Ayteniz v NRMA Insurance

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11861/2002 - ERDAL AYTENIZ v NRMA INSURANCE LIMITED

JUDGMENT (Appeal decision of LCM -- insurance - wilful misconduct) 1 MASTER: By amended summons filed 11 February 2003, the plaintiff seeks, firstly, leave to appeal the decision of Giles LCM dated 7 June 2002 in local court proceedings 214/2001; secondly, that the judgment of the Magistrate dated 7 June 2002 be set aside; and thirdly, entry of judgment for the plaintiff on the statement of liquidated claim, or alternatively, that the matter be remitted to the Local Court for a new trial. The plaintiff relied on two affidavits of Steven Stojanovic sworn 18 December 2002. This matter has been referred to a Master for hearing by the list Judge. 2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the Tribunal member acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 3 The plaintiff appeals from the whole of the decision of Giles LCM dated 7 June 2002. The grounds of appeal are firstly, that the Magistrate erred at law in requiring the plaintiff to discharge the onus of proof that it was more probable than not that an exclusion under the policy of insurance did not apply; secondly, that the Magistrate erred at law in requiring the plaintiff to disprove an exclusion under the relevant policy of insurance which was an allegation of fraud; and, thirdly, that the Magistrate erred at law in not finding that the plaintiff had discharged the onus of proof so as to succeed upon the amended statement of ordinary claim. 4 The plaintiff submitted that the Magistrate misdirected herself as to the proper test to be applied with respect to the matters required to be proved by the plaintiff, namely, that the plaintiff carried the onus of proving that he did not commit fraud and the Magistrate's failure to find that the defendant carried the onus or proving fraud and not the plaintiff. The plaintiff further submitted that the Magistrate failed to consider, or misdirected herself, as to the proper test to be applied with respect to the burden of proof to be applied to the allegations of fraud raised by the defendant - the Briginshaw test; and that the Magistrate failed to give any, or any proper consideration, as to whether the defendant has discharged its onus of proof with respect to the allegations of fraud. The Magistrate erred in finding that there was no evidence at all that the damage arose from an independent criminally motivated car burner and therefore consequently failed to give proper consideration to the issue of whether the defendant had made out its allegations of fraud. 5 The defendant submitted that the amended summons is incompetent and should be dismissed. The defendant submitted that the plaintiff's appeal does not come within s 69(2) of the Act as the plaintiff pleads matters of mixed law and fact or alternatively, matter of fact only (see Carr v Neill [1999] NSWSC 1263; Pace v Read [2000] NSWSC 823) and therefore requires leave of the court to appeal. 6 The principles according to which this court is to decide whether an appeal should be allowed from the decision of the Magistrate are stated definitively in a short passage in the joint judgment of Dixon, Evatt and McTiernan JJ in House v The King (1936) 55 CLR 499 at 504-505. It is, I think, useful to re-state them as follows: "The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred."

Proceedings in the Local Court 7 In the Local Court proceedings, the plaintiff pleaded that on 28 May 1999 at about 2.30 am his 1996 Holden Commodore motor vehicle was set on fire by a person or persons unknown to him. A claim was made by the plaintiff under the contract of insurance, and the defendant refused to pay the claim. The plaintiff sought damages in the amount of $23,625 (being the agreed value less salvage value of $1,000 and excess $375), interest and costs, for breach of contract of insurance. 8 It is common ground that the contract of insurance contained, firstly, an exclusion clause, namely that the policy did not include "loss or damage intentionally caused by you or a person acting with your express or implied consent"; and secondly, a provision which stated "We may refuse a claim or cancel the policy or both if you are not truthful and frank in any statement you make in a claim or in connection with a claim", and this was pleaded in the defence. I shall refer to it as the first ground of defence. There were further defences raised, namely, that the plaintiff failed to comply with his duty of disclosure when he entered into the policy and fraud. 9 The Magistrate in her reasons for judgment stated: "It is time for a decision in terms of this general division civil claims matter that is brought by the plaintiff Erdal Ayteniz against the defendant in this matter, the NRMA Insurance Limited. It is the plaintiff's contention that under the terms of his insurance contract the defendant, the NRMA, is contractually obliged to pay out his fire written-off car at an agreed value. The defence contend that they are not under any obligation to pay out Mr Ayteniz's claim because the damage arose from an act intentionally caused by Mr Ayteniz, or occurred with his consent, for which the defendant is specifically not liable under their policy. I have heard a grant deal of evidence on this particular point, regarding the events and circumstances of the very late evening of 27 May and the very crucial first three hours of the morning of 28 May, back in 1999. I have also heard a great deal about Mr Ayteniz's, and his brother-in-law, Mr Ant's movements that night and what happens when they leave the eventually fire burnt-out car at Clifton Gardens and they go fishing some 100 to 200 metres away on the wharf at Clifton Gardens. It is Mr Ayteniz's claim that his car was damaged otherwise than with his involvement or consent, and he is obliged to prove that to me on the civil standard, on the balance of probabilities, that is, as a proposition it is more likely than not that on balance the damage was caused by someone else. The grave and serious problem with accepting the plaintiff's contention is that the car was locked, the windows are up, the bonnet is down, the petrol flap is shut, when the plaintiff leave the car in the Clifton Gardens carpark, and he walks with his brother-in-law the 100 to 200 metres or so down the Clifton Gardens wharf and sat fishing for somewhere between half an hour, on Mr Ant's evidence, an hour on Mr Ayteniz's evidence - nothing turned on that - and they still have a direct sight line back to the car. They do not hear any sound and no alarm goes off in the car. The bonnet of the car has clearly, on balance, been opened. Normally that would trigger the car alarm. On balance, accelerant has been put over the engine in the engine bay and the bonnet has been closed again. The damage is major to the engine bay much more so, according to Mr Simpson, than would be expected if fuel was simply poured over the car from the outside, bonnet closed, and flowed down the usual rain water exits, through the engine bay to exit beneath the car. There were no signs of forced entry into the car or the bonnet. There arose an inescapable inference from that, and the fact that the petrol flap had been released, which is only releasable from a lever near the driver's seat, inside the car, and it was an inference pointing to the involvement of a person with key access. That sole person, on his own admission, is Mr Ayteniz. Clearly, at first blush, there is a circumstantial case that pointed to Mr Ayteniz's involvement in damaging his own car. Two people are there witnessing, and they gave evidence to me today -well over the last two days - about how, as witnesses, how they became aware that Mr Ayteniz's car was on fire. Those two witnesses differed markedly. That was Mr Ant and Mr Ayteniz. That, to me, was rather crucial. Mr Ant says the flames drew his attention up to the burning car. Mr Ayteniz says fishing, facing the harbour, there's a loud explosion, made them turn around, they looked up, they could see the burning. Whether Mr Ant and Mr Ayteniz were in fact fishing, given that the police make a note that the lines are dry and tied off with no hooks or sinkers, at first blush again, that was a minor point. But Mr Ayteniz says that Mr Ant did all the tidying up of the rods, and tying off of the lines, the taking off of the hooks and the sinkers while he, Mr Ayteniz, is talking to the police. Mr Ant says that no such thing happened. Well Mr Ant said no such thing. In two days the car's registration is going to run out, but there is no green slip for reinsurance obtained at that point. There is no evidence at all that the damage arose from an independent criminally motivated car burner. The only partial explanation that Mr Ayteniz can give for the damage is that someone has poured petrol from the outside, all over the car and lit it. But that is against Mr Simpson's evidence and the evidence of my own observations of the damage to the engine bay, here in exhibit 8. This person has no access under the bonnet to place accelerant on the engine. But even if this independent criminally minded person could have forced their way under the bonnet, they have done so in complete silence, and replaced the bonnet down such that signs of forced entry were not evidence (sic). There are no noised (sic) heard by Mr Ant or Mr Ayteniz. If this independent criminally motivated car burner brought a hose with him to siphon from the petrol from the accidentally open tank, he took that hose with him, but he left his petrol can. It makes no sense that you torch a car for no motive, other than entertainment, and you do not stay to watch it or enjoy it, when there are clearly four people in view who are going to prevent your enjoyment of that fire as soon as the flames become apparent. The idea that someone completely unrelated to Mr Ayteniz burnt this car is so inherently unbelievable that it merely serves to throw suspicion back on Mr Ayteniz. I am not satisfied, on the balance of probabilities, that this damage to Mr Ayteniz's car was inflicted by someone unconnected to him and on balance it appears quite the reverse. THERE IS A VERDICT FOR THE DEFENDANT, BEING ENTERED AND THIS BEING A CIVIL JURISDICTION, COSTS FOLLOW THE CAUSE." 10 The portions that are in bold are those that the plaintiff's counsel referred to as the critical passages. 11 It is common ground that the passage below correctly reflects the law in relation to wilful misconduct. In Craig v Associated National Insurance Co Ltd (1983) 71 FLR 455 Carter J posited at 456: "In respect of the defence of wilful misconduct the question is whether it is for the plaintiff to disprove the allegation that he deliberately set fire to the vessel as well as proving the facts necessary to entitle him to be indemnified, or whether the onus is on the insurer to prove the allegation of wilful misconduct as particularised."

And answered: "The onus remains on the insured to prove the fortuitous and accidental nature of the loss and to exclude on the balance of probabilities the allegation of the insurer that the vessel was scuttled. The Vainqueur [1974] 2 Lloyd's Rep 398." 12 At the outset of the judgment, the Magistrate defined the issue that she was called upon to decide. It was the defence's contention that they were not under any obligation to pay out the plaintiff's claim because the damage arose from an act intentionally caused by him or with his consent, for which the defendant is specifically not liable under its policy. 13 The plaintiff's counsel conceded that the Magistrate's statement that the plaintiff was "obliged to prove on the civil standard, on the balance of probabilities, that is, as a proposition it was more likely than not that on the balance the damage was caused by someone else" was correct and she had not gone any further. There was no error of law. 14 The plaintiff submitted that the Magistrate did go further and made a finding of fraud when she said she was "not satisfied, on the balance of probabilities, that this damage to Mr Ayteniz's car was inflicted by someone unconnected to him and on balance it appears quite the reverse." 15 It is my view that at the outset of her judgment, the Magistrate defined the issue she was determining, namely the exclusion clause defence of wilful misconduct. She did not need to consider the further issues of non-disclosure and fraud and it is my view that she did not do so. Thus, there is no error of law. 16 The plaintiff raised a discrete point, namely, that when the Magistrate made the statement that "there is no evidence at all that the damage arose from an independent criminally motivated car burner" she erred because the plaintiff gave evidence on this topic. Hence, according to the plaintiff, there was evidence on this issue that the Magistrate misdirected herself at law. When the judgment is read as a whole, the Magistrate was unimpressed with the plaintiff's evidence. Notwithstanding that statement, in light of the other evidence referred to in the Magistrate's judgment it was open to her to arrive at her decision. There has been no miscarriage of justice. There is no error of law which would merit this matter being remitted to the Local Court. The appeal is dismissed. The verdict is confirmed. The amended summons is dismissed. 17 Costs are discretionary. Normally costs follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. 18 The Court orders:

(2) The verdict in favour of the defendant is confirmed.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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