Plaintiffs v Defendant

Supreme Court of Victoria|2008-03-17|Before: KAYE J

PRACTICE and procedure - Action in insurance policy - Defences of arson and fraudulent exaggeration of quantum of claim - Insured plaintiffs permitted to split case - No case submission on defences - Applicable test - Whether plaintiffs required to elect to call no evidence.

**1 The plaintiffs claim to be entitled to indemnity, pursuant to a policy of insurance effected by them with the defendant, in respect of the destruction of their house and its contents at Jeeralang on 6 October 2001. The defendant has refused to pay the plaintiffs' claim on the grounds, first, that the plaintiffs or one of them deliberately lit the fire, and, secondly, that the plaintiffs have fraudulently exaggerated the quantum of their claim. The defendant bears the onus of proof in respect of both defences. All of the formal matters relating to the plaintiffs' claim have been admitted. An agreement has been reached between the parties as to the quantum of the plaintiffs' claim, should they succeed. Accordingly, at the commencement of the trial it was agreed that the defendant should call its evidence first in support of its defences, before the plaintiffs be required to call their evidence in response to them. The defendant has now closed its case. Mr P. Willee QC, who appears with Mr M. Lapirow on behalf of the plaintiffs, has submitted that there is no case to answer.

2 The case of the defendant, on both defences, is substantially circumstantial. However, some of it was sought to be established by the evidence of two witnesses, Alistair Ashton and Leah Griffiths, whose evidence was the subject of attack in cross-examination on the grounds of credit. In determining the submission which is now before me, it is important to identify the relevant principles which would apply in such a case.

3 In my view the authorities, to which I shall shortly refer, establish the following broad principles which should apply to the application which is before me:**

Where a no case submission is made in a trial by jury, the role of the judge is to determine whether, on the view of the evidence most favourable to the party against whom such a submission has been made ("the respondent party"), the jury could (not would) find in favour of the respondent party.[1]
The test which is applicable, where a judge is sitting without a jury, is less stringent. In such a case the judge may uphold a no case submission, notwithstanding that the evidence, on the view most favourable to the respondent party, could support a judgment in favour of the respondent party.[2]
In such a case the judge may perform an assessment of the quality of the evidence which has been called on behalf of the respondent party. In some cases, such an assessment may involve the judge evaluating the credit of witnesses from whom such evidence has been called.[3]
In determining a no case submission, the judge is entitled to draw inferences from the evidence.[4]
On a no case submission, the judge cannot draw an inference against the party making the submission ("the moving party") based upon the absence of evidence from that party.[5]
Although the judge, sitting alone, may assess the quality of the evidence in determining a no case submission, nonetheless the test which is to be applied by the judge, at that stage, is different to the test which the judge would apply in determining the ultimate outcome of the case, at the conclusion of a trial. Notwithstanding that the judge, in determining the no case submission, may assess the quality of the evidence, nonetheless the test remains whether, on the evidence so assessed, the judge "could" (not would) find for the respondent party on the evidence so far led. In such a case, the judge would only find against the respondent party if the evidence, so far adduced, is so unsatisfactory or inherently unreliable or equivocal that he were to conclude that he could not be reasonably satisfied of the case made by the respondent party on the evidence thus far adduced.[6]

**4 The only proposition which was in dispute before me is number 6. Mr Willee submitted that the applicable test, in a no case submission such as this, is whether, on the evidence adduced, I would, on the balance of probabilities, find in favour of the defendant on the two defences relied on by it. On the other hand, Mr S.K. Wilson QC, who appears with Mr A. Donald for the defendant, submitted that the test which I should apply, at this stage of the proceeding, is not the same test which is to be performed by a judge who has heard all the evidence and is giving final judgment. Mr Wilson accepted, on the basis of the statements of principle in Protean (Holdings) Ltd and ors v American Home Assurance Co,[7] that it is appropriate that I perform a qualitative assessment of the evidence so far adduced. Nonetheless he submitted that, at this stage, the applicable test is whether, on that evidence, I could (not would) find in favour of the defendant, on its defences, on the balance of probabilities. As I have already indicated, I consider that the submissions made by Mr Wilson on this aspect of the case are correct.

5 The starting point is the often cited dictum of Windeyer J in Jones v Dunkel,[8] where his Honour stated:**

When there is no jury, the proposition "no case to answer" may obviously mean far more than "is there evidence on which a jury could find for the plaintiff?" it may mean would you, the judge, on the evidence given, decide for the plaintiff?"

**6 In Protean, Young CJ,[9] after referring to that dictum, expressed the test in terms of whether the judge "would", on the evidence given, decide for the respondent party. However, that sentence in his Honour's judgment must be understood in light of the passages which had preceded it. The Chief Justice postulated three possible outcomes of a no case submission. The first was where the trial judge concluded that the evidence "could" sustain a finding against the moving party; in such a case his Honour stated that the trial judge would overrule the submission and allow the case to proceed. The second postulated result was that the case was so finely balanced that the trial judge was not satisfied that, even if the evidence "could" sustain a finding against the moving party, the judge would be prepared to make the finding himself; in such a case, tried without a jury, the Chief Justice expressed the view that the trial judge "would no doubt allow the case to proceed". The third result postulated by the Chief Justice is where the trial judge concludes that "the evidence could not sustain a finding against"[10] the moving party. In such a case the trial judge should uphold the submission. Thus, in each of those three postulated cases, the Chief Justice, in Protean, adhered to the test as to whether the evidence "could" sustain a finding against the moving party. It is in that context that his Honour's statement, to which I have referred (namely that the applicable test was "would the judge, on the evidence, decide for the respondent party"), must be construed.

7 In my view, the judgment of Tadgell J in Protean supports the same approach. His Honour postulated two types of no case submission. The first was where it was submitted there is no evidence at all in support of the respondent party's case. The second case was where it was submitted that, notwithstanding there was some evidence in favour of the respondent party's case, the judge should not act on it because "for example, it is so unsatisfactory or inherently unreliable or equivocal that he should find that the burden of proof resting on the respondent party has not been discharged ... ".[11] In the latter case, Tadgell J held that the trial judge must be entitled to assess the quality of the evidence, in determining such a proposition advanced on behalf of the moving party. Nonetheless, his Honour, in the succeeding passage of his judgment, twice referred to the relevant test as whether the trial judge, after evaluating the evidence, "could" act on it in favour of the respondent party. Thus, his Honour noted that the second type of submission was inappropriate, unless it embraced a contention that "such evidence as there is amounts in law to nought".[12] In a subsequent passage, his Honour pointed out that the respondent party, in order to meet a no case submission, was not required to demonstrate that it would ultimately have succeeded had the evidence remained unaltered at the conclusion of the trial.[13] In making that observation Tadgell J referred to a passage from the speech of Lord Blackburn in Metropolitan Railway Co v Jackson.[14] There, his Lordship (in relation to a jury trial) accepted the test as that stated by Maule J in Jewell v Parr,[15] namely, that the question for the judge is " ... not whether there is literally no evidence, but whether there is none that ought reasonably to satisfy the jury that the fact sought to be proved is established."

8 Thus, in my view, both the Chief Justice and Tadgell J, in Protean, distinguished between the test to be applied by a trial judge, sitting alone, in determining a no case submission, from the test which is to be applied by a trial judge in determining the final outcome of a case. The other member of the Full Court was Fullagar J. His Honour referred to the dictum of Windeyer J in Jones v Dunkel, and then stated, "The circumstances of the present case were such that, in my view, the propositions really did mean the latter question posed by Windeyer J"[16] (that is, the expression "could" meant "would"). Two points should be noted concerning that observation by Fullagar J. First, his Honour considered that the learned trial judge in the case before him (Marks J) did address himself to the first question, namely whether the evidence was "capable" of supporting the inferences sought by the defendant to be found open upon it. Secondly, Fullagar J expressly concurred with the views stated by Young CJ and Tadgell J in their separate judgments on that point. Considered in that light, in my view Fullagar J was not postulating a test different to that stated by the other two members of the Court.

9 In my view, the authorities which have been decided since Protean support my construction of the judgments by the Full Court in Protean. In Sarkis v Deputy Commissioner of Taxation,[17] Nettle JA, after referring to the dictum of Windeyer J in Jones v Dunkel, stated in respect of the test to be applied by a judge sitting alone:**

In such a case, the judge must decide whether he or she could find for the defendant on the evidence so far led. As Tadgell J reasoned in Protean, it would be quite unrealistic to expect him or her to do so without being able to consider all questions which bear on the sufficiency of the evidence and without power to draw or decline to draw all inferences from the evidence given on which the respondent party might seek to rely.[18]

**10 I do not consider that the Court of Appeal expressed the test differently in Clarey v Permanent Trustee Co Limited and anor.[19] In Rasomen Pty Ltd v Shell Company of Australia Limited,[20] the Full Court of the Federal Court referred to and adopted the passage from the judgment of Tadgell J in Protean to which I have referrred.[21]

11 In Tru Floor Service Pty Ltd v Jenkins (No. 2),[22] Sundberg J referred to Protean, Sarkis, Rasomen, and the decision of Finkelstein J in Compaq Computer Australia Pty Ltd v Merry,[23] and concluded[24] that, where a judge sits alone, the function of the judge was "no different from that which has to be performed by a judge who has heard all the evidence in the ordinary way and who has to give final judgment." The analysis of the authorities on which I have embarked does not, in my view, with respect, justify that conclusion. In some cases, the task undertaken by the judge may be akin to the same task to be undertaken by the judge at the conclusion of the trial. However, in my view, the authorities to which I have referred do not, in all cases, equate the two tasks. Rather, as I have stated, my task, at this stage, having assessed the evidence, is to determine whether, on the balance probabilities, I could find in favour of the defendant on its two defences.

12 In undertaking that task, it is important to refer to the standard of proof which must be attained by the defendant in order to substantiate its defences. The two defences relied upon by the defendant involve allegations of serious criminal conduct on behalf of both plaintiffs. This is a civil proceeding, and the civil standard, namely the balance of probabilities, applies. Nonetheless, in light of the gravity of the allegations made by the defendant, I, as the tribunal of fact, would only be entitled to be satisfied of the defences, on the balance of probabilities, should I be satisfied that the proofs adduced in support of them are cogent.[25] The defendant's case, on both of its defences, is basically circumstantial. Thus, the defendant relies on a process of inference, from the facts which it has established, in order to satisfy me, on the balance of probabilities, of its defences. In order to succeed on those defences, the defendant must, therefore, establish that, on the factual circumstances proved by it, the more probable inference is that the plaintiffs deliberately lit the fire (in the case of the arson defence), and (in the case of the exaggerated claim defence) that the plaintiffs deliberately and fraudulently exaggerated the quantum of their claim.[26] In determining the question whether an inference, relied upon by the defendant, has been established on the balance of probabilities, it is necessary to consider all the evidence, proven by the defendant, in combination. That is, in determining whether a particular inference relied upon by the defendant is the more probable inference, my task is to consider the evidence, proven by the defendant, as a whole. Inferences are not drawn by considering each individual fact in isolation from the other. On the contrary, it is the united and combined force of several facts, acting together, which may, in an appropriate case, give rise to an inference on the balance of probabilities.[27]

13 In determining the no case submission made by the plaintiffs, I deferred, until the completion of Mr Willee's submissions, ruling on whether I should put the plaintiffs to their election to call no evidence. In the end, in the course of discussion with Mr Wilson, I ruled that I would not, in the circumstances of the case, put the plaintiffs to their election.

14 The ordinary rule is that a judge will not rule on a submission of no case to answer, unless the moving party announces that it will not call any evidence, in the event that the submission does not succeed. However, that rule is not inflexible and it admits of exceptions. Ultimately, the question, as to whether or not the moving party should be put to its election, is a question for the exercise of the judge's discretion. The answer to that question depends on the just and convenient disposition of the litigation in the interests of justice. Where the respondent party to the submission has made an allegation of fraud, that circumstance may weigh in favour of an exercise of the discretion by the trial judge not to put the moving party to its election. Where a no case submission is made, a trial judge may require the moving party to put its argument, before the judge rules on whether that party should be put to its election. Such a course of action enables a judge to better determine whether it is in the interests of justice that the moving party be put to its election.[28]

15 In this case I deferred ruling on whether the plaintiffs should be put to their election until I heard the submissions made by Mr Willee. There were, I consider, two competing considerations as to whether I should put the plaintiffs to their election. On the one hand, the allegations made against the plaintiffs are particularly serious. Not only does the defendant allege that the plaintiffs deliberately lit the fire which destroyed their house and its contents, but, also, the defendant alleges that they fraudulently inflated the quantum of their claim in three material respects. It is also alleged that the fraudulent intention of the plaintiffs dated back to the time at which the policy with the defendant was first taken out, when, the defendant alleges, the plaintiffs deliberately and fraudulently inflated the values of the specified items contained in the insurance policy. Thus, the allegations made against the plaintiffs are not only serious, but are broad ranging. On the other hand, after hearing Mr Willee, it became clear that the submissions made on behalf of the plaintiffs, on the no case submission, were wider than simply pointing to a lacuna in the evidence adduced on behalf of the defendant. Rather, the submissions dealt in some detail with the evidence put before me in a qualitative sense. In such a case it is recognised that it is generally appropriate that the moving party be put to its election.[29]

16 In the end, having heard the submissions from Mr Willee, I decided not to put the plaintiffs to their election. The allegations made against the plaintiffs are, as I have said, serious. They should have every opportunity to respond to them in this case. I was concerned that the plaintiffs should not be put in a position which might disentitle them to give evidence, save at the price of foregoing a ruling on the no case submission. Accordingly, notwithstanding the cogent considerations in favour of putting the plaintiffs to their election, I determined not to do so.

17 The arson defence was essentially circumstantial. Basically, the defendant relies on the following principal factors in support of that defence:**

Approximately four months before the fire the first plaintiff (Oakley) approached a fellow employee, Leah Griffiths ("Griffiths") and her then boyfriend Alistair Ashton ("Ashton"), with a view to persuading Ashton to burn down the plaintiffs' house.
The plaintiffs had at least one motive to burn down the house, namely, that its woodwork was infested with termites. Mr Wilson also opened the case on the basis that the plaintiffs had a financial motive to burn down the house, namely that they were in pressing financial circumstances. He did not rely on that motive in opposing the no case submission.
Oakley had the opportunity to light the fire. He was the last person in the house before the fire commenced. He left the house at a time within which the fire would have commenced.
Arson has not been excluded as a potential cause of the fire.
Other possible alternative causes of the fire have been excluded.
Before the fire the plaintiffs removed, or prepared to remove, some of their belongings out of the house for storage elsewhere.
The plaintiffs have deliberately and fraudulently exaggerated the quantum of their claim. It was put that the exaggeration of the claim was part of the fraudulent intent with which the house was deliberately set on fire.

**18 I shall briefly examine each of the factors to which I have just referred. In doing so, I do bear in mind the principle to which I have adverted, namely, that it is the combined weight of the facts, which have been thus far established, which determine whether, on the evidence, as the ultimate judge of the facts in this case, I could reasonably hold, on the balance of probabilities, that the plaintiffs deliberately burnt down their house.

19 The first category of evidence, to which I have just referred, arises from the testimony of Griffiths and Ashton. It is only necessary to summarise their evidence briefly for the present purposes. In 2001, Griffiths and Oakley were working in a pharmacy in Warragul. They shared car rides to and from work. In doing so they became friendly, and were twice intimate. Griffiths stated that on one day, when driving home from work, Oakley asked her if she knew anyone who would or could burn down his house. He said that his house had white ants, and that it was insured for more than the amount for which it could be re-sold. Griffiths told Oakley that she would speak to her partner Alistair Ashton. Subsequently, Ashton told her that Oakley and he had had a conversation, and that Ashton had agreed to burn down the house while the plaintiffs were on holidays overseas. As a "down payment", Ashton was given a motorbike safety vest by Oakley, which Griffiths saw in his possession.

20 Ashton, in his evidence, stated that one afternoon after work Griffiths told him that Oakley had asked her if she knew anyone who would be interested in burning down the plaintiffs' house. Two or three days later, Oakley telephoned Ashton and offered to drive him out to his property. Ashton agreed. Oakley drove Ashton to the plaintiffs' property and showed him around it. While he was doing so he showed him termite damage in the rear part of the house. He told Ashton that the house was riddled with termites. He asked Ashton to burn down the house. He told Ashton that, if he did so, he could have any of the property that was then in the house. Oakley told Ashton that he did not want him to use gasoline, but rather wanted the fire to look accidental. Ashton, in his evidence, stated that he did not commit to burning down the house. Oakley gave him a bike jacket. Ashton in his evidence further stated that he never agreed to burn down the house. Ultimately, when Oakley and the second plaintiff (Tomlinson) returned from overseas, Ashton returned the jacket to Oakley, and told him that he had not set the house on fire. It was subsequent to that conversation that the house burnt down.

21 Both Griffiths and Ashton were subjected to strenuous cross-examination by Mr Willee. Their credit was well and truly put in issue. Mr Willee has submitted to me that I should now reject the evidence of both witnesses. He made a number of criticisms of their evidence, including the following:**

The evidence of both witnesses did not come to light until they were approached by the defendant's solicitor in 2006.
There were a number of internal inconsistencies in the evidence of both Ashton and Griffiths. Further, the evidence of Griffiths was not consistent with that of Ashton on a number of important matters.
Ashton's demeanour in the witness box was unusual and somewhat bizarre. He gave a number of odd responses to questions asked in cross-examination.
Ashton (and to a lesser degree Griffiths) admitted to using marijuana at the time of the alleged discussions.
The evidence of both witnesses was inherently improbable. It was most unlikely that someone in the position of Oakley would, "out of the blue", have approached a young person such as Griffiths and asked her if she knew anyone who would burn down the house. On the evidence of both witnesses, no further discussions took place relating to the matter, save when Ashton returned the bike jacket to Oakley.

**22 Clearly, both Ashton and Griffiths are witnesses whose evidence I should scrutinise with considerable caution. If this were a criminal trial, they would be regarded as accomplices to a conspiracy to commit arson, and a jury would be instructed to treat their evidence with particular care, and to look for independent evidence to support or corroborate their testimony. While those principles do not apply in the present case, nonetheless the underlying rationale for them has some resonance in guiding me as to how I should approach the evidence of both witnesses.

23 Accordingly, I closely scrutinised the evidence of Griffiths and Ashton while they were giving evidence, and have subjected their evidence to a careful analysis on re-reading the transcript of it. Certainly, the evidence of both witnesses can be subjected to a number of criticisms. In light of the conclusions which I have reached about their evidence, I do not consider it appropriate at this stage to canvass those matters in any detail. I would not, nonetheless, reject either witness, or the substantive evidence given by them. Notwithstanding the reservations which I do have about their evidence, I do not consider that those reservations are such as to lead me, at this stage, to disbelieve either witness, in respect of the core part of their evidence, namely that Oakley spoke to both of them with a view to burning down his house in about mid-2001.

24 Furthermore, there are some matters which do independently corroborate the evidence, particularly of Ashton. As I stated, Ashton gave evidence that, when he viewed the plaintiffs' property, he was shown areas in which the woodwork had been attacked by termites. That evidence was supported by the testimony of the forensic fire examiner, Neil Barnes, who investigated the fire on 10 October 2001. On examining the premises, he found four or five areas where white ants had attacked the sub-floor frame in the rear part of the house. He also found evidence of white ant attack in the base of the rear door. Mr Barnes' evidence was also subject to strenuous cross-examination, but, at this stage, I accept it as truthful and accurate. In addition, Mr Ashton gave evidence that, when he was at the plaintiffs' premises, he observed a number of boxes in which items had been packed and stored. He said that the goods were being packed out to other peoples' houses, and that the plaintiffs' house looked like they were either moving in or moving out. That evidence, to some degree, was supported by the testimony of Marilyn England, a then friend of the plaintiffs. She stated that after the fire, two storage boxes, which looked like large courier boxes, containing property of the plaintiffs, were brought to her house. That evidence was not contested in cross-examination.

25 In addition, it does not appear to be in dispute that, some time before Oakley and Tomlinson left for overseas in about July 2001, Oakley provided his motorbike vest to Ashton. In cross-examination, it was put that the transaction was one of loan rather than gift or down payment. Nonetheless it does not appear to be in contest that, at a relevant time, Ashton was provided the vest by Oakley. The evidence is that, while Griffiths was a fellow employee of Oakley, and on friendly terms with him, Ashton and Oakley otherwise had little to do with each other. The fact that Oakley would have given Ashton the jacket, in such circumstances, does, in my view, lend some independent support to the evidence of both Ashton and Griffiths.

26 As I remarked in the course of argument, the assessment of the credibility of witnesses, and in particular witnesses such as Griffiths and Ashton, is generally a dynamic process during a trial. It is rare that a judge will entirely discount a witness's evidence, upon having heard that witness give evidence. There are a number of witnesses about whom a trial judge may have some reservations. However, ordinarily the credibility and testimony of witnesses, such as Griffiths and Ashton, are measured by a judge having regard to the whole of the evidence which is called throughout the trial. Sometimes the evidence of witnesses such as Griffiths and Ashton may strengthen, or weaken, by dint of other evidence given after they have completed their testimony. As I have stated, in the present case, on the status of the current evidence, I do have some reservations about the evidence of both Griffiths and Ashton. Nonetheless, at this stage of the trial, my reservations are not such as to induce me to reject their evidence. Accordingly, from the point of view of the no case submission, and at this stage of the trial, I do proceed on the basis that Oakley did intend to burn down the plaintiffs' house four months before the fire actually occurred, and that he wished to do so because it was the subject of infestation by termites. I also accept that such was the desire of Oakley to burn down the house that he saw fit to approach a young fellow employee, and her then partner, with a view to persuading them to burn the house down for him and Tomlinson while they were overseas.

27 The next item of evidence relied upon by the defendant is that of motive. For the reasons which I have already set out, at this stage, I am prepared to accept that the woodwork of the plaintiffs' premises, some months before the fire, had suffered attack by termites. At this stage of the trial, the evidence of Barnes and Ashton supports that proposition.

28 I further accept the evidence that Oakley had the opportunity to set fire to the house. The evidence of Mr Barling, who was in charge of the Country Fire Authority strike team which first attended the fire, was that the fire was reported to the CFA at 10.15am on the day of the fire, Saturday 6 October 2001. The fire crew left the Churchill Station at 10.21am, which is four kilometres from the site of the fire. Before it left the station, Mr Barling saw a column of thick black smoke from the vicinity of the fire. When the CFA strike team arrived at the fire at 10.27am, the house was well on fire. The windows had broken and the fire had vented. Mr Barnes gave evidence that, in broad terms, it takes approximately 30 to 40 minutes for a fire to reach such a stage that a pall of smoke could be seen from it a few kilometres away. In a signed statement made by him three weeks after the fire, Oakley stated that he watched a television episode until it completed at about 9.30am, after which he left the house in his motor vehicle and drove to friends in Colville. In those circumstances, I consider that the evidence is reasonably capable of supporting the factual finding that Oakley was at the house at or about the time at which the fire commenced, and that he departed from the house after it commenced. The evidence also establishes that Oakley was the last person to leave the house. The only other person who had been in it that morning was Tomlinson, who had left for work more than one hour previously.

29 I also accept the proposition that, at this stage, the evidence is reasonably capable of establishing that arson has not been excluded as a cause of the fire. The three experts who have given evidence, Mr Knight, Mr Lording and Mr Barnes, each considered that the fire commenced a short distance east of the Coonara heater in the family room in the south-east quadrant of the house. The precise point of origin cannot be pinpointed because of the severity of the fire. Mr Barnes stated that if the fire had been deliberately lit using accelerants, he would not have been able to find any evidence of that because of the severity of the fire damage.

30 I also accept, at this stage, that the evidence is reasonably capable of establishing the proposition that other possible alternative causes of the fire have been excluded. Although the fire was in the vicinity of the Coonara heater in the family room, the area in which it commenced was to the east of that heater. The door of the heater faced to the south. Mr Knight, Mr Barnes and Mr Lording each found that the front door of the Coonara was closed at the time of the fire, and there was no defect in the Coonara, or its flue, which could have accounted for the cause of the fire. Similarly, Mr Knight, Mr Barnes and Mr Lording also excluded the possibility that the fire was caused by any electrical fault. The damage to the electrical wiring of the premises indicated that the fire had damaged the wiring, and that such damage was secondary to the fire. Each of them expressed the view that such damage as they observed to the wiring was not of the type which would have been the cause of the fire. Further, there is no evidence that the fire had originated from appliances which had failed or malfunctioned. No destroyed appliances were later observed in the area of the origin of the fire.

31 In addition, the evidence, at this stage, is reasonably capable of excluding the possibility that the fire was deliberately lit by someone who had wrongfully gained access to the premises. First, the timing of the departure of Mr Oakley was such that it would have been an extraordinary coincidence for someone else to have gained access to it in order to start the fire. Secondly, in his statement, Mr Oakley said that he had locked the house, and set its alarm, on departing from it shortly after 9.30am.

32 In those circumstances, the evidence which has been adduced to date is capable of reasonably establishing the proposition that any other possible causes of the fire have been excluded. Ultimately, the question of the cause of the fire will be a matter for inference. Inferences are drawn from established facts. As I have already discussed, the question of whether an inference, contended for by the defendant, is to be accepted, depends on whether that inference is the more probable hypothesis on the established facts. That question depends upon considering any competing inferences which might be available on the evidence. However, it does not depend on measuring a particular inference available on the evidence in favour of one party, against conjecture, or a process of speculation with no proper factual foundation, relied on by the other party. At this stage of the evidence, it is sufficient for me to conclude that I consider that the evidence, thus far established, is reasonably capable of establishing the propositions:**

(a) that arson has not been excluded as a cause of the fire;

(b) that arson by a third person (other than the plaintiffs) has been excluded as a reasonably possible cause of the fire;

(c) that other possible causes of the fire - electrical damage, or failure of appliances, or malfunction of the Coonara heater or the like - have been reasonably excluded.

**33 The final set of circumstances relied on by the defendant is that, before the fire, the plaintiffs removed, or prepared to remove, items which they owned out of the house. For reasons which I have already set out above, I am not prepared, at this stage, to reject the evidence of Ashton on this aspect of the case for the purposes of determining the no case submission. Further, as I have stated, to some extent, Ashton's evidence is supported by the evidence of Marilyn England.

34 Thus, I consider that, at this stage, there is evidence which supports each of the six main circumstantial factors relied upon by the defendant. Mr Willee submitted that, even if I accepted the evidence of Ashton and Griffith, I should not accept that the intention of Oakley and Thompson to burn down the house continued to subsist from the time of the discussions with Ashton and Griffith (about June 2001) until the time of the fire (October 2001). He submitted that, given that both witnesses stated that there was no further discussion with them about the topic after the initial discussions, the evidence supports the inference that, even if Oakley had an earlier intention to burn down the house, he had resiled from it at the time of the fire. In my view, that submission has an air of unreality about it. In particular, if it be that Oakley's intention was so specific in mid-2001, that he there and then determined to burn down the house, and to enlist the aid of two other persons to do so, on the current state of the evidence, in my view, the inference would be reasonably open, to say the least, that such an intention had subsisted until the time of the fire four months later.

35 Thus, having accepted that the defendant has, at this stage, adduced evidence which is reasonably capable of supporting each of the six factual propositions on which its circumstantial case of arson is founded, the remaining question is whether the united force of that evidence is such as to be reasonably capable of supporting the inference that the plaintiffs deliberately burnt down their house. In my view, the plain answer to that question is that the combined force of that evidence is reasonably capable of supporting a case of arson against the plaintiffs. If, at the end of the trial, I were to accept each of the six propositions, which I have found thus far the subject of reasonable support in the evidence, then I would consider that it would be reasonably open for myself, as the judge of the facts, to conclude that the probable inference is that the plaintiffs deliberately lit the fire. That conclusion is a result of the combination of the findings: that four months before the fire, Oakley had conspired with Ashton and Griffiths to burn down the house; that he had a motive for wanting the house to be burnt down; that he was the last person on the premises before the house burnt down; that he left the house within a time in which the fire would have commenced; that arson has not been excluded as a cause of the fire; that other possible alternative causes of the fire have been reasonably excluded; and that before the fire the plaintiffs either removed, or prepared to remove, many of their belongings from the house. Those facts, in combination, would reasonably entitle a trial judge to conclude that the fire had been deliberately lit by the plaintiffs or one or other of them. For those reasons, I reject the no case submission in relation to the defence of arson.

36 I turn, then, to the second defence to the plaintiffs' claim, namely the "exaggerated claim" defence. That defence is made on three bases, namely:**

(a) The claim by the plaintiffs on the defendant, for property damaged in the fire, included items of damage which the plaintiffs owned, but which had not been damaged or destroyed in the fire.

(b) The plaintiffs fraudulently exaggerated the value of the items of property claimed by them to have been destroyed in the fire.

**37 As I understand it, the defendant has not relied on any one of the three bases exclusively. Rather, the defendant alleges that the effect of any one basis, or more than one basis taken in combination, is such that the claim made by the plaintiffs was fraudulent, and was of such significance that the plaintiffs should not be entitled to rely on s 56 of the Insurance Contracts Act 1984 (Cth) to excuse the making of such a claim.

38 It is useful to commence with the first category of allegation, namely, that the plaintiffs claimed items which they owned, but which had not been destroyed in the fire. There is, I consider, evidence of two items of value, claimed by the plaintiffs from the defendant, which, on the evidence, were not lost in the fire. The first item is a Stars and Stripes bicycle. The uncontested evidence of Mrs England was that, before the fire, the plaintiffs brought some bikes and a saddle to her property, including the Stars and Stripes bike. After the plaintiffs returned from overseas in August 2001, and before the fire, they took some of the property back to their house, but left the Stars and Stripes bike and saddle with her. The plaintiffs, through their counsel, have admitted that the bike was left at the premises of Mrs England, and was not in their own house when the fire occurred. Mr Willee did cross-examine Mrs England about the type of saddle which was left with her. However, that cross-examination did not, in my view, disturb the evidence of Mrs England that a saddle was left with her, and was not returned to the plaintiffs before the fire. On the evidence of Mrs England, the saddle was clearly one of some value.

39 The plaintiffs by their claim asserted that they had lost all of the bicycles set out in the specified contents section of the insurance policy. That part of the policy specified four mountain bikes at a value of $36,497, and two road bikes at a value of $6,398. At the commencement of the trial, and in submissions, it was admitted that the Stars and Stripes bicycle had been included in the plaintiffs' claim. Later, in the course of argument, Mr Willee informed me that the plaintiffs wished to retract that admission. However, he correctly acknowledged that, for the purposes of the no case submission, it has evidentiary weight as an admission by the plaintiffs that the bicycle was part of the claim on the insurer. On the evidence to date, it would seem that the Stars and Stripes bicycle was one of the four mountain bikes specified on the policy, and thus was valued at $9,000. Even if it was one of the road bikes, it was valued at about $3,200. Accordingly, on any view, the bicycle claimed by the plaintiffs in the insurance claim, but not destroyed by the fire, was of some substantial value. So, too, was the saddle. As I understood him, Mr Willee conceded, in argument, that those two items, alone, were sufficient to create a case to answer for the plaintiffs. I agree with that concession. However, he submitted that the exaggerated claim defence should, as it were, be divided into three components, and that, on the state of the evidence, there was only a case to answer on the one component, namely the claim for items which were owned by the plaintiffs but not destroyed in the fire.

40 In my view, the defence cannot properly be sub-divided in the manner contended for by Mr Willee for the purposes of a no case submission. It may be the case - and on this I express no view - that a no case submission may be able to be made in respect of some but not all causes of action relied on by a plaintiff (where a no case submission is made by a defendant), or on some but not all defences relied on by a defendant (where a no case submission is made by a plaintiff). However, in this case, the three bases on which the exaggerated claim defence is made, and to which I have referred above, are but categories of particulars provided by the defendant in respect of the one defence, namely, that the plaintiffs have made a fraudulently exaggerated claim on their insurer. In my view, the nature of the items of property for which the claim was falsely made, and their values as asserted by the plaintiffs, would be sufficient, alone, to constitute evidence on which a judge of fact could reasonably conclude that there had been a fraudulent claim made on the insurer. In other words, applying the test which I have stated earlier in these reasons, I am of the view that there is a case to answer in respect of the exaggerated claim defence, if the only parts of evidence upon which, at this stage, the defendant could rely were the saddle and the bicycle.

41 However, the evidence in support of that defence, established to date, goes further. The defendant also relies on the evidence of Ashton that, some months before the fire, the plaintiffs had packed up a large amount of their belongings, in anticipation of the house being destroyed by fire. As I have stated, I do not, at this stage, reject that evidence. Mrs England gave evidence that the plaintiffs left two courier-sized boxes with her after the fire. That evidence, taken in combination with the evidence about the bicycle and the saddle, in my view would be a sufficient basis upon which a judge could reasonably infer that that plaintiffs had removed from their premises a number of items of property, which were not destroyed in the fire, but for which they made their claim on the insurance policy.

42 The other two bases, or "strands", of the exaggerated claim defence may be dealt with together. In a sense, they are the two sides of the one proposition, and they are both based substantially on the evidence of the accountant, Mr Yeowart. In essence, the second and third bases are that the plaintiffs did not have the items, or items of property to the value, claimed by them from their insurer. Those propositions were based on an analysis of the plaintiffs' income and expenses, and also on an analysis of the evidence substantiating the importation of goods by the plaintiffs into Australia, and the acquisition by them of items of property since they arrived in Australia. The first exercise performed by Mr Yeowart was an analysis of the plaintiffs' income and expenses. That analysis was not, by and large, challenged in cross-examination. Mr Yeowart concluded that during the three months immediately preceding the fire, the plaintiffs' fortnightly net wages averaged $2,342, and their fortnightly expenses totalled $2,070, leaving an estimated surplus of approximately $270 per fortnight. On the other hand, for the financial year ended 30 June 2001, Mr Yeowart estimated that the plaintiffs had had an average net income of $1,846 per fortnight, as compared with average fortnightly expenses of $2,070, leaving an average shortfall of $224 per fortnight. That part of Mr Yeowart's evidence related to the claim by the defendant that the plaintiffs could not have afforded to acquire, in Australia, the extent of personal property claimed by them to have been destroyed in the fire.

43 The other part of Mr Yeowart's evidence concerned an assessment by him of the assets which the plaintiffs brought into Australia, and the assets which they have acquired since. The starting point for that analysis is an insurance document, dated February 1999, evidencing that the plaintiffs had insured property shipped to Australia in the sum of $24,243. To that amount Mr Yeowart added two further amounts. First, he added a sum of $10,000, comprising the value of furniture and household items disclosed by the plaintiffs in a statement of financial position provided by them to the ANZ Bank in support of a loan application in November 1998. In addition, Mr Yeowart added the sum of $19,307, being goods purchased by the plaintiffs from Harvey Norman on 22 November 1998. The evidence of that purchase was contained in two invoices which have been tendered as exhibits.

44 Mr Yeowart also examined the plaintiffs' bank statements and Visa card statements. From those statements he was able to identify cash withdrawals and credit card purchases which had been transacted at retail premises, and which might have related to the acquisition of personal items. Those purchases totalled $15,841. In addition, Mr Yeowart identified cash withdrawals from the accounts of the plaintiffs in excess of $150, and miscellaneous purchases greater than $50, which could possibly have included asset acquisitions. The figure which he provided for that component was adjusted in cross-examination. As adjusted, the additional figure for possible purchases ranged from $5,500 (on the low side) to $19,875 (on the high side). Based on those calculations, Mr Yeowart's analysis is that the plaintiffs' personal property, at the time of the fire, would have been valued, on a cost basis, between about $81,000 and $97,000.

45 The defendant points to the difference between the amount of assets as found by Mr Yeowart, and the amounts contained in the claims put forward by the plaintiffs to the defendant insurer. The defendant alleges that the amounts claimed in respect of a number of the items were deliberately exaggerated.

46 In response, Mr Willee submitted, first, that the claim made by the plaintiffs on the insurer included amounts for the fittings and fixtures which were destroyed in the fire. Those items were attached to the property when the plaintiffs purchased the house at Jeeralang in October 1998. Secondly, it was put that the claim includes a number of items which had been imported from the United Kingdom by the plaintiffs, but may not have been included in the insurance certificate on which Mr Yeowart relied. Thirdly, Mr Willee pointed out that, whereas Mr Yeowart assessed the plaintiffs' assets on an "historical cost" basis, the plaintiffs' claim on the defendant was made on the basis of the replacement value of the items, on a "new for old" basis. Mr Willee submitted that, taking those three matters into account, there was no wilful exaggeration of the claim made by the plaintiffs upon the defendant.

47 The first point made by Mr Willee has substance. However, the claims by the plaintiffs were originally for amounts in excess of $310,000. Thus, when the amount of $35,000 is deducted for the carpets, curtains and light fittings, the amount claimed is a little less than $280,000.

48 The second point relied on by Mr Willee was that a number of the household items taken into account by Mr Yeowart had been imported from the United Kingdom, and not acquired by the plaintiffs since their arrival in Australia. In support of that proposition the plaintiffs rely, amongst other matters, on details recorded in the insurance claim. In fact, that claim includes items which are said to be valued at $50,000 (other than the mountain bikes) and which, according to the claim, were imported from the United Kingdom. The only evidence, outside the claim, in support of that proposition is the original insurance document, which provided for an insured value of $24,000. It is true that the difference between the two amounts may be accounted for, at least to some extent, depending upon whether the amount declared for insurance was on an indemnity or replacement basis. Nonetheless, the size of the discrepancy between the two amounts does, to some extent, undercut Mr Willee's submission that Mr Yeowart's analysis should be qualified by reference to a significant amount of goods which were claimed to have been imported from the United Kingdom.

49 However, even if allowance were to be made for the importation from the United Kingdom of goods of a greater value than that contained in the insurance certificate ($24,000), there is still a significant difference between the amount of assets which Mr Yeowart has assessed the plaintiffs would have owned by the time of the fire, and the amount claimed by the plaintiffs. That conclusion remains after I take into account the circumstance that the plaintiffs made their claim on a replacement basis, whereas Mr Yeowart has carried out his assessment on an historical cost basis. Put another way, if the plaintiffs did import goods to a replacement value of $50,000, that amount is still a long way short of the replacement value claimed by the plaintiffs in respect of the items lost in the fire, namely $280,000. Allowing for the circumstance that the amount of the difference (more than $200,000) comprises the replacement, and not cost, value of the goods acquired by the plaintiffs in Australia, and allowing for the evidence of the acquisition by the plaintiffs of further items of personal property before the fire, nonetheless there is, in my view, a reasonably arguable case as to whether the plaintiffs could have afforded to purchase further personal property to the extent claimed by them, given the findings of Mr Yeowart as to their income and recurring expenses.

50 That conclusion is reinforced by an analysis by Mr Wilson, by which he compared the amounts claimed by the plaintiffs in respect of a number of items, with evidence as to the recent cost of purchase of those items. For example, the analysis discloses a significant difference between the amounts claimed by the plaintiffs in respect of various items of furniture, electronic equipment, and the like, with the amounts paid by the plaintiffs to Harvey Norman on acquisition of those items in November 1998. In respect of some of the items, the amount claimed was well in excess of double the amount paid three years previously. The items referred to in the analysis constitute evidence on which a trial judge, as the tribunal of fact, could reasonably conclude that there had been deliberate exaggeration of the values of items claimed by the plaintiffs from the defendant.

51 There has so far been some focus on the evidence relating to the Sony projector and screen. Those items were listed in the insurance policy as "specified items" with sums insured of $49,995, and $10,150, respectively. The screen was described as a "Stewart Unity Screen". The policy was arranged by Oakley with Ms Emma Szabados, who was then a customer service representative of the defendant at its Traralgon RACV office. Ms Szabados told Oakley that, for any specified item listed in excess of $1,500, the insurer required a receipt or a valuation. Oakley said that the projector had been brought over from England, and that to get a valuation he would have to speak to someone in England. Ultimately, a valuation from Stothers Music and Hi Fi, of Traralgon, was produced, stating that the replacement price for the projector would be around $49,995. Thus, it was insured for that amount as a specified item. There is no evidence as to how the insurer was satisfied as to the value of the screen.

52 In support of their claim to the insurer, Oakley and Tomlinson each made statements dated 29 October 2001, which they signed. Oakley stated that the projector was purchased as a secondhand unit as a private sale out of the Trading Post from someone in Noble Park, for the sum of $5,500. He stated that the screen was purchased separately from the same person for $1,000. He adhered to that account when he spoke to the defendant's insurance investigator, in a taped record of interview, in July 2002. However, ultimately, in the course of pre-trial discovery, the plaintiffs produced an invoice which was evidence that the projector and screen (together with a remote and brackets) were purchased from TVP Productions for the sum of $4,990 in February 1999.

53 In addition, the defendant has called evidence from Mr Paul Kutcher, who is a director of Visual Fidelity Pty Ltd. That company carries on the business of the sale and importation of movie projection equipment for the Australian domestic market. At present it is the sole importer of Stewart film screens. Mr Kutcher viewed a DVD taken by Ms Tomlinson's parents when they visited Australia in 1999. That DVD included images of the screen which the plaintiffs claimed was a Stewart screen. Mr Kutcher's evidence is that the screen which he saw was not a Stewart screen. Notwithstanding the cross-examination of Mr Kutcher by Mr Lapirow, in my opinion Mr Kutcher's evidence is capable of supporting the conclusion that the plaintiffs' screen was not a "Stewart" screen. Further, Mr Kutcher stated that, even if the screen were a Stewart screen, in October 2001 a Stewart 120 inch screen would have had a retail value of approximately $7,000 to $8,000. Thus, the screen was insured by the plaintiffs for almost 150% of its retail value, even if it were a Stewart screen.

54 In my view, the matters to which I have just referred, relating to the projector and screen, are each capable of lending support to the exaggerated claim defence. First, they are capable of supporting the proposition that the two items were included on the policy by reason of a deliberate overstatement of their value and, in the case of the screen, of its quality. Secondly, there is a difference, and at least arguably an inconsistency, between the circumstances in which Oakley claimed, in his statement and record of interview, to have purchased the items, and the price he claimed to have paid for them, and the circumstances in which they were purchased, and the price he actually paid for them, as evidenced by the invoice which was produced in the course of discovery. In my view, those matters are capable of being relied upon by the defendant in support of the proposition that the plaintiffs deliberately overstated the value and nature of the items, both in securing insurance cover and, subsequently, in the claim made by them on the defendant.

55 All the matters, to which I have just referred, add weight to the issues relating to the bicycle and the saddle, which were items claimed by the plaintiffs but not destroyed in the fire. As I have already stated, I regard the claims in respect of the bicycle and the saddle as raising, on their own, a sufficient case for the plaintiffs to answer in respect to the exaggerated claim defence. The additional matters to which I have referred fortify that conclusion. Taking those matters into account, I am of the opinion that, as the evidence presently stands, there is sufficient evidence upon which a judge might reasonably conclude, on the balance of probabilities, that the plaintiffs so exaggerated their claim that they made a fraudulent claim upon the defendant. Accordingly, I consider that there is a case to answer in respect to the exaggerated claim defence.**

56 For the reasons which I have set out at some length, I am of the view that there is a case to answer in respect of both defences relied on by the defendant. I emphasise that that conclusion is based on the evidence thus far adduced in the trial, and based on my view that my task, at this stage, is to assess whether, as the judge of facts, I could find in favour of the defendant on the evidence so far led in respect of its two defences.

[1] Naxakis v Western General Hospital & Anor [1999] HCA 22; (1999) 197 CLR 269.

[2] Protean (Holdings) Limited (Receivers and Managers Appointed) and ors v American Home Assurance Co [1985] VicRp 18; [1985] VR 187, 215 (Young CJ), 235-6 (Fullagar J), 238-9 (Tadgell J); Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 330-331 (Windeyer J); Clarey v Permanent Trustee Co Limited and anor [2005] VSCA 128, [72].

[3] Protean (Holdings) Limited v American Home Assurance Co, ibid, 239 (Tadgell J); Tru Floor Service Pty Ltd v Jenkins (No. 2) [2006] FCA 632, [37] - [40] (Sundberg J).

[4] Sarkis and ors v Deputy Commissioner of Taxation [2005] VSCA 67 at [13] (Nettle JA).

[5] Protean (Holdings) Limited v American Home Assurance Co, [1985] VicRp 18; [1985] VR 187, 215 (Young CJ); compare Sarkis and ors v Deputy Commissioner of Taxation, ibid, [17] (Nettle JA).

[6] Protean (Holdings) Limited v American Home Assurance Co, ibid, 215 (Young CJ), 239 - 240 (Tadgell J); Sarkis v Deputy Commissioner of Taxation, ibid, [14] (Nettle JA); Residues Treatment and Trading Co Limited and anor v Southern Resources Limited and ors (1989) 52 SASR 54, 68 (Perry J).

[21] See also Residues Treatment and Trading Co Limited and anor v Southern Resources Limited and ors (1989) 52 SASR 54, 68 (Perry J).

[25] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 350 (Rich J), 362-3 (Dixon J); Rejfek and anor v McElroy and anor [1965] HCA 46; (1965) 112 CLR 517, 521.

[26] Holloway v McFeeters [1956] HCA 25; (1956) 94 CLR 470, 480-481.

[27] Transport Industries Insurance Co Limited v Longmuir [1997] 1 VR 125, 128 (Winneke P), 141 (Tadgell JA).

[28] Union Bank of Australasia Limited v Puddy [1949] VicLawRp 46; [1949] VLR 242, 244-6 (Fullagar J); Protean (Holdings) Limited v American Home Assurance Co [1985] VicRp 18; [1985] VR 187, 215 (Young CJ), 236 (Fullagar J), 238-9 (Tadgell J); Rasomen Pty Ltd v Shell Company of Australia Limited (1997) 75 FCR 714, 224.

[29] Residues Treatment and Trading Co Limited and anor v Southern Resources Limited and ors (1989) 52 SASR 54, 69 (Perry J).

At a glance

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Judgment (93 paragraphs)

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Cases Cited (8)