Stealth Enterprises Australia Pty Limited trading as The Gentlemen's Club v Calliden Insurance Limited

Judgment 1The plaintiff owns and operates a brothel. The defendant, an insurer, issued a policy of insurance to the plaintiff. The policy commenced on 3 September 2010 and was renewed on 3 September 2011. That policy covered, inter alia, loss to the building and contents of the brothel by fire. Business interruption by such a contingency was also covered. On 1 December 2012 there was a fire at the premises. The plaintiff has required the defendant to indemnify it. The defendant has declined to do so. 2By a notice of motion filed on 29 October 2013 the defendant sought orders including these: (1)Leave be granted to the defendant to file and serve a further amended defence in the form attached to the Affidavit of Paul John Angus sworn on 29 October 2013. (2)Leave be granted pursuant to UCPR 22.1 for the defendant to administer to the plaintiff interrogatories in the form accompanying this Notice of Motion. (3)An order that the plaintiff provide verified answers by affidavit to the interrogatories referred to in order 3 within 21 days of the date of this order. (4)An order that the verified answers to the interrogatories be provided by the director Mr Baris Tukel pursuant to UCPR 21.5(2)(c). 3Mr Heath, counsel for the defendant, read the affidavit of Paul John Angus sworn on 29 October 2013, to which a draft further amended defence and interrogatories were annexed. Mr Maybury, counsel for the plaintiff, did not object to the Court's granting leave to amend the defence but submitted that the portion of the draft intended to plead fraudulent non-disclosure did not adequately do so. I accepted Mr Maybury's submission and granted leave to amend in the form of the draft save for the portion of it dealing with fraudulent non-disclosure. I granted leave to amend to plead fraudulent non-disclosure in terms which I did not specify. 4The issues dealt with at length were those raised by paragraphs 2, 3 and 4 of the notice of motion. The interrogatories the defendant desired to administer arise out of innocent non-disclosure already pleaded and fraudulent non-disclosure to be pleaded by amendment. 5Relevantly, innocent non-disclosure is pleaded thus: 34A Further, and in the alternative, Mr. Baris Tukel is and was at all material times the sole director of the plaintiff and a shareholder of the plaintiff and therefore its guiding mind. 34B Mr. Fidel Tukel at the time the Policy was entered into was the manager of the plaintiff company. Particulars Mr. Fidel Tukel signed the declaration to the "Adult Industrv Scheme- Business Proposal Form" to the Policy on or about 26 June 2010 designating his the "Proposer's Title" as "Manager". 34C At the time the Policy was entered into Mr. Baris Tukel was an associate of and was himself a member of the motor cycle club known as the "Comancheros". Particulars of Association Mr Baris Tukel was known to be and was from time to time in company of and with members and was himself a member of the motor cycle club known as the "Comancheros" and/or communicated with members of such a group telephone email of other forms of communication 34D At the time the Policy was entered into Mr Fidel Tukel was an associate or member of the motorcycle club known as the "Rebels" and/or alternatively the "Finks" and/or alternatively the "Comancheros" in New South Wales. Particulars of Association Mr Baris Tukel was known to be and was from time to time in company of and with members and was himself a member of the motor cycle club known as the 'Comancheros" and/or the "Finks" and or the 'Rebels" and communicated with members of such a groups or any of them by telephone email or other forms of communication 34E The matters pleaded in paragraphs 34A, 34B 34C and 34D were matters known to the plaintiff, being matters that: i. the plaintiff knew to be matters relevant to the decision of the defendant whether to accept the risk to be insured under the Policy and, if so, on what terms; or ii. a reasonable person in the circumstances could be expected to know to be matters so relevant; within the meaning of s21 of the IC Act. ("the further relevant matters") 34F Prior to entering into the contract of insurance for the Policy and/or alternatively prior to renewing the Policy (namely, prior to 3 September 2011), the plaintiff failed to disclose any or all of the further relevant matters ('the second non-disclosure'). 34G By reason of the second non-disclosure, the defendant is entitled to reduce any liability in respect of the Claim so as to place the defendant in the position it would have been had the relevant matters been disclosed Particulars Section 28(3) of the IC Act 34H The defendant says, that had the plaintiff disclosed any or all of the further relevant matters it would not have agreed to insure the Premises at all and therefore it is entitled to reduce any liability it may have to the plaintiff to nil. 6Fraudulent non-disclosure will be pleaded by amendment. The factual basis is set out as follows in the draft: 35A Further and in the alternative, prior to first entering into the Policy, and prior to renewing the Policy, namely prior to 3 September 2011 Baris Tukel was member of the Comancheros Motor Cycle Club. 35B Further and in the alternative, prior to first entering into the Policy, and prior to renewing the Policy, namely prior to 3 September 2011 Fidel Tukel was an associate of a member of the Comancheros Motor Cycle Club, namely his brother Baris, or alternatively himself a member of the Comancheros Motor Cycle Club. 7In addition the defendant pleads breaches of a number of policy conditions. The third such matter is pleaded thus: 42 In breach of Policy term four, the plaintiff has refused and continues to refuse to provide all reasonable information and assistance required by the defendant ('the third breach') Particulars a. Mr. Baris Tukel is and was at all material times the sole director of the plaintiff and a shareholder of the plaintiff. b. The defendant requested the plaintiff to provide information as to any relationship or association Mr. Baris Tukel has with any motorcycle group ('the information') 43 Mr. Baris Tukel has refused and continues to refuse to provide the information. 8The affidavit of Mr Angus discloses that on 31 January 2013 he wrote on behalf of the defendant to the solicitor for the plaintiff a letter requiring answers to questions. His requirement relied on a condition of the policy, cited in the letter, that: If something happens which gives rise or may give rise to a claim under the policy...you must...provide all reasonable information and assistance as we require 9There were 24 questions, most of which were virtually identical to those posed in the desired interrogatories. They asked whether Baris Tukel were a member, an office holder or an associate of the Comancheros group or any other motorcycle group or groups and, if so, the identity of any such group, and the dates of commencement and cessation of any such membership, office or association. Like questions were asked about Fidel Tukel. Attached to the letter were copies of newspaper articles about allegedly corrupt activities of the Comanchero Motorcycle Club, about Fidel Tukel as an underworld figure with asserted links to the Comanchero and Rebels motorcycle clubs and to a football club and about asserted links between Baris and Fidel Tukel and organised crime figures. 10Correspondence followed in which the solicitor for the plaintiff invited the defendant to explain how, in the light of the articles, there was a proper basis to seek information about association with any motorcycle club. In his letter the solicitor for the plaintiff asked whether the defendant had disclosed to the plaintiff that association with certain groups or people was relevant to its decision whether to accept the risk and whether the defendant had a policy or guideline alleged to be public knowledge. 11Correspondence continued, but the questions were never answered. 12Exhibit A is a copy of a subpoena served by the defendant on the New South Wales Police Force requiring production of all documents relating to Baris Tukel, born 31 July 1986, and Fidel Tukel, born 7 May 1981, showing any membership or association with any motorcycle club or group between 1 March 2010 and 30 March 2012. Also part of the exhibit are copies of documents produced in response to the subpoena. They include: