Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Sgro v Australian Associated Motor Insurers Ltd [2015] NSWCA 262 Hearing dates: 31 July 2015 Decision date: 02 September 2015 Before: Beazley P at [1]; Meagher JA at [67]; McDougall J at [78] Decision: Appeal dismissed with costs. Catchwords: INSURANCE – whether vehicle stolen – trial judge not satisfied on balance of probabilities that vehicle stolen INSURANCE – Insurance Contracts Act 1984 (Cth) s 56 – dishonest intent to induce false belief in insurer for purpose of obtaining benefit INSURANCE – Insurance Contracts Act 1984 (Cth), s 56 – specific finding of fraud required PRACTICE AND PROCEDURE – pleadings – fraud to be clearly particularised – UCPR, r 14.14 PRACTICE AND PROCEDURE – where probabilities equal PROCEDURAL FAIRNESS – allegation of fraud – party to be fairly confronted with allegation of fraud Legislation Cited: Evidence Act 1995 (NSW), s 140 Insurance Contracts Act 1984 (Cth), s 56 Uniform Civil Procedure Rules 2005 (NSW), r 14.14 Cases Cited: Anderson v AON Risk Services Australia Ltd [2004] QSC 49; 13 ANZ Insurance Cases ¶61-614 Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279 Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 Compania Naviera Vascongada v British & Foreign Marine Insurance Co Ltd (The Gloria) (1936) 54 LIL Rep 35 Derry v Peek (1889) 14 App Cas 337 Fox v Percy [2003] HCA 22; 214 CLR 118 Ghazal v Government Insurance Office (NSW) (1992) 29 NSWLR 336 Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; 13 ANZ Insurance Cases ¶161-639 Inzaurralde v Government Insurance Office of New South Wales (Court of Appeal, 28 October 1992, unreported) Minister Administering the Crown Lands Consolidation Act and Western Lands Act v Tweed Byron Local Aboriginal Land Council (1990) 71 LGRA 201 Palamisto General Enterprises v Ocean Marine Insurance Co Ltd (1972) 2 QB 625 Rejfek v McElroy [1965] HCA 46; 112 CLR 517 Simon v NRMA Insurance Ltd [1991] NSWCA 247 Somaghi v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 100; 102 ALR 339 To v Australian Associated Motor Insurers Ltd [2001] VSCA 48; 3 VR 279 Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; 240 CLR 444 Walton v The Colonial Mutual Life Assurance Society Ltd [2004] NSWSC 616; 13 ANZ Insurance Cases ¶61-620 Category: Principal judgment Parties: Antonio Sgro (Appellant) Australian Associated Motor Insurers Ltd (Respondent) Representation: Counsel: J C Kelly SC; J Mendel (Appellant) B Burke (Respondent) Solicitors: Elmassian Lawyers (Appellant) Courtenay & Co Solicitors (Respondent) File Number(s): 2014/209672 Decision under appeal Court or tribunal: District Court Date of Decision: 20 June 2014 Before: Olsson SC DCJ File Number(s): 2012/310761 [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.] HEADNOTE [This headnote is not to be read as part of the judgment] Mr Sgro was the owner of a motor vehicle which he alleged was stolen. Australian Associated Motor Insurers Ltd (AAMI), with whom the vehicle was insured, refused Mr Sgro's claim made on his policy of insurance. Mr Sgro brought proceedings against AAMI, pleading entitlement to payment under the policy of $190,350, being the agreed value of the vehicle plus interest. AAMI denied Mr Sgro's entitlement to payment and alleged that his claim was fraudulent pursuant to the Insurance Contracts Act 1984 (Cth), s 56. Mr Sgro's claim was rejected by Olsson SC DCJ. Her Honour held that she was not satisfied to the requisite standard that the vehicle was stolen. Her Honour also held that AAMI was entitled to refuse the appellant's claim pursuant to s 56 of the Insurance Contracts Act. In so doing, her Honour declined to make a finding of fraud, but rather held that Mr Sgro, "for whatever reason", was not honest and candid in the answers he gave in relation to the claim. Held per Beazley P (Meagher JA and McDougall J agreeing), dismissing the appeal: (1) The absence of a finding of a financial motive for making a fraudulent claim did not mean that the rejection of the claim was incongruous. Rather, the absence of a financial motive was a factor to be weighed alongside other evidence. [8]-[11]; [67]; [78] (2) There was no error in her Honour's findings as to the timing of the events which occurred on the day the vehicle was allegedly stolen. [21]; [67]; [78] (3) It was open to her Honour not to accept the evidence of Mr Sgro's parents. Such evidence was not unchallenged, and her Honour was entitled to draw her own conclusions as to its veracity and reliability. [26]; [67]; [78] Fox v Percy [2003] HCA 22; 214 CLR 118. (4) Having made factual findings open to her on the evidence, her Honour's ultimate finding was that she was not satisfied, on the balance of probabilities, that the vehicle was stolen. Mr Sgro's claim accordingly failed. [43]; [75]; [78] (5) Fraud must be clearly pleaded and properly particularised. A pleading must allege the acts involved and that they were done in a manner that involves fraud. Good pleading practice requires that an allegation that false statements have been made with intent to induce the payment of a claim should be pleaded in specific terms. [55]; [65]; [67]; [77]-[78] Uniform Civil Procedure Rules 2005 (UCPR), r 14.14; Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279; Minister Administering the Crown Lands Consolidation Act and Western Lands Act v Tweed Byron Local Aboriginal Land Council (1990) 71 LGRA 201. (6) It is a basic obligation of procedural justice to fairly confront a person with the suggestion that a case is false or fraudulent. [56]; [57]; [78] Ghazal v Government Insurance Office (NSW) (1992) 29 NSWLR 336; Somaghi v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 100; 102 ALR 339; Inzaurralde v Government Insurance Office of New South Wales (Court of Appeal, 28 October 1992, unreported). (7) The seriousness of a finding of fraud, including statutory fraud, does not permit of other than a specific finding that the fraud, or the contravening conduct, had in fact occurred. Her Honour's finding that Mr Sgro was not honest and candid "for whatever reason" did not satisfy this fundamental requirement. [54]; [57]; [78] Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336. (8) The test for fraud is satisfied if the insured has a dishonest intent to induce a false belief in the insurer for the purpose of obtaining payment or some other benefit under the policy. However, the fraudulent statement need not be material to the insured's claim. It is not necessary to show prejudice as having been suffered by the insurer for s 56 of the Insurance Contracts Act to be relied upon. [47]; [70]; [78] Walton v The Colonial Mutual Life Assurance Society Ltd [2004] NSWSC 616; 13 ANZ Insurance Cases ¶61-620; To v Australian Associated Motor Insurers Ltd [2001] VSCA 48; 3 VR 279. (9) It was unclear whether AAMI intended to plead common law fraud. If AAMI did so intend, the pleadings did not comply with the requirements of UCPR, r 14.14. Any such claim ought to have been clearly pleaded and brought by way of cross-claim. [64]; [74] Obiter: In a case where, on the whole of the evidence, the probabilities are equal, a plaintiff will fail, having not satisfied the court on the balance of probabilities of the necessary facts to establish the cause of action. [44]; [76] Compania Naviera Vascongada v British & Foreign Marine Insurance Co Ltd (The Gloria) (1936) 54 LIL Rep 35; Palamisto General Enterprises v Ocean Marine Insurance Co Ltd (1972) 2 QB 625; Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; 13 ANZ Insurance Cases ¶161-639; Anderson v AON Risk Services Australia Ltd [2004] QSC 49; 13 ANZ Insurance Cases ¶61-614; Simon v NRMA Insurance Ltd [1991] NSWCA 247. Judgment 1. BEAZLEY P: The appellant was the owner of a red Ferrari 360 Modena motor vehicle (the vehicle), which he alleged was stolen from a suburban street between approximately 8 pm on 17 December and 12:50 am on 18 December 2011. On 21 September 2012, the respondent, with whom the vehicle was insured, including in respect of theft, refused the appellant's claim made on his policy of insurance. 2. By statement of claim filed 8 October 2012, the appellant brought proceedings against the respondent, pleading that in accordance with the terms of his insurance policy, he was entitled to the payment of the agreed value of the vehicle in the sum of $190,350 plus interest. By its defence the respondent denied that the appellant was entitled to the moneys claimed. The respondent also alleged that the claim was fraudulent within the meaning of the Insurance Contracts Act 1984 (Cth), s 56. The respondent may also have pleaded common law fraud. I will return to that question later in these reasons. 3. On 20 June 2014, Olsson SC DCJ rejected the appellant's claim on two bases. First, given inconsistencies in the appellant's evidence, her Honour "was not satisfied to the requisite standard that the vehicle was stolen": at [128]. Her Honour also held, at [139], that the respondent was entitled to refuse the claim pursuant to s 56 of the Insurance Contracts Act, as the appellant was not honest and candid in the answers he gave to the respondent as to his whereabouts on the afternoon of 17 December 2011, the day the vehicle disappeared. 4. Her Honour stated, at [129], that having regard to her finding at [128], it was not "necessary to dispose of the defence that the claim was made fraudulently". Her Honour nonetheless stated, at [132], that she declined to make any finding of fraud "in the absence of cogent evidence" on critical matters, such as the number and location of the keys and remote devices for the vehicle, and in the absence of being satisfied there was any financial motive for the appellant to have been involved in the disappearance of the vehicle. Issues on the appeal 1. The appellant's grounds of appeal raised the following issues: (1) the incongruity of the verdict, given that the trial judge, at [98], was not prepared to draw any inference with respect to any financial motive the appellant might have had for making a fraudulent claim: appeal grounds 4, 5, 6 and 7 (the motive issue); (2) the likelihood, on the evidence, that the appellant parked the vehicle in Eurella Street at about 8 pm, and not earlier, as found by her Honour: appeal grounds 1, 2, 3, 10 and 11 (the time issue); (3) whether her Honour erred in failing to accept the corroborating evidence of the appellant's parents in respect of the central aspect of the appellant's version of events, that he left home at 7:34 pm in the vehicle: appeal grounds 12 and 13 (the parents' evidence issue); (4) whether her Honour erred in rejecting the possibility that persons associated with the motor dealer, Rick Damelian, from whom the appellant had purchased the vehicle, may have had access to keys for the vehicle and organised its theft: appeal grounds 8 and 9 (the other evidence issue); (5) whether her Honour erred in finding that the respondent was entitled to refuse the appellant's claim pursuant to the Insurance Contracts Act, s 56: appeal ground 15(b) (the s 56 issue). 1. It should be noted that no oral argument was advanced by the appellant before this Court in support of appeal grounds 8 and 9. Appeal grounds 14-16 raised general matters based on the foregoing issues and in which the appellant contended for judgment in his favour. Save for appeal ground 15(b) which deals with the s 56 issue, it is not necessary to separately consider grounds 14-16. 2. In considering the issues raised on the appeal, it is necessary to keep distinct her Honour's refusal of the claim on the basis that she was not satisfied that the vehicle had been stolen, a matter upon which the appellant bore the onus in the sense that it was for the appellant, as the insured, to "prove such facts as are necessary to prove that the loss was covered by the contract": Wallaby Grip Limited v QBE Insurance (Australia) Limited [2010] HCA 9; 240 CLR 444 at [28]; and the respondent's reliance on the Insurance Contracts Act, s 56, upon which it bore the onus: Wallaby Grip at [36]. (1) The motive issue 1. The appellant adduced evidence at trial that he conducted a very successful smallgoods business that had allowed him to acquire, in a relatively short period of time, the vehicle unencumbered and two parcels of real estate in which there was significant equity. The business itself was expanding and operating profitably, having trading profits of approximately $815,000 in 2012 and $1,105,000 in 2013. 2. The appellant also gave evidence that his acquisition of the vehicle was the culmination of his boyhood dreams, and that he looked after it with a great deal of personal care. 3. Her Honour, at [98], was not prepared to draw any inference as to a financial motive for making a fraudulent claim. The appellant submitted, in effect, that the absence of a finding of a financial motive compelled a finding of theft such that he ought to have succeeded in his claim. He contended that the anomalies and inconsistencies in his evidence were not such that they subsumed the importance and relevance of lack of any financial motive. In short, he contended that it was "glaringly impossible that a person who did not have a financial motive would perpetrate an insurance fraud". On his submission, it was: "… a matter of ordinary human experience [that] people make false insurance claims because they have a financial motive; without a dishonest intention to obtain a payment to which they not entitled, there is no point in the exercise." 1. Although human nature is more complex than this simple aphorism, the trial judge's finding at [98] was an important one in the appellant's favour. However, of itself, the finding did not require a finding that the vehicle had been stolen, but was a factor to be weighed with the other evidence. (2) The time issue 1. On the appeal, apart from motive, the appellant's principal challenge to her Honour's judgment on his claim related to her findings as to time. The question in issue was the time at which the vehicle had been parked and the time it had been driven away. In this regard, her Honour accepted the evidence of Mr Robert Sacco, who lived in Eurella Street, opposite where the vehicle had in fact been parked on 17 December. Mr Sacco, by chance, had a deep interest in Ferrari motor vehicles. He identified the model of the vehicle he saw parked opposite his house, as a 360 Modena, being the model of the appellant's vehicle. Based on Mr Sacco's evidence, her Honour found, at [121]: "… that the car was there between 5.00pm and 5.50pm and was driven away at approximately 6.30pm. It follows, therefore, that I find that [the appellant] was not truthful about his whereabouts and that of the car during those times." Mr Sacco's evidence 1. Mr Sacco was interviewed by the respondent's investigator on 9 January 2012, some three weeks after the vehicle was said to have been stolen. On 17 December 2011, Mr Sacco was gardening and saw a red Ferrari arrive and park opposite his house. He identified the vehicle, correctly, as a "360". He said he saw a male, dressed in jeans and a white shirt, get out of the vehicle and walk away. He heard the sound of the car locking. He said the vehicle was parked opposite his house "between 5:30 and 6:30". He saw the vehicle being driven away an hour or so later. He said the vehicle "had gone before the sun had set". He said the street lights had not come on at the time the vehicle was driven away and described Eurella Street as being "a relatively dark street". 2. In between the vehicle arriving and leaving, Mr Sacco called out to his eight year old son to "go across the road and have a look at the Ferrari". 3. Asked by the respondent's investigator what time the vehicle left Eurella Street, he said: "… I would have to say maybe 7:30. About 7:30. It arrived between 5:30 and 6:30. It was only here for an hour, if that." 1. Mrs Sacco was also interviewed by the investigator. She had a memory of preparing the evening meal at the time the vehicle was parked at the front of the property. She said this was at about 6 pm and that the vehicle was only parked opposite the Saccos' house for 30-45 minutes. Mrs Sacco did not give evidence, although the report of the respondent's investigator, which included the information provided by Mrs Sacco, was tendered in evidence by the appellant. 2. Mr Sacco was cross-examined. Contrary to the case advanced by the appellant on the appeal, that on Mr Sacco's statement to the insurance investigator, the vehicle was driven away at about 7:30 pm, his cross-examination was not directed to establishing that the vehicle must have been parked opposite his house at about or after 7:30 pm. Rather, the cross-examination as to time was as follows: "Q. And it's the case, isn't it, that it's common in your family to have dinner somewhere between 6 and 6.30? A. Typically, yes. Q. Typically that's the same? A. Yeah. My wife likes to feed the kids at a regular time. Q. And usually your wife starts preparing the meal around about 6? A. It can vary at times, but yeah, we try to eat between 6 and 7. Q. 6.30? A. Yeah. Q. And do you remember on that day what time you sat down to have a meal? A. I can't recollect the exact time because I was potting away and finished the work, so actually my wife, she had dinner with the kids, so I came in later, so I didn't actually physically sit down. Q. So how much later did you come in? A. I can't recall. It was a long time ago. I can't recall. Q. No. I understand. In any event, you kept on working away and is it the case that you saw the red Ferrari around about 5 o'clock on the Saturday? A. Yeah. I thought it was around that time, yes. Q. Around about 5pm? A. Yeah. Q. And it's also the case, isn't it, that you saw it leave? A. Yes. Sorry, I heard it leave. … Q. So in relation to the timing between when the vehicle arrived, which you've indicated was about 5 o'clock, it's the case, isn't it, that you told the investigator that you thought it was there for about an hour? A. I may have. Like, we're talking three years ago. … Q. … so you called your son to indicate to him that there was a red Ferrari across the road? A. Yep. … Q. He went to see the vehicle for about five minutes? A. Yes, approximately five minutes. … Q. So that would be somewhere not long after 5 o'clock in the afternoon? A. Yep, that's – yeah, around about that time I'd say. … Q. [Your wife] saw it, but by 6 o'clock she had gone into the house to start preparing the meal? A. I would guess at that time -- Q. Because that's the usual -- A. Yeah, in family time, yeah, she'd be feeding the kids around -- … Q. And they all want to be fed by, at least 6.30 I suppose? A. In most cases, my wife is pretty particular in that case. … Q. So based on the timing at which you saw the car arrive, which was round about 5, would you say that the car left, that it was being driven away, somewhere after 6 o'clock? A. I'd say yes, it would have been some time after 6. Q. And it was still light, wasn't it? A. It was still light, yeah. … Q. Sir, would you say, based on your best recollection now, the latest time that the car left the front of your house was about 6.30pm on the Saturday? A. Could have been, look I can't accurately pinpoint it, I wasn't clock watching. HER HONOUR Q. But you can put it in the context of whether or not it was still light? A. Yeah, definitely. It wasn't dark, it was still light. [COUNSEL] Q. And you can put it in the context that if your wife saw it leaving, then she must have been outside? A. If she saw it leaving, yes, she must have seen it then. Q. And you'd also accept the fact that your wife ordinarily starts cooking the evening meal around about 6 o'clock? A. Yeah, well she starts cooking …" 1. No questions were directed to Mr Sacco to the effect that the time he first saw the vehicle was or even could have been at about or later than 7.30 pm. Rather, the cross-examination proceeded on the basis that the vehicle was parked in the street at about 5 pm and was there at about 6 pm and driven away at about 6:30 pm. Indeed, if anything, the cross-examiner, by his questions, locked in that time. 2. The appellant, accordingly, gets little comfort from Mr Sacco's statement to the investigator that the vehicle was driven away at about 7:30 pm. It is apparent from Mr Sacco's statement that he indicated the time of 7:30 pm as being an hour from the later time in the range of 5:30-6:30 pm that he told the investigator he saw the vehicle arrive. Mrs Sacco's time estimates, with which Mr Sacco agreed in cross-examination, established a fairly definite time at which the vehicle was parked in the street and the time that it was driven away. That was well before 7:30 pm, when it was established that the appellant was still at home. 3. The appellant relied upon judicial observations that time estimates are always likely to be imprecise. That is true enough, as Mr Sacco's statements to the insurance investigator indicated. However, in this case, there was a focal point to the time estimates, namely, the time at which Mrs Sacco was preparing dinner. Mr Sacco agreed that this was the relevant time reference and that the vehicle was parked in the street at about 6 pm. 4. It follows that the appellant has not established error in her Honour's finding at [121] as to the approximate time the vehicle was parked in Eurella Street and the approximate time it was driven away. (3) The parents' evidence issue 1. The appellant submitted that there was unchallenged evidence, namely, that of his mother, that he left home in the vehicle at about 7:30 pm. Both the appellant's parents swore affidavits as to his activities on 17 December 2011 and the whereabouts of the vehicle. Mrs Sgro, the appellant's mother, said the vehicle was parked in the garage of their house for the entire duration of 17 December until the appellant drove it sometime between 7 pm and 7:20 pm. She also said the appellant had come home in the later afternoon and left the house between 7 pm and 7:20 pm. 2. Mr Sgro, the appellant's father, gave evidence that the appellant came home about 5-5:30 pm, dressed in his work clothes, and went out after the Channel 7 news. He said he heard the sound of the vehicle and saw it being backed out of the garage. He said this was between 7 pm and 7:20 pm. Mrs Sgro gave evidence to the same effect. 3. The appellant submitted that Mrs Sgro's evidence was unchallenged and therefore ought to have been accepted by the trial judge. 4. Contrary to the appellant's submissions, Mrs Sgro was vigorously cross-examined as to the time the appellant left home in the vehicle. She was expressly cross-examined to the effect that, contrary to her evidence, the appellant could have left, in the vehicle, much earlier than 7-7:20 pm. She was also cross-examined that she had only placed the time frame of 7-7:20 pm as when the appellant left home shortly prior to the hearing. Mr Sgro was also cross-examined. 5. Although neither witness resiled from their evidence, that is a different matter from saying that a witness' evidence is unchallenged. The trial judge, having heard and seen both Mr and Mrs Sgro give evidence, was entitled to draw her own conclusions as to their veracity and reliability. In this regard, her Honour stated, at [39], that she gave their evidence "very little weight" and, at [123], that she "decline[d] to attach any weight to [their] evidence … regarding their son's activities on the evening of 17 December". No error has been shown in her Honour's assessment of their evidence: Fox v Percy [2003] HCA 22; 214 CLR 118. (4) Other evidence issues 1. Appeal grounds 8 and 9 concerned her Honour's finding as to the appellant's alleged panic when reporting the vehicle as stolen to police. 2. Her Honour stated, at [114]: "What is not plausible to my mind is [the appellant's] action in ringing the police on 18 or 19 December and suggesting that it was possible that someone involved with the motor dealer Rick Damelian, or the liquidators of that business, could have had access to spare keys, sourced information or got [the appellant's] address and somehow taken the vehicle that way. It strongly suggests that [the appellant] was in something of a panic about explaining how the car might have been stolen." 1. In his written submissions, the appellant contended that the identification of the motor dealer to police as the possible holder of a spare key did not support an inference of panic. The appellant instead asserted that it was a "perfectly proper thing" to draw the possibility of a spare key to the attention of police. 2. This argument did not extend beyond the appellant's own surmise. No evidence was adduced to support the appellant's possible explanation relating to there being a spare key. Her Honour was entitled to make an assessment of this explanation and to accept it as plausible or not. No error has been shown in her Honour's assessment of this evidence. 3. There are other inconsistencies that arose at trial as regards the evidence of the appellant. The appellant's case was that on the afternoon of 17 December 2011, he had left work at 2 pm and driven straight home, where he stayed until he went out for the evening at about 7:30 pm, having made arrangements for dinner at Burwood at 8:30 pm with his brother, sister-in-law and two friends. The arrangements included going to a movie at the Burwood Cinema complex after dinner. The dinner and movie arrangements were corroborated and are not in dispute. 4. The appellant's evidence was that he drove the vehicle from his home and parked it in Eurella Street, before walking from there to the restaurant. 5. In his statement to the insurance investigator given on 5 January 2012, approximately three weeks after 17 December 2011, the appellant gave a detailed account of the route he had taken from his home to Eurella Street, which is about a minute's drive from the appellant's house, as follows: "… I came out of Wright Street, I headed towards Parramatta Road, down Parramatta Road city way, like heading towards the city, I drove through Norton Street (northbound) [sic], from Norton Street I went to City West Link, headed back towards Burwood, so out of Norton Street, left on City West Link, headed out toward Burwood and then back onto Parramatta Road, sorry, City West Link, Parramatta Road, straight to Burwood." 1. The appellant explained to the insurance investigator that he had taken that route as he "went for a small drive" before going out. In cross-examination, the appellant said that he took the Norton Street route in order to give the vehicle a 10-15 minute drive, "to get the engine temperatures up". He agreed, under further cross-examination, that the Norton Street route would probably have taken about 20 minutes. 2. The respondent adduced evidence of CCTV footage of Norton Street which revealed that a red Ferrari had not been driven along that road at the time the appellant claimed he had done so. Confronted with this evidence, the appellant sought to explain, in cross-examination, that all he had ever said to the insurance investigator was that that was the usual route he took on a Saturday night. In further cross-examination, the appellant gave various routes he might have taken on the night. 3. The variations in the appellant's evidence as to the route he took were relevant, on the respondent's case, as telephone records indicated that he left home at 7:34 pm and was in Burwood at 7:49 pm, some 15 minutes later. Had he taken the Norton Street route, he would not have arrived in Eurella Street until between 7:55 pm and 8 pm. The respondent submitted that it was therefore necessary for him, whilst under cross-examination, to find a route that would have taken no more than 15 minutes, so as to be able to accommodate the period of time taken to drive to Eurella Street with the telephone records. The purport of the submission was that the appellant's evidence was not to be believed. 4. At trial, the respondent also successfully attacked other aspects of the appellant's original version of what he had done and where he had been on the afternoon of 17 December 2011 as given to the respondent's investigator. For example, contrary to his original version of events given to the insurance investigator, that he went straight home from work, the appellant, upon checking his telephone records, which indicated that he had been in Wiley Park and Homebush during the afternoon, later told the investigator and maintained in evidence that he had gone to his storage unit in Homebush and built a clothes rack, which took 2-3 hours, and arrived home at 5 pm. More detailed telephone records obtained by the respondent indicated that the appellant left work at 2:48 pm and was home by 4:43 pm. 5. In my opinion, there was no error in her Honour's assessment, at [115], of the appellant's evidence as containing "mysteries and anomalies", such that she had "considerable hesitation in accepting it unless corroborated": judgment at [124]. Nor was error established in her Honour not finding one way or the other whether the appellant drove the vehicle when he left home at 7:34 pm. Conclusion on issues (1)-(4) 1. Having reviewed the evidence and made the factual and credit findings presented by the evidence, her Honour, at [125]-[127], made the following three specific factual findings: first, that the appellant arrived home at, or just after, 5 pm; secondly, that she was satisfied that the appellant left the house at about 7.34 pm; thirdly, that he had dinner with friends at about 8 pm and then saw a movie at Burwood Westfield Cinema, and that the movie finished at about 12.40 am. 2. Her Honour, however, at [126], stated that she was "not satisfied as to whether he left in [the vehicle] or not". I take that to be a finding that her Honour was not satisfied one way or the other as to that matter. Her Honour, at [128], noting that given the inconsistencies in the appellant's evidence she was "not satisfied that an insured event ... occurred", stated her conclusion that she was "not satisfied to the requisite standard that the vehicle was stolen". The "requisite standard" to which her Honour referred was the civil standard of the balance of probabilities. 3. Her Honour reiterated her conclusion in stating her reasons for not dealing with any fraud issue, at [129]: "As I have found that I am not satisfied that the vehicle was stolen – an essential element of [the appellant's] case – it is not necessary to dispose of the defence that the claim was made fraudulently." 1. Her Honour's finding, at [128], that she was not satisfied to the requisite standard that the vehicle was stolen, as I understand her reasons, was a finding that the appellant had not proved, on the balance of probabilities, that the vehicle had been stolen. I consider this to be the case, notwithstanding that it appears, as I have indicated, that the finding at [126] was a statement that her Honour was not satisfied either way. 2. In order for a plaintiff to succeed, it must satisfy the court, on the whole of the evidence, of the facts necessary to establish the cause of action. In coming to its determination, a court is not required to accept the whole of the evidence adduced by one or other of the parties. Nor is it required to accept the whole of the evidence of a particular witness. It may find itself satisfied in respect of some facts, not satisfied in respect of other facts, and not satisfied one way or the other in respect of other matters. If, on the whole of the evidence, the court is satisfied that the facts necessary to sustain the cause of action have been proved on the balance of probabilities, the plaintiff will succeed. In the present case, that required the appellant to satisfy the court that an insurable event had occurred. The relevant insurable event was the theft of the vehicle. As I have said, her Honour specifically found that she was "not satisfied to the requisite standard" that the vehicle had been stolen. Accordingly, the appellant's claim failed. 3. In a case where, on the whole of the evidence, the probabilities are equal, a plaintiff will fail, having not satisfied the court on the balance of probabilities of the necessary facts to establish the cause of action. If in a case such as the present, the court had found that the probability that the vehicle was stolen was equal to the probability that it was not stolen, the appellant would not have succeeded on his claim: see Compania Naviera Vascongada v British & Foreign Marine Insurance Co Ltd (The Gloria) (1936) 54 LIL Rep 35 at 50-51; Palamisto General Enterprises v Ocean Marine Insurance Co Ltd (1972) 2 QB 625; Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; 13 ANZ Insurance Cases ¶161-639; Anderson v AON Risk Services Australia Ltd [2004] QSC 49; 13 ANZ Insurance Cases ¶61-614. Thus, even if I have misunderstood her Honour's conclusion at [128] as being a finding that the probabilities were equal rather than a finding on the balance of probabilities, the appellant's claim would still have failed. (5) The s 56 issue 1. The trial judge dealt with the respondent's s 56 defence at [134] ff. That section provides: "56 Fraudulent claims (1) Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim. (2) In any proceedings in relation to such a claim, the court may, if only a minimal or insignificant part of the claim is made fraudulently and non‑payment of the remainder of the claim would be harsh and unfair, order the insurer to pay, in relation to the claim, such amount (if any) as is just and equitable in the circumstances. (3) In exercising the power conferred by subsection (2), the court shall have regard to the need to deter fraudulent conduct in relation to insurance but may also have regard to any other relevant matter." 1. Her Honour, correctly, referred at the outset to the proper operation of the section, namely, that: "The reference to fraud does not require a finding that the vehicle was taken by or with the knowledge or consent of the owner, but refers to a false statement, knowingly made in connection with a claim for the purpose of inducing the insurer to meet the claim: Tiep Thi To v Australian Associated Motor Insurers Limited [(2001) 3 VR 279]." 1. Her Honour also referred to the statement of Einstein J in Walton v The Colonial Mutual Life Assurance Society Ltd [2004] NSWSC 616; 13 ANZ Insurance Cases ¶61-620 at [144], as follows: "… the test for fraud is satisfied if the insured has a dishonest intent to induce a false belief in the insurer for the purpose of obtaining payment or some other benefit under the policy. As such, where the insured makes a false statement with knowledge in a claim to induce the insurer to meet the claim, the claim is made fraudulently. The fraudulent statement need not be material to the insured's claim nor is the insured absolved of any responsibility by asserting that he considered his claim to be valid … it is not necessary to show prejudice as having been suffered by the insurer for s 56 to be relied upon." 1. Although the respondent pleaded that the appellant had made six specific false statements, it appears from her Honour's reasons that at the hearing, two misstatements were relied upon: the appellant's statement as to his whereabouts on the afternoon of 17 December 2011 between 2 pm and 4:45 pm and the route that he told the investigator he took in driving from his home to Eurella Street. 2. Her Honour was not prepared to find that the statement the appellant made as to the route he took was made to induce a false belief in the respondent. Likewise, her Honour was not prepared to make such a finding in respect of the statements the appellant made relating to his movements on the afternoon of 17 December in relation to "the time he left work and so on": judgment at [138]. However, having accepted Mr Sacco's evidence and found that the car Mr Sacco saw was the appellant's vehicle, her Honour stated, at [139]: "That being the case, for whatever reason, [the appellant] was not honest or candid in the answers that he gave about his whereabouts that afternoon." (emphasis added) 1. Her Honour, at [140], continued: "That being the case, I am satisfied that [the respondent] was entitled to refuse the claim pursuant to s 56 of the Insurance Contracts Act." 1. The appellant submitted that the trial judge erred in this finding. He pointed out that s 56 requires a finding that the false statement alleged to ground the defence must be made with the relevant intent, namely, for the purpose of inducing the insurer to meet the claim. Her Honour did not make any such finding. Rather, her conclusion was based upon the non-specific statement of "whatever reason" the appellant had for making the statement. 2. The appellant sought to defend her Honour's reasoning by reference to [103], where her Honour had set out the correct test and a "comprehensive" reading of [137]-[140]. To understand this argument, it is necessary to set out those paragraphs: "137 Counsel for [the appellant] argued that each of the false answers could be explained by [the appellant] being unsure about the precise events of the day rather than being made with a dishonest intent. 138 I agree up to a point. As I have said, there were many aspects of [the appellant's] evidence which I found to be unsatisfactory but I am not prepared to find that, particularly with respect to his movements on the afternoon of 17 December, the time he left work and so on and the route he took when he went out in the evening, were made with a dishonest intent to induce a false belief in [the respondent]. 139 However, I have accepted Mr Sacco's evidence and found, on the balance of probabilities that the car that Mr Sacco saw was [the appellant's] car. That being the case, for whatever reason, [the appellant] was not honest or candid in the answers that he gave about his whereabouts that afternoon. 140 That being the case, I am satisfied that [the respondent] was entitled to refuse the claim pursuant to s 56 of the Insurance Contracts Act." 1. The respondent submitted that properly understood, her Honour intended, by the use of the conjunction "However" as the introduction to [139], to draw a distinction between her finding at [138], that she was not satisfied, upon the application of the correct test, that the statements there identified were made with intent to induce a false belief in the respondent, and her finding at [139]. The appellant submitted that the distinction, so drawn, taken with her Honour's conclusion at [140], must have meant that she considered the statement referred to in [139] was made with the necessary intent, for the purposes of s 56. 2. The seriousness of a finding of fraud, including statutory fraud, does not permit of other than a specific finding that the fraud, or the contravening conduct, has in fact occurred. This was well explained by Dixon J in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336, albeit in the context of the requisite standard of proof. His Honour stated, at 362-363: "It is often said that such an issue as fraud must be proved 'clearly', 'unequivocally', 'strictly' or 'with certainty' … This does not mean that some standard of persuasion is fixed intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained [that the fraud has been committed]." (citations omitted) 1. The seriousness of raising a question of fraud underlies the express pleading requirement that fraud be clearly pleaded and properly particularised: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 14.14. The pleading must allege the acts involved and that they were done in a manner that involves fraud: Banque Commerciale SA v Akhil Holdings Ltd [1990] HCA 11; 169 CLR 279 at 285; Minister Administering the Crown Lands Consolidation Act and Western Lands Act v Tweed Byron Local Aboriginal Land Council (1990) 71 LGRA 201 at 203-204. 2. In Ghazal v Government Insurance Office (NSW) (1992) 29 NSWLR 336 at 344, Kirby P observed, in the context of the manner in which a case was run at trial, that it is necessary to fairly confront a person with the suggestion that a case is false or fraudulent. His Honour pointed out that this was once considered a question of fairness but was now accepted to be a basic obligation of procedural justice: Somaghi v Minister for Immigration, Local Government and Ethnic Affairs (1991) 31 FCR 100; 102 ALR 339 at 108-109, 118-119; Inzaurralde v Government Insurance Office of New South Wales (Court of Appeal, 28 October 1992, unreported) per Mahoney JA; Ghazal at 345. 3. The same is to be said of a finding of fraud. A finding of fraud, including fraud for the purposes of s 56, involves a finding that a person has been untruthful and deliberately so, with the intent of obtaining a financial gain. It is a finding of seriously wrong conduct. Although it was not suggested that criminal consequences are likely to flow from the finding in this case, the appellant submitted that there may be serious implications for his future insurance needs. But even without that concern, it cannot be gainsaid that, if a finding of fraud is to be made, it should be made clearly and the reasons for the finding articulated. A statement that "for whatever reason" the respondent's entitlement to have the claim refused under s 56 does not satisfy this fundamental requirement. Some additional comments 1. There was a question as to whether the respondent had in fact pleaded common law fraud, independently of the s 56 defence. As I explain below, the reference to common law fraud was, at best, nebulous. The same may be said of the respondent's submissions at trial. 2. The only pleading that could possibly have indicated that an allegation of common law fraud was being made were in paras 14 and 15 of the defence, which was in the following terms: "Should the court conclude the claim of [the appellant] to have been fraudulent then [the respondent] seeks that it be paid not only its costs of these proceedings but also its costs of investigating [the claim]." 1. "Particulars of special claim for costs" were then pleaded in para 15 in terms: "a. The claim is false. b. [The appellant] seeks to use the court as an instrument of that fraud." 1. In the way the matter was argued at trial, the highest that a question of fraud was put was in para 12 of the written submissions where, in dealing with the s 56 defence, a submission was made that a false statement, made recklessly, in association with an insurance claim, made the claim fraudulent in the sense explained in Derry v Peek (1889) 14 App Cas 337. 2. It would appear, however, from [129] and [132] of the judgment, that her Honour considered the matter was in issue. Her Honour stated, at [129], that as she was not satisfied that the vehicle had been stolen, it was not necessary to determine the claim was made fraudulently: see Rejfek v McElroy [1965] HCA 46; 112 CLR 517 at 521. Her Honour thus, at [132], declined to make any finding of fraud "in the absence of cogent evidence going to such critical issues as the number and location of keys and remotes for the vehicle and motive". 3. Paragraphs 14 and 15 of the defence followed the respondent's pleading in para 12 in which it raised the defence pursuant to the Insurance Contracts Act, s 56. 4. If paras 14 and 15 were intended to plead fraud, the pleading did not comply with the requirements of the UCPR, r 14.14. The respondent ought not to have been allowed to pursue a claim in fraud based on pleadings in the terms in which they appear in those paragraphs. Indeed, in the terms in which those paragraphs were pleaded, they may not have been intended to raise common law fraud at all, given their terms and their proximity to the s 56 pleading. Rather, it may be that these paragraphs were intended to put the appellant on notice of a claim for damages should the defence under s 56 succeed. If that was their intended function, any such claim, not only should have been clearly pleaded, the claim ought to have been brought by way of cross-claim. The same is to be said if in fact paras 14 and 15 of the defence were intended to plead common law fraud. 5. A brief comment ought also be made in respect of the pleading of the s 56 defence in para 12. Although the respondent pleaded that the appellant "made false statements in support of the claim" so that the respondent was entitled to refuse the claim pursuant to s 56, the pleading does not assert that the false statements were made with the intent to induce the respondent to pay the claim. It may be that that allegation was implicit in the pleading that the respondent pursuant to s 56 was entitled to refuse the claim. Nonetheless, good pleading practice required that the allegation of intent be made in specific terms. 6. The order I propose is: The appeal is dismissed with costs. 1. MEAGHER JA: I have had the advantage of reading in draft the judgment of Beazley P. I agree that the appeal should be dismissed with costs and wish to add some observations which emphasise what the Uniform Civil Procedure Rules 2005 (NSW) make clear by r 14.14(2) and (3), namely that the material facts supporting an allegation of fraud (in this case the making of a fraudulent insurance claim) must be specifically and clearly pleaded. That requirement in turn directs the pleader's attention to what as a matter of law must be proved to make out the relevant cause of action or defence. 2. The appellant insured's claim to an indemnity under the motor vehicle insurance policy was made and pleaded on the basis that his vehicle was stolen between 8pm on 17 December 2011 and 12.50am on 18 December 2011. His evidence was that he had parked the vehicle in Eurella Street, Burwood at about 8pm on that night, eaten at a restaurant in Burwood and then seen a movie at the Burwood Westfield Complex. When he returned to Eurella Street at about 12.50am the vehicle was not there. 3. The respondent insurer denied the allegation that the vehicle had been stolen. By doing so it put in issue whether the vehicle had been taken away or removed from the appellant's possession without his consent. The respondent also alleged that the appellant had made false statements in support of his claim and, for that reason, that it was entitled to refuse payment under s 56(1) of the Insurance Contracts Act 1984 (Cth). The statements alleged to have been false did not include the appellant's claim that the vehicle had been stolen: cf the allegation made in Simon v NRMA Insurance Limited [1991] NSWCA 247, which concerned a motor vehicle insurance claim arising in circumstances similar to those in this case. 4. Section 56(1) provides that where a claim under a contract of insurance "is made fraudulently" the insurer may refuse payment of the claim. That will be so if a false statement is knowingly made in connection with the claim for the purpose of inducing the insurer to pay the claim: per Buchanan JA (Charles and Callaway JJA agreeing) in To v Australian Associated Motor Insurers Ltd [2001] VSCA 48; 3 VR 279 at [19], [23]. 5. The respondent provided particulars of six false statements said to have been made by the appellant in support of his claim. One, that the appellant had purchased a clutch kit for the vehicle, had no apparent connection with the making of the claim and was subsequently abandoned. The last of the remaining statements concerned the number of keys and remotes for the vehicle in the possession of the appellant. The particulars of that statement included: The incorrect answers given in respect of the numbers of keys and the numbers of remotes said to have been in the possession of the plaintiff are significant given that the defendant says that the plaintiff arranged for his vehicle to be taken from one place (where it was parked) to another place (unknown) to be kept in secret so that an insurance claim could be made in respect of its theft. 1. No similar allegation was made in relation to the other statements said to be false. 2. The respondent's defence did not plead, as it should have done in order to engage the application of s 56(1), that the appellant had knowingly made each of the false statements for the purpose of inducing it to accept his claim that the vehicle had been stolen. One consequence of this, as the learned President's reasons show, was that, when considering the respondent's reliance on that defence, the primary judge neither addressed nor made a finding as to the appellant's alleged fraudulent purpose in making the false statements. 3. A second consequence of this deficiency in the pleading was to create apparent uncertainty as to whether the respondent had made a positive case that the claim was fraudulent because the vehicle was known by the appellant not to have been stolen. Plainly enough, if that allegation was made, the respondent would have borne the burden of proof, the satisfaction of which was to be addressed in accordance with subss 140(1) and (2) of the Evidence Act 1995 (NSW) as informed by the principles in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336. This uncertainty is apparent from the primary judge's statement at [132] declining to make "any findings as to fraud in the absence of cogent evidence going to such critical issues as the number and location of keys and remotes for the vehicle and motive". In circumstances where there was no allegation that the claim was fraudulent in the sense referred to above, there was no occasion for her Honour to make any findings directed to such an allegation. 4. Addressing the appellant's claim that the vehicle was stolen from Eurella Street at some time between 8pm and 12.50am, her Honour was not satisfied that it had been parked in that street at any time during that period: Judgment at [109], [122], [126], [128]. Her Honour did, however, find that the vehicle was parked in Eurella Street (and opposite the Sacco family residence) at some time after 5pm and until it was driven away at approximately 6.30pm: Judgment at [119], [120], [121]. That this occurred was not consistent with the appellant's evidence that he had first driven the vehicle from his home, where he lived with his parents, at about 7.30pm: Judgment at [121], [139]. Having regard to these and other inconsistences in the appellant's evidence concerning the circumstances surrounding the disappearance of the vehicle, the primary judge was not prepared to accept his uncorroborated evidence which would have meant that the vehicle had been parked in Eurella Street twice in the same evening. I agree, for the reasons given by Beazley P, that the primary judge did not err in not being satisfied that the vehicle had been stolen. 5. In so concluding, the primary judge made clear that her finding was not a finding of fraud: Judgment at [122], [132]. Nor was her Honour's conclusion necessarily equivalent to a finding of fraud because, in a case where the only reasonable alternative was that the appellant had participated in the vehicle's disappearance, it was open to her Honour to find that she was not satisfied the vehicle had been stolen where the probability that it had been stolen was equal to the probability that it had not: per Samuels AP in Simon v NRMA Insurance Ltd. See also Hammoud Brothers Pty Ltd v Insurance Australia Ltd [2004] NSWCA 366; 13 ANZ Ins Cas 61-639 at [32]-[33] (Bryson JA, Ipp and Tobias JJA agreeing); and the earlier decision of McMurdo J in Anderson v AON Risk Services Australia Ltd [2004] QSC 49; 13 ANZ Ins Cas 61-614 at [87]. 6. I also agree, for the reasons given by the President, that the primary judge erred in concluding that the respondent was entitled to refuse payment of the claim because the appellant made false statements as to his whereabouts and that of the vehicle in the early evening of 17 December 2011. In this case, to be entitled to rely on a defence under s 56(1), the insurer had to plead and prove that any false statement was knowingly made by the appellant for the purpose of inducing it to pay his claim. 7. McDOUGALL J: I agree with Beazley P, for the reasons her Honour gives, that the appeal should be dismissed with costs. I agree also with the additional observations of Meagher JA. ********** 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: 02 September 2015