Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Insurance Australia Ltd t/as NRMA Insurance v El Kabbout [2014] NSWCA 426 Hearing dates: 1 December 2014 Decision date: 01 December 2014 Before: McColl JA at [1], Macfarlan JA at [33] Decision: Application for leave to appeal dismissed with costs [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: APPEAL - leave to appeal - applicant insurer held liable to pay claim in respect of motor vehicle written off after collision with tree - whether trial judge reversed the onus of proof - where expert evidence that accident could not have occurred as respondent contended - where trial judge misstated one aspect of expert's evidence - where applicant sought to avoid policy in reliance on claim respondent failed to be truthful and frank in relation to claim - whether applicant had established arguable error requiring correction to avoid injustice warranting appellate intervention - leave refused Legislation Cited: District Court Act 1973 (NSW) Evidence Act 1995 (NSW) Insurance Contract Act 1984 (Cth) Cases Cited: Collier v Lancer (No 2) [2013] NSWCA 186 Compania Naviera Vascongada v British & Foreign Marine Insurance Co Ltd (The Gloria) (1936) 54 Ll L Rep 35 Fox v Percy [2003] HCA 22; (2004) 214 CLR 118 Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; (2005) 13 ANZ Ins Cas ¶61 - 639 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352 Norfeld Pty Ltd v Amanda Lee Jones trading as Watermark Patent and Trademark Attorneys [2014] NSWCA 408 Category: Principal judgment Parties: Insurance Australia Ltd t/as NRMA Insurance ACN 11 000 016 722 - Applicant Fadi El Kabbout - Respondent Representation: Counsel: MBJ Lee SC with LM Jackson - Applicant T Boyd - Respondent Solicitors: William Roberts Lawyers - Applicant Kheir Lawyers - Respondent: File Number(s): CA 2014/196927 Publication restriction: No Decision under appeal Citation: Kabbout v Insurance Australia Ltd t/as NRMA Insurance Ltd (District Court of NSW, Williams SC DCJ, 11 June 2014, unrep) Date of Decision: 2014-06-11 00:00:00 Before: Williams SC DCJ File Number(s): 2013/89917 Judgment 1McCOLL JA: The applicant, Insurance Australia Ltd t/as NRMA Insurance, sought leave to appeal from a judgment of Williams SC DCJ in which his Honour found that the respondent, Fadi El Kabbout, had established that a motor vehicle insurance policy issued by the applicant on 20 April 2011 responded to the respondent's claim to recover the agreed value of a motor vehicle which was written off after colliding with a tree on 17 May 2012 while being driven by the respondent. 2Leave to appeal was required because the amount in issue in the underlying proceedings was $63,669: s 127(2)(c)(i), District Court Act 1973 (NSW). 3At the conclusion of the argument on 1 December 2014 the Court ordered that the application for leave to appeal be dismissed with costs. 4These are my reasons for joining in those orders. 5The principles governing the circumstances in which leave to appeal will be granted have been conveniently collected recently in Collier v Lancer (No 2) [2013] NSWCA 186 (Ward and Leeming JJA) as follows: "[7] While there are no exhaustive or rigid rules of practice or criteria governing the grant of leave to appeal (Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170), leave should be granted only where there are substantial reasons to allow an appellate review (Johnson Tiles Pty Ltd v Esso Australia Ltd [2000] FCA 1572; (2000) 104 FCR 564), such as where there is an error of principle which, if uncorrected, will result in substantial injustice (Minogue v Williams [2000] FCA 125; (2000) 60 ALD 366; BHP Petroleum Pty Ltd v Oil Basins Ltd [1985] VicRp 72; [1985] VR 756; Niemann v Electronic Industries Ltd [1978] VicRp 44; [1978] VR 431; Darrell Lea (Vic) Pty Ltd v Union Assurance Society of Australia Ltd [1969] VicRp 50; [1969] VR 401). [8] Where there is no question of principle (and particularly where there is only a small amount in dispute), leave to appeal will usually be refused (Jaycar Pty Ltd v Lombardo [2011] NSWCA 284; Zelden Sewell Henamast Pty Ltd [2011] NSWCA 56; Dunn v Ross Lamb Motors [1978] 1 NSWLR 26). As Bathurst CJ said in The Age Company Ltd v Liu [2013] NSWCA 26 (at [13]), with the agreement of Beazley and McColl JJA, 'Generally speaking, it is only appropriate to grant leave in matters that involve issues of principle, questions of public importance or in circumstances where it is reasonably clear that an injustice has occurred by reason of error in the judgment, going beyond what is merely arguable'." (Emphasis added) 6The "requirement for leave to appeal from a judgment where the quantum in dispute is less than $100,000 implicitly recognises the importance of keeping in mind the need for proportionality of the Court time and the costs incurred in resolving disputes": Norfeld Pty Ltd v Amanda Lee Jones trading as Watermark Patent and Trademark Attorneys [2014] NSWCA 408 (at [35]). Background 7The respondent's case was that the collision was an accident caused by his reaction to seeing headlights from an oncoming vehicle. The applicant defended the proceedings on four bases, only three of which (effectively two) were pressed on the application for leave to appeal. The trial went for three days, two successive and then after a few days break a third on which counsel spoke to written submissions. Judgment was delivered the following day. 8The first limb of the applicant's defence was that the respondent had failed to discharge his burden of establishing on the balance of probabilities that the motor vehicle was damaged in an accident. 9The respondent was the only witness in his case. He gave evidence of how he said the accident had happened and was extensively cross-examined. The applicant called an expert, Mr Mark Sculthorpe, a Motor Vehicle Accident Reconstructionist. His evidence was adduced to establish the applicant's thesis that there was "no possibility" of the collision having occurred as the respondent had said. 10Mr Sculthorpe examined the circumstances of the accident including analysing the vehicle's "black box". He gave evidence that that examination demonstrated that in the two seconds prior to the accident the respondent "applied the [vehicle's] accelerator as hard as is physically possible", increasing the vehicle's speed from 38.6kph to 43.4kph and then, half a second prior to impact and whilst still travelling at 43kph, lightly applied the vehicle's footbrake and reduced its speed by 1.6kph to 41.8kph at about which speed the vehicle collided with the tree. His evidence was said to support what the primary judge described (and rejected) as follows: "I cannot accept the thesis lurking behind the defendant's case, but never explicitly embraced for obvious reasons, namely that the plaintiff deliberately drove the car into a tree with a view to securing some modest financial advantage, notwithstanding the obvious risk of causing serious injury by driving at 40kph or 50kph into a tree." 11The second basis on which the applicant defended the proceedings was that the respondent had not been truthful and frank in statements made in relation to, or in connection with, his claim, thus enabling the applicant to refuse his claim in reliance upon a term of the insurance policy to that effect. The third, which Mr M B J Lee of Senior Counsel, who appeared with Ms L M Jackson on the application and at trial, conceded was effectively the same as the truthful and frank defence, was that the respondent had breached his statutory obligation to act with utmost good faith pursuant to s 13 of the Insurance Contract Act 1984 (Cth) (the "ICA"). 12The primary judge described the "truthful and frank defence" as being "at the heart of [the applicant's] case": J3. His Honour dealt with that defence succinctly, observing (J18) that he was obliged to determine "the truth or the true facts necessary for a consideration of the operation of the exclusion clause". The applicant had identified three matters which it contended constituted untruthful statements on the respondent's part in relation to the claim. One related to statements by the respondent as to the amount of money he owed to a financier in respect of the insured vehicle. The second related to the number of cars the respondent said he had purchased in 2012. The third related to what the applicant described as "compelling evidence that demonstrat[ed] that the respondent lied to the NRMA Claims investigator about the number of times he had driven past the site of the collision". 13As to the first matter, the primary judge recorded that the respondent had said in a record of interview that he was repaying $500 a month on his loan with the assistance of his brother, whereas in evidence he admitted he was broke shortly before the accident, had received arrears notices in respect of the loan and was paying less than $500 a month even with his brother's assistance: J15 - 16. 14In support of the third matter, the applicant relied at trial on a record purportedly of a conversation between the respondent and an NRMA claims investigator which included the following: "How familiar are you with this area? maybe [sic, as in original] the 5th time hes [sic] driven that way". 15The respondent was cross-examined about this conversation. He agreed that he had given other answers the investigator had recorded until he was asked about the passage quoted above. He denied having given that answer, saying "[t]hat's the first time", meaning, I infer the first time that he had driven that way. (Trial T/s 89) 16The primary judge found that the applicant's note of the conversation did not "constitute proof of a lie about [the respondent's] familiarity with the road", saying that there was no evidence as to the reliability of the summary: J15. 17The primary judge concluded (J19) that the matters the applicant relied upon as constituting statements in relation to the claim for the purposes of its truthful and frank defence, were "in very large measure no more than the type of variation in versions given at different times since an event that one commonly encounters when a lay person is tested by a searching cross-examination based on extensive preparation of documentary material." 18However, his Honour also concluded that even though he had reservations about the respondent's reliability and honesty in a number of respects, nevertheless there was "a general and compelling consistency as to [his] version of the incident" such that his Honour was satisfied the respondent had established that the damage to his vehicle was caused by the collision with the tree as a result of an accident: J19. Consideration 19The applicant recognised the disproportion between the legal resources that had already been expended on the case and the amount in issue. However Mr Lee submitted that demonstrable errors in the primary judgment warranted correction in exercise of what it termed this Court's visitorial jurisdiction. 20Mr Lee argued that the applicant had established that the primary judge misdirected himself on the onus question in a manner which was glaringly improbable and accordingly susceptible to appellate review in accordance with Fox v Percy [2003] HCA 22; (2004) 214 CLR 118. In his written submissions Mr Lee identified the misdirection in his Honour's rejection of the lurking thesis (see [ REF _Ref405366698 \r \h 10] above). He complained that this demonstrated that his Honour considered that if the respondent did not make out his case, the implication was that he was involved in serious misconduct. I do not accept that is the proper characterisation of his Honour's remark. 21The applicant had submitted that the primary judge should apply the principles as to the respondent's burden of proof explained in Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; (2005) 13 ANZ Ins Cas ¶61 - 639 ("Hammoud"). In Hammoud, Bryson JA (with whom Ipp and Tobias JJA agreed) discussed the onus of proof in an appeal challenging a primary judge's finding that an insured had failed in a claim against an insurance company based on the proposition that his motor vehicle had been stolen. His Honour stated that the insurer did not bear any onus of proof: Hammoud (at [26]). In the course of his discussion, Bryson JA referred (at [32]) to Compania Naviera Vascongada v British & Foreign Marine Insurance Co Ltd (The Gloria) (1936) 54 Ll L Rep 35. In Compania Naviera Vascongada Branson J said in relation to an insurer which asserted a ship had been scuttled thus entitling it to avoid the policy, where there were competing hypotheses as to the cause of damage: " ... If, however, the evidence is such that the court giving full weight to the consideration that scuttling is a crime, is not satisfied that the ship was scuttled, but finds that the probability that she was is equal to the probability that her loss was fortuitous, the plaintiffs will fail." 22In my view, the primary judge's statement concerning the "lurking thesis" hypothesis was not a misdirection on the onus of proof (which his Honour had earlier recorded rested on the respondent on the balance of probabilities to be assessed in accordance with s 140 of the Evidence Act 1995 (NSW)). Rather his Honour was saying that the applicant had not demonstrated that the "lurking thesis" was tenable to a point where it was equally consistent with the respondent's hypothesis that the damage to his vehicle was caused by an accident, thus warranting rejection of the claim: see Luxton v Vines [1952] HCA 19; (1952) 85 CLR 352; Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 (at 304). 23Mr Lee also complained that Mr Sculthorpe's analysis of the black box was irreconcilable with the respondent's account of the collision and that his Honour should accordingly have found the respondent had failed to discharge his burden of proof. 24He complained that the primary judge incorrectly attributed to Mr Sculthorpe a concession that he could not exclude the possibility of an accident happening as a result of the respondent taking action in an attempt to avoid an oncoming hazard, but that Mr Sculthorpe did not think this was a reasonable possibility (J13). Mr Lee pointed out that in the relevant section of the transcript Mr Sculthorpe had in fact refused to entertain that possibility at all. 25Elsewhere his Honour recorded, in a passage Mr Lee did not criticise, that Mr Sculthorpe agreed in cross examination that it was possible a driver "might in panic accelerate rather than brake and act in accordance with Mr Sculthorpe's expectation of a reasonably prudent driver" (J8). 26The primary judge looked at the logic of the events (Fox v Percy (at [31])), noting (J8) that the applicant's case based on Mr Sculthorpe's evidence was that the respondent "deliberately drove his car into a tree by accelerating shortly before impact and not deviating". His Honour found that thesis inherently improbable, asking rhetorically (J8) "why would the plaintiff expose himself to a significant risk of injury by running his car into a tree at an impact speed sufficient to deploy the air bags or write off the vehicle when most of the proceeds of any insurance recovery would have gone to a financier rather than into [his] pocket"? 27In my view, even if it be accepted that his Honour misstated one passage of Mr Sculthorpe's evidence, such error could not be said to have even arguably invalidated his Honour's overall assessment of the logic of the events and, accordingly, his rejection of that evidence as demonstrating the respondent's account should not be accepted. In my view the applicant did not establish any arguable error in this respect which would warrant appellate intervention. 28I also do not accept that the applicant has established that it has an arguable case for leave to appeal in relation to the truthful and frank defence ground. Mr Lee submitted his Honour should have accepted that the conversation with the investigator was truthfully recorded and that it could not stand with the respondent's evidence that he had only driven there once (a statement the respondent had apparently also made on other occasions), so that one of the statements must be untruthful, thus attracting the exclusion clause. 29However, in my view the primary judge was entitled to view the investigator's record with doubt for the reasons he expressed. In addition, the possibility the investigator misheard "first" for "fifth" in the telephone conversation cannot be excluded. 30The primary judge had the advantage of seeing the respondent give evidence. As I have said, his Honour determined that despite his reservations about him, the applicant had not demonstrated that the truthful and frank clause was engaged. It might be said that his Honour could have dealt with the truthful and frank defence in greater detail but, in my view, having regard to the matters to which the applicant drew the Court's attention, his Honour's rejection of that defence was open to him. 31Even if the applicant had demonstrated an arguable case in respect of this defence, the best outcome for it on appeal, as Mr Lee fairly accepted, would be a new trial. No doubt the respondent would seek on that occasion (although he did not at trial) to rely upon s 54 of the ICA. Although no doubt, there would be an argument in any new trial about the availability of that defence having regard to the way the first trial was conducted, it is conceivable that leave might be given to rely upon that provision. In such circumstances it is difficult to see how the untruthful statements for which the applicant contended could have caused the applicant any relevant prejudice within the meaning given to that expression in s 54 of the ICA. 32In my view the applicant did not demonstrate any arguable case of error in principle demonstrating fundamental injustice in the primary judgment if uncorrected which would warrant a grant of leave to appeal. 33MACFARLAN JA: The reasons given by McColl JA reflect my reasons for joining in the making of orders in this matter on 1 December 2014; ********** 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: 09 December 2014