Kalloghlian v Chubb Insurance Company of Australia Ltd

Background facts

1. The Plaintiff claimed to have purchased a Rolex Oyster Perpetual Watch for $32,000 AUD from a jeweller in Syria in 2005. The watch was purchased using monies withdrawn from his parents' bank account held in Syria. The Plaintiff had authority to use those funds. The Plaintiff was unable to locate any receipt or other documentation relating to the purchase. He could not remember the jeweller from whom it was bought. He had no travel documents relating to the trip during which the watch was bought because he had lost his passport for that period. There was proof of that loss. He travelled into Syria by car.
2. On 30 June 2014 the Plaintiff renewed his insurance with Chubb. The policy covered loss of property wherever that occurred.
3. On 13 July 2014 he lost the watch whilst at Copacabana Beach in Rio de Janiero. It either fell off his wrist or was taken from him by an unknown person. He endeavoured to make a complaint to a policeman at the beach but he said that the policeman was not interested. He made no formal report of the loss of the watch to a police station. However, he cut short his trip by two days because of the loss.
4. The managing director of Monte Cristo Gems Pty Limited, Shahe Sanossian, gave evidence that he had maintained and serviced the Plaintiff's family's watches for some years including the Plaintiff's Rolex Perpetual Watch day/date 18k solid yellow gold 36mm with diamond dial. He last cleaned that watch in about June 2014. He took a photo of the Plaintiff wearing the watch at that time. In August 2014 the Plaintiff rang him to tell him that he had lost the watch in Brazil. The Plaintiff asked him how much a new one would cost.
5. At the trial the Plaintiff was cross-examined about his purchase of the watch, its loss, and the renewal of the insurance policy. Mr Sanossian was not cross-examined.

The Magistrate's judgment

1. The Magistrate's reasons are on any view fairly succinct. His Honour stated briefly what the claim was about and noted two policy conditions which the insurer claimed had not been complied with relating to proof of loss by the Plaintiff. The conditions are these: You must submit to Us, within 60 days after We request, Your signed, sworn proof of loss providing us with all information and documentation We request such as the cause of loss, inventories, receipts, repair estimates and other similar records. You agree not to bring legal action against Us unless You have first complied with all the conditions of this Policy. For property, You also agree to bring any action against Us within two years after a loss occurs, but not until 30 days after the proof of loss has been submitted to Us and the amount of loss has been determined.
2. The Magistrate identified two issues which were whether the Plaintiff had standing to bring the claim and whether he had proved the loss of the watch. His Honour first found that the Plaintiff had standing to bring the claim. In doing so his Honour said at paragraph 7, Mr Kalloghlian has complied with the proof of loss clause by providing information to Chubb.
3. His Honour summarised the Plaintiff's evidence concerning the purchase and loss of the watch. He set out the Plaintiff's and the Defendant's submissions. His Honour's decision then followed in these terms: 16. The proof of loss clause requires the insured to submit a signed sworn proof of loss providing all information and documentation the insurer requests. Mr Kalloghlian has submitted a signed sworn proof of loss, stating: (1) He has lodged a claim (2) At all material times, he was the owner of the watch, and has provided a photograph of himself wearing the watch. (3) He bought the watch in Syria (4) On 13/07/2014 he lost the watch on Copacabana beach, between 8-8:30 pm. 17. Mr Kalloghlian has been unable to provide proof of purchase of the watch. He has not produced: (1) The receipt for the watch. (2) A passport to prove travel to Syria, or any other travel documentation. (3) Any documentation from a bank in Syria where he claims to have withdrawn money he used to purchase the watch. (4) Any information about the seller of the watch. (5) A valuation of the watch made to prove authenticity and value at the time of purchase. (6) A police report (7) Any detailed information about the circumstances of the loss, only stating the place and time of alleged loss, but without saying what he was doing at the [scil. time] of the alleged loss. (8) Any information about contacting the Police to ascertain whether the watch had been recovered. 18. Mr Kalloghlian bears the onus to prove the loss. On the balance of probabilities the court is not satisfied that Mr Kalloghlian has proved loss. 19. It is insufficient for Mr Kalloghlian to provide only the information he has provided, doing such does not satisfy the proof of loss clause, because it does not prove loss. (emphasis added)
4. It may be observed that the conclusion at paragraph 19 is quite inconsistent with the conclusion at paragraph 7 (set out at [12] above).
5. Thereafter, his Honour set out and briefly discussed s 54 of the Insurance Contracts Act. His Honour's conclusion was that s 54 was not engaged because there was no act of the insured as contemplated by the section.
6. The consideration of s 54 is a little difficult to understand. It was relied upon by the Plaintiff to answer any failure that was held to have occurred on its part by not lodging what the insurer said was a proof of loss. That was a condition of the contract that needed to be complied with. However, since the learned Magistrate had already found that the Plaintiff could not be prevented from bringing its action from any failure to lodge a proof of loss, consideration of s 54 became unnecessary.
7. His Honour then considered briefly s 13 of the Insurance Contracts Act and the submission of the Plaintiff that the insurer was in breach of it by not having paid the claim. The Magistrate correctly held that the section was not breached just because the insurer did not pay the claim. He said the insurer was entitled to request further information to satisfy the proof of loss clause.
8. Finally, in the section of the judgment headed "Interpretation of the contract" his Honour discussed a number of cases concerning principles of construction of a commercial contract including, in relation to insurance contracts, the decision in McCann v Switzerland Insurance (2000) 203 CLR 579.
9. His Honour's conclusion from these cases was this: [31] As can be gleaned from the abovementioned cases, the principle of contracts being interpreted in a business-like manner relates to the surrounding circumstances at the time the contract was made, it does not relate to the paucity of evidence provided in proof of a condition precedent of a contract.

The parties' submissions

1. The Plaintiff submitted that there were two significant errors which justified the relief sought. The first was that his Honour posed and answered the wrong question by saying in paragraph 17 that the Plaintiff had been unable to provide proof of purchase of the watch. The correct test was whether the Plaintiff had brought himself within the insuring clause of the policy. The Plaintiff said that the policy provided that benefits were payable if the insured suffered a loss that was covered under the policy during the policy period. The relevant benefit was entitled "Deluxe Contents Coverage" and was defined as including "Cover against physical loss or damage to Your contents anywhere in the world".
2. The second error was that his Honour failed to provide reasons or adequate reasons explaining why it was that the Plaintiff was unsuccessful in his claim.
3. The Plaintiff submitted that it must be assumed that the Magistrate rejected his evidence concerning the purchase of the watch but his Honour does not say why he has done so. Further, although his Honour noted the evidence given by Mr Sanossian he made no finding about whether or not he accepted that evidence. Given that Mr Sanossian was not cross-examined, that was a significant matter.
4. The Defendant submitted that the onus lay on the Plaintiff to prove he had the watch and he lost the watch. It was only by doing that that he could prove his loss under the policy. The Defendant pointed to the Plaintiff's acceptance that, implicitly, the Magistrate had rejected his evidence. The Defendant submitted that it was apparent from paragraphs 17 to 19 of the judgment that the reason his Honour did not accept the Plaintiff's evidence was because of the lack of corroborative material there identified. The Defendant submitted that where the Magistrate referred in paragraph 17 to the Plaintiff being unable to "provide proof of purchase" that should be read as "purchase and loss" if the context is taken into account. That is because items number (6)-(8) in paragraph 17 are clearly referring to the loss of the watch.
5. The Defendant relied on what was said in Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd and Penrith Pastoral Co Pty Ltd [1983] 3 NSWLR 378 by Hutley JA (with whom Samuels JA agreed) at 381: It was submitted that the appellant had the right to have findings so explicit that it would know whether the decision was based on fact or law. This is an extension of the principles enunciated in Pettitt v Dunkley and, in my opinion, that case should be confined to the special case where there are no reasons, or a mere caricature of reasons, on an issue depending upon a view of the law. Cripps J's detailed judgment is sufficiently voluminous for any purpose. The extent to which a court must go in giving reasons is incapable of precise definition. A court must not nullify rights of appeal by giving no or nominal reasons, but there is no duty to expound reasons so as to facilitate appeals. This applies particularly to the situation where a judge has to decide between conflicting witnesses, including experts. The choice between conflicting experts may have to be a matter of judgment, not of detailed reasoning. I am unable to see what issue of law the appellant was deprived of having dealt with by this Court by the fact that his Honour did not specifically pronounce on whether he accepted the evidence as to the policy of the Penrith Council or not. If he accepted the evidence, it could have diminished the compensation payable, but would not necessarily have done so, as he would have had to give weight to the possibility that the policy might be changed or not survive scrutiny on review. The material having been admitted into evidence, what was done with it was a decision of fact. I am unable to see how any question of law could be extracted from any decision that might be made.
6. The Defendant also made reference to Mahoney JA's judgment at 385: However, such a duty [to state reasons] does not exist in respect of every matter, of fact or of law, which was or might have been raised in the proceeding. It is not the duty of the judge to decide every matter which is raised in argument. He may decide a case in a way which does not require the determination of a particular submission: in such a case he may put it aside or, as Lord Scarman said, merely salute it in passing: R v Barnet London Borough Council; Ex parte Nilish Shah [1983] 2 AC 309, at 350.

Consideration

1. In Abdel Naser Qushair v Naji Raffoul [2009] NSWCA 329 Sackville AJA (Campbell JA and Bergin CJ in Eq agreeing) said at [52]: [52] The principles relating to the obligation of a trial judge to give adequate reasons for making findings of fact, including findings said to be demeanour based, were summarised by McColl JA (with whom Ipp JA and Bryson AJA agreed) in Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110. Her Honour's statement of the principles was accompanied by detailed citation of authority. The following is a summary, with reference only to some of the leading authorities: (i) The giving of adequate reasons lies at the heart of the judicial process, since a failure to provide sufficient reasons can lead to a real sense of grievance because the losing party cannot understand why he or she lost (at [57]): see Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, at 442, per Meagher JA. (ii) While lengthy and elaborate reasons are not required, at a minimum the trial judge's reasons should be adequate for the exercise of a facility of appeal, where that facility is available (at [56]): see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, at 260, per Kirby P; at 269, per Mahoney JA. (iii) The extent and content of the reasons will depend on the particular case and the issues under consideration, but it is essential to expose the reasoning on a point critical to the contest between the parties (at [58]): see Soulemezis v Dudley, at 259, per Kirby P; at 280, per McHugh JA. This may require the judge to refer to evidence which is critical to the proper determination of the issue in dispute (at [62]): Beale v GIO, at 443, per Meagher JA. (iv) Where credit issues are involved, it is necessary to explain why one witness is preferred to another. Consequently, bald findings on credit, where substantial factual issues have to be addressed, may not comply with the common law duty to give reasons (at [65]): Palmer v Clarke (1989) 19 NSWLR 158, at 170, per Kirby P (with whom Samuels JA agreed). (v) Where an appellate court concludes that the trial judge has failed to give adequate reasons, the court has a discretion whether or not to direct a new trial. If, despite the inadequate reasons, only one conclusion is available, a new trial may not be necessary (at [67]).
2. Recently, Harrison AsJ in Zeait v Insurance Australia Limited t/as NRMA Insurance [2016] NSWSC 587 said: [28] It is trite law that if a court fails to give sufficient reasons for its decision it constitutes an error of law: see Wang v Yamamoto [2015] NSWSC 942; and Jung v Son [1998] NSWCA 120. [29] In Wang v Yamamoto at [35]-[38], I stated: "[35] It is not in dispute that a Magistrate is obliged to provide adequate reasons and not to do so constitutes an error of law: see Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 at [41] per Santow JA. [36] In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 340 Meagher JA at 422 stated: A failure to provide sufficient reasons can and often does lead to a real sense of grievance that a party does not know or understand why the decision was made: Re Poyser and Mills Arbitration [1964] 2 QB 467 at 478. This court has previously accepted the proposition that a judge is bound to expose his reasoning in sufficient detail to enable a losing party to understand why it lost. [37] In Stoker, Santow JA at [41] said that "It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings." However, "the extent and the content of reasons will depend upon the particular case under consideration and the matters in issue. While a judge is not obliged to spell out every detail of the process of reasoning to a finding, it is essential to expose the reasons for resolving a point critical to the contest between the parties": see Pollard v RRR Corporation Pty Limited [2009] NSWCA 110, McColl JA at [58] (with whom Ipp JA and Bryson AJA agreed). [38] In Soulemezis v Dudley (Holdings) Pty Ltd (1987) NSWLR 247, McHugh JA at 281 stated: "In a case where a right of appeal is given only in respect of a question of law, different considerations apply from the case where there is a full appeal. An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less elaborately than an issue involving a question of mixed fact and law. If no right of appeal is given against findings of fact, a failure to state the basis of even a crucial finding of fact, if it involves no legal standard, will only constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done. If, for example, the only issue before a court is whether the plaintiff sustained injury by falling over, a simple finding that he fell or sustained injury would be enough if the decision simply turned on the plaintiff's credibility. But, if, in addition to the issue of credibility, other matters were relied on as going to the probability or improbability of the plaintiff's case, such a simple finding would not be enough." [30] In Jung v Son, Stein JA stated (at 6): "While a judge does not have to state reasons for every aspect of the case, his reasons must be sufficient to satisfy the requirements of Pettitt v Dunkley [1971] 1 NSWLR 376. The reasons must be sufficient to enable an appellate tribunal to gain a proper understanding of the basis of the verdict. Not to do so is an error of law (Asprey JA at 382 and Moffitt JA at 388). Failure to give reasons also makes it impossible for an appellate tribunal to give effect to a plaintiff's right of appeal. Issues critical to the case, as these were, must be dealt with by reasons (Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728)." In short, the judicial officer should make it clear what he or she is deciding and why.
3. One can perceive a subtle shift in the approach of the Court of Appeal since Tatmar. What the more recent cases stress is the need for both the losing party and an appeal court to understand why it is that the judge reached the view he or she did. That is particularly the case in a case such as the present where there is only an appeal as of right on a question of law. As McHugh JA made clear in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 different considerations apply in such cases.
4. The policy relevantly provided: Benefits are payable if You suffer a loss that is covered under the Masterpiece Signature policy during the policy period, unless an exclusion or condition applies. Before Chubb will pay a claim, You must meet the requirements for making a claim which are explained on page PDS5 of this PDS and on pages Y2-Y3 of the Masterpiece Signature policy. (emphasis in the original) … Deluxe Contents Provides cover against physical loss or damage to Your contents anywhere in the world. Benefits include: Replacement cost coverage without deduction for depreciation; … High limits for special contents including jewellery $50,000 any one claim and $25,000 per item; The definition of "Contents" in the Deluxe Contents Coverage: means personal property You or a family member owns or possesses. (emphasis added) The definition of "Covered Loss": means the physical loss or damage to Your contents or other property covered under this part of Your Policy subject to the terms, conditions and exclusions in this Policy.
5. In the policy conditions relating to coverage for damage to property, under the heading "Proof of loss" the following appears: You must submit to Us, within 60 days after We request, Your signed, sworn proof of loss providing all information and documentation We request such as the cause of loss, inventories, receipts, repair estimates and other similar records.
6. In the same section under the heading "Legal action against Us" the following appears: You agree not to bring legal action against Us unless You have first complied with all conditions of this Policy. For property, You also agree to bring any action against Us within two years after a loss occurs, but not until 30 days after proof of loss has been submitted to Us and the amount of loss has been determined.
7. As best as can be determined from the somewhat elliptical reasons of the Magistrate, his Honour seems to have identified proof of purchase of the watch with satisfaction of the proof of loss clause. Even if the opening words of paragraph 17 of the judgment should be read as including proof of the loss of the watch, the Magistrate's conclusion is simply that the Plaintiff has not proved loss (see paragraph 18). It must be inferred, as the Plaintiff accepts, that the Magistrate has not accepted, principally, the evidence of the Plaintiff. A further inference that can be drawn from paragraphs 17 to 19 is that the reason the Plaintiff has failed is that he did not have any or all of the documents and proof set out in paragraph 17. However, that is not the only other inference that can be drawn.
8. There are cases, whether involving insurance or other matters, where a plaintiff has no corroborative evidence of essential facts but the Plaintiff's evidence is believed with the result that he or she is successful in the claim. It was not a requirement of the policy or of the law generally that the Plaintiff in the present case needed to have corroborative evidence to succeed in the claim. The Plaintiff does not know, therefore, whether he failed because his evidence was not believed or because he did not have the matters enumerated in paragraph 17 or for both reasons.
9. Further, if he was not believed he does not know whether it was all of his evidence or some of it and why the disbelieved evidence was not believed. For example, he may have been believed about the purchase of the watch but not about the circumstances of its loss because his evidence in that regard was sparse and no report of its loss was made to the police. On the other hand, he may have been disbelieved about the purchase of the watch because he did not have any documents relating to its purchase, and that caused the Magistrate to doubt his oral evidence. Or perhaps, the Magistrate disbelieved him by reason of his demeanour.
10. Further, Mr Sanossian's evidence, which was not considered at all in the judgment, and about which he was not cross-examined, provided some corroboration of the Plaintiff's evidence about, at least, being in possession of a Rolex watch of the type described by the Plaintiff. Whilst I accept that Mr Sanossian does not know if the watch he saw and cleaned was the watch said to have been purchased in Syria and which was said to be lost in Rio de Janeiro, there was a need for the Magistrate to say why, in the face of that unchallenged evidence, it did not go some way to support the Plaintiff's evidence about his possession of the watch shortly before it was lost.
11. This was a classic case where a claimant on an insurance policy had almost only his own word to prove ownership or possession and loss of the object for which the claim was made. An insurer might take the view in such circumstances that a plaintiff would need to commence proceedings so that his evidence could be given on oath and tested in a court. Paragraphs 17 to 19 of the judgment read as if the Magistrate was considering the matter from the point of view of an insurer in such circumstances, when his Honour had the additional benefit of evidence on oath and cross-examination and, as it happens, the evidence of another witness that provided some small support for the Plaintiff's claim. I say that the Magistrate appears to have approached it from that point of view because there is no reference anywhere in the judgment to his assessment of the Plaintiff's evidence nor his assessment of Mr Sanossian's evidence. His Honour's focus was only on documents and material that was not provided.
12. Ultimately, the Plaintiff had to be believed to succeed in this case. It was incumbent on the Magistrate to assess his evidence and explain why it was not accepted. Additionally, when Mr Sanossian's evidence went a little way to corroborating the Plaintiff it was incumbent on the Magistrate to say either why he did not accept that evidence or to say why, if it was accepted, it did not support the Plaintiff.
13. The judgment of the court below does not provide reasons that are sufficient to enable this Court, in its appellate role, to gain a proper understanding of the basis of the verdict: Jung v Son [1998] NSWCA 120. The parties, particularly the Plaintiff, do not know why the decision was made and the Plaintiff is entitled to have reasoning in sufficient detail to enable him to understand why he lost: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 422. It is not sufficient that the Plaintiff can infer that his evidence was not accepted. He is entitled to know why that is so.
14. Additionally, the Magistrate does not seem to have asked himself the correct question which was whether the Plaintiff brought himself within the insuring clause relevant to the loss. His focus on the purchase of the watch appears to have overlooked entirely that it was sufficient that the insured either own or possess the watch. Nowhere in the judgment is the insuring clause nor the definition of "Contents" set out or referred to. The only parts of the Policy in the judgment are the two policy conditions set out at [11] above.
15. Mr Sanossian's evidence was of more significance in relation to the issue of possession as opposed to ownership. His evidence demonstrated that the Plaintiff possessed a Rolex watch of the description that the Plaintiff himself also gave and that it was possessed shortly before the alleged loss and the claim on the insurer. That could suggest that, if the Magistrate disbelieved the Plaintiff, it was because he did not accept his evidence about losing the watch on the basis that Mr Sanossian's evidence, whilst never being able to corroborate purchase, was able to corroborate possession by the Plaintiff. However, there is nothing in the judgment to suggest the Magistrate gave any consideration to possession because of his mis-directed focus on the purchase of the watch and the absence of documents generally.
16. In my opinion the Plaintiff has demonstrated that the Magistrate's reasons are inadequate. I do not consider that as a matter of discretion I should refuse to order a re-trial. It is not the case that, despite the inadequate reasons, only one conclusion is available on the evidence. The proceedings should be remitted to the Local Court to be dealt with by a different magistrate since it is likely, that the Magistrate has impliedly made credit findings.

Conclusion

1. I make the following orders: 1. Appeal allowed. 2. Set aside the judgment of Bradd LCM of 11 December 2015. 3. Remit the matter to the Local Court to be heard by a different magistrate. 4. The Defendant should pay the Plaintiff's costs of the appeal. 5. The costs of the first trial to be at the discretion of the Magistrate hearing the re-trial.

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: 01 July 2016