summary commented that Dr Smith appeared not to have been given the two vocational assessments, nor the report of Dr George of 8 March 2011. The vocational assessments were, for the reasons I have given, of at least arguable relevance to the formation of Dr Smith’s opinions. Likewise it was not an irrational comment to note that Dr Smith had not seen Dr George’s report. Dr George’s report of 8 March 2011 was the closest of these reports to the date for assessment of 9 March 2011 and therefore arguably of the most relevance (see [205] below).

13. [197]

    Thirdly, his Honour criticised the Information Summary for not extracting Dr Smith’s “strongest opinion” which was that the respondent was “totally unemployable” (see [161] above).

14. [198]

    This was not however Dr Smith’s strongest opinion expressed in that report. In the report he also expressed the view that the respondent satisfied “the formal definition of total and permanent disability” and “will not be able to realistically obtain work on the open labour market” (see [135] above). These further opinions were quoted and addressed in the Information Summary. His Honour was therefore in error in stating that the Information Summary did not extract Dr Smith’s “strongest opinion” and did not therefore deal with the “main thrust” of that report. The omitted opinion (that the respondent was “totally unemployable”) was of much less significance to the policy question than the opinions that the appellant did address because, unlike the others, it at least arguably related only to the present position of the respondent, and not to the permanency of her condition. Ground 7 should therefore be rejected insofar as it relates to Dr Smith’s opinions – they were taken into account and the appellant did provide its reasons for not acting on them. The sufficiency of those reasons is not an issue on the appeal. It is sufficient to conclude that the appellant addressed the relevant material and expressed not irrational reasons, not for disregarding it (because there is no reason to consider that the appellant did that), but for not treating it as decisive in favour of the respondent’s claim for indemnity.

15. [199]

    The primary judge stated that Dr Grace’s report of 24 June 2011 (which said that it was unlikely that the respondent could “ever be gainfully employed in the capacity for which she is reasonably qualified because of her education, training or experience” – see [108] above) was not referred to in the Information Summary but was “so directly relevant to and contradictory of MetLife’s conclusion” that it needed to be dealt with, with reasons being given for it not being acted upon (see [164] above).

16. [200]

    The appellant did however address the report in the Information Summary and, in the manner referred to above (see [165]), did explain why Dr Grace’s opinion did not require the appellant to be relevantly satisfied. The appellant accordingly established error by the primary judge in relation to Dr Grace’s report.

17. [201]

    The following observations in relation to Dr Grace’s opinions which are summarised in [104]-[110] above demonstrate that they did require the appellant to be relevantly satisfied and in fact contradicted the respondent’s claim for indemnity. In his reports of 30 January 2011, 10 December 2011 and 14 August 2012 Dr Grace opined that the respondent would be capable of returning to non-police work. He indicated this also in the portion of his 22 March 2011 report quoted in [107] above.

18. [202]

    The certification that he gave in his letter of 24 June 2011, in similar terms to the policy provision, was, from its context in the letter, clearly based upon the assumption that the “education, training or experience” referred to in the certification was the respondent’s education, training and experience as a police officer. This interpretation is confirmed by the other opinions of Dr Grace to which I have just referred. It is also confirmed by the somewhat narrower language used in Dr Grace’s certification as compared to the policy provision (compare [108] above to [83] above and see TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [66]).

19. [203]

    As general matters, the primary judge made two further points.

20. [204]

    First, he was critical of the appellant appearing to attach greater importance to medical opinions expressed near to the date for assessment as distinct from those expressed later. This approach was evident, for example, in the appellant’s comment in its Information Summary that Dr Smith’s report of 12 July 2013 was prepared over two years after the date for assessment (after he had examined the respondent for the first time). His Honour thought that this approach was “apt to cause probative medical evidence well after the assessment date to be artificially displaced” (Judgment at [207] quoted in [167] above).

21. [205]

    The appellant’s approach was not however irrational or unreasonable. The date the opinion was expressed might not have been of crucial significance but it was at least a matter the appellant was entitled to take into account. Opinions expressed after the date to which they relate are utilised in “many fields of law” (HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [39]; and see TAL Life Ltd v Shuetrim at [150]-[151], cited by the primary judge at [66]).

22. [206]

    There is however a qualification to their relevance that the subsequent opinion may be of limited weight for reasons as follows, expressed in HTW at [40] in the context of valuation law:

23. [207]

    The advantage that an opinion expressed close to the date in question has is thus that it is unnecessary to attempt to identify matters occurring after that date which might reduce the opinion’s relevance. For a later opinion it might for example, consistently with HTW, be necessary to consider whether any supervening and unforeseeable illnesses or marked changes have occurred since the date for assessment.

24. [208]

    Secondly, the primary judge returned to the vocational assessments and criticised the appellant’s reliance on them (see Judgment at [209] quoted in [168] above). I have already indicated why I consider his Honour’s observations on this topic to be erroneous (see [190]-[193] above).

25. [209]

    For these reasons, the appellant has established that his Honour erred in upholding Ground 7.

ORDERS

1. [210]

   As the primary judge erroneously upheld the three bases of challenge to the appellant’s decision of 24 July 2015, to which I have referred, the appeal should be allowed.

2. [211]

   I propose the following orders:

   1. (1)

      Allow the appeal.

   2. (2)

      Set aside orders (1) to (4) made on 9 March 2020 and also any subsequently made costs orders.

   3. (3)

      Judgment for the appellant in the respondent’s proceedings against it.

   4. (4)

      Order the respondent to pay the appellant’s costs at first instance and on appeal.

   5. (5)

      Grant the respondent a certificate under the Suitors’ Fund Act 1951 (NSW), if qualified.

3. [212]

   MEAGHER JA: Each of the three grounds on which the primary judge found that MetLife had breached its obligation to act fairly and reasonably in considering the question identified immediately below is challenged on appeal. That question was whether it was satisfied that Ms Sandstrom fell within the definition of total and permanent disablement (TPD), and specifically whether her incapacity was such that she was unlikely ever to engage in any profession, trade or occupation for which she was reasonably qualified by reason of her education, training or experience. In that context there was no question as to her ever working again as a police officer, or in some similar occupation.

4. [213]

   I agree with Basten JA that the appeal should be dismissed. I do so for the reasons his Honour gives and add the following additional observations in relation to grounds 2 and 3. I also deal with Ms Sandstrom’s cross-appeal directed to the primary judge’s refusal to make a special costs order following MetLife’s rejection of her Calderbank offer. Accordingly, I agree with the orders proposed by Basten JA.

5. [214]

   As to grounds 2 and 3: It was for Ms Sandstrom to provide evidence in support of her claim, and in engaging with that evidence and determining whether it was so satisfied MetLife was required to act reasonably and fairly. After all, its liability to pay a total and permanent disablement benefit depended on its being satisfied that Ms Sandstrom’s incapacity answered the relevant description.

6. [215]

   MetLife’s rejection letter dated 24 July 2015 asserted that there was “medical opinion prior to and around the date for assessment of [Ms Sandstrom’s] claim (9 March 2011) that she was likely to be able to return to work at some point in the future”, although not for the police force. Whether evidentiary material answering that description provided support for Ms Sandstrom’s claim, left MetLife unable to be satisfied that she was within the definition or enabled it to be positively (and unnecessarily) satisfied that she did not, depended among other things on whether that material addressed Ms Sandstrom’s likely capacity at some time to engage in employment for which her past education, training or experience had prepared her.

7. [216]

   Dr George, a consultant psychiatrist, undertook a psychiatric assessment of Ms Sandstrom at the request of the NSW Police Force, reporting by letter dated 8 March 2011. One of the questions he was asked to address was whether Ms Sandstrom’s disablement was such that she was “unlikely ever to engage in any gainful profession, trade or occupation”, not the question which MetLife was required to address. Although an affirmative answer to that question would provide support for Ms Sandstrom’s claim, a negative answer would not exclude it. The NSW Police Force then asked questions of Ms Sandstrom’s treating psychiatrist, Dr Grace, and of Dr Wong, concerning Dr George’s assessment. MetLife’s use of and reliance on a part of that report is the subject of ground 2 and its use of and reliance on Dr Grace and Dr Wong’s responses to the questions asked of them is the principal subject of ground 3.

8. [217]

   Following MetLife’s letter dated 26 February 2015 to Ms Sandstrom inviting submissions and further material in support of her claim, her solicitors responded on 22 April 2015. They in turn referred to Dr George’s report of 8 March 2011. There is no reference in that letter, or in MetLife’s earlier letter, to the responding letters of Dr Grace and Dr Wong, which are first referred to in MetLife’s letter of 23 June 2015 as being part of a body of “contemporaneous medical opinion at and around the date of assessment which is inconsistent with a conclusion” that Ms Sandstrom was “unlikely ever” to return to some form of work “within her education, training or experience”.

9. [218]

   That evidence also included Dr George’s statement that he believed that at some time in the future Ms Sandstrom “may be able to return to some form of work with a different employer”. In the face of the ambiguities in that statement and the fact that it was not responding to the question which MetLife was required to address, MetLife acted unreasonably in relying on it, in the absence of further inquiry or clarification, as one of the “contemporaneous” medical opinions described above.

10. [219]

    The first part of ground 3 is directed to MetLife’s reliance on Dr Wong’s affirmative answer to question 1 in the questionnaire. That answer is said to include her agreement with Dr George’s opinion of uncertain content that at some point in the future Ms Sandstrom may be able to return to some form of work. In circumstances where Dr Wong had answered question 3 in the negative (she did not believe that there was any capacity for Ms Sandstrom to return to work in the foreseeable future), MetLife’s reliance on her affirmative answer to question 1 as another of the “contemporaneous” opinions was also unreasonable.

11. [220]

    The second part of ground 3 is directed to Dr Grace’s answers to the same questionnaire, which were also said to have supported Dr George’s uncertain opinion. Again, MetLife treated Dr Grace’s affirmative answer to question 3 as being inconsistent with a conclusion that Ms Sandstrom would be unlikely ever to return to some form of work within her education, training or experience. Its doing so without addressing or mentioning his contrary opinion given on 24 June 2011, which was directed to the question which MetLife was required to consider, did not have due regard to the interests of the insured and her contractual right to have that question considered fairly and reasonably.

12. [221]

    As to the cross-appeal: By her cross-appeal filed by consent on 14 July 2020, Ms Sandstrom challenges the primary judge’s refusal to make a special costs order in the face of the appellant’s asserted unreasonable conduct in failing to accept her Calderbank offer dated 20 March 2018 before it expired on 28 March. That offer was to settle her claim for $300,000 inclusive of interest and costs, together with the discharge of all prior costs orders. At the time that offer was made the proceedings had been on foot since 7 October 2015 and the hearing was due to commence on 16 April 2018.

13. [222]

    As Ms Sandstrom’s cross-appeal is “as to costs only”, leave to appeal is required by Supreme Court Act 1970 (NSW), s 101(2)(c) (cf Housman v Camuglia [2021] NSWCA 106). Leave is not opposed and should be granted.

14. [223]

    The primary judge’s reasons first deal with the validity of MetLife’s decision of 24 July 2015 declining the claim. Having answered that question in favour of Ms Sandstrom, they then consider whether she satisfied the TPD definition. Whilst the validity of MetLife’s decision was to be determined by reference to the evidentiary material before MetLife, the second question required the court to determine for itself whether or not she satisfied the definition at the date for assessment, albeit with the benefit of further medical and other expert evidence, as well as lay evidence.

15. [224]

    Whether the Calderbank offer was engaged depended on Ms Sandstrom succeeding in both stages of the inquiry and achieving a better outcome than the offer made. That occurred, Ms Sandstrom recovering a total judgment sum of $752,818. The issue for the primary judge was whether it was unreasonable for MetLife to reject Ms Sandstrom’s offer, which it was accepted contained a genuine element of compromise. That offer was made following a mediation, also on 20 March 2018. The day after the time for its acceptance expired, Ms Sandstrom served a further statement from herself and a statement (the first) from her husband, Mr Abbott. All of this evidence was relevant to the second of the questions to be addressed.

16. [225]

    Ms Sandstrom’s statement sought to explain her social media and other records considered by one of MetLife’s experts, Dr Kneebone, to reveal activities and interactions inconsistent with her self-reported symptoms and disabilities. Mr Abbott gave detailed evidence about Ms Sandstrom’s condition and its impacts on their lives from day to day. The primary judge considered that evidence, which described her behaviour over a long period of time and in various circumstances, both to support Ms Sandstrom’s self-reporting evidence and to provide insights as to her “employability” (Judgment [488]-[491]).

17. [226]

    In addition, at the hearing Dr Wilkins gave oral evidence as to the unlikelihood of Ms Sandstrom’s condition being improved by particular treatments or of its otherwise improving to the point where she might pursue “a useful ordinary life”.

18. [227]

    In determining whether MetLife’s rejection of the offer was unreasonable, the primary judge focused on its prospects of success on the second question by reference to the evidence available at that time. In doing so he did not consider the extent of the compromise involved in Ms Sandstrom’s offer. That offer was to accept less than half of the principal amount to which she would have been entitled and was inclusive of costs.

19. [228]

    His Honour reasoned as follows (Sandstrom v FSS Trustee Corporation & Anor (No 2) [2020] NSWSC 581 at [19]-[22]):

20. [229]

    Three grounds of appeal are relied on. By the first it is said that the primary judge erred in applying a “retrospective analysis” to the question whether or not MetLife’s rejection of the offer was unreasonable. Reference to his Honour’s reasoning shows that he did consider the position from MetLife’s perspective at the time the offer was made, and on the basis that it did not have the evidence subsequently given. In his Honour’s assessment that material was substantially relevant both to the acceptance of Ms Sandstrom’s evidence and to whether she was unlikely ever to be able to engage in work for which she was reasonably qualified, in a case in which that assessment was to be made looking forward over a period of 35 years. His Honour reasoned that as the evidence was material to his assessment, it would equally have been “at the forefront of consideration” by MetLife had it been available at the time the offer was made. In the absence of that material his Honour considered, albeit implicitly, that the material before MetLife was not such as to suggest that its prospects of success were poor or other than reasonable.

21. [230]

    By the second ground, it is said that his Honour limited his inquiry as to the unreasonableness of MetLife’s rejection of the offer to two categories of evidence, as opposed to all of the evidence that was available. This ground does not accurately or fully describe his Honour’s analysis, which included that the material available at the time of the offer did not establish (because its prospects of success were insufficiently strong) that MetLife’s rejection was unreasonable.

22. [231]

    The third ground is that in determining whether MetLife acted reasonably, the primary judge took into account an irrelevant consideration, namely the evidence of Dr Wilkins. In essence it is said that Dr Wilkins’ ultimate opinion as to Ms Sandstrom being totally incapacitated did not change and had been expressed in his “numerous reports and notes” served by the time of the mediation. It is then contended that the evidence he gave at trial did no more than support that ultimate opinion. This argument does not engage with the primary judge’s assessment that Dr Wilkins’ further evidence was persuasive in support of the conclusion that Ms Sandstrom satisfied the TPD definition. Accordingly, in his Honour’s view it was material to an assessment of MetLife’s prospects of success, as was the absence of evidence to that effect at the time of the offer.

23. [232]

    The primary judge did not err in the exercise of his costs discretion. Accordingly, the cross-appeal should be dismissed with costs.