Kervan Trading Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [1999] NSWSC 185

New South Wales Supreme Court CITATION : Kervan Trading Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [1999] NSWSC 185 CURRENT JURISDICTION : Common Law FILE NUMBER(S) : 11233/92 HEARING DATE(S) : 08/02/99; 09/02/99; 10/02/99; 11/02/99; 12/02/99 JUDGMENT DATE : 12 March 1999

Kervan Trading Pty Ltd (Plaintiff)

PARTIES : v

Mercantile Mutual Insurance (Australia) Ltd (Defendant) JUDGMENT OF : Barr J at 1

Mr IM Wales SC/Mr G Hansen (Plaintiff) COUNSEL : Mr J Graves SC/Mr M Orlov (Defendant) Truman Hoyle (Plaintiff) SOLICITORS : A R Conolly & Company (Defendant) CATCHWORDS : Fire insurance policy - claim - defence of fraud. Helton v Allen (1940) 63 CLR 691 ACTS CITED : Hornal v Neuberger Products [1957] 1 QB 247 Briginshaw v Briginshaw & Anor (1938) 60 CLR 336. DECISION : Verdict for the defendant with costs.

THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

GRAHAM BARR J

Friday, 12 March 1999

11233/92 - KERVAN TRADING PTY LTD v MERCANTILE MUTUAL INSURANCE (AUSTRALIA) LTD

JUDGMENT 1 HIS HONOUR: The plaintiff sues the defendant for the proceeds of a fire insurance policy issued by the defendant and covering the contents of the plaintiff's shop, which was severely damaged by fire on 27 August 1989. The defendant admits the issue of the policy and that the plaintiff suffered a total loss. The sum insured was $300,000. The parties agree that the fire was deliberately lit and the only issue is whether the plaintiff had foreknowledge of the fire. 2 There are two consequences when, as here, a defence of fraud is pleaded. First, the issue must be tried by a jury: Supreme Court Act s 88. However, although the matter was not dealt with formally, counsel informed the Court that the parties consented to the matter being tried without a jury. I order that all issues of fact be tried without a jury. 3 Secondly, the burden of proving fraud lies on the person who asserts it. If, as here, the asserted fraud is criminal in character, it must be proved strictly, because the degree of proof in a civil trial depends on the magnitude of the thing that is in issue. Helton v Allen (1940) 63 CLR 691 per Dixon, Evatt and McTiernan JJ at 711. 4 In Hornal v Neuberger Products [1957] 1 QB 247 Denning LJ said at 258: The more serious the allegation the higher the degree of probability that is required; but it need not, in a civil case, reach the very high standard required by the criminal law. 5 In Briginshaw v Briginshaw & Anor (1938) 60 CLR 336 Dixon J said this at 361 - The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. I cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality … But reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences. 6 The defendant must therefore establish to a high degree of probability that the plaintiff knew that its shop was going to be set on fire. As will appear, that will involve proof that its managing director and controlling officer, Mr Kemal Kavurma, had that knowledge. 7 At the time of the fire Mr Kavurma was the principal executive officer of the plaintiff, having been appointed managing director on 15 January 1985. The plaintiff carried on the business of importing Turkish and Greek videos, copying and distributing them in premises at 37 Queen Street Auburn. It occupied the rear of the ground floor of that premises. 8 Mr Kavurma became associated with the film or video business during the 1970s. In 1980 he established a business called Akturk Video at Auburn, hiring out video cassettes to the public. In October 1984 he acquired a controlling interest in the plaintiff and the plaintiff acquired the undertaking, equipment and stock of Akturk Video. The plaintiff owned a substantial number of master video tapes and had exclusive distribution rights in Australia for films present and future made by a number of producers. Video tapes were dubbed with English or Greek subtitles and the plaintiff acquired special equipment for that purpose. In November 1998 it moved to occupy the rear portion of the ground floor of 37 Queen Street Auburn. It leased that part of the premises from Auburn United Friendly Society. 9 The front part of the ground floor was leased by Mr Kavurma and Mr Hassan Atmali, the secretary of the plaintiff, for the conduct of a business, called Turkmen Video. They had equal interests in that business, hiring out videos to the general public. Part of the plaintiff's business consisted in the supply of video tapes to Turkmen Video. 10 The first floor of the same premises was occupied by the owner as offices and a pharmacy. The whole of the premises, upstairs and down, was fitted with a burglar alarm system connected to the office of a security organisation, Kanimbla Security Proprietary Limited, which maintained and monitored it. 11 On 27 August 1989 Mr Kavurma left the shop by the front door in the company of Mr Mehmet Atmali, the brother of Hassan Atmali. Records of Kanimbla Security show that the alarm was turned on at 10.46 pm. The shop was well on fire by midnight. 12 Mr Jeffrey Gudmann, a consultant in fire and explosion investigations, gave evidence. His qualifications and conclusions were not challenged. A plan annexed to his report shows that the premises comprises a narrow building whose long axis runs approximately south-north at right angles to Queen Street. The front of the premises, which was occupied by Turkmen Video, is wider than the rear. Mr Kavurma and the plaintiff's employees had to walk through that portion to enter and leave the building by the front door. The alarm board for all parts of the ground floor was in the front of the premises. Behind the counter at the rear of that portion was a door giving access to a narrower portion of the building which comprised three rooms in a row. The first contained shelving with equipment, tapes and the like and a table, and led on to the second. The second led onto the third. 13 Two independent seats of fire were established, one in the first of these rooms and the other in the second. Both seats were close to the eastern exterior wall. 14 Altogether there were eight openings in the exterior brick wall through which it might have been possible to gain access to the first and second rooms. Two of them were the front doors leading on to Queen Street. There was a single door in the western wall behind the front portion of the premises leading directly on to the first room. The evidence conclusively establishes that none of those doors was forced. The third room, which was used for storage, contained a door and a window. The door was locked and padlocked and permanently nailed shut. There were tool marks on the door, as though someone had tried to jemmy it open, but it is not possible to say when they were made. The evidence shows that the door was not open immediately before or during the fire. In the same room was a window, and that showed no sign of forced entry. Of course, there was no seat of fire in that room. 15 The seat of fire in the second room was close by the only opening in the exterior wall, a window. Although it had been protected originally by a stout wire mesh, by the time Mr Gudmann made his inspection the mesh had been pulled out of place. The window was broken, of course, and that could have happened before the fire began. Samples taken at the seat of that fire showed that petrol had been used to start it. Clearly enough, some petrol soaked and lighted object could have been dropped through the window to the point where the fire began. 16 The first room contained two exterior wall openings, a boarded up window and a boarded-up door. There was no sign of forced entry of the window. There was an air conditioning unit fitted to the upper portion of the door. Above the door and the unit was a small window, hinged at the bottom and opening inwards. It was originally protected by wire mesh. At the time of Mr Gudmann's inspection, the mesh had been detached at its lower fixing points. The seat of the fire was more or less directly under the window. The exterior part of the air conditioning unit had a flat top, and lying on it Mr Gudmann found pieces of partially burnt cloth. Tests showed that they contained petrol residue. On the ground next to the door were two stacked bottle crates upon which someone could have stood to gain access to the window above. 17 According to Mr Gudmann, the proprietor of the video shop told him that before the fire a timber wall lining had covered the window. However, Mr Gudmann found only a few remnants of the lining, none of them close to the window, so it is not possible to say how efficiently the window was covered internally. There was no evidence whether it could have been opened far enough to allow anyone to pour petrol through it or drop a lighted cloth onto the floor from outside the building. However, the lining would not have extended below the bottom of the hinged frame because the air conditioning unit was there. It seems possible for the fire to have started in such a manner. 18 Near the seat of the fire in that room was found a broken glass vase into the neck of which there had been stuffed a roll of video cassette labels. The vase contained petrol residue. It contained very little sooty deposit on the underside of its base, which suggested that it might have been standing upright during the fire. In the same place was a coffee table, though by the time Mr Gudmann inspected, the vase was broken and underneath the table. It is impossible to say whether the vase was used in some way to start the fire and, if so, whether it was introduced from outside the building, or whether it might have been originally standing on the coffee table or whether petrol was introduced by pouring through the window or by some other means or deliberately or accidentally. Mr Gudmann offered no opinion. Counsel made no submissions about the part played by the vase. 19 I conclude that it was possible for an accelerant and a source of heat to be introduced from outside the building adjacent to each of the two seats of fire and that that is probably how the fire began. 20 Mr David Rath, general manager of Kanimbla Security, gave evidence. He said that the alarm detectors at the front of the premises were set to delay the raising of the alarm for a short time to allow persons to enter and leave the premises at the opening and close of work. Detectors in the three rooms occupied by the plaintiff would have triggered sirens instantly if they had detected the presence of any person or object. Any detector raising the alarm would have brought into operation an automatic dialling system by which the alarm would have been raised at the premises of Kanimbla Security. Such a signal would also have been sent to Kanimbla Security if the power had been turned off or the external siren interfered with. 21 The records of Kanimbla Security showed no malfunction after the alarm was turned on. Although the system components were damaged by fire, Mr Rath detected nothing about them that would suggest that they were not working properly at the time of the fire. However, no signal was received by Kanimbla Security. 22 The damage to the rear rooms of the premises was severe and the upstairs offices had already begun to sustain serious damage above the second room. The alarms in both premises should have sent independent signals to Kanimbla Securities. The only explanation Mr Rath could put forward why they did not was that the telephone lines, which were the means by which the automatic signal was sent to Kanimbla Securities, must have been severed outside the building. Unfortunately, he did not look to see whether this was so. Even so, that seems to be the only reasonable explanation for the failure of the system. 23 The defendant submitted that Mr Kavurma had a motive to burn the premises and claim the proceeds of the policy, relying on evidence of his and the plaintiff's financial position before and at the time of the fire. 24 Following the fire Mr Kavurma signed a number of documents, namely a statement to the police on 28 August, a statement to an insurance investigator, Mr Thomas, on 30 August and two records of interviews between himself and Mr Thomas on 30 October and 2 November 1989 respectively. In these documents Mr Kavurma made a number of significant statements about his and the plaintiff's financial affairs. 25 He said that the plaintiff had had the lease of a $60,000 subtitling machine but fell behind in the payment of instalments, and that the lessor repossessed it in 1986. The plaintiff borrowed $50,000 from Mr James Fuggle in the same year. The loan was not fully repaid by the time of the fire. At that time, the plaintiff owed about $100,000 in loans made by solicitor and private lenders. 26 Mr Kavurma himself owed the balance of a judgment debt in the District Court, to Roscoe WG Hoyle & Co, solicitors, whom he had instructed to act for Akturk Video Pty Limited in proceedings in the Equity Division of this Court and in the Supreme Court of Victoria. The solicitors obtained judgment for approximately $70,000 and there was still some $40,000 owing at the time of the fire. It is unclear, however, whether Mr Kavurma included his $40,000 personal debt in the $100,000 he told Mr Thomas the plaintiff owed. 27 In February 1986 a company called TBE Pty Limited sold and delivered to the plaintiff a number of video cassette recorders and other electrical equipment for $19,000. The money was never paid and TBE obtained judgment against the plaintiff in 1988. Judgment was never satisfied and a writ of execution was issued. A number of conversations followed between Mr Kavurma and Mr John Marsden, the principle of TBE Pty Limited, during which Mr Kavurma first tried to pass off responsibility for the debt to a man in Melbourne with whom he had a dispute, the subject of separate court proceedings, and then said that he and the plaintiff had no money. He advised Mr Marsden to write off the debt. 28 In a written report to the National Companies and Securities Commission, signed by Mr Kavurma on 18 May 1987, the stock was valued at $300,000 but its realisable value at only 10% of that amount. 29 During 1989 Direct Acceptance Corporation Limited served a notice of demand on Mr Kavurma following his personal guarantee to it concerning the debts of Akturk Video Proprietary Limited and Akturk's default. Some $10,000 was demanded. It was not suggested that Mr Kavurma had any defence. 30 As at the date of the fire there were fixed and floating charges registered over the assets of the plaintiff for $37,000 owed to Direct Acceptance Corporation and $50,000 owed to Mr Fuggle. Mr Kavurma told Mr Thomas that the charges were enough to discourage lenders from advancing any more money to the plaintiff. 31 The trading results of the plaintiff were poor. For the 1985 financial year there was a net loss of $24,753, for 1986 a net loss of $12,236, for 1987 a net loss of $48,397, for 1988 a net profit of $27,283 and for 1989 a net loss of $10,933. Accumulated losses at 30 June 1989 were $69,036. 32 Although the plaintiff had a bank account at the State Bank of New South Wales at Auburn there was no movement on that account for the six months immediately before the fire. On a number of occasions debts of the plaintiff were paid by cheques drawn on the account of Turkmen Video. 33 Mr Kavurma was the majority shareholder in the plaintiff, holding about 210,000 ordinary shares as against other holdings totalling about 70,000 shares. He told Mr Thomas that he had sunk into the plaintiff's business $296,000, which he had obtained from the sale of a former video shop business, a farm, a crop and from a personal borrowing of $50,000. 34 Apart from his interest in the plaintiff and Turkmen Video, which appeared to have minimal assets and to have an overdraft of $85,000 and other debts, Mr Kavurma's only assets seem to have been his interest in the contents of his and his wife's house. His wife owned a 12 year old Mercedes Benz motor vehicle. They had virtually no money in the bank. 35 Mr Kavurma told the police that at the time of the fire the plaintiff had no reserve funds and all its money was tied up in stock at the Queen Street premises. 36 It was submitted on behalf of the plaintiff that Mr Kavurma had no motive to destroy the assets of the business. The defendant's admission that the plaintiff suffered a loss of no less than $300,000 in the fire amounted, it was submitted, to an admission that the plaintiff had substantial assets. It was submitted that Mr Kavurma had been in the video business for years and re-opened a video shop almost immediately after the fire in the same district. His preparedness to recommence a similar business to similar customers showed that he was confident that his business could trade profitably. It was further submitted that it would have been a huge risk to liquidate the substantial assets of the plaintiff by means of the fire and the insurance claim because that would have made it easier for the creditors of the plaintiff to get their hands on the money. 37 As will appear, however, Mr Kavurma set up in business again only by the use of $25,000 which he borrowed and never repaid. I have difficulty in accepting those submissions. 38 There were other submissions, too, which I do not accept. The first was that Mr Kavurma's starting up business again, combined with the fact that this was a cash business, suggested that the business might not have been as unprofitable as counsel for the defendant contended. Such a submission carries with it at least the implication that much of what Mr Kavurma certified as true in official documents was not in fact true. 39 On the whole of this evidence I accept the submission of the defendant that the business was chronically starved of ready money and I think that it might have suited Mr Kavurma's interests to convert the contents of the business to cash. 40 The defendant's two principal witnesses were Miss Semra Yuksel and her mother, Mrs Emine Yuksel. Miss Yuksel met Mr Kavurma in 1982 when she was 20 years old and began working for him full time at the premises where Akturk Video was then operating. She was paid in cash. Soon afterwards, Mr Kavurma formed a partnership with a man called Sogutlu, but it did not last long, and after the rift Miss Yuksel worked for Mr Sogutlu. She left his employment in about 1987 and after a short period of unemployment began working again for Mr Kavurma at Turkmen Video. She continued to work for him until after the fire. Part of her job was to deal with telephone callers, particularly suppliers of video tapes and video tape recorders who wanted their bills paid. Mr Kavurma would often ask her to put them off, saying that he was not there or giving other excuses. 41 Miss Yuksel met Mr Atmali in 1985 and by the time of the fire had been in a sexual relationship with him for some time, perhaps two years. Miss Yuksel lived with her mother. Mr Atmali and Mr Kavurma were in the habit of calling in regularly. Mr Atmali used to stay overnight several nights each week. Mrs Yuksel disapproved of the relationship because Mr Atmali was married. 42 On 19 June 1989 Miss Yuksel went to Turkey for a holiday and to visit members of her family and did not return to Australia until 9 September 1989, a few days after the fire. 43 According to Mrs Yuksel, Mr Kavurma and Mr Atmali went to her house about four weeks after Miss Yuksel left for Turkey. She had $4,000 in a bank account and they knew about it, though she could not say how and assumed that she must have mentioned the fact at some time. They told her that they wanted to buy cassettes for the video shop and asked her to lend them the $4,000. They said they would repay her with interest. She agreed and they took her to the Commonwealth Bank at Lidcombe and she withdrew the money and handed it to them. About a year later Mr Atmali telephoned her and told her that the money was being repaid. Mr Kavurma repaid the $4,000 without interest. 44 Mrs Yuksel went on to say that about one week before the fire the two men again visited her house and Mr Atmali said to her in the presence of Mr Kavurma - "Mummy, we need the key to your garage to store something in it." 45 Mrs Yuksel agreed and gave them a key. Over the following three nights the two men placed in the garage a number of cardboard boxes which they brought in Mr Atmali's car. They were stored along three walls of the garage. She did not speak to them about the boxes as they were delivered, but had a look at them after delivery was complete. She opened a box and saw a machine that looked like a video cassette recorder. She did not open any other box, but some of them were old and imperfectly sealed and she could see video cassette boxes inside them. 46 Although Mrs Yuksel telephoned Miss Yuksel in Turkey she did not tell her about the fire. Miss Yuksel found out about it in a telephone conversation with Mr Atmali. He simply told her that the shop had burnt and gave her no information about the cause of the fire. 47 Mr Atmali collected Miss Yuksel from the airport on her return and drove her to her mother's house. On the way she suggested to him that he had been involved in the lighting of the fire. He did not deny the suggestion and said that they were already renting a new shop and were going to get lots of money. 48 On the same day Miss Yuksel went into the garage and saw the boxes to which her mother referred in her evidence. She looked into one or two of them and saw that they were full of video cassettes. One of them contained two pieces of equipment that had been at the Queen Street premises before she left for Turkey. One was a machine used to write the name Turkmen Video onto the beginning of video tapes. That I take it is the same as the equipment also called a titling machine. The box contained another piece of equipment that Miss Yuksel recognised. It had coloured buttons along its face. 49 The video tapes that Miss Yuksel saw were from the shop and she could identify labelling in the handwriting of Mr Kavurma, Mr Atmali or their employees. 50 Miss Yuksel went on to say that on the following day she went to the new shop which Mr Kavurma and Mr Atmali were in the process of setting up in Auburn Road, Auburn. They had kept the name Turkmen Video. Mr Kavurma and Mr Atmali were there alone and a conversation took place between them and Miss Yuksel as she helped them. Although it was put to her that she had played no part in the setting up of the shop, I prefer her evidence that she did. Ex G is a photograph of her in the process of doing so. 51 In the conversation Mr Kavurma said words like these - We're going to get a lot of money out of this fire. I felt a bit bad when I came to the front of the shop and I saw that it was on fire. I know that I arranged for the fire to be lit and that I knew it was going to happen but I still felt bad about it. I tried to get into the shop when I arrived but the police wouldn't let me and told me it was because of the fire. 52 Miss Yuksel said - Why did you store your stuff in my mother's place. Why didn't you go to one of your relatives? 53 Mr Kavurma replied - The insurance company would have searched the homes of my relatives. I didn't think they would search your mother's place because you were overseas. When we get the money I will buy you a unit. 54 Miss Yuksel spoke to Mr Kavurma a number of times. He often expressed concern to her about the progress of the insurance claim and said things like - When I was organising the fire I was concerned that the junkie who we had organised to light it may be observed by someone. I am concerned that someone might talk to the insurance company and let them know about me such as Senay or Nihat Karci. 55 Senay was a former girlfriend with whom Mr Kavurma had a dispute. Mr Karci was apparently a man with whom Mr Kavurma had a business dispute. 56 The new shop began to trade about six weeks after the fire. Having helped in the setting up of the shop, Miss Yuksel worked there when the business opened. Mr Atmali brought to the shop the two pieces of equipment that she had seen in her garage. The video cassettes that she had seen, however, remained in the garage until about six months after the fire. 57 Other equipment and video cassettes which Miss Yuksel had not seen before arrived at the shop, and I accept that this may have been brought by Mr Kavurma or Mr Atmali from a shop in Melbourne in which they had an interest and which had closed down. 58 About six or seven months after the fire Mr Kavurma told Miss Yuksel that he did not trust her any more and thought that she might talk to people about the fire and what he and Mr Atmali had done. A few days later Mr Atmali began moving the boxes of video tapes out of Mrs Yuksel's garage. They were moved into the new business and Miss Yuksel recognised them there. She asked Mr Kavurma why he was using material from the old business and he replied to the effect - They wouldn't know. If they ask me about it I will tell them I bought it. 59 In order to set up the new business Mr Kavurma and Mr Atmali borrowed a substantial amount of money, including $25,000 from Miss Yuksel. They signed a document, a copy of which was annexed to Miss Yuksel's statement and which did not come under challenge, by which they promised to repay her $30,000. The difference represented interest. Miss Yuksel was never repaid. 60 None of the evidence shows that Mr Kavurma could not have been knowingly concerned in the arrangements that were made for the fire to be set, and I am satisfied that he had a motive to be concerned in those arrangements. However, I agree with the submissions of counsel on both sides that the defendant cannot prove fraud unless I accept the evidence of Miss and Mrs Yuksel. 61 It is necessary before I deal with the criticisms made of their evidence to say something of the circumstances in which they came to make their statements to a representative of the defendant. Miss Yuksel said in her statement, Exhibit B dated 17 February 1998, that for much of 1990 and 1991 she was not paid as she continued to work for Mr Kavurma and Mr Atmali. During 1991 Mr Kavurma terminated her services. The promise by Mr Kavurma and Mr Atmali was to repay her the $30,000 no later than 1 July 1991. Although Miss Yuksel could not accurately state the time, it was when she realised that she was not likely to get her money back that she spoke to a police officer about the matter. She knew the name of the police sergeant who had been concerned in part of the dispute between Mr Kavurma and his former girlfriend (who had apparently obtained an apprehended domestic violence order or some similar order against him in the Local Court), telephoned the police station and asked for him. He came to her house and she told him the whole story, including the confessions Mr Atmali and Mr Kavurma had made to her. The sergeant did not record their conversation in any notebook and she was never asked to sign a written statement. 62 There was no evidence of precisely when or how Miss Yuksel came to give information to the defendant. She made a statement in September 1996, but that document did not come into evidence. The best Miss Yuksel was able to say was that her first contact with anyone on behalf of the defendant would have been some time after 1994, after her relationship with Mr Atmali had come to an end. Up to that time nobody from the insurer had asked her to make a statement. 63 Mrs Yuksel's evidence contained some differences from Miss Yuksel's. In the first place, she was not prepared to admit that Mr Atmali ever stayed overnight at her house. She seemed reluctant to admit that their relationship before the fire had been a sexual one. Her evidence was that after the fire Miss Yuksel continued her relationship with him in the hope of getting her money back. She said that she herself maintained friendly relations with Mr Atmali until it became obvious that Miss Yuksel was not going to be paid. She was asked whether she hated Mr Atmali and her reply was to the effect that she hated him and Mr Kavurma because they had organised between themselves to take money from Miss Yuksel and had spent it. She said that they must be punished for what they had done. 64 It was submitted that the Court ought not to accept Mrs Yuksel's evidence on critical matters in view of her hatred of Mr Kavurma, her wish to see him punished and her refusal on oath to admit that Mr Atmali had slept with Miss Yuksel at her house. It was further submitted that Mrs Yuksel had on her own account, as was the case, admitted that if Mr Kavurma's claim had been paid by the defendant and he had repaid Miss Yuksel out of the proceeds, they would never have reported the matter. 65 Although Mrs Yuksel was unprepared to admit something that must have been obvious to her, namely the fact that Mr Atmali slept with Miss Yuksel at her house, I think that this says more about her culture and morals than about her general standard of honesty. She came to Australia from Turkey when Miss Yuksel was fifteen years old. Her husband had died when Miss Yuksel was only two years old. She strongly disapproved of the relationship because Mr Atmali was a married man. She must have found the fact of the relationship shameful and I think that that may explain why she was not prepared to admit the obvious. Of course, the question whether or not Mr Atmali stayed overnight at Mrs Yuksel's house had no particular relevance to the things she said Mr Kavurma had said and done. 66 Mrs Yuksel's frank admission of her hatred of Mr Atmali and her wish to see him punished and her frank acknowledgment that she would not have reported the matter to the insurance company if Miss Yuksel had been repaid her $30,000 do not cause me to doubt her honesty in her account about what Mr Kavurma did and said. I observed her demeanour closely and I found her forthrightness refreshing. I do not consider it a fair statement to say that she and Miss Yuksel were prepared to receive an advantage from a fraudulent insurance claim instead of reporting the matter to the authorities. They had no obligation to report the matter to the insurer. Miss Yuksel had reported the matter to the police. The fraud was not theirs and I find it entirely understandable that, knowing what she did, Mrs Yuksel might stand back and do nothing in the hope that her daughter might receive her money. 67 Mrs Yuksel was next attacked about evidence she gave about a conversation with Mr Atmali. She said that when she first heard about the fire it was an accident, as far as she knew. About a week later Mr Atmali came to her house and the first thing she said to him was- "Aren't you ashamed to burn your store? How could you do this? Aren't you afraid of God?" 68 She was cross-examined about that conversation and admitted that when she made her accusation she did not know whether Mr Atmali had burnt the shop or not. 69 The submission was that her evidence was incredible. I do not accept the submission. Miss Yuksel had worked for Mr Atmali and Mr Kavurma for years and had been on intimate relations with Mr Atmali for a long time. She was well aware of the shortcomings of their businesses and the serious and chronic financial difficulties that Mr Atmali and Mr Kavurma were constantly facing. All the time she and her mother shared a house and apparently agreeable relations. It would be surprising if her mother did not know about the financial position of the businesses. 70 Although Mr Kavurma denied it, I accept Mrs Yuksel's evidence that he and Mr Atmali found it necessary to borrow $4,000 from her during Miss Yuksel's absence in Turkey. They were always borrowing to cover their shortage of money. Although it is obvious that Mrs Yuksel wants the plaintiff to lose this action, I do not think that she would lie in order to ensure it. Moreover, if she invented a story about their borrowing $4,000 she would not invent another about its repayment. 71 The $4,000 loan must have made the serious financial position of the plaintiff uppermost in Mrs Yuksel's mind on the first occasion when she spoke to Mr Atmali after the fire. Although, as she said, she did not know that he had set fire to the shop, she must have had a very shrewd idea that some such thing had happened. I find her accusation consistent with her forthright manner in the witness box. I think that she did say such a thing to Mr Atmali, and not without reason. 72 The next criticism was that although the fire and Mr Atmali's admission about it were matters of importance to her, she never told Miss Yuksel about them on the telephone. I do not find her evidence incredible or inconsistent. Mrs Yuksel said that once every fortnight or once a month she telephoned Miss Yuksel in Turkey. I accept Miss Yuksel's evidence that her mother did not telephone very often. By the time Mrs Yuksel found out about the fire and spoke to Mr Atmali, Miss Yuksel was within a few days of leaving Turkey to return to Sydney. It is by no means clear that the two spoke on the telephone within the last few days of Miss Yuksel's absence. In cross-examination Mrs Yuksel said that she might have, because she placed an order with Miss Yuksel for things she wanted her to bring home, but I think that it was only surmise. I accept the evidence of both witnesses that they did not discuss the fire on the telephone. 73 The next criticism was based upon a comparison between the evidence of Mrs Yuksel and Miss Yuksel about whether Mrs Yuksel told Miss Yuksel about Mr Atmali's confession as soon as she came home. Mrs Yuksel said she did. Miss Yuksel said that she did not, though she said that there had been a conversation between her and Mr Atmali in the car on the way home from the airport about the fire. 74 There is an inconsistency, as counsel has observed, but it does not cause me to doubt Mrs Yuksel's honesty. These matters are more concerned, I think with accuracy and the sheer ability to recollect events ten years after they happened. 75 The next attack on Mrs Yuksel's evidence concerned alleged differences between what she had said in her statement and what she said in cross-examination. In her statement she said that her friendship towards Mr Kavurma and Mr Atmali ceased after the fire. In her evidence she said that she had remained friendly until her daughter broke off relations with Mr Atmali. 76 I think that there is a discrepancy, but it does not cause me to doubt Mrs Yuksel's honesty. Her comment was that she may have misunderstood what she was being asked when she prepared her statement, and that might well be so. 77 The next attack was on her evidence about the repayment of the loan of $4,000. In her statement she said that it was repaid about one year later by Mr Atmali. In cross-examination she said it was Mr Kavurma who repaid the money. In further explanation she said that Mr Kavurma telephoned her telling her that he had sent the money and that Mr Atmali handed it to her. I have already said why I am satisfied that Mrs Yuksel is telling the truth about the loan. 78 The next attack compared the versions given by Mrs and Miss Yuksel respectively of the appearance of the boxes that Mr Kavurma and Mr Atmali had put in the garage. The submission was that they could not stand together. Mrs Yuksel's evidence may be summarised as that boxes were stacked from floor to ceiling along three sides of the garage. Miss Yuksel's evidence was that the boxes went to shoulder height on two sides of the garage. If that were all there was to it, the discrepancy might be significant, but it is not. Proper allowance has to be made for the failure of memory after such a long time. Secondly, as Miss Yuksel made clear, there were things in the garage which belonged to her. She was never asked whether the boxes which had arrived in her absence, together with her own possessions, filled all three sides of the garage. The evidence was left unclear. 79 The asserted discrepancies do not cause me to doubt the evidence of Mrs Yuksel. 80 The first submission about Miss Yuksel was that her demeanour was that of a reluctant and unwilling person. I do not agree. I found her evidence impressive. She could not remember the detail of her statement without being allowed to refer to it, but that did not cause me to doubt her honesty. I thought that at one stage, after some hours of cross-examination, she showed signs of nerves and frustration, but I put that down to the unfamiliarity to her of the position she found herself in. 81 Like Mrs Yuksel, Miss Yuksel was criticised for being prepared to stand by and, if it materialised, receive an advantage from a fraudulent insurance claim. I repeat the remarks I made about Mrs Yuksel in that respect. 82 Miss Yuksel's identification of the titling machine in the garage was challenged. It was submitted that the defendant had called no evidence to show that no titling machine had been found at the burnt out premises. It was pointed out that the machine was listed in the schedule of damaged items in the claim form and that the defendant had admitted a total loss. It is not clear to me that any titling machine was found in the debris. Mr Kavurma said so, but I do not accept his evidence. The defendant's admission of a total loss did not imply any acceptance that the titling machine itself was lost. 83 I am satisfied that Miss Yuksel saw the titling machine in the garage. 84 Miss Yuksel's evidence about her interview with the police sergeant was said to be "implausible in the extreme" and unsupported by any documents produced by the Commissioner of Police on subpoena. Counsel for the defendant conceded that no such documents had been produced. However, Miss Yuksel's account if true makes it quite unlikely that any document ever came into existence. She said, and was not tested about this, that the sergeant made no note in any official police notebook and that she was not asked to sign a written statement. The sergeant was not involved in the fire investigation, if it was still current at that time, but only concerned with the dispute between Mr Kavurma and his former girlfriend. I think that the fact that no documents were produced by the Commissioner for Police takes the matter nowhere. There is nothing else that is inherently unbelievable about her account of her conversation with the police sergeant. 85 Finally it was submitted that evidence of Mr Erdem, whose impartiality and truthfulness were not attacked, also served to refute the evidence of Mrs Yuksel and Miss Yuksel. Mr Erdem runs a video business in Brunswick, Melbourne. He has known Mr Kavurma and Mr Atmali for some time and was involved in copyright litigation against them. More recently, they set up a shop in Melbourne in 1988 and he saw them there and gave them some assistance. 86 He visited their shop and saw video cassettes there. The shop traded for about a year. At one time Mr Erdem was told that there had been a fire in Mr Kavurma's shop in Sydney and he spoke to him about it on the phone. The Melbourne shop was then closed and Mr Kavurma and Mr Atmali took the video tapes that were there. Mr Erdem went to the new business of Mr Kavurma in Sydney and had a look at the video tapes that were there. He saw labels that he had seen in Melbourne. They were one centimetre by one and a half centimetres and yellow. He asked Mr Kavurma why he had not taken them off and the reply was that they were very hard to remove. 87 In fact this evidence is capable of bearing only on the evidence of Miss Yuksel. But her evidence was that the material stored in her garage stayed there for six months after the fire and that when the new shop was set up other equipment and video cassettes were brought into the shop. She did not know where they had been stored. 88 She was asked in cross-examination about the stocking of the new shop immediately after the fire, that is within the six-month period during which she said the tapes from the old shop remained in her mother's garage, and she said that she did not know where the stock came from. 89 There is no conflict between her evidence and Mr Erdem's. 90 Mr Kavurma gave evidence and denied that he had any knowledge that the premises was to be burnt. He denied storing any material in Mrs Yuksel's garage and denied the admissions Miss Yuksel said that he had made. Although much of his evidence was interpreted from Turkish, a significant part was given in English and I formed the impression that his understanding of English was reasonably good. 91 He began to be cross-examined about statements he had made and I think that he must have realised that his attention was going to be drawn to things he had said that might not help his case. He was shown a copy of the statement he signed for Mr Thomas on 30 August 1989. These questions and answers followed - Q. In connection with the insurance company's investigation, you spoke with or were interviewed by Mr Thomas on a number of occasions? A. Yes, without an interpreter …