Supreme Court New South Wales Medium Neutral Citation: Cook v Sirius International Insurance Corporation Australian Branch [2020] NSWSC 1631 Hearing dates: 6, 7 and 11 August 2020 Decision date: 17 November 2020 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Dismiss the plaintiffs' claim with costs. Catchwords: INSURANCE — Claims — Fraud — Proof — Where fires started in hotel — Where claim denied based on allegation that plaintiff started the fires Legislation Cited: Conveyancing Act 1919 (NSW), s 12 Evidence Act 1995 (NSW), s 140 Insurance Contracts Act 1984 (Cth), ss 13, 54, 56 Cases Cited: Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 Belhaven & Stenton Peerage (1875) 1 App Cas 278 Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 94 ALJR 715 Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 Browne v Dunn (1893) 6 R 67 Chamberlain v R (No 2) (1984) 153 CLR 521; [1984] HCA 7 Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 HG v The Queen (1999) 197 CLR 414; [1999] HCA 2 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 McLennan v Insurance Australia Ltd [2014] NSWCA 300; (2014) 313 ALR 173 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 Oneflare Pty Ltd v Chernih [2017] NSWCA 195 Palmer v Dolman [2005] NSWCA 361 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 Sharma v Insurance Australia Ltd [2017] NSWCA 307 Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 Volonakis v Erceg [2019] NSWSC 1875 Category: Principal judgment Parties: Stephen William Cook (First Plaintiff) Christine Margaret Cook (Second Plaintiff) Sirius International Insurance Corporation Australian Branch (First Defendant) Certain Underwriters at Lloyd's of London Subscribing to Contract Number GH01613 (Second Defendant) Representation: Counsel: GM Watson SC with PG Cutler (Plaintiffs) J Sexton SC with J Lee (Defendants) Solicitors: Fitzpatrick Solicitors (Plaintiffs) Clyde & Co (Defendants) File Number(s): 2016/00240683 Publication restriction: Nil Judgment 1. HER HONOUR: Before me for hearing in August this year was an application by the plaintiffs (Mr and Mrs Cook) against the first and second defendants (Sirius International Insurance Corporation and certain underwriters at Lloyd's of London, to whom I will refer collectively as the Insurers), seeking a declaration that the Insurers were in breach of a policy of insurance in declining indemnity in respect of loss suffered by reason of two fires occasioning damage to certain hotel/motel premises in Cowra on 7 September 2010. It is not disputed that the fires were deliberately lit. 2. The Insurers have denied liability on the basis of their allegation that it was the first plaintiff, Mr Stephen Cook, who deliberately lit each fire. There is also a dispute as to the quantum of loss claimed in the event that liability is established. Background 1. The plaintiffs were at all material times the directors and shareholders of SW & CM Cook Investments Pty Ltd (Cook Investments), a company which has since been liquidated (the rights under the insurance policy with the Insurers having been assigned to the plaintiffs). Acquisition of the Hotel 1. In October 2007, Cook Investments acquired the Townhouse Hotel Motel in Kendal Street, Cowra (the Hotel), buying the land and business for around $3.5 million. Most of the purchase price was borrowed (from a financier, Resimac, then owned by Perpetual) and secured with personal guarantees from the plaintiffs over their family home at Glossodia. 2. Mr Cook (as will be recalled, the first plaintiff) is a former police officer, whose sole other income came from his police pension. His evidence is that it was intended that the business be operated as a family business and, indeed, for a time it appears that the plaintiffs' two children did work in the business. Layout of the Hotel 1. The Hotel was on a sloping block and had three split levels. The premises comprised: the hotel bar; a restaurant and dining room attached to the hotel; a function room upstairs (above the dining room and kitchen); an area containing a TAB facility and gaming machines; and a separate motel complex, with 35 separate rooms, adjacent to the Hotel itself (access to which was gained from outside the Hotel). The reception office was on the level of the street, near the front entry and near the stairwell going up to the function room. Through the office (and accessible only through the office) was a private room and bathroom where Mr Cook resided most nights as manager of the Hotel. 2. Three-quarters or so up the upper staircase was a window through which access to the Hotel by means of a roof or awning to the side of the Hotel would have been possible (had the window been open or had there been forced entry); and, below that roof or awning was a trellis beyond which was the motel accommodation. 3. I here note that the location of these rooms, and that window, is of some significance, as I will explain in due course. 4. There was also, below the level of the office (and accessible down a staircase near to the upper staircase), a maintenance room through a door that led out to the courtyard near various of the motel rooms (in particular motel room no 2). Insurance 1. Cook Investments relevantly held two insurance policies: first, a business interruption policy (with Calliden Insurance), on which policy it made a claim after the fires for business interruption which claim was accepted by Calliden shortly after the claim was made; and, second, a policy of insurance with the Insurers, which was entered into on 16 October 2009 (the Policy) and was current as at the time of the fires (and is the subject of the present claim). 2. The Policy was an indemnity policy insuring Cook Investments against, relevantly, property damage, in the following terms: If the Building or Stock or Contents as described in the Schedule or any part thereof, and which are at the Situation shown In the Schedule, are lost, destroyed or damaged as a result of any of the Events referred to then We will indemnify you for the value of the property at the time of the Event, or pay You the costs of reinstating the damaged property, or We may, at Our option repair, reinstate or replace that property or any part of that property. (Subject to the provisions of the Average Condition) 1. The Policy contained an exclusion clause entitled "General Exclusion (1)(i)", excluding cover for loss or damage directly or indirectly occasioned by a wilful act of the Insured. Financial position of the Hotel business in 2009 to 2010 1. It is not disputed that, prior to the fires, the Hotel business was generally unsuccessful from a financial perspective (or, at least, it was not as successful as the plaintiffs had hoped), although the plaintiffs say that there was no pressing demand which could not be met. 2. I will return to this in due course, but simply here note that the Insurers say that the financial position of the business was deteriorating at the relevant time and that this formed part of the motivation for Mr Cook to light the fires (in an attempt to extract himself from the business). Finance in respect of the Hotel 1. As noted (see at [4] above), the acquisition of the Hotel was, in part, financed by a five year interest only loan from Resimac of $2.61 million (see T 12.44-T 13.5), a subsidiary of Perpetual (see T 111.43). That loan was repayable in October 2012 (see T 13.29). 2. In early 2009, a representative of Resimac had indicated to Mr Cook that Resimac would not extend that loan when it expired in October 2012 (see T 28.35-40). Mr Cook then made enquiries with brokers and was told that, as a result of the then global financial crisis, "no one" was lending money for hotels and that it would be very difficult to refinance the Resimac loan (see T 29.10-25). 3. As also noted (see at [4] above), the plaintiffs had personally guaranteed that loan, and Mr Cook understood that Resimac could compel the sale of the family home at Glossodia to recover moneys owing to it if there was a shortfall on any sale of the Hotel (see T 12.14), though his evidence was to effect that he did not consider this likely. Family business 1. As also noted (see at [5] above), the plaintiffs had intended to run the Hotel as a family business when it was purchased in 2007. However, ultimately that did not eventuate. Mr Cook's daughter left the Hotel due to personal issues and Mr Cook's son left the Hotel due to marital issues (see Mr Cook's affidavit sworn on 10 June 2018 at [10] and [22](ii)). 2. Therefore, by 2010, Mr Cook was spending the majority of his time at the Hotel, while Mrs Cook remained at the family home in Glossodia (see Mr Cook's affidavit sworn on 10 June 2018 at [22](iii); and see also T 33.3-7). Mr Cook accepted in cross-examination that he found the 3.25 hour drive each way between Glossodia and the Hotel "difficult" (see T 33.8). 3. Mr Cook's evidence was that he was running the Hotel, working long hours and living away from his wife and, as a result, he decided to sell the business in around August 2009 (see Mr Cook's affidavit sworn on 10 June 2018 at [22](iv); and see also T 32.29-T 33.25). Mr Cook also gave evidence of a serious assault on him at the hotel in March 2008 (see Mr Cook's affidavit sworn on 10 June 2018 at [22](iv)). Listing of Hotel for sale 1. In August 2009, the Hotel was listed for sale through Gilchrist Business Brokers for a price of $3.5 million (see T 32.33; T 33.24). 2. In May 2010, the price of the Hotel was reduced to $3.3 million (see Mr Cook's affidavit sworn on 10 June 2018 at [23]; see also T 34.23). 3. As may therefore be observed, at the date of the fires, the Hotel had been on the market for almost 13 months. It appears that no offer had been received to purchase the Hotel in that time (see Mr Cook's affidavit sworn on 10 June 2018 at [23]), although in his oral evidence (which the Insurers say should be rejected), Mr Cook suggested to the contrary (see T 33.40-45). (It appears that Mr Cook may have been treating "qualified' enquiries as relevant on this issue but he also had a vague recollection of some offer having been made – as to which there is no corroborative evidence.) 4. I interpose here to note that the Insurers say that it is likely that, if an offer had actually been received to purchase the Hotel, then Mr Cook would have given evidence about that in his affidavit; and they maintain that it is telling that the plaintiffs did not, with the exception of one letter in September 2009 at the beginning of the sale process, give any evidence of information from or advice received from Gilchrist Business Brokers. 5. Furthermore, the Insurers say that the lack of an offer to purchase the Hotel is consistent with the evidence of Mr Ian Britton, the valuation expert called to give evidence by the plaintiffs, to the effect that the Hotel was not worth $3.5 million in 2009 (and nor was it was worth $3.3 million in 2010) (see T 101.25-35). Indeed, the Insurers say that, by 2009, the Hotel was probably worth less than half what Cook Investments had paid for it. The fires on 7 September 2010 1. Coming now to the events of 7 September 2010, at this time, Mr Cook was managing the Hotel business and generally residing in the manager's flat in the Hotel (as will be recalled, the private accommodation at the back of the office to which I have referred above) on the ground floor of the main premises, accessible through the hotel office near the stairs which went up to the function area (and down to the door leading out to the courtyard and maintenance room). 2. In the very early hours of the morning on 7 September 2010, two fires were lit on the premises: one was in a maintenance room on the lowest level; the other was in a function room on the highest of the three levels (almost directly above the fire in the maintenance room). 3. As noted above, it is not disputed that the fires were deliberately lit. No accelerant was found to have been used and no electrical fault was the cause of the fires. 4. At the time that the fires were lit, Mr Cook was physically on the premises and the Insurers point out that there is no direct evidence that anyone else was in the hotel part of the premises at that time (although there were a number of guests in the adjacent motel accommodation). 5. The hotel premises was fitted with a number of passive infrared sensors (PIR detectors) (which detect movement, not smoke) as well as smoke alarms. Relevantly, there were no PIR detectors upstairs in the function area and there were no PIR detectors in the upper part of the stairwell leading to the function room (see Mr Cook's affidavit sworn on 10 June 2018 at [27]-[28]). There was in evidence a printout of the security company (Custom Security Services, to which I will refer as CSS), recording the activation of the alarms on the premises in the early hours of 7 September 2010. I will return to that evidence in due course. 6. Mr Cook's evidence is that, on the evening of 6 September 2010 (a Monday), he was on duty working the hotel as manager and bar man; and there was a chef and cook also on the premises as well as a waitress working in the restaurant (see Mr Cook's affidavit sworn on 10 June 2018 at [25]). 7. Mr Cook explained that Monday nights were generally quiet and there were only ten motel guests staying that night (see Mr Cook's affidavit sworn on 10 June 2018 at [26]). 8. Mr Cook closed the hotel premises between 9pm and 9.30pm (see Mr Cook's affidavit sworn on 10 June 2018 at [26]). More specifically, in cross-examination, he said that he secured the doors around the premises and activated the alarm at around 9.25pm (see T 55.15-24). Mr Cook says that he activated the burglar alarm system by keying in a code on the keypad located at the entrance to the office. The alarm activation is confirmed by the CSS printout. 9. Mr Cook says he then retired to bed (see, for example, T 46.15-20; T 55.23). I interpolate to record that it is noted by the Insurers that there is no objective evidence to corroborate this. 10. At 2.23am on 7 September 2010, a PIR detector detected movement on or near the stairwell (see T 56.50-T 57.1). As adverted to, Mr Cook's understanding is that the PIR detectors detect movement, but not smoke (T 65.50), and I understand this to be the case. 11. The CSS printout records that an unanswered call was made to the landline telephone number for the Hotel at 2.23.48am (and see T 57.15-24); and that a telephone call was then made to Mr Cook on his mobile telephone (see T 57.25-31). This evidence accords with Mr Cook's affidavit evidence that he was woken at approximately 2.20am on 7 September 2010 by a call on his mobile telephone from CSS advising that they had a report of an alarm on the stairwell (see Mr Cook's affidavit sworn on 10 June 2018 at [29]). (The closest landline telephone to Mr Cook's room was the reception or office.) 12. That mobile telephone call lasted one minute from 2.24.44am to 2.25.44am (see T 57.42-50). Again, I interpolate to record that the Insurers here point out that Mr Cook could have been anywhere in the Hotel with his mobile telephone when he answered this telephone call. 13. After Mr Cook received that telephone call, his evidence is that he went to the office and turned off the alarm (see Mr Cook's affidavit sworn on 10 June 2018 at [30]). The CSS printout records that the alarm was turned off at 2.26am (see also T 58.3). 14. Mr Cook's evidence is that he then walked down the stairs to the doors at the bottom to ensure that they were locked (those doors leading from the reception to the courtyard of the motel). Mr Cook says that those doors (when locked) could be opened from the inside and outside by key only and that he did not go outside because the doors were locked (see Mr Cook's affidavit sworn on 10 June 2018 at [30]; T 59.9-18). Mr Cook says that he walked back up the stairs, that he checked the fire doors in the reception foyer and they were locked, that he checked the side exit doors and they were locked, that he then walked into the bistro area and checked to see if the deck doors were open (they were closed) and that he looked towards the outer area of the restaurant and did not see anything unusual (see Mr Cook's affidavit sworn 10 June 2018 at [31]). Mr Cook's evidence was that he was able to look outside, including at the workshop doors, and did not see anything unusual (see, for example, T 59.28). Again, I interpolate to note that the Insurers say that there is no objective evidence to corroborate this. 15. Mr Cook's evidence is that he walked back to his room, went to the toilet and then went to bed; that he lay there for some minutes trying to get to sleep and then realised that he had forgotten to re-set the alarm so he got out of bed again, went down to the office and re-set the alarm and then returned to bed (see Mr Cook's affidavit sworn on 10 June 2018 at [32]). The CSS printout records that Mr Cook did not reactivate the alarm for 16 minutes until 2.42am (see T 58.29-33). As to this, I interpolate to note that the Insurers say that Mr Cook's evidence as to what happened in this period of time should be rejected. 16. At 2.48am, multiple PIR sensors detected movement on the ground floor of the Hotel (see T 58.35-42) (bar, bistro and reception areas). CSS again called Mr Cook. His evidence is that he must have "drifted off" after he re-set the alarm because the next thing he remembers is his mobile telephone ringing with another call from CSS with reports of multiple alarms (see Mr Cook's affidavit sworn on 10 June 2018 at [33]). It appears that the multiple alarms were due to the fire in the workshop burning through alarm cables. The Insurers say that this is something that Mr Cook may not have anticipated, though it is not clear what they seek to draw from this. 17. Mr Cook's evidence is that he got out of bed and went to the reception foyer area, that he could see a large amount of white smoke, that he went through the reception door and called the fire brigade on 000, that he then went to the motel rooms to the rear of the hotel premises and knocked on each of the doors to get the guests to evacuate and then he moved his car from near the reception area (see Mr Cook's affidavit sworn on 10 June 2018 at [33]). He then gives evidence of assisting the fire brigade in access to the motel courtyard, providing access to the room where the electricity main switch was to disconnect the electricity and went to turn off the gas supply (see Mr Cook's affidavit sworn on 10 June 2018 at [34]). Mr Cook says that, during the course of the morning, he waited outside while the fire brigade put out the fire and during the course of the morning a fire brigade officer informed him that, in addition to the fire in the maintenance room, there was a fire in the upstairs function room and suggested to him that the fire looked suspicious (see Mr Cook's affidavit sworn on 10 June 2018 at [35]). 18. Mr Cook says that he inspected the damage for the first time on 8 September 2010 (see Mr Cook's affidavit sworn on 10 June 2018 at [38]). He says that he could see that the main damage was in the maintenance room and the dining room of the restaurant (again, which was above the maintenance room). He says that he walked up the stairs and that he noticed that a window on the stairs was open (see Mr Cook's affidavit sworn on 10 June 2018 at [38]). His evidence in cross-examination was that, when he inspected the premises on 8 September 2010, he observed no indicia of forced entry to any door or window (see also T 66.25). 19. Pausing here, the findings which the Insurers say should be made are that: Mr Cook triggered the alarm outside of his residence so as to attempt (poorly) to conceal his own conduct by implicating an unidentified intruder or intruders; Mr Cook knew that he would receive a telephone call from CSS, to which he responded; Mr Cook was then able to deactivate the alarm system under the pretence of looking around the premises for intruders; and Mr Cook lit both the fires. Damage 1. Damage was caused by the fire, smoke and the measures taken to extinguish the fire. That damage required closing the kitchen, dining room and function room. Some parts of the bar area were also damaged, including the TAB and the gaming machines. 2. On 11 September 2010, the Hotel was re-opened without a functioning kitchen and restaurant (see Mr Cook's affidavit sworn on 10 June 2018 at [41]). Insurance claims 1. As I have noted (see at [10]ff above), Cook Investments lodged claims on both its business interruption and property damage insurance policies. Relevantly, on 21 September 2010, Cook Investments lodged a claim seeking indemnity pursuant to the Policy for damage arising out of the fires (see Mr Cook's affidavit sworn on 10 June 2018 at [44]). 2. Mr Greg Kelly, a forensic investigator and former police officer, of Greg Kelly & Associates, was appointed by the Insurers to carry out an investigation on their behalf. 3. On 5 September 2011, following the investigation as to the cause of the fires, the Insurers, by letter from their then solicitors, Turks Legal, denied indemnity, relying upon the General Exclusion (1)(i) and ss 13 and 54 of the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act). 4. As noted above, the Insurers contend that Mr Cook deliberately lit the two fires in the Hotel. Appointment of receiver and subsequent liquidation of Cook Investments 1. By the time that the Insurers declined the claim, a receiver had been appointed. Mr William Hamilton (of WJ Hamilton & Co) was appointed to Cook Investments by the registered mortgagee, Resimac, as receiver on 10 August 2011. Mr Hamilton subsequently gave a series of reports to Perpetual and Resimac, and those reports were admitted into evidence without objection (see Mrs Cook's affidavit sworn on 31 May 2018 at Annexure J). 2. The plaintiffs say that the Hotel business did not recover after the fires (see also Mr Cook's affidavit sworn on 10 June 2018 at [49]ff). 3. On 14 October 2011, Cook Investments was placed into liquidation by order of the Federal Court of Australia. Mr Neil Robert Cussen was appointed liquidator. The petitioning creditor was the Deputy Commissioner of Taxation. 4. On 23 April 2012, the receiver sold the Hotel for $1.025 million in a fire-damaged state. Mr Cussen resigned as liquidator. 5. Cook Investments was deregistered on 27 January 2013. 6. On 26 May 2016, Cook Investments was reinstated pursuant to an order of this Court and Mr Cussen resumed office as liquidator. 7. On 14 June 2016, the liquidator of Cook Investments assigned by deed to the plaintiffs all of the company's right, title and interest at law and in equity to its cause of action against the Insurers under the Policy. Notice of the assignment was given to the Insurers on 23 June 2016 pursuant to s 12 of the Conveyancing Act 1919 (NSW). The Insurers do not take any issue in these proceedings as to the validity of the assignment or at to the plaintiffs' standing to sue. Commencement of proceedings 1. By statement of claim filed on 10 August 2018, the plaintiffs commenced these proceedings, seeking damages to compensate them for the alleged breach by the Insurers of the promise to indemnify Cook Investments in relation to Cook Investments' loss arising from the fires. 2. As adverted to above, the Insurers have defended the claim on the basis that Mr Cook deliberately lit the fires and, thus, that they are entitled to rely upon the exclusion clause in the Policy or, alternatively, are otherwise entitled to deny indemnity by reason of s 13 and s 56(1) of the Insurance Contracts Act. 3. The Insurers accept that they bear the onus of establishing that they are entitled to rely upon an exclusion clause in the Policy or that there has been a breach of the insured's duty of utmost good faith (see, for example, McLennan v Insurance Australia Ltd [2014] NSWCA 300; (2014) 313 ALR 173). Further, the Insurers accept that s 140 of the Evidence Act 1995 (NSW) (Evidence Act) requires an approach similar or identical to that set out by Dixon J, as his Honour then was, in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (Briginshaw) (see particularly at 362; and see also, for example, Bale v Mills (2011) 81 NSWLR 498; [2011] NSWCA 226 (Bale v Mills) at [71]-[73]), having regard to the seriousness of the allegations here made against Mr Cook. Issues for determination 1. The first issue for determination, being the central factual question in issue, is as to whether Mr Cook lit the fires in the Hotel on 7 September 2010, which caused the damage for which the plaintiffs now sue. 2. The second issue for determination, if liability is established, is as to the quantum of loss and damage. 3. I now turn to the first of those issues. Liability: did Mr Cook light the fires? 1. Since the Insurers bear the onus of establishing that Mr Cook deliberately lit the fires, it is convenient to deal first with their submissions on the issue of liability. Insurers' submissions 1. In summary, the Insurers' submissions are that Mr Cook had both the motive and opportunity to light the fires; and that it should be found that he did so. The Insurers accept that their case is circumstantial, insofar as there is no direct evidence that Mr Cook lit the fires, but point out that it is not disputed that Mr Cook was present in the Hotel at the time of the fire and they say that it is common ground that Mr Cook had the opportunity to light the fires. The Insurers say that there are compelling inferences to be drawn from the facts and circumstances surrounding the fires that lead to the conclusion that Mr Cook was indeed responsible for lighting the fires. Alleged motive to light the fires 1. As to motive, the Insurers say that: Cook Investments was in perilous financial circumstances; the plaintiffs had personally guaranteed a substantial debt of Cook Investments (as will be recalled, the $2.61 million owing to the mortgagee, Resimac – see at [4] above); it should be inferred that, by the time that the Hotel was listed for sale in August 2009 (as to which, see at [21]ff above), Mr Cook was aware that the Resimac loan would not be able to be refinanced; and, in any event, by September 2010 it must have been increasingly obvious to Mr Cook that the termination date for the Resimac loan was drawing closer and there was no apparent means by which the loan could be re-paid. The Insurers rely upon the report dated 9 August 2017 of Mr Christopher Ehlers as to the financial position of Cook Investments. 2. The Insurers say that, on any view of the evidence, the financial position of the Hotel had significantly deteriorated since 19 October 2007, when Cook Investments commenced trading. They say that the financial issues for the plaintiffs started from when the Hotel was purchased for $3.48 million in October 2007 (as to which see above; see also, for example, T 10). 3. It is noted that, in addition to that purchase price: $190,000 in stamp duty was payable (see T 10.25); $60,000 was due to Resimac for loan fees, which Mr Cook says he paid by transferring his boat to the broker (see T 10.47; T 14.3); and an unknown sum was paid to the solicitors acting on the conveyance (see T 10.50-T 11.4). Therefore, it is said that (although Mr Cook did not accept this in cross-examination) the funds expended in the acquisition of the Hotel were at least $3.73 million. 4. The Insurers note that Cook Investments (which was incorporated only at the time of the acquisition) did not have any funds to contribute to the purchase, other than loans or funds put in by the plaintiffs (see T 11.34-39). 5. The Insurers submit that the evidence reveals that funding for the purchase was derived from the following sources: $2.61 million from Resimac, with an interest rate, initially of 10.84%, which later increased, taking the monthly repayments from $15,000 to $23,000 (see, for example, T 12.44-T 13.7; T 29.34-39; T 34.46); by re-finance of the plaintiffs' family home at Glossodia, secured by second mortgage, in an amount of $200,000 (see T 11.40-46); by re-finance of an investment property owned by the plaintiffs at Yeronga in Queensland, secured by a mortgage to Resimac, in an unknown amount (see T 12.23-28); by re-finance of Mrs Cook's parents' holiday home in Tuncurry, New South Wales, in the amount of $190,000 for the payment of stamp duty (see T 10.24-40); and by vendor finance from the proprietor of the Hotel in amount of $240,000 (see T 12.31-39). It is noted that there is an unexplained shortfall in those figures (of some $490,000), there being no evidence as to the source of those additional funds. 6. The Insurers note that, as at the time of the acquisition of the Hotel, Mr Cook had a police pension in the amount of around $60,000 per annum, which was his only other source of income. 7. It is also to be noted that, at the time that Cook Investments commenced trading from the Hotel, Ms Joanne Williams was the bookkeeper and she remained in the position of manager and bookkeeper until around December 2010 (see Mr Cook's affidavit sworn on 10 June 2018 at [17]; [52]), when she resigned. Furthermore, Mr Cook says that his chef, Mr Richard Morgan, ceased employment in December 2010 at around the same time and that he and Ms Williams started their own restaurant two days later (see Mr Cook's affidavit sworn on 10 June 2018 at [52]). 8. Insofar as there appears to be a suggestion in Mr Cook's affidavit (see at [60]) of some misconduct on the part of Mr Morgan and Ms Williams, there was no such accusation made in the course of submissions. Instead, reliance was placed on this evidence as explanation of the issues to which Mr Cook deposed in relation to the accuracy of the accounts. I simply note that it was not suggested that either of the former staff members had anything to do with the fires and there is nothing from which I could make any such finding. 9. Relatedly, a firm of accountants (Dunn, Kean & Staff) acted as accountants for Cook Investments from the time it commenced trading to the time at which the receiver was appointed (see T 15.16-23). 10. The Insurers say that the financial position of Cook Investments deteriorated markedly between the financial years ending 30 June 2009 and ending 2010 (see Ex A). In particular, it is noted that: the loss before income tax increased (even not taking into account interest payments which were erroneously recorded) from $149,767.41 to $328,426.45 and, if the interest was correctly taken into account, the loss would be $628,000 (referring to Ex A p 3; T 20.10); the net profit from bar trading decreased from $292,086.28 to $175,184.17 (referring to Ex A p 4); the net profit from the restaurant decreased from $157,004.53 to a loss of $104,177.23 (referring to Ex A p 5); the net profit from the motel rooms increased from $220,959.91 to $252,569.82 (referring to Ex A p 6), but that this relatively modest increase was far less than the decreased profit from bar trading and the restaurant; the net profit from poker machines had increased from $215,414.56 to $225,375.56, but that this was essentially only as a result of taxes decreasing on income derived from those machines (referring to Ex A p 7; T 122.15); most significantly, trade and other creditors had increased from $368,075.07 to $987,300.63 (Ex A p 8); and accumulated losses had increased from $286,703.61 to $615,130.06 (even without taking into account the incorrect application of the interest paid) (referring to Ex A p 12). 11. The Insurers say that the evidence of Mr Cook (see, for example, T 23.30) that there were "anomalies" in the accounts of Cook Investments (apart from the incorrect treatment of interest payments as capital reductions) should be rejected. 12. It is submitted that, notwithstanding the imprecise evidence given by Mr Cook of "anomalies" in the MYOB recordkeeping and the fact that the accounts (in Ex A) were not finalised, signed accounts for the relevant period, the figures there recorded are likely to be reasonably reliable because the only "anomaly" identified is the incorrect expensing of interest as principal. The Insurers point to Mr Ehlers' evidence that he reconciled the MYOB figures for 2008 and 2009, finding there was a non-material difference of about 4% (see also T 116.33; T 117.20-27; T 124.3-23). 13. The Insurers note that, although the 2010 financial report was not finalised, it was prepared by Dunn, Kean & Staff on the basis of MYOB data provided to it by staff employed by Cook Investments (T 22.45-47) and that the relevant 2009 figures in Ex A appear in the company's 2009 tax return (referring to T 16.13; T 124.5-15). 14. The Insurers say that the fact that Cook Investments had significant creditors as at 30 June 2010 is also further supported by the facts that: as at 25 October 2011, Mrs Cook signed a document in relation to work being carried out by the receivers to the effect that the company owed $108,000 to the Australian Taxation Office in relation to superannuation guarantee charge liability and a further $357,846 to other creditors (referring also to T 25.5); and, by the date of that document, Calliden (as will be recalled, the business interruption insurer – see at [10] above), had paid the company funds which had been used to discharge other creditors (referring to Mr Cook's affidavit sworn 10 June 2018 at [53]; T 25.10-15). 15. Following from the above, the Insurers contend for a finding that the MYOB data which led to the preparation of the accounts for Cook Investments as contained in Ex A did not contain any material anomalies or errors, apart from the incorrect treatment of payments to Resimac. 16. Further, it is said that if Mr Cook had been informed by the new bookkeeper, Ms Elder, of such anomalies (see his evidence at T 36.45-49), then Ms Elders could have been called in the plaintiffs' case and/or Mr Cook would have had some form of record supporting his contention. The Insurers call for an inference of the kind identified in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) to be drawn against the plaintiffs in respect of their failure to call Ms Elder. 17. In any event, regardless of the precise figures in respect of the loss Cook Investments incurred in the financial year ending 30 June 2010, the Insurers point to the following concessions by Mr Cook during the course of his cross-examination: that the costs in the restaurant had been increasing, which had had a material impact on its profitability (see T 21.19-30); that the company had entered into arrangement to pay $1,000 to discharge a further debt of $95,450 for GST and PAYG tax to the Australian Taxation Office (see T 25.33-39); that the company owed $57,000 to Cowra Council as at September 2010 for unpaid rates and had entered into an arrangement to discharge that debt (see T 26.6-9); that the company was funding purchases on a Westpac credit card, the balance of which was increasing (see T 31.3-27); that the winter of 2010, being just before the fires, was one of the worst winters for trading (see T 31.43-46); that the company was not paying its bills as and when they fell due (see, for example, T 36); and that, as at September 2010, Mr Cook had no other source of funds besides selling the investment property at Yeronga or leasing out parts of the business (see, for example, T 43.49-T 44.5). 18. In addition, it is said that the Resimac loan statement demonstrates that Cook Investments was not paying its major financier on time after about March 2010 and was incurring penalties as a result. 19. Further, the Insurers point to the evidence of Mr Ehlers, when shown the error in respect of the application of the interest which had been paid (i.e., attributing the interest as a deductible expense, rather than a reduction in Cook Investments' indebtedness to Resimac), that this further adversely affected the financial position of the company, by increasing its loss for the financial year ending 30 June 2010 from $615,130.06 to $860,000 (see T 125.15-35). 20. The Insurers therefore say that, by the date of the fires, Cook Investments was, on any view, in severe financial difficulty and, notwithstanding Mr Cook's asserted hopes and expectations concerning leasing parts of the business, there were no realistically reasonable prospects that the business could trade out of that increasingly dire financial position. It is said that, as the person who was running the business on a day to day basis (see particularly T 17.33-35; T 23.44-47), it must have been obvious to Mr Cook that the business was going rapidly downhill and that there was no realistic prospect of it turning around. Alleged opportunity to light the fires 1. As to Mr Cook's opportunity to light the fires, the Insurers note that it is accepted by the plaintiffs that there were two separate fires each of which was deliberately lit. It is also noted that Mr Cook is the only person who, on the direct evidence, was in the hotel premises at the time the two fires were lit and thereby had the opportunity to light the fires. It is noted that there is no evidence of either fire being lit using some unusual means not available to Mr Cook. 2. I have set out above the chronology of events in relation to the triggering of the PIR detector alarms (see at [30]ff above) and to the findings that the Insurers say should be made in this regard (see at [66]ff above). 3. In their submissions, the Insurers address (and argue that these should each be dismissed as a plausible explanation for the fires) the following alternative possibilities which appear to be raised by the plaintiffs as to the lighting of the fires. 4. First, that a person or persons could have entered the Hotel through a window located on the southern side of the Hotel above the stairwell leading up to the top level function room. 5. Second, that the doors to the workshop could be opened by using a flat piece of metal to push back the latch. 6. Third, that a key to the workshop attached to a green tag which was usually kept behind the bar was observed to be missing about a week after the fire. 7. Fourth, that motel room no 2 may have had signs of forced entry. 8. Fifth, that Mr Cook told someone present on the night of the fire (Mr Craig Goldsmith) that a female in one of the motel rooms on the night of the fire should not have been there. 9. Turning to each of those in turn, the Insurers say as follows. Open window on stairwell 1. The Insurers say that the findings made in respect of the stairwell window are particularly important as this window is the only possible identified ingress to the Hotel itself which would have enabled third party access to the function room without triggering the alarms on the ground floor level, particularly the PIR near the staircase. 2. The Insurers say that the single PIR detector activation, as well as the absence of any signs of forced entry at the doors, negates any possibility that an intruder entered through one of the doors located on the ground floor, noting that the PIRs on that floor in the reception, bistro and bar areas were not activated before the workshop fire burnt through the alarm cables. It is said that, if an intruder had entered through any of those doors and gone up the stairs to the function room, then not only would the staircase PIR have activated (as it did – see at [35] above) but at least one other PIR in the reception or bistro areas would also have been activated. 3. The Insurers say that if (as they contend there should be – see, for example, at [197]ff below) a finding is made that the window was closed as at the time of the fires, that is significant in terms of the circumstantial case that Mr Cook set off the PIR alarm himself by exiting his residence. 4. The Insurers say that the evidence does not support the plaintiffs' contention that the window located above the stairwell leading up the function room on the southern side of the Hotel was open at the time the fires started. As adverted to, Mr Cook's evidence was that when he inspected the Hotel for the first time on 8 September 2010 he noticed that the window on the stairs was open (see Mr Cook's affidavit sworn on 10 June 2018 at [38]). Relevantly here too, Mr Kinsella, the fire brigade officer who gave evidence in the plaintiffs' case, says that he did not open that window, though the Insurers point out that he was not even aware of it at the time (see Mr Kinsella's affidavit sworn in September 2019 at [5]). 5. Following, the Insurers say that the evidence against the contention that the window was open is far more compelling. Specifically, they submit that no finding should be made that the window was opened at the time the fires started for the following six reasons. 6. First, that Mr Cook gave no evidence that the window in question was left unlocked prior to the fire and gave no evidence of anything indicating that it had been forced open. It is submitted that a Ferrcom inference (see Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 (Ferrcom)) should be drawn that no evidence Mr Cook could have given on either of those matters would have assisted the plaintiff's case. 7. Second, that the photos of the window (including, in particular, of the locking mechanism) show no indication of damage consistent with forced entry and no witness has suggested that there is, or was, any indication of that window being forced. 8. Third, that Mr Kelly gave unchallenged evidence that the dust and debris deposits on the sill of the window were consistent with the window being closed at the time of the fire (see Mr Kelly's report of 31 May 2017 at [9.6]). It is said that Mr Kelly gives reasons for forming that opinion and that his evidence on this issue should be accepted. 9. Fourth, that the statement of Senior Constable Sarah Walker supports the conclusion drawn by Mr Kelly, in that Senior Constable Walker states that the window had been opened by the attending fire brigade to allow for air flow (Ex 2, pp 10-11). It is noted that Mr Kelly was aware of that statement when preparing his report (see T 156.33). 10. Fifth, it is said that the evidence of Mr Kinsella that he did not open the relevant window does not take the matter any further, not least since there were over fifteen firefighters present at the Hotel at the time of the fires (see Ex 3, pp 5-6). 11. Sixth, that, although there was evidence of people climbing the trellis at the rear of the hotel building in order to access the bistro on the ground floor middle level, there was no evidence of anyone having climbed up to the function room level prior to the fire and there is no evidence of any footprints or other indicia of a person accessing the window across the roof immediately below it. It is noted that Mr Cook's evidence was that, to his knowledge, no one had previously gained access to the Hotel using that route of entry (see T 73.12-14). 12. As noted (see at [90] above), next is the possibility that the doors to the workshop could be opened by using a flat piece of metal to push back the latch Access to the workshop using a flat piece of metal 1. The Insurers note that the workshop key did not permit access to the Hotel itself. As such, they say that, if their submissions as to the unlikelihood of an intruder having gained access through the staircase window are accepted, the issue of access to the workshop diminishes in importance because it does not explain how both fires were started by anyone other than Mr Cook. 2. Pausing here, at least on one view, it would be sufficient for the purposes of the Insurers' defence for there simply to be a finding as to the starting of one of the fires by Mr Cook (though, in light of my ultimate disposition, nothing turns on that point). In that regard, I note that there was no attribution of damage as between the different fires. In any event, I accept that, even if the possibility of entry to the workshop raised relevant doubt, there would still be left the issue that the evidence discloses no reasonable possibility that anyone other than Mr Cook lit the other fire (which, it seems, could then be used in reasoning to a factual conclusion as to the identity of the person who started, or assisted in starting, the workshop fire). 3. The Insurers make three further submissions in respect of the access to the workshop. 4. First, that there is no evidence as to how long the key behind the bar to the workshop had been missing (see the affidavit of 6 February 2019 of Mr Ronald Burgin, employed at the Hotel as a "handyman", at [12]-[13]). It is said that, without that evidence, it is not possible properly to assess the significance (if any) which attaches to the fact that there was a missing key. 5. Second, that Mr Cook had a key to the workshop (see Mr Burgin's affidavit of 6 February 2019 at [12]). 6. Third, that, in respect of the ability of a person to "force the lock", Mr Kelly (an experienced forensic investigator and former detective in the New South Wales Police) gave evidence that the locking mechanism on the workshop door was such that, if the doors were properly secured, metal could not have been placed in the gap to make contact with the mechanism (see particularly T 148.48-T 149.43). The Insurers say that that evidence (based upon Mr Kelly's inspection of the locks and his expertise and experience as a forensic investigator and a policeman) should be accepted. 7. As noted (see at [91] above), next is that a key to the workshop (usually kept behind the bar) was observed to be missing about a week after the fire. The missing key 1. I have considered above various submissions as to the missing key. 2. As noted (see at [92] above), next is that motel room no 2 may have had signs of forced entry. Forced entry into motel room no 2 1. The Insurers say that, irrespective of whether or not there were signs of forced entry (and, indeed, irrespective of whether such a factual finding is or were made), the issue of signs of forced entry to that motel room (or any motel room at the Hotel) is irrelevant. In this connection, it is noted that motel room no 2 is located on the hallway opposite to the workshop (see T 143.25-27). Thus, it is said that access to motel room no 2 did not permit access to the workshop and there is no purpose related to the fire in the workshop for a person nefariously attempting to gain access to motel room no 2. 2. In any event, the Insurers say that the evidence on which the plaintiffs rely, namely, a report of the fire brigade (see Ex B, p 15-16), should not be accepted. The Insurers point to the statement of Senior Constable Walker as establishing that: there was no evidence of damage to the strike plate of the lock to motel room no 2; there was no evidence of entry or disturbance to motel room no 2; and (most importantly, they say) there was no evidence of any damage to any access door to the courtyard or the hallway where motel room no 2 is located (Ex 2, pp 8-9). 3. The Insurers submit that the evidence of an investigation by the police, who (the Insurers not) specialise in investigating crimes, as opposed to the observations of a member of the fire brigade, should be preferred. 4. In any event, the Insurers say that establishing that an intruder may have had access to the workshop through motel room no 2 does not, and cannot, explain how both fires were started by anyone other than Mr Cook because it does not explain how an intruder accessed the function room. 5. Finally (see at [93] above), there is the evidence that Mr Cook told someone present on the night of the fire (again, Mr Craig Goldsmith) that a female in one of the motel rooms on the night of the fire should not have been there. The unidentified woman 1. As to the unidentified woman, the plaintiffs rely upon a statement made to the police by Mr Craig Goldsmith, a local security guard, in relation to a conversation he had with Mr Cook immediately after the fires. The Insurers say that that evidence is of no assistance to the plaintiffs for three reasons. 2. First, that Mr Cook gave no evidence of having such a conversation with Mr Goldsmith or of observing any female person in the area of the motel rooms who was not supposed to be there. Again, it is submitted that a Ferrcom inference can be drawn that any evidence Mr Cook could have given would not have assisted the plaintiffs' case. It is said that it can be inferred that, if Mr Cook had given instructions to his lawyers that such an event had occurred, that evidence would have been led from Mr Cook, as it may have been of some importance (referring to Volonakis v Erceg [2019] NSWSC 1875 at [179] per Hallen J). 3. Second, that the evidence is vague and untested as the plaintiffs did not call Mr Goldsmith in their case (and there was no evidence or explanation as to his absence as a witness). 4. Third, that, even if Mr Goldsmith's evidence is accepted as reliable, it is of little probative value because, if Mr Cook did light the fires, then it is likely that he would have embraced the opportunity to tell someone something which might suggest other persons were involved. It is said that, as Mr Goldsmith's evidence only emerged in cross examination of Mr Kelly, it was not possible for the Insurers to put that proposition to Mr Cook in cross-examination. Other exculpatory contentions 1. Insofar as Mr Cook (in his affidavit sworn on 10 June 2018 at [69]-[70]) contends that the circumstance that the fires did not destroy the hotel entirely tells against him being the arsonist, the Insurers point out that he accepted that he had no previous personal experience of attempting to burn buildings and no experience as a policeman in the arson squad (see T 66.36-49). 2. The Insurers submit that the complexity of the two fires on two different levels tells against an outsider (or outsiders) with a grievance against the Cooks being the perpetrator(s), as does the single alarm activation from the staircase PIR. The Insurers submit that it is more likely that an outsider with a grievance would have lit a single fire (it is said, by way of example, by simply throwing a "Molotov cocktail" through a window). 3. The Insurers place weight on the first, single alarm activation in this context. They say that if the intruder, or intruders, had either entered or escaped via the emergency doors to the street in the reception or bistro areas before the alarm cabling had burnt, then other PIRs would have activated. They say that it is improbable that an intruder, or intruders, would have waited about twenty minutes after the first alarm before escaping from the Hotel (i.e., after the alarm system cabling had burnt). 4. Also, as to escape, it is said that the evidence establishes that the escape route could not have been the window in the stairwell and it is noted that there is no evidence suggesting any other window being open before the fire brigade and police arrived. 5. The Insurers submit that the totality of the evidence overall points persuasively to Mr Cook lighting both fires, including: the complexity of two fires on different levels; the impossibility of forcing the doors at the base of the staircase leading down towards the storeroom (thus necessitating an outside perpetrator, or perpetrators, entering and exiting the hotel part of the building externally to light the fire in the function room); the single alarm activation outside Mr Cook's residence; the absence of any evidence of forced entry to the hotel part of the building; the evidence against the stairwell window being open; and the 16 minutes during which the alarm system was switched off. 6. I now turn to the plaintiffs' submission as to liability. Plaintiffs' submissions 1. The plaintiffs emphasise that determination of the liability issue depends upon the Insurers proving, in essence, that Mr Cook committed two serious criminal offences (arson and fraud) and they emphasise the burden of proof in this regard. It is noted that Mr Cook denies that he lit the fires. The plaintiffs submit that the overwhelming effect of the evidence is to suggest that Mr Cook did not deliberately light those fires. 2. In this regard, the plaintiffs further emphasise the High Court's observation that "the conventional perception is that members of our society do not ordinarily engage in fraudulent conduct" and that it is that "perception, which underpins the need for clear evidence of fraud" (see Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 94 ALJR 715 at [39] per Bell, Keane and Nettle JJ; and see also Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 at 171 per Mason CJ, Brennan, as his Honour then was, Deane and Gaudron JJ and Briginshaw at 362). They say that it has never been suggested that Mr Cook was of anything less than a person of good character, with an unblemished record of honesty. It is noted that Mr Cook is a family man and that, as a former police detective, has a history of public service. It is thus said that the "conventional perception" applies with force in these proceedings. 3. The plaintiffs say that the crimes allegedly committed Mr Cook were not matters merely of a financial character; rather, they would have involved planning and deliberate and physical acts of destruction. It is said that the location of the fire in the maintenance room placed the lives of those persons staying in the motel complex at risk. The plaintiffs say that it is unlikely that Mr Cook would have so acted. 4. The plaintiffs also emphasise the consequences of Mr Cook's actions should he have been prosecuted and punished. It is said that, if Mr Cook acted in the fashion alleged by the Insurers then, if prosecuted, he faced losing his liberty, his property and (in all likelihood) his family. The plaintiffs point out that for "nearly all" members of our community, the criminal justice system is powerful deterrent and they say that this makes it very unlikely that someone like Mr Cook would have engaged in such activity (especially if there was little or nothing to be gained by the fires). 5. As to this last point, the plaintiffs say that Mr Cook had nothing to gain from the fires. In this regard, reference is made to Mr Cook's evidence to the effect that lighting the fires could not have been of a financial benefit to him. It is noted that the location of the fires was such that all that could ever have been achieved (it is said) was to take the restaurant and function areas out of operation and to reduce the turnover of the business, which would only have reduced profitability, especially during the inevitable delay in having the premises repaired (see Mr Cook's affidavit sworn on 10 June 2018 at [68]-[70]). 6. The plaintiffs emphasise in this regard that the Policy was a policy of indemnity and, thus, that Cook Investments would never have been able to recover more than the extent of the damage and could only get back what it lost (with a likely loss of trade and reputation during the period of repairs); and that, even if the Insurers were willing to pay for the value of the property before the fire (which is said to have been an extremely unlikely outcome), the relevant market was depressed, and the value of the land, buildings and business was far less than Cook Investments had paid for it. 7. I refer in due course (see particularly at [161]ff below) to the submissions made as to Mr Cook's evidence, and that of Mr Kelly. Suffice it here to note that the plaintiffs say that a key part of the cross-examination of Mr Cook proceeded upon an "erroneous basis" (insofar as it was based upon figures set out in what appeared to be a final set of accounts, which Mr Cook was asked to assume were documents that had been produced to the Court under a subpoena by the liquidator). They also say that Mr Kelly's evidence should be given no weight (for the reasons which I will elaborate in due course – see at [178] below). Alleged motive to light the fires 1. In addition to the preceding, and as to the question of motive specifically, the plaintiffs submit the following. 2. First, that, while the business was not doing well financially at the time, it had not reached a "desperate stage" (as to which, see further below). It is said that the business provided ancillary benefits to the plaintiffs' family, including accommodation and work for family members; and that the records of the receiver show that the business was surviving. 3. Second, that, while the land and business was for sale, this was because the plaintiffs had made the decision that the demands of running the business were too great, and the profits were too small. It is said that the land and business had been on the market for some time but that there was no rush to sell. Other matters 1. As to the suggestion by Mr Kelly that there was no other suspect, the plaintiffs maintain that in Cowra there were numerous persons with a "gripe" with the hotel and/or its management after being excluded from the premises, and that there had been "trouble before". 2. Turning back to the evidence as to the financial performance of the business, the plaintiffs say that, while it is obvious that the business was performing poorly and that its long-term viability was questionable, they dispute that this means that, as at September 2010, the financial position of the Hotel had reached a desperate state, pointing to Mr Cook's evidence to the contrary. 3. It is said that, when cross-examined about these matters, Mr Cook answered each of them. It is said that when it was put (it is said, incorrectly) to Mr Cook that the interest was not being paid, Mr Cook (it is said, correctly) disagreed (see T 34.42); when it was put to Mr Cook that the company's income tax and superannuation liabilities were increasing, Mr Cook explained that that had been made subject to an agreement with the Australian Taxation Office (see T 34.48-T 35.1); when it was put to Mr Cook that unpaid creditors were increasing, Mr Cook denied that (and it is said that no evidence was adduced to demonstrate to the contrary) (see T 35.4); when certain figures from the (non-finalised) accounts were put to Mr Cook he said that the figures were not correct (see, for example, T 34.8); and, when it was put to Mr Cook that he was not aware of refinancing options, Mr Cook explained that was in the future and circumstances could have changed (see T 35.23-25). 4. In particular, it is noted that, when it was put to Mr Cook that he was under sufficient distress to wish to sell the premises, he explained that there were several alternatives open to him (see T 35.23-35.50). 5. The plaintiffs say that the material contained in the receiver's reports suggests to the contrary of the proposition that the business was in dire straits, noting that the receiver prepared a succession of reports for Perpetual and Resimac commenting upon the business. It is said that those reports were generally supportive of the notion that there was a reasonable business in place (see Mrs Cook's affidavit sworn on 31 May 2018 at Annexure G; and Mr Cook's affidavit sworn on 10 June 2018 at Annexure G). 6. It is said that the material contained in Mr Britton's report also suggests to the contrary. Particularly, it is said that in Mr Britton's report, and throughout his oral evidence, Mr Britton suggested that there was a sustainable business; and that Mr Britton had double checked the revenues and pointed out that there was a typical rate of return to be expected on net revenues. It is said that it may well be that Mr Cook (an inexperienced manager) was not securing those revenues, but that does not suggest that the business would inevitably fail, much less that the circumstances had become desperate in September 2010 (see T 95.1-95.9). 7. As to the evidence of Mr Ehlers, it is said that he "narrowly specified" those matters which concerned him (referring to [3.1] and [3.2] of the report, where Mr Ehlers specified seven matters of general concern, and three matters of specific concern). It is said that each of the three matters of specific concern was wrong; that Mr Ehlers incorrectly referred to the failure to be able to pay interest, whereas Mr Cook correctly said that interest was being paid to Resimac; that Mr Ehlers noted the challenge by the reopening of the Imperial Hotel, whereas Mr Cook said that he had not noticed a further downward trend in income and his evidence that "they had their trade, their people and we kind of had our people" was not challenged (see T 24.8-24.26); and that Mr Ehlers referred to the fact that the business had been put up for sale, whereas Mr Cook gave specific evidence as to why the business had been placed for sale, none of which had anything to do with the financial position (on which evidence it is said that, again, Mr Cook was not challenged) (see, for example, Mr Cook's affidavit sworn on 10 June 2020at [22]-[23]). 8. It is also noted that Mr Ehlers adjusted his evidence taking into account the fact that interest payments had been made, but complaint is made as to the manner in which this was done. It is said that, given the serious allegations against Mr Cook, it would have been preferable that an expert, upon discovering an error in a report, correct the report so that the person accused of misconduct could answer the same; and it is said that the material relied upon by Mr Ehlers is impossible to reconcile with other financial records. 9. In that regard, it is said that Mr Ehlers relied heavily upon the balance sheet as at 30 June 2010 which was part of the "non-finalised" accounts which demonstrated a negative equity of over $600,000, whereas the receiver prepared a balance sheet as at 10 November 2011 (after trading had diminished due to the fire) which showed a negative equity of just over $50,000. It is noted that the evidence produced by the receiver was admitted by consent and not subjected to cross-examination or analysis. 10. In any event, it is said that the evidence of Mr Ehlers did not support the contention that the situation had become desperate. 11. It is further submitted that the objective facts point away from this being some kind of insurance fraud. In this regard, the plaintiffs point to the following: that only a small portion of the business was affected by the fires (and they note again that as it was an indemnity policy such that no more was recoverable than the cost of repairs); that the location of the fires was such that the effect of the fires was to disrupt the more profitable aspects of the business; that the timing of the fires was such that they occurred during the best months for the business (those being the warmer months); and that the fires ruined the prospects of sale. 12. Other factors said to counter the suggestion that it was Mr Cook who set the fires are that: an inspection undertaken by the fire brigade which (directly contrary to Mr Kelly's assertions) found places where an outsider could gain access to the interior (and the plaintiffs say that there was evidence that the window was open); the police investigation did not lead to any charge against Mr Cook; and that there had been disruptions in the past amongst patrons of the Hotel (and hence there were others who might "have a grudge" against Mr Cook or with the management and staff at the Hotel). Determination as to liability 1. As noted (see at [60] above), the Insurers accept that they bear the onus of establishing entitlement to rely upon the exclusion clause or that there has been a breach of the insured's duty of utmost good faith; and they accept that the standard of proof to be applied is the standard prescribed by s 140 of the Evidence Act and that regard must be had to the nature of the cause of action or the defence, the nature of the subject matter of the proceedings and the gravity of the matters alleged. 2. In this regard, reference is made by the Insurers to the following principles described in Palmer v Dolman [2005] NSWCA 361 (see at [41] per Ipp JA, with whom Tobias JA agreed at [125] and Basten JA agreed at [126]) as "well established in determining, in a civil case, whether circumstantial evidence leads to an inference of fraud", and which were applied in an arson fraud insurance claim in Sharma v Insurance Australia Ltd [2017] NSWCA 307 (see at [66] per Meagher JA, with whom Macfarlan agreed at [1] and Sackville AJA agreed at [103]). 3. First, that the fact-finder must consider "the weight which is to be given to the united force of all the circumstances put together" (quoting Belhaven & Stenton Peerage (1875) 1 App Cas 278 at 279 per Lord Cairns, quoted with approval in Chamberlain v R (No 2) (1984) 153 CLR 521 at 535; [1984] HCA 7 per Gibbs CJ and Mason J, as his Honour then was). 4. Second, that the onus of proof is only to be applied at the final stage of the reasoning process: "[i]t is erroneous to divide the process into stages and, at each stage, apply some particular standard of proof. To do so destroys the integrity of [a] circumstantial case" (quoting Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 129 per Winneke P). 5. Third, that the inference drawn from the proved facts must be weighed against realistic possibilities as distinct from possibilities that might be regarded as fanciful. 6. Fourth, that, where the competing possibilities are of equal likelihood or the choice between them can only be resolved by conjecture then the allegation is not proved (see also Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5 per Dixon J, as his Honour then was, Williams, Webb, Fullagar and Kitto JJ). 7. With these principles in mind, the Insurers say that it is not incumbent on them to negate, beyond reasonable doubt, all possibilities other than fraud by the insured; but, instead, that they need only persuade the Court, on the balance of probabilities having regard to all the circumstances, including the seriousness of the allegations, that Mr Cook lit the fires. I accept this submission and bear in mind the preceding observations. 8. In disposing of this aspect of the proceeding, I first deal with the issues raised as to the credibility of Mr Cook and of Mr Kelly. Credibility of witnesses 1. It is convenient first to consider the credibility of Mr Cook. Mr Cook 1. As already noted (see at [137] above), it is submitted that a key part of the cross-examination of Mr Cook proceeded on an "erroneous basis". It is noted that the documents put to Mr Cook (as documents obtained on subpoena from the liquidator) were not in fact a final set of accounts (the covering page clearly being marked as "not finalised" – see Ex 1 cf Ex A). 2. It is submitted by the plaintiffs that the way in which the documents were presented suggested that they had some authority and it is said that the draft accounts should not have been supplied to Mr Cook without him being told that they were not finalised (as this may have had an effect on his evidence). It was suggested that this invested the documents with a degree of authority that might make it difficult for the witness to disagree with the propositions then made. 3. In any event, it is said that Mr Cook's evidence on the key issue to which they related (the performance of the business) was vindicated. In that regard, it is said that a key issue put to Mr Cook in cross-examination was to the effect that the business was performing so poorly that no interest payments were able to be made from October 2009 to July 2010 – the key allegation being that interest payments had ceased (which Mr Cook steadfastly denied – see, for example, T 19.27-T 20.12). It is said that this, too, may have affected his evidence (in that it might have been misinterpreted to be evasive) but that, in fact, Mr Cook was correct and it was clearly established that interest payments had been made (see Ex E; and see, for example T 69.42-T 72.9). 4. As to the evidence from Mr Ehlers that this meant that it left a "financial hole" in some other part of the business, complaint is made that Mr Cook was not questioned upon that correct basis and Mr Cook was not given the opportunity to put his side of the evidence. 5. The plaintiffs say that there were some matters of general importance which were not put to Mr Cook or where his evidence was not challenged, such as the following: Mr Cook's explanation in his affidavit that there was nothing he could gain by setting the fires; whether there was evidence of a forced entry to any part of the premises (pointing to the fact that Mr Kelly's report did not refer to forced entry but that Mr Cook gave evidence that there were signs of forced entry to a room in the motel adjacent to the storeroom – see Mr Cook's affidavit sworn on 10 June 2018 at [72](b) and (f)); and Mr Cook's evidence about other persons who had access to keys (see Mr Cook's affidavit sworn on 10 June 2018 at [73]). 6. Furthermore, it is said that various important matters relied upon by Mr Kelly were not put to Mr Cook: first, that Mr Kelly relied upon Mr Cook's failure to explain his whereabouts during a period of 16 minutes (which Mr Kelly said that this meant that Mr Cook's behaviour was questionable) whereas it is said that Mr Cook directly addressed this issue in his affidavit and there was no challenge to his account (see Mr Kelly's report at [12.11] cf Mr Cook's affidavit sworn on 10 June 2018 at [32]-[33], [72](d)-(e)); second, that Mr Kelly apparently thought that when Mr Cook saw the doors to the maintenance room they were locked but that was not correct because Mr Cook (and Mr Goldsmith) said that they saw that the doors to the maintenance room were open (see, for example, T 151.10-T 151.34; Ex B); third, that in his report, Mr Kelly stated that there was no access to the internal courtyard of the motel and, because he had seen no evidence of forced entry (that being said to be incorrect), this meant that he could not see how an intruder could have gained entry (whereas Mr Cook explained to Mr Kelly's investigator that there was an unlocked access into that courtyard – see Mr Cook's affidavit sworn on 10 June 2018 at [72](c)). 7. It is said that Mr Kelly relied upon an inference from Mr Cook failing to run toward the fire but that, as Mr Cook explained in his evidence, Mr Cook ran to the motel complex to alert guests to the fire (an account which the plaintiffs say was independently corroborated by Mr Goldsmith and on which they say Mr Cook was not challenged – see particularly T 155.9-T 156.12; Mr Cook's affidavit sworn on 10 June 2018 at [33]). 8. As to the complaints made of Mr Cook's cross-examination in relation to the accounts, in substance these complaints go to the fact that the accounts to which Mr Cook was taken were not finalised accounts and this was not drawn to his attention. 9. Ultimately, this goes to the issue of whether the business of the company was performing so badly as to give rise to a motive for him to commit arson. I accept that there may have been some confusion on Mr Cook's part as to whether what was put to him was a final document in relation to the accounts. However, what is relevant is that Mr Cook was adamant as to the issue of interest payments and was shown to be correct. Accordingly, to my mind, this complaint goes nowhere. 10. Furthermore, in any event, I did not regard Mr Cook as evasive or instructive in the witness box. I formed the impression that some of his evidence (as to the options for refinancing and the like) may have been unduly optimistic but, overall, I do not make any adverse findings as to that evidence. Likewise, I do not see that the issue in relation to the accounts on which Mr Cook was cross-examined does not mean that he was not given the opportunity to put his side of the evidence. In this connection, those complaints here made also go nowhere. 11. As to the complaint that some matters said to be of general importance were not put to Mr Cook or evidence was not challenged (including Mr Cook's explanation in his affidavit that there was nothing he could gain by setting the fires; whether there was evidence of a forced entry to any part of the premises and Mr Cook's evidence about other persons who had access to keys), I consider that various of these matters were traversed in the course of the evidence. As Senior Counsel for the Insurers adverted to, the rule in Browne v Dunn (1893) 6 R 67 (which is a rule of fairness and which, as was made clear in Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [68]-[73]; [75] per Heydon, Crennan and Bell JJ, as cited in Bale v Mills, is especially the case when a judge is being asked to impeach a witness' credit) does not require every word of a witness' affidavit to be put to the witness. I here also have in mind what was said by Meagher JA (with whom Gleeson JA agreed at [95] and Leeming JA agreed at [96]) in Oneflare Pty Ltd v Chernih [2017] NSWCA 195 (Oneflare), namely that (at 42): 42. There are many ways in which a party or other witness might sufficiently be put on notice that their evidence on a particular subject or to a particular effect is challenged as untruthful, and as to the basis of that challenge. Depending on the circumstances, those ways include by pleadings, affidavits or statements of evidence exchanged before the hearing, and opening statements made or exchanged at the commencement of the hearing, as well as by cross-examination. 1. I note that, on the critical aspects of the matter (in particular, what happened in the sixteen minutes that the alarm was deactivated), Mr Cook's account was challenged. On other issues, such as the aspects of Mr Kelly's evidence relating to any damage to the motel room no 2 door, I accept the Insurers' submissions that this is peripheral, noting that Mr Cook accepted that there was access to the maintenance room from the courtyard so that any damage to the motel room door (whenever any such damage might have occurred) does not take the matter any further. 2. The critical point is that none of the evidence about which there was, or now is, a complaint that it was unchallenged (leaving aside that parts of that evidence such as the sixteen minute gap were, in my opinion, sufficiently the subject of challenge in order to give Mr Cook in fairness the opportunity to respond thereto) in and of itself is not dispositive. 3. As to the complaints in relation to Mr Kelly's evidence, for reasons that I explain below, these complaints are not dispositive. Whatever Mr Kelly thought or did not think on questions of motivation of the like are irrelevant to the disposition of the matter. 4. At this juncture, I note that, ultimately, this case will not be decided on the question of motive in and of itself; nor will it be decided on the basis of an assessment of Mr Cook's character, which I accept up to this point has not been shown to be otherwise than unblemished; nor of his demeanour in the witness box, which I considered to be matter of fact and not evasive or obstructive (as I have also noted above). Again, I here make no adverse credibility finding against Mr Cook in relation to the giving of his evidence, although I accept that a finding on the balance of probabilities as to arson or fraud does involve adverse credit findings as to his involvement in such conduct. 5. Rather, and as will be seen from my reasons below, I have reached the conclusion that, on the balance of probabilities and conscious of the need for an actual persuasion having regard to the serious nature of the allegations, it was Mr Cook who deliberately lit the fires (whether alone or with assistance); and, crucially, this is principally because of the weight that I place on the evidence of the PIR activations (as to which, see the chronology above), the lack of any evidence of forced entry to the main part of the premises and the evidence that there had been no disturbance to the staircase windowsill. Mr Kelly 1. As may be apparent from the preceding, the plaintiffs are highly critical as to Mr Kelly's evidence. 2. The plaintiffs say that Mr Kelly's report is "a combination of speculation, inference, [and] personal and second-hand views as to the credibility of Mr Cook". It is submitted that, upon ordinary principles (referring by way of example to HG v The Queen (1999) 197 CLR 414; [1999] HCA 2 (HG v The Queen) at [40]-[44] per Gleeson CJ), Mr Kelly's report does not meet the standard necessary to qualify as expert evidence. Furthermore, complaint is made that Mr Kelly strayed from fields in which he might be an expert, into offering opinions (it being said that the report suffers from all of the flaws identified in the report of the psychologist in HG v The Queen – see particularly at [39]-[44]). 3. More particularly, complaint is made that: there is no statement of assumed facts on which Mr Kelly's report is based; that it is difficult (or "perhaps impossible") to separate observations of fact from the opinion; that there was selectivity in both the production of the reports (only one of a number apparently prepared by Mr Kelly having been tendered) and in the identification of evidence and issues. 4. It is also said that, to the extent that they are known, the facts upon which Mr Kelly based his opinion were either contradicted by other evidence, or were at least rendered doubtful. 5. As to the complaint in relation to the selectivity in the production of the single report into evidence, it is noted that Mr Kelly said in cross-examination that he had "written numerous reports in relation to this matter" and had given what he variously described as "a series of reports", "other reports" and "a number of reports" (referring to T 133.4; T 141.30; T 147.46; T 148.3). The plaintiffs complain that no explanation has been given as to why only one report went into evidence. It is said that other reports appear to have contained important observations which were not put into evidence (and it is suggested that there is an obvious adverse inference to be drawn from this). 6. As to the complaint in relation to the selectivity in the identification of evidence and issues, the plaintiffs say that matters which were not included in the report Mr Kelly submitted to the Court included the following. 7. First, although Mr Kelly had agreed that it was very important to determine whether there were any signs of forced access, his report did not refer to signs of forced entry (though it is said that Mr Kelly was aware that there were signs of forced entry and had taken photographs "to prove it", which information he said was included in another report). It is noted that Mr Kelly's reason for failing to do so was that it was not a question put to him in his instructions and that he did not believe it was relevant (referring to T 128.10; T 131.9; T 139.4-T 139.13; T 139.4-140.3). 8. Second, although Mr Kelly agreed that it was important to determine as to whether the locks on relevant doors were sufficiently strong and although Mr Kelly had become aware that Mr Burgin had given evidence that the lock on the maintenance room could easily be defeated, there was no reference to Mr Burgin's experience (referring to T 127.46; T 148.34-T 149.42). 9. Third, although Mr Kelly agreed that it was important to determine who might have keys to the locks on the premises, he does not seem to have made any enquires about this (leaving this to a factual investigator, Mr Solberg, who produced a report which Mr Kelly did not read); and, although Mr Kelly was aware that there were spare keys and at least one that had been missing, he did not refer to this matter in his report because he did not see it as being relevant and he was not asked to address the question specifically (referring to T 127.42; T 143.29-T 144.34; T 144.36-145.23; T 145.47). 10. Fourth, although Mr Kelly agreed that it was important to determine how an intruder might be able to escape and was aware that there were several places of easy escape through fire doors, he did not refer to this in his report (even though he had referred to it in earlier reports). It is said that Mr Kelly included this information in his early reports because he felt it was relevant "to consider whether it was a possibility that someone else could have been there and set fire to the premises in two different locations and gone about their business, escaping without being detected" (referring to T 128.17-128.30; T 147.1-148.12). 11. Further, it is said that Mr Kelly displayed uncertainty as to what he had read at any particular point in time. It is said that it is not clear whether he is asserting that he had all relevant material at the time that the report which went into evidence was created. Similarly, complaint is made as to the thoroughness of Mr Kelly's report in this regard; and again, reference is made to the issue as to those persons who might have had access to keys to the premises, which Mr Kelly said was a task delegated to a "factual investigator" but then said that he had had not "read through the factual reports" (referring to T 143.29-144.34). 12. As to Mr Kelly's evidence, I consider that much of the criticism made of it by the plaintiffs is well-founded. I considered his report not to be objective and to be very much a assortment of statements of opinion and speculation as to various of the matters about which the plaintiffs have complained. 13. Nevertheless, as to the complaint about selectivity, I consider that this is, to some extent, unfair in that the forensic decision to produce only one report to the Court was no doubt not that of Mr Kelly (but presumably that of the Insurers' legal representatives). Moreover, as I understand it, the plaintiffs may have had access to the earlier reports, which could have been tendered had they wished to tender them. Likewise, and to the extent that they have not had access, the plaintiffs could also have called for production, even at the point in time that Mr Kelly's evidence was tendered and he was called to give evidence. In this respect, I note particularly what was said by Senior Counsel for the Insurers(at T 187.24-42): … It's said there that no explanation has been given as to why only one report went into evidence. In strict terms of the evidence before this Court, that is true apart from one piece of transcript, which I will take your Honour to. However, that proposition, words like "cute", "pushing the envelope" come to mind. My learned friends know perfectly well that one of Mr Kelly's reports was in reply to a report which they served and then informed the defendants they would not be relying on. So it was a reply report. They know that perfectly well and they shouldn't be saying that no explanation has been given to the Court when they know perfectly well what that explanation is. Secondly, at transcript 141 at about line 30 Mr Kelly said that - line 31 in answer to a question he mentions, "My initial report to the insurance company or the lawyers involved then". My learned friends know that Turks were the lawyers who wrote to Klinicha Lea and not Clyde and Company, and then the next question, "You've given a...of the insurers?" "Yes." Now, they have never been called for but they would not normally be put into evidence. The reports that were prepared for the purposes of the proceedings were served. Other reports were never called for… 1. With those observations in mind, I here record that I did form the opinion that Mr Kelly was advocating for his own views as to what had happened and I treat his opinions with some caution and an appropriate degree of circumspection. Indeed, for the reasons that I now turn to, I have formed my own views on the evidence, without the need to rely on those of Mr Kelly. Reasoning as to liability 1. As outlined above, the critical aspects of the matter on which the Insurers place reliance are that there was a single alarm activated in the location outside the reception office, with no cogent evidence of forced entry and a time period of sixteen minutes in which the alarm was deactivated (see particularly T 184.1-11); and, indeed, not those matters that Mr Kelly may have thought important, such as the fact that Mr Cook did not run towards the fire but ran out of the Hotel (a fact that I consider has no probative significance since there was a plausible explanation for it). 2. In this connection, there is no doubt that there was a sixteen minute period between the time that the first PIR alarm was activated (and the alarm was de-activated by Mr Cook) and the time that the alarm was re-activated (after which the multiple alarms were triggered by the burnt cables following the fire in the maintenance room) in which Mr Cook could have moved around the Hotel without triggering the motion sensors and in which he had time to set both the fires. 3. The possibility that a person or persons could have entered the Hotel through the window located on the southern side of the Hotel above the stairwell leading up to the top level function room is not consistent with the evidence that the window was opened by the fire brigade in order to allow air into the building (noting the statement of Senior Constable Walker that the window had been opened by the attending fire brigade – see at [103] above) and is not consistent with the evidence that the dust and debris on the windowsill was undisturbed. 4. To the extent that this evidence alone does not foreclose the possibility that someone entered (and, perhaps, exited) through this window (noting here that Senior Constable Walker might have been wrong in her record), I consider that such a possibility is inherently implausible. More particularly, it is implausible that someone entering the Hotel by those means would then have triggered the single PIR detector but could then have moved around the premises and escaped without setting off other PIR detectors (and, indeed, without being seen by Mr Cook in the period of time that he says he went around the premises looking to check for any disturbance). 5. Likewise, I accept that it would be extraordinary (and, again, I consider inherently implausible) that somebody (having on this hypothesis gained entry through that window) lighting a fire in the upstairs function room, having triggered an alarm, then to escape through that window and get out on to the flat roof, without leaving any evidence of any footprints or the like, and then even perhaps to turn around and close the window (which on the evidence that the window was opened by the fire brigade would have to be the case). 6. As I have just adverted to, I accept that the evidence as to the window being closed at the time of the fire rests to a large extent on the accuracy of the account given to, and recorded, by Senior Constable Walker (i.e., that the window was opened by the fire brigade). I bear in mind the caution in placing weight on the accuracy of entries of that kind (and the complaint by the plaintiffs that evidence was not adduced directly from Senior Constable Walker). However, there is simply no evidence that the window was left open; nor is there any evidence that the window was forced; nor that there was any entry through or out of that window. The evidence of Mr Kinsella does not assist because he was not even aware that there was a window there. Nor is it necessary to draw a Ferrcom inference from the failure of Mr Cook to give evidence that the window was or was not locked or closed when he went to bed. 7. In any event, for the reasons that I am here recording, the ultimate factual disposition does not ipso facto turn on whether the window was open or closed at the time of the fire, or whether it was subsequently opened by the fire brigade. 8. Again, the hypothesis that an outside intruder gained access to the upstairs function room from the staircase window does not, to my mind, plausibly explain how only the single PIR activation occurred. This is not least because, on that hypothesis, the intruder must then have come down the stairs in order to trigger the alarm but the intruder could not have got out through the downstairs stairwell (and the door leading to the maintenance room) because that door was locked according to Mr Cook's evidence and he was adamant that those doors could not be forced open in the manner in which Mr Burgin suggested in his evidence (see, for example, T 60.33-T 61.46). Moreover, if it was not Mr Cook who had set off the alarm outside the manager's residence then again it is inherently implausible, if not inexplicable, that other PIR alarms (say in the reception or bistro area) would not have been activated by the putative intruder. 9. Similarly, if perhaps more generally, it is implausible that someone wishing to cause damage to the Hotel would have chosen to do so by such methods which, it seems to me, raised an acute possibility of detection (particularly as compared to such other methods as the defendants here point out – as to which, see for example at [126] above). 10. Likewise, the hypothesis that there were two intruders simultaneously lighting fires, one in the upstairs function room and one in the maintenance room outside, again this does not explain the single PIR activation. 11. In this connection too, as to the evidence in relation to the doors to the workshop (that they could be opened by using a flat piece of metal to push back the latch and that a key to the workshop attached to a green tag which was usually kept behind the bar was observed to be missing about a week after the fire), this does not explain how the fire on the upper floor of the Hotel was lit. While it could be hypothesised that one intruder gained access to the workshop by either of these methods, it would still be necessary for the other intruder to have gained access to the function room. These are compounding improbabilities. 12. As to the suggestion that motel room no 2 may have had signs of forced entry, this is inconsistent with Senior Constable Walker's observations; but, in any event, it still does not adequately explain how the fire in the upper floor of the Hotel was lit with the single activation outside the reception office. At most it explains how access might have been gained to the maintenance room (and even then it does not address the issue as to whether the doors to the maintenance room were forced open, unlocked or left open). 13. As to the suggestion that someone was seen in one of the motel rooms on the night of the fire who should not have been there, even accepting that this was said, it is too imprecise to be of any probative value. Furthermore, even accepting that some unidentified woman was in the motel room, that person might have been in the motel room for any number of reasons. It is pure speculation to think that any such person might have had anything to do with the fires (and, again, it does not address the difficulty as to how the upper floor fire was lit). 14. I accept the submission for the Insurers that the complexity of the two fires on two different levels tells against an outsider (or outsiders) being the perpetrator(s), noting also the observations above in relation to other means by which someone else wishing to cause damage to the Hotel could have achieved that objective. 15. On the hypothesis that an outside intruder (or intruders) had either entered or escaped via the emergency doors to the street in the reception or bistro areas after the alarm system had been re-activated but before the alarm cabling had burnt, to my mind, this possibility is foreclosed by the fact that other PIRs were not activated. Indeed, on this hypothesis then, without Mr Cook's involvement, it would be necessary to accept that the intruder(s) somehow activated the single staircase alarm but then managed to move around the Hotel unheard and unseen by Mr Cook in order to set both fires and then escape without forcing any of the doors and without activating the alarm once it had been reactivated before the alarm cabling was burnt. I agree with the Insurers' submissions that it is inherently improbable that an intruder or intruders would have waited about twenty minutes after the first alarm before escaping from the Hotel (i.e., after the alarm system cabling had burnt). Again, for the preceding reasons, I accept that any such escape route could not have been the window in the stairwell and there is no evidence suggesting that any other window was open before the fire brigade and police arrived. The suggestion that an intruder or intruders might have escaped through the fire doors, again, does not explain that there was only a single PIR activation before the cabling was burnt and the multiple sensors were activated (and, also, that Mr Cook did not observe or hear such an escape). 16. Alternatively, on such a hypothesis, it could be said that the intruder(s) activated the single staircase alarm after setting one or both of the fires. However, this would mean that the escape must have been made either before Mr Cook went around the premises to check for disturbances, while Mr Cook was moving around the premises or that the intruder(s) remained in the premises while Mr Cook did so. Again, for the preceding reasons, I see that each of these is inherently improbable, if not impossible (not least because, on such a hypothesis, the fires would have been burning while Mr Cook did so). 17. In my opinion, and acutely conscious of the seriousness of the allegations here made against Mr Cook, I consider that the matters to which the Insurers point (namely, the complexity of two fires on different levels, the impossibility of forcing the doors at the base of the staircase leading down towards the storeroom thus necessitating an outside perpetrator entering and exiting the hotel part of the building externally to light the fire in the function room, the single alarm activation outside the manager's flat which would not have occurred had an intruder simply entered and exited via the stairwell window, the absence of evidence of forced entry to the hotel part of the building, the evidence against the stairwell window being open and the sixteen minutes during which the alarm system was switched off) inexorably point to Mr Cook lighting both fires. 18. To my mind, the single alarm activation from the staircase PIR (which would not have been triggered had the upstairs function room fire been lit by someone entering and leaving by the stairwell window alone and not descending further down the staircase) and the sixteen minute time period in which the alarm was deactivated points to Mr Cook (with or without assistance) lighting the fires. 19. I should note (as adverted to above) that it was accepted that there was no malfunction of the PIR detectors and that there was no accelerant used for the fires (see, for example, T 168.29). 20. I should also here note that it is not necessary to speculate as to the motivation for Mr Cook to have acted as he did. Suffice it to say that the suggestion that he would have had no reason to benefit from such conduct perhaps betrays the reality that, had the premises burnt down, the plaintiffs would have stood to be rescued, so to speak, from what was, even putting aside dispute as to just how bad the state of affairs was, a business that was clearly deteriorating and which the plaintiffs had personally guaranteed. In this connection, I also note the plaintiffs' position in relation to the quantification of loss and damage, being in excess of $1 million (see particularly at [213] below) seems, to my mind, to demonstrate a possible motivation in lighting the fires and making the insurance claims. Furthermore, such a submission presumes that Mr Cook was acting rationally – and, it is perhaps equally possible that this was simply a poorly thought through, and misguided, action on his part. I see no need to draw any Jones v Dunkel inference as to the fact that Mr Elder was not called to give evidence as to the account "anomalies". 21. The basis for my conclusion that Mr Cook did so, on the balance of probabilities and having regard to the standard of proof required by application of the Briginshaw principles, is that I can see no other plausible explanation for the events that occurred. The Insurers have, I think, foreclosed the doubts that have been raised, and might otherwise have existed, on the evidence. 22. For those reasons, the plaintiffs' claim must be dismissed. However, in the event that I am wrong in relation to this finding of fact, I now turn to consider the second issue in relation to quantum of loss and damage. Damages: if liability was established, what is the quantum of loss and damage? 1. As the plaintiffs bear the onus on this issue, I turn first to their submissions. Plaintiffs' submissions 1. The plaintiffs say that the contract was breached by the Insurers shortly after the fires (i.e., they say that the Insurers should have agreed to indemnify at about the time that Calliden Insurance agreed to indemnify in respect of the business interruption policy). It is said that this would have been a reasonable period after the fire and that, instead, the Insurers only declined indemnity on 5 September 2011 (that being one year after the fires). 2. The plaintiffs further say that the difficulties that now arise in calculating damages arise by reason of the Insurers' breach, including the delay in making a decision; and that such complications do not stand in the way of assessing and awarding damages (citing Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 349; [1994] HCA 4 per Mason CJ, Dawson, Toohey and Gaudron JJ). It is said that the loss and damage caused by the Insurers' breach of contract is substantial and that all the available evidence points to a particular result. 3. It should be noted here that the plaintiffs (despite their pleading) do not press a loss of profits claim (see T 3.13). 4. In summary, the plaintiffs say that the damages are in the order of more than $1 million (in a range of $1.1 million to $1.3 million), relying: first, upon estimates made at the time indicating the nature and extent of the physical damage to the premises and contents, and the cost of repairs and replacement; and, second, on a valuation undertaken by an independent valuer (Mr Britton). I refer to that evidence in due course. 5. The plaintiffs here emphasise that the indemnity does not merely cover damage to the building and, instead, it extends to cover stock and contents, and they note that the indemnity allows for the Insurers to fulfil their promise in three ways (by paying out the value of the property at the time of the event; by paying to the insured the costs of reinstating the damaged property; or by undertaking the repairs on their own account). 6. The plaintiffs say that none of the evidence in relation to the damages was subject to an objection, and most of it was not subject to cross-examination. It is said that it all points toward a "remarkably similar result" (that being a result of around $1.2 million). 7. It is convenient next to consider the submissions concerning alleged diminution in value. The diminution in value 1. As adverted to, it is said that one means of measuring the damages would be for the Insurers to have paid out Cook Investments in respect of the pre-fire value of the property. 2. In that event, reliance is placed on the report of Mr Ian Britton. It is noted that the receiver (as will be recalled, Mr Hamilton) instructed Mr Britton in 2011 to value the business and the premises on behalf of the financiers and that, August 2011, Mr Britton provided a detailed report addressing the "market value" of the property and business as a "going concern" on two bases: "as is" and "as if complete". 3. As part of his report, Mr Britton relied upon the cost of repairs as estimated by building consultants (Sergon) (as to which see also at [230] below). Mr Britton valued the property and business as follows: market value "as is" at $1 million; market value "as if complete" at $2.1 million. 4. It is submitted that, not only was Mr Britton's opinion independent, but it was ultimately confirmed to be correct given that the land and business were eventually sold "as is" for $1.025 million. 5. The plaintiffs say that it is appropriate for reliance to be placed upon Mr Britton's expert opinion, emphasising that, as Mr Britton was appointed by the receiver, he stands independent of both the plaintiffs and the Insurers. The plaintiffs here also point to Mr Britton's experience in the area of valuing hotels and motels in country New South Wales. It is noted that, in cross-examination, Mr Britton said that he had, "valued nearly 100 hotels/motels a year and I've been doing it for nearly 15 years…" (see T 86.13-86.17). As noted above, it is said that Mr Britton's assessment of the value of the business in its damaged condition was vindicated by the outcome, in that Mr Britton had estimated that the property in its damaged condition had a market value of $1 million and it sold for $1.025 million. It is noted that, although the Insurers have had Mr Britton's report since January 2019, they chose to place no evidence before the Court which would have the effect of contradicting Mr Britton's approach, methods or results. 6. It is further said (although it is not clear what it is suggested turns on this) that, to some extent, the Insurers received an advantage by relying upon the report of Mr Britton. It is noted that Mr Britton's valuation was given as at August 2011 (nearly a year after the fire and during a period in which the general prices for these kinds of businesses had fallen). 7. Again, it is said that Mr Britton's position translates into a "straightforward result": a loss of $1.1 million (i.e., in its undamaged condition the Hotel had a value of $2.1 million; in its damaged condition it had a value of only $1 million). 8. It is convenient next to consider the Sergon report. The Sergon report 1. As adverted to, an alternative basis on which it is suggested that the damages may be calculated is by reference to the report of Sergon, a firm of building consultants, which was retained on behalf of the Insurers. 2. It is noted that, shortly after the insurance claim was lodged, the Insurers appointed Cunningham Lindsey to act as agent in assessing the loss. As at 11 October 2010, Cunningham Lindsey advised the Insurers that the repair costs would be in the order of $670,000 and the replacement of the contents would cost $250,000. The plaintiffs say that, to this, there would be added numerous other fees and expenses. They say that this opinion appears to have been based upon the work of a specialist building consultant, Sergon. 3. On 18 October 2010, Sergon provided a detailed assessment of the necessary works and probable building costs (see Mrs Cook's affidavit sworn on 31 May 2018 at Annexure G; Mr Cook's affidavit sworn on 10 June 2018 at Annexure G). 4. Sergon's estimate of the building costs was $629,574.51. The plaintiffs say that there is no reason not to adopt that base figure in any assessment of damages. 5. Sergon went on to state that no allowance had been made for a range of items. The plaintiffs say that it is plain that some of these costs would be incurred, and there was a chance that others might be incurred. The plaintiffs say that some allowance must be made for these items, and there is scant evidence about it (although there was a reference to it in the reserve set by the Insurers – see at [242] below). It is also noted that the report of Sergon did not deal with the contents which were destroyed or damaged in the fire. 6. I here note that Sergon's report was admitted by consent and there was no challenge to any part of it. It is said that, on its face, it is comprehensive and careful. The receiver's reports 1. The plaintiffs also make reference to the receiver's reports, which the plaintiffs say tend to confirm Mr Britton's opinion. It is noted that the receiver had separately pursued a sale of the premises and the repair of the premises (which did not ultimately proceed) in that there was at one stage a tentative agreement for sale of the land and business as damaged by the fire for $1.15 million. It is noted that, although the receiver had access to the report by Sergon, he separately pursued information regarding reinstating the premises. It is said that this "strongly confirmed" Sergon's estimate. In relation to the repairs, the receiver commissioned an architect and a quote was tentatively accepted for the sum $632,000 (which did not proceed). 2. The plaintiffs say that the reason the contract for repairs did not proceed appears to be because requirements were demanded by Cowra Council and WorkCover. It is noted that these requirements are not costed, but appear to have included a need for renewed wiring ($22,000) and special work containing asbestos ($91,000). It is said that no allowance for damage to the contents was given. 3. The plaintiffs submit that the receiver's reports are helpful because they identify property damaged which was not the subject of the report by Sergon, noting that four of the gaming machines were damaged and needed to be replaced (estimated at $60,000). 4. Next, it is necessary to to consider the Cooks' own evidence as to the contents damaged. The Cooks' evidence regarding the contents 1. Each of the plaintiffs annexed to his or her affidavit a list of the contents of the property which had been damaged. Those lists were admitted as evidence of the contents, but not as to their value (see Mr Cook's affidavit sworn on 10 June 2018 at Annexure H; Mrs Cook's affidavit sworn on 31 May 2018 at Annexure H). 2. The plaintiffs submit that, even without values of those items, it can comfortably be concluded that a wide variety of items were destroyed (which they say supports other evidence relating to the value of the contents). Setting the reserve 1. The plaintiffs also point to the evidence that the insurers were advised to set a reserve against the cost of rectifying the damage from the fire. It is accepted that setting a reserve is only a very rough estimate, but it is said that this confirms the evidence in relation to the nature and extent of the loss. As I have noted above, the Insurers had retained a firm of loss assessors, Cunningham Lyndsey, and, on 11 October 2010, the Insurers were advised to set a reserve of $1 million comprising building costs of $670,000, replacement of contents at $250,000 and "fees" of $80,000 (see Ex F). Plaintiffs' concluding submission as to damages 1. Again, the plaintiffs submit that there are different ways in which the assessment of damages could be approached: by reference to the diminution of value; by reference to the costs of reconstruction and the replacement of the contents; or by utilising the evidence on both issues in order to arrive at a figure which is appropriate taking all of that evidence into account. 2. The plaintiffs say that, if the diminution in value method is adopted, the loss is $1.1 million; alternatively, if it is the cost of reinstating the premises and the contents, then there are different pieces of evidence to be considered (noting the estimated cost of repairs and reinstatement, which according to Sergon and other sources are said to be in the order of $630,000 plus additional costs on top of the building costs, such as professional services and licences). It is noted that Cunningham Lyndsey set fees at $80,000. As to the replacement of the contents which were destroyed by the fire, again, it is known that gaming machines, worth $60,000, needed to be replaced. The loss adjuster's estimate, which the plaintiffs say would seem to be reasonable, is $250,000. 3. The plaintiffs submit that a pragmatic assessment of damages should be made somewhere between $1 million and $1.1 million (and that interest can be calculated in due course). Insurers' submissions as to damages 1. The Insurers criticise the quantum of the damages claim brought by the plaintiffs as being "somewhat opaque". They say that, prima facie, the measure of damages is the rectification costs of the Hotel and that the plaintiffs' claim for loss of capital value of the Hotel on sale is misconceived (as is the evidence adduced in support of that claim). In closing submissions, the figure the Insurers put as to the rectification costs is the amount of $740,535.51, being the cost of repairing the damaged property as a result of the two fires. 2. Insofar as the claim for damages is advanced on the basis of the loss of capital value of the sale of the Hotel, as noted above, the Insurers say that this is not the correct measure of damages and they also make the following submissions. 3. First, they say that little, if any, weight can be put on the opinions expressed by Mr Britton in his report. It is said that the assumptions made by Mr Britton as to the financial and trading position of the Hotel were incorrect (comparing Mr Britton's report at [10.1]-[10.4] to Ex A). It is noted that Mr Britton accepted that the assumptions as to the trading performance of the Hotel were materially relevant to his opinion (referring to T 86.25-35, T 89.23-50, T 90.36-49). 4. Second, that, in coming to the opinion that he did, Mr Britton accepted that the only sale in his table of comparables at a price higher than $2 million was the Tourist Hotel in Queanbeyan, which was not comparable (see T 96.35-37); that the only other sale with an net operating profit higher than $400,000 was the Murwillumbah Hotel, which sold for $1.9 million; that the "as if complete" valuation figure of $2.1 million should be reduced by $250,000 for "Allowance - Partial Refurbishment" (and referring to T 99.35); and that Cowra was a "weak" hotel/motel town with a lot of competition and with no hotel turning over $30,000 per week (see T 98.49-99.21). 5. Thus, it is submitted that, if the valuation evidence is found to be relevant to the quantum assessment, then the finding should be that the market value of Hotel, undamaged by fire, was no greater than $1.7 million and the difference between market value undamaged by fire and the actual sale price of $1.025 million was $675,000. 6. Third, and alternatively, that even if it is accepted that the loss of capital value on the sale of the Hotel is the proper way to measure damages, and Mr Britton's valuation figure for market value undamaged by fire is accepted, then the damages are not $1,025,000 (being the difference in the sale price of $1.025 million and the opinion of Mr Britton as to what a repaired Hotel would have sold for, being $2.1 million) but, rather, $775,000, as an additional $250,000 for upgrades to non-fire damaged areas of the Hotel which would have been necessary to carry out regardless of the fires (referring, inter alia, to T 99.35). 7. Finally, it is said that the plaintiffs cannot claim both the rectification costs and the loss of capital value realised by the sale of the Hotel because, if the plaintiffs succeed, then the Insurers ought to have expended the rectification costs, which would have allowed the plaintiffs to obtain the sale price. It is noted that the plaintiffs never expended the rectification moneys themselves. Determination as to damages 1. Had it been necessary to determine this issue, I would have accepted that the correct measure of damage was the rectification costs in the amount of $740,535.51 with an allowance for the contents destroyed in the fire (which on the evidence could only be assessed at the amount of the TAB machines, being some $60,000). 2. Apart from the fact that I do not consider that the loss of capital value on sale of the Hotel is the appropriate measure of damages, I have difficulty accepting the weight placed by the plaintiffs on Mr Britton's report for the reason that, experienced as I accept Mr Britton is in valuing country hotels and motels, I do not consider that the comparables used by Mr Britton were sufficiently comparable and I consider (with no disrespect to Mr Britton who had been asked to adopt them) that there is force as to the criticism made in respect of the assumptions adopted by Mr Britton. That said, it is true that the final sale of the Hotel in its fire damaged state was very close to the value placed by Mr Britton on the Hotel. 3. In any event, even had the loss of capital value been the appropriate way to measure the damages and Mr Britton's report been accepted as to the market valuer of the property undamaged by fire, I accept that the damages would be $775,000 (for the reasons submitted by the Insurers). 4. Thus, had it been necessary to determine damages, I would have concluded that a sum of between $775,000 and $800,000 was the correct measure of damages. Conclusion and orders 1. It remains only to be said that I see no reason not to make the usual order as to costs. 2. For the preceding reasons, I make the following order: 1. Dismiss the plaintiffs' claim with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 November 2020