NRMA Insurance Limited v SMITH SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL MEAGHER JA, HANDLEY JA and ABADEE AJA 20 September 1996 [1996] NSWCA 404 Evidence — Credibility — trial judge's assessment of party — rejection of claim of theft under insurance policy by an insured — decision in favour of that party by trial judge not to be lightly displaced on appeal — Devries vy ANI; Baron Akerhielm v Rolf De Mare & Ors Abadee AJA. The appellant appeals from the judgment of Judge Harry Bell entered in favour of the respondent in the District Court on 3 September 1993. The respondent's case was that he parked his motor car outside his grandparents" premises where he was residing at about 10pm on the evening of 1 February 1991. Those premises were located at Edgecliff. When he left the vehicle in order to enter the premises he activated the car's alarm system. He said that after entering the premises he did not leave the premises until the next morning. After leaving his grandparents" home he went outside and observedthat his car was missing. He returned inside and rang the Paddington police station. He reported the stolen car over the "phone. He was told to report the matter in person. He left the premises and then went to the Edgecliff station and entered a train to travel to Marrickville for the purpose of returning some videos. He went to the Marrickville or Sydenham police station and reported the occurrence of the theft of his car. On 4 February 1991 he was given a message by his employer that the car had been found. He went to its location at Leichhardt and observed that the vehicle was in a stripped condition. He lodged a claim form with the appellant insurer on 4 February 1991. The action brought by the respondent involved proceedings under an insurance policy with the appellant. It concerned the theft of his Holden Calais motor car. The contract of insurance was entered into on or about 10 April 1990. Whilst the existence of the policy was not disputed by the appellant at the trial it was claimed by the respondent that the appellant was not entitled to avoid the policy. In its defence the appellant said that the proposal was false, and was not true and correct. More significantly it denied that the motor car had been the subject of any theft, asserting that the respondent was involved in the fraudulent disposal of the vehicle and that the plaintiff's claim was made fraudulently. His Honour, in embarking upon the task, clearly understood the issues that confronted him, stating at appeal book p 164 that he had todecide on the basis of the whole of the evidence whether there was probably a theft or not, or simply whether he was not satisfied that there was, in fact, such a theft. It has been submitted by Mr Seton that his Honour correctly stated what the issues were, but ultimately misdirected himself in the determination of those stated issues. 2 UNREPORTED JUDGMENTS In his judgment the trial Judge found that the appellant had failed to discharge its onus of proof demonstrating that the respondent had made a fraudulent claim. This finding is not now challenged on appeal. However the appellant challenges the trial Judge's finding that the respondent had discharged the onus of proof that on the evidence that the Holden Calais had been stolen. It has also been submitted that his Honour did not consider the whole of the evidence on the issue of whether the respondent discharged that onus of proof. The appellant has submitted that his Honour should have considered the objective facts established by the evidence and not just whether he believed the respondent or not. Further, or alternately, it was argued that his Honour had erred in finding that the respondent was a credible witness. I would immediately observe that this latter ground of complaint is a difficult one to maintain where his Honour had the benefit of seeing and hearing the respondent give his evidence. His Honour found that the respondent's evidence, as to the theft, was uncontradicted, whilst acknowledging at the same time that such was the nature of most cases of 'this sort'. Indeed his Honour said that the evidence of the plaintiff in such circumstances should be 'scrutinised closely before it is accepted'. This is precisely what his Honour did in the circumstances of the instant case. His Honour said that there was a clear motive for the respondent to make a false claim. However he also said that motive alone was seldom sufficient. His Honour then proceeded to state what were the relevant circumstances from which he was asked to infer fraud. They were said to be thirteen in number. His Honour dealt with each of the thirteen matters and it is not necessary for the purpose of this judgment to repeat them. His Honour considered that the circumstances, to which he referred, together with the inconsistent statements and irrational explanations offered, cast doubt upon two transactions (by which I take his Honour to mean the two thefts) which had been identified by his Honour in the relevant thirteen circumstances so stated. His Honour considered that whilst there was a very thick cloud of suspicion in relation to such transactions ultimately he concluded that it was not enough to cast suspicion over the plaintiff's activities. Thus, his Honour appears to have formed the view that whilst the circumstances and particularly the inconsistent and irrational explanation offered by the respondent raised suspicion, nevertheless, he was not prepared to draw from those matters alone an inference that there had been no theft at all. In respect of this aspect of the matter I see no error in the reasoning of the trial Judge. His Honour also appears to have concluded that there was a distinction between suspicion on the one hand, and proof on the other. His Honour concluded that the respondent's uncontradicted evidence as to theft was not negatived by any inference arising from any or all of the thirteen circumstances stated, or from his inconsistent and irrational explanations. Again I see no error in such a view. However, his Honour did not stop there in relation to refusing to draw the inference of theft from the matters referred to. He then turned to consider whether he believed the respondent on the balance of probabilities. In examining the respondent's evidence, his Honour had the opportunity of closely scrutinising that evidence and also closely observing the demeanour of the respondent. Indeed the appeal book reveals that cross-examination of the respondent had taken place over a period of two days and there is almost sixty pages of cross-examination that appears in the appeal book. I mention these matters so as to indicate that URJ NRMA Insurance Limited v SMITH (Meagher JA) 3 clearly his Honour's assessment of the respondent was not based merely upon a fleeting visit to the witness box. His Honour had the opportunity of carefully observing the demeanour of the respondent whilst he was giving evidence, particularly in a lengthy cross-examination. It is clear that in relation to whether he accepted the respondent's case that there had been a theft his Honour gave considerable weight to the impressions formed in relation to the respondent's evidence. His Honour said, appeal book page 166: I saw him to be cross-examined, I noted his inconsistent answers, but really thought that it was more consistent with naivety and fright than with dishonesty and I find on the balance of probabilities that the car was stolen. This finding of his Honour clearly indicates that his Honour had been weighing the evidence of the respondent in the witness box, and particularly weighing his credibility and demeanour by reference to that long appearance. It seems to me that his Honour's finding clearly reflects an evaluation finding in relation to demeanour. Thus it seems to me that his Honour's finding makes it almost impossible for the appellant to succeed on this appeal. See Abalos v The Australian Postal Commission (1991) 71 CLR 167. Here the Judge's findings depended, to a significant extent, on the credibility of the respondent, see Devries v The Australian National Railways Commission (1992) 177 CLR 472 at 479. Although his Honour did not specifically make refer to a finding based upon the demeanour of the respondent, it seems to me that the passage that I have quoted from his Honour's judgment would suggest that at the very least the subtle influence of demeanour played a role and operated in his mind in the determination of the matter. In a case of this nature I also consider that it is important to bear in mind that the claim made by the appellant was that the respondent was responsible either for the theft of the car, in the sense that either he stole the car, or alternatively he arranged for his car to be stolen for him. In the case of Baron Uno Carl Samuel Akerheilm & Anor v Rolf De Mare & Ors (1959) AC 789, a case concerning an action involving fraudulent misrepresentations, the Privy Council said at p 806 as follows: Their Lordships can hardly imagine a case in which the credibility of a witness could be more vital than a case like the present where the claim is based on deceit, and the witness in question is one of the defendants charged with deceit. Their Lordships would add that they accept, andwould apply in the present case, the principle that where a defendant has been acquitted of fraud in a court of first instance the decision in his favour should not be displaced on appeal except on the clearest grounds. I consider that these remarks are apt to be applied particularly in the circumstances, where the respondent actually gave evidence and was extensively cross-examined and further, in circumstances where the trial Judge clearly based his judgment upon his impression formed in consequence of having both seen and heard him. For these brief reasons I am of the view that the appellant has not established any of the appeal grounds relied upon. In my view the appeal should be dismissed with costs. Meagher JA. I agree. Handley JA. I also agree. Meagher JA. The order of the Court therefore, is the appeal is dismissed with costs. UNREPORTED JUDGMENTS Orders accordingly. Counsel for the appellant: R W Seton Solicitors for the appellant: Abbott Tout Counsel for the respondent: Brad Hughes Solicitors for the respondent: Michael E Stevens and Co