Collings v Australian Associated Motor Insurers Limited

THE ISSUES

1. There are four broad issues raised in the proceedings.
2. First, whether the policy only covered accidental damage, and if so, whether Mr and Mrs Collings have established that the damage was accidental.
3. Secondly, whether the fire resulted from the deliberate and intentional conduct of Mrs Collings.
4. Thirdly, whether the Insurer was entitled to refuse to pay the claim or not pay the whole of the claim because of fraudulent claims within the ambit of s 56 of the Insurance Contracts Act 1984 (Cth). By the time of final submissions, the alleged fraudulent claims comprised three matters: 1. representations by Mrs Collings about her awareness of the status of her insurance policy; 2. representations by Mr and Mrs Collings about possessing $10,000 in cash; and 3. representations by Mrs Collings about possessing $25,000 in jewellery.
5. Fourthly, the quantum of loss or damage.

THE POLICY

1. AAMI, the insurance company, had first issued a home and contents policy to Mr and Mrs Collings in November 2000 when they purchased their house. It was apparently renewed from time to time but had expired in about March 2006. A cover note was taken in February 2007 but lapsed on non‑payment of the premium three weeks later. On 16 June 2007, some six days before the fire, a policy was issued by AAMI which required payment of monthly instalments of the premium at the end of each month. The fire occurred six days later, before the first instalment was due.
2. The Home Insurance Schedule of the policy provided in respect of "Building Complete Replacement Cover", "Repair or rebuilding costs Unlimited" and in respect of "contents cover contents $150,000".
3. The contents cover was an increase of $30,000 on the amount of cover provided for in the most recent cover note that expired in March 2006. The schedule provided for a building excess of $1,000 and a contents excess of $1,000, although only one excess was applicable if there was a claim on both the building and the contents in respect of the same event.
4. The Building Policy wording or "Home Building Insurance Policy Disclosure Statement" included the following provisions: "Amount covered is the most we will pay, less any excess, for any accidental loss and damage covered by your AAMI policy occurring during the period your home is insured with us. The amount covered includes GST. The current amount covered is shown on the most recent of your insurance schedule and your renewal notice." "Fire means burning with flames." "Home… It excludes: ... fixed carpets, carpet of any type, internal blinds, drapes, curtains, ..." "Insured event. The occurrences...listed...which cause loss and damage to your home." "Loss and damage: Loss or lost means your home or a fixed part of your home being destroyed, stolen or damaged beyond economical repair. Damage means actual physical damage to your home." "Total loss means damage to your home, to the extent that we reasonably consider that complete or near-complete rebuilding is necessary to reinstate the property, or where we have paid the whole of the amount covered." "When your building and contents are insured with AAMI and your claim is for loss or damage to both, only one excess, the higher of your building and contents excesses will be payable." "What we cover: Insured events ... Yes - the insured events you are covered for, No - the conditions and exclusions that specifically apply to particular insured events." "Yes No You are covered for loss or damage to your home occurring during the period of cover and caused by the following events: But not for: Fire (burning with flames) Loss or damage caused by: any process involving the application of heat where there was no flame, for example, cigarette burn marks or scorch marks are not covered, soot and smoke where your home or the site has not been damaged by fire."

"You are not covered under any section of the policy for loss, damage, cost or liability caused by or arising from or involving: ... fraud or fraudulent means or devices used by you or anyone acting on your behalf to obtain benefit under this policy, deliberate or intentional acts committed by you or someone acting on your behalf..." "What we will pay When an insured event causes loss or damage to your home during the period of the cover, we will pay up to the amount covered. We will decide either to repair, rebuild or replace your home or to pay the cost of repairing, rebuilding or replacing your home. Our payment will be the reasonable cost of returning your home to the same condition it was in immediately before the loss or damage occurred. Our payment will be on the basis that new materials will be used. Where possible, we will match materials. Where this is not possible, materials that match as near as reasonably practicable will be paid for by us. We will not pay to replace unrepaired materials so as to achieve a match with repaired or replaced materials. Our payment will include, where applicable, the following costs and these costs will be included within the home building amount covered. Demolition and removal of debris We will pay the reasonable cost of, and, at our option, arrange for the demolition of your destroyed home, removal of debris from the site necessary for repairing or rebuilding, removal from the site of fallen and unsafe parts of a tree when the tree or part of it has impacted with your home causing loss or damage. Making safe We will pay the reasonable cost of, and, at our option, arrange for any temporary work required to make safe your destroyed or damaged home. Professional fees We will pay the reasonable fees for the services, if necessary, of an architect or surveyor. Extra costs In repairing or rebuilding your home, we will pay the extra costs necessary to satisfy the current requirements of any local council or government authority." "Additional benefits and protection When the insured event causes loss or damage to your home during the period of cover, we provide the following additional benefits. Any payment we make will be additional to the home building amount covered and will include GST. We help with the cost of temporary accommodation We will pay for the reasonable cost incurred by you for comparable accommodation while your home is being rebuilt or repaired, provided: you have claimed on this policy and we are satisfied everything is in order, we are satisfied that your home is no longer habitable, and you were living permanently in your home at the time. Our payment will be the lesser of: an amount equal to 10% of the amount covered, and the actual cost incurred by you during the reasonable period up to 12 months required to repair or rebuild your home. ... We help replace garden beds, trees, shrubs and other plants We will pay you the cost of up to $1,000 of making good the damage to trees, shrubs, plants, hedges or garden beds on your site caused by fire or the impact of vehicles (not driven by you or by any person living at your home)." "What happens when you claim on your AAMI policy When you tell us about the loss or damage to your home, where necessary and as soon as possible, we arrange: for our assessor to meet with you, inspect your home and confirm the full details of the loss or damage, temporary repairs to and the securing of your home, temporary accommodation for you and your family... We discuss with you what is necessary to make good the loss or damage and then we will decide either to repair, rebuild or replace your home or pay the cost of repairing, rebuilding or replacing your home up to the amount covered. We ordinarily obtain independent, competitive quotes, from repairers recommended by AAMI. If you want, you can choose a repairer to provide one of the quotes. We will review the quotes, including any quote from a repairer you choose, and what is necessary to properly repair your home. We will select the repairer who has submitted the more competitive and complete quote and they will be the repairer who repairs your home. We have your home repaired, keeping you informed all the way along. What happens to the amount covered after the claim has been paid? If we do not consider your home to be a total loss and the payments made by us are less than the amount covered, there is no change to the original amount covered and your policy continues to remain to the period of cover. However, if we do consider your home to be a total loss, or we pay the amount covered for your home building, then the policy comes to an end… Changes to your home You can have changes made to the design and structure of your home before repair or rebuilding. Any extra cost of such changes will be your responsibility. We may decide to pay you the reasonable cost of rebuilding or repairing your home without the changes you require. What we do if your home cannot be repaired If your home is destroyed or so badly damaged that it cannot be economically repaired, we declare it a total loss and pay you the amount covered. What happens to your policy when we make that total loss payment When we make a total loss payment: we pay the amount covered for your home building, we agree to pay any outstanding additional benefits, your policy, including the legal liability it provides, comes to an end. Because our payment meets all our obligations to you in full, there is no refund of any portion of the premium." "Your responsibilities include ... Allowing us access You must provide us with access to your home for the inspection of loss or damage, arranging quotations, repair or rebuilding, progress inspections if required. ... Giving assistance - information, notices, negotiating, defending and settling claims You must give us the information and assistance we reasonably request in evaluating the cause, extent and value of any claim. This may include: providing us with full details of the claim in writing, providing valuations, receipts or other evidence of ownership, providing written statements, undergoing an interview or interviews about the circumstances of the claim, appearing in court and giving the evidence. ... If you fail to assist us or do not abide by any of these terms, we may reduce or refuse to pay your claim."

1. The Contents Policy wording or "Home Contents Insurance Policy Product Disclosure Statement" adopts much of the same provisions as the Building Policy. It also contains additional provisions including: "The value of your home contents Because this policy provides for replacing or repairing your damaged or destroyed contents at current cost, it is your responsibility to value your contents for the current cost of replacing them if they were completely destroyed. The value you decide upon will be the amount your contents will be covered for under this policy. Therefore, it is in your own best interest to ensure that the value you placed on them is accurate when you first insure them and that is updated when you renew your policy. To help you do this, AAMI provides a home contents value calculator. You can access at the AAMI website www.aami.com.au or by calling AAMI on 13 22 44." "Amount covered is the most we will pay, less any excess, for any accidental loss and damage to your contents covered by your AAMI policy occurring during the period your contents are insured with us. The amount covered includes GST. The current amount covered is shown on the most recent of your insurance schedule and your renewal notice." "Total loss means damage to your home contents, to the extent that we reasonably consider that a complete or near‑complete repair or replacement is necessary to reinstate your contents, or where we have paid the whole of the amount covered." "There are three classes of contents General contents This class provides cover up to the amount covered for all your contents, other than: those contents where we limit the cover to a specific amount. These contents are listed under the next heading, Contents with Limited Cover… Contents with Limited Cover This class provides cover up to a specific limited amount for these particular contents: Valuables; floor rugs; CDs, DVDs and game cartridges; computer equipment; tools of trade; professional equipment; home business equipment; motorised or other wheelchairs; medical equipment; artificial limbs and artificial body parts, aids, and accessories; cash, money orders, etc.; and contents temporarily removed from your home… Specified Items Where your Contents with Limited Cover would cost more to replace than the limits we apply, you can tell us about them and we may insure them for their current replacement value as Specified Items…" "Contents with Limited Cover Any payment we make for Contents with Limited Cover will be within the contents amount covered. Valuables Overall limit for any one claim: $5,000 in total. Any: jewellery, watch, fur, figurine, antique (other than antique furniture), Painting, sculpture, curio, piece of bullion, print, picture, tapestry, Persian (or similar) rug or unfixed carpet, other item containing gold, silver, platinum, gems, or precious or semi‑precious stones, other work of art, item made of china, porcelain or like material. Limit: Up to $1,000 for each item pair, set or collection of any kind (for example, bullion, cards, coins, crockery, cutlery, earrings, medals, stamps, videos, etc. but not compact discs). Limit: Up to $1,000 in total for each pair, set or collection ... CDs, DVDs and game cartridges Limit for anyone claim: Up to $1,000 in total including those which form part of a set or collection. Computer equipment Computers, printers, CD-ROMs, discs, software, and associated accessories. Limit for any one claim: Up to $7,500 in total. … Home business equipment The following business equipment ordinarily located in your home and used for the office work involved in conducting a business: computers, printers, CD ROMs, discs, software, and associated with accessories, telephones, answering machines, and fax machines, mobile phones, personal organisers and pagers, desks, chairs, filing and storage cabinets, and other office furniture, sundry equipment normally used or associated with an office. Limit for any one claim: Up to $10,000 in total. ... Cash, money orders, etc. Cash, money orders, gift vouchers, tickets, stamps (not in a set or collection), manuscripts, certificates of title, licences, registration papers, negotiable instruments or documents of any kind. Limit for any one claim: Up to $200 in total." "What we will pay - new for old Repairing or replacing your home contents If your home contents are lost or damaged during the period of cover by an insured event covered under this policy, we will: decide either to repair or replace your home contents or to pay the cost of repairing or replacing them. If we decide to repair or replace your contents: it will be with new materials or new contents, where possible, we will match materials and contents. Where this is not possible, materials and contents that in our opinion match the lost or damaged contents as near as reasonably practicable will be used. If we decide to pay the cost of repairing or replacing the contents: our payment will not exceed the limits detailed in this policy for particular classes of contents and it will not exceed the amount covered, except as provided for under 'Additional benefits and protection'… our payments for the repair and replacement of your contents will be limited to the discounted price that suppliers ordinarily provide to us because of the volume of our purchases, or the current retail price, whichever is lower, whether we repair or replace, or pay the cost of repairing or replacing contents, we will not pay to replace unrepaired materials or contents to achieve a match with repaired or replaced contents." "What we do if your home contents are destroyed If your home contents are destroyed, we declare them a total lost and pay you the amount covered."

"ACCIDENTAL" FIRE AND THE MEANING OF "AMOUNT COVERED"

1. AAMI submits that because the definition of "amount covered" in the policy refers to "accidental loss and damage", Mr and Mrs Collings must establish that the damage resulted from an accident. When asked whether that excluded fire from the malicious act of a third party, AAMI submitted that such an event would come within the meaning of "accidental."
2. In my view, this submission manifests a misunderstanding of the policy. The term "amount covered" is conceptually no different from what might usually be covered by the term "sum insured." It reflects the maximum amount of coverage. This is the only sensible meaning when textual factors are considered, such as "the most we'll pay" and the "current amount covered is shown on the…schedule". In other words, there was amount covered of $150,000 for contents, and an unlimited amount for building damage, as shown on the schedule. That is the maximum amount payable for any accidental loss.
3. Thus the reference to "accidental loss" is to identify that the maximum loss is determined from a typical insured event. That accidental losses covered by the policy are insured events does not mean that the only insured events are those established to be accidental losses.
4. If insured events were confined to those proved by the insured to be accidental, it would be expected that the policy would say so in the list of insured events. Relevantly, the policy does not refer to "accidental fire" but "fire", and similarly for other insured events. Of course deliberate events are excluded, but by an express exclusion, not by narrowing without textual justification the definition of insured events.
5. Similarly, it is a misconception to state that no proof of "amount covered" occurs without proof of "accidental" loss. The insured must prove loss or damage from an insured event to recover. The "amount covered" only becomes significant if there is an issue of whether the damage exceeds the amount covered, as the amount covered is the maximum amount payable, and is the amount shown on the schedule.
6. I therefore reject as a matter of construction the requirement that Mr and Mrs Collings must establish that the loss was accidental. Whether, in any case, that was established here is considered as part of the next issue.

(a) TIMING OF MRS COLLINGS' DEPARTURE

1. The timing of Mrs Collings' departure is significant in drawing inferences about the cause of the fire, and is submitted by AAMI to be a significant matter in determining whether the fire was deliberately lit by Mrs Collings. AAMI submitted that Mrs Collings was burdened with caring for her dying mother and financial difficulties, which caused her, in the period between about 2.40pm and 2.55pm on 22 June 2007, to set alight her curtains or lounge, so as to burn down her house. In seeking to establish that Mrs Collings burnt down her house, AAMI rely on a number of matters including the time of Mrs Collings' departure from her house and her statements as to her departure time; the circumstance that she alone had access to the house at that time; and to the expert evidence.
2. Notably, no reliance is placed on the circumstance that the policy was obtained only six days prior to the fire, presumably because AAMI submitted that the fire resulted from a "spur of the moment" decision by Mrs Collings, and also because AAMI accepted that Mr Collings had no prior knowledge of the fire yet he had directed or suggested to Mrs Collings to check on and obtain insurance. Although not pressed as a factor of any significance at the trial, it was nevertheless stated by the AAMI investigator, one Mr Craig Mason, to Mrs Collings that "one of the major issues we have with the claim is in regards to the insurance and when the policy was incepted."
3. Mrs Collings gave evidence that she departed the house at approximately 2.25pm. That time is identified by a call she made to her husband, established by phone records. She says that the telephone call occurred when she was in her car, in her driveway immediately before departing, and that she told her husband that Mr Glasson had "left the house" and "there was no need for [Robert] to hurry home". Mrs Collings said she left 20 to 30 minutes prior to school finishing for her son at 2.50pm to ensure she got a parking space. The spaces were difficult to find. On this occasion, she got the first parking space, a matter the subject of comment at the time by Leanne Tighe, another mother of a school child. Mrs Collings waited about 15 minutes for her son, Aaron, to finish school.
4. Phyllis Watson, the next door neighbour, was also interviewed by Mr Mason and the transcript of that interview was received as evidence. Ms Watson said that Mrs Collings consistently left her home to pick up her son between 2.30 and 2.40pm. Ms Watson identified this time partly from the afternoon television shows that she apparently regularly watched and from the time she heard the Collings' "noisy" car depart each afternoon. In that interview, she resisted strongly suggestions from Mr Mason that she had ever said that Mrs Collings left at 2.50pm or 2.55pm. Ms Watson's evidence was tendered by AAMI, and she was not called, so her evidence was not challenged.
5. Mrs Tighe, a parent of one of Aaron Collings' classmates, gave evidence that she arrived at the school prior to the release of her child from kindergarten at 2.50pm. She saw Mrs Collings ahead of her obtain the front parking spot, and she commented to Mrs Collings about that saying, "I can't believe you got that parking spot, I have never got that parking spot." The conversation was said to be memorable because Mrs Tighe had never obtained that parking spot and it was the first time she had spoken to Mrs Collings. They subsequently became friends. Mrs Tighe noticed, while at school, a large amount of smoke coming from a place in the suburb. The next day her son, Aaron Collings' classmate, told her that a fire had burnt down Aaron Collings' house. By these matters, she identified her conversation with Mrs Collings as occurring on the day of the fire, and she said, "I specifically remember having that conversation with her that day."
6. Mrs Collings and Mrs Tighe were challenged on their evidence, but did not alter their testimony. Mrs Tighe's evidence about her conversation with her son the next day, referring to Aaron's house being burnt down, was not challenged. In my view, that is a matter which is likely to generate memories about the incidents and the related conversations at that time.
7. Mrs Tighe was criticised for her evidence that she saw the smoke while she was waiting for the children to come out of class. The timing of that observation may be significant, but it depends upon the precise recollection by Mrs Tighe of what was occurring when the smoke appeared, the actual timing of the appearance of the smoke (which was not established and it need not have been at the precise time the house commenced burning with flames at perhaps 2.55pm) and the actual time Mrs Tighe's son came out of class on that particular day. I do not regard these matters as impacting adversely on her evidence of when Mrs Collings arrived at the school, or her evidence as to the usual time kindergarten children were released. I found Mrs Tighe to be a persuasive witness with a reliable recollection, and I accept her evidence.
8. AAMI relied on the evidence of Leonard Juffermans who attended the premises at about 4.00pm on the day of the fire. Mr Juffermans' evidence in-chief was given orally and also comprised a transcript of interview with Mr Mason on 3 October 2007, three and half months after the fire. Mr Juffermans gave evidence that in a conversation with Mrs Collings, she told him that she had left the house at approximately 2.50pm. In cross‑examination, Mr Juffermans accepted that Mrs Collings repeatedly asked him if she could get family photos that were in the kitchen. He said he could recall that vaguely, and referred to having written it in his notes. He accepted that Mrs Collings' main concern was with family photos in the kitchen. The following exchange also occurred: "Q. Ms Collings told you, didn't she, that she had to pick up her son from school? A. Yes, it was her sister's elder brother from recollection. Q. She told you, didn't she, that he finished school at 2.50 in the afternoon, didn't she? A. No, she told me three. Q. Have you made a note anywhere where she says that she told you her son finished school at 3pm? A. Can I have a look? Q. Yes. A. Yes. Yeah. Well, according to my statement it was an assumption. My recollection is that it was I - because they - I said, "What time did you leave the house." My recollection was that she said, "14.50" because she had to pick up her son at three, so she liked to be there in time. … Q. What I suggest to you has occurred is Ms Collings has told you she has to pick up her son or had to pick up her son I should say - at 14.50 - not using that expression - but 2.50 in the afternoon, and you've written down or assumed that she left the house at 2.50 in the afternoon. A. Because that's what she told me. Q. Do you agree that that, (a) could have happened? A. Can you repeat what could have happened? Q. That Ms Collings told you she had to pick up her son at 2.50 in the afternoon, and you have assumed from that that she left at 2.50 in the afternoon. A. Yes." This exchange indicates a concession by Mr Juffermans that Mrs Collings, in stating 2.50, may have been referring to her son's pick up time rather than the time she left the house. Mr Juffermans, in re-examination, later gave further evidence in clarification: "Q. Mr Juffermans, you've indicated there's something you wish to clarify in relation to that answer given. What is that? A. I - I - I do recall saying to the witness - to Amanda, sorry, 'How do you know it was 14:50?' And she said, 'It was because I have to pick up my child from school at 3 o'clock and I like to be there on time.' That's how I know what the time was, or approximately 14:50." Further cross-examination followed: Q. If Ms Collings had told you that she had to pick up her child at 3pm, that would have been something that you would have made a note of in your records, wouldn't you? A. Not necessarily, I - I do remember - I do remember asking it because I - I was thinking how do you know you left at - at 14:50, it's - it's a pretty particular time. So I do - I do recall that she said 14:50 and straight after I said, 'Why - why do - how do you know it was 14:50?' Q. Where were you standing at the time you had this conversation? A. On the street, or in the yard, it could have been either. Q. So you don't recall if it was on the street or in the yard, it in the front of the house. A. No, because I had two discussions with her. Q. Was this in the first discussion you had with her or the second discussion you had with her? A. No idea. Q. Do you know what she was wearing at the time? A. No. I was concentrating on what she was saying. Q. It would have been fairly important to you at that stage to establish reasons why somebody might have left the home or been at the home at the time of that fire, wasn't it, which is why you ask questions in the first place? A. One of the reasons, yes. Q. I suggest to you that if Mrs Collings had given you that further information, that would have been something that you would have made a note of. A. But I didn't. Q. You say specifically recall her saying she had to pick her child up at 3pm and you recall that now, what is it now, nine years later almost. A. Yeah, that particular time. There's bits and pieces of the case I remember, not many but fragments. … Q. Mr Juffermans, you were reminded about an answer you gave yesterday where you were asked whether Mrs Collings said or could have said that she had to pick up her son at 2.50, and you assumed that she left at 2.50, and you agreed with that yesterday, and today you've given evidence that she said she liked to be on time to pick up her child at 3.00. A. Yes, your Honour. Q. Are you able to tell the Court how you reconcile those two answers? A. I was thinking about the case a lot last night, your Honour. It's just something you recall because I was thinking how did I come to the time of 14.50, and I always ask how did you come to a time because a lot of witnesses they will give a time but then they can't tell you how they came to that time. So I was trying to remember what I could about the case, I don't lie under oath, and that's what I do recall."
9. Mr Juffermans' note of this conversation stated: "INTERVIEW WITH OCCUPANTS • Female occupant departed house with 4yr old daughter at approx. 1450hrs • Neighbour noted smoke issuing at approx. 1455 • 1st arriving pump at 1501 • denies airconditioning on • denies smoking in house this pm • admits to smoking, but last smoke in house 1130hrs • states daughter under constant supervision User: Juffermans, Leonard Date: 22 Jun 2007 19:36". In the note, both the reference to the neighbour noting smoke at 1455 and the pump arriving at 1501 are accepted by both parties to be factually incorrect, and they were not suggested to be matters stated by Mr or Mrs Collings. Thus, in these respects Mr Juffermans' notes of timing are unreliable: the time the smoke was noticed, the arrival of the fire brigade, and that the notes were derived from an interview with Mr or Mrs Collings. This casts some doubt over the reliability of Mr Juffermans' note on the time of Mrs Collings' departure.
10. I do not doubt that Mr Juffermans' evidence was honestly given. However, aspects of the conversation which are not recorded, such as the reference to school ending at 3pm, must be viewed with caution, because Mr Juffermans is attempting to recall a conversation which occurred almost nine years earlier, and the particular reference to 3pm was not, at the time, seen by him to be sufficiently significant to warrant a note being made.
11. AAMI also rely on a note made by AAMI which states: "IO [Insured owner] left home at 1445 to go and pick up child from school. Passed husband on way - husband on way home. Husband got home at 1505 and neighbours had already called fire brigade and they were in attendance."
12. Like Mr Juffermans' note, this note does not purport to record the precise words that were said, inferentially by Mrs Collings. Nor is the note strictly correct in referring to her husband arriving home at 1505, as the other evidence indicates he arrived home at the same time as the fire brigade at 3.08pm. However, as with Mr Juffermans' account of time, I think it likely that Mrs Collings did refer to a time: in this case, 14:45, most likely by orally stating 2.45 or a quarter to 3. Although the likely reference to time was in respect of her departure, the brevity of the note means that the contents of the conversation, including any reference to uncertainty, are not complete. The note does not specify how Mrs Collings identified the time.
13. AAMI also relies on Mr Collings' police record of interview that same evening, where Mr Collings states, "She left home not ten minutes before I got home." As Mr Collings arrived home at 3.08pm, this must be incorrect. No one suggests that Mrs Collings left at 2.58pm. It is inconsistent with the other evidence relied on by AAMI. Without more detail of any conversations between Mr Collings and Mrs Collings, I do not regard Mr Collings' conclusion on the evening of the fire about when Mrs Collings left as probative evidence of when she did.
14. James Munday, the defendant's fire expert, records Mrs Collings as telling him, on 25 July 2007, about a month after the fire, that she left the house at "1440 to 1445". Again, I assume this means she said words to the effect of "20 to 3 or a quarter to 3". Although, again, the full terms of the conversations are not recorded, I am inclined to accept that Mrs Collings did tell Mr Munday that she left the house at 2.40pm or 2.45pm. Mr Munday's notes of 30 July 2007 also indicate that Mrs Collings said that Mr Glasson left at about 2.30.
15. On 11 September 2007, Mrs Collings was interviewed by Mr Mason of AAMI. She said she thought Mr Glasson came at around 1.30pm and that he stayed for "[p]robably about an hour or just over. It was just under an hour actually". The interrogation then followed: "Q274. Alright do you think he stayed for about an hour, a little bit less. A274. Yeah, about that. Q275. So do you know what time it was that he actually left? A275. It was about twenty past 2.00. Q276. How do you know the time? A276. Because I was watching the time to get my son from school. I've always had a phobia of being late to pick my son up from school. … Q278. [Why did he leave?] A278. Because he was going to his daughter's I think. And he knew that Robert would still be probably just over half an hour to an hour. Q279. Sorry? A279. He knew Robert was still coming home from work. Q280. Alright, after he left, what did you do? A280. Ran in and got changed, washed my daughter's face and hands, done her hair and left. … Q285. And what time was it that you left to go to pick up your son from school? A285. Between 2.30 and quarter to. Actually it was before quarter to because I got the first parking spot. And you don't get that unless you're early. I don't know five or ten minutes getting dressed and then I left. … Q301. Given that it is only a short distance, are you aware of what time was that you actually arrived or when you parked the car out the front of the school? A301. I wasn't watching my watch that I didn't have, I know I didn't have a watch on. I'd say about three or four minutes later. Just because sometimes it's hard to get out on Reservoir Road. Q302. How long did you have to wait for Aaron to come out? A302. Just over ten minutes. … Q306. So you come out about 10 minutes later, so what, he finishes school about 3.00 o'clock, is that right? A306. Yes. Q307. Do they always come out on the bell or? A307. No they're there beforehand because it's a Catholic school and they pray and just do their little business".
16. Mrs Collings said in her affidavit that Mr Glasson left at about 2.15pm, that Aaron's school day ended at 2.50pm and that she left at about 2.24pm when she called Mr Collings while she was waiting in the car before leaving. As the phone call finished at 2.26pm she must have left after that. Her account to Mr Mason has some aspects that are consistent with a departure by or about 2.30pm: Mr Glasson left at 20 past two, she knew Robert would be half an hour or more to get home, she "ran" in after Mr Glasson left because of her phobia of being late for her son, she left five or 10 minutes after Mr Glasson, she got the first parking spot and that Aaron came out before the bell (the bell being perhaps at 3pm). Her account to Mr Mason provides no support for leaving at 2:45pm or later, but some support for leaving after 2:30pm. These times must be considered in the context that she was not wearing a watch.
17. In my view, opinions about timing without reference to outside events, as was the case with Mrs Collings' early representations, are likely to be unreliable. Mrs Collings in her affidavit has been able to rely on phone records. Mrs Tighe has relied upon an early arrival enabling a preferred parking spot and the timing of the departure of the children from class. Ms Watson has relied on the programming of her daily TV shows. Each have relied upon outside events for the timing of the departure (or arrival at school) of Mrs Collings. They are more likely to be precise than estimates made without the benefit of a timepiece or external guides of the time.
18. Contrary to AAMI's submissions, in my view the account Mrs Collings gives should be accepted. Her account to Mr Mason in September 2007, her own affidavit and the evidence of Ms Watson and Mrs Tighe all support the conclusion that she left early, she got the first parking spot and that Aaron usually came out before the bell, perhaps at 2:50pm. The only evidence contrary to this is the somewhat uncertain evidence about timing she gave on the day or evening of the fire, given without the benefit of a watch or without a record of when her telephone calls had been made. At that time, the destruction by fire must have seemed to her to have occurred very quickly. It hardly seems likely that if she lit the fire she would place herself at the house at the time of the fire and if she did not light the fire then her time estimates are irrelevant. Although contemporaneous evidence is commonly more reliable than later recollections, I do not accept that that is so in relation to estimates of time made without the benefit of any external guide. Her later evidence has the benefit of phone records which identify the time that she called Mr Collings.
19. Accordingly, I accept that Aaron was generally let out of class at about 2.50pm, that Mrs Collings left the driveway of her home shortly before or around 2.30pm, that she was early and that she obtained the first parking spot. This conclusion depends, in part, upon my assessment of Mrs Collings' credit.

(b) FINANCIAL STRUGGLES AND PERSONAL STRESSES

1. AAMI submits that at the time of the fire: "Mrs Collings was in a financial position in which the mortgage payments had not been paid since at least 1 February 2007, the Council rates were in arrears and were the subject of a payment arrangement, the television payments were in arrears, the home telephone had been disconnected and the credit card she and her husband had been using was drawn beyond it's [sic] limit and had been suspended or cancelled for many months. Mrs Collings was also burdened at the time with tasks associated with caring for her mother who had been diagnosed with a terminal illness."
2. None of these matters seem to be disputed. The financial difficulties seem to have resulted from an accident involving Mr Collings' truck, which had the consequence of the truck being off the road for some weeks or months, leaving him and his family without an income.
3. Mrs Collings was reluctant to admit how difficult their financial situation was, although Mr Collings did. Her evidence on this may indicate that financial challenges experienced in 2007 might not resonate so loudly nine years later. Also, Mrs Collings viewed these struggles as temporary only: persisting only so long as it took to repair Mr Collings' truck, or so long as it took AAMI, who coincidentally appeared to be the truck's insurer, to pay the full demurrage claim to Mr Collings for the period his truck was off the road. The lack of income led to missed mortgage payments, rates arrears, failure to pay credit card debt, perhaps the non‑payment of the insurance cover note and other matters.
4. I accept that Mr and Mrs Collings were facing financial challenges, and that Mrs Collings faced the personal challenge of caring for her dying mother.
5. The way in which these financial and personal stressors provided a motive for Mrs Collings to commit arson was not altogether clear and was not developed in submissions by AAMI. The evidence indicated that the home was well-maintained although perhaps internally untidy at the time of the fire. Photos indicated that it had been painted externally and internally by Mr Collings, who had previously had a career as a painter. There was no evidence of any attempt or even inquiry about selling the property. Indeed, AAMI did not suggest that this was part of a well thought out plan by Mrs Collings: rather it was that after Mr Glasson left the home at around 2.15 or so that afternoon, the weight of personal and financial stressors caused Mrs Collings to make a spur of the moment decision to burn her house down.
6. It may be that stress causes some people to act irrationally. But there is no evidence that Mrs Collings was given to irrational behaviour. Her other conduct on this day; arriving promptly, even early, to collect her son from school, taking her children for ice cream on the way home, disputing with her husband when he phoned her to say their house was on fire, did not reveal any irrationality on her part.
7. Related to this matter is the credit of Mrs Collings. The challenges to her credit concern the accuracy of her answers as to her timing, her recollections of the currency of her insurance, the value of her jewellery and the existence of cash on the premises. No specific inconsistencies, apart from those I have referred to in relation to the estimates of time, were identified. The other matters are dealt with later in this judgment. So far as her demeanour was concerned, I found nothing which indicated that she should not be believed. On occasion, she did not adopt a dispassionate approach when answering questions, although that may be explained by having lost her home in a fire and her claim on her policy being rejected. When she was initially confronted with the suggestion that she was involved in the burning of her house in her interview with Mr Mason, she directly rejected it in a way I found convincing. The following exchange with Mr Mason occurred: "Q448. Given those time frames, and given that the information that we have is that a naked flame was used to start this fire, did you have anything to do with the burning of the house? A448. No. Q449. Can you explain how the house could have caught fire? A449. No, because I wasn't there when it happened. Q450. Do you understand what I'm saying to you in regards to the time frame? A450. Yeah, definitely, definitely. But I can't explain something that I know nothing about. Q451. If these time frames are examined more closely, it would indicate to us that this place would have had to of been on fire when you left? A451. Bullshit, the house was not, did I hurry out the door, or am I just going to walk out casually as I do every other day with my daughter, my daughter is a Chronic Asthmatic, I don't think so."

(c) ACCESS TO THE PREMISES

1. It was not disputed that Mr and Mrs Collings were the only persons that had keys to the premises. It was not disputed that the external doors to the house were locked and that there were no signs of a break‑in. These circumstances eliminate some possible causes of the fire, including the actions of a stranger entering the house through the front door.
2. As Mr Collings was not present, AAMI submits that only Mrs Collings had the capacity to light a fire in the house. But if Mrs Collings was away from the house from 2.30pm until after the fire brigade had arrived, her having a key is insignificant.
3. AAMI's submission that there could have been no involvement of a third party depended on all the windows being locked. AAMI's expert, Mr Munday, assumed that all of the shutters were down and that the windows were locked. He gave evidence that the photos of the house after the fire indicated that the shutters were down. When challenged on this evidence, he accepted the possibility that what he regarded as the bottom of the shutter below the window might more accurately have been the shutter frame or housing, and thus might not indicate that the shutter was closed. I was not satisfied that the state of the windows and shutters after the fire enabled any conclusions to be drawn about whether the shutters or windows at the front of the lounge room were closed.
4. The other evidence of the front window being shut was Mrs Collings' answer to the AAMI investigator that the house was locked up. The "house being locked up" could, but may well not, refer to all the windows being locked as well as the doors.
5. I am not persuaded that Mrs Collings would have put the shutters down or locked the windows before picking up Aaron. That was not suggested to her in cross-examination. She gave several accounts of what she did before leaving the house and she made no reference to the windows or shutters. There is also no suggestion that the windows were permanently locked or that the shutters were permanently down and there is photographic evidence to the contrary. I accept Mrs Collings' evidence that the shutters were only partially down and that the windows may have been open.

(d) THE EXPERT EVIDENCE

1. The experts were agreed in rejecting any electrical cause of the fire. I accept their conclusions that the fire started in the front‑middle of the lounge room. Although Mr and Mrs Collings' counsel raised a possibility that the iron was left on, there is no evidence of this and in any event, the damage to the iron was, according to the experts, not consistent with it being the cause of the fire.
2. Mr Munday, the defendant's expert, assumed that the power point adjacent to the power source for the iron, where a phone charger was plugged in, was turned off. However, there was a contemporaneous record of the fire brigade stating that the power point was switched on. If so, and a phone was being charged, it is possible that a phone could have overheated and caused a fire. The charger's cord would need to have been almost 2 metres long to reach the point of origin of the fire. There was no evidence that a phone was plugged into the charger or of the length of the charge cord, and it was uncertain whether the power point was on, so this cause seems unlikely.
3. That leaves two possibilities. The application of a naked flame to a curtain or the lounge, or the consequences of smouldering resulting from something such as a lit cigarette.
4. AAMI asserts that the opinion of Barry Eadie, Mr and Mrs Collings' expert, was that the fire was most likely the result of a naked flame, a matter agreed to by AAMI's expert, Mr Munday. It is something which Mr Eadie did state. But Mr Eadie also stated: "I am of the opinion that the most likely cause of the fire was from a discarded cigarette as there had been smoking on the front veranda that afternoon, becoming lodged behind the sofa and coming into contact with a small quantity of combustible material."
5. As to this latter opinion, Mr Munday conceded that it was possible if Mrs Collings had left much earlier than the time he had assumed of 2.40pm to 2.45pm, say at 2.25pm.
6. The concluding passage of the joint report of the experts states: "i. If the time between Mrs. Collings leaving and fire discovery is less than 15 minutes then ignition source was most probably from flame contact. ii. If the time interval between Mrs. Collings leaving the house and fire discovery was greater than 30 minutes then the ignition source was more likely from a smouldering source." Thus, if Mrs Collings left at about 2.25pm, more than 30 minutes prior to the discovery of the fire at about 2.59pm, the experts agree that the ignition source was most likely a smouldering source. Although a smouldering source could be started at about 2.30pm, it seems incredible to suppose that Mrs Collings could have intended to burn her house down by a smouldering fire resulting from a lit cigarette. The likely result of a smouldering cigarette on a lounge might be thought by the uninformed to be damage to her lounge on contact and a period of inconvenience and smoke smells, rather than a full blown house fire. The existence of smoke damage would be particularly troublesome in the Collings' home as the daughter, Megan, was asthmatic. As a general rule, Mr and Mrs Collings did not smoke cigarettes in the house for that reason. If this conclusion is accepted that the fire resulted from a smouldering cigarette, AAMI expressly did not press a finding of deliberate conduct by Mrs Collings.
7. AAMI tendered video evidence of how a burning cigarette on furniture transitions to a burning flame. There was a significant period of about 30 minutes for that to occur. That would coincide approximately with the time period after Mrs Collings' departure. The video also indicated that there is limited smoke in the earlier period of the smouldering, and that in the first five minutes or so, it is not especially noticeable.
8. In Mr Munday's view, this seems to be the only method of ignition if Mrs Collings left her house before 2.40pm. Even if Mrs Collings left at 2.40pm or 2.45pm, in his view there could not have been a direct flame applied to the lounge because the fire damage was inconsistent with a fire flaming vigorously for 25 to 30 minutes until it was extinguished by the fire brigade at or immediately before 3.10pm. Thus, for a fire to have been caused in this time period - in the period from 15 to 30 minutes before the fire was extinguished - would require a naked flame to be applied to the curtains, he thought, which would burn somewhat, fall to the floor, burn more slowly for some minutes until the flames spread to the upholstered lounge, presumably at about 2.55pm.
9. The conduct of Mrs Collings hardly seems consistent with lighting the fire. She sees her husband proceeding to a burning house and makes no attempt to warn him. She has pets left in and at the house. Her house is close to her neighbours with whom she shares friendly or at least untroubled relations. She leaves the school to travel to the shops rather than proceed home. She does not accept her husband's account of the fire and needs police persuasion. The fire occurs at the front and readily visible part of the house. No accelerant is used. At no stage did Mr and Mrs Collings attempt to sell their house or appear to have a motive for a fire. All these matters point away from Mrs Collings lighting the fire.
10. Perhaps the primary submission put by AAMI was that if no alternative explanation for the fire could be found, it must be attributed to the deliberate conduct of Mrs Collings.
11. Although a smouldering cigarette might have caused the fire, there was no evidence of smoke in the house when Mrs Collings left. How could a cigarette make its way to the lounge?
12. Mr Glasson is deceased but his answers to Mr Mason's questions are also part of the evidence tendered by AAMI. He gave evidence consistent with Mrs Collings that Mrs Collings was folding washing, "towels and clothes" in a basket whilst he was there "25, half an hour" having a smoke and a cup of tea. "Then I said well I've got to get going, she said Rob won't be home until 4 o'clock, she said you can wait there and I said oh well I won't wait I'll get going…But the, when I said I've got to go she said Oh yea I've got to go down and pick up the kids from school and I said alright I wasn't interested in that…so anyhow I left".
13. Mr Glasson said he went to his ex‑wife's place. The record of interview continued: "Q49. Do you know how long it would take you to get there? A49. I couldn't believe it, I could not believe that a house could, I mean I'm not, common sense shows you that, I can't see how a house with a linen, you know material lounge, even if you dropped a cigarette on them, it wouldn't have gone that fast, it wouldn't have burnt that fast to you know, it would smoulder."
14. Later, Mr Glasson was asked about what he did with his cigarette butt, and he said, "I usually put them out you know."
15. If an unextinguished cigarette was either thrown into the basket of towels Mrs Collings was folding as she was visited by Mr Glasson, which was then placed in the lounge, or a cigarette was thrown through an open window, then this could cause a fire about 30 minutes later, about the time the fire started.
16. Mr Glasson's non‑responsive comment quoted above is odd and might indicate (but might not) that he may have suspected that he could have contributed to the fire. His remarks about the speed of the fire seem defensive, distancing himself from the consequences of a discarded lit cigarette that he could have dropped or discarded. There was evidence that he was erratic, unpredictable and there was an earlier Apprehended Violence Order on him taken out by the Collings. Although I can make no finding about his conduct, on the balance of probabilities, I think there is a possibility that his actions could have led, even inadvertently, to the fire.

(e) CONCLUSION

1. Arson is a serious criminal offence. Although the standard of proof is only to the civil standard, in accordance with the principles of Briginshaw v Briginshaw (1938) 60 CLR 336, the Court is not to be comfortably satisfied of arson by Mrs Collings on inexact proofs and indirect inferences: "In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences … [where] the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency." See Briginshaw at 362.
2. In any event, I am persuaded on the balance of probabilities that Mrs Collings did not cause a fire by any deliberate or intentional act. I am of the view that it resulted from some uncertain event or act, perhaps from the conduct of Mr Glasson, inadvertent or otherwise, or Mrs Collings' daughter playing with a cigarette or matches, or possibly an overheated mobile phone. These others possibilities might have caused the fire.

7. FRAUDULENT CLAIMS
8. Section 56 of the Insurance Contracts Act 1984 (Cth) 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."
9. In Alexander Raymond Walton v The Colonial Mutual Life Assurance Society Limited [2004] NSWSC 616, Einstein J stated at [144]: "The operation of s 56 of the Act has been considered in a number of cases. Relevant principles include the following: • 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. (See Tiep Thi To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279; Naomi Marble & Granite Pty Ltd v FAI General Insurance Company Ltd (No 1) [1999] 1 Qd R 507 and Mourad v NRMA Insurance Ltd (2003) 12 ANZ Ins Cas 61-560); • it is not necessary to show prejudice as having been suffered by the insurer for s 56 to be relied upon. The only restriction upon an insurer's right to refuse payment of the claim is the discretion granted within s 56(2) of the Insurance Contracts Act (see Tiep Thi To v Australian Associated Motor Insurers Ltd (2001) 3 VR 279)."
10. By the conclusion of the hearing, only three fraudulent claims were pressed, as indicated above.

(a) MRS COLLINGS' AWARENESS OF HER LACK OF INSURANCE IN EARLY JUNE 2007

1. This is said by AAMI to come within particular 9(v) of the defence, and although it is not the central element of that allegation, I accept that it falls within it.
2. The following exchange between Mrs Collings and Mr Mason occurred during her interview: "Q169. Yeap. So when were you aware that you were not insured? A169. When I spoke to my husband about it. Q170. Do you know when that was, say? A170. That day, the day that I took the policy out." AAMI relies on this as a fraudulent claim on the basis that Mrs Collings was aware prior to calling AAMI that Mr and Mrs Collings were uninsured, and also that Mrs Collings knew this when she provided the above quoted answers to Mr Mason some three months later.
3. The answers given by Mrs Collings must be considered in the context of the surrounding questions and answers in the record of interview, which was as follows: "Q161. Alright, one of the major issues we have with the claim is in regards to the insurance and when the policy was incepted. I've been advised that the policy had lapsed for a period of time and that a covernote was taken out immediately prior to the fire actually occurring. A161. The 16 when we took the cover and I took that because of all the weather, like storm damage that was happening up the central coast. Q162. Alright, when you first purchased the premises, was it insured? A162. Yes. Q163. Who did you have it insured with at that time? A163. AAMI. Q164. So it wasn't insured with anyone else at any stage? A164. No. Q165. And what made the insurance run out? A165. Probably me not using my brain, and doing things that I should have been doing like concentrating on the household bills and everyday upkeep because I was caring for my mum. Q166. Do you recall receiving any renewal notices from the insurance company? A166. No. Q167. And you say that what made you think about insuring the house was the storm that were hitting the North Coast? A167. Mmm. Q168. Were we having any storms here at that time? A168. It was raining but, I mean Newcastle got flooded. Q169. Yeap. So when were you aware that you were not insured? A169. When I spoke to my husband about it. Q170. Do you know when that was, say? A170. That day, the day that I took the policy out. Q171. What came up in conversation? What made you aware that you were not insured? A171. I couldn't recall. I think we were talking about my Aunty who lives in Gosford and she's got some foster kids and she got flooded out. Q172. Whereabouts is she sorry? A172. The Central Coast. Q173. And what, did you check to see if you were insured or did you know at that point that you were not insured or did you ring up and ask or? A173. Well once we both discussed it, I knew he didn't do it and he knew I didn't do it so we fixed it up. Q174. Do you know how long were you not insured for? A174. No, I couldn't tell you."
4. The evidence relied on by AAMI to establish dishonesty by Mrs Collings in Q/A 169-170 is as follows: the insurance taken out in 2000 had lapsed in about March 2006; the cover note was taken out in February 2007 but lapsed due to non‑payment in March 2007; the notices of the cover note and its lapsing were sent to Mrs Collings' home address; and the AAMI record of Mrs Collings' phone call to obtain insurance on 16 June 2007 records, "was unable to commence prev as mother has been in hospital".
5. The record of interview reveals Mrs Collings asserting that the insurance ran out because of her oversight, but that it was not until she spoke to her husband that she became aware of it. It was common ground that Mrs Collings was facing financial challenges and dealing with the personal stress of her mother dying of cancer. In those circumstances, it seems unlikely that the status of her insurance policy would be constantly on her mind. The conversation with Mr Collings was not seriously disputed. I think it likely, as her evidence indicates, that until her mind was brought to consider her insurance position as a result of her discussion with her husband, Mrs Collings had overlooked that the insurance had expired.
6. Although Mrs Collings denied receiving the renewal notices, I doubt whether her recollection on that subject, nine years after the event, is reliable. She may have received the notices. That does not establish that she did not "become aware of" her lapsed insurance when, some months later, she spoke to her husband. Her statement at Q/A 169-170, quoted earlier, is relied on by AAMI but goes no further than this, and I accept it. Her statement to AAMI, recorded when she took out the insurance, is not inconsistent with this. On her own evidence, she became aware of not being insured when she spoke to her husband, not when she called AAMI. That she was unaware in early June 2007 of the lapsed insurance is not inconsistent with her not commencing insurance at some earlier time (such as March 2007) because her mother was in hospital.
7. Accordingly, I accept the truth of her statement to Mr Mason and no question of dishonesty thus arises.
8. Even if the statement to Mr Mason was not true, it does not establish dishonesty. AAMI must establish that on 11 September 2007, at the time of the interview, Mrs Collings knew that she did not become aware of the lack of insurance when she spoke to her husband. In the period before the interview with Mr Mason her personal challenges had increased. Her home had burnt down, her insurer had not yet accepted the claim, and her father had committed suicide. What her mindset was some three months earlier at the time of speaking to her husband about insurance may not have been at the forefront of her mind when she spoke to Mr Mason. Even if Mrs Collings' answer to Mr Mason was incorrect, which I reject, I would not be persuaded that it was dishonest.
9. Accordingly, I reject that these answers about her awareness of her insurance amounted to a fraudulent claim.

(b) THE $10,000 CASH

1. Mr and Mrs Collings gave evidence of a tin sometimes kept in the filing cabinet but, according to Mrs Collings, most recently, before the fire, located on a ledge above the lounge room doors. This tin, both Mr and Mrs Collings said, contained jewellery said to be worth $25,000 (or more, according to Mr Collings) and about $10,000 cash.
2. Not all of this $35,000 was recoverable under the policy. Under the policy a claim for valuables was limited to $5,000, which included jewellery and other matters. Other valuables claimed, even apart from the jewellery in this case, may have exhausted the $5,000 limit. As for cash, the limit was $200. Nevertheless, AAMI maintained that the reference to these amounts constituted a dishonest attempt to recover greater amounts, or recover under the policy, and is relevant to assessing Mrs Collings' credit. They rely on Tiep Thi To v Australian Associated Motor Insurers [2001] VSCA 48.
3. Unlike Tiep Thi To, in this case Mrs Collings was aware of the policy limits before she made the representations alleged to constitute the fraudulent claim. The first allegedly fraudulent representation of Mrs Collings having the $10,000 in cash is in a claim document which indicates a claim for $200 in cash. AAMI does not dispute that she had an entitlement to $200 in cash. So it appears that prior to any alleged dishonest claim Mrs Collings was informed of the limited cover for $200 cash and was informed that AAMI had rejected her argument that the limitation should not apply.
4. Accordingly, both AAMI and Mrs Collings were aware that she was only entitled to recover $200, whether she had in the house $200 cash or $10,000 cash. How exaggerating the amount of cash in the house, which was not recoverable, would induce AAMI to meet the claim is not at all clear. AAMI submitted that it would do so by her adhering consistently to a position known to be false. That is only plausible if the first time the representation is made it is at a time when Mr and Mrs Collings were seeking to recover the $10,000. That is not so, as the first claim made express reference to only $200 being recoverable.
5. As to the question of falsity, AAMI rely on the accounts of Mr and Mrs Collings as to the origin of that cash. It was said to result from contributions, including from Mrs Collings' sister, to pay for her mother's impending funeral. At no stage did Mr or Mrs Collings disavow this as the reason. Mrs Collings' sister did not corroborate their account with testimony. There was evidence that the sisters had a difficult relationship, and AAMI did not assert any Jones v Dunkel inference arising from Mrs Collings' sister not being called. AAMI took no steps to have Mrs Collings' sister give evidence disputing Mrs Collings' testimony.
6. Nor could it be said that Mrs Collings having $10,000 cash was unlikely or uncharacteristic. It was common ground that Mr and Mrs Collings paid for their house in about 2000 with $195,000 in cash stored under the bed, a matter that prompted no adverse cross‑examination or submission from AAMI.
7. I am not satisfied that the assertions by Mr and Mrs Collings about $10,000 in cash in the house were false or dishonest or were said in order to induce AAMI to meet the residue of the claim.

(c) $25,000 JEWELLERY

1. The issues arising from Mrs Collings' statements in respect of jewellery to the value of $25,000 are similar to the cash. There was corroborating evidence from Mr Collings and Mrs Collings' aunt, and perhaps Mrs Collings' sister, that Mrs Collings had significant amounts of jewellery. As to the truth of these statements, it must first be determined what is meant by a claim that one has $25,000 worth of jewellery. Mr Collings himself thought it was worth twice that, and his expression of this view to AAMI is not the subject of a fraudulent claim defence. In context, as AAMI accepted, it was not that Mrs Collings had jewellery which had been formally valued at, or which could be established to be worth, $25,000. Rather, it must be that Mrs Collings believed that the jewellery she possessed was worth $25,000. There was no evidence to indicate that Mrs Collings did not believe her jewellery to be worth $25,000, nor did AAMI either at trial or in its investigations pursue a line of questioning to the effect that there was no reasonable belief for that value or that it was not an opinion genuinely held by Mrs Collings.
2. Rather, the evidence relied upon by AAMI was the opinion of others (not experts, but relatives who made representations about value to Mr Mason) to indicate that the jewellery was not worth that much. Whether expert or lay, opinions of value are not evidence that Mrs Collings did not genuinely hold the belief of the value she espoused. Also, as noted above, whether the jewellery was in fact worth $25,000 makes no difference to the amount of the claim. AAMI accepted that Mr and Mrs Collings possessed valuables sufficient to meet the policy sublimit.
3. As with any fraud claim, the Briginshaw principles are applicable in determining whether the Court is comfortably satisfied of a fraud. In this case, I am not satisfied in respect of a fraudulent claim just as I was not satisfied in respect to the claim of arson. AAMI's defence relies principally on the past statements of Mrs Collings of value, which were perceived to be inconsistent with other representations made to its investigator. Whilst that might be a legitimate approach to take, notwithstanding the injunction in Isaiah 29:21 not to "make a [woman] an offender for a word", in this case there was no clear inconsistency in the accounts given by Mrs Collings.
4. I reject the defence of a fraudulent claim.

8. QUANTUM OF DAMAGES
9. Three components of damage are claimed in the proceedings: for the loss of the building, for lost rent and for lost contents.

(a) THE BUILDING CLAIM

1. The policy provided for an unlimited "amount covered" for repair or rebuilding costs. Records of AAMI indicate that a report it commissioned and obtained in the days after the fire revealed: "Residence was burnt out completely; with all windows and doors burnt out. All windows were broken as a direct result of the force of the fire...The fire for the most part has completely destroyed the home; with full rebuild required as soon as possible."
2. The property remained in this state at least until 28 September 2007. This need for a complete rebuild does not appear to be genuinely in dispute. However, by the time AAMI declined indemnity some seven months later, in January 2008, the mortgagee had taken possession of the property (on 11 October 2007) and subsequently resold the property as land, the remains of the house having been demolished and the block cleared. AAMI sought quotes for the rebuild on 31 August 2007, however, no quotes were in evidence.
3. As indicated above, the policy covered demolition, removal of debris, professional fees such as an architect and surveyor, and any extra costs to satisfy government requirements, as well as the rebuilding. Under the policy, AAMI was obliged, in the event that the home was destroyed or so badly damaged as to preclude economic repair, to "declare it a total loss and pay…the amount covered". As the amount covered was unlimited, this clause cannot be applied literally.
4. The policy also obliged AAMI, as soon as possible, to have an assessor meet with Mr and Mrs Collings to inspect the home, confirm the full details of the damage, discuss the rebuild and decide, in this case, either to rebuild or pay the costs for the rebuilding of the home. AAMI did not elect, in the seven months prior to declinature, to do any of these things and, in these proceedings, revealed no details of the anticipated costs of rebuilding.
5. The ordinary application of the policy would require the damages to be assessed as the costs of the rebuild at the reasonable date for decision. Mr and Mrs Collings do not take issue that the date of decision on 24 January 2008 was reasonable, so the damages would ordinarily be the cost of the rebuild as at that date. For reasons which elude me, no party has put on any evidence concerning that matter.
6. Mr and Mrs Collings advanced four methods for determining damages for the lost house.
7. First, they rely on the current value of the house, had it remained, as the fundamental integer in the calculation algorithm. They tender evidence, not objected to, that the house in its 2007 pre-fire state would have been worth $600,000 on 24 July 2015. From this amount they deduct the mortgage costs applicable in 2007 to the home loan, about $190,000, thus producing about $410,000 under this head of damage.
8. There are a number of difficulties with this methodology. The first is that the level of debt secured by the mortgage was about $270,000 shortly after the date of the fire. Although some of this debt, perhaps $70,000, was incurred by the purchase of a truck by Mr Collings, it nevertheless diminished the equity in the home. When the mortgagee repossessed the house and sold it, the entire debt was apparently discharged (although the land achieved only about $240,000 on sale). The Collings retained the truck which, so far as the evidence revealed, was not security for the loan.
9. In my view, if it was appropriate to use this method of calculation, it would require a consideration of the home equity at $330,000 ($600,000 - $270,000), deducting from the value of the house the whole of the amount secured against the house. The fact that some of the loan was used for a truck or, for that matter, a swimming pool, a holiday or a business venture, makes no difference. The value of their asset must be reduced by the amount of the loan secured against it.
10. But even that figure takes the value of the home in 2015 and the value of the mortgage in 2007. There is no evidence that Mr and Mrs Collings would have kept the value of the mortgage at $270,000 or would have regained and retained possession of the land. There is evidence to the contrary: they made no mortgage payments from February 2007 until August 2007 inclusive, and I must infer from the lack of evidence to the contrary that they made no payments thereafter.
11. By August 2007, the value of the debt substantially exceeded the value of the security. It is doubtful whether Mr and Mrs Collings could have persuaded the mortgagee or any other potential lender to refinance their debt. Had they received some insurance payout, that debt could have been reduced, but then they would have had insufficient funds to build the replacement house.
12. There are authorities that support awarding the amount of diminished value as at the date of the breach. In 2007, the house was worth, on the more generous valuation of AAMI, which is accepted by Mr and Mrs Collings, $315,000. So the equity at that date was only about $45,000. That approach of awarding the amount of diminished value as at the date of breach is more applicable when a house is only an investment, rather than a family home, as here. See Kenwright v Insurance Australia Limited [2013] NSWDC 255 at [44]-[49] and [51]-[55]; Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668 per Megaw LJ at 673 and 674; Castellain v Preston (1883) 11 QBD 380 at 386; [1881-85] All ER 493 at 495 per Brett LJ.
13. Kelly and Ball Principles of Insurance Law (David St L Kelly & Michael L Ball, LexisNexis Australia) at [12.0120.1] states: "There are two main methods for determining the amount of the insured's loss. The first is by reference to the cost of replacing or repairing the insured property after making allowance for wear and tear. The other is by comparing the market value of the insured's interest in the insured property immediately before the loss with its market value immediately after the loss."
14. Kelly and Ball recognise that the insured's loss is generally measured by this cost of replacement (see Spina v Mutual Acceptance (Insurance) Ltd (1984) 3 ANZ Ins Cas 60-554 at 78 and 345, Reynolds v Phoenix Assurance Co Ltd [1978] 2 Lloyd's Rep 440, Roumeh Food Stores (NSW) Pty Ltd v New India Insurance Co Ltd [1972] 1 NSWLR 227 at 237). But at [12.0120.25] they identify some exceptions: "the insured is not entitled to recover the cost of reinstatement where he or she does not intend to reinstate the insured property or where reinstatement is impossible. For example, in Leppard v Excess Insurance Co Ltd [1979] 2 All ER 668; [1979] 1 WLR 512, the insured property was on the market at the time it was destroyed by fire. The court held that, in that case, the insurer was only entitled to the market value of the property. Similarly, in Kypris v MLC Fire & General Insurance Co Pty Ltd (1981) 1 ANZ Ins Cas 60-451, changes to planning laws prevented reinstatement. In that case, the court assessed the insured's loss by reference to market value. Likewise, in VACC Insurance Co Ltd v Lekkas (1999) 10 ANZ Ins Cas 61-436, a block of shops which was under threat of compulsory acquisition was badly damaged by fire. The Victorian Supreme Court only permitted the insured to recover the block's market value (taking into account the threat of compulsory acquisition) less the amount payable as compensation on the acquisition."
15. The current policy is similar to that in Raso v NRMA Insurance t/as NRMA Home Insurance (New South Wales Court of Appeal, Mahoney, Priestley and Handley JJA, 14 December 1992, unreported) involving a policy drafted in similar terms. That policy provided (at 17) that: "1. COVER FOR THE HOME We will cover you if any of the events which are listed below destroys or damages the home. This means that we may choose to: - pay you the sum insured, or - pay you the cost of repairing or - replacing the home, or - repair or replace the home." The Court of Appeal held (at 17): "The language of the policy ('we may choose to') confers an option on the underwriter to either pay the sum insured or to reinstate or pay the cost of reinstatement. The underwriter did not exercise the option. However it is clear from The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92-93 and the cases there cited that 'where there are two or more ways in which a defendant might perform the contract, the court in assessing damages adopts the mode of performance which is most beneficial to the defendants." The Court of Appeal accepted the submission that although the policy did not in terms provide an option of paying the insured the loss of market value, nevertheless, this was its "necessary legal effect when the option to pay the sum insured is read subject to the overriding effect of the indemnity principle". The Court concluded (at 19): "because an insurance contract is a contract of indemnity, the amount recoverable under the policy could not exceed the sum necessary to indemnify the [Insured] against the loss actually sustained by them in consequence of the fire. An assured is not entitled to recover the amount specified in the policy unless it represents his actual loss. The amount specified fixes only the maximum liability of the insurer under the policy... It follows that, despite the language of its policy, the respondent was not bound to pay the sum insured. It could have elected to indemnify the insured for the loss of market value."
16. This is an approach which is endorsed as appropriate by AAMI in the absence of any other relevant evidence. The fact that, at the time of the declinature, Mr and Mrs Collings were no longer in possession of the land, provides some support for this approach. Indeed, Mr and Mrs Collings adopted it as their second alternative for calculating damages. However, they adopt in that calculation a mortgage value of around $190,000 which, for the reasons given above, is inappropriate.
17. The third alternative for calculating damages adopted by Mr and Mrs Collings is a cost of rebuild method, which I have indicated would be the usual approach in respect of a family home, given the wording of the policy. But the evidence of the cost of rebuild is very thin. Mr and Mrs Collings rely on an undated instruction sheet that indicated an "estimate" of $400,000. Quite what the estimate is for is not revealed. Perhaps that "estimate" is a reserve, the estimate of the value of the claim. There is a statement in the document that the contents sum insured was $120,000, which is incorrect. Another instruction sheet, also undated, has the correct sum insured for the contents of $150,000, but has an estimate of $300,000. No explanation for these differences is provided.
18. Although there was an attempt to attribute dates to these documents by the reference to "instructions" in other notes, I was less than satisfied with that approach. Further, the estimate might reasonably be considered to be the cost to AAMI of the claim, potentially including the contents sum insured, cost of investigators, the cost of emergency accommodation and furniture for the Collings family, legal fees and other incidentals, as well as the building cost. It gives no real certainty as to the building cost, a matter emphasised by the different amounts varying by 33 and a third percent in the two instruction sheets, and the different amounts for the contents sum insured.
19. I do not regard the "instruction sheets" as helpful or probative of the proper building costs, other than to illustrate the obvious matter that was conceded by AAMI, that the $45,000 amount of equity in the house at the time of the fire does not fairly represent the rebuild cost, but grossly understates it.
20. The fourth alternative advocated by Mr and Mrs Collings is to award them the cost of the rental from 2008 to date, and then continuing for their life expectancy of another 49 years. No authority was cited in support of this approach. It is obvious that a judgment cannot award the rent into the future, for, among other reasons, the judgment itself may operate to relieve them of that need. Nor does such an award bear any relationship to the entitlements of Mr and Mrs Collings under the terms of the policy. I conclude that an award of all future and past rent is inappropriate.
21. Bearing all these matters in mind, the only real evidence of loss is $45,000 lost equity in their home. The policy did not oblige or even allow AAMI to elect to pay that amount. It could only elect to pay the costs of the rebuild, an obviously greater sum.
22. One matter which might be overlooked by this analysis is that the fire produced a negative equity in the property. It is agreed that the land was sold for $240,000, but the demolition work was done on the property to enable that sale to take place. As indicated above, the house was valued by the AAMI expert and accepted by Mr and Mrs Collings to be $315,000. If I were to assume a cost of $20,000 to demolish the house and clear the block so that the land was then worth $240,000, it follows that after the fire the property was worth only $220,000 ($240,000 less $20,000 clean‑up costs). Thus, the fire produced an adverse change in the value of the property of $95,000.
23. It might be argued that this method assumes that Mr and Mrs Collings remain indebted under the mortgage. I do not think it assumes that, although it does not assume that the debt has been forgiven. Mr and Mrs Collings indicated in submissions that no further claim from the mortgagee is expected. Whether it remains unenforceable is uncertain.
24. Thus, an application of the indemnity principle would entitle Mr and Mrs Collings to recover the difference between the value of their home before the fire of $315,000, and the value after of about $220,000. If the mortgagee has forgiven Mr and Mrs Collings of their debt, that must have occurred later; presumably at around or after the time of the sale of the property in 2008. I do not see how AAMI is entitled to set-off any benefit subsequently granted to Mr and Mrs Collings by their mortgagee. The loss from the fire occurred in June 2007. On that date, the equity in the home diminished from positive $45,000 to negative $50,000. The fire produced a net change in the value of the property from $315,000 to $220,000. That is a loss of $95,000, even if some of that loss might subsequently have been alleviated by a decision of the mortgagee. I would infer that that decision was done to benefit the Collings, or at least not for the benefit of AAMI.
25. There can be little doubt that $95,000 remains less than the amount of the rebuild costs. However, to apply the principles identified above, by the time of the fire it might be thought unlikely that Mr and Mrs Collings would be able to retain the house to live in, and that its value to them at that point was likely only its sale value. Further, rebuilding became impossible or impracticable because of the repossession by the mortgagee. These matters lend support to the approach that the reduced value of the property is the better method of valuing the loss, especially in circumstances where there is no evidence of the cost of the rebuild.
26. Another criticism that might be made of this approach is the absence of any evidence of the cost of demolition and clean‑up. That is so, but it is a relatively small component of the loss. It is real, if unquantified, and doing the best I can, I think $20,000 is reasonable for that work. I also bear in mind that the amount awarded would remain substantially less than I would expect the rebuilding cost to be, an amount Mr and Mrs Collings would have had a real prospect of being awarded had there been any evidence on that subject or at least, as their counsel pressed, they lost the chance of regaining possession and rebuilding, and so may have been entitled to some proportion of the rebuild costs amount.
27. For all these reasons, I assess the loss under the building component of the policy at $95,000.

(b) RENTAL CLAIM

1. Mr and Mrs Collings claim $18,200, being 12 months' rent at $350 a week. AAMI does not dispute the weekly rate or the entitlement to 12 months' rent, but refer to the agreed fact that accommodation for seven months, from late June 2007 to late January 2008, has already been paid.
2. The policy states that the amount payable in respect to rent shall be relevantly, "the actual cost incurred by you during the reasonable period up to 12 months required to repair or rebuild your home". Mr and Mrs Collings submit that the rebuild had not commenced so the reasonable period to rebuild had not either, and so the 12 month rental period has not yet occurred. However, the policy only allows costs "during the reasonable period...required to...rebuild" not the actual rebuilding period. And if the period has not commenced, then the entitlement to accommodation costs has also not commenced and so the seven months of rental payments must still be credited by AAMI.
3. In my view, the reasonable construction of that clause is that the phrase "while your home is being rebuilt" includes the necessary preparation work before actual works begin. The period of preparation would include assessment of the claim, demolition, planning approvals and the like. This is all within the period during which AAMI was obliged to meet the cost of accommodation: AAMI could not refuse to provide accommodation on the basis that the "rebuild hasn't commenced". But the words "up to 12 months" must be given their usual meaning. In this case, AAMI accepts a 12-month liability at a maximum, but it is not obliged to cover a further period. I agree with this approach.
4. Accordingly, while AAMI is liable for the cost of 12 months' accommodation, the cost of seven months' accommodation has already been met. Mr and Mrs Collings are entitled to the residue of that period of five months at $350 a week (about $1,520 per month), which is approximately equal to $7,600.

(c) CONTENTS

1. In the statement of claim, Mr and Mrs Collings pleaded that some of the contents of their home were destroyed. AAMI sought particulars of those contents and a detailed list was provided. AAMI admitted the pleaded paragraph. AAMI conceded that the admission in the defence constituted an admission of the destruction in the fire of all of the particularised items.
2. This claim is complicated because Mr and Mrs Collings at trial relied upon a different list of destroyed items. The list pressed at trial includes items not included on the particularised list. On the other hand, the majority of the items on the particularised list, although admitted by AAMI to have been destroyed, do not appear on the list pressed at trial. The reason for this course appears to be that Mr and Mrs Collings overlooked the admission by AAMI in its defence and relied upon values attributed by AAMI to certain items claimed, (attributed in what was termed the final AAMI calculator), as evidence that those items were accepted by AAMI. If effective, this approach had the advantage for them that not only were the items conceded to have been destroyed but that there was a value attributed to the destroyed items.
3. During the trial, a Scott Schedule was ordered which required AAMI to identify the amount conceded. Most of the items pressed at trial were not the subject of dispute by AAMI on the Scott Schedule, although some figures were reduced. The reduction adopted by AAMI was, in most cases, a reduction to a figure found in an earlier AAMI calculator.
4. In the result, Mr and Mrs Collings have ignored the previous admissions but claimed the items and amounts allowed in the final AAMI calculator, a calculation that appears to have resulted from both computer and natural person analysis by AAMI of the contents claim. AAMI, on the other hand, has in the Scott Schedule conceded most items and values but where the final AAMI calculator has increased the values it has sought to reduce them to figures in an earlier AAMI calculator. Where the initial figure was higher than the final calculator, AAMI appears, perhaps unsurprisingly, to have accepted the lower figure in the final calculator adopted by Mr and Mrs Collings.
5. There was evidence before me that the figures in the initial AAMI calculator were not appropriate.
6. In my view, the approach adopted by Mr and Mrs Collings is to be preferred. It takes the good with the bad in the figures adopted by the final AAMI calculator rather than seeking to cherry‑pick the lower values as AAMI appears to do. It also forgoes, for the purpose of this litigation, many of the items conceded by AAMI as part of its defence in an effort to expedite the calculation of value. The end result is an amount of $91,761, an amount substantially under the sum insured of $150,000.
7. Apart from AAMI's reliance on the earlier inappropriate calculator, the Scott Schedule records a reduction of $3,500 in respect of the porcelain dolls, which is conceded by Mr and Mrs Collings, since the maximum amount of valuables covered under the policy is already elsewhere claimed. AAMI also asserts that two side tables are wrongly claimed because four further side tables were elsewhere claimed. That does not seem to me to warrant a reduction. Similarly, a claim for an upright vacuum cleaner is not accepted by AAMI on the basis that it is not claimed, but it is claimed in these proceedings as it appears in the final AAMI calculator (which records the particulars of the plaintiffs' claim) and I propose to allow it.
8. The only other item disputed in the Scott Schedule is a claim for jewellery of $5,000. Although allowed in AAMI's final calculator, AAMI submits that the policy only allows an amount of $1,000 for jewellery. This assertion is based on the policy having a limit of $1,000 for each item in the valuables section. AAMI contends that "jewellery" is an "item". In my view, this argument is without substance. Plainly, the limit of $1,000 is applicable to one item of jewellery. This conclusion is supported by another part of the valuables clause which indicates that earrings are regarded as a "pair" or "set", and that there is a limit of $1,000 for a "pair" or "set". There is nothing in the policy to indicate that all jewellery is one "item".
9. During trial submissions, AAMI sought to distance itself from the contents of the Scott Schedule arguing that they may have been other items salvaged, or at least there was no evidence that the items claimed were lost. But at the very least, the contents claim originally submitted by Mr and Mrs Collings was a representation of their loss, which is evidence of that fact pursuant to s 64 of the Evidence Act 1995. It is relevant that AAMI accepted and paid for temporary furniture and household items for the period it met the accommodation costs of Mr and Mrs Collings indicating that those items were lost.
10. Accordingly, I allow the claim for contents at $91,760.

(d) CREDITS

1. Mr and Mrs Collings accept that AAMI is entitled to credits of $25,000 for emergency funding already provided, the $1,000 excess and the $549 annual premium, a total of $26,549.
2. Thus, damages comprise: Component ($) Building 95,000 Plus: Contents 91,760 Rental 7,600 Total 194,360 Less: Credits 26,549 Balance 167,811

9. INTEREST
10. Interest must be awarded on this amount ($167,811) from the agreed date of 24 January 2008 until today under s 57 of the Insurance Contracts Act 1984 (Cth). According to a table provided by AAMI, that amounts to 62.11%, which produces on the principal sum an amount of interest of $104,227.41 (62.11% x $167,811). Together with the principal sum, the total damages are $272,038.41 ($167,811 + $104,227.41).

10. ORDERS
11. Accordingly, the orders of the Court are: 1. Judgment for the plaintiffs in the sum of $272,038.41. 2. Defendant to pay the plaintiffs' costs. 3. Stay entry of orders (1) and (2) for 2 weeks and, if notice within that time is given to my associate seeking to make further submissions, thereafter until the hearing of those submissions.

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: 18 August 2016