The broker applied for income protection from Asteron in 1992 and the policy was issued in 1994.

It provided a total disability benefit and partial disability benefit.

In July 2010, he claimed under the policy after being diagnosed with bone cancer. He said he had stopped all work at the end of 2009.

But in September 2014, Asteron received evidence that he was still working and payments being made to him were suspended. Asteron sought restitution of all payments previously made.

The broker issued court proceedings, seeking a declaration he was entitled to the sums withheld for him and he was not liable to make any repayment.

Law firm Duncan Cotterill said the court was hampered by a lack of medical evidence but was able to conclude that while he was sick as defined in the policy, he was not totally or partially disabled.

He was working fewer hours but his income had not suffered.

“The question thus became whether Asteron was entitled to cease payment and to demand restitution of sums paid up to the date when payment ceased. This effectively amounted to a fraudulent claim, and required the court to consider the correct legal framework for dealing with fraudulent claims.”

The judge held that the duty of utmost good faith was an implied term of the insurance contract and therefor the matter was to bet resolved under the Contract and Commercial Law Act (CCL Act).

“In this case, the court determined that [the broker] was in breach of the duty of utmost good faith by having made dishonest and false statements in relation to his claim. Those statements were included in progress reports made after the initial claim. The evidence was that in fact [the broker] had returned to work in 2010, working four hours per day, and remained active in his business.”

Under the CCL Act, Asteron was within its rights to cancel the policy if the breach was essential or one that substantially altered Asteron’s benefits and burdens.

The judge said it was appropriate to order repayment of all sums paid under the policy even if some elements of the claim were genuine.

The broker claimed he relied on those payments to purchase a holiday house, two luxury cars and holidays to the Pacific.

The court rejected the defence of change of position, and said that: “A person who has dishonestly induced another to make a payment cannot claim it is inequitable to require repayment because he or she has changed position in reliance on the fruits of the dishonesty.”