In a judgment handed down yesterday, the court upheld a previous decision in the case of Commonwealth Financial Planning Ltd v Couper, concurring that a former Commonwealth Financial Planning adviser had engaged in “misleading and deceptive conduct” and ordering the Commonwealth Bank of Australia-owned financial planning business to pay legal costs.
According to court documents, the dispute arose when a CommInsure life policy was taken out by Noel Stevens upon advice from Andrew Galloway, an employee and authorised representative of Commonwealth FP.
Mr Stevens was later diagnosed with pancreatic cancer and the CBA declined to pay out on his policy because his application, completed by Mr Galloway, had not accurately disclosed his medical history, particularly alcohol use.
The former client won an initial negligence claim against Commonwealth FP – a decision that has now been upheld by a three-judge bench of the appellate court.
“The judgement should stand and the appeal should be dismissed because the written advice given by Mr Galloway was misleading and deceptive, even if fully explained orally, and it caused Mr Stevens to cancel his Westpac life policy,” the decision said.
The court found that Mr Galloway ought to have advised Mr Stevens that there was a risk that certain non-disclosures would void his CommInsure policy but would not have voided his Westpac policy.
Section 29(3) of the Insurance Contracts Review Act allows an insurer to void a policy for an innocent non-disclosure within three years of taking out the policy, the court explained. But Mr Stevens faced no such risk with his Westpac policy because he had held it for over three years, the judgment explains.
Mr Galloway gave evidence at the trial that he was not aware of this provision and his employers had not brought it to his attention.
“The contravention caused Mr Stevens to cancel his Westpac life policy, thereby causing the loss in respect of which the primary judge found he was entitled to recover damages,” the court concluded.
The judgment went on to suggest the financial planner had not acted in the best interests of his client and that vested interests may have come into play.
“The unequivocal advice that the CommInsure policy was cheaper on a like for like, dollar for dollar, basis was incomplete,” the court said. “In the circumstances in which Mr Galloway found himself, it is difficult to see how he placed Mr Stevens' interest ahead of his own and of his employer.”
