Zeait v Insurance Australia Limited t/as NRMA Insurance

Factual background

1. Ms Zeait is the owner of a Mercedes CLK 240 convertible ("the vehicle"). The vehicle was purchased in 2008 at a cost of approximately $55,000 after purchase price, auction fees and registration.
2. After the vehicle was registered, Ms Zeait obtained a comprehensive insurance policy from NRMA. The agreed value of the vehicle under the policy was $60,500 (S/C [6]; D [3(a)]).
3. On 1 August 2013, the vehicle was involved in a collision with another vehicle at a roundabout in Merrylands, New South Wales. The vehicle was being driven at the time by Ms Zeait. Mr Zeait, the plaintiff's husband, was a passenger. The other vehicle was being driven by Mr Baalbaki.
4. Following the collision, Ms Zeait lodged a claim with NRMA under her policy of comprehensive motor vehicle insurance. NRMA refused to indemnify Ms Zeait.

The Local Court proceedings

1. By statement of claim filed in the Local Court on 8 April 2014 the plaintiff sued the defendant for payment of the agreed sum of $60,500 under the comprehensive insurance policy.
2. By defence dated 14 Mar 2014 and filed in the Local Court, the defendant pleaded that the plaintiff was not involved in an accident as alleged or at all, that she or someone acting with her knowledge and consent caused deliberate damage to the vehicle, that the plaintiff failed to prove that the damage claimed was caused by an event covered by the policy and that she failed to prove that there was an accidental collision that gave rise to a loss that is claimable pursuant to the insurance policy (Defence [4] & [5]). The other matters pleaded in the defence were not addressed by either party during the two days of hearing and the Magistrate considered them abandoned (J [3]).

Hearing in the Local Court

1. The proceedings were heard in the Local Court at Parramatta on 17 March 2015 and 22 June 2015.
2. At the trial it was common ground as to the ownership of the vehicle, the existence of a comprehensive insurance policy, that the damage was caused to the plaintiff's vehicle by a collision with another motor vehicle and the agreed value of the quantum of damages (J [1]).
3. In dispute was whether the damage caused to the plaintiff's vehicle was accidental or not and therefore whether it was covered by the policy of insurance. The plaintiff's case was that the damage was caused accidentally and was covered by the policy of insurance. The defendant's case was that the damage was not accidental and therefore was not covered by Ms Zeait's comprehensive insurance policy with NRMA.
4. The plaintiff relied on her statement and that of her husband, both filed 8 August 2014, and the statement of Mr Baalbaki, filed 6 November 2014. The defendant relied on the affidavit of Suzanne Pankiw, who witnessed the accident, dated 25 September 2014 and the traffic accident investigation report of a crash investigator, Mr George, dated 12 Stepember 2014. All of these witnesses gave evidence and were cross examined.

Evidence of the collision

1. At the hearing the witnesses gave differing accounts of what occurred during the collision.
2. Ms Zeait's version of events is that on 1 August 2013 she was driving her vehicle along Chetwynd Road with her husband, Salim Zeait, as passenger. After she entered the roundabout at Morris Street, a vehicle struck her vehicle on the side at the passenger door and the rear quarter panel. Ms Zeait stopped her vehicle and the other vehicle was leaning against hers in the area in which it had struck. The driver of the other vehicle, Mr Baalbaki, was an old man who was unknown to Ms Zeait. He got out of his vehicle and had a brief exchange with Ms Zeait. He then got back into his car. Ms Zeait said that when he attempted to reverse, his car went forward and struck Ms Zeait's vehicle a second time, this time in the rear corner, breaking the rear tail light. Once both vehicles had cleared from the road, Ms Zeait went over to Mr Baalbaki and they exchanged details (Statement, 7/8/2014, [13]-[24]). In cross examination, Ms Zeait's evidence was that Mr Baalbaki's vehicle reversed approximately six or eight inches before moving forward and colliding with Ms Zeait's vehicle a second time (T20.32-40 17/3/2015).
3. Mr Zeait said he witnessed Mr Baalbaki's vehicle impact Ms Zeait's vehicle twice. He said he recognised Mr Baalbaki as a parishioner from his church, although he had not spoken to him before (Statement, 7/8/2014, [10]-[19]). In cross examination, Mr Zeait was asked whether the vehicle he was a passenger in continued to travel after it was hit. His evidence was that the vehicle travelled forward "maybe 3 metres, maybe 2 metres, maybe 4 metres", however he could not remember (T54.38-9 17/3/2015). This was contrary to Ms Zeait's version, who in cross examination said she stopped her vehicle immediately when it was hit (T16.27 17/3/2015).
4. Mr Baalbaki admitted he collided with another vehicle and exchanged details with the female driver (Statement, 5/11/2014, [7]-[8]). Mr Baalbaki said he later saw Mr Zeait at the church he attended ([25]). Mr Baalbaki underwent an interview with crash investigator Deon Giampietro as part of the NRMA's investigation of Mr Zeait's claim. In that record of interview, Mr Giampietro asked Mr Baalbaki how many times his vehicle impacted with Ms Zeait's car. Mr Baalbaki's evidence was he only hit the vehicle once (Record of Interview, 1/11/2013, Q324). He then said that the other vehicle rotated and impacted with the side of his car (Record of Interview, 1/11/2013, Q325-6). That evidence also indicates that there were two impacts with the plaintiff's vehicle.
5. For completeness, Ms Pankiw's version is that she witnessed Mr Baalbaki's vehicle collide with Ms Zeait's car twice. After the first impact, Mr Baalbaki's reversed "maybe several feet back" before it drove into Ms Zeait's car in the roundabout again. Ms Pankiw estimated that the second collision happened "2 or 3 minutes after the first collision". Ms Pankiw did not see the drivers, who she thought were both males, exchange details (Pankiw Aff, 25/9/14, [4]-[6], [8]-[16]). The Magistrate reproduced portions of Ms Pankiw's statement (reproduced later in this judgment). He did not refer to the following statements contained in her record of interview with crash investigator Mr Giampietro on 30 October 2013: "Q.92 Okay. Did you hear any skid marks at the back before the first impact? A. No none at all. He just seemed to pull up and hit him. Q.93 Okay. A. Like he did it on purpose to me." (Record of Interview, 30/10/2013, CB 255.)
6. In other words, she was saying that it was a staged accident. All of the witnesses say that there were two impacts, although their versions as to how they occurred differed.
7. Finally in his traffic accident investigation report dated 12 September 2014 Mr George said the following: "Damage Correlation & Conclusion 31. The incident descriptions provided by the Insured and her husband are somewhat vague and do not assist with undertaking any detailed assessment of the alleged collision dynamics. This and the unavailability of the other party's version and vehicle for any physical inspection, along with its missing bumper section, places further restrictions on any detailed collision analysis. … 33. Based upon the available information there remains several significant areas of concern and inconsistency with respect to damage correlation". (CB 216.)
8. Mr George then lists the areas of concern and inconsistency, including internal inconsistencies in Ms Zeait's statement and inconsistencies between the accounts and his observations of the vehicle and the site of the collision. In cross examination, Mr George said he did not have access to Ms Pankiw's statement and that it would have been relevant to his conclusions (T24.40-46 22/6/2015). The Magistrate considered Mr George's report to be of limited value (J [5]).

The decision of the Magistrate

1. On 30 July 2015, the Magistrate handed down his written reasons for his decision. The Magistrate entered judgment in favour of the defendant. The written reasons for his decision are as follows: "… 2. The defendant insurer resists the plaintiff's claim by asserting that the plaintiff has breached the terms of the policy of insurance so as to justify the insurer in refusing the claim outright. The statement of claim relevantly asserts that: "5. During the currency of the said policy of Insurance, namely, the 1st August 2013, the said motor vehicle... was involved in a motor vehicle accident which such vehicle sustained extreme damage." The defence relevantly asserts: "4. The defendant denies the matters alleged in paragraph 5 of the statement of claim. (a) The plaintiff was not involved in an accident as alleged or at all. (b) The plaintiff or someone acting with the plaintiffs knowledge and consent caused deliberate damage to the vehicle. 5. The defendant denies the matters alleged in paragraph 6 of the statement of claim. (a) The plaintiff has failed to prove that the damage that has been claimed was caused by an event covered by the policy. (b) The plaintiff has failed to prove that there was an accidental collision that gave rise to a loss that is claimable pursuant to the insurance policy. " 3. Whilst this pleading is unusual it does at least adumbrate the issues actually argued. The other matters of defence pleaded were not addressed by either party during the two days of hearing, and are considered abandoned. 4. In summary, the plaintiff called 3 witnesses who were in the two vehicles at the time of the collision(s). Whilst those witnesses' evidence was thoroughly confused and confusing, both internally and relatively, there was a common thread of evidence that the vehicle driven by a Mr Baldaki collided with the passenger side of the plaintiff's vehicle in a roundabout. Mr Baldaki himself admitted as much. Notwithstanding the confusion, if this evidence stood alone it would be sufficient to establish the plaintiff's claim on the balance of probabilities as it would establish the facts disputed by the defendant in paragraphs 4 and 5 of the statement of claim. 5. The defendant's case was based on two witnesses, a Mr George who was a crash investigator and a Mrs Panciw. Mr George's evidence suggested that there had been more than one collision causing damage to the plaintiff's vehicle, but given his inability to access and test Mr Baldaki's vehicle, his evidence could not amount to very much. 6. By contrast, the evidence of Mrs Panciw was critical. Relevantly, her statement (Exhibit 6) proceeds as follows: "… 2. On 1 August, 2013 I resided at XXX, Merrylands NSW 2160. I had resided at XXX, Merrylands for approximately six years. 3. I moved from XXX, Merrylands NSW 2160 a short time after 1 August 2013. 4. The house that I used to live in at XXX, Merrylands had windows that overlooked the roundabout on the corner of Chetwynd Road and Morris Street. 5. XXX is situated on the corner of Chetwynd Road and Morris Street. 6. On 1 August, 2013 at approximately 8:30pm to 9pm, I was looking out of the window and patting my cat, I saw two cars at the roundabout. 7. My son Shane Pankiw was also at home that night. 8. I do not know the model or make of the two cars. One car was a lighter colour then the other car which was a dark colour. 9. The darker colour car had stopped in the roundabout, it was stationary for one or two seconds when the other car came up very close and collided with the car in the roundabout. 10. I saw that after the collision the car in the roundabout moved towards the kerb. The kerb across from XXX at the section near the roundabout had grass on it. It looked to me like the car mounted the kerb after the collision. 11. I then saw the car that was hit whilst in the roundabout reverse back towards the roundabout. 12. The car that hit the car in the roundabout reversed a short distance, maybe several feet back, and then drove into the car in the roundabout again. 13. I estimate that the second collision happened 2 or 3 minutes after the first collision. The impact from the collision was to the passenger side of the car in the roundabout. 14. After the collision I saw a male get out of the car that was hitting the car in the roundabout, he appeared to be saying something to the driver in the other car, but I could not hear what was said. I then saw the man get back into the car and then both cars drove away from the roundabout by driving up Chetwynd Road. 15. I did not see the drivers exchange details. 16. I did not recognise or know either of the drivers. Both of the drivers appeared to me to be males. … 18. I also recall later in the evening, maybe an hour after the two cars left the roundabout, the darker car the one that was hit in the roundabout came back on Chetwynd Road and turned right at the roundabout onto Morris Street and drove away. I recall being surprised that he was still driving." 7. Mr Jobson for the plaintiff also tendered without objection a copy of a record of interview between Mr Giampietro and Mrs Panciw on 30 October 2013, but no reference was made to it in submissions or cross-examination and I do not consider that it detracts from Mrs Panciw's credit in any way. 8. If I accept Mrs Panciw's evidence at face value, it establishes two collisions between the vehicles. This is supported by Mr George's evidence which also identifies two different impacts on the plaintiff's vehicle, although it cannot, by itself, identify when and in what sequence those impacts occurred. 9. But most tellingly, Mrs Panciw's evidence is that the impacts occurred "2 or 3 minutes" apart [13]. This critical point in her evidence was unchallenged. Such evidence is clearly inconsistent with any of the plaintiff's witnesses' versions that could, at best, suggest a second impact very quickly after the first impact. That version is also inconsistent with Mr George's findings as to the impact locations, which are substantially separated. Furthermore, Mrs Panciw's evidence is that Mr Baldaki's car "reversed a short distance, maybe several feet back, and then drove into the car in the roundabout again [12]". [Emphasis added] 10. I accept Mrs Panciw's evidence. As a witness she was entirety independent of the parties, not shaken in cross-examination, and the clarity and simplicity of her evidence was in marked contrast to the evidence of the plaintiff's witnesses, which was in all instances vague, inconsistent both internally and relatively and, in my view, not credible. 11. I find a verdict, and give judgment for, the defendant. …"

Grounds of appeal

1. The plaintiff appealed from the whole of the decision of Magistrate Brown dated 30 July 2015. There are ten grounds of appeal that fall into two main topics. The first topic is that the Magistrate failed to give any or adequate reasons for his decision (Grounds 2, 4 and 9). The second topic is that the Magistrate's decision was contrary to the evidence before him (Grounds 1, 3, 5, 6, 7, 8 and 10). I will deal with the first topic and then, if necessary, I will deal with the second one.

Submissions

1. Counsel for the plaintiff submitted that the Magistrate failed to provide any or sufficient reasons for his decision. It was submitted that the judgment is lacking in evidence that the Magistrate engaged in any reasoning process to come to his conclusion that the plaintiff was unsuccessful and how his conclusions mean that the policy of insurance should not respond. Counsel further submitted that the Magistrate did not address the inconsistencies in the plaintiff's evidence or give reasons as to why those inconsistencies would affect a claim under a comprehensive policy of insurance. Finally, counsel submitted that the Magistrate failed to give any reasons as to why the evidence is so tellingly against the plaintiff's claim and in doing so, fundamentally misapprehended the nature of the proceedings brought in the Local Court. Therefore the findings should not stand.
2. Counsel for the defendant submitted that the Magistrate's reasons disclose the process of reasoning which the Magistrate relied upon, the basis upon which he preferred one witness over another and the reasons for that finding. Counsel further submitted that the Magistrate's reasons for finding that the collision was not covered by the policy of insurance were implicit in his reasons. The Magistrate referred to the policy exclusions pleaded in the defence at the beginning of his reasons and he premised his reasoning on fitting the claim within the bounds of the policy. Counsel for the defendant conceded that the Magistrate did not expressly say that the policy did not cover the collision; however, his ultimate finding was that the evidence of the plaintiff was not credible and therefore the plaintiff failed to demonstrate that the claim fell within the insuring clause of the policy.

Obligation to provide sufficient reasons

1. 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.
2. 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 J 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 plaintiffs 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."
3. 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 Pettit 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 plaintiffs 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.

Product disclosure statement

1. Central to the dispute was whether the collision was covered by the plaintiff's insurance policy with the defendant. It was common ground that the plaintiff had a policy of comprehensive motor insurance with the defendant and the collision occurred during the currency of this policy. The policy of insurance was governed by the product disclosure statement ("PDS"). It is necessary to set out the relevant terms of the PDS.
2. According to the PDS, a comprehensive policy of insurance covered accidental damage to the vehicle (PDS 4). The defendant, the insurer, agreed to cover loss or damage caused by an accident, including a collision (PDS 7). The insurer could decide whether to repair the vehicle, pay to the insured the cost of repairing the vehicle, or pay to the insured the agreed or market value (PDS 7). Not covered under the policy is "loss or damage caused intentionally by you, or a person acting with your express or implied consent" (PDS 23).
3. Therefore, pursuant to the policy of insurance the defendant was entitled to refuse to pay the plaintiff's claim if the collision was caused intentionally by the plaintiff or someone acting with her express or implied consent (D [4]).

Consideration

1. The issue in dispute between the parties in the Local Court was whether the plaintiff had breached the terms of the policy of insurance so as to justify the insurer refusing to indemnify the plaintiff. The defendant alleged that the plaintiff, or someone acting with the plaintiff's knowledge and consent, caused deliberate damage to the vehicle, the plaintiff's claim was not covered by the policy and the plaintiff had failed to prove an accidental collision took place that was claimable under the insurance policy (D [5]).
2. Therefore the Magistrate's task, after determining a collision occurred, was to determine whether the claim was one which fell within the policy of insurance. The onus was upon the plaintiff to demonstrate that the damage was caused accidentally, not intentionally. There was no dispute that Mr Baalbaki's vehicle collided with Ms Zeait's vehicle at least once. All the witnesses called by both sides gave evidence that there was a second impact, but the witnesses' accounts as to how the second one occurred differed. The Magistrate considered that the plaintiff's evidence, by itself, would be sufficient to establish the plaintiff's claim on the balance of probabilities, as it would establish the facts disputed in the defence (J [4]).
3. However, the Magistrate stated the evidence of Ms Pankiw was critical, as it demonstrated that the two impacts could not have occurred in quick succession and that Mr Baalbaki's vehicle reversed several feet before driving into Ms Zeait's vehicle a second time. This was at odds with the plaintiff's witnesses' accounts, which the Magistrate considered "vague, inconsistent both internally and relatively and, in my view, not credible." (J [10].)
4. After the Magistrate accepted Ms Pankiw's evidence and found the plaintiff's witnesses not credible, although he did not explain why this was so, he did not explain whether his decision was based upon a finding that the plaintiff's claim was not covered by the policy of insurance because the accident had been staged by Ms Zeait or upon some other basis. His Honour also did not reveal how his finding that Ms Pankiw's evidence was credible led him to find that the plaintiff was not entitled to payment under the policy of insurance.

Conclusion

1. Contrary to the defendant's submission, in my view it was not implicit in the Magistrate's decision that he found the plaintiff's claim was not covered by the policy of insurance. The Magistrate was obliged to set out why the plaintiff was not entitled to be indemnified by reference to the terms of the insurance policy. He did not do so. Without giving reasons on this topic, the parties and this Court are not able to gain a proper understanding of the basis for the verdict in favour of the defendant. In my view, the Magistrate has made an error of law as his Honour gave insufficient reasons and his decision should be set aside. Hence, it is unnecessary to consider the remaining grounds of appeal.
2. The result is that the appeal is allowed. The Magistrate's decision should be set aside. The matter should be remitted to the Local Court to be determined according to law.

Costs

1. Costs are discretionary. Costs usually follow the event. The defendant is to pay the plaintiff's costs.

The Court orders that: (1) The appeal is allowed. (2) The judgment of his Honour Magistrate Brown dated 30 July 2015 is set aside. (3) The matter is remitted to the Local Court to be determined according to law. (4) The defendant is to pay the plaintiff's costs.

Amendments 09 June 2016 - Paragraph [12] Deleted the words "Nothing turn on this." 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: 09 June 2016